American Healthways Reports Second-Quarter Diluted Earnings Per Share of $0.15; Revenues Increase 42%.Business Editors/Health/Medical Writers 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.--(BUSINESS WIRE)--March 22, 2004 Affirms Fiscal 2004 Earnings Guidance; Provides Guidance for Third and Fourth Quarters 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:
AMHC Aviation Structural Mechanic Hydraulics Chief ), today announced that the Company met earnings guidance for the second quarter ended February February: see month. 29, 2004, with 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 of $0.15. Revenues for the quarter increased 42% to $57,122,000 from $40,101,000 for the second quarter of fiscal 2003. Net income for the second quarter was $5,324,000, or $0.15 per diluted share, compared with $5,144,000, or $0.16 per diluted share, for the second quarter of fiscal 2003. Results for the second quarter of fiscal 2003 included $0.03 per share from incentive bonus revenues compared with no earnings impact from incentive bonus revenues for the second quarter this fiscal year. Prior-period results have been adjusted to reflect the two-for-one stock split effected in December December: see month. 2003. "We are pleased with the Company's performance," stated Leedle. "In achieving the high end of our earnings guidance, the Company was right on track with our expectations for the second quarter. Our revenue growth was driven by a 54% increase in actual lives under management to 1,054,000 at the end of the quarter from 686,000 at the end of the second quarter of fiscal 2003. While we experienced normal disenrollment/reenrollment activities by our health plan customers as of January January: see month. 1st, the net decline from this seasonal activity this year was, as expected, slightly less than the historical rate of 5% to 7% due to the reduced churn churn: see butter. in our ASO ASO arteriosclerosis obliterans. ASO 1 Administrative services organization, see there 2 Allele-specific–oligonucleotide hybridization 3 Anti-streptolysin O, see there accounts. In addition, as expected, a number of new lives under management were added during the quarter from growth in ASO contracts and from the initiation initiation, the transition and attendant ceremonies, such as ordeals and rites, involved in passing from one state or status to another, often from childhood to adulthood. It was among the most important social institutions of early humans. of several previously announced new contracts and contract expansions during the quarter, resulting in a net increase in total lives under management from the preceding quarter. As discussed in our first-quarter news release, the ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale of costs ahead of revenue recognition for newly signed contracts, the opening of two new care enhancement centers to handle actual and anticipated near-term near-term adj. Of, for, or involving a short period of time in the near future. growth and continuing StatusOne integration costs had the expected effect on our results. "We remain pleased with the implementation of new contracts, which continue on schedule, and with our contracting momentum. We renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. , expanded or signed new contracts with six health plans during the second quarter, and we have signed four additional new or expanded contracts since the end of the second quarter. We continue to produce substantial growth in our ASO/PPO lives under management, which have increased approximately 60% to over 210,000 at the end of the second quarter from 132,000 at the end of fiscal 2003 and have more than tripled since the second quarter of fiscal 2003. Through our joint efforts with our health plan customers, we have 127 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 under contract. "Among our highlights since the start of the second quarter are the following: -- Ten New, Renewed, or Expanded Contracts Signed - We signed six contracts in the second quarter, including those with The Regence Re´gence n. 1. Rule. Group, HealthSpring and Joint Benefit Trust that we discussed in the first quarter earnings release. We also signed a new contract with Harvard Harvard, town (1990 pop. 12,329), Worcester co., E central Mass.; inc. 1732. A Shaker house and cemetery, a Native American museum, and a Harvard observatory are there. Pilgrim Health Care for our 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. program, which represents the first cross-sale of an existing StatusOne customer. Mutual of Omaha Mutual of Omaha, best known for sponsoring the popular television show Mutual of Omaha's Wild Kingdom, is a Fortune 500 insurance and financial services company headquartered in Omaha, Nebraska. expanded its three-year contract by adding heart failure and asthma asthma (ăz`mə, ăs`–), chronic inflammatory respiratory disease characterized by periodic attacks of wheezing, shortness of breath, and a tight feeling in the chest. A cough producing sticky mucus is symptomatic. programs to the diabetes program we have been providing for four years. We also signed a two-year contract renewal with Blue Cross Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. of Kansas City Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , for whom we have provided diabetes and cardiac programs since June June: see month. 2000. Since the end of the second quarter, the Company has entered into three contracts with new customers and one additional contract expansion. Among the new contracts, the first is with Colorado-based Rocky Mountain Health Plans ("RMHP RMHP Rocky Mountain Health Plans "), which is scheduled to begin July July: see month. 