EX-99.4 6 g83311exv99w4.txt EX-99.4 SECTION OF OM(UNAUDITED PROFORMA) EXHIBIT 99.4 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The following table sets forth the unaudited pro forma condensed combined financial data for Psychiatric Solutions, Ramsay and The Brown Schools as a combined company, giving effect to the acquisitions of Ramsay and The Brown Schools and the Financing Transactions as if they had occurred on the dates indicated and after giving effect to the pro forma adjustments discussed herein. The unaudited pro forma condensed combined balance sheet as of March 31, 2003 has been derived from Psychiatric Solutions', Ramsay's, and The Brown Schools' historical balance sheets, adjusted to give effect to these acquisitions and the Financing Transactions, as well as our acquisition of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and our merger with PMR as if they occurred on March 31, 2003. The pro forma condensed combined income statement for the twelve months ended March 31, 2003, the three months ended March 31, 2003 and 2002 and the year ended December 31, 2002 give effect to the acquisitions of Ramsay and The Brown Schools and the Financing Transactions, as well as our acquisition of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and our merger with PMR as if they occurred at the beginning of the periods presented. The adjustments necessary to fairly present the unaudited pro forma condensed combined financial data have been made based on available information and in the opinion of management are reasonable. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with this unaudited pro forma condensed combined financial data. The pro forma adjustments are preliminary and revisions to the preliminary purchase price allocations and financing of the transactions may have a significant impact on the pro forma adjustments. A final valuation of net assets acquired associated with the Ramsay acquisition cannot be made prior to the completion of this offering memorandum. A final determination of these fair values will be conducted by Psychiatric Solutions' independent valuation specialists. The consideration of this valuation will most likely result in a change in the value assigned to the fixed and intangible assets acquired of Ramsay. The unaudited pro forma condensed combined financial data is for comparative purposes only and does not purport to represent what our financial position or results of operations would actually have been had the events noted above in fact occurred on the assumed dates or to project our financial position or results of operations for any future date or future period. The unaudited pro forma condensed combined financial data should be read in conjunction with the "Selected Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere in this offering memorandum. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2003 (DOLLARS IN THOUSANDS)
THE BROWN SCHOOLS ADJUSTMENTS ----------------------------------------------------- THE THE BROWN PRO FORMA PSYCHIATRIC BROWN SCHOOLS OF PURCHASE PRO FORMA SOLUTIONS SCHOOLS(1) OKLAHOMA, INC. ADJUSTMENTS COMBINED ----------- ---------- -------------- ----------- --------- ASSETS Current assets: Cash and cash equivalents........ $ 4,045 $ -- $ 2 $ (2)(2) $ 4,045 Accounts receivable, net......... 22,137 8,913 2,213 -- 33,263 Other current assets............. 2,832 345 114 -- 3,291 ------- -------- ------- -------- -------- Total current assets........... 29,014 9,258 2,329 (2) 40,599 Property, plant and equipment, net.............................. 33,764 13,321 2,226 30,625(3) 79,936 Costs in excess of net assets acquired, net.................... 26,846 -- 3,004 11,268(4) 41,118 Amortizable intangible asset, net.............................. 3,558 -- -- -- 3,558 Other assets....................... 