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): October 5, 2017 (September 29, 2017)
 
 
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, CT
 
06902
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (203) 307-2800
Not Applicable
(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 2.01 Completion of Acquisition or Disposition of Assets

On September 29, 2017, The Providence Service Corporation (“Providence”) completed its previously announced sale of its 60% ownership interest in Mission Providence Pty Ltd (“Mission Providence”), a joint venture between Providence and Mission Australia ACN (“Mission Australia”), to Konekt Limited (“Konekt”). Mission Providence delivers employment preparation and placement services in Australia.
Konekt acquired 100% of the stock of Mission Providence pursuant to the share sale agreement dated August 10, 2017 by and between Mission Australia, Ingeus Australasia Pty Ltd, a subsidiary of Providence, Konekt Workplace Health Solutions Pty Ltd and Konekt. Pursuant to the terms of the joint venture agreement, Providence received 75% of the total consideration in connection with the sale of its equity interest in Mission Providence, which equaled AUD 20.2 million (or approximately USD $15.9 million based on the exchange rate as of September 29, 2017). The consideration was paid in cash at closing.
Item 9.01 Financial Statements and Exhibits
(b)     Pro forma financial information     
The unaudited pro forma condensed consolidated balance sheet of Providence and its subsidiaries as of June 30, 2017 and the unaudited pro forma condensed consolidated statements of income of Providence and its subsidiaries for the six months ended June 30, 2017 and the year ended December 31, 2016 and the related notes thereto, are presented to give effect to Providence’s sale of its equity interest in Mission Providence, and are filed as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated herein by reference.
 
These unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the financial position or results of operations that would have occurred had the sale been effected on the assumed dates. Future results may vary significantly from the results reflected in the unaudited pro forma condensed consolidated financial statements.

(d)      Exhibits
 
Exhibit
Number
  
Description
 
 
 
The unaudited pro forma condensed consolidated balance sheet of Providence and its subsidiaries as of June 30, 2017, and the unaudited pro forma condensed consolidated statements of income of Providence and its subsidiaries for the six months ended June 30, 2017 and the year ended December 31, 2016 giving effect to Providence’s sale of its equity interest in Mission Providence.





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: October 5, 2017
 
 
 
By:
 
/s/ David Shackelton
 
 
 
 
Name:
 
David Shackelton
 
 
 
 
Title:
 
Chief Financial Officer
         



Exhibit


Exhibit 99.1



UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements have been derived by the application of pro forma adjustments to the historical consolidated financial information of The Providence Service Corporation (the “Company” or “Providence”), which have been presented to give effect to Providence’s sale of its equity interest in Mission Providence Pty Ltd (“Mission Providence”).
Mission Providence was formed in 2014 as a joint venture between Providence and Mission Australia ACN ("Mission Australia") to provide employment services under the Australian Government Department of Employment’s jobactive program. On September 29, 2017, Providence and Mission Australia completed the sale of 100% of the stock of Mission Providence to Konekt Limited, pursuant to the share sale agreement dated August 10, 2017.
At closing, Providence received AUD 20.2 million ($15.9 million) for its equity interest, net of transaction fees, based upon the exchange rate at that date of AUD 0.7839 to USD $1.00.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2017 of the Company is presented as if the sale had occurred as of June 30, 2017. The unaudited pro forma condensed consolidated statements of income of the Company for the six months ended June 30, 2017 and the year ended December 31, 2016 are presented as if the sale had occurred on January 1, 2016.
The Company’s historical financial information was derived from its audited consolidated financial statements for the year ended December 31, 2016 (as included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017) and the Company’s unaudited condensed consolidated financial statements for the six months ended June 30, 2017 (as included in its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2017). The Company’s historical financial statements used in preparing the unaudited pro forma financial data are summarized and should be read in conjunction with its historical financial statements and risk factors, all of which are included in the filings with the Securities and Exchange Commission noted above.
The unaudited pro forma adjustments give effect to events that are (i) directly attributable to the sale, (ii) factually supportable and (iii) based on estimates, available information and certain assumptions that the Company believes are reasonable given the information currently available. The unaudited pro forma adjustments and primary assumptions are described in the accompanying notes. The unaudited pro forma condensed consolidated balance sheet and statements of income are being provided for illustrative purposes only and do not purport to represent what the Company’s results of operations or financial position would have been if the sale had occurred on the dates indicated and are not intended to project the Company’s results of operations or financial position for any future period. Any of the factors underlying these estimates and assumptions may change or prove to be materially different and the estimates and assumptions may not be representative of facts that existed upon completion of the sale. Amounts in the unaudited pro forma condensed consolidated financial statements are presented in U.S. dollars.






