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8-K - FORM 8-K - Alliance HealthCare Services, Inc | d390235d8k.htm |
Exhibit 99.1
NEWS RELEASE
Contact:
Alliance HealthCare Services
Howard Aihara
Executive Vice President
Chief Financial Officer
(949) 242-5300
ALLIANCE HEALTHCARE SERVICES REPORTS SECOND QUARTER 2012
RESULTS
COST SAVING INITIATIVES EXCEED EXPECTATIONS AND COMPANY UPDATES 2012
GUIDANCE
NEWPORT BEACH, CAAugust 6, 2012 Alliance HealthCare Services, Inc. (NYSE:AIQ) (the Company or Alliance), a leading national provider of outpatient diagnostic imaging and radiation therapy services, announced results for the second quarter ended June 30, 2012.
Second Quarter Highlights
| Adjusted EBITDA increased 4.4% sequentially to $39.4 million and 1.6% from the year ago period of $38.8 million |
| Cost saving initiatives generated $33 million in annualized savings, versus goal of $20- $25 million |
| Total debt (including current maturities) less cash and equivalents, decreased $24.3 million in the first six months of 2012 compared to $19.4 million in the same period last year, a 25% improvement |
| Company updates 2012 guidance based upon increases in Adjusted EBITDA and cash flows |
Second Quarter 2012 Financial Results
The solid results we are reporting today reflect our continued progress against our strategic initiatives and drive towards stability and growth, stated Larry C. Buckelew, Chairman of the Board and Chief Executive Officer. Having been in my new role for two months, I am now more convinced than ever that we have the right team in place to enhance the long-term strategy and facilitate our vision of expanding our role with our customers.
Our results this quarter are primarily attributable to the successful implementation of Project Phoenix, the cost savings plan that we introduced last summer. Our team was able to identify and generate annualized savings which significantly exceeded our goals. The success and discipline of this program has permanently changed our corporate culture to focus on continuously improving our operational efficiency. I am fully committed to building upon these achievements, and realizing our long-term vision to become a more vital and strategic partner to our customers.
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Alliance HealthCare Services
Press Release
August 6, 2012
Page 2
Revenue for the second quarter of 2012 was sequentially stable at $120.7 million compared to $120.8 million in the first quarter of 2012. On a year-over-year basis, second quarter 2012 revenue decreased 5.6% from $127.8 million in the second quarter of 2011, in part due to trimming our portfolio of unprofitable Imaging Division business resulting in a revenue reduction, partially offset by an organic increase in radiation oncology revenue of $2.0 million, or 9.8%.
Alliances Adjusted EBITDA (as defined below) increased sequentially 4.4% to $39.4 million in the second quarter of 2012 compared to $37.8 million in the first quarter of 2012. On a year-over-year basis, Adjusted EBITDA increased 1.6% from $38.8 million in the second quarter of 2011. The sequential and year-over-year growth was organic given the Company made no additional acquisitions since the April 1, 2011 US Radiosurgery and 24|7 Radiology transactions.
Alliances net loss, computed in accordance with generally accepted accounting principles (GAAP), improved by $4.0 million to ($0.8) million in the second quarter of 2012, compared to ($4.8) million in the first quarter of 2012 and by $3.2 million compared to ($4.0) million in the second quarter of 2011.
Net loss per share on a diluted basis, computed in accordance with GAAP, was ($0.02) per share in the second quarter of 2012 versus ($0.08) per share in the second quarter of 2011. In the second quarter of 2012, net loss per share on a diluted basis was impacted by $0.01 in the aggregate due to restructuring charges, mergers and acquisitions transaction costs, fair value adjustments related to interest rate swaps and differences in the GAAP income tax rate from our historical income tax rate. In the second quarter of 2011, net loss per share on a diluted basis was impacted by ($0.03) in the aggregate due to fair value adjustments related to interest rate swaps, severance and related costs, mergers and acquisitions transaction costs, refinancing transaction costs and differences in the GAAP income tax rate from our historical income tax rate. Alliances historical income tax rate has been 42%, rather than the GAAP income tax benefit rate of 75.2% in the second quarter of 2012 and 35.8% in the second quarter of 2011.
