TUCSON, Ariz., Aug. 10 The Providence Service Corporation (Nasdaq: PRSC) today announced record second quarter revenue and earnings per share for the period ended June 30, 2009.
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For the second quarter of 2009, the Company reported revenue of $191.8 million, an increase of 11% from $173.0 million for the comparable period in 2008. Revenue from Providence's social services segment grew 12% to $87.7 million in the second quarter from the prior year period and revenue from its non-emergency transportation (NET) services segment grew 10% to $104.1 million in the second quarter from the prior year period. Operating income grew 38% to $14.0 million in the second quarter as compared to $10.1 million recorded in the year ago quarter. Net income increased 53% to $5.3 million, or $0.40 per diluted share, in the quarter ended June 30, 2009, a record for the Company's second quarter. Included in the 2009 quarter was $447,000 in costs associated with its proxy contest. In the year ago quarter, net income was $3.4 million, or $0.27 per diluted share. Providence's direct client census was approximately 56,000 at June 30, 2009, up from approximately 52,000 at June 30, 2008, and the Company had an estimated 6.7 million individuals eligible to receive services under its NET contracts at June 30, 2009. The Company had 625 direct contracts at June 30, 2009 up from 604 at June 30, 2008.
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Managed entity revenue, which represents revenue of the not-for-profit social services organizations the Company provides management and/or administrative services to in return for a negotiated management fee, decreased 13% to $54.4 million for the quarter ended June 30, 2009 from $62.8 million for the prior year period. The decrease in managed entity revenue from period to period was primarily attributable to the effect of the Company's renegotiation of the terms of various contracts with managed entities and the Company's September 2008 acquisition and consolidation of substantially all of the assets in Illinois and Indiana of Camelot Community Care, Inc., a managed entity. Managed entity revenue is presented to provide investors with an additional measure of the size of the operations under Providence's management or administration and can help investors understand trends in management fee revenue. Managed client census decreased to approximately 23,000 at June 30, 2009 as compared to approximately 26,000 at June 30, 2008 and contracts of managed entities decreased from 344 to 300 year over year.
For the first six months of 2009, revenue increased 9% to $378.5 million from $346.7 million for the year ago period. Revenue from Providence's social services segment grew 11% to $172.9 million in the first six months of 2009 from the prior year period and revenue from its NET services segment grew 8% to $205.6 million in the first six months of 2009 from the prior year period. Operating income increased 38% to $29.0 million for the first six months of 2009 compared to $21.1 million in the first six months of 2008. Net income was $11.1 million, or $0.84 per diluted share, for the six month period ended June 30, 2009 compared to net income of $7.1 million, or $0.56 per diluted share, for the six months ended June 30, 2008. Included in the first six months of 2009 was $1.0 million in costs associated with the Company's proxy contest. Managed entity revenue was $107.8 million and $124.2 million in the first six months of 2009 and 2008, respectively.
"Aggressive cost control along with improved census related to an upturn in Medicaid enrollment has led to another solid quarter for the Company," said Fletcher McCusker, Chairman and CEO. "In the most recent contract cycle thus far, we have achieved 100% contract renewals and although we do not currently anticipate any benefit from healthcare reform in calendar 2009, the payer environment continues to stabilize. This has led to the year over year improvements in both our social services and NET segments and solid cash flow generation, including approximately $11.3 million in the second quarter alone. As our financial condition continues to strengthen, we plan to look at options to reduce debt and improve the Company's capitalization."
Guidance
While visibility in 2009 continues to improve, pending the completion of state budgets, the Company will refrain from providing additional guidance for 2009.
Conference Call
Providence will hold a conference call to discuss its results on Tuesday, August 11, 2009 at 11:00 a.m. EDT (9:00 a.m. MDT, 8:00 a.m. Arizona and PDT). 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 33388849. Participants may pre-register for the call at https://www.theconferencingservice.com/prereg/key.process?key=PTW8AV98A. 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 August 18, 2009 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 90155340.
