Form 8-K Performant Financial For: Feb 19
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E-mailUNITED 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): February 19, 2016
Performant Financial Corporation
(Exact name of registrant as specified in its charter)
Delaware | 001-35628 | 20-0484934 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
333 North Canyons Parkway
Livermore, California 94551
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (925) 960-4800
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. Entry into a Material Definitive Agreement.
On February 19, 2016, Performant Business Services, Inc., which is a wholly-owned subsidiary of Performant Financial Corporation (the “Company”) and is the borrower under that certain Credit Agreement dated as March 19, 2012 with Madison Capital Funding LLC, as agent (the “Agent”) and the lenders party thereto from time to time (as amended, the “Credit Agreement”), entered into Amendment No. 4 to the Credit Agreement (the “Fourth Amendment”). The Company and certain other of its subsidiaries are guarantors of the obligations under the Credit Agreement.
Pursuant to the Fourth Amendment, the Company’s financial covenants were modified as follows:
• | The annual capital expenditure limitation of $12.5 million, which was in effect for the year ending December 31, 2016, has been revised under the Fourth Amendment to be $8 million for the years ending December 31, 2016 and December 31, 2017. |
• | The total debt to EBITDA ratio of 3.25 to1.0, which was in effect for the computation periods ending as of March 31, 2017 and June 30, 2017, has been revised under the Fourth Amendment to be 4.75 to 1.0 for those periods. |
• | The interest coverage ratio of 2.50 to 1.0, which was in effect for the computation period ending as of December 31, 2016, has been revised under the Fourth Amendment to be 2.0 to 1.0 for the computation period ending as of December 31, 2016 and 1.75 to 1.0 for the computation periods ending as March 31, 2017 and June 30, 2017. |
• | The fixed charge coverage ratio of 1.20 to1.0, which was in effect for the quarterly computation periods under the Credit Agreement ending as of March 31, 2017 through December 31, 2017, has been revised under the Fourth Amendment to apply only to the computation periods ending as September 30, 2017 and December 31, 2017. |
• | The required minimum adjusted cash balance of $30.0 million, which was in effect from March 31, 2016 through December 31, 2016, has been revised under the Fourth Amendment to be $10.0 million from March 31, 2016 through September 30, 2016. |
• | The minimum trailing twelve month EBITDA of $20.0 million, which was in effect from March 31, 2016 through December 31, 2016, has been revised under the Fourth Amendment by shortening such period to extend until June 30, 2016. |
Interest charged under the Credit Agreement as revised by the Fourth Amendment with respect to the Term A loan revolving loan advances is now charged either at Prime +5.75% or LIBOR + 6.75%, and interest with respect to the Term B loan is now charged either at Prime + 6.25% or LIBOR + 7.25%. In connection with the Fourth Amendment, the Company voluntarily prepaid $22.5 million under the Credit Agreement, which was applied ratably to the Term A loan and the Term B loan. In addition, the Company deposited $7.5 million into a deposit account which is subject to the exclusive control of the Agent. Pursuant to the Fourth Amendment, these funds will be remitted to the Agent for application to the term loans or other obligations, as applicable, under the Credit Agreement on the earlier to occur of (i) September 30, 2016 (or such later date not more than thirty (30) days thereafter as may be agreed by Agent in its sole discretion) and (ii) the occurrence and continuation of an event of default; however, all or a portion of these funds may also be returned the Company if the Agent and the requisite lenders under the Credit Agreement elect otherwise in their sole discretion.
The foregoing summary of the Fourth Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of such Fourth Amendment, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.
Item 2.02 | Results of Operations and Financial Condition. |
On February 25, 2016, Performant Financial Corporation issued a press release announcing financial results for its quarter and year ended December 31, 2015. The full text of the press release is furnished as Exhibit 99.1.
The information furnished in this Form 8-K, including the exhibit attached, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and it shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits |
10.1 | Amendment No. 4 to Credit Agreement, dated as of February 19, 2016, by and among Performant Business Services, Inc., the Lenders party hereto, and Madison Capital Funding LLC. | ||
99.1 | Press release issued by Performant Financial Corporation, dated February 25, 2016. | ||
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 hereunto duly authorized.
Dated: February 25, 2016
PERFORMANT FINANCIAL CORPORATION | ||
By: | /s/ Hakan Orvell | |
Hakan Orvell | ||
Chief Financial Officer | ||
Exhibit 10.1
AMENDMENT NO. 4 TO CREDIT AGREEMENT
This AMENDMENT NO. 4 TO CREDIT AGREEMENT ("Amendment") is dated as of February 19, 2016, and is entered into by and among PERFORMANT BUSINESS SERVICES, INC. (formerly known as DCS Business Services, Inc.), a Nevada corporation ("Borrower"), the Lenders (as defined in the Credit Agreement as hereafter defined) party hereto, and MADISON CAPITAL FUNDING LLC, as Agent for all Lenders.
W I T N E S S E T H:
WHEREAS, Borrower, Agent and the Lenders from time to time party thereto are parties to that certain Credit Agreement dated as of March 19, 2012 (as the same has been or may be from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"; capitalized terms not otherwise defined herein have the definitions provided therefor in the Credit Agreement, as amended hereby); and
WHEREAS, Borrower, Agent and Required Lenders have agreed to amend the Credit Agreement in certain respects, in each case subject to the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Credit Agreement and this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendments to the Credit Agreement. Subject to the satisfaction of the conditions set forth in Section 2 below, and in reliance on the representations and warranties set forth in Section 3 below, the Credit Agreement is hereby amended as follows:
(a) Section 1.1 of the Credit Agreement is amended by inserting new defined terms "Cash Reserve Account", "Cash Reserve Account Release Date", "Fourth Amendment Closing Date", "June 30, 2017 Compliance Date" and "Permitted DOE Addbacks" in their appropriate alphabetical order therein as follows:
Cash Reserve Account means the deposit account established in the name of Borrower at Wells Fargo Bank, National Association after February 1, 2016 (or such other deposit account as may be approved in writing by Agent following the Fourth Amendment Closing Date in its sole discretion as the Cash Reserve Account) for purposes of Section 6.11 of this Agreement.
Cash Reserve Account Release Date means the date upon which either (x) all funds in the Cash Reserve Account are received by Agent for application to the Term Loans in accordance with the terms of Section 6.11, or (y) Agent and Required Lenders consent to the release of all of the funds in the Cash Reserve Account to Borrower or another Loan Party pursuant to Section 6.11.
Fourth Amendment Closing Date means February 19, 2016.
June 2017 Compliance Date means the date (if any) upon which the Borrower delivers to Agent financial statements in respect of the Fiscal Quarter ending June 30, 2017 pursuant to Section 6.1.2 together with a Compliance Certificate in respect of such period pursuant to Section 6.1.3 that demonstrates compliance with each of the financial ratios and restrictions set forth in Sections 7.14.2, 7.14.4, 7.14.5 and 7.14.6 for such period and certifies that no other Default or Event of Default has occurred and is continuing as of the date of delivery of such Compliance Certificate.
