EX-99 2 a5258860ex99.txt EXHIBIT 99 Exhibit 99 Psychiatric Solutions Announces Third Quarter Earnings Per Diluted Share of $0.29 Increases 2006 Earnings Guidance to Range of $1.10 to $1.12 Establishes 2007 Earnings Guidance in Range of $1.37 to $1.41 FRANKLIN, Tenn.--(BUSINESS WIRE)--Oct. 25, 2006--Psychiatric Solutions, Inc. ("PSI") (NASDAQ: PSYS) today announced financial results for the third quarter and nine months ended September 30, 2006. Revenue for the third quarter rose to a record $254,814,000, an increase of 15.6% from $220,458,000 for the third quarter of 2005. Net income for the third quarter of 2006 was $15,524,000, or $0.29 per diluted share, which included stock compensation expense of $0.02. Net income for the third quarter of 2005 was $1,179,000, or $0.03 per diluted share, which included a pre-tax loss on the refinancing of long-term debt of $14,881,000, or $0.20 per diluted share after tax. Adjusted income from continuing operations per diluted share, which excludes stock compensation expense in 2006 and the loss on refinancing in 2005, increased 41% to $0.31 for the third quarter of 2006 from $0.22 for the third quarter of 2005. Diluted shares used in computing per share amounts increased 17% for the third quarter of 2006 from the third quarter of 2005. All results in this release have been adjusted to reflect the 2-for-1 stock split effected in January 2006. Please see pages 6 and 7 for a reconciliation of GAAP and non-GAAP financial results. "With the substantial profitable growth PSI produced for the third quarter, we continue to meet or exceed our financial objectives," commented Joey Jacobs, Chairman, President and Chief Executive Officer of PSI. "Consistent with our strong long-term growth record, our third quarter results once again reflected significant increases in same-facility revenue and in the number of psychiatric inpatient beds in operation. Our same-facility revenue, which is now derived from 55 facilities including the 20 facilities acquired from Ardent Health Services in 2005, increased 7.6% for the quarter, driven by 2.8% growth in patient days and 4.6% growth in revenue per patient day. Through the first nine months of 2006, same-facility revenue increased 8.7%, with a 3.2% increase in patient days and a 5.4% increase in revenue per patient day. "As this performance indicates, we are successfully leveraging the inherent growth potential in our inpatient facilities through our strategies to capture additional market share. Contributing to this growth are the increasing productivity and efficiencies that we continue to generate in combination with our substantial revenue growth. These operating improvements are accountable for the increase in our same-facility EBITDA margin to 20.0% for the latest quarter from 17.4% for the third quarter of 2005, while total adjusted EBITDA for the Company increased to 16.7% of revenue for the third quarter from 14.7% for the comparable 2005 period. "PSI completed the third quarter with more than 6,900 inpatient beds in operation. While we continue to implement our strategy of gradually expanding bed capacity within our existing base of facilities, most of the growth in beds reflects our ongoing acquisition strategy, through which we target the addition of a minimum of six inpatient facilities each year. Through the first nine months of 2006, we completed the acquisition of nine inpatient facilities in eight transactions, including the purchase of five facilities with approximately 450 inpatient beds during the third quarter. In a market that remains highly fragmented, we are confident that there are ample opportunities to sustain our acquisition strategy for the foreseeable future. "We also remain confident that the strength of our financial position and our increasing cash flow from operations will enable us to implement our growth strategies successfully. Cash flow from operations for the third quarter increased 19% to $28.8 million from the third quarter last year and 58% to $80.8 million for the first nine months of 2006 versus the same period in 2005." Based primarily on the Company's earnings for the first nine months of $0.81 per diluted share and its outlook for the remainder of 2006, PSI today increased its guidance for earnings per diluted share, which includes stock compensation expense expected to be approximately $0.15, to a range of $1.10 to $1.12, from the previous range of $1.08 to $1.10. Additionally, the Company established its guidance for 2007 earnings per diluted share in a range of $1.37 to $1.41, which includes stock compensation expense expected to be approximately $0.14. The Company's guidance does not include the impact from any future acquisitions. PSI will hold a conference call to discuss this release tomorrow at 9:00 a.m. Eastern