##### 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, 2006 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from ________________ to _________________
  Psychiatric Solutions, Inc.
  DELAWARE
    
    23-2491707(State or Other Jurisdiction of Incorporation or
    
    (I.R.S. Employer Identification No.)Organization)
 840 Crescent Centre Drive, Suite 460
Franklin, TN 37067
 (615) 312-5700
 þ o
 þ o o
 o þ




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##### Table of Contents



TABLE OF CONTENTS
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005 (Unaudited)
    
    
    1Condensed Consolidated Statements of Income for the three month periods ended March 31, 2006 and 2005 (Unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2006 and 2005
(Unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 6. Exhibits
    
    
    22EX-10.3  FORM OF RESTRICTED AGREEMENTEX-31.1  SECTION 302 CERTIFICATION OF THE CEOEX-31.2  SECTION 302 CERTIFICATION OF THE CAOEX-32.1  SECTION 906 CERTIFICATION OF THE CEO & CAO




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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 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    25,657
    
    
    $
    54,700Accounts receivable, less allowance for doubtful accounts of
$17,495 and $15,355, respectively
    
    
    146,141
    
    
    
    132,416Prepaids and other
    
    
    52,478
    
    
    
    52,225Total current assets
    
    
    224,276
    
    
    
    239,341Property and equipment, net of accumulated depreciation
    
    
    403,698
    
    
    
    378,266Cost in excess of net assets acquired
    
    
    540,605
    
    
    
    527,655Other assets
    
    
    28,445
    
    
    
    29,872Total assets
    
    $
    1,197,024
    
    
    $
    1,175,134LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    16,853
    
    
    $
    18,744Salaries and benefits payable
    
    
    40,954
    
    
    
    46,909Other accrued liabilities
    
    
    31,708
    
    
    
    34,411Current portion of long-term debt
    
    
    359
    
    
    
    325Total current liabilities
    
    
    89,874
    
    
    
    100,389Long-term debt, less current portion
    
    
    485,900
    
    
    
    482,064Deferred tax liability
    
    
    36,050
    
    
    
    32,151Other liabilities
    
    
    22,952
    
    
    
    20,818Total liabilities
    
    
    634,776
    
    
    
    635,422Stockholders equity:Common stock, $0.01 par value, 125,000 shares authorized;
52,751 and 52,430 issued and outstanding, respectively
    
    
    528
    
    
    
    524Additional paid-in capital
    
    
    506,108
    
    
    
    495,768Accumulated earnings
    
    
    55,612
    
    
    
    43,420Total stockholders equity
    
    
    562,248
    
    
    
    539,712Total liabilities and stockholders equity
    
    $
    1,197,024
    
    
    $
    1,175,134
  1




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PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except for per share amounts)
 Three Months Ended March 31,2006
    
    
    2005Revenue
    
    $
    242,477
    
    
    $
    134,618Salaries, wages and employee benefits (including
share-based compensation of $6,254 for 2006)
    
    
    139,981
    
    
    
    73,516Professional fees
    
    
    22,722
    
    
    
    14,035Supplies
    
    
    14,028
    
    
    
    8,288Rentals and leases
    
    
    3,381
    
    
    
    2,301Other operating expenses
    
    
    23,765
    
    
    
    15,211Provision for doubtful accounts
    
    
    4,800
    
    
    
    2,668Depreciation and amortization
    
    
    4,745
    
    
    
    2,880Interest expense
    
    
    9,208
    
    
    
    3,505Loss on refinancing long-term debt
    
    
    
    
    
    
    6,990222,630
    
    
    
    129,394Income from continuing operations
before income taxes
    
    
    19,847
    
    
    
    5,224Provision for income taxes
    
    
    7,542
    
    
    
    2,037Income from continuing operations
    
    
    12,305
    
    
    
    3,187(Loss) income from discontinued operations, net of
income tax benefit (provision) of $69 and $(90)
for 2006 and 2005, respectively
    
    
    (113
    )
    
    
    141Net income
    
    $
    12,192
    
    
    $
    3,328Basic earnings per share:Income from continuing operations
    
    $
    0.23
    
    
    $
    0.08(Loss) income from discontinued operations,
net of taxes
    
    
    
    
    
    
    Net income
    
    $
    0.23
    
    
    $
    0.08Diluted earnings per share:Income from continuing operations
    
    $
    0.23
    
    
    $
    0.08(Loss) income from discontinued operations,
net of taxes
    
    
    
    
    
    
    Net income
    
    $
    0.23
    
    
    $
    0.08Shares used in computing per share amounts:Basic
    
    
    52,514
    
    
    
    40,964Diluted
    
    
    53,890
    
    
    
    42,346
  2




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PSYCHIATRIC SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Three Months Ended March 31,2006
    
    
    2005Operating activities:Net income
    
    $
    12,192
    
    
    $
    3,328Adjustments to reconcile net income to
net cash provided by continuing
operating activities:Depreciation and amortization
    
    
    4,745
    
    
    
    2,880Provision for doubtful accounts
    
    
    4,800
    
    
    
    2,668Share-based compensation
    
    
    6,254
    
    
    
    Amortization of loan costs
    
    
    405
    
    
    
    174Loss on refinancing long-term debt
    
    
    
    
    
    
    6,990Change in income tax assets and liabilities
    
    
    4,202
    
    
    
    (4,746
    )Changes in operating assets and liabilities,
net of effect of acquisitions:Accounts receivable
    
    
    (13,044
    )
    
