Psychiatric Solutions, Inc. (�PSI�) (NASDAQ: PSYS) today announced
financial results for the second quarter ended June 30, 2008.
Revenue was a record $451.0 million for the quarter, up 28.4% from
$351.2 million for the second quarter of 2007. Income from
continuing operations increased 40.5% to $0.52 per diluted share
for the second quarter of 2008 from adjusted income from continuing
operations of $0.37 per diluted share for the second quarter last
year, which excluded a loss on debt refinancing of $0.09 per
diluted share after tax. A reconciliation of all GAAP and non-GAAP
financial results in this release can be found on pages 6 and 7.
Same-facility revenue increased 7.8% for the second quarter of
2008, driven by same-facility growth in net revenue per patient day
of 5.1% and growth in patient days of 2.7%. Same-facility EBITDA
margin expanded 170 basis points to 21.8% compared with the second
quarter of 2007, and EBITDA margin for all facilities increased 130
basis points to 21.1%. Consolidated adjusted EBITDA grew 34.7% to a
record $81.5 million, or 18.1% of revenue, for the second quarter
of 2008 from the same quarter of 2007. Cash flow from continuing
operations for the second quarter of 2008 was more than
$41.5�million. �PSI produced strong profitable growth for the
second quarter of 2008,� commented Joey Jacobs, Chairman, President
and Chief Executive Officer of PSI. �Demand for high quality
inpatient psychiatric care has continued to increase in our
fragmented, capacity-constrained industry, driving substantial
growth in our same-facility revenue. In addition, we have expanded
PSI�s capacity to meet increased demand through both accretive
facility acquisitions and the addition of more than 300 beds to
existing and new inpatient psychiatric facilities during the first
half of 2008. As expected, this volume growth and continuing
initiatives to enhance productivity in each facility have generated
significant operating leverage, expanding our profit margins. �We
expect to continue benefiting from strong industry growth trends in
2008 and beyond. In this environment, we remain highly focused on
executing a proven business model that has enabled us to build a
long-term record of outstanding performance, while also becoming
the leading provider in the inpatient psychiatric care industry. We
are confident we have the opportunities, the resources and the
expertise to further strengthen our leadership position and enhance
stockholder value.� Based on the Company�s results for the second
quarter and first half of 2008 and its outlook for the remainder of
the year, PSI today updated its guidance range for earnings from
continuing operations per diluted share for 2008 to $2.02 to $2.03,
reflecting growth of 36% compared to 2007. The Company�s guidance
does not include the impact from any future acquisitions. PSI will
hold a conference call to discuss its second quarter financial
results at 10:00 a.m. Eastern time on Thursday, July 31, 2008. A
live webcast of the conference call will be available at
www.psysolutions.com in the �Investors� section of the site or at
www.earnings.com. The webcast will be available through the end of
business on August 15, 2008. 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
recently acquired 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, decreases
in 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 and is the largest operator of owned or leased
freestanding psychiatric inpatient facilities with over 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 June 30, Six Months Ended June 30, 2008 2007
2008 2007 � � Revenue $ 450,965 $ 351,223 $ 877,744 $ 670,791 �
Salaries, wages and employee benefits (including share-based
compensation of $4,517, $3,910, $10,077 and $7,583 for the
respective three and six month periods in 2008 and 2007) 246,231
193,364 483,118 371,797 Professional fees 46,385 35,000 89,724
65,643 Supplies 24,773 19,398 48,358 37,571 Rentals and leases
6,112 4,951 12,296 9,531 Other operating expenses 41,833 34,631
