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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             
 
Commission File Number 001-34221
 

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


Delaware86-0845127
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
       1275 Peachtree StreetSixth FloorAtlantaGeorgia30309
(Address of principal executive offices)(Zip Code)
 
(404) 888-5800
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.001 par value per sharePRSCThe NASDAQ Global Select Market





1


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
  
Non-accelerated filer Smaller reporting company
  
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 7(a)(2)(B) of the Securities Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No

As of November 4, 2019, there were outstanding 12,899,438 shares (excluding treasury shares of 5,081,434) of the registrant’s Common Stock, $0.001 par value per share.


2


TABLE OF CONTENTS
 Page
  
 
   
   
 
Condensed Consolidated Balance Sheets – September 30, 2019 (unaudited) and December 31, 2018
   
 
Unaudited Condensed Consolidated Statements of Operations – Three and nine months ended September 30, 2019 and 2018
 
 
 
 
Unaudited Condensed Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2019 and 2018
  
Unaudited Condensed Consolidated Statements of Stockholders’ Equity – Three and nine months ended September 30, 2019 and 2018
 
Unaudited Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2019 and 2018
 Notes to the Unaudited Condensed Consolidated Financial Statements – September 30, 2019
11
   
   
   
  
 
   
   
Item 1A.
   
   


3


PART I—FINANCIAL INFORMATION
Item 1.   Financial Statements.
The Providence Service Corporation
Condensed Consolidated Balance Sheets
(in thousands except share and per share data)
September 30, 2019December 31, 2018
 (Unaudited) 
Assets  
Current assets:  
Cash and cash equivalents$40,637  $5,678  
Accounts receivable, net of allowance of $3,516 in 2019 and $1,854 in 2018
198,232  147,756  
Other receivables3,435  4,846  
Prepaid expenses and other11,435  44,167  
Restricted cash833  1,482  
Current assets of discontinued operations322  7,051  
Total current assets254,894  210,980  
Operating lease right-of-use assets20,266    
Property and equipment, net21,968  22,965  
Goodwill135,216  135,216  
Intangible assets, net21,470  26,146  
Equity investment154,532  161,503  
Other assets12,196  9,949  
Restricted cash, less current portion  2,886  
Total assets$620,542  $569,645  
Liabilities, redeemable convertible preferred stock and stockholders’ equity
Current liabilities:
Current portion of operating lease liabilities$6,742  $  
Current portion of long-term obligations308  718  
Accounts payable7,614  8,828  
Accrued expenses32,654  39,191  
Accrued transportation costs112,410  84,889  
Deferred revenue231  562  
Reinsurance and related liability reserves4,636  5,438  
Current liabilities of discontinued operations1,246  3,257  
Total current liabilities165,841  142,883  
Long-term debt, less current portion122  353  
Operating lease liabilities, less current portion14,786    
Other long-term liabilities17,926  14,970  
Deferred tax liabilities24,339  23,049  
Long-term liabilities of discontinued operations639    
Total liabilities223,653  181,255  
Commitments and contingencies (Note 13)
Redeemable convertible preferred stock
Convertible preferred stock, net: Authorized 10,000,000 shares; $0.001 par value; 799,969 and 801,606, respectively, issued and outstanding; 5.5%/8.5% dividend rate
77,234  77,392  
Stockholders’ equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 17,967,996 and 17,784,769, respectively, issued and outstanding (including treasury shares)
18  18  
Additional paid-in capital346,034  334,744  
Retained earnings190,857  187,127  
Treasury shares, at cost, 5,081,434 and 4,970,093 shares, respectively
(217,254) (210,891) 
Total stockholders’ equity319,655  310,998  
Total liabilities, redeemable convertible preferred stock and stockholders’ equity$620,542  $569,645  

 See accompanying notes to the unaudited condensed consolidated financial statements
4


