UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


FORM 8-K

 


 CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): August 6, 2015

 


The Providence Service Corporation

(Exact name of registrant as specified in its charter)

 


Delaware

 

001-34221

 

86-0845127

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

   

64 East Broadway Blvd., Tucson, Arizona

 

85701

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (520) 747-6600

 

Not Applicable

(Former name or former address, if changed since last report)

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

 
 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On August 6, 2015, we issued a press release containing certain financial information for the quarter ended June 30, 2015. As noted in the press release, we have provided non-GAAP financial measures (earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, adjusted net income and adjusted diluted earnings per share), the reasons we have provided such measures and a reconciliation of the non-GAAP measures to the most directly comparable GAAP measure. Readers should consider the non-GAAP measures in addition to, and not as a substitute for, the measure of financial performance prepared in accordance with GAAP. In this regard, GAAP refers to accounting principles generally accepted in the United States. A copy of the press release is being furnished hereto as Exhibit 99.1 and is incorporated herein by reference.

 

 

On our earnings call scheduled for August 7, 2015, we intend to provide certain pro forma financial measures assuming our acquisitions of both Ingeus Limited (“Ingeus”) and CCHN Group Holdings, Inc., the parent company of Community Care Health Network, Inc. (d/b/a Matrix Medical Network) (“Matrix”) occurred on January 1, 2014. The table below presents our revenue and a reconciliation of net income to adjusted EBITDA for the twelve months ended June 30, 2015, assuming that we had acquired Ingeus and Matrix on January 1, 2014:

 

   

(in thousands)

 
   

Pro forma twelve months ended

 
   

June 30, 2015

 
         

Service revenue

  $ 1,936,357  
         

Net income

  $ 28,160  
         

Interest expense, net

    29,181  

Provision for income taxes

    17,983  

Depreciation and amortization

    60,777  
         

EBITDA

    136,101  
         

Acquisition costs

    10  

Integration and restructuring charges

    1,927  

Ingeus acquisition related equity compensation

    5,998  

Gain on foreign currency translation

    (559 )

Charges related to the separation of an executive officer, net

    695  

Contingent consideration adjustments

    (16,314 )

Asset impairment charges

    6,915  
         

Adjusted EBITDA

  $ 134,773  

 

 
 

 

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

     

Exhibit
Number

  

Description

   

99.1

  

Company’s Press Release dated August 6, 2015.

     

 

 
 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

THE PROVIDENCE SERVICE CORPORATION

     

Date: August 6, 2015

By:

/s/ David Shackelton

 

Name:

David Shackelton

 

Title:

Interim Chief Financial Officer

 



Exhibit 99.1

 

 

AT THE COMPANY

AT CAMERON ASSOCIATES

David Shackelton – Interim Chief Financial Officer

Alison Ziegler     212/554-5469

520/747-6600

 

  

FOR IMMEDIATE RELEASE

 

Providence Service Corporation Reports Second Quarter 2015 Results

 

Second Quarter 2015 Financial Highlights:

 

Revenue of $508.3 million

 

Diluted earnings per common share of $0.26, Adjusted diluted earnings per common share (non-GAAP) of $0.67

 

Adjusted EBITDA (non-GAAP) of $36.0 million

 

Cash flow from operations of $4.7 million

 

 

TUCSON, ARIZONA August 6, 2015 – The Providence Service Corporation (Nasdaq: PRSC) today announced its financial results for the second quarter and six months ended June 30, 2015. Included in the results are results of the operations of Ingeus and Matrix Medical Network acquired on May 31, 2014 and October 24, 2014, respectively.

 

Second Quarter 2015 Results

For the second quarter of 2015, the Company reported consolidated revenue of $508.3 million, an increase of 47.8% from $344.0 million in the comparable period of 2014. The 2015 results included $140.7 million of revenue contributed by Ingeus and Matrix in the second quarter of 2015. The second quarter of 2014 included $28.8 million in revenue from Ingeus. Excluding revenue attributable to these acquired businesses, consolidated revenue was $367.6 million in the second quarter of 2015, an increase of 16.6% from the comparable period of 2014.

