American Healthways Reports First-Quarter Earnings of $0.22 Per Diluted Share Compared with $0.12 for First-Quarter Fiscal 2004.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. -- Establishes Second-Quarter Earnings 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 of fiscal 2005. For the quarter, which ended November November: see month. 30, 2004, revenues increased 39% to $71,186,000 from $51,078,000 for the first quarter of fiscal 2004. Net income rose 96% to $7,762,000 from $3,956,000. Earnings 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 increased 83% to $0.22 for the first quarter from $0.12 for the first quarter of fiscal 2004, which included incentive bonus revenues of $0.01 per diluted share. Excluding the incentive bonus revenues from the first quarter of fiscal 2004, earnings per diluted share for the first quarter of fiscal 2005 increased 100% from the first quarter of fiscal 2004. Prior-period results have been adjusted to reflect the two-for-one stock split effected in December December: see month. 2003. "Our strong profitable growth for the first quarter of fiscal 2005 as compared with the first quarter of fiscal 2004 positions us well for achieving our full-year growth objectives," remarked Leedle. "As anticipated, this performance primarily resulted from the growth in actual lives under management, reflecting increased business with existing health plan customers, contracts with new health plans and ongoing growth in contracts with 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 employers on behalf of our health plan customers. In addition, our substantial revenue growth drove greater operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. for the quarter, complemented by lower interest expense after a substantial reduction of debt during the quarter." The highlights of the Company's performance since the end of fiscal 2004 include:
-- Strong Growth in Actual Lives Under Management and Backlog -
Actual lives under management increased 37% to 1,419,000 at
the end of the first quarter from 1,039,000 at the end of the
first quarter of fiscal 2004. Annualized revenues in backlog
increased 76% to $38,557,000 at the end of the first quarter
from the same time in fiscal 2004 and rose 154% from
$15,200,000 at the end of fiscal 2004.
-- Continued Heavy Demand for Disease Management Solutions from
Self-Insured Employers - The growth in the Company's actual
lives under management for the first quarter was primarily
driven by the 165% expansion in self-insured employer lives
under management to 405,000 at the quarter's end from 153,000
at the end of the first quarter of fiscal 2004. This increase
reflects the substantial expansion of the Company's business
with self-insured employers on behalf of health plan
customers, contracts for which rose 160% to 265 at the end of
the quarter from 102 at the end of the first quarter of fiscal
2004. Self-insured employer lives under management increased
12% on a sequential-quarter basis, from 361,000 at the end of
fiscal 2004.
-- Four New, Extended or Expanded Health Plan Contracts Since End
of Fiscal 2004 - The Company's pipeline of potential contracts
remains very active as illustrated by the four new, extended
or expanded health plan contracts signed since the end of
fiscal 2004. Two of these contracts represent significant
service and contract length expansions for existing customers.
In October, the Company announced a new three-year contract,
effective October 1, 2004, to provide chronic kidney disease
and end-stage renal disease services for Blue Cross Blue
Shield of Massachusetts' members with kidney disease. This
contract is the second expansion of this relationship,
following the addition of diabetes disease management services
in a three-year contract signed in 2003 and the original
four-year contract for congestive heart failure disease
management services signed in 2001.
In addition, the Company signed a new five-year contract in
November with Wellmark, Inc. to provide its full suite of
disease management and care enhancement services to the
fully insured individual and group members of Wellmark
Blue Cross and Blue Shield and Wellmark Health Plan of
Iowa, Inc., effective January 1, 2005. This contract
expands the original five-year contract signed in August
2004, which provides the full suite of services to
Wellmark's self-insured employer groups, seven of which
have already elected to offer American Healthways'
services.
The third contract that the Company signed in the first
quarter was with Blue Shield of California, a new
customer, to provide its diabetes, coronary artery
disease, chronic obstructive pulmonary disease and asthma
disease management services. This contract has a
three-year term and will begin January 1, 2005.
American Healthways also recently marked the first anniversary
of its contract with The Regence Group, for the Company's
full suite of disease and high risk health management
programs, with the extension of the contract from three
years to six years. The extension of the contract, which
was the first contract integrating the Company's disease
management, care enhancement and high risk management
programs, resulted from the early success of the Company's
programs among The Regence Group's large-employer
customers.