Permitted DOE Addbacks means, in respect of any fiscal month commencing with the first fiscal month in respect of which Borrower elects (subject to the requirements set forth below) to add amounts set forth and in accordance with the below to Consolidated Net Income for purposes of the calculation of EBITDA, direct costs of the Loan Parties incurred following the Fourth Amendment Closing Date in connection with the start up of a new Department of Education contract that may be entered into by one or more of the Loan Parties with the Department of Education following the Fourth Amendment Closing Date (to the extent in any month in excess of the revenue of the Loan Parties received under such contract during such month) that are incurred in connection with the Loan Parties' work as a prime contractor under such contract (excluding any overhead or shared cost allocations that are not directly related to such contract) that (x) are accompanied by supporting detail provided to Agent and are subject to the review and reasonable approval of Agent, (y) are in an amount not in excess of $1,400,000 in any calendar month, and (z) are incurred in the 9 consecutive month period commencing on the first day of the first fiscal month in respect of which Borrower elects to add Permitted DOE Addbacks to Consolidated Net Income for purposes of the calculation of EBITDA.
(b) Section 1.1 of the Credit Agreement is amended by deleting the definition of the term "December 2016 Compliance Date" therefrom in its entirety.
(c) Section 1.1 of the Credit Agreement is amended by amending and restating the definition of the term "Adjusted Cash" set forth therein in its entirety as follows:
Adjusted Cash means, as of any date of determination, the sum of (i) cash and Cash Equivalents of Borrower and its Subsidiaries that are Guarantors maintained in bank accounts (including, for the avoidance of doubt, the Cash Reserve Account) that are subject to a tri-party control agreement satisfactory to Agent in favor of Agent, minus (ii) the Revolving Outstandings as of such date of determination.
(d) Section 1.1 of the Credit Agreement is amended by amending and restating the definition of the term "Applicable Margin" set forth therein in its entirety as follows:
Applicable Margin means the applicable rate per annum set forth below:
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Revolving Loans and Term A Loan | Term B Loan | ||
Base Rate | LIBOR Rate | Base Rate | LIBOR Rate |
5.75% | 6.75% | 6.25% | 7.25% |
With respect to the Incremental Term Loans funded after the Fourth Amendment Closing Date, a percent per annum set forth in the applicable Incremental Amendment.
(e) Section 1.1 of the Credit Agreement is amended by amending the definition of the term "EBITDA" set forth therein by (i) deleting the "and" following clause (xviii) thereof, (ii) replacing the "." at the end of clause (xix) thereof with ", and", and (iii) inserting new clause (xx) and (xxi) immediately after clause (xix) thereof as follows:
(xx) costs, fees or expenses incurred in connection with the Amendment No. 4 to Credit Agreement dated as of the Fourth Amendment Closing Date , and (xxi) Permitted DOE Addbacks.
(f) Section 1.1 of the Credit Agreement is amended by amending and restating the definition of the term "Required Adjusted Cash Amount" in its entirety as follows:
Required Adjusted Cash Amount means, at all times from and after the Fourth Amendment Closing Date until September 30, 2016, $10,000,000.
(g) Section 1.1 of the Credit Agreement is amended by amending and restating the definition of the term "Total Debt to EBITDA Ratio" set forth therein in its entirety as follows:
Total Debt to EBITDA Ratio means as of the last day of any Fiscal Quarter, the ratio of (a) Total Debt as of such day (minus, solely as of the last day of Fiscal Quarters ending prior to the Cash Reserve Account Release Date (but in no event in respect of any Fiscal Quarter ending after June 30, 2017), the lesser of (x) $7,500,000 and (y) the amount of cash on deposit in the Cash Reserve Account) to (b) Adjusted EBITDA for the Computation Period ending on such day.
(h) Section 6.1.3 of the Credit Agreement is amended by replacing the reference to "(provided that Compliance Certificates shall also be required to be delivered contemporaneously with each set of financial statements pursuant to Section 6.1.2 for months that do not correspond to the last month of a Fiscal Quarter with respect to the financial statements for all months ending from November 30, 2014 through and including December 31, 2016)" set forth therein with a reference to "(provided that Compliance Certificates shall also be required to be delivered contemporaneously with each set of financial statements pursuant to Section 6.1.2 for months that do not correspond to the last month of a Fiscal Quarter with respect to the financial statements for all months ending from November 30, 2014 through and including June 30, 2016)".
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(i) Section 6.10 of the Credit Agreement is amended and restated in its entirety as follows:
6.10. Maintenance of Minimum Cash Balance.
At all times (other than a period of not more than three consecutive Business Days) until September 30, 2016, Borrower and its Subsidiaries that are Guarantors shall maintain Adjusted Cash equal to at least the then applicable Required Adjusted Cash Amount; provided, however, that the three (3) Business Day cure period set forth above may not be utilized by Borrower more than two (2) times in any Fiscal Quarter. Borrower shall certify to Agent that it has been in compliance with this covenant at all times during the relevant period with each set of financial statements delivered by Borrower pursuant to Section 6.1.2 with respect to periods ending on or prior to September 30, 2016, and shall provide certification and, to the extent requested by Agent, calculations and evidence demonstrating the same, of compliance with this covenant at such additional times that Agent may request such calculations in its discretion.
(j) A new Section 6.11 is inserted at the end of Article 6 of the Credit Agreement as follows:
6.11. Cash Reserve Account.
At all times from the Fourth Amendment Closing Date until the Cash Reserve Account Release Date, Borrower shall maintain on deposit at least $7,500,000 in immediately available funds in the Cash Reserve Account, shall at all times prior to the Cash Reserve Account Release Date maintain the Cash Reserve Account and not use the Cash Reserve Account for any purpose other than holding the funds described above, and shall at all times until the Cash Reserve Account Release Date cause the Cash Reserve Account to be subject to a deposit account control agreement among Borrower, Agent and the depositary bank at which the Cash Reserve Account is established pursuant to which the Cash Reserve Account is under the sole dominion and control of Agent. Absent the consent of Agent and Required Lenders to the contrary following the Fourth Amendment Closing Date (which may be given or withheld in their sole discretion), upon the earlier of (x) September 30, 2016 (or such later date not more than thirty (30) days thereafter as may be agreed by Agent in its sole discretion) and (y) the occurrence and continuation of an Event of Default on or after the Fourth Amendment Closing Date (or Agent or Borrower acquiring knowledge following the Fourth Amendment Closing Date of any Event of Default that was in existence on or prior to the Fourth Amendment Closing Date), Borrower authorizes Agent to direct the depository bank at which the Cash Reserve Account is established to remit all funds therein to Agent (and shall take any action that may be requested by Agent (including issuing its own direction to depository bank to remit such funds to Agent) in order to cause such funds to be remitted to Agent) for application to the Term Loans as a voluntary prepayment
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thereof, to be applied (i) pro rata to the then outstanding principal amount of the Term A Loans and Term B Loans, and (ii) as to the amounts applied to the Term A Loans and Term B Loans, be applied to the scheduled installments thereof in the inverse order of maturity (provided, for the avoidance of doubt, that if Agent receives the funds from the Cash Reserve Account following the occurrence of an Acceleration Event, such funds shall instead be applied in accordance with Section 2.12.2(b)). If, in connection with the award of a Department of Education Contract to a Loan Party, or otherwise, Agent and Required Lenders agree in their sole discretion following the Fourth Amendment Closing Date that all or a portion of the funds then on deposit in the Cash Reserve Account may be released to the Borrower, then Agent shall direct the depositary bank in respect of the Cash Reserve Account to remit such funds to the Borrower or another Loan Party at a deposit account mutually agreed by Agent and Borrower (and, to the extent that Agent and Required Lenders agree in their sole discretion that all funds may be released to the Borrower, following the release of all funds therefrom Agent shall authorize the termination of the deposit account control agreement in respect of the Cash Reserve Account and concurrently therewith Borrower shall cause the Cash Reserve Account to be closed).
(k) Section 7.5(a) of the Credit Agreement is amended by replacing the reference to "December 2016 Compliance Date" set forth therein with a reference to "June 2017 Compliance Date".
(l) Section 7.14.1 of the Credit Agreement is amended and restated in its entirety as follows:
7.14.1. Fixed Charge Coverage Ratio.
Not permit the Fixed Charge Coverage Ratio as calculated on the last day of the Computation Period ending September 30, 2017 and the last day of each Computation Period ending thereafter, to be less than 1.20:1.0.
(m) Section 7.14.2. of the Credit Agreement is amended and restated in its entirety as follows:
7.14.2 Total Debt to EBITDA Ratio.
Not permit the Total Debt to EBITDA Ratio as of the last day of any Computation Period to exceed the applicable ratio set forth below for such Computation Period:
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Computation Period Ending | Total Debt to EBITDA Ratio |
December 31, 2015 | 5.00:1.0 |
March 31, 2016, June 30, 2016, September 30, 2016 December 31, 2016, March 31, 2017 and June 30, 2017 | 4.75:1.0 |
September 30, 2017 and each Computation Period ending thereafter | 3.25:1.0 |
(n) Section 7.14.3 of the Credit Agreement is amended by amending and restating clause (d) thereof in its entirety as follows:
(d) Notwithstanding anything to the contrary set forth in this Agreement, Borrower may not utilize the equity cure right set forth in this Section 7.14.3 with respect to any Computation Period ending prior to the Computation Period ending December 31, 2017.
(o) Section 7.14.4 of the Credit Agreement is amended and restated in its entirety as follows:
7.14.4. Interest Coverage Ratio.
Not permit the Interest Coverage Ratio for any Computation Period set forth below to be less than the applicable ratio set forth below for such Computation Period:
Computation Period Ending | Interest Coverage Ratio |
December 31, 2015 | 2.25:1.0 |
March 31, 2016, June 30, 2016 and September 30, 2016 | 2.50:1.0 |
December 31, 2016 | 2.00:1.0 |
March 31, 2017 and June 30, 2017 | 1.75:1.0 |
(p) Section 7.14.5. of the Credit Agreement is amended by replacing the reference to "through and including the month ending on December 31, 2016" set forth therein with a reference to "through and including the month ending on June 30, 2016".
(q) Section 7.14.6. of the Credit Agreement is amended and restated in its entirety as follows:
7.14.6 Capital Expenditures.
Not permit the aggregate amount of all Capital Expenditures made by Holdings and its Subsidiaries in the Fiscal Year ending December 31, 2015 to
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exceed $12,500,000, and not permit the aggregate amount of all Capital Expenditures made by Holdings and its Subsidiaries in the Fiscal Year ending December 31, 2016 and in the Fiscal Year ending December 31, 2017 to exceed $8,000,000.
(r) Section 8.1.4 of the Credit Agreement is amended by inserting a reference to ", 6.11" immediately following the reference to "6.10" and prior to the reference to "and Section 7" set forth therein.
2. Conditions to Effectiveness of Amendment. The effectiveness of this Amendment is subject to satisfaction of the following conditions precedent:
(a) Agent shall have received a copy of this Amendment (including the Consent and Reaffirmation attached hereto), executed by Borrower, each Loan Party and Required Lenders;
(b) No Default or Event of Default shall have occurred and be continuing as of the date of this Amendment;
(c) On a date following February 12, 2016, Borrower shall have made (and Agent shall have received in immediately available funds) a voluntary prepayment of the Term Loans in an amount equal to $22,500,000, which $22,500,000 voluntary prepayment of the Term Loans shall (i) be applied pro rata to the then outstanding principal amount of the Term A Loans and Term B Loans, and (ii) as to the amounts applied to the Term A Loans and Term B Loans, be applied to the scheduled installments thereof in the inverse order of maturity;
(d) Agent shall have received the Amendment Fee (as defined below) for the benefit of the applicable Lenders, and Borrower shall have paid all other fees and expenses (including fees and expenses of counsel to the extent invoiced) of Agent due and payable as of the date hereof in connection with this Amendment, the Credit Agreement and the other Loan Documents; and
(e) Agent shall have received evidence satisfactory to Agent that the Cash Reserve Account has been established by Borrower and has been funded with $7,500,000 in immediately available funds, and Borrower, Agent and Wells Fargo Bank, National Association shall (unless Agent shall agree in writing in its sole discretion in a post-closing letter executed between Borrower and Agent prior to the effectiveness of this Amendment that such requirement shall be satisfied by Borrower on a post-closing basis on terms acceptable to Agent, which would include that failure to obtain such deposit account control agreement within the time period agreed therein (as such period may be extended by Agent in its sole discretion) would constitute an Event of Default) that such deposit account control agreement may be obtained following the effectiveness of this Amendment) have entered into a deposit account control agreement in form and substance satisfactory to Agent granting Agent sole dominion and control over the Cash Reserve Account.