 

Service expense as a percentage of revenue was 88.6% in the second quarter of 2015 compared to 89.9% in the second quarter of 2014. Second quarter 2015 and 2014 service expense included a $1.5 million and $0.5 million charge, respectively, related to the amortization of the fair value of restricted stock awards issued in connection with the acquisition of Ingeus. General and administrative (G&A) expense as a percentage of revenue was 4.6% in the second quarter of 2015 compared to 4.7% in the second quarter of 2014. Second quarter 2015 G&A expense included a $0.7 million charge related to stock award modifications related to a separation agreement with our former chief executive officer. The Company also reported a loss on equity investment of $1.1 million in the quarter related to the Company’s investment in Mission Providence, a joint venture in Australia, which continued to incur start-up costs during the second quarter of 2015.

 

The Company reported net income available to common shareholders of $4.2 million, or $0.26 per diluted common share, in the second quarter of 2015 compared to net income available to common shareholders of $6.7 million, or $0.46 per diluted common share, in the prior year period. Adjusted net income available to common shareholders (non-GAAP) in the second quarter of 2015 was $10.8 million, or $0.67 per diluted common share, versus second quarter 2014 adjusted net income available to common shareholders (non-GAAP) of $10.7 million, or $0.74 per diluted common share. A reconciliation of net income to adjusted net income available to common shareholders (non-GAAP) and the calculation of adjusted diluted earnings per common share is presented below.

 

Adjusted EBITDA (non-GAAP) for the second quarter of 2015 was $36.0 million compared to $22.5 million in the same period last year. Adjusted EBITDA for the second quarter of 2015 includes the loss on equity investment of $1.1 million related to Mission Providence. A reconciliation of net income to EBITDA and Adjusted EBITDA is presented below.

 

James Lindstrom, Chief Executive Officer, stated, “Our financial results in the second quarter benefited from strong volumes in HA Services, execution on operational improvement and organic growth initiatives in Human Services, and increased membership and new contracts in NET Services. In our WD Services segment, management remained focused on launching large, recently won contracts. Partially due to delayed start-up expenses and additional complementary revenue sources associated with these new contracts, the financial performance of WD Services exceeded our internal expectations for the second quarter. While we are pleased with our strong second quarter and first half performance, quarterly volatility exists across our segments due to a variety of factors including, but not limited to, seasonality and the timing of contract start-up expenses. Thus, we remain focused on our annual performance as previously communicated as well as delivering unique, value-add solutions for our clients and generating long term intrinsic value per share.”

 

 

 
 

 

 

Year to Date 2015 Results

For the first six months of 2015, the Company reported consolidated revenue of $1.0 billion, an increase of 60.1% from $633.4 million in the comparable period of 2014. The 2015 results included $299.1 million of revenue contributed by Ingeus and Matrix during the first half of 2015. The first half of 2014 included $28.8 million in revenue from Ingeus. Excluding revenue attributable to these acquired businesses, consolidated revenue was $715.0 million, an increase of 18.3% from the comparable period of 2014.

 

Service expense as a percentage of revenue was 88.2% in the first half of 2015 compared to 89.8% in the first half of 2014. First half 2015 and 2014 service expense included a $3.1 million and $0.5 million charge, respectively, related to the amortization of the fair value of restricted stock awards issued in connection with the acquisition of Ingeus. G&A expense as a percentage of revenue was 4.7% in the first half of 2015 and 2014. First half 2015 and 2014 G&A expense included a $0.7 million and $0.5 million charge, respectively, related to separation arrangements with certain former executive officers. The Company also reported a loss on equity investment of $3.5 million in the first half of 2015 related to the Company’s investment in Mission Providence, which incurred start-up costs during the first half of 2015 related to successful bidding activity.

 

The Company reported net income available to common shareholders of $9.2 million, or $0.57 per diluted common share, in the first half of 2015 compared to net income available to common shareholders of $13.0 million, or $0.91 per diluted common share, in the prior year period. Adjusted net income available to common shareholders (non-GAAP) in the first half of 2015 was $23.2 million, or $1.44 per diluted common share, versus first half 2014 adjusted net income available to common shareholders (non-GAAP) of $19.4 million, or $1.36 per diluted common share. A reconciliation of net income to adjusted net income available to common shareholders (non-GAAP) and the calculation of adjusted earnings per diluted common share is presented below.

