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Providence Service Corporation Announces Record Revenues and Earnings in the First Quarter of 2009

First Quarter Highlights:

- Revenue gained 7.5% to $187 million compared to Q1 2008

- Net income increased 58.7% compared to Q1 2008, rising to $5.9 million, or $0.44 per diluted share

- Increases in client census and rate combined with increased efficiencies in operations contributed to record earnings

- Cash from operations totaled $7.8 million

- Sale of NET Services operations suspended by Providence

TUCSON, Ariz., May 6 /PRNewswire-FirstCall/ -- The Providence Service Corporation (Nasdaq: PRSC) today announced results for the first quarter of 2009 ended March 31, 2009.

For the first quarter of 2009, the Company reported revenue of $186.7 million, an increase of approximately 7.5% from $173.7 million for the comparable period in 2008. Revenue from Providence's social services segment grew 9.1% to $85.2 million in the first quarter compared to $78.1 million in the prior year period while revenue from its non-emergency transportation (NET) services business totaled $101.5 million in the first quarter of 2009, an increase of 6.2% from $95.6 million in the first quarter of 2008.

Operating income increased 37.4% to $15.0 million in the first quarter of 2009 compared to $10.9 million recorded in the year ago period. Net income gained 58.7% to $5.9 million, or $0.44 per diluted share, in the quarter ended March 31, 2009, and included approximately $2.1 million in costs and expenses related to the amended credit agreement, the now abandoned consent solicitation and costs related to the potential sale of non-strategic assets. In the year ago quarter, net income was $3.7 million, or $0.29 per diluted share.

Providence's direct client census was approximately 60,000 at March 31, 2009, up from over 55,000 at March 31, 2008, and the Company had over six million individuals eligible to receive services under its NET contracts at March 31, 2009. The Company had 726 direct contracts at March 31, 2009 up from 705 at March 31, 2008.

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 13.2% to $53.4 million for the quarter ended March 31, 2009 from $61.5 million for the prior year period. The decrease in managed entity revenue from period to period was primarily attributable to 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 was approximately 22,000 at March 31, 2009 as compared to approximately 25,000 at March 31, 2008. Contracts of managed entities decreased to 293 from 325 year over year.

"Given the difficult business conditions we experienced in the back half of 2008, we are particularly pleased to see such across the board improvements in the first quarter both from the traction from operating efficiencies realized as well as external improvements in the payer sector," said Fletcher McCusker, Chairman and CEO. "Our rates have improved, referral impediments have eased, our census is up, our operational improvements, including cost cutting measures, initiated last year in our most challenging markets have proven successful and most of the expense reductions we announced expecting continued pressure on revenue have been implemented. The social services segment contributed $0.37 per diluted share while the NET segment contributed $0.07 to diluted earnings per share. The diluted earnings per share for the NET segment include a corporate overhead allocation, all interest related to senior debt, and approximately $1.6 million comprised of the amended credit agreement fees and expense and costs related to the sale of non-strategic assets."

"We saw our payer environment begin to stabilize in our social services markets in the first quarter of 2009. We attribute much of this to the favorable psychology associated with the passage of the Children's Health Insurance Program Reauthorization Act (signed into law in February 2009), the American Recovery and Reinvestment Act of 2009, and a Federal court decision that permanently enjoined the State of California from making any Medicaid cuts. For the first time since July 2008, we believe that state governments are now operating under the assumption that there will be additional federal assistance to help manage the services afforded our indigent populations. With respect to our NET Services operating segment, we saw some rates improve along with lower utilization, which resulted in improved operating margin for the first quarter of 2009. Given the current favorable Medicaid outlook, anticipated new funding availability for our payers and the improvement in performance in both segments of our operations, we have suspended efforts to sell our NET services operations in favor of growing both segments of our business and keeping them working together on behalf of our state payers to maximize value for our stockholders."

