Form 8-K

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): August 4, 2004

 


 

The Providence Service Corporation

(Exact name of registrant as specified in its charter)

 


 

Delaware   000-50364   86-0845127

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

(I.R.S. Employer

Identification No.)

 

5524 East Fourth Street, Tucson Arizona   85711
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (520) 747-6600

 

N/A

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

 



ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

 

(c) Exhibits:

 

99.1 Earnings release issued by The Providence Service Corporation on August 4, 2004.

 

ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

On August 4, 2004, The Providence Service Corporation issued an earnings release reporting its financial results for the three and six months ended June 30, 2004. A copy of this earnings release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

THE PROVIDENCE SERVICE CORPORATION

Date: August 4, 2004

 

By:

 

/S/ MICHAEL N. DEITCH


       

Michael N. Deitch

       

Chief Financial Officer

Earnings release

Exhibit 99.1

 

LOGO

 

PROVIDENCE SERVICE CORPORATION

 

AT THE COMPANY   AT FINANCIAL RELATIONS BOARD

Fletcher McCusker – Chairman and CEO

  Alison Ziegler - General Information

Kate Blute – Director of Investor and Public Relations

  Susan Garland – Analyst Information

520/747-6600

  212/445-8300
    Cynthia Martin – Media Information
    312/640-6741

 

FOR IMMEDIATE RELEASE

 

Providence Service Corporation Reports Record

Second Quarter 2004 Financial Results

 

Highlights:

 

  Total revenue grew 41% to $20.7 million, the fourth consecutive quarter of record revenue

 

  Managed revenue grew 88% to a record $29.1 million

 

  Total client census grew to 18,299 from 12,561 a year ago, a 46% increase

 

  Acquisition of Aspen Community Services in July is expected to contribute $21 million in annual revenue

 

TUCSON, ARIZONA – August 4, 2004 -- The Providence Service Corporation (Nasdaq: PRSC) today announced financial results for the second quarter ended June 30, 2004.

 

For the second quarter of 2004, the Company reported net income available to common stockholders of $1.5 million, a 123% increase from $655,000 in the quarter ended June 30, 2003. Earnings were $0.15 per diluted share based on shares outstanding of 9.7 million in the second quarter of 2004 compared to $0.14 per diluted share in the prior year period on 5.5 million shares outstanding. Revenue was $20.7 million for the second quarter of 2004, an increase of 41% from $14.7 million for the same quarter last year. Providence’s direct client census grew to 7,075 at June 30, 2004, a 48% increase from 4,787 at June 30, 2003. The number of direct contracts increased to 160 at June 30, 2004 from 118 at June 30, 2003.

 

For the first six months of 2004, the Company reported net income available to common stockholders of $2.6 million, or $0.28 per diluted share on 9.2 million shares outstanding. This compares to net income available to common stockholders of $1.1 million, or $0.26 per diluted share, based on 5.5 million shares outstanding for the same period last year. Revenue increased 39% to $39.1 million from $28.1 million for the prior year period.

 

Managed revenue, which represents revenue of the not-for-profit social services organizations the Company manages in return for a negotiated management fee,

 

—more—

 

5524 E. Fourth Street · Tucson, Arizona 85711 · Tel 520/747-6600 · Fax 520/747-6605 · www.provcorp.com


Providence Service Corporation Reports Second Quarter Financial Results

Page 2

 

increased 88% to $29.1 million from $15.5 million for the same quarter one year ago. For the six months ended June 30, 2004, managed revenue increased 63% to $49.5 million from $30.3 million for the same period last year. Managed revenue is presented to provide investors with an additional measure of the size and depth of the operations under Providence’s direction and can help investors understand trends in management fee revenue. Managed client census grew to 11,224 at June 30, 2004 as compared to 7,774 at June 30, 2003. Contracts of managed entities grew from 58 to 92 year over year.

 

Fletcher McCusker, Chairman and CEO of Providence, commented, “We are extremely pleased to be able to report our fourth consecutive quarter of record revenue and earnings since going public in August of last year. Our revenue and client census growth continues to benefit from the overall growth in the privatization of social services as well as the confidence our government sector clients have in our capabilities to provide alternatives to institutional care. The growth in our management fees, initial synergies realized from our acquisitions, as well as the ramp up of several large contracts also helped to drive an improvement in our operating margins, which increased to over 12% in the quarter. We believe we are absolutely in the right place at the right time.”

