Radiologix, Inc. Reports First Quarter 2006 Results

DALLAS, May 4  /PRNewswire-FirstCall/ -- Radiologix, Inc. (AMEX:RGX), a leading national provider of diagnostic imaging services, today announced financial results for its first quarter ended March 31, 2006.

  Select Financial Information
  (in thousands of dollars)                         For the Three Months
                                                        Ended March 31,
                                                    2006           2005
                                                              (As restated)

  Service fee revenue                              $65,117        $62,751
  Service fee revenue excluding terminated
   operations                                      $65,117        $61,821

  EBITDA from continuing operations (A)            $12,736        $11,884
  EBITDA from continuing operations excluding
   terminated operations (A)                       $12,721        $11,552

  Net income                                        $2,036           $953
  Income from continuing operations                 $1,799         $1,387
  Income from continuing operations excluding
   terminated operations (A)                        $1,784         $1,056

   (A) As defined and reconciled below

  First Quarter 2006 Results


For the first quarter ended March 31, 2006, service fee revenue was $65.1 million, compared to $62.8 million for the first quarter of 2005.  Radiologix earned net income of $2.0 million, or $0.09 per diluted share, compared to net income of $1.0 million or $0.04 per diluted share for the first quarter of 2005.

   * Service fee revenue excluding terminated operations was $65.1 million,
     compared to $61.8 million for the first quarter of 2005.

   * Income from continuing operations was $1.8 million, compared to $1.4
     million for the first quarter of 2005.

   * Income from continuing operations excluding terminated operations was
     $1.8 million, compared to $1.1 million for the first quarter of 2005.

   * EBITDA was $12.7 million, compared to $11.9 million for the first
     quarter of 2005.

   * EBITDA excluding terminated operations was $12.7 million, compared to
     $11.6 million for the first quarter of 2005.

  Restated 2005 Results


As we discussed in our 2005 Form 10-K, in addition to restating our financial statements for the year ended December 31, 2004, the Company restated its financial statements for the three quarters ended March 31, June 30, and September 30, 2005 to correct the accounting treatment of the PresGar equipment lease contract acquired on October 31, 2004, for $13.9 million. This restatement also resulted in a revision of our tax expense for the three months ended March 31, 2005.  The impact of the restatement in the first quarter of 2005 is a reduction in depreciation and amortization expense of $0.2 million, a reduction in income tax expense of $0.2 million, and an increase in net income of $0.4 million.  The financial information contained in this press release reflects these restated amounts.

Charges and Gains

Radiologix recorded the following pre-tax charges and gains to continuing operations, excluding terminated operations, during the first quarter of 2006 and 2005:

   * $387,000 in the first quarter of 2006 and $101,000 in the first quarter
     of 2005 to record compensation expense for restricted stock awards and
     stock options outstanding; and

   * $807,000 in the first quarter of 2006 and $325,000 in the first quarter
     of 2005 to record gains on sales of diagnostic imaging equipment.

  Income Taxes


Due to losses for the last three years, it is uncertain if our deferred tax assets will be realized.  Valuation allowances for net deferred tax assets were recorded in 2004 and 2005.  The tax provision of $0.1 million for the first quarter ended March 31, 2006, is for state income taxes and federal alternative minimum tax.

Balance Sheet

Cash and cash equivalents were $44.9 million at March 31, 2006, compared to $36.0 million at December 31, 2005, primarily reflecting continued strong cash collections in the first quarter of 2006.

Net debt (total debt less cash and cash equivalents and restricted cash) was $119.8 million at March 31, 2006, compared to net debt of $128.7 million at December 31, 2005.  Total debt was $170.3 million at March 31, 2006 and December 31, 2005.

Days sales outstanding (DSOs) was 44 days for March 31, 2006 compared to 48 days for December 31, 2005.

Sarbanes-Oxley Section 404

As noted in our 2005 Form 10-K, subsequent to December 31, 2005, but prior to the finalization of our 2005 consolidated financial statements, Radiologix placed into operation new controls to address the material weakness we identified in our accounting for lease terminations.  These new controls include a more thorough and detailed review of material unusual transactions by senior financial officers, and outside accounting experts if deemed necessary.

We believe these new controls have remediated the material weakness that existed as of December 31, 2005, and that these controls operated effectively during the three months ended March 31, 2006.

