EX-99 2 g97908exv99.txt EX-99 PRESS RELEASE 10/27/05 EXHIBIT 99 PSYCHIATRIC SOLUTIONS, INC. (LOGO) CONTACT: Brent Turner Executive Vice President, Finance and Administration (615) 312-5700 PSYCHIATRIC SOLUTIONS REPORTS THIRD QUARTER FINANCIAL RESULTS ------------------------- REVENUE GROWS 72% ------------------------- SAME-FACILITY REVENUE INCREASES 9.6% ------------------------- EARNINGS GUIDANCE RAISED FOR 2005 Franklin, Tenn. (October 27, 2005) - Psychiatric Solutions, Inc. ("PSI") (NASDAQ: PSYS) today announced financial results for the third quarter and nine months ended September 30, 2005. Revenue increased 72% for the quarter to a record $223,572,000 from $130,219,000 for the third quarter of 2004. Net income for the third quarter of 2005, which included a pre-tax loss on the refinancing of long-term debt of $14,881,000, was $1,179,000, or $0.05 per diluted share. Excluding the loss on debt refinancing, net income was $10,256,000 for the third quarter of 2005, up 91% from $5,364,000 for the third quarter of 2004, and earnings per diluted share were $0.44, up 42% from $0.31. Diluted shares used in computing earnings per share increased 32% for the latest quarter from the third quarter last year. Please see pages 7 and 8 for a reconciliation of GAAP and non-GAAP financial results. Joey Jacobs, Chairman, President and Chief Executive Officer of PSI, remarked, "We are pleased to report outstanding financial and operating performance for the third quarter. Our organic growth strategy continued to produce strong results, with a 9.6% expansion in same-facility revenue, following an 8.5% increase for the third quarter last year and a 9.5% increase for the second quarter of 2005. Reflecting both rising demand and limited industry capacity, this increase in same-facility revenue was driven by the healthy combination of 4.2% growth in patient days and 5.2% growth in revenue per patient day. In addition, this increase, which represents our 12th consecutive expansion in quarterly same-facility revenue, provides further evidence of the value our facilities deliver within their communities and the high quality care our patients receive. "As anticipated, this substantial same-facility revenue growth, together with our ongoing efforts to increase operational productivity, produced significant operating leverage. PSI's adjusted EBITDA doubled for the third quarter to $32,623,000, or 14.6% of revenues, from $16,301,000, or 12.5% of revenues, for the third quarter of 2004. The adjusted EBITDA margin produced by the same-facility base increased to 16.4% for the third quarter, up from 14.9% for the third quarter last year. Please see pages 7 and 8 for a reconciliation of GAAP and non-GAAP financial results. "Our results for the third quarter also reflect the acquisition of 20 inpatient psychiatric facilities from Ardent Health Services in a transaction completed on July 1, 2005, which added approximately 2,000 beds to our base of more than 4,300 at the start of the third quarter. Because of the significant similarity between these facilities and our existing facilities, the integration of these facilities into our operations has - MORE - PSYS Reports Third Quarter Results Page 2 October 27, 2005 proceeded smoothly, and, as expected, the third quarter financial results from these 20 facilities were accretive to our results. The continuing success of our organic growth strategy supports our confidence in the potential of these facilities to make a substantial contribution to our future growth and profitability. "Due to our strong cash flow from operations for the third quarter and our common stock offering in September, which provided net proceeds of $192.6 million, we have significantly reduced our borrowings relating to the purchase of the Ardent facilities. At the end of the third quarter, our debt to total capitalization was 48.2%, cash and cash equivalents were $30.0 million and there were no borrowings under our $150 million revolving credit facility. As a result, we continue to have the financial flexibility to execute our proven growth strategies, including selective acquisitions such as the purchase of a 59-bed facility in Chino, California, completed in early August." Based primarily on the Company's financial results for the first nine months of 2005 and current industry conditions, PSI today raised its guidance for adjusted earnings per diluted share for 2005 to a range of $1.63 to $1.65 from the previous range of $1.57 to $1.62. PSI also affirmed its established guidance for 2006 earnings per diluted share in a range of $2.10 to $2.15. The Company's guidance does not include the impact of losses on the refinancing of long-term debt, any impact from additional future acquisitions, or the anticipated adoption of FAS 123R in January 2006. Mr. Jacobs concluded, "We believe the track record PSI has produced over the last three years demonstrates our ability to implement our organic growth and acquisition strategies successfully to produce significant profitable growth. Our achievements during this time have also enabled us to become the leading provider of inpatient psychiatric care in the United States, offering the highest quality of care through the dedicated efforts of over 13,000 employees. In an industry environment of rising demand and limited supply, we expect to leverage these opportunities to build further 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 November 11, 2005. 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, including the inpatient facilities acquired from Ardent Heath Services; (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 federal and state health care programs or managed care companies and exposure to claims and legal actions by patients and others; and (6) potential - MORE - PSYS Reports Third Quarter Results Page 3 October 27, 2005 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 55 owned or leased freestanding psychiatric inpatient facilities with more than 6,400 beds. PSI also manages freestanding psychiatric inpatient facilities for government agencies and psychiatric inpatient units within medical/surgical hospitals owned by others. - MORE - PSYS Reports Third Quarter Results Page 4 October 27, 2005 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, ----------------------- ------------------------ 2005 2004 2005 2004 --------- -------- --------- --------- Revenue $ 223,572 $130,219 $ 503,624 $ 348,020 Salaries, wages and employee benefits 123,731 71,310 275,982 188,663 Professional fees 22,642 13,875 51,462 38,422 Supplies 13,541 8,563 30,985 22,283 Rentals and leases 3,447 2,553 8,218 6,407 Other operating expenses 22,631 14,221 54,250 39,522 Provision for doubtful accounts 4,957 3,396 10,301 8,051 Depreciation and amortization 4,370 2,628 10,326 7,094 Interest expense 11,386 5,105 18,213 14,077 Loss on refinancing long-term debt 14,881 -- 21,871 6,407 --------- -------- --------- --------- 221,586 121,651 481,608 330,926 Income from continuing operations before income taxes 1,986 8,568 22,016 17,094 Provision for income taxes 774 3,254 8,586 6,496 --------- -------- --------- --------- Income from continuing operations 1,212 5,314 13,430 10,598 (Loss) income from discontinued operations, net of taxes (33) 50 (216) (164) --------- -------- --------- --------- Net income 1,179 5,364 13,214 10,434 Accrued preferred stock dividends -- 149 -- 656 --------- -------- --------- --------- Net income available to common stockholders $ 1,179 $ 5,215 $ 13,214 $ 9,778 ========= ======== ========= ========= Basic earnings per share: Income from continuing operations $ 0.05 $ 0.35 $ 0.64 $ 0.73 Income (loss) from discontinued operations -- -- (0.01) (0.01) --------- -------- --------- --------- $ 0.05 $ 0.35 $ 0.63 $ 0.72 ========= ======== ========= ========= Diluted earnings per share: Income from continuing operations $ 0.05 $ 0.31 $ 0.61 $ 0.61 Income (loss) from discontinued operations -- -- (0.01) (0.01) --------- -------- --------- --------- $ 0.05 $ 0.31 $ 0.60 $ 0.60 ========= ======== ========= ========= Shares used in computing per share amounts: Basic 22,410 14,796 21,142 13,629 Diluted 23,202 17,535 21,875 17,383