    
    (6,400
    )Prepaids and other current assets
    
    
    (1,890
    )
    
    
    (1,320
    )Accounts payable
    
    
    (2,627
    )
    
    
    2,002Salaries and benefits payable
    
    
    (5,272
    )
    
    
    1,214Accrued liabilities and other liabilities
    
    
    (712
    )
    
    
    5,610Net cash provided by continuing operating activities
    
    
    9,053
    
    
    
    12,400Net cash provided by discontinued operating activities
    
    
    1,503
    
    
    
    938Net cash provided by operating activities
    
    
    10,556
    
    
    
    13,338Investing activities:Cash paid for acquisitions, net of cash acquired
    
    
    (38,300
    )
    
    
    (500
    )Capital purchases of leasehold improvements,
equipment and software
    
    
    (5,513
    )
    
    
    (5,255
    )Cash paid for investments in equity method investees
    
    
    
    
    
    
    (840
    )Other assets
    
    
    239
    
    
    
    (482
    )Net cash used in investing activities
    
    
    (43,574
    )
    
    
    (7,077
    )Financing activities:Principal payments on long-term debt
    
    
    (93
    )
    
    
    (50,375
    )Net increase
in revolving credit facility
    
    
    
    
    
    
    30,000Payment of loan and issuance costs
    
    
    (22
    )
    
    
    (129
    )Refinancing of long-term debt
    
    
    
    
    
    
    (5,316
    )Excess tax benefits from share-based payment arrangements
    
    
    2,446
    
    
    
    Proceeds
from issuance of common stock upon exercise of stock options
    
    
    1,644
    
    
    
    804Net cash provided by (used in) financing activities
    
    
    3,975
    
    
    
    (25,016
    )Net decrease in cash
    
    
    (29,043
    )
    
    
    (18,755
    )Cash and cash equivalents at beginning of the period
    
    
    54,700
    
    
    
    33,434Cash and cash equivalents at end of the period
    
    $
    25,657
    
    
    $
    14,679Effect of Acquisitions:Assets acquired, net of cash acquired
    
    $
    43,372
    
    
    $
    Cash paid for prior year acquisitions
    
    
    
    
    
    
    500Liabilities assumed
    
    
    (1,109
    )
    
    
    Long-term debt assumed
    
    
    (3,963
    )
    
    
    Cash paid for acquisitions, net of cash acquired
    
    $
    38,300
    
    
    $
    500Significant Non-cash Transactions:Refinancing of long-term debt
    
    $
    
    
    
    $
    1,674
  3




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##### Table of Contents



1. Recent Developments
   2. Basis of Presentation
  3. Earnings Per Share
 Earnings per Share
  4




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##### Table of Contents



Three Months EndedMarch 31,2006
    
    
    2005Numerator:Income from continuing operations
    
    $
    12,305
    
    
    $
    3,187(Loss) income from discontinued operations, net of taxes
    
    
    (113
    )
    
    
    141Net income
    
    $
    12,192
    
    
    $
    3,328Denominator:Weighted average shares outstanding for basic earnings per share
    
    
    52,514
    
    
    
    40,964Effects of dilutive stock options and warrants outstanding
    
    
    1,376
    
    
    
    1,382Shares used in computing diluted earnings per common share
    
    
    53,890
    
    
    
    42,346Basic earnings per share:Income from continuing operations
    
    $
    0.23
    
    
    $
    0.08(Loss) income from discontinued operations, net of taxes
    
    
    
    
    
    
    $
    0.23
    
    
    $
    0.08Diluted earnings per share:Income from continuing operations
    
    $
    0.23
    
    
    $
    0.08(Loss) income from discontinued operations, net of taxes
    
    
    
    
    
    
    $
    0.23
    
    
    $
    0.08
 4. Share-Based Compensation
 Share Based Payment Accounting for Stock-Based Compensation, Accounting
for Stock Issued to Employees
   5




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Threemonths endedMarch 31,2005Net income
    
    $
    3,328Pro forma compensation expense from stock options, net of taxes
    
    
    1,824Pro forma net income
    
    $
    1,504Basic earnings per share, as reported
    
    $
    0.08Diluted earnings per share, as reported
    
    $
    0.08Basic pro forma earnings per share
    
    $
    0.04Diluted pro forma earnings per share
    
    $
    0.04
    WeightedWeighted
    
    
    AverageNumber
    
    
    Average
    
    
    Remaining
    
    
    Aggregateof
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    

Term
(in years)
    
    
    ValueOutstanding at December 31, 2005
    
    
    4,472
    
    
    $
    13.01
    
    
    
    N/A
    
    
    
    N/AGranted
    
    
    1,814
    
    
    $
    33.02
    
    
    
    N/A
    
    
    
    N/ACanceled
    
    
    48
    
    
    $
    31.41
    
    
    
    N/A
    
    
    
    N/AExercised
    
    
    (266
    )
    
    $
    6.18
    
    
    
    N/A
    
    
    
    N/AOutstanding at March 31, 2006
    
    
    6,068
    
    
    $
    19.14
    
    
    
    8
    
    
    $
    84,888Exercisable at March 31, 2006
    
    
    2,258
    
    
    $
    13.61
    
    
    
    8
    
    
    $
    44,075
   6




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Three Months Ended March 31,2006
    
    
    2005Weighted average grant-date fair value of options
    
    $
    9.69
    
    
    $
    7.60Risk-free interest rate
    
    
    5
    %
    
    
    4
    %Expected Volatility
    
    
    30
    %
    
    
    33
    %Expected
term (in years)
    