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3. Representations and Warranties. To induce Agent and the Required Lenders to enter into this Amendment, Borrower represents and warrants to Agent and Lenders that:
(a) the execution, delivery and performance of this Amendment has been duly authorized by all requisite corporate action on the part of Borrower and each other Loan Party and that this Amendment has been duly executed and delivered by Borrower and each other Loan Party;
(b) this Amendment and the Borrower's obligations under the Credit Agreement as amended hereby constitute the legal, valid and binding obligation of Borrower and are enforceable against Borrower in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditor's rights generally and to general principles of equity;
(c) the execution and delivery by Borrower and the other Loan Parties of this Amendment does not require the consent or approval of any Person, except such consents and approvals as have been obtained;
(d) after giving effect to this Amendment, the representations and warranties of Borrower and each other Loan Party set forth in the Credit Agreement and the other Loan Documents are true and correct in all material respects with the same effect as if made on the date hereof (except to the extent such representations and warranties are stated to relate to a specific earlier date, in which case such representations and warranties are true and correct in all material respects as of such earlier date);
(e) no Default or Event of Default has occurred and is continuing; and
(f) Borrower has established the Cash Reserve Account as a new deposit account of the Borrower that is not used for any purposes other than as set forth in Section 6.11 of the Credit Agreement (as amended hereby), and has funded the Cash Reserve Account with $7,500,000 in immediately available funds on or prior to the date hereof.
4. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.
5. References. Any reference to the Credit Agreement contained in any document, instrument or Credit Agreement executed in connection with the Credit Agreement shall be deemed to be a reference to the Credit Agreement as modified by this Amendment.
6. Amendment Fee. In consideration of the agreements set forth herein, upon the effectiveness of this Amendment in accordance with, and subject to all of the conditions specified in Section 2 hereof (other than Section 2(d)), Borrower agrees to pay to Agent, for the ratable benefit of the respective Lenders that executed and sent signature pages to this Amendment to the Agent (including pages that were delivered in escrow) on or before 5:00
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p.m. (Chicago time) on February 18, 2016 (such Lenders, the "Consenting Lenders"), an amendment fee equal to 0.25% of the sum of the Revolving Loan Commitments and outstanding principal amount of the Term Loans of the Consenting Lenders as of the date hereof (after giving effect to the $22,500,000 prepayment of the Term Loans to be made by Borrower on the date hereof pursuant to Section 2(c) above).
7. Counterparts; Electronic Transmission. This Amendment may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument. Facsimile signatures and other electronic signatures shall also constitute originals.
8. Release.
(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of Borrower and each other Loan Party (by such other Loan Party's execution and delivery of the attached Consent and Reaffirmation), on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and Lenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all such other Persons being hereinafter referred to collectively as the "Releasees" and individually as a "Releasee"), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set‑off, demands and liabilities whatsoever (individually, a "Claim" and collectively, "Claims") of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, Borrower or such Loan Party or any of their successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, for or on account of, or in relation to, or in any way in connection with any of the Credit Agreement, or any of the other Loan Documents or transactions thereunder or related thereto.
(b) Each of Borrower and each other Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
(c) Each of Borrower and each other Loan Party agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth herein.
9. Ratification. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions of the Credit Agreement and shall not be deemed to be a consent to the modification or waiver of any other term or condition of
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the Credit Agreement. Except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and each of the other Loan Documents are ratified and confirmed and shall continue in full force and effect.
10. For purposes of determining withholding Taxes imposed under FATCA, from and after the effective date of this Amendment, the Borrower and the Agent shall treat (and the Lenders hereby authorize the Agent to treat) the Credit Agreement as not qualifying as a "grandfathered obligation" within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
11. Governing Law. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above.
PERFORMANT BUSINESS SERVICES, INC. (formerly known as DCS Business Services, Inc.) By: /s/ Hakan Orvell Name: Hakan Orvell Title: CFO |
Signature Page to Amendment No. 4 to Credit Agreement
MADISON CAPITAL FUNDING LLC, as Agent and a Lender By: /s/ Craig Dugan Name:Craig Dugan Title:VP |
Signature Page to Amendment No. 4 to Credit Agreement
Amalgamated Bank, as a Lender By: /s/ Melony Heh Name: Melony Heh Title: Vice President |
Signature Page to Amendment No. 4 to Credit Agreement
AUDAX CREDIT OPPORTUNITIES (SBA), LLC., as a Lender By: /s/ Michael P. McGonigle Name: Michael P. McGonigle Title: Authorized Signatory |
AUDAX CREDIT OPPORTUNITIES OFFSHORE LTD., as a Lender By: /s/ Michael P. McGonigle Name: Michael P. McGonigle Title: Authorized Signatory |
AUDAX SENIOR DEBT (WCTPT) SPV, LLC, as a Lender By: /s/ Michael P. McGonigle Name: Michael P. McGonigle Title: Authorized Signatory |
A CMFG LIFE INSURANCE COMPANY, as a Lender Audax Management Company (NY), LLC, its subadviser, By: /s/ Michael P. McGonigle Name: Michael P. McGonigle Title: Authorized Signatory |
Signature Page to Amendment No. 4 to Credit Agreement
MC Funding, Ltd By: Monroe Capital Management, LLC, as Collateral Manager By: /s/ Jeffrey Willians Name: Jeffrey Willians Title: Director |
Signature Page to Amendment No. 4 to Credit Agreement
PENNANTPARK FLOATING RATE FUNDING I, LLC, as a Lender PennantPark Floating Rate Capital Ltd., as Designated Manager By: /s/ Arthur H. Penn Name:Arthur H. Penn Title: Chief Executive Officer |
Signature Page to Amendment No. 4 to Credit Agreement
BancAlliance Inc. By: AP Commercial LLC, its attorney-in-fact, as a Lender By: /s/ John Gray Name: John Gray Title: Executive Vice President |
Signature Page to Amendment No. 4 to Credit Agreement
NEWSTAR COMMERCIAL LOAN FUNDING 2012-2 LLC, as a Lender By: NewStar Financial, Inc., its Designated Manager By: /s/ Andres Alev Name Andres Alev Title: Director |
NEWSTAR COMMERCIAL LOAN FUNDING 2014-1 LLC, as a Lender By: NewStar Financial, Inc., its Designated Manager By: /s/ Andres Alev Name Andres Alev Title: Director |
Signature Page to Amendment No. 4 to Credit Agreement
MCF CLO IV LLC as a Lender By: MCF Capital Management LLC, as collateral manager By: /s/ Ashish Shah Name: Ashish Shah Title: Director |
Signature Page to Amendment No. 4 to Credit Agreement
MCF CLO II LLC as a Lender By: MCF Capital Management LLC, as collateral manager By: /s/ Ashish Shah Name: Ashish Shah Title: Director |
Signature Page to Amendment No. 4 to Credit Agreement
MCF CLO I LLC, as a Lender By: MCF Capital Management LLC, as collateral manager By: /s/ Ashish Shah Name: Ashish Shah Title: Director |
Signature Page to Amendment No. 4 to Credit Agreement
ING CAPITAL LLC, as a Lender By: /s/ Marilyn Densel Fulton Name Marilyn Densel Fulton Title: Managing Director By: /s/ Naresh Purohit Name Naresh Purohit Title: Vice President |
Signature Page to Amendment No. 4 to Credit Agreement
Saratoga Investment Corp CLO 2013-1, Ltd., as a Lender By: /s/ Pavel Antonov Name: Pavel Antonov Title: Attorney In Fact |
Signature Page to Amendment No. 4 to Credit Agreement
FTP Credit Holdings LLC, as a Lender By: /s/ Steve McLaughlin Name Steve McLaughlin Title: President and Secretary |
Signature Page to Amendment No. 4 to Credit Agreement
CONSENT AND REAFFIRMATION
Each of Performant Financial Corporation, Performant Recovery, Inc. (formerly known as Diversified Collection Services, Inc.) and Performant Technologies, Inc. (formerly known as Vista Financial, Inc.) (collectively, the "Companies") hereby (i) acknowledges receipt of a copy of the foregoing Amendment No. 4 to Credit Agreement dated as of February 19, 2016 (the "Amendment"); (ii) consents to Borrower's execution and delivery of the Amendment and the consummation of the transactions contemplated thereby; (iii) agrees to be bound by the Amendment (including by Section 8 of the Amendment); (iv) affirms that nothing contained in the Amendment shall modify in any respect whatsoever any Loan Document to which it is a party; and (v) reaffirms that such Loan Documents shall continue to remain in full force and effect and that its guaranty of the Obligations and grant of security interests in its assets to secure such guaranty of the Obligations shall remain in effect in all respects. Although the Companies have been informed of the matters set forth herein and has acknowledged and agreed to same, each of the Companies understands that Agent and Lenders have no obligation to inform either Company of such matters in the future or to seek acknowledgment of either Company or agreement to future amendments, waivers or consents, and nothing herein shall create such a duty.
