Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

FORM 8-K 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 8, 2018

The Providence Service Corporation
(Exact name of registrant as specified in its charter)
 

 
Delaware
 
001-34221
 
86-0845127
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 
 
 
700 Canal Street, Third Floor
Stamford, Connecticut
 
06902
 
 
 
 
 
 
 
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (203) 307-2800

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨

 






Item 2.02 Results of Operations and Financial Condition.

On March 8, 2018, The Providence Service Corporation (the “Company”) issued a press release announcing its financial results for the quarter and fiscal year ended December 31, 2017. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
 
On March 8, 2018, the Company posted an investor presentation to the Investor Relations section of its website www.prscholdings.com, in connection with the earnings call for the quarter and fiscal year ended December 31, 2017. A copy of the investor presentation is being furnished as Exhibit 99.2 to this Current Report on Form 8-K.  
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number
Description
 
 
99.1

99.2

 





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
THE PROVIDENCE SERVICE CORPORATION
 
 
 
Date: March 8, 2018
 
By:
 
/s/ David Shackelton
 
 
Name:
 
David Shackelton
 
 
Title:
 
Chief Financial Officer

Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12118158&doc=4
Providence Service Corporation Reports Fourth Quarter and Full Year 2017 Results

Highlights for the Fourth Quarter of 2017:

Revenue from continuing operations of $406.9 million, a 5.5% increase from the fourth quarter of 2016
Income from continuing operations, net of tax, of $39.1 million, or $2.41 per diluted common share, compared to a loss of $25.7 million, or $1.77 per diluted common share, in the fourth quarter of 2016
Benefit from the Tax Reform Act of $29.6 million or $1.89 per diluted common share
Adjusted Net Income of $11.5 million, a 77.6% improvement on the fourth quarter of 2016; Adjusted EPS of $0.66, a 100.0% improvement on prior year
Adjusted EBITDA of $26.4 million, a 36.7% increase from the fourth quarter of 2016
Cash provided by operating activities of $18.1 million
Repurchased 708.1 thousand shares from November 3, 2017 through March 5, 2018

Highlights for the Full Year 2017:

Revenue from continuing operations of $1.62 billion, a 2.9% increase from 2016
Income from continuing operations, net of tax, of $59.8 million, or $3.50 per diluted common share, compared to a loss of $18.9 million, or $1.45 per diluted common share, in 2016
Adjusted Net Income of $30.3 million; Adjusted EPS of $1.65, an 8.6% improvement on prior year
Adjusted EBITDA of $72.4 million
Cash provided by operating activities of $55.0 million
At year-end, cash balance of $95.3 million, no long-term debt, and $170 million book carrying value of interest in Matrix. $33.3 million of year-end cash deployed for share repurchases in Q1 2018


STAMFORD, CT March 8, 2018 – The Providence Service Corporation (the “Company” or “Providence”) (Nasdaq: PRSC), today reported financial results for the three and twelve months ended December 31, 2017.

“I am very pleased with our fourth quarter results,” stated Carter Pate, Interim Chief Executive Officer. “NET Services continued to make substantial progress on value enhancement activities, especially in regards to transportation cost reductions, and added to its successful 2017 renewal year, which already included New Jersey and Philadelphia, by securing the Virginia contract for another three years. Within WD Services, in addition to being awarded a third Work and Health Program contract, bringing total secured contract value under the program to approximately $195 million over five years, profitability continued to improve as a result of a lower corporate and shared services cost structure. Lastly our Matrix Investment continued to successfully convert its sales pipeline into new signed logos, positioning Matrix for another year of strong revenue growth in 2018. Matrix also announced and subsequently closed its acquisition of HealthFair. This positive momentum across all of our segments positions us well in 2018 for improved profitability and continued long-term value creation."


Fourth Quarter 2017 Results

For the fourth quarter of 2017, the Company reported revenue from continuing operations of $406.9 million, an increase of 5.5% from $385.8 million in the fourth quarter of 2016. Excluding the effects of changes in currency exchange rates, revenue from continuing operations increased 4.4%.

Income from continuing operations, net of tax, in the fourth quarter of 2017 was $39.1 million, or $2.41 per diluted common share, compared to losses of $25.7 million, or $1.77 per diluted common share, in the fourth quarter of 2016. Income from continuing operations, net of tax, in the fourth quarter of 2017 includes a $29.6 million benefit due to the impact of the Tax Cuts and Jobs Act (the “Tax Reform Act”). Income from continuing operations, net of tax, in the fourth quarter of 2016 includes impairment charges of $21.0 million. Income from continuing operations, net of tax, in the fourth quarters of 2017 and 2016





includes restructuring and related charges of $4.6 million and $7.4 million, respectively. Adjusted Net Income in the fourth quarter of 2017 was $11.5 million, or $0.66 per diluted common share, compared to $6.4 million, or $0.33 per diluted common share, in the fourth quarter of 2016.

Segment-level Adjusted EBITDA was $34.3 million in the fourth quarter of 2017, compared to $24.2 million in the fourth quarter of 2016. Adjusted EBITDA was $26.4 million in the fourth quarter of 2017, compared to $19.3 million in the fourth quarter of 2016.

Full Year 2017 Results

For the twelve months of 2017, the Company reported revenue from continuing operations of $1.62 billion, an increase of 2.9% from $1.58 billion in 2016. Excluding the effects of changes in currency exchange rates, revenue from continuing operations increased 3.4%.

