Healthways Posts 3Q and 9 Months Earnings

Oct 28, 2009 (Close-Up Media via COMTEX) -- HWAY | Quote | Chart | News | PowerRating -- Healthways, Inc. has announced financial results for the third quarter and nine months ended September 30.

In a release on October 22, the Company noted that total revenues for the quarter were $181.6 million compared with revenues of $187.4 million for the three months ended September 30, 2008. Net income for the third quarter of 2009 was $8.8 million, or $0.26 per diluted share, which was two cents above the Company's earnings guidance range. Net income for the third quarter of 2008 was $15.6 million, or $0.45 per diluted share.

Ben R. Leedle, Jr., chief executive officer of Healthways, said, "The performance of our domestic operations once again enabled us to exceed our revenue and earnings expectations for the quarter. These better than expected results for the third quarter were driven primarily by the timing of performance-based revenue recognition, as certain performance targets were measured and achieved earlier than forecast, and by higher than projected billed lives. The strong earnings performance by our domestic operations was slightly offset by higher than anticipated net costs in our international operations, primarily related to the start-up of the Australian contract with Hospitals Contribution Fund.

"The Company's cash flow from operations was a strong $42.1 million for the third quarter. In addition to investing approximately $13.4 million in capital expenditures during the quarter, we also reduced our debt by $34.1 million. This reduction contributed to a debt to EBITDA ratio as calculated under our credit agreement of 2.0 at the end of the quarter, which is the low end of the forecasted range for 2009. Combined with our debt reduction during the first six months of the year, our total debt to capitalization has improved 410 basis points to 42.1 percent at the end of the third quarter from 46.2 percent at December 31, 2008.

"Since the beginning of the third quarter, we have signed new, expanded or extended contracts that reflect demand across the breadth of our solutions from new and existing Healthways customers, representing regional Blue Cross Blue Shield health plans, state governments, and Fortune 100 employers. Under these agreements, we will provide our chronic condition management, Silver Sneakers, QuitNet comprehensive smoking cessation, lifestyle health coaching, and/or WholeHealth solutions.

"Among these customers, we are pleased to report today a significant new agreement that expands our long-term relationship with Health Care Service Corp. (HCSC), one of the nation's largest health plans. Under the terms of this multi-year agreement, Healthways will make its national fitness center network available to approximately 6.7 million of HCSC's commercial members. With this unique business model and related services, we have created a new consumer solution designed to support healthy behaviors for individuals in a commercial population. This agreement is a further example of how our extensive infrastructure allows for the rapid creation of innovative solutions that differentiate Healthways competitively in the commercial market, just as Silver Sneakers has done in the Medicare Advantage market."

Financial Guidance

Based on the performance of the Company's domestic operations for the first nine months of 2009, Healthways today increased its guidance for 2009 revenues to a range of $708 million to $717 million from the previous range of $685 million to $700 million. This revision includes a new range for revenues from domestic operations of $691 million to $697 million, up from $668 million to $680 million previously. Guidance for 2009 revenues from international operations remains unchanged in a range of $17 million to $20 million.

Due to the anticipated increase in 2009 revenues, Healthways also revised its guidance for 2009 adjusted net income per diluted share, which excludes previously announced lawsuit settlement costs of $0.73 per diluted share, to a range of $1.01 to $1.05 compared with the previous range of $0.97 to $1.05. This new earnings guidance also reflects the expected $0.02 per diluted share net cost impact of the HealthHonors acquisition announced last week. Guidance for 2009 adjusted net income per diluted share includes a new range for domestic operations of $1.13 to $1.15 compared with $1.07 to $1.13 previously, while the net cost impact from international operations has increased to a range of $0.10 to $0.12 from the previous range of $0.08 to $0.10.

The Company's guidance for net income per diluted share for the fourth quarter of 2009 is in a range of $0.19 to $0.23. Domestic operations are expected to produce net income per diluted share of $0.20 to $0.22, including the effect of the HealthHonors acquisition. Fourth-quarter 2009 results from international operations are expected to be in a range of $0.01 net cost per diluted share to $0.01 net income per diluted share.

Leedle concluded, "We are pleased by the better than expected financial performance of our domestic operations for the third quarter and throughout 2009 and by our continued contracting momentum. We are also building our potential for future growth through the expansion of our value proposition as evidenced by our recently announced third-quarter WholeHealth contract with a Fortune 100 company and our new contract with HCSC.

"While encouraged by the Company's progress, we remain cautious in our near-term outlook because of uncertainty about the economic environment and the possible impact of both the high domestic unemployment rate and potential healthcare reform on our customers. Given today's economic environment, we believe the timeframe for sustained and significant improvement in the rate of unemployment is still unclear and that the possibility remains for further attrition. Despite our caution, we believe we are well positioned to continue managing through the current environment, with substantial cash flow from operations, a strengthening financial position and ample liquidity.

"Longer-term, we remain confident of the Company's prospects for further substantial growth. In both the U.S and internationally, health plans, employers and governments are increasingly focused on the potential for reducing the future growth of healthcare costs by reducing health risks and preventing or delaying disease onset and progression. Healthways has been a leading pioneer in the development and application of these strategies with a proven record that healthier people cost less. With solutions demonstrated to be the most comprehensive, integrated and scalable in the market, we are well positioned to leverage this increased focus to expand the populations we serve and, through successful performance, to create further shareholder value."

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