Psychiatric Solutions, Inc. (“PSI”) (NASDAQ: PSYS) today
announced financial results for the second quarter ended June 30,
2010. Revenue increased 10.4% for the quarter to $502.7 million
from $455.3 million for the second quarter of 2009. Income from
continuing operations attributable to PSI stockholders increased
12.9% to $39.0 million for the second quarter of 2010 from $34.6
million for the second quarter last year, and 11.3% per diluted
share to $0.69 from $0.62. Results for the second quarter of 2010
included transaction costs of approximately $6.4 million, which are
related to PSI’s previously announced definitive agreement
providing for the acquisition of PSI by Universal Health Services,
Inc. (“UHS”).
PSI’s same-facility revenue for the second quarter of 2010 grew
7.7% from the second quarter last year, primarily due to a 4.2%
increase in patient days and a 3.3% increase in revenue per patient
day. The Company expanded its same-facility EBITDA margin by 100
basis points to 24.0% for the second quarter from 23.0% for the
second quarter of 2009. Consolidated adjusted EBITDA increased to
$97.4 million, or 19.4% of revenue, for the second quarter of 2010
from $89.6 million, or 19.7% of revenue, for the second quarter
last year. A reconciliation of all GAAP and non-GAAP financial
results in this release can be found on page 7.
Net cash from continuing operating activities for the second
quarter of 2010 increased 25.9% from the second quarter of 2009 to
$99.1 million. Capital expenditures, primarily for maintenance and
the addition of beds to existing facilities, totaled $28.1 million
for the quarter. PSI made $56.7 million of principal payments on
long-term debt during the quarter, including a $50 million optional
prepayment on its senior secured term loan. PSI’s ratio of debt to
total capitalization improved to 50.6% at the end of the second
quarter of 2010 from 52.8% at the end of the first quarter of 2010
and 56.5% at the end of the second quarter of 2009. In addition,
the ratio of debt to adjusted EBITDA for the trailing 12 months
improved to 3.3 at the end of the quarter just ended from 3.5 at
the end of the first quarter of 2010 and 3.8 at the end of the
second quarter last year. PSI completed the second quarter of 2010
with $49.7 million in cash and cash equivalents and no borrowings
under its $300 million revolving credit facility.
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) the
occurrence of any event, change or other circumstance that could
give rise to the termination of the merger agreement with UHS; (2)
the outcome of any legal proceedings that have been or may be
instituted against PSI and others relating to the merger agreement
or other matters; (3) the inability to complete the merger due to
the failure to obtain stockholder approval or the failure to
satisfy other conditions to consummation of the merger, including
the expiration or termination of any waiting period applicable to
the consummation of the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended; (4) the failure of
UHS to obtain the necessary debt financing to consummate the
merger; (5) the failure of the merger to close for any other
reason; (6) risks that the proposed merger disrupts current plans
and operations and the potential difficulties in employee retention
as a result of the merger; (7) the effect of the pending merger on
PSI’s physician and patient relationships, operating results and
business generally; (8) the amount of the costs, fees, expenses and
charges related to the merger and the actual terms of the debt
financing that will be obtained for the merger; (9) the merger
agreement restricts PSI’s ability to take certain actions without
UHS’ approval, including making certain acquisition, dispositions,
investments or capital expenditures and entering into, terminating
or amending material contracts; (10) general economic and business
conditions; (11) PSI’s ability to comply with applicable licensure
and accreditation requirements; (12) risks inherent to the health
care industry, including government investigations, the impact of
unforeseen changes in regulation, decreases in reimbursement rates
from federal and state health care programs or managed care
companies and exposure to claims and legal actions by patients,
stockholders and others; (13) the ability to receive timely
additional financing on terms acceptable to PSI to fund PSI's
acquisition strategy and capital expenditure needs; and (14) PSI’s
ability to improve the operations of its inpatient facilities and
successfully integrate 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 and is the
largest operator of owned or leased freestanding psychiatric
inpatient facilities with over 11,000 beds in 32 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.
Additional Information about the Proposed Merger and Where
You Can Find It
PSI has filed with the Securities and Exchange Commission (the
“SEC”) a preliminary proxy statement and other relevant materials
in connection with the proposed acquisition of PSI by UHS, and
intends to file a definitive proxy statement and other relevant
materials in connection with the proposed acquisition. The
definitive proxy statement will be mailed to PSI’s stockholders.
