American Healthways Produces First-Quarter Fiscal 2006 Earnings at High End of Guidance on 27% Increase In Revenues; Reports Expansion in Annualized Backlog to $40.2 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. -- Affirms Fiscal 2006 Guidance and Establishes Second-Quarter Guidance 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 first quarter ended November November: see month. 30, 2005. Revenues increased 27% for the first quarter to $90,592,000 from $71,186,000 for the first quarter of fiscal 2005. Net income was $6,456,000, or $0.18 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 first quarter of fiscal 2006. Consistent with the Company's guidance, these results included per-share costs of $0.06 related to 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 ) compensation program; $0.06 related to the Company's participation in two 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; and $0.01 related to international initiatives. Excluding these costs, the Company's core commercial business produced earnings of $0.31 per diluted share for the first quarter of fiscal 2006, up 41% from net income per diluted share of $0.22 for the first quarter of fiscal 2005, which was all attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the core commercial business.
COMPARISON OF COMPONENTS OF FIRST-QUARTER FISCAL 2006 AND FISCAL 2005
NET INCOME PER DILUTED SHARE
(See pages 10-11 for a reconciliation of GAAP and non-GAAP results)
Three Months Ended
Nov. 30,
----------------------- %
2005 2004 Change
---------- --------- --------
Core commercial $ 0.31 $ 0.22 (1) 41%
LTI (0.06)(2) (0.04)(3)
---------- ----------
Core commercial after LTI 0.25 0.18 39%
MHS (0.06) -
International (0.01) -
---------- ----------
$ 0.18 (1) $0.18
(1) EPS, GAAP basis.
(2) Represents equity-based compensation costs, net of tax, of
$1,945,000 expensed under Statement of Financial Accounting
Standards ("SFAS") No. 123(R) beginning on September 1, 2005 and
cash-based awards, net of tax, of $155,000 issued in lieu of
equity-based compensation that was historically granted to certain
levels of management.
(3) Represents the net pro forma impact of equity-based compensation
for first-quarter fiscal 2005.
"We are pleased to report that the first quarter's financial results met the high end of our earnings guidance and that the Company achieved further substantial operational progress for the quarter," remarked Leedle. "We continued to leverage the significant earnings momentum in our core commercial business - up 41% compared with the first quarter of fiscal 2005 - to support our major initiatives to expand our addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be markets. These initiatives include our participation in the MHS pilots, our early-stage development of international opportunities and our innovative strategies to drive the evolution of health and care support solutions beyond disease management with proprietary, proactive health support for whole populations. As a result of our first-quarter performance, we remain confident of achieving our goals for fiscal 2006, even as we position the Company to achieve significant long-term profitable growth." Additional highlights of the Company's performance to-date in fiscal 2006 include:
-- Strong Growth Achieved in Self-Insured Employer Lives Under
Management and in Backlog - Reflecting high employer demand
for disease management and care enhancement services, the
Company produced a 64% increase in self-insured employer lives
under management to 666,000 at the end of the first quarter of
fiscal 2006 from 405,000 at the end of the first quarter of
fiscal 2005.
In addition, estimated annualized revenues in backlog from
self-insured employers nearly tripled during the first quarter
of fiscal 2006 from year-end fiscal 2005, driving estimated
annualized revenues in the overall backlog to $40,172,000 at
the quarter's end. The backlog stood at approximately
$32,578,000 at the end of fiscal 2005, including approximately
$11 million related to the CIGNA MHS pilot that was launched
during the first quarter. Reflecting the growth in
self-insured employer business, the Company had contracts with
437 specifically identifiable employers at the end of the
first quarter of fiscal 2006, up from 265 and 372 at the end
of the first and fourth quarters of fiscal 2005, respectively.
The Company's total lives under management at the end of the
first quarter of fiscal 2006 increased 28% to 1,814,000 from
1,419,000 at the end of the first quarter of fiscal 2005.
-- Increased Core Commercial Business through New, Expanded or
Extended Contracts and New Product Development - In addition
to expanding the core commercial business through growth in
self-insured employer lives, the Company has also entered a
new, multi-plan, regional Medicare Advantage agreement,
expanded and extended four existing health plan contracts
since the start of fiscal 2006, and achieved developmental
milestones on two new products.
