Exhibit 99.2
PROVIDENCE SERVICE CORPORATION
| | |
| AT THE COMPANY | | AT CAMERON ASSOCIATES |
| Fletcher McCusker – Chairman and CEO | | Alison Ziegler 212-554-5469 |
| 520-747-6600 | | |
FOR IMMEDIATE RELEASE
Providence Service Corporation Reports Q3 2011 Results
In Line With Recently Revised Guidance
Third Quarter Highlights:
| | • | | Revenue increased 8.5% over last year’s third quarter |
| | • | | Start-up and tax expenses contributed to higher costs |
| | • | | Net cash provided by operations totaled $10.1 million |
| | • | | LogistiCare continues to win new and incumbent contracts |
TUCSON, ARIZONA – November 2, 2011 –The Providence Service Corporation (Nasdaq: PRSC) today announced its financial results for the third quarter ended September 30, 2011. Earnings per diluted share was $0.15, at the high end of the Company’s recently revised guidance range issued on October 27.
For the third quarter of 2011, the Company reported revenue of $235.6 million, an increase of 8.5% from $217.2 million for the comparable period in 2010. Revenue from Providence’s non-emergency transportation (NET) services segment grew 7.4% to $146.0 million in the third quarter from $135.9 million in the prior year period. Revenue from the social services segment increased 10.2% to $89.5 million, up from $81.2 million in the third quarter of 2010. Revenue growth was consistent with new contract wins and organic growth.
Net income was $1.95 million, or $0.15 per diluted share, in the third quarter of 2011. Items negatively impacting the third quarter included contractual payment issues related to two contracts, atypical start-up costs related to new and expanded LogistiCare contracts, and an adjustment due to annual tax reconciliations. Net income was $2.9 million, or $0.22 per diluted share, in the third quarter of 2010.
Providence’s direct client census was approximately 57,100 at September 30, 2011 compared to 54,700 at September 30, 2010. The Company had approximately 10.4 million individuals eligible to receive services under its NET contracts at September 30, 2011 compared to approximately 8.4 million at September 30, 2010. Direct contracts numbered 595 at September 30, 2011 up from 547 at September 30, 2010.
For the first nine months of 2011, the Company reported revenue of $698.7 million, an increase of 5.8% from $660.4 million in the first nine months of 2010. Revenue from Providence’s NET services segment grew 6.3% to $427.0 million in the first nine months of 2011 from $401.5 million in the prior year period. Revenue from the social services segment increased 4.9% to $271.7 million, up from $258.9 million in the first nine months of 2010.
Net income was $11.3 million, or $0.85 per diluted share, in the first nine months of 2011 and included a non-cash charge of approximately $2.5 million, or $0.11 per share, related to the write-off of unamortized deferred financing fees of its senior credit facility. Net income was $19.3 million, or $1.44 per diluted share, in the first nine months of 2010.
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64 E. Broadway Blvd.— Tucson, Arizona 85701— Tel 520/747-6600— Fax 520/747-6605— www. provcorp.com
Providence Service Corporation
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At September 30, 2011, the Company had unrestricted cash and cash equivalents of $48.5 million. During the first nine months of 2011, the Company generated a total of $31.9 million in cash from operations. At September 30, 2011, the Company had long term liabilities of $164.0 million, down from $184.5 million at December 31, 2010 and $187.6 million at September 30, 2010.
“We are certainly disappointed with our earnings this quarter, but the issues are primarily growth related and not due to a decline in business,” stated Fletcher McCusker, Chairman and CEO. “Overall, in the medical transportation management space we have compiled an impressive win rate given the intensely competitive activity, which is a testament to LogistiCare’s record of performance throughout the country. While the start up costs have been atypical in the last few awards and involved higher than normal levels of travel and local expenses, we believe we have created goodwill with our payers and is a worthwhile tradeoff to generate multiyear contracts worth hundreds of millions of dollars.”