1, 2004. Under this three-year contract, American Healthways will provide its diabetes and cardiac disease programs to RMHP's commercial members. The second contract is with Massachusetts-based Private Healthcare Systems, the operator of the largest proprietary PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there network in the country. Under this contract, which is scheduled to begin May 1, 2004, we will provide our full suite of disease management and care enhancement services. The third new contract is with North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. State Health Plan for our 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 health management program, which is scheduled to begin April 1, 2004. In addition to the expansion with Mutual of Omaha in January, the plan has already decided to further expand the relationship again to also include chronic obstructive pulmonary disease chronic obstructive pulmonary disease n. Abbr. COPD A chronic lung disease, such as asthma or emphysema, in which breathing becomes slowed or forced. and coronary artery disease coronary artery disease, condition that results when the coronary arteries are narrowed or occluded, most commonly by atherosclerotic deposits of fibrous and fatty tissue. , which will be launched in April and continue for a three-year term. -- Care Enhancement Center Openings Reflect Growing Lives Under Management - To handle the additional required capacity for servicing the new contracts signed since the beginning of the fiscal year, American Healthways completed the planned and on-schedule openings of its seventh care enhancement center in Baltimore Baltimore, city (1990 pop. 736,014), N central Md., surrounded by but politically independent of Baltimore co., on the Patapsco River estuary, an arm of Chesapeake Bay; inc. 1745. during the second quarter, followed by the eighth center in Seattle Seattle (sēăt`əl), city (1990 pop. 516,259), seat of King co., W Wash., built on seven hills, between Elliott Bay of Puget Sound and Lake Washington; inc. 1869. on March 1st in conjunction with the launch of the Regence contract. Annual and Quarterly Guidance for Fiscal 2004 American Healthways reaffirms its established guidance for fiscal 2004 earnings per diluted share in a range of $0.71 to $0.73, based on its current health plan business under management, its 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. at the end of the second quarter - approximately $19 million in 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 - and its pipeline of potential new contracts and contract extensions. The Company also continues to expect fiscal 2004 revenues to be in a range of $245 million to $255 million. Furthermore, the Company is today establishing its guidance for earnings per diluted share for the third quarter of fiscal 2004, in a range of $0.18 to $0.19, and for the fourth quarter of fiscal 2004, in a range of $0.26 to $0.27, which includes the anticipated recording of certain performance-based revenues from the billings-in-excess-of-earnings account as contractual targets are met. The Company's earnings per diluted share were $0.14 and $0.15 for the third and fourth quarters of fiscal 2003, respectively, which included $0.01 and $0.02 of incentive bonus revenues, respectively. The Company's earnings guidance does not include any impact of future incentive bonus revenues. Summary Mr. Leedle concluded, "We believe American Healthways' prospects for continuing 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. profitable growth are supported by strong industry trends, our leading industry position, the documented results we are producing with all of our established programs, and a very active pipeline of potential contracts. At a time of growing commercial, Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. demand for effective disease management solutions, we feel that American Healthways is uniquely positioned to meet that demand because of the comprehensiveness of its programs, the scale of its operations and its proven ability to bend the trend of health care cost increases with both large commercial and 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. populations." 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 the following Web site - www.streetevents.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 replay will be available on the Company's Web site for the next 12 months. Any material information disclosed 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 Company's ability to integrate the operations of StatusOne into the Company's business; the Company's ability to achieve the expected financial results for StatusOne; the timing 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 execute on 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 health plan customers; the Company's ability to effect cost savings and clinical outcomes improvements under health plan 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 under the terms of its health plan contracts ahead of data collection and reconciliation; the ability of the Company to collect contractually earned incentive bonuses; the ability of the Company's health plan 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 resolve favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. contract billing and interpretation issues with its health plan customers; the ability of the Company to effectively integrate new technologies such as those encompassed in its care enhancement initiatives into the Company's care management information technology 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 needed to support the growth of the Company's health plan operations and to support or guarantee the Company's performance under new health plan contracts; unusual and unforeseen patterns of health care utilization by individuals with diabetes, cardiac, 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 with hospitals and health plan organizations; 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 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; and general economic conditions. The Company undertakes no obligation to update or revise any such forward-looking statements. 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 Feb. 29, 2004, the Company had 1,054,000 actual lives under management nationwide. For more information visit www.americanhealthways.com.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
February 29/28, February 29/28,
------------------------ ------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues $ 57,122 $ 40,101 $ 108,200 $ 77,639
Cost of services 37,020 24,806 71,164 49,432
----------- ----------- ----------- -----------
Gross margin 20,102 15,295 37,036 28,207
Selling, general
& administrative
expenses 6,022 3,793 11,164 7,711
Depreciation and
amortization 4,429 2,663 8,570 5,201
Interest 890 120 1,834 306
----------- ----------- ----------- -----------
Income before
income taxes 8,761 8,719 15,468 14,989
Income tax
expense 3,437 3,575 6,187 6,146
----------- ----------- ----------- -----------
Net income $ 5,324 $ 5,144 $ 9,281 $ 8,843
=========== =========== =========== ===========
Basic income per
share(1): $ 0.17 $ 0.17 $ 0.29 $ 0.29
=========== =========== =========== ===========
Diluted income
per share(1): $ 0.15 $ 0.16 $ 0.27 $ 0.27
=========== =========== =========== ===========
Weighted average
common shares and
equivalents(1):
Basic 32,039,000 30,883,000 31,915,000 30,838,000
Diluted 34,746,000 32,680,000 34,507,000 32,685,000
(1) Restated to reflect the impact of a two-for-one stock split on
December 19, 2003.