Income from continuing operations, net of tax, for the twelve months of 2017 was $59.8 million, or $3.50 per diluted common share, compared to losses of $18.9 million, or $1.45 per diluted common share, in the twelve months of 2016. Income from continuing operations, net of tax, for the twelve months of 2017 includes a $29.6 million benefit due to the impact of the Tax Reform Act. Income from continuing operations, net of tax, for the twelve months of 2016 includes impairment charges of $21.0 million. Income from continuing operations, net of tax, for the twelve months of 2017 and 2016 includes restructuring and related charges of $11.6 million and $14.4 million, respectively. Adjusted Net Income in the twelve months of 2017 was $30.3 million, or $1.65 per diluted common share, compared to $29.9 million, or $1.52 per diluted common share, in the twelve months of 2016.

Segment-level Adjusted EBITDA was $101.7 million in the twelve months of 2017, compared to $97.8 million in the comparable period of 2016. Adjusted EBITDA was $72.4 million in the twelve months of 2017, compared to $72.2 million in the twelve months of 2016.
  

Share Repurchases

As previously announced, on November 2, 2017, the Board approved the extension of the Company’s stock repurchase program, authorizing the Company to repurchase up to $69.6 million (the amount remaining from the $100.0 million repurchase amount authorized on October 26, 2016) of the Company’s common stock through December 31, 2018.

From November 3, 2017 through March 5, 2018 the Company repurchased 708,095 shares of common stock for $43.8 million, or for an average price of $61.90 per share. Since beginning to repurchase shares in the fourth quarter of 2015 through March 5, 2018, the Company has repurchased 3.5 million shares of common stock, or approximately 22% of the Company’s common stock outstanding at the beginning of the fourth quarter of 2015, for $166.2 million, or for an average price of $46.86 per share. As of March 5, 2018, $25.8 million of additional share repurchase capacity existed under this program.

Segment Results

For analysis purposes, the Company provides revenue, expenses, operating income (loss), income (loss) from continuing operations, net of taxes, and Adjusted EBITDA on a segment basis. Segment results include revenue and expenses incurred by each segment, as well as an allocation of certain direct expenses incurred by Corporate on behalf of the segment. No direct expenses were incurred by Corporate on behalf of the Matrix Investment segment. The activities reflected in Corporate and Other include executive, accounting, finance, internal audit, tax, legal, public reporting, certain strategic and corporate development functions, the results of the Company’s captive insurance company and elimination entries recorded in consolidation.

NET Services

NET Services revenue was $330.6 million for the fourth quarter of 2017, an increase of 4.4% from $316.6 million in the fourth quarter of 2016. Operating income was $23.8 million, or 7.2% of revenue, in the fourth quarter of 2017, compared to $23.6 million, or 7.4% of revenue, in the fourth quarter of 2016. Included in NET Services operating income in the fourth quarters of 2017 and 2016 were $1.4 million and $1.7 million, respectively, of restructuring and related charges. NET Services Adjusted EBITDA was $28.7 million, or 8.7% of revenue, in the fourth quarter of 2017, compared to $28.8 million, or 9.1% of revenue, in the fourth quarter of 2016.






NET Services revenue was $1.32 billion for the twelve months of 2017, an increase of 6.8% from $1.23 billion for the twelve months of 2016. Operating income was $65.7 million, or 5.0% of revenue, in the twelve months of 2017, compared to $77.1 million, or 6.2% of revenue, in the comparable period of 2016. Included in NET Services operating income in the twelve months of 2017 and 2016 were $6.3 million and $2.9 million, respectively, of restructuring and related charges. NET Services Adjusted EBITDA was $85.3 million, or 6.5% of revenue, in the twelve months of 2017, compared to $92.4 million, or 7.5% of revenue, in the comparable period of 2016.

The year-over-year increase in NET Services revenue in the fourth quarter of 2017 was primarily due to increased revenue from new contracts including new MCO contracts in New York and new state regional contracts in Texas. Additionally, NET Services benefited from membership growth and rate increases on a number of existing contracts as well as retroactive rate increases to compensate for increased utilization experienced throughout the year on multiple MCO contracts. The year-over-year revenue increase was partially offset by reductions in revenue from contracts we no longer serve, including a contract with the state of New York. Adjusted EBITDA as a percentage of revenue was in line with the fourth quarter of 2016; benefiting from an expense reserve released upon the finalization of a contract amendment with a state customer, while being negatively impacted by the loss of the contract with the state of New York.


WD Services

WD Services revenue was $76.3 million for the fourth quarter of 2017, an increase of 10.4% from $69.1 million in the fourth quarter of 2016. Excluding the effects of changes in currency exchange rates, revenue increased 4.5% in the fourth quarter of 2017 versus the fourth quarter of 2016. Operating income was $2.9 million in the fourth quarter of 2017 including a $2.0 million benefit from a favorable resolution of a contingency related to the acquisition of Ingeus, compared to a $32.8 million loss in the fourth quarter of 2016. WD Services operating loss in the fourth quarter of 2016 included impairment charges of $19.6 million. Included within WD Services operating income / loss in the fourth quarters of 2017 and 2016 were restructuring and related costs of $1.5 million and $5.8 million, respectively. WD Services Adjusted EBITDA was $5.6 million, or 7.3% of revenue, in the fourth quarter of 2017 compared to a negative Adjusted EBITDA of $4.5 million, or negative 6.6% of revenue, in the fourth quarter of 2016.

WD Services revenue was $305.7 million for the twelve months of 2017, a decrease of 11.2% from $344.4 million in the twelve months of 2016. Excluding the effects of changes in currency exchange rates, revenue declined 8.9% in the twelve months of 2017 versus the twelve months of 2016. Operating income was $2.0 million in the twelve months of 2017, compared to an operating loss of $39.5 million in the comparable period of 2016. WD Services operating loss in the twelve months of 2016 included impairment charges of $19.6 million. Included within WD Services operating income / loss in the twelve months of 2017 and 2016 were restructuring and related costs of $3.6 million and $11.5 million, respectively. WD Services Adjusted EBITDA was $16.3 million, or 5.3% of revenue, in the twelve months of 2017 compared to $5.5 million, or 1.6% of revenue, in the comparable period of 2016.