For the NET contracts up for renewal in 2011, to date the Company has announced that it has been awarded four of the nine incumbent contracts, in Delaware, Pennsylvania, South Carolina and Virginia. Three awards in Arkansas, Georgia and Nevada have yet to be finalized. Colorado and Connecticut were not renewed primarily due to price. In addition, LogistiCare has also implemented or been notified of four new state contract awards in 2011. As we announced recently, one of these states is Missouri, which was lost in a re-bid in October 2010, but has now re-contracted with LogistiCare as the new broker was unable to fulfill its contract. The other new states include Michigan, Wisconsin and a southern state we are not permitted to identify.
“We believe we are positioned to continue to benefit from recent trends that favor the privatization and in-home provision of social services. While we expect challenges from time to time, we remain bullish on our ability to win new business in a competitive environment,” concluded Mr. McCusker.
Guidance
For the fourth quarter of 2011, revenue is anticipated to be in the range of $245 to $250 million. Diluted earnings per share is now forecast to be between $0.30 and $0.32, down from prior estimates of $0.36 and $0.38. Our fourth quarter 2011 earnings guidance has been reduced by $0.06 for reasons that include incremental NET start up costs in Wisconsin, South Carolina, New Jersey and now Missouri, which are anticipated to continue through the fourth quarter, and a higher tax rate estimated at 45.5% in the fourth quarter. This compares to revenue of $219.3 million and diluted earnings per share of $0.33 in the fourth quarter of 2010.
Providence currently anticipates revenue for 2011 of between $944 and $949 million up from prior expectations of $933 to $943 million. Earnings per diluted share is now anticipated to be between $1.15 and $1.17 and includes the non-cash charge of approximately $2.5 million, or $0.11 per share, related to the write-off of unamortized deferred financing fees of its senior credit facility. This is down from prior estimates of between $1.29 and $1.33 per share. In 2010, Providence reported revenue of $879.7 million and diluted earnings per share of $1.78.
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, November 3, 2011, 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 or http://www.earnings.com. The call is also available by dialing (888) 680-0865 or for international callers (617) 213-4853 and by using the passcode 87937977. Participants may pre-register for the call athttps://www.theconferencingservice.com/prereg/key.process?key=PB6LVL6HB. Pre-registrants will be issued a pin number to use when dialing into the live call which will provide quick access to the conference by bypassing the operator upon connection.
A replay of the teleconference will be available on http://investor.provcorp.com and http://www.earnings.com. A replay will also be available until November 10, 2011 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 84992425.
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Providence Service Corporation
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About Providence
The Providence Service Corporation, through its owned and managed entities, provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence is different from many of its competitors in that it provides its social services primarily in the client’s own home or in community based settings versus treatment facilities or hospitals and provides its NET management services through local transportation providers rather than owning its own fleet of vehicles. The Company provides a range of services through its direct entities to approximately 57,100 clients through 595 active contracts at September 30, 2011, with an approximate 10.4 million individuals eligible to receive the Company’s non-emergency transportation services. Combined, the Company has an approximately $1 billion book of business including managed entities.
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, 2010. 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.