3,438 39 24 682(5) 4,183 ------- -------- ------- -------- -------- Total assets....................... $96,620 $ 22,618 $ 7,583 $ 42,573 $169,394 ======= ======== ======= ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings............ $ 9,529 $ -- $ -- $ 15,171(6) 24,700 Accounts payable................. 3,486 6,172 1,054 (597)(2) 10,115 Accrued liabilities.............. 12,610 2,385 661 (572)(2) 15,084 ------- -------- ------- -------- -------- Total current liabilities...... 25,625 8,557 1,715 14,002 49,899 Long-term debt, less current portion.......................... 36,657 -- -- 36,000(6) 72,657 Other liabilities.................. 3,447 -- -- -- 3,447 ------- -------- ------- -------- -------- Total liabilities.................. 65,729 8,557 1,715 50,002 126,003 Series A convertible preferred stock............................ -- -- -- 12,500(6) 12,500 Common stock....................... 77 -- 1 (1)(7) 77 Additional paid-in capital......... 35,013 14,061 10,749 (24,810)(7) 35,013 Notes receivable from stockholders..................... (711) -- -- -- (711) Accumulated (deficit) earnings..... (3,488) -- (4,882) 4,882(7) (3,488) Treasury stock..................... -- -- -- -- -- ------- -------- ------- -------- -------- Total stockholders' equity......... 30,891 14,061 5,868 (19,929) 30,891 ------- -------- ------- -------- -------- Total liabilities and stockholders' equity........................... $96,620 $ 22,618 $ 7,583 $ 42,573 $169,394 ======= ======== ======= ======== ======== RAMSAY AND FINANCING TRANSACTIONS ADJUSTMENTS ----------------------------------- OFFERING AND PURCHASE PRO FORMA PRO FORMA RAMSAY ADJUSTMENTS COMBINED -------- ----------- --------- ASSETS Current assets: Cash and cash equivalents........ $ 328 $ 2,714 $ 7,087 Accounts receivable, net......... 21,089 -- 54,352 Other current assets............. 7,007 -- 10,298 -------- --------- -------- Total current assets........... 28,424 2,714 71,737 Property, plant and equipment, net.............................. 33,732 -- 113,668 Costs in excess of net assets acquired, net.................... 2,286 28,755(8) 72,159 Amortizable intangible asset, net.............................. -- -- 3,558 Other assets....................... 7,698 1,896(9) 14,470 -------- --------- -------- Total assets....................... $ 72,140 $ 33,365 $274,899 ======== ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings............ $ 3,856 $ (27,002)(10) $ 1,554 Accounts payable................. 4,504 -- 14,619 Accrued liabilities.............. 9,431 -- 24,515 -------- --------- -------- Total current liabilities...... 17,791 (27,002) 40,688 Long-term debt, less current portion.......................... 13,061 89,714(10) 175,432 Other liabilities.................. 3,675 2,979(11) 10,101 -------- --------- -------- Total liabilities.................. 34,527 65,691 226,221 Series A convertible preferred stock............................ -- 12,500(10) 25,000 Common stock....................... 95 (95)(12) 77 Additional paid-in capital......... 127,169 (127,169)(12) 35,013 Notes receivable from stockholders..................... -- -- (711) Accumulated (deficit) earnings..... (85,752) 78,539(12) (10,701) Treasury stock..................... (3,899) 3,899(12) -- -------- --------- -------- Total stockholders' equity......... 37,613 (44,826) 23,678 -------- --------- -------- Total liabilities and stockholders' equity........................... $ 72,140 $ 33,365 $274,899 ======== ========= ========
