FOR IMMEDIATE RELEASE Contact: Mary A. Chaput
Executive Vice President and
Chief Financial Officer
(615) 665-1122
AMERICAN HEALTHWAYS REPORTS EPS OF $1.12 FOR FISCAL 2003
FOURTH-QUARTER EARNINGS TOTAL $0.30 PER SHARE
EXPECTS CONTINUED PROFITABLE GROWTH FOR FISCAL 2004
NASHVILLE, TENN. (OCTOBER 9, 2003) - Ben R. Leedle, Jr., President and Chief
Executive Officer of American Healthways, Inc. (Nasdaq: AMHC), today announced
financial results for the fourth quarter and 12 months ended August 31, 2003.
For the fourth quarter, revenues increased 20% to $46,010,000 from $38,279,000
for the fourth quarter of fiscal 2002. Net income rose 33% to $5,081,000 from
$3,826,000. Earnings per diluted share for the fourth quarter were $0.30, up 25%
from $0.24 for the fourth quarter of fiscal 2002. The Company's results include
the effect of incentive bonus revenues of $0.03 per diluted share for the latest
quarter and $0.05 per diluted share for the comparable prior-year period.
Revenues increased 35% for fiscal 2003 to $165,471,000 from $122,762,000 for
fiscal 2002. Net income for the year rose 78% to $18,474,000 from $10,355,000
for fiscal 2002, and earnings per diluted share increased 75% to $1.12 from
$0.64. These results include the effect of incentive bonus revenues of $0.13 per
diluted share for fiscal 2003 and $0.12 per diluted share for fiscal 2002.
"American Healthways' fourth-quarter and fiscal 2003 financial and operating
results continued to reflect the rapid expansion of our industry leading disease
management and care enhancement business," remarked Leedle. "This expansion is
readily apparent in the 49% growth in actual lives under management, to 838,000
at the fiscal year end from 563,000 at the end of fiscal 2002. As we announced
on September 30th, we are now reporting actual lives under management instead of
diabetes equivalent lives. In addition to serving fully insured members of many
of the country's largest and most innovative health plans, we have also produced
significant growth in the actual lives under management from their ASO/PPO
memberships and agreements with 70 large self-insured employers.
"Because of the successful expansion of our health plan business, the fourth
quarter marked our 12th consecutive quarter of substantial profitable growth on
a comparable-quarter basis. In fact, in the past two fiscal years alone, actual
lives under management have more than tripled from 245,000 to 838,000, a
compound annual growth rate of 85%. This increase has driven a two-year compound
annual growth rate for the Company's net income of 142% and for earnings per
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AMHC Reports Third-Quarter Results
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October 9, 2003
diluted share of 126%. Based on both our growing contracting momentum and the
continuing success of our programs, we are confident that American Healthways is
well positioned to sustain substantial profitable growth for the foreseeable
future by helping our customers achieve improvement in the health and the health
care cost of their members."
STRONG CONTRACTING GROWTH
"A number of recent announcements have highlighted our growing contracting
momentum," Leedle said. "Yesterday, we announced:
- a new five-year contract with WellChoice Inc., parent company
of Empire Blue Cross Blue Shield, New York's largest health
insurer, under which we will provide diabetes, heart failure,
coronary artery disease, chronic obstructive pulmonary disease
(COPD) and asthma programs to a portion of their fully insured
commercial managed care members, while offering these same
programs and 11 other impact conditions to their ASO/PPO
members;
- a new five-year contract with Oxford Health Plans to provide
our diabetes, heart failure and coronary artery disease
programs to Oxford members beginning January 2004;
- a new three-year contract with Horizon Healthcare Services,
Inc. and its subsidiary, Horizon Healthcare of New Jersey,
Inc., the largest health insurer in New Jersey, under which we
will provide our heart failure program to their fully insured
and Medicare+Choice members beginning January 2004.
"Since the beginning of our fourth quarter, we have reported that the Company
has:
- extended and expanded its relationship with CIGNA Healthcare
through a new five-year contract that consolidates multiple
existing arrangements into one contract, while including our
program for COPD;
- extended and expanded our relationship with Hawaii Medical
Service Association, the Blue Cross Blue Shield plan for
Hawaii, through a new seven-year contract, which adds COPD,
asthma and end stage renal disease to our existing diabetes
and cardiac programs.