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Providence Service Corporation
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The Providence Service Corporation
Consolidated Statements of Income
(in thousands except share and per share data)
(UNAUDITED)
| | | | | | | | | | | | | | | | |
| | | Three months ended
September 30, | | | Nine months ended
September 30, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
Revenues: | | | | | | | | | | | | | | | | |
Home and community based services | | $ | 77,679 | | | $ | 69,045 | | | $ | 236,259 | | | $ | 222,060 | |
Foster care services | | | 8,598 | | | | 8,830 | | | | 25,518 | | | | 26,838 | |
Management fees | | | 3,229 | | | | 3,340 | | | | 9,909 | | | | 10,020 | |
Non-emergency transportation services | | | 146,046 | | | | 135,936 | | | | 426,982 | | | | 401,513 | |
| | | | | | | | | | | | | | | | |
| | | 235,552 | | | | 217,151 | | | | 698,668 | | | | 660,431 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Client service expense | | | 75,970 | | | | 71,547 | | | | 226,190 | | | | 219,055 | |
Cost of non-emergency transportation services | | | 137,551 | | | | 121,079 | | | | 395,887 | | | | 351,129 | |
General and administrative expense | | | 12,690 | | | | 12,172 | | | | 37,027 | | | | 34,740 | |
Depreciation and amortization | | | 3,402 | | | | 3,175 | | | | 9,979 | | | | 9,428 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 229,613 | | | | 207,973 | | | | 669,083 | | | | 614,352 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 5,939 | | | | 9,178 | | | | 29,585 | | | | 46,079 | |
Other (income) expense: | | | | | | | | | | | | | | | | |
Interest expense | | | 2,204 | | | | 3,933 | | | | 8,266 | | | | 12,375 | |
Loss on extinguishment of debt | | | — | | | | — | | | | 2,463 | | | | — | |
Interest income | | | (53 | ) | | | (62 | ) | | | (161 | ) | | | (189 | ) |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 3,788 | | | | 5,307 | | | | 19,017 | | | | 33,893 | |
Provision for income taxes | | | 1,837 | | | | 2,399 | | | | 7,742 | | | | 14,602 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 1,951 | | | $ | 2,908 | | | $ | 11,275 | | | $ | 19,291 | |
| | | | | | | | | | | | | | | | |
Earnings per share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.15 | | | $ | 0.22 | | | $ | 0.85 | | | $ | 1.46 | |
Diluted | | $ | 0.15 | | | $ | 0.22 | | | $ | 0.85 | | | $ | 1.44 | |
Weighted-average number of common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 13,255,367 | | | | 13,203,651 | | | | 13,238,043 | | | | 13,187,811 | |
Diluted | | | 13,307,177 | | | | 13,281,005 | | | | 13,316,459 | | | | 14,953,914 | |
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Providence Service Corporation
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The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
| | | | | | | | |
| | | September 30,
2011 | | | December 31,
2010 | |
| | | (Unaudited) | | | (Audited) | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 48,506 | | | $ | 61,261 | |
Accounts receivable, net of allowance of $5.8 million in
2011 and $5.3 million in 2010 | | | 80,605 | | | | 76,112 | |
Management fee receivable | | | 3,839 | | | | 5,840 | |
Other receivables | | | 1,994 | | | | 3,930 | |
Restricted cash | | | 5,121 | | | | 7,314 | |
Prepaid expenses and other | | | 18,384 | | | | 15,478 | |
Deferred tax assets | | | 997 | | | | 1,633 | |
| | | | | | | | |
Total current assets | | | 159,446 | | | | 171,568 | |
Property and equipment, net | | | 24,300 | | | | 16,401 | |
Goodwill | | | 113,708 | | | | 113,783 | |
Intangible assets, net | | | 60,563 | | | | 66,442 | |
Restricted cash, less current portion | | | 11,164 | | | | 9,080 | |
Other assets | | | 8,902 | | | | 9,659 | |
| | | | | | | | |
Total assets | | $ | 378,083 | | | $ | 386,933 | |
| | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Current portion of long-term obligations | | $ | 10,000 | | | $ | 18,113 | |
Accounts payable | | | 3,959 | | | | 2,888 | |
Accrued expenses | | | 35,965 | | | | 33,551 | |
Accrued transportation costs | | | 47,199 | | | | 41,869 | |
Deferred revenue | | | 2,614 | | | | 5,374 | |
Reinsurance liability reserve | | | 12,124 | | | | 11,898 | |
