America Service Group Announces Second Quarter Results; Company Announces up to $30 Million Stock Repurchase Program.BRENTWOOD Brentwood, city and district, England Brentwood, city (1991 pop. 51,212) and district, Essex, SE England. Brentwood is mainly residential but produces some agricultural equipment, film, and prefabricated concrete. , Tenn. -- America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. 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 ): Highlights: --Net income of $3.1 million for the quarter and $7.1 million year to date --Adjusted 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 increase of 10.2% from the prior year quarter to $8.0 million --Board of Directors approves stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program of up to $30 million --Company updates guidance for full-year 2005 results America Service Group Inc. (NASDAQ: ASGR) announced today results for the second quarter and six months ended June June: see month. 30, 2005. Additionally, the Company announced that its Board of Directors has approved a stock repurchase program to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. up to $30 million of the Company's common stock over the next 24 months. Commenting on second quarter results, Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. Catalano Catalano, originally an adjective or derived substantive indicating something or someone Catalan, can refer to the following persons:
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 the Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). contract. The Board and management are confident in the future of the Company, as demonstrated in the Board's authorization The right or permission to use a system resource; the process of granting access. See access control. of a stock repurchase program of up to $30 million." FAS 144 Impact on Income Statement Presentation Format As noted in our 2004 annual report on 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. , the Company is applying the discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. provisions 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 ("FAS 144") to all service contracts that 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. subsequent to January January: see month. 1, 2002. FAS 144 requires the Company to follow the income statement presentation format described in FAS 144. The results of operations of contracts that expire, less applicable income taxes, are classified on the Company's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: statements of operations 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 presentation 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 income or loss from discontinued operations, net of taxes. Items such as indirect selling, general and administrative expenses or interest expense cannot be allocated to expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. contracts. The application of the FAS 144 accounting presentation to expired 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. . As a result of the application of FAS 144, "healthcare revenues" and "healthcare expenses" on the Company's consolidated statements of operations for any period presented will only include revenues and expenses from continuing contracts. The Company will also discuss "Total Revenues," "Total Healthcare Expenses," and "Total Gross Margin," which will include all of the Company's revenues and healthcare expenses for a period (i.e., healthcare revenues plus revenues from expired service contracts, or healthcare expenses plus expenses from expired contracts). Total Gross Margin is defined as Total Revenues less Total Healthcare Expenses. Total Gross Margin excludes loss contract reserve utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be . Results for Second Quarter and Six Months Ended June 30, 2005 Healthcare revenues from continuing contracts for the second quarter of 2005 were $161.0 million, an increase of 8.7% over the prior year quarter. Healthcare revenues for the six months ended June 30, 2005, were $314.6 million, an increase of 8.5% over the prior year period. Total Revenues, which includes revenues from continuing and discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: contracts, for the second quarter of 2005 were $175.8 million, an increase of 1.8% over the prior year quarter. Total Revenues for the six months ended June 30, 2005, were $345.4 million, an increase of 1.3% over the prior year period. Healthcare expenses from continuing contracts for the second quarter of 2005 were $148.6 million, or 92.3% of healthcare revenues, as compared with $135.0 million, or 91.2% of healthcare revenues, in the prior year quarter. Healthcare expenses for the six months ended June 30, 2005, were $290.0 million, or 92.2% of healthcare revenues, as compared with $265.0 million, or 91.4% of healthcare revenues, in the prior year period. The