radnet_8k-ex9901.htm

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.”

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.

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.

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.

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.

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.

	June 30,			December 31,
	2010			2009
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	20,476		$	10,094
Accounts receivable, net		94,351			87,825
Prepaid expenses and other current assets		13,068			9,990
Total current assets		127,895			107,909
PROPERTY AND EQUIPMENT, NET		187,924			182,571
OTHER ASSETS
Goodwill		124,178			106,502
Other intangible assets		52,852			54,313
Deferred financing costs, net		16,544			8,229
Investment in joint ventures		16,815			18,741
Deposits and other		2,792			2,406
Total assets	$	529,000		$	480,671
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	72,556		$	69,641
Due to affiliates		3,450			7,456
Current portion of notes payable		8,539			6,927
Current portion of deferred rent		654			560
Obligations under capital leases		11,323			14,121
Total current liabilities		96,522			98,705
LONG-TERM LIABILITIES
Deferred rent, net of current portion		10,363			8,920
Deferred taxes		277			277
Notes payable, net of current portion		481,934			416,699
Obligations under capital leases, net of current portion		8,628			13,568
Other non-current liabilities		19,611			17,263
Total liabilities		617,335			555,432
COMMITMENTS AND CONTINGENCIES

EQUITY DEFICIT
Common stock - $.0001 par value, 200,000,000 shares authorized;
36,979,725 and 36,259,279 shares issued and outstanding at
June 30, 2010 and December 31, 2009, respectively		4			4
Paid-in-capital		160,225			156,758
Accumulated other comprehensive loss		(2,754	)		(1,588	)
Accumulated deficit		(245,856	)		(229,989	)
Total Radnet, Inc.'s equity deficit		(88,381	)		(74,815	)
Noncontrolling interests		46			54
Total equity deficit		(88,335	)		(74,761	)
Total liabilities and equity deficit	$	529,000		$	480,671

RADNET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE DATA)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009

NET REVENUE	$	138,951		$	131,146		$	263,129		$	259,149

OPERATING EXPENSES
Operating expenses		106,205			99,716			204,844			196,729
Depreciation and amortization		13,876			13,212			27,151			26,386
Provision for bad debts		8,468			8,369			16,145			16,343
Loss on sale of equipment		51			277			155			303
Severance costs		435			340			567			357

Total operating expenses		129,035			121,914			248,862			240,118


INCOME FROM OPERATIONS		9,916			9,232			14,267			19,031

OTHER EXPENSES
Interest expense		12,729			12,578			22,696			26,171
Loss on extinguishment of debt		9,871			-			9,871			-
Gain on bargin purchase		-			(1,387	)		-			(1,387	)
Other expenses		1,150			792			1,150			418

Total other expenses		23,750			11,983			33,717			25,202

LOSS BEFORE INCOME TAXES AND EQUITY
IN EARNINGS OF JOINT VENTURES		(13,834	)		(2,751	)		(19,450	)		(6,171	)
Provision for income taxes		128			(13	)		(206	)		(50	)
Equity in earnings of joint ventures		1,971			2,453			3,832			5,088
NET LOSS		(11,735	)		(311	)		(15,824	)		(1,133	)
Net income attributable to noncontrolling interests		21			25			43			45
NET LOSS ATTRIBUTABLE TO RADNET, INC.
COMMON STOCKHOLDERS	$	(11,756	)	$	(336	)	$	(15,867	)	$	(1,178	)

BASIC AND DILUTED NET LOSS PER SHARE
ATTRIBUTABLE TO RADNET, INC.
COMMON STOCKHOLDERS	$	(0.32	)	$	(0.01	)	$	(0.43	)	$	(0.03	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted		36,916,905			35,924,279			36,641,953			35,920,246

	Six Months Ended
	June 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(15,824	)	$	(1,133	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		27,151			26,386
Provision for bad debts		16,145			16,343
Equity in earnings of joint ventures		(3,832	)		(5,088	)
Distributions from joint ventures		5,758			4,363
Deferred rent amortization		1,537			374
Deferred financing cost interest expense		1,365			1,340
Amortization of bond discount		51			-
Loss on sale of equipment		155			303
Loss on extinguishment of debt		9,871			-
Gain on bargin purchase		-			(1,387	)
Stock-based compensation		2,027			2,224
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions:
Accounts receivable		(18,967	)		(13,863	)
Other current assets		(2,990	)		2,211
Other assets		(386	)		328
Accounts payable and accrued expenses		435			478
Net cash provided by operating activities		22,496			32,879

