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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 March 31, 2020

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)

N/A
(Former name, former address and former fiscal year, if changed since last report)


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 May 4, 2020, there were outstandin12,913,960 shares (excluding treasury shares of 5,278,684) of the registrant’s Common Stock, $0.001 par value per share.


2






TABLE OF CONTENTS
 Page
  
 
   
   
 
Condensed Consolidated Balance Sheets – March 31, 2020 (unaudited) and December 31, 2019
   
 
Unaudited Condensed Consolidated Statements of Operations – Three months ended March 31, 2020 and 2019
  
Unaudited Condensed Consolidated Statements of Stockholders’ Equity – Three months ended March 31, 2020 and 2019
 
Unaudited Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2020 and 2019
 Notes to the Unaudited Condensed Consolidated Financial Statements – March 31, 2020
   
   
   
  
 
   
   
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)
March 31, 2020December 31, 2019
 (Unaudited) 
Assets  
Current assets:  
Cash and cash equivalents$254,371  $61,365  
Accounts receivable, net of allowance of $6,760 in 2020 and $5,933 in 2019
172,050  180,416  
Other receivables3,672  3,396  
Prepaid expenses and other32,555  10,942  
Restricted cash73  153  
Current assets of discontinued operations33  155  
Total current assets462,754  256,427  
Operating lease right-of-use assets18,693  20,095  
Property and equipment, net22,586  23,243  
Goodwill135,216  135,216  
Intangible assets, net18,353  19,911  
Equity investment128,098  130,869  
Other assets11,415  11,620  
Total assets$797,115  $597,381  
Liabilities, redeemable convertible preferred stock and stockholders’ equity
Current liabilities:
Current portion of long-term debt$162,000  $  
Current portion of finance lease liabilities276  308  
Accounts payable38,469  9,805  
Current portion of operating lease liabilities6,737  6,730  
Accrued expenses46,361  38,733  
Accrued transportation costs67,778  87,063  
Deferred revenue565  227  
Self-funded insurance programs5,502  5,890  
Current liabilities of discontinued operations1,455  1,430  
Total current liabilities329,143  150,186  
Finance lease liabilities, less current portion  45  
Operating lease liabilities, less current portion12,987  14,502  
Other long-term liabilities15,010  15,029  
Deferred tax liabilities34,497  22,907  
Total liabilities391,637  202,669  
Commitments and contingencies (Note 13)
Redeemable convertible preferred stock
Convertible preferred stock, net: Authorized 10,000,000 shares; $0.001 par value; 798,772 and 798,788, respectively, issued and outstanding; 5.5%/8.5% dividend rate
77,120  77,120  
Stockholders’ equity
Common stock: Authorized 40,000,000 shares; $0.001 par value; 18,192,644 and 18,073,763, respectively, issued and outstanding (including treasury shares)
18  18  
Additional paid-in capital354,628  351,529  
Retained earnings198,736  183,733  
Treasury shares, at cost, 5,232,229 and 5,088,782 shares, respectively
(225,024) (217,688) 
Total stockholders’ equity328,358  317,592  
Total liabilities, redeemable convertible preferred stock and stockholders’ equity$797,115  $597,381  
4






 See accompanying notes to the unaudited condensed consolidated financial statements
5






The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands except share and per share data)
 Three months ended March 31,
 20202019
Service revenue, net$367,291  $367,815  
Operating expenses:  
Service expense332,661  340,498  
General and administrative expense20,795  19,401  
Depreciation and amortization3,790  4,475  
Total operating expenses357,246  364,374  
Operating income10,045  3,441  
Other expenses (income):  
Interest expense, net241  303  
Other income  (66) 
Equity in net loss of investee2,550  1,656  
Income from continuing operations before income taxes
7,254  1,548  
(Benefit) provision for income taxes(9,046) 234  
Income from continuing operations, net of tax16,300  1,314  
Loss from discontinued operations, net of tax(202) (732) 
Net income$16,098  $582  
Net income (loss) available to common stockholders (Note 11)
$12,998  $(535) 
Basic earnings (loss) per common share:  
Continuing operations$1.02  $0.02  
Discontinued operations(0.02) (0.06) 
Basic earnings (loss) per common share$1.00  $(0.04) 
Diluted earnings (loss) per common share:  
Continuing operations$1.02  $0.02  
Discontinued operations(0.02) (0.06) 
Diluted earnings (loss) per common share$1.00  $(0.04) 
Weighted-average number of common shares outstanding:  
Basic12,987,740  12,899,714  
Diluted13,012,991  12,953,328  

