Results Show Sequential Quarterly Improvement
DALLAS, Aug. 7 /PRNewswire-FirstCall/ -- Radiologix, Inc. (Amex: RGX), a
leading national provider of diagnostic imaging services, today announced
financial results for its second quarter ended June 30, 2003, and provided
updates on certain corporate activities.
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Second Quarter 2003 Results
For the second quarter 2003, Radiologix reported service fee revenue of
$65.0 million versus $71.5 million for the second quarter 2002, a 9.1 percent
decrease, resulting primarily from a reduction in volume related to an
increase in competition in key markets that continues to impact the company.
Second quarter 2003 service fee revenue increased 1.0 percent from
$64.4 million for the first quarter 2003.
Radiologix reported net income of $276,000 for the second quarter 2003,
compared to net income of $4.8 million for the second quarter 2002 and a net
loss of $4.6 million for the first quarter 2003.
Radiologix reported diluted earnings per share ("EPS") for the second
quarter 2003 of $0.01, compared to diluted earnings per share of $0.21 for the
second quarter 2002 and a net loss per diluted share of $0.21 for the first
quarter 2003.
Radiologix reported diluted EPS from continuing operations, excluding
charges (as described below under "Charges"), for the second quarter 2003 of
$0.04, compared to $0.20 for the second quarter 2002 and $0.02 for the first
quarter 2003.
EBITDA (as defined and described below under "EBITDA") from continuing
operations, excluding charges, was $13.1 million for the second quarter 2003,
compared to $18.9 million for the second quarter 2002 and $12.2 for the first
quarter 2003. EBITDA from continuing operations, excluding charges, as a
percent of service fee revenue was 20.2 percent for the second quarter 2003
compared to 26.4 percent for the second quarter 2002 and 18.9 percent for the
first quarter 2003.
Cash flow generated from operations was $9.1 million for the second
quarter 2003, compared to $9.6 million for the second quarter 2002 and
$961,000 for the first quarter 2003.
"We believe that second quarter results validate what we discussed last
quarter-that the metrics of our core business are stabilizing compared to the
previous three quarters," said Stephen D. Linehan, president and C.E.O. of
Radiologix. "We adjusted our cost structure to better match our revenue
stream, reviewed our vendor relationships and evaluated our sales and
marketing effort for effectiveness and quality. Progress in each of these
areas yielded results that positively impacted our second quarter and we
believe will continue to have a beneficial impact for Radiologix in the
future."
Year To Date ("YTD") June 30 Results
Radiologix reported YTD 2003 service fee revenue of $129.4 million versus
$142.5 million for YTD 2002, a 9.2 percent decrease. Radiologix incurred a
net loss of $4.3 million for YTD 2003, compared to net income of $9.2 million
for YTD 2002.
Radiologix reported a net loss per diluted share for YTD 2003 of
$0.20, compared to diluted EPS of $0.40 for YTD 2002.
EBITDA, from continuing operations excluding charges, was $25.3 million
for YTD 2003, compared to $37.5 million for YTD 2002, a decrease of
32.4 percent. EBITDA as a percent of service fee revenue was 19.6 percent for
YTD 2003 compared to 26.3 percent for YTD 2002.
Cash flow generated from operations was $10.1 million for YTD 2003,
compared to $20.4 million for YTD 2002.
Balance Sheet
Cash and cash equivalents were $18.4 million at June 30, 2003, compared to
$19.2 million at December 31, 2002. Radiologix's liquidity stood at
$43.4 million at June 30, 2003, including $25.0 million of its $35.0 million
line of credit that is currently available to Radiologix given constraints of
certain financial covenants. Radiologix's line of credit remains undrawn.
Total debt at June 30, 2003, was $176.2 million, compared to total debt of
$178.2 million at December 31, 2002. Net debt (total debt less cash and cash
equivalents) at June 30, 2003, was $157.7 million, compared to net debt of
$159.1 million at December 31, 2002.
Days sales outstanding ("DSOs") was 69 days at June 30, 2003, compared to
73 days at December 31, 2002 and 68 days at June 30, 2002.
Radiologix remains in compliance with all covenants related to its debt
instruments.
Charges
In the second quarter 2003, Radiologix incurred a $311,000 pre-tax charge
for severance costs. Also in the second quarter 2003, Radiologix reserved
$500,000 (before taxes) as an estimate for potential payments we may incur
directly or indirectly related to certain lease payments (as described below
under "Other Matters").
For YTD 2003, Radiologix incurred an aggregate $1.8 million pre-tax
charge, including $1.3 million for severance costs and the $500,000 reserve as
an estimate for potential payments we may incur directly or indirectly related
to certain lease payments.
