EX-99 2 a5456245ex99.txt EXHIBIT 99 Exhibit 99 Psychiatric Solutions Reports Record Revenue and Adjusted Income from Continuing Operations for Second Quarter 2007 Increases 2007 Earnings Guidance FRANKLIN, Tenn.--(BUSINESS WIRE)--July 25, 2007--Psychiatric Solutions, Inc. ("PSI") (NASDAQ: PSYS) today announced financial results for the second quarter and six months ended June 30, 2007. Revenue increased 43.2% to a record $354,126,000 for the second quarter from $247,237,000 for the second quarter of 2006. Income from continuing operations was $15,266,000, or $0.27 per diluted share, for the second quarter of 2007, which included a loss on refinancing of debt of $8,179,000 primarily related to the Company's tender of its 10.625% Senior Subordinated Notes. Excluding that loss, adjusted income from continuing operations was $20,269,000, or $0.37 per diluted share for the second quarter of 2007. For the second quarter of 2006, income from continuing operations was $15,974,000, or $0.29 per diluted share. Please see pages 7 and 8 for a reconciliation of GAAP and non-GAAP financial results. "PSI completed another strong quarter of profitable growth for the second quarter of 2007," said Joey Jacobs, Chairman, President and Chief Executive Officer of PSI. "We set new records for revenue and adjusted income from continuing operations, expanded our same-facility EBITDA margin and completed the acquisition of Horizon Health Corporation, bringing, among other assets, 15 new inpatient facilities with approximately 1,600 beds to PSI. As a result of this acquisition, we had approximately 10,000 beds in 89 facilities at the end of the second quarter, up from approximately 6,500 beds in 58 facilities at the same time last year. "Our results for the second quarter were consistent with our long-term record of profitable growth. Our revenue growth for the quarter was driven by the performance of the facilities acquired in the last year in combination with an increase in same-facility revenue of 7.0%. Contributing to our same-facility revenue growth, PSI's same-facility patient days rose 2.3% for the quarter and same-facility revenue per patient day increased 4.4%. "The substantial growth in our revenue for the second quarter enabled us to achieve further gains in operating leverage, complementing our continuing initiatives to improve the operating efficiency of each of our facilities. As a result, our same-facility EBITDA increased as a percentage of same-facility revenue to 21.3% for the second quarter of 2007, compared with 19.8% for the second quarter of 2006. We are also pleased to have maintained our EBITDA margin of 19.7% for all facilities for the latest quarter, the same as the second quarter last year, which is indicative of our progress in integrating acquired facilities with lower margins and improving their results of operations. PSI's consolidated adjusted EBITDA for the second quarter increased 45.6% to $60.9 million, or 17.2% of revenue, from $41.9 million, or 16.9% of revenue, for the second quarter of 2006." Based primarily on the Company's operating and financial results for the second quarter and first half of 2007 and its outlook for the remainder of the year, PSI increased its guidance for adjusted earnings from continuing operations per diluted share for 2007 to a range of $1.47 to $1.49, representing an annual growth rate in a range of 29% to 31% compared to 2006. PSI also affirmed its previously established guidance for the third and fourth quarters of 2007. The Company's guidance excludes the one-time loss on refinancing of debt and does not include the impact from any future acquisitions. Mr. Jacobs concluded, "PSI's significant prospects for profitable growth for the second half of 2007 and beyond reflect compelling industry dynamics, including growing demand in a capacity constrained market; our successful business model, which is based on proven growth and operating strategies; and the compassionate and high quality care our skilled facility teams provide our often desperately ill patients and their families. As the nation's leading provider of inpatient psychiatric care, we are well positioned to leverage these strengths to expand our capability to serve the growing needs of our industry and, thereby, to create additional 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 August 9, 2007. 