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Providence Service Corporation Releases Fourth Quarter and Year End 2009 Results

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."  


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 or  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  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 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 
                                   ----        ----        ----        ---- 
      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 
       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 
                                                           ----      ---- 
    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 
                                                         ========  ======== 
                   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 
                                                          =======    ======= 

SOURCE The Providence Service Corporation

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