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Providence Service Corporation Reports Q2 2011 Results In Line With Expectations

TUCSON, Ariz., Aug. 8, 2011 /PRNewswire/ -- The Providence Service Corporation (Nasdaq: PRSC) today announced its financial results for the second quarter ended June 30, 2011.  

For the second quarter of 2011, the Company reported revenue of $235.3 million, an increase of 5.8% from $222.3 million for the comparable period in 2010.  Revenue from Providence's non-emergency transportation (NET) services segment grew 6.7% to $142.0 million in the second quarter from $133.1 million in the prior year period.  Revenue from the social services segment increased 4.6% to $93.3 million, up from $89.2 million in the second quarter of 2010.  

Net income was $4.9 million, or $0.36 per diluted share, in the second quarter of 2011.  This compares to net income of $7.3 million, or $0.54 per diluted share, in the second quarter of 2010.  The Company benefitted from a $1.7 million quarter over quarter decline in interest expense as a result of refinancing its senior credit facility in the first quarter of 2011.

Providence's direct client census was approximately 59,100 at June 30, 2011, compared to approximately 58,100 at December 31, 2010 and 60,700 at June 30, 2010.  Year over year census was negatively impacted by a decline, primarily in workforce development, due to our non-renewal of one contract.  The Company had approximately 9.6 million individuals eligible to receive services under its NET contracts at June 30, 2011 compared to approximately 8.2 million at December 31, 2010 and approximately 8.0 million at June 30, 2010.  Direct contracts numbered 647 at June 30, 2011 up from 633 at June 30, 2010.  

For the first six months of 2011, the Company reported revenue of $463.1 million, an increase of 4.5% from $443.3 million in the first six months of 2010.  Revenue from Providence's NET services segment grew 5.8% to $280.9 million in the first half of 2011 from $265.6 million in the prior year period.  Revenue from the social services segment increased 2.5% to $182.2 million, up from $177.7 million in the first half of 2010.

Net income was $9.3 million, or $0.70 per diluted share, in the first half of 2011 and included a non-cash charge of approximately $2.5 million, or $0.11 per share, related to the write-off of unamortized deferred financing fees of its senior credit facility.  Net income was $16.4 million, or $1.19 per diluted share, in the first half of 2010.  

At June 30, 2011, the Company had unrestricted cash and cash equivalents of $54.2 million.  During the first half of 2011, the Company generated a total of $21.9 million in cash from operations.  At June 30, 2011, the Company had long term liabilities of $179.1 million, down from $184.5 million at December 31, 2010 and $190.3 million at June 30, 2010.  

"Our second quarter 2011 results are consistent with our revised forecast," stated Fletcher McCusker, Chairman and CEO.  "We have completed the social services contract renewal cycle with substantially all contracts renewed and with relatively stable rates.  The NET segment is more competitive than ever and while we are pleased with our new wins, they have come with lower margins.  We won the incumbent contract in Virginia, our second largest contract, and recently added a new state-wide NET services contract in Wisconsin and our bid was accepted and we are currently negotiating for a large state regional contract as part of a competitive procurement.  Due to start up expenses, the two new contracts are not expected to be profitable in 2011."

Guidance Providence anticipates revenue for 2011 of between $933 and $943 million and earnings per diluted share of between $1.29 and $1.33 after including the non-cash charge of approximately $2.5 million, or $0.11 per share, related to the write-off of unamortized deferred financing fees of its senior credit facility.  In 2010, Providence reported revenue of $879.7 million and diluted earnings per share of $1.78.

In the third quarter of 2011, we anticipate revenue to be in a range of $230 to $235 million, with the addition of the NET services contract in Wisconsin.  Diluted earnings per share for the third quarter is forecasted to be between $0.23 and $0.25 given the seasonal slowdown in our school based business.  This compares to revenue of $217.2 million and diluted earnings per share of $0.22 in the third quarter of 2010.

For the fourth quarter of 2011, revenue is anticipated to be in the range of $240 to $245 million, with the addition of our newest NET services state regional contract award, and diluted earnings per share is forecasted to be between $0.36 and $0.38.  This compares to revenue of $219.3 million and diluted earnings per share of $0.33 in the fourth quarter of 2010.  

Conference CallProvidence will hold a conference call at 11:00 a.m. EDT (9:00 a.m. MDT and 8:00 a.m. Arizona and PDT) Tuesday, August 9, 2011, 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) 680-0890 or for international callers (617) 213-4857 and by using the passcode 77538181.  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 August 16, 2011 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 31282673.

