EX-99.1 2 g96535exv99w1.txt EX-99.1 PRESS RELEASE OF PSYCHIATRIC SOLUTIONS, INC., DATED JULY 28, 2005 EXHIBIT 99.1 [PSYCHIATRIC SOLUTIONS, INC. LOGO] CONTACT: Brent Turner Vice President, Treasurer and Investor Relations (615) 312-5700 PSYCHIATRIC SOLUTIONS REPORTS 41% GROWTH IN SECOND QUARTER EARNINGS PER DILUTED SHARE TO $0.41 ---------- SAME-FACILITY REVENUES INCREASE 9.5% Franklin, Tenn. (July 28, 2005) - Psychiatric Solutions, Inc. ("PSI") (NASDAQ: PSYS) today announced financial results for the second quarter and six months ended June 30, 2005. Revenue increased 23% for the quarter to a record $143,868,000 from $116,936,000 for the second quarter of 2004. Net income available to common stockholders rose 77% to $8,707,000 from $4,923,000. Earnings per diluted share increased 41% to $0.41 for the second quarter of 2005 from $0.29 for the second quarter of 2004, on a 22% increase in diluted shares used in computing earnings per share, primarily due to the Company's December 2004 stock offering. "We are very pleased with our strong second quarter results, particularly with our same-facility performance and overall margin expansion," stated Joey Jacobs, Chairman, President and Chief Executive Officer of PSI. "With 33 of our 34 facilities in operation at the end of the second quarter contributing to our same-facility results, we produced 9.5% growth in same-facility revenues. This performance was driven by growth for the quarter of 6.7% in patient days, 3.8% in admissions and 2.7% in revenue per patient day. Same-facility EBITDA increased to 18.8% of same-facility revenue for the quarter from 16.1% for the comparable prior year quarter. "Our revenue growth, combined with our continuous efforts to enhance operating efficiencies, increased operating leverage and expanded EBITDA to $20,653,000 for the second quarter of 2005, up from $15,390,000 for the second quarter last year. We continued to make significant progress on our long-term goal of increasing EBITDA as a percentage of revenue, as reflected in the growth in consolidated EBITDA to 14.4% of revenue for the second quarter from 13.2% for the second quarter of 2004. "Our second quarter results demonstrated key elements of our long-term organic growth strategy, including significant same-facility revenue growth and continued margin expansion producing excess cash flow that can be applied to debt reduction and other uses. We believe our ability to produce consistent and sustainable long-term profitable growth is primarily dependent on our organic growth strategy. We expect to continue to enhance this growth through a proven acquisition strategy, most recently reflected by the addition of 20 inpatient psychiatric facilities with approximately 2,000 beds from Ardent Health Services. "This transaction, which we consummated on July 1, 2005, brings high quality facilities and an outstanding team of skilled professionals to PSI. Because the facilities are similar to ours in terms of size, market leadership, operations and organic growth potential, we are confident that they will be accretive to our financial results and support our position as the leading provider of inpatient psychiatric services in the country." - MORE - PSYS Reports Second Quarter Results Page 2 July 28, 2005 Based primarily on the Company's financial results for the first half of 2005, its July 1st acquisition of the Ardent facilities and its judgment as to industry conditions, PSI today confirmed its established guidance for adjusted earnings per diluted share for 2005 in a range of $1.57 to $1.62 compared with $1.18 for 2004. This guidance does not include the impact of losses on the refinancing of long-term debt or any impact from additional future acquisitions. Mr. Jacobs concluded, "We entered the second half of 2005 with substantial momentum due to superior execution of our organic growth strategy and the Ardent transaction. With an industry environment characterized by increasing demand and limited new supply, we believe we are well positioned to sustain long-term profitable growth." 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 13, 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 difficulties in integrating the operations of PSI with recently acquired operations, including the inpatient facilities acquired from Ardent Heath Services. 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, including the factors listed in PSI's Annual Report on Form 10-K for 2004 filed on March 15, 2005, under the caption "Risk Factors." 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 54 owned or leased freestanding psychiatric inpatient facilities with more than 6,300 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 Second Quarter Results Page 3 July 28, 2005 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)

THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------ ------------------------ 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Revenue $ 143,868 $ 116,936 $ 282,598 $ 220,366 Salaries, wages and employee benefits 77,717 63,402 154,084 119,109 Professional fees 14,829 12,977 29,085 24,668 Supplies 9,036 7,379 17,620 13,959 Rentals and leases 2,461 2,109 4,801 3,876 Other operating expenses 16,496 13,043 32,141 25,559 Provision for doubtful accounts 2,676 2,636 5,344 4,663 Depreciation and amortization 3,058 2,361 5,960 4,468 Interest expense 3,321 4,515 6,844 8,971 Loss on refinancing long-term debt -- -- 6,990 6,407 ---------- ---------- ---------- ---------- 129,594 108,422 262,869 211,680 Income from continuing operations before income taxes 14,274 8,514 19,729 8,686 Provision for income taxes 5,567 3,237 7,694 3,302 ---------- ---------- ---------- ---------- Income from continuing operations 8,707 5,277 12,035 5,384 Loss from discontinued operations, net of taxes -- (169) -- (313) ---------- ---------- ---------- ---------- Net income 8,707 5,108 12,035 5,071 Accrued preferred stock dividends -- 185 -- 508 ---------- ---------- ---------- ---------- Net income available to common stockholders $ 8,707 $ 4,923 $ 12,035 $ 4,563 ========== ========== ========== ========== Basic earnings per share: Income from continuing operations $ 0.42 $ 0.36 $ 0.59 $ 0.37 Loss from discontinued operations -- (0.01) -- (0.02) ---------- ---------- ---------- ---------- $ 0.42 $ 0.35 $ 0.59 $ 0.35 ========== ========== ========== ========== Diluted earnings per share: Income from continuing operations $ 0.41 $ 0.30 $ 0.57 $ 0.31 Loss from discontinued operations -- (0.01) -- (0.02) ---------- ---------- ---------- ---------- $ 0.41 $ 0.29 $ 0.57 $ 0.29 ========== ========== ========== ========== Shares used in computing per share amounts: Basic 20,515 14,120 20,498 13,039 Diluted 21,229 17,376 21,201 17,301

-MORE- PSYS Reports Second Quarter Results Page 4 July 28, 2005 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

JUNE 30, DECEMBER 31, 2005 2004 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 7,593 $ 33,255 Accounts receivable, less allowance for doubtful accounts of $10,426 and $10,639, respectively 82,640 77,539 Prepaids and other 17,761 16,412 ---------- ---------- Total current assets 107,994 127,206 Property and equipment, net of accumulated depreciation 222,656 218,231 Cost in excess of net assets acquired 131,428 130,079 Other assets 23,936 22,330 ---------- ---------- Total assets $ 486,014 $ 497,846 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 10,938 $ 10,529 Salaries and benefits payable 33,604 27,355 Other accrued liabilities 23,041 28,668 Current portion of long-term debt 427 20,764 ---------- ---------- Total current liabilities 68,010 87,316 Long-term debt, less current portion 143,482 153,572 Deferred tax liability 11,153 8,020 Other liabilities 5,921 4,423 ---------- ---------- Total liabilities 228,566 253,331 Stockholders' equity: Common stock, $0.01 par value, 48,000 shares authorized; 20,528 and 20,468 issued and outstanding, respectively 205 205 Additional paid-in capital 228,942 228,044 Accumulated earnings 28,301 16,266 ---------- ---------- Total stockholders' equity 257,448 244,515 ---------- ---------- Total liabilities and stockholders' equity $ 486,014 $ 497,846 ========== ==========

-MORE- PSYS Reports Second Quarter Results Page 5 July 28, 2005 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)

SIX MONTHS ENDED JUNE 30, 2005 2004 ---------- ---------- OPERATING ACTIVITIES: Net income $ 12,035 $ 5,071 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations, net of taxes -- 313 Depreciation and amortization 5,960 4,468 Provision for doubtful accounts 5,344 4,663 Amortization of loan costs 338 419 Loss on refinancing long-term debt 6,990 6,407 Change in income tax assets and liabilities 1,446 2,660 Changes in operating assets and liabilities: Accounts receivable (10,581) (9,464) Prepaids and other assets (2,101) 2,096 Accounts payable 409 (1,859) Salaries and benefits payable 3,830 4,303 Accrued liabilities and other liabilities 3,351 (1,095) ---------- ---------- Net cash provided by operating activities 27,021 17,982 INVESTING ACTIVITIES: Acquisitions, net of cash acquired (5,793) (112,194) Capital purchases of property and equipment (10,029) (6,874) Investment in equity method investee (840) -- Other (883) (2,260) ---------- ---------- Net cash used in investing activities (17,545) (121,328) FINANCING ACTIVITIES: Net principal (payments) borrowings on long-term debt (30,427) 74,445 Refinancing of long-term debt (5,316) (3,844) Payment of loan and issuance costs (487) (1,603) Proceeds from issuance of common stock 1,092 1,564 ---------- ---------- Net cash (used in) provided by financing activities (35,138) 70,562 ---------- ---------- Net decrease in cash and cash equivalents (25,662) (32,784) Cash and cash equivalents at beginning of the period 33,255 44,954 ---------- ---------- Cash and cash equivalents at end of the period $ 7,593 $ 12,170 ========== ========== SIGNIFICANT NON-CASH TRANSACTIONS: Loss on refinancing long-term debt $ 1,674 $ 2,563 ========== ========== EFFECT OF ACQUISITIONS: Assets acquired, net of cash acquired $ -- $ 119,657 Cash payment for prior-year acquisitions 5,793 -- Liabilities assumed -- (7,463) ---------- ---------- Acquisitions, net of cash acquired $ 5,793 $ 112,194 ========== ==========

