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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): February 24, 2000
RES-CARE, INC.
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(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.)
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INFORMATION TO BE INCLUDED IN THE REPORT
Items 1, 2, 3, 4, 6, and 8 are not applicable and are omitted from this report.
Item 5. Other Events
On February 24, 2000, Res-Care, Inc. issued a press release to announce
its fourth quarter and 1999 results. The release also reported that the Company
had received a proposal to acquire all of the outstanding Res-Care shares from a
management-led buyout group, which proposal was subsequently withdrawn. A copy
of the press release is included as Exhibit 99 to this report.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits.
The following exhibit is filed with this Report on Form 8-K:
REGULATION S-K
EXHIBIT NUMBERS EXHIBIT
99 Press Release dated February 24, 2000
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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: February 28, 2000 By /s/ Ronald G. Geary
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Ronald G. Geary
Chairman, CEO and President
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Contact: ResCare Communications Department
502-394-2100
[email protected]
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RESCARE REPORTS FOURTH QUARTER AND 1999 RESULTS
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REPORTS DISCUSSION OF POSSIBLE MANAGEMENT-LED BUYOUT
LOUISVILLE, Ky. (February 24, 2000) -- Res-Care, Inc. (Nasdaq/NM: RSCR), the
nation's leading provider of services to persons with mental retardation and
development disabilities (MR/DD) and at-risk and troubled youth, announced
results for the fourth quarter and year ended December 31, 1999. Revenues for
the fourth quarter rose 8% to $212.1 million from $195.7 million for the fourth
quarter of 1998. Net income, before the additional provision for doubtful
accounts discussed below, decreased 8% to $6.2 million, or $0.24 per diluted
share, from $6.8 million, or $0.25 per diluted share.
For the year, revenues rose 18% to $831.5 million from $706.2 million
for 1998. In June 1999, ResCare completed the acquisition of PeopleServe and
recorded a one-time charge of approximately $20 million in the second quarter of
1999 related to this transaction. Income from continuing operations, before the
merger-related charge and the additional provision for doubtful accounts,
increased 22% to $28 million, or $1.04 per diluted share, from $22.9 million, or
$0.90 per diluted share, for 1998.
Commenting on the 1999 results, Ronald G. Geary, chairman, president
and chief executive officer said, "Our fourth quarter was affected by two
previously announced events that did not occur in the quarter as planned. Our
acquisition of the business operations of Social Vocational Services, Inc. (SVS)
has been delayed by regulatory procedures. Construction delays at the Villalba
Juvenile Treatment Facility in Puerto Rico caused the opening of this facility
to be delayed until January 2000.
"Fourth quarter results were also affected by our decision to increase
our reserve for doubtful accounts by approximately $8 million ($0.19 per share
after tax). In the fourth quarter of 1999 and in early 2000, management has had
discussions with various state agencies and has obtained clarification regarding
certain aspects of state billing procedures. As a result of these discussions
and the additional information obtained, management revised its previous
estimates regarding the collectibility of certain older accounts. Management
believes that added personnel, in addition to new processes and procedures, will
significantly reduce the level of older account balances in the future. The
fourth quarter was further negatively impacted by normal seasonal issues as well
as incremental claims incurred as the Company transitioned from its self-insured
employee medical plan to a new plan, effective January 1, 2000, with a fixed
level of self-insurance exposure. This resulted in an incremental charge of
approximately $2.5 million ($0.06 per share after tax) to our expense for
employee health care claims, which is reflected in facility and program expenses
in the accompanying income statement data. As a result of the new plan,
management expects quarterly medical expenses in 2000 to return to pre-fourth
quarter levels.
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RESCARE REPORTS FOURTH QUARTER EARNINGS
FEBRUARY 24, 2000
"Historically, our growth was primarily driven by our acquisition program.
Currently, initiatives at both state and federal levels are creating unique
opportunities to drive growth internally by expanding our existing operations
and extending our services into new areas. Particularly significant are
initiatives by states to provide funding to address the large waiting lists of
individuals seeking community-based MR/DD services. Also, the federal government
recently announced an effort to accelerate states' compliance with a recent U.S.
Supreme Court decision regarding the rights of individuals now living in
institutions to receive community-based services. While we will continue to
evaluate acquisition situations as they arise, current conditions in the capital
markets do not encourage us to actively pursue them. As a result, our focus for
2000 is to put in place the systems and structures that will aid our regions in
capitalizing on these emerging initiatives.
"With this emphasis on internal growth, we expect year 2000 revenue
will range from approximately $950 million to $990 million and net income per
diluted share from $ 1.25 to $1.30. This growth is lower than in recent years
when acquisitions fueled higher rates. The earnings estimates do not include the
effect of any expenses in 2000 related to the possible transaction described
below if no transaction is consummated."
The Company also announced that it received a proposal, which was
subsequently withdrawn, for a management-led group to acquire all the Company's
outstanding shares of common stock through a merger at a price of $18 per share
in cash. The proposal was made by a group, which included members of the
Company's management and three equity investment funds. Prior to execution of
the definitive agreements for the transaction, the group withdrew its proposal
when the lead equity investment fund decided not to proceed with the transaction
because of its concern about the availability of debt financing at acceptable
rates in light of current conditions in the credit markets. Representatives of
management and the two remaining investment funds have indicated to the Company
their desire to continue negotiations regarding a possible transaction. A
special committee of the Board of Directors was formed to negotiate and evaluate
any possible transaction. The special committee is being advised by J.C.
Bradford & Co. There can be no assurance that discussions regarding a possible
transaction will continue, that any new offer will be made to the Company, or
that any transaction will ultimately be consummated. The Company does not expect
to update the status of any discussions until a definitive agreement is executed
or it becomes apparent that no transaction will occur.