The year-over-year increase in WD Services revenue in the fourth quarter of 2017 was primarily related to increases in the offender rehabilitation contract together with growth in UK Health and Youth Services programs and increases from various employability programs outside of the UK, including in Australia, France and Canada. This was partially offset by the anticipated ending of referrals under the Work Programme contract in the UK. While WD Services has successfully secured contracts under the UK's Work and Health Programme with a combined total value of approximately $195 million over 5 years, revenues under these contracts were minimal in the fourth quarter of 2017. Adjusted EBITDA was significantly higher in the fourth quarter of 2017 compared to 2016 due to the benefits from the reduced headcount related to the start of the Ingeus Futures program at the end of 2016 as well as a reduction in IT and facility costs.


Corporate and Other

Corporate and Other incurred a $9.8 million operating loss in the fourth quarter of 2017 compared to an operating loss of $7.0 million in the fourth quarter of 2016. Included within Corporate and Other operating loss in the fourth quarter of 2017 were restructuring and related costs of $1.7 million. Included within operating loss in the fourth quarter of 2016 was an impairment charge of $1.4 million related to the sale of certain real estate assets. Corporate and Other Adjusted EBITDA was negative $7.9 million in the fourth quarter of 2017 compared to negative $4.9 million in the fourth quarter of 2016.

Corporate and Other incurred a $31.7 million operating loss in the twelve months of 2017, compared to a $29.0 million operating loss in the twelve months of 2016. Included within Corporate and Other operating loss in the twelve months of 2017 were restructuring and related costs of $1.7 million as well as $3.4 million of professional costs associated with focused strategic initiatives. Included within operating loss in the twelve months of 2016 was an impairment charge of $1.4 million





related to the sale of certain real estate assets. Corporate and Other Adjusted EBITDA was negative $29.2 million in the twelve months of 2017 compared to negative $25.6 million in the comparable period of 2016.

The year-over-year increase in the Corporate and Other Adjusted EBITDA loss in the fourth quarter of 2017 was primarily due to a $2.3 million increase in cash settled stock-based compensation as a result of an increase in the Company’s stock price in the fourth quarter of 2017 as compared to a decrease in the fourth quarter of 2016 as well as a decrease in the benefits associated with favorable claims experiences on our reinsurance and self-insured programs. Included within Corporate and Other Adjusted EBITDA for the fourth quarter of 2017 and the fourth quarter of 2016 is $1.6 million and $0.9 million, respectively, of expense related to a share-based long-term incentive plan. No shares were distributed under this plan as the performance hurdles were not met. As such, as of December 31, 2017, we accelerated all remaining unrecognized compensation expense for the Holding Company long-term incentive plan.

Corporate and Other included other income in the fourth quarter of 2017 of $5.4 million related to the settlement of a previously disclosed litigation related to a putative stockholder class action derivative complaint.




Matrix Investment (Equity Investment)

For the three and twelve months ended December 31, 2017, Providence recorded a gain in equity earnings of $13.0 million and $13.4 million, respectively, related to its Matrix Investment. Included within the equity income is the impact on Matrix of the Tax Reform Act.

As Providence’s interest in Matrix is accounted for as an equity method investment, the following numbers are not included within the Company’s consolidated results of operations. For the fourth quarter of 2017, Matrix’s revenue was $52.5 million, an increase of 0.4% from $52.3 million in the fourth quarter of 2016. Matrix’s operating income was $1.8 million, or 3.4% of revenue, for the fourth quarter of 2017, compared to a $0.2 million operating loss, or negative 0.4% of revenue, for the fourth quarter of 2016. Included within Matrix’s operating income in the fourth quarter of 2017 were $0.5 million of management fees paid to Matrix shareholders and acquisition costs of $0.4 million. Included within Matrix's operating income in the fourth quarter of 2016 were $4.0 million of expense related to transaction bonuses paid to the Matrix management team as well as $2.4 million of other transaction related expenses. Matrix’s Adjusted EBITDA was $11.6 million, or 22.1% of revenue, for the fourth quarter of 2017, compared to $11.7 million, or 22.5% of revenue, in the fourth quarter of 2016.

For the twelve months of 2017, Matrix’s revenue was $227.9 million, an increase of 9.7% from $207.7 million in the twelve months of 2016. Matrix’s operating income was $11.9 million, or 5.2% of revenue, for the twelve months of 2017, compared to $17.8 million, or 8.6% of revenue, for the comparable period of 2016. Included within Matrix’s operating income in the twelve months of 2017 was $2.7 million of transaction bonuses paid to the Matrix management team, $2.3 million of management fees paid to Matrix’s shareholders, $0.9 million of other transaction related expenses and acquisition costs of $1.3 million. Matrix’s Adjusted EBITDA was $51.7 million, or 22.7% of revenue, for the twelve months of 2017, compared to $51.7 million, or 24.9% of revenue, in the twelve months of 2016.

Matrix had moderate year-over-year revenue growth for the fourth quarter of 2017 with Adjusted EBITDA margins impacted by lower prices.

As of December 31, 2017, Matrix had cash of $15.0 million and $193.1 million of term loan debt outstanding under its credit facility.

On February 16, 2018 Matrix completed its acquisition of HealthFair for $160 million plus an earn-out payment contingent upon HealthFair’s 2018 performance.  The transaction combines Matrix’s expansive in-home capabilities with HealthFair’s national fleet of mobile health clinics equipped with advanced diagnostic capabilities.  With the addition of HealthFair, Matrix’s network increases to more than 6,000 community-based providers across all 50 states, including over 1,700 nurse practitioners.

