11/10/2002

HPSC Announces Better Than Expected Results For Third Quarter; EPS Up 23%

Strong Buy Recommendation Reiterated

HPSC announced on November 5, 2002 that its third quarter net income, EPS, and contract originations were all at record levels. Revenues increased 2% to $13.9 million versus $13.6 million for the third quarter last year. Gains on sales of leases and notes increased to $4.8 million from $4.3 million last year's quarter, while its deduction from sales for Provision for Losses increased to ($3.8 million) from ($2.7 million). Net income increased 27% to $1.19 million as contrasted to $937,000 last year while its diluted EPS increased 23% to $0.27 per share as compared to $0.22 in last year?s third quarter.

For the nine months, revenue declined slightly to $40.2 million from $40.8 million. This decrease was the result of lower Gains on Sales of leases in the current year of $10.7 million as compared to $11.1 million last year. The deduction from sales for Provision for Losses increased to ($8.4 million) from ($6.8 million). Net income for this year's first nine months increased 72% to $3.1 million versus $1.8 million last year. Diluted EPS for the first nine months increased 70% to $0.71 per share as compared to $0.42 in last year?s nine months. At the end of the nine month period, the gross portfolio of owned and managed lease contracts and notes receivable increased 11% to $896 million as compared to $807 million and unearned income increased 10% to $115 million as compared to $105 million at year-end 2001.

The reported results confirm our belief that HPSC is well on its way to a record year of net income. Our estimated net income for the third quarter was $1.05 million as compared to the reported $1.19 million and our estimated diluted was EPS $0.24 as compared to the reported figure of $0.27. Our diluted EPS estimate of $0.93-$0.94 (adjusted for restated earnings for the first six months of 2002) appears now to be low and we will be reviewing these estimates in an updated research report that will be published shortly after the release of the SEC filing 10Q for September 30, 2002. Considering HPSC?s current and future growth prospects and the fact that the stock has decreased approximately 24.6% from its recent high of $10.15 on June 18, 2002, we believe the stock continues to afford investors an excellent buying opportunity.

We reiterate our STRONG BUY RECOMMENDATION and our price target over the next twelve to eighteen months of $14.00 to $16.00 a share.

J.M.Dutton & Associates, LLC. John M. Dutton, President and Supervisory Analyst, 1129 Manning Drive, Suite 310, El Dorado Hills, CA 95762 Phone (916) 941-4985, Fax (978) 418-6422 Email: [email protected] Web site: www.JMDutton.com

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© Copyright, 2002, by J.M. Dutton & Associates, LLC.