UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

Form 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

or

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-20372

RES-CARE, INC.

(Exact name of registrant as specified in its charter)

KENTUCKY		61-0875371
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)
9901 Linn Station Road		40223-3808
Louisville, Kentucky		~~40223-3808~~(Zip Code)
(Address of principal executive offices)		~~(Zip Code)~~

Registrant’s telephone number, including area code:(502) 394-2100

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 twelve 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 üNo __.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes üNo __.

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 definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12-b of the Act (Check one):

Large accelerated filer: __ Accelerated filer: __ Non-accelerated filer: ü Smaller reporting company: __

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes __No ü.

The number of shares outstanding of the registrant’s common stock, no par value, as of ~~October~~July 31, ~~2013~~2014 was 21,344,741.

Table of Contents

INDEX

RES-CARE, INC. AND SUBSIDIARIES

		~~PAGE~~	PAGE
PART I.	FINANCIAL INFORMATION	~~NUMBER~~	NUMBER
Item 1.	Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013	3	3
	Condensed Consolidated Statements of Comprehensive Income – Three Months Ended September 30, 2013 and 2012; Nine Months Ended September 30, 2013 and 2012	4
	Condensed Consolidated Statements of Comprehensive Income – Three Months Ended June 30, 2014 and 2013; Six Months Ended June 30, 2014 and 2013		4
	Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2013 and 2012	5
	Condensed Consolidated Statements of Shareholder’s Equity		5
	Notes to Condensed Consolidated Financial Statements – September 30, 2013	6
	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2014 and 2013		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Notes to Condensed Consolidated Financial Statements – June 30, 2014		7
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 4.	Controls and Procedures	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		27
PART II.	OTHER INFORMATION
Item 4.	Controls and Procedures		27
Item 1.	Legal Proceedings	28
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	28
Item 1.	Legal Proceedings		28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 1A.	Risk Factors		28
Item 3.	Defaults upon Senior Securities	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 4.	Mine Safety Disclosures	28
Item 3.	Defaults upon Senior Securities		28
Item 5.	Other Information	28
Item 4.	Mine Safety Disclosures		28
Item 6.	Exhibits	28
Item 5.	Other Information		28
SIGNATURES
Item 6.	Exhibits		28
EXHIBITS
SIGNATURES
EXHIBITS

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

(Unaudited)

	September 30			December 31
	June 30			December 31
	2013			2012
	2014			2013
ASSETS
Current assets:
Cash and cash equivalents	$	5136,~~190~~868		$	~~50,134~~$	29,997
Accounts receivable, net of allowance for doubtful accounts of $11,978 in 2013 and $11,997 in 2012	230,745			228,377
Accounts receivable, net of allowance for doubtful accounts of $16,194 in 2014 and $11,900 in 2013	251,191				241,873
Refundable income taxes	~~2,982~~926			—	—
Deferred income taxes	1826,~~870~~820			~~17,589~~	19,811
Prepaid expenses and other current assets	26,434			22,116
Non-trade receivables	4,503				6,852
Total current assets	330,221			318,216
Prepaid expenses and other current assets	17,916				19,578
Property and equipment, net	100,128			97,030
Total current assets	338,224				318,111
Goodwill	301,710			288,265
Property and equipment, net	101,621				101,021
Other intangible assets, net	326,038			321,293
Goodwill	308,927				308,350
Other assets	23,703			27,154
Other intangible assets, net	329,680				333,613
Total assets	$	1,081,800		$	1,051,958
Other assets	26,068				25,182
LIABILITIES AND SHAREHOLDER’S EQUITY
Total assets	$	1,104,520			$	1,086,277
Current liabilities:
LIABILITIES AND SHAREHOLDER’S EQUITY
Trade accounts payable	$	32,296		$	37,738
Current liabilities:
Accrued expenses	140,340			114,876
Trade accounts payable	$	37,503			$	34,089
Current portion of long-term debt	12,305			14,695
Accrued expenses	133,168				120,803
Current portion of obligations under capital leases	6,606			6,052
Current portion of long-term debt	11,185				14,291
Accrued income taxes	606			1,813
Current portion of obligations under capital leases	6,515				6,516
Total current liabilities	192,153			175,174
Accrued income taxes	3,218				—
Long-term liabilities	37,449			56,469
Total current liabilities	191,589				175,699
Long-term debt	350,247			358,420
Long-term liabilities	43,631				39,143
Obligations under capital leases	14,040			11,632
Long-term debt	450,036				345,506
Deferred income taxes	109,014			106,253
Obligations under capital leases	14,485				13,724
Total liabilities	702,903			707,948
Deferred income taxes	119,189				116,084
Shareholder’s equity:
Total liabilities	818,930				690,156
Preferred shares, authorized 1,000,000 shares, no par value, except 48,095 shares designated as Series A with stated value of $1,050 per share, no shares issued and outstanding in 2013 and 2012	—			—
Shareholder’s equity:
Common stock, no par value, authorized 40,000,000 shares, issued and outstanding 21,344,741 in 2013 and 2012	—			—
Common stock, no par value, authorized 40,000,000 shares, issued and outstanding 21,344,741 in 2014 and 2013	—				—
Additional paid-in capital	~~246~~248,~~721~~036			~~244,345~~	247,053
Retained earnings	~~132~~38,~~713~~132			~~99,734~~	149,617
Accumulated other comprehensive income (loss)	(~~328~~578		)	30	(549		)
Total shareholder’s equity – Res-Care, Inc.	379,106			344,109
Total shareholder’s equity	285,590				396,121
Noncontrolling interest	(209		)	(99		)
Total liabilities and shareholder’s equity	$	1,104,520			$	1,086,277
Total shareholder’s equity	378,897			344,010
Total liabilities and shareholder’s equity	$	1,081,800		$	1,051,958

See accompanying notes to condensed consolidated financial statements.

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RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended

~~Nine~~Six Months Ended

September 30

June 30

2013

2012

2013

2012

2014

2013

2014

2013

Revenues

~~409~~431,~~934~~434

396,~~838~~233

1852,~~195,621~~917

1785,~~194,082~~687

Cost of services

~~305~~326,~~518~~834

295,~~997~~107

~~894~~644,~~967~~432

~~896~~589,~~420~~450

Gross profit

104,~~416~~600

~~100~~101,~~841~~126

~~300~~208,~~654~~485

~~297~~196,~~662~~237

Operating expenses:

Operational general and administrative

5955,~~018~~496

57,~~331~~343

~~178~~115,~~932~~206

~~176~~112,~~412~~379

Corporate general and administrative

2029,~~474~~277

1420,~~774~~011

5157,~~828~~237

4838,~~905~~888

Total operating expenses

7984,~~492~~773

7277,~~105~~354

~~230~~172,~~760~~443

~~225~~151,~~317~~267

Operating income

2419,~~924~~827

2823,~~736~~772

6936,~~894~~042

7244,~~345~~970

Interest expense, net

8,~~140~~500

87,~~243~~665

2416,~~342~~574

2716,~~075~~202

Loss on extinguishment of debt

—659

—

—659

~~7,129~~—

Income before income taxes

1610,~~784~~668

2016,~~493~~107

4518,~~552~~809

3828,~~141~~768

Income tax expense

54,~~450~~380

85,~~249~~868

127,~~683~~846

157,~~363~~233

Net income

116,~~334~~288

1210,~~244~~239

3210,~~869~~963

2221,~~778~~535

Net loss-noncontrolling interest

~~(34~~—

)

(2440

)

~~(110~~—

)

(8576

)

Net income-Res-Care, Inc.

116,~~368~~288

1210,~~268~~279

3210,~~979~~963

2221,~~863~~611

Other comprehensive income:

Foreign currency translation adjustments

56235

~~265~~(223

)

(~~358~~29

)

~~294~~(414

)

Comprehensive income attributable to Res-Care, Inc.

116,~~424~~523

1210,~~533~~056

3210,~~621~~934

2321,~~157~~197

Total comprehensive income

116,~~390~~523

1210,~~509~~016

3210,~~511~~934

2321,~~072~~121

See accompanying notes to condensed consolidated financial statements.

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RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH~~SHAREHOLDER’S ~~FLOWS~~EQUITY

(In thousands)

(Unaudited)

	Nine Months Ended
										Accumulated
	September 30
					Additional					Other
	2013			2012
	Common Stock				Paid-In		Retained			Comprehensive
Cash flows from operating activities:
	Shares		Amount		Capital		Earnings			Income/(Loss)			Total
Net income	$	32,869		$	22,778
Balance at December 31, 2013	21,345		—		$	247,053	$	149,617		$	(549	)	$	396,121
Adjustments to reconcile net income to cash provided by operating activities:
Net income	—		—		—		10,963			—			10,963
Depreciation and amortization	25,535			25,208
Foreign currency translation adjustment arising during period	—		—		—		—			(29		)	(29		)
Amortization of discount and deferred debt issuance costs	2,612			2,091
Cash dividends declared	—		—		—		(122,448		)	—			(122,448		)
Share-based compensation	~~2,376~~—		—	~~2,945~~	983		—			—			983
Deferred income taxes, net	1,480			1,622
Balance at June 30, 2014	21,345		—		$	248,036	$	38,132		$	(578	)	$	285,590
Provision for losses on accounts receivable	4,430			4,237
Loss on extinguishment of debt, net of original issue discount paid	—			6,400
Loss on sale of assets	81			76
Changes in operating assets and liabilities	(13,935		)	(23,102		)
Cash provided by operating activities	55,448			42,255
Cash flows from investing activities:
Purchases of property and equipment	(15,007		)	(11,324		)
Acquisitions of businesses, net of cash acquired	(19,995		)	(22,077		)
Proceeds from sale of assets	344			80
Cash used in investing activities	(34,658		)	(33,321		)
Cash flows from financing activities:
Long-term debt repayments	(14,190		)	(172,077		)
Long-term debt borrowings	—			175,000
Payments on obligations under capital leases	(5,446		)	(4,510		)
Debt issuance costs	(2		)	(4,007		)
Cash used in financing activities	(19,638		)	(5,594		)
Effect of exchange rate changes on cash and cash equivalents	(96		)	93
Increase in cash and cash equivalents	1,056			3,433
Cash and cash equivalents at beginning of period	50,134			25,651
Cash and cash equivalents at end of period	$	51,190		$	29,084
Supplemental schedule of non-cash investing and financing activities:
Notes issued in connection with acquisitions	$	1,336		$	739
Capital lease obligations	$	8,409		$	4,254
Settlement of Seller obligations in connection with an acquisition	$	1,240		$	—

See accompanying notes to condensed consolidated financial statements.

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RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 30
	2014			2013
Cash flows from operating activities:
Net income	$	10,963		$	21,535
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	18,068			16,726
Amortization of deferred debt issuance costs	1,182			1,742
Share-based compensation	983			1,552
Deferred income taxes, net	(3,904		)	2,347
Provision for losses on accounts receivable	5,141			3,343
Loss on extinguishment of debt	659			—
Loss on sale of assets	96			100
Changes in operating assets and liabilities	11,552			(13,279		)
Cash provided by operating activities	44,740			34,066
Cash flows from investing activities:
Purchases of property and equipment	(9,976		)	(8,212		)
Acquisitions of businesses, net of cash acquired	(949		)	(2,234		)
Proceeds from sale of assets	203			184
Cash used in investing activities	(10,722		)	(10,262		)

Cash flows from financing activities:
Long-term debt repayments	(172,600		)	(9,280		)
Long-term debt borrowings	275,000			—
Payments on obligations under capital leases	(3,692		)	(3,499		)
Dividend paid	(122,448		)	—
Debt issuance costs	(3,618		)	(2		)
Cash used in financing activities	(27,358		)	(12,781		)

Effect of exchange rate changes on cash and cash equivalents	211			(81		)

Increase in cash and cash equivalents	6,871			10,942

Cash and cash equivalents at beginning of period	29,997			50,134

Cash and cash equivalents at end of period	$	36,868		$	61,076

Supplemental schedule of non-cash investing and financing activities:
Notes issued in connection with acquisitions	$	98		$	336
Capital lease obligations	$	4,452		$	6,513
Settlement of Seller obligations in connection with an acquisition	$	—		$	1,240
Purchases of property and equipment in accounts payable	$	197		$	—

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands, except per share data)

(Unaudited)

Note 1. Basis of Presentation

Res-Care, Inc. is a human service company that provides residential, therapeutic, job training and educational supports to people with developmental or other disabilities, youth with special needs, adults who are experiencing barriers to employment, and older people who need home care assistance. All references in this Quarterly Report on Form 10-Q to “ResCare”, “Company”, “our company”, “we”, “us”, or “our” mean Res-Care, Inc. and, unless the context otherwise requires, its consolidated subsidiaries.

The accompanying condensed consolidated financial statements of ResCare have been prepared in accordance with Article 10 of Regulation S-X and do not include all information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for comprehensive annual financial statements. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial condition and results of operations for the interim periods have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full year.

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts and related disclosures of commitments and contingencies. We rely on historical experience and on various other assumptions that we believe to be reasonable under the circumstances to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

For further information refer to the consolidated financial statements and footnotes thereto in our ~~2012~~2013 Annual Report on Form 10-K filed February 1918, ~~2013~~2014.

Reclassification

Certain immaterial reclassifications between segments have been made to 2012 amounts to conform to 2013 presentation.

Out-of-Period Items

During the third quarter of 2013, we recorded an out-of-period adjustment which increased our costs of services by approximately $1 million and decreased net income by approximately $0.6 million. This item related to the second quarter of 2013 and resulted from a physical inventory adjustment in our Pharmacy operation. We also identified and recorded another out-of-period adjustment during the third quarter of 2013 which decreased revenues by approximately $1.3 million, of which $0.5 million related to 2012 and $0.8 million related to the first half of 2013. These out-of-period adjustments decreased net income for the third quarter of 2013 by approximately $2.3 million before tax ($1.4 million after tax). We evaluated the total out-of-period adjustments impacting the third quarter and year-to-date 2013, both individually and in the aggregate, in relation to the current period, when they were corrected, as well as the periods in which they originated and concluded that these adjustments are not material to any financial statements for all impacted periods.

