Healthways Cuts Forecast for 2011 on Loss of Cigna Contract
Healthways Inc. (HWAY), a manager of diabetes and heart disease services, lowered its forecast for 2011 and cut jobs after losing a contract with the health insurer Cigna Corp. (CI)
Healthways will have a net loss of $4.67 to $4.56 per share, compared with an earlier forecast that it would earn 90 cents to $1 a share, the Franklin, Tennessee-based company said today in a statement.
The contract with Cigna, which ends in 2013, accounts for 16 percent of the company’s 2011 revenue, Moody’s Investors Service said in a Dec. 15 statement. Healthways will take a goodwill writedown of $184 million, or $5.36 per diluted share, and a severance charge of $8.5 million, or about 15 cents a share.
“This writedown is a non-cash charge, and it is expected to have no impact on our liquidity, future operations or compliance with our debt covenants,” Chief Financial Officer Alfred Lumsdaine said in the statement.
Healthways cut 10 percent of its workforce, or 275 jobs, “which is obviously a difficult but necessary step,” Chief Executive Officer Ben Leedle said today on a conference call.
Without the charges, net income would be 85 cents to 94 cents a share, Healthways said. The company will close two Cigna call centers by mid-January. On Dec. 15, Moody’s downgraded Healthways to Ba3, three steps below investment grade.
To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net
To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net
Rate this Page