HealthFair’s 2017 revenue was approximately $45 million.  HealthFair expects significant growth in 2018 supported by several recently awarded national contracts with major health plans.   The acquisition was funded through an increase in Matrix's outstanding debt and rollover equity from the seller of HealthFair.  Providence and Frazier did not contribute additional equity to fund the acquisition.  Following the transaction, Matrix had net debt of approximately $310 million with Providence retaining an ownership percentage of 43.6%.






Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted which reduces the U.S. federal corporate income tax rate to 21% commencing in 2018. As a result of the decrease in rate, the Company remeasured its deferred tax liabilities as of December 31, 2017, and recorded a provisional net tax benefit of $19.4 million in the fourth quarter of 2017. In addition, Matrix remeasured its deferred tax liabilities in connection with the Tax Reform Act, which resulted in additional equity income to Providence of $13.6 million. The Providence tax provision reflects tax expense of $3.4 million on this additional equity income. Thus, the total impact of tax reform is $29.6 million.

Investor Presentation and Conference Call

Providence will hold a conference call to discuss its financial results on Friday, March 9, 2018 at 8:00 a.m. ET. An investor presentation has been prepared to accompany the conference call and can be found on the Company’s website (investor.prscholdings.com.). To access the call, please dial:

US toll-free: 1 (844) 244 3865
International: 1 (518) 444 0681
Passcode: 8798476


Replay (available until March 16, 2018):
US toll-free: 1 (855) 859 2056
International: 1 (404) 537 3406
Passcode: 8798476


You may also access the conference call via webcast at investor.prscholdings.com, where the call also will be archived.

About Providence

The Providence Service Corporation owns subsidiaries and investments primarily engaged in the provision of healthcare services in the United States and workforce development services internationally. For more information, please visit prscholdings.com.

Non-GAAP Financial Measures and Adjustments

In addition to the financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release includes EBITDA, Adjusted EBITDA and Segment-level Adjusted EBITDA for the Company and its operating segments, and Adjusted Net Income and Adjusted EPS for the Company, which are performance measures that are not recognized under GAAP. EBITDA is defined as income (loss) from continuing operations, net of taxes, before: (1) interest expense, net, (2) provision (benefit) for income taxes and (3) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before certain items, including (as applicable): (1) restructuring and related charges, (2) foreign currency transactions, (3) equity in net earnings or losses of investees, (4) certain litigation related expenses or settlement income, (5) gain or loss on sale of equity investments, (6) management fees and (7) certain transaction and related costs. Segment-level Adjusted EBITDA is calculated as Adjusted EBITDA for the company excluding the Adjusted EBITDA associated with corporate and holding company costs reported as our Corporate and Other Segment. Adjusted Net Income is defined as income (loss) from continuing operations, net of tax, before certain items, including (1) restructuring and related charges, (2) foreign currency transactions, (3) equity in net earnings or losses of investees, (4) certain litigation related expenses or settlement income, (5) intangible amortization expense, (6) gain or loss on sale of equity investments, (7) the impact of the Tax Reform Act, (8) excess tax charges associated with long term incentive plans, (9) the impact of adjustments on noncontrolling interests, (10) transaction and related costs and (11) the income tax impact of such adjustments. Adjusted EPS is calculated as Adjusted Net Income less (as applicable): (1) dividends on convertible preferred stock, (2) accretion of convertible preferred stock discount, and (3) income allocated to participating stockholders, divided by the diluted weighted-average number of common shares outstanding. We utilize these non-GAAP performance measures, which exclude certain expenses and amounts, because we believe the timing of such expenses is unpredictable and not driven by our core operating results, and therefore render comparisons with prior periods as well as with other companies in our industry less meaningful. We believe such measures allow investors to gain a better understanding of the factors and trends affecting the ongoing operations of our business. We consider our core operations to be the ongoing activities to provide services from which we earn revenue, including direct operating costs and indirect costs to support these activities. In addition, our net earnings in e





quity investees are excluded from these measures, as we do not have the ability to manage these ventures, allocate resources within the ventures, or directly control their operations or performance.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation from or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. We urge you to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.

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, our continuing relationship with government entities and our ability to procure business from them, our ability to manage growing and changing operations, the implementation of healthcare reform law, government budget changes and legislation related to the services that we provide, our ability to renew or replace existing contracts that have expired or are scheduled to expire with significant clients, and other risks detailed in Providence’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K. 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.

Investor Relations Contact            
Laurence Orton – VP Finance & Corporate Controller         
(203) 307-2800
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Providence Service Corporation
Page 7
The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Income
(in thousands except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Three months ended December 31,
 
Twelve months ended December 31,
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Service revenue, net
 
$
406,888

 
$
385,819

 
$
1,623,882

 
$
1,578,245

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
    Service expense
 
364,566

 
357,099

 
1,489,044

 
1,452,110

    General and administrative expense
 
18,632

 
17,363

 
72,336

 
69,911

    Asset impairment charge
 

 
21,003

 

 
21,003

    Depreciation and amortization
 
6,753

 
6,546

 
26,469

 
26,604

Total operating expenses
 
389,951

 
402,011

 
1,587,849

 
1,569,628

Operating income (loss)
 
16,937

 
(16,192
)
 
36,033

 
8,617

 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
    Interest expense, net
 
296

 
344

 
1,278

 
1,583

    Other income
 
(5,363
)
 

 
(5,363
)
 

    Equity in net (gain) loss of investees
 
(13,044
)
 
4,593

 
(12,054
)
 
10,287

    (Gain) loss on sale of equity investment
 
229

 

 
(12,377
)
 

    Loss (gain) on foreign currency transactions
 
(256
)
 
(42
)
 
