RGX Radiologix

DALLAS, Nov. 8 /PRNewswire-FirstCall/ -- Radiologix, Inc. (AMEX:RGX), a leading national provider of diagnostic imaging services, today announced financial results for its third quarter ended September 30, 2006. Select Financial Information (in thousands of dollars) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 (As restated) (As restated) Service fee revenue $63,643 $62,259 $193,889 $189,320 Service fee revenue excluding terminated operations $63,643 $62,258 $193,889 $188,352 EBITDA from continuing operations(A) $11,646 $11,166 $35,390 $34,854 EBITDA from continuing operations excluding terminated operations(A) $11,630 $11,222 $35,367 $34,640 Net income (loss) $(714) $(365) $1,563 $1,794 Income (loss) from continuing operations $(732) $217 $1,268 $2,780 Income (loss) from continuing operations excluding terminated operations(A) $(748) $254 $1,245 $2,655 (A) As defined and reconciled below Third Quarter 2006 Results For the third quarter ended September 30, 2006, service fee revenue was $63.6 million, compared to $62.3 million for the third quarter of 2005. Radiologix incurred a net loss of $714,000, or $0.03 per diluted share, compared to a net loss of $365,000 or $0.02 per diluted share for the third quarter of 2005. * Service fee revenue excluding terminated operations was $63.6 million, compared to $62.3 million for the third quarter of 2005. * Loss from continuing operations was $732,000, compared to income of $217,000 for the third quarter of 2005. * Loss from continuing operations excluding terminated operations was $748,000, compared to income of $254,000 for the third quarter of 2005. * EBITDA was $11.6 million, compared to $11.2 million for the third quarter of 2005. * EBITDA excluding terminated operations was $11.6 million, compared to $11.2 million for the third quarter of 2005. Year to Date September 30, 2006 Results For the nine months ended September 30, 2006, service fee revenue was $193.9 million, compared to $189.3 million for the nine months ended September 30, 2005. Radiologix earned net income of $1.6 million, or $0.07 per diluted share, compared to net income of $1.8 million or $0.08 per diluted share for the nine months ended September 30, 2005. * Service fee revenue excluding terminated operations was $193.9 million, compared to $188.4 million for the nine months ended September 30, 2005. * Income from continuing operations was $1.3 million, compared to $2.8 million for the nine months ended September 30, 2005. * Income from continuing operations excluding terminated operations was $1.2 million, compared to $2.7 million for the nine months ended September 30, 2005. * EBITDA was $35.4 million, compared to $34.9 million for the nine months ended September 30, 2005. * EBITDA excluding terminated operations was $35.4 million, compared to $34.6 million for the nine months ended September 30, 2005. Restated 2005 Results As we discussed in our 2005 Form 10-K, in addition to restating our financial statements for the year ended December 31, 2004, the Company restated its financial statements for each of the three quarters ended March 31, June 30, and September 30, 2005 to correct the accounting treatment of the PresGar equipment lease contract acquired on October 31, 2004, for $13.9 million. This restatement also resulted in a revision of our tax expense for the three and nine months ended September 30, 2005. The impact of the restatement in the three months ended September 30, 2005 is a reduction in depreciation and amortization expense of $0.2 million, an increase in income tax expense of $0.4 million, and a reduction in net income of $0.2 million. The impact of the restatement in the nine months ended September 30, 2005 is a reduction in depreciation and amortization expense of $0.6 million, a reduction in income tax expense of $0.2 million, and an increase in net income of $0.8 million. The financial information contained in this press release reflects these restated amounts. Charges and Gains Radiologix recorded the following pre-tax charges and gains to continuing operations, excluding terminated operations, during the third quarter of 2006 and 2005: * $1.0 million in the third quarter of 2006 and zero in the third quarter of 2005 to record expenses related to the pending merger with Primedex Health Systems, Inc. (See below); * $388,000 in the third quarter of 2006 and $182,000 in the third quarter of 2005 to record stock based compensation expense; and * $105,000 gain in the third quarter of 2006 and zero gain in the third quarter of 2005 to record net gains on sales of diagnostic imaging equipment. For the nine months ended September 30, 2006 and 2005, Radiologix recorded the following pre-tax charges and gains to continuing operations, excluding terminated operations: * $1.0 million for the nine months ended September 30, 2006 