 

“With the Aspen transaction, our third since the IPO and our largest to date, we have entered two new markets, California and Nevada, and added drug court treatment to our service offerings,” added Mr. McCusker. “We also continue to have a solid new business pipeline which currently is at approximately $11 million.”

 

“Accretion from the Aspen transaction and the recently announced management contracts in New England will fully offset the dilution resulting from the follow-on offering closed last quarter and are expected to add at least $0.01 per share for 2004. As a result, we are increasing our 2004 guidance of $0.70 to $0.72 per share to $0.71 to $0.73 per share. We also expect Aspen to generate estimated annual revenue of $21 million and contribute approximately $0.07 to $0.08 per share for 2005,” concluded Mr. McCusker.

 

Providence will hold a conference call at 11:00 a.m. ET (9:00 a.m. MT, 8:00 a.m. PT) on Thursday, August 5, 2004. Interested parties are invited to listen to the call live over the Internet at www.provcorp.com or www.fulldisclosure.com or by dialing (800) 257-3401. International callers should dial (303) 262-2131. A replay of the teleconference will be available on www.provcorp.com and www.fulldisclosure.com. A replay will also be available until August 12, 2004 by dialing (800) 405-2236 or (303) 590-3000, and using passcode 11004931.

 

Providence Service Corporation, through its owned and managed entities, provides home and community based social services to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence operates no beds, treatment facilities, hospitals, or group homes preferring to provide

 

—more—


Providence Service Corporation Reports Second Quarter Financial Results

Page 3

 

services in the client’s own home or other community setting. Through its owned and managed entities, Providence maintains 252 government contracts in 19 states and the District of Columbia as of June 30, 2004.

 

Certain statements herein, such as any statements about Providence’s confidence or strategies or its expectations about revenues, results of operations, profitability, contracts or market opportunities, constitute “forward-looking statements” within the meaning of the private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause Providence’s actual results or achievements to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, reliance on government-funded contracts, risks associated with government contracting, risks involved in managing government business, legislative or policy changes, challenges resulting from growth or acquisitions, adverse media and legal, economic and other risks detailed in Providence’s other filings with the Securities and Exchange Commission. Words such as “believe,” “demonstrate,” “expect,” “estimate,” “anticipate,” “should” and “likely” and similar expressions identify 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. Providence undertakes no obligation to update any forward-looking statement contained herein.

 

—financial tables to follow—


Providence Service Corporation Reports Second Quarter Financial Results

Page 4

 

The Providence Service Corporation

Condensed Consolidated Statements of Operations

(in thousands except share and per share data)

(UNAUDITED)

 

    

Three months ended

June 30


   

Six months ended

June 30


 
     2004

    2003

    2004

    2003

 

Revenues:

                                

Home and community based services

   $ 14,739     $ 10,570     $ 27,713     $ 20,086  

Foster care services

     3,251       2,610       6,510       5,149  

Management fees

     2,689       1,500       4,911       2,859  
    


 


 


 


       20,679       14,680       39,134       28,094  

Operating expenses:

                                

Client service expense

     15,091       11,153       28,841       21,621  

General and administrative expense

     2,845       1,592       5,408       2,837  

Depreciation and amortization

     248       217       476       486  
    


 


 


 


Total operating expenses

     18,184       12,962       34,725       24,944  
    


 


 


 


Operating income

     2,495       1,718       4,409       3,150  

Other (income) expense:

                                

Interest expense

     109       570       228       1,124  

Interest income

     (46 )     (8 )     (88 )     (17 )

Equity in earnings of unconsolidated affiliate

     —         (77 )     —         (134 )
    


 


 


 


Income before income taxes

     2,432       1,233       4,269       2,177  

Provision for income taxes

     973       481       1,708       840  
    


 


 


 


Net income

     1,459       752       2,561       1,337  

Preferred stock dividends

     —         97       —         193  
    


 


 


 


Net income available to common stockholders

   $ 1,459     $ 655     $ 2,561     $ 1,144  
    


 


 


 


Earnings per common share:

                                

Basic

   $ 0.15     $ 0.30     $ 0.29     $ 0.52  
    


 


 


 


Diluted

   $ 0.15     $ 0.14     $ 0.28     $ 0.26  
    


 


