EX-99.1 2 ex991_072210.htm EX-99.1, PRESS RELEASE ex991_072210.htm
Exhibit 99.1

                              
  Contact: 
Mary A. Chaput
Chief Financial Officer
 
(615) 614-4929


HEALTHWAYS REPORTS SECOND-QUARTER ADJUSTED EARNINGS
OF $0.29 PER DILUTED SHARE AND GAAP EARNINGS OF $0.34 PER DILUTED SHARE
¾¾¾¾¾¾¾¾¾¾¾
ESTABLISHES 2010 ADJUSTED EARNINGS GUIDANCE RANGE OF $1.07 TO $1.18 AND
RAISES 2010 GAAP EARNINGS GUIDANCE RANGE TO $1.12 TO $1.23

 
NASHVILLE, Tenn. (July 22, 2010) – Healthways, Inc. (NASDAQ: HWAY) today announced financial results for the second quarter ended June 30, 2010.  Total revenues for the quarter were $175.5 million compared with $177.8 million for the second quarter of 2009.  Net income for the second quarter of 2010 was $11.8 million, or $0.34 per diluted share, compared with $8.9 million, or $0.26 per diluted share, for the second quarter of 2009.  Results for the second quarter of 2010 included earnings of $0.05 per diluted share attributable to an adjustment to an estimated earn-out liability and an investment gain. Excluding these items, adjusted earnings per diluted share totaled $0.29, an 11.5% increase over the second quarter of 2009.

COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE
See pages 7 - 9 for a reconciliation of GAAP and non-GAAP measures

     
Three Months Ended June 30,
  
     
2010 Actual
  
2010 Guidance
  
2009 Actual
    
                     
 
Domestic, excluding earn-out adjustment and investment gain
  
$
0.29
  
$
0.26-0.28
  
$
0.31
    
 
International
    
0.00
 
  
0.00-0.01
    
(0.05
)
  
 
Adjusted net income per diluted share
    
0.29
    
0.26-0.29
    
0.26
    
 
Earn-out adjustment and investment gain
    
0.05
    
-
    
-
 
  
 
Net income per diluted share
  
$
0.34
  
$
0.26-0.29
  
$
0.26
 
  
 
Ben R. Leedle, Jr., chief executive officer of Healthways, remarked, “Healthways achieved solid financial results, producing revenues consistent with expectations, expanded margins, strong cash flow, a strengthened financial position and a return to comparable-quarter earnings growth.  As anticipated, revenues declined versus the comparable and sequential quarters primarily due to the impact of previously discussed renegotiated or terminated contracts. Also as anticipated, EBITDA margin, excluding the earn-out adjustment and investment gain, expanded to 19.2% compared with 17.8% for the second quarter last year and 18.4% for the first quarter this year.

“Our RFP volume for the second quarter increased over both the comparable and sequential quarters, and our sales pipeline continued to strengthen.  We signed a number of domestic contracts with existing and new customers since the start of the second quarter, including a multi-year, fixed-fee contract for a program called WellnessWorks to serve the more than 5,000 Washington, D.C.-based employees of the Department of the Interior, the General Services Administration, and the Office of Personnel Management.

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HWAY Reports Second-Quarter Results
Page 2
July 22, 2010

 “Healthways also continued to grow its international presence through new contracts and expanded contracts.  In June, we announced an agreement with International SOS Assistance, Inc. to provide chronic care management services for the Department of Defense Tricare Overseas Program. The program will be made available to approximately 15,000 remote active duty service members and their families located in 146 countries around the world and will be serviced through our current world-wide infrastructure on our Embrace™ platform.
 
“In Australia, our existing contract with Hospital Contributions Fund was expanded to include chronic disease programs for 100,000 members added through its acquisition of Manchester Unity, a private health insurer.  Last week, we also announced our second contract in Australia, with Teachers Health Fund, the country’s 7th largest private health insurer, to make our total population solution available to its 200,000 members.  These contracts reflect our expanding international scale, capabilities and growing record of performance.

