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Q4 2007 Earnings Call Transcript

Published: 21 Feb 2008

[Eli Glovinsky:]

Good morning and welcome ladies and gentleman to Alliance Imaging's Fourth Quarter and Full Year 2007 Earnings Conference Call. My name is Eli Glovinsky and I'm 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'll open up the conference 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 and 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 effective intense levels of competition in the Company's industry, changes in the healthcare regulatory and reimbursement environment, the Company's ability to keep pace with technological development within the industry, the Company's ability to integrate acquisitions, the effects 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 web site at www.sec.co. The company disclaims any intention or obligation to update or revise any forward-looking statements whether is a result of new information, future events, or otherwise. Financial and other statistical information presented on this conference call in the company's 2008 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 web site located at www.allianceimaging.com. The company is offering a live webcast of today's call, which can be accessed on the company's web site. Please visit our web site for replay information. I will now turn the conference over to Paul Viviano, Chairman of the Board and Chief Executive Officer of Alliance Imaging. Please go ahead, Paul.

[Paul Vivino:]

Thank you, Eli. I would like to welcome you to Alliance Imaging's fourth quarter and full year 2007 earnings call. With me today is Howard Aihara, our Executive Vice President and Chief Financial Officer. On today's call I will first briefly review our 2007 results and achievements followed by an update of the trends in the Healthcare Services Industry and the specifics associated with the diagnostic imaging sector. I will then provide an overview of our companywide initiatives and Howard will follow with the details of our fourth quarter and full year 2007 financial performance. We will open up the call for a question-and-answer session after our prepared remarks. Yesterday, Alliance announced full year 2007 revenue of $444.9 million and adjusted EBITDA of $165.6 million, both of which are above the company's guidance ranges. These performance indicators reflect many achievements for Alliance in 2007 which was the year of great transition. Our most notable achievements include, proactively managing the impact of the DRA and HOPPS reimbursement rate reduction, which impacted our revenue by $14 million while still maintaining our relatively high operating margins. Continue organic volume growth in our PET/CT business, diligently working to maintain our mobile MRI operating margins, generating strong operating cash flow totaling approximately $118 million in 2007, opening 16 fixed-site imaging centers and two radiation therapy cancer centers, adapting seamlessly to the change in major shareholder ownership in April 2007, successfully completing two significant acquisitions in the fourth quarter, and closing a $150 million bond offering increasing our capacity intended for future acquisitions. Combined, these factors allowed us to exceed expectations in 2007 and our company is well positioned for continued success and revenue and adjusted EBITDA growth in 2008. I would also like to reaffirm our full year 2008 guidance ranges. For full year 2008, Alliance expects revenue to range from $472 to $484 million. Adjusted EBITDA for full year 2008 is expected to range from $172 to $182 million. Year-over-year volume growth in Healthcare Services continues to be relatively soft. A recent report which cracks volume data for approximately 500 acute care hospitals reported that for the month of December same store admission growth totaled approximately negative 1% year-over-year. The average Same-Store hospital admission growth rate for the fourth quarter was less than 1% year-over-year. For the third quarter of 2007, same store adjusted admissions averaged positive 2% year-over-year. Both inpatient admissions and adjusted admissions, which include hospital outpatient services have experienced very modest to flat growth during full year 2007. On an anecdotal basis, our hospital partners and customers are also reporting very modest to flat annual volume growth. From our perspective, the market conditions that dictate this flat to modest same store acute hospital admission growth rate will remain in place. For full year 2008, we expect the hospital and adjusted admissions will continue at this very low rate of growth. I highlighted industrywide statics, because low volume growth in the acute care hospital sector directly impacts the company's performance. Alliance generates approximately 90% of revenue from wholesale relationships overwhelmingly with acute care hospitals. Thus as hospital volume growth has been negatively impacted our scan volume has also been adversely affected. At the cost of diagnostic imaging rising, commercial insurers have increased their rate of retention, a radiology benefit managers which continues to be a contributing factor to modest volume growth. Private payers continue to implement initiatives which negatively impact volumes by placing undue hardship on patient and nurse providing service in order to cut costs. Further, the increase in patient cost sharing continues to impact our volumes negatively as employers increasingly offer health plans that are designed to shift financial responsibility to their employees. We expect this dynamic to continue as employers look for ways to reduce their growing health care cost. Our current position to continue to operate imaging technology in their private practice setting. Although, the trend of adding advanced imaging to the medical group office practice setting appears to have recently slowed. This element of the imaging sector continues to be a major cause for excess supply of advanced imaging systems in many markets. Physicians are adding advanced imaging equipment in their offices, continues to exist primarily due to the physician in office ancillary services exemption under the Stark Law. Once medical groups add these services to their practice setting referral which previously went to the hospital and the broader imaging community are no longer available. Numerous studies have concluded that physician's incorporating advanced imaging in their office setting leads to over utilization which hurts the entire industry including Alliance. Excess supply in the market exacerbates over utilization both of which in turn generally drive pricing down. Payers reduce reimbursement to counter the rising volume of advanced imaging procedures as a way to constraint costs. This additional pricing pressure causes physicians to order even more scans to offset the decline in reimbursement per procedure. Payers often respond with added pricing reductions and pressure is thus further heightened. The physician in office exemption is an important and ongoing challenge in our industry with no immediate resolution in the near term expected. To address the concern of potential excess in our necessary utilization of the advanced imaging procedures, Alliance and the association of quality imaging are advocating for the adoption of clinical quality standards as the most appropriate policy modification. United Health Group is one example of private payers, advancing quality initiatives with its requirement that outpatient imaging providers be accredited to their United Health Care imaging accreditation quality program as developed by the American College of Radiology and the Intersocietal Accreditation Commission. Today the imaging environment continues to place pressure on our business. In 2007, our retail business was impacted due to the DRA reimbursement reductions. We believe that the impact of the DRA is just beginning to be felt in the imaging industry and we will not see the full effect of this at until late in 2008. These changes have started to force some providers to exit the market through sale or closure of operations and others to withdraw plans to expand or upgrade their services. Due to our business model and financial strength, we are well positioned to capitalize on these events which are anticipated to intensify consolidation in the imaging industry. CMS has adopted its HOPPS update for 2008, which includes provisions that impact outpatient imaging. The new HOPPS rate will further decrease medicare PET and PET/CT technical revenues nationally by approximately 20%, and will decrease MRI technical revenues nationally by approximately 3%. We expect these changes will negatively impact Alliances revenues by approximately $3 million for full year of 2008. There continues to be significant discussion in Washington DC regarding federal reimbursement for all providers including the physician component of the SGR formula, as well as the potential funding sources for the State Children's Health Insurance program or SCHIP. On December 28th, 2007, the Medicare extenders package was signed into law which included among other things, a six months physician payment fixed and an 18 month extension of SCHIP. The SCHIP Program was renewed at current level and did not include any expansion of the program. The physician fix was funded primarily by cut to the Medicare Advantage Program. More importantly to Alliance and the Imaging industry, the bill contained no imaging cuts. We are however part of the uncertain legislated and regulatory landscape for all healthcare providers. There is currently much speculation regarding which legislated and regulatory changes will be adopted. Whatever the outcome, imaging services may continue to be a target for offsets and as a result aggressive efforts will be continued in order to protect the industry from additional future cuts. To that end, Alliance continues to be an active participant in lobbying efforts to endorse the benefits of the diagnostic imaging sector. Alliance and the Association of Quality Imaging have been very active in promoting a plan in Washington, which advocates for no additional reductions in reimbursement and for the adoption of clinical quality standards for all providers of Advanced Diagnostic Imaging Services. Alliance is distinguished in the market by our commitment to partnering with hospitals and Healthcare systems. We believe the joint success of our hospital partners and Alliance is the key to our company's future success. Toward that end, we continue to develop our three growth initiatives PET/CT services, the development of fixed site imaging center, and a development of radiation oncology centers. We have experienced strong growth in our PET/CT business as our 2007 revenues totaled approximately $140 million. At this point, Alliance continues to be the largest provider of PET/CT services in the nation. Our fixed site imaging center development is similarly impressive as we now operate 88 fixed sites. The initial stages of our investment and radiation therapy is quite promising as we now operate 12 cancer centers. We are adding to our Alliance Oncology Development opportunity pipeline and are also investing in the appropriate leadership infrastructure for this entity. Given the dramatic impact of the DRA and HOPPS reductions relating to the broader diagnostic imaging industry, the pipeline of opportunities for further acquisition by Alliance is robust and we are well positioned to take advantage of these opportunities. For that end, we have invested in and are developing a small M&A infrastructure within the company to continue our highly selected and disciplined approach to acquire and select organizations. We are also creating comprehensive integration plans that will allow our new additions to continue to grow within the overall framework of Alliance Imaging. Operationally, we continue to generate strong cash flows and had created additional capacity on our balance sheet to the completion of $150 million bond offering. This capacity is intended to enable us to proactively pursue additional acquisitions which are consistent with our focus on return on invested capital. While 2007 proved to be a year of challenge for Alliance, given the DRA and other regulatory changes, we have continued to focus on delivering strong operating results and maintaining our adjusted EBITDA margins as well as generating strong cash flow. We also continue to expect volume growth in PET/CT to offset the pricing pressure placed on this segment of our business. For 2007, we exceeded our guidances ranges for revenue and adjusted EBITDA and looking ahead into 2008, we expect both revenue and adjusted EBITDA growth over our 2007 results. We have a sustained record of strong financial performance and positive cash flow. Additionally, we are committed to clinical excellence, quality patient care, and customer service. Combined, these factors will enable us to experience continuous success throughout 2008 and beyond. Our strategy allows us to focus on our hospital partnership business model and we expect these efforts will help us return to a growth trajectory in 2008. We believe, we are well positioned for the future and we will continue to prudently invest resources in our growth products and selectively pursue acquisitions in a highly disciplined manner. I will now turn the call over to Howard.