Cash flows provided by operating activities were $18.4 million in the second quarter of 2012 compared to $27.2 million in the second quarter of 2011. The difference in operating cash flows is primarily attributable to the timing of working capital requirements and cash interest payments on the term loan facility. Capital expenditures in the second quarter of 2012 were $6.2 million compared to $11.2 million in the second quarter of 2011. Alliance opened one new fixed-site imaging center in the second quarter of 2012.
Alliances net debt, defined as total long-term debt (including current maturities) less cash and cash equivalents, decreased $24.3 million to $575.0 million at June 30, 2012 from $599.3 million at December 31, 2011. Cash and cash equivalents were $61.9 million at June 30, 2012 and $44.2 million at December 31, 2011. The Companys net debt, as defined above, divided by the last twelve months Adjusted EBITDA, as defined in the Companys credit agreement, was 4.00x for the twelve month period ended June 30, 2012.
The Companys total long-term debt (including current maturities) decreased to $636.9 million at June 30, 2012 from $643.5 million at December 31, 2011. The Companys total debt divided by the last twelve months Adjusted EBITDA, as defined in the credit agreement, was 4.43x for the twelve month period ended June 30, 2012. Adjusted EBITDA as defined in the Companys credit agreement includes an adjustment to exclude income attributable to non-controlling interest in subsidiaries.
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Alliance HealthCare Services
Press Release
August 6, 2012
Page 3
NYSE Listing Update
As previously disclosed, on September 28, 2011 the New York Stock Exchange (NYSE) notified the Company that it no longer satisfied the minimum $75 million market capitalization requirement. The NYSE accepted the Companys plan to regain compliance with this standard, and granted the Company an 18-month grace period through March 23, 2013, to demonstrate compliance with that standard. In addition and also as previously disclosed, the Company announced that it had received notification from the NYSE that it no longer complied with the audit committee composition rule as a result of the appointment of Mr. Buckelew as interim Chief Executive Officer, and separately the minimum $1.00 stock price requirement as a result of the stock demonstrating an average closing price of less than $1.00 per share for a 30-day period. The Company is currently operating under grace periods granted by the NYSE through December 1, 2012 to remedy the audit committee composition issue and through January 3, 2013 to remedy the minimum stock price requirement.
Full Year 2012 Guidance
Alliance is updating certain of its full year 2012 guidance ranges as follows:
Previous Guidance Ranges |
Updated Guidance Ranges |
Difference | ||||
(dollars in millions) | (dollars in millions) | (dollars in millions) | ||||
Revenue |
$470 - $500 | $465 - $485 | ($5) - ($15) | |||
Adjusted EBITDA |
$140 - $160 | $148 - $160 | $8 - $0 | |||
Capital expenditures |
$55 - $65 | $40 - $50 | $15 - $15 | |||
Decrease in long-term debt, net of the change in cash and cash equivalents (before investments in acquisitions) |
$15 - $25 | $35 - $40 | $20 - $15 |
The guidance ranges for 10-15 fixed-site imaging center openings and 3-5 radiation oncology center openings remains unchanged.
Buckelew commented, Our updated guidance ranges reflect the success of Project Phoenix, particularly the strategic operational discipline to forego certain revenue streams and grow more profitable business. Our Adjusted EBITDA growth, cash on hand, and capital expenditure plans will enable us to pay down debt in a disciplined manner. Going forward, reducing our debt obligation remains a top priority.
We believe in the underlying fundamentals of our business and that Alliances stock price is undervalued by the market. At its current trading price, we expect certain members of our Board of Directors and management team to be buyers of Alliance common stock in coming months, added Buckelew.
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Alliance HealthCare Services
Press Release
August 6, 2012
Page 4
Second Quarter 2012 Earnings Conference Call
Investors and all others are invited to listen to a conference call discussing second quarter 2012 results. The conference call is scheduled for Tuesday, August 7, 2012 at 8:30 a.m. Eastern Time. The call will be broadcast live on the Internet and can be accessed by visiting the Companys website at www.alliancehealthcareservices-us.com. Click on Audio Presentations in the Investors section of the website to access the link.