The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands except share and per share data)
 Three months ended September 30,Nine months ended September 30,
 2019201820192018
Service revenue, net$393,385  $343,771  $1,125,111  $1,024,203  
Operating expenses:    
Service expense356,271  313,511  1,042,717  934,367  
General and administrative expense15,979  17,045  52,241  53,081  
Asset impairment charge      678  
Depreciation and amortization4,148  3,780  12,976  11,107  
Total operating expenses376,398  334,336  1,107,934  999,233  
Operating income16,987  9,435  17,177  24,970  
Other expenses (income):    
Interest expense, net188  250  793  808  
Other income(66)   (199)   
Equity in net loss of investee3,188  1,587  6,159  4,106  
Gain on remeasurement of cost method investment  (6,577)   (6,577) 
Income from continuing operations before income taxes
13,677  14,175  10,424  26,633  
Provision for income taxes5,097  3,880  3,940  6,951  
Income from continuing operations, net of tax8,580  10,295  6,484  19,682  
(Loss) income from discontinued operations, net of tax(426) (2,964) 540  (18,026) 
Net income8,154  7,331  7,024  1,656  
Net loss from discontinued operations attributable to non-controlling interest
  (177)   (285) 
Net income attributable to Providence$8,154  $7,154  $7,024  $1,371  
Net income (loss) available to common stockholders (Note 11)
$6,104  $5,224  $3,230  $(1,939) 
Basic earnings (loss) per common share:    
Continuing operations$0.50  $0.61  $0.21  $1.24  
Discontinued operations(0.03) (0.20) 0.04  (1.39) 
Basic earnings (loss) per common share$0.47  $0.41  $0.25  $(0.15) 
Diluted earnings (loss) per common share:    
Continuing operations$0.50  $0.60  $0.21  $1.23  
Discontinued operations(0.03) (0.20) 0.04  (1.38) 
Diluted earnings (loss) per common share$0.47  $0.40  $0.25  $(0.15) 
Weighted-average number of common shares outstanding:    
Basic12,993,934  12,865,777  12,956,222  12,992,403  
Diluted13,004,449  12,927,122  12,977,598  13,069,140  

See accompanying notes to the unaudited condensed consolidated financial statements
5


The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Comprehensive Income
(in thousands)

Three months ended September 30,Nine months ended September 30,
2019201820192018
Net income$8,154  $7,331  $7,024  $1,656  
Net loss attributable to non-controlling interest
  (177)   (285) 
Net income attributable to Providence8,154  7,154  7,024  1,371  
Other comprehensive loss:    
Foreign currency translation adjustments, net of tax  (882)   (2,924) 
Reclassification of translation loss realized upon sale of subsidiary and equity investment, respectively
  627    627  
Other comprehensive loss  (255)   (2,297) 
Comprehensive income (loss)8,154  7,076  7,024  (641) 
Comprehensive loss attributable to non-controlling interest
  (203)   (356) 
Comprehensive income (loss) attributable to Providence$8,154  $6,873  $7,024  $(997) 
 

































See accompanying notes to the unaudited condensed consolidated financial statements
6


The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Stockholders’ Equity 
(in thousands except share data)