 


 


Weighted-average number of common shares outstanding:

                                

Basic

     9,430,894       2,200,873       8,961,734       2,193,133  

Diluted

     9,676,271       5,498,760       9,229,315       5,491,020  

 

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Providence Service Corporation Reports Second Quarter Financial Results

Page 5

 

The Providence Service Corporation

Condensed Consolidated Balance Sheets

(in thousands except share and per share data)

 

     June 30
2004


    December 31
2003


 
     (Unaudited)     (Audited)  

Assets

                

Current assets:

                

Cash and cash equivalents

   $ 15,947     $ 15,004  

Accounts receivable, net of allowance of $100,469 and $69,000

     11,636       9,199  

Held-to-maturity investments

     3,998       3,973  

Management fee receivable

     3,173       3,577  

Prepaid expenses and other

     1,473       947  

Deferred tax asset

     617       617  
    


 


Total current assets

     36,844       33,317  

Property and equipment, net

     2,113       1,772  

Note receivable from not-for-profit affiliate

     1,282       407  

Goodwill

     20,380       13,429  

Intangible assets, net

     2,773       986  

Deferred tax asset

     1,543       1,543  

Other assets

     1,773       1,834  
    


 


Total assets

   $ 66,708     $ 53,288  
    


 


Liabilities and stockholders' equity

                

Current liabilities:

                

Accounts payable

   $ 1,522     $ 1,001  

Accrued expenses

     5,032       4,732  

Current portion of capital lease obligations

     97       89  

Current portion of long-term obligations

     135       1,494  
    


 


Total current liabilities

     6,786       7,316  

Capital lease obligations, less current portion

     88       139  

Long-term obligations, less current portion

     900       2,100  

Stockholders' equity:

                

Common stock: Authorized 40,000,000 shares; $0.001 par value; 9,464,234 and 8,481,839 issued and outstanding (including treasury shares)

     9       8  

Additional paid-in capital

     64,592       51,773  

Accumulated deficit

     (5,368 )     (7,930 )
    


 


       59,233       43,851  

Less 146,905 and 135,501 treasury shares, at cost

     299       118  
    


 


Total stockholders' equity

     58,934       43,733  
    


 


Total liabilities and stockholders' equity

   $ 66,708     $ 53,288  
    


 


 

—more—


Providence Service Corporation Reports Second Quarter Financial Results

Page 6

 

The Providence Service Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(UNAUDITED)

 

     Six months ended
June 30


 
     2004

    2003

 

Operating activities

                

Net income

   $ 2,561     $ 1,337  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

                

Depreciation

     316       240  

Amortization

     160       246  

Amortization of deferred financing costs and discount on investment

     43       —    

Stock compensation

     86       87  

Equity in earnings of unconsolidated affiliate

     —         (134 )

Changes in operating assets and liabilities, net of effects of acquisitions:

                

Trade accounts receivable, net

     (2,173 )     (2,432 )

Management fee receivable

     425       (1,385 )

Prepaid expenses and other

     (823 )     (463 )

Accounts payable

     454       (443 )

Accrued expenses

     (72 )     906  
    


 


Net cash provided by (used in) operating activities

     977       (2,041 )

Investing activities

                

Purchase of property and equipment

     (442 )     (335 )

Acquisition of businesses, net of cash acquired

     (7,057 )     (1,858 )

Note receivable from unconsolidated affiliate

     (875 )     —    

Restricted cash for contract performance

     (613 )     —    

Distributions received from unconsolidated affiliate

     —         63  
    


 


Net cash used in investing activities

     (8,987 )     (2,130 )

Financing activities

                

Net borrowings (payments) on revolving note

     (59 )     1,707  

Payments of capital leases

     (42 )     (91 )

Repayments of short-term debt

     (1,400 )     —    

Repayments of long-term debt

     (2,100 )     —    

Proceeds from common stock issued pursuant to stock option exercise, net

     390       1  

Proceeds from common stock offering, net

     12,164       (74 )

Proceeds from long-term debt

     —         3,038  

Debt financing costs

     —         (137 )
    


 


Net cash provided by financing activities

     8,953       4,444  
    


 


Net change in cash

     943       273  

Cash at beginning of period

     15,004       1,019  
    


 


Cash at end of period

   $ 15,947     $ 1,292  
    


 


 

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