Healthways Reports First Quarter Adjusted Net Income Per Diluted Share of $0.30; GAAP Net Loss of $0.43 Per Diluted Share

First Quarter Revenues Total $182.7 Million

Establishes Second-Quarter Earnings Guidance
NASHVILLE, Tenn.--(Business Wire)--
Healthways, Inc. (NASDAQ: HWAY) today announced financial results for the first
quarter ended March 31, 2009. Total revenues for the quarter were $182.7
million, an increase of 1% compared with revenues of $180.9 million for the
three months ended March 31, 2008. Healthways' net loss for the first quarter of
2009 was $14.8 million, or $0.43 per diluted share, including costs of $40.0
million, or $0.73 per diluted share, related to the previously announced
settlement of a lawsuit. As anticipated in the Company`s guidance, the
first-quarter results included a gain of $0.05 per diluted share resulting from
the sale of D2Hawkeye, Inc., a company in which Healthways held a minority
stake. Net income excluding the lawsuit settlement costs ("adjusted net income")
was $10.2 million for the first quarter of 2009, which was equal to net income
for the comparable period in 2008. Adjusted net income per diluted share for the
first quarter of 2009 increased 11% to $0.30 from net income per diluted share
of $0.27 for the comparable 2008 period.

COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE
See pages 8 and 9 for a reconciliation of GAAP and non-GAAP results

Three Months Ended March 31,
2009 2009 2008
Actual Guidance Actual
Domestic, excluding lawsuit settlement costs $ 0.33 $ 0.27 - 0.30 $ 0.29
International (0.03 ) (0.03)-(0.02 ) (0.02 )
Adjusted net income per diluted share 0.30 0.24 - 0.28 0.27
Lawsuit settlement costs (0.73 ) (0.73 ) -
Net income per diluted share $ (0.43 ) $ (0.49)-(0.45 ) $ 0.27

"Healthways` revenues and earnings for the first quarter of 2009 represent a
good start toward achieving our financial objectives for the year," remarked Ben
R. Leedle, Jr., chief executive officer of Healthways. "This performance
resulted from stronger than expected revenues in our domestic business, which we
attribute to two principal factors. The first is higher-than-expected membership
visits within our Silver Sneakers® fitness program across the established
fitness center network, including the Curves participating locations that went
live in January. Secondly, we experienced lower-than-expected attrition in
billed lives during the first quarter. In fact, billed lives at the end of the
first quarter increased to 35.8 million from 26.9 million at March 31, 2008 and
32.9 million at December 31, 2008. This growth contributed to an increase in our
penetration of available lives to 18.4% at the end of the quarter, compared with
14.3% and 16.9% at March 31, and December 31, 2008, respectively.

"We are also pleased to report substantial cash flow from operations of $38.5
million for the quarter. Our capital expenditures for the quarter, primarily
related to the expected mid-year launch of our integrated data and technology
solutions platform, EmbraceSM, totaled $11.5 million out of an estimated $35
million for the full year. In anticipation of making payments in the second
quarter related to the lawsuit settlement, we completed the first quarter with
$40.7 million in cash and $280.6 million available under our credit facility.

The Company took a major step in building the value of the Gallup-Healthways
Well-Being IndexTM during the first quarter with the announcement of a new
alliance with America`s Health Insurance Plans (AHIP), the national association
representing nearly 1,300 member companies providing health insurance coverage
to more than 200 million Americans.

In the release accompanying the announcement, Karen Ignagni, President and CEO
of AHIP, said, "These data are a national wake-up call to re-orient our system
toward preventive care, wellness and chronic care management. As members of
Congress focus on health care reform, these data will serve as an important
resource to gauge the true health and well-being of their constituents."

Mr. Leedle continued, "We are seeing increased interest in the Gallup-Healthways
Well-Being Index among existing and potential customers, who are becoming more
focused on making investments in employee health that reduce direct cost and
drive improved productivity. We are helping them recognize and understand that
the Gallup-Healthways Well-Being Index is a powerful tool that can evaluate
their population with great specificity, provide baselines and benchmarks of
employee well-being, internally and externally, and measure the impact of our
programs in improving well-being over time."

