American Healthways Exceeds Fourth-Quarter and Fiscal 2005 Earnings Guidance; Fiscal 2005 Revenues Increase 27% with Guidance for 32% to 38% Growth for Fiscal 2006; Lives under Management Expand to 1.9 Million.NASHVILLE Nashville, city (1990 pop. 487,969), state capital, coextensive with Davidson co., central Tenn., on the Cumberland River, in a fertile farm area; inc. as a city 1806, merged with Davidson co. 1963. , Tenn. -- Ben R. Leedle, Jr., president and chief executive officer of American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Healthways Healthways can mean:
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 : AMHC AMHC Association of Mental Health Clergy AMHC Aviation Structural Mechanic Hydraulics Chief ), today announced financial results for the fourth quarter and year ended August 31, 2005. For the quarter, revenues increased 22% to $87,624,000 from $71,855,000 for the fourth quarter of fiscal 2004. Net income was $8,344,000, or $0.23 per 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. share, for the fourth quarter of fiscal 2005, including the impact of costs of $0.08 per diluted share associated with preparation and initial operation of the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. Health Support ("MHS (1) (Message Handling Service) An earlier messaging system from Novell that supported multiple operating systems and other messaging protocols, including SMTP, SNADS and X.400. It used the SMF-71 messaging format. ") pilots. Excluding the impact of the MHS pilots, the Company's net income per diluted share for the fourth quarter of fiscal 2005 was $0.31. Net income for the fourth quarter of fiscal 2004 was $9,293,000, or $0.27 per diluted share. See pages 9-10 for a reconciliation of GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and non-GAAP results. Revenues for fiscal 2005 rose 27% to $312,504,000 from $245,410,000 for fiscal 2004. Net income increased 27% to $33,084,000 for fiscal 2005 from $26,058,000 for fiscal 2004, while net income per diluted share increased 24% to $0.93 from $0.75. Results for fiscal 2005 included costs of $0.10 per diluted share associated with preparation and initial operation of the MHS pilots. Results for fiscal 2004 included the impact of incentive bonus revenues of $0.04 per diluted share. Excluding the impact of the MHS pilots and incentive bonus revenues, net income per diluted share for fiscal 2005 increased 45% to $1.03 from $0.71 for fiscal 2004. See pages 9-10 for a reconciliation of GAAP and non-GAAP results. Leedle commented, "American Healthways' operating and financial performance for the fourth quarter of fiscal 2005, which resulted in earnings for the quarter and full year above our guidance, is clear evidence of the continuing growth opportunities in our industry, the Company's proven ability to capture increased market share and the substantial momentum driving our business today." Additional highlights of the Company's performance for fourth-quarter and full-year fiscal 2005 include: --26 New, Extended or Expanded Health Plan Contracts for Fiscal 2005 - With the addition of six signings during the fourth quarter, the Company achieved 26 new, extended or expanded health plan contracts for fiscal 2005. Eight of these contracts were with new health plan customers, including three signed during the fourth quarter. Details of fourth-quarter contracts include: --a new two-year contract with Alameda Alameda (ăləmē`də, –mā`də), city (1990 pop. 76,459), Alameda co., W central Calif., on an island just off the eastern shore of San Francisco Bay; settled 1850, inc. as a city 1884. Alliance, bringing the Company's StatusOne high-risk high-risk adjective Referring to an ↑ risk of suffering from a particular condition Infectious disease Referring to an ↑ risk for exposure to blood-borne pathogens, which occurs with blood bank technicians, dental professionals, dialysis unit management program to a specific group of beneficiaries of Alameda Alliance's managed Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. program, who are at highest risk for imminent Impending; menacingly close at hand; threatening. Imminent peril, for example, is danger that is certain, immediate, and impending, such as the type an individual might be in as a result of a serious illness or accident. acute and high-cost health episodes; --a new five-year contract with Scott & White Health Plan to provide the Company's disease management programs for five chronic diseases to a segment of its fully insured The person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. insured n. population, with the potential to expand the programs to the whole population; and --a new three-year agreement with Premera Blue Cross Premera Blue Cross is a nonprofit Blue Cross Blue Shield licensed health insurance company based in Mountlake Terrace, Washington. It sells health insurance plans under the Blue Cross license in Washington state except Clark County and under both the Blue Cross and Blue Shield to deliver customized disease management solutions to its fully insured and self-insured self-insured Self fund Health insurance adjective Referring to the practice of carrying an individual health insurance policy for oneself; self insurance is usually more expensive than group insurance employer groups employer group Association of employers Managed care An entity with a current