PSA grows operating income by 52% in 3rd Q

Monday, August 18, 2003

August 19 , 2003

NORCROSS, Ga. - Pediatric Services of America’s operating income increased 52% to $2.8 million during the third quarter from $1.8 million during the same period last year. Net revenue increased 10% to $54 million from $49 million last year.

During the nine months ended June 30, net revenue increased 10% to $160 million from $146 million during the same period last year. Operating income increased 8% to $7.3 million compared to $6.8 million during the same nine months in 2002.

PSA derives about 25% of its revenue from home respiratory services, most of that in the pediatric arena but a small portion comes from adult respiratory services. The rest of its business consists of daycare centers for medically fragile children, private duty nursing and pharmacy services.

For the remainder of fiscal year 2003 and during fiscal year 2004, the company plans to explore its growth opportunities in the following areas:

- The company intends to continue to focus on local market opportunities. In addition, PSA seeks to enhance its same store internal growth plans by implementation of its managed care marketing strategy, which is to better utilize its managed care contract portfolio and market its services to the respective discharge planners and case managers who control the patient referrals for these covered lives.

- The company also plans to grow through accretive acquisitions with a valuation criterion that seeks to price businesses at 3 1/2 to 4 1/2 times trailing cash flow and is pleased with its current pipeline of candidates.

- The company also plans to open additional start-up branch offices in identified key markets, primarily in private duty nursing.

During the third quarter, the company completed a staffing reduction at selected locations, including the corporate office, primarily through position eliminations, reductions in workforce and attrition. These reductions were part of an overall cost reduction plan designed to enhance operating margin rates. While the impact of these reductions was not material to the third quarter's results, we expect a full quarter impact in the fourth quarter of fiscal 2003.

PSAI provides comprehensive pediatric home health care services through a network of over 120 branch offices in 22 states, including satellite offices and branch office start-ups.