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)

Three months ended March 31, 2020
Common StockAdditional
Paid-In
RetainedTreasury Stock
 SharesAmountCapitalEarningsSharesAmountTotal
Balance at December 31, 201918,073,763  $18  $351,529  $183,733  5,088,782  $(217,688) $317,592  
Net income —  —  —  16,098  —  —  16,098  
Stock-based compensation—  —  1,005  —  —  —  1,005  
Exercise of employee stock options
39,111  —  2,054  —  —  —  2,054  
Restricted stock issued79,029  —  —  —  626  (37) (37) 
  Shares issued for bonus settlement and director stipends
701  —  38  —  —  —  38  
Stock repurchase plan—  —  —  —  142,821  (7,299) (7,299) 
  Conversion of convertible preferred stock to common stock
40  —  2  —  —  —  2  
  Convertible preferred stock dividends (1)
—  —  —  (1,095) —  —  (1,095) 
Balance at March 31, 202018,192,644  $18  $354,628  $198,736  5,232,229  $(225,024) $328,358  
(1) Cash dividends on redeemable convertible preferred stock of $1.37 per share were distributed to convertible preferred stockholders for the three months ended March 31, 2020.


Three months ended March 31, 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  
 Net income —  —  —  582  —  —  582  
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 stipends599  —    —  —  —    
Convertible preferred stock dividends (1)
—  —  —  (1,087) —  —  (1,087) 
Balance at March 31, 201917,867,747  $18  $339,404  $186,622  4,973,552  $(211,108) $314,936  
(1) Cash dividends on redeemable convertible preferred stock of $1.36 per share were distributed to convertible preferred stockholders for the three months ended March 31, 2019.

See accompanying notes to the unaudited condensed consolidated financial statements
7






The Providence Service Corporation
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

 Three months ended March 31,
 20202019
Operating activities  
Net income$16,098  $582  
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation2,231  2,916  
Amortization1,559  1,559  
Provision for doubtful accounts827  87  
Stock-based compensation1,045  2,103  
Deferred income taxes11,590  (768) 
Amortization of deferred financing costs and debt discount33  101  
Equity in net loss of investee2,550  1,656  
Reduction of right of use assets2,248  2,332  
Changes in operating assets and liabilities:  
Accounts receivable and other receivables7,484  1,631  
Prepaid expenses and other(21,463) 3,526  
Income taxes on gain from sale of business22  5,103  
Self-funded insurance programs(388) (1,311) 
Accounts payable and accrued expenses36,317  (6,003) 
Accrued transportation costs(19,285) 26,640  
Deferred revenue338  (361) 
Other long-term liabilities(2,374) (962) 
Net cash provided by operating activities38,832  38,831  
Investing activities  
Purchase of property and equipment(1,574) (1,682) 
Net cash used in investing activities(1,574) (1,682) 
Financing activities  
Proceeds from debt162,000    
Preferred stock dividends(1,095) (1,087) 
Repurchase of common stock, for treasury(7,299) (217) 
Proceeds from common stock issued pursuant to stock option exercise2,054  2,557  
Restricted stock surrendered for employee tax payment(37)   
Other financing activities(77) (145) 
Net cash provided by financing activities155,546  1,108  
Net change in cash, cash equivalents and restricted cash192,804  38,257  
Cash, cash equivalents and restricted cash at beginning of period61,673  12,367  
Cash, cash equivalents and restricted cash at end of period$254,477  $50,624  
See accompanying notes to the unaudited condensed consolidated financial statements
8






