PSAI Pediatric Services OF America (MM)

Pediatric Services of America, Inc. (Nasdaq: PSAI) announces financial results for the first quarter of fiscal year 2006. The highlights of PSAI's results for the first quarter ended December 31, 2005 include: -- Completed the sale of the Pharmacy business; -- Made significant progress in fulfilling its obligations under the Transition Services Agreement with Accredo Health Group Inc. and are on schedule to complete all service responsibilities by May 31, 2006, which will allow PSAI to focus solely on growing its existing businesses; -- Completed the full redemption of the outstanding 10% Senior Subordinated Notes due 2008 (the "Notes") and terminated the credit facility with GE Capital Corp. For the first quarter of fiscal 2006, net revenue from continuing operations decreased less than one percent to $42,233,000 from $42,406,000 in the fourth quarter of fiscal year 2005. Consolidated net income was $24,182,000 in the first quarter of fiscal year 2006 as compared to $1,559,000 for the fourth quarter of fiscal year 2005. Diluted net income per share was $3.33 in the first quarter of fiscal year 2006 as compared to $0.21 in the fourth quarter of fiscal year 2005. Net income for the first quarter of fiscal 2006 includes $777,000 of income net of tax from discontinued operations and a $24,579,000 gain net of tax on disposal of our discontinued operations. In addition, an expense of approximately $837,000 was recorded in the first quarter of fiscal 2006 for the write-off of the deferred financing fees and call premium related to the full redemption of the Notes and termination of the credit agreement with GE Capital Corp. "With the completion of the sale of our Pharmacy business, we were able to fully redeem our $20,350,000 outstanding debt and terminate the credit facility," said Daniel J. Kohl, President and CEO of PSAI. "In addition, we have identified a significant number of acquisition opportunities. We are pleased with how quickly we've been able to build a pipeline of potential acquisition targets, but we intend to proceed in a measured manner in order to ensure we are completing only high-quality transactions." For fiscal year 2006, PSAI continues to expect that earnings from continuing operations will be in the range of $0.16-$0.19. Conference Call A conference call to discuss these results has been scheduled for Thursday, February 9, 2006 at 11:00 a.m. ET. The dial-in number for all Participants is 800-374-1702. Note: To join the Q&A session, please press the asterisk followed by 1. If you are unable to listen to the live broadcast, replays of the conference call will be available until February 23, 2006 by dialing 800-642-1687. To connect with the replay of the conference call, please refer to the Pediatric Services of America, Inc. Earnings Call, Passcode: 4855785 #. PSAI provides comprehensive pediatric home health care services through a network of over 100 branch offices in 19 states, including satellite offices and branch office start-ups. Through these offices PSAI provides a combination of services, including pediatric private duty nursing (PDN), pediatric day treatment centers (PPECs) and respiratory therapy and equipment services (RTES). Additional information on PSAI may be found on the Company's website at http://www.psakids.com. NOTE: This press release contains certain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to future financial performance of Pediatric Services of America, Inc. (the "Company"). When used in this press release, the words "may," "targets," "goal," "will," "could," "should," "would," "believe," "feel," "expects," "confident," "anticipate," "estimate," "intend," "plan," "potential" and similar expressions may be indicative of forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control. The Company cautions that various factors, including the factors described hereunder and those discussed in the Company's other filings with the Securities and Exchange Commission, as well as general economic conditions, industry trends, the Company's anticipated uses of the proceeds from the sale of its Pharmacy Business, the Company's ability to collect for equipment sold or rented, assimilate and manage previously acquired field operations, collect accounts receivable, including receivables related to acquired businesses and receivables under appeal, hire and retain qualified personnel and comply with and respond to billing requirements issues, including those related to the Company's billing and collection system, nurse shortages, competitive bidding, HIPAA regulations, Average Wholesale Price ("AWP") reductions, adverse litigation, workers' compensation losses, availability and cost of medical malpractice insurance and reduced state funding levels and nursing hours authorized by Medicaid programs, and the impact of changes resulting from the recently enacted Medicare Act, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements of the Company made by or on behalf of the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of an unanticipated event. New factors emerge from time to