Providence Service Corporation Reports Q3 2013 Results

            Providence Service Corporation Reports Q3 2013 Results

Third Quarter Highlights:

- Net income rose to $3.5 million

- Diluted EPS increased to $0.25

- Adjusted EBITDA was $11.7 million

- Quarter benefitted from improved NET margins

PR Newswire

TUCSON, Ariz., Nov. 6, 2013

TUCSON, Ariz., Nov. 6, 2013 /PRNewswire/ -- The Providence Service Corporation
(Nasdaq: PRSC) today announced its financial results for the third quarter
ended September 30, 2013.

For the third quarter of 2013, the Company reported revenue of $276.7 million,
a decrease of 1% from $280.3 million in the comparable period of 2012.
Revenue from Providence's Non-emergency Transportation (NET) services segment
decreased 2% to $192.0 million in the third quarter from $196.3 million in the
prior year period. The decrease was due primarily to the transition of the
Connecticut contract from "at risk" to "administrative services only", and the
voluntary termination of the Wisconsin contracts effective July 31, 2013. This
decrease was partially offset by increased revenue related to continued
expansion in California, membership growth in the New York City administrative
contracts, and favorable rate adjustments in other states. Revenue from the
Human Services segment, formerly known as the Social Services segment,
increased 1% to $84.7 million from $84.0 million in the third quarter of 2012,
primarily related to the impact of a new workforce development contract in
Wisconsin which began in 2013.

Net income was $3.5 million, or $0.25 per diluted share, in the third quarter
of 2013 compared to net income of $1.2 million, or $0.09 per diluted share in
the prior year period. The increase in net income was due primarily to
improved margins in the NET Services segment. In addition, the results for
third quarter of 2012 included an asset impairment charge of approximately
$2.5 million, before taxes, related to our Canadian operations. EBITDA
(non-GAAP) for the third quarter of 2013 was $11.2 million compared to $9.0
million in the same period last year. Adjusted EBITDA (non-GAAP) for the
third quarter of 2013 was $11.7 million compared to $11.5 million in the same
period last year. A reconciliation of net income to EBITDA and Adjusted
EBITDA is presented below.

The Company had approximately 16.0 million individuals eligible to receive
services under its NET contracts at September 30, 2013, an increase of 8% from
approximately 14.8 million at September 30, 2012. Providence's direct Human
Service client census was approximately 55,700, up 9% from 50,900 at September
30, 2012.

For the first nine months of 2013, the Company reported revenue of $845.8
million, an increase of 3% from $819.4 million in the first nine months of
2012. Revenue from Providence's NET services segment grew 6% to $583.0
million in the first nine months of 2013 from $549.8 million in the prior year
period. Revenue from the Human Services segment decreased 2% to $262.8
million, down from $269.5 million in the first nine months of 2012.

Net income was $16.1 million, or $1.17 per diluted share, in the first nine
months of 2013. This is an increase from net income of $5.6 million, or $0.42
per diluted share, in the first nine months of 2012. EBITDA (non-GAAP) for
the first nine months of 2013 was $43.2 million, representing a 59% increase
from $27.2 million in the same period last year. Adjusted EBITDA (non-GAAP)
for the first nine months of 2013 was $44.2 million, representing an increase
of 46% from $30.3 million in the same period last year. A reconciliation of
net income to EBITDA and Adjusted EBITDA is presented below.

During the first nine months of 2013, the Company generated a total of $45.7
million in cash from operations. At September 30, 2013, the Company had
unrestricted cash and cash equivalents of $91.1 million as well as
approximately $142.3 million available for borrowing under the recently
amended and restated senior secured credit facility.Long-term obligations at
September 30, 2013 were $123.5 million.

"We continue to show solid financial results year to date in 2013," said
Warren Rustand, Chief Executive Officer. "Growth and profitability were driven
by our NET Services segment, which is benefitting from the full period impact
of new contract awards that began during 2012, as well as the termination of,
or changes to, contracts that were not meeting our financial expectations."