IN WITNESS WHEREOF, the parties hereto have caused this Consent and Reaffirmation to be duly executed under seal and delivered by their respective duly authorized officers on and as of the date of the Amendment.
[Signature Page Follows]
PERFORMANT FINANCIAL CORPORATION By: /s/ Hakan Orvell Name: Hakan Orvell Title: CFO |
PERFORMANT RECOVERY, INC. (formerly known as Diversified Collection Services, Inc.) By: /s/ Hakan Orvell Name: Hakan Orvell Title: CFO |
PERFORMANT TECHNOLOGIES, INC. (formerly known as Vista Financial, Inc.) By: /s/ Hakan Orvell Name: Hakan Orvell Title: CFO |
Signature Page to Consent and Reaffirmation –Amendment No. 4 to Credit Agreement
Exhibit B
Form of Compliance Certificate
Please refer to the Credit Agreement dated as of March 19, 2012 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), by and among the undersigned ("Borrower"), the lenders party thereto from time to time, as Lenders, and Madison Capital Funding LLC, as administrative agent ("Agent"). This certificate (this "Certificate"), together with supporting calculations attached hereto, is delivered to Agent and Lenders pursuant to the terms of the Credit Agreement. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement.
[Enclosed herewith is a copy of the [annual audited/quarterly/monthly] report of Borrower as at ________________ (the "Computation Date"), which report fairly presents in all material respects the financial condition and results of operations [(subject to the absence of footnotes and to normal year-end adjustments)] of Borrower as of the Computation Date and has been prepared in accordance with GAAP consistently applied.]
Borrower hereby certifies and warrants that the computations set forth on the schedule attached hereto correspond to the ratios contained in the Credit Agreement and such computations are true and correct as at the [Computation Date] [date hereof, after giving pro forma effect to the Acquisition (and related Loans) pursuant to which this certificate is delivered].
Borrower further certifies that no Event of Default or Default has occurred and is continuing as of the date hereof [except as described on the Schedule attached hereto].
PERFORMANT BUSINESS SERVICES, INC. (formerly known as DCS Business Services, Inc.) By: Title: |
B-1
Schedule to Compliance Certificate
Dated as of _________________
Dated as of _________________
A. Section 7.14.1 - Minimum Fixed Charge Coverage Ratio | ||||
1. Consolidated Net Income | $________ | |||
2. Plus: Losses from Dispositions, extraordinary items, discontinued operations, reappraisal, revaluation or write-down of assets interest expense and the Agent's fee income tax expense depreciation amortization charges for impairment of goodwill and other intangibles management fees and reimbursable expenses amortization of debt discounts and commissions | $________ $________ $________ $________ $________ $________ $________ $________ | |||
3. Plus: Transaction fees and expenses in connection with this agreement Non-cash expenses in connection with options, deferred compensation and stock options | $________ $________ | |||
Transaction Fees in connection with Permitted Acquisitions and Investments permitted under Sections 7.11(q) and 7.11(s) | $________ | |||
Transaction fees and expenses in connection with a successful Qualified IPO | $________ | |||
Transaction fees and expenses in connection with an unsuccessful Qualified IPO | $________ | |||
Costs and expenses related to Permitted Debt or equity issuances | $________ | |||
Non-cash expenses in the form of options granted to Borrower or Holdings and other non-cash expense with respect to deferred compensation and stock options | $________ | |||
severance expenses approved by the Agent | $________ | |||
business interruption insurance proceeds | $________ | |||
Non-cash adjustment to the valuation of earnout payments or other consideration relating to Investments permitted hereunder | $________ | |||
cash restructuring charges approved by the Agent in connection with Permitted Acquisitions and Investments permitted under Sections 7.11(q) and 7.11(s) | $________ | |||
non-cash restructuring charges from Permitted Acquisitions or Investments permitted under Sections 7.11(q) and 7.11(s) | $________ | |||
non-cash charges (or minus non-cash gains) relating to various accounting charges | $________ | |||
other extraordinary costs and expenses satisfactory to Agent | $________ | |||
non-cash adjustments relating to earn-outs and other investment consideration | $________ | |||
any Cure Amount contributed pursuant to Section 7.14.3 (solely for purpose of determining compliance with Section 7.14.1 and 7.14.2) | $________ | |||
the result of (a) the amount collected during such period from the Department of Education for services performed and invoiced, but for which revenue has not yet been recognized in Consolidated Net Income, minus (b) revenue from the Department of Education recognized in Consolidated Net Income during such period for which cash was received in a prior period and where revenue was not previously recognized, all subject to the review and reasonable approval of Agent | $________ | |||
CMS Settlement Addback up to $3,000,000 during term of Agreement | $_________ | |||
Fees, costs and expenses re Amendment No. 2 | $_________ | |||
Fees, costs and expenses re Amendment No. 4 | $_________ | |||
Permitted DOE Addbacks | $_________ | |||
4. Minus: Gains from Dispositions, extraordinary items, discontinued operations, reappraisal, revaluation or write-up of assets | $________ | |||
5. Total (EBITDA) | $________ | |||
6. Income taxes paid in cash (net of refunds) and tax distributions paid in cash | $________ | |||
7. other restricted payments made pursuant to Section 7.4 (other than restricted payments funded from an Increase Request, Additional Subordinated Debt or a Qualified IPO, and transaction expenses distributed pursuant to Section 7.4(iv)) | $________ | |||
8. Unfinanced Capital Expenditures paid in cash | $________ | |||
9. Sum of (6), (7) and (8) | $________ | |||
10. Remainder of (5) minus (9) | $________ | |||
11. Interest Expense paid in cash | $________ | |||
12. Required payments of principal of Debt (including Term Loans but excluding Revolving Loans) | $________ | |||
13. Scheduled installments for the purchase of licenses of software paid in cash | $________ | |||
14. Sum of (11), (12) and (13) | $________ | |||
15. Ratio of (10) to (14) | ___:1.00 | |||
B. Section 7.14.2 - Maximum Total Debt to [Adjusted] EBITDA Ratio | ||||
1. Total Debt | $________ | |||
2. [Adjusted] EBITDA (from Item A(5) above[, plus Pro Forma EBITDA totaling $______ in the aggregate for all applicable Permitted Acquisitions in such period (comprising of Pro Forma Adjusted EBITDA in the following individual amounts with respect to the following individual Permitted Acquisitions (x) _______, $________, (y) _______, $________ and (z) _______, $________)]) | $________ | |||