Regulation G: GAAP and Non-GAAP Financial Information

This release contains certain financial information not derived in accordance with GAAP.  Radiologix uses both GAAP and non-GAAP metrics to measure its financial results.  We believe that, in addition to GAAP metrics, these non-GAAP metrics assist Radiologix in measuring its cash-based performance.

Radiologix 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.

As Radiologix has historically reported non-GAAP results to the investment community, management also believes the inclusion of non-GAAP measures provides consistency in its financial reporting.

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 below.

Income from continuing operations is defined as income from continuing operations calculated in accordance with GAAP.

Income from continuing operations excluding terminated operations is defined as income from continuing operations excluding terminated San Antonio and certain Mid-Atlantic operations.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization, each from continuing operations, plus restricted stock compensation expense, and is reconciled to its nearest comparable GAAP financial measure.

EBITDA from continuing operations excluding terminated operations is defined as EBITDA excluding terminated San Antonio and certain Mid-Atlantic operations.

EBITDA and EBITDA from continuing operations excluding terminated operations are non-GAAP financial measures used as analytical indicators by Radiologix management and the healthcare industry to assess business performance.  They also serve as measures of leverage capacity and ability to service debt.

EBITDA and EBITDA from continuing operations excluding terminated operations should not be considered measures of financial performance under GAAP, and the items excluded from EBITDA and EBITDA from continuing operations excluding terminated operations 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 and EBITDA from continuing operations excluding terminated operations are not measurements determined in accordance with GAAP and are therefore susceptible to varying methods of calculation, these metrics, as presented, may not be comparable to other similarly titled measures of other companies.

Conference Call

In connection with this press release, you are invited to listen to our conference call with Sami S. Abbasi, president and chief executive officer, and Michael N. Murdock, senior vice president and chief financial officer, on Thursday, May 4, 2006, at 8 a.m. Central Time / 9 a.m. Eastern Time.

You may access the call by dialing [phone] and entering code 6394809.  A replay of the call will be available by dialing [phone] and entering code 6394809.

In addition, the conference call will be broadcast live over the Internet. 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 First Quarter 2006 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 owned or operated 69 diagnostic imaging centers located in 7 states as of March 31, 2006.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").  Forward-looking statements include words such as "may," "will," "would," "could," "likely," "estimate," "intend," "plan," "continue," "believe," "expect" or "anticipate" and other similar words, and include all discussions about our acquisition and development plans.  We do not guarantee that the events described in this press release will occur as described, or that any positive trends noted in this press release will continue.

These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's reasonable estimates of future results or trends.  Although we believe that our plans and objectives reflected in, or suggested by, such forward-looking statements are reasonable, we may not achieve such plans or objectives.  You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this press release.  You should read this press release completely and with the understanding that actual future results may be materially different from what we expect.  We will not update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations include, but are not limited to:

   * economic, demographic, business and other conditions in our markets;
   * the highly competitive nature of the healthcare business;
   * changes in patient referral patterns;
   * changes in the rates or methods of third-party reimbursement for
     diagnostic imaging services;
   * changes in our contracts with radiology practice groups;
   * changes in the number of radiologists operating in our contracted
     radiology practice groups;
   * the ability to recruit and retain technologists;
   * the availability of additional capital to fund capital expenditure
     requirements;
   * lawsuits against Radiologix and our contracted radiology practice
     groups;
   * changes in operating margins, particularly changes due to our managed
     care contracts and capitated fee arrangements;
   * failure by Radiologix to comply with state and federal anti-kickback
     and anti-self referral laws or any other applicable healthcare
     regulations;
   * changes in business strategy and development plans;
   * changes in federal, state or local regulations affecting the healthcare
     industry;
   * our indebtedness, debt service requirements and liquidity constraints;
   * risks related to our Senior Notes and healthcare securities generally;
   * interruption of operations due to severe weather or other extraordinary
     events; and
   * charges for unusual or infrequent (non-recurring) matters.



A more comprehensive list of such factors is set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and our other filings with the Securities and Exchange Commission.

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 May 4, 2006.  Radiologix undertakes no obligation to update any forward-looking statement or statements to reflect new events or circumstances or future developments.

