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8-K - FORM 8-K - ModivCare Incprsc20151105_8k.htm
EX-2.1 - EXHIBIT 2.1 - ModivCare Incex2-1.htm

Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

The following unaudited pro forma condensed consolidated financial statements have been derived by the application of pro forma adjustments to the Company’s historical consolidated financial information, which have been presented to give effect to the disposition of Providence Human Services, LLC and Providence Community Services, LLC (Providence’s Human Services segment). The unaudited pro forma condensed consolidated balance sheet as of June 30, 2015 of Providence and its subsidiaries is presented as if the disposition had occurred as of June 30, 2015. The unaudited pro forma condensed consolidated statements of income of Providence and its subsidiaries for the six months ended June 30, 2015 and the years ended December 31, 2014, 2013, and 2012 are presented as if the disposition had occurred on January 1, 2012.

 

The Company’s historical financial information was derived from its audited consolidated financial statements for the years ended December 31, 2014, 2013 and 2012 (as filed in its Annual Report on Form 10-K with the Securities and Exchange Commission on March 16, 2015, March 14, 2014 and March 15, 2013, respectively) and the Company’s unaudited condensed consolidated financial statements for the six months ended June 30, 2015 (as filed in its Quarterly Report on Form 10-Q with the Securities and Exchange Commission on August 7, 2015). The Company’s historical financial statements used in preparing the unaudited pro forma financial data are summarized and should be read in conjunction with its historical financial statements and risk factors, all of which are included in the filings with the Securities and Exchange Commission noted above.

 

The unaudited pro forma adjustments are based on estimates, available information and certain assumptions that the Company believes are reasonable. The unaudited pro forma adjustments and primary assumptions are described in the accompanying notes. The unaudited pro forma condensed consolidated balance sheet and statements of income are being provided for illustrative purposes only and do not purport to represent what our results of operations or financial position would have been if the transaction had occurred on the dates indicated and are not intended to project our results of operations or financial position for any future period. Any of the factors underlying these estimates and assumptions may change or prove to be materially different and the estimates and assumptions may not be representative of facts that existed upon completion of the disposition.

 

 
 

 

 

The Providence Service Corporation

Pro Forma Condensed Consolidated Balance Sheet - Unaudited

June 30, 2015

(in thousands)

 

   

Providence Service Corporation Historical

   

Disposition of Providence Human Services

   

Pro Forma Adjustments

     

Pro Forma

 

Assets

                                 

Current assets:

                                 

Cash and cash equivalents

  $ 145,161     $ (16,967   $ 104,314  

c

  $ 232,508  

Accounts receivable, net

    211,741       (46,741 )     -         165,000  

Other current assets

    61,919       (6,624 )     -         55,295  

Total current assets

    418,821       (70,332 )     104,314         452,803  
                                   

Goodwill

    358,483       (13,344 )     -         345,139  

Intangible assets, net

    321,535       (14,833 )     -         306,702  

Other non-current assets

    118,205       (17,204 )     10,000   f     111,001  

Total assets

  $ 1,217,044     $ (115,713 )   $ 114,314       $ 1,215,645  
                                   

Liabilities and stockholders' equity

                                 

Current liabilities:

                                 

Accrued expenses

  $ 127,722    

$

(19,245 )   $ 19,119  

d

  $ 127,596  

Other current liabilities

    193,212       (4,434 )     -         188,778  

Total current liabilities

    320,934       (23,679 )     19,119         316,374  
                                   

Long-term obligations, less current portion

    458,667       -       (97,347 )

c

    361,320  

Other non-current liabilities

    116,636       3,274       -         119,910  

Total liabilities

    896,237       (20,405 )     (78,228 )       797,604  
                                   

Mezzanine equity

                                 

Convertible preferred stock, net

    77,719       -       -         77,719  
                                   

Stockholders' equity

                                 

