Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 09, 2017 | Jun. 30, 2016 | |
NonPlanOutstandingWarrantsMember | |||
Entity Registrant Name | RadNet, Inc. | ||
Entity Central Index Key | 790,526 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 47,198,596 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 | ||
Entity Public Float | $ 224,518,331 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 20,638 | $ 446 |
Accounts receivable, net | 164,210 | 162,843 |
Current portion of deferred tax assets | 0 | 22,279 |
Due from affiliates | 2,428 | 4,815 |
Prepaid expenses and other current assets | 28,435 | 38,986 |
Assets held for sale | 2,203 | 0 |
Total current assets | 217,914 | 229,369 |
PROPERTY AND EQUIPMENT, NET | 247,725 | 256,722 |
OTHER ASSETS | ||
Goodwill | 239,553 | 239,408 |
Other intangible assets | 42,682 | 45,253 |
Deferred financing costs, net of current portion | 2,004 | 2,841 |
Investment in joint ventures | 43,509 | 33,584 |
Deferred tax assets, net of current portion | 50,356 | 24,685 |
Deposits and other | 5,733 | 4,565 |
Total assets | 849,476 | 836,427 |
CURRENT LIABILITIES | ||
Accounts payable, accrued expenses and other | 111,166 | 113,813 |
Due to affiliates | 13,141 | 6,564 |
Deferred revenue | 1,516 | 1,598 |
Current portion of deferred rent | 2,961 | 2,563 |
Current portion of notes payable | 22,031 | 22,383 |
Current portion of obligations under capital leases | 4,526 | 10,038 |
Total current liabilities | 155,341 | 156,959 |
LONG-TERM LIABILITIES | ||
Deferred rent, net of current portion | 24,799 | 26,865 |
Notes payable, net of current portion | 609,445 | 599,914 |
Obligations under capital lease, net of current portion | 2,730 | 6,385 |
Other non-current liabilities | 5,108 | 9,843 |
Total liabilities | 797,423 | 799,966 |
EQUITY | ||
Common stock - $.0001 par value, 200,000,000 shares authorized; 46,574,904 and 46,281,189 shares issued and outstanding at December 31, 2016 and 2015, respectively | 4 | 4 |
Additional paid-in-capital | 198,387 | 197,297 |
Accumulated other comprehensive gain (loss) | 306 | (153) |
Accumulated deficit | (150,211) | (164,571) |
Total Radnet, Inc.'s stockholders' equity | 48,486 | 32,577 |
Noncontrolling interests | 3,567 | 3,884 |
Total equity | 52,053 | 36,461 |
Total liabilities and equity | $ 849,476 | $ 836,427 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common stock - par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock - shares authorized | 200,000,000 | 200,000,000 |
Common stock - shares issued | 46,574,904 | 46,281,189 |
Common stock - shares outstanding | 46,574,904 | 46,281,189 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
NET REVENUE | |||
Service fee revenue, net of contractual allowances and discounts | $ 821,587 | $ 746,756 | $ 670,136 |
Provision for bad debts | (45,387) | (36,033) | (29,807) |
Net service fee revenue | 776,200 | 710,723 | 640,329 |
Revenue under capitation arrangements | 108,335 | 98,905 | 77,240 |
Total net revenue | 884,535 | 809,628 | 717,569 |
OPERATING EXPENSES | |||
Cost of operations, excluding depreciation and amortization | 775,801 | 708,289 | 602,652 |
Depreciation and amortization | 66,610 | 60,611 | 59,258 |
Loss on sale and disposal of equipment | 767 | 866 | 1,113 |
Severance costs | 2,877 | 745 | 1,241 |
Total operating expenses | 846,055 | 770,511 | 664,264 |
INCOME FROM OPERATIONS | 38,480 | 39,117 | 53,305 |
OTHER INCOME AND EXPENSES | |||
Interest expense | 43,455 | 41,684 | 42,727 |
Meaningful use incentive | (2,808) | (3,270) | (2,034) |
Equity in earnings of joint ventures | (9,767) | (8,927) | (6,970) |
Gain on sale of imaging centers | 0 | (5,434) | 0 |
Gain on return of common stock | (5,032) | 0 | 0 |
Loss on early extinguishment of senior notes | 0 | 0 | 15,927 |
Other expenses | 196 | 419 | 3 |
Total other expenses | 26,044 | 24,472 | 49,653 |
INCOME BEFORE INCOME TAXES | 12,436 | 14,645 | 3,652 |
Provision for income taxes | (4,432) | (6,007) | (1,967) |
NET INCOME | 8,004 | 8,638 | 1,685 |
Net income attributable to noncontrolling interests | 774 | 929 | 309 |
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | $ 7,230 | $ 7,709 | $ 1,376 |
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | $ .16 | $ 0.18 | $ .03 |
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | $ .15 | $ .17 | $ .03 |
Weighted average shares outstanding - Basic | 46,244,188 | 43,805,794 | 41,070,077 |
Weighted average shares outstanding - Diluted | 46,655,032 | 45,171,372 | 43,149,196 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Statement of Comprehensive Income [Abstract] | |||
NET INCOME | $ 8,004 | $ 8,638 | $ 1,685 |
Foreign currency translation adjustments | (49) | (41) | (62) |
Change in fair value of cash flow hedge, net of taxes of $310 | 508 | 0 | 0 |
COMPREHENSIVE INCOME | 8,463 | 8,597 | 1,623 |
Less comprehensive income attributable to non-controlling interests | 774 | 929 | 309 |
COMPREHENSIVE INCOME ATTRIBUTIBLE TO RADNET, INC. COMMON STOCKHOLDERS | $ 7,689 | $ 7,668 | $ 1,314 |
CONSOLIDATED STATEMENTS OF COM6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Statement of Comprehensive Income [Abstract] | |||
Taxes on change in fair value of cash flow hedge | $ 310 | $ 0 | $ 0 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Accumulated Deficit [Member] | Total Radnet, Inc. Stockholders (Deficit) Equity [Member] | Noncontrolling Interest [Member] | Total |
Beginning balance, shares at Dec. 31, 2013 | 40,089,196 | ||||||
Beginning balance, value at Dec. 31, 2013 | $ 4 | $ 173,622 | $ (50) | $ (173,656) | $ (80) | $ 2,290 | $ 2,210 |
Issuance of common stock upon exercise of options/warrants, shares | 1,579,695 | ||||||
Issuance of common stock upon exercise of options/warrants | 1,546 | 1,546 | 1,546 | ||||
Stock-based compensation | 2,463 | 2,463 | 2,463 | ||||
Issuance of restricted stock and other awards, shares | 1,156,785 | ||||||
Purchase of non-controlling interests | 119 | 119 | (315) | (196) | |||
Sale of a noncontrolling interests | 200 | 200 | |||||
Distributions paid to noncontrolling interests | (148) | (148) | |||||
Change in cumulative foreign currency translation adjustment | (62) | (62) | (62) | ||||
Change in fair value of cash flow hedge, net of taxes | 0 | ||||||
Net income | 1,376 | 1,376 | 309 | 1,685 | |||
Ending balance, shares at Dec. 31, 2014 | 42,825,676 | ||||||
Ending balance, value at Dec. 31, 2014 | $ 4 | 177,750 | (112) | (172,280) | 5,362 | 2,336 | 7,698 |
Issuance of common stock upon exercise of options/warrants, shares | 835,098 | ||||||
Issuance of common stock upon exercise of options/warrants | 594 | 594 | 594 | ||||
Stock-based compensation | 7,635 | 7,635 | 7,635 | ||||
Issuance of restricted stock and other awards, shares | 1,014,423 | ||||||
Forfeiture of restricted stock, shares | (59,053) | ||||||
Sale of a noncontrolling interests | 2,077 | 2,077 | 1,348 | 3,425 | |||
Distributions paid to noncontrolling interests | (729) | (729) | |||||
Change in cumulative foreign currency translation adjustment | (41) | (41) | (41) | ||||
Issuance of stock for acquisition, shares | 1,665,045 | ||||||
Issuance of stock for acquisition, value | 9,241 | 9,241 | 9,241 | ||||
Change in fair value of cash flow hedge, net of taxes | 0 | ||||||
Net income | 7,709 | 7,709 | 929 | 8,638 | |||
Ending balance, shares at Dec. 31, 2015 | 46,281,189 | ||||||
Ending balance, value at Dec. 31, 2015 | $ 4 | 197,297 | (153) | (164,571) | 32,577 | 3,884 | 36,461 |
Cumulative effect of accounting change due to adoption of ASU 2016-09 | 7,130 | 7,130 | 7,130 | ||||
Issuance of common stock upon exercise of options/warrants, shares | 314,448 | ||||||
Issuance of common stock upon exercise of options/warrants | 150 | 150 | 150 | ||||
Stock-based compensation | 5,767 | 5,767 | 5,767 | ||||
Issuance of restricted stock and other awards, shares | 937,803 | ||||||
Purchase of non-controlling interests | (495) | (495) | (599) | (1,094) | |||
Sale of a noncontrolling interests | 700 | 700 | 700 | ||||
Distributions paid to noncontrolling interests | (492) | (492) | |||||
Change in cumulative foreign currency translation adjustment | (49) | (49) | (49) | ||||
Return of common stock, shares | (958,536) | ||||||
Return of common stock, value | (5,032) | (5,032) | (5,032) | ||||
Change in fair value of cash flow hedge, net of taxes | (508) | 508 | 508 | ||||
Net income | 7,230 | 7,230 | 774 | 8,004 | |||
Ending balance, shares at Dec. 31, 2016 | 46,574,904 | ||||||
Ending balance, value at Dec. 31, 2016 | $ 4 | $ 198,387 | $ 306 | $ (150,211) | $ 48,486 | $ 3,567 | $ 52,053 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net income | $ 8,004 | $ 8,638 | $ 1,685 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 66,610 | 60,611 | 59,258 |
Provision for bad debts | 45,387 | 36,033 | 29,807 |
Gain on return of common stock | (5,032) | 0 | 0 |
Equity in earnings of joint ventures | (9,767) | (8,927) | (6,970) |
Distributions from joint ventures | 2,926 | 7,731 | 7,358 |
Amortization and write off of deferred financing costs and loan discount | 5,045 | 5,369 | 5,732 |
Loss on sale and disposal of equipment | 767 | 866 | 1,113 |
Loss on early extinguishment of senior notes | 0 | 0 | 15,927 |
Gain on sale of imaging centers | 0 | (5,434) | 0 |
Stock-based compensation | 5,826 | 7,647 | 2,500 |
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions: | |||
Accounts receivable | (47,055) | (34,514) | (43,973) |
Other current assets | 11,038 | (14,198) | (5,514) |
Other assets | 1,267 | (3,813) | (281) |
Deferred taxes | 3,446 | 4,036 | 655 |
Deferred rent | (1,668) | 7,011 | 2,180 |
Deferred revenue | (82) | (366) | 620 |
Accounts payable and accrued expenses and other | 4,929 | (3,653) | (9,093) |
Net cash provided by operating activities | 91,641 | 67,037 | 61,004 |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Purchase of imaging facilities | (6,641) | (90,792) | (9,428) |
Purchase of property and equipment | (59,251) | (42,964) | (41,740) |
Proceeds from sale of equipment | 481 | 1,282 | 1,088 |
Proceeds from sale of imaging facilities | 0 | 35,500 | 0 |
Proceeds from sale of internal use software | 301 | 443 | 0 |
Cash contribution from partner in JV formation | 994 | 0 | 0 |
Equity contributions in existing and purchase of interest in joint ventures | (1,374) | (265) | (3,562) |
Net cash used in investing activities | (65,490) | (96,796) | (53,642) |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Principal payments on notes and leases payable | (11,880) | (9,773) | (23,913) |
Proceeds from borrowings | 476,504 | 73,869 | 210,000 |
Payments on senior notes | (469,086) | (23,727) | (211,344) |
Deferred financing costs | (945) | 0 | (6,650) |
Net (payments) proceeds on revolving credit facility | 0 | (15,300) | 15,300 |
Dividends paid to noncontrolling interests | (492) | (729) | (148) |
Proceeds from the sale of non-controlling interests | 992 | 5,005 | 0 |
Purchase on non-controlling interests | (1,153) | 0 | (196) |
Proceeds from issuance of common stock upon exercise of options/warrants | 150 | 594 | 1,546 |
Net cash (used in) provided by financing activities | (5,910) | 29,939 | (15,405) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (49) | (41) | (62) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 20,192 | 139 | (8,105) |
CASH AND CASH EQUIVALENTS, beginning of period | 446 | 307 | 8,412 |
CASH AND CASH EQUIVALENTS, end of period | 20,638 | 446 | 307 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||
Cash paid during the period for interest | 37,487 | 36,028 | 41,584 |
Cash paid during the period for income taxes | 2,798 | 1,781 | 1,070 |
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | |||
Purchase of equipment and leasehold improvements not yet paid for | 28,800 | $ 32,400 | $ 19,400 |
Capital lease debt related to radiology equipment | 1,300 | ||
Non-cash gain from return of common stock | 5,000 | ||
Transfer of fixed assets to new joint venture | $ 2,700 |
1. NATURE OF BUSINESS
1. NATURE OF BUSINESS | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS | We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue. At December 31, 2016, we operated directly or indirectly through joint ventures with hospitals, 305 centers located in California, Delaware, Florida, Maryland, New Jersey, New York, and Rhode Island. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services. Our multi-modality strategy diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of multiple procedures. The consolidated financial statements include the accounts of Radnet Management, Inc. (or “Radnet Management”) and Beverly Radiology Medical Group III, a professional partnership (“BRMG”). BRMG is a partnership of ProNet Imaging Medical Group, Inc., Breastlink Medical Group, Inc. and Beverly Radiology Medical Group, Inc. The consolidated financial statements also include Radnet Management I, Inc., Radnet Management II, Inc., Radiologix, Inc., Radnet Managed Imaging Services, Inc., Delaware Imaging Partners, Inc., New Jersey Imaging Partners, Inc. and Diagnostic Imaging Services, Inc. (“DIS”), all wholly owned subsidiaries of Radnet Management. All of these affiliated entities are referred to collectively as “RadNet”, “we”, “us”, “our” or the “Company” in this report. Accounting Standards Codification (“ASC”) 810-10-15-14, Consolidation Howard G. Berger, M.D., is our President and Chief Executive Officer, a member of our Board of Directors, and also owns, indirectly, 99% of the equity interests in BRMG. BRMG is responsible for all of the professional medical services at nearly all of our facilities located in California under a management agreement with us, and employs physicians or contracts with various other independent physicians and physician groups to provide the professional medical services at most of our California facilities. We generally obtain professional medical services from BRMG in California, rather than provide such services directly or through subsidiaries, in order to comply with California’s prohibition against the corporate practice of medicine. However, as a result of our close relationship with Dr. Berger and BRMG, we believe that we are able to better ensure that medical service is provided at our California facilities in a manner consistent with our needs and expectations and those of our referring physicians, patients and payors than if we obtained these services from unaffiliated physician groups. We contract with nine medical groups which provide professional medical services at all of our facilities in Manhattan and Brooklyn, New York. These contracts are similar to our contract with BRMG. Six of these groups are owned by John V. Crues, III, M.D., RadNet’s Medical Director, a member of our Board of Directors, and a 1% owner of BRMG. Dr. Berger owns a controlling interest in two of these medical groups which provide professional medical services at one of our Manhattan facilities. RadNet provides non-medical, technical and administrative services to BRMG and the nine medical groups mentioned above (“NY Groups”) for which it receives a management fee, pursuant to the related management agreements. Through the management agreements we have exclusive authority over all non-medical decision making related to the ongoing business operations of BRMG and the NY Groups and we determine the annual budget of BRMG and the NY Groups. BRMG and the NY Groups both have insignificant operating assets and liabilities, and de minimis equity. Through management agreements with us, substantially all cash flows of BRMG and the NY Groups after expenses including professional salaries, are transferred to us. We have determined that BRMG and the NY Groups are variable interest entities, that we are the primary beneficiary, and consequently, we consolidate the revenue and expenses, assets and liabilities of each. BRMG and the NY Groups on a combined basis recognized $135.7 million, $113.1 million and $89.3 million of revenue, net of management services fees to RadNet, for the years ended December 31 2016, 2015, and 2014, respectively and $135.7 million, $113.1 million and $89.3 million of operating expenses for the years ended December 31 2016, 2015, and 2014, respectively. RadNet, Inc. recognized $430.4 million, $343.9 million and $287.4 million of total billed net service fee revenue for the years ended December 31, 2016, 2015 and 2014, respectively, for management services provided to BRMG and the NY Groups relating primarily to the technical portion of billed revenue. The cash flows of BRMG and the NY Groups are included in the accompanying consolidated statements of cash flows. All intercompany balances and transactions have been eliminated in consolidation. In our consolidated balance sheets at December 31, 2016 and December 31, 2015, we have included approximately $100.0 million and $89.8 million, respectively, of accounts receivable and approximately $9.0 million and $8.5 million of accounts payable and accrued liabilities related to BRMG and the NY Groups, respectively. The creditors of BRMG and the NY Groups do not have recourse to our general credit and there are no other arrangements that could expose us to losses on behalf of BRMG and the NY Groups. However, RadNet may be required to provide financial support to cover any operating expenses in excess of operating revenues. At all of our centers we have entered into long-term contracts with radiology groups in the area to provide physician services at those facilities. These radiology practices provide professional services, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers. The radiology practices maintain full control over the provision of professional services. In these facilities we enter into long-term agreements with radiology practice groups (typically 40 years). Under these arrangements, in addition to obtaining technical fees for the use of our diagnostic imaging equipment and the provision of technical services, we provide management services and receive a fee based on the value of the services we provide. Except in New York City, the fee is based on the practice group’s professional revenue, including revenue derived outside of our diagnostic imaging centers. In New York City we are paid a fixed fee set in advance for our services. We own the diagnostic imaging equipment and, therefore, receive 100% of the technical reimbursements associated with imaging procedures. The radiology practice groups retain the professional reimbursements associated with imaging procedures after deducting management service fees paid to us and we have no financial controlling interest in the radiology practices. Because of the controlling relationship of Dr. Berger and Dr. Crues in the California and New York City practices as stated in detail above, we consolidate the revenue and expenses. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | PRINCIPLES OF CONSOLIDATION - The operating activities of subsidiaries are included in the accompanying consolidated financial statements from the date of acquisition. Investments in companies in which we have the ability to exercise significant influence, but not control, are accounted for by the equity method. All intercompany transactions and balances, with our consolidated entities and the unsettled amount of intercompany transactions with our equity method investees, have been eliminated in consolidation. As stated in Note 1 above, the BRMG and NY Groups are variable interest entities and we consolidate the operating activities and balance sheets of each. USE OF ESTIMATES - The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the financial statements; and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could materially differ from these estimates. REVENUES - Service fee revenue, net of contractual allowances and discounts, consists of net patient fees received from various payors and patients themselves based mainly upon established contractual billing rates, less allowances for contractual adjustments and discounts. As it relates to BRMG and the NY Groups centers, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by BRMG and the NY Groups as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees from BRMG and the NY Groups. As it relates to non-BRMG and NY Groups centers, namely the affiliated physician groups, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities. Service fee revenues are recorded during the period the services are provided based upon the estimated amounts due from the patients and third-party payors. Third-party payors include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Estimates of contractual allowances are based on historical collection rates of payor reimbursement contract agreements. We also record a provision for doubtful accounts based primarily on historical collection rates related to patient copayments and deductible amounts for patients who have health care coverage under one of our third-party payors. Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans. Our service fee revenue, net of contractual allowances and discounts, the provision for bad debts, and revenue under capitation arrangements for the years ended December 31, are summarized in the following table (in thousands): Years Ended December 31, 2016 2015 2014 Commercial insurance (1) $ 539,793 $ 486,489 $ 437,525 Medicare 187,941 168,545 159,562 Medicaid 28,170 23,948 24,499 Workers' compensation/personal injury 36,548 32,728 30,543 Other (2) 29,135 35,046 18,007 Service fee revenue, net of contractual allowances and discounts 821,587 746,756 670,136 Provision for bad debts (45,387 ) (36,033 ) (29,807 ) Net service fee revenue 776,200 710,723 640,329 Revenue under capitation arrangements 108,335 98,905 77,240 Total net revenue $ 884,535 $ 809,628 $ 717,569 (1) (2) PROVISION FOR BAD DEBTS - We provide for an allowance against accounts receivable that could become uncollectible to reduce the carrying value of such receivables to their estimated net realizable value. We estimate this allowance based on the aging of our accounts receivable by the historical payment patterns of each type of payor, write-off trends, and other relevant factors. A significant portion of our provision for bad debt relates to co-payments and deductibles owed to us from patients with insurance. Although we attempt to collect deductibles and co-payments due from patients with insurance at the time of service, this attempt to collect at the time of service is not an assessment of the patient’s ability to pay nor are revenues recognized based on an assessment of the patient’s ability to pay. There are various factors that can impact collection trends, such as changes in the economy, which in turn have an impact on the increased burden of co-payments and deductibles to be made by patients with insurance. These factors continuously change and can have an impact on collection trends and our estimation process. Our allowance for bad debts at December 31, 2016 and 2015 was $20.7 million and $20.8 million, respectively. ACCOUNTS RECEIVABLE - Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience. MEANINGFUL USE INCENTIVE - Under the American Recovery and Reinvestment Act of 2009, a program was enacted that provides financial incentives for providers that successfully implement and utilize electronic health record technology to improve patient care. Our software development team in Canada established an objective to build a Radiology Information System (RIS) software platform that has been awarded Meaningful Use certification. As this certified RIS system is implemented throughout our imaging centers, the radiologists that utilize this software can be eligible for the available financial incentives. In order to receive such incentive payments providers must attest that they have demonstrated meaningful use of the certified RIS in each stage of the program. We account for this meaningful use incentive under the Gain Contingency Model outlined in ASC 450-30. Under this model, we record within non-operating income, meaningful use incentive only after Medicare accepts an attestation from the qualified eligible professional demonstrating meaningful use. We recorded approximately $2.8 million, $3.3 million and $2.0 million during the twelve months ended December 31, 2016, 2015 and 2014, respectively, relating to this incentive. GAIN ON RETURN OF COMMON STOCK - In the second quarter of 2016, we determined that certain pre-acquisition financial information of Diagnostic Imaging Group (“DIG”) provided to us by the sellers contained errors. As a result of this, we negotiated and reached a settlement with the sellers of DIG in June 2016 for the return of 958,536 shares of common stock which had a fair value of $5.0 million on the date of return. Such return has been recognized as a gain on return of common stock in our statement of operations. SOFTWARE REVENUE RECOGNITION – Our subsidiary, eRAD, Inc., sells Picture Archiving Communications Systems (“PACS”) and related services, primarily in the United States. The PACS systems sold by eRAD are primarily composed of certain elements: hardware, software, installation and training, and support. Sales are made primarily through eRAD’s sales force. These sales are multiple-element arrangements that generally include hardware, software, software installation, configuration, system installation, training and first-year warranty support. Hardware, which is not unique or special purpose, is purchased from a third-party and resold to eRAD’s customers with a small mark-up. We have determined that our core software products, such as PACS, are essential to most of our arrangements as hardware, software and related services are sold as an integrated package. Therefore, these transactions are accounted for under ASC 605-25, Multiple-Element Arrangements Software. For the years ended December 31, 2016, 2015 and 2014, we recorded approximately $6.2 million, $6.1 million and $5.5 million, respectively, in revenue related to our eRAD business which is included in net service fee revenue in our consolidated statement of operations. At December 31, 2016 we had a deferred revenue liability of approximately $1.5 million associated with eRAD sales which we expect to recognize into revenue over the next 12 months. SOFTWARE DEVELOPMENT COSTS - Costs related to the research and development of new software products and enhancements to existing software products all for resale to our customers are expensed as incurred. We utilize a variety of computerized information systems in the day to day operation of our diagnostic imaging facilities. One such system is our front desk patient tracking system or Radiology Information System (“RIS”). We have historically utilized third party RIS software solutions and pay monthly fees to outside third party software vendors for the use of this software. We have developed our own RIS solution from the ground up through our wholly owned subsidiary, Radnet Management Information Systems (“RMIS”) and began utilizing this system beginning in the first quarter of 2015. In accordance with ASC 350-40, Accounting for the Costs of Computer Software Developed for Internal Use, We have entered into multiple agreements to license our RIS system to outside customers. For the twelve months December 31, 2016 and December 31, 2015, we received approximately $301,000 and $443,000 with respect to this licensing agreement, respectively. In accordance with ASC 350-40, we recorded the receipt of these funds against the capitalized software costs explained above. We intend to record any future proceeds in the same manner until the carrying value of our capitalized software costs are brought to zero. As of December 31, 2016, the net carrying value of our capitalized software costs was approximately $3.1 million. CONCENTRATION OF CREDIT RISKS - Financial instruments that potentially subject us to credit risk are primarily cash equivalents and accounts receivable. We have placed our cash and cash equivalents with one major financial institution. At times, the cash in the financial institution is temporarily in excess of the amount insured by the Federal Deposit Insurance Corporation, or FDIC. Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our clients and maintain an allowance for bad debts based upon our historical collection experience. CASH AND CASH EQUIVALENTS - We consider all highly liquid investments that mature in three months or less when purchased to be cash equivalents. The carrying amount of cash and cash equivalents approximates their fair market value. DEFERRED FINANCING COSTS - Costs of financing are deferred and amortized on a straight-line basis over the life of the associated loan, which approximates the effective interest rate method. Deferred financing costs, net of accumulated amortization, were $2.0 million and $4.9 million, as of December 31, 2016 and 2015, respectively. In conjunction with our Restatement Amendment, a net addition of approximately $237,000 was added to deferred financing costs, consisting of $946,000 new additional costs from the amendment and a write off of $709,000 due to a change in lender mix. See Note 8, Notes Payable, Line of Credit, and Capital Leases for more information. INVENTORIES - Inventories, consisting mainly of medical supplies, are stated at the lower of cost or net realizable value with cost determined by the first-in, first-out method. PROPERTY AND EQUIPMENT - Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 30 years. Maintenance and repairs are charged to expense as incurred. BUSINESS COMBINATION - Accounting for acquisitions requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. GOODWILL AND INDEFINITE LIVED INTANGIBLES - Goodwill at December 31, 2016 totaled $239.6 million. Indefinite lived intangible assets at December 31, 2016 totaled $7.9 million and are associated with the value of certain trade name intangibles. Goodwill and trade name intangibles are recorded as a result of business combinations. Management evaluates goodwill and trade name intangibles, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of a reporting unit is estimated using a combination of the income or discounted cash flows approach and the market approach, which uses comparable market data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any. Impairment of trade name intangibles is tested at the subsidiary level by comparing the subsidiary’s trade name carrying amount to its respective fair value. We tested both goodwill and trade name intangibles for impairment on October 1, 2016, noting no impairment, and have not identified any indicators of impairment through December 31, 2016. LONG-LIVED ASSETS - We evaluate our long-lived assets (property and equipment) and intangibles, other than goodwill, for impairment whenever indicators of impairment exist. Generally accepted accounting principles (GAAP) requires that if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible is less than the carrying value of that asset, an asset impairment charge must be recognized. The amount of the impairment charge is calculated as the excess of the asset’s carrying value over its fair value, which generally represents the discounted future cash flows from that asset or in the case of assets we expect to sell, at fair value less costs to sell. No indicators of impairment were identified with respect to our long-lived assets as of December 31, 2016. INCOME TAXES - Income tax expense is computed using an asset and liability method and using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized. Income taxes are further explained in Note 11. UNINSURED RISKS - On November 1, 2008 we obtained a fully funded and insured workers’ compensation policy, thereby eliminating any uninsured risks for employee injuries occurring on or after that date. This fully funded policy remained in effect through November 1, 2013 and continues to cover any claims incurred through this date. On November 1, 2013 we entered into a high-deductible workers’ compensation insurance policy. We have recorded liabilities of $2.9 million for the year ended December 31, 2016, and $2.2 million for the year ended December 31, 2015, respectively for the estimated future cash obligations associated with the unpaid portion of the workers compensation claims incurred. We and our affiliated physicians carry an annual medical malpractice insurance policy that protects us for claims that are filed during the policy year and that fall within policy limits. The policy has a deductible for which is $10,000 per incidence at December 31, 2016 and was $24,000 per incidence at December 31, 2015. In December 2008, in order to eliminate the exposure for claims not reported during the regular malpractice policy period, we purchased a medical malpractice tail policy, which provides coverage for any claims reported in the event that our medical malpractice policy expires. As of December 31, 2016, this policy remains in effect. We have entered into an arrangement with Blue Shield to administer and process claims under a self-insured plan that provides health insurance coverage for our employees and dependents. We have recorded liabilities as of December 31, 2016 and 2015 of $2.4 million and $1.8 million, respectively, for the estimated future cash obligations associated with the unpaid portion of the medical and dental claims incurred by our participants. Additionally, we entered into an agreement with Blue Shield for a stop loss policy that provides coverage for any claims that exceed $250,000 up to a maximum of $1.0 million in order for us to limit our exposure for unusual or catastrophic claims. LOSS AND OTHER UNFAVORABLE CONTRACTS – We assess the profitability of our contracts to provide management services to our contracted physician groups and identify those contracts where current operating results or forecasts indicate probable future losses. Anticipated future revenue is compared to anticipated costs. If the anticipated future cost exceeds the revenue, a loss contract accrual is recorded. In connection with the acquisition of Radiologix in November 2006, we acquired certain management service agreements for which forecasted costs exceeds forecasted revenue. As such, an $8.9 million loss contract accrual was established in purchase accounting, and is included in other non-current liabilities. The recorded loss contract accrual is being accreted into operations over the remaining term of the acquired management service agreements. As of December 31, 2016 and 2015, the remaining accrual balance is $5.6 million, and $5.7 million, respectively. As part of our ongoing acquisition activities, we have certain operating lease commitments for facilities that are not in use. Accordingly, we have recorded a loss contract accrual related to the remaining payments under these lease commitments. As of December 31, 2015, the remaining loss contract accrual for these leases was $85,000 and was completely amortized during the 2016 fiscal year with no balance remaining as of December 31, 2016. In addition and related to acquisition activity, we have certain operating lease commitments for facilities where the fair market rent differs from the lease contract rate. We have recorded an unfavorable contract liability representing the difference between the total value of the fair market rent and the contract rent over the current term of the lease applicable from the date of acquisition. As of December 31, 2016 and 2015, the unfavorable contract liability on these leases is $1.6 million and $581,000, respectively. EQUITY BASED COMPENSATION – We have one long-term incentive plan which we refer to as the 2006 Plan, which we amended and restated as of April 20, 2015 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 11, 2015. As of December 31, 2016, we have reserved for issuance under the Restated Plan 12,000,000 shares of common stock. We can issue options, stock awards, stock appreciation rights and cash awards under the Restated Plan. Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options and warrants generally vest over three to five years and expire five to ten years from date of grant. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. FOREIGN CURRENCY TRANSLATION - The functional currency of our foreign subsidiaries is the local currency. In accordance with ASC 830, Foreign Currency Matters COMPREHENSIVE INCOME - ASC 220, Comprehensive Income, FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement: Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities. Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data. Level 3—Fair value is determined by using inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgment. The table below summarizes the estimated fair values of certain of our financial assets that are subject to fair value measurements, and the classification of these assets on our consolidated balance sheets, as follows (in thousands): As of December 31, 2016 Level 1 Level 2 Level 3 Total Current assets Interest Rate Contracts $ – $ 818 $ – $ 818 The estimated fair value of these contracts, which are discussed in Note 10, was determined using Level 2 inputs. More specifically, the fair value was determined by calculating the value of the difference between the fixed interest rate of the interest rate swaps and the counterparty’s forward LIBOR curve. The forward LIBOR curve is readily available in the public markets or can be derived from information available in the public markets. The table below summarizes the estimated fair value and carrying amount of our long-term debt as follows (in thousands): As of December 31, 2016 Level 1 Level 2 Level 3 Total Fair Value Total Face Value First Lien Term Loans $ – $ 483,129 $ – $ 483,129 $ 478,938 Second Lien Term Loans $ – $ 167,580 $ – $ 167,580 $ 168,000 As of December 31, 2015 Level 1 Level 2 Level 3 Total Total Face Value First Lien Term Loans $ – $ 444,258 $ – $ 444,258 $ 451,023 Second Lien Term Loans – 173,700 – 173,700 180,000 Our revolving credit facility had no aggregate principal amount outstanding as of December 31, 2016. The estimated fair value of our long-term debt, which is discussed in Note 8, was determined using Level 2 inputs primarily related to comparable market prices. We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our capital lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates. EARNINGS PER SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data): Years Ended December 31, 2016 2015 2014 Net income attributable to RadNet, Inc. common stockholders $ 7,230 $ 7,709 $ 1,376 BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 46,244,188 43,805,794 41,070,077 Basic net income per share attributable to RadNet, Inc. common stockholders $ 0.16 $ 0.18 $ 0.03 DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 46,244,188 43,805,794 41,070,077 Add nonvested restricted stock subject only to service vesting 220,416 865,326 994,610 Add additional shares issuable upon exercise of stock options and warrants 190,428 500,252 1,084,509 Weighted average number of common shares used in calculating diluted net income per share 46,655,032 45,171,372 43,149,196 Diluted net income per share attributable to RadNet, Inc. common stockholders $ 0.15 $ 0.17 $ 0.03 For the years ended December 31, 2016, 2015 and 2014 we excluded 165,000, 265,000, and 245,000, respectively, outstanding options, in the calculation of diluted earnings per share because their effect would be antidilutive. INVESTMENT IN JOINT VENTURES – We have twelve unconsolidated joint ventures with ownership interests ranging from 35% to 55%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method, since RadNet does not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of December 31, 2016. Acquisition of new facilities On August 15, 2016 our joint venture, Franklin Imaging, LLC, acquired a single multi-modality imaging center located in Rosedale, Maryland for cash consideration of $1.0 million and the assumption of capital lease debt of $241,000. Franklin Imaging, LLC made a fair value determination of the acquired assets and approximately $600,000 of fixed assets, $30,000 of other assets and goodwill of $648,000 was recorded in respect to the transaction. Formation of new joint ventures On April 1, 2016, Community Imaging Partners Inc., a wholly owned subsidiary of RadNet, entered into a joint venture with Mt. Airy Health Services, LLC, a partnership of Frederick Memorial Hospital and Carroll Hospital Center. On August 31, 2016, Community Imaging Partners Inc. contributed $200,000 for a 40% economic interest in the partnership and funded an additional $440,000 in relation to a capital call. Mt. Airy Health Services, LLC, contributed $300,000 for a 60% economic interest and an additional $660,000 in relation to the capital call. On May 9, 2016, RadNet, through a newly formed subsidiary, Glendale Advanced Imaging LLC, entered into a joint venture with Dignity Health, a California nonprofit public benefit corporation. On June 1, 2016, RadNet contributed net assets of $2.2 million for a 55% economic interest and Dignity Health contributed net assets of $1.8 million for a 45% economic interest. Joint venture investment and financial information The following table is a summary of our investment in joint ventures during the years ended December 31, 2016 and December 31, 2015 (in thousands): Balance as of December 31, 2014 $ 32,123 Equity contributions in existing joint ventures 265 Equity in earnings in these joint ventures 8,927 Distribution of earnings (7,731 ) Balance as of December 31, 2015 $ 33,584 Equity contributions in existing joint ventures 3,084 Equity in earnings in these joint ventures 9,767 Distribution of earnings (2,926 ) Balance as of December 31, 2016 $ 43,509 We received management service fees from the centers underlying these joint ventures of approximately $11.9 million for the year ended December 31, 2016 and $9.3 million per year for the years ended December 31, 2015 and 2014, respectively. We eliminate any unrealized portion of our management service fees with our equity in earnings of joint ventures. The following table is a summary of key financial data for these joint ventures as of December 31, 2016 and 2015, respectively, and for the years ended December 31, 2016, 2015 and 2014, respectively, (in thousands): December 31, Balance Sheet Data: 2016 2015 Current assets $ 40,093 $ 28,186 Noncurrent assets 100,146 91,660 Current liabilities (14,077 ) (15,258 ) Noncurrent liabilities (44,405 ) (44,059 ) Total net assets $ 81,757 $ 60,529 Book value of RadNet joint venture interests $ 38,538 $ 28,397 Cost in excess of book value of acquired joint venture interests 4,970 4,970 Elimination of intercompany profit remaining on Radnet's consolidated balance sheet – 217 Total value of Radnet joint venture interests $ 43,509 $ 33,584 Total book value of other joint venture partner interests $ 43,219 $ 32,132 2016 2015 2014 Net revenue $ 160,134 $ 125,544 $ 101,189 Net income $ 21,933 $ 19,485 $ 14,854 |
3. RECENT ACCOUNTING STANDARDS
3. RECENT ACCOUNTING STANDARDS | 12 Months Ended |
Dec. 31, 2016 | |
Recent Accounting Standards | |
RECENT ACCOUNTING STANDARDS | Accounting standards adopted In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09 (“ASU 2016-09”), Compensation—Stock Compensation In November 2015, the FASB issued ASU No. 2015-17 (“ASU 2015-17”), Income Taxes In September 2015, the FASB issued ASU No. 2015-16 (“ASU 2015-16”), Business Combinations, In August 2015, the FASB issued ASU No. 2015-15 (“ASU 2015-15”), Interest – Imputation of Interest In April 2015, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2015-03 (“ASU 2015-03”), Interest – Imputation of Interest In thousands As previously reported Impact of adoption As currently reported Prepaid expenses and other current assets $ 40,139 (1,153 ) 38,986 Deferred financing costs, net of current portion 3,696 (855 ) 2,841 Others 794,600 – 794,600 Total assets $ 838,435 $ (2,008 ) $ 836,427 Current portion of notes payable 23,076 (693 ) 22,383 Notes payable, net of current portion 601,229 (1,315 ) 599,914 Others 177,669 – 177,669 Total liabilities 801,974 (2,008 ) 799,966 Total equity 36,461 – 36,461 Total liabilities and equity $ 838,435 $ (2,008 ) $ 836,427 In February 2015, the FASB issued ASU No. 2015-02 (“ASU 2015-02”), Consolidation – Amendments to the Consolidation Analysis, Accounting standards not yet adopted In January 2017, the FASB issued ASU No. 2017-04 ("ASU 2017-04"), Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current Step 1). ASU 2017-04 is effective for annual and any interim impairment tests for periods beginning after December 15, 2019, with early adoption permitted. We are evaluating the effect of this guidance. In January 2017, the FASB issued ASU No. 2017-01 ("ASU 2017-01"), Clarifying the Definition of a Business. ASU 2017-01 changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is considered a business. ASU 2017-01 is effective for annual periods beginning after December 31, 2017 including interim periods within those periods. We are evaluating the effect of this guidance. In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases, In May 2014, the FASB issued ASU No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers |
4. FACILITY ACQUISITIONS AND DI
4. FACILITY ACQUISITIONS AND DISPOSITIONS | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
FACILITY ACQUISITIONS AND DISPOSITIONS | Acquisitions In separate purchases occurring on July 1 and October 1 2016, we acquired for approximately $1.2 million the remaining non-controlling interest of 47.6% in the Park West joint venture, thus increasing our ownership percentage from 52.4% to 100%. The difference between the consideration paid and the carrying value of the non-controlling interest purchased was recorded as additional paid-in capital. On March 1, 2016 we completed our acquisition of certain assets of Advanced Radiological Imaging – Astoria P.C. consisting of two multi-modality imaging centers located in Astoria, NY for cash consideration of $5.0 million. The facility provides MRI, PET/CT, Ultrasound and X-ray services. We have made a fair value determination of the acquired assets and approximately $3.6 million of fixed assets, $47,000 of prepaid assets, $100,000 covenant not to compete, and $1.3 million of goodwill were recorded. On October 1, 2015 we completed our acquisition of certain assets of DIG consisting of seventeen multi-modality imaging centers located in the boroughs of Brooklyn and Queens, New York, for $62.9 million detailed as follows: cash consideration of $54.6 million ($49.6 million paid at execution, $5 million to be paid 18 months after acquisition or earlier if certain conditions are met), the assumption of $2.1 million in equipment debt, and issuance of 1.5 million RadNet common shares valued at $8.3 million on the acquisition date. The transaction also includes contingent consideration payable equal to five times the amount by which collections on the sellers’ historical revenue exceeds a defined threshold. During 2016, based on fair value determination of the assets and liabilities by a third party, we recorded certain measurement period adjustments associated with our acquisition. In the second quarter of 2016, these adjustments resulted in an increase to fixed assets acquired by $1.1 million and the recognition of a net unfavorable lease contract liability of $1.0 million. In the third quarter of 2016, we recorded a decrease to our intangible and fixed assets of approximately $121,000. Also, amounts previously owed to DIG of $5.0 million were reduced to $3.4 million on June 15, 2016 when we remitted a payment of $1.6 million to a payor on behalf of DIG. On October 1, 2015 we completed our acquisition of certain assets of Philip L. Chatham, M.D., Inc., an oncology practice with offices in the Los Angeles, CA area, for consideration of $916,000, paid in shares of equal value of the common stock of RadNet, Inc. and $300,000 in cash. We have made a fair value determination of the acquired assets and approximately $26,000 of fixed assets, $100,000 covenant not to compete intangible asset, $300,000 of medical supplies and $790,000 of goodwill were recorded with respect to this transaction. On September 1, 2015 we completed our acquisition of certain assets of Murray Hill Radiology and Mammography, P.C. and Murray Hill MRI Holding, LLC, consisting of a single multi-modality imaging center located in Manhattan, New York for a cash consideration of $5.8 million. The facility provides MRI, CT, Ultrasound and X-ray services. We have made a fair value determination of the acquired assets and approximately $1.6 million of fixed assets, $95,000 of prepaid assets and $4.1 million of goodwill were recorded. On August 3, 2015 we completed our acquisition of certain assets of Hanford Imaging, LP, consisting of a single multi-modality imaging center located in Hanford, CA for cash consideration of $1.0 million. The facility provides MRI, CT, Ultrasound and X-ray services. We have made a fair value determination of the acquired assets and approximately $215,000 of fixed asset and $785,000 of goodwill were recorded. On June 1, 2015 we completed our acquisition of certain assets of Healthcare Radiology and Diagnostic systems, PLLC, consisting of a single multi-modality imaging center located in the Bronx, NY area for cash consideration of $425,000. The facility provides MRI, CT, Ultrasound and X-ray services. We have made a fair value determination of assets acquired and approximately $134,500 of fixed assets and $290,500 of leasehold improvements were recorded On May 1, 2015 we completed our acquisition of certain assets of California Radiology consisting of six multi-modality imaging centers located in Los Angeles, California for cash consideration of $4.2 million. The facilities provide MRI, PET/CT, Ultrasound and X-ray services. We have made a fair value determination of the acquired assets and approximately $217,000 of equipment, $1.7 million of leasehold improvements, $34,000 in other assets, $100,000 of other intangible assets relating to a covenant not to compete contract and $2.1 million of goodwill were recorded with respect to this transaction. On April 15, 2015 we completed our acquisition of certain assets of New York Radiology Partners, consisting of eleven multi-modality imaging centers located in Manhattan, New York for cash consideration of $29.8 million, a note to seller of $1.5 million, and the assumption of equipment debt of $2.3 million. The facilities provide a full range of radiology services including MRI, PET/CT, Mammography, Ultrasound, X-ray and other related services. With the use of an outside valuation expert, we have made a fair value determination of the acquired assets and assumed liabilities. In total, RadNet acquired assets of $34.5 million and assumed current liabilities of $891,000. Asset amounts acquired were $6.9 million in equipment, $11.6 million in leasehold improvements, $9.9 million in goodwill, $1.2 million in intangible assets, and $4.9 million of accounts receivable and other assets. Current liabilities assumed related to accounts payable, payroll and other related short term obligations. Assets held for sale On November 4, 2016, the Board of Directors resolved to sell the Company’s interest in five of its Rhode Island imaging centers operating under the name The Imaging Institute within the upcoming 12 months. The following table summarizes the major categories of assets classified as held for sale in the accompanying consolidated balance sheets at December 31, 2016 (in thousands): Property and equipment, net $ 1,056 Other assets 21 Goodwill 1,126 Total assets held for sale $ 2,203 As the sale of these assets does not represent a strategic shift that will have a major effect on the Company’s operations and financial results, it is not classified as a discontinued operation. Dispositions On September 30, 2015 we completed a sale of 10 wholly owned imaging centers to one of our non-consolidated joint ventures for which we hold a 49% non-controlling interest, The New Jersey Imaging Network, L.L.C., for approximately $35.5 million. We recorded a gain of $5.4 million with respect to this transaction. On August 3, 2015 we sold a 25% non-controlling interest in one of our wholly owned entities, Baltimore County Radiology, LLC (“BCR”) to Lifebridge Health for $5.0 million. On the date of sale, the net book value of this 25% interest was $1.3 million. In accordance with ASC 810-10-45-23, the proceeds in excess of this net book value amounting to $3.7 million was recorded to equity. In addition to the proceeds initially received, the transaction included an earn out provision in which RadNet had the opportunity to receive approximately $1.2 million in additional proceeds if certain operating performance targets of BCR were achieved within the 12 months following the transaction. In the third quarter of 2016, we recorded an increase to additional paid-in capital as a result of $992,000 received as part of the earn out provision. |
5. GOODWILL AND OTHER INTANGIBL
5. GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | Goodwill is recorded as a result of business combinations. Activity in goodwill for the years ended December 31, 2015 and 2016 is provided below (in thousands): Balance as of December 31, 2014 $ 200,304 Adjustment to our allocation of goodwill for the acquisition of Liberty Pacific 200 Goodwill acquired through the acquisition of California Radiology 2,107 Goodwill acquired through the acquisition of New York Radiology Partners 9,897 Goodwill disposed through the sale of New Jersey Imaging Partners (18,833 ) Goodwill acquired through the acquisition of Hanford Imaging, LP 785 Goodwill acquired through the acquisition of Murry Hill Radiology and MRI 4,123 Goodwill acquired through the acquisition of Phillip L Chatam, M.D., Inc. 790 Goodwill acquired through the acquisition of Diagnostic Imaging Group, LLC 40,035 Balance as of December 31, 2015 239,408 Goodwill acquired through the acquisition of Advanced Radiological Imaging 1,280 Adjustments to our preliminary allocation of the purchase price of Diagnostic Imaging Group, LLC (47 ) Goodwill acquired through the acquisition of Landmark Imaging, LLC 38 Goodwill allocated to assets held for sale (1,126 ) Balance as of December 31, 2016 $ 239,553 The amount of goodwill from these acquisitions that is deductible for tax purposes as of December 31, 2016 is $99.1 million. Other intangible assets are primarily related to the value of management service agreements obtained through our acquisition of Radiologix, Inc. in 2006 and are recorded at a cost of $57.5 million less accumulated amortization of $23.4 million at December 31, 2016. Also included in other intangible assets is the value of covenant not to compete contracts associated with our facility acquisitions totaling $5.9 million less accumulated amortization of $5.3 million, as well as the value of trade names associated with acquired imaging facilities totaling $10.2 million less accumulated amortization of $1.5 million and dispositions of $750,000. In connection with our purchase of eRAD is the $4.0 million value of eRAD’s developed technology and its customer relationships, which have been fully amortized as of December 31, 2016. Total amortization expense for the years ended December 31, 2016, 2015 and 2014 was $2.6 million, $3.0 million, and $3.1 million, respectively. Intangible assets are amortized using the straight-line method. Management service agreements are amortized over 25 years using the straight line method. Developed technology and customer relationships are amortized over 5 years using the straight line method. The following table shows annual amortization expense, by asset classes that will be recorded over the next five years (in thousands): 2017 2018 2019 2020 2021 Thereafter Total Weighted average amortization period remaining in years Management Service Contracts $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 22,683 $ 34,118 14.9 Covenant not to compete contracts 251 208 122 42 4 – 627 2.8 Trade Names* – – – – – 7,937 7,937 – Total Annual Amortization $ 2,538 $ 2,495 $ 2,409 $ 2,329 $ 2,291 $ 30,620 $ 42,682 * These trade name intangibles have an indefinite life |
6. PROPERTY AND EQUIPMENT
6. PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment and accumulated depreciation and amortization are as follows (in thousands): December 31, 2016 2015 Land $ 250 $ 250 Medical equipment 393,001 352,005 Computer and office equipment, furniture and fixtures 99,434 107,014 Software development costs 6,391 6,391 Leasehold improvements 252,595 232,550 Equipment under capital lease 26,758 29,796 Total property and equipment cost 778,429 728,006 Accumulated depreciation and amortization (529,648 ) (471,284 ) Total net property and equipment 248,781 256,722 Equipment held for sale (1,056 ) – Total property and equipment $ 247,725 $ 256,722 Depreciation and amortization expense of property and equipment, including amortization of equipment under capital leases, for the years ended December 31, 2016, 2015 and 2014 was $64.0 million, $57.6 million, and $56.2 million, respectively. |
7. ACCOUNTS PAYABLE AND ACCRUED
