Healthways Reports Fourth-Quarter Revenues of $175.2 Million

Thu Feb 7, 2013 6:45am EST

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Reports Quarterly Net Income Per Diluted Share of $0.02; Adjusted Net Income of
$0.05 Per Diluted Share before $0.03 Charge

Affirms Revenue Guidance for 2013 and Establishes 2013 EPS Guidance
NASHVILLE, Tenn.--(Business Wire)--
Ben R. Leedle, Jr., president and chief executive officer of Healthways, Inc.
(NASDAQ: HWAY), today announced financial results for the fourth quarter and
year ended December 31, 2012. For the fourth quarter, total revenues were $175.2
million compared with $180.0 million for the fourth quarter of 2011. Net income
per diluted share for the fourth quarter of 2012 was $0.02 compared with a loss
for the fourth quarter of 2011 of $5.32. Excluding a restructuring charge of
$0.03 per diluted share for capacity realignment costs, adjusted net income per
diluted share for the fourth quarter of 2012 was $0.05. For the fourth quarter
of 2011, adjusted net income per diluted share was $0.27, excluding
restructuring charges related to severance costs and Cigna-dedicated capacity
reductions and impairment charges related to the write down of goodwill. 

Total revenues for 2012 were $677.2 million compared with $688.8 million for
2011. Net income per diluted share for 2012 was $0.24 compared with a net loss
per diluted share for 2011 of $4.68. Excluding the restructuring and impairment
charges discussed above, adjusted net income per diluted share was $0.27 for
2012 compared with $0.85 for 2011.

                                                                                                                                               
 COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE                                                                                      
 
See pages 8-9 for a reconciliation of GAAP and non-GAAP measures                                                                             
                                                                                                                                               
                                                             3 Months Ended                             12 Months Ended                        
                                                             December 31,                               December 31,                           
                                                             2012                       2011 (1)        2012                  2011 (1)         
 Domestic, excluding restructuring and impairment charges    $    0.00             $    0.31            $    0.26             $    0.98        
 International, excluding restructuring charges                   0.05                  (0.04  )             0.01                  (0.13  )    
 Adjusted net income per diluted share                            0.05                  0.27                 0.27                  0.85        
 Restructuring charges(2)                                         (0.03  )              (0.17  )             (0.03  )              (0.16  )    
 Impairment charges(2)                                            -                     (5.43  )             -                     (5.36  )    
 Net income (loss) per diluted share(3)                      $    0.02             $    (5.32  )        $    0.24             $    (4.68  )    
                                                                                                                                               
 (1) The assumed exercise of stock-based compensation awards for the three and twelve months ended December 31, 2011 was not considered because the impact would be anti-dilutive. 
 (2) Per-share results differ for the three and twelve months ended December 31, 2011 due to different weighted average outstanding shares and equivalents for each period. 
 (3) Figures may not add due to rounding.                                                                                                      
                                                                                                                                               


Leedle remarked, "Healthways` financial and operating performance for the fourth
quarter and the year was on track strategically, tactically and financially with
our plans to return the Company to a path of consistent profitable growth.
Because of the strong business development success we achieved during 2012, we
have strong visibility to a return to revenue growth in 2013 and beyond. We are
also confident that the ramping of our existing contract base during 2013, along
with expected new and renewed contracts signed in 2013, will provide for a full
return to sustainable profitable growth for 2014 and beyond." 

Fourth-Quarter Results

"Fourth-quarter revenues were impacted by the wind-down of the Cigna contract,
which represented comparable-period declines in revenues of approximately $20
million for the fourth quarter and $70 million for full-year 2012," said Leedle.
"As we discussed in our third-quarter press release, fourth-quarter revenues
were also affected by the early renewal of two significant contracts, resulting
in changes that reduced revenue for the fourth quarter of 2012, while
significantly increasing our expected revenues in 2013 and beyond both for these
renewed contracts and the Company overall. 

