Exhibit 99.1
NEWS RELEASE
Contact:
Alliance Imaging
Howard Aihara
Executive Vice President
Chief Financial Officer
(714) 688-7100
ALLIANCE IMAGING REPORTS RESULTS
FOR THE SECOND QUARTER AND FIRST SIX MONTHS ENDED JUNE 30, 2006;
RAISES FULL YEAR 2006 ADJUSTED EBITDA GUIDANCE
ANAHEIM, CA—August 3, 2006—Alliance Imaging, Inc. (NYSE:AIQ), a leading national provider of diagnostic imaging services, announced results for the second quarter and first six months ended June 30, 2006.
Second Quarter and First Six Months 2006 Financial Results
Revenue for the second quarter of 2006 increased 6.3% to $115.3 million from $108.4 million in the comparable 2005 quarter. For the first six months of 2006, revenue was $230.6 million compared to $214.4 million in the same period of 2005, an increase of 7.6%.
Alliance’s Adjusted EBITDA (as defined below), was $44.9 million in the second quarter, a 7.4% increase compared to $41.8 million in the same quarter a year ago. “Adjusted EBITDA” as defined under the terms of Alliance’s Credit Agreement, is earnings before interest expense, net of interest income; income taxes; depreciation expense; amortization expense; minority interest expense; non-cash share-based compensation; a maximum of $750,000 of severance and related costs in each fiscal year; the tentative class action lawsuit settlement (discussed below); and other non-cash charges. For a more detailed discussion of Adjusted EBITDA and reconciliation to net income, see the table entitled “Adjusted EBITDA” included in the tables following this release.
For the first six months of 2006, Adjusted EBITDA totaled $88.5 million compared to $83.0 million in the first six months of 2005, an increase of 6.7%.
Earnings per share on a diluted basis, in accordance with generally accepted accounting principles, was $0.10 per share for the second quarter of 2006, compared to $0.12 per share in the comparable period of 2005. Non-cash share-based compensation reduced diluted earnings per share by $0.01 in the second quarter of 2006. The tentative class action lawsuit settlement, net of taxes (discussed below) reduced diluted earnings per share by $0.03 in the second quarter of 2006.
Earnings per share on a diluted basis were $0.20 and $0.24 per share for the first six months of 2006 and 2005, respectively. Non-cash share-based compensation and severance and related costs reduced diluted earnings per share by $0.02 in the first six months of 2006. The tentative class action lawsuit settlement, net of taxes (discussed below), reduced diluted earnings per share by $0.03 in the first six months of 2006.
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Alliance Imaging
Press Release
August 3, 2006
Cash flows provided by operating activities was $28.9 million in the second quarter of 2006 compared to $23.6 million in the corresponding quarter of 2005, and totaled $48.4 million and $50.7 million in the first six months of 2006 and 2005, respectively. Capital expenditures in the second quarter of 2006 were $18.7 million compared to $15.5 million in the second quarter of 2005, and were $43.0 million and $28.9 million for the first six months of 2006 and 2005, respectively. Alliance opened four new fixed-sites in the second quarter of 2006 and has opened five new fixed-sites in the first six months of 2006.
Alliance’s total long-term debt (including current maturities) decreased $20.9 million to $558.7 million as of June 30, 2006 from $579.6 million as of December 31, 2005. Cash and cash equivalents decreased $1.0 million to $12.4 million at June 30, 2006 from $13.4 million at December 31, 2005.
Paul S. Viviano, Chairman of the Board and Chief Executive Officer, stated, “We are pleased with our continued progress, especially in the context of a very challenging healthcare services environment.”
Tentative Class Action Lawsuit Settlement
As previously disclosed in the Company’s public filings, in May 2005 Alliance was served with a complaint alleging wage and hour claims on behalf of a class of approximately 400 former and current California employees in which the plaintiffs alleged violations of California’s wage, meal period, and break time laws and regulations. On July 19, 2006, the Company and the Plaintiffs entered into a tentative settlement of the class action lawsuit pursuant to which all claims would be dismissed with prejudice in consideration of a cash payment of $2.5 million. The settlement is subject to court approval and a hearing has been scheduled for September 1, 2006 at which the court will consider the parties’ joint motion for preliminary approval and conditional certification of a class.