-- Company's Selection by Centers for Medicare and Medicaid
Services ("CMS") to Participate in Two of Nine Pilot Programs
Under Medicare's Chronic Care Improvement Program (CCIP) -
American Healthways' position as the country's leading
provider of disease management services was further validated
by its selection to participate in two of the nine CCIP pilots
awarded by CMS in December. In addition to directly operating
one pilot to serve 20,000 Medicare fee-for-service
beneficiaries in Maryland and the District of Columbia, the
Company will serve 20,000 beneficiaries in Georgia in
collaboration with CIGNA. All the pilots are for diabetes and
congestive heart failure disease management services and are
operationally similar to American Healthways' successful
programs for commercial and Medicare + Choice health plan
populations. In the future, CMS is expected to expand,
regionally or nationally, programs that prove successful.
-- Strengthening of Financial Position Through Pay Down of Debt -
Through a combination of cash flow from operations and cash
and cash equivalents, American Healthways substantially
reduced its debt to $25,696,000 at the end of the first
quarter from $48,805,000 at the end of fiscal 2004. As a
result, the ratio of the Company's debt to total
capitalization improved to 13.4% at the end of the first
quarter from 23.9% at the end of fiscal 2004. The Company also
had cash and cash equivalents of $35,917,000 at the end of the
first quarter of fiscal 2005.
Second-Quarter Earnings Guidance American Healthways today established its guidance for earnings per diluted share for the second quarter of fiscal 2005 in a range of $0.23 to $0.24 compared with $0.15 for the second quarter of fiscal 2004. The Company's earnings guidance does not include any impact of future incentive bonus revenues. In addition, the Company expects to continue to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. and record costs in the second quarter to finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... the agreements associated with pilot programs under CMS's CCIP CCIP Chambre de Commerce et d'Industrie de Paris (Paris Chamber of Commerce, France) CCIP Cisco Certified Internetwork Professional CCIP Centre for Critical Infrastructure Protection (New Zealand) . These costs are included in the Company's second-quarter earnings guidance and its established earnings guidance for fiscal 2005 of $1.00 to $1.02 per diluted share. This guidance does not include the costs or revenues associated with implementing or operating these 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. pilots. The Company will not provide further guidance for fiscal 2005 associated with implementing or operating these CMS pilots until details of the agreements have been finalized See finalization. . Summary "American Healthways' operating results for the first quarter again met our expectations," concluded Leedle. "These results also continue to 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' unique position in a relatively young industry with strong growth potential, even before considering the potential doubling of the market's size should the CCIP expand to include the entire 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. fee-for-service fee-for-ser·vice adj. Charging a fee for each service performed. market. Our industry leadership and our confidence in our prospects for continued clinical and financial performance rest on our unmatched history of successful performance at scale." 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.streetevents.com or www.fulldisclosure.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 522652, 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 regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. rules 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 sign and implement new contracts for disease management services 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 with respect to cost savings, or to effect such savings and improvements within the time frames contemplated by the Company; the Company's ability to accurately forecast performance and the timing of revenue recognition under the terms of its contracts 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 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 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 StatusOne and other acquired businesses or technologies into the Company's business; the Company's ability to service its debt and make principal and interest payments as those payments become due; 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 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. 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 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 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; 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, 2004, the Company had 1,419,000 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 Ended
November 30,
---------------------
2004 2003
---------- --------
Revenues $71,186 $51,078
Cost of services 45,972 34,144
---------- --------
Gross margin 25,214 16,934
Selling, general & administrative expenses 6,173 5,142
Depreciation and amortization 5,462 4,142
Interest 642 944
---------- --------
Income before income taxes 12,937 6,706
Income tax expense 5,175 2,750
---------- --------
Net income $7,762 $3,956
========== ========
Basic income per share: $0.24 $0.12
========== ========
Diluted income per share: $0.22 $0.12
========== ========
Weighted average common shares
and equivalents:
Basic 32,922 31,790
Diluted 35,289 34,218
American Healthways, Inc.
Statistical Information
(Dollars in thousands)
(Unaudited)
November 30, November 30,
2004 2003
------------ ------------
Operating Statistics
Actual lives under management
at end of period 1,419,000 1,039,000(1)
Annualized revenue in backlog $38,557 $21,931
(1) Restated to include the Company's hospital-based diabetes program
patients.