"Earnings for the fourth quarter were affected by our success in signing a
number of previously discussed new large contracts that required significant
implementation costs, as well as by the revenue decline discussed above. We
partially offset the impact of these costs and lower revenues through the
performance of our international operations, which produced net income of $0.05
per diluted share for the fourth quarter, primarily driven by the timing of
milestone-based revenue recognition." 

Fourth-Quarter Business Development Success Caps Record Contracting Year

"Our business development momentum remained strong in the fourth quarter of
2012, as we continued to execute large, long-term total population management
contracts requiring the significant scale and integration capabilities that we
believe Healthways is uniquely capable of providing through our comprehensive
Well-Being Improvement Solution," Leedle added. "During the quarter, we signed
34 contracts, including 12 with new customers, 10 expansions and 12 extensions.
In total, the new and expanded contracts signed in 2012 are expected to produce
average annualized new revenues of $157 million at target performance, compared
with our previous record of $119 million from contracts we signed in 2011. 

"Our 2012 contracting results demonstrate that we are continuing to grow our
business significantly in each of our major markets: health plans, health
systems and employers. In the fourth quarter alone, we announced new total
population management contracts with two large employers, who, combined, have
over 325,000 employees and eligible dependents. We continued to expand the
services we provide to a number of our largest health plan customers. We also
signed contracts with three major health systems that represent 40 hospitals and
more than 6,400 affiliated physicians across portions of seven states. 

"An increasing number of these large, long-term contracts have growing revenue
streams that reflect both the staged implementation of services and the
expansion of lives we serve through our comprehensive Well-Being Improvement
Solution. Over the past year and together with our new health system partners
and their affiliated physicians, we have secured both Medicare and commercial
ACOs, expanding the number of attributed lives to whom we will collaboratively
provide integrated services and support. 

"As a result of the number and scope of the contracts signed in 2012, we have
reached a critical mass of business that we expect will drive a return to
revenue growth for 2013 and beyond. Further, based on continuing business
development momentum with health systems, health plans and employers, including
government entities, we are confident our contracting success will continue in
2013." 

Financial Guidance

As discussed in the third-quarter release, Healthways` guidance for 2013
revenues is a range of $710 million to $750 million. This range represents a 5%
to 11% increase over 2012 revenues, despite reduced revenues of approximately
$80 million in 2013, as compared to 2012, from the terminations of the Cigna
contract and one other health plan contract (the "two terminated contracts").
Once launched, many of the contracts signed in 2012 are expected to take from
six to 24 months to reach an average target revenue run rate. As a result, the
Company expects its revenues for the second half of 2013 will be substantially
larger than revenues for the first half of the year. The Company also expects
its existing contract base at the end of 2012 to produce organic revenue growth
for 2014 over 2013 of more than $85 million. 

Healthways expects that EBITDA margin for 2013 will be in a range of 10.5% to
12.5%, compared to an EBITDA margin of 11.9% for 2012. There are a number of
factors impacting the Company`s EBITDA margin expectations for 2013, including
the two terminated contracts, which, as a result of their scale, relationship
tenure, services and platforms, carried margins higher than the Company`s
consolidated averages. In addition, some large contracts include
performance-based revenue that the Company expects to recognize in the second
half of 2013. Further, many of the large contracts signed during 2012 initially
require significant implementation costs ahead of the revenue ramp anticipated
to occur during 2013 and beyond, as a variety of services are deployed to engage
an increasing number of covered lives. As a result of these dynamics, Healthways
expects significant expansion in the EBITDA margin through the sequential
quarters of 2013. 

The Company`s guidance for net income per diluted share for 2013 is in a range
of $0.25 to $0.35. The Company expects net income per diluted share to ramp
sharply through the sequential quarters of 2013, with a loss for the first
quarter of approximately $0.15 per diluted share.

