Exhibit 99.1 PHC, INC. ANNOUNCES FINANCIAL RESULTS FOR THE FIRST QUARTER OF FISCAL 2007 Management Expects To Announce Company's Largest Contract Award beginning in Third Quarter of 2007 FOR IMMEDIATE RELEASE Company Contact: Investor Relations Contact: - --------------- -------------------------- PHC, Inc. Hayden Communications, Inc. Bruce A. Shear Matt Hayden or Peter Seltzberg 978-536-2777 843-272-4653 FINANCIAL HIGHLIGHTS: >> Record first quarter revenue >> Corporate milestone of second consecutive quarter of revenues above $10 million >> Net revenue increased 12.5% to $10.1 million over the same period last year >> 23% increase in contract support revenues over the same period last year >> 31% increase in patient days over the same period last year >> Provision for doubtful accounts decreased 31.1% to $452,500 from $656,900 for the same period last year Peabody, Mass., November 14, 2006 -- PHC, Inc., d.b.a. Pioneer Behavioral Health (OTC Bulletin Board: PIHC), a leading provider of inpatient and outpatient behavioral health services and pharmaceutical research, today announced its fiscal 2007 first quarter financial results, for the period ended September 30, 2006. Key Financial Indicators (all numbers in thousands, except per-share amounts) Q1 2007 Q1 2006 Increase % Change (decrease) Consolidated revenues $10,062 $8,945 $1,117 12.5% Patient care revenues $ 7,876 $6,713 $1,163 17.3% Pharmaceutical study revenues $ 1,051 $1,306 $ (255) (19.5%) Contract support service revenues $1,134 $ 926 $ 208 22.5% Income from operations $ 554 $ 601 $ (47) (7.8%) Net Income* $ 283 $ 384 $ (101) (26.3%) Earnings per share - Basic $ 0.02 $ 0.02 $ 0.00 -- Diluted $ 0.01 $ 0.02 %(0.01) (50.0%) * Fully taxed for the quarter ended September 30, 2007 (Q1 2007) 4 Financial Results Total net revenue from operations increased 12.5 percent to $10.1 million compared to $8.9 million for the first quarter last year. Net patient care revenue increased 17.3 percent to $7.9 million from the $6.7 million for the same period last year. The increase was primarily due to a 31 percent increase in patient days, and another 20 new beds at the Detroit Behavioral Institute. Revenue from pharmaceutical studies decreased 19.6 percent to $1.1 million from $1.3 million in the quarter due to inherent cyclicality and quarter-to-quarter fluctuation within this segment. Contract support services revenue provided by Wellplace increased 22.5 percent to $1.1 million for the quarter compared to $925,800 for the same quarter last year, primarily due to the start of a smoking cessation contract with a major government contractor. Total operating expenses for the quarter increased 14.0 percent to $9.5 million from $8.3 million during the first quarter of last year. Included in this increase was a 17 percent increase in administrative expenses which were incurred to bolster the Company's receivable collections resources and to add the appropriate level of staffing and space to support additional patients at Detroit Behavioral Institute. The Company's provision for doubtful accounts in the quarter decreased to $452,500 from $656,900 in the year ago same period. The percentage of bad debt expense to net patient care revenue for the quarter ended September 30, 2006 was 5.7 percent compared to 9.8 percent last year. "Prospects for increasing our bed count, a key metric of our financial health, have never been stronger, and we believe that for fiscal 2008, we can grow this number in excess of 50 percent compared to a prior best for us of about 22 percent," commented Bruce Shear, CEO, of Pioneer Behavioral Health. "We are particularly pleased to announce one particular significant new contract underway that we anticipate signing, based on several months of negotiations, prior to the end of this calendar year. If successful, this contract would represent the largest contract in the Company's history and have a material impact on both the revenue and operating profit beginning in calendar 2007, while furthering PHC's leadership position in a critical geographic market. While we lay the groundwork for our next growth phase in fiscal 2007 and 2008, we continue to execute on our business plan as evidenced by our net revenues topping the $10 million milestone for the second consecutive quarter. Patient days increased more than 30 percent for the quarter, due to strong demand and higher bedcount in our facilities. In our