##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    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: 0-19673
 
 AMERICA SERVICE GROUP INC.
  Delaware(State or other jurisdiction of 
incorporation or organization)
    
    51-0332317(I.R.S. Employer
Identification No.)
 105 Westpark Drive, Suite 200
Brentwood, Tennessee
(Address of principal executive offices)
    
    37027
(Zip Code)
 (615) 373-3100
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



AMERICA SERVICE GROUP INC.
 QUARTERLY REPORT ON FORM 10-Q
INDEX
 PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    3Condensed Consolidated Statements of Income for the quarters ended March 31, 2010 and 2009
    
    4Condensed Consolidated Statements of Cash Flows for the quarters ended March 31, 2010 and 2009
    
    5Notes to Condensed Consolidated Financial Statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    32Item 4. Controls and Procedures
    
    32PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    33Item 1A. Risk Factors
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    37Item 3. Defaults Upon Senior Securities
    
    37Item 4. Reserved
    
    37Item 5. Other Information
    
    37Item 6. Exhibits
    
    38Signatures
    
    39EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I:
 FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 AMERICA SERVICE GROUP INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (shown in 000s except share and per share amounts)  (UNAUDITED)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    41,504
    
    
    $
    37,655Accounts receivable, net of allowance for doubtful accounts of $312 and $358, respectively
    
    
    50,652
    
    
    
    44,629Inventories
    
    
    2,788
    
    
    
    2,929Prepaid expenses and other current assets
    
    
    16,280
    
    
    
    16,754Current deferred tax assets
    
    
    6,340
    
    
    
    9,252Total current assets
    
    
    117,564
    
    
    
    111,219Property and equipment, net
    
    
    10,064
    
    
    
    9,447Goodwill
    
    
    40,772
    
    
    
    40,772Contracts, net
    
    
    1,868
    
    
    
    1,937Other assets
    
    
    10,473
    
    
    
    11,837Total assets
    
    $
    180,741
    
    
    $
    175,212LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    21,412
    
    
    $
    15,393Accrued medical claims liability
    
    
    23,900
    
    
    
    22,358Accrued expenses
    
    
    56,890
    
    
    
    62,895Deferred revenue
    
    
    12,720
    
    
    
    13,385Total current liabilities
    
    
    114,922
    
    
    
    114,031Noncurrent portion of accrued expenses
    
    
    17,464
    
    
    
    15,481Noncurrent deferred tax liabilities
    
    
    2,930
    
    
    
    3,727Total liabilities
    
    
    135,316
    
    
    
    133,239Commitments and contingencies (Note 17)Stockholders equity:Preferred stock, $0.01 par value, 2,000,000 shares authorized at March 31, 2010 and
December 31, 2009; no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 20,000,000 shares authorized at March 31, 2010 and
December 31, 2009; 8,983,879 and 8,947,370 shares issued and outstanding at March 31,
2010 and December 31, 2009, respectively
    
    
    90
    
    
    
    89Additional paid-in capital
    
    
    34,400
    
    
    
    33,608Retained earnings
    
    
    10,935
    
    
    
    8,276Total stockholders equity
    
    
    45,425
    
    
    
    41,973Total liabilities and equity
    
    $
    180,741
    
    
    $
    175,212
 
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AMERICA SERVICE GROUP INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (shown in 000s except share and per share amounts)  (UNAUDITED)
 Quarter ended March 31,2010
    
    
    2009Healthcare revenues
    
    $
    162,542
    
    
    $
    124,496Healthcare expenses
    
    
    147,109
    
    
    
    115,516Gross margin
    
    
    15,433
    
    
    
    8,980Selling, general and administrative expenses
    
    
    8,852
    
    
    
    7,245Audit Committee investigation and related expenses
    
    
    153
    
    
    
    13Depreciation and amortization
    
    
    771
    
    
    
    622Income from operations
    
    
    5,657
    
    
    
    1,100Interest expense (income)
    
    
    (20
    )
    
    
    64Income from continuing operations before income tax provision
    
    
    5,677
    
    
    
    1,036Income tax provision
    
    
    2,368
    
    
    
    454Income from continuing operations
    
    
    3,309
    
    
    
