Alliance HealthCare Services Amends Its Credit Agreement

  Alliance HealthCare Services Amends Its Credit Agreement

Strong Cash Position Provides Opportunity to Reduce Term Loan and Modify Debt
                                  Covenants

Business Wire

NEWPORT BEACH, Calif. -- November 07, 2012

Alliance HealthCare Services, Inc. (NYSE:AIQ) (the “Company” or “Alliance”), a
leading national provider of outpatient diagnostic imaging and radiation
therapy services, announced that the 2^nd amendment (the “Amendment”) to its
Credit Agreement dated December 1, 2009 (the “Credit Agreement”) has become
effective.

The Amendment modifies the Credit Agreement’s maximum leverage covenant to
require that the Company maintain a maximum ratio of consolidated total debt
to consolidated Adjusted EBITDA, as defined below, less minority interest
expense of 5.00 to 1.00 through September 30, 2014, 4.75 to 1.00 from October
1, 2014 through September 30, 2015, 4.50 to 1.00 from October 1, 2015 through
December 31, 2015 and 4.25 to 1.00 thereafter.

On November 5, 2012, in connection with the Amendment, the Company raised
$30.0 million from the sale of certain imaging assets, which the Company
subsequently leased from the financing parties. The Company offered the money
raised in the sale and lease transactions as a mandatory prepayment of
outstanding term loans to the lenders under the Credit Agreement (the
“Mandatory Prepayment”).

In addition to the Mandatory Prepayment, the Company offered $45.0 million of
cash on the Company’s balance sheet to offer to lenders under the Credit
Agreement as a voluntary prepayment of outstanding term loans (the “Voluntary
Prepayment,” and, together with the Mandatory Prepayment, the “Prepayments”).
Lenders under the Credit Agreement had the right to waive acceptance of the
Mandatory Prepayment, and the Amendment provided the lenders with the right to
waive acceptance of the Voluntary Prepayment. Pursuant to the Amendment, the
Company re-offered amounts of the Prepayments declined by lenders until 95% of
the Prepayments were applied to prepay borrowings outstanding under the term
loan facility. On November 6, 2012, the Company prepaid $74.5 million of
outstanding term loans. The Amendment provides that the Prepayments will
satisfy all future mandatory amortization payments under the Credit Agreement.

In connection with the $30 million sale and lease transactions, the Company
will incur approximately $8 million of annual rent expense which will reduce
Adjusted EBITDA in the future.

As of September 30, 2012, Alliance’s ratio of consolidated total debt to
consolidated Adjusted EBITDA less minority interest expense calculated
pursuant to the Credit Agreement was 4.37 to 1.00. Adjusted for the sale and
lease transactions and prepayment of the $74.5 million under the Credit
Agreement, the Company’s ratio of consolidated total debt to consolidated
Adjusted EBITDA less minority interest expense as of September 30, 2012 as
calculated pursuant to the Credit Agreement was 4.08 to 1.00. A reconciliation
of Adjusted EBITDA calculated pursuant to the Credit Agreement to net income
calculated in accordance with generally accepted accounting principles in the
United States, or “GAAP,” is included at the end of 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 approximately 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 499 diagnostic imaging and
radiation therapy systems. The Company is the nation’s largest provider of
advanced diagnostic mobile imaging services and one of the leading operators
of fixed-site imaging centers, with 130 locations across the country. Alliance
also operates 30 radiation therapy centers, including 15 dedicated
stereotactic radiosurgery facilities, many of which are operated in
conjunction with local community hospital partners, providing treatment and
care for cancer patients. With 15 stereotactic radiosurgery facilities in
operation, Alliance is among the leading providers of stereotactic
radiosurgery nationwide.

Forward-Looking Statements

This press release contains forward-looking statements relating to future
events, including statements related to the amount of annual rent expense
under the sale and lease transactions. 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, 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 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.

Adjusted EBITDA

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, 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 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 management’s interpretation of such results to its
board of directors. Management also compares the Company’s 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 Company’s 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 Company’s 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
Company’s 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 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 Adjusted EBITDA. 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,
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 Company’s management, is calculated differently from Consolidated
Adjusted EBITDA, as defined in the Company’s credit agreement and reported in
the Company’s SEC filings.

The calculation of Adjusted EBITDA is shown below:


                                                                     Twelve
                                                                          months
                 Third Quarter Ended         Nine Months Ended            Ended
                 September 30,               September 30,                September
                                                                          30,
                 2011          2012         2011          2012          2012
Net loss
attributable
to Alliance      $ (137,270 )   $ (1,243 )   $ (143,713 )   $ (6,866  )   $ (23,265 )
HealthCare
Services, Inc.
Income tax
(benefit)          (26,561  )     409          (30,141  )     (4,660  )     (12,761 )
expense
Interest
expense and        12,436         13,702       36,171         41,069        54,687
other, net
Amortization       4,330          3,989        12,265         11,995        16,174
expense
Depreciation       22,710         20,568       67,959         62,706        84,721
expense
Share-based
payment
(included in
selling,           1,061          157          3,657          193           1,155
general and
administrative
expenses)
Noncontrolling
interest in        133            2,483        2,716          7,461         9,753
subsidiaries
Severance and      20             -            750            -             -
related costs
Restructuring      3,597          1,020        3,597          4,015         7,555
charges
Transaction        1,355          (58    )     3,537          321           112
costs
Impairment         155,703        -            155,703        -             12,089
charges
Other non-cash
charges
(included in       994            642          1,361          2,601         4,036
other (income)
and expenses,
net)
Adjusted         $ 38,508      $ 41,669    $ 113,862     $ 118,835    $ 154,256 
EBITDA (1)
                                                                          
(1) Adjusted EBITDA includes non-recurring cash legal settlement of $2,157 in the
third quarter ended September 30, 2012, nine months ended September 30, 2012 and
twelve months ended September 30, 2012.


The leverage ratio calculations for the 12 months ended September 30, 2012 are
shown below, as well as the calculation for the ratio adjusted for the bank
amendment transaction outlined above:


                        Less:                                  
                          Noncontrolling               Adjusted      Adjusted
                                                       for
                          interest in      Credit      debt          Credit
           Consolidated   subsidiaries     Agreement   amendment     Agreement
Total      $   631,096    $   -            $ 631,096   $ (74,515 )   $ 556,581
debt
                                                                     
Last 12
months         154,256        (9,753  )      144,503     (8,000  )     136,503
Adjusted
EBITDA
                                                                     
Total
leverage   4.09x                           4.37x                     4.08x
ratio


Contact:

Alliance HealthCare Services
Howard Aihara
Executive Vice President
Chief Financial Officer
949-242-5300
 
Press spacebar to pause and continue. Press esc to stop.