group benefits agreement in effect with a health plan to provide covered health care services to its employee-subscribers and eligible dependents. and individual members. In addition to these contracts signed with new health plans, during the fourth quarter the Company also executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. a second contract expansion with Tufts Health Plan, through a five-year agreement to offer the Company's full suite of services to the plan's self-insured employer groups, which represent more than 250,000 lives; announced the early renewal and three-year extension of its contract with Memorial Medical Center; and finalized See finalization. its contract as a sub-contractor to CIGNA CIGNA CG (Connecticut General Life Insurance Company) INA (Insurance Company of North America) under CIGNA's MHS agreement. --41% Growth in Actual Lives Under Management - The Company added a net 548,000 lives to actual lives under management during fiscal 2005, completing the fiscal year with 1,883,000 lives under management, up 41% from 1,335,000 at the end of fiscal 2004. Lives under management increased by 250,000, or 15%, sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen from the end of the third quarter of fiscal 2005. --78% Growth in Self-Insured Employer Lives - American Healthways continued the rapid expansion of its self-insured employer lives on behalf of its health plan customers, adding 280,000 lives to complete fiscal 2005 with 641,000 self-insured employer lives under management, up 78% from 361,000 at the end of fiscal 2004. The Company also produced 14% sequential-quarter growth in these lives from 562,000 at the end of the third quarter of fiscal 2005. At August 31, 2005, the Company had contracts with 372 specifically identifiable employers, a 93% increase from the 193 employer contracts at the end of fiscal 2004. --Year-End Fiscal 2005 Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of $33 Million - The Company's estimated 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. revenues in backlog of contracts signed but not yet initiated were $32,578,000 at the end of fiscal 2005 compared with $15,200,000 at the end of fiscal 2004. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $11 million of the backlog at the end of fiscal 2005 related to the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of the cooperative cooperative Organization owned by and operated for the benefit of those using its services. Cooperatives have been successful in such fields as the processing and marketing of farm products and the purchasing of other kinds of equipment and raw materials, and in the agreement between CIGNA and CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. concerning the Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. MHS pilot. The Company's backlog was $45,191,000 at the end of the third quarter of fiscal 2005, approximately $20 million of which related to the MHS pilot for 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). and the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). , which went live in the fourth quarter. --Substantial Cash Flow and Strengthened Financial Position - Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $29,529,000 for the fourth quarter and $75,205,000 for fiscal 2005, a 41% increase over fiscal 2004. In addition to capital expenditures of approximately $16 million for fiscal 2005, the Company used its cash flow to acquire assets such as Health IQ Diagnostics (1) Software routines that test hardware components (memory, keyboard, disks, etc.). Diagnostics are often stored in ROM chips and activated on startup. (2) Error messages in a programmer's source code that refer to statements or syntax that the compiler or assembler and the Savard Savard is a surname, and may refer to:
This page or section lists people with the surname Savard. Systems, strengthen its financial position primarily by paying off all its bank debt and increase its cash and cash equivalents to $63,467,000 at year end. 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. at the end of fiscal 2005 was $206,930,000. --Launch of Maryland and District of Columbia MHS Pilot - The Company and CMS launched the first MHS pilot on schedule, August 1st, which will provide 20,000 area Medicare beneficiaries services for diabetes diabetes or diabetes mellitus (məlī`təs), chronic disorder of glucose (sugar) metabolism caused by inadequate production or use of insulin, a hormone produced in specialized cells (beta cells in the islets of and congestive heart failure congestive heart failure, inability of the heart to expel sufficient blood to keep pace with the metabolic demands of the body. In the healthy individual the heart can tolerate large increases of workload for a considerable length of time. ("CHF CHF In currencies, this is the abbreviation for the Swiss Franc. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. "). Since the August 1, 2005, launch of the pilot, the Company has engaged 65% to 70% of the targeted population, ahead of the Company's expectations. --Finalization and Post-Quarter Launch of CIGNA MHS Pilot - On August 29, 2005, CIGNA Health Support and CMS announced an agreement to begin the Georgia MHS pilot in September September: see month. 