As previously mentioned, this tentative settlement has the effect of reducing second quarter and first half 2006 diluted earnings per share by $0.03. Pursuant to the definition of Adjusted EBITDA in the Company’s Credit Agreement, this amount is excluded from the calculation of Adjusted EBITDA. For financial reporting purposes, the $2.5 million charge is included in the line item entitled “Cost of revenues, excluding depreciation and amortization,” in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income.
Full Year 2006 Guidance
The Company’s previous guidance was for revenue to range from $445 million to $453 million and Adjusted EBITDA to range from $157 million to $163 million.
Alliance is raising its full year Adjusted EBITDA 2006 guidance. The Company’s revenue guidance remains unchanged and is expected to range from $445 million to $453 million. Alliance’s Adjusted EBITDA is now expected to range from $163 million to $168 million.
The Company’s revenue and Adjusted EBITDA guidance reflects five less scanning days in the second half of 2006 compared to the first half of the year, representing a 4% reduction in scanning days.
Consistent with previous guidance, the Company expects capital expenditures to range from $85 million to $90 million, long-term debt, net of the change in cash and cash equivalents, is expected to decrease by $25 million to $30 million, and the Company expects to open 10 to 15 fixed-sites in 2006, a portion of which are planned to replace mobile service to the Company’s current customers. The Company’s income tax rate is expected to total approximately 41% of pretax income.
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Second Quarter 2006 Earnings Conference Call
Investors and all others are invited to listen to a conference call discussing first quarter 2006 results. The conference call is scheduled for Friday, August 4, 2006 at 1:00 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.allianceimaging.com. Click on Audio Presentations in the Investor Relations section of the website to access the link. The conference call can also be accessed at (888) 247-2250 (United States) or (973) 935-8452 (International). Interested parties should call at least five minutes prior to the conference call to register. A replay of the call can be accessed until November 4, 2006 by visiting the Company’s website or by calling (877) 519-4471 (United States) or (973) 341-3080 (International). The conference call identification number is 7666992.
About Alliance Imaging
Alliance Imaging is a leading national provider of shared-service and fixed-site diagnostic imaging services, based upon annual revenue and number of diagnostic imaging systems deployed. Alliance provides imaging and therapeutic services primarily to hospitals and other healthcare providers on a shared and full-time service basis, in addition to operating a growing number of fixed-site imaging centers. The Company had 500 diagnostic imaging systems, including 335 MRI systems and 74 PET or PET/CT systems, and served over 1,000 clients in 43 states at June 30, 2006. Of these 500 diagnostic imaging systems, 72 were located in fixed-sites, which includes systems installed in hospitals or other buildings on or near hospital campuses, medical groups’ offices, or medical buildings and retail sites.
Forward-Looking Statements
This press release contains forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For a complete list of risks and uncertainties, please refer to the Risk Factor section of the Company’s Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission.
