TUCSON, Ariz., March 12 /PRNewswire-FirstCall/ -- The Providence Service Corporation today announced results for the fourth quarter and calendar year ended December 31, 2007.
For the fourth quarter of 2007, the Company reported revenue of $98.7 million, an increase of 76% from $55.9 million for the comparable period in 2006 including an increase of 36% in its social services segment and above the Company's guidance of $70 million. The higher than anticipated revenue was in large part due to the timing of the LogistiCare transaction closing, which occurred in the first week of December after a faster than anticipated Hart, Scott, Rodino review. LogistiCare added $22.9 million of revenue to the fourth quarter and year.
Operating income was $8.9 million in the quarter, a substantial increase from just over $1.0 million in the year ago period. Net income was $4.3 million, or $0.35 per diluted share, in the quarter ended December 31, 2007, exceeding the high end of guidance issued in conjunction with the release of third quarter results. LogistiCare's contribution to earnings in the quarter after deal related expenses, debt service and the amortization of intangible value was negligible. In the year ago quarter ended December 31, 2006, net income was $669,000, or $0.05 per diluted share. Providence's direct client census grew to over 52,000 at December 31, 2007 from over 48,000 at December 31, 2006, and the Company had over five million individuals eligible to receive services under its non-emergency transportation capitated contracts. The number of direct contracts increased to 638 at December 31, 2007 from 558 at December 31, 2006.
Managed entity revenue, which represents revenue of the not-for-profit social services organizations the Company provides management and/or administrative services to in return for a negotiated management fee, increased 20% to $59.9 million for the quarter ended December 31, 2007 from $49.9 million for the prior year period. Managed entity revenue is presented to provide investors with an additional measure of the size of the operations under Providence's management or administration and can help investors understand trends in management fee revenue. Managed client census grew to nearly 24,000 at December 31, 2007 as compared to approximately 23,000 at December 31, 2006. Contracts of managed entities grew from 310 to 320 year over year.
For the full year, revenue increased 49% to $285.2 million from $191.9 million for the year ago period. Operating income gained 67% to $25.7 million for 2007 compared to $15.4 million in 2006. Net income was $14.4 million, or $1.19 per diluted share, for the year ended December 31, 2007 compared to net income of $9.4 million, or $0.80 per fully diluted share, for the year ended December 31, 2006. Managed entity revenue was $225.0 million and $187.1 million in 2007 and 2006, respectively.
"We are proud to have had such a successful year," said Fletcher McCusker, Chairman and CEO. "We continue to have incredible payer loyalty, having never lost a government contract, and very predictable revenue and expenses. Equally exciting, we have just announced the results of a three year study of our services by Vanderbilt University indicating that we are successful with our clients 81% of the time, having stabilized and/or improving their level of functioning. We are creating value for our shareholders, creating meaningful change with our clients and maintaining a highly predictable business. The LogistiCare services have begun to create more demand on our services and as we move forward together in 2008 as the largest provider of community based social services in the country, we see continued opportunities and synergies."
Guidance
The Company anticipates first quarter 2008 revenue of approximately $170 million with earnings per share of $0.30 after recording discretionary management bonuses of $1.6 million, to be paid as part of the Compensation Committee's executive retention plan which was based on a salary survey conducted by Mercer. The Company expects this bonus to be offset by the annual savings to interest expense as the result of a lower LIBOR rate. While at the current time the Company has no change to its prior 2008 annual guidance of $673 million in revenue and $1.45 to $1.50 in diluted earnings per share, it will provide guidance for the remaining three quarters of 2008 after it has more visibility into the July procurement cycle.
Conference Call
Providence will hold a conference call at 11:00 a.m. EDT (9:00 a.m. MDT, 8:00 a.m. Arizona and PDT) tomorrow, Thursday, March 13, 2008 to discuss its financial results and corporate developments. Interested parties are invited to listen to the call live over the Internet at http://investor.provcorp.com/ or http://www.earnings.com/. The call is also available by dialing (888) 713-4199, or for international callers (617) 213-4861 and by using the passcode 27757306. Participants may pre-register for the call at https://www.theconferencingservice.com/prereg/key.process?key=PB7HLV3PU. Pre-registrants will be issued a pin number to use when dialing into the live call which will provide quick access to the conference by bypassing the operator upon connection. A replay of the teleconference will be available on http://investor.provcorp.com/ and http://www.earnings.com/. A replay will also be available until March 20, 2008 by dialing (888) 286-8010 or (617) 801-6888, and using passcode 34828565.
About Providence
Providence Service Corporation, through its owned and managed entities, provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence does not own or operate beds, treatment facilities, hospitals or group homes, preferring to provide services in the client's own home or other community setting. At the time of the closing of the LogistiCare acquisition in December 2007, it was estimated that the combined company would provide a range of services to approximately 76,000 clients, with approximately 7.2 million individuals eligible to receive the Company's services related to its LogistiCare operations, through approximately 900 contracts and would have a nearly $1 billion book of business with managed entities capable of servicing over 8 million eligible members.
Certain statements herein, such as any statements about Providence's confidence or strategies or its expectations about revenues, results of operations, profitability, earnings per share, contracts, collections, award of contracts, acquisitions and related growth, growth resulting from initiatives in certain states, effective tax rate 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 filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2006. 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.