345

 
(1,375
)
Income (loss) from continuing operations before income taxes
 
35,075

 
(21,087
)
 
64,204

 
(1,878
)
Provision (benefit) for income taxes
 
(3,991
)
 
4,570

 
4,401

 
17,036

Income (loss) from continuing operations, net of tax
 
39,066

 
(25,657
)
 
59,803

 
(18,914
)
Discontinued operations, net of tax
 
16

 
108,428

 
(5,983
)
 
108,760

Net income (loss)
 
39,082

 
82,771

 
53,820

 
89,846

Net loss (income) attributable to noncontrolling interests
 
(156
)
 
1,649

 
(451
)
 
2,082

Net income (loss) attributable to Providence
 
$
38,926

 
$
84,420

 
$
53,369

 
$
91,928

 
 
 
 
 
 
 
 
 
Net income (loss) available to common
 
 
 
 
 
 
 
 
  stockholders
 
$
32,929

 
$
69,838

 
$
41,865

 
$
74,374

 
 
 
 
 
 
 
 
 
Basic earnings (loss) per common share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
2.43

 
$
(1.77
)
 
$
3.52

 
$
(1.45
)
Discontinued operations
 

 
6.69

 
(0.44
)
 
6.52

Basic earnings (loss) per common share
 
$
2.43

 
$
4.92

 
$
3.08

 
$
5.07

 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
2.41

 
$
(1.77
)
 
$
3.50

 
$
(1.45
)
Discontinued operations
 

 
6.69

 
(0.44
)
 
6.52

Diluted earnings (loss) per common share
 
$
2.41

 
$
4.92

 
$
3.06

 
$
5.07

 
 
 
 
 
 
 
 
 
Weighted-average number of common
 
 
 
 
 
 
 
 
  shares outstanding:
 
 
 
 
 
 
 
 
    Basic
 
13,570,615

 
14,199,722

 
13,602,140

 
14,666,896

    Diluted
 
13,664,727

 
14,199,722

 
13,673,314

 
14,666,896










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Providence Service Corporation
Page 8

The Providence Service Corporation
Condensed Consolidated Balance Sheets
(in thousands)
 
 
 
 
 
 
 
December 31, 2017
 
December 31, 2016
 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
    Cash and cash equivalents
 
$
95,310

 
$
72,262

    Accounts receivable, net of allowance
 
158,926

 
162,115

    Other current assets (1)
 
42,093

 
53,726

Total current assets
 
296,329

 
288,103

Property and equipment, net
 
50,377

 
46,220

Goodwill and intangible assets, net
 
165,607

 
168,748

Equity investments
 
169,912

 
161,363

Other long-term assets (2)
 
21,865

 
20,845

Total assets
 
$
704,090

 
$
685,279

 
 
 
 
 
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
 
 
 
 
    Current portion of long-term obligations
 
$
2,400

 
$
1,721

    Other current liabilities (3)
 
224,530

 
226,075

Total current liabilities
 
226,930

 
227,796

Long-term obligations, less current portion
 
584

 
1,890

Other long-term liabilities (4)
 
63,013

 
80,353

Total liabilities
 
290,527

 
310,039

 
 
 
 
 
Mezzanine and stockholder's equity
 
 
 
 
Convertible preferred stock, net
 
77,546

 
77,565

Stockholders' equity
 
336,017

 
297,675

Total liabilities, redeemable convertible preferred stock and stockholders' equity
 
$
704,090

 
$
685,279


(1) Comprised of other receivables, restricted cash and prepaid expenses and other.
(2) Comprised of restricted cash, less current portion, deferred tax assets and other assets.
(3) Comprised of accounts payable, accrued expenses, accrued transportation costs, deferred revenue and reinsurance and related liability reserves.
(4) Includes deferred tax liabilities and other long-term liabilities.


 



--more--





Providence Service Corporation
Page 9

The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands) (1)
 
 
 
 
 
 
 
Twelve months ended December 31,
 
 
2017
 
2016
Operating activities
 
 
 
 
Net income
 
$
53,820

 
$
89,846

  Depreciation and amortization
 
26,469

 
47,725

  Stock-based compensation
 
7,543

 
5,136

  Asset impairment charge
 

 
21,003

  Equity in net (gain) loss of investees
 
(12,054
)
 
10,287

  Gain on sale of equity investment
 
(12,377
)
 

  Other non-cash credits
 
(20,646
)
 
(7,638
)
  Gain on sale of business, net of tax
 

 
(109,403
)
  Changes in working capital
 
12,289

 
(15,191
)
Net cash provided by operating activities
 
55,044

 
41,765

Investing activities
 
 
 
 
Purchase of property and equipment
 
(19,923
)
 
(41,216
)
Sale of business, net of cash sold
 

 
371,580

Equity investments/loan to joint venture
 
10

 
(13,663
)
Proceeds from sale of equity investment
 
15,593

 

Other investing activities
 
5,134

 
7,204

Net cash provided by investing activities
 
814

 
323,905

Financing activities
 
 
 
 
Preferred stock dividends
 
(4,418
)
 
(4,419
)
Repurchase of common stock, for treasury
 
(29,364
)
 
(70,378
)
Net proceeds of long-term debt
 

 
(304,950
)
Other financing activities
 
(6
)
 
2,926

Net cash used in financing activities
 
(33,788
)
 
(376,821
)
Effect of exchange rate changes on cash
 
978

 
(1,357
)
Net change in cash and cash equivalents
 
23,048

 
(12,508
)
Cash and cash equivalents at beginning of period
 
72,262

 
84,770

Cash and cash equivalents at end of period
 
$
95,310

 
$
72,262

(1) Includes both continuing and discontinued operations.