“The Company’s financial position at the end of the second quarter improved on a comparable and sequential-quarter basis as a result of increased profit margins and operating cash flows. Net cash flows provided by operating activities for the second quarter were $34.4 million, and capital expenditures totaled $10.7 million.  We utilized our free cash flow to pay down $22.6 million of debt during the second quarter, resulting in a ratio of total debt to total capitalization of 39.1% at the end of the quarter compared with 45.8% at June 30, 2009 and 41.9% at March 31, 2010.  The ratio of long-term debt to EBITDA, as calculated under our credit agreement, was 1.9 at the end of the quarter compared with 2.0 at the end of the second quarter last year and 2.1 at the end of the first quarter this year.

“We continue to expect to produce net cash flows from operating activities for the full year in a range of $80 million to $100 million, which would more than fund anticipated 2010 total capital expenditures in the range of $45 million to $50 million.  Currently, we intend to apply free cash flow generated during 2010 primarily towards debt repayment.”

Revenue Guidance

Healthways today raised the lower end of its guidance for 2010 revenues, establishing a new range of $695 million to $718 million compared with the previous range of $677 million to $718 million. This range includes revenues from domestic operations in a range of $668 million to $685 million compared with the previous range of $650 million to $685 million.  International revenues remain in a range of $27 million to $33 million.

 
COMPARISON OF COMPONENTS OF REVENUES FOR THE YEAR ENDING
DECEMBER 31, 2010 (GUIDANCE) AND THE YEAR ENDED DECEMBER 31, 2009
(Dollars in millions)
 
     
Twelve Months
     
Ending
Dec. 31, 2010 (Guidance)
  
Ended
Dec. 31, 2009 (Actual)
  
             
 
Domestic
  
$
668.0-685.0
  
$
699.0
  
 
International
    
27.0-33.0
    
18.4
  
 
Total Company
  
$
695.0-718.0
  
$
717.4
  


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HWAY Reports Second-Quarter Results
Page 3
July 22, 2010

Earnings Guidance

The Company today raised its guidance for 2010 net income per diluted share to a range of $1.12 to $1.23 from the previous range of $1.05 to $1.18.  This new guidance reflects the second-quarter earn-out adjustment and investment gain of $0.05 per diluted share, which was not included in the original guidance.  In addition, this new guidance reflects the impact of the increase in the lower end of revenue guidance, somewhat offset by increased costs related to international business development and new contract implementation.  Guidance for adjusted net income per diluted share, which excludes the earn-out adjustment and investment gain, is in a range of $1.07 to $1.18, and consists of a range from domestic operations of $1.08 to $1.16 and from international operations in a range of ($0.01) to $0.02.

The Company’s guidance for net income per diluted share for the third quarter of 2010 is in a range of $0.26 to $0.29.  Domestic operations are expected to produce net income per diluted share of $0.26 to $0.28, and international operations are expected to be in a range of $0.00 to $0.01.


COMPARISON OF COMPONENTS OF NET INCOME PER DILUTED SHARE
See pages 7 - 9 for a reconciliation of GAAP and non-GAAP measures

 
     
Twelve Months
     Three Months
  
     
Ending
Dec. 31, 2010 (Guidance)
  
Ended
Dec. 31, 2009
(Actual)
  
Ending
Sept. 30, 2010 (Guidance)
    
                     
 
Domestic, excluding earn-out adjustment, investment gain, and lawsuit settlement costs
  
$
1.08-1.16
  
$
1.10
  
$
0.26-0.28
    
 
International
    
(0.01)-0.02
    
(0.11
)
  
0.00-0.01
    
 
Adjusted net income per diluted share
    
1.07-1.18
    
0.99
    
0.26-0.29
    
 
Earn-out adjustment and investment gain
    
0.05
    
0.05
 
  
-
    
 
Lawsuit settlement costs
  
 
-
  
 
(0.73
)
 
-
    
 
Net income per diluted share
  
$
1.12-1.23
  
$
0.30
(1)
$
0.26-0.29
    

(1) Figures do not add due to rounding.
 
Summary

Mr. Leedle concluded, “Earnings growth and enhanced margins produced in the second quarter position us well to achieve our financial guidance for the full year.  Recent contracting momentum provides evidence that the market understands and is positively responding to our value proposition.  We continue to be cautious in our outlook for the balance of 2010 due to ongoing uncertainty about the strength of the economy and the ongoing implementation of the recently enacted health care legislation.  However, with the global economy increasingly focused on the unsustainable growth in healthcare costs, we believe demand is growing worldwide for our proven, scaled and comprehensive solutions that help healthy individuals stay healthy, reduce health risks and optimize care for those with chronic conditions.”