The Providence Service Corporation Consolidated Statements of Income (in thousands except share and per share data) Three months ended Year ended December 31, December 31, 2007 2006 2007 2006 Revenues: Home and community based services $63,355 $45,395 $216,583 $152,067 Foster care services 7,103 5,814 25,648 21,913 Management fees 5,340 4,729 20,069 17,877 Non-emergency transportation services 22,867 - 22,867 - 98,665 55,938 285,167 191,857 Operating expenses: Client service expense 78,883 47,474 223,591 149,516 General and administrative expense 9,091 6,439 30,875 23,437 Depreciation and amortization 1,787 1,011 4,989 3,463 Total operating expenses 89,761 54,924 259,455 176,416 Operating income 8,904 1,014 25,712 15,441 Other (income) expense: Interest expense 2,259 134 3,071 855 Interest income (492) (534) (1,470) (1,456) Income before income taxes 7,137 1,414 24,111 16,042 Provision for income taxes 2,842 745 9,722 6,661 Net income $4,295 $669 $14,389 $9,381 Earnings (loss) per common share: Basic $0.35 $0.05 $1.21 $0.82 Diluted $0.35 $0.05 $1.19 $0.80 Weighted-average number of common shares outstanding: Basic 11,909,708 12,165,751 11,744,856 11,472,408 Diluted 12,130,380 12,323,736 11,926,575 11,676,323 The Providence Service Corporation Consolidated Balance Sheets (in thousands except share and per share data) December 31, 2007 2006 Assets Current assets: Cash and cash equivalents $35,379 $40,703 Accounts receivable-billed, net of allowance of $2.6 million and $5.3 million 65,852 36,148 Accounts receivable - unbilled 2,250 2,134 Management fee receivable 10,166 7,342 Other receivables 2,524 881 Notes receivable 563 975 Notes receivable from related party 1,734 - Restricted cash 8,842 2,300 Prepaid expenses and other 9,554 4,284 Deferred tax assets 5,390 966 Total current assets 142,254 95,733 Property and equipment, net 11,562 2,784 Notes receivable, less current portion 880 739 Goodwill 280,710 56,656 Intangible assets, net 98,254 29,037 Restricted cash, less current portion 6,461 6,211 Other assets 12,158 1,175 Total assets $552,279 $192,335 Liabilities and stockholders' equity Current liabilities: Current portion of long-term obligations $8,950 $332 Accounts payable 14,035 2,902 Accrued expenses 36,638 21,588 Accrued transportation costs 24,576 - Deferred revenue 4,062 791 Reinsurance liability reserve 8,344 2,986 Total current liabilities 96,605 28,599 Long-term obligations, less current portion 236,469 619 Deferred tax liabilities 30,896 4,061 Total liabilities 363,970 33,279 Non-controlling interest 7,649 - Commitments and contingencies Stockholders' equity: Common stock: Authorized 40,000,000 shares; $0.001 par value; 12,756,392 and 12,171,127 issued and outstanding (including treasury shares) 13 12 Additional paid-in capital 159,177 141,381 Common stock subscription receivable (715) - Retained earnings 32,351 17,962 Accumulated other comprehensive income 1,093 - 191,919 159,355 Less 612,026 and 146,905 treasury shares, at cost 11,259 299 Total stockholders' equity 180,660 159,056 Total liabilities and stockholders' equity $552,279 $192,335 The Providence Service Corporation Consolidated Statements of Cash Flows (in thousands) Year ended December 31, 2007 2006 Operating activities Net income $14,389 $9,381 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,578 1,076 Amortization 3,411 2,387 Amortization of deferred financing costs 291 158 Deferred income taxes (502) (317) Stock based compensation 2,407 472 Excess tax benefit upon exercise of stock options (680) - Reserve on note receivable 100 - Changes in operating assets and liabilities, net of effects of acquisitions: Billed and unbilled accounts receivable, net (243) (10,677) Management fee receivable (3,595) (855) Other receivable (157) 1,517 Reinsurance liability reserve 1,166 1,127 Prepaid expenses and other (823) 158 Accounts payable and accrued expenses 9,146 2,610 Accrued transportation costs (6,293) - Deferred revenue (1,991) (237) Net cash provided by operating activities 18,204 6,800 Investing activities Purchase of property and equipment (1,949) (1,076) Acquisition of businesses, net of cash acquired (233,877) (17,605) Acquisition earn out payments (8,299) - Restricted cash for contract performance (1,287) (6,561) Purchase of short-term investments, net (320) (149) Working capital advances to third party - (251) Advances to related parties (2,534) - Collection of notes receivable 685 70 Net cash used in investing activities (247,581) (25,572) Financing activities Repurchase of common stock, for treasury (10,960) - Proceeds from common stock issued pursuant to stock option exercise 2,363 6,507 Excess tax benefit upon exercise of stock options 680 1,909 Proceeds from common stock offering, net - 59,595 Proceeds from long-term debt 243,000 - Repayment of long-term debt (332) (17,434) Debt financing costs (10,888) (96) Net cash provided by financing activities 223,863 50,481 Effect of exchange rate changes on cash 190 - Net change in cash (5,324) 31,709 Cash at beginning of period 40,703 8,994 Cash at end of period $35,379 $40,703
