Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ~~☐ Yes~~☐Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ~~☐ Yes~~☐Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~Website,~~Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ ~~232.405 of this chapter)~~232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See ~~the~~ definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates based on the closing price for such common equity as reported on The NASDAQ Global Select Market on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2015) was $607.3 million.

As of ~~March 8,~~April 26, 2016, there were outstanding ~~14,866,327~~14,858,366 shares (excluding treasury shares of ~~2,332,679)~~2,352,279) of the registrant’s Common Stock, ~~$.001~~$0.001 par value per share, and 803,508 shares of the registrant’s Preferred Stock, $0.001 par value per share, which isare the only classes of outstanding capital stock of the registrant.

This Amendment No. 1 on Form ~~10-K are incorporated by reference to~~10-K/A (this “Amendment”) amends our definitive proxy statement on Schedule 14A for our 2016 stockholder meeting; provided that if such proxy statement is not filed on or before April 30, 2016, such information will be included in an amendment to thisAnnual Report on Form 10-K for the fiscal year ended December 31, 2015 that was filed with the Securities and Exchange Commission, or SEC, on ~~or before such date.~~March 11, 2016 (the “Original Filing”). We are filing this Amendment for the purpose of including information required by Part III of Form 10-K. This information is being included in this Amendment because the Company’s definitive proxy statement will not be filed within 120 days of the last day of our fiscal year ended December 31, 2015. We are also amending Part II, Item 7A and the footnotes to Item 15 in order to correct certain errors in the original filing.

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Item 15 of Part IV of the Original Filing has been amended to contain currently dated certifications from our Chief Executive Officer and Chief Financial Officer. The currently dated certifications are attached hereto as Exhibits 31.1 and 31.2. Because no financial statements are contained in this Amendment, we are not including certifications pursuant to 18 U.S.C. 1350.

Except as set forth in Part II and Part III below, no other changes are made to the Original Filing other than to update the cover page of the Original Filing. Unless expressly stated, this Amendment does not reflect events occurring after the filing of the Original Filing, nor does it modify or update in any way the disclosures contained in the Original Filing. Accordingly, this Amendment should be read in conjunction with our Original Filing and our other filings made with the SEC subsequent to the filing of the Original Filing. References herein to the “Company,” “Providence,” “we,” “our,” and “us” refer to The Providence Service Corporation.

The Providence Service Corporation (the “Company” or “Providence”), a Delaware corporation formed in 1996, is a holding company, whose subsidiaries provide critical healthcare and workforce development services. The Company operates within two key industry sectors-US healthcare and global workforce development-through its three operating segments: Non-Emergency Transportation Services (“NET Services”), Workforce Development Services (“WD Services”) and Health Assessment Services (“HA Services”). NET Services coordinates non-emergency transportation for individuals whose limited mobility and/or financial resources would otherwise hinder them from accessing necessary healthcare and social services. WD Services primarily provides employability and offender rehabilitation services to eligible participants of government sponsored programs. HA Services, provides care optimization and delivery solutions, including comprehensive health assessments (“CHAs”) for health plans as well as in-home care management offerings.

Ingeus Proprietary Limited and its wholly and partly-owned subsidiaries and associates (collectively, “Ingeus”) was acquired on May 30, 2014, and is included in WD Services. CCHN Group Holdings, Inc. and its wholly-owned subsidiaries and affiliates operating under the tradename Matrix (“Matrix”) was acquired on October 23, 2014, and is included in HA Services. On November 1, 2015, we completed the sale of the Human Services segment, which is accounted for as a discontinued operation.

~~As of December 31, 2015, we operated in 44 states and the District of Columbia in the United States (“US”), and in 11 countries outside of the US.~~

Our holding company strategy is designed to increase shareholder value through positive returns on invested capital and free cash flow generation, which in turn is predicated upon the continued development and efficient delivery of critical and high quality services. Our current service offerings are based upon a common purpose of delivering exceptional value in the healthcare and workforce development service industries, primarily in a community or home setting.

In order to meet our goal of increasing shareholder value, we have established certain priorities at both the holding company and segment leadership levels. The prioritiesofour leadership at the holding company level include: 1) pursuing the highest standards of governance, values and compliance, 2) ensuring operating excellence by attracting, developing, and retaining empowered and accountable segment level leadership with deep industry experience, and 3) allocating capital opportunistically in markets that may be inefficient or where we have an ability to invest at a discount to intrinsic value, particularly where our experience, analysis, and long-term perspective can provide an advantage over competitors. As demonstrated in 2015 with the divestiture of our Human Services segment, we also may dispose of current or future investments based on a variety of factors, including availability of alternative opportunities to deploy capital or otherwise maximize shareholder value as well as other strategic considerations.

Within our current segments, we seek to leverage our market reputation, customer relationships, and core competencies to capture growth opportunities within our current markets and service lines. We also intend to utilize these assets to expand organically and through acquisitions into adjacent markets and complementary service lines. Our core competencies include developing and managing large provider networks, tailoring healthcare and workforce development service offerings to the unique needs of diverse communities and populations, and designing service delivery models to achieve superior outcomes in low cost settings. We also continuously strive to capture service delivery efficiencies while also improving the quality of our offerings.

In identifying, evaluating and selecting strategic opportunities, we may encounter intense competition from other entities having similar business objectives, such as strategic investors, private equity groups and special purpose acquisition corporations. Many of these entities are well established and have extensive experience identifying and effecting transactions directly or through affiliates. These competitors may possess greater human and other resources than us, and our financial resources may be relatively limited in comparison. Any of these factors may place us at a competitive disadvantage in contrast to our competitors.

In the execution of our holding company strategy, our 30 person holding company staff utilizes their investment experience in both public and private markets, previous operational leadership in a variety of industries, as well as other typical public holding company capabilities, including competencies in the areas of accounting, tax, human resource, information technology and legal. Our colleagues may also supplement our segment leadership teams in the areas of strategic development, operational and financial improvement, and cross segment sales or operational synergies on a selective basis. During 2016, we intend to relocate our executive offices to700 Canal St., Stamford, CT, 06901.

The Company operates in three segments, NET Services, WD Services and HA Services. Financial information about segments and geographic areas, including revenues, operating income (loss), and long-lived assets of each segment and geographic information is included in Note 23,~~Segments,~~ ~~of our consolidated financial statements presented elsewhere in this report and is incorporated herein by reference. Additionally, see Item 1A,~~~~Risk Factors~~~~, for a discussion of risks related to our operations~~.

Effective November 1, 2015, we sold our Human Services segment. The operating results of the Human Services segment have been reclassified into discontinued operations in the consolidated financial statements in all periods presented.

~~Services offered.~~NET Services provides non-emergency transportation solutions to clients in 39 states and the District of Columbia. As of December 31, 2015, approximately 24.8 million individuals were eligible to receive our transportation services.For 2015, 2014 and 2013, NET Services accounted for 63.9%, 77.8% and 96.4%, respectively, of our consolidated revenue.

NET Services contracts with state and regional Medicaid programs, local government agencies, hospital systems, and managed care organizations (“MCOs” and collectively “NET payers”) for the coordination of their members’ (“NET end-users”) non-emergency transportation needs. NET end-users are typically Medicaid or Medicare eligible members, whose limited mobility and/or financial resources would otherwise hinder their ability to access necessary healthcare and social services. We believe our transportation services not only improve the quality of life and health of the populations we serve, but also keep individuals in their homes and out of more expensive institutional care settings.

To fulfill the transportation needs of NET end-users, we have established a contracted network of approximately 5,000 independent transportation providers, including operators of wheelchair equipped vehicles, multi-passenger vans, taxis, and ambulances. To ensure the safety, quality, and compliance of our network, each of our transportation providers undergoes an in-depth credentialing process, including: (i) criminal background checks, driving record checks, and drug testing of drivers; (ii) driver training on first aid, patient sensitivity, and cultural diversity; (iii) inspections of vehicles and communication systems; and (iv) demonstration of adequate insurance coverage. We receive transportation requests directly from NET end-users or their representatives, such as social workers, through our call/support centers and utilize a proprietary technology platform to coordinate trips in an efficient and user friendly manner. A significant percentage of our transports are standing orders, mostly for patients who require frequent, recurring services such as dialysis treatment, mental health services, physical therapy, or adult day care services. Non-standing orders include more ad hoc needs for transportation including doctor visits, dental appointments, and hospital discharges.

~~Revenue and payers.~~We contract primarily with state and local government entities and MCOs.Contracts with state Medicaid agencies represent the largest source of our revenue.State payer contracts are typically for three to five years with renewal options.NET Services derived approximately 15.0%, 17.0% and 15.3% of revenue from a single state payer for the years ended December 31, 2015, 2014 and 2013, respectively. The next four largest NET payers in the aggregate comprised approximately 24.2%, 26.2% and 28.4% of NET Services’ revenue for the years ended December 31, 2015, 2014 and 2013, respectively.

Approximately 83.6% of NET Services’ revenue in 2015 was generated under capitated contracts where we assume the responsibility of meeting the covered healthcare related transportation requirements of a specific population. Capitated contracts are generally structured with fixed per member, per month payment ratesbased upon the defined scope of work, actual historical transportation data for the defined population and geographical region to be served, future assumptions on key costs which includes the purchase price of various levels of transport as well as the program population’s future behavior and the necessity of the program. Historically, under a majority of the contracts, we received payment at the outset of the contract month. However, recently certain states have introduced reconciliation contracts, whereby payment is received after the contract month, based upon a reconciliation of the member count. Approximately 14.0% of NET Services’ revenue in 2015 was derived from fee for service and flat fee contracts, under which fees are generatedbased upon billing rates for specific services or defined membership populations.

~~Seasonality.~~ The quarterly operating income and cash flows of NET Services normally fluctuate as a result of seasonal variations in the business, principally due to lower NET end-user demand during the holiday and winter seasons. While revenue is generally fixed, primarily as a result of the capitated nature of the majority of our contracts, service expense varies based on NET end-user utilization of our services. Thus, we experience quarterly fluctuations in operating income as a result of this seasonal demand.

~~Competition.~~ ~~We compete with a variety of organizations that provide similar healthcare and social services related~~transportation, such as American Medical Response, Inc., Medical Transportation Management Inc., and SoutheasTrans, Inc. as well as local and regional providers. Most local competitors seek to win contracts for specific counties or small geographic territories whereas we and other larger competitors seek to win contracts for an entire state or large regional area. Historically, we have been successful in competitively bidding for state-wide or other large Medicaid population programs. We compete based on our technical expertise and experience, which is delivered in a high service, competitive price environment, although we are not necessarily the lowest priced provider in many instances.

~~Business development~~. In states where we have regional contracts, we generally seek to expand our services to additional regions in these states and in contiguous states, in order to improve operating efficiencies and opportunities for our existing operational network. We make decisions about which RFPs to consider centrally, selectively targeting contracts based on our profitability goals and service capabilities.

~~Services offered.~~HA Services provides care optimization and delivery solutions, which primarily includes comprehensive health assessments (“CHAs”), but also includes in-home and community-based care management offerings. HA Services utilizes a national network of approximately 800 nurse practitioners (“NPs”), located across 35 states, to provide its services primarily to members of Medicare Advantage (“MA”) health plans.For 2015 and 2014, HA Services accounted for 12.8% and 3.8%, respectively, of our consolidated revenue. The increase in revenue is due to the acquisition of Matrix in October 2014.

HA Services primarily generates revenue from CHAs, which capture a health plan members’ health, social, environment and medication risks. Our services typically commence with a member analysis that utilizes client data, such as medical claims data, to maximize our ability to improve client and member outcomes as a result of the assessment process.

Through our contact centers, which include almost 165 colleagues, we pursue additional data collection and schedule assessments. Our NPs then spend up to 60 minutes in the member’s home conducting a comprehensive CHA, which is comprised of a number of distinct components. In addition to checking vital signs and performing a physical examination, our NPs review the member’s health history and medical prescriptions, conduct a depression screening, evaluate the immediate residential setting for any physical safety issues, review recommended screening tests, and conduct a series of geriatric screens for fall risks, nutrition, and cognitive function. As the evaluation is intended to provide a complete clinical assessment, our NPs are also trained to record all diagnoses of medical conditions.

The data collected during the CHA is captured electronically on a portable tablet. The CHA process is specifically designed to engage and coordinate with the member’s full care network in order to facilitate follow-up care and treatment. Following each CHA, educational and clinical information is shared with the member, the member’s primary healthcare provider and health plan to identify and close gaps in care. The CHA captures accurate and detailed health diagnoses, which also assists our health plan customers in determining the appropriate reimbursement levels for their member base. In addition to identifying opportunities to improve and optimize care, our service offering can deliver immediate impact on care outcomes.

In addition to our primary CHA services, we launched a chronic care management offering in 2015. With data provided by our health plan clients, we utilize analytics to determine which members we can most effectively lower costs and improve outcomes through face-to-face engagements with clinicians. Each program is customized and is served by a comprehensive team of case managers, nurse practitioners, registered nurses, and trained call center colleagues. We anticipate our chronic care management offering will become an increasing proportion of HA Services’ revenue over the next two to three years.

~~Revenue, payers and clients.~~As of December 31, 2015, HA Services’ customers included approximately 40 health plans, including for profit multi-state health plans and non-profit health plans that operate in only one state or several counties within one state. HA Services serves many of the largest and most prestigious health plans and health systems in the US. For the year ended December 31, 2015, HA Services’ top five customers accounted for approximately 73.6% of its revenue, and its largest customer accounted for approximately 31.1% of its revenue. HA Services enters into annual or multi-annual contracts with its customers under which it is paid on a per assessment basis.

~~Seasonality~~.Historically, we have experienced higher CHA volume in the second half of the calendar year as a result of an accelerating demand towards calendar year-end. However, in 2015, CHAs were performed more evenly throughout the year as we worked to balance our volume to more efficiently utilize our NPs.

~~Competition~~.We believe that Matrix and CenseoHealth are the largest independent providers of CHAs to the health plan market. There are many smaller volume competitors, including Advance Health, EMSI Healthcare Services, MedXM, and Inovalon, Inc. Some plans in-source CHA services for their members through their own network of NPs, including some plans which also utilize our services Our services are often priced at a premium relative to our competitors, and we believe we will continue to maintain a pricing differential as a result of: (i) our national footprint across 35 states, (ii) sophisticated stratification techniques to identify gaps in data and care, (iii) multi-channel member engagement capabilities, (iv) the benefits of HA Services’ community-based NPs, (v) greater control, uniformity and consistency in delivering high quality services for beneficiaries, and (vi) our ability to execute and deliver the assessment goals of our customers. Our chronic care management competitors include Landmark Healthcare, PopHealthcare and Optum.

~~Business development~~.Our business development capabilities are key to capitalizing on our significant market and growth opportunities. While we have historically been led by a small team of account managers and sales personnel, we believe that additional strategic investments in sales and marketing will enable us to increasingly seize on the healthcare industry’s need for expanded assessment offerings and chronic care management solutions. To that end, we are expanding our dedicated sales personnel, which includes focused sales professionals who have expertise in certain fields, including chronic care management. Marketing strategies include sponsorship and partnership of key industry conferences, client-focused events and programs, and face-to-face marketing.

~~Services offered.~~WD Services provides workforce development and offender rehabilitation services, both of which include employment preparation and placement, apprenticeship and training, and certain health related services, such as employee assistance programs.For 2015, 2014 and 2013, WD Services accounted for 23.3%, 18.4% and 3.6%, respectively, of our consolidated revenue. The growth in revenue is principally due to the acquisition of Ingeus in May 2014.

WD Services’end user client base (“WD end-users”) is broad, and includes both the recently and long-term unemployed, disabled, and unskilled individuals, as well as individuals that are coping with medical illnesses, are newly graduated from educational institutions, or have been released from incarceration.

As of December 31, 2015, WD Services operated across 12 countries, including the United Kingdom (“UK”), Australia, France, Saudi Arabia, South Korea, Canada, the US, Germany, Poland, Spain, Sweden, and Switzerland. However, the operations in Sweden will cease during 2016.

~~Revenue, payers and clients.~~~~The majority of our revenues are generated~~by providing employability and training programs with national government entities seeking to reduce unemployment or recidivism rates. For the years ended December 31, 2015 and 2014, approximately 75.5% and 66.6%, respectively, of WD Services’ revenue was derivedfrom operations in the UK. Additionally, approximately 40.0% and 57.2% of our WD Services’ revenue was derived from a single government customer during the years ended December 31, 2015 and 2014, respectively. During the year ended December 31, 2015, approximately 28.2% of WD Services’ revenue was derived from the second largest WD Services customer.

The nature of services offered by WD Services often relies on our ability to improve a certain set of outcomes at a reduced cost versus previously utilized in-sourced delivery models. As a result, as we commence new contracts with new transformational delivery models, we are required to invest significant upfront capital for information technology, facilities and transformational costs, such as consultants and redundancy payments. The level of upfront funding required is dependent upon the size and natureof the contract. Although significant upfront funding may be required, revenues are often payable only as services are delivered and in some cases only after incentive measures have been achieved. As a result of these two factors, there can be significant variability in our earnings from quarter to quarter, and from year to year. Thus, we measure our contracts success over the term of the contract and believe the financial results of WD Services are best viewed over a multi-year perspective.

~~Seasonality~~.While there has been period-to-period variability in WD Services’ earnings due to the factorsdiscussed above and alsoset forth in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – How We Earn our Revenue – WD Services,” there has not been a material seasonal effect on the WD Services’ results of operations.

~~Competition~~.In the UK, Australia and Saudi Arabia, the workforce development and offender rehabilitation market is served primarily by large multi-nationalcorporations that provide a wider range of outsourced services than we offer. In Canada, France, Germany, South Korea, Spain, Sweden, Switzerland, and the US, our competition primarily consists of small, privately owned companies. Our largercompetitors include Maximus, Capita, G4S, Sodexo, Interserve and Serco.

The market for services to governments is competitive and subject to change and pricing pressure, particularly during the bidding for contract renewals. However, due to the critical nature of our offerings and the end-users we serve, market entry can be difficult for new entrants or those without previous examples of service excellence. In addition, due to the complexity, significant upfront investment, and long-term nature of the contracts, barriers to entry exist for those potential new competitors without prior, relevant experience.

~~Business development~~.Our business development activities areperformed at both the local level as well as centrally in WD Services’ London headquarters.Through local and global networks and relationships, we become aware of new opportunities for which we developbids through competitive processes. The nature of the competitive processes varies from highly competitive to being one of afew, or the sole, service providers to bid on a contract.

Our primary focus is on expanding our portfolio of national contracts within our areas of expertise. However, other key elements of our long-term strategy include leveraging our expertise in certain adjacent niche or inefficient markets, expanding our services to private corporations, and increasing the provision of skills and training services as well as health-related services. In addition, in late 2015, our bidding process was reviewed and transformed with an improved focus on pursuing only those contracts where we can estimate financial outcomes within our investment and risk criteria and where we can demonstrate differentiated and improved outcomes for our clients.

As of December 31, 2015, we employed approximately 9,072 clinical, client service and administrative personnel. Of these employees, 3,668 work in our NET Services segment, 4,325 work in our WD Services segment and 1,049 work in our HA Services segment.

We believe that our employee relations are good because we offer competitive compensation, including stock-based compensation to key employees, training, education assistance and career advancement opportunities. By offering competitive compensation and benefit packages to our employees, we believe we are able to consistently deliver high quality service, recruit qualified candidates and increase employee confidence, satisfaction and retention.

None of our US employees are members of a union. We have nearly 3,000 and 370 full-time employees in the UK and France, respectively. Certain of our UK employees are members of the NAPO and Unison unions and certain of our employees in France are members of the Confederation Generale du Travail. Unionized employees in both countries have collective bargaining rights. Participation in unions is confidential under European employment laws. We believe we have good relationships with our employees, both unionized and non-unionized, in the US and internationally.

We are subject to numerous federal, state and local laws and regulations. These laws and regulations significantly affect the way in which we operate various aspects of our business. We must also comply with state and local licensing requirements and requirements for participation in Medicare, Medicaid, requirements for contracting with MA plans, and contractual requirements imposed upon us by the state and local agencies with which we contract for such healthcare and human services. Failure to follow the rules and requirements of these programs can significantly affect our ability to be paid for the services we provide.

In addition, our revenue is largely derived from contracts that are directly or indirectly paid or funded by government agencies, including Medicare and Medicaid. A significant decline in expenditures, or shift of expenditures or funding, could cause payers to reduce their expenditures under those contracts or not renew such contracts, either of which could have a negative impact on our future operating results. As funding for our contracts is dependent in part upon federal funding, such funding changes could have a significant effect on our business.

The healthcare industry is highly regulated and the federal and state laws that affect our business are significant. Federal law and regulations are based primarily upon the Medicare and Medicaid programs, each of which is financed, at least in part, with federal money. State jurisdiction is based upon a state’s authority to license certain categories of healthcare professionals and providers and the state’s interest in regulating the quality of healthcare in the state, regardless of the source of payment. The significant areas of federal and state regulatory laws that may affect our business, include, but are not limited to the following:

A violation of any law could result in civil and criminal penalties, the refund of monies paid by government and/or private payers, our exclusion from participation in federal healthcare payer programs, and/or the loss of our license to conduct business within a particular state’s boundaries. Although we believe that we are able to maintain material compliance with all applicable laws, these laws are complex and a review of our practices by a court, or applicable law enforcement or regulatory authority, could result in an adverse determination that could harm our business. Furthermore, the laws applicable to our business are subject to change, interpretation and amendment, which could adversely affect our ability to conduct our business.

Federal healthcare laws apply in any case in which we are providing an item or service that is reimbursable by a federal healthcare payer program. The principal federal laws that affect our business include those that prohibit the filing of false or improper claims with federal healthcare payer programs and those that prohibit unlawful inducements for the referral of business reimbursable under federal healthcare payer programs.

Under the federal False Claims Act (31 U.S.C. §§ 3729-3733) and similar state laws, the government may impose civil liability on us if we knowingly submit, or participate in submitting, any claims for payment to the federal or state government that are false or fraudulent, or that contain false or misleading information. The False Claims Act defines a claim as a demand for money or property made directly to the government or to a contractor, grantee, or other recipient if the money is to be spent on the government’s behalf or if the government will reimburse the contractor or grantee. Liability can be incurred for submitting (or causing another to submit) false claims with actual knowledge or for submitting false claims with reckless disregard or deliberate ignorance. Liability can also be incurred for knowingly making or using a false record or statement to receive payment from the federal government or for knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the government. Consequently, a provider need not take an affirmative action to conceal or avoid an obligation to the government, but the mere retention of an overpayment from the government could lead to potential liability under the False Claims Act.

If we are ever found to have violated the False Claims Act, we could be required to make significant payments to the government (including damages and penalties in addition to the return of reimbursements previously collected) and could be excluded from participating in federal healthcare programs. Many states also have similar false claims statutes. In addition, healthcare fraud is a priority of the US Department of Justice, Office of Inspector General and the Federal Bureau of Investigation and state Attorneys General. These agencies have devoted a significant amount of resources to investigating healthcare fraud.

While the criminal statutes generally are reserved for instances evidencing fraudulent intent, the civil and administrative penalty statutes are being applied by the federal government in an increasingly broad range of circumstances. Examples of the types of activities giving rise to liability for filing false claims include billing for services not rendered, misrepresenting services rendered (i.e., mis-coding) and applications for duplicate reimbursement. Additionally, the federal government takes the position that a pattern of claiming reimbursement for unnecessary services violates these statutes if the claimant should have known that the services were unnecessary. The federal government also takes the position that claiming reimbursement for services that are substandard is a violation of these statutes if the claimant should have known that the care was substandard. Criminal penalties also are available in the case of claims filed with private insurers if the federal government shows that the claims constitute mail fraud or wire fraud or violate any of the federal criminal healthcare fraud statutes.

State Medicaid agencies and state Attorneys General also have authority to seek criminal or civil sanctions for fraud and abuse violations. In addition, private insurers may bring actions under state false claim laws. In certain circumstances, federal and state laws authorize private whistleblowers to bring false claim or “qui tam” suits on behalf of the government against providers and reward the whistleblower with a portion of any final recovery. In addition, the federal government has engaged a number of private audit organizations to assist it in tracking and recovering claims for healthcare services that may have been improperly submitted.

Governmental investigations and whistleblower “qui tam” suits against healthcare companies have increased significantly in recent years, and have resulted in substantial penalties and fines. Although we monitor our billing practices for compliance with applicable laws, such laws are very complex, and we might not be able to detect all errors or interpret such laws in a manner consistent with a court or an agency’s interpretation.

Under HIPAA, the US Department of Health and Human Services (“DHHS”) issued rules to define and implement standards for the electronic transactions and code sets for the submission of transactions such as claims, and privacy and security of individual health information in whatever manner it is maintained.

The Final Rule on Enforcement of the HIPAA Administrative Simplification provisions, including the transaction standards, the security standards and the privacy rule, published by DHHS addresses, among other issues, DHHS’s policies for determining violations and calculating civil monetary penalties, how DHHS will address the statutory limitations on the imposition of civil monetary penalties, and various procedural issues. The rule extends enforcement provisions currently applicable to the healthcare privacy regulations to other HIPAA standards, including security, transactions and the appropriate use of service code sets.

The Health Information Technology for Economic and Clinical Health Act, (“HITECH”), enacted as part of the American Recovery and Reinvestment Act of 2009, extends certain of HIPAA’s obligations to parties providing services to healthcare entities covered by HIPAA known as “business associates,” imposes new notice of privacy breach reporting obligations, extends enforcement powers to state attorney generals and amends the HIPAA privacy and security laws to strengthen the civil and criminal enforcement of HIPAA. HITECH establishes four categories of violations that reflect increasing levels of culpability, four corresponding tiers of penalty amounts that significantly increase the minimum penalty amount for each violation, and a maximum penalty amount of $1.5 million for all violations of an identical provision. With the additional HIPAA enforcement power under HITECH, the Office of Civil Rights of the Department of Health and Human Services and states are increasing their investigations and enforcement of HIPAA compliance. We have taken steps to ensure compliance with HIPAA and we are monitoring compliance on an ongoing basis.

Additionally, the HITECH Final Rule imposes various requirements on covered entities and business associates, and expands the definition of “business associates” to cover contractors of business associates. We are continuing to assess our compliance obligations under HIPAA as modified by HITECH, and are implementing operational and systems changes, associate education and resources. There is no guarantee that we will be able to implement them adequately given HIPAA’s complexity and the recently finalized HIPAA and HITECH regulations, which may be subject to changing and perhaps conflicting interpretation. Our ongoing ability to comply with all of the HIPAA requirements is uncertain, which may expose us to the criminal and increased civil penalties provided under HITECH and may require us to incur significant costs in order to seek to comply with its requirements.

Federal law commonly known as the “Anti-Kickback Statute” prohibits the knowing and willful offer, solicitation, payment or receipt of anything of value (direct or indirect, overt or covert, in cash or in kind) which is intended to induce: the referral of an individual for a service for which payment may be made by Medicare, Medicaid or certain other federal healthcare programs; or the ordering, purchasing, leasing, or arranging for, or recommending the purchase, lease or order of, any service or item for which payment may be made by Medicare, Medicaid or certain other federal healthcare programs.

Interpretations of the Anti-Kickback Statute have been very broad and under current law, courts and federal regulatory authorities have stated that this law is violated if even one purpose (as opposed to the sole or primary purpose) of the arrangement is to induce referrals. Even bona fide investment interests in a healthcare provider may be questioned under the Anti-Kickback Statute if the government concludes that the opportunity to invest was offered as an inducement for referrals.

This act is subject to numerous statutory and regulatory “safe harbors.” The safe harbor regulations, however, do not cover all lawful relationships between healthcare providers and referral sources. Failure of an arrangement to satisfy all of the requirements of a particular safe harbor does not mean that the arrangement is unlawful. However, it may mean that such an arrangement will be subject to scrutiny by the regulatory authorities.

While we believe that our operations are in compliance with applicable Medicare and Medicaid fraud and abuse laws, there can be no guarantee. We seek to structure all applicable arrangements to comply with applicable safe harbors where reasonably possible. There is a risk however, that the federal government might investigate such arrangements and conclude they violate the Anti-Kickback Statute. If our arrangements are found to violate the Anti-Kickback Statute, we, along with our clients would be subject to civil and criminal penalties, which may include exclusion from participation in government reimbursement programs, and our arrangements would not be legally enforceable, which could materially and adversely affect our business.

Many states, including some where we do business, have adopted anti-kickback laws that are similar to the federal Anti-Kickback Statute. Some of these state laws are very closely patterned on the federal Anti-Kickback Statute; others, however, are broader and reach reimbursement by private payers. If our activities were deemed to be inconsistent with state anti-kickback or illegal remuneration laws, we could face civil and criminal penalties or be barred from such activities, any of which could harm our business.

We may be subject to federal and state statutes banning payments for referrals of patients and referrals by physicians to healthcare providers with whom the physicians have a financial relationship. Section 1877 of the Social Security Act, also known as the “Stark Law”, prohibits physicians from making a “referral” for “designated health services” for Medicare (and in many cases Medicaid) patients from entities or facilities in which such physicians directly or indirectly hold a “financial relationship”.

A financial relationship can take the form of a direct or indirect ownership, investment or compensation arrangement. A referral includes the request by a physician for, or ordering of, or the certifying or recertifying the need for, any designated health services.

Certain services that we provide may be identified as “designated health services” for purposes of the Stark Law. We cannot provide assurance that future regulatory changes will not result in other services we provide becoming subject to the Stark Law’s ownership, investment or compensation prohibitions in the future.

Many states, including some states where we do business, have adopted similar or broader prohibitions against payments that are intended to induce referrals of clients. Moreover, many states where we operate have laws similar to the Stark Law prohibiting physician self-referrals. We contract with a significant number of human services providers and practitioners, including therapists, physicians and psychiatrists, and arrange for these individuals or entities to provide services to our clients. While we believe that these contracts are in compliance with the Stark Law, no assurance can be made that such contracts will not be considered in violation of the Stark Law.

On March 23, 2010, the President of the United States signed into law comprehensive health reform through the Patient Protection and Affordable Care Act (Pub. L. 11-148) (“PPACA” or “ACA”). On March 30, 2010, the President signed a reconciliation budget bill that included amendments to the PPACA (Pub. L. 11-152). These laws in combination form the “Health Care Reform Act” referred to herein. The changes to various aspects of the healthcare system in the Health Care Reform Act are far-reaching and include, among many others, substantial adjustments to Medicare reimbursement, establishment of individual mandates for healthcare coverage, extension of coverage to certain populations, expansion of Medicaid, restrictions on physician-owned hospitals, and increased efficiency and oversight provisions.

Some of the provisions of the Health Care Reform Act took effect immediately, while others will take effect later or will be phased in over time, ranging from a few months following approval to ten years. Due to the complexity of the Health Care Reform Act, it is likely that additional legislation will be considered and enacted. The Health Care Reform Act requires the promulgation of regulations that will likely have significant effects on the healthcare industry and third party payers. Thus, the healthcare industry and our operations may be subjected to significant new statutory and regulatory requirements and contractual terms and conditions, and consequently to structural and operational changes and challenges.

The Health Care Reform Act also implements significant changes to healthcare fraud and abuse laws that will intensify the risks and consequences of enforcement actions. These include expansion of the False Claims Act by: (a) narrowing the public disclosure bar; and (b) explicitly stating that violations of the Anti-Kickback Statute trigger false claims liability. In addition, the Health Care Reform Act lessens the intent requirements under the Anti-Kickback Statute to provide that a person may violate the statute without knowledge or specific intent. The Health Care Reform Act also provides new funding and expanded powers to investigate fraud, including through expansion of the Medicare Recovery Audit Contractor (“RAC”) program to Medicare Parts C and D and Medicaid and authorizing the suspension of Medicare and Medicaid payments to a provider of services pending an investigation of a credible allegation of fraud. Finally, the legislation creates enhanced penalties for noncompliance, including increased criminal penalties and expansion of administrative penalties under Medicare and Medicaid. Collectively, such changes could have a material adverse impact on our operations.

Our programs are subject to periodic surveys by government authorities and/or their contractors to ensure compliance with various requirements. Regulators conducting periodic surveys often provide reports containing statements of deficiencies for alleged failures to comply with various regulatory requirements. In most cases, if a deficiency finding is made by a reviewing agency, we will work with the reviewing agency to agree upon the steps to be taken to bring our program into compliance with applicable regulatory requirements. In some cases, however, an agency may take a number of adverse actions against a program, including:

While we believe that our programs are in compliance with Medicare, Medicaid and other program certification requirements and state licensure requirements, failure to comply with these requirements could have a material adverse impact on our business and our ability to enter into contracts with other agencies to provide services.

Agencies and other payers periodically conduct pre-payment or post-payment medical reviews or other audits of our claims. In order to conduct these reviews, payers request documentation from us and then review that documentation to determine compliance with applicable rules and regulations, including the eligibility of clients to receive benefits, the appropriateness of the care provided to those clients, and the documentation of that care. Any determination that we have not complied with applicable rules and regulations could result in adjustment of payments or the incurrence of fines and penalties, or in situations of significant compliance failures review or non-renewal of related contracts.

Some states in which we operate prohibit general business entities, such as we are, from “practicing medicine,” which definition varies from state to state and can include employing physicians, as well as engaging in fee-splitting arrangements with these healthcare providers. Among other things, we currently contract with and employ NPs to perform CHAs. We believe that we have structured our operations appropriately; however, we could be alleged or found to be in violation of some or all of these laws. If a state determines that some portion of our business violates these laws, it may seek to have us discontinue those portions or subject us to penalties, fines, certain license requirements or other measures. Any determination that we have acted improperly in this regard may result in liability to us. In addition, agreements between the corporation and the professional may be considered void and unenforceable.

Many of our employees are subject to federal and state laws and regulations governing the ethics and practice of their professions. For example, our mid-level practitioners, e.g., NPs, are subject to state laws requiring physician supervision and state laws governing mid-level scope of practice. As the use of mid-levels by physicians increases, state governing boards are implementing more robust regulations governing mid-levels and their scope of practice under physician supervision. Our ability to provide mid-level practitioner services may be restricted by the enactment of new state laws governing mid-level scope of practice and by state agency interpretations and enforcement of such existing laws. In addition, professionals who are eligible to participate in Medicare and Medicaid as individual providers must not have been excluded from participation in government programs at any time. Our ability to provide services depends upon the ability of our personnel to meet individual licensure and other requirements.

As a provider of WD services in multiple international jurisdictions, we are subject to numerous national and local laws and regulations. These laws and regulations significantly affect the way in which we operate various aspects of our business. We must also comply with contract-specific technical and infrastructure requirements. Failure to follow the rules and requirements of these programs can significantly affect our ability to be paid for the services we provide. In addition, our revenue is primarily derived from contracts that are funded by national governments that are seeking to reduce the overall unemployment rate, or improve job placement success for targeted cohorts, and the recidivism rate. Further, the revenue we receive from these contracts is typically tied to milestones that are largely uncontrolled by us. Such milestones include the job placement success of clients, duration and tenure of clients in jobs once they are placed, and various other market and industry factors including the overall unemployment rate. A significant decline in national and local government initiatives to provide funding for employment programs, or shift of expenditures or funding, could cause government sponsors to reduce their expenditures under those contracts or not renew such contracts, either of which could have a negative impact on our future operating results.

Our WD Services segment is also subject to the European Union’s and other countries’ data security and protection laws and regulations. These laws and regulations may restrict the flow of information, including information about employees or service users, from this segment to the Company in the United States. In certain instances, informed consent to the data transfer must be given by the affected employee or service user. Compliance with such laws and regulations may make it more difficult for the Company to gather data necessary to ensure the appropriate operation of its internal controls or to detect corruption resulting in the need for additional controls or increasing the Company’s costs to maintain appropriate controls. Failure to comply with such laws and regulations could result in fines or penalties against the Company.

Further, our international operations are subject to various US and foreign statutes that prevent bribery and corruption, including the US Foreign Corrupt Practices Act and the UK’s Bribery Act. These statutes generally prevent the provision of anything of value to government officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment and require the maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions. In addition, many countries in which we operate have antitrust or competition regulations which prohibit collusive tendering or bid-rigging behavior. Failure to comply with any of these statutes and regulations could result in fines or penalties and could have a negative impact on our future operations.

Our website is www.prscholdings.com. We make available, free of charge at this website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the United States Securities and Exchange Commission. The information on the website listed above is not and should not be considered part of this annual report on Form 10-K and is not incorporated by reference in this document. In addition, we will provide, at no cost, paper or electronic copies of our Forms 10-K, 10-Q and 8-K and amendments to those reports filed with or furnished to the Securities and Exchange Commission. Requests for such filings should be directed to David Shackelton, Chief Financial Officer, telephone number: (520) 747-6600.

The following risks should be read in conjunction with other information contained, or incorporated by reference, in this report, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and our consolidated financial statements and related notes. If any of the following risks actually occurs, our business, financial condition and operating results could be adversely affected.

~~Our annual operating results and stock price may be volatile or may decline regardless of our operating performance.~~

~~Our annual operating results and the market price for our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:~~

In addition, the stock markets, and in particular the NASDAQ Global Market, have experienced considerable price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we become involved in securities litigation, we could incur substantial costs, and our resources and the attention of management could be diverted from our business.

W~~e obtain~~~~a significant portion of~~ ~~our business through responses to government requests for proposals~~ ~~and~~ ~~we may not be awarded contracts through this process in the future,~~or ~~contracts we are awarded may not be profitable.~~

We obtain, and will continue to seek to obtain, a significant portion of our business from national, state, and local government entities. To obtain business from government entities, we are often required to respond to RFPs. To propose effectively, we must accurately estimate our cost structure for servicing a proposed contract, the time required to establish operations and the terms of the proposals submitted by competitors. We must also assemble and submit a large volume of information within rigid and often short timetables. Our ability to respond successfully to RFPs will greatly impact our business. We may not be awarded contracts through the RFP process, and our proposals may not result in profitable contracts.

If we fail to establish and maintain important relationships with officials of government entities and agencies, we may not be able to successfully procure or retain government-sponsored contracts, which could negatively impact our revenues.

To facilitate our ability to procure or retain government-sponsored contracts, we rely in part on establishing and maintaining relationships with officials of various government entities and agencies. These relationships enable us to provide informal input and advice to the government entities and agencies prior to the development of an RFP or program for privatization of healthcare and workforce development services and we believe they enhance our chances of procuring contracts with these payers. The effectiveness of our relationships may be reduced or eliminated with changes in the personnel holding various government offices or staff positions. We also may lose key personnel who have these relationships. We may be unable to successfully manage our relationships with government entities and agencies and with elected officials and appointees. Any failure to establish, maintain or manage relationships with government and agency personnel may hinder our ability to procure or retain government-sponsored contracts.

~~Government unions may oppose privatizing government programs to outside vendors such as us, which could limit our market opportunities.~~

Our success depends in part on our ability to win contracts to administer and manage programs traditionally administered by government employees. Many government employees, however, belong to labor unions with considerable financial resources and lobbying networks. These unions could apply opposing political pressure on legislators and other officials seeking to privatize government programs. Union opposition could result in our losing government contracts or being precluded from providing services under government contracts, or maintaining or renewing existing contracts. The ability to renew and obtain new contracts is critical to our financial success. If we could not renew certain contracts, or obtain new contracts, due to opposition political actions, it could have a material adverse impact on our operating results.

~~Inaccurate, misleading or negative media coverage could damage our reputation and harm our ability to procure government sponsored contracts.~~

The media sometimes provides news coverage about our contracts and the services we or our competitors provide to clients in our sectors. This media coverage, if negative, could influence government officials to slow the pace of privatizing or retendering government services. Moreover, inaccurate, misleading or negative media coverage about us could harm our reputation and, accordingly, our ability to obtain government sponsored contracts.

The services we provide across our three segments are subject to lawsuits and claims. A substantial award could have a material adverse impact on our operations and cash flows, and could adversely impact our ability to continue to purchase appropriate liability insurance. We can be subject to claims for negligence or intentional misconduct (in addition to professional liability type claims) by an employee or a third party we engage to assist with the provision of services, including but not limited to claims arising out of accidents involving vehicle collisions, workforce development placements or CHAs and various claims that could result from employees or contracted third parties driving to or from interactions with clients and while providing direct client services. We can be subject to employee related claims such as wrongful discharge or discrimination or a violation of equal employment laws and permitting issues. While we are insured for these types of claims, damages exceeding our insurance limits or outside our insurance coverage, such as a claim for fraud, certain wage and hour violations or punitive damages, could adversely affect our cash flow and financial condition.

~~We face substantial competition in attracting and retaining experienced professionals, and we may be unable to~~~~sustain or~~~~grow our business if we cannot attract and retain qualified employees.~~

Our success depends to a significant degree on our ability to attract and retain highly qualified and experienced professionals who possess the skills and experience necessary to deliver high quality services to our clients. Our objective of providing the highest quality of service to our clients is a significant consideration when we evaluate education, experience and qualifications of potential candidates for employment as direct care and administrative staff. To that end, we attempt to hire professionals and others with requisite educational backgrounds and professional certifications. These employees are in great demand and are likely to remain a limited resource for the foreseeable future.

The performance in each of our business segments also depends on the talents and efforts of our highly skilled intellectual technology professionals. Competition for skilled intellectual technology professionals can be intense. Our success depends on our ability to recruit, retain and motivate these individuals.

Our ability to attract and retain employees with the requisite experience and skills depends on several factors including, but not limited to, our ability to offer competitive wages, benefits and professional growth opportunities. Some of the companies with which we compete for experienced personnel have greater financial, technical, political and marketing resources, name recognition and a larger number of clients and payers than we do. The inability to attract and retain experienced personnel could have a material adverse effect on our business.

~~Our success depends on our ability to manage growing and changing operations.~~

Since 1996, our business has grown significantly in size and complexity, most recently with the acquisitions of Ingeus and Matrix in 2014. This growth has placed, and is expected to continue to place, significant demands on our management, systems, internal controls and financial and physical resources. In addition, we expect that we will need to further develop our financial and managerial controls and reporting systems to accommodate future growth. This could require us to incur significant expense for, among other things, hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems and expanding our information technology infrastructure. The nature of our business is such that qualified management personnel can be difficult to find. Our inability to manage growth effectively could have a material adverse effect on our financial results.

~~Our success depends on our ability to compete effectively in the marketplace.~~

We compete for clients and for contracts with a variety of organizations that offer similar services across all of our segments. Many organizations of varying sizes compete with us, including local not-for-profit organizations and community based organizations, larger companies, organizations that provide similar NET management services to Medicaid eligible beneficiaries in local markets, large multi-national corporations that provide WD services and CHA providers. Some of these companies have greater financial, technical, political, marketing, name recognition and other resources and a larger number of clients or payers than we do. In addition, some of these companies offer more services than we do. We have experienced, and expect to continue to experience, competition from new entrants into the markets in which we operate. Increased competition may result in pricing pressures, loss of or failure to gain market share or loss of clients or payers, any of which could have a material adverse effect on our operating results.

~~Our business~~~~could be~~ ~~subject to security breaches and attacks.~~

We provide services to individuals, including services that require us to maintain sensitive and personal client information, including information relating to their health, social security numbers and other identifying data. Therefore, our information technology systems store client information protected by numerous federal, state and foreign regulations. Further, our systems include interfaces to third-party stakeholders, often connected via the Internet. As a result of the data we maintain and third-party access, we are subject to increasing cyber security risks. The nature of our business, where services are often performed outside a secured location, adds additional risk. While we have implemented measures to detect and prevent security breaches and cyber-attacks, our measures may not be effective. Criminals are constantly devising schemes to circumvent information technology security safeguards, and other companies have recently suffered serious data security breaches. If unauthorized parties gain access to our networks or databases, they may be able to steal, publish, delete or modify our private and sensitive third-party information, including personal identification information. In addition, employees may intentionally or inadvertently cause data or security breaches that result in the unauthorized release of personal or confidential information.

Our WD Services segment has operations in many countries in Europe and these operations have access to significant amounts of sensitive personal information about individuals. In Europe, these operations are subject to European and national data privacy legislation, which imposes significant obligations on data processors and controllers with respect to such personal information. Similar regimes exist in other WD Service jurisdictions such as Australia, Canada and South Korea. In addition, our contractual obligations with customers can require additional, stringent commitments in the handling of such information, which are subject to client audit procedures and other checks, often with severe contractual penalties in the case of breach.

As a result of any security breach, or loss or mishandling of data, we could incur liability, regulatory actions, fines, contractual deductions, enforcement orders or litigation, which could increase our costs and have a material adverse effect on our operating results. Further, any such breach, or loss or mishandling of data could impact our business reputation and could result in the loss of contractual relationships or make it more difficult to obtain new contracts, having an adverse effect on our business and financial performance.

Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled individuals, with the continued contributions of our senior management being especially critical to our success. Competition for well-qualified employees across Providence and its various businesses is intense and our continued ability to compete effectively depends, in part, upon our ability to attract new employees. While we have established programs to attract new employees and provide incentives to retain existing employees, particularly our senior management, we cannot assure you that we will be able to attract new employees or retain the services of our senior management or any other key employees in the future. Effective succession planning is also important to our future success. If we fail to ensure the effective transfer of senior management knowledge and smooth transitions involving senior management across our various businesses, our ability to execute short and long term strategic, financial and operating goals, as well as our business, financial condition and results of operations generally, could be adversely affected.

~~We conduct business in a heavily regulated healthcare industr~~~~y. C~~~~ompliance~~~~with existing regulations is costly~~, ~~and changes in regulations or violations of regulations may result in increased costs or sanctions that~~~~could~~~~reduce our revenue and profitability.~~

~~The healthcare industry is subject to extensive federal and state regulations relating to, among other things:~~

Both federal and state government agencies have increased coordinated civil and criminal enforcement efforts related to the healthcare industry. Regulations related to the healthcare industry are extremely complex and, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation of those laws.The Patient Protection and Affordable Care Act has also introduced some degree of regulatory uncertainty as the industry does not know how the changes it introduces will affect many aspects of the industry.Medicare and Medicaid anti-fraud and abuse laws prohibit certain business practices and relationships related to items and services reimbursable under Medicare, Medicaid and other governmental healthcare programs, including the payment or receipt of remuneration to induce or arrange for referral of patients or recommendation for the provision of items or services covered by Medicare or Medicaid or any other federal or state healthcare program. Federal and state laws prohibit the submission of false or fraudulent claims, including claims to obtain reimbursement under Medicare and Medicaid. We have implemented compliance policies to help assure our compliance with these regulations as they become effective; however, different interpretations or enforcement of these laws and regulations in the future could subject our practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel, services or the manner in which we conduct our business.

~~Our HA Services segment~~ ~~operates in a heavily regulated healthcare industry, and changes to the regulatory landscape could have a material adverse effect on~~~~our~~~~results of operations and financial condition.~~

The CHA services industry is primarily regulated by federal and state healthcare laws and the requirements of participation and reimbursement of the MA Program established by CMS. From time to time, CMS considers changes to regulatory guidelines with respect to prospective CHAs. CMS could adopt new guidelines that may, for example, increase the costs associated with CHAs or limit the opportunities and settings available to administer CHAs. Further, changes in or adoption of new state laws governing the scope of practice of mid-level practitioners, or more restrictive interpretations of such laws, may restrict our ability to provide services using nurse practitioners. Any such implementation of additional regulations on the CHA industry by CMS or other regulatory bodies or further regulation of mid-level practitioners could have a material adverse impact on our HA Services segment’s revenues and margins, which could have a material adverse impact on our consolidated results of operations.

~~In our WD Services segment, w~~~~e conduct business in~~~~several countries, each with its own system of regulation. C~~~~ompliance~~~~with existing regulations is costly~~, ~~and changes in regulations or violations of regulations may result in increased costs or sanctions that~~~~could~~~~reduce our revenue and profitability.~~

In 2015, our WD Services segment operated in 11 countries outside the US. Each of these countries has its own national and municipal laws and regulations, and some countries such as Australia, Germany and Switzerland, have both federal and state regulations. These laws can differ significantly from country to country. In addition, in Europe, countries (including the United Kingdom) are subject to European Union laws and rules. We have implemented compliance policies to help assure our compliance with these laws and regulations as they become effective; however, different interpretations or enforcement of these laws and regulations in the future could subject our practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel, services or the manner in which we conduct our business.

~~We could be subject to actions for false claims if we do not comply with government coding and billing rules~~, ~~which could~~~~have a material adverse impact on our operating results~~.

If we fail to comply with federal and state documentation, coding and billing rules, we could be subject to criminal and/or civil penalties, loss of licenses and exclusion from the Medicare and Medicaid programs, which could have a material adverse impact on our operating results. In billing for our services to third-party payers, we must follow complex documentation, coding and billing rules. These rules are based on federal and state laws, rules and regulations, various government pronouncements, and industry practice. Failure to follow these rules could result in potential criminal or civil liability under the federal False Claims Act, under which extensive financial penalties can be imposed and/or under various state statutes which prohibit the submission of false claims for services covered. Compliance failure could further result in criminal liability under various federal and state criminal or civil statutes.

In the WD Services segment, particularly in Europe, our contracts are subject to stringent claims and invoice processing regimes which vary depending on the customer and nature of the payment mechanism. Under European procurement legislation which has been implemented in each European Union member state, any conviction for fraud can result in a ban from participating in public procurement tenders for up to five years, or until the organization in question has put in place “self clean” measures to the satisfaction of the procuring authority. This could significantly affect our business given that most of our customers in Europe are governmental organizations. Any such breaches or deficiencies in paperwork associated with billing may also be subject to contractual claw back regimes and penalties, which can be enforced many years after the revenue has been paid by the relevant authority.

While we carefully and regularly review our documentation, coding and billing practices, the rules are frequently vague and confusing and we cannot assure that governmental investigators, private insurers or private whistleblowers will not challenge our practices. Such a challenge could result in a material adverse effect on our financial position and results of operations.

~~If we fail to comply with the federal Anti-~~K~~ickback Statute, we could be subject to criminal and civil penalties, loss of licenses and exclusion from the Medicare and Medicaid programs,~~~~all of~~~~which could~~~~have a material adverse impact on our operating results~~.

The federal Anti-Kickback Statute prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of items or services payable by a federally funded healthcare program. Any of our financial relationships with healthcare providers will be potentially implicated by this statute to the extent Medicare or Medicaid referrals are implicated. Violations of the Anti-kickback Statute could result in substantial civil or criminal penalties, including criminal fines of up to $25,000 per violation, imprisonment of up to five years, civil penalties under the Civil Monetary Penalties Law (42 U.S.C. 1320a-7a) of up to $50,000 per violation, plus three times the remuneration involved, civil penalties under the False Claims Act of up to $11,000 for each claim submitted, plus three times the amounts paid for such claims and exclusion from participation in the Medicare and Medicaid programs. Any such penalties could have a significant negative effect on our operations. Furthermore, the exclusion, if applied to us, could result in significant reductions in our revenues, which could materially and adversely affect our business, financial condition and results of our operations. In addition, many states have adopted laws similar to the federal Anti-Kickback Statute with similar penalties.

~~If we fail to comply with physician self-referral laws, to the extent applicable to our operations, we could~~~~experience~~ ~~a significant loss of reimbursement revenue.~~

We may be subject to federal and state statutes and regulations banning payments for referrals of patients and referrals by physicians to healthcare providers with whom the physicians have a financial relationship and billing for services provided pursuant to such referrals if any occur. Violation of these federal and state laws and regulations, to the extent applicable to our operations, may result in prohibition of payment for services rendered, loss of licenses, fines, criminal penalties and exclusion from Medicare and Medicaid programs. To the extent we do maintain such financial relationships with physicians, we rely on certain exceptions to self-referral laws that we believe will be applicable to such arrangements. Any failure to comply with such exceptions could result in the penalties discussed above.

~~Our WD~~~~Services~~~~segment operates~~~~internationally, which exposes the group to risks of bribery, corruption~~~~and collusive tendering practices with respect to public officials and tenders~~.

As an international business whose customers are largely in the public sector, the WD Services segment generally wins work through public tender processes. Various statutes, such as the UK’s Bribery Act and the Foreign Corrupt Practices Act in the US, prohibit us from providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. These statutes require us to maintain adequate record-keeping and internal accounting practices to accurately reflect our transactions. In addition, many countries in which we operate have antitrust or competition regulations which prohibit collusive tendering or bid-rigging behavior. Policies and procedures we implement to prevent bribery, corruption and anti-competitive conduct may not effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition and results of operations.Further, our WD Services segment is subject to the European Union’s and other countries’ data security and protection laws and regulations. These laws and regulations may restrict the flow of information, including information about employees or service users, from this segment to the Company in the US. In certain instances, informed consent to the data transfer must be given by the affected employee or service user. Compliance with such laws and regulations may make it more difficult for the Company to maintain the records and internal accounting practices necessary to ensure the appropriate operation of our internal controls or to detect corruption.Any breach of bribery, corruption and collusive tendering laws could also expose our operations in Europe to a ban from participating in public procurement tenders for up to 5 years, or until the organization in question has put in place “self clean” measures to the satisfaction of the procuring authority.

We ~~are~~ ~~subject to regulations relating to privacy and security of patient information.~~ ~~Failure to comply with privacy regulations could result in a material adverse impact on our operating results.~~

~~There are numerous federal and state regulations addressing patient information privacy and security concerns.In particular, the federal regulations issued under (“HIPAA”) contain provisions that:~~

Compliance with state and federal laws and regulations is costly and requires our management to expend substantial time and resources. Further, the HIPAA regulations and state privacy laws expose us to increased regulatory risk, as the penalties associated with a failure to comply, even if unintentional, could have a material adverse effect on our results of operations.

We have an internal committee to maintain our privacy and security policies regarding client information in compliance with HIPAA. This committee is responsible for training our employees, including our regional and local managers and staff, to comply with HIPAA and monitoring compliance with the policy. The costs associated with our ongoing compliance could be substantial, which could negatively impact our results of operations.

Our WD Services segment has operations in many countries in Europe, and internationally, and these operations have access to significant amounts of sensitive personal information about individuals. In Europe, these operations are subject to European and national data privacy legislation which imposes significant obligations on data processors and controllers with respect to such personal information. Some countries, such as France and Germany, have particularly strong privacy laws which impose even greater obligations on people handling personal information. There are proposed amendments being suggested to European data privacy legislation which could significantly increase the fines for any breaches. In addition to fining powers, information privacy regulators in Europe have significant powers to require organizations that breach regulations to put in place measures to ensure that such breaches do not occur again, and require businesses to stop processing personal information until the required measures are in place. Such orders could significantly impact our business given we are required to handle personal information as part of our service delivery model.

~~As a government contractor, we are subject to an increased risk of litigation and other legal actions and liabilities.~~

As a government contractor, we are subject to an increased risk of investigation, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities that are not as frequently experienced by companies that do not provide government sponsored services. Companies providing government sponsored services can also become involved in public inquiries which can lead to negative media speculation or potential cancellation or termination of contracts. In our WD Services segment in Europe, European procurement regulations in force in each European Union member state require public procurement authorities to impose a ban from participating in public procurement tenders for up to five years, or until the organization in question has put in place “self clean” measures to the satisfaction of the procuring authority where companies are found guilty of fraud or certain other criminal offenses. Authorities can also exercise their discretion to blacklist companies for up to two years where they believe they have been involved in acts of gross misconduct or until the organization in question has put in place “self clean” measures to the satisfaction of the procuring authority. The occurrence of any of these actions, regardless of the outcome, could disrupt our operations and result in increased costs, and could limit our ability to obtain additional contracts in other jurisdictions.

~~Our business could be adversely affected by future legislative changes that hinder or reverse the privatization of~~~~NET services or WD services~~.

The market for certain of our services depends largely on government sponsored programs. These programs can be modified or amended at any time. Moreover, part of our growth strategy includes aggressively pursuing opportunities created by government initiatives to privatize the delivery of NET services and WD services. However, there are opponents to the privatization of these services and, as a result, future privatization is uncertain. If additional privatization initiatives are not proposed or enacted, or if previously enacted privatization initiatives are challenged, repealed or invalidated, there could be a material adverse impact on our operating results.

~~Our business is subject to licensing regulations and other regulatory provisions, including regulatory provisions governing surveys and audits~~.C~~hanges to~~, ~~or violations of~~, ~~these regulations could negatively impact our revenues.~~

In many of the locations where we operate, we are required by local laws (both US and foreign) to obtain and maintain licenses. The applicable state and local licensing requirements govern the services we provide, the credentials of staff, record keeping, treatment planning, client monitoring and supervision of staff. The failure to maintain these licenses or the loss of a license could have a material adverse impact on our business and could prevent us from providing services to clients in a given jurisdiction. Most of our contracts are subject to surveys or audit by our payers. We are also subject to regulations that restrict our ability to contract directly with a government agency in certain situations. Such restrictions could affect our ability to contract with certain payers, and could have a material adverse impact on our results of operations.

~~Changes in budgetary priorities of the government entities that fund the services we provide could result in our loss of contracts or a decrease in amounts payable to us under our contracts.~~

Our revenue is largely derived from contracts that are directly or indirectly paid or funded by government agencies. All of these contracts are subject to legislative appropriations and state or national budget approval. The availability of funding under our contracts with state governments is dependent in part upon federal funding to states. Changes in Medicaid methodology may further reduce the availability of federal funds to states in which we provide services. Among the alternative Medicaid funding approaches that states have explored are provider assessments as tools for leveraging increased Medicaid federal matching funds. Provider assessment plans generate additional federal matching funds to the states for Medicaid reimbursement purposes, and implementation of a provider assessment plan requires approval by the Centers for Medicare and Medicaid Services in order to qualify for federal matching funds. These plans usually take the form of a bed tax or a quality assessment fee, which were historically required to be imposed uniformly across classes of providers within the state, except that such taxes only applied to Medicaid health plans.