80,641 65,839 Provision for doubtful accounts 8,623 7,275 15,782
13,939 Depreciation and amortization 10,069 7,245 19,478 13,484
Interest expense 19,765 17,029 40,103 31,414 Loss on refinancing
long-term debt � - � � 8,179 � � - � � 8,179 � � 403,791 � �
327,072 � � 789,500 � � 617,397 � Income from continuing operations
before income taxes 47,174 24,151 88,244 53,394 Provision for
income taxes � 17,844 � � 8,961 � � 33,533 � � 20,198 � Income from
continuing operations 29,330 15,190 54,711 33,196 Loss from
discontinued operations, net of income tax benefit of $39, $64, $23
and $51 for the respective three and six month periods in 2008 and
2007 � (271 ) � (583 ) � (156 ) � (464 ) Net income $ 29,059 � $
14,607 � $ 54,555 � $ 32,732 � � Basic earnings per share: Income
from continuing operations $ 0.53 $ 0.28 $ 0.99 $ 0.62 Loss from
discontinued operations, net of taxes � - � � (0.01 ) � - � � (0.01
) Net income $ 0.53 � $ 0.27 � $ 0.99 � $ 0.61 � � Diluted earnings
per share: Income from continuing operations $ 0.52 $ 0.27 $ 0.98 $
0.60 Loss from discontinued operations, net of taxes � - � � (0.01
) � (0.01 ) � (0.01 ) Net income $ 0.52 � $ 0.26 � $ 0.97 � $ 0.59
� � Shares used in computing per share amounts: Basic 55,279 54,104
55,211 53,955 Diluted 56,233 55,372 56,016 55,305 � � PSYCHIATRIC
SOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited,
in thousands) � � � June 30, December 31, 2008 2007 � � ASSETS
Current assets: Cash and cash equivalents $ 18,780 $ 39,970
Accounts receivable, less allowance for doubtful accounts of
$44,678 and $35,587 for 2008 and 2007, respectively 263,552 231,993
Prepaids and other � 78,467 � 67,382 Total current assets 360,799
339,345 Property and equipment, net of accumulated depreciation
760,065 693,677 Cost in excess of net assets acquired 1,198,598
1,073,583 Other assets � 65,755 � 72,039 Total assets $ 2,385,217 $
2,178,644 � LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 29,656 $ 31,246 Salaries and
benefits payable 86,688 82,458 Other accrued liabilities 60,640
61,794 Current portion of long-term debt � 6,052 � 6,016 Total
current liabilities 183,036 181,514 Long-term debt, less current
portion 1,294,909 1,166,008 Deferred tax liability 56,418 49,131
Other liabilities � 22,667 � 23,090 Total liabilities 1,557,030
1,419,743 Minority interest 4,606 4,159 Total stockholders' equity
� 823,581 � 754,742 Total liabilities and stockholders' equity $
2,385,217 $ 2,178,644 � � PSYCHIATRIC SOLUTIONS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) � �
Six Months Ended June 30, 2008 2007 � Operating activities: Net
income $ 54,555 $ 32,732 Adjustments to reconcile net income to net
cash provided by continuing operating activities: Depreciation and
amortization 19,478 13,484 Amortization of loan costs and bond
premium 1,105 1,038 Share-based compensation 10,077 7,583 Loss on
refinancing long-term debt - 8,179 Change in income tax assets and
liabilities 432 (716 ) Loss from discontinued operations, net of
taxes 156 464 Changes in operating assets and liabilities, net of
effect of acquisitions: Accounts receivable (30,529 ) (16,365 )
Prepaids and other current assets 379 (1,253 ) Accounts payable
(1,453 ) (5,437 ) Salaries and benefits payable 2,604 (4,693 )
Accrued liabilities and other liabilities � (3,133 ) � 6,311 � Net
cash provided by continuing operating activities 53,671 41,327 Net
cash (used in) provided by discontinued operating activities �
(1,468 ) � 824 � Net cash provided by operating activities 52,203
42,151 � Investing activities: Cash paid for acquisitions, net of
cash acquired (157,953 ) (452,361 ) Capital purchases of property
and equipment (48,769 ) (28,929 ) Other assets � (481 ) � (744 )
Net cash used in continuing investing activities (207,203 )
(482,034 ) Net cash provided by discontinued investing activities �
1,276 � � - � Net cash used in investing activities (205,927 )
(482,034 ) � Financing activities: Net increase in revolving credit
facility 130,000 9,000 Borrowings on long-term debt - 481,875
