Providence Service Corporation Reports 2013 Results

             Providence Service Corporation Reports 2013 Results

2013 Highlights:

- Net income rose to $19.4 million

- Diluted EPS increased to $1.41

- Adjusted EBITDA increased 27% to $55.3 million

- Net cash provided by operations totaled $55.2 million

PR Newswire

TUCSON, Ariz., March 12, 2014

TUCSON, Ariz., March 12, 2014 /PRNewswire/ -- The Providence Service
Corporation (Nasdaq: PRSC) today announced its financial results for the
fourth quarter and year ended December 31, 2013.

Fourth Quarter 2013 Results
For the fourth quarter of 2013, the Company reported revenue of $276.8
million, a decrease of 3% from $286.5 million in the comparable period of
2012. Revenue from Providence's Non-emergency Transportation (NET) services
segment decreased 7% to $187.2 million in the fourth quarter from $200.8
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 membership growth in the New York City administrative
contracts. Revenue from the Human Services segment increased 5% to $89.6
million from $85.7 million in the fourth quarter of 2012, primarily related to
the impact of a new workforce development contract in Wisconsin and a new
foster care contract in Texas.

Net income increased 17% to $3.4 million, or $0.24 per diluted share, in the
fourth quarter of 2013 compared to net income of $2.9 million, or $0.22 per
diluted share, in the prior year period. The fourth quarters of 2013 and 2012
each included expenses of approximately $1.3 million (net of benefit of
forfeiture of stock based compensation) related to the separation of certain
former executive officers. The Company's effective tax rate declined in the
fourth quarter of 2013 to 25.8%. The decrease in the tax rate was primarily
related to the favorable tax treatment of certain equity compensation expenses
in 2013. EBITDA (non-GAAP) for the fourth quarter of 2013 was $9.8 million
compared to $12.0 million in the same period last year. Adjusted EBITDA
(non-GAAP) for the fourth quarter of 2013 was $11.1 million compared to $13.3
million in the same period last year. A reconciliation of net income to
EBITDA and Adjusted EBITDA is presented below. 

The Company had approximately 15.8 million individuals eligible to receive
services under its NET Services contracts at December 31, 2013, an increase of
5% from approximately 15.1 million at December 31, 2012. Providence's direct
Human Service client census at December 31, 2013 was approximately 56,300, up
9% from 51,600 at December 31, 2012.

Full-Year 2013 Results
For the full year of 2013, the Company reported revenue of $1,122.7 million,
an increase of 2% from $1,105.9 million in 2012. Revenue from Providence's
NET Services segment grew 3% to $770.2 million in 2013 from $750.7 million in
the prior year, primarily due to contracts that began or were expanded in 2012
and 2013 and favorable rate adjustments. This increase was partially offset
by 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. Revenue from the Human Services segment
decreased 1% to $352.4 million in 2013 from $355.2 million in 2012, primarily
due to the termination of and changes to certain management service
agreements, 2012 contract terminations related to the workforce development
business in Canada, and the expiration of contracts related to Providence's
home based educational tutoring. This decrease was partially offset by
revenue growth related to new contracts awarded in 2013. 

Net income was $19.4 million, or $1.41 per diluted share, in 2013, a 129% and
120% increase, respectively, from $8.5 million, or $0.64 per diluted share, in
2012. EBITDA (non-GAAP) for 2013 was $53.0 million, a 35% increase from $39.2
million last year. Adjusted EBITDA (non-GAAP) for 2013 was $55.3 million, an
increase of 27% from $43.6 million last year. A reconciliation of net income
to EBITDA and Adjusted EBITDA is presented below. 

During 2013, the Company generated a total of $55.2 million in cash from
operations. At December 31, 2013, the Company had unrestricted cash and cash
equivalents of $99.0 million as well as approximately $142.3 million available
for borrowing under the 2013 amended and restated senior secured credit
facility. Long-term obligations at December 31, 2013 were $123.5 million.

"We finished 2013 with favorable financial results," said Warren Rustand,
Chief Executive Officer. "Our NET Services segment benefitted from 2012
start-up efforts, expanded business, negotiated rate adjustments and the exit
from some of its less profitable markets. However, the NET Services segment
margins in the fourth quarter were negatively impacted by a revenue reserve
for certain potential overpayments made to the Company that resulted from
errors in the eligibility files provided by the payer."