Segments

Effective ~~January~~July 1, 2013, we ~~began~~made ~~managing~~certain ~~and~~changes ~~operating~~within our ~~Pharmacy~~business ~~Services~~lines asto ameet ~~new~~our ~~reporting~~future ~~segment~~growth objectives. ~~Pharmacy~~ Some ~~Services~~of isthe acomponents ~~limited,~~and ~~closed-door~~structure ~~pharmacy~~within ~~focused~~certain onreportable ~~serving~~segments ~~individuals~~changed ~~with~~and ~~cognitive,~~our ~~intellectual~~Youth Services segment’s name changed to Education and ~~developmental~~Training ~~disabilities~~Services. The ~~pharmacy~~majority ~~operations~~of ~~were~~our ~~previously~~Residential ~~included~~Youth ~~with~~reporting ~~our~~unit moved from the Education and Training Services segment to the Residential Services segment. AsWe also moved a ~~result~~small ofoperation ~~this~~from ~~change,~~our ~~the~~ResCare ~~results~~HomeCare segment to our Education and Training Services segment. Therefore, as of July 1, 2013, our reportable segments are: (i) Residential Services, ~~segment~~(ii) ResCare ~~has~~HomeCare, ~~been~~(iii) Education ~~retrospectively~~and ~~recast~~Training ~~for~~Services, ~~all~~(iv) Workforce ~~periods~~Services ~~presented~~and (v) Pharmacy Services.

~~Effective~~Residential ~~July 1,~~Services ~~2013~~primarily includes services for individuals with intellectual, wecognitive ~~made~~or ~~certain~~other ~~changes~~developmental ~~within~~disabilities in our ~~business~~community ~~lines~~home settings. ResCare HomeCare primarily includes periodic in-home care services to ~~meet~~the ~~our~~elderly, ~~future~~as ~~growth~~well ~~objectives~~as persons with disabilities. ~~Our~~ ~~reportable~~Education ~~segments~~and ~~did~~Training ~~not~~Services ~~change~~consists ~~significantly~~of our Job Corps centers, alternative education programs, charter schools, training for professionals working with children, training for potential foster and adoptive parents and other individual and family counseling and instruction. ~~Some~~Workforce Services is comprised of ~~the~~our ~~components~~domestic job training and ~~structure~~placement ~~within~~programs ~~certain~~that ~~reportable~~assist ~~segments~~welfare ~~changed~~recipients and ~~our~~disadvantaged ~~Youth~~job seekers in finding employment and improving their career prospects. Pharmacy Services ~~segment’s~~is ~~name~~a ~~changed~~limited, closed-door pharmacy business focused on serving individuals with intellectual and developmental disabilities. We believe the changes in our segments will allow us to ~~Education~~serve our customers more efficiently and ~~Training~~allow ~~Services~~future growth and long-term sustainability. ~~The~~We ~~majority~~have ofpresented prior periods to reflect the change in our segments. Further information regarding our segments is included in Note 7.

~~- 6 -~~Reclassification

Certain shared services related expenses have been reclassified from operational general and administrative expense to corporate general and administrative expense effective January 1, 2014. These shared services include quality, human

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Table of Contents

~~Residential~~resources, ~~Youth~~government ~~reporting~~relations ~~unit~~and ~~moved~~certain ~~from~~accounting ~~the~~and ~~Education~~finance ~~and~~oversight ~~Training~~functions, ~~Services~~as ~~segment~~well toas the ~~Residential~~business ~~Services~~centers ~~segment. We~~for ~~also moved a small operation from~~ our ~~ResCare HomeCare segment to our Education and Training Services segment~~operations. ~~Further~~Prior ~~information~~periods ~~regarding~~have ~~our~~been ~~segments~~reclassified isfor ~~included in Note 7~~comparability.

A $2.4 million favorable health insurance adjustment was recorded as a credit to corporate general and administrative expenses in the three months ended March 31, 2014 due to favorable health claim trends. In the three months ended June 30, 2014, it was determined that this favorable health insurance adjustment related to our operating segments, therefore we reclassified the $2.4 million from corporate general and administrative expenses to the operating segments.

Note 2. Acquisitions

We completed ~~five~~two acquisitions within our Residential Services, and ResCare HomeCare ~~and Education and Training Services~~ segments during the first ~~nine~~six months of ~~2013~~2014. Aggregate consideration for these acquisitions was approximately $241.50 million, including $1.0.1 million of notes issued ~~and net settlement of management fees of $1~~.2 ~~million.~~ The operating results of the acquisitions are included in the condensed consolidated financial statements from the date of acquisition. Proforma results and other disclosure have not been included as the acquisitions are considered immaterial, individually and in ~~aggregate to~~ the ~~three and nine month periods ended September 30, 2013~~aggregate.

The preliminary aggregate purchase price for these acquisitions was allocated as follows:

Accounts receivable	$	1,024
Prepaid assets	$		9
Property and equipment	~~358~~14
Other intangible assets	~~9,972~~574
Goodwill	~~13,282~~	449
Other assets	269
Aggregate purchase price	$		1,046
Liabilities	(410		)
Aggregate purchase price	$	24,495

The other intangible assets consist primarily of customer relationships, ~~trade names~~ and covenants not to compete. All intangible assets will be amortized over five to twenty years. We expect all of the $130.34 million of goodwill will be deductible for tax purposes.

Note 3. Goodwill

Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist. The date of our annual impairment test is October 1. ~~A change in our reportable segments, more fully described herein in Note 1, resulted in a change in the composition of our reporting units, which is the unit of accounting for goodwill.~~ ~~Accordingly, we reallocated goodwill between our Residential Services, ResCare HomeCare, Education and Training Services and Pharmacy Services reporting units using the relative fair value approach.~~ A summary of changes to goodwill during the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 is as follows:

					Education
	Residential		ResCare		& Training		Workforce		Pharmacy
	Services		HomeCare		Services		Services		Services		Total
Balance at January 1, 2013
Balance at January 1, 2014
Goodwill	$	~~169~~182,~~547~~446	$	6673,~~361~~547	$	15,311	$	32,720	$	4,326	$	~~288~~308,~~265~~350
Goodwill added through acquisitions	~~8,618~~263		~~4,664~~186		—		—		—		~~13,282~~449
Other	163		—		—		—		—		163
Other (1)	128		—		—		—		—		128
Balance at September 30, 2013	$	178,328	$	71,025	$	15,311	$	32,720	$	4,326	$	301,710
Balance at June 30, 2014	$	182,837	$	73,733	$	15,311	$	32,720	$	4,326	$	308,927

(1) Primarily relates to foreign currency translation adjustments.

For our October 1, 2013 annual impairment test, all reporting units passed Step One. The ResCare HomeCare reporting unit passed Step One with a fair value that exceeded its carrying value by a 7 percent margin. Inability to meet projected results utilized in the annual impairment test could lead to a potential impairment in the future.

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Note 4. Debt

Long-term debt and obligations under capital leases consist of the following:

- 7 -

	June 30		December 31
	2014		2013

10.75% senior notes due 2019	$	200,000	$	200,000
Senior secured Term Loan A due 2017	—		157,513
Senior secured Term Loan A due 2019	198,925		—
Senior secured Revolving Facility	60,000		—
Obligations under capital leases	21,000		20,240
Notes payable and other	2,296		2,284
	482,221		380,037
Less current portion	17,700		20,807
	$	464,521	$	359,230

On April 25, 2014, we entered into an amended and restated senior secured credit facility (the “2014 Credit Agreement”) in an aggregate principal amount of $650 million, which replaced our 2012 senior secured credit facility and the related term loan A. The 2014 Credit Agreement consists of a Term Loan A (the “Term Loan A”) in an aggregate principal amount of $200 million, a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $250 million, and a Delayed-Draw Term Loan A (the “DDTL”) in an aggregate amount of $200 million. At closing, proceeds from the new Term Loan A and Revolving Facility were used to (i) refinance the prior revolver and term loan A, (ii) fund a distribution to shareholders of approximately $130 million, and (iii) fund related transaction fees and expenses, and (iv) used for working capital and other general corporate purposes permitted under the 2014 Credit Agreement, including certain acquisitions and investments. The Term Loan A, the Revolving Facility and the DDTL (if drawn upon) each mature on April 25, 2019. The Term Loan A will amortize in an aggregate annual amount equal to a percentage of the original principal amount of the Term Loan A beginning September 30, 2014 as follows: (i) 5% during each of the first two years after funding, (ii) 7.5% during the third year after funding, (iii) 10% during the fourth year after funding and, (iv) 12.5% during the final year of the term. The balance of the Term Loan A is payable at maturity. Pricing for the Term Loan A, Revolving Facility and the DDTL (if drawn upon) will be variable, at the London Interbank Offer Rate (LIBOR) plus 225 basis points. LIBOR is defined as having no minimum rate. The DDTL may be drawn within 12 months from the closing date to call the 10.75% senior unsecured notes due 2019 (which are callable on January 15, 2015) and other uses allowed in the 2014 Credit Agreement. The 2014 Credit Agreement also provides that, upon satisfaction of certain conditions, the Company may increase the aggregate principal amount of loans outstanding thereunder by up to $175 million, subject to receipt of additional lending commitments for such loans. The loans and other obligations under the 2014 Credit Agreement are (i) guaranteed by Onex Rescare Holdings Corp. (“Holdings”) and substantially all of its subsidiaries (subject to certain exceptions and limitations) and (ii) secured by substantially all of the assets of the Company, Holdings and substantially all of its subsidiaries (subject to certain exceptions and limitations). The 2014 Credit Agreement contains financial covenants which require us to maintain specific ratios with respect to interest coverage and leverage. This agreement provides for the exclusion of charges incurred with the resolution of certain named legal proceedings, as well as any non-cash impairment charges, in the calculation of certain financial covenants.

Our obligations under capital leases are $21.0 million as of June 30, 2014, due primarily to vehicle capital leases. The current portion of these lease obligations was $6.5 million.

We recorded a loss on extinguishment of debt of $0.7 million for the three and six month periods ended June 30, 2014 associated with termination of the 2012 senior secured revolving credit facility and the Term Loan A prepayment. Loss on extinguishment of debt consists principally of write-offs of deferred debt issuance costs. This transaction was primarily accounted for as a modification and was analyzed on a lender by lender basis.

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Table of Contents

	September 30		December 31
	2013		2012
10.75% senior notes due 2019	$	200,000	$	200,000
Senior secured Term Loan A due 2017	159,701		170,625
Senior secured credit facility	—		—
Obligations under capital leases	20,646		17,683
Notes payable and other	2,851		2,491
	383,198		390,799
Less current portion	18,911		20,747
	$	364,287	$	370,052

Subsequent to receiving the proceeds from the 2014 Credit Agreement, we declared and paid a dividend of $122.4 million to Onex ResCare Holdings Corp shareholders. We also recorded a one-time pre-tax charge of $7.6 million for the accrual of discretionary payments to stock option holders, of which $3.8 million was paid out prior to June 30, 2014.

On April 5, 2012, we entered into a new senior secured credit facility (the “Credit Agreement”) in an aggregate principal amount of $375 million, which replaced our 2010 senior secured revolving credit facility and the senior secured term loan (the “Term Loan B”). The Credit Agreement consists of a term loan (the “Term Loan A”) in an aggregate principal amount of $175 million and a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $200 million. The Term Loan A and the Revolving Facility each mature on April 5, 2017. The Term Loan A will amortize in an aggregate annual amount equal to a percentage of the original principal amount of the Term Loan A as follows: (i) 5% during each of the first two years after funding, (ii) 10% during the third year after funding and (iii) 15% during each of the final two years of the term. The balance of the Term Loan A is payable at maturity. Pricing for the Term Loan A will be variable, at the London Interbank Offer Rate (LIBOR) plus a spread, which is currently 275 basis points. LIBOR is defined as having no minimum rate. The spread varies between 225 and 300 basis points depending on our total leverage ratio. The proceeds of the Term Loan A were used to repay the Company’s prior Term Loan B and pay certain related fees and expenses. The proceeds of the Revolving Facility may be used for working capital and for other general corporate purposes permitted under the Credit Agreement, including certain acquisitions and investments. The Credit Agreement also provides that, upon satisfaction of certain conditions, the Company may increase the aggregate principal amount of loans outstanding thereunder by up to $175 million, subject to receipt of additional lending commitments for such loans. The loans and other obligations under the Credit Agreement are (i) guaranteed by Onex Rescare Holdings Corp. (“Holdings”) and substantially all of its subsidiaries (subject to certain exceptions and limitations) and (ii) secured by substantially all of the assets of the Company, Holdings and substantially all of its subsidiaries (subject to certain exceptions and limitations). The Credit Agreement contains various financial covenants relating to capital expenditures and rentals, and requires us to maintain specific ratios with respect to interest coverage and leverage. The agreement continues to provide for the exclusion of charges incurred with the resolution of certain legal proceedings provided in Note 8 to Notes to the Condensed Consolidated Financial Statements, as well as any non-cash impairment charges, in the calculation of certain financial covenants.

Our obligations under capital leases are $20.6 million as of September 30, 2013, due primarily to vehicle capital leases. The current portion of these lease obligations was $6.6 million (see Note 11).

Note 5. Income Taxes

The effective tax rate was 3241.51% and 4036.34% for the three months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013, respectively, and 2741.87% and 4025.31% for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013, respectively. The ~~decrease~~2014 inrate was negatively impacted by the ~~effective~~expiration of jobs tax credits (not renewed for 2014), while the 2013 rate iswas ~~primarily~~favorably ~~due~~impacted toby the ~~impact~~renewal of jobs tax credits. On January 2, 2013, legislation was enacted that reinstated the jobs credit provisions retroactive to January 1, 2012. The ~~nine~~three months ended ~~September~~March 3031, 2013 ~~includes~~included ~~the~~that ~~impact~~quarter’s ~~of $3.4 million of~~ jobs tax ~~credits~~credit ~~related~~impact ~~to 2013, prorated,~~ and $3.43 million related to 2012 and prior periods’ jobs tax credit impact.