2005, under which the Company will participate as a subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. to CIGNA. The pilot, which launched on schedule, provides diabetes and CHF health support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services for 20,000 Medicare beneficiaries in Georgia. Multi-Channel See multichannel. Distribution of Whole Population Health and Care Support Solutions "Looking forward," Leedle continued, "we anticipate continued profitable growth in fiscal 2006 through ongoing gains in commercial market share, as we further leverage opportunities with existing health plans, add new health plans and expand the types of diseases and conditions our solutions address. We are also building new channels of potentially substantial growth through both our participation in our MHS pilots and through increased investment in pursuit of international opportunities. "In addition, we have continued to identify, pursue and integrate expanded capabilities to further improve outcomes of quality and cost in healthcare. As a result, the Company's offerings have evolved from care enhancement for people with acute, long term and chronic conditions, to proprietary, proactive health support for whole populations, including next generation wellness solutions. "We also plan to concurrently con·cur·rent adj. 1. Happening at the same time as something else. See Synonyms at contemporary. 2. Operating or acting in conjunction with another. 3. Meeting or tending to meet at the same point; convergent. drive growth through new strategic initiatives designed to raise the standards for outcomes in health and care support programs through providing an increased level of integration, specificity and actionable Giving sufficient legal grounds for a lawsuit; giving rise to a Cause of Action. An act, event, or occurrence is said to be actionable when there are legal grounds for basing a lawsuit on it. engagement. Through these initiatives, we are again playing a pivotal role as a leading industry innovator in driving the evolution of health and care support solutions beyond disease management. These new solutions will be predicated on an increasing demand for effective and meaningful integration of health data and information from 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. , lab and other elements of the care management spectrum. Successfully integrating these care components and data sources will enable more comprehensive and informed intervention A procedure used in a lawsuit by which the court allows a third person who was not originally a party to the suit to become a party, by joining with either the plaintiff or the defendant. processes that will be more sensitive and specific to individual consumers, will engage more people and will, in turn, result in better outcomes than ever before possible. "While we are projecting continued profitable growth from our well established solutions in concert with health plans, we also expect that all of our capabilities will be attractive to employers, our own government and also international communities. We remain confident that the level of our success in the market today, and the vision and innovation that direct our efforts toward the future, will continue to clearly and favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. differentiate differentiate /dif·fer·en·ti·ate/ (dif?er-en´she-at) 1. to distinguish, on the basis of differences. 2. to develop specialized form, character, or function differing from that surrounding it or from the original. American Healthways in its existing and emerging markets. We believe our opportunities for continuing substantial profitable growth are consistent with the great and growing worldwide need for solutions that measurably meas·ur·a·ble adj. 1. Possible to be measured: measurable depths. 2. Of distinguished importance; significant: a measurable figure in literature. improve the quality, and thereby, reduce the cost, of health care." Financial Guidance American Healthways today established its financial guidance for fiscal 2006. The Company's guidance for revenues for fiscal 2006 is in a range of $412 million to $432 million. The MHS pilots are expected to account for $22 million to $25 million of these revenues, with the remainder produced by the Company's core commercial business. The Company's guidance does not include any revenues from international sources for fiscal 2006. The Company's guidance for net income per diluted share for fiscal 2006 is in a range of $1.10 to $1.14. This earnings guidance includes the expected impact of the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. incentive ("LTI LTI Linear Time Invariant LTI Long Term Incentive (NZ) LTI Lingua Tertii Imperii (language of the NAZI empire, Latin) LTI Lost Time Injury LTI Leadership Training Institute LTI Lost Time Incident ") program of $0.24 per diluted share, $0.21 of which relates to the adoption of Statement of Financial Accounting Standards No. 123(R) and $0.03 of which relates to cash incentive awards expected to be granted in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. previously utilized stock option incentives. Excluding these costs, the Company's guidance for net income per diluted share for fiscal 2006 is in a range of $1.34 to $1.38. The Company continues to expect the MHS pilots to be accretive to its earnings per share for fiscal 2006, both for the 12 months comprising fiscal 2006 and cumulatively, including the expenses