ResCare, through its Division for Persons with Disabilities, serves
approximately 17,000 consumers in 28 states, Washington, D.C. and Canada; and,
through its Division for Youth Services, serves approximately 9,200 at-risk and
special needs youth in 17 states, Washington, D.C. and Puerto Rico. Now in its
26th year, ResCare employs approximately 29,000 people. More information about
ResCare is available on the Company's Web site at http://www.rescare.com.
The Company from time to time makes forward-looking statements in its
public disclosures, including statements relating to the Company's expected
financial results, revenues that might be expected from new or acquired programs
and facilities, other statements regarding development and acquisition
activities, statements regarding reimbursement under federal and state programs
and statements regarding various trends favoring downsizing,
de-institutionalization and privatization of government programs. In the
Company's filings under the federal securities laws, including its annual,
periodic and current reports, the Company identifies important factors that
could cause the Company's results to differ materially from those contained in
such forward-looking statements. Reference is hereby made to such disclosures.
Financial Tables Attached
2
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RESCARE, INC.
FINANCIAL HIGHLIGHTS
(Unaudited)
(In thousands, except per share data)
The historical financial information that follows has been restated to
reflect the merger of Rescare and Peopleserve, including the merger-related
charge recorded in the second quarter of 1999:
INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 December 31
------------------------------------ ----------------------------------
1999 1998 1999 1998
--------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net revenues $212,068 $195,741 $831,545 $706,249
Facility and program expenses 184,152 166,972 715,535 608,095
--------------- ----------------- ---------------- --------------
Facility and program contribution 27,916 28,769 116,010 98,154
Operating expenses (income):
Corporate general and administrative 5,913 7,325 27,726 27,590
Depreciation and amortization 5,287 5,577 21,107 18,561
Merger-related charge - - 20,498 -
Additional provision for doubtful accounts 8,000 - 8,000 -
Other income 82 40 40 (307)
--------------- ----------------- ---------------- --------------
Total operating expenses 19,282 12,942 77,371 45,844
--------------- ----------------- ---------------- --------------
Operating income 8,634 15,827 38,639 52,310
Interest, net 5,306 4,361 18,750 13,894
--------------- ----------------- ---------------- --------------
Income from continuing operations before
Income taxes 3,328 11,466 19,889 38,416
Income tax expense 1,745 4,698 10,153 15,484
--------------- ----------------- ---------------- --------------
Income from continuing operations 1,583 6,768 9,736 22,932
Gain from sale of unconsolidated affiliate, net of tax - - 534 -
Cumulative effect of accounting change, net of tax - - (3,932) -
--------------- ----------------- ---------------- --------------
Net income $1,583 $6,768 $6,338 $22,932
=============== ================= ================ ==============
Basic earnings per share from
Continuing operations $0.07 $0.28 $0.40 $0.96
Gain from sale of unconsolidated affiliate, net of tax - - 0.02 -
Cumulative effect of accounting change, net of tax - - (0.16) -
--------------- ----------------- ---------------- --------------
Basic earnings per share $0.07 $0.28 $0.26 $0.96
=============== ================= ================ ==============
Diluted earnings per share from
Continuing operations $0.06 $0.25 $0.39 $0.90
Gain from sale of unconsolidated affiliate, net of tax - - 0.02 -
Cumulative effect of accounting change, net of tax - - (0.16) -
--------------- ----------------- ---------------- --------------
Diluted earnings per share $0.06 $0.25 $0.25 $0.90
=============== ================= ================ ==============
Weighted average number of common shares:
Basic 24,251 24,017 24,184 23,898
Diluted 24,498 31,730 24,970 31,225
</TABLE>
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BALANCE SHEET DATA:
<TABLE>
<CAPTION>
December 31 December 31
1999 1998
------------------ ------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 7,057 $ 19,956
Accounts and notes receivable, net 141,807 132,707
Other current assets 21,692 14,664
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Total current assets 170,556 167,327
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Property and equipment, net 102,739 90,053
Excess of acquisition cost over net assets acquired, net 220,493 213,723
Other assets 29,343 33,819
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$523,131 $504,922
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $70,027 $91,841
Other long-term liabilities 4,681 6,812
Long-term debt 285,039 251,682
Shareholders' equity 163,384 154,587
------------------ ------------------
$523,131 $504,922
================== ==================
</TABLE>
EARNINGS PER SHARE DATA:
For the quarter and year ended December 31, 1999, the calculation of diluted
earnings per share excludes the shares issuable upon conversion and the income
effect of the convertible subordinated notes. The convertible subordinated notes
were considered antidilutive as a result of the merger-related charge recorded
in the second quarter and the additional provision for doubtful accounts
recorded in the fourth quarter. The following is the calculation of the diluted
earnings per share for the quarter and year ended December 31, 1999 assuming
conversion of the subordinated notes:
<TABLE>
<CAPTION>
Income from Diluted Shares
Continuing Operations Outstanding
----------------------------- ------------------------------
Quarter Year Quarter Year
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
As reported $1,583 $9,736 24,498 24,970
Net income effect of merger-related charge - 13,655 - -
Net income effect of additional provision
for doubtful accounts 4,640 4,640 - -
Interest expense, net of income tax effect,
on convertible subordinated notes 1,230 4,920 - -
Adjustment in diluted shares outstanding as
a result of the merger-related charge - - 6,666 6,666
-------------- ------------- --------------- -------------
$7,453 $32,951 31,164 31,636
============== ============= =============== =============
Diluted earnings per share, recalculated $0.24 $1.04
</TABLE>
The per share amounts for the fourth quarter charges discussed above
have been calculated using the weighted average number of common shares
excluding the shares issuable upon conversion of the convertible subordinated
notes.
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