However, the Deficit Reduction Act of 2005 (“Deficit Reduction Act”) requires states that desire to impose provider taxes to impose taxes on all MCOs, not just Medicaid MCOs. This uniformity requirement as it relates to taxing all MCOs may make states more reluctant to use provider assessments as a vehicle for raising matching funds and, thus, reduce the amount of funding that the states receive and have available. Moreover, under the Deficit Reduction Act, states may be allowed to reduce the benefits provided to certain Medicaid enrollees, which could affect the services that states contract for with us. We cannot make any assurances that these Medicaid changes will not negatively affect the funding under our contracts. As funding under our contracts is dependent in part upon federal funding, such funding changes could have a significant effect upon our business.

Currently, many of the US states and overseas countries in which we operate are facing budgetary shortfalls or changes in budgetary priorities. While many of these states are dealing with budgetary concerns by shifting costs from institutional care to home and community based care such as we provide, there is no assurance that this trend will continue.

Likewise, in many of the overseas countries addressed by our WD Services segment, a continued focus on austerity measures following the global financial crisis to reduce national and local budget deficits could lead to further spending cuts or changes to welfare arrangements. This may make availability of funding for outsourcing of such services more difficult to obtain from relevant government departments, which may lead to more challenging terms and conditions including pressure on prices or volumes of services provided.

Consequently, a significant decline in government expenditures, shift of expenditures or funding away from programs that call for the types of services that we provide, or change in government contracting or funding policies could cause payers to terminate their contracts with us or reduce their expenditures under those contracts, either of which could have a negative impact on our operating results.

~~We derive a significant amount of our revenues from a few payers, which puts us at risk. Any changes in the funding, financial viability~~ ~~or our relationships with these payers could have a material adverse impact on our results of operations.~~

We generate a significant amount of the revenues in our segments from a few payers under a small number of contracts. For example, for the years ended December 31, 2015, 2014 and 2013, we generated approximately 52.8%, 56.2% and 61.8%, respectively, of our revenue from our top ten payers. Additionally, our top five payers related to our NET Services operating segment represent, in the aggregate, approximately 39.2%, 43.2% and 43.6%, respectively, of our NET Services operating segment revenue for the years ended December 31, 2015, 2014 and 2013.The top payer related to our WD Services operating segment represented40.0% and57.2% of our WD Services operating segment revenue for the years ended December 31, 2015 and the period from May 31, 2014 to December 31, 2014, respectively. Additionally, the top payer related to our HA Services operating segment represented31.1% and43.2% of our HA Services operating segment revenue for the year ended December 31, 2015 and the period from October 24, 2014 to December 31, 2014, respectively.The loss of, reduction in amounts generated by, or changes in methods or regulations governing payments for our services under these contracts could have a material adverse impact on our revenue and results of operations.

~~Changes to the fee structure in our workforce development contracts with the UK Department of Work & Pension could have a material adverse effect on our operating results.~~

Approximately 40.0% and57.2% of WD Services’ revenues for the year ended December 31, 2015 and the period from May 31, 2014 to December 31, 2014, respectively, are derived from seven standardized regional contracts with the Department of Work & Pension (“DWP”) under the Work Programme, whereby services are provided to long-term unemployed individuals to place them into jobs. Under the terms of the contracts with the DWP, effective July 1, 2014, the fee structure has changed, eliminating certain upfront payments and discounting certain other fees. As a result, going forward, WD Services will receive the majority of its revenue under these contracts only upon demonstrating the client’s continued employment for a substantial period of time and upon achievement of incentive measures over the defined measurement periods. However, a substantial portion of the total cost of providing services to clients is incurred in the period between referral and job placement. The loss of, continued reduction in amounts generated by, or changes in methods or regulations governing payments for our services under these contracts with the DWP could have a material adverse impact on our WD Services segment’s revenue and margins, which could have a material adverse impact on our consolidated results of operations.

~~Our contracts in~~~~certain of~~ ~~our segment~~s~~can be terminated prior to expiration, without cause and without penalty to the payers. There can be no assurance that~~~~out contracts~~ will survive until the end of their stated terms, or that upon their expiration these contracts will be renewed or extended. Disruptions to our contracts could have a material adverse impact on our results of operations.

With respect to many of our contracts, the payer may terminate the contract without cause, at will and without penalty to the payer, either immediately or upon the expiration of a short notice period in the event that, among other reasons, government appropriations supporting the programs serviced by the contract are reduced or eliminated. The failure of payers to renew or extend significant contracts or their early termination of significant contracts could adversely affect our financial performance. We cannot anticipate if, when or to what extent a payer might terminate its contract with us prior to its expiration or fail to renew or extend its contract with us.

O~~ur contracts~~~~are~~ ~~subject to audit and modification by the payers with whom we contract,~~at ~~their sole discretion.~~

Our business depends on our ability to successfully perform under various government funded contracts. Under the terms of these contracts, payers can review our performance, as well as our records and general business practices at any time, and may, in their discretion:

~~If payers have significant audit findings, or if they make material modifications to our contracts, it could have a material adverse impact on our results of operations.~~

~~If we fail to satisfy our contractual obligations, we could be liable for damages and financial penalties~~,~~which may place existing pledged performance and payment bonds at risk as well as~~~~harm our ability to keep our existing contracts or obtain new contracts~~ ~~and future bonds~~.

Our failure to comply with our contract obligations could, in addition to providing grounds for immediate termination of the contract for cause, negatively impact our financial performance and damage our reputation, which, in turn, could have a material adverse effect on our ability to maintain current contracts or obtain new ones. Our failure to meet contractual obligations could also result in substantial actual and consequential financial damages. The termination of a contract for cause could, for instance, subject us to liabilities for excess costs incurred by a payer in obtaining similar services from another source. In addition, our contracts require us to indemnify payers for our failure to meet standards of care, and some of them contain liquidated damages provisions and financial penalties that we must pay if we breach these contracts.

~~If we fail to estimate accurately the cost of performing certain contracts~~~~, we may experience reduced or negative margins~~.

Approximately 83.6%, 84.1% and 83.4% of our NET services revenue during 2015, 2014 and 2013, respectively, was generated under capitated contracts with the remainder generated through fee for service (“FFS”) and flat fee contracts. Our WD Services segment also provides services under FFS and flat fee contracts. Under most of our capitated contracts, we assume the responsibility of managing the needs of a specific geographic population by contracting out transportation services to local van, cab and ambulance companies on a per ride or per mile basis. We use a “pricing model” to determine applicable contract rates, which takes into account factors, such as estimated utilization, state specific data, previous experience in the state and/or with similar services, medical covered programs outlined, identified populations to be serviced, estimated volume and availability of mass transit. The amount of the fixed per member, per month fee is determined in the bidding process, but predicated on actual historical transportation data for the subject geographic region (provided by the payer), actuarial work performed in-house as well as by third party actuarial firms and actuarial analyses provided by the payer. If the utilization of our services is more than we estimated, the contract may be less profitable than anticipated, or may not be profitable at all. Under our FFS contracts, we receive fees based on our interactions with government sponsored clients. To earn a profit on these contracts, we must accurately estimate costs incurred in providing services. Our risk on these contracts is that our client population is not large enough to cover our fixed costs, such as rent and overhead. Our FFS contracts are not reimbursed on a cost basis and therefore, if we fail to estimate our costs accurately, we may experience reduced margins, or even losses on these contracts.

~~Our results of operations will continue to fluctuate due to seasonality.~~

Our quarterly operating results and operating cash flows normally fluctuate as a result of seasonal variations in our business. Our NET Services operating segment experiences fluctuations in demand for its non-emergency transportation services during the summer, winter and holiday seasons. Due to higher demand in the summer months and lower demand in the winter and holiday seasons, coupled with a primarily fixed revenue stream based on a per member, per month payment structure, our NET Services operating segment normally experiences lower operating margins in the summer season and higher operating margins in the winter and holiday seasons. Our HA and WD Services operating segmentstypically do not experience seasonal fluctuations in operating results, however, quarterly volatility in revenue and earnings is common due to uneven customer demand in our HA Services segment and the timing of commencement and expiration of certain major contracts in our WD Services segment.

~~Our reported financial results could suffer if there is an impairment of goodwill or other intangible assets.~~

Goodwill may be impaired if the estimated fair value of one or more of our reporting units is less than the carrying value of the respective reporting unit. Because we have grown in part through acquisitions, goodwill and other intangible assets represent a significant portion of our assets. We perform an analysis on our goodwill balances to test for impairment on an annual basis. Similarly, interim impairment tests may also be required in advance of our annual impairment test if events occur or circumstances change that would more likely than not reduce the fair value, including goodwill, of one or more of our reporting units below the reporting unit’s carrying value. Such circumstances could include but are not limited to: (1) loss of significant contracts, (2) a significant adverse change in legal factors, government regulations, or in the climate of our business, (3) unanticipated competition, (4) an adverse action or assessment by a regulator, or (5) a significant decline in our stock price. If events occur or circumstances change, we may be required to record an impairment adjustment to our goodwill or other intangible assets which could have a material adverse impact on our results of operations and financial position.

~~We may incur costs before receiving related revenues, which could result in cash shortfalls.~~

When we are awarded a contract to provide services, we may incur expenses before we receive any contract payments. These expenses include leasing office space, purchasing office equipment, instituting information technology systems, and hiring personnel. As a result, in certain large contracts where the government does not fund program start-up costs, we may be required to invest significant sums of money before receiving any related contract payments or sufficient payments needed to cover start-up costs. In addition, payments due to us from payers may be delayed due to billing cycles or as a result of failures to approve government budgets in a timely manner. Moreover, especially under FFS arrangements, any resulting cash shortfall could be exacerbated if we fail to either invoice the payer or to collect our fee in a timely manner. This could have a material adverse impact on our ongoing operations and our financial position.

~~We have a substantial amount of debt, which could impair our financial condition.~~

We have a significant amount of indebtedness. As of December 31, 2015, we had approximately $305.0 million of total indebtedness and approximately $212.1 million of available letter of credit and borrowing capacity under our credit facilities. Our substantial level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. Our substantial indebtedness could have other important consequences on our business. For example, it could:

Our ability to satisfy and manage our debt obligations depends on our ability to generate cash flow and on overall financial market conditions. To some extent, this is subject to prevailing economic and competitive conditions and to certain financial, business and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow from operations to permit us to pay principal, premium, if any, or interest on our debt obligations. If we are unable to generate sufficient cash flow from operations to service our debt obligations and meet our other cash needs, we may be forced to reduce or delay capital expenditures, sell or curtail assets or operations, seek additional capital, or seek to restructure or refinance our indebtedness. If we must sell or curtail our assets or operations, it may negatively affect our ability to generate revenue.

In addition, on February 11, 2015 and March 12, 2015, we issued $65.5 million and $15.8 million, respectively, of convertible preferred stock. The terms of the convertible preferred stock require us to pay mandatory quarterly dividends, either in cash or through an increase in the stated principal value of such stock. Our ability to satisfy and manage our obligations under our outstanding preferred stock depends, in part, on our ability to generate cash flow and on overall financial market conditions and the other factors discussed above.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to fund our day-to-day operations or to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled debt service obligations.

Our credit facility restricts our ability to dispose of assets and use the proceeds from any such dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

~~Our variable-rate indebtedness exposes us to interest rate risk, which could cause our debt service obligations~~~~to increase significantly.~~

Borrowings under our credit facility are subject to variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable-rate indebtedness would increase and our net income would decrease, even though the amount borrowed under the facilities remained the same. As of December 31, 2015, we had $305.0 million outstanding variable-rate borrowings under our credit facility. Borrowings under our credit facilities accrue interest at LIBOR plus 3.0% per annum as of December 31, 2015. An increase of 1% in the LIBOR rate would cause an increase in interest expense of approximately $6.8 million over the remaining term of the Amended and Restated Credit Agreement, which matures in 2018.

~~Restrictive covenants in our credit facility may limit our current and future operations, particularly our ability to respond to changes in our business or to pursue our business strategies.~~

The terms contained in the agreements that govern certain of our indebtedness, and the agreements that govern any future indebtedness of ours may include, a number of restrictive covenants that impose significant operating and financial restrictions, including restrictions on our ability to take actions that we believe may be in our best interest. These agreements, among other things, limit our ability to:

A breach of the covenants or restrictions could result in a default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross acceleration or cross-default provision applies. In the event our lenders and note holders accelerate the repayment of our borrowings, we cannot assure that we and our subsidiaries would have sufficient assets to repay such indebtedness.

~~Our use of a reinsurance program to cover certain claims for losses suffered and costs or expenses incurred could negatively impact our business.~~

We reinsure a substantial portion of our automobile, general liability, professional liability and workers’ compensation insurance. We also reinsured the general liability, professional liability, workers’ compensation insurance, automobile liability and automobile physical damage of various members of the network of subcontracted transportation providers and independent third parties over various policy years under reinsurance programs through our two wholly-owned captive insurance subsidiaries. However, effective February 15, 2011, we did not renew our reinsurance agreement and do not assume liabilities for policies that cover the general liability, automobile liability, and automobile physical damage coverage of our independent third party transportation providers after that date. We will continue to administer existing policies for the foreseeable future and resolve remaining and future claims related to these policies. In the event that actual reinsured losses increase unexpectedly and substantially exceed actuarially determined estimated reinsured losses under the program, the aggregate of such losses could materially increase our liability and adversely affect our financial condition, liquidity, cash flows and results of operations. In addition, as the availability to us of certain traditional insurance coverage diminishes or increases in cost, we will continue to evaluate the levels and types of insurance we include in our reinsurance and self-insurance programs. Any increase to these programs increases our risk exposure and therefore increases the risk of a possible material adverse effect on our financial condition, liquidity, cash flows and results of operations.

~~Any acquisition that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value~~~~or have a material adverse impact on~~ ~~our operating results.~~

We have made, and anticipate that we will continue to make, strategic acquisitions as part of our growth strategy. We have made a number of acquisitions since our inception. The success of these and other acquisitions depends in part on our ability to integrate acquired companies into our business operations. There can be no assurance that the companies acquired will continue to generate income at the historical levels on which we based our acquisition decisions, that we will be able to maintain or renew the acquired companies’ contracts, that we will be able to realize operating and economic efficiencies upon integration of acquired companies, or that the acquisitions will not adversely affect our results of operations or financial condition.

We continually review opportunities to acquire other businesses that would complement our current services, expand our markets or otherwise offer prospects for growth. In connection with our acquisition strategy, we could issue stock that would dilute existing stockholders’ percentage ownership, or we could incur or assume substantial debt or contingent liabilities. Acquisitions involve numerous risks, including, but not limited to, the following:

We cannot assure you that we will be successful in overcoming problems encountered in connection with any acquisition and our inability to do so could disrupt our operations and adversely affect our business. Moreover, we rely heavily on the representations and warranties and related indemnities provided to us by the sellers of acquired companies, including as they relate to creation, ownership and rights in intellectual property and compliance with laws and contractual requirements. Our failure to address these risks or other problems encountered in connection with past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities and harm our business generally.

~~Contract profitability may decline due to actions by governmental agencies.~~

In our WD Services segment, our operating costs and profitability may be significantly impacted by actions required by a government agency, such as the availability of information systems maintained by the government to streamline enrollment into our service programs. In addition, certain contracts may require that we hire former government employees, in relation to offering our service programs. Lastly, revenue under certain contracts may be adjusted prospectively if client volumes are below expectations. If the Company is unable to adjust its costs accordingly, profitability is negatively impacted.

~~Our estimated income taxes could be materially different from income taxes that we ultimately pay.~~

We are subject to income taxes in both the US and numerous jurisdictions abroad. Significant judgment and estimation is required in determining our provision for income taxes and related matters. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determinations are uncertain or otherwise subject to interpretation. Our determination of our income tax liability is always subject to review by applicable tax authorities and we are currently subject to audits in a number of jurisdictions. Although we believe our income tax estimates and related determinations are reasonable and appropriate, relevant taxing authorities may disagree. The ultimate outcome of any such audits and reviews could be materially different from estimates and determinations reflected in our historical income tax provisions and accruals. Any adverse outcome of any such audit or review could have an adverse effect on our financial condition and results of operations.

~~Significant commercial arrangements could result in operating and financial difficulties.~~

In 2014 we entered into a joint venture in order to bid on a new contract. Our future growth may depend, in part, on future similar arrangements, any of which could be material to our financial condition and results of operations. The success of these arrangements will depend in part on the satisfactory performance of contractual obligations by our partners, over which we will not have control. Further, challenges may arise relating to such arrangements, such as governance, accountability and decision-making conflicts, which may be costly to resolve or may make the arrangement less successful.

There are risks associated with our international operations that are different from the risks associated with our operations in the US, and our exposure to the risks of a global market could hinder our ability to maintain and expand international operations.

We have operation centers in Australia, Canada, France, Germany, Poland, Saudi Arabia, South Korea,Spain, Sweden, Switzerland, the United Kingdom and the US. In implementing our international strategy, we may face barriers to entry and competition from local companies and other companies that already have established global businesses, as well as the risks generally associated with conducting business internationally. The success and profitability of international operations are subject to numerous risks and uncertainties, many of which are outside of our control, such as:

In addition, changes in policies and/or laws of the US or foreign governments resulting in, among other changes, higher taxation, tariffs or similar protectionist laws could reduce the anticipated benefits of international operations and could have a material adverse effect on our results of operations and financial condition. We have currency exposure arising from both sales and purchases denominated in foreign currencies, including intercompany transactions outside the US, and we currently do not conduct hedging activities. We cannot predict with precision the effect of future exchange-rate fluctuations on our business and operating results, and significant rate fluctuations could have a material adverse effect on our results of operations and financial condition.

~~We operate~~~~and are in a taxable income position~~~~in multiple tax jurisdictions~~, ~~and face the risk of double taxation if one jurisdiction does not acquiesce to the tax claims of another jurisdiction.~~

We currently operate in the US and 11 foreign countries and are subject to income taxes in those countries and the specific states and/or provinces where we operate. In the event one taxing jurisdiction disagrees with another taxing jurisdiction, we could experience temporary or permanent double taxation and increased professional fees to resolve taxation matters.

~~Our revenues and expenses are subject to foreign economic and currency risks due to our operations outside of the~~US.

We have operations in 11 countries outside the US. The value of the US dollar against other foreign currencies has seen significant volatility recently. Our reported financial condition and results of operations are reported in multiple currencies, and are then translated into US dollars at the applicable exchange rate for inclusion in our consolidated financial statements. Appreciation of the US dollar against these other currencies will have a negative impact on our reported net revenue and operating income while depreciation of the US dollar against such currencies will have a positive effect on reported net revenue and operating income.

As of March 2016, our holding company headquarters was located in an owned building in Tucson, Arizona. In December 2015 we signed a lease for additional holding company office space in Stamford, Connecticut. In 2016, we intend to relocate principal executive offices into this new office space located at 700 Canal St., Stamford, CT, 06901. We intend to also maintain our holding company office space in Tucson, Arizona. NET Services leases space in approximately 38 locations, WD Services leases space in approximately 299 locations, and HA Services leases space in approximately three locations. The lease terms vary and we believe are generally at market rates. We believe that our properties are adequate for our current business needs, and believe that we can obtain adequate space, if needed, to meet our foreseeable business needs.

On June 15, 2015, a putative stockholder class action derivative complaint was filed in the Court of Chancery of the State of Delaware, (the “Court”), captioned Haverhill Retirement System v. Kerley et al., C.A. No. 11149-VCL. The complaint names Richard A. Kerley, Kristi L. Meints, Warren S. Rustand, Christopher Shackelton (the “Individual Defendants”) and Coliseum Capital Management, LLC (“Coliseum”) as defendants, and the Company as a nominal defendant. The complaint purported to allege that the dividend rate increase term originally in the Company’s outstanding convertible preferred stock was an impermissibly coercive measure that impaired the voting rights of the Company’s stockholders in connection with the vote on the removal of certain voting and conversion caps previously applicable to the preferred stock (the “Caps”), and that the Individual Defendants breached their fiduciary duties by approving the dividend rate increase term and attempting to coerce the stockholder vote relating to the Company’s preferred stock, and by failing to disclose all material information necessary to allow the Company’s stockholders to cast an informed vote on the Caps. The complaint also purports to allege derivative claims alleging that the Individual Defendants breached their fiduciary duties to the Company by entering into the subordinated note and standby agreement with Coliseum, and granting Coliseum certain stock options. The complaint further alleges that Coliseum has aided and abetted the Individual Defendants in breaching their fiduciary duties and that demand on the Board is excused as futile. The complaint sought, among other things, an injunction prohibiting the stockholder vote relating to the dividend rate increase, a finding that the Individual Defendants are liable for breaching their fiduciary duties to the Company and the Company’s stockholders, a finding that Coliseum is liable for aiding and abetting the Individual Defendant’s breaches of their fiduciary duties, a finding that Coliseum is liable for unjust enrichment, a finding that demand on the Board is excused as futile, a revision or rescission of the terms of the subordinated note and preferred stock as necessary and/or appropriate, a requirement for the Company to reform its corporate governance profile to protect against future misconduct similar to that alleged by the putative stockholder class, a certification of the putative stockholder class, compensatory damages, together with pre- and post-judgment interest, costs and disbursements (including expenses, attorneys’ and experts’ fees), and any other and further relief as is just and equitable.

On August 31, 2015, after arms’ length negotiations, the parties reached an agreement in principle and executed a memorandum of understanding providing for the settlement of claims concerning the dividend rate increase term and stockholder vote and related disclosure. The Memorandum of Understanding stated that the Defendants have entered into the partial settlement of the litigation solely to eliminate the distraction, burden, expense, and potential delay of further litigation involving claims that have been settled. Pursuant to the partial settlement, the Company agreed to supplement the disclosures in its definitive proxy statement on Schedule 14A (“Definitive Proxy Statement”), Coliseum and certain of its affiliates and the Company entered into an amendment to that certainSeries A Preferred Stock Exchange Agreement, by and among Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P., Blackwell Partners, LLC, and The Providence Service Corporation dated as of February 11, 2015 described in the Definitive Proxy Statement, and the Board of Directors of the Company agreed to adopt a policy related to the Board’s determination each quarter as to whether the Company should pay cash dividends or allow dividends to be paid in the form of PIK dividends on the preferred stock, as further described in the supplemental proxy disclosures. On September 2, 2015, Providence issued supplemental disclosures through a Supplement to the Proxy Statement. On September 16, 2015, Providence stockholders approved the removal of the Caps.

The settlement provided for, among other things, the release of any claims based on alleged coercion and disclosure related to the stockholder vote on the removal of the Caps. On November 13, 2015, the Court issued an order setting out the schedule related to application for court approval of the proposed settlement and plaintiffs’ counsel’s request for attorneys’ fees and expenses related to the settlement as provided for in the Memorandum of Understanding (“MOU”). The Company provided notice of the proposed partial settlement to Providence’s shareholders by December 11, 2015. At a hearing on February 9, 2016, the court denied approval of the settlement. The Court indicated that plaintiff’s counsel could petition the Court for a mootness fee, and that defendants would have the opportunity to oppose any such application.

On January 12, 2016, plaintiff filed a verified amended class action and derivative complaint. In addition to the defendants named in the earlier complaint, the amended complaint names David Shackelton, Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Blackwell Partners, LLC, Coliseum Capital CO-Invest, L.P. (collectively, and together with Coliseum Capital Management, LLC, “Coliseum”) and RBC Capital Markets, LLC, (“RBC Capital Markets”) as additional defendants. The amended complaint purports to allege direct and derivative claims for breach of fiduciary duty against some or all of the Individual Defendants and David Shackelton (collectively, the “Amended Individual Defendants”) regarding the approval of the subordinated note, the rights offering, standby agreement with Coliseum, and grant to Coliseum of certain stock options. The amended complaint also purports to allege an additional derivative claim for unjust enrichment against Coliseum regarding the subordinated note, the rights offering, and standby agreement with Coliseum, and stock options. The amended complaint further alleges that Coliseum and RBC Capital Markets aided and abetted the Amended Individual Defendants in breaching their fiduciary duties and that demand on the Board is excused as futile.

The amended complaint seeks (a) findings that (i) the Amended Individual Defendants are liable for breaching their fiduciary duties to the Company and the putative stockholder class, (ii) Coliseum and RBC Capital are liable for aiding and abetting such alleged breaches of fiduciary duties, (iii) Coliseum is liable for unjust enrichment, (iv) certain stock options awarded to Coliseum were the product of waste, and (iv) demand on the Board is excused as futile, (b) revision or rescission of the terms of the subordinated note and preferred stock as necessary and/or appropriate, (c) a requirement that the Company reform its corporate governance profile to protect against future misconduct similar to that alleged by the putative stockholder class, (d) certification of the putative stockholder class, (e) compensatory damages, together with pre- and post-judgment interest, costs and disbursements (including expenses, attorneys’ and experts’ fees), and (f) any other and further relief as is just and equitable.

Item 7A.Quantitative and Qualitative Disclosures About Market ~~for our common stock~~

Our common stock, $0.001 par value per share, our only class of common equity, has been quoted on NASDAQ under the symbol “PRSC” since August 19, 2003. Prior to that time there was no public market for our common stock. As of March 8, 2016, there were 26 holders of record of our common stock. The following table sets forth the high and low sales prices per share of our common stock for the period indicated, as reported on NASDAQ Global Select Market:

High

Low

2015

Fourth Quarter
$ 56.92 $ 41.80
Third Quarter
$ 53.49 $ 39.08
Second Quarter
$ 55.99 $ 40.52
First Quarter
$ 53.60 $ 36.03

2014

Fourth Quarter
$ 48.70 $ 34.03
Third Quarter
$ 49.41 $ 35.70
Second Quarter
$ 43.35 $ 28.07
First Quarter
$ 29.00 $ 23.91
~~Stock Performance Graph~~
~~The following graph shows a comparison of the cumulative total return for our common stock, NASDAQ Health Index and Russell 2000 Index assuming an investment of $100 in each on December 31, 2010.~~

~~Dividends~~
We have not paid any cash dividends on our common stock and do not plan to pay dividends on our common stock in the foreseeable future. In addition, our ability to pay dividends on common stock is limited by the terms of our credit agreement. The payment of future cash dividends, if any, will be reviewed periodically by the Board and will depend upon, among other things, our financial condition, funds from operations, the level of our capital and development expenditures, any restrictions imposed by present or future debt instruments and changes in federal tax policies, if any.

~~Issuer Purchases of Equity Securities~~
Period

Total Number
of Shares of
Common Stock
Purchased (1)

Average Price
Paid per
Share

Total Number of
Shares of Common Stock
Purchased as Part of
Publicly Announced
Program (2)

Maximum Number of
Shares of Common Stock
that May Yet Be Purchased
Under Program (3)

Maximum Dollar Value of
Shares of Common Stock
that May Yet Be Purchased
Under Program (2)
(in thousands)

Fourth quarter:

October 1, 2015 to October 31, 2015
751,061 $ 41.23 - 243,900 $ -
November 1, 2015 to November 30, 2015
59,818 $ 46.97 54,100 243,900 67,489
December 1, 2015 to December 31, 2015
55,481 $ 47.24 55,050 243,900 64,887

Total
866,360 $ 42.01 109,150 243,900 $ 64,887
~~______________________~~
~~(1)~~
Includes (i) shares that were acquired from employees in connection with the settlement of income tax and related benefit withholding obligations arising from vesting in restricted stock awards; (ii) common stock retained by us for the payment of the exercise price upon the exercise of stock options; (iii) the repurchase of 707,318 shares of our common stock for approximately $29.0 million that was not subject to a specific plan; and (iv) the repurchase of shares under the repurchase program authorized by the Board of Directors on November 4, 2015. For more information on these repurchases, see Note 12,~~Stockholders’ Equity~~Risk.~~, in the notes to consolidated financial statements.~~
~~(2)~~
On November 4, 2015 our Board of Directors authorized the Company to engage in a common stock repurchase program to repurchase up to $70.0 million in aggregate value of the Company’s common stock during the twelve-month period following November 4, 2015. As of December 31, 2015, we have spent approximately $5.1 million to purchase 109,150 shares of our common stock under this plan.
~~(3)~~ Our Board of Directors approved a stock repurchase program in February 2007 for up to one million shares of our common stock. Through December 31, 2012, we spent approximately $14.4 million to purchase 756,100 shares of our common stock on the open market under this program. No purchases have been made under the program since 2012. This program was formally cancelled by the Company in January 2016.

~~Equity Compensation Plan Information~~
~~The following table provides certain information as of December 31, 2015 with respect to our equity based compensation plans.~~
Plan category

Number ofsecurities tobe issuedupon exerciseofoutstandingoptions,warrants andrights

Weighted-averageexercise priceof
outstandingoptions,warrants andrights

(a)
Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans (excludingsecurities
reflected incolumn (a))

Equity compensation plans approved by security holders (1)
505,452 $34.84 1,262,626
Equity compensation plans not approved by security holders
— — —
Total
505,452 $34.84 1,262,626
~~(1)~~
The number of shares shown in column (a) represents the number of shares available for issuance pursuant to stock options and other stock-based awards that could be granted in the future under the 2006 Long-Term Incentive Plan, as amended.
~~Item 6.~~
~~Selected Financial Data.~~
We have derived the following selected financial data from the consolidated financial statements and related notes. The information set forth below is not necessarily indicative of future results. This information should be read in conjunction with our consolidated financial statements and the related notes, and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all of which are included elsewhere in this report.

Year Ended December 31,

2015(1)(2)(3)(8) 2014(1)(4)(5) 2013(1)(7)(8) 2012(1)(6)(8) 2011(1)(9)
(dollars and shares in thousands, except per share data)
Statement of operations data:

Service revenue, net
$ 1,695,446 $ 1,136,211 $ 798,766 $ 777,010 $ 623,814

Operating expenses:

Service expense
1,544,365 1,023,785 736,669 732,242 578,612
General and administrative expense
73,616 44,501 25,590 27,011 21,870
Depreciation and amortization
53,469 22,833 9,331 9,606 8,716
Asset impairment charges
- - - 2,506 -
Total operating expenses
1,671,450 1,091,119 771,590 771,365 609,198
Operating income
23,996 45,092 27,176 5,645 14,616
Other expenses:

Interest expense, net
16,213 13,122 6,921 7,513 10,009
Loss on extinguishment of debt
- - 525 - 2,463
Equity in net loss of investee
10,970 - - - -
Gain on foreign currency transactions
(857 ) (37 ) - - -
Income (loss) from continuing operations,before income taxes
(2,330 ) 32,007 19,730 (1,868 ) 2,144
Provision for income taxes
16,276 8,090 6,625 494 77
Income (loss) from continuing operations,net of tax
(18,606 ) 23,917 13,105 (2,362 ) 2,067
Discontinued operations, net of tax
101,800 (3,642 ) 6,333 10,844 14,873
Net income
83,194 20,275 19,438 8,482 16,940
Net loss attributable to noncontrolling interests
502 - - - -
Net income attributable to Providence
$ 83,696 $ 20,275 $ 19,438 $ 8,482 $ 16,940

Diluted earnings per common share:

Continuing operations
$ (1.45 ) $ 1.59 $ 0.95 $ (0.18 ) $ 0.15
Discontinued operations
5.75 (0.24 ) 0.46 0.82 1.12
Total
$ 4.30 $ 1.35 $ 1.41 $ 0.64 $ 1.27

Weighted-average number of commonshares outstanding:

Diluted
15,961 15,019 13,810 13,225 13,322

As of December 31,

2015(1) 2014(4)(5) 2013(7) 2012 2011(9)
(dollars in thousands)
Balance sheet data:

Cash and cash equivalents
$ 84,770 $ 135,258 $ 75,156 $ 26,250 $ 21,840
Total assets
1,053,976 1,168,934 425,954 391,737 379,053
Long-term obligations, including currentportion
303,845 574,613 123,500 130,000 150,493
Other liabilities
382,423 372,907 151,817 143,050 119,537
Convertible preferred stock
77,576 - - - -
Total stockholders' equity
290,132 221,414 150,637 118,687 109,023

~~(1)~~
On November 1, 2015, we completed the sale of our Human Services segment. Accordingly, the results of operations and financial condition of our Human Services segment have been presented in discontinued operations for all periods presented. Included in 2015 is a gain on the sale of the Human Services segment, net of tax, totaling approximately $100.3 million.
~~(2)~~
The Company incurred approximately $20.9 million of accelerated expense related to restricted shares and cash placed into escrow at the time of the Ingeus acquisition. The shares and cash were placed into escrow concurrent with the payments of the acquisition consideration paid for Ingeus; however, because two sellers of Ingeus remained employees post acquisition, the value of the shares and cash was recognized as compensation expense over the escrow term. Acceleration was triggered when the two sellers separated from the Company. In addition, in 2015 and 2014, respectively, the Company incurred $5.9 million and $4.5 million of expense prior to the separation of these two employees. Benefits of $2.5 million and $16.1 million associated with the reduction in the fair value of Ingeus contingent consideration are included in general and administrative expenses for 2015 and 2014, respectively. 2015 expenses also include $12.2 million of WD Services’ redundancy costs and $2.4 million in Ingeus transaction related expenses, whereas 2014 includes $11.8 million in acquisition costs primarily related to the acquisitions of Ingeus and Matrix.
~~(3)~~
The loss on equity investments relates to our investment in Mission Providence. Mission Providence began providing services in July 2015 and has incurred substantial start-up and administrative costs to date.
~~(4)~~
Two significant acquisitions were completed during 2014. We acquired Ingeus effective May 30, 2014 and we acquired Matrix effective October 23, 2014. These acquisitions resulted in the creation of two new segments in 2014, WD Services and HA Services. These acquisitions affect the comparability of the information reflected in the selected financial data. See the year on year analysis included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report for more information.
~~(5)~~
On May 28, 2014 we entered into the first amendment to our credit facility which increased the aggregate amount of the revolving credit facility from $165.0 million to $240.0 million. On October 23, 2014, we entered into the second amendment to our credit facility which added an additional term loan in the amount of $250.0 million. Additionally, on October 23, 2014, we entered into a 14.0% unsecured subordinated related party note in the aggregate principal amount of $65.5 million. The unsecured subordinated related party note was repaid on February 11, 2015 with proceeds from the issuance of $65.5 million of convertible preferred stock. The increases in our debt balances resulted in an increase in interest expense in 2014 over 2013. Additionally, 2014 includes approximately $4.5 million of financing fees that were deferred and fully expensed within interest expense in the fourth quarter of 2014 in relation to bridge financing commitments and approximately $3.0 million of third party financing fees that are included in general and administrative expense.
~~(6)~~
As a result of changes in the market environment in British Columbia, we initiated intangible asset impairment valuations of our Canadian business and, based on the results, we recorded impairment charges totaling approximately $2.5 million related to our intangible assets other than goodwill for the year ended December 31, 2012.
~~(7)~~
On August 2, 2013, we executed a new credit facility and paid all amounts due under the then existing credit facility with proceeds from the new credit facility. In conjunction with the termination of the previous credit facility, we recorded a loss on extinguishment of debt in 2013 of approximately $0.5 million.
~~(8)~~
We incurred expense (net of benefit of forfeiture of stock-based compensation) of approximately $0.7 million, $1.3 million and $1.3 million in 2015, 2013 and 2012, respectively for severance and retirement payments related former executive officers and key employees.
~~(9)~~
On March 11, 2011, we executed a new credit facility and paid all amounts due under the then existing credit facility with cash in the amount of $12.3 million and proceeds from the new credit facility. In conjunction with the termination of the previous credit facility, we recorded a loss on extinguishment of debt in 2011 of approximately $2.5 million.

~~Item 7.~~
~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 6, “Selected Financial Data” and our consolidated financial statements and related notes included in Item 8 of this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth in Item 1A, entitled, “Risk Factors” and elsewhere in this report may cause actual results to differ materially from those projected in the forward-looking statements.
~~Overview of Our Business~~
       ~~Please refer to~~ ~~Item 1. “Business”~~of this Form 10-K for a discussion of the Company’s services and corporate strategy. The Providence Service Corporation is a holding company that owns and manages diverse operating subsidiaries, comprised of providers of health care and workforce development services to a variety of end markets. Our operations are currently organized into three principal business segments: NET Services, WD Services, and HA Services.
~~Business Outlook~~
Our performance is affected by a number of trends that drive the demand for our services. In particular, the markets in which we operate are exposed to various trends such as government outsourcing and health care cost management. Over the long term, we believe there are numerous factors that could positively drive demand and affect growth within the industries in which we operate, including (i) an aging population, which will increase demand for health care services, (ii) budget pressure on governments, which may increase the use of private corporations to provide necessary services and (iii) care at home, driven by cost pressures on traditional reimbursement models and technological advances enabling remote engagement.
Recently, our company has grown through acquisitions, primarily in the WD Services and HA Services segments. Historically, our segments have grown through organic expansion into new markets and service lines, organic expansion within existing markets and service lines, increases in the number of clients served under contracts we have been awarded, the securing of new contracts, and through acquisitions.
~~We continue to selectively identify and pursue the acquisition of attractive businesses that are complementary to our business strategies.~~
~~Revenues and Expense~~
~~NET Services~~
We provide non-emergency transportation management services under contracts with state Medicaid and local agencies, hospital systems or private managed care organizations (“MCOs”). Most of our contracts are capitated, which means we are paid on a per member, per month basis for each eligible member. For most contracts, we arrange for transportation of members through our network of independent transportation providers, whereby we remit payment to the transportation providers. However, for certain contracts, we only provide management services, and do not contract with transportation providers for the actual transportation.
~~WD Services~~
We provide workforce development and offender rehabilitation services on a global basis that include employment preparation and placement, apprenticeship and training, and certain health related services, such as employee assistance programs. Our client base for workforce development services is broad and includes long-term unemployed, disabled, and unskilled individuals, as well as individuals that are coping with medical illnesses, are newly graduated from educational institutions, and those that have been released from incarceration. We contract primarily with national government entities that seek to reduce the unemployment and recidivism rates. We are paid largely based on job placement and job sustainment success, but are also paid attachment fees based on the admission of clients into our programs, as well as incentive fees that are usually paid at the end of defined measurement periods based on direct and indirect variables. We also earn revenue under fixed fee for service arrangements, based upon contractual rates established at the outset of the applicable contract year, although the rate may be prospectively adjusted during the contract year based upon actual volumes.   We bill according to contractual terms, typically after proof of services have been achieved.

As described above, when WD Services enters into new markets and service lines, it often experiences significant costs which are expensed as incurred, whereas revenue may not be realized until a later date. As a result, WD Services experiences significant variability in its financial results and, therefore, we believe the results are best viewed over a multi-year perspective.
HA ~~Services~~
We contract with health plans to provideCHAs for their MA members that meet certain pre-determined criteria. A CHA is a comprehensive physical examination of an individual performed by one of our nurse practitioners (“NPs”), typically in the home setting. The CHA process is specifically designed to engage and coordinate with the member’s full care network in order to facilitate follow-up care and treatment.
In addition to our primary CHA services, we launched a chronic care management offering in 2015. With data provided by our health plan clients, we utilize analytics to determine which members we can most effectively lower healthcare costs and improve outcomes through face-to-face engagements with clinicians. Each program is customized and is served by a comprehensive team of case managers, nurse practitioners, registered nurses, and trained call center colleagues. We anticipate our chronic care management offering to becoming an increasing proportion of HA Services’ revenue over the next 2-3 years.
~~Classification of Operating Expenses~~
Our “Service expense” line item includes the majority of the operating expenses of our segments as well as our captive insurance company, with the exception of certain costs which are classified as “General and administrative expense”, including facilities and related charges and contingent consideration adjustments. Service expense also excludes asset impairment charges and depreciation and amortization expenses. In the discussion below, we present the breakdown of service expense by the following major captions: purchased services, payroll and related costs, other operating expenses and stock-based compensation. Purchased services includes the amounts we pay to third-party service providers and are typically dependent upon service volume. Payroll and related costs include all personnel costs of our verticals, while other operating expenses include general overhead costs of our verticals. Stock-based compensation represents the stock-based compensation expense associated with stock grants to employees of our segments.
Our “General and administrative expense” primarily includes the operating expenses of our corporate office, excluding depreciation and amortization, as well as facilities and related charges of our segments and contingent consideration adjustments.
~~Critical Accounting Policies and Estimates~~
Critical accounting policies and estimates are those that we believe are important in the preparation of our consolidated financial statements because they require that we use judgment and estimates in applying those policies. We prepare our consolidated financial statements and accompanying notes in accordance with generally accepted accounting principles in the United States (“GAAP”). Preparation of the consolidated financial statements and accompanying notes requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as revenue and expenses during the periods reported. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.
~~There are certain critical estimates that we believe require significant judgment in the preparation of our consolidated financial statements. We consider an accounting estimate to be critical if:~~
•
~~It requires us to make an assumption because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and~~
•
~~Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.~~
~~For more information on each of these policies, see Note 2,~~~~Significant Accounting Policies~~~~, in the notes to consolidated financial statements. We discuss information about the nature and rationale for our critical accounting estimates below.~~

~~Transportation Accrual~~
We accrue the cost of transportation expense within NET Services based on the amount we expect to be billed by transportation providers, as we generally only pay transportation providers for completed trips based upon documentation submitted. The transportation accrual requires significant judgment, as the accrual is based upon contractual rates and mileage estimates, as well as a rate for unknown cancellations, as members may have requested transportation but not notified us of cancellation. Based upon historical experience and contract terms, we estimate the amount of expense we expect to incur for invoices which have not been submitted. Actual expense could be greater or less than the amounts estimated due to changes in member or transportation provider behavior.
~~Business Combinations~~
We assign the value of the consideration transferred to acquire a business to the tangible assets and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from customer relationships and trade names, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
~~Recoverability of Goodwill and Indefinite and Definite-Lived Intangible Assets~~
~~Goodwill~~. We assess goodwill for impairment annually, or more frequently, if events and circumstances indicate impairment may have occurred. In the evaluation of goodwill for impairment, we typically first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. If so, we perform a quantitative assessment and compare the fair value of the reporting unit to the carrying value. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and we proceed to step two of the impairment analysis. In step two of the analysis, we will record an impairment loss equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value should such a circumstance arise. Periodically, we may choose to forgo the initial qualitative assessment and perform quantitative analysis to assist in our annual evaluation.
We may base our measurement of fair value of reporting units the present value of future discounted cash flows, a market valuation approach, or a blended approach. The discounted cash flows model indicates the fair value of the reporting units based on the present value of the cash flows that we expect the reporting units to generate in the future. Our significant estimates in the discounted cash flows model include: our weighted average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the Company to comparable publicly traded firms in similar lines of business. Our significant estimates in the market approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA") multiples in estimating the fair value of the reporting units.
In addition to measuring the fair value of our reporting units as described above, we consider the combined carrying and fair values of our reporting units in relation to the Company’s total fair value of equity plus debt and preferred equity as of the assessment date. Our equity value assumes our fully diluted market capitalization, using the stock price on the valuation date. The debt value is based on the highest value expected to be paid to repurchase the debt, which represents the principal of each debt instrument. The fair value of the Company's reporting units were substantially in excess of the carrying value at December 31, 2015.

~~Indefinite-Lived Intangible Assets~~. We base our measurement of fair value of indefinite-lived intangible assets, which consists of a trade name using the relief-from-royalty method. This method assumes that the trade name has value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brand, the appropriate royalty rate and the weighted average cost of capital.
~~Definite-Lived Intangible Assets.~~ We review the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, we would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset groups carrying amount and its estimated fair value.
The use of different estimates or assumptions in determining the fair value of our goodwill, indefinite-lived and definite-lived intangible assets may result in different values for these assets, which could result in an impairment or, in the period in which an impairment is recognized, could result in a materially different impairment charge.
~~Income Taxes~~
We record income taxes under the liability method. Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect when we realize the underlying items of income and expense. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income, and the carryforward periods available to us for tax reporting purposes, as well as other relevant factors. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates.
We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we expect to take in a future tax return. The determination for required liabilities is based upon an analysis of each individual tax position, taking into consideration whether it is more likely than not that our tax position, based on technical merits, will be sustained upon examination. For those positions for which we conclude it is more likely than not it will be sustained, we recognize the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority. The difference between the amount recognized and the total tax position is recorded as a liability. The ultimate resolution of these tax positions may be greater or less than the liabilities recorded.

~~Reinsurance and Self-Insurance Liabilities~~
The Company reinsures a substantial portion of its automobile, general and professional liability and workers’ compensation costs under reinsurance programs through the Company’s wholly-owned subsidiary, Social Services Providers Captive Insurance Company (“SPCIC”), a licensed captive insurance company domiciled in the State of Arizona. In addition, the Company maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims and for a maximum potential claim liability based on member enrollment. The Company utilizes independent actuarial reports to determine the expected losses and in order to record the appropriate entries.The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related to its reinsurance and self-funded insurance programs. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known.
~~Revenue Recognition~~
~~NET Services segment~~
~~Capitation contracts.~~ The majority of NET Services revenue is generated under capitated contracts with payers where we assume the responsibility of meeting the covered transportation requirements of a specific geographic population based on per-member per-month fees for the number of members in the payer’s program. Revenue is recorded based upon the amount earned per period.
~~Fee for service~~ ~~contracts.~~ ~~Revenues earned under fee for service (“FFS”) contracts are based upon contractually established billing rates. Revenues are recognized when the service is provided based upon contractual amounts.~~
~~Flat fee~~ ~~contracts.~~ Revenues earned under flat fee contracts are recognized ratably over the covered service period based upon contractually established fees which do not fluctuate with any changes in the membership population who are eligible to receive the transportation services.
For most contracts, we arrange for transportation of members through our network of independent transportation providers, whereby we remit payment to the transportation providers. However, for certain contracts, we only provide management services, and do not contract with transportation providers for the actual transportation.
~~Workforce~~D~~evelopment~~~~Services segment~~
WD Services revenues are generated from providing workforce development and offender rehabilitation services, both of which include employment preparation and placement, apprenticeship and training, and certain health related services, such as employee assistance programs. While the specific terms vary by contract and country, the Company often receives four types of revenue streams under contracts with government entities: attachment fees, job placement/job outcome fees, sustainment fees and incentive fees. Attachment fees are typically upfront payments that are payable when a client is referred by the contracting government entity and the person enters the program, and cover the overall services provided under the program. Job placement fees are typically payable when a client is employed. Job outcome fees are typically payable when a client is employed, and remains employed for a specified period of time. Sustainment fees are typically payable upon certain employment tenure milestones. Incentive fees are generally based upon a calculation that includes a variety of factors and inputs, such as average sustainment rates and client referral rates. Incentive fees vary greatly by contract.
Attachment fee revenue is recognized ratably over the period of service, based upon an estimate of the period of time general services will be provided (i.e. the person is placed in a job or reaches the maximum time period for the program). The estimate of the period of time services will be rendered is based upon historical data. Job Placement, Job Outcome and Sustainment Fee revenue is recognized when certain milestones are achieved, and amounts become billable. Incentive Fee revenue is generally recognized when the revenue is fixed and determinable, frequently at the end of the cumulative calculation period, unless the contractual terms allow for earned payments on a fixed or ratable basis.
Revenue is also earned under fixed fee for service arrangements, based upon an expected volume of services to be performed. The expected volume of services is generally agreed at the outset of the contract year. Revenue under these contracts may be adjusted prospectively during the contract year, or for future contract years, if actual volumes are below expected levels.

~~Health Assessment Services~~~~segment~~
The HA Services segment contracts with health plans to provide clinical assessments for their MA members that meet certain pre-determined criteria as defined by the providers. An assessment is a comprehensive physical examination of an individual performed by one of the Company’s nurse practitioners. The MA clients for whom the Company performs these examinations use the assessment reports to impact care management of the MA member and properly report the cost of care of those members. Revenue is recognized in the period in which the services are rendered.
~~Deferred Revenue~~
At times the Company may receive funding for certain services in advance of services being rendered. These amounts are reflected in the consolidated balance sheets as “Deferred revenue” until the services are rendered.
~~Stock Based Compensation~~
Our primary form of employee stock-based compensation is stock option awards and restricted stock, including certain awards which vest based upon performance conditions. We measure the value of stock option awards on the date of grant at fair value using the appropriate valuation techniques, including the Black-Scholes and Monte Carlo option-pricing models. We recognize the fair value, net of estimated forfeitures, as stock-based compensation expense over the remaining term on a straight-line basis. The pricing models require various highly judgmental assumptions including volatility and expected option term. If any of the assumptions used in the models change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period.
We record stock-based compensation expense net of estimated forfeitures. In determining the estimated forfeiture rates for stock-based awards, we periodically conduct an assessment of the actual number of equity awards that have been forfeited to date as well as those expected to be forfeited in the future. We consider many factors when estimating expected forfeitures, including the type of award, the employee class and historical experience. The estimate of stock awards that will ultimately be forfeited requires significant judgment and to the extent that actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period such estimates are revised.
     ~~Restructuring and Related Reorganization Costs~~
The Company has engaged in employee headcount rightsizing actions within the WD Services segment which require management to estimate the timing and amount of severance and other employee separation costs for workforce reduction. The Company accrues for severance and other employee separation costs under these actions when it is probable that a liability has been incurred and the amount is reasonably estimable. The amounts used in determining severance accruals are based on an estimate of the salaries and related benefit costs payable under existing plans for the number of employees impacted, but the final determination of the actual employees to be terminated is subject to a customary consultation process. The estimate of costs that will ultimately be paid requires significant judgment and to the extent that actual results or updated results differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period such amounts are determined.

~~Results of operations~~
~~Segment reporting.~~ Our operations are organized and reviewed by management along our segment lines, which are: NET Services, WD Services, and HA Services. Effective November 1, 2015, we completed the sale of our Human Services segment. The Human Services segment results of operations are separately discussed in the “Discontinued operations, net of tax”, section set forth below.
Segment results are based on how our chief operating decision maker manages our business, makes operating decisions and evaluates operating performance. The operating results of the Segments include revenue and expenses incurred by the segment, as well as an allocation of direct expenses incurred by our corporate division on behalf of the segment. Indirect expenses, including unallocated corporate functions and expenses, such as executive, finance, human resources, information technology and legal, as well as the results of our captive insurance company (the “Captive”) and elimination entries recorded in consolidation are reflected in Corporate and Other. Note that in prior periods, the Company reported its segment activities under a full absorption method, where all corporate direct and indirect costs were allocated to the reporting segments. Additionally, the oversight of two legacy businesses was transferred to the management of WD Services in 2015. The segment results for the years ended December 31, 2014 and 2013 have been recast to reflect the current management of the segments.
~~Year ended December 31, 201~~5 ~~compared to year ended December 31, 201~~4
~~The following table sets forth results of operations and the percentage of consolidated total revenues represented by items in our consolidated statements of income for 2015 and 2014 (in thousands):~~

Year ended December 31,

2015

2014

$
Percentage
of Revenue
$
Percentage
of Revenue

Service revenue, net
1,695,446 100.0% 1,136,211 100.0%

Operating expenses:

Service expense
1,544,365 91.1% 1,023,785 90.1%
General and administrative expense
73,616 4.3% 44,501 3.9%
Depreciation and amortization
53,469 3.2% 22,833 2.0%
Total operating expenses
1,671,450 98.6% 1,091,119 96.0%

Operating income
23,996 1.4% 45,092 4.0%

Non-operating expense:

Interest expense, net
16,213 1.0% 13,122 1.2%
Equity in net loss of investee
10,970 0.6% - 0.0%
Gain on foreign currency transactions
(857 ) -0.1% (37 ) 0.0%
Income from continuing operations beforeincome taxes
(2,330 ) -0.1% 32,007 2.8%
Provision for income taxes
16,276 1.0% 8,090 0.7%
Income (loss) from continuing operations
(18,606 ) -1.1% 23,917 2.1%
Discontinued operations, net of tax
101,800 6.0% (3,642 ) -0.3%
Net income
83,194 4.9% 20,275 1.8%
Net loss attributable to noncontrolling interest
502 0.0% - 0.0%
Net income attributable to Providence
83,696 4.9% 20,275 1.8%

~~Service revenue, net.~~Consolidated service revenue, net for 2015 increased $559.2 million, or 49.2%, compared to 2014. Revenue for 2015 compared to 2014 includes an increase in revenue attributable to HA Services of approximately $174.1 million, as a result of the acquisition of Matrix on October 23, 2014, as well as an increase in revenue of WD Services of approximately $186.3 million, as a result of the acquisition of Ingeus on May 30, 2014. Additionally, NET Services experienced an increase in revenue of approximately $198.7 million.
~~Total operating expenses.~~Consolidated operating expenses for 2015 increased $580.3 million, or 53.2%, compared to 2014. Operating expenses for 2015 compared to 2014 included an increase in expenses attributable to HA Services of approximately $154.1 million and an increase in expenses attributable to WD Services of approximately $246.2 million, due primarily to the acquisitions discussed above, and an increase in expense attributable to NET Services of $195.2 million. Partially offsetting these expense increases was a decrease in Corporate and Other expenses of approximately $15.2 million.
~~Operating income.~~Consolidated operating income for 2015 decreased approximately $21.1 million, or 46.8%, compared to 2014. The decrease was primarily attributable to the decrease in the operating income of WD Services in 2015 as compared to 2014 of approximately $59.9 million. This decrease was partially offset by an increase in HA Services operating income of approximately $20.0 million, increased operating income of NET Services of approximately $3.5 million and decreased expenses for Corporate and Other of approximately $15.3 million.
~~Interest expense, net.~~ Consolidated interest expense, net for 2015 increased approximately $3.1 million, or 23.6%, compared to 2014. The increase is primarily related to the increase in outstanding debt incurred primarily to fund our acquisitions, as well as the amortization of deferred financing fees related to the debt refinancing in October 2014.
~~Loss on equity investments.~~Loss on equity investments relates to our investment in Mission Providence. Mission Providence began providing services in July 2015 and has incurred significant start-up and administrative costs to date. We record 75% of Mission Providence’s profit or loss.
~~Gain on foreign currency transactions.~~T~~he foreign currency gain of approximately $0.9 million and $0.04 million for 2015 and 2014, respectively, were primarily due to translation adjustments of our foreign subsidiaries.~~
~~Provision for income taxes.~~Our effective tax rate for 2015 exceeded 100%. The effective tax rate exceeded the United States federal statutory rate of 35% primarily due to foreign net operating losses (including equity investment losses) for which the future income tax benefit currently cannot be recognized, significant losses in foreign jurisdictions with tax rates lower than the US rate of 35%, state income taxes, and certain non-deductible expenses, including significant amounts of compensation expense related to two former shareholders of Ingeus who reside in Australia, for which no tax deduction may be claimed. The Company’s effective tax rate for 2014 was 25.3%, due primarily to the reduction in fair value in contingent consideration for the Ingeus acquisition, which is not treated as taxable income.

~~Discontinued operations, net of tax.~~The following table summarizes the major classes of line items included in income from discontinued operations, net of tax, and the percentage of service revenue from discontinued operations, for 2015 and 2014 (in thousands):

Year Ended December 31,

2015

2014

$
Percentage of
Revenue
$
Percentage of
Revenue

Service revenue, net
291,510 100.0% 344,960 100.0%

Service expense
264,293 90.7% 315,008 91.3%
General and administrative expense
14,975 5.1% 19,134 5.5%
Asset impairment charge
1,593 0.5% 6,915 2.0%
Depreciation and amortization
4,831 1.7% 6,655 1.9%
Interest expense, net
2,829 1.0% 1,478 0.4%
Income from discontinued operationsbefore provision for income taxes
2,989 1.0% (4,230 ) -1.2%
Gain on disposition
123,129 42.2% - 0.0%
Benefit (provision) for income taxes
(24,318 ) -8.3% 588 0.2%
Discontinued operations, net of tax
101,800 34.9% (3,642 ) -1.1%
The results above include an allocation of interest expense related to 50% of the net proceeds from the sale of the Human Services segment, which was required to be repaid by the lenders under the credit facility. The $24.3 million provision for income taxes for the year ended December 31, 2015 includes a tax provision of $22.8 million related to the gain on disposition.
~~Net loss attributable to noncontrolling interest.~~~~We have minority interests, some of which are in companies that are currently experiencing losses due to start-up costs. As such we have a net loss attributable to noncontrolling interests.~~
~~Segment Results.~~~~The following analysis includes discussion of each of our segments.~~
~~NET Services~~
~~NET Services financial results are as follows for 2015 and 2014 (in thousands):~~

Year Ended December 31,

2015

2014

$
Percentage of
Revenue

$

Percentage of
Revenue

Service revenue, net
1,083,015 100.0% 884,287 100.0%

Service expense
991,659 91.6% 800,454 90.5%
General and administrative expense
10,704 1.0% 8,406 1.0%
Depreciation and amortization
9,429 0.9% 7,699 0.9%
Operating income
71,223 6.6% 67,728 7.7%
~~Service revenue, net.~~ Services revenue, net for 2015 increased $198.7 million, or 22.5%, compared to 2014. The increase was primarily related to the full year impact of new state contracts which commenced in 2014 in Texas, Maine, Illinois, and Rhode Island; new state and MCO contracts which commenced in 2015 in Florida, California, New York, and Texas; increased membership under state and MCO contracts in New Jersey, Florida, California, Michigan and New York; and higher rates in certain existing markets. The increase in revenue was partially offset by the termination of our contracts in Mississippi and Connecticut partway through 2014.