The conference call can be accessed at (877) 638-4550. Interested parties should call at least five minutes prior to the call to register. A telephone replay will be available until September 7, 2012. The telephone replay can be accessed by calling (855) 859-2056 or (404) 537-3406. The conference call identification number is 11821097.
Definition of Adjusted EBITDA
Adjusted EBITDA, as defined by the Companys management, represents net income (loss) before: interest expense, net of interest income; income taxes; depreciation expense; amortization expense; net income (loss) attributable to noncontrolling interests; non-cash share-based compensation; severance and related costs; restructuring charges; fees and expenses related to acquisitions; costs related to debt financing; non-cash impairment charges; and other non-cash charges included in other (income) expense, net, which includes non-cash losses on sales of equipment. The components used to reconcile net income (loss) to Adjusted EBITDA are consistent with our historical presentation of Adjusted EBITDA. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States, or GAAP. For a more detailed discussion of Adjusted EBITDA and reconciliation to net income (loss), see the section entitled Adjusted EBITDA included in the tables following this release.
About Alliance HealthCare Services
Alliance HealthCare Services is a leading national provider of advanced outpatient diagnostic imaging and radiation therapy services based upon annual revenue and number of systems deployed. Alliance focuses on MRI, PET/CT and CT through its Imaging division and radiation therapy through its Oncology division. With more than 1,900 team members committed to providing exceptional patient care and exceeding customer expectations, Alliance provides quality clinical services for over 1,000 hospitals and other healthcare partners in 46 states. Alliance operates 501 diagnostic imaging and radiation therapy systems. The Company is the nations largest provider of advanced diagnostic mobile imaging services and one of the leading operators of fixed-site imaging centers, with 126 locations across the country. Alliance also operates 32 radiation therapy centers, including 16 dedicated stereotactic radiosurgery facilities, many of which are operated in conjunction with local community hospital partners, providing treatment and care for cancer patients. With 16 stereotactic radiosurgery facilities in operation, Alliance is among the leading providers of stereotactic radiosurgery nationwide.
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Alliance HealthCare Services
Press Release
August 6, 2012
Page 5
Forward-Looking Statements
This press release contains forward-looking statements relating to future events, including statements related to the Companys improvement plan, including its efforts to stabilize and grow the Imaging Division, expand the Radiation Oncology Division, and increase organizational efficiency and cost savings through the Journey to Excellence and Project Phoenix initiatives; and to its Full Year 2012 Guidance, including its forecasts of revenue, Adjusted EBITDA, cash capital expenditures, decrease in long-term debt and the opening of new fixed-site imaging and radiation therapy centers; statements related to potential purchases of Alliance stock by directors and executive officers; and estimates of revenues lost and revenues gained from new client contracts in the Companys revenue gap disclosures on the last page of the tables following this release. In this context, forward-looking statements often address the Companys expected future business and financial results and often contain words such as expects, anticipates, intends, plans, believes, seeks or will. Forward-looking statements by their nature address matters that are uncertain and subject to risks. Such uncertainties and risks include: changes in the preliminary financial results and estimates due to the restatement or review of the Companys financial statements; the nature, timing and amount of any restatement or other adjustments; the Companys ability to make timely filings of its required periodic reports under the Securities Exchange Act of 1934; issues relating to the Companys ability to maintain effective internal control over financial reporting and disclosure controls and procedures; the Companys high degree of leverage and its ability to service its debt; factors affecting the Companys leverage, including interest rates; the risk that the counterparties to the Companys interest rate swap agreements fail to satisfy their obligations under these agreements; the Companys ability to obtain financing; the effect of operating and financial restrictions in the Companys debt instruments; the accuracy of the Companys estimates regarding its capital requirements; the effect of intense levels of competition in the Companys industry; changes in the methods of third party reimbursements for diagnostic imaging and radiation oncology services; fluctuations or unpredictability of the Companys revenues, including as a result of seasonality; changes in the healthcare regulatory environment; the Companys ability to keep pace with technological developments within its industry; the growth or lack thereof in the market for imaging, radiation oncology and other services; the disruptive effect of hurricanes and other natural disasters; adverse changes in general domestic and worldwide economic conditions and instability and disruption of credit markets; difficulties the Company may face in connection with recent, pending or future acquisitions, including unexpected costs or liabilities resulting from the acquisitions, diversion of managements attention from the operation of the Companys business, and risks associated with integration of the acquisitions; and other risks and uncertainties identified in the Risk Factors section of the Companys Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (the SEC), as may be modified or supplemented by our subsequent filings with the SEC. These uncertainties may cause actual future results or outcomes to differ materially from those expressed in the Companys forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake to update its forward-looking statements except as required under the federal securities laws.