Note 6. Financial Instruments

At ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated carrying value because of the short-term nature of these instruments. The fair value of our other financial instruments subject to fair value disclosures are as follows:

- 8 -

	June 30, 2014				December 31, 2013
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Long-term debt:
10.75% senior notes	$	200,000	$	218,500	$	200,000	$	223,500
Senior secured Term Loan A due 2017	—		—		157,513		157,513
Senior secured Term Loan A due 2019	198,925		198,925		—		—
Senior secured Revolving Facility	60,000		60,000		—		—
Notes payable and other	2,296		2,247		2,284		2,200

Table of Contents

	September 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Long-term debt:
10.75% senior notes	$	200,000	$	223,500	$	200,000	$	221,000
Senior secured Term Loan A	159,701		159,701		170,625		170,625
Notes payable and other	2,851		2,751		2,491		2,410

We estimated the fair value of the debt instruments using market quotes and calculations based on current market rates available to us (Level 2).

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Note 7. Segment Information

We have five reportable operating segments: (i) Residential Services, (ii) ResCare HomeCare, (iii) Education and Training Services, (iv) Workforce Services and (v) Pharmacy Services. Residential Services primarily includes services for individuals with intellectual, cognitive or other developmental disabilities in our community home settings. ResCare HomeCare primarily includes periodic in-home care services to the elderly, as well as persons with disabilities. Education and Training Services consists of our Job Corps centers, alternative education programs, charter schools, training for professionals working with children, training for potential foster and adoptive parents and other individual and family counseling and instruction. Workforce Services is comprised of our domestic job training and placement programs that assist welfare recipients and disadvantaged job seekers in finding employment and improving their career prospects. Pharmacy Services is a limited, closed-door pharmacy focused on serving individuals with cognitive, intellectual and developmental disabilities.

The following table sets forth information about our reportable segments:

Education

Residential

ResCare

& Training

Workforce

Pharmacy

Services

HomeCare

Services

Corporate

Total

Three months ended September 30:

Three months ended June 30:

2013

2014

Revenues

~~224~~237,~~823~~927

9395,~~645~~684

3134,~~074~~046

42,~~257~~381

1821,~~135~~396

—

~~409~~431,~~934~~434

Operating income (loss) (1)

2931,~~127~~956

78,~~843~~683

2,~~867~~724

4,~~909~~883

~~844~~1,132

(2029,~~666~~551

)

2419,~~924~~827

Total assets

~~613~~628,~~770~~965

~~191~~187,~~130~~907

5051,~~495~~510

8381,~~774~~712

1820,~~609~~860

~~124~~133,~~022~~566

1,~~081~~104,~~800~~520

Capital expenditures

3,~~979~~031

~~204~~133

3919

~~228~~15

71108

2,~~274~~107

65,~~795~~413

Depreciation and amortization

5,~~432~~647

~~759~~831

~~134~~145

~~287~~384

4138

2,~~156~~068

89,~~809~~113

2012

2013

Revenues

~~212~~215,~~623~~530

8289,~~996~~607

3634,~~946~~928

4839,~~797~~596

1516,~~476~~572

—

396,~~838~~233

Operating income (loss) (1)

2926,~~819~~388

58,~~886~~316

2,~~979~~241

34,~~448~~258

12,~~405~~576

(1420,~~801~~007

)

2823,~~736~~772

Total assets

~~589~~603,~~011~~034

~~169~~180,~~957~~074

5651,~~802~~292

8978,~~415~~321

1218,~~678~~786

~~106~~135,~~372~~622

1,~~024~~067,~~235~~129

Capital expenditures

1,~~494~~913

~~135~~172

~~250~~109

764

21,~~014~~848

34,~~909~~109

Depreciation and amortization

45,~~925~~356

~~686~~560

~~152~~129

~~324~~268

3638

2,~~076~~180

8,~~199~~531

Nine months ended September 30:

Six months ended June 30:

2013

2014

Revenues

~~651~~471,~~678~~759

~~271~~189,~~886~~263

~~100~~68,~~492~~170

~~121~~82,~~671~~188

4941,~~894~~537

—

1852,~~195,621~~917

Operating income (loss) (1)

7860,~~673~~051

1816,~~921~~355

75,~~601~~545

128,~~589~~616

42,~~448~~880

(5257,~~338~~405

)

6936,~~894~~042

Capital expenditures

75,~~550~~585

~~564~~322

~~117~~24

~~352~~135

~~304~~194

63,~~120~~716

159,~~007~~976

Depreciation and amortization

1511,~~800~~153

21,~~139~~634

~~401~~290

~~833~~762

~~111~~77

64,~~251~~152

2518,~~535~~068

2012

2013

Revenues

~~631~~428,~~533~~057

~~250~~177,~~462~~039

~~114~~69,~~058~~418

~~149~~79,~~113~~414

4831,~~916~~759

—

1785,~~194,082~~687

Operating income (loss) (1)

8352,~~998~~600

1615,~~234~~021

94,~~552~~897

78,~~751~~054

3,~~717~~604

(4839,~~907~~206

)

7244,~~345~~970

Capital expenditures

3,~~933~~632

~~695~~368

4510

~~425~~124

85233

63,~~141~~845

118,~~324~~212

Depreciation and amortization

1510,~~244~~449

21,~~067~~127

~~460~~259

~~948~~546

~~122~~70

64,~~367~~275

2516,~~208~~726

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(1) Under Corporate, the operating loss is comprised of our corporate general and administrative expenses, as well as other operating income and expenses related to the corporate office.

Note 8. Legal Proceedings

ResCare, or its affiliates, are parties to various legal and/or administrative proceedings arising out of the operation of our programs and arising in the ordinary course of business. ~~Except~~We record accruals for ~~the~~such ~~matter~~contingencies ~~discussed~~to ~~below,~~the extent that we doconclude ~~not~~it ~~believe~~is ~~the~~probable ~~ultimate~~that a liability, ifhas ~~any,~~been ~~for~~incurred ~~these~~and ~~proceedings~~the oramount ~~claims~~of the loss can be reasonably estimated. In June 2014, ~~individually~~a orsettlement was reached on the wage/hour class-action lawsuit filed in 2009 in the ~~aggregate~~Superior Court of the State of California styled Gloria Nelson, et al v. ResCare, Inc., et al, which results in ~~excess~~no ofadditional ~~amounts~~charge ~~already~~to ~~provided~~our previously reserved amount. The pre-tax charges recorded in connection with legal matters, ~~will~~including ~~have~~settlements in 2014 of a ~~material~~communication ~~adverse~~practices ~~effect~~and onwage/hour ~~our~~class-action ~~condensed~~lawsuit, ~~consolidated~~increased ~~financial~~by ~~condition~~$10.8 million during the six months ended June 30, ~~results~~2014, compared to the same period in 2013. Court approval and payment of ~~operations~~the orsettlements ~~cash~~noted ~~flows~~above are expected later in 2014.

~~We record accruals for such contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.~~ No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time ~~regarding the matters specifically described below~~ because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes. Nevertheless, it is reasonably possible that the outcome of these matters may have a material adverse effect on our financial condition, results of operations or cash flows or may affect our reputation.

In March 2007, a lawsuit was filed in Bernalillo County, New Mexico State Court styled Larry Selk, by and through his legal guardian, Rani Rubio v. Res-Care New Mexico, Inc., Res-Care, Inc., et al. The lawsuit sought compensatory and punitive damages for claims of negligence, negligence per se, violations of the Unfair Practices Act and violations of the Resident Abuse and Neglect Act. On February 19, 2010, ruling on post-trial motions, the New Mexico trial court judge approved a final award of $15.5 million, plus statutory interest, in favor of plaintiffs. We, as well as the plaintiffs, appealed. Oral arguments before the Court of Appeals were held on November 15, 2011. A settlement was reached among all parties in the third quarter of 2013 and will be presented to the court in November for approval. We made provisions in our condensed consolidated financial statements for this self-insured matter and expect to fund the settlement in the fourth quarter of 2013.

During the third quarter of 2013, we recorded a pretax charge of $4.3 million in connection with the settlement of various legal matters, including the Selk matter.

Note 9. Noncontrolling Interest

As of September 30, 2013, ResCare held a 66.7% interest in Rest Assured LLC, a limited liability company comprised of public and private organizations providing remote monitoring services for persons with disabilities and the elderly. ASC 810, Noncontrolling Interests in Consolidated Financial Statements, (“ASC 810”) clarifies that noncontrolling interest be reported as a component separate from the parent’s equity and that changes in the parent’s ownership interest in a subsidiary be recorded as equity transactions if the parent retains its controlling interest in the subsidiary. The statement also requires consolidated net income to include amounts attributable to both the parent and the noncontrolling interest on the face of the income statement. In addition, ASC 810 requires a parent to recognize a gain or loss in net income on the date the parent deconsolidates a subsidiary, or ceases to have a controlling financial interest in a subsidiary. There is no foreign currency translation adjustment related to Rest Assured. Balances are as follows:

Noncontrolling interest as of December 31, 2011	$	11
Net loss-noncontrolling interest	(110		)
Noncontrolling interest as of December 31, 2012	(99		)
Net loss-noncontrolling interest	(110		)
Noncontrolling interest as of September 30, 2013	$	(209	)

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Table of Contents

Note 10. Impact of Recently Issued Accounting Pronouncements

We do not believe there are any new accounting pronouncements that have been issued that might have a material impact on our condensed consolidated financial position or results of operations.

Note 11. Revision of Previously Reported Data

As discussed in the lease arrangements footnote (Note 13) on our 2012 Form 10-K, we recorded an out-of-period adjustment in the fourth quarter of 2012 to correct the accounting treatment for our leased vehicles. Due to the immateriality of the amount, the 2011 and prior pre-tax income impact of approximately $0.7 million ($0.4 million after tax) was corrected in our revised first quarter 2012 results. The table below includes the correction of the 2012 impact of the adjustment in the revised three month and nine months ended September 30, 2012. These amounts were not considered material to the prior periods.

	As Reported			Adjustment			As Revised
Three Months Ended September 30, 2012
Revenues	$	396,838		$	—		$	396,838
Gross profit	100,636			205			100,841
Operating income	28,498			238			28,736
Interest expense	7,951			292			8,243
Net income (loss):
Net income (loss)	12,276			(32		)	12,244
Net loss – noncontrolling interest	(24		)	—			(24		)
Net income (loss) – ResCare, Inc.	$	12,300		$	(32	)	$	12,268
Nine Months Ended September 30, 2012
Revenues	$	1,194,082		$	—		$	1,194,082
Gross profit	297,648			14			297,662
Operating income	72,330			15			72,345
Interest expense	26,301			774			27,075
Net income (loss):
Net income (loss)	23,240			(462		)	22,778
Net loss – noncontrolling interest	(85		)	—			(85		)
Net income (loss) – ResCare, Inc.	$	23,325		$	(462	)	$	22,863
As of September 30, 2012
Property and equipment, net	$	81,386		$	16,590		$	97,976
Current portion of Long-term debt, including capital leases	74			5,856			5,930
Obligations under capital leases	288			11,503			11,791
Nine Months Ended September 30, 2012
Cash provided by operating activities	$	37,814		$	4,441		$	42,255
Cash provided by (used in) financing activities	(1,153		)	(4,441		)	(5,594		)

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Table of Contents

~~Note~~in 12the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes. ~~Subsidiary~~ While ~~Guarantors~~we do not believe the ultimate liability, if any, for these proceedings or claims, individually or in the aggregate, in excess of amounts already provided, will have a material adverse effect on our financial condition, results of operations or cash flows or may affect our reputation, it is reasonably possible they could.

~~The~~Note ~~Senior Notes are jointly, severally, fully and unconditionally guaranteed, subject to certain automatic customary release provisions, by our 100% owned U~~9.S. Noncontrolling subsidiaries. There are no restrictions on our ability to obtain funds from our U.S. subsidiaries by dividends or other means. The following are condensed consolidating financial statements of our company, including the guarantors. This information is provided pursuant to Rule 3 — 10 of Regulation S-X in lieu of separate financial statements of each subsidiary guaranteeing the Senior Notes. The following condensed consolidating financial statements present the balance sheet, statement of comprehensive income and cash flows of (i) Res-Care, Inc. (in each case, reflecting investments in its consolidated subsidiaries under the equity method of accounting), (ii) the guarantor subsidiaries, (iii) the non-guarantor subsidiaries, and (iv) the eliminations necessary to arrive at the information for our company on a consolidated basis. The condensed consolidating financial statements should be read in conjunction with the accompanying condensed consolidated financial statements.Interest