 

Adjusted EBITDA (non-GAAP) for the first half of 2015 was $72.3 million compared to $40.7 million in the same period last year. Adjusted EBITDA for the first half of 2015 includes the loss on equity investment of $3.5 million related to Mission Providence. A reconciliation of net income to EBITDA and Adjusted EBITDA is presented below.

 

Segment Results

For analysis purposes, revenue, expenses, operating income, net income, EBITDA (non-GAAP), and Adjusted EBITDA (non-GAAP) on a comparable basis are provided for Providence’s four segments for the three and six month periods ended June 30, 2015 and 2014. As previously disclosed, beginning in 2015, the Company began analyzing the results of the segments without the historical allocation of indirect corporate costs. Only corporate costs that represent expenses directly attributable to specific segments are allocated to the respective segment. Additionally, in 2015, the Company’s legacy workforce development businesses were transferred to the management team of the WD Services segment. As such, the operating segment results for 2014 have been recast.

 

Non-emergency Transportation (NET) Services

Revenue from the NET Services segment increased 25.1% to $270.7 million in the second quarter of 2015 from $216.3 million in the prior year period. Service expense for the segment increased to $246.9 million, or 91.2% of NET Services revenue, in the second quarter of 2015 compared to $196.5 million or 90.8% of NET Services revenue in the second quarter of 2014. NET Services operating income increased 18.5% to $18.9 million in the second quarter from $15.9 million in the prior year period. NET Services Adjusted EBITDA (non-GAAP) increased $3.4 million, or 19.2%, to $21.2 million in the second quarter from $17.8 million in the prior year period.

 

In the first half of 2015, revenue from the NET Services segment increased 26.8% to $525.5 million from $414.4 million in the prior year period. Service expense for the segment increased to $476.2 million, or 90.6% of NET Services revenue, in the first half of 2015 compared to $371.7 million or 89.7% of NET Services revenue in the first half of 2014. NET Services operating income increased 13.0% to $39.6 million in the first half of 2015 from $35.1 million in the prior year period. NET Services Adjusted EBITDA (non-GAAP) increased $5.5 million, or 14.3%, to $44.2 million in the first half of 2015 from $38.7 million in the prior year period.

 

Revenue for the NET Services segment was favorably impacted by new contracts in Rhode Island, Maine, and Texas and increased membership in certain states, partially offset by the elimination of contracts in Mississippi and Connecticut. As anticipated, service costs as a percentage of revenue continued to increase due to higher utilization related to increased usage by expansion and woodwork populations in addition to covered members becoming more aware of their NET benefits.

 

 

 
 

 

 

Human Services

Revenue from the Human Services segment decreased 1.2% to $90.2 million in the second quarter of 2015, compared to $91.3 million in the second quarter of 2014. Both periods exclude revenue related to the legacy workforce development services business that was transitioned to the WD Services segment at the beginning of 2015. Service expense for the segment was $78.7 million, or 87.2% of Human Services revenue, in the second quarter of 2015 compared to $82.6 million, or 90.4% of Human Services revenue in 2014. Human Services operating income was $4.8 million in the second quarter compared to $2.0 million in the prior year period. Human Services Adjusted EBITDA (non-GAAP) increased $2.7 million to $6.6 million in the second quarter of 2015 from $3.8 million in the prior year period.

 

In the first half of 2015, revenue from the Human Services segment increased 0.6% to $176.4 million, compared to $175.4 million in the first half of 2014. Both periods exclude revenue related to the legacy workforce development services business that was transitioned to the WD Services segment at the beginning of 2015. Service expense for the segment was $156.3 million, or 88.6% of Human Services revenue, in the first half of 2015 compared to $161.5 million, or 92.1% of Human Services revenue in 2014. Human Services operating income was $6.6 million in the first half of the year compared to $0.7 million in the prior year period. Human Services Adjusted EBITDA (non-GAAP) increased $5.6 million to $10.2 million in the first half of 2015 from $4.6 million in the prior year period.

