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17 August, 2010

RadNet Reports Second Quarter Financial Results and Reaffirms 2010 Full-Year Guidance

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FOR IMMEDIATE RELEASE

  • Revenue for the quarter was $139.0 million and Adjusted EBITDA(1) was $27.4 million; increases of 6.0% and 1.6%, respectively, over the prior year’s quarter

  • On a sequential basis, compared with the first quarter of 2010, Revenue and Adjusted EBITDA(1) increased 11.9% and 33.7%, respectively

  • Procedural volumes show improvement;  Overall procedural volumes increased 4.7% over the prior year’s quarter and 10.7% sequentially compared with the first quarter of 2010

  • RadNet’s per share net loss of $(0.32) for the quarter(compared with a per share loss of $(0.01)in the prior year) is primarily the result of a $9.9 million loss, or$(0.27) per share, on extinguishment of debt resulting from our recent refinancing transaction and a $1.5 million non-cash charge, or $(0.04) per share, from our interest rate swaps

  • Recent refinancing transaction has brought total liquidity to approximately $195 million, inclusive of $20.5 million of cash balance, $100 million available revolving credit facility and the $75 million accordion feature of our senior secured loans

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented “We are pleased with the improvements we saw in our financial and operating results this quarter from our first quarter’s performance.  Our Revenue, Adjusted EBITDA(1) and aggregate procedural volumes increased by double-digit growth rates from the first quarter of this year.  Furthermore, our Revenue, Adjusted EBITDA(1)  and procedural volumes in the second quarter exceeded last year’s second quarter levels.”

Dr. Berger continued, “There has been much publicly written about the fact that physician office visits in 2010 have decreased on average between 5% and 10% as compared with the first six months of last year.  The recent experiences of our marketing and sales teams, who call on physician offices, support these findings.  Despite this, our same center performance has exceeded these industry metrics, which suggests that we are gaining market share in our core regions and illustrates the strength of our operating model.”

“The challenging operating environment has brought us new opportunities to expand our business through acquisitions and to broaden the scope of our product and service offering.  During the quarter, we completed important acquisitions of Truxtun Medical Group and of certain assets from the Sonix Medical Resources bankruptcy proceeding,” added Dr. Berger.  “Our competitors continue to experience significant procedural volume decreases, reduced access to available capital financing and financial pressure from lower reimbursement and cost structures that lack economies of scale.  In contrast, RadNet remains a strong cash flow generator, with almost $200 million in liquidity under our existing capital structure.   As such, we believe we are well positioned to capitalize on business and acquisition opportunities.”

Second Quarter Financial Results

For the second quarter of 2010, RadNet reported Revenue, Adjusted EBITDA(1) and Net Loss of $139.0 million, $27.4 million and $(11.8) million, respectively.  Revenue increased $7.8 million (or 6.0%), Adjusted EBITDA(1) increased $0.4 million (or 1.6%) and Net Loss increased $11.4 million, respectively, over the second quarter of 2009.  On a sequential basis, compared to the first quarter of 2010, Revenue increased $14.8 million (or 11.9%), Adjusted EBITDA(1) increased $6.9 million (or 33.7%) and Net Loss increased $7.6 million, respectively.  Net Loss for the second quarter was $(0.32) per share, compared to a Net Loss of $(0.01) per share in the second quarter of 2009 (based upon a weighted average number of fully diluted shares outstanding of 36.9 million and 35.9 million for these periods in 2010 and 2009, respectively).  Affecting Net Loss in the second quarter of 2010 were certain non-cash expenses and non-recurring items including:  $9.9 million loss on extinguishment of debt related to the write-off of deferred financing fees associated with our refinanced credit facilities; $1.5 million non-cash loss on the fair value adjustments and related amortization of interest rate swaps associated with the Company’s credit facilities, $1.2 million of non-cash employee stock compensation expense resulting from the vesting of certain options and warrants; $435,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $51,000 loss on the disposal of certain capital equipment; and $695,000 of non-cash Deferred Financing Expense related to the amortization of financing fees paid as part of our new credit facilities and senior unsecured notes.  The aggregate affect of these items totaled $(0.37) per share during the quarter.

For the second quarter of 2010, as compared to the prior year’s second quarter, MRI volume increased 6.5%, CT volume decreased 1.6% and PET/CT volume decreased 3.5%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 4.7% over the prior year’s second quarter.  On a same-center basis, including only those centers which were part of RadNet for both the second quarters of 2010 and 2009, MRI volume decreased 2.9%, CT volume decreased 10.0% and PET/CT volume decreased 5.1%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, decreased 4.1% over the prior year’s same quarter.

Dr. Berger continued, “The refinancing transaction we completed this quarter was a transforming capital event for our Company.  It has substantially increased our financial flexibility and has favorably positioned us to participate in the accelerating consolidation of our industry.”

“We are very focused on initiatives designed to improve our operating margins.  As our industry continues to experience procedural volume pressure from economic and healthcare industry factors, we will continue to drive down costs from our business.  Scale and breadth of service offering are becoming increasingly important in our industry to create efficiency,” concluded Dr. Berger.