The Company yesterday announced a new three-year disease
management agreement with Blue Cross and Blue Shield of
Minnesota, who has been contracted to provide medical
management services for the Medicare Advantage plans offered
across Region 19 by the Blue Cross Blue Shield Northern Plains
Alliance. The Alliance includes the independent Blue Cross and
Blue Shield licensees in the states of Iowa, Minnesota,
Montana, Nebraska, North Dakota, South Dakota and Wyoming.
Under this contract, the Company will provide congestive heart
failure services to members of the newly formed regional
entity's Medicare Advantage health plans.
Also yesterday, the Company announced the expansion of its
long-term relationship with CIGNA through the initiation of a
program for high risk obesity, which is a new product for the
Company, once more broadening its solution portfolio and value
proposition. The program begins Jan. 1, 2006 and will assist
members with metabolic syndrome, a condition related to
overweight/obesity, physical inactivity and genetic factors.
In the third contract expansion or extension with Blue Cross
Blue Shield of Massachusetts (BCBSMA), the Company expanded
its program serving high-risk diabetes members to include all
diabetes members and extended the program for two additional
years, through September 2007. The Company's initial
relationship with BCBSMA began in 2001 and now also includes
programs for their members with congestive heart failure,
chronic kidney disease and end stage renal disease.
During the first quarter, the Company also signed its 9th and
10th agreements to provide services to members of the Federal
Employee Program (FEP) as part of its relationship with Blue
Cross Blue Shield of Utah and Blue Cross Blue Shield of Kansas
City. Both programs will focus on serving federal employees
and dependents who have diabetes and/or cardiac disease. These
agreements reflect continuing validation of the effectiveness
of the Company's programs in improving health and reducing
cost and also the Federal government's keen interest in
chronic care improvement efforts both as an employer and a
payer.
American Healthways also confirmed favorable first-year
results for its phase 1 oncology program, including a
first-year return on investment for customers of over 200%.
Development on phase 2 of the product design is already
underway.
-- Rising Engagement in Maryland/DC MHS Pilot Now Exceeds 80% -
The Company has continued to exceed its expectations for
engagement of targeted Medicare beneficiaries for diabetes and
congestive heart failure services under its MHS pilot serving
approximately 20,000 people in Maryland and the District of
Columbia. Having now contacted approximately 17,000
beneficiaries since the pilot's August 1st launch, the Company
has engaged over 80% of the targeted population with an
approximate 4% opt-out rate. In addition to validating the
Company's experience with, and processes for engaging,
Medicare beneficiaries, this better-than-expected rate of
engagement is also attributable to the planning, preparation
and support of the MHS pilots by staff at the Centers for
Medicare and Medicaid Services (CMS). The Company intends to
continue its efforts to contact the remaining targeted
Medicare beneficiaries and expects additional success in
engaging those beneficiaries as they are reached.
Although the Company does not intend to provide detailed
information regarding its role as a subcontractor to CIGNA for
their MHS pilot serving approximately 20,000 Medicare
beneficiaries in Georgia that launched in September, the
Company has continued to leverage its experience in its
Maryland/DC MHS pilot to enhance its performance in the
Georgia MHS pilot as well.
-- Whole Population Health and Care Support Service Initiatives
Gain Traction with Employers - The Company continues to make
progress in its innovative initiatives to develop and
implement health and care support programs that go beyond
disease management to meaningfully engage whole populations.
Representative of the potential market for these
next-generation initiatives, Health IQ's consumer-directed
health support services are experiencing significant market
interest as evidenced by the more than doubling of the number
of employer contracts for these services since the Company
acquired Health IQ Diagnostics in June 2005.
-- Substantially Expanded Credit Facility and Strengthened
Financial Position - During the first quarter of fiscal 2006,
the Company amended its credit facility to, among other
things, increase the size of the facility from $150 million to
$250 million, with an additional $50 million accordion
feature. With expected capital expenditures planned for fiscal
2006 of $17 million to $20 million, and, at the end of the
first quarter of fiscal 2006, cash and cash equivalents of
$68,677,000 and stockholders' equity of $222,899,000, this
untapped credit facility strengthens the Company's ability to
implement its growth strategies.
Financial Guidance Based on the Company's first-quarter results and its outlook for the remainder of the fiscal year, American Healthways today affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its established 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, which includes the expected impact of the Company's LTI compensation program of $0.24 per diluted share. 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 today established its guidance for net income per diluted share for the second quarter of fiscal 2006 in a range of $0.19 to $0.20, including the anticipated impact of $0.06 from the Company's LTI compensation program. Excluding the LTI costs, the Company's guidance for second-quarter net income per diluted share is in a range of $0.25 to $0.26. The Company's second-quarter earnings guidance also includes (i) a $0.07 net cost impact of the MHS pilots; and (ii) a $0.01 expense related to on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" 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 $0.33 to $0.34 for the second quarter of fiscal 2006, compared with $0.24 for the second quarter of fiscal 2005.
