RESCARE SECOND QUARTER 2013 RESULTS
Second Quarter 2013 Financial Results
Revenues for the second quarter of 2013 were $396.2 million, which was a 0.9% decrease from prior year period revenues of $399.9 million. Contract losses and modifications in Workforce Services and Youth Services segments were partially offset by increased revenues from acquisitions in our Residential and HomeCare segments since the second quarter of 2012.
Net income was $10.2 million for the second quarter of 2013, compared with $4.8 million in the same period of 2012. The increase is primarily due to lower interest expense and a $7.1 million pre-tax charge for extinguishment of debt in the second quarter of 2012, related to the April 5, 2012 refinancing of our credit facility. Adjusted EBITDA for the second quarter of 2013 was $33.2 million versus $32.9 million in the prior year quarter.
RES-CARE, INC.
Unaudited Financial Highlights
(In thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
| Income Statement Data: | ||||||||||||||||
| Revenues | $ | 396,233 | $ | 399,902 | $ | 785,687 | $ | 797,244 | ||||||||
| Cost of services | 295,168 | 301,143 | 589,544 | 600,423 | ||||||||||||
| Gross profit | 101,065 | 98,759 | 196,143 | 196,821 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Operational general and administrative | 61,049 | 58,732 | 119,819 | 119,081 | ||||||||||||
| Corporate general and administrative | 16,244 | 16,464 | 31,354 | 34,131 | ||||||||||||
| Total operating expenses | 77,293 | 75,196 | 151,173 | 153,212 | ||||||||||||
| Operating income | 23,772 | 23,563 | 44,970 | 43,609 | ||||||||||||
| Interest expense, net | 7,665 | 8,389 | 16,202 | 18,832 | ||||||||||||
| Loss on extinguishment of debt | — | 7,129 | — | 7,129 | ||||||||||||
| Income before income taxes | 16,107 | 8,045 | 28,768 | 17,648 | ||||||||||||
| Income tax expense | 5,868 | 3,246 | 7,233 | 7,114 | ||||||||||||
| Net income | 10,239 | 4,799 | 21,535 | 10,534 | ||||||||||||
| Net loss – noncontrolling interest | (40 | ) | (31 | ) | (76 | ) | (61 | ) | ||||||||
| Net income – Res-Care, Inc. | $ | 10,279 | $ | 4,830 | $ | 21,611 | $ | 10,595 | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency translation adjustments | (223 | ) | (132 | ) | (414 | ) | 29 | |||||||||
| Comprehensive income attributable to Res-Care, Inc. | $ | 10,056 | $ | 4,698 | $ | 21,197 | $ | 10,624 | ||||||||
| Total comprehensive income | $ | 10,016 | $ | 4,667 | $ | 21,121 | $ | 10,563 | ||||||||
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RES-CARE, INC.
Unaudited Financial Highlights (continued)(In thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net income to EBITDA and Adjusted EBITDA: | ||||||||||||||||
| Net income | $ | 10,239 | $ | 4,799 | $ | 21,535 | $ | 10,534 | ||||||||
| Add: Interest, net | 7,665 | 8,389 | 16,202 | 18,832 | ||||||||||||
| Loss on extinguishment of debt | — | 7,129 | — | 7,129 | ||||||||||||
| Depreciation and amortization | 8,531 | 8,202 | 16,726 | 17,009 | ||||||||||||
| Income tax expense | 5,868 | 3,246 | 7,233 | 7,114 | ||||||||||||
EBITDA (1) | 32,303 | 31,765 | 61,696 | 60,618 | ||||||||||||
| Add: Share-based compensation | 848 | 851 | 1,552 | 2,025 | ||||||||||||
| Acquisition costs | — | 264 | — | 264 | ||||||||||||
Adjusted EBITDA (1) | $ | 33,151 | $ | 32,880 | $ | 63,248 | $ | 62,907 | ||||||||
June 30, 2013 | December 31, 2012 | |||||||
| Balance Sheet Data: | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 61,076 | $ | 50,134 | ||||
| Accounts receivable, net | 230,439 | 228,377 | ||||||
| Other current assets | 44,467 | 39,705 | ||||||
| Total current assets | 335,982 | 318,216 | ||||||
| Property and equipment, net | 98,202 | 97,030 | ||||||
| Goodwill | 289,686 | 288,265 | ||||||
| Other intangible assets, net | 319,287 | 321,293 | ||||||
| Other assets | 23,972 | 27,154 | ||||||
| $ | 1,067,129 | $ | 1,051,958 | |||||
| LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||
| Current liabilities | $ | 166,775 | $ | 175,174 | ||||
| Other long-term liabilities | 165,105 | 162,722 | ||||||
| Long-term debt | 368,566 | 370,052 | ||||||
| Shareholder’s equity | 366,683 | 344,010 | ||||||
| $ | 1,067,129 | $ | 1,051,958 | |||||
| (1) | EBITDA is defined as income from continuing operations before depreciation and amortization, net interest expense, loss on extinguishment of debt and income taxes. Adjusted EBITDA is defined as EBITDA before share-based compensation and acquisition costs. EBITDA and Adjusted EBITDA should not be considered as measures of financial performance under accounting principles generally accepted in the United States of America. The items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. Management routinely calculates and presents EBITDA and Adjusted EBITDA because it believes that EBITDA and Adjusted EBITDA are useful to investors and are used as analytical indicators within the industry to evaluate performance, measure leverage capacity and debt service ability, and to estimate current or prospective enterprise value. EBITDA is also used in measurements under certain covenants contained in the Company’s credit agreement. |
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RES-CARE, INC.