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ALLIANCE IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
(in thousands, except per share amounts)
| | Second Quarter Ended | | First Six Months Ended | |
| | June 30, | | June 30, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
Revenues | | $ | 108,434 | | $ | 115,305 | | $ | 214,398 | | $ | 230,648 | |
Costs and expenses: | | | | | | | | | |
Cost of revenues, excluding depreciation and amortization | | 53,892 | | 62,593 | | 107,828 | | 122,460 | |
Selling, general and administrative expenses | | 13,677 | | 13,611 | | 25,363 | | 27,367 | |
Employment agreement costs | | 92 | | — | | 366 | | — | |
Severance and related costs | | — | | 47 | | — | | 536 | |
Depreciation expense | | 20,463 | | 20,919 | | 40,926 | | 41,920 | |
Amortization expense | | 901 | | 1,229 | | 1,782 | | 2,473 | |
Interest expense, net of interest income | | 9,508 | | 10,074 | | 18,569 | | 20,290 | |
Other (income) and expense, net | | (55 | ) | (256 | ) | (387 | ) | 472 | |
Total costs and expenses | | 98,478 | | 108,217 | | 194,447 | | 215,518 | |
Income before income taxes, minority interest expense, and earnings from unconsolidated investees | | 9,956 | | 7,088 | | 19,951 | | 15,130 | |
Income tax expense | | 4,169 | | 3,535 | | 8,301 | | 7,009 | |
Minority interest expense | | 544 | | 495 | | 956 | | 1,035 | |
Earnings from unconsolidated investees | | (912 | ) | (1,977 | ) | (1,596 | ) | (3,017 | ) |
Net income | | $ | 6,155 | | $ | 5,035 | | $ | 12,290 | | $ | 10,103 | |
Comprehensive income, net of taxes: | | | | | | | | | |
Net income | | $ | 6,155 | | $ | 5,035 | | $ | 12,290 | | $ | 10,103 | |
Unrealized (loss) gain on hedging transactions, net of taxes | | (1,144 | ) | 304 | | 1,601 | | 1,121 | |
Comprehensive income, net of taxes: | | $ | 5,011 | | $ | 5,339 | | $ | 13,891 | | $ | 11,224 | |
Earnings per common share: | | | | | | | | | |
Basic | | $ | 0.12 | | $ | 0.10 | | $ | 0.25 | | $ | 0.20 | |
Diluted | | $ | 0.12 | | $ | 0.10 | | $ | 0.24 | | $ | 0.20 | |
Weighted average number of shares of common stock and common stock equivalents: | | | | | | | | | |
Basic | | 49,286 | | 49,758 | | 49,210 | | 49,684 | |
Diluted | | 50,270 | | 50,232 | | 50,290 | | 50,107 | |
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ALLIANCE IMAGING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
| | December 31, | | June 30, | |
| | 2005 | | 2006 | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 13,421 | | $ | 12,423 | |
Accounts receivable, net of allowance for doubtful accounts | | 48,236 | | 53,478 | |
Deferred income taxes | | 6,186 | | 18,157 | |
Prepaid expenses and other current assets | | 3,686 | | 4,998 | |
Other receivables | | 8,983 | | 11,074 | |
Total current assets | | 80,512 | | 100,130 | |
Equipment, at cost | | 752,128 | | 760,475 | |
Less accumulated depreciation | | (393,179 | ) | (404,275 | ) |
Equipment, net | | 358,949 | | 356,200 | |
Goodwill | | 154,656 | | 154,612 | |
Other intangible assets, net | | 39,071 | | 38,155 | |
Deferred financing costs, net | | 8,236 | | 7,628 | |
Other assets | | 33,918 | | 25,104 | |
Total assets | | $ | 675,342 | | $ | 681,829 | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 23,672 | | $ | 14,646 | |
Accrued compensation and related expenses | | 14,088 | | 15,954 | |
Accrued interest payable | | 4,561 | | 4,689 | |
Income taxes payable | | 87 | | 76 | |
Other accrued liabilities | | 29,064 | | 31,248 | |
Current portion of long-term debt | | 7,781 | | 7,016 | |
Total current liabilities | | 79,253 | | 73,629 | |
Long-term debt, net of current portion | | 418,260 | | 398,158 | |
