America Service Group, Inc. ( ASGR) Q3 2010 Earnings Conference Call October 29, 2010 11 AM ET Executives Rich Hallworth – President, CEO and COO Mike Taylor – CFO, EVP, and Treasurer Jon Walker – SVP, Chief Development Officer Analysts Kevin Campbell – Avondale Partners Michael Lamb – Wealth Monitors Presentation Operator
Our entire focus is to assure we group, retain, train and provide our care givers the knowledge and tools they need to optimize their ability to make the right decisions at the point of care. To this end we have invested heavily and made significant progress over the last few years but the challenges are many. Our dedicated efforts to continuously improve quality of care have been and will continue to be a company priority.Our balance sheet continues to be very strong. We ended the quarter with $15.4 million of cash on hand and we still have no debt. Our day sales outstanding did increase from 27 days at June 30 to 38 days at the end of the third quarter. While our cash on hand is down from the $29.7 million on hand at the end of the second quarter primarily due to the increase in DSOs, we have no reason to believe the decrease was other than a temporary delay in collecting accounts receivable. Such collections have rebounded in October. We were pleased in late September to announce that we reached an agreement on a new two-year contract with the city of New York to continue to provide services to the inmates on Rikers Island. Our existing contract expires December 31, 2010. Although this is an entirely new contract; the structure, financial and risk terms are very similar to our current cost plus contract. The RFP pipeline continues to be very active and strong. We have new bids pending or in process in excess of $350 million of annual revenue potential. As anxious as we are to hear the decision on both the Arizona DOC and Miami-Dade proposals, these RFPs remain active as both continue to evaluate bidders best and final offers. We also submitted our comprehensive proposal to the Illinois DOC on October 15th. In addition, we are currently working on our response to the Mississippi DOC which is due in mid-December. These four prospects comprise the majority of the new bid pipeline.
In addition to this act of proposal pipeline, we are expecting several more opportunities in the near future. Over the next 12 months we anticipate additional requests for proposals with $400 million in additional annual revenue potential including the New Mexico, Indiana and North Carolina DOCs among others. There is no guarantee that all of these RFPs will be issued or awarded, nor can we assure that we will bid on each of them.For the second consecutive quarter, we were not active in the market under our stock repurchase program. The Board of Directors and management are still supportive of the repurchase program. However, we may not be active every quarter for numerous reasons some of which could include contract negotiation, market conditions, bid opportunities etc. Consistent with past practices we do not discuss when we are or are not in the market or the specific reasons for such. As announced in yesterday’s press release, our Board of Directors has again declared a $0.06 per share dividend for the quarter. One last point I’d like to make, next Tuesday is Election Day and there are 37 gubernatorial offices up for bid including 25 governors that are being termed out. We are closely following several key races, which may have significant impact on our current contracts those with our competitors and will certainly impact the anticipated wave of privatization statement. I’d now like to ask Mike Taylor, our Executive Vice President and Chief Financial Officer to speak in more detail about financial matters. Following Mike’s remarks, Jon Walker, our Senior Vice President of Business Development, will also be available for questions. Mike Taylor Thank you Rich, good morning everyone. The company’s third quarter financial results continue a string of strong recent performance. Gross margins on the continuing contracts was 8.7% in the third quarter, significantly improved from 5.9% in the prior year quarter. Read the rest of this transcript for free on seekingalpha.com