The Providence Service Corporation
Supplemental Cash Flow Information
(in thousands)

 Three months ended
March 31,
Supplemental cash flow information20202019
Cash paid for interest$197  $654  
Cash paid for income taxes, net of refunds$1,437  $104  

See accompanying notes to the unaudited condensed consolidated financial statements
9






The Providence Service Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
March 31, 2020
(in thousands except years, share and per share data)
 
1.    Organization and Basis of Presentation

Description of Business

The Providence Service Corporation (“we”, the “Company” or “Providence”) is the largest manager of non-emergency medical transportation (“NET”) programs for state governments and managed care organizations (“MCOs”) in the United States (“U.S.”). The Company operates under the brands LogistiCare and Circulation. Additionally, the Company owns a minority investment in CCHN Group Holdings, Inc. and its subsidiaries (“Matrix”). Matrix provides a broad array of assessment and care management services that improve health outcomes for individuals and financial performance for health plans. Matrix’s national network of community-based clinicians delivers in-home services while its fleet of mobile health clinics provide community-based care with advance diagnostic capabilities. These solutions combined with Matrix’s advanced engagement approach, help health plans manage risks, close care gaps and connect members to care.

During 2018, the Company announced an organizational consolidation plan ("Organizational Consolidation") to integrate substantially all activities and functions performed at the corporate holding company level into its NET Services segment. As part of the Organizational Consolidation, which was substantially completed by January 1, 2019, the Company incurred restructuring and related organization costs. See Note 8, Restructuring and Related Reorganization Costs, for further information.

Basis of Presentation

The Company follows accounting standards set by the Financial Accounting Standards Board (“FASB”). The FASB establishes accounting principles generally accepted in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (“ASC”), which serves as the single source of authoritative accounting and applicable reporting standards to be applied for non-governmental entities. All amounts are presented in U.S. dollars, unless otherwise noted.

The Company’s condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for the fair presentation of the results of the interim periods have been included.

The Company has made estimates relating to the reporting of assets and liabilities, revenues and expenses and certain disclosures in the preparation of these condensed consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. Management has evaluated events and transactions that occurred after the balance sheet date and through the date these condensed consolidated financial statements were filed with the SEC and considered the effect of such events in the preparation of these condensed consolidated financial statements.

The condensed consolidated balance sheet at December 31, 2019 has been derived from audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. The condensed consolidated financial statements contained herein should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The Company accounts for its investment in Matrix using the equity method, as the Company does not control the decision-making process or business management practices of Matrix. While the Company has access to certain information and performs certain procedures to review the reasonableness of information, the Company relies on the management of Matrix to provide accurate financial information prepared in accordance with GAAP. The Company receives audit reports relating to such financial information from Matrix’s independent auditors on an annual basis. The Company is not aware of any errors in or possible misstatements of the financial information provided by Matrix that would have a material effect on the Company’s condensed consolidated financial statements. See Note 5, Equity Investment, for further information.
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Uncertainties due to COVID-19

In December 2019, an outbreak of a new strain of a coronavirus; causing a coronavirus disease ("COVID-19"), began in Wuhan, Hubei Province, China. In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. COVID-19, as well as measures taken by governmental authorities and private actors to limit the spread of this virus, has and is likely to continue to interfere with the ability of the Company's employees, suppliers, transportation providers and other business providers to carry out their assigned tasks at ordinary levels of performance relative to the conduct of our business which may cause the Company to materially curtail certain business operations. While the Company is monitoring the impact of COVID-19 on the business and financial results at this time, the Company is unable to accurately predict the extent to which the coronavirus pandemic impacts the business, operations and financial results.

The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and reported amounts of revenue and expenses. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s first quarter 2020 results of operations or financial position. It is possible that these assumptions and estimates may materially change prior to December 31, 2020.

In response to the circumstances described above, the Company borrowed $162,000 under the revolving credit facility to enhance its financial flexibility given uncertainty during the COVID-19 pandemic and its impact on global economies and financial markets. See Note 9, Debt, for further information.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a delay in the payment of employer federal payroll taxes during 2020 after the date of enactment. Due to the favorable impact of the CARES Act on the Company’s 2018 U.S. net operating losses ("NOLs"), the effective tax rate was lower than the U.S. federal statutory rate of 21.0% for the three months ended March 31, 2020. See Note 12, Income Taxes, for further information.

