Radiologix, Inc. Announces Third Quarter 2003 Results

		RADIOLOGIX LOGO Based in Dallas, Texas, Radiologix is a leading radiology services company that develops, consolidates and manages radiology service networks. These networks consist primarily of free-standing radiology centers and locations at which the company provides radiology services that have been outsourced by hospitals. The company's objective is to develop and operate networks of radiology facilities to provide a full spectrum of radiology services and extensive geographic coverage in existing market areas and in selected new markets. (PRNewsFoto) [JL] DALLAS, TX USA

DALLAS, Nov. 6 /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, 2003, and provided updates on certain corporate activities. Third Quarter 2003 Results For the third quarter 2003, Radiologix reported service fee revenue of $64.4 million versus $69.6 million for the third quarter 2002, a 7.6 percent decrease, resulting primarily from lower volume related to continued competitive pressures in our key markets. Radiologix reported a net loss of $646,000 for the third quarter 2003, compared to net income of $3.2 million for the third quarter 2002, and reported income from continuing operations of $36,000 for the third quarter 2003 compared to income from continuing operations of $3.4 million for the third quarter 2002 Radiologix reported a net loss per diluted share for the third quarter 2003 of $0.03, compared to diluted earnings per share ("EPS") of $0.14 for the third quarter 2002. For the third quarter 2003, Radiologix reported diluted EPS of $0.00 from continuing operations compared to diluted EPS from continuing operations of $0.14 for the third quarter 2002. EBITDA (as defined and described below under "EBITDA" and reconciled to the most comparable GAAP financial measure on page 10 below) from continuing operations, was $11.4 million for the third quarter 2003, compared to $16.8 million for the third quarter 2002. EBITDA from continuing operations as a percent of service fee revenue was 17.7 percent for the third quarter 2003 compared to 24.1 percent for the third quarter 2002. Cash flow generated from operations was $11.3 million for the third quarter 2003, compared to $10.3 million for the third quarter 2002. Third quarter 2003 results were impacted by a number of factors including: * lower volume related to continued competitive pressures in key markets, * Hurricane Isabel, which disrupted our Mid-Atlantic operations, closing some of our imaging centers for up to three days, and * to a lesser extent this year, the typical seasonality we see in the third quarter that generally makes it our weakest quarter. "Despite these overall quarterly results, which were complicated by weather and other factors, we did have some organic growth in a few of our markets," said Stephen D. Linehan, president and C.E.O. of Radiologix. "We are working hard on improving results across the country, especially in our Mid-Atlantic region, and our cash position and liquidity continue to be strong." Year To Date ("YTD") September 30 Results Radiologix reported YTD 2003 service fee revenue of $193.4 million versus $211.7 million for YTD 2002, an 8.6 percent decrease. Radiologix incurred a net loss of $5.0 million for YTD 2003, compared to net income of $12.4 million for YTD 2002. For YTD 2003, Radiologix reported income from continuing operations excluding charges (as described below under "Charges") of $1.4 million compared to income from continuing operations of $12.6 million for YTD 2002. Radiologix reported a net loss per diluted share for YTD 2003 of $0.23, compared to diluted EPS of $0.54 for YTD 2002, and diluted EPS from continuing operations excluding charges of $0.06 for YTD 2003 compared to diluted EPS of $0.55 for YTD 2002. EBITDA from continuing operations excluding charges was $36.7 million for YTD 2003, compared to $54.2 million for YTD 2002, a decrease of 32.3 percent. EBITDA from continuing operations excluding charges as a percent of service fee revenue was 19.0 percent for YTD 2003 compared to 25.6 percent for YTD 2002. Cash flow generated from operations was $21.5 million for YTD 2003, compared to $30.8 million for YTD 2002. Balance Sheet Cash and cash equivalents were $24.7 million at September 30, 2003 compared to $19.2 million at December 31, 2002. Currently, Radiologix's $35 million revolving line credit is undrawn and the company has access to $11.6 million of the $35.0 million, given the constraints of certain financial covenants. Total debt at September 30, 2003, was $175.0 million, compared to total debt of $178.2 million at December 31, 2002. Net debt (total debt less cash and cash equivalents) at September 30, 2003, was $150.3 million, compared to net debt of $159.1 million at December 