##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2009
or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from

to
 Commission file number 0-20488
 Psychiatric Solutions, Inc.
  Delaware
    
    23-2491707(State or Other Jurisdiction of Incorporation or
    
    (I.R.S. Employer Identification No.)Organization)
 
 
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
  
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008 (Unaudited)
    
    
    1Condensed Consolidated Statements of Income for the three month periods ended March 31, 2009
and 2008 (Unaudited)
    
    
    2Condensed Consolidated Statement of Stockholders Equity for the three month period ended
March 31, 2009 (Unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31,
2009 and 2008 (Unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 6. Exhibits
    
    
    23EX-31.1EX-31.2EX-32.1EX-10.1EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 PSYCHIATRIC SOLUTIONS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited, in thousands)
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,025
    
    
    $
    51,271Accounts receivable, less allowance for doubtful accounts
of $50,392 and $48,882 for
2009 and 2008, respectively
    
    
    257,051
    
    
    
    248,236Prepaids and other
    
    
    84,042
    
    
    
    101,363Total current assets
    
    
    361,118
    
    
    
    400,870Property and equipment, net of accumulated depreciation
    
    
    857,705
    
    
    
    836,223Cost in excess of net assets acquired
    
    
    1,201,595
    
    
    
    1,201,492Other assets
    
    
    72,201
    
    
    
    66,175Total assets
    
    $
    2,492,619
    
    
    $
    2,504,760LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    39,968
    
    
    $
    35,401Salaries and benefits payable
    
    
    81,973
    
    
    
    85,813Other accrued liabilities
    
    
    66,608
    
    
    
    76,542Current portion of long-term debt
    
    
    5,043
    
    
    
    34,414Total current liabilities
    
    
    193,592
    
    
    
    232,170Long-term debt, less current portion
    
    
    1,268,598
    
    
    
    1,280,006Deferred tax liability
    
    
    72,617
    
    
    
    69,471Other liabilities
    
    
    30,656
    
    
    
    28,271Total liabilities
    
    
    1,565,463
    
    
    
    1,609,918Redeemable noncontrolling interest
    
    
    5,096
    
    
    
    4,957Stockholders equity:Common stock, $0.01 par value, 125,000 shares authorized;
56,234 and 55,934 issued
and outstanding for 2009
and 2008, respectively
    
    
    562
    
    
    
    559Additional paid-in capital
    
    
    612,316
    
    
    
    608,341Accumulated other comprehensive loss
    
    
    (2,880
    )
    
    
    (3,695
    )Retained earnings
    
    
    312,062
    
    
    
    284,680Total stockholders equity
    
    
    922,060
    
    
    
    889,885Total liabilities and stockholders equity
    
    $
    2,492,619
    
    
    $
    2,504,760
  1




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##### Table of Contents



PSYCHIATRIC SOLUTIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited, in thousands except for per share amounts)
 Three Months Ended March 31,2009
    
    
    2008Revenue
    
    $
    450,380
    
    
    $
    423,829Salaries, wages and employee benefits (including share-based
compensation of $4,819 and $5,560 for 2009 and 2008, respectively)
    
    
    252,733
    
    
    
    235,448Professional fees
    
    
    43,947
    
    
    
    42,859Supplies
    
    
    23,451
    
    
    
    23,175Rentals and leases
    
    
    5,737
    
    
    
    6,008Other operating expenses
    
    
    42,592
    
    
    
    38,560Provision for doubtful accounts
    
    
    8,455
    
    
    
    7,102Depreciation and amortization
    
    
    10,999
    
    
    
    9,370Interest expense
    
    
    17,277
    
    
    
    20,338405,191
    
    
    
    382,860Income from continuing operations before income taxes
    
    
    45,189
    
    
    
    40,969Provision for income taxes
    
    
    17,254
    
    
    
    15,566Income from continuing operations
    
    
    27,935
    
    
    
    25,403(Loss) income from discontinued operations, net of income tax (benefit)
provision of $(237) and $140 for 2009 and 2008, respectively
    
    
    (414
    )
    
    
    207Net income
    
    
    27,521
    
    
    
    25,610Less: Net income attributable to noncontrolling interest
    
    
    (139
    )
    
    
    (114
    )Net income attributable to stockholders
    
    $
    27,382
    
    
    $
    25,496Basic earnings per share:Income from continuing operations attributable to stockholders
    
    $
    0.50
    
    
    $
    0.46(Loss) income from discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    Net income attributable to stockholders
    
    $
    0.49
    
    
    $
    0.46Diluted earnings per share:Income from continuing operations attributable to stockholders
    
    $
    0.50
    
    
    $
    0.45(Loss) income from discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    0.01Net income attributable to stockholders
    
    $
    0.49
    
    
    $
    0.46Shares used in computing per share amounts:Basic
    
    
    55,495
    
    
    
    55,143Diluted
    
    
    55,968
    
    
    
    55,799Amounts attributable to stockholders:Income from continuing operations, net of tax
    
    $
    27,796
    
    
    $
    25,289Discontinued operations, net of tax
    
    
    (414
    )
    
    
    207Net income
    
    $
    27,382
    
    
    $
    25,496
  2




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PSYCHIATRIC SOLUTIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 (Unaudited, in thousands)
 AccumulatedAdditional
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Earnings
    
    
    TotalBalance at December 31, 2008
    
    
    55,934
    
    
    $
    559
    
    
    $
    608,341
    
    
    $
    (3,695
    )
    
    $
    284,680
    
    
    $
    889,885Comprehensive income:Net income attributable to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,382
    
    
    
    27,382Change in fair value of interest rate
swap, net of tax benefit of $546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    815
    
    
    
    
    
    
    
    815Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    28,197Share-based compensation
    
    
    
    
    
    
    
    
    
    
    4,819
    
    
    
    
    
    
    
    
    
    
    
    4,819Repurchase of common stock upon restricted
stock vesting
    
    
    (35
    )
    
