Psychiatric Solutions Reports 38% Growth in Second Quarter Income From Continuing Operations Per Diluted Share28 July 2006
Psychiatric Solutions, Inc. ("PSI") (Nasdaq: PSYS) today announced financial results for the second quarter and six months ended June 30, 2006. Revenue for the second quarter was a record $248,404,000, up 78% from $139,490,000 for the second quarter of 2005. Income from continuing operations increased 81% for the second quarter of 2006 to $15,869,000 from $8,769,000 for the comparable prior-year period. Income from continuing operations per diluted share, which includes stock compensation expense of $0.02, rose 38% to $0.29 from $0.21 for the second quarter last year. Excluding stock compensation expense, adjusted income from continuing operations per diluted share increased 52% to $0.32 for the latest quarter from $0.21 for the second quarter of 2005. Net income per diluted share was $0.28 for the second quarter, up 33% from the prior year. Diluted shares used in computing per share amounts increased 27% for the second quarter of 2006 from the second quarter of 2005. All results in this release have been adjusted to reflect the 2-for-1 stock split effected in January 2006. Please see pages 7 and 8 for a reconciliation of GAAP and non-GAAP financial results.
"For the second quarter of 2006, PSI again produced strong profitable growth," said Joey Jacobs, Chairman, President and Chief Executive Officer of PSI. "Consistent with our long-term record of success, this growth was primarily driven by the increase in the number of our inpatient psychiatric beds in operation, which expanded by approximately 2,500 to over 6,500 beds at the end of the second quarter of 2006 from over 4,000 at the end of the second quarter last year.
"For 2006, we have already met our minimum annual target of acquiring at least six inpatient facilities with the completion of two acquisitions in early July. The six acquired facilities brought a total of approximately 450 beds to PSI. We are pleased to note that we financed the purchase of these facilities with internally generated cash, as cash flow from operations tripled to $41.5 million for the second quarter, while increasing over 90% for the first half of 2006 to $52 million, each compared to the prior-year period. We also continue to work toward the completion of a previously announced transaction in which we would acquire nine facilities with more than 1,000 beds. In addition to acquisitions, we continue to expand capacity at existing facilities through the addition of new beds.
"PSI's revenue growth for the second quarter was also driven by an 8% increase in same-facility revenue, reflecting the second key element of our growth strategy. Contributing to the increase in same-facility revenue, revenue per patient day grew 5.9% for the second quarter, while patient days rose 2.1%. For the first half of 2006, same-facility revenue was up 9.6% on a 5.9% increase in revenue per patient day and a 3.5% increase in patient days. Our same-facility revenue growth for the second quarter drove a 13% increase in same-facility EBITDA to $26,276,000, or 19.2% of same-facility revenue, for the second quarter of 2006 from $23,242,000, or 18.3% of same-facility revenue, for the second quarter of 2005. PSI's total adjusted EBITDA more than doubled for the second quarter of 2006 to a record $41,868,000, or 16.9% of revenue, from $20,730,000, or 14.9% of revenue, for the comparable prior-year period." Please see pages 7 and 8 for a reconciliation of GAAP and non-GAAP financial results.
Based primarily on the Company's financial results for the second quarter and first half of 2006, the completion of the two acquisitions in early July, current industry fundamentals and its outlook for 2006, PSI today increased its guidance for earnings per diluted share, which includes stock compensation expense expected to be approximately $0.15, to a range of $1.08 to $1.10, from the previous range of $1.02 to $1.05. The Company's guidance does not include the impact from any future acquisitions.
PSI will hold a conference call to discuss this release tomorrow at 9:00 a.m. Eastern time. Participants will have the opportunity to listen to the conference call over the Internet by going to http://www.psysolutions.com and clicking Investor Relations or by going to http://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 10, 2006.