The Providence Service Corporation
Pro Forma Condensed Consolidated Balance Sheet - Unaudited
June 30, 2017
(in thousands)

 
Providence Service Corporation Historical
 
Disposition of Mission Providence
 
Pro Forma
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
56,583

 
$
15,553

a
$
72,136

Accounts receivable, net
172,189

 

 
172,189

Other current assets
57,451

 

 
57,451

Total current assets
286,223

 
15,553

 
301,776

 
 
 
 
 
 
Goodwill
120,818

 

 
120,818

Equity investments
160,601

 
(3,326
)
b
157,275

Other non-current assets
115,234

 

 
115,234

Total assets
$
682,876

 
$
12,227

 
$
695,103

 
 
 
 
 
 
Liabilities and stockholders' equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accrued expenses
$
105,464

 
$

 
$
105,464

Accrued transportation costs
83,812

 

 
83,812

Other current liabilities
49,345

 

 
49,345

Total current liabilities
238,621

 

 
238,621

 
 
 
 
 
 
Other non-current liabilities
81,022

 

 
81,022

Total liabilities
319,643

 

 
319,643

 
 
 
 
 
 
Redeemable convertible preferred stock
 
 
 
 
 
Convertible preferred stock, net
77,565

 

 
77,565

 
 
 
 
 
 
Stockholders' equity
 
 
 
 
 
    Common stock and APIC
307,951

 

 
307,951

    Retained earnings
153,266

 
12,134

c
165,400

    Treasury shares
(144,193
)
 

 
(144,193
)
    Other stockholders' equity
(31,356
)
 
93

c
(31,263
)
Total stockholders' equity
285,668

 
12,227

 
297,895

Total liabilities, redeemable convertible preferred stock and stockholders' equity
$
682,876

 
$
12,227

 
$
695,103




The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.





The Providence Service Corporation
Pro Forma Condensed Consolidated Statements of Income
for the six months ended June 30, 2017
Unaudited
(in thousands, except share and per share data)

 
Providence Service Corporation Historical
 
Disposition of Mission Providence
 
Pro Forma
 
 
 
 
 
 
Service revenue, net
$
807,477

 
$

 
$
807,477

 
 
 
 
 
 
Operating expenses:
 
 
 
 

    Service expense
746,446

 

 
746,446

    General and administrative expense
35,076

 

 
35,076

    Depreciation and amortization
13,169

 

 
13,169

Total operating expenses
794,691

 

 
794,691

Operating income
12,786

 

 
12,786

 
 
 
 
 
 
Other expenses:
 
 
 
 
 
    Interest expense, net
681

 

 
681

    Equity in net loss (gain) of investees
530

 
(963
)
d
(433
)
    (Gain) loss on foreign currency translation
400

 

 
400

Income (loss) from continuing operations before income taxes
11,175

 
963

 
12,138

Provision for income taxes
5,402

 

 
5,402

Income from continuing operations, net of tax
5,773

 
963

 
6,736

Discontinued operations, net of tax
(5,984
)
 

 
(5,984
)
Net income (loss)
(211
)
 
963

 
752

Net loss (income) attributable to noncontrolling interests
(200
)
 

 
(200
)
Net income (loss) attributable to Providence
$
(411
)
 
$
963

 
$
552

 
 
 
 
 
 
Net income available to common
 
 
 
 
 
  stockholders
$
(3,037
)
 
 
 
$
(2,199
)
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
    Basic
$
(0.22
)
 
 
 
$
(0.16
)
    Diluted
$
(0.22
)
 
 
 
$
(0.16
)
 
 
 
 
 
 
Weighted-average number of common
 
 
 
 
 
  shares outstanding:
 
 
 
 
 
    Basic
13,628,572

 
 
 
13,628,572

    Diluted
13,687,183

 
 
 
13,687,183



The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.