 
 

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HWAY Reports Second-Quarter Results
Page 4
July 22, 2010

Conference Call

Healthways will hold a conference call to discuss this release today at 5:00 p.m. Eastern Time. Investors will have the opportunity to listen to the conference call live over the Internet by going to www.healthways.com and clicking Investor Relations, or by going to www.earnings.com, at least 15 minutes early to register, download and install any necessary audio software.  For those who cannot listen to the live broadcast, a telephonic replay will be available for one week at 719-457-0820, code 8641831, 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 and involve a number of risks and uncertainties.  Those forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief or expectations of the Company, including, without limitation, all statements regarding the Company’s future earnings and results of operations.  In order for the Company to utilize the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, investors are hereby cautioned that the following important factors, among others, may affect these forward-looking statements.  Consequently, actual operations and results may differ materially from those expressed in these forward-looking statements.  The important factors include but are not limited to:

·  
the Company’s ability to sign and implement new contracts;
·  
the Company’s ability to accurately forecast performance and the timing of revenue recognition under the terms of our customer contracts ahead of data collection and reconciliation in order to provide forward-looking guidance;
·  
the Company’s ability to reach mutual agreement with the Centers for Medicare and Medicaid Services (CMS) with respect to the Company’s results under Phase I of Medicare Health Support;
·  
the Company’s ability to 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 risks associated with changes in macroeconomic conditions;
·  
the Company’s ability to integrate acquired businesses or technologies into the Company’s business;
·  
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 impact of litigation involving the Company and/or its subsidiaries;
·  
the impact of future state, federal, and international health care and other applicable legislation and regulations, including health care reform, 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, 2009, and other filings with the Securities and Exchange Commission.

The Company undertakes no obligation to update or revise any such forward-looking statements.
 
 

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HWAY Reports Second-Quarter Results
Page 5
July 22, 2010

About Healthways

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


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HWAY Reports Second-Quarter Results
Page 6
July 22, 2010



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


     
Three Months Ended
  
Six Months Ended
  
     
June 30,
  
June 30,
  
     
2010
  
2009
  
2010
  
2009
  
                             
 
Revenues
  
$
175,523 
  
$
177,836 
  
$
354,522 
  
$
360,572 
  
 
Cost of services (exclusive of depreciation and amortization of $9,928, $8,540, $20,161, and $17,326, respectively, included below)
    
121,985 
    
127,762 
    
250,852 
    
260,599 
  
 
Selling, general & administrative expenses
    
18,703 
    
18,449 
    
35,938 
    
37,234 
  
 
Depreciation and amortization
    
13,341 
    
11,949 
    
26,895 
    
24,199 
  
                             
 
Operating income
    
21,494 
    
19,676 
    
40,837 
    
38,540 
  
 
Gain on sale of investment
    
(1,163
 )
 
— 
    
(1,163
)
  
(2,581
)
 
Interest expense
    
3,612 
    
4,142 
    
7,034 
    
8,202 
  
 
Legal settlement and related costs
    
— 
    
— 
    
— 
    
39,956 
  
                             
 
Income (loss) before income taxes
    
19,045 
    
15,534 
    
34,966 
    
(7,037
)
 
Income tax expense (benefit)
    
7,207 
    
6,658 
    
13,714 
    
(1,100
)
                             
 
Net income (loss)
  
$
11,838 
  
$
8,876 
  
$
21,252
  
$
(5,937
)
                             
 
Earnings (loss) per share:
                          
 
  Basic
  
$
0.35 
  
$
0.26 
  
$
0.62 
  
$
(0.18
)
                             
 
  Diluted
  
$
0.34 
  
$
0.26 
  
$
0.61 
  
$
(0.18
)
                             
 
Weighted average common shares
                          
 
and equivalents:
                          
 
Basic
    
34,117 
    
33,689 
    
34,037 
    
33,679 
  
 
Diluted
    
34,933 
    
34,186 
    
34,928 
    
33,679 
  
                             

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HWAY Reports Second-Quarter Results
Page 7
July 22, 2010


