| Delaware                        |   | 62-1117144          |
|---------------------------------|--------|---------------------|
| (State or Other Jurisdiction of |   | (I.R.S. Employer    |
| Incorporation or Organization)  |   | Identification No.) |

| 701 Cool Springs Boulevard, Franklin, TN  37067 |
|-----------------------------------------------------------|
| (Address of Principal Executive Offices) (Zip Code)       |

| 615-614-4929                                               |
|------------------------------------------------------------|
| (Registrant’s Telephone Number, Including Area Code) |

|                                                                               |
|------------------------------------------------------------------------------------|
| (Former name, former address and former fiscal year, if changed since last report) |

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| Non-accelerated filer ¨ | (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
|------------------------------|-----------------------------------------------|----------------------------------|

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|   |    |     |                                                                                       | Page     |   |
|--------|---------|----------|--------------------------------------------------------------------------------------------|----------|--------|
|   | Part I  |     |                                                                                       |     |   |
|   |    | Item 1.  | Financial Statements                                                                       | 4        |   |
|   |    | Item 2.  | Management’s Discussion and Analysis of Financial Condition andResults of Operations |  19 |   |
|   |    | Item 3.  | Quantitative and Qualitative Disclosures About Market Risk                                 | 32       |   |
|   |    | Item 4.  | Controls and Procedures                                                                    | 33       |   |
|   | Part II |     |                                                                                       |     |   |
|   |    | Item 1.  | Legal Proceedings                                                                          | 34       |   |
|   |    | Item 1A. | Risk Factors                                                                               | 36       |   |
|   |    | Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                                | 36       |   |
|   |    | Item 3.  | Defaults Upon Senior Securities                                                            | 36       |   |
|   |    | Item 4.  | Removed and Reserved                                                                       | 36       |   |
|   |    | Item 5.  | Other Information                                                                          | 36       |   |
|   |    | Item 6.  | Exhibits                                                                                   | 36       |   |

----

| Item 1. | Financial Statements |   |
|---------|----------------------|--------|

|   |                                                             |   | March 31, |     |   |   | December 31, |   |     |   |
|--------|------------------------------------------------------------------|--------|-----------|----------|--------|--------|--------------|--------|----------|--------|
|   |                                                             |   | 2010      |     |   |   | 2009         |   |     |   |
|   | Current assets:                                                  |   |      |     |   |   |         |   |     |   |   |
|   | Cash and cash equivalents                                        |   | $         | 1,289    |   |   |         | $      | 2,356    |   |   |
|   | Accounts receivable, net                                         |   |      | 117,152  |   |   |         |   | 100,833  |   |   |
|   | Prepaid expenses                                                 |   |      | 9,045    |   |   |         |   | 10,433   |   |   |
|   | Other current assets                                             |   |      | 5,388    |   |   |         |   | 4,945    |   |   |
|   | Income taxes receivable                                          |   |      | 4,622    |   |   |         |   | 6,452    |   |   |
|   | Deferred tax asset                                               |   |      | 23,715   |   |   |         |   | 24,197   |   |   |
|   |   Total current assets                                 |   |      | 161,211  |   |   |         |   | 149,216  |   |   |
|   |                                                             |   |      |     |   |   |         |   |     |   |   |
|   | Property and equipment:                                          |   |      |     |   |   |         |   |     |   |   |
|   | Leasehold improvements                                           |   |      | 40,658   |   |   |         |   | 40,609   |   |   |
|   | Computer equipment and related software                          |   |      | 196,499  |   |   |         |   | 166,448  |   |   |
|   | Furniture and office equipment                                   |   |      | 28,117   |   |   |         |   | 28,096   |   |   |
|   | Capital projects in process                                      |   |      | 3,446    |   |   |         |   | 23,052   |   |   |
|   |                                                             |   |      | 268,720  |   |   |         |   | 258,205  |   |   |
|   | Less accumulated depreciation                                    |   |      | (144,518 | )      |   |         |   | (134,046 | )      |   |
|   |                                                             |   |      | 124,202  |   |   |         |   | 124,159  |   |   |
|   |                                                             |   |      |     |   |   |         |   |     |   |   |
|   | Other assets                                                     |   |      | 15,748   |   |   |         |   | 11,498   |   |   |
|   |                                                             |   |      |     |   |   |         |   |     |   |   |
|   | Customer contracts, net                                          |   |      | 27,912   |   |   |         |   | 29,343   |   |   |
|   | Other intangible assets, net                                     |   |      | 71,519   |   |   |         |   | 71,704   |   |   |
|   | Goodwill, net                                                    |   |      | 496,306  |   |   |         |   | 496,446  |   |   |
|   |                                                             |   |      |     |   |   |         |   |     |   |   |
|   | Total assets                                                     |   | $         | 896,898  |   |   |         | $      | 882,366  |   |   |
|   |                                                             |   |      |     |   |   |         |   |     |   |   |
|   | See accompanying notes to the consolidated financial statements. |   |      |     |   |   |         |   |     |   |   |