    582Income (loss) from discontinued operations, net of taxes
    
    
    (112
    )
    
    
    117Net income
    
    $
    3,197
    
    
    $
    699Net income available to common shareholders (Note 18)
    
    $
    3,092
    
    
    $
    674Net income (loss) available to common shareholders per common
share  basic:Continuing operations
    
    $
    0.37
    
    
    $
    0.07Discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    0.01Net income available to common shareholders per common
share (Note 18)
    
    $
    0.36
    
    
    $
    0.08Net income (loss) available to common shareholders per common
share  diluted:Continuing operations
    
    $
    0.36
    
    
    $
    0.07Discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    0.01Net income available to common shareholders per common
share (Note 18)
    
    $
    0.35
    
    
    $
    0.08Weighted average common shares outstanding:Basic
    
    
    8,659,803
    
    
    
    8,939,478Diluted
    
    
    8,743,774
    
    
    
    8,954,668Dividends declared per share
    
    $
    0.06
    
    
    $
    
 
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AMERICA SERVICE GROUP INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (shown in 000s)  (UNAUDITED)
 Quarter endedMarch 31,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    3,197
    
    
    $
    699Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    771
    
    
    
    643Loss on retirement of fixed assets
    
    
    1
    
    
    
    9Finance cost amortization
    
    
    8
    
    
    
    26Deferred income taxes
    
    
    2,243
    
    
    
    453Share-based compensation expense
    
    
    432
    
    
    
    476Excess tax benefits from share-based compensation expense
    
    
    (128
    )
    
    
    (61
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (6,023
    )
    
    
    (4,886
    )Inventories
    
    
    141
    
    
    
    85Prepaid expenses and other current assets
    
    
    474
    
    
    
    (647
    )Other assets
    
    
    1,355
    
    
    
    (6
    )Accounts payable
    
    
    6,019
    
    
    
    (436
    )Accrued medical claims liability
    
    
    1,542
    
    
    
    1,137Accrued expenses
    
    
    (4,560
    )
    
    
    2,348Deferred revenue
    
    
    (665
    )
    
    
    5,140Net cash provided by operating activities
    
    
    4,807
    
    
    
    4,980Cash flows from investing activities:Capital expenditures
    
    
    (1,319
    )
    
    
    (885
    )Net cash used in investing activities
    
    
    (1,319
    )
    
    
    (885
    )Cash flows from financing activities:Share repurchases
    
    
    (544
    )
    
    
    (1,624
    )Excess tax benefits from share-based compensation expense
    
    
    128
    
    
    
    61Issuance of common stock
    
    
    186
    
    
    
    150Exercise of stock options
    
    
    591
    
    
    
    505Net cash provided by (used in) financing activities
    
    
    361
    
    
    
    (908
    )Net increase in cash and cash equivalents
    
    
    3,849
    
    
    
    3,187Cash and cash equivalents at beginning of period
    
    
    37,655
    
    
    
    24,855Cash and cash equivalents at end of period
    
    $
    41,504
    
    
    $
    28,042
 
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AMERICA SERVICE GROUP INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
 1. Basis of Presentation
   2. Description of Business
  3. Audit Committee Investigation
  6




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4. Share-Based Compensation
   Weighted Average
    
    
    Aggregate IntrinsicWeighted Average
    
    
    Remaining
    
    
    Value (inOptions
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    thousands) (1)Outstanding, December 31, 2009
    
    
    822,673
    
    
    $
    17.16Granted
    
    
    
    
    
    
    Exercised
    
    
    (56,203
    )
    
    
    10.52Canceled
    
    
    
    
    
    
    Outstanding, March 31, 2010
    
    
    766,470
    
    
    $
    17.65
    
    
    
    5.02
    
    
    $
    1,071Exercisable, March 31, 2010
    
    
    716,470
    
    
    $
    18.18
    
    
    
    4.78
    
    
    $
    767Expected to
vest, March 31, 2010(2)
    
    
    49,211
    
    
    $
    10.01
    
    
    
    8.47
    
    
    $
    299
 
 (1)
    
    Based upon the difference between the closing market price of the Companys common stock on the last trading day of the
quarter and the exercise price of in-the-money options.(2)
    