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; (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 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; (6) PSI's ability to comply with applicable licensure and accreditation requirements; and (7) 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. 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 61 owned or leased freestanding psychiatric inpatient facilities with more than 6,600 beds in 27 states. 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 Six Months Ended
June 30, June 30,
--------------------------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenue $248,404 $139,490 $490,716 $273,758
Salaries, wages and employee
benefits (including share-
based compensation of $2,136
and $8,390 for the three
and six months ended June 30,
2006, respectively) 138,133 74,739 277,932 148,019
Professional fees 24,286 14,582 47,001 28,615
Supplies 14,417 8,655 28,431 16,917
Rentals and leases 3,296 2,391 6,643 4,661
Other operating expenses 23,948 15,736 47,669 30,891
Provision for doubtful accounts 4,592 2,657 9,358 5,313
Depreciation and amortization 4,867 3,044 9,612 5,924
Interest expense 9,270 3,310 18,478 6,815
Loss on refinancing long-term debt - - - 6,990
-------- -------- -------- --------
222,809 125,114 445,124 254,145
-------- -------- -------- --------
Income from continuing operations
before income taxes 25,595 14,376 45,592 19,613
Provision for income taxes 9,726 5,607 17,325 7,649
-------- -------- -------- --------
Income from continuing operations 15,869 8,769 28,267 11,964
(Loss) income from discontinued
operations, net of income tax
benefit (provision) of $(311),
$(39), $(437) and $45 for the
respective three and six month
periods in 2006 and 2005 (508) (62) (714) 71
-------- -------- -------- --------
Net income $15,361 $8,707 $27,553 $12,035
======== ======== ======== ========
Basic earnings per share:
Income from continuing
operations $0.30 $0.21 $0.54 $0.29
(Loss) income from discontinued
operations, net of taxes (0.01) - (0.02) -
-------- -------- -------- --------
Net income $0.29 $0.21 $0.52 $0.29
======== ======== ======== ========
Diluted earnings per share:
Income from continuing
operations $0.29 $0.21 $0.52 $0.28
(Loss) income from discontinued
operations, net of taxes (0.01) - (0.01) -
-------- -------- -------- --------
Net income $0.28 $0.21 $0.51 $0.28
======== ======== ======== ========
Shares used in computing per
share amounts:
Basic 52,913 41,029 52,715 40,997
Diluted 54,070 42,457 53,981 42,402
PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
June 30, December 31,
2006 2005
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $56,453 $54,699
Accounts receivable, less allowance
for doubtful accounts of
$17,919 and $15,355, respectively 147,123 132,288
Prepaids and other 48,146 53,473
---------- ----------
Total current assets 251,722 240,460
Property and equipment, net of
accumulated depreciation 409,284 378,163
Cost in excess of net assets acquired 548,373 526,536
Other assets 27,494 29,872
---------- ----------
Total assets $1,236,873 $1,175,031
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $18,108 $18,726
Salaries and benefits payable 46,131 46,872
Other accrued liabilities 37,026 34,363
Current portion of long-term debt 364 325
---------- ----------
Total current liabilities 101,629 100,286
Long-term debt, less current portion 485,808 482,064
Deferred tax liability 42,537 32,151
Other liabilities 23,403 20,818
---------- ----------
Total liabilities 653,377 635,319
Stockholders' equity:
Common stock, $0.01 par value,
125,000 shares authorized;
53,054 and 52,430 issued and
outstanding, respectively 531 524
Additional paid-in capital 511,992 495,768
Accumulated earnings 70,973 43,420
---------- ----------
Total stockholders' equity 583,496 539,712
---------- ----------
Total liabilities and stockholders' equity $1,236,873 $1,175,031
========== ==========
PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended June 30,
-------------------------
2006 2005
------- -------
Operating activities:
Net income $27,553 $12,035
Adjustments to reconcile net income to
net cash provided by continuing
operating activities:
Depreciation and amortization 9,612 5,924
Share-based compensation 8,390 -
Amortization of loan costs 811 338
Loss on refinancing long-term debt - 6,990
Loss (income) from discontinued
operations, net of taxes 714 (71)
Change in income tax assets and liabilities 16,283 1,446
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable (9,267) (5,001)
Prepaids and other current assets (4,999) (2,551)
Accounts payable (1,339) 434
Salaries and benefits payable 456 3,957
Accrued liabilities and other liabilities 2,115 3,378
------- -------
Net cash provided by continuing
operating activities 50,329 26,879
Net cash provided by discontinued
operating activities 1,708 142
------- -------
Net cash provided by operating activities 52,037 27,021
Investing activities:
Cash paid for acquisitions, net of
cash acquired (44,471) (5,793)
Capital purchases of leasehold
improvements, equipment and software (13,123) (10,029)
Cash paid for investments in equity
method investees - (840)
Other assets (317) (883)
------- -------
Net cash used in investing activities (57,911) (17,545)
Financing activities:
Principal payments on long-term debt (180) (50,427)
Net increase in revolving credit facility - 20,000
Payment of loan and issuance costs (40) (487)
Refinancing of long-term debt - (5,316)
Excess tax benefits from share-based
payment arrangements 4,248 -
Proceeds from issuance of common
stock upon exercise of stock options 3,600 1,092
------- -------
Net cash provided by (used in)
financing activities 7,628 (35,138)
------- -------
Net decrease in cash 1,754 (25,662)
Cash and cash equivalents at
beginning of the period 54,699 33,451
------- -------
Cash and cash equivalents at end of
the period $56,453 $7,789
======= =======
Effect of Acquisitions:
Assets acquired, net of cash acquired $54,164 $-
Cash paid for prior year acquisitions - 5,793
Liabilities assumed (5,730) -
Long-term debt assumed (3,963) -
------- -------
Cash paid for acquisitions, net of
cash acquired $44,471 $5,793
======= =======
Psychiatric Solutions, Inc.