[Howard Aihara:]

Thanks Paul. Yesterday Alliance Imaging reported fourth quarter and full year 2007 results. Alliance's results were above the company's full year 2007 revenue and adjusted EBITDA guidance ranges. Alliance's full year 2007 revenue totalled $444.9 which was above our guidance range of $439 million to $443 million. Alliance's full year 2007 adjusted EBITDA totaled $165.6 million which was above our guidance range of $162 million to $164 million. For full year 2007, revenue totaled $444.9 million compared to $435.8 million for 2006. Alliance's full year 2007 adjusted EBITDA totaled $165.6 million compared to $171.6 million in 2006. In the fourth quarter, revenue totaled $113.6 million, up $1.9 million or 1.7% from the fourth quarter of 2006. Adjusted EBITDA in the fourth quarter of 2007 totaled $39.7 million compared to $40.9 million in the same quarter of 2006. Fourth quarter 2006 adjusted EBITDA was favorably impacted by $1.7 million Hurricane Katrina insurance settlement, as adjusted fourth quarter 2007 adjusted EBITDA was $39.7 million compared to $39.2 million in the fourth quarter of 2006. Full year 2007 revenue and adjusted EBITDA reflected retail pricing impact of the Deficit Reduction Act and the PET and PET/CT HOPPS Medicare reimbursement reductions. As we have previously stated, these retail Medicare reimbursement reductions impacted full year 2007 revenue and adjusted EBITDA by approximately $14 million. In the fourth quarter of 2007, total MRI revenue was $67.1 million compared to $67.4 million in the fourth quarter of 2006. The company reduced the average number of scan-based MRI systems to 249 systems in the fourth quarter of 2007 compared to 261 systems a year ago. Total scan-based MRI volume was 159,000 scans in the fourth quarter of 2007 compared 168,000 scans in the fourth quarter of 2006. For the fourth quarter of 2007, scans per system per day were 9.26 compared to 9.37 in the same quarter of 2006. Alliance's average MRI price per scan in the fourth quarter of 2007 was $373 compared to $358 in the same quarter of 2006. PET/CT revenue increased to $35.8 million in the fourth quarter of 2007 compared to $34.1 million in the fourth quarter of 2006. In the fourth quarter of 2007, PET/CT scan volume increased 18% to 30,100 scans from 25,600 a year ago. The average price per PET/CT scan decreased to $1,176 from $1,327 in the fourth quarter of 2007 compared to the same quarter last year which was primarily due to the DRA and HOPPS Medicare price reductions. PET/CT scans per system per day increased to 6.1 in the fourth quarter of 2007 compared to 6 a year ago. Total revenue from Alliance's fixed sites increased 24% to $22.2 million in the fourth quarter of 2007 from $17.8 million in the fourth quarter a year ago. Depreciation expense totaled $20.7 million in both the fourth quarters of 2007 and 2006. Amortization expense increased to $1.7 million in the fourth quarter of 2007 compared to $1.2 million a year ago. This increase was due to the New England Health Enterprises and because of the acquisitions completed in the fourth quarter of 2007. Alliance's net interest expense increased $1.7 million to $11.9 millin in the fourth quarter of 2007 compared to $10.2 million in the same quarter of last year. This increase was primarily related to $1 million charge for cost related to a bridge loan financing retired during the fourth quarter of 2007 and interest expense associated with the company's new $150 million senior subordinated note offering. Diluted EPS, adjusted for the bridge loan financing cost which had a $0.01 per share impact was $0.05 per share in the fourth quarter of 2007 compared to $0.08 in the fourth quarter of 2006. Looking on to the full year 2007, total MRI revenue was $265.3 million compared to $280.1 million a year ago, primarily due to the declining mobile MRI revenue, which was partially offset by an increase in fixed rate revenue. Total scan based MRI volume was 646,000 scans in 2007 compared to 703,000 scans in 2006. The scan based MRI systems; scans per system per day in 2007 were 9.3 compared to 9.4 in 2006. Volume to the average MRI price per scan in 2007 increased to $365 compared to $360 in 2006. PET/CT revenue increased to $139.7 million in 2007 compared to $133.3 million in 2006. In 2007, PET/CT scan volumes increased 16% to 115,900 scans from 100,000 a year ago. The average price per PET/CT scan was $1195 in 2007 compared to $1316 in 2006. PET/CT scans per system per day increased to 6.3 in 2007 from 6 in 2006. Total revenues from licensed fixed site increased to $78.1 million in 2007 from $73.3 million in 2006. As of year-end, the company operates a total of 88 fixed imaging sites, 5 of which are in unconsolidated joint ventures. Adjusted EBITDA was $165.6 million in 2007 compared to $171.6 million in 2006. Alliance’s adjusted EBITA margins as a percentage of revenue was 37.2% in 2007 and 37.7% in 2006. Diluted earnings per share completed in accordance with Generally Accepted Accounting Principles were $0.31 per share in 2007 and $0.37 per share in 2006. Weighted average shares outstanding for 2007 was 51.6 million shares. Alliance’s effective income tax rate as a percentage of pre-tax income was 41.8% for 2007. Cash income taxes paid totaled $4.4 million in 2007 compared to $2.1 million in 2006. For full year 2007, Alliance generated $118 million in cash flow from operating activities compared to $115.8 million in 2006. Day sales outstanding on accounts receivables were 48 days. Capital expenditures totaled $65.3 