    
    
    
    
    
    (953
    )
    
    
    
    
    
    
    
    
    
    
    (953
    )Exercise of stock options and
grants of restricted stock, net
of issuance costs
    
    
    335
    
    
    
    3
    
    
    
    337
    
    
    
    
    
    
    
    
    
    
    
    340Income tax effect of stock option
exercises
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    
    
    
    
    
    
    
    
    (228
    )Balance at March 31, 2009
    
    
    56,234
    
    
    $
    562
    
    
    $
    612,316
    
    
    $
    (2,880
    )
    
    $
    312,062
    
    
    $
    922,060
  3




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PSYCHIATRIC SOLUTIONS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited, in thousands)
 Three Months Ended March 31,2009
    
    
    2008Operating activities:Net income
    
    $
    27,521
    
    
    $
    25,610Adjustments to reconcile net income to net cash provided by
continuing operating activities:Depreciation and amortization
    
    
    10,999
    
    
    
    9,370Amortization of loan costs and bond premium
    
    
    715
    
    
    
    553Share-based compensation
    
    
    4,819
    
    
    
    5,560Change in income tax assets and liabilities
    
    
    15,908
    
    
    
    10,003Loss (income) from discontinued operations, net of taxes
    
    
    414
    
    
    
    (207
    )Changes in operating assets and liabilities,
net of effect of acquisitions:Accounts receivable
    
    
    (8,821
    )
    
    
    (18,569
    )Prepaids and other current assets
    
    
    1,440
    
    
    
    (32
    )Accounts payable
    
    
    (2,816
    )
    
    
    (524
    )Salaries and benefits payable
    
    
    (3,840
    )
    
    
    (4,386
    )Accrued liabilities and other
liabilities
    
    
    (6,061
    )
    
    
    (15,116
    )Net cash provided by continuing operating activities
    
    
    40,278
    
    
    
    12,262Net cash used in discontinued operating activities
    
    
    (98
    )
    
    
    (694
    )Net cash provided by operating activities
    
    
    40,180
    
    
    
    11,568Investing activities:Cash paid for acquisitions, net of cash acquired
    
    
    
    
    
    
    (141,248
    )Capital purchases of property and equipment
    
    
    (24,682
    )
    
    
    (22,932
    )Other assets
    
    
    (165
    )
    
    
    (1,205
    )Net cash used in investing activities
    
    
    (24,847
    )
    
    
    (165,385
    )Financing activities:Net (decrease) increase in revolving credit facility
    
    
    (39,333
    )
    
    
    130,000Principal payments on long-term debt
    
    
    (1,272
    )
    
    
    (2,057
    )Payment of loan and issuance costs
    
    
    (5,363
    )
    
    
    (12
    )Repurchase of common stock upon restricted stock vesting
    
    
    (953
    )
    
    
    (209
    )Proceeds from exercises of common stock options
    
    
    342
    
    
    
    879Net cash (used in) provided by financing activities
    
    
    (46,579
    )
    
    
    128,601Net decrease in cash
    
    
    (31,246
    )
    
    
    (25,216
    )Cash and cash equivalents at beginning of the period
    
    
    51,271
    
    
    
    39,970Cash and cash equivalents at end of the period
    
    $
    20,025
    
    
    $
    14,754Effect of Acquisitions:Assets acquired, net of cash acquired
    
    $
    
    
    
    $
    144,289Liabilities assumed
    
    
    
    
    
    
    (3,041
    )Cash paid for acquisitions, net of cash acquired
    
    $
    
    
    
    $
    141,248
  4




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PSYCHIATRIC SOLUTIONS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 MARCH 31, 2009
 1. Recent Developments
  2. Basis of Presentation
  3. Earnings Per Share
 Earnings per Share
  Three Months EndedMarch 31,2009
    
    
    2008Numerator:Basic and diluted earnings per share:Income from continuing operations attributable
to stockholders
    
    $
    27,796
    
    
    $
    25,289(Loss) income from discontinued operations,
net of taxes
    
    
    (414
    )
    
    
    207Net income attributable to stockholders
    
    $
    27,382
    
    
    $
    25,496Denominator:Weighted average shares outstanding for basic earnings per share
    
    
    55,495
    
    
    
    55,143Effects of dilutive stock options and restricted stock outstanding
    
    
    473
    
    
    
    656Shares used in computing diluted earnings per common share
    
    
    55,968
    
    
    
    55,799Basic earnings per share:Income from continuing operations attributable to stockholders
    
    $
    0.50
    
    
    $
    0.46(Loss) income from discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    Net income attributable to stockholders
    
    $
    0.49
    
    
    $
    0.46Diluted earnings per share:Income from continuing operations attributable to stockholders
    
    $
    0.50
    
    
    $
    0.45(Loss) income from discontinued operations, net of taxes
    
    
    (0.01
    )
    
    
    0.01Net income attributable to stockholders
    
    $
    0.49
    
    
    $
    0.46
 5




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PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 4. Share-Based Compensation
      5. Acquisitions
    6. Long-term debt
  March 31,
    
    
    December 31,2009
    
    
    2008Senior credit facility:Revolving line of credit facility, expiring on December 31, 2011
and bearing interest of 5.9% and 3.4% at March 31, 2009
and December 31, 2008, respectively
    
    $
    190,000
    
    
    $
    229,333Senior secured term loan facility, expiring on July 1, 2012
and bearing interest of 2.3% and 3.1% at March 31, 2009
and December 31, 2008, respectively
    
    
    567,688
    
    
    
    568,62573/4% Senior Subordinated Notes
    
    
    475,666
    
    
    
    475,841Mortgage loans on facilities, maturing in 2036, 2037 and 2038
bearing fixed interest rates of 5.7% to 7.6%
    
    
    33,170
    
    
    
    33,273Other
    
    
    7,117
    
    
    
    7,3481,273,641
    
    
    