| | | | | | | | |
Total current liabilities | | | 111,861 | | | | 113,693 | |
Long-term obligations, less current portion | | | 142,993 | | | | 164,190 | |
Other long-term liabilities | | | 10,130 | | | | 8,721 | |
Deferred tax liabilities | | | 10,843 | | | | 11,580 | |
| | | | | | | | |
Total liabilities | | | 275,827 | | | | 298,184 | |
Commitments and contingencies | | | | | | | | |
Stockholders’ equity: | | | | | | | | |
| | | | | | | | |
Common stock: Authorized 40,000,000 shares;
$0.001 par value; 13,617,249 and 13,580,385 issued and outstanding (including treasury shares) | | | 14 | | | | 14 | |
Additional paid-in capital | | | 175,200 | | | | 172,540 | |
Retained deficit | | | (67,226 | ) | | | (78,501 | ) |
Accumulated other comprehensive loss, net of tax | | | (1,258 | ) | | | (881 | ) |
Treasury stock, at cost, 623,576 and 619,768 shares | | | (11,435 | ) | | | (11,384 | ) |
| | | | | | | | |
Total Providence stockholders’ equity | | | 95,295 | | | | 81,788 | |
Non-controlling interest | | | 6,961 | | | | 6,961 | |
| | | | | | | | |
Total stockholders’ equity | | | 102,256 | | | | 88,749 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 378,083 | | | $ | 386,933 | |
| | | | | | | | |
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Providence Service Corporation
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The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
(UNAUDITED)
| | | | | | | | |
| | | Nine months ended
September 30, | |
| | | 2011 | | | 2010 | |
Operating activities | | | | | | | | |
Net income | | $ | 11,275 | | | $ | 19,291 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation | | | 4,200 | | | | 3,654 | |
Amortization | | | 5,779 | | | | 5,774 | |
Amortization of deferred financing costs | | | 1,401 | | | | 1,844 | |
Loss on extinguishment of debt | | | 2,463 | | | | — | |
Provision for doubtful accounts | | | 2,378 | | | | 3,825 | |
Deferred income taxes | | | (429 | ) | | | 540 | |
Stock based compensation | | | 2,733 | | | | 1,037 | |
Excess tax benefit upon exercise of stock options | | | (3 | ) | | | (62 | ) |
Other | | | 705 | | | | (117 | ) |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | (2,423 | ) | | | (2,147 | ) |
Management fee receivable | | | 2,001 | | | | 951 | |
Other receivables | | | 1,941 | | | | (626 | ) |
Restricted cash | | | (183 | ) | | | (151 | ) |
Prepaid expenses and other | | | (3,194 | ) | | | (8,359 | ) |
Reinsurance liability reserve | | | 609 | | | | 2,788 | |
Accounts payable and accrued expenses | | | (97 | ) | | | 10,407 | |
Accrued transportation costs | | | 5,331 | | | | 5,961 | |
Deferred revenue | | | (2,758 | ) | | | (2,799 | ) |
Other long-term liabilities | | | 193 | | | | 444 | |
| | | | | | | | |
Net cash provided by operating activities | | | 31,922 | | | | 42,255 | |
Investing activities | | | | | | | | |
Purchase of property and equipment, net | | | (8,675 | ) | | | (8,417 | ) |
Acquisition of businesses, net of cash acquired | | | (5,279 | ) | | | — | |
Restricted cash for contract performance | | | 1,436 | | | | (2,410 | ) |
Purchase of short-term investments, net | | | (86 | ) | | | (94 | ) |
| | | | | | | | |
Net cash used in investing activities | | | (12,604 | ) | | | (10,921 | ) |
Financing activities | | | | | | | | |
Repurchase of common stock, for treasury | | | (51 | ) | | | — | |
Proceeds from common stock issued pursuant to stock option exercise | | | 33 | | | | 312 | |
Excess tax benefit upon exercise of stock options | | | 3 | | | | 62 | |
Proceeds from long-term debt | | | 115,000 | | | | — | |
Repayment of long-term debt | | | (144,311 | ) | | | (18,287 | ) |
Debt financing costs | | | (2,652 | ) | | | (61 | ) |
Capital lease payments | | | (11 | ) | | | (9 | ) |
| | | | | | | | |
Net cash used in financing activities | | | (31,989 | ) | | | (17,983 | ) |
| | | | | | | | |
Effect of exchange rate changes on cash | | | (84 | ) | | | 109 | |
| | | | | | | | |
Net change in cash | | | (12,755 | ) | | | 13,460 | |
Cash at beginning of period | | | 61,261 | | | | 51,157 | |
| | | | | | | | |
Cash at end of period | | $ | 48,506 | | | $ | 64,617 | |
| | | | | | | | |
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