-more- PSYS Reports Second Quarter Results Page 6 July 28, 2005 PSYCHIATRIC SOLUTIONS, INC. RECONCILIATION OF ADJUSTED EARNINGS PER DILUTED SHARE TO EARNINGS PER DILUTED SHARE (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------ ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Net income $ 8,707 $ 5,108 $ 12,035 $ 5,071 Plus reconciling items: Discontinued operations, net of taxes -- 169 -- 313 Provision for income taxes 5,567 3,237 7,694 3,302 ---------- ---------- ---------- ---------- Income from continuing operations before income taxes 14,274 8,514 19,729 8,686 Discontinued operations, pre-tax -- (273) -- (505) Loss on refinancing long-term debt -- -- 6,990 6,407 ---------- ---------- ---------- ---------- Adjusted income before income taxes 14,274 8,241 26,719 14,588 Provision for income taxes 5,567 3,132 10,420 5,543 ---------- ---------- ---------- ---------- Adjusted net income $ 8,707 $ 5,109 $ 16,299 $ 9,045 ========== ========== ========== ========== Earnings per diluted share $ 0.41 $ 0.29 $ 0.57 $ 0.29 ========== ========== ========== ========== Fully taxed adjusted earnings per diluted share(a) $ 0.41 $ 0.29 $ 0.77 $ 0.52 ========== ========== ========== ========== Diluted shares used in computing per share amounts: 21,229 17,376 21,201 17,301

(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 and it is not influenced by fluctuations in the Company's stock price. 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 Second Quarter Results Page 7 July 28, 2005 PSYCHIATRIC SOLUTIONS, INC. RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (UNAUDITED) (IN THOUSANDS)

THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Income from continuing operations $ 8,707 $ 5,277 $ 12,035 $ 5,384 Provision for income taxes 5,567 3,237 7,694 3,302 Interest expense 3,321 4,515 6,844 8,971 Depreciation and amortization 3,058 2,361 5,960 4,468 ---------- ---------- ---------- ---------- EBITDA(a) 20,653 15,390 32,533 22,125 Other expenses: Loss on refinancing long-term debt -- -- 6,990 6,407 ---------- ---------- ---------- ---------- Adjusted EBITDA(a) $ 20,653 $ 15,390 $ 39,523 $ 28,532 ========== ========== ========== ==========

(a) EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as net income (loss) before discontinued operations, interest expense (net of interest income), income taxes, depreciation and amortization. Adjusted EBITDA is defined as net income (loss) before discontinued operations, 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. PSYS Reports Second Quarter Results Page 8 July 28, 2005 PSYCHIATRIC SOLUTIONS, INC. OPERATING STATISTICS - OWNED FACILITIES (UNAUDITED) (REVENUE IN THOUSANDS)

THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- % --------------------------- % 2005 2004 CHG. 2005 2004 CHG. ----------- ----------- -------- ----------- ----------- --------- SAME-FACILITY RESULTS: Revenue $ 109,614 $ 100,096 9.5% $ 201,673 $ 186,655 8.0% Admissions 12,267 11,822 3.8% 22,496 22,048 2.0% Patient days 257,235 241,096 6.7% 480,170 452,659 6.1% Average length of stay(a) 21.0 20.4 2.9% 21.3 20.5 3.9% Revenue per patient day(b) $ 426 $ 415 2.7% $ 420 $ 412 1.9% EBITDA margin 18.8% 16.1% 270 BPS 18.0% 15.8% 220 BPS TOTAL FACILITY RESULTS: Revenue $ 126,972 $ 100,096 26.9% $ 248,654 $ 186,655 33.2% Admissions 14,700 11,822 24.3% 29,536 22,048 34.0% Patient days 288,773 241,096 19.8% 566,300 452,659 25.1% Average length of stay(a) 19.6 20.4 (3.9)% 19.2 20.5 (6.3)% Revenue per patient day(b) $ 440 $ 415 6.0% $ 439 $ 412 6.6% EBITDA margin 18.3% 16.1% 220 BPS 17.6% 15.8% 180 BPS

(a) Average length of stay is defined as patient days divided by admissions. (b) Revenue per patient day is defined as owned facility revenues divided by patient days. -END-