and zero for the nine months ended September 30, 2005 to record expenses related to the pending merger with Primedex Health Systems, Inc. (See below); * $1.1 million for the nine months ended September 30, 2006 and $395,000 for the nine months ended September 30, 2005 to record stock based compensation expense; and * $857,000 gain for the nine months ended September 30, 2006 and $651,000 gain for the nine months ended September 30, 2005 to record net gains on sales of diagnostic imaging equipment. Income Taxes Due to losses for the last three years, it is uncertain if our deferred tax assets will be realized. Valuation allowances for net deferred tax assets were recorded in 2004 and 2005. The tax provision of $0.2 million and $0.4 million for the three and nine months ended September 30, 2006, respectively, is for state income taxes and federal alternative minimum tax. Balance Sheet Cash and cash equivalents were $49.8 million at September 30, 2006, compared to $36.0 million at December 31, 2005, primarily reflecting continued strong cash collections during the nine months ended September 30, 2006. Net debt (total debt less cash and cash equivalents and restricted cash) was $114.8 million at September 30, 2006, compared to net debt of $128.7 million at December 31, 2005. Total debt was $170.3 million at September 30, 2006 and December 31, 2005. Days sales outstanding (DSO) was 48 days for September 30, 2006 compared to 48 days for December 31, 2005. Plan of Merger With Primedex Health Systems, Inc. On July 6, 2006, the Company entered into a Merger Agreement with Primedex Health Systems, Inc. in which a wholly owned subsidiary of Primedex will merge with and into Radiologix. The transaction will create the largest owner and operator of fixed-site diagnostic imaging centers in the United States, with 131 locations. Under the terms of the Merger Agreement, which has been approved by each company's Board of Directors, Radiologix shareholders will receive an aggregate consideration of 22,621,922 shares of Primedex common stock and $42.95 million in cash. Based upon the closing price of $2.69 for Primedex common stock as of October 6, 2006, the record date for the stockholder meetings, each Radiologix stockholder would receive $1.78 in cash for each Radiologix share, plus one share of Primedex common stock for total consideration valued at $4.47 per share. Upon completion of the merger, we estimate that, subject to adjustment as described above, Radiologix's former stockholders will own approximately 33.9% of the outstanding shares of Primedex common stock, based on the number of shares of Radiologix and Primedex common stock outstanding on the record date. The merger is expected to be completed on November 15, 2006, subject to regulatory approvals, the approvals of Primedex's and Radiologix's stockholders, as well as other customary closing conditions. Sarbanes-Oxley Section 404 As noted in our 2005 Form 10-K, subsequent to December 31, 2005, but prior to the finalization of our 2005 consolidated financial statements, Radiologix placed into operation new controls to address the material weakness we identified in our accounting for lease terminations. These new controls include a more thorough and detailed review of material unusual transactions by senior financial officers, and outside accounting experts if deemed necessary. We believe these new controls have remediated the material weakness that existed as of December 31, 2005, and that these controls operated effectively during the nine months ended September 30, 2006. Regulation G: GAAP and Non-GAAP Financial Information This release contains certain financial information not derived in accordance with GAAP. Radiologix uses both GAAP and non-GAAP metrics to measure its financial results. We believe that, in addition to GAAP metrics, these non-GAAP metrics assist Radiologix in measuring its cash-based performance. Radiologix believes this information is useful to investors and other interested parties because it removes unusual and nonrecurring charges that occur in the affected period and provides a basis for measuring the Company's financial condition against other quarters. As Radiologix has historically reported non-GAAP results to the investment community, management also believes the inclusion of non-GAAP measures provides consistency in its financial reporting. Such information should not be considered as a substitute for any measures calculated in accordance with GAAP, and may not be comparable to other similarly titled measures of other companies. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Reconciliation of this information to the most comparable GAAP measures is included in this release in the tables below. Income from continuing operations is defined as income from continuing operations calculated in accordance with GAAP. Income from continuing operations excluding terminated operations is defined as income from continuing operations excluding terminated San Antonio and certain Mid-Atlantic operations. EBITDA is defined as earnings before interest, taxes, depreciation and amortization, each from continuing operations, plus restricted stock compensation expense, and is reconciled to its nearest comparable GAAP financial measure. EBITDA from continuing operations excluding terminated operations is defined as EBITDA excluding terminated San Antonio and certain Mid-Atlantic operations. EBITDA and EBITDA from continuing operations excluding terminated operations are non-GAAP financial measures used as analytical indicators by Radiologix management and the healthcare industry to assess business performance. They also serve as measures of leverage capacity and ability to service debt. EBITDA and EBITDA from continuing operations excluding terminated operations should not be considered measures of financial performance under GAAP, and the items excluded from EBITDA and EBITDA from continuing operations excluding terminated operations should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. As EBITDA and EBITDA from continuing operations excluding terminated operations are not measurements determined in accordance with GAAP and are therefore susceptible to varying methods of calculation, these metrics, as presented, may not be comparable to other similarly titled measures of other companies. About Radiologix Radiologix (http://www.radiologix.com/ ) is a leading national provider of diagnostic imaging services, owning and operating multi-modality diagnostic imaging centers that use advanced imaging technologies such as positron emission tomography (PET), magnetic resonance imaging (MRI), computed tomography (CT) and nuclear medicine, as well as x-ray, general radiography, mammography, ultrasound and fluoroscopy. The diagnostic images created, and the radiology reports based on these images, enable more accurate diagnosis and more efficient management of illness for ordering physicians. Radiologix owned or operated 68 diagnostic imaging centers located in 7 states as of September 30, 2006. Forward-Looking Statements This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include words such as "may," "will," "would," "could," "likely," "estimate," "intend," "plan," "continue," "believe," "expect" or "anticipate" and other similar words, and include all discussions about our acquisition and development plans. We do not guarantee that the events described in this press release will occur as described, or that any positive trends noted in this press release will continue. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's reasonable estimates of future results or trends. Although we believe that our plans and objectives reflected in, or suggested by, such forward-looking statements are reasonable, we may not achieve such plans or objectives. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this press release. You should read this press release completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future. Specific factors that might cause actual results to differ from our expectations include, but are not limited to: * economic, demographic, business and other conditions in our markets; * the highly competitive nature of the healthcare business; * changes in patient referral patterns; * changes in the rates or methods of third-party reimbursement for diagnostic imaging services; * changes in our contracts with radiology practice groups; * changes in the number of radiologists operating in our contracted radiology practice groups; * the ability to recruit and retain technologists; * the availability of additional capital to fund capital expenditure requirements; * lawsuits against Radiologix and our contracted radiology practice groups; * changes in operating margins, particularly changes due to our managed care contracts and capitated fee arrangements; * failure by Radiologix to comply with state and federal anti-kickback and anti-self referral laws or any other applicable healthcare regulations; * changes in business strategy and development plans; * changes in federal, state or local regulations affecting the healthcare industry; * our indebtedness, debt service requirements and liquidity constraints; * risks related to our Senior Notes and healthcare securities generally; * interruption of operations due to severe weather or other extraordinary events; * charges for unusual or infrequent (non-recurring) matters; and * risks related to certain closing provisions of the merger with Primedex that, if not satisfied or waived, will result in the merger not being completed. A more comprehensive list of such factors is set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and