    
    4
    
    
    
    5Dividend yield
    
    
    0
    %
    
    
    0
    %
     5. Mergers and Acquisitions
     6. Long-term debt
  March 31,
    
    
    December 31,2006
    
    
    2005Senior credit facility:Senior Secured Term Loan Facility, expiring on July 1, 2012
and bearing interest of 6.4% and
6.2% at March 31, 2006
and December 31, 2005, respectively
    
    $
    200,000
    
    
    $
    200,0007 3/4% Senior Subordinated Notes
    
    
    220,000
    
    
    
    220,00010 5/8% Senior Subordinated Notes
    
    
    38,681
    
    
    
    38,681Mortgage loans on facilities, maturing in 2036, 2037 and 2038
bearing fixed interest rates of 5.65% to 7.6%
    
    
    27,276
    
    
    
    23,377Other
    
    
    302
    
    
    
    331486,259
    
    
    
    482,389Less current portion
    
    
    359
    
    
    
    325Long-term debt
    
    $
    485,900
    
    
    $
    482,064
 Senior Credit Facility
  7




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7 3 / 4 % Notes


3 4 5 8 3 4 3 4


10 5 / 8 % Notes


5 8 5 8 5 8


5 8 5 8 5 8 5 8 3 4


Mortgage Loans




7. Income Taxes




8



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8. Discontinued Operations
 Accounting for the Impairment or Disposal of Long-Lived Assets
  Three Months EndedMarch 31,2006
    
    
    2005Revenue
    
    $
    1,681
    
    
    $
    4,112Salaries, wages and employee benefits
    
    
    1,219
    
    
    
    2,852Professional fees
    
    
    78
    
    
    
    224Supplies
    
    
    195
    
    
    
    295Rentals and leases
    
    
    29
    
    
    
    37Other operating expenses
    
    
    343
    
    
    
    429Provision for doubtful accounts
    
    
    (12
    )
    
    
    Depreciation and amortization
    
    
    11
    
    
    
    25Interest expense
    
    
    
    
    
    
    191,863
    
    
    
    3,881(Loss) income from discontinued operations before
income taxes
    
    
    (182
    )
    
    
    231(Benefit from) provision for income taxes
    
    
    (69
    )
    
    
    90(Loss) income from discontinued operations, net of taxes
    
    $
    (113
    )
    
    $
    141
 9. Disclosures About Reportable Segments
 Disclosures About Segments of an Enterprise and
Related Information
  9




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Three Months Ended March 31, 2006
 Owned andLeased
    
    
    Management
    
    
    CorporateFacilities
    
    
    Contracts
    
    
    and Other
    
    
    ConsolidatedRevenue
    
    $
    229,921
    
    
    $
    12,556
    
    
    $
    
    
    
    $
    242,477Adjusted EBITDA
    
    $
    44,617
    
    
    $
    2,144
    
    
    $
    (6,707
    )
    
    $
    40,054Interest expense
    
    
    3,985
    
    
    
    1
    
    
    
    5,222
    
    
    
    9,208Depreciation and amortization
    
    
    4,266
    
    
    
    170
    
    
    
    309
    
    
    
    4,745Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    7,542
    
    
    
    7,542Inter-segment expenses
    
    
    9,374
    
    
    
    535
    
    
    
    (9,909
    )
    
    
    Other expenses:Share-based compensation
    
    
    
    
    
    
    
    
    
    
    6,254
    
    
    
    6,254Total other expenses
    
    
    
    
    
    
    
    
    
    
    6,254
    
    
    
    6,254Income (loss) from continuing operations
    
    $
    26,992
    
    
    $
    1,438
    
    
    $
    (16,125
    )
    
    $
    12,305Segment assets
    
    $
    1,072,876
    
    
    $
    29,580
    
    
    $
    94,568
    
    
    $
    1,197,024
 Three Months Ended March 31, 2005
 Owned andLeased
    
    
    Management
    
    
    CorporateFacilities
    
    
    Contracts
    
    
    and Other
    
    
    ConsolidatedRevenue
    
    $
    121,682
    
    
    $
    12,936
    
    
    $
    
    
    
    $
    134,618Adjusted EBITDA
    
    $
    20,598
    
    
    $
    2,475
    
    
    $
    (4,474
    )
    
    $
    18,599Interest expense
    
    
    8,298
    
    
    
    1
    
    
    
    (4,794
    )
    
    
    3,505Depreciation and amortization
    
    
    2,566
    
    
    
    171
    
    
    
    143
    
    
    
    2,880Provision for income taxes
    
    
    399
    
    
    
    
    
    
    
    1,638
    
    
    
    2,037Inter-segment expenses
    
    
    3,537
    
    
    
    460
    
    
    
    (3,997
    )
    
    
    Other expenses:Loss on refinancing long-term debt
    
    
    
    
    
    
    
    
    
    
    6,990
    
    
    
    6,990Total other expenses
    
    
    
    
    
    
    
    
    
    
    6,990
    
    
    
    6,990Income (loss) from continuing operations
    
    $
    5,798
    
    
    $
    1,843
    
    
    $
    (4,454
    )
    
    $
    3,187Segment assets
    
    $
    412,201
    
    
    $
    31,905
    
    
    $
    39,282
    
    
    $
    483,388
 10. Financial Information for the Company and Its Subsidiaries
  10




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Condensed Consolidating Balance Sheet
As of March 31, 2006
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    14,866
    