recorded in the second half of fiscal 2005 associated with preparation and initial operation of the pilots. As a result, the Company's earnings guidance for fiscal 2006 includes net income of $0.10 to $0.11 per diluted share from the MHS pilots. In addition, the Company's earnings guidance for fiscal 2006 includes the costs of anticipated investment in international initiatives totaling $0.05 to $0.06 per diluted share. The Company's core commercial business, excluding long-term incentive program costs, is expected to produce net income per diluted share in a range of $1.29 to $1.33 for fiscal 2006. The Company also established its guidance for net income per diluted share for the first quarter of fiscal 2006 in a range of $0.17 to $0.18. Excluding the anticipated impact of $0.06 from the Company's LTI program, the Company's guidance for first-quarter net income per diluted share is in a range of $0.23 to $0.24. The Company's first quarter earnings guidance also includes (i) a $0.06 impact related to the anticipated expenses of the MHS pilots; and (ii) a $0.01 expense related to anticipated international investment. The Company's core commercial business, excluding long-term incentive program costs, is expected to produce net income per diluted share in a range of $0.30 to $0.31 for the first quarter of fiscal 2006.
COMPARISON OF FISCAL 2006 EPS GUIDANCE TO FISCAL 2005
AND COMPONENTS OF FIRST-QUARTER FISCAL 2006 GUIDANCE
(See pages 9-10 for a reconciliation of GAAP and non-GAAP results)
Twelve Months
--------------------------- Three Months
Ending Ending Nov. 30,
Aug. 31, 2006 Ended % 2005
(Guidance) Aug. 31, 2005 Change (Guidance)
-------------- ---------------------- ---------------
Core commercial $ 1.29 - 1.33 $ 1.03 25 - 29% $0.30 - 0.31
MHS 0.10 - 0.11 (0.10) - (0.06)
International (0.05 - 0.06) - - (0.01)
-------------- ----------- --------------
Total before
LTI 1.34 - 1.38 0.93(1) 44 - 48% 0.23 - 0.24
LTI (0.24) (0.18)(2) - (0.06)
-------------- ----------- --------------
Total after
LTI $1.10 - 1.14(1) $ 0.75 47 - 52% $0.17 - 0.18(1)
(1) EPS, GAAP basis.
(2) Represents the net pro forma impact of equity-based compensation
for fiscal 2005.
Conference Call American Healthways will hold a conference call to discuss this release today at 5:00 p.m. Eastern time. Investors will have the opportunity to listen to the conference call live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by going to www.americanhealthways.com and clicking Investor Relations Investor relations The process by which the corporation communicates with its investors. , or by going to www.earnings.com, at least 15 minutes early to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. For those who cannot listen to the live broadcast, a telephonic replay will be available for one week at 719/457-0820, code 4242632, and the replay will also be available on the Company's Web site for the next 12 months. Any material information disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). on the quarterly conference call that has not been previously disclosed publicly will be available on the Company's website at www.americanhealthways.com. 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 This press release contains 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. that are based upon current expectations and involve a number of risks and uncertainties. In order for the Company to utilize the "safe harbor" 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, investors are hereby cautioned that these statements may be affected by the important factors, among others, set forth below, and consequently, actual operations and results may differ materially from those expressed in these forward-looking statements. The important factors include: the timing and costs of implementation, and the effect, of regulations and interpretations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Medicare Prescription Drug, Improvement, and Modernization Act The Medicare Prescription Drug, Improvement, and Modernization Act (Pub.L. 108-173, 117 Stat. 2066, also called Medicare Modernization Act or MMA) is a law of the United States which was enacted in 2003. of 2003; the Company's ability to accurately forecast performance and the timing of revenue recognition under the terms of its health plan contracts and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. its cooperative agreement with CMS ahead of data collection and reconciliation in order to provide 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. guidance; the Company's ability to anticipate the rate of market acceptance of disease management solutions and the individual market dynamics in potential international markets and the ability of the Company to accurately forecast the costs necessary to implement the Company's strategy of establishing a presence in these markets; the Company's ability to sign and implement new contracts for disease management and care enhancement services; the risks associated with a significant concentration of the Company's revenues with a limited number of customers; the Company's ability to effect cost savings and clinical outcomes improvements under disease management and care enhancement contracts and reach mutual agreement with customers and/or CMS with respect to cost savings, or to effect such savings and improvements within the time frames contemplated