SUBSCRIBE TO TMCnet
TMCnet - World's Largest Communications and Technology Community

TMCNet:  National Mentor Holdings, Inc. Announces First Quarter Ended December 31, 2013 Results

[February 12, 2014]

National Mentor Holdings, Inc. Announces First Quarter Ended December 31, 2013 Results

BOSTON --(Business Wire)--

National Mentor Holdings, Inc. (the "Company") today announced its financial results for the first quarter ended December 31, 2013.

First Quarter Results

Revenue for the quarter ended December 31, 2013 was $307.5 million, an increase of $13.8 million, or 4.7%, over revenue for the quarter ended December 31, 2012. Revenue increased $10.9 million from organic growth, including growth related to new programs, and $2.9 million from acquisitions that closed during and after the three months ended December 31, 2012.

Income from operations for the quarter ended December 31, 2013 was $13.1 million, an increase of $5.3 million as compared to income from operations for the quarter ended December 31, 2012. Net loss for the quarter ended December 31, 2013 was $4.7 million compared to a net loss of $8.4 million for the quarter ended December 31, 2012.

Pro Forma Adjusted EBITDA1 for the quarter ended December 31, 2013 was $31.8 million, an increase of $2.2 million, or 7.4%, as compared to Pro Forma Adjusted EBITDA for the quarter ended December 31, 2012. Pro Forma Adjusted EBITDA increased due to organic growth and acquisitions closed since December 31, 2012 as well as expense leveraging and cost containment efforts. The growth in Pro Forma Adjusted EBITDA was partially offset by the increase in health insurance and occupancy expense. Adjusted EBITDA margin1 increased to 10.3% for the quarter ended December 31, 2013 from 10.1% for the quarter ended December 31, 2012.

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 Friday, February 14, 2014 at 11:00 a.m. ET 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. ET on Friday, February 21, 2014. Those wishing to participate in the February 14 conference call by telephone are required to email their name and affiliation to dwight.robson@thementornetwork.com for dial-in information.

About the Company

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.

Forward-Looking Statements

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.

1 Pro Forma Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. See "Non-GAAP Financial Measures" below.

Non-GAAP Financial Measures

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, exclusive 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 (i) 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 and (ii) the adjustment for operating losses from new starts is not capped at $8.0 million.

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 (News - Alert).




       
 

Selected Financial Highlights

($ in thousands)

(unaudited)

 
Three Months Ended
December 31,
2013 2012
Statements of Operations Data:
Net revenue $ 307,481 $ 293,636
Cost of revenue (exclusive of depreciation expense shown separately below) 241,852 233,721
General and administrative expenses 36,481 36,658
Depreciation and amortization   16,065     15,508  
 
Income from operations 13,083 7,749
Management fee of related party (345 ) (336 )
Other income, net 347 338
Interest income 30 5
Interest expense   (19,501 )   (19,604 )
 
Loss from continuing operations before income taxes (6,386 ) (11,848 )
Benefit for income taxes   (1,673 )   (3,499 )
 
Loss from continuing operations (4,713 ) (8,349 )
Income (loss) from discontinued operations, net of tax   23     (25 )
 
Net loss $ (4,690 ) $ (8,374 )
 
 
Additional financial data:
 
Program rent expense $ 10,176 $ 9,335
 
 

Reconciliation of Non-GAAP Financial Measures

($ in thousands)

(unaudited)

       
Three Months Ended
December 31,
2013

2012(1)

Reconciliation from Net loss to Pro Forma Adjusted EBITDA:
 
Net loss $ (4,690 ) $ (8,374 )
Loss (income) from discontinued operations, net of tax (23 ) 25
Benefit for income tax (1,673 ) (3,499 )
Interest expense, net 19,471 19,599
Management fee of related party (2) 345 336
Depreciation and amortization 16,065 15,508
PL/GL Tail Reserve (3) - 2,427
Restructuring (4) 405 12
Transaction-related costs, fees and expenses (5) 208 162
Non-cash impairment (6) - 72
Stock-based compensation (7) 20 171
Loss on disposal of assets 18 152
Operating losses from new starts (8) 1,452 2,887
Business optimization expenses 99 80
Acquired EBITDA (9)   86     22  
 
Pro Forma Adjusted EBITDA $ 31,783   $ 29,580  
 
 
Three Months Ended
December 31,
2013 2012
Margin Data:
 
Consolidated Revenue $ 307,481 $ 293,636
Less: Revenue related to unprofitable new starts (10)   911     2,265  
 
$ 306,570 $ 291,371
 
Pro Forma Adjusted EBITDA $ 31,783 $ 29,580
Less: Acquired EBITDA (9)   86     22  
 
$ 31,697 $ 29,558
Adjusted EBITDA Margin 10.3 % 10.1 %
 
 

(1) Pro Forma Adjusted EBITDA for the three months ended December 31, 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 our earnings release for the three months ended December 31, 2012 to Pro Forma Adjusted EBITDA as presented in this earnings release.

    Three Months
Ended December 31,
2012(11)
Reconciliation from Adjusted EBITDA to Pro Forma Adjusted EBITDA:
 
Adjusted EBITDA $ 26,591
Operating losses from new starts (8) 2,887
Business optimization expenses 80
Acquired EBITDA (9)   22
 
Pro Forma Adjusted EBITDA $ 29,580
 
 

(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 (News - Alert) 450 for companies that have claims-made insurance.

(4) Represents costs incurred as part of the restructuring of corporate and certain field functions.

(5) Represents costs related to the October 2012 debt repricing, external acquisition expenses, franchise taxes and transaction costs incurred.

(6) Represents impairment charges associated with goodwill related to underperforming programs.

(7) Represents non-cash stock-based compensation expense.

(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 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 month period that falls within the three months ended December 31, 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.

(11) During fiscal 2013, the Company sold its Mentor Rhode Island business and closed certain Human Services operations in the state of Virginia. Results presented in the table for the three months ended December 31, 2012 reflect the classification of these businesses as discontinued operations.

Selected Balance Sheet and Cash Flow Highlights

($ in thousands)

(unaudited)

       
As of
Balance Sheet Data: December 31, 2013 September 30, 2013
Cash and cash equivalents $ 20,589 $ 19,315
Working capital (1) 64,295 58,267
Total assets 1,016,354 1,020,372
Total debt (2) 801,963 803,464
Net debt (3) 731,374 734,149
Shareholder's deficit (65,034 ) (60,831 )
 
Three Months Ended

Other Financial Data:

December 31, 2013 December 31, 2012
Cash flows provided by (used in):
Operating activities $ 10,116 $ (2,692 )
Investing activities (7,341 ) (8,111 )
Financing activities (1,501 ) 10,803
Purchases of property and equipment (6,023 ) (8,227 )
Cash paid for acquisitions (1,240 ) (475 )
 
 

(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).


[ Back To Technology News's Homepage ]

OTHER NEWS PROVIDERS







Technology Marketing Corporation

800 Connecticut Ave, 1st Floor East, Norwalk, CT 06854 USA
Ph: 800-243-6002, 203-852-6800
Fx: 203-866-3326

General comments: tmc@tmcnet.com.
Comments about this site: webmaster@tmcnet.com.

STAY CURRENT YOUR WAY

© 2014 Technology Marketing Corporation. All rights reserved | Privacy Policy