Exhibit 99.1
Press Release
National Mentor Holdings, Inc. Announces Third Quarter 2008 Results
BOSTON, Massachusetts, August 14, 2008 – National Mentor Holdings, Inc. (the “Company”) today announced its financial results for the third quarter ended June 30, 2008.
Third Quarter Results
Revenues for the quarter ended June 30, 2008 were $242.9 million, an increase of $13.8 million, or 6.0%, over revenues for the quarter ended June 30, 2007. Approximately $10.9 million of this increase was due to growth in our existing programs and approximately $2.8 million of this increase was due to revenues derived from new programs that began operations during the last two quarters of the fiscal year ended September 30, 2007 (“fiscal 2007”) and the first three quarters of the fiscal year ended September 30, 2008 (“fiscal 2008”).
Income from operations for the quarter ended June 30, 2008 was $12.0 million, an increase of $0.3 million as compared to income from operations for the quarter ended June 30, 2007. The operating margin was 4.9% for the quarter ended June 30, 2008, a decrease from 5.1% for the quarter ended June 30, 2007.
Net loss for the quarter ended June 30, 2008 was $2.0 million compared to net loss of $45 thousand for the quarter ended June 30, 2007.
Adjusted EBITDA(1) for the quarter ended June 30, 2008 was $25.8 million, an increase of $0.7 million, or 2.8%, as compared to Adjusted EBITDA for the quarter ended June 30, 2007. Adjusted EBITDA was negatively impacted by increased investments 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) income is provided on page 5.
Year-to-Date Results
Revenues for the nine months ended June 30, 2008 were $720.5 million, an increase of $43.9 million, or 6.5%, over revenues for the nine months ended June 30, 2007. Approximately $2.9 million of this increase relates to acquisitions that closed during fiscal 2007. Excluding the revenue growth from these acquisitions, revenues increased $41.0 million, or 6.1%. Approximately $32.8 million of this increase was due to growth in our existing programs. The remaining increase of $8.2 million was derived from new programs that began operations during fiscal 2007 and fiscal 2008.
Income from operations for the nine months ended June 30, 2008 was $35.5 million, a decrease of $3.3 million as compared to income from operations for the nine months ended June 30, 2007. The operating margin was 4.9% for the nine months ended June 30, 2008, a decrease from 5.7% for the nine months ended June 30, 2007.
Net loss for the nine months ended June 30, 2008 was $3.7 million compared to net income of $0.4 million for the nine months ended June 30, 2007.
Adjusted EBITDA for the nine months ended June 30, 2008 was $75.7 million, a decrease of $1.6 million, or 2.0%, as compared to Adjusted EBITDA for the nine months ended June 30, 2007. Adjusted EBITDA was negatively impacted by the ongoing effects of a change in reimbursement policy affecting the Company’s business in North Carolina beginning in the third quarter of fiscal 2007. In addition, increased investments by the Company in new program starts and other growth initiatives during the period significantly increased expenses, further reducing Adjusted EBITDA.
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 Monday, August 18, 2008 at 11:00 a.m. EST 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. EST on Monday, August 25, 2008. Those wishing to participate in the August 18 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 individuals with intellectual/developmental disabilities, at-risk children and youth with emotional, behavioral or medically complex needs and their families, and persons with acquired brain injury. The MENTOR Network’s customized services offer its clients, as well as the payers of these services, an attractive, cost-effective alternative to human services provided in large, institutional settings. The MENTOR Network provides services to clients in 37 states.
