Providence Service Corporation Reports Q2 2013 Results

            Providence Service Corporation Reports Q2 2013 Results

Highlights:

- Revenue rose 3.1% over last year's second quarter to $287.6 million

- Second quarter diluted EPS increased to $0.43

- Quarter benefitted from full effect of new NET contracts, favorable NET rate
adjustments and positive transportation utilization trends

PR Newswire

TUCSON, Ariz., Aug. 7, 2013

TUCSON, Ariz., Aug. 7, 2013 /PRNewswire/ -- The Providence Service Corporation
(Nasdaq: PRSC) today announced its financial results for the second quarter
ended June 30, 2013. 

For the second quarter of 2013, the Company reported revenue of $287.6
million, an increase of 3.1% from $278.9 million in the comparable period of
2012. Revenue from Providence's non-emergency transportation (NET) services
segment grew 4.8% to $197.9 million in the second quarter from $188.8 million
in the prior year period, benefitting from the full implementation of the New
York City program and rate increases in a few key contracts. Revenue from the
social services segment declined 0.4% to $89.8 million from $90.1 million in
the second quarter of 2012, primarily related to the impact of waivers granted
under the No Child Left Behind Act which led to declines in educational
tutoring revenue.

Net income was $5.9 million, or $0.43 per diluted share, in the second quarter
of 2013 compared to net income of $1.4 million, or $0.11 per diluted share in
the prior year period. Improved margins in the growing NET services segment,
as well as stable margins on the social services side, contributed to the
gain. Adjusted EBITDA (non-GAAP) for the second quarter of 2013 was $15.7
million, representing an increase of 84.5% from $8.5 million in the same
period last year. A reconciliation of net income to Adjusted EBITDA
(non-GAAP) is presented below.

The Company had approximately 17.2 million individuals eligible to receive
services under its NET contracts at June 30, 2013 an increase of 26.5% from
approximately 13.6 million at June 30, 2012. Providence's direct social
service client census was approximately 53,100 and 53,000 at June 30, 2013 and
2012, respectively. Total direct contracts numbered 584 at June 30, 2013
compared to 629 at June 30, 2012. The decrease in the number of contracts was
primarily due to the expiration of contracts related to our home based
educational tutoring business which resulted from waivers granted under the No
Child Left Behind Act.

For the first six months of 2013, the Company reported revenue of $569.1
million, an increase of 5.6% from $539.1 million in the first six months of
2012. Revenue from Providence's NET services segment grew 10.6% to $391.0
million in the first half of 2013 from $353.5 million in the prior year
period. Revenue from the social services segment decreased 4.0% to $178.1
million, down from $185.6 million in the first half of 2012.

Net income was $12.6 million, or $0.91 per diluted share, in the first half of
2013. This compares to net income of $4.5 million, or $0.33 per diluted
share, in the first half of 2012. Adjusted EBITDA (non-GAAP) for the first
six months of 2013 was $32.5 million, representing an increase of 73.0% from
$18.8 million in the same period last year. A reconciliation of net income to
Adjusted EBITDA (non-GAAP) is presented below.

"Our strong results year to date in 2013 were primarily driven by our NET
business, which is continuing to benefit from the full effect of our contract
start-up efforts in 2012 as well as the final phase-in of our New York City
contract, which went live in January of this year," said Warren Rustand, Chief
Executive Officer. "I am also pleased with the improved margins we saw in the
quarter, which resulted from excellent transportation cost management, as well
as further growth of our commercial and managed care lines of business in
California."

"On the social services side, even though we have experienced some softness in
certain markets, we saw stable margins and our contract base remains solid as
we completed our renewal cycle for the fiscal year beginning July 2013. We
remain committed to our focus on profitable growth and improving operating
efficiencies and have initiated state-by-state growth initiatives to expand
our current scope of services into both existing and new markets."

