Tuesday, March 29, 2005


Chances are you or someone you know has had to have an X-ray, MIR, CT or Ultrasound recently. If you have active children you have probably experienced this thrill too often. Recently, I discovered an 8-year old company in a growth business that fits our "good value" screening criteria. It is a company that is living up to its commitment to provide high quality, cost effective radiology services. Company literature says that Radiologix (RGX) strives to be the premier provider of diagnostic imaging services through high-quality service to patients, referring physicians and mutually beneficial relationships with radiologists who provide expert interpretations of diagnostic images. Through the commitment of valued employees, Radiologix is dedicated to growing shareholder value by delivering personalized, timely and cost-effective services to patients, affiliated physicians, referring physicians, and the health care community.

In November 1997, seven successful, geographically diverse, physician-owned radiology practices joined together to form what is now known as Radiologix. (http://www.radiologix.com/). Each of these physicians contributed their imaging center and administrative assets in exchange for ownership in the Company. The Corporate Office and National Support Center is based in Dallas, TX and provides functional support to the subsidiaries.

Today, Radiologix owns and operates 76 freestanding, outpatient diagnostic imaging centers. The centers employ 2,000 and provide a broad range of diagnostic imaging services in 10 states. The company maintains a strong presence in all of its markets. Thanks to the efforts of their family of employees and member physicians, Radiologix has become one of the leading providers of radiology services in the United States. The company utilizes technology and technical expertise to perform a range of imaging procedures, such as magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, ultrasound, mammography, bone densitometry, general radiology and fluoroscopy.

Radiologix’s mission statement is to offer the benefits of small, family type practices, combined with the structure, security and funding of a publicly traded corporation. The radiologist partners work closely with the staff to ensure the highest possible patient care. Management feels it is important to kept the family feeling in the centers while providing "best in class" radiology services.

We have often noted the aging of the "baby boomers". Data show remarkable growth in the number of doctor visits in the USA. US citizens who have reached 51 years of age are taking 7 times the number of prescriptions as they were taking 10 years ago. Health Care is a growth business. Employment for radio-logic technologists is expected to grow most rapidly in offices and clinics of physicians, including diagnostic imaging centers. Health facilities such as Radiologix are expected to grow very rapidly due to the strong shift toward outpatient care, encouraged by third-party payers and made possible by technological advances that permit more procedures to be performed outside the hospital.

Fiscal year end results did not fully reflect the successful year Radiologix had. "2004 was a watershed year for our company. We focused our efforts on stabilizing our operations, building our leadership team, and strengthening our internal controls. As such, we made many difficult operational, financial and personnel decisions that resulted in significant but primarily non-cash financial charges. These decisions challenged our team, tested our resolve, and blurred our true underlying performance," said Sami S. Abbasi, president and chief executive officer of Radiologix. "However, by making these decisions and acting on them, we left 2004 stronger, healthier financially, and better positioned for the future. I am confident in our operations and in our potential to create long-term sustainable shareholder value."

Radiologix’s largest competitors, Alliance Imaging, (AIQ) (http://www.allianceimaging.com/) founded in 1983 has 478 diagnostic imaging systems with over 1,000 clients in 43 states. This stock was volatile during the year. The 52 week low of $3.60 was made on 3-29-04 and the 52 week high of $14.15 was hit 2-1-05, Alliance reported an increase in fourth quarter revenue of 5.5%. Revenue for 2004 increased 4.0%.

Per the Center for Disease Control, (www.cdc.gov/), emergency department visits are on the increase. Two factors are involved: overall population growth and the aging of our population. Older Americans, those 75 years of age and over, had the highest rate of emergency department visits-65 visits per 100 persons per year while the national average was 39 visits per 100 persons per year. You or your family member will likely use diagnostic and imaging services in any 5 year time.

The recent roller coaster ride may have be contributing to the cheapness of the stock. Radiologix’s 52 week high of $4.98 on 2-4-04 and 52 week low of $2.99 on 10-24-04 is too exciting for conservative investors. However, patient investors should be well rewarded by the stock. With a price now of $4.29 per share, are you willing to take a chance on this 8 year old diagnostic imaging company?