American Healthways, Inc.
Statistical Information
(Dollars in thousands)
(Unaudited)
February 29, February 28,
2004 2003
------------------ -----------------
Operating Statistics
Actual lives under
management at end of period 1,053,820 685,683
Annualized revenue in backlog $18,833 $16,320 (1)
(1) Includes StayWell and HealthPlus contracts signed in March 2003.
Reconciliation of Diluted Earnings Per Share Excluding
Incentive Bonus Revenues to Diluted Earnings Per Share (EPS),
GAAP Basis
Three Months Ended Three Months Ended
February 29, February 28,
2004 2003
------------------ ------------------
EPS excluding incentive bonus
revenues (2) $0.15 $0.13
EPS attributable to incentive
bonus revenues - 0.03
------------------ ----------------
EPS, GAAP basis $0.15 $0.16
================== ================
(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
(In thousands, except share and per share data)
(Unaudited)
February 29, August 31,
2004 2003(1)
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 29,260 $ 35,956
Accounts receivable, net
Billed 34,683 18,526
Unbilled 3,817 7,971
Other current assets 5,378 4,267
Deferred tax asset 1,097 758
----------- -----------
Total current assets 74,235 67,478
Property and equipment
Leasehold improvements 6,103 5,045
Computer equipment and related software 46,000 38,214
Furniture and office equipment 10,944 9,558
----------- -----------
63,047 52,817
Less accumulated depreciation (31,836) (25,166)
----------- -----------
Net property and equipment 31,211 27,651
Long-term deferred tax asset 67 -
Other assets 3,026 182
Intangible assets, net 21,876 264
Goodwill, net 93,541 44,438
----------- -----------
Total assets $ 223,956 $ 140,013
----------- -----------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,904 $ 4,067
Accrued salaries and benefits 3,603 9,162
Accrued liabilities 4,724 2,790
Contract billings in excess of earned
revenue 7,817 3,272
Income taxes payable 219 391
Current portion of long-term debt 12,404 389
Current portion of long-term liabilities 955 360
----------- -----------
Total current liabilities 34,626 20,431
Long-term debt 42,634 109
Long-term deferred tax liability 11,838 2,380
Other long-term liabilities 5,053 4,662
Commitments and contingencies
Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares
authorized, none outstanding - -
Common stock(2)
$.001 par value, 75,000,000 and 40,000,000
shares authorized, 32,116,632 and
31,593,464 shares outstanding 32 32
Additional paid-in capital (2) 82,163 74,070
Retained earnings 47,610 38,329
----------- -----------
Total stockholders' equity 129,805 112,431
----------- -----------
Total liabilities and stockholders' equity $ 223,956 $ 140,013
----------- -----------
(1) Certain items have been reclassified to conform to current
classifications.
(2) Restated to reflect the impact of a two-for-one stock split on
December 19, 2003.
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
February 29/28,
-------------------
2004 2003(1)
Cash flows from operating activities:
Net income $ 9,281 $ 8,843
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,570 5,201
Amortization of deferred loan costs 384 138
Tax benefit of stock option exercises 3,780 719
Increase in accounts receivable, net (11,574) (5,249)
Increase in other current assets (232) (781)
Increase in accounts payable 294 50
Decrease in accrued salaries and benefits (6,179) (5,780)
Increase in other current liabilities 2,947 9,778
Other 1,489 727
Decrease in other assets 170 168
Payments on other long-term liabilities (300) (204)
-------- -------
Net cash flows provided by operating activities 8,630 13,610
-------- -------
Cash flows from investing activities:
Acquisition of property and equipment (8,538) (7,757)
Business acquisitions, net of cash acquired (60,223) -
-------- -------
Net cash flows used in investing activities (68,761) (7,757)
-------- -------
Cash flows from financing activities:
Increase in restricted cash and cash equivalents - (3,000)
Proceeds from issuance of term note, net of
deferred loan costs 57,685 -
Exercise of stock options 1,964 392
Payments of long term-debt (6,214) (189)
-------- -------
Net cash flows provided by (used in) financing
activities 53,435 (2,797)
-------- -------
Net increase (decrease) in cash and cash
equivalents (6,696) 3,056
Cash and cash equivalents, beginning of period 35,956 23,924
-------- -------
Cash and cash equivalents, end of period $ 29,260 $ 26,980
======== ========
(1) Certain items have been reclassified to conform to current
classifications.
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