Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - AMERICA SERVICE GROUP INC /DE | g26297e8vk.htm |
| EX-99.2 - EX-99.2 - AMERICA SERVICE GROUP INC /DE | g26297exv99w2.htm |
| EX-10.2 - EX-10.2 - AMERICA SERVICE GROUP INC /DE | g26297exv10w2.htm |
| EX-10.1 - EX-10.1 - AMERICA SERVICE GROUP INC /DE | g26297exv10w1.htm |
Exhibit 99.1
Contact:
|
Richard Hallworth | Michael W. Taylor | ||
| President and Chief | Executive Vice President | |||
| Executive Officer | and Chief Financial Officer | |||
| (615) 376-0669 | (615) 376-0669 |
AMERICA SERVICE GROUP ANNOUNCES
FOURTH QUARTER AND YEAR END RESULTS
FOURTH QUARTER AND YEAR END RESULTS
Fourth Quarter Highlights:
| • | Increase in net income to $1.6 million in the quarter, from a net loss of $236,000 in the prior year quarter; |
| • | Incurred $740,000 of expenses in the quarter related to merger transaction; |
| • | Increase in net cash provided by operating activities to $25.8 million in the quarter from $8.5 million in the prior year quarter; |
| • | Increase in cash and cash equivalents to $39.6 million at December 31, 2010, from $15.4 million at September 30, 2010; and |
| • | No debt outstanding at December 31, 2010. |
BRENTWOOD, Tennessee (March 3, 2011) — America Service Group Inc. (NASDAQ:ASGR) announced today
results for the fourth quarter and year ended December 31, 2010, and provided its initial guidance
for full-year 2011 results.
Income Statement Presentation Format as a Result of United States Generally Accepted
Accounting Principles (“GAAP”) Related to Discontinued Operations
As noted in its 2009 annual report on Form 10-K, the Company is applying the discontinued
operations provisions of GAAP to all service contracts that expire subsequent to January 1, 2002.
In accordance with GAAP, the results of operations of contracts that expire, less applicable income
taxes are classified on the Company’s consolidated statements of operations separately from
continuing operations. The presentation prescribed for discontinued operations requires the
collapsing of healthcare revenues and expenses, as well as other specifically identifiable costs,
into the income or loss from discontinued operations, net of taxes. Items such as indirect
selling, general and administrative expenses or interest expense cannot be allocated to expired
contracts. The GAAP accounting presentation as it relates to discontinued operations and the
Company’s expired contracts has no impact on net income, earnings per share, total cash flows or
stockholders’ equity.
As a result of the application of GAAP related to discontinued operations, “healthcare revenues”
and “healthcare expenses” on the Company’s consolidated statements of operations for any period
presented will only include revenues and expenses from continuing contracts. The Company will also
discuss “Total Revenues,” “Total Healthcare Expenses,” and “Total Gross Margin,” which will include
all of the Company’s revenues and healthcare expenses for a period (i.e., healthcare revenues plus
revenues from expired service contracts, or healthcare expenses plus expenses from expired
contracts less share-based compensation expense). Total Gross Margin is defined as Total Revenues
less Total Healthcare Expenses. Total Gross Margin excludes share-based compensation expense.
Reconciliations of healthcare revenues to Total Revenues, healthcare expenses to Total Healthcare
Expenses and gross margin to Total Gross Margin are found in the attached schedules.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 2
March 3, 2011
Page 2
March 3, 2011
Results for Fourth Quarter and Year End December 31, 2010
Healthcare revenues from continuing contracts for the fourth quarter of 2010 were $158.8 million,
an increase of 3.2% over the prior year quarter. Healthcare revenues from continuing contracts for
the year ended December 31, 2010, were $630.3 million, an increase of 8.8% over the prior year
period. Total Revenues, which include revenues from continuing and discontinued contracts, for the
fourth quarter of 2010 were $159.6 million, a decrease of 0.9% from the prior year quarter. Total
Revenues for the year ended December 31, 2010, were $639.5 million, an increase of 4.8% from the
prior year period. The increase in both healthcare revenues from continuing contracts as well as
Total Revenues from the prior year ended December 31, 2009, is primarily due to the commencement of
services on April 1, 2009, under the Company’s contract with the State of Michigan Department of
Corrections.
Healthcare expenses from continuing contracts for the fourth quarter of 2010 were $146.3 million,
or 92.1% of healthcare revenues, as compared with $137.5 million, or 89.3% of healthcare revenues,
in the prior year quarter. Healthcare expenses from continuing contracts for the year ended
December 31, 2010, were $575.6 million, or 91.3% of healthcare revenues, as compared with $533.9
million, or 92.1% of healthcare revenues, in the prior year period. Total Healthcare Expenses,
which include expenses from continuing and discontinued contracts but excludes share-based
compensation expense, for the fourth quarter of 2010 were $147.3 million, or 92.3% of Total
Revenues, as compared with $144.1 million, or 89.5% of Total Revenues, in the prior year quarter.