COMPARISON OF FISCAL 2006 EPS GUIDANCE TO FISCAL 2005
AND COMPONENTS OF SECOND-QUARTER FISCAL 2006 GUIDANCE
(See pages 10-11 for a reconciliation of GAAP and non-GAAP results)
Twelve Months
--------------------------------------
Ending Three Months
Aug. 31, Ended Ending
2006 Aug. 31, % Feb. 28, 2006
(Guidance) 2005 Change (Guidance)
-------------- -------------------- ---------------
Core
commercial $ 1.29 - 1.33 $ 1.03 25 - 29% $0.33 - 0.34
MHS 0.10 - 0.11 (0.10) - (0.07)
International (0.05 - 0.06) - - (0.01)
------------- ------- ---------------
Total
before LTI 1.34 - 1.38 0.93 (1) 44 - 48% 0.25 - 0.26
LTI (0.24)(2) (0.18)(3) - (0.06)(2)
------------- ------- ---------------
Total after
LTI $ 1.10 - 1.14 (1) $ 0.75 47 - 52% $0.19 - 0.20 (1)
(1) EPS, GAAP basis.
(2) Represents costs of equity-based compensation expensed under SFAS
No. 123(R) beginning on September 1, 2005 and cash-based awards
issued in lieu of equity-based compensation that was historically
granted to certain levels of management.
(3) Represents the net pro forma impact of equity-based compensation
for fiscal 2005.
Summary "We believe that American Healthways is uniquely positioned to leverage the expanding growth opportunity in health and care support to sustain significant short- and long-term profitable growth," concluded Leedle. "As we drive the future of the industry beyond disease management to multi-channel See multichannel. distribution of whole population health and care support solutions, we remain differentiated dif·fer·en·ti·ate v. dif·fer·en·ti·at·ed, dif·fer·en·ti·at·ing, dif·fer·en·ti·ates v.tr. 1. To constitute the distinction between: by the comprehensiveness of our programs; our demonstrated ability to improve the quality and lower the cost of health care; our ability to scale in response to specific opportunities; the financial success of our business model; the strength of our financial position; and the deep human expertise driving our clinical and financial results. In short, we are the leading provider in a substantially expanding segment of the healthcare industry, and we are confident of our prospects for continued growth." 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 8564223, 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 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 with 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. 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 health and care support 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 effectively manage any growth that it might experience; the Company's ability to retain existing customers if they are acquired by other health plans which already have or are not interested in health and care support programs; the Company's ability to sign and implement new contracts for health and care support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other 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 health and care support 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 fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. resolve contract billing and interpretation issues with its customers; the Company's ability to integrate the operations of 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 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 health and care support initiatives or otherwise licensed or acquired by the Company, into the Company's health and care support 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 health and care support 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 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 , 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 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 health and care support 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; 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 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 health management services proven to improve the quality of health care and lower costs. As of November 30, 2005, the Company had more than 1.8 million 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 Ended
November 30,
--------------------
2005 2004
---------- ---------
Revenues $ 90,592 $ 71,186
Cost of services 63,845 45,972
---------- ---------
Gross margin 26,747 25,214
Selling, general & administrative expenses 10,123 6,173
Depreciation and amortization 5,663 5,462
Interest 255 642
---------- ---------
Income before income taxes 10,706 12,937
Income tax expense 4,250 5,175
---------- ---------
Net income $ 6,456 $ 7,762
========== =========
Basic income per share: $ 0.19 $ 0.24
========== =========
Diluted income per share: $ 0.18 $ 0.22
========== =========
Weighted average common shares
and equivalents:
Basic 33,961 32,922
Diluted 35,973 35,289
American Healthways, Inc.
Statistical Information
(Dollars in thousands)
(Unaudited)
November 30, November 30,
2005 2004
--------------------------
Operating Statistics
Actual lives under
management at end of period 1,814,000 1,419,000
Annualized revenue in backlog $40,172 $38,557
American Healthways, Inc.