    
    $
    10,791
    
    
    
    
    
    
    $
    25,657Accounts receivable, net
    
    
    
    
    
    
    146,141
    
    
    
    
    
    
    
    
    
    
    
    146,141Prepaids and other
    
    
    
    
    
    
    44,537
    
    
    
    7,941
    
    
    
    
    
    
    
    52,478Total current assets
    
    
    
    
    
    
    205,544
    
    
    
    18,732
    
    
    
    
    
    
    
    224,276Property and equipment, net of accumulated depreciation
    
    
    
    
    
    
    374,720
    
    
    
    36,750
    
    
    
    (7,772
    )
    
    
    403,698Cost in excess of net assets acquired
    
    
    
    
    
    
    540,605
    
    
    
    
    
    
    
    
    
    
    
    540,605Investment in subsidiaries
    
    
    436,208
    
    
    
    
    
    
    
    
    
    
    
    (436,208
    )
    
    
    Other assets
    
    
    12,069
    
    
    
    13,077
    
    
    
    3,299
    
    
    
    
    
    
    
    28,445Total assets
    
    $
    448,277
    
    
    $
    1,133,946
    
    
    $
    58,781
    
    
    $
    (443,980
    )
    
    $
    1,197,024Current Liabilities:Accounts payable
    
    
    
    
    
    $
    16,853
    
    
    $
    
    
    
    $
    
    
    
    $
    16,853Salaries and benefits payable
    
    
    
    
    
    
    40,954
    
    
    
    
    
    
    
    
    
    
    
    40,954Other accrued liabilities
    
    
    9,171
    
    
    
    22,337
    
    
    
    6,969
    
    
    
    (6,769
    )
    
    
    31,708Current portion of long-term debt
    
    
    71
    
    
    
    
    
    
    
    288
    
    
    
    
    
    
    
    359Total current liabilities
    
    
    9,242
    
    
    
    80,144
    
    
    
    7,257
    
    
    
    (6,769
    )
    
    
    89,874Long-term debt, less current portion
    
    
    458,912
    
    
    
    
    
    
    
    26,988
    
    
    
    
    
    
    
    485,900Deferred tax liability
    
    
    
    
    
    
    36,050
    
    
    
    
    
    
    
    
    
    
    
    36,050Other liabilities
    
    
    3,325
    
    
    
    10,168
    
    
    
    9,459
    
    
    
    
    
    
    
    22,952Total liabilities
    
    
    471,479
    
    
    
    126,362
    
    
    
    43,704
    
    
    
    (6,769
    )
    
    
    634,776Stockholders (deficit) equity:Total stockholders (deficit) equity
    
    
    (23,202
    )
    
    
    1,007,584
    
    
    
    15,077
    
    
    
    (437,211
    )
    
    
    562,248Total liabilities and stockholders (deficit) equity
    
    $
    448,277
    
    
    $
    1,133,946
    
    
    $
    58,781
    
    
    $
    (443,980
    )
    
    $
    1,197,024
 11




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##### Table of Contents



Condensed Consolidating Balance Sheet
As of December 31, 2005
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    44,115
    
    
    $
    10,585
    
    
    $
    
    
    
    $
    54,700Accounts receivable, net
    
    
    
    
    
    
    132,416
    
    
    
    
    
    
    
    
    
    
    
    132,416Prepaids and other
    
    
    
    
    
    
    52,225
    
    
    
    
    
    
    
    
    
    
    
    52,225Total current assets
    
    
    
    
    
    
    228,756
    
    
    
    10,585
    
    
    
    
    
    
    
    239,341Property and equipment, net of accumulated depreciation
    
    
    
    
    
    
    356,920
    
    
    
    29,179
    
    
    
    (7,833
    )
    
    
    378,266Cost in excess of net assets acquired
    
    
    
    
    
    
    527,655
    
    
    
    
    
    
    
    
    
    
    
    527,655Investment in subsidiaries
    
    
    444,888
    
    
    
    
    
    
    
    
    
    
    
    (444,888
    )
    
    
    Other assets
    
    
    12,441
    
    
    
    14,016
    
    
    
    3,415
    
    
    
    
    
    
    
    29,872Total assets
    
    $
    457,329
    
    
    $
    1,127,347
    
    
    $
    43,179
    
    
    $
    (452,721
    )
    
    $
    1,175,134Current Liabilities:Accounts payable
    
    $
    
    
    
    $
    18,744
    
    
    $
    
    
    
    $
    
    
    
    $
    18,744Salaries and benefits payable
    
    
    
    
    
    
    46,909
    
    
    
    
    
    
    
    
    
    
    
    46,909Other accrued liabilities
    
    
    12,994
    
    
    
    21,104
    
    
    
    313
    
    
    
    
    
    
    
    34,411Current portion of long-term debt
    
    
    77
    
    
    
    
    
    
    
    248
    
    
    
    
    
    
    
    325Total current liabilities
    
    
    13,071
    
    
    
    86,757
    
    
    
    561
    
    
    
    
    
    
    
    100,389Long-term debt, less current portion
    
    
    458,935
    
    
    
    
    
    
    
    23,129
    
    
    
    
    
    
    
    482,064Deferred tax liability
    
    
    
    
    
    
    32,151
    
    
    
    
    
    
    
    
    
    
    
    32,151Other liabilities
    
    
    3,011
    
    
    
    9,544
    
    
    
    8,263
    
    
    
    
    
    
    
