Providence Service Corporation Releases Fourth Quarter and Year End 2009 Results
- Revenue increased 21% to $216 million, a record fourth quarter
- Diluted earnings per share of $0.42 for the quarter
- Cash from operations totaled $18 million for the quarter; over $61 million for 2009
- Total 2009 senior debt reduction of approximately $33 million through December
TUCSON, Ariz., March 10 /PRNewswire-FirstCall/ -- The Providence Service Corporation (Nasdaq: PRSC) today announced its financial results for the fourth quarter and calendar year ended December 31, 2009.
Fourth Quarter 2009 Results
For the fourth quarter of 2009, the Company reported revenue of $215.6 million, an increase of 21% from $178.0 million for the comparable period in 2008. Revenue from Providence's social services segment grew 5% to $85.6 million in the fourth quarter from the prior year period. Revenue from its non-emergency transportation (NET) services segment grew 35% to $130.0 million in the fourth quarter from the prior year period, benefitting from the July 1, 2009 startup of its New Jersey contract.
The Company reported operating income of $14.9 million and net income of $5.6 million, or $0.42 per diluted share, in the quarter ended December 31, 2009. In the year ago period, the Company reported an operating loss of $32.3 million and a net loss of $22.0 million, or $1.74 per diluted share, which included a $28.9 million asset impairment charge.
Providence's direct client census by quarter for 2009 was approximately 59,700 at March 31, 2009, 56,000 at June 30, 2009, 52,600 at September 30, 2009 and 62,200 at December 31, 2009. At December 31, 2009, the Company had an estimated 7.7 million individuals eligible to receive services under its NET contracts, up from approximately 6.3 million at December 31, 2008. The Company had 734 contracts at December 31, 2009 compared to 716 at December 31, 2008.
Full-Year 2009 Results
For the full year, revenue increased 16% to $801.0 million from $691.7 million for the year ago period. Revenue from Providence's social services segment grew 10% to $340.7 million in 2009 from the prior year period and revenue from its NET services segment grew 21% to $460.3 million in 2009 from the prior year period.
The Company reported operating income of $53.7 million and net income of $21.1 million, or $1.60 per diluted share, for 2009. Included in 2009 were a non-recurring tax benefit of $1.4 million, or $0.11 per diluted share resulting from the Company's true up of its 2008 income tax provision with the actual 2008 federal and state tax returns filed in 2009 and approximately $8.8 million, or approximately $0.39 per share, of savings resulting from the Company's 2009 salary and related benefits freeze, and reduced stock compensation. In addition, Providence's 2009 results included expenses associated with the Company's amended credit agreement and costs associated with the proxy contest of approximately $3.2 million, or $0.14 per share. This compares to an operating loss of $149.3 million and a net loss of $155.6 million, or $12.42 per diluted share, in 2008, which included a $169.9 million non-cash asset impairment charge and approximately $5.8 million expense for the vesting acceleration of all previously awarded and unvested stock options and restricted stock awards.
At December 31, 2009, the Company had cash and cash equivalents of $51.2 million. Over $61 million in cash from operations was generated in 2009, $18 million in the fourth quarter. On the strength of its strong cash flow, in October, as previously announced, the Board of Directors authorized a total voluntary prepayment on its senior debt of $20 million, which was completed in the fourth quarter. The voluntary prepayment, combined with scheduled principal payments reduced Providence's senior debt to approximately $131.8 million at December 31, 2009.
"The turnaround in our results in 2009 has been dramatic," commented Fletcher McCusker, Chairman and CEO. "We benefitted from our cost savings initiatives as well as increased Medicaid enrollment and an apparent shift toward home based care. Our business model of not owning beds or fleets of vehicles has enabled us to be nimble in the face of recent uncertain market conditions. While state budgets remain challenged, Medicaid has continued to grow due to the federal stimulus, new rules for eligibility, the State Children's Health Insurance Program (SCHIP) legislation and the federal court continuing to restrict states from cutting Medicaid services. While our expense structure should return to more normal levels in 2010, we anticipate that positive Medicaid and home based enrollment trends will benefit our business.