Senior subordinated notes | | 153,541 | | 153,541 | |
Minority interests and other liabilities | | 4,400 | | 4,229 | |
Deferred income taxes | | 60,144 | | 79,073 | |
Total liabilities | | 715,598 | | 708,630 | |
Stockholders’ deficit: | | | | | |
Common stock | | 496 | | 498 | |
Additional paid-in deficit | | (11,876 | ) | (9,647 | ) |
Accumulated comprehensive income | | 3,217 | | 4,338 | |
Accumulated deficit | | (32,093 | ) | (21,990 | ) |
Total stockholders’ deficit | | (40,256 | ) | (26,801 | ) |
Total liabilities and stockholders’ deficit | | $ | 675,342 | | $ | 681,829 | |
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ALLIANCE IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| | Six Months Ended
June 30, | |
| | 2005 | | 2006 | |
Operating activities: | | | | | |
Net income | | $ | 12,290 | | $ | 10,103 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Provision for doubtful accounts | | 1,478 | | 1,593 | |
Non-cash share-based compensation | | 126 | | 1,308 | |
Depreciation and amortization | | 42,708 | | 44,393 | |
Amortization of deferred financing costs | | 1,462 | | 794 | |
Distributions greater than (less than) equity in undistributed income of investees | | 271 | | (188 | ) |
Deferred income taxes | | 7,236 | | 6,354 | |
(Gain) loss on sale of assets | | (387 | ) | 472 | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | (1,203 | ) | (6,903 | ) |
Prepaid expenses and other current assets | | (1,554 | ) | (1,312 | ) |
Other receivables | | (2,901 | ) | (2,091 | ) |
Other assets | | (2,243 | ) | (848 | ) |
Accounts payable | | (11,977 | ) | (8,915 | ) |
Accrued compensation and related expenses | | (1,379 | ) | 1,866 | |
Accrued interest payable | | 2,737 | | 128 | |
Income taxes payable | | (63 | ) | (11 | ) |
Other accrued liabilities | | 3,802 | | 1,934 | |
Minority interests and other liabilities | | 342 | | (259 | ) |
Net cash provided by operating activities | | 50,745 | | 48,418 | |
Investing activities: | | | | | |
Equipment purchases | | (28,948 | ) | (43,035 | ) |
Decrease in deposits on equipment | | 3,419 | | 10,388 | |
Proceeds from sale of assets | | 1,251 | | 2,322 | |
Net cash used in investing activities | | (24,278 | ) | (30,325 | ) |
Financing activities: | | | | | |
Principal payments on equipment debt | | (2,972 | ) | (1,934 | ) |
Principal payments on term loan facility | | (25,000 | ) | (2,675 | ) |
Principal payments on revolving loan facility | | (15,000 | ) | (28,825 | ) |
Proceeds from revolving loan facility | | 15,000 | | 13,500 | |
Payments of debt issuance costs | | (211 | ) | (186 | ) |
Proceeds from exercise of employee stock options | | 1,052 | | 1,029 | |
Net cash used in financing activities | | (27,131 | ) | (19,091 | ) |
Net decrease in cash and cash equivalents | | (664 | ) | (998 | ) |
Cash and cash equivalents, beginning of period | | 20,721 | | 13,421 | |
Cash and cash equivalents, end of period | | $ | 20,057 | | $ | 12,423 | |
Supplemental disclosure of cash flow information: | | | | | |
Interest paid | | $ | 14,580 | | $ | 19,676 | |
Income taxes paid, net of refunds | | 1,291 | | 767 | |
Supplemental disclosure of non-cash investing and financing activities: | | | | | |
Net book value of assets exchanged | | $ | 3,679 | | $ | 5,439 | |
Capital lease obligations assumed for the purchase of equipment debt | | — | | 1,839 | |
Equipment debt transferred to unconsolidated investee | | — | | (2,772 | ) |
Comprehensive income from hedging transactions, net of taxes | | 1,601 | | 1,121 | |
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ALLIANCE IMAGING, INC.