    Amount represents options expected to vest net of estimated
forfeitures.  WeightedRestricted
    
    
    Average Grant-Shares
    
    
    Date Fair ValueNonvested, December 31, 2009
    
    
    298,070
    
    
    $
    12.83Granted
    
    
    
    
    
    
    Vested
    
    
    (4,167
    )
    
    
    11.46Forfeited
    
    
    
    
    
    
    Nonvested, March 31, 2010
    
    
    293,903
    
    
    $
    12.85
 5. Discontinued Operations
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Quarter endedMarch 31,2010
    
    
    2009Healthcare revenues
    
    $
    1,539
    
    
    $
    6,376Healthcare expenses
    
    
    1,728
    
    
    
    6,157Gross margin
    
    
    (189
    )
    
    
    219Depreciation and amortization
    
    
    
    
    
    
    21Income (loss) from discontinued operations before taxes
    
    
    (189
    )
    
    
    198Income tax provision (benefit)
    
    
    (77
    )
    
    
    81Income (loss) from discontinued operations, net of taxes
    
    $
    (112
    )
    
    $
    117
 6. Fair Value of Financial Instruments
   7. Accounts Receivable
  March 31,
    
    
    December 31,2010
    
    
    2009Billed accounts receivable
    
    $
    22,741
    
    
    $
    20,762Unbilled accounts receivable
    
    
    29,626
    
    
    
    25,485Other accounts receivable
    
    
    502
    
    
    
    64852,869
    
    
    
    46,895Less: Allowances
    
    
    (312
    )
    
    
    (358
    )52,557
    
    
    
    46,537Less: Receivables reclassified as noncurrent
    
    
    (1,905
    )
    
    
    (1,908
    )$
    50,652
    
    
    $
    44,629
    8




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8. Prepaid Expenses and Other Current Assets
  March 31,
    
    
    December 31,2010
    
    
    2009Prepaid insurance
    
    $
    6,150
    
    
    $
    6,824Prepaid cash deposits for professional liability claims losses
    
    
    8,376
    
    
    
    8,501Prepaid performance bonds
    
    
    37
    
    
    
    80Prepaid other
    
    
    1,717
    
    
    
    1,349$
    16,280
    
    
    $
    16,754
 9. Property and Equipment
  March 31,
    
    
    December 31,
    
    
    Estimated2010
    
    
    2009
    
    
    Useful LivesLeasehold improvements
    
    $
    1,006
    
    
    $
    1,006
    
    
    7 yearsEquipment and furniture
    
    
    10,403
    
    
    
    9,843
    
    
    5 yearsComputer software
    
    
    7,327
    
    
    
    7,095
    
    
    3-5 yearsMedical equipment
    
    
    1,178
    
    
    
    1,180
    
    
    5 yearsAutomobiles
    
    
    62
    
    
    
    62
    
    
    5 yearsManagement information systems under development
    
    
    695
    
    
    
    176
    
    
    
    20,671
    
    
    
    19,362Less: Accumulated depreciation
    
    
    (10,607
    )
    
    
    (9,915
    )$
    10,064
    
    
    $
    9,447
   9




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10. Other Assets
  March 31,
    
    
    December 31,2010
    
    
    2009Deferred financing costs
    
    $
    68
    
    
    $
    68Less: Accumulated amortization
    
    
    (18
    )
    
    
    (10
    )50
    
    
    
    58Estimated prepaid professional liability claims losses
    
    
    3,864
    
    
    
    5,217Prepaid insurance deposits
    
    
    4,540
    
    
    
    4,540Noncurrent receivables
    
    
    1,905
    
    
    
    1,908Other refundable deposits
    
    
    114
    
    
    
    114$
    10,473
    
    
    $
    11,837
 11. Contract Intangibles
  March 31,
    
    
    December 31,2010
    
    
    2009Contracts:Gross value
    
    $
    4,000
    
    
    $
    4,000Less: Accumulated amortization
    
    
    (2,132
    )
    
    
    (2,063
    )$
    1,868
    
    
    $
    1,937
   12. Accrued Expenses
  March 31,
    
    
    December 31,2010
    
    
    2009Salaries and employee benefits
    
    $
    21,807
    
    
    $
    21,528Professional liability claims
    
    
    22,381
    
    
    
