LOUISVILLE, Ky., Nov. 4, 2010 (GLOBE NEWSWIRE) -- ResCare, Inc. (Nasdaq:RSCR) today announced results for the third quarter and nine months ended September 30, 2010.
Third Quarter 2010 Financial Results
Revenues for the third quarter of 2010 were $403.7 million, an increase of 2% over revenues of $395.8 million for the same period in 2009. During the third quarter of 2010, the Company recorded an estimated pre-tax, non-cash charge of $65.6 million ($50.1 million, net of tax, or $1.73 per diluted common share) as a result of the impairment of goodwill at three of its reporting units. The Company also incurred pre-tax costs of approximately $2.0 million ($1.2 million, net of tax, or $0.04 per diluted share) related to the pending transaction with an affiliate of Onex Corporation. Net loss attributable to common shareholders was $41.9 million, or $1.45 per diluted common share, for the third quarter of 2010, compared with net income attributable to common shareholders of $10.0 million, or $0.35 per diluted common share, in the same period of 2009.
Adjusted net income attributable to common shareholders, which excludes the aforementioned impairment charge and transaction costs, was $8.1 million, or $0.28 per diluted common share, in the third quarter of 2010. Adjusted EBITDA for the third quarter of 2010 was $26.6 million compared with $29.1 million in the prior year quarter.
Ralph G. Gronefeld, Jr., president and chief executive officer, said, "We made progress in the reorganization of our business lines to better reflect our company's growth initiatives, but it is an ongoing process. We stood our ground financially in one of the most challenging economic times that has brought news just about every week this year of proposed state budget or service cuts. I must commend our leadership and all our employees for their continued focus on our mission. We are committed to being a partner with our customers and to finding the most effective, efficient ways to provide the much needed services our constituencies rely upon."
Guidance
Although operations continue to perform in line with ResCare's expectations, the Company announced that, based on the uncertainty of potential adjustments to the goodwill impairment charge in the fourth quarter, it is withdrawing its previously issued earnings guidance for 2010.
A listen only simulcast of ResCare's third quarter 2010 conference call will be available online at www.rescare.com on November 5, 2010, beginning at 9:00 a.m. Eastern Time and a replay available at 11:00 a.m. Eastern Time.
About ResCare
ResCare, with more than 35 years of experience helping people reach their highest level of independence, is one of the largest providers of home care to the elderly and persons with disabilities. It also offers residential and support services to people with intellectual and developmental disabilities and provides education, vocational training and job placement for people of all ages and skill levels. Based in Louisville, Kentucky, ResCare and its nearly 50,000 dedicated employees serve more than a million people a year in 41 states, Washington, D.C., Puerto Rico and a number of international locations. For more information about ResCare, please visit the Company's website at www.rescare.com.
From time to time, ResCare makes forward-looking statements in its public disclosures, including statements relating to expected financial results, revenues that might be expected from new or acquired programs and facilities, its development and acquisition activities, reimbursement under federal and state programs, financing plans, compliance with debt covenants and other risk factors, and various trends favoring privatization of government programs. In ResCare's filings under the federal securities laws, including its annual, periodic and current reports, the Company identifies important factors that could cause its actual results to differ materially from those anticipated in forward-looking statements. Please refer to the discussion of those factors in the Company's filed reports. Statements related to expected financial results are as of this date only, and ResCare does not assume any responsibility to update these statements.
Important Information
This announcement and the description contained herein are for informational purposes only and are not an offer to purchase or a solicitation of an offer to sell securities of the Company. The tender offer in connection with the Onex transaction is being made only pursuant to the Offer to Purchase, Letter of Transmittal and related materials that Onex Rescare Acquisition, LLC filed with the SEC on a combined Tender Offer Statement on Schedule TO and Transaction Statement on Schedule 13E‑3 on October 7, 2010, as amended. In addition, ResCare filed a Solicitation/Recommendation Statement on Schedule 14D‑9 and Transaction Statement on Schedule 13E-3 with respect to the tender offer on October 7, 2010. ResCare shareholders should read these materials and any related amendments carefully because these documents contain important information, including the terms and conditions of the offer. These documents may be obtained for free at the SEC's website at www.sec.gov. ResCare shareholders may also obtain these documents for free by calling Georgeson Inc., the information agent for the tender offer, at 1-866-203-9357. Shareholders can obtain these documents when they are filed and become available free of charge from the SEC's website at www.sec.gov. In addition, copies of the solicitation/recommendation statement, the proxy statement and other filings containing information about the Company, the tender offer and the share exchange may be obtained, if and when available, without charge, by directing a request to Res-Care, Inc. Attention: David Miles, Chief Financial Officer at 502-394-2137, or on the Company's corporate website at www.rescare.com.
