<PAGE> 1
================================================================================
FORM 10Q -- QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
Commission File Number: 0-20135
---------------
AMERICA SERVICE GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0332317
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 WESTPARK DRIVE, SUITE 300
BRENTWOOD, TENNESSEE 37027
(Address and zip code of principal executive office)
(615) 373-3100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed under Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
There were 3,731,060 shares of Common Stock outstanding as of April 28,
2000.
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1
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AMERICA SERVICE GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at March 31, 2000 and December 31, 1999 ............... 3
Condensed Consolidated Income Statements for the three months ended March 31, 2000 and
March 31, 1999 ............................................................................. 4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and
March 31, 1999 ............................................................................. 5
Notes to Condensed Consolidated Financial Statements ........................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 7
PART II. OTHER INFORMATION
Item 5: Other Events .......................................................................... 9
Item 6: Exhibits and Reports on Form 8-K ...................................................... 9
Signature page ................................................................................ 10
</TABLE>
2
<PAGE> 3
PART I:
FINANCIAL INFORMATION
AMERICA SERVICE GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash .................................................... $ 451 $ 444
Accounts receivable: healthcare and other, less allowance
for doubtful accounts ................................ 39,124 39,738
Prepaid expenses and other current assets ............... 7,956 7,440
Current deferred taxes .................................. 1,289 1,289
--------------------------
Total current assets ............................ 48,820 48,911
Property and equipment, net ............................... 4,077 3,932
Deferred taxes ............................................ 562 562
Cost in excess of net assets acquired, net ................ 58,664 44,548
Other assets .............................................. 667 774
--------------------------
$ 112,790 $ 98,727
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................ $ 13,668 $ 11,531
Accrued expenses ........................................ 26,356 27,882
--------------------------
Total current liabilities ....................... 40,024 39,413
Noncurrent portion of accrued expenses .................... 3,097 2,874
Long-term debt ............................................ 37,200 25,500
Commitments and contingencies
Mandatory redeemable preferred stock ...................... 12,380 12,375
Mandatory redeemable common stock ......................... 1,842 1,842
Common stock .............................................. 37 37
Additional paid in capital ................................ 12,863 12,856
Stockholders' notes receivable ............................ (1,075) (1,060)
Retained earnings ......................................... 6,422 4,890
--------------------------
Total liabilities and stockholders' equity ...... $ 112,790 $ 98,727
==========================
</TABLE>
See notes to condensed consolidated financial statements.
3
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AMERICA SERVICE GROUP INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Healthcare revenue ......................... $ 76,169 $ 58,281
Healthcare expenses ........................ 68,626 52,478
----------------------------
Gross margin ............................... 7,543 5,803
Selling, general and administrative expenses 3,241 3,020
Depreciation and amortization .............. 977 667
----------------------------
Income from operations ..................... 3,325 2,116
Interest, net .............................. (498) (1,024)
----------------------------
Income before taxes ........................ 2,827 1,092
Provision for income taxes ................. 1,132 612
----------------------------
Net income ................................. 1,695 480
Preferred stock dividends .................. 163 1,989
----------------------------
Net income (loss) attributable to common
shares ..................................... $ 1,532 $ (1,509)
============================
Net income (loss) per common share:
Basic .................................... $ 0.41 $ (0.42)
============================
Diluted .................................. $ 0.32 $ (0.42)
============================
Weighed average shares outstanding:
Basic .................................... 3,726 3,575
============================
Diluted .................................. 5,346 3,575
============================
</TABLE>
See notes to condensed consolidated financial statements.