    1,314,420Less current portion
    
    
    5,043
    
    
    
    34,414Long-term debt
    
    $
    1,268,598
    
    
    $
    1,280,006
 6




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PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 Senior Credit Facility
     7 3 / 4 % Notes
 3 4 3 4 3 4 3 4 3 4 3 4 3 4
 Mortgage Loans
  7




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PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 Interest Rate Swap Agreements
  7. Income Taxes
  8. Discontinued Operations
 Accounting for the Impairment or Disposal of Long-Lived Assets
  Three Months EndedMarch 31,2009
    
    
    2008Revenue
    
    $
    1,982
    
    
    $
    5,841Operating expenses
    
    
    2,633
    
    
    
    5,494(Loss) income from discontinued operations before income taxes
    
    
    (651
    )
    
    
    347(Benefit) provision for income taxes
    
    
    (237
    )
    
    
    140(Loss) income from discontinued operations, net of income taxes
    
    $
    (414
    )
    
    $
    207
 9. Disclosures About Reportable Segments
 Disclosures About Segments of an Enterprise and
Related Information
  8




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PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 Three Months Ended March 31, 2009
 Owned andLeasedFacilities
    
    
    Other
    
    
    Corporate
    
    
    ConsolidatedRevenue
    
    $
    407,027
    
    
    $
    43,353
    
    
    $
    
    
    
    $
    450,380Adjusted EBITDA
    
    $
    82,462
    
    
    $
    8,252
    
    
    $
    (12,430
    )
    
    $
    78,284Interest expense
    
    
    7,236
    
    
    
    79
    
    
    
    9,962
    
    
    
    17,277Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    17,254
    
    
    
    17,254Depreciation and amortization
    
    
    9,185
    
    
    
    1,424
    
    
    
    390
    
    
    
    10,999Inter-segment expenses
    
    
    17,347
    
    
    
    2,068
    
    
    
    (19,415
    )
    
    
    Other expenses:Share-based compensation
    
    
    
    
    
    
    
    
    
    
    4,819
    
    
    
    4,819Income (loss) from continuing operations
    
    
    48,694
    
    
    
    4,681
    
    
    
    (25,440
    )
    
    
    27,935Less: Income
attributable to noncontrolling interest
    
    
    (139
    )
    
    
    
    
    
    
    
    
    
    
    (139
    )Income (loss) from continuing operations
attributable to
stockholders
    
    $
    48,555
    
    
    $
    4,681
    
    
    $
    (25,440
    )
    
    $
    27,796Total assets
    
    $
    2,250,108
    
    
    $
    147,567
    
    
    $
    94,944
    
    
    $
    2,492,619
 Three Months Ended March 31, 2008
 Owned andLeasedFacilities
    
    
    Other
    
    
    Corporate
    
    
    ConsolidatedRevenue
    
    $
    382,446
    
    
    $
    41,383
    
    
    $
    
    
    
    $
    423,829Adjusted EBITDA
    
    $
    80,195
    
    
    $
    7,960
    
    
    $
    (11,918
    )
    
    $
    76,237Interest expense
    
    
    7,076
    
    
    
    214
    
    
    
    13,048
    
    
    
    20,338Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    15,566
    
    
    
    15,566Depreciation and amortization
    
    
    7,825
    
    
    
    1,184
    
    
    
    361
    
    
    
    9,370Inter-segment expenses
    
    
    15,704
    
    
    
    1,952
    
    
    
    (17,656
    )
    
    
    Other expenses:Share-based compensation
    
    
    
    
    
    
    
    
    
    
    5,560
    
    
    
    5,560Income (loss) from continuing operations
    
    
    49,590
    
    
    
    4,610
    
    
    
    (28,797
    )
    
    
    25,403Less: Income
attributable to noncontrolling interest
    
    
    (114
    )
    
    
    
    
    
    
    
    
    
    
    (114
    )Income (loss) from continuing operations attributable to
stockholders
    
    $
    49,476
    
    
    $
    4,610
    
    
    $
    (28,797
    )
    
    $
    25,289Total assets
    
    $
    2,114,577
    
    
    $
    128,772
    
    
    $
    84,513
    
    
    $
    2,327,862
 10. Financial Information for the Company and Its Subsidiaries
  9




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PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 Condensed Consolidating Balance Sheet
As of March 31, 2009
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    12,500
    
    
    $
    7,525
    
    
    $
    
    
    
    $
    20,025Accounts receivable, net
    
    
    
    
    
    
    248,674
    
    
    
    8,446
    
    
    
    (69
    )
    
    
    257,051Prepaids and other
    
    
    
    
    
    
    68,746
    
    
    
    15,731
    
    
    
    (435
    )
    
    
    84,042Total current assets
    
    
    
    
    
    
    329,920
    
    
    
    31,702
    
    
    
    (504
    )
    
    
    361,118Property and equipment, net of accumulated depreciation
    
    
    
    
    
    
    810,690
    
    
    
    56,461
    
    
    
    (9,446
    )
    
    
    857,705Cost in excess of net assets acquired
    
    
    
    
    
    
    1,201,595
    
    
    
    
    
    
    
    
    
    
    
    1,201,595Investment in subsidiaries
    
    
    1,593,045
    
    
    
    (472,002
    )
    
    
    (23,205
    )
    
    
    (1,097,838
    )
    
    
    Other assets
    
    
    17,118
    
    
    
    4,279
    
    
    
    30,675
    
    
    
    20,129
    
    
    
    72,201Total assets
    
    $
    1,610,163
    
    
    $
    1,874,482
    
    
    $
    95,633
    
    
    $
    (1,087,659
    )
    
    $
    2,492,619Current liabilities:Accounts payable
    
    $
    
    
    
    $
    39,085
    
    
    $
    952
    
    
    $
    (69
    )
    
    $
    39,968Salaries and benefits payable
    
    
    
    
    
    
    80,967
    
    
    
    1,498
    
    
    