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

Reconciliation of Domestic Diluted Earnings Per Share (EPS) Excluding Earn-Out
Adjustment, Investment Gain, and Lawsuit Settlement Costs and Reconciliation of Adjusted EPS to EPS, GAAP Basis

     
 
Three Months Ended
    
 
Twelve Months Ended
    
     
June 30, 2010
    
December 31, 2009
    
 
Domestic EPS excluding earn-out adjustment, investment gain, and lawsuit settlement costs (1)
$
0.29
    
$
1.10
    
 
International EPS (loss)
  
0.00
      
(0.11
)
  
 
Adjusted EPS (2)
$
0.29
    
$
0.99
    
 
EPS attributable to earn-out adjustment and investment gain  (3)
  
0.05
      
0.05
    
 
EPS (loss) attributable to lawsuit settlement costs (4)
  
—
      
(0.73
)
  
 
EPS, GAAP basis (5)
$
0.34
    
$
0.30
    

(1) Domestic EPS excluding earn-out adjustment, investment gain, and lawsuit settlement costs is a non-GAAP financial measure.  The Company excludes EPS (loss) attributable to earn-out adjustment, investment gain, and lawsuit settlement costs from this measure because of its comparability to the Company's historical operating results and EPS guidance.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider Domestic EPS excluding earn-out adjustment, investment gain, and lawsuit settlement costs in isolation or as a substitute for Domestic EPS determined in accordance with accounting principles generally accepted in the United States.

(2) Adjusted EPS is a non-GAAP financial measure.  The Company excludes EPS (loss) attributable to earn-out adjustment, investment gain, and lawsuit settlement costs from this measure because of its comparability to the Company's historical operating results and EPS guidance.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider Adjusted EPS in isolation or as a substitute for EPS determined in accordance with accounting principles generally accepted in the United States.

(3) EPS attributable to earn-out adjustment and investment gain in 2010 includes income of $1.5 million during the three months ended June 30, 2010 attributable to an adjustment to the estimated earn-out liability from the 2009 HealthHonors acquisition.  In addition, it includes a $2.6 million gain during 2009 related to the January 2009 sale of a private company in which we held a preferred stock investment and a $1.2 million gain during the three months ended June 30, 2010 attributable to a final escrow release related to this sale.

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

(5) Figures may not add due to rounding.



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HWAY Reports Second-Quarter Results
Page 8
July 22, 2010


Reconciliation of Domestic EPS Guidance Excluding Earn-Out Adjustment
and Investment Gain and Reconciliation of Adjusted EPS Guidance to
EPS Guidance, GAAP Basis

     
 
Twelve Months Ending
      
     
December 31, 2010
      
 
Domestic EPS guidance excluding earn-out adjustment and investment gain (6)
$
1.08 – 1.16
      
 
International EPS guidance
  
(0.01) – 0.02
      
 
Adjusted EPS guidance (7)
$
1.07 – 1.18
      
 
EPS attributable to earn-out adjustment and investment gain (8)
  
0.05
      
 
EPS guidance, GAAP basis
$
1.12 – 1.23
      

(6) Domestic EPS guidance excluding earn-out adjustment and investment gain is a non-GAAP financial measure.  The Company excludes EPS attributable to earn-out adjustment and investment gain from this measure because of its comparability to the Company's historical operating results.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider Domestic EPS guidance excluding earn-out adjustment and investment gain in isolation or as a substitute for Domestic EPS guidance determined in accordance with accounting principles generally accepted in the United States.

(7) Adjusted EPS guidance is a non-GAAP financial measure.  The Company excludes EPS attributable to earn-out adjustment and investment gain from this measure because of its comparability to the Company's historical operating results.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider Adjusted EPS guidance in isolation or as a substitute for EPS guidance determined in accordance with accounting principles generally accepted in the United States.

(8) EPS attributable to earn-out adjustment and investment gain includes income of $1.5 million attributable to an adjustment to the estimated earn-out liability from the 2009 HealthHonors acquisition and a $1.2 million gain attributable to a final escrow release related to the January 2009 sale of a private company in which we held a preferred stock investment.