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ALLIANCE HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands, except per share amounts)
Quarter
Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2012 | 2011 | 2012 | |||||||||||||
Revenues |
$ | 127,780 | $ | 120,664 | $ | 246,208 | $ | 241,417 | ||||||||
Costs and expenses: |
||||||||||||||||
Cost of revenues, excluding depreciation and amortization |
71,394 | 63,881 | 138,760 | 130,020 | ||||||||||||
Selling, general and administrative expenses |
19,889 | 18,078 | 36,947 | 38,913 | ||||||||||||
Transaction costs |
1,810 | 20 | 2,182 | 263 | ||||||||||||
Severance and related costs |
266 | 772 | 730 | 1,301 | ||||||||||||
Depreciation expense |
23,197 | 20,693 | 45,249 | 42,138 | ||||||||||||
Amortization expense |
4,609 | 3,994 | 7,935 | 8,006 | ||||||||||||
Interest expense and other, net |
12,000 | 13,679 | 23,735 | 27,367 | ||||||||||||
Other (income) and expense, net |
193 | 1,208 | 130 | 1,362 | ||||||||||||
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Total costs and expenses |
133,358 | 122,325 | 255,668 | 249,370 | ||||||||||||
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Loss before income taxes, earnings from unconsolidated investees, and noncontrolling interest |
(5,578 | ) | (1,661 | ) | (9,460 | ) | (7,953 | ) | ||||||||
Income tax benefit |
(2,237 | ) | (2,427 | ) | (3,580 | ) | (5,069 | ) | ||||||||
Earnings from unconsolidated investees |
(1,031 | ) | (1,161 | ) | (2,020 | ) | (2,239 | ) | ||||||||
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Net (loss) income |
(2,310 | ) | 1,927 | (3,860 | ) | (645 | ) | |||||||||
Less: Net income attributable to noncontrolling interest |
(1,730 | ) | (2,728 | ) | (2,583 | ) | (4,978 | ) | ||||||||
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Net loss attributable to Alliance HealthCare Services, Inc. |
$ | (4,040 | ) | $ | (801 | ) | $ | (6,443 | ) | $ | (5,623 | ) | ||||
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Comprehensive loss, net of taxes |
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Net loss attributable to Alliance HealthCare Services, Inc. |
$ | (4,040 | ) | $ | (801 | ) | $ | (6,443 | ) | $ | (5,623 | ) | ||||
Unrealized (loss) gain on hedging transactions, net of taxes |
(248 | ) | 37 | (201 | ) | 92 | ||||||||||
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Comprehensive income (loss), net of taxes: |
$ | (4,288 | ) | $ | (764 | ) | $ | (6,644 | ) | $ | (5,531 | ) | ||||
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Loss per common share attributable to Alliance HealthCare Services, Inc.: |
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Basic |
$ | (0.08 | ) | $ | (0.02 | ) | $ | (0.12 | ) | $ | (0.11 | ) | ||||
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Diluted |
$ | (0.08 | ) | $ | (0.02 | ) | $ | (0.12 | ) | $ | (0.11 | ) | ||||
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Weighted average number of shares of common stock and common stock equivalents: |
||||||||||||||||
Basic |
53,222 | 53,148 | 53,114 | 53,230 | ||||||||||||
Diluted |
53,222 | 53,148 | 53,114 | 53,230 |
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ALLIANCE HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
December 31, 2011 |
June 30, 2012 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 44,190 | $ | 61,866 | ||||
Accounts receivable, net of allowance for doubtful accounts |
70,701 | 67,877 | ||||||
Deferred income taxes |
10,086 | 10,086 | ||||||
Prepaid expenses |
6,462 | 5,522 | ||||||
Other receivables |
4,301 | 5,097 | ||||||
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|||||
Total current assets |
135,740 | 150,448 | ||||||
Equipment, at cost |
954,337 | 883,484 | ||||||
Less accumulated depreciation |
(663,038 | ) | (631,209 | ) | ||||
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Equipment, net |
291,299 | 252,275 | ||||||
Goodwill |
56,493 | 56,493 | ||||||
Other intangible assets, net |
143,024 | 134,595 | ||||||
Deferred financing costs, net |