    (492
    )
    
    
    81,973Other accrued liabilities
    
    
    18,909
    
    
    
    47,402
    
    
    
    732
    
    
    
    (435
    )
    
    
    66,608Current portion of long-term debt
    
    
    4,614
    
    
    
    
    
    
    
    429
    
    
    
    
    
    
    
    5,043Total current liabilities
    
    
    23,523
    
    
    
    167,454
    
    
    
    3,611
    
    
    
    (996
    )
    
    
    193,592Long-term debt, less current portion
    
    
    1,235,857
    
    
    
    
    
    
    
    32,741
    
    
    
    
    
    
    
    1,268,598Deferred tax liability
    
    
    
    
    
    
    72,617
    
    
    
    
    
    
    
    
    
    
    
    72,617Other liabilities
    
    
    5,169
    
    
    
    (46,357
    )
    
    
    33,784
    
    
    
    38,060
    
    
    
    30,656Total liabilities
    
    
    1,264,549
    
    
    
    193,714
    
    
    
    70,136
    
    
    
    37,064
    
    
    
    1,565,463Redeemable noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,096
    
    
    
    5,096Total stockholders equity
    
    
    345,614
    
    
    
    1,680,768
    
    
    
    25,497
    
    
    
    (1,129,819
    )
    
    
    922,060Total liabilities and stockholders equity
    
    $
    1,610,163
    
    
    $
    1,874,482
    
    
    $
    95,633
    
    
    $
    (1,087,659
    )
    
    $
    2,492,619
 Condensed Consolidating Balance Sheet
As of December 31, 2008
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    39,881
    
    
    $
    11,390
    
    
    $
    
    
    
    $
    51,271Accounts receivable, net
    
    
    
    
    
    
    240,513
    
    
    
    7,792
    
    
    
    (69
    )
    
    
    248,236Prepaids and other
    
    
    
    
    
    
    86,203
    
    
    
    15,595
    
    
    
    (435
    )
    
    
    101,363Total current assets
    
    
    
    
    
    
    366,597
    
    
    
    34,777
    
    
    
    (504
    )
    
    
    400,870Property and equipment, net of accumulated depreciation
    
    
    
    
    
    
    788,100
    
    
    
    57,647
    
    
    
    (9,524
    )
    
    
    836,223Cost in excess of net assets acquired
    
    
    
    
    
    
    1,201,492
    
    
    
    
    
    
    
    
    
    
    
    1,201,492Investment in subsidiaries
    
    
    1,665,813
    
    
    
    (545,345
    )
    
    
    (23,526
    )
    
    
    (1,096,942
    )
    
    
    Other assets
    
    
    12,633
    
    
    
    2,506
    
    
    
    27,971
    
    
    
    23,065
    
    
    
    66,175Total assets
    
    $
    1,678,446
    
    
    $
    1,813,350
    
    
    $
    96,869
    
    
    $
    (1,083,905
    )
    
    $
    2,504,760Current liabilities:Accounts payable
    
    $
    
    
    
    $
    34,605
    
    
    $
    865
    
    
    $
    (69
    )
    
    $
    35,401Salaries and benefits payable
    
    
    
    
    
    
    87,617
    
    
    
    1,727
    
    
    
    (3,531
    )
    
    
    85,813Other accrued liabilities
    
    
    28,786
    
    
    
    43,958
    
    
    
    3,798
    
    
    
    
    
    
    
    76,542Current portion of long-term debt
    
    
    33,991
    
    
    
    
    
    
    
    423
    
    
    
    
    
    
    
    34,414Total current liabilities
    
    
    62,777
    
    
    
    166,180
    
    
    
    6,813
    
    
    
    (3,600
    )
    
    
    232,170Long-term debt, less current portion
    
    
    1,247,156
    
    
    
    
    
    
    
    32,850
    
    
    
    
    
    
    
    1,280,006Deferred tax liability
    
    
    
    
    
    
    69,471
    
    
    
    
    
    
    
    
    
    
    
    69,471Other liabilities
    
    
    12,433
    
    
    
    (61,852
    )
    
    
    31,688
    
    
    
    46,002
    
    
    
    28,271Total liabilities
    
    
    1,322,366
    
    
    
    173,799
    
    
    
    71,351
    
    
    
    42,402
    
    
    
    1,609,918Redeemable noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,957
    
    
    
    4,957Total stockholders equity
    
    
    356,080
    
    
    
    1,639,551
    
    
    
    25,518
    
    
    
    (1,131,264
    )
    
    
    889,885Total liabilities and stockholders equity
    
    $
    1,678,446
    
    
    $
    1,813,350
    
    
    $
    96,869
    
    
    $
    (1,083,905
    )
    
    $
    2,504,760
 10




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##### Table of Contents



PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2009
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsRevenue
    
    $
    
    
    
    $
    438,136
    
    
    $
    13,538
    
    
    $
    (1,294
    )
    
    $
    450,380Salaries, wages and employee benefits
    
    
    
    
    
    
    245,904
    
    
    
    6,829
    
    
    
    
    
    
    
    252,733Professional fees
    
    
    
    
    
    
    42,264
    
    
    
    2,963
    
    
    
    (1,280
    )
    
    
    43,947Supplies
    
    
    
    
    
    
    22,855
    
    
    
    596
    
    
    
    
    
    
    
    23,451Rentals and leases
    
    
    
    
    
    
    6,704
    
    
    
    106
    
    
    
    (1,073
    )
    
    
    5,737Other operating expenses
    
    
    
    
    
    
    41,358
    
    
    
    1,682
    
    
    
    (448
    )
    
    
    42,592Provision for doubtful accounts
    
    
    
    
    
    
    8,243
    
    
    
    212
    
    
    
    
    
    
    
    8,455Depreciation and amortization
    
    
    
    
    
    
    10,530
    
    
    
    546
    
    
    
    (77
    )
    