time. Participants will have the opportunity to listen to the conference call over the Internet by going to www.psysolutions.com and clicking Investor Relations or by going to www.earnings.com. Participants are encouraged to go to the selected web sites at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available at these sites shortly after the call through the end of business on November 9, 2006. This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements other than those made solely with respect to historical fact and are based on the intent, belief or current expectations of PSI and its management. PSI's business and operations are subject to a variety of risks and uncertainties that might cause actual results to differ materially from those projected by any forward-looking statements. Factors that could cause such differences include, but are not limited to: (1) potential competition which alters or impedes PSI's acquisition strategy by decreasing PSI's ability to acquire additional inpatient facilities on favorable terms; (2) the ability of PSI to improve the operations of acquired inpatient facilities; (3) the ability to maintain favorable and continuing relationships with physicians who use PSI's facilities; (4) the ability to receive timely additional financing on terms acceptable to PSI to fund PSI's acquisition strategy and capital expenditure needs; (5) risks inherent to the health care industry, including the impact of changes in regulation, reimbursement rates from federal and state health care programs or managed care companies and exposure to claims and legal actions by patients and others; (6) PSI's ability to comply with applicable licensure and accreditation requirements; (7) an adverse judgment in PSI's litigation with FHC Health Systems, Inc.; and (8) potential difficulties in integrating the operations of PSI with recently acquired operations. The forward-looking statements herein are qualified in their entirety by the risk factors set forth in PSI's filings with the Securities and Exchange Commission. PSI undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. PSI offers an extensive continuum of behavioral health programs to critically ill children, adolescents and adults through its operation of 64 owned or leased freestanding psychiatric inpatient facilities with more than 6,900 beds in 27 states. PSI also manages freestanding psychiatric inpatient facilities for government agencies and psychiatric inpatient units within medical/surgical hospitals owned by others. PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands except for per share amounts) Three Months Ended Nine Months Ended September 30, September 30, --------------------------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Revenue $254,814 $220,458 $745,530 $494,216 Salaries, wages and employee benefits (including share- based compensation of $2,059 and $10,449 for the three and nine months ended September 30, 2006, respectively) 144,715 121,583 422,647 269,602 Professional fees 24,209 22,511 71,210 51,126 Supplies 14,577 13,220 43,008 30,137 Rentals and leases 3,280 3,381 9,923 8,042 Other operating expenses 23,214 22,348 70,883 53,239 Provision for doubtful accounts 4,413 4,954 13,771 10,267 Depreciation and amortization 5,234 4,355 14,846 10,279 Interest expense 10,059 11,377 28,537 18,192 Loss on refinancing long-term debt - 14,881 - 21,871 --------- --------- --------- --------- 229,701 218,610 674,825 472,755 --------- --------- --------- --------- Income from continuing operations before income taxes 25,113 1,848 70,705 21,461 Provision for income taxes 9,543 721 26,868 8,370 --------- --------- --------- --------- Income from continuing operations 15,570 1,127 43,837 13,091 (Loss) income from discontinued operations, net of income tax benefit (provision) of $28, $(33), $465 and $(78) for the respective three and nine month periods in 2006 and 2005 (46) 52 (760) 123 --------- --------- --------- --------- Net income $15,524 $1,179 $43,077 $13,214 ========= ========= ========= ========= Basic earnings per share: Income from continuing operations $0.29 $0.03 $0.83 $0.31 (Loss) income from discontinued operations, net of taxes - - (0.01) - --------- --------- --------- --------- Net income $0.29 $0.03 $0.82 $0.31 ========= ========= ========= ========= Diluted earnings per share: Income from continuing operations $0.29 $0.03 $0.81 $0.30 (Loss) income from discontinued operations, net of taxes - - (0.01) - --------- --------- --------- --------- Net income $0.29 $0.03 $0.80 $0.30 ========= ========= ========= ========= Shares used in computing per share amounts: Basic 53,114 44,820 52,849 42,285 Diluted 54,266 46,405 54,077 43,750 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) September 30, December 31, 2006 2005 