increase in healthcare expenses from continuing contracts as a percentage of healthcare revenue when compared with the prior year quarter and first six months is primarily due to increases in off-site off-site adj. Taking place or located away from the site, as of a particular activity: an off-site waste treatment operation. off utilization expenses in certain full-risk contracts and increases in medical malpractice Improper, unskilled, or negligent treatment of a patient by a physician, dentist, nurse, pharmacist, or other health care professional. expenses. Total Healthcare Expenses, which includes expenses from continuing and discontinued contracts, for the second quarter of 2005 were $163.5 million, or 93.0% of Total Revenues, as compared with $161.0 million, or 93.2% of Total Revenues, in the prior year quarter. Total Healthcare Expenses for the six months ended June 30, 2005, were $321.0 million, or 93.0% of Total Revenues, as compared with $318.2 million, or 93.3% of Total Revenues, in the prior year period. Gross margin from continuing contracts for the second quarter of 2005 was $12.4 million, or 7.7% of healthcare revenues, as compared with $13.0 million, or 8.8% of healthcare revenues, in the prior year quarter. Gross margin for the six months ended June 30, 2005, was $24.7 million, or 7.8% of healthcare revenues, as compared with $24.8 million, or 8.6% of healthcare revenues, in the prior year period. Total Gross Margin, which includes continuing and discontinued contracts, for the second quarter of 2005 was $12.3 million, or 7.0% of Total Revenues, as compared with $11.7 million, or 6.8% of Total Revenues, in the prior year quarter. Total Gross Margin for the six months ended June 30, 2005, was $24.3 million, or 7.0% of Total Revenues, as compared with $22.8 million, or 6.7% of Total Revenues, in the prior year period. Selling, general and administrative expenses for the second quarter of 2005 were $4.3 million, or 2.7% of healthcare revenues, as compared with $4.5 million, or 3.0% of healthcare revenues, in the prior year quarter. Selling, general and administrative expenses for the six months ended June 30, 2005, were $8.6 million, or 2.7% of healthcare revenues, as compared with $8.9 million, or 3.1% of healthcare revenues, in the prior year period. Selling, general and administrative expenses as a percentage of Total Revenues for the second quarter of 2005 and the six months ended June 30, 2005, were 2.5% as compared with 2.6% in the prior year quarter and prior year period. In addition to the above selling, general and administrative expenses, the Company incurred $451,000 of due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. expenses in the second quarter of 2005 related to a potential acquisition of a healthcare company outside of the corrections sector. These acquisition discussions were discontinued in late July July: see month. 2005. The Company expects to record an additional $150,000 to $250,000 of due diligence expenses in the third quarter of 2005, representing expenses incurred during the month of July prior to the discontinuance Cessation; ending; giving up. The discontinuance of a lawsuit, also known as a dismissal or a non-suit, is the voluntary or involuntary termination of an action. DISCONTINUANCE, pleading. A chasm or interruption in the pleading. 2. of the acquisition discussions. Adjusted EBITDA for the second quarter of 2005 was $8.0 million, an increase of 10.2%, as compared with $7.2 million in the prior year quarter. Adjusted EBITDA for the six months ended June 30, 2005, was $15.7 million, an increase of 12.8%, as compared with $13.9 million in the prior year period. As reflected in the attached schedule, the Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, amortization, increases or decreases in reserves for loss contracts, discontinued acquisition expenses and the charge for settlement of a Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and legal matter recorded in the first quarter of 2004. The Company includes in Adjusted EBITDA the results of discontinued operations under the same definition. Depreciation and amortization expense for the second quarter of 2005 was $1.0 million, consistent with the prior year quarter. Depreciation and amortization expense for the six months ended June 30, 2005, was $2.0 million as compared with $1.9 million in the prior year period. Income from operations for the second quarter of 2005 was $6.7 million as compared with $7.6 million in the prior year quarter. Income from operations for the six months ended June 30, 2005, was $13.6 million as compared with $8.9 million in the prior year period. Negatively impacting the current year results is the $451,000 of discontinued acquisition expenses recorded in the second quarter. Negatively impacting the prior year results is the $5.2 million charge for final settlement of a Florida legal matter recorded in the first quarter. Net