Healthcare Insurance Portability and Accountability Act ("HIPAA")
As we have previously disclosed on various conference calls, Radiologix
has been working diligently to ensure our compliance with HIPAA's standard
transaction and code set requirements ("the HIPAA EDI requirements") by the
October 16, 2003, deadline. These efforts have included contracting with
certain third-party vendors and claims clearinghouses to provide certain
products and services to facilitate our compliance plans. While we believe
that we will be compliant by that date, we cannot provide assurances that we
will ultimately achieve compliance by the deadline. We estimate that we will
incur approximately $1.1 million in costs in 2003 to achieve compliance with
the HIPAA EDI requirements.
If any of the third-party vendors that we have contracted with to assist
us and/or to provide services to us in our plan to comply with the HIPAA EDI
requirements are unable to timely deliver the contracted services, we may be
unable to meet the October 16, 2003, deadline.
Radiologix may experience delayed payments from third-party payors after
October 16, 2003, the date by which payors are expected to comply with the
HIPAA EDI requirements. In connection with the HIPAA EDI requirements, our
payors are expected to comply with the standard transactions and code set
requirements by October 16, 2003. Noncompliance by our payors and other
healthcare providers with the HIPAA EDI requirements by October 16, 2003, may
cause Radiologix to experience a delay in its claims processing by its payors
or lead to a large number of rejected claims. Either of these results may
slow our cash collection and increase our DSOs. This, in turn, may cause
limited availability to capital for growth.
Radiologix has taken and is taking proactive steps to mitigate this risk,
including meeting with our payors in advance of the October 16, 2003, deadline
to assess their readiness and discuss contingency plans. In addition, we are
managing our business to maintain sufficient cash on hand and capacity under
our existing credit facility to supplement the cash-flow shortfalls.
Legal Proceedings
Radiologix is currently engaged in a legal dispute with M&S Imaging
Associates, Inc. ("M&S") and its radiologists in the San Antonio, Texas,
market. The M&S radiologists served Radiologix with a lawsuit on May 12,
2003, alleging that their non-compete covenants in their employment agreements
with M&S, of which Radiologix is a third party beneficiary, are unenforceable
under Texas law.
Radiologix filed its answer to M&S's lawsuit denying all allegations
contained in their original petition. In addition, Radiologix asserted
counterclaims against the radiologists who filed the lawsuit and also joined
M&S as a third party defendant, for fraud, interference with contractual and
business relations, civil conspiracy, and breach of contract and of non-
solicitation agreement. Radiologix has also served M&S with a separate notice
of default and demand for indemnification under the November 1997 Service
Agreement between M&S and Radiologix (the "Service Agreement").
On July 16, 2003, M&S served Radiologix with a demand for arbitration
under the Service Agreement alleging certain acts of mismanagement vis-a-vis
its billing and collection operations on behalf of M&S. Although Radiologix
has not yet responded to this demand, it intends to vigorously deny and defend
itself against M&S's allegations.
Radiologix can give no assurances that the legal proceedings disclosed
here will not have a material adverse impact on its financial position, cash
flow and results of operations.
Other Matters
As part of a routine, ongoing compliance and legal review, Radiologix has
found that rents negotiated for the subletting of space from physician
landlords of several Radiologix locations may have exceeded fair market value.
Radiologix sent a letter to the U.S. Department of Health & Human
Services' Office of the Inspector General ("OIG"), informing them of the
preliminary findings and seeking their guidance and assistance to remedy this
situation. Accordingly, in the second quarter 2003, we reserved $500,000 as
an estimate for potential payments we may incur directly or indirectly.
Radiologix can give no assurance, however, that the OIG will not impose fines
in excess of our estimate. Radiologix can give no assurance that any
potential payments or findings would not have a material adverse effect on its
financial position, cash flow and results of operations.
GAAP and Non-GAAP Financial Information
This release contains certain financial information not derived in
accordance with generally accepted accounting principles (GAAP), including
EBITDA. Radiologix believes this information is useful to investors and other
interested parties. Such information should not be considered as a substitute
for any measures derived in accordance with GAAP, and may not be comparable to
other similarly titled measures of other companies. Reconciliation of this
information to the most comparable GAAP measures is included later in this
release.
EBITDA
EBITDA ("Earnings Before Interest, Taxes, Depreciation and Amortization,
and including equity in earnings of investments and minority interests") is a
non-GAAP financial measure used as an analytical indicator by Radiologix
management and the healthcare industry to assess business performance. It
also serves as a measure of leverage capacity and debt service ability.
EBITDA should not be considered as a measure of financial performance under
generally accepted accounting principles, and the items excluded from EBITDA
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 is not a
measurement determined in accordance with generally accepted accounting
principles and is thus susceptible to varying calculations, EBITDA as
presented may not be comparable to other similarly titled measures of other
companies. EBITDA from continuing operations, excluding severance costs and
charges is used to show adjustments to EBITDA for comparative purposes to
previous periods.