our other filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which such statement is made. The information in this press release is as of November 8, 2006. Radiologix undertakes no obligation to update any forward-looking statement or statements to reflect new events or circumstances or future developments. Radiologix, Inc. Consolidated Balance Sheets (In thousands) September 30, December 31, 2006 2005 ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $49,753 $36,004 Restricted cash 5,800 5,662 Accounts receivable, net of allowances 42,500 40,815 Due from affiliates 705 1,737 Federal and state income tax receivable 6,064 6,189 Other current assets 4,993 5,491 Total current assets $109,815 $95,898 Property and equipment, net 64,893 67,965 Investments in joint ventures 9,757 10,597 Intangible assets, net 51,551 54,050 Deferred financing costs, net 3,704 4,942 Other assets 586 1,076 Total assets $240,306 $234,528 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and other accrued expenses $7,931 $10,157 Accrued physician retention 7,536 7,051 Accrued salaries and benefits 8,335 6,987 Accrued interest 4,836 685 Current maturities of capital lease obligations 34 32 Other current liabilities 409 477 Total current liabilities $29,081 $25,389 Long-term debt, net of current portion 158,270 158,270 Convertible debt 11,980 11,980 Capital lease obligations, net of current portion 36 62 Deferred revenue 6,187 6,494 Other liabilities 1,915 1,488 Total liabilities $207,469 $203,683 Commitments and contingencies Minority interests in consolidated subsidiaries 1,168 1,874 STOCKHOLDERS' EQUITY: Common stock 2 2 Treasury stock (180) (180) Additional paid-in capital 16,750 15,615 Retained earnings 15,097 13,534 Total stockholders' equity $31,669 $28,971 Total liabilities and stockholders' equity $240,306 $234,528 Radiologix, Inc. Consolidated Statements of Operations (In thousands, except per share data) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 (As restated) (As restated) Service fee revenue $63,643 $62,258 $193,889 $189,320 Costs of operations: Cost of services 40,387 40,389 121,635 120,838 Equipment lease 4,111 3,545 11,753 9,582 Provision for doubtful accounts 5,489 4,521 16,376 13,647 Depreciation and amortization 6,432 5,931 18,456 17,433 Gross profit $7,224 $7,872 $25,669 $27,820 Merger costs 1,049 --- 1,049 --- Corporate general and administrative 3,174 3,862 12,338 13,195 Interest expense, net, including amortization of deferred financing costs 4,325 4,561 13,128 13,802 Income (loss) before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, income taxes and discontinued operations $(1,324) $(551) $(846) $823 Equity in earnings of investments 939 1,227 3,009 2,888 Minority interests in income of consolidated subsidiaries (163) (184) (541) (487) INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATION $(548) $492 $1,622 $3,224 Income tax expense 184 275 354 444 INCOME (LOSS) FROM CONTINUING OPERATIONS $(732) $217 $1,268 $2,780 Discontinued Operations: Income (loss) from discontinued operations before income taxes 18 (582) 295 (986) Income tax expense --- --- --- --- Income (loss) from discontinued operations $18 $(582) $295 $(986) NET INCOME (LOSS) $(714) $(365) $1,563 $1,794 INCOME (LOSS) PER COMMON SHARE Income (loss) from continuing operations -basic $(0.03) $0.01 $0.06 $0.13 Income (loss) from discontinued operations -basic $--- $(0.03) $0.01 $(0.05) Net income (loss) -basic $(0.03) $(0.02) $0.07 $0.08 Income (loss) from continuing operations -diluted $(0.03) $0.01 $0.06 $0.13 Income (loss) from discontinued operations-diluted $--- $(0.03) $0.01 $(0.05) Net income (loss) -diluted $(0.03) $(0.02) $0.07 $0.08 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 22,242,417 22,138,145 22,242,417 22,030,959 Diluted 22,242,417 22,411,042 22,279,253 22,342,653 Radiologix, Inc. Reconciliation of Non-GAAP Financial Information (In thousands) Reconciliation of Income from Continuing Operations to EBITDA from Continuing Operations For the Three Months For the Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 (As restated) (As restated) GAAP: Income (loss) from continuing operations $(732) $217 $1,268 $2,780 Add: Income tax expense 184 275 354 444 Add: Interest expense, net 4,325 4,561 13,128 13,802 Add: Depreciation and amortization 6,432 5,931 18,456 17,433 Add: Restricted stock compensation expense 388 182 1,135 395 Add: Merger costs 1,049 --- 1,049 --- EBITDA from continuing operations $11,646 $11,166 $35,390 $34,854 Radiologix, Inc. Reconciliation of Non-GAAP Financial Information, Excluding Terminated Operations (In thousands) Reconciliation of Income from Continuing Operations to EBITDA from Continuing Operations, Excluding Terminated Operations For the Three Months For the Nine Months Ended September 30, Ended September 30, 2006 2005 2006 2005 (As