Common stock and APIC

    270,044       -       -         270,044  

Other stockholders' equity

    (26,956 )     -       97,234  

e

    70,278  

Total stockholders' equity

    243,088       -       97,234         340,322  

Total liabilities and stockholders' equity

  $ 1,217,044     $ (20,405 )   $ 19,006       $ 1,215,645  

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 
 

 

  

The Providence Service Corporation

Pro Forma Condensed Consolidated Statements of Income

for the six months ended June 30, 2015

Unaudited

(in thousands, except share and per share data)

 

   

Providence Service Corporation Historical

   

Disposition of Providence Human Services

   

Pro Forma Adjustments

     

Pro Forma

 
                                   

Service revenue, net

  $ 1,014,046     $ (175,979 )   $ -       $ 838,067  
                                   

Operating expenses:

                                 

Service expense

    893,926       (155,820 )     -         738,106  

General and administrative expense

    48,000       (9,937 )     (206 ) a     37,857  

Depreciation and amortization

    29,857       (3,613 )     -         26,244  

Total operating expenses

    971,783       (169,370 )     (206 )       802,207  

Operating income

    42,263       (6,609 )     206         35,860  
                                   

Other expenses:

                                 

Interest expense, net

    10,552       29       (1,671 ) b     8,910  

Loss on equity investment

    3,542       -       -         3,542  

(Gain) Loss on foreign currency translation

    (395 )     -       -         (395 )

Income before income taxes

    28,564       (6,638 )     1,877         23,803  

Provision for income taxes

    15,693       (2,782 )     746         13,657  

Net income

  $ 12,871     $ (3,856 )   $ 1,131       $ 10,146  
                                   

Net income available to common stockholders

  $ 9,243                       $ 6,750  
                                   

Earnings per common share:

                                 

Basic

  $ 0.58                       $ 0.42  

Diluted

  $ 0.57                       $ 0.42  
                                   

Weighted-average number of common shares outstanding:

                                 

Basic

    16,036,959                         16,036,959  

Diluted

    16,193,372                         16,193,372  

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 
 

 

   

The Providence Service Corporation

Pro Forma Condensed Consolidated Statements of Income

for the twelve months ended December 31, 2014

Unaudited

(in thousands, except share and per share data)

 

   

Providence Service Corporation Historical

   

Disposition of Providence Human Services

   

Pro Forma Adjustments

     

Pro Forma

 
                                   

Service revenue, net

  $ 1,481,171     $ (344,960 )   $ -       $ 1,136,211  
                                   

Operating expenses:

                                 

Service expense

    1,338,793       (315,008 )     -         1,023,785  

General and administrative expense

    63,635       (19,134 )     -         44,501  

Depreciation and amortization

    29,488       (6,655 )     -         22,833  

Asset impairment charge

    6,915       (6,915 )     -         -  

Total operating expenses

    1,438,831       (347,712 )     -         1,091,119  

Operating income

    42,340       2,752       -         45,092  
                                   

Other expense:

                                 

Interest expense, net

    14,600       41       (1,519 ) b     13,122  

Gain on foreign currency translation

    (37 )     -       -         (37 )

Income before income taxes

    27,777       2,711       1,519         32,007  

Provision for income taxes

    7,502       (16 )     604         8,090  

Net income

  $ 20,275     $ 2,727     $ 915       $ 23,917  
                                   

Earnings per common share:

                                 

Basic

  $ 1.37                       $ 1.62  

Diluted

  $ 1.35                       $ 1.59  
                                   

Weighted-average number of common shares outstanding:

                                 

Basic

    14,765,303                         14,765,303  

Diluted

    15,018,561                         15,018,561  

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 
 

 

  

The Providence Service Corporation

Pro Forma Condensed Consolidated Statements of Income

for the twelve months ended December 31, 2013

Unaudited

(in thousands, except share and per share data)

 

   

Providence Service Corporation Historical

   

Disposition of Providence Human Services

   

Pro Forma

 
                         

Service revenue, net

  $ 1,122,682     $ (323,916 )   $ 798,766  
                         

Operating expenses:

                       

Service expense

    1,020,051       (283,382 )     736,669  

General and administrative expense

    48,633       (23,043 )     25,590  

Depreciation and amortization

    14,872       (5,541 )     9,331  

Asset impairment charge

    492       (492 )     -  

Total operating expenses

    1,084,048       (312,458 )     771,590  

Operating income

    38,634       (11,458 )     27,176  
                         

Other expense:

                       

Interest expense, net

    6,894       27       6,921  

Loss on extinguishment of debt

    525       -       525  

Income before income taxes

    31,215       (11,485 )     19,730  

Provision for income taxes

    11,777       (5,152 )     6,625  

Net income

  $ 19,438     $ (6,333 )   $ 13,105  
                         

Earnings per common share:

                       

Basic

  $ 1.44             $ 0.97  

Diluted

  $ 1.41             $ 0.95  
                         

Weighted-average number of common shares outstanding:

                       

Basic

    13,499,885               13,499,885  

Diluted

    13,809,874               13,809,874  

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 
 

 

  

The Providence Service Corporation

Pro Forma Condensed Consolidated Statements of Income

for the twelve months ended December 31, 2012

Unaudited

(in thousands, except share and per share data)

 

   

Providence Service Corporation Historical

   

Disposition of Providence Human Services

   

Pro Forma

 
                         

Service revenue, net

  $ 1,105,889     $ (328,879 )   $ 777,010  
                         

Operating expenses:

                       

Service expense

    1,010,776       (278,534 )     732,242  

General and administrative expense

    53,383       (26,372 )     27,011  

Depreciation and amortization

    15,023       (5,417 )     9,606  

Asset impairment charge

    2,506       -       2,506  

Total operating expenses

    1,081,688       (310,323 )     771,365  

Operating income

    24,201       (18,556 )     5,645  
                         

Other expense:

                       

Interest expense, net

    7,508       5       7,513  

Income before income taxes

    16,693       (18,561 )     (1,868 )

Provision for income taxes

    8,211       (7,717 )     494  

Net income

  $ 8,482     $ (10,844 )   $ (2,362 )
                         

Earnings per common share:

                       

Basic

  $ 0.64             $ (0.18 )

Diluted

  $ 0.64             $ (0.18 )
                         

Weighted-average number of common shares outstanding:

                       

Basic

    13,225,448               13,225,448  

Diluted

    13,354,613               13,225,448  

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 
 

 

  

The Providence Service Corporation

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

(in thousands)

 

1.

Description of the transactions and basis of presentation

 

 

Description of the Transaction

 

Effective November 1, 2015, The Providence Service Corporation (the “Company” or “Providence”) along with Ross Innovative Employment Solutions Corp. (“Ross” and, collectively with Providence, the “Sellers”) completed the sale of Providence Human Services, LLC and Providence Community Services, LLC, comprising Providence’s Human Services segment, to Molina Healthcare, Inc. (“Buyer”) pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated September 3, 2015.

 

Pursuant to the Purchase Agreement, Buyer paid to Providence on November 2, 2015 a purchase price comprised of a $200,000 cash payment (prior to adjustments for estimated working capital, certain seller transaction costs, debt assumed by the Buyer, and a cash payment for the Providence Human Services cash and cash equivalents on hand at closing), (the “Transaction”). The Company intends to use 50% of the net cash proceeds, as further defined below, from the Transaction to fund a prepayment of revolving loans under its existing credit facility. Subject to additional management evaluation of market and business conditions, share price and other factors and evaluation and approval of the Board of Directors, the remaining proceeds of the Transaction may be used for acquisitions, investments in the long-term development of the Company’s other segments and the return of capital to stockholders through a stock repurchase program.

