RadNet Inc (RDNT) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to RadNet, Incorporated, first-quarter 2010 earnings conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that today's conference is being recorded and would now like to turn the conference over to Mr. Alan Sheinwald of Alliance Advisors. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us today to discuss RadNet's first-quarter 2010 earnings results. On the call this morning is our Company's Chairman and Chief Executive Officer, Dr. Howard Berger, and our CFO and Executive Vice President, Mr. Mark Stolper.

Before we begin today I would like to remind everyone of the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. This presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995.

Specifically, statements concerning anticipated future financial and operating performance, RadNet's ability to continue to grow the business by generating patient referrals and contracts with radiology practices; recruiting and retaining technologists and receiving third-party reimbursements for diagnostic imaging services; successfully integrating acquired operations; generation of revenue and adjusted EBITDA for the acquired operations as estimated and identifyied; and achieve potential cost savings, among others, 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 RadNet's actual results to differ materially from the statements contained herein. These risks and uncertainties include among others, problems that may arise in successfully executing the debt refinancing plan; integrating acquisitions; future regulatory or legislative actions in the industry; as well as those risks set forth in RadNet's report filed with the SEC from time to time, including RadNet's Annual Report on Form 10-K for the year ended December 31, 2009, Form 10-Q for this current period ended March 31, 2010.

Undue reliance should not be placed on forward-looking statements, especially guidance on future financial performance, which speaks only as of the date it is made. RadNet's 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.

With that I would like to turn the call over to Dr. Howard Berger. Howard, you may begin.

Thank you, Alan, and good morning, everyone. And thank you for joining us today.

On today's call, Mark Stolper and I plan to provide you with highlights from our first-quarter 2010 results, give you more insight into the factors which affected this performance, and discuss our future strategy. After our prepared remarks we will open the call to your questions. I would like to thank all of you for your interest in our Company and for dedicating a portion of your day to participate in our conference call this morning.

The first-quarter performance of 2010 was greatly affected by unusually severe weather conditions in the mid-Atlantic and northeastern parts of our country. As many of you are aware, these regions were hit hard with extraordinary amounts of snow and they experienced blizzard conditions at various times throughout the quarter.

Maryland and Delaware, which historically average between six and seven inches of snow in the month of February, experienced over 45 inches this February. Similar extraordinary snowfall occurred in New Jersey and the lower part of New York State. As a result of these unusual weather conditions we were forced to close the majority of our centers in these regions for several days during the quarter, as both patients and our referring physicians were unable to travel.

As much as I would like to be able to tell you that the lost procedural volume is not lost forever but is simply delayed, because we will see these patients in our centers in the future, I cannot. Unfortunately when the offices of our referring physicians and our inbound scheduling departments are both closed, scanning days are lost. Fewer patients entered the healthcare delivery system before, during, and after these blizzards, resulting in fewer referrals to our centers. If there are delayed services from any patients, the recapture of additional scanning volume in our very busy centers is almost imperceptible.

Aside from the unusual weather, we experienced softer volumes than we anticipated throughout our networks especially in January and February. Although I cannot tell you with certainty why this was, I would like to make several observations to perhaps give you a better understanding of what may have occurred.

First, our competitors in our markets as well as other industry players also experienced a very slow beginning to 2010. The acquisition targets we have been analyzing in our core markets almost without exception exhibited decreased procedural volumes in the first quarter. Many were down 5% to 10% on a procedural volume basis from last year's first quarter. This is further supported by the results recently reported by our major competitor in Maryland, who publicly released very soft revenue and EBITDA metrics last week.

Second, we have been told by our referring physician community that their office visits were significantly lower from the prior year's first quarter. As our business is dependent on patient volume being referred to us on a daily basis from thousands of local primary care physicians and specialists, it is not surprising to us that our patient volumes are correlated.

Third, we have noted that much of the overall US medical diagnostic industry, including the two largest clinical laboratories, exhibited decreased procedural volume in the first quarter. On a national scale, the two largest clinical labs showed decreased testing volumes of between 2.5% and 3.5% from last year's first quarter.

Although I am merely speculating, we believe that the difficult economic environment is having a greater effect this year with respect to how patients manage their healthcare needs, in particular at the beginning of the calendar year when many patients have not yet met their annual deductibles. I simply believe that patients are deferring or forgoing care in favor of retaining money that they would otherwise have to stand on personal healthcare.