- MORE - PSYS Reports Third Quarter Results Page 5 October 27, 2005 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

SEPTEMBER 30, DECEMBER 31, 2005 2004 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 29,972 $ 33,314 Accounts receivable, less allowance for doubtful accounts of $16,860 and $10,662, respectively 134,319 76,984 Prepaids and other 45,349 16,601 ---------- -------- Total current assets 209,640 126,899 Property and equipment, net of accumulated depreciation 374,796 218,211 Cost in excess of net assets acquired 527,742 130,079 Other assets 30,724 22,330 ---------- -------- Total assets $1,142,902 $497,519 ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 18,231 $ 10,355 Salaries and benefits payable 46,744 27,205 Other accrued liabilities 32,408 28,665 Current portion of long-term debt 321 20,764 ---------- -------- Total current liabilities 97,704 86,989 Long-term debt, less current portion 482,081 153,572 Deferred tax liability 22,603 8,020 Other liabilities 21,784 4,423 ---------- -------- Total liabilities 624,172 253,004 Stockholders' equity: Common stock, $0.01 par value, 48,000 shares authorized; 25,989 and 20,468 issued and outstanding, respectively 260 205 Additional paid-in capital 488,990 228,044 Accumulated earnings 29,480 16,266 ---------- -------- Total stockholders' equity 518,730 244,515 ---------- -------- Total liabilities and stockholders' equity $1,142,902 $497,519 ========== ========

- MORE - PSYS Reports Third Quarter Results Page 6 October 27, 2005 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)