----

|   |                                                                                         |   | March 31, |   |   |   | December 31,  |   |   |
|--------|----------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|---------------|--------|--------|
|   |                                                                                         |   | 2010      |   |   |   | 2009          |   |   |
|   | Current liabilities:                                                                         |   |      |   |   |   |          |   |   |
|   | Accounts payable                                                                             | $      | 18,555    |   |   | $      | 29,171        |   |   |
|   | Accrued salaries and benefits                                                                |   | 32,878    |   |   |   | 58,212        |   |   |
|   | Accrued liabilities                                                                          |   | 31,130    |   |   |   | 25,004        |   |   |
|   | Deferred revenue                                                                             |   | 6,044     |   |   |   | 4,639         |   |   |
|   | Contract billings in excess of earned revenue                                                |   | 73,405    |   |   |   | 70,440        |   |   |
|   | Current portion of long-term debt                                                            |   | 2,030     |   |   |   | 2,192         |   |   |
|   | Current portion of long-term liabilities                                                     |   | 1,963     |   |   |   | 3,854         |   |   |
|   | Total current liabilities                                                                    |   | 166,005   |   |   |   | 193,512       |   |   |
|   |                                                                                         |   |      |   |   |   |          |   |   |
|   | Long-term debt                                                                               |   | 278,835   |   |   |   | 254,345       |   |   |
|   | Long-term deferred tax liability                                                             |   | 18,299    |   |   |   | 14,617        |   |   |
|   | Other long-term liabilities                                                                  |   | 43,961    |   |   |   | 42,615        |   |   |
|   |                                                                                         |   |      |   |   |   |          |   |   |
|   | Stockholders’ equity:                                                                  |   |      |   |   |   |          |   |   |
|   | Preferred stock                                                                              |   |      |   |   |   |          |   |   |
|   |       $.001 par value, 5,000,000 shares                        |   |      |   |   |   |          |   |   |
|   | authorized, none outstanding                                                                 |   | —   |   |   |   |  — |   |   |
|   | Common stock                                                                                 |   |      |   |   |   |          |   |   |
|   |       $.001 par value, 120,000,000 shares authorized,          |   |      |   |   |   |          |   |   |
|   |         34,062,274 and 33,858,917 shares outstanding |   | 34        |   |   |   | 34            |   |   |
|   | Additional paid-in capital                                                                   |   | 225,957   |   |   |   | 222,472       |   |   |
|   | Retained earnings                                                                            |   | 168,294   |   |   |   | 158,880       |   |   |
|   | Accumulated other comprehensive loss                                                         |   | (4,487    | )      |   |   | (4,109        | )      |   |
|   |   Total stockholders’ equity                                                 |   | 389,798   |   |   |   | 377,277       |   |   |
|   |                                                                                         |   |      |   |   |   |          |   |   |
|   | Total liabilities and stockholders’ equity                                             | $      | 896,898   |   |   | $      | 882,366       |   |   |
|   |                                                                                         |   |      |   |   |   |          |   |   |

|   | See accompanying notes to the consolidated financial statements. |   |
|--------|------------------------------------------------------------------|--------|

----

|   |                                                                                                              |   | Three Months Ended |    |
|--------|-------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|   |                                                                                                              |   | March 31,          |    |
|   |                                                                                                              |   | 2010               |    | 2009 |   |
|   |                                                                                                              |   |               |    |   |   |   |   |
|   | Revenues                                                                                                          |   | $                  | 178,999 |   | $ | 182,736 |   |
|   | Cost of services (exclusive of depreciation and amortization of $10,233 and $8,786, respectively, included below) |   |               | 128,868 |   |   | 132,838 |   |
|   | Selling, general & administrative expenses                                                                    |   |               | 17,235  |   |   | 18,785 |   |
|   | Depreciation and amortization                                                                                     |   |               | 13,554  |   |   | 12,250 |   |
|   |                                                                                                              |   |               |    |   |   |   |   |
|   | Operating income                                                                                                  |   |               | 19,342  |   |   | 18,863 |   |
|   | Gain on sale of investment                                                                                        |   |               | — |   |   | (2,581 | ) |
|   |  Interest expense                                                                                            |   |               | 3,422   |   |   | 4,060 |   |
|   | Legal settlement and related costs                                                                                |   |               | — |   |   | 39,956 |   |
|   |                                                                                                              |   |               |    |   |   |   |   |
|   | Income (loss) before income taxes                                                                                 |   |               | 15,920  |   |   | (22,572 | ) |
|   | Income tax expense (benefit)                                                                                      |   |               | 6,506   |   |   | (7,759 | ) |
|   |                                                                                                              |   |               |    |   |   |   |   |
|   | Net income (loss)                                                                                                 |   | $                  | 9,414   |   | $ | (14,813 | ) |
|   |                                                                                                              |   |               |    |   |   |   |   |
|   | Earnings (loss) per share:                                                                                        |   |               |    |   |   |   |   |
|   |   Basic                                                                                                 |   | $                  | 0.28    |   | $ | (0.44 | ) |
|   |                                                                                                              |   |               |    |   |   |   |   |
|   |   Diluted(1)                                                                                            |   | $                  | 0.27    |   | $ | (0.44 | ) |
|   |                                                                                                              |   |               |    |   |   |   |   |
|   | Weighted average common shares                                                                                    |   |               |    |   |   |   |   |
|   | and equivalents:                                                                                                  |   |               |    |   |   |   |   |
|   |   Basic                                                                                                 |   |               | 33,955  |   |   | 33,669 |   |
|   |   Diluted(1)                                                                                            |   |               | 34,919  |   |   | 33,669 |   |
|   |                                                                                                              |   |               |    |   |   |   |   |