~~Service expense.~~~~Service expense is comprised of the following for 2015 and 2014 (in thousands):~~

Year Ended December 31,

2015

2014

$
Percentage of
Revenue
$
Percentage of
Revenue

Purchased services
814,632 75.2% 657,979 74.4%
Payroll and related costs
141,669 13.1% 111,212 12.6%
Other operating expenses
34,634 3.2% 30,676 3.5%
Stock-based compensation
724 0.1% 587 0.1%
Total service expense
991,659 91.6% 800,454 90.5%
Service expense for 2015 increased $191.2 million, or 23.9%, compared to 2014. The increase in service expense is primarily attributable to an increase in purchased transportation services due primarily to higher volume. Purchased transportation services as a percentage of revenue increased slightly, primarily as a result of an increase in utilization, including Medicaid expansion members as they become more familiar with the availability of transportation services. Additionally, our payroll and related costs increased for 2015 as compared to 2014 due to additional contracts and increased call volume due to the increased utilization. Our other operating expenses also increased in 2015 as compared to 2014 due to volume, although it decreased slightly as a percentage of revenue.
~~General and administrative expense.~~ General and administrative expenses in 2015 increased $2.3 million, or 27.3%, as compared to 2014, due to increased facility costs resulting from the overall growth of our operations, including the opening of a new call center in Arizona.
~~Depreciation and amortization expense.~~ Depreciation and amortization expenses increased approximately $1.7 million primarily due to the addition of long-lived assets in our expanded call centers. As a percentage of revenue, depreciation and amortization remained constant at approximately 0.9%.
~~WD Services~~
WD Services’ comparative results are significantly impacted due to the acquisition of Ingeus in May 2014. The results presented below include Ingeus for the full-year 2015 as compared to the post-acquisition period in 2014. WD Services financial results are as follows for 2015 and 2014 (in thousands):

Year Ended December 31,

2015

2014

$
Percentage of
Revenue
$
Percentage of
Revenue

Service revenue, net
395,059 100.0% 208,763 100.0%

Service expense
393,803 99.7% 184,919 88.6%
General and administrative expense
29,846 7.6% (2,072 ) -1.0%
Depreciation and amortization
13,776 3.5% 8,406 4.0%
Operating income (loss)
(42,366 ) -10.7% 17,510 8.4%
~~Service revenue, net.~~ Service revenue, net in 2015 increased $186.3 million, or 89.2%, compared to 2014. The increase in 2015 compared to 2014 is primarily related to the inclusion of Ingeus since May 30, 2014, as Ingeus contributed $367.4 million in 2015 compared to $179.3 million in 2014. Additionally, WD Services experienced revenue growth due to a significant new offender rehabilitation program which began in 2015, offset by revenue declines associated with declining referrals and reduced unit pricing under one of its primary employability programs in the United Kingdom. Assuming Ingeus was acquired on January 1, 2014, WD Services revenue in 2014 would have been approximately $361.2 million on a pro forma basis.

~~Service expense.~~~~Service expense is comprised of the following for 2015 and 2014 (in thousands):~~

Year Ended December 31,

2015

2014

$
Percentage of
Revenue
$
Percentage of
Revenue

Payroll and related costs
249,130 63.1% 105,436 50.5%
Purchased services
78,498 19.9% 48,114 23.0%
Other operating expenses
45,418 11.5% 27,938 13.4%
Stock-based compensation
20,757 5.3% 3,431 1.6%
Total service expense
393,803 99.7% 184,919 88.6%
Service expense in 2015 increased $208.9 million, or 113.0%, compared to 2014. The increase in 2015 compared to 2014 is primarily related to the Ingeus acquisition. Payroll and related costs increased primarily as a result of new headcount for a new offender rehabilitation program. Generally, under new contracts, headcount costs increase as new employees are hired and trained prior to significant revenue being earned, resulting in an increase in payroll and related costs as a percentage of revenue. Payroll and related costs for the year ended December 31, 2015 include approximately $12.2 million in termination benefits primarily related to two redundancy plans designed to better align headcount with service delivery volumes and the impact of utilization of new information technology systems. Certain redundancy costs were anticipated in developing our estimate of costs when bidding for new contracts. The majority of these redundancy benefits are expected to be paid during 2016. Additionally, on October 15, 2015, we entered into Settlement Deeds whereby two Ingeus executives’ (who were also selling shareholders of Ingeus) employment agreements were terminated by mutual agreement. The termination of the employees’ employment agreements resulted in approximately $4.8 million of accelerated compensation expense and $16.1 million in accelerated stock-based compensation from restricted shares and cash placed into escrow in 2014, in conjunction with the payment of acquisition consideration of Ingeus. These amounts would otherwise have been recognized over the four year vesting period, which was scheduled to end in May 2018. In addition, in 2015 and 2014, respectively, the company incurred $5.9 million and $4.5 million of expense prior to termination. WD Services also incurred approximately $2.4 million in other costs associated with the separation with these two employees which is included in other operating expenses in the table above.
~~General and administrative expense.~~ General and administrative expense in 2015 increased $31.9 million compared to 2014. $13.6 million of the increase relates to the impact of the reduction in the fair value of contingent consideration, as the reduction recorded in 2015 was $2.5 million as compared to the reduction in 2014 of $16.1 million. The fair value of the contingent consideration is zero at December 31, 2015. Additionally, facility costs increased $18.3 million, to $32.3 million in 2015 from $14.0 million in 2014 primarily due to the Ingeus acquisition, as well as growth associated with our new programs.
~~Depreciation and amortization expense.~~ ~~Depreciation and amortization expense for 2015 increased approximately $5.4 million compared to 2014, principally attributable to the full year of activity in 2015 for Ingeus.~~

~~HA Services~~
HA Services comparative results are significantly impacted due to the acquisition of Matrix in October 2014. The results presented below include Matrix for the full-year 2015 as compared to the post-acquisition period in 2014. HA Services financial results are as follows for 2015 and 2014 (in thousands):

Year Ended December 31,

2015

2014

$
Percentage of
Revenue
$
Percentage of
Revenue

Service revenue, net
217,436 100.0% 43,331 100.0%

Service expense
163,211 75.1% 35,185 81.2%
General and administrative expense
2,630 1.2% 421 1.0%
Depreciation and amortization
29,472 13.6% 5,619 13.0%
Operating income
22,123 10.2% 2,106 4.9%
~~Service revenue, net.~~ HA Services revenue in 2015 increased $174.1 million, or 401.8%, as compared to 2014. The increase was primarily attributable to the inclusion of the results of Matrix for the full year of 2015. Assuming Matrix had been acquired on January 1, 2014, HA Services revenues in 2014 would have been approximately $211.4 million on a pro forma basis. In addition to the impact due to the acquisition, the increase was also due to increased volume offset by a slight decline in pricing.
~~Service expense.~~~~Service expense is comprised of the following for 2015 and 2014 (in thousands):~~

Year Ended December 31,

2015

2014

$
Percentage of
Revenue
$
Percentage of
Revenue

Payroll and related costs
132,939 61.1% 27,571 63.6%
Purchased services
1,305 0.6% 356 0.8%
Other operating expenses
28,859 13.3% 7,258 16.8%
Stock-based compensation
108 0.0% - 0.0%
Total service expense
163,211 75.1% 35,185 81.2%
~~Service expense in 2015 increased $128.0 million compared to 2014 due primarily to the Matrix acquisition.~~
~~General and administrative expense.~~ General and administrative expense in 2015 increased $2.2 million compared to 2014 due to increased facility costs, which were approximately $2.6 million and $0.4 million for 2015 and 2014, respectively.
~~Depreciation and amortization expense.~~ Depreciation and amortization expense in 2015 increased $23.9 million compared to 2014. Depreciation and amortization includes approximately $26.1 million and $5.0 million of amortization of intangible assets acquired in the Matrix acquisition for 2015 and 2014, respectively.

~~Corporate and Other~~
Corporate and Other includes the headcount and professional service costs incurred at the holding company level, the Company’s captive insurance company, and elimination entries to account for inter-segment transactions. Corporate and Other financial results are as follows for 2015 and 2014 (in thousands):

Year Ended December 31,

2015

2014

$ $
Service revenue, net (a)
(64 ) (170 )

Service expense (a)
(4,308 ) 3,227
General and administrative expense
30,436 37,746
Depreciation and amortization
792 1,109
Operating loss
(26,984 ) (42,252 )
(a) Negative amounts are present for this line item due to elimination entries that are included in Corporate and Other. Offsetting amounts are reflected in the financial results of our operating segments.
~~Operating loss.~~ Corporate and Other operating loss in 2015 decreased by approximately $15.3 million as compared to 2014, due primarily to decreased expenses. Service expense for 2015 decreased $7.5 million as compared to 2014 due to favorable claims history in 2015 for our self-insurance and reinsurance programs, as well as a decrease in certain payroll and related costs of $3.8 million primarily due to positions eliminated in 2014.
General and administrative expenses in 2015 decreased approximately $7.3 million, or 19.4%, compared to 2014. The decrease was primarily related to a decrease in acquisition costs of approximately $11.2 million, which were incurred in relation to the acquisitions of Ingeus and Matrix. Additionally, the year ended December 31, 2014 included approximately $3.0 million in financing fees associated with the debt refinancing completed in October 2014. Offsetting these decreases in expenses were increased legal fees in 2015 as compared to 2014, of which approximately $0.8 million related to legal fees associated witha putative stockholder class action derivative complaint. Additional increases in general and administrative expenses related to additional accounting and compliance related fees, recruiting, professional fees and payroll related costs of approximately $5.2 million due primarily to increased costs to integrate Ingeus and Matrix into our internal controls program as well as increased audit costs related to the new companies acquired. We also incurred expense attributable to stock award modifications in the amount of approximately $0.7 million related to a separation agreement with our former Chief Executive Officer. In addition, in 2015 we incurred approximately $1.4 million in general and administrative expense related to a new stock-based long-term incentive plan designed to provide long-term performance based awards to certain executive officers of Providence.

~~Year ended December 31, 201~~4 ~~compared to year ended December 31, 201~~3
~~The following table sets forth results of operations and the percentage of consolidated total revenues represented by items in our consolidated statements of income for 2014 and 2013 (in thousands):~~

Year Ended December 31,

2014

2013

$
Percentage
of Revenue
$
Percentage
of Revenue

Service revenue, net
1,136,211 100.0% 798,766 100.0%

Operating expenses:

Service expense
1,023,785 90.1% 736,669 92.2%
General and administrative expense
44,501 3.9% 25,590 3.2%
Depreciation and amortization
22,833 2.0% 9,331 1.2%
Total operating expenses
1,091,119 96.0% 771,590 96.6%

Operating income
45,092 4.0% 27,176 3.4%

Non-operating expense:

Interest expense, net
13,122 1.2% 6,921 0.9%
Loss on extinguishment of debt
- 0.0% 525 0.1%
Gain on foreign currency transactions
(37 ) 0.0% - 0.0%
Income from continuing operations beforeincome taxes
32,007 2.8% 19,730 2.5%
Provision for income taxes
8,090 0.7% 6,625 0.8%
Income from continuing operations
23,917 2.1% 13,105 1.6%
Discontinued operations, net of tax
(3,642 ) -0.3% 6,333 0.8%
Net income
20,275 1.8% 19,438 2.4%
~~Service revenue, net.~~Consolidated service revenue, net for 2014 increased $337.4 million, or 42.2%, compared to 2013. 2014 includes an increase in revenue attributable to the 2014 acquisitions of Ingeus and Matrix of $179.3 million and $43.3 million, respectively. Additionally, NET Services experienced an increase in revenue of approximately $114.0 million.
~~Total operating expenses.~~Consolidated operating expenses for 2015 increased $319.5 million, or 41.4%, compared to 2013. 2014 includes an increase attributable to Ingeus and Matrix of $164.1 million and $41.2 million, respectively. Additionally, NET service expense increased $89.7 million in 2014 as compared to 2013 and Corporate and Other operating expenses increased $23.5 million.
~~Operating income.~~Consolidated operating income for 2014 increased approximately $17.9 million, or 65.9%, compared to 2013. The increase was attributable to the addition in 2014 of Ingeus’s operating income of $15.1 million and Matrix’s operating income of $2.1 million. Additionally, NET Services experienced an increase in operating income of $23.4 million. These increases in operating income were partially offset by the increase in operating loss for Corporate and Other of $23.5 million.
~~Interest expense, net.~~Consolidated interest expense, net for 2014 increased $6.2 million, or 89.6%, compared to 2013 due to an increase in debt. Current and long-term debt obligations increased to $575.2 million at December 31, 2014, from $123.5 million at December 31, 2013. In addition, interest expense includes $4.5 million of financing fees which were fully expensed in the fourth quarter of 2014 in relation to bridge financing commitments.
~~Gain on foreign currency transactions.~~ ~~The gain on foreign currency of approximately $0.04 million for 2014 resulted primarily from translation adjustments of our foreign subsidiaries.~~
~~Loss on extinguishment of debt~~. Loss on extinguishment of debt of approximately $0.5 million for 2013 resulted from the write-off of deferred financing fees related to our credit facility that was repaid in full in August 2013 with proceeds from our amended and restated credit facility. As current and previous credit facilities were loan syndications, and a number of lenders participated in both credit facilities, the Company evaluated the accounting for financing fees on a lender by lender basis and recorded a charge accordingly.

~~Provision for income taxes.~~Our effective tax rate for 2014 and 2013 was 25.3% and 33.6% respectively. Our effective tax rate was lower than the US federal statutory rate of 35.0% for 2014 due primarily to the impact of the non-taxable nature of a favorable contingent consideration adjustment related to the Ingeus acquisition.
~~Discontinued operations, net of tax.~~The following table summarizes the major classes of line items included in income from discontinued operations, net of tax, and the percentage of service revenue from discontinued operations, for 2014 and 2013 (in thousands):

Year Ended December 31,

2014

2013

$
Percentage of
Revenue
$
Percentage of
Revenue

Service revenue, net
344,960 100.0% 323,916 100.0%

Service expensez
315,008 91.3% 283,382 87.5%
General and administrative expense
19,134 5.5% 23,043 7.1%
Asset impairment charge
6,915 2.0% 492 0.2%
Depreciation and amortization
6,655 1.9% 5,541 1.7%
Interest expense, net
1,478 0.4% (27 ) 0.0%
Income from discontinued operationsbefore provision for income taxes
(4,230 ) -1.2% 11,485 3.5%
Provision for income taxes
(588 ) -0.2% 5,152 1.6%
Discontinued operations, net of tax
(3,642 ) -1.1% 6,333 2.0%
The results above include an allocation of interest expense related to 50% of the net proceeds from the sale of the Human Services segment, which was required to be repaid by the lenders under the credit facility.
~~Segment Results.~~~~The following analysis includes discussion on each of our segments.~~
~~NET Services~~
~~NET Services segment financial results were as follows for 2014 and 2013 (in thousands):~~

Year Ended December 31,

2014

2013

$
Percentage of
Revenue
$
Percentage of
Revenue

Service revenue, net
884,287 100.0% 770,246 100.0%

Service expense
800,454 90.5% 710,755 92.3%
General and administrative expense
8,406 1.0% 7,397 1.0%
Depreciation and amortization
7,699 0.9% 7,725 1.0%
Operating income
67,728 7.7% 44,369 5.8%
~~Service revenue, net.~~ Service revenue, net for 2014 increased $114.0 million, or 14.8%, compared to 2013. The major drivers of the increase include increased membership under our New Jersey contract, a new contract with the state of Rhode Island, additional members added under both new and expanded contracts in Michigan, implementation of various new managed care contracts across the country, and expansion of our contracts with the states of Maine and Texas. Additional membership increases were experienced in a number of other states such as Delaware, Georgia, Nevada and South Carolina. This revenue growth was partially offset by the elimination of our contracts in Wisconsin, Mississippi, and Hartford, Connecticut.

~~Service expense.~~~~Service expense is comprised of the following for 2014 and 2013 (in thousands):~~

Year Ended December 31,

2014

2013

$
Percentage of
Revenue
$
Percentage of
Revenue

Purchased services
657,979 74.4% 591,864 76.8%
Payroll and related costs
111,212 12.6% 92,550 12.0%
Other operating expenses
30,676 3.5% 25,261 3.3%
Stock-based compensation
587 0.1% 1,080 0.1%
Total service expense
800,454 90.5% 710,755 92.3%
Service expense for 2014 increased $89.7 million, or 12.6%, compared to 2013. The increase in service expense is primarily attributable to the increase in payroll and related costs and purchased transportation services due primarily to volume. The increase in payroll and related costs was due to the hiring of additional staff for new contracts in Maine, Texas and Utah, expansion efforts across several other markets, and additional staffing needed for expansion of the California ambulance commercial and managed care lines of business. The increase in purchased services is attributable to additional purchased service costs for our expanded business and new contracts covering Hawaii, Kansas, Louisiana, Maine, Michigan, New Mexico, Ohio, Texas, Rhode Island, New York, and Utah, as well as further expansion in the California commercial and managed care markets. These increases were partially offset by decreases related to the termination of a contract with the City of Hartford, several managed care contracts, our Wisconsin contracts, and the State of Mississippi Medicaid and End Stage Renal contracts. Additional decreases in purchased services costs were caused by the transition to an administrative services only contract in Connecticut. Additionally, as a percentage of NET Services’ revenue, purchased services decreased to approximately 74.4% for 2014, from 76.8% for 2013. This decline in purchased services expense as a percent of NET Services’ revenue is due to membership expansion in existing contracts with lower utilization levels than the historical trend.
~~General and administrative expense.~~ General and administrative expense in 2014 increased $1.0 million, or 13.6%, as compared to 2013 due to an increase in facility costs due to volume, which were $8.4 million and $7.4 million for 2014 and 2013, respectively.
~~Depreciation and amortization expense.~~ ~~Depreciation and amortization expense remained relatively constant at approximately $7.7 million for 2014 and 2013.~~
~~WD Services~~
WD Services comparative results are significantly impacted due to the acquisition of Ingeus in May 2014. The results presented below include Ingeus for the post-acquisition period in 2014. 2013 results include two legacy businesses which were previously managed as part of the Human Services segment. WD Services segment financial results were as follows for 2014 and 2013 (in thousands):

Year Ended December 31,

2014

2013

$
Percentage of
Revenue
$
Percentage of
Revenue

Service revenue, net
208,763 100.0% 28,671 100.0%

Service expense
184,919 88.6% 24,650 86.0%
General and administrative expense
(2,072 ) -1.0% 1,888 6.6%
Depreciation and amortization
8,406 4.0% 573 2.0%
Operating income (loss)
17,510 8.4% 1,560 5.4%
~~Service revenue, net.~~ ~~Service revenue, net in 2014 increased $180.1 million compared to 2013, primarily due to the acquisition of Ingeus.~~

~~Service expense.~~~~Service expense is comprised of the following for 2014 and 2013 (in thousands):~~

Year Ended December 31,

2014

2013

$
Percentage of
Revenue
$
Percentage of
Revenue

Payroll and related costs
105,436 50.5% 16,775 58.5%
Purchased services
48,114 23.0% 2,523 8.8%
Other operating expenses
27,938 13.4% 5,352 18.7%
Stock-based compensation
3,431 1.6% - 0.0%
Total service expense
184,919 88.6% 24,650 86.0%
~~Service expense in 2014 increased $160.3 million compared to 2013. The increase in service expense in 2014 compared to 2013, primarily as a result of the acquisition of Ingeus.~~
~~General and administrative expense.~~ General and administrative expense in 2014 decreased $4.0 million compared to 2013, reflecting a $16.1 million reduction in the fair value of contingent consideration for the Ingeus acquisition, partially offset by an increase in facility costs, which were $14.0 million and $1.9 million for 2014 and 2013, respectively.
~~Depreciation and amortization expense.~~ Depreciation and amortization expenses for 2014 increased by approximately $7.8 million compared to 2013, primarily due to the acquisition of Ingeus, including the amortization of intangible assets acquired in the acquisition.
~~HA Services~~
HA ~~Services was formed with the acquisition of Matrix in October 2014, and thus the comparative results are not meaningful. HA Services financial results were as follows for 2014 and 2013 (in thousands):~~

Year Ended December 31,

2014

2013

$
Percentage of
Revenue
$
Percentage of
Revenue

Service revenue, net
43,331 100.0% -
0.0%

Service expense
35,185 81.2% - 0.0%
General and administrative expense
421 1.0% - 0.0%
Depreciation and amortization
5,619 13.0% - 0.0%
Operating income
2,106 4.9% - 0.0%
~~Service revenue, net.~~ Service revenue, net represents revenue attributable to Matrix, which we acquired on October 23, 2014. The 2014 revenue includes revenue from October 23, 2014 to December 31, 2014 primarily derived from providing CHAs.

~~Service expense.~~~~Service expense is comprised of the following for 2014 and 2013 (in thousands):~~

Year Ended December 31,

2014

2013

$
Percentage of
Revenue
$
Percentage
ofRevenue

Payroll and related costs
27,571 63.6% - 0.0%
Purchased services
356 0.8% - 0.0%
Other operating expenses
7,258 16.8% - 0.0%
Total service expense
35,185 81.2% - 0.0%
~~The increase in service expense in 2014 compared to 2013 was related to the acquisition of Matrix.~~
~~General and administrative expense.~~ ~~General and administrative expense includes approximately $0.4 million of facility costs for the period of October 23, 2014 through December 31, 2014.~~
~~Depreciation and amortization expense.~~ ~~Depreciation and amortization expense includes approximately $5.0 million of amortization of intangible assets acquired in the Matrix acquisition.~~
~~Corporate and Other~~
Corporate and Other includes the costs of the holding company, the Company’s captive insurance company, and elimination entries to account for inter-segment transactions. Corporate and Other financial results were as follows for 2014 and 2013 (in thousands):

Year Ended December 31,

2014

2013

$ $
Service revenue, net (a)
(170 ) (151 )

Service expense
3,227 1,264
General and administrative expense
37,746 16,305
Depreciation and amortization
1,109 1,033
Operating loss
(42,252 ) (18,753 )
~~(a)~~
Negative amounts are present for this line item due to elimination entries that are included in Corporate and Other. Offsetting amounts are reflected in the financial results of our operating segments.
~~Operating loss.~~ Corporate and Other operating loss in 2014 increased by approximately $23.5 million as compared to 2013. The increase was primarily a result of increased general and administrative expense which included approximately $11.8 million in acquisition related costs, $3.0 million in third party fees related to our debt financing and $0.8 million in integration and restructuring costs incurred during 2014. Additionally, there was an increase in stock based compensation expense of approximately $2.2 million and $1.5 million related to stock options and stock appreciation rights, respectively, primarily due to awards granted to an executive officer, key employees and a director for efforts made in connection with the Ingeus and Matrix acquisitions during the third quarter of 2014, one-third of which vested upon grant.

~~Seasonality~~
Our quarterly operating results and operating cash flows normally fluctuate due in part to seasonal factors and uneven demand for services and the timing of new contracts, which impact the amount of revenues earned and expenses incurred. NET Services experiences fluctuations in demand during the summer, winter and holiday seasons. Due to higher demand in the summer months and lower demand in the winter and holiday seasons, coupled with a primarily fixed revenue stream based on a per member, per month payment structure, NET Services normally experiences lower operating margins in the summer season and higher operating margins in the winter and holiday seasons. HA Services experiences quarterly volatility in revenue and earnings due to uneven demand for services. WD Services is impacted by the timing of commencement and the expiration of major contracts. Under many of WD Services’ contracts in new service lines, we invest significant sums of money in personnel, leased office space, purchased or developed technology, and other costs, and generally incur these costs prior to commencing services and receiving payments. This results in significant variability in its financial performance and cash flows between quarters and for comparative periods. It is expected that future contracts will be structured in a similar fashion.
~~Liquidity and capital resources~~
Short-term capital requirements consist primarily of recurring operating expenses, new contract start-up costs, including workforce restructuring costs, commitments to fund investments, and debt service requirements. We expect to meet these requirements through available cash on hand, the generation of cash from our operating segments, and borrowing capacity under our revolving credit facility.
On September 3, 2015, we entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”), pursuant to which we agreed to sell all of the membership interests in Providence Human Services, LLC and Providence Community Services, LLC, comprising our Human Services segment, in exchange for cash proceeds of approximately $200.0 million prior to adjustments for estimated working capital, certain seller transaction costs, debt assumed by the buyer, plus a $20.1 million cash payment received for the Providence Human Services cash and cash equivalents on hand at closing, with an additional $10.0 million held in an indemnity escrow.
Additionally, in November 2015, we used $206.0 million of the cash received from the sale of our Human Services segment to pay down a portion of the outstanding borrowings under our revolving credit facility (only 50% of our net cash proceeds were required to be used to pay down our revolving credit facility).
In October 2015, we repurchased 707,318 shares of our common stock for approximately $29.0 million from cash on hand and borrowings under our revolving credit facility. In addition, we repurchased 109,150 shares of our common stock for approximately $5.1 million, under a plan approved by the Board of Directors on November 4, 2015.
On February 5, 2015, we completed a sale of convertible preferred stock, which was initiated in 2014. $80.7 million of net proceeds from the sale of convertible preferred stock were realized and used to repay a $65.5 million unsecured subordinated bridge note due to a related party.
Cash flow from investing activities was our primary source of cash in 2015 due to the sale of our Human Services segment. Our balance of cash and cash equivalents was $84.8 million and $135.3 million at December 31, 2015 and 2014, respectively, including $37.5 million and $42.7 million held in foreign countries, respectively. Such cash is generally used to fund foreign operations, although it may be used also to repay intercompany indebtedness existing between Providence and its foreign subsidiaries.In addition, we had restricted cash of $20.1 million and $18.0 million at December 31, 2015 and 2014, respectively, related to contractual obligations and activities of our captive insurance subsidiaries and other subsidiaries. At December 31, 2015 and 2014, our total debt was $305.0 million and $576.1 million, respectively. The reduction is primarily a result of the pay down of a portion of our revolving credit facility with the proceeds from the sale of our Human Services segment as well as scheduled principal payments under our debt agreements, and the repayment of the related party loan as discussed above.
We believe we can access capital markets to raise equity or debt financing for various business reasons, including required debt payments and acquisitions. The timing, term, size, and pricing of any such financing will depend on investor interest and market conditions, and there can be no assurance that we will be able to obtain any such financing.
~~The cash flow statement for all periods presented includes both continuing and discontinued operations.~~

~~Year ended December 31, 201~~5
~~Cash flows~~
~~Operating activities.~~We generated net cash flows from operating activities of $13.2 million for 2015. These cash flows included net income of $83.2 million, which includes a non-cash net of tax gain on sale of our Human Services segment of $100.3 million. In addition, non-cash items include, $38.1 million of amortization expense, $26.6 million in stock-based compensation expense, $20.2 million of depreciation expense, and an $11.0 million loss on equity investments. Significant non-cash activity from our discontinued operations included $2.4 million of depreciation, $2.5 million of amortization, and $1.6 million of asset impairment charges. Changes in working capital items, include the following significant items:
●
$86.6 million use of cash due to the increase in accounts receivable, the majority of which is due to an increase in NET Services’ accounts receivable of $48.0 million due primarily to timing, as two significant customer balances increased at year-end, but were subsequently collected as of February 2016. In addition, $16.2 million of the increase in NET Services’ accounts receivable is due to amounts owed under capitated reconciliation contracts, whereby funds are received after a final reconciliation of the number of members served. Historically, funds were received for the majority of capitated contracts at the beginning of the contract month. Such reconciliation contracts are becoming more prevalent in NET Services. Additionally, WD Services accounts receivable increased $20.4 million due to additional revenue contracts in place during 2015 as compared to 2014. The accounts receivable of Human Services, our discontinued operation, increased $9.9 million from December 31, 2014 to the time of sale, which is reported as a use of cash from operations in the statement of cash flows.
●
$19.0 million source of cash due to the increase in deferred revenue, of which approximately $15.7 million related to WD Services in association with cash received in advance of services being rendered for two large contracts.
~~Investing activities.~~Net cash generated by investing activities totaled $143.3 million for 2015. The sale of our Human Services segment effective November 1, 2015, resulted in cash proceeds from investing activities of $199.9 million. $35.1 million of cash was used to purchase property and equipment primarily to support the growth of our continuing operations, and $16.1 million was used to fund our equity investment in Mission Providence. Purchases of property and equipment by our discontinued operations totaled approximately $2.2 million.
~~Financing activities.~~Net cash used in financing activities totaled $231.3 million for 2015. We repaid a net amount of $182.0 million under our revolving credit facility during 2015, primarily with the use of a portion of our proceeds from the sale of our Human Services segment. Additionally, scheduled term loan payments totaled $23.6 million. We also repaid the $65.5 million unsecured subordinated related party bridge note from the net proceeds of $80.7 million received from the issuance of preferred stock. Additional use of funds included stock repurchases of $36.8 million, a contingent consideration payment related to the Ingeus acquisition of approximately $7.5 million and preferred stock dividend payments of $3.9 million. Cash proceeds from the exercise of employee stock option exercises were $4.9 million.
~~Year ended December 31, 201~~4
~~Cash flows~~
~~Operating activities.~~We generated net cash flows from operating activities of approximately $55.2 million for 2014. These cash flows included net income of approximately $20.3 million. In addition, non-cash items include, $15.4 million of amortization expense, $7.6 million in stock-based compensation expense, $14.1 million of depreciation expense, ($16.3) million from the reduction in fair value of contingent consideration and ($5.2) million from deferred taxes. Significant non-cash activity from our discontinued operations included $3.2 million of depreciation, $3.5 million of amortization, and $6.9 million of asset impairment charges. The balance of the cash provided by operating activities is primarily due to the net effect of changes in other working capital items, including the following significant items:
●
$17.2 million increase in accounts receivable primarily due to a $10.9 million increase in the discontinued operation Human Services’ accounts receivable balance and an $11.0 million increase in NET Services’ accounts receivable balance. $2.8 million of the increase in Human Services’ accounts receivable balance was due to increased sales volume associated with two acquisitions completed by the segment in 2014. The majority of the remaining increase in Human Services’ accounts receivable balance was attributable to slower collections of fourth quarter revenue in 2014 versus 2013. The increase in NET Services’ accounts receivable balance was primarily due to two large payers that had amounts due as of December 31, 2014 that were subsequently collected at the beginning of 2015;
●
An approximate $8.0 million increase in prepaid and other assets primarily related to a $3.6 million increase in prepaid income taxes associated with our discontinued operation Human Services and NET Services segments, a $2.9 million preferred share backstop fee paid to a related party in association with the financing of our acquisition of Matrix, and $1.8 million of prepaid compensation associated with the acquisition of Ingeus; and
●
An approximate $28.5 million increase in accounts payable and accrued expenses primarily attributable to the timing of payments related to non-emergency transportation contract reimbursements due to a change in the timing of our provider payments for our NET Services segment which resulted in significant provider payments being paid in January as opposed to December in the prior year.

~~Investing activities.~~Net cash used in investing activities totaled $443.4 million primarily due to acquisitions completed in 2014. $352.1 million of cash was paid in the acquisition of Matrix, approximately $55.1 million, net of cash acquired, was paid in the acquisition of Ingeus and $9.8 million of cash was paid for two Human Services businesses acquired through asset purchase agreements in 2014. Additionally, $23.2 million was used to purchase property and equipment to support the growth of our operations. Purchases of property and equipment by our discontinued operations totaled approximately $4.8 million.
~~Financing activities.~~Net cash provided by financing activities totaled $453.1 million. Under the Second Amendment to our credit facility, we borrowed $250.0 million under a term loan. Additionally, we borrowed $185.7 million from our revolving credit facility, and borrowed $65.5 million on an unsecured subordinated related party bridge note. We paid scheduled principal term payments of $48.6 million. In conjunction with the refinancing of our debt, we paid $12.8 million of financing fees. Cash proceeds from the exercise of employee stock option exercises totaled $11.0 million.
~~Obligations and commitments~~
~~Credit facility.~~ On August 2, 2013, we entered into an Amended and Restated Credit Agreement (as amended, supplemented, or modified, the “Credit Agreement”) with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, SunTrust Bank, as syndication agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and SunTrust Robinson Humphrey, Inc., as joint lead arrangers and joint book managers and other lenders party thereto. The Credit Agreement provided us with a senior secured credit facility, or the Credit Facility, in aggregate principal amount of $225.0 million, comprised of a $60.0 million term loan facility and a $165.0 million revolving credit facility. The Credit Facility includes sublimits for swingline loans and letters of credit in amounts of up to $10.0 million and $25.0 million, respectively. On August 2, 2013, we borrowed the entire amount available under the term loan facility and $16.0 million under our revolving credit facility and used the proceeds thereof to refinance certain of our existing indebtedness.
On May 28, 2014 we entered into the first amendment (the “First Amendment”) to our Credit Facility. The First Amendment provided for, among other things, an increase in the aggregate amount of the revolving credit facility from $165.0 million to $240.0 million and other modifications in connection with the consummation of the acquisition of Ingeus.
On October 23, 2014, we entered into the Second Amendment to the Amended and Restated Credit and Guaranty Agreement and Consent (the “Second Amendment”) to amend the Credit Facility to (i) add a new term loan tranche in aggregate principal amount of up to $250.0 million to partly finance the acquisition of Matrix, (ii) provide the consent of the required lenders to consummate the acquisition of Matrix, (iii) permit incurrence of additional debt to fund the acquisition of Matrix, (iv) add an excess cash flow mandatory prepayment provision and (v) such other amendments which are beneficial to us and provided greater flexibility for our future operations.
On September 3, 2015, we entered into the Third Amendment and Consent to the Amended and Restated Credit and Guaranty Agreement (the “Third Amendment”) to amend the Credit Agreement. Pursuant to the Third Amendment, the lenders under the Credit Agreement consented to Providence’s sale of the Human Services segment, provided that a minimum amount equal to 50% of the net cash proceeds, as defined in the Credit Agreement, of the sale was applied pro rata to the prepayment of revolving loans and swingline loans under the Credit Agreement. Further, the lenders consented to our use of 50% of the net cash proceeds of the sale to make restricted payments to repurchase common stock pursuant to a Providence stock repurchase program. The Third Amendment provided for appropriate amendments to the terms of the Credit Agreement to reflect such consents. The Credit Facility defines “net cash proceeds” to include cash proceeds or cash equivalents actually received in a disposition such as the sale, net of direct costs incurred, taxes paid or payable as a result of the disposition, the amount of required payments on indebtedness as a result of the disposition, and the amount of any reasonable reserve established in accordance with generally accepted accounting principles for contingency payments, such as indemnification obligations.

Under the Credit Facility we have an option to request an increase in the amount of the revolving credit facility and/or the term loan facility from time to time (on substantially the same terms as apply to the existing facilities) in an aggregate amount of up to $75.0 million with either additional commitments from lenders under the Credit Agreement at such time or new commitments from financial institutions acceptable to the administrative agent in its reasonable discretion, so long as no default or event of default exists at the time of any such increase. We may not be able to access additional funds under this increase option as no lender is obligated to participate in any such increase under the Credit Facility.
The Credit Facility matures on August 2, 2018. We may prepay the Credit Facility in whole or in part, at any time without premium or penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in connection with prepayments of London Interbank Offered Rate, or LIBOR, loans. The unutilized portion of the commitments under the Credit Facility may be irrevocably reduced or terminated by us at any time without penalty.
Our obligations under the Credit Facility are guaranteed by all of our present and future domestic subsidiaries, excluding certain domestic subsidiaries, which includes our insurance captives. Our obligations under, and each guarantor’s obligations under its guaranty of, the Credit Facility are secured by a first priority lien on substantially all of our respective assets, including a pledge of 100% of the issued and outstanding stock of our domestic subsidiaries, excluding our insurance captives, and 65% of the issued and outstanding stock of our first tier foreign subsidiaries.
Interest on the outstanding principal amount of the loans accrues, at our election, at a per annum rate equal to LIBOR, plus an applicable margin or the base rate plus an applicable margin. The applicable margin ranges from 2.25% to 3.25% in the case of LIBOR loans and 1.25% to 2.25% in the case of the base rate loans, in each case, based on our consolidated leverage ratio as defined in the Credit Agreement. Interest on the loans is payable quarterly in arrears. The interest rate applied to our term loan at December 31, 2015 was 3.33%. In addition, we are obligated to pay a quarterly commitment fee based on a percentage of the unused portion of each lender’s commitment under the revolving credit facility and quarterly letter of credit fees based on a percentage of the maximum amount available to be drawn under each outstanding letter of credit. The commitment fee and letter of credit fee range from 0.25% to 0.50% and 2.25% to 3.25%, respectively, in each case, based on our consolidated leverage ratio.
The $60.0 million term loan is subject to quarterly amortization payments, which commenced on December 31, 2014, so that the following percentages of the term loan outstanding on the closing date plus the principal amount of any term loans funded pursuant to the increase option are repaid as follows: 7.5% between December 31, 2014 and September 30, 2015, 10.0% between December 31, 2015 and September 30, 2016, 12.5% between December 31, 2016 and September 30, 2017, 15% between December 31, 2017 and June 30, 2018 and the remaining balance at maturity.
The $250.0 million term loan is subject to quarterly amortization payments, which commenced on March 31, 2015, so that the following percentages of the term loan outstanding on the closing date plus the principal amount of any term loans funded pursuant to the increase option are repaid as follows: 7.5% between March 31, 2015 and December 31, 2015, 10.0% between March 31, 2016 and December 31, 2016, 12.5% between March 31, 2017 and December 31, 2017, 15.0% between March 31, 2018 and June 30, 2018 and the remaining balance at maturity.
The Credit Facility also requires us (subject to certain exceptions as set forth in the Amended and Restated Credit Agreement) to prepay the outstanding loans in an aggregate amount equal to 100% of the net cash proceeds received from certain asset dispositions (or 50% of net cash proceeds in the case of the sale of the Human Services segment), debt issuances, insurance and casualty awards and other extraordinary receipts.

The Credit Agreement contains customary affirmative and negative covenants and events of default. The negative covenants include restrictions on our ability to, among other things, incur additional indebtedness, create liens, make investments, give guarantees, pay dividends, sell assets, and merge and consolidate. We are subject to financial covenants, including consolidated net leverage and consolidated fixed charge covenants. We were in compliance with all covenants as of December 31, 2015.
We had $19.7 million of borrowings outstanding under the revolving credit facility as of December 31, 2015. $25.0 million of the revolving credit facility is available to collateralize letters of credit. As of December 31, 2015, eight letters of credit in the amount of approximately $8.2 million were outstanding. At December 31, 2015, our available credit under the revolving credit facility was $212.1 million.
~~Rights offering.~~We completed a Rights Offering, on February 5, 2015, allowing all of the Company’s existing common stock holders the non-transferrable right to purchase their pro rata share of $65.5 million of convertible preferred stock at a price equal to $100.00 per share. The convertible preferred stock is convertible into shares of our common stock at a conversion price equal to $39.88, which was the closing price of our common stock on the NASDAQ Global Select Market on October 22, 2014.
Stockholders exercised subscription rights to purchase 130,884 shares of the Company's convertible preferred stock. Pursuant to the terms and conditions of the Standby Purchase Agreement between Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P. and Blackwell Partners, LLC (collectively, the "Standby Purchasers") and the Company, the remaining 524,116 shares of the Company's preferred stock was purchased by Standby Purchasers at the $100.00 per share subscription price. The Standby Purchasers beneficially owned approximately 94% of our outstanding convertible preferred stock after giving effect to the Rights Offering and the Standby Purchase Agreement. The Company received $65.5 million in aggregate gross proceeds from the consummation of the Rights Offering and Standby Purchase Agreement, which it used to repay the related party unsecured subordinated bridge note that was outstanding as of December 31, 2014.
Additionally, on March 12, 2015, the Standby Purchasers exercised their right to purchase an additional 150,000 shares of the Company’s convertible preferred stock at a $105 per share subscription price.
We may pay a noncumulative cash dividend on each share of convertible preferred stock, when, as and if declared by our board of directors, at the rate of five and one-half percent (5.5%) per annum on the liquidation preference then in effect. Following the issue date of the convertible preferred stock, on or before the third business day immediately preceding each fiscal quarter, we will determine our intention whether or not to pay a cash dividend with respect to that ensuing quarter and will give notice of our intention to each holder of convertible preferred stock as soon as practicable thereafter.
In the event we do not declare and pay a cash dividend, the liquidation preference will be increased to an amount equal to the liquidation preference in effect at the start of the applicable dividend period, plus an amount equal to such then applicable liquidation preference multiplied by eight and one-half percent (8.5%) per annum, computed on the basis of a 365-day year and the actual number of days elapsed from the start of the applicable dividend period to the applicable date of determination.
Cash dividends are payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, commencing on the first calendar day of the first January, April, July or October following the date of original issuance of the convertible preferred stock, and, if declared, will begin to accrue on the first day of the applicable dividend period. Paid in kind (“PIK”) dividends, if applicable, will accrue and be cumulative on the same schedule as set forth above for cash dividends and will also be compounded at the applicable annual rate on each applicable subsequent dividend date. PIK dividends are paid upon the occurrence of a liquidation event, conversion or redemption in accordance with the terms of the convertible preferred stock. Cash dividends were declared each quarter for the year ended December 31, 2015 and totaled approximately $3.9 million.

~~Contingent obligations.~~ ~~We maintain a 409(A) Deferred Compensation Rabbi Trust Plan for highly compensated employees of our NET Services operating segment. Benefits are paid from our general assets under this plan.~~
~~Reinsurance and Self-Funded Insurance Programs~~
~~Reinsurance~~
We reinsure a substantial portion of our NET Services’, HA Services’, and historical Human Services’ automobile, general and professional liability and workers’ compensation costs under reinsurance programs through Social Services Providers Captive Insurance Company (“SPCIC”), a wholly owned subsidiary of the Company. The decision to reinsure our risks and also to provide a self-funded health insurance program to our employees was made based on current conditions in the insurance marketplace that have led to increasingly higher levels of self-insurance retentions, an increasing number of coverage limitations, and fluctuating insurance premium rates.
SPCIC, which is a licensed captive insurance company domiciled in the State of Arizona, reinsures third-party insurers for general and professional liability exposures for the first dollar of each and every loss up to $1.0 million per loss and $5.0 million in the aggregate. At December 31, 2015, the cumulative reserve for expected losses since inception in 2005 of this reinsurance program was approximately $2.3 million. The excess premium over our expected losses may be used to fund SPCIC’s operating expenses, fund any deficit arising in automobile and workers’ compensation liability coverage, provide for surplus reserves, and fund any other risk management activities.
SPCIC reinsures a third-party insurer for workers’ compensation insurance for the first dollar of each and every loss up to $0.5 million per claim. The cumulative reserve for expected losses since inception in 2005 of this reinsurance program at December 31, 2015 was approximately $9.1 million.
SPCIC also reinsures a third-party insurer for automobile liability exposures up to $250,000 per claim. The cumulative reserve for expected losses since inception in 2013 of this reinsurance program at December 31, 2015 was approximately $1.6 million.
Based on an independent actuarial report, our expected losses related to workers’ compensation, automobile and general and professional liability in excess of our liability under our associated reinsurance programs at December 31, 2015 was approximately $6.7 million. We recorded a corresponding receivable from third-party insurers and liability at December 31, 2015 for these expected losses, which would be paid by third-party insurers to the extent losses are incurred. We have an umbrella liability insurance policy providing additional coverage in the amount of $25.0 million in the aggregate in excess of the policy limits of the general and professional liability insurance policy and automobile liability insurance policy.
SPCIC had restricted cash of approximately $19.5 million and $17.5 million at December 31, 2015 and 2014, respectively, which was restricted to secure the reinsured claims losses of SPCIC under the automobile, general and professional liability and workers’ compensation reinsurance programs. The full extent of claims may not be fully determined for years. Therefore, the estimates of potential obligations are based on recommendations of an independent actuary using historical data, industry data, and our claims experience.
~~Health Insurance~~
We offer our NET Services’, HA Services’ and corporate employees an option to participate in self-funded health insurance programs. Additionally, we also historically offered this option to our Human Services’ employees. During the year ended December 31, 2015, health claims were self-funded with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims to $275,000 per person and for a maximum potential claim liability based on member enrollment.
Health insurance claims are paid as they are submitted to the plan administrator. We maintain accruals for claims that have been incurred but not yet reported to the plan administrator, and therefore, have not been paid. The incurred but not reported reserve is based on an established cap and current payment trends of health insurance claims. The liability for the self-funded health plan of approximately $2.4 million and $2.0 million as of December 31, 2015 and 2014, respectively, was recorded in “Reinsurance liability and related reserve” in our consolidated balance sheets.

We charge our employees a portion of the costs of our self-funded group health insurance programs. We determine this charge at the beginning of each plan year based upon historical and projected medical utilization data. Any difference between our projections and our actual experience is borne by us, up to the stop-loss limit. We estimate potential obligations for liabilities under this program to reserve what we believe to be a sufficient amount to cover liabilities based on our past experience. Any significant increase in the number of claims or costs associated with claims made under this program above what we reserve could have a material adverse effect on our financial results.
~~Contractual cash obligations~~.
~~The following is a summary of our future contractual cash obligations as of December 31, 2015:~~

At December 31, 2015

Contractual cash obligations (000's)

Total

Less than
1 Year

1-3
Years

3-5
Years

After 5
Years

Debt
$ 304,950 $ 31,375 $ 273,575 $ - $ -
Interest (1)
27,530 11,404 16,126 - -
Purchased services commitments (2)
3,895 1,952 1,461 482 -
Equity investment capital contributions
4,654 4,654 - - -
Guarantees (3) 34,586 34,036 550 - -
Letters of credit (3) 8,233 4,360 280 - 3,593
Operating Leases (4)
73,569 25,864 25,268 13,403 9,034
Total
$ 457,417 $ 113,645 $ 317,260 $ 13,885 $ 12,627
~~(1)~~
~~Future interest payments have been calculated at the current rates as of December 31, 2015.~~
~~(2)~~
Our purchase obligations represent the minimum obligations we have under agreements with certain of our vendors. These minimum obligations are less than our projected use for those periods. Payments may be more than the minimum obligations based on actual use.
~~(3)~~
Guarantees and letters of credit (“LOCs”) are commitments that represent funding responsibilities that may require our performance in the event of third-party demands or contingent events. Guarantees include surety bonds we provide to certain customers to protect against potential non-delivery of our non-emergency transportation services. Of the outstanding balance of our stand-by LOCs, $8.2 million directly reduces the amount available to us from our revolving credit facility. The surety bonds and LOC amounts in the above table represent the amount of commitment expiration per period.
~~(4)~~
~~The operating leases are for office space and related office equipment. We account for these leases on a monthly basis. Certain leases contain periodic rent escalation adjustments and renewal options.~~
~~Other than the items described above, we do not have any off-balance sheet arrangements as of December 31, 2015.~~
~~Stock repurchase program~~s
           Our board of directors approved a stock repurchase plan on February 1, 2007. Under this stock repurchase program we spent approximately $14.4 million to purchase 756,100 shares of our common stock on the open market. We did not purchase shares of our common stock during the period 2008 through 2011 or during the period of 2013 through 2015 under this plan. This plan was formally cancelled in January 2016.
On November 4, 2015, our board of directors authorized the Company to engage in a common stock repurchase program to repurchase up to $70.0 million in aggregate value of the Company’s common stock during the twelve-month period following November 4, 2015. Purchases under the common stock repurchase program may be made from time-to-time through a combination of open market repurchases (including Rule 10b5-1 plans), privately negotiated transactions, and accelerated share repurchase transactions, at the discretion of the Company’s officers, and as permitted by securities laws, covenants under existing bank agreements, and other legal requirements. During 2015, the Company spent approximately $5.1 million to purchase 109,150 shares of our common stock under this plan.
~~Off-~~b~~alance~~s~~heet~~a~~rrangements~~
             As of December 31, 2015 and 2014, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

~~New Accounting Pronouncements~~
~~The new accounting pronouncements that impact our business are included in Note 2,~~~~Significant Accounting Policies and Recent Accounting Pronouncements,~~ ~~of our consolidated financial statements presented elsewhere in this report and are incorporated herein by reference.~~
~~Forward-Looking Statements~~
Certain statements contained in this report on Form 10-K, such as any statements about our confidence or strategies or our expectations about revenues, liabilities, results of operations, cash flows, ability to fund operations, profitability, ability to meet financial covenants, contracts or market opportunities, constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. You can identify forward-looking statements by the use of words such as “may,” “should,” “will,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future,” and “intends” and similar expressions which are intended to identify forward-looking statements.
The forward-looking statements contained herein are not guarantees of our future performance and are subject to a number of known and unknown risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause our actual results or achievements to differ materially from those expressed, implied or forecasted in the forward-looking statements. These risks and uncertainties include, but are not limited to the risks described under Part I Item 1A of this report.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this report. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We do not intend to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
~~Item 7A.~~
~~Quantitative and Qualitative Disclosures About Market Risk.~~

Foreign currency risk

As of December 31, 2015, we conducted business in 11 countries outside the US. As such, our cash flows and earnings are subject to fluctuations from changes in foreign currency exchange rates. We do not currently hedge against the possible impact of currency fluctuations. For 2015, we used 11 functional currencies and generated approximately $378.1 million of our net operating revenues from operations outside the US. As we expand further into international markets, we expect the risk from foreign currency exchange rates to increase.

A 10% adverse change in the foreign currency exchange rate from Great British Pounds to US Dollars would have a $29.8 million negative impact on consolidated revenue, ~~[and~~and a ~~$[ ]~~$2.0 million negative impact on net ~~income].~~income. A 10% adverse change in other foreign currency exchange rates would not have a significant impact on the Company.

We assess the significance of foreign currency risk on a periodic basis and may implement strategies to manage such risk as we deem appropriate.

Interest rate and market risk

As of December 31, 2015, we had borrowings under our term loans of $285.3 million and borrowings under our revolving line of credit of $19.7 million. Borrowings under the Credit Agreement accrue interest at LIBOR plus 3.00% per annum as of December 31, 2015. An increase of 1% in the LIBOR rate would cause an increase in interest expense of approximately $6.8 million over the remaining term of the Amended and Restated Credit Agreement, which expires in 2018. We do not currently hedge against the possible impact of interest rate fluctuations.

We assess the significance of interest rate market risk on a periodic basis and may implement strategies to manage such risk as we deem appropriate.

~~Item 8.~~
PART III
~~Financial Statements and Supplementary Data.~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~Item 10.Directors, Executive Officers and Corporate Governance.

~~Management’s Report on Internal Control Over Financial Reporting~~
The following table sets forth certain information with respect to the current directors as of April 26, 2016.
Name

Age

Class

Term
Expires

Audit

Compensation

Nominating
and
Corporate
Governance
Richard A. Kerley†

66

1

2016

X

X

X
James M. Lindstrom

43

2

2017

Kristi L. Meints

61

3

2018

X

X

X
Leslie V. Norwalk

50

2

2017

X

X

X
Christopher S. Shackelton *†

36

1

2016

X = Current Committee Member; * = Chairman of the Board; † = Director Nominee
The following is a brief summary of the background of each director:
Richard A. Kerley has served as our director since May 2010 and chairperson of the Compensation Committee since March 2011. Mr. Kerley also serves on our Audit and Nominating and Governance Committees. Mr. Kerley served as the Senior Vice President, Chief Financial Officer and member of the board of directors of Peter Piper, Inc., a privately-held pizza and entertainment restaurant chain, from November 2008 to December 2014, when he retired. From July 2005 to October 2008, Mr. Kerley served as the Chief Financial Officer of Fender Musical Instruments Corporation. From June 1981 to July 2005, Mr. Kerley was an audit partner with Deloitte & Touche LLP. Prior to becoming a partner at Deloitte & Touche, Mr. Kerley served as an audit manager and staff accountant from August 1971 to June 1981. Mr. Kerley also serves on the board and is the lead director of The Joint Corporation, a publicly traded operator, manager and franchisor of chiropractic clinics. He received a bachelor of business administration degree in accounting from Marshall University in 1971.
Mr. Kerley is a senior financial executive with experience in a variety of operational issues, financial budgeting, planning and analysis, capital investment decisions, mergers and acquisitions, operational and financial controls, internal and external reporting, financings and public offerings and filings with the SEC. Mr. Kerley’s strong financial background provides the Board with financial expertise, including an understanding of financial statements, finance, capital investing strategies and accounting.
62
~~Reports of Independent Registered Public Accounting Firm~~
63
~~Consolidated Balance Sheets at December 31, 2015 and 2014~~
65
~~For the years ended December 31, 2015, 2014 and 2013:~~
~~Consolidated Statements of Income~~
66
~~Consolidated Statements of Comprehensive Income~~
67
~~Consolidated Statements of Stockholders’ Equity~~
68
~~Consolidated Statements of Cash Flows~~
69
~~Notes to Consolidated Financial Statements~~
71

~~Management’s Report~~James Lindstrom, was appointed to serve as our director, Chief Executive Officer and President, effective August 6, 2015. From January 2015 until his appointment as director, Chief Executive Officer and President, Mr. Lindstrom served as our Executive Vice President and Chief Financial Officer. Before joining the Company, he served as Chairman of the Board, President and Chief Executive Officer of Integrated Electrical Services, Inc., or IES, a provider of industrial products and infrastructure services from October 2011 through January 2015. He also served as President and Chief Executive Officer of IES since October 2011 and previously served as Interim President and Chief Executive Officer of IES since June 2011, and as a member of the Board of Directors of IES since May 2010 and Chairman of the Board since February 2011. Over a 20 year-career, Mr. Lindstrom has led or invested in major turnarounds and companies experiencing strategic transformations in a variety of industries, including the financial services, energy, business services and manufacturing industries. Prior to joining IES, Mr. Lindstrom was employed by Tontine Associates, LLC, a private investment fund and an affiliate of IES's majority stockholder, from January 2006 until October 2011. From 2003 to 2006, Mr. Lindstrom was Chief Financial Officer of Centrue Financial Corporation, a regional financial services company and had prior experience in private equity, investment banking and operations and has served on ~~Internal Control Over Financial Reporting~~multiple private and public boards of directors. He received his BA from Colby College and his MBA from the Tuck School of Business at Dartmouth.

~~Our management~~ Mr. Lindstrom is qualified to serve on the Board due to his extensive experience in public and private investing, prior executive roles and the knowledge and experience he brings as the Company’s Chief Executive Officer.
Kristi L. Meintshas ~~the responsibility for establishing~~served as our director and maintaining adequate internal control over financial reporting for the registrant, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an assessment, as of December 31, 2015,chairperson of the ~~effectiveness~~Audit Committee since August 2003. Ms. Meints also serves on our Compensation and Nominating and Governance Committees. From January 2005 to December 2009, when she retired, and from August 1999 until September 2003, Ms. Meints served as Vice President and Chief Financial Officer of ~~our internal control over~~Chicago Systems Group, Inc. (now known as CSG Government Solutions, Inc.), a technology consulting firm based in Chicago, Illinois. Prior to joining Chicago Systems Group, Inc., Ms. Meints served as Chief Financial Officer of Peter Rabbit Farms, a vegetable farming business in Southern California. From January 1998 until August 1999, she was an independent financial ~~reporting based on~~consultant serving as Chief Financial Officer for Cordon Corporation, a start-up services company. Ms. Meints was group finance director for Avery Dennison Corporation, a New York Stock Exchange listed company that is a multi-national manufacturer of consumer and industrial products, from March 1996 until December 1997. From February 1977 until June 1995, she held a variety of financial positions at SmithKline Beecham Corporation, including as director of finance, worldwide manufacturing animal health products; and as manager of accounting and budgets for Norden Laboratories, Inc., one of its wholly owned subsidiaries. She received a bachelor’s degree in accounting from Wayne State College in 1975 and a master’s degree in business administration from the ~~criteria set forth by the Committee~~University of ~~Sponsoring Organizations of the Treadway Commission~~Nebraska in ~~Internal Control–Integrated Framework (2013).~~1984.

~~We designed our internal control over~~Ms. Meints’ strong financial ~~reporting~~and operational background, including her experience as Chief Financial Officer of Chicago Systems Group, Inc. and Peter Rabbit Farms and senior finance positions at Avery Dennison Corporation and SmithKline Beecham Corporation, provides financial expertise to ~~provide reasonable assurance regarding~~ the ~~reliability of financial reporting and the preparation~~Board, including an understanding of financial statements, ~~for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies~~budgeting, operational and ~~procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately~~corporate finance and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
~~Based on our assessment, we concluded our internal control over financial reporting is effective as of December 31, 2015.~~accounting.

~~KPMG LLP, an independent registered public accounting firm, which audited~~Leslie V. Norwalkwas appointed to serve as our ~~consolidated financial statements included~~director and a member of the Audit, Compensation and Nominating and Governance Committees on November 5, 2015 and has served as chairperson of the Nominating and Governance Committee since December 2015. Since September 2007, Ms. Norwalk has served as Strategic Counsel to Epstein Becker & Green, P.C. From 2001 to 2007, Ms. Norwalk served the Bush Administration in ~~this report~~the Centers for Medicare & Medicaid Services (CMS). From 2006 to 2007 she was the Acting Administrator, where she managed the operations of federal health care programs, including Medicare and Medicaid. For the four years prior to that position, she was the agency's Deputy Administrator. Prior to serving the Bush Administration, Ms. Norwalk practiced law with Epstein Becker & Green, P.C. where she advised clients on ~~Form 10-K has issued an audit report~~a variety of healthcare policy matters. She also served the first Bush administration in the White House Office of Presidential Personnel and the Office of the U.S. Trade Representative. Ms. Norwalk is currently a director on the ~~effectiveness~~public company boards of NuVasive Inc., Press Ganey Holdings, Inc. and Endologix, Inc. She also serves as an Advisor to Warburg Pincus, Enhanced Equity and Peloton Equity. She earned a J.D. from George Mason University School of Law and a bachelor's degree from Wellesley College.

