Providence Service seeks shareholder support for director nominees

By Lisa Kerner

Charlotte, N.C., May 5 - Providence Service Corp. began mailing definitive proxy materials to its stockholders in connection with the annual meeting set for June 15.

The record date for the meeting is April 20.

The company's board of directors is recommending that stockholders vote to re-elect as directors the company's chairman and chief executive officer Fletcher Jay McCusker and Kristi L. Meints, chairperson of the board's audit committee.

Providence urged shareholders to reject the dissident nominees put forth by Avalon Correctional Services, Inc. and its controlling stockholder, Donald C. Smith.

In a Tuesday letter to shareholders, Providence said that as of Friday, the company's stock is up more than 615% since the beginning of the year.

"Even in this challenging economic environment, your company continues to perform well," Providence told shareholders.

The company said its revenue for the full year ended Dec. 31 increased approximately 143% to $691.7 million from $285.2 million in 2007.

Providence said it expects its first quarter of 2009 to be "an extraordinarily strong quarter with anticipated revenue of between approximately $180.0 million and $185.0 million and diluted earnings per share of at least $0.35."

Avalon's nominees have "no relevant experience in the social services industry" and the company has a "history of substandard corporate governance practices," Providence said.

In addition, the dissident group has not provided any plans or proposals to enhance stockholder value, according to Providence.

"We believe that the ultimate goal of the dissident group is to be able to assert substantial influence and effective control over Providence disproportionate to their investment in Providence," the letter said.

Avalon wants change

As previously reported, Avalon and its affiliates filed preliminary proxy materials seeking the election of Michael C. Bradley Jr. and retired U.S. Navy captain Brian T. Costello to Providence's board.

In March, Avalon dropped its consent solicitation against Providence after Providence's board of directors unanimously approved changes to the company's bylaws.

Avalon wanted to change Providence's bylaws to prevent the company from, among other thing, obtaining background information on board candidates, Providence said previously.

Oklahoma City-based Avalon owns and operates private community correctional facilities and correctional programming.

Providence is a Tucson-based provider of home- and community-based social services to government-sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.

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