million in 2007 compared to $75 million a year ago. Alliance opened 76 imaging sites in the fourth quarter of 2007 into the full year 2007 opened a total of 16 fixed imaging sites. In 2007, the company purchased 15 PET/CT systems and had non PET systems trade-ins for net increase of 6 systems. In 2007, the company purchased 25 MRI systems and have 46 MRI trade in are sales for net reduction of 21 MRI systems. Alliance opened two new radiation therapy centers in 2007 and operates a total of 12 radiation therapy centers at 12/31/2007, two of which are in unconsolidated joint ventures. Alliance’s total long-term debt was $670.8 million at December 31, 2007, and $529.4 million a year ago. Cash and cash equivalents was $120.9 million on December 31, 2007 and $16.4 million at year end 2006. The increase in long-term debt and cash and cash equivalence is primarily related to our $150 million bond offering completed in the fourth quarter of 2007. Including $64.1 million available under the company’s line of credit, Alliance had total liquidity of $185 million a year end 2007. In the first quarter of 2008, the company entered into interest rates swap agreements; they hedged in future cash interest payment on approximately $185 million of Alliance’s variable rate bank debt. These agreements are three years in length. Under these arrangements, the company receives three-month LIBOR and pays a fixed rate of 3.15%. After taking into account these interest rates swaps, Alliance’s fixed rate debt totaled approximately $490 million or 73% of the company’s total debt was approximately $181 million or 27% subject to variable interest rates. Alliance's net debt is defined as total debt less cash and cash equivalents was $549.9 million at December 31st 2007 and $513 million at December 31st 2006. The company generated significant free cash flow in 2007. Free cash flow is defined as the change in net debt investments and acquisitions totaled $54.3 million in 2007 compared to $53.2 million in 2006. Alliance's net leverage ratio defined as net debt divided by LTM adjusted EBITDA was 3.1 times for 2007 compared to 3 times for full year 2006. The company's total leverage ratio defined as total debt divided by LTM adjusted EBITDA was 3.7 and 3.1 times for the years ended December 31st, 2007 and 2006. Moving forward to 2008, I will now reaffirm our full year 2008 financial guidance. For full year 2008, Alliance expects revenue to range from $472 million to $484 million. Adjusted EBITDA for full year 2008 is expected to range from $172 million to $182 million. In 2008, we expect cash capital expenditures to range from $55 million to $65 million. Alliance expects to open 15 to 20 fixed site imaging centers in 2008. Alliance's 2008 radiation/oncology revenue is expected to range from $19 million to $21 million or approximately 4% of total revenue. Alliance expects to open 3 to 5 radiation/oncology centers in 2008, most of which are expected to open late in the year. Our 2008 full year income tax rate is expected to total approximately 42% of free tax income. In terms of free cash flow, we expect to decrease the long-term debt. We'll have a change in cash and cash equivalents of approximately $38 million to $48 million in 2008. Weighted average shares outstanding on a diluted basis is expected to total approximately 53 million shares in 2008. Thank you for your interest in Alliance. I'll now turn the call back over to Paul.

[Paul Viviano:]

Thank you, Howard. Alliance is well positioned for growth given its experienced management team, financial strength, established record of successful operations and national infrastructure. We continue to have a strong commitment to clinical excellence, quality patient care and customer service. Our strategy of investing in PET/CT, fixed site imaging centers and radiation therapy will allow us to continue to establish track record and resulting growth for 2008. Further, consistent with our strategy, we will continue to proactively evaluate and selectively acquire radiation therapy cancer centers, fixed-site imaging centers, and PET/CT providers. Our goal is to be the first choice for healthcare providers to meet their outpatient imaging and radiation therapy needs. We will continue to focus on providing outstanding clinical care for our patients and a compelling value proposition for our partners. Finally, we will operate our business in a highly efficient manner while simultaneously meeting our criteria for return-on-capital. We thank you for your interest in Alliance and look forward to answering your questions. I will now return the call to the operator to begin the question-and-answer session.

[Operator:]

(Operator Instructions). Your first question comes from Darren Lehrich of Deutsche Bank. Please go ahead.

[Darren Lehrich:]

Thanks good morning. A couple of things here I wanted to cover, I guess just first with regard to the MRI price per scan. Could you just give us a little bit of commentary about the strength in pricing you saw in the quarter and what your outlook is on that?

[Howard Aihara:]

Sure Darren, this is Howard. The MRI pricing as you know for the past two years, has been very, very stable in the low $360 range. Due to the acquisition of New England Health Enterprises which is the fixed site imaging center we acquired in the Northeast, those go all under retail arrangements which are higher price per scan than in our wholesale arrangement. So in terms of the pricing impact we saw a further favorable bump in price in the low $370 range.

