SOURCE: Pioneer Behavioral Health

Pioneer Behavioral Health

February 13, 2009 08:00 ET

PHC Reports Second Quarter Fiscal 2009 Results

PEABODY, MA--(Marketwire - February 13, 2009) - PHC, Inc., d/b/a Pioneer Behavioral Health (AMEX: PHC), a leading provider of inpatient and outpatient behavioral health services, reported financial results for the company's second fiscal quarter ended December 31, 2008.

Second Quarter Fiscal 2009 Highlights

--  Patient care revenue totaled $10.1 million, off less than one percent
    from the same year-ago quarter
--  Signed agreement for sale of Pivotal Research Centers for a total
    consideration of $5.0 million, of which $2.0 million is contingent on
    future revenue
--  Established rate increases for major contracts effective January 1,
    2009
    

Key  Financial  Indicators
(Dollars  in  thousands,  except  per-share  amounts.)

                                                   Q2 FY2009    Q2 FY2008
                                                  -----------  ------------
Total revenues*                                   $    11,020  $     11,273
Patient care revenues                                  10,106        10,147
Net income (loss)*                                       (404)          524
Earnings (loss) per share - Basic & Diluted*            (0.02)         0.03

*From continuing operations. Income/loss includes start-up losses from
Seven Hills Behavioral Institute and Capstone Academy in the second fiscal
quarter of approximately $1.1 million.


Second Quarter 2009 Financial Results

For the second fiscal quarter ended December 31, 2008, net revenue from operations totaled $11.0 million (excluding discontinued operations). This represented a decrease of 2.2% from $11.3 million in the second quarter of fiscal 2008.

Patient care segment revenue totaled $10.1 million, off less than one percent from the same year-ago quarter. The slight decrease in patient care revenue was due primarily to the effect of general economic conditions offset partially by the contribution of newly opened operations.

Contract support services revenue from the company's Wellplace subsidiary decreased 19% to $0.9 million. This decrease is due to the expiration of a smoking cessation contract with a government contractor. The company has submitted a bid to continue and expand the contract should the contractor decide to continue the program. PHC expects to increase contract support service revenue through new contracts for EAP (Employee Assistance Programs) and smoking cessation programs.

Income from continuing operations was a loss of $843,000, as compared to income of $834,000 in the same period a year ago. The loss includes more than $790,000 in startup losses related to the company's Seven Hills Behavioral Institute and approximately $307,000 from startup expenses at Capstone Academy.

The net loss from continuing operations was $404,000 or ($0.02) per basic and fully diluted share (based on 20.1 million basic and fully diluted shares), which compares to net income from continuing operations in the same year ago quarter of $524,000 or $0.03 per basic and fully diluted share (based on 20.1 million basic shares and 20.5 million diluted shares). The loss includes approximately $1.1 million in aforementioned new facility startup expenses, plus expenses related to increased utilization of capitated contracts in the company's Harmony division. Losses at Harmony are not expected to continue due to improved margins from significant rate increases from two major renegotiated contracts which became effective January 1, 2009.

Second Quarter 2009 Operational Highlights

Pioneer announced at the end of December 2008 the final agreement for the sale of Pivotal Research Centers, which comprises the pharmaceutical studies segment, to Premier Research Group PLC for total consideration of up to $5.0 million. The divestiture of this business will allow Pioneer to focus on its core business of delivering behavioral health programs and services. This transaction is expected to close by the end of the current month.

During the quarter, the company advanced the development of its Capstone Academy in Detroit, Michigan, and in January 2009 officially opened this new facility. Capstone represents the next phase of PHC's efforts to provide expanded residential treatment services to adjudicated youth in the Detroit metropolitan area. In combination with the company's Detroit Behavioral Institute (DBI), this facility, if fully utilized, could double PHC's inpatient capacity in the area and has the potential to generate additional annual revenue of more than $5.0 million. With the addition of Capstone, the company will have 14 treatment centers across five states that offer behavioral health services.

Management Commentary

"As expected, this was a transitional quarter as we continued the startup at Capstone and worked toward CMS Medicare certification for Seven Hills," said Bruce A. Shear, Pioneer's president and CEO. "Excluding the startup losses of our new facilities in Henderson and Detroit, once again this quarter we continued our long tradition of operating profitably. In fact, this amount improved approximately $234,000 over the previous quarter and improved $388,000 over the same period a year ago."