 

Revenue in the Human Services segment was positively impacted by two acquisitions that occurred in 2014 and organic expansion in certain markets, and negatively impacted by the termination of the Texas foster care contract and the exiting of certain underperforming services and offices. Service costs as a percentage of revenue benefited from the termination of the Texas foster care contract and several business improvement and streamlining initiatives executed throughout the organization.

 

Workforce Development (WD) Services

WD Services revenue was $92.2 million in the second quarter of 2015 and relates primarily to the Ingeus business that was acquired on May 30, 2014. In the second quarter of 2014, WD Services revenue was $36.6 million and represents the legacy workforce development services business that had historically been part of Human Services as well as one month of operations of Ingeus. Service expense for the segment was $83.2 million, or 90.3% of WD revenue, in the second quarter of 2015. WD Services operating loss was $2.4 million in the second quarter of 2015 and included a $1.5 million expense related to the amortization of the fair value of restricted stock awards issued in connection with the acquisition of Ingeus. WD Services Adjusted EBITDA (non-GAAP) was $1.4 million in the second quarter of 2015 and included a loss on equity investment of $1.1 million related to Mission Providence. In the second quarter of 2014, service expense was $30.5 million, or 83.2% of WD revenue, operating income was $2.6 million, and Adjusted EBITDA (non-GAAP) was $5.1 million.

 

In the first half of 2015, WD Services revenue, related primarily to the acquired Ingeus operations, was $199.8 million. In the first half of 2014, WD Services revenue was $44.1 million and represents the legacy workforce development services business that had historically been part of Human Services as well as one month of operations of Ingeus. Service expense for the segment was $177.5 million, or 88.8% of WD revenue, in the first half of 2015. WD Services operating income was $0.4 million in the first half of 2015 and included a $3.1 million expense related to the amortization of the fair value of restricted stock awards issued in connection with the acquisition of Ingeus. WD Services Adjusted EBITDA (non-GAAP) was $6.6 million in the first half of 2015 and included a loss on equity investment of $3.5 million related to Mission Providence. In the first half of 2014, service expense was $36.9 million, or 83.7% of WD revenue, operating income was $3.0 million, and Adjusted EBITDA (non-GAAP) was $5.7 million.

 

Health Assessment (HA) Services

HA Services revenue, primarily derived from providing comprehensive health assessments, was $55.4 million in the second quarter of 2015 and is comprised of revenue from Matrix, acquired on October 23, 2014. Service expense for the segment was $41.2 million, or 74.4% of HA Services revenue. HA Services operating income was $6.3 million in the second quarter of 2015, and HA Services Adjusted EBITDA (non-GAAP) was $13.5 million for the same period.

 

In the first half of 2015, HA Services revenue was $112.8 million. Service expense for the segment was $84.4 million, or 74.8% of HA Services revenue. HA Services operating income was $12.8 million in the first half of 2015, and HA Services Adjusted EBITDA (non-GAAP) was $27.1 million for the same period.

 

Conference Call

Providence will hold a conference call at 11:00 a.m. EDT (8:00 a.m. PDT/MST) Friday, August 7, 2015 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 (866) 515-2912, or for international callers (617) 399-5126, and by using the passcode 83463896. A replay of the teleconference will be available on http://investor.provcorp.com. A replay will also be available until August 14, 2015 by dialing (888) 286-8010 or (617) 801-6888 and using passcode 80558015.

 

 

 
 

 

 

About Providence

Providence is a Tucson, Arizona-based company that provides and manages government sponsored human services, innovative global employment services, comprehensive health assessment and care management services, and non-emergency transportation services. It offers: (1) non-emergency transportation management services to state Medicaid programs, local government agencies, hospital systems, health maintenance organizations, private managed care organizations and commercial insurers, as well as to individuals with limited mobility, people with limited means of transportation, people with disabilities and Medicaid members; (2) home- and community-based counseling services, which include home-based and intensive home-based counseling, workforce development, substance abuse treatment services, school support services and correctional services; (3) foster care and therapeutic foster care services; (4) case management, referral and monitoring services; (5) social improvement, employment and welfare services to various international government bodies and corporations; and (6) in-home comprehensive health assessment and care management services primarily to Medicare Advantage programs. Providence is unique in that it provides and manages its human services primarily in the client’s own home or in community based settings, rather than in hospitals or treatment facilities and provides its non-emergency transportation services clients through local transportation providers rather than an owned fleet of vehicles.