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (IN THOUSANDS) | Accounts payable and accrued expenses were comprised of the following (in thousands): December 31, 2016 2015 Accounts payable $ 40,952 $ 52,296 Accrued expenses 42,883 32,950 Accrued payroll and vacation 19,119 17,692 Accrued professional fees 8,212 10,875 Total $ 111,166 $ 113,813 |
8. NOTES PAYABLE, LINE OF CREDI
8. NOTES PAYABLE, LINE OF CREDIT AND CAPITAL LEASES | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE, LINE OF CREDIT AND CAPITAL LEASES | Notes payable, revolving credit facility and capital lease obligations Our notes payable, line of credit and capital lease obligations consist of the following (in thousands): December 31, 2016 2015 Revolving lines of credit $ – $ – First Lien Term Loans 478,938 451,023 Second Lien Term Loans 168,000 180,000 Discounts on term loans (16,783 ) (9,542 ) Promissory note payable to the former owner of a practice acquired at an interest rate of 1.5% due through 2019 980 1,361 Promissory note payable to Healthcare Partners for imaging equipment acquired through acquisition at an interest rate of 5.25% – 431 Equipment notes payable at interest rates ranging from 3.3% to 10.2%, due through 2020, collateralized by medical equipment 341 1,032 Obligations under capital leases at interest rates ranging from 2.5% to 10.8%, due through 2022, collateralized by medical and office equipment 7,256 16,423 Total debt obligations 638,732 640,728 Less: current portion (26,557 ) (33,114 ) Long term portion debt obligations $ 612,175 $ 607,614 The following is a listing of annual principal maturities of notes payable exclusive of all related discounts, capital leases and repayments on our revolving credit facilities for years ending December 31 (in thousands): 2017 $ 24,784 2018 24,751 2019 24,526 2020 24,261 2021 192,250 Thereafter 357,687 Total notes payable obligations $ 648,259 We lease equipment under capital lease arrangements. Future minimum lease payments under capital leases for years ending December 31 (in thousands) is as follows: 2017 $ 4,764 2018 2,163 2019 359 2020 201 2021 81 Thereafter 15 Total minimum payments 7,583 Amount representing interest (327 ) Present value of net minimum lease payments 7,256 Less current portion (4,526 ) Long-term portion lease obligations $ 2,730 Term Loans and Financing Activity Information Included in our consolidated balance sheet at December 31, 2016 are $630.2 million of senior secured term loan debt (net of unamortized discounts of $16.8 million), broken down by loan agreement as follows (in thousands): As of December 31, 2016 Face Value Discount Total Carrying Value First Lien Term Loans $ 478,938 $ (14,712 ) $ 464,226 Second Lien Term Loans $ 168,000 $ (2,071 ) $ 165,929 Total $ 646,938 $ (16,783 ) $ 630,155 Our revolving credit facility had no aggregate principal amount outstanding as of December 31, 2016. At December 31, 2016, our credit facilities were comprised of two tranches of term loans and a revolving credit facility. On July 1, 2016 (the “Restatement Effective Date”), we entered into Amendment No. 3 to Credit and Guaranty Agreement (the “Restatement Amendment”) pursuant to which we amended and restated our then existing first lien credit facilities on the terms set forth in the Amended and Restated First Lien Credit and Guaranty Agreement dated July 1, 2016 (as amended from time to time, the “First Lien Credit Agreement”). Pursuant to the First Lien Credit Agreement, we have issued $485 million of senior secured term loans (the “First Lien Term Loans”) and established a $117.5 million senior secured revolving credit facility (the “Revolving Credit Facility”). We have also entered into a Second Lien Credit and Guaranty Agreement dated March 25, 2014 (as amended from time to time, the “Second Lien Credit Agreement”) pursuant to which we issued $180 million of secured term loans (the “Second Lien Term Loans”). As of December 31, 2016, we were in compliance with all covenants under out credit facilities. The following describes our 2016 financing activities: Restatement Amendment and the First Lien Credit Agreement On July 1, 2016, we entered into the Restatement Amendment pursuant to which we amended and restated our then existing first lien credit facilities on the terms set forth in the First Lien Credit Agreement. As of the Restatement Effective Date, our first lien credit facilities consisted of a Credit and Guaranty Agreement that we entered into on October 10, 2012 (the “Original First Lien Credit Agreement”), as subsequently amended by a first amendment dated April 3, 2013 (the “2013 Amendment”), a second amendment dated March 25, 2014 (the “2014 Amendment”), and a joinder agreement dated April 30, 2015 (the “2015 Joinder” and collectively with the Original First Lien Credit Agreement, the 2013 Amendment and the 2014 Amendment, the “Prior First Lien Credit Agreement”). The First Lien Credit Agreement increased the aggregate principal amount of First Lien Term Loans to $485.0 million and increased the Revolving Credit Facility to $117.5 million. Proceeds from the First Lien Credit Agreement were used to repay the previously outstanding first lien loans under the Prior First Lien Credit Agreement, make a $12.0 million principal payment of the Second Lien Term Loans, pay costs and expenses related to the First Lien Credit Agreement and provide approximately $10.0 million for general corporate purposes. Interest. Payments. Maturity Date. Incremental Feature: minus Revolving Credit Facility: Second Lien Credit Agreement On March 25, 2014, we entered into the Second Lien Credit Agreement to provide for, among other things, the borrowing of $180.0 million of Second Lien Term Loans. The proceeds from the Second Lien Term Loans were used to redeem our 10 3/8% senior unsecured notes, due 2018, to pay the expenses related to the transaction and for general corporate purposes. On July 1, 2016, in conjunction with the Restatement Amendment, a $12.0 million principal payment was made on the Second Lien Term Loans. The Second Lien Credit Agreement provides for the following: Interest. Payments. Termination. The following describes our financing activities on the retired Senior Notes: Senior Notes On April 6, 2010, we issued and sold $200 million of 10 3/8% senior unsecured notes due 2018 at a price of 98.680% (the “Senior Notes”). All payments of the Senior Notes, including principal and interest, were guaranteed jointly and severally on a senior secured basis by RadNet, Inc., and all of Radnet Management’s current and future domestic wholly owned restricted subsidiaries. The Senior Notes were issued under an indenture dated April 6, 2010 (the “Indenture”), by and among Radnet Management, Inc., as issuer, RadNet, Inc., as parent guarantor, the subsidiary guarantors thereof and U.S. Bank National Association, as trustee. We paid interest on the senior notes on April 1 |
9. COMMITMENTS AND CONTINGENCIE
9. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Leases Facilities Equipment Total 2017 $ 58,368 $ 8,337 $ 66,705 2018 49,638 7,784 57,422 2019 43,192 5,695 48,887 2020 35,276 3,841 39,117 2021 28,062 1,999 30,061 Thereafter 56,008 1,332 57,340 $ 270,544 $ 28,988 $ 299,532 Total rent expense, including equipment rentals, for the years ended December 31, 2016, 2015 and 2014 was $74.2 million, $71.7 million and $64.5 million, respectively. Litigation |
10. DERIVATIVE INSTRUMENTS
10. DERIVATIVE INSTRUMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | We are exposed to certain risks relating to our ongoing business operations. The primary risk managed by us using derivative instruments is interest rate risk. Our credit facilities are comprised of two tranches of term loans. On July 1, 2016, we issued $485 million of the First Lien Term Loans. We also previously entered into a Second Lien Credit Agreement pursuant to which we issued $180 million of Second Lien Term Loans. Proceeds from the First Lien Term Loans were used in part to make a $12 million principal payment of the Second Lien Term Loans to reduce the outstanding balance due to $168 million. Both tranches of term loans have a LIBOR floor of 1% which serves as an interest rate floor based on our three month LIBOR rate election. See Note 8, Notes Payable, Revolving Credit Facility and Capital Leases for more information. In the fourth quarter of 2016, the Company entered into two forward interest rate cap agreements ("2016 Caps"). The 2016 Caps will mature in September and October 2020. The 2016 Caps had notional amounts of $150,000,000 and $350,000,000, respectively, which were designated at inception as cash flow hedges of future cash interest payments associated with portions of the Company’s variable rate bank debt. Under these arrangements, the Company purchased a cap on 3 month LIBOR at 2.0%. The Company is liable for a $5.3 million premium to enter into the caps which is being accrued over the life of the agreements. At inception, we designated our interest rate cap agreements as cash flow hedges of floating-rate borrowings. In accordance with ASC Topic 815, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e., change in fair value) is initially reported as a component of accumulated other comprehensive income in the consolidated statement of equity (deficit). The remaining gain or loss, if any, is recognized currently in earnings. As of December 31, 2016, the cash flow hedges were deemed to be effective. No amount is expected to be reclassified into earnings in the next twelve months. Below represents as of December 31, 2016 the fair value of our interest rate caps and gain recognized: The fair value of derivative instruments as of December 31, 2016 is as follows (amounts in thousands): Derivatives Balance Sheet Location Fair Value – Asset Derivatives Interest rate contracts Current assets $818 A tabular presentation of the effect of derivative instruments on our statement of comprehensive income is as follows (amounts in thousands): Effective Interest Rate Cap Amount of Gain Recognized on Derivative Location of Gain Recognized in Income on Derivative Interest rate contracts $818 Other Comprehensive Income |
11. INCOME TAXES
11. INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | For the years ended December 31, 2016, 2015 and 2014, we recognized income tax expense comprised of the following (in thousands): 2016 2015 2014 Federal current tax $ 88 $ 237 $ – State current tax 914 1,705 1,283 Other current tax 28 28 29 Federal deferred tax 2,539 3,625 869 State deferred tax 863 412 (214 ) Income tax expense $ 4,432 $ 6,007 $ 1,967 A reconciliation of the statutory U.S. federal rate and effective rates is as follows: 2016 2015 2014 Federal tax 34.00% 34.00% 34.00% State franchise tax, net of federal benefit 1.80% 8.50% -3.64% Other Non deductible expenses -0.09% -0.01% 0.00% Meals and entertainment 2.10% 1.75% 4.85% Noncontrolling Interest in Partnerships -2.11% -2.16% -2.88% Equity compensation -4.05% -1.74% -8.72% Changes in valuation allowance 4.70% -17.32% 24.52% Return-to-provision 0.22% 3.29% -9.57% Deferred true-ups and other -25.25% 13.41% 16.34% Uncertain tax positions 22.44% 0.01% -3.67% Expiring net operating losses 1.88% 1.28% 2.62% Income tax expense 35.64% 41.01% 53.85% Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial and income tax reporting purposes and operating loss carryforwards. Our deferred tax assets and liabilities comprise the following (in thousands): At December 31, Deferred tax assets: 2016 2015 Net operating losses $ 84,509 $ 78,912 Accrued expenses 4,400 4,125 Straight-Line Rent Adjustment 10,750 11,263 Unfavorable contract liability 2,114 2,142 Equity compensation 950 846 Allowance for doubtful accounts 6,033 4,341 Other 1,357 1,092 Valuation Allowance (4,428 ) (3,841 ) Total Deferred Tax Assets $ 105,685 $ 98,880 Deferred tax liabilities: Property Plant & Equipment (6,994 ) (8,582 ) Goodwill (23,350 ) (18,617 ) Intangibles (12,066 ) (12,088 ) Non accrual experience method reserve (8,483 ) (7,882 ) Other (4,436 ) (4,747 ) Total Deferred Tax Liabilities $ (55,329 ) $ (51,916 ) Net Deferred Tax Asset $ 50,356 $ 46,964 As of December 31, 2016, the Company had federal net operating loss carryforwards of approximately $231.6 million, which expire at various intervals from the years 2017 to 2036. The Company also had state net operating loss carryforwards of approximately $ 160.5 million, which expire at various intervals from the years 2017 through 2036. As of December 31, 2016, $ 23.5 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. Future ownership changes as determined under Section 382 of the Internal Revenue Code could further limit the utilization of net operating loss carryforwards. We considered all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations. The evaluation of this evidence requires significant judgment about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. As of December 31, 2016, we have determined that deferred tax assets of $105.7 million are more likely-than-not to be realized. We have also determined that deferred tax liabilities of $ 23.4 million are required related to book basis in goodwill that has an indefinite life. For the next five years, and thereafter, federal net operating loss carryforwards expire as follows (in thousands): Year Ended Total Net Operating Loss Carryforwards Amount Subject to 382 limitation 2017 1,501 1,501 2018 10,968 – 2019 7,178 – 2020 – – 2021 24,257 – Thereafter 187,725 40,632 $ 231,629 $ 42,133 For the next five years, and thereafter, California net operating loss carryforwards expire as follows (in thousands): Year Ended Total Net Operating Loss Carryforwards 2017 4,520 2018 – 2019 – 2020 – 2021 – Thereafter 17,773 $ 22,293 We file consolidated income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2012. We do not anticipate the results of any open examinations would result in a material change to its financial position. At December 31 2016, the Company has unrecognized tax benefits of $3.9 million of which $2.8 million will affect the effective tax rate if recognized. A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended as follows (in thousands): December 31, 2016 2015 2014 Balance at beginning of year $ 94 $ 3,761 $ 3,970 Increases (Decreases) related to prior year tax positions 3,861 (3,667 ) (209 ) Expiration of the statute of limitations for the assessment of taxes (94 ) – – Balance at end of year $ 3,861 $ 94 $ 3,761 The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2016 the Company accrued an insignificant amount of interest expense. As of December 31, 2016, accrued interest and penalties were insignificant. |
12. STOCK-BASED COMPENSATION
12. STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | Stock Incentive Plans Options We have one long-term equity incentive plan which we refer to as the 2006 Equity Incentive Plan, which we amended and restated as of April 20, 2015 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 11, 2015. As of December 31, 2016, we have reserved for issuance under the Restated Plan 12,000,000 shares of common stock. We can issue options, stock awards, stock appreciation rights and cash awards under the Restated Plan. Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options generally vest over three to five years and expire five to ten years from the date of grant. As of December 31, 2016, we had outstanding options to acquire 375,626 shares of our Common Stock, of which options to acquire 205,000 shares were exercisable. During the twelve months ended December 31, 2016, we granted options to acquire 170,626 shares under our Restated Plan. The following summarizes all of our option transactions during the year ended December 31, 2016: Outstanding Options Under the 2006 Plan Shares Weighted Average Exercise price Per Common Share Weighted Remaining Contractual Life (in years) Aggregate Intrinsic Value Balance, December 31, 2015 931,667 $4.69 Granted 170,626 6.01 Exercised (576,667 ) 2.96 Canceled, forfeited or expired (150,000 ) 7.51 Balance, December 31, 2016 375,626 6.82 4.45 $ 252,238 Exercisable at December 31, 2016 205,000 7.51 0.92 176,400 Aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on December 31, 2016 and the exercise price, multiplied by the number of in-the-money options as applicable) that would have been received by the holder had all holders exercised their options on December 31, 2016. Total intrinsic value of options exercised during the years ended December 31, 2016 and 2015 was approximately $1.7 million and $6.2 million, respectively. As of December 31, 2016, total unrecognized stock-based compensation expense related to non-vested employee awards was $438,998, which is expected to be recognized over a weighted average period of approximately 3.0 years. Restricted Stock Awards (“RSA’s”) The Restated Plan permits the award of restricted stock awards (“RSA’s”). As of December 31, 2016, we have issued a total of 4,264,011 RSA’s of which 573,145 were unvested at December 31, 2016. The following summarizes all unvested RSA’s activities during the year ended December 31, 2016: RSA’s Weighted-Average Remaining Contractual Term (Years) Weighted-Average Fair Value RSA’s unvested at December 31, 2015 771,342 $5.17 Changes during the period Granted 802,803 $6.16 Vested (1,000,999 ) $5.13 Forfeited – $0.00 RSA’s unvested at December 31, 2016 573,145 0.57 $6.18 We determine the fair value of all RSA’s based of the closing price of our common stock on award date. Other stock bonus awards The Restated Plan also permits the award of stock bonuses not subject to any future service period. These awards are valued and expensed based on the closing price of our common stock on the date of award. During the year ended December 31, 2016 we issued 35,000 shares relating to these awards In sum, of the 12,000,000 shares of common stock reserved for issuance under the Restated Plan, at December 31, 2016, we had issued 12,168,387 total shares between options, RSA’s and other stock awards. With options cancelled and RSA’s forfeited amounting to 2,975,009 and 59,053 shares, respectively, there remain 2,865,675 shares available under the Restated Plan for future issuance. |
13. EMPLOYEE BENEFIT PLAN
13. EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
EMPLOYEE BENEFIT PLAN | We adopted a profit-sharing/savings plan pursuant to Section 401(k) of the Internal Revenue Code that covers substantially all non-professional employees. Eligible employees may contribute on a tax-deferred basis a percentage of compensation, up to the maximum allowable under tax law. Employee contributions vest immediately. The plan does not require a matching contribution by us through December 31, 2016. |
14. QUARTERLY RESULTS OF OPERAT
14. QUARTERLY RESULTS OF OPERATIONS | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
