Subsidiary Guarantors

12 Months Ended

Dec. 31, 2011

Subsidiary Guarantors

Subsidiary Guarantors

21.          Subsidiary Guarantors

The Senior Notes are jointly, severally, fully and unconditionally guaranteed by our 100% owned U.S. subsidiaries. There are no restrictions on our ability to obtain funds from our U.S. subsidiaries by dividends or other means. The following are condensed consolidating financial statements of our company, including the guarantors. This information is provided pursuant to Rule 3-10 of Regulation S-X in lieu of separate financial statements of each subsidiary guaranteeing the Senior Notes. The following condensed consolidating financial statements present the balance sheet, statement of operations and cash flows of (i) Res-Care, Inc. (in each case, reflecting investments in its consolidated subsidiaries under the equity method of accounting), (ii) the guarantor subsidiaries, (iii) the nonguarantor subsidiaries, and (iv) the eliminations necessary to arrive at the information for our company on a consolidated basis. The condensed consolidating financial statements should be read in conjunction with the accompanying Consolidated Financial Statements.

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

(In thousands)

	December 31, 2011
	SUCCESSOR
			Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.		Subsidiaries			Subsidiaries			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	16,733	$	6,598		$	2,320		$	—		$	25,651
Accounts receivable, net	22,947		198,001			141			—			221,089
Refundable income taxes	11,432		—			—			—			11,432
Deferred income taxes	13,668		—			—			—			13,668
Non-trade receivables	752		5,650			282			—			6,684
Prepaid expenses and other current assets	8,556		9,961			15			—			18,532
Total current assets	74,088		220,210			2,758			—			297,056
Property and equipment, net	45,827		39,045			21			—			84,893
Goodwill	237,075		25,365			5,257			—			267,697
Other intangible assets, net	307,566		7,388			—			—			314,954
Investment in subsidiaries	755,530		41,782			—			(797,312		)	—
Other assets	24,548		3,079			31			—			27,658
	$	1,444,634	$	336,869		$	8,067		$	(797,312	)	$	992,258
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Trade accounts payable	$	26,293	$	19,778		$	36		$	—		$	46,107
Accrued expenses	64,061		57,702			869			—			122,632
Current portion of long-term debt	1,700		2,724			116			—			4,540
Current portion of obligations under capital leases	—		89			—			—			89
Accrued income taxes	1,051		—			(82		)	—			969
Total current liabilities	93,105		80,293			939			—			174,337
Intercompany	535,101		(544,991		)	9,890			—			—
Long-term liabilities	55,112		88			—			—			55,200
Long-term debt	363,786		1,068			—			—			364,854
Obligations under capital leases	—		342			—			—			342
Deferred gains	300		—			—			—			300
Deferred income taxes	98,275		—			(5		)	—			98,270
Total liabilities	1,145,679		(463,200		)	10,824			—			693,303
Total shareholder’s equity	298,955		800,069			(2,757		)	(797,312		)	298,955
	$	1,444,634	$	336,869		$	8,067		$	(797,312	)	$	992,258

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

(In thousands)

