Psychiatric Solutions Announces Third Quarter 2010 Earnings of $0.94 per Diluted Share on 10.4% Growth in Same-Facility Revenue

FRANKLIN, Tenn.--([ BUSINESS WIRE ])--Psychiatric Solutions, Inc. (aPSIa) (NASDAQ: PSYS) today announced financial results for the third quarter ended September 30, 2010. Revenue increased 12.2% for the quarter to $508.5 million from $453.2 million for the third quarter of 2009. Income from continuing operations attributable to PSI stockholders increased 89.7% to $53.7 million for the third quarter of 2010 from $28.3 million for the third quarter last year and 88.0% per diluted share to $0.94 from $0.50. Results for the third quarter of 2010 included transaction costs of approximately $2.4 million, which were related to PSIa�s previously announced definitive agreement providing for the acquisition of PSI by Universal Health Services, Inc.

PSIa�s same-facility revenue for the third quarter of 2010 grew 10.4% from the third quarter of 2009, primarily due to a 4.0% increase in patient days and a 6.1% increase in revenue per patient day. The Company expanded its same-facility EBITDA margin to 27.3% for the third quarter from 20.7% for the third quarter of 2009. Consolidated adjusted EBITDA increased 51.6% to $121.5 million, or 23.9% of revenue, for the third quarter of 2010 from $80.2 million, or 17.7% of revenue, for the third quarter of 2009. A reconciliation of all GAAP and non-GAAP financial results in this release can be found on page 5.

Net cash from continuing operating activities for the third quarter of 2010 increased 85.5% from the third quarter of 2009 to $68.9 million. Capital expenditures, primarily for maintenance and the addition of beds to facilities, totaled $24.8 million for the quarter. PSI made $51.2 million of principal payments on long-term debt during the quarter, including a $50 million optional prepayment on its senior secured term loan. PSIa�s ratio of debt to total capitalization improved to 48.2% at the end of the third quarter of 2010 from 50.6% at the end of the second quarter of 2010 and 56.2% at the end of the third quarter of 2009. In addition, the ratio of debt to adjusted EBITDA for the trailing 12 months improved to 2.8 at the end of the third quarter of 2010 from 3.3 at the end of the second quarter of 2010 and 4.0 at the end of the third quarter last year. PSI completed the third quarter of 2010 with $43.4 million in cash and cash equivalents and no borrowings under its $300 million revolving credit facility.

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.






PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except for per share amounts)


		Three Months Ended September 30,						Nine Months Ended September 30,
		2010			2009			2010			2009


Revenue		$	508,544		$	453,187		$	1,487,194		$	1,342,404

Salaries, wages and employee benefits (including share-based compensation of $4,946, $4,249, $12,738 and $13,525 for the respective three and nine month periods in 2010 and 2009)			256,713			252,617			779,486			746,807
Professional fees			46,921			42,040			142,567			124,332
Supplies			24,350			23,137			72,332			69,549
Rentals and leases			4,893			5,040			14,571			15,169
Other operating expenses			50,216			44,600			157,427			126,687
Provision for doubtful accounts			8,615			9,817			30,552			26,569
Depreciation and amortization			12,968			11,436			38,237			32,904
Interest expense			16,663			18,551			49,714			53,263
			421,339			407,238			1,284,886			1,195,280
Income from continuing operations before income taxes			87,205			45,949			202,308			147,124
Provision for income taxes			33,277			17,651			77,572			56,380
Income from continuing operations			53,928			28,298			124,736			90,744
Loss from discontinued operations, net of taxes			(796	)		(153	)		(8,221	)		(464	)
Net income			53,132			28,145			116,515			90,280
	Less: Net income attributable to noncontrolling interest		(247	)		7			(297	)		(338	)
Net income attributable to PSI stockholders		$	52,885		$	28,152		$	116,218		$	89,942

