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Alliance HealthCare Services Reports Second Quarter 2015 ResultsAlliance HealthCare Services, Inc. (NASDAQ:AIQ) (the "Company," "Alliance," "we" or "our"), a leading national provider of outsourced radiology services through its Alliance HealthCare Radiology Division ("Alliance Radiology") and radiation therapy services through its Alliance HealthCare Oncology Division ("Alliance Oncology"), today announced the results for the second quarter and six months ended June 30, 2015. Second Quarter 2015 Highlights
Second Quarter 2015 Financial Results "Our second quarter results demonstrate that growth is accelerating as we strengthen execution of our multi-faceted strategic growth plan," stated Tom Tomlinson, Chief Executive Officer and President of Alliance HealthCare Services. "We are pleased to see year-over-year 6.5% revenue growth in the second quarter. Alliance Oncology grew 5.8% due largely to the Charleston Area Radiation Therapy Center in West Virginia, a transaction we entered into late last year. Our Alliance Oncology pipeline of new opportunities remains very strong with a new center scheduled to commence later this year. As we recently announced, late in Q2 we opened our stereotactic radiosurgery center in San Francisco in partnership with Dignity Health." Tomlinson continued, "In our Alliance Radiology business, we drove high single digit same-store volume growth in our MRI and PET/CT business lines as a result of increased physician-facing sales efforts and other programs that focus on helping our hospital partners gain market share. We continue to strategically compete on price to sustain and grow market share in a highly competitive mobile imaging market, with MRI pricing decreasing 6.9% and PET/CT pricing decreasing 6.3% year-over-year. Our RAD360 strategy continues to gain momentum with hospital systems and other providers, driven by the strong value proposition provided through our end-to-end radiology service line solutions. Our recent investment in interventional services, through the Pain Center of Arizona acquisition, is off to a positive start and contributed $8.2 million in revenue in the second quarter of 2015 and we have very compelling future partnership opportunities in this fast-growing segment of the healthcare services market." Revenue for the second quarter of 2015 was $118.5 million compared to $111.2 million in the second quarter of 2014. Impacting revenue this quarter was approximately $8.2 million of interventional radiology revenue driven by the acquisition of The Pain Center of Arizona in February 2015. Continued pricing reductions in the Radiology Division negatively impacted revenue by $4.9 million, consistent with Alliance's full year 2015 guidance. Oncology Division revenue grew by 5.8% in the second quarter of 2015, to $25.3 million, from $23.9 million in the second quarter of 2014, largely due to the revenue generated by the acquisition of Charleston Area Radiation Therapy Center. Alliance's Adjusted EBITDA in the second quarter of 2016 decreased 7.2% to $34.0 million from $36.7 million in the second quarter of 2014. Impacting second quarter Adjusted EBITDA was the aforementioned radiology pricing reductions of $4.9 million. Alliance's net loss, computed in accordance with generally accepted accounting principles (GAAP), totaled ($2.0) million in the second quarter of 2015 compared to net income of $2.8 million in the second quarter of 2014. Alliance's historical income tax rate has been 42.5%, compared to the GAAP income tax rate of 41.1% in the second quarter of 2015 and 39.3% in the second quarter of 2014. Net loss on a diluted basis, computed in accordance with GAAP, was ($0.18) per share in the second quarter of 2015 compared to net income on a diluted basis of $0.26 per share for same quarter of 2014. Net income per share on a diluted basis was impacted by ($0.52) in the second quarter of 2015 and ($0.26) in the second quarter of 2014 in the aggregate due to restructuring charges, impairment charges, transaction costs, legal matter expenses and differences in the GAAP income tax rate from our historical income tax rate. Cash flows provided by operating activities totaled $27.7 million in the second quarter of 2015 compared to $23.9 million in the second quarter of 2014. In the second quarter of 2015, total capital expenditures, including deposits on equipment, were $19.8 million ($11.7 million in cash capital expenditures, $6.4 million in financed equipment and $1.7 million in cash deposits) compared to $12.7 million ($7.5 million in cash capital expenditure and $5.2 million in cash deposits) in the second quarter of 2014. In the second quarter of 2015, capital expenditures (including deposits on equipment) in growth investments totaled $13.2 million and capital expenditures and cash deposits in maintenance investments totaled $6.6 million. Alliance's net debt, defined as total long-term debt (including current maturities) less cash and cash equivalents, increased $25.4 million to $499.7 million at June 30, 2015 from $474.3 million at December 31, 2014. Cash and cash equivalents were $43.4 million at June 30, 2015 and $33.0 million at December 31, 2014. The Company's net debt, as defined above, divided by the last twelve months Consolidated Adjusted EBITDA was 3.66x for the twelve month period ended June 30, 2015 compared to 3.33x 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 3.98x for the twelve month period ended June 30, 2015 compared to 3.55x for the twelve month period ended a year