    25,236Accrued workers compensation claims
    
    
    7,503
    
    
    
    7,130Accrued loss contingency related to shareholder
litigation (see Note 17)
    
    
    15,126
    
    
    
    15,126Other
    
    
    7,537
    
    
    
    9,35674,354
    
    
    
    78,376Less: Noncurrent portion of deferred lease liability
    
    
    (934
    )
    
    
    (958
    )Less: Noncurrent portion of professional liability
and workers compensation claims
    
    
    (16,530
    )
    
    
    (14,523
    )$
    56,890
    
    
    $
    62,895
 13. Reserve for Loss Contracts
  10




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14. Banking Arrangements
       11




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15. Income Taxes
       16. Professional and General Liability Self-Insurance Retention
   12




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17. Commitments and Contingencies
  Litigation and Claims
 Lysager Professional Liability Suit.
 13




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Matters involving PHS and Baltimore County, Maryland.
   14




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Matters Related to the Audit Committee Investigation and Shareholder Litigation
  Shareholder Litigation.
  15




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Delaware Department of Justice Inquiry
 Other Matters
  Performance Bonds
  16




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18. Net Income (Loss) Per Common Share
     Quarter endedMarch 31,2010
    
    
    2009Numerator:Income from continuing operations
    
    $
    3,309
    
    
    $
    582Income (loss) from discontinued operations, net of taxes
    
    
    (112
    )
    
    
    117Net income
    
    
    3,197
    
    
    
    699Less: Income allocated to participating securities (unvested restricted shares)
    
    
    (105
    )
    
    
    (25
    )Net income allocated to common shareholders
    
    $
    3,092
    
    
    $
    674Components of income allocated to participating securities (unvested restricted shares):Income from continuing operations
    
    $
    109
    
    
    $
    21Income (loss) from discontinued operations, net of taxes
    
    
    (4
    )
    
    
    4Income allocated to participating securities
    
    $
    105
    
    
    $
    25Components of net income allocated to common shareholders  numerator for calculating
net income (loss) available to common shareholders per common share:Income from continuing operations
    
    $
    3,200
    
    
    $
    561Income (loss) from discontinued operations, net of taxes
    
    
    (108
    )
    
    
    113Net income allocated to common shareholders
    
    $
    3,092
    
    
    $
    674Denominator:Denominator for basic net income (loss) available to common shareholders per common share  weighted average shares
    
    
    8,659,803
    
    
    
    8,939,478Effect of dilutive non-participating securities:Employee stock options
    
    
    83,971
    
    
    
    15,190Denominator for diluted net income (loss) available to common shareholders per common share  adjusted weighted average
shares and assumed conversions
    
    
    8,743,774
    
    
    
    8,954,668Net income (loss) available to common shareholders per common share  basic:Continuing operations
    
    $
    0.37
    
    
    $
    0.07Discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    0.01Net income available to common shareholders per common share
    
    $
    0.36
    
    
    $
    0.08Net income (loss) available to common shareholders per common share  diluted:Continuing operations
    
    $
    0.36
    
    
    $
    0.07Discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    0.01Net income available to common shareholders per common share
    
    $
    0.35
    
    
    $
    0.08
 17




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Quarter endedMarch 31,2010
    
    
    2009Options excluded from computation of diluted net
income per common share as effect would be
anti-dilutive
    
    
    396,000
    
    
    
    997,144Weighted average exercise price of excluded options
    
    $
    21.82
    
    
    $
    18.57
 19. Comprehensive Income
  20. Share Repurchases
  21. Subsequent Event
   18