Basic earnings per share:
	Income from continuing operations attributable to PSI stockholders	$	0.96		$	0.51		$	2.23		$	1.63
	Loss from discontinued operations, net of taxes		(0.01	)		-			(0.15	)		(0.01	)
	Net income attributable to PSI stockholders	$	0.95		$	0.51		$	2.08		$	1.62

Diluted earnings per share:
	Income from continuing operations attributable to PSI stockholders	$	0.94		$	0.50		$	2.19		$	1.61
	Loss from discontinued operations, net of taxes		(0.02	)		-			(0.15	)		(0.01	)
	Net income attributable to PSI stockholders	$	0.92		$	0.50		$	2.04		$	1.60

Shares used in computing per share amounts:
	Basic		55,945			55,579			55,850			55,545
	Diluted		57,356			56,340			56,913			56,077

Amounts attributable to PSI stockholders:
	Income from continuing operations	$	53,681		$	28,305		$	124,439		$	90,406
	Loss from discontinued operations, net of taxes		(796	)		(153	)		(8,221	)		(464	)
	Net income	$	52,885		$	28,152		$	116,218		$	89,942






PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)


		September 30,		December 31,
		2010		2009


ASSETS
Current assets:
	Cash and cash equivalents	$	43,422	$	6,815
	Accounts receivable, less allowance for doubtful accounts of $53,710 and $51,894, respectively		258,822		249,439
	Other current assets		94,155		105,166
Total current assets			396,399		361,420
Property and equipment, net of accumulated depreciation			977,250		931,730
Cost in excess of net assets acquired			1,153,111		1,153,111
Other assets			57,009		60,979
Total assets		$	2,583,769	$	2,507,240

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable	$	35,709	$	35,397
	Salaries and benefits payable		97,930		81,129
	Other accrued liabilities		91,871		62,036
	Current portion of long-term debt		4,436		4,940
Total current liabilities			229,946		183,502
Long-term debt, less current portion			1,075,182		1,182,139
Deferred tax liability			81,786		81,137
Other liabilities			31,097		25,790
Total liabilities			1,418,011		1,472,568
Redeemable noncontrolling interest			4,583		4,337
Total stockholders' equity			1,161,175		1,030,335
Total liabilities and stockholders' equity		$	2,583,769	$	2,507,240






PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

			Nine Months Ended September 30,
			2010			2009

Operating activities:
Net income			$	116,515		$	90,280
Adjustments to reconcile net income to net cash provided by continuing operating activities:
	Depreciation and amortization			38,237			32,904
	Amortization of loan costs and bond discount			4,728			3,574
	Share-based compensation			12,738			13,525
	Change in income tax assets and liabilities			45,472			15,624
	Loss from discontinued operations, net of taxes			8,221			464
	Changes in operating assets and liabilities, net of effect of acquisitions:
		Accounts receivable		(9,383	)		(4,611	)
		Prepaids and other current assets		(7,527	)		771
		Accounts payable		3,606			(1,707	)
		Salaries and benefits payable		16,801			3,421
		Accrued liabilities and other liabilities		(5,364	)		995
Net cash provided by continuing operating activities				224,044			155,240
Net cash provided by (used in) discontinued operating activities				1,189			(252	)
Net cash provided by operating activities				225,233			154,988

Investing activities:
Cash paid for acquisitions, net of cash acquired				-			(32,708	)
Cash paid for real estate acquisitions				-			(18,996	)
Capital purchases of property and equipment				(82,371	)		(95,392	)
Other assets				35			389
Net cash used in continuing investing activities				(82,336	)		(146,707	)
Net cash used in discontinued investing activities				(12	)		(221	)
Net cash used in investing activities				(82,348	)		(146,928	)

Financing activities:
Net decrease in revolving credit facility				-			(138,374	)
Borrowings on long-term debt				-			106,500
Principal payments on long-term debt				(109,176	)		(3,823	)
Payment of loan and issuance costs				(27	)		(9,826	)
Distributions to noncontrolling interests				(51	)		(723	)
Excess tax benefits from share-based payment arrangements				-			208
Repurchase of common stock upon restricted stock vesting				(490	)		(992	)
Proceeds from exercises of common stock options				3,466			1,065
Net cash used in financing activities				(106,278	)		(45,965	)
Net increase (decrease) in cash				36,607			(37,905	)
Cash and cash equivalents at beginning of the period				6,815			51,271
Cash and cash equivalents at end of the period			$	43,422		$	13,366