                             Radiologix, Inc.
                       Consolidated Balance Sheets
                              (In thousands)

                                                 March 31,     December 31,
                                                    2006           2005
                        ASSETS                  (Unaudited)
  CURRENT ASSETS:
      Cash and cash equivalents                    $44,877        $36,004
      Restricted cash                                5,702          5,662
      Accounts receivable, net of
       allowances                                   41,418         40,815
      Due from affiliates                            1,768          1,737
      Federal and state income tax
       receivable                                    6,081          6,189
      Other current assets                           5,151          5,491
          Total current assets                    $104,997        $95,898
  Property and equipment, net                       68,154         67,965
  Investments in joint ventures                      8,392         10,597
  Intangible assets, net                            53,217         54,050
  Deferred financing costs, net                      4,529          4,942
  Other assets                                         966          1,076
          Total assets                            $240,255       $234,528

          LIABILITIES AND STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES:
      Accounts payable and other
       accrued expenses                             $6,984        $10,157
      Accrued physician retention                    8,245          7,051
      Accrued salaries and benefits                  8,964          6,987
      Accrued interest                               4,838            685
      Current maturities of capital
       lease obligations                                32             32
      Other current liabilities                        665            477
          Total current liabilities                $29,728        $25,389
  Long-term debt, net of current
   portion                                         158,270        158,270
  Convertible debt                                  11,980         11,980
  Capital lease obligations, net of
   current portion                                      54             62
  Deferred revenue                                   6,392          6,494
  Other liabilities                                  1,524          1,488
         Total liabilities                        $207,948       $203,683

  Commitments and contingencies
  Minority interests in consolidated
   subsidiaries                                        913          1,874
  STOCKHOLDERS' EQUITY:
      Common stock                                       2              2
      Treasury stock                                  (180)          (180)
      Additional paid-in capital                    16,002         15,615
      Retained earnings                             15,570         13,534
          Total stockholders' equity               $31,394        $28,971
          Total liabilities and
           stockholders' equity                   $240,255       $234,528



                             Radiologix, Inc.
                  Consolidated Statements of Operations
                  (In thousands, except per share data)

                                                    For the Three Months
                                                       Ended March 31,
                                                     2006           2005
                                                               (As restated)

  Service fee revenue                              $65,117        $62,751
  Costs of operations:
      Cost of services                              39,916         39,820
      Equipment lease                                3,756          2,806
      Provision for doubtful accounts                5,279          4,467
      Depreciation and amortization                  5,970          5,644
          Gross profit                             $10,196        $10,014

  Corporate general and administrative               4,716          4,348
  Interest expense, net, including
   amortization of deferred financing
   costs                                             4,477          4,676

  Income before equity in earnings of
   unconsolidated affiliates, minority
   interests in consolidated subsidiaries,
   income taxes and discontinued operations         $1,003           $990

  Equity in earnings of investments                  1,045            622
  Minority interests in income of
   consolidated subsidiaries                          (146)          (149)

  INCOME BEFORE INCOME TAXES AND
   DISCONTINUED OPERATIONS                          $1,902         $1,463
  Income tax expense                                   103             76
  INCOME FROM CONTINUING OPERATIONS                 $1,799         $1,387

  Discontinued Operations:
      Income (loss) from discontinued
       operations before income taxes                  237           (434)
      Income tax expense (benefit)                     ---            ---
          Income (loss) from discontinued
           operations                                 $237          $(434)
  NET INCOME                                        $2,036           $953

  INCOME PER COMMON SHARE
      Income from continuing
       operations-basic                              $0.08          $0.06
      Income (loss) from discontinued
       operations-basic                              $0.01         $(0.02)
          Net income-basic                           $0.09          $0.04
      Income from continuing
       operations-diluted                            $0.08          $0.06
      Income (loss) from discontinued
       operations-diluted                            $0.01         $(0.02)
          Net income-diluted                         $0.09          $0.04

  WEIGHTED AVERAGE SHARES OUTSTANDING
      Basic                                     22,242,417     21,913,738
      Diluted                                   22,242,417     22,509,821



                             Radiologix, Inc.
             Reconciliation of Non-GAAP Financial Information
                              (In thousands)

  Reconciliation of Income from
   Continuing Operations to EBITDA from
   Continuing Operations
                                                     For the Three Months
                                                        Ended March 31,
                                                     2006           2005
                                                               (As restated)