4
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AMERICA SERVICE GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
MARCH 31,
2000 1999
--------------------------
<S> <C> <C>
Operating activities:
Net income ............................................. $ 1,695 $ 480
Adjustments to reconcile net income to net cash provided
by operating activities:
Interest on stockholders' notes receivable ........... (15) --
Depreciation and amortization ........................ 977 667
Accretion of subordinated notes ...................... -- 119
Changes in operating assets and liabilities, net of
effects from acquisition:
Accounts receivable ............................... 614 (1,688)
Prepaid expenses and other current assets ......... (245) (2,386)
Other assets ...................................... 24 (218)
Accounts payable .................................. 2,137 10,031
Accrued expenses .................................. (2,243) (3,434)
--------------------------
Net cash provided by operating activities .............. 2,944 3,571
Investing activities:
Cash paid for acquisition, net of cash acquired ........ (14,194) (66,077)
Capital expenditures ................................... (450) (259)
--------------------------
Net cash used in investing activities .................. (14,644) (66,336)
Financing activities
Proceeds from long-term debt ........................... 14,094 47,000
Payments on long-term debt ............................. (2,394) (10,000)
Exercise of stock options .............................. 7 31
Proceeds from mandatory redeemable preferred stock ..... -- 5,000
Proceeds from subordinated notes ....................... -- 15,000
--------------------------
Net cash provided by financing activities .............. 11,707 57,031
--------------------------
Net increase (decrease) in cash ........................ 7 (5,734)
Cash and cash equivalents, beginning of period ......... 444 7,211
--------------------------
Cash and cash equivalents, end of period ............... $ 451 $ 1,477
==========================
</TABLE>
See notes to condensed consolidated financial statements.
5
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AMERICA SERVICE GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
The interim consolidated financial statements as of March 31, 2000 and for
the quarter then ended are unaudited, but in the opinion of management, have
been prepared in conformity with generally accepted accounting principles
applied on a basis consistent with those of the annual audited consolidated
financial statements. Such interim consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the financial position and the results of operations for the
quarter presented. The results of operations for the three months presented are
not necessarily indicative of the results to be expected for the year ending
December 31, 2000. The interim consolidated financial statements should be read
in connection with the audited consolidated financial statements for the year
ended December 31, 1999.
2. ACQUISITIONS
On March 29, 2000, the Company acquired the Pennsylvania and New York
operations of Correctional Physician Services, Inc. ("CPS"). The transaction was
structured as an asset purchase. CPS has assigned its contracts for the Eastern
Region of the Pennsylvania Department of Corrections and the Yonkers Region of
the New York Department of Correctional Services to Prison Health Services,
Inc., an operating subsidiary of America Service Group. The purchase price was
$14 million and was financed with the Company's existing Senior Credit Facility.
CPS is a privately held company with headquarters located in Blue Bell,
Pennsylvania. Combined, the Pennsylvania and New York operations of CPS provided
services to approximately 21,000 inmates and had approximately $41 million in
revenue during 1999. The Company accounted for the acquisition using the
purchase method of accounting.
On January 26, 1999, the Company purchased all of the outstanding stock of
EMSA Government Services, Inc. ("EMSA") from InPhyNet Administrative Services,
Inc. ("InPhyNet") for $67.0 million in cash pursuant to a Stock Purchase
Agreement, dated as of December 18, 1998 (the "Stock Purchase Agreement"), as
amended by the First Amendment to Stock Purchase Agreement, dated as of January
26, 1999 (the "First Amendment"), between the Company and InPhyNet. InPhyNet is
a wholly-owned subsidiary of MedPartners, Inc. ("MedPartners").
EMSA conducts its operations through two wholly-owned subsidiaries, EMSA
Correctional Care, Inc. and EMSA Military Services, Inc., each of which became
indirect subsidiaries of the Company pursuant to its acquisition of EMSA. EMSA
Correctional provides comprehensive managed healthcare solutions to state and
local correctional facilities, managing healthcare for approximately 70,000
inmates. EMSA Military contracts with the U.S. Department of Defense (the "DOD")
and the Veterans Administration (the "VA") to provide emergency medicine and
primary healthcare services to active and retired military personnel and their
dependents at medical facilities operated by the DOD and the VA.
