National Mentor (NMH) 8-K National Mentor Holdings, Inc. Announces Second Quarter 2010 Results

Exhibit 99.1

Press Release

National Mentor Holdings, Inc. Announces Second Quarter 2010 Results

BOSTON, Massachusetts, May 13, 2010 — National Mentor Holdings, Inc. (the “Company”) today announced its financial results for the second quarter ended March 31, 2010.

Second Quarter Results

Revenue for the quarter ended March 31, 2010 was $252.5 million, an increase of $11.8 million, or 4.9%, over revenue for the quarter ended March 31, 2009. Revenue increased $13.1 million related to acquisitions that closed during the period from January 1, 2009 to March 31, 2010 and $1.9 million related to organic growth, including growth related to new programs. Revenue growth was partially offset by a reduction in revenue of $3.2 million from businesses we divested during the same period.

Income from operations for the quarter ended March 31, 2010 was $10.2 million, a decrease of $0.1 million as compared to income from operations for the quarter ended March 31, 2009. The operating margin was 4.0% for the quarter ended March 31, 2010, a decrease from 4.3% for the quarter ended March 31, 2009.

Net loss for the quarter ended March 31, 2010 was $4.7 million compared to net loss of $1.2 million for the quarter ended March 31, 2009.

Adjusted EBITDA⁽¹⁾ for the quarter ended March 31, 2010 was $25.3 million, an increase of $1.5 million, or 6.4%, as compared to Adjusted EBITDA for the quarter ended March 31, 2009. The increase in Adjusted EBITDA was the result of the increase in revenue noted above, as well as our on-going cost containment efforts. Adjusted EBITDA was negatively impacted by an increase in health insurance costs and an increase related to investment in growth initiatives.

(1) Adjusted EBITDA is a non-GAAP financial performance measure used by management, which is net income (loss) before interest expense and interest income, income taxes, depreciation and amortization, and certain non-operating expenses. A reconciliation of Adjusted EBITDA to net loss is provided on page 5.

Year-to-Date Results

Revenue for the six months ended March 31, 2010 was $504.3 million, an increase of $22.4 million, or 4.6%, over revenue for the six months ended March 31, 2009. Revenue increased $22.5 million related to acquisitions that closed during the period from October 1, 2009 to March 31, 2010 and $6.2 million related to organic growth, including growth related to new programs. Revenue growth was partially offset by a reduction in revenue of $6.3 million from businesses we divested during the same period.

Income from operations for the six months ended March 31, 2010 was $21.1 million, an increase of $0.3 million as compared to income from operations for the six months ended March 31, 2009. The operating margin was 4.2% for the six months ended March 31, 2010, a decrease from 4.3% for the six months ended March 31, 2009.

Net loss for the six months ended March 31, 2010 was $4.7 million compared to net loss of $3.5 million for the six months ended March 31, 2009.

Adjusted EBITDA⁽¹⁾ for the six months ended March 31, 2010 was $51.3 million, an increase of $3.9 million, or 8.2%, as compared to Adjusted EBITDA for the six months ended March 31, 2009. The increase in Adjusted EBITDA was the result of the increase in revenue noted above, as well as our on-going cost containment efforts. Adjusted EBITDA was negatively impacted by an increase in health insurance costs, an increase related to investment in growth initiatives and an increase in workers’ compensation costs.

The reported results are available on the Company’s investor relations web site at www.tmnfinancials.com. The user name “mentor” and the password “results” are required in order to access this site. In addition, National Mentor Holdings, Inc. will hold a conference call Friday, May 14, 2010 at 11:00 a.m. EDT to discuss its financial results. The call will be broadcast live on the web at www.tmnfinancials.com and at www.fulldisclosure.com. A rebroadcast of the call will be available on both web sites until 5:00 p.m. EDT on Friday, May 21, 2010. Those wishing to participate in the May 14 conference call by telephone are required to email their name and affiliation to dwight.robson@thementornetwork.com for dial-in information.

National Mentor Holdings, Inc., which markets its services under the name The MENTOR Network, is a leading provider of home and community-based human services to adults and children with intellectual and/or developmental disabilities, acquired brain injury and other catastrophic injuries and illnesses; and to youth with emotional, behavioral and medically complex challenges. The MENTOR Network’s customized services offer its clients, as well as the payors of these services, an attractive, cost-effective alternative to human services provided in large, institutional settings. The MENTOR Network provides services to clients in 36 states.

* * * * * * * * * * *

From time to time, the Company may make forward-looking statements in its public disclosures. The forward-looking statements are based on estimates and assumptions made by management of the Company and are believed to be reasonable, although they are inherently uncertain and difficult to predict. The forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from any such forward-looking statements, including the risks and uncertainties disclosed as Forward-Looking Statements and Risk Factors included in the Company’s filings with the Securities and Exchange Commission.