We have seen procedural volumes rebound significantly in March and April. As compared to the volumes we experienced in February on the eastern, mid-Atlantic, and northeast we are up about 25% in March and April over the volumes that we experienced in February of this year.

Equally important, the softness that our competitors have experienced has created more consolidation opportunities at multiples that would not be possible in more certain economic times. In a difficult economy, a challenged reimbursement environment, and a market climate where access to capital is scarce, we strongly believe that scale is important. RadNet will endeavor to consolidate smaller operators, which we believe will make our business more efficient on an operational basis.

On that front, we completed several important strategic acquisitions during and subsequent to the first quarter. On January 1, 2010, we completed the acquisition of Union Imaging Center, a multimodality facility in Union, New Jersey, offering MRI, CT, PET/CT, nuclear medicine, mammography, ultrasound, and x-ray services. The Union facility is located in the heart of Northern New Jersey, nearby to our existing cluster of facilities.

On April 16 we completed the previously announced acquisition of Truxtun Medical Group in Bakersfield, California. Truxtun operates four multimodality facilities in Bakersfield, a Metropolitan Statistical Area with a population exceeding 800,000 residents in Kern County, California. Because Truxtun is a long-standing and leading provider of radiology services in that market, our acquisition would provide us with what we believe to be the best platform from which to grow in the Bakersfield area.

During the first quarter we signed a letter of intent to acquire the New Jersey operations subsidiary of Health Diagnostic, which includes three facilities in Edison, Old Bridge, and Green Brook, New Jersey. The three centers operate a combination of MRI, CT, mammography, ultrasound, and x-ray. Like the Union acquisition, the Health Diagnostic New Jersey centers increases our Northern New Jersey market presence and continues to further our multimodality approach and desire to become indispensable to the health plans, referring physicians, and patients whom we serve.

On April 27 we acquired three multimodality facilities from the Sonix Medical Resources' bankruptcy proceedings in New York. The facilities are located in Brooklyn, New York, Chatham, New Jersey, and Haddon Heights, New Jersey and operate a combination of MRI, CT, mammography, ultrasound, fluoroscopy, and related modalities. The two facilities in New Jersey will enhance our growing presence in a state we entered last year and where we are already becoming a force.

I'm particularly excited about the acquisition of the Brooklyn facility, which is our first purchase in any borough of New York City. The acquisition provides us an opportunity to work with Maimonides Medical Center and its radiology group, associations we believe will expand further the Brooklyn marketplace for RadNet.

We will remain committed to acquisitions like these that are leverage-neutral or deleveraging and are core to our market penetration strategy. We will be completing more of these transactions in the upcoming months and benefiting from their financial contribution, potential cost savings, efficiencies, and enhanced contracting from our growing core market scale.

At this time I would like to turn over the call to Mark Stolper, our Executive Vice President and Chief Financial Officer, to discuss some of the highlights of our first-quarter 2010 performance. When he is finished I will make some closing remarks.

Thank you, Howard. And thank you all for participating in our first-quarter 2010 conference call. I am now going to briefly review our first-quarter performance and attempt to highlight what I believe to be some material items. I will also give some further explanation of certain items in our financial statements, as well as provide some insights into some of the metrics that drove our first-quarter performance.

In my discussion I will use the term adjusted EBITDA, which is a non-GAAP financial measure. 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 and earnings of unconsolidated operations, and subtracts minority interest in subsidiaries, and is adjusted for non-cash unusual or infrequent events that took place during the period.

A full quantitative and qualitative reconciliation of adjusted EBITDA to income from operations is included in our earnings release.

With that said I would now like to review our first-quarter 2010 results. For the three months ended March 31, 2010, RadNet reported revenue and adjusted EBITDA of $124.2 million and $20.5 million, respectively. Revenue decreased $3.8 million or 3% over the prior year's same quarter and adjusted EBITDA decreased $5.8 million or 22.1% over the prior year's same quarter.

The decrease in revenue and adjusted EBITDA from the first quarter of last year was the result of unusually severe weather on the East Coast and general softness in volumes, which Dr. Berger addressed in his earlier remarks. Because the vast majority of our expenses are fixed and were higher relative to the first quarter of 2009 due to acquisitions we completed over the last 12 months, our lower revenue flowed directly through to our adjusted EBITDA and net income line items.

