Providence Service Corporation Reports 2012 Results

             Providence Service Corporation Reports 2012 Results

Highlights:

- Revenue increased approximately 17% in 2012 to a record $1.1 billion

- 2012 net cash provided by operations totaled $42.5 million

- Fourth quarter net income declined 3% from the fourth quarter of 2011 while
adjusted EBITDA increased 24%

PR Newswire

TUCSON, Ariz., March 13, 2013

TUCSON, Ariz., March 13, 2013 /PRNewswire/ -- The Providence Service
Corporation (Nasdaq: PRSC) today announced its financial results for the
fourth quarter and year ended December 31, 2012. 

Fourth Quarter 2012 Results
For the fourth quarter of 2012, the Company reported revenue of $286.5
million, an increase of 17.3% from $244.3 million in the comparable period in
2011. Revenue from Providence's non-emergency transportation (NET) services
segment grew 29.9% to $200.8 million in the fourth quarter from $154.6 million
in the prior year period, benefiting from new contract wins and program
expansions in certain NET markets. Revenue from the social services segment
declined 4.5% to $85.7 million from $89.8 million in the fourth quarter of
2011. Social services revenue was impacted primarily by the loss of workforce
development contracts in certain markets and expiration of contracts related
to our home based educational tutoring business.

Providence reported net income of $2.9 million, or $0.22 per diluted share, in
the fourth quarter of 2012 compared to net income of $3.0 million, or $0.22
per diluted share, in the fourth quarter of 2011. Impacts to the fourth
quarter 2012 results included payments of approximately $1.3 million (net of
benefit of forfeiture of stock based compensation) due to the retirement of
two executive officers. Adjusted EBITDA (non-GAAP) for the fourth quarter of
2012 was $13.3 million, up 24.1% from $10.7 million in the same period last
year. A reconciliation of net income to Adjusted EBITDA (non-GAAP) is
presented below.

The Company had approximately 15.1 million individuals eligible to receive
services under its NET contracts at December 31, 2012, an increase of 33.3%
from approximately 11.3 million at December 31, 2011. Providence's direct
social service client census was over 51,000 at December 31, 2012 compared to
61,000 at December 31, 2011. The decrease in the number of clients was
primarily due to the loss of workforce development contracts in certain
markets and expiration of contracts related to our home based educational
tutoring business which resulted from waivers granted under the No Child Left
Behind Act. 

Full-Year 2012 Results
For the full year, the Company reported revenue of $1.1 billion, an increase
of 17.3% from $943.0 million for 2011. Revenue from Providence's NET services
segment grew 29.1% to $750.7 million in 2012 from $581.5 million in the prior
year period. Revenue from the social services segment decreased 1.7% to
$355.2 million, down from $361.4 million for 2011. A contract price reduction
in one state, workforce development contract terminations, managed care
reforms and waivers granted under the No Child Left Behind Act negatively
impacted revenues from the social services segment.

Included in the 2012 results is a non-cash $2.5 million asset impairment
charge related to certain intangible assets of the Company's Canadian
subsidiary. This charge resulted from an analysis of our Canadian operations
that was triggered by a reorganization of the service delivery system in
British Columbia in 2012 that required the subsidiary to rebid all of its
contracts.

In 2012, net income was $8.5 million, or $0.64 per diluted share. In addition
to the asset impairment charge, also impacting the 2012 results were payments
related to the retirement of two executive officers, higher than expected
expenses due to increased healthcare claims activity under the self-funded
employee health plan and higher utilization of NET services. In 2011, the
Company reported net income of $16.9 million, or $1.27 per diluted share. The
2011 results included a non-cash charge of approximately $2.5 million related
to the write-off of unamortized deferred financing fees offset by a $2.7
million gain related to a June 2011 acquisition. Providence's effective tax
rate from continuing operations for 2011 and 2012 was higher than the U.S.
federal statutory rate of 35% due primarily to state taxes and non-deductible
stock option expense. Further, the effective tax rate for 2012 was
unfavorably impacted by the asset impairment charge recorded in 2012.
Adjusted EBITDA (non-GAAP) for 2012 was $43.6 million compared to $50.3
million in the same period last year. A reconciliation of net income to
Adjusted EBITDA (non-GAAP) is presented below.

At December 31, 2012, the Company had unrestricted cash and cash equivalents
of $55.9 million. During 2012, the Company generated a total of $42.5 million
in cash from operations, of which it used $3.5 million to repurchase 293,600
shares of common stock. At December 31, 2012, the Company had total long term
obligations of $130.0 million, down from $150.5 million at December 31, 2011.

