Alliance HealthCare Services third quarter 2013 revenue decreases $2.6 million

Nov 6 2013

Alliance HealthCare Services, Inc. (NASDAQ:AIQ) (the "Company" or "Alliance"), a leading national provider of outpatient diagnostic imaging and radiation therapy services, announced results for the third quarter ended September 30, 2013.

Third Quarter 2013 Highlights

• Adjusted EBITDA increased by 3% over the prior year, representing the sixth consecutive quarter of organic Adjusted EBITDA growth ⁽¹⁾
• Same store volume growth was 1.2% for MRI and 1.6% for PET/CT in the third quarter of 2013 compared to the third quarter of 2012
• Alliance generated net income per share of $0.41, after excluding loss on extinguishment of debt, impairment charges, restructuring and transaction costs, and differences in the GAAP income tax rate compared to our historical income tax rate. Earnings per share in accordance with GAAP was ($0.19) per share.
• Continued to generate strong cash flow, with $43.3 million reduction in net debt in the last twelve month period ⁽²⁾
• Raised incremental term loan proceeds of $70.0 million in October 2013 which allows the Company to redeem the remaining balance on the 8% senior notes. The transaction will save the Company an additional $5 million annually in cash interest expense beginning in December 2013.
• Tom Tomlinson assumed role as Chief Executive Officer, President and Director on October 1, 2013.

"I am pleased to be joining the company at a time when we are consistently reporting solid results. I want to thank our dedicated team that is helping to transform our business every day and executing against our long-term strategic initiatives. We expect to increasingly benefit from our performance driven culture, as we continue to focus on identifying both operational efficiencies and revenue expansion opportunities. In fact, we were able to achieve a sixth consecutive quarter of adjusted EBITDA growth, which is a testament to our dedication to managing the business efficiently in a rapidly evolving marketplace," stated Tom Tomlinson, Chief Executive Officer and President.

"Looking forward, we are focused on finding additional ways to become indispensable to our more than 1,000 hospital partners, and have significant opportunities in front of us to help our customers improve how they operate their radiology and oncology service lines. We believe we are uniquely positioned to capitalize on the ongoing trends in the healthcare space given our 30 year track record of aligning with hospital partners, and look forward to driving meaningful value creation for our stakeholders over the long-term."

Third Quarter 2013 Financial Results

Revenue for the third quarter of 2013 was $113.4 million compared to $116.0 million in the third quarter of 2012. This $2.6 million decrease in revenue was driven primarily by the strategic reduction of our customer base in 2012. After this strategic reduction of our customer base, third quarter of 2013 revenue was almost neutral compared to a year ago.

Alliance's Adjusted EBITDA (as defined below) decreased 7.5% to $38.6 million in the third quarter of 2013 from $41.7 million in the third quarter of 2012. Excluding $2.0 million of rent expense from the sale/leaseback transaction completed in November 2012 and a one-time gain on a cash legal settlement of $2.2 million received in the third quarter of 2012, Adjusted EBITDA would have increased by 2.7% to $40.6 million in the third quarter of 2013 from $39.5 million in the third quarter of 2012.

Alliance's net loss, computed in accordance with generally accepted accounting principles ("GAAP"), totaled ($2.1) million in the third quarter of 2013 and ($1.2) million in the third quarter of 2012.

Net loss per share on a diluted basis, computed in accordance with GAAP, was ($0.19) per share in the third quarter of 2013 compared to ($0.12) per share in the third quarter of 2012. In the third quarter of 2013, net loss per share on a diluted basis was impacted by ($0.60) due to loss on extinguishment of debt, impairment of intangible assets for a strategically closed center in our imaging division, restructuring charges, transaction costs and differences in the GAAP income tax rate compared to our historical income tax rate. In the third quarter of 2012, net loss per share on a diluted basis was impacted by ($0.12) in the aggregate due to restructuring charges, mergers and acquisitions transaction costs and differences in the GAAP income tax rate from our historical income tax rate.

Cash flows provided by operating activities totaled $32.6 million in the third quarter of 2013 compared to $37.3 million in the third quarter of 2012. In the third quarter of 2013, capital expenditures were $8.7 million compared to $6.6 million in the third quarter of 2012. Alliance will continue to allocate resources through targeted investments designed to support and move forward the long-term goals of the business.

Alliance's net debt, defined as total long-term debt (including current maturities) less cash and cash equivalents, decreased $21.3 million to $497.4 million at September 30, 2013 from $518.7 million at December 31, 2012. Cash and cash equivalents were $49.1 million at September 30, 2013 and $40.0 million at December 31, 2012. As a result of the Company's successful term loan refinancing in June 2013, the Company's net debt was increased by $12.4 million related to fees and expenses incurred and $3.2 million due to the change in the unamortized discount on the old and new term loans. The Company's net debt, as defined above, divided by the last twelve months Consolidated Adjusted EBITDA was 3.36x for the twelve month period ended September 30, 2013 compared to 3.58x for the twelve month period ended a year ago. The Company's total debt, as defined above, divided by the last twelve months Consolidated Adjusted EBITDA was 3.70x for the twelve month period ended September 30, 2013 compared to 4.09x for the twelve month period ended a year ago.

"Our ability to raise $70 million of incremental borrowings under our existing senior secured term loan highlights the ongoing improvement in our business performance and the increasing strength of our balance sheet. The financing represents another positive step in our ongoing effort to maximize the efficiency of our capital structure, while providing the flexibility and cash flow necessary to execute upon our strategic initiatives, including ongoing reduction of our debt. In fact, as a result of our strong free cash flow generation, we have paid down $139 million of debt and consistently lowered our total leverage and net leverage ratios over the past eight quarters," stated Howard K. Aihara, Executive Vice President and Chief Financial Officer.