About ProvidenceThe 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 institutional beds, treatment facilities or hospitals, preferring to provide social services in the client's own home or other community setting.  It provides its non-emergency transportation services management through local transportation providers rather than owning its own fleet of vehicles.  The Company provides a range of services through its direct entities to approximately 59,100 clients through 647 active contracts at June 30, 2011, with an approximate 9.6 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," "forecast," "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, the implementation of the healthcare reform law, state budget changes and legislation 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, 2010. 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 CorporationConsolidated Statements of Income(in thousands except share and per share data)(UNAUDITED)Three months endedSix months endedJune 30,June 30,2011201020112010Revenues:  Home and community based services$
53,015  Foster care services8,6699,27216,92018,008  Management fees3,3353,3856,6806,680  Non-emergency transportation services141,970133,113280,936265,577235,310222,320463,116443,280Operating expenses:  Client service expense77,40573,864150,219147,508  Cost of non-emergency transportation services132,227116,562258,336230,050  General and administrative expense12,41311,78024,33722,567  Depreciation and amortization3,3293,1266,5776,253Total operating expenses225,374205,332439,469406,378Operating income 9,93616,98823,64736,902Other (income) expense:  Interest expense2,3314,0676,0628,442  Loss on extinguishment of debt--2,464-  Interest income(49)(56)(108)(127)Income before income taxes7,65412,97715,22928,587Provision for income taxes2,7995,7005,90512,203Net  income $
,384Earnings per share:  Basic$
.24  Diluted$
.19Weighted-average number of common shares  outstanding:  Basic13,235,83713,192,59213,229,23813,179,759  Diluted13,321,39814,965,30413,320,95714,950,867The Providence Service CorporationConsolidated Balance Sheets(in thousands except share and per share data)June 30,December 31,20112010Assets(Unaudited)(Audited)Current assets:Cash and cash equivalents$
,261Accounts receivable, net of allowance of $5.5 million in2011 and $5.3 million in 201078,63876,112Management fee receivable4,5935,840Other receivables2,6533,930Restricted cash6,0337,314Prepaid expenses and other22,67015,478Deferred tax assets6611,633Total current assets169,414171,568Property and equipment, net23,67816,401Goodwill113,839113,783Intangible assets, net62,67266,442Restricted cash, less current portion10,6349,080Other assets9,2559,659Total assets$
386,933Liabilities and stockholders' equity Current liabilities:Current portion of long-term obligations$
8,113Accounts payable3,8702,888Accrued expenses35,55233,551Accrued transportation costs44,26741,869Deferred revenue3,2495,374Reinsurance liability reserve13,37911,898Total current liabilities110,317113,693Long-term obligations, less current portion157,524164,190Other long-term liabilities10,8768,721Deferred tax liabilities10,71011,580Total liabilities289,427298,184Commitments and contingenciesStockholders' equity:Common stock:  Authorized 40,000,000 shares; $0.001 par value; 13,617,249  and 13,580,385issued and outstanding (including treasury shares) 1414Additional paid-in capital174,277172,540Retained deficit(69,177)(78,501)Accumulated other comprehensive loss, net of tax(575)(881)Treasury stock, at cost, 623,576  and 619,768 shares(11,435)(11,384)  Total Providence stockholders' equity93,10481,788Non-controlling interest6,9616,961Total stockholders' equity 100,06588,749Total liabilities and stockholders' equity $
386,933The Providence Service CorporationConsolidated Statements of Cash Flows(in thousands)(UNAUDITED)Six months endedJune 30,20112010Operating activitiesNet income $
9,324$ 16,384Adjustments to reconcile net income to net cash  provided by operating activities:  Depreciation 2,7212,403  Amortization3,8563,850  Amortization of deferred financing costs 9551,241  Loss on extinguishment of debt2,464-  Provision for doubtful accounts1,5343,037  Deferred income taxes(123)603  Stock based compensation1,809379  Excess tax benefit upon exercise of stock options(3)(53)  Other384(82)  Changes in operating assets and liabilities:Accounts receivable732(3,323)Management fee receivable1,24779Other receivables1,282(3,229)Restricted cash(34)(46)Prepaid expenses and other(7,610)(5,811)Reinsurance liability reserve3,4682,548Accounts payable and accrued expenses(640)5,229Accrued transportation costs2,3983,102Deferred revenue(2,128)(1,572)Other long-term liabilities22814Net cash provided by operating activities21,86424,753Investing activitiesPurchase of property and equipment, net(6,530)(4,243)Acquisition of businesses, net of cash acquired(6,463)-Restricted cash for contract performance1,426(3,161)Purchase of short-term investments, net(58)(63)Net cash used in investing activities(11,625)(7,467)Financing activitiesRepurchase of common stock, for treasury(51)-Proceeds from common stock issued pursuant to -  stock option exercise33278Excess tax benefit upon exercise of stock options353Proceeds from long-term debt110,000-Repayment of long-term debt(124,780)(14,664)Debt financing costs(2,606)(13)Capital lease payments(8)(6)Net cash used in financing activities(17,409)(14,352)Effect of exchange rate changes on cash7547Net change in cash(7,095)2,981Cash at beginning of period61,26151,157Cash at end of period$  54,166$ 54,138

SOURCE Providence Service Corporation
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