Total Healthcare Expenses for the year ended December 31, 2010, were $585.3 million, or 91.5% of
Total Revenues, as compared with $562.8 million, or 92.2% of Total Revenues, in the prior year
period. The increase in both healthcare expenses from continuing contracts as well as Total
Healthcare Expenses from the prior year ended December 31, 2009, is primarily due to the
commencement of services on April 1, 2009, under the Company’s contract with the State of Michigan
Department of Corrections. One of the most volatile components of the Company’s Total Healthcare
Expenses each period relates to professional liability expenses. Total professional liability
expenses, which include policy premiums, current year loss provision, adjustments to prior year
loss provisions, actuarial adjustments and administrative claim management expenses, were 4.4% of
Total Healthcare Expenses for the fourth quarter of 2010, as compared with 0.2% of Total Healthcare
Expenses in the prior year quarter. This increase was primarily due to an increase in expected
expenses for 2010 claims and the prior year quarter benefiting from $2.3 million of positive
reserve development on pre-2009 claims reserves. Total professional liability expenses for the
year ended December 31, 2010, were 4.0% of Total Healthcare Expenses, as compared with 2.9% of
Total Healthcare Expenses in the prior year.
Gross margin from continuing contracts for the fourth quarter of 2010 was $12.6 million, or 7.9% of
healthcare revenues, as compared with $16.4 million, or 10.7% of healthcare revenues, in the prior
year quarter. Gross margin from continuing contracts for the year ended December 31, 2010, was
$54.7 million, or 8.7% of healthcare revenues, as compared with $45.5 million, or 7.9% of
healthcare revenues, in the prior year period. Total Gross Margin, which includes continuing and
discontinued contracts and excludes share-based compensation expense, for the fourth quarter of
2010 was $12.3 million, or 7.7% of Total Revenues, as compared with $17.0 million, or 10.5% of
Total Revenues, in the prior year quarter. Total Gross Margin for the year ended December 31,
2010, was $54.2 million, or 8.5% of Total Revenues, as compared with $47.7 million, or 7.8% of
Total Revenues, in the prior year period. The decrease in both gross margin from continuing
contracts as well as Total Gross Margin from the prior year quarter ended December 31, 2009, is
primarily due to the increase in total professional liability expenses discussed above.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 3
March 3, 2011
Page 3
March 3, 2011
Selling, general and administrative expenses for the fourth quarter of 2010 were $7.2 million, or
4.6% of healthcare revenues, as compared with $8.7 million, or 5.7% of healthcare revenues, in the
prior year quarter. Selling, general and administrative expenses for the year ended December 31,
2010, were $32.2 million, or 5.1% of healthcare revenues, as compared with $30.0 million, or 5.2%
of healthcare revenues, in the prior year period. Included in selling, general and administrative
expenses is accrued bonus expense related to the Company’s 2010 incentive compensation plan of
$73,000 and $2.2 million in the fourth quarter and year ended December 31, 2010, respectively.
This compares with accrued bonus expense related to the Company’s 2009 incentive compensation plan
of $1.6 million and $2.7 million in the fourth quarter and year ended December 31, 2009,
respectively. Also, included in selling, general and administrative expenses is share-based
compensation expense of $309,000 and $2.0 million in the fourth quarter and year ended December 31,
2010, respectively, compared with $428,000 and $1.8 million of share-based compensation expense for
the fourth quarter and year ended December 31, 2009, respectively. Selling, general and
administrative expenses, excluding share-based compensation expense, as a percentage of Total
Revenues for the fourth quarter of 2010 were 4.3%, as compared with 5.1% in the prior year quarter.
Selling, general and administrative expenses, excluding share-based compensation expense, as a
percentage of Total Revenues for the year ended December 31, 2010, were 4.7%, as compared with 4.6%
in the prior year period.
The Company incurred $740,000 of expenses in the fourth quarter of 2010 related to the merger
transaction announced earlier today.
Expenses related to the Company’s Audit Committee investigation into certain matters at Secure
Pharmacy Plus, LLC, the findings of which were reported in March 2006, for the quarters ended
December 31, 2010 and 2009, were $109,000 and $7.3 million, respectively, and for the year ended
December 31, 2010 and 2009, were $496,000 and $8.4 million, respectively. The expenses incurred in
the quarter and year ended December 31, 2010, are primarily due to legal expenses incurred as part
of the Company reaching a settlement in principle on February 19, 2010, regarding the shareholder
litigation filed against the Company and certain individual defendants on April 6, 2006, and
related litigation filed by the Company against one of its insurance carriers discussed below. The
expenses incurred in the quarter and year ended December 31, 2009, were primarily due to the
settlement and legal defense costs less insurance proceeds received by the Company.