    
    10,999Interest expense
    
    
    16,866
    
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    17,27716,866
    
    
    
    377,858
    
    
    
    13,345
    
    
    
    (2,878
    )
    
    
    405,191(Loss) income from continuing operations before income taxes
    
    
    (16,866
    )
    
    
    60,278
    
    
    
    193
    
    
    
    1,584
    
    
    
    45,189(Benefit from) provision for income taxes
    
    
    (6,426
    )
    
    
    23,466
    
    
    
    214
    
    
    
    
    
    
    
    17,254(Loss) income from continuing operations
    
    
    (10,440
    )
    
    
    36,812
    
    
    
    (21
    )
    
    
    1,584
    
    
    
    27,935Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    (414
    )
    
    
    
    
    
    
    
    
    
    
    (414
    )Net (loss) income
    
    
    (10,440
    )
    
    
    36,398
    
    
    
    (21
    )
    
    
    1,584
    
    
    
    27,521Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (139
    )
    
    
    (139
    )Net (loss) income attributable to stockholders
    
    $
    (10,440
    )
    
    $
    36,398
    
    
    $
    (21
    )
    
    $
    1,445
    
    
    $
    27,382
 Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2008
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsRevenue
    
    $
    
    
    
    $
    412,664
    
    
    $
    13,596
    
    
    $
    (2,431
    )
    
    $
    423,829Salaries, wages and employee benefits
    
    
    
    
    
    
    228,248
    
    
    
    7,200
    
    
    
    
    
    
    
    235,448Professional fees
    
    
    
    
    
    
    41,009
    
    
    
    1,850
    
    
    
    
    
    
    
    42,859Supplies
    
    
    
    
    
    
    22,605
    
    
    
    570
    
    
    
    
    
    
    
    23,175Rentals and leases
    
    
    
    
    
    
    5,916
    
    
    
    92
    
    
    
    
    
    
    
    6,008Other operating expenses
    
    
    
    
    
    
    36,883
    
    
    
    1,707
    
    
    
    (30
    )
    
    
    38,560Provision for doubtful accounts
    
    
    
    
    
    
    6,833
    
    
    
    269
    
    
    
    
    
    
    
    7,102Depreciation and amortization
    
    
    
    
    
    
    8,816
    
    
    
    615
    
    
    
    (61
    )
    
    
    9,370Interest expense
    
    
    19,820
    
    
    
    
    
    
    
    518
    
    
    
    
    
    
    
    20,33819,820
    
    
    
    350,310
    
    
    
    12,821
    
    
    
    (91
    )
    
    
    382,860(Loss) income from continuing operations before
income taxes
    
    
    (19,820
    )
    
    
    62,354
    
    
    
    775
    
    
    
    (2,340
    )
    
    
    40,969(Benefit from) provision for income taxes
    
    
    (7,591
    )
    
    
    23,125
    
    
    
    32
    
    
    
    
    
    
    
    15,566(Loss) income from continuing operations
    
    
    (12,229
    )
    
    
    39,229
    
    
    
    743
    
    
    
    (2,340
    )
    
    
    25,403Income from discontinued operations, net of taxes
    
    
    
    
    
    
    207
    
    
    
    
    
    
    
    
    
    
    
    207Net (loss) income
    
    
    (12,229
    )
    
    
    39,436
    
    
    
    743
    
    
    
    (2,340
    )
    
    
    25,610Less: Net income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114
    )
    
    
    (114
    )Net (loss) income attributable to stockholders
    
    $
    (12,229
    )
    
    $
    39,436
    
    
    $
    743
    
    
    $
    (2,454
    )
    
    $
    25,496
 11




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##### Table of Contents



PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2009
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsOperating activities:Net (loss) income
    
    $
    (10,440
    )
    
    $
    36,398
    
    
    $
    (21
    )
    
    $
    1,584
    
    
    $
    27,521Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    10,530
    
    
    
    546
    
    
    
    (77
    )
    
    
    10,999Amortization of loan costs and bond premium
    
    
    715
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    715Share-based compensation
    
    
    
    
    
    
    4,819
    
    
    
    
    
    
    
    
    
    
    
    4,819Change in income tax assets and liabilities
    
    
    
    
    
    
    15,908
    
    
    
    
    
    
    
    
    
    
    
    15,908Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    414Changes in operating assets and liabilities, net of
effect of acquisitions:Accounts receivable
    
    
    
    
    
    
    (8,167
    )
    
    
    (654
    )
    
    
    
    
    
    
    (8,821
    )Prepaids and other current assets
    
    
    
    
    
    
    1,576
    
    
    
    (136
    )
    
    
    
    
    
    
    1,440Accounts payable
    
    
    
    
    
    
    (2,903
    )
    
    
    87
    
    
    
    
    
    
    
    (2,816
    )Salaries and benefits payable
    
    
    
    
    
    
    (3,611
    )
    
    
    (229
    )
    
    
    
    
    
    
    (3,840
    )Accrued liabilities and other liabilities
    
    
    
    
    
    
    (5,114
    )
    
    
    (947
    )
    
    
    
    
    
    
    (6,061
    )Net cash (used in) provided by continuing operating activities
    
    
    (9,725
    )
    
    
    49,850
    
    
    
    (1,354
    )
    
    
    1,507
    
    
    
    40,278Net cash used in discontinued operating activities
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    (98
    )Net cash (used in) provided by operating activities
    
    
    (9,725
    )
    
    
    49,752
    
    
    
    (1,354
    )
    
    
    1,507
    
    
    
    40,180Investing activities:Capital purchases of property and equipment
    
    
    
    
    
    
    (25,322
    )
    
    
    640
    
    
    
    
    
    
    
    (24,682
    )Other assets
    
    
    
    
    
    
    2,562
    
    
    
    (2,727
    )
    
    
    
    
    
    
    (165
    )Net cash used in investing activities
    
    
    
    
    
    
    (22,760
    )
    
    
    (2,087
    )
    
    
    
    
    