----

|                                      |   |      |          |   |   |          |   |     |          | Accumulated   |   |                |   |   |   |
|-------------------------------------------|--------|-----------|---------------|--------|--------|---------------|--------|----------|---------------|---------------|--------|---------------------|--------|--------|--------|
|                                      |   |      |          |   |   | Additional    |   |     |          | Other         |   |                |   |   |   |
|                                      |   | Preferred |          | Common |   | Paid-in       |   | Retained |          | Comprehensive |   |                |   |   |   |
|                                      |   | Stock     |          | Stock  |   | Capital       |   | Earnings |          | Income (Loss) |   | Total               |   |   |   |
| Balance, December 31, 2009                |   |      | $—      |   |   | $34      |   |     | $222,472      |          |   | $158,880            |   |   |   |  $(4,109 | ) |   | $377,277 |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Comprehensive income:                     |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Net income                                |   |      |  — |   |   |  — |   |     |  — |          |   | 9,414               |   |   |   |  — |   |   | 9,414 |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Net change in fair value of interest rate |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| swaps, net of income tax benefit of $252  |   |      |  — |   |   |  — |   |     |  — |          |   |  —       |   |   |   | (390 | ) |   | (390 | ) |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment   |   |      |  — |   |   |  — |   |     |  — |          |   | —             |   |   |   | 12 |   |   | 12 |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Total comprehensive income                |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   | 9,036 |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Exercise of stock options                 |   |      |  — |   |   |  — |   |     | 393           |          |   |  —       |   |   |   |  —  |   |   | 393 |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Tax effect of option exercises            |   |      |  — |   |   |  — |   |     | 120           |          |   |  —  |   |   |   |  —  |   |   | 120 |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Share-based employee compensation expense |   |      |  — |   |   |  — |   |     | 2,972         |          |   |  —  |   |   |   |  —  |   |   | 2,972 |   |
|                                      |   |      |          |   |   |          |   |     |          |          |   |                |   |   |   |   |   |   |   |   |
| Balance, March 31, 2010                   |   |      | $—      |   |   | $34      |   |     | $225,957      |          |   | $168,294            |   |   |   |  $(4,487 | ) |   | $389,798 |   |

| See accompanying notes to the consolidated financial statements. |
|------------------------------------------------------------------|

