-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WUt0DAZKbZJpFBidDyoSgE4n8NgEeCzMICVPGXAso+9VH2xd6lBXbl45BWRFzzer HxByjxpIUD2/XG2ffqJ4BA== 0001157523-04-007413.txt : 20040805 0001157523-04-007413.hdr.sgml : 20040805 20040805071944 ACCESSION NUMBER: 0001157523-04-007413 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040804 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20040805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RES CARE INC /KY/ CENTRAL INDEX KEY: 0000776325 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 610875371 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20372 FILM NUMBER: 04953115 BUSINESS ADDRESS: STREET 1: 10140 LINN STATION RD CITY: LOUISVILLE STATE: KY ZIP: 40223 BUSINESS PHONE: 5023942100 MAIL ADDRESS: STREET 1: 10140 LINN STATION RD CITY: LOUISVILLE STATE: KY ZIP: 40223 8-K 1 a4696088.txt RESCARE 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 4, 2004 RES-CARE, INC. (Exact Name of Registrant as specified in Charter) Kentucky 0-20372 61-0875371 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 10140 Linn Station Road, Louisville, Kentucky 40223 (Address of principal executive offices) (Zip code) (502) 394-2100 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report.) INFORMATION TO BE INCLUDED IN THE REPORT Items 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 are not applicable and are omitted from this report. Item 12. Results of Operations and Financial Condition On August 4, 2004, Res-Care, Inc. issued a press release to announce its 2004 second quarter and six months results. A copy of the press release is included as Exhibit 99.1 to this report. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RES-CARE, INC. Date: August 4, 2004 By: /s/ Ronald G. Geary --------------------------- Ronald G. Geary Chairman, CEO and President EXHIBIT INDEX Exhibit Number Description of Exhibits - ------- ----------------------- 99.1 Copy of press release issued by the Company on August 4, 2004. EX-99.1 2 a4696088ex991.txt PRESS RELEASE EXHIBIT 99.1 ResCare Reports Strong Second Quarter Operating Results; Company Affirms Earlier Guidance LOUISVILLE, Ky.--(BUSINESS WIRE)--Aug. 4, 2004--ResCare (NASDAQ/NM:RSCR), the nation's leading provider of services to persons with developmental and other disabilities and people with special needs, today announced results for the second quarter and six months ended June 30, 2004. Ronald G. Geary, ResCare chairman, president and chief executive officer, said, "Our strong performance in the second quarter, despite a difficult reimbursement environment, is particularly gratifying. Challenged by a worsening economy for the past two years, we became even more efficient. Now, as the economy is beginning to improve, we believe we are streamlined and well positioned to take full advantage of the upswing. With our tested and proven business model and the funding received from the recent Onex investment, we have a high level of confidence in our ability to increase our momentum and shareholder value." Revenues for the second quarter of 2004 increased 5% over the prior year period to a record $250.8 million. Net income was $4.5 million, an increase of 7% over the prior year. Net income included $791,000 of expenses related to payments required under the provisions of the director stock option plans as a result of the Onex investment. In addition, the second quarter includes the impact of an increase in the Company's effective tax rate to 39%, or $223,000, which is a result of the absence of the Work Opportunity Tax Credit compared with the prior year, since renewal legislation has not been passed. Excluding the Onex-related expenses, the tax rate change, and the accounting for the Beneficial Conversion Feature discussed below, the Company's diluted earnings per share would have been $0.19 for the second quarter, an increase of 12% over the prior year. During the second quarter, ResCare's net income attributable to common shareholders was affected by a non-cash reduction of $14.8 million as the result of the accounting for its sale of convertible preferred shares to affiliates of Onex Corporation. This non-cash item, known as a "Beneficial Conversion Feature," is a technical application of the Emerging Issues Task Force's (EITF) Issue 98-5 (1) and does not affect net income, cash flows or total shareholders' equity. The Beneficial Conversion Feature was determined by multiplying the number of common shares issuable upon conversion of the preferred shares by the difference between the market price of the common stock on the date of closing and the contractually agreed