EX-99 2 g99701exv99.txt EX-99 PRESS RELEASE OF PSYCHIATRIC SOLUTIONS, INC., DATED FEBRUARY 16, 2006 EXHIBIT 99 (PSYCHIATRIC SOLUTIONS, INC. LOGO) CONTACT: Brent Turner Executive Vice President, Finance and Administration (615) 312-5700 PSYCHIATRIC SOLUTIONS ANNOUNCES 44% GROWTH IN FOURTH QUARTER NET INCOME PER DILUTED SHARE TO $0.26 --------------------------- INCREASES EARNINGS GUIDANCE FOR 2006 TO $1.14 TO $1.17 PER DILUTED SHARE Franklin, Tenn. (February 16, 2006) - Psychiatric Solutions, Inc. ("PSI") (NASDAQ: PSYS) today announced financial results for the fourth quarter and year ended December 31, 2005. For the fourth quarter, revenue increased 67% to $224,150,000 from $133,873,000 for the fourth quarter of 2004. Net income was $13,940,000 for the latest quarter, more than double the $6,367,000 for the fourth quarter of 2004. Net income per diluted share rose 44% to $0.26 for the fourth quarter of 2005 from $0.18 for the fourth quarter of 2004, on a 49% increase in diluted shares used in computing per share amounts. All results in this release have been adjusted to reflect the 2-for-1 stock split effected in January 2006. Revenue for 2005 was $727,774,000, up 51% from $481,893,000 for 2004. Net income, which included pre-tax losses on refinancing of long-term debt of $21,871,000 and $6,407,000 for 2005 and 2004, respectively, was $27,154,000, or $0.59 per diluted share for 2005, compared with $16,801,000, or $0.48 per diluted share for 2004. Excluding losses on debt refinancing, adjusted net income increased 95% to $40,599,000 for 2005 from $20,774,000 for 2004, and adjusted net income per diluted share rose 49% to $0.88 from $0.59. Diluted shares used in computing per share amounts increased 32% for 2005 from 2004. Please see pages 8 and 9 for a reconciliation of GAAP and non-GAAP financial results. "PSI's strong fourth quarter financial performance capped another year of substantial profitable growth," said Joey Jacobs, Chairman, President and Chief Executive Officer of PSI. "Our results again validate the strengths of our complementary organic growth and acquisition strategies, as well as the continuing industry demand for high quality inpatient psychiatric care. We are confident that the operational momentum that enabled us to become the country's leading provider of these services during 2005 positions us well to achieve our goals for 2006. "PSI's organic growth strategy contributed significantly to increased revenue, as reflected in the 6.4% expansion in same-facility revenue for the fourth quarter, our 13th consecutive quarterly increase. Our 8.0% growth in same-facility revenue for the full year was driven by a 4.6% increase in patient days and a 3.3% increase in revenue per patient day. This performance was in line with our continuing targets of 7% to 9% annual same-facility revenue growth and 3% to 5% annual growth in both patient days and revenue per patient day. "Our fourth quarter revenue growth was also driven by the successful implementation of our acquisition strategy during 2005, which was primarily accountable for the expansion of our beds in operation to over 6,400 at the end of 2005 from approximately 4,000 at the end of 2004. Combined with PSYS Reports Fourth Quarter Results Page 2 February 16, 2006 the effect of increased same-facility revenue, our accretive acquisitions produced further operating leverage, with EBITDA for the fourth quarter of 2005 more than doubling to $35,830,000, or 16.0% of revenue, from $17,847,000, or 13.3% of revenue, for the fourth quarter of 2004. Reflecting both expanding economies of scale and operating productivity, our same-facility EBITDA margin increased 200 basis points to 18.7% of same-facility revenue for the latest quarter from 16.7% for the fourth quarter of 2004." Please see pages 8 and 9 for a reconciliation of GAAP and non-GAAP financial results. Based primarily on the Company's financial results for 2005 and current industry conditions, PSI today raised its guidance for earnings per diluted share for 2006 to a range of $1.14 to $1.17 from the previous range of $1.10 to $1.13. The Company's guidance does not include the impact from any future acquisitions or expense related to the adoption of FAS 123R in January 2006, which expense is expected to be in a range of $0.09 to $0.11 for 2006. Mr. Jacobs added, "To achieve our financial goals for 2006, we expect to continue implementing our strategies for organic growth by focusing on increasing our market share in our existing service areas through the expansion of successful programs, the introduction of new programs and the addition of new beds through the expansion of existing facilities during the year. We also are continuing to evaluate additional acquisitions, targeting a minimum of six inpatient psychiatric facilities during 2006, including the three facilities with 240 beds acquired in January. As a result of our stock offering during 2005 and our cash flow from operations for the year of $79,766,000, we completed 2005 with the financial capacity in place to successfully implement this strategy." Mr. Jacobs concluded, "In the final analysis, our profitable growth for 2005 and our prospects for 2006 are attributable to the employees of PSI, who are responsible for the high quality care we provide our patients. The dedication and commitment they demonstrate all day, every day, remains the essential factor supporting PSI's ability to achieve continuing profitable growth and increased stockholder value." PSI will hold a conference call to discuss this release tomorrow at 10:00 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 March 2, 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 unforeseen changes in regulation, reimbursement rates from -MORE- PSYS Reports Fourth Quarter Results Page 3 February 16, 2006 federal and state health care programs or managed care companies and exposure to claims and legal actions by patients and others; and (6) 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 58 owned or leased freestanding psychiatric inpatient facilities with more than 6,500 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. -MORE- PSYS Reports Fourth Quarter Results Page 4 February 16, 2006 PSYCHIATRIC SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)