ADJUSTED EBITDA
(in thousands)
Adjusted EBITDA represents net income before interest expense, net of interest income; income taxes; depreciation expense; amortization expense; minority interest expense; non-cash share-based compensation; a maximum of $750,000 of severance and related costs in each fiscal year; the tentative class action lawsuit settlement, and other non-cash charges. Adjusted EBITDA is not a presentation made in accordance with accounting principles generally accepted in the United States of America. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Adjusted EBITDA is included because the Company’s amended credit agreement uses a measure similar to this to calculate the Company’s compliance with covenants such as interest coverage ratio (as defined in Section 7.6A of the Company’s amended credit agreement), consolidated leverage ratio (as defined in Section 7.6B of the Company’s amended credit agreement) and consolidated senior leverage ratio (as defined in Section 7.6J of the Company’s amended credit agreement). The Company’s failure to comply with these covenants could result in the amounts borrowed under these instruments, together with accrued interest and fees, becoming immediately due and payable. If the Company is not able to refinance this debt when it becomes due, the Company could become subject to bankruptcy proceedings. Per the credit agreement, the Company was required to maintain a maximum consolidated leverage ratio not to exceed 4.00 to 1.00 as of both June 30, 2005 and 2006, and maintain a minimum interest coverage ratio in excess of 2.50 to 1.00 and 2.75 to 1.00 for the quarters ended June 30, 2005 and 2006, respectively. As a result of the fourth amendment to the credit agreement, beginning December 31, 2005, the Company was further required to maintain a maximum consolidated senior leverage ratio not to exceed 3.00 to 1.00 for the duration of the agreement. The Company was in compliance with these covenants for the quarters ended June 30, 2005 and 2006. While Adjusted EBITDA is used to measure the Company’s compliance with its debt covenants, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. The calculation of Adjusted EBITDA in accordance with the Company’s amended credit agreement is shown below:
| | 2nd Quarter Ended June 30, | | Six Months Ended June 30, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
Net income | | $ | 6,155 | | $ | 5,035 | | $ | 12,290 | | $ | 10,103 | |
Income tax expense | | 4,169 | | 3,535 | | 8,301 | | 7,009 | |
Interest expense, net of interest income | | 9,508 | | 10,074 | | 18,569 | | 20,290 | |
Amortization expense | | 901 | | 1,229 | | 1,782 | | 2,473 | |
Depreciation expense | | 20,463 | | 20,919 | | 40,926 | | 41,920 | |
Non-cash share-based compensation (included in selling, general and administrative expenses) | | 63 | | 593 | | 126 | | 1,308 | |
Minority interest expense | | 544 | | 495 | | 956 | | 1,035 | |
Severance and related costs | | — | | 47 | | — | | 536 | |
Tentative class action lawsuit settlement (included in cost of revenues, excluding depreciation and amortization) | | — | | 2,500 | | — | | 2,500 | |
Other non-cash charges (included in other income and expenses, net) | | — | | 455 | | — | | 1,313 | |
Adjusted EBITDA | | $ | 41,803 | | $ | 44,882 | | $ | 82,950 | | $ | 88,487 | |
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Consolidated leverage ratio, as of the last day of any fiscal quarter, is defined under our credit agreement as the ratio of the consolidated total debt as of that date to the consolidated Adjusted EBITDA for the four fiscal quarters ending on that date. As of June 30, 2005 and 2006, our consolidated leverage ratio was as follows:
| | June 30, | |
| | 2005 | | 2006 | |
Consolidated total debt | | $ | 547,692 | | $ | 558,715 | |
Last 12 months consolidated Adjusted EBITDA | | 166,597 | | 165,533 | |
Consolidated leverage ratio | | 3.29x | | 3.38x | |
| | | | | | | |
Consolidated senior leverage ratio, as of the last day of any fiscal quarter, is defined under our credit agreement as the ratio of the consolidated senior debt as of that date to the consolidated Adjusted EBITDA for the four fiscal quarters ending on that date. As of June 30, 2006, our consolidated senior leverage ratio was as follows:
| | June 30, | |
| | 2006 | |
Consolidated senior debt | | $ | 405,174 | |
Last 12 months consolidated Adjusted EBITDA | | 165,533 | |
Consolidated senior leverage ratio | | 2.45x | |
| | | | |
Interest coverage ratio is defined under our credit agreement as the ratio of consolidated Adjusted EBITDA to consolidated cash interest expense for the four fiscal quarter period ending on the last day of any fiscal quarter. As of June 30, 2005 and 2006, our interest coverage ratio was as follows:
| | June 30, | |
| | 2005 | | 2006 | |
Last 12 months consolidated Adjusted EBITDA | | $ | 166,597 | | $ | 165,533 | |
Last 12 months consolidated cash interest expense | | 44,905 | | 37,148 | |
Interest coverage ratio | | 3.71x | | 4.46x | |
| | | | | | | |
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ALLIANCE IMAGING, INC.