Ms. Norwalk’s significant healthcare regulatory and policy expertise, including her experiences with the Bush Administration on Medicare and Medicaid matters, provides needed industry expertise to the Board. Ms. Norwalk will be able to help guide the Company’s strategy as the healthcare regulatory environment continues to evolve. She also provides additional independent leadership to the Board in compliance with The Nasdaq Stock Market LLC’s (“NASDAQ”) listing requirements.
Christopher S. Shackelton was appointed Chairman in November 2012, and has served as a director since July 2012. Until June 1, 2015, he served as a member of the Audit, Compensation and Nominating and Governance Committees. Mr. Shackelton is a Managing Partner at Coliseum Capital Management, LLC, an investment firm that he co-founded in January 2006. Previously, Mr. Shackelton worked at Watershed Asset Management and Morgan Stanley & Co. Mr. Shackelton also serves on the boards of LHC Group Inc., a nursing care company, BioScrip Inc., an infusion services company and Advanced Emissions Solutions Inc., a clean energy technology company. Mr. Shackelton was previously Chairman of Rural/Metro Corp, an emergency ambulance company, from December 2010 to June 2011 and served on the board of Interstate Hotels Inc., a global hotel management company from February 2009 through March 2010. Mr. Shackelton is actively involved in multiple charitable organizations, including as Chairman of The Connecticut Open. Mr. Shackelton received a bachelor’s degree in Economics from Yale College in 2001.
Mr. Shackelton’s experience creating stockholder value for a wide range of companies provides the Board with valuable business leadership and strategic focus. Mr. Shackelton brings financial, investing and accounting experience from other public company boards on which he led mergers and acquisitions, financings, restructurings and other initiatives. Furthermore, Mr. Shackelton’s in-depth knowledge of the healthcare industry is particularly beneficial to the Board.
The following is a brief summary of the background of each executive officer who is not a director as of April 26, 2016:
David Shackelton, 30, was appointed to serve as Chief Financial Officer on October 1, 2015. Prior to his appointment, Mr. Shackelton served as our ~~internal control over~~Interim Chief Financial Officer from August through October 2015 and Head of Corporate Development, joining the Company in February 2014. Prior to joining Providence, Mr. Shackelton was a private equity investment professional at Mill Road Capital from June 2013 to February 2014 and The Blackstone Group from July 2008 to July 2011. From July 2011 to June 2013, Mr. Shackelton attended Stanford Graduate School of Business. Mr. Shackelton has a BA from Yale University and a MBA from Stanford Graduate School of Business.
Justina Uzzell, 37, was appointed to serve as Senior Vice President and Chief People Officer, effective March 9, 2014. Ms. Uzzell’s prior experience was at Banner Health where she spent almost 15 years from May 1999 through February 2014 providing various levels of human resources leadership, including her most recent position as Chief Human Resource Officer serving from March 2009 to March 2014. Prior to that, Ms. Uzzell was accountable for all of the human resources functions and business operations at two of Banner Health’s hospitals. Ms. Uzzell holds a B.B.A. in business management from the University of Phoenix and her MBA from Grand Canyon University. She is a member of the American College of Healthcare Executives, Society of Human Resource Management and American Society for Healthcare Human Resources Association. She holds the credential of Senior Human Resources Professional (SPHR) from The Society of Human Resources.
Matthew Umscheid, 45, joined Providence as Senior Vice President of Strategic Services in November 2015 and became an executive officer in April 2016. Prior to joining Providence, Mr. Umscheid was with Parthenon Capital Partners from April 2007 to November 2015, where most recently he served as Director, Strategy and Implementation. Mr. Umscheid led multiple value creation projects within healthcare services, including portfolio company strategy and operational improvement, carve outs, merger integration and business intelligence. Mr. Umscheid has served on the boards of Parthenon healthcare services companies as well as worked as an advisor and board observer for multiple financial ~~reporting. KPMG LLP’s audit report is also included~~and business services companies. Prior to joining Parthenon Capital Partners in ~~this report on Form 10-K.~~2007, Mr. Umscheid was Manager and Consultant with L.E.K. Consulting. Mr. Umscheid has an MBA from Tuck School of Business, Dartmouth College and a BS in Civil Engineering from University of Notre Dame.

~~Report~~William Severance, 49, was appointed to serve as Chief Accounting Officer, effective February 1, 2016, and became an executive officer in April 2016. Prior to joining the Company, Mr. Severance served as the Chief Accounting Officer of ~~Independent Registered Public~~the Gilt Groupe, a pioneer in e-commerce in the U.S., from 2010 to January 2016. Prior to that, he served in various roles for Travelport Limited, a global travel commerce platform providing distribution and technology solutions to the travel industry, from 2005 to 2009; and IAC/InterActiveCorp, a leading media and Internet company, from 1999 to 2005. Mr. Severance also worked for 11 years for Ernst and Young LLP in the Atlanta, New York and Hamburg, Germany offices. He holds a B.S. in Accounting ~~Firm~~from Louisiana State University and is a member of the Georgia Society of CPA’s and American Institute of CPA’s.

Sophia Tawil,38, joined the Company as Senior Vice President, General Counsel, Chief Compliance Officer and Secretary on April 25, 2016. Prior to joining the Company, Ms. Tawil worked at Cravath, Swaine & Moore LLP as a Senior Attorney since December 2014, and as a Corporate Associate from September 2006 to December 2014. Ms. Tawil received a BA from Barnard College, Columbia University and a J.D. from University of Pennsylvania Law School.
David Shackelton, the Company’s Chief Financial Officer, and Christopher Shackelton, the Company’s Chairman, are brothers.
Audit Committee and Audit Committee Financial Expert
The Company’s Board has a separately designated standing Audit Committee. The Audit Committee is currently composed of Ms. Meints (Chairperson), Ms. Norwalk, and Mr. Kerley. Christopher Shackelton was a member of the Audit Committee until he stepped down effective June 1, 2015, when he assumed the role of Interim Chief Executive Officer. Ms. Norwalk joined the Audit Committee on November 4, 2015. The primary function of our Audit Committee is to assist our Board of Directors in fulfilling its responsibility to oversee management’s conduct of our financial reporting process, including review of our financial reports and other financial information, our system of internal accounting controls, our compliance with legal and regulatory requirements, the qualifications and independence of our independent auditors and the performance of our internal audit staff and independent auditors. Our Audit Committee has sole authority to appoint, retain, compensate, evaluate and terminate our independent auditors and to approve all engagement fees and terms for our independent auditors.

The Board has determined that each member of ~~Directors~~the Audit Committee is independent as defined by the applicable NASDAQ listing standards and ~~Stockholders~~
Rule 10A-3 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The ~~Providence Service Corporation:~~Board has determined that Ms. Meints and Mr. Kerley are each an “audit committee financial expert” as defined under Item 407 of SEC Regulation S-K.

We have audited the accompanying consolidated balance sheets of The Providence Service Corporation and subsidiaries (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for eachSection 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the ~~years in the three-year period ended December 31, 2015. In connection with~~Exchange Act requires our ~~audits~~executive officers, directors and persons who beneficially own more than ten percent (10%) of a registered class of the ~~consolidated financial statements, we have also audited~~Common Stock to file with the ~~financial statement schedule~~SEC initial reports of ownership and reports of changes in ~~Item 15(a)(2). These consolidated financial statements~~ownership of Common Stock and other equity securities of Providence. Executive officers, directors and greater than ten percent (10%) stockholders are required by SEC regulation to furnish Providence with copies of all Section 16(a) forms they file.
To the ~~financial statement schedule are the responsibility~~Company’s knowledge, based solely on a review of the ~~Company’s management. Our responsibility is~~copies of such reports furnished to ~~express an opinion on these consolidated financial statements~~the Company and ~~financial statement schedule based on our audits.~~
~~We conducted our audits in accordance~~written representations that no other reports were required, the Company believes that all Section 16(a) executive officers, directors and greater than ten percent (10%) beneficial stockholders of Providence complied with applicable Section 16(a) requirements during the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Providence Service Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year periodyear ended December 31, 2015 in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken asother than Mr. Kerley and Ms. Meints who each inadvertently had one late filing of a ~~whole, presents fairly, in all material aspects, the information set forth therein.~~
WeForm 4. Mr. Kerley inadvertently filed a Form 4 on May 27, 2015 which should have ~~also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31,~~been filed no later than May 22, 2015, ~~based~~and Ms. Meints inadvertently filed a Form 4 on ~~criteria established in~~~~Internal Control – Integrated Framework (2013)~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 11, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
~~/s/ KPMG LLP~~
~~Phoenix, Arizona~~
~~March 11, 2016~~
February 24, 2015 that should have been filed no later than February 9, 2015.

~~Report~~Code of ~~Independent Registered Public Accounting Firm~~
~~The Board of Directors and Stockholders~~
~~The Providence Service Corporation:~~
~~We have audited The Providence Service Corporation’s (the Company) internal control over financial reporting as of December 31, 2015, based oncriteria established in~~~~Internal Control – Integrated Framework~~ ~~(2013)~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.Ethics

We ~~conducted~~have adopted a code of ethics that applies to our ~~audit in accordance with the standards~~senior management, including our chief executive officer, chief financial officer, controllers and persons performing similar functions. A copy of ~~the Public Company Accounting Oversight Board (United States). Those standards require that we plan~~our code of ethics is available on our website at www.prscholdings.com and ~~perform the audit~~without charge upon written request directed to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
~~In our opinion,~~Ann Mullen, Ethics Program Manager, at The Providence Service Corporation, ~~maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in~~~~Internal Control – Integrated Framework (~~~~2013~~) ~~issued by COSO.~~
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Providence Service Corporation and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated March 11, 2016 expressed an unqualified opinion on those consolidated financial statements.
~~/s/ KPMG LLP~~
~~Phoenix, Arizona~~
~~March 11, 2016~~

~~The Providence Service Corporation~~
~~Consolidated Balance Sheets~~
~~(in thousands except share and per share data)~~

December 31,

2015

2014

Assets

Current assets:

Cash and cash equivalents
$ 84,770 $ 135,258
Accounts receivable, net of allowance of$5,587 in 2015 and $4,515 in 2014
178,049 107,565
Other receivables
16,298 5,314
Prepaid expenses and other
30,718 43,134
Restricted cash
4,012 3,234
Deferred tax assets
5,877 4,148
Current assets of discontinued operations
- 75,993
Total current assets
319,724 374,646
Property and equipment, net
57,787 42,648
Goodwill
340,029 342,412
Intangible assets, net
285,951 323,904
Other assets
34,399 18,812
Restricted cash, less current portion
16,044 14,764
Deferred tax asset
42 -
Non-current assets of discontinued operations
- 51,748
Total assets
$ 1,053,976 $ 1,168,934
Liabilities and stockholders' equity

Current liabilities:

Current portion of long-term obligations
$ 31,375 $ 24,588
Note payable to related party
- 65,500
Accounts payable
30,007 46,557
Accrued expenses
130,552 99,273
Accrued transportation costs
64,537 55,492
Deferred revenue
28,667 10,743
Reinsurance and related liability reserves
10,134 11,077
Current liabilities of discontinued operations
- 26,228
Total current liabilities
295,272 339,458
Long-term obligations, less current portion
272,470 484,525
Other long-term liabilities
25,052 25,974
Deferred tax liabilities
93,474 96,928
Non-current liabilities of discontinued operations
- 635
Total liabilities
686,268 947,520
Commitments and contingencies (Note 19)

Reedeemable convertible preferred stock

Convertible preferred stock, net: Authorized 10,000,000 shares;$0.001 par value; 803,518 and 0 issued and outstanding;5.5%/8.5% dividend rate
77,576 -
Stockholders' equity

Common stock: Authorized 40,000,000 shares; $0.001 parvalue; 17,186,780 and 16,870,285 issued and outstanding(including treasury shares)
17 17
Additional paid-in capital
293,012 261,155
Retained earnings (accumulated deficit)
69,209 (13,366 )
Accumulated other comprehensive loss, net of tax
(16,831 ) (8,756 )
Treasury shares, at cost, 1,895,998 and 1,014,108 shares
(54,823 ) (17,686 )
Total Providence stockholders' equity
290,584 221,364
Noncontrolling interest
(452 ) 50
Total stockholders' equity
290,132 221,414
Total liabilities and stockholders' equity
$ 1,053,976 $ 1,168,934
~~See accompanying notes to the consolidated financial statements~~700 Canal Street, Third Floor, Stamford, CT 06902.

~~The Providence Service Corporation~~
~~Consolidated Statements of Income~~
~~(in thousands except share and per share data)~~

Year Ended December 31,

2015

2014

2013

Service revenue, net
$ 1,695,446 $ 1,136,211 $ 798,766

Operating expenses:

Service expense
1,544,365 1,023,785 736,669
General and administrative expense
73,616 44,501 25,590
Depreciation and amortization
53,469 22,833 9,331
Total operating expenses
1,671,450 1,091,119 771,590
Operating income
23,996 45,092 27,176

Other expenses:

Interest expense, net
16,213 13,122 6,921
Equity in net loss of investee
10,970 - -
Loss on extinguishment of debt
- - 525
Gain on foreign currency transactions
(857 ) (37 ) -
Income (loss) from continuing operationsbefore income taxes
(2,330 ) 32,007 19,730
Provision for income taxes
16,276 8,090 6,625
Income (loss) from continuing operations, net of tax
(18,606 ) 23,917 13,105
Discontinued operations, net of tax
101,800 (3,642 ) 6,333
Net income
83,194 20,275 19,438
Net loss attributable to noncontrolling interests
502 - -
Net income attributable to Providence
$ 83,696 $ 20,275 $ 19,438

Net income available to commonstockholders (Note 15)
$ 68,601 $ 20,275 $ 19,438

Basic earnings (loss) per common share:

Continuing operations
$ (1.45 ) $ 1.62 $ 0.97
Discontinued operations
5.75 (0.25 ) 0.47
Basic earnings per common share
$ 4.30 $ 1.37 $ 1.44

Diluted earnings (loss) per common share:

Continuing operations
$ (1.45 ) $ 1.59 $ 0.95
Discontinued operations
5.75 (0.24 ) 0.46
Diluted earnings per common share
$ 4.30 $ 1.35 $ 1.41

Weighted-average number of commonshares outstanding:

Basic
15,960,905 14,765,303 13,499,885
Diluted
15,960,905 15,018,561 13,809,874
~~See accompanying notes to the consolidated financial statements~~

~~The Providence Service Corporation~~
~~Consolidated Statements of Comprehensive Income~~
~~(in thousands)~~

Year Ended December 31,

2015

2014

2013

Net income
$ 83,194 $ 20,275 $ 19,438
Net loss attributable to noncontrolling interest
502 - -
Net income attributable to Providence
83,696 20,275 19,438
Other comprehensive loss:

Foreign currency translation adjustments, net of tax
(8,075 ) (7,337 ) (526 )
Other comprehensive loss
(8,075 ) (7,337 ) (526 )
Comprehensive income
75,119 12,938 18,912
Comprehensive income attributable to noncontrolling interest
508 - -
Comprehensive income attributable to Providence
$ 75,627 $ 12,938 $ 18,912
~~See accompanying notes to the consolidated financial statements~~

~~The Providence Service Corporation~~
~~Consolidated Statements of Stockholders' Equity~~
~~(in thousands except share data)~~

Common Stock

Additional
Paid-In

Retained
Earnings
(Accumulated

Accumulated
Other
Comprehensive
Loss, Net of

Treasury Stock

Non-
Controlling

Shares

Amount

Capital

Deficit)

Tax

Shares

Amount

Interest

Total

Balance at December 31, 2012
13,785,947 $ 14 $ 180,778 $ (53,079 ) $ (893 ) 928,478 $ (15,094 ) $ 6,961 $ 118,687
Stock-based compensation
- - 3,079 - - - - - 3,079
Exercise of employee stock options, including net tax benefit of $437
592,126 - 10,506 - - - - - 10,506
Restricted stock issued
99,239 - - - 27,964 (547 ) - (547 )
Foreign currency translation adjustments, net of tax
- - - - (526 ) - - - (526 )
Net income attributable to Providence
- - - 19,438 - - - - 19,438
Balance at December 31, 2013
14,477,312 14 194,363 (33,641 ) (1,419 ) 956,442 (15,641 ) 6,961 150,637
Stock-based compensation
- - 7,562 - - - - - 7,562
Exercise of employee stock options, including net tax benefit of $2,683
512,927 - 13,702 - - - - - 13,702
Restricted stock issued
74,714 - - - - 18,504 (524 ) - (524 )
PSC of Canada Exchange Corp. shares exchanged
261,694 1 6,960 - - 39,162 (1,521 ) (6,961 ) (1,521 )
Restricted shares issued related to Ingeus acquisition, unvested
596,915 1 (1 ) - - - - - -
Restricted shares issued related to Matrix acquisition, unvested
946,723 1 38,569 - - - - - 38,570
Other
- - - - - - - 50 50
Foreign currency translation adjustments, net of tax
- - - - (7,337 ) - - - (7,337 )
Net income attributable to Providence
- - - 20,275 - - - - 20,275
Balance at December 31, 2014
16,870,285 17 261,155 (13,366 ) (8,756 ) 1,014,108 (17,686 ) 50 221,414
Stock-based compensation
- - 26,622 - - - - - 26,622
Exercise of employee stock options, including net tax benefit of $2,706
247,333 - 7,899 - - 5,718 (299 ) - 7,600
Restricted stock issued
65,447 - - - - 15,961 (759 ) - (759 )
Stock repurchase
- - - - - 816,468 (34,111 ) - (34,111 )
Shares surrendered by employees to pay employee taxes related to shares released from escrow
- - - - - 43,743 (1,968 ) - (1,968 )
Conversion of convertible preferred stock to common stock
3,715 - 150 - - - - - 150
Beneficial conversion feature related to preferred stock
- - 1,071 - - - - - 1,071
Convertible preferred stock dividends
- - (2,814 ) (1,121 ) - - - - (3,935 )
Accretion of convertible preferred stock discount
- - (1,071 ) - - - - - (1,071 )
Foreign currency translation adjustments, net of tax
- - - - (8,075 ) - - - (8,075 )
Noncontrolling interests
- - - - - - - (502 ) (502 )
Net income attributable to Providence
- - - 83,696 - - - - 83,696
Balance at December 31, 2015
17,186,780 $ 17 $ 293,012 $ 69,209 $ (16,831 ) 1,895,998 $ (54,823 ) $ (452 ) $ 290,132
~~See accompanying notes to the consolidated financial statements~~

~~The Providence Service Corporation~~
~~Consolidated Statements of Cash Flows~~
~~(in thousands)~~

Year Ended December 31,

2015

2014

2013

Operating activities

Net income
$ 83,194 $ 20,275 $ 19,438
Adjustments to reconcile net income to net cashprovided by operating activities:

Depreciation
20,234 14,051 7,738
Amortization
38,067 15,437 7,134
Provision for doubtful accounts
2,539 2,589 3,245
Stock-based compensation
26,622 7,562 3,079
Deferred income taxes
(10 ) (5,208 ) (3,282 )
Amortization of deferred financing costs and debt discount
2,041 5,561 960
Loss on extinguishment of debt
- - 525
Excess tax benefit upon exercise of stock options
(2,857 ) (2,722 ) (1,120 )
Gains on remeasurement of contingent consideration
(2,469 ) (16,314 ) -
Asset impairment charge
1,593 6,915 492
Equity in net loss of investee
10,970 - -
Gain on sale of business
(123,129 ) - -
Income taxes payable on gain on sale of business 22,797 - -
Other non-cash charges (credits)
(419 ) 3,088 364
Changes in operating assets and liabilities, net of effectsof acquisitions:

Accounts receivable
(86,627 ) (17,208 ) 7,186
Other receivables
(5,104 ) 327 1,199
Restricted cash
(20 ) 266 (141 )
Prepaid expenses and other
19,778 (7,954 ) (856 )
Reinsurance liability reserve
(611 ) 3,761 (19 )
Accounts payable and accrued expenses
(21,900 ) 28,483 18,863
Accrued transportation costs
9,045 530 (6,354 )
Deferred revenue
19,043 (3,454 ) (3,366 )
Other long-term liabilities
463 (790 ) 152
Net cash provided by operating activities
13,240 55,195 55,237
Investing activities

Purchase of property and equipment
(35,072 ) (23,242 ) (10,183 )
Net increase (decrease) in short-term investments
(18 ) (19 ) 177
Acquisitions, net of cash acquired
(3,433 ) (416,986 ) (989 )
Sale of business, net of cash sold
199,943 - -
Equity investment
(16,072 ) - -
Restricted cash for reinsured claims losses
(2,058 ) (3,108 ) (2,848 )
Net cash provided by (used in) investing activities
143,290 (443,355 ) (13,843 )
Financing activities

Proceeds from issuance of preferred stock, netof issuance costs
80,667 - -
Preferred stock dividends
(3,928 ) - -
Repurchase of common stock, for treasury
(36,838 ) (524 ) (547 )
Proceeds from common stock issued pursuant to stock option exercise
4,894 11,019 10,069
Excess tax benefit upon exercise of stock options
2,857 2,722 1,120
Proceeds from long-term debt
34,000 501,200 76,000
Repayment of long-term debt
(305,125 ) (48,625 ) (82,500 )
Payment of contingent consideration
(7,496 ) - -
Debt financing costs
(286 ) (12,769 ) (2,082 )
Capital lease payments and other
- 73 (9 )
Net cash provided by (used in) financing activities
(231,255 ) 453,096 2,051
Effect of exchange rate changes on cash
(911 ) (3,525 ) (313 )
Net change in cash
(75,636 ) 61,411 43,132
Cash at beginning of period
160,406 98,995 55,863
Cash at end of period
$ 84,770 $ 160,406 $ 98,995
~~See accompanying notes to the consolidated financial statements~~

~~The Providence Service Corporation~~
~~Supplemental Cash Flow Information~~
~~(in thousands)~~

Year Ended December 31,

Supplemental cash flow information

2015

2014

2013

Cash included in current assets of discontinuedoperations held for sale
$ - $ 25,148 $ 23,839
Cash paid for interest
$ 16,699 $ 10,726 $ 5,839
Cash paid for income taxes
$ 21,555 $ 18,389 $ 13,395
Accrued unfunded future equity investment capital contributions
$ 4,654 $ - $ -
PSC of Canada Exchange Corp. shares exchanged
$ - $ 6,961 $ -
PSC of Canada Exchange Corp. shares converted totreasury shares for fulfillment of obligation by sellersof WCG related to dispute with British Columbia
$ - $ 1,521 $ -
Acquisitions:

Purchase price
$ - $ 525,596 $ 989
Less:

Cash acquired
- 37,159 -
Common stock issued for acquistions of business
- 38,570 -
Contingent consideration
- 30,095 -
Note payable to former shareholder
- 600 -
Amount due to former shareholder
- 2,186 -
Working capital adjustments to purchase price
(3,433 ) - -
Acquisitions, net of cash acquired
$ 3,433 $ 416,986 $ 989
~~See accompanying notes to the consolidated financial statements~~

~~The Providence Service Corporation~~Item 11.Executive Compensation

~~Notes to Consolidated Financial Statements~~Compensation Discussion and Analysis

~~December 31, 2015~~
~~(in thousands except years, share and per share data)~~
1. ~~Organization and Basis of Presentation~~General

~~Description of Business~~Introduction

~~The Providence Service Corporation (the “Company”~~This Compensation Discussion and Analysis (“CD&A”) explains the executive compensation program for the following individuals, who are referred to as the Named Executive Officers or ~~“Providence”)~~NEOs:
●
James M. Lindstrom - Chief Executive Officer and Former Chief Financial Officer
●
Christopher S. Shackelton - Former Interim Chief Executive Officer
●
Warren S. Rustand - Former Chief Executive Officer
●
David Shackelton - Chief Financial Officer
●
Robert E. Wilson - Former Chief Financial Officer
●
Michael-Bryant Hicks – Former Senior Vice President and General Counsel
●
Herman M. Schwarz – Chief Executive Officer, LogistiCare Solutions, LLC
●
Justina Uzzell – Chief People Officer
Executive Summary
Overview
Providence is a holding company, whose subsidiaries provide critical healthcare and workforce development services. ~~We operate in~~The Company operates within two key industry sectors-US healthcare and global workforce development-through its three operating segments: Non-Emergency Transportation Services ~~(“NET Services”)~~(LogistiCare), Workforce Development Services ~~(“WD Services”)~~(Ingeus) and Health Assessment Services ~~(“HA Services”)~~(Matrix). ~~NET Services coordinates non-emergency transportation for individuals~~Beginning with the acquisitions of Matrix and Ingeus in 2014, we established and implemented a new business strategy where Providence became a holding company whose ~~limited mobility and/or financial resources would otherwise hinder them from accessing necessary~~subsidiaries provide access to critical healthcare and ~~social~~workforce development services. WDSenior leadership, including our NEOs, continued to lead our transition towards fully implementing the holding company structure in 2015.
Our holding company strategy is designed to increase intrinsic value on a per share basis, which in turn is predicated upon the continued development and efficient delivery of critical and high quality services. Our current service offerings are based upon a common purpose of delivering exceptional value in the healthcare and workforce development service industries, primarily in a community or home setting.
In order to meet our goal of increasing shareholder value, we have established certain priorities at both the holding company and segment leadership levels. The priorities of our leadership at the holding company level include: 1) pursuing the highest standards of governance, values and compliance, 2) ensuring operating excellence by attracting, developing, and retaining empowered and accountable segment level leadership with deep industry experience, and 3) allocating capital opportunistically in markets that may be inefficient or where we have an ability to invest at a discount to intrinsic value, particularly where our experience, analysis, and long-term perspective can provide an advantage over competitors. As demonstrated in 2015 with the divestiture of our Human Services ~~primarily provides employability and offender rehabilitation services~~segment, we also may dispose of current or future investments based on a variety of factors, including availability of alternative opportunities to ~~eligible participants of government sponsored programs. HA Services, provides care optimization and delivery solutions, including comprehensive health assessments (“CHAs”) for health plans~~deploy capital or otherwise maximize shareholder value as well as ~~in-home care management offerings.~~
Ingeus Proprietary Limited and its wholly and partly-owned subsidiaries and associates (collectively, “Ingeus”) were acquired on May 30, 2014, and is included in WD Services. CCHN Group Holdings, Inc. and its wholly-owned subsidiaries and affiliates under the tradename Matrix (“Matrix”) were acquired on October 23, 2014, and is included in HA Services. On November 1, 2015, we completed the sale of the Human Services segment, which is accounted for as a discontinued operation.
~~As of December 31, 2015, the Company operated in 44 states and the District of Columbia in the United States (“US”), and in 11~~ other ~~countries outside of the US.~~
~~Sale of Human Services~~
On November 1, 2015, the Company completed the sale of the Human Services segment. The assets and liabilities of the Human Services segment are classified as held for sale in the consolidated balance sheet for the year ended December 31, 2014. Additionally, the operating results of this segment are reported as discontinued operations, net of tax in the consolidated statements of income for the years ended December 31, 2015, 2014 and 2013. See Note 22,~~Discontinued Operations.~~
~~Basis of Presentation~~
The Company follows accounting standards set by the Financial Accounting Standards Board (“FASB”). The FASB establishes accounting principles generally accepted in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants, which the Company is required to follow. References to GAAP issued by the FASB in these footnotes are to the FASB~~Accounting Standards Codification~~ (“ASC”), which serves as a single source of authoritative non-SEC accounting and reporting standards to be applied by non-governmental entities. All amounts are presented in US dollars, unless otherwise noted.
Se~~asonality~~
The Company’s quarterly operating results and operating cash flows normally fluctuate due in part to seasonal factors and uneven demand for services and the timing of new contracts, which impact the amount of revenues earned and expenses incurred. NET Services experiences fluctuations in demand during the summer, winter and holiday seasons. Due to higher demand in the summer months and lower demand in the winter and holiday seasons, coupled with a primarily fixed revenue stream based on a per member, per month payment structure, NET Services normally experiences lower operating margins in the summer season and higher operating margins in the winter and holiday seasons. HA Services experiences quarterly volatility in revenue and earnings due to uneven demand for services. WD Services is impacted by the timing of commencement and the expiration of major contracts. Under many of WD Services’ contracts in new service lines, the Company invests significant sums of money in personnel, leased office space, purchased or developed technology, and other costs, and generally incur these costs prior to commencing services and receiving payments. This results in significant variability in its financial performance and cash flows between quarters and for comparative periods. It is expected that future contracts will be structured in a similar fashion.

2.~~Significant Accounting Policies~~ ~~and Recent Accounting Pronouncements~~
~~Principles of Consolidation~~
The accompanying consolidated financial statements include The Providence Service Corporation, Inc., our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We record our investments in entities that we do not control, but over which we have the ability to exercise significant influence, using the equity method. We have eliminated significant intercompany transactions and accounts.
~~Accounting Estimates~~
The Company uses estimates and assumptions in the preparation of the consolidated financial statements in accordance with GAAP. The estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. The Company’s actual financial results could differ significantly from these estimates. The significant estimates underlying our consolidated financial statements include revenue recognition; allowance for doubtful accounts; accrued transportation costs; accrued restructuring; income taxes; recoverability of current and long-lived assets; intangible assets and goodwill; loss contingencies; accounting for business combinations, including amounts assigned to definite and indefinite lived intangibles and contingent consideration; loss reserves for reinsurance and self-funded insurance programs; and stock-based compensation.
~~Cash and Cash Equivalents~~
Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less. Investments in cash equivalents are carried at cost, which approximates fair value. The Company places its temporary cash investments with high credit quality financial institutions. At times, such investments may be in excess of the federally insured limits.
At December 31, 2015 and 2014, approximately $37,467 and $42,651, respectively, of cash was held in foreign countries. Such cash is generally used to fund foreign operations, although it may be used also to repay intercompany indebtedness or similar arrangements.strategic considerations.

Organizational/People Changes
In light of our business model, our most critical asset is our people, including our holding company team that drives our capital allocation decisions and our segment leadership teams which drive operational excellence. Our strategic initiatives have necessitated several organizational changes at the holding company level.
Mr. Warren Rustand, who served as our CEO from May 7, 2013, stepped down from his position as CEO on June 1, 2015. While the Company conducted a comprehensive search for a CEO replacement, Providence’s Chairman, Mr. Christopher S. Shackelton assumed the CEO role on an interim basis. During Mr. Shackelton’s term as interim CEO, he did not receive any pay other than his compensation as Chairman. On August 6, 2015, the Company appointed Mr. James M. Lindstrom, then CFO of the Company, as CEO.
Mr. Robert Wilson served as our CFO from November 19, 2012. Having completed his contractual employment commitment at the end of 2014, Mr. Wilson stepped down from his role with the Company. Mr. Lindstrom was thereafter hired as Executive Vice President and CFO effective January 16, 2015. Upon Mr. Lindstrom’s appointment to CEO on August 6, 2015, Mr. David Shackelton, then Vice President, Head of Corporate Development, was appointed as interim CFO. On October 1, 2015, the Company appointed Mr. David Shackelton as CFO.
Ms. Justina Uzzell was hired as Chief People Officer on March 9, 2014.
Mr. Matthew Umscheid was hired as Senior Vice President of Strategic Services on November 2, 2015.
Mr. William Severance was hired as Chief Accounting Officer on February 1, 2016.
Mr. Michael-Bryant Hicks resigned as Senior Vice President and General Counsel effective February 25, 2016.
Ms. Sophia Tawil was hired as Senior Vice President and General Counsel effective April 25, 2016.
New LTI Program
We believe in recognizing the performance of our executive officers through compensation made up of a base salary and performance based incentives. The primary focus of the incentive compensation plan structure was revised in 2015 by the Compensation Committee to better align with the new business strategy and our shareholders’ objectives. The Compensation Committee implemented a new LTI program for our holding company executives, called the HoldCo LTI Plan, designed to drive extraordinary stockholder value and reward our executives for substantial stockholder value creation.
Our executives begin to receive compensation under this plan once our multi-year compound annual stockholder return exceeds 8%. If our stockholder return exceeds 8% per annum during the specified period, our executives will earn Providence common shares in conjunction with increases in Providence’s share price. While these awards are earned through 2017, the common shares vest between December 31, 2017 and December 31, 2019. We believe this structure encourages an ownership mentality that incentivizes our management to create stockholder value over a multi-year period.
The Committee also established a new LTI program for the senior leadership at each of our segments based on value creation (as measured by EBITDA growth) and free cash flow generation, as described below under “—2015 Executive Compensation Program Decisions – Long-Term Incentives”.

New Stock Matching Program
Finally, in pursuit of encouraging an ownership mindset in our executives, we offered a Stock Matching Program in 2015, under which executives were invited to purchase equity from the Company through the grant of an immediately exercisable option to further encourage an ownership mindset and align executives with the Company’s long-term success. For every share an executive purchased, he or she was entitled to retain matching options subject to time-based vesting that had been granted together with the immediately exercisable option. These matching options are forfeited if the executive sells any shares (not just the shares purchased under this program), subject to limited exceptions, prior to December 31, 2017. Given the match was made in options, executives will receive no benefit from this program unless the stock price increases, they do not sell any shares and they remain employed with the Company. Mr. Lindstrom and Mr. David Shackelton each purchased $500,000 in Company shares under this program in 2015, and therefore retained matching options, in addition to their previous open market purchases since joining the Company.
~~Restricted Cash~~Stockholder Say-on-Pay and Company Response

In establishing and recommending 2015 compensation for the NEOs, the Compensation Committee considered the results of the Say-on-Pay vote at the 2015 Annual Meeting of Stockholders. At ~~December 31, 2015~~that meeting, our stockholders approved our executive compensation for the 2014 fiscal year with approximately 86.1% of the votes cast in favor. Our Board of Directors recognizes that executive compensation is important to stockholders and ~~2014,~~takes this into account when reviewing the ~~Company had approximately $20,056 and $17,998, respectively,~~compensation program throughout the year. In reviewing the compensation program in light of ~~restricted cash:~~the new business strategy of operating as a holding company, the Committee established a compensation plan that directly aligns the compensation paid to NEOs with value delivered to stockholders.

December 31,

2015

2014

Collateral for letters of credit - Reinsured claims losses
3,033 3,033
Escrow/Trust - Reinsured claims losses
17,023 14,965
Subtotal restricted cash for reinsured claims losses
20,056 17,998

Total restricted cash
20,056 17,998

Less current portion
4,012 3,234

$ 16,044 $ 14,764
Detailed Discussion and Analysis

OfCompensation Committee Philosophy
We believe that compensation programs offered to NEOs should support the ~~restricted cash amount at December 31, 2015~~creation of stockholder value over the long term and ~~2014:~~achievement of our strategic and financial goals. Accordingly, our guiding compensation principles focus on:

●
~~approximately $3,033~~attracting and retaining high-performance leaders;
●
aligning the interests of our executives with those of our stockholders;
●
linking a meaningful portion of executive compensation to performance; and
●
awarding a significant portion of compensation based on at-risk opportunities tied to stockholder returns.

2015 Compensation Components
The specific components of the 2015 executive compensation program are as follows:
Component
Description
Purpose
Base Salary
Fixed cash component.
Reward for sustained individual performance, overall skills, experience and tenure.
2015 Cash Bonus Awards
2015 cash bonus awards consisted of the Annual Incentive Program (“AIP”) and special bonuses. Special bonuses rewarded NEOs for numerous accomplishments made in ~~both periods served as collateral~~2015 in support of the business strategy.
Provide direct financial incentive to the executives to achieve specific financial and individual goals.
Long-Term Incentives (“LTI”)
LTI consisted of the new HoldCo LTI Plan and Senior Executive LTIP.
Performance-based Restricted Stock Units (“PBRSUs”) and Time-Based Restricted Stock (“TBRS”) were also granted in the beginning of the year to certain NEOs at that time under our old equity plan design, prior to establishing the HoldCo LTI Plan.
One-time new hire grants were provided to certain executives in connection with their employment agreements.
New HoldCo LTI Plan aligns with holding company business strategy and drives stockholder value creation. Senior Executive LTIP drives growth for ~~irrevocable standby letters~~each of ~~credit~~the segments.
Stock Matching Program
Participants purchased shares out-of-pocket and received a one-for-one match in options subject to ~~secure any reinsured claims losses under~~time-based vesting.
Encourages ownership and alignment with the Company’s ~~reinsurance program;~~success over a multi-year period.
Benefits and Perquisites
We provide certain benefits generally available to all salaried employees and we provide additional benefits for NEOs. Perquisites for NEOs relate primarily to commuting reimbursement. See Benefits and Perquisites for further detail.
Provide an appropriate level of employee benefits.
Post-Termination Compensation
NEOs are eligible for certain payments post-termination, as specified in Potential Payments Upon Termination or Change in Control.
Provide an appropriate level of payment in the event of a change in control or termination.
Other Policies
Stock Ownership Guidelines
Clawback
Anti-Hedging / Anti-Pledging
Enhance alignment with stockholder interests.

2015 Executive Compensation Program Decisions
The following decisions were made in 2015 regarding each of these compensation components.
Base Salary
The Compensation Committee reviewed the base salaries of each continuing NEO, and set salaries for newly-hired NEOs, at levels intended to be competitive, as further discussed under “—Approach for Developing the Executive Compensation Program”, and provide the appropriate level of fixed compensation for each individual’s role at the Company. In determining the base salaries in 2015 for each NEO, the Compensation Committee considered the internal pay comparisons within the executive group at Providence, individual performance, overall financial performance of the Company, and market data. Salaries for our NEOs as of year-end or as of the date of their resignation were as follows:
Name
2014 Base Salary⁽¹⁾
2015 Base Salary
Mr. Lindstrom
N/A
$650,000⁽²⁾
Mr. David Shackelton
N/A
$450,000⁽³⁾
Mr. Rustand
$590,000
$740,000
Mr. Wilson
$400,000
$400,000
Mr. Hicks
$350,000
$350,000
Mr. Schwarz
$432,000
$500,000
Ms. Uzzell
N/A
$250,000
(1) Reflects 2014 base salaries for those serving as NEOs during that year.
(2) The base salary for Mr. Lindstrom was set at $550,000 when he was appointed SVP and CFO in January 2015 and increased to $650,000 when he was appointed CEO on August 6, 2015.
(3) The base salary for Mr. David Shackelton in his capacity as Vice President, Head of Corporate Development was $180,000. When appointed Interim CFO in August 2015, Mr. David Shackelton’s base salary was set at $300,000 and increased to $450,000 when he was appointed CFO on October 1, 2015.
Actual salaries were pro-rated for time served in 2015 as shown in the Summary Compensation Table.
2015 Cash Bonus Awards
Annual Incentive Plan (“AIP”)
All NEOs participated in the 2015 AIP, except for Christopher Shackelton. For 2015, the AIP was based on corporate financial performance, measured by earnings before interest, taxes, depreciation and amortization, or EBITDA. AIP payouts were subject to achieving the EBITDA target, set equal to the budget for 2015, after expensing the actual AIP payout amounts. EBITDA performance achieved below the EBITDA target results in no payouts under the 2015 AIP. Although Ms. Uzzell was not subject to the 2015 AIP, her bonus award was based on the same design as the 2015 AIP.

Messrs. Lindstrom, David Shackelton, Rustand, Hicks, and Schwarz were also eligible to earn an additional payout through sharing between them 20% of the amount, if any, by which actual EBITDA performance exceeded the EBITDA target, after expensing the actual AIP bonus payouts. Each individual’s additional payout is subject to a cap of 25% of each individual’s base salary received in 2015.
Each participant’s AIP opportunity was determined as a percentage of base salary, as follows:
Name
Target AIP
Opportunity as
% of Salary
Mr. Lindstrom
75%⁽¹⁾
Mr. David Shackelton
75%⁽²⁾
Mr. Rustand
100%
Mr. Wilson
50%
Mr. Hicks
75%
Mr. Schwarz
75%
Ms. Uzzell
50%⁽³⁾
(1) Mr. Lindstrom target AIP opportunity was 75% during his time served as CFO and was maintained at 75% when he was appointed CEO.
(2) David Shackelton’s target AIP opportunity was 25% from January 1, 2015 to August 5, 2015. Upon being appointed to the CFO role, his target AIP opportunity increased to 75% of base salary for August 6, 2015 to December 31, 2015.
(3) Although Ms. Uzzell was not subject to the 2015 AIP, her bonus payout as indicated above was based on achieving the same EBITDA target under the 2015 AIP.
Actual performance was below the EBITDA target, and therefore no AIP awards were paid in 2015. See below for details.
Target/Budgeted EBITDA
$137.7M
Actual EBITDA
$67.4M
Payout as a % of Target
0%

Special Bonuses
The Compensation Committee awarded special discretionary bonuses for certain NEOs serving at the holding company in recognition of their numerous accomplishments in 2015, including, but not limited to, the sale of the Human Services segment and the transition to the holding company structure. Messrs. Lindstrom and David Shackelton and Ms. Uzzell received $400,000, $240,000, and $135,000, respectively.
Mr. Schwarz also received a special discretionary bonus of $855,779 in recognition of his contribution to the outstanding performance of LogistiCare in 2015 and the impact his leadership has had on value creation over a multi-year period.
Long-Term Incentives
HoldCo LTI Plan
The HoldCo LTI Plan is a multi-year plan with a contingent share based payout based on stock price performance, thus providing direct alignment with stockholders. The Compensation Committee selected participants of the HoldCo LTI Plan based on individuals who could have a significant impact on Company results in support of the business strategy. Performance will be measured from August 6, 2015 (the “award date”) to December 31, 2017 (the “determination date”). No further LTI plans are expected to be put into place for participants of the HoldCo LTI Plan through December 31, 2017.
Under the HoldCo LTI Plan, executives will earn Providence common shares based on the degree to which Providence’s compound annual stockholder returns exceed 8% (“Extraordinary Shareholder Value”) over the specified performance period. No award will be payable if compound annual stockholder returns are below 8%. If returns are above 8%, all participating executives will share in a total pool equal to 8% of the Extraordinary Shareholder Value. The pool will be capped based on 8% of 40% compound annual stockholder returns. The beginning and ending value will be measured based on the 90-day volume-weighted average stock price (“VWAP”) ending on the award date and determination date, respectively.
The LTI opportunity was set such that, at a compound annual growth rate of 15%, our executives’ compensation would be below the median of our peers. In order to earn compensation at or above median, performance above 15% compound annual would be required, such that at the plan maximum of 40%, our executives’ compensation would be positioned towards the high end of the peer group, aligned with the outstanding results to the shareholders.
The table set forth below illustrates the payouts that would be achieved under the HoldCo LTI Plan based on each of the assumed Compound Annual Growth Rates set forth in the table, which are provided solely for purposes of illustration of the operation of the HoldCo LTI Pool.
HoldCo LTI Pool Value at Varying Levels of Stock Price Performance

($ in millions, except per share amounts)

(Threshold)

Compound Annual Growth Rate (1)
0.0 % 8.0 % 15.0 %
Determination Share Price (2)
$ 47.20 $ 56.79 $ 66.04

Stockholder Value (3)
$ 914.8 $ 1,100.6 $ 1,279.8
Less: Hurdle Shareholder Value
$ (1,100.6 ) $ (1,100.6 ) $ (1,100.6 )
Extraordinary Shareholder Value
$ - $ - $ 179.3
HoldCo LTI Pool Value(4)
$ - $ - $ 14.3
Implied # of RSUs (5)
- - 217,157
(1) Compound annual growth rate of Providence 90 Day VWAP from August 6, 2015 to December 31, 2017

(2) Assumed PRSC 90 Day VWAP as of December 31, 2017 based on the assumed compound annual growth rates listed in the table.
(3) Based upon 19.38 million shares of Providence common stock being outstanding plus the number of any unissued shares of stock from any Company outstanding securities, including any shares of convertible preferred stock which remain subject to conversion and any outstanding options or restricted stock units as of August 6, 2015
(4) Calculated as 8% of Extraordinary Shareholder Value
(5) Calculated as the projected HoldCo LTI Pool Value divided by the projected Determination Share Price, in each case based on the assumptions set forth in the table
Participants in the HoldCo LTI Plan receive a percentage allocation of this pool and will receive their awards in Providence shares of common stock, subject to the below vesting schedule. The number of shares will be determined based on each participant’s percentage allocation of the pool in dollars divided by the 90-day VWAP ending on the determination date.
Each NEO who is participating in the HoldCo LTI Plan was allocated the following percentage of the pool as of December 31, 2015:
Named Executive Officer
Percent Allocation of Pool
Mr. Lindstrom
40%
Mr. David Shackelton
20%
Mr. Hicks
7.5%
Ms. Uzzell
7.5%
All Other Participants
10%
Reserve for Future Awards
15%
60% of each HoldCo LTI Plan participant’s shares will be issued on or shortly following the determination date, 25% will vest on the one-year anniversary of the determination date (December 31, 2018), and the remaining 15% will vest on the second anniversary of the determination date (December 31, 2019). Participants must be employed as of the vesting dates in order for each tranche to vest. Accordingly, because Mr. Hicks resigned in 2016 prior to any vesting date, he forfeited his award upon his resignation.
Senior Executive Long Term Incentive Plan (“Senior Executive LTIP”).
The Senior Executive LTIP, a program under the 2006 Plan, is designed to align the interests of the executive teams at each subsidiary with the value creation goals of the Company. The plan is intended to motivate the subsidiary executives to make decisions that create long-term value for shareholders by achieving growth for their business. Mr. Schwarz is the only NEO who participates in a Senior Executive LTIP, and he participates in the LogistiCare Vertical LTIP in particular. Ingeus and Matrix also have similar Senior Executive LTIP programs for their senior management.

The Senior Executive LTIP is a cash incentive awarded for each subsidiary based on growing such subsidiary’s intrinsic value (as measured by EBITDA growth over a three-year period times a 6X multiple) and free cash flow metrics. Additionally, in order to qualify the award for performance-based compensation under Section 162(m) of the Internal Revenue Code (the “IRC”), the Senior Executive LTIP is subject to a performance condition of 2% EBITDA margin for the twelve-month period beginning on either October 1, 2015, January 1, 2016, or January 1, 2017 (“162(m) Performance Period”).
The performance period for each subsidiary program is from December 31, 2014 to December 31, 2017. For LogistiCare in particular, the baseline intrinsic value is based on 2014 EBITDA and the ending intrinsic value is based 70% on 2017 EBITDA and 30% on 2016 EBITDA.
Value Created is defined for each subsidiary program as the result of subtracting the subsidiary’s baseline intrinsic value from the subsidiary’s ending intrinsic value. A Value Creation Pool is generated for each subsidiary plan based on the sum of the amounts derived from the percentages of Value Created determined in accordance with the following table based on the subsidiary’s Compound Annual Growth Rate (“CAGR”) over the performance period:
Value Creation Pool
(% of Value Created (“VC”))
5% of VC from 0-10% CAGR
6% of VC from 10%-20% CAGR
7% of VC for ≥ 20% CAGR
The Value Creation Pool may be funded up to an implied three-year CAGR of 40%.
Separately, a Free Cash Flow Pool (“FCF Pool”) is generated equal to the three year cumulative Free Cash Flow for the performance period multiplied by the quotient of the amount of the Value Creation Pool divided by Value Created.
The Value Creation Pool and the FCF Pool are added to generate the total award pool. To the extent an award pool is created for LogistiCare and subject to his continued employment during the performance period, Mr. Schwarz will receive a cash payment subject to extended multi-year vesting. In 2015, Mr. Schwarz was allocated a participation percentage of 40% of the LogistiCare total award pool.
60% of the product of the pool created and Mr. Schwarz’s participation percentage allocation will pay out at the end of the performance period. On the first and second anniversaries of the determination date, Mr. Schwarz will receive additional payments equal to 25% and 15%, respectively, of the payout, subject to continued employment as of the date of payment.
Participants may elect to receive up to 50% of the award in Common Stock of the Company. Any portion of the award elected to be received in shares will payout in the first tranche.
Definitions of Performance Measures for Senior Executive LTIP
Specific definitions of EBITDA margin, EBITDA and free cash flow for purposes of the Senior Executive LTIP are as follows.
“EBITDA Margin” means, for each 162(m) Performance Period, the quotient obtained when LogistiCare’s EBITDA for the 162(m) Performance Period (after making adjustments that add back any one-time costs associated with acquisitions or divestitures, stock-based compensation, gain or loss on equity investments, and other non-cash related items) is divided by its revenues for such 162(m) Performance Period, as determined by the Administrator.

“EBITDA” means LogistiCare’s earnings before income taxes, depreciation, and amortization. EBITDA will be the reported EBITDA for LogistiCare in the Providence Service Corporation 10-K, adjusted for certain items related to acquisitions/divestitures, share-settled equity costs, contingent consideration, gain/loss on equity investment, asset impairment, foreign currency translation gains/losses, amortization of start-up costs for contracts and Senior Vertical LTIP accrual.
“Free Cash Flow” means LogistiCare’s free cash flow. Free Cash Flow will be the operating cash flow for LogistiCare, including corporate allocations, adjusted for certain items related to pro-forma adjustments, cash transfers, acquisition costs, dividends from equity investment, capital expenditures, estimated interest payments, and tax payments.
Stock Matching Program
In August 2015, the Compensation Committee offered the Stock Matching Program for certain NEOs. Under this program, certain NEOs were invited to purchase equity from the Company, essentially investing in the stock alongside stockholders, in order to further align with stockholder interests and establish an ownership mindset in the Company. The program functions such that for every share of Providence stock that an executive purchased, the executive received an option that vests at the end of three years and expires after five years, so long as the executive does not sell any shares for three years and remains employed by the Company during the three-year period. Because the match is in options, executives will receive no benefit from this plan unless the stock price increases.
Mr. Lindstrom and Mr. David Shackelton each purchased $500,000 of common shares under this program. To implement this program, each of our NEOs as of August 2015 was issued 11,319 options with a 10-day exercise period (“Special Options”) and 11,319 Matching Options (subject to three-year cliff vesting) based on an exercise price of $44.17. Messrs. Lindstrom and David Shackelton exercised their Special Options by paying the exercise price and kept their Matching Options. Other NEOs did not exercise their Special Options and therefore forfeited their Special and Matching Options.
The Matching Options are otherwise subject to terms substantially identical to those applicable to Providence’s previously granted time-vested stock options, including continued employment, and will vest fully in connection with a Change in Control. All options were granted pursuant to the 2006 Plan.
New Hire Grants
Upon Mr. Lindstrom’s appointment as CFO, he was awarded a restricted stock unit (“RSU”) award valued at $500,000 on June 1, 2015 in connection with his employment agreement. This award was subject to Mr. Lindstrom purchasing at least $100,000 of our common stock, which was purchased between May 28, 2015 and June 1, 2015. One-third of the RSUs were deemed vested on the date of grant, one-third vested on July 26, 2015, and one-third vested on January 26, 2016. Although these awards have vested, the stock will not be issued to Mr. Lindstrom until the earlier of (a) the third anniversary of the date of grant and (b) six months following the termination of his employment.
Annual Equity Grants
At the beginning of 2015, the Compensation Committee granted Performance-based Restricted Stock Units (“PBRSUs”) and Time-based Restricted Stock (“TBRS”) to Messrs. Rustand, Hicks and Schwarz, consistent with the annual equity program that was approved by the Board of Directors in March 2015. Specifically, equity grants were made based on a mix of 80% PBRSUs and 20% TBRS.

As Messrs. Rustand and Hicks are no longer with the Company, specific treatment of their outstanding equity grants is provided for in their respective Separation Agreements. See the Employment Agreements with the Named Executive Officers section for further detail.
PBRSUs vest based on return on equity, or ROE, performance over a 3-year period commencing on January 1, 2015 and ending December 31, 2017. ROE will be measured based on consolidated net income for the performance period divided by the average of stockholder’s equity over the same period. PBRSUs are subject to the following payout scale:
PBRSU Pay/Performance Scale
3-Year ROE
Payout as a % of Target
≥ 15%
100%
≥ 12 but less than 15%
33%
< 12%
0%
Each vested PBRSU will be settled through the issuance of a share of Providence common stock. Vesting criteria for PBRSU awards require employment with Providence throughout the performance period ending December 31, 2017, as well as achievement of the performance goal.
TBRS will vest in three equal annual installments on the first, second and third anniversaries of the date of grant, provided that the recipient is employed by us on each vesting date.
To determine the amount of PBRSUs and TBRS to award each NEO, the Compensation Committee made a subjective determination, after considering the internal pay comparisons within the executive group at Providence, individual performance, overall financial performance of the company, and market data. Specific 2015 equity grants made to Messrs. Rustand, Hicks and Schwarz were as follows. Messrs. David Shackelton and Ms. Uzzell did not receive grants under this program given their roles at the time of grant, and Mr. Lindstrom did not receive grants under this program given the new hire grants awarded in connection with his employment agreement, as specified above.
Executive

Total Target $ Value

# of PBRSUs at Maximum

# of TBRS

Rustand
$ 851,000 13,085 3,271
Hicks
$ 315,000 4,843 1,211
Schwarz
$ 575,000 8,841 2,210
Total
26,769 6,692
The PBRSUs grants made in 2013 covered the performance period from January 1, 2013 to December 31, 2015. ROE for this time period performed below the threshold level of performance, and therefore, none of the PBRSUs vested in connection with this award.

Policy Regarding the Timing of Equity Award Grants
The Compensation Committee makes its decisions regarding the number of stock options, shares of restricted stock and PBRSUs to be awarded to the NEOs without regard to the effects that the release of our financial results might have on our stock price. The exercise price per share for option grants and the per share value used to determine the number of shares of stock subject to PBRSU and TBRS awards are equal to the closing market price of our Common Stock on the date of grant. Thus, the exercise price of the options granted and the value of the restricted stock and/or PBRSUs awarded are not known until after the close of regular trading on NASDAQ on the day the Compensation Committee meets.
Equity awards may be granted during the year to new hires and employees receiving a promotion and in other special circumstances. Our policy is that only the Compensation Committee may make such grants to officers subject to the reporting requirements of Section 16 under the Exchange Act.
Approach for Developing the Executive Compensation Program
The compensation of our CEO is determined and approved by the Compensation Committee. Our CEO annually reviews the performance of each NEO, other than himself, relative to the annual performance goals established for the year. Our CEO then makes recommendations to the Compensation Committee with respect to all aspects of the compensation of the other NEOs, but does not participate in the final deliberations of the Compensation Committee with respect thereto. The Compensation Committee exercises discretion in modifying compensation recommendations relating to the other NEOs that were made by our CEO and approves all compensation decisions for the NEOs.
In 2015, the Compensation Committee engaged ClearBridge Compensation Group, LLC (“ClearBridge”), a nationally recognized consulting firm, to assess the competitiveness of pay for the executive officers and provide independent advice and recommendations to the Compensation Committee regarding executive compensation. In order to avoid conflicts of interest, ClearBridge only does work for or authorized by the Compensation Committee. Prior to retaining ClearBridge, the Compensation Committee reviewed ClearBridge’s independence as contemplated by the committee’s charter and applicable NASDAQ rules, and determined that there were no conflicts of interest.
We believe it is appropriate for NEO pay to be competitive with the market for comparable executives. To achieve this objective, we will assess market data for a peer group of companies established by the Compensation Committee from time to time. We periodically review our peer group for competitive compensation benchmarking analysis. In determining pay levels for 2015, the following peer group was used:
Amedisys
LHC Group
Chemed
Magellan Health Services
Ensign Group
MAXIMUS
Envision Healthcare Holdings
Restaurant Brands International
Healthways
TransDigm Group
IPC Healthcare
IPC Healthcare was acquired in November 2015.
In addition to market data, the Compensation Committee takes into consideration other factors, including an individual’s role, tenure, experience, skills and performance when making compensation decisions.

Benefits and Perquisites
401(k) Plans
All NEOs are eligible to participate in our 401(k) Plan and to receive a company match, subject to plan requirements and contribution limits established by the IRS. NEOs receive matching contributions under our 401(k) Plan equal to 10% of participant elective contributions up to a maximum amount of $400. At the end of each plan year, we also may make a contribution on a discretionary basis on behalf of participants who have made elective contributions for the plan year.
Deferred Compensation
Previously we maintained a deferred compensation plan to compensate for the inability of certain of our highly compensated employees to take full advantage of our 401(k) plan. None of our NEOs participated in this plan and it was terminated in December 2015. We maintain a Rabbi Trust Plan for highly compensated employees of LogistiCare. However, none of our NEOs participated in this plan during 2015.
Other Benefits and Perquisites
During 2015, our NEOs received, to varying degrees, a limited amount of other benefits, including certain group life, health, medical and other non-cash benefits generally available to all salaried employees. In addition, we also pay for the premiums of certain health and dental benefits for their families and additional disability and life insurance premiums on their behalf, which are not available to all salaried employees. We also provide certain perquisites to our NEOs, primarily relating to commuting. More detail on these benefits and perquisites may be found in the “Summary Compensation Table.”
Other compensation policies
Stock Ownership Guidelines for NEOs
We believe that promoting stock ownership aligns the interests of our NEOs with those of our stockholders and provides strong motivation to build stockholder value. Under the guidelines, NEOs are expected to own shares of our Common Stock with a value equal to the following multiple of their respective salaries:
Executive
Stock Ownership Guideline as aMultiple of Salary
CEO
3x annual salary
Other NEOs
2x annual salary
The following shares held by our NEOs will count towards meeting the required holding level:
●
Shares held directly or indirectly;

●
~~of the remaining $17,023 and $14,965:~~
o
~~approximately $2,125 and $2,800, respectively, was~~Any restricted ~~and held in a trust for historical reinsurance claims losses under the Company’s general and professional liability reinsurance program;~~
o
~~approximately $565 and $493, respectively, was~~stock or restricted ~~under a historical auto liability program associated with the NET Services segment that ceased providing reinsurance on new claims in 2011;~~stock units (whether vested or unvested); and

o●
~~approximately $14,333 and $11,672, respectively, was restricted and held~~Shares owned jointly with or in a trust for, ~~reinsurance claims losses under~~their immediate family members residing in the ~~Company’s workers’ compensation, general and professional liability and auto liability reinsurance programs.~~same household.