                                                                               
 COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE                      
 
See pages 8-9 for a reconciliation of GAAP and non-GAAP measures             
                                                                               
                                          Twelve Months                        
                                          Ending                Ended          
                                          Dec. 31, 2013         Dec. 31, 2012  
                                          (Guidance)            (Actual)       
 Adjusted net income per diluted share    $0.25 - 0.35          $0.27          
 Restructuring charges                    -                     (0.03)         
 Net income per diluted share             $0.25 - 0.35          $0.24          


Healthways continues to be well-positioned to finance its expected growth. At
the end of 2012, the Company had $55 million of availability on its revolving
credit facility, and its ratio of long-term debt to EBITDA, as calculated under
its credit agreement, was 3.4 times. The Company expects 2013 net operating cash
flows to be in a range of $70 million to $80 million, and capital expenditures
for the year are expected to total approximately $45 million. 

Summary

Leedle concluded, "The past year marked a major step in our path to
re-establishing consistent, profitable long-term growth. During the year, we
began or continued the implementation of a number of large, comprehensive
contracts signed in 2011 and 2012, and we demonstrated the accelerating demand
for our comprehensive Well-Being Improvement Solution from health plans, health
systems and employers. As a result, we have built the contract base expected to
drive absolute revenue growth in 2013 and further revenue growth for 2014. As in
2012, we expect margin pressure in 2013 as we implement and grow the revenue
streams from this series of new, long-term and strategic relationships with
health plans, health systems and employers. However, we expect our revenue
growth to drive comparable-quarter margin expansion as early as the second half
of 2013, with additional EBITDA and earnings growth continuing for 2014. 

"We believe our longer-term prospects continue to grow more favorable as the
healthcare industry accelerates the transition to a value-based payment model
based on longitudinal cost and quality outcomes. The acceleration in our
business development momentum, in terms of contract volume and the size,
comprehensiveness and integration requirements of the contracts signed and under
development, support this belief. Further, our 2012 contracting success is
evidence of Healthways strong market differentiation. We believe Healthways is
in the best position to serve increasing market demand for total population
management because we have developed, and lead the market for, well-being
improvement. We have a long-term record of proven, value-based performance and
compelling innovation that, together, have enabled us to consistently expand our
value proposition in anticipation of the transformation of the healthcare
industry." 

Conference Call

Healthways will hold a conference call to discuss this release today at 9:00
a.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 5679724, 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, which are based upon current
expectations, involve a number of risks and uncertainties and are subject to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. 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. Those
forward-looking statements are subject to the finalization of the Company`s
annual financial accounting procedures and may be affected by certain risks and
uncertainties, including, but not limited to:

* the Company`s ability to sign and implement new contracts; 
* the Company`s ability to accurately forecast the costs required to
successfully implement new contracts; 
* the Company`s ability to accurately forecast the costs necessary to integrate
new or acquired businesses, services (including outsourced services) or
technologies into the Company`s business; 
* the Company`s ability to anticipate change and respond to emerging trends in
the domestic and international markets for healthcare and the impact of the same
on demand for the Company`s services; 
* the Company`s ability to implement its integrated data and technology
solutions platform within the required time frame and expected cost estimates
and to develop and enhance this platform and/or other technologies to meet
evolving customer and market needs; 
* 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 accurately forecast the Company`s revenues, margins,
earnings and net income, as well as any potential charges that the Company may
incur as a result of changes in its business; 
* the Company`s ability to accurately forecast performance and the timing of
revenue recognition under the terms of its customer contracts ahead of data
collection and reconciliation; 
* the Company`s ability to accurately forecast enrollment and participation
rates in services and programs offered within the Company`s contracts; 
* the Company`s ability to accurately forecast the costs necessary to establish
a presence in international markets; 
* the risks associated with foreign currency exchange rate fluctuations; 
* 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;