Financial Guidance

Healthways` guidance for adjusted net income per diluted share, which excludes
the lawsuit settlement costs, remains in a range of $0.90 to $1.04 for 2009. The
Company`s revenue guidance for 2009 remains in the range of $652 to $680
million.

Healthways today established its guidance for net income per diluted share for
the second quarter of 2009 in a range of $0.22 to $0.25, including $0.27 to
$0.29 expected from domestic operations and a net cost impact of $0.04 to $0.05
from international operations. The expected sequential decrease in
second-quarter earnings from the first quarter relates primarily to the gain on
the sale of D2Hawkeye, Inc. recorded in the first quarter, in addition to the
expected lower revenues from the potential impact on our billed lives from
rising unemployment and the increased costs associated with the implementation
of the Company`s contract with Hospitals Contribution Fund (HCF) in Australia,
which will go live in the second quarter of 2009.

COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE
See pages 8 and 9 for a reconciliation of GAAP and non-GAAP results

Twelve Months Three Months

Ending
June 30, 2009
(Guidance)
Ending Ended
Dec. 31, 2009 Dec. 31, 2008
(Guidance) (Actual)
Domestic, excluding lawsuit settlement costs $ 1.00 - 1.12 $ 1.20 $ 0.27 - 0.29
International (0.10)-(0.08 ) (0.10 ) (0.05)-(0.04 )
Adjusted net income per diluted share 0.90 - 1.04 1.10 0.22 - 0.25
Lawsuit settlement costs (0.73 ) - -
Net income per diluted share $ 0.17 - 0.31 $ 1.10 $ 0.22 - 0.25

Summary

Mr. Leedle concluded, "We are encouraged by our first-quarter operating and
financial results and by the opportunities we see in both the domestic and
international markets. Healthways is well positioned financially and
organizationally to maximize these opportunities, in part due to our initiatives
in 2008 to streamline our management structure, optimize capacity and align our
management and sales cycles more closely with those of our customers.

"In 2009 and beyond, we expect to continue expanding our market leadership in
providing solutions at scale that are proven to lower healthcare costs, not just
by providing the best evidence-based care to those already affected by disease,
but also by helping keep healthy people healthy and mitigating or slowing the
progression to disease for those with modifiable family or lifestyle risk
factors. We remain confident of our ability to meet increasing demand for these
solutions and, in so doing, of our continuing prospects for creating significant
long-term growth in shareholder value."

Conference Call

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.healthways.com and
clicking Investor Relations, or by going to www.earnings.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 telephonic replay will be
available for one week at 719-457-0820, code 4376582, and the replay will also
be available on the Company`s web site for the next 12 months.