Compliance with the established holding level requirement as determined under the amended guidelines was required by December 31, 2014 or within five years of a person becoming a NEO, whichever is later, and will be calculated and determined as of December 31 of each year. Further, NEOs are allowed to sell shares of Common Stock to satisfy tax obligations upon vesting of PBRSUs and TBRS and the exercise price and taxes owed upon the exercise of stock options. Once the ownership requirement has been achieved, the executive officers are free to sell shares of our Common Stock above the required holding level. In determining whether the executive meets the required holding level, the stock ownership guidelines were amended to require use of the greater of (a) the closing market share price as of the date an executive is granted or purchases such shares and (ii) the closing market share price on December 31 of the year the calculation is performed (or the last trading day of that year, if the markets are closed on December 31). In the event a NEO does not achieve his or her holding level set forth above or thereafter sells shares of our Common Stock in violation of the stock ownership guidelines, the Board will consider all relevant facts and take such actions as it deems appropriate under the circumstances.
As of December 31, 2015, other than Mr. Schwarz, none of our NEOs have been NEOs for more than five years and is yet required to meet their respective ownership guideline. Based on the number of shares Mr. Schwarz held as of December 31, 2015, the Compensation committee determined that he is in compliance with these guidelines.
~~Accounts Receivable~~Clawback
It is the Board’s policy that the Compensation Committee will, to the extent permitted by governing law, have the sole and ~~Allowance~~absolute authority to make retroactive adjustments to any cash or equity-based incentive compensation paid to executive officers and certain other officers where the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement. Where applicable, we will seek to recover any amount determined to have been inappropriately received by the individual executive.
Anti-hedging / anti-pledging

We have a policy that prohibits employees and the Board from engaging in any hedging or monetization transactions, or other financial arrangements that establish a short position in our Common Stock or otherwise are designed to hedge or offset a decrease in market value. In addition, we have a policy that prohibits our executive officers and the Board from pledging our Common Stock as collateral for ~~Doubtful Accounts~~a loan or for a margin account.

Change in Control and Severance Arrangements and Severance Payments in 2015

During 2015, we had employment agreements or offer letters with each of our NEOs, which provided for a severance payment upon the termination of employment under certain circumstances and for payment upon a change in control for all NEOs other than Ms. Uzzell as described below under “—Employment Agreements with the Named Executive Officers” and “—Potential Payments Upon Termination or Change in Control”.

When entering into these employment agreements with the NEOs, both during 2015 and in prior years, the Compensation Committee evaluated the Company’s past practice with respect to change in control ("CIC") provisions and severance arrangements and evaluated current market practices for such provisions. The Company has historically included similar provisions in its employment arrangements in order to attract the quality leadership it believes important to the execution of its strategy. The Committee believes that it is important to incentivize management to focus on the execution of the Company’s strategy and to minimize the distraction that may occur as a result of concerns over issues of termination or if the Company were to face a potential CIC transaction. In structuring the provisions included in the employment agreements, the Committee balanced the need to eliminate such distractions with the protection that it believed necessary to provide a competitive employment package to the Company’s NEOs, taking into account all of the terms of the employment agreements. The Compensation Committee considered certain legal and tax provisions, fairness to stockholders, tenure of each executive officer and general corporate practice to select the events that would have triggered payments under the employment agreements noted above. Potential payments to executives upon the occurrence of the events noted above did not impact the Compensation Committee’s decisions regarding other compensation elements.

Certain payment provisions of these employment agreements are also triggered by a CIC which is defined in the employment agreements, and an ensuing negative employment event. However, if the sum of any lump payments, the value of any accelerated vesting of stock options and restricted stock awards, and the value of any other benefits payable to the executive officer on a CIC would constitute an “excess parachute payment” (as defined in Section 280G of the IRC), then such lump sum payment or other benefit will be reduced to the largest amount that will not result in receipt by the executive officer of a parachute payment. See “—Potential Payments Upon Termination or a Change in Control – Change in Control Payments.”

The HoldCo LTI Plan provides for pro rata participation by a participant who has had a Qualified Termination (as defined in the HoldCo LTI Plan) payable when awards are paid to other participants, and provides for forfeiture of all participation rights for a termination other than a Qualified Termination. The program provides that in the event of a Change in Control (as defined by the 2006 Plan) on or before December 31, 2017, all outstanding awards will be settled on the closing date of the Change in Control in an amount of cash and/or unrestricted stock that together have a fair market value equal to the total amount otherwise payable to the participant under the program determined as of such closing date without regard to the otherwise applicable vesting requirements. In the event of a Change in Control after December 31, 2017, each participant will receive on the closing date of the Change in Control cash and/or unrestricted stock having a fair market value equal to the total amount otherwise payable to the participant based on the determination as of December 31, 2017 without regard to the otherwise applicable vesting requirements.

In addition, in the event of a change in control (as defined in the 2006 Plan) of the Company during any performance period, the PBRSUs will be deemed earned by each executive and settled in shares at the maximum level established by the Committee and distributed to the executive within the number of days set forth in the Form of Performance Restricted Stock Unit Agreement.

Impact of tax treatment on compensation

Under Section 162(m) of the IRC, we may not take a tax deduction for compensation paid to any NEO (other than our CFO) that exceeds $1 million in any year unless the compensation is “performance-based.” While the Compensation Committee endeavors to structure compensation so that we may take a tax deduction, it does not have a policy requiring that all compensation must be deductible and it may, from time to time, authorize compensation that is not tax deductible. The Holdco LTI Plan and Senior Executive LTIP have been structured to take advantage of the performance-based exemption under Section 162(m).

Other provisions of the IRC can also affect compensation decisions. Section 409A of the IRC, which governs the form and timing of payment of deferred compensation, imposes sanctions, including a 20% penalty and an interest penalty, on a recipient of deferred compensation that does not comply with Section 409A. The Compensation Committee takes into account the potential implications of Section 409A in determining the form and timing of compensation awarded to our executives and strives to structure its compensation plans to meet these requirements.

Section 280G of the IRC disallows a company’s tax deduction for payments received by certain individuals in connection with a change in control to the extent that the payments exceed an amount approximately three times their average annual compensation, an “excess parachute payment”, and Section 4999 of the IRC imposes a 20% excise tax on those payments. The Compensation Committee also takes the provisions of Sections 280G and 4999 into account in structuring compensation, endeavoring to enable the Company to take a tax deduction and executives to avoid the excise tax. For example, our CIC provisions and severance arrangements with our NEOs contain provisions reducing such payments to an amount that will not constitute an excess parachute payment.

Compensation Committee Report

The ~~Company records accounts receivable amounts at~~Compensation Committee operates under a written charter and is comprised entirely of directors meeting the ~~contractual amount, less an allowance~~independence requirements of NASDAQ listing requirements. The Board established this committee to discharge the Board’s responsibilities relating to compensation of our Chief Executive Officer and each of our other executive officers. The Compensation Committee has overall responsibility for ~~doubtful accounts. The Company maintains an allowance for doubtful accounts at an amount it estimates~~decisions relating to ~~be sufficient to cover~~all compensation plans, policies, and benefit programs as they affect the ~~risk that an account will not be collected. The Company regularly evaluates its accounts receivable, especially receivables that are past due,~~Chief Executive Officer and reassesses its allowance for doubtful accounts based on specific client collection issues. In circumstances where the Company is aware of a specific payer’s inability to meet its financial obligation, the Company records a specific allowance for doubtful accounts to reduce the net recognized receivable to the amount the Company reasonably expects to collect. The Company also provides a general allowance, based upon historical evidence.other executive officers.

The Compensation Committee has reviewed and discussed with Providence’s management the preceding section entitled “Compensation Discussion and Analysis.” Based on this review and discussions with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s ~~provision~~annual report through filing of this proxy statement.

Compensation Committee

Richard Kerley (Chairperson)	Kristi L. Meints	Leslie V. Norwalk

Summary Compensation Table

The following table sets forth certain information with respect to compensation paid by us for ~~doubtful accounts expense for~~services rendered in all capacities to us and our subsidiaries during the fiscal years ended December 31, 2015, 2014 and 2013 ~~was $1,388, $1,232~~to our Named Executive Officers, which group is comprised of (1) each person who served as our Chief Executive Officer during 2015, (2) each person who served as our Chief Financial Officer during 2015, and ~~$1,270, respectively.~~(3) each of our three other most highly compensated executive officers employed on December 31, 2015:

Name and Principal Position	Year	Salary (1) ($)		Bonus ($)		Stock Awards (2)(3) ($)		Option Awards (4) ($)			Non-Equity Incentive Plan Compensation (5) ($)		All Other Compensation (6)(7) ($)		Total ($)

James M. Lindstrom	2015		559,744		400,000		5,536,022		198,190			-		25,661		6,719,617
Chief Executive Officer, Former Chief Financial Officer

David Shackelton	2015		268,385		240,000		2,518,000		198,190			-		24,762		3,249,337
Chief Financial Officer

Christopher Shackelton (8)	2015		-		-		-		-			-		347,711		347,711
Former Interim Chief Executive Officer

Warren S. Rustand	2015		745,692		-		394,858		-			-		54,272		1,194,822
Former Chief Executive Officer	2014		590,000		-		378,082		4,134,397			590,000		53,589		5,746,068
	2013		633,619		123,238		205,281		-			386,329		44,357		1,392,824

Robert E. Wilson	2015		91,026		-		-		-	��		-		6,015		97,041
Former Chief Financial Officer	2014		400,000		200,000		-		-			-		22,446		622,446
	2013		400,000		200,000		-		-			-		30,383		630,383

Michael-Bryant Hicks	2015		352,693		-		1,090,412		198,190			-		15,655		1,656,950
Former Senior Vice President and General Counsel	2014		345,962		-		143,732		-			344,896		24,126		858,716

Justina Uzzell	2015		251,923		135,000		944,250		198,190			-		14,086		1,543,449
Chief People Officer

Herman M. Schwarz (9)	2015		489,539		855,779		266,785		198,190			-		5,918		1,816,211
Chief Executive Officer of LogistiCare Solutions, LLC, our wholly-owned subsidiary	2014 2013		432,000 428,069		- -		230,513 230,521		- -			432,000 432,000		11,939 14,699		1,106,452 1,105,289

~~Property and Equipment~~___________________

(1)	Includes amounts contributed to our 401(k) Plan by each executive officer.

Property and equipment are stated at historical cost, net of accumulated depreciation, or at fair value if the assets were initially recorded as the result of a business combination. Depreciation is calculated using the straight-line method over the estimated useful life of the asset. Maintenance and repairs are expensed as incurred. Gains and losses resulting from the disposition of an asset are reflected in operating expense.

(2)

This column shows the aggregate grant date fair value of the restricted stock, Holdco LTI Plan awards and PBRSUs and TBRS awarded in 2015, 2014 and 2013 in accordance with FASB ASC 718. Additional information regarding such awards is set forth in the notes to the “Grants of Plan Based Awards Table” and “Outstanding Equity Awards” table. The grant date fair values have been determined based on the assumptions set forth in our Annual Reports on Form 10-K for the years ended December 31, 2015, 2014 and 2013 (Note 13, Stock-Based Compensation and Similar Arrangements). Each of Mr. Rustand, Mr. Hicks and Mr. Schwarz were granted a number of PBRSUs in 2015, 2014 and 2013 subject to certain performance conditions. The amounts included in this column for the PBRSUs granted in 2015, 2014 and 2013 are consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC 718. The grant date fair value of the PBRSU award granted in 2015 to each of Messrs. Rustand, Hicks and Schwarz assuming the maximum level of performance will be achieved totaled approximately $680,813, $251,981 and $459,997, however, amounts included in the table above reflect the threshold level of performance. The grant date fair value of Holdco LTI Plan awards was determined based on the likely payout based on a Monte Carlo simulation model.

(3)

In the case of Mr. Rustand and Mr. Hicks, this column reflects certain PBRSUs, restricted stock and options which were forfeited upon termination of employment. Mr. Rustand forfeited 13,085 PBRSUs with a grant date fair value of $224,668 and 3,271 shares of restricted stock which were granted on March 18, 2015 and had a grant date fair value of $170,190. In connection with his termination in 2016, Mr. Hicks forfeited 4,843 PBRSUs with a grant date fair value of $83,154 and 807 shares of restricted stock which were granted on March 18, 2015 and had a grant date fair value of $41,988. Additional information regarding the size of the awards is set forth in the notes to the “Grants of Plan Based Awards Table” and “Outstanding Equity Awards” table.

(4)

This column reflects the aggregate grant date fair value of options awarded in 2015 and 2014 in accordance with FASB ASC 718. Additional information regarding the size of the awards is set forth in the notes to the “Grants of Plan Based Awards Table” and “Outstanding Equity Awards” table. The grant date fair values have been determined based on the assumptions set forth in our Annual Reports on Form 10-K for the years ended December 31, 2015 and 2014 under the notes indicated above in note (2). All of the options granted in 2015 were granted in connection with the Stock Purchase Program. Only Messrs. Lindstrom and David Shackelton purchased the stock available for them to purchase, and were able to retain the matching options associated therewith. The options granted to Messrs. Hicks and Schwarz and to Ms. Uzzell were forfeited.

(5)	The amounts in this column reflect cash incentive awards made to the Named Executive Officers under the annual incentive plan for 2015, 2014 and 2013.

(6)	We provide the Named Executive Officers (with the exception of Christopher Shackelton) with certain group life, health, medical and other non-cash benefits generally available to all salaried employees, which are included in this column. For 2015, the amounts in this column include the following:

Name	Health, Dental, Life and Disability InsurancePremiums		Matching Contributions under Retirement Savings Plans		Other Insurance Plan Premiums (a)
James Lindstrom	$	3,547	$	400	$	—

David Shackelton	$	4,435	$	—	$	—

Warren Rustand	$	11,121	$	—	$	43,151

Robert Wilson	$	4,638	$	—	$	—

Michael-Bryant Hicks	$	14,041	$	400	$	1,214

Herman Schwarz	$	4,063	$	400	$	1,455

Justina Uzzell	$	13,717	$	369	$	—

(a)

For Mr. Rustand, these premiums were paid under two life insurance plans we provided for Mr. Rustand with aggregate death benefit coverage of up to $3.1 million. For Mr. Hicks and Mr. Schwarz, these premiums were paid under separate life insurance plans with death benefit coverage of up to $1,050,000 and $1,000,000, respectively.

(7)	In addition to amounts disclosed in note (6) above, this column also includes the incremental value of perquisites for the Named Executive Officers detailed in the following table.

	Year	Commuting ($)
James Lindstrom	2015		21,714
Chief Executive Officer

Robert E. Wilson	2015		1,377
Former Chief Financial Officer

David Shackelton	2015		20,327
Chief Financial Officer

(8)

For the period he served as Interim Chief Executive Officer, Christopher Shackelton did not receive any additional compensation, but continued to receive compensation in his capacity as a director and Chairman of our Board. The amount shown in the “All Other Compensation” column for Christopher Shackelton includes his director fees.

(9)	As a result of the Company’s organizational changes, effective April 2016, Mr. Schwarz is no longer considered an executive officer of the Company.

_________________

~~Recoverability~~Grants of ~~Goodwill and Indefinite-Lived Intangible Assets~~Plan Based Awards Table

The ~~Company analyzes the carrying value~~following Grants of ~~goodwill~~Plan Based Awards Table provides additional information about stock and ~~indefinite-lived intangible assets at the end of each fiscal year,~~option awards and more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Such circumstances could include, but are not limited to: (1) the loss or modification of significant contracts, (2) a significant adverse change in legal factors or in business climate, (3) unanticipated competition, (4) an adverse action or assessment by a regulator, or (5) a significant decline in the Company’s stock price. When analyzing goodwill for impairment, the Company first assesses qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test described below. If the Company determines, based on a qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company performs a two-step quantitative goodwill impairment test. In connection with its analysis of the carrying value of goodwill, the Company reconciles the aggregate fair value of its reporting unitsnon-equity incentive plan awards granted to the ~~Company’s market capitalization, including a control premium that is reasonable within~~Named Executive Officers during the context of industry data on premiums paid. When determining whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, then the Company completes a second step, and the amount of the impairment loss is calculated by comparing the implied fair value of the reporting unit goodwill to its carrying amount. In calculating the implied fair value of the reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. The Company did not record any impairment charges for continuing operations for the yearsyear ended December 31, 2015. The compensation plans under which the grants in the following table were made are described under the subheadings entitled “Determinations Made Regarding Executive Compensation for 2015 - Annual Incentive Cash Compensation” and ~~2014.~~

~~Recoverability of~~~~Intangible~~A~~ssets~~S~~ubject to~~A~~mortization~~“Determinations Made Regarding Executive Compensation for 2015 - Equity-Based Compensation” in the “Compensation Discussion andO~~ther Long-Lived Assets~~

Intangible assets subject to amortization and other long-lived assets are carried at cost and are amortized on a straight-line basis over their estimated useful lives of 3 to 15 years. The Company reviews the carrying value of long-lived assets or asset groups, including property and equipment, to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. The Company assesses whether any relevant factors limit the period over which acquired assets are expected to contribute directly or indirectly to future cash flows for amortization purposes. While the Company uses discounted cash flows to value the acquisition of intangible assets, the Company has elected to use the straight-line method of amortization to determine amortization expense each period. If indicators of impairment exist, the Company assesses the recoverability of the unamortized balance of its long-lived assets based on undiscounted expected future cash flows. Should this analysis indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of any intangible asset is recognized as an impairment loss.

~~Accrued Transportation Costs~~ Analysis” section.

NET Services contracts with third-party providers for transportation services. Eligible members schedule transportation through the Company’s central reservation system. The cost of transportation is recorded in the month the services are rendered, based upon contractual rates and mileage estimates. Transportation providers provide invoices once the trip is completed. Any trips that have not been invoiced require an accrual, based upon the expected cost as well as an estimate for cancellations, as the Company is generally only obligated to pay the transportation provider for completed trips. These estimates are based upon the historical trend associated with each contract’s population and the transportation provider network servicing the program. There may be differences between actual invoiced amounts and estimated costs, and any resulting adjustments are included in expense. There were no significant out-of-period adjustments recorded for the years ended December 31, 2015, 2014 and 2013. Accrued transportation costs were $64,537 and $55,492 at December 31, 2015 and 2014, respectively.

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards (3)

Name (1)	Grant Date	Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)		All Other Stock Awards: Number of Shares of Stock or Units (#) (4)		All Other Option Awards; Number of Securities Underlying Options (#)(5)		Exercise or Base Price of Option Awards ($/Sh)		Grant Date Fair Value of Stock and Option Awards ($)
Lindstrom
	(2)		-		444,124		592,165		-		-		-		-		-		-		-
	6/1/15		-		-		-		-		-		-		10,361		-		-		500,022
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		11,715
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		186,475
	8/6/15		-		-		-		-		86,862		287,734		-		-		-		5,036,000
David Shackelton
	(2)		-		147,267		187,438		-		-		-		-		-		-		-
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		11,715
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		186,475
	8/6/15		-		-		-		-		43,431		143,867		-		-		-		2,518,000

Rustand (6)
	(2)		-		740,000		925,000		-		-		-		-		-		-		-
	3/18/15		-		-		-		4,318		-		13,085		-		-		-		224,668
	3/18/15		-		-		-		-		-		-		3,271		-		-		170,190
Hicks (6)
	(2)		-		262,500		350,000		-		-		-		-		-		-		-
	3/18/15		-		-		-		1,598		-		4,843		-		-		-		83,154
	3/18/15		-		-		-		-		-		-		1,211		-		-		63,008
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		11,715
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		186,475
	8/6/15		-		-		-		-		16,286		53,950		-		-		-		944,250

Uzzell
	(2)		-		125,000		-		-		-		-		-		-		-		-
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		11,715
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		186,475
	8/6/15		-		-		-		-		16,286		53,950		-		-		-		944,250
Schwarz
	(2)		-		375,000		500,000		-		-		-		-		-		-		-
	3/18/15		-		-		-		2,918		-		8,841		-		-		-		151,799
	3/18/15		-		-		-		-		-		-		2,210		-		-		114,986
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		11,715
	8/6/15		-		-		-		-		-		-		-		11,319		44.17		186,475
	(7)		-		2,417,880		-		-		-		-		-		-		-		-

~~Deferred Financing Costs~~~~and Debt Discounts~~
(1)
Mr. Wilson is not included in the table above as he did not participate in the 2015 annual incentive plan and held no outstanding equity grants at December 31, 2015. Mr. Wilson’s 2015 bonus eligibility was based on the terms of his employment agreement subject to the Company reaching its EBITDA target.

The Company capitalizes direct expenses incurred in connection with its credit facilities and other borrowings, and amortizes such expenses over the life of the respective credit facility or other borrowings. Fees charged by third parties are recorded as deferred financing costs and fees charged by lenders are recorded as a debt discount. Deferred financing costs, net of amortization, totaling approximately $3,774 and $5,284 at December 31, 2015 and 2014, respectively, are included in “Other assets” in the consolidated balance sheets. Debt discount, net of amortization, totaling approximately $1,105 and $1,462 at December 31, 2015 and 2014, respectively, is included in “Long-term obligations, less current portion” in the consolidated balance sheets.
(2)
Amounts represent the target (payment made if the EBITDA criteria are met for the fiscal year) and maximum payouts (payment made if the EBITDA criteria are exceeded for the fiscal year) under the annual incentive plan for 2015 or similar provisions of their employment agreements or offer letters. The actual amounts earned by the Named Executive Officers in 2015 under the annual incentive plan are set forth under the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.

(3)

Amounts represent the (a) estimated target and maximum number of shares eligible to be earned by Messrs. Lindstrom, David Shackelton and Hicks and Ms. Uzzell under the Holdco LTI Plan granted on August 6, 2015 based on the assumptions discussed under “Compensation Discussion and Analysis” and (b) number of units eligible to be earned related to the PBRSUs granted to Messrs. Rustand, Hicks and Schwarz in 2015, which will be settled in shares of common stock. The HoldCo LTI Plan does not have a predetermined target number of shares. Target number of shares displayed in the table is based on a 15% compound annual growth rate. The grant date fair value of the awards is consistent with estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC 718.

(4)

The number of shares shown in this column represents restricted stock awards made to (a) the Named Executive Officers for 2015 under the annual equity-based compensation program and (b) Mr. Lindstrom pursuant to his employment agreement. The grant date fair value of each of these awards was calculated in accordance with the provisions of FASB ASC 718.

(5)

The number of shares shown in this column represents the Special and Matching Options. Matching Options were forfeited on a share per share basis to the extent the Special Options were not exercised prior to termination such that if a Special Option expired without exercise, the full related Matching Option was forfeited. Messrs. Lindstrom and David Shackelton exercised their Special Options in full and now hold the number of Matching Options specified above. Messrs. Hicks and Schwarz and Ms. Uzzell did not exercise their Special Options and as a result forfeited all Matching Options.

(6)

Includes certain PBRSUs, restricted stock and options which were forfeited upon termination of employment. Mr. Rustand forfeited 13,085 PBRSUs with a grant date fair value of $224,668 and 3,271 shares of restricted stock which were granted on March 18, 2015 and had a grant date fair value of $170,190. Mr. Hicks forfeited 4,843 PBRSUs with a grant date fair value of $83,154 and 807 shares of restricted stock which were granted on March 18, 2015 and had a grant date fair value of $41,988. Additional information regarding the size of the awards is set forth in the notes to the “Summary Compensation Table” and “Outstanding Equity Awards” table.

(7)	Represents the currently estimated expected payment to Mr. Schwarz under the Senior Executive LTIP as of the end of the performance period of December 31, 2017.

~~Revenue Recognition~~Employment Agreements with the Named Executive Officers

~~We recognize revenue when it is earned~~The following discussion and ~~realizable based on~~ the ~~following criteria: persuasive evidence that an arrangement exists, services have been rendered,~~discussion under the ~~price is fixed~~subheading below entitled “—Potential Payments Upon Termination or ~~determinable and collectability is reasonably assured.~~ a Change in Control.” describe certain terms of the employment agreements with the Named Executive Officers.

~~NET Services segment~~James Lindstrom

~~Capitation contracts.~~Mr. Lindstrom served as the Company’s Chief Financial Officer from January 14, 2015 to August 6, 2015 under the terms of an employment agreement (the “Prior Lindstrom Employment Agreement”) dated January 14, 2015. The ~~majority~~Company and Mr. Lindstrom entered into an employment agreement (the “Lindstrom Employment Agreement”), dated August 6, 2015 (the “Effective Date”), in connection with the appointment of ~~NET Services revenue is generated under capitated contracts with payers where we assume~~Mr. Lindstrom as President and Chief Executive Officer. The Lindstrom Employment Agreement replaces the ~~responsibility~~Prior Lindstrom Employment Agreement. The Lindstrom Employment Agreement provides for a term commencing as of ~~meeting~~ the covered transportation requirements of a specific geographic population based on per-member per-month fees for the number of members in the payer’s program. Revenue is recorded based upon the amount earned per period.Effective Date and ending December 31, 2017.

~~Fee for service~~ ~~contracts.~~ ~~Revenues earned under fee for service (“FFS”) contracts are based upon contractually established billing rates. Revenues are recognized when~~Under the ~~service~~terms of the Lindstrom Employment Agreement, as of the Effective Date Mr. Lindstrom’s annual base salary is ~~provided based upon contractual amounts.~~

~~Flat fee~~ ~~contracts.~~ ~~Revenues earned under flat fee contracts are recognized ratably over~~$650,000. In addition to his annual base salary, during the ~~covered service period based upon contractually established fees which do not fluctuate with any changes in~~term of the ~~membership population who are~~Lindstrom Employment Agreement Mr. Lindstrom is eligible to ~~receive the transportation services.~~

For most contracts, we arrange for transportation of members through our network of independent transportation providers, whereby we remit payment to the transportation providers. However, for certain contracts, we only provide management services, and do not contract with transportation providers for the actual transportation.

~~Workforce~~D~~evelopment~~~~Services segment~~

WD Services revenues are generated from providing workforce development and offender rehabilitation services, both of which include employment preparation and placement, apprenticeship and training, and certain health related services, suchparticipate in bonus plans or incentive compensation programs, if any, as employee assistance programs. While the specific terms vary by contract and country, the Company often receives four types of revenue streams under contracts with government entities: attachment fees, job placement/job outcome fees, sustainment fees and incentive fees. Attachment fees are typically upfront payments that are payable when a client is referred by the contracting government entity and the person enters the program, and cover the overall services provided under the program. Job placement fees are typically payable when a client is employed. Job outcome fees are typically payable when a client is employed, and remains employed for a specified period of time. Sustainment fees are typically payable upon certain employment tenure milestones. Incentive fees are generally based upon a calculation that includes a variety of factors and inputs, such as average sustainment rates and client referral rates. Incentive fees vary greatly by contract.

Attachment fee revenue is recognized ratably over the period of service, based upon an estimate of the period of time general services will be provided (i.e. the person is placed in a job or reaches the maximum time period for the program). The estimate of the period of time services will be rendered is based upon historical data. Job Placement, Job Outcome and Sustainment Fee revenue is recognized when certain milestones are achieved, and amounts become billable. Incentive Fee revenue is generally recognized when the revenue is fixed and determinable, frequently at the end of the cumulative calculation period, unless the contractual terms allow for earned payments on a fixed or ratable basis.

Revenue is also earned under fixed fee for service arrangements, based upon an expected volume of services to be performed. The expected volume of services is generally agreed at the outset of the contract year. Revenue under these contracts may ~~be adjusted prospectively during the contract year, or for future contract years, if actual volumes are below expected levels.~~

~~Health Assessment Services~~~~segment~~

The HA Services segment contracts with health plans to provide clinical assessments for their Medicare Advantage (“MA”) members that meet certain pre-determined criteria as defined by the providers. An assessment is a comprehensive physical examination of an individual performed by one of the Company’s nurse practitioners. The MA clients for whom the Company performs these examinations use the assessment reports to impact care management of the MA member and properly report the cost of care of those members. Revenue is recognized in the period in which the services are rendered.

~~Deferred Revenue~~

At times the Company may receive funding for certain services in advance of services being rendered. These amounts are reflected in the consolidated balance sheets as “Deferred revenue” until the services are rendered.

~~Stock-Based Compensation~~

~~The Company follows the fair value recognition provisions of ASC Topic 718 –~~~~Compensation~~ –~~Stock Compensation~~(“ASC 718”), which requires companies to measure and recognize compensation expense for all share based payments at fair value. The Company calculates the fair value of stock options using the Black-Scholes option-pricing formula. The fair value of non-vested restricted stock grants is determined based on the closing market price of the Company’s common stock on the date of grant. Stock-based compensation expense charged against income for stock options and stock grants is based on the grant-date fair value, based upon the number of awards expected to vest. Forfeitures estimated at the time of grant are revised as necessary based upon actual vesting. The expense for stock-based compensation awards is amortized on a straight-line basis over the requisite service period, which is typically the vesting period. We record RSUs that may be settled by the holder in cash, rather than shares, as a liability and we remeasure these liabilities at fair value at the end of each reporting period. Upon settlement of these awards, our total compensation expense recorded over the vesting period of the awards will equal the settlement amount, which is based on our stock price on the settlement date. Performance-based RSUs vest upon achievement of certain company-based performance conditions. On the date of grant, we determine the fair value of the performance-based award based on the fair value of our common stock at that time and we assess whether it is probable that the performance targets will be achieved. If assessed as probable, we record compensation expense for these awards over the estimated performance period. At each reporting period, we reassess the probability of achieving the performance targets and the performance period required to meet those targets. The estimation of whether the performance targets will be achieved and of the performance period required to achieve the targets requires judgment, and to the extent actual results or updated estimates differ from our current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised, or the change in estimate will be applied prospectively depending on whether the change affects the estimate of total compensation cost to be recognized or merely affects the period over which compensation cost is to be recognized. The ultimate number of shares issued and the related compensation expense recognized will be based on a comparison of the final performance metrics to the specified targets.

The Company follows the short-cut method prescribed by ASC 718 to calculate its pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of ASC 718 (“APIC pool”). There was no effect on the Company’s financial results for 2015, 2014 or 2013 related to the application of the short-cut method to determine its APIC pool balance.

~~Income Taxes~~

Deferred income taxes are determined by the liability method in accordance with ASC Topic 740 - Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are determined based on differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and are measured using the enacted tax rates and laws that are expected to be in effect ~~when~~from time to time, at a level consistent with his position and with the ~~differences are expected~~Company’s then current policies and practices. For the period commencing January 14, 2015 and for the remainder of 2015, Mr. Lindstrom was eligible to ~~reverse. The Company considers many factors when assessing~~participate in a bonus program under which he will be paid an amount equal to seventy-five percent (75%) of his aggregate base salary payable during 2015 under the ~~likelihood of future realization of deferred tax assets, including recent earnings experience by jurisdiction, expectations of future taxable income,~~Prior Lindstrom Employment Agreement and the ~~carryforward periods available~~Lindstrom Employment Agreement (the “Lindstrom Base Salary”), upon the achievement of a financial performance target set by the Board for ~~tax reporting purposes, as well as other relevant factors. The Company establishes a valuation allowance~~2015, and up to ~~reduce deferred tax assets~~an additional twenty-five percent (25%) for performance in excess of such target. Details with respect to the ~~amount that is more likely than not to be realized. Due to inherent complexities arising from~~severance and Change in Control provisions under the ~~nature of~~Lindstrom Employment Agreement are set forth below under the ~~Company’s businesses, future changes~~subheading entitled “—Potential Payments Upon Termination or Change in income tax law or variances between the Company’s actual and anticipated operating results, the Company makes certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates.

~~The Company has recorded a valuation allowance which includes amounts for net operating losses and tax credit carryforwards, as more fully described in Note 18,~~~~Income Taxes,~~ ~~for which the Company has concluded that it is more likely than not that these net operating loss and tax credit carryforwards will not be realized in the ordinary course of operations.~~Control.”

The Company ~~recognizes interest and penalties related~~will maintain term life insurance on the life of Mr. Lindstrom for a period of five years. Mr. Lindstrom will have the absolute right to ~~income taxes as a component~~designate the beneficiaries under his policy. The Company will pay the premium for the shorter of ~~income tax expense.~~(i) the period of five years commencing on the later of (a) the Effective Date or (b) the date the insurance goes into effect or (ii) the period Mr. Lindstrom is employed by the Company. Premiums in respect thereof will thereafter be paid by Mr. Lindstrom.

~~Residual US income taxes have not been provided on undistributed earnings~~David Shackelton

Effective October 1, 2015, David Shackelton became Senior Vice President and Chief Financial Officer. On November 18, 2015, the Company and David Shackelton entered into an employment agreement (the “D. Shackelton Employment Agreement”), effective as of September 28, 2015 (the “Effective Date”). The D. Shackelton Employment Agreement provides for a term commencing as of the Effective Date and ending December 31, 2017.

Under the terms of the D. Shackelton Employment Agreement, David Shackelton’s annual base salary is $450,000. In addition to his annual base salary, during the term of the D. Shackelton Employment Agreement, David Shackelton is eligible to participate in bonus plans or incentive compensation programs, if any, as may be in effect from time to time, at a level consistent with his position and with the Company’s ~~foreign subsidiaries. These earnings are considered~~then current policies and practices. For the calendar year 2015, David Shackelton was eligible to ~~be indefinitely reinvested and, accordingly, no provision for US federal and state income taxes~~participate in a bonus program under which he will be ~~provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject~~paid: (i) an amount equal to both US income taxes and withholding taxes payable to various foreign jurisdictions less an adjustment for foreign tax credit, although funds utilized to repay intercompany amounts are not subject to withholding requirements. Becausetwenty-five percent (25%) of the ~~availability~~base salary to which he was entitled starting on January 1, 2015 and ending on August 5, 2015 upon the achievement of ~~US foreign tax credits, it is not practicable~~the financial performance targets set by the Board for 2015; and (ii) an amount equal to ~~determine~~seventy-five percent (75%) of his aggregate base salary payable for the ~~US federal income tax liability that would be payable if~~period commencing August 6, 2015 and ending December 31, 2015 (the “CFO Base Salary”) upon the achievement of the financial performance targets set by the Board for 2015, and up to an additional twenty-five percent (25%) of the CFO Base Salary for performance in excess of such ~~earnings were not reinvested indefinitely.~~target. Details with respect to the severance and Change in Control provisions under the D. Shackelton Employment Agreement are set forth below under the subheading entitled “—Potential Payments Upon Termination or Change in Control.”

The Company ~~accounts~~will maintain term life insurance on the life of David Shackelton for ~~uncertain tax positions based~~a period of five years. David Shackelton will have the absolute right to designate the beneficiaries under his policy. The Company will pay the premium for the shorter of (i) the period of five years commencing on ~~a two-step process~~the later of ~~evaluating recognition and measurement criteria. The first step assesses whether~~(a) the ~~tax position~~Effective Date or (b) the date the insurance goes into effect or (ii) the period David Shackelton is ~~more likely than not to be sustained upon examination~~employed by the ~~tax authority, including resolution~~Company. Premiums in respect thereof will thereafter be paid by David Shackelton.

Warren S. Rustand

Effective May 7, 2013, Mr. Rustand was appointed Chief Executive Officer and the Company entered into an employment agreement (“Rustand Employment Agreement”) with Mr. Rustand with a term through December 31, 2015. The Rustand Employment Agreement replaced a letter agreement that governed his employment as interim Chief Executive Officer, except for certain bonus provisions described below. Under the Rustand Employment Agreement, Mr. Rustand was entitled to an annual base salary of ~~any appeals or litigation,~~$590,000, which was increased to $740,000 on December 14, 2014.

In addition, Mr. Rustand was eligible to participate in a bonus program whereby he was paid a pro-rata portion (based on the number of days during the fiscal year following May 7, 2013) of an amount equal to seventy-five percent (75%) of his annual base salary upon the achievement of a financial performance target set by the Board for 2013 and a pro-rata portion of an additional amount equal to a portion of a pool equal to twenty percent (20%) of the amount by which the Company exceeds such financial performance target for 2013 up to twenty-five (25%) of Mr. Rustand’s annual base salary. Additionally, Mr. Rustand was entitled to receive a bonus equal to fifty percent (50%) of his annualized based compensation specified under the prior letter agreement which was calculated, paid and pro-rated based on the ~~technical merits~~number of the position. If the tax position meets the more likely than not criteria, the portion of the tax benefit greater than 50% likely to be realized upon settlement with the tax authority is recognized in the consolidated financial statements.

~~Foreign~~C~~urrency~~T~~ranslation~~

~~Local currencies generally are considered the functional currencies outside the US. Assets~~days elapsed commencing January 1, 2013 and ~~liabilities~~through May 7, 2013. Bonus opportunities for ~~operations in local-currency environments are translated at month-end exchange rates of the period reported. Income~~2014 and expense items are translated at the average exchange rate for each applicable month. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive loss, net of tax, in stockholders’ equity.

~~Loss Reserves for Certain Reinsurance and Self-~~~~Funded~~ ~~Insurance Programs~~

~~The Company reinsures a substantial portion of its automobile, general and professional liability and workers’ compensation costs under reinsurance programs~~2015 were provided through the Company’s ~~wholly-owned subsidiary, Social Services Providers Captive Insurance Company (“SPCIC”), a licensed captive insurance company domiciled in the State of Arizona.~~

The Company and its subsidiaries enter into insurance arrangements with third-party insurers. SPCIC reinsures these third-party insurers for general and professional liability exposures for the first dollar of each and every loss up to $1,000 per loss and $5,000 in the aggregate. SPCIC also reinsures third-party insurers for automobile liability exposures for $250 per claim. Additionally, SPCIC reinsures a third-party insurer for worker’s compensation insurance for the first dollar of each and every loss up to $500 per occurrence. As of December 31, 2015 and 2014, the Company had reserves of approximately $12,988 and $12,750, respectively, for the automobile, general and professional liability and workers’ compensation programs (net of expected losses in excess of the Company’s liability which would be paid by third-party insurers to the extent losses are incurred). The reserves are classified as “Reinsurance liability reserves” and “Other long-term liabilities” in the consolidated balance sheets.

Based on an independent actuarial report, the Company’s expected losses related to workers’ compensation, automobile and general and professional liability in excess of its liability under its associated reinsurance programs at December 31, 2015 and 2014 was approximately $6,745 and $5,525, respectively. The Company recorded a corresponding receivable from third-party insurers and liability at December 31, 2015 and 2014 for these expected losses, which would be paid by third-party insurers to the extent losses are incurred.

The Company utilizes analyses prepared by third party administrators and independent actuaries based on historical claims information with respect to the general and professional liability coverage, workers’ compensation coverage, automobile liability, automobile physical damage, and health insurance coverage to determine the amount of required reserves.

The Company also maintains a self-funded health insurance program with a stop-loss umbrella policy with a third party insurer to limit the maximum potential liability for individual claims to $275 per person and for a maximum potential claim liability based on member enrollment. With respect to this program, the Company considers historical and projected medical utilization data when estimating its health insurance program liability and related expense. As of December 31, 2015 and 2014, the Company had approximately $2,351 and $1,973, respectively, in reserve for its self-funded health insurance programs. The reserves are classified as “Reinsurance and related liability reserves” in the consolidated balance sheets.annual cash incentive program.

~~The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related~~Mr. Rustand was also eligible to its reinsurance and self-funded insurance programs. The Company believes its reserves are adequate. However, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known. There were no significant out-of-period adjustments recordedreceive certain severance benefits in the ~~periods covered~~event he is terminated by ~~this report.~~

~~Restructuring and Related Reorganization Costs~~the Company without Cause (as defined by the Rustand Employment Agreement) including if such termination occurred in connection with or following a Change in Control.

The Rustand Employment Agreement contained restrictive covenants providing for Mr. Rustand’s non-competition, non-solicitation/non-piracy, non-disclosure and non-disparagement. The term of the non-competition and non-solicitation covenants was for a period that includes the term of the Rustand Employment Agreement, and for a period of two years after the Rustand Employment Agreement was terminated for any reason.

The Rustand Employment Agreement terminated upon Mr. Rustand’s separation with the Company, ~~has engaged in employee headcount rightsizing actions within~~other than the ~~WD Services segment~~provisions related to non-competition, non-solicitation, non-piracy and non-disclosure, intellectual property and non-disparagement, which ~~require management to estimate the timing~~by their terms survive termination.

In connection with Mr. Rustand’s resignation as Chief Executive Officer and amount of severance and other employee separation costs for workforce reduction. The Company accrues for severance and other employee separation costs under these actions when it is probable that benefits will be paidas a board member, on May 29, 2015, Mr. Rustand and the ~~amount is reasonably estimable. The amounts used in determining severance accruals are based on an estimate of the salaries~~Company entered into a separation and ~~related benefit costs payable under existing plans, and are included in accrued expenses~~general release agreement (the “Rustand Separation Agreement”), which, to the extent ~~they have not been paid.~~applicable, supersedes the Rustand Employment Agreement.

Pursuant to, and subject to the terms of, the Rustand Separation Agreement, Mr. Rustand remained with the Company as a senior advisor through December 31, 2015, and continued to receive the same base salary applicable in 2015 during his tenure as Chief Executive Officer. Mr. Rustand was also eligible to receive annual performance cash awards based on previously granted performance awards related to his performance during 2015, which amount was calculated based on the same criteria and paid at the same time as payments are made in respect of similar awards to which other executives of the Company are entitled, as well as certain other benefits. As further consideration for entering into the Separation Agreement, Mr. Rustand was eligible to receive amounts payable in respect of certain outstanding performance restricted stock units and time restricted stock grants, and was eligible to exercise certain outstanding option awards.

~~Non-controlling Interests~~Robert E. Wilson

~~Non-controlling interests represent~~Effective September 13, 2013, Mr. Wilson entered into an Employment Agreement (“Wilson Employment Agreement”). The term of the ~~non-controlling holders' percentage share~~Wilson Employment Agreement extended to December 31, 2014.

Mr. Wilson was entitled to an annual base salary of ~~income~~$400,000. In addition to the annual base salary during the term of the Wilson Employment Agreement, Mr. Wilson was eligible to receive an annual bonus in the amount of fifty percent (50%) of his base salary upon the achievement of one hundred percent (100%) of budgeted EBITDA performance for each of the 2013 and 2014 calendar years, as determined by the Board of Directors or ~~losses from a subsidiary~~the Compensation Committee.

Mr. Wilson was eligible to receive certain severance benefits in ~~which~~the event he was terminated by the Company ~~holds~~without Cause (as such term is defined in the Wilson Employment Agreement), including if such termination occurred in connection with or following a ~~majority, but less~~Change in Control.

The Wilson Employment Agreement contained non-competition, non-solicitation/non-piracy, non-disclosure and non-disparagement covenants. The non-competition and non-solicitation covenants applied during the term of the Wilson Employment Agreement and will apply for a period of two years after the Wilson Employment Agreement is terminated for any reason.

The Wilson Employment Agreement terminated upon Mr. Wilson’s separation with the Company, other than ~~100 percent, ownership interest~~the provisions related to non-competition, non-solicitation, non-piracy and non-disclosure, intellectual property and non-disparagement, which by their terms survive termination.

In connection with Mr. Wilson’s resignation as Chief Financial Officer, the Company and Mr. Wilson entered into an Employment and Separation Agreement (the “Wilson Separation Agreement”), dated February 2, 2015, which provided for the termination of Mr. Wilson’s employment with Providence effective March 20, 2015. Details with respect to the benefits provided to Mr. Wilson under the Wilson Separation Agreement are set forth below under the subheading entitled “—Potential Payments Upon Termination or Change in Control”.

Michael-Bryant Hicks

Effective February 25, 2016, Mr. Hicks resigned his position as Senior Vice President and General Counsel of the Company. On January 6, 2014, Mr. Hicks was appointed Senior Vice President and General Counsel, and the ~~results~~Company entered into a letter agreement (the “Hicks Offer Letter”). Under the Hicks Offer Letter, Mr. Hicks was entitled to an annual base salary of $350,000. In addition to an annual base salary, Mr. Hicks was eligible to participate in bonus plans or incentive compensation programs, if any, as may be in effect from time to time, at a level consistent with his position and with the Company’s then current policies and practices.

In addition, Mr. Hicks was eligible to participate in a bonus program whereby he would be paid an amount equal to seventy-five percent (75%) of his annual base salary, measured on a similar basis to that of other senior executives. Mr. Hicks was also entitled to earn an additional bonus of up to twenty-five percent (25%) of his base salary through sharing with other eligible executive officers twenty percent (20%) of the amount, if any, by which EBITDA of the Company exceeded the EBITDA target, after expensing the actual bonus amounts (including the additional bonus opportunity).

Per the Hicks Offer Letter, Mr. Hicks was eligible to receive benefits on the same basis as others in the senior executive group, including life insurance and disability coverage.

Mr. Hicks was also eligible to receive certain severance benefits equal to two times his base salary in the event he is terminated by the Company without cause if such termination occurred in connection with or following a Change in Control. In connection with his resignation of his position with the Company in 2016, Mr. Hicks is no longer eligible for severance payments.

In connection with Mr. Hicks’ resignation, on February 15, 2016, Mr. Hicks and the Company entered into the Hicks Separation Agreement, effective February 8, 2016, which, to the extent applicable, superseded the Hicks Offer Letter. Details with respect to the benefits provided to Mr. Hicks under the Hicks Separation Agreement are ~~consolidated and included~~set forth below under the subheading entitled “—Potential Payments Upon Termination or Change in ~~our consolidated financial statements. The Company has a 90 percent ownership in The Reducing Reoffending Partnership Limited (“RRP”)~~Control”.

~~Discontinued Operations~~Herman Schwarz

~~In determining whether~~On March 24, 2014, we entered into a ~~group~~new employment agreement with Mr. Schwarz (the “Schwarz Employment Agreement”). The employment agreement with Mr. Schwarz commenced upon the expiration of ~~assets disposed (or~~the then existing employment agreement with him on March 22, 2014 and expired on March 21, 2016.

The Schwarz Employment Agreement has no automatic renewal. Among other things, the Schwarz Employment Agreement includes provisions for compensation and benefits (including term life insurance maintained by Providence for Mr. Schwarz’s benefit) and restrictive covenants as well as severance in the event of termination of employment under certain circumstances and a payment upon certain termination events in connection with or following a Change in Control (defined below). Details with respect to the severance and Change in Control provisions are set forth below under the subheading entitled “—Potential Payments Upon Termination or Change in Control.”

Mr. Schwarz is entitled to an annual base salary of $500,000. The annual base salary paid to Mr. Schwarz is reviewed at least annually by the Board and the Compensation Committee or other applicable committee of the Board in accordance with our compensation polices and guidelines and may be ~~disposed) of should be presented~~modified as a ~~discontinued operation, we make a determination~~result of ~~whether~~such review at the criteria for held-for-sale classification is met and whether the disposition represents a strategic shift that has (or will have) a major effect on the entity’s operations and financial results. If these determinations can be made affirmatively, the results of operationssole discretion of the ~~group~~Board and/or the Compensation Committee. Mr. Schwarz's agreement provided that he was also eligible to participate in a bonus program whereby he would be paid an amount equal to seventy-five percent (75%) of ~~assets being disposed~~his annual base salary, measured on a similar basis to that of ~~(as well as~~other senior executives. Mr. Schwarz was entitled to earn an additional bonus of up to twenty-five percent (25%) of his base salary through sharing with other eligible executive officers twenty percent (20%) of the amount, if any, ~~gain or loss on the disposal transaction) are aggregated for separate presentation apart from continuing operating results~~by which EBITDA of the Company inexceeded the ~~consolidated financial statements. See Note 22,~~~~Discontinued Operations,~~ ~~for a summary of discontinued operations.~~

~~Earnings Per Share~~

~~We compute basic earnings per share by taking net income attributable to~~EBITDA target, after expensing the ~~Company available to common stockholders divided~~actual bonus amounts (including the additional bonus opportunity). This bonus eligibility was replaced by the weighted average number of common shares outstanding during the period including restricted stock and stock held in escrow if such shares are participating securities. Diluted earnings per share includes the potential dilution that could occur from stock-based awards and other stock-based commitments using the treasury stock or the as-if converted methods, as applicable. For additional information on how we compute earnings per share, see Note 15,~~Earnings Per Share~~.

~~Fair Value of Financial Instruments~~

~~We disclose the fair value of our financial instruments based on the fair value hierarchy using the following three categories:~~

~~Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.~~

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

~~Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.~~Senior Executive LTIP.

The Company may be required to pay additional consideration in relation to certain acquisitions based on the achievement of certain earnings targets. Acquisition-related contingent consideration is initially measuredSchwarz Employment Agreement contains restrictive covenants providing for Mr. Schwarz’s non-competition, non-solicitation/non-piracy and recorded at fair value as an element of consideration paid in connection with an acquisition with subsequent adjustments recognized in “General and administrative expense” in the consolidated statements of income.non-disclosure. The Company determines the fair value of acquisition-related contingent consideration, and any subsequent changes in fair value using a discounted probability-weighted approach. This approach takes into consideration Level 3 unobservable inputs including probability assessments of expected future cash flows over the period in which the obligation is expected to be settled and applies a discount factor that captures the uncertainties associated with the obligation. Changes in these unobservable inputs could significantly impact the fair valueterm of the ~~obligation recorded~~non-competition and non-solicitation covenants is for a period that includes the term of the Schwarz Employment Agreement and for a period of 18 months after the Schwarz Employment Agreement is terminated for any reason.

Justina Uzzell

Effective March 5, 2014, Ms. Uzzell was appointed Senior Vice President and Chief People Officer and the Company entered into a letter agreement (the “Uzzell Offer Letter”) with Ms. Uzzell. Under the Uzzell Offer Letter, Ms. Uzzell is entitled to an annual base salary of $250,000.

In addition, Ms. Uzzell was eligible to participate in a bonus program whereby she would be paid an amount equal to twenty-five percent (25%) of her annual base salary at the ~~accompanying consolidated balance sheets and operating expenses in~~sole discretion of the ~~consolidated statements of income.~~Company.

Outstanding Equity Awards at December 31, 2015

The ~~carrying amounts~~following table reflects the equity awards granted by us to the Named Executive Officers outstanding at December 31, 2015:

	Option Awards								Stock Awards

Name and Grant Date	Number of Securities Underlying Unexercised Options (#) Exercisable (1)		Number of Securities Underlying Unexercised Options (#) Unexercisable (1)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#) (2)(3)		Market Value of Shares or Units of Stock That Have Not Vested ($) (2)(3)		Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(4)		Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(5)
James M. Lindstrom
6/1/15 (6)		—		—		—		—		3,453		162,015		—		—
8/6/15		—		11,319		44.17		8/6/20		—		—		—		—
8/6/15		—		—		—		—		—		—		287,734		13,500,479

David Shackelton
9/11/14		33,333		16,667		43.81		9/11/24		—		—		—		—
8/6/15		—		11,319		44.17		8/6/20		—		—		—		—
8/6/15		—		—		—		—		—		—		143,867		6,750,339

Warren S. Rustand (7)
9/11/14		133,333		—		43.81		6/30/18		—		—		—		—

Justina Uzzell
12/15/14		—		10,000		36.27		3/31/18		—		—		—		—
8/6/15		—		—		—		—		—		—		53,950		2,531,334

Michael-Bryant Hicks (8)
3/7/14		—		—		—		—		1,431		67,143		2,835		133,018
3/18/15		—		—		—		—		1,211		56,820		1,598		74,987
8/6/15		—		—		—		—		—		—		53,950		2,531,334

Herman M. Schwarz(9)
6/9/08		8,898		—		26.14		6/9/18		—		—		—		—
5/15/09		3,000		—		11.72		5/15/19		—		—		—		—
5/20/10		30,000		—		17.35		5/20/20		—		—		—		—
3/14/11		12,000		—		14.72		3/14/21		—		—		—		—
3/28/13		—		—		—		—		1,791		84,034		—		—
3/7/14		—		—		—		—		2,296		107,728		4,546		213,298
3/18/15		—		—		—		—		2,210		103,693		2,918		136,891

(1)

The options expire ten years from the date of grant (except for the options granted to Messrs. Lindstrom and David Shackelton, which expire five years from the date of grant, and the options granted to Ms. Uzzell in 2014 which expire on the later of March 31, 2018 or the 30th trading day after December 31, 2017 that is not in a blackout period pursuant to the Company’s applicable insider trading policy). The options have an exercise price equal to the closing market price of our Common Stock on the date of grant. The unvested options granted to Messrs. Lindstrom and David Shackelton on August 6, 2015 cliff vest on August 6, 2018, the unvested options granted to David Shackelton on September 11, 2014 vest on June 30, 2016, and the unvested options granted to Ms. Uzzell on December 15, 2014 cliff vest on December 31, 2017.

(2)	Represents unvested restricted stock awards that vest as follows:

Award	Grant Date	Vesting
Restricted Stock	3/28/13	1/3 per year beginning on the anniversary of the grant
Restricted Stock	3/7/14	1/3 per year beginning on the anniversary of the grant
Restricted Stock	3/18/15	1/3 per year beginning on the anniversary of the grant
Restricted Stock	6/1/15	January 26, 2016

(3)	The market value of the unvested restricted stock awards was calculated using the closing market price of our Common Stock on December 31, 2015.

(4)

Represents (a) potential estimated maximum pay out under the Holdco LTI Plan, payable following the performance period ending December 31, 2017 granted in 2015, and (b) unvested performance restricted stock units granted during 2014 and 2015, at the threshold performance level, that vest on December 31, 2016 and December 31, 2017, respectively.

(5)

The market value of the unvested, unearned Holdco LTI Plan shares that would be issuable assuming performance at the maximum payout and performance restricted stock units was calculated, assuming performance at threshold, in each case using the closing market price of our Common Stock on December 31, 2015.

(6)	Mr. Lindstrom also holds 6,827 restricted stock awards that have vested, but will not be issued to him until the earlier of (a) the third anniversary of the date of grant and (b) six months following the termination of his employment.

(7)	Upon Mr. Rustand’s separation on December 31, 2015, he forfeited 66,667 unvested stock options with an exercise price of $43.81, 6,406 unvested restricted stock awards and 31,899 unvested PBRSUs.

(8)	Upon Mr. Hicks’ separation on February 25, 2016, he forfeited 1,522 unvested restricted stock awards and 13,434 unvested PBRSUs.

(9)

On December 30, 2008, the Board, upon recommendation of the Compensation Committee, approved the acceleration of the vesting dates of all outstanding unvested stock options and restricted stock previously awarded to eligible directors, employees and consultants, including stock options and restricted stock awards granted to the Named Executive Officers effective December 30, 2008. All other terms of the stock options and restricted stock remained the same.

Option Exercises and Stock Vesting Table

The following table provides additional information about the value realized by the Named Executive Officers on option award exercises and stock and PBRSU award vesting during the year ended December 31, 2015.

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized onExercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
James M. Lindstrom (1)		11,319		-		81		3,909
David Shackelton		11,319		19,242		-		-
Warren S. Rustand (2)		32,314		1,174,892		7,312		312,185
Robert Wilson		45,000		1,723,230		-		-
Michael Bryant-Hicks		-		-		716		31,905
Herman M. Schwarz		20,825		790,547		15,583		717,656

(1)

In addition, Mr. Lindstrom had 6,827 shares of restricted stock that vested during 2015 that had a value of $320,180 on the date of vesting. These shares will not be issued to him until the earlier: of (a) the third anniversary of the date of grant and (b) six months following termination. Therefore, no value was realized upon vesting.

(2)	The number of shares acquired on vesting and value realized on vesting for Mr. Rustand include awards granted to him as both a director and executive officer.

Non-qualified Deferred Compensation

Name

Executive

Contributions in

Last FY ($)

Registrant

Contributions in

last FY($) (1)

Aggregate

Earnings in

Last FY

($)(2)

Aggregate

Withdrawals/

Distributions ($)

Aggregate

Balance at

Last FY

($)(3)

James Lindstrom

—

320,180

143

—

320,323

(1)

Represents the value of shares of restricted stock that vested in 2015 but, pursuant to the terms of Mr. Lindstrom’s employment agreement, will not be issued to him until the earlier of (a) the third anniversary of the date of grant and (b) six months following the termination of his employment. The restricted stock awards are reported in the Summary Compensation Table for 2015 (the year of grant) as well.

(2)

Reflects the change in the Company’s stock price applicable to 3,454 shares of restricted stock from $45.57 on July 26, 2015 to $46.92 on December 31, 2015, net of the change in the Company stock price applicable to 3,373 shares of restricted stock from $48.26 on June 1, 2015 to $46.92 on December 31, 2015.

(3)	Based on the aggregate value of the vested restricted stock not yet delivered at December 31, 2015.

Previously we maintained a deferred compensation plan to compensate for the inability of ~~cash~~certain of our highly compensated employees to take full advantage of our 401(k) plan. None of our Named Executive Officers participated in this plan and ~~cash equivalents, restricted cash, accounts receivable and accounts payable approximate their fair value because of the relatively short-term maturity of these instruments.~~it was terminated in December 2015.

Potential Payments Upon Termination or Change in Control

~~Recent~~General

Each Named Executive Officer’s employment agreement, other than Mr. Hicks’ and Ms. Uzzell’s Offer Letters, provides for severance payments in the event of termination of employment under certain circumstances and, each Named Executive Officer’s employment agreement, other than Ms. Uzzell’s Offer Letter, provides for a payment in the event of a Change in Control (none of which include excise tax gross-ups).

The receipt of the payments and benefits to the Named Executive Officers under the employment agreements are generally conditioned upon their complying with non-competition, non-solicitation/non-piracy and non-disclosure provisions. By the terms of such agreements, the executives acknowledge that a breach of some or all of the covenants described therein will entitle us to injunctive relief restraining the commission or continuance of any such breach, in addition to any other available remedies.

The Compensation Committee considered certain legal and tax provisions, fairness to stockholders, tenure of each executive officer and general corporate practice to select the events that will trigger payments under the employment agreements noted below.

