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Res Care Inc (RSCR) SEC Filing 10-K Annual report for the fiscal year ending Sunday, December 31, 2006

Res Care Inc

CIK: 776325 Ticker: RSCR

EX-99.1
2
a5348405ex99_1.txt
EXHIBIT 99.1

                                                                    Exhibit 99.1

       ResCare Reports Fourth Quarter and Year-End 2006 Results

    LOUISVILLE, Ky.--(BUSINESS WIRE)--March 5, 2007--ResCare, Inc.
(NASDAQ: RSCR), the nation's leading provider of residential,
training, therapeutic, educational and support services for people
with disabilities and special needs, today announced results for the
fourth quarter and year ended December 31, 2006.

    Fourth Quarter 2006 Financial Highlights

    Revenues for the fourth quarter of 2006 increased 24% over the
prior year period to a record $337.1 million. Income from continuing
operations was $11.7 million, or $0.35 per diluted common share. The
fourth quarter effective income tax rate was 27.3%, reflecting a full
year impact of work opportunity tax credits, which were retroactively
extended by Congress in December. This favorable tax rate in the
fourth quarter resulted in a benefit of approximately $0.04 per
diluted common share. The fourth quarter also included pre-tax
share-based compensation of approximately $1.4 million, or $0.03 per
diluted common share.

    Adjusted income from continuing operations per diluted common
share increased 17% to $0.34 for the fourth quarter of 2006 from $0.29
for the fourth quarter of 2005. Adjusted income from continuing
operations per diluted common share excludes share-based compensation
expense for both periods and the loss on refinancing in 2005. Both
periods were also adjusted for normalized income tax rates of 35.8%
and 33.5% for 2006 and 2005, respectively. EBITDA for the fourth
quarter was $25.2 million versus $9.0 million in the prior year.
Adjusted EBITDA was $26.6 million versus $21.1 million in the prior
year, a 26% increase. Adjusted EBITDA margin was 7.9% versus 7.8% in
the prior year. Please see pages 5 and 6 of this release for a
reconciliation of GAAP measures to adjusted income from continuing
operations and adjusted EBITDA.

    The Company ceased providing community services in the District of
Columbia and New Mexico in the first quarter and fourth quarter of
2006, respectively. These withdrawals have been accounted for as
discontinued operations. Accordingly, the results of these operations
and the related exit costs, net of income taxes, have been classified
as discontinued operations for all periods presented.

    Net loss from discontinued operations for the fourth quarter of
2006 was $2.7 million, or $0.08 per diluted common share. The loss is
comprised of a pretax operational loss of $2.3 million, exit costs and
impairment charges of $1.7 million, offset by a tax benefit of $1.3
million. For the fourth quarter of 2005, net loss from discontinued
operations was $0.8 million, or $0.02 per diluted common share. This
loss was comprised of pretax operational loss of $1.2 million, offset
by a tax benefit of $0.4 million.

    Full Year 2006 Financial Highlights

    Revenues for 2006 increased 24% over the prior year period to a
record $1.3 billion. Income from continuing operations was $42.0
million, or $1.27 per diluted common share, which included share-based
compensation expense of $2.7 million, or $0.05 per diluted common
share.

    Adjusted income from continuing operations per diluted common
share, which excludes share-based compensation expense for both
periods and the loss on refinancing in 2005, increased 29% to $1.32
for 2006 from $1.02 in 2005. EBITDA for 2006 was $100.1 million versus
$68.1 million in 2005. Adjusted EBITDA was $102.8 million versus $80.2
million in the prior year, a 28% increase. Adjusted EBITDA margin for
2006 was 7.9% compared with 7.7% in the prior year.

    Net loss from discontinued operations for 2006 was $5.3 million,
or $0.16 per diluted common share. The loss is comprised of a pretax
operational loss of $4.3 million and exit costs and impairment charges
of $3.9 million, offset by a tax benefit of $2.9 million. For 2005,
net loss from discontinued operations was $3.6 million, or $0.11 per
diluted common share. This loss was comprised of a pretax operational
loss of $5.4 million, offset by a tax benefit of $1.8 million.

