EX-99.1 2 g88926exv99w1.txt EX-99.1 PRESS RELEASE PSYCHIATRIC SOLUTIONS, INC. (PSI LOGO) CONTACT: Brent Turner Vice President, Treasurer and Investor Relations (615) 312-5700 PSYCHIATRIC SOLUTIONS REPORTS RECORD GROWTH FOR THE FIRST QUARTER OF 2004 AND RAISES 2004 EARNINGS GUIDANCE --------------- REVENUE NEARLY TRIPLES ON GROWTH IN INPATIENT BEDS AND 7.3% INCREASE IN SAME-FACILITY REVENUES --------------- ALSO ANNOUNCES ACQUISITION OF TWO INPATIENT PSYCHIATRIC FACILITIES WITH 159 BEDS Franklin, Tenn. (May 3, 2004) - Psychiatric Solutions, Inc. ("PSI") (Nasdaq: PSYS) today announced financial results for the first quarter ended March 31, 2004. Revenue increased 190% for the first quarter to $107,584,000 from $37,104,000 for the first quarter of 2003. Including a loss of $6,407,000 on a previously disclosed refinancing of long-term debt, there was a net loss available to common stockholders of $360,000 for the first quarter of 2004, compared with net income available to common stockholders of $789,000 for the first quarter of 2003, and a loss of $0.03 per diluted share, compared with earnings of $0.10 per diluted share. PSI's adjusted earnings per diluted share increased 44% to $0.23 for the first quarter of 2004 from $0.16 for the first quarter of 2003, on a 110% increase in shares used in computing adjusted diluted per share amounts. Adjusted EBITDA for the quarter was $12,920,000, up 190% from $4,453,000 for the first quarter of 2003. The adjusted results for 2004 exclude the loss on refinancing long-term debt discussed above, and adjusted results for 2003 exclude a net loss on a change in valuation of put warrants and in reserve on stockholder notes. Please see pages 7 and 8 for a reconciliation of 1) adjusted earnings per diluted share with earnings per diluted share and 2) adjusted EBITDA with net income, for the first quarter of 2004 and 2003. "PSI's first quarter financial results represent an outstanding start to 2004," said Joey Jacobs, Chairman, President and Chief Executive Officer of PSI. "We are pleased with our significant growth in same-facility revenues of 7.3% for the quarter, especially against solid same-facility revenue performance for the first quarter last year. Consistent with our strategies to produce organic revenue growth through a combination of increased admissions and improved pricing, our first quarter same-facility revenue growth reflected a 6.3% increase in admissions and 2.6% growth in revenue per patient day. Through six consecutive quarters of growth in same-facility revenues, we have continued to refine our revenue-generating initiatives, supporting our expectations that organic revenue growth and improved operating efficiencies in our same-facility base will contribute significantly to our long-term earnings growth. -MORE- PSYS Reports First Quarter Results Page 2 May 3, 2004 "For the first quarter, our revenue growth primarily resulted from the more than 350% increase in our inpatient beds, to over 3,200 at the end of the first quarter of 2004 from approximately 700 at the same time in 2003. We announced the purchase of three inpatient facilities in two transactions in the first quarter accounting for more than 350 of these beds. Since the end of the first quarter we have also announced a definitive agreement to purchase four additional facilities with a total of 360 beds, which is expected to be completed during the current quarter, and our facility in Meridian, MS, which we purchased in November 2003, has opened a new 60-bed residential treatment center originally scheduled to open in the third quarter of 2004. "In addition, today we announce the completion of the purchase of two inpatient psychiatric facilities with 159 beds from Palmetto Behavioral Health, headquartered in Charleston, SC. The facilities are located in Charleston and Florence, SC, and produced revenues for 2003 of $12.8 million. We expect the acquisition will be accretive to our financial results. With these two new facilities and upon the anticipated June closing of the purchase of the four facilities announced last week, we will have acquired ten inpatient psychiatric facilities since the beginning of November 2003." Based on the Company's first quarter financial results and the acquisitions completed thus far in 2004, PSI is raising its guidance for adjusted earnings per diluted share for 2004 to a range of $1.00 to $1.04 from its previous range of $0.86 to $0.90, which excludes the first quarter loss on refinancing of debt discussed above. In addition, PSI anticipates that the consummation of the acquisition of the four facilities announced last week would have an accretive impact on the Company's new earnings guidance for 2004. Mr. Jacobs added, "As our first quarter results and our 2004 acquisition activity to date demonstrate, we are successfully executing our strategies to expand our share of the inpatient behavioral healthcare market. We are proud to note that a critical aspect of this success is our company-wide commitment to providing the highest quality of care to the thousands of patients we serve every day. There remains a tremendous need for the services we provide and, therefore, a substantial ongoing growth opportunity for PSI. We are confident that by continuing to fulfill this commitment to quality of care, we will continue to create additional shareholder 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.streetevents.com or www.fulldisclosure.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 June 3, 2004. 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 -MORE- PSYS Reports First Quarter Results Page 3 May 3, 2004 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 facilities on favorable terms; (2) the ability of PSI to improve the operations of acquired 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 healthcare industry, including the impact of unforeseen changes in regulation, reimbursement rates from federal and state healthcare 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, including the factors listed in the Annual Report on Form 10-K for fiscal year 2003 filed on March 25, 2004, 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. Psychiatric Solutions, Inc. offers an extensive continuum of behavioral health programs to critically ill children, adolescents and adults through its operation of 28 owned or leased freestanding psychiatric inpatient facilities with more than 3,400 beds. The Company also manages freestanding psychiatric inpatient facilities for government agencies and psychiatric inpatient units within general acute care hospitals owned by others. -MORE- PSYS Reports First Quarter Results Page 4 May 3, 2004 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)