~~Accounting Pronouncements~~Severance Payments

~~In April 2014,~~James Lindstrom and David Shackelton

Under their respective employment agreements, Messrs. Lindstrom and David Shackelton would be eligible to receive a severance benefit, upon executing a general release in favor of us in the ~~FASB issued Accounting Standards Update (“ASU”) No. 2014-08,~~~~Presentation~~event of ~~Financial Statements (Topic 2015)~~a termination of the executive officer by us without Cause (as defined below). The severance payment to which Mr. Lindstrom will be entitled is equal to (i) the lesser of (a) his base salary that would have been paid from the date of termination through December 31, 2017 and ~~Property, Plant,~~(b) his base salary in effect at termination, or, (ii) if greater, a payment of six months of base salary, and ~~Equipment (Topic 360): Reporting Discontinued Operations~~any bonus earned for the prior completed fiscal year, but not yet paid, and ~~Disclosures~~a pro-rata portion of ~~Disposals~~any bonus earned for the then fiscal year through the date of ~~Components~~termination. The severance payment to which David Shackelton will be entitled is equal to twelve months’ base salary and any bonus earned for the prior completed fiscal year, but not yet paid, and a pro-rata portion of ~~an Entity~~ ~~(“ASU 2014-08”). ASU 2014-08 changes~~any bonus earned for the ~~requirements for reporting discontinued operations.~~ then fiscal year through the date of termination.

Under the ~~ASU discontinued operations~~employment agreements with Messrs. Lindstrom and David Shackelton, “Cause” is defined ~~as either a:~~as:

●

~~Component~~Fraud or theft committed by the employee against us or any of anour subsidiaries, affiliates, joint ventures and related organizations, including any entity managed by us (collectively referred to as “Affiliates”), or ~~group~~commission of ~~components that~~

~~has been disposed of, meets the criteria to be classified as held-for-sale,~~a felony or ~~has been abandoned/spun-off; and~~

~~represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results,~~any crime involving fraud or moral turpitude; or

●

~~Business~~Gross negligence of the employee or ~~nonprofit activity~~willful misconduct by the employee that ~~on acquisition, meets~~results, in either case, in material economic or reputational harm to us or our Affiliates; or

●

Breach of any provision by the ~~criteria~~employee of the employment agreement or breach of any fiduciary duty or duty of loyalty owed to ~~be classified~~us or our Affiliates; or

●

Conduct of the employee tending to bring us or our Affiliates into public disgrace or embarrassment, or which is reasonable likely to cause one or more of its customers or clients to cease doing business with, or reduce the amount of business with, the Company or its Affiliates; or

●

Neglect or refusal by the employee to perform duties or responsibilities as ~~held-for-sale.~~directed by us, the Board or any executive committee established by the Board, or violation by the employee of any express direction of any lawful rule or regulation established by us or the Board or any committee established by the Board which is consistent with the scope of the employee’s duties under the employment agreement, if such failure, refusal, or violation continues uncured for a period 10 days after written notice from us to the employee specifying the failure, refusal, or violation and our intention to terminate the employment agreement for Cause; or

●

Commission of any acts or omissions by the employee resulting in or intended to result in direct material personal gain to the employee at our or our Affiliates’ expense; or

��

●

Employee materially compromises our or our Affiliates’ trade secrets or other confidential and proprietary information.

~~This ASU~~Action or inaction by the employee is ~~effective for publicly held companies prospectively for all disposals (or classifications as held for sale)~~not considered “willful” unless done or omitted by him intentionally and without his reasonable belief that his action or inaction was in our or our Affiliates’ best interests, and does not include failure to act by reason of ~~components of an entity that occur within annual periods beginning on~~total or ~~after December 15, 2014, and interim periods within those years, and all businesses that, on acquisition, are classified as held for sale that occur within annual periods beginning on~~partial incapacity due to physical or after December 15, 2014, and interim periods within those years. The Company adopted this accounting literature effective January 1, 2015 and has accounted for the sale of its Human Services segment in 2015 under this guidance.mental illness.

~~In May 2014,~~Justina Uzzell

Ms. Uzzell will not be entitled to severance payments pursuant to the ~~FASB issued ASU No. 2014-09,~~Uzzell Offer Letter.

~~Revenue from Contracts with Customers: Topic 606~~Michael-Bryant Hicks ~~(“ASU 2014-09”). This ASU will supersede~~

Pursuant to the ~~revenue recognition requirements~~Hicks Offer Letter, Mr. Hicks was eligible for a lump sum payment, equal to two times Mr. Hicks’ then current base salary, on the same basis and terms as applicable to the Company’s senior executives, upon termination by the Company without cause following a change in ~~Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle~~control of the ~~guidance~~Company. Mr. Hicks stepped down from his position, effective February 25, 2016, and in accordance with the Hicks Separation Agreement, Mr. Hicks is ~~that an entity should recognize revenue~~no longer entitled to ~~depict~~ the ~~transfer~~change of ~~promised goods~~control benefit.

Herman Schwarz

Under the Schwarz Employment Agreement, Mr. Schwarz will be eligible to receive a severance benefit equal to one and one half times his base salary then in effect, upon executing a general release in favor of us in the event of a termination either by us without Cause, or ~~services to customers in an amount that reflects~~by Mr. Schwarz for Good Reason (each as defined below).

Under the ~~consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:~~ Schwarz Employment Agreement, “Cause” is defined as:

●

Fraud or theft committed by the employee against us or any of our subsidiaries, affiliates, joint ventures and related organizations, including any entity managed by us (collectively referred to as “Affiliates”), or commission of a felony; or

●

~~Step 1: Identify~~Gross negligence of the ~~contract(s)~~employee or willful misconduct by the employee that results, in either case, in material economic harm to us or our Affiliates; or

●

Breach of any provision by the employee of the Schwarz Employment Agreement or breach of any fiduciary duty or duty of loyalty owed to us or our Affiliates, if such breach continues uncured for a period 10 days after written notice from us to the employee specifying the failure, refusal, or violation and our intention to terminate the Schwarz Employment Agreement for Cause; or

●

Conduct of the employee tending to bring us or our Affiliates into public disgrace; or

●

Neglect or refusal by the employee to perform duties or responsibilities as directed by us, the Board or any executive committee established by the Board, or violation by the employee of any express direction of any lawful rule or regulation established by us or the Board or any committee established by the Board which is consistent with the scope of the employee’s duties under the Schwarz Employment Agreement, if such failure, refusal, or violation continues uncured for a ~~customer.~~period 10 days after written notice from us to the employee specifying the failure, refusal, or violation and our intention to terminate the Schwarz Employment Agreement for Cause; or

●

Commission of any acts or omissions by the employee resulting in or intended to result in direct material personal gain to the employee at our or our Affiliates’ expense; or

●

Employee materially compromises our or our Affiliates’ trade secrets or other confidential and proprietary information.

Cause does not include a bona fide disagreement over a corporate policy, so long as the employee does not willfully violate on a continuing basis specific written directions from the Board or any executive committee of the Board, which directions are consistent with the provisions of the Schwarz Employment Agreement. Action or inaction by the employee is not considered “willful” unless done or omitted by him intentionally and without his reasonable belief that his action or inaction was in our or our Affiliates’ best interests, and does not include failure to act by reason of total or partial incapacity due to physical or mental illness.

Under the Schwarz Employment Agreement, “Good Reason” is defined as:

●

The assignment to the employee by us of any duties inconsistent with the employee’s status with us or a substantial alteration in the nature or status of the employee’s responsibilities from those in effect on the effective date of the Schwarz Employment Agreement, or a reduction in the employee’s titles or offices as in effect on the effective date of the Schwarz Employment Agreement, except in connection with the termination of his employment for Cause or disability or as a result of the employee’s death, or by the employee other than for Good Reason, or our establishment of a new office to which the employee may be asked to report, or our hiring of a President or other officer which may result in the reassignment of some of the employee’s duties to someone in our employ below the level of the employee; or

●

A reduction by us in the employee’s base salary as in effect on the effective date of the Schwarz Employment Agreement or as the same may be increased from time to time during the term of the employment agreement; or

●

The relocation of the employee to one of our offices located outside of the greater metropolitan area of Atlanta, GA; or

●

Any material breach by us of a material term or provision contained in the Schwarz Employment Agreement, which breach is not cured within thirty (30) days following the receipt by the Board of written notice of such breach.

The table below includes a description and the amount of estimated payments and benefits that would be provided by us (or our successor) to each of the Named Executive Officers employed by us as of December 31, 2015, under the employment agreements or offer letters, assuming that such agreement had been in effect and the termination circumstance occurred on December 31, 2015 and did not involve a Change in Control (as defined below):

		Reason for Termination of Employment
Named Officer and Nature of Payment		Voluntary by Executive $		Termination by Us without Cause or Termination by Executive for Good Reason (2) $		Cause $		Death $		Disability $
James M. Lindstrom
	●	~~Step 2: Identify the performance obligations in the contract.~~

	●	~~Step 3: Determine the transaction price.~~

Total cash payment	●	~~Step 4: Allocate the transaction price to the performance obligations in the contract.~~	-		650,000		-		-		-
Cost of continuation of benefits			-		-		-		-		-
Value of accelerated stock option and stock awards (1)			-		-		-		-		-
Total			-		650,000		-		-		-
David Shackelton
Total cash payment			-		450,000		-		-		-
Cost of continuation of benefits			-		-		-		-		-
Value of accelerated stock option and stock awards (1)			-		-		-		-		-
Total			-		450,000		-		-		-
Michael-Bryant Hicks:
Total cash payment			-		-		-		-		-
Cost of continuation of benefits			-		-		-		-		-
Value of accelerated stock option and stock awards (1)			-		-		-		-		-
Total			-		-		-		-		-
Herman M. Schwarz:
Total cash payment			-		750,000		-		-		-
Cost of continuation of benefits			-		-		-		-		-
Value of accelerated stock option and stock awards (1)			-		-		-		-		-
Total			-		750,000		-		-		-

_________________

(1)	●Except for the equity-based awards granted to each Named Executive Officer in 2015, 2014 and 2013, all equity awards were vested at December 31, 2015.

(2)

~~Step 5: Recognize revenue when (or as)~~Only the ~~entity satisfies a performance obligation.~~employment agreement with Mr. Schwarz provides for severance for termination by the executive for “Good Reason.” The employment agreements for Messrs. Lindstrom, David Shackelton and Hicks do not provide for severance for termination by the executive for “Good Reason.”

In ~~August~~connection with Mr. Rustand’s resignation as Chief Executive Officer and as a board member, on May 29, 2015, Mr. Rustand and the ~~FASB issued ASU No. 2015-14,~~~~Revenue from Contracts~~Company entered into the Rustand Separation Agreement, which, to the extent applicable, superseded the Rustand Employment Agreement, including applicable severance provisions. Pursuant to the Rustand Separation Agreement, Mr. Rustand remained with ~~Customers: Topic 606~~the Company as a senior advisor through December 31, 2015, and received the same base salary applicable in 2015 during his tenure as Chief Executive Officer. Mr. Rustand was also eligible to receive annual performance cash awards based on previously granted performance awards related to his performance during 2015, which ~~deferred~~amount was calculated based on the same criteria and paid at the same time as payments are made in respect of similar awards to which other executives of the Company are entitled, as well as certain other benefits. As further consideration for entering into the Rustand Separation Agreement, Mr. Rustand was eligible to receive amounts payable in respect of certain outstanding performance restricted stock units and time restricted stock grants, and was eligible to exercise certain outstanding option awards.

In connection with Mr. Wilson’s resignation as Chief Financial Officer, the Company and Mr. Wilson entered into the Wilson Separation Agreement, which provided for the termination of Mr. Wilson’s employment with Providence effective March 20, 2015. Under the Wilson Separation Agreement, Mr. Wilson was entitled to the following: (i) his base salary through the Resignation Effective Date, as provided in the Wilson Employment Agreement; (ii) subject to Mr. Wilson’s execution of a release agreement, an amount based on the annual performance cash bonus award relating to the performance of Providence during 2015, pro-rated for the number of days during the fiscal year prior to the effective date of ~~ASU 2014-09. The amendments~~his resignation, which amount was to be calculated based on the same criteria and paid at the same time as payments made in ~~this update allowed publicly held entities~~respect to ~~apply the new revenue standard for annual reporting periods (including interim periods within those annual periods) beginning after December 15, 2017. Early adoption~~similar awards to which other executives of the ~~standard is permitted, but not before annual periods beginning after December 15, 2016. The~~ Company ~~will begin evaluating the impact ASU 2014-09 will have on its consolidated financial statements during 2016.~~

~~In February 2015, the FASB issued ASU 2015-02,~~~~Consolidation (Topic 810): Amendments~~are entitled; (iii) reimbursement for any reasonable expenses incurred prior to the ~~Consolidation Analysis~~~~(“ASU 2015-02”)~~,effective date of his resignation and (iv) the benefits to which ~~changes~~Mr. Wilson was entitled during the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (“VIE”), and (c) variable interests in a VIE held by related partiesterm of the ~~reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to~~Employment Agreement, as well as certain investment companies and similar entities. The new guidance excludes money market funds that are required to comply with Rule 2a-7 of the Investment Company Act of 1940 and similar entities from the U.S. GAAP consolidation requirements. The new consolidation guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. The Company adopted ASU 2015-02 effective January 1, 2016 and will re-evaluate its existing VIEs for consolidation accordingly during the three-month period ending March 31, 2016 and prospectively apply the guidance when evaluating potential new VIEs for consolidation.

~~In November 2014, the FASB issued ASU No 2014-16,~~~~Derivatives and Hedging~~ ~~(Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued~~other benefits as set forth in the ~~Form~~Wilson Separation Agreement. These payments satisfied the requirements of ~~a Share is More Akin to Debt or to Equity(“ASU 2014-16”)~~.This update requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument issued in the form of a share, including the embedded derivative feature that is being evaluated for separate accounting from the host contract when evaluating whether the host contract is more akin to debt or equity. In evaluating the stated and implied substantive terms and features, the existence or omission of any single term or feature does not necessarily determine the economic characteristics and risks of the host contract. Although an individual term or feature may weigh more heavily in the evaluation on the basis of facts and circumstances, an entity should use judgment based on an evaluation of all the relevant terms and features. ASU 2014-16 is effective for publicly held business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company adopted ASU 2014-16 effective January 1, 2015 and applied the literature to determine the accounting for its convertible preferred stock issued in 2015. The adoption of ASU 2014-16 did not impact the Company’s existing financial instruments.

~~In April 2015, the FASB issued ASU No. 2015-03,~~~~Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs~~ (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistentMr. Wilson’s Employment Agreement with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. For publicly held business entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted for financial statements that have not been previously issued. The amendments should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The Company adopted ASU 2015-03 on January 1, 2016 and will reclassify debt issuance costs as contra-liability accounts.

~~In September 2015, the FASB issued ASU 2015-16,~~~~Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments~~ (“ASU 2015-16”) which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. The ASU is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, early adoption is permitted. The Company adopted ASU 2015-16 on January 1, 2016. The adoption of the ASU will impact the Company’s accounting and disclosures related to future business acquisitions.

~~In November 2015, the FASB issued ASU 2015-17,~~~~Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes~~ (“ASU 2015-17”) which changes how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The Company intends to adopt ASU 2015-17 on January 1, 2017. This ASU will impact the Company’s financial statements, as the Company has approximately $5,877 of current deferred tax assets, at December 31, 2015. The result of the application of this guidance would be to reclassify the current deferred tax assets to long-term deferred tax assets in the consolidated balance sheet.Providence.

~~In February 2016, the FASB issued ASU No. 2016-02,~~~~Leases: Topic 842~~(“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presentedChange in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. ASU 2016-02 is effective for publicly held entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted. The Company will begin evaluating the impact ASU 2016-02 will have on its consolidated financial statements during 2016.

3. ~~Equity Investment~~Control Payments

~~The Company entered into~~Certain payment provisions of the employment agreements, except the Uzzell Offer Letter, are also triggered by a ~~joint venture~~“Change in Control.” Under the employment agreements with Messrs. Lindstrom, David Shackelton, and Schwarz a “Change in Control” is defined as an event or events, in which:

●

any “person” as defined in Sections 13(d) and 14(d) of the Exchange Act (other than (i) us or our subsidiaries, (ii) any fiduciary holding securities under our employee benefit plan or our subsidiaries, or (iii) any company owned by our stockholders), is or becomes the “beneficial owner” of fifty percent (50%) (twenty-five percent (25%) in the case of Mr. Schwarz) or more of our voting outstanding securities;

●

we consummate (i) mergers or consolidations as more specifically described in the employment agreements, (ii) a liquidation or (iii) the sale or disposition of all or substantially all of our assets; or

●

in the case of Mr. Schwarz, a majority of our directors are replaced in certain circumstances during any period of two consecutive years.

Mr. Lindstrom’s employment agreement entitles him to receive (i) the product of two multiplied by his twelve-month base salary; and (ii) a pro-rata portion of any bonus earned for the then fiscal year through the date of termination if a Change in ~~November 2014~~Control occurs during the agreement term and after such Change in Control but prior to ~~form Mission Providence Pty Ltd (“Mission Providence”). Mission Providence delivers employment services in Australia. The Company has a 60% ownership in Mission Providence, and has rights to 75%~~the end of Mission Providence’s distributions of cash or profit surplus twice per calendar year. The Company provided $16,072 in capital contributions in 2015 to Mission Providence, and will continue to provide further contributions in exchange for its equity interests.the term, he is terminated without Cause.

~~The Company determined it has~~David Shackelton’s employment agreement entitles him to receive twelve months’ base salary and a ~~variable interest~~pro-rata portion of any bonus earned for the then fiscal year through the date of termination if a Change in ~~Mission Providence. However, it does not have unilateral power~~Control occurs during the agreement term and after such Change in Control but prior to ~~direct~~ the ~~activities that most significantly impact Mission Providence’s economic performance, which include budget approval, business planning,~~end of the ~~appointment of key officers and liquidation and distribution of share capital. As a result,~~term, he is terminated without Cause.

Prior to their resignations from the Company, each of Messrs. Rustand’s and Wilson’s employment agreements would have entitled them to receive (i) the greater of (a) annual base salary through the end of the term of the employment agreement or (b) fifty percent (50%) of annual base salary, and (ii) a pro-rata portion of any bonus earned prior to termination if a Change in Control occurs during the agreement term and after such Change in Control but prior to the end of the term, they are terminated without Cause. However, Mr. Wilson stepped down from his position, effective as of January 14, 2015, and in accordance with the Wilson Separation Agreement, Mr. Wilson is ~~not~~no longer entitled to this change of control benefit. Mr. Rustand stepped down from his position, effective June 1, 2015, and in accordance with the ~~primary beneficiary~~Rustand Separation Agreement, Mr. Rustand is no longer entitled to this change of ~~Mission Providence. The~~control benefit.

In the event of a Change in Control of the Company ~~accounts~~during the term of the Schwarz Employment Agreement, and prior to the 24 month anniversary of the consummation date of the Change in Control (i) we terminate Mr. Schwarz’s employment without Cause, (ii) Mr. Schwarz terminates his employment for ~~this investment~~Good Reason, in lieu of any other amounts payable under the ~~equity method~~Schwarz Employment Agreement, or (iii) Mr. Schwarz’s agreement expires by its terms and we do not offer to renew the agreement for an additional term to expire no earlier than the 24 month anniversary of ~~accounting~~the consummation date of the Change in Control, Mr. Schwarz would receive a lump sum payment equal to two times the average of his annual W-2 compensation from us for the most recent five taxable years ending before the effective date of a Change in Control. The lump sum payment will be paid to Mr. Schwarz within ten days of his termination of employment following the Change in Control.

Upon a Change in Control each of Messrs. Lindstrom and Schwarz is and Messrs. Hicks, Rustand and Wilson were, entitled to an accelerated vesting and payment of stock options, restricted stock and target PBRSU awards granted to that executive officer. However, if the sum of any lump payments, the value of any accelerated vesting of stock options and restricted stock awards, and the ~~Company’s share~~value of ~~Mission Providence’s losses are recorded as “Equity~~any other benefits payable to the executive officer, would constitute an “excess parachute payment” (as defined in net loss of investee” in the accompanying consolidated statements of income. Cash contributions made to Mission Providence in exchange for its equity interests are included in the consolidated statements of cash flows as “Equity investments”. The investment is accounted for as partSection 280G of the ~~WD Services segment.~~

~~The following table summarizes the carrying amounts of the assets and liabilities included in the Company’s consolidated balance sheet and the maximum loss exposure related~~IRC), then such lump sum payment or other benefit will be reduced to the ~~Company’s interest~~largest amount that will not result in ~~Mission Providence~~receipt by the executive officer of a parachute payment. Mr. Wilson stepped down from his position, effective as of ~~December 31, 2015:~~

Assets

Liabilities

Other Assets

Accrued
Expenses

Maximum
Exposure to
Loss

$ 9,324 $ 4,654 $ 9,324

~~Accrued Expenses relates~~January 14, 2015, and in accordance with the Employment and Separation Agreement dated February 2, 2015, Mr. Wilson is no longer entitled to this change of control benefit. Mr. Rustand stepped down from his position, effective June 1, 2015, and in accordance with the ~~remaining funding committed~~Employment and ~~required under the joint venture agreement pursuant~~Separation Agreement dated May 29, 2015, Mr. Rustand is no longer entitled to ~~the Company’s 60% equity interest. The commitment is denominated in Australian dollars at an amount~~this change of AUD $6,397. In addition to the committed contributions which are included in “Other Assets” and “Accrued Expenses” in the table above, the Company may need to make additional capital contributions.control benefit.

~~Summary financial information~~The Hicks Offer Letter entitled Mr. Hicks to compensation equal to two times Mr. Hicks’ then applicable base salary, in a lump sum, on the same basis and terms as would be the case for ~~Mission Providence~~senior executives of the Company. Mr. Hicks stepped down from his position, effective February 25, 2016, and in accordance with the Hicks Separation Agreement, Mr. Hicks is ~~as follows:~~no longer entitled to the change of control benefit.

December 31,
2015

Current assets
$ 7,789
Long-term assets
8,869
Current liabilities
10,488
Long-term liabilities
-

Year ended
December 31,
2015

Revenue
$ 11,206
Operating loss
(19,397 )
Net loss
(13,106 )

4~~. Prepaid Expenses~~The following table quantifies the estimated maximum amount of payments and ~~Other~~

~~Prepaid expenses~~benefits under the employment agreements, offer letters, and ~~other were comprised~~agreements relating to awards granted under our 2006 Plan to which the Named Executive Officers employed by us as of ~~the following:~~December 31, 2015 would have been entitled upon a Change in Control of our Company that occurred on December 31, 2015 and termination of employment.

December 31,

2015

2014

Prepaid income taxes
1,607 13,865
Prepaid insurance
3,714 4,293
Prepaid taxes and licenses
4,895 4,672
Prepaid rent
2,246 2,288
Deposits held for leased premises and bonds
3,622 3,249
Preferred share backstop fee paid to related party
- 2,947
Other
14,634 11,820

Total prepaid expenses and other
$ 30,718 $ 43,134

Name

Change in
Control
Payment
($)

Value of
Accelerated
Vesting of
Equity Awards
($)

Total
Termination
Benefits
(1) ($)

James M. Lindstrom
1,300,000 24,931 1,324,931
David Shackelton
450,000 24,852 474,852
Justina Uzzell
- 27,572 27,572
Michael-Bryant Hicks
700,000 644,407 1,344,407
Herman M. Schwarz
1,082,368 1,774,306 2,856,674
__________________

(1)
No value has been assigned to any provisions of the employment agreements that remain in force following the Change in Control.
5.    ~~Property and Equipment~~Compensation of Non-Employee Directors

~~Property and equipment consisted~~As compensation for their service as directors of the ~~following:~~Company in 2015, each non-employee member of the Board received an $85,000 annual retainer. For service as committee Chairs, the Chairs of the Audit Committee, Compensation Committee and Nominating and Governance Committee each received an additional retainer of $35,000. For service as Chairman of the Board, the Chairman of the Board received an additional retainer of $40,000. Payment of the annual stipends was made on a monthly basis in advance of each month of service. On March 18, 2015, Mr. Kerley and Ms. Meints were each awarded 4,000 shares of restricted stock under the 2006 Plan, which vest in three equal installments on the first, second and third anniversaries of the date of grant. On March 18, 2015, Coliseum Capital Partners, L.P. was granted 4,000 stock equivalent units, which vest in three equal installments on the first, second and third anniversaries of the date of grant in lieu of an award to Christopher Shackelton as further discussed in note (4) to the table below. Upon her appointment to the Board, on November 4, 2015, Ms. Norwalk was awarded 627 shares of restricted stock under the 2006 Plan, which also vest in three equal installments on the first, second and third anniversaries of the date of grant. Except for certain expense reimbursement noted below, no additional payments were made to non-employee members for participating in Board and committee meetings.

Estimated
Useful

December 31,

Life (in years)

2015

2014

Land
-- $ 1,182 $ 1,182
Building
39 5,215 5,215
Computer and telecom equipment
3 - 5 32,961 24,293
Software
3 - 5 30,728 11,172
Leasehold improvements
Shorter of 7 years or lease term 17,436 14,220
Furniture and fixtures
5 - 10 7,739 6,434
Automobiles
5 3,471 2,986
Construction in progress
-- 3,446 2,858
102,178 68,360
Less accumulated depreciation
44,391 25,712
Total property and equipment, net
$ 57,787 $ 42,648
~~Depreciation expense from continuing operations was approximately $17,858, $10,848~~Non-employee directors are also reimbursed for reasonable expenses incurred in connection with attending meetings of the Board and ~~$5,288 for the years ended December 31, 2015, 2014 and 2013, respectively.~~meetings of Board committees.

6.~~Goodwill and Intangibles~~2015 Director Compensation Table

~~Goodwill~~
Name

Fees Earned
or Paidin
Cash ($)

Stock
Awards
(1)(2)
($)

Option
Awards
($)

Total
($)

Richard Kerley*
138,535 208,120 - 346,655
Kristi L. Meints*
120,717 (3) 208,120 - 328,837
Leslie V. Norwalk*
15,162 32,491 - 47,653
Christopher S. Shackelton (4)
139,591 208,120 - 347,711

~~Changes in goodwill were as follows:~~

NET
Services

WD
Services (1)

HA
Services

Consolidated
Total

Balances at December 31, 2013

Goodwill
$ 191,215 $ 9,916 $ - $ 201,131
Accumulated impairment losses (2)
(96,000 ) (6,041 ) - (102,041 )
95,215 3,875 - 99,090

Ingeus acquisition
- 35,484 - 35,484
Matrix acquisition
- - 210,576 210,576
Foreign currency translation adjustment
- (2,738 ) - (2,738 )
Balances at December 31, 2014

Goodwill
191,215 42,662 210,576 444,453
Accumulated impairment losses (2)
(96,000 ) (6,041 ) - (102,041 )
95,215 36,621 210,576 342,412

Matrix acquisition adjustments
- - (505 ) (505 )
Foreign currency translation adjustment
- (1,878 ) - (1,878 )
Balances at December 31, 2015

Goodwill
191,215 40,784 210,071 442,070
Accumulated impairment losses (2)
(96,000 ) (6,041 ) - (102,041 )
$ 95,215 $ 34,743 $ 210,071 $ 340,029

*
Committee Chair at December 31, 2015
(1)
~~(1)~~Represents the aggregate grant date fair value of the stock and stock equivalent units granted in 2015. The ~~goodwill~~aggregate grant date fair value of the restricted stock was computed in accordance with the Financial Accounting Standards Board’s, or FASB Accounting Standards Codification (“ASC”) Topic 718-Compensation-Stock Compensation,or ASC 718. For a discussion of valuation assumptions, see Note 13, Stock-Based Compensation and Similar Arrangements, of our Annual Report on Form 10-K for ~~WD Services has been recast from the prior year presentation to reflect the classificationof two legacy workforce development businesses from the Human Services segment to the WD Servicessegment as further described in Note 23,~~~~Segments~~.
~~(2) Accumulated impairment losses relate to impairment charges incurred during~~ the year ended December 31, ~~2008.~~2015. Other than the 8,297 shares of restricted stock awarded to Mr. Kerley and Ms. Meints in 2013 and 2014, the 4,000 shares of restricted stock awarded to Mr. Kerley and Ms. Meints in 2015, and the 627 shares of restricted stock award to Ms. Norwalk in 2015, there were no other stock awards outstanding as of December 31, 2015 that were previously granted to the non-employee members of the Board. As of December 31, 2015, two-thirds of the 12,500 shares of restricted stock granted in 2013 were vested, one-third of the 6,195 shares of restricted stock granted in 2014 were vested and none of the 4,000 or 627 tranches of shares of restricted stock granted in 2015 were vested. In respect of Mr. Shackelton’s Board service, none of the stock equivalent units granted in 2015 were vested as of December 31, 2015. 10,399 stock equivalent units granted in 2013 and 2014 vested in 2015.
(2)
The following table sets forth the number of outstanding unexercised options to purchase shares of Common Stock and the associated exercise price and grant date fair value held by each non-employee director as of December 31, 2015. All outstanding options were fully vested as of December 31, 2015.

Number of stock options

Grant
Date

Exercise
Price

Richard
Kerley

Kristi L.
Meints

Leslie V.
Norwalk

1/3/07
$ 24.59 - 3,999 -
6/9/08
$ 26.14 - 10,000 -
6/14/10
$ 16.35 - 7,814 -
5/17/11
$ 14.16 667 2,000 -

Total
667 23,813 -
(3)
Includes $717 paid to Ms. Meints in reimbursement of accompanying traveler’s expenses for travel to a Board meeting.

(4)
All of Christopher Shackelton’s compensation for service on the Board inures to the benefit of Coliseum Capital Partners, L.P. (of which Mr. Shackelton is a Managing Partner) pursuant to this entity’s policy regarding Christopher Shackelton’s service on the board of companies in which it has an equity interest. Coliseum also holds previously granted stock equivalent units in respect of Mr. Shackelton’s Board service, 133,332 of which were vested as of December 31, 2015, and 66,668 remained unvested, with an exercise price of $43.81.
~~The total amount~~
Under the Company’s stock ownership guidelines, as amended, non-employee directors are expected to own shares of ~~goodwill~~our Common Stock with a value equal to three times their annual stipend, subject to a grace period of three years following such director’s appointment to the Board.
Pursuant to the amended stock ownership guidelines, the following will count towards meeting the required holding level:
●
Shares held directly or indirectly;
●
Any restricted stock or stock units held under our annual equity-based compensation program (whether vested or unvested); and,
●
Shares owned jointly with or in trust for, their immediate family members residing in the same household.
Compliance with the established holding level requirement as determined under the guidelines was required by December 31, 2014, subject to a grace period of three years following a director’s appointment to the Board, and will be determined and calculated as of December 31 of each year. Once the ownership requirement has been achieved, the non-employee directors are free to sell shares of our Common Stock above the required holding level. In determining whether the director meets the required holding level, the stock ownership guidelines were amended to require use of the greater of (a) the closing market share price as of the date a director is granted or purchases such shares and (b) the closing market share price on December 31 of the year the calculation is performed (or the last trading day of that ~~was deductible for income tax purposes related to acquisitions~~year, if the markets are closed on December 31). In the event a non-employee director does not achieve his or her holding level set forth above or thereafter sells shares of our Common Stock in violation of the stock ownership guidelines, the Board will consider all relevant facts and take such actions as it deems appropriate under the circumstances. Based on the number of shares held by each of our non-employee directors as of December 31, 2015, ~~and 2014 was approximately $5,217.~~the Compensation Committee has determined that each of our non-employee directors is in compliance with these guidelines.

~~Intangible Assets~~
~~Intangible assets are comprised of acquired customer relationships, trademarks~~Compensation Committee Interlocks and ~~trade names, and developed technology. Intangible assets consisted of the following:~~

December 31,

2015

2014

Estimated
Useful
Life (in years)

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

Customer relationships
15 $ 47,973 $ (26,804 ) $ 48,258 $ (23,939 )
Customer relationships
10 219,989 (27,662 ) 221,701 (5,830 )
Trademarks and Trade Names
Indefinite 25,900 - 25,900 -
Trademarks and Trade Names
10 15,935 (2,523 ) 16,724 (976 )
Developed technology
5 43,841 (10,698 ) 44,016 (1,950 )
Total
$ 353,638 $ (67,687 ) $ 356,599 $ (32,695 )
Insider Participation

The ~~weighted-average amortization period at December 31, 2015 for intangibles with~~Compensation Committee consists of Mr. Kerley (Chairperson), Ms. Meints and Ms. Norwalk. No person who served as a ~~definite life was 10.1 years. No significant residual value is estimated for these intangible assets. Amortization expense from continuing operations was approximately $35,612, $11,985 and $4,042 for~~member of the ~~years~~Compensation Committee during the fiscal year ended December 31, 2015 ~~2014 and 2013, respectively. The total amortization expense is estimated~~was a current or former officer or employee of Providence, or engaged in certain transactions with us, which was required to be ~~as follows for the next five years and thereafter as of December 31, 2015:~~
Year

Amount

2016
$ 35,458
2017
35,458
2018
35,458
2019
33,527
2020
26,689
Thereafter
93,461
Total
$ 260,051

7.    ~~Accrued Expenses~~
~~Accrued expenses consisted~~disclosed by regulations of the ~~following:~~

December 31,

2015

2014

Accrued compensation
$ 27,546 $ 33,185
NET Services accrued expenses
26,669 27,380
Taxes payable
24,302 3,678
Contingent consideration
- 7,767
Other
52,035 27,263
Total accrued expenses
$ 130,552 $ 99,273
~~Additional information included in Note 9,~~~~Fair Value Measurements,~~ ~~regarding~~SEC, except as provided below. Christopher Shackelton served as a member of the ~~contingent consideration liability.~~
8.    ~~Restructuring~~Compensation Committee until his resignation from the committee and ~~Related Reorganization Costs~~
Insimultaneous appointment as Interim Chief Executive Officer on June 1, 2015. There were no compensation committee “interlocks” during the fourth quarter of 2015, WD Services approved two redundancy plans. The first plan relates to the termination of employees currently delivering services under a new offender rehabilitation program. The second plan primarily relates to the termination of employees delivering services under the Company’s employability and skills training programs and certain other employees in the UK.   The Company recorded severance and related charges of approximately $10,551 as offiscal year ended December 31, 2015, ~~relating to termination benefits associated with these two plans~~ which ~~is recorded~~generally means that none of Providence’s executive officers served as “Service expense” in the accompanying consolidated statements of income. The cost is estimated based upon the employee groups impacted, average salary and benefits, and redundancy benefits pursuant to the existing policies. The final identificationa director or member of the ~~employees is subject to customary consultation procedures.~~
~~Summary~~compensation committee of~~Severance and Related Charges~~

January 1,
2015

Costs
Incurred

Cash Payments

Other Adjustments

December 31,
2015

Charges related to new offenderrehabilitation program
$ - $ 8,465 $ (1,839 ) $ (88 ) $ 6,538
Charges related to UK restructuring
- 2,086 - (27 ) 2,059

Total
$ - $ 10,551 $ (1,839 ) $ (115 ) $ 8,597
~~The total~~ another entity, one of ~~accrued severance and related costs~~whose executive officers served as a member of ~~$8,597 is reflected in “Accrued expenses” in the consolidated balance sheets. The amount accrued~~our Board or as a member of ~~December 31, 2015 is expected to be settled primarily in 2016.~~

9.    ~~Fair Value Measurements~~
~~Liabilities measured at fair value on a recurring basis were as follows:~~
~~December 31, 2015~~
~~Level 1~~
~~Level 2~~
~~Level 3~~
~~Total~~
~~Contingent consideration liabilities~~
$ - $ - $ - $ -
December 31, 2014

Level 1

Level 2

Level 3

Total

Contingent consideration liabilities
$ - $ - $ 10,549 $ 10,549
~~There were no transfers between Level 1 and Level 2, or into or out of Level 3, during 2015 and 2014.~~
~~The changes in Level 3 liabilities measured at fair value on a recurring basis were as follows:~~

Contingent Consideration Liabilities

December 31, 2015

December 31, 2014

Balance at the beginning of year
$ 10,549 $ -
Initial valuation upon acquistion
- 30,095
Payments
(7,496 ) -
Gain in general and administrative expense
(2,469 ) (16,314 )
Foreign exchange revaluation
(584 ) (3,232 )
Balance at end of year
$ - $ 10,549
The fair value of the Company’s contingent consideration was $10,549 at December 31, 2014, of which $7,767 is included in “Accrued expenses” and $2,782 is included in “Other long-term liabilities” in the consolidated balance sheets. During 2015, it was determined the fair value under remaining contingent consideration arrangements was zero, and “General and administrative expense” reflects a gain of $2,469.
~~The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements were as follows:~~
~~December 31, 2015~~
~~Fair Value~~
~~Valuation Technique~~
~~Significant~~
~~Unobservable Inputs~~
~~Value~~
~~Contingent consideration liabilities~~
$ -
~~Discounted probability-weighted approach~~
~~Discount rate~~
~~14.12%~~
December 31, 2014

Fair Value

Valuation Technique

Significant
Unobservable Inputs

Value

Contingent consideration liabilities
$ 10,549
Discounted probability-weighted approach

Discount rate
15.25%
~~Financial instruments that were not remeasured at fair value were as follows:~~

December 31, 2015

December 31, 2014

Fair Value
Level

Carrying
Value

Estimated
Fair Value

Carrying
Value

Estimated
Fair Value

Financial assets

Cash and cash equivalents
1 $ 84,770 $ 84,770 $ 135,258 $ 135,258
Financial liabilities

Long-term obligations
3 $ 304,950 $ 308,892 $ 576,075 $ 576,075

10.    ~~Long-Term Obligations~~~~and Note Payable to Related Party~~
          ~~The Company’s long-term obligations were as follows:~~

December 31,
2015

December 31,
2014

$240,000 revolving loan, LIBOR plus 2.25% - 3.25% (effective rate of 3.41% atDecember 31, 2015) with interest payable at least once every three monthsthrough August 2018
$ 19,700 $ 201,700
$250,000 term loan, LIBOR plus 2.25% - 3.25% (effective rate of 3.33% at December 31,2015), with principal payable quarterly beginning March 31, 2015 and interest payableat least once every three months, through August 2018
231,250 250,000
$60,000 term loan, LIBOR plus 2.25% - 3.25% (effective rate of 3.33% at December 31,2015), with principal payable quarterly beginning December 31, 2014 and interest payableat least once every three months, through August 2018
54,000 58,875
14.0% unsecured related party, subordinated bridge note with principal due September 30,2018, and interest payable quarterly
- 65,500
304,950 576,075
Unamortized discount on debt
(1,105 ) (1,462 )
303,845 574,613
Less current portion
31,375 90,088
Total long-term obligations, less current portion
$ 272,470 $ 484,525
           ~~Annual maturities of long-term obligations as of December 31, 2015 are as follows:~~
Year

Amount

2016
31,375
2017
39,125
2018
234,450
Total
$ 304,950
~~Credit Facility~~
On August 2, 2013, the Company entered into an Amended and Restated Credit Agreement (as amended, modified or supplemented, the “Credit Agreement”) with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, SunTrust Bank, as syndication agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and SunTrust Robinson Humphrey, Inc., as joint lead arrangers and joint book managers, and other lenders party thereto. The Credit Agreement provided the Company with a senior secured credit facility in the aggregate principal amount of $225,000, comprised of a $60,000 term loan facility and a $165,000 revolving credit facility. The Credit Facility includes sublimits for swingline loans and letters of credit in amounts up to $10,000 and $25,000, respectively. On August 2, 2013, the Company borrowed the entire amount available under the term loan facility and $16,000 under the revolving credit facility and used the proceeds thereof to refinance certain of the Company’s existing indebtedness.
On May 28, 2014 the Company entered into the first amendment (the “First Amendment”) to the Credit Agreement. The First Amendment provided for, among other things, an increase in the aggregate amount of the revolving credit facility from $165,000 to $240,000 and other modifications in connection with the consummation of the acquisition of Ingeus.
On October 23, 2014, the Company entered into the Second Amendment to the Credit Agreement (the “Second Amendment”) to amend the Credit Facility to (i) add a new term loan tranche in the aggregate principal amount of up to $250,000 to partly finance the acquisition of Matrix, (ii) provide the consent of the required lenders to consummate the acquisition of Matrix, (iii) permit incurrence of additional debt to fund the acquisition of Matrix, (iv) add an excess cash flow mandatory prepayment provision and (v) such other amendments which the Company believes are beneficial to the Company and provide greater flexibility for our ~~future operations.~~Board’s Compensation Committee.

~~On September 3, 2015, the Company entered into the Third Amendment~~Item 12.Security Ownership of Certain Beneficial Owners and Consent to the Credit Agreement (the “Third Amendment”) to amend the Credit Agreement to (i) allow the lenders under the Credit Agreement to consent to the Company’s sale of the Human Services segment, provided that a minimum amount equal to 50% of the net cash proceeds, as defined in the Credit Agreement, of the sale is applied pro rata to the prepayment of revolving loansManagement and swingline loans under the Credit Agreement and (ii) allow the lenders to consent to the Company’s use of 50% of the net cash proceeds of the sale to make restricted payments to repurchase common stock pursuant to a Providence stock repurchase program. The Third Amendment provides for appropriate amendments to the terms of the Credit Agreement to reflect such consents. The Credit Facility defines “net cash proceeds” to include cash proceeds or cash equivalents actually received in a disposition such as the sale, net of direct costs incurred, taxes paid or payable as a result of the disposition, the amount of required payments on indebtedness as a result of the disposition, and the amount of any reasonable reserve established in accordance with generally accepted accounting principles for contingency payments, such as indemnification obligations.Related Stockholder Matters

Under the Credit Facility, as amended, the Company has an option to request an increase in the amount of the revolving credit facility and/or the term loan facility from time to time (on substantially the same terms as apply to the existing facilities) in an aggregate amount of up to $75,000 with either additional commitments from lenders under the Credit Agreement at such time or new commitments from financial institutions acceptable to the administrative agent in its reasonable discretion, so long as no default or event of default exists at the time of any such increase. The Company may not be able to access additional funds under this option as no lender is obligated to participate in any such increase under the Credit Facility and new lenders may not be identified.Principal Stockholders

The ~~Credit Facility matures~~following table sets forth certain information, as of April 26, 2016, with respect to the beneficial ownership of Providence’s Common Stock and Preferred Stock by (a) each stockholder known by us to own beneficially more than five percent of our outstanding voting power of Common Stock and Preferred Stock; (b) all of Providence’s directors and nominees for director, (c) all of Providence’s executive officers named in the “Summary Compensation Table” which follows, who were named executive officers on ~~August 2, 2018. The Company may prepay~~April 26, 2016 and (d) all of Providence’s directors and executive officers as a group. Except as otherwise specified, the ~~Credit Facility in whole or in part, at any time without premium or penalty, subject~~named beneficial owner has sole voting and investment power with respect to ~~reimbursement of~~ the lenders’ breakage and redeployment costs in connection with prepayments of London Interbank Offered Rate, or LIBOR, loans. The unutilized portion of the commitments under the Credit Facility may be irrevocably reduced or terminated by the Company at any time without penalty.shares.

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s present and future domestic subsidiaries, excluding certain domestic subsidiaries which include our insurance captives. The Company’s obligations under, and each guarantor’s obligations under its guaranty of, the Credit Facility are secured by a first priority lien on substantially all of the Company’s respective assets, including a pledge of 100% of the issued and outstanding stock of the Company’s domestic subsidiaries, excluding the Company’s insurance captives, and 65% of the issued and outstanding stock of the Company’s first tier foreign subsidiaries.
Interest on the outstanding principal amount of the loans accrues, at the Company’s election, at a per annum rate equal to LIBOR, plus an applicable margin, or the base rate as defined in the agreement plus an applicable margin. The applicable margin ranges from 2.25% to 3.25% in the case of LIBOR loans and 1.25% to 2.25% in the case of the base rate loans, in each case, based on the Company’s consolidated leverage ratio as defined in the Credit Agreement. Interest on the loans is payable quarterly in arrears. The interest rate applied to the Company’s term loan at December 31, 2015 was 3.33%. In addition, the Company is obligated to pay a quarterly commitment fee based on a percentage of the unused portion of each lender’s commitment under the revolving credit facility and quarterly letter of credit fees based on a percentage of the maximum amount available to be drawn under each outstanding letter of credit. The commitment fee and letter of credit fee range from 0.25% to 0.50% and 2.25% to 3.25%, respectively, in each case, based on the Company’s consolidated leverage ratio.
The $60,000 term loan is subject to quarterly amortization payments, which commenced on December 31, 2014, so that the following percentages of the term loan outstanding on the closing date plus the principal amount of any term loans funded pursuant to the increase option are repaid as follows: 7.5% between December 31, 2014 and September 30, 2015, 10.0% between December 31, 2015 and September 30, 2016, 12.5% between December 31, 2016 and September 30, 2017, 15.0% between December 31, 2017 and June 30, 2018 and the remaining balance at maturity.
The $250,000 term loan is subject to quarterly amortization payments, which commenced on March 31, 2015, so that the following percentages of the term loan outstanding on the closing date plus the principal amount of any term loans funded pursuant to the increase option are repaid as follows: 7.5% between March 31, 2015 and December 31, 2015, 10.0% between March 31, 2016 and December 31, 2016, 12.5% between March 31, 2017 and December 31, 2017, 15.0% between March 31, 2018 and June 30, 2018 and the remaining balance at maturity.
Name and Address

No. of Shares of Common Stock Beneficially Owned (1)

No. of Shares of Preferred Stock Beneficially Owned (1)

Percent of Total Voting Power (1)

Coliseum Capital Management, LLC
Adam Gray
Christopher S. Shackelton(2)
1,968,360 765,916 23.0 %
FMR LLC(3)
2,159,057 — 12.8 %
BlackRock, Inc.(4)
1,261,286 — 7.5 %
Renaissance Technologies LLC(5)
921,900 — 5.5 %
Richard A. Kerley(6)
26,130

— *
James M. Lindstrom(7)
13,519 — *
Kristi L. Meints(8)
65,179 1,000 *
Leslie V. Norwalk
— — *
Christopher S. Shackelton(9)
1,968,360 765,916 23.0 %
David Shackelton(10)
44,652 190 *
Justina Uzzell
— — *
All directors and executive officers as a group (10 persons)(11)
2,119,202 767,106 24.0 %

~~The Credit Facility also requires~~__________________
*
Less than 1%
(1)
The securities “beneficially owned” by each stockholder are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the SEC. Accordingly, they may include securities to which the stockholder has or shares voting or investment power or has the right to acquire within 60 days of April 26, 2016. Beneficial ownership may be disclaimed as to certain of the securities. As of April 26, 2016 there were 14,858,366 shares of the Common Stock outstanding, and 803,508 shares of Preferred Stock outstanding, which, on an as-converted basis, represents 2,014,814 shares of Common Stock. The Common Stock and Preferred Stock are the only outstanding classes of capital stock of the Company with voting rights, and the Common Stock and the Preferred Stock vote together as a single class. Each share of Common Stock is entitled to one vote, and each share of Preferred Stock is entitled to that number of votes equal to the whole number of shares of Common Stock into which such holder’s aggregate number of shares of Preferred Stock are convertible as of the close of business on April 26, 2016. As of April 26, 2016, each share of outstanding Preferred Stock was convertible into approximately 2.51 shares of Common Stock.
(2)
This information is based on ownership information reported in the Schedule 13D/A filed on March 17, 2015 with the SEC by Coliseum Capital Management, LLC, Coliseum Capital, LLC, Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P., Adam Gray and Christopher S. Shackelton (Metro Center, 1 Station Place, 7th Floor South, Stamford, CT 06902) and on the Form 4 filed by the same entities and individuals on March 22, 2016. Based on information available in the Schedule 13D/A and Form 4, the shares are held directly by (a) Coliseum Capital Partners, L.P. ("CCP"), an investment limited partnership of which Coliseum Capital, LLC, a Delaware limited liability company ("CC"), is general partner and for which Coliseum Capital Management, LLC, a Delaware limited liability company ("CCM"), serves as investment adviser, (b) Coliseum Capital Partners II, L.P., an investment limited partnership of which CC is general partner and for which CCM serves as investment adviser, and (c) a separate account investment advisory client of CCM. Christopher S. Shackelton and Adam Gray manage CCM and CC. Each of Christopher S. Shackelton, Adam Gray, the separate account, CCP, CC and CCM disclaim beneficial ownership of these securities except to the extent of each person's own pecuniary interest therein.
(3)
This information is based on the Schedule 13G/A filed by FMR LLC (245 Summer Street, Boston, Massachusetts 02210) with the SEC on February 12, 2016.
(4)
This information is based on the Schedule 13G/A filed by BlackRock, Inc. (55 East 52nd Street, New York, NY 10055) with the SEC on January 27, 2016.
(5)
This information is based on the Schedule 13G/A filed by Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation (800 Third Avenue, New York, New York 10022) with the SEC on February 11, 2016.
(6)
Includes 25,463 shares of Common Stock held by Mr. Kerley and 667 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of April 26, 2016.
(7)
Includes 13,519 shares of Common Stock held by Mr. Lindstrom.
(8)
Includes 41,978 shares of Common Stock held by Ms. Meints and 23,813 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of April 26, 2016.
(9)
Includes shares of Common Stock and Preferred Stock held by Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P. and a separate account managed by Coliseum Capital Management, LLC (for additional information see footnote 2 to the Principal Stockholders table above). Mr. Christopher Shackelton disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein.
(10)
Includes 11,319 shares of Common Stock held by Mr. David Shackelton and 33,333 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of April 26, 2016.
(11) Includes 2,061,389 shares of Common Stock and 57,813 shares of Common Stock issuable upon the exercise of options that are exercisable within 60 days of April 26, 2016.

Item 13.Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Transactions
Policy Regarding Certain Relationships and Related Transactions
Pursuant to its written charter, the ~~Company (subject~~Audit Committee has adopted a Related Person Transaction Policy that, subject to certain exceptions, requires the Audit Committee (or the chair of the Audit Committee, in certain instances) to review and either ratify, approve or disapprove all “transactions” with “related persons,” which have the meanings given to such terms in Item 404(a) of Regulation S-K.
In determining whether to approve or ratify a transaction with a related person under the policy, the Audit Committee is to consider all relevant information and facts available to it regarding the transaction and take into account factors such as ~~set forth~~the related person’s relationship to the Company and interest in the ~~Amended and Restated Credit Agreement) to prepay~~transaction (direct or indirect), the ~~outstanding loans in an aggregate amount equal to 100%~~terms of the ~~net cash proceeds received from certain asset dispositions (or 50%~~transaction and the benefits to the Company of ~~net cash proceeds~~the transaction. No director is to participate in the ~~case~~approval of ~~the sale of the Human Services segment), debt issuances, insurance and casualty awards and other extraordinary receipts.~~a related person transaction for which he or she is a related person or otherwise has a direct or indirect interest.

The ~~Credit Agreement contains customary affirmative~~Audit Committee is also to review and ~~negative covenants~~assess ongoing related person transactions, if any, on at least an annual basis to determine whether any such transactions remain appropriate or should be modified or terminated.
Each year our directors and ~~events of default. The negative covenants include restrictions on the Company’s ability to,~~officers complete Directors’ and Officers’ Questionnaires, which, among other things, ~~incur~~are designed to elicit certain information relating to transactions with the Company in which the officer or director or any immediate family member of such officer or director has a direct or indirect interest. We also make inquiries quarterly of officers and directors to identify any additional ~~indebtedness, create liens, make investments, give guarantees, pay dividends, sell assets and merge and consolidate. The Company is~~related person transactions that have arisen since the last inquiry as a means to ensure all potential transactions subject to ~~financial covenants, including consolidated net leverage~~the policy are captured. These questionnaires are reviewed by our General Counsel and ~~consolidated fixed charge covenants.~~
~~The Company had $19,700 of borrowings outstanding under~~any such transactions or other related person transactions are brought to the ~~revolving credit facility as of December 31, 2015. $25,000~~attention of the revolving credit facility is available to collateralize certain letters of credit, As of December 31, 2015, eight letters of credit in the amount of approximately $8,233 were outstanding. At December 31, 2015, the Company’s available credit under the revolving credit facility was $212,067.
~~The Company incurred fees of approximately $12,738 to refinance long-term debt during 2014. The Company has accounted for fees related to the refinancing of its long-term debt,~~Audit Committee as well as unamortized deferred financing fees related to the Credit Facility, under ASC 470-50 – Debt Modifications and Extinguishments. As both credit facilities were loan syndications, and a number of lenders participated in both credit facilities, the Company evaluated the accounting for financing fees on a lender by lender basis. Of the total amount of fees incurred for the refinancing of debt, approximately $5,224 was deferred as deferred financing fees or debt discount, and is amortized over the life of the loans, approximately $4,500 was deferred and fully expensed in the fourth quarter of 2014 in relation to bridge financing commitments and approximately $3,014 was immediately expensed in 2014. appropriate.

~~Related party u~~Transaction with CBIZ Benefits and Insurance Services, Inc.
We use CBIZ Benefits and Insurance Services, Inc., or CBIZ, a subsidiary of CBIZ, Inc., to administer and consult on our self-insured employee health benefits. For 2015, CBIZ and its subsidiaries received fees, paid by Providence of approximately $436,500, and commissions of approximately $169,000, paid by third parties related to business with Providence. Eric Rustand, the son of Warren Rustand, our former Chief Executive Officer, works for CBIZ. Eric Rustand, Senior Benefits Consultant for CBIZ, is the lead consultant on the employee health benefits plans for Providence. For 2015, Eric Rustand received approximately $106,000 in compensation from CBIZ related to CBIZ's business with Providence. Warren Rustand served as a member of the Board and as Chief Executive Officer of Providence until June 1, 2015. The business relationship between Providence and CBIZ existed prior to Warren Rustand becoming a member of the Board.
~~nsecured~~Unsecured Subordinated Bridge Note and Standby Purchase Agreement s~~ubordinated~~b~~ridge~~n~~ote~~

On October 23, 2014, ~~the Company~~we issued to Coliseum Capital Management, LLC and certain of its affiliates (“Coliseum”), a related party, a 14.0% Unsecured Subordinated Note in ~~the~~ aggregate principal amount of $65,500 (the “Note”) due September 30, 2018. Interest from the issuance date to, but excluding, the 120th day after the issuance date, was paid in cash in the amount of $3,015 on the issuance of the Note, of which $1,281 is included in “Prepaid expenses and other” in the consolidated balance sheet as of December 31, 2014. Coliseum held approximately 15% of the Company’s outstanding common stock as of October 23, 2014 and is the Company’s largest shareholder. Additionally, Christopher Shackelton, who serves on the Company’s board of directors, is also a Managing Partner at Coliseum Capital Management, LLC.
The Note was repaid in full on February 11, 2015, with the proceeds from a registered rights offering (“Rights Offering”) and a related standby purchase agreement. The Rights Offering allowed all of the Company’s existing common stock holders the non-transferrable right to purchase their pro rata share of $65,500 of convertible preferred stock at a price of $100 per share, as further described in Note 11,~~Convertible Preferred Stock, Net~~~~. As such, the Note was classified as a current liability at December 31, 2014.~~
11.  ~~Convertible Preferred Stock, Net~~
The Company completed a rights offering on February 5, 2015 providing all of the Company’s existing common stock holders the non-transferrable right to purchase their pro rata share of $65,500 of convertible preferred stock at a price equal to $100 per share. The convertible preferred stock is convertible into shares of Providence’s common stock at a conversion price equal to $39.88 per share, which was the closing price of the Company’s common stock on the NASDAQ Global Select Market on October 22, 2014.
Stockholders exercised subscription rights to purchase 130,884 shares of the Company's convertible preferred stock. Pursuant to the terms and conditions of the Standby Purchase Agreement (the “Standby Purchase Agreement”) between Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P. and Blackwell Partners, LLC (collectively, the "Standby Purchasers") and the Company, the remaining 524,116 shares of the Company's preferred stock were purchased by the Standby Purchasers at the $100 per share subscription price. The Company received $65,500 in aggregate gross proceeds from the consummation of the Rights Offering and Standby Purchase Agreement. Additionally, on March 12, 2015, the Standby Purchasers exercised their right to purchase an additional 150,000 shares of the Company’s convertible preferred stock, at a purchase price of $105 per share or a total purchase price of $15,750, of the same series and having the same conversion price as the convertible preferred stock sold in the Rights Offering.

The Company may pay a noncumulative cash dividend on each share of convertible preferred stock, if and when declared by its Board of Directors, at the rate of five and one-half percent (5.5%) per annum on the liquidation preference then in effect. On or before the third business day immediately preceding each fiscal quarter, the Company must determine its intention whether or not to pay a cash dividend with respect to that ensuing quarter and will give notice of its intention to each holder of convertible preferred stock as soon as practicable thereafter.
In the event the Company does not declare and pay a cash dividend, the Company will declare a paid in kind (“PIK”) dividend by increasing the liquidation preference of the convertible preferred stock to an amount equal to the liquidation preference in effect at the start of the applicable dividend period, plus an amount equal to the liquidation preference then in effect multiplied by eight and one-half percent (8.5%) per annum, computed on the basis of a 365-day year and the actual number of days elapsed from the start of the applicable dividend period to the applicable date of determination. All holders of the Company’s preferred stock are able to convert their preferred stock to shares of common stock at a rate of approximately 2.51 shares of common stock for each share of preferred stock. As of December 31, 2015, 1,482 shares of convertible preferred stock were converted to 3,715 shares of common stock.
Cash dividends are payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, which commenced on April 1, 2015, and, if declared, will begin to accrue on the first day of the applicable dividend period. PIK dividends, if applicable, will accrue and be cumulative on the same schedule as set forth above for cash dividends and will also be compounded at the applicable annual rate on each applicable subsequent dividend date. Cash dividends totaling $594, $1,104, $1,116, and $1,114 were paid to preferred stockholders on April 1, 2015, July 1, 2015, October 1, 2015 and January 1, 2016, respectively.
The convertible preferred stock is accounted for outside of stockholders’ equity as it could be redeemed upon certain change in control events that are not solely in the control of the Company. Dividends are recorded in stockholders’ equity and consist of the 5.5%/8.5% dividend. At the time of issuance of the preferred stock, the Company recorded a discount on preferred stock related to beneficial conversion features that arose due to the closing price of the Company’s common stock being higher than the conversion price of the convertible preferred stock on the commitment date. The amortization of this discount was recorded in stockholders’ equity. The discount was fully amortized as of December 31, 2015.
~~The following table summarizes the convertible preferred stock activity for 2015:~~

Dollar Value

Share Count

Beginning Balance
$ - -
Shares issued
81,250 805,000
Issuance costs
(3,531 ) -
Beneficial conversion feature
(1,071 ) -
Amortization of beneficial converstion feature
1,071 -
Conversion to common stock
(149 ) (1,482 )
Allocation of issuance costs
6 -
Ending Balance
$ 77,576 803,518
~~As of December 31, 2015, the 803,518 outstanding shares of convertible preferred stock are convertible into 2,014,840 shares of common stock.~~
12~~.    Stockholders’ Equity~~
The Company’s second amended and restated certificate of incorporation provides that the Company’s authorized capital stock consists of 40,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of convertible preferred stock, $0.001 par value per share.
At December 31, 2015 and 2014 there were 17,186,780 and 16,870,285 shares of the Company’s common stock issued, respectively, including 1,895,998 and 1,014,108 treasury shares at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014 there were 803,518 and 0 shares of convertible preferred stock issued and outstanding, respectively.