Principal payments on long-term debt (2,487 ) (39,918 ) Payment of
loan and issuance costs (30 ) (6,173 ) Refinancing long-term debt -
(7,127 ) Excess tax benefits from share-based payment arrangements
815 3,566 Proceeds from exercises of common stock options � 4,236 �
� 7,850 � Net cash provided by financing activities � 132,534 � �
449,073 � Net (decrease) increase in cash (21,190 ) 9,190 Cash and
cash equivalents at beginning of the period � 39,970 � � 18,520 �
Cash and cash equivalents at end of the period $ 18,780 � $ 27,710
� � Effect of Acquisitions: Assets acquired, net of cash acquired $
164,558 $ 513,674 Liabilities assumed (6,605 ) (43,609 ) Common
stock issued - (9,000 ) Long-term debt assumed � - � � (8,704 )
Cash paid for acquisitions, net of cash acquired $ 157,953 � $
452,361 � � PSYCHIATRIC SOLUTIONS, INC. RECONCILIATION OF NET
INCOME TO ADJUSTED INCOME FROM CONTINUING OPERATIONS (Unaudited, in
thousands, except for per share amounts) � � � � � Three Months
Ended June 30, Six Months Ended June 30, 2008 2007 2008 2007 � Net
income $ 29,059 $ 14,607 $ 54,555 $ 32,732 Plus reconciling items:
Discontinued operations, net of taxes 271 583 156 464 Provision for
income taxes 17,844 8,961 33,533 20,198 Income from continuing
operations before income taxes 47,174 24,151 88,244 53,394 Loss on
refinancing long-term debt - 8,179 - 8,179 Adjusted income from
continuing operations before income taxes 47,174 32,330 88,244
61,573 Adjusted provision for income taxes 17,844 11,996 33,533
23,292 Adjusted income from continuing operations(a) $ 29,330 $
20,334 $ 54,711 $ 38,281 � Income from continuing operations per
diluted share $ 0.52 $ 0.27 $ 0.98 $ 0.60 Adjusted income from
continuing operations per diluted share $ 0.52 $ 0.37 $ 0.98 $ 0.69
� Diluted shares used in computing per share amounts 56,233 55,372
56,016 55,305 � (a) PSI believes its calculation of adjusted income
from continuing operations 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 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 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) � � � � �
Three Months Ended June 30, Six Months Ended June 30, 2008 2007
2008 2007 � Income from continuing operations $ 29,330 $ 15,190 $
54,711 $ 33,196 Provision for income taxes 17,844 8,961 33,533
20,198 Interest expense 19,765 17,029 40,103 31,414 Depreciation
and amortization � 10,069 � 7,245 � 19,478 � 13,484 EBITDA(a)
77,008 48,425 147,825 98,292 Other expenses: Share-based
compensation 4,517 3,910 10,077 7,583 Loss on refinancing long-term
debt � - � 8,179 � - � 8,179 Adjusted EBITDA(a) $ 81,525 $ 60,514 $
157,902 $ 114,054 � (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, 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, � % Change 2008 2007 Same-facility results: Revenue
$ 349,169 $ 323,812 7.8% Admissions 35,568 34,121 4.2% Patient days
601,436 585,344 2.7% Average length of stay(a) 16.9 17.2 -1.7% Net
revenue per patient day(b) $ 581 $ 553 5.1% EBITDA margin 21.8%
20.1% 170 bps � Total facility results: Revenue $ 405,687 $ 325,651
24.6% Admissions 42,633 34,394 24.0% Patient days 707,076 588,880
20.1% Average length of stay(a) 16.6 17.1 -2.9% Net revenue per
patient day(b) $ 574 $ 553 3.8% EBITDA margin 21.1% 19.8% 130 bps �
Six Months Ended June 30, %Change 2008 2007 Same-facility results:
Revenue $ 672,835 $ 624,230 7.8% Admissions 68,490 66,189 3.5%
Patient days 1,158,367 1,128,354 2.7% Average length of stay(a)
16.9 17.0 -0.6% Net revenue per patient day(b) $ 581 $ 553 5.1%
EBITDA margin 21.9% 20.2% 170 bps � Total facility results: Revenue
$ 791,083 $ 629,643 25.6% Admissions 83,234 66,839 24.5% Patient
days 1,381,918 1,138,975 21.3% Average length of stay(a) 16.6 17.0
-2.4% Net revenue per patient day(b) $ 572 $ 553 3.4% EBITDA margin
21.0% 19.9% 110 bps � (a) Average length of stay is defined as
patient days divided by admissions. (b) Net revenue per patient day
is defined as owned facility revenue divided by patient days.
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