"During the fourth quarter, we saw our NET margins improve sequentially as we
worked to stabilize or exit some of our underperforming contracts," said
Warren Rustand, Interim Chief Executive Officer. "The impact of these margin
gains was offset by the one-time charges associated with the management
transition that occurred in the quarter."

"Our newly restructured management team is committed to improving shareholder
value. Initiatives include investing in our technology platform, which will
enable our employees to operate our business more effectively. Operating
income should improve in 2013 as a result of the cost savings generated by the
operating efficiencies and the corrective actions implemented to improve
poorly performing NET contracts. These steps, which included the recent
decision not to rebid our Wisconsin contract, reflect our commitment to forego
business that will not generate an acceptable rate of return."

"Looking to 2014 and beyond, we believe this year's and subsequent years'
investments will position Providence to take advantage of additional
transportation outsourcing and emerging healthcare trends, including
integrated healthcare and the Affordable Care Act, which is expected to result
in an increased demand for the services we provide."

Conference Call
Providence will hold a conference call at 11:00 a.m. EDT (9:00 a.m. MDT and
8:00 a.m. Arizona and PDT) Thursday, March 14, 2013 to discuss its financial
results and corporate developments. Interested parties are invited to listen
to the call live over the Internet at http://investor.provcorp.com or
http://www.earnings.com. The call is also available by dialing (866) 788-0542
or for international callers (857) 350-1680 and by using the passcode
40977253. A replay of the teleconference will be available on
http://investor.provcorp.com. A replay will also be available until March 21,
2013 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 11430080.

About Providence
The Providence Service Corporation, through its owned and managed entities,
provides home and community based social services and non-emergency
transportation services management to government sponsored clients under
programs such as welfare, juvenile justice, Medicaid and corrections.
Providence is different from many of its competitors in that it provides its
social services primarily in the client's own home or in community based
settings versus treatment facilities or hospitals and provides its NET
management services through local transportation providers rather than owning
its own fleet of vehicles. The Company provides a range of services through
its direct entities to over 51,000 clients through 640 active contracts at
December 31, 2012, with an approximate 15.1 million individuals eligible to
receive the Company's non-emergency transportation services. Combined, the
Company has an approximately $1 billion book of business including managed
entities.

Non-GAAP Presentation
In addition to the financial results prepared in accordance with generally
accepted accounting principles (GAAP) provided throughout this press release,
the Company has provided EBITDA and Adjusted EBITDA, non-GAAP measurements,
which present its earnings on a pro forma basis. Providence's management
utilizes these non-GAAP measurements as a means to measure overall operating
performance and to better compare current operating results with other
companies within its industry. Details of the excluded items and a
reconciliation of the non-GAAP financial measures to the most comparable GAAP
financial measure are presented in the table below. The non-GAAP measures do
not replace the presentation of our GAAP financial results. The Company has
provided this supplemental non-GAAP information because the Company believes
it provides meaningful comparisons of the results of Providence's operations
for the periods presented in this press release. The non-GAAP measures are not
in accordance with, or an alternative for GAAP and may be different from pro
forma measures used by some companies. The items excluded in the non-GAAP
measures pertain to certain items that are considered to be material so that
exclusion of the items would, in management's belief, enhance a reader's
ability to compare the results of the Company's business after excluding these
items.

Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as "believe,"
"demonstrate," "expect," "estimate," "forecast," "anticipate," "should" and
"likely" and similar expressions identify forward-looking statements. In
addition, statements that are not historical should also be considered
forward-looking statements. Readers are cautioned not to place undue reliance
on those forward-looking statements, which speak only as of the date the
statement was made. Such forward-looking statements are based on current
expectations that involve a number of known and unknown risks, uncertainties
and other factors which may cause actual events to be materially different
from those expressed or implied by such forward-looking statements. These
factors include, but are not limited to the global credit crisis, capital
market conditions, the implementation of the healthcare reform law, state
budget changes and legislation and other risks detailed in Providence's
filings with the Securities and Exchange Commission, including its Annual
Report on Form 10-K for the fiscal year ended December 31, 2011 and Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2012 and September 30,
2012. Providence is under no obligation to (and expressly disclaims any such
obligation to) update any of the information in this press release if any
forward-looking statement later turns out to be inaccurate whether as a result
of new information, future events or otherwise.

