Via Facsimile and U.S. Mail
Mail Stop 6010
February 14, 2006
Paula C. Wurts
Controller and
Chief Financial Officer
PHC, Inc.
200 Lake Street, Suite 102
Peabody, MA 09160
Re: PHC, Inc.
Form 10-K for Fiscal Year Ended June 30, 2005
Filed September 28, 2005
File No. 000-22916
Dear Ms. Wurts:
We have reviewed your filing and have the following
comments.
We have limited our review of your filing to only your financial
statements and related disclosures and do not intend to expand our
review to other portions of your documents. In our comments, we
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Item 1: Description of Business, page 2
1. We believe your disclosures regarding revenues could be
improved.
Please provide us the following information in a disclosure-type
format:
a. Whether your billing system generates contractual adjustments
based on fee schedules of the patient`s insurance plan for each
patient encounter or if an estimate of contractual allowances is
made. If an estimate is made, state what factors are considered
in
determining the estimate.
b. Your policy for collecting co-payments.
c. Your day`s sales outstanding for each period presented.
Discuss
the reasons for significant changes from the prior period.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Critical Accounting Policies, pages 19-20
2. We believe that your disclosures as it relates to contractual
adjustments and receivables could be improved. Please provide us
the
following information in disclosure-type format:
* For each period presented, the amount of changes in estimates of
prior period contractual adjustments that you recorded during the
current period. For example for fiscal 2005, this amount would
represent the amount of the difference between estimates of
contractual adjustments for services provided in fiscal 2004 and
the
amount of the new estimate or settlement amount that was recorded
during fiscal 2005.
* Quantify the reasonably possible effects that a change in
estimate
of unsettled amounts from third party payors as of the latest
balance
sheet date could have on financial position and operations.
* Provide in a comparative tabular format, the payor mix
concentrations and related aging of accounts receivable. The
aging
schedule may be based on management`s own reporting criteria (i.e.
unbilled, less than 30 days, 30 to 60 days etc.) or some other
reasonable presentation. At a minimum, the information should
indicate the past due amounts and a breakdown by payor
classification
(i.e. Medicare, Medicaid, Managed care and other, and Self-pay).
We
would expect Self-pay to be separately classified from any other
grouping. If your billing system does not have the capacity to
provide an aging schedule of your receivables, discuss that fact
and
clarify how this affects your ability to estimate your allowance
for
bad debts.
* If you have amounts that are pending approval from third party
payors (i.e. Medicaid Pending), provide the balances of such
amounts,
where they have been classified in your aging buckets, and what
payor
classification they have been grouped with. If amounts are
classified outside of self-pay, explain why this classification is
appropriate and provide the historical percentage of amounts that
get
reclassified into self-pay.
Contractual Obligations, page 26
3. Please tell us why it appears scheduled interest payments on
long-
term debt are excluded from the table even though interest expense
would appear to be payable under the contractual terms of the
long-
term debt.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk,
page 28
4. It appears that quantitative disclosures on your interest rate
risk are required using one of the three disclosure alternatives
in
Rule 305(a) of Regulation S-K. Please provide this information in
a
disclosure-type format or tell us why these disclosures were
omitted.
Item 8. Financial Statements and Supplementary Data
Consolidated Financial Statements
Consolidated Statements of Operations, F-4
5. Please tell us your revenue recognition policy for
pharmaceutical
study revenue, the nature of billable units of service provided,
and
how the billable units of service are measured under the terms of
your agreements. Demonstrate for us how your policy complies with
GAAP.
Notes to Consolidated Financial Statements
Note A - The Company and Summary of Significant Accounting
Policies,
page F-8
Goodwill and other intangible assets, page F-11
6. Please explain to us why the straight-line method of
amortization
for the customer relationships acquired reflects the pattern in
which
the economic benefits of the intangible asset is consumed. Tell
us
why an accelerated method of amortization does not result in an
appropriate and systematic allocation of the intangible`s cost to
the
periods benefited.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your response to our comments and provides
requested
information. Detailed letters greatly facilitate our review.
Please
file your letter on EDGAR under the form type label CORRESP.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filing includes all information required under the Securities and
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comment, please provide,
in
your letter, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Todd Sherman, Staff Accountant, at 202-551-
3665
or Don Abbott, Senior Accountant, at 202-551-3608 if you have
questions regarding the comments. In this regard, do not hesitate
to
contact me, at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief Accountant
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Paula C. Wurts
PHC, Inc.
February 14, 2006
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