"As we think about the balance of 2013 we will continue to position the
Company for future growth opportunities in 2014 and beyond. We remain focused
on our core business and organic growth, improving operating efficiencies,
investing in technology and performance management systems as well as pursuing
tuck-in acquisitions.We believe we are uniquely positioned today to take
advantage of favorable health care trends including: strategic alliances,
partnerships, pilot programs, increased outsourcing of logistics management
and new initiatives in the fields of integrated care."

"Finally, we are quite pleased with our refinancing that was announced earlier
this week. We restructured and extended our senior credit facility which
strengthens our capital structure and increases our borrowing capacity and
flexibility for future growth."

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, August 8, 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. The call
is also available by dialing (877) 546-5020 or for international callers (857)
244-7552 and by using the passcode 91955683. A replay of the teleconference
will be available on http://investor.provcorp.com. A replay will also be
available until August 15, 2013 by dialing (888) 286-8010 or (617) 801-6888,
and using passcode 57517132.

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
its 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 53,100 clients through 584 active
contracts at June 30, 2013, with an approximate 17.2 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
non-GAAP measures used by some other 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 and Quarterly
Report on Form 10-Q for the quarter ended March 31, 2013. 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          Six months ended
                          June 30,                    June 30,
                          2013           2012         2013         2012
Revenues:
 Social services         $         $        $         $   
                          89,754         90,100       178,108      185,576
 Non-emergency           197,883        188,837      391,016      353,508
transportation services
                          287,637        278,937      569,124      539,084
Operating expenses:
 Client service expense  76,296         76,528       151,813      156,738
 Cost of non-emergency   182,931        180,639      359,615      337,618
transportation services
 General and             12,731         13,791       25,183       26,530
administrative expense
 Asset impairment        492            -            492          -
charge
 Depreciation and        3,734          3,610        7,464        7,235
amortization
Total operating expenses  276,184        274,568      544,567      528,121
Operating income         11,453         4,369        24,557       10,963
Other (income) expense:
 Interest expense        1,719          1,909        3,491        3,816
 Interest income         (30)           (43)         (52)         (84)
Income before income      9,764          2,503        21,118       7,231
taxes
Provision for income      3,888          1,085        8,564        2,771
taxes
Net income              $        $       $        $     
                          5,876          1,418        12,554       4,460
Earnings per share:
 Basic                   $        $       $       $     
                           0.44          0.11        0.95        0.34
 Diluted                 $        $       $       $     
                           0.43          0.11        0.91        0.33
Weighted-average number
of common shares
 outstanding:
 Basic                   13,403,985     13,301,188   13,277,285   13,283,948
 Diluted                 13,680,911     13,417,966   14,912,861   13,411,300



The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
(Unaudited)
                                           June 30,       December 31,
                                           2013           2012
Assets
Current assets:
 Cash and cash equivalents              $   73,974  $       55,863
 Accounts receivable, net of allowance
of $4.1 million for
 2013 and $3.7 million for 2012        95,412         98,628
 Management fee receivable              2,820          2,662
 Other receivables                      1,474          1,920
 Restricted cash                        3,526          1,787
 Prepaid expenses and other             25,199         14,807
 Deferred tax assets                    -              532
Total current assets                       202,405        176,199
Property and equipment, net                29,908         30,380
Goodwill                                   113,298        113,915
Intangible assets, net                     46,036         49,651
Restricted cash, less current portion      17,866         10,953
Other assets                               10,730         10,639
Total assets                               $  420,243   $      391,737
Liabilities and stockholders' equity
Current liabilities:
 Current portion of long-term           $   62,500  $       14,000
obligations
 Accounts payable                       4,513          4,569
 Accrued expenses                       48,777         32,976
 Accrued transportation costs           55,742         61,316
 Deferred revenue                       5,392          7,055
 Reinsurance liability reserve          15,785         12,713
 Deferred tax liabilities               1,363          -
Total current liabilities                  194,072        132,629
Long-term obligations, less current        61,000         116,000
portion
Other long-term liabilities                14,956         13,527
Deferred tax liabilities                   11,642         10,894
Total liabilities                          281,670        273,050
Commitments and contingencies
Stockholders' equity:
 Common stock: Authorized
40,000,000 shares;
 $0.001 par value; 14,292,789
and 13,785,947
 issued and outstanding            14             14
(including treasury shares)
 Additional paid-in capital             188,979        180,778
 Accumulated deficit                    (40,525)       (53,079)
 Accumulated other comprehensive loss,  (1,308)        (893)
net of tax
 Treasury stock, at cost, 952,776 and  (15,548)       (15,094)
928,478 shares
 Total Providence stockholders' equity    131,612        111,726
 Non-controlling interest               6,961          6,961
Total stockholders' equity                138,573        118,687
Total liabilities and stockholders'        $  420,243   $      391,737
equity