The purchase price paid to InPhyNet was subject to increase or decrease on a
dollar-for-dollar basis by an amount equal to the amount by which EMSA's working
capital, as defined, and as reflected on its balance sheet as of January 25,
1999 (the "Closing Date Balance Sheet"), was in excess of or was less than $27.6
million. The Closing Date Balance Sheet reflected working capital, as defined,
of $24.0 million. Accordingly, the Company received $3.6 million in March 1999
as part of the purchase price adjustment. The Company accounted for the EMSA
acquisition using the purchase method of accounting.
The Company used $47.0 million in borrowings under the Credit Facility and
the aggregate $20.0 million in proceeds received from its issuance of the
Convertible Securities to Capital Partners and Executive Partners to finance, in
part, the EMSA acquisition, which consisted of assets acquired of $89.2 million,
including cash of $0.9 million and $46.7 million of cost in excess of net assets
acquired and the assumption of $22.2 million in liabilities.
6
<PAGE> 7
The following unaudited pro forma results of operations give effect to the
operations of the Company as if the acquisition had occurred effective January
1, 1999 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
MARCH 31,
1999
----------
<S> <C>
Healthcare revenue ............ $ 68,009
Net loss attributable to common (1,511)
shares
Net loss per common share:
Basic ....................... $ (0.42)
==========
Diluted ..................... $ (0.42)
==========
</TABLE>
ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This quarterly report on Form 10-Q contains and incorporates by reference
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Those statements include, among other things, discussions of the
Company's business strategy and expectations concerning the Company's position
in the industry, future operations, margins, profitability, liquidity and
capital resources. All these forward-looking statements are based on estimates
and assumptions made by management of the Company that, although believed to be
reasonable, are inherently uncertain. Therefore, undue reliance should not be
placed on such statements and estimates. No assurance can be given that any of
such estimates or statements will be realized, and it is likely that actual
results may differ materially from those contemplated by such forward-looking
statements. Factors that may cause such differences include, but are not limited
to, those set forth in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 (the "1999 Form 10-K") under the heading "Item 1.
Business -- Cautionary Statements," which cautionary statements are hereby
incorporated herein by reference. All forward-looking statements attributable to
the Company or persons acting on behalf of the Company are expressly qualified
in their entirety by the cautionary statements set forth in the 1999 Form 10-K.
In light of these and other uncertainties, the inclusion of forward-looking
statements herein or in any statement made by the Company should not be regarded
as a representation by the Company that the Company's plans and objectives will
be achieved.
GENERAL
The financial statements of the Company for the quarter ended March 31, 1999
include the operations of EMSA since January 26, 1999, the date of acquisition.
The acquisition was strategic in that it positioned the Company as the second
largest provider of comprehensive managed healthcare for incarcerated
individuals in the United States and positions the Company to capitalize on
opportunities within the $4.5 billion correctional healthcare industry. Through
the acquisition of EMSA, the Company was able to (1) increase its contracts from
thirty-five to ninety-six; (2) increase the number of inmates served from 64,000
to 133,000; (3) diversify its revenue base, so that no one contract exceeds 8%
of combined revenue; (4) increase its market presence from sixteen to
twenty-five states; (5) leverage its corporate general and administrative
expenses; (6) obtain more favorable pricing in areas such as pharmacy, medical
supplies and lab costs; and (7) strengthen certain critical disciplines such as
marketing and operations management.
In addition to the strategic advantages, EMSA's contracts are similar to the
Company's prison and jail contracts, which will allow the Company to implement
its operational process, which includes (1) a claims management tracking system
that monitors incidents, claims and litigation; (2) a Daily Operating Report to
control staffing and off-site utilization; (3) biweekly pharmacy reports; and
(4) a comprehensive cost review system that analyzes average costs per inmate at
each facility.
RESULTS OF OPERATIONS
FIRST QUARTER MARCH 2000 COMPARED TO FIRST QUARTER MARCH 1999
Healthcare revenues for the quarter March 2000 increased to $76.2 million
from $58.3 million in the first quarter 1999. The $17.9 million increase is
attributable to EMSA being included for the full quarter of March 2000, an
increase of a net nine new contracts and
7
<PAGE> 8
an increase in inmate population and automatic pricing adjustments of existing
contracts. Revenue from new contracts was $7.9 million, while six contracts with
revenue totaling $4.9 million at March 31, 1999 were terminated prior to
December 31, 1999.