"There was clearly pent up demand that resulted from the rationing of care that occurred in the back half of 2008 and we remain cautious regarding the remainder of 2009. A number of states still face record deficits and fiscal 2010 state budgets will not be set until around June 2009. While we are not ready to issue guidance based upon our first quarter results, we believe there is more rational behavior and budget planning returning to the system of care."

"Our staff's commitment to the quality of our services and outcomes of our programs is very impressive and we are grateful to them for their dedication."


The Company will not provide any further guidance for the year at this time.

Conference Call

Providence will hold a conference call to discuss its results and corporate developments on Thursday, May 7, 2009 at 11:00 a.m. EDT (9:00 a.m. MDT and 8:00 a.m. Arizona and PDT). Interested parties are invited to listen to the call live over the Internet at or The call is also available by dialing (888) 679-8040, or for international callers (617) 213-4851 and by using the passcode 38247809. Participants may pre-register for the call at 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 and A replay will also be available until May 14, 2009 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 62359874.

About Providence

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 81,000 clients through 1,019 contracts at March 31, 2009, with an estimated 6.7 million individuals eligible to receive the Company's non-emergency transportation services related to its LogistiCare operations. Combined, the Company has a nearly $1 billion book of business including managed entities.

Certain statements herein, such as any statements about Providence's confidence or strategies or its expectations about revenues, results of operations, profitability, earnings per share, contracts, collections, award of contracts, acquisitions and related growth, growth resulting from initiatives in certain states, effective tax rate or market opportunities, constitute "forward-looking statements" within the meaning of the private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause Providence's actual results or achievements to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, reliance on government-funded contracts, risks associated with government contracting, risks involved in managing government business, legislative or policy changes, challenges resulting from growth or acquisitions, adverse media and legal, economic and other risks detailed in Providence's filings with the Securities and Exchange Commission, including its latest Form 10-K. Words such as "believe," "demonstrate," "expect," "estimate," "anticipate," "should" and "likely" and similar expressions identify 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. Providence undertakes no obligation to update any forward-looking statement contained herein.

                           --financial tables to follow--

                           The Providence Service Corporation
                            Consolidated Statements of Income
                     (in thousands except share and per share data)

                                                   Three months ended
                                                       March 31,
                                                  2009            2008
      Home and community based services         $72,691         $65,896
      Foster care services                        8,948           6,952
      Management fees                             3,592           5,242
      Non-emergency transportation services     101,481          95,574
                                                186,712         173,664

    Operating expenses:
      Client service expense                     66,874          61,483
      Cost of non-emergency
       transportation services                   89,822          86,248
      General and administrative expense         11,891          11,666
      Depreciation and amortization               3,084           3,320

    Total operating expenses                    171,671         162,717

    Operating income                             15,041          10,947

    Other (income) expense:
      Interest expense                            5,314           5,285
      Interest income                              (116)           (358)

    Income before income taxes                    9,843           6,020

    Provision for income taxes                    3,966           2,316

    Net income                                   $5,877          $3,704

    Earnings per share:
      Basic                                       $0.45           $0.30
      Diluted                                     $0.44           $0.29

    Weighted-average number of common
     Shares outstanding:
      Basic                                  13,115,018      12,527,875
      Diluted                                14,851,279      12,739,617

                       The Providence Service Corporation
                          Consolidated Balance Sheets
                 (in thousands except share and per share data)

                                              March 31,      December 31,
                                                2009            2008
    Assets                                   (Unaudited)      (Audited)
    Current assets:
      Cash and cash equivalents                $32,149         $29,364
      Accounts receivable-billed, net of
       allowance of $5.3 million in 2009
       and $3.4 million in 2008                 81,879          72,617
      Accounts receivable -unbilled                514             424
      Management fee receivable                  7,644           7,703
      Other receivables                          3,322           3,149
      Notes receivable                             395             468
      Restricted cash                            7,877           7,804
      Prepaid expenses and other                11,941          15,378
      Deferred tax assets                        4,803           4,757
    Total current assets                       150,524         141,664
    Property and equipment, net                 11,464          11,983
    Notes receivable, less current portion          98             132
    Goodwill                                   113,050         112,770
    Intangible assets, net                      79,553          81,556
    Restricted cash, less current portion        5,210           5,207
    Other assets                                12,198          12,351
    Total assets                              $372,097        $365,663