----

|   |                                                               |   | Three Months EndedMarch 31, |     |
|--------|--------------------------------------------------------------------|--------|-----------------------------|----------|
|   |                                                               |   | 2010                        |     |   |   | 2009 |   |
|   | Cash flows from operating activities:                              |   |                        |     |   |   |   |   |   |   |
|   | Net income (loss)                                                  |   | $                           | 9,414    |   |   |   | $ | (14,813 | ) |
|   | Adjustments to reconcile net income (loss) to net cash provided by |   |                        |     |   |   |   |   |   |   |
|   | (used in) operating activities, net of business acquisitions:      |   |                        |     |   |   |   |   |   |   |
|   | Depreciation and amortization                                      |   |                        | 13,554   |   |   |   |   | 12,250 |   |
|   | Amortization of deferred loan costs                                |   |                        | 396      |   |   |   |   | 348 |   |
|   | Gain on sale of investment                                         |   |                        | —  |   |   |   |   | (2,581 | ) |
|   | Share-based employee compensation expense                          |   |                        | 2,972    |   |   |   |   | 2,847 |   |
|   | Excess tax benefits from share-based payment arrangements          |   |                        | (401     | ) |   |   |   | (32 | ) |
|   | Increase in accounts receivable, net                               |   |                        | (16,274  | ) |   |   |   | (8,593 | ) |
|   | Decrease (increase) in other current assets                        |   |                        | 2,853    |   |   |   |   | (8,150 | ) |
|   | (Decrease) increase in accounts payable                            |   |                        | (6,744   | ) |   |   |   | 3,238 |   |
|   | (Decrease) increase in accrued salaries and benefits               |   |                        | (25,322  | ) |   |   |   | 12,309 |   |
|   | Increase in other current liabilities                              |   |                        | 10,225   |   |   |   |   | 39,717 |   |
|   | Deferred income taxes                                              |   |                        | 3,509    |   |   |   |   | 2,303 |   |
|   | Other                                                              |   |                        | 1,892    |   |   |   |   | 1,907 |   |
|   | Increase in other assets                                           |   |                        | (1,034   | ) |   |   |   | (868 | ) |
|   | Payments on other long-term liabilities                            |   |                        | (2,313   | ) |   |   |   | (1,392 | ) |
|   | Net cash flows (used in) provided by operating activities          |   |                        | (7,273   | ) |   |   |   | 38,490 |   |
|   |                                                               |   |                        |     |   |   |   |   |   |   |
|   | Cash flows from investing activities:                              |   |                        |     |   |   |   |   |   |   |
|   | Change in restricted cash                                          |   |                        | —  |   |   |   |   | (538 | ) |
|   | Sale of investment                                                 |   |                        | —  |   |   |   |   | 11,626 |   |
|   | Acquisition of property and equipment                              |   |                        | (12,638  | ) |   |   |   | (11,504 | ) |
|   | Other                                                              |   |                        | (1,412   | ) |   |   |   | (940 | ) |
|   | Net cash flows used in investing activities                        |   |                        | (14,050  | ) |   |   |   | (1,356 | ) |
|   |                                                               |   |                        |     |   |   |   |   |   |   |
|   | Cash flows from financing activities:                              |   |                        |     |   |   |   |   |   |   |
|   | Proceeds from issuance of long-term debt                           |   |                        | 281,250  |   |   |   |   | 91,200 |   |
|   | Payments of long-term debt                                         |   |                        | (256,922 | ) |   |   |   | (84,940 | ) |
|   | Deferred loan costs                                                |   |                        | (2,963   | ) |   |   |   | (769 | ) |
|   | Excess tax benefits from share-based payment arrangements          |   |                        | 401      |   |   |   |   | 32 |   |
|   | Exercise of stock options                                          |   |                        | 393      |   |   |   |   | 65 |   |
|   | Repurchase of stock options                                        |   |                        | —  |   |   |   |   | (736 | ) |
|   | Change in outstanding checks and other                             |   |                        | (1,817   | ) |   |   |   | (6,149 | ) |
|   | Net cash flows provided by (used in) financing activities          |   |                        | 20,342   |   |   |   |   | (1,297 | ) |
|   |                                                               |   |                        |     |   |   |   |   |   |   |
|   | Effect of exchange rate changes on cash                            |   |                        | (86      | ) |   |   |   | (255 | ) |
|   |                                                               |   |                        |     |   |   |   |   |   |   |
|   | Net (decrease) increase in cash and cash equivalents               |   |                        | (1,067   | ) |   |   |   | 35,582 |   |
|   |                                                               |   |                        |     |   |   |   |   |   |   |
|   | Cash and cash equivalents, beginning of period                     |   |                        | 2,356    |   |   |   |   | 5,157 |   |
|   |                                                               |   |                        |     |   |   |   |   |   |   |
|   | Cash and cash equivalents, end of period                           |   | $                           | 1,289    |   |   |   | $ | 40,739 |   |

| See accompanying notes to the consolidated financial statements. |
|------------------------------------------------------------------|

----

| (1) | Basis of Presentation |   |
|-----|-----------------------|--------|

| (2) | Recently Issued Accounting Standards |   |
|-----|--------------------------------------|--------|

| (3) | Share-Based Compensation |   |
|-----|--------------------------|--------|

----

|   |                           |   |   |   |           |   | Weighted-    |   |   |          |    |   |
|--------|--------------------------------|--------|--------|--------|----------------|--------|--------------|--------|--------|---------------|---------|--------|
|   |                           |   |   |   |           |   | Average      |   |   |          |    |   |
|   |                           |   |   |   | Weighted-      |   | Remaining    |   |   | Aggregate     |    |   |
|   |                           |   | Shares |   | Average        |   | Contractual  |   |   | Intrinsic     |    |   |
|   | Options                        |   | (000s) |   | Exercise Price |   | Term (years) |   |   | Value ($000s) |    |   |
|   | Outstanding at January 1, 2010 |   | 4,936  |   | $              | 18.46  |         |   |   |          |    |   |   |
|   | Granted                        |   | 806    |   |           | 15.44  |         |   |   |          |    |   |   |
|   | Exercised                      |   | (36    | )      |           | 10.76  |         |   |   |          |    |   |   |
|   | Forfeited or expired           |   | (56    | )      |           | 25.73  |         |   |   |          |    |   |   |
|   | Outstanding at March 31, 2010  |   | 5,650  |   |           | 18.01  |         | 5.28   |   |          | $16,396 |   |   |
|   | Exercisable at March 31, 2010  |   | 3,635  |   |           | 18.87  |         | 3.51   |   |          | 11,087  |   |   |

|   |                         |   |   |   |   | Weighted-  |   |
|--------|------------------------------|--------|--------|--------|--------|------------|--------|
|   |                         |   |   |   |   | Average    |   |
|   |                         |   | Shares |   |   | Grant Date |   |
|   | Nonvested Shares             |   | (000s) |   |   | Fair Value |   |
|   | Nonvested at January 1, 2010 |   | 1,015  |   |   | $          | 22.21  |   |
|   | Granted                      |   | 112    |   |   |       | 15.53  |   |
|   | Vested                       |   | (166   | )      |   |       | 12.78  |   |
|   | Forfeited                    |   | (11    | )      |   |       | 30.43  |   |
|   | Nonvested at March 31, 2010  |   | 950    |   |   |       | 22.97  |   |

| (4) | Income Taxes |   |
|-----|--------------|--------|

| (5) | Derivative Investments and Hedging Activities |   |
|-----|-----------------------------------------------|--------|