THREE MONTHS ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ---------------------- ------------------------- 2005 2004 2005 2004 -------- -------- --------- --------- Revenue $224,150 $133,873 $ 727,774 $ 481,893 Salaries, wages and employee benefits 124,694 73,376 400,676 262,039 Professional fees 22,197 14,511 73,659 52,933 Supplies 13,149 8,382 44,134 30,665 Rentals and leases 3,477 2,574 11,695 8,981 Other operating expenses 21,560 14,440 75,810 53,962 Provision for bad debts 3,243 2,743 13,544 10,794 Depreciation and amortization 4,489 2,771 14,815 9,865 Interest expense 8,868 4,887 27,081 18,964 Loss on refinancing long-term debt -- -- 21,871 6,407 -------- -------- --------- --------- 201,677 123,684 683,285 454,610 -------- -------- --------- --------- Income from continuing operations before income taxes 22,473 10,189 44,489 27,283 Provision for income taxes 8,554 3,872 17,140 10,368 -------- -------- --------- --------- Income from continuing operations 13,919 6,317 27,349 16,915 Income (loss) from discontinued operations, net of income taxes 21 50 (195) (114) -------- -------- --------- --------- Net income 13,940 6,367 27,154 16,801 Accrued preferred stock dividends -- 7 -- 663 -------- -------- --------- --------- Net income available to common stockholders $ 13,940 $ 6,360 $ 27,154 $ 16,138 ======== ======== ========= ========= Basic earnings per share: Income from continuing operations $ 0.27 $ 0.18 $ 0.61 $ 0.55 Income (loss) from discontinued operations -- -- -- -- -------- -------- --------- --------- Net income $ 0.27 $ 0.18 $ 0.61 $ 0.55 ======== ======== ========= ========= Diluted earnings per share: Income from continuing operations $ 0.26 $ 0.18 $ 0.59 $ 0.48 Income (loss) from discontinued operations -- -- -- -- -------- -------- --------- --------- Net income $ 0.26 $ 0.18 $ 0.59 $ 0.48 ======== ======== ========= ========= Shares used in computing per share amounts: Basic 52,233 34,745 44,792 29,140 Diluted 53,852 36,244 46,296 35,146

-MORE- PSYS Reports Fourth Quarter Results Page 5 February 16, 2006 PSYCHIATRIC SOLUTIONS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)