The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                                                     Six months ended
                                                     June 30,
                                                     2013        2012
Operating activities
Net income                                          $  12,554  $   4,460
Adjustments to reconcile net income to net cash
 provided by operating activities:
 Depreciation                                      3,873       3,442
 Amortization                                       3,591       3,793
 Amortization of deferred financing costs          523         567
 Provision for doubtful accounts                    1,608       627
 Deferred income taxes                              2,194       728
 Stock based compensation                           1,745       2,500
 Excess tax benefit upon exercise of stock options  (640)       (48)
 Asset impairment charge                            492         -
 Other                                              85          (21)
 Changes in operating assets and liabilities:
 Accounts receivable                              1,856       (9,916)
 Management fee receivable                        (451)       936
 Other receivables                                446         (989)
 Restricted cash                                  (102)       (20)
 Prepaid expenses and other                       (10,864)    (9,244)
 Reinsurance liability reserve                    4,718       2,859
 Accounts payable and accrued expenses            15,718      977
 Accrued transportation costs                     (5,575)     11,313
 Deferred revenue                                 (1,661)     1,693
 Other long-term liabilities                      (33)        3,445
Net cash provided by operating activities            30,077      17,102
Investing activities
Purchase of property and equipment, net              (3,494)     (6,329)
Acquisition of businesses, net of cash acquired      -           (190)
Restricted cash for reinsured claims losses          (8,550)     980
Purchase of short-term investments, net              (16)        461
Net cash used in investing activities                (12,060)    (5,078)
Financing activities
Repurchase of common stock for treasury              (454)       (169)
Proceeds from common stock issued pursuant to
 stock option exercise                              6,649       222
Excess tax benefit upon exercise of stock options    640         48
Repayment of long-term debt                          (6,500)     (5,000)
Debt financing costs                                 -           (29)
Capital lease payments                               (5)         (17)
Net cash provided by (used in) financing activities  330         (4,945)
Effect of exchange rate changes on cash              (236)       (84)
Net change in cash                                   18,111      6,995
Cash at beginning of period                          55,863      43,184
Cash at end of period                                $  73,974  $  50,179



The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
(in thousands)
(Unaudited)
                              Three months ended     Six months ended
                              June 30,                June 30,
                              2013         2012       2013        2012
Net income                    $   5,876  $  1,418  $  12,554  $   4,460
Interest expense, net         1,689        1,866      3,439       3,732
Provision for income taxes    3,888        1,085      8,564       2,771
Depreciation and amortization 3,734        3,610      7,464       7,235
EBITDA                        15,187       7,979      32,021      18,198
Asset impairment charge       492          -          492         -
Strategic alternatives costs  -            519        -           591
Adjusted EBITDA              $  15,679   $  8,498  $  32,513  $  18,789

SOURCE The Providence Service Corporation

Website: http://www.provcorp.com
Contact: Robert Wilson, Chief Financial Officer, 520/747-6600; or Cameron
Associates, Alison Ziegler, 212/554-5469
 
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