* the Company`s ability to achieve the contractually required cost savings and
clinical outcomes improvements and reach mutual agreement with customers with
respect to cost savings, or to achieve such savings and improvements within the
time frames it contemplates; 
* the risks associated with changes in macroeconomic conditions; 
* the risks associated with data privacy or security breaches, computer hacking,
network penetration and other illegal intrusions; 
* the impact of litigation involving the Company and/or its subsidiaries; 
* the impact of future state, federal and international legislation and
regulations applicable to the Company`s business, including the Patient
Protection and Affordable Care Act, 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 December 31, 2011, 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 largest independent global provider of well-being improvement
solutions. Dedicated to creating a healthier world one person at a time, the
Company uses the science of behavior change to produce and measure positive
change in well-being for our customers, which include employers, integrated
health systems, hospitals, physicians, health plans, communities and government
entities. We provide highly specific and personalized support for each
individual and their team of experts to optimize each participant`s health and
productivity and to reduce health-related costs. Results are achieved by
addressing longitudinal health risks and care needs of everyone in a given
population. The Company has scaled its proprietary technology infrastructure and
delivery capabilities developed over 30 years and now serves approximately 40
million people on four continents. Learn more at www.healthways.com.

                                                                                                                                                                                                                                                                                                                                              
      HEALTHWAYS, INC.                                                                                                                                                                                                                                                                                                                        
      
CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                                                                                                                                                                                                  
      
(Unaudited)                                                                                                                                                                                                                                                                                                                            
      
(In thousands, except per share data)                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                              
                                                                                                                                                                     Three Months Ended                                                                                      Twelve Months Ended                                              
                                                                                                                                                                     December 31,                                                                                            December 31,                                                     
                                                                                                                                                                     2012                                                2011                                   2012                                   2011                                   
                                                                                                                                                                                                                                                                                                                                              
      Revenues                                                                                                                                                       $            175,180                   $            179,995                                $            677,170                   $            688,765                   
      Cost of services (exclusive of depreciation and amortization of $9,404, $9,281, $36,094, and $36,248, respectively, included below)                                         137,559                                133,211                                             533,880                                510,724                   
      Selling, general and administrative expenses                                                                                                                                17,432                                 15,120                                              60,888                                 64,843                    
      Depreciation and amortization                                                                                                                                               13,501                                 12,644                                              51,734                                 49,988                    
      Impairment loss                                                                                                                                                             -                                      183,288                                             -                                      183,288                   
      Restructuring and related charges                                                                                                                                           1,773                                  9,036                                               1,773                                  9,036                     
                                                                                                                                                                                                                                                                                                                                              
      Operating income (loss)                                                                                                                                                     4,915                                  (173,304     )                                      28,895                                 (129,114     )            
      Interest expense                                                                                                                                                            3,328                                  3,384                                               14,149                                 13,193                    
                                                                                                                                                                                                                                                                                                                                              
      Income (loss) before income taxes                                                                                                                                           1,587                                  (176,688     )                                      14,746                                 (142,307     )            
      Income tax expense                                                                                                                                                          983                                    382                                                 6,722                                  15,386                    
                                                                                                                                                                                                                                                                                                                                              
      Net income (loss)                                                                                                                                              $            604                       $            (177,070     )                         $            8,024                     $            (157,693     )            
                                                                                                                                                                                                                                                                                                                                              
      Earnings (loss) per share:                                                                                                                                                                                                                                                                                                              
      Basic                                                                                                                                                          $            0.02                      $            (5.32        )                         $            0.24                      $            (4.68        )            
                                                                                                                                                                                                                                                                                                                                              
      Diluted(1)                                                                                                                                                     $            0.02                      $            (5.32        )                         $            0.24                      $            (4.68        )            
                                                                                                                                                                                                                                                                                                                                              
      Weighted average common shares and equivalents:                                                                                                                                                                                                                                                                                         
      Basic                                                                                                                                                                       33,931                                 33,268                                              33,597                                 33,677                    
      Diluted (1)                                                                                                                                                                 34,311                                 33,268                                              33,836                                 33,677                    
                                                                                                                                                                                                                                                                                                                                              