ago. Alliance's decrease in net debt, before investments in acquisitions and before growth capital expenditures, was $16.7 million in the second quarter of 2015. After adjusting for investments in growth capital expenditures, Alliance's net debt decreased $3.5 million in the second quarter of 2015. "During the quarter, we successfully raised incremental funds of $30 million on our term loan and used the proceeds to repay our outstanding revolver balance and strengthen our balance sheet," commented Tomlinson. "As we continue to see increased opportunities through our Alliance Oncology, RAD 360 and interventional radiology platforms, this increased capacity provides important financial flexibility to capitalize on these important growth initiatives." Full Year 2015 Guidance Alliance is reaffirming its full year 2015 guidance ranges as follows:
Second Quarter 2015 Earnings Conference Call Investors and all others are invited to listen to a conference call discussing second quarter 2015 results. The conference call is scheduled for Thursday, August 6, 2015 at 5:00 p.m. Eastern Time. The call will be broadcast live on the Internet and can be accessed by visiting the Company's 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 November 7, 2015. The telephone replay can be accessed by calling (800) 585-8367. The conference call identification number is 96992929. Definition of Non-GAAP Measures Adjusted EBITDA and Adjusted Net Income Per Share are not measures of financial performance under generally accepted accounting principles in the United States, or "GAAP." For a more detailed discussion of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measure, see the section entitled "Non-GAAP Measures" included in the tables following this release. About Alliance HealthCare Services Alliance HealthCare Services (NASDAQ: AIQ) is a leading national provider of outsourced healthcare services with a 30+year track record of award-winning patient care/satisfaction and service line expertise. Providing diagnostic radiology services through its Radiology Division (Alliance HealthCare Radiology), interventional radiology & pain management services through its Interventional Services Division (Alliance HealthCare Interventional Services) and radiation oncology services through its Oncology Division (Alliance HealthCare Oncology), Alliance is the nation's largest provider of advanced diagnostic mobile imaging services, an industry-leading operator of fixed-site imaging centers, and a leading provider of stereotactic radiosurgery nationwide. As of June 30, 2015, Alliance operated 518 diagnostic imaging and radiation therapy systems, including 118 fixed-site imaging centers across the country; and 32 radiation therapy centers and stereotactic radiosurgery (SRS) facilities. With a strategy of partnering with hospitals, health systems and physician practices, Alliance provides quality clinical services for over 1,000 hospitals and other healthcare partners in 44 states where approximately 1,800 Alliance Team Members are committed to providing exceptional patient care and exceeding customer expectations. For more information, visit www.alliancehealthcareservices-us.com. Forward-Looking Statements This press release contains forward-looking statements relating to future events, including statements related to the Company's long-term growth strategy and efforts to diversify its business model, the Company's plans to expand its new Interventional Services Division both organically and through one or more acquisitions; the Company's expectations regarding growth across the Company's divisions, the expansion of its service footprint and revenue growth, and the Company's Full Year 2015 Guidance, including its forecasts of revenue, Adjusted EBITDA, capital expenditures, and decrease in long-term debt. In this context, forward-looking statements often address the Company's 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 Company's financial statements; the nature, timing and amount of any restatement or other adjustments; the Company's ability to make timely filings of its required periodic reports under the Securities Exchange Act of 1934; issues relating to the Company's ability to maintain effective internal control over financial reporting and disclosure controls and procedures; the Company's high degree of leverage and its ability to service its debt; factors affecting the Company's leverage, including interest rates; the risk that the counterparties to the Company's interest rate swap agreements fail to satisfy their obligations under these agreements; the Company's ability to obtain financing; the effect of operating and financial restrictions in the Company's debt instruments; the accuracy of the Company's estimates regarding its capital requirements; the effect of intense levels of competition in the Company's industry; changes in the methods of third party reimbursements for diagnostic imaging and radiation oncology services; fluctuations or unpredictability of the Company's revenues, including as a result of seasonality; changes in the healthcare regulatory environment; the Company's 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 management's attention from the operation of the Company's business, and risks associated with integration of the acquisitions; and other risks and uncertainties identified in the Risk Factors section of the Company's Form 10-K for the year ended December 31, 2014, 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 Company's 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.