InEffective ~~connection~~October 1, ~~with~~2013, ~~the~~ResCare ~~preparation~~acquired ~~of our condensed consolidated financial statements for~~ the ~~third~~33.3% ~~quarter~~interest ofin ~~2013,~~Rest weAssured ~~made~~LLC ~~certain~~that ~~immaterial~~was ~~adjustments~~held toby ~~our~~an ~~condensed~~unrelated ~~consolidating~~party ~~statement~~for ofno cash ~~flows~~compensation. Prior ~~for~~to ~~the~~this ~~nine months ended September 30~~transaction, ~~2012~~ResCare toheld ~~reflect~~a ~~the~~66.7% ~~proper~~interest ~~classification~~in ofRest ~~cash~~Assured ~~flows~~LLC, ~~related~~a tolimited ~~intercompany~~liability ~~transactions in which the parent~~ company ~~made~~comprised ~~direct payments and collected direct receipts on behalf~~ of ~~certain~~public ~~guarantor~~ and ~~non-guarantor~~private ~~subsidiaries.~~organizations Weproviding ~~will~~remote ~~also~~monitoring ~~make~~services ~~similar adjustments to our condensed consolidating statements of cash flows~~ for ~~comparative~~persons ~~periods~~with ~~presented~~disabilities inand ~~future~~the ~~filings~~elderly. ~~This~~ASC ~~condensed~~810, ~~consolidating~~Noncontrolling ~~financial~~Interests ~~information is provided~~ in ~~connection~~Consolidated ~~with~~Financial ~~outstanding~~Statements, ~~senior~~(ASC ~~notes~~810) clarifies that ~~are fully and unconditionally guaranteed by~~ a ~~group~~noncontrolling ofinterest ~~our~~must ~~subsidiaries.~~be ~~These~~reported ~~adjustments~~as ~~did~~a ~~not~~component ~~affect~~separate ~~the~~from ~~assets available to~~ the ~~group~~parent’s ofequity ~~subsidiaries~~and ~~guaranteeing~~that ~~our~~changes ~~senior~~in ~~notes;~~the ~~did~~parent’s ~~not~~ownership ~~change~~interest ~~the~~in ~~net~~a ~~increase~~subsidiary ormust ~~decrease~~be inrecorded ~~cash~~as ~~and~~equity ~~cash~~transactions ~~equivalents~~if ~~for~~ the parent ~~company,~~retains ~~the~~its ~~issuer,~~controlling ~~the~~interest ~~guarantor~~in ~~subsidiaries or~~ the ~~non-guarantor~~subsidiary. ~~subsidiaries;~~The ~~and~~statement ~~had~~also norequires ~~impact on~~ consolidated ~~amounts.~~net ~~The~~income ~~substantial~~to ~~majority~~include ofamounts ~~these~~attributable ~~adjustments~~to ~~had~~both the ~~effect of a) decreasing the~~ parent ~~company’s net cash inflows from operating activities~~ and ~~increasing~~ the ~~parent~~noncontrolling ~~company’s~~interest ~~net~~on ~~cash~~the ~~inflows~~face ~~from~~of ~~financing~~the ~~activities~~income ~~by $187~~statement.0 ~~million~~In addition, b)ASC ~~increasing~~810 ~~the~~requires ~~guarantors’~~a ~~net~~parent ~~cash~~to ~~inflows~~recognize ~~from~~a ~~operating~~gain ~~activities~~or ~~and~~loss ~~increasing~~in ~~the guarantors’~~ net ~~cash~~income ~~outflows~~on ~~from~~the ~~financing~~date ~~activities by $107.5 million and c) decreasing~~ the ~~non-guarantors’~~parent ~~net~~deconsolidates ~~cash~~a ~~outflows~~subsidiary, ~~from~~or ~~operating~~ceases ~~activities~~to ~~and~~have ~~decreasing~~a ~~the~~controlling ~~non-guarantors’~~financial ~~net~~interest ~~cash~~in ~~inflows~~a ~~from~~subsidiary. Balances ~~financing~~are ~~activities~~as ~~by $79.5 million.~~follows:

Noncontrolling interest as of December 31, 2012	$	(99	)
Net loss-noncontrolling interest	(110		)
Acquisition of remaining noncontrolling interest	209

Noncontrolling interest as of December 31, 2013	$	—

Note 10. Impact of Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2016 (early adoption is not permitted), including interim periods within that reporting period. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and are currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.

Note 11. Subsidiary Guarantors

The Senior Notes are jointly, severally, fully and unconditionally guaranteed, subject to certain automatic customary release provisions, by our 100% owned U.S. subsidiaries. There are no restrictions on our ability to obtain funds from our U.S. subsidiaries by dividends or other means. The following are condensed consolidating financial statements of our company, including the guarantors. This information is provided pursuant to Rule 3 – 10 of Regulation S-X in lieu of separate financial statements of each subsidiary guaranteeing the Senior Notes. The following condensed consolidating financial statements present the balance sheet, statement of comprehensive income and cash flows of (i) Res-Care, Inc. (in each case, reflecting investments in its consolidated subsidiaries under the equity method of accounting), (ii) the guarantor subsidiaries, (iii) the non-guarantor subsidiaries, and (iv) the eliminations necessary to arrive at the information for our company on a consolidated basis. The condensed consolidating financial statements should be read in conjunction with the accompanying condensed consolidated financial statements.

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Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

~~September~~June 30, ~~2013~~2014

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	4635,~~764~~450		$	~~3,659~~505		$	~~767~~913		$	—		$	5136,~~190~~868
Accounts receivable, net	2631,~~143~~100			~~204~~220,~~381~~022			~~221~~69			—			~~230~~251,~~745~~191
Refundable income taxes	~~2,982~~926			—			—			—			~~2,982~~926
Deferred income taxes	1826,~~870~~820			—			—			—			1826,~~870~~820
Prepaid expenses and other current assets	15,229			10,765			440			—			26,434
Non-trade receivables	3,409			1,071			23			—			4,503
Total current assets	109,988			218,805			1,428			—			330,221
Prepaid expenses and other current assets	8,386			9,516			14			—			17,916
Property and equipment, net	50,202			49,572			354			—			100,128
Total current assets	106,091			231,114			1,019			—			338,224
Goodwill	296,476			—			5,234			—			301,710
Property and equipment, net	49,879			51,712			30			—			101,621
Other intangible assets, net	298,724			27,311			3			—			326,038
Goodwill	303,870			27			5,030			—			308,927
Intercompany	—			691,102			69,723			(760,825		)	—
Other intangible assets, net	295,177			34,503			—			—			329,680
Investment in subsidiaries	966,516			42,772			—			(1,009,288		)	—
Intercompany	—			713,512			68,266			(781,778		)	—
Other assets	19,916			3,769			18			—			23,703
Investment in subsidiaries	1,010,952			37,913			—			(1,048,865		)	—
	$	1,741,822		$	1,033,331		$	76,760		$	(1,770,113	)	$	1,081,800
Other assets	19,981			6,087			—			—			26,068
	$	1,785,950		$	1,074,868		$	74,345		$	(1,830,643	)	$	1,104,520
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Trade accounts payable	$	1622,~~520~~739		$	1514,~~737~~741		$	3923		$	—		$	3237,~~296~~503
Accrued expenses	7873,~~668~~629			6058,~~827~~943			~~845~~596			—			~~140~~133,~~340~~168
Current portion of long-term debt	10,~~938~~000			1,~~367~~185			~~1,167~~—			~~(1,167~~—		)	1211,~~305~~185
Current portion of obligations under capital leases	—			6,~~606~~515			—			—			6,~~606~~515
Accrued income taxes	~~662~~3,218			—			~~(56~~—		)	—			~~606~~3,218
Total current liabilities	~~106~~109,~~788~~586			8481,~~537~~384			~~1,995~~619			~~(1,167~~—		)	~~192~~191,~~153~~589
Intercompany	~~761~~779,~~189~~684			—			—			(~~761~~779,~~189~~684		)	—
Long-term liabilities	3642,~~962~~976			~~487~~655			—			—			3743,~~449~~631
Long-term debt	~~348~~448,~~763~~925			1,~~484~~111			—			—			~~350~~450,~~247~~036
Obligations under capital leases	—			14,~~040~~485			—			—			14,~~040~~485
Deferred income taxes	~~109~~119,~~014~~189			—			—			—			~~109~~119,~~014~~189
Total liabilities	1,~~362~~500,~~716~~360			~~100~~97,~~548~~635			~~1,995~~619			(~~762~~779,~~356~~684		)	~~702~~818,~~903~~930
Preferred shares	—			—			—			—			—
Common stock	—			—			—			—			—
Additional paid-in capital	~~246~~248,~~721~~036			~~477~~478,~~447~~422			122,~~998~~023			(600,445		)	~~246~~248,~~721~~036
Retained earnings	~~132~~38,~~713~~132			~~455~~498,~~354~~829			(47,~~214~~134		)	(~~408~~451,~~140~~695		)	~~132~~38,~~713~~132
Accumulated other comprehensive (loss) income	(~~328~~578		)	(18		)	(~~810~~1,163		)	~~828~~1,181			(~~328~~578		)
Total shareholder’s equity-Res-Care, Inc.	379,106			932,783			74,974			(1,007,757		)	379,106
Total shareholder’s equity	285,590			977,233			73,726			(1,050,959		)	285,590
Noncontrolling interest	—			—			(209		)	—			(209		)
	$	1,785,950		$	1,074,868		$	74,345		$	(1,830,643	)	$	1,104,520
Total shareholder’s equity	379,106			932,783			74,765			(1,007,757		)	378,897
	$	1,741,822		$	1,033,331		$	76,760		$	(1,770,113	)	$	1,081,800

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Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, ~~2012~~2013

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	4226,~~633~~335		$	42,~~795~~860		$	~~2,706~~802		$	—		$	5029,~~134~~997
Accounts receivable, net	2125,~~515~~953			~~206~~215,~~491~~864			~~371~~56			—			~~228~~241,~~377~~873
Refundable income taxes	—			—			—			—			—
Deferred income taxes	1719,~~589~~811			—			—			—			1719,~~589~~811
Prepaid expenses and other current assets	11,620			9,981			515			—			22,116
Non-trade receivables	4,592			2,237			23			—			6,852
Total current assets	93,357			221,267			3,592			—			318,216
Prepaid expenses and other current assets	10,793			8,765			20			—			19,578
Property and equipment, net	43,320			53,282			428			—			97,030
Total current assets	87,484			229,726			901			—			318,111
Goodwill	282,832			—			5,433			—			288,265
Property and equipment, net	50,854			50,160			7			—			101,021
Other intangible assets, net	302,293			19,000			—			—			321,293
Goodwill	303,270			27			5,053			—			308,350
Intercompany	—			629,357			70,725			(700,082		)	—
Other intangible assets, net	297,535			36,078			—			—			333,613
Investment in subsidiaries	906,981			42,014			—			(948,995		)	—
Intercompany	—			695,097			68,427			(763,524		)	—
Other assets	24,073			3,064			17			—			27,154
Investment in subsidiaries	990,793			37,913			—			(1,028,706		)	—
	$	1,652,856		$	967,984		$	80,195		$	(1,649,077	)	$	1,051,958
Other assets	18,746			6,436			—			—			25,182
	$	1,748,682		$	1,055,437		$	74,388		$	(1,792,230	)	$	1,086,277
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Trade accounts payable	$	2017,~~499~~851		$	1716,~~181~~210		$	5828		$	—		$	3734,~~738~~089
Accrued expenses	5561,~~299~~175			58,~~729~~950			~~848~~678			—			~~114~~120,~~876~~803
Current portion of long-term debt	13,~~098~~125			1,~~573~~166			~~1,746~~—			~~(1,722~~—		)	14,~~695~~291
Current portion of obligations under capital leases	—			6,~~052~~516			—			—			6,~~052~~516
Accrued income taxes	~~1,843~~—			—			~~(30~~—		)	—			~~1,813~~—
Total current liabilities	9092,~~739~~151			8382,~~535~~842			~~2,622~~706			~~(1,722~~—		)	175,~~174~~699
Intercompany	~~697~~761,~~988~~430			—			—			(~~697~~761,~~988~~430		)	—
Long-term liabilities	5638,~~240~~508			~~229~~635			—			—			5639,~~469~~143
Long-term debt	~~357~~344,~~527~~388			~~893~~1,118			—			—			~~358~~345,~~420~~506
Obligations under capital leases	—			1113,~~632~~724			—			—			1113,~~632~~724
Deferred income taxes	~~106~~116,~~253~~084			—			—			—			~~106~~116,~~253~~084
Total liabilities	1,~~308~~352,~~747~~561			9698,~~289~~319			~~2,622~~706			(~~699~~761,~~710~~430		)	~~707~~690,~~948~~156
Preferred shares	—			—			—			—			—
Common stock	—			—			—			—			—
Additional paid-in capital	~~244~~247,~~345~~053			~~476~~478,~~811~~422			~~125~~121,~~104~~814			(~~601~~600,~~915~~236		)	~~244~~247,~~345~~053
Retained earnings	99149,~~734~~617			~~394~~478,~~902~~714			(47,~~055~~178		)	(~~347~~431,~~847~~536		)	99149,~~734~~617
Accumulated other comprehensive (loss) income	30(549		)	(18		)	(~~377~~954		)	~~395~~972			30(549		)
Total shareholder’s equity-Res-Care, Inc.	344,109			871,695			77,672			(949,367		)	344,109
Total shareholder’s equity	396,121			957,118			73,682			(1,030,800		)	396,121
Noncontrolling interest	—			—			(99		)	—			(99		)
	$	1,748,682		$	1,055,437		$	74,388		$	(1,792,230	)	$	1,086,277
Total shareholder’s equity	344,109			871,695			77,573			(949,367		)	344,010
	$	1,652,856		$	967,984		$	80,195		$	(1,649,077	)	$	1,051,958

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Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended ~~September~~June 30, ~~2013~~2014

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	5964,~~873~~084		$	~~349~~366,~~309~~960		$	~~752~~390		$	—		$	~~409~~431,~~934~~434
Operating expenses	6261,~~872~~388			~~321~~349,~~376~~908			~~762~~311			—			~~385~~411,~~010~~607
Operating (loss) income	(2,999		)	27,933			(10		)	—			24,924
Operating income	2,696			17,052			79			—			19,827
Other expenses (income):
Interest, net	8,~~180~~168			~~(104~~333		)	64(1		)	—			8,~~140~~500
Equity in earnings of subsidiaries	(18,744		)	(311		)	—			19,055			—
Loss on extinguishment of debt	659			—			—			—			659
Total other (income) expenses	(10,564		)	(415		)	64			19,055			8,140
Equity in earnings of subsidiaries	(9,945		)	—			—			9,945			—
Income (loss) before income taxes	7,565			28,348			(74		)	(19,055		)	16,784
Total other (income) expenses	(1,118		)	333			(1		)	9,945			9,159
Income tax (benefit) expense	(3,803		)	9,282			(29		)	—			5,450
Income (loss) before income taxes	3,814			16,719			80			(9,945		)	10,668
Net income (loss)	11,368			19,066			(45		)	(19,055		)	11,334
Income tax (benefit) expense	(2,474		)	6,820			34			—			4,380
Net loss-noncontrolling interest	—			—			(34		)	—			(34		)
Net income (loss)	6,288			9,899			46			(9,945		)	6,288
Net income (loss)-Res-Care, Inc.	11,368			19,066			(11		)	(19,055		)	11,368
Net loss-noncontrolling interest	—			—			—			—			—
Net income (loss)-Res-Care, Inc.	6,288			9,899			46			(9,945		)	6,288
Other comprehensive income (loss):
Foreign currently translation adjustments	56235			—			56(235		)	~~(56~~235		)	56235
Comprehensive income (loss) attributable to Res-Care, Inc.	$	116,~~424~~523		$	199,~~066~~899		$	45(189	)	$	(199,~~111~~710	)	$	116,~~424~~523
Total comprehensive income (loss)	$	116,~~424~~523		$	199,~~066~~899		$	11(189	)	$	(199,~~111~~710	)	$	116,~~390~~523