RESCARE, INC. | ||||
Unaudited Financial Highlights (In thousands, except per share data) |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2010 | 2009 | 2010 | 2009 | |
Income Statement Data: | ||||
Revenues | $ 403,675 | $ 395,837 | $ 1,189,678 | $ 1,191,927 |
Facility and program expenses | 367,758 | 358,829 | 1,084,126 | 1,083,763 |
Facility and program contribution | 35,917 | 37,008 | 105,552 | 108,164 |
Corporate general and administrative | 18,141 | 14,196 | 47,538 | 45,027 |
Goodwill impairment charges | 65,577 | – | 65,577 | – |
Other operating (income) expense, net | (334) | 186 | 385 | (217) |
Operating (loss) income | (47,467) | 22,626 | (7,948) | 63,354 |
Interest expense, net | 4,846 | 3,972 | 14,613 | 12,475 |
(Loss) income before income taxes | (52,313) | 18,654 | (22,561) | 50,879 |
Income tax (benefit) expense | (10,346) | 7,158 | 636 | 19,104 |
Net (loss) income – including noncontrolling interests | (41,967) | 11,496 | (23,197) | 31,775 |
Net loss – noncontrolling interests | (33) | (159) | (156) | (578) |
Net (loss) income – ResCare, Inc. | (41,934) | 11,655 | (23,041) | 32,353 |
Net income attributable to preferred shareholders | – | 1,665 | – | 4,636 |
Net (loss) income attributable to common shareholders | $ (41,934) | $ 9,990 | $ (23,041) | $ 27,717 |
Earnings per common share: | ||||
Basic (loss) earnings per share | $ (1.45) | $ 0.35 | $ (0.80) | $ 0.96 |
Diluted (loss) earnings per share | $ (1.45) | $ 0.35 | $ (0.80) | $ 0.96 |
Weighted average number of common shares: | ||||
Basic | 29,017 | 28,858 | 28,952 | 28,757 |
Diluted | 29,017 | 28,858 | 28,952 | 28,757 |
RESCARE, INC. Unaudited Financial Highlights (continued) |
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(In thousands, except per share data) | ||||
Reconciliation of Net (Loss) Income to Adjusted Net Income Attributable to Common Shareholders: |
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Three Months Ended September 30, | ||||
2010 | 2009 | |||
Per diluted common share |
Per diluted common share |
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Net (loss) income - ResCare, Inc., as reported | $ (41,934) | $ (1.45) | $ 11,655 | $ 0.40 |
Onex transaction costs, net of tax | 1,231 | 0.04 | – | – |
Goodwill impairment charge, net of tax | 50,105 | 1.73 | – | – |
Adjusted Net Income – ResCare, Inc.(1) | 9,402 | 0.32 | 11,655 | 0.40 |
Adjusted Net Income attributable to preferred shareholders(2) | (1,337) | (0.04) | (1,665) | (0.05) |
Adjusted Net Income attributable to common shareholders(3) | $ 8,065 | $ 0.28 | $ 9,990 | $ 0.35 |
Weighted average diluted common shares | 29,017 | 28,858 |
Nine Months Ended September 30, | ||||
2010 | 2009 | |||
Per diluted common share |
Per diluted common share | |||
Net (loss) income - ResCare, Inc., as reported | $ (23,041) | $ (0.80) | $ 32,353 | $ 1.12 |
Onex transaction costs, net of tax | 1,231 | 0.04 | – | – |
Goodwill impairment charge, net of tax | 50,105 | 1.73 | – | – |
Adjusted Net Income – ResCare, Inc.(1) | 28,295 | 0.97 | 32,353 | 1.12 |
Adjusted Net Income attributable to preferred shareholders(2) | (4,031) | (0.13) | (4,636) | (0.16) |
Adjusted Net Income attributable to common shareholders(3) | $ 24,264 | $ 0.84 | $ 27,717 | $ 0.96 |
Weighted average diluted common shares | 28,952 | 28,757 | ||
1) Adjusted Net Income – ResCare, Inc. is defined as Net income – ResCare, Inc. before the estimated goodwill impairment charge and the Onex transaction costs, net of their related income tax effects. Adjusted Net Income – ResCare, Inc. and its attribution to preferred and common shareholders should not be considered as a measure of financial performance under accounting principles generally accepted in the United States of America. The items excluded from Adjusted Net Income – ResCare, Inc. are significant components in understanding and assessing financial performance. Management believes that Adjusted Net Income – ResCare, Inc. is useful to investors to evaluate performance. |
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2) Adjusted Net Income attributable to preferred shareholders is determined based on Adjusted Net Income – ResCare, Inc. whereby income is attributed to preferred shareholders. | ||||