"Our business turnaround in 2009 also enabled us to generate significant cash flow during the year, over $61 million, much of which was used to reduce our debt. In total we repaid $32.6 million in senior debt in 2009 including voluntary prepayments and prepaid an additional $5 million on our senior debt in January 2010. We are pleased to report that our covenant issues of a year ago are resolved. Our improved financial picture also should facilitate our strategy of making strategic acquisitions in 2010.
"Finally, should health care reform move ahead, we believe we are well positioned to benefit. The plan currently under discussion dramatically increases Medicaid eligibility, adding approximately 12 million new enrollees. Even without reform, the President's budget contemplates federal funding for Medicaid to continue at stimulus levels, which combined with the growing preference for home based services should provide for continued organic growth."
Guidance
As previously announced, for 2010, the Company expects revenue of between $850 and $870 million, an increase of 6% to 9%, and earnings per diluted share of $1.32 to $1.35 assuming a 40.71% tax rate, and assuming approximately $0.39 per share of expenses not incurred in 2009; primarily the employee salary freeze and stock compensation expense. For the first quarter of 2010, the Company expects revenue of between $210 and $220 million and earnings per diluted share of between $0.45 and $0.48. This compares to revenue of $187 million and diluted earnings per share of $0.44 in the first quarter of 2009. This forecast does not include any unannounced contract wins or acquisitions.
Conference Call
Providence will hold a conference call at 11:00 a.m. EST (9:00 a.m. Arizona and MST and 8:00 a.m. PST) Thursday, March 11, 2010, 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) 679-8018, or for international callers (617) 213-4845 and by using the passcode 49097228. Participants may pre-register for the call at https://www.theconferencingservice.com/prereg/key.process?key=PLAVTX3GE. 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 March 18, 2010 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 41711418.
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 does not own or operate beds, treatment facilities, hospitals or group homes, preferring to provide services in the client's own home or other community setting. The Company provides a range of services through its direct entities to approximately 62,200 clients through 734 active contracts at December 31, 2009, with an estimated 7.7 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," "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, 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, 2008. 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--
The Providence Service Corporation
Consolidated Statements of Operations
(in thousands except share and per share data)
Three months ended Year ended
December 31, December 31,
------------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Home and community
based services $72,482 $67,068 $289,007 $258,003
Foster care services 9,728 10,331 37,284 32,343
Management fees 3,429 4,012 14,447 20,217
Non-emergency
transportation services 130,007 96,572 460,275 381,107
------- ------ ------- -------
215,646 177,983 801,013 691,670
Operating expenses:
Client service expense 70,360 70,456 275,126 253,652
Cost of non-emergency
transportation services 116,407 91,414 415,300 356,271
General and
administrative expense 10,855 16,441 44,010 48,412
Asset impairment charge - 28,930 - 169,930
Depreciation and
amortization 3,106 3,062 12,852 12,722
----- ----- ------ ------
Total operating expenses 200,728 210,303 747,288 840,987
------- ------- ------- -------
Operating income (loss) 14,918 (32,320) 53,725 (149,317)
Other (income) expense:
Interest expense 4,828 4,668 20,798 19,578
Interest income (91) (169) (366) (979)
--- ---- ---- ----
Income (loss) before
income taxes 10,181 (36,819) 33,293 (167,916)
Provision (benefit) for
income taxes 4,630 (14,866) 12,167 (12,311)
----- ------- ------ -------
Net income (loss) $5,551 $(21,953) $21,126 $(155,605)
====== ======== ======= =========
Earnings (loss) per share:
Basic $0.42 $(1.74) $1.61 $(12.42)
Diluted $0.42 $(1.74) $1.60 $(12.42)
Weighted-average number of
common shares outstanding:
Basic 13,151,652 12,600,346 13,130,092 12,531,869