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Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

~~Nine~~Six Months Ended ~~September~~June 30, ~~2013~~2014

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	~~182~~126,~~937~~220		$	1725,~~010,425~~910		$	~~2,259~~787		$	—		$	1852,~~195,621~~917
Operating expenses	~~195~~125,~~326~~436			~~927~~690,~~947~~726			~~2,454~~713			—			1816,~~125,727~~875
Operating (loss) income	(12,389		)	82,478			(195		)	—			69,894
Operating income	784			35,184			74			—			36,042
Other expenses (income):
Interest, net	2415,~~410~~900			~~(246~~676		)	~~178~~(2		)	—			2416,~~342~~574
Equity in earnings of subsidiaries	(59,535		)	(758		)	—			60,293			—
Loss on extinguishment of debt	659			—			—			—			659
Total other (income) expenses	(35,125		)	(1,004		)	178			60,293			24,342
Equity in earnings of subsidiaries	(20,159		)	—			—			20,159			—
Income (loss) before income taxes	22,736			83,482			(373		)	(60,293		)	45,552
Total other (income) expenses	(3,600		)	676			(2		)	20,159			17,233
Income tax (benefit) expense	(10,243		)	23,030			(104		)	—			12,683
Income (loss) before income taxes	4,384			34,508			76			(20,159		)	18,809
Net income (loss)	32,979			60,452			(269		)	(60,293		)	32,869
Income tax (benefit) expense	(6,579		)	14,393			32			—			7,846
Net loss-noncontrolling interest	—			—			(110		)	—			(110		)
Net income (loss)	10,963			20,115			44			(20,159		)	10,963
Net income (loss)-Res-Care, Inc.	32,979			60,452			(159		)	(60,293		)	32,979
Net loss-noncontrolling interest	—			—			—			—			—
Net income (loss)-Res-Care, Inc.	10,963			20,115			44			(20,159		)	10,963
Other comprehensive income (loss):
Foreign currently translation adjustments	(~~358~~29		)	—			(~~358~~29		)	~~358~~29			(~~358~~29		)
Comprehensive income (loss) attributable to Res-Care, Inc.	$	3210,~~621~~934		$	6020,~~452~~115		$	~~(517~~15	)	$	(5920,~~935~~130	)	$	3210,~~621~~934
Total comprehensive income (loss)	$	3210,~~621~~934		$	6020,~~452~~115		$	~~(627~~15	)	$	(5920,~~935~~130	)	$	3210,~~511~~934

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Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended ~~September~~June 30, ~~2012~~2013

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	62,~~506~~612		$	~~333~~332,~~462~~866		$	~~870~~755		$	—		$	396,~~838~~233
Operating expenses	6867,~~257~~277			~~298~~304,~~973~~324			~~872~~860			—			~~368~~372,~~102~~461
Operating (loss) income	(54,~~751~~665		)	3428,~~489~~542			(2105		)	—			2823,~~736~~772
Other expenses (income):
Interest, net	7,~~960~~935			~~286~~(327		)	(357		)	—			87,~~243~~665
Loss on extinguishment of debt	—			—			—			—			—
Equity in earnings of subsidiaries	(2024,~~457~~576		)	(69304		)	—			2024,~~526~~880			—
Total other (income) expenses	(1216,~~497~~641		)	~~217~~(631		)	(357		)	2024,~~526~~880			87,~~243~~665
(Loss) income before income taxes	6,746			34,272			1			(20,526		)	20,493
Income (loss) before income taxes	11,976			29,173			(162		)	(24,880		)	16,107
Income tax (benefit) expense	(51,~~522~~697		)	134,~~770~~195			1(24		)	—			85,~~249~~868
Net income (loss)	1210,~~268~~279			2024,~~502~~978			—(138		)	(2024,~~526~~880		)	1210,~~244~~239
Net loss-noncontrolling interest	—			—			(2440		)	—			(2440		)
Net income (loss)-Res-Care, Inc.	1210,~~268~~279			2024,~~502~~978			24(98		)	(2024,~~526~~880		)	1210,~~268~~279
Other comprehensive income (loss):
Foreign currently translation adjustments	~~265~~(223		)	—			~~265~~(223		)	~~(265~~223		)	~~265~~(223		)
Comprehensive income (loss) attributable to Res-Care, Inc.	$	1210,~~533~~056		$	2024,~~502~~978		$	~~289~~(321	)	$	(2024,~~791~~657	)	$	1210,~~533~~056
Total comprehensive income (loss)	$	1210,~~533~~056		$	2024,~~502~~978		$	~~265~~(361	)	$	(2024,~~791~~657	)	$	1210,~~509~~016

- 17 -

Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

~~Nine~~Six Months Ended ~~September~~June 30, ~~2012~~2013

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Revenues	$	~~189~~123,~~821~~064		$	1661,~~001,834~~116		$	21,~~427~~507		$	—		$	1785,~~194,082~~687
Operating expenses	~~207~~132,~~428~~454			~~911~~606,~~707~~571			21,~~602~~692			—			1740,~~121,737~~717
Operating (loss) income	(179,~~607~~390		)	9054,~~127~~545			(~~175~~185		)	—			7244,~~345~~970
Other expenses (income):
Interest, net	2616,~~396~~230			~~687~~(142		)	(8114		)	—			2716,~~075~~202
Loss on extinguishment of debt	~~7,129~~—			—			—			—			~~7,129~~—
Equity in earnings of subsidiaries	(5340,~~408~~791		)	(~~153~~447		)	—			5341,~~561~~238			—
Total other (income) expenses	(1924,~~883~~561		)	~~534~~(589		)	(8114		)	5341,~~561~~238			3416,~~204~~202
(Loss) income before income taxes	2,276			89,593			(167		)	(53,561		)	38,141
Income (loss) before income taxes	15,171			55,134			(299		)	(41,238		)	28,768
Income tax (benefit) expense	(206,~~587~~440		)	3613,~~017~~748			(6775		)	—			157,~~363~~233
Net income (loss)	2221,~~863~~611			5341,~~576~~386			(~~100~~224		)	(5341,~~561~~238		)	2221,~~778~~535
Net loss-noncontrolling interest	—			—			(8576		)	—			(8576		)
Net income (loss)-Res-Care, Inc.	2221,~~863~~611			5341,~~576~~386			(15148		)	(5341,~~561~~238		)	2221,~~863~~611
Other comprehensive income (loss):
Foreign currently translation adjustments	~~294~~(414		)	—			~~294~~(414		)	~~(294~~414		)	~~294~~(414		)
Comprehensive income (loss) attributable to Res-Care, Inc.	$	2321,~~157~~197		$	5341,~~576~~386		$	~~279~~(562	)	$	(5340,~~855~~824	)	$	2321,~~157~~197
Total comprehensive income (loss)	$	2321,~~157~~197		$	5341,~~576~~386		$	~~194~~(638	)	$	(5340,~~855~~824	)	$	2321,~~072~~121

- 18 -

Table of Contents

RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

~~Nine~~Six Months Ended ~~September~~ June 30, ~~2013~~2014

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Operating activities:
Net income (loss)	$	3210,~~979~~963		$	6020,~~452~~115		$	~~(269~~44	)	$	(6020,~~293~~159	)	$	3210,~~869~~963
Adjustments to reconcile net income to cash provided by operating activities:
Adjustments to reconcile net income, including
Depreciation and amortization	13,571			11,847			117			—			25,535
noncontrolling interest, to cash provided by
Amortization of discount and deferred debt issuance costs on notes	2,612			—			—			—			2,612
operating activities	6,165			7,728			(275		)	20,159			33,777
Share-based compensation	2,376			—			—			—			2,376
Cash provided by (used in) operating activities	17,128			27,843			(231		)	—			44,740
Deferred income taxes, net	1,480			—			—			—			1,480
Provision for losses on accounts receivable	754			3,676			—			—			4,430
Loss from sale of assets	—			81			—			—			81
Equity in earnings of subsidiaries	(59,535		)	(758		)	—			60,293			—
Changes in operating assets and liabilities	(33,219		)	18,816			468			—			(13,935		)
Cash (used in) provided by operating activities	(38,982		)	94,114			316			—			55,448
Investing activities:
Purchases of property and equipment	(82,~~602~~686		)	(67,~~362~~260		)	(4330		)	—			(159,~~007~~976		)
Acquisitions of businesses, net of cash acquired	—			(~~19,995~~949		)	—			—			(~~19,995~~949		)
Proceeds from sale of assets	—			~~344~~203			—			—			~~344~~203
Cash used in investing activities	(82,~~602~~686		)	(268,~~013~~006		)	(4330		)	—			(3410,~~658~~722		)
Financing activities:
Long-term debt (repayments) borrowings	(10,929		)	(2,682		)	(579		)	—			(14,190		)
Long-term debt repayments	(172,515		)	(85		)	—			—			(172,600		)
Payments on obligations under capital leases	—			(5,446		)	—			—			(5,446		)
Long-term debt borrowings	275,000			—			—			—			275,000
Debt issuance costs	(2		)	—			—			—			(2		)
Payments on obligations under capital leases	—			(3,692		)	—			—			(3,692		)
Net payments relating to intercompany financing	62,646			(61,109		)	(1,537		)	—			—
Debt issuance costs	(3,618		)	—			—			—			(3,618		)
Cash provided by (used in) financing activities	51,715			(69,237		)	(2,116		)	—			(19,638		)
Dividend paid.	(122,448		)	—			—			—			(122,448		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(96		)	—			(96		)
Net payments relating to intercompany financing	18,254			(18,415		)	161			—			—
(Decrease) increase in cash and cash equivalents	4,131			(1,136		)	(1,939		)	—			1,056
Cash (used in) provided by financing activities	(5,327		)	(22,192		)	161			—			(27,358		)
Cash and cash equivalents at beginning of period	42,633			4,795			2,706			—			50,134
Effect of exchange rate changes on cash and cash equivalents	—			—			211			—			211
Cash and cash equivalents at end of period	$	46,764		$	3,659		$	767		$	—		$	51,190
Increase (decrease) in cash and cash equivalents	9,115			(2,355		)	111			—			6,871
Cash and cash equivalents at beginning of period	26,335			2,860			802			—			29,997
Cash and cash equivalents at end of period	$	35,450		$	505		$	913		$	—		$	36,868

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RES-CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

~~Nine~~Six Months Ended ~~September~~ June 30, ~~2012~~2013

(In thousands)

				Guarantor			Non-Guarantor						Consolidated
	ResCare, Inc.			Subsidiaries			Subsidiaries			Eliminations			Total
Operating activities:
Net income (loss)	$	2221,~~863~~611		$	5341,~~576~~386		$	(~~100~~224	)	$	(5341,~~561~~238	)	$	2221,~~778~~535
Adjustments to reconcile net income to cash provided by operating activities:
Adjustments to reconcile net income, including noncontrolling interest, to cash provided by operating activities	(35,175		)	5,948			520			41,238			12,531
Depreciation and amortization	13,588			11,486			134			—			25,208
Cash (used in) provided by operating activities	(13,564		)	47,334			296			—			34,066
Amortization of discount and deferred debt issuance costs on notes	2,091			—			—			—			2,091
Share-based compensation	2,945			—			—			—			2,945
Deferred income taxes, net	1,622			—			—			—			1,622
Provision for losses on accounts receivable	793			3,444			—			—			4,237
Loss on extinguishment of debt, net of original issue discount paid	6,400			—			—			—			6,400
Loss from sale of assets	—			76			—			—			76
Equity in earnings of subsidiaries	(53,408		)	(153		)	—			53,561			—
Changes in operating assets and liabilities	(22,859		)	3,021			(3,264		)	—			(23,102		)
Cash (used in) provided by operating activities	(25,965		)	71,450			(3,230		)	—			42,255
Investing activities:
Purchases of property and equipment	(74,~~258~~242		)	(3,~~913~~940		)	(~~153~~30		)	—			(118,~~324~~212		)
Acquisitions of businesses, net of cash acquired	—			(222,~~077~~234		)	—			—			(222,~~077~~234		)
Proceeds from sale of assets	—			80184			—			—			80184
Cash used in investing activities	(74,~~258~~242		)	(255,~~910~~990		)	(~~153~~30		)	—			(3310,~~321~~262		)
Financing activities:
Long-term debt repayments	(~~169~~8,~~640~~737		)	(~~2,129~~179		)	(~~308~~364		)	—			(~~172~~9,~~077~~280		)
Long-term debt borrowings	~~175,000~~—			—			—			—			~~175,000~~—
Debt issuance costs	(~~4,007~~2		)	—			—			—			(~~4,007~~2		)
Payments on obligations under capital leases	—			(43,~~510~~499		)	—			—			(43,~~510~~499		)
Net payments relating to intercompany financing	3741,~~429~~677			(4139,~~353~~687		)	3(1,~~924~~990		)	—			—
Cash provided by (used in) financing activities	3832,~~782~~938			(4743,~~992~~365		)	3(2,~~616~~354		)	—			(512,~~594~~781		)
Effect of exchange rate changes on cash and cash equivalents	—			—(81		)	93—			—			93(81		)
Increase (decrease) in cash and cash equivalents	515,~~559~~132			(2,~~452~~102		)	~~326~~(2,088		)	—			310,~~433~~942
Cash and cash equivalents at beginning of period	1642,~~733~~633			64,~~547~~795			2,~~371~~706			—			2550,~~651~~134
Cash and cash equivalents at end of period	$	2257,~~292~~765		$	42,~~095~~693		$	~~2,697~~618		$	—		$	2961,~~084~~076

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand ResCare’s financial performance and condition. MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes. All references in MD&A to “ResCare”, “Company”, “our company”, “we”, “us”, or “our” mean Res-Care, Inc. and unless the context otherwise requires, its consolidated subsidiaries.