Based upon more normalized per-day procedural volumes we experienced in March and April of this year, we estimate that we lost approximately $4.5 million of revenue and approximately $3.5 million of EBITDA in January and February.

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 all other exams, decreased 0.4% over the prior year's first quarter.

In the first quarter of 2010, we performed 762,114 total procedures. The procedures were consistent with our multimodality approach whereby 78.2% of all the work we did by volume was from routine imaging. Our procedures in the first quarter of 2010 were as follows.

87,737 MRIs as compared with 86,284 MRIs in the first quarter of 2009. 73,122 CTs as compared with 77,886 CTs in the first quarter of 2009. 5,324 PET/CTs as compared with 5,444 PET/CTs in the first quarter of 2009. And 595,931 routine imaging exams, which include nuclear medicine, ultrasound, mammography, x-ray, and all other exams, as compared with 595,702 of all of these exams in the first quarter of 2009.

Net loss for the first quarter of 2010 was negative $4.1 million or negative $0.11 per share compared to a net loss of negative $842,000 or negative $0.02 per share reported for the three-month period ended March 31, 2009, based upon a weighted average number of shares outstanding of 36.4 million and 35.9 million for those periods in 2010 and 2009, respectively.

Affecting net income in the first quarter of 2010 were certain non-cash expenses and nonrecurring items including the following. $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 for 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.

With regards to some specific income statement accounts, overall GAAP interest expense for the first quarter of 2010 was $10 million. Adjusting for the non-cash impacts from items such as amortization of financing fees and accrued interest, cash interest expense was $9.3 million during the quarter. This compares with GAAP interest expense in the first quarter of 2009 of $13 million and cash paid for interest in that period of $11 million.

For the first quarter of 2010, bad debt expense was 6.2% of our next revenue compared with an overall blended rate also of 6.2% for the full year of 2009.

With regards to our balance sheet, as of March 31, 2010, we had $445.8 million of total debt; and we were undrawn on our $55 million revolving line of credit. This is a decrease in our total debt of $5.5 million during the quarter and was the result of repaying notes and leases payable and addng no new debt during the quarter.

In the first quarter, we had cash capital expenditures net of asset dispositions of $12.9 million. On October 6, 2010 -- I'm sorry, on April 6, 2010, we announced the closing of our debt refinancing plan for an aggregate of $585 million.

The debt refinancing plan included the issuance of $285 million of senior secured term loans due April 6, 2016; a $100 million senior secured revolving credit facility due April 6, 2015; and $200 million in aggregate principal amount of senior unsecured notes due April 1, 2018.

The $285 million senior secured term mind and the $100 million senior secured revolving credit facility are floating-rate facilities, and we may request the interest rate be based upon LIBOR, subject to a 2% LIBOR floor plus an applicable LIBOR margin of 3.75%.

The $100 million senior secured revolving credit facility was undrawn at close. And the $200 million in aggregate amount of senior unsecured notes have a coupon of 10 3/8% and were issued at a price of 98.68%. The obligations under the new credit facilities are guaranteed by the Company, all of our current and future wholly-owned domestic subsidiaries, and certain of our affiliates.

In addition to refinancing the existing senior secured credit facilities at the time, the net proceeds of the debt refinancing plan were used to fund our previously announced acquisition of Truxtun Medical Group in Bakersfield, California, and will fund the New Jersey operating subsidiary -- the acquisition of the New Jersey operating subsidiary of Health Diagnostics which we expect to complete shortly.

In addition, the financing funded approximately $20 million of capital to the Company's balance sheet and paid related fees and expenses of the offering. The senior unsecured notes were offered and sold in a private placement exempt from the registration under the Securities Act to qualified institutional buyers pursuant to Rule 144A and Regulation S under the Securities Act of 1933 as amended.

I would now like to turn the call back to Dr. Berger, who will make some closing remarks.

Thank you, Mark. We want our shareholders to know that we remain very enthusiastic about the future of RadNet. Our focus will be to remain prudent in how we invest the capital that has been made available to us. Our strategic plan will take advantage of a market that has many opportunities for growth, based on the challenging environment that all providers in our industry must try to manage through.