    Ralph Gronefeld, ResCare president and chief executive officer,
said, "2006 was an excellent year for ResCare. We are especially
pleased with the performance of our Community Services Group, which
had a revenue increase of 11% and an operating income increase of 16%.
We continue to execute on our acquisition strategy, primarily in the
home care field, and maintain our focus on improving the revenue
growth and profitability of our Employment Training Services segment.
We look forward to 2007 being another strong year for ResCare."

    2007 Guidance

    The Company confirmed its 2007 guidance for diluted earnings per
common share in the range of $1.24 to $1.28 on projected revenues of
approximately $1.43 billion. The revenue guidance represents an
increase of approximately 10% over 2006. Included in this guidance is
share-based compensation expense of approximately $0.13 per diluted
common share and expenses related to the consolidation of the
Company's headquarters in Louisville, Kentucky of $0.03 per diluted
common share.

    A listen-only simulcast and replay of ResCare's fourth quarter and
year-end 2006 conference call will be available on-line at
www.rescare.com and www.earnings.com on March 6, 2007, beginning at
9:00 a.m. Eastern Time.

    ResCare, founded in 1974 and based in Louisville, Kentucky,
provides services in 36 states, Washington, D.C., Puerto Rico and
Canada. ResCare's services include residential, therapeutic, job
training and educational supports to people with developmental or
other disabilities; education and training to young people in the Job
Corps program; one-stop employment and training services for people
experiencing barriers to employment; and supports to older people in
their homes. More information is available at www.rescare.com.

    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 ResCare's filings under the
federal securities laws, including its annual, periodic and current
reports, the Company identifies important factors that could cause its
actual results to differ materially from those anticipated in
forward-looking statements. Please refer to the discussion of those
factors in the Company's filed reports. Statements related to expected
financial results are as of this date only, and ResCare does not
assume any responsibility to update these statements.



                            RESCARE, INC.
                    Unaudited Financial Highlights
                (In thousands, except per share data)

                           Three Months Ended        Year Ended
                              December 31,          December 31,
                           ------------------- -----------------------
                             2006      2005       2006        2005
                           --------- --------- ----------- -----------
Income Statement Data:
Revenues                   $337,068  $270,886  $1,302,118  $1,046,556
Facility and program
 expenses (1)               300,088   240,843   1,161,275     932,862
                           --------- --------- ----------- -----------
    Facility and program
     contribution            36,980    30,043     140,843     113,694
Corporate general and
 administrative (1)          16,233    12,583      57,668      47,128
Loss on refinancing               -    11,914           -      11,914
                           --------- --------- ----------- -----------
  Operating income           20,747     5,546      83,175      54,652
Interest expense, net         4,624     3,704      17,792      17,394
                           --------- --------- ----------- -----------
  Income from continuing
   operations before
   income taxes              16,123     1,842      65,383      37,258
Income tax expense            4,409       439      23,374      12,480
                           --------- --------- ----------- -----------
  Income from continuing
   operations                11,714     1,403      42,009      24,778
Loss from discontinued
 operations, net of taxes    (2,724)     (807)     (5,313)     (3,556)
                           --------- --------- ----------- -----------

Net income                    8,990       596      36,696      21,222
Net income attributable to
 preferred shareholders       1,326        91       5,453       3,268
                           --------- --------- ----------- -----------
Net income attributable to
 common shareholders         $7,664      $505     $31,243     $17,954
                           ========= ========= =========== ===========

Basic earnings per common
 share:
  From continuing
   operations                 $0.36     $0.04       $1.30       $0.79
  From discontinued
   operations                 (0.08)    (0.02)      (0.17)      (0.11)
                           --------- --------- ----------- -----------
    Basic earnings per
     common share             $0.28     $0.02       $1.13       $0.68
                           ========= ========= =========== ===========

Diluted earnings per
 common share:
  From continuing
   operations                 $0.35     $0.04       $1.27       $0.77
  From discontinued
   operations                 (0.08)    (0.02)      (0.16)      (0.11)
                           --------- --------- ----------- -----------
    Diluted earnings per
     common share             $0.27     $0.02       $1.11       $0.66
                           ========= ========= =========== ===========