PSYCHIATRIC SOLUTIONS, INC.
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO EBITDA AND ADJUSTED EBITDA
(Unaudited, in thousands)


			Three Months Ended September 30,				Nine Months Ended September 30,
			2010		2009		2010		2009


	Income from continuing operations attributable to PSI stockholders		$	53,681	$	28,305	$	124,439	$	90,406
		Provision for income taxes		33,277		17,651		77,572		56,380
		Interest expense		16,663		18,551		49,714		53,263
		Depreciation and amortization		12,968		11,436		38,237		32,904
	EBITDA^(a)			116,589		75,943		289,962		232,953
	Other expenses:
		Share-based compensation		4,946		4,249		12,738		13,525
	Adjusted EBITDA^(a)		$	121,535	$	80,192	$	302,700	$	246,478

^(a)	EBITDA and adjusted EBITDA are non-GAAP financial measures. EBITDA is defined as income from continuing operations attributable tostockholders before interest expense (net of interest income), income taxes, depreciation and amortization. Adjusted EBITDA is defined asincome 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 aOther expensesa. These other expenses may occur in future periods butthe amounts recognized can vary significantly from period to period and do not directly relate to the ongoing operations of our healthcare facilities. PSIa�s management relies on EBITDA and adjusted EBITDA as the primary measures to review and assess operatingperformance of its facilities and their management teams. PSI believes it is useful to investors to provide disclosures of its operating resultson the same basis as that used by management. Management and investors also review EBITDA and adjusted EBITDA to evaluate PSIa�soverall performance and to compare PSIa�s current operating results with corresponding periods and with other companies in the healthcare industry. You should not consider EBITDA and adjusted EBITDA in isolation or as a substitute for net income, operating cash flows orother cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Because EBITDAand adjusted EBITDA are not measures of financial performance under accounting principles generally accepted in the United Statesand 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 September 30,						%
		2010			2009			Change
Same-facility results:
	Revenue	$	464,021		$	420,421		10.4%
	Admissions		48,491			44,799		8.2%
	Patient days		745,759			717,089		4.0%
	Average length of stay^(a)		15.4			16.0		-3.8%
	Revenue per patient day^(b)	$	622		$	586		6.1%
	EBITDA margin		27.3	%		20.7	%	660 bps

Total facility results:
	Revenue	$	471,391		$	420,421		12.1%
	Admissions		49,573			44,799		10.7%
	Patient days		755,277			717,089		5.3%
	Average length of stay^(a)		15.2			16.0		-5.0%
	Revenue per patient day^(b)	$	624		$	586		6.5%
	EBITDA margin		27.2	%		20.7	%	650 bps


		Nine Months Ended September 30,						%
		2010			2009			Change
Same-facility results:
	Revenue	$	1,353,119		$	1,248,314		8.4%
	Admissions		144,482			132,881		8.7%
	Patient days		2,246,412			2,145,861		4.7%
	Average length of stay^(a)		15.5			16.1		-3.7%
	Revenue per patient day^(b)	$	602		$	582		3.4%
	EBITDA margin		24.4	%		21.5	%	290 bps

Total facility results:
	Revenue	$	1,381,279		$	1,248,314		10.7%
	Admissions		148,248			132,881		11.6%
	Patient days		2,280,722			2,145,861		6.3%
	Average length of stay^(a)		15.4			16.1		-4.3%
	Revenue per patient day^(b)	$	606		$	582		4.1%
	EBITDA margin		24.3	%		21.5	%	280 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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Psychiatric Solutions Announces Third Quarter 2010 Earnings of $0.94 per Diluted Share on 10.4% Growth in Same-Facility Revenue