31, 2002. Days sales outstanding ("DSOs") was 68 days at September 30, 2003, compared to 73 days at December 31, 2002 and 70 days at September 30, 2002. Radiologix remains in compliance with all covenants related to its debt instruments. Charges Radiologix is reporting one additional single-modality imaging center in discontinued operations in our financial statements for the third quarter 2003. As a result, Radiologix recognized a $500,000 non-cash goodwill impairment charge for the third quarter 2003. Three of the single-modality-imaging centers that were presented as discontinued operations as of June 30, 2003, were sold as of September 30, 2003. Concurrent with the sale of these sites, Radiologix incurred a $300,000 charge to earnings (for an equipment lease buyout) that was recognized in discontinued operations. 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 (as described below under "Other Matters"). Discontinued Operations As of June 30, 2003, Radiologix reported seven single-modality imaging centers in discontinued operations. At September 30, 2003, one imaging center was added to discontinued operations and three imaging centers were sold for the assumption of certain obligations. Of the five remaining imaging centers in discontinued operations, we expect that by December 31, 2003, we will have sold two centers and closed one. HIPAA EDI As previously disclosed in various press releases and on various conference calls, Radiologix worked diligently to ensure our compliance with the Health Insurance Portability and Accountability Act's ("HIPAA") electronic data interchange ("EDI") standard transaction and code set requirements ("the HIPAA EDI requirements") by the October 16, 2003 deadline, and Radiologix met this compliance deadline. We are able to produce compliant transactions and we continue to test with our trading partners to ensure that there are no unexpected claim or payment delays. In September, the Center for Medicare and Medicaid Studies ("CMS") announced that it would implement a contingency plan to accept noncompliant electronic transactions after the October 16, 2003 compliance deadline to ensure processing of claims from providers who would not meet the deadline and otherwise would have had their Medicare claims rejected. CMS will regularly reassess provider readiness and determine how long the contingency plan will be in effect. Radiologix continues to believe that there may be some cash flow disruption once CMS and other payor contingency plans are no longer in effect. Legal Proceedings The lawsuits between Radiologix, M&S Imaging Associates, Inc. (San Antonio) and its member physicians have been resolved. Radiologix, M&S Imaging Associates, Inc. and its member physicians have settled all claims set forth in their lawsuits and related arbitration proceedings. The settlement agreement calls for the parties to sever their business relationship as of June 30, 2004. According to the settlement agreement, "Radiologix, M&S Imaging and its member physicians have reached an amicable resolution of their differences. The parties have made accommodations for pursuing their respective business interests." Terms of the Settlement Agreement are confidential. Other Matters As previously discussed, as part of a routine, ongoing compliance and legal review, Radiologix 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. Subsequently, Radiologix has qualified for the Provider Self-disclosure Protocol of the Department of Health and Human Services' Office of the Inspector General ("OIG"). The Provider Self-disclosure Protocol is a self- reporting program that provides for minimizing the cost and disruption associated with on-going investigations of the OIG. 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 charges (severance and/or other) is used to show adjustments to EBITDA for comparative purposes to previous periods. A reconciliation of EBITDA to the most comparable GAAP financial measure may be found on page 10 below. 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.O.O., that will be broadcast live over the Internet on Thursday, November 6, 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 from the "Investor Relations" drop- down menu, click on "Conference Calls & Presentations." If you are unable to participate during the live Webcast, the Third Quarter 2003 Results Conference Call will be archived on Radiologix's Web site, http://www.radiologix.com. To access the replay, from the "Investor Relations" drop-down menu, click on "Conference Calls & Presentations." 