Subject to the rights specifically granted to holders of any then outstanding shares of the Company’s preferred stock, the Company’s common stockholders are entitled to vote together as a class on all matters submitted to a vote of the Company’s stockholders, and are entitled to any dividends that may be declared by the Company’s board of directors. The Company’s common stockholders do not have cumulative voting rights. Upon the Company’s dissolution, liquidation or winding up, holders of the Company’s common stock are entitled to share ratably in the Company’s net assets after payment or provision for all liabilities and any preferential liquidation rights of the Company’s preferred stock then outstanding. The Company’s common stockholders do not have preemptive rights to purchase shares of the Company’s stock. The issued and outstanding shares of the Company’s common stock are not subject to any redemption provisions and are not convertible into any other shares of the Company’s capital stock. The rights, preferences and privileges of holders of the Company’s common stock will be subject to those of the holders of any shares of the Company’s preferred stock the Company may issue in the future.
During the year ended December 31, 2014, the sellers of WCG International Consultants Ltd. (“WCG”) surrendered 39,162 exchangeable shares of PSC of Canada Exchange Corp. (“PSC”) to fulfill their obligation to the Company for the settlement of a dispute and the reimbursement of legal fees. These shares were converted to shares of the Company and transferred to treasury. Additionally, 222,532 exchangeable shares of PSC were exchanged into shares of common stock of the Company and distributed to the sellers of WCG, thus eliminating the related non-controlling interest balance as of December 31, 2014.
During the year ended December 31, 2014, the Company issued stock, with certain escrow restrictions, in conjunction with the acquisitions of Ingeus and Matrix. See additional information on these acquisitions in Note 21,~~Acquisitions~~.
~~The following table reflects the total number of shares of the Company’s common stock reserved for future issuance as of December 31, 2015:~~
~~Shares of common stock reserved for:~~
~~Exercise of stock options and restricted stock awards~~
~~556,461~~
~~Conversion of preferred stock to common stock~~
~~2,014,840~~
~~Issuance of Performance Restricted Stock Units~~
~~122,151~~
~~Total shares of common stock reserved for future issuance~~
~~2,693,452~~
~~Share Repurchases~~
On October 14, 2015, the Company entered into an agreement to repurchase 707,318 of its common stock held by former stockholders of Matrix for an aggregate purchase price of $29,000 (or $41.00 per share). The Company funded this purchase through a combination of borrowing on its revolving credit facility and cash on hand. The purchase of these shares was completed on October 30, 2015.
On November 4, 2015, the Company’s Board of Directors authorized the Company to engage in a common stock repurchase program to repurchase up to $70,000 in aggregate value of the Company’s common stock during the twelve-month period following November 4, 2015. As of December 31, 2015, the Company has spent approximately $5,111 to repurchase 109,150 shares.
During the years ended December 31, 2015, 2014 and 2013, the Company repurchased 15,961 shares, 18,504 shares and 27,964 shares, respectively, from employees to cover the settlement of income tax and related benefit withholding obligations arising from vesting of restricted stock awards. In addition, in 2015, the Company withheld 5,718 shares for the payment of the exercise price upon the exercise of stock options and 43,743 shares to cover the settlement of income tax and related benefit withholding obligations arising from shares held by employees that were released from escrow related to the Matrix acquisition, which shares are treated as treasury stock.
On February 1, 2007, the Company’s Board of Directors approved a stock repurchase program for up to one million shares of its common stock under which the Company spent approximately $14,376 to purchase 756,100 shares of its common stock in the open market since the inception of this stock repurchase program through December 31, 2012. No repurchases have been made since 2012. This program was formally terminated in January 2016.

13~~.    Stock-Based Compensation~~ ~~and Similar~~ ~~Arrangements~~
The Company provides stock-based compensation to employees, non-employee directors, consultants and advisors under the Company’s 2006 Long-Term Incentive Plan (“2006 Plan”). Upon stockholder approval in May 2006, the 2006 Plan replaced the former 1997 Stock Option and Incentive Plan (“1997 Plan”) and 2003 Stock Option Plan (“2003 Plan”). The 2003 Plan and the 1997 Plans have expired and no awards were outstanding under the plans as of December 31, 2015.
To achieve the purposes of the Company’s stock-based compensation program described above, the 2006 Plan allows the flexibility to grant or award stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units including restricted stock units and performance awards to eligible persons. The following table summarizes the activity under the 2006 Plan as of December 31, 2015:

Number of shares

Number of shares

of the Company's

of the Company's

common stock

common stock

remaining

Number of shares of the Company's

authorized for

available for

common stock subject to

issuance

future grants

Options

Stock Grants

2006 Plan
4,400,000 1,262,626 505,452 173,160
~~The following table reflects the amount of stock-based compensation, for share settled awards, recorded in each financial statement line item for the years ended December 31, 2015, 2014 and 2013:~~

Year ended December 31,

2015

2014

2013

Service expense
$ 21,588 $ 4,019 $ 1,054
General and administrative expense
5,027 3,537 1,421
Discontinued operations, net of tax
7 6 604
Total stock-based compensation
$ 26,622 $ 7,562 $ 3,079
~~Stock-based compensation included in service expense is related to the following segments:~~

Year ended December 31,

2015

2014

2013

NET Services
$ 724 $ 587 $ 1,054
WD Services (a)
20,756 3,432 -
HA Services
108 - -
Total stock-based compensation in service expense
$ 21,588 $ 4,019 $ 1,054
~~(a)~~
~~WD Services includes $16,078 related to the acceleration of awards pursuant to the separation agreement of two executives.~~
The amounts above exclude the tax benefit of approximately $2,322, $1,570 and $909 for the years ended December 31, 2015, 2014 and 2013, respectively. For the years ended December 31, 2015, 2014 and 2013, the amount of excess tax benefits resulting from the exercise of stock options was approximately $2,857, $2,722 and $1,120, respectively. For the years ended December 31, 2015, 2014 and 2013, the Company had tax shortfalls resulting from the exercise of stock options of approximately $151, $38 and $683, respectively. The excess tax benefits resulting from the exercise of stock options are reflected as cash flows from financing activities for the years ended December 31, 2015, 2014 and 2013 in the consolidated statements of cash flows.

~~Stock Options~~
  During the year ended December 31, 2015, the Company granted a total of 294,294 stock options under the 2006 Plan to purchase the Company’s common stock at exercise prices equal to the market value of the Company’s common stock on the date of grant. The options were granted to executive officers and certain key employees. As approved by the Compensation Committee of the Board of Directors, in order to promote stock ownership and align the goals of senior management with investors, the grants were comprised of 147,147 special stock options, and 147,147 matching stock options. The special stock options were immediately vested, but the life of the option was 10 days. Thus, the grantees had 10 days from the grant date to exercise the special stock options in a buy and hold transaction. If the grantees did not exercise their special stock options within the 10-day period, the options expired and an equal number of matching stock options were forfeited. The option exercise price for all options granted ranged from $44.17 to $45.59. A total of 33,957 special stock options were exercised, and 113,190 special stock options expired. 33,957 of matching stock options remain outstanding, and 113,190 were forfeited. The matching stock options cliff vest on the third anniversary of the grant date and expire five years after the grant date. However, the matching stock options are subject to forfeiture if the holder of the matching options sells any stock of the Company during the three year vesting period, subject to certain limited exceptions, on a one option for each share sold basis. The weighted-average fair value of these options totaled $8.77 per share.
~~The fair value of each stock option awarded is estimated on the date of grant using the Black-Scholes option-pricing formula based on the following assumptions:~~

Year ended December 31,

2015

2014

Expected dividend yield
0.0% 0.0%
Expected stock price volatility
33.84% - 46.14% 45.6% - 50.25%
Risk-free interest rate
0.35% - 1.35% 1.1% - 1.88%
Expected life of options 10 days - 4 years 3.25 - 5.47 years
The risk-free interest rate was based on the US Treasury security rate in effect as of the date of grant which corresponds to the expected life of the award. The expected lives of options and the expected stock price volatility were based on the Company’s historical data, or the Company’s best estimate where appropriate. The Company determined the expected life of the matching options granted in 2015 by using the mid-point of the vesting period and contractual life of the award, as the Company’s historical information did not provide a reliable expected life.
During the year ended December 31, 2015, the Company issued 196,823 shares of its common stock in connection with the exercise of employee stock options, including the 33,957 of special options exercises discussed above, under the Company’s 2006 Plan. In addition, during the year ended December 31, 2015, the Company issued 50,510 shares of its common stock in connection with the exercise of employee stock options under the 2003 Plan.

~~The following table summarizes the stock option activity for the year ended December 31, 2015:~~

Year ended December 31, 2015

Weighted-

Number

Weighted-

average

of Shares

average

Remaining

Aggregate

Under

Exercise

Contractual

Intrinsic

Option

Price

Term

Value

Balance at beginningof period
813,622 $ 30.77
Granted
294,294 44.28
Exercised
(247,333 ) 21.00
Forfeited/Cancelled
(213,691 ) 43.18
Expired
(113,440 ) 44.28
Shares modified and settled in cash
(28,000 ) 36.27
Outstanding at endof period
505,452 $ 34.84 3.8 $ 6,106
Vested or expected tovest at end of period
480,847 $ 34.68 3.8 $ 5,887
Exercisable at endof period
336,994 $ 32.77 3.9 $ 4,768
The weighted-average grant-date fair value for options granted, total intrinsic value and cash received by the Company related to options exercised during the years ended December 31, 2015, 2014 and 2013 were as follows:

Year ended December 31,

2015

2014

2013

Weighted-average grant date fair value
$ 8.77 $ 17.09
Not Applicable

Options exercised:

Total intrinsic value
$ 6,659 $ 9,107 $ 4,544
Cash received
$ 4,895 $ 11,019 $ 10,069
~~During 2013, no stock options were granted.~~
~~Stock Option Modification~~s
During the second quarter of 2015, Warren Rustand terminated his role as Chief Executive Officer (“CEO”) and board member of the Company, but remained employed as a Senior Advisor through the end of 2015. As a result of Mr. Rustand’s termination as CEO, a Separation Agreement was entered into between the Company and Mr. Rustand. As a result of this Separation Agreement, Mr. Rustand’s outstanding stock options from his grant of 200,000 stock options on September 11, 2014 were modified to accelerate the vesting date for the second tranche of options from June 30, 2015 to June 5, 2015, and the exercise period for all vested options of 133,332 was lengthened. As a result of the modifications to the terms of the original stock options granted to Mr. Rustand, the Company recognized additional stock-based compensation expense of $737 as of December 31, 2015.
Additionally, during the second half of 2015, in conjunction with the sale of the Human Services segment, the awards for 28,000 stock options were modified and resulted in these awards being settled in cash.
~~Restricted Stock Awards~~
During the year ended December 31, 2015, the Company granted 33,356 shares of restricted stock awards (“RSAs”) to non-employee directors of its board of directors, executive officers and certain key employees. The awards primarily vest in three equal installments on the first, second and third anniversaries of the date of grant, with the exception of one award which vests in three equal installments over an approximate seven-month vesting period.

During the year ended December 31, 2015, the Company issued 65,447 shares of its common stock to non-employee directors, executive officers and key employees upon the vesting of certain RSAs granted in 2015, 2014, 2013 and 2012 under the Company’s 2006 Plan. An additional 6,827 RSAs vested during the year but were not released to the participant due to an additional holding period required by the grant agreement. In connection with the vesting of these RSAs, 15,961 shares of the Company’s common stock were surrendered to the Company by the recipients to pay their associated taxes due to the federal and state taxing authorities during 2015. These shares were placed in treasury.
~~The following table summarizes the activity of the shares and weighted-average grant date fair value of the Company’s non-vested restricted common stock during the year ended December 31, 2015:~~

Weighted-average

grant date

Shares

fair value

Non-vested at beginning of period
91,347 $ 21.44
Granted
33,356 $ 50.51
Vested
(72,274 ) $ 21.71
Forfeited or cancelled
(8,247 ) $ 44.24
Non-vested at end of period
44,182 $ 38.67
As of December 31, 2015, there was approximately $2,307 of unrecognized compensation cost related to unvested share settled stock options and RSAs granted under the 2006 Plan. The cost is expected to be recognized over a weighted-average period of 1.79 years. The total fair value of stock options and RSAs vested was $3,709, $4,155 and $3,642 for the years ended December 31, 2015, 2014 and 2013, respectively.
~~Other Restricted Stock Award Grants~~
During the year ended December 31, 2014, the Board of Directors approved the grant of 596,915 RSAs to two individuals in connection with the Ingeus acquisition. The grants were made outside of the 2006 Plan, as they were related to the acquisition. However, since the term of the awards provided for vesting based on continued employment, the awards were accounted for as stock-based compensation. The shares necessary to settle these awards were placed in an escrow account in 2014, and were releasable from escrow in accordance with the vesting of the awards. Per the original terms of the agreements, the awards vested upon continued employment of the grantees, in four equal installments on the anniversary date of the grant. However, on October 15, 2015, the Company entered into Settlement Deeds whereby the executives’ employment was terminated by mutual agreement and vesting was no longer based upon continued employment. The Company recognized approximately $16,078 in stock-based compensation expense at the time of the modification, which otherwise would have been recognized over the remainder of the vesting period. Additionally, the Company recognized accelerated deferred compensation expense of $4,714 related to the Settlement Deeds. As of December 31, 2015, 447,686 underlying shares to settle the awards are held in the escrow account.
~~Performance~~~~Restricted Stock~~~~Units~~
The Company had 122,151 performance restricted stock units (“PRSUs”) outstanding at December 31, 2015. These awards will vest upon meeting certain performance criteria over a set performance period. 99,979 of the outstanding PRSUs at December 31, 2015 have a performance criteria tied to the Company’s return on equity (“ROE”), with performance periods ending on December 31, 2015, 2016 and 2017. The grantees will earn 33% of PRSUs granted if the ROE is 12% but less than 15%, and 100% of the PRSUs granted if the ROE is 15% or more. 22,172 of the outstanding PRSUs at December 31, 2015 have a performance criteria tied to the NET Services segment’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) and the Company’s EBITDA performance with performance periods ending on December 31, 2015, 2016 and 2017. Compensation expense related to these awards totaled $613, ($162) and $162 for the years ended December 31, 2015, 2014 and 2013, respectively.

~~Cash Settled Awards~~
During the years ended December 31, 2015 and 2014, respectively, the Company issued 4,000 and 6,195 stock equivalent units (“SEUs”), which settle in cash, to Coliseum Capital Partners, L.P., in lieu of a grant to Christopher Shackelton, Chairman of the Board of Directors, that vest one-third upon each anniversary of the vesting date. The fair value of the SEUs is based on the closing stock price on the last day of the period and the completed requisite service period. During the year ended December 31, 2014, the Company issued 200,000 stock option equivalent units (“SOEUs”), with an exercise price of $43.81 per share, which settle in cash, to Coliseum Capital Partners, L.P in lieu of a grant to Mr. Shackelton. This award vests one-third upon grant, one-third on June 30, 2015 and one-third on June 30, 2016. No additional SOEUs were granted during the year ended December 31, 2015. For the SEUs, the Company recorded approximately $588 and $375 of expense during the years ended December 31, 2015 and 2014, respectively. For the SOEUs, the Company recorded $1,888 and $1,249 of expense during the years ended December 31, 2015 and 2014, respectively. The expense is included in “General and administrative expense” in the consolidated statements of income. The fair value of the unvested SEUs was determined based on the Company’s closing stock price on December 31, 2015. The fair value of the SOEUs was estimated as of December 31, 2015 and 2014 using the Black-Scholes option-pricing formula and amortized over the option’s graded vesting periods with the following assumptions:

Year ended December 31,

2015

2014

Expected dividend yield
0.0% 0.0%
Expected stock price volatility
43.75% - 45.30% 46.75% - 50.1%
Risk-free interest rate
1.24% - 1.70% 1.3% - 1.76%
Expected life of options (in years)
2.75 - 4.75 3.75 - 5.75
As of December 31, 2015, the Company had a short-term liability of $3,555 in “Accrued expenses” in the consolidated balance sheet related to unexercised vested and non-vested cash settled share-based payment awards. The cash settled share-based compensation expense in total excluded a tax benefit of approximately $990 and $650 for the years ended December 31, 2015 and 2014, respectively. The unrecognized compensation cost is expected to be recognized over a weighted average period of .52 years; however, the total expense will continue to be adjusted for the unexercised vested SOEUs until they are exercised.
~~Holdco Long-Term Incentive Plan~~
On August 6, 2015 (the “Award Date”), the Compensation Committee of the Board of Directors adopted the 2015 Holding Company LTI Program (the “HoldCo LTIP”) under the 2006 Plan. The LTIP is designed to provide long term performance based awards to certain executive officers of Providence. Under the program, executives will receive shares of Providence common stock based on the shareholder value created in excess of an 8.0% compounded annual return between the Award Date and December 31, 2017 (the “Extraordinary Shareholder Value”). The Award Date value is calculated on the basis of the Providence stock price equal to the volume weighted average of the common share price over a 90-day period ending on the Award Date. The value as of December 31, 2017 will be calculated on the basis of a similar 90-day volume weighted average common share price. A pool for use in the allocation of awards will be created equal to 8.0% of the Extraordinary Shareholder Value. Participants in the HoldCo LTIP will receive a percentage allocation of any such pool and, following determination of the size of the pool, will be entitled to a number of shares equal to their pro rata portion of the pool divided by the volume weighted average of the Company’s per share price over the 90-day period ending on December 31, 2017. Of the shares allocated, 60% will be issued to the participant on or shortly following determination of the pool, 25% will vest and be issued on the one-year anniversary of such determination date, subject to continued employment, and the remaining 15% will be issued on the second anniversary of the determination date, subject to continued employment. As of December 31, 2015, 85% of the award pool had been granted to executives and approximately $1,353 of expense is included in “General and administrative expense” in the consolidated statements of income for the year ended December 31, 2015. As of December 31, 2015, there was approximately $8,257 of unrecognized compensation cost related to non-vested Holdco LTIP shares granted under the 2006 Plan. The cost is expected to be recognized over a weighted-average period of 2.55 years. These awards are equity classified and the fair value of the awards was calculated using a Monte-Carlo simulation valuation model.

~~14.~~~~Vertical Long-Term Incentive Plan~~
The Company established new Long-Term Incentive Plans (“Vertical LTIPs”) for the Company’s three operating segments, or verticals, during the fourth quarter of 2015. The three plans are consistent in their basic terms, but each have been customized for specific aspects of the associated vertical. The awards pay in cash, however up to 50% of the award may be paid in unrestricted stock if the recipient elects this option when the Vertical LTIP offer letter is received. In addition, at the discretion of the Company, the recipients may be able to elect unrestricted stock in lieu of cash compensation at a later date. The baseline value is six times the starting Adjusted EBITDA for the vertical plus the investment made in any equity method joint ventures. The determination date is December 31, 2017. The amount of money in the Vertical LTIP pool is set as of the determination date and is equal to the sum of the Value Creation Pool (including any Acquisition Value Creation Pool) and the Free Cash Flow (“FCF”) Pool (whether positive or negative). The Valuation Creation Pool is an amount determined by the Administrator according to a set table based on the vertical’s compound annual growth rate (“CAGR”) of adjusted EBITDA as applied by the Administrator to the baseline value. The FCF Pool is the product of the vertical’s FCF for the performance period and the percentage used to determine the Value Creation Pool (i.e., the Value Creation Pool divided by the lesser of the Value Created, or the value created over the baseline value when increased by 40% compound annual growth in Adjusted EBITDA). The participation percentage awarded at the effective date of each plan was set at 80%. Future participants may be added to each plan, however, the total payout cannot exceed 100% of the pool. The Company’s Adjusted EBITDA Margin, for the twelve-month period beginning on either October 1, 2015, January 1, 2016 or January 1, 2017 must be equal to or exceed two percent for an amount to be payable under each of the Vertical LTIPs. The awards vest in three installments: 60% of the award will pay out immediately following December 31, 2017, 25% one year following the performance period (i.e. December 31, 2018) and 15% two years following the performance period (i.e. December 31, 2019). Payout is subject to the employee remaining employed by the Company. For the year ended December 31, 2015, approximately $575 of expense is included in “Service expense” in the consolidated statements of income related to this plan.

15~~.    Earnings Per Share~~
~~The following table details the computation of basic and diluted earnings per share:~~

Year ended December 31,

2015

2014

2013

Numerator:

Net income attributable to Providence
$ 83,696 $ 20,275 $ 19,438
Less dividends on convertible preferred stock
(3,935 ) - -
Less accretion of convertible preferred stock discount
(1,071 ) - -
Less income allocated to participating securities
(10,089 ) - -
Net income available to common stockholders
$ 68,601 $ 20,275 $ 19,438

Continuing operations
$ (23,110 ) $ 23,917 $ 13,105
Discontinued operations
91,711 (3,642 ) 6,333
$ 68,601 $ 20,275 $ 19,438

Denominator:

Denominator for basic earnings per share --weighted-average shares
15,960,905 14,765,303 13,499,885
Effect of dilutive securities:

Common stock options
- 236,538 292,937
Performance-based restricted stock units
- 16,720 17,052
Denominator for diluted earnings per share -- adjustedweighted-average shares assumed conversion
15,960,905 15,018,561 13,809,874

Basic earnings (loss) per share:

Continuing operations
$ (1.45 ) $ 1.62 $ 0.97
Discontinued operations
5.75 (0.25 ) 0.47
$ 4.30 $ 1.37 $ 1.44
Diluted earnings (loss) per share:

Continuing operations
$ (1.45 ) $ 1.59 $ 0.95
Discontinued operations
5.75 (0.24 ) 0.46
$ 4.30 $ 1.35 $ 1.41
The accretion of convertible preferred stock discount in the table above related to a beneficial conversion feature of the Company’s convertible preferred stock that was fully amortized as of June 30, 2015. Income allocated to participating securities is calculated by allocating a portion of net income less dividends on convertible stock and amortization of convertible preferred stock discount to the convertible preferred stock holders on a pro-rata basis; however, the convertible preferred stockholders are not required to absorb losses.
For the years ended December 31, 2015, 2014 and 2013, employee stock options to purchase 19,226, 92,054 and 452,421 shares, respectively, of common stock were not included in the computation of diluted earnings per share as the exercise prices of these options was greater than the average fair value of the common stock for the period and, therefore, the effect of these options would have been anti-dilutive. For the year ended December 31, 2015, 700,241 shares of convertible preferred stock were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. Additionally, for the year ended December 31, 2015, employee stock options to purchase 154,699 shares of common stock were not included in the computation of diluted earnings as the Company recorded a net loss available to common stockholders from continuing operations for the current year and as such, all potentially dilutive securities were anti-dilutive. The effect of issuing 1,139,145 shares of common stock on an assumed conversion basis related to the 6.5% Convertible Senior Subordinated Notes due in 2014 (“Senior Notes”) was not included in the computation of diluted earnings per share for the years ended December 31, 2013 as it would have been antidilutive.

16~~.    Leases~~
The Company has non-cancellable contractual obligations in the form of operating leases for office space, related office equipment and other facilities. The leases expire in various years and generally provide for renewal options. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.
The operating leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Several of these lease agreements contain provisions for periods in which rent payments are reduced. The total amount of rental payments due over the lease term is being charged to rent expense on a straight-line basis over the term of the lease. The difference between rent expense recorded and the amount paid, for continuing operations, as of December 31, 2015 and 2014 was approximately $2,190 and $1,645, respectively, and is included in "Other long-term liabilities” in the consolidated balance sheets. Also, the lease agreements generally require the Company to pay executory costs such as real estate taxes, insurance, and repairs.
~~Future minimum payments under non-cancelable operating leases for equipment and property with initial terms of one year or more consisted of the following at December 31, 2015:~~

Operating

Leases

2016
$ 25,864
2017
14,578
2018
10,690
2019
7,837
2020
5,566
Thereafter
9,034
Total future minimum lease payments
$ 73,569
~~Rent expense for continuing operations related to operating leases was approximately $38,272, $17,042 and $8,279, for the years ended December 31, 2015, 2014 and 2013, respectively.~~
17~~.    Retirement Plan~~
The Company maintains a qualified defined contribution plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (“IRC”), for all employees of its NET Services operating segment and corporate personnel. The Company, at its discretion, may make a matching contribution to the plan. Any matching contributions vest over five years. Unvested matching contributions are forfeitable upon employee termination. Employee contributions are fully vested and non-forfeitable. The Company’s contributions to the plan for continuing operations were approximately $221, $180 and $153, for the years ended December 31, 2015, 2014 and 2013, respectively.
The Company also maintains defined contribution plans, for the benefit of eligible HA Services’ employees under the provision of Section 401(k) of the IRC. The Company, at its discretion, may make a matching contribution to the plan. Any matching contributions vest over three years. Unvested matching contributions are forfeitable upon employee termination. Employee contributions are fully vested and non-forfeitable. The Company’s contributions to these plans were approximately $1,257 and $299 for the years ended December 31, 2015 and 2014, respectively.
WD Services’ employees are entitled to benefits under certain retirement plans. The WD Services’ segment has separate plans in each country it operates. The defined contribution plans receive fixed contributions from WD Services’ companies and the legal or constructive obligation is limited to these contributions. The Company’s contributions to these defined contribution plans were approximately $10,331, $2,424 and $20 for the years ended December 31, 2015, 2014 and 2013, respectively.
On August 31, 2007, the Board adopted The Providence Service Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”) for the Company’s eligible employees and independent contractors of a participating employer (as defined in the Deferred Compensation Plan). Under the Deferred Compensation Plan participants were able to defer all or a portion of their base salary, service bonus, performance-based compensation earned in a period of 12 months or more, commissions and, in the case of independent contractors, compensation reportable on Form 1099. This plan was terminated in December 2015.

The Company also maintains a 409 (A) Deferred Compensation Rabbi Trust Plan for highly compensated employees of NET Services. This plan was put in place to compensate for the inability of highly compensated employees to take full advantage of the Company’s 401(k) plan. Additional information is included in Note 19,~~Commitments and Contingencies~~.
18~~.    Income Taxes~~
~~The following table summarizes our US and foreign income (loss) from continuing operations before income taxes:~~

Year ended December 31,

2015

2014

2013

US
$ 51,362 $ 16,151 $ 19,466
Foreign
(53,692 ) 15,856 264
Total
$ (2,330 ) $ 32,007 $ 19,730
~~The federal and state income tax provision is summarized as follows:~~

Year ended December 31,

2015

2014

2013

Federal:

Current
$ 16,595 $ 8,189 $ 8,888
Deferred
(321 ) (1,619 ) (2,662 )
16,274 6,570 6,226
State:

Current
$ 2,174 $ 2,644 $ 829
Deferred
(594 ) (1,104 ) (412 )
1,580 1,540 417
Foreign:

Current
$ 523 $ (616 ) $ (19 )
Deferred
(2,101 ) 596 1
(1,578 ) (20 ) (18 )

Total provision for income taxes
$ 16,276 $ 8,090 $ 6,625

          A reconciliation of the provision for income taxes with amounts determined by applying the statutory US federal income tax rate to income (loss) from continuing operations before income taxes is as follows:

Year Ended December 31,

2015

2014

2013

Federal statutory rates
35 % 35 % 35 %
Federal income tax atstatutory rates
$ (816 ) $ 11,203 $ 6,905
Change in valuation allowance
3,812 1,813 -
Change in uncertain tax positions
236 (1,681 ) -
State income taxes, net offederal benefit
759 1,342 340
Difference between federal statutoryand foreign tax rate
4,642 (353 ) 15
Stock compensation
(184 ) (524 ) (862 )
Meals and entertainment
260 157 61
Amortization of deferred consideration
9,444 1,574 -
Transaction costs
(447 ) 1,769 -
Contingent consideration liability reversal
(854 ) (5,748 ) -
Nontaxable interest income
(965 ) (660 ) -
Tax credits
(1,065 ) - -
Legal expense
284 - -
Depreciation
649 - -
Equity in net loss of investee
366 - -
Other
155 (802 ) 166
Provision for income taxes
$ 16,276 $ 8,090 $ 6,625
Effective income tax rate
(699 )% 25 % 34 %
The Company recognized an income tax provision for the year ended December 31, 2015 despite having a loss from continuing operations before income taxes. Because of foreign net operating losses (including equity investee losses) for which the future income tax benefit currently cannot be recognized and non-deductible expenses such as amortization of deferred consideration related to the Ingeus acquisition, the Company recognized estimated taxable income upon which the estimate income tax provision for financial reporting is calculated.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

December 31,

2015

2014

Deferred tax assets:

Net operating loss carryforwds
$ 18,357 $ 21,746
Tax credit carryforwards
1,093 2,288
Accounts receivable allowance
829 3,835
Accrued items and reserves
15,877 4,164
Stock compensation
3,226 2,043
Deferred rent
858 717
Deferred financing costs
127 906
Deferred revenue
- 320
Other
582 181
40,949 36,200
Deferred tax liabilities:

Prepaids
1,181 1,698
Property and equipment depreciation
6,441 2,375
Goodwill and intangibles amortization
97,926 111,120
Other
273 165
105,821 115,358
Net deferred tax liabilities
(64,872 ) (79,158 )
Less valuation allowance
(22,683 ) (13,622 )
Net deferred tax liabilities
$ (87,555 ) $ (92,780 )
Current deferred tax assets, net of valuation allowance of $583and $2,811 for 2015 and 2014, respectively
$ 5,877 $ 4,148
Net noncurrent deferred tax assets, net of valuation allowance of$21,513 for 2015
42 -
Net noncurrent deferred tax liabilities, net of valuation allowanceof $587 and $10,811 for 2015 and 2014, repectively
(93,474 ) (96,928 )
$ (87,555 ) $ (92,780 )
          At December 31, 2015, the Company had approximately $578 of federal net operating loss carryforwards which expire in years 2018 through 2035, and $12,239 of state net operating loss carryforwards which expire as follows:
2016
$ 1,469
2017
-
2018
69
2019
-
2020
-
Thereafter
10,701
$ 12,239
~~The Company had net operating loss carryforwards in the following countries which can be carried forward indefinitely:~~
Australia
$ 42,349
Canada
241
France
3,998
Sweden
1,251
UK
2,886
~~In addition, affiliates of Matrix file separate tax returns and have federal and state net operating loss carryforwards of $2,541 and $1,989, respectively, which expire in years 2019 through 2035.~~
          Realization of the Company’s net operating loss carryforwards is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized, to the extent they are not covered by a valuation allowance. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The net change in the total valuation allowance for the year ended December 31, 2015 was $9,061, of which $3,812 related to current operations and $5,249 related to the adjustment of Ingeus and Matrix balances upon acquisition. The valuation allowance includes $21,513 primarily for Australia and France net operating loss carryforwards, and $1,170 for federal and state net operating loss and tax credit carryforwards for which the Company has concluded that it is more likely than not that these net operating loss and tax credit carryforwards will not be realized in the ordinary course of operations. The Company will continue to assess the valuation allowance, and to the extent it is determined that the valuation allowance should be changed, an appropriate adjustment will be recorded.
The Company recognized certain excess tax benefits related to stock option plans for the years ended December 31, 2015, 2014 and 2013 in the amount of $2,857, $2,722 and $1,120, respectively. Such benefits were recorded as a reduction of income taxes payable and an increase in additional paid-in-capital and are included in “Exercise of employee stock options” in the accompanying statements of stockholders’ equity and comprehensive income.
The Company recognized a tax shortfall related to stock option plans for the years ended December 31, 2015, 2014 and 2013 in the amount of $151, $38 and $683, respectively. This was recorded as a reduction of deferred tax assets and a decrease to additional paid-in-capital and is included in “Exercise of employee stock options” in the accompanying statements of stockholders’ equity and comprehensive income.
           The Company expects no material amount of the unrecognized tax benefits to be recognized during the next twelve months. The Company recognizes interest and penalties as a component of income tax expense. During the years ended December 31, 2015, 2014 and 2013, the Company recognized approximately $27, $14 and $76, respectively, in interest and penalties. The Company had approximately $48 and $24 for the payment of penalties and interest accrued as of December 31, 2015 and 2014, respectively. A reconciliation of the liability for unrecognized income tax benefits is as follows:

December 31,

2015

2014

2013

Unrecognized tax benefits, beginning of year
$ 1,165 $ 414 $ 254
Balance upon acquisition
(51 ) 2,432
Increase (decrease) related to prior year positions
(75 ) 14 82
Increase related to current year tax positions
389 160 78
Statute of limitations expiration
(77 ) (1,855 ) -
Unrecognized tax benefits, end of year
$ 1,351 $ 1,165 $ 414
           The Company is subject to taxation in the US and various foreign and state jurisdictions. The statute of limitations is generally three years for the US, two to five years in foreign countries and between three and four years for the various states in which the Company operates. The Company is subject to the following material taxing jurisdictions: US, United Kingdom, Australia, France, Saudi Arabia and Korea. The tax years that remain open for examination by the US and various foreign countries and states principally include the years 2011-2015.
19~~.    Commitments and Contingencies~~
~~Legal~~~~proceedings~~
On June 15, 2015, a putative stockholder class action derivative complaint was filed in the Court of Chancery of the State of Delaware, (the “Court”), captioned Haverhill Retirement System v. Kerley et al., C.A. No. 11149-VCL. The complaint names Richard A. Kerley, Kristi L. Meints, Warren S. Rustand, Christopher Shackelton (the “Individual Defendants”) and Coliseum Capital Management, LLC (“Coliseum”) as defendants, and the Company as a nominal defendant. The complaint purported to allege that the dividend rate increase term originally in the Company’s outstanding convertible preferred stock was an impermissibly coercive measure that impaired the voting rights of the Company’s stockholders in connection with the vote on the removal of certain voting and conversion caps previously applicable to the preferred stock (the “Caps”), and that the Individual Defendants breached their fiduciary duties by approving the dividend rate increase term and attempting to coerce the stockholder vote relating to the Company’s preferred stock, and by failing to disclose all material information necessary to allow the Company’s stockholders to cast an informed vote on the Caps. The complaint also purports to allege derivative claims alleging that the Individual Defendants breached their fiduciary duties to the Company by entering into the subordinated note and standby agreement with Coliseum, and granting Coliseum certain stock options. The complaint further alleges that Coliseum has aided and abetted the Individual Defendants in breaching their fiduciary duties and that demand on the Board is excused as futile. The complaint sought, among other things, an injunction prohibiting the stockholder vote relating to the dividend rate increase, a finding that the Individual Defendants are liable for breaching their fiduciary duties to the Company and the Company’s stockholders, a finding that Coliseum is liable for aiding and abetting the Individual Defendant’s breaches of their fiduciary duties, a finding that Coliseum is liable for unjust enrichment, a finding that demand on the Board is excused as futile, a revision or rescission of the terms of the subordinated note and preferred stock as necessary and/or appropriate, a requirement for the Company to reform its corporate governance profile to protect against future misconduct similar to that alleged by the putative stockholder class, a certification of the putative stockholder class, compensatory damages, together with pre- and post-judgment interest, costs and disbursements (including expenses, attorneys’ and experts’ fees), and any other and further relief as is just and equitable.

On August 31, 2015, after arms’ length negotiations, the parties reached an agreement in principle and executed a memorandum of understanding providing for the settlement of claims concerning the dividend rate increase term and stockholder vote and related disclosure. The Memorandum of Understanding stated that the Defendants have entered into the partial settlement of the litigation solely to eliminate the distraction, burden, expense, and potential delay of further litigation involving claims that have been settled. Pursuant to the partial settlement, the Company agreed to supplement the disclosures in its definitive proxy statement on Schedule 14A (“Definitive Proxy Statement”), Coliseum and certain of its affiliates and the Company entered into an amendment tothat certainSeries A Preferred Stock Exchange Agreement, by and among Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P., Blackwell Partners, LLC, and The Providence Service Corporation dated as of February 11, 2015 described in the Definitive Proxy Statement, and the Board of Directors of the Company agreed to adopt a policy related to the Board’s determination each quarter as to whether the Company should pay cash dividends or allow dividends to be paid in the form of PIK dividends on the preferred stock, as further described in the supplemental proxy disclosures. On September 2, 2015, Providence issued supplemental disclosures through a Supplement to the Proxy Statement. On September 16, 2015, Providence stockholders approved the removal of the Caps.
The settlement provided for, among other things, the release of any claims based on alleged coercion and disclosure related to the stockholder vote on the removal of the Caps. On November 13, 2015, the Court issued an order setting out the schedule related to application for court approval of the proposed settlement and plaintiffs’ counsel’s request for attorneys’ fees and expenses related to the settlement as provided for in the MOU. The Company provided notice of the proposed partial settlement to Providence’s shareholders by December 11, 2015. At a hearing on February 9, 2016, the court denied approval of the settlement. The Court indicated that plaintiff’s counsel could petition the Court for a mootness fee, and that defendants would have the opportunity to oppose any such application.
On January 12, 2016, plaintiff filed a verified amended class action and derivative complaint. In addition to the defendants named in the earlier complaint, the amended complaint names David Shackelton, Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Blackwell Partners, LLC, Coliseum Capital CO-Invest, L.P. (collectively, and together with Coliseum Capital Management, LLC, “Coliseum”) and RBC Capital Markets, LLC, (“RBC Capital Markets”) as additional defendants. The amended complaint purports to allege direct and derivative claims for breach of fiduciary duty against some or all of the Individual Defendants and David Shackelton(collectively, the “Amended Individual Defendants”)regarding the approval of the subordinated note, the rights offering, standby agreement with Coliseum, and grant to Coliseum of certain stock options. The amended complaint also purports to allege an additional derivative claim for unjust enrichment against Coliseum regarding the subordinated note, the rights offering, and standby agreement with Coliseum, and stock options. The amended complaint further alleges that Coliseum and RBC Capital Markets has aided and abetted the Amended Individual Defendants in breaching their fiduciary duties and that demand on the Board is excused as futile.
The amended complaint seeks (a) findings that (i) the Amended Individual Defendants are liable for breaching their fiduciary duties to the Company and the putative stockholder class, (ii) Coliseum and RBC Capital are liable for aiding and abetting such alleged breaches of fiduciary duties, (iii) Coliseum is liable for unjust enrichment, (iv) certain stock options awarded to Coliseum were the product of waste, and (iv) demand on the Board is excused as futile, (b) revision or rescission of the terms of the subordinated note and preferred stock as necessary and/or appropriate, (c) a requirement that the Company reform its corporate governance profile to protect against future misconduct similar to that alleged by the putative stockholder class, (d) certification of the putative stockholder class, (e) compensatory damages, together with pre- and post-judgment interest, costs and disbursements (including expenses, attorneys’ and experts’ fees), and (f) any other and further relief as is just and equitable.

The Company has recorded approximately $1,435 in legal expenses, $1,275 in settlement expenses and $310 of indemnified legal expenses of the Standby Purchasers as set forth in the Standby Purchase Agreement related to this case. Additionally, the Company recorded an offsetting receivable of approximately $2,210 in “Other receivables” in the consolidated balance sheet at December 31, 2015, which is expected to be reimbursed through insurance proceeds.
In addition to the matter described above, in the ordinary course of business, we are a party to various lawsuits. Management does not expect these lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Providence. We also evaluate other potential contingent matters, including ongoing matters of our acquired companies which arose prior to our date of purchase. Our indemnification agreements or other agreements may not protect us from liability, even though the matter occurred prior to our ownership of the Company.As of December 31, 2015, HA Services has certain malpractice claims which arose prior to our date of purchase. We believe it is reasonably possible that a loss has occurred; however, we are not able to reliably estimate the amount of loss.We do not believe the aggregate amount of liability that could be reasonably possible with respect to these matters would have a material adverse effect on our financial results; however, litigation is inherently uncertain and the actual losses incurred in the event that our legal proceedings were to result in unfavorable outcomes could have a material adverse effect on our business and financial performance.
~~Indemnifications~~
           The Company has provided certain standard indemnifications in connection with the sale of the Human Services segment. All representation and warranties made by the Company in the Membership Interest Purchase Agreement (the “Purchase Agreement”) to sell the Human Services segment survive through the 15^th month following the closing date. However, certain representations, including tax representations, survive until the expiration of applicable statutes of limitation, and healthcare representations survive until the third anniversary of the closing date. The Company is not aware of any indemnification liabilities that require accrual at December 31, 2015.
The Company has indemnified the Standby Purchasers from and against any and all losses, claims, damages, expenses and liabilities relating to or arising out of (i) any breach of any representation, warranty, covenant or undertaking made by or on behalf of the Company in the Standby Purchase Agreement and (ii) the transactions contemplated by the Standby Purchase Agreement and the Note (as defined in Note 20), except to the extent that any such losses, claims, damages, expenses and liabilities are attributable to the gross negligence, willful misconduct or fraud of such Standby Purchaser. During the year ended December 31, 2015, $310 of indemnified legal expenses of the Standby Purchasers have been expensed by the Company as further discussed above.
~~Deferred Compensation Plan~~
The Company has one deferred compensation plan for management and highly compensated employees of NET Services as of December 31, 2015. The deferred compensation plan is unfunded, and benefits are paid from the general assets of the Company. As of December 31, 2014, the Company had two deferred compensation plans for employees of NET Services and Human Services, which was sold in 2015. The total of participant deferrals, which is reflected in “Other long-term liabilities” in the consolidated balance sheets, was approximately $1,600 and $1,432 at December 31, 2015 and 2014, respectively.
20~~.    Transactions with Related Parties~~
On October 23, 2014, the Company issued to Coliseum Capital Management, LLC and certain of its affiliates (“Coliseum LLC”) a 14.0% Unsecured Subordinated Note in aggregate principal amount of $65,500$65,500,000 (the “Note”). Interest from the issuance date to, but excluding, the 120th day after the issuance date, was paid in cash in the amount of ~~$3,015~~$3,014,795 on the issuance of the Note. ~~Coliseum LLC held approximately 15% of our outstanding common stock as of October 23, 2014 and is the Company’s largest shareholder. Additionally,~~ Christopher Shackelton, who serves as our Chairman of the ~~board~~Board of ~~directors,~~Directors, is also a Managing Partner at Coliseum Capital Management, LLC.
The Note was repaid in full on February 11, 2015, with the proceeds from a registered ~~rights offering~~Rights Offering (“Rights Offering”) and related standby purchase commitment, ~~(“Rights Offering” described in Note 11,~~~~Convertible Preferred Stock, Net~~), which allowed all of the Company’s existing common ~~stock holders~~stockholders the non-transferrable right to purchase their pro rata share of ~~$65,500~~$65,500,000 of convertible preferred stock at a price of ~~$100~~$100.00 per ~~share.~~share, as further described below.

In connection with the anticipated Rights Offering, on October 23, 2014, the Company entered ~~the Standby~~into a standby purchase agreement (the “Standby Purchase ~~Agreement~~Agreement”) with ~~the Standby Purchasers,~~Coliseum, pursuant to which ~~the Standby Purchasers~~Coliseum agreed to purchase, substantially simultaneously with the completion of the Rights Offering, in the aggregate, all of the available preferred stock not otherwise sold in the Rights Offering following the exercise of the subscription privileges of holders of the Company’s common stock. As consideration for entering into the Standby Purchase Agreement, on October 23, 2014, the Company paid ~~the Standby Purchasers~~Coliseum a fee of ~~$2,947, which are partially treated as issuance costs and thus included in “Convertible preferred stock, net” in the consolidated balance sheet at December 31, 2015.~~$2,947,000. In addition, ~~the Standby Purchasers had the~~Coliseum’s right, exercisable within 30 days following the completion of the Rights Offering, to purchase ~~150,000~~ additional ~~shares of~~ preferred stock valued at $15,000,000 at a price per share equal to 105% of ~~$105 per share, which~~the Subscription Price, was exercised on March 12, 2015. ~~Preferred stock dividends earned by Coliseum during the year ended December 31, 2015 totaled $3,739.~~

~~The~~Employment of David Shackelton
David Shackelton, the brother of Christopher Shackelton, the Chairman of the Board of Providence, is currently employed by the Company ~~also incurred legal expenses under an indemnification agreement with~~as Chief Financial Officer, or CFO, and reports to our Chief Executive Officer. In 2015, David Shackelton’s total compensation, including the ~~Standby Purchasers as further discussed~~grant date fair value of equity awards, was $3,249,337. David Shackelton’s compensation for 2015 is more fully described above in ~~Note 19,~~~~Commitments~~the Summary Compensation Table and ~~Contingencies~~.the accompanying explanatory tables.
Independence of the Board

The ~~Company operates a call center in Phoenix, Arizona. The building in which~~Board believes that independence depends not only on our director’s individual relationships, but also on the ~~call center~~Board’s overall attitude. Providing objective, independent judgment is ~~located was leased to~~at the ~~Company from VWP McDowell, LLC (“McDowell”) until July 2014, at which time McDowell sold its interest in the property. Certain immediate family members~~core of the ~~Chief Executive Officer~~Board’s oversight function. Under our corporate governance guidelines, the Board, with the assistance of ~~NET Services had~~legal counsel and the Nominating and Governance Committee, uses the current standards for “independence” established by NASDAQ to evaluate any material relationship a ~~partial ownership interest in McDowell. In~~director may have with Providence to determine director independence. A director is not considered “independent” unless the ~~aggregate these family members owned an approximate 13% interest in McDowell directly and indirectly through a trust. For 2014 and 2013,~~Board affirmatively determines that the ~~Company expensed approximately $234 and $412, respectively, in lease payments to McDowell.~~
~~21. Acquisitions~~
~~Ingeus~~
On May 30, 2014, the Company acquired all of the outstanding equity of Ingeus, a workforce development and outsourced services company and a market leader in outsourced employability programs, operating in the social improvement, employment, offender rehabilitation and welfare services markets. Ingeusdirector has operations in 10 countries and four continents. The acquisition expanded the Company’s presence into international markets, diversified its customer base, and enhanced its workforce development expertise globally.
The purchase price was comprised of (i) a GBP £35,000, plus adjustments, cash payment on May 30, 2014 ($92,279, after increase for customary adjustments), (ii) contingent consideration of up to GBP £75,000 ($125,978), payable over a five year period, based on the achievement of certain Ingeus milestones, including the achievement of certain levels of Ingeus’s earnings before interest, taxes, depreciation and amortization and other defined criteria and (iii) contingent consideration of £5,000 ($8,399) upon successful award of a specified customer contract. In addition, on May 30, 2014, the Company issued restricted shares of the Company’s common stock and agreed to make cash payments to the former shareholders, including two employees, of Ingeusno material relationship with a combined value of GBP £14,346 ($24,097), subject to a vesting schedule of 25% per year over a four-year period which is accounted for as a compensatory arrangement. The foreign currency translations above were based on the conversion rate on May 30, 2014.
~~The Company incurred acquisition and related costs of $4,311 during the year ended December 31, 2014, which are included in “General and administrative expenses”~~Providence or any subsidiary in the consolidated ~~statements~~group other than as a director of ~~income.~~
~~The final purchase price~~another board of ~~Ingeus is calculated as follows:~~
Cash
$ 92,279
Cash - Adjustment amount (1)
2,180
Fair value of contingent consideration
29,893
Total purchase price
$ 124,352

~~The table~~directors of one of our consolidated subsidiaries. Any relationship that falls below ~~presents Ingeus’s net assets based upon final assessment of their respective fair values:~~
Cash
$ 37,159
Accounts receivable
34,125
Other current assets
14,343
Property and equipment
10,501
Intangibles
65,700
Goodwill (2)
35,484
Current liabilities
(49,026 )
Other non-current liabilities
(23,934 )
Total
$ 124,352
~~(1) Includes final working capital and other closing account true-ups.~~
~~(2) The goodwill was allocated to the Company's WD Services segment. The goodwill is not expected to be deductible for tax purposes. Goodwill includesthe value of the purchased assembled workforce.~~
~~The fair value of intangible assets is as follows:~~

Type

Life (in years)

Value

Customer relationships

Amortizable

10
$ 43,700
Trademarks and trade names

Amortizable

10
18,000
Developed technology

Amortizable

5
4,000

9.7*
$ 65,700
*Weighted-average amortization period
~~Matrix~~
On October 23, 2014, the Company acquired all of the outstanding equity of CCHN Group Holdings, Inc. (“CCHN”), the parent company of Community Care Health Network, Inc. (dba Matrix Medical Network), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of September 17, 2014, referred to herein as the Matrix Acquisition. Matrix is a provider of CHAs for MA health plans and risk bearing providers and had a national footprint across 33 states at the time of acquisition. The acquisition expanded the Company's clinical capabilities and home based services with the addition of operations which included approximately 700 nurse practitioners.
Pursuant to the Merger Agreement, the Company paid consideration of $354,637 in cash (including working capital adjustments) and 946,723 shares of the Company’s common stock (with an aggregate value of $40,000 based on the closing price of the Company’s common stock on the NASDAQ Stock Market on September 17, 2014). Pursuant to the Merger Agreement, at the Closing, subject to the escrow arrangements described in the Merger Agreement, each share of CCHN then outstanding immediately prior to the closing and each vested stock option of CCHN then outstanding immediately prior to the closing was converted into the right to receive the merger consideration described above. The cash required to complete the Matrix Acquisition and fund certain related expenses was derived from (1) the cash proceeds from the new $250,000 term loan under the Second Amendment to the Credit Agreement (as discussed above), (2) the cash proceeds from an approximately $23,400 draw down from the Company’s revolving credit facility, (3) the cash proceeds from the issuance of the Note (as discussed above) and (4) approximately $48,000 of cash on hand. The cash consideration paid for CCHN was subject to certain customary adjustments for working capital purposes.

The Company incurred acquisition and related costs for this acquisition of $7,360 during year ended December 31, 2014, which are included in “General and administrative expenses” in the consolidated statements of income.
~~The final purchase price of Matrix is calculated as follows:~~
Cash (including working capital adjustment)
$ 354,637
Equity consideration (valued using October 23, 2014 stock price)
38,569
Total purchase price
$ 393,206
~~The table below presents Matrix’s net assets based upon the final estimate of the respective fair values:~~
Accounts receivable (1)
$ 21,546
Other current assets
11,253
Property and equipment
4,293
Intangibles
247,500
Goodwill (2)
210,071
Other non-current assets
3,953
Deferred taxes, net
(80,681 )
Accounts payable and accrued liabilities
(24,175 )
Other non-current liabilities
(554 )
Total
$ 393,206
~~(1)~~
The fair value of trade accounts receivable acquired in this transaction was determined to be approximately $21,546. The gross amount due with respect to these receivables is approximately $22,745, of which approximately $1,199 is expected to be uncollectible.
~~(2)~~ ~~The goodwill was allocated to the Company's HA Services segment. Goodwill totaling $995 is expected to be deductible for tax purposes. Goodwill includes the value of the purchased assembled workforce.~~

~~The fair value of intangible assets is as follows:~~

Type

Life (in years)

Value

Trademarks and trade names

Indefinite Lived
N/A $ 25,900
Customer relationships

Amortizable

10
181,300
Developed technology

Amortizable

5
40,300

9.1*
$ 247,500
*Weighted-average amortization period for intangible assets with definite lives
~~Pro forma information~~
The amounts of Ingeus’s and Matrix’s revenue and net income included in the Company’s consolidated statements of income for the years ended December 31, 2014 and 2013, and the unaudited pro forma revenue and net income of the combined entity had the acquisition date been January 1, 2013, are:

Year ended December 31,

2014

2013

Actual Ingeus:

Revenue
$ 179,307 $ -
Net income
$ 13,936 $ -

Actual Matrix:

Revenue
$ 43,331 $ -
Net income
$ 1,348 $ -

Proforma:

Revenue
$ 1,456,736 $ 1,312,332
Net income
$ 43,868 $ 20,103
Diluted earnings per share
$ 2.74 $ 1.31
The pro forma information above for the year ended December 31, 2014 includes the elimination of acquisition related costs. Adjustments for all periods include compensation and stock-based compensation expense related to employment agreements effective upon consummation of the acquisitions, additional interest expense on the debt issued to finance the acquisitions, amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets and property and equipment and related tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been affected on January 1, 2013.
Additionally, during the second and fourth quarters of 2014, the Company acquired two human services businesses through asset purchase agreements. The Company has not disclosed purchase information or the pro forma impact of these acquisitions as it is immaterial to the Company’s financial position and results of operations. The operations of these two acquisitions are include in discontinued operations, net of tax.
22~~. Discontinued Operations~~
On September 3, 2015, the Company entered into a Purchase Agreement, pursuant to which the Company agreed to sell all of the membership interests in Providence Human Services, LLC and Providence Community Services, LLC, comprising the Company’s Human Services segment, in exchange for cash proceeds of approximately $200,000 prior to adjustments for estimated working capital, certain seller transaction costs, debt assumedthreshold set forth by the ~~buyer,~~standards for “independence” established by NASDAQ and ~~a $20,099 cash payment received for the Providence Human Services cash and cash equivalents on hand at closing. The net proceeds are approximately $230,703, although $10,000~~our corporate governance guidelines, or is ~~held in an indemnity escrow and recorded within “Other assets”. Proceeds include a customary working capital adjustment of approximately $13,246.~~

The Company’s cash and cash equivalents of $135,258 at December 31, 2014 excludes $25,148 of cash and cash equivalents pertaining to the Human Services segment which are classified as “Current assets of discontinued operations held for sale” in the Consolidated Balance Sheets. In accordance with the Purchase Agreement, the amount of the Human Services segment cash and cash equivalents on hand as of the closing date was to remain in the Human Services segment entities as a closing accommodation. The buyer paid the Company for the Human Services segment cash and cash equivalents at closing in addition to the net cash sale proceeds.
~~Results of Operations~~
~~The following table summarizes the results of operations classified as discontinued operations, net of tax, for the years ended December 31, 2015, 2014 and 2013:~~

December 31,

2015

2014

2013

Service revenue, net
$ 291,510 $ 344,960 $ 323,916

Operating expenses:

Service expense
264,293 315,008 283,382
General and administrative expense
14,975 19,134 23,043
Asset impairment charge
1,593 6,915 492
Depreciation and amortization
4,831 6,655 5,541
Total operating expenses
285,692 347,712 312,458
Operating income (loss)
5,818 (2,752 ) 11,458

Other expenses:

Interest expense, net
2,829 1,478 (27 )
Income (loss) from discontinued operationsbefore gain on disposition and income taxes
2,989 (4,230 ) 11,485
Gain on disposition
123,129 - -
(Provision) benefit for income taxes
(24,318 ) 588 (5,152 )
Discontinued operations, net of tax
$ 101,800 $ (3,642 ) $ 6,333
~~The $24,318 provision for income taxes for the year ended December 31, 2015 includes a tax provision of $22,797 related to the gain on disposition.~~
~~Asset impairment charge~~
In connection with classifying the Human Services segment as a discontinued operation, the Company was required to compare the estimated fair values of each reporting unit of the underlying disposal group, less the costs to sell, to the respective carrying amount. As a result of this analysis, the Company recorded a non-cash goodwill impairment charge of $1,593 for the year ended December 31, 2015, which is included in “Asset impairment charge” in the table above. The impairment charge was related to the Company’s Maple Star reporting unit.
We estimated the fair value of each reporting unit within the Human Services segment based on both a market-based valuation approach and an income-based valuation approach. The valuation methodology applied was consistent with our methodology for the 2014 and 2013 annual goodwill impairment assessments. Under the market approach, the fair value of the reporting unit is determined using one or more methods based on current values in the market for similar businesses. Under the income approach, the fair value of the reporting unit is based on the cash flow streams expected to be generated by the reporting unit over an appropriate time period, and then discounting the cash flows to present value using an appropriate discount rate. The income approach is dependent on a number of significant management assumptions, including estimates of future revenue and expenses, growth rates and discount rates. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including our interpretation of current economic indicators and market valuations, and assumptions about our strategic plans with regard to our operations.