Due to our size, efficiencies, and professional management team, this will enable RadNet to both deleverage our Company's balance sheet while finding the best opportunities to capitalize on the current market conditions, which will further enhance our competitive market position and generate a positive return for our investors.

Despite the challenges we faced during the first quarter, I believe the milestone events that have taken place since the first of January have set the stage for achieving the results as forecasted in our 2010 guidance.

First, we noted significant volume improvement in March and April, as I mentioned previously, to the extent of perhaps 25% increases in our mid-Atlantic and northeastern regions.

Second, we successfully completed our debt refinancing plan which extended the maturity of our debt to2015, 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 for growth; by adding $20 million of cash to our balance sheet to execute further opportunities along with the already announced acquisitions.

Third we completed the previously announced acquisition of Truxtun Medical Group, which gives us a platform on in Kern County, California, 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.

We will continue to pursue a disciplined approach to making capital expenditures and investments in the future. We believe that we can maintain the high quality of medical services and access leading technology for which our centers are recognized by our patients in their respective markets, despite having lower capital expenditure in 2000 than we did in 2009 for our base business.

Our free cash flow guidance, which is a proxy for the amount of cash our operations generate after we pay our cash interest expense and make capital expenditures, illustrates that we anticipate being able to make further acquisitions and/or repay senior term debt in 2010. For the remainder of 2010 we will continue to add opportunistically, to capitalize on the market consolidation and growth prospects which we believe add the most strategic significance while improving our earnings.

Moving forward, we see our balance sheet being enhanced, an improved cost structure and profitability, which should make it possible for us to experience strong growth both organically and through consolidation during 2010.

On the year-end conference call held in March we discussed some of the initiatives on which we are executing to make our business more efficient, such as negotiating new maintenance and service contracts on our equipment, collecting more self-pay dollars at our centers, and with in-house collection capabilities working on cost-saving, corporate insurance programs, among others. These initiatives are all moving forward and I believe they and others in the future will become increasingly important as we use them to mitigate any further reimbursement reductions or other industry financial pressures.

We still see revenues of $540 million to $560 million with an adjusted EBITDA in the range of $107 million to $111 million in 2010. Even with the previous mention challenges we are pleased with how our business has performed and we believe that within our industry we have the model that is best positioned to capitalize on the opportunities that will continue to arise as our industry continues its transition.

We are proud of the achievements as a provider and a public company to date and believe that the economic and service model we have built will continue to yield outstanding results for both our clients and shareholders equally. We look forward to continue down the path that we have embarked upon with our new financing and access to capital.

There is still much to do in the way of enhanced efficiencies and expansion which we know are in the best interest of our shareholders. I look forward to providing all interested parties with our next update in August. Operator, we are now ready for the question-and-answer portion of the call.

(Operator Instructions) Darren Lehrich, Deutsche Bank.

Good morning. I was wondering -- this is Brian Zimmerman in for Darren Lehrich. I was wondering how you guys are looking at leverage levels in relation to consolidation opportunities in front of you.

I guess I was just curious if you think you delever from the current levels, or you stay at about the same level?

Thank you. We continue to see the market actively pursuing consolidation. As a result, the pipeline of potential acquisitions and opportunities that we are analyzing are all with metrics that would get us into a neutral or deleveraging position. The previously stated range that we are looking for or at is between 3 and 4 times EBITDA multiples. The Company sees no reason for us to stretch beyond that, and there is more than enough ample opportunities to provide that.

I should also note that when we do look at opportunities that are in the 3 to 4 times multiple range, that is before any cost-saving measures or other efforts that we can take after the acquisition to help further consolidate and deleverage those acquisitions is actually done. So overall, we would expect the vast majority of our potential acquisitions to be deleveraging from the Company's current leverage multiple.

Okay. Thanks. Then do you expect to be net income positive during the second half of 2010?

Yes, I was just asked this s recently -- I think at your conference in Boston. In the second quarter we are going to have a significant writedown of the deferred financing -- non-cash writedown I should say of the deferred financing costs associated with the old GE Credit facilities, which is going to be somewhere between $9 million and $10 million of a non-cash hit to the second quarter.

So if you take that out of the equation, we do see getting into a net income positive position in the third and fourth quarters of this year.