Reclassifications

During the three months ended March 31, 2020, the Company has separately classified the reduction of Right of Use assets in its consolidated statement of cash flows and conformed the prior period.

2.    Significant Accounting Policies and Recent Accounting Pronouncements

The Company adopted the following accounting pronouncements during the three months ended March 31, 2020:

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). The amendments in ASU 2016-13 superseded much of the existing guidance for reporting credit losses for assets held at amortized cost basis and available for sale debt securities. The amendments in ASU 2016-13 affected loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company adopted ASU 2016-13 on January 1, 2020. As of the quarter ended March 31, 2020, this guidance did not have a material impact on the condensed consolidated financial statements or disclosures and we do not expect the adoption of this guidance will have a material impact in the future.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 removed certain disclosures, modified certain disclosures and added additional disclosures. The Company adopted ASU 2018-13 on January 1, 2020. As of the quarter ended March 31, 2020, this guidance did not have an impact on the condensed consolidated financial statements or disclosures and we do not expect the adoption of this guidance will have a material impact in the future.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain
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internal-use software. The Company elected to apply the prospective transition approach and therefore applied the transition requirements to any eligible costs incurred after adoption. The Company adopted ASU 2018-15 on January 1, 2020. As of the quarter ended March 31, 2020, the Company has not incurred any material implementation costs associated with new service contracts since the date of adoption.

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. The amendments related to Issue 1, Issue 2, Issue 4, and Issue 5 are conforming amendments. For public business entities, the amendments are effective upon issuance of the final ASU. The amendment related to Issue 3 is a conforming amendment that affects the guidance in the amendments in Accounting Standards Update No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. That guidance relates to the amendments in Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The effective date of Update 2019-04 for the amendments to Update 2016-01 is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendments related to Issue 6 and Issue 7 affect the guidance in the amendments in Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Public business entities that meet the definition of an SEC filer, excluding eligible smaller reporting companies as defined by the SEC, should adopt the amendments in ASU 2016-13 during 2020. The Company adopted the amendments on April 1, 2020. These amendments did not have an impact on the condensed consolidated financial statements or disclosures and we do not expect the adoption of the amendments to have a material impact in the future.

Recent accounting pronouncements that the Company has yet to adopt are as follows:

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which modifies ASC 740, Income Taxes, to reduce complexity in certain areas of accounting for income taxes. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the impact ASU 2019-12 will have on its condensed consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 ("ASU 2020-01"), to clarify the interaction among the accounting standards for equity securities, equity method investments and certain derivatives. ASU 2020-01 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company is currently evaluating the impact of ASU 2020-01 on its condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") which provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The relief granted in ASC 848, Reference Rate Reform, is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. The provisions of ASC 848 must be applied to a Topic, Subtopic, or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. Entities may apply the provisions as of the beginning of the reporting period when the election is made (i.e. as early as the first quarter 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company is currently evaluating the impact ASU 2020-01 will have on its condensed consolidated financial statements or disclosures, but it does not expect the adoption to have a material impact.

3.    Revenue Recognition

Disaggregation of Revenue
The following table summarizes disaggregated revenue from contracts with customers by contract type:
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Three months ended March 31, 2020Three months ended March 31, 2019
State Medicaid agency contracts$180,731  $176,968  
Managed care organization contracts186,560  190,847  
  Total Service revenue, net$367,291  $367,815  
Capitated contracts$300,724  $304,596  
Non-capitated contracts66,567  63,219  
  Total Service revenue, net$367,291  $367,815  

During the three months ended March 31, 2020 and 2019, the Company recognized $632 and $2,572, respectively, from contractual adjustments relating to performance obligations satisfied in previous periods to which the customer agreed.