by the Company; the ability of the Company to collect contractually con·trac·tu·al adj. Of, relating to, or having the nature of a contract. con·trac  tu·al·ly adv.Adv. 1. earned performance incentive bonuses; the ability of the Company's customers and/or CMS to provide timely and accurate data that is essential to the operation and measurement of the Company's performance under the terms of its health plan contracts; the Company's ability to favorably resolve contract billing and interpretation issues with its customers; the Company's ability to integrate the operations of Health IQ Diagnostics and other acquired businesses or technologies into the Company's business; the ability of the Company to develop new products and deliver outcomes on those products; the ability of the Company to effectively integrate new technologies and approaches, such as those encompassed in its care enhancement initiatives or otherwise licensed or acquired by the Company, into the Company's care enhancement platform; the Company's ability to renew and/or maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company's results of operations; the ability of the Company to implement its care enhancement strategy within expected cost estimates; the ability of the Company to obtain adequate financing to provide the capital that may be necessary to support the growth of the Company's operations and to support or guarantee the Company's performance under new contracts; unusual and unforeseen patterns of health care 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 by individuals with diabetes, cardiac cardiac /car·di·ac/ (-ak) 1. pertaining to the heart. 2. pertaining to the cardia. car·di·ac adj. 1. Of, near, or relating to the heart. 2. , respiratory respiratory /res·pi·ra·to·ry/ (res´pi-rah-tor?e) pertaining to respiration. res·pi·ra·to·ry adj. Of, relating to, used in, or affecting respiration. and/or other diseases or conditions for which the Company provides services, in the health plans with which the Company has executed a disease management contract; the ability of the health plans to maintain the number of covered lives enrolled in the plans during the terms of the agreements between the health plans and the Company; the Company's ability to attract and/or retain and effectively manage the employees required to implement its agreements; the impact of 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. involving the Company and/or its subsidiaries; the impact of future state and federal health care and other applicable legislation and regulations on the ability of the Company to deliver its services and on the financial health of the Company's customers and their willingness to purchase the Company's services; the Company's ability to have its internal controls positively attested at·test v. at·test·ed, at·test·ing, at·tests v.tr. 1. To affirm to be correct, true, or genuine: The date of the painting was attested by the appraiser. 2. to by its independent auditors Independent Auditor An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report. Notes: These auditors aren't affiliated with the company being audited. as required by Section 404 of the Sarbanes-Oxley Act See SOX. of 2002; current geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. turmoil and the continuing threat of domestic or international terrorism Noun 1. international terrorism - terrorism practiced in a foreign country by terrorists who are not native to that country act of terrorism, terrorism, terrorist act - the calculated use of violence (or the threat of violence) against civilians in order to attain ; general worldwide and domestic economic conditions and stock market volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the ; and other risks detailed in the Company's annual, quarterly, or other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements. Company Profile American Healthways, Inc. is the nation's leading and largest provider of specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. , comprehensive disease management, care enhancement and high-risk health management services proven to improve the quality of health care and lower costs. As of August 31, 2005, the Company had 1,883,000 actual lives under management nationwide. For more information visit www.americanhealthways.com.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Twelve Months
Ended Ended
August 31, August 31,
----------------- -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Revenues $87,624 $71,855 $312,504 $245,410
Cost of services 60,218 43,885 205,253 156,462
-------- -------- --------- ---------
Gross margin 27,406 27,970 107,251 88,948
Selling, general &
administrative expenses 7,822 6,680 28,418 23,686
Depreciation and
amortization 5,563 5,096 22,408 18,450
Interest 228 833 1,630 3,509
-------- -------- --------- ---------
Income before income taxes 13,793 15,361 54,795 43,303
Income tax expense 5,449 6,068 21,711 17,245
-------- -------- --------- ---------
Net income $8,344 $9,293 $33,084 $26,058
======== ======== ========= =========
Basic income per share: $0.25 $0.28 $1.00 $0.81
======== ======== ========= =========
Diluted income per share: $0.23 $0.27 $0.93 $0.75
======== ======== ========= =========
Weighted average common shares
and equivalents:
Basic 33,742 32,776 33,241 32,264
Diluted 36,163 34,943 35,691 34,632
American Healthways, Inc.