Okay. Do you have maybe any annual guidance around that, or --?

We did not release EPS guidance for 2010.

Okay. Then my final question. I was wondering if you had any specific commentary on California trends, where weather was less of a factor.

In California, we experienced what we believe was the same phenomenon that we experienced on the East Coast, with a very slow ramp-up in January and February. Obviously, we didn't have the weather conditions, but we did see what we believed was a 2% to 3% decrease in volume in California, which we believe was -- as we indicated in some of our remarks -- more or less the national trend due to a variety of factors as outlined earlier.

We have seen like the East Coast though, March and April have come back very, very strong in California; and we expect California to be a major contributor going forward for the rest of this year.

All right. Thanks a lot, guys.

Kevin Ellich, RBC Capital Markets.

Good morning. Just a couple questions. Howard, I was wondering if you had a rough estimate as to what percent of the procedures that were pushed out because of weather might come back and how long that usually takes? Just based off of historical patterns.

Kevin, I don't really think -- and I did try to address that a little bit in my remarks, but it was probably not as clear as it could be. The fact that we had down days primarily in February due to the severe weather conditions, we were down at times for three and four days in a row. It wasn't just a matter of our facilities being closed; it was also that referring doctors and patients couldn't get into the offices of our doctors to have the studies ordered.

It is almost as if these were holidays or that, effectively, the year has been shortened for us. And those scanning days have been lost forever. Because the process is not one of just people who couldn't get their scans done and then being pushed into the backlog; it is really patients who didn't get their studies ordered in the first place, and then once the offices were opened up again there was a ramp-up to get the patients who had deferred or were unable to get into doctors' offices back into the system.

It's important to realize that outpatient diagnostic imaging is a non-emergent procedure. And patients will quite often put off an exam that they want to get done at a time when it is convenient, unless it becomes a more urgent matter for them to get in earlier.

So in the month of February we estimate that we lost 25% of our scanning days in the month of February due to the harsh weather conditions, primarily in Maryland and Delaware which are two of our biggest markets on the East Coast. And as a result those days and their scanning volume times are lost.

The patients who didn't get their studies done will just be bled out over a period of time. And given how busy our centers are in those markets, I think it will be virtually imperceptible.

So from -- this is perhaps a long-winded answer -- but effectively, we just shortened our year by the number of days that we were closed both due to the fact that we couldn't scan and that there weren't patients that could come to our offices or referring physician offices.

Got it. No, that is actually quite helpful and putting it in better context. I appreciate that.

Then I was just wondering if you guys have seen any changes in scans for mammography given all of the kind of noise and scuttlebutt that is out in the marketplace?

Good question. We began to see a slowdown in mammography which we think is a result of the report from the commission back in -- I believe it was October, October or November. There was a slowdown in November and December that continued into January and February.

We saw a rapid recovery, although not to the same levels, that we had seen pre the commission announcement. But there seems to be a trend back up towards the more expected volumes of mammography, although I would say it is off slightly as compared to the high point of last year.

This probably isn't too surprising, given the fact that it will take some time before people realize that -- like many other medical providers and other people who have opined on this in healthcare, was ill-advised and inappropriate. And I think that that process probably will take six to nine months.

But eventually I believe we will be seeing as much if not more mammography in the future, given the increasing risks of breast cancer and effective ways of diagnosing it.

Got it. Then is there any way you can quantify how much of a slowdown you guys saw that might be based on the commission announcement?

If I had to guess a number, I would say maybe 5% at this point. I think it was a bigger impact at the end of the year and the beginning of the year. But that partially is also related to the other weather conditions and whatnot.

We have seen here in California much less of an impact from the mammography than we have on the East Coast.

Okay. That's helpful. Then just one quick question for Mark. With the renegotiation or even debt refinancing that you guys did, wondering if you have any advice or guidance on interest expense?

Sure. You know, we said from in terms of pricing standpoint that it was nominally more expensive than the existing agreement. And with respect to total cash interest expense throughout the year, we are projecting between $42 million and $47 million of cash interest expense in 2010.

Got it. Okay. Thanks, guys.

Rob Mains, Morgan Keegan.

Yes, thanks. Mark, do you have the same-store number for just routine?

Hang on a second, I am looking at a report. Yes. Routine studies were down 4.5% on a same-center basis.