Conference Call
In connection with this earnings press release, you are invited to listen
to our conference call with Stephen D. Linehan, president and C.E.O., and Sami
S. Abbasi, executive vice president and C.F.O., that will be broadcast live
over the Internet on Thursday, August 7, 2003, at 8:00 a.m. Central Time, 9:00
a.m. Eastern Time. You may listen to the call via the Internet by navigating
to Radiologix's Web site (http://www.radiologix.com) and clicking on "Stock"
from the home page top navigation and then clicking on "Conference Call" on
the left navigation.
If you are unable to participate during the live Webcast, the first
quarter earnings conference call will be archived on Radiologix's Web site,
http://www.radiologix.com. To access the replay, click on "Stock" from the
home page top navigation and then click on "Conference Call" on the left
navigation.
About Radiologix
Radiologix (http://www.radiologix.com) is a leading national provider of
diagnostic imaging services through its ownership and operation of
technologically advanced, multi-modality diagnostic imaging centers, and its
provision of administrative, management and other information services to
certain radiology business partners. Radiologix derives the majority of its
revenues from the production and management of diagnostic imaging procedures
utilizing technologies such as x-ray, magnetic resonance imaging ("MRI"),
computed tomography ("CT"), mammography, ultrasound, nuclear medicine,
positron emission tomography ("PET"), as well as general radiography and
fluoroscopy. These images, and the radiology reports that are based on these
images, permit ordering physicians to diagnose and manage diseases and
injuries more accurately and effectively than would be possible without this
clinical information. Radiologix owns or operates 115 imaging centers located
in 17 states, with concentrated geographic coverage in markets located in
California, Florida, Kansas, Maryland, New York, Texas and Virginia.
Safe Harbor Statement
This press release contains forward-looking statements that relate to
future financial results or business expectations and are made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Such
statements give our current expectations or forecasts of future events; they
do not relate strictly to historical or current facts. 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 August 7, 2003. Radiologix
undertakes no obligation to update any forward-looking statement or statements
to reflect new events or circumstances or future developments.
We have tried, whenever possible, to identify such statements by using
words such as "anticipated," "estimates," "expect," "project," "intend,"
"plan," "believe," "will" and similar expressions in connection with any
discussion of future operations or financial performances. These statements
are subject to risks and uncertainties that exist in the Company's operations
and business environment. Business plans may change as circumstances warrant
and actual results may differ materially from any forward-looking statements,
which reflect the management's opinion only as of the date hereof. Such risks
and uncertainties include, but are not limited to, those associated with the
Company's acquisition and expansion strategy; integration of the Company's
affiliated physician practices and newly acquired imaging centers; the
Company's ability to achieve operating efficiencies and engage in successful
new development efforts; regulatory changes; reimbursement trends;
governmental policies; and general economic and business conditions. Such
risks and uncertainties, as well as additional risk factors which could affect
the forward-looking statements made in this press release, are included in the
Company's filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the year ended December 31, 2002, and its
periodic reports on Forms 10-Q and 8-K (if any).
We cannot guarantee that any forward-looking statements will be realized,
although we believe we have been prudent in our plans and assumptions.
Achievement of future results is subject to risks, uncertainties and
potentially inaccurate assumptions. Should known or unknown risks or
uncertainties materialize, or should underlying assumptions prove inaccurate,
actual results could vary materially from past results and those anticipated,
estimated or projected. Investors should bear this in mind as they consider
forward-looking statements.
Radiologix, Inc.
Summary Income Statements
(In thousands, except per share data)
3 Months Ended June 30, 6 Months Ended June 30,
2002 2003 2002 2003
Service fee revenue $71,495 $65,014 $142,486 $129,410
Salaries and benefits 20,130 20,692 40,249 42,000
Field supplies 4,508 4,579 8,675 8,707
Field rent and
lease expense 7,624 8,142 15,079 16,234
Other field expenses 11,096 10,983 22,723 21,474
Bad debt expense 6,065 5,595 11,977 11,145
Corporate general
and administrative 3,960 3,375 7,865 7,016
Severance and
other related costs -- 311 -- 1,280
Total costs
and expenses $53,383 $53,677 $106,568 $107,856
Equity in earnings
of investments 1,085 1,314 2,206 2,512
Minority interests in
consolidated subsidiaries (308) (331) (669) (530)
Depreciation and
amortization 6,244 6,967 12,342 13,837
Interest expense, net 4,754 4,567 9,615 9,243
Income from continuing
operations, before
income taxes $7,891 $786 $15,498 $456
Income tax expense 3,157 314 6,199 182
Income from continuing
operations 4,734 $472 $9,299 $274
Discontinued Operations
Income (loss) from
discontinued operations,
before income taxes $63 $(327) $(163) $(7,680)
Income tax expense
(benefit) 25 (131) (65) (3,072)
Income (loss) from
discontinued operations $38 $(196) $(98) $(4,608)
Net income (loss) $4,772 $276 $9,201 $(4,334)
Basic EPS $0.23 $0.01 $0.45 $(0.20)
Weighted average
shares - basic 20,712 21,695 20,370 21,695
Diluted EPS from
continuing operations $0.21 $0.02 $0.41 $0.01
Diluted earnings
(loss) per share $0.21 $0.01 $0.40 $(0.20)
Weighted average
shares - diluted 24,256 21,823 24,113 21,768
Radiologix, Inc.
