SOURCE: Pioneer Behavioral Health

May 14, 2008 08:00 ET

PHC Reports Results for Third Quarter Fiscal 2008

PEABODY, MA--(Marketwire - May 14, 2008) - PHC, Inc., d.b.a. Pioneer Behavioral Health (AMEX: PHC), a leading provider of inpatient and outpatient behavioral health services and pharmaceutical research, reported financial results for the company's fiscal third quarter ended March 31, 2008.

Third Quarter FY2008 Financial and Operational Highlights

--  Revenues of $12.1 million decreased $175,000 or 1% vs. Q3 2007, due to
    a weakness in the non-core pharmaceutical research revenue, offset by
    increases from core patient care and contract support
--  Patient care revenue increased 1% vs. Q3 2007
--  Contract support revenue increased 4% vs. Q3 2007
--  Patient days increased 8% vs. Q3 2007
--  Announced the grand opening of Seven Hills Behavioral Institute near
    Las Vegas, Nevada. Seven Hills is projected to contribute annualized
    revenue of approximately $12 million, along with higher margins than PHC's
    other inpatient facilities, during fiscal 2009.
    

Key Financial Indicators

(In thousands, except per-share amounts.)

Q3 FY2008 vs. Q3 FY2007                 Q3 2008  Q3 2007  Change  % Change
Consolidated revenues                   $ 12,143 $ 12,318 $  (175)    (1%)
Patient care revenues                   $ 10,165 $ 10,023 $   142      1%
Income from operations - core business* $    717 $    674 $    43      6%
Net Income Before Taxes                 $    255 $    519 $  (264)   (51%)
Net Income                              $    156 $    316 $  (160)   (51%)
Earnings per share - Basic              $   0.01 $   0.02 $ (0.01)   (50%)
Earnings per share - Diluted            $   0.01 $   0.02 $ (0.01)   (50%)

*Patient care and contract support, excluding pharmaceutical research
segment.

Financial Results

For the third quarter ended March 31, 2008, total net revenue from operations decreased 1% to $12.1 million, as compared to $12.3 million in the same year-ago quarter. This decrease is primarily attributable to a decrease in net revenue from the company's pharmaceutical studies segment, which was down 31% to $0.8 million from $1.2 million in the same year-ago period. Revenue from the patient care segment increased 1% to $10.2 million, as compared to $10.0 million for the same quarter last year. Contract support services revenue provided by the company's Wellplace subsidiary increased 4% to $1.2 million, as compared to $1.1 million in the same year-ago quarter.

Income from operations for the quarter totaled $0.3 million, a decrease of 55% from the $0.6 million reported for the same period last year. Net income before taxes decreased 51% to $0.3 million from $0.5 million for the same year-ago period. This decrease is primarily attributable to a $0.4 million decrease in net income from operations by the company's pharmaceutical studies business segment, offset by a 6% increase in net income from operations in the company's core patient care business.

Net income for the quarter was $0.2 million, or $0.01 per fully diluted share (based on 20.5 million fully diluted shares), a decrease of 51% compared to net income of $0.3 million, or $0.02 per fully diluted share (based on 20.6 million shares) for the third quarter of last year. This represents the company's 24th consecutive profitable quarter, which was sustained while incurring significant startup costs for the company's new Seven Hills facility.

"Aside from the effect of what we see as a temporary decrease in our pharmaceutical research revenue, we continued to see both revenues and income rise due to the strengths of our core operations," said Pioneer's president and CEO Bruce A. Shear, "In fact, timing was everything this quarter, since soon after the quarter ended, Pivotal initiated its largest Phase I Alzheimer's Disease trial for a major national sponsor."

Continued Shear: "The major highlight for the quarter, however, was announcing the long-awaited grand opening of our new Seven Hills Behavioral Institute. This is our first facility built from the ground up and it required significant start up costs that will continue until it reaches anticipated profitability late in the current quarter. Despite some $200,000 in such costs incurred in the third quarter, this segment of our business still achieved strong net income from operations, and allowed us to continue our record of sustained overall profitability over the last two years.