    20,818Total liabilities
    
    
    475,017
    
    
    
    128,452
    
    
    
    31,953
    
    
    
    
    
    
    
    635,422Stockholders (deficit) equity:Total stockholders (deficit) equity
    
    
    (17,688
    )
    
    
    998,895
    
    
    
    11,226
    
    
    
    (452,721
    )
    
    
    539,712Total liabilities and stockholders (deficit) equity
    
    $
    457,329
    
    
    $
    1,127,347
    
    
    $
    43,179
    
    
    $
    (452,721
    )
    
    $
    1,175,134
 Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2006
(Unaudited, dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsRevenue
    
    $
    
    
    
    $
    242,477
    
    
    $
    2,821
    
    
    $
    (2,821
    )
    
    $
    242,477Salaries, wages and employee benefits
    
    
    
    
    
    
    139,981
    
    
    
    
    
    
    
    
    
    
    
    139,981Professional fees
    
    
    
    
    
    
    22,674
    
    
    
    48
    
    
    
    
    
    
    
    22,722Supplies
    
    
    
    
    
    
    14,028
    
    
    
    
    
    
    
    
    
    
    
    14,028Rentals and leases
    
    
    
    
    
    
    3,381
    
    
    
    
    
    
    
    
    
    
    
    3,381Other operating expenses
    
    
    
    
    
    
    23,213
    
    
    
    2,343
    
    
    
    (1,791
    )
    
    
    23,765Provision for doubtful accounts
    
    
    
    
    
    
    4,800
    
    
    
    
    
    
    
    
    
    
    
    4,800Depreciation and amortization
    
    
    
    
    
    
    4,543
    
    
    
    263
    
    
    
    (61
    )
    
    
    4,745Interest expense
    
    
    8,893
    
    
    
    
    
    
    
    315
    
    
    
    
    
    
    
    9,2088,893
    
    
    
    212,620
    
    
    
    2,969
    
    
    
    (1,852
    )
    
    
    222,630(Loss) income from continuing operations before income
taxes
    
    
    (8,893
    )
    
    
    29,857
    
    
    
    (148
    )
    
    
    (969
    )
    
    
    19,847(Benefit from) provision for income taxes
    
    
    (3,379
    )
    
    
    10,804
    
    
    
    117
    
    
    
    
    
    
    
    7,542(Loss) income from continuing operations
    
    
    (5,514
    )
    
    
    19,053
    
    
    
    (265
    )
    
    
    (969
    )
    
    
    12,305(Loss) income from discontinued operations, net of taxes
    
    
    
    
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    (113
    )Net (loss) income
    
    $
    (5,514
    )
    
    $
    18,940
    
    
    $
    (265
    )
    
    $
    (969
    )
    
    $
    12,192
 12




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##### Table of Contents



Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2005
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsRevenue
    
    $
    
    
    
    $
    134,618
    
    
    $
    1,626
    
    
    $
    (1,626
    )
    
    $
    134,618Salaries, wages and employee benefits
    
    
    
    
    
    
    73,516
    
    
    
    
    
    
    
    
    
    
    
    73,516Professional fees
    
    
    
    
    
    
    13,994
    
    
    
    41
    
    
    
    
    
    
    
    14,035Supplies
    
    
    
    
    
    
    8,288
    
    
    
    
    
    
    
    
    
    
    
    8,288Rentals and leases
    
    
    
    
    
    
    2,301
    
    
    
    
    
    
    
    
    
    
    
    2,301Other operating expenses
    
    
    
    
    
    
    15,208
    
    
    
    891
    
    
    
    (888
    )
    
    
    15,211Provision for doubtful accounts
    
    
    
    
    
    
    2,668
    
    
    
    
    
    
    
    
    
    
    
    2,668Depreciation and amortization
    
    
    
    
    
    
    2,695
    
    
    
    246
    
    
    
    (61
    )
    
    
    2,880Interest expense
    
    
    3,132
    
    
    
    
    
    
    
    373
    
    
    
    
    
    
    
    3,505Loss on refinancing of long-term debt
    
    
    6,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,99010,122
    
    
    
    118,670
    
    
    
    1,551
    
    
    
    (949
    )
    
    
    129,394(Loss) income before income taxes
    
    
    (10,122
    )
    
    
    15,948
    
    
    
    75
    
    
    
    (677
    )
    
    
    5,224(Benefit from) provision for income taxes
    
    
    (3,954
    )
    
    
    5,991
    
    
    
    
    
    
    
    
    
    
    
    2,037(Loss) income from continuing operations
    
    
    (6,168
    )
    
    
    9,957
    
    
    
    75
    
    
    
    (677
    )
    
    
    3,187(Loss) income from discontinued operations, net of taxes
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141Net (loss) income
    
    $
    (6,027
    )
    
    $
    9,957
    
    
    $
    75
    
    
    $
    (677
    )
    
    $
    3,328
 13




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2006
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsOperating activities:Net (loss) income
    
    $
    (5,514
    )
    
    $
    18,940
    
    
    $
    (265
    )
    
    $
    (969
    )
    
    $
    12,192Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    4,543
    
    
    
    263
    
    
    
    (61
    )
    
    
    4,745Provision for doubtful accounts
    
    
    
    
    
    
    4,800
    
    
    
    
    
    
    
    
    
    
    
    4,800Share-based compensation
    
    
    
    
    
    
    6,254
    
    
    
    
    
    
    
    
    
    
    
    6,254Amortization of loan costs
    
    
    
    
    