upon conversion price. Including the accounting for the Beneficial Conversion Feature, the Onex-related expenses and the tax rate change discussed above, net loss attributable to common shareholders for the quarter was $10.3 million, or $0.40 per share. "I want to emphasize that the accounting for the Beneficial Conversion Feature, recorded in accordance with EITF 98-5, has absolutely no impact on our net income, cash flows or total shareholders' equity in this quarter or any future quarter," Mr. Geary stated. The Company confirmed its earlier earnings guidance for 2004, which excludes the accounting for the Beneficial Conversion Feature associated with the Onex transaction. This guidance does not reflect any anticipated accretive effect from acquisitions in 2004 made possible by the Onex funding. In closing, Mr. Geary said, "This has been an eventful first half of the year. The Onex investment has further improved our prospects. In addition, I am pleased to report that our balance sheet is exceptionally strong. Days sales outstanding are at 45, the lowest in the history of the Company. Our ratios are excellent, and we are in a solid cash position and on target to meet or exceed our goal of $39 million in cash flow from operations for the full year. We will continue to focus on existing operations while adding value through selective acquisitions. We are excited about the second half of the year, and 2005 has the potential to be even better." A listen-only simulcast and replay of ResCare's second quarter conference call will be available online at www.rescare.com and www.fulldisclosure.com on August 5, 2004, beginning at 9:00 a.m. Eastern Time. (1) Issue 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, of the Emerging Issues Task Force of the Financial Accounting Standards Board. From time to time, ResCare makes forward-looking statements in its public disclosures, including statements relating to expected financial results, revenues that might be expected from new or acquired programs and facilities, its development and acquisition activities, reimbursement under federal and state programs, financing plans, compliance with debt covenants and other risk factors, and various trends favoring downsizing, de-institutionalization and privatization of government programs. In our filings under the federal securities laws, including our annual, periodic and current reports, we identify important factors that could cause our actual results to differ materially from those anticipated in forward-looking statements. Please refer to the discussion of those factors in our filed reports. RESCARE, INC. Unaudited Financial Highlights (In thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Income Statement Data: Revenues $250,844 $238,293 $496,026 $476,837 Facility and program expenses 225,133 214,225 445,595 428,303 --------- --------- --------- --------- Facility and program contribution 25,711 24,068 50,431 48,534 Operating expenses: Corporate general and administrative 9,526 8,573 19,233 18,480 Depreciation and amortization 3,054 3,030 6,067 6,035 Other expense (income), net 749 (264) 750 (235) --------- --------- --------- --------- Total operating expenses 13,329 11,339 26,050 24,280 --------- --------- --------- --------- Operating income 12,382 12,729 24,381 24,254 Interest expense, net 4,956 6,120 10,041 12,257 --------- --------- --------- --------- Income before income taxes 7,426 6,609 14,340 11,997 Income tax expense 2,896 2,379 5,385 4,319 --------- --------- --------- --------- Net income 4,530 4,230 8,955 7,678 Non-cash beneficial conversion feature (1) (14,784) -- (14,784) -- --------- --------- --------- --------- Net (loss) income attributable to common shareholders $(10,254) $4,230 $(5,829) $7,678 ========= ========= ========= ========= Basic and diluted earnings (loss) per common share $(0.40) $0.17 $(0.23) $0.31 ========= ========= ========= ========= Weighted average number of common shares: Basic 25,323 24,421 25,150 24,420 Diluted 25,323 24,606 25,150 24,489 EBITDA (2) $15,436 $15,759 $30,448 $30,289 EBITDAR (2) 24,553 24,540 48,801 47,652 (1) The non-cash beneficial conversion feature of $14.8 million reflected in the quarter ended June 30, 2004, relates to the closing of the sale of convertible preferred shares at a time when the market price of the common shares exceeded the contractually agreed upon conversion price per common share. The beneficial conversion feature decreases the net income attributable to common shareholders used in the calculation of basic and diluted net earnings (loss) per common share. (2) EBITDA is defined