"Also during the third quarter we made great progress toward identifying potential acquisitions, as well as submitting proposals for the continued expansion of our Wellplace division. Our cash position is strong and we are focused on delivering margins companywide during fiscal 2009 that are consistent with expectations now that Seven Hills is open and has begun to admit patients this week. The opportunities for growth of our company have never been better, and we are excited and highly confident about our future."

Teleconference Information

PHC will host a conference call today at 10:00 a.m. Eastern Time. A question and answer session will follow management's presentation.

To participate in the call, dial the appropriate number 5-10 minutes prior to the start time, request the PHC conference call and provide the conference ID.

Domestic callers: 1-800-862-9098
International callers: 1-785-424-1051
Conference ID#: 7PHC

A web simulcast of the call can be accessed via PHC's website at www.phc-inc.com. The call will be available for replay starting at 7:30 p.m. Eastern Time until June 14, 2008:

Toll-Free Replay number: 1-800-753-6120
International Replay number: 1-402-220-0684
(No pass code required)

If you have any difficulty connecting with the conference call or webcast, please contact the Liolios Group at 949-574-3860.

About PHC, Inc.

Pioneer Behavioral Health operates companies that provide inpatient and outpatient behavioral health care services, clinical research and Internet- and telephonic-based referral services. The companies contract with national insurance companies, government payors, and major transportation and gaming companies, among others, to provide such services. For more information, visit www.phc-inc.com.

Statement under the Private Securities Litigation Reform Act of 1995

This press release may include "forward-looking statements" that are subject to risks and uncertainties. Forward-looking statements include information about possible or assumed future results of the operations or the performance of the Company and its future plans and objectives. Various future events or factors may cause the actual results to vary materially from those expressed in any forward-looking statements made in this press release. For a discussion of these factors and risks, see the company's annual report on Form 10-K for the most recently ended fiscal year.

                        PHC, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS


                                                  March 31,     June 30,
                                                ------------  ------------
ASSETS                                              2008          2007
                                                ------------  ------------
Current assets:                                  (unaudited)
   Cash and cash equivalents                    $  3,555,153  $  3,395,173
   Accounts receivable, net of allowance for
    doubtful accounts of $2,864,042 at March
    31, 2008 and $3,764,583 at June 30, 2007       6,654,422     6,524,387
   Pharmaceutical receivables                      1,743,179     1,942,268
   Prepaid expenses                                  599,960       688,600
   Other receivables and advances                    633,366       868,628
   Deferred income tax asset                       1,263,214     2,015,000
                                                ------------  ------------
      Total current assets                        14,449,294    15,434,056
   Accounts receivable, non-current                   35,000        35,000
   Other receivables                                  74,090        91,697
   Property and equipment, net                     2,442,574     2,121,191
   Deferred financing costs, net of
    amortization of $243,907 and $150,124 at
    March 31, 2008 and June 30, 2007                 506,587       613,865
   Customer relationships, net of amortization
    of $470,000 at March 31, 2008 and $380,000
    at June 30, 2007, respectively                 1,930,000     2,020,000
   Goodwill                                        3,508,576     3,508,576
   Other assets                                    4,729,491     3,465,356
                                                ------------  ------------
         Total assets                           $ 27,675,612  $ 27,289,741
                                                ------------  ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                             $  1,202,709  $  1,261,841
   Current maturities of long-term debt            1,235,822     1,134,300
   Revolving credit note                           1,063,738     1,518,742
   Deferred revenue                                  153,734       433,301
   Current portion of obligations under capital
    leases                                           173,899       205,858
   Accrued payroll, payroll taxes and benefits     1,606,959     1,631,693
   Accrued expenses and other liabilities          1,591,838     1,702,772
                                                ------------  ------------
         Total current liabilities                 7,028,699     7,888,507
   Long-term debt, net of current maturities         595,317       831,387
   Obligations under capital leases                  247,607       226,706
   Deferred tax liability                             93,000        93,000
                                                ------------  ------------
         Total liabilities                         7,964,623     9,039,600
                                                ------------  ------------
Stockholders' equity:
   Preferred Stock, 1,000,000 shares
    authorized, none issued or outstanding                --            --
   Class A common stock, $.01 par value,
    30,000,000 shares authorized, 19,786,059
    and 19,622,076 shares issued at March 31,
    2008 and June 30, 2007, respectively             197,860       196,221
   Class B common stock, $.01 par value,
    2,000,000 shares authorized, 775,760 issued
    and outstanding at March 31, 2008 and June
    30, 2007, respectively, each convertible
    into one share of Class A common stock             7,758         7,758
   Additional paid-in capital                     27,265,105    26,812,808
   Treasury stock, 362,698 shares and 199,098
    shares of Class A common stock at March 31,
    2008 and June 30, 2007, respectively, at
    cost                                            (622,666)     (191,700)
   Accumulated deficit                            (7,137,068)   (8,574,946)
                                                ------------  ------------
      Total stockholders' equity                  19,710,989    18,250,141
                                                ------------  ------------
      Total liabilities and stockholders'
       equity                                   $ 27,675,612  $ 27,289,741
                                                ============  ============




