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
Providence Service Corporation Reports Q2 2013 Results
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