 

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, Adjusted EBITDA, Adjusted net income, and Adjusted diluted EPS, 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, our continuing relationship with government entities and our ability to procure business from them, our ability to manage growing and changing operations, 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, 2014 and subsequent filings. 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-- 

 

 
 

 

 

Providence Service Corporation

Page 5

  

The Providence Service Corporation

Unaudited Condensed Consolidated Statements of Income

(in thousands except share and per share data)

 

   

Three months ended

   

Six months ended

 
   

June 30,

   

June 30,

 
   

2015

   

2014

   

2015

   

2014

 
                                 

Service revenue

  $ 508,251     $ 343,953     $ 1,014,046     $ 633,356  
                                 

Operating expenses:

                               

Service expense

    450,058       309,130       893,926       569,066  

General and administrative expense

    23,316       16,156       48,000       29,775  

Depreciation and amortization

    14,957       5,143       29,857       8,871  

Total operating expenses

    488,331       330,429       971,783       607,712  

Operating income

    19,920       13,524       42,263       25,644  
                                 

Other expenses:

                               

Interest expense, net

    4,545       1,261       10,552       2,846  

Loss on equity investment

    1,059       -       3,542       -  

(Gain) Loss on foreign currency translation

    (714 )     61       (395 )     101  

Income before income taxes

    15,030       12,202       28,564       22,697  

Provision for income taxes

    8,396       5,530       15,693       9,738  

Net income

  $ 6,634     $ 6,672     $ 12,871     $ 12,959  
                                 

Net income available to common stockholders

  $ 4,181     $ 6,672     $ 9,243     $ 12,959  
                                 

Earnings per common share:

                               

Basic

  $ 0.26     $ 0.47     $ 0.58     $ 0.93  

Diluted

  $ 0.26     $ 0.46     $ 0.57     $ 0.91  
                                 

Weighted-average number of common shares outstanding:

                               

Basic

    16,097,198       14,171,013       16,036,959       14,006,944  

Diluted

    16,240,898       14,453,964       16,193,372       14,306,898  

 

 

 

 

 

 

--more-- 

 

 
 

 

 

Providence Service Corporation

Page 6

 

The Providence Service Corporation

Condensed Consolidated Balance Sheets

(in thousands except share and per share data)

 

   

June 30,

   

December 31,

 
   

2015

   

2014

 

Assets

 

(Unaudited)

         

Current assets:

               

Cash and cash equivalents

  $ 145,161     $ 160,406  

Accounts receivable, net of allowance of $6,893 in 2015 and $6,034 in 2014

    211,741       151,344  

Other receivables

    15,131       6,866  

Prepaid expenses and other

    42,149       46,157  

Restricted cash

    3,641       3,807  

Deferred tax assets

    998       6,066  

Total current assets

    418,821       374,646  

Property and equipment, net

    62,127       57,148  

Goodwill

    358,483       355,641  

Intangible assets, net

    321,535       340,673  

Other assets

    40,803       22,373  

Restricted cash, less current portion

    15,275       14,764  

Total assets

  $ 1,217,044     $ 1,165,245  

Liabilities and stockholders' equity

               

Current liabilities:

               

Current portion of long-term obligations

  $ 29,663     $ 25,188  

Note payable to related party

    -       65,500  

Accounts payable

    56,441       48,061  

Accrued expenses

    127,722       121,857  

Accrued transportation costs

    61,514       55,492  

Deferred revenue

    27,733       12,245  

Reinsurance liability reserve

    17,861       11,115  

Total current liabilities

    320,934       339,458  

Long-term obligations, less current portion

    458,667       484,525  

Other long-term liabilities

    30,204       26,609  

Deferred tax liabilities

    86,432       93,239  

Total liabilities

    896,237       943,831  

Commitments and contingencies

               