                        PHC, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)


                           Three Months Ended         Nine Months Ended
                                March 31,                 March 31,
                            2008         2007         2008         2007
                        -----------  -----------  -----------  -----------
Revenues:
   Patient care, net    $10,164,933  $10,022,611  $30,439,569  $25,845,713
   Pharmaceutical
    studies                 803,541    1,164,195    3,646,359    3,089,498
   Contract support
    services              1,174,455    1,131,237    3,455,597    3,397,398
                        -----------  -----------  -----------  -----------
      Total revenues     12,142,929   12,318,043   37,541,525   32,332,609
                        -----------  -----------  -----------  -----------
Operating expenses:
   Patient care
    expenses              5,675,813    5,808,401   16,444,479   14,295,132
   Patient care
    expenses,
    pharmaceutical          706,073      601,737    2,132,679    1,510,223
   Cost of contract
    support services        894,866      776,893    2,521,085    2,302,622
   Provision for
    doubtful accounts       204,203      426,812      968,771    1,226,795
   Administrative
    expenses              3,847,632    3,467,960   11,257,465    9,393,966
   Administrative
    expenses,
    pharmaceutical          527,764      598,085    1,705,377    1,806,748
                        -----------  -----------  -----------  -----------
      Total operating
       expenses          11,856,351   11,679,888   35,029,856   30,535,486
                        -----------  -----------  -----------  -----------

Income from operations      286,578      638,155    2,511,669    1,797,123
                        -----------  -----------  -----------  -----------

Other income (expense):
   Interest income           62,589       52,775      147,628      119,432
   Other income               8,631       (3,430)      41,202       (7,508)
   Interest expense        (102,733)    (168,797)    (351,433)    (501,068)
                        -----------  -----------  -----------  -----------

      Total other
       expenses, net        (31,513)    (119,452)    (162,603)    (389,144)
                        -----------  -----------  -----------  -----------

Income before provision
 for taxes                  255,065      518,703    2,349,066    1,407,979
Provision for income
 taxes                       99,030      202,924      911,188      547,829
                        -----------  -----------  -----------  -----------

Net income applicable
 to common
 shareholders           $   156,035  $   315,779  $ 1,437,878  $   860,150
                        ===========  ===========  ===========  ===========


Basic net income per
 common share           $      0.01  $      0.02  $      0.07  $      0.05
                        ===========  ===========  ===========  ===========

Basic weighted average
 number of shares
 outstanding             20,188,228   19,858,979   20,166,242   19,037,806
                        ===========  ===========  ===========  ===========


Diluted net income per
 common share           $      0.01  $      0.02  $      0.07  $      0.04
                        ===========  ===========  ===========  ===========

Diluted weighted
 average number of
 shares outstanding      20,477,709   20,626,118   20,485,241   19,644,201
                        ===========  ===========  ===========  ===========

Contact Information

  • Company Contact:
    PHC, Inc.
    Bruce A. Shear
    President & CEO
    Tel: 978-536-2777

    Investor Relations Contact:
    Liolios Group, Inc.
    Scott Kitcher or Geoffrey Plank
    Tel: 949-574-3860