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of imaging facilities		(29,809	)		(3,917	)
Proceeds from sale of imaging facilities					650
Purchase of property and equipment		(20,818	)		(15,594	)
Purchase of equity interest in joint ventures		-			(315	)
Net cash used in investing activities		(50,627	)		(19,176	)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and leases payable		(11,334	)		(11,666	)
Repayment of debt		(412,000	)		-
Proceeds from borrowings		482,360			-
Deferred financing costs		(17,239	)		-
Distributions paid to noncontrolling interests		(51	)		(59	)
Payments on line of credit		-			(336	)
Payments to counterparties of cash flow hedges		(3,272	)		(1,642	)
Proceeds from issuance of common stock		49			-
Net cash provided by (used in) financing activities		38,513			(13,703	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		10,382			-
CASH AND CASH EQUIVALENTS, beginning of period		10,094			-
CASH AND CASH EQUIVALENTS, end of period	$	20,476		$	-

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	16,857		$	21,832

RADNET, INC.

	Three Months Ended
	June 30,
	2010			2009

Income from Operations	$	9,916		$	9,232
Plus Depreciation and Amortization		13,876			13,212
Plus Equity in Earnings of Joint Ventures		1,971			2,453
Plus Non Cash Employee Stock Compensation		1,208			1,515
Plus Loss on Sale of Equipment		51			277
Less Net Income Attributable to Noncontrolling Interests		(21	)		(25	)
Subtotal		27,001			26,664
Plus Severance Costs		435			340
Adjusted EBITDA(1)	$	27,436		$	27,004

	Six Months Ended
	June 30,
	2010			2009

Income from Operations	$	14,267		$	19,031
Plus Depreciation and Amortization		27,151			26,386
Plus Equity in Earnings of Joint Ventures		3,832			5,088
Plus Non Cash Employee Stock Compensation		2,027			2,224
Plus Loss on Sale of Equipment		155			303
Less Net Income Attributable to Noncontrolling Interests		(43	)		(45	)
Subtotal		47,389			52,987
Plus Severance Costs		567			357
Adjusted EBITDA(1)	$	47,956		$	53,344

RADNET PAYMENTS BY PAYORS *

	Three Months Ended June 30, 2010		Three Months Ended March 31, 2010		Three Months Ended December 31, 2009

Commercial Insurance		55.5		55.9		55.9
Medicare		19.5		19.2		19.7
Capitation		15.6		15.2		15.3
Workers Compensation/Personal Injury		4.1		3.9		3.4
Medicaid		3.0		3.1		3.4
Other		2.3		2.6		2.3
		100.0		100.0		100.0


RADNET PAYMENTS BY MODALITY *

	Three Months Ended June 30, 2010		Three Months Ended March 31, 2010		Three Months Ended December 31, 2009

MRI		34.4		34.3		33.9
CT		17.5		17.8		19.0
PET/CT		6.2		6.4		5.9
X-ray		10.1		10.0		9.7
Ultrasound		10.9		10.6		10.4
Mammography		15.9		15.8		16.4
Nuclear Medicine		1.7		1.8		1.4
Other		3.2		3.3		3.2
		100.0		100.0		100.0


RADNET AVERAGE PAYMENTS BY MODALITY *

	Three Months Ended June 30, 2010		Three Months Ended March 31, 2010		Three Months Ended December 31, 2009

MRI	$	500	$	501	$	502
CT		306		306		307
PET/CT		1,495		1,495		1,492
X-ray		40		40		40
Ultrasound		108		107		109
Mammography		134		135		134
Nuclear Medicine		322		323		321
Other		125		126		125

Note

* Based upon global payments received from consolidated Imaging Centers from that year's dates of service.

Excludes payments from hospital contracts, Breastlink, Center Management Fees and other miscellaneous operating activities.

(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.

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