Alliance HealthCare Services, Inc. (AIQ)

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Alliance HealthCare Services, Inc. (AIQ)

Q4 2008 Earnings Call

March 6, 2009 8:30 am ET


Eli Glovinsky - Executive Vice President, General Counsel and Secretary

Paul Viviano - Chairman of the Board and Chief Executive Officer

Howard Aihara - Executive Vice President and Chief Financial Officer


Kevin Ellich – RBC Capital

Mark Arnold – Piper Jaffray

Whit Mayo – Robert W. Baird

Darren Lehrich – Deutsche Bank

Rob Mains – Morgan Keegan

Kyle Smith – Jefferies

[Paul Cowell] – Columbus Nova


Eli Glovinsky

Welcome ladies and gentlemen, to Alliance Healthcare Services Fourth Quarter and Full Year 2008 Earnings Conference Call. My name is Eli Glovinsky and I am the company's Executive Vice President, General Counsel and Secretary.

At this time I would like to inform you that this conference is being recorded for rebroadcast and that all lines have been placed on mute to prevent any background noise. We will open the conference up for questions and answers after the presentation.

This conference call contains forward looking statements which are based on the company's current expectations, forecasts, and assumptions. Forward looking statements involve risks and uncertainties which could cause actual outcomes and results to differ materially from the company's expectations, forecasts, and assumptions.

These risks and uncertainties include factors affecting the company's ability to stabilize its core MRI business and grow revenue and profits from PET/CT fixed-site imaging centers and radiation therapy, the company's leverage including fluctuations in interest rates, the company's ability to obtain financing, the effect of operating and financial restrictions on the company's debt instruments, the accuracy of the company's estimates regarding capital requirements, the effect of intense levels of competition in the company's industry, the effect of global and US economic conditions, changes in the healthcare, regulatory, and reimbursement environment, the company's ability to keep pace with technological development within the industry, the effect of higher energy prices, the company's ability to integrate acquisitions, the effect of natural disasters, and other risks and uncertainties, including both enumerated and described in the company's filings with the Securities and Exchange Commission, which are available on the SEC website at

The company disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Financial and other statistical information presented on this conference call and the company's 2009 guidance release, along with the information required by the SEC's Regulation G, may be accessed through the Financial Releases button in the Investor Relations section of the company's website located at

The company is offering a live webcast of today's call, which can be accessed on the company's website. Please visit our website for replay information.

I will now turn the conference over to Paul Viviano, Chairman of the Board and Chief Executive Officer of Alliance HealthCare Services.

Paul Viviano

I would like to welcome you to Alliance HealthCare Services Fourth Quarter and Full Year 2008 Earnings Call. With me today is Howard Aihara, our Executive Vice President and Chief Financial Officer. On today's call I will first review our strong 2008 results and achievements, followed by an update on trends in the healthcare services industry and a discussion of the diagnostic imaging and radiation therapy sectors. Howard will follow with the details of our fourth quarter and full year 2008 financial results. As is our practice we will accept questions after our prepared remarks.

Alliance’s performance in 2008 reflects the accomplishments of our many operational and strategic initiatives as well as the continued success of our acquisition efforts. Two thousand eight was a year of many accomplishments for Alliance and our focused and diligent efforts contributed to Alliance’s performance and growth for the year.

We are very pleased to report 2008 revenue of $496 million and adjusted EBITDA of $183 million both of which were at the high end of the company’s guidance ranges. In 2008 revenue increased 11% over 2007 levels and adjusted EBITDA increased by 10% over 2007 levels. We also generated significant operating cash flow of $128 million for 2008 an increase of $10 million over 2007.

Our most notable achievements include successfully completing the acquisition and integration of three significant transactions including six cyber knife stereotactic radiosurgery facilities and two PET/CT companies, medical outsourcing services and shared PET imaging, opening 21 fixed-site imaging centers including 12 in the fourth quarter and three radiation therapy cancer centers, continued strong organic volume growth in our PET/CT business and continued focus on operational efficiency to maintain our mobile MRI operating margins.

Combine these factors allowed us to meet expectations in 2008 and despite challenging economic times, position Alliance for continued revenue and adjusted EBITDA growth in 2009. Given this we are pleased to reaffirm our full year 2009 guidance ranges. With over $70 million of cash on hand at the end of 2008 access to an additional $50 million under our current revolving line of credit and continued strong operating cash flows we are well positioned to execute our strategic and operational plans including acquisitions without the need to access credit markets.

In light of the continued volatility of the US credit markets Alliance is in a favorable position to capitalize on opportunities to work with hospitals and other clinical partners who have been negatively impacted as they deal with significant capital constraints, higher borrowing costs and substantial investment portfolio defines.

The American Hospital Association recently surveyed over 600 hospitals CEOs to assess the impact of the current economic climate on hospitals and found that most US hospitals are experiencing significant capital constraints and as a result are canceling or delaying previously planned capital projects. Specifically, the AHA report noted that nine out of 10 hospitals reported that it was difficult to access tax exempt bond markets and other important sources of financing and an equal number of hospitals also reported significant declines in charitable giving as a result of the decline in world wide equity markets.

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