Reconciliation of Diluted Earnings Per Share Excluding Incentive Bonus
Revenues to Diluted Earnings Per Share (EPS), GAAP Basis
Three Months Ended
November 30,
------------------------- %
2004 2003 Change
------------ ------------ ------
EPS excluding incentive bonus
revenues(2) $0.22 $0.11 100%
EPS attributable to incentive bonus
revenues - 0.01
------------ ------------
EPS, GAAP basis $0.22 $0.12 83%
============ ============
(2) EPS excluding incentive bonus revenues is a non-GAAP financial
measure. The Company excludes incentive bonuses from this measure
primarily because of their unpredictability and relies on EPS
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 EPS excluding incentive bonus
revenues in isolation or as a substitute for EPS determined in
accordance with accounting principles generally accepted in the
United States.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
November 30, August 31,
2004 2004
------------ ----------
Assets
Current assets:
Cash and cash equivalents $35,917 $52,187
Restricted cash 2,473 1,524
Accounts receivable, net
Billed 38,337 33,235
Unbilled 645 866
Other current assets 6,737 5,976
Deferred tax asset 2,271 2,248
------------ ----------
Total current assets 86,380 96,036
Property and equipment
Leasehold improvements 8,919 8,730
Computer equipment and related software 54,921 53,379
Furniture and office equipment 14,781 14,514
------------ ----------
78,621 76,623
Less accumulated depreciation (41,280) (36,796)
------------ ----------
Net property and equipment 37,341 39,827
Other assets 2,862 2,456
Intangible assets, net 19,077 19,854
Goodwill, net 92,398 93,574
------------ ----------
Total assets $238,058 $251,747
------------ ----------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $5,391 $10,343
Accrued salaries and benefits 7,133 4,616
Accrued liabilities 5,728 4,688
Contract billings in excess of earned
revenue 4,134 4,898
Income taxes payable 4,207 3,294
Current portion of long-term debt 156 12,243
Current portion of long-term liabilities 1,080 1,018
------------ ----------
Total current liabilities 27,829 41,100
Long-term debt 25,540 36,562
Long-term deferred tax liability 12,658 12,658
Other long-term liabilities 6,356 5,992
Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares
authorized, none outstanding - -
Common stock
$.001 par value, 75,000,000 shares
authorized, 32,993,393 and 32,857,041
shares outstanding 33 33
Additional paid-in capital 93,492 90,980
Retained earnings 72,150 64,387
Accumulated other comprehensive income - 35
------------ ----------
Total stockholders' equity 165,675 155,435
------------ ----------
Total liabilities and stockholders' equity $238,058 $251,747
------------ ----------
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
November 30,
-------------------
2004 2003(1)
Cash flows from operating activities:
Net income $7,762 $3,956
Adjustments to reconcile net income to net cash
provided by operating activities, net of
business acquisitions:
Depreciation and amortization 5,462 4,142
Amortization of deferred loan costs 164 192
Tax benefit of stock option exercises 1,142 2,028
(Increase) decrease in accounts receivable, net (4,881) 1,182
(Increase) decrease in other current assets (818) 497
Decrease in accounts payable (4,952) (1,480)
Increase (decrease) in accrued salaries and
benefits 2,517 (6,599)
Increase in other current liabilities 1,189 1,706
Other 571 488
Decrease in other assets 160 49
Payments on other long-term liabilities - (61)
---------- --------
Net cash flows provided by operating activities 8,316 6,100
---------- --------
Cash flows from investing activities:
Acquisition of property and equipment (2,098) (3,061)
Business acquisitions, net of cash acquired 1,176 (59,812)
---------- --------
Net cash flows used in investing activities (922) (62,873)
---------- --------
Cash flows from financing activities:
Increase in restricted cash (949) -
Proceeds from issuance of long-term debt - 60,000
Deferred loan costs (730) (2,315)
Payments of long-term debt (23,109) (3,123)
Exercise of stock options 1,124 1,262
---------- --------
Net cash flows (used in) provided
by financing activities (23,664) 55,824
---------- --------
Net decrease in cash and cash equivalents (16,270) (949)
Cash and cash equivalents, beginning of period 52,187 35,956
---------- --------
Cash and cash equivalents, end of period $35,917 $35,007
========== ========
(1) Certain items have been reclassified to conform to current
classifications.
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