Alliance HealthCare Services third quarter revenue increases 4.7% to $126.8 million

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 third quarter ended September 30, 2011.

Third Quarter 2011 Financial Results

Revenue for the third quarter of 2011 was $126.8 million compared to $121.1 million in the third quarter of 2010, an increase of 4.7%. On a sequential quarter basis, revenue decreased (0.8%) to $126.8 million in the third quarter of 2011 compared to $127.8 million in the second quarter of 2011.

Alliance's Adjusted EBITDA (as defined below) was $38.5 million in the third quarter of 2011 compared to $40.4 million in the third quarter 2010, a decrease of 4.7%. On a sequential quarter basis, Adjusted EBITDA was steady at $38.5 million in the third quarter of 2011 compared to $38.8 million in the second quarter of 2011.

Alliance's net loss, computed in accordance with generally accepted accounting principles ("GAAP"), totaled ($137.3) million in the third quarter of 2011, including ($133.0) million of non-cash impairment charges net of tax, and ($1.0) million in the third quarter of 2010.

Net loss per share on a diluted basis, computed in accordance with GAAP, was ($2.58) per share in the third quarter of 2011 and ($0.02) per share in the third quarter of 2010. In the third quarter of 2011, net loss per share on a diluted basis was impacted by ($2.55) in the aggregate due to non-cash impairment charges, restructuring charges, severance and related costs, mergers and acquisitions transaction costs and a lower GAAP income tax rate than our historical income tax rate. Alliance's historical income tax rate has been approximately 42%, rather than the GAAP income tax rate of 16.2% in the third quarter of 2011.

The third quarter of 2011 included non-cash impairment charges totaling $155.7 million, or $133.0 million net of tax, related to Alliance's imaging division. Alliance completed step one of its impairment analysis which indicated impairment as of September 30, 2011 and therefore began, but has not completed, the subsequent steps to quantify a final goodwill impairment charge. However, management's best estimate of a goodwill impairment charge is $153.0 million, and $2.7 million related to impairment of certain intangible assets. The impairment charge is based on a preliminary analysis and may be subject to further adjustments. During the fourth quarter, the Company intends to complete the valuation work to determine the fair value of the imaging division assets and liabilities and record adjustments to their estimate, if any. Alliance believes that the reduction in fair value which prompted the impairment charges is a result of sustained high unemployment rates, a reported decline in physician office visits, and other conditions in the United States arising from global economic conditions. These factors have had a sustained negative impact on the Company's stock price and on the fair value of its imaging division reporting unit. As a result, Alliance recorded the estimated non-cash impairment charges in the third quarter of 2011. These impairment charges are non-cash expenses and will not have any impact on the Company's cash position, future cash flows or debt covenants.

Cash flows provided by operating activities were $24.4 million in the third quarter of 2011 compared to $32.6 million in the third quarter of 2010, and $27.2 million in the second quarter of 2011. Capital expenditures in the third quarter of 2011 were $15.0 million compared to $15.6 million in the third quarter of 2010.

Cash and cash equivalents were $40.3 million at September 30, 2011 and $97.2 million at December 31, 2010.

Alliance's net debt, defined as total long-term debt (including current maturities) less cash and cash equivalents, increased $50.8 million to $606.9 million at September 30, 2011 from $556.1 million at December 31, 2010. In connection with the recently announced amendment to the Company's credit agreement, the Company paid down $25.0 million of borrowings outstanding under the Company's term loan facility and paid $6.0 million to the consenting lenders and other amendment related fees. In addition, the Company used approximately $42.0 million in cash; net of cash acquired, and assumed $26.0 million in equipment debt in connection with the acquisition of US Radiosurgery in April 2011. The Company also used approximately $5.0 million in cash in connection with the acquisition of assets from 24/7 Radiology in April 2011. The Company's net debt, as defined above, divided by the last twelve months Adjusted EBITDA, was 4.07x for the twelve month period ended September 30, 2011.

The Company's total long-term debt (including current maturities) decreased to $647.3 million at September 30, 2011 from $653.3 million at December 31, 2010. The Company's total long-term debt (including current maturities) divided by last twelve months Adjusted EBITDA (computed based on the definition thereof in the Company's amended Credit Agreement) was 4.45x for the twelve month period ended September 30, 2011.

Paul S. Viviano, Chairman of the Board and Chief Executive Officer, stated, "Alliance continues to focus on the three critical elements of our improvement plan. The Imaging Division strategy includes improving renewals of existing customers, driving new sales, and providing service in a more cost effective manner through recently disclosed expense reduction programs. Alliance Oncology continues to experience same customer volume growth, while focused on opening new de novo linear accelerator and stereotactic radiosurgery facilities. We continue to be diligent regarding the cost savings initiatives across the entire organization, for which we expect to realize $20 to $25 million of annualized savings phased in over an approximate two-year period. In the third quarter of 2011 we achieved $11 million dollars of annualized savings, which exceeded our target of $10 million dollars. Finally, the Company continues to evaluate selective acquisition opportunities in a disciplined manner."

Full Year 2011 Guidance

Alliance is reaffirming the full year 2011 revenue, Adjusted EBITDA, fixed-site center openings, and radiation therapy center openings guidance ranges. The Company is also updating its full year 2011 guidance ranges for cash capital expenditures and decrease in long-term debt, net of the change in cash and cash equivalents (before investments in acquisitions and debt financing costs).

Source Alliance HealthCare Services