"Our Human Services segment continued to experience revenue growth in the
fourth quarter due primarily to new workforce development and foster care
contracts that began in 2013. This growth was offset by margin declines in
the fourth quarter related to weather disruptions and the continued transition
in Texas related to our new foster care contract. We expect the Texas foster
care implementation to be completed by the end of the first quarter in 2014.
In addition, the continued transition of certain states to the managed care
environment has contributed to the margin pressure we have experienced in the
Human Services segment in the past year."

"During 2014 we will direct our attention to expanding our operating segments
through both organic and acquisitive growth, with a specific focus on growing
our home and community-based services and foster care services, while reducing
our involvement in management fee service arrangements in our Human Services
segment."

"Overall, looking out to 2014 and beyond, we believe we are positioned to
benefit from current health care trends, including the Affordable Care Act,
increased Medicaid enrollment, the trend toward home and community-based care
and the industry-wide focus on the reduction in health care delivery costs.
In order to position ourselves to take full advantage of these opportunities,
we have continued to strengthen our management team and further improve our
operational efficiency. Additionally, our consistently positive cash flow,
strong cash position and substantial borrowing capacity will continue to
support our company-wide growth initiatives."

Conference Call
Providence will hold a conference call at 11:00 a.m. EDT (8:00 a.m. PDT/MST)
Thursday, March 13, 2014 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) 706-7745, or for international callers (617) 614-3472, and by
using the passcode 47132627. A replay of the teleconference will be available
on http://investor.provcorp.com. A replay will also be available until March
20, 2014 by dialing (888) 286-8010 or (617) 801-6888 and using passcode
53482011.

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 56,300 clients at December 31, 2013, with
approximately 15.8 million individuals eligible to receive the Company's
non-emergency transportation services. The Company had over $1.1 billion in
revenues in 2013.

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.
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        Year ended
                            December 31,              December 31,
                            2013         2012         2013         2012
Revenues:
 Non-emergency             $          $          $         $   
transportation services     187,218     200,814     770,246      750,658
 Human services            89,627       85,705       352,436      355,231
Total revenues              276,845      286,519      1,122,682    1,105,889
Operating expenses:
 Cost of non-emergency     173,765      185,826      710,428      706,692
transportation services
 Client service expense    80,929       73,884       309,623      304,084
 General and               12,368       14,784       48,633       53,383
administrative expense
 Depreciation and          3,683        3,769        14,872       15,023
amortization
 Asset impairment charge   -            -            492          2,506
Total operating expenses    270,745      278,263      1,084,048    1,081,688
Operating income           6,100        8,256        38,634       24,201
Other (income) expense:
 Interest expense          1,627        1,834        7,035        7,640
 Loss on extinguishment    -            -            525          -
of debt
 Interest income           (49)         (23)         (141)        (132)
Income before income taxes  4,522        6,445        31,215       16,693
Provision for income taxes  1,165        3,580        11,777       8,211
Net income                $        $        $        $     
                            3,357       2,865       19,438       8,482
Earnings per share:
 Basic                     $       $       $       $     
                            0.24        0.22         1.44        0.64
 Diluted                   $       $       $       $     
                            0.24        0.22         1.41        0.64
Weighted-average number of
common shares outstanding:
 Basic                     13,763,037   13,071,342   13,499,885   13,225,448
 Diluted                   14,121,956   13,254,509   13,809,874   13,354,613