Preliminary Note Regarding Forward-Looking Statements

Statements in this report that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. In addition, we expect to make such forward-looking statements in future filings with the Securities and Exchange Commission, in press releases, and in oral and written statements made by us or with our approval. These forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, capital structure and other financial items; (2) statements of plans and objectives of ResCare or our management or Board of Directors; (3) statements of future actions or economic performance, including development activities; (4) statements of assumptions underlying such statements; and (5) statements about the limitations on the effectiveness of controls. Words such as “believes”, “anticipates”, “expects”, “intends”, “plans”, “targets”, and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those ~~indicated~~ in such statements. ~~Events~~Some orof ~~circumstances~~the ~~that~~events ~~could cause actual results to differ from our forward-looking statements include, among other things, federal, state and local budgetary shortfalls~~ or ~~changes~~circumstances in reimbursement policies; reductions in reimbursement rates or authorized services or the imposition of more stringent cost controls by government and other payors; delays in timely payment by government and other payors; our ability to maintain, expand and renew existing service contracts and to obtain additional contracts; factors that adversely affect our ability to compete for contracts; changing government regulation with respect to Medicaid and other laws affecting our business; increases in regulatory oversight; and factors affecting our reputation and ability to maintain appropriate relationships with officials of government agencies and advocacy groups. These and other factors that could cause actual results to differ from those ~~indicated~~discussed in the forward-looking statements are discussed in ~~greater detail in~~ the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K and in Part II, Item 1A of this Report. Such forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date on which such statement is made.

Overview of Our Business

We receive revenues primarily from the delivery of residential, training, educational and support services to various populations with special needs. Our programs include an array of services provided in both residential and non-residential settings for adults and youths with intellectual, cognitive or other developmental disabilities, and youths who have special educational or support needs, are from disadvantaged backgrounds, or have severe emotional disorders, including some who have entered the juvenile justice system. We also offer, through drop-in or live-in services, personal care, meal preparation, housekeeping, transportation and some skilled nursing care to the elderly in their own homes. Additionally, we provide services to transition welfare recipients, young people and people who have been laid off or have special barriers to employment into the workforce and become productive employees.

WeOur ~~have five~~ reportable ~~operating~~ segments are: (i) Residential Services, (ii) ResCare HomeCare, (iii) Education & and Training Services, (iv) Workforce Services and (v) ~~Pharmacy~~ Services. Residential Services primarily includes services for individuals with intellectual, cognitive or other developmental disabilities in our community home settings. ResCare HomeCare primarily includes periodic in-home care services to the elderly, as well as persons with disabilities. Education & Training Services consists of our Job Corps centers, alternative education programs, charter schools, training for professionals working with children, training for potential foster and adoptive parents and other individual and family counseling and instruction. Workforce Services is comprised of our domestic job training and placement programs that assist welfare recipients and disadvantaged job seekers in finding employment and improving their career prospects. Pharmacy Services ~~is a limited, closed-door pharmacy focused on serving individuals with cognitive, intellectual and developmental disabilities~~.

Residential Services primarily includes services for individuals with intellectual, cognitive or other developmental disabilities in our community home settings. ResCare HomeCare primarily includes periodic in-home care services to the elderly, as well as persons with disabilities. Education and Training Services consists of our Job Corps centers, alternative education programs, charter schools, training for professionals working with children, training for potential foster and adoptive parents and other individual and family counseling and instruction. Workforce Services is comprised of our domestic job training and placement programs that assist welfare recipients and disadvantaged job seekers in finding employment and improving their career prospects. Pharmacy Services is a limited, closed-door pharmacy business focused on serving individuals with cognitive, intellectual and developmental disabilities.

We evaluate performance based on profit or loss from operations before corporate expenses and other income, interest and income taxes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment revenues and transfers are not significant. Further information regarding our segments is included in Notes 1 and 7 of the Notes to Consolidated Financial Statements.

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Revenues for our Residential Services operations are derived primarily from state Medicaid programs, and other government agencies, ~~commercial insurance companies~~ and from management contracts with private operators, ~~who are~~ generally not- for- profit providers, ~~that~~who contract with state government agencies and are ~~also~~ reimbursed under the Medicaid ~~program~~programs. Our services include social, functional and vocational skills training, supported employment and emotional and psychological counseling for individuals with intellectual or other disabilities. WeReimbursement ~~also~~varies ~~provide~~by ~~respite,~~state ~~therapeutic~~and service type, and ~~other~~may ~~services~~be tobased ~~individuals~~on ~~with~~a ~~special~~variety ~~needs~~of ~~and~~methods toincluding ~~older~~flat ~~people~~rate, incost-based ~~their~~reimbursement, ~~homes.~~per ~~These~~person ~~services~~per ~~are~~diem, ~~provided~~or onunit anof ~~as-needed~~service basis based on published fee schedules. Rates are periodically adjusted based upon state budgets or ~~hourly~~economic ~~basis~~conditions ~~through~~and ~~our~~their ~~periodic~~impact ~~in-home~~on ~~services~~state budgets. At programs ~~that~~where we are the provider of record, we are directly reimbursed onunder astate ~~unit-~~Medicaid programs for services we provide and such revenues are affected by occupancy levels. For programs where we operate pursuant to management contracts, the management fee is negotiated with the provider of~~-service~~ ~~basis~~record.

~~Reimbursement~~Revenues ~~varies~~for byour ~~state~~HomeCare ~~and~~services are ~~service~~derived ~~type,~~primarily ~~and~~from ~~may~~state beMedicaid ~~based on a variety of methods including flat-rate~~programs, ~~cost-based reimbursement~~Medicare, ~~per~~other ~~person~~governmental ~~per diem~~programs, orcommercial ~~unit-of-service~~insurance ~~basis.~~programs ~~Rates are periodically adjusted based upon state budgets or economic conditions~~ and ~~their~~private ~~impact~~pay ~~on state budgets~~agreements. AtWe ~~programs~~provide ~~where~~a werange ~~are the provider~~ of ~~record~~ services, weboth ~~are~~skilled ~~directly~~and ~~reimbursed~~non-skilled, ~~under~~primarily ~~state Medicaid programs~~ for ~~services~~older wepeople ~~provide~~in ~~and~~their ~~such revenues are affected by occupancy levels~~homes. AtThese ~~most~~services ~~programs~~are ~~that~~provided weon ~~operate~~an ~~pursuant~~as toneeded ~~management~~basis and are ~~contracts,~~reimbursed ~~the~~on ~~management~~a ~~fee~~unit ~~is negotiated with the provider~~ of ~~record~~service basis. ~~Through~~We ~~ResCare HomeCare, we~~ also provide these in-home services to seniors on a private pay basis. We are concentrating growth efforts in the home care private pay business to further diversify our revenue streams.

We operate vocational training centers under the federal Job Corps program administered by the Department of Labor (“DOL”) through our Education & and Training Services operations. Under Job Corps contracts, we are reimbursed for direct costs of services related to Job Corps center operations, allowable indirect costs for general and administrative costs, plus a predetermined management fee. The management fee takes the form of a fixed contractual amount plus a computed amount based on certain performance criteria. All of such amounts are reflected as revenue, and all such direct costs are reflected as cost of services. Final determination of amounts due under Job Corps contracts is subject to audit and review by the DOL, and renewals and extension of Job Corps contracts are based in part on performance reviews.

We operate job training and placement programs that assist disadvantaged job seekers in finding employment and improving their career prospects through our Workforce Services operations. These programs are administered under contracts with local and state governments. We are typically reimbursed for direct costs of services related to the job training centers, allowable indirect costs plus a fee for profit. The fee can take the form of a fixed contractual amount (rate or price) or be computed based on certain performance criteria. The contracts are funded by federal agencies, including the DOL and Department of Health and Human Services.

Revenues for our Pharmacy Services operations are derived primarily from the Federal Medicare Part D plan, State Medicaid programs and other third-party payors. Revenue is recognized in the period pharmaceutical medications are shipped or at the time consultant pharmacist services are rendered.

Outlook

We provide a variety of vital human services and derive a significant portion of our revenue from state and federal government sources. Despite cost containment efforts, many states are dealing with budget deficits or shortfalls as a result of recent economic conditions, including their Medicaid budgets that fund a significant portion of the services we provide. We are seeing some unfavorable sequestration impacts to our Education & Training Services and Workforce Services segments. The Department of Labor (DOL) announced slot reductions and other cost savings initiatives across all Job Corps centers effective July 1, 2013 and preliminary Workforce Investment Act (WIA) adult and youth related funding cuts. These future impacts are discussed further in the Results of Operations section.

Application of Critical Accounting Policies

Our discussion and analysis of the financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts and related disclosures of commitments and contingencies. We rely on historical experience and on various other assumptions that we believe to be reasonable under the circumstances to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

We continually review our accounting policies and financial information disclosures. A summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements was provided in our 2012 Annual Report on Form 10-K filed February 19, 2013. Management has discussed the development, selection, and application of our critical accounting policies with our Audit Committee. During the first nine months of 2013, there were no material changes in the critical accounting policies and assumptions.

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2013 Annual Report on Form 10-K filed February 18, 2014. Management has discussed the development, selection, and application of our critical accounting policies with our Audit Committee. During the first six months of 2014, there were no material changes in the critical accounting policies and assumptions.

Results of Operations

	Three Months Ended						~~Nine~~Six Months Ended
	September 30						September 30
	June 30						June 30
	2013			2012			2013			2012
	2014			2013			2014			2013
	(Dollars in thousands)
Revenues:
Residential Services	$	~~224~~237,~~823~~927		$	~~212~~215,~~623~~530		$	~~651~~471,~~678~~759		$	~~631~~428,~~533~~057
ResCare HomeCare	9395,~~645~~684			8289,~~996~~607			~~271~~189,~~886~~263			~~250~~177,~~462~~039
Education & Training Services	3134,~~074~~046			3634,~~946~~928			~~100~~68,~~492~~170			~~114~~69,~~058~~418
Workforce Services	42,~~257~~381			4839,~~797~~596			~~121~~82,~~671~~188			~~149~~79,~~113~~414
Pharmacy Services	1821,~~135~~396			1516,~~476~~572			4941,~~894~~537			4831,~~916~~759
Consolidated	$	~~409~~431,~~934~~434		$	396,~~838~~233		$	1852,~~195,621~~917		$	1785,~~194,082~~687
Operating income:
Residential Services	$	2931,~~127~~956		$	2926,~~819~~388		$	7860,~~673~~051		$	8352,~~998~~600
ResCare HomeCare	78,~~843~~683			58,~~886~~316			1816,~~921~~355			1615,~~234~~021
Education & Training Services	2,~~867~~724			2,~~979~~241			75,~~601~~545			94,~~552~~897
Workforce Services	4,~~909~~883			34,~~448~~258			128,~~589~~616			78,~~751~~054
Pharmacy Services	~~844~~1,132			12,~~405~~576			42,~~448~~880			3,~~717~~604
Corporate (1)	(2029,~~666~~551		)	(1420,~~801~~007		)	(5257,~~338~~405		)	(4839,~~907~~206		)
Consolidated	$	2419,~~924~~827		$	2823,~~736~~772		$	6936,~~894~~042		$	7244,~~345~~970
Operating margin:
Residential Services	13.04%			1412.02%			12.17%			1312.3%
ResCare HomeCare	89.41%			79.13%			78.06%			68.5%
Education & Training Services	98.20%			86.14%			78.61%			87.41%
Workforce Services	11.65%			710.18%			10.35%			510.21%
Pharmacy Services	45.73%			915.15%			86.9%			711.63%
Corporate (1)	(56.08%		)	(35.70%		)	(46.47%		)	(45.10%		)
Consolidated	64.16%			76.20%			54.82%			65.17%

________

(1) Represents corporate general and administrative expenses, as well as other operating income and expenses related to the corporate office.

Consolidated

Consolidated revenues for the quarter and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 increased $1335.12 million and $167.52 million, or 38.39% and 08.16%, respectively, from the same periods in ~~2012~~2013. Organic growth for the three months and six months ended June 30, 2014 was 3.8% and 3.2%, respectively. Revenues are more fully described in the segment discussions.

Consolidated operating income, which includes corporate general and administrative expenses, for the quarter ended ~~September~~June 30, ~~2013~~2014, was $2419.98 million compared to operating income of $2823.78 million from the same period in ~~2012~~2013. Consolidated operating margins were 64.16% and 76.20% for the quarterly periods in ~~2013~~2014 and ~~2012~~2013, respectively. The decrease in operating income and margin ~~resulted~~ primarily resulted from ~~$2.3~~higher ~~million~~corporate ofgeneral ~~out-of-period~~and ~~adjustments~~administrative ~~described~~expenses infor ~~Note~~incentive 1compensation ~~and~~for ~~from~~stock ~~higher~~option ~~corporate~~holders ~~legal~~ and insurance ~~expenses~~costs, which were partially offset by ~~margin~~improved ~~improvement~~results and margins in our ~~ResCare~~Residential ~~HomeCare and Workforce~~ Services ~~businesses~~segment.