largest segment, treatment services, we generated a 17.3 percent increase in revenue, despite significant ramp-up costs, primarily related to increasing our investment in the Detroit Behavioral Institute. The increases in operating expenses included a $694,000, or 21.3 percent increase in patient treatment care expenses, and a $241,000, or 40.3 percent increase in contract support costs. Increases in administrative costs of $466,000, or 17.7 percent over last year's period were primarily due to myriad set-up and other infrastructure costs necessitated by the expansion underway at Detroit Behavioral Institute. Interest expense for the quarter decreased 22.8 percent in the quarter due to a reduction of long term debt since last year's same period. Income from operations for the quarter was $554,000, down 7.9 percent from the $601,000 reported for the same period last year. Net income for the three months was $283,000, or $0.01 per fully diluted share (based on 19.3 million fully diluted shares) compared to net income of $384,000, or $0.02 per fully diluted share (based on 19.3 million shares) for the first quarter last year. This year's first fiscal quarter was the first quarter in which the Company recorded an income tax provision assuming an estimated 39 percent corporate tax rate while in the prior-year quarter, the Company recorded a 20 percent tax rate for the income tax provision. Had the Company incurred the same 39 percent tax rate, net income for the first quarter of fiscal 2006 would have been $292,700, which is comparable to this year. 5 The Company reported $1.8 million in cash as of September 30, 2006, largely unchanged from June 30, 2006. Total net receivables from patient care for the first quarter of 2006, were $7.1 million, which was a 2.9 percent increase from $6.9 million at June 30, 2006. The Company's balance sheet had a current ratio of 2:1 on September 30, 2006 and stockholders' equity increased 3.1 percent to $13.8 million as of September 30, 2006 from $13.5 million as of June 30, 2006. Mr. Shear concluded, "This was a solid start to what we believe will be a year of growth and continued profitability. In late fiscal 2007, we expect to open our Seven Hills Behavioral Institute in the fast growing metropolitan area of Las Vegas. We continue to have active and productive discussions with key constituents in the region, reinforcing our confidence in our ability to quickly fill this important facility due to strong demand and the lack of alternatives in the region. These discussions are also leading to a substantial network of supporters, further demonstrating that we continue to be a leader in the behavioral health care industry." Teleconference Information The Company will host a conference call to discuss the fiscal 2007 first quarter results on Tuesday, November 14, 2006 at 4:15 p.m. Eastern Time. Interested parties within the United States can access the call by dialing 800-299-6183 and international callers may dial 617-801-9713. Please use passcode 25512706. A replay of the call also will be available until November 21, 2006 at 888-286-8010 for callers within the United States, and 617-801-6888 for international callers. Please use passcode 24225834 for the replay. This call is being webcast by CCBN, and can be accessed at PHC, Inc.'s web site at www.phc-inc.com. The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com, or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents, at www.streetevents.com. About Pioneer Behavioral Health Pioneer Behavioral Health operates companies that provide inpatient and outpatient behavioral health care services, clinical research and Internet- and telephonic-based referral services. The companies contract with national insurance companies, government payors, and major transportation and gaming companies, among others, to provide such services. For more information, please visit www.phc-inc.com or www.haydenir.com. Statement under the Private Securities Litigation Reform Act of 1995: Statement under the Private Securities Litigation Reform Act of 1995: This press release may include "forward-looking statements" that are subject to risks and uncertainties. Forward-looking statements include information about possible or assumed future results of the operations or the performance of the company 6 and its future plans and objectives. Various future events or factors may cause the actual results to vary