----

|   | (In $000s)                                                     |   | Foreign currency exchange contracts |   | Interest rate swap agreements |   |   |
|--------|----------------------------------------------------------------|--------|-------------------------------------|--------|-------------------------------|--------|--------|
|   | Assets:                                                        |   |                                |   |                          |   |   |
|   |   Derivatives not designated as hedging instruments: |   |                                |   |                          |   |   |
|   |      Other current assets             |   | $151                                |   | $—                      |   |   |
|   | Total assets                                                   |   | $151                                |   | $—                      |   |   |
|   |                                                           |   |                                |   |                          |   |   |
|   |  Liabilities:                                             |   |                                |   |                          |   |   |
|   |   Derivatives not designated as hedging instruments: |   |                                |   |                          |   |   |
|   |      Accrued liabilities              |   | $93                                 |   | $—                      |   |   |
|   |                                                           |   |                                |   |                          |   |   |
|   |   Derivatives designated as hedging instruments:     |   |                                |   |                          |   |   |
|   |      Accrued liabilities              |   | —                             |   | 976                           |   |   |
|   |      Other long-term liabilities      |   | —                             |   | 6,756                         |   |   |
|   | Total liabilities                                              |   | $93                                 |   | $7,732                        |   |   |
|   |                                                           |   |                                |   |                          |   |   |

----

|   |   |  Swap # |   | Original NotionalAmount (in $000s) |   | Fixed InterestRate |   | Termination Date  |   |   |   |   |   |
|--------|--------|--------------|--------|------------------------------------|--------|--------------------|--------|-------------------|--------|--------|--------|--------|--------|
|   |   | 1            |   | 30,000                             |   | 3.760              | %      | March 30, 2011    |   |   |   |   |   |
|   |   | 2            |   | 40,000                             |   | 3.433              | %      | December 30, 2011 |   |   |   |   |   |
|   |   | 3            |   | 50,000                             |   | 3.688              | %      | December 30, 2011 |   |   |   |   |   |
|   |   | 4            |   | 40,000                             |   | 3.855              | %      | December 30, 2011 |   |   |   |   |   |
|   |   | 5            |   | 57,500                             |   | 3.385              | %      | December 31, 2013 | (1)    |   |   |   |   |
|   |   | 6            |   | 57,500                             |   | 3.375              | %      | December 31, 2013 | (2)    |   |   |   |   |

|                                                                  |   | Three Months Ended March 31, 2010                                                |   |
|-----------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|
|     Derivatives inCash Flow Hedging Relationships |   |  Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion) |   |  Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |   |  Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |   |
| Interest rate swap agreements, gross of tax effect                    |   | $(2,245)                                                                    |   | Interest expense |   | $(1,603)  |   |

----

|   |   |                   |   | Notional      |   |   |
|--------|--------|------------------------|--------|---------------|--------|--------|
|   |   | Foreign Currency       |   | Amount (000s) |   |   |
|   |   | Australian Dollar      |   | AUD 3,635     |   |   |
|   |   | Brazilian Real         |   | BRL 545       |   |   |
|   |   | British Pound Sterling |   | ₤ 255   |   |   |
|   |   | Euro                   |   | € 1,515 |   |   |
|   |   | Indian Rupee           |   | INR 5,837     |   |   |

| (6) | Fair Value Measurements |   |
|-----|-------------------------|--------|

|   | Level 1:  Quoted prices in active markets for identical assets or liabilities;                                                                                                                                                                                                                                                                                                   |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | Level 2:  Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-based valuation techniques in which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and  |   |
|   | Level 3:  Unobservable inputs that are supported by little or no market activity and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.                                                                                                                                                              |   |