2 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2003 (DOLLARS IN THOUSANDS) (1) This column presents condensed combined balance sheet data for five of the six facilities acquired from The Brown Schools in April 2003, including The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital, Inc. This group of five facilities was audited separately from The Brown Schools of Oklahoma, Inc. (2) Represents the elimination of cash and cash equivalents ($2), Medicare liabilities ($572) and bank overdrafts ($597) not acquired in connection with the acquisition of The Brown Schools. (3) Represents the adjustment of the property, plant and equipment of The Brown Schools to reflect their appraised value. (4) Represents adjustment to goodwill, calculated as follows: Total required financing.................................... $ 63,671 Less: Estimated capitalized financing costs................. (682) Less: Net assets acquired................................... (51,721) -------- Adjustment to goodwill...................................... $ 11,268 ========
(5) Represents estimated capitalized financing costs incurred in connection with the acquisition of The Brown Schools. (6) Represents the incurrence of $15,171 of short-term borrowings and $36,000 of long-term debt and the issuance of $12,500 of our series A convertible preferred stock to finance the acquisition of The Brown Schools. (7) Reflects the elimination of The Brown Schools' equity accounts and existing accumulated (deficit) earnings. (8) Represents adjustment to goodwill, calculated as follows: Total purchase price........................................ $ 58,075 Plus: Estimated transaction costs........................... 7,600 Less: Net assets acquired................................... (36,920) -------- Adjustment to goodwill...................................... $ 28,755 ========
(9) Represents estimated capitalized financing costs of $4,650 incurred in connection with the acquisition of Ramsay, less write-off of existing capitalized financing costs due to extinguishment of debt ($1,481) for Psychiatric Solutions and ($693) for Ramsay, less write-off of estimated capitalized financing costs incurred in connection with the acquisition of The Brown Schools ($580). (10) Represents (a) the incurrence of $150,000 of long-term debt, less the repayment of Ramsay's short-term debt ($3,856) and long-term debt ($13,061) and the repayment a portion of Psychiatric Solutions' short-term debt ($23,146) and a portion of its long-term debt ($47,225) and (b) the issuance of $12,500 of our series A convertible preferred stock, to finance the acquisition of Ramsay. (11) Represents a reclassification of put warrants from debt to other liabilities due to the pay off of $10,000 of related debt to the 1818 Fund. These warrants were exercised and classified as temporary equity in April 2003. (12) Reflects the elimination of Ramsay's equity accounts and existing accumulated (deficit) earnings of $85,752, debt prepayment penalties of ($3,350), a write-off of capitalized finance cost of ($2,061), and a write-off of the original issue discount on debt of ($1,802) related to the pay-off of $10,000 of debt to the 1818 Fund. 3 UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR THE TWELVE MONTHS ENDED MARCH 31, 2003 (DOLLARS IN THOUSANDS)
THE BROWN SCHOOLS ADJUSTMENTS ------------------------------------------------------- THE THE BROWN PSYCHIATRIC BROWN SCHOOLS OF PRO FORMA PRO FORMA SOLUTIONS(1) SCHOOLS(2) OKLAHOMA, INC. ADJUSTMENTS COMBINED ------------ ---------- -------------- ----------- ---------- Revenue.................................. $143,643 $59,165 $17,804 $ -- $220,612 -------- ------- ------- ------- -------- Expenses: Salaries, wages and employee benefits............................. 71,123 33,330 8,607 -- 113,060 Professional fees...................... 18,521 4,238 688 -- 23,447 Rentals and leases..................... 1,186 723 311 -- 2,220 Other operating expenses(18)........... 32,916 14,268 6,189 (3,342)(3) 50,031 Provision for doubtful accounts........ 4,422 1,716 81 -- 6,219 Depreciation and amortization.......... 2,415 1,536 239 (82)(4) 4,108 Other expenses(5)...................... 1,942 458 -- -- 2,400 -------- ------- ------- ------- -------- Total expenses................... 