THREE MONTHS ENDED MARCH 31, ----------------------------- 2004 2003 --------- --------- Revenue $ 107,584 $ 37,104 Salaries, wages and employee benefits 58,995 17,785 Professional fees 12,056 4,451 Supplies 6,941 1,691 Rentals and leases 1,783 248 Other operating expenses 12,862 7,159 Provision for doubtful accounts 2,027 1,322 Depreciation and amortization 2,117 667 Interest expense 4,456 1,420 Loss on refinancing long-term debt 6,407 -- Change in valuation of put warrants -- 960 Change in reserve on stockholder notes -- (461) --------- --------- 107,644 35,242 (Loss) income before income taxes (60) 1,862 (Benefit from) provision for income taxes (23) 1,073 --------- --------- Net (loss) income (37) 789 Accrued preferred stock dividends 323 -- --------- --------- Net (loss) income available to common stockholders $ (360) $ 789 ========= ========= Earnings per common share: Basic $ (0.03) $ 0.10 ========= ========= Diluted $ (0.03) $ 0.10 ========= ========= Shares used in computing per share amounts: Basic 11,958 7,739 Diluted 11,958 8,209

-MORE- PSYS Reports First Quarter Results Page 5 May 3, 2004 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

MARCH 31, DECEMBER 31, 2004 2003 --------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 34,176 $ 44,832 Accounts receivable, less allowance for doubtful accounts of $8,707 (unaudited) and $7,491, respectively 65,278 60,055 Prepaids and other 6,762 8,529 --------- --------- Total current assets 106,216 113,416 Property and equipment, net of accumulated depreciation 175,851 149,757 Cost in excess of net assets acquired 70,501 68,970 Contracts, net 2,614 2,850 Other assets 16,685 13,642 --------- --------- Total assets $ 371,867 $ 348,635 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,190 $ 11,637 Salaries and benefits payable 16,634 13,642 Other accrued liabilities 23,743 20,168 Current portion of long-term debt 1,100 1,023 --------- --------- Total current liabilities 53,667 46,470 Long-term debt, less current portion 190,816 173,980 Deferred tax liability 6,681 6,762 Other liabilities 4,120 4,779 --------- --------- Total liabilities 255,284 231,991 Series A convertible preferred stock, $0.01 par value, 6,000 shares authorized; 4,545 shares issued and outstanding 25,617 25,316 Stockholders' equity: Common stock, $0.01 par value, 48,000 shares authorized; 11,995 and 11,937 issued and outstanding, respectively 120 119 Additional paid-in capital 91,412 91,423 Notes receivable from stockholders (338) (338) Accumulated unrealized gains (losses) 4 (4) Accumulated (deficit) earnings (232) 128 --------- --------- Total stockholders' equity 90,966 91,328 --------- --------- Total liabilities and stockholders' equity $ 371,867 $ 348,635 ========= =========

-MORE- PSYS Reports First Quarter Results Page 6 May 3, 2004 PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)