  GAAP: Income from continuing operations           $1,799         $1,387
  Add: Income tax expense                              103             76
  Add: Interest expense, net                         4,477          4,676
  Add: Depreciation and amortization                 5,970          5,644
  Add: Restricted stock compensation expense           387            101
  EBITDA from continuing operations                $12,736        $11,884



                             Radiologix, Inc.
  Reconciliation of Non-GAAP Financial Information, Excluding Terminated
                                Operations
                              (In thousands)

  Reconciliation of Income from Continuing
   Operations to EBITDA from Continuing
   Operations, Excluding Terminated
   Operations
                                                     For the Three Months
                                                        Ended March 31,
                                                     2006           2005
                                                               (As restated)
  GAAP: Income from continuing operations,
   excluding terminated operations                  $1,784         $1,056
  Add: Income tax expense                              103             76
  Add: Interest expense, net                         4,477          4,676
  Add: Depreciation and amortization                 5,970          5,643
  Add: Restricted stock compensation expense           387            101
  EBITDA from continuing operations
   excluding terminated operations                 $12,721        $11,552



                             Radiologix, Inc.
 Reconciliation of Financial Information, Excluding Terminated Operations
                              (In thousands)

                                For the Three Months Ended March 31, 2006
                                                               Radiologix
                                                               Excluding
                                               Terminated      Terminated
                               Radiologix      Operations      Operations

  Service fee revenue            $65,117          $---          $65,117
  Costs of operations:
      Cost of services            39,916             2           39,914
      Equipment lease              3,756             6            3,750
      Provision for doubtful
       accounts                    5,279           (23)           5,302
      Depreciation and
       amortization                5,970           ---            5,970
          Gross profit           $10,196           $15          $10,181

  Corporate general and
   administrative                  4,716           ---            4,716
  Interest expense, net,
   including amortization of
   deferred financing costs        4,477           ---            4,477

  Income before equity in
   earnings of unconsolidated
   affiliates, minority interests
   in consolidated subsidiaries,
   income taxes and discontinued
   operations                     $1,003           $15             $988

  Equity in earnings of
   unconsolidated affiliates       1,045           ---            1,045

  Minority interests in income
   of consolidated subsidiaries     (146)          ---             (146)

  INCOME BEFORE INCOME TAXES AND
   DISCONTINUED OPERATIONS        $1,902           $15           $1,887

  Income tax expense                 103           ---              103

  INCOME FROM CONTINUING
   OPERATIONS                     $1,799           $15           $1,784



                             Radiologix, Inc.
 Reconciliation of Financial Information, Excluding Terminated Operations
                              (In thousands)

                                For the Three Months Ended March 31, 2005
                                            (As restated)
                                                               Radiologix
                                                               Excluding
                                               Terminated      Terminated
                               Radiologix      Operations      Operations

  Service fee revenue            $62,751          $930          $61,821
  Costs of operations:
      Cost of services            39,820           354           39,466
      Equipment lease              2,806           ---            2,806
      Provision for doubtful
       accounts                    4,467           244            4,223
      Depreciation and
       amortization                5,644             1            5,643
           Gross profit          $10,014          $331           $9,683

  Severance and other related
   costs                             ---           ---              ---
  Lease termination expense          ---           ---              ---
  Corporate general and
   administrative                  4,348           ---            4,348
  Impairment of Goodwill             ---           ---              ---
  Interest expense, net,
   including amortization of
   deferred financing costs        4,676           ---            4,676

  Income before equity in
   earnings of unconsolidated
   affiliates, minority interests
   in consolidated subsidiaries,
   Income taxes and discontinued
   operations                       $990          $331             $659

  Equity in earnings of
   unconsolidated affiliates         622           ---              622

  Minority interests in income
   of consolidated subsidiaries     (149)          ---             (149)

  INCOME BEFORE INCOME TAXES
   AND DISCONTINUED OPERATIONS    $1,463          $331           $1,132

  Income tax expense                  76           ---               76

  INCOME FROM CONTINUING
   OPERATIONS                     $1,387          $331           $1,056


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DATASOURCE: Radiologix, Inc.



CONTACT:  Michael N. Murdock, Chief Financial Officer of Radiologix,

Inc., [phone], or  



Web site:  http://www.radiologix.com/

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