The settlement regarding the shareholder litigation, which received final Court approval on October
15, 2010, provided for payment by the Company of $10.5 million and issuance by the Company of
300,000 shares of common stock and led to a dismissal with prejudice of all claims against all
defendants in the litigation. The $10.5 million cash component of the settlement was paid by the
Company to the escrow agent appointed by the Court during the second quarter of 2010. The 300,000
shares of common stock were issued by the Company to the escrow agent appointed by the Court upon
final Court approval on October 15, 2010. The final total value of the settlement, based upon the
Company’s closing share price for its common stock of $15.12 per share on October 15, 2010, was
approximately $15.0 million, resulting in a reduction from the preliminary settlement estimate of
$90,000 recorded in the third quarter of 2010.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 4
March 3, 2011
Page 4
March 3, 2011
In addition to its primary directors and officers liability (“D&O”) insurance carrier, with which
the Company has settled all claims, the Company also maintains D&O insurance with an excess D&O
carrier that provides for additional coverage of up to $5.0 million for losses in excess of $10.0
million. To date, the excess D&O carrier has denied coverage of this matter. After failing to
reach agreement with the excess D&O carrier concerning the amount of their contribution to the
settlement, the Company filed suit against the excess D&O carrier in the second quarter of 2010.
Corporate restructuring expenses related to management transitional changes previously disclosed by
the Company on June 21, 2010, were $290,000 for the year ended December 31, 2010. There were no
corporate restructuring expenses in the year ended December 31, 2009.
Adjusted EBITDA for the fourth quarter of 2010 was $5.4 million, as compared with $8.7 million in
the prior year quarter. Adjusted EBITDA for the year ended December 31, 2010, was $24.0 million,
as compared with $19.5 million in the prior year period. As reflected in the attached schedule,
the Company defines Adjusted EBITDA as earnings before interest expense or income, income taxes,
depreciation, amortization, merger expenses, corporate restructuring expenses, Audit Committee
investigation and related expenses (including shareholder litigation expenses) and share-based
compensation expense. The Company includes in Adjusted EBITDA the results of discontinued
operations under the same definition.
Depreciation and amortization expense for the fourth quarter of 2010 was $972,000, as compared with
$851,000 in the prior year quarter. Depreciation and amortization expense for the year ended
December 31, 2010, was $3.5 million, as compared with $2.8 million in the prior year period.
Income from operations for the fourth quarter of 2010 was $3.5 million, as compared with a loss
from operations of $439,000 in the prior year quarter. Income from operations for the year ended
December 31, 2010, was $17.5 million, as compared with $4.4 million in the prior year period.
Net interest expense for the fourth quarter of 2010 was $2,000, as compared with net interest
income of $31,000 in the prior year quarter. Net interest income for the year ended December 31,
2010, was $76,000, as compared with net interest expense of $117,000 in the prior year period.
Income from continuing operations before income taxes for the fourth quarter of 2010 was $3.5
million, as compared with a loss from continuing operations before income taxes of $408,000 in the
prior year quarter. Income from continuing operations before income taxes for the year ended
December 31, 2010, was $17.6 million, as compared with $4.3 million in the prior year period.
The income tax provision for the fourth quarter of 2010 was $1.7 million, as compared with $115,000
in the prior year quarter. The income tax provision for the year ended December 31, 2010, was $7.7
million, as compared with $2.2 million in the prior year period.
Income from continuing operations after taxes for the fourth quarter of 2010 was $1.8 million, as
compared with a loss from continuing operations after taxes of $523,000 in the prior year quarter.
Income from continuing operations after taxes for the year ended December 31, 2010, was $9.9
million, as compared with $2.1 million in the prior year period.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 5
March 3, 2011
Page 5
March 3, 2011
The loss from discontinued operations, net of taxes, for the fourth quarter of 2010 was $149,000,
as compared with income from discontinued operations, net of taxes, of $287,000 in the prior year
quarter. The loss from discontinued operations, net of taxes, for the year ended December 31,
2010, was $333,000, as compared with income from discontinued operations, net of taxes, of $1.2
million in the prior year period.
Net income for the fourth quarter of 2010 was $1.6 million, as compared with a net loss of $236,000
in the prior year quarter. Net income for the year ended December 31, 2010, was $9.5 million, as
compared with $3.3 million in the prior year period.
Net income available to common shareholders represents the Company’s net income excluding any
amounts required to be allocated to unvested restricted shares for purposes of calculating earnings
per share. Net income available to common shareholders for the fourth quarter of 2010 was $1.6
million, or $0.18 per basic and diluted common share, as compared with a net loss available to
common shareholders of $236,000, or $0.03 per basic and diluted common share, in the prior year
quarter. Net income available to common shareholders for the year ended December 31, 2010, was
$9.4 million, or $1.06 and $1.05 per basic and diluted common share, respectively, as compared with
$3.2 million, or $0.36 per basic and diluted common share, in the prior year period.
