America Service Group Announces Reconfirmation of 2003 Expectations and Revised Interpretation of FAS 144 Accounting Presentation.Business Editors/Health/Medical Writers BRENTWOOD, Tenn.--(BUSINESS WIRE)--March 31, 2003 America Service Group Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ASGR ASGR America Service Group Inc. ASGR Armed Services Graves Registration Office ) announced today that based on guidance from its independent accountants, Ernst & Young LLP LLP - Lower Layer Protocol ("E&Y"), the Company has revised its interpretation of the applicability of Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). Statement of Financial Accounting Standards No. 144: Accounting for the Impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. or Disposal of Long-Lived Assets, ("FAS 144"), as it relates to the accounting presentation of the Company's service contracts that expired during 2002. Commenting on today's announcement, Michael W. Taylor, the Company's senior vice president and chief financial officer, said, "The application of the FAS 144 accounting presentation to our expired service contracts has no impact on net income, earnings per share, total cash flows or stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. for the year ended December 31, 2002. More importantly, it also has no material effect on previous comments the Company has made about 2003 expectations." The Company reconfirms its expectations of revenues from continuing and expiring contracts ("Total Revenues") to be in the range of $545 million for 2003, before any new contract awards. The Company was awarded approximately $50 million of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. new business in 2002. Additionally, the Company still expects gross margins and selling, general and administrative expenses to be approximately 6.5% and 2.6%, respectively, of Total Revenues in 2003. This would generate EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become of approximately $21 million in 2003. The Company also still expects pre-tax income from continuing and discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. to be in excess of $12 million in 2003. In its press release dated February 19, 2003, the Company and E&Y did not consider the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of service contracts to be an event under FAS 144 that would require discontinued operations presentation in the income statement. Subsequent to this announcement of the Company's year-end results, the Company and E&Y have concluded that FAS 144 does apply to the termination or expiration of a contract. This has resulted in the application of discontinued operations presentation for the contracts that have expired during 2002 in the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , including revised quarterly data, as filed today with the Securities and Exchange Commission. The revised interpretation of the applicability of FAS 144 to the Company's contracts will require the Company to follow the income statement reporting in FAS 144 for discontinued operations in periods in which one or more of the Company's service contracts expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. . The results of operations of contracts that expire, less applicable income taxes, will be classified on the Company's income statement separately from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the . The classification prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). for discontinued operations requires the collapsing of healthcare revenues and expenses, as well as other specifically identifiable costs, into the gain or loss from discontinued operations. Items such as indirect selling, general and administrative expenses or interest expense cannot be allocated to these expiring contracts. The provisions of FAS 144 are applicable only to contract expirations after the effective date of FAS 144. The Company adopted the provisions of FAS 144 effective January 1, 2002. As such, any contracts that expired during 2002 have been presented as discontinued operations and prior period consolidated income statements consolidated income statement An income statement that combines the income statements of two or more organizations. As with other consolidated statements, a consolidated income statement eliminates any funds owed to or due from firms within the same group. have been reclassified. Contracts that expired prior to 2002 are required to be presented in continuing operations. A schedule of the components of the income (loss) from discontinued operations (contracts that expired during 2002) is set forth below (in thousands).
Year Ended
Dec. 31, % of Dec. 31, % of
2002 Revenue 2001 Revenue
---------------------------------
Healthcare revenues $78,441 100.0 $93,956 100.0
Healthcare expenses 72,950 93.0 89,231 95.0
-------- ----- ------- -----
Gross margin 5,491 7.0 4,725 5.0
Depreciation and amortization 64 0.1 93 0.1
Impairment of long-lived assets -- -- 13,236 14.1
-------- ----- ------- -----
Income (loss) from discontinued
operations before taxes 5,427 6.9 (8,604) (9.2)
Income tax (benefit) -- -- -- --
-------- ----- ------- -----
Income (loss) from discontinued
operations, net of tax $5,427 6.9 $(8,604) (9.2)
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Revised consolidated income statements for the years ended December 31, 2002 and 2001, which classify clas·si·fy tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies 1. To arrange or organize according to class or category. 2. To designate (a document, for example) as confidential, secret, or top secret. the results of operations for contracts that expired in 2002 as discontinued operations, are attached. The Company's consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. and statement of cash flows that were previously reported on February 19, 2003 are not impacted by the revised interpretation. The Company intends to continue to apply discontinued operations presentation rules to all future contract expirations. America Service Group Inc., based in Brentwood, Tennessee Brentwood is a city in Williamson County, Tennessee, United States. The population was 23,445 as of the U.S. Census Bureau's 2000 census, and as of 2007, Brentwood's population has increased to over 30,000. Brentwood is an affluent Nashville suburb. , is the leading provider of correctional healthcare services in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . America Service Group Inc., through its subsidiaries, provides a wide range of healthcare and pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. programs to government agencies for the medical care of inmates. This press release may contain "forward-looking" statements made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. As such, they involve risk and uncertainty that actual results may differ materially from those projected in the forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . A discussion of the important factors and assumptions regarding the statements and risks involved is contained in the Company's filings with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this release. The Company assumes no obligations to update or revise them or provide reasons why actual results may differ.
AMERICA SERVICE GROUP INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
Year Ended
Dec. 31, % of Dec. 31, % of
2002 Revenue 2001 Revenue
--------------------------------
Healthcare revenues $481,540 100.0 $458,515 100.0
Healthcare expenses 452,310 93.9 443,508 96.7
Reduction in loss contract reserve 3,320 0.7 -- --
Charge for loss contracts -- -- 18,318 4.0
-------- ----- -------- -----
Gross margin 32,550 6.8 (3,311) (0.7)
Selling, general and
administrative expenses 14,411 3.0 19,063 4.2
Depreciation and amortization 4,749 1.0 7,442 1.6
Strategic initiative and
severance expenses -- -- 2,562 0.6
-------- ----- -------- -----
Income (loss) from operations 13,390 2.8 (32,378) (7.1)
Interest, net 5,825 1.2 5,713 1.2
Charge for early retirement of debt 726 0.2 -- --
-------- ----- -------- -----
Income (loss) before income
tax provision (benefit) 6,839 1.4 (38,091) (8.3)
Income tax provision (benefit) 365 0.1 (1,852) (0.4)
-------- ----- -------- -----
Income (loss) from
continuing operations 6,474 1.3 (36,239) (7.9)
Income (loss) from
discontinued operations 5,427 1.2 (8,604) (1.9)
-------- ----- -------- -----
Net income (loss) 11,901 2.5 (44,843) (9.8)
Preferred stock dividends -- -- 163 --
-------- ----- -------- -----
Net income (loss) attributable
to common shares $11,901 2.5 $(45,006) (9.8)
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Income (loss) per common
share - basic:
Income (loss) from
continuing operations $1.15 $(6.88)
Income (loss) from
discontinued operations 0.97 (1.62)
-------- --------
Net income (loss) $2.12 $(8.50)
======== ========
Income (loss) per common
share - diluted:
Income (loss) from
continuing operations $1.13 $(6.88)
Income (loss) from
discontinued operations 0.95 (1.62)
-------- --------
Net income (loss) $2.08 $(8.50)
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Weighted average shares outstanding:
Basic 5,603 5,292
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Diluted 5,718 5,292
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