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $10,465 $54,699 Accounts receivable, less allowance for doubtful accounts of $16,456 and $15,355, respectively 157,264 132,288 Prepaids and other 41,932 53,473 ------------- ------------- Total current assets 209,661 240,460 Property and equipment, net of accumulated depreciation 476,942 378,163 Cost in excess of net assets acquired 603,944 526,536 Other assets 27,401 29,872 ------------- ------------- Total assets $1,317,948 $1,175,031 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $19,144 $18,726 Salaries and benefits payable 52,516 46,872 Other accrued liabilities 43,488 34,363 Current portion of long-term debt 568 325 ------------- ------------- Total current liabilities 115,716 100,286 Long-term debt, less current portion 537,878 482,064 Deferred tax liability 37,082 32,151 Other liabilities 23,065 20,818 ------------- ------------- Total liabilities 713,741 635,319 Stockholders' equity: Common stock, $0.01 par value, 125,000 shares authorized; 53,247 and 52,430 issued and outstanding, respectively 532 524 Additional paid-in capital 517,178 495,768 Retained earnings 86,497 43,420 ------------- ------------- Total stockholders' equity 604,207 539,712 ------------- ------------- Total liabilities and stockholders' equity $1,317,948 $1,175,031 ============= ============= PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Nine Months Ended September 30, ------------------- 2006 2005 --------- --------- Operating activities: Net income $43,077 $13,214 Adjustments to reconcile net income to net cash provided by continuing operating activities: Depreciation and amortization 14,846 10,279 Share-based compensation 10,449 - Amortization of loan costs 1,225 818 Loss on refinancing long-term debt - 21,871 Loss (income) from discontinued operations, net of taxes 760 (123) Change in income tax assets and liabilities 24,270 1,715 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (12,621) (9,801) Prepaids and other current assets (7,182) (3,868) Accounts payable (1,943) 2,102 Salaries and benefits payable 4,878 1,715 Accrued liabilities and other liabilities 1,401 13,328 --------- --------- Net cash provided by continuing operating activities 79,160 51,250 Net cash provided by (used in) discontinued operating activities 1,664 (73) --------- --------- Net cash provided by operating activities 80,824 51,177 Investing activities: Cash paid for acquisitions, net of cash acquired (167,065) (514,732) Capital purchases of leasehold improvements, equipment and software (20,880) (14,285) Cash paid for investments in equity method investees - (1,340) Other assets 35 1,013 --------- --------- Net cash used in investing activities (187,910) (529,344) Financing activities: Issuances of long-term debt - 545,000 Principal payments on long-term debt (274) (236,735) Net increase in revolving credit facility 52,000 - Payment of loan and issuance costs (101) (13,294) Refinancing of long-term debt - (15,398) Excess tax benefits from share-based payment arrangements 5,771 - Proceeds from secondary offering of common stock, net of issuance costs - 192,637 Proceeds from issuance of common stock upon exercise of stock options 5,456 2,615 --------- --------- Net cash provided by financing activities 62,852 474,825 --------- --------- Net decrease in cash (44,234) (3,342) Cash and cash equivalents at beginning of the period 54,699 33,451 --------- --------- Cash and cash equivalents at end of the period $10,465 $30,109 ========= ========= Effect of Acquisitions: Assets acquired, net of cash acquired $182,056 $623,000 Cash paid for prior year acquisitions - 5,793 Liabilities assumed (10,745) (49,296) Issuance of common stock used in acquisitions - (64,765) Long-term debt assumed (4,246) - --------- --------- Cash paid for acquisitions, net of cash acquired $167,065 $514,732 ========= ========= Psychiatric Solutions, Inc. Reconciliation of Net Income to Adjusted Income From Continuing Operations (Unaudited) (In thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2006 2005 2006 2005 --------- -------- -------- -------- Net income $15,524 $1,179 $43,077 $13,214 Plus reconciling items: Discontinued operations, net of taxes 46 (52) 760 (123) Provision for income taxes 9,543 721 26,868 8,370 --------- -------- -------- -------- Income from continuing operations before income taxes 25,113 1,848 70,705 21,461 Stock compensation 2,059 - 10,449 - Loss on refinancing long-term debt - 14,881 - 21,871 --------- -------- -------- -------- Adjusted income from continuing operations before income taxes 27,172 16,729 81,154 43,332 Adjusted provision for income taxes 10,325 6,524 30,839 16,899 --------- -------- -------- -------- Adjusted income from continuing operations $16,847 $10,205 $50,315 $26,433 ========= ======== ======== ======== Income