Healthcare expenses during the first quarter 2000 were $68.6 million or
90.1% of revenue versus $52.5 million or 90.0% of revenue for the same period in
1999. The $16.1 million increase is mainly attributable to the EMSA acquisition
being included for the entire first quarter of March 2000.
Selling, general and administrative expenses for the quarter ended March
2000 increased $0.2 million as compared to March 1999, again due to EMSA being
operational for the full quarter. As a percent of revenue, selling, general and
administrative expenses are 4.3% for the quarter March 2000 versus 5.2% for
March 1999. The percentage decrease demonstrates the leverage on selling,
general and administrative expense provided by a higher revenue base.
Depreciation and amortization increased $0.3 million to $1.0 million for the
quarter March 2000. The increase is mainly due to the amortization of cost in
excess of net assets related to the EMSA acquisition, totaling $46.7 million,
which is being amortized over twenty years, being included the entire first
quarter in 2000.
Net interest expense of $0.5 million for the quarter March 2000 declined
$0.5 million from March 1999. The decline is related to repayment of $29.0
million of debt throughout 1999 and the conversion of $7.5 million of
Convertible Subordinated Notes in August 1999. Net interest expense of $1.0
million was offset by $0.1 million of interest income for the quarter March
1999.
Income taxes for the quarter March 2000 were $1.1 million, which equates to
a 40% effective tax rate, versus $0.6 million for the same quarter in 1999.
Preferred stock dividends of $0.2 million relate to the 5% coupon rate on
the $12.5 million of Convertible Preferred Stock. Preferred stock dividends in
1999 include a one-time noncash, nonrecurring dividend of $1.9 million, which
increased additional paid-in capital and represents a $3.68 dividend on each
outstanding share of Convertible Preferred Stock at March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at March 31, 2000, were $0.45
million, compared with cash of $0.44 million at December 31, 1999. Cash provided
by operating activities during the three months ended March 31, 2000 was $2.9
million compared to cash provided by operations of $3.6 million for the
comparable 1999 period. Due to the positive trend in cash flow from operations,
the Company was able to reduce the Senior Credit Facility by $2.4 million during
the first quarter 2000.
Management believes that the current levels of cash, when coupled with
internally generated funds and $10.0 million available under the line of credit,
are sufficient to meet the Company's foreseeable cash needs.
YEAR 2000 UPDATE
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the Year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
8
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PART II:
OTHER INFORMATION
ITEM 5. -- OTHER EVENTS
On March 29, 2000, the Company announced its Acquisition of the Pennsylvania
and New York operations of Correctional Physician Services, Inc. (CPS).
On April 24, 2000, the Company issued a press release discussing its first
quarter 2000 operating performance. A copy of such press release is attached
hereto as Exhibit 99.1 and is hereby incorporated herein by reference.
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
<TABLE>
<S> <C> <C>
3.1 -- Amended and Restated Certificate of Incorporation of America Service Group Inc. (incorporated by reference to
Exhibit 3.1 of the Registrant's Registration Statement on Form S-1, Registration No. 33-43306, as amended).
3.2 -- Amended and Restated By-Laws of America Service Group Inc. (incorporated by reference to Exhibit 3.2 of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
4.1 -- Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-1, Registration No. 33-43306).
11.1 -- Statement re-computation of per share earnings.
27.1 -- Financial Data Schedule for the quarter ended March 31, 2000 (for SEC use only)
27.2 -- Financial Data Schedule for the quarter ended March 31, 2000 (for SEC use only)
99.1 -- March 31, 2000 Earnings Release
</TABLE>
(B) Reports on Form 8-K (None)
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly authorized this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICA SERVICE GROUP INC.
/s/ MICHAEL CATALANO
--------------------------------------------
Michael Catalano
President & Chief Executive Officer
/s/ BRUCE A. TEAL
--------------------------------------------
Bruce A. Teal
Executive Vice President & Chief Financial
Officer
Dated: May 12, 2000
10
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
11.1 -- Statement re-computation of per share earnings....................................