	December 31, 2010
	SUCCESSOR
			Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.		Subsidiaries			Subsidiaries			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	11,084	$	9,825		$	6,643		$	—		$	27,552
Accounts receivable, net	37,902		175,721			2,318			—			215,941
Refundable income taxes	1,297		—			(98		)	—			1,199
Deferred income taxes	14,564		—			72			—			14,636
Non-trade receivables	5,300		1,541			506			—			7,347
Prepaid expenses and other current assets	8,385		9,495			725			—			18,605
Total current assets	78,532		196,582			10,166			—			285,280
Property and equipment, net	21,231		64,895			757			—			86,883
Goodwill	239,066		8,239			—			—			247,305
Other intangible assets, net	313,106		2,270			—			—			315,376
Investment in subsidiaries	885,443		41,994			80,267			(1,007,704		)	—
Other assets	25,834		4,127			147			—			30,108
	$	1,563,212	$	318,107		$	91,337		$	(1,007,704	)	$	964,952
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Trade accounts payable	$	29,343	$	24,832		$	2,077		$	—		$	56,252
Accrued expenses	68,291		57,649			1,109			—			127,049
Current portion of long-term debt	32,232		3,015			3,948			—			39,195
Current portion of obligations under capital leases	6		86			—			—			92
Accrued income taxes	1,480		—			(76		)	—			1,404
Total current liabilities	131,352		85,582			7,058			—			223,992
Intercompany	695,613		(688,106		)	(7,507		)	—			—
Long-term liabilities	35,425		2,013			188			—			37,626
Long-term debt	364,798		2,086			—			—			366,884
Obligations under capital leases	—		431			—			—			431
Deferred income taxes	93,411		—			(5		)	—			93,406
Total liabilities	1,320,599		(597,994		)	(266		)	—			722,339
Total shareholder’s equity	242,613		916,101			91,603			(1,007,704		)	242,613
	$	1,563,212	$	318,107		$	91,337		$	(1,007,704	)	$	964,952

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In thousands)

	Year Ended December 31, 2011
	SUCCESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	257,792		$	1,319,735		$	1,808		$	—		$	1,579,335
Operating expenses	275,681			1,197,406			2,348			—			1,475,435
Operating (loss) income	(17,889		)	122,329			(540		)	—			103,900
Other expenses (income):
Interest, net	42,124			(55		)	(10		)	—			42,059
Equity in earnings of subsidiaries	(73,831		)	—			—			73,831			—
Total other (income) expenses	(31,707		)	(55		)	(10		)	73,831			42,059
Income (loss) from continuing operations before income taxes	13,818			122,384			(530		)	(73,831		)	61,841
Income tax (benefit) expense	(19,414		)	39,590			(171		)	—			20,005
Income (loss) from continuing operations	33,232			82,794			(359		)	(73,831		)	41,836
Loss (income) from discontinued operations, net of tax	19,760			—			(8,604		)	—			11,156
Net income (loss)-including noncontrolling interest	52,992			82,794			(8,963		)	(73,831		)	52,992
Net loss-noncontrolling interest				(171		)	—			—			(171		)
Net income (loss)-Res-Care, Inc.	$	52,992		$	82,965		$	(8,963	)	$	(73,831	)	$	53,163

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In thousands)

	For the Period November 16, 2010 — December 31, 2010
	SUCCESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	31,456		$	163,620		$	—		$	—		$	195,076
Operating expenses	31,487			147,399			136			—			179,022
Operating (loss) income	(31		)	16,221			(136		)	—			16,054
Other (income) expenses:
Interest, net	2,829			(8		)	(11		)	—			2,810
Equity in earnings of subsidiaries	(7,574		)	—			—			7,574			—
Total other (income) expenses	(4,745		)	(8		)	(11		)	7,574			2,810
Income (loss) before income taxes	4,714			16,229			(125		)	(7,574		)	13,244
Income tax (benefit) expense	(1,469		)	6,092			184			—			4,807
Income (loss) from continuing operations	6,183			10,137			(309		)	(7,574		)	8,437
Loss from discontinued operations, net of tax	—			—			(2,254		)	—			(2,254		)
Net income (loss)-including noncontrolling interest	6,183			10,137			(2,563		)	(7,574		)	6,183
Net loss-noncontrolling interest				(18		)	—			—			(18		)
Net income (loss)-Res-Care, Inc.	$	6,183		$	10,155		$	(2,563	)	$	(7,574	)	$	6,201

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Period January 1, 2010 – November 15, 2010

(In thousands)