Related Balance Sheet Accounts

The following table provides information about accounts receivable, net:
March 31, 2020December 31, 2019
Accounts receivable$117,536  $124,868  
Reconciliation contracts receivable61,274  61,481  
Allowance for doubtful accounts(6,760) (5,933) 
Accounts receivable, net$172,050  $180,416  
The following table provides information about other accounts included on the accompanying condensed consolidated balance sheets:
March 31, 2020December 31, 2019
Accrued contract payments, included in accrued expenses
$20,058  $15,706  
Deferred revenue, current 565  227  
Deferred revenue, long-term, included in other long-term liabilities
723  758  
During the three months ended March 31, 2020 and 2019, $48 and $339 of deferred revenue as of December 31, 2019 and 2018, respectively, was recognized.
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4.    Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:

March 31, 2020March 31, 2019
Cash and cash equivalents$254,371  $42,418  
Restricted cash, current73  1,868  
Current assets of discontinued operations33  4,297  
Restricted cash, less current portion  2,041  
Cash, cash equivalents and restricted cash$254,477  $50,624  

Restricted cash primarily relates to amounts held in trusts for reinsurance claims losses under the Company’s now dissolved captive insurance operation for historical workers’ compensation, general and professional liability and auto liability reinsurance programs, as well as amounts restricted for withdrawal under our self-insured medical and benefits plans. The wholly owned captive insurance subsidiary, Social Services Providers Captive Insurance Company ("SPCIC"), was dissolved during the three months ended March 31, 2020. Current assets of discontinued operations principally reflects the cash position of WD Services operations in Saudi Arabia, which was not sold as part of the WD Services Sale. The operation in Saudi Arabia is winding down. See Note 15, Discontinued Operations, for further information on the WD Services sale.

5.    Equity Investment

As of March 31, 2020 and December 31, 2019, the Company owned a 43.6% non-controlling interest in Matrix. Pursuant to a stock subscription agreement by and among The Providence Service Corporation, CCHN Group Holdings, Inc., and Mercury Fortuna Buyer, LLC ("Shareholder’s Agreement"). Affiliates of Frazier Healthcare Partners hold rights necessary to control the fundamental operations of Matrix. The Company accounts for this investment in Matrix under the equity method of accounting and the Company’s share of Matrix’s income or losses are recorded as “Equity in net loss (gain) of investee” in the accompanying condensed consolidated statements of operations. During the year ended December 31, 2019, Matrix recorded asset impairment charges of $55,056. No impairment was recorded for the three months ended, March 31, 2020.

The carrying amount of the assets included in the Company’s condensed consolidated balance sheets and the maximum loss exposure related to the Company’s interest in Matrix as of March 31, 2020 and December 31, 2019 totaled $128,098 and $130,869, respectively.

Summary financial information for Matrix on a standalone basis is as follows:
 March 31, 2020December 31, 2019
Current assets$69,766  $64,221  
Long-term assets641,065  631,007  
Current liabilities38,891  31,256  
Long-term liabilities365,026  351,380  

Three months ended March 31, 2020Three months ended March 31, 2019
Revenue$61,304  $66,983  
Operating (loss) income (1,673) 555  
Net loss(6,357) (4,486) 

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6.    Prepaid Expenses and Other

Prepaid expenses and other were comprised of the following: 
March 31, 2020December 31, 2019
Prepaid income taxes$25,128  $2,942  
Prepaid insurance630  1,317  
Prepaid rent892  868  
Other prepaid expenses5,905  5,815  
Total prepaid expenses and other$32,555  $10,942  


7.    Accrued Expenses

Accrued expenses consisted of the following:
March 31, 2020December 31, 2019
Accrued compensation and related liabilities$14,442  $8,941  
Accrued contract payments20,058  15,706  
Accrued cash settled stock-based compensation2,567  3,282  
Other accrued expenses9,294  10,804  
Total accrued expenses$46,361  $38,733  

8.    Restructuring and Related Reorganization Costs

On April 11, 2018, the Company announced the Organizational Consolidation to transfer all job responsibilities previously performed by employees of the holding company to LogistiCare and to close the corporate offices in Stamford, Connecticut and Tucson, Arizona. The Company adopted an employee retention plan designed to retain the holding company level employees during the transition. The Organizational Consolidation was completed during the second quarter of 2019.

