The Providence Service Corp. (PRSC, Financial) filed Quarterly Report for the period ended 2009-03-31.
The Providence Service Corporation provides privatized social services to individuals and families in home and community based settings. Their services are reimbursed by government programs such as welfare juvenile justice Medicaid or corrections. They own no beds or facilities preferring to provide their client care in home and community based settings. The Providence Service Corp. has a market cap of $138.4 million; its shares were traded at around $10.76 with a P/E ratio of 10.7 and P/S ratio of 0.2. The Providence Service Corp. had an annual average earning growth of 24.6% over the past 5 years.
Management fees. Revenue for entities we manage but do not consolidate for financial reporting purposes (managed entity revenue) decreased to $53.4 million for the three months ended March 31, 2009 as compared to $61.5 million for the same three month period last year. The decrease of approximately $1.7 million in management fees for the three month period ended March 31, 2009 as compared to the three months ended March 31, 2008 was primarily attributable to the acquisition of assets from CCC (a managed entity) in September 2008 and the effect of changes made to management services arrangements with certain of our managed entities effective January 1, 2009.
Stock-based compensation. Stock-based compensation of approximately $800 for the three months ended March 31, 2009 represents the amortization of the fair value of stock options awarded to a key employee in January 2009 under our 2006 Long-Term Incentive Plan. All stock-based compensation expense for the three months ended March 31, 2009 was expensed as part of client service expense. Of the total stock-based compensation expense of approximately $554,000 for the three months ended March 31, 2008, approximately $163,000 was expensed as part of client service expense and the remainder as general and administrative expense.
Also contributing to the increase in corporate administrative expenses were arrangement, legal, accounting and other expenses related to the amended credit and guarantee agreement discussed below, legal and other fees related to the now abandoned consent solicitation initiated by a dissident stockholder, costs related to the potential sale of non-strategic assets and other expenses aggregating to an increase over the three month period ended March 31, 2008 of approximately $2.2 million. In addition, as a result of our growth over the twelve month period ended March 31, 2009, rent and facilities costs increased $131,000 for the three months ended March 31, 2009 excluding the impact of the CCC and AW acquisitions. Partially offsetting the increases in general and administrative expenses for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 was a decrease in payroll and related costs totaling approximately $1.2 million due to discretionary bonuses that were paid during the three months ended March 31, 2008 that were not paid during the same
current year three month period. Due to the acceleration of vesting of all unvested stock-based awards as of December 30, 2008, stock-based compensation expense that would have been charged in 2009 for awards granted prior to December 30, 2008 was eliminated. As result, general and administrative expense for the three months ended March 31, 2009 decreased by approximately $391,000 as compared the same prior year period. Additionally, we modified our management services arrangement with a managed entity that resulted in the transfer of certain employees to the managed entity in exchange for lower management services fees. As a result, payroll and related costs of these employees decreased for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 by approximately $224,000. As a percentage of revenue, general and administrative expense decreased from 6.7% for the three months ended March 31, 2008 to 6.4% for the three months ended March 31, 2009 due to the effect of lower incremental general and administrative expense of our NET Services operating segment relative to its total revenue contribution.
Interest expense. Our current and long-term debt obligations have decreased to approximately $234.2 million at March 31, 2009 from $243.3 million at March 31, 2008, which resulted in a decrease in the associated interest expense from approximately $5.3 million for the three months ended March 31, 2008 to approximately $5.2 million for the three months ended March 31, 2009. In addition, interest expense for the three months ended March 31, 2009 included approximately $127,000 related to the de-designation of our interest rate swap during the first quarter of 2009 and approximately $348,000 of accelerated amortization of deferred financing fees due to the amendment of our credit and guarantee agreement discussed below.
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The Providence Service Corporation provides privatized social services to individuals and families in home and community based settings. Their services are reimbursed by government programs such as welfare juvenile justice Medicaid or corrections. They own no beds or facilities preferring to provide their client care in home and community based settings. The Providence Service Corp. has a market cap of $138.4 million; its shares were traded at around $10.76 with a P/E ratio of 10.7 and P/S ratio of 0.2. The Providence Service Corp. had an annual average earning growth of 24.6% over the past 5 years.
Highlight of Business Operations:
Foster care services. The acquisition of substantially all of the assets in Illinois and Indiana of Camelot Community Care, Inc., or CCC, in September 2008 added approximately $2.9 million to foster care services revenue for the three months ended March 31, 2009 as compared to the same three month period one year ago. Partially offsetting the increase in foster care services revenue for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 was the impact of our exit from the foster care market in Kentucky in January 2009 and various state foster care program restructurings which resulted in a decrease in foster care services revenue of approximately $1.0 million. We continuously recruit additional foster care homes in many of our markets which we expect will increase our foster care service offerings.Management fees. Revenue for entities we manage but do not consolidate for financial reporting purposes (managed entity revenue) decreased to $53.4 million for the three months ended March 31, 2009 as compared to $61.5 million for the same three month period last year. The decrease of approximately $1.7 million in management fees for the three month period ended March 31, 2009 as compared to the three months ended March 31, 2008 was primarily attributable to the acquisition of assets from CCC (a managed entity) in September 2008 and the effect of changes made to management services arrangements with certain of our managed entities effective January 1, 2009.
Stock-based compensation. Stock-based compensation of approximately $800 for the three months ended March 31, 2009 represents the amortization of the fair value of stock options awarded to a key employee in January 2009 under our 2006 Long-Term Incentive Plan. All stock-based compensation expense for the three months ended March 31, 2009 was expensed as part of client service expense. Of the total stock-based compensation expense of approximately $554,000 for the three months ended March 31, 2008, approximately $163,000 was expensed as part of client service expense and the remainder as general and administrative expense.
Also contributing to the increase in corporate administrative expenses were arrangement, legal, accounting and other expenses related to the amended credit and guarantee agreement discussed below, legal and other fees related to the now abandoned consent solicitation initiated by a dissident stockholder, costs related to the potential sale of non-strategic assets and other expenses aggregating to an increase over the three month period ended March 31, 2008 of approximately $2.2 million. In addition, as a result of our growth over the twelve month period ended March 31, 2009, rent and facilities costs increased $131,000 for the three months ended March 31, 2009 excluding the impact of the CCC and AW acquisitions. Partially offsetting the increases in general and administrative expenses for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 was a decrease in payroll and related costs totaling approximately $1.2 million due to discretionary bonuses that were paid during the three months ended March 31, 2008 that were not paid during the same
current year three month period. Due to the acceleration of vesting of all unvested stock-based awards as of December 30, 2008, stock-based compensation expense that would have been charged in 2009 for awards granted prior to December 30, 2008 was eliminated. As result, general and administrative expense for the three months ended March 31, 2009 decreased by approximately $391,000 as compared the same prior year period. Additionally, we modified our management services arrangement with a managed entity that resulted in the transfer of certain employees to the managed entity in exchange for lower management services fees. As a result, payroll and related costs of these employees decreased for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 by approximately $224,000. As a percentage of revenue, general and administrative expense decreased from 6.7% for the three months ended March 31, 2008 to 6.4% for the three months ended March 31, 2009 due to the effect of lower incremental general and administrative expense of our NET Services operating segment relative to its total revenue contribution.
Interest expense. Our current and long-term debt obligations have decreased to approximately $234.2 million at March 31, 2009 from $243.3 million at March 31, 2008, which resulted in a decrease in the associated interest expense from approximately $5.3 million for the three months ended March 31, 2008 to approximately $5.2 million for the three months ended March 31, 2009. In addition, interest expense for the three months ended March 31, 2009 included approximately $127,000 related to the de-designation of our interest rate swap during the first quarter of 2009 and approximately $348,000 of accelerated amortization of deferred financing fees due to the amendment of our credit and guarantee agreement discussed below.
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