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 General
    Forward-Looking Statements
  
    
    the Companys ability to retain existing client contracts and obtain new contracts at
acceptable pricing levels;
    
    whether or not government agencies continue to privatize correctional healthcare
services;
    
    risks arising from governmental budgetary pressures and funding;
    
    the possible effect of adverse publicity on the Companys business;
    
    increased competition for new contracts and renewals of existing contracts;
    
    risks arising from the possibility that the Company may be unable to collect accounts
receivable or that accounts receivable collection may be delayed;
    
    the Companys ability to limit its exposure for inmate medical costs, catastrophic illnesses, injuries and medical malpractice claims in excess of
amounts covered under contracts or insurance coverage;
    
    the Companys ability to maintain and continually develop information technology and
clinical systems;
    
    the outcome or adverse development of pending litigation, including professional
liability litigation;
    
    the Companys determination whether to continue the payment of quarterly cash dividends,
and if so, at the current amount;
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
    
    the Companys determination whether to repurchase shares under its stock repurchase
program;
    
    the Companys dependence on key management and clinical personnel;
    
    risks arising from potential weaknesses or deficiencies in the Companys internal control
over financial reporting;
    
    risks associated with the possibility that the Company may be unable to satisfy covenants
under its credit facility;
    
    the risk that government or municipal entities (including the Companys government and
municipal customers) may bring enforcement actions against, seek additional refunds from, or
impose penalties on, the Company or its subsidiaries as a result of the matters investigated
by the Audit Committee in prior years or the previous restatement of the Companys financial
results;
    
    the Companys ability to expand its products beyond its traditional correctional health client base; and
    
    the risk that recent legal settlements, including settlement in principle of the
shareholder litigation, are not approved by the respective courts.
  Critical Accounting Policies And Estimates
 General
  
    
    revenue (net of contractual allowances) and cost recognition (including the
estimated cost of off-site medical claims);
    
    allowance for doubtful accounts;
    
    loss contracts;
    
    professional and general liability self-insurance retention;
    
    other self-funded insurance reserves;
    
    legal contingencies;
    
    impairment of intangible assets and goodwill;
    
    amortizable life of contract intangibles;
    
    income taxes; and
    
    share-based compensation.
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Revenue and Cost Recognition
       Percentage of Revenue fromContinuing OperationsFor the Quarter Ended
    
    For the Quarter EndedContract Category
    
    March 31, 2010
    

March 31, 2009Fixed Fee
    
    
    12.4
    %
    
    
    15.1
    %Population Based
    
    
    68.1
    %
    
    
    59.6
    %Cost Plus a Fee
    
    
    19.5
    %
    
    
    25.3
    %
 21




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Allowance for Doubtful Accounts
   22




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Loss Contracts
    23




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Professional and General Liability Self-Insurance Retention
     Other Self-Funded Insurance Reserves
  24




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Legal Contingencies
   Impairment of Intangible Assets and Goodwill
     
    
    significant underperformance or loss of key contracts relative to expected
historical or projected future operating results;
    
    significant changes in the manner of use of the Companys assets or in the
Companys overall business strategy;
    
    significant negative industry or economic trends; and
    
    an adverse change in the Companys market capitalization.
  25




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Amortizable Life of Contract Intangibles
  Income Taxes
      26




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Share-Based Compensation
  Results of Operations
  Quarter endedMarch 31,Percentage of Healthcare Revenues
    
    2010
    
    
    2009Healthcare revenues
    
    
    100.0
    %
    
    
    100.0
    %Healthcare expenses
    
    
    90.5
    
    
    
    92.8Gross margin
    
    
    9.5
    
    
    
    7.2Selling, general and administrative expenses
    
    
    5.4
    
    
    
    5.8Audit Committee investigation and related expenses
    
    
    0.1
    
    
    
    Depreciation and amortization
    
    
    0.5
    
    
    
    0.5Income from operations
    
    
    3.5
    
    
    
    0.9Interest expense (income)
    
    
    
    
    
    
    0.1Income from continuing operations before income tax provision
    
    
    3.5
    
    
    
    0.8Income tax provision
    
    
    1.5
    
    
    
    0.3Income from continuing operations
    
    
    2.0
    
    
    
    0.5Income (loss) from discontinued operations, net of taxes
    
    
    
    
    
    
    0.1Net income
    
    
    2.0
    %
    
    
    0.6
    %
 Quarter Ended March 31, 2010 Compared to Quarter Ended March 31, 2009
 Healthcare revenues.
 Healthcare expenses.
 27