[Darren Lehrich:]

Okay. That's helpful. And then, I guess just wanted to get some commentary from you about how you feel the reception has been in the Radiation/Oncology Community and how you see your traction gaining in that marketplace, just kind of a big picture question?

[Paul Viviano:]

Hi! Darren, this is Paul. I'll be happy to try to address your question. There is no doubt that we're still new at the business of Radiation/Oncology. We believe that it holds a lot of promise for us. Our strategy is been very overt. We have a number of hospital, customers and clients that we serve their imaging related needs that also have radiation therapy centers, many of which need new IMRT and IGRT capable linear accelerators. And so, our focus has been to work with those existing hospital customers to upgrade and replace their equipment. And we're beginning to gain traction, we've given guidance on how many centers that we'll develop this year and it's a significantly bigger number than last year and believe we're gaining some traction in this arena. We're also active in evaluating acquisitions of small regional providers like Bethesda that would be so community providers that we think fit our criteria, that also have in any circumstances CON and/or relationship with the hospital. And so, we believe we're gaining traction. It becomes a meaningful part of our business. Howard reflected it's about 4% of our revenue for '08. We believe it would be a significantly greater part of our revenue in '09 and in future years beyond that, and we will kind of give you guidance year-by-year as the strategy evolves. So, we're very excited about the business, as there are a lot of opportunities and there is a lot of work ahead of us in order for us to be successful at this. We've provided some commentary to this 5 years approximately to generate roughly $100 million in our PET/CT business and it take us about the same amount of time to generate roughly $100 million in our fixed-site imaging center business, and we hope that, that same horizon could possibly translate into Radiation/Oncology being a similar size organization after five years as those two other new businesses that we started up. So, we're beginning to make some traction and have some impact on our company and in the business.

[Darren Lehrich:]

And if you had a dollar of acquisition spent to make, over the course of the next year, what would you think that dollar would be focused more on the imaging side or more on the Radiation/Oncology side?

[Paul Viviano:]

If you know of any dollar deals out there Darren, but our sense is we're looking at all the opportunities, all three of the segments would be Radiation/Oncology, PET/CT, and fixed-sites largely in CON states almost exclusively in CON states. And, it's hard to answer your question in the absence of some specifics because each individual deal as you know, has a profile and a risk that gets associated with it, the profile of growth, the profile of what you can approach as the assets for the purchased price, the profile of how well it will be integrated and can it flourish in our system and within our company all become meaningful indicators. And so, we don't have a specific buyers, but all those factors might get waited to lead us to one acquisition versus another on a specific company-by-company basis.

[Darren Lehrich:]

Okay. And then – thanks for that. Last thing is for Howard, with regard to the net income guidance and implicitly it's $0.23 to $0.28 I think with the share count you are seeing k for '08. Can you just help reconcile that range and may be help us think about any one kind of items that might be included in the net income number for 2008? Thanks.

[Howard Aihara:]

Sure. Darren, you know there's about, we’re going to incur about $10 million of interest expense on senior subordinated note offering. We have not factored any acquisitions and so, there is no EBITDA associated with any acquisitions. We just pay the interest expense that roughly dilutes earnings in 2008; I think that’s the primary driver of both the income number.

[Darren Lehrich:]

Okay. Very good. Thanks.

[Howard Aihara:]

Thanks Darren.

[Operator:]

Thank You. Your next question comes from Whit Mayo of Stephens Incorporated. Please go ahead.

[Whit Mayo:]

Thanks Good Morning. Paul, can you talk a little bit about the recent acquisition that you’ve made and just give us an update as to the integration where they stand and specifically if you give us the Bethesda acquisition and the management team that you acquired there, how they assimilated the culture, the organization, and how do you forsee their involvement with your other oncology access overtime?

[Paul Viviano:]

Thanks Whit, this is Paul. The integration of the two acquisitions has gone really well. I can’t speak about each of them individually. You referenced specifically, initially Bethesda and we are very pleased with how the integration is proceeding more on track relative to volume and other major financial performance indicators and so, we are pleased that the upgrade of equipment has gone well. The management team seems to be very pleased. We are thrilled to have them as part of our team. They are helping us with other projects. We are looking at their assistance in both acquisitions as well as the development of new centers given their extensive knowledge and background in this base and we spent time with them there. They in turn helped us in other regions with specific projects and the integration process has gone exceptionally well. The local physician community has been seen most for them. Our investment of time and effort and energy in those markets has been well received. So, that acquisition has really gone quite well and I am pleased to share that relative to me that integration process is also going well. We got a good reception from the local referring medical community in both Massachusetts and Maine and believe there are opportunities there for us to grow. There was less for the management team that joined us there that was more at the site level management level of executive that joined us and those individuals are getting very well and one of strength of that acquisition is we have such a strong Northeast presence in Massachusetts and Maine that the integration into our Northeast region has gone very well. So I am very pleased overall how things are going in both these settings. And as you know, this is certainly one of the risks as our acquisition strategy and we spend a lot of time looking at culture and other critical elements that will help dictate the success of the integration of our acquisitions, because obviously the future performance of them depends on their fate and so, it’s an important part of our upfront consideration as we evaluate acquisition targets.

[Whit Mayo:]

That is really helpful. And talking net interest income in your prepared remark just like a little you know more color on it, just – can you talk a little bit more about the involvement that you are having with I guess, with the industry quality initiatives, and just kind of specifically, what are some of the elements and goals of I guess, the coalition and just what are the specific quality objectives that you guys are trying to accomplish?

[Paul Viviano:]

Relative to the association, we have spent lot of time with the association we are very actively involved. We were not members of the imaging association prior to 2007 and that lot of historical reasons why that was the case. We restructured the association to be exclusively now comprised of imaging providers and so, are pleased that our efforts to restructure the board in the policy making capability of reorganization is involved into a strong platform advocating for no additional reimbursement reductions for imaging, which is obviously job 1. Job 1A is advocating proactively for the adoption of clinical quality standards and when we say that, what we are advocating for is that, today Alliance imaging hospitals, most imaging centers that are operated by radiologist or competitors et cetera e all certified or accredited either by the joint commission in hospitals case or by the American College of Radiology, which is the case for most pre-scanning centers, where those accreditation and certification standards are not required and generally not applied for and received is in the physician in office exemption where medical groups have add advanced diagnostic imaging equipment, and they get reimbursed the same as us. They're able to negotiate contracts with payers and be a medicare beneficiary recipient of payment without the need for adopting clinical quality standards for equipment, for staffing, for who interprets the images, the kinds of things that help distinguish quality providers in this arena. And so, we've advocated with Medicare, with CMS, with HHS, with health plans, with anybody that will listen to us, that we believe that quality standard should be adopted universally across the board, and as the physician in their office practice setting want to accomplish the same level of clinical quality as we do and adopt the same standards and invest the same resources and go through the same accreditation process then they are obviously welcome to add imaging services in their offices. We believe that adopting those quality standards will have a material effect on our industry and that many physicians practice office settings will be able to afford the investment of resources in order to achieve those accreditation standards. Notwithstanding, we believe those quality standards should be adopted and we have been allowed advocate for that in Washington.