interest expense for the second quarter of 2005 was $205,000 as compared with $453,000 in the prior year quarter. Net interest expense for the six months ended June 30, 2005, was $433,000 as compared with $1.0 million in the prior year period. Further offsetting the above net interest expense, the Company collected $249,000 of late fee income in the second quarter of 2005. The late fee income related to past due accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying balances due from a client. Income from continuing operations before income taxes for the second quarter of 2005 was $6.7 million as compared with $7.2 million in the prior year quarter. Income from continuing operations before income taxes for the six months ended June 30, 2005, was $13.4 million as compared with $7.9 million in the prior year period. Positively impacting current year results is the $249,000 of late fee income offset by the negative impact of the $451,000 of discontinued acquisition expenses recorded in the second quarter. Negatively impacting the prior year results is the $5.2 million charge for final settlement of a Florida legal matter recorded in the first quarter. The income tax provision for the second quarter of 2005 was $2.7 million, an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. 40% effective tax rate, as compared with an income tax benefit of $5.3 million in the prior year quarter. The income tax provision for the six months ended June 30, 2005, was $5.4 million, an approximate 40% effective tax rate, as compared with an income tax benefit of $5.0 million in the prior year period. The income tax provision for the second quarter of 2005 and the six months ended June 30, 2005, is not comparable with the prior year quarter and prior year six month income tax provision, due to the deferred tax valuation allowance that existed during the prior year until June 30, 2004. Substantially all of the Company's deferred tax valuation allowance was reversed at June 30, 2004, resulting in a noncash income tax benefit in the second quarter of 2004 of $5.3 million. Income from continuing operations for the second quarter of 2005 was $4.0 million as compared with $12.5 million in the prior year quarter. Income from continuing operations for the six months ended June 30, 2005, was $8.0 million as compared with $12.9 million in the prior year period. Positively impacting the current year results is the $249,000 of late fee income offset by the negative impact of the $451,000 of discontinued acquisition expenses recorded in the second quarter. Negatively impacting the prior year results is the $5.2 million charge for final settlement of a Florida legal matter recorded in the first quarter, offset by the positive impact of the $5.3 million income tax valuation allowance reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its recorded in the second quarter. Additionally, the income tax provision for the second quarter of 2005 and the six months ended June 30, 2005, is not comparable with the prior year quarter and prior year six month income tax provision, due to the deferred tax valuation allowance that existed during the prior year until June 30, 2004. The loss from discontinued operations, net of taxes, for the second quarter of 2005 was $871,000 as compared with $8.2 million in the prior year quarter. The loss from discontinued operations, net of taxes, for the six months ended June 30, 2005, was $1.0 million as compared with $8.9 million in the prior year period. Negatively impacting the current year loss from discontinued operations, net of taxes, is the $1.3 million increase in the Company's loss contract reserve recorded in the second quarter of 2005 to cover losses and allocated overhead related to the Company's Maryland Department of Public Safety and Correctional cor·rec·tion n. 1. The act or process of correcting. 2. Something offered or substituted for a mistake or fault: made corrections in the report. 3. a. Services ("Maryland DPS Minicomputer series from Bull HN. 1. (language, text) DPS - Display PostScript. 2. (language) DPS - A real-time language with direct expression of timing requests. ["Language Constructs for Distributed Real-Time PRogramming", I. ") contract through its expiration on June 30, 2005. The Company had previously announced on June 15, 2005, that it expected to increase its reserves for losses under the Maryland DPS contract in a range of $1.0 million to $1.5 million in the second quarter of 2005. Negatively impacting the prior year second quarter and first six months loss from discontinued operations, net of taxes, is the $6.8 million loss contract charge recorded in the second quarter related to the Maryland DPS contract. Additionally, the income tax provision for the second quarter of 2005 and the six months ended June 30, 2005, is not comparable with the prior year quarter and prior year six month income tax provision due to the deferred