Before making any voting or investment decisions with respect to
the transaction, investors and security holders of PSI are urged to
read the proxy statement and the other relevant materials when they
become available because they will contain important information
about the transaction, PSI and UHS. Investors and security holders
may obtain free copies of these documents (when they are available)
and other documents filed with the SEC at the SEC’s web site at
www.sec.gov. In addition, investors and security holders may obtain
a free copy of the documents filed with the SEC from PSI by
directing such request by mail or telephone to Psychiatric
Solutions, Inc., 6640 Carothers Parkway, Suite 500, Franklin,
Tennessee 37067, Attention: Brent Turner, Executive Vice President,
Finance and Administration, telephone: (615) 312-5700, or from
PSI’s website, located at www.psysolutions.com.
Participants in the Solicitation
PSI and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from its stockholders
in connection with the merger. Information about PSI’s directors
and executive officers is set forth in PSI’s definitive proxy
statements and Annual Reports on Form 10-K, previously filed with
the SEC. Additional information regarding the interests of the
participants in the solicitation of proxies in connection with the
merger is included in the Company’s preliminary proxy statement
relating to the merger.
PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (Unaudited, in thousands except for per
share amounts) Three
Months Ended June 30, Six Months Ended June 30,
2010 2009 2010 2009
Revenue $ 502,694 $ 455,287 $ 978,650 $ 889,217
Salaries, wages and employee
benefits (including share-based compensation of $4,282, $4,457,
$7,792 and $9,276 for the respective three and six month periods in
2010 and 2009)
263,298 249,904 522,773 494,190 Professional fees 50,718 42,362
95,646 82,292 Supplies 24,304 23,492 47,982 46,412 Rentals and
leases 4,843 5,049 9,678 10,129 Other operating expenses 56,316
40,821 107,211 82,087 Provision for doubtful accounts 10,104 8,290
21,937 16,752 Depreciation and amortization 12,879 10,915 25,269
21,468 Interest expense 16,553 18,103
33,051 34,712 439,015
398,936 863,547 788,042
Income from continuing operations before income taxes 63,679 56,351
115,103 101,175 Provision for income taxes 24,612
21,565 44,295 38,729
Income from continuing operations 39,067 34,786 70,808 62,446 Loss
from discontinued operations, net of taxes (3,929 )
(172 ) (7,425 ) (311 ) Net income 35,138 34,614
63,383 62,135 Less: Net income attributable to noncontrolling
interest (18 ) (206 ) (50 ) (345 ) Net
income attributable to PSI stockholders $ 35,120 $ 34,408
$ 63,333 $ 61,790 Basic earnings per
share: Income from continuing operations attributable to PSI
stockholders $ 0.70 $ 0.62 $ 1.27 $ 1.12 Loss from discontinued
operations, net of taxes (0.07 ) -
(0.14 ) (0.01 ) Net income attributable to PSI stockholders
$ 0.63 $ 0.62 $ 1.13 $ 1.11
Diluted earnings per share: Income from continuing operations
attributable to PSI stockholders $ 0.69 $ 0.62 $ 1.25 $ 1.11 Loss
from discontinued operations, net of taxes (0.07 ) -
(0.13 ) (0.01 ) Net income attributable to PSI
stockholders $ 0.62 $ 0.62 $ 1.12 $ 1.10
Shares used in computing per share amounts: Basic
55,889 55,559 55,802 55,531 Diluted 56,995 55,921 56,691 55,948
Amounts attributable to PSI stockholders: Income from
continuing operations $ 39,049 $ 34,580 $ 70,758 $ 62,101 Loss from
discontinued operations, net of taxes (3,929 ) (172 )
(7,425 ) (311 ) Net income $ 35,120 $ 34,408
$ 63,333 $ 61,790
PSYCHIATRIC
SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) June
30, December 31, 2010 2009
ASSETS Current assets: Cash and cash equivalents $ 49,698 $
6,815
Accounts receivable, less
allowance for doubtful accounts of $56,120 and $51,894,
respectively
254,412 249,439 Other current assets 85,760 105,166
Total current assets 389,870 361,420 Property and equipment, net of
accumulated depreciation 965,833 931,730 Cost in excess of net
assets acquired 1,153,111 1,153,111 Other assets 58,959
60,979 Total assets $ 2,567,773 $ 2,507,240
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 41,057 $ 35,397 Salaries and benefits payable
100,101 81,129 Other accrued liabilities 74,304 62,036 Current
portion of long-term debt 4,742 4,940 Total current
liabilities 220,204 183,502 Long-term debt, less current portion
1,125,625 1,182,139 Deferred tax liability 82,260 81,137 Other