QUARTERLY RESULTS OF OPERATIONS | The following table sets forth a summary of our unaudited quarterly operating results for each of the last eight quarters in the years ended December 31, 2016 and 2015. This quarterly data has been derived from our unaudited consolidated interim financial statements which, in our opinion, have been prepared on substantially the same basis as the audited financial statements contained elsewhere in this report and include all normal recurring adjustments necessary for a fair presentation of the financial information for the periods presented. These unaudited quarterly results should be read in conjunction with our financial statements and notes thereto, included elsewhere in this report. The operating results in any quarter are not necessarily indicative of the results that may be expected for any future period (in thousands except per share data). 2016 Quarter Ended 2015 Quarter Ended Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31 Statement of Operations Data: Net revenue $ 216,388 $ 218,565 $ 224,643 $ 224,939 $ 181,267 $ 204,289 $ 208,366 $ 215,706 Total operating expenses 213,405 210,487 212,192 209,971 183,213 190,905 191,137 205,256 Total other expenses 7,875 5,717 11,578 10,641 6,723 10,836 5,731 10,109 Equity in earnings of joint ventures (2,279 ) (3,274 ) (2,576 ) (1,638 ) (1,102 ) (3,207 ) (1,992 ) (2,626 ) Benefit from (provision for) income taxes 1,180 (2,253 ) (1,458 ) (1,901 ) 3,091 (2,192 ) (5,199 ) (1,707 ) Net (loss) income (1,433 ) 3,382 1,991 4,064 (4,476 ) 3,563 8,291 1,260 Net income (loss) attributable to noncontrolling interests 290 (243 ) 344 383 78 168 304 379 Net (loss) income attributable to Radnet, Inc. common stockholders $ (1,723 ) $ 3,625 $ 1,647 $ 3,681 $ (4,554 ) $ 3,395 $ 7,987 $ 881 Basic net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: $ (0.04 ) $ 0.08 $ 0.04 $ 0.08 $ (0.11 ) $ 0.08 $ 0.18 $ 0.02 Diluted net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: $ (0.04 ) $ 0.08 $ 0.04 $ 0.08 $ (0.11 ) $ 0.08 $ 0.18 $ 0.02 Weighted average shares outstanding Basic 46,581 46,559 45,869 45,967 42,747 43,370 43,637 45,454 Diluted 46,581 46,882 46,334 46,389 42,747 44,686 44,752 46,545 |
15. RELATED PARTY TRANSACTIONS
15. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | We use World Wide Express, a package delivery company owned by our western operations chief operating officer, to provide delivery services for us. For the years ended December 31, 2016, 2015 and 2014, we paid approximately $670,000, $693,000 and $833,000, respectively, to World Wide Express for those services. At December 31, 2016 and 2015, we had outstanding amounts due to World Wide Express of $273,000 and $161,000, respectively. |
16. SUBSEQUENT EVENTS
16. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | On January 6, 2017, Image Medical Inc., a wholly owned subsidiary of RadNet, entered into a membership purchase agreement with ScriptSender, LLC, a partnership held by two individuals which provides secure data transmission services of medical information. Image Medical will contribute $3.0 million for a 49% equity interest in the partnership. In a separate management agreement, Image Medical Inc. will provide management and accounting services to the operation in return for a set fee. On January 13, 2017, we completed our acquisition of certain assets of Resolution Medical Imaging Corporation, consisting of two multi modality imaging center located in Santa Monica, CA for cash consideration of $2.1 million, the assumption of approximately $1.7 million in equipment debt, and payoff of a small business administration loan of $241,000. The facilities provide MRI, CT, Ultrasound, and X-Ray services. On February 1, 2017, we completed our acquisition of certain assets of MRI Centers, Inc., consisting of one single-modality imaging center located in Torrance, CA for cash consideration of $718,000. The facility provides MRI and sports medicine services. On February 2, 2017, we entered into a fourth amendment to our first lien credit agreement and senior secured revolving facility. Pursuant to the fourth amendment, the interest rate charged for the applicable margin on both facilities was reduced by 50 basis points, from 3.75% to 3.25%. The minimum LIBOR rate underlying the senior secured term loans remains at 1.0%. Except for such reduction in the interest rate on credit extensions, this amendment did not result in any other material modifications to the amended and restated credit agreement evidencing the first lien term loans and the senior secured revolving credit facility. |
2. SUMMARY OF SIGNIFICANT ACC25
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | PRINCIPLES OF CONSOLIDATION - The operating activities of subsidiaries are included in the accompanying consolidated financial statements from the date of acquisition. Investments in companies in which we have the ability to exercise significant influence, but not control, are accounted for by the equity method. All intercompany transactions and balances, with our consolidated entities and the unsettled amount of intercompany transactions with our equity method investees, have been eliminated in consolidation. As stated in Note 1 above, the BRMG and NY Groups are variable interest entities and we consolidate the operating activities and balance sheets of each. |
Use of Estimates | USE OF ESTIMATES - The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the financial statements; and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could materially differ from these estimates. |
Revenues | REVENUES - Service fee revenue, net of contractual allowances and discounts, consists of net patient fees received from various payors and patients themselves based mainly upon established contractual billing rates, less allowances for contractual adjustments and discounts. As it relates to BRMG and the NY Groups centers, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by BRMG and the NY Groups as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees from BRMG and the NY Groups. As it relates to non-BRMG and NY Groups centers, namely the affiliated physician groups, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities. Service fee revenues are recorded during the period the services are provided based upon the estimated amounts due from the patients and third-party payors. Third-party payors include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Estimates of contractual allowances are based on historical collection rates of payor reimbursement contract agreements. We also record a provision for doubtful accounts based primarily on historical collection rates related to patient copayments and deductible amounts for patients who have health care coverage under one of our third-party payors. Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans. Our service fee revenue, net of contractual allowances and discounts, the provision for bad debts, and revenue under capitation arrangements for the years ended December 31, are summarized in the following table (in thousands) : Years Ended December 31, 2016 2015 2014 Commercial insurance (1) $ 539,793 $ 486,489 $ 437,525 Medicare 187,941 168,545 159,562 Medicaid 28,170 23,948 24,499 Workers' compensation/personal injury 36,548 32,728 30,543 Other (2) 29,135 35,046 18,007 Service fee revenue, net of contractual allowances and discounts 821,587 746,756 670,136 Provision for bad debts (45,387 ) (36,033 ) (29,807 ) Net service fee revenue 776,200 710,723 640,329 Revenue under capitation arrangements 108,335 98,905 77,240 Total net revenue $ 884,535 $ 809,628 $ 717,569 (1) (2) |
Meaningful Use Incentive | MEANINGFUL USE INCENTIVE - Under the American Recovery and Reinvestment Act of 2009, a program was enacted that provides financial incentives for providers that successfully implement and utilize electronic health record technology to improve patient care. Our software development team in Canada established an objective to build a Radiology Information System (RIS) software platform that has been awarded Meaningful Use certification. As this certified RIS system is implemented throughout our imaging centers, the radiologists that utilize this software can be eligible for the available financial incentives. In order to receive such incentive payments providers must attest that they have demonstrated meaningful use of the certified RIS in each stage of the program. We account for this meaningful use incentive under the Gain Contingency Model outlined in ASC 450-30. Under this model, we record within non-operating income, meaningful use incentive only after Medicare accepts an attestation from the qualified eligible professional demonstrating meaningful use. We recorded approximately $2.8 million, $3.3 million and $2.0 million during the twelve months ended December 31, 2016, 2015 and 2014, respectively, relating to this incentive. |
Provision for Bad Debts | PROVISION FOR BAD DEBTS - We provide for an allowance against accounts receivable that could become uncollectible to reduce the carrying value of such receivables to their estimated net realizable value. We estimate this allowance based on the aging of our accounts receivable by the historical payment patterns of each type of payor, write-off trends, and other relevant factors. A significant portion of our provision for bad debt relates to co-payments and deductibles owed to us from patients with insurance. Although we attempt to collect deductibles and co-payments due from patients with insurance at the time of service, this attempt to collect at the time of service is not an assessment of the patient’s ability to pay nor are revenues recognized based on an assessment of the patient’s ability to pay. There are various factors that can impact collection trends, such as changes in the economy, which in turn have an impact on the increased burden of co-payments and deductibles to be made by patients with insurance. These factors continuously change and can have an impact on collection trends and our estimation process. Our allowance for bad debts at December 31, 2016 and 2015 was $20.7 million and $20.8 million, respectively. |
Accounts Receivable | ACCOUNTS RECEIVABLE - Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience. |
Gain on return of common stock | GAIN ON RETURN OF COMMON STOCK - In the second quarter of 2016, we determined that certain pre-acquisition financial information of Diagnostic Imaging Group (“DIG”) provided to us by the sellers contained errors. As a result of this, we negotiated and reached a settlement with the sellers of DIG in June 2016 for the return of 958,536 shares of common stock which had a fair value of $5.0 million on the date of return. Such return has been recognized as a gain on return of common stock in our statement of operations. |
Software Revenue Recognition | SOFTWARE REVENUE RECOGNITION – Our subsidiary, eRAD, Inc., sells Picture Archiving Communications Systems (“PACS”) and related services, primarily in the United States. The PACS systems sold by eRAD are primarily composed of certain elements: hardware, software, installation and training, and support. Sales are made primarily through eRAD’s sales force. These sales are multiple-element arrangements that generally include hardware, software, software installation, configuration, system installation, training and first-year warranty support. Hardware, which is not unique or special purpose, is purchased from a third-party and resold to eRAD’s customers with a small mark-up. We have determined that our core software products, such as PACS, are essential to most of our arrangements as hardware, software and related services are sold as an integrated package. Therefore, these transactions are accounted for under ASC 605-25, Multiple-Element Arrangements Software. For the years ended December 31, 2016, 2015 and 2014, we recorded approximately $6.2 million, $6.1 million and $5.5 million, respectively, in revenue related to our eRAD business which is included in net service fee revenue in our consolidated statement of operations. At December 31, 2016 we had a deferred revenue liability of approximately $1.5 million associated with eRAD sales which we expect to recognize into revenue over the next 12 months. |
Software Development Costs | SOFTWARE DEVELOPMENT COSTS - Costs related to the research and development of new software products and enhancements to existing software products all for resale to our customers are expensed as incurred. We utilize a variety of computerized information systems in the day to day operation of our diagnostic imaging facilities. One such system is our front desk patient tracking system or Radiology Information System (“RIS”). We have historically utilized third party RIS software solutions and pay monthly fees to outside third party software vendors for the use of this software. We have developed our own RIS solution from the ground up through our wholly owned subsidiary, Radnet Management Information Systems (“RMIS”) and began utilizing this system beginning in the first quarter of 2015. In accordance with ASC 350-40, Accounting for the Costs of Computer Software Developed for Internal Use, We have entered into multiple agreements to license our RIS system to outside customers. For the twelve months December 31, 2016 and December 31, 2015, we received approximately $301,000 and $443,000 with respect to this licensing agreement, respectively. In accordance with ASC 350-40, we recorded the receipt of these funds against the capitalized software costs explained above. We intend to record any future proceeds in the same manner until the carrying value of our capitalized software costs are brought to zero. As of December 31, 2016, the net carrying value of our capitalized software costs was approximately $3.1 million. |
Concentration of Credit Risks | CONCENTRATION OF CREDIT RISKS - Financial instruments that potentially subject us to credit risk are primarily cash equivalents and accounts receivable. We have placed our cash and cash equivalents with one major financial institution. At times, the cash in the financial institution is temporarily in excess of the amount insured by the Federal Deposit Insurance Corporation, or FDIC. Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. We continuously monitor collections from our clients and maintain an allowance for bad debts based upon our historical collection experience. |
Cash and Cash Equivalents | CASH AND CASH EQUIVALENTS - We consider all highly liquid investments that mature in three months or less when purchased to be cash equivalents. The carrying amount of cash and cash equivalents approximates their fair market value. |
Deferred Financing Costs | DEFERRED FINANCING COSTS - Costs of financing are deferred and amortized on a straight-line basis over the life of the associated loan, which approximates the effective interest rate method. Deferred financing costs, net of accumulated amortization, were $2.0 million and $4.9 million, as of December 31, 2016 and 2015, respectively. In conjunction with our Restatement Amendment, a net addition of approximately $237,000 was added to deferred financing costs, consisting of $946,000 new additional costs from the amendment and a write off of $709,000 due to a change in lender mix. See Note 8, Notes Payable, Line of Credit, and Capital Leases for more information. |
Inventories | INVENTORIES - Inventories, consisting mainly of medical supplies, are stated at the lower of cost or net realizable value with cost determined by the first-in, first-out method. |
Property and Equipment | PROPERTY AND EQUIPMENT - Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 30 years. Maintenance and repairs are charged to expense as incurred. |
Business Combination | BUSINESS COMBINATION - Accounting for acquisitions requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. |
Goodwill and Indefinite Lived Intangibles | GOODWILL AND INDEFINITE LIVED INTANGIBLES - Goodwill at December 31, 2016 totaled $239.6 million. Indefinite lived intangible assets at December 31, 2016 totaled $7.9 million and are associated with the value of certain trade name intangibles. Goodwill and trade name intangibles are recorded as a result of business combinations. Management evaluates goodwill and trade name intangibles, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of a reporting unit is estimated using a combination of the income or discounted cash flows approach and the market approach, which uses comparable market data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any. Impairment of trade name intangibles is tested at the subsidiary level by comparing the subsidiary’s trade name carrying amount to its respective fair value. We tested both goodwill and trade name intangibles for impairment on October 1, 2016, noting no impairment, and have not identified any indicators of impairment through December 31, 2016. |
Long-Lived Assets | LONG-LIVED ASSETS - We evaluate our long-lived assets (property and equipment) and intangibles, other than goodwill, for impairment whenever indicators of impairment exist. Generally accepted accounting principles (GAAP) requires that if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible is less than the carrying value of that asset, an asset impairment charge must be recognized. The amount of the impairment charge is calculated as the excess of the asset’s carrying value over its fair value, which generally represents the discounted future cash flows from that asset or in the case of assets we expect to sell, at fair value less costs to sell. No indicators of impairment were identified with respect to our long-lived assets as of December 31, 2016. |
Income Taxes | INCOME TAXES - Income tax expense is computed using an asset and liability method and using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized. Income taxes are further explained in Note 11. |
Uninsured Risks | UNINSURED RISKS - On November 1, 2008 we obtained a fully funded and insured workers’ compensation policy, thereby eliminating any uninsured risks for employee injuries occurring on or after that date. This fully funded policy remained in effect through November 1, 2013 and continues to cover any claims incurred through this date. On November 1, 2013 we entered into a high-deductible workers’ compensation insurance policy. We have recorded liabilities of $2.9 million for the year ended December 31, 2016, and $2.2 million for the year ended December 31, 2015, respectively for the estimated future cash obligations associated with the unpaid portion of the workers compensation claims incurred. We and our affiliated physicians carry an annual medical malpractice insurance policy that protects us for claims that are filed during the policy year and that fall within policy limits. The policy has a deductible for which is $10,000 per incidence at December 31, 2016 and was $24,000 per incidence at December 31, 2015. In December 2008, in order to eliminate the exposure for claims not reported during the regular malpractice policy period, we purchased a medical malpractice tail policy, which provides coverage for any claims reported in the event that our medical malpractice policy expires. As of December 31, 2016, this policy remains in effect. We have entered into an arrangement with Blue Shield to administer and process claims under a self-insured plan that provides health insurance coverage for our employees and dependents. We have recorded liabilities as of December 31, 2016 and 2015 of $2.4 million and $1.8 million, respectively, for the estimated future cash obligations associated with the unpaid portion of the medical and dental claims incurred by our participants. Additionally, we entered into an agreement with Blue Shield for a stop loss policy that provides coverage for any claims that exceed $250,000 up to a maximum of $1.0 million in order for us to limit our exposure for unusual or catastrophic claims. |