Statistical Information
(Dollars in thousands)
(Unaudited)
August 31, August 31,
2005 2004
---------- -----------
Operating Statistics
Actual lives under
management at end of period 1,883,000 1,335,000
Annualized revenue in backlog $32,578 $15,200
American Healthways, Inc.
Reconciliations of Non-GAAP Measures to GAAP Measures
(In thousands, except per share data)
(Unaudited)
Reconciliations of Core Commercial Diluted Earnings Per Share
Excluding Incentive Bonus Revenues to
Diluted Earnings Per Share (EPS), GAAP Basis
Three Months Ended
August 31,
------------------- %
2005 2004 Change
--------- --------- ------
Core commercial EPS excluding incentive
bonus revenues(1) $0.31 $0.27 15%
Less: EPS attributable to MHS pilots(2) (0.08) -
EPS attributable to incentive bonus
revenues - -
--------- ---------
EPS, GAAP basis $0.23 $0.27
========= =========
Twelve Months Ended
August 31,
------------------- %
2005 2004 Change
--------- --------- ------
Core commercial EPS excluding incentive
bonus revenues(1) $1.03 $0.71 45%
Less: EPS attributable to MHS pilots(2) (0.10) -
EPS attributable to incentive bonus
revenues - 0.04
--------- ---------
EPS, GAAP basis $0.93 $0.75
========= =========
(1) Core commercial EPS excluding incentive bonus revenues is a non-
GAAP financial measure. The Company excludes MHS pilots and
international initiatives from this measure and relies on core
commercial EPS because of its comparability to the Company's
historical operations. The Company excludes incentive bonus revenues
from this measure primarily because of their unpredictability and
relies on revenues excluding incentive bonus revenues as a primary
measure to review and assess the ongoing operating performance of
contracts. The Company believes it is useful to investors to provide
disclosures of its operating results on the same basis as that used
by management. You should not consider core commercial EPS in
isolation or as a substitute for EPS determined in accordance with
accounting principles generally accepted in the United States.
(2) EPS attributable to MHS pilots includes costs associated with the
preparation and initial operation of the Medicare Health Support
(MHS) pilots in Maryland and the District of Columbia and in Georgia.
Reconciliation of Revenues Excluding Incentive Bonus Revenues to
Revenues, GAAP Basis
Twelve Months Ended
August 31,
------------------- %
2005 2004 Change
--------- --------- ------
Revenues excluding incentive bonus
revenues(3) $312,338 $242,958 29%
Incentive bonus revenues 166 2,452
--------- ---------
Revenues, GAAP basis 312,504 245,410
========= =========
(3) Revenues excluding incentive bonus revenues is a non-GAAP
financial measure. The Company excludes incentive bonus revenues
from this measure primarily because of their unpredictability and
relies on revenues excluding incentive bonus revenues as a primary
measure to review and assess the ongoing operating performance of
contracts. The Company believes it is useful to investors to provide
disclosures of its operating results on the same basis as that used
by management. You should not consider revenues excluding incentive
bonus revenues in isolation or as a substitute for revenues
determined in accordance with accounting principles generally
accepted in the United States.
American Healthways, Inc.