Six Month Financial Results

For the six months ended June 30, 2010, RadNet reported Revenue, Adjusted EBITDA(1) and Net Loss of $263.1 million, $53.3 million and $(15.9) million, respectively.  Revenue increased $4.0 million (or 1.5%), Adjusted EBITDA(1) decreased $5.4 million (or 10.1%) and Net Loss increased $14.7 million, respectively, over the first six months of 2009.  Net Loss for the six month period ended June 30, 2010 was $(0.43) per share, compared to a Net Loss of $(0.03) per share in corresponding six month period of 2009 (based upon a weighted average number of fully diluted shares outstanding of 36.6 million and 35.9 million for these periods in 2010 and 2009, respectively).  Affecting Net Loss in the first six months of 2010 were certain non-cash expenses and non-recurring items including:  $9.9 million loss on extinguishment of debt related to the write-off of deferred financing fees associated with our refinanced credit facilities; $1.5 million non-cash loss on the fair value adjustments and related amortization of interest rate swaps associated with the Company’s credit facilities, $2.0 million of non-cash employee stock compensation expense resulting from the vesting of certain options and warrants; $567,000 of severance paid in connection with headcount reductions; $155,000 loss on the disposal of certain capital equipment; and $1.4 million of non-cash Deferred Financing Expense related to the amortization of financing fees paid as part of our new credit facilities and senior unsecured notes. The aggregate affect of these items totaled $(0.42) per share during the quarter.

2010 Guidance:

For its 2010 fiscal year, RadNet reaffirms its previously announced guidance ranges as follows:

Revenue$540 million - $560 million
Adjusted EBITDA(1)$107 million - $111 million
Capital Expenditures$34 million - $38 million
Cash Interest Expense$42 million - $47 million
Free Cash Flow(2)$25 million - $35 million

Conference Call for Today

Dr. Howard Berger, President and Chief Executive Officer, and Mark Stolper, Executive Vice President and Chief Financial Officer, will host a conference call today at 10:30 a.m. Eastern Daylight Time.  During the call, management will discuss the Company's 2010 second quarter financial results.

Conference Call Details:

Date: Monday, August 9, 2010
Time: 10:30 a.m. EDT
Dial In-Number: 1-888-490-2763
International Dial-In Number: 1-719-457-2657

It is recommended that participants dial in approximately five to ten minutes prior to the start of the 10:30 a.m. call. A telephonic replay of the conference call may be accessed approximately two hours after the call through August 16, 2010, by dialing 1-877-870-5176 or 1-858-384-5517 for international callers and entering the replay access code 7320194.

There will also be a simultaneous live webcast of the conference call which can be accessed under "News " in the RadNet Investor Relations section of the company website at www.radnet.com or you may use the link audio feed and archived recording of the conference call available at http://viavid.net/dce.aspx?sid=000078D1.

Regulation G: GAAP and Non-GAAP Financial Information

This release contains certain financial information not reported in accordance with GAAP. The Company uses both GAAP and non-GAAP metrics to measure its financial results.  The Company believes that, in addition to GAAP metrics, these non-GAAP metrics assist the Company in measuring its cash-based performance.  The Company 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.  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 which follow.

About RadNet, Inc.

RadNet, Inc. is a national market leader providing high-quality, cost-effective diagnostic imaging services through a network of 191 fully-owned and operated outpatient imaging centers.  RadNet’s core markets include California, Maryland, Delaware, New Jersey and New York.  Together with affiliated radiologists, and inclusive of full-time and per diem employees and technicians, RadNet has a total of approximately 4,000 employees.  For more information, visit http://www.radnet.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning successfully integrating acquired operations, successfully achieving 2010 financial guidance, achieving cost savings, continuing to grow its business by generating patient referrals and contracts with radiology practices, and receiving third-party reimbursement for diagnostic imaging services, are forward-looking statements within the meaning of the Safe Harbor. Forward-looking statements are based on management's current, preliminary expectations and are subject to risks and uncertainties, which may cause the Company's actual results to differ materially from the statements contained herein. Further information on potential risk factors that could affect RadNet's business and its financial results are detailed in its most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, especially guidance on future financial performance, which speaks only as of the date they are made. RadNet undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

RadNet, Inc.
Mark Stolper, 310-445-2800
Executive Vice President and Chief Financial Officer

Alliance Advisors, LLC
Alan Sheinwald, President
914-669-0222
asheinwald@allianceadvisors.net

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Footnotes

(1) The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, each from continuing operations and adjusted for losses or gains on the disposal of equipment, other income or loss, debt extinguishments and non-cash equity compensation.  Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taken place during the period.

Adjusted EBITDA is reconciled to its nearest comparable GAAP financial measure.  Adjusted EBITDA is a non-GAAP financial measure used as analytical indicator by RadNet management and the healthcare industry to assess business performance, and is a measure of leverage capacity and ability to service debt.  Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation or as alternatives 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 Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented, may not be comparable to other similarly titled measures of other companies.

(2) As noted above, the Company defines Free Cash Flow as Adjusted EBITDA less total Capital Expenditures (whether completed with cash or financed) and Cash Interest paid.  Free Cash Flow is a non-GAAP financial measure.  The Company uses Free Cash Flow because the Company believes it provides useful information for investors and management because it measures our capacity to generate cash from our operating activities. Free Cash Flow does not represent total cash flow since it does not include the cash flows generated by or used in financing activities. In addition, our definition of Free Cash Flow may differ from definitions used by other companies.

Free Cash Flow should not be considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation or as alternatives 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 Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented, may not be comparable to other similarly titled measures of other companies.

 

17 August, 2010