    
    (24,847
    )Financing activities:Net decrease in revolving credit facility
    
    
    (39,333
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,333
    )Principal payments on long-term debt
    
    
    (1,170
    )
    
    
    
    
    
    
    (102
    )
    
    
    
    
    
    
    (1,272
    )Payment of loan and issuance costs
    
    
    (5,363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,363
    )Repurchase of common stock upon restricted stock vesting
    
    
    (953
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (953
    )Net transfers to and from members
    
    
    56,202
    
    
    
    (54,373
    )
    
    
    (322
    )
    
    
    (1,507
    )
    
    
    Proceeds from exercises of common stock options
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    342Net cash provided by (used in) financing activities
    
    
    9,725
    
    
    
    (54,373
    )
    
    
    (424
    )
    
    
    (1,507
    )
    
    
    (46,579
    )Net decrease in cash
    
    
    
    
    
    
    (27,381
    )
    
    
    (3,865
    )
    
    
    
    
    
    
    (31,246
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    39,881
    
    
    
    11,390
    
    
    
    
    
    
    
    51,271Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    12,500
    
    
    $
    7,525
    
    
    $
    
    
    
    $
    20,025
 12




---



##### Table of Contents



PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2008
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsOperating activities:Net (loss) income
    
    $
    (12,229
    )
    
    $
    39,436
    
    
    $
    743
    
    
    $
    (2,340
    )
    
    $
    25,610Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    8,816
    
    
    
    615
    
    
    
    (61
    )
    
    
    9,370Amortization of loan costs and bond premium
    
    
    542
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    553Share-based compensation
    
    
    
    
    
    
    5,560
    
    
    
    
    
    
    
    
    
    
    
    5,560Change in income tax assets and liabilities
    
    
    
    
    
    
    10,003
    
    
    
    
    
    
    
    
    
    
    
    10,003Income from discontinued operations, net of taxes
    
    
    
    
    
    
    (207
    )
    
    
    
    
    
    
    
    
    
    
    (207
    )Changes in operating assets and liabilities, net of
effect of acquisitions:Accounts receivable
    
    
    
    
    
    
    (18,064
    )
    
    
    (505
    )
    
    
    
    
    
    
    (18,569
    )Prepaids and other current assets
    
    
    
    
    
    
    13,865
    
    
    
    (13,897
    )
    
    
    
    
    
    
    (32
    )Accounts payable
    
    
    
    
    
    
    (649
    )
    
    
    125
    
    
    
    
    
    
    
    (524
    )Salaries and benefits payable
    
    
    
    
    
    
    (4,029
    )
    
    
    (357
    )
    
    
    
    
    
    
    (4,386
    )Accrued liabilities and other liabilities
    
    
    304
    
    
    
    (16,050
    )
    
    
    630
    
    
    
    
    
    
    
    (15,116
    )Net cash (used in) provided by continuing operating activities
    
    
    (11,383
    )
    
    
    38,681
    
    
    
    (12,635
    )
    
    
    (2,401
    )
    
    
    12,262Net cash used in discontinued operating activities
    
    
    
    
    
    
    (694
    )
    
    
    
    
    
    
    
    
    
    
    (694
    )Net cash (used in) provided by operating activities
    
    
    (11,383
    )
    
    
    37,987
    
    
    
    (12,635
    )
    
    
    (2,401
    )
    
    
    11,568Investing activities:Cash paid for acquisitions, net of cash acquired
    
    
    (141,248
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141,248
    )Capital purchases of property and equipment
    
    
    
    
    
    
    (22,673
    )
    
    
    (259
    )
    
    
    
    
    
    
    (22,932
    )Other assets
    
    
    
    
    
    
    (1,138
    )
    
    
    (67
    )
    
    
    
    
    
    
    (1,205
    )Net cash used in investing activities
    
    
    (141,248
    )
    
    
    (23,811
    )
    
    
    (326
    )
    
    
    
    
    
    
    (165,385
    )Financing activities:Net increase in revolving credit facility
    
    
    130,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,000Principal payments on long-term debt
    
    
    (1,961
    )
    
    
    
    
    
    
    (96
    )
    
    
    
    
    
    
    (2,057
    )Payment of loan and issuance costs
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )Repurchase of common stock upon restricted stock vesting
    
    
    (209
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209
    )Net transfers to and from members
    
    
    23,934
    
    
    
    (25,511
    )
    
    
    (824
    )
    
    
    2,401
    
    
    
    Proceeds from exercises of common stock options
    
    
    879
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    879Net cash provided by (used in) financing activities
    
    
    152,631
    
    
    
    (25,511
    )
    
    
    (920
    )
    
    
    2,401
    
    
    
    128,601Net decrease in cash
    
    
    
    
    
    
    (11,335
    )
    
    
    (13,881
    )
    
    
    
    
    
    
    (25,216
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    19,154
    
    
    
    20,816
    
    
    
    
    
    
    
    39,970Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    7,819
    
    
    $
    6,935
    
    
    $
    
    
    
    $
    14,754Effect of Acquisitions:Assets acquired, net of cash acquired
    
    
    144,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,289Liabilities assumed
    
    
    (3,041
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,041
    )Cash paid for acquisitions, net of cash acquired
    
    $
    141,248
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    141,248
 11 Fair Value Measurements
 Fair
Value Measurements
   13