Mezzanine equity

               

Preferred stock: Authorized 10,000,000 shares; $0.001 par value; 805,000 and 0 issued and outstanding; 5.5%/8.5% dividend rate

    77,719       -  

Stockholders' equity

               

Common stock: Authorized 40,000,000 shares; $0.001 par value; 17,081,535 and 16,870,285 issued and outstanding (including treasury shares)

    17       17  

Additional paid-in capital

    270,027       261,155  

Accumulated deficit

    (495 )     (13,366 )

Accumulated other comprehensive loss, net of tax

    (8,045 )     (8,756 )

Treasury shares, at cost, 1,029,557 and 1,014,108 shares

    (18,420 )     (17,686 )

 Total Providence stockholders' equity

    243,084       221,364  

Non-controlling interest

    4       50  

Total stockholders' equity

    243,088       221,414  

Total liabilities and stockholders' equity

  $ 1,217,044     $ 1,165,245  

 

 

--more--

 

 
 

 

 

Providence Service Corporation

Page 7

 

The Providence Service Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

   

Six months ended June 30,

 
   

2015

   

2014

 

Operating activities

               

Net income

  $ 12,871     $ 12,959  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation

    10,165       4,908  

Amortization

    19,692       3,963  

Provision for doubtful accounts

    1,369       1,089  

Stock based compensation

    6,058       1,400  

Deferred income taxes

    (4,815 )     207  

Amortization of deferred financing costs

    1,071       410  

Excess tax benefit upon exercise of stock options

    (2,239 )     (2,346 )

Loss on equity investments

    3,542       -  

Other non-cash charges

    (225 )     (40 )

Changes in operating assets and liabilities:

               

Accounts receivable

    (60,908 )     (21,736 )

Other receivables

    (2,617 )     487  

Restricted cash

    69       205  

Prepaid expenses and other

    (12,234 )     (4,544 )

Reinsurance liability reserve

    9,691       4,648  

Accounts payable and accrued expenses

    17,755       7,172  

Accrued transportation costs

    6,022       13,554  

Deferred revenue

    14,555       (52 )

Other long-term liabilities

    281       (4,009 )

Net cash provided by operating activities

    20,103       18,275  

Investing activities

               

Purchase of property and equipment

    (13,122 )     (8,267 )

Acquisitions, net of cash acquired

    (1,665 )     (59,666 )

Equity investments

    (10,284 )     -  

Net decrease in short-term investments

    (9 )     (9 )

Restricted cash for reinsured claims losses

    (413 )     (4,744 )

Net cash used in investing activities

    (25,493 )     (72,686 )

Financing activities

               

Proceeds from issuance of preferred stock, net of issuance costs

    80,667       -  

Preferred stock dividends

    (1,698 )     -  

Repurchase of common stock, for treasury

    (734 )     (501 )

Proceeds from common stock issued pursuant to stock option exercise

    2,377       9,150  

Excess tax benefit upon exercise of stock options

    2,239       2,346  

Proceeds from long-term debt

    -       115,000  

Repayment of long-term debt

    (87,125 )     (47,500 )

Payment of contingent consideration

    (7,496 )     -  

Debt financing costs

    (30 )     (700 )

Other

    (46 )     (8 )

Net cash (used in) provided by financing activities

    (11,846 )     77,787  

Effect of exchange rate changes on cash

    1,991       629  

Net change in cash

    (15,245 )     24,005  

Cash at beginning of period

    160,406       98,995  

Cash at end of period

  $ 145,161     $ 123,000  

 

 

--more--

 

 

 
 

 

 

Providence Service Corporation

Page 8

 

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA

(in thousands)

(Unaudited)

 

   