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) PSI's ability to successfully integrate the Horizon Health operations; (2) potential competition which alters or impedes PSI's acquisition strategy by decreasing PSI's ability to acquire additional inpatient facilities on favorable terms; (3) the ability of PSI to improve the operations of acquired inpatient facilities; (4) the ability to maintain favorable and continuing relationships with physicians who use PSI's facilities; (5) the ability to receive timely additional financing on terms acceptable to PSI to fund PSI's acquisition strategy and capital expenditure needs; (6) 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 (7) PSI's ability to comply with applicable licensure and accreditation requirements. 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 89 owned or leased freestanding psychiatric inpatient facilities with approximately 10,000 beds in 31 states, Puerto Rico and the U.S. Virgin Islands. 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 Six Months Ended June 30, June 30, ------------------- ------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Revenue $354,126 $247,237 $676,564 $488,838 Salaries, wages and employee benefits (including share- based compensation of $3,910, $2,136, $7,583 and $8,390 for the respective three and six month periods 2007 and 2006) 195,100 137,367 375,235 276,570 Professional fees 35,164 24,164 66,064 46,755 Supplies 19,581 14,315 37,925 28,272 Rentals and leases 5,015 3,286 9,644 6,632 Other operating expenses 34,962 23,782 66,509 47,390 Provision for doubtful accounts 7,275 4,596 13,939 9,355 Depreciation and amortization 7,256 4,838 13,512 9,551 Interest expense 17,030 9,124 31,416 18,332 Loss on refinancing of long- term debt 8,179 - 8,179 - --------- --------- --------- --------- 329,562 221,472 622,423 442,857 --------- --------- --------- --------- Income from continuing operations before income taxes 24,564 25,765 54,141 45,981 Provision for income taxes 9,298 9,791 20,626 17,473 --------- --------- --------- --------- Income from continuing operations 15,266 15,974 33,515 28,508 Loss from discontinued operations, net of income tax benefit of $402, $376, $478 and $585 for the respective three and six month periods 2007 and 2006 (659) (613) (783) (955) --------- --------- --------- --------- Net income $14,607 $15,361 $32,732 $27,553 ========= ========= ========= ========= Basic earnings per share: Income from continuing operations $0.28 $0.30 $0.62 $0.54 Loss from discontinued operations, net of taxes (0.01) (0.01) (0.01) (0.02) --------- --------- --------- --------- Net income $0.27 $0.29 $0.61 $0.52 ========= ========= ========= ========= Diluted earnings per share: Income from continuing operations $0.27 $0.29 $0.60 $0.53 Loss from discontinued operations, net of taxes (0.01) (0.01) (0.01) (0.02) --------- --------- --------- --------- Net income $0.26 $0.28 $0.59 $0.51 ========= ========= ========= ========= Shares used in computing per share amounts: Basic 54,104 52,913 53,955 52,715 Diluted 55,372 54,070 55,305 53,981 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) June 30, December 31, 2007 2006 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $27,845 $18,572 Accounts receivable, less allowance for doubtful accounts of $32,047 and $18,672, respectively 239,579 179,050 Prepaids and other 60,490 45,364 ------------ ------------ Total current assets 327,914 242,986 Property and equipment, net of accumulated depreciation 666,167 539,758 Cost in excess of net assets acquired 1,101,405 760,268 Other assets 44,134 37,910 ------------ ------------ Total assets $2,139,620 $1,580,922 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $29,394 $25,222 Salaries and benefits payable 73,930 66,236 Other accrued liabilities 61,484 45,855 Current portion of long-term debt 4,966 2,386 ------------ ------------ Total current liabilities 169,774 139,699 Long-term debt, less current portion 1,197,950 740,921 Deferred tax liability 49,109 44,924 Other liabilities 30,718 27,599 ------------ ------------ Total liabilities 1,447,551 953,143 Minority interest 4,120 - Stockholders' equity: Common stock, $0.01 par value, 125,000 shares authorized; 54,326 and 53,421 issued and outstanding, respectively 543 534 Additional paid-in capital 551,155 523,193 Retained earnings 136,251 104,052 ------------ ------------ Total stockholders' equity 687,949 627,779 ------------ ------------ Total liabilities and stockholders' equity $2,139,620 $1,580,922 ============ ============ PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Six Months Ended June 30, ------------------ 2007 2006 --------- -------- Operating activities: Net income $32,732 $27,553 Adjustments to reconcile net income to net cash provided by continuing operating activities: Depreciation and amortization 13,512 9,551 Share-based compensation 7,583 8,390 Loss on refinancing of long-term debt 8,179 - Amortization of loan costs and bond premium 1,038 811 Loss from discontinued operations 783 955 Change in income tax assets and liabilities (716) 16,283 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (15,431) (8,335) Prepaids