Okay. Now, I'm kind of back of enveloping this, but based on the comments that you said about how business in March and April has behaved, relative to where you were January/February, am I correct in surmising that you are like in the flat to maybe up a little bit range in those two months on a same-store basis?

You know, Rob, I haven't done that calculation so I can't -- I did it through March; I haven't done it through April. We did it for the quarter, so I can't tell you with certainty right now.

Okay. But Howard, I did hear you say that the strength that you saw, it is not just in the snow areas? You also saw a rebound on the West Coast as well?

Yes, the increase is not quite as dramatic, Rob, because obviously we weren't affected as much by the weather conditions here on the West Coast. But the initial softness that we saw at the beginning of the year appears to have dissipated and our volumes are very strong here.

Part of that also is due to a number of new initiatives we have with some of the medical groups and capitation initiatives which are continuing to drive business into our networks.

Okay. Then I had a couple pricing questions, one actually has to do with capitation. One is, we have got some Medicare pricing pressures this year, more to come next year. Are you seeing any spillover to the commercial marketplace?

I know this one you have handled in the past. Just want to get an update on that.

Then second, specifically, the administration seems to have the long knives out for Medicare Advantage plans. I am wondering if on your cap agreements for MA you are seeing any new pricing pressures.

We haven't seen very much in the way of pricing pressures, to answer the first part of your question, Rob, from any of the payors out here. When I say out here I am talking about at RadNet, not just the West Coast.

So that follow-on and given the fact that many of our contracts are already at or below Medicare anyhow, is not unexpected. So this is what we really planned, that we thought there would be very little follow-on from the Medicare cuts.

In regards to Medicare Advantage programs with our capitation, we are -- as we every year are -- looking at several of our capitation contracts, which we are getting perhaps as much as 2% to 3% increases in our existing capitation rates.

Several of the groups are focused very much on Medicare. And while we may be getting still an increase in the senior enrollment or Medicare program, it is a little bit less than the increases that we are seeing on the commercial lives.

But overall we continue to see increases in all of our capitation contracts. But as I mentioned, perhaps a little less so for the senior population.

Okay.

Rob, I believe a lot of the Medicare Advantage pricing change begins in 2012 and it has a several year phase-in.

Right, but --

I am not sure that we would see anything over the next couple few years here in our senior life capitation contracts. I think what I will also say is it further -- the fact that there may be some pricing pressures on the payors doesn't always necessarily translate to how they contract with the capitated groups and then how the capitated medical groups subcontract with us for the imaging portion.

What it does do, I believe, is make our program a much more important part for the medical groups. Because what we're doing is fixing their cost, and managing utilization, and decreasing the cost that they would otherwise have to spend if they sent out their imaging on a fee-for-service basis.

So to the extent that the medical groups are feeling some pressure from the Medicare Advantage carriers, who are in turn feeling the pressure from CMS pricing, I think it makes our relationship with the medical groups even that much more important.

Okay. Good answer. Thanks a lot.

Arthur Henderson, Jefferies.

Hi. Thanks for taking my question. Howard, as you think about acquisitions going forward, I know you mentioned that the Sonix acquisition has given you a new entry point into New York. Is that an area that we should expect to see more growth?

And what is your thoughts on greenfield acquisition opportunities in new markets you are not in?

Well, the first part is we that are very excited. We think there is a lot of opportunities in the New York City market. This is our first entrance into that, and we're very pleased that it was with such a prestigious institution as Maimonides Medical Center.

Because not only do we think that that bring some very interesting opportunities for us in the Brooklyn market, it also aligns us with a very powerful radiology group at Maimonides. And that -- we have already had some conversations about expansion in that market.

Greenfield centers are not something that would be very high on our radar screen here. As I have said before in other conference calls and conferences, that I don't think that there at this point is the need for many more, if any, outpatient imaging centers. I see the market consolidating.

It's a lot cheaper and a lot easier to enter a market through an acquisition process, particularly at the multiples that we're seeing today that continue to be very attractive and very accretive for the Company.

So I won't rule out an occasional greenfield or new center if it is a strategic opportunity for us. But I would say that they would be very few and far between.

Okay. That's helpful. Then, Mark, with respect to the guidance, I know that you mentioned in your release and in your remarks that some of these acquisitions that you have recently done are contributing to that. Do you have any other acquisitions that are unannounced in the guidance number?