Three Months Ended June 30, 2015

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 
                                                 

Net income

  $ 11,693     $ 2,804     $ (1,905 )   $ 3,749     $ (9,707 )   $ 6,634  
                                                 

Interest expense, net

    -       (9 )     (43 )     (5 )     4,602       4,545  

Provision for income taxes

    7,183       1,992       (786 )     2,522       (2,515 )     8,396  

Depreciation and amortization

    2,329       1,767       3,332       7,185       344       14,957  
                                                 

EBITDA

    21,205       6,554       598       13,451       (7,276 )     34,532  
                                                 

Ingeus acquisition related equity compensation

    -       -       1,524       -       -       1,524  

Gain on foreign currency translation

    -       -       (714 )     -       -       (714 )

Charges related to the separation of an executive officer, net

    -       -       -       -       695       695  
                                                 

Adjusted EBITDA

  $ 21,205     $ 6,554     $ 1,408     $ 13,451     $ (6,581 )   $ 36,037  

 

   

Three Months Ended June 30, 2014

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 
                                                 

Net income

  $ 9,545     $ 1,182     $ 2,321     $ -     $ (6,376 )   $ 6,672  
                                                 

Interest expense, net

    (2 )     (8 )     (228 )     -       1,499       1,261  

Provision for income taxes

    6,381       876       503       -       (2,230 )     5,530  

Depreciation and amortization

    1,865       1,745       1,261       -       272       5,143  
                                                 

EBITDA

    17,789       3,795       3,857       -       (6,835 )     18,606  
                                                 

Acquisition costs

    -       -       -       -       2,496       2,496  

Integration and restructuring charges

    -       15       732       -       97       844  

Ingeus acquisition related equity compensation

    -       -       486       -       -       486  

Loss on foreign currency translation

    -       -       54       -       7       61  
                                                 

Adjusted EBITDA

  $ 17,789     $ 3,810     $ 5,129     $ -     $ (4,235 )   $ 22,493  

 

 

 

 

 

--more--

 

 
 

 

 

Providence Service Corporation

Page 9

  

The Providence Service Corporation

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA

(in thousands)

(Unaudited) 

 

   

Six Months Ended June 30, 2015

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 
                                                 

Net income

  $ 24,305     $ 3,840     $ (4,286 )   $ 7,595     $ (18,583 )   $ 12,871  
                                                 

Interest expense, net

    (1 )     (29 )     (58 )     (9 )     10,649       10,552  

Provision for income taxes

    15,312       2,798       1,640       5,193       (9,250 )     15,693  

Depreciation and amortization

    4,606       3,614       6,648       14,367       622       29,857  
                                                 

EBITDA

    44,222       10,223       3,944       27,146       (16,562 )     68,973  
                                                 

Ingeus acquisition related equity compensation

    -       -       3,057       -       -       3,057  

Gain on foreign currency translation

    -       -       (395 )     -       -       (395 )

Charges related to the separation of an executive officer, net

    -       -       -       -       695       695  
                                                 

Adjusted EBITDA

  $ 44,222     $ 10,223     $ 6,606     $ 27,146     $ (15,867 )   $ 72,330  

 

   

Six Months Ended June 30, 2014

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 
                                                 

Net income

  $ 20,954     $ 380     $ 2,530     $ -     $ (10,905 )   $ 12,959  
                                                 

Interest expense, net

    (6 )     (20 )     (243 )     -       3,115       2,846  

Provision for income taxes

    14,114       369       660       -       (5,405 )     9,738  

Depreciation and amortization

    3,626       3,324       1,392       -       529       8,871  
                                                 

EBITDA

    38,688       4,053       4,339       -       (12,666 )     34,414  
                                                 

Acquisition costs

    -       -       -       -       4,325       4,325  

Integration and restructuring costs

    -       29       732       -       97       858  

Ingeus acquisition related equity compensation

    -       -       486       -       -       486  

Loss on foreign currency translation

    -       -       95       -       6       101  

Charges related to the separation of an executive officer, net

    -       511       -       -       -       511  
                                                 

Adjusted EBITDA

  $ 38,688     $ 4,593     $ 5,652     $ -     $ (8,238 )   $ 40,695  

 

 
 

 

 

Providence Service Corporation

Page 10

 