Loss and Other Unfavorable Contracts | LOSS AND OTHER UNFAVORABLE CONTRACTS – We assess the profitability of our contracts to provide management services to our contracted physician groups and identify those contracts where current operating results or forecasts indicate probable future losses. Anticipated future revenue is compared to anticipated costs. If the anticipated future cost exceeds the revenue, a loss contract accrual is recorded. In connection with the acquisition of Radiologix in November 2006, we acquired certain management service agreements for which forecasted costs exceeds forecasted revenue. As such, an $8.9 million loss contract accrual was established in purchase accounting, and is included in other non-current liabilities. The recorded loss contract accrual is being accreted into operations over the remaining term of the acquired management service agreements. As of December 31, 2016 and 2015, the remaining accrual balance is $5.6 million, and $5.7 million, respectively. As part of our ongoing acquisition activities, we have certain operating lease commitments for facilities that are not in use. Accordingly, we have recorded a loss contract accrual related to the remaining payments under these lease commitments. As of December 31, 2015, the remaining loss contract accrual for these leases was $85,000 and was completely amortized during the 2016 fiscal year with no balance remaining as of December 31, 2016. In addition and related to acquisition activity, we have certain operating lease commitments for facilities where the fair market rent differs from the lease contract rate. We have recorded an unfavorable contract liability representing the difference between the total value of the fair market rent and the contract rent over the current term of the lease applicable from the date of acquisition. As of December 31, 2016 and 2015, the unfavorable contract liability on these leases is $1.6 million and $581,000, respectively. |
Equity Based Compensation | EQUITY BASED COMPENSATION – We have one long-term incentive plan which we refer to as the 2006 Plan, which we amended and restated as of April 20, 2015 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 11, 2015. As of December 31, 2016, we have reserved for issuance under the Restated Plan 12,000,000 shares of common stock. We can issue options, stock awards, stock appreciation rights and cash awards under the Restated Plan. Certain options granted under the Restated Plan to employees are intended to qualify as incentive stock options under existing tax regulations. Stock options and warrants generally vest over three to five years and expire five to ten years from date of grant. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. |
Foreign Currency Translation | FOREIGN CURRENCY TRANSLATION - The functional currency of our foreign subsidiaries is the local currency. In accordance with ASC 830, Foreign Currency Matters |
Comprehensive Income | COMPREHENSIVE INCOME - ASC 220, Comprehensive Income, |
Fair Value Measurements | FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement: Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities. Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data. Level 3—Fair value is determined by using inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgment. The table below summarizes the estimated fair values of certain of our financial assets that are subject to fair value measurements, and the classification of these assets on our consolidated balance sheets, as follows (in thousands): As of December 31, 2016 Level 1 Level 2 Level 3 Total Current assets Interest Rate Contracts $ – $ 818 $ – $ 818 The estimated fair value of these contracts, which are discussed in Note 10, was determined using Level 2 inputs. More specifically, the fair value was determined by calculating the value of the difference between the fixed interest rate of the interest rate swaps and the counterparty’s forward LIBOR curve. The forward LIBOR curve is readily available in the public markets or can be derived from information available in the public markets. The table below summarizes the estimated fair value and carrying amount of our long-term debt as follows (in thousands): As of December 31, 2016 Level 1 Level 2 Level 3 Total Fair Value Total Face Value First Lien Term Loans $ – $ 483,129 $ – $ 483,129 $ 478,938 Second Lien Term Loans $ – $ 167,580 $ – $ 167,580 $ 168,000 As of December 31, 2015 Level 1 Level 2 Level 3 Total Total Face Value First Lien Term Loans $ – $ 444,258 $ – $ 444,258 $ 451,023 Second Lien Term Loans – 173,700 – 173,700 180,000 Our revolving credit facility had no aggregate principal amount outstanding as of December 31, 2016. The estimated fair value of our long-term debt, which is discussed in Note 8, was determined using Level 2 inputs primarily related to comparable market prices. We consider the carrying amounts of cash and cash equivalents, receivables, other current assets, current liabilities and other notes payables to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization or payment. Additionally, we consider the carrying amount of our capital lease obligations to approximate their fair value because the weighted average interest rate used to formulate the carrying amounts approximates current market rates. |
Earnings Per Share | EARNINGS PER SHARE - Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data): Years Ended December 31, 2016 2015 2014 Net income attributable to RadNet, Inc. common stockholders $ 7,230 $ 7,709 $ 1,376 BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 46,244,188 43,805,794 41,070,077 Basic net income per share attributable to RadNet, Inc. common stockholders $ 0.16 $ 0.18 $ 0.03 DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 46,244,188 43,805,794 41,070,077 Add nonvested restricted stock subject only to service vesting 220,416 865,326 994,610 Add additional shares issuable upon exercise of stock options and warrants 190,428 500,252 1,084,509 Weighted average number of common shares used in calculating diluted net income per share 46,655,032 45,171,372 43,149,196 Diluted net income per share attributable to RadNet, Inc. common stockholders $ 0.15 $ 0.17 $ 0.03 For the years ended December 31, 2016, 2015 and 2014 we excluded 165,000, 265,000, and 245,000, respectively, outstanding options, in the calculation of diluted earnings per share because their effect would be antidilutive. |
Investment in Joint Ventures | INVESTMENT IN JOINT VENTURES – We have twelve unconsolidated joint ventures with ownership interests ranging from 35% to 55%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method, since RadNet does not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of December 31, 2016. Acquisition of new facilities On August 15, 2016 our joint venture, Franklin Imaging, LLC, acquired a single multi-modality imaging center located in Rosedale, Maryland for cash consideration of $1.0 million and the assumption of capital lease debt of $241,000. Franklin Imaging, LLC made a fair value determination of the acquired assets and approximately $600,000 of fixed assets, $30,000 of other assets and goodwill of $648,000 was recorded in respect to the transaction. Formation of new joint ventures On April 1, 2016, Community Imaging Partners Inc., a wholly owned subsidiary of RadNet, entered into a joint venture with Mt. Airy Health Services, LLC, a partnership of Frederick Memorial Hospital and Carroll Hospital Center. On August 31, 2016, Community Imaging Partners Inc. contributed $200,000 for a 40% economic interest in the partnership and funded an additional $440,000 in relation to a capital call. Mt. Airy Health Services, LLC, contributed $300,000 for a 60% economic interest and an additional $660,000 in relation to the capital call. On May 9, 2016, RadNet, through a newly formed subsidiary, Glendale Advanced Imaging LLC, entered into a joint venture with Dignity Health, a California nonprofit public benefit corporation. On June 1, 2016, RadNet contributed net assets of $2.2 million for a 55% economic interest and Dignity Health contributed net assets of $1.8 million for a 45% economic interest. Joint venture investment and financial information The following table is a summary of our investment in joint ventures during the years ended December 31, 2016 and December 31, 2015 (in thousands): Balance as of December 31, 2014 $ 32,123 Equity contributions in existing joint ventures 265 Equity in earnings in these joint ventures 8,927 Distribution of earnings (7,731 ) Balance as of December 31, 2015 $ 33,584 Equity contributions in existing joint ventures 3,084 Equity in earnings in these joint ventures 9,767 Distribution of earnings (2,926 ) Balance as of December 31, 2016 $ 43,509 We received management service fees from the centers underlying these joint ventures of approximately $11.9 million for the year ended December 31, 2016 and $9.3 million per year for the years ended December 31, 2015 and 2014, respectively. We eliminate any unrealized portion of our management service fees with our equity in earnings of joint ventures. The following table is a summary of key financial data for these joint ventures as of December 31, 2016 and 2015, respectively, and for the years ended December 31, 2016, 2015 and 2014, respectively, (in thousands): December 31, Balance Sheet Data: 2016 2015 Current assets $ 40,093 $ 28,186 Noncurrent assets 100,146 91,660 Current liabilities (14,077 ) (15,258 ) Noncurrent liabilities (44,405 ) (44,059 ) Total net assets $ 81,757 $ 60,529 Book value of RadNet joint venture interests $ 38,538 $ 28,397 Cost in excess of book value of acquired joint venture interests 4,970 4,970 Elimination of intercompany profit remaining on Radnet's consolidated balance sheet – 217 Total value of Radnet joint venture interests $ 43,509 $ 33,584 Total book value of other joint venture partner interests $ 43,219 $ 32,132 2016 2015 2014 Net revenue $ 160,134 $ 125,544 $ 101,189 Net income $ 21,933 $ 19,485 $ 14,854 |
2. SUMMARY OF SIGNIFICANT ACC26
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Service Fee Revenue | Years Ended December 31, 2016 2015 2014 Commercial insurance (1) $ 539,793 $ 486,489 $ 437,525 Medicare 187,941 168,545 159,562 Medicaid 28,170 23,948 24,499 Workers' compensation/personal injury 36,548 32,728 30,543 Other (2) 29,135 35,046 18,007 Service fee revenue, net of contractual allowances and discounts 821,587 746,756 670,136 Provision for bad debts (45,387 ) (36,033 ) (29,807 ) Net service fee revenue 776,200 710,723 640,329 Revenue under capitation arrangements 108,335 98,905 77,240 Total net revenue $ 884,535 $ 809,628 $ 717,569 (1) (2) |
Schedule of fair value of assets and liabilities | As of December 31, 2016 Level 1 Level 2 Level 3 Total Current assets Interest Rate Contracts $ – $ 818 $ – $ 818 As of December 31, 2016 Level 1 Level 2 Level 3 Total Fair Value Total Face Value First Lien Term Loans $ – $ 483,129 $ – $ 483,129 $ 478,938 Second Lien Term Loans $ – $ 167,580 $ – $ 167,580 $ 168,000 As of December 31, 2015 Level 1 Level 2 Level 3 Total Total Face Value First Lien Term Loans $ – $ 444,258 $ – $ 444,258 $ 451,023 Second Lien Term Loans – 173,700 – 173,700 180,000 |
Earnings per share | Years Ended December 31, 2016 2015 2014 Net income attributable to RadNet, Inc. common stockholders $ 7,230 $ 7,709 $ 1,376 BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 46,244,188 43,805,794 41,070,077 Basic net income per share attributable to RadNet, Inc. common stockholders $ 0.16 $ 0.18 $ 0.03 DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS Weighted average number of common shares outstanding during the period 46,244,188 43,805,794 41,070,077 Add nonvested restricted stock subject only to service vesting 220,416 865,326 994,610 Add additional shares issuable upon exercise of stock options and warrants 190,428 500,252 1,084,509 Weighted average number of common shares used in calculating diluted net income per share 46,655,032 45,171,372 43,149,196 Diluted net income per share attributable to RadNet, Inc. common stockholders $ 0.15 $ 0.17 $ 0.03 |
Investment in joint ventures | Balance as of December 31, 2014 $ 32,123 Equity contributions in existing joint ventures 265 Equity in earnings in these joint ventures 8,927 Distribution of earnings (7,731 ) Balance as of December 31, 2015 $ 33,584 Equity contributions in existing joint ventures 3,084 Equity in earnings in these joint ventures 9,767 Distribution of earnings (2,926 ) Balance as of December 31, 2016 $ 43,509 |
Key financial data on joint ventures | December 31, Balance Sheet Data: 2016 2015 Current assets $ 40,093 $ 28,186 Noncurrent assets 100,146 91,660 Current liabilities (14,077 ) (15,258 ) Noncurrent liabilities (44,405 ) (44,059 ) Total net assets $ 81,757 $ 60,529 Book value of RadNet joint venture interests $ 38,538 $ 28,397 Cost in excess of book value of acquired joint venture interests 4,970 4,970 Elimination of intercompany profit remaining on Radnet's consolidated balance sheet – 217 Total value of Radnet joint venture interests $ 43,509 $ 33,584 Total book value of other joint venture partner interests $ 43,219 $ 32,132 2016 2015 2014 Net revenue $ 160,134 $ 125,544 $ 101,189 Net income $ 21,933 $ 19,485 $ 14,854 |
3. RECENT ACCOUNTING STANDARDS
3. RECENT ACCOUNTING STANDARDS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Recent Accounting Standards | |
Impact of recent accounting standards change | In thousands As previously reported Impact of adoption As currently reported Prepaid expenses and other current assets $ 40,139 (1,153 ) 38,986 Deferred financing costs, net of current portion 3,696 (855 ) 2,841 Others 794,600 – 794,600 Total assets $ 838,435 $ (2,008 ) $ 836,427 Current portion of notes payable 23,076 (693 ) 22,383 Notes payable, net of current portion 601,229 (1,315 ) 599,914 Others 177,669 – 177,669 Total liabilities 801,974 (2,008 ) 799,966 Total equity 36,461 – 36,461 Total liabilities and equity $ 838,435 $ (2,008 ) $ 836,427 |
4. FACILITY ACQUISITIONS AND 28
4. FACILITY ACQUISITIONS AND DISPOSITIONS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Assets held for sale | Property and equipment, net $ 1,056 Other assets 21 Goodwill 1,126 Total assets held for sale $ 2,203 |
5. GOODWILL AND OTHER INTANGI29
5. GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill and other intangible assets | Balance as of December 31, 2014 $ 200,304 Adjustment to our allocation of goodwill for the acquisition of Liberty Pacific 200 Goodwill acquired through the acquisition of California Radiology 2,107 Goodwill acquired through the acquisition of New York Radiology Partners 9,897 Goodwill disposed through the sale of New Jersey Imaging Partners (18,833 ) Goodwill acquired through the acquisition of Hanford Imaging, LP 785 Goodwill acquired through the acquisition of Murry Hill Radiology and MRI 4,123 Goodwill acquired through the acquisition of Phillip L Chatam, M.D., Inc. 790 Goodwill acquired through the acquisition of Diagnostic Imaging Group, LLC 40,035 Balance as of December 31, 2015 239,408 Goodwill acquired through the acquisition of Advanced Radiological Imaging 1,280 Adjustments to our preliminary allocation of the purchase price of Diagnostic Imaging Group, LLC (47 ) Goodwill acquired through the acquisition of Landmark Imaging, LLC 38 Goodwill allocated to assets held for sale (1,126 ) Balance as of December 31, 2016 $ 239,553 |
Annual amortization expense | 2017 2018 2019 2020 2021 Thereafter Total Weighted average amortization period remaining in years Management Service Contracts $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 2,287 $ 22,683 $ 34,118 14.9 Covenant not to compete contracts 251 208 122 42 4 – 627 2.8 Trade Names* – – – – – 7,937 7,937 – Total Annual Amortization $ 2,538 $ 2,495 $ 2,409 $ 2,329 $ 2,291 $ 30,620 $ 42,682 * These trade name intangibles have an indefinite life |
6. PROPERTY AND EQUIPMENT (Tabl
6. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | December 31, 2016 2015 Land $ 250 $ 250 Medical equipment 393,001 352,005 Computer and office equipment, furniture and fixtures 99,434 107,014 Software development costs 6,391 6,391 Leasehold improvements 252,595 232,550 Equipment under capital lease 26,758 29,796 Total property and equipment cost 778,429 728,006 Accumulated depreciation and amortization (529,648 ) (471,284 ) Total net property and equipment 248,781 256,722 Equipment held for sale (1,056 ) – Total property and equipment $ 247,725 $ 256,722 |
7. ACCOUNTS PAYABLE AND ACCRU31
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and accrued expenses | December 31, 2016 2015 Accounts payable $ 40,952 $ 52,296 Accrued expenses 42,883 32,950 Accrued payroll and vacation 19,119 17,692 Accrued professional fees 8,212 10,875 Total $ 111,166 $ 113,813 |
8. NOTES PAYABLE, LINE OF CRE32
8. NOTES PAYABLE, LINE OF CREDIT AND CAPITAL LEASES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable, line of credit and capital lease obligations | December 31, 2016 2015 Revolving lines of credit $ – $ – First Lien Term Loans 478,938 451,023 Second Lien Term Loans 168,000 180,000 Discounts on term loans (16,783 ) (9,542 ) Promissory note payable to the former owner of a practice acquired at an interest rate of 1.5% due through 2019 980 1,361 Promissory note payable to Healthcare Partners for imaging equipment acquired through acquisition at an interest rate of 5.25% – 431 Equipment notes payable at interest rates ranging from 3.3% to 10.2%, due through 2020, collateralized by medical equipment 341 1,032 Obligations under capital leases at interest rates ranging from 2.5% to 10.8%, due through 2022, collateralized by medical and office equipment 7,256 16,423 Total debt obligations 638,732 640,728 Less: current portion (26,557 ) (33,114 ) Long term portion debt obligations $ 612,175 $ 607,614 |
Annual principal maturities of notes payable | 2017 $ 24,784 2018 24,751 2019 24,526 2020 24,261 2021 192,250 Thereafter 357,687 Total notes payable obligations $ 648,259 |
Schedule of capital lease minimum payments | 2017 $ 4,764 2018 2,163 2019 359 2020 201 2021 81 Thereafter 15 Total minimum payments 7,583 Amount representing interest (327 ) Present value of net minimum lease payments 7,256 Less current portion (4,526 ) Long-term portion lease obligations $ 2,730 |
Term loans and financing activity | As of December 31, 2016 Face Value Discount Total Carrying Value First Lien Term Loans $ 478,938 $ (14,712 ) $ 464,226 Second Lien Term Loans $ 168,000 $ (2,071 ) $ 165,929 Total $ 646,938 $ (16,783 ) $ 630,155 |