Nine Months Ended September 30, 2019
Common StockAdditional
Paid-In
RetainedTreasury Stock
 SharesAmountCapitalEarningsSharesAmountTotal
Balance at December 31, 201817,784,769  $18  $334,744  $187,127  4,970,093  $(210,891) $310,998  
 Stock-based compensation—  —  2,103  —  —  —  2,103  
 Exercise of employee stock options
57,022  —  2,557  —  —  —  2,557  
 Restricted stock issued25,357  —  —  —  3,459  (217) (217) 
 Shares issued for bonus settlement and director stipends
599  —  —  —  —  —    
 Convertible preferred stock dividends (1)
—  —  —  (1,087) —  —  (1,087) 
 Net income attributable to Providence
—  —  —  582  —  —  582  
Balance at March 31, 201917,867,747  $18  $339,404  $186,622  4,973,552  $(211,108) $314,936  
     Stock-based compensation—  —  1,289  —  —  —  1,289  
     Exercise of employee stock options
67,931  —  3,826  —  —  —  3,826  
      Restricted stock issued
7,088  —  —  —  2,419  (155) (155) 
  Shares issued for bonus settlement and director stipends
202  —  —  —  —  —    
       Preferred stock conversion
4,104  —  157  —  —  —  157  
       Convertible preferred stock dividends (1)
—  —  —  (1,098) —  —  (1,098) 
  Net loss attributable to Providence
—  —  —  (1,712) —  —  (1,712) 
Balance at June 30, 201917,947,072  $18  $344,676  $183,812  4,975,971  $(211,263) $317,243  
     Stock-based compensation—  —  855  —  —  —  855  
      Exercise of employee stock options
17,755  —  503  —  —  —  503  
      Restricted stock issued
2,313  —  —  —  42  (3) (3) 
  Shares issued for bonus settlement and director stipends
856  —  —  —  —  —    
Stock repurchase plan—  —  —  —  105,421  (5,988) (5,988) 
       Preferred stock conversion
  —    —  —  —    
       Convertible preferred stock dividends (1)
—  —  —  (1,109) —  —  (1,109) 
  Net income attributable to Providence
—  —  —  8,154  —  —  8,154  
Balance at September 30, 201917,967,996  $18  $346,034  $190,857  5,081,434  $(217,254) $319,655  
(1) Cash dividends on redeemable convertible preferred stock of $1.36, $1.37, and $1.38 per share were distributed to convertible preferred stockholders for the three months ended March 31, 2019, June 30, 2019, and September 30, 2019, respectively.













7


The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Stockholders’ Equity - continued
(in thousands except share data)

Nine Months Ended September 30, 2018
Accumulated
Other
Common StockAdditional
Paid-In
RetainedComprehensive
Loss, Net of
Treasury StockNon-
Controlling
 SharesAmountCapitalEarningsTaxSharesAmountInterestTotal
Balance at December 31, 201717,473,598  $17  $313,955  $204,818  $(25,805) 4,126,132  $(154,803) $(2,165) $336,017  
Stock-based compensation—  —  993  —  —  —  —  —  993  
Exercise of employee stock options
212,789  1  8,819  —  —      —  8,820  
Restricted stock issued20,904  —  —  —  —  3,778  (237) —  (237) 
Shares issued for bonus settlement and director stipends2,715  —  150  —  —  —  —  —  150  
Stock repurchase plan—  —  —  —  —  583,027  (36,930) —  (36,930) 
Convertible preferred stock dividends (2)
—  —  —  (1,089) —  —  —  —  (1,089) 
Foreign currency translation adjustments, net of tax
—  —  —  —  1,926  —  —  (81) 1,845  
Non-controlling interest—  —  —  —  —  —  —  296  296  
Other
—  —  49  —  —  —  —  —  49  
Net income attributable to Providence
—  —  —  5,430  —  —  —  —  5,430  
Cumulative effect adjustment from change in accounting principle, net of tax
—  —  —  5,710  —  —  —  —  5,710  
Balance at March 31, 201817,710,006  18  $323,966  $214,869  $(23,879) 4,712,937  $(191,970) $(1,950) $321,054  
Stock-based compensation—  —  3,446  —  —  —  —  —  3,446  
Exercise of employee stock options
53,004    2,842  —  —      —  2,842  
Restricted stock issued6,085  —  (320) —  —  129  (9) —  (329) 
Performance restricted stock issued
3,110    (109) —  —  —  —  —  (109) 
Shares issued for bonus settlement and director stipends
318  —    —  —  —  —  —    
Stock repurchase plan—  —  —  —  —  255,692  (18,823) —  (18,823) 
Conversion of convertible preferred stock to common stock
2,608  —  105  (5) —  —  —  —  100  
Convertible preferred stock dividends (2)
—  —  —  (1,101) —  —  —  —  (1,101) 
Foreign currency translation adjustments, net of tax
—  —  —