Cash and cash equivalents were $39.6 million at December 31, 2010, as compared with $15.4 million
at September 30, 2010, and $37.7 million at December 31, 2009. There was no debt outstanding at
December 31, 2010, September 30, 2010 or December 31, 2009. Days sales outstanding in accounts
receivable were 30 days at December 31, 2010, as compared with 38 days at September 30, 2010, and
25 days at December 31, 2009. Net cash provided by operating activities for the fourth quarter of
2010 was $25.8 million, as compared with $8.5 million in the prior year quarter. Net cash provided
by operating activities for the year ended December 31, 2010, was $9.2 million, as compared with
$24.5 million in the prior year period.
Declaration of Quarterly Dividend
On March 2, 2011, the Company’s Board of Directors declared a quarterly cash dividend of $0.06 per
share on the Company’s common stock for the 2011 first quarter. The dividend will be paid on April
12, 2011, to shareholders of record on March 22, 2011. The Company is prohibited under the terms
of the merger agreement, announced earlier today, from paying any additional dividends until the transaction closes or the
merger agreement is terminated.
Stock Repurchase Program
On March 4, 2008, the Company announced that its Board of Directors had approved a stock repurchase
program to repurchase up to $15 million of the Company’s common stock through the end of 2009. On
July 28, 2009, the Company’s Board of Directors authorized the extension of the stock repurchase
program by two years through the end of 2011.
There were no repurchases of common stock during the fourth quarter of 2010. Since the inception
of the repurchase program, the Company has repurchased and retired 891,850 shares of its common
stock under the repurchase program for approximately $11.2 million. The Company is prohibited
under the terms of the merger agreement, announced earlier today, from making any additional repurchases of its common stock
until the transaction closes or the merger agreement is terminated.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 6
March 3, 2011
Page 6
March 3, 2011
As of March 2, 2011, the Company had approximately 9.3 million shares outstanding.
Initial 2011 Guidance
The Company’s initial guidance for estimated full-year 2011 results is summarized below:
| Initial Guidance | ||||
| For Full Year | ||||
| 2011 Results | ||||
Total Revenues (1) |
$635.0 — $645.0 million | |||
Healthcare expenses (2) |
$576.5 — $586.5 million | |||
Gross margin (2) |
$58.5 million | |||
Selling, general and administrative expenses (3) |
$34.0 million | |||
Depreciation, amortization and interest expense (1) |
$4.0 million | |||
Pre-tax income (1)(2)(3)(4) |
$20.5 million | |||
Income tax provision (1)(4) |
$8.7 million | |||
Net income (4) |
$11.8 million | |||
| (1) | From continuing and discontinued contracts. | |
| (2) | From continuing and discontinued contracts, including share-based compensation expense allocated to healthcare expenses of $0.1 million estimated for 2011. | |
| (3) | Including share-based compensation expense allocated to selling, general and administrative expenses of $1.4 million estimated for 2011. | |
| (4) | Excluding any 2011 expenses related to merger expenses or Audit Committee investigation and related expenses. |
Consistent with past practice, the Company’s guidance for full-year 2011 results does not
consider the impact of any contracts with potential new customers that have not yet been signed
including the Company’s potential new contract with Public Health Trust/Jackson Health System for
correctional healthcare services for inmates in Miami-Dade County, Florida. Contracts currently in
operation are included in the guidance for full-year 2011 results through the end of the year,
unless the Company has previously been notified otherwise by the client.
Conference Call
Due to the pending merger, the Company will not be holding a conference call with respect to
fourth quarter and year-end 2010 financial results.
America Service Group Inc., based in Brentwood, Tennessee, is a leading provider of correctional
healthcare services in the United States. America Service Group Inc., through its subsidiaries,
provides a wide range of healthcare programs to government agencies for the medical care of
inmates. More information about America Service Group can be found on the Company’s website at
www.asgr.com.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 7
March 3, 2011
Page 7
March 3, 2011
This
release contains certain financial information not derived in accordance with GAAP. The
Company believes this information is useful to investors and other interested parties. Such
information should not be considered as a substitute for any measures derived in accordance with
GAAP and may not be comparable to other similarly titled measures of other companies. A discussion
of the Company’s definition of such information and reconciliation to the most comparable GAAP
measure is included below.
The most directly comparable GAAP measures for the guidance provided
by the Company are: healthcare revenues; healthcare expenses; gross margin; income from continuing operations before
income taxes; income tax provision; depreciation and amortization; and interest, each of which will
only include results from continuing contracts. Because it is not possible to reliably forecast
discontinued operations, reconciliation of the Company’s guidance to the most directly comparable
GAAP measure cannot be estimated on a forward-looking basis.