3. Ratio of (1) to (2) | ____ to 1 | |||
4. Maximum allowed | ____ to 1 | |||
C. Section 7.14.4 – Minimum Interest Coverage Ratio | ||||
1. EBITDA (from Item [__] above) | $________ | |||
2. Interest Expense paid in cash | $________ | |||
3. Ratio of (1) to (2) | ____ to 1 | |||
4. Minimum required | ____ to 1 | |||
D. Section 7.15.5 – Minimum EBITDA. | ||||
1. EBITDA (from Item [__] above) | $________ | |||
2. Minimum required | $20,000,000 | |||
E. Section 7.14.6 - Capital Expenditures | ||||
1. Capital Expenditures for the Fiscal Year | $________ | |||
2. Maximum Permitted Capital Expenditures | $8,000,000 | |||
Performant Financial Corporation Announces Financial Results for Fourth Quarter and Full Year 2015
Livermore, Calif., February 25, 2015 - Performant Financial Corporation (Nasdaq: PFMT), a leading provider of technology-enabled recovery and related analytics services in the United States, today reported the following financial results for its fourth quarter ended December 31, 2015:
Fourth Quarter Financial Highlights
• | Total revenues of $41.1 million, compared to $39.7 million in the prior year period, up 3.4% |
• | Net income of $2.2 million or $0.04 per diluted share, compared to a net loss of $(2.4) million, or $(0.05) per diluted share, in the prior year period |
• | Adjusted EBITDA of $9.8 million, compared to $4.9 million in the prior year period |
• | Adjusted net income of $4.0 million, or $0.08 per diluted share, compared to an adjusted net loss of $(0.2) million or $(0.00) per diluted share, respectively, in the prior year period |
Full Year 2015 Financial Highlights
• | Total revenues of $159.4 million, compared to $195.4 million in the prior year period, down 18.4% |
• | Net loss of $(1.8) million, or $(0.04) per diluted share, compared to net income of $9.4 million, or $0.19 per diluted share, in the prior year period |
• | Adjusted EBITDA of $28.8 million, compared to $44.7 million in the prior year period |
• | Adjusted net income of $6.6 million, or $0.13 per diluted share, compared to $15.3 million and $0.31 per diluted share, respectively, in the prior year period |
“Although 2015 was another transitional period, we made aggressive expense management decisions and managed our business with the intent of maintaining a strong financial platform,” said Lisa Im, Performant's Chief Executive Officer.
Fourth Quarter 2015 Results
Student lending revenues in the fourth quarter were $32.8 million, an increase of 7.0% from $30.7 million in the prior year period. The U.S. Department of Education and Guaranty Agencies accounted for revenues of $9.7 million and $23.2 million, respectively, in the fourth quarter of 2015, compared to $13.7 million and $17.0 million in the prior year period. Student loan placement volume (defined below) during the quarter totaled $0.9 billion, compared to $1.7 billion in the prior year period. This figure reflects the lack of placements under our contract with the Department of Education, which expired in April 2015 and remains in a delayed re-bidding process.
Healthcare revenues in the fourth quarter were $4.3 million, up from $2.4 million in the prior year period. Medicare audit recovery revenues were $2.8 million in the fourth quarter, an increase of $1.3 million from the prior year period. Commercial healthcare clients contributed revenues of $1.5 million in the fourth quarter of 2015, an increase of $0.5 million from the prior year period.
Other revenues in the fourth quarter were $3.9 million, down from $6.6 million in the prior year period. This decrease is primarily due to a tax amnesty program conducted in the fourth quarter of 2014.
As of December 31, 2015, the Company had cash and cash equivalents of approximately $71.2 million.
Full Year 2015 Results
Revenues for the full year ended December 31, 2015 were $159.4 million, a decrease of 18.4% compared to $195.4 million in the prior year period. Student Lending revenues declined 13.7% to $119.4 million from $138.3 million in 2014. Student Loan Placement Volume totaled $5.3 billion as compared to $6.7 billion in the prior year. Healthcare revenues declined 38.8% to $19.9 million from $32.5 million in the prior year. Other revenues declined 18.3% to $20.1 million from $24.6 million in the prior year
Net loss for the full year was $(1.8) million, or EPS of $(0.04) per share on a fully diluted basis, compared to net income of $9.4 million or EPS of $0.19 per share on a fully diluted basis in 2014. Adjusted EBITDA for 2015 was $28.8 million as compared to $44.7 million in 2014. Adjusted net income for 2015 was $6.6 million, resulting in adjusted earnings per share
of $0.13 on a fully diluted basis. This compares to adjusted net income of $15.3 million or $0.31 per fully diluted share in 2014.
Business Outlook
“The same challenges that we faced in 2015, including the suspension of placements from the Department of Education pending the contract re-bidding process, reduced student loan recovery fees and limited audit scope under the RAC contract during that contract transition process, have continued into 2016. We anticipate that 2016 will be softer than 2015 primarily due to the delayed impact on our revenues of reduced student loan placements in 2015. Further, even if we are successful in obtaining the outstanding contract awards there will be a several month implementation period before we would begin to see significant new revenues. As a result, we expect 2016 full year revenue to be in the range of $125 to $135 million,” concluded Im.
Note Regarding Use of Non-GAAP Financial Measures
In this press release, to supplement our consolidated financial statements, the Company presents adjusted EBITDA and adjusted net income. These measures are not in accordance with generally accepted accounting principles (GAAP) and accordingly reconciliations of adjusted EBITDA and adjusted net income to net income determined in accordance with GAAP are included in the “Reconciliation of Non-GAAP Results” table at the end of this press release. We have included adjusted EBITDA and adjusted net income in this press release because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends and to prepare and approve our annual budget. Accordingly, we believe that adjusted EBITDA and adjusted net income provide useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and board of directors. Our use of adjusted EBITDA and adjusted net income has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items, specifically interest, tax and depreciation and amortization expenses, equity-based compensation expense and certain other non-operating expenses, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be calculated differently from similarly titled non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.
