HPSC, Inc. Reports Year End Results; Net Income Increases 79%; Financing Contract Originations Increase 18%

Business Wire, March 24, 2003

Business Editors

BOSTON--(BUSINESS WIRE)--March 24, 2003

HPSC, Inc. (AMEX:HDR) today reported a 79% increase in net income for the year ending December 31, 2002 of $4.3 million, or $1.00 per share on a diluted basis, compared to net income of $2.4 million in 2001, or $0.55 diluted net income per share. Basic net income per share was $1.07 per share, up 78% from $0.60 basic net income per share as reported in the prior year.

For the full year 2002, the Company increased its volume of new financing contract originations to $311 million, an 18% increase over $263 million produced in 2001. The gross portfolio of leases and notes under management, which includes both financing contracts owned by the company as well as sold and serviced, increased to $935 million at year end 2002, a 16% increase from a gross portfolio size of $807 million at the end of 2001. Net investment in leases and notes owned by the Company increased 15% during 2002 to $458 million, compared to $397 million in the prior year.

John W. Everets, Chairman and Chief Executive Officer said, "We are gratified by our progress during 2002. Our company-wide management information systems and our strategic sales and marketing programs yielded significant growth last year. We added more than 7,600 contracts, bringing the number of medical professionals we serve to record levels. Our first quarter of 2003 is off to a strong start."

For its fourth quarter of 2002, the Company recorded net income of $1.3 million, or $0.29 diluted net income per share, compared to $579,000, or $0.13 diluted net income per share, for the same period in 2001, an increase of 125%. Basic net income per share increased 107% from $0.15 in the fourth quarter last year to $0.31 in the fourth quarter of 2002. New financing contract originations increased 32% in the fourth quarter of 2002, to $91 million from $69 in the same period last year.

The fiscal year 2001 numbers used in this release for comparison purposes are the financial results of the Company for the year 2001, as restated on August 14, 2002.

About HPSC

HPSC Inc. is a leading non-bank financial services company providing leasing and financing opportunities to the medical and dental professions in all 50 states.

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act. Such statements are subject to a number of risks and uncertainties, including but not limited to, the following: the company's dependence on maintaining and increasing funding sources, restrictive covenants in funding documents; payment restrictions and default risks in asset securitization transactions to which the company is a party; customer credit risks; competition for customers and for capital funding at favorable rates relative to the capital costs of the company's competitors; changes in healthcare payment policies; interest rate risk; the risk that the company may not be able to realize the residual value of financed equipment at the end of its lease term; interest rate hedge contract risks; risks associated with the sale of certain receivable pools by the company; dependence on sales representatives and the current management team; and fluctuations in quarterly operating results. The company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, contain additional information concerning such risk factors. Actual results in the future could differ materially from those described in the forward-looking statements as a result of the risk factors, including those set forth above, and the risk factors described in the Annual Report. HPSC cautions the reader, however, that such list of risk factors may not be exhaustive. HPSC undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.

Operating Performance:
  (in thousands,
   except per
   share and          Three Months Ended            Year Ended
   share           December 31, December 31, December 31, December 31,
   amounts)           2002         2001         2002         2001

Revenues
    Earned income      $13,079      $11,509      $50,954      $47,970
    Gain on sales
     of leases and
     notes, net          5,013        3,761       15,804       14,928
    Provision for
     losses             (3,018)      (2,597)     (11,448)      (9,409)
Net revenues            15,074       12,673       55,310       53,489
Selling, general
 and administrative      6,440        5,241       22,280       22,126
Loss from employee
 defalcation               ---          521          448        1,379
Interest expense,
 net                     6,515        5,949       25,345       25,993
Income (loss)
 before income
 taxes                   2,119          962        7,237        3,991
Provision for
 income taxes              834          383        2,891        1,612
Net income              $1,285         $579       $4,346       $2,379

BASIC NET INCOME
 PER SHARE               $0.31        $0.15        $1.07        $0.60

Shares used to
 compute basic net
 income per share.   4,099,480    3,963,952    4,064,404    3,965,378

DILUTED NET INCOME
 PER SHARE               $0.29        $0.13        $1.00        $0.55

Shares used to
 compute diluted
 net income per
 share               4,376,117    4,321,411    4,339,846    4,319,673


                                              Selected Financial Data

                                             December 31, December 31,
                                                 2002         2001

Cash and cash equivalents                            $51         $698
Restricted cash- Securitization servicing         29,633       28,786
Unearned income                                  118,043      104,741
Net investment in leases and notes               458,034      396,996
Senior notes and notes payable to banks          388,304      336,806
Senior subordinated notes                         17,960       19,985
Stockholders' equity (Note 1)                     39,841       36,781

1. Stockholders' equity includes the effects of unrealized Accumulated
   Other Comprehensive Losses, net of tax, of $5,711 and $4,348 at
   December 31, 2002 and 2001, respectively.