tax valuation allowance that existed during the prior year until June 30, 2004. Net income for the second quarter of 2005 was $3.1 million, or $0.29 basic and $0.28 diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. per common share, as compared with $4.3 million, or $0.40 basic and $0.39 diluted per common share, in the prior year quarter. Net income for the six months ended June 30, 2005, was $7.1 million, or $0.65 basic and $0.63 diluted per common share, as compared with $3.9 million, or $0.37 basic and $0.36 diluted per common share, in the prior year period. Positively impacting the current year results is the $249,000 of late fee income recorded in the second quarter, offset by the negative impact of the $451,000 of discontinued acquisition expenses and the $1.3 million increase in the Company's loss contract reserve recorded in the second quarter. Negatively impacting the prior year results is the $6.8 million loss contract charge recorded in the second quarter and the $5.2 million charge for final settlement of a Florida legal matter recorded in the first quarter, partially offset by the positive impact of the $5.3 million income tax valuation allowance reversal recorded in the second quarter. Additionally, the income tax provision for the second quarter of 2005 and the six months ended June 30, 2005, is not comparable with the prior year quarter and prior year six month income tax provision due to the deferred tax valuation allowance that existed during the prior year until June 30, 2004. Cash on hand decreased to $11.5 million at June 30, 2005, as compared with $15.6 million at March 31, 2005. Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). in accounts receivable increased to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 46 days at June 30, 2005, as compared to 45 days at March 31, 2005. The Company had no debt outstanding as of June 30, 2005. 2005 Guidance The Company is updating its previous guidance for full-year 2005 results. Consistent with past practice, the Company's guidance for full-year 2005 results does not consider the impact of any potential new business. Contracts currently in operation are included in the guidance for full-year 2005 results through the end of the year, unless the Company has previously been notified otherwise by the client. The Company's guidance for full-year 2005 results (adjusted for the items discussed in detail in the footnotes) is summarized below:
Total Revenues (1) $640.0 - $660.0 million
Depreciation, amortization
and interest expense $5.1 million
Adjusted pre-tax income (2) $26.9 - $27.9 million
Effective tax rate 40%
Adjusted net income (2) $16.1 - $16.7 million
Weighted average common shares
outstanding - diluted 11.0 million - 11.1 million
Adjusted net income per common
share - diluted (2) $1.45 - $1.52
(1) From continuing and discontinued contracts
(2) From continuing and discontinued contracts and adjusted to
exclude the pre-tax positive impact of the $249,000 of late fee
income recorded in the second quarter, as well as the pre-tax
negative impacts of the $451,000 of discontinued acquisition
expenses recorded in the second quarter, the additional $150,000
to $250,000 of discontinued acquisition expenses expected to be
recorded in the third quarter and the $1.3 million increase in
the Company's loss contract reserve recorded in the second
quarter.
Stock Repurchase Program The Company's Board of Directors has approved a stock repurchase program to repurchase up to $30 million of the Company's common stock over the next 24 months. This program is intended to be implemented through purchases made from time to time in either the open market or through private transactions, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Securities and Exchange Commission requirements. Under the stock repurchase program, no shares will be purchased directly from officers or directors of the Company. As of July 25, 2005, the Company had approximately 10.9 million shares outstanding. The timing, prices and sizes of purchases will depend upon prevailing stock prices, general economic and market conditions and other considerations. Funds for the repurchase of shares are expected to come primarily from cash generated from operations and also from funds on hand, including amounts available under the Company's credit facility. The repurchase program does not obligate obligate /ob·li·gate/ (ob´li-gat) pertaining to or characterized by the ability to survive only in a particular environment or to assume only a particular role, as an obligate anaerobe. the Company to acquire any particular amount of common stock and the repurchase program may be suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. at any time at the Company's discretion. Conference Call A listen-only simulcast Simulcast is a portmanteau of "simultaneous broadcast", and refers to programs or events broadcast across more than one medium, or more than one service on the same medium, at the same time. and replay of America Service Group's first quarter conference call will be available online at www.asgr.com or www.earnings.com on July 27, 2005, beginning at 11:00 a.m. Eastern time. In addition, a copy of the press release containing the related financial information can be found on the Company's website. 