"We also significantly advanced our managed care business in the Las Vegas area during the quarter with the renegotiation of capitated contracts which are structured to increase revenue and improve margins in this quarter," continued Shear. "As these new rates come into effect and our new facilities come more up to speed, we anticipate a return to company-wide profitability before the end of the current quarter.

"Given our progress in many areas this quarter, we continue to believe our fundamentals and prospects for growth have never been stronger. Our efforts to focus on our core business of patient care allowed us to sustain our revenue levels even in these trying economic times that have impacted other companies far more than us. Demand for our services remains strong and our industry is prospering. The recent signing of the Mental Health Parity bill is expected to serve as another strong market driver -- one from which we are in an ideal position to benefit substantially over the years to come."

Fiscal 2009 Guidance

Based on the continued expectation that the company's patient care revenue maintains its forecasted growth of more than 20% in fiscal 2009, management continues to see an achievable goal of income before taxes of 8-10% of net revenue as it approaches fiscal 2010.

"As we have indicated in our prior reporting," said Shear, "due to the substantial investments we have made in new facilities, we expect the most visible improvement of our performance in 2009 will come during the second half when our newest projects, like Capstone Academy, come up to speed."

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.

Date: Friday, February 13, 2009
Time: 10:00 a.m. Eastern time (7:00 a.m. Pacific time)
Dial-In Number: 1-800-862-9098
International: 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. A replay of the call will be available after 1:00 p.m. Eastern time on the same day and until March 13, 2009:

Toll-free replay number: 1-800-695-1624
International replay number: 1-402-530-9026
(No passcode 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.

PHC, Inc., d/b/a Pioneer Behavioral Health, is a national healthcare company providing behavioral health services in five states, including substance abuse treatment facilities in Utah and Virginia, and inpatient and outpatient psychiatric facilities in Michigan, Pennsylvania, and Nevada. The company also offers internet and telephonic-based referral services that includes employee assistance programs and critical incident services. Contracted services with government agencies, national insurance companies, and major transportation and gaming companies cover more than one million individuals. Pioneer helps people gain and maintain physical, spiritual and emotional health through delivering the highest quality, most culturally responsive and compassionate behavioral health care programs and 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 STATEMENTS OF OPERATIONS
                               (Unaudited)


                        Three Months Ended           Six Months Ended
                           December 31,                December 31,
                    --------------------------  --------------------------
                        2008          2007          2008          2007
                    ------------  ------------  ------------  ------------
Revenues:
   Patient care,
    net             $ 10,105,942  $ 10,147,332  $ 20,665,438  $ 20,302,549
   Contract support
    services             914,374     1,125,245     2,046,783     2,253,229
                    ------------  ------------  ------------  ------------
      Total revenues  11,020,316    11,272,577    22,712,221    22,555,778
                    ------------  ------------  ------------  ------------
Operating expenses:
   Patient care
    expenses           5,906,307     5,472,592    12,064,464    10,768,666
   Cost of contract
    support services     771,505       823,571     1,599,284     1,626,219
   Provision for
    doubtful
    accounts             308,329       342,342       754,143       764,568
   Administrative
    expenses           4,877,390     3,799,897     9,572,364     7,409,833
                    ------------  ------------  ------------  ------------
      Total
       operating
       expenses       11,863,531    10,438,402    23,990,255    20,569,286
                    ------------  ------------  ------------  ------------


Income (loss) from
 operations             (843,215)      834,175    (1,278,034)    1,986,492
                    ------------  ------------  ------------  ------------

Other income
 (expense):
   Interest income        44,206        52,504        95,475        85,039
   Other income           24,888        18,472        55,742        32,571
   Interest expense      (96,306)     (102,854)     (177,948)     (216,753)
                    ------------  ------------  ------------  ------------

      Total other
       income
       (expenses),
       net               (27,212)      (31,878)      (26,731)      (99,143)
                    ------------  ------------  ------------  ------------

Income (loss)
 before taxes           (870,427)      802,297    (1,304,765)    1,887,349
Income tax
 (benefit)
 provision              (466,634)      277,807      (506,053)      739,064
                    ------------  ------------  ------------  ------------

Income (Loss) from
 continuing
 operations             (403,793)      524,490      (798,712)    1,148,285

Discontinued
 operations - net
 of tax provision -
 Pivotal              (1,312,280)      (42,658)   (1,250,064)      133,558
                    ------------  ------------  ------------  ------------