--more--





Providence Service Corporation
Page 10

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
(Unaudited)
 
 
Three months ended December 31, 2017
 
 
NET Services
 
WD Services
 
Total Segment-Level
 
Matrix Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
330,558

 
$
76,330

 
$
406,888

 
$

 
$

 
$
406,888

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
300,344

 
65,752

 
366,096

 

 
(1,530
)
 
364,566

  General and administrative expense
2,901

 
4,494

 
7,395

 

 
11,237

 
18,632

  Depreciation and amortization
3,513

 
3,156

 
6,669

 

 
84

 
6,753

Total operating expenses
306,758

 
73,402

 
380,160

 

 
9,791

 
389,951

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
23,800

 
2,928

 
26,728

 

 
(9,791
)
 
16,937

 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
 
 
 
  Interest expense, net
20

 
375

 
395

 

 
(99
)
 
296

  Other income

 

 

 

 
(5,363
)
 
(5,363
)
  Equity in net (gain) loss of investees

 
(27
)
 
(27
)
 
(13,017
)
 

 
(13,044
)
  Loss on sale of equity investment

 
229

 
229

 

 

 
229

  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
(256
)
 
(256
)
 

 

 
(256
)
Income (loss) from continuing
 
 
 
 
 
 
 
 
 
 
 
     operations, before income tax
23,780

 
2,607

 
26,387

 
13,017

 
(4,329
)
 
35,075

Provision (benefit) for income taxes
7,796

 
1,668

 
9,464

 
3,322

 
(16,777
)
 
(3,991
)
Income (loss) from continuing operations, net of taxes
15,984

 
939

 
16,923

 
9,695

 
12,448

 
39,066

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
20

 
375

 
395

 

 
(99
)
 
296

Provision (benefit) for income taxes
7,796

 
1,668

 
9,464

 
3,322

 
(16,777
)
 
(3,991
)
Depreciation and amortization
3,513

 
3,156

 
6,669

 

 
84

 
6,753

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
27,313

 
6,138

 
33,451

 
13,017

 
(4,344
)
 
42,124

 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related charges (1)
1,404

 
1,507

 
2,911

 

 
1,716

 
4,627

Equity in net (gain) loss of investees

 
(27
)
 
(27
)
 
(13,017
)
 

 
(13,044
)
Loss on sale of equity investment

 
229

 
229

 

 

 
229

Loss (gain) on foreign currency transactions

 
(256
)
 
(256
)
 

 

 
(256
)
Litigation income (2)

 

 

 

 
(5,273
)
 
(5,273
)
Other (3)

 
(2,041
)
 
(2,041
)
 

 

 
(2,041
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
28,717

 
$
5,550

 
$
34,267

 
$

 
$
(7,901
)
 
$
26,366

(1) Restructuring and related charges are comprised of employee separation costs, which include redundancy program costs of $1,459 within WD Services, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $48 and NET Services' value enhancement initiative of $1,404. They also include $1,716 of severance and other costs related to the former CEO of Providence within Corporate and Other.
(2) Litigation Income related to the settlement of a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-K.
(3) Reflects the favorable resolution of contingency related to the acquisition of Ingeus.

--more—





Providence Service Corporation
Page 11
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
(Unaudited)
 
 
Three months ended December 31, 2016
 
 
NET Services (1)
 
WD Services
 
Total Segment-Level
 
Matrix
Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
316,562

 
$
69,111

 
$
385,673

 
$

 
$
146

 
$
385,819

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
286,545

 
72,351

 
358,896

 

 
(1,797
)
 
357,099

  General and administrative expense
2,923

 
7,064

 
9,987

 

 
7,376

 
17,363

  Asset impairment charge

 
19,588

 
19,588

 

 
1,415

 
21,003

  Depreciation and amortization
3,517

 
2,912

 
6,429

 

 
117

 
6,546

Total operating expenses
292,985

 
101,915

 
394,900

 

 
7,111

 
402,011

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
23,577

 
(32,804
)
 
(9,227
)
 

 
(6,965
)
 
(16,192
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
 
 
 
  Interest expense, net
(1
)
 
209

 
208

 

 
136

 
344

  Equity in net (gain) loss of investees

 
2,804

 
2,804

 
1,789

 

 
4,593

  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
(42
)
 
(42
)
 

 

 
(42
)
Income (loss) from continuing
 
 
 
 
 
 
 
 
 
 
 
     operations, before income tax
23,578

 
(35,775
)
 
(12,197
)
 
(1,789
)
 
(7,101
)
 
(21,087
)
Provision (benefit) for income taxes
9,210

 
(288
)
 
8,922

 
(674
)
 
(3,678
)
 
4,570

Income (loss) from continuing operations, net of taxes
14,368

 
(35,487
)
 
(21,119
)
 
(1,115
)
 
(3,423
)
 
(25,657
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
(1
)
 
209

 
208

 

 
136

 
344

Provision (benefit) for income taxes
9,210

 
(288
)
 
8,922

 
(674
)
 
(3,678
)
 
4,570

Depreciation and amortization
3,517

 
2,912

 
6,429

 

 
117

 
6,546

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
27,094

 
(32,654
)
 
(5,560
)
 
(1,789
)
 
(6,848
)
 
(14,197
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset impairment charge

 
19,588

 
19,588

 

 
1,415

 
21,003

Restructuring and related charges (2)
1,679

 
5,756

 
7,435

 

 

 
7,435

Equity in net (gain) loss of investees

 
2,804

 
2,804

 
1,789

 

 
4,593

Loss (gain) on foreign currency transactions

 
(42
)
 
(42
)
 

 

 
(42
)
Litigation expense (3)

 

 

 

 
491

 
491

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
28,773

 
$
(4,548
)
 
$
24,225

 
$

 
$
(4,942
)
 
