exh_991.htm

RESCARE SECOND QUARTER 2013 RESULTS

Second Quarter 2013 Financial Results

Revenues for the second quarter of 2013 were $396.2 million, which was a 0.9% decrease from prior year period revenues of $399.9 million. Contract losses and modifications in Workforce Services and Youth Services segments were partially offset by increased revenues from acquisitions in our Residential and HomeCare segments since the second quarter of 2012.

Net income was $10.2 million for the second quarter of 2013, compared with $4.8 million in the same period of 2012. The increase is primarily due to lower interest expense and a $7.1 million pre-tax charge for extinguishment of debt in the second quarter of 2012, related to the April 5, 2012 refinancing of our credit facility. Adjusted EBITDA for the second quarter of 2013 was $33.2 million versus $32.9 million in the prior year quarter.

RES-CARE, INC.

Unaudited Financial Highlights

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Income Statement Data:
Revenues	$	396,233		$	399,902		$	785,687		$	797,244
Cost of services		295,168			301,143			589,544			600,423
Gross profit		101,065			98,759			196,143			196,821
Operating expenses:
Operational general and administrative		61,049			58,732			119,819			119,081
Corporate general and administrative		16,244			16,464			31,354			34,131
Total operating expenses		77,293			75,196			151,173			153,212

Operating income		23,772			23,563			44,970			43,609

Interest expense, net		7,665			8,389			16,202			18,832
Loss on extinguishment of debt		—			7,129			—			7,129
Income before income taxes		16,107			8,045			28,768			17,648
Income tax expense		5,868			3,246			7,233			7,114
Net income		10,239			4,799			21,535			10,534
Net loss – noncontrolling interest		(40	)		(31	)		(76	)		(61	)
Net income – Res-Care, Inc.	$	10,279		$	4,830		$	21,611		$	10,595

Other comprehensive income:
Foreign currency translation adjustments		(223	)		(132	)		(414	)		29
Comprehensive income attributable to Res-Care, Inc.	$	10,056		$	4,698		$	21,197		$	10,624
Total comprehensive income	$	10,016		$	4,667		$	21,121		$	10,563

-MORE-

Page 2

RES-CARE, INC.

Unaudited Financial Highlights (continued)

(In thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net income to EBITDA and Adjusted EBITDA:
Net income	$	10,239	$	4,799	$	21,535	$	10,534
Add: Interest, net		7,665		8,389		16,202		18,832
Loss on extinguishment of debt		—		7,129		—		7,129
Depreciation and amortization		8,531		8,202		16,726		17,009
Income tax expense		5,868		3,246		7,233		7,114
EBITDA (1)		32,303		31,765		61,696		60,618
Add: Share-based compensation		848		851		1,552		2,025
Acquisition costs		—		264		—		264
Adjusted EBITDA (1)	$	33,151	$	32,880	$	63,248	$	62,907

	June 30, 2013		December 31, 2012
Balance Sheet Data:
ASSETS

Cash and cash equivalents	$	61,076	$	50,134
Accounts receivable, net		230,439		228,377
Other current assets		44,467		39,705
Total current assets		335,982		318,216
Property and equipment, net		98,202		97,030
Goodwill		289,686		288,265
Other intangible assets, net		319,287		321,293
Other assets		23,972		27,154
	$	1,067,129	$	1,051,958

LIABILITIES AND SHAREHOLDER’S EQUITY

Current liabilities	$	166,775	$	175,174
Other long-term liabilities		165,105		162,722
Long-term debt		368,566		370,052
Shareholder’s equity		366,683		344,010
	$	1,067,129	$	1,051,958

(1)

EBITDA is defined as income from continuing operations before depreciation and amortization, net interest expense, loss on extinguishment of debt and income taxes. Adjusted EBITDA is defined as EBITDA before share-based compensation and acquisition costs. EBITDA and Adjusted EBITDA should not be considered as measures of financial performance under accounting principles generally accepted in the United States of America. The items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing financial performance. Management routinely calculates and presents EBITDA and Adjusted EBITDA because it believes that EBITDA and Adjusted EBITDA are useful to investors and are used as analytical indicators within the 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 the Company’s credit agreement.

-MORE-

Page 3

RES-CARE, INC.

Unaudited Financial Highlights (continued)

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Cash Flow Data:
Net income	$	10,239		$	4,799		$	21,535		$	10,534
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization		8,531			8,202			16,726			17,009
Amortization of discount and deferred debt issuance costs		872			592			1,742			1,267
Share-based compensation		848			851			1,552			2,025
Deferred income taxes, net		383			(476	)		2,347			624
Provision for losses on accounts receivable		1,525			1,336			3,343			2,885
Loss on extinguishment of debt, net of original issue discount paid		—			6,400			—			6,400
Loss on sale of assets		(2	)		60			100			95
Changes in operating assets and liabilities		2,500			3,802			(13,279	)		(16,320	)
Cash provided by (used in) operating activities		24,896			25,566			34,066			24,519

Cash flows from investing activities:
Proceeds from sale of assets		103			33			184			43
Purchases of property and equipment		(4,109	)		(3,154	)		(8,212	)		(7,415	)
Acquisitions of businesses, net of cash acquired		(2,227	)		(4,112	)		(2,234	)		(8,662	)
Cash used in investing activities		(6,233	)		(7,233	)		(10,262	)		(16,034	)

Cash flows from financing activities:
Debt repayments, net		(4,281	)		5,745			(12,779	)		3,131
Debt issuance costs		6			(3,978	)		(2	)		(3,978	)
Cash (used in) provided by financing activities		(4,275	)		1,767			(12,781	)		(847	)
Effect of exchange rate on cash and cash equivalents		(15	)		(55	)		(81	)		9
Increase in cash and cash equivalents	$	14,373		$	20,045		$	10,942		$	7,647

-MORE-

Page 4

RES-CARE, INC.

Unaudited Financial Highlights (continued)

(Dollars in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Segment Data:
Revenues:
Residential Services	$	207,580		$	202,943		$	412,081		$	403,741
ResCare HomeCare		89,991			84,129			178,059			168,148
Youth Services		42,494			45,042			84,374			91,599
Workforce Services		39,596			51,487			79,414			100,316
Pharmacy Services		16,572			16,301			31,759			33,440
Consolidated	$	396,233		$	399,902		$	785,687		$	797,244

Operating Income(1):
Residential Services	$	24,493		$	27,436		$	48,891		$	54,005
ResCare HomeCare		6,064			5,432			10,596			10,230
Youth Services		2,810			3,604			5,871			6,865
Workforce Services		4,068			2,355			7,680			4,303
Pharmacy Services		2,577			1,167			3,604			2,312
Corporate		(16,240	)		(16,431	)		(31,672	)		(34,106	)
Consolidated	$	23,772		$	23,563		$	44,970		$	43,609

Operating Margin(1):
Residential Services		11.8	%		13.5	%		11.9	%		13.4	%
ResCare HomeCare		6.7	%		6.5	%		6.0	%		6.1	%
Youth Services		6.6	%		8.0	%		7.0	%		7.5	%
Workforce Services		10.3	%		4.6	%		9.7	%		4.3	%
Pharmacy Services		15.6	%		7.2	%		11.3	%		6.9	%
Corporate		(4.1	%)		(4.1	%)		(4.0	%)		(4.3	%)
Consolidated		6.0	%		5.9	%		5.7	%		5.5	%

(1)	Other (expense) income, which is included with corporate general and administrative expenses per the Income Statement Data on page 1, has been allocated for purposes of segment reporting.

-END-