132,525 56,269 16,115 (3,424) 201,485 Interest expense......................... (6,598) (6,200) (895) 1,793(6) (11,900) -------- ------- ------- ------- -------- Earnings from continuing operations before taxes........................... 4,520 (3,304) 794 5,217 7,227 Provision (benefit) for taxes............ (2,966) -- -- 1,237(7) (1,729) -------- ------- ------- ------- -------- Net earnings from continuing operations............................. 7,486 (3,304) 794 3,980 8,956 Accrued dividends on series A convertible preferred stock........................ -- -- -- 637(8) 637 -------- ------- ------- ------- -------- Net earnings from continuing operations applicable to common stockholders...... $ 7,486 $(3,304) $ 794 $ 3,343 $ 8,319 ======== ======= ======= ======= ======== Other Financial Data: Capital expenditures................... $ 1,911 $ 1,095 $ 291 $ -- $ 3,297 RAMSAY AND FINANCING TRANSACTIONS ADJUSTMENTS ---------------------- PRO FORMA PRO FORMA RAMSAY ADJUSTMENTS COMBINED -------- ----------- --------- Revenue.................................. $145,852 $ -- $366,464 -------- ------- -------- Expenses: Salaries, wages and employee benefits............................. 92,318 (3,000)(9) 202,378 Professional fees...................... 3,991 -- 27,438 Rentals and leases..................... 4,434 -- 6,654 Other operating expenses(18)........... 32,802 -- 82,833 Provision for doubtful accounts........ 1,549 -- 7,768 Depreciation and amortization.......... 2,593 -- 6,701 Other expenses(5)...................... -- -- 2,400 -------- ------- -------- Total expenses................... 137,687 (3,000) 336,172 Interest expense......................... (2,342) (6,102)(10) (20,344) -------- ------- -------- Earnings from continuing operations before taxes........................... 5,823 (3,102) 9,948 Provision (benefit) for taxes............ (5,773) (388) (7,890) -------- ------- -------- Net earnings from continuing operations............................. 11,596 (2,715) 17,837 Accrued dividends on series A convertible preferred stock........................ -- 637(12) 1,274 -------- ------- -------- Net earnings from continuing operations applicable to common stockholders...... $ 11,596 $(3,352) $ 16,563 ======== ======= ======== Other Financial Data: Capital expenditures................... $ 2,010 $ -- $ 5,307
4 UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR THE THREE MONTHS ENDED MARCH 31, 2003 (DOLLARS IN THOUSANDS)
THE BROWN SCHOOLS ADJUSTMENTS ------------------------------------------------------ THE THE BROWN PSYCHIATRIC BROWN SCHOOLS OF PRO FORMA PRO FORMA SOLUTIONS SCHOOLS(2) OKLAHOMA, INC. ADJUSTMENTS COMBINED ----------- ---------- -------------- ----------- ---------- Revenue................................. $37,104 $13,851 $4,395 $ -- $55,350 ------- ------- ------ ------ ------- Expenses: Salaries, wages and employee benefits............................ 17,785 8,319 2,146 -- 28,250 Professional fees..................... 4,451 995 185 -- 5,631 Rentals and leases.................... 248 188 77 -- 513 Other operating expenses(18).......... 8,850 3,434 1,551 (814)(3) 13,021 Provision for doubtful accounts....... 1,322 388 20 -- 1,730 Depreciation and amortization......... 667 279 59 65 (4) 1,070 Other expenses........................ 499 458 -- -- 957 ------- ------- ------ ------ ------- Total expenses.................. 33,822 14,061 4,038 (749) 51,172 Interest expense........................ (1,420) (1,414) (257) 389 (6) (2,702) ------- ------- ------ ------ ------- Earnings from continuing operations before taxes.......................... 1,862 (1,624) 100 1,138 1,476 Provision (benefit) for taxes........... 1,073 -- -- (147)(7) 926 ------- ------- ------ ------ ------- Net earnings from continuing operations............................ 