"Our Human Services segment experienced modest revenue growth in the third
quarter due to a new workforce development contract that started up in 2013,
as well as stabilization of the business following contract terminations
related to our Canadian and tutoring businesses. We will continue to focus
our attention on expanding and improving the performance of our Human Services
segment through operating efficiencies and both organic and acquisitive
growth."

"Overall, we are pleased with the progress the Company has made in 2013 to
date and remain committed to initiatives that we set forth at the beginning of
the year, primarily related to improving efficiencies. As we look toward 2014
and beyond, we continue to believe that the impact of Medicaid expansion under
the Affordable Care Act will create opportunities for us to serve a
substantially larger population of currently underserved citizens. Beyond
Medicaid expansion, we continue to believe that general health care market
trends, which include growing awareness of the need to coordinate physical and
behavioral health care services and the importance of facilitated
non-emergency access to preventative services, will position Providence to
benefit from systemic market changes in the future."

Conference Call
Providence will hold a conference call at 11:00 a.m. EST (9:00 a.m. Arizona
and MST and 8:00 a.m. PST) Thursday November 7, 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 (800) 510-0146 or for international callers (617)
614-3449 and by using the passcode 94634423. A replay of the teleconference
will be available on http://investor.provcorp.com. A replay will also be
available until November 14, 2013 by dialing (888) 286-8010 or (617) 801-6888,
and using passcode 49143112.

About Providence
The Providence Service Corporation provides or manages the delivery of home
and community based human 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 human 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 55,700 clients at September 30, 2013,
with approximately 16.0 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 US 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. 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         Nine months ended
                         September 30,              September 30,
                         2013           2012        2013          2012
Revenues:
 Human services         $   84,702  $         $  262,809  $  269,526
                                        83,950
 Non-emergency          192,011        196,335     583,028       549,844
transportation services
                         276,713        280,285     845,837       819,370
Operating expenses:
 Client service         76,881         73,462      228,695       230,200
expense
 Cost of non-emergency  177,049        183,248     536,664       520,866
transportation services
 General and            11,082         12,069      36,265        38,599
administrative expense
 Asset impairment       -              2,506       492           2,506
charge
 Depreciation and       3,725          4,018       11,188        11,254
amortization
Total operating          268,737        275,303     813,304       803,425
expenses
Operating income        7,976          4,982       32,533        15,945
Other (income) expense:
 Interest expense       1,916          1,990       5,407         5,806
 Loss on                525            -           525           -
extinguishment of debt
 Interest income        (40)           (25)        (92)          (109)
Income before income     5,575          3,017       26,693        10,248
taxes
Provision for income     2,048          1,859       10,612        4,631
taxes
Net income             $           $        $           $   
                         3,527         1,158      16,081       5,617
Earnings per share:
 Basic                  $          $       $         $    
                         0.26          0.09       1.20         0.42
 Diluted                $          $       $         $    
                         0.25          0.09       1.17         0.42
Weighted-average number
of common shares
outstanding:
 Basic                  13,674,467     13,263,826  13,411,204    13,277,191
 Diluted                14,049,329     13,342,614  13,711,124    13,388,355



The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
                                              September 30,      December 31,
                                              2013               2012
Assets                                        (Unaudited)
Current assets:
 Cash and cash equivalents                 $          $      
                                              91,103             55,863
 Accounts receivable, net of allowance of
$4.4 million for 2013 and $3.7 million for    91,245             98,628
2012
 Management fee receivable                 2,309              2,662
 Other receivables                         1,683              1,920
 Restricted cash                           3,837              1,787
 Prepaid expenses and other                19,577             14,807
 Deferred tax assets                       130                532
Total current assets                          209,884            176,199
Property and equipment, net                   30,886             30,380
Goodwill                                      113,345            113,915
Intangible assets, net                        44,250             49,651
Restricted cash, less current portion         14,198             10,953
Other assets                                  12,318             10,639
Total assets                                  $           $     
                                              424,881            391,737
Liabilities and stockholders' equity
Current liabilities:
 Current portion of long-term obligations  $          $      
                                              47,500             14,000
 Accounts payable                          4,543              4,569
 Accrued expenses                          48,766             32,976
 Accrued transportation costs              56,410             61,316
 Deferred revenue                          5,263              7,055
 Reinsurance liability reserve             13,159             12,713
Total current liabilities                     175,641            132,629
Long-term obligations, less current portion   76,000             116,000
Other long-term liabilities                   15,736             13,527
Deferred tax liabilities                      11,683             10,894
Total liabilities                             279,060            273,050
Commitments and contingencies
Stockholders' equity:
Common stock: Authorized 40,000,000
shares;$0.001 par value; 14,426,603 and
13,785,947 issued and                         14                 14