--financial tables to follow--



The Providence Service Corporation
Consolidated Statements of Income
(in thousands except share and per share data)
(UNAUDITED)
                         Three months ended         Year ended
                         December 31,               December 31,
                         2012           2011        2012          2011
Revenues:
 Home and community     $   74,292  $         $  309,300  $  314,556
based services                          78,297
 Foster care services   8,422          8,686       33,534        34,204
 Management fees        2,991          2,770       12,397        12,679
 Non-emergency          200,814        154,559     750,658       581,541
transportation services
                         286,519        244,312     1,105,889     942,980
Operating expenses:
 Client service         73,884         78,217      304,084       304,407
expense
 Cost of non-emergency  185,826        143,531     706,692       539,417
transportation services
 General and            14,784         11,833      53,383        48,861
administrative expense
 Asset impairment       -              -           2,506         -
charge
 Depreciation and       3,769          3,677       15,023        13,656
amortization
Total operating          278,263        237,258     1,081,688     906,341
expenses
Operating income        8,256          7,054       24,201        36,639
Other (income) expense:
 Interest expense       1,834          1,940       7,640         10,206
 Loss on                -              -           -             2,463
extinguishment of debt
 Gain on bargain        -              -           -             (2,711)
purchase
 Interest income        (23)           (44)        (132)         (204)
Income before income     6,445          5,158       16,693        26,885
taxes
Provision for income     3,580          2,204       8,211         9,945
taxes
Net income             $           $        $          $  
                         2,865         2,954      8,482        16,940
Earnings per share:
 Basic                  $          $       $         $    
                         0.22          0.22       0.64         1.28
 Diluted                $          $       $         $    
                         0.22          0.22       0.64         1.27
Weighted-average number
of common shares
 outstanding:
 Basic                  13,071,342     13,256,524  13,225,448    13,242,702
 Diluted                13,254,509     13,336,903  13,354,613    13,321,609



The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
                                                       December 31,
                                                       2012         2011
Assets                                                 (Unaudited)  (Audited)
Current assets:
 Cash and cash equivalents                          $  55,863   $  43,184
 Accounts receivable, net of allowance of $3.7
million in
 2012 and $5.8 million in 2011                     98,628       87,163
 Management fee receivable                          2,662        3,537
 Other receivables                                  1,920        1,601
 Restricted cash                                    1,787        4,654
 Prepaid expenses and other                         14,807       15,989
 Deferred tax assets                                532          1,965
Total current assets                                   176,199      158,093
Property and equipment, net                            30,380       28,563
Goodwill                                               113,915      113,737
Intangible assets, net                                 49,651       59,474
Restricted cash, less current portion                  10,953       10,882
Other assets                                           10,639       8,304
Total assets                                           $ 391,737    $ 379,053
Liabilities and stockholders' equity
Current liabilities:
 Current portion of long-term obligations           $  14,000   $  10,000
 Accounts payable                                   4,569        4,461
 Accrued expenses                                   32,976       30,654
 Accrued transportation costs                       61,316       47,657
 Deferred revenue                                   7,055        2,194
 Reinsurance liability reserve                      12,713       11,921
Total current liabilities                              132,629      106,887
Long-term obligations, less current portion            116,000      140,493
Other long-term liabilities                            13,527       9,740
Deferred tax liabilities                               10,894       12,910
Total liabilities                                      273,050      270,030
Stockholders' equity:
 Common stock: Authorized 40,000,000 shares;
 $0.001 par value; 13,785,947 and 13,621,951
 issued and outstanding (including treasury    14           14
shares)
 Additional paid-in capital                         180,778      176,172
 Retained deficit                                   (53,079)     (61,561)
 Accumulated other comprehensive loss, net of tax   (893)        (1,128)
 Treasury stock, at cost, 928,478 and 623,576      (15,094)     (11,435)
shares
 Total Providence stockholders' equity                111,726      102,062
 Non-controlling interest                           6,961        6,961
Total stockholders' equity                            118,687      109,023
Total liabilities and stockholders' equity            $ 391,737    $ 379,053