789 (1,624) 100 1,285 550 Accrued dividends on series A convertible preferred stock........... -- -- -- 156 (8) 156 ------- ------- ------ ------ ------- Net earnings from continuing operations applicable to common stockholders..... $ 789 $(1,624) $ 100 $1,129 $ 394 ======= ======= ====== ====== ======= Other Financial Data: Capital expenditures.................. $ 628 $ 569 $ 75 $ -- $ 1,272 RAMSAY AND FINANCING TRANSACTIONS ADJUSTMENTS --------------------- PRO FORMA PRO FORMA RAMSAY ADJUSTMENTS COMBINED ------- ----------- --------- Revenue................................. $36,527 $ -- $91,877 ------- ------- ------- Expenses: Salaries, wages and employee benefits............................ 23,571 (750)(9) 51,071 Professional fees..................... 783 -- 6,414 Rentals and leases.................... 1,234 -- 1,747 Other operating expenses(18).......... 8,537 -- 21,558 Provision for doubtful accounts....... 402 -- 2,132 Depreciation and amortization......... 641 -- 1,711 Other expenses........................ -- -- 957 ------- ------- ------- Total expenses.................. 35,168 (750) 85,590 Interest expense........................ (557) (1,770)(10) (5,029) ------- ------- ------- Earnings from continuing operations before taxes.......................... 802 (1,020) 1,258 Provision (benefit) for taxes........... 305 (388)(11) 843 ------- ------- ------- Net earnings from continuing operations............................ 497 (633) 415 Accrued dividends on series A convertible preferred stock........... -- 156 (12) 312 ------- ------- ------- Net earnings from continuing operations applicable to common stockholders..... $ 497 $ (789) $ 103 ======= ======= ======= Other Financial Data: Capital expenditures.................. $ 413 $ -- $ 1,685
5 UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR THE THREE MONTHS ENDED MARCH 31, 2002 (DOLLARS IN THOUSANDS)
RIVEREDGE AND PMR ADJUSTMENTS ----------------------------------------------- PRO FORMA PSYCHIATRIC PSYCHIATRIC RIVEREDGE PURCHASE SOLUTIONS SOLUTIONS HOSPITAL PMR ADJUSTMENTS PRO FORMA ----------- --------- ------- ----------- ----------- Revenue........................ $23,188 $6,544 $ 4,804 $ -- $34,536 ------- ------ ------- ----- ------- Expenses: Salaries, wages and employee benefits.................... 13,970 3,616 555 -- 18,141 Professional fees............. 3,108 212 68 -- 3,388 Rentals and leases............ 190 25 33 -- 248 Other operating expenses(18)................ 2,671 1,861 4,161 -- 8,693 Provision for (recovery of) doubtful accounts........... 715 44 (1,931) -- (1,172) Depreciation and amortization................ 386 80 116 109(13) 691 Other expenses(5)............. -- -- (18) -- (18) ------- ------ ------- ----- ------- Total expenses.......... 21,040 5,838 2,984 109 29,971 Interest expense.............. (1,372) (139) (2) (427)(14) (1,940) Other income-interest......... -- -- 109 (109)(15) -- ------- ------ ------- ----- ------- Earnings from continuing operations before taxes..... 776 567 1,927 (645) 2,625 Provision (benefit) for taxes....................... 21 221 (88) (187)(16) (33) ------- ------ ------- ----- ------- Net earnings from continuing operations.................. 755 346 2,015 (458) 2,658 Accrued dividends on series A convertible preferred stock....................... -- -- -- -- -- ------- ------ ------- ----- ------- Net earnings from continuing operations applicable to common stockholders......... $ 755 $ 346 $ 2,015 $(458) $ 2,658 ======= ====== ======= ===== ======= Other Financial Data: Capital expenditures.......... $ 187 $ -- $ -- $ -- $ 187 RAMSAY AND FINANCING TRANSACTIONS THE BROWN SCHOOLS ADJUSTMENTS ADJUSTMENTS ----------------------------------------------------- --------------------- THE THE BROWN BROWN SCHOOLS OF PRO FORMA PRO FORMA PRO FORMA PRO FORMA SCHOOLS(2) OKLAHOMA, INC. ADJUSTMENTS COMBINED RAMSAY ADJUSTMENTS COMBINED ---------- -------------- ----------- --------- ------- ----------- ---------- Revenue........................ $14,860 $4,411 $ -- $53,807 $35,831 $ -- $89,638 ------- ------ ----- ------- ------- ------ ------- Expenses: Salaries, wages and employee benefits.................... 