- entered a new five-year contract with Blue Cross Blue Shield
of Nebraska to provide our comprehensive suite of programs,
including impact conditions, to its self-insured employer
groups;
- extended and expanded our relationship with Community Health
Plan through a new three-year contract, which adds our
programs for COPD, asthma and back pain to our existing
diabetes and cardiac programs;
- entered a new three-year contract with QualChoice/QCA of
Arkansas to provide our programs for diabetes and heart
disease to its fully insured members beginning October 2003
and to offer these programs to its self-insured employer
groups; and
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AMHC Reports Third-Quarter Results
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October 9, 2003
"Among other benefits resulting from these contracts, we now have contract terms
of between five years and 10 years for our largest three customers, who
accounted for approximately 70% of fiscal 2003 revenues, and these contracts are
essentially risk-free. In addition, we have expanded the opportunity with our
current customers to help them sell our programs to their ASO/PPO customers
representing approximately 10 million members, even as we have aggressively
increased actual ASO/PPO lives under management to 132,000 at the end of fiscal
2003 from approximately 22,000 at the end of fiscal 2002. In short, we believe
these contracts provide clear evidence of increasing demand among health plans
and employers for our demonstrated disease management solutions, and they
strengthen American Healthways' position as the industry leader."
LANDMARK OUTCOMES ACHIEVED
"In recent weeks," Leedle continued, "two other seminal events have occurred
that, from a strategic perspective, are easily as important for the Company's
long-term growth prospects. First, one of our largest customers, Blue Cross Blue
Shield of Minnesota ("Blue Cross"), just released the first year's results from
our pioneering 10-year agreement to provide our comprehensive programs for 17
chronic conditions and diseases to more than 130,000 of its members. To quote
Blue Cross's Chief Medical Officer, Dr. Bill Gold, on this report, `Based on the
results from the first year of this innovative program, the potential impact is
staggering.'
"We agree with this assessment on several levels. Blue Cross found that, at a
time when employers across the nation are facing an expected 12% increase in
their health care costs for 2004 - the fifth consecutive year of double-digit
increases - our programs reduced its projected percentage increase in spending
for all of their fully insured members by 200 to 300 basis points. In other
words, our programs, which cover just 10% to 15% of Blue Cross's fully insured
members, who typically account for 40% to 45% of its costs, produced a
significant reduction in the cost inflation Blue Cross expects for 2004 across
its entire fully insured membership. Not only do these savings represent an
overall return on Blue Cross's investment ("ROI") of at least $2.90 for every
dollar spent, but they were also achieved in just the first year of a 10-year
program that we expect will produce increasing savings in successive years.
"It is also crucial to recognize, as Blue Cross reported, that these savings
were produced because our programs substantially improved the quality and
accessibility of health care for individual plan members, which improved their
clinical outcomes, i.e. their health. We are confident that this combination of
better individual outcomes and lower costs is a formula that will not be lost on
those currently debating the potential of disease management and care
enhancement to combat spiraling Medicare costs.
"These findings are of further importance to American Healthways because they
are also the first independent verification of the potential for our programs
for impact conditions, which enable us to serve a much broader segment of our
health plan customers' members than programs for individual chronic diseases,
such as diabetes or COPD. While our chronic disease programs generated savings
in line with expectations, the savings from our impact condition programs
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AMHC Reports Third-Quarter Results
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October 9, 2003
substantially exceeded expectations. We believe these results provide strong
early-stage validation of our strategy to reach a higher percentage of our
customers' populations and thereby have the opportunity to have a greater impact
on their overall heath care expenditures."
CONTINUED PROGRAM ENHANCEMENT
Leedle added, "Consistent with this strategy to reach more of our customers'
members, our second key strategic success in September was our acquisition of
StatusOne Health Systems. By enhancing our ability to reach a segment of our
customers' populations that accounts for substantial health care costs, this
acquisition significantly broadens our capabilities to meet health plans'
growing interest for single-source solutions for their disease management and
care enhancement needs. Because of StatusOne's strong internal growth and the
substantial cross-selling opportunities within our respective customer bases, we
expect this acquisition to be modestly accretive to earnings per diluted share
for fiscal 2004 and significantly accretive for fiscal 2005.