DECEMBER 31, --------------------------- 2005 2004 ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 54,554 $ 33,314 Accounts receivable, less allowance for doubtful accounts of $15,355 and $10,662, respectively 134,323 76,984 Prepaids and other 50,838 16,601 ----------- --------- Total current assets 239,715 126,899 Property and equipment: Land 79,139 30,461 Buildings 290,100 182,855 Equipment 38,212 20,185 Less accumulated depreciation (29,094) (15,290) ----------- --------- 378,357 218,211 Cost in excess of net assets acquired 527,655 130,079 Other assets 29,885 22,330 ----------- --------- Total assets $ 1,175,612 $ 497,519 =========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 18,836 $ 10,355 Salaries and benefits payable 47,284 27,205 Other accrued liabilities 34,422 28,665 Current portion of long-term debt 325 20,764 ----------- --------- Total current liabilities 100,867 86,989 Long-term debt, less current portion 482,064 153,572 Deferred tax liability 32,151 8,020 Other liabilities 20,818 4,423 ----------- --------- Total liabilities 635,900 253,004 Stockholders' equity: Common stock, $0.01 par value, 125,000 shares authorized; 52,430 and 40,935 issued and outstanding, respectively 524 409 Additional paid-in capital 495,768 227,840 Accumulated earnings 43,420 16,266 ----------- --------- Total stockholders' equity 539,712 244,515 ----------- --------- Total liabilities and stockholders' equity $ 1,175,612 $ 497,519 =========== =========

-MORE- PSYS Reports Fourth Quarter Results Page 6 February 16, 2006 PSYCHIATRIC SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

YEAR ENDED DECEMBER 31, ------------------------- 2005 2004 --------- --------- OPERATING ACTIVITIES: Net income $ 27,154 $ 16,801 Adjustments to reconcile net income to net cash provided by continuing operating activities: Depreciation and amortization 14,815 9,865 Provision for doubtful accounts 13,544 10,794 Amortization of loan costs 1,187 691 Loss on refinancing long-term debt 21,871 6,407 Change in income tax assets and liabilities 9,494 6,920 Loss from discontinued operations, net of taxes 195 114 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (23,323) (13,938) Prepaids and other current assets (3,434) 2,495 Accounts payable 1,929 (5,302) Salaries and benefits payable 2,556 5,247 Accrued liabilities and other liabilities 13,315 (126) Other 463 -- --------- --------- Net cash provided by continuing operating activities 79,766 39,968 INVESTING ACTIVITIES: Cash paid for acquisitions, net of cash acquired (514,525) (136,495) Capital purchases of leasehold improvements, equipment and software (21,750) (17,201) Purchases of short-term investments (29,400) -- Sales of short-term investments 29,400 -- Sale of long-term securities -- 953 Cash paid for investments in equity method investees (1,340) -- Other assets 1,219 (1,417) --------- --------- Net cash used in investing activities (536,396) (154,160)

(Continued) -MORE- PSYS Reports Fourth Quarter Results Page 7 February 16, 2006 PSYCHIATRIC SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

YEAR ENDED DECEMBER 31, -------------------------- 2005 2004 --------- ---------- FINANCING ACTIVITIES: Borrowings on long-term debt $ 545,000 $ -- Principal payments on long-term debt (236,822) (810) Payment of loan and issuance costs (13,932) (2,300) Refinancing of long-term debt (15,398) (3,844) Proceeds from public offering of common stock, net of issuance costs 192,637 104,691 Proceeds from exercises of common stock options 6,385 4,428 Proceeds from repayment of stockholder notes -- 338 --------- ---------- Net cash provided by financing activities 477,870 102,503 --------- ---------- Net increase (decrease) in cash 21,240 (11,689) Cash and cash equivalents at beginning of the year 33,314 45,003 --------- ---------- Cash and cash equivalents at end of the year $ 54,554 $ 33,314 ========= ========== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 16,718 $ 18,821 ========= ========== Income taxes paid $ 7,490 $ 3,354 ========= ========== EFFECT OF ACQUISITIONS: Assets acquired, net of cash acquired $ 624,821 $ 148,345 Cash paid for prior year acquisitions 5,793 -- Liabilities assumed (51,324) (11,850) Common stock and stock options issued (64,765) -- --------- ---------- Cash paid for acquisitions, net of cash acquired $ 514,525 $ 136,495 ========= ========== SIGNIFICANT NON-CASH TRANSACTIONS: Issuance of common stock upon conversion of series A convertible preferred stock $ -- $ 25,915 ========= ========== Refinancing of long-term debt $ 6,473 $ 2,563 ========= ==========