time, and it is not possible for management to predict all of such factors. Further, management cannot assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. -0- *T PEDIATRIC SERVICES OF AMERICA, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) Three Months Ended December 31, September 30, 2005 2005 ------------ ------------- Net revenue $42,233 $42,406 Costs and expenses: Costs of goods and services 21,531 21,978 Other operating costs and expenses Administrative and marketing salaries, wages and benefits 8,996 8,888 Business insurance 1,646 1,203 Overhead 3,666 3,533 ---------- --------- Other operating costs and expenses 14,308 13,624 Corporate, general and administrative Salaries, wages and benefits 3,750 3,916 Business insurance 64 56 Professional services 894 1,446 Overhead 719 666 ---------- --------- Corporate, general and administrative 5,427 6,084 Provision for doubtful accounts 445 547 Depreciation and amortization 995 993 ---------- --------- Total costs and expenses 42,706 43,226 ---------- --------- Operating loss (473) (820) Other income 3 - Loss on early extinguishment of debt (837) - Interest income 385 62 Interest expense (560) (608) ---------- --------- Loss from continuing operations before income tax benefit (1,482) (1,366) Income tax benefit (308) (1,231) ---------- --------- Loss from continuing operations (1,174) (135) Discontinued operations: Income from discontinued operations before income tax expense 1,281 2,806 Income tax expense 504 1,112 ------- ------ Income from discontinued operations 777 1,694 ---------- --------- Gain on disposal of discontinued operations before income tax expense 40,524 - Income tax expense 15,945 - ------- ------ Gain on disposal of discontinued operations 24,579 - ---------- --------- Net income $24,182 $1,559 ========== ========= Income per share data: Basic net income per share data: Loss from continuing operations $(0.16) $(0.02) Income from discontinued operations 0.11 0.23 Gain on disposal of discontinued operations 3.38 - ---------- --------- Net income $3.33 $0.21 ========== ========= Diluted net income per share data: Loss from continuing operations $(0.16) $(0.02) Income from discontinued operations 0.11 0.23 Gain on disposal of discontinued operations 3.38 - ---------- --------- Net income $3.33 $0.21 ========== ========= Weighted average shares outstanding: Basic 7,269 7,258 ========== ========= Diluted 7,269 7,258 ========== ========= CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION December 31, 2005 September 30, 2005 ----------------- ------------------ Cash and cash equivalents $64,272 $19,037 Accounts receivable, less allowance for doubtful accounts 25,760 26,232 Long-term obligations, net of current maturities - 20,350 Total stockholders' equity 98,304 73,569 Respiratory Therapy, Equipment and Consolidated Nursing PPEC Services Total -------------------------------------- Three months ended December 31, 2005 Net revenue $25,375 $2,558 $14,300 $42,233 Costs of goods and services Nursing and therapist salaries, wages, benefits and supplies 16,771 136 226 17,133 Pharmacy product and supplies 1,722 1,722 Disposables/Supplies 13 8 2,655 2,676 -------------------------------------- Total cost of goods and services 16,784 144 4,603 21,531 Other operating costs and expenses Administrative and marketing salaries, wages and benefits 3,380 1,421 4,195 8,996 Business Insurance 1,103 93 450 1,646 Overhead 1,434 424 1,808 3,666 -------------------------------------- Total operating costs and expenses 5,917 1,938 6,453 14,308 Provision for doubtful accounts (38) 43 440 445 Depreciation 40 45 753 838 -------------------------------------- Branch office contribution margin $2,672 $388 $2,051 $5,111 ====================================== Three months ended September 30, 2005 Net revenue $25,447 $2,658 $14,301 $42,406 Costs of goods and services Nursing and therapist salaries, wages, benefits and supplies 16,746 167 212 17,125 Pharmacy product and supplies - - 1,827 1,827 Disposables/Supplies 11 5 3,010 3,026 -------------------------------------- Total cost of goods and services 16,757 172 5,049 21,978 Other operating costs and expenses Administrative and marketing salaries, wages and benefits 3,455 1,370 4,063 8,888 Business Insurance 761 77 365 1,203 Overhead 1,324 436 1,773 3,533 -------------------------------------- Total operating costs and expenses 5,540 1,883 6,201 13,624 Provision for doubtful accounts 113 (50) 484 547 Depreciation 45 46 748 839 -------------------------------------- Branch office contribution margin $2,992 $607 $1,819 $5,418 ====================================== Three Months Three Months Ended Ended December 31, September 30, 2005 2005 ------------- -------------- Total profit for reportable segments $5,111 $5,418 Corporate, general and administrative (5,427) (6,084) Corporate depreciation and amortization (157) (154) Other income 3 - Loss on early extinguishment of debt (837) - Interest income 385 62 Interest expense (560) (608) ------------- -------------- Loss from continuing operations, before income tax benefit $(1,482) $(1,366) ============= ============== *T