$
19,283


(1) We have reclassified certain amounts relating to our prior period results to conform to our current period presentation.
(2) Restructuring and related charges include employee separation costs related to redundancy programs within WD Services of $3,771, and $881 of former CEO departure costs within NET Services, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $1,985 and NET Services' value enhancement initiative of $798.
(3) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-K.
--more--





Providence Service Corporation
Page 12
The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
(Unaudited)
 
 
Twelve months ended December 31, 2017
 
 
NET Services
 
WD Services
 
Total Segment-Level
 
Matrix Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
1,318,220

 
$
305,662

 
$
1,623,882

 
$

 
$

 
$
1,623,882

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
1,227,426

 
265,417

 
1,492,843

 

 
(3,799
)
 
1,489,044

  General and administrative expense
11,779

 
25,438

 
37,217

 

 
35,119

 
72,336

  Depreciation and amortization
13,275

 
12,851

 
26,126

 

 
343

 
26,469

Total operating expenses
1,252,480

 
303,706

 
1,556,186

 

 
31,663

 
1,587,849

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
65,740

 
1,956

 
67,696

 

 
(31,663
)
 
36,033

 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 

 
 
 
 
 
 
  Interest expense, net
69

 
1,333

 
1,402

 

 
(124
)
 
1,278

  Other income

 

 

 

 
(5,363
)
 
(5,363
)
  Equity in net (gain) loss of investees

 
1,391

 
1,391

 
(13,445
)
 

 
(12,054
)
  (Gain) on sale of equity investment

 
(12,377
)
 
(12,377
)
 

 

 
(12,377
)
  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
345

 
345

 

 

 
345

Income (loss) from continuing operations,
 
 
 
 
 
 
 
 
 
 
 
     before income tax
65,671

 
11,264

 
76,935

 
13,445

 
(26,176
)
 
64,204

Provision (benefit) for income taxes
24,018

 
1,218

 
25,236

 
3,483

 
(24,318
)
 
4,401

Income (loss) from continuing operations, net of taxes
41,653

 
10,046

 
51,699

 
9,962

 
(1,858
)
 
59,803

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
69

 
1,333

 
1,402

 

 
(124
)
 
1,278

Provision (benefit) for income taxes
24,018

 
1,218

 
25,236

 
3,483

 
(24,318
)
 
4,401

Depreciation and amortization
13,275

 
12,851

 
26,126

 

 
343

 
26,469

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
79,015

 
25,448

 
104,463

 
13,445

 
(25,957
)
 
91,951

 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related charges (1)
6,318

 
3,554

 
9,872

 

 
1,716

 
11,588

Equity in net (gain) loss of investees

 
1,391

 
1,391

 
(13,445
)
 

 
(12,054
)
(Gain) on sale of equity investment

 
(12,377
)
 
(12,377
)
 

 

 
(12,377
)
Loss (gain) on foreign currency transactions

 
345

 
345

 

 

 
345

Litigation income (2)

 

 

 

 
(4,969
)
 
(4,969
)
Other (3)
 

 
(2,041
)
 
(2,041
)
 

 

 
(2,041
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
85,333

 
$
16,320

 
$
101,653

 
$

 
$
(29,210
)
 
$
72,443

(1) Restructuring and related charges are comprised of employee separation costs, which include redundancy program costs of $2,577 and other severance costs of $182 within WD Services and NET Services chief executive officer search fees of $214, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $795 and NET Services' value enhancement initiative of $6,104. They also include $1,716 of severance and other costs related to the former CEO of Providence within Corporate and Other.
(2) Litigation Income related to the settlement of a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-K.    
(3)
Reflects the favorable resolution of contingency related to the acquisition of Ingeus.
--more--





Providence Service Corporation
Page 13

The Providence Service Corporation
Reconciliation of Non-GAAP Financial Measures
Segment Information and Adjusted EBITDA
(in thousands)
(Unaudited)
 
 
Twelve months ended December 31, 2016
 
 
NET Services (1)
 
WD Services
 
Total Segment-Level
 
Matrix
Investment
 
Corporate and Other
 
Total Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenue, net
$
1,233,720

 
$
344,403

 
$
1,578,123

 
$

 
$
122

 
$
1,578,245

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
  Service expense
1,132,857

 
320,147

 
1,453,004

 

 
(894
)
 
1,452,110

  General and administrative expense
11,406

 
30,300

 
41,706

 

 
28,205

 
69,911

  Asset impairment charge

 
19,588

 
19,588

 

 
1,415

 
21,003

  Depreciation and amortization
12,375

 
13,824

 
26,199

 

 
405

 
26,604

Total operating expenses
1,156,638

 
383,859

 
1,540,497

 

 
29,131

 
1,569,628

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
77,082

 
(39,456
)
 
37,626

 

 
(29,009
)
 
8,617

 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
 
 
 
  Interest expense, net
(4
)
 
777

 
773

 

 
810

 
1,583

  Equity in net (gain) loss of investees

 
8,498

 
8,498

 
1,789

 

 
10,287

  Loss (gain) on foreign currency
 
 
 
 
 
 
 
 
 
 
 
     transactions

 
(1,375
)
 
(1,375
)
 

 

 
(1,375
)
Income (loss) from continuing
 
 
 
 
 
 
 
 
 
 
 
     operations, before income tax
77,086

 
(47,356
)
 
29,730

 
(1,789
)
 
(29,819
)
 
(1,878
)
Provision (benefit) for income taxes
29,708

 
(1,172
)
 
28,536

 
(674
)
 
(10,826
)
 
17,036

Income (loss) from continuing operations, net of taxes
47,378

 
(46,184
)
 
1,194

 
(1,115
)
 
(18,993
)
 
(18,914
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
(4
)
 
777

 
773

 

 
810

 
1,583

Provision (benefit) for income taxes
29,708

 
(1,172
)
 
