Providence Service Corporation Reports Q1 2013 Results

            Providence Service Corporation Reports Q1 2013 Results

First Quarter Highlights:

- Revenue rose 8% over last year's first quarter to $281.5 million

- Diluted earnings per share increased to $0.49

- Net cash provided by operations totaled $30 million

- Net income and adjusted EBITDA increased 120% and 64%, respectively, from
the first quarter of 2012

PR Newswire

TUCSON, Ariz., May 8, 2013

TUCSON, Ariz., May 8, 2013 /PRNewswire/ --The Providence Service Corporation
(Nasdaq: PRSC) today announced its financial results for the first quarter
ended March 31, 2013. 

First Quarter 2013 Results
For the first quarter of 2013, the Company reported revenue of $281.5 million,
an increase of 8% from $260.1 million in the comparable period in 2012.
Revenue from Providence's non-emergency transportation (NET) services segment
grew 17% to $193.1 million in the first quarter from $164.7 million in the
prior year period, benefiting from new contacts and program expansions in
certain NET markets. Revenue from the social services segment declined 7% to
$88.4 million from $95.5 million in the first quarter of 2012. Social
services revenue was impacted primarily by 2012 contract terminations related
to the workforce development business in Canada as well as the expiration of
contracts related to Providence's home based educational tutoring business due
to changes in the No Child Left Behind Act. Excluding Canada and educational
tutoring, social services revenue would have declined by approximately 2%
which was due primarily to the impact of inclement weather on billable hours
in the Northeast. 

Providence reported net income of $6.7 million, or $0.49 per diluted share, in
the first quarter of 2013 compared to net income of $3.0 million, or $0.23 per
diluted share, in the first quarter of 2012. Earnings for the first quarter
of 2013 were positively impacted by the full implementation of NET contracts
that were in start-up mode in the first quarter of 2012, the recent expansion
of business in existing markets and negotiated rate adjustments in select
programs in both the social services and NET segments. The prior year quarter
included a non-recurring tax benefit of approximately $0.03 per share related
to a tax accounting method change for a 2011 acquisition. Adjusted EBITDA
(non-GAAP) for the first quarter of 2013 was $16.8 million, representing an
increase of 64% from $10.3 million in the same period last year. A
reconciliation of net income to Adjusted EBITDA (non-GAAP) is presented
below.

The Company had approximately 16.8 million individuals eligible to receive
services under its NET contracts at March 31, 2013, an increase of 36% from
approximately 12.4 million at March 31, 2012. Providence's direct social
service client census was approximately 54,500 at March 31, 2013 compared to
approximately 61,900 at March 31, 2012. The decrease in the number of clients
was primarily due to contract terminations 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. 

At March 31, 2013, the Company had unrestricted cash and cash equivalents of
$83.1 million. During the first quarter of 2013, the Company generated a
total of $29.8 million in cash from operations. At March 31, 2013, the
Company had total long-term obligations of $127.3 million compared to $130.0
million at December 31, 2012.

"We are pleased with our NET results in the quarter, which saw the effect of a
full quarter of revenue from our NET start-up efforts in 2012 as well as the
final phase-in of our New York City contract , which went live in January,"
said Warren Rustand, Chief Executive Officer. "Our results also benefited
from expanded NET business in Georgia and South Carolina compared to the year
ago period, as well as further growth of our commercial and managed care lines
of business in California. Additionally, we are starting to benefit from
negotiated rate adjustments in select programs."

"On the social services side, our contract base is solid going into the 2013
renewal cycle with the implementation of several new programs including our
foster care contract in Texas. We remain committed to our focus on operating
efficiencies and improving returns. We saw some initial benefit in the first
quarter as a result of performance improvements and positive rate increases in
certain markets. As we look to the remainder of 2013 and beyond, we will
continue to invest in our infrastructure and take the necessary steps to
position the company to benefit from emerging trends in healthcare,
particularly the development of integrated models of healthcare delivery and
increased outsourcing of transportation management."

Conference Call
Providence will hold a conference call at 11:00 a.m. EDT (8:00 a.m. Arizona
and PDT) Thursday, May 9, 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) 318-8617 or for international callers
(617) 399-5136 and by using the passcode 57144115. A replay of the
teleconference will be available on http://investor.provcorp.com. A replay
will also be available until May 16, 2013 by dialing (888) 286-8010 or (617)
801-6888, and using passcode 44683383.

About Providence
The Providence Service Corporation provides or manages the delivery of home
and community based social services and NET management services to primarily
government sponsored clients under programs such as welfare, juvenile justice,
Medicaid and corrections. Providence is unique in that it provides or manages
social services primarily in the client's own home or in community based
settings rather than in hospitals or other treatment facilities, and provides
its NET management services through local transportation providers rather than
an owned fleet of vehicles. The Company provides a range of services through
its direct entities to approximately 54,500 clients through 649 active
contracts at March 31, 2013, with an approximate 16.8 million individuals
eligible to receive the Company's non-emergency transportation services. The
Company had over $1.1 billion in revenues in 2012.

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. 