17,268 | 15,534 | ||||||
Other assets |
19,270 | 29,175 | ||||||
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Total assets |
$ | 663,094 | $ | 638,520 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 22,417 | $ | 15,961 | ||||
Accrued compensation and related expenses |
18,204 | 18,998 | ||||||
Accrued interest payable |
6,582 | 6,261 | ||||||
Other accrued liabilities |
33,438 | 31,053 | ||||||
Current portion of long-term debt |
24,923 | 25,056 | ||||||
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Total current liabilities |
105,564 | 97,329 | ||||||
Long-term debt, net of current portion |
430,451 | 423,535 | ||||||
Senior notes |
188,109 | 188,268 | ||||||
Other liabilities |
879 | 826 | ||||||
Deferred income taxes |
43,002 | 37,690 | ||||||
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Total liabilities |
768,005 | 747,648 | ||||||
Stockholders equity: |
||||||||
Common stock |
527 | 527 | ||||||
Treasury stock |
(2,729 | ) | (2,739 | ) | ||||
Additional paid-in capital |
20,269 | 20,311 | ||||||
Accumulated comprehensive loss |
(950 | ) | (858 | ) | ||||
Accumulated deficit |
(171,288 | ) | (176,911 | ) | ||||
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Total stockholders equity attributable to Alliance HealthCare Services, Inc. |
(154,171 | ) | (159,670 | ) | ||||
Noncontrolling interest |
49,260 | 50,542 | ||||||
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Total stockholders equity |
(104,911 | ) | (109,128 | ) | ||||
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Total liabilities and stockholders equity |
$ | 663,094 | $ | 638,520 | ||||
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- 7 -
ALLIANCE HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended June 30, |
||||||||
2011 | 2012 | |||||||
Operating activities: |
||||||||
Net loss |
$ | (3,860 | ) | $ | (645 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Provision for doubtful accounts |
1,658 | 1,338 | ||||||
Share-based payment |
2,642 | 42 | ||||||
Depreciation and amortization |
53,184 | 50,139 | ||||||
Amortization of deferred financing costs |
1,426 | 1,934 | ||||||
Accretion of discount on long term debt |
792 | 842 | ||||||
Adjustment of derivatives to fair value |
(1 | ) | (67 | ) | ||||
Distributions less than undistributed earnings from investees |
(625 | ) | (149 | ) | ||||
Deferred income taxes |
(3,974 | ) | (5,256 | ) | ||||
(Gain) loss on sale of assets |
(71 | ) | 895 | |||||
Changes in operating assets and liabilities, net of acquisitions: |
||||||||
Accounts receivable |
(6,105 | ) | 1,486 | |||||
Prepaid expenses |
3,435 | 939 | ||||||
Other receivables |
(1,906 | ) | (796 | ) | ||||
Other assets |
(351 | ) | (1,873 | ) | ||||
Accounts payable |
5,442 | (4,672 | ) | |||||
Accrued compensation and related expenses |
(657 | ) | 794 | |||||
Accrued interest payable |
(548 | ) | (321 | ) | ||||
Income taxes payable |
61 | 23 | ||||||
Other accrued liabilities |
(3,861 | ) | (1,913 | ) | ||||
Other liabilities |
| 26 | ||||||
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Net cash provided by operating activities |
46,681 | 42,766 | ||||||
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Investing activities: |
||||||||
Equipment purchases |
(21,079 | ) | (9,927 | ) | ||||
Increase in deposits on equipment |
(2,312 | ) | (5,531 | ) | ||||
Acquisitions, net of cash received |
(46,650 | ) | | |||||
Decrease in cash in escrow |
300 | 1,257 | ||||||
Proceeds from sale of assets |
271 | 4,500 | ||||||
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Net cash used in investing activities |
(69,470 | ) | (9,701 | ) | ||||
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ALLIANCE HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
(in thousands)
Six Months Ended June 30, |
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2011 | 2012 | |||||||
Financing activities: |
||||||||
Principal payments on equipment debt |
(4,574 | ) | (6,337 | ) | ||||
Proceeds from equipment debt |
| 854 | ||||||
Principal payments on term loan facility |