[Whit Mayo:]

Okay, okay, so that’s fairly consistent with industry rhetoric we've heard for a while. Howard, looking at the balance sheet, the deferred taxes were down about 10 million in the quarter, just get an idea of what was going on there, and can we also get what the NOL was at the end of the quarter?

[Howard K. Aihara:]

Sure Whit, we've got -- there's more then went between the deferred taxes and the income taxes table which is a current liability. There is some moment between the deferred tax assets and liabilities as we do our year-end tax provision. In terms of our NOL, we have approximately $13 million available as of the end of 2007 and we've given guidance of our cash income tax payments for 2008 and we will give ballpark of call it $6 million to $8 million.

[Whit Mayo:]

Again one last question, I will hop back in the queue, just thinking about the first quarter, how should we think about the number of working days, how does that compare, and also the stock comp expense, and then, if we could also get an idea of what the incremental deferred financing from your bond yield will be?

[Howard Aihara:]

Oh lets see. In the terms of deferred financing cost is about -- $2.2 million is going to be accredited into interest expense for amortization deferred financing costs. I am sorry; could you give me the other topics as well?

[White Mayo:]

Yeah. The number of working days in the first quarter and stock comp?

[Howard Aihara:]

The number of working days in the first quarter are very similar to the number of working days in the first quarter of last year. And in terms of non-stock based compensation, we incurred about $1.1 million in the fourth quarter of 2007, and I expect that to go up a little bit into 2008 per quarter.

[Whit Mayo:]

Okay, that’s fine. Thanks guys.

[Howard Aihara:]

Thanks Whit.

[Operator:]

Thank you. Your next question comes from Mark Arnold, Piper Jaffray. Please go ahead.

[Mark Arnold:]

Paul, I assume that Howard's to blame for just getting you guys up at 5

[Howard Aihara:]

It really wasn't my idea Mark. Let's put it that way.

[Mark Arnold:]

I guess just to start off, the one thing that stood out to me and I'm still a little confused on is the other modalities and the other revenue line. I'm just struggling with it, it appears to be a little bit low given what I would have thought the contribution from the Bethesda Centers, I would have been to that line item and particularly relative to Q2 and Q3's performance in that line item. So, is there something I'm missing there, is there anything with, you know, was there some equipment downtime as you picked both centers and upgrading them to have IGRT capability, that would have artificially deflated that number a little bit in Q4?

[Howard Aihara:]

Hi Mark, this is Howard. You know, it really was not always that the Bethesda acquisition as I mentioned earlier, was pretty much on track with what we expected in terms of the revenue run rate. Really the other revenue decline was really related to, we had some decline in other modality revenue outside of MRI and PET/CT revenue was down a bit, there is a lot of other fact that we had a few fixed site closure that were included in other revenue as well. So that was the reason why the increase revenue from the Bethesda acquisition was offset by some of these other decreases.

[Mark Arnold:]

Okay. And then, I guess jumping to the fixed site, can you just remind me how the fixed site opening affect your calculation of the MRI revenue gap?

[Howard Aihara:]

Well it depends on the type of fixed site it is, if it say, brand new customer that we haven’t done business with before, it would be counted in the new annualized sales portion of the revenue gap, MRI revenue gap. If it's a conversion of an existing mobile customer to fixed site, we wouldn't count in that number. Basically, what I would do is basically increase the number of days of service that we’re providing, you know say you have a two or three day mobile customer that converts to a fixed site and therefore then the number of days per weeks sold would typically be in the 5 to 6 range. So that's what happens there.

[Mark Arnold:]

So conversions are not included in that calculation at all?

[Howard Aihara:]

That's correct.

[Mark Arnold:]

Okay. So…

[Paul Viviano:]

Mark, this is Paul. We have been pleased with the increasing percentage of our fixed sites being conversions from formal mobile customers when we started the business in earnest in late 2003. The percentage was quite small. We have given guidance generally that, that number has increased over the years, where it is 40% to 50% now of our fixed sites for conversions from mobile customers and that will continue to grow. We believe there is a percentage of the total going forward. You know our success in converting existing customers and so, the MRI revenue gap is impacted little bit by that, because of some moving target burdened upon.

[Mark Arnold:]

Okay. And then just one other question on that. When you are trying to do that calculation with the fixed sites coming online, when you show that 12 month snapshot or what the impact, how much revenue is coming online, are you assuming that being fully ramped up or you assuming what the contribution would be in the next quarter?

[Howard Aihara:]

Mark, this is Howard. We basically assumed kind of the beginning run rate of that customer. So, based on our forecast of the fiscal years revenue, that's what included, it is not fully ramped up, it’s basically the first year's revenue that we expect from that customer.

[Mark Arnold:]

Okay, great. And moving on -- just on the radiation therapy site, can you give any update on center development. Can we expect one to open may be in the Northeast before the end of this quarter?

[Paul Viviano:]

I really haven't given quarterly specific guidance, but we have given guidance for the year and so, we will make the announcement as they opened, we want to be respectful of our hospital customers and partners that we have in these markets, so we have not given quarterly specific guidance for openings.

[Howard Aihara:]

And again Mark, I think in my prepared remarks I mentioned that the 3 to 5 that we expect to open in 2008, it primarily is back-end weighted toward the end of the year.

[Mark Arnold:]

Okay. PET/CT, utilization in the quarter appears to be particularly strong, particularly given that the big jump in the number of days of service. I guess, first, is that days of service sustainable? And then second, how fast do you expect the scans persistent per day to kind ramp back up to where it was in Q3?

[Howard Aihara:]

Mark, we don’t give a specific guidance in terms of the utilization of our system. We did see relatively stronger utilization of the systems and slightly lower scans persistent through the end of the fourth quarter. In terms of revenue for 2008, we gave guidance for the full year of growth of between 9% to 12% in PET/CT revenues and we are reaffirming that guidance today.

[Mark Arnold:]

Okay. And adjusted EBITDA guidance implies that we are expecting margins in the range of 36% to 38% for the full year. So that’s in line the full year 2007 adjusted EBITDA of about 37.2%.

[Mark Arnold:]

And then finally, what’s your expectation for decline in mobile unit strength in 2008?

[Howard Aihara:]

We don’t give specific guidance related to the specific mobile MRI decline. We’ve seen historically, the last couple of years, last three years a decline of about 20 MRI systems per year, and I don’t expect much change from that going forward into 2008.

