National Mentor Holdings, Inc. Announces Results for the Third Quarter and Nine Months ended June 30, 2013
<0> National Mentor Holdings, Inc.Dwight Robson, 617-790-4293 </0>
National Mentor Holdings, Inc. (the “Company”) today announced its financial results for the third quarter and nine months ended June 30, 2013.
Revenue for the quarter ended June 30, 2013 was $304.3 million, an increase of $20.6 million, or 7.3%, over revenue for the quarter ended June 30, 2012. Revenue increased $22.5 million from organic growth, including growth related to new programs and a $2.1 million adjustment to our state provider tax reserve relating to pre-Merger periods, and $5.6 million from acquisitions that closed during and after the three months ended June 30, 2012. The organic growth was partially offset by a reduction in revenue of $7.5 million from businesses we divested during the same period.
Income from operations for the quarter ended June 30, 2013 was $15.9 million, an increase of $3.2 million, as compared to income from operations for the quarter ended June 30, 2012. Net loss for the quarter ended June 30, 2013 was $2.5 million compared to net loss of $3.0 million for the quarter ended June 30, 2012.
Pro Forma Adjusted EBITDA for the quarter ended June 30, 2013 was $34.8 million, an increase of $3.2 million, or 10.3%, as compared to Pro Forma Adjusted EBITDA for the quarter ended June 30, 2012. Pro Forma Adjusted EBITDA increased due to core growth and acquisitions closed since June 30, 2012 as well as cost containment efforts and expense leveraging. The growth in Pro Forma Adjusted EBITDA was partially offset by increased expense for accounts receivable reserves and occupancy. Adjusted EBITDA margin increased to 11.5% for the quarter ended June 30, 2013 from 11.2% for the quarter ended June 30, 2012.
Revenue for the nine months ended June 30, 2013 was $893.5 million, an increase of $59.9 million, or 7.2%, over revenue for the nine months ended June 30, 2012. Revenue increased $62.4 million from organic growth, including growth related to new programs and a $2.1 million adjustment to our state provider tax reserve relating to pre-Merger periods, and $18.3 million from acquisitions that closed during and after the nine months ended June 30, 2012. Revenue growth was partially offset by a reduction in revenue of $20.8 million from businesses we divested during the same period.
Income from operations for the nine months ended June 30, 2013 was $34.3 million, a slight decrease of $0.2 million as compared to income from operations for the nine months ended June 30, 2012. Net loss for the nine months ended June 30, 2013 was $18.7 million compared to net loss of $9.1 million for the nine months ended June 30, 2012.
Pro Forma Adjusted EBITDA for the nine months ended June 30, 2013 was $93.8 million, an increase of $6.8 million, or 7.8%, as compared to Pro Forma Adjusted EBITDA for the nine months ended June 30, 2012. Pro Forma Adjusted EBITDA increased due to core growth and acquisitions closed since June 30, 2012 as well as cost containment efforts and expense leveraging. The growth in Pro Forma Adjusted EBITDA was partially offset by the increased expense for accounts receivable reserves and occupancy. Adjusted EBITDA margin increased to 10.6% for the nine months ended June 30, 2013 from 10.4% for the nine months ended June 30, 2012.
The reported results are available on the Company’s investor relations web site at . 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 Friday, August 16, 2013 at 11:00 a.m. ET to discuss its financial results. The call will be broadcast live on the web at and at . A rebroadcast of the call will be available on both web sites until 5:00 p.m. ET on Friday, August 23, 2013. Those wishing to participate in the August 16 conference call by telephone are required to email their name and affiliation to 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 34 states.
Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. See “Non-GAAP Financial Measures” below.
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 under the captions “Forward-Looking Statements” and “Risk Factors” in the Company’s filings with the Securities and Exchange Commission.