9. COMMITMENTS AND CONTINGENC33
9. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of operating lease payments | Facilities Equipment Total 2017 $ 58,368 $ 8,337 $ 66,705 2018 49,638 7,784 57,422 2019 43,192 5,695 48,887 2020 35,276 3,841 39,117 2021 28,062 1,999 30,061 Thereafter 56,008 1,332 57,340 $ 270,544 $ 28,988 $ 299,532 |
10. DERIVATIVE INSTRUMENTS (Tab
10. DERIVATIVE INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Fair value of derivatives | Derivatives Balance Sheet Location Fair Value – Asset Derivatives Interest rate contracts Current assets $818 |
Effect of derivative instruments on comprehensive income | Effective Interest Rate Cap Amount of Gain Recognized on Derivative Location of Gain Recognized in Income on Derivative Interest rate contracts $818 Other Comprehensive Income |
11. INCOME TAXES (Tables)
11. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Schedule of components of income tax expense | 2016 2015 2014 Federal current tax $ 88 $ 237 $ – State current tax 914 1,705 1,283 Other current tax 28 28 29 Federal deferred tax 2,539 3,625 869 State deferred tax 863 412 (214 ) Income tax expense $ 4,432 $ 6,007 $ 1,967 |
Reconciliation of income tax expense | 2016 2015 2014 Federal tax 34.00% 34.00% 34.00% State franchise tax, net of federal benefit 1.80% 8.50% -3.64% Other Non deductible expenses -0.09% -0.01% 0.00% Meals and entertainment 2.10% 1.75% 4.85% Noncontrolling Interest in Partnerships -2.11% -2.16% -2.88% Equity compensation -4.05% -1.74% -8.72% Changes in valuation allowance 4.70% -17.32% 24.52% Return-to-provision 0.22% 3.29% -9.57% Deferred true-ups and other -25.25% 13.41% 16.34% Uncertain tax positions 22.44% 0.01% -3.67% Expiring net operating losses 1.88% 1.28% 2.62% Income tax expense 35.64% 41.01% 53.85% |
Schedule of deferred tax assets and liabilities | At December 31, Deferred tax assets: 2016 2015 Net operating losses $ 84,509 $ 78,912 Accrued expenses 4,400 4,125 Straight-Line Rent Adjustment 10,750 11,263 Unfavorable contract liability 2,114 2,142 Equity compensation 950 846 Allowance for doubtful accounts 6,033 4,341 Other 1,357 1,092 Valuation Allowance (4,428 ) (3,841 ) Total Deferred Tax Assets $ 105,685 $ 98,880 Deferred tax liabilities: Property Plant & Equipment (6,994 ) (8,582 ) Goodwill (23,350 ) (18,617 ) Intangibles (12,066 ) (12,088 ) Non accrual experience method reserve (8,483 ) (7,882 ) Other (4,436 ) (4,747 ) Total Deferred Tax Liabilities $ (55,329 ) $ (51,916 ) Net Deferred Tax Asset $ 50,356 $ 46,964 |
Schedule of unrecognized tax benefits | December 31, December 31, December 31, 2016 2015 2014 Balance at beginning of year $ 94 $ 3,761 $ 3,970 Increases (Decreases) related to prior year tax positions 3,861 (3,667 ) (209 ) Expiration of the statute of limitations for the assessment of taxes (94 ) – – Balance at end of year $ 3,861 $ 94 $ 3,761 |
Federal [Member] | |
Schedule of net operating loss carryforwards | Year Ended Total Net Operating Loss Carryforwards Amount Subject to 382 limitation 2017 1,501 1,501 2018 10,968 – 2019 7,178 – 2020 – – 2021 24,257 – Thereafter 187,725 40,632 $ 231,629 $ 42,133 |
California [Member] | |
Schedule of net operating loss carryforwards | Year Ended Total Net Operating Loss Carryforwards 2017 4,520 2018 – 2019 – 2020 – 2021 – Thereafter 17,773 $ 22,293 |
12. STOCK-BASED COMPENSATION (T
12. STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of options activity | Outstanding Options Under the 2006 Plan Shares Weighted Average Exercise price Per Common Share Weighted Remaining Contractual Life (in years) Aggregate Intrinsic Value Balance, December 31, 2015 931,667 $4.69 Granted 170,626 6.01 Exercised (576,667 ) 2.96 Canceled, forfeited or expired (150,000 ) 7.51 Balance, December 31, 2016 375,626 6.82 4.45 $ 252,238 Exercisable at December 31, 2016 205,000 7.51 0.92 176,400 |
Schedule of RSA activity | RSA’s Weighted-Average Remaining Contractual Term (Years) Weighted-Average Fair Value RSA’s unvested at December 31, 2015 771,342 $5.17 Changes during the period Granted 802,803 $6.16 Vested (1,000,999 ) $5.13 Forfeited – $0.00 RSA’s unvested at December 31, 2016 573,145 0.57 $6.18 |
14. QUARTERLY RESULTS OF OPER37
14. QUARTERLY RESULTS OF OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Financial Information | 2016 Quarter Ended 2015 Quarter Ended Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31 Statement of Operations Data: Net revenue $ 216,388 $ 218,565 $ 224,643 $ 224,939 $ 181,267 $ 204,289 $ 208,366 $ 215,706 Total operating expenses 213,405 210,487 212,192 209,971 183,213 190,905 191,137 205,256 Total other expenses 7,875 5,717 11,578 10,641 6,723 10,836 5,731 10,109 Equity in earnings of joint ventures (2,279 ) (3,274 ) (2,576 ) (1,638 ) (1,102 ) (3,207 ) (1,992 ) (2,626 ) Benefit from (provision for) income taxes 1,180 (2,253 ) (1,458 ) (1,901 ) 3,091 (2,192 ) (5,199 ) (1,707 ) Net (loss) income (1,433 ) 3,382 1,991 4,064 (4,476 ) 3,563 8,291 1,260 Net income (loss) attributable to noncontrolling interests 290 (243 ) 344 383 78 168 304 379 Net (loss) income attributable to Radnet, Inc. common stockholders $ (1,723 ) $ 3,625 $ 1,647 $ 3,681 $ (4,554 ) $ 3,395 $ 7,987 $ 881 Basic net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: $ (0.04 ) $ 0.08 $ 0.04 $ 0.08 $ (0.11 ) $ 0.08 $ 0.18 $ 0.02 Diluted net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: $ (0.04 ) $ 0.08 $ 0.04 $ 0.08 $ (0.11 ) $ 0.08 $ 0.18 $ 0.02 Weighted average shares outstanding Basic 46,581 46,559 45,869 45,967 42,747 43,370 43,637 45,454 Diluted 46,581 46,882 46,334 46,389 42,747 44,686 44,752 46,545 |
1. NATURE OF BUSINESS (Details
1. NATURE OF BUSINESS (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
BRMG and NY Groups revenues | $ 135,700 | $ 113,100 | $ 89,300 |
BRMG and NY Groups operating expenses | 135,700 | 113,100 | 89,300 |
Management services provided to BRMG and NY Groups | 430,400 | 343,900 | $ 287,400 |
BRMG and NY Groups accounts receivable | 100,000 | 89,800 | |
BRMG and NY Groups accounts payable | $ 9,000 | $ 8,500 |
2. SUMMARY OF ACCOUNTING POLICI
2. SUMMARY OF ACCOUNTING POLICIES (Details - Summary of net revenue) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||
Accounting Policies [Abstract] | ||||||||||||
Commercial Insurance | [1] | $ 539,793 | $ 486,489 | $ 437,525 | ||||||||
Medicare | 187,941 | 168,545 | 159,562 | |||||||||
Medicaid | 28,170 | 23,948 | 24,499 | |||||||||
Workers Compensation/Personal Injury | 36,548 | 32,728 | 30,543 | |||||||||
Other | [2] | 29,135 | 35,046 | 18,007 | ||||||||
Service fee revenue, net of contractual allowances and discounts | 821,587 | 746,756 | 670,136 | |||||||||
Provision for bad debts | (45,387) | (36,033) | (29,807) | |||||||||
Net service fee revenue | 776,200 | 710,723 | 640,329 | |||||||||
Revenue under capitation arrangements | 108,335 | 98,905 | 77,240 | |||||||||
Total net revenue | $ 224,939 | $ 224,643 | $ 218,565 | $ 216,388 | $ 215,706 | $ 208,366 | $ 204,289 | $ 181,267 | $ 884,535 | $ 809,628 | $ 717,569 | |
[1] | 21% of our net service fees revenue for the year ended December 31, 2016 and 20% for the years ended December 31, 2015 and 2014 were earned from a single payor. | |||||||||||
[2] | Other consists of revenue from teleradiology services, consulting fees and software revenue. |
2. SUMMARY OF ACCOUNTING POLI40
2. SUMMARY OF ACCOUNTING POLICIES (Details - Fair Value Measurements) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
FAIR VALUE MEASUREMENTS | ||
Interest rate contracts | $ 818 | |
First Lien Term Loans | 478,938 | $ 451,023 |
Second Lien Term Loans | 168,000 | 180,000 |
Total Fair Value [Member] | ||
FAIR VALUE MEASUREMENTS | ||
Interest rate contracts | 818 | |
First Lien Term Loans | 483,129 | 444,258 |
Second Lien Term Loans | 167,580 | 173,700 |
Level 1 [Member] | ||
FAIR VALUE MEASUREMENTS | ||
Interest rate contracts | 0 | |
First Lien Term Loans | 0 | 0 |
Second Lien Term Loans | 0 | 0 |
Level 2 [Member] | ||
FAIR VALUE MEASUREMENTS | ||
Interest rate contracts | 818 | |
First Lien Term Loans | 483,129 | 444,258 |
Second Lien Term Loans | 167,580 | 173,700 |
Level 3 [Member] | ||
FAIR VALUE MEASUREMENTS | ||
Interest rate contracts | 0 | |
First Lien Term Loans | 0 | 0 |
Second Lien Term Loans | $ 0 | $ 0 |
2. SUMMARY OF ACCOUNTING POLI41
2. SUMMARY OF ACCOUNTING POLICIES (Details - Earnings Per Share) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Earnings Per Share [Abstract] | |||||||||||
Net income attributable to Radnet, Inc.'s common stockholders | $ 3,681 | $ 1,647 | $ 3,625 | $ (1,723) | $ 881 | $ 7,987 | $ 3,395 | $ (4,554) | $ 7,230 | $ 7,709 | $ 1,376 |
BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS | |||||||||||
Weighted average shares outstanding - Basic | 45,967,000 | 45,869,000 | 46,559,000 | 46,581,000 | 45,454,000 | 43,637,000 | 43,370,000 | 42,747,000 | 46,244,188 | 43,805,794 | 41,070,077 |
Basic net income per share attributable to Radnet, Inc.'s common stockholders | $ .08 | $ .04 | $ .08 | $ (.04) | $ .02 | $ .18 | $ .08 | $ (.11) | $ .16 | $ 0.18 | $ .03 |
DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS | |||||||||||
Weighted average shares outstanding during the period | 45,967,000 | 45,869,000 | 46,559,000 | 46,581,000 | 45,454,000 | 43,637,000 | 43,370,000 | 42,747,000 | 46,244,188 | 43,805,794 | 41,070,077 |
Add nonvested restricted stock subject only to service vesting | 220,416 | 865,326 | 994,610 | ||||||||
Add additional shares issuable upon exercise of stock options and warrants | 190,428 | 500,252 | 1,084,509 | ||||||||
Weighted average shares outstanding - Diluted | 46,389,000 | 46,334,000 | 46,882,000 | 46,581,000 | 46,545,000 | 44,752,000 | 44,686,000 | 42,747,000 | 46,655,032 | 45,171,372 | 43,149,196 |
Diluted net income per share attributable to RadNet, Inc.'s common stockholders | $ .08 | $ .04 | $ .08 | $ (.04) | $ .02 | $ .18 | $ .08 | $ (.11) | $ .15 | $ .17 | $ .03 |
2. SUMMARY OF ACCOUNTING POLI42
2. SUMMARY OF ACCOUNTING POLICIES (Details - Investment in Joint Ventures) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Equity Method Investments and Joint Ventures [Abstract] | |||||||||||
Beginning balance | $ 33,584 | $ 32,123 | $ 33,584 | $ 32,123 | |||||||
Equity contributions in existing joint ventures | 3,084 | 265 | |||||||||
Equity earnings in these joint ventures | $ 1,638 | $ 2,576 | $ 3,274 | $ 2,279 | $ 2,626 | $ 1,992 | $ 3,207 | $ 1,102 | 9,767 | 8,927 | $ 6,970 |
Distribution of earnings | (2,926) | (7,731) | (7,358) | ||||||||
Ending balance | $ 43,509 | $ 33,584 | $ 43,509 | $ 33,584 | $ 32,123 |
2. SUMMARY OF ACCOUNTING POLI43
2. SUMMARY OF ACCOUNTING POLICIES (Details - Key Financial Data on Joint Ventures) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Key financial data for joint ventures | |||
Current assets | $ 40,093 | $ 28,186 | |
Noncurrent assets | 100,146 | 91,660 | |
Current liabilities | (14,077) | (15,258) | |
Noncurrent liabilities | (44,405) | (44,059) | |
Total net assets | 81,757 | 60,529 | |
Book value of Radnet joint venture interests | 38,539 | 28,397 | |
Cost in excess of book value of acquired joint venture interests | 4,970 | 4,970 | |
Elimination of intercompany profit remaining on Radnet's consolidated balance sheet | 0 | 217 | |
Total value of Radnet joint venture interests | 43,509 | 33,584 | $ 32,123 |
Total book value of other joint venture partner interests | 43,218 | 32,132 | |
Net revenue | 160,134 | 125,544 | 101,189 |
Net income | $ 21,933 | $ 19,485 | $ 14,854 |
2. SUMMARY OF ACCOUNTING POLI44
2. SUMMARY OF ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands | 7 Months Ended | 12 Months Ended | ||
Aug. 15, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Allowance for bad debts | $ 20,700 | $ 20,800 | ||
Meaningful use incentive income | $ 2,808 | 3,270 | $ 2,034 | |
Common stock returned from acquisition, shares | 958,536 | |||
Gain on return of common stock | $ 5,032 | 0 | 0 | |
Service Fee Revenue net of contractual allowances and discounts | 821,587 | 746,756 | 670,136 | |
Deferred revenue | 1,516 | 1,598 | ||
Capitalized software costs, gross | 6,400 | |||
Software licensing revenue | 301 | 443 | ||
Capitalized software costs, net | 3,100 | |||
Deferred financing costs, net of accumulated amortization | 2,000 | 4,900 | ||
Deferred financing costs, added during period | 946 | |||
Deferred financing costs written off | 709 | |||
Goodwill | 239,553 | 239,408 | 200,304 | |
Indefinite lived intangible assets | 7,900 | |||
Medical malpractice deductible per incidence | 10 | 24 | ||
Contract loss accrual | 5,600 | 5,700 | ||
Lease commitment loss accrual | 0 | 85 | ||
Unfavorable contract liability | 1,600 | 581 | ||
Management service fees | 11,900 | 9,300 | 9,300 | |
Community Imaging Partners [Member] | Joint Venture [Member] | Mt. Airy Health Services [Member] | ||||
Funds contributed | $ 640,000 | |||
Economic interest | 40.00% | |||
Glendale Advanced Imaging [Member] | Joint Venture [Member] | Dignity Health [Member] | ||||
Economic interest | 55.00% | |||
Assets contributed | $ 2,200 | |||
Franklin Imaging [Member] | ||||
Goodwill | $ 648 | |||
Consideration transfered | 1,000 | |||
Capital lease assumed | 241 | |||
Fixed assets acquired | 600 | |||
Other assets acquired | $ 30 | |||
Options [Member] | ||||
Shares excluded from diluted earnings per share calculation | 165,000 | |||
Warrants [Member] | ||||
Shares excluded from diluted earnings per share calculation | 265,000 | |||
Restricted Stock Awards [Member] | ||||
Shares excluded from diluted earnings per share calculation | 245,000 | |||
Workers Compensation [Member] | ||||
Self-insurance accrual | $ 2,900 | 2,200 | ||
Health Insurance [Member] | ||||
Self-insurance accrual | 2,400 | 1,800 | ||
eRAD [Member] | ||||
Service Fee Revenue net of contractual allowances and discounts | 6,200 | $ 6,100 | $ 5,500 | |
Deferred revenue | $ 1,500 |
3. RECENT ACCOUNTING STANDARD45
3. RECENT ACCOUNTING STANDARDS (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Prepaid expenses and other current assets | $ 28,435 | $ 38,986 | ||
Deferred financing costs, net of current portion | 2,004 | 2,841 | ||
Others | 794,600 | |||
Total assets | 849,476 | 836,427 | ||
Current portion of notes payable | 22,031 | 22,383 | ||
Notes payable, net of current portion | 609,445 | 599,914 | ||
Others | 177,669 | |||
Total liabilities | 797,423 | 799,966 | ||
Total equity | 52,053 | 36,461 | $ 7,698 | $ 2,210 |
Total liabilities and equity | $ 849,476 | 836,427 | ||
As previously reported [Member] | ||||
Prepaid expenses and other current assets | 40,139 | |||
Deferred financing costs, net of current portion | 3,696 | |||
Others | 794,600 | |||
Total assets | 838,435 | |||
Current portion of notes payable | 23,076 | |||
Notes payable, net of current portion | 601,229 | |||
Others | 177,669 | |||
Total liabilities | 801,974 | |||
Total equity | 36,461 | |||
Total liabilities and equity | 838,435 | |||
Impact of Adoption [Member] | ||||
Prepaid expenses and other current assets | (1,153) | |||
Deferred financing costs, net of current portion | (855) | |||
Others | 0 | |||
Total assets | (2,008) | |||
Current portion of notes payable | (693) | |||
Notes payable, net of current portion | (1,315) | |||
Others | 0 | |||
Total liabilities | (2,008) | |||
Total equity | 0 | |||
Total liabilities and equity | $ (2,008) |
4. FACILITY ACQUISITIONS AND 46
4. FACILITY ACQUISITIONS AND DISPOSITIONS (Details - Assets held for sale) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Assets held for sale | $ 2,203 | $ 0 |
Propery and equipment, net [Member] | ||
Assets held for sale | 1,056 | |
Other assets [Member] | ||
Assets held for sale | 21 | |
Goodwill [Member] | ||
Assets held for sale | $ 1,126 |
4. FACILITY ACQUISITIONS (Detai
4. FACILITY ACQUISITIONS (Details Narrative) - USD ($) $ in Thousands | 2 Months Ended | 4 Months Ended | 5 Months Ended | 6 Months Ended | 7 Months Ended | 8 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 01, 2016 | May 01, 2015 | Apr. 15, 2015 | Jun. 01, 2015 | Jun. 15, 2016 | Aug. 03, 2015 | Sep. 01, 2015 | Sep. 30, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Common stock issued, value | $ 9,241 | |||||||||
NJ Imaging [Member] | ||||||||||
Divestiture, cash received | 35,500 | |||||||||
Gain on sale of investment | 5,400 | |||||||||
Baltimore County Radiology [Member] | ||||||||||
Divestiture, cash received | 5,000 | |||||||||
Proceeds in excess of book value | 3,700 | |||||||||
Earn out received | $ 992 | |||||||||
Advanced Radiological Imaging [Member] | ||||||||||
Acquisition, cash paid | $ 5,000 | |||||||||
Fixed assets acquired | 3,600 | |||||||||
Prepaid assets acquired | 47 | |||||||||
Goodwill acquired | 1,300 | |||||||||
Intangible assets acquired | $ 100 | |||||||||
DIG [Member] | ||||||||||
Acquisition, cash paid | $ 1,600 | $ 49,600 | ||||||||
Cash to be paid for acquisition | 5,000 | $ (1,600) | ||||||||
Fixed assets acquired | 1,100 | |||||||||
Goodwill acquired | (121) | |||||||||
Notes payable assumed | 2,100 | 1,000 | ||||||||
Common stock issued, value | 8,300 | |||||||||
Total consideration transferred | 62,900 | |||||||||
Philip L. Chatham [Member] | ||||||||||
Acquisition, cash paid | 300 | |||||||||
Fixed assets acquired | 26 | |||||||||
Inventory acquired | 300 | |||||||||
Goodwill acquired | 790 | |||||||||
Intangible assets acquired | 100 | |||||||||
Total consideration transferred | $ 916 | |||||||||
Murray Hill Radiology and Mammograph [Member] | ||||||||||
Acquisition, cash paid | $ 5,800 | |||||||||
Fixed assets acquired | 1,600 | |||||||||
Prepaid assets acquired | 95 | |||||||||
Goodwill acquired | 4,100 | |||||||||
Total consideration transferred | $ 5,800 | |||||||||
Hanford Imaging [Member] | ||||||||||
Acquisition, cash paid | $ 1,000 | |||||||||
Fixed assets acquired | 215 | |||||||||
Goodwill acquired | 785 | |||||||||
Total consideration transferred | $ 1,000 | |||||||||
Healthcare Radiology and Diagnostic [Member] | ||||||||||
Acquisition, cash paid | $ 425 | |||||||||
Fixed assets acquired | 134 | |||||||||
Leasehold improvements acquired | 291 | |||||||||
Total consideration transferred | $ 425 | |||||||||
California Radiology [Member] | ||||||||||
Acquisition, cash paid | $ 4,200 | |||||||||
Fixed assets acquired | 217 | |||||||||
Goodwill acquired | 2,100 | |||||||||
Intangible assets acquired | 100 | |||||||||
Other assets acquired | 34 | |||||||||
Leasehold improvements acquired | $ 1,700 | |||||||||
NY Radiology Partners [Member] | ||||||||||
Acquisition, cash paid | $ 29,800 | |||||||||
Note payable issued | 1,500 | |||||||||
Fixed assets acquired | 6,900 | |||||||||
Accounts receivable acquired | 4,900 | |||||||||
Goodwill acquired | 9,900 | |||||||||
Intangible assets acquired | 1,200 | |||||||||
Leasehold improvements acquired | 11,600 | |||||||||
Notes payable assumed | 2,300 | |||||||||
Current liabilities assumed | $ 891 | |||||||||
Joint Venture [Member] | Park West [Member] | ||||||||||
Acquisition, cash paid | $ 1,200 | |||||||||