27.1 -- Financial Data Schedule for the quarter ended March 31, 2000 (for SEC use only)...
99.1 -- Announcement of Acquisition of CPS Contract.......................................
99.2 -- March 2000 Earnings Release.......................................................
</TABLE>
11
<PAGE> 1
EXHIBIT 11.1
AMERICA SERVICE GROUP INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Net income $1,695 $ 480
Preferred stock dividends 163 1,989
-----------------------
Numerator for basic earnings per share - income
(loss) available to common stockholders $1,532 $(1,509)
=======================
Denominator for basic earnings per share -
weighted average shares 3,726 3,575
Effect of dilutive securities 1,620 --
-----------------------
Weighted average common shares outstanding -
diluted 5,346 3,575
=======================
Basic earnings (loss) per share $ 0.41 $ (0.42)
=======================
Diluted earnings (loss) per share $ 0.32 $ (0.42)
=======================
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICA SERVICE GROUP INC. FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 451
<SECURITIES> 0
<RECEIVABLES> 39,686
<ALLOWANCES> (562)
<INVENTORY> 2,788
<CURRENT-ASSETS> 48,820
<PP&E> 7,446
<DEPRECIATION> (3,369)
<TOTAL-ASSETS> 112,790
<CURRENT-LIABILITIES> 40,024
<BONDS> 0
12,380
0
<COMMON> 37
<OTHER-SE> 20,052<F1>
<TOTAL-LIABILITY-AND-EQUITY> 112,790
<SALES> 76,169
<TOTAL-REVENUES> 76,169
<CGS> 68,626
<TOTAL-COSTS> 71,867
<OTHER-EXPENSES> 977<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 498
<INCOME-PRETAX> 2,827
<INCOME-TAX> 1,132
<INCOME-CONTINUING> 1,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,695
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.32
<FN>
<F1>Includes $1,842,000 of Redeemable Common Stock
<F2>Depreciation and Amortization Expense
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
(AMERICA SERVICE GROUP INC. LOGO)
N E W S R E L E A S E
FOR IMMEDIATE RELEASE
CONTACT: MICHAEL CATALANO BRUCE A. TEAL
PRESIDENT AND CHIEF EXECUTIVE OFFICER EXECUTIVE VICE PRESIDENT AND
(615) 376-1319 CHIEF FINANCIAL OFFICER
(615) 376-1361
AMERICA SERVICE GROUP INC. ACQUIRES ASSETS OF
CORRECTIONAL PHYSICIAN SERVICES, INC.
NASHVILLE, Tennessee (March 29, 2000) - America Service Group Inc. (NASDAQ:ASGR)
today announced that it has acquired the Pennsylvania and New York operations of
Correctional Physician Services, Inc. (CPS). The transaction was structured as
an asset purchase. CPS has assigned its contracts for the Eastern Region of the
Pennsylvania Department of Corrections and the Yonkers Region of the New York
Department of Correctional Services to Prison Health Services, Inc., an
operating subsidiary of America Service Group.
The purchase price for the acquisition was $14 million cash, financed
with the Company's existing Senior Credit Facility. The acquisition is expected
to be accretive to the Company's earnings within the current year.
CPS is a privately held company with headquarters located in Blue Bell,
Pennsylvania. Combined, the Pennsylvania and New York operations of CPS provided
services to approximately 21,000 inmates and had approximately $41 million in
revenue during 1999.
The CPS operations complement and consolidate America Service Group's
existing operations in Pennsylvania and New York. "We are honored to expand our
relationships with the Pennsylvania Department of Corrections and the New York
Department of Correctional Services," said Michael Catalano, President and Chief
Executive Officer of America Service Group. "Our company will continue to serve
these clients with the added commitment of management and clinical talent at
CPS."