"Together, we believe the release of the Blue Cross findings and the StatusOne
transaction will provide additional impetus to the momentum evidenced by our
contracting success since the start of the fourth quarter. We are confident the
Company is well positioned to leverage this momentum to achieve its fiscal 2004
financial objectives."
FISCAL 2004 GUIDANCE
American Healthways' guidance for fiscal 2004 is based on its current health
plan business under management, its current backlog, which is expected to
produce annualized revenues of approximately $35 million, and its pipeline of
potential new contracts and contract extensions. As previously announced, the
Company anticipates its earnings per diluted share for fiscal 2004 to be in the
range of $1.40 to $1.44. Earnings per diluted share for first quarter of fiscal
2004 are expected to be in the range of $0.20 to $0.21, compared to $0.23 for
first quarter of fiscal 2003 ($0.03 of which related to incentive bonuses), due
both to the impact of initial StatusOne transaction and integration costs and
the ramp-up of contract costs ahead of revenue recognition for American
Healthways' new agreements that are expected to start in the first or second
quarters of fiscal 2004. American Healthways also continues to expect fiscal
2004 revenues to be in a range of $245 million to $255 million. Company guidance
does not include any impact of incentive bonuses.
SUMMARY
Leedle concluded, "After many years of pioneering effort and investment, we are
very pleased, although not surprised, with the recognition disease management
and care enhancement is receiving today and with the opportunity its growth
represents for American Healthways. Over the years, we have carefully structured
this Company to be well positioned to leverage this opportunity to produce
significant, sustainable and long-term profitable growth. Our proven business
model is scalable and well financed, and we continue essential investments in
the training and retention of high quality people throughout our organization.
As a result of our long-term focus, demonstrated expertise and contracting
momentum, we remain optimistic about the Company's prospects for building
additional stockholder value."
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October 9, 2003
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 by going to www.americanhealthways.com
and clicking Investor Relations or by going to the following Web site -
www.streetevents.com - at least 15 minutes early to register, download 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 PROVISIONS
This press release contains forward-looking statements 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 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 Company's ability to sign and
execute new contracts for health plan disease management services and care
enhancement services and to sign and execute new contracts for hospital-based
diabetes 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 performance 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 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 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 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
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AMHC Reports Third-Quarter Results
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October 9, 2003
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 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, comprehensive disease management and care enhancement services to
health plans, physicians, medical management organizations and hospitals. The
Company's programs have been reviewed and approved for clinical excellence by
Johns Hopkins and remain the only disease management programs to have been
certified or accredited by each of the National Committee on Quality Assurance
(NCQA), the Joint Commission on Accreditation of Health Care Organizations
(JCAHO), and the American Accreditation Healthcare Commission (URAC). At August
31, 2003, American Healthways disease and care management programs served
838,000 actual lives under management. The Company also operates diabetes
management programs in hospitals nationwide. For more information visit
www.americanhealthways.com.
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October 9, 2003
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED, EXCEPT FOR FISCAL YEAR 2002)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
AUGUST 31, AUGUST 31,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues $ 46,010 $ 38,279 $ 165,471 $ 122,762
Cost of services 29,971 25,332 106,130 84,845
----------- ----------- ----------- -----------
Gross margin 16,039 12,947 59,341 37,917
Selling, general & administrative expenses 4,270 4,038 16,511 12,726
Depreciation and amortization 3,027 2,264 10,950 7,271
Interest 131 161 569 370
----------- ----------- ----------- -----------
Income before income taxes 8,611 6,484 31,311 17,550
Income tax expense 3,530 2,658 12,837 7,195
----------- ----------- ----------- -----------
Net income $ 5,081 $ 3,826 $ 18,474 $ 10,355
=========== =========== =========== ===========
Basic income per share: $ 0.32 $ 0.25 $ 1.19 $ 0.69
=========== =========== =========== ===========
Diluted income per share: $ 0.30 $ 0.24 $ 1.12 $ 0.64
=========== =========== =========== ===========
Weighted average common shares
and equivalents:
Basic 15,710,000 15,321,000 15,524,000 14,973,000
Diluted 16,844,000 16,260,000 16,505,000 16,094,000
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October 9, 2003
AMERICAN HEALTHWAYS, INC.