    
    394
    
    
    
    11
    
    
    
    
    
    
    
    405Change in income tax assets and liabilities
    
    
    
    
    
    
    4,202
    
    
    
    
    
    
    
    
    
    
    
    4,202Changes in operating assets and liabilities, net of
effect of acquisitions:Accounts receivable
    
    
    
    
    
    
    (13,044
    )
    
    
    
    
    
    
    
    
    
    
    (13,044
    )Prepaids and other current assets
    
    
    
    
    
    
    6,051
    
    
    
    (7,941
    )
    
    
    
    
    
    
    (1,890
    )Accounts payable
    
    
    
    
    
    
    (2,627
    )
    
    
    
    
    
    
    
    
    
    
    (2,627
    )Salaries and benefits payable
    
    
    
    
    
    
    (5,272
    )
    
    
    
    
    
    
    
    
    
    
    (5,272
    )Accrued liabilities and other liabilities
    
    
    (108
    )
    
    
    (8,430
    )
    
    
    7,826
    
    
    
    
    
    
    
    (712
    )Net cash provided by continuing operating activities
    
    
    (5,622
    )
    
    
    15,811
    
    
    
    (106
    )
    
    
    (1,030
    )
    
    
    9,053Net cash provided by discontinued operating activities
    
    
    
    
    
    
    1,503
    
    
    
    
    
    
    
    
    
    
    
    1,503Net cash provided by operating activities
    
    
    (5,622
    )
    
    
    17,314
    
    
    
    (106
    )
    
    
    (1,030
    )
    
    
    10,556Investing activities:Cash paid for acquisitions, net of cash acquired
    
    
    (38,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,300
    )Capital purchases of leasehold improvements, equipment
and software
    
    
    
    
    
    
    (5,513
    )
    
    
    
    
    
    
    
    
    
    
    (5,513
    )Other assets
    
    
    
    
    
    
    (150
    )
    
    
    389
    
    
    
    
    
    
    
    239Net cash (used in) provided by investing activities
    
    
    (38,300
    )
    
    
    (5,663
    )
    
    
    389
    
    
    
    
    
    
    
    (43,574
    )Financing activities:Principal payments on long-term debt
    
    
    (29
    )
    
    
    
    
    
    
    (64
    )
    
    
    
    
    
    
    (93
    )Net transfers to and from members
    
    
    39,883
    
    
    
    (40,900
    )
    
    
    (13
    )
    
    
    1,030
    
    
    
    Payment of loan and issuance costs
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )Excess tax benefits from share-based payment arrangements
    
    
    2,446
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,446Proceeds
from issuance of common stock upon exercise of stock options
    
    
    1,644
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,644Net cash provided by (used in) financing activities
    
    
    43,922
    
    
    
    (40,900
    )
    
    
    (77
    )
    
    
    1,030
    
    
    
    3,975Net decrease in cash
    
    
    
    
    
    
    (29,249
    )
    
    
    206
    
    
    
    
    
    
    
    (29,043
    )Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    44,115
    
    
    
    10,585
    
    
    
    
    
    
    
    54,700Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    14,866
    
    
    $
    10,791
    
    
    $
    
    
    
    $
    25,657
 14




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2005
(Dollars in thousands)
 Combined
    
    
    
    
    
    
    
    
    
    
    TotalSubsidiary
    
    
    Combined Non-
    
    
    Consolidating
    
    
    ConsolidatedParent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    AmountsOperating Activities:Net (loss) income
    
    $
    (6,027
    )
    
    $
    9,957
    
    
    $
    75
    
    
    $
    (677
    )
    
    $
    3,328Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    2,695
    
    
    
    246
    
    
    
    (61
    )
    
    
    2,880Provision for doubtful accounts
    
    
    
    
    
    
    2,668
    
    
    
    
    
    
    
    
    
    
    
    2,668Amortization of loan costs
    
    
    163
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    174Loss on refinancing long-term debt
    
    
    6,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,990Change in income tax assets and liabilities
    
    
    
    
    
    
    (4,746
    )
    
    
    
    
    
    
    
    
    
    
    (4,746
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (6,400
    )
    
    
    
    
    
    
    
    
    
    
    (6,400
    )Prepaids and other current assets
    
    
    
    
    
    
    1,285
    
    
    
    (2,605
    )
    
    
    
    
    
    
    (1,320
    )Accounts payable
    
    
    
    
    
    
    2,002
    
    
    
    
    
    
    
    
    
    
    
    2,002Salaries and benefits payable
    
    
    
    
    
    
    1,214
    
    
    
    
    
    
    
    
    
    
    
    1,214Accrued liabilities and other liabilities
    
    
    2,047
    
    
    
    (38
    )
    
    
    3,601
    
    
    
    
    
    
    
    5,610Net cash provided by continuing operating activities
    
    
    3,173
    
    
    
    8,637
    
    
    
    1,328
    
    
    
    (738
    )
    
    
    12,400Net cash provided by discontinued operating activities
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    938Net cash provided by operating activities
    
    
    3,173
    
    
    
    9,575
    
    
    
    1,328
    
    
    
    (738
    )
    
    
    13,338Investing Activities:Acquisitions, net of cash acquired
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Capital purchases of property and equipment
    
    
    
    
    
    
    (5,255
    )
    
    
    
    
    
    
    
    
    
    
    (5,255
    )Investment in equity method investee
    
    
    (840
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (840
    )Other assets
    
    
    
    
    
    
    (247
    )
    
    
    (235
    )
    