(2,300 | ) | (6,000 | ) | ||||
Payments of debt issuance costs |
(213 | ) | (200 | ) | ||||
Payments of contingent consideration |
(1,626 | ) | | |||||
Noncontrolling interest in subsidiaries |
(1,543 | ) | (3,696 | ) | ||||
Proceeds from shared-based payment arrangements |
54 | | ||||||
Purchase of treasury stock |
| (10 | ) | |||||
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Net cash used in financing activities |
(10,202 | ) | (15,389 | ) | ||||
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Net (decrease) increase in cash and cash equivalents |
(32,991 | ) | 17,676 | |||||
Cash and cash equivalents, beginning of period |
97,162 | 44,190 | ||||||
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Cash and cash equivalents, end of period |
$ | 64,171 | $ | 61,866 | ||||
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Supplemental disclosure of cash flow information: |
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Interest paid |
$ | 22,019 | $ | 25,012 | ||||
Income taxes paid, net of refunds |
(2,357 | ) | 523 | |||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||
Net book value of assets exchanged |
$ | 26 | $ | 4,467 | ||||
Capital lease obligations related to the purchase of equipment |
| 4,017 | ||||||
Comprehensive (loss) gain from hedging transactions, net of taxes |
(201 | ) | 92 | |||||
Equipment debt assumed in connection with acquisitions |
25,973 | | ||||||
Equipment purchases in accounts payable |
1,616 | 1,784 | ||||||
Noncontrolling interest assumed in connection with acquisitions |
42,360 | |
- 9 -
ALLIANCE HEALTHCARE SERVICES, INC.
ADJUSTED EBITDA
(in thousands)
Adjusted EBITDA, as defined by the Companys management, represents net income (loss) before: interest expense, net of interest income; income taxes; depreciation expense; amortization expense; net income (loss) attributable to noncontrolling interests; non-cash share-based compensation; severance and related costs; restructuring charges; fees and expenses related to acquisitions, costs related to debt financing, non-cash impairment charges, and other non-cash charges included in other (income) expense, net, which includes non-cash losses on sales of equipment. The components used to reconcile net income (loss) to Adjusted EBITDA are consistent with our historical presentation of Adjusted EBITDA. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States, or GAAP.
Management uses Adjusted EBITDA, and believes it is a useful measure for investors, for a variety of reasons. Management regularly communicates its Adjusted EBITDA results and managements interpretation of such results to its board of directors. Management also compares the Companys Adjusted EBITDA performance against internal targets as a key factor in determining cash incentive compensation for executives and other employees, largely because management feels that this measure is indicative of how our diagnostic imaging and radiation oncology businesses are performing and are being managed. The diagnostic imaging and radiation oncology industry continues to experience significant consolidation. These activities have led to significant charges to earnings, such as those resulting from acquisition costs, and to significant variations among companies with respect to capital structures and cost of capital (which affect interest expense) and differences in taxation and book depreciation of facilities and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. In addition, management believes that because of the variety of equity awards used by companies, the varying methodologies for determining non-cash share-based compensation expense among companies and from period to period, and the subjective assumptions involved in that determination, excluding non-cash share-based compensation from Adjusted EBITDA enhances company-to-company comparisons over multiple fiscal periods and enhances the Companys ability to analyze the performance of its diagnostic imaging and radiation oncology businesses.
Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies. In addition, Adjusted EBITDA has other limitations as an analytical financial measure. These limitations include the fact that Adjusted EBITDA is calculated before recurring cash charges including interest expense, income taxes and severance costs, and is not adjusted for capital expenditures, the replacement cost of assets or other recurring cash requirements of the Companys business. Adjusted EBITDA also does not reflect any cost for equity awards to employees and does not exclude income attributable to noncontrolling interests. In the future, the Company expects that it may incur expenses similar to the excluded items discussed above. Accordingly, the exclusion of these and other similar items in the Companys non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual. Management compensates for the limitations of using Adjusted EBITDA as an analytical measure by relying on the Companys GAAP results to evaluate its operating performance and by considering independently the economic effects of the items that are or are not reflected in Adjusted EBITDA. Management also compensates for these limitations by providing GAAP-based disclosures concerning the excluded items in the Companys financial disclosures. As a result of these limitations, however, Adjusted EBITDA should not be considered as an alternative to net income (loss), as calculated in accordance with GAAP, or as an alternative to any other GAAP measure of operating performance. Adjusted EBITDA, as defined by the Companys management, is calculated differently from Consolidated Adjusted EBITDA, as defined in the Companys credit agreement and reported in the Companys SEC filings.
- 10 -
The calculation of Adjusted EBITDA is shown below:
Second Quarter Ended June 30, | Six Months Ended June 30, | Twelve months Ended June 30, |
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2011 | 2012 | 2011 | 2012 | 2012 | ||||||||||||||||
Net loss attributable to Alliance HealthCare Services, Inc. |
$ | (4,040 | ) | $ | (801 | ) | $ | (6,443 | ) | $ | (5,623 | ) | $ | (159,292 | ) | |||||
Income tax benefit |
(2,237 | ) | (2,427 | ) | (3,580 | ) | (5,069 | ) | (39,731 | ) | ||||||||||
Interest expense and other, net |
12,000 | 13,679 | 23,735 | 27,367 | 53,421 | |||||||||||||||
Amortization expense |
4,609 | 3,994 | 7,935 | 8,006 | 16,515 | |||||||||||||||
Depreciation expense |
23,197 | 20,693 | 45,249 | 42,138 | 86,863 | |||||||||||||||
Share-based payment (included in selling, general and administrative expenses) |
1,207 | (840 | ) | 2,596 | 36 | 2,059 | ||||||||||||||
Noncontrolling interest in subsidiaries |
1,730 | 2,728 | 2,583 | 4,978 | 7,403 | |||||||||||||||
Severance and related costs |
266 | | 730 | | 20 | |||||||||||||||
Restructuring charges |
| 873 | | 2,995 | 10,132 | |||||||||||||||
Transaction costs |
1,810 | 20 | 2,182 | 379 | 1,525 | |||||||||||||||
Impairment charges |
167,792 | |||||||||||||||||||
Other non-cash charges (included in other (income) and expenses, net) |
257 | 1,489 | 367 | 1,959 | 4,388 | |||||||||||||||
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Adjusted EBITDA |
$ | 38,799 | $ | 39,408 | $ | 75,354 | $ | 77,166 | $ | 151,095 | ||||||||||
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The leverage ratio calculations for the 12 months ended June 30, 2012 are shown below:
Consolidated | Less: Noncontrolling interest in subsidiaries |
Credit Agreement |
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Total debt |
$ | 636,859 | $ | | $ | 636,859 | ||||||
Less: Cash and cash equivalents |
(61,866 | ) | | (61,866 | ) | |||||||
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Net debt |
574,993 | | 574,993 | |||||||||
Last 12 months Adjusted EBITDA |
151,095 | (7,403 | ) | 143,692 | ||||||||
Total leverage ratio |
4.21x | 4.43x | ||||||||||
Net leverage ratio |
3.81x | 4.00x |
The reconciliation from net loss to Adjusted EBITDA for the 2012 guidance range is shown below (in millions):
2012 Full Year Previous Guidance Range |
2012 Full Year Updated Guidance Range |
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Net loss |
($ | 24 | ) | ($ | 14 | ) | ($ | 16 | ) | ($ | 14 | ) | ||||
Income tax benefit |
(18 | ) | (10 | ) | (18 | ) | (10 | ) | ||||||||
Depreciation expense; amortization expense; interest expense and other, net; noncontrolling interest in subsidiaries; share-based payment and other expenses |
182 | 184 | 182 | 184 | ||||||||||||
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Adjusted EBITDA |
$ | 140 | $ | 160 | $ | 148 | $ | 160 | ||||||||
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ALLIANCE HEALTHCARE SERVICES, INC.