Weighted average number of
 common shares:
  Basic                      27,786    26,688      27,558      26,424
  Diluted                    28,149    27,328      28,171      27,087

EBITDA (2)                  $25,199    $8,995    $100,089     $68,112
Adjusted EBITDA (2)         $26,576   $21,050    $102,836     $80,167
--------------------------

(1) We recorded share-based compensation expense of $1.4 million and
 $2.7 million for the three months and year ended December 31, 2006,
 respectively. Of the $1.4 million for the three months ended December
 31, 2006, we included $1.0 million in facility and program expenses
 and $0.4 million in corporate general and administrative expenses. Of
 the $2.7 million for the year ended December 31, 2006, we included
 $1.0 million in facility and program expenses and $1.7 million in
 corporate general and administrative expenses.

(2) Adjusted EBITDA is defined as EBITDA before the loss on
 refinancing and share-based compensation. EBITDA is defined as income
 from continuing operations before depreciation and amortization, net
 interest expense and income taxes. Adjusted EBITDA and 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 Adjusted EBITDA and EBITDA are
 significant components in understanding and assessing financial
 performance. Management routinely calculates and communicates
 Adjusted EBITDA and EBITDA 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. A
 reconciliation of income from continuing operations to Adjusted
 EBITDA and EBITDA is included herein.





                            RESCARE, INC.
              Unaudited Financial Highlights (Continued)
                (In thousands, except per share data)

                               Three Months Ended      Year Ended
                                  December 31,        December 31,
                               ------------------- -------------------
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------
Reconciliation of Income from
 Continuing Operations to
 Adjusted Income from
 Continuing Operations:
Income from continuing
 operations before income
 taxes                          $16,123    $1,842   $65,383   $37,258
Share-based compensation          1,377       141     2,747       141
Loss on refinancing                   -    11,914         -    11,914
                               --------- --------- --------- ---------
Adjusted income from
 continuing operations before
 income taxes                    17,500    13,897    68,130    49,313
Adjusted provision for income
 taxes (a)                        6,256     4,655    24,356    16,520
                               --------- --------- --------- ---------
Adjusted income from
 continuing operations          $11,244    $9,242   $43,774   $32,793
                               ========= ========= ========= =========

Adjusted income to preferred
 shareholders                    $1,660    $1,411     6,505    $5,049
                               ========= ========= ========= =========

Adjusted income to common
 shareholders                    $9,584    $7,831   $37,269   $27,744
                               ========= ========= ========= =========

Income from continuing
 operations per diluted common
 share                            $0.35     $0.04     $1.27     $0.77

Adjusted income from
 continuing operations per
 diluted common share (b)         $0.34     $0.29     $1.32     $1.02

Diluted common shares used in
 computing per share amounts     28,149    27,328    28,171    27,087

(a) Normalized tax rate of 35.8% and 33.5% for the fourth quarter and
 full year of 2006 and 2005, respectively, reflecting the full-year
 impact of work opportunity tax credits.

(b) ResCare believes its calculation of adjusted income from
 continuing operations per diluted common share provides a better
 measure of the Company's ongoing performance and provides better
 comparability of the periods presented because it excludes items not
 related to the Company's core business operations, as well as items
 that did not impact 2005. Adjusted income from continuing operations
 per diluted common share should not be considered as a measure of
 financial performance under accounting principles generally accepted
 in the United States of America, and the items excluded from it are
 significant components in understanding and assessing financial
 performance. Because adjusted income from continuing operations per
 diluted common share is not a measurement determined in accordance
 with accounting principles generally accepted in the United States
 and is thus susceptible to varying calculations, it may not be
 comparable as presented to other similarly titled measures of other
 companies.