Terms used in this Press Release
Student Loan Placement Volume refers to the dollar volume of defaulted student loans first placed with us during the specified period by public and private clients for recovery. Placement Volume allows us to measure and track trends in the amount of inventory our clients in the student lending market are placing with us during any period. The revenue associated with the recovery of a portion of these loans may be recognized in subsequent accounting periods, which assists management in estimating future revenues and in allocating resources necessary to address current Placement Volumes.
Earnings Conference Call
The Company will hold a conference call to discuss its fourth quarter and full year 2015 results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed on the Investor Relations section of the Company’s website at investors.performantcorp.com. The conference call is also available by dialing 877-705-6003 (domestic) or 201-493-6725 (international).
A replay of the call will be available on the Company's website or by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the passcode 13630175. The telephonic replay will be available approximately three hours after the call, through March 3, 2016.
About Performant Financial Corporation
Performant helps government and commercial organizations enhance revenue and contain costs by preventing, identifying and recovering waste, improper payments and defaulted assets. Performant is a leading provider of these services in several industries, including healthcare, student loans and government. Performant has been providing recovery audit services for more than nine years to both commercial and government clients, including serving as a Recovery Auditor for the Centers for Medicare and Medicaid Services.
Powered by a proprietary analytic platform and workflow technology, Performant also provides professional services related to the recovery effort, including reporting capabilities, support services, customer care and stakeholder training
programs meant to mitigate future instances of improper payments. Founded in 1976, Performant is headquartered in Livermore, California.
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our outlook for revenues in 2016. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, that our agreements with CMS and the Department of Education, two of our largest customers, are currently subject to rebidding processes, that we have not received student loan placements from the Department of Education since April, 2015 due to the long-delayed contract re-bidding process, that we have significant indebtedness and the uncertainties in our business could impact our ability to maintain long-term compliance with our debt covenants, that contract transition rules have significantly limited our activity under the existing RAC contract, that the amount of commissions we are required to return to CMS due to successful appeals by the provider could exceed our estimated appeals reserve, the high level of revenue concentration among the Company's four largest customers, that many of the Company's customer contracts are subject to periodic renewal, are not exclusive and do not provide for committed business volumes, that the Company faces significant competition in all of its markets, that the U.S. federal government accounts for a significant portion of the Company's revenues, that future legislative and regulatory changes may have significant effects on the Company's business, that failure of the Company's or third parties' operating systems and technology infrastructure could disrupt the operation of the Company's business and the threat of breach of the Company's security measures or failure or unauthorized access to confidential data that the Company possesses. More information on potential factors that could affect the Company's financial condition and operating results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's quarterly report on Form 10-Q for the nine months ended September 30, 2015. The forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements to conform these statements to actual results or revised expectations
Contact Information
Richard Zubek
Investor Relations
925-960-4988
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||
Consolidated Balance Sheets | |||||||
(In thousands, except per share amounts) | |||||||
(Unaudited) | |||||||
Assets | December 31, 2015 | December 31, 2014 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 71,182 | $ | 80,298 | |||
Trade accounts receivable, net of allowance for doubtful accounts of $386 and $32, respectively | 17,965 | 15,047 | |||||
Deferred income taxes | 7,170 | 7,605 | |||||
Prepaid expenses and other current assets | 12,933 | 12,559 | |||||
Income tax receivable | — | 4,394 | |||||
Debt issuance costs, current portion | 1,078 | 986 | |||||
Total current assets | 110,328 | 120,889 | |||||
Property, equipment, and leasehold improvements, net | 25,515 | 27,647 | |||||
Identifiable intangible assets, net | 25,074 | 29,093 | |||||
Goodwill | 82,522 | 82,522 | |||||
Debt issuance costs, net of current portion | 1,038 | 2,456 | |||||
Other assets | 179 | 222 | |||||
Total assets | $ | 244,656 | $ | 262,829 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Current maturities of notes payable | $ | 9,076 | $ | 9,820 | |||
Accrued salaries and benefits | 4,761 | 5,380 | |||||
Accounts payable | 929 | 1,370 | |||||
Other current liabilities | 5,615 | 8,452 | |||||
Income taxes payable | 895 | — | |||||
Estimated liability for appeals | 19,118 | 18,625 | |||||
Net payable to client | 14,400 | 12,110 | |||||
Total current liabilities | 54,794 | 55,757 | |||||
Notes payable, net of current portion | 85,182 | 101,975 | |||||
Deferred income taxes | 8,818 | 11,666 | |||||
Other liabilities | 2,006 | 2,259 | |||||
Total liabilities | 150,800 | 171,657 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Common stock, $0.0001 par value. Authorized, 500,000 shares at December 31, 2015 and 2014, respectively; issued and outstanding, 49,479 and 49,350 shares at December 31, 2015 and 2014, respectively | 5 | 5 | |||||
Additional paid-in capital | 61,808 | 57,329 | |||||
Retained earnings | 32,043 | 33,838 | |||||
Total stockholders’ equity | 93,856 | 91,172 | |||||
Total liabilities and stockholders’ equity | $ | 244,656 | $ | 262,829 | |||
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues | $ | 41,054 | $ | 39,695 | $ | 159,381 | $ | 195,378 | |||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | 20,482 | 22,440 | 88,077 | 93,676 | |||||||||||
Other operating expenses | 15,795 | 18,129 | 64,596 | 74,433 | |||||||||||
Total operating expenses | 36,277 | 40,569 | 152,673 | 168,109 | |||||||||||
Income (loss) from operations | 4,777 | (874 | ) | 6,708 | 27,269 | ||||||||||
Interest expense | (2,089 | ) | (2,406 | ) | (8,889 | ) | (10,171 | ) | |||||||