    Liabilities and stockholders' equity
    Current liabilities:
      Current portion of long-term
       obligations                             $15,021         $14,265
      Accounts payable                           3,776           3,005
      Accrued expenses                          29,477          27,233
      Accrued transportation costs              31,357          32,051
      Deferred revenue                           4,695           3,375
      Current portion of interest rate swap      1,403           1,431
      Reinsurance liability reserve              8,301           8,847
    Total current liabilities                   94,030          90,207
    Long-term obligations, less current
     portion                                   219,169         223,494
    Other long-term liabilities                  4,029           3,975
    Deferred tax liabilities                    11,056          10,096
    Total liabilities                          328,284         327,772
    Commitments and contingencies

    Stockholders' equity:
        Common stock: Authorized 40,000,000
         shares; $0.001 par value; 13,473,859
         and 13,462,356 issued and outstanding
         (including treasury shares)                13              13
      Additional paid-in capital               170,005         169,699
      Retained deficit                        (117,377)       (123,254)
      Accumulated other comprehensive
       loss, net of tax                         (4,405)         (4,449)
       Treasury stock, at cost,
        619,768 shares                         (11,384)        (11,384)
     Total Providence stockholder's equity      36,852          30,625
        Non-controlling interest                 6,961           7,266
    Total stockholder's equity                  43,813          37,891
    Total liabilities and stockholder's
     equity                                   $372,097        $365,663

                        The Providence Service Corporation
                       Consolidated Statements of Cash Flows
                                  (in thousands)
                                                       Three months ended
                                                            March 31,
                                                       2009           2008
    Operating activities
    Net income                                        $5,877         $3,704
    Adjustments to reconcile net income to net cash
     provided by operating activities:
      Depreciation                                     1,160          1,241
      Amortization                                     1,925          2,079
      Amortization of deferred financing costs           998            620
      Provision for doubtful accounts                    487            614
      Deferred income taxes                              828           (231)
      Stock based compensation                             1            554
      Excess tax benefit upon exercise of
       stock options                                       -            (27)
      Other                                              147             19
      Changes in operating assets and liabilities,
       net of effects of acquisitions:
        Billed and unbilled accounts receivable       (9,958)        (2,899)
        Management fee receivable                         59           (295)
        Other receivable                                (179)           882
        Restricted cash                                 (127)           559
        Reinsurance liability reserve                   (347)           (46)
        Prepaid expenses and other                     3,385            749
        Accounts payable and accrued expenses          2,868          4,760
        Accrued transportation costs                    (694)           768
        Deferred revenue                               1,313           (838)
        Other long-term liabilities                       23             29
    Net cash provided by operating activities          7,766         12,242
    Investing activities
    Purchase of property and equipment, net             (667)        (1,017)
    Acquisition of businesses, net of cash acquired       (4)          (346)
    Restricted cash for contract performance              51          2,643
    Purchase of short-term investments, net              (65)            26
    Collection of notes receivable                       107          2,531
    Net cash provided by (used in)
     investing activities                               (578)         3,837
    Financing activities
    Proceeds from common stock issued pursuant to
     stock option exercise                                 -            101
    Excess tax benefit upon exercise of stock options      -             27
    Repayment of long-term debt                       (3,569)        (2,162)
    Debt financing costs                                (769)           (33)
    Capital lease payments                               (34)             -
    Net cash used in financing activities             (4,372)        (2,067)
    Effect of exchange rate changes on cash              (31)          (195)
    Net change in cash                                 2,785         13,817
    Cash at beginning of period                       29,364         35,379
    Cash at end of period                            $32,149        $49,196

SOURCE Providence Service Corporation
Copyright©2009 PR Newswire.
All rights reserved

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