Cautionary Statement
This press release
contains “forward-looking” statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements in this release
that are not historical facts, including statements about the Company’s or management’s beliefs and
expectations, including 2011 guidance, constitute forward-looking statements and may be indicated
by words or phrases such as “anticipate,” “estimate,” “plans,” “expects,” “projects,” “should,”
“will,” “believes” or “intends” and similar words and phrases. Forward-looking statements involve
inherent risks and uncertainties. A number of important factors could cause actual results to
differ materially from those contained in any forward-looking statement. Such factors include, but
are not limited to, the following:
| • | the Company’s ability to retain existing client contracts and obtain new contracts at acceptable pricing levels; | |
| • | whether or not government agencies continue to privatize correctional healthcare services; | |
| • | risks arising from governmental budgetary pressures and funding; | |
| • | the possible effect of adverse publicity on the Company’s business; | |
| • | increased competition for new contracts and renewals of existing contracts; | |
| • | risks arising from the possibility that the Company may be unable to collect accounts receivable or that accounts receivable collection may be delayed; | |
| • | the Company’s ability to limit its exposure for inmate medical costs, catastrophic illnesses, injuries and medical malpractice claims in excess of amounts covered under contracts or insurance coverage; | |
| • | the Company’s ability to maintain and continually develop information technology and clinical systems; | |
| • | the outcome or adverse development of pending litigation, including professional liability litigation; | |
| • | the Company’s determination whether to continue the payment of quarterly cash dividends, and if so, at the current amount; | |
| • | the Company’s determination whether to repurchase shares under its stock repurchase program; | |
| • | the Company’s dependence on key management and clinical personnel; | |
| • | risks arising from potential weaknesses or deficiencies in the Company’s internal control over financial reporting; | |
| • | risks associated with the possibility that the Company may be unable to satisfy covenants under its credit facility; | |
| • | the risk that government or municipal entities (including the Company’s government and municipal customers) may bring enforcement actions against, seek additional refunds from, or impose penalties on, the Company or its subsidiaries as a result of the matters investigated by the Audit Committee in prior years; | |
| • | the Company’s ability to expand its products beyond its traditional correctional health client base; | |
| • | the Company’s ability to obtain shareholder approval, regulatory approval and close the merger transaction; | |
| • | the inability to complete the merger in a timely fashion; | |
| • | the effect of the announcement of the merger transaction on the Company’s business relationships, operating results and business generally; and | |
| • | the diversion of management’s attention from ongoing business concerns as a result of the pendency or consummation of the merger. |
A
discussion of important factors and assumptions regarding certain
statements and risks involved in an investment in the Company is contained in the Company’s Annual Report on Form 10-K and other
filings it makes with the Securities and Exchange Commission. These forward-looking statements are
made as of the date of this release. The Company assumes no obligations to update or revise them
or provide reasons why actual results may differ.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 8
March 3, 2011
Page 8
March 3, 2011
AMERICA SERVICE GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
| Three Months Ended December 31, | ||||||||||||||||
| % of | % of | |||||||||||||||
| 2010 | Revenue | 2009 | Revenue | |||||||||||||
Healthcare revenues |
$ | 158,823 | 100.0 | $ | 153,942 | 100.0 | ||||||||||
Healthcare expenses |
146,269 | 92.1 | 137,502 | 89.3 | ||||||||||||
Gross margin |
12,554 | 7.9 | 16,440 | 10.7 | ||||||||||||
Selling, general and administrative expenses |
7,249 | 4.6 | 8,721 | 5.7 | ||||||||||||
Merger expenses |
740 | 0.4 | — | — | ||||||||||||
Audit Committee investigation and related expenses |
109 | 0.1 | 7,307 | 4.7 | ||||||||||||
Depreciation and amortization |
972 | 0.6 | 851 | 0.6 | ||||||||||||
Income (loss) from operations |
3,484 | 2.2 | (439 | ) | (0.3 | ) | ||||||||||
Interest expense (income) |
2 | — | (31 | ) | — | |||||||||||
Income (loss) from continuing operations
before income tax provision |
3,482 | 2.2 | (408 | ) | (0.3 | ) | ||||||||||
Income tax provision |
1,713 | 1.1 | 115 | — | ||||||||||||
Income (loss) from continuing operations |
1,769 | 1.1 | (523 | ) | (0.3 | ) | ||||||||||
Income (loss) from discontinued operations,