as income before depreciation and amortization, net interest expense and income taxes. EBITDAR is defined as EBITDA before facility rent. EBITDA and EBITDAR should not be considered as measures of financial performance under accounting principles generally accepted in the United States of America and the items excluded from EBITDA and EBITDAR are significant components in understanding and assessing financial performance. Management routinely calculates and communicates EBITDA and EBITDAR and believes that they are useful to investors because they are commonly used as analytical indicators within our industry to evaluate performance, measure leverage capacity and debt service ability, and to estimate current or prospective enterprise value. EBITDA is also used in measurements under certain covenants contained in our credit agreement. The table below sets forth a reconciliation of net income to EBITDA and EBITDAR. RESCARE, INC. Unaudited Financial Highlights (Continued) (In thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Net income as reported $4,530 $4,230 $8,955 $7,678 Add: Interest, net 4,956 6,120 10,041 12,257 Depreciation and amortization 3,054 3,030 6,067 6,035 Income tax expense 2,896 2,379 5,385 4,319 --------- --------- --------- --------- EBITDA 15,436 15,759 30,448 30,289 Add: Facility rent 9,117 8,781 18,353 17,363 --------- --------- --------- --------- EBITDAR $24,553 $24,540 $48,801 $47,652 ========= ========= ========= ========= The Company uses earnings before special items and EBITDA before special items as key performance measures of results of operations for purposes of evaluating performance internally. These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measures provides additional information to facilitate the comparison of past and present operations, excluding items that the Company does not believe are indicative of our ongoing operations. The following table sets forth a reconciliation of these non-GAAP amounts to those reported. Three Months Ended June 30, 2004 Net (loss) income attributable to common EBITDA shareholders EPS --------- --------- --------- As reported $15,436 $(10,254) $(0.40) Special items: Non-cash beneficial conversion feature -- 14,784 0.57 Onex-related expenses 791 483 0.02 Effect of higher income tax rate -- 223 -- --------- --------- --------- Amount before special items $16,227 $5,236 $0.19 ========= ========= ========= RESCARE, INC. Unaudited Financial Highlights (Continued) (In thousands, except per share data) June 30, March 31, Dec. 31, 2004 2004 2003 --------- --------- --------- Balance Sheet Data: (Audited) ASSETS Cash and cash equivalents $95,421 $37,749 $23,440 Accounts receivable, net 125,133 136,479 129,199 Other current assets 28,172 27,811 28,732 --------- --------- --------- Total current assets 248,726 202,039 181,371 Property and equipment, net 68,006 67,847 68,422 Goodwill 229,555 230,831 230,306 Other assets 20,909 22,698 22,927 --------- --------- --------- $567,196 $523,415 $503,026 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $129,408 $138,608 $110,073 Other long-term liabilities 16,645 15,855 16,086 Long-term debt 169,021 170,144 184,576 Shareholders' equity 252,122 198,808 192,291 --------- --------- --------- $567,196 $523,415 $503,026 ========= ========= ========= Six Months Ended June 30, -------------------- 2004 2003 --------- --------- Cash Flow Data: Net income $8,955 $7,678 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 6,067 6,035 Amortization of discount on notes 582 214 Deferred income taxes, net 359 (83) Provision for losses on accounts receivable 2,592 3,729 Tax benefit from exercise of stock options 726 -- Loss from sale of assets -- 37 Gain on extinguishment of debt -- (219) Changes in operating assets and liabilities 12,310 4,066 --------- --------- Cash provided by operating activities 31,591 21,457 --------- --------- Cash flows from investing activities: Purchases of property and equipment (5,217) (8,394) Acquisitions of businesses (955) (9,000) Proceeds from sales of assets 32 234 --------- --------- Cash used in investing activities (6,140) (17,160) --------- --------- Cash flows from financing activities: Net repayments of long-term debt (3,620) (2,807) Proceeds received from exercise of stock options 3,541 26 Net proceeds from issuance of preferred stock 46,609 -- --------- --------- Cash provided by (used in) financing activities 46,530 (2,781) --------- --------- Increase in cash and cash equivalents $71,981 $1,516 ========= ========= CONTACT: ResCare Nel Taylor, 502-394-2100 www.rescare.com -----END PRIVACY-ENHANCED MESSAGE-----