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 a 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 release contains certain financial information not derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. in accordance with United States generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). The Company believes this information is useful to investors and other interested parties. Such information should not be considered as a substitute for any measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. A discussion of the Company's definition of such information and reconciliation to the most comparable GAAP measure is included below. The most directly comparable GAAP measures for the guidance provided by the Company are: Healthcare Revenues; Income from Continuing Operations Before Income Taxes; Depreciation and Amortization; and Interest, each of which will only include results from continuing contracts. Because it is not possible to reliably forecast discontinued operations, reconciliation of the Company's guidance to the most directly comparable GAAP measure is not practicable practicable adj. when something can be done or performed. to be estimated on a forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. basis. 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, including the Company's beliefs and expectations of future performance, the effects of any stock split and may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes" or "intends" and similar words and phrases Words and Phrases® A multivolume set of law books published by West Group containing thousands of judicial definitions of words and phrases, arranged alphabetically, from 1658 to the present. . 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. including, without limitation, risks related to the following: the Company's ability to retain existing client contracts and obtain new contracts; whether or not government agencies continue to privatize pri·va·tize tr.v. pri·va·tized, pri·va·tiz·ing, pri·va·tiz·es To change (an industry or business, for example) from governmental or public ownership or control to private enterprise: "The strike ... correctional healthcare services; the possible effect of adverse publicity on the Company's business; increased competition for new contracts and renewals of existing contracts; the Company's ability to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution its expansion strategies; the Company's ability to limit its exposure for catastrophic illnesses catastrophic illness A morbid condition that results in health care costs that exceed a person's income, or which compromise financial independence, reducing him/her to subsistence or near-poverty levels; CIs are usually life-threatening and may leave significant and injuries in excess of amounts covered under contracts or insurance coverage; the outcome of pending litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; the Company's dependence on key personnel; and the Company's determination whether to repurchase shares under the stock repurchase program. A discussion of these important factors and assumptions regarding the statements and risks involved is contained in the Company's annual report on Form 10-K and other 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 STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
--------------------------------
June 30, % of June 30, % of
2005 Revenue 2004 Revenue
-------- ----- -------- -----
Healthcare revenues $160,996 100.0 $148,088 100.0
Healthcare expenses 148,562 92.3 135,048 91.2
-------- ----- -------- -----
Gross margin 12,434 7.7 13,040 8.8
Selling, general and
administrative expenses 4,329 2.7 4,465 3.0
Discontinued acquisition expenses 451 0.3 -- --
Depreciation and amortization 1,000 0.6 959 0.7
-------- ----- -------- -----
Income from operations 6,654 4.1 7,616 5.1
Interest, net 205 0.1 453 0.3
Late fee income 249 0.2 -- --
-------- ----- -------- -----
Income from continuing
operations before income
tax provision (benefit) 6,698 4.2 7,163 4.8
Income tax provision (benefit) 2,680 1.7 (5,329) (3.6)
-------- ----- -------- -----
Income from continuing operations 4,018 2.5 12,492 8.4
Loss from discontinued operations,
net of taxes (871) (0.5) (8,189) (5.5)
-------- ----- -------- -----
Net income $3,147 2.0 $4,303 2.9
======== ===== ======== =====
Income (loss) per common
share - basic:
Income from continuing operations 0.37 $1.17
Loss from discontinued operations,
net of taxes 0.08) (0.77)
-------- --------
Net income $0.29 $0.40
======== ========
Income (loss) per common