----

|   | (In 000s)                           |   |   |    Level 2 |   |   |    Level 3 |   |   |  Gross Fair Value |   |   |    Netting (1) |   |   |   Net Fair Value |   |   |   |
|--------|-------------------------------------|--------|--------|---------------------------|--------|--------|---------------------------|--------|--------|------------------------|--------|--------|-------------------------------|--------|--------|----------------------------|--------|--------|--------|
|   | Assets:                             |   |   |                      |   |   |                      |   |   |                   |   |   |                          |   |   |                       |   |   |   |
|   | Foreign currency exchange contracts |   | $      | 151                       |   | $      | —                   |   | $      | 151                    |   | $      | (6                            | )      | $      | 145                        |   |   |   |
|   | Liabilities:                        |   |   |                      |   |   |                      |   |   |                   |   |   |                          |   |   |                       |   |   |   |
|   | Foreign currency exchange contracts |   | $      | 93                        |   | $      | —                   |   | $      | 93                     |   | $      | (6                            | )      | $      | 87                         |   |   |   |
|   | Interest rate swap agreements       |   |   | 7,732                     |   |   | —                   |   |   | 7,732                  |   |   | —                       |   |   | 7,732                      |   |   |   |
|   | Contingent consideration liability  |   |   | —                   |   |   | 3,043                     |   |   | 3,043                  |   |   | —                       |   |   | 3,043                      |   |   |   |

|   | · | Cash and cash equivalents – The carrying amount of $1.3 million approximates fair value because of the short maturity of those instruments (less than three months). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Long-term debt –The estimated fair value of outstanding borrowings under our credit agreement is based on the average of the prices set by the issuing bank given current market conditions and is not necessarily indicative of the amount we could realize in a current market exchange. The estimated fair value and carrying amount of outstanding borrowings under the Fourth Amended Credit Agreement (see Note 7) at March 31, 2010 are $266.1 million and $280.5 million, respectively. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Long-Term Debt |   |
|-----|----------------|--------|

----

| (8) | Commitments and Contingencies |   |
|-----|-------------------------------|--------|

----

----

| (9) | Sale of Investment |   |
|-----|--------------------|--------|

----

| (10) | Comprehensive Income |   |
|------|----------------------|--------|

| (11) | Earnings (Loss) Per Share |   |
|------|---------------------------|--------|

|   | (In 000s, except per share data)                                                                                                   |   | Three Months EndedMarch 31, |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|   |                                                                                                                               |   | 2010                        |   | 2009 |   |
|   | Numerator:                                                                                                                         |   |                        |   |   |   |   |   |
|   | Net income (loss) - numerator for basic earnings (loss) per share                                                                  |   | $                           | 9,414  |   | $ | (14,813 | ) |
|   |                                                                                                                               |   |                        |   |   |   |   |   |
|   | Denominator:                                                                                                                       |   |                        |   |   |   |   |   |
|   | Shares used for basic earnings (loss) per share                                                                                    |   |                        | 33,955 |   |   | 33,669 |   |
|   | Effect of dilutive securities outstanding:                                                                                         |   |                        |   |   |   |   |   |
|   | Non-qualified stock options                                                                                                        |   |                        | 529    |   |   | — |   |
|   | Restricted stock units                                                                                                             |   |                        | 435    |   |   | — |   |
|   | Shares used for diluted earnings (loss) per share(1)                                                                               |   |                        | 34,919 |   |   | 33,669 |   |
|   |                                                                                                                               |   |                        |   |   |   |   |   |
|   | Earnings (loss) per share:                                                                                                         |   |                        |   |   |   |   |   |
|   | Basic                                                                                                                              |   | $                           | 0.28   |   | $ | (0.44 | ) |
|   | Diluted(1)                                                                                                                         |   | $                           | 0.27   |   | $ | (0.44 | ) |
|   |                                                                                                                               |   |                        |   |   |   |   |   |
|   | Dilutive securities outstanding not included in the computation of earnings (loss) per share because their effect is antidilutive: |   |                        |   |   |   |   |   |
|   | Non-qualified stock options                                                                                                        |   |                        | 3,370  |   |   | 4,089 |   |
|   |       Restricted stock units                                                                         |   |                        | 5      |   |   | 596 |   |

----

| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   |
|---------|---------------------------------------------------------------------------------------------|--------|

|   | · | fostering wellness and disease prevention through total population screening, health risk assessments and supportive interventions; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | providing access to health improvement programs, such as fitness, weight management, and complementary and alternative medicine. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | promoting the reduction of lifestyle behaviors that lead to poor health or chronic conditions; and |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | providing educational materials and personal interactions with highly trained nurses and other healthcare professionals to create and sustain healthier behaviors for those individuals at-risk or in the early stages of chronic conditions. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | incorporating the latest, evidence-based clinical guidelines into interventions to optimize patient health outcomes; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|

|   | · | developing care support plans and motivating members to set attainable goals for themselves; |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | providing local market resources to address acute episodic interventions; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | coordinating members’ care with their healthcare providers; |
|--------|--------|-------------------------------------------------------------------|

|   | · | providing software licensing and management consulting in support of well-being improvement services; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | providing high-risk care management for members at risk for hospitalization due to complex conditions. |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | our ability to sign and implement new contracts for our solutions; |
|--------|--------|--------------------------------------------------------------------|