The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
(UNAUDITED)
                                                     December 31,
                                                     2013         2012
Assets
Current assets:
 Cash and cash equivalents                        $  98,995  $   55,863
 Accounts receivable, net of allowance of
 $4.2 million in 2013 and $3.7 million in 2012  88,315       98,628
 Management fee receivable                        1,821        2,662
 Other receivables                                4,786        4,105
 Prepaid expenses and other                       11,831       12,622
 Restricted cash                                  3,772        1,787
 Deferred tax assets                              2,152        532
Total current assets                                 211,672      176,199
Property and equipment, net                          32,709       30,380
Goodwill                                             113,263      113,915
Intangible assets, net                               43,476       49,651
Other assets                                         11,681       10,639
Restricted cash, less current portion                11,957       10,953
Total assets                                         $ 424,758   $  391,737
Liabilities and stockholders' equity
Current liabilities:
 Current portion of long-term obligations         $  48,250  $   14,000
 Accounts payable                                 3,904        4,569
 Accrued expenses                                 52,484       32,976
 Accrued transportation costs                     54,962       61,316
 Deferred revenue                                 3,687        7,055
 Reinsurance liability reserve                    10,778       12,713
Total current liabilities                            174,065      132,629
Long-term obligations, less current portion          75,250       116,000
Other long-term liabilities                          15,359       13,527
Deferred tax liabilities                             9,447        10,894
Total liabilities                                    274,121      273,050
Commitments and contingencies
Stockholders' equity
 Common stock: authorized 40,000,000 shares;
$0.001 par
 value; 14,477,312 and 13,785,947 issued and
outstanding
 (including treasury shares)                  14           14
 Additional paid-in capital                       194,363      180,778
 Accumulated deficit                              (33,641)     (53,079)
 Accumulated other comprehensive loss, net of     (1,419)      (893)
tax
 Treasury shares, at cost, 956,442 and 928,478    (15,641)     (15,094)
shares
 Total Providence stockholders' equity              143,676      111,726
 Non-controlling interest                        6,961        6,961
Total stockholders' equity                          150,637      118,687
Total liabilities and stockholders' equity           $ 424,758   $  391,737





The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                                                       Year ended
                                                       December 31,
                                                       2013        2012
Operating activities
Net income                                             $  19,438  $   8,482
Adjustments to reconcile net income to net cash
 provided by operating activities:
 Depreciation                                        7,738       7,537
 Amortization                                         7,134       7,486
 Provision for doubtful accounts                      3,245       2,305
 Stock based compensation                             3,079       3,873
 Deferred income taxes                                (3,282)     (816)
 Amortization of deferred financing costs            960         1,138
 Loss on extinguishment of debt                      525         -
 Excess tax benefit upon exercise of stock options    (1,120)     (91)
 Asset impairment charge                              492         2,506
 Other non-cash charges                               364         158
 Changes in operating assets and liabilities, net of
effects
 of acquisitions:
 Accounts receivable                                7,186       (16,589)
 Management fee receivable                          659         875
 Other receivables                                  540         (319)
 Restricted cash                                    (141)       163
 Prepaid expenses and other                         (856)       256
 Reinsurance liability reserve                      (19)        1,034
 Accounts payable and accrued expenses              18,863      2,412
 Accrued transportation costs                       (6,354)     13,660
 Deferred revenue                                   (3,366)     4,862
 Other long-term liabilities                        152         3,556
Net cash provided by operating activities              55,237      42,488
Investing activities
Purchase of property and equipment                     (10,183)    (9,522)
Net increase in short-term investments                 177         444
Acquisitions, net of cash acquired                     (989)       (190)
Restricted cash for reinsured claims losses            (2,848)     2,633
Net cash used in investing activities                  (13,843)    (6,635)
Financing activities
Repurchase of common stock, for treasury               (547)       (3,658)
Proceeds from common stock issued pursuant to stock
 option exercise                                      10,069      949
Excess tax benefit upon exercise of stock options      1,120       91
Proceeds from long-term debt                           76,000      -
Repayment of long-term debt                            (82,500)    (20,493)
Debt financing costs                                   (2,082)     (65)
Capital lease payments                                 (9)         (23)
Net cash provided by (used in) financing activities    2,051       (23,199)
Effect of exchange rate changes on cash                (313)       25
Net change in cash                                     43,132      12,679
Cash at beginning of period                            55,863      43,184
Cash at end of period                                  $  98,995  $  55,863





The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
(in thousands)
(Unaudited)
                            Three months ended       Year ended
                            December 31,              December 31,
                            2013         2012         2013        2012
Net income                  $   3,357  $   2,865  $  19,438  $   8,482
Interest expense, net       1,578        1,811        6,894       7,508
Provision for income taxes  1,165        3,580        11,777      8,211
Depreciation and            3,683        3,769        14,872      15,023
amortization
EBITDA                      9,783        12,025       52,981      39,224
Asset impairment charge     -            -            492         2,506
Payments related to
retirement and
 termination of executive  1,277        1,293        1,277       1,293
officers
Loss on extinguishment of   -            -            525         -
debt
Strategic alternatives      -            -            -           593
costs
Adjusted EBITDA            $  11,060   $  13,318   $  55,275  $  43,616

SOURCE The Providence Service Corporation

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