NINE MONTHS ENDED SEPTEMBER 30, 2005 2004 --------- --------- OPERATING ACTIVITIES: Net income $ 13,214 $ 10,434 Adjustments to reconcile net income to net cash provided by continuing operating activities: Loss from discontinued operations, net of taxes 216 164 Depreciation and amortization 10,326 7,094 Provision for doubtful accounts 10,301 8,051 Amortization of loan costs 818 706 Loss on refinancing long-term debt 21,871 6,407 Change in income tax assets and liabilities 1,715 5,979 Changes in operating assets and liabilities: Accounts receivable (20,075) (10,331) Prepaids and other assets (4,160) 2,019 Accounts payable 2,037 (5,258) Salaries and benefits payable 1,634 6,488 Accrued liabilities and other liabilities 13,280 4,405 --------- --------- Net cash provided by continuing operating activities 51,177 36,158 INVESTING ACTIVITIES: Cash paid for acquisitions, net of cash acquired (514,732) (115,842) Capital purchases of property and equipment (14,285) (11,155) Investment in equity method investees (1,340) -- Other 1,013 (2,063) --------- --------- Net cash used in investing activities (529,344) (129,060) FINANCING ACTIVITIES: Net increase in revolving credit facility -- 70,000 Issuances of long-term debt 545,000 -- Repayments of long-term debt (236,735) (794) Loss on refinancing long-term debt (15,398) (3,844) Payment of loan and issuance costs (13,294) (2,027) Proceeds from repayment of stockholder notes -- 338 Proceeds from secondary offering of common stock, net of issuance costs 192,637 -- Proceeds from exercises of stock options 2,615 2,108 --------- --------- Net cash provided by financing activities 474,825 65,781 --------- --------- Net decrease in cash and cash equivalents (3,342) (27,121) Cash and cash equivalents at beginning of the period 33,314 44,954 --------- --------- Cash and cash equivalents at end of the period $ 29,972 $ 17,833 ========= ========= SIGNIFICANT NON-CASH TRANSACTIONS: Issuance of common stock used for acquisitions $ 64,765 $ -- ========= ========= Loss on refinancing long-term debt $ 6,473 $ 2,563 ========= ========= Issuance of common stock upon conversion of series A convertible preferred stock $ -- $ 15,791 ========= ========= EFFECT OF ACQUISITIONS: Assets acquired, net of cash acquired $ 623,000 $ 122,902 Cash payment for prior-year acquisitions 5,793 3,350 Liabilities assumed (49,296) (10,410) Issuance of common stock used for acquisitions (64,765) -- --------- --------- Cash paid for acquisitions, net of cash acquired $ 514,732 $ 115,842 ========= =========

- MORE - PSYS Reports Third Quarter Results Page 7 October 27, 2005 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 NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ---------------------- 2005 2004 2005 2004 -------- -------- -------- -------- Net income $ 1,179 $ 5,364 $ 13,214 $ 10,434 Plus reconciling items: Discontinued operations, net of taxes 33 (50) 216 164 Provision for income taxes 774 3,254 8,586 6,496 -------- -------- -------- -------- Income from continuing operations before income taxes 1,986 8,568 22,016 17,094 Discontinued operations, pre-tax (54) 81 (354) (265) Loss on refinancing long-term debt 14,881 -- 21,871 6,407 -------- -------- -------- -------- Adjusted income before income taxes 16,813 8,649 43,533 23,236 Provision for income taxes 6,557 3,285 16,978 8,830 -------- -------- -------- -------- Adjusted net income $ 10,256 $ 5,364 $ 26,555 $ 14,406 ======== ======== ======== ======== Earnings per diluted share $ 0.05 $ 0.31 $ 0.60 $ 0.60 ======== ======== ======== ======== Adjusted earnings per diluted share(a) $ 0.44 $ 0.31 $ 1.21 $ 0.83 ======== ======== ======== ======== Diluted shares used in computing per share amounts: 23,202 17,535 21,875 17,383

(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 Third Quarter Results Page 8 October 27, 2005 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, ------------------- ------------------- 2005 2004 2005 2004 ------- ------- ------- ------- Income from continuing operations $ 1,212 $ 5,314 $13,430 $10,598 Provision for income taxes 774 3,254 8,586 6,496 Interest expense 11,386 5,105 18,213 14,077 Depreciation and amortization 4,370 2,628 10,326 7,094 ------- ------- ------- ------- EBITDA(a) 17,742 16,301 50,555 38,265 Other expenses: Loss on refinancing long-term debt 14,881 -- 21,871 6,407 ------- ------- ------- ------- Adjusted EBITDA(a) $32,623 $16,301 $72,426 $44,672 ======= ======= ======= =======

(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 Third Quarter Results Page 9 October 27, 2005 PSYCHIATRIC SOLUTIONS, INC. OPERATING STATISTICS - OWNED FACILITIES (UNAUDITED) (REVENUE IN THOUSANDS)

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- % --------------------------- % 2005 2004 CHG. 2005 2004 CHG. ----------- ----------- -------- ----------- ----------- -------- SAME-FACILITY RESULTS: Revenue $ 125,500 $ 114,487 9.6% $ 327,173 $ 301,142 8.6% Admissions 14,397 13,849 4.0% 36,893 35,897 2.8% Patient days 281,541 270,142 4.2% 761,711 722,801 5.4% Average length of stay(a) 19.6 19.5 0.5% 20.6 20.1 2.5% Revenue per patient day(b) $ 446 $ 424 5.2% $ 430 $ 417 3.1% EBITDA margin 16.4% 14.9% 150 BPS 17.4% 15.5% 190 BPS TOTAL FACILITY RESULTS: Revenue $ 207,534 $ 114,487 81.3% $ 456,188 $ 301,142 51.5% Admissions 24,212 13,849 74.8% 53,748 35,897 49.7% Patient days 416,962 270,142 54.3% 983,262 722,801 36.0% Average length of stay(a) 17.2 19.5 (11.8)% 18.3 20.1 (9.0)% Revenue per patient day(b) $ 498 $ 424 17.5% $ 464 $ 417 11.3% EBITDA margin 17.4% 14.9% 250 BPS 17.5% 15.5% 200 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-