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##### Table of Contents



Selling, general and administrative expenses.
 Audit Committee investigation and related expenses.
 Depreciation and amortization
 Interest expense (income)
 Income tax provision.
 Income from continuing operations.
 Income (loss) from discontinued operations, net of taxes
 Net income.
 Liquidity and Capital Resources
 Overview
  28




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Share Repurchases
   Dividends
   29




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Credit Facility
       Liquidity and Capital Resources Outlook
  30




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Other Financing Transactions
   Off-Balance Sheet Transactions
  31




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
    32




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PART II:
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  Lysager Professional Liability Suit.
 33




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##### Table of Contents



Matters involving PHS and Baltimore County, Maryland.
    34




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##### Table of Contents



Matters Related to the Audit Committee Investigation and Shareholder Litigation
  Shareholder Litigation.
   35




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##### Table of Contents



Delaware Department of Justice Inquiry
 Other Matters
  36




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##### Table of Contents



ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  (c) Total
    
    
    (d) MaximumNumber of
    
    
    Number (orShares
    
    
    Approximate Dollar(b)
    
    
    Purchased as
    
    
    Value) of shares that(a) Total of
    
    
    Average
    
    
    Part of Publicly
    
    
    May Yet BeNumber of
    
    
    Price
    
    
    Announced
    
    
    Purchased UnderShares
    
    
    Paid per
    
    
    Plans or
    
    
    the Plans orPeriod
    

    Purchased
    
    
    Share
    
    
    Programs
    
    
    Programs (1)January 2010 (1/1/10 to 1/31/10)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    February 2010 (2/1/10 to 2/28/10)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    March 2010 (3/1/10 to 3/31/10)
    
    
    33,500
    
    
    $
    16.24
    
    
    
    33,500
    
    
    $
    3,812
 
 (1)
    
    On February 27, 2008, the Companys Board of Directors approved a stock repurchase
program to repurchase up to $15 million of the Companys common stock through the end of 2009. On
July 28, 2009, the Companys Board of Directors authorized the extension of this program by two
years through the end of 2011, while maintaining the total $15 million limit. As of March 31, 2010,
the Company has repurchased and retired a total of 891,850 shares of common stock under the stock
repurchase program at an aggregate cost of approximately $11.2 million. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. RESERVED
 
 ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
 3.1 
    
    Amended and Restated Certificate of Incorporation of America Service Group Inc.
(incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form
10-Q for the three month period ended June 30, 2002).3.2 
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of America
Service Group Inc. (incorporated herein by reference to Exhibit 3.4 to the Companys Quarterly
Report on Form 10-Q for the three month period ended June 30, 2004).3.3 
    
    Amended and Restated By-Laws of America Service Group Inc. (incorporated herein by
reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed on March 3, 2009).4.1 
    
    Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the
Companys Quarterly Report on Form 10-Q for the three month period ended June 30, 2002).4.2 
    
    Certificate of Designation of the Series A Convertible Preferred Stock (incorporated
herein by reference to Exhibit 99.3 to the Companys Current Report on Form 8-K filed on
February 10, 1999).10.1 
    
    2010 Incentive Compensation Plan of America Service Group Inc. (incorporated herein by
reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on March 2,
2010).10.2 
    
    Amendment No.1 and Waiver to the Revolving Credit and Security Agreement, dated March 2,
2010 between America Service Group Inc., a Delaware corporation, Prison Health Services, Inc.,
a Delaware corporation, Prison Health Services of Indiana, LLC, an Indiana limited liability
company, Secure Pharmacy Plus, LLC, a Tennessee limited liability company, Correctional Health
Services, LLC, a New Jersey limited liability company, and CapitalSource Bank, a California
industrial bank, as lender and collateral and administrative agent (incorporated herein by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on March 2, 2010).11 
    
    Computation of Per Share Earnings.*31.1 
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2 
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1 
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2 
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Data required by U.S. GAAP related to earnings per share is provided in Note 18 to the condensed
consolidated financial statements in this report. 38




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SIGNATURES
  AMERICA SERVICE GROUP INC./s/ RICHARD HALLWORTHRichard HallworthPresident & Chief Executive Officer
(Duly Authorized Officer)/s/ MICHAEL W. TAYLORMichael W. TaylorExecutive Vice President & Chief Financial Officer
(Principal Financial Officer)  39