materially from those expressed in any forward-looking statements made in this press release. For a discussion of these factors and risks, see the company's annual report on Form 10-K for the most recently ended fiscal year. - tables follow - 7 PHC, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, June 30, ASSETS 2006 2006 (unaudited) Current assets: Cash and cash equivalents $1,774,410 $ 1,820,105 Accounts receivable, net of allowance for doubtful accounts of $3,155,365 at September 30, 2006 and $3,100,586 at June 30, 2006 7,167,055 6,955,475 Pharmaceutical receivables 1,474,353 1,470,019 Prepaid expenses 948,474 490,655 Other receivables and advances 907,769 751,791 Deferred income tax asset 2,960,768 3,110,000 _________ _________ Total current assets 15,232,829 14,598,045 Accounts receivable, non-current 35,000 40,000 Other receivable 47,680 53,457 Property and equipment, net 1,943,734 1,799,888 Deferred financing costs, net of amortization of $115,661 at September 30, 2006 and $106,422 June 30, 2006 107,785 117,023 Customer relationships, net of amortization of $290,000 at September 30, 2006 and $260,000 at June 30, 2006 2,110,000 2,140,000 Goodwill 2,664,643 2,664,643 Other assets 555,377 571,931 _________ _________ Total assets $22,697,048 $ 21,984,987 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,831,519 $ 1,518,615 Current maturities of long-term debt 872,518 909,057 Revolving credit note 1,777,931 1,603,368 Deferred revenue 246,286 385,742 Current portion of obligations under capital leases 146,660 57,881 Accrued payroll, payroll taxes and benefits 1,632,449 1,619,672 Accrued expenses and other liabilities 1,052,408 1,026,419 _________ _________ Total current liabilities 7,559,771 7,120,754 Long-term debt 890,997 1,021,546 Obligations under capital leases 47,075 61,912 Deferred tax liability 325,000 325,000 _________ _________ Total liabilities 8,822,843 8,529,212 ========= ========= Stockholders' equity: Preferred Stock, 1,000,000 shares authorized, none issued or outstanding -- -- Class A common stock, $.01 par value, 30,000,000 shares authorized, 17,953,463 and 17,874,966 shares issued at September 30, 2006 and June 30, 2006, respectively 179,535 178,749 Class B common stock, $.01 par value, 2,000,000 shares authorized, 775,760 issued and outstanding at September 30, 2006 and June 30, 2006, respectively, each convertible into one share of Class A common Stock 7,758 7,758 Additional paid-in capital 23,852,558 23,718,197 Treasury stock, 199,098 shares of Class A common stock at September 30, 2006 and June 30, 2006, at cost (191,700) (191,700) Accumulated deficit (9,973,946) (10,257,229) ___________ _____________ Total stockholders' equity 13,874,205 13,455,775 Total liabilities and stockholders' equity $22,697,048 $21,984,987 =========== =========== See Notes to Condensed Consolidated Financial Statements 8 PHC, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2006 2005 Revenues: Patient care, net $ 7,876,432 $ 6,712,980 Pharmaceutical studies 1,051,383 1,306,009 Contract support services 1,134,391 925,837 __________ ____________ Total revenues 10,062,206 8,944,826 __________ ____________ Operating expenses: Patient care expenses 3,955,652 3,261,911 Patient care expenses, pharmaceutical 486,937 563,154 Cost of contract support services 838,555 597,795 Provision for doubtful accounts 452,525 656,887 Administrative expenses 3,095,455 2,629,676 Administrative expenses, pharmaceutical 679,108 633,999 __________ ____________ Total operating expenses 9,508,232 8,343,422 __________ ____________ Income from operations 553,974 601,404 __________ ____________ Other income (expense): Interest income 32,849 22,864 Other income (943) 10,785 Interest expense (119,830) (155,218) __________ ____________ Total other expenses, net (87,924) (121,569) __________ ____________ Income before provision for taxes 466,050 479,835 Provision for income taxes 182,767 95,628 __________ ____________ Net income $ 283,283 $384,207 ========== ============ Basic net income per common share $ 0.02 $ 0.02 ============ ============= Basic weighted average number of shares outstanding 18,514,142 18,099,342 =========== ============= Fully diluted net income per common share $ 0.01 $ 0.02 ============ ============= Fully diluted weighted average number of shares outstanding 19,296,638 19,270,164 =========== ============= See Notes to Condensed Consolidated Financial Statements. 9