Consolidated operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 was $6936.90 million compared to $7245.30 million for the same period in ~~2012~~2013. Consolidated operating margins were 54.82% and 65.17% for the ~~nine~~six month periods in ~~2013~~2014 and ~~2012~~2013, respectively. The decrease in operating income and margin primarily resulted from higher corporate general and

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~~Net~~administrative ~~interest~~expenses ~~expense decreased $0.1 million~~ for ~~the~~legal ~~third~~costs ~~quarter of 2013~~ and ~~$2.7~~incentive ~~million~~compensation for ~~the~~stock ~~nine~~option ~~months ended September 30~~holders, ~~2013,~~which ~~compared~~were topartially ~~the~~offset ~~same~~by ~~periods~~improved inresults ~~2012. The decreases for the three~~ and ~~nine~~margins month periods were due primarily to lower rates from the new senior secured credit facility that closed during the second quarter of 2012. The 2012 nine month period also include $7.1 million related to a loss on extinguishment of debt from the refinancing that is further described in ~~Note~~all 4business tosegments ~~the~~except ~~Notes~~Pharmacy ~~to the Condensed Consolidated Financial Statements~~Services. Our effective income tax rate for the nine months ended September 30, 2013 was 27.8% as compared to 40.3% over the same period in 2012. The 2013 rate was favorably impacted by the renewal of jobs tax credits. Due to the retroactive application of the tax credit to January 1, 2012, our effective tax rate for the first nine months of 2013 reflects not only the 2013 year-to-date impact, but also $3.4 million related to 2012 and prior periods.

Net interest expense increased $0.8 million for the second quarter of 2014 and $0.4 million for the six months ended June 30, 2014, compared to the same periods in 2013. The increases for the three and six month periods were due primarily to higher borrowing levels. The 2014 second quarter and six month periods also include $0.7 million related to a loss on extinguishment of debt from the refinancing that is further described in Note 4 to the Notes to the Condensed Consolidated Financial Statements. Our effective income tax rate for the six months ended June 30, 2014 was 41.7% as compared to 25.1% over the same period in 2013. The 2014 rate was negatively impacted by the expiration of jobs tax credits (not renewed for 2014), while the 2013 rate was favorably impacted by the renewal of jobs tax credits. Due to the retroactive application of the tax credit to January 1, 2012, our effective tax rate for the first six months of 2013 reflects not only the first six months impact, but also $3.3 million related to 2012 and prior periods.

Residential Services

Residential Services revenues for the quarter ended ~~September~~June 30, ~~2013~~2014 increased $1222.24 million, or 510.74%, over the same period in ~~2012~~2013. This increase was due primarily to ~~acquisition~~acquisitions ~~growth~~ of $1216.70 million, ~~and~~ organic growth of $25.87 million, ~~which~~and ~~were partially offset by~~ rate ~~decreases~~increases ~~and decreased census~~ of $10.87 million in certain states~~, as well $1~~.3 ~~million of out-of-period adjustments described in Note 1.~~ Operating margin was 13.04% for the quarter ended ~~September~~June 30, ~~2013~~2014 compared to 1412.02% for the same period in ~~2012~~2013. The ~~reduction~~increase in margin is primarily attributable to ~~the~~lower ~~$1.3~~health ~~million~~insurance ~~out-of-period adjustment and higher~~ costs ~~for wages, employee benefits and insurance~~.

Residential Services revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 increased $2043.17 million, or 310.2%, over the same period in ~~2012~~2013. This increase was due primarily to acquisition ~~growth~~ of $2833.60 million, ~~and~~ organic growth of $6.8.1 million and rate increases in certain states of $02.16 million~~, which were partially offset by decreased census of $11~~.~~5 million in certain states, $1~~.3 ~~million of out-of-period adjustments and $2.2 million related to one less operating day in February 2013.~~ Operating margin was 12.17% for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to 1312.3% for the same period in ~~2012~~2013. The ~~reduction~~increase in margin is attributable to ~~the~~cost ~~$1.3~~efficiencies ~~million out-of-period adjustment~~ and ~~higher~~lower ~~costs~~health ~~for wages, employee benefits and~~ insurance costs.

ResCare HomeCare

ResCare HomeCare revenues for the quarter ended ~~September~~June 30, ~~2013~~2014 increased $~~10.~~6.1 million, or 126.8%, over the same period in ~~2012~~2013. This increase was due primarily to acquisition ~~and organic~~ growth of $64.93 million, ~~and~~organic growth of $21.74 million, ~~respectively,~~and rate/system ~~and~~changes ~~service increases~~ of $0.54 million in certain states ~~and $0~~.5 ~~million related to one half less operating day.~~ Operating margin ~~increased~~decreased from 79.13% in ~~2012~~2013 to 89.41% in ~~2013 due primarily to effective management of expenses~~2014.

ResCare HomeCare revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 increased $2112.42 million, or 8.6.9%, over the same period in ~~2012~~2013. This increase was due primarily to acquisition ~~and~~of $8.8 million, organic growth of $162.91 million and ~~$6.4 million, respectively, which were partially offset by~~ rate/system ~~and~~changes ~~service cuts~~ of $1.34 million in certain states ~~and $0~~.5 ~~million related to one less operating day in February 2013.~~ Operating margin increased from 68.5% in ~~2012~~2013 to 78.06% in ~~2013 due primarily to effective management of expenses~~2014.

Education & Training Services

Education & Training Services revenues for the quarter ended ~~September~~June 30, ~~2013~~2014 decreased $50.9 million, or 152.95%, from the same period of ~~2012~~2013, due primarily to ~~spending~~slot ~~reductions~~reduction inacross ~~our~~all Job Corps ~~business~~centers ofeffective ~~$4.3 million~~July 1, ~~as well as rate, census and referral declines in certain states within our other businesses for $1~~2013.~~4 million.~~ Operating margin was 98.20% in the ~~third~~second quarter of ~~2013~~2014 and 86.14% for the same period in ~~2012~~2013. The ~~improvement~~increase in margin is primarily attributable to ~~the~~improved ~~lower~~census ~~level~~in ofcertain ~~revenues~~education ~~for~~related ~~the 2013 period~~operations.

Education & Training Services revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 decreased $131.62 million, or 111.98%, from the same period of ~~2012~~2013, due primarily to ~~spending~~slot ~~reductions~~reduction inacross ~~our~~all Job Corps ~~business~~centers ofeffective ~~$7.3 million~~July 1, ~~as well as rate, census and referral declines in certain states within our other businesses for $5~~2013.~~7 million.~~ Operating margin was 78.61% in the first ~~nine~~six months of ~~2013~~2014 and 87.41% for the same period in ~~2012~~2013. The ~~reduction~~improvement in margin is primarily attributable to ~~higher~~improved ~~general~~census ~~and~~in ~~administrative~~certain ~~expenses,~~education ~~which~~related ~~were not reduced ratably with the revenue changes within other businesses~~operations.

Workforce Services

Workforce Services revenues for the quarter ended June 30, 2014 increased $2.8 million, or 7.0%, from the same period in 2013, due primarily to net contract wins/changes of $1.5 million and organic growth of $1.3 milion. Operating margin increased from 10.8% in the second quarter of 2013 to 11.5% in the same period in 2014, due primarily to lower health insurance costs.

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~~Effective~~Workforce ~~July 1,~~Services ~~2013,~~revenues for the ~~DOL’s~~six ~~Employment~~months ~~and~~ended ~~Training~~June 30, ~~Administration~~2014 ~~(ETA)~~increased ~~implemented~~$2.8 ~~slot~~million, ~~reductions~~or ~~across~~3.5%, ~~all~~from ~~Job~~the ~~Corps~~same ~~centers. This~~period ~~resulted~~ in ~~a reduction of approximately 1~~2013,~~000~~ ~~students~~due orprimarily ~~21%~~to oforganic ~~the~~growth ~~total~~opportunities. Operating ~~students~~margin weincreased ~~were~~from ~~previously contracted to serve~~10. ~~For~~1% in the ~~fourteen~~first ~~centers~~six ~~operated~~months byof ~~ResCare,~~2013 ~~this~~to ~~resulted~~10.5% in ~~approximately~~the ~~$8.0~~same ~~million~~period in ~~reduced~~2014, ~~revenue~~due primarily to ~~current~~higher ~~contract~~margins ~~value~~ on anour ~~annualized~~organic ~~basis~~growth opportunities.

Workforce Services

Workforce Services revenues for the quarter ended September 30, 2013 decreased $6.5 million, or 13.4%, from the same period in 2012, due primarily to the loss of certain contracts, including the previously reported WeCare contract. Operating margin increased from 7.1% in the third quarter of 2012 to 11.6% in the same period in 2013, due primarily to favorable net contract changes.

Workforce Services revenues for the nine months ended September 30, 2013 decreased $27.4 million, or 18.4%, from the same period in 2012, due primarily to the loss of certain contracts, including the previously reported WeCare contract. Operating margin increased from 5.2% in the first nine months of 2012 to 10.3% in the same period in 2013, due primarily to favorable changes in our Indiana contract of $0.9 million and a reduction in insurance costs of $3.8 million.

Pharmacy Services

Pharmacy Services revenues for the quarter ended ~~September~~June 30, ~~2013~~2014 increased $24.78 million, or 1729.21%, from the same period in ~~2012~~2013. This increase was due primarily to ~~starting~~organic growth in all the states we have pharmacy ~~operations~~services, as well as new services in ~~California~~Kansas. Operating margin decreased from 915.15% in the ~~third~~second quarter of ~~2012~~2013 to 45.73% in the same period in ~~2013~~2014. The ~~lower~~reduction in margin is primarily attributable to ana ~~out-of-period~~favorable ~~adjustment~~physical ofinventory ~~$1.0~~valuation ~~million~~error that ~~was~~occurred ~~recorded~~ in the ~~third~~second quarter of 2013 and ~~related~~was tothen areversed ~~physical inventory valuation error that occurred~~ in the ~~second~~third quarter of 2013.

Pharmacy Services revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 ~~increased~~decreased $19.08 million, or 230.08%, from the same period in ~~2012~~2013, due primarily to ~~the~~organic ~~impact~~growth ~~of our new pharmacy~~ in ~~California,~~all ~~which~~the ~~was~~states ~~partially~~we ~~offset~~have bypharmacy ~~the~~services, ~~change~~as ~~from~~well ~~name~~as ~~brand~~new ~~drugs~~services toin ~~generic drugs~~Kansas.. Operating margin ~~increased~~decreased from 711.63% in the first ~~nine~~six months of ~~2012~~2013 to 86.9% in the same period in ~~2013~~2014. The ~~improvement~~reduction in margin is primarily attributable to ~~lower~~a ~~product~~favorable ~~cost~~physical inventory valuation error that occurred in the second quarter of 2013 and was then reversed in the third quarter of 2013.

Corporate

Total corporate operating expenses represent corporate general and administrative expenses, as well as other operating income and expenses. Total expenses in the quarter ended ~~September~~June 30, ~~2013~~2014 increased $5.9.5 million ~~from~~compared ~~the~~to same period in ~~2012~~2013 due primarily to ~~increased insurance and legal costs of~~ $67.26 million, ~~which~~of ~~were~~incentive ~~partially~~compensation ~~offset~~expense byfor ~~lower~~stock ~~incentive~~option ~~compensation~~holders ~~accruals~~and of $01.27 million of higher insurance related costs. Total expenses in the first ~~nine~~six months of ~~2013~~2014 increased $318.42 million compared to first ~~nine~~six months of ~~2012~~2013 due primarily to ~~increased insurance and legal costs of~~ $610.58 million, ~~which~~of ~~were~~higher ~~partially~~legal ~~offset~~costs byin ~~lower~~our ~~incentive~~first ~~compensation~~quarter ~~accruals, wage expense, professional services expense~~ and ~~share-based~~the ~~compensation expense of~~ $17.36 million, ~~$0.4~~of ~~million,~~incentive ~~$0.2~~compensation ~~million~~mentioned ~~and $0~~above.~~6 million, respectively.~~

Financial Condition, Liquidity and Capital Resources

Total assets increased $2918.82 million, or 21.87%, at ~~September~~June 30, ~~2013~~2014 over balances at December 31, ~~2012~~2013. ~~This increase was primarily related to intangible assets of $18.2 million, property and equipment of $3.1 million and refundable income taxes of $3.0 million.~~

Cash and cash equivalents were $5136.29 million at ~~September~~June 30, ~~2013~~2014, as compared to $5030.10 million at December 31, ~~2012~~2013. Cash provided by operations for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 was $5544.47 million compared to $4234.31 million for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. ~~This increase was primarily due to higher net income.~~

Net accounts receivable at ~~September~~June 30, ~~2013~~2014 increased to $~~230~~251.72 million, compared to $~~228~~241.49 million at December 31, ~~2012~~2013. Days of revenue in net accounts receivable were 5051 days at ~~September~~June 30, ~~2013~~2014, compared with 4950 days at December 31, 2013.

Our capital requirements relate primarily to our plans to expand through selective acquisitions and the development of new programs, and our need for sufficient working capital for general corporate purposes. Since most of our programs are operating at or near capacity, and budgetary pressures and other forces are expected to limit increases in reimbursement rates we receive, our ability to continue to grow at the current rate depends directly on our acquisition and development activity. We have historically satisfied our working capital requirements, capital expenditures and scheduled debt payments from our operating cash flows and borrowings under our revolving credit facility, and expect that this will continue for at least the next twelve months.

Cash used in investing activities at June 30, 2014 increased $0.5 million over the same period in 2013 primarily due to higher purchases of property and equipment in 2014, which were partially offset by lower amounts spent on acquisitions.