Reconciliations of Non-GAAP Measures to GAAP Measures
(In thousands, except per share data)
(Unaudited)
Reconciliation of Pro Forma Diluted Earnings Per Share to
Diluted Earnings Per Share (EPS), GAAP Basis
Twelve Months Ended
August 31,
2005
-------------
Pro forma EPS(4) $0.75
EPS attributable to net pro forma
effect of equity-based compensation(5) 0.18
-------------
EPS, GAAP basis $0.93
=============
(4) Pro forma EPS is a non-GAAP financial measure. The Company
excludes the net pro forma effect of equity-based compensation from
this measure and provides pro forma EPS because of its comparability
to the Company's fiscal 2006 EPS guidance. The Company believes it
is useful to investors to provide disclosures of its operating
results and guidance on the same basis as that used by management.
You should not consider pro forma EPS in isolation or as a substitute
for EPS determined in accordance with accounting principles generally
accepted in the United States.
(5) EPS attributable to net pro forma impact of equity-based
compensation includes the net effect on earnings per share as if the
Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123 to
equity-based employee compensation.
Reconciliation of Diluted Earnings Per Share Guidance
Excluding Long-Term Incentive Program Costs to
Diluted Earnings Per Share (EPS) Guidance, GAAP Basis
Three Months Twelve Months
Ended Ended
November 30, August 31,
2005 2006
------------- --------------
EPS guidance excluding long-term
incentive program costs(6) $0.23 - $0.24 $1.34 - $1.38
Less: EPS guidance attributable to
long-term incentive program costs(7) (0.06) (0.24)
------------- --------------
EPS guidance, GAAP basis $0.17 - $0.18 $1.10 - $1.14
============== ==============
(6) EPS guidance excluding long-term incentive program costs is a non-
GAAP financial measure. The Company excludes the costs of its long-
term incentive program from this measure and provides EPS guidance
excluding long-term incentive program costs because of its
comparability to the Company's historical financial statements. The
Company believes it is useful to investors to provide disclosures of
its guidance on the same basis as that used by management. You
should not consider EPS guidance excluding long-term incentive
program costs in isolation or as a substitute for EPS determined in
accordance with accounting principles generally accepted in the
United States.
(7) EPS guidance attributable to long-term incentive program costs
includes costs of equity-based awards to be expensed under SFAS No.
123(R) beginning on September 1, 2005 and cash-based awards expected
to be issued in lieu of equity-based awards that were historically
granted to certain levels of management. These cash-based awards are
a result of changes in the design of the Company's long-term
incentive program in preparation for adopting SFAS No. 123(R).
Reconciliation of Core Commercial Diluted Earnings Per Share Guidance
Excluding Long-Term Incentive Program Costs to
Diluted Earnings Per Share (EPS) Guidance, GAAP Basis
Three Months Twelve Months
Ended Ended
November 30, August 31,
2005 2006
------------- --------------
Core commercial EPS guidance excluding
long-term incentive program costs(8) $0.30 - $0.31 $1.29 - $1.33
EPS guidance attributable to MHS
pilots(9) (0.06) 0.10 - 0.11
Less: EPS guidance attributable to
international initiatives(10) (0.01) (0.05 - 0.06)
Less: EPS guidance attributable to
long-term incentive program costs(7) (0.06) (0.24)
------------- --------------
EPS guidance, GAAP basis $0.17 - $0.18 $1.10 - $1.14
============== ==============
(7) EPS guidance attributable to long-term incentive program costs
includes costs of equity-based awards to be expensed under SFAS No.
123(R) beginning on September 1, 2005 and cash-based awards expected
to be issued in lieu of equity-based awards that were historically
granted to certain levels of management. These cash-based awards are
a result of changes in the design of the Company's long-term
incentive program in preparation for adopting SFAS No. 123(R).
(8) Core commercial EPS guidance excluding long-term incentive program
costs is a non-GAAP financial measure. The Company excludes MHS
pilots, international initiatives, and costs of the long-term
incentive program from this measure and relies on core commercial EPS
guidance excluding long-term incentive program costs because of its
comparability to the Company's historical operations and financial
statements. The Company believes it is useful to investors to
provide disclosures of its guidance on the same basis as that used by
management. You should not consider core commercial EPS guidance
excluding long-term incentive program costs in isolation or as a
substitute for EPS guidance determined in accordance with accounting
principles generally accepted in the United States.