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, 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
                                    March 31,
                                    2013                  2012
Revenues:
 Home and community based          $      76,960    $      84,125
services
 Foster care services              8,444                 8,355
 Management fees                   2,950                 2,995
 Non-emergency transportation      193,133               164,672
services
                                    281,487               260,147
Operating expenses:
 Client service expense            75,517                80,210
 Cost of non-emergency             176,684               156,979
transportation services
 General and administrative        12,452                12,739
expense
 Depreciation and amortization     3,729                 3,626
Total operating expenses            268,382               253,554
Operating income                   13,105                6,593
Other (income) expense:
 Interest expense                  1,772                 1,907
 Interest income                   (21)                  (42)
Income before income taxes          11,354                4,728
Provision for income taxes          4,676                 1,686
Net income                        $       6,678   $       3,042
Earnings per share:
 Basic                             $        0.51  $        0.23
 Diluted                           $        0.49  $        0.23
Weighted-average number of common
shares
 outstanding:
 Basic                             13,148,717            13,266,908
 Diluted                           14,507,367            13,404,833



The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
(Unaudited)
                                          March 31,          December 31,
                                          2013               2012
Assets
Current assets:
 Cash and cash equivalents             $          $        
                                          83,080             55,863
 Accounts receivable, net of
allowance of $3.8 million in
 2013 and $3.7 million in 2012        89,147             98,628
 Management fee receivable             3,305              2,662
 Other receivables                     1,267              1,920
 Restricted cash                       2,151              1,787
 Prepaid expenses and other            14,581             14,807
 Deferred tax assets                   994                532
Total current assets                      194,525            176,199
Property and equipment, net               29,858             30,380
Goodwill                                  113,866            113,915
Intangible assets, net                    47,846             49,651
Restricted cash, less current portion     10,953             10,953
Other assets                              10,822             10,639
Total assets                              $           $       
                                          407,870            391,737
Liabilities and stockholders' equity
Current liabilities:
 Current portion of long-term          $          $        
obligations                               15,000             14,000
 Accounts payable                      4,650              4,569
 Accrued expenses                      44,303             32,976
 Accrued transportation costs          59,257             61,316
 Deferred revenue                      9,377              7,055
 Reinsurance liability reserve         9,174              12,713
Total current liabilities                 141,761            132,629
Long-term obligations, less current       112,250            116,000
portion
Other long-term liabilities               14,974             13,527
Deferred tax liabilities                  11,785             10,894
Total liabilities                         280,770            273,050
Stockholders' equity:
 Common stock: Authorized
40,000,000 shares;
 $0.001 par value; 13,988,726
and 13,785,947
 issued and outstanding           14                 14
(including treasury shares)
 Additional paid-in capital            183,057            180,778
 Accumulated deficit                   (46,401)           (53,079)
 Accumulated other comprehensive       (1,053)            (893)
loss, net of tax
 Treasury stock, at cost, 949,961 and  (15,478)           (15,094)
928,478 shares
 Total Providence stockholders' equity   120,139            111,726
 Non-controlling interest              6,961              6,961
Total stockholders' equity               127,100            118,687
Total liabilities and stockholders'       $           $       
equity                                   407,870            391,737



The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                                               Three months ended
                                               March 31,
                                               2013              2012
Operating activities
Net income                                    $     6,678  $    3,042
Adjustments to reconcile net income to net
cash
 provided by operating activities:
 Depreciation                                1,934             1,729
 Amortization                                 1,795             1,897
 Amortization of deferred financing costs    264               286
 Provision for doubtful accounts              558               (193)
 Deferred income taxes                        (21)              (441)
 Stock based compensation                     918               1,067
 Excess tax benefit upon exercise of stock    (158)             (21)
options
 Other                                        22                (18)
 Changes in operating assets and
liabilities:
 Accounts receivable                        8,905             (8,282)
 Management fee receivable                  (643)             470
 Other receivables                          653               (228)
 Restricted cash                            (410)             (215)
 Prepaid expenses and other                 (287)             445
 Reinsurance liability reserve              (1,948)           (1,811)
 Accounts payable and accrued expenses      11,349            592
 Accrued transportation costs               (2,059)           6,159
 Deferred revenue                           2,322             1,230
 Other long-term liabilities                (71)              3,446
Net cash provided by operating activities      29,801            9,154
Investing activities
Purchase of property and equipment, net        (1,438)           (4,168)
Acquisition of businesses, net of cash         -                 (190)
acquired
Restricted cash for reinsured claims losses    46                1,553
Purchase of short-term investments, net        (8)               (25)
Net cash used in investing activities          (1,400)           (2,830)
Financing activities
Repurchase of common stock for treasury        (384)             (118)
Proceeds from common stock issued pursuant
to
 stock option exercise                        1,878             80
Excess tax benefit upon exercise of stock      158               21
options
Repayment of long-term debt                    (2,750)           (2,500)
Capital lease payments                         (3)               (14)
Net cash used in financing activities          (1,101)           (2,531)
Effect of exchange rate changes on cash        (83)              78
Net change in cash                             27,217            3,871
Cash at beginning of period                    55,863            43,184
Cash at end of period                          $    83,080   $   47,055



The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
(in thousands)
                                 Three months ended
                                 March 31,
                                 2013              2012
Net income                       $     6,678  $     3,042
Interest expense, net            1,751             1,865
Provision for income taxes       4,676             1,686
Depreciation and amortization    3,729             3,626
EBITDA                           16,834            10,219
Strategic alternatives costs (a) -                 73
Adjusted EBITDA                 $    16,834   $    10,292



Notes:
    Represents costs incurred related to the Company's review of strategic
    alternatives arising from unsolicited proposals to take the Company
 a) 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.



SOURCE The Providence Service Corporation

Website: http://www.provcorp.com
Contact: AT THE COMPANY: Robert Wilson - Chief Financial Officer,
520/747-6605; AT CAMERON ASSOCIATES: Alison Ziegler, 212/554-5469