[Mark Arnold:]

I understood. Thank you.

[Paul Viviano:]

Thank you.

[Operator:]

Thank you, our next questions comes from Ann Haynes of Leerink Swann. Please go ahead.

[Ann Haynes:]

Hi. So, Paul, on your comments you mentioned you are missing some personal investment elimination leadership and I think it’s an M&A, can you give us some more details on that?

[Paul Viviano:]

I can give you a little bit of color Ann, but relative to M&A, we have appointed an Executive Vice President for M&A, Chris Joyce, who was our Former Regional Executive, our Senior Regional Vice President for Southeast Region. I assumed that responsibility on January 1st and Chris has assembled a small team of 300 individuals that work with him, and we believe that given the importance of our acquisition strategy to our overall success in strategy that it made sense to make that investment along with the completion of the $150 million bond offering and the other liquidity that’s available to us on our balance sheet. So we have a very experienced executive leading this effort. Chris works closely with Howard and with Eli, our General Counsel. We spend a lot of time with our operational team, Michael Frisch, who is our Chief Operating Officer and each of our Regional Executives to the extent that the targeted acquisitions would occur in their region, all would be active participants and due diligence assessing the opportunity along with our M&A team. On both of the radiation therapy we have added business development, Executives in each of our regions, we have some operational staff that we add in each of our regions in addition to the small infrastructure that accompanied our acquisition of Bethesda.

[Ann Haynes:]

Okay great. In other competitive landscape you did touch upon on the other comments as well. I guess, I want to focus the question more on the hospital MRI business, obviously, that business has been deteriorating, but has been stable, you know stabilizing over the past couple of years. Now because of the cost in 2007, you are seeing a change in behavior in your hospitals as diagnostic imaging purchasing become less of a priority for their investment, and still, can you actually see that deterioration easing more even worsen over the next couple of years as since these procedures are less more profitable, less hospital would like to taking the business in house?

[Paul Viviano:]

A little over to draw conclusion relative to that, the house pricing just became effective in January 1st for the hospitals relative to the decline in MRI revenue, as it is most things, it’s a complicated landscape and our sense is that the ongoing pressure on hospital volumes combined with their ongoing inflationary trends nursing salaries, et cetera and the design of many hospitals that currently wants to invest in infrastructure with physicians, infrastructure with IT, add new beds, expand their ERs, that there is a update more capital constraint going on in hospitals, which we think will lead to a path of more opportunities to work with our hospital partners, specifically to develop fixed sites. When you see that in our guidance, you see that 15 to 26 sites currently would be the biggest year that we would have every success to the year are momentum of our fixed sites business growth and I think it reflects a couple of things, I think it reflects the notion that you highlighted pricing pressure for MR, volume pressure on MR, plus other operating factors in the hospital arena plus we are becoming more recognized as a confident and capable operator of fixed sites. So we add all that together we are pleased that. As a result to the momentum in our fixed site business, our talk at some length about the continued pressure on our mobile MRI business, we do not expect that to change as a result of all the things that I talked about, but I do think that our fixed-site business will continue to gain momentum.

[Ann Haynes:]

Okay great. Thank You.

[Paul Viviano:]

Sure.

[Operator:]

Your next question comes from (Myal Hyponetho) of Credit Suisse. Please go ahead.

[Myal Hyponetho:]

Hi guys. I just wanted to revisit a couple of bigger picture questions. First of all, in terms of the United accreditation, I am just wondering if you could give us a sense when you expect to get a sense of any behavior changes or any impact from that or just any general comments along those lines? And then secondly, just thinking in terms of utilization on the PET scan persistent per day, can you just give us some general comments around looking forward based on today’s indications, are there any clinical reasons like why that can approach that of the MRI utilization, just any comments that about where we can be ultimately still kind of growing at a greater rate? Thanks.

[Paul Viviano:]

(Myal) this is Paul, relative to that adult plan, I don’t know if you saw they posted a delay in the implementation of the plan and I think it reflects according to what they disclosed publicly, we don’t have any inside information. What they did above was that they were so overwhelmed with numbers of applications and the administrative burden that this new policy caused them that they have delayed the implementation for a couple of quarters. We expect this by nothing is going to affect until the end of the year, as a result of their administrative challenges that they face in implementing this program and so, they say they still have the resolved implement the program successfully. We believe that to be the case and we think that we will have an impact on some volumes. We think that some providers will achieve this level of certification or accreditation and may drop out of their network, which in certain markets could drown some volumes of other providers. I am not sure those will be the markets, we have a presence and we will stay tune, we will find out together. But I think that United is so big and such a thought leader in the industry, that there are lot of other health plans that are watching this with the anticipation, and this may likely become a bellwether for other health plans considering adapting similar kinds of policies. We are very disappointed that’s not going to happen when they initially targeted, but we understand this is a big administrative process. Secondly, your point PET/T utilization, we have seen continued strong growth in volume nationally on a national basis. We have seen kind of mid teens, low teens volume growth and expect that largely to continue; again we are not talking about Alliance’s Business, we are talking about the national volume growth of PET/CT. We have seen a very dramatic slowdown of sales of new PET/CT systems into the market on a national basis. We have seen and heard from our OEM colleagues that the number of sales of new PET/CT units were down dramatically from ‘07 compared to ’06. We have heard numbers in the 60% plus range could be significantly greater 60% decline in sales year-over-year. So, the supply is moderating, the volume continues to grow meaningfully, and we scent that there will be this equilibrium, the supply will equal the demand not to distant future. It shows that the actual utilization, there is no reason why we cant to 9 PET/CT in the day on a system just like we do 9 to 10 MRI scans per system per day. You are limited a little bit by the FDG production and delivery times in those kinds of things, but presuming you can workout the operational clinical details, there is no reason why that the numbers and volumes can approximate and the same numbers of scans persistent per day as MRI. I am not sure that I exactly addressed your question or your point (Myles). I will be happy to expand on our…

[Myal Hyponetho:]

No, that’s perfect. Thanks a lot for the color.

[Paul Viviano:]

Sure, thank you.

[Operator:]

Thank you. Your next question comes from (Brian Chandler) (Workpoint) Capital. Please go ahead.

[Brian Chandler:]

Hi guys, congratulations on a good quarter. One, (Inaudible) had a couple of additional questions. On the CapEx side, you guys are guiding at that $55 to 65 million, which would be below trend line from the last couple of years and yet you are stepping up your investment in the radiology for the radiation/oncology centers to 3 to 5 this year. If join a bit right that those are more expensive than the other installations and tend to run more like 4 to 5 million dollars each. Is that a fair characterization, and if so, does that mean that the amount of spending on the core PET/CT and MRI replacement cycles going down?