(3) Adjusted Net Income attributable to common shareholders is determined based on Adjusted Net Income – ResCare, Inc. whereby income is attributed to common shareholders. |
RESCARE, INC. | ||||
Unaudited Financial Highlights (continued) | ||||
(In thousands) | ||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2010 | 2009 | 2010 | 2009 | |
Reconciliation of (Loss) Income from Continuing Operations to EBITDA and Adjusted EBITDA: |
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(Loss) income from continuing operations | $ (41,967) | $ 11,496 | $ (23,197) | $ 31,775 |
Add: Interest, net | 4,846 | 3,972 | 14,613 | 12,475 |
Depreciation and amortization | 6,506 | 6,504 | 19,271 | 19,658 |
Income tax (benefit) expense | (10,346) | 7,158 | 636 | 19,104 |
EBITDA(1) | (40,961) | 29,130 | 11,323 | 83,012 |
Onex transaction costs | 1,970 | – | 1,970 | – |
Goodwill impairment charge | 65,577 | – | 65,577 | – |
Adjusted EBITDA(1) | $ 26,586 | $ 29,130 | $ 78,870 | $ 83,012 |
Sept. 30, 2010 |
Dec. 31, 2009 |
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Balance Sheet Data: | ||
ASSETS | ||
Cash and cash equivalents | $ 10,480 | $ 20,672 |
Accounts receivable, net | 227,513 | 211,350 |
Other current assets | 40,498 | 48,552 |
Total current assets | 278,491 | 280,574 |
Property and equipment, net | 73,161 | 81,347 |
Goodwill | 370,940 | 422,626 |
Other assets, net | 69,394 | 60,393 |
$ 791,986 | $ 844,940 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Current liabilities | $ 177,116 | $ 156,946 |
Other long-term liabilities | 52,819 | 59,076 |
Long-term debt | 152,180 | 196,193 |
Shareholders' equity | 409,871 | 432,725 |
$ 791,986 | $ 844,940 | |
(1) EBITDA is defined as income from continuing operations before depreciation and amortization, net interest expense and income taxes. Adjusted EBITDA is defined as EBITDA before the estimated goodwill impairment charge and Onex transaction costs. EBITDA and Adjusted EBITDA should not be considered as measures of financial performance under accounting principles generally accepted in the United States of America. The items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. Management routinely calculates and presents EBITDA and Adjusted EBITDA because it believes that EBITDA and Adjusted EBITDA are useful to investors and are commonly used as analytical indicators within the industry to evaluate performance, measure leverage capacity and debt service ability, and to estimate current or prospective enterprise value. EBITDA is also used in measurements under certain covenants contained in the Company's credit agreement. |
RESCARE, INC. | ||
Unaudited Financial Highlights (continued) | ||
(In thousands) | ||
Nine Months Ended September 30, |
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2010 | 2009 | |
Cash Flow Data: | ||
Net (loss) income – including noncontrolling interests | $ (23,197) | $ 31,775 |
Adjustments to reconcile net (loss) income, including noncontrolling interests, to cash provided by operating activities: | ||
Depreciation and amortization | 19,271 | 19,658 |
Goodwill impairment charge | 65,577 | – |
Amortization of discount | 1,340 | 909 |
Share-based compensation | 2,224 | 3,413 |
Deferred income taxes | (3,548) | 7,384 |
Excess tax expense from share-based compensation | 583 | – |
Provision for losses on accounts receivable | 5,402 | 5,666 |
Gain on purchase of business | – | (559) |
Loss on sale of assets | 12 | 248 |
Changes in operating assets and liabilities | (1,030) | (1,546) |
Cash provided by operating activities | 66,634 | 66,948 |
Cash flows from investing activities: | ||
Proceeds from sale of assets | 306 | 169 |
Purchases of property and equipment | (6,937) | (12,654) |
Acquisitions of businesses | (21,213) | (17,994) |
Cash used in investing activities | (27,844) | (30,479) |
Cash flows from financing activities: | ||
Debt repayments, net | (42,987) | (44,851) |
Debt issuance costs | (4,519) | (38) |
Excess tax expense from share-based compensation | (583) | – |
Employee withholding payments on share-based compensation | (881) | (1,302) |
Proceeds received from exercise of stock options | – | 415 |
Cash used in financing activities | (48,970) | (45,776) |
Effect of exchange rate on cash and cash equivalents | (12) | 390 |
Decrease in cash and cash equivalents | $ (10,192) | $ (8,917) |
RESCARE, INC. | ||||
Unaudited Financial Highlights (continued) | ||||
(Dollars in thousands) | ||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2010 | 2009 | 2010 | 2009 | |
Segment Data: | ||||
Revenues: | ||||
Community Services | $ 298,872 | $ 292,138 | $ 880,114 | $ 864,188 |
Job Corps Training Services | 28,890 | 31,966 | 90,008 | 113,378 |
Employment Training Services | 67,222 | 61,167 | 190,247 | 175,457 |
Other | 8,691 | 10,566 | 29,309 | 38,904 |
Consolidated | $ 403,675 | $ 395,837 | $ 1,189,678 | $ 1,191,927 |
Adjusted Operating Income (Loss)(1): | ||||
Community Services | $ 30,799 | $ 30,747 | $ 86,784 | $ 87,604 |
Job Corps Training Services | 2,299 | 2,241 | 6,513 | 8,346 |
Employment Training Services | 4,720 | 5,009 | 14,080 | 12,611 |
Other | (1,965) | (1,132) | (2,037) | (347) |
Total Operating Expenses | (15,773) | (14,239) | (45,741) | (44,860) |
Consolidated | $ 20,080 | $ 22,626 | $ 59,599 | $ 63,354 |
Adjusted Operating Margin(1): | ||||
Community Services | 10.3% | 10.5% | 9.9% | 10.1% |
Job Corps Training Services | 8.0% | 7.0% | 7.2% | 7.4% |
Employment Training Services | 7.0% | 8.2% | 7.4% | 7.2% |
Other | (22.6%) | (10.7%) | (7.0%) | (0.9%) |
Total Operating Expenses | (3.9%) | (3.6%) | (3.8%) | (3.8%) |
Consolidated | 5.0% | 5.7% | 5.0% | 5.3% |
(1) Adjusted Operating Income is defined as operating income before the estimated goodwill impairment charge and Onex transaction costs. Adjusted Operating Margin is defined as Adjusted Operating Income divided by Revenues. Adjusted Operating Income should not be considered as a measure of financial performance under accounting principles generally accepted in the United States of America. The items excluded from Adjusted Operating Income are significant components in understanding and assessing financial performance. Management believes that Adjusted Operating Income is useful to investors to evaluate performance. A reconciliation of Adjusted Operating Income to GAAP measures is included in this press release. |
RESCARE, INC. | ||||
Unaudited Financial Highlights (continued) | ||||
(Dollars in thousands) | ||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2010 | 2009 | 2010 | 2009 | |
Reconciliation of Operating (Loss) Income to Adjusted Operating Income (Loss): |
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Operating (Loss) Income(1): | ||||
Community Services(2) | $ (16,090) | $ 30,747 | $ 39,895 | $ 87,604 |
Job Corps Training Services | 2,299 | 2,241 | 6,513 | 8,346 |
Employment Training Services | 4,720 | 5,009 | 14,080 | 12,611 |
Other(3) (4) | (20,653) | (1,132) | (20,725) | (347) |
Total Operating Expenses (5) | (17,743) | (14,239) | (47,711) | (44,860) |
Consolidated | $ (47,467) | $ 22,626 | $ (7,948) | $ 63,354 |
Adjustments: | ||||
Community Services(2) | $ 46,889 | $ – | $ 46,889 | $ – |
Job Corps Training Services | – | – | – | – |
Employment Training Services | – | – | – | – |
Other(3) (4) | 18,688 | – | 18,688 | – |
Total Operating Expenses (5) | 1,970 | – | 1,970 | – |
Consolidated | $ 67,547 | $ – | $ 67,547 | $ – |
Adjusted Operating Income (Loss): | ||||
Community Services | $ 30,799 | $ 30,747 | $ 86,784 | $ 87,604 |
Job Corps Training Services | 2,299 | 2,241 | 6,513 | 8,346 |
Employment Training Services | 4,720 | 5,009 | 14,080 | 12,611 |
Other | (1,965) | (1,132) | (2,037) | (347) |
Total Operating Expenses | (15,773) | (14,239) | (45,741) | (44,860) |
Consolidated | $ 20,080 | $ 22,626 | $ 59,599 | $ 63,354 |
(1) Other operating expense (income) per Income Statement Data on page 3 has been allocated for purposes of segment reporting. | ||||
(2) Operating loss for the three month and nine month periods ended September 30, 2010, included an estimated $46.9 million goodwill impairment charge. | ||||
(3) Operating loss for the three month and nine month periods ended September 30, 2010, included an estimated $13.8 million goodwill impairment charge in our International reporting unit. | ||||
(4) Operating loss for the three month and nine month periods ended September 30, 2010, included an estimated $4.9 million goodwill impairment charge in our Schools reporting unit. | ||||
(5) Operating loss for the three month and nine month periods ended September 30, 2010, included a $2.0 million charge related to Onex transaction costs in our corporate general and administrative expenses. |