ALLIANCE HEALTHCARE SERVICES, INC. NON-GAAP MEASURES (in thousands) Adjusted EBITDA and Adjusted Net Income Per Share (the "Non-GAAP Measures") are not measures of financial performance under generally accepted accounting principles in the United States, or "GAAP." Adjusted EBITDA, as defined by the Company's 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, legal matter expenses, 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 Net Income Per Share, as defined by the Company's management, represents net income (loss) before: restructuring charges; fees and expenses related to acquisitions; legal matter expenses; and differences in the GAAP income tax rate compared to our historical income tax rate. The components used to reconcile net income (loss) per share to Adjusted Net Income Per Share are consistent with our historical presentation of Adjusted Net Income Per Share. Management uses the Non-GAAP Measures, and believes they are useful measures for investors, for a variety of reasons. Management regularly communicates the results of its Non-GAAP Measures and management's interpretation of such results to its board of directors. Management also compares the Company's results of its Non-GAAP Measures against internal targets as a key factor in determining cash incentive compensation for executives and other employees, largely because management feels that these measures are 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 Company's ability to analyze the performance of its diagnostic imaging and radiation oncology businesses. 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 Company's non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual. The Non-GAAP Measures have certain limitations as analytical financial measures, which management compensates for by relying on the Company's GAAP results to evaluate its operating performance and by considering independently the economic effects of the items that are or are not reflected in the Non-GAAP Measures. Management also compensates for these limitations by providing GAAP-based disclosures concerning the excluded items in the Company's financial disclosures. As a result of these limitations and because the Non-GAAP Measures may not be directly comparable to similarly titled measures reported by other companies, however, the Non-GAAP Measures should not be considered as an alternative to the most directly comparable GAAP measure, or as an alternative to any other GAAP measure of operating performance. The calculation of Adjusted EBITDA is shown below:
The leverage ratio calculations as of June 30, 2015 are shown below:
The reconciliation of (loss) earnings per diluted share - GAAP to adjusted (loss) earnings per diluted share non-GAAP is shown below:
The reconciliation from net income to Adjusted EBITDA for the 2015 guidance range is shown below (in millions):
ALLIANCE HEALTHCARE SERVICES, INC. The Company utilizes same store volume growth as a historical statistical measure of the MRI and PET/CT imaging procedure, linear accelerator (Linac) treatment and SRS case growth at its customers in a specified period on a year-over-year basis. Same store volume growth is calculated by comparing the cumulative scan, treatment or case volume at all locations in the current year quarter to the same quarter in the prior year. The group of customers whose volume is included in the scan or treatment volume totals is those that received service from Alliance for the full quarter in each of the comparison periods. A positive percentage represents growth over the prior year quarter and a negative percentage represents a decline over the prior year period. Alliance measures each of its major imaging and oncology modalities, MRI, PET/CT, Linac and SRS, separately. The Radiology Division same store volume growth/(decline) for the last four calendar quarters ended June 30, 2015 is as follows:
The Oncology Division same store volume growth/(decline) for the last four calendar quarters ended June 30, 2015 is as follows:
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