share - diluted:
Income from continuing operations $0.36 $1.13
Loss from discontinued operations,
net of taxes (0.08) (0.74)
-------- --------
Net income $0.28 $0.39
======== ========
Weighted average common
shares outstanding:
Basic 10,873 10,692
======== ========
Diluted 11,123 11,034
======== ========
AMERICA SERVICE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Six Months Ended
--------------------------------
June 30, % of June 30, % of
2005 Revenue 2004 Revenue
-------- ----- -------- -----
Healthcare revenues $314,630 100.0 $289,874 100.0
Healthcare expenses 289,957 92.2 265,034 91.4
-------- ----- -------- -----
Gross margin 24,673 7.8 24,840 8.6
Selling, general and
administrative expenses 8,633 2.7 8,881 3.1
Discontinued acquisition expenses 451 0.2 -- --
Depreciation and amortization 1,979 0.6 1,900 0.6
Charge for settlement of
Florida legal matter -- -- 5,200 1.8
-------- ----- -------- -----
Income from operations 13,610 4.3 8,859 3.1
Interest, net 433 0.1 964 0.4
Late fee income 249 0.1 -- --
-------- ----- -------- -----
Income from continuing
operations before income
tax provision (benefit) 13,426 4.3 7,895 2.7
Income tax provision (benefit) 5,381 1.7 (4,977) (1.7)
-------- ----- -------- -----
Income from continuing operations 8,045 2.6 12,872 4.4
Loss from discontinued operations,
net of taxes (985) (0.4) (8,927) (3.0)
-------- ----- -------- -----
Net income $7,060 2.2 $3,945 1.4
======== ===== ======== =====
Income (loss) per common
share - basic:
Income from continuing operations $0.74 $1.21
Loss from discontinued operations,
net of taxes (0.09) (0.84)
-------- --------
Net income $0.65 $0.37
========= ========
Income (loss) per common
share - diluted:
Income from continuing operations $0.72 $1.17
Loss from discontinued operations,
net of taxes (0.09) (0.81)
-------- --------
Net income $0.63 $0.36
======== ========
Weighted average common
shares outstanding:
Basic 10,860 10,648
======== ========
Diluted 11,142 10,983
======== ========
AMERICA SERVICE GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, Dec. 31,
2005 2004
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $11,484 $7,191
Accounts receivable, healthcare and
other less allowances 89,781 93,111
Inventories 7,287 7,639
Prepaid expenses and other current assets 16,121 17,186
Current deferred tax assets 4,641 9,349
-------- --------
Total current assets 129,314 134,476
Property and equipment, net 6,000 5,356
Goodwill, net 43,896 43,896
Contracts, net 7,979 8,793
Other intangibles, net 960 1,076
Other assets 8,396 12,548
-------- --------
Total assets $196,545 $206,145
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $43,437 $49,786
Accrued medical claims liability 28,423 25,808
Accrued expenses 50,079 45,351
Deferred revenue 1,893 11,869
Current portion of loss contract reserve -- 6,062
-------- --------
Total current liabilities 123,832 138,876
Noncurrent portion of accrued expenses 8,556 11,259
Noncurrent deferred tax liabilities 876 1,017
-------- --------
Total liabilities 133,264 151,152
-------- --------
Stockholders' equity:
Common stock 109 108
Additional paid-in capital 56,574 55,203
Deferred compensation (287) (143)
Retained earnings (accumulated deficit) 6,885 (175)
-------- --------
Total stockholders' equity 63,281 54,993
-------- --------
Total liabilities and stockholders' equity $196,545 $206,145
======== ========
AMERICA SERVICE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30,
------------------
2005 2004
-------- --------
Operating Activities
Net income $7,060 $3,945
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,987 1,965
Finance cost amortization 291 297
Stock option income tax benefits 81 --
Deferred income taxes 4,567 (5,255)
Amortization of deferred compensation 31 --
Interest on stockholders' notes receivable -- (2)
Increase in loss contract reserve 1,295 6,800
Changes in operating assets and liabilities:
Accounts receivable, net 3,330 (13,370)
Inventories 352 26
Prepaid expenses and other current assets 1,065 3,492
Other assets 3,989 (2,203)
Accounts payable (6,349) 10,176
Accrued medical claims liability 2,615 5,316
Accrued expenses 2,025 2,222
Deferred revenue (9,976) (4,951)
Loss contract reserve utilization (7,357) (1,430)
-------- --------
Net cash provided by operating activities 5,006 7,028
-------- --------
Investing Activities
Capital expenditures (1,829) (1,165)
-------- --------
Net cash used in investing activities (1,829) (1,165)
-------- --------
Financing Activities
Net payments on line of credit and term loan -- (1,198)
Issuance of common stock 369 205
Exercise of stock options 747 1,533
-------- --------
Net cash provided by financing activities 1,116 540
-------- --------
Net increase in cash and cash equivalents 4,293 6,403
Cash and cash equivalents at beginning of period 7,191 1,157
-------- --------
Cash and cash equivalents at end of period $11,484 $7,560
======== ========
AMERICA SERVICE GROUP INC.
