PSAI Pediatric Services OF America (MM)

Pediatric Services of America, Inc., d/b/a PSA Healthcare (Nasdaq: PSAI) announced today financial results for the second quarter of fiscal year 2006. Recent corporate developments and the highlights of PSA's results for the second quarter ended March 31, 2006 include: -- Entered into a definitive agreement to purchase select assets of Melmedica Children's Healthcare, Inc., an Illinois corporation; -- Increased nursing hours staffed by 3.5%, to 806,000 hours from 779,000 hours in first quarter; and -- Completed the accounting and pharmacy service obligations under the Transition Services Agreement with Accredo Health, 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. For the second quarter of fiscal 2006, net revenue from continuing operations increased $1,269,000 to $43,502,000 as compared to $42,233,000 in the first quarter of fiscal year 2006. Net income was $598,000 in the second quarter of fiscal year 2006 as compared to $24,182,000 for the first quarter of fiscal year 2006. Diluted net income per share was $0.08 in the second quarter of fiscal year 2006 as compared to $3.33 in the first quarter of fiscal year 2006. 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 10% Senior Subordinated Notes due 2008 and termination of the credit agreement with GE Capital Corp. "We are pleased to announce that we have entered into an agreement to acquire the pediatric nursing services business of Melmedica Children's Healthcare, Inc., and we remain focused on the pipeline of potential acquisition targets we have in place," said Daniel J. Kohl, President and CEO of PSAI. "In addition, our nurse recruiting programs seem to be having a positive impact on nursing hours staffed, our PPEC business is performing well and cash collections continue to be strong. As such, the trends of our core businesses seemed headed in the right direction." 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 Wednesday, May 10, 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 May 24, 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: 8012072 #. PSA 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 PSA 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 PSA 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 PSA Healthcare, 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 integration of the Melmedica acquisition, 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 March 31, December 31, 2006 2005 --------- ------------ Net revenue $43,502 $42,233 Costs and expenses: Costs of goods and services (exclusive of depreciation shown separately below) 22,300 21,531 Other operating costs and expenses Administrative and marketing salaries, wages and benefits 9,031 8,996 Business insurance 1,966 1,646 Overhead 3,784 3,666 ------- ------- Other operating costs and expenses 14,781 14,308 Corporate, general and administrative Salaries, wages and benefits 3,329 3,750 Business insurance 59 64 Professional services 1,044 894 Overhead 675 719 ------- ------- Corporate, general and administrative 5,107 5,427 Provision for doubtful accounts 19 445 Depreciation and amortization 1,013 995 ------- ------- Total costs and expenses 43,220 42,706 ------- ------- Operating income (loss) 282 (473) Other income 5 3 Loss on early extinguishment of debt - (837) Interest income 626 385 Interest expense (4) (560) ------- ------- Income (loss) from continuing operations before income tax expense (benefit) 909 (1,482) Income tax expense (benefit) 334 (308) ------- ------- Income (loss) from continuing operations 575 (1,174) Discontinued operations: Income from discontinued operations before income tax expense - 1,281 Income tax expense - 504 ------- ------- Income from discontinued operations - 777 ------- ------- Gain on disposal of discontinued operations before income tax expense 38 40,524 Income tax expense 15 15,945 ------- ------- Gain on disposal of discontinued operations 23 24,579 ------- ------- Net income $ 598 $24,182 ======= ======= Income per share data: Basic net income per share data: Income (loss) from continuing operations $ 0.08 $ (0.16) Income from discontinued operations - 0.11 Gain on disposal of discontinued operations 0.00 3.38 ------- ------- Net income $ 0.08 $ 3.33 ======= ======= Diluted net income per share data: Income (loss) from continuing operations $ 0.08 $ (0.16) Income from discontinued operations - 0.11 Gain on disposal of discontinued operations 0.00 3.38 ------- ------- Net income $ 0.08 $ 3.33 ======= ======= Weighted average shares outstanding: Basic 7,372 7,269 ======= ======= Diluted 7,372 7,269 ======= ======= CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION March 31, December 31, 2006 2005 ------------ --------------- Cash and cash equivalents $ 57,458 $ 64,272 Accounts receivable, less allowance for doubtful accounts 26,102 25,760 Total stockholders' equity 100,918 98,304 *T -0- *T Respiratory Therapy, Equipment and Consolidated Nursing PPEC Services Total --------------------------------------- Three Months Ended March 31, 2006 Net revenue $26,404 $ 2,799 $14,299 $43,502 Costs of goods and services (exclusive of depreciation shown separately below) Nursing and therapist salaries, wages, benefits and supplies 17,341 126 322 17,789 Pharmacy product and supplies - - 1,763 1,763 Disposables/Supplies 12 15 2,721 2,748 ------- ------- ------- ------- Total cost of goods and services 17,353 141 4,806 22,300 Other operating costs and expenses Administrative and marketing salaries, wages and benefits 3,408 1,502 4,121 9,031 Business Insurance 1,302 106 558 1,966 Overhead 1,400 441 1,943 3,784 ------- ------- ------- ------- Total operating costs and expenses 6,110 2,049 6,622 14,781 Provision for doubtful accounts 106 (46) (41) 19 Depreciation 38 46 767 851 ------- ------- ------- ------- Branch office contribution margin $ 2,797 $ 609 $ 2,145 $ 5,551 ======= ======= ======= ======= Three months ended December 31, 2005 Net revenue $25,375 $ 2,558 $14,300 $42,233 Costs of goods and services (exclusive of depreciation shown separately below) 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 Three Months Ended Ended March 31, December 31, 2006 2005 ---------- ------------ Total profit for reportable segments $ 5,551 $ 5,111 Corporate, general and administrative (5,107) (5,427) Corporate depreciation and amortization (162) (157) Other income 5 3 Loss on early extinguishment of debt - (837) Interest income 626 385 Interest expense (4) (560) ---------- ---------- Income (loss) from continuing operations, before income tax expense (benefit) $ 909 $ (1,482) ========== ========== *T