Tucson: Providence profitable after big losses in ’08

Providence profitable after big losses in ’08

By David Wichner 3/10/2010

ARIZONA DAILY STAR

Cost-cutting and increased en­rollments helped Tucson-based social-services provider Provi­dence Service Corp. turn around to a profit for the fourth quarter and all of 2009 after posting mil­lions of dollars in losses in 2008.

In an earnings release after the markets’ close Wednesday, Provi­dence reported fourth-quarter net income of $5.6 million, or 42 cents per share. That compares with a net loss of $22 million, or $1.74 per share, in the fourth quarter of 2008, which included a $28.9 mil­lion asset-impairment charge.

Fourth-quarter revenue was $215.6 million, up 21 percent from the same period in 2008.

For all of 2009, Providence re­ported net income of $21.1 million, or $1.60 per share, including a non-recurring tax benefit of $1.4 million. That compares with a net loss of $155.6 million, or $12.42 per share, in 2008, when the company posted a $169.9 million, non-cash asset-impairment charge against the value of previous acquisitions.

Revenue for the full year in­creased 16 percent to $801 million. In prepared remarks, Provi­dence Chairman and CEO Fletch­er McCusker attributed the turn­about to cost-cutting, including a salary freeze, and higher enroll­ments in the company’s social­services programs.

“We benefited from our cost­savings initiatives as well as in­creased Medicaid enrollment and an apparent shift toward home­based care,” said McCusker, who is scheduled to discuss the results with analysts on a conference call today.

Providence, which provides in­home counseling, non-emergency medical transportation and other social services, wrote down the value of its assets in 2008 as some of its government customers de­layed or sought to scale back con­tracts during the recession.

While state budgets remain “challenged,”Medicaid has contin­ued to grow because of federal stimulus efforts, new eligibility rules, reauthorization of the feder­al- state Children’s Health Insur­ance Program and federal court rul­ings restricting states from cutting Medicaid services, McCusker said.

Providence shares closed Wednesday at $14.59, up $1.03 or 7.6 percent, in trading on the Nas­daq Stock Market.

McCusker said the company should be well-positioned to capi­talize on health-care overhaul, noting that the current legislation would dramatically increase Med­icaid eligibility, adding about 12 million new enrollees.

The company kept its 2010 earnings forecast of revenue rang­ing between $850 million and $870 million, and earnings per share of $1.32 to $1.35.

Contact Assistant Business Editor David Wichner at dwichner@azstarnet.com or 573-4181.