 

Additionally, on September 3, 2015, Providence entered into the Third Amendment and Consent to the Amended and Restated Credit and Guaranty Agreement (the “Amendment”) amending its Amended and Restated Credit and Guaranty Agreement, previously amended by that certain First Amendment dated May 28, 2014 and Second Amendment dated October 23, 2014 by and among Providence, certain domestic subsidiaries of Providence, Bank of America, as administrative agent, and the other lenders party thereto (as amended to date, the “Credit Agreement”). Pursuant to the Amendment, the lenders under the Credit Agreement consented to Providence’s sale of its Human Services segment pursuant to the Transaction and the use by Providence of 50% of the net cash proceeds of the Transaction to make restricted payments to repurchase common stock pursuant to the Providence stock repurchase program, provided that a minimum amount equal to 50% of the net cash proceeds, as defined in the Credit Agreement, of the Transaction would be applied pro rata to the prepayment of revolving loans and swingline loans under the Credit Agreement. The Amendment provides for appropriate amendments to the terms of the Credit Agreement to reflect such consents. The Credit Facility defines “net cash proceeds” to include cash proceeds or cash equivalents actually received in a disposition such as the Transaction, net of direct costs incurred, taxes paid or payable as a result of the disposition, the amount of required payments on indebtness as a result of the disposition, and the amount of any reasonable reserve established in accordance with generally accepted accounting principles for contingency payments, such as indemnification obligations.

 

Basis of Presentation

 

The unaudited pro forma condensed consolidated financial statements have been prepared based on the Company’s historical financial information giving effect to the disposition of Providence’s Human Services segment and related adjustments described in these notes. Certain note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted as permitted by the SEC rules and regulations.

 

2.

Pro forma adjustments to unaudited condensed consolidated financial statements 

 

 

a.

Adjustment to remove transaction expenses recorded during the six months ended June 30, 2015.

 

 

b.

Adjustment to remove interest expense related to the portion of the revolving credit facility that was required by the Company’s lenders to be repaid upon sale of Providence’s Human Services segment. The portion of the revolving credit facility required by the Company’s lenders to be repaid upon sale of the Human Services segment is estimated to be $97,347.

 

 

c.

Adjustment of $97,347 to reflect the 50% of cash consideration of $194,694 from the Providence Human Services disposition, net of estimated seller transaction costs, estimated working capital adjustments, and debt assumed by Buyer required by the Company’s lenders to pay outstanding credit facility obligations; less an adjustment of $10,000 to reflect the portion of the closing cash consideration held in indemnity escrow (refer to Note f.); plus an adjustment of $16,967 to reflect the amount of Providence Human Services cash and cash equivalents as of June 30, 2015 purchased by the Buyer at closing. As a closing accommodation, Providence and Buyer agreed that Providence would not remove the Providence Human Services cash and cash equivalents on hand and that Buyer would pay Providence for this amount at closing (refer to Note e.).

 

 

d.

Adjustments to record the estimated income tax impacts related to the Providence Human Services disposition.

 

 

e.

Adjustment to reflect the estimated gain on sale, net of tax, from the Providence Human Services disposition is calculated as follows:

 

 

Purchase price

  $ 200,000  

Add: Estimated working capital adjustments

    3,883  

Less: Debt assumed by Buyer

    (600 )

Less: Estimated seller transaction costs

    (8,589 )

Cash consideration, net of adjustments and before cash and cash equivalents acquired

    194,694  

Add: Cash paid for Providence Human Services cash and cash equivalents as of June 30, 2015

    16,967  c

Total cash received, including cash held in indemnity escrow

    211,661  
         

Providence Human Services net book value as of June 30, 2015, excluding cash and cash equivalents

    78,341  

Add: Providence Human Services cash and cash equivalents as of June 30, 2015

    16,967  c

Total Providence Human Services net book value as of June 30, 2015

    95,308  
         

Estimated pre-tax gain

    116,353  

Provision for income taxes

    19,119  

Estimated gain on sale, net of tax

  $ 97,234  

 

 

 

f.

Adjustment of $10,000 to reflect the portion of the closing cash consideration held in indemnity escrow for the benefit of Providence.