Safe Harbor Provisions

This press release contains forward-looking statements, including our guidance
and financial expectations for future periods, that are based upon current
expectations and involve a number of risks and uncertainties. Those
forward-looking statements include all statements that are not historical
statements of fact and those regarding the intent, belief or expectations of the
Company, including, without limitation, all statements regarding the Company`s
future earnings and results of operations. 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 the following important factors, among
others, may affect these forward-looking statements. Consequently, actual
operations and results may differ materially from those expressed in these
forward-looking statements. The important factors include but are not limited
to: the Company`s ability to sign and implement new contracts for Health and
Care Support solutions; the Company`s ability to accurately forecast performance
and the timing of revenue recognition under the terms of its contracts with
customers ahead of data collection and reconciliation in order to provide
forward-looking guidance; the impact of any new or proposed legislation,
regulations and interpretations relating to the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, including the potential expansion to
Phase II for Medicare Health Support programs and any legislative or regulatory
changes with respect to Medicare Advantage; the Company`s ability to reach
mutual agreement with the Centers for Medicare and Medicaid Services (CMS) with
respect to the Company`s results under Phase I of Medicare Health Support; the
Company`s ability to anticipate the rate of market acceptance of Health and Care
Support solutions in potential international markets; the ability of the Company
to accurately forecast the costs necessary to implement the Company`s strategy
of establishing a presence in international markets; the risks associated with
foreign currency exchange rate fluctuations and the Company`s ability to hedge
against such fluctuations; the Company`s ability to retain existing health plan
customers if they decide to take programs in-house or are acquired by other
health plans which already have or are not interested in Health and Care Support
programs; 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 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 achieve estimated
annualized revenue in backlog in the manner and within the timeframe the Company
expects, which is based on certain estimates regarding the implementation of the
Company`s services; the ability of the Company and/or its customers to enroll
participants in the Company`s Health and Care Support programs in a manner and
within the timeframe anticipated by the Company; 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 contracts;
the Company`s ability to favorably resolve contract billing and interpretation
issues with its customers; the Company`s ability to service its debt and make
principal and interest payments as those payments become due; the risks
associated with changes in macroeconomic conditions, which may reduce the demand
and/or the timing of purchases for the Company`s services from customers or
potential customers, reduce the number of covered lives of the Company`s
existing customers, restrict the Company`s ability to obtain additional
financing, or impact the availability of credit under the Company`s credit
agreement; counterparty risk associated with our interest rate swap agreements;
the Company`s ability to integrate acquired businesses or technologies into the
Company`s business; the impact of any impairment of the Company`s goodwill or
other intangible assets; the Company`s ability to develop new products and
deliver outcomes on those products; 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 Company`s ability to obtain adequate
financing to provide the capital that may be necessary to support the Company`s
operations and to support or guarantee the Company`s performance under new
contracts; unusual and unforeseen patterns of healthcare utilization by
individuals with diabetes, cardiac, respiratory and/or other diseases or
conditions for which the Company provides services; the ability of the Company`s
customers to maintain the number of covered lives enrolled in the plans during
the terms of the agreements; the impact of litigation involving the Company
and/or its subsidiaries; the impact of future state, federal, and international
health care and other applicable legislation and regulations on the Company`s
ability to deliver its services and on the financial health of the Company`s
customers and their willingness to purchase the Company`s services; and other
risks detailed in the Company`s Annual Report on Form 10-K for the fiscal year
ended August 31, 2008 and other filings with the Securities and Exchange
Commission. The Company undertakes no obligation to update or revise any such
forward-looking statements.

About Healthways

Healthways is the leading provider of specialized, comprehensive solutions to
help millions of people maintain or improve their health and well-being and, as
a result, reduce overall costs. Healthways' solutions are designed to help
healthy individuals stay healthy, mitigate and slow the progression of disease
associated with family or lifestyle risk factors and promote the best possible
health for those already affected by disease. Our proven, evidence-based
programs provide highly specific and personalized interventions for each
individual in a population, irrespective of age or health status, and are
delivered to consumers by phone, mail, internet and face-to-face interactions,
both domestically and internationally. Healthways also provides a national,
fully accredited complementary and alternative Health Provider Network, offering
convenient access to individuals who seek health services outside of, and in
conjunction with, the traditional healthcare system. For more information,
please visit www.healthways.com.

HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

Three Months Ended
March 31,
2009 2008

Revenues $ 182,736 $ 180,940
Cost of 132,838 128,187
services
(exclusive
of
depreciati
on and
amortizati
on of
$8,786 and
$8,429,
respective
ly,
included
below)
Selling, 18,785 18,691
general
and
administra
tive
expenses
Depreciati 12,250 11,809
on and
amortizati
on

Operating 18,863 22,253
income
Gain on (2,581 ) -
sale of
investment
Interest 4,060 4,887
expense
Legal 39,956 -
settlement
and
related
costs

Income (22,572 ) 17,366
(loss)
before
income
taxes
Income tax (7,759 ) 7,163
expense
(benefit)

Net income $ (14,813 ) $ 10,203
(loss)

Earnings
(loss) per
share:
Basic $ (0.44 ) $ 0.28

Diluted $ (0.43 ) $ 0.27

Weighted
average
common
shares and
equivalent
s:
Basic 33,669 36,035
Diluted 34,067 37,730

Healthways, Inc.
Statistical Information
(In thousands)
(Unaudited)

