PEDIATRIC SERVICES OF AMERICA INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-23946

PEDIATRIC SERVICES OF AMERICA, INC.

(Exact name of Registrant as specified in its charter)


Delaware		58-1873345
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

310 Technology Parkway, Norcross GA 30092-2929

(Address of principal executive offices, including zip code)

(770) 441-1580

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes ¨ No x

As of January 30, 2004 the Registrant had 6,884,654 shares of Common Stock, $0.01 Par Value, outstanding.

Page 1 of 25

FORM 10-Q

PEDIATRIC SERVICES OF AMERICA, INC.

INDEX


		Page Number

PART I FINANCIAL INFORMATION

ITEM 1:	Financial Statements

	Condensed Consolidated Balance Sheets as of December 31, 2003 and September 30, 2003	3

	Condensed Consolidated Statements of Operations for the three months ended December 31, 2003 and 2002	5

	Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2003 and 2002	6

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

ITEM 3:	Quantitative and Qualitative Disclosures about Market Risk	23

ITEM 4:	Controls and Procedures	23

PART II OTHER INFORMATION

ITEM 1:	Legal Proceedings	24

ITEM 6:	Exhibits and Reports on Form 8-K	24

SIGNATURES		25

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

PEDIATRIC SERVICES OF AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	December 31, 2003			September 30, 2003
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,059		$	9,171
Accounts receivable, less allowances for doubtful accounts of $5,169 and $3,900, respectively		42,566			37,043
Prepaid expenses		2,456			991
Deferred income taxes		4,778			4,778
Workers’ compensation loss fund		2,732			1,633
Inventory		3,085			2,724
Insurance recoveries		2,008			2,227
Other current assets		263			327

Total current assets		59,947			58,894

Property and equipment:
Home care equipment held for rental		31,038			30,009
Furniture and fixtures		11,711			11,402
Vehicles		700			700
Leasehold improvements		1,981			1,961

		45,430			44,072
Accumulated depreciation and amortization		(36,921	)		(36,343	)

		8,509			7,729

Other assets:
Goodwill, less accumulated amortization of approximately $9,613		36,540			36,540
Certificates of need, less accumulated amortization of approximately $609 and $604, respectively		64			69
Deferred financing fees, less accumulated amortization of approximately $727 and $709, respectively		661			632
Noncompete agreements, less accumulated amortization of approximately $1,191 and $1,181, respectively		89			99
Deferred income taxes		2,916			2,916
Workers’ compensation bond collateral		2,295			2,779
Insurance recoveries		6,415			5,396
Other		284			290

		49,264			48,721

Total assets	$	117,720		$	115,344

See accompanying notes.

PEDIATRIC SERVICES OF AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS—(Continued)

(In thousands)


	December 31, 2003		September 30, 2003
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,832	$	6,045
Accrued compensation		4,536		5,138
Income taxes payable		1,356		1,382
Accrued insurance		5,068		5,798
Refunds payable		1,219		1,176
Accrued interest		425		951
Other accrued liabilities		1,974		2,062
Deferred revenue		710		733
Current maturities of long-term obligations		192		178

Total current liabilities		22,312		23,463
Long-term accrued insurance		12,262		10,302
Long-term obligations, net of current maturities		20,495		20,515


Total liabilities		55,069		54,280
Redeemable preferred stock, $.01 par value, 2,000 shares authorized, no shares issued and outstanding		—		—

Stockholders’ equity:
Common stock, $.01 par value, 80,000 shares authorized 6,884 and 6,879 shares issued and outstanding at December 31, 2003 and September 30, 2003, respectively		69		69
Additional paid-in capital		49,261		49,247
Retained earnings		13,321		11,748

Total stockholders’ equity		62,651		61,064

Total liabilities and stockholders’ equity	$	117,720	$	115,344

See accompanying notes.

PEDIATRIC SERVICES OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended December 31,
	2003			2002
	(Unaudited)			(Unaudited)
Net revenue	$	59,830		$	52,562
Costs and expenses:
Costs of goods and services		33,296			28,569
Other operating costs and expenses
Administrative and marketing salaries, wages and benefits		10,222			9,938
Business insurance		1,983			1,861
Overhead		4,172			3,948

Other operating costs and expenses		16,377			15,747
Corporate, general and administrative
Salaries, wages and benefits		3,557			3,462
Business insurance		44			89
Professional services		520			415
Overhead		734			722

Corporate, general and administrative		4,855			4,688
Provision for doubtful accounts		1,383			278
Depreciation and amortization		864			1,060

Total costs and expenses		56,775			50,342

Operating income		3,055			2,220
Other income		4			—
Interest income		43			30
Interest expense		(532	)		(650	)

Income before income tax expense		2,570			1,600
Income tax expense		997			629

Net income	$	1,573		$	971


Net income per share data:
Basic	$	0.23		$	0.14

Diluted	$	0.22		$	0.14


Weighted average shares outstanding:
Basic		6,882			6,845

Diluted		7,251			7,080

See accompanying notes.

PEDIATRIC SERVICES OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Three Months Ended December 31,
	2003			2002
	(Unaudited)			(Unaudited)
Operating activities:
Net income	$	1,573		$	971
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization		864			1,060
Provision for doubtful accounts		1,383			278
Amortization of deferred financing fees		18			22
Changes in operating assets and liabilities:
Accounts receivable		(6,906	)		(2,301	)
Prepaid expenses		(1,465	)		(462	)
Inventory		(361	)		(1,484	)
Other assets		51			127
Workers’ compensation loss fund		(1,099	)		(832	)
Workers’ compensation bond collateral		484			(908	)
Accounts payable		787			2,191
Income taxes		(26	)		519
Accrued liabilities, refunds, interest and insurance recoveries		(766	)		(179	)

Net cash used by operating activities		(5,463	)		(998	)
Investing activities:
Purchases of property and equipment		(1,568	)		(704	)

Net cash used in investing activities		(1,568	)		(704	)
Financing activities:
Principal payments of long-term debt		(48	)		(69	)
Deferred financing fees		(47	)		—
Proceeds from exercise of stock options		14			37

Net cash used in financing activities		(81	)		(32	)

Decrease in cash and cash equivalents		(7,112	)		(1,734	)
Cash and cash equivalents at beginning of period		9,171			10,990

Cash and cash equivalents at end of period	$	2,059		$	9,256

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,073		$	1,272

Cash paid for taxes	$	1,024		$	121

See accompanying notes.