A total of $2,011 in restructuring and related costs was incurred during the three months ended March 31, 2019 related to the Organizational Consolidation. These costs include $1,393 of retention and personnel costs, $191 of stock-based compensation expense, $144 of depreciation and $283 of other costs, primarily related to recruiting and legal costs. These costs are recorded as “General and administrative expense” and “Depreciation and amortization” in the accompanying condensed consolidated statements of operations.

A total of $13,060 in restructuring and related costs was incurred on a cumulative basis through December 31, 2019 related to the Organizational Consolidation. These costs include $7,516 of retention and personnel costs, $2,035 of stock-based compensation expense, $673 of depreciation and $2,836 of other costs, primarily related to recruiting and legal costs.

The summary of the liability for restructuring and related reorganization costs is as follows:

 January 1, 2019Costs
Incurred
Cash PaymentsDecember 31, 2019
Retention and personnel liability$1,956  $2,418  $(4,374) $  
Other liability398  1,308  (1,706)   
Total$2,354  $3,726  $(6,080) $  

No restructuring and related costs were incurred, related to the Organizational Consolidation, during the three months ended March 31, 2020.

There was no restructuring liability as of March 31, 2020.

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During the three months ended March 31, 2020, the Company incurred approximately $450 of restructuring expenses for the closure of its Las Vegas contact center. The majority of these costs were recorded to “Service expense” and the remainder were recorded to "General and administrative expense".

9.    Debt

The Company is a party to the amended and restated credit and guaranty agreement, dated as of August 2, 2013 (as amended, the “Credit Agreement”), with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and the other lenders party thereto. On May 6, 2020, the Company entered into the Seventh Amendment to the Amended and Restated Credit and Guaranty Agreement (the “Seventh Amendment”) which, among other things, extends the maturity date to August 1, 2021, expands the amount available under the revolving credit facility (the “Credit Facility”) from $200,000 to $225,000, and increases the sub-facility for letters of credits from $25,000 to $40,000. Interest on the loans is payable quarterly in arrears. In addition, the Company is obligated to pay a quarterly commitment fee based on a percentage of the unused portion of each lender’s commitment under the Credit Facility and quarterly letter of credit fees based on a percentage of the maximum amount available to be drawn under each outstanding letter of credit.

As of March 31, 2020, the Company had $162,000 of borrowings outstanding on the Credit Facility, in addition to letters of credit outstanding in the amount of $13,551. The Company’s available credit under the Credit Facility was $24,449. Under the Credit Agreement, the Company has an option to request an increase in the amount of the revolving credit facility from time to time (on substantially the same terms as apply to the existing facilities) in an aggregate amount of up to $75,000 with either additional commitments from lenders under the Credit Agreement at such time or new commitments from financial institutions acceptable to the administrative agent in its reasonable discretion, so long as no default or event of default exists at the time of any such increase. The Company may not be able to access additional funds under this increase option as no lender is obligated to participate in any such increase under the Credit Facility.

As of March 31, 2020, interest on the outstanding principal amount of loans accrued, at the Company’s election, at a per annum rate equal to LIBOR, plus an applicable margin, or the base rate as defined in the agreement plus an applicable margin. The applicable margin ranged from 2.25% to 3.25% in the case of LIBOR loans and 1.25% to 2.25% in the case of the base rate loans, in each case, based on the Company’s consolidated leverage ratio as defined in the Credit Agreement. The commitment fee and letter of credit fee ranged from 0.25% to 0.50% and 2.25% to 3.25%, respectively, in each case based on the Company’s consolidated leverage ratio as defined by the Credit Agreement. As of March 31, 2020, the all-in interest rate was 4.17%.