	For the Period January 1, 2010 — November 15, 2010
	PREDECESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	277,287		$	1,089,451		$	863		$	—		$	1,367,601
Operating expenses	543,735			1,013,681			4,744			—			1,562,160
Operating (loss) income	(266,448		)	75,770			(3,881		)	—			(194,559		)
Other (income) expenses:
Interest, net	16,521			(51		)	(9		)	—			16,461
Equity in earnings of subsidiaries	(41,952		)	—			—			41,952			—
Total other (income) expenses	(25,431		)	(51		)	(9		)	41,952			16,461
(Loss) income from continuing operations before income taxes	(241,017		)	75,821			(3,872		)	(41,952		)	(211,020		)
Income tax (benefit) expense	(64,668		)	17,515			(3,367		)	—			(50,520		)
(Loss) income from continuing operations	(176,349		)	58,306			(505		)	(41,952		)	(160,500		)
Loss from discontinued operations, net of tax	—			—			(15,849		)	—			(15,849		)
Net (loss) income-including noncontrolling interest	(176,349		)	58,306			(16,354		)	(41,952		)	(176,349		)
Net loss-noncontrolling interest	—			(130		)	(42		)	—			(172		)
Net (loss) income-Res-Care, Inc.	$	(176,349	)	$	58,436		$	(16,312	)	$	(41,952	)	$	(176,177	)

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(In thousands)

	Year Ended December 31, 2009
	PREDECESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	288,830		$	1,267,909		$	1,820		$	—		$	1,558,559
Operating expenses	375,087			1,165,402			(256		)	—			1,540,233
Operating (loss) income	(86,257		)	102,507			2,076			—			18,326
Other (income) expenses:
Interest, net	16,368			(53		)	—			—			16,315
Equity in earnings of subsidiaries	(53,674		)	—			—			53,674			—
Total other (income) expenses	(37,306		)	(53		)	—			53,674			16,315
(Loss) income from continuing operations before income taxes	(48,951		)	102,560			2,076			(53,674		)	2,011
Income tax (benefit) expense	(38,659		)	36,225			771			—			(1,663		)
(Loss) income from continuing operations	(10,292		)	66,335			1,305			(53,674		)	3,674
Loss from discontinued operations, net of tax	—			—			(13,966		)	—			(13,966		)
Net (loss) income-including noncontrolling interest	(10,292		)	66,335			(12,661		)	(53,674		)	(10,292		)
Net loss-noncontrolling interest	—			(152		)	(703		)	—			(855		)
Net (loss) income-Res-Care, Inc.	$	(10,292	)	$	66,487		$	(11,958	)	$	(53,674	)	$	(9,437	)

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

	Year Ended December 31, 2011
	SUCCESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Operating activities:
Net income — including noncontrolling interest	$	52,992		$	82,794		$	(8,963	)	$	(73,831	)	$	52,992
Adjustments to reconcile net income, including noncontrolling interest, to cash provided by operating activities:
Depreciation and amortization	12,824			8,060			108			—			20,992
Amortization of discount and deferred debt issuance costs on notes	2,943			—			—			—			2,943
Stock compensation	2,383			—			—			—			2,383
Deferred income taxes, net	4,458			—			(8		)	—			4,450
Provision for losses on accounts receivable	3,903			1,928			20			—			5,851
Write down of assets held for sale	2,808			—			(1,166		)	—			1,642
Loss on sale of assets	—			481			—			—			481
Equity in earnings of subsidiaries	(73,831		)	—			—			73,831			—
Changes in operating assets and liabilities	(151,659		)	120,350			12,187			—			(19,122		)
Cash (used in) provided by operating activities	(143,179		)	213,613			2,178			—			72,612
Investing activities:
Purchases of property and equipment	(21,566		)	7,826			233			—			(13,507		)
Acquisitions of businesses, net of cash acquired	—			(23,106		)	—			—			(23,106		)
Proceeds from sale of assets	—			221			—			—			221
Cash (used in) provided by investing activities	(21,566		)	(15,059		)	233			—			(36,392		)
Financing activities:
Long-term (repayments) debt borrowings	(37,134		)	2,142			(3,832		)	—			(38,824		)
Payments on obligations under capital leases, net	—			(92		)	—			—			(92		)
Debt issuance costs	(561		)	—			—			—			(561		)
Funds contributed by co-investors	1,400			—			—			—			1,400
Net payments relating to intercompany financing	206,689			(203,768		)	(2,921		)	—			—
Cash provided by (used in) financing activities	170,394			(201,718		)	(6,753		)	—			(38,077		)
Effect of exchange rate changes on cash and cash equivalents	—			(63		)	19			—			(44		)
Increase (decrease) in cash and cash equivalents	5,649			(3,227		)	(4,323		)	—			(1,901		)
Cash and cash equivalents at beginning of period	11,084			9,825			6,643			—			27,552
Cash and cash equivalents at end of period	$	16,733		$	6,598		$	2,320		$	—		$	25,651