liabilities 32,932 25,790 Total liabilities 1,461,021
1,472,568 Redeemable noncontrolling interest 4,336 4,337 Total
stockholders' equity 1,102,416 1,030,335 Total
liabilities and stockholders' equity $ 2,567,773 $ 2,507,240
PSYCHIATRIC SOLUTIONS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Six Months Ended June 30, 2010
2009 Operating activities: Net income $ 63,383
$ 62,135
Adjustments to reconcile net
income to net cash provided by continuing operating activities:
Depreciation and amortization 25,269 21,468 Amortization of loan
costs and bond discount 3,136 2,034 Share-based compensation 7,792
9,276 Change in income tax assets and liabilities 15,849 21,579
Loss from discontinued operations, net of taxes 7,425 311
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable (4,973 ) (2,125 ) Prepaids and other current
assets 1,180 547 Accounts payable 7,586 (2,646 ) Salaries and
benefits payable 18,972 2,848 Accrued liabilities and other
liabilities 9,542 2,681 Net cash
provided by continuing operating activities 155,161 118,108 Net
cash provided by discontinued operating activities 1,656
142 Net cash provided by operating activities
156,817 118,250
Investing activities: Cash paid for
real estate acquisitions - (18,996 ) Capital purchases of property
and equipment (57,605 ) (62,141 ) Other assets (112 )
430 Net cash used in continuing investing activities (57,717
) (80,707 ) Net cash used in discontinued investing activities
(12 ) (499 ) Net cash used in investing activities
(57,729 ) (81,206 )
Financing activities: Net
decrease in revolving credit facility - (169,333 ) Borrowings on
long-term debt - 106,500 Principal payments on long-term debt
(57,999 ) (2,553 ) Payment of loan and issuance costs (22 ) (8,110
) Distributions to noncontrolling interests (51 ) - Repurchase of
common stock upon restricted stock vesting (490 ) (953 ) Proceeds
from exercises of common stock options 2,357
390 Net cash used in financing activities (56,205 )
(74,059 ) Net increase (decrease) in cash 42,883 (37,015 )
Cash and cash equivalents at beginning of the period 6,815
51,271 Cash and cash equivalents at end of the
period $ 49,698 $ 14,256
PSYCHIATRIC
SOLUTIONS, INC. RECONCILIATION OF INCOME FROM CONTINUING
OPERATIONS TO EBITDA AND ADJUSTED EBITDA (Unaudited, in
thousands) Three
Months Ended June 30, Six Months Ended June 30,
2010 2009 2010 2009
Income from continuing operations attributable to PSI stockholders
$ 39,049 $ 34,580 $ 70,758 $ 62,101 Provision for income taxes
24,612 21,565 44,295 38,729 Interest expense 16,553 18,103 33,051
34,712 Depreciation and amortization 12,879 10,915
25,269 21,468 EBITDA(a) 93,093 85,163 173,373 157,010
Other expenses: Share-based compensation 4,282 4,457
7,792 9,276 Adjusted EBITDA(a) $ 97,375 $ 89,620 $
181,165 $ 166,286 (a)
EBITDA and adjusted EBITDA are
non-GAAP financial measures. EBITDA is defined as income from
continuing operations attributable to stockholders before interest
expense (net of interest income), income taxes, depreciation and
amortization. Adjusted EBITDA is defined as income from continuing
operations attributable to stockholders before interest expense
(net of interest income), income taxes, depreciation, amortization,
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 June
30, % 2010 2009 Change
Same-facility results: Revenue $ 456,653 $ 423,889 7.7 % Admissions
48,504 44,821 8.2 % Patient days 760,508 729,539 4.2 % Average
length of stay(a) 15.7 16.3 -3.7 % Revenue per patient day(b) $ 600
$ 581 3.3 % EBITDA margin 24.0 % 23.0 % 100 bps Total
facility results: Revenue $ 467,119 $ 423,889 10.2 % Admissions
49,870 44,821 11.3 % Patient days 773,205 729,539 6.0 % Average
length of stay(a) 15.5 16.3 -4.9 % Revenue per patient day(b) $ 604
$ 581 4.0 % EBITDA margin 24.0 % 23.0 % 100 bps
Six
Months Ended June 30, % 2010 2009
Change Same-facility results: Revenue $ 889,098 $ 827,892
7.4 % Admissions 95,991 88,082 9.0 % Patient days 1,500,653
1,428,772 5.0 % Average length of stay(a) 15.6 16.2 -3.7 % Revenue
per patient day(b) $ 592 $ 579 2.2 % EBITDA margin 22.8 % 21.9 % 90
bps Total facility results: Revenue $ 909,888 $ 827,892 9.9
% Admissions 98,675 88,082 12.0 % Patient days 1,525,445 1,428,772
6.8 % Average length of stay(a) 15.5 16.2 -4.3 % Revenue per
patient day(b) $ 596 $ 579 2.9 % EBITDA margin 22.8 % 21.9 % 90 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.
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