Reconciliation of Non-GAAP Financial Information
(In thousands, except per share data)
3 Months Percent of 3 Months Percent of
6/30/2002 Revenue 2003 Revenue
Service Fee Revenue $71,495 100.0 $65,014 100.0
Income from
continuing operations $4,734 6.6 $ 472 0.7
Add: Income tax expense 3,157 4.4 314 0.5
Add: Interest
expense, net 4,754 6.6 4,567 7.0
Add: Depreciation
and amortization 6,244 8.7 6,967 10.7
EBITDA $18,889 26.4 $12,320 18.9
Add: Severance costs -- -- 311 0.5
Add: Contingency Payment
(included in "Other
field expenses") -- -- 500 0.8
EBITDA, excluding
severance costs
and changes $18,889 26.4 $13,131 20.2
6 Months, Percent of 6 Months Percent of
6/30/2002 Revenue 6/30/2003 Revenue
Service Fee Revenue $142,486 100.0 $129,410 100.0
Income from
continuing operations $9,299 6.5 $274 0.2
Add: Income tax expense 6,199 4.4 182 0.1
Add: Interest
expense, net 9,615 6.7 9,243 7.1
Add: Depreciation
and amortization 12,342 8.7 13,837 10.7
EBITDA $37,455 26.3 $23,536 18.2
Add: Severance costs -- -- 1,280 1.0
Add: Contingency Payment
(included in "Other
field expenses") -- -- 500 0.4
EBITDA, excluding
severance costs
and changes $37,455 26.3 $25,316 19.6
3 Months Ended
6/30/2002 3/31/2003 6/30/2003
Net income (loss) $4,772 $(4,610) $276
Add: Income tax expense (benefit) 25 (2,941) (131)
Add: Income (loss) from operations (63) 7,353 327
Income (loss) from
continuing operations $4,734 $(198) $472
Add: Severance and other
related costs, net of tax -- 581 487
Income from continuing operations,
excluding charges $4,734 $383 $959
Fully diluted shares outstanding 24,256 23,344 21,823
EPS from continuing operations,
excluding charges $0.20 $0.02 $0.04
Radiologix, Inc.
Summary Balance Sheets
(In thousands)
Audited Unaudited
December 31, 2002 June 30, 2003
CURRENT ASSETS
Cash and cash equivalents $19,153 $18,438
Accounts receivable, net of allowances 69,377 65,656
Due from affiliates 5,100 6,490
Assets held for sale -- 39
Other current assets 7,225 7,284
Total current assets $100,855 $97,907
Property and equipment, net 62,103 63,164
Investment in joint ventures 10,149 10,546
Goodwill 28,510 21,610
Intangible assets, net 72,151 70,290
Deferred financing cost, net 9,719 8,913
Other assets 12,604 7,922
Total assets $296,091 $280,352
CURRENT LIABILITIES
Accounts payable and accrued expenses $19,145 $10,867
Accrued physician retention 8,216 8,979
Accrued salaries and benefits 8,268 8,891
Current portion of long-term debt 266 266
Current portion of capital lease obligation 4,052 3,168
Other current liabilities 458 460
Total current liabilities $40,405 $32,631
Deferred income taxes 4,200 1,900
Long-term debt, net of current portion 160,412 160,224
Convertible debt 11,980 11,980
Capital lease obligations,
net of current portion 1,519 533
Deferred revenue 7,721 7,516
Other liabilities 147 123
Total liabilities $226,384 $214,907
Minority interests in
consolidated subsidiaries 1,340 1,409
Total stockholders' equity 68,367 64,036
Total liabilities and stockholders' equity $296,091 $280,352
SOURCE Radiologix, Inc.
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CONTACT:
Paul R. Streiber, Investor Relations of
Radiologix, Inc., +1-214-303-2702, or
paul.streiber@radiologix.com
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