and other current assets (1,359) (6,129) Accounts payable (5,562) (1,415) Salaries and benefits payable (4,600) 280 Accrued liabilities and other liabilities 6,234 1,961 --------- -------- Net cash provided by continuing operating activities 42,393 49,905 Net cash (used in) provided by discontinued operating activities (159) 1,942 --------- -------- Net cash provided by operating activities 42,234 51,847 Investing activities: Cash paid for acquisitions, net of cash acquired (452,361) (44,471) Capital purchases of leasehold improvements, equipment and software (28,929) (13,123) Other assets (744) (317) --------- -------- Net cash used in investing activities (482,034) (57,911) Financing activities: Borrowings on long-term debt 481,875 - Principal payments on long-term debt (39,918) (180) Net increase in revolving credit facility borrowings 9,000 - Payment of loan and stock issuance costs (6,173) (40) Costs to refinance long-term debt (7,127) - Excess tax benefits from share-based payment arrangements 3,566 4,248 Proceeds from issuance of common stock upon exercise of stock options 7,850 3,600 --------- -------- Net cash provided by financing activities 449,073 7,628 --------- -------- Net increase in cash 9,273 1,564 Cash and cash equivalents at beginning of the period 18,572 54,699 --------- -------- Cash and cash equivalents at end of the period $27,845 $56,263 ========= ======== Effect of Acquisitions: Assets acquired, net of cash acquired $513,674 $54,164 Liabilities assumed (43,609) (5,730) Long-term debt assumed (8,704) (3,963) Common stock issued (9,000) - --------- -------- Cash paid for acquisitions, net of cash acquired $452,361 $44,471 ========= ======== Psychiatric Solutions, Inc. Reconciliation of Net Income to Adjusted Income from Continuing Operations (Unaudited) (In thousands, except per share amounts) Three Months Six Months Ended Ended June 30, June 30, --------------- --------------- 2007 2006 2007 2006 ------- ------- ------- ------- Net income $14,607 $15,361 $32,732 $27,553 Plus reconciling items: Discontinued operations, net of taxes 659 613 783 955 Provision for income taxes 9,298 9,791 20,626 17,473 ------- ------- ------- ------- Income from continuing operations before income taxes 24,564 25,765 54,141 45,981 Loss on refinancing of long-term debt 8,179 - 8,179 - ------- ------- ------- ------- Adjusted income from continuing operations before income taxes 32,743 25,765 62,320 45,981 Adjusted provision for income taxes 12,474 9,791 23,742 17,473 ------- ------- ------- ------- Adjusted income from continuing operations(a) $20,269 $15,974 $38,578 $28,508 ======= ======= ======= ======= Income from continuing operations per diluted share $ 0.27 $ 0.29 $ 0.60 $ 0.53 ======= ======= ======= ======= Adjusted income from continuing operations per diluted share(a) $ 0.37 $ 0.29 $ 0.70 $ 0.53 ======= ======= ======= ======= Diluted shares used in computing per share amounts: 55,372 54,070 55,305 53,981 (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, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2007 2006 2007 2006 --------- -------- -------- ------- Income from continuing operations $ 15,266 $ 15,974 $ 33,515 $28,508 Provision for income taxes 9,298 9,791 20,626 17,473 Interest expense 17,030 9,124 31,416 18,332 Depreciation and amortization 7,256 4,838 13,512 9,551 --------- -------- -------- ------- EBITDA(a) 48,850 39,727 99,069 73,864 Other expenses: Loss on refinancing of long- term debt 8,179 - 8,179 - Share-based compensation 3,910 2,136 7,583 8,390 --------- -------- -------- ------- Adjusted EBITDA(a) $ 60,939 $ 41,863 $114,831 $82,254 ========= ======== ======== ======= (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 Six Months Ended June 30, % June 30, % ------------------- -------------------- 2007 2006 Chg. 2007 2006 Chg. --------- --------- ------ ---------- --------- ------ Same-facility results: Revenue $246,965 $230,892 7.0% $485,223 $456,739 6.2% Admissions 27,474 26,215 4.8% 54,702 53,057 3.1% Patient days 453,663 443,481 2.3% 893,264 879,006 1.6% Average length of stay(a) 16.5 16.9 (2.4)% 16.3 16.6 (1.8)% Revenue per patient day(b) $544 $521 4.4% $543 $520 4.4% EBITDA margin 150 130 21.3% 19.8% bps 21.0% 19.7% bps Total facility results: Revenue $326,839 $243,487 39.4% $632,004 $463,532 36.3% Admissions 34,409 26,296 30.9% 66,859 53,208 25.7% Patient days 592,159 452,840 30.8% 1,145,535 896,620 27.8% Average length of stay(a) 17.2 17.2 0.0% 17.1 16.9 1.2% Revenue per patient day(b) $552 $518 6.6% $552 $517 6.8% EBITDA margin 19.7% 19.7% 0 bps 19.9% 19.7% 20 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. Brent Turner Executive Vice President, Finance and Administration 615-312-5700