The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                                                     Year ended
                                                     December 31,
                                                     2012       2011
Operating activities
Net income                                          $  8,482  $ 16,940
Adjustments to reconcile net income to net cash
 provided by operating activities:
 Depreciation                                      7,537      5,921
 Amortization                                       7,486      7,735
 Amortization of deferred financing costs          1,138      1,695
 Loss on extinguishment of debt                     -          2,463
 Gain on bargain purchase                           -          (2,711)
 Provision for doubtful accounts                    2,305      3,131
 Deferred income taxes                              (816)      (530)
 Stock based compensation                           3,873      3,675
 Excess tax benefit upon exercise of stock options  (91)       (17)
 Asset impairment charge                            2,506      -
 Other                                              158        645
 Changes in operating assets and liabilities:
 Accounts receivable                              (16,589)   (9,019)
 Management fee receivable                        875        2,302
 Other receivables                                (319)      2,334
 Restricted cash                                  163        (80)
 Prepaid expenses and other                       256        (680)
 Reinsurance liability reserve                    1,034      (431)
 Accounts payable and accrued expenses            2,412      (5,342)
 Accrued transportation costs                     13,660     5,788
 Deferred revenue                                 4,862      (3,179)
 Other long-term liabilities                      3,556      398
Net cash provided by operating activities            42,488     31,038
Investing activities
Purchase of property and equipment, net              (9,522)    (11,306)
Acquisition of businesses, net of cash acquired      (190)      (4,889)
Restricted cash for reinsured claims losses          2,633      1,692
Purchase of short-term investments, net              444        (113)
Net cash used in investing activities                (6,635)    (14,616)
Financing activities
Repurchase of common stock for treasury              (3,658)    (51)
Proceeds from common stock issued pursuant to
 stock option exercise                              949        56
Excess tax benefit upon exercise of stock options    91         17
Proceeds from long-term debt                         -          115,000
Repayment of long-term debt                          (20,493)   (146,811)
Debt financing costs                                 (65)       (2,651)
Capital lease payments                               (23)       (15)
Net cash used in financing activities                (23,199)   (34,455)
Effect of exchange rate changes on cash              25         (44)
Net change in cash                                   12,679     (18,077)
Cash at beginning of period                          43,184     61,261
Cash at end of period                                $ 55,863   $ 43,184



The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
(in thousands)
                                   Three months ended   Year ended
                                   December 31,          December 31,
                                   2012       2011       2012       2011
Net income                         $  2,865  $  2,954  $  8,482  $ 16,940
Interest expense, net              1,811      1,896      7,508      10,002
Provision for income taxes         3,580      2,204      8,211      9,945
Depreciation and amortization      3,769      3,677      15,023     13,656
EBITDA                             12,025     10,731     39,224     50,543
Asset impairment charge (a)        -          -          2,506      -
Payments related to retirement of
     executive officers, net (b)   1,293      -          1,293      -
Strategic alternatives costs (c)   -          -          593        -
Loss on extinguishment of debt (d) -          -          -          2,463
Gain on bargain purchase (e)       -          -          -          (2,711)
Adjusted EBITDA (f)                $ 13,318   $ 10,731   $ 43,616   $ 50,295



Notes:
       Due to the impact of a reorganization of the service delivery system in
       British Columbia, Canada during the nine months ended September 30,
a)     2012 that required the Company's WCG International subsidiary to rebid
       all of its contracts, the Company recorded an asset impairment charge
       totaling approximately $2.5 million related to its intangible assets
       for 2012.
       Represents payments related to the retirement of the Company's former
b)    CEO and CFO in 2012, net of benefit of forfeiture of stock based
       compensation upon their departure.
       Represents costs incurred related to the Company's review of strategic
       alternatives arising from unsolicited proposals to take the Company
c)    private. The Company terminated this review in June 2012 upon
       determining that a continued focus on the Company's operations was the
       best alternative to maximize shareholder value.
       Represents a loss on extinguishment of debt resulting from the
d)    write-off of deferred financing fees related to the Company's credit
       facility that was repaid in full in March 2011.
       Represents a gain associated with the Company's acquisition of The
e)    ReDCo Group, Inc. in 2011 where the fair value of the acquired entity's
       net assets exceeded the purchase price of said entity.
       Providence previously included adjustments for stock based compensation
       expense and certain contract start-up costs in the calculation of
       Adjusted EBITDA for the three and nine months ended September 30,
f)    2012. Upon further consideration, the Company believes that these
       adjustments should not be included in the calculation of Adjusted
       EBITDA when measuring overall operating performance and comparing
       Providence's current operating results with other companies within its
       industry.

SOURCE Providence Service Corporation

Website: http://www.provcorp.com
Contact: Robert Wilson - Chief Financial Officer, +1-520-747-6605; or Alison
Ziegler, Cameron Associates, +1-212-554-5469