    
    
    
    
    
    (482
    )Net cash used in investing activities
    
    
    (1,340
    )
    
    
    (5,502
    )
    
    
    (235
    )
    
    
    
    
    
    
    (7,077
    )Financing Activities:Net principal payments on long-term debt
    
    
    (20,318
    )
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    (20,375
    )Net transfers to and from members
    
    
    23,930
    
    
    
    (24,668
    )
    
    
    
    
    
    
    738
    
    
    
    Payment of loan and issuance costs
    
    
    (129
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129
    )Refinancing of long-term debt
    
    
    (5,316
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,316
    )Proceeds
from issuance of common stock upon exercise stock options
    
    
    
    
    
    
    804
    
    
    
    
    
    
    
    
    
    
    
    804Net cash (used in) provided by financing activities
    
    
    (1,833
    )
    
    
    (23,864
    )
    
    
    (57
    )
    
    
    738
    
    
    
    (25,016
    )Net (decrease) increase in cash
    
    
    
    
    
    
    (19,791
    )
    
    
    1,036
    
    
    
    
    
    
    
    (18,755
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    30,971
    
    
    
    2,463
    
    
    
    
    
    
    
    33,434Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    11,180
    
    
    $
    3,499
    
    
    $
    
    
    
    $
    14,679
 15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
 This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements include statements regarding the intent,
belief or current expectations of Psychiatric Solutions and its management. Such forward-looking
statements are not guarantees of future performance and involve risks and uncertainties that may
cause our actual results to differ materially from the results discussed in the forward-looking
statements. Risks and uncertainties that might cause such differences include but are not limited
to: (1) potential competition that alters or impedes our acquisition strategy by decreasing our
ability to acquire additional facilities on favorable terms; (2) our ability to integrate and
improve the operations of acquired facilities; (3) our ability to maintain favorable and continuing
relationships with physicians who use our facilities; (4) our ability to receive timely additional
financing on terms acceptable to us to fund our acquisition strategy and capital expenditure needs;
(5) risks inherent to the health care industry, including the impact of unforeseen 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) our ability to
retain key employees who are instrumental to our successful operations; (7) our ability to maintain
effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act; (8) our
ability to ensure confidential information is not inappropriately disclosed and that we are in
compliance with federal and state health information privacy standards; (9) 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;
(10) our ability to obtain adequate levels of general and professional liability insurance; and
(11) those risks and uncertainties described from time to time in our filings with the Securities
and Exchange Commission (the SEC). The forward-looking statements herein are qualified in their
entirety by the risk factors set forth in our filings with the SEC. A copy of our filings may be
obtained from the Public Reference Room of the SEC at 450 Fifth Street NW, Washington, D.C. at
prescribed rates.
 Overview
  Sources of Revenue
 Patient Service Revenue
  Management Contract Revenue
  Results of Operations
  16




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##### Table of Contents



For the Three Months Ended March 31,2006
    
    
    2005Amount
    
    
    %
    
    
    Amount
    
    
    %Revenue
    
    $
    242,477
    
    
    
    100.0
    %
    
    $
    134,618
    
    
    
    100.0
    %Salaries, wages, and employee benefits (including
share-based compensation of $6,254 for 2006)
    
    
    139,981
    
    
    
    57.7
    %
    
    
    73,516
    
    
    
    54.6
    %Professional fees
    
    
    22,722
    
    
    
    9.4
    %
    
    
    14,035
    
    
    
    10.4
    %Supplies
    
    
    14,028
    
    
    
    5.8
    %
    
    
    8,288
    
    
    
    6.2
    %Provision for doubtful accounts
    
    
    4,800
    
    
    
    2.0
    %
    
    
    2,668
    
    
    
    2.0
    %Other operating expenses
    
    
    27,146
    
    
    
    11.2
    %
    
    
    17,512
    
    
    
    13.0
    %Depreciation and amortization
    
    
    4,745
    
    
    
    1.9
    %
    
    
    2,880
    
    
    
    2.1
    %Interest expense, net
    
    
    9,208
    
    
    
    3.8
    %
    
    
    3,505
    
    
    
    2.6
    %Other expenses:Loss on refinancing long-term debt
    
    
    
    
    
    
    0.0
    %
    
    
    6,990
    
    
    
    5.2
    %Income from continuing operations before
income taxes
    
    
    19,847
    
    
    
    8.2
    %
    
    
    5,224
    
    
    
    3.9
    %Provision for income taxes
    
    
    7,542
    
    
    
    3.1
    %
    
    
    2,037
    
    
    
    1.5
    %Income from continuing operations
    
    $
    12,305
    
    
    
    5.1
    %
    
    $
    3,187
    
    
    
    2.4
    %
 Quarter Ended March 31, 2006 Compared To Quarter Ended March 31, 2005
  Three Months Ended March 31,
    
    
    %2006
    
    
    2005
    
    
    ChangeTotal facility results:Revenue
    
    $
    229,921
    
    
    $
    121,682
    
    
    
    89.0
    %Number of facilities at period end
    
    
    58
    
    
    
    34
    
    
    
    70.6
    %Admissions
    
    
    26,944
    
    
    
    14,836
    
    
    
    81.6
    %Patient days
    
    
    447,028
    
    
    
    277,527
    
    
    
    61.1
    %Average length of stay
    
    
    16.6
    
    
    
    18.7
    
    
    
    -11.2
    %Revenue per patient day
    
    $
    514
    
    
    $
    438
    
    
    