March 31, March 31,
2009 2008
Operating Statistics
Domestic commercial available lives 195,000 187,500
Domestic commercial billed lives 35,800 26,900

Healthways, Inc.
Reconciliation of Non-GAAP Measures to GAAP Measures
(Unaudited)

Reconciliation of Domestic Diluted Earnings Per Share (EPS) Excluding Lawsuit
Settlement Costs and
Reconciliation of Adjusted EPS to Diluted EPS (Loss), GAAP Basis

Three Months Ended
March 31, 2009
Domestic EPS excluding lawsuit settlement costs (1) $ 0.33
International EPS (loss) (0.03 )
Adjusted EPS (2) $ 0.30
EPS (loss) attributable to lawsuit settlement costs (3) (0.73 )
EPS (loss), GAAP basis $ (0.43 )

(1) Domestic EPS excluding lawsuit settlement costs is a non-GAAP financial
measure. The Company excludes EPS (loss) attributable to lawsuit settlement costs
from this measure because of its comparability to the Company's historical
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 Domestic EPS excluding
lawsuit settlement costs in isolation or as a substitute for Domestic EPS
determined in accordance with accounting principles generally accepted in the
United States.

(2) Adjusted EPS is a non-GAAP financial measure. The Company excludes EPS
(loss) attributable to lawsuit settlement costs from this measure because of its
comparability to the Company's historical 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 Adjusted EPS in isolation or as a substitute for EPS determined in
accordance with accounting principles generally accepted in the United States.

(3) EPS (loss) attributable to lawsuit settlement costs consists of pre-tax
charges of $40 million related to the Company`s settlement of a qui tam lawsuit.

Reconciliation of Domestic EPS Guidance Excluding Lawsuit Settlement Costs and Reconciliation of
Adjusted EPS Guidance to Diluted EPS (Loss) Guidance, GAAP Basis

Three Months Ended Twelve Months Ending
March 31, 2009 December 31, 2009
Domestic EPS guidance excluding lawsuit settlement costs (4) $ 0.27 - 0.30 $ 1.00 - 1.12
International EPS (loss) guidance (0.03) - (0.02 ) (0.10) - (0.08 )
Adjusted EPS guidance (5) $ 0.24 - 0.28 $ 0.90 - 1.04
EPS (loss) attributable to lawsuit settlement costs (6) (0.73 ) (0.73 )
EPS (loss) guidance, GAAP basis $ (0.49) - (0.45 ) $ 0.17 - 0.31

(4) Domestic EPS guidance excluding lawsuit settlement costs is a non-GAAP financial measure. The Company excludes EPS
(loss) attributable to lawsuit settlement costs from this measure because of its comparability to the Company's
historical operating results. 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 Domestic EPS guidance
excluding lawsuit settlement costs in isolation or as a substitute for Domestic EPS guidance determined in accordance
with accounting principles generally accepted in the United States.

(5) Adjusted EPS guidance is a non-GAAP financial measure. The Company excludes EPS (loss) attributable to lawsuit
settlement costs from this measure because of its comparability to the Company's historical operating results. 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 Adjusted EPS guidance in isolation or as a substitute for EPS
guidance determined in accordance with accounting principles generally accepted in the United States.

(6) EPS (loss) attributable to lawsuit settlement costs consists of pre-tax charges of $40 million related to the
Company`s settlement of a qui tam lawsuit.

Reconciliation of Adjusted Net Income to Net Loss, GAAP Basis
(In millions)

Three Months Ended
March 31, 2009
Adjusted net income (7) $ 10.2
Net loss attributable to lawsuit settlement costs (8) (25.0 )
Net loss, GAAP basis $ (14.8 )

(7) Adjusted net income is a non-GAAP financial measure. The Company excludes net
loss attributable to lawsuit settlement costs from this measure because of its
comparability to the Company's historical 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 adjusted net income in isolation or as a substitute for net income
determined in accordance with accounting principles generally accepted in the
United States.

(8) Net loss attributable to lawsuit settlement costs consists of after-tax
charges of $25 million related to the Company`s settlement of a qui tam lawsuit.