This press release includes presentations of Adjusted EBITDA because it is the primary measure used by management to assess financial performance. Adjusted EBITDA represents net income (loss) before interest expense and interest income, income taxes, depreciation and amortization, and certain non-operating expenses. Reconciliations of net income (loss) to Adjusted EBITDA are presented within the tables below. Adjusted EBITDA does not represent and should not be considered an alternative to net income or cash flows from operations, as determined by accounting principles generally accepted in the United States, or GAAP. While Adjusted EBITDA is frequently used as a measure of financial performance and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.

Selected Financial Highlights
($ in thousands)
(unaudited)

	Three Months Ended						Six Months Ended
	March 31						March 31
	2010			2009			2010			2009
Statements of Operations Data:
Net revenues	$	252,502		$	240,737		$	504,330		$	481,970
Cost of revenues		193,659			184,386			385,502			367,474
Gross profit		58,843			56,351			118,828			114,496
General and administrative expenses		34,197			32,724			68,861			67,326
Depreciation and amortization		14,444			13,287			28,866			26,341
Income from operations		10,202			10,340			21,101			20,829
Management fee of related party (1)		(287	)		(259	)		(563	)		(482	)
Other expense, net		(185	)		(440	)		(128	)		(801	)
Interest income		18			28			31			144
Interest income from related party		469			117			945			117
Interest expense		(11,520	)		(11,742	)		(23,401	)		(24,181	)
Loss from continuing operations before income taxes		(1,303	)		(1,956	)		(2,015	)		(4,374	)
Benefit for income taxes		(736	)		(700	)		(1,369	)		(736	)
Loss from continuing operations		(567	)		(1,256	)		(646	)		(3,638	)
(Loss) income from discontinued operations, net of tax		(4,089	)		74			(4,052	)		116
Net loss	$	(4,656	)	$	(1,182	)	$	(4,698	)	$	(3,522	)
Additional financial data:
Program rent expense	$	7,222		$	6,279		$	14,085		$	12,624
Adjusted EBITDA (2)	$	25,262		$	23,732		$	51,322		$	47,433

Reconciliation of Non-GAAP Financial Measures
($ in thousands)
(unaudited)

	Three Months Ended						Six Months Ended
	March 31						March 31
	2010			2009			2010			2009
Reconciliation from Net loss to Adjusted EBITDA:
Net loss		($4,656	)		($1,182	)		($4,698	)		($3,522	)
Loss (income) from discontinued operations, net of tax		4,089			(74	)		4,052			(116	)
Benefit for income taxes		(736	)		(700	)		(1,369	)		(736	)
Interest income		(18	)		(28	)		(31	)		(144	)
Interest income from related party		(469	)		(117	)		(945	)		(117	)
Interest expense		11,520			11,742			23,401			24,181
Depreciation and amortization		14,444			13,287			28,866			26,341
Management fee of related party (1)		287			259			563			482
Loss on disposal of property and equipment		296			208			389			267
Gain on disposal of assets		—			—			(43	)		(38	)
Stock-based compensation (3)		134			337			248			835
Acquisition Costs (4)		190			—			708			—
Predecessor company claims (5)		181			—			181			—
Adjusted EBITDA (2)	$	25,262		$	23,732		$	51,322		$	47,433

Selected Balance Sheet and Cash Flow Highlights
($ in thousands)
(unaudited)

	As of
	March 31, 2010		September 30, 2009
Balance Sheet Data:
Cash and cash equivalents	$	13,722	$	23,650
Working capital(6)		40,689		47,836
Total assets		993,453		995,610
Total debt (7)		508,042		509,976
Shareholder’s equity		222,978		223,728

	Six Months Ended
	March 31, 2010			March 31, 2009
Other Financial Data :
Cash flows provided by (used in):
Operating activities	$	31,777		$	22,296
Investing activities		(39,771	)		(36,219	)
Financing activities		(1,934	)		(9,116	)
Purchases of property and equipment		9,061			17,263
Cash paid for acquisitions, net		29,199			13,113

(1)	Represents management fees paid to Vestar Capital Partners V, L.P.
(2)	Adjusted EBITDA represents net income (loss) before interest expense and interest income, income taxes, depreciation and amortization, and certain non-operating expenses.
(3)	Represents non-cash stock-based compensation expense.
(4)	Represents expensed transaction costs related to acquisitions as a result of the adoption of Accounting Standards Codification 805,Business Combinations, on October 1, 2009.
(5)	Represents insurance claims incurred by the Predecessor Company (prior to the acquisition by Vestar on June 29, 2006).
(6)	Working capital is calculated by subtracting current liabilities from current assets.
(7)	Total debt includes obligations under capital leases.

CONTACT: Dwight Robson at 617-790-4293 ordwight.robson@thementornetwork.com.

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