SEGMENT AND STATISTICAL INFORMATION
(UNAUDITED, EXCEPT FOR FISCAL YEAR 2002)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
AUGUST 31, AUGUST 31,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
SEGMENT OPERATING INFORMATION
Revenues:
Health plan contracts $ 42,468 $ 33,864 $ 150,085 $ 104,250
Hospital contracts 3,477 4,345 15,099 18,195
Other revenue 65 70 287 317
--------- --------- --------- ---------
$ 46,010 $ 38,279 $ 165,471 $ 122,762
========= ========= ========= =========
Income before income taxes:
Health plan contracts $ 15,940 $ 12,241 $ 56,918 $ 32,837
Hospital contracts 696 554 3,069 3,636
Shared support services (6,365) (4,686) (22,610) (14,624)
--------- --------- --------- ---------
Total segments 10,271 8,109 37,377 21,849
General corporate (1,660) (1,625) (6,066) (4,299)
--------- --------- --------- ---------
$ 8,611 $ 6,484 $ 31,311 $ 17,550
========= ========= ========= =========
OPERATING STATISTICS
Health Plan Segment
Health plan actual lives under
management at end of period 837,710 563,451 837,710 563,451
Annualized Revenue in backlog $ 12,200 $ 27,600 $ 12,200 $ 27,600
Hospital Segment
Contracts at end of period 49 55 49 55
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October 9, 2003
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
AUGUST 31, August 31,
2003 2002
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 35,956 $ 23,924
Accounts receivable, net
Billed 18,526 15,146
Unbilled 7,971 5,543
Other current assets 4,267 3,495
Deferred tax asset 758 1,313
--------- ---------
Total current assets 67,478 49,421
Property and equipment
Leasehold improvements 5,045 3,459
Computer equipment, related software
and other equipment 47,772 35,148
--------- ---------
52,817 38,607
Less accumulated depreciation (25,166) (16,802)
--------- ---------
Net property and equipment 27,651 21,805
Long-term deferred tax asset -- 942
Other assets, net 446 1,411
Goodwill, net 44,438 44,438
--------- ---------
Total assets $ 140,013 $ 118,017
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,067 $ 4,268
Accrued salaries and benefits 9,162 11,726
Accrued liabilities 2,790 2,372
Contract billings in excess of earned revenue 3,272 5,726
Income taxes payable 391 235
Current portion of other long-term debt/liabilities 749 799
--------- ---------
Total current liabilities 20,431 25,126
Long-term debt 109 514
Long-term deferred tax liability 2,380 --
Other long-term liabilities 4,662 3,568
Commitments and contingencies
Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares authorized,
none outstanding -- --
Common stock
$.001 par value, 40,000,000 shares authorized,
15,796,732 and 15,366,232 shares outstanding 16 15
Additional paid-in capital 74,086 68,939
Retained earnings 38,329 19,855
--------- ---------
Total stockholders' equity 112,431 88,809
--------- ---------
Total liabilities and stockholders' equity $ 140,013 $ 118,017
--------- ---------
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October 9, 2003
AMERICAN HEALTHWAYS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
TWELVE MONTHS ENDED
AUGUST 31,
---------------------------
2003 2002
----------- --------
(UNAUDITED)
Cash flows from operating activities:
Net income $ 18,474 $ 10,355
Income tax expense 12,837 7,195
-------- --------
Income before income taxes 31,311 17,550
Depreciation and amortization 10,950 7,271
Income taxes (net paid) (5,378) (336)
Decrease (increase) in working capital items (11,381) (1,430)
Other, net 1,432 1,042
-------- --------
Net cash flows provided by operating activities 26,934 24,097
Cash flows from investing activities:
Acquisition of property and equipment (16,168) (13,829)
Business acquisitions -- (442)
-------- --------
Net cash flows used in investing activities (16,168) (14,271)
Cash flows from financing activities:
Exercise of stock options 1,649 1,998
Payments of long-term debt (383) (276)
-------- --------
Net cash flows (used in) provided by financing activities 1,266 1,722
Net increase in cash and cash equivalents 12,032 11,548
Cash and cash equivalents, beginning of period 23,924 12,376
-------- --------
Cash and cash equivalents, end of period $ 35,956 $ 23,924
======== ========
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