Subsequent to the Seventh Amendment, interest on the outstanding principal amount of loans accrues, at the Company’s election, at a per annum rate equal to the greater of either LIBOR or 1.00%, plus an applicable margin, or the base rate as defined in the agreement plus an applicable margin. The applicable margin ranges from 2.25% to 3.00% in the case of LIBOR loans and 1.25% to 2.00% in the case of the base rate loans, in each case, based on the Company’s consolidated leverage ratio as defined in the Credit Agreement. The commitment fee and letter of credit fee ranges from 0.35% to 0.50% and 2.25% to 3.00%, respectively, in each case based on the Company’s consolidated leverage ratio as defined in the Credit Agreement.

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s present and future domestic subsidiaries. The Company’s obligations are secured by a first priority lien on substantially all of the Company’s assets excluding the Company’s interest in Matrix.

The Credit Agreement contains customary affirmative and negative covenants and events of default. The negative covenants include restrictions on the Company’s ability to, among other things, incur additional indebtedness, create liens, make investments, give guarantees, pay dividends, sell assets, and merge and consolidate. The Company is subject to financial covenants, including consolidated net leverage and consolidated interest coverage covenants. The Company’s consolidated net leverage ratio may not be greater than 3.00:1.00 as of the end of any fiscal quarter and the Company’s consolidated interest coverage ratio may not be less than 3.00:1.00 as of the end of any fiscal quarter. The Company was in compliance with all covenants as of March 31, 2020. The covenants did not change as a result of the Seventh Amendment.

10.    Stock-Based Compensation and Similar Arrangements

The Company provides stock-based compensation to employees and non-employee directors under the Company’s 2006 Long-Term Incentive Plan (“2006 Plan”). The 2006 Plan allows the flexibility to grant or award stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units including restricted stock units and performance awards to eligible persons.

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The following table reflects the amount of stock-based compensation for continuing operations, for share settled awards, recorded in each financial statement line item for the three months ended March 31, 2020 and 2019:

 Three months ended March 31,
 20202019
Service expense$65  $165  
General and administrative expense980  1,938  
Total stock-based compensation$1,045  $2,103  

At March 31, 2020, the Company had 664,360 stock options outstanding with a weighted-average exercise price of $65.92. The Company also had 65,618 unvested restricted stock awards ("RSAs") and 37,050 unvested restricted stock units ("RSUs") outstanding at March 31, 2020 with a weighted-average grant date fair value of $44.42 and $63.57, respectively.

Cash-Settled Awards

The Company also grants stock equivalent unit awards (“SEUs”) and stock option equivalent units that are cash-settled awards and are not included as part of the 2006 Plan. During the three months ended March 31, 2020 and March 31, 2019, the Company recorded a benefit of $563 and expense of $1,189 of stock-based compensation for cash-settled awards, respectively. The benefit and expense for cash-settled awards is included as “General and administrative expense” in the accompanying condensed consolidated statements of operations. As the instruments are accounted for as liability awards, the income or expense recorded for the three months ended March 31, 2020 and 2019 is attributable to the Company’s change in stock price from the previous reporting period. The liability for unexercised cash-settled share-based payment awards of $2,567 and $3,282 at March 31, 2020 and December 31, 2019, respectively, is reflected in “Accrued expenses” in the condensed consolidated balance sheets. At March 31, 2020, the Company had 3,862 SEUs and 200,000 stock option equivalent units outstanding.

Long-Term Incentive Plans

In connection with the acquisition of Circulation during 2018, the Company established a management incentive plan (“MIP”) intended to motivate key employees of Circulation. During the three months ended March 31, 2019, the MIP was amended to remove the previously included performance requirements and to provide for a total fixed payment of $12,000 to the group of MIP participants. During the year ended December 31, 2019, the MIP was further amended to a total fixed payment of $2,720. The payout date is within 30 days following the finalization of the Company’s audited financial statements for the fiscal year ending December 31, 2021 and the payout is subject to the participant remaining employed by the Company through December 31, 2021, except for certain termination scenarios. As of March 31, 2020 and December 31, 2019, the Company has accrued $1,363 and $1,108, respectively, related to the MIP and reflected in “Other long-term liabilities” in the condensed consolidated balance sheets.

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11.    Earnings (Loss) Per Share