Our financing activities included a net proceeds of debt and capital lease obligations of $98.7 million for the first six months of 2014, which includes proceeds of $275 million related to the debt refinancing which is discussed below. This compares to a net payment of debt and capital lease obligations of $12.8 million for the same period in 2013. During 2014, we paid a dividend to our shareholders of $122.4 million and paid $3.6 million in debt issuance costs due to the debt refinancing. In addition to quarterly principal and seller note payments made in the six months ended June 30, 2013, we made an additional

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~~31,~~required ~~2012~~$4.3 ~~The~~million ~~increase~~principal ~~in days of revenue is due primarily to temporary~~ payment ~~delays~~resulting from ~~several~~the ~~payors~~annual ~~caused~~Excess byCash aFlow ~~variety~~calculation, ofwhich ~~reasons~~was ~~including~~part ~~transitioning~~of ~~from~~our ~~legacy~~financial ~~payor~~covenants ~~systems~~under ~~and~~the ~~awaiting~~previous ~~executed contract changes~~agreement.

~~Our~~On ~~capital~~December 22, ~~requirements~~2010, ~~relate~~we ~~primarily~~issued to$200 ~~our~~million ~~plans~~of to10.75% ~~expand~~senior ~~through~~notes ~~selective~~due ~~acquisitions and the development of new programs~~January 15, ~~and~~2019 ~~our~~in ~~need~~a ~~for~~private ~~sufficient~~placement ~~working~~to ~~capital~~qualified ~~for~~institutional ~~general~~buyers ~~corporate~~under ~~purposes.~~the ~~Since~~Securities ~~most~~Act of ~~our~~1933. ~~programs~~The ~~are~~10.75% ~~operating~~senior ~~at or near capacity~~notes, ~~and~~which ~~budgetary~~had ~~pressures~~an ~~and~~issue ~~other~~price ~~forces~~of ~~are~~100% ~~expected~~of tothe ~~limit~~principal ~~increases~~amount, inare ~~reimbursement~~unsecured ~~rates~~obligations weranking ~~receive,~~equal ~~our ability~~ to ~~continue~~existing toand ~~grow~~future atdebt ~~the~~and ~~current~~are ~~rate~~subordinate ~~depends~~to ~~directly~~existing onand ~~our~~future ~~acquisition~~secured ~~and~~debt. ~~development~~The ~~activity~~10.75% Wesenior ~~have~~notes ~~historically~~are ~~satisfied~~jointly, ~~our working capital requirements~~severally, ~~capital~~fully ~~expenditures~~ and ~~scheduled~~unconditionally ~~debt~~guaranteed ~~payments~~by ~~from~~ our ~~operating~~domestic ~~cash flows and borrowings under our revolving credit facility, and expect that this will continue for at least the next twelve months~~subsidiaries.

~~Cash~~On ~~used~~April 25, 2014, we entered into an amended and restated senior secured credit facility (the “2014 Credit Agreement”) in ~~investing~~an ~~activities~~aggregate atprincipal ~~September 30~~amount of $650 million, ~~2013~~which ~~increased~~replaced $1our 2012 senior secured credit facility and the related term loan A.3 The 2014 Credit Agreement consists of a Term Loan A (the “Term Loan A”) in an aggregate principal amount of $200 million, ~~over~~a revolving credit facility (the ~~same~~“Revolving ~~period~~Facility”) in ~~2012~~an ~~primarily~~aggregate ~~due~~principal amount of $250 million, and a Delayed-Draw Term Loan A (the “DDTL”) in an aggregate amount of $200 million. At closing, proceeds from the new Term Loan A and Revolving Facility were used to ~~higher~~(i) refinance ~~spending~~the onprior ~~property~~revolver and ~~equipment~~term loan A, (ii) fund a distribution to shareholders of approximately $130 million, and (iii) fund related transaction fees and expenses, and (iv) used for working capital and other general corporate purposes permitted under the 2014 Credit Agreement, including certain acquisitions and investments. The Term Loan A, the Revolving Facility and the DDTL (if drawn upon) each mature on April 25, 2019. The Term Loan A will amortize in an aggregate annual amount equal to a percentage of the original principal amount of the Term Loan A beginning September 30, 2014 as follows: (i) 5% during each of the first ~~nine~~two years after funding, (ii) 7.5% during the third year after funding, (iii) 10% during the fourth year after funding and, (iv) 12.5% during the final year of the term. The balance of the Term Loan A is payable at maturity. Pricing for the Term Loan A, Revolving Facility and the DDTL (if drawn upon) will be variable, at the London Interbank Offer Rate (LIBOR) plus 225 basis points. LIBOR is defined as having no minimum rate. The DDTL may be drawn within 12 months from the closing date to call the 10.75% senior unsecured notes due 2019 (which are callable on January 15, 2015) and other uses allowed in the 2014 Credit Agreement. The 2014 Credit Agreement also provides that, upon satisfaction of ~~2013~~certain ~~compared~~conditions, the Company may increase the aggregate principal amount of loans outstanding thereunder by up to $175 million, subject to receipt of additional lending commitments for such loans. The loans and other obligations under the ~~same~~2014 ~~period~~Credit Agreement are (i) guaranteed by Onex Rescare Holdings Corp. (“Holdings”) and substantially all of its subsidiaries (subject to certain exceptions and limitations) and (ii) secured by substantially all of the assets of the Company, Holdings and substantially all of its subsidiaries (subject to certain exceptions and limitations). The 2014 Credit Agreement contains financial covenants which require us to maintain specific ratios with respect to interest coverage and leverage. This agreement provides for the exclusion of charges incurred with the resolution of certain named legal proceedings, as well as any non-cash impairment charges, in the calculation of certain financial covenants. We recorded a loss on extinguishment of debt of $0.7 million for the three and six month periods ended June 30, 2014 associated with termination of the 2012 senior secured revolving credit facility and the Term Loan A prepayment. Loss on extinguishment of debt consists principally of write-offs of deferred debt issuance costs.

~~Our~~Subsequent ~~financing~~to ~~activities~~receiving ~~included~~the ~~payments~~proceeds offrom ~~debt and capital lease obligations of $19.6 million for~~ the ~~first~~2014 ~~nine~~Credit ~~months~~Agreement, ofwe ~~2013.~~declared ~~This~~and ~~compares~~paid to a ~~net~~dividend ~~borrowing~~ of $2122.94 million ofto ~~debt~~Onex ~~offset~~ResCare byHoldings ~~payments~~Corp ofshareholders. We ~~capital~~also ~~lease~~recorded ~~obligations~~a ~~and~~one-time ~~debt~~pre-tax ~~issuance~~charge ~~costs~~ of $47.56 million ~~and $4.0 million, respectively,~~ for the ~~same~~accrual ~~period~~of indiscretionary ~~2012,~~payments ~~which included our refinancing discussed below. In addition~~ to ~~quarterly~~stock ~~principal~~option ~~and seller note payments made in the nine months ended September 30~~holders, ~~2013,~~of wewhich ~~made an additional required~~ $4.3.8 million ~~principal~~was ~~payment~~paid ~~resulting~~out ~~from~~prior ~~the~~to ~~annual Excess Cash Flow calculation~~June 30, ~~which is part of our financial covenants discussed below~~2014.

OnOur ~~April 5,~~obligations ~~2012,~~under wecapital ~~entered~~leases ~~into~~are ~~a new senior secured credit facility (the “Credit Agreement”) in an aggregate principal amount of~~ $~~375 million, which replaced our 2010 senior secured revolving credit facility and the senior secured term loan (the “Term Loan B”)~~21.0 ~~The Credit Agreement consists of a term loan (the “Term Loan A”) in an aggregate principal amount of $175~~ million and ~~a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of~~ $~~200~~20.2 million. The Term Loan A and the Revolving Facility each mature on April 5, 2017. The Term Loan A will amortize in an aggregate annual amount equal to a percentage of the original principal amount of the Term Loan A as ~~follows: (i) 5% during each~~ of ~~the first two years after funding~~ June 30, ~~(ii) 10%~~2014 ~~during the third year after funding~~ and ~~(iii)~~December ~~15% during each of the final two years of the term. The balance of the Term Loan A is payable at maturity. Pricing for the Term Loan A will be variable~~31, ~~at the London Interbank Offer Rate (LIBOR) plus a spread~~2013, ~~which is currently 275 basis points~~respectively. ~~LIBOR is defined as having no minimum rate. The spread varies between 225 and 300 basis points depending on our total leverage ratio.~~ ~~The~~These ~~proceeds~~primarily ofrelate ~~the Term Loan A were used~~ to ~~repay~~vehicle ~~the Company’s prior Term Loan B and pay certain related fees and expenses. The proceeds of the Revolving Facility may be used for working~~ capital ~~and for other general corporate purposes permitted under the Credit Agreement, including certain acquisitions and investments~~leases. The ~~Credit~~current ~~Agreement~~portion ~~also provides that, upon satisfaction~~ of ~~certain~~these ~~conditions,~~lease ~~the~~obligations ~~Company~~was ~~may increase the aggregate principal amount of loans outstanding thereunder by up to~~ $~~175~~6.5 million, ~~subject~~as ~~to receipt~~ of ~~additional lending commitments for such loans. The loans and other obligations under the Credit Agreement are (i)~~June ~~guaranteed~~30, by2014 ~~Onex Rescare Holdings Corp. (“Holdings”)~~ and ~~substantially all of its subsidiaries (subject to certain exceptions and limitations) and (ii)~~December ~~secured by substantially all of the assets of the Company~~31, ~~Holdings and substantially all of its subsidiaries (subject to certain exceptions and limitations)~~2013. The Credit Agreement contains various financial quarterly covenants that require us to maintain specific ratios with respect to interest coverage and leverage. The Credit Agreement also contains covenants relating to capital expenditures and Excess Cash Flows which are to be completed annually. The Excess Cash Flow calculation is defined in the Credit Agreement. A cash flow recapture can be required based on the Company’s leverage ratio and ending cash balance at year end. Any recaptured amount derived from the calculation is used to pre pay the Company’s Term Loan A. The new agreement continues to provide for the exclusion of charges incurred with the resolution of certain legal proceedings provided in Note 8 to Notes to the Condensed Consolidated Financial Statements, as well as any non-cash impairment charges, in the calculation of certain financial covenants.

As of ~~September~~June 30, ~~2013~~2014, we had irrevocable standby letters of credit in the principal amount of $~~55.3~~42 million issued primarily in connection with our insurance programs. As of ~~September~~June 30, ~~2013~~2014, we had $~~144.7~~148 million available under the amended and restated revolving credit facility, with noan outstanding balance of $60 million. Outstanding balances bear interest at 2.7525% over the LIBOR or other bank developed rates at our option. As of ~~September~~June 30, ~~2013~~2014, the weighted average interest rate was ~~not applicable as there were no outstanding borrowings~~4.0%. Letters of credit had a borrowing rate of 2.8838% as of ~~September~~June 30, ~~2013~~2014. The commitment fee on the unused balance was 0.540%. The margin over LIBOR and the commitment fee is determined quarterly based on our leverage ratio, as defined by the revolving credit facility.

We are in compliance with our debt covenants at June 30, 2014, and we believe we will continue to be in compliance with these covenants over the next twelve months. Our ability to achieve the thresholds provided for in the financial covenants

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We were in compliance with our debt covenants at September 30, 2013, and we believe we will continue to be in compliance with these covenants over the next twelve months. Our ability to achieve the thresholds provided for in the financial covenants largely depends upon continued profitability, reductions of amounts borrowed under the facility and continued cash collections.

Operating funding sources were approximately 68% through Medicaid reimbursement, 87% from the DOL and 2425% from other payors. We believe our sources of funds through operations and available through the credit facility described above will be sufficient to meet our working capital, planned capital expenditure and scheduled debt repayment requirements for the next twelve months.

We had no significant off-balance sheet transactions or interests in ~~2013~~2014 or ~~2012~~2013.

Impact of Recently Issued Accounting Pronouncements

See Note 10 of the Notes to Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The market risk inherent in our financial instruments and positions represents the potential loss arising from adverse changes in interest rates. While we are exposed to changes in interest rates as a result of any outstanding variable rate debt, we do not currently utilize any derivative financial instruments related to our interest rate exposures. Our senior secured term loan and senior secured credit facility, which have interest rates based on margins over LIBOR or prime, tiered based upon leverage calculations, had noan outstanding ~~borrowings~~balance of $260 million as of ~~September~~June 30, ~~2013~~2014 and $157.5 million as of December 31, ~~2012~~2013. A 100 basis point movement in the interest rate sustained for one year would result in an approximate $2.6 million annualized effect on interest expense and cash flows.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

ResCare’s management, under the supervision and with the participation of the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO concluded that ResCare’s disclosure controls and procedures are effective in timely making known to them material information required to be disclosed in the reports filed or submitted under the Securities Exchange Act. There were no changes in ResCare’s internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2013~~2014 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Limitations on the Effectiveness of Controls

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, 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, with our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, that breakdowns can occur because of simple errors or mistakes, and that controls can be circumvented by the acts of individuals or groups. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding the legal proceedings is provided in Note 8 to the condensed consolidated financial statements set forth in Part I of this report and incorporated by reference into this Part II, Item 1.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in our ~~2012~~2013 Annual Report on Form 10-K filed February 1918, ~~2013 and our first and second quarter 2013 10-Qs~~2014.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit			~~Description of Exhibit~~	Description of Exhibit
*	~~31.1~~	31.1	~~Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.~~	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
*	~~31.2~~	31.2	~~Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.~~	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
*	32	32	~~Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*	~~101~~	101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements.	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements.
		*		Filed herewith

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			RES-CARE, INC.	~~RES-CARE, INC.~~
			Registrant	~~Registrant~~
Date:	~~November~~August 114, ~~2013~~2014	By:	~~By:~~/s/ Ralph G. Gronefeld, Jr.	~~/s/ Ralph G. Gronefeld, Jr.~~
			Ralph G. Gronefeld, Jr.	~~Ralph G. Gronefeld, Jr.~~
			President and Chief Executive Officer	~~President and Chief Executive Officer~~
Date:	~~November~~August 114, ~~2013~~2014	By:	~~By:~~/s/ D. Ross Davison	~~/s/ D. Ross Davison~~
			D. Ross Davison	~~D. Ross Davison~~
			Chief Financial Officer	~~Chief Financial Officer~~

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Filing Compare · RES CARE INC /KY/