Attached files
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| 8-K - FORM 8-K - NATIONAL MENTOR HOLDINGS, INC. | c21186e8vk.htm |
Exhibit 99.1
Press Release
National Mentor Holdings, Inc. Announces Third Quarter 2011
Results
Results
BOSTON, Massachusetts, August 15, 2011— National Mentor Holdings, Inc. (the “Company”) today
announced its financial results for the third quarter ended June 30, 2011.
Third Quarter Results
Revenue for the quarter ended June 30, 2011 was $271.2 million, an increase of $12.4 million, or
4.8%, over revenue for the quarter ended June 30, 2010. Revenue increased $7.7 million related to
acquisitions that closed during and after the three months ended June 30, 2010 and $4.7 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 quarter ended June 30, 2011 was $8.3 million, a decrease of $4.0
million as compared to income from operations for the quarter ended June 30, 2010. The operating
margin was 3.1% for the quarter ended June 30, 2011, a decrease from 4.7% for the quarter ended
June 30, 2010.
Net loss for the quarter ended June 30, 2011 was $8.3 million compared to net loss of $0.7 million
for the quarter ended June 30, 2010. In addition to the factors noted below with respect to
Adjusted EBITDA, net loss was negatively impacted by increases in interest expense, stock-based
compensation expense, and depreciation and amortization expense; as well as expense related to the
restructuring of certain corporate and field functions.
Adjusted EBITDA(1) for the quarter ended June 30, 2011 was $30.3 million, an increase of
$1.9 million, or 6.8%, as compared to Adjusted EBITDA for the quarter ended June 30, 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 increased expense related to higher self-insured retentions and premiums for
professional and general liability policies, rate reductions in several states, including Indiana,
Oregon and Wisconsin, and increased occupancy expense.
| (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 nine months ended June 30, 2011 was $803.6 million, an increase of $45.3 million,
or 6.0%, over revenue for the nine months ended June 30, 2010. Revenue increased $34.7 million
related to acquisitions that closed during and after fiscal 2010 and $10.6 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 nine months ended June 30, 2011 was $29.7 million, a decrease of
$4.6 million as compared to income from operations for the nine months ended June 30, 2010. The
operating margin was 3.7% for the nine months ended June 30, 2011, a decrease from 4.5% for the
nine months ended June 30, 2010.
Net loss for the nine months ended June 30, 2011 was $19.6 million compared to net loss of $5.4
million for the nine months ended June 30, 2010. In addition to the factors noted below with
respect to Adjusted EBITDA, net loss increased due to several factors including expenses related to
the Company’s refinancing transactions, partially offset by a gain recognized upon the repurchase
of the Company’s investment in the NMH Holdings notes. In addition, net loss for the nine months
ended June 30, 2011 was also negatively impacted by increases in interest expense, depreciation and
amortization expense and stock-based compensation expense; expense for transaction recognition
bonuses; and expense related to the restructuring of certain corporate and field functions.
Adjusted EBITDA(1) for the nine months ended June 30, 2011 was $87.6 million, an
increase of $7.3 million, or 9.1%, as compared to Adjusted EBITDA for the nine months ended June
30, 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 increased expense related to higher self-insured retentions and
premiums for professional and general liability policies, increased occupancy expense, rate
reductions in several states, including Indiana, Oregon and Wisconsin, and 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 Tuesday,
August 23, 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 Tuesday, August 30, 2011. Those wishing to
participate in the August 23 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 35 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 | Nine Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Statements of Operations Data: |
||||||||||||||||
Net revenue |
$ | 271,196 | $ | 258,785 | $ | 803,583 | $ | 758,266 | ||||||||
Cost of revenue (exclusive of
depreciation expense shown
separately below) |
209,492 | 199,170 | 621,086 | 582,196 | ||||||||||||
General and administrative expenses |
36,586 | 32,719 | 106,006 | 98,819 | ||||||||||||
Depreciation and amortization |
16,800 | 14,627 | 46,795 | 42,990 | ||||||||||||
Income from operations |
8,318 | 12,269 | 29,696 | 34,261 | ||||||||||||
Management fee of related party |