Equity interest owned | 100.00% |
5. GOODWILL AND OTHER INTANGI48
5. GOODWILL AND OTHER INTANGIBLE ASSETS (Details - Schedule of Goodwill) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill, beginning balance | $ 239,408 | $ 200,304 |
Goodwill allocated to assets held for sale | (1,126) | |
Adjustments to preliminary allocations of purchase price | (47) | 200 |
Goodwill, ending balance | 239,553 | 239,408 |
New Jersey Imaging Powers, Inc. [Member] | ||
Goodwill allocated to assets held for sale | (18,833) | |
California Radiology [Member] | ||
Goodwill acquired through acquisitions | 2,107 | |
New York Radiology Partners [Member] | ||
Goodwill acquired through acquisitions | 9,897 | |
Hanford Imaging, L.P. [Member] | ||
Goodwill acquired through acquisitions | 785 | |
Murray Hill Radiology [Member] | ||
Goodwill acquired through acquisitions | 4,123 | |
Philip L. Chatham [Member] | ||
Goodwill acquired through acquisitions | 790 | |
Diagnostic Imaging Group, LLC [Member] | ||
Goodwill acquired through acquisitions | $ 40,035 | |
Advanced Radiological Imaging [Member] | ||
Goodwill acquired through acquisitions | 1,280 | |
Landmark Imaging [Member] | ||
Goodwill acquired through acquisitions | $ 38 |
5. GOODWILL AND OTHER INTANGI49
5. GOODWILL AND OTHER INTANGIBLE ASSETS (Details - Annual Amortization Schedule) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Amortization next twelve months | $ 2,538 |
Amortization year 2018 | 2,495 |
Amortization year 2019 | 2,409 |
Amortization year 2020 | 2,329 |
Amortization year 2021 | 2,291 |
Amortization year thereafter | 30,620 |
Amortiztion total | 42,682 |
Management Service Contracts [Member] | |
Amortization next twelve months | 2,287 |
Amortization year 2018 | 2,287 |
Amortization year 2019 | 2,287 |
Amortization year 2020 | 2,287 |
Amortization year 2021 | 2,287 |
Amortization year thereafter | 22,683 |
Amortiztion total | $ 34,118 |
Weighted average amortization period remaining in years | 14 years 10 months 24 days |
Covenant Not To Compete [Member] | |
Amortization next twelve months | $ 251 |
Amortization year 2018 | 208 |
Amortization year 2019 | 122 |
Amortization year 2020 | 42 |
Amortization year 2021 | 4 |
Amortization year thereafter | 0 |
Amortiztion total | $ 627 |
Weighted average amortization period remaining in years | 2 years 9 months 18 days |
Trade Names [Member] | |
Amortization next twelve months | $ 0 |
Amortization year 2018 | 0 |
Amortization year 2019 | 0 |
Amortization year 2020 | 0 |
Amortization year 2021 | 0 |
Amortization year thereafter | 7,937 |
Amortiztion total | $ 7,937 |
5. GOODWILL AND OTHER INTANGI50
5. GOODWILL AND OTHER INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Other intangible assets, gross | $ 57,500 | ||
Accumulated amortization | 23,400 | ||
Amortization expense | 2,600 | $ 3,000 | $ 3,100 |
Goodwill deductible for tax purposes | 99,100 | ||
Noncompete Agreements [Member] | |||
Other intangible assets, gross | 5,900 | ||
Accumulated amortization | 5,300 | ||
Trade Names [Member] | |||
Other intangible assets, gross | 10,200 | ||
Accumulated amortization | 1,500 | ||
Dispositions of intangibles | 750 | ||
Customer Relationships [Member] | |||
Other intangible assets, gross | 4,000 | ||
Accumulated amortization | $ 4,000 | ||
Amortization period | 5 years | ||
Management Service Contracts [Member] | |||
Amortization period | 25 years | ||
Developed Technology [Member] | |||
Amortization period | 5 years |
6. PROPERTY AND EQUIPMENT (Deta
6. PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 778,429 | $ 728,006 |
Accumulated depreciation and amortization | (529,648) | (471,284) |
Property and equipment, net | 248,781 | 256,722 |
Equipment held for sale | (1,056) | 0 |
Property and equipment, net | 247,725 | 256,722 |
Land [Member] | ||
Property and equipment, gross | 250 | 250 |
Medical equipment [Member] | ||
Property and equipment, gross | 393,001 | 352,005 |
Computer and office equipment, furniture and fixtures [Member] | ||
Property and equipment, gross | 99,434 | 107,014 |
Software development costs [Member] | ||
Property and equipment, gross | 6,391 | 6,391 |
Leasehold improvements [Member] | ||
Property and equipment, gross | 252,595 | 232,550 |
Equipment under capital lease [Member] | ||
Property and equipment, gross | $ 26,758 | $ 29,796 |
6. PROPERTY AND EQUIPMENT (De52
6. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | |||
Depreciation and amortization expense | $ 64,000 | $ 57,600 | $ 56,200 |
7. ACCOUNTS PAYABLE AND ACCRU53
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Payables and Accruals [Abstract] | ||
Accounts payable | $ 40,952 | $ 52,296 |
Accrued expenses | 42,883 | 32,950 |
Accrued payroll and vacation | 19,119 | 17,692 |
Accrued professional fees | 8,212 | 10,875 |
Accounts payable and accrued expenses | $ 111,166 | $ 113,813 |
8. NOTES PAYABLE, LINE OF CRE54
8. NOTES PAYABLE, LINE OF CREDIT AND CAPITAL LEASES (Details - Schedule of debt) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Revolving lines of credit | $ 0 | $ 0 |
Discounts on term loan and notes | (16,783) | (9,542) |
Equipment notes payable | 341 | 1,032 |
Obligations under capital leases | 7,256 | 16,423 |
Total notes payable, line of credit and capital lease obligations | 638,732 | 640,728 |
Less: current portion | (26,557) | (33,114) |
Total notes payable, line of credit and capital lease obligations, long-term | 612,175 | 607,614 |
Former owner of an acquired practice [Member] | ||
Promissory notes payable | 980 | 1,361 |
Healthcare Partners [Member] | ||
Promissory notes payable | 0 | 431 |
First Lien Term Loan [Member] | ||
Term loans | 478,938 | 451,023 |
Second Lien Term Loans [Member] | ||
Term loans | $ 168,000 | $ 180,000 |
8. NOTES PAYABLE (Details - An
8. NOTES PAYABLE (Details - Annual note payable maturities) $ in Thousands | Dec. 31, 2016USD ($) |
Debt Disclosure [Abstract] | |
2,017 | $ 24,784 |
2,018 | 24,751 |
2,019 | 24,526 |
2,020 | 24,261 |
2,021 | 192,250 |
Thereafter | 357,687 |
Annual principal maturities | $ 648,259 |
8. NOTES PAYABLE (Details - Min
8. NOTES PAYABLE (Details - Minimum capital lease payments) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
2,017 | $ 4,764 | |
2,018 | 2,163 | |
2,019 | 359 | |
2,020 | 201 | |
2,021 | 81 | |
Thereafter | 15 | |
Total minimum payments | 7,583 | |
Amount representing interest | (327) | |
Present value of net minimum lease payments | 7,256 | |
Less current portion | (4,526) | $ (10,038) |
Long-term portion | $ 2,730 | $ 6,385 |
8. NOTES PAYABLE (Details - Ter
8. NOTES PAYABLE (Details - Term Loans) $ in Thousands | Dec. 31, 2016USD ($) |
First Lien Term Loan [Member] | |
Term loans face value | $ 478,938 |
Term loans discount | (14,712) |
Term loan carrying value | 4,464,226 |
Second Lien Term Loans [Member] | |
Term loans face value | 168,000 |
Term loans discount | (2,071) |
Term loan carrying value | 165,929 |
Short-term Debt [Member] | |
Term loans face value | 646,938 |
Term loans discount | (16,783) |
Term loan carrying value | $ 630,155 |
8. NOTES PAYABLE, LINE OF CRE58
8. NOTES PAYABLE, LINE OF CREDIT AND CAPITAL LEASES (Details Narrative) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
First Lien Credit Agreement [Member] | Term Loan [Member] | |
Debt face amount | $ 485,000 |
Interest rate description | Adjusted Eurodollar plus 3.75% per annum or Base Rate plus2.75% per annum |
Debt periodic payment frequency | quarterly |
Debt periodic payment | $ 6,100 |
Payment on debt | $ 6,200 |
Debt maturity date | Sep. 25, 2020 |
First Lien Credit Agreement [Member] | Revolving Credit Facility [Member] | |
Credit facility maximum borrowing amount | $ 117,500 |
Interest rate description | interest based on types of borrowings as follows: (i) unpaid principal on loans under the Revolving Credit Facility at the Adjusted Eurodollar Rate (as defined in the First Lien Credit Agreement) plus 3.75% per annum or the Base Rate (as defined in the First Lien Credit Agreement) plus 2.75% per annum, (ii) letter of credit fees at 3.75% per annum and fronting fees for letters of credit at 0.25% per annum, in each case on the average aggregate daily maximum amount available to be drawn under all letters of credit issued under the First Lien Credit Agreement, and (iii) commitment fee of 0.5% per annum on the unused revolver balance. |
Debt maturity date | Jul. 1, 2021 |
Second Lien Credit Agreement [Member] | Term Loan [Member] | |
Debt face amount | $ 180,000 |
Effective interest rate | 8.00% |
Debt maturity date | Mar. 25, 2021 |
9. COMMITMENTS AND CONTINGENC59
9. COMMITMENTS AND CONTINGENCIES (Details - Operating leases) $ in Thousands | Dec. 31, 2016USD ($) |
2,017 | $ 66,705 |
2,018 | 57,422 |
2,019 | 48,887 |
2,020 | 39,117 |
2,021 | 30,061 |
Thereafter | 57,340 |
Total operating lease payments | 299,532 |
Facilities [Member] | |
2,017 | 58,368 |
2,018 | 49,638 |
2,019 | 43,192 |
2,020 | 35,276 |
2,021 | 28,062 |
Thereafter | 56,008 |
Total operating lease payments | 270,544 |
Equipment [Member] | |
2,017 | 8,337 |
2,018 | 7,784 |
2,019 | 5,695 |
2,020 | 3,841 |
2,021 | 1,999 |
Thereafter | 1,332 |
Total operating lease payments | $ 28,988 |
9. COMMITMENTS AND CONTINGENC60
9. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Rent expense | $ 74,200 | $ 71,700 | $ 64,500 |
10. DERIVATIVE INSTRUMENTS (Det
10. DERIVATIVE INSTRUMENTS (Details - Fair Value) $ in Thousands | Dec. 31, 2016USD ($) |
Interest Rate Contract [Member] | |
Derivative asset fair value | $ 818 |
10. DERIVATIVE INSTRUMENTS (D62
10. DERIVATIVE INSTRUMENTS (Details - Gain on Derivative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Amount of gain recognized on derivative | $ 508 | $ 0 | $ 0 |
Interest Rate Contract [Member] | |||
Amount of gain recognized on derivative | $ 818 |
11. INCOME TAXES (Details - Inc
11. INCOME TAXES (Details - Income tax expense (benefit)) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |||||||||||
Federal current tax | $ 88 | $ 237 | $ 0 | ||||||||
State current tax | 914 | 1,705 | 1,283 | ||||||||
Other current tax | 28 | 28 | 29 | ||||||||
Federal deferred tax | 2,539 | 3,625 | 869 | ||||||||
State deferred tax | 863 | 412 | (214) | ||||||||
Income tax expense | $ 1,901 | $ 1,458 | $ 2,253 | $ (1,180) | $ 1,707 | $ 5,199 | $ 2,192 | $ (3,091) | $ 4,432 | $ 6,007 | $ 1,967 |
11. INCOME TAXES (Details - Eff
11. INCOME TAXES (Details - Effective tax rates) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |||
Federal tax | 34.00% | 34.00% | 34.00% |
State franchise tax, net of federal benefit | 1.80% | 8.50% | (3.64%) |
Other Non deductible expenses | (0.09%) | (0.01%) | 0.00% |
Meals and entertainment | 2.10% | 1.75% | 4.85% |
Noncontrolling interest in partnerships | (2.11%) | (2.16%) | (2.88%) |
Equity compensation | (4.05%) | (1.74%) | (8.72%) |
Changes in valuation allowance | 4.70% | (17.32%) | 24.52% |
Return-to-provision | 0.22% | 3.29% | (9.57%) |
Deferred tru-ups and other | (25.25%) | 13.41% | 16.34% |
Uncertain tax positions | 22.44% | 0.01% | (3.67%) |
Expiring net operating losses | 1.88% | 1.28% | 2.62% |
Income tax expense | 35.64% | 41.01% | 53.85% |
11. INCOME TAXES (Details - Def
11. INCOME TAXES (Details - Deferred tax assets and liabilities) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Income Tax Disclosure [Abstract] | ||
Net operating losses | $ 84,509 | $ 78,912 |
Accrued expenses | 4,400 | 4,125 |
Straight-Line Rent Adjustment | 10,750 | 11,263 |
Unfavorable contract liability | 2,114 | 2,142 |
Equity compensation | 950 | 846 |
Allowance for doubtful accounts | 6,033 | 4,341 |
Other | 1,357 | 1,092 |
Valuation allowance | (4,427) | (3,841) |
Total Deferred Tax Assets | 105,685 | 98,880 |
Deferred tax liabilities: | ||
Property Plant & Equipment | (6,994) | (8,582) |
Goodwill | (23,350) | (18,617) |
Intangibles | (12,066) | (12,088) |
Non accrual experience method reserve | (8,483) | (7,882) |
Other | (4,436) | (4,747) |
Total Deferred Tax Liabilities | (55,329) | (51,916) |
Net Deferred Tax Asset | $ 50,356 | $ 46,964 |
11. INCOME TAXES (Details - Net
11. INCOME TAXES (Details - Net operating loss carryforward) $ in Thousands | Dec. 31, 2016USD ($) |
Net operating loss carryforward | $ 231,629 |
NOL carryforward subject to 382 limitation | 40,632 |
California Operating Loss Carryforward | 22,293 |
2017 [Member] | |
Net operating loss carryforward | 1,501 |
NOL carryforward subject to 382 limitation | 1,501 |
California Operating Loss Carryforward | 4,520 |
2018 [Member] | |
Net operating loss carryforward | 10,968 |
NOL carryforward subject to 382 limitation | 0 |
California Operating Loss Carryforward | 0 |
2019 [Member] | |
Net operating loss carryforward | 7,178 |
NOL carryforward subject to 382 limitation | 0 |
California Operating Loss Carryforward | 0 |
2020 [Member] | |
Net operating loss carryforward | 0 |
NOL carryforward subject to 382 limitation | 0 |
California Operating Loss Carryforward | 0 |
2021 [Member] | |
Net operating loss carryforward | 24,257 |
NOL carryforward subject to 382 limitation | 0 |
California Operating Loss Carryforward | 0 |
Thereafter [Member] | |
Net operating loss carryforward | 187,725 |
NOL carryforward subject to 382 limitation | 40,632 |
California Operating Loss Carryforward | $ 17,773 |
11. INCOME TAXES (Details - Unr
11. INCOME TAXES (Details - Unrecognized tax benefit) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |||
Unrecognized tax benefit, beginning balance | $ 94 | $ 3,761 | $ 3,970 |
Increases resulting from prior period tax positions | 3,861 | 0 | |
Decreases resulting from prior period tax positions | (3,667) | (209) | |
Expiration of the statute of limitations for the assessment of taxes | (94) | ||
Unrecognized tax benefit, ending balance | $ 3,861 | $ 94 | $ 3,761 |
11. INCOME TAXES (Details Narra
11. INCOME TAXES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Net operating loss carryforward | $ 231,629 | |||
Unrecognized tax benefits | 3,861 | $ 94 | $ 3,761 | $ 3,970 |
Federal [Member] | ||||
Net operating loss carryforward | $ 231,600 | |||
Operating loss ending expiration date | Dec. 31, 2036 | |||
California [Member] | ||||
Net operating loss carryforward | $ 160,500 | |||
Operating loss ending expiration date | Dec. 31, 2036 |
12. STOCK-BASED COMPENSATION (D
12. STOCK-BASED COMPENSATION (Details - Outstanding options and warrants) - Options [Member] $ / shares in Units, $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Shares Outstanding, beginning balance | shares | 931,667 |
Shares granted | shares | 170,626 |
Shares exercised | shares | (576,667) |
Shares cancelled, forfeited or expired | shares | (150,000) |
Shares outstanding, ending blance | shares | 375,626 |
Exercisable, ending balance | shares | 205,000 |
Weighted average exercise price, beginning balance | $ / shares | $ 4.69 |
Weighted average exercise price, granted | $ / shares | 6.01 |
Weighted average exercise price, exercised | $ / shares | 2.96 |
Weighted average exercise price, cancelled, forfeited or expired | $ / shares | 7.51 |
Weighted average exercise price, ending balance | $ / shares | 6.82 |
Weighted average exercise price, exercisable | $ / shares | $ 7.51 |
Weighted average remaining contractual life, ending balance | 4 years 5 months 12 days |
Weighted average remaining contractual life, exercisable | 11 months 1 day |
Aggregate intrinsic value, ending balance | $ | $ 252,238 |
Aggregate intrinsic value, exercisable | $ | $ 176,400 |
12. STOCK-BASED COMPENSATION 70
12. STOCK-BASED COMPENSATION (Details - RSU's) - Restricted Stock Awards [Member] | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
RSA's outstanding, beginning balance | 771,342 |
RSA's granted | 802,803 |
RSA's vested | (1,000,999) |
RSA's forfeited | |
RSA's outstanding, ending balance | 573,145 |
Weighted-Average Remaining Contractual Term | 6 months 26 days |
Weighted-average fair value, beginning balance | $ / shares | $ 5.17 |
Weighted-average fair value, granted | $ / shares | 6.16 |
Weighted-average fair value, vested | $ / shares | 5.13 |
Weighted-average fair value, ending balance | $ / shares | $ 6.18 |
12. STOCK-BASED COMPENSATION 71
12. STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Intrinsic value of options and warrants exercised | $ 1,700,000 | $ 6,200,000 |
Unrecognized stock-based compensation expense | $ 438,998 | |
Unrecognized expense weighted average period | 3 years | |
Restated Plan [Member] | ||
Shares authorized | 12,000,000 | |
Shares available for future issuance, options, warrants, shares of restricted stock and other bonus awards | 2,865,675 | |
Awards issued to date | 12,168,387 | |
Options cancelled | 2,975,009 | |
RSA's forfeited | 59,053 | |
Future Service [Member] | ||
Options granted | 35,000 | |
Restricted Stock Awards [Member] | ||
Awards issued to date | 4,264,011 | |
RSA's unvested | 573,145 | |
RSA's forfeited |
14. QUARTERLY RESULTS OF OPER72
14. QUARTERLY RESULTS OF OPERATIONS (Details-Statements of Operations) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Quarterly Results Of Operations Details-statements Of Operations | |||||||||||
Net service fee revenue | $ 224,939 | $ 224,643 | $ 218,565 | $ 216,388 | $ 215,706 | $ 208,366 | $ 204,289 | $ 181,267 | $ 884,535 | $ 809,628 | $ 717,569 |
Total operating expenses | 209,971 | 212,192 | 210,487 | 213,405 | 205,256 | 191,137 | 190,905 | 183,213 | 846,055 | 770,511 | 664,264 |
Total other expenses | 10,641 | 11,578 | 5,717 | 7,875 | 10,109 | 5,731 | 10,836 | 6,723 | 43,911 | 56,623 | |
Equity in earnings of joint ventures | (1,638) | (2,576) | (3,274) | (2,279) | (2,626) | (1,992) | (3,207) | (1,102) | (9,767) | (8,927) | (6,970) |
Benefit from (provision for) income taxes | (1,901) | (1,458) | (2,253) | 1,180 | (1,707) | (5,199) | (2,192) | 3,091 | (4,432) | (6,007) | (1,967) |
Net (loss) income | 4,064 | 1,991 | 3,382 | (1,433) | 1,260 | 8,291 | 3,563 | (4,476) | 8,004 | 8,638 | 1,685 |
Net income (loss) attributable to noncontrolling intersts | 383 | 344 | (243) | 290 | 379 | 304 | 168 | 78 | 774 | 929 | 309 |
Net (loss) income attributable to Radnet, Inc. common stockholders | $ 3,681 | $ 1,647 | $ 3,625 | $ (1,723) | $ 881 | $ 7,987 | $ 3,395 | $ (4,554) | $ 7,230 | $ 7,709 | $ 1,376 |
Basic net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: | $ .08 | $ .04 | $ .08 | $ (.04) | $ .02 | $ .18 | $ .08 | $ (.11) | $ .16 | $ 0.18 | $ .03 |
Diluted net (loss) income attributable to Radnet, Inc. common stockholders (loss) earnings per share: | $ .08 | $ .04 | $ .08 | $ (.04) | $ .02 | $ .18 | $ .08 | $ (.11) | $ .15 | $ .17 | $ .03 |
Weighted average shares outstanding - Basic | 45,967,000 | 45,869,000 | 46,559,000 | 46,581,000 | 45,454,000 | 43,637,000 | 43,370,000 | 42,747,000 | 46,244,188 | 43,805,794 | 41,070,077 |
Weighted average shares outstanding - Diluted | 46,389,000 | 46,334,000 | 46,882,000 | 46,581,000 | 46,545,000 | 44,752,000 | 44,686,000 | 42,747,000 | 46,655,032 | 45,171,372 | 43,149,196 |
15. RELATED PARTY TRANSACTIONS
15. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |||
Delivery services paid to related party | $ 670 | $ 693 | $ 833 |
Due to related party | $ 273 | $ 161 |