The Providence Service Corporation
Pro Forma Condensed Consolidated Statements of Income
for the year ended December 31, 2016
Unaudited
(in thousands, except share and per share data)

 
Providence Service Corporation Historical
 
Disposition of Mission Providence
 
Pro Forma
 
 
 
 
 
 
Service revenue, net
$
1,578,889

 
$

 
$
1,578,889

 
 
 
 
 
 
Operating expenses:
 
 
 
 

    Service expense
1,452,754

 

 
1,452,754

    General and administrative expense
69,911

 

 
69,911

    Asset impairment charge
21,003

 

 
21,003

    Depreciation and amortization
26,604

 

 
26,604

Total operating expenses
1,570,272

 

 
1,570,272

Operating income
8,617

 

 
8,617

 
 
 
 
 
 
Other expenses:
 
 
 
 
 
    Interest expense, net
1,583

 

 
1,583

    Equity in net loss of investees
10,287

 
(8,521
)
d
1,766

    (Gain) loss on foreign currency translation
(1,375
)
 

 
(1,375
)
Income (loss) from continuing operations before income taxes
(1,878
)
 
8,521

 
6,643

Provision for income taxes
17,036

 

 
17,036

Income from continuing operations, net of tax
(18,914
)
 
8,521

 
(10,393
)
Discontinued operations, net of tax
108,760

 

 
108,760

Net income (loss)
89,846

 
8,521

 
98,367

Net loss (income) attributable to noncontrolling interests
2,082

 

 
2,082

Net income (loss) attributable to Providence
$
91,928

 
$
8,521

 
$
100,449

 
 
 
 
 
 
Net income available to common
 
 
 
 
 
  stockholders
$
74,374

 
 
 
$
82,894

 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
    Basic
$
5.07

 
 
 
$
5.65

    Diluted
$
5.07

 
 
 
$
5.65

 
 
 
 
 
 
Weighted-average number of common
 
 
 
 
 
  shares outstanding:
 
 
 
 
 
    Basic
14,666,896

 
 
 
14,666,896

    Diluted
14,666,896

 
 
 
14,666,896



The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.







The Providence Service Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(in thousands)
 

1. Basis of presentation
The unaudited pro forma condensed consolidated financial statements have been prepared based on the Company’s historical financial information giving effect to the sale of its equity interest in Mission Providence described in these notes. Certain note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted as permitted by the SEC rules and regulations.
 
2. Pro forma adjustments to unaudited condensed consolidated financial statements

a.
Adjustment to record the cash received from the sale of Mission Providence, based upon the exchange rate as of June 30, 2017 of AUD 0.7686 to USD $1.00.

b.
Adjustment to remove the equity investment in Mission Providence.

c.
Adjustment to reflect the estimated gain on sale, net of tax, from the sale of the Company's equity interest in Mission Providence is calculated as follows:
Cash consideration received by Providence using June 30, 2017 exchange rate of AUD 0.7686 to USD $1.00
$
15,553

Less: Book value of equity investment in Mission Providence at June 30, 2017
3,326

Less: Accumulated other comprehensive loss released for foreign currency translation adjustments
93

Estimated pre-tax gain
12,134

Provision for income taxes

Estimated gain on sale, net of tax
$
12,134

There is no provision for income taxes related to the book gain on sale, as for tax purposes, no tax benefit was recognized by Providence in the historical periods for the equity losses incurred.

d.
Adjustment to remove equity in net loss of investees attributable to Mission Providence. No related adjustment to the provision of income taxes is necessary as no tax benefit was recorded by Providence in the historical periods for the equity losses incurred.