UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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OMB APPROVAL
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OMB Number:3235-0145
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SCHEDULE 13D
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Under the Securities Exchange Act of 1934
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(Amendment No. 1)*
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HEALTHWAYS, INC.
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Common Stock, par value $0.001 per share
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422245100
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North Tide Capital, LLC
500 Boylston Street, Suite 310
Boston, Massachusetts 02116
Tel. No.: 617- 449-3122
Attn: Chief Financial Officer
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
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December 2, 2013
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(Date of Event which Requires Filing of this Statement)
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1
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Names of Reporting Persons.
North Tide Capital Master, LP
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2
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Check the Appropriate Box if a Member of a Group (See Instructions)
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(a) [ ]
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(b) [ ]
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3
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SEC Use Only
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4
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Source of Funds (See Instructions):
WC
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5
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Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e):
[ ]
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6
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Citizenship or Place of Organization.
Cayman Islands
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Number
of Shares
Beneficially
Owned by
Each
Reporting
Person With
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7 Sole Voting Power
0
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8 Shared Voting Power
3,000,000
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9 Sole Dispositive Power
0
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10 Shared Dispositive Power
3,000,000
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11
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Aggregate Amount Beneficially Owned by Each Reporting Person
3,000,000
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12
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Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]
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13
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Percent of Class Represented by Amount in Row (11)
8.6%
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14
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Type of Reporting Person (See Instructions)
PN (Limited Partnership)
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1
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Names of Reporting Persons.
North Tide Capital, LLC
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2
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Check the Appropriate Box if a Member of a Group (See Instructions)
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(a) [ ]
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(b) [ ]
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3
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SEC Use Only
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4
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Source of Funds (See Instructions):
AF
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5
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Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e):
[ ]
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6
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Citizenship or Place of Organization.
Massachusetts
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Number
of Shares
Beneficially
Owned by
Each
Reporting
Person With
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7 Sole Voting Power
0
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8 Shared Voting Power
3,400,000
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9 Sole Dispositive Power
0
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10 Shared Dispositive Power
3,400,000
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11
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Aggregate Amount Beneficially Owned by Each Reporting Person
3,400,000
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12
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Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]
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13
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Percent of Class Represented by Amount in Row (11)
9.7%
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14
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Type of Reporting Person (See Instructions)
IA, OO (Limited Liability Company)
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1
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Names of Reporting Persons.
Conan Laughlin
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2
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Check the Appropriate Box if a Member of a Group (See Instructions)
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(a) [ ]
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(b) [ ]
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3
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SEC Use Only
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4
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Source of Funds (See Instructions):
AF
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5
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Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e):
[ ]
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6
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Citizenship or Place of Organization.
United States
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Number
of Shares
Beneficially
Owned by
Each
Reporting
Person With
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7 Sole Voting Power
0
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8 Shared Voting Power
3,400,000
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9 Sole Dispositive Power
0
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10 Shared Dispositive Power
3,400,000
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11
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Aggregate Amount Beneficially Owned by Each Reporting Person
3,400,000
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12
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Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]
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13
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Percent of Class Represented by Amount in Row (11)
9.7%
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14
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Type of Reporting Person (See Instructions)
HC, IN
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AMENDMENT NO. 15 TO SCHEDULE 13D
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Item 4.
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Purpose of Transaction
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Item 7.
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Material to Be Filed as Exhibits
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Exhibit 99.2
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Letter, dated December 2, 2013, from the North Tide to the Board of Directors of the Issuer.
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NORTH TIDE CAPITAL MASTER, LP
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By: North Tide Capital GP, LLC,
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its General Partner
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By: /s/ Conan Laughlin
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Conan Laughlin
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Manager
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NORTH TIDE CAPITAL, LLC
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By: /s/ Conan Laughlin
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Conan Laughlin
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Manager
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CONAN LAUGHLIN
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By: /s/ Conan Laughlin
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Conan Laughlin, Individually
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1.
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Unlock the value of the Silver Sneakers business. Although disclosure from the company makes it difficult to estimate, we believe the Silver Sneakers business may represent as much as 40% of the Company’s total revenue and substantially all of the Company’s EBITDA. By all accounts, this business has been one of the few successes at Healthways during Mr. Leedle’s tenure. Healthways paid $450 million to acquire the business in 2006, a figure that is remarkable in the context of the entire Healthways enterprise value today of $730 million (and less than $600 million in late October). Lives in the Silver Sneakers program are projected to grow 11% this year (to 9 million lives), and we believe the business is substantially more durable than the consensus does – health plans, members, and gyms simply love the program, the payback is real, and plans are unlikely to cut this benefit even with continued rate pressure. Given the rapid growth and likely high margin profile of this business, and our understanding that it is highly separable from the core health and wellness operations, we believe its value as a stand-alone entity is potentially equal to or greater than the entire Healthways enterprise value today. The Board should evaluate its options to highlight and realize this value.
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2.
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Shut down the international “experiment”. Healthways began a program to expand its core disease management offerings internationally in 2005, during a “boom” period for the company. Disclosure around the financial performance of the international business is no longer available (why is this?), but as of the last disclosure in the Company’s fourth quarter 2012 earnings release, the international segment generated 2012 revenue of $31 million and EPS of 0.01. Our guess is that the International business still contributes close to zero EBITDA, and is nothing more than a PR strategy by CEO Ben Leedle to inflate the Company’s growth opportunity to the investment community and deflect scrutiny on his struggling domestic operations. Running an international business with a President based in Munich, Germany (who received $1.5 million in total compensation in 2012) with contracts in locations as far away as Brazil and Australia seems ill-conceived for a company that is struggling to execute and make money in its core US health and wellness operations. The Board should end this experiment immediately.
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3.
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Re-focus on the core domestic population health and wellness opportunity. We believe the long term value in Healthways shares rests with the company’s position as the largest independent population health and wellness company in the US. The idea that a small percentage of the population accounts for the majority of healthcare costs is not a new one, but the rapidly evolving landscape of reimbursement and risk makes the core Healthways value proposition and service offering an increasingly valuable asset. We suspect a lack of management depth and operational focus underlies the significant underperformance of this business, which by our math generates less than $400 million in revenue (lower today than it did in 2006 prior to the Axia acquisition) and little to no EBITDA (versus a 22% EBITDA margin in 2006)8. It is inexcusable that the Board would obfuscate blame on management for being dealt a bad hand in terms of market shifts, as a more capable leadership team surely would have navigated these changes more profitably. Population health may one of the biggest opportunities in healthcare over the next decade, and Healthways shareholders deserve a management team that can execute against this opportunity.
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