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

	For the Period November 16, 2010 – December 31, 2010
	SUCCESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Operating activities:
Net income — including noncontrolling interest	$	6,183		$	10,137		$	(2,563	)	$	(7,574	)	$	6,183
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	464			1,820			31			—			2,315
Amortization of discount and debt issuance costs	70			—			—			—			70
Deferred income taxes, net	2,440			—			3			—			2,443
Provision for losses on accounts receivable	—			844			—			—			844
Gain on sale of assets	—			(27		)	—			—			(27		)
Equity in earnings of subsidiaries	(7,574		)	—			—			7,574			—
Changes in operating assets and liabilities	9,331			37,910			405			—			47,646
Cash provided by (used in) operating activities	10,914			50,684			(2,124		)	—			59,474
Investing activities:
Purchases of property and equipment	(1,258		)	(869		)	—			—			(2,127		)
Acquisitions of businesses, net of cash acquired	—			(7,192		)	—			—			(7,192		)
Proceeds from sale of assets	—			59			—			—			59
Cash used in investing activities	(1,258		)	(8,002		)	—			—			(9,260		)
Financing activities:
Long-term debt repayments	(122,450		)	(25		)	87			—			(122,388		)
Long-term debt borrowings	366,600			—			—			—			366,600
Short-term borrowings-three months or less, net	(50,000		)	—			—			—			(50,000		)
Payments on obligations under capital leases	—			(11		)	—			—			(11		)
Net payments relating to intercompany financing	32,946			(38,064		)	5,118			—			—
Debt issuance costs	(15,863		)	—			—			—			(15,863		)
Payments on common share exchange	(56,875		)	—			—			—			(56,875		)
Redemption of preferred shares	(158,843		)	—			—			—			(158,843		)
Return on preferred shares	(753		)	—			—			—			(753		)
Cash (used in) provided by financing activities	(5,238		)	(38,100		)	5,205			—			(38,133		)
Effect of exchange rate on cash and cash equivalents	—			(3		)	15			—			12
Increase in cash and cash equivalents	4,418			4,579			3,096			—			12,093
Cash and cash equivalents at beginning of period	6,666			5,246			3,547			—			15,459
Cash and cash equivalents at end of period	$	11,084		$	9,825		$	6,643		$	—		$	27,552

