Attached files
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| 8-K - FORM 8-K - NATIONAL MENTOR HOLDINGS, INC. | c16916e8vk.htm |
Exhibit 99.1
Press Release
National Mentor Holdings, Inc. Announces Second Quarter 2011 Results
BOSTON, Massachusetts, May 16, 2011— National Mentor Holdings, Inc. (the “Company”) today
announced its financial results for the second quarter ended March 31, 2011.
Second Quarter Results
Revenue for the quarter ended March 31, 2011 was $266.9 million, an increase of $15.9 million, or
6.4%, over revenue for the quarter ended March 31, 2010. Revenue increased $11.3 million related
to acquisitions that closed after January 1, 2010 and $4.6 million related to organic growth,
including growth related to new programs. Modest organic growth was achieved despite the negative
impact of rate reductions in several states, including Indiana,
Oregon and Wisconsin.
Income from operations for the quarter ended March 31, 2011 was $10.3 million, a decrease of $0.5
million as compared to income from operations for the quarter ended March 31, 2010. The operating
margin was 3.9% for the quarter ended March 31, 2011, a decrease from 4.3% for the quarter ended
March 31, 2010.
Net loss for the quarter ended March 31, 2011 was $13.1 million compared to net loss of $4.7
million for the quarter ended March 31, 2010. The increase in net loss is primarily due to
expenses incurred related to the refinancing transactions. During the second quarter, the Company
recorded $19.3 million in extinguishment of debt costs including (i) the tender premium and consent
fees paid in connection with the old notes (ii) acceleration of deferred financing costs related to
the prior indebtedness and (iii) transaction costs. In addition, the Company recorded $2.4 million
in transaction recognition bonuses. These expenses were partially offset by a $3.0 million gain
recognized in connection with the repurchase of the Company’s investment in the NMH Holdings notes.
Adjusted EBITDA(1) for the quarter ended March 31, 2011 was $29.3 million, an increase
of $3.6 million, or 13.8%, as compared to Adjusted EBITDA for the quarter ended March 31, 2010.
The increase in Adjusted EBITDA was the result of the increase in revenue noted above, as well as
our on-going cost containment efforts. Partially offsetting this increase, Adjusted EBITDA was
negatively impacted by rate reductions in several states, including
Indiana, Oregon and Wisconsin.
Adjusted EBITDA was also negatively impacted by increased expenses related to (i) higher
self-insured retentions and premiums for professional and general liability policies and (ii)
higher reserves for employment practices liability claims.
| (1) | Adjusted EBITDA is a non-GAAP financial performance measure used by management, which is net
income (loss) before interest expense and interest income, income taxes, depreciation and
amortization, and certain non-operating expenses. A reconciliation of Adjusted EBITDA to net loss
is provided on page 6. |
Year-to-Date Results
Revenue for the six months ended March 31, 2011 was $533.5 million, an increase of $32.5 million,
or 6.5%, over revenue for the six months ended March 31, 2010. Revenue increased $25.8 million
related to acquisitions that closed after October 1, 2009 and $6.7 million related to organic
growth, including growth related to new programs. Modest organic growth was achieved despite the
negative impact of rate reductions in several states, including
Indiana, Oregon and Wisconsin.
Income from operations for the six months ended March 31, 2011 was $21.2 million, a decrease of
$0.8 million as compared to income from operations for the six months ended March 31, 2010. The
operating margin was 4.0% for the six months ended March 31, 2011, a decrease from 4.4% for the six
months ended March 31, 2010.
Net loss for the six months ended March 31, 2011 was $11.3 million compared to net loss of $4.7
million for the six months ended March 31, 2010. The increase in net loss is primarily due to
expenses incurred related to the refinancing transactions. During the six months ended March 31,
2011, the Company recorded $19.3 million in extinguishment of debt costs including (i) the tender
premium and consent fees paid in connection with the old notes (ii) acceleration of deferred
financing costs related to the prior indebtedness and (iii) transaction costs. In addition, the
Company recorded $2.4 million in transaction recognition bonuses. These expenses were partially
offset by a $3.0 million gain recognized in connection with the repurchase of the Company’s
investment in the NMH Holdings notes.
Adjusted EBITDA(1) for the six months ended March 31, 2011 was $57.2 million, an
increase of $5.2 million, or 10.0 %, as compared to Adjusted EBITDA for the six months ended March
31, 2010. The increase in Adjusted EBITDA was the result of the increase in revenue noted above,
as well as our on-going cost containment efforts. Partially offsetting this increase, Adjusted
EBITDA was negatively impacted by rate reductions in several states,
including Indiana, Oregon and Wisconsin. Adjusted EBITDA was also negatively impacted by increased expenses related to (i)
higher self-insured retentions and premiums for professional and general liability policies and
(ii) higher reserves for employment practices liability claims.
The reported results are available on the Company’s investor relations web site at
www.tmnfinancials.com. The user name “mentor” and the password “results” are required in order to
access this site. In addition, National Mentor Holdings, Inc. will hold a conference call
Wednesday, May 18, 2011 at 11:00 a.m. EDT to discuss its financial results. The call will be
broadcast live on the web at www.tmnfinancials.com and at www.fulldisclosure.com. A rebroadcast of
the call will be available on both web sites until 5:00 p.m. EDT on Wednesday, May 25, 2011. Those
wishing to participate in the May 18 conference call by telephone are required to email their name
and affiliation to dwight.robson@thementornetwork.com for dial-in information.
National Mentor Holdings, Inc., which markets its services under the name The MENTOR Network, is a
leading provider of home and community-based health and human services to adults and children with
intellectual and/or developmental disabilities, acquired brain injury and other catastrophic
injuries and illnesses; and to youth with emotional, behavioral and/or medically complex
challenges. The MENTOR Network’s customized service plans offer its clients, as well as the payors
for these services, an attractive, cost-effective alternative to health and human services provided
in large, institutional settings. The MENTOR Network provides services to clients in 36 states.
* * * * * * * * * * *
From time to time, the Company may make forward-looking statements in its public disclosures. The
forward-looking statements are based on estimates and assumptions made by management of the Company
and are believed to be reasonable, although they are inherently uncertain and difficult to predict.
The forward-looking statements involve a number of risks and uncertainties that could cause actual
results to differ materially from any such forward-looking statements, including the risks and
uncertainties disclosed as Forward-Looking Statements and Risk Factors included in the Company’s
filings with the Securities and Exchange Commission.
This press release includes presentations of Adjusted EBITDA because it is the primary measure used
by management to assess financial performance. Adjusted EBITDA represents net income (loss) before
interest expense and interest income, income taxes, depreciation and amortization, and certain
non-operating expenses. Reconciliations of net income (loss) to Adjusted EBITDA are presented
within the tables below. Adjusted EBITDA does not represent and should not be considered an
alternative to net income or cash flows from operations, as determined by accounting principles
generally accepted in the United States, or GAAP. While Adjusted EBITDA is frequently used as a
measure of financial performance and the ability to meet debt service requirements, it is not
necessarily comparable to other similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.
Selected Financial Highlights
($ in thousands)
(unaudited)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| March 31 | March | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Statements of Operations Data: |
||||||||||||||||
Net revenue |
$ | 266,946 | $ | 251,002 | $ | 533,473 | $ | 501,008 | ||||||||
Cost of revenue (exclusive of
depreciation expense shown
separately below) |
206,650 | 193,055 | 412,712 | 384,389 | ||||||||||||
General and administrative expenses |
34,940 | 32,966 | 69,526 | 66,224 | ||||||||||||
Depreciation and amortization |
15,013 | 14,231 | 30,020 | 28,398 | ||||||||||||
Income from operations |
10,343 | 10,750 | 21,215 | 21,997 | ||||||||||||
Management fee of related party |
(310 | ) | (287 | ) | (655 | ) | (563 | ) | ||||||||
Other income (expense), net |
248 | (185 | ) | 477 | (129 | ) | ||||||||||
Extinguishment of debt |
(19,278 | ) | — | (19,278 | ) | — | ||||||||||
Gain from available for sale
investment security |
3,018 | — | 3,018 | — | ||||||||||||
Interest income |
6 | 18 | 11 | 31 | ||||||||||||
Interest income from related party |
190 | 469 | 684 | 945 | ||||||||||||
Interest expense |
(14,145 | ) | (11,520 | ) | (22,290 | ) | (23,401 | ) | ||||||||
Loss from continuing operations
before income taxes |
(19,928 | ) | (755 | ) | (16,818 | ) | (1,120 | ) | ||||||||
Benefit for income taxes |
(6,921 | ) | (465 | ) | (5,576 | ) | (967 | ) | ||||||||
Loss from continuing operations |
(13,007 | ) | (290 | ) | (11,242 | ) | (153 | ) | ||||||||
Loss from discontinued operations,
net of tax |
(51 | ) | (4,366 | ) | (50 | ) | (4,545 | ) | ||||||||
Net loss |
$ | (13,058 | ) | $ | (4,656 | ) | $ | (11,292 | ) | $ | (4,698 | ) | ||||
Additional financial data: |
||||||||||||||||
Program rent expense |
$ | 7,820 | $ | 7,140 | $ | 15,527 | $ | 13,919 | ||||||||
Adjusted EBITDA |
$ | 29,255 | $ | 25,698 | $ | 57,185 | $ | 51,986 | ||||||||
Reconciliation of Non-GAAP Financial Measures
($ in thousands)
(unaudited)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| March 31 | March 31 | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Reconciliation from Net loss to Adjusted EBITDA: |
||||||||||||||||
Net loss |
$ | (13,058 | ) | $ | (4,656 | ) | $ | (11,292 | ) | $ | (4,698 | ) | ||||
Loss from discontinued operations, net of tax |
51 | 4,366 | 50 | 4,545 | ||||||||||||
Benefit for income taxes |
(6,921 | ) | (465 | ) | (5,576 | ) | (967 | ) | ||||||||
Gain from available for sale investment security |
(3,018 | ) | — | (3,018 | ) | — | ||||||||||
Interest income |
(6 | ) | (18 | ) | (11 | ) | (31 | ) | ||||||||
Interest income from related party |
(190 | ) | (469 | ) | (684 | ) | (945 | ) | ||||||||
Interest expense |
14,145 | 11,520 | 22,290 | 23,401 | ||||||||||||
Depreciation and amortization |
15,013 | 14,231 | 30,020 | 28,398 | ||||||||||||
Management fee of related party (1) |
310 | 287 | 655 | 563 | ||||||||||||
Extinguishment of debt (2) |
19,278 | — | 19,278 | — | ||||||||||||
(Gain) loss on disposal of assets |
(51 | ) | 296 | (96 | ) | 346 | ||||||||||
Stock-based compensation (3) |
174 | 134 | 174 | 248 | ||||||||||||
Acquisition costs (4) |
128 | 260 | 336 | 864 | ||||||||||||
Change in fair value of contingent consideration (5) |
99 | — | 321 | — | ||||||||||||
Claims made insurance liability (6) |
205 | — | 205 | — | ||||||||||||
Predecessor company claims (7) |
— | 181 | — | 181 | ||||||||||||
Transaction recognition bonuses (8) |
2,362 | — | 2,362 | — | ||||||||||||
Restructuring (9) |
773 | 31 | 1,623 | 81 | ||||||||||||
Terminated transaction costs (10) |
(39 | ) | — | 548 | — | |||||||||||
Adjusted EBITDA (11) |
$ | 29,255 | $ | 25,698 | $ | 57,185 | $ | 51,986 | ||||||||
Selected Balance Sheet and Cash Flow Highlights
($ in thousands)
(unaudited)
(unaudited)
| As of | ||||||||
| Balance Sheet Data: | March 31, 2011 | September 30, 2010 | ||||||
Cash and cash equivalents |
$ | 12,544 | $ | 26,448 | ||||
Working capital (12) |
16,204 | 11,169 | ||||||
Total assets |
1,029,679 | 1,015,885 | ||||||
Total debt (13) |
768,136 | 506,182 | ||||||
Shareholder’s equity |
(6,888 | ) | 225,133 | |||||
| Six Months Ended | ||||||||
| Other Financial Data : | March 31, 2011 | March 31, 2010 | ||||||
Cash flows provided by (used in): |
||||||||
Operating activities |
$ | 17,735 | $ | 31,777 | ||||
Investing activities |
(62,026 | ) | (39,771 | ) | ||||
Financing activities |
30,387 | (1,934 | ) | |||||
Purchases of property and equipment |
9,194 | 9,061 | ||||||
Cash paid for acquisitions (including
cash paid for earn-out obligations) |
6,666 | 29,199 | ||||||
| (1) | Represents management fees incurred to Vestar Capital
Partners V, L.P. |
|
| (2) | Represents costs related to
extinguish the old debt
as part of the February 2011 refinancing, including tender
premium and consent fees, deferred financing costs and transaction
costs. |
|
| (3) | Stock-based compensation represents non-cash stock based
compensation. |
|
| (4) | Represents external acquisition costs. |
|
| (5) | Represents changes in fair value of contingent earn-out
obligations arising from acquisitions. |
|
| (6) | Represents a charge to establish a reserve reflecting the total probable
loss from incurred but not yet reported employment practices liability claims. |
|
| (7) | Represents adjustments for expenses related to professional and general
liability insurance claims which occurred prior to the Merger on June 26, 2009. |
|
| (8) | Represents payment of one-time discretionary bonuses in recognition of
individuals’ contributions to enabling the successful closing of the refinancing
transactions. |
|
| (9) | Represents costs incurred as part of the restructuring of corporate and
certain field functions. |
|
| (10) | Represents consulting and legal costs related to a transaction which was not
completed. |
|
| (11) | Adjusted EBITDA represents net income (loss) before interest expense and
interest income, income taxes, depreciation and amortization, and certain
non-operating expenses. |
|
| (12) | Working capital is calculated as current assets minus current liabilities,
excluding cash and cash equivalents, restricted cash, current portion of long-term
debt and current portion of obligations under capital leases. |
|
| (13) | Total debt includes obligations under capital leases. |
CONTACT: Dwight Robson at 617-790-4293 or dwight.robson@thementornetwork.com.
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