from continuing operations per diluted share $0.29 $0.03 $0.81 $0.30 ========= ======== ======== ======== Adjusted income from continuing operations per diluted share $0.31 $0.22 $0.93 $0.60 ========= ======== ======== ======== Diluted shares used in computing per share amounts: 54,266 46,405 54,077 43,750 (a) PSI believes its calculation of adjusted income from continuing operations per diluted share provides a better measure of the Company's ongoing performance and provides better comparability to prior periods because it excludes items not related to the Company's core business operations. Adjusted income from continuing operations per diluted share should not be considered as a measure of financial performance under accounting principles generally accepted in the United States, and the items excluded from it are significant components in understanding and assessing financial performance. Because adjusted income from continuing operations per diluted share is not a measurement determined in accordance with accounting principles generally accepted in the United States and is thus susceptible to varying calculations, it may not be comparable as presented to other similarly titled measures of other companies. Psychiatric Solutions, Inc. Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA (Unaudited) (In thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2006 2005 2006 2005 --------- -------- --------- -------- Income from continuing operations $15,570 $1,127 $43,837 $13,091 Provision for income taxes 9,543 721 26,868 8,370 Interest expense 10,059 11,377 28,537 18,192 Depreciation and amortization 5,234 4,355 14,846 10,279 --------- -------- --------- -------- EBITDA(a) 40,406 17,580 114,088 49,932 Other expenses: Stock compensation 2,059 - 10,449 - Loss on refinancing long- term debt - 14,881 - 21,871 --------- -------- --------- -------- Adjusted EBITDA(a) $42,465 $32,461 $124,537 $71,803 ========= ======== ========= ======== (a) EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as income from continuing operations before interest expense (net of interest income), income taxes, depreciation and amortization. Adjusted EBITDA is defined as income from continuing operations before interest expense (net of interest income), income taxes, depreciation, amortization, stock compensation and other items included in the caption above labeled "Other expenses". These other expenses may occur in future periods but the amounts recognized can vary significantly from period to period and do not directly relate to the ongoing operations of our health care facilities. PSI's management relies on EBITDA and adjusted EBITDA as the primary measures to review and assess operating performance of its facilities and their management teams. PSI believes it is useful to investors to provide disclosures of its operating results on the same basis as that used by management. Management and investors also review EBITDA and adjusted EBITDA to evaluate PSI's overall performance and to compare PSI's current operating results with corresponding periods and with other companies in the health care industry. You should not consider EBITDA and adjusted EBITDA in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Because EBITDA and adjusted EBITDA are not measures of financial performance under accounting principles generally accepted in the United States and are susceptible to varying calculations, they may not be comparable to similarly titled measures of other companies. Psychiatric Solutions, Inc. Operating Statistics - Owned Facilities (Unaudited) (Revenue in thousands) Three Months Ended Nine Months Ended September 30, % September 30, % ------------------- -------------------- 2006 2005 Chg. 2006 2005 Chg. --------- --------- ------- ---------- --------- ------- Same-facility results: Revenue $222,992 $207,306 7.6% $494,705 $455,255 8.7% Admissions 24,425 24,208 0.9% 54,502 53,721 1.5% Patient days 427,163 415,428 2.8% 1,007,883 976,752 3.2% Average length of stay(a) 17.5 17.2 1.7% 18.5 18.2 1.6% Revenue per patient day(b) $522 $499 4.6% $491 $466 5.4% EBITDA margin 20.0% 17.4% 260 bps 19.8% 17.6% 220 bps Total facility results: Revenue $241,868 $207,306 16.7% $707,278 $455,255 55.4% Admissions 26,357 24,208 8.9% 79,655 53,721 48.3% Patient days 462,691 415,428 11.4% 1,364,947 976,752 39.7% Average length of stay(a) 17.6 17.2 2.3% 17.1 18.2 (6.0)% Revenue per patient day(b) $523 $499 4.8% $518 $466 11.2% EBITDA margin 19.9% 17.4% 250 bps 19.7% 17.6% 210 bps (a) Average length of stay is defined as patient days divided by admissions. (b) Revenue per patient day is defined as owned facility revenue divided by patient days. CONTACT: Psychiatric Solutions Inc., Franklin Executive Vice President, Finance and Administration Brent Turner, 615-312-5700