SCHEDULE OF LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES
(In thousands)
Three Months Ended
--------------------------------
June 30, % of June 30, % of
2005 Revenue 2004 Revenue
-------- ----- -------- -----
Healthcare revenues $14,781 100.0 $24,568 100.0
Healthcare expenses 14,935 101.1 25,926 105.5
Increase in loss contract reserve 1,295 8.7 6,800 27.7
-------- ----- -------- -----
Gross margin (1,449) (9.8) (8,158) (33.2)
Depreciation and amortization 3 0.0 27 0.1
-------- ----- -------- -----
Loss from discontinued operations
before income taxes (1,452) (9.8) (8,185) (33.3)
Income tax provision (benefit) (581) (3.9) 4 0.0
-------- ----- -------- -----
Loss from discontinued operations,
net of taxes $(871) (5.9) $(8,189) (33.3)
======== ===== ======== =====
Six Months Ended
--------------------------------
June 30, % of June 30, % of
2005 Revenue 2004 Revenue
-------- ----- -------- -----
Healthcare revenues $30,741 100.0 $51,087 100.0
Healthcare expenses 31,080 101.1 53,132 104.0
Increase in loss contract reserve 1,295 4.2 6,800 13.3
-------- ----- -------- -----
Gross margin (1,634) (5.3) (8,845) (17.3)
Depreciation and amortization 8 0.0 65 0.1
-------- ----- -------- -----
Loss from discontinued operations
before income taxes (1,642) (5.3) (8,910) (17.4)
Income tax provision (benefit) (657) (2.1) 17 0.1
-------- ----- -------- -----
Loss from discontinued operations,
net of taxes $(985) (3.2) $(8,927) (17.5)
======== ===== ======== =====
AMERICA SERVICE GROUP INC. DISCUSSION AND RECONCILIATION OF NON-GAAP MEASURES (In thousands) This release contains certain financial information not derived in accordance with United States generally accepted accounting principles ("GAAP"). The Company believes this information is useful to investors and other interested parties. Such information should not be considered as a substitute for any measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. A discussion of the Company's definition of such information and reconciliation to the most comparable GAAP measure is included below. ADJUSTED EBITDA The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, amortization, increases or decreases in reserves for loss contracts, discontinued acquisition expenses and the charge for settlement of a Florida legal matter. The Company includes in Adjusted EBITDA the results of discontinued operations under the same definition. The Company believes that Adjusted EBITDA is an important operating measure that supplements discussions and analysis of the Company's results of operations. The Company believes that it is useful to investors to provide disclosures of its results of operations on the same basis as that used by management, credit providers and analysts. The Company's management, credit providers and analysts rely upon Adjusted EBITDA as a key measure to review and assess operating performance. Adjusted EBITDA is utilized by management, credit providers and analysts to compare the Company's current operating results with the corresponding periods in the previous year and to compare the Company's operating results with other companies in the healthcare industry. Adjusted EBITDA is not a measure of financial performance under United States generally accepted accounting principles and should not be considered an alternative to net income as a measure of operating performance or to cash flows from operating, investing and financing activities as a measure of liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is susceptible susceptible /sus·cep·ti·ble/ (su-sep´ti-b'l) 1. readily affected or acted upon. 2. lacking immunity or resistance and thus at risk of infection. sus·cep·ti·ble adj. to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures presented by other companies.