28,536

 
(674
)
 
(10,826
)
 
17,036

Depreciation and amortization
12,375

 
13,824

 
26,199

 

 
405

 
26,604

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA
89,457

 
(32,755
)
 
56,702

 
(1,789
)
 
(28,604
)
 
26,309

 
 
 
 
 
 
 
 
 
 
 
 
 
Asset impairment charge

 
19,588

 
19,588

 

 
1,415

 
21,003

Restructuring and related charges (2)
2,909

 
11,513

 
14,422

 

 

 
14,422

Equity in net (gain) loss of investees

 
8,498

 
8,498

 
1,789

 

 
10,287

Loss (gain) on foreign currency transactions

 
(1,375
)
 
(1,375
)
 

 

 
(1,375
)
Litigation expense (3)

 

 

 

 
1,574

 
1,574

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
92,366

 
$
5,469

 
$
97,835

 
$

 
$
(25,615
)
 
$
72,220

(1) We have reclassified certain amounts relating to our prior period results to conform to our current period presentation.
(2) Restructuring and related charges include employee separation costs related to redundancy programs within WD Services of $8,951, and $881 of former CEO departure costs within NET Services, as well as third-party consulting and implementation costs related to WD Services' value enhancement initiative of $2,562 and NET Services' value enhancement initiative of $2,028.
(3) Litigation expense related to defense cost for a putative stockholder class action derivative complaint, which is more fully described in the Company's Form 10-K.
--more--





Providence Service Corporation
Page 14

The Providence Service Corporation
Summary Financial Information of Equity Investments (1)
(in thousands)
(Unaudited)
 
Three months ended December 31, 2017
 
Matrix Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
52,536

 
$

 
$
691

 
$
53,227

Operating expense (2)
41,881

 

 
628

 
42,509

Depreciation and amortization
8,883

 

 
5

 
8,888

Operating income (loss)
1,772

 

 
58

 
1,830

 
 
 
 
 
 
 
 
Other expense (income)

 

 
(12
)
 
(12
)
Interest expense
3,823

 

 

 
3,823

Provision (benefit) for income taxes
(29,492
)
 

 
17

 
(29,475
)
Net income (loss)
27,441

 

 
53

 
27,494

 
 
 
 
 
 
 
 
Interest
46.6
%
 
75.0
%
 
50.0
%
 
N/A

Net income (loss) - Equity Investment
12,796

 

 
27

 
12,823

Management fee and other (3)
221

 

 

 
221

Equity in net gain (loss) of investee
$
13,017

 
$

 
$
27

 
$
13,044

 
 
 
 
 
 
 
 
Net Debt (4)
178,030

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended December 31, 2016
 
Matrix
Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
41,635

 
$
10,106

 
$
442

 
$
52,183

Operating expense (2)
39,357

 
10,718

 
444

 
50,519

Depreciation and amortization
6,356

 
903

 
1

 
7,260

Operating income (loss)
(4,078
)
 
(1,515
)
 
(3
)
 
(5,596
)
 
 
 
 
 
 
 
 
Other expense (income)

 
(195
)
 
(11
)
 
(206
)
Interest expense
2,949

 
15

 

 
2,964

Provision (benefit) for income taxes
(2,828
)
 
2,400

 
15

 
(413
)
Net income (loss)
(4,199
)
 
(3,735
)
 
(7
)
 
(7,941
)
 
 
 
 
 
 
 
 
Interest
46.8
%
 
75.0
%
 
50.0
%
 
N/A

Net income (loss) - Equity Investment
(1,965
)
 
(2,801
)
 
(3
)
 
(4,769
)
Management fee and other (5)
176

 

 

 
176

Equity in net gain (loss) of investee
$
(1,789
)
 
$
(2,801
)
 
$
(3
)
 
$
(4,593
)
(1) The results of equity method investments are excluded from the calculation of Providence's Adjusted EBITDA and Adjusted Net Income.
(2) Excludes depreciation and amortization.
(3) Includes amounts relating to management fees due from Matrix to Providence of $247 less Providence share-based compensation expense of $26.
(4) Represents cash of $15,020 and debt of $193,050 on Matrix's standalone balance sheet as of December 31, 2017.
(5) Includes amounts relating to management fees due from Matrix to Providence of $185 less Providence share-based compensation expense of $9.

--more--






Providence Service Corporation
Page 15

The Providence Service Corporation
Summary Financial Information of Equity Investments (1)
(in thousands)
(Unaudited)
 
Twelve months ended December 31, 2017
 
Matrix Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
227,872

 
$
30,125

 
$
2,185

 
$
260,182

Operating expense (2)
182,489

 
28,739

 
2,055

 
213,283

Depreciation and amortization
33,512

 
3,150

 
20

 
36,682

Operating income (loss)
11,871

 
(1,764
)
 
110

 
10,217

 
 
 
 
 
 
 
 
Other expense (income)

 
18

 
(46
)
 
(28
)
Interest expense
14,818

 
150

 

 
14,968

Provision (benefit) for income taxes
(29,613
)
 
1

 
38

 
(29,574
)
Net income (loss)
26,666

 
(1,933
)
 
118

 
24,851

 
 
 
 
 
 
 
 
Interest
46.6
%
 
75.0
%
 
50.0
%
 
N/A

Net income (loss) - Equity Investment
12,434

 
(1,451
)
 
60

 
11,043

Management fee and other (3)
1,011

 

 

 
1,011

Equity in net gain (loss) of investee
$
13,445

 
$
(1,451
)
 
$
60

 
$
12,054

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended December 31, 2016
 
Matrix
Investment
 
Mission
Providence
 
Other
 
Total
Revenue
$
41,635

 
$
36,581

 
$
722

 
$
78,938