Reconciliation of Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization (EBITDA) to Net Income (in thousands)

     
Three Months
      
Three Months
      
Three Months
      
     
Ended
      
Ended
      
Ended
      
     
June 30, 2010
      
March 31, 2010
      
June 30, 2009
      
 
Adjusted EBITDA (9)
  
$
33,355 
      
$
32,896
      
$
31,625 
      
 
Earn-out adjustment and investment gain (10)
    
2,643
        
—
        
—
      
 
Interest expense
    
(3,612
)
      
(3,422
)
      
(4,142
)
    
 
Income tax expense
    
(7,207
)
      
(6,506
)
      
(6,658
)
    
 
Depreciation and amortization
    
(13,341
)
      
(13,554
)
      
(11,949
)
    
 
Net income
  
$
11,838 
      
$
9,414 
      
$
8,876 
      

(9) Adjusted EBITDA is a non-GAAP financial measure.  The Company excludes earn-out adjustment,

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HWAY Reports Second-Quarter Results
Page 9
July 22, 2010

investment gain, interest, taxes, depreciation and amortization from this measure and provides adjusted EBITDA to enhance investors' understanding of the Company's operating performance and its capacity to fund capital expenditures and working capital requirements.  The Company believes it is useful to investors to provide disclosures of its operating results on the same basis as that used by management.  You should not consider adjusted EBITDA in isolation or as a substitute for net income determined in accordance with accounting principles generally accepted in the United States.

(10) Earn-out adjustment and investment gain include income of $1.5 million attributable to an adjustment to the estimated earn-out liability from the 2009 HealthHonors acquisition and a $1.2 million gain attributable to a final escrow release related to the January 2009 sale of a private company in which we held a preferred stock investment.

Reconciliation of Revenues Excluding Earn-Out Adjustment to Revenues, GAAP Basis
(In thousands)

     
 
Three Months Ended
      
     
June 30, 2010
      
 
Revenues excluding earn-out adjustment (11)
$
174,043
      
 
Earn-out adjustment (12)
  
1,480
      
 
Revenues, GAAP basis
$
175,523
      

(11) Revenues excluding earn-out adjustment is a non-GAAP financial measure.  The Company excludes earn-out adjustment from this measure and provides revenues excluding earn-out adjustment because of its comparability to the Company's historical operating results and guidance.  The Company believes it is useful to investors to provide disclosures of its operating results and guidance on the same basis as that used by management.  You should not consider revenues excluding earn-out adjustment in isolation or as a substitute for revenues determined in accordance with accounting principles generally accepted in the United States.

(12) Earn-out adjustment consists of income of $1.5 million attributable to an adjustment to the estimated earn-out liability from the 2009 HealthHonors acquisition.

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HWAY Reports Second-Quarter Results
Page 10
July 22, 2010


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

     
June 30,
      
December 31,
  
     
2010
      
2009
  
 
Assets
                
 
Current assets:
                
 
Cash and cash equivalents
$
1,082
      
$
2,356
  
 
Accounts receivable, net
  
112,596
        
100,833
  
 
Prepaid expenses
  
10,329
        
10,433
  
 
Other current assets
  
4,282
        
4,945
  
 
Income taxes receivable
  
2,769
        
6,452
  
 
Deferred tax asset
  
22,359
        
24,197
  
                   
 
Total current assets
  
153,417
        
149,216 
  
                   
 
Property and equipment
                
 
Leasehold improvements
  
40,887
        
40,609
  
 
Computer equipment and related software
  
200,579
        
166,448
  
 
Furniture and office equipment
  
28,287
        
28,096
  
 
Capital projects in process
  
8,295
        
23,052
  
     
278,048
        
258,205
  
 
Less accumulated depreciation
  
(154,636
)
      
(134,046
)
 
Net property and equipment
  
123,412
        
124,159
  
                   
 
Other assets
  
15,292
        
11,498
  
 
Customer contracts, net
  
26,494
        
29,343
  
 
Other intangible assets, net
  
71,243
        
71,704
  
 
Goodwill, net
  
496,306
        
496,446
  
                   
 
Total assets
$
886,164
      
$
882,366
  
                   
 
Liabilities and stockholders' equity
                
 
Current liabilities:
                
 
Accounts payable
$
17,046
      
$
29,171
  
 
Accrued salaries and benefits
  
30,359
        
58,212
  
 
Accrued liabilities
  
30,646
        
25,004
  
 
Deferred revenue
  
6,128
        
4,639
  
 
Contract billings in excess of earned revenue
  
75,759
        
70,440
  
 
Current portion of long-term debt
  
3,271
        
2,192
  
 
Current portion of long-term liabilities
  
3,348
        
3,854
  
                   
 