|   | · | our ability to retain existing customers and to renew or maintain contracts with our customers under existing terms or restructure these contracts on terms that would not have a material negative impact on our results of operations; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our 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 impact of recently enacted national healthcare reform legislation on our operations and/or the demand for our services; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | the impact of any new or proposed legislation, regulations and interpretations relating to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, including the potential expansion to Phase II for Medicare Health Support programs and any legislative or regulatory changes with respect to Medicare Advantage; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | our ability to reach mutual agreement with the Centers for Medicare & Medicaid Services (“CMS”) with respect to results under Phase I of Medicare Health Support; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our ability to anticipate the rate of market acceptance of our solutions in potential international markets; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | our ability to accurately forecast the costs necessary to implement our strategy of establishing a presence in international markets; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the risks associated with foreign currency exchange rate fluctuations and our ability to hedge against such fluctuations; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | the risks associated with a significant concentration of our revenues with a limited number of customers; |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | our ability to effect cost savings and clinical outcomes improvements under our contracts and reach mutual agreement with customers with respect to cost savings, or to effect such savings and improvements within the time frames contemplated by us; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our ability to achieve estimated annualized revenue in backlog in the manner and within the timeframe we expect, which is based on certain estimates regarding the implementation of our services; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our ability and/or the ability of our customers to enroll participants in our programs in a manner and within the timeframe anticipated by us; |   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | · | the ability of our customers to provide timely and accurate data that is essential to the operation and measurement of our performance under the terms of our contracts; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our ability to favorably resolve contract billing and interpretation issues with our customers; |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | our ability to service our debt and make principal and interest payments as those payments become due; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | the risks associated with changes in macroeconomic conditions, which may reduce the demand and/or the timing of purchases for our services from customers or potential customers, reduce the number of covered lives of our existing customers, restrict our ability to obtain additional financing, or impact the availability of credit under our Fourth Amended Credit Agreement; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | counterparty risk associated with our interest rate swap agreements and foreign currency exchange contracts; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | our ability to integrate acquired businesses or technologies into our business; |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | the impact of any impairment of our goodwill or other intangible assets; |
|--------|--------|--------------------------------------------------------------------------|

|   | · | our ability to develop new products and deliver outcomes on those products; |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | our ability to implement our new integrated data and technology solutions platform within the timeframe and cost estimates that we expect; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our ability to obtain adequate financing to provide the capital that may be necessary to support our operations and to support or guarantee our performance under new contracts; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | unusual and unforeseen patterns of healthcare utilization by individuals with diabetes, cardiac, respiratory and/or other diseases or conditions for which we provide services; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the ability of our customers to maintain the number of covered lives enrolled in the plans during the terms of our agreements; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the impact of litigation involving us and/or our subsidiaries; |
|--------|--------|----------------------------------------------------------------|

|   | · | the impact of future state, federal, and international healthcare and other applicable legislation and regulations on our ability to deliver our services and on the financial health of our customers and their willingness to purchase our services; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | current geopolitical turmoil, the continuing threat of domestic or international terrorism, and the potential emergence of a health pandemic; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | other risks detailed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and other filings with the Securities and Exchange Commission. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |               |   | March 31,   |   | March 31,   |   |   |   |   |   |
|--------|--------------------|--------|-------------|--------|-------------|--------|--------|--------|--------|--------|
|   |               |   | 2010        |   | 2009        |   |   |   |   |   |
|   | Available lives(1) |   | 193,100,000 |   | 195,000,000 |   |   |   |   |   |
|   | Billed lives       |   | 38,100,000  |   | 35,800,000  |   |   |   |   |   |

|   | · | keep healthy people healthy; |
|--------|--------|------------------------------|

|   | · | mitigate or eliminate lifestyle risk factors that can lead to disease; and |
|--------|--------|----------------------------------------------------------------------------|

|   | · | optimize care for those with chronic illness. |
|--------|--------|-----------------------------------------------|

----

----

----

----

----

|   |                                         |   | Three Months Ended |   |   |
|--------|----------------------------------------------|--------|--------------------|--------|--------|
|   |                                         |   | March 31,          |   |   |
|   |                                         |   | 2010               |   | 2009   |   |   |
|   |                                         |   |               |   |   |   |   |
|   | Revenues                                     |   | 100.0              | %      | 100.0  | % |   |
|   | Cost of services (exclusive of depreciation  |   |               |   |   |   |   |
|   | and amortization included below)             |   | 72.0               | %      | 72.7   | % |   |
|   | Selling, general and administrative expenses |   | 9.6                | %      | 10.3   | % |   |
|   | Depreciation and amortization                |   | 7.6                | %      | 6.7    | % |   |
|   | Operating income                             |   | 10.8               | %      | 10.3   | % |   |
|   |                                         |   |               |   |   |   |   |
|   | Gain on sale of investment                   |   | —            |   | (1.4   | )% |   |
|   | Interest expense                             |   | 1.9                | %      | 2.2    | % |   |
|   | Legal settlement and related costs           |   | —            |   | 21.9   | % |   |
|   |                                         |   |               |   |   |   |   |
|   | Income (loss) before income taxes            |   | 8.9                | %      | (12.4  | )% |   |
|   | Income tax expense                           |   | 3.6                | %      | (4.2   | )% |   |
|   |                                         |   |               |   |   |   |   |
|   | Net income (loss) (1)                        |   | 5.3                | %      | (8.1   | )% |   |