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 owns or operates 110 imaging centers located in 16 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 November 6, 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; the enforceability of its Service Agreements and related documents; 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 9 Months Ended Sept. 30, Sept. 30, 2002 2003 2002 2003 Service fee revenue $69,624 $64,365 $211,670 $193,365 Salaries and benefits 21,188 21,145 61,350 63,054 Field supplies 4,190 4,455 12,841 13,144 Field rent and lease expense 7,495 8,135 22,452 24,245 Other field expenses 11,184 10,572 33,798 31,933 Bad debt expense 6,007 5,578 17,940 16,680 Corporate general and administrative 3,712 3,560 11,577 10,576 Severance and other related costs -- -- -- 1,280 Total costs and expenses $53,776 $53,445 $159,958 $160,912 Equity in earnings of investments 1,212 647 3,419 3,159 Minority interests in consolidated subsidiaries (286) (200) (955) (730) Depreciation and amortization 6,613 6,820 18,935 20,657 Interest expense, net 4,560 4,486 14,167 13,723 Income from continuing operations, before income taxes $5,601 $61 $21,074 $502 Income tax expense 2,241 25 8,430 201 Income from continuing operations $3,360 $36 $12,644 $301 Discontinued operations Loss from discontinued operations, before income taxes $(282) $(1,137) $(420) $(8,802) Income tax benefit (113) (455) (168) (3,521) Loss from discontinued operations $(169) $(682) $(252) $(5,281) Net income (loss) $3,191 $(646) $12,392 $(4,980) Basic earnings (loss) per share $0.15 $(0.03) $0.60 $(0.23) Weighted average shares - basic 21,489 21,741 20,747 21,711 Diluted EPS from continuing operations $0.14 $0.00 $0.55 $0.01 Diluted earnings (loss) per share $0.14 $(0.03) $0.54 $(0.23) Weighted average shares - diluted 24,234 22,224 24,158 21,907 Radiologix, Inc. Reconciliation of Non-GAAP Financial Information (In thousands, except per share data) 3 Months Percent of 3 Months Percent of 9/30/2002 Revenue 9/30/2003 Revenue Service fee revenue $69,624 100.0 $64,365 100.0 Income from continuing operations $3,360 4.8 $36 0.1 Add: Income tax expense from continuing operations 2,241 3.2 25 0.0 Add: Interest expense, net 4,560 6.6 4,486 7.0 Add: Depreciation and amortization 6,613 9.5 6,820 10.6 EBITDA from continuing operations $16,774 24.1 $11,367 17.7 9 Months, Percent of 9 Months Percent of 9/30/2002 Revenue 9/30/2003 Revenue Service fee revenue $211,670 100.0 $193,365 100.0 Income from continuing operations $12,644 6.0 $301 0.2 Add: Income tax expense from 8,430 4.0 201 0.1 continuing operations Add: Interest expense, net 14,167 6.7 13,723 7.1 Add: Depreciation and amortization 18,935 8.9 20,657 10.7 EBITDA from continuing operations $54,176 25.6 $34,882 18.0 Add: Severance costs -- -- 1,280 0.7 Add: Contingency payment (included in Other field expenses) -- -- 500 0.3 EBITDA from continuing operations, excluding severance costs and charges $54,176 25.6 $36,662 19.0 3 Mos. 3 Mos. YTD YTD Ended Ended Ended Ended 9/30/2002 9/30/2003 9/30/2002 9/30/2003 Net income (loss) $3,191 $(646) $12,392 $(4,980) Less: Income tax benefit from discontinued operations 113 455 168 3,521 Add: Loss from discontinued operations 282 1,137 420 8,802 Income from continuing operations $3,360 $36 $12,644 $301 Add: Severance costs, net of tax -- -- -- 768 Add: Contingency payment (included in Other field expenses), net of tax -- -- -- 300 Income from continuing operations, excluding severance costs and charges $3,360 $36 $12,644 $1,369 Fully diluted shares outstanding 24,234 22,224 24,158 21,907 EPS from continuing operations, excluding severance costs and charges $0.14 $0.00 $0.55 $0.06 Radiologix, Inc. Summary Balance Sheets (In thousands) Audited Unaudited December 31, September 30, 2002 2003 CURRENT ASSETS Cash and cash equivalents $19,153 $24,717 Accounts receivable, net of allowances 69,377 62,688 Due from affiliates 5,100 5,474 Assets held for sale -- 39 Other current assets 7,225 8,221 Total current assets $100,855 $101,139 Property and equipment, net 62,103 62,896 Investment in joint ventures 10,149 10,367 Goodwill 28,510 21,110 Intangible assets, net 72,151 69,337 Deferred financing cost, net 9,719 8,511 Other assets 12,604 9,068 Total assets $296,091 $282,428 CURRENT LIABILITIES Accounts payable and accrued expenses $19,145 $15,735 Accrued physician retention 8,216 9,570 Accrued salaries and benefits 8,268 7,023 Current portion of long-term debt 266 261 Current portion of capital lease obligation 4,052 2,238 Other current liabilities 458 511 Total current liabilities $40,405 $35,338 Deferred income taxes 4,200 1,900 Long-term debt, net of current portion 160,412 160,209 Convertible debt 11,980 11,980 Capital lease obligations, net of current portion 1,519 313 Deferred revenue 7,721 7,414 Other liabilities 147 164 Total liabilities $226,384 $217,318 Minority interests in consolidated subsidiaries 1,340 1,470 Total stockholders' equity 68,367 63,640 Total liabilities and stockholders' equity $296,091 $282,428