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 and managed entities to over 78,000 clients through 925 contracts at June 30, 2009, with an estimated 6.7 million individuals eligible to receive the Company's non-emergency transportation services. Combined, the Company has a nearly $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 Income (in thousands except share and per share data) (UNAUDITED) Three months ended Six months ended June 30, June 30, ----------------------- ---------------------- 2009 2008 2009 2008 ---------- ---------- ---------- ---------- Revenues: Home and community based services $74,501 $65,385 $147,192 $131,281 Foster care services 9,446 7,566 18,394 14,518 Management fees 3,736 5,425 7,328 10,668 Non-emergency transportation services 104,149 94,649 205,630 190,223 ---------- ---------- ---------- ---------- 191,832 173,025 378,544 346,690 Operating expenses: Client service expense 69,482 62,172 136,356 123,656 Cost of non-emergency transportation services 95,223 87,459 185,044 173,706 General and administrative expense 10,056 10,100 21,947 21,766 Depreciation and amortization 3,097 3,166 6,181 6,486 ---------- ---------- ---------- ---------- Total operating expenses 177,858 162,897 349,528 325,614 ---------- ---------- ---------- ---------- Operating income 13,974 10,128 29,016 21,076 Other (income) expense: Interest expense 5,398 4,709 10,712 9,995 Interest income (62) (241) (178) (599) Income before income taxes 8,638 5,660 18,482 11,680 Provision for income taxes 3,388 2,222 7,355 4,538 ---------- ---------- ---------- ---------- Net income $5,250 $3,438 $11,127 $7,142 ========== ========== ========== ========== Earnings per share: Basic $0.40 $0.27 $0.85 $0.57 Diluted $0.40 $0.27 $0.84 $0.56 Weighted-average number of common shares outstanding: Basic 13,120,345 12,519,527 13,117,697 12,484,331 Diluted 13,207,330 12,693,880 13,189,950 12,677,379 The Providence Service Corporation Consolidated Balance Sheets (in thousands except share and per share data) June 30, December 31, 2009 2008 -------- -------- Assets (Unaudited) (Audited) Current assets: Cash and cash equivalents $38,695 $29,364 Accounts receivable-billed, net of allowance of $4.2 million in 2009 and $3.4 million in 2008 79,350 72,617 Accounts receivable - unbilled 434 424 Management fee receivable 7,348 7,703 Other receivables 4,983 3,149 Notes receivable 125 468 Restricted cash 6,990 7,804 Prepaid expenses and other 16,054 15,378 Deferred tax assets 3,909 4,757 -------- -------- Total current assets 157,888 141,664 Property and equipment, net 11,657 11,983 Notes receivable, less current portion - 132 Goodwill 113,231 112,770 Intangible assets, net 77,904 81,556 Restricted cash, less current portion 5,941 5,207 Other assets 11,788 12,351 -------- -------- Total assets $378,409 $365,663 ======== ======== Liabilities and stockholders' equity Current liabilities: Current portion of long-term obligations 17,891 $14,265 Accounts payable 4,068 3,005 Accrued expenses 30,477 27,233 Accrued transportation costs 31,412 32,051 Deferred revenue 5,125 3,375 Current portion of interest rate swap 1,278 1,431 Reinsurance liability reserve 10,015 8,847 -------- -------- Total current liabilities 100,266 90,207 Long-term obligations, less current portion 212,725 223,494 Other long-term liabilities 4,296 3,975 Deferred tax liabilities 10,980 10,096 -------- -------- Total liabilities 328,267 327,772 Commitments and contingencies Stockholders' equity: Common stock: Authorized 40,000,000 shares; $0.001 par value; 13,483,859 and 13,462,356 issued and outstanding (including treasury shares) 13 13 Additional paid-in capital 170,119 169,699 Retained deficit (112,127) (123,254) Accumulated other comprehensive loss, net of tax (3,440) (4,449) Treasury stock, at cost, 619,768 shares (11,384) (11,384) -------- -------- Total Providence stockholders' equity 43,181 30,625 Non-controlling interest 6,961 7,266 -------- -------- Total stockholders' equity 50,142 37,891 -------- -------- Total liabilities and stockholders' equity $378,409 $365,663 ======== ======== The Providence Service Corporation Consolidated Statements of Cash Flows (in thousands) (UNAUDITED) Six months ended June 30, ---------------------- 2009 2008 ------- ------- Operating activities Net income $11,127 $7,142 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,327 2,313 Amortization 3,854 4,173 Amortization of deferred financing costs 1,688 1,201 Provision for doubtful accounts 1,630 994 Deferred income taxes 1,526 (484) Stock based compensation 62 1,163 Excess tax benefit upon exercise of stock options (36) (185) Other 270 22 Changes in operating assets and liabilities, net of effects of acquisitions: Billed and unbilled accounts receivable (7,268) (2,283) Management fee receivable 355 (792) Other receivables (2,320) (1,346) Restricted cash 122 457 Reinsurance liability reserve 1,490 2,094 Prepaid expenses and other 1,840 (5,300) Accounts payable and accrued expenses 1,224 3,667 Accrued transportation costs (639) (798) Deferred revenue 1,741 (522) Other long-term liabilities 81 51 ------- ------- Net cash provided by operating activities 19,074 11,567 Investing activities Purchase of property and equipment, net (1,957) (2,075) Acquisition of businesses, net of cash acquired (277) (537) Acquisition earn out payments - (6,671) Restricted cash for contract performance (41) 2,536 Purchase of short-term investments, net (122) (45) Collection of notes receivable 474 2,873 ------- ------- Net cash used in investing activities (1,923) (3,919) Financing activities Repurchase of common stock, for treasury - (55) Proceeds from common stock issued pursuant to stock option exercise 16 469 Excess tax benefit upon exercise of stock options 36 185 Repayment of long-term debt (7,143) (4,325) Debt financing costs (791) (89) Capital lease payments (51) - ------- ------- Net cash used in financing activities (7,933) (3,815) ------- ------- Effect of exchange rate changes on cash 113 (141) ------- ------- Net change in cash 9,331 3,692 Cash at beginning of period 29,364 35,379 ------- ------- Cash at end of period $38,695 $39,071 ======= =======
SOURCE The Providence Service Corporation