THREE MONTHS ENDED MARCH 31, 2004 2003 -------- -------- OPERATING ACTIVITIES Net income $ (37) $ 789 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,117 667 Provision for doubtful accounts 2,027 1,322 Accretion of detachable warrants -- 77 Non-cash stock compensation expense -- 5 Amortization of loan costs 199 160 Loss on refinancing long-term debt 6,407 -- Change in valuation of put warrants -- 960 Change in reserve on stockholder notes -- (461) Long-term interest accrued -- 81 Changes in operating assets and liabilities: Accounts receivable (3,195) (3,986) Prepaids and other assets 1,981 (973) Accounts payable (2,320) 148 Salaries and benefits payable 2,065 (1,178) Accrued liabilities and other liabilities 5,745 3,514 -------- -------- Net cash provided by operating activities 14,989 1,125 INVESTING ACTIVITIES: Cash paid for acquisitions, net of cash acquired (33,211) -- Capital purchases of property and equipment (3,058) (628) Other assets (1,505) (180) -------- -------- Net cash used in investing activities (37,774) (808) FINANCING ACTIVITIES: Net principal borrowings on long-term debt 16,856 1,336 Refinancing of long-term debt (3,844) -- Payment of loan and issuance costs (987) -- Proceeds from issuance of common stock 104 -- -------- -------- Net cash provided by financing activities 12,129 1,336 Net increase (decrease) in cash (10,656) 1,653 Cash at beginning of the period 44,832 2,392 -------- -------- Cash at end of the period $ 34,176 $ 4,045 ======== ======== SIGNIFICANT NON-CASH TRANSACTIONS: Loss on refinancing long-term debt $ (2,563) $ -- ======== ======== EFFECT OF ACQUISITIONS: Assets acquired, net of cash acquired $ 31,682 $ -- Cash payment for prior-year acquisition 3,350 -- Liabilities assumed (1,821) -- -------- -------- Cash paid for acquisitions, net of cash acquired $ 33,211 $ -- ======== ========

-MORE- PSYS Reports First Quarter Results Page 7 May 3, 2004 PSYCHIATRIC SOLUTIONS, INC. RECONCILIATION OF FULLY TAXED ADJUSTED EARNINGS PER DILUTED SHARE TO EARNINGS PER DILUTED SHARE (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED MARCH 31, -------------------------- 2004 2003 ----------- ----------- Net (loss) income $ (37) $ 789 Plus reconciling items: (Benefit from) provision for income taxes (23) 1,073 ----------- ----------- (Loss) income before income taxes (60) 1,862 Loss on refinancing long-term debt 6,407 -- Change in valuation of put warrants -- 960 Change in reserve on stockholder notes -- (461) ----------- ------------ Adjusted income before income taxes 6,347 2,361 Provision for income taxes 2,412 1,073 ----------- ----------- Adjusted net income(a) $ 3,935 $ 1,288 =========== =========== Earnings per diluted share $ (0.03) $ 0.10 =========== =========== Fully taxed adjusted earnings per diluted share(a)(b) $ 0.23 $ 0.16 =========== =========== Diluted shares used in computing per share amounts: Earnings per share 11,958 8,209 Fully taxed adjusted earnings per share(b) 17,231 8,209

(a) PSI believes its calculation of fully taxed 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. Fully taxed 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 fully taxed 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, they may not be comparable as presented to other similarly titled measures of other companies. (b) For purposes of calculating fully taxed adjusted earnings per diluted share, includes 5,273 diluted shares for the first quarter of 2004 representing series A convertible preferred stock, stock options and warrants that are anti-dilutive for purposes of calculating earnings per diluted share. -MORE- PSYS Reports First Quarter Results Page 8 May 3, 2004 PSYCHIATRIC SOLUTIONS, INC. RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (UNAUDITED) (IN THOUSANDS)

THREE MONTHS ENDED MARCH 31, -------------------------- 2004 2003 ----------- ----------- Net (loss) income $ (37) $ 789 (Benefit from) provision for income taxes (23) 1,073 Interest expense 4,456 1,420 Depreciation and amortization 2,117 667 Other expenses: Loss on refinancing long-term debt 6,407 -- Change in valuation of put warrants -- 960 Change in reserve on stockholder notes -- (461) Non-cash stock compensation expense 5 ----------- ----------- Total other expenses 6,407 504 ----------- ----------- Adjusted EBITDA(a) $ 12,920 $ 4,453 =========== ===========

(a) Adjusted EBITDA is a non-GAAP financial measure and is defined as net (loss) income 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 adjusted EBITDA as the primary measure 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 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 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 adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States and is susceptible to varying calculations, it may not be comparable to similarly titled measures of other companies. -MORE- PSYS Reports First Quarter Results Page 9 May 3, 2004 PSYCHIATRIC SOLUTIONS, INC. OPERATING STATISTICS - OWNED FACILITIES (UNAUDITED) (REVENUES IN THOUSANDS)

THREE MONTHS ENDED MARCH 31, -------------------------- % 2004 2003 CHG. ----------- ----------- ------ SAME-FACILITY RESULTS: Revenues $ 27,970 $ 26,078 7.3% Admissions 4,619 4,344 6.3% Patient days 47,862 45,785 4.5% Average length of stay(a) 10.4 10.5 (1.7)% Revenue per patient day(b) $ 584 $ 570 2.6% TOTAL FACILITY RESULTS: Revenues $ 86,443 $ 26,078 231.5% Admissions 10,231 4,344 135.5% Patient days 211,563 45,785 362.1% Average length of stay(a) 20.7 10.5 97.1% Revenue per patient day(b) $ 409 $ 570 (28.2)%

(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-