SELECTED STATISTICAL INFORMATION
| | Second Quarter Ended | |
| | June 30, | |
| | 2005 | | 2006 | |
MRI | | | | | |
Average number of total systems | | 336.4 | | 323.0 | |
Average number of scan-based systems | | 285.2 | | 274.1 | |
Scans per system per day (scan-based systems) | | 9.61 | | 9.38 | |
Total number of scan-based MRI scans | | 195,479 | | 179,869 | |
Price per scan | | $ | 354.60 | | $ | 361.54 | |
Scan-based MRI revenue (in millions) | | $ | 69.3 | | $ | 65.0 | |
Non-scan based MRI revenue (in millions) | | 6.9 | | 6.6 | |
Total MRI revenue (in millions) | | $ | 76.2 | | $ | 71.6 | |
PET and PET/CT | | | | | |
Average number of systems | | 52.4 | | 69.1 | |
Scans per system per day | | 5.46 | | 5.89 | |
Total number of PET and PET/CT scans | | 17,025 | | 24,734 | |
Price per scan | | $ | 1,327 | | $ | 1,314 | |
Total PET and PET/CT revenue (in millions) | | $ | 22.7 | | $ | 32.9 | |
Revenue breakdown (in millions) | | | | | |
Total MRI revenue | | $ | 76.2 | | $ | 71.6 | |
PET and PET/CT revenue | | 22.7 | | 32.9 | |
Other modalities and other revenue | | 9.5 | | 10.8 | |
Total revenues | | $ | 108.4 | | $ | 115.3 | |
Total fixed-site revenue (in millions) | | $ | 17.4 | | $ | 18.9 | |
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ALLIANCE IMAGING, INC.
SELECTED STATISTICAL INFORMATION
MRI REVENUE GAP
(in millions)
The Company utilizes the MRI revenue gap as a statistical measure of its MRI client losses and new client contracts. The MRI revenue gap is calculated by measuring the difference between (a) the quarterly MRI revenue run rate lost as a result of clients choosing to terminate contracts with the Company, excluding clients for which Alliance provides interim service and clients that the Company elects to terminate, and (b) projected quarterly new MRI revenue from new client contracts commencing service in the quarter.
The MRI revenue gap for the last eight calendar quarters and the last twelve month period ended June 30, 2006 is as follows:
| | (a) | | (b) | | | |
| | Revenue | | New | | MRI | |
| | Lost | | Revenue | | Revenue Gap | |
2004 | | | | | | | |
Third Quarter | | $ | (11.0 | ) | $ | 6.5 | | $ | (4.5 | ) |
Fourth Quarter | | (16.4 | ) | 5.9 | | (10.5 | ) |
2005 | | | | | | | |
First Quarter | | (9.4 | ) | 5.9 | | (3.5 | ) |
Second Quarter | | (12.2 | ) | 8.8 | | (3.4 | ) |
Third Quarter | | (14.2 | ) | 4.4 | | (9.8 | ) |
Fourth Quarter | | (8.9 | ) | 9.7 | | 0.8 | |
2006 | | | | | | | |
First Quarter | | (10.2 | ) | 6.4 | | (3.8 | ) |
Second Quarter | | (6.4 | ) | 6.2 | | (0.2 | ) |
Last Twelve Months Ended June 30, 2006 | | $ | (39.7 | ) | $ | 26.7 | | $ | (13.0 | ) |
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