America Service Group Inc., based in Brentwood, Tennessee, is a leading
provider of correctional healthcare services in the United States. America
Service Group contracts with approximately one hundred government agencies to
provide a wide range of managed healthcare programs tailored to specific client
needs. The Company employs over 4,200 medical, professional and administrative
staff nationwide.
This press release may contain "forward-looking" statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. As such, they involve risk and uncertainty that actual
results may differ materially from those projected in the forward-looking
statements. A discussion of the important factors and assumptions regarding the
statements and risks involved is contained in the Company's filings with the
Securities and Exchange Commission.
-END-
105 Westpark Drive - Suite 300 - Brentwood, TN 37027 - 615-373-3100 -
Fax 615-376-9862
<PAGE> 1
EXHIBIT 99.2
(AMERICA SERVICE GROUP INC. LOGO)
N E W S R E L E A S E
FOR IMMEDIATE RELEASE
CONTACT: MICHAEL CATALANO BRUCE A. TEAL
PRESIDENT AND CHIEF EXECUTIVE OFFICER EXECUTIVE VICE PRESIDENT AND
(615) 376-1319 CHIEF FINANCIAL OFFICER
(615) 376-1361
AMERICA SERVICE GROUP ANNOUNCES RECORD FIRST QUARTER RESULTS
--------------------------
COMPANY ANNOUNCES SECOND ACQUISITION THIS YEAR
First Quarter Highlights:
- - Completed acquisition of Correctional Physician Services, Inc. (CPS)
- - Revenues increased 31% over first quarter of 1999
- - Earnings per share, exclusive of preferred stock dividends, increased 167%
over first quarter of 1999
- - EBITDA per share increased to $0.80 versus $0.67 for the first quarter of
1999
- - Senior bank debt reduced by an additional $2.3 million prior to CPS
acquisition
- - Today separately announced the acquisition of Correctional Health
Services, Inc. (CHS)
NASHVILLE, Tennessee (April 24, 2000) - America Service Group Inc. (NASDAQ:ASGR)
announced today record first quarter results. The Company also separately
announced that it has executed a stock purchase agreement to acquire
Correctional Health Services, Inc. (CHS).
Michael Catalano, president and chief executive officer of America
Service Group, said, "We are pleased to report solid first quarter financial
results and our second acquisition this year. Clearly, our operating performance
and financial strength have earned us a leadership position in the industry."
Healthcare revenue for the first quarter of 2000 was $76.2 million, up
31% from $58.3 million in the year-ago quarter, primarily due to the Company's
acquisition of EMSA Government Services (EMSA) during the first quarter of 1999.
Net income was $1.7 million for the first quarter of 2000 compared with net
income of $480,000 for the first quarter of 1999.
Diluted earnings per share was $0.32 for the first quarter of 2000
compared with a loss per share of $0.42 for the first quarter of 1999, which was
due to a $1.9 million noncash, nonrecurring preferred stock dividend. Excluding
the impact of the noncash, nonrecurring dividend in 1999, diluted earnings per
share for the first quarter of 1999 would have been $0.12.
-MORE-
105 Westpark Drive - Suite 300 - Brentwood,TN 37027 - 615-373-3100 -
Fax 615-376-9862
<PAGE> 2
ASGR Reports First Quarter Results
Page 2
April 24, 2000
Healthcare expenses as a percent of revenue for the first quarter of
2000 were 90.1%, a slight increase over 90.0% in the first quarter of 1999. In
addition, selling, general and administrative expenses improved from 5.2% of
revenues in the first quarter of 1999 to 4.3% of revenues in the first quarter
of 2000.
On March 29, 2000, the Company announced that it had acquired the
Pennsylvania and New York operations of Correctional Physician Services, Inc.
(CPS) for $14 million through an asset purchase agreement whereby the contracts
for the Eastern Region of the Pennsylvania Department of Corrections and the
Yonkers Region of the New York Department of Correctional Services were assigned
to Prison Health Services, Inc., an operating subsidiary of America Service
Group. The two contracts provided services to approximately 21,000 inmates and
produced revenues of approximately $41 million during 1999. CPS is a privately
held company with headquarters located in Blue Bell, Pennsylvania.