Diluted 13,246,842 12,600,346 13,211,393 12,531,869
The Providence Service Corporation
Consolidated Balance Sheets
(in thousands except share and per share data)
December 31,
------------
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $51,157 $29,364
Accounts receivable-billed, net of allowance of
$2.9 million in 2009 and $3.4 million in
2008 80,458 72,617
Accounts receivable - unbilled 330 424
Management fee receivable 7,160 7,703
Other receivables 4,118 3,149
Notes receivable - 468
Restricted cash 8,154 7,804
Prepaid expenses and other 12,440 15,378
Deferred tax assets 3,558 4,757
----- -----
Total current assets 167,375 141,664
Property and equipment, net 11,166 11,983
Notes receivable, less current portion - 132
Goodwill 113,673 112,770
Intangible assets, net 73,963 81,556
Restricted cash, less current portion 5,942 5,207
Other assets 10,988 12,351
------ ------
Total assets $383,107 $365,663
======== ========
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term obligations $17,481 $14,265
Accounts payable 4,011 3,005
Accrued expenses 33,390 27,233
Accrued transportation costs 40,907 32,051
Deferred revenue 8,347 3,375
Current portion of interest rate swap 372 1,431
Reinsurance liability reserve 12,645 8,847
------ -----
Total current liabilities 117,153 90,207
Long-term obligations, less current portion 186,732 223,494
Other long-term liabilities 5,144 3,975
Deferred tax liabilities 11,740 10,096
------ ------
Total liabilities 320,769 327,772
Commitments and contingencies
Stockholders' equity:
Common stock: Authorized 40,000,000 shares;
$0.001 par value; 13,521,959 and 13,462,356
issued and outstanding (including treasury
shares) 14 13
Additional paid-in capital 170,551 169,699
Retained deficit (102,128) (123,254)
Accumulated other comprehensive loss, net of
tax (1,676) (4,449)
Treasury stock, at cost, 619,768 shares (11,384) (11,384)
------- -------
Total Providence stockholders' equity 55,377 30,625
Non-controlling interest 6,961 7,266
----- -----
Total stockholders' equity 62,338 37,891
------ ------
Total liabilities and stockholders' equity $383,107 $365,663
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The Providence Service Corporation
Consolidated Statements of Cash Flows
(in thousands)
Year ended
December 31,
------------
2009 2008
---- ----
Operating activities
Net income (loss) $21,126 $(155,605)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 4,690 4,505
Amortization 8,162 8,216
Amortization of deferred financing costs 2,979 2,698
Provision for doubtful accounts 4,479 4,084
Deferred income taxes 2,299 (14,553)
Stock based compensation 302 8,760
Excess tax benefit upon exercise of stock
options (140) (185)
Asset impairment charge - 169,930
Other 109 28
Changes in operating assets and liabilities, net
of effects of acquisitions:
Billed and unbilled accounts receivable (10,543) (9,277)
Management fee receivable 542 (2,364)
Other receivables (1,110) (417)
Restricted cash 112 (214)
Reinsurance liability reserve 4,115 2,621
Prepaid expenses and other 3,006 (5,828)
Accounts payable and accrued expenses 7,047 (6,681)
Accrued transportation costs 8,856 7,475
Deferred revenue 4,886 (702)
Other long-term liabilities 184 (105)
--- ----
Net cash provided by operating activities 61,101 12,386
Investing activities
Purchase of property and equipment, net (3,699) (4,664)
Acquisition of businesses, net of cash
acquired (1,038) (3,597)
Acquisition of management agreement (100) (418)
Acquisition earn out payments - (6,671)
Restricted cash for contract performance (1,197) 2,506
Purchase of short-term investments, net (194) (186)
Collection of notes receivable 600 3,292
--- -----
Net cash used in investing activities (5,628) (9,738)
Financing activities
Repurchase of common stock, for treasury - (125)
Proceeds from common stock issued pursuant to
stock option exercise 150 469
Excess tax benefit upon exercise of stock
options 140 185
Repayment of long-term debt (33,545) (8,650)
Debt financing costs (802) (89)
Capital lease payments (70) (1)
--- --
Net cash used in financing activities (34,127) (8,211)
------- ------
Effect of exchange rate changes on cash 447 (452)
--- ----
Net change in cash 21,793 (6,015)
Cash at beginning of period 29,364 35,379
------ ------
Cash at end of period $51,157 $29,364
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SOURCE The Providence Service Corporation
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