    17.4
    %Same-facility results:Revenue
    
    $
    135,103
    
    
    $
    121,682
    
    
    
    11.0
    %Number of facilities at period end
    
    
    34
    
    
    
    34
    
    
    
    0.0
    %Admissions
    
    
    15,247
    
    
    
    14,836
    
    
    
    2.8
    %Patient days
    
    
    289,521
    
    
    
    277,527
    
    
    
    4.3
    %Average length of stay
    
    
    19.0
    
    
    
    18.7
    
    
    
    1.6
    %Revenue per patient day
    
    $
    467
    
    
    $
    438
    
    
    
    6.6
    %
 Revenue
 Salaries, wages and employee benefits Share Based Payment
 17




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##### Table of Contents



Accounting for Stock Issued to
Employees
 Professional fees
 Supplies.
 Provision for doubtful accounts
 Other operating expenses
 Depreciation and amortization
 Interest expense, net
 Other expenses.
 Loss from discontinued operations, net of taxes
 18




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##### Table of Contents



Liquidity and Capital Resources
   3 4
  5 8
    19




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##### Table of Contents



Contractual Obligations
 Payments Due by Period (in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsLong-term debt (1):Senior Credit Facility:Senior Secured Term Loan Facility, expiring on July 1, 2012
and bearing interest of 6.4% at March 31, 2006
    
    $
    200,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    200,0007 3/4% Senior Subordinated Notes due July 15, 2015
    
    
    220,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    220,00010 5/8% Senior Subordinated Notes due June 15, 2013
    
    
    38,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,681Mortgage loans on facilities, maturing in 2036, 2037 and 2038
bearing fixed interest rates of 5.65% to 7.60%
    
    
    27,276
    
    
    
    288
    
    
    
    631
    
    
    
    712
    
    
    
    25,645485,957
    
    
    
    288
    
    
    
    631
    
    
    
    712
    
    
    
    484,326Lease and other obligations
    
    
    43,449
    
    
    
    8,114
    
    
    
    11,831
    
    
    
    6,878
    
    
    
    16,626Total contractual obligations
    
    $
    529,406
    
    
    $
    8,402
    
    
    $
    12,462
    
    
    $
    7,590
    
    
    $
    500,952
 
 (1)
    
    Excludes capital lease obligations of $302,000, which are included in lease and other obligations.
 3 4 5 8 3 4 5 8
 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
 Share-Based Compensation
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 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
  21




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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 of 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
    
    Amended and Restated Bylaws (incorporated by
reference to Exhibit 3.2 to the Companys Annual
Report on Form 10-K for the fiscal year ended April
30, 1997).4.1
    
    Reference is made to Exhibits 3.1 through 3.5.4.2
    
    Common Stock Specimen Certificate (incorporated by
reference to Exhibit 4.2 to the Companys Annual Report
on Form 10-K for the fiscal year ended December 31,
2002).4.3
    
    Indenture, dated as of June 30, 2003, among Psychiatric
Solutions, Inc., the Guarantors named therein and
Wachovia Bank, National Association, as Trustee
(incorporated by reference to Exhibit 4.10 to the
Companys Registration Statement on Form S-4, filed on
July 30, 2003 (Registration No. 333-107453) (the 2003
S-4)).4.4
    
    Form of Notes (included in Exhibit 4.3).4.5
    
    Purchase Agreement, dated as of June 19, 2003, among
Psychiatric Solutions, Inc., the Guarantors named
therein, Lehman Brothers Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Jefferies & Company,
Inc. (incorporated by reference to Exhibit 4.12 to the
2003 S-4).4.6
    
    Indenture, dated as of July 6, 2005, by and among
Psychiatric Solutions, Inc., the Guarantors named
therein and Wachovia Bank, National Association, as
Trustee (incorporated by reference to Exhibit 4.1 to
the Companys Current Report on Form 8-K, filed July 8,
2005).4.7
    
    Form of Notes (included in Exhibit 4.6).4.8
    
    Purchase Agreement, dated as of June 30, 2005, among
Psychiatric Solutions, Inc., the Guarantors named
therein, Citigroup Global Markets Inc. on behalf of
Banc of America Securities LLC, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities
Inc. and Lehman Brothers Inc. (incorporated by
reference to Exhibit 4.3 to the Companys Current
Report on Form 8-K, filed on July 8, 2005).4.9
    
    Exchange and Registration Rights Agreement, dated as of
July 6, 2005, among Psychiatric Solutions, Inc., the
subsidiary guarantors from time to time party thereto,
and Citigroup Global Markets Inc. on behalf of Banc of
America Securities LLC, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, J.P. Morgan Securities Inc. and
Lehman Brothers Inc. (incorporated by reference to
Exhibit 4.4 to the Companys Current Report on Form
8-K, filed on July 8, 2005).10.1
    
    Psychiatric Solutions, Inc. 2006 Cash Bonus Plans
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K, filed on February
28, 2006).10.2
    
    Psychiatric Solutions, Inc. 2006 Long-Term Equity
Compensation Plan (incorporated by reference to Exhibit
10.2 to the Companys Current Report on Form 8-K, filed
on February 28, 2006).
 22




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##### Table of Contents



ExhibitNumber
    
    Description10.3*
    
    Form of Restricted Stock Agreement.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 herewith
 23




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##### Table of Contents



SIGNATURES
  Psychiatric Solutions, Inc.By:
    /s/ Jack E. PolsonJack E. Polson

Chief Accounting Officer