Reconciliation of Net Income to Adjusted Income
From Continuing Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Net income $ 15,361 $ 8,707 $ 27,553 $ 12,035
Plus reconciling items:
Discontinued operations,
net of taxes 508 62 714 (71)
Provision for income
taxes 9,726 5,607 17,325 7,649
-------- -------- -------- --------
Income from continuing
operations before
income taxes 25,595 14,376 45,592 19,613
Stock compensation 2,136 - 8,390 -
Loss on refinancing
long-term debt - - - 6,990
-------- -------- -------- --------
Adjusted income from
continuing operations
before income taxes 27,731 14,376 53,982 26,603
Adjusted provision for
income taxes 10,538 5,607 20,513 10,375
-------- -------- -------- --------
Adjusted income from
continuing operations $ 17,193 $ 8,769 $ 33,469 $ 16,228
======== ======== ======== ========
Income from continuing
operations per diluted
share $ 0.29 $ 0.21 $ 0.52 $ 0.28
======== ======== ======== ========
Adjusted income from
continuing operations
per diluted share(a) $ 0.32 $ 0.21 $ 0.62 $ 0.38
======== ======== ======== ========
Diluted shares used in
computing per share
amounts 54,070 42,457 53,981 42,402
(a) PSI believes its calculation of adjusted income from continuing
operations 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. Adjusted income from continuing operations
per diluted share should not be considered as a measure of financial
performance under U.S. generally accepted accounting principles and
the items excluded from it are significant components in understanding
and assessing financial performance. Because adjusted income from
continuing operations per diluted share is not a measurement
determined in accordance with U.S. generally accepted accounting
principles 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 Six Months Ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Income from continuing
operations $ 15,869 $ 8,769 $ 28,267 $11,964
Provision for income
taxes 9,726 5,607 17,325 7,649
Interest expense 9,270 3,310 18,478 6,815
Depreciation and
amortization 4,867 3,044 9,612 5,924
-------- -------- -------- --------
EBITDA(a) 39,732 20,730 73,682 32,352
Other expenses:
Stock compensation 2,136 - 8,390 -
Loss on refinancing
long-term debt - - - 6,990
-------- -------- -------- --------
Adjusted EBITDA(a) $ 41,868 $ 20,730 $ 82,072 $ 39,342
======== ======== ======== ========
(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, 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 U.S. generally accepted accounting principles. Because
EBITDA and adjusted EBITDA are not measures of financial performance
under U.S. generally accepted accounting principles 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, %
----------------------
2006 2005 Chg.
---------- ---------- ----
Same-facility results:
Revenue $ 136,775 $ 126,617 8.0%
Admissions 14,837 14,694 1.0%
Patient days 292,173 286,241 2.1%
Average length of stay(a) 19.7 19.5 1.0%
Revenue per patient day(b) $ 468 $ 442 5.9%
EBITDA margin 19.2% 18.3% 90 bps
Total facility results:
Revenue $ 235,654 $ 126,617 86.1%
Admissions 26,361 14,694 79.4%
Patient days 456,202 286,241 59.4%
Average length of stay(a) 17.3 19.5 (11.3)%
Revenue per patient day(b) $ 517 $ 442 17.0%
EBITDA margin 19.6% 18.3% 130 bps
Six Months Ended
June 30, %
----------------------
2006 2005 Chg.
---------- ---------- ----
Same-facility results:
Revenue $ 271,713 $ 247,950 9.6%
Admissions 30,077 29,513 1.9%
Patient days 580,720 561,324 3.5%
Average length of stay(a) 19.3 19.0 1.6%
Revenue per patient day(b) $ 468 $ 442 5.9%
EBITDA margin 19.6% 17.7% 190 bps
Total facility results:
Revenue $ 465,410 $ 247,950 87.7%
Admissions 53,298 29,513 80.6%
Patient days 902,256 561,324 60.7%
Average length of stay(a) 16.9 19.0 (11.1)%
Revenue per patient day(b) $ 516 $ 442 16.7%
EBITDA margin 19.6% 17.7% 190 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.
Source: prnewswire
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