Additionally, in conjunction with its annual review of goodwill impairment as of December 31, 2014, the Company performed the two-step impairment analysis and determined that goodwill was impaired for two of its Human Services segment reporting units. The goodwill impairment in the Maple Star reporting unit was attributable to declines in forecasted referrals, leading to a decline in projected future cash flows of the entity. The Company recorded an impairment charge of $3,810 related to the Maple Star reporting unit. The impairment for the second reporting unit was attributable to lower than expected performance during 2014 in the Providence of Idaho reporting unit, as well as a lower than expected projections in future years. An impairment charge of $2,815 was recorded related to the Providence of Idaho reporting unit. Additionally, based on a triggering event for one of the Human Services segment reporting units, the Company recorded a goodwill impairment charge of approximately $290 prior to conducting its annual asset impairment test.
~~Interest expense, net~~
~~The Company allocated interest expense to discontinued operations based on the portion of the revolving line of credit that was~~not required to be ~~paid with the proceeds from the sale~~disclosed under Item 404(a) of ~~the Human Services segment. The total allocated interest expense was $2,871~~SEC Regulation S-K, is automatically deemed to be an immaterial relationship. Our Board has affirmatively determined that Mr. Kerley, Ms. Meints and ~~$1,519, respectively, for the years ended December 31, 2015 and 2014, and is included in “Interest expense, net” in the table above.~~Ms. Norwalk are independent directors.
~~Assets and Liabilities~~~~of Discontinued Operations~~
~~The following table summarizes the carrying amounts of the major classes of assets and liabilities of the discontinued operations in the consolidated balance sheet as of December 31, 2014:~~

December 31,

2014

Cash and cash equivalents
$ 25,148
Accounts receivable, net of allowance of $1,518
43,779
Other receivables
1,552
Prepaid expenses and other
3,023
Restricted cash
573
Deferred tax assets
1,918
Current assets of discontinued operations
$ 75,993

Property and equipment, net
$ 14,500
Goodwill
13,229
Intangible assets, net
16,769
Deferred tax liabilities
3,689
Other assets
3,561
Non-current assets of discontinued operations
$ 51,748

Current portion of long-term obligations
$ 600
Accounts payable
1,504
Accrued expenses
22,584
Deferred revenue
1,502
Reinsurance liability reserve
38
Current liabilities of discontinued operations
$ 26,228

Other long-term liabilities
$ 635
Non-current liabilities of discontinued operations
$ 635

Item 14.~~Cash Flow Information~~Principal Accounting Fees and Services.

~~The following table presents depreciation, amortization, capital expenditures, and significant operatingnoncash items~~
Fees of ~~the discontinued operations for the years ended December 31, 2015, 2014 and 2013:~~

December 31,

2015

2014

2013

Cash flows from discontinued operating activities:

Depreciation
$ 2,376 $ 3,202 $ 2,450
Amortization
2,455 3,453 3,091
Asset impairment charge
1,593 6,915 492
Stock based compensation
7 6 604
Deferred income taxes
(5,680 ) (1,155 ) 2,257

Cash flows from discontinued investing activities:

Purchase of property and equipment
$ 2,224 $ 4,766 $ 2,452
23~~.    Segments~~Independent Registered Public Accounting Firm

The Company has three reportable and operating segments: NET Services, WD Services and HA Services. Segment results are based on how our chief operating decision maker manages our business, makes operating decisions and evaluates operating performance. The operating results ofFees for professional services provided by KPMG, the segments include revenue and expenses incurred by the segment, as well as an allocation of direct expenses incurred by Corporate on behalf of the segment. Indirect expenses, including unallocated corporate functions and expenses, such as executive, finance, human resources, information technology and legal, as well as the results of our captive insurance company (the “Captive”) and elimination entries recorded in consolidation are reflected in Corporate and Other. Note that in prior periods, the Company reported its segment activities under a full absorption method, where all corporate direct and indirect costs were allocated to the reporting segments. Additionally, the oversight of two legacy businesses was transferred to the management of WD Services in 2015. The segment resultsCompany’s independent registered public accounting firm, for the ~~years ended December 31, 2014 and 2013 have been recast to reflect the current management of the segments.~~

The following table sets forth certain financial information attributable to the Company’s business segments (excluding the Human Services segment which has been classified to discontinued operations) for the years ended December 31, 2015, 2014 and 2013.

Year Ended December 31, 2015

NET Services

WD Services

HA Services

Corporate and Other

Total

Service revenue, net
$ 1,083,015 $ 395,059 $ 217,436 $ (64 ) $ 1,695,446
Service expense
991,659 393,803 163,211 (4,308 ) 1,544,365
General and administrative expense
10,704 29,846 2,630 30,436 73,616
Depreciation and amortization
9,429 13,776 29,472 792 53,469
Operating income (loss)
$ 71,223 $ (42,366 ) $ 22,123 $ (26,984 ) $ 23,996

Loss on equity investment
$ - $ 10,970 $ - $ - $ 10,970
Total assets
$ 296,591 $ 213,042 $ 477,206 $ 67,137 $ 1,053,976
Long-lived asset expenditures
$ 12,232 $ 11,869 $ 8,079 $ 668 $ 32,848

Year Ended December 31, 2014

NET Services

WD Services

HA Services

Corporate and Other

Total

Service revenue, net
$ 884,287 $ 208,763 $ 43,331 $ (170 ) $ 1,136,211
Service expense
800,454 184,919 35,185 3,227 1,023,785
General and administrative expense
8,406 (2,072 ) 421 37,746 44,501
Depreciation and amortization
7,699 8,406 5,619 1,109 22,833
Operating income (loss)
$ 67,728 $ 17,510 $ 2,106 $ (42,252 ) $ 45,092

Total assets
$ 279,604 $ 190,167 $ 506,069 $ 65,353 $ 1,041,193
Long-lived asset expenditures
$ 12,477 $ 104,594 $ 459,991 $ 473 $ 577,535

Year Ended December 31, 2013

NET Services

WD Services

HA Services

Corporate and Other

Total

Service revenue, net
$ 770,246 $ 28,671 $ - $ (151 ) $ 798,766
Service expense
710,755 24,650 - 1,264 736,669
General and administrative expense
7,397 1,888 - 16,305 25,590
Depreciation and amortization
7,725 573 - 1,033 9,331
Operating income (loss)
$ 44,369 $ 1,560 $ - $ (18,753 ) $ 27,176

Long-lived asset expenditures
$ 5,308 $ 86 $ - $ 3,326 $ 8,720

~~Geographic Information~~
~~The following table details the Company’s revenue from continuing operations and long-lived assets by geographic location.~~
For the year ended December 31, 2015

United

United

Other

Consolidated

States

Kingdom

Foreign

Total

Service revenue, net
$ 1,317,354 $ 298,386 $ 79,706 $ 1,695,446
Long-lived assets (b)
42,576 11,173 4,038 57,787
For the year ended December 31, 2014

United

United

Other

Consolidated

States

Kingdom

Foreign

Total

Service revenue, net
$ 945,749 $ 139,065 $ 51,397 $ 1,136,211
Long-lived assets (b)
33,114 7,292 2,242 42,648
For the year ended December 31, 2013

United

United

Other

Consolidated

States

Kingdom

Foreign (a)

Total

Service revenue, net
$ 788,204 $ - $ 10,562 $ 798,766
~~(a)~~
~~Consists of Canadian operations.~~
~~(b)~~
~~Represents property and equipment, net.~~
Domestic service revenue, net, totaled 77.7%, 83.2% and 98.7% of service revenue, net for the years ended December 31, 2015, 2014 and 2013, respectively. Foreign service revenue, net, totaled 22.3%, 16.8% and 1.3% of service revenue, net for the years ended December 31, 2015, 2014 and 2013, respectively.
At December 31, 2015, approximately $108,587, or 29.5%, of the Company’s net assets from continuing operations were located in countries outside of the US. At December 31, 2014, approximately $109,423, or 49.4%, of the Company’s net assets from continuing operations were located in countries outside of the US.
~~Customer~~I~~nformation~~
Contracts with domestic governmental agencies and other domestic entities that contract with governmental agencies accounted for approximately 54.5%, 69.2% and 78.3% of the Company’s domestic revenue for the years ended December 31, 2015, 2014 and 2013, respectively. Contracts with foreign governmental agencies and other foreign entities that contract with governmental agencies accounted for approximately 95.3%, 94.5% and 97.8% of the Company’s foreign revenue for the years ended December 31, 2015, 2014 and 2013, respectively. Additionally, approximately 40.0% and 57.2% of our WD Services revenue for thefiscal years ended December 31, 2015 and 2014, ~~respectively, was generated from one foreign payer.~~in each of the following categories were:

Approximately 13.2% and 14.7% of the Company’s consolidated revenue was derived from one US state for the years ended December 31, 2014 and 2013, respectively. Approximately 10.7% of the Company’s consolidated revenue was derived from the one UK governmental agency for the year ended December 31, 2014.

24.    ~~Quarterly Results (Unaudited)~~

Quarter ended

March 31,

June 30,

September 30,

December 31,

2015(1) 2015 (1) 2015(1) 2015(1)(2)(3)(8)

Service revenue, net
$ 419,829 $ 418,238 $ 432,450 $ 424,929
Operating Income (loss)
20,773 15,137 7,037 (18,951 )
Income (loss) from continuingoperations, net of tax
5,856 4,843 (3,622 ) (25,683 )
Discontinued operations, net of tax
394 1,732 (1,791 ) 101,465
Net income attributable to Providence
6,236 6,634 (5,571 ) 76,397
Earnings (loss) per common share (9):

Basic
$ 0.32 $ 0.26 $ (0.41 ) $ 4.07
Diluted
$ 0.32 $ 0.26 $ (0.41 ) $ 4.07

Quarter ended

March 31,

June 30,

September 30,

December 31,

2014(4) 2014(4) (5) 2014 (4) (6) 2014(4) (7) (8)

Service revenue, net
$ 205,558 $ 252,869 $ 309,474 $ 368,310
Operating Income
11,902 10,556 2,448 20,186
Income (loss) from continuingnet of tax
6,201 5,111 1,252 11,353
Discontinued operations, net of tax
86 1,561 (986 ) (4,303 )
Net income
6,287 6,672 266 7,050
Earnings per common share (9):

Basic
$ 0.45 $ 0.47 $ 0.02 $ 0.46
Diluted
$ 0.44 $ 0.46 $ 0.02 $ 0.45

Fiscal Year Ended December 31,

2015

2014

Audit fees
$ 3,107,040 $ 2,455,000
Audit related fees
– 5,000
Tax fees
1,593,983 729,000
All other fees
100,185 576,000
Total
$ 4,801,208 $ 3,765,000

~~(1)~~
Includes equity in net loss of investee of approximately $2,483, $1,059, $4,465 and $2,962, for the quarters ending March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015, respectively, related to our investment in Mission Providence which incurred significant start-up costs during 2015.
~~(2)~~
The Company incurred approximately $20,944 of expense related to restricted shares and cash placed into escrow at the time of the Ingeus acquisition. The shares and cash were placed into escrow concurrent with the payment of the acquisition consideration paid for Ingeus; however, because two sellers of Ingeus remained employees post acquisition, the value of the shares and cash was recognized as compensation expense over the escrow term. Acceleration of this expense was triggered when the two sellers separated from the Company.
~~(3)~~
~~Includes gain on disposition, net of tax, of $100,332, in relation to the sale of the Company’s Human Services segment.~~
~~(4)~~
Includes acquisition costs of approximately $1,829, $2,496, $3,686 and $3,827, for the quarters ending March 31, 2014, June 30, 2014, September 30, 2014 and December 31, 2014, respectively, in relation to the acquisitions of Ingeus and Matrix.
~~(5)~~
~~The Company purchased Ingeus on May 30, 2014. Results of operations include Ingeus from the acquisition date.~~
~~(6)~~
~~Includes approximately $3,294 of compensation expense related to the immediate vesting of certain equity based compensation awards granted in the third quarter of 2014.~~
~~(7)~~
~~The Company purchased Matrix on October 23, 2014. Results of operations include Matrix from the acquisition date.~~
~~(8)~~
~~Includes a gain due to a reduction in the estimated fair value of contingent consideration of $2,469 in 2015 and $16,314 in 2014 primarily related to the Ingeus acquisition.~~
~~(9)~~
~~Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of quarterly earnings per share may not equal the total computed for the year.~~

~~Item 9.~~
~~Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.~~
~~None.~~
~~Item 9A.~~
~~Controls and Procedures.~~
~~(a) Evaluation~~Audit Fees. Audit fees consisted of ~~disclosure controls and procedures~~
~~The Company, under the supervision and~~amounts incurred for services performed in association with the ~~participation of its management, including its principal executive officer and principal~~annual financial ~~officer, evaluated~~statement audit (including required quarterly reviews), the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report (December 31, 2015) (“Disclosure Controls”). Based upon the Disclosure Controls evaluation, the principal executive officer and principal financial officer have concluded that the Disclosure Controls are effective in reaching a reasonable level of assurance that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
~~(b) Changes in internal controls~~
~~The principal executive officer and principal financial officer also conducted an evaluation~~audit of the Company’s internal control over financial reporting, ~~(“Internal Control”)~~and other procedures normally required by the independent auditor in order to ~~determine whether any changes~~be able to form an opinion on the Company’s consolidated financial statements. The increase in ~~Internal Control occurred during~~audit fees in 2015, compared to 2014 is primarily attributable to the ~~quarter ended December 31, 2015 that have materially affected~~Company’s growth due to 2014 acquisitions and the change in scope of audit work with respect to operations subject to internal control testing. Other procedures included consultations relating to the audit or ~~which are reasonably likely to materially affect Internal Control. Based on that evaluation, it was identified that~~quarterly reviews, and services performed by KPMG in connection with ~~the Company’s integration of the businesses of Ingeus~~SEC registration statements, periodic reports and ~~Matrix, acquired in 2014,~~other documents filed with the ~~Company’s legacy operations, the Company has established~~SEC or ~~enhanced internal controls over the period-end close, consolidation, financial reporting processes, and certain significant accounts of these businesses. Additionally,~~other documents issued in connection with the Providence Human Services divestiture, the Company deployed new information technology servers upon which its financial accounting and reporting applications operate, and separated its historically combined databases from those of the divested subsidiary. The Company also implemented or changed information technology controls primarily related to system access and change management controls resulting from these changes in the Company’s internal control environment.securities offerings.

~~(c) Limitations on~~Audit Related Fees. Audit related fees consisted of amounts incurred for the ~~Effectiveness~~stand alone audit of ~~Controls~~one of the Company’s subsidiaries.

~~Control systems, no matter how well conceived~~Tax Fees. Tax fees consisted of amounts incurred for professional services rendered by KPMG for tax compliance and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints,tax consulting in 2015 and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.2014.

~~(d) Management’s report on~~All Other Fees. Other fees primarily consisted of fees incurred for services rendered by KPMG in 2015 and 2014 for the audit of information technology security and internal control over ~~financial reporting~~
~~Management’s report on internal control over financial reporting is presented in Part II, Item 8, of this report and is hereby incorporated by reference.~~
~~(e)~~~~Audit~~~~report of the registered public accounting firm~~protected client health information related to our non-emergency transportation management services operating segment.

The Audit Committee has considered and determined that the services provided by KPMG were compatible with KPMG maintaining their independence.
The Audit Committee has adopted a policy that requires advance approval of all audit, ~~report~~audit related, tax services and other services performed by the independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. The Audit Committee pre-approved all of the ~~registered public accounting firm is presented~~foregoing services provided to the Company by KPMG in ~~Part II, Item 8, of this report~~fiscal years 2015 and ~~is hereby incorporated by reference.~~

~~Item 9B.~~
~~Other Information.~~
~~None.~~2014.

PART ~~III~~IV
~~Item 10.~~
~~Directors, Executive Officers and Corporate Governance~~.
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A for our 2016 stockholder meeting; provided that if such proxy statement is not filed on or before April 29, 2016, such information will be included in an amendment to this Report on Form 10-K filed on or before such date.

~~Code of Ethics~~
We have adopted a code of ethics that applies to our senior management, including our chief executive officer, chief financial officer, controller and persons performing similar functions. Copies of our code of ethics are available without charge upon written request directed to Ann Mullen, Ethics Program Manager, at The Providence Service Corporation, 44 East Broadway Blvd. Suite 350, Tucson, AZ, 85701.
~~Item 11.~~
~~Executive Compensation.~~
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A for our 2016 stockholder meeting; provided that if such proxy statement is not filed on or before April 29, 2016, such information will be included in an amendment to this Report on Form 10-K filed on or before such date.
~~Item 12.~~
~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.~~
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A for our 2016 stockholder meeting; provided that if such proxy statement is not filed on or before April 29, 2016, such information will be included in an amendment to this Report on Form 10-K filed on or before such date.
~~Item 13.~~
~~Certain Relationships and Related Transactions, and Director Independence.~~
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A for our 2016 stockholder meeting; provided that if such proxy statement is not filed on or before April 29, 2016, such information will be included in an amendment to this Report on Form 10-K filed on or before such date.
~~Item 14.~~
~~Principal Accounting Fees and Services~~.
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A for our 2016 stockholder meeting; provided that if such proxy statement is not filed on or before April 29, 2016, such information will be included in an amendment to this Report on Form 10-K filed on or before such date.
~~PART IV~~
Item 15.
Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements

The following consolidated financial statements including footnotes are included in Item 8.

•

Consolidated Balance Sheets at December 31, 2015 and 2014;

•

Consolidated Statements of Income for the years ended December 31, 2015, 2014 and 2013;

•

Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013;

•

Consolidated Statements of Stockholders’ Equity at December 31, 2015, 2014, and 2013; and

•

Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013.

(2) Financial Statement Schedules

Schedule II Valuation and Qualifying Accounts
(in thousands)

Additions
Additions

Balance at Charged to Charged to Balance at
Balance at

Charged to

Charged to

Balance at

beginning of costs and other end of
beginning of

costs and

other

end of

period expenses accounts Deductions period
period

expenses

accounts

Deductions

period

Year Ended December 31, 2015:

Allowance for doubtful accounts
$ 4,515 $ 1,818 $ 1,152 (1 ) $ 1,898 (2 ) $ 5,587 $ 4,515 $ 1,818 $ 1,152 (1) $ 1,898 (2) $ 5,587

Year Ended December 31, 2014:

Allowance for doubtful accounts
$ 2,465 $ 1,099 $ 3,915 (1 ) $ 2,964 (2 ) $ 4,515 $ 2,465 $ 1,099 $ 3,915 (1) $ 2,964 (2) $ 4,515

Year Ended December 31, 2013:

Allowance for doubtful accounts
$ 1,724 $ 1,184 $ 3,418 (1 ) $ 3,861 (2 ) $ 2,465 $ 1,724 $ 1,184 $ 3,418 (1) $ 3,861 (2) $ 2,465

Notes:
~~Schedule above has been recast from prior year to exclude activity related to discontinued operations.~~
(1)
Amounts primarily include the allowance for contractual adjustments related to our non-emergency transportation services operating segment that are recorded as adjustments to non-emergency transportation services revenue.
~~(2)~~
(2) Write-offs, net of ~~recoveries~~
recoveries.

All other schedules are omitted because they are not applicable or the required information is shown in our financial statements or the related notes thereto.

(3) Exhibits

Exhibit
Number

Description
2.1(19)

Share Sale Agreement, dated as of March 31, 2014, by and among The Providence Service Corporation, Pinnacle Australia Holdco Pty Ltd, Thérèse Virginia Rein, Gregory Kenneth Ashmead and GK Ashmead Holdings Pty Limited (as trustee of the GK Ashmead Nominees Trust).

2.2(19)

Australian Share Sale Agreement Side Deed, dated as of March 31, 2014, by and among Providence, Pinnacle Australia Holdco Pty Ltd, Thérèse Virginia Rein, Gregory Kenneth Ashmead, GK Ashmead Holdings Pty Limited (as trustee of the GK Ashmead Nominees Trust) and Deloitte LLP.

2.3(21)

Agreement and Plan of Merger, dated as of September 17, 2014 by and among The Providence Service Corporation, Matrix Acquisition Co., CCHN Group Holdings, Inc. and the Holders' Representative named therein.

2.4 ~~(31)~~(30)

Membership Interest Purchase Agreement, dated September 3, 2015 by and among The Providence Service Corporation, Ross Innovative Employment Solutions Corp. and Molina Healthcare, Inc.

~~2.5(32)~~     2.5(31)

Amendment to Membership Interest Purchase Agreement, dated October 30, 2015, by and among by and among The Providence Service Corporation, Ross Innovative Employment Solutions Corp. and Molina Pathways, LLC, as assignee of Molina Healthcare, Inc.

3.1(1)

Second Amended and Restated Certificate of Incorporation of The Providence Service Corporation, including Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of Delaware on December 9, 2011.

3.2(2)

Amended and Restated Bylaws of The Providence Service Corporation, effective March 10, 2010.

3.3(17)

Certificate of Elimination of Series A Junior Participating Preferred Stock of the Providence Service Corporation, dated as of March 27, 2014.

~~3.4(27)~~     3.4(26)

Certificate of Designations of Series A Convertible Preferred Stock of The Providence Service Corporation, dated as of February 6, 2015

~~3.5(28)~~     3.5(27)

Certificate of Amendment of the Certificate of Incorporation of The Providence Service Corporation, dated as of May 6, 2015.

4.1(3)

Convertible Senior Subordinated Note Indenture, dated November 13, 2007, between The Providence Service Corporation and The Bank of New York Trust Company, N.A., as Trustee.

4.2(4)

Form of Note (included as Exhibit A to the Indenture, listed as Exhibit 4.1 hereto).

4.3(5) Amended and Restated Rights Agreement, dated as of December 9, 2011, by and between The Providence Service Corporation and Computershare Trust Company, N.A., as Rights Agent.

4.4(17) Amendment and Termination of Rights Agreement, dated as of March 27, 2014, by and between The Providence Service Corporation and Computershare Trust Company, N.A., as Rights Agent.

+10.1(6)

The Providence Service Corporation Stock Option and Incentive Plan, as amended.

+10.2(7)

2003 Stock Option Plan, as amended.

+~~10.3(33)~~10.3(32)

The Providence Service Corporation 2006 Long-Term Incentive Plan, as amended.

+10.4(9)

Amended and Restated Providence Service Corporation Deferred Compensation Plan.

10.5(3)

Registration Rights Agreement, dated November 13, 2007, by and among The Providence Service Corporation and the Purchasers named therein.

10.6(13)

Amended and Restated Credit and Guaranty Agreement dated as of August 2, 2013 among The Providence Service Corporation, Bank of America, N.A. SunTrust Bank, BMO Harris Bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated and SunTrust Robinson Humphrey, Inc.

10.7(13)

Amended and Restated Pledge Agreement dated as of August 2, 2013 by and among The Providence Service Corporation (including its subsidiaries) and Bank of America, N.A., as administrative agent.

10.8(13)

Amended and Restated Security Agreement, dated as of August 2, 2013, by and among The Providence Service Corporation (including its subsidiaries) and Bank of America, N.A., as administrative agent.

10.9(20)

First Amendment to Amended and Restated Credit and Guaranty Agreement and Consent, dated as of May 28, 2014, among The Providence Service Corporation, the Guarantors named therein, the New Subsidiaries named therein, Bank of America, N.A., the Lenders named therein and HSBC Bank USA, National Association.

10.10(22)

Second Amendment, dated as of October 23, 2014, to the Amended and Restated Credit and Guaranty Agreement, dated as of August 3, 2012by and among The Providence Service Corporation, the Guarantors stated therein, Bank of America, N.A., SunTrust Bank, Royal Bank of Canada, BMO Harris Bank, N.A., HSBC Bank USA, National Association, the other Lenders named therein, the New Lenders named therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Robinson Humphrey, Inc., and RBC Capital Markets.

10.11(22)

14.0% Unsecured Subordinated Note, dated October 23, 2014, by and among The Providence Service Corporation, Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P., and Blackwell Partners, LLC.

10.12(22)

Standby Purchase Agreement, dated October 23, 2014, by and among The Providence Service Corporation, Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., Coliseum Capital Co-Invest, L.P., and Blackwell Partners, LLC.

10.13 ~~(31)~~(30)

Third Amendment and Consent to the Amended and Restated Credit and Guaranty Agreement dated as of September 3, 2015, by and among The Providence Service Corporation, the guarantors named therein, Bank of America, N.A., Sun Trust Bank, Royal Bank of Canada, BMO Harris Bank, N.A., HSBC Bank USA, National Association, the other lenders named therein, Merrill Lynch Pierce, Fenner & Smith Incorporated, Sun Trust Robinson Humphrey, Inc. and RBC Capital Markets.

+10.14(10)

Amended and Restated Employment Agreement dated May 17, 2011 between The Providence Service Corporation and Fred D. Furman.

+10.15(15)

Separation and General Release Agreement dated December 31, 2013 between The Providence Service Corporation and Fred D. Furman.

+10.16(10)

Amended and Restated Employment Agreement dated May 17, 2011 between The Providence Service Corporation and Craig A. Norris.

+10.17(12)

Employment Agreement dated May 7, 2013 between The Providence Service Corporation and Warren S. Rustand.

+10.18(14)

Employment Agreement dated September 13, 2013 between The Providence Service Corporation and Robert E. Wilson.

+10.19(16)

Letter Agreement dated March 14, 2014, amending the Amended and Restated Employment Agreement, dated May 17, 2011 between The Providence Service Corporation and Craig A. Norris.

+10.20(18)

Employment Agreement dated March 24, 2014 between The Providence Service Corporation and Herman Schwarz.

+10.21(20)

Executive Service Agreement, dated as of April 10, 2014, by and between Ingeus Europe Limited and Thérèse Rein.

+10.22(23)

Employment Agreement, dated January 14, 2015, by and between The Providence Service Corporation and James Lindstrom.

+10.23(24)

Employment and Separation Agreement, dated February 2, 2015, by and between The Providence Service Corporation and Robert E. Wilson.

+10.24(28)

Separation and General Release Agreement, by and between The Providence Service Corporation and Warren S. Rustand, dated May 29, ~~2015.~~2015

+10.25(29)

Employment Agreement, dated August 6, 2015, by and between The Providence Service Corporation and James ~~Lindstrom.~~Lindstrom

+10.26(33)

Employment Agreement, dated as of September 28, 2015, by and between The Providence Service Corporation and David ~~Shackelton.~~Shackelton

+10.27(26)

Letter Agreement regarding Offer of Employment, effective as of January 6, 2014, by and between The Providence Service Corporation and Michael-Bryant Hicks.

+10.28(26)

Letter Agreement regarding Offer of Employment, dated as of January 5, 2015, by and between The Providence Service Corporation and Michael Fidgeon.

+10.29(11)

Form of Restricted Stock Agreements, as amended.

+10.30(11)

Form of Stock Option Agreements.

+10.31(11)

Form of 2011 Performance Restricted Stock Unit Agreements.

+10.32(1)

Form of 2012 Performance Restricted Stock Unit Agreements.

+10.33(12)

Form of 2013 Performance Restricted Stock Unit Agreements.

+~~10.34(27)~~10.34(26)

Form of 2014 Performance Restricted Stock Unit Agreements.

+~~10.35(26)~~10.35(25)

Form of 2015 Performance Restricted Stock Unit Agreements.

+~~10.36(30)~~10.36(29)

2015 HoldCo LTI Program of Providence Service ~~Corporation.~~Corporation

+~~10.37(30)~~10.37(29)

Form of Special Incentive Stock Option Award ~~Agreement.~~Agreement

+~~10.38(30)~~10.38(29)

Form of Matching Incentive Stock Option Award ~~Agreement.~~Agreement

* 12.1

Statement re Computation of Ratios of Earnings to Fixed Charges.

*21.1

Subsidiaries of the Registrant.

*23.1

Consent of KPMG LLP.

**31.1

Certification pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 of the Chief Executive Officer.

**31.2 Certification pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 of the Chief Financial Officer.

*32.1 Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer.

*32.2 Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer.
~~101. INS~~
~~XBRL Instance Document.~~

*101. INS XBRL Instance Document

*101.SCH

XBRL Schema ~~Document.~~
Document

*101.CAL

XBRL Calculation Linkbase ~~Document.~~
Document

*101.LAB

XBRL Label Linkbase ~~Document.~~
Document

*101.PRE

XBRL Presentation Linkbase ~~Document.~~
Document

*101.DEF

XBRL Definition Linkbase ~~Document.~~
Document

+
Management contract or compensatory plan or arrangement.

*
[Previously filed with the Original Filing
**
Filed ~~herewith]~~herewith

(1)
Incorporated by reference from an exhibit to the registrant’s annual report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 15, 2012.

(2)
Incorporated by reference from an exhibit to the ~~registrant’s~~registrant��s annual report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 12, 2010.
(3)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on November 15, 2007.

(4)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on November 7, 2007.

(5)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on December 9, 2011.

(6)
Incorporated by reference from an exhibit to the registrant’s registration statement on Form S-1 (Registration No. 333-106286) filed with the Securities Exchange Commission on June 19, 2003.

(7)
Incorporated by reference from an exhibit to the registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2005 filed with the Securities and Exchange Commission on August 9, 2005.

(8)
Incorporated by reference from an appendix to the registrant’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on April 20, 2011.

(9)
Incorporated by reference from an exhibit to the registrant’s annual report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 11, 2011.
(10)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2011.

(11)
Incorporated by reference from an exhibit to the registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2011 filed with the Securities and Exchange Commission on May 6, 2011.

(12)
Incorporated by reference from an exhibit to the registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2013 filed with the Securities and Exchange Commission on May 10, 2013.

(13)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2013.

(14)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on September 17, 2013.

(15)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on January 1, 2014.

(16)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2014.

(17)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on March 27, 2014.

(18)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on March 28, 2014.

(19)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2014.

(20)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2014.

(21)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on September 18, 2014.

(22)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2014.

(23)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on January 21, 2015.

(24)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on February 6, 2015.

(25)
Incorporated by reference from an exhibit to the registrant’s quarterly report on Form 10-Q for the quarter ended March 31, 2015 filed with the Securities and Exchange Commission on May 11, 2015.

(26)
Incorporated by reference from an exhibit to the Amendment No. 1 registrant’s annual report on Form 10-K/A for the year ended December 31, 2014 filed with the Securities and Exchange Commission on April 30, 2015.

(27)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exhibit Commission on May 7, 2015.

(28)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on June 2, 2015.

(29)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on August 11, 2015.

(30)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2015.

(31)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2015.

(32)
Incorporated by reference from an exhibit to the registrant’s quarterly report on Form 10-Q for the quarter ended September 30, 2015 filed with the Securities and Exchange Commission on November 9, 2015.

(33)
Incorporated by reference from an exhibit to the registrant’s current report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

THE PROVIDENCE SERVICE CORPORATION

Date: April 29, 2016
By:

~~/s/ James Lindstrom~~
~~James Lindstrom~~
~~Chief Executive Officer~~
~~Dated: March 11, 2016~~
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
~~Signature~~
~~Title~~
~~Date~~
/s/ James Lindstrom
~~/S/ JAMES LINDSTROM~~
James Lindstrom
Chief Executive Officer ~~and Director~~
~~March 11, 2016~~
~~James Lindstrom~~ (Principal Executive Officer)

~~/S/ DAVID SHACKELTON~~Date: April 29, 2016
By:

~~Chief Financial Officer~~
~~March 11, 2016~~
~~David Shackelton~~ ~~(Principal Financial and Accounting Officer)~~
/s/ David Shackelton

~~/S/ CHRISTOPHER SHACKELTON~~David Shackelton
Chief Financial Officer
~~Chairman of the Board~~
~~March 11, 2016~~
~~Christopher Shackelton~~

~~/S/ RICHARD A. KERLEY~~(Principal Financial Officer)
~~Director~~
~~March 11, 2016~~
~~Richard A. Kerley~~
~~/S/ KRISTI L. MEINTS~~
~~Director~~
~~March 11, 2016~~
~~Kristi L. Meints~~
~~/S/ LESLIE V. NORWALK~~
~~Director~~
~~March 11, 2016~~
~~Leslie V. Norwalk~~

59
~~127~~

Delaware	86-0845127
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4~~4 East Broadway Blvd.~~ ~~Suite 350~~,700 Canal Street, Third Floor ~~Tucson, Arizona~~Stamford, CT	~~85701~~06902
(Address of principal executive offices)	(Zip code)

Title of each Class		Name of each exchange on which registered
Common Stock, $0.001 par value per share		The NASDAQ Global Select Market

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended December 31, 2015

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

		Page No.
~~PART I~~

~~Item 1.~~	~~Business~~	4

~~Item 1A.~~	~~Risk Factors~~	15

~~Item 1B.~~	~~Unresolved Staff Comments~~	29

~~Item 2.~~	~~Properties~~	29

~~Item 3.~~	~~Legal Proceedings~~	29

~~Item 4.~~	~~Mine Safety Disclosures~~	30

PART II

Item 5.7A.	Quantitative and Qualitative Disclosure About Market ~~for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~Risk	315

~~Item 6.~~	~~Selected Financial Data~~	33

~~Item 7.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	36

~~Item 7A.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	61

~~Item 8.~~	~~Financial Statements and Supplementary Data~~	62

~~Item 9.~~	~~Changes in and Disagreements With Accountants on Accounting and Financial Disclosure~~	~~117~~

~~Item 9A.~~	~~Controls and Procedures~~	~~117~~

~~Item 9B.~~	~~Other Information~~	~~118~~

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	~~119~~ 6

Item 11.	Executive Compensation	~~119~~ 11

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~119~~ 47

Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~119~~ 49

Item 14.	Principal Accounting Fees and Services	~~119~~ 51

	PART IV

Item 15.	Exhibits, Financial Statement Schedules	~~119~~ 52

SIGNATURES		~~127~~

~~EXHIBIT INDEX~~

	•		~~make it more difficult for us to satisfy our obligations;~~
	•		~~limit our ability to borrow additional amounts to fund working capital, capital expenditures, debt service requirements, execution of our business strategy or acquisitions and other purposes;~~
	•		~~require us to dedicate a substantial portion of our cash flow from operations to pay principal and~~ ~~interest on our debt, which would reduce the funds available to us for other purposes;~~
	•		~~make us more vulnerable to adverse changes in general economic, industry and competitive conditions, as well as in government regulation and to our business;~~
	•		~~expose us to risks inherent in interest rate fluctuations because some of our borrowings are atvariable rates of interest, which could result in higher interest expenses in the event of increases in interest rates; and~~
	•		~~make it more difficult to satisfy our financial obligations.~~

	•		~~incur additional debt;~~
	•		~~provide guarantees in respect of obligations of other persons;~~
	•		~~issue redeemable stock and preferred stock;~~
	•		~~pay dividends or distributions or redeem or repurchase capital stock;~~
	•		~~make loans, investments and capital expenditures;~~
	•		~~enter into transactions with affiliates;~~
	•		~~create or incur liens;~~
	•		~~make distributions from our subsidiaries;~~
	•		~~sell assets and capital stock of our subsidiaries;~~
	•		~~make acquisitions; and~~
	•		~~consolidate or merge with or into, or sell substantially all of our assets to, another person.~~

	•		~~challenges assimilating the acquired operations;~~
	•		~~unanticipated costs and known and unknown legal or financial liabilities associated with an acquisition;~~
	•		~~diversion of management’s attention from our core businesses;~~
	•		~~adverse effects on existing business relationships with customers;~~
	•		~~entering markets in which we have limited or no experience;~~
	•		~~potential loss of key employees of purchased organizations;~~
	•		~~the incurrence of excessive leverage in financing an acquisition;~~
	•		~~failure to maintain and renew contracts of the acquired business;~~
	•		~~costs associated with litigation or other claims arising in connection with the acquired company;~~
	•		~~unanticipated operating, accounting or management difficulties in connection with an acquisition; and~~
	•		~~dilution to our earnings per share.~~

	•		~~political or economic instability;~~
	•		~~changes in governmental regulation or taxation;~~
	•		~~currency exchange fluctuations;~~
	•		~~difficulties and costs of staffing and managing operations in certain foreign countries;~~
	•		~~work stoppages or other changes in labor conditions; and~~
	•		~~taxes and other restrictions on repatriating foreign profits back to the US.~~

	High		Low
2015
Fourth Quarter	$	56.92	$	41.80
Third Quarter	$	53.49	$	39.08
Second Quarter	$	55.99	$	40.52
First Quarter	$	53.60	$	36.03

2014
Fourth Quarter	$	48.70	$	34.03
Third Quarter	$	49.41	$	35.70
Second Quarter	$	43.35	$	28.07
First Quarter	$	29.00	$	23.91

Period	Total Number of Shares of Common Stock Purchased (1)		Average Price Paid per Share		Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Program (2)		Maximum Number of Shares of Common Stock that May Yet Be Purchased Under Program (3)		Maximum Dollar Value of Shares of Common Stock that May Yet Be Purchased Under Program (2) (in thousands)

Fourth quarter:
October 1, 2015 to October 31, 2015		751,061	$	41.23		-		243,900	$	-
November 1, 2015 to November 30, 2015		59,818	$	46.97		54,100		243,900		67,489
December 1, 2015 to December 31, 2015		55,481	$	47.24		55,050		243,900		64,887

Total		866,360	$	42.01		109,150		243,900	$	64,887

	~~(1)~~	Includes (i) shares that were acquired from employees in connection with the settlement of income tax and related benefit withholding obligations arising from vesting in restricted stock awards; (ii) common stock retained by us for the payment of the exercise price upon the exercise of stock options; (iii) the repurchase of 707,318 shares of our common stock for approximately $29.0 million that was not subject to a specific plan; and (iv) the repurchase of shares under the repurchase program authorized by the Board of Directors on November 4, 2015. For more information on these repurchases, see Note 12,~~Stockholders’ Equity~~Risk.~~, in the notes to consolidated financial statements.~~

	~~(2)~~	On November 4, 2015 our Board of Directors authorized the Company to engage in a common stock repurchase program to repurchase up to $70.0 million in aggregate value of the Company’s common stock during the twelve-month period following November 4, 2015. As of December 31, 2015, we have spent approximately $5.1 million to purchase 109,150 shares of our common stock under this plan.

	~~(3)~~	Our Board of Directors approved a stock repurchase program in February 2007 for up to one million shares of our common stock. Through December 31, 2012, we spent approximately $14.4 million to purchase 756,100 shares of our common stock on the open market under this program. No purchases have been made under the program since 2012. This program was formally cancelled by the Company in January 2016.

Plan category	Number ofsecurities tobe issuedupon exerciseofoutstandingoptions,warrants andrights		Weighted-averageexercise priceof outstandingoptions,warrants andrights		(a) Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans (excludingsecurities reflected incolumn (a))
Equity compensation plans approved by security holders (1)		505,452		$34.84		1,262,626
Equity compensation plans not approved by security holders		—		—		—
Total		505,452		$34.84		1,262,626

	Year Ended December 31,
		2015(1)(2)(3)(8)			2014(1)(4)(5)			2013(1)(7)(8)		2012(1)(6)(8)			2011(1)(9)
	(dollars and shares in thousands, except per share data)
Statement of operations data:
Service revenue, net	$	1,695,446		$	1,136,211		$	798,766	$	777,010		$	623,814

Operating expenses:
Service expense		1,544,365			1,023,785			736,669		732,242			578,612
General and administrative expense		73,616			44,501			25,590		27,011			21,870
Depreciation and amortization		53,469			22,833			9,331		9,606			8,716
Asset impairment charges		-			-			-		2,506			-
Total operating expenses		1,671,450			1,091,119			771,590		771,365			609,198
Operating income		23,996			45,092			27,176		5,645			14,616
Other expenses:
Interest expense, net		16,213			13,122			6,921		7,513			10,009
Loss on extinguishment of debt		-			-			525		-			2,463
Equity in net loss of investee		10,970			-			-		-			-
Gain on foreign currency transactions		(857	)		(37	)		-		-			-
Income (loss) from continuing operations,before income taxes		(2,330	)		32,007			19,730		(1,868	)		2,144
Provision for income taxes		16,276			8,090			6,625		494			77
Income (loss) from continuing operations,net of tax		(18,606	)		23,917			13,105		(2,362	)		2,067
Discontinued operations, net of tax		101,800			(3,642	)		6,333		10,844			14,873
Net income		83,194			20,275			19,438		8,482			16,940
Net loss attributable to noncontrolling interests		502			-			-		-			-
Net income attributable to Providence	$	83,696		$	20,275		$	19,438	$	8,482		$	16,940

Diluted earnings per common share:
Continuing operations	$	(1.45	)	$	1.59		$	0.95	$	(0.18	)	$	0.15
Discontinued operations		5.75			(0.24	)		0.46		0.82			1.12
Total	$	4.30		$	1.35		$	1.41	$	0.64		$	1.27

Weighted-average number of commonshares outstanding:
Diluted		15,961			15,019			13,810		13,225			13,322

	As of December 31,
		2015(1)		2014(4)(5)		2013(7)		2012		2011(9)
		(dollars in thousands)
Balance sheet data:
Cash and cash equivalents	$	84,770	$	135,258	$	75,156	$	26,250	$	21,840
Total assets		1,053,976		1,168,934		425,954		391,737		379,053
Long-term obligations, including currentportion		303,845		574,613		123,500		130,000		150,493
Other liabilities		382,423		372,907		151,817		143,050		119,537
Convertible preferred stock		77,576		-		-		-		-
Total stockholders' equity		290,132		221,414		150,637		118,687		109,023

~~(1)~~	On November 1, 2015, we completed the sale of our Human Services segment. Accordingly, the results of operations and financial condition of our Human Services segment have been presented in discontinued operations for all periods presented. Included in 2015 is a gain on the sale of the Human Services segment, net of tax, totaling approximately $100.3 million.

~~(2)~~	The Company incurred approximately $20.9 million of accelerated expense related to restricted shares and cash placed into escrow at the time of the Ingeus acquisition. The shares and cash were placed into escrow concurrent with the payments of the acquisition consideration paid for Ingeus; however, because two sellers of Ingeus remained employees post acquisition, the value of the shares and cash was recognized as compensation expense over the escrow term. Acceleration was triggered when the two sellers separated from the Company. In addition, in 2015 and 2014, respectively, the Company incurred $5.9 million and $4.5 million of expense prior to the separation of these two employees. Benefits of $2.5 million and $16.1 million associated with the reduction in the fair value of Ingeus contingent consideration are included in general and administrative expenses for 2015 and 2014, respectively. 2015 expenses also include $12.2 million of WD Services’ redundancy costs and $2.4 million in Ingeus transaction related expenses, whereas 2014 includes $11.8 million in acquisition costs primarily related to the acquisitions of Ingeus and Matrix.

~~(3)~~	The loss on equity investments relates to our investment in Mission Providence. Mission Providence began providing services in July 2015 and has incurred substantial start-up and administrative costs to date.

~~(4)~~	Two significant acquisitions were completed during 2014. We acquired Ingeus effective May 30, 2014 and we acquired Matrix effective October 23, 2014. These acquisitions resulted in the creation of two new segments in 2014, WD Services and HA Services. These acquisitions affect the comparability of the information reflected in the selected financial data. See the year on year analysis included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report for more information.

~~(5)~~	On May 28, 2014 we entered into the first amendment to our credit facility which increased the aggregate amount of the revolving credit facility from $165.0 million to $240.0 million. On October 23, 2014, we entered into the second amendment to our credit facility which added an additional term loan in the amount of $250.0 million. Additionally, on October 23, 2014, we entered into a 14.0% unsecured subordinated related party note in the aggregate principal amount of $65.5 million. The unsecured subordinated related party note was repaid on February 11, 2015 with proceeds from the issuance of $65.5 million of convertible preferred stock. The increases in our debt balances resulted in an increase in interest expense in 2014 over 2013. Additionally, 2014 includes approximately $4.5 million of financing fees that were deferred and fully expensed within interest expense in the fourth quarter of 2014 in relation to bridge financing commitments and approximately $3.0 million of third party financing fees that are included in general and administrative expense.

~~(6)~~	As a result of changes in the market environment in British Columbia, we initiated intangible asset impairment valuations of our Canadian business and, based on the results, we recorded impairment charges totaling approximately $2.5 million related to our intangible assets other than goodwill for the year ended December 31, 2012.

~~(7)~~	On August 2, 2013, we executed a new credit facility and paid all amounts due under the then existing credit facility with proceeds from the new credit facility. In conjunction with the termination of the previous credit facility, we recorded a loss on extinguishment of debt in 2013 of approximately $0.5 million.

~~(8)~~	We incurred expense (net of benefit of forfeiture of stock-based compensation) of approximately $0.7 million, $1.3 million and $1.3 million in 2015, 2013 and 2012, respectively for severance and retirement payments related former executive officers and key employees.

~~(9)~~	On March 11, 2011, we executed a new credit facility and paid all amounts due under the then existing credit facility with cash in the amount of $12.3 million and proceeds from the new credit facility. In conjunction with the termination of the previous credit facility, we recorded a loss on extinguishment of debt in 2011 of approximately $2.5 million.

	●	$17.2 million increase in accounts receivable primarily due to a $10.9 million increase in the discontinued operation Human Services’ accounts receivable balance and an $11.0 million increase in NET Services’ accounts receivable balance. $2.8 million of the increase in Human Services’ accounts receivable balance was due to increased sales volume associated with two acquisitions completed by the segment in 2014. The majority of the remaining increase in Human Services’ accounts receivable balance was attributable to slower collections of fourth quarter revenue in 2014 versus 2013. The increase in NET Services’ accounts receivable balance was primarily due to two large payers that had amounts due as of December 31, 2014 that were subsequently collected at the beginning of 2015;

	●	An approximate $8.0 million increase in prepaid and other assets primarily related to a $3.6 million increase in prepaid income taxes associated with our discontinued operation Human Services and NET Services segments, a $2.9 million preferred share backstop fee paid to a related party in association with the financing of our acquisition of Matrix, and $1.8 million of prepaid compensation associated with the acquisition of Ingeus; and

	●	An approximate $28.5 million increase in accounts payable and accrued expenses primarily attributable to the timing of payments related to non-emergency transportation contract reimbursements due to a change in the timing of our provider payments for our NET Services segment which resulted in significant provider payments being paid in January as opposed to December in the prior year.

	At December 31, 2015
Contractual cash obligations (000's)	Total		Less than 1 Year		1-3 Years		3-5 Years		After 5 Years
Debt	$	304,950	$	31,375	$	273,575	$	-	$	-
Interest (1)		27,530		11,404		16,126		-		-
Purchased services commitments (2)		3,895		1,952		1,461		482		-
Equity investment capital contributions		4,654		4,654		-		-		-
Guarantees (3)		34,586		34,036		550		-		-
Letters of credit (3)		8,233		4,360		280		-		3,593
Operating Leases (4)		73,569		25,864		25,268		13,403		9,034
Total	$	457,417	$	113,645	$	317,260	$	13,885	$	12,627

~~(1)~~	~~Future interest payments have been calculated at the current rates as of December 31, 2015.~~
~~(2)~~	Our purchase obligations represent the minimum obligations we have under agreements with certain of our vendors. These minimum obligations are less than our projected use for those periods. Payments may be more than the minimum obligations based on actual use.
~~(3)~~	Guarantees and letters of credit (“LOCs”) are commitments that represent funding responsibilities that may require our performance in the event of third-party demands or contingent events. Guarantees include surety bonds we provide to certain customers to protect against potential non-delivery of our non-emergency transportation services. Of the outstanding balance of our stand-by LOCs, $8.2 million directly reduces the amount available to us from our revolving credit facility. The surety bonds and LOC amounts in the above table represent the amount of commitment expiration per period.

	December 31,
	2015			2014
Assets
Current assets:
Cash and cash equivalents	$	84,770		$	135,258
Accounts receivable, net of allowance of$5,587 in 2015 and $4,515 in 2014		178,049			107,565
Other receivables		16,298			5,314
Prepaid expenses and other		30,718			43,134
Restricted cash		4,012			3,234
Deferred tax assets		5,877			4,148
Current assets of discontinued operations		-			75,993
Total current assets		319,724			374,646
Property and equipment, net		57,787			42,648
Goodwill		340,029			342,412
Intangible assets, net		285,951			323,904
Other assets		34,399			18,812
Restricted cash, less current portion		16,044			14,764
Deferred tax asset		42			-
Non-current assets of discontinued operations		-			51,748
Total assets	$	1,053,976		$	1,168,934
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term obligations	$	31,375		$	24,588
Note payable to related party		-			65,500
Accounts payable		30,007			46,557
Accrued expenses		130,552			99,273
Accrued transportation costs		64,537			55,492
Deferred revenue		28,667			10,743
Reinsurance and related liability reserves		10,134			11,077
Current liabilities of discontinued operations		-			26,228
Total current liabilities		295,272			339,458
Long-term obligations, less current portion		272,470			484,525
Other long-term liabilities		25,052			25,974
Deferred tax liabilities		93,474			96,928
Non-current liabilities of discontinued operations		-			635
Total liabilities		686,268			947,520
Commitments and contingencies (Note 19)
Reedeemable convertible preferred stock
Convertible preferred stock, net: Authorized 10,000,000 shares;$0.001 par value; 803,518 and 0 issued and outstanding;5.5%/8.5% dividend rate		77,576			-
Stockholders' equity
Common stock: Authorized 40,000,000 shares; $0.001 parvalue; 17,186,780 and 16,870,285 issued and outstanding(including treasury shares)		17			17
Additional paid-in capital		293,012			261,155
Retained earnings (accumulated deficit)		69,209			(13,366	)
Accumulated other comprehensive loss, net of tax		(16,831	)		(8,756	)
Treasury shares, at cost, 1,895,998 and 1,014,108 shares		(54,823	)		(17,686	)
Total Providence stockholders' equity		290,584			221,364
Noncontrolling interest		(452	)		50
Total stockholders' equity		290,132			221,414
Total liabilities and stockholders' equity	$	1,053,976		$	1,168,934

	Common Stock				Additional Paid-In			Retained Earnings (Accumulated			Accumulated Other Comprehensive Loss, Net of			Treasury Stock					Non- Controlling
	Shares		Amount		Capital			Deficit)			Tax			Shares		Amount			Interest			Total
Balance at December 31, 2012		13,785,947	$	14	$	180,778		$	(53,079	)	$	(893	)		928,478	$	(15,094	)	$	6,961		$	118,687
Stock-based compensation		-		-		3,079			-			-			-		-			-			3,079
Exercise of employee stock options, including net tax benefit of $437		592,126		-		10,506			-			-			-		-			-			10,506
Restricted stock issued		99,239		-					-			-			27,964		(547	)		-			(547	)
Foreign currency translation adjustments, net of tax		-		-		-			-			(526	)		-		-			-			(526	)
Net income attributable to Providence		-		-		-			19,438			-			-		-			-			19,438
Balance at December 31, 2013		14,477,312		14		194,363			(33,641	)		(1,419	)		956,442		(15,641	)		6,961			150,637
Stock-based compensation		-		-		7,562			-			-			-		-			-			7,562
Exercise of employee stock options, including net tax benefit of $2,683		512,927		-		13,702			-			-			-		-			-			13,702
Restricted stock issued		74,714		-		-			-			-			18,504		(524	)		-			(524	)
PSC of Canada Exchange Corp. shares exchanged		261,694		1		6,960			-			-			39,162		(1,521	)		(6,961	)		(1,521	)
Restricted shares issued related to Ingeus acquisition, unvested		596,915		1		(1	)		-			-			-		-			-			-
Restricted shares issued related to Matrix acquisition, unvested		946,723		1		38,569			-			-			-		-			-			38,570
Other		-		-		-			-			-			-		-			50			50
Foreign currency translation adjustments, net of tax		-		-		-			-			(7,337	)		-		-			-			(7,337	)
Net income attributable to Providence		-		-		-			20,275			-			-		-			-			20,275
Balance at December 31, 2014		16,870,285		17		261,155			(13,366	)		(8,756	)		1,014,108		(17,686	)		50			221,414
Stock-based compensation		-		-		26,622			-			-			-		-			-			26,622
Exercise of employee stock options, including net tax benefit of $2,706		247,333		-		7,899			-			-			5,718		(299	)		-			7,600
Restricted stock issued		65,447		-		-			-			-			15,961		(759	)		-			(759	)
Stock repurchase		-		-		-			-			-			816,468		(34,111	)		-			(34,111	)
Shares surrendered by employees to pay employee taxes related to shares released from escrow		-		-		-			-			-			43,743		(1,968	)		-			(1,968	)
Conversion of convertible preferred stock to common stock		3,715		-		150			-			-			-		-			-			150
Beneficial conversion feature related to preferred stock		-		-		1,071			-			-			-		-			-			1,071
Convertible preferred stock dividends		-		-		(2,814	)		(1,121	)		-			-		-			-			(3,935	)
Accretion of convertible preferred stock discount		-		-		(1,071	)		-			-			-		-			-			(1,071	)
Foreign currency translation adjustments, net of tax		-		-		-			-			(8,075	)		-		-			-			(8,075	)
Noncontrolling interests		-		-		-			-			-			-		-			(502	)		(502	)
Net income attributable to Providence		-		-		-			83,696			-			-		-			-			83,696
Balance at December 31, 2015		17,186,780	$	17	$	293,012		$	69,209		$	(16,831	)		1,895,998	$	(54,823	)	$	(452	)	$	290,132

	Year Ended December 31,
Supplemental cash flow information	2015			2014		2013

Cash included in current assets of discontinuedoperations held for sale	$	-		$	25,148	$	23,839
Cash paid for interest	$	16,699		$	10,726	$	5,839
Cash paid for income taxes	$	21,555		$	18,389	$	13,395
Accrued unfunded future equity investment capital contributions	$	4,654		$	-	$	-
PSC of Canada Exchange Corp. shares exchanged	$	-		$	6,961	$	-
PSC of Canada Exchange Corp. shares converted totreasury shares for fulfillment of obligation by sellersof WCG related to dispute with British Columbia	$	-		$	1,521	$	-
Acquisitions:
Purchase price	$	-		$	525,596	$	989
Less:
Cash acquired		-			37,159		-
Common stock issued for acquistions of business		-			38,570		-
Contingent consideration		-			30,095		-
Note payable to former shareholder		-			600		-
Amount due to former shareholder		-			2,186		-
Working capital adjustments to purchase price		(3,433	)		-		-
Acquisitions, net of cash acquired	$	3,433		$	416,986	$	989

Component	Description	Purpose
Base Salary	Fixed cash component.	Reward for sustained individual performance, overall skills, experience and tenure.
2015 Cash Bonus Awards	2015 cash bonus awards consisted of the Annual Incentive Program (“AIP”) and special bonuses. Special bonuses rewarded NEOs for numerous accomplishments made in ~~both periods served as collateral~~2015 in support of the business strategy.	Provide direct financial incentive to the executives to achieve specific financial and individual goals.
Long-Term Incentives (“LTI”)	LTI consisted of the new HoldCo LTI Plan and Senior Executive LTIP. Performance-based Restricted Stock Units (“PBRSUs”) and Time-Based Restricted Stock (“TBRS”) were also granted in the beginning of the year to certain NEOs at that time under our old equity plan design, prior to establishing the HoldCo LTI Plan. One-time new hire grants were provided to certain executives in connection with their employment agreements.	New HoldCo LTI Plan aligns with holding company business strategy and drives stockholder value creation. Senior Executive LTIP drives growth for ~~irrevocable standby letters~~each of ~~credit~~the segments.
Stock Matching Program	Participants purchased shares out-of-pocket and received a one-for-one match in options subject to ~~secure any reinsured claims losses under~~time-based vesting.	Encourages ownership and alignment with the Company’s ~~reinsurance program;~~success over a multi-year period.
Benefits and Perquisites	We provide certain benefits generally available to all salaried employees and we provide additional benefits for NEOs. Perquisites for NEOs relate primarily to commuting reimbursement. See Benefits and Perquisites for further detail.	Provide an appropriate level of employee benefits.
Post-Termination Compensation	NEOs are eligible for certain payments post-termination, as specified in Potential Payments Upon Termination or Change in Control.	Provide an appropriate level of payment in the event of a change in control or termination.
Other Policies	Stock Ownership Guidelines Clawback Anti-Hedging / Anti-Pledging	Enhance alignment with stockholder interests.

Name	2014 Base Salary⁽¹⁾	2015 Base Salary
Mr. Lindstrom	N/A	$650,000⁽²⁾
Mr. David Shackelton	N/A	$450,000⁽³⁾
Mr. Rustand	$590,000	$740,000
Mr. Wilson	$400,000	$400,000
Mr. Hicks	$350,000	$350,000
Mr. Schwarz	$432,000	$500,000
Ms. Uzzell	N/A	$250,000

Name	Target AIP Opportunity as % of Salary
Mr. Lindstrom	75%⁽¹⁾
Mr. David Shackelton	75%⁽²⁾
Mr. Rustand	100%
Mr. Wilson	50%
Mr. Hicks	75%
Mr. Schwarz	75%
Ms. Uzzell	50%⁽³⁾

Target/Budgeted EBITDA		$137.7M
Actual EBITDA		$67.4M
Payout as a % of Target		0%

HoldCo LTI Pool Value at Varying Levels of Stock Price Performance
($ in millions, except per share amounts)
				(Threshold)
Compound Annual Growth Rate (1)		0.0	%		8.0	%		15.0	%
Determination Share Price (2)	$	47.20		$	56.79		$	66.04

Stockholder Value (3)	$	914.8		$	1,100.6		$	1,279.8
Less: Hurdle Shareholder Value	$	(1,100.6	)	$	(1,100.6	)	$	(1,100.6	)
Extraordinary Shareholder Value	$	-		$	-		$	179.3
HoldCo LTI Pool Value(4)	$	-		$	-		$	14.3
Implied # of RSUs (5)		-			-			217,157

Named Executive Officer	Percent Allocation of Pool
Mr. Lindstrom	40%
Mr. David Shackelton	20%
Mr. Hicks	7.5%
Ms. Uzzell	7.5%
All Other Participants	10%
Reserve for Future Awards	15%

PBRSU Pay/Performance Scale

3-Year ROE	Payout as a % of Target

≥ 15%	100%

≥ 12 but less than 15%	33%

< 12%	0%

Executive	Total Target $ Value		# of PBRSUs at Maximum		# of TBRS
Rustand	$	851,000		13,085		3,271
Hicks	$	315,000		4,843		1,211
Schwarz	$	575,000		8,841		2,210
Total				26,769		6,692

Amedisys	LHC Group

Chemed	Magellan Health Services

Ensign Group	MAXIMUS

Envision Healthcare Holdings	Restaurant Brands International

Healthways	TransDigm Group

IPC Healthcare

	December 31, 2015
Current assets	$	7,789
Long-term assets		8,869
Current liabilities		10,488
Long-term liabilities		-