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##### Table of Contents



PSYCHIATRIC SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2009
 12. Recent Accounting Pronouncements
 Disclosures
about Derivative Instruments and Hedging Activities  An Amendment of SFAS 133
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements  an Amendment of ARB No. 51
 14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Statements
    
    
    our substantial indebtedness and adverse changes in credit markets impacting our ability to receive timely additional
financing on terms acceptable to us to fund our acquisition strategy and capital expenditure needs;
    
    risks inherent to the health care industry, including the impact of unforeseen changes in regulation and the potential adverse
impact of government investigations, liabilities and other claims asserted against us;
    
    economic downturn resulting in efforts by federal and state health care programs and managed care companies to reduce
reimbursement rates for our services;
    
    potential competition that alters or impedes our acquisition strategy by decreasing our ability to acquire additional
inpatient facilities on favorable terms;
    
    our ability to comply with applicable licensure and accreditation requirements;
    
    our ability to comply with extensive laws and government regulations related to billing, physician relationships, adequacy of
medical care and licensure;
    
    our ability to retain key employees who are instrumental to our operations;
    
    our ability to successfully integrate and improve the operations of acquired inpatient facilities;
    
    our ability to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act;
    
    our ability to maintain favorable and continuing relationships with physicians and other health care professionals who use our
inpatient facilities;
    
    our ability to ensure confidential information is not inappropriately disclosed and that we are in compliance with federal and
state health information privacy standards;
    
    our ability to comply with federal and state governmental regulation covering health care-related products and services
on-line, including the regulation of medical devices and the practice of medicine and pharmacology;
    
    our ability to obtain adequate levels of general and professional liability insurance;
    
    future trends for pricing, margins, revenue and profitability that remain difficult to predict in the industries that we serve;
    
    negative press coverage of us or our industry that may affect public opinion; and
    
    those risks and uncertainties described from time to time in our filings with the SEC.
  15




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##### Table of Contents



Overview
    
    
    operating results from the March 1, 2008 acquisition of five behavioral health care facilities from UMC;
    
    same-facility growth at our behavioral health care facilities in patient days of 0.5% and revenue per patient day of 2.8%;
    
    a reduction in interest expense as a percentage of revenue to 3.8% for the three months ended March 31, 2009 compared to
4.8% in the same period of 2008 due primarily to a decrease in interest rates on our variable rate debt; and
    
    a decrease in share-based compensation expense of $0.7 million.
  
    
    one of our behavioral health care hospitals in Chicago, Illinois experienced a decline in operating results
primarily due to a hold on admissions placed on this facility by the Illinois Department of Children and Family
Services that began in 2008 and costs of professional services related to a United States Department of Justice
investigation; and
    
    an increase in our self-insured general and professional liability insurance expense as a percentage of revenue.
 Sources of Revenue
 Patient Service Revenue
  Other Revenue
  16




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##### Table of Contents



Results of Operations
  For the Three Months Ended March 31,2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %Revenue
    
    $
    450,380
    
    
    
    100.0
    %
    
    $
    423,829
    
    
    
    100.0
    %Salaries, wages, and employee benefits (including
share-based compensation of $4,819 and $5,560
for 2009 and 2008, respectively)
    
    
    252,733
    
    
    
    56.2
    %
    
    
    235,448
    
    
    
    55.5
    %Professional fees
    
    
    43,947
    
    
    
    9.8
    %
    
    
    42,859
    
    
    
    10.1
    %Supplies
    
    
    23,451
    
    
    
    5.2
    %
    
    
    23,175
    
    
    
    5.5
    %Provision for doubtful accounts
    
    
    8,455
    
    
    
    1.9
    %
    
    
    7,102
    
    
    
    1.7
    %Other operating expenses
    
    
    48,329
    
    
    
    10.7
    %
    
    
    44,568
    
    
    
    10.5
    %Depreciation and amortization
    
    
    10,999
    
    
    
    2.4
    %
    
    
    9,370
    
    
    
    2.2
    %Interest expense, net
    
    
    17,277
    
    
    
    3.8
    %
    
    
    20,338
    
    
    
    4.8
    %Income from continuing operations before
income taxes
    
    
    45,189
    
    
    
    10.0
    %
    
    
    40,969
    
    
    
    9.7
    %Provision for income taxes
    
    
    17,254
    
    
    
    3.8
    %
    
    
    15,566
    
    
    
    3.7
    %Income from continuing operations
    
    
    27,935
    
    
    
    6.2
    %
    
    
    25,403
    
    
    
    6.0
    %Less: Income attributable to noncontrolling interest
    
    
    (139
    )
    
    
    0.0
    %
    
    
    (114
    )
    
    
    0.0
    %Income from continuing operations attributable to
stockholders
    
    $
    27,796
    
    
    
    6.2
    %
    
    $
    25,289
    
    
    
    6.0
    %
 Three Months Ended March 31, 2009 Compared To Three Months Ended March 31, 2008
  Three Months Ended March 31,
    
    %2009
    
    2008
    
    ChangeSame-facility results:Revenue (in thousands)
    
    $
    395,339
    
    
    $
    382,446
    
    
    
    3.4
    %Admissions
    
    
    41,824
    
    
    
    40,480
    
    
    
    3.3
    %Patient days
    
    
    675,404
    
    
    
    672,227
    
    
    
    0.5
    %Average length of stay (in days)
    
    
    16.1
    
    
    
    16.6
    
    
    
    -3.0
    %Revenue per patient day
    
    $
    585
    
    
    $
    569
    
    
    
    2.8
    %Total facility results:Revenue (in thousands)
    
    $
    407,027
    
    
    $
    382,446
    
    
    
    6.4
    %Admissions
    
    
    43,410
    
    
    
    40,480
    
    
    
    7.2
    %Patient days
    
    
    696,171
    
    
    
    672,227
    
    
    
    3.6
    %Average length of stay (in days)
    
    
    16.0
    
    
    
    16.6
    
    
    
    -3.6
    %Revenue per patient day
    
    $
    585
    
    
    $
    569
    
    
    
    2.8
    %
 Revenue
 17




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##### Table of Contents



Salaries, wages, and employee benefits
 Professional fees
 Supplies.
 Provision for doubtful accounts
 Other operating expenses
 Depreciation and amortization
 Interest expense, net
 Income attributable to noncontrolling interest
 Loss) Income from discontinued operations, net of taxes
 18




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Liquidity and Capital Resources
        19