The Providence Service Corporation

Adjusted Earnings Per Share

(in thousands, except share and per share data)

(Unaudited)

 

   

Three months ended June 30,

   

Six months ended June 30,

 
   

2015

   

2014

   

2015

   

2014

 
                                 

Net income

  $ 6,634     $ 6,672     $ 12,871     $ 12,959  
                                 

Acquisition costs

    -       2,496       -       4,325  

Integration and restructuring costs

    -       844       -       858  

Ingeus acquisition related equity compensation

    1,524       486       3,057       486  

(Gain) Loss on foreign currency translation

    (714 )     61       (395 )     101  

Payments related to separation arrangements with certain former executive officers, net

    695       -       695       511  

Intangible amortization expense

    9,881       2,338       19,692       3,963  

Tax effected impact of adjustments

    (3,927 )     (2,157 )     (7,754 )     (3,759 )
                                 

Adjusted net income

    14,093       10,740       28,166       19,444  
                                 

Dividends on preferred stock

    (1,104 )     -       (1,698 )     -  

Amortization of preferred stock discount

    (825 )     -       (1,071 )     -  

Income allocated to participating securities

    (1,355 )     -       (2,159 )     -  
                                 

Adjusted net income available to common stockholders, diluted

    10,809       10,740       23,238       19,444  
                                 

Adjusted diluted earnings per common share

  $ 0.67     $ 0.74     $ 1.44     $ 1.36  
                                 

Diluted weighted-average number of common shares outstanding

    16,240,898       14,453,964       16,193,372       14,306,898  

 

 

 

 

 

--more--

 

 

 
 

 

 

Providence Service Corporation

Page 11

 

The Providence Service Corporation

Segment Information

(in thousands)

(Unaudited)

 

   

Three Months Ended June 30, 2015

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 

Revenues

  $ 270,690     $ 90,222     $ 92,175     $ 55,404     $ (240 )   $ 508,251  

Operating income (loss)

    18,876       4,787       (2,389 )     6,266       (7,620 )     19,920  

Depreciation and amortization

    2,329       1,767       3,332       7,185       344       14,957  

Net Income

    11,693       2,804       (1,905 )     3,749       (9,707 )     6,634  

Adjusted EBITDA (Non-GAAP)

    21,205       6,554       1,408       13,451       (6,581 )     36,037  
                                                 
   

Three Months Ended June 30, 2014

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 

Revenues

  $ 216,296     $ 91,333     $ 36,617     $ -     $ (293 )   $ 343,953  

Operating income (loss)

    15,925       2,049       2,649       -       (7,099 )     13,524  

Depreciation and amortization

    1,865       1,745       1,261       -       272       5,143  

Net Income

    9,545       1,182       2,321       -       (6,376 )     6,672  

Adjusted EBITDA (Non-GAAP)

    17,789       3,810       5,129       -       (4,235 )     22,493  
                                                 
   

Six Months Ended June 30, 2015

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 

Revenues

  $ 525,450     $ 176,409     $ 199,793     $ 112,836     $ (442 )   $ 1,014,046  

Operating income (loss)

    39,615       6,607       444       12,781       (17,184 )     42,263  

Depreciation and amortization

    4,606       3,614       6,648       14,367       622       29,857  

Net Income

    24,305       3,840       (4,286 )     7,595       (18,583 )     12,871  

Adjusted EBITDA (Non-GAAP)

    44,222       10,223       6,606       27,146       (15,867 )     72,330  
                                                 
   

Six Months Ended June 30, 2014

 
   

NET Services

   

Human Services

   

WD Services

   

HA Services

   

Corporate and Other

   

Total

 

Revenues

  $ 414,373     $ 175,435     $ 44,065     $ -     $ (517 )   $ 633,356  

Operating income (loss)

    35,061       729       3,043       -       (13,189 )     25,644  

Depreciation and amortization

    3,626       3,324       1,392       -       529       8,871  

Net Income

    20,954       380       2,530       -       (10,905 )     12,959  

Adjusted EBITDA (Non-GAAP)

    38,688       4,593       5,652       -       (8,238 )     40,695  

 

 

 

###

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