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
Three Months Ended
June 30,
------------------
2005 2004
-------- --------
Net income $3,147 $4,303
Depreciation and taxes included in loss
from discontinued operations, net of taxes (578) 31
Increase in loss contract reserve included in
loss from discontinued operations, net of taxes 1,295 6,800
Income tax provision (benefit) 2,680 (5,329)
Late fee income (249) --
Interest, net 205 453
Depreciation and amortization 1,000 959
Discontinued acquisition expenses 451 --
-------- --------
Adjusted EBITDA $7,951 $7,217
======== ========
Six Months Ended
June 30,
------------------
2005 2004
-------- --------
Net income $7,060 $3,945
Depreciation and taxes included in loss
from discontinued operations, net of taxes (649) 82
Increase in loss contract reserve included in
loss from discontinued operations, net of taxes 1,295 6,800
Income tax provision (benefit) 5,381 (4,977)
Late fee income (249) --
Interest, net 433 964
Depreciation and amortization 1,979 1,900
Discontinued acquisition expenses 451 --
Charge for settlement of Florida legal matter -- 5,200
-------- --------
Adjusted EBITDA $15,701 $13,914
======== ========
TOTAL REVENUES, TOTAL HEALTHCARE EXPENSES AND TOTAL GROSS MARGIN The Company defines Total Revenues as healthcare revenues plus revenues from expired service contracts classified as discontinued operations. The Company defines Total Healthcare Expenses as healthcare expenses plus expenses from expired contracts classified as discontinued operations. The Company defines Total Gross Margin as Total Revenues less Total Healthcare Expenses. Total Gross Margin excludes loss contract reserve utilization. The Company believes that Total Revenues, Total Healthcare Expenses and Total Gross Margin are useful measurements when comparing the Company's performance for such items as selling, general and administrative expenses, interest expense or tax expense as a percentage of revenue between periods. As a result of the application of FAS 144, "healthcare revenues," "healthcare expenses," and "gross margin" on the Company's consolidated statements of operations for any period presented will only include revenues and expenses from continuing contracts.
RECONCILIATION OF HEALTHCARE REVENUES TO TOTAL REVENUES
Three Months Ended
June 30,
------------------
2005 2004
-------- --------
Healthcare revenues $160,996 $148,088
Healthcare revenues included in loss
from discontinued operations, net of taxes 14,781 24,568
-------- --------
Total Revenues $175,777 $172,656
======== ========
Six Months Ended
June 30,
------------------
2005 2004
-------- --------
Healthcare revenues $314,630 $289,874
Healthcare revenues included in loss
from discontinued operations, net of taxes 30,741 51,087
-------- --------
Total Revenues $345,371 $340,961
======== ========
RECONCILIATION OF HEALTHCARE EXPENSES TO TOTAL HEALTHCARE EXPENSES
Three Months Ended
June 30,
------------------
2005 2004
-------- --------
Healthcare expenses $148,562 $135,048
Healthcare expenses included in loss
from discontinued operations, net of taxes 14,935 25,926
-------- --------
Total Healthcare Expenses $163,497 $160,974
======== ========
Six Months Ended
June 30,
------------------
2005 2004
-------- --------
Healthcare expenses $289,957 $265,034
Healthcare expenses included in loss
from discontinued operations, net of taxes 31,080 53,132
-------- --------
Total Healthcare Expenses $321,037 $318,166
======== ========
RECONCILIATION OF GROSS MARGIN TO TOTAL GROSS MARGIN
Three Months Ended
June 30,
------------------
2005 2004
-------- --------
Gross margin $12,434 $13,040
Gross margin included in loss from
discontinued operations, net of taxes (1,449) (8,158)
Increase in loss contract reserve included in
loss from discontinued operations, net of taxes 1,295 6,800
-------- --------
Total Gross Margin $12,280 $11,682
======== ========
Six Months Ended
June 30,
------------------
2005 2004
-------- --------
Gross margin $24,673 $24,840
Gross margin included in loss from discontinued
operations, net of taxes (1,634) (8,845)
Increase in loss contract reserve included in
loss from discontinued operations, net of taxes 1,295 6,800
-------- --------
Total Gross Margin $24,334 $22,795
======== ========
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