Interest income | — | 1 | — | 1 | |||||||||||
Income (loss) before provision for (benefit from) income taxes | 2,688 | (3,279 | ) | (2,181 | ) | 17,099 | |||||||||
Provision for (benefit from) income taxes | 493 | (900 | ) | (386 | ) | 7,699 | |||||||||
Net income (loss) | $ | 2,195 | $ | (2,379 | ) | $ | (1,795 | ) | $ | 9,400 | |||||
Net income (loss) per share | |||||||||||||||
Basic | $ | 0.04 | $ | (0.05 | ) | $ | (0.04 | ) | $ | 0.19 | |||||
Diluted | $ | 0.04 | $ | (0.05 | ) | $ | (0.04 | ) | $ | 0.19 | |||||
Weighted average shares | |||||||||||||||
Basic | 49,475 | 49,336 | 49,415 | 48,816 | |||||||||||
Diluted | 50,123 | 49,336 | 49,415 | 49,834 | |||||||||||
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||
Consolidated Statements of Cash Flows | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
Twelve Months Ended | |||||||
December 31, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (1,795 | ) | $ | 9,400 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Loss on disposal of assets | (585 | ) | 33 | ||||
Depreciation and amortization | 13,368 | 12,450 | |||||
Deferred income taxes | (2,413 | ) | (1,703 | ) | |||
Stock-based compensation | 5,009 | 3,707 | |||||
Interest expense from debt issuance costs and amortization of discount note payable | 1,242 | 1,177 | |||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivable | (2,918 | ) | 4,602 | ||||
Prepaid expenses and other current assets | (374 | ) | (8,159 | ) | |||
Income tax receivable | 4,394 | (4,394 | ) | ||||
Other assets | 174 | 57 | |||||
Accrued salaries and benefits | (619 | ) | (6,446 | ) | |||
Accounts payable | (441 | ) | (1,013 | ) | |||
Other current liabilities | (2,339 | ) | 1,873 | ||||
Income taxes payable | 895 | (103 | ) | ||||
Deferred revenue | — | — | |||||
Estimated liability for appeals | 493 | 3,342 | |||||
Net payable to client | 2,290 | 12,110 | |||||
Other liabilities | 319 | 933 | |||||
Net cash provided by operating activities | 16,700 | 27,866 | |||||
Cash flows from investing activities: | |||||||
Proceeds from sale of property, equipment, and leasehold improvements | 1,268 | — | |||||
Purchase of property, equipment, and leasehold improvements | (7,895 | ) | (10,146 | ) | |||
Net cash used in investing activities | (6,627 | ) | (10,146 | ) | |||
Cash flows from financing activities: | |||||||
Repayment of notes payable | (17,537 | ) | (21,509 | ) | |||
Debt issuance costs paid | — | (653 | ) | ||||
Taxes paid related to net share settlement of stock awards | (90 | ) | — | ||||
Proceeds from exercise of stock options | 37 | 610 | |||||
Income tax benefit (shortfall) from employee stock awards | (507 | ) | 3,221 | ||||
Payment of purchase obligation | (1,123 | ) | (1,000 | ) | |||
Net cash used in financing activities | (19,220 | ) | (19,331 | ) | |||
Effect of foreign currency exchange rate changes on cash | 31 | — | |||||
Net increase (decrease) in cash and cash equivalents | (9,116 | ) | (1,611 | ) | |||
Cash and cash equivalents at beginning of year | 80,298 | 81,909 | |||||
Cash and cash equivalents at end of year | $ | 71,182 | $ | 80,298 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid (received) for income taxes | $ | (2,726 | ) | $ | 10,185 | ||
Cash paid for interest | $ | 7,650 | $ | 8,978 | |||
PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES | |||||||||||||||
Reconciliation of Non-GAAP Results | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Adjusted Earnings Per Diluted Share: | |||||||||||||||
Net income (loss) | $ | 2,195 | $ | (2,379 | ) | $ | (1,795 | ) | $ | 9,400 | |||||
Plus: Adjustment items per reconciliation of adjusted net income | 1,793 | 2,135 | 8,363 | 5,865 | |||||||||||
Adjusted net income (loss) | $ | 3,988 | $ | (244 | ) | $ | 6,568 | $ | 15,265 | ||||||
Adjusted Earnings Per Diluted Share | $ | 0.08 | $ | — | $ | 0.13 | $ | 0.31 | |||||||
Diluted avg shares outstanding (7) | 50,123 | 49,336 | 50,032 | 49,834 | |||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Adjusted EBITDA: | |||||||||||||||
Net income (loss) | $ | 2,195 | $ | (2,379 | ) | $ | (1,795 | ) | $ | 9,400 | |||||
Provision for (benefit from) income taxes | 493 | (900 | ) | (386 | ) | 7,699 | |||||||||
Gain on sale of land (6) | — | — | (636 | ) | — | ||||||||||
Interest expense | 2,089 | 2,406 | 8,889 | 10,171 | |||||||||||
Interest income | — | (1 | ) | — | (1 | ) | |||||||||
Transaction expenses (1) | — | 1,276 | 3,270 | 1,276 | |||||||||||
Restructuring and other expenses (4) | 149 | — | 1,079 | — | |||||||||||
Depreciation and amortization | 3,274 | 3,392 | 13,368 | 12,450 | |||||||||||
Stock based compensation | 1,611 | 1,086 | 5,009 | 3,707 | |||||||||||
Adjusted EBITDA | $ | 9,811 | $ | 4,880 | $ | 28,798 | $ | 44,702 | |||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Adjusted Net Income (Loss): | |||||||||||||||
Net income (loss) | $ | 2,195 | $ | (2,379 | ) | $ | (1,795 | ) | $ | 9,400 | |||||
Gain on sale of land (6) | — | — | (636 | ) | — | ||||||||||
Transaction expenses (1) | — | 1,276 | 3,270 | 1,276 | |||||||||||
Stock based compensation | 1,611 | 1,086 | 5,009 | 3,707 | |||||||||||
Amortization of intangibles (2) | 945 | 938 | 4,026 | 3,737 | |||||||||||
Deferred financing amortization costs (3) | 285 | 259 | 1,191 | 1,055 | |||||||||||
Restructuring and other expenses (4) | 149 | — | 1,079 | — | |||||||||||
Tax adjustments (5) | (1,197 | ) | (1,424 | ) | (5,576 | ) | (3,910 | ) | |||||||
Adjusted Net Income (Loss) (7) | $ | 3,988 | $ | (244 | ) | $ | 6,568 | $ | 15,265 | ||||||
(1) Represents direct and incremental costs associated with expenses incurred in 2015 for a potential acquisition and related financing. | |||||||||||||||
(2) Represents amortization of capitalized expenses related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004, and also an acquisition in the first quarter of 2012 to enhance our analytics capabilities. | |||||||||||||||
(3) Represents amortization of capitalized financing costs related to financing conducted in 2012 and costs related to the amendment of the terms of the note payable in 2014. | |||||||||||||||
(4) Represents restructuring costs and severance and termination expenses incurred in connection with termination of employees and consultants in 2015. | |||||||||||||||
(5) Represents tax adjustments assuming a marginal tax rate of 40%. | |||||||||||||||
(6) Represents gain on the sale of land in San Angelo, TX in 2015. | |||||||||||||||
(7) While net income (loss) for the twelve months ended December 31, 2015 reflects a net loss of $(1,795), the computation of adjusted net income results in adjusted net income of $6,568. Therefore, the calculation of the adjusted earnings per diluted share for the twelve months ended December 31, 2015 includes dilutive common share equivalents of 617 added to the basic weighted average shares of 49,415. | |||||||||||||||
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