                            RESCARE, INC.
              Unaudited Financial Highlights (continued)
                            (In thousands)

                               Three Months Ended      Year Ended
                                  December 31,        December 31,
                               ------------------- -------------------
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------
Reconciliation of Income from
 Continuing Operations to
 EBITDA and Adjusted EBITDA:
Income from continuing
 operations                     $11,714    $1,403   $42,009   $24,778
Add: Interest, net                4,624     3,704    17,792    17,394
     Depreciation and
      amortization                4,452     3,449    16,914    13,460
     Income tax expense           4,409       439    23,374    12,480
                               --------- --------- --------- ---------
EBITDA                           25,199     8,995   100,089    68,112
Share-based compensation          1,377       141     2,747       141
Loss on refinancing                   -    11,914         -    11,914
                               --------- --------- --------- ---------
Adjusted EBITDA                 $26,576   $21,050  $102,836   $80,167
                               ========= ========= ========= =========

Adjusted EBITDA margin
(as percentage of revenue)          7.9%      7.8%      7.9%      7.7%

                                                   Dec. 31,  Dec. 31,
                                                     2006      2005
                                                   --------- ---------
Balance Sheet Data:
ASSETS
Cash and cash equivalents                            $5,541    $9,894
Short-term investments                                    -    27,650
Accounts receivable, net                            197,711   160,821
Other current assets                                 33,039    23,362
                                                   --------- ---------
    Total current assets                            236,291   221,727
Property and equipment, net                          75,606    74,175
Goodwill                                            375,494   281,016
Other assets                                         38,665    24,111
                                                   --------- ---------
                                                   $726,056  $601,029
                                                   ========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                                $126,371  $108,414
Other long-term liabilities                          42,319    38,033
Long-term debt                                      205,889   152,584
Shareholders' equity                                351,477   301,998
                                                   --------- ---------
                                                   $726,056  $601,029
                                                   ========= =========





                            RESCARE, INC.
              Unaudited Financial Highlights (continued)
                            (In thousands)

                                                       Year Ended
                                                      December 31,
                                                   -------------------
                                                     2006      2005
                                                   --------- ---------
Cash Flow Data:
Net income                                          $36,696   $21,222
Adjustments to reconcile net income to cash
 provided by operating activities:
    Depreciation and amortization                    17,134    13,865
    Amortization of discount and deferred charges     1,004     1,228
    Impairment charges                                1,499         -
    Loss on sale of assets                              139       377
    Deferred income taxes, net                        3,800     2,266
    Tax benefit from exercise of stock options            -     3,376
    Excess tax benefits from share-based
     compensation                                    (3,122)        -
    Provision for losses on accounts receivable       5,836     4,789
    Share-based compensation                          2,747       141
    Loss on refinancing                                   -    11,914
    Changes in operating assets and liabilities     (29,493)  (14,624)
                                                   --------- ---------
      Cash provided by operating activities          36,240    44,554
                                                   --------- ---------
Cash flows from investing activities:
  Net redemptions of short-term investments          27,650    25,585
  Purchases of property and equipment               (17,258)  (14,175)
  Proceeds from sale of assets                          680        64
  Acquisitions of businesses                       (113,456)  (36,959)
                                                   --------- ---------
      Cash used in investing activities            (102,384)  (25,485)
                                                   --------- ---------
Cash flows from financing activities:
  Long-term debt repayments                          (3,881) (192,101)
  Borrowings of long-term debt                       40,000   162,223
  Short-term borrowings - three months or less,
   net                                               15,000         -
  Proceeds from sale and leaseback transactions       2,651         -
  Debt issuance costs                                  (535)   (4,131)
  Excess tax benefits from share-based
   compensation                                       3,122         -
  Proceeds received from exercise of stock options    6,906     6,504
  Payments on obligations under capital leases       (1,472)     (989)
  Tender premium costs                                    -    (9,085)
                                                   --------- ---------
      Cash provided by (used in) financing
       activities                                    61,791   (37,579)
                                                   --------- ---------
  Decrease in cash and cash equivalents             $(4,353) $(18,510)
                                                   ========= =========

    CONTACT: ResCare, Inc.
             Ross Davison, 502-394-2123
             Treasurer - Investor Relations Officer



The following information was filed by Res Care Inc (RSCR) on Tuesday, March 6, 2007 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Ticker: RSCR
CIK: 776325
Form Type: 10-K Annual Report
Accession Number: 0000950152-07-001893
Submitted to the SEC: Wed Mar 07 2007 5:03:19 PM EST
Accepted by the SEC: Wed Mar 07 2007
Period: Sunday, December 31, 2006
Industry: Nursing And Personal Care Facilities

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