Radnet first-quarter revenue down, net loss up

• Revenue was $124.2 million and Adjusted EBITDA was $20.5 million; decreases of 3.0% and 22.1%, respectively, over the prior year's quarter
• For the quarter, RadNet reports a per share net loss of $(0.11) compared to a per share loss of $(0.02 )in the prior year
• RadNet reduced Total Debt during the quarter by $5.5 million
• As previously disclosed, results were significantly impacted by severe weather conditions in the East Coast during January and February; per day volumes improved in March and April

RadNet, Inc. (Nasdaq:RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 190 fully-owned and operated outpatient imaging centers, today reported financial results for its first quarter of 2010.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented, "The unusually severe weather we experienced in our East Coast Operations had an extraordinary effect on our center level volumes in our Mid-Atlantic, New York and New Jersey operations in January and February. Because the vast majority of our expenses are fixed and were higher relative to the first quarter of 2009 because of acquisitions we completed over the last twelve months, our lower revenue flowed directly through to our Adjusted EBITDA and Net Income. Based on more normalized per-day procedural volumes we experienced in March and April, we estimate that we lost approximately $4.5 million of revenue and $3.5 million of EBITDA in January and February."

Financial Results

For the first quarter of 2010, the Company reported Revenue, Adjusted EBITDA and Net Loss of $124.2 million, $20.5 million and $(4.1) million, respectively. Revenue decreased $3.8 million (or 3.0%), Adjusted EBITDA decreased $5.8 million (or 22.1%) and Net Loss increased $3.3 million, respectively, over the first quarter of 2009. Net Loss for the first quarter was $(0.11) per share, compared to a Net Loss of $(0.02) per share in the first quarter of 2009 (based upon a weighted average number of fully diluted shares outstanding of 36.4 million and 35.9 million for these periods in 2010 and 2009, respectively). Affecting Net Income in the first quarter of 2010 were certain non-cash expenses and non-recurring items including: $819,000 of non-cash employee stock compensation expense resulting from the vesting of certain options and warrants; $132,000 of severance paid in connection with headcount reductions related to cost savings initiatives from previously announced acquisitions; $104,000 loss on the disposal of certain capital equipment; and $670,000 of non-cash Deferred Financing Expense related to the amortization of financing fees paid as part of our existing credit facilities.

For the first quarter of 2010, as compared to the prior year's first quarter, MRI volume increased 1.7%, CT volume decreased 6.1% and PET/CT volume decreased 2.2%. Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, decreased 0.4% over the prior year's first quarter.  On a same-center basis, including only those centers which were part of RadNet for both the first quarters of 2010 and 2009, MRI volume decreased 5.5%, CT volume decreased 10.9% and PET/CT volume decreased 2.3%. Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, decreased 5.3% over the prior year's same quarter.

Dr. Berger continued, "Aside from the effects of the unusually severe weather on our business, we experienced lighter volumes in January and February than in past years. Although we cannot determine the reasons for this with certainty, our referring physicians reported to us that they also observed decreased levels of office visits during these months. It is important to note that the 2010 financial guidance we released a couple of weeks ago incorporated these first quarter results as well as the effects of the previously disclosed $3 million to $4 million negative impact we will experience this year from the 2010 Medicare reimbursement cuts."

"Despite our disappointment regarding the lost revenue during the quarter, I believe events that took place during and subsequent to the first quarter set the stage for achieving the results as forecasted in our 2010 guidance. First, we noted significant volume improvement in March and April. Second, we successfully completed our debt refinancing plan, which extended the maturity of our debt to 2015, 2016 and 2018 for our revolving credit facility, senior term loan and senior unsecured notes, respectively. The refinancing plan materially enhances our liquidity by making a new $100 million revolving credit facility available to us, by providing the capital we required to complete previously announced acquisitions and by adding approximately $20 million of cash to our balance sheet. Third, we completed the previously announced acquisition of Truxtun Medical Group, which gives us a platform in Kern County, CA from which we believe we can grow a significantly larger presence. Finally, we completed the acquisition of certain facilities in New York and New Jersey from the bankruptcy proceedings of Sonix Medical Resources," added Dr. Berger.

2010 Guidance:

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

The above guidance incorporates the partial-year contribution of the acquisitions of Truxtun Medical Group (completed in April 2010), the New Jersey operating subsidiary of Health Diagnostics (expected to be completed in May 2010) and the recently completed acquisition of three centers purchased in a bankruptcy proceeding of Sonix Medical Resources, Inc. Also, as previously disclosed, incorporated into the guidance is an estimated $3 million to $4 million decrease to Revenue and EBITDA from lower Medicare Reimbursement associated with the 2010 Medicare Fee Schedule passed in November 2009 (as amended by the House of Representatives Reconciliation Bill passed in the first fiscal quarter of 2010).