Reconciliations of Non-GAAP Measures to GAAP Measures
(In thousands, except per share data)
(Unaudited)
Reconciliation of Diluted Earnings Per Share
Excluding Long-Term Incentive Program Costs to
Diluted Earnings Per Share (EPS), GAAP Basis
Three Months
Ended
November 30,
2005
------------
Core commercial EPS excluding long-term
incentive compensation program costs (1) $ 0.31
Less: EPS attributable to long-term
incentive compensation program costs (2) (0.06)
------------
Core commercial EPS including long-term
incentive compensation program costs (3) $ 0.25
Less: EPS attributable to MHS pilots (4) (0.06)
Less: EPS attributable to international
initiatives (5) (0.01)
------------
EPS, GAAP basis $ 0.18
============
(1) Core commercial EPS excluding long-term incentive compensation
program costs is a non-GAAP financial measure. The Company
excludes EPS attributable to MHS pilots, international
initiatives, and long- term incentive compensation program costs
from this measure and relies on core commercial EPS 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 operations on the same basis as that used by management.
You should not consider core commercial EPS excluding long-term
incentive compensation program costs in isolation or as a
substitute for EPS determined in accordance with accounting
principles generally accepted in the United States.
(2) EPS attributable to long-term incentive compensation program costs
includes costs of equity-based awards expensed under SFAS No.
123(R) beginning on September 1, 2005 and cash-based awards 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
compensation program in preparation for adopting SFAS No. 123(R).
(3) Core commercial EPS including long-term incentive compensation
program costs is a non-GAAP financial measure. The Company
excludes EPS attributable to MHS pilots and international
initiatives from this measure and relies on core commercial EPS
including long-term incentive compensation program costs because
of its comparability to the Company's historical operations. 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 including
long-term incentive compensation program costs in isolation or as
a substitute for EPS determined in accordance with accounting
principles generally accepted in the United States.
(4) EPS 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.
(5) EPS attributable to international initiatives includes costs to
implement the Company's strategy of establishing a presence in
international markets.
Reconciliation of Pro Forma Diluted Earnings Per Share to
Diluted Earnings Per Share (EPS), GAAP Basis
Three Months Twelve Months
Ended Ended
November 30, August 31,
2004 2005
------------ -------------
Pro forma EPS (6) $ 0.18 $ 0.75
EPS attributable to net pro forma effect
of equity-based compensation (7) 0.04 0.18
------------ -------------
EPS, GAAP basis $ 0.22 $ 0.93
============ =============
(6) Pro forma EPS is a non-GAAP financial measure. The Company
includes the net pro forma effect of equity-based compensation in
this measure and provides pro forma EPS because of its
comparability to the Company's fiscal 2006 operating results and
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.
(7) 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 during fiscal 2005.
American Healthways, Inc.
Reconciliations of Non-GAAP Measures to GAAP Measures
(In thousands, except per share data)
(Unaudited)
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
Ending Ending
February 28, August 31,
2006 2006
-------------- --------------
EPS guidance excluding long-term
incentive compensation program costs
(8) $0.25 - $0.26 $1.34 - $1.38
Less: EPS guidance attributable to
long-term incentive compensation
program costs (9) (0.06) (0.24)
-------------- --------------
EPS guidance, GAAP basis $0.19 - $0.20 $1.10 - $1.14
============== ==============
(8) EPS guidance excluding long-term incentive compensation program
costs is a non-GAAP financial measure. The Company excludes EPS
attributable to the costs of its long-term incentive compensation
program from this measure and provides EPS guidance excluding
long- term incentive compensation 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 compensation program costs in isolation or as
a substitute for EPS determined in accordance with accounting
principles generally accepted in the United States.
(9) EPS guidance attributable to long-term incentive compensation
program costs includes costs of equity-based awards expensed under
SFAS No. 123(R) beginning on September 1, 2005 and cash-based
awards expected 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 compensation 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
Ending Ending
February 28, August 31,
2006 2006
-------------- --------------
Core commercial EPS guidance excluding
long-term incentive compensation
program costs (10) $0.33 - $0.34 $1.29 - $1.33
EPS guidance attributable to MHS
pilots (11) (0.07) 0.10 - 0.11
Less: EPS guidance attributable to
international initiatives (12) (0.01) (0.05 - 0.06)
Less: EPS guidance attributable to
long-term incentive compensation
program costs (9) (0.06) (0.24)
-------------- --------------
EPS guidance, GAAP basis $0.19 - $0.20 $1.10 - $1.14
============== ==============
(9) EPS guidance attributable to long-term incentive compensation
program costs includes costs of equity-based awards expensed under
SFAS No. 123(R) beginning on September 1, 2005 and cash-based
awards 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 compensation program in preparation
for adopting SFAS No. 123(R).