[Howard Aihara:]

Brian, this is Howard. You are correct in terms of the radiation therapy investments being typically higher than an imaging project 4 to 5 million is a good range of numbers for radiation therapy project. In terms of spending in imaging, we have largely completed the PET to PET/CT conversion process. We only have -- of the 39 PET and PET/CT systems we have at the end of the year, we only have 4 remaining PET systems, so that cycle is largely completed. So in 2008, we expect to purchase new PET/CT systems that few of them will be replacements. So – and our investments in mobile MRI are kind of a replacement CapEx there. It tends to be pretty steady, we spend about 25% of our current CapEx on mobile MRI in terms of kind of our replacement process. So we are going to sort of see declining PET/CT investment due to the replacement process, conversion process being over with some incremental CapEx spending on radiation therapy offsetting that.

[Brian Chandler:]

Thanks that awful. As far as fourth quarter and then also as it relates to 2008 guidance, can you remind me what date did you close on the two acquisitions, and is there anything you can give us more granular on contribution either on the revenue or EBITDA side from either of those acquisitions in the fourth quarter numbers?

[Howard Aihara:]

Brian, this is Howard. In terms of the closing date for those acquisitions they were in, you know, call it really the mid November. So, basically, I think you can use a mid quarter convention that completed the impact. The revenue from the Bethesda acquisition was approximately $14 million annually and for the New England Health Imaging acquisition approximately $20 million. We have said that the margins of those, two acquisitions combined were about slightly above our company light adjusted EBITDA margin of 37%. So, we are slightly above that.

[Brian Chandler:]

So, I mean, if you do that, you end up with some -- the implication is that you -- without the contribution on our mid quarter basis from those acquisitions the core business would have been down, a little more than what you otherwise showed. Is that, I mean, is that is a fair implication part?

[Howard Aihara:]

You know, one thing I would like to point out is that the fourth quarter typically is based on where the calendar falls and the holidays, a shorter quarter than the third. In fact, the fourth quarter of 2007 was actually two full days shorter than the third quarter of 2007 sequentially. So that plays into our fourth quarter results, and if you look back at history we typically see that trend.

[Brian Chandler:]

Okay. Anything, I didn’t see any breakout of any non-recurring expenses, where there anything that went along with the acquisitions either severance related or other integration related that did either occured in the fourth quarter that you can tell us about or that we should anticipate for 2008?

[Howard Aihara:]

There really works a whole lot of cost related to the acquisitions, legal cost, and accounting and finance costs are capitalized as part of the acquisition. Other than the fact that we talked about there being million dollars worth of interest expense related to the temporary bridge loan that we financed, that will help finance our acquisition other than that. And, probably about $700,000 of additional interest expense related to you, various financing activities that took place to help fund from those acquisitions and $159 million senior subordinated note offering. There was about $1.7 million worth of expense in the fourth quarter that I kind of use unusual, but that was all shop and interest expense.

[Brian Chandler:]

Okay. So, but it is an interest expense. So, you're adding it back to your EBITDA calculation?

[Howard Aihara:]

Well, yes it is from the EBITDA, you take net income, and you add back interest expense.

[Brian Chandler:]

Right. Okay. So, it's not interesting either?

[Howard Aihara:]

That's correct.

[Brian Chandler:]

But, if you look at your guidance for 2008, if you take into effect the acquisitions at revenue levels that you've given us and assuming roughly the same or slightly better on a merchant contribution to EBITDA that would imply that you are looking for particularly sort of at the midpoint your guidance for the core business to be essentially flat year-on-year, notwithstanding the fact that you're opening new fixed-site centers and Radiation/Oncology centers, I have that correct?

[Howard Aihara:]

Well, going back into the earlier quarter of 2007. We have some one time items $2 million gain on sales in one of our composite invested another $0.5 million of gain on our real estate investment sale and a couple of other things. We probably had about $3 million worth of unusual items in 2007 that positively impacted adjusted EBITDA that we don't anticipate being there in 2008.

[Paul Viviano:]

Brain this is Paul. In addition that we've talked about the HOPPS and PET/CT pricing impact of $3 million that will impact our performance in 2008, both revenue and EBITDA, and you've also seen us take of a rather conservative stance relative to providing an outlook year-over-year and continue to adopt that stance as well.

[Brian Chandler:]

Understood, it appeared to be a conservative view of the world on us, I was missing something that's why I wanted to make sure there wasn't some other factors embedded in there?

[Paul Viviano:]

I think one other point for '08 that Howard made earlier is that Radiation/Oncology Centers that we'll open in '08 are certainly kind of back-end loaded. Again, we don't give guidance specifically about when these openings occur as it is a little bit lumpy. But that from best we know given the construction timelines and opening targets that they will be back-end loaded and while we're really pleased we're going to open between three and five Radiation Therapy Centers in '08. They're unlikely to have a meaningful impact on revenue in EBITDA once they open in 2008.

[Brian Chandler:]

Last question for you? My impression was that in '06 and to a certain extent in '07, you were able to make some cost cuts that helped offset some of the pricing impact of DRA and HOPPS et cetera. I'm wondering what you're seeing in the business now, whether or not there is cost pressure based on both maybe price of oils/gasoline or head count pressure for radiologists or whether in fact you think there are some additional things you can do on the cost side? Thanks.

[Howard Aihara:]

Brain this is Howard. There is always areas that in Healthcare Services that we look to top rate more efficiently. We continue to do mobile route restructuring and look for labor efficiencies, looking at our logistics and transportation costs, working based on our scale working our sourcing contracts, so there are always areas and where we have various initiatives to continue to focus on reducing cost. Our adjusted EBITDA margin guidance for 2008 is in the 36% to 38% range which is consistent with where we are in 2007. So despite as you mentioned there is fuel pricing pressure and labor inflation rate pressures, we will work hard to mitigate those and expect to generate a very consistent margin year-to-year.

[Brian Chandler:]

Thanks guys.

[Operator:]

Your next question comes from Mike Scarangella of Merrill Lynch. Please go ahead.

[Micheal Scarangella:]

Hi good Morning guys, most of my questions have been answered. I just had one last on the macro volume outlook. You mentioned that volume coming out of the acute care hospital was pretty sluggish and you expect that to continue. We have seen a spike recently reported in flu volume and respiratory cases in the first quarter. I am just wondering if that helps you at all. Thanks.

[Paul Viviano:]

Mike, this is Paul. We will see if it helps us or not. Traditionally, a spike in hospital volume related to flu season uptick generally doesn't positively impact our volumes. Most of our cases are derived from neurologist, neurosurgeon, orthopedic surgeons, internist et cetera for maladies other than there have been a flu process, while that may be positively impacting the hospital sector, it would not be traditional for that to have a meaningful impact on our business, but we will see.