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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 | | Nine Months Ended | |
| | June 30 | | June 30 | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
Statements of Operations Data: | | | | | | | | | |
Net revenues | | $ | 242,897 | | $ | 229,086 | | $ | 720,503 | | $ | 676,623 | |
Cost of revenues | | 183,552 | | 173,176 | | 545,859 | | 509,985 | |
Gross profit | | 59,345 | | 55,910 | | 174,644 | | 166,638 | |
General and administrative expenses | | 34,196 | | 31,317 | | 100,394 | | 90,278 | |
Depreciation and amortization | | 13,186 | | 12,953 | | 38,710 | | 37,493 | |
Income from operations | | 11,963 | | 11,640 | | 35,540 | | 38,867 | |
Management fee of related party (1) | | (284 | ) | (234 | ) | (1,075 | ) | (672 | ) |
Other expense, net | | (62 | ) | (79 | ) | (246 | ) | (399 | ) |
Interest income | | 131 | | 241 | | 582 | | 776 | |
Interest expense | | (12,099 | ) | (12,330 | ) | (36,281 | ) | (37,803 | ) |
(Loss) income from continuing operations before income taxes | | (351 | ) | (762 | ) | (1,480 | ) | 769 | |
Provision (benefit) for income taxes | | 797 | | (717 | ) | 1,326 | | 381 | |
(Loss) income from continuing operations | | (1,148 | ) | (45 | ) | (2,806 | ) | 388 | |
Loss from discontinued operations, net of tax | | (846 | ) | — | | (846 | ) | — | |
Net (loss) income | | $ | (1,994 | ) | $ | (45 | ) | $ | (3,652 | ) | $ | 388 | |
| | | | | | | | | |
Additional financial data: | | | | | | | | | |
Program rent expense (2) | | $ | 6,315 | | $ | 5,500 | | $ | 18,349 | | $ | 15,995 | |
Adjusted EBITDA (3) | | $ | 25,834 | | $ | 25,129 | | $ | 75,685 | | $ | 77,256 | |
Reconciliation of Non-GAAP Financial Measures
($ in thousands)
(unaudited)
| | Three Months Ended | | Nine Months Ended | |
| | June 30 | | June 30 | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
Reconciliation from Net (loss) income to Adjusted EBITDA: | | | | | | | | | |
Net (loss) income | | $ | (1,994 | ) | $ | (45 | ) | $ | (3,652 | ) | $ | 388 | |
Provision (benefit) for income taxes | | 797 | | (717 | ) | 1,326 | | 381 | |
Interest income | | (131 | ) | (241 | ) | (582 | ) | (776 | ) |
Interest expense | | 12,099 | | 12,330 | | 36,281 | | 37,803 | |
Depreciation and amortization | | 13,186 | | 12,953 | | 38,710 | | 37,493 | |
Management fee of related party(1) | | 284 | | 234 | | 1,075 | | 672 | |
Loss on disposal of property and equipment | | 74 | | 336 | | 479 | | 737 | |
Gain on disposal of business units | | — | | — | | (65 | ) | — | |
Loss from discontinued operations, net of tax | | 846 | | — | | 846 | | — | |
Stock-based compensation (4) | | 673 | | 279 | | 1,267 | | 558 | |
Adjusted EBITDA (3) | | $ | 25,834 | | $ | 25,129 | | $ | 75,685 | | $ | 77,256 | |
Selected Balance Sheet and Cash Flow Highlights
($ in thousands)
(unaudited)
| | As of | |
| | June 30, 2008 | | September 30, 2007 | |
Balance Sheet Data: | | | | | |
Cash and cash equivalents | | $ | 52,007 | | $ | 29,373 | |
Working capital | | 60,759 | | 57,297 | |
Total assets | | 1,017,749 | | 1,012,628 | |
Total debt (5) | | 514,461 | | 516,295 | |
Shareholders’ equity | | 239,665 | | 246,031 | |
| | | | | | | |
| | Nine Months Ended | |
| | June 30, 2008 | | June 30, 2007 | |
Other Financial Data: | | | | | |
Cash flows provided by (used in): | | | | | |
Operating activities | | $ | 46,265 | | $ | 39,312 | |
Investing activities | | (19,975 | ) | (33,433 | ) |
Financing activities | | (3,656 | ) | (5,560 | ) |
| | | | | |
Purchases of property and equipment | | 15,903 | | 9,787 | |
Cash paid for acquisitions, net of cash received | | 5,876 | | 24,819 | |
| | | | | | | |
(1) Represents management fees paid to Vestar Capital Partners V, L.P.
(2) Program rent expense is defined as lease expenses related to buildings directly utilized in providing services to clients.
(3) Adjusted EBITDA represents net income (loss) before interest expense and interest income, income taxes, depreciation and amortization, and certain non-operating expenses.
(4) Represents non-cash stock-based compensation expense.
(5) Total debt includes obligations under capital leases.
CONTACT: Dwight Robson at 617-790-4293 or dwight.robson@thementornetwork.com.
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