restated) (As restated) GAAP: Income (loss) from continuing operations, excluding terminated operations $(748) $254 $1,245 $2,655 Add: Income tax expense 184 295 354 357 Add: Interest expense, net 4,325 4,560 13,128 13,801 Add: Depreciation and amortization 6,432 5,931 18,456 17,432 Add: Restricted stock compensation expense 388 182 1,135 395 Add: Merger costs 1,049 --- 1,049 --- EBITDA from continuing operations excluding terminated operations $11,630 $11,222 $35,367 $34,640 Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) For the Three Months Ended September 30, 2006 Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $63,643 $--- $63,643 Costs of operations: Cost of services 40,387 1 40,386 Equipment lease 4,111 --- 4,111 Provision for doubtful accounts 5,489 (17) 5,506 Depreciation and amortization 6,432 --- 6,432 Gross profit $7,224 $16 $7,208 Merger costs 1,049 --- 1,049 Corporate general and administrative 3,174 --- 3,174 Interest expense, net, including amortization of deferred financing costs 4,325 --- 4,325 Income (loss) before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, income taxes and discontinued operations $(1,324) $16 $(1,340) Equity in earnings of unconsolidated affiliates 939 --- 939 Minority interests in income of consolidated subsidiaries (163) --- (163) INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS $(548) $16 $(564) Income tax expense 184 --- 184 INCOME (LOSS) FROM CONTINUING OPERATIONS $(732) $16 $(748) Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) For the Three Months Ended September 30, 2005 (As restated) Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $62,258 $(1) $62,259 Costs of operations: Cost of services 40,389 48 40,341 Equipment lease 3,545 8 3,537 Provision for doubtful accounts 4,521 (1) 4,522 Depreciation and amortization 5,931 --- 5,931 Gross profit $7,872 $(56) $7,928 Merger costs --- --- --- Corporate general and administrative 3,862 --- 3,862 Interest expense, net, including amortization of deferred financing costs 4,561 1 4,560 Loss before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, Income taxes and discontinued operations $(551) $(57) $(494) Equity in earnings of unconsolidated affiliates 1,227 --- 1,227 Minority interests in income of consolidated subsidiaries (184) --- (184) INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS $492 $(57) $549 Income tax expense (benefit) 275 (20) 295 INCOME (LOSS) FROM CONTINUING OPERATIONS $217 $(37) $254 Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) For the Nine Months Ended September 30, 2006 Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $193,889 $--- $193,889 Costs of operations: Cost of services 121,635 16 121,619 Equipment lease 11,753 8 11,745 Provision for doubtful accounts 16,376 (47) 16,423 Depreciation and amortization 18,456 --- 18,456 Gross profit $25,669 $23 $25,646 Merger costs 1,049 --- 1,049 Corporate general and administrative 12,338 --- 12,338 Interest expense, net, including amortization of deferred financing costs 13,128 --- 13,128 Income (loss) before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, Income taxes and discontinued operations $(846) $23 $(869) Equity in earnings of unconsolidated affiliates 3,009 --- 3,009 Minority interests in income of consolidated subsidiaries (541) --- (541) INCOME BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS $1,622 $23 $1,599 Income tax expense 354 --- 354 INCOME FROM CONTINUING OPERATIONS $1,268 $23 $1,245 Radiologix, Inc. Reconciliation of Financial Information, Excluding Terminated Operations (In thousands) Radiologix Excluding Terminated Terminated Radiologix Operations Operations Service fee revenue $189,320 $968 $188,352 Costs of operations: Cost of services 120,838 486 120,352 Equipment lease 9,582 26 9,556 Provision for doubtful accounts 13,647 242 13,405 Depreciation and amortization 17,433 1 17,432 Gross profit $27,820 $213 $27,607 Merger costs --- --- --- Corporate general and administrative 13,195 --- 13,195 Interest expense, net, including amortization of deferred financing costs 13,802 1 13,801 Income before equity in earnings of unconsolidated affiliates, minority interests in consolidated subsidiaries, Income taxes and discontinued operations $823 $212 $611 Equity in earnings of unconsolidated affiliates 2,888 --- 2,888 Minority interests in income of consolidated subsidiaries (487) --- (487) INCOME BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS $3,224 $212 $3,012 Income tax expense 444 87 357 INCOME FROM CONTINUING OPERATIONS $2,780 $125 $2,655 http://www.newscom.com/cgi-bin/prnh/19991026/RLGXLOGO http://photoarchive.ap.org/ DATASOURCE: Radiologix, Inc. CONTACT: Michael N. Murdock, Chief Financial Officer of Radiologix, Inc., +1-214-303-2717, or Web site: http://www.radiologix.com/

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