Net income (loss)
 applicable to
 common
 shareholders       $ (1,716,073) $    481,832  $ (2,048,776) $  1,281,843
                    ============  ============  ============  ============

Basic net income
 (loss) per common
 share
   Continuing
    operations      $      (0.02) $       0.03  $      (0.04) $       0.05
   Discontinued
    operations             (0.07)        (0.01)        (0.06)         0.01
                    ------------  ------------  ------------  ------------
                    $      (0.09) $       0.02  $      (0.10) $       0.06
                    ============  ============  ============  ============

Basic weighted
 average number of
 shares outstanding   20,131,080    20,143,636    20,154,583    20,140,208

Diluted net income
 (loss) per common
 share
   Continuing
    Operations      $      (0.02) $       0.03  $      (0.04) $       0.05
   Discontinued
    operations             (0.07)        (0.01)        (0.06)         0.01
                    ------------  ------------  ------------  ------------
                    $      (0.09) $       0.02  $      (0.10) $       0.06
                    ============  ============  ============  ============

Diluted weighted
 average number of
 shares outstanding   20,131,080    20,485,294    20,154,583    20,494,963





                  PHC, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED BALANCE SHEETS

                                                December 31,    June 30,
                                                ------------  ------------
                                                    2008          2008
                                                ------------  ------------
                                                       (unaudited)
                      ASSETS
Current assets:
   Cash and cash equivalents                    $  1,003,243  $  3,142,226
   Accounts receivable, net of allowance for
    doubtful accounts of $2,382,826 at
    December 31, 2008 and $2,230,371 at
    June 30, 2008                                  6,490,297     6,439,733
   Other receivables - third party                   170,633            --
   Prepaid expenses                                  336,382       491,503
   Prepaid income taxes                              432,651       269,074
   Other receivables and advances                    729,011       623,295
   Deferred income tax asset - current             2,339,077       967,999
   Assets held for sale - Pivotal                  3,437,578     5,313,993
                                                ------------  ------------
      Total current assets                        14,938,872    17,247,823
   Accounts receivable, non-current                   35,000        35,000
   Other receivables                                  62,073        71,889
   Property and equipment, net                     5,047,243     4,382,421
   Deferred income tax asset - non-current           472,000       528,840
   Deferred financing costs, net of amortization
    of $363,174 and $286,413 at December 31,
    2008 and June 30, 2008                           409,067       470,829
   Goodwill                                          969,098       969,098
   Other assets                                    2,652,884     2,784,965
                                                ------------  ------------
         Total assets                           $ 24,586,237  $ 26,490,865
                                                ============  ============
      LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
   Accounts payable                             $  1,346,251  $  1,318,421
   Current maturities of long-term debt              653,465       651,379
   Revolving credit note                           1,124,319       977,203
   Current portion of obligations under capital
    leases                                           122,582       170,285
   Accrued payroll, payroll taxes and benefits     1,699,403     1,528,640
   Accrued expenses and other liabilities          1,312,753     1,434,983
   Liabilities held for sale - Pivotal               762,676     1,128,470
                                                ------------  ------------
         Total current liabilities                 7,021,449     7,209,381
   Long-term debt, net of current maturities       1,181,447       393,705
   Obligations under capital leases                  184,442       229,274
                                                ------------  ------------
         Total liabilities                         8,387,338     7,832,360
                                                ------------  ------------
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, 19,825,899
    and 19,806,147 shares issued at December
    31, 2008 and June 30, 2008, respectively         198,259       198,061
   Class B common stock, $.01 par value,
    2,000,000 shares authorized, 775,080 and
    775,672 issued and outstanding at December
    31, 2008 and June 30, 2008, respectively,
    each convertible into one share of Class A
    common stock                                       7,751         7,757
   Additional paid-in capital                     27,477,729    27,388,821
   Treasury stock, 689,290 and 387,698 shares
    of Class A common stock at December 31, 2008
    and June 30, 2008, respectively, at cost      (1,185,846)     (685,916)
   Accumulated deficit                           (10,298,994)   (8,250,218)
                                                ------------  ------------
      Total stockholders' equity                  16,198,899    18,658,505
                                                ------------  ------------
      Total liabilities and stockholders'
       equity                                   $ 24,586,237  $ 26,490,865
                                                ============  ============

Contact Information

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

    Investor Relations Contact:
    Liolios Group, Inc.
    Ron Both or Cody Slach
    Email Contact
    Tel: 949-574-3860