net of taxes |
(149 | ) | (0.1 | ) | 287 | 0.1 | ||||||||||
Net income (loss) |
$ | 1,620 | 1.0 | $ | (236 | ) | (0.2 | ) | ||||||||
Net income (loss) available to common
shareholders for purposes of calculating
earnings per share |
$ | 1,604 | $ | (236 | ) | |||||||||||
Income (loss) available to common shareholders
per common share — basic: |
||||||||||||||||
Continuing operations |
$ | 0.19 | $ | (0.06 | ) | |||||||||||
Discontinued operations, net of taxes |
(0.01 | ) | 0.03 | |||||||||||||
Net income (loss) available to common
shareholders per common share |
$ | 0.18 | $ | (0.03 | ) | |||||||||||
Income (loss) available to common shareholders
per common share — diluted: |
||||||||||||||||
Continuing operations |
$ | 0.19 | $ | (0.06 | ) | |||||||||||
Discontinued operations, net of taxes |
(0.01 | ) | 0.03 | |||||||||||||
Net income (loss) available to common
shareholders per common share |
$ | 0.18 | $ | (0.03 | ) | |||||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
9,119 | 8,775 | ||||||||||||||
Diluted |
9,179 | 8,843 | ||||||||||||||
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 9
March 3, 2011
Page 9
March 3, 2011
AMERICA SERVICE GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share data)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share data)
| Year Ended December 31, | ||||||||||||||||
| % of | % of | |||||||||||||||
| 2010 | Revenue | 2009 | Revenue | |||||||||||||
Healthcare revenues |
$ | 630,303 | 100.0 | $ | 579,474 | 100.0 | ||||||||||
Healthcare expenses |
575,628 | 91.3 | 533,928 | 92.1 | ||||||||||||
Gross margin |
54,675 | 8.7 | 45,546 | 7.9 | ||||||||||||
Selling, general and administrative expenses |
32,159 | 5.1 | 29,972 | 5.2 | ||||||||||||
Merger expenses |
740 | 0.1 | — | — | ||||||||||||
Corporate restructuring expenses |
290 | — | — | — | ||||||||||||
Audit Committee investigation and related expenses |
496 | 0.1 | 8,413 | 1.4 | ||||||||||||
Depreciation and amortization |
3,462 | 0.6 | 2,756 | 0.5 | ||||||||||||
Income from operations |
17,528 | 2.8 | 4,405 | 0.8 | ||||||||||||
Interest expense (income) |
(76 | ) | — | 117 | 0.1 | |||||||||||
Income from continuing operations
before income tax provision |
17,604 | 2.8 | 4,288 | 0.7 | ||||||||||||
Income tax provision |
7,722 | 1.2 | 2,175 | 0.3 | ||||||||||||
Income from continuing operations |
9,882 | 1.6 | 2,113 | 0.4 | ||||||||||||
Income (loss) from discontinued operations,
net of taxes |
(333 | ) | (0.1 | ) | 1,169 | 0.2 | ||||||||||
Net income |
$ | 9,549 | 1.5 | $ | 3,282 | 0.6 | ||||||||||
Net income available to common shareholders
for purposes of calculating earnings per share |
$ | 9,368 | $ | 3,176 | ||||||||||||
Income (loss) available to common shareholders
per common share — basic: |
||||||||||||||||
Continuing operations |
$ | 1.10 | $ | 0.23 | ||||||||||||
Discontinued operations, net of taxes |
(0.04 | ) | 0.13 | |||||||||||||
Net income available to common shareholders
per common share |
$ | 1.06 | $ | 0.36 | ||||||||||||
Income (loss) available to common shareholders
per common share — diluted: |
||||||||||||||||
Continuing operations |
$ | 1.09 | $ | 0.23 | ||||||||||||
Discontinued operations, net of taxes |
(0.04 | ) | 0.13 | |||||||||||||
Net income available to common shareholders
per common share |
$ | 1.05 | $ | 0.36 | ||||||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
8,860 | 8,917 | ||||||||||||||
Diluted |
8,934 | 8,959 | ||||||||||||||
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 10
March 3, 2011
Page 10
March 3, 2011
AMERICA SERVICE GROUP INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
| Dec. 31, | Dec. 31, | |||||||
| 2010 | 2009 | |||||||
| ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 39,584 | $ | 37,655 | ||||
Accounts receivable: healthcare and other, less allowances |
52,481 | 44,629 | ||||||
Inventories |
2,868 | 2,929 | ||||||
Prepaid expenses and other current assets |
13,750 | 16,754 | ||||||
Current deferred tax assets |
3,359 | 9,252 | ||||||
Total current assets |
112,042 | 111,219 | ||||||
Property and equipment, net |
11,040 | 9,447 | ||||||
Goodwill |
40,772 | 40,772 | ||||||
Contracts, net |
1,658 | 1,937 | ||||||
Other assets |
11,852 | 11,837 | ||||||
Total assets |
$ | 177,364 | $ | 175,212 | ||||
| LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 23,691 | $ | 15,393 | ||||
Accrued medical claims liability |
23,750 | 22,358 | ||||||
Accrued expenses |
38,810 | 62,895 | ||||||
Deferred revenue |
10,053 | 13,385 | ||||||
Total current liabilities |
96,304 | 114,031 | ||||||
Noncurrent portion of accrued expenses |
20,460 | 15,481 | ||||||
Noncurrent deferred tax liabilities |
4,836 | 3,727 | ||||||
Total liabilities |
121,600 | 133,239 | ||||||
Stockholders’ equity: |
||||||||
Common stock |
93 | 89 | ||||||
Additional paid-in capital |
40,015 | 33,608 | ||||||
Retained earnings |
15,656 | 8,276 | ||||||
Total stockholders’ equity |
55,764 | 41,973 | ||||||
Total liabilities and equity |
$ | 177,364 | $ | 175,212 | ||||
