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NightHawk Radiology Holdings, Inc. announced its financial results for first quarter 2010 and updates St. Paul Radiology Dispute

NightHawk Radiology Holdings , Inc., the leading provider of radiology solutions to radiology groups across the United States, announced its financial results for first quarter 2010 and provided an update on its dispute with St. Paul Radiology.

First Quarter 2010 Highlights

• Revenue was $36.5 million driven by total scan volume of approximately 765,000 scans.
• Total scan volume increased 6% from the year ago quarter.
• Final scan volumes increased 43% from the year ago quarter.
• Adjusted net income was $1.2 million, or $0.05 per diluted share. Adjusted net income excludes non-cash charges for stock compensation,amortization of intangible assets, malpractice reserve adjustments,effect of cancelled and ineffective interest rate swap contracts and severance costs. Also excluded in the first quarter of 2010 is a non-cash charge of $27.3 million ($16.9 million after-tax) resulting from the impairment of the company's intangible assets related to an ongoing negotiation towards a potential settlement of the company's dispute with St. Paul Radiology.
• GAAP net loss was $19.2 million, or $0.81 per diluted share. A reconciliation of adjusted net income to GAAP net loss is included in the tables attached to this press release.
• Cash flow from operations was $2.8 million.
• Cash and cash equivalents at March 31, 2010 totaled $33.9 million.

"We are pleased to report revenue and adjusted EPS in the middle of our guidance range. The solid quarterly results reflected good growth in preliminary volumes and robust growth in finals volumes," said David Engert, the company's president and chief executive officer.

Update on Dispute with St. Paul Radiology

As we have discussed in previous quarters, in September 2009, St. Paul Radiology notified us that it believes that we are in breach of certain of our obligations under our agreements with it. Although we continue to believe such claims of breach and their related allegations of damages are without merit, we have also continued in discussions with St. Paul Radiology in an attempt to resolve the dispute and discuss a mutually-acceptable dissolution of the original arrangement of the parties. In recent weeks, as a result of continued discussions between us and St. Paul Radiology, the parties have made substantial progress toward achieving a negotiated resolution. Although such resolution remains subject to successful negotiation and execution of final terms and definitive agreements, as part of the potential transaction as currently contemplated, the parties would terminate their existing relationships and unwind the July 2007 transaction. We would receive an up-front payment from St. Paul Radiology of $10 million and ongoing periodic payments from St. Paul Radiology totaling $14 million, resulting in aggregate consideration paid by St. Paul Radiology to us of $24 million. In addition, concurrently with the termination of the agreements with St. Paul Radiology, we would also enter into a separate agreement pursuant to which we would sell each of Midwest Physician Services, LLC and Emergency Radiology Services, LLC and their related assets for an aggregate consideration of $2 million payable to us upon closing. Finally, in addition to the amounts described above, if these transactions are consummated, we also expect to receive a tax refund equal to approximately $10 million resulting from the loss we will incur as a result of these transactions. If the transactions are consummated, we intend to pay the entire $36 million as principal repayments on our existing term loan, with $26 million to be paid following closing of the transactions and the remaining $10 million to be paid on or before June 30, 2011.

Please note that settlement negotiations are not complete and the parties may not be able to finalize a resolution. If a settlement is reached, it may be on terms different than those currently contemplated. For more information about the proposed transaction, the risks associated therewith and the associated current and future potential effects on our financial statements and future results of operations, please see the descriptions and risk factors set forth in our quarterly report for the period ending March 31, 2010 to be filed on or before May 10, 2010 as well as the other risk factors described in the company's periodic reports filed with the Securities and Exchange Commission from time to time. NightHawk does not undertake any obligation to publicly update its forward-looking statements based on events or circumstances after the date hereof.

Second Quarter 2010 Outlook

The company expects to see a seasonal sequential increase in scan volumes in the second quarter of 2010, offset by the continuing impact of price declines. Specifically, revenue for the second quarter of 2010 is expected to be in the range of $37.5 to $38.5 million and adjusted EPS is expected to be in the range of 6 to 7 cents. This outlook for the second quarter assumes that the existing agreements with St. Paul Radiology remain in place throughout the quarter. If a final definitive settlement is reached and the agreements with St. Paul Radiology are terminated, our financial results will no longer reflect the revenue and profits under those agreements from the transaction date forward.

Earnings Conference Call

The first quarter conference call will be held today, May 6, 2010 at 4:30 p.m. eastern time. A live webcast of the conference call, as well as a replay, will be available online on the company's corporate website at http://www.nighthawkrad.net. Participants can also access the call by dialing (800)762-8908 or (480)629-9774 (for international callers). A replay of the call will be available approximately two hours after the conclusion of the call and will remain available until midnight eastern time on Thursday, May 27, 2010. To access the replay, dial (800)406-7325 or (303)590-3

Source: NightHawk Radiology Services