HEALTHWAYS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)

March 31, December 31,
2009 2008
Assets
Current assets:
Cash and cash equivalents $ 40,739 $ 5,157
Accounts receivable, net 123,703 115,108
Prepaid expenses 11,762 13,479
Other current assets 7,093 3,810
Income taxes receivable 8,000 -
Deferred tax asset 27,748 30,488

Total current assets 219,045 168,042

Property and equipment
Leasehold improvements 37,367 34,635
Computer equipment and related software 142,441 138,369
Furniture and office equipment 29,392 29,610
Capital projects in process 21,862 17,462
231,062 220,076
Less accumulated depreciation (117,639 ) (108,635 )
Net property and equipment 113,423 111,441

Other assets 8,083 18,089
Customer contracts, net 31,360 32,715
Other intangible assets, net 67,326 68,207
Goodwill, net 484,584 484,596

Total assets $ 923,821 $ 883,090

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 18,322 $ 21,633
Accrued salaries and benefits 45,472 33,161
Accrued liabilities 74,851 26,294
Deferred revenue 8,425 6,904
Contract billings in excess of earned revenue 73,298 71,406
Income taxes payable - 8,034
Current portion of long-term debt 3,825 2,035
Current portion of long-term liabilities 5,066 4,609

Total current liabilities 229,259 174,076

Long-term debt 310,867 304,372
Long-term deferred tax liability 7,260 8,073
Other long-term liabilities 33,631 39,533

Stockholders' equity
Preferred stock
$.001 par value, 5,000,000 shares authorized, none outstanding - -
Common stock
$.001 par value,120,000,000 shares authorized, 33,682,571 and 33,648,976 shares 34 34
outstanding
Additional paid-in capital 215,481 213,461
Retained earnings 133,693 148,506
Accumulated other comprehensive loss (6,404 ) (4,965 )

Total stockholders' equity 342,804 357,036

Total liabilities and stockholders' equity $ 923,821 $ 883,090

HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Three Months Ended
March 31,
2009 2008
Cash flows from operating activities:
Net income (loss) $ (14,813 ) $ 10,203
Adjustments to reconcile net income to net cash provided by operating activities, net of
business acquisitions:
Depreciation and amortization 12,250 11,809
Amortization of deferred loan costs 348 291
Share-based employee compensation expense 2,847 4,484
Excess tax benefits from share-based payment arrangements (32 ) (3,057 )
Increase in accounts receivable, net (8,593 ) (20,110 )
Increase in other current assets (8,150 ) (902 )
Increase (decrease) in accounts payable 3,238 (2,568 )
Increase in accrued salaries and benefits 12,309 8,789
Increase in other current liabilities 39,717 6,734
Deferred income taxes 2,303 (27 )
Other 1,907 8,849
Increase in other assets (3,449 ) (1,856 )
Payments on other long-term liabilities (1,392 ) (1,789 )
Net cash flows provided by operating activities 38,490 20,850

Cash flows from investing activities:
Change in restricted cash (538 ) -
Sale of investment 11,626 -
Acquisition of property and equipment (11,504 ) (29,007 )
Acquisitions, net of cash acquired - (279 )
Other (940 ) (1,250 )
Net cash flows used in investing activities (1,356 ) (30,536 )

Cash flows from financing activities:
Proceeds from issuance of long-term debt 91,200 62,287
Payments of long-term debt (84,940 ) (551 )
Deferred loan costs (769 ) -
Excess tax benefits from share-based payment arrangements 32 3,057
Exercise of stock options 65 2,734
Repurchases of stock options (736 ) -
Repurchases of common stock - (22,208 )
Change in outstanding checks and other (6,149 ) -
Net cash flows (used in) provided by financing activities (1,297 ) 45,319

Effect of exchange rate changes on cash (255 ) 283

Net increase in cash and cash equivalents 35,582 35,916

Cash and cash equivalents, beginning of period 5,157 40,515

Cash and cash equivalents, end of period $ 40,739 $ 76,431

Healthways, Inc.
Mary A. Chaput, 615-614-4929
Executive Vice President and Chief Financial Officer

Copyright Business Wire 2009