In a separate release dated April 24, 2000, the Company announced that
it had signed an agreement to acquire the stock of Correctional Health Services,
Inc. (CHS) for a purchase price of $17 million. CHS is a privately held company
with headquarters in Verona, New Jersey. It presently has annualized revenues of
approximately $19 million generated by 19 contracts providing services to 23
adult and juvenile detention and residential treatment facilities with a total
average daily population of approximately 12,000 inmates. Closing of the CHS
transaction is subject to customary regulatory clearance and is expected on June
1, 2000.
A listen-only simulcast of America Service Group's first quarter
conference call will be available online at www.asgr.com or www.streetevents.com
on April 25, 2000, beginning at 11:00 a.m. Eastern time. The online replay will
follow immediately and continue for 30 days.
America Service Group Inc., based in Brentwood, Tennessee, is a leading
provider of correctional healthcare services in the United States. Subsequent to
the CPS and CHS transactions, America Service Group Inc., through its
subsidiaries, contracts with 123 government agencies to provide a wide range of
managed healthcare programs for approximately 165,000 patients. The Company
employs over 4,600 medical, professional and administrative staff nationwide.
This press release may contain "forward-looking" statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. As such, they involve risk and uncertainty that actual
results may differ materially from those projected in the forward-looking
statements. A discussion of the important factors and assumptions regarding the
statements and risks involved is contained in the Company's filings with the
Securities and Exchange Commission.
-MORE-
<PAGE> 3
ASGR Reports First Quarter Results
Page 3
April 24, 2000
AMERICA SERVICE GROUP INC.
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------
March 31, % of March 31, % of
2000 Revenue 1999 Revenue
---- ------- ---- -------
<S> <C> <C> <C> <C>
CONDENSED INCOME STATEMENT DATA:
Healthcare revenue $ 76,169 100.0 $ 58,281 100.0
Healthcare expenses 68,626 90.1 52,478 90.0
-------- --------- -------- ---------
Gross margin 7,543 9.9 5,803 10.0
Selling, general and administrative expenses 3,241 4.3 3,020 5.2
Depreciation and amortization 977 1.3 667 1.1
-------- --------- -------- ---------
Income from operations 3,325 4.4 2,116 3.6
Interest, net (498) (0.7) (1,024) (1.8)
-------- --------- -------- ---------
Income before taxes 2,827 3.7 1,092 1.9
Provision for income taxes 1,132 1.5 612 1.1
-------- --------- -------- ---------
Net income 1,695 2.2 480 0.8
Preferred stock dividends 163 0.2 1,989 3.4
-------- --------- -------- ---------
Net income (loss) attributable to common shares $ 1,532 2.0 $ (1,509) (2.6)
-------- --------- -------- ---------
Net income (loss) per common share:
Basic $ 0.41 $ (0.42)
-------- --------
Diluted $ 0.32 $ (0.42)
-------- --------
Diluted - exclusive of preferred stock dividends $ 0.32 $ 0.12
-------- --------
Weighted average shares outstanding:
Basic 3,726 3,575
-------- --------
Diluted 5,346 3,575
-------- --------
Diluted - exclusive of preferred stock dividends 5,346 4,166
-------- --------
</TABLE>
<TABLE>
<CAPTION>
March 31, Dec. 31,
2000 1999
---- ----
<S> <C> <C>
CONDENSED BALANCE SHEET DATA:
Cash and cash equivalents $ 451 $ 444
Other current assets 48,369 48,467
-------- -------
Current assets 48,820 48,911
Cost in excess of net assets acquired 58,664 44,548
Property and equipment, net 4,077 3,932
Other assets 1,228 1,336
-------- -------
$112,789 $98,727
======== =======
Current liabilities $ 40,028 $39,413
Other liabilities 3,098 2,874
Long-term debt 37,200 25,500
Stockholders' equity 32,463 30,940
-------- -------
$112,789 $98,727
======== =======
</TABLE>
-END-