outstanding (including treasury shares)
 Additional paid-in capital                192,547            180,778
 Accumulated deficit                       (36,998)           (53,079)
 Accumulated other comprehensive loss,     (1,155)            (893)
net of tax
 Treasury stock, at cost, 952,776 and     (15,548)           (15,094)
928,478 shares
 Total Providence stockholders' equity       138,860            111,726
 Non-controlling interest                  6,961              6,961
Total stockholders' equity                   145,821            118,687
Total liabilities and stockholders' equity   $           $     
                                              424,881            391,737

 



The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                                                Nine months ended
                                                September 30,
                                                2013             2012
Operating activities
Net income                                     $    16,081  $    5,617
Adjustments to reconcile net income to net
cashprovided by operating activities:
 Depreciation                                 5,802            5,578
 Amortization                                  5,386            5,676
 Amortization of deferred financing costs     746              865
 Loss on extinguishment of debt                525              -
 Provision for doubtful accounts               2,570            1,418
 Deferred income taxes                         1,395            (420)
 Stock based compensation                      2,402            3,586
 Excess tax benefit upon exercise of stock     (999)            (60)
options
 Asset impairment charge                       492              2,506
 Other                                         352              (33)
 Changes in operating assets and liabilities:
 Accounts receivable                         5,033            (10,304)
 Management fee receivable                   105              849
 Other receivables                           237              (509)
 Restricted cash                             (255)            14
 Prepaid expenses and other                  (6,031)          (3,556)
 Reinsurance liability reserve               2,720            1,773
 Accounts payable and accrued expenses       15,744           3,040
 Accrued transportation costs                (4,906)          16,901
 Deferred revenue                            (1,792)          3,639
 Other long-term liabilities                 52               3,357
Net cash provided by operating activities       45,659           39,937
Investing activities
Purchase of property and equipment, net         (6,413)          (7,565)
Acquisition of businesses, net of cash          -                (190)
acquired
Restricted cash for reinsured claims losses     (5,040)          1,269
Purchase of short-term investments, net         (23)             452
Net cash used in investing activities           (11,476)         (6,034)
Financing activities
Repurchase of common stock for treasury         (454)            (3,658)
Proceeds from common stock issued pursuant      9,244            258
tostock option exercise
Excess tax benefit upon exercise of stock       999              60
options
Proceeds from long-term debt                    76,000           -
Repayment of long-term debt                     (82,500)         (9,993)
Debt financing costs                            (2,083)          (53)
Capital lease payments                          (8)              (20)
Net cash provided by (used in) financing        1,198            (13,406)
activities
Effect of exchange rate changes on cash         (141)            76
Net change in cash                              35,240           20,573
Cash at beginning of period                     55,863           43,184
Cash at end of period                           $    91,103  $   63,757

 



The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
(in thousands)
(Unaudited)
                               Three months ended   Nine months ended
                               September 30,         September 30,
                               2013       2012       2013      2012
Net income                     $  3,527  $  1,158  $ 16,081  $  5,617
Interest expense, net          1,876      1,965      5,315     5,697
Provision for income taxes     2,048      1,859      10,612    4,631
Depreciation and amortization  3,725      4,018      11,188    11,254
EBITDA                         11,176     9,000      43,196    27,199
Asset impairment charge        -          2,506      492       2,506
Loss on extinguishment of debt 525        -          525       -
Strategic alternatives costs   -          2          -         593
Adjusted EBITDA               $ 11,701   $ 11,508   $ 44,213  $ 30,298

SOURCE The Providence Service Corporation

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