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 11
March 3, 2011
Page 11
March 3, 2011
AMERICA SERVICE GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| Year Ended | ||||||||
| December 31, | ||||||||
| 2010 | 2009 | |||||||
Cash Flows from Operating Activities |
||||||||
Net income |
$ | 9,549 | $ | 3,282 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||
Depreciation and amortization |
3,473 | 2,842 | ||||||
Loss on retirement of fixed assets |
99 | 32 | ||||||
Finance cost amortization |
31 | 114 | ||||||
Deferred income taxes |
7,002 | (1,908 | ) | |||||
Share-based compensation expense |
2,097 | 1,822 | ||||||
Excess tax benefits from share-based compensation expense |
— | (144 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable, net |
(7,852 | ) | (3,622 | ) | ||||
Inventories |
61 | 4 | ||||||
Prepaid expenses and other current assets |
3,004 | (3,767 | ) | |||||
Other assets |
(42 | ) | (6,767 | ) | ||||
Accounts payable |
8,298 | (4,177 | ) | |||||
Accrued medical claims liability |
1,392 | 7,615 | ||||||
Accrued expenses |
(14,570 | ) | 23,865 | |||||
Deferred revenue |
(3,332 | ) | 5,333 | |||||
Net cash provided by operating activities |
9,210 | 24,524 | ||||||
Cash Flows from Investing Activities |
||||||||
Capital expenditures |
(4,890 | ) | (4,547 | ) | ||||
Net cash used in investing activities |
(4,890 | ) | (4,547 | ) | ||||
Cash Flows from Financing Activities |
||||||||
Share repurchases |
(544 | ) | (8,270 | ) | ||||
Dividends on common stock |
(2,169 | ) | (912 | ) | ||||
Excess tax benefits from share-based compensation expense |
— | 144 | ||||||
Restricted stock repurchased from employees for employees’ tax liability |
(957 | ) | (177 | ) | ||||
Issuance of common stock |
392 | 319 | ||||||
Exercise of stock options |
887 | 1,719 | ||||||
Net cash used in financing activities |
(2,391 | ) | (7,177 | ) | ||||
Net increase in cash and cash equivalents |
1,929 | 12,800 | ||||||
Cash and cash equivalents at beginning of period |
37,655 | 24,855 | ||||||
Cash and cash equivalents at end of period |
$ | 39,584 | $ | 37,655 | ||||
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 12
March 3, 2011
Page 12
March 3, 2011
AMERICA SERVICE GROUP INC.
SCHEDULES OF INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES
(Unaudited, in thousands)
SCHEDULES OF INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES
(Unaudited, in thousands)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Healthcare revenues |
$ | 814 | $ | 7,139 | $ | 9,188 | $ | 30,990 | ||||||||
Healthcare expenses |
1,062 | 6,632 | 9,739 | 28,931 | ||||||||||||
Gross margin |
(248 | ) | 507 | (551 | ) | 2,059 | ||||||||||
Depreciation and amortization |
3 | 23 | 11 | 85 | ||||||||||||
Income (loss) from discontinued operations
before income taxes |
(251 | ) | 484 | (562 | ) | 1,974 | ||||||||||
Income tax provision (benefit) |
(102 | ) | 197 | (229 | ) | 805 | ||||||||||
Income (loss) from discontinued operations,
net of taxes |
$ | (149 | ) | $ | 287 | $ | (333 | ) | $ | 1,169 | ||||||
AMERICA SERVICE GROUP INC.
DISCUSSION AND RECONCILIATIONS OF NON-GAAP MEASURES
(Unaudited, in thousands)
DISCUSSION AND RECONCILIATIONS OF NON-GAAP MEASURES
(Unaudited, in thousands)
This release contains certain financial information not derived in accordance with GAAP. The
Company believes this information is useful to investors and other interested parties. Such
information should not be considered as a substitute for any measures derived in accordance with
GAAP and may not be comparable to other similarly titled measures of other companies. A discussion
of the Company’s definition of such information and reconciliations to the most comparable GAAP
measures (net income, healthcare revenues, healthcare expenses and gross margin) are included
below.
ADJUSTED EBITDA
The Company defines Adjusted EBITDA as earnings before interest expense or income, income taxes,
depreciation, amortization, merger expenses, corporate restructuring expenses, Audit Committee
investigation and related expenses (including shareholder litigation expenses) and share-based
compensation expense. The Company includes in Adjusted EBITDA the results of discontinued
operations under the same definition.
The Company believes that Adjusted EBITDA is an important operating measure that supplements
discussions and analysis of the Company’s results of operations. The Company believes that it is
useful to investors to provide disclosures of its results of operations on the same basis as that
used by management, credit providers and analysts. The Company’s management, credit providers and
analysts rely upon Adjusted EBITDA as a key measure to review and assess operating performance.
Adjusted EBITDA is utilized by management, credit providers and analysts to compare the Company’s
current operating results with the corresponding periods in the previous year and to compare the
Company’s operating results with other companies in the healthcare industry.