Total current liabilities
  
166,557
        
193,512
  
                   
 
Long-term debt
  
256,328
        
254,345
  
 
Long-term deferred tax liability
  
15,788
        
14,617
  
 
Other long-term liabilities
  
43,716
        
42,615
  

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HWAY Reports Second-Quarter Results
Page 11
July 22, 2010



 
 
Stockholders' equity
                
 
Preferred stock
                
 
$.001 par value, 5,000,000 shares authorized,
                
 
none outstanding
  
— 
        
— 
  
 
Common stock
                
 
$.001 par value,120,000,000 shares authorized,
                
 
34,200,161 and 33,858,917 shares outstanding
  
34
        
34
  
 
Additional paid-in capital
  
228,677
        
222,472
  
 
Retained earnings
  
180,132
        
158,880
  
 
Accumulated other comprehensive loss
  
(5,068
)
      
(4,109
)
                   
 
Total stockholders' equity
  
403,775
        
377,277
  
                   
 
Total liabilities and stockholders' equity
$
886,164
      
$
882,366
  
 

- MORE -
 
 
 
HWAY Reports Second-Quarter Results
Page 12
July 22, 2010



HEALTHWAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
     
Six Months Ended
  
     
June 30,
  
     
2010
      
2009
  
 
Cash flows from operating activities:
                  
 
Net income (loss)
  
$
21,252
      
$
(5,937
)
 
Adjustments to reconcile net income to net cash provided by
                  
 
operating activities, net of business acquisitions:
                  
 
Depreciation and amortization
    
26,895
        
24,199
  
 
Amortization of deferred loan costs
    
869
        
738
  
 
Gain on sale of investment
    
(1,163
)
      
(2,581
)
 
Loss on disposal of property and equipment
    
28
        
726
  
 
Share-based employee compensation expense
    
5,591
        
5,306
  
 
Excess tax benefits from share-based payment arrangements
    
(806
)
      
(56
)
 
Increase in accounts receivable, net
    
(11,782
)
      
(3,365
)
 
Decrease (increase) in other current assets
    
6,152
        
(5,825
)
 
(Decrease) increase in accounts payable
    
(6,437
)
      
482
  
 
(Decrease) increase in accrued salaries and benefits
    
(27,779
)
      
14,675
  
 
Increase (decrease) in other current liabilities
    
13,797
        
(360
)
 
Deferred income taxes
    
1,908
        
2,305
  
 
Other
    
2,317
        
3,187
  
 
Increase in other assets
    
(909
)
      
(1,018
)
 
Payments on other long-term liabilities
    
(2,845
)
      
(2,461
)
 
Net cash flows provided by operating activities
    
27,088
        
30,015
  
                     
 
Cash flows from investing activities:
                  
 
Change in restricted cash
    
—
        
(538
)
 
Sale of investment
    
1,163
        
11,626
  
 
Acquisition of property and equipment
    
(23,384
)
      
(22,241
)
 
Other
    
(2,814
)
      
(2,286
)
 
Net cash flows used in investing activities
    
(25,035
)
      
(13,439
)
                     
 
Cash flows from financing activities:
                  
 
Proceeds from issuance of long-term debt
    
417,450
        
165,200
  
 
Payments of long-term debt
    
(415,766
)
      
(173,035
)
 
Deferred loan costs
    
(3,166
)
      
(784
)
 
Excess tax benefits from share-based payment arrangements
    
806
        
56
  
 
Exercise of stock options
    
532
        
139
  
 
Repurchases of stock options
    
—
        
(736
)
 
Change in outstanding checks and other
    
(2,881
)
      
(6,149
)
 
Net cash flows used in financing activities
    
(3,025
)
      
(15,309
)
                     
 
Effect of exchange rate changes on cash
    
(302
)
      
93
  
                     
 
Net (decrease) increase in cash and cash equivalents
    
(1,274
)
      
1,360
  
                     
 
Cash and cash equivalents, beginning of period
    
2,356
        
5,157
  
                     
 
Cash and cash equivalents, end of period
  
$
1,082
      
$
6,517
  

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