(9) EPS guidance attributable to MHS pilots includes revenues and
costs associated with the operation of the MHS pilots in Maryland and
the District of Columbia and in Georgia.
(10) EPS guidance attributable to international initiatives includes
costs of anticipated investment in international initiatives.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
August 31, August 31,
2005 2004(1)
--------- ----------
Assets
Current assets:
Cash and cash equivalents $63,467 $45,147
Restricted cash 3,811 1,524
Investments - 7,040
Accounts receivable, net
Billed 39,539 33,235
Unbilled 1,158 866
Other current assets 5,681 6,502
Deferred tax asset 3,305 2,248
--------- ----------
Total current assets 116,961 96,562
Property and equipment
Leasehold improvements 12,836 10,067
Computer equipment and related software 61,772 53,379
Furniture and office equipment 16,294 14,514
--------------------
90,902 77,960
Less accumulated depreciation (51,114) (36,957)
--------- ----------
Net property and equipment 39,788 41,003
Other assets 2,065 2,456
Intangible assets, net 16,120 19,854
Goodwill, net 96,020 93,574
--------- ----------
Total assets $270,954 $253,449
--------- ----------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $7,424 $10,343
Accrued salaries and benefits 23,055 4,616
Accrued liabilities 4,994 4,688
Contract billings in excess of earned revenue 8,037 4,898
Income taxes payable 660 3,294
Current portion of long-term debt 163 12,243
Current portion of long-term liabilities 1,984 1,018
--------- ----------
Total current liabilities 46,317 41,100
Long-term debt 416 36,562
Long-term deferred tax liability 8,236 12,658
Other long-term liabilities 9,055 7,694
Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares authorized,
none outstanding - -
Common stock
$.001 par value, 75,000,000 shares authorized,
33,808,518 and 32,857,041 shares outstanding 34 33
Additional paid-in capital 109,425 90,980
Retained earnings 97,471 64,387
Accumulated other comprehensive income - 35
--------- ----------
Total stockholders' equity 206,930 155,435
--------- ----------
Total liabilities and stockholders' equity $270,954 $253,449
--------- ----------
(1) Certain items have been reclassified to conform to current
classifications.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Twelve Months Ended
August 31,
-------------------
2005 2004(1)
Cash flows from operating activities:
Net income $33,084 $26,058
Adjustments to reconcile net income to net cash
provided by operating activities, net of
business acquisitions:
Depreciation and amortization 22,408 18,450
Amortization of deferred loan costs 488 768
Tax benefit of stock option exercises 11,672 10,013
Increase in accounts receivable, net (6,485) (7,174)
Decrease (increase) in other current assets 1,098 (899)
(Decrease) increase in accounts payable (3,112) 5,733
Increase (decrease) in accrued salaries and
benefits 18,439 (4,865)
Increase in other current liabilities 788 3,060
Deferred income taxes (5,433) (491)
Other 2,497 2,834
Decrease in other assets 633 356
Payments on other long-term liabilities (872) (371)
-------- --------
Net cash flows provided by operating activities 75,205 53,472
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (16,161) (25,013)
Purchases of investments (2,000) (6,000)
Proceeds on sale of investments 9,040 70
Business acquisitions, net of cash acquired (1,120) (60,223)
-------- --------
Net cash flows used in investing activities (10,241) (91,166)
-------- --------
Cash flows from financing activities:
Increase in restricted cash (2,287) (1,524)
Proceeds from issuance of long-term debt 48,000 60,000
Deferred loan costs (730) (2,315)
Payments of long-term debt (96,226) (12,424)
Exercise of stock options 4,599 4,258
-------- --------
Net cash flows (used in) provided by financing
activities (46,644) 47,995
-------- --------
Net increase in cash and cash equivalents 18,320 10,301
Cash and cash equivalents, beginning of period 45,147 34,846
-------- --------
Cash and cash equivalents, end of period $63,467 $45,147
======== ========
(1) Certain items have been reclassified to conform to current
classifications.
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