SELECTED STATISTICAL INFORMATION
Second Quarter Ended June 30, |
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2011 | 2012 | |||||||
MRI |
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Average number of total systems |
287.6 | 264.3 | ||||||
Average number of scan-based systems |
243.9 | 222.7 | ||||||
Scans per system per day (scan-based systems) |
8.08 | 8.57 | ||||||
Total number of scan-based MRI scans |
126,674 | 124,605 | ||||||
Price per scan |
$ | 373.56 | $ | 359.88 | ||||
Scan-based MRI revenue (in millions) |
$ | 47.3 | $ | 44.8 | ||||
Non-scan based MRI revenue (in millions) |
5.2 | 4.3 | ||||||
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Total MRI revenue (in millions) |
$ | 52.5 | $ | 49.1 | ||||
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PET and PET/CT |
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Average number of systems |
121.3 | 118.8 | ||||||
Scans per system per day |
5.32 | 5.60 | ||||||
Total number of PET and PET/CT scans |
41,490 | 40,428 | ||||||
Price per scan |
$ | 1,020 | $ | 963 | ||||
Total PET and PET/CT revenue (in millions) |
$ | 42.8 | $ | 39.6 | ||||
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Radiation oncology |
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Linear accelerator treatments |
23,649 | 22,894 | ||||||
Cyberknife patients |
533 | 620 | ||||||
Total radiation oncology revenue (in millions) |
$ | 20.4 | $ | 22.5 | ||||
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Revenue breakdown (in millions) |
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Total MRI revenue |
$ | 52.5 | $ | 49.1 | ||||
PET and PET/CT revenue |
42.8 | 39.6 | ||||||
Radiation oncology revenue |
20.4 | 22.5 | ||||||
Other modalities and other revenue |
12.1 | 9.5 | ||||||
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Total revenues |
$ | 127.8 | $ | 120.7 | ||||
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2011 | 2012 | |||||||
Total fixed-site revenue (in millions) |
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Second quarter ended June 30 |
$ | 31.2 | $ | 30.2 |
- 12 -
ALLIANCE HEALTHCARE SERVICES, INC.
SELECTED STATISTICAL INFORMATION
IMAGING DIVISION REVENUE GAP
(in millions)
The Company utilizes the imaging division revenue gap as a statistical measure of its client losses and new client contracts. The imaging division revenue gap is calculated by measuring the difference between (a) the imaging division annualized revenue run rate lost as a result of clients choosing to terminate or not renew contracts with the Company, excluding clients for which Alliance provides professional radiology services, interim services and clients that the Company elects to terminate, and (b) projected new imaging division annualized revenue from new client contracts, excluding professional radiology services and interim services, commencing service in the quarter.
The annualized revenue run rate lost from customers choosing to terminate service may not be representative of the revenues such customers would have generated had they remained our customers.
The projected annualized revenue from new client contracts is calculated using contractual pricing where agreed upon, and assumptions with respect to pricing and reimbursement levels for all other new customer relationships. The projected annualized revenue from new client contracts is also calculated using assumptions with respect to customer ramp-up and scan volumes. Our assumptions are based on our experience in the industry and our expectations with respect to pricing and volume trends, and may not reflect actual revenue from new clients for a number of reasons, including greater than expected macroeconomic challenges impacting the imaging business, the variance in ramp-up time of customers adding new service lines, unexpected changes in business conditions and greater than expected competition for imaging services. See Forward-Looking Statements for a discussion of the other risks and uncertainties that may cause actual future results or outcomes to differ materially from those expressed above.
The imaging division revenue gap for the last four calendar quarters and the last twelve- month period ended June 30, 2012 is as follows:
(a) Revenue Lost |
(b) New Revenue |
Imaging Division Revenue Gap |
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2011 |
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Third Quarter |
($ | 8.3 | ) | $ | 2.3 | ($ | 6.0 | ) | ||||
Fourth Quarter |
(10.5 | ) | 4.7 | (5.8 | ) | |||||||
2012 |
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First Quarter |
(6.4 | ) | 8.2 | 1.8 | ||||||||
Second Quarter |
(8.0 | ) | 4.6 | (3.4 | ) | |||||||
Last Twelve Months Ended |
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June 30, 2012 |
($ | 33.2 | ) | $ | 19.8 | ($ | 13.4 | ) |
- 13 -