Adjusted EBITDA is not a measure of financial performance under United States generally accepted
accounting principles and should not be considered an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and financing activities as a
measure of liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with
generally accepted accounting principles and is susceptible to varying calculations, Adjusted
EBITDA, as presented, may not be comparable to other similarly titled measures presented by other
companies.
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 13
March 3, 2011
Page 13
March 3, 2011
AMERICA SERVICE GROUP INC.
DISCUSSION AND RECONCILIATIONS OF NON-GAAP MEASURES (Continued)
(Unaudited, in thousands)
DISCUSSION AND RECONCILIATIONS OF NON-GAAP MEASURES (Continued)
(Unaudited, in thousands)
RECONCILIATIONS OF NET INCOME (LOSS) TO ADJUSTED EBITDA
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income (loss) |
$ | 1,620 | $ | (236 | ) | $ | 9,549 | $ | 3,282 | |||||||
Depreciation and taxes included in income (loss)
from discontinued operations, net of taxes |
(99 | ) | 220 | (218 | ) | 890 | ||||||||||
Income tax provision |
1,713 | 115 | 7,722 | 2,175 | ||||||||||||
Interest expense (income) |
2 | (31 | ) | (76 | ) | 117 | ||||||||||
Depreciation and amortization |
972 | 851 | 3,462 | 2,756 | ||||||||||||
Merger expenses |
740 | — | 740 | — | ||||||||||||
Corporate restructuring expenses |
— | — | 290 | — | ||||||||||||
Audit Committee investigation and related expenses |
109 | 7,307 | 496 | 8,413 | ||||||||||||
Share-based compensation expense included in
healthcare expenses |
14 | 16 | 78 | 53 | ||||||||||||
Share-based compensation expense included in
selling,
general and administrative expenses |
309 | 428 | 1,966 | 1,769 | ||||||||||||
Adjusted EBITDA |
$ | 5,380 | $ | 8,670 | $ | 24,009 | $ | 19,455 | ||||||||
TOTAL REVENUES, TOTAL HEALTHCARE EXPENSES AND TOTAL GROSS MARGIN
The Company defines Total Revenues as healthcare revenues plus revenues from expired service
contracts classified as discontinued operations. The Company defines Total Healthcare Expenses as
healthcare expenses plus expenses from expired contracts classified as discontinued operations,
less share-based compensation expense. The Company defines Total Gross Margin as Total Revenues
less Total Healthcare Expenses.
The Company believes that Total Revenues, Total Healthcare Expenses and Total Gross Margin are
useful measurements when comparing the Company’s performance for such items as selling, general and
administrative expenses, interest expense or tax expense as a percentage of revenue between
periods. As a result of the application of GAAP, “healthcare revenues,” “healthcare expenses,” and
“gross margin” on the Company’s consolidated statements of operations for any period presented will
only include revenues and expenses from continuing contracts.
RECONCILIATIONS OF HEALTHCARE REVENUES TO TOTAL REVENUES
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Healthcare revenues |
$ | 158,823 | $ | 153,942 | $ | 630,303 | $ | 579,474 | ||||||||
Healthcare revenues included in income (loss)
from discontinued operations, net of taxes |
814 | 7,139 | 9,188 | 30,990 | ||||||||||||
Total Revenues |
$ | 159,637 | $ | 161,081 | $ | 639,491 | $ | 610,464 | ||||||||
-MORE-
ASGR Announces Fourth Quarter and Year-End Results
Page 14
March 3, 2011
Page 14
March 3, 2011
AMERICA SERVICE GROUP INC.
DISCUSSION AND RECONCILIATIONS OF NON-GAAP MEASURES (Continued)
(Unaudited, in thousands)
DISCUSSION AND RECONCILIATIONS OF NON-GAAP MEASURES (Continued)
(Unaudited, in thousands)
RECONCILIATIONS OF HEALTHCARE EXPENSES TO TOTAL HEALTHCARE EXPENSES
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Healthcare expenses |
$ | 146,269 | $ | 137,502 | $ | 575,628 | $ | 533,928 | ||||||||
Healthcare expenses included in income (loss)
from discontinued operations, net of taxes |
1,062 | 6,632 | 9,739 | 28,931 | ||||||||||||
Share-based compensation expense included in
healthcare expenses |
(14 | ) | (16 | ) | (78 | ) | (53 | ) | ||||||||
Total Healthcare Expenses |
$ | 147,317 | $ | 144,118 | $ | 585,289 | $ | 562,806 | ||||||||
RECONCILIATIONS OF GROSS MARGIN TO TOTAL GROSS MARGIN
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Gross margin |
$ | 12,554 | $ | 16,440 | $ | 54,675 | $ | 45,546 | ||||||||
Gross margin included in income (loss)
from discontinued operations, net of taxes |
(248 | ) | 507 | (551 | ) | 2,059 | ||||||||||
Share-based compensation expense included in
gross margin |
14 | 16 | 78 | 53 | ||||||||||||
Total Gross Margin |
$ | 12,320 | $ | 16,963 | $ | 54,202 | $ | 47,658 | ||||||||
-END-