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

	For the Period January 1, 2010 – November 15, 2010
	PREDECESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Operating activities:
Net (loss) income — including noncontrolling interest	$	(176,349	)	$	58,306		$	(16,354	)	$	(41,952	)	$	(176,349	)
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation and amortization	10,083			11,541			824			—			22,448
Impairment charge	250,181			—			12,974			—			263,155
Amortization of discount and deferred debt issuance costs on notes	1,577			—			—			—			1,577
Share-based compensation	6,201			—			—			—			6,201
Deferred income taxes, net	(55,547		)	—			(51		)	—			(55,598		)
Provision for losses on accounts receivable	—			9,573			—			—			9,573
Excess tax benefit from exercise of stock options	1,176			—			—			—			1,176
Loss on sale of assets	—			198			—			—			198
Equity in earnings of subsidiaries	(41,952		)	—			—			41,952			—
Changes in operating assets and liabilities	(27,179		)	(25,872		)	6,496			—			(46,555		)
Cash (used in) provided by operating activities	(31,809		)	53,746			3,889			—			25,826
Investing activities:
Purchases of property and equipment	(4,275		)	(4,265		)	(53		)	—			(8,593		)
Acquisitions of businesses, net of cash acquired	—			(21,234		)	—			—			(21,234		)
Proceeds from sale of assets	—			120			—			—			120
Cash used in investing activities	(4,275		)	(25,379		)	(53		)	—			(29,707		)
Financing activities:
Long-term debt repayments	—			(1,395		)	—			—			(1,395		)
Long-term debt borrowings	2,594			—			—			—			2,594
Short-term borrowings-three months or less, net	3,237			151			2,612			—			6,000
Payments on obligations under capital leases	—			(85		)	—			—			(85		)
Net payments relating to intercompany financing	38,558			(26,491		)	(12,067		)	—			—
Debt issuance costs	(4,543		)	—			—			—			(4,543		)
Excess tax benefits from share-based compensation	(1,176		)	—			—			—			(1,176		)
Employee withholding payments on share-based compensation	(2,683		)	—			—			—			(2,683		)
Cash provided by (used in) financing activities	35,987			(27,820		)	(9,455		)	—			(1,288		)
Effect of exchange rate on cash and cash equivalents	—			44			(88		)	—			(44		)
Increase (decrease) in cash and cash equivalents	(97		)	591			(5,707		)	—			(5,213		)
Cash and cash equivalents at beginning of period	6,763			4,655			9,254			—			20,672
Cash and cash equivalents at end of period	$	6,666		$	5,246		$	3,547		$	—		$	15,459

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

	Year Ended December 31, 2009
	PREDECESSOR
				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Operating activities:
Net (loss) income — including noncontrolling interest	$	(10,292	)	$	66,335		$	(12,661	)	$	(53,674	)	$	(10,292	)
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation and amortization	11,537			12,533			2,091			—			26,161
Impairment charge	62,082			1,000			8,909			—			71,991
Amortization of discount and deferred debt issuance costs on notes	1,221			—			—			—			1,221
Share-based compensation	4,259			—			—			—			4,259
Deferred income taxes, net	(9,743		)	—			(19		)	—			(9,762		)
Provision for losses on accounts receivable	—			9,009			—			—			9,009
Excess tax benefit from exercise of stock options	369			—			—			—			369
Gain on purchase of business	—			(1,474		)	—			—			(1,474		)
Loss on sale of assets	—			269			—			—			269
Equity in earnings of subsidiaries	(53,674		)	—			—			53,674			—
Changes in operating assets and liabilities	42,732			(25,562		)	(4,284		)	—			12,886
Cash provided by (used in) operating activities	48,491			62,110			(5,964		)	—			104,637
Investing activities:
Purchases of property and equipment	(6,185		)	(9,279		)	(464		)	—			(15,928		)
Acquisitions of businesses, net of cash acquired	—			(20,397		)	—			—			(20,397		)
Proceeds from sale of assets	—			188			—			—			188
Cash used in investing activities	(6,185		)	(29,488		)	(464		)	—			(36,137		)
Financing activities:
Long-term debt repayments	(2,575		)	1,764			—			—			(811		)
Long-term debt borrowings	—			—			—			—			—
Short-term borrowings-three months or less, net	(57,831		)	(3,161		)	1,192			—			(59,800		)
Payments on obligations under capital leases	—			(121		)	—			—			(121		)
Proceeds from sale and leaseback transaction	—			—			—			—			—
Net payments relating to intercompany financing	26,122			(30,795		)	4,673			—			—
Debt issuance costs	(72		)	—			—			—			(72		)
Proceeds received from exercise of stock options	415			—			—			—			415
Excess tax benefits from share-based compensation	(369		)	—			—			—			(369		)
Employee withholding payments on share-based compensation	(1,379		)	—			—			—			(1,379		)
Cash (used in) provided by financing activities	(35,689		)	(32,313		)	5,865			—			(62,137		)
Effect of exchange rate on cash and cash equivalents	—			298			417			—			715
Increase (decrease) in cash and cash equivalents	6,617			607			(146		)	—			7,078
Cash and cash equivalents at beginning of period	146			4,048			9,400			—			13,594
Cash and cash equivalents at end of period	$	6,763		$	4,655		$	9,254		$	—		$	20,672