No.

Okay. I think that's it. All right. Thank you.

Henry Reukauf, Deutsche Bank.

Hey, guys. Just a question on the same-store volume growth. I think, Mark, you mentioned that you had done the numbers in March. Just trying to get a feel for what March looks on a year-over-year basis? March and April.

I don't think you have done April yet, I think you said. But how does it look year-over-year say for March?

I think Rob asked this question. I have done the numbers for the quarter ended March, but not March itself.

Okay. Is there -- yes, go ahead.

I mean our feel for March is that it is slightly better. It was slightly better on a volumes basis than March of last year; but it did have one additional work day.

Okay. On a feel, do you think you are -- I mean obviously -- or in your guidance are you anticipating at least flat volumes for the year still?

Yes.

Okay. Then just on the Brooklyn purchase, -- is there a dedicated relationship from Maimonides there? I guess what I'm trying to get at is, was that center -- did it go into bankruptcy because of debt issues? Or was it because of volume issues? Why do you feel so positive about it?

Well, the center is actually performing reasonably well. I believe that the reason it was wrapped up in the Sonix bankruptcy proceedings has to do more with debt, as you have mentioned, Henry, as well as other operating metrics from several other centers. Although we brought three centers out of bankruptcy, there were I think at one time a total of seven or eight centuries in there, the other four or five of which we did not bid on.

But I think that the company has long been suffering from issues with both investment into the facilities as well as too much leverage and debt. So the relationship with Maimonides has been there for quite some time and has been enthusiastically embraced both by RadNet as well as Maimonides going forward. We expect there to be other opportunities that will emanate from that.

But it is a committed relationship that we plan on strengthening and see opportunities in that Brooklyn market that I don't believe we would have seriously considered without this entry point.

Okay. Thanks very much.

Miles Highsmith, RBC Capital Markets. [Kenneth King, Tricredit] Partners.

Hey, guys. Just wanted to follow up on the guidance here. So you're maintaining the $107 million to $111 million. If I extrapolate that and backing out the $20.5 million you did in the first quarter, it implies a $115 million to $120 million run rate. Can you comment if that sounds about where guys are thinking the business is today?

I think another way to look at it might be that if you factor out the first quarter, and the remaining three quarters would have to generate in the neighborhood of $87 million to about $91 million of EBITDA, which would project down to somewhere around $28 million to $30 million, is something that we are comfortable with at this point in time. Yes.

Okay. Then on the volume front, I noticed that the MRIs were still up but that I guess CT took a pretty big hit. Can you maybe talk about what is going on with the different modalities there?

Yes. I think CT, much like the question that I answered earlier about mammography, is a issue that has been impacted by some of the reports that have come out about high radiation doses. I believe that some of the payors as well as referring physicians and patients are perhaps a little bit more circumspect about when and how often to get CT scanning.

We find that to be not necessarily good medicine; but nonetheless I believe it is part of the public perception at this time, which has caused a slight decrease in CT scanning. The other part of that that we see is that there is more and more CT scanning done in emergency rooms. And some of the patients that might have previously come into our centers for some CT scanning may be diverted to emergency rooms for patients that have more severe or emergent needs.

So I think the combination of increasing CT volumes in the emergency rooms as well as the lessening of the physician and consumer patient market for doing CTs may be part of that. I think there is some initiatives from the manufacturers to significantly reduce the radiation dose on CT scanners, some of which are on the new systems, and some opportunities for retrofitting CT scanners to help that process, which I think over the long haul will have a beneficial impact.

But I believe those are the two major factors affecting CT. The MRI growth I think is something that we're just going to continue to see because of the increasing demand and benefit that MRI scanning has.

Got it, okay. Thanks.

At this time there are no further questions. I will turn the call back over to Dr. Howard Berger with any closing remarks.

Okay. Well, thank you all for participating in this morning's conference call. Again I would like to take the opportunity to thank all of our shareholders for their continued support and the employees of RadNet for their dedication and hard work.

We will continue to endeavor to be a market leader that provides great services with an appropriate return on investment for all shareholders. Thank you for your time today, and I look forward to our August second-quarter call. Thank you.

That does conclude our conference for today. Thank you for your participation.