(10) Core commercial EPS guidance excluding long-term incentive
compensation program costs is a non-GAAP financial measure. The
Company excludes EPS attributable to MHS pilots, international
initiatives, and long-term incentive compensation program costs
from this measure and relies on core commercial EPS guidance
excluding long-term incentive compensation 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 compensation
program costs in isolation or as a substitute for EPS guidance
determined in accordance with accounting principles generally
accepted in the United States.
(11) 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.
(12) EPS guidance attributable to international initiatives includes
anticipated costs to implement the Company's strategy of
establishing a presence in international markets.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
November 30, August 31,
2005 2005 (1)
------------ -----------
Assets
Current assets:
Cash and cash equivalents $ 68,677 $ 63,467
Restricted cash 3,839 3,811
Accounts receivable, net
Billed 49,377 39,539
Unbilled 1,206 1,158
Other current assets 6,848 5,681
Deferred tax asset 3,345 3,305
------------ -----------
Total current assets 133,292 116,961
Property and equipment
Leasehold improvements 13,659 12,836
Computer equipment and related software 65,527 61,772
Furniture and office equipment 16,562 16,294
------------ -----------
95,748 90,902
Less accumulated depreciation (55,921) (51,114)
------------ -----------
Net property and equipment 39,827 39,788
Other assets 2,358 2,065
Intangible assets, net 15,137 16,120
Goodwill, net 96,042 96,020
------------ -----------
Total assets $ 286,656 $ 270,954
------------ -----------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,680 $ 3,622
Accrued salaries and benefits 16,474 26,845
Accrued liabilities 5,404 5,006
Contract billings in excess of earned
revenue 16,818 8,037
Income taxes payable 2,591 660
Current portion of long-term debt 167 163
Current portion of long-term liabilities 2,077 1,984
------------ -----------
Total current liabilities 48,211 46,317
Long-term debt 386 416
Long-term deferred tax liability 5,457 8,236
Other long-term liabilities 9,703 9,055
Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares
authorized, none outstanding - -
Common stock
$.001 par value, 75,000,000 shares
authorized, 34,121,574 and
33,808,518 shares outstanding 34 34
Additional paid-in capital 118,938 109,425
Retained earnings 103,927 97,471
------------ -----------
Total stockholders' equity 222,899 206,930
------------ -----------
Total liabilities and stockholders' equity $ 286,656 $ 270,954
------------ -----------
(1) Certain items have been reclassified to conform to current
classifications.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
November 30,
-------------------
2005 2004 (1)
Cash flows from operating activities:
Net income $ 6,456 $ 7,762
Adjustments to reconcile net income to net cash
provided by operating activities, net of
business acquisitions:
Depreciation and amortization 5,663 5,462
Amortization of deferred loan costs 117 164
Share-based employee compensation expense 3,221 -
Tax benefit of stock option exercises (3,842) 1,142
Increase in accounts receivable, net (9,886) (4,881)
Increase in other current assets (1,167) (818)
Increase (decrease) in accounts payable 1,058 (4,492)
(Decrease) increase in accrued salaries and
benefits (10,371) 2,112
Increase in other current liabilities 15,167 1,134
Deferred income taxes (2,822) -
Other 741 571
Decrease in other assets 159 160
--------- ---------
Net cash flows provided by operating activities 4,494 8,316
--------- ---------
Cash flows from investing activities:
Acquisition of property and equipment (4,716) (2,098)
Business acquisitions, net of cash acquired (22) 1,176
--------- ---------
Net cash flows used in investing activities (4,738) (922)
--------- ---------
Cash flows from financing activities:
Increase in restricted cash (28) (949)
Proceeds from issuance of long-term debt - 48,000
Deferred loan costs (569) (730)
Tax benefit of stock option exercises 3,842 -
Payments of long-term debt (26) (71,109)
Exercise of stock options 2,235 1,124
--------- ---------
Net cash flows provided by (used in) financing
activities 5,454 (23,664)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 5,210 (16,270)
Cash and cash equivalents, beginning of period 63,467 45,147
--------- ---------
Cash and cash equivalents, end of period $ 68,677 $ 28,877
========= =========
(1) Certain items have been reclassified to conform to current
classifications.
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