-MORE- PSYS Reports Fourth Quarter Results Page 8 February 16, 2006 PSYCHIATRIC SOLUTIONS, INC. RECONCILIATION OF NET INCOME AND EARNINGS PER DILUTED SHARE TO ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER DILUTED SHARE (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, ----------------------- ----------------------- 2005 2004 2005 2004 -------- -------- -------- -------- Net income $ 13,940 $ 6,367 $ 27,154 $ 16,801 Plus reconciling items: Discontinued operations, net of taxes (21) (50) 195 114 Provision for income taxes 8,554 3,872 17,140 10,368 -------- -------- -------- -------- Income from continuing operations before income taxes 22,473 10,189 44,489 27,283 Discontinued operations, pre-tax 34 81 (320) (184) Loss on refinancing long-term debt -- -- 21,871 6,407 -------- -------- -------- -------- Adjusted income before income taxes 22,507 10,270 66,040 33,506 Provision for income taxes 8,567 3,903 25,441 12,732 -------- -------- -------- -------- Adjusted net income $ 13,940 $ 6,367 $ 40,599 $ 20,774 ======== ======== ======== ======== Earnings per diluted share $ 0.26 $ 0.18 $ 0.59 $ 0.48 ======== ======== ======== ======== Adjusted earnings per diluted share(a) $ 0.26 $ 0.18 $ 0.88 $ 0.59 ======== ======== ======== ======== Diluted shares used in computing per share amounts: 53,852 36,244 46,296 35,146

(a) PSI believes its calculation of adjusted earnings 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 earnings 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 earnings 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. -MORE- PSYS Reports Fourth Quarter Results Page 9 February 16, 2006 PSYCHIATRIC SOLUTIONS, INC. RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA AND ADJUSTED EBITDA (UNAUDITED) (IN THOUSANDS)

THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, -------------------- --------------------- 2005 2004 2005 2004 ------- ------- -------- ------- Income from continuing operations $13,919 $ 6,317 $ 27,349 $16,915 Provision for income taxes 8,554 3,872 17,140 10,368 Interest expense 8,868 4,887 27,081 18,964 Depreciation and amortization 4,489 2,771 14,815 9,865 ------- ------- -------- ------- EBITDA(a) 35,830 17,847 86,385 56,112 Other expenses: Loss on refinancing long-term debt -- -- 21,871 6,407 ------- ------- -------- ------- Adjusted EBITDA(a) $35,830 $17,847 $108,256 $62,519 ======= ======= ======== =======

(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. -MORE- PSYS Reports Fourth Quarter Results Page 10 February 16, 2006 PSYCHIATRIC SOLUTIONS, INC. OPERATING STATISTICS -- OWNED FACILITIES (UNAUDITED) (REVENUE IN THOUSANDS)

THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, -------------------------- % ------------------------- % 2005 2004 CHG. 2005 2004 CHG. ----------- ----------- ------- ---------- ---------- ------ SAME-FACILITY RESULTS: Revenue $ 126,120 $ 118,559 6.4% $ 453,293 $ 419,701 8.0% Admissions 13,578 13,587 (0.1)% 50,471 49,484 2.0% Patient days 281,342 274,039 2.7% 1,043,053 996,840 4.6% Average length of stay(a) 20.7 20.2 2.5% 20.7 20.1 3.0% Revenue per patient day(b) $ 448 $ 433 3.5% $ 435 $ 421 3.3% EBITDA margin 18.7% 16.7% 200 BPS 17.8% 15.8% 200 BPS TOTAL FACILITY RESULTS: Revenue $ 208,179 $ 118,559 75.6% $ 664,367 $ 419,701 58.3% Admissions 23,382 13,587 72.1% 77,130 49,484 55.9% Patient days 417,366 274,039 52.3% 1,400,628 996,840 40.5% Average length of stay(a) 17.8 20.2 (11.9)% 18.2 20.1 (9.5)% Revenue per patient day(b) $ 499 $ 433 15.2% $ 474 $ 421 12.6% EBITDA margin 19.7% 16.7% 300 BPS 18.2% 15.8% 240 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. -END-