8,920 2,046 -- 29,107 22,196 (750)(9) 50,553 Professional fees............. 1,066 164 -- 4,618 822 -- 5,440 Rentals and leases............ 173 63 -- 484 963 -- 1,447 Other operating expenses(18)................ 3,567 1,514 (863)(3) 12,911 7,907 -- 20,818 Provision for (recovery of) doubtful accounts........... 400 -- -- (772) 720 -- (52) Depreciation and amortization................ 300 63 (40)(4) 1,014 625 -- 1,639 Other expenses(5)............. -- -- -- (18) 125 -- 107 ------- ------ ----- ------- ------- ------ ------- Total expenses.......... 14,426 3,850 (903) 47,344 33,358 (750) 79,952 Interest expense.............. (843) (215) (290)(6) (3,288) (690) (903)(10) (4,881) Other income-interest......... -- -- -- -- -- -- -- ------- ------ ----- ------- ------- ------ ------- Earnings from continuing operations before taxes..... (409) 346 613 3,175 1,783 (153) 4,805 Provision (benefit) for taxes....................... -- -- -- (33) 214 -- 181 ------- ------ ----- ------- ------- ------ ------- Net earnings from continuing operations.................. (409) 346 613 3,208 1,569 (153) 4,624 Accrued dividends on series A convertible preferred stock....................... -- -- 156(8) 156 -- 156(12) 312 ------- ------ ----- ------- ------- ------ ------- Net earnings from continuing operations applicable to common stockholders......... $ (409) $ 346 $ 457 $ 3,052 $ 1,569 $ (309) $ 4,312 ======= ====== ===== ======= ======= ====== ======= Other Financial Data: Capital expenditures.......... $ 119 $ 127 $ -- $ 433 $ 876 $ -- $ 1,309
6 UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2002 (DOLLARS IN THOUSANDS)
RIVEREDGE AND PMR ADJUSTMENTS THE BROWN SCHOOLS ADJUSTMENTS ----------------------------------------------- ----------------------------- PRO FORMA PSYCHIATRIC THE THE BROWN PSYCHIATRIC RIVEREDGE PURCHASE SOLUTIONS BROWN SCHOOLS OF SOLUTIONS HOSPITAL PMR ADJUSTMENTS PRO FORMA SCHOOLS(2) OKLAHOMA, INC. ----------- --------- ------- ----------- ----------- ---------- -------------- Revenue..................... $113,912 $14,152 $13,011 $ -- $141,075 $60,174 $17,820 -------- ------- ------- -------- -------- ------- ------- Expenses: Salaries, wages and employee benefits........ 62,326 8,907 1,513 (1,267)(17) 71,479 33,931 8,507 Professional fees.......... 14,373 1,271 1,814 -- 17,458 4,309 667 Rentals and leases......... 870 52 264 -- 1,186 708 297 Other operating expenses(18)............. 20,651 2,576 9,532 -- 32,759 14,401 6,152 Provision for (recovery of) doubtful accounts........ 3,681 211 (1,964) -- 1,928 1,728 61 Depreciation and amortization............. 1,770 140 181 348(13) 2,439 1,557 243 Other expenses(5).......... -- -- 1,425 -- 1,425 -- -- -------- ------- ------- -------- -------- ------- ------- Total expenses........... 103,671 13,157 12,765 (919) 128,674 56,634 15,927 Interest expense............ (5,564) (628) (4) (922)(14) (7,118) (5,629) (853) Other income -- interest.... -- -- 209 (209)(15) -- -- -- -------- ------- ------- -------- -------- ------- ------- Earnings from continuing operations before taxes.... 4,677 367 451 (212) 5,283 (2,089) 1,040 Provision (benefit) for taxes...................... (1,007) 190 (3,255) -- (4,072) -- -- -------- ------- ------- -------- -------- ------- ------- Net earnings from continuing operations................. 5,684 177 3,706 (212) 9,355 (2,089) 1,040 Accrued dividends on series A convertible preferred stock...................... -- -- -- -- -- -- -- -------- ------- ------- -------- -------- ------- ------- Net earnings from continuing operations applicable to common stockholders........ $ 5,684 $ 177 $ 3,706 $ (212) $ 9,355 $(2,089) $ 1,040 ======== ======= ======= ======== ======== ======= ======= Other Financial Data: Capital expenditures....... $ 1,470 $ -- $ -- $ -- $ 1,470 $ 645 $ 343 RAMSAY AND FINANCING TRANSACTIONS BROWN SCHOOLS ADJUSTMENTS --------------------------- ---------------------- PRO FORMA PRO FORMA PRO FORMA PRO FORMA ADJUSTMENTS COMBINED RAMSAY ADJUSTMENTS COMBINED ----------- ---------- -------- ----------- --------- Revenue..................... $ -- $219,069 $145,156 $ -- $364,225 -------- -------- -------- -------- -------- Expenses: Salaries, wages and employee benefits........ -- 113,917 90,943 (3,000)(9) 201,860 Professional fees.......... -- 22,434 4,030 -- 26,464 Rentals and leases......... -- 2,191 4,163 -- 6,354 Other operating expenses(18)............. (3,391)(3) 49,921 32,172 -- 82,093 Provision for (recovery of) doubtful accounts........ -- 3,717 1,867 -- 5,584 Depreciation and amortization............. (187)(4) 4,052 2,577 -- 6,629 Other expenses(5).......... -- 1,425 125 -- 1,550 -------- -------- -------- -------- -------- Total expenses........... (3,578) 197,657 135,877 (3,000) 330,534 Interest expense............ 1,114(6) (12,486) (2,475) (5,235)(10) (20,196) Other income -- interest.... -- -- -- -- -- -------- -------- -------- -------- -------- Earnings from continuing operations before taxes.... 4,692 8,926 6,804 (2,235) 13,495 Provision (benefit) for taxes...................... 1,384(7) (2,688) (5,864) -- (8,552) -------- -------- -------- -------- -------- Net earnings from continuing operations................. 3,308 11,614 12,668 (2,235) 22,047 Accrued dividends on series A convertible preferred stock...................... 637(8) 637 -- 637(12) 1,274 -------- -------- -------- -------- -------- Net earnings from continuing operations applicable to common stockholders........ $ 2,671 $ 10,977 $ 12,668 $(2,872) $ 20,773 ======== ======== ======== ======== ======== Other Financial Data: Capital expenditures....... $ -- $ 2,458 $ 2,473 $ -- $ 4,931
7 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENTS (DOLLARS IN THOUSANDS) (1) Includes the historical results of Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) and PMR from the beginning of the period presented, except for capital expenditures, which are for Psychiatric Solutions only. (2) This column presents five of the six facilities acquired from The Brown Schools in April 2003, including The Brown Schools of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The Brown Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital, Inc. This group of five facilities was audited separately from The Brown Schools of Oklahoma, Inc. (3) Represents the elimination of overhead costs (salaries and expenses) historically allocated to the operation of The Brown Schools, plus Psychiatric Solutions' expected incremental costs to manage the business. (4) Reflects adjustment to depreciation and amortization resulting from changes in the valuation of The Brown Schools' fixed assets to reflect their appraised value. (5) Other expenses include (a) for the three months ended March 31, 2003, expense of $960 to revalue put warrants, income of $461 to release reserves on stockholder notes and a loss of $458 related to a sale of land; (b) for the three months ended March 31, 2002, asset impairment charges incurred at Ramsay of $125 and $18 of recoveries from the sale of previously written down assets at PMR; and (c) for the year ended December 31, 2002, asset impairment charges incurred at Ramsay of $125, $18 of recoveries from the sale of previously written down assets at PMR, $1,900 of employee severance and termination costs associated with the winding up of PMR and $457 of other various gains associated with PMR. (6) Represents the elimination of historical interest expense and the recording of interest expense relating to the financing of the acquisition of The Brown Schools. (7) Reflects the expected provision for income taxes resulting from the acquisition of The Brown Schools. (8) Reflects pay-in-kind dividends related to the issuance of $12,500 of Psychiatric Solutions' series A convertible preferred stock concurrently