This earnings release includes a presentation of Pro Forma Adjusted EBITDA, which is a non-GAAP financial measure. Pro Forma Adjusted EBITDA is defined as net income (loss) before interest expense and interest income, income taxes, depreciation and amortization, exclusion of discontinued operations, further adjusted to add back certain non-cash charges, fees under the management agreement with the Company’s equity sponsor, proceeds of business insurance, transaction bonuses, certain expenses incurred under indemnification or refunding provisions for acquisitions, severance costs and relocation costs and deductions attributable to minority interests, non-cash compensation expense, income tax credits to the extent not netted, non-cash income and interest income and gains on interest rate hedges, unusual or non-recurring income or gains, unusual or non-recurring losses, operating losses from new starts, business optimization expenses, further adjusted for EBITDA of acquired businesses on a pro forma basis and EBITDA of sold businesses. Pro Forma Adjusted EBITDA is similar to the definition of “Consolidated EBITDA” in the Company’s senior credit agreement, except that it does not include an adjustment for the difference between the cash basis and accrual basis of professional and general liability, or PL/GL, charges.
This earnings release also includes a presentation of Adjusted EBITDA Margin, which is a non-GAAP financial measure. Adjusted EBITDA Margin is defined as (i) Pro Forma Adjusted EBITDA, less the pro forma portion of EBITDA relating to acquired businesses, divided by (ii) consolidated revenue, less revenue related to unprofitable new starts. These adjustments are made to better reflect the performance of the Company’s core business and acquired companies, excluding new starts that are unprofitable.
Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin are presented because they are important measures used by management to assess financial performance, and management believes they provide a more transparent view of the Company’s operating performance and operating trends. The Company’s business strategy has been to pursue growth primarily through acquisitions and new program starts and, more recently, to improve margin. As part of this strategy, in recent periods the Company’s spending on new starts has increased substantially. As a result, the Company believes its presentation of Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin provides additional information investors can use to assess the Company’s progress on its goals. The Company also believes these measures are useful to investors in assessing financial performance because these non-GAAP financial measures are similar to the metrics used by investors and other interested parties when comparing companies in the Company’s industry that have different capital structures, debt levels and/or tax rates. Furthermore, Pro Forma Adjusted EBITDA closely correlates to the EBITDA measure used in the Company’s senior credit agreement. Reconciliations of net income (loss) to Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin data are presented within the tables below.
Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin do not represent and should not be considered alternatives to net income or cash flows from operations, as determined by accounting principles generally accepted in the United States, or GAAP. While Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin are frequently used as measures of financial performance and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin should be reviewed in conjunction with the Company’s financial statements filed with the SEC.
(1)Pro Forma Adjusted EBITDA for the three and nine months ended June 30, 2012 is presented in accordance with the new basis of presentation beginning with the earnings release for the quarter ended March 31, 2013. The following table sets forth a reconciliation of Adjusted EBITDA as previously reported in prior earnings release to Pro Forma Adjusted EBITDA as presented in this earnings release for the three and nine months ended June 30, 2012.
(2) Represents management fees incurred for payment to Vestar Capital Partners V, L.P.
(3) Represents an adjustment to our tail reserve for professional and general liability claims which is required by ASC 450 for companies with claims-made insurance.
(4) Represents impairment charges associated with goodwill related to underperforming programs.
(5) Represents costs related to the October 2012 debt repricing, external acquisition expenses, and transaction costs incurred as part of the restructuring of corporate and certain field functions.
(6) Represents non-cash stock-based compensation expense.
(7) Represents an adjustment to a reserve for a provider tax that was accrued for prior to the Merger on June 29, 2006.
(8) Represents losses from any programs started within 18 months of the end of the period that have operating losses during the period.
(9) Represents pro forma pre-closing EBITDA with respect to any acquisitions made during the period, based on actual EBITDA reported by the acquired entity or business during the most recent three and nine month period available at the time of acquisition, after giving effect to identified adjustments as a result of the combination, pro rated for the portion of that three and nine month period that falls within the three and nine months ended June 30, 2013 and 2012, as applicable, prior to the closing of the acquisition.
(10) Represents revenue from new programs started within 18 months of the end of the period that have operating losses during the period.
(1) Calculated as current assets minus current liabilities.
(2) Includes obligations under capital leases.
(3) Net debt as defined in the senior credit agreement (total debt, net of cash and cash equivalents and LOC restricted cash of $50 million).