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##### Table of Contents



Contractual Obligations
 Payments Due by Period (in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-term debt (1):Senior Credit Facility:Revolving line of credit facility, expiring on December 31, 2011
and bearing interest of 5.9% at March 31, 2009
    
    $
    190,000
    
    
    $
    
    
    
    $
    190,000
    
    
    $
    
    
    
    $
    Senior secured term loan facility, expiring on July 1, 2012
and bearing interest of 2.3% at March 31, 2009
    
    
    567,688
    
    
    
    3,750
    
    
    
    7,500
    
    
    
    556,438
    
    
    
    73/4% Senior Subordinated Notes due July 15, 2015
    
    
    475,666
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475,666Mortgage loans on facilities, maturing in 2036, 2037 and 2038
bearing fixed interest rates of 5.7% to 7.6%
    
    
    33,170
    
    
    
    430
    
    
    
    943
    
    
    
    1,067
    
    
    
    30,7301,266,524
    
    
    
    4,180
    
    
    
    198,443
    
    
    
    557,505
    
    
    
    506,396Lease and other obligations
    
    
    111,444
    
    
    
    38,732
    
    
    
    19,505
    
    
    
    12,199
    
    
    
    41,008Total contractual obligations
    
    $
    1,377,968
    
    
    $
    42,912
    
    
    $
    217,948
    
    
    $
    569,704
    
    
    $
    547,404
 
 (1)
    
    Excludes capital lease obligations and other obligations of $7.1 million, which are included in lease and other obligations. 3 4
 Critical Accounting Policies
  Allowance for Doubtful Accounts
    Allowances for Contractual Discounts
  20




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##### Table of Contents



Professional and General Liability
  Income Taxes
  Accounting for Uncertainty in Income Taxes -
An Interpretation of FASB Statement No. 109,
 Share-Based Compensation
 Share Based Payment
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  21




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##### Table of Contents



Item 4. Controls and Procedures.
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchases of Equity Securities
  Total Number of
    
    Maximum NumberShares Purchased
    
    of Shares that Mayas Part of Publicly
    
    Yet Be PurchasedTotal Number of
    
    Average Price
    
    Announced Plans or
    
    Under the Plans orPeriod
    
    Shares Purchased (1)
    
    Paid Per Share
    
    Programs
    
    ProgramsJanuary 1, 2009 through
January 31, 2009
    
    
    
    
    
    $
    
    
    
    
    N/A
    
    
    
    N/AFebruary 1, 2009
through
February 28, 2009
    
    
    35,091
    
    
    
    27.18
    
    
    
    N/A
    
    
    
    N/AMarch 1, 2009 through
March 31, 2009
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    35,091
    
    
    $
    27.18
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    All of the shares listed were surrendered by our employees in satisfaction of the employees
tax liabilities related to the vesting of restricted stock. The surrender of shares by our
employees was made in accordance with the terms of restricted stock agreements between the
employees and us and did not involve any payments by us. We currently do not have a stock
repurchase program. 22




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##### Table of Contents



Item 6. Exhibits.
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of PMR
Corporation, filed with the Delaware Secretary of State on
March 9, 1998 (incorporated by reference to Exhibit 3.1 to the
Companys Annual Report on Form 10-K for the fiscal year ended
April 30, 1998).3.2
    
    Certificate of Amendment to Amended and Restated Certificate of
Incorporation of PMR Corporation, filed with the Delaware
Secretary of State on August 5, 2002 (incorporated by reference to
Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the
quarter ended July 31, 2002).3.3
    
    Certificate of Amendment to Amended and Restated Certificate of
Incorporation of Psychiatric Solutions, Inc., filed with the
Delaware Secretary of State on March 21, 2003 (incorporated by
reference to Appendix A to the Companys Definitive Proxy
Statement, filed on January 22, 2003).3.4
    
    Certificate of Amendment to Amended and Restated Certificate of
Incorporation of Psychiatric Solutions, Inc., filed with the
Delaware Secretary of State on December 15, 2005 (incorporated by
reference to Exhibit 3.4 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2005).3.5
    
    By-laws (incorporated by reference to Exhibit 3 to the Companys
Current Report on Form 8-K filed on November 6, 2007).10.1*
    
    Incremental Facility Amendment, dated as of
February 25, 2009, to the Second Amended and
Restated Credit Agreement, as amended, by and
among Psychiatric Solutions, Inc., BHC Holdings,
Inc., Premier Behavioral Solutions, Inc.,
Alternative Behavioral Services, Inc., Horizon
Health Corporation, Community Cornerstones, Inc.,
FHP  Puerto Rico, Inc., First Hospital
Panamericano, Inc., FHCHS of Puerto Rico, Inc.,
the subsidiaries of Psychiatric Solutions, Inc.
party thereto as guarantors, the incremental
revolving credit lenders party thereto, Citicorp
North America, Inc., as term loan facility
administrative agent, Bank of America, N.A., as
revolving credit facility administrative agent,
Barclays Bank PLC, as syndication agent, and
General Electric Capital Corporation, JPMorgan
Chase Bank, N.A. and Fifth Third Bank, as
documentation agents.10.2
    
    Psychiatric Solutions, Inc. 2009 Long-Term Equity
Compensation Plan (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on
Form 8-K, filed on March 6, 2009).10.3
    
    Psychiatric Solutions, Inc. 2009 Cash Bonus Plans
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K, filed on
March 6, 2009).31.1*
    
    Certification of the Chief Executive Officer of
Psychiatric Solutions, Inc. pursuant to
Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of the Chief Accounting Officer of
Psychiatric Solutions, Inc. pursuant to
Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certifications of the Chief Executive Officer and
Chief Accounting Officer of Psychiatric Solutions,
Inc. pursuant to Rule 13a-14(b) of the Securities
Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed or furnished herewith 23




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Signatures
  Psychiatric Solutions, Inc.By:
    /s/ Jack E. PolsonJack E. PolsonExecutive Vice President, Chief Accounting Officer