[Micheal Scarangella:]

Thank you.

[Paul Viviano:]

Sure. Thank you.

[Operator:]

Your last question comes from Kyle Smith of Jefferies & Co. Please go ahead.

[Kyle Smith:]

Good Morning gentleman.

[Paul Viviano:]

Hi Kyle.

[Kyle Smith:]

Couple of question here, one is on the big slug of investment in PET/CT that you just completed. My understanding is that this basically buys you a period of time where you can afford to spend a bit below long-term trend line without any ill effects and then that will be followed by need for wave of upgrades or replacement. Can you give us a sense for maybe how many years of a window you’ve got?

[Howard Aihara:]

Kyle, this is Howard, in terms of in PET/CT there. There are typically some software upgrade long the road to do there, and may be some of the peripheral equipment that goes along with it, but there is a PET/CT platform at this stage pretty stable and you we really give an outlook year-to-year in terms of our CapEx spending, but there just isn't huge kind of maintenance CapEx that goes along with the PET/CT product.

[Kyle Smith:]

Okay. And so, you are not willing at this point to give us an indication for how long that useful life is before you might need to start replacing all of these systems. Is it 5 years, is it 10, anything in long terms to help/

[Howard Aihara:]

In terms of what we used for depreciation purposes for the books, we depreciated the equipment over a 7 year period of time and you know this is PET/CT is still a relatively new technology. But we certainly expect, we could use these systems longer than our seven year book life, but at this point we don’t have a lot of strength since this technology as it is not seven years old yet.

[Paul Viviano:]

Kyle, this is Paul. In addition to that I sense that the current MRI and PET/CT and to some extent the CT platforms nationally that are developed by the OEMs are stable and that these technologies are very durable and will last for a very long time and so, to the extent you maintain the equipment appropriately and do the software upgrade as Howard referred to that there is little reason to think that these wouldn't be usable clinically and provide state-of –the-art clinical diagnostic information will be on there, their depreciable life. One of the unintended consequences of this traumatic reductions in reimbursement from the DRA is as the sale of new advanced imaging equipment begins to really be negatively impacted and sell by the OEMs, is it there is less research for new technology being invested by the OEMs in these platforms and so, I think that they have a longer useable life technologies that at a phase where it is going to be very difficult to improve meaningfully on the current technology in PET/CT, MRI and CT.

[Kyle Smith:]

That's excellent color. It really helps in forming my long-term views. On the utilization front, from your comment it sounds like a little sequential downtick in scans per system per day in PET/CT. You really are viewing that as just a blip on a longer term up-trend. Is that correct?

[Howard Aihara:]

Hi Kyle, this is Howard. That is correct, you know, we expect to see significant volume growth in PET/CT nationally as Paul mentioned earlier, somewhere in the low-to-mid teens percent in 2008 growth. And there will be number of new systems that we've have purchased in 2008 but also fact that a lot of our existing customers who will increase there volume growth as well. So, we don't specifically guide to as scans per system per day number but certainly the units that we have the ability to put through many more than 6.1 scans per day.

[Kyle Smith:]

Excellent. And I know you are not disclosing the actual EBITDA contribution in the fourth quarter from the two acquisitions but using your indications of the revenue run rates and the margin territory. I'm coming up with the core business EBITDA being down about 7%ish in the quarter versus the 3% reported, and up 4.5%ish in the third quarter. Is that about the right territory or am I maybe missing something in my math?

[Howard Aihara:]

Kyle, I mentioned in the fourth quarter of 2006, we had a $1.7 million insurance settlement gain from Hurricane Katrina. So that increased EBITDA by $1.7 million in the fourth quarter of 2006. So, I think you should adjust for that for kind of an apple-to-apple comparison.

[Kyle Smith:]

Great, thank you, I actually have missed that comment earlier. Housekeeping item on the acquisition spending, I have got 48 million for NEHE and 36 million for Bethesda. There is still about, it looks like $6 million or $7 million GAAP versus the cash flow statements indication of what you paid in the quarter. What accounts for the difference?

[Howard Aihara:]

We bought a small platform. Actually, it was a very small acquisition in the second half of the year in the early fourth quarter, just not of any size to really be that notable.

[Kyle Smith:]

Okay. And then finally at this point I know you don't bake future acquisitions into your guidance and obviously don't want to speak about individual transactions prematurely. But I wanted to get a sense now that you have got dedicated team for M&A in place. What the endpoints or the bookmarks for targeted total spending in 2008 or maybe how that spending might be loaded. Is it first half loaded, back half loaded, evenly spread? Just to get a sense of what we should be expecting in terms of acquisitions for 2008?

[Paul Viviano:]

Kyle, this is Paul. We really don’t have a sense for loading or completing these transactions and the impact they might have on 2008 at this point in time. Nor do we have a target of what we have targeted to spend in terms of the resources that are available on our balance sheet. We obviously felt strongly that before we would issue $150 million that our pipeline was very robust and very strong and that we would likely be in a position to proceed with completing some transactions. But they are never done, as you know, until they are actually done. And so while we continue to be very proactive looking at acquisitions in the three areas that we have targeted and cited before PET/CT, fixed site in CON states and radiation oncology centers. We are looking at transactions in everyone of those sectors of the business and we are in negotiations with several potential sellers at this point. But at this point they are just potential deals. So, it is a little bit early to be more descriptive about what the impact would be on '08 until we have a little more time underway and completed some additional negotiations and which point of course we will share those conclusions with you. But at this point we are doing an (Inaudible) of lot of work and believe that there is some good opportunities out there for us and we hope some of them get translated into actual acquisitions.

[Kyle Smith:]

That's fair. But maybe if I can come out, from a slightly different direction. At this point you have got between the cash in the balance sheet and the revolve availability quite a bit of dry powder. Do you foresee the possibility that you might use it all up in 2008 and maybe need to come back to the capital markets or do you foresee that you'll probably have additional dry powder left over at year-end to deploy in 2009, or you just don't know?

[Paul Viviano:]

It is too early to really provide any additional color for you in that respect.

[Kyle Smith:]

Okay, well I appreciate the color as always. You guys are very informative and I look forward to the next quarter.

[Paul Viviano:]

Thank you.

[Kyle Smith:]

Bye.

[Operator:]

As there are no further questions, I'll now conclude this conference call.

[Paul Viviano:]

We thank you for your interest in Alliance Imaging. We look forward to discussing with you our first quarter 2008 results which will occur in early May. Thank you very much for joining us this morning.

[Operator:]

Ladies and gentleman, this concludes the Alliance Imaging conference call for today. Thank you all for participating and have a nice day. All parties may disconnect now.