| ·   | a decrease in salaries and benefits expense, primarily due to 1) a restructuring of the Company, which was largely completed during the fourth quarter of calendar 2008 but for which some terminations continued into early 2009; 2) certain other employee reductions in 2009; and 3) a decrease in health insurance costs related to changes in employee medical plan design in 2010; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | a decrease in the level of short-term incentive compensation based on the Company’s year-to-date financial performance against established internal targets for these periods; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | cost savings related to certain cost management initiatives. |
|--------------------|--------------------------------------------------------------|

| ·   | an increased portion of our revenue generated by fitness center and certain health improvement programs, which typically have a higher cost of services as a percentage of revenue than our other programs; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in long-term incentive costs, primarily due to changes in our long-term incentive plan design as well as accelerated stock-based compensation costs, net of forfeitures, related to employee terminations during the three months ended March 31, 2010; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in information technology costs related to certain maintenance and software licensing costs. |
|--------------------|----------------------------------------------------------------------------------------------------------|

----

| ·   | payments during the three months ended March 31, 2010 related to short term incentive compensation earned and accrued over the sixteen months ended December 31, 2009; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | decreased cash collections on accounts receivable for the three months ended March 31, 2010 compared to the three months ended March 31, 2009; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the timing of several significant vendor payments. |
|--------------------|----------------------------------------------------|

----

|   |   |  Swap # |   | Original NotionalAmount (in $000s) |   | Fixed InterestRate |   | Termination Date  |   |   |   |   |   |
|--------|--------|--------------|--------|------------------------------------|--------|--------------------|--------|-------------------|--------|--------|--------|--------|--------|
|   |   | 1            |   | 30,000                             |   | 3.760              | %      | March 30, 2011    |   |   |   |   |   |
|   |   | 2            |   | 40,000                             |   | 3.433              | %      | December 30, 2011 |   |   |   |   |   |
|   |   | 3            |   | 50,000                             |   | 3.688              | %      | December 30, 2011 |   |   |   |   |   |
|   |   | 4            |   | 40,000                             |   | 3.855              | %      | December 30, 2011 |   |   |   |   |   |
|   |   | 5            |   | 57,500                             |   | 3.385              | %      | December 31, 2013 | (1)    |   |   |   |   |
|   |   | 6            |   | 57,500                             |   | 3.375              | %      | December 31, 2013 | (2)    |   |   |   |   |

----

| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |   |
|---------|------------------------------------------------------------|--------|

----

| Item 4. | Controls and Procedures |   |
|---------|-------------------------|--------|

----

| Item 1. | Legal Proceedings |   |
|---------|-------------------|--------|

----

----

| Item 1A. | Risk Factors |   |
|----------|--------------|--------|

| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |   |
|---------|-------------------------------------------------------------|--------|

|   | Not Applicable. |   |
|--------|-----------------|--------|

| Item 3. | Defaults Upon Senior Securities |   |
|---------|---------------------------------|--------|

|   | Not Applicable. |   |
|--------|-----------------|--------|

| Item 4. | Removed and Reserved |   |
|---------|----------------------|--------|

| Item 5. | Other Information |   |
|---------|-------------------|--------|

|   | Not Applicable. |   |
|--------|-----------------|--------|

| Item 6. | Exhibits |   |
|---------|----------|--------|

|   | (a) | Exhibits |
|--------|-----|----------|

|   |   |                                                                                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1   |   | Employment Agreement dated December 19, 2008 between the Company and Anne Wilkins (replaces Exhibit 10.3 to Form 10-QT of the Company’s transition period ended December 31, 2008) |
|   |   |                                                                                                                                                                                     |
| 31.1   |   | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended                                                        |
|   |   |                                                                                                                                                                                     |
| 31.2   |   | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended                                                        |
|   |   |                                                                                                                                                                                     |
| 32     |   | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                     |

----

|   |        |   |   | Healthways, Inc.               |
|--------|-------------|--------|--------|--------------------------------|
|   |        |   |   | (Registrant)                   |
|   |        |   |   |                           |
|   |        |   |   |                           |
|   |        |   |   |                           |
|   |        |   |   |                           |
| Date   | May 7, 2010 |   | By     | /s/ Mary A. Chaput             |
|   |        |   |   | Mary A. Chaput                 |
|   |        |   |   | Chief Financial Officer        |
|   |        |   |   | (Principal Financial Officer)  |
|   |        |   |   |                           |
|   |        |   |   |                           |
|   |        |   |   |                           |
|   |        |   |   |                           |
| Date   | May 7, 2010 |   | By     | /s/ Alfred Lumsdaine           |
|   |        |   |   | Alfred Lumsdaine               |
|   |        |   |   | Chief Accounting Officer       |
|   |        |   |   | (Principal Accounting Officer) |

----