Unaudited Financial Highlights (continued)
(In thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
| Cash Flow Data: | ||||||||||||||||
| Net income | $ | 10,239 | $ | 4,799 | $ | 21,535 | $ | 10,534 | ||||||||
| Adjustments to reconcile net income to cash provided by (used in) operating activities: | ||||||||||||||||
| Depreciation and amortization | 8,531 | 8,202 | 16,726 | 17,009 | ||||||||||||
| Amortization of discount and deferred debt issuance costs | 872 | 592 | 1,742 | 1,267 | ||||||||||||
| Share-based compensation | 848 | 851 | 1,552 | 2,025 | ||||||||||||
| Deferred income taxes, net | 383 | (476 | ) | 2,347 | 624 | |||||||||||
| Provision for losses on accounts receivable | 1,525 | 1,336 | 3,343 | 2,885 | ||||||||||||
| Loss on extinguishment of debt, net of original issue discount paid | — | 6,400 | — | 6,400 | ||||||||||||
| Loss on sale of assets | (2 | ) | 60 | 100 | 95 | |||||||||||
| Changes in operating assets and liabilities | 2,500 | 3,802 | (13,279 | ) | (16,320 | ) | ||||||||||
| Cash provided by (used in) operating activities | 24,896 | 25,566 | 34,066 | 24,519 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Proceeds from sale of assets | 103 | 33 | 184 | 43 | ||||||||||||
| Purchases of property and equipment | (4,109 | ) | (3,154 | ) | (8,212 | ) | (7,415 | ) | ||||||||
| Acquisitions of businesses, net of cash acquired | (2,227 | ) | (4,112 | ) | (2,234 | ) | (8,662 | ) | ||||||||
| Cash used in investing activities | (6,233 | ) | (7,233 | ) | (10,262 | ) | (16,034 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Debt repayments, net | (4,281 | ) | 5,745 | (12,779 | ) | 3,131 | ||||||||||
| Debt issuance costs | 6 | (3,978 | ) | (2 | ) | (3,978 | ) | |||||||||
| Cash (used in) provided by financing activities | (4,275 | ) | 1,767 | (12,781 | ) | (847 | ) | |||||||||
| Effect of exchange rate on cash and cash equivalents | (15 | ) | (55 | ) | (81 | ) | 9 | |||||||||
| Increase in cash and cash equivalents | $ | 14,373 | $ | 20,045 | $ | 10,942 | $ | 7,647 | ||||||||
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RES-CARE, INC.
Unaudited Financial Highlights (continued)
(Dollars in thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
| Segment Data: | ||||||||||||||||
| Revenues: | ||||||||||||||||
| Residential Services | $ | 207,580 | $ | 202,943 | $ | 412,081 | $ | 403,741 | ||||||||
| ResCare HomeCare | 89,991 | 84,129 | 178,059 | 168,148 | ||||||||||||
| Youth Services | 42,494 | 45,042 | 84,374 | 91,599 | ||||||||||||
| Workforce Services | 39,596 | 51,487 | 79,414 | 100,316 | ||||||||||||
| Pharmacy Services | 16,572 | 16,301 | 31,759 | 33,440 | ||||||||||||
| Consolidated | $ | 396,233 | $ | 399,902 | $ | 785,687 | $ | 797,244 | ||||||||
Operating Income(1): | ||||||||||||||||
| Residential Services | $ | 24,493 | $ | 27,436 | $ | 48,891 | $ | 54,005 | ||||||||
| ResCare HomeCare | 6,064 | 5,432 | 10,596 | 10,230 | ||||||||||||
| Youth Services | 2,810 | 3,604 | 5,871 | 6,865 | ||||||||||||
| Workforce Services | 4,068 | 2,355 | 7,680 | 4,303 | ||||||||||||
| Pharmacy Services | 2,577 | 1,167 | 3,604 | 2,312 | ||||||||||||
| Corporate | (16,240 | ) | (16,431 | ) | (31,672 | ) | (34,106 | ) | ||||||||
| Consolidated | $ | 23,772 | $ | 23,563 | $ | 44,970 | $ | 43,609 | ||||||||
Operating Margin(1): | ||||||||||||||||
| Residential Services | 11.8 | % | 13.5 | % | 11.9 | % | 13.4 | % | ||||||||
| ResCare HomeCare | 6.7 | % | 6.5 | % | 6.0 | % | 6.1 | % | ||||||||
| Youth Services | 6.6 | % | 8.0 | % | 7.0 | % | 7.5 | % | ||||||||
| Workforce Services | 10.3 | % | 4.6 | % | 9.7 | % | 4.3 | % | ||||||||
| Pharmacy Services | 15.6 | % | 7.2 | % | 11.3 | % | 6.9 | % | ||||||||
| Corporate | (4.1 | %) | (4.1 | %) | (4.0 | %) | (4.3 | %) | ||||||||
| Consolidated | 6.0 | % | 5.9 | % | 5.7 | % | 5.5 | % | ||||||||
| (1) | Other (expense) income, which is included with corporate general and administrative expenses per the Income Statement Data on page 1, has been allocated for purposes of segment reporting. |
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