 (1)  The assumed exercise of stock-based compensation awards for the three and twelve months ended December 31, 2011 was not considered because the impact would be anti-dilutive.                                                                                                                                                           


                                                                                                                                                                                                                   
   Healthways, Inc.                                                                                                                                                                                                
   
Reconciliation of Non-GAAP Measures to GAAP Measures                                                                                                                                                           
   
(Unaudited)                                                                                                                                                                                                    
   
                                                                                                                                                                                                               
   
Reconciliation of Domestic Earnings Per Share (EPS) Excluding Restructuring Charges and Reconciliation of Adjusted EPS to EPS, GAAP Basis                                                                      
                                                                                                                                                                                                                   
                                                                       Three Months Ended                                                                  Twelve Months Ended                                     
                                                                       December 31, 2012                                                                   December 31, 2012                                       
   Domestic EPS excluding restructuring charges (1)                                  $             0.00                                                                  $             0.26                        
   International EPS                                                                               0.05                                                                                0.01                        
   Adjusted EPS (2)                                                                  $             0.05                                                                  $             0.27                        
   EPS (loss) attributable to restructuring charges (3)                                            (0.03         )                                                                     (0.03         )             
   EPS, GAAP basis                                                                   $             0.02                                                                  $             0.24                        
                                                                                                                                                                                                                   


(1) Domestic EPS excluding restructuring charges is a non-GAAP financial
measure. The Company excludes EPS (loss) attributable to restructuring charges
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 excluding restructuring
charges 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 restructuring charges 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 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 restructuring charges includes $1.8 million
associated with charges related to capacity realignment.

                                                                                                                                                                                                                          
   Reconciliation of Domestic EPS Excluding Restructuring and Impairment Charges and Reconciliation of Adjusted EPS to EPS, GAAP Basis (4)                                                                                
                                                                                                                                                                                                                          
                                                                                                  Three Months Ended                                                         Twelve Months Ended                          
                                                                                                  December 31, 2011                                                          December 31, 2011                            
   Domestic EPS excluding restructuring and impairment charges (5)                                $              0.31                                                        $              0.98                          
   International EPS (loss) excluding restructuring charges (6)                                                  (0.04          )                                                           (0.13          )              
   Adjusted EPS (7)                                                                               $              0.27                                                        $              0.85                          
   EPS (loss) attributable to restructuring charges (8)                                                          (0.17          )                                                           (0.16          )              
   EPS (loss) attributable to impairment charges (9)                                                             (5.43          )                                                           (5.36          )              
   EPS (loss), GAAP basis (10)                                                                    $              (5.32          )                                            $              (4.68          )              


(4) The assumed exercise of stock-based compensation awards for the three and
twelve months ended December 31, 2011 was not considered because the impact
would be anti-dilutive. 

(5) Domestic EPS excluding restructuring and impairment charges is a non-GAAP
financial measure. The Company excludes EPS (loss) attributable to restructuring
and impairment charges 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
excluding restructuring and impairment charges in isolation or as a substitute
for Domestic EPS determined in accordance with accounting principles generally
accepted in the United States. 

(6) International EPS (loss) excluding restructuring charges is a non-GAAP
financial measure. The Company excludes EPS (loss) attributable to restructuring
charges 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 International EPS (loss)
excluding restructuring charges in isolation or as a substitute for
International EPS (loss) determined in accordance with accounting principles
generally accepted in the United States. 

(7) Adjusted EPS is a non-GAAP financial measure. The Company excludes EPS
(loss) attributable to restructuring and impairment charges 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 in isolation or as a substitute for EPS
determined in accordance with accounting principles generally accepted in the
United States. 

(8) EPS (loss) attributable to restructuring charges includes $9.0 million
associated with charges related to severance costs and Cigna-dedicated capacity
reductions. 

(9) EPS (loss) attributable to impairment charges includes $183.3 million
associated with the write-down of goodwill. 

(10) Figures may not add due to rounding.

                                                                                              
 Reconciliation of Revenues Excluding Cigna to Revenues, GAAP Basis                           
                                                                                              
                                          Twelve Months Ended         Twelve Months Ended     
                                          December 31, 2012           December 31, 2011       
   Revenues excluding Cigna (11)          $           631.2           $           573.3       
   Revenues attributable to Cigna (12)                46.0                        115.5       
   Revenues, GAAP basis                   $           677.2           $           688.8       


(11) Revenues excluding Cigna is a non-GAAP financial measure. The Company
excludes revenues attributable to Cigna 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 revenues excluding Cigna in isolation or as a substitute for
revenues determined in accordance with accounting principles generally accepted
in the United States. 

(12) Revenues attributable to Cigna consist of pre-tax revenues of $46.0 million
and $115.5 million for the twelve months ended December 31, 2012 and 2011,
respectively.

                                                                                            
 HEALTHWAYS, INC.                                                                           
 
CONSOLIDATED BALANCE SHEETS                                                               
 
(Unaudited)                                                                               
 
(In thousands)                                                                            
 
                                                                                          
 
ASSETS                                                                                    
                                                                                            
                                              December 31,            December 31,          
                                              2012                    2011                  
 Current assets:                                                                            
 Cash and cash equivalents                    $        1,759          $        864          
 Accounts receivable, net                              108,337                 97,459       
 Prepaid expenses                                      9,727                   11,417       
 Other current assets                                  7,227                   1,412        
 Income taxes receivable                               5,920                   6,065        
 Deferred tax asset                                    8,839                   10,314       
 Total current assets                                  141,809                 127,531      
                                                                                            
 Property and equipment:                                                                    
 Leasehold improvements                                40,679                  41,622       
 Computer equipment and related software               267,902                 239,732      
 Furniture and office equipment                        23,552                  26,324       
 Capital projects in process                           11,799                  17,811       
                                                       343,932                 325,489      
 Less accumulated depreciation                         (187,438  )             (183,301  )  
                                                       156,494                 142,188      
                                                                                            
 Other assets                                          21,042                  10,797       
                                                                                            
 Intangible assets, net                                90,228                  92,997       
 Goodwill, net                                         338,695                 335,392      
                                                                                            
 Total assets                                 $        748,268        $        708,905      
                                                                                            
 See accompanying notes to the consolidated financial statements.                           


                                                                                                                                                           
 HEALTHWAYS, INC.                                                                                                                                          
 
CONSOLIDATED BALANCE SHEETS                                                                                                                              
 
(In thousands, except share and per share data)                                                                                                          
 
(Unaudited)                                                                                                                                              
 
                                                                                                                                                         
 
LIABILITIES AND STOCKHOLDERS` EQUITY                                                                                                                     
                                                                                                                                                           
                                                                                                                    December 31,          December 31,     
                                                                                                                    2012                  2011             
 Current liabilities:                                                                                                                                      
 Accounts payable                                                                                                $  26,343             $  22,578           
 Accrued salaries and benefits                                                                                      24,909                35,617           
 Accrued liabilities                                                                                                39,234                28,639           
 Deferred revenue                                                                                                   5,643                 9,273            
 Contract billings in excess of earned revenue                                                                      14,793                13,154           
 Current portion of long-term debt                                                                                  11,801                3,725            
 Current portion of long-term liabilities                                                                           5,535                 5,771            
 Total current liabilities                                                                                          128,258               118,757          
                                                                                                                                                           
 Long-term debt                                                                                                     278,534               266,117          
 Long-term deferred tax liability                                                                                   36,053                26,964           
 Other long-term liabilities                                                                                        26,602                31,351           
                                                                                                                                                           
 Stockholders` equity:                                                                                                                                     
 Preferred stock                                                                                                                                           
 $.001 par value, 5,000,000 shares authorized, none outstanding                                                     -                     -                
 Common stock                                                                                                                                              
 $.001 par value, 120,000,000 shares authorized, 33,924,464 and 33,304,681 shares outstanding, respectively         34                    33               
 Additional paid-in capital                                                                                         251,357               247,137          
 Retained earnings                                                                                                  56,541                48,517           
 Treasury stock, at cost, 2,254,953 shares in treasury                                                              (28,182       )       (28,182       )  
 Accumulated other comprehensive loss                                                                               (929          )       (1,789        )  
 Total stockholders` equity                                                                                         278,821               265,716          
                                                                                                                                                           
 Total liabilities and stockholders` equity                                                                      $  748,268            $  708,905          


                                                                                                                                                                      
 HEALTHWAYS, INC.                                                                                                                                                     
 
CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                                               
 
(Unaudited)                                                                                                                                                         
 
(In thousands)                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                             Twelve Months Ended                      
                                                                                                                             December 31,                             
                                                                                                                             2012                  2011            
 Cash flows from operating activities:                                                                                                                                
 Net income (loss)                                                                                                        $  8,024                 $     (157,693  )  
 Adjustments to reconcile net income to net cash flows provided by operating activities, net of business acquisitions:                                                
 Depreciation and amortization                                                                                               51,734                      49,988       
 Impairment loss                                                                                                             -                           183,288      
 Amortization and write-off of deferred loan costs                                                                           2,284                       1,894        
 Share-based employee compensation expense                                                                                   6,371                       9,246        
 Deferred income taxes                                                                                                       (867      )                 (3,572    )  
 Excess tax benefits from share-based payment arrangements                                                                   (492      )                 (433      )  
 Increase in accounts receivable, net                                                                                        (23,439   )                 (7,452    )  
 Decrease in other current assets                                                                                            2,517                       6,960        
 (Decrease) increase in accounts payable                                                                                     (995      )                 1,466        
 Decrease in accrued salaries and benefits                                                                                   (12,980   )                 (8,932    )  
 Increase in other current liabilities                                                                                       13,637                      2,676        
 Other                                                                                                                       (5,096    )                 (1,144    )  
 Net cash flows provided by operating activities                                                                             40,698                      76,292       
                                                                                                                                                                      
 Cash flows from investing activities:                                                                                                                                
 Acquisition of property and equipment                                                                                       (48,912   )                 (49,290   )  
 Business acquisitions, net of cash acquired                                                                                 (4,693    )                 (23,523   )  
 Other                                                                                                                       (6,872    )                 (6,889    )  
 Net cash flows used in investing activities                                                                                 (60,477   )                 (79,702   )  
                                                                                                                                                                      
 Cash flows from financing activities:                                                                                                                                
 Proceeds from issuance of long-term debt                                                                                    753,450                     439,621      
 Payments of long-term debt                                                                                                  (734,255  )                 (417,490  )  
 Deferred loan costs                                                                                                         (2,547    )                 -            
 Excess tax benefits from share-based payment arrangements                                                                   492                         433          
 Exercise of stock options                                                                                                   2,835                       4,825        
 Repurchases of common stock                                                                                                 -                           (23,690   )  
 Change in outstanding checks and other                                                                                      582                         (709      )  
 Net cash flows provided by financing activities                                                                             20,557                      2,990        
                                                                                                                                                                      
 Effect of exchange rate changes on cash                                                                                     117                         220          
                                                                                                                                                                      
 Net increase in cash and cash equivalents                                                                                   895                         (200      )  
                                                                                                                                                                      
 Cash and cash equivalents, beginning of period                                                                              864                         1,064        
                                                                                                                                                                      
 Cash and cash equivalents, end of period                                                                                 $  1,759                 $     864          
                                                                                                                                                                      
                                                                                                                                                                      
 Noncash Activities:                                                                                                                                                  
 Issuance of unregistered common stock associated with Navvis acquisition                                                 $  -                     $     3,262        


Healthways, Inc.
Investor Relations Contact:
Chip Wochomurka, 615-614-4493
chip.wochomurka@healthways.com



Copyright Business Wire 2013

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