(297 | ) | (279 | ) | (952 | ) | (842 | ) | ||||||||
Other income (expense), net |
48 | (223 | ) | 522 | (349 | ) | ||||||||||
Extinguishment of debt |
— | — | (19,278 | ) | — | |||||||||||
Gain from available for sale
investment security |
— | — | 3,018 | — | ||||||||||||
Interest income |
11 | 4 | 22 | 35 | ||||||||||||
Interest income from related party |
— | 480 | 684 | 1,425 | ||||||||||||
Interest expense |
(19,660 | ) | (11,595 | ) | (41,950 | ) | (34,996 | ) | ||||||||
(Loss) income from continuing
operations before income taxes |
(11,580 | ) | 656 | (28,238 | ) | (466 | ) | |||||||||
(Benefit) provision for income taxes |
(3,187 | ) | 1,115 | (8,763 | ) | 146 | ||||||||||
Loss from continuing operations |
(8,393 | ) | (459 | ) | (19,475 | ) | (612 | ) | ||||||||
Income (loss) from discontinued
operations, net of tax |
64 | (242 | ) | (147 | ) | (4,784 | ) | |||||||||
Net loss |
$ | (8,329 | ) | $ | (701 | ) | $ | (19,622 | ) | $ | (5,396 | ) | ||||
Additional financial data: |
||||||||||||||||
Program rent expense |
$ | 8,554 | $ | 7,892 | $ | 24,024 | $ | 21,734 | ||||||||
Adjusted EBITDA |
$ | 30,305 | $ | 28,374 | $ | 87,626 | $ | 80,322 | ||||||||
Reconciliation of Non-GAAP Financial Measures
($ in thousands)
(unaudited)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Reconciliation from Net loss to Adjusted
EBITDA: |
||||||||||||||||
Net loss |
$ | (8,329 | ) | $ | (701 | ) | $ | (19,622 | ) | $ | (5,396 | ) | ||||
(Income) loss from discontinued
operations, net of tax |
(64 | ) | 242 | 147 | 4,784 | |||||||||||
(Benefit) provision for income taxes |
(3,187 | ) | 1,115 | (8,763 | ) | 146 | ||||||||||
Gain from available for sale investment
security |
— | — | (3,018 | ) | — | |||||||||||
Interest income |
(11 | ) | (4 | ) | (22 | ) | (35 | ) | ||||||||
Interest income from related party |
— | (480 | ) | (684 | ) | (1,425 | ) | |||||||||
Interest expense |
19,660 | 11,595 | 41,950 | 34,996 | ||||||||||||
Depreciation and amortization |
16,800 | 14,627 | 46,795 | 42,990 | ||||||||||||
Management fee of related party (1) |
297 | 279 | 952 | 842 | ||||||||||||
Extinguishment of debt (2) |
— | — | 19,278 | — | ||||||||||||
(Gain) loss on disposal of assets |
(52 | ) | 52 | (148 | ) | 398 | ||||||||||
Stock-based compensation (3) |
3,335 | 390 | 3,509 | 638 | ||||||||||||
Acquisition expenses (4) |
226 | 138 | 563 | 1,002 | ||||||||||||
Change in fair value of contingent
consideration (5) |
— | 1,072 | 321 | 1,072 | ||||||||||||
Claims made insurance liability (6) |
— | — | 205 | — | ||||||||||||
Predecessor company claims (7) |
— | — | — | 181 | ||||||||||||
Transaction recognition bonuses (8) |
— | — | 2,362 | — | ||||||||||||
Restructuring (9) |
917 | 49 | 2,539 | 129 | ||||||||||||
Terminated transaction costs (10) |
— | — | 549 | — | ||||||||||||
Lease termination fee (11) |
713 | — | 713 | — | ||||||||||||
Adjusted EBITDA (12) |
$ | 30,305 | $ | 28,374 | $ | 87,626 | $ | 80,322 | ||||||||
Selected Balance Sheet and Cash Flow Highlights
($ in thousands)
(unaudited)
(unaudited)
| As of | ||||||||
| Balance Sheet Data: | June 30, 2011 | September 30, 2010 | ||||||
Cash and cash equivalents |
$ | 20,577 | $ | 26,448 | ||||
Working capital (13) |
(1,102 | ) | 11,169 | |||||
Total assets |
1,037,777 | 1,015,885 | ||||||
Total debt (14) |
767,475 | 506,182 | ||||||
Shareholder’s equity |
(14,926 | ) | 225,133 | |||||
| Nine Months Ended | ||||||||
| Other Financial Data : | June 30, 2011 | June 30, 2010 | ||||||
Cash flows provided by (used in): |
||||||||
Operating activities |
$ | 42,812 | $ | 48,635 | ||||
Investing activities |
(76,474 | ) | (47,419 | ) | ||||
Financing activities |
27,791 | (2,986 | ) | |||||
Purchases of property and equipment |
(14,633 | ) | (14,465 | ) | ||||
Cash paid for acquisitions (including
cash paid for earn-out obligations) |
(19,353 | ) | (32,776 | ) | ||||
| (1) | Represents management fees incurred for payment 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) | Represents non-cash stock-based compensation. |
|
| (4) | Represents external acquisition expenses. |
|
| (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 29, 2006. |
|
| (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) | Represents an early lease termination fee incurred in conjunction with
closing an underperforming program. |
|
| (12) | Represents net income (loss) before interest expense and interest income,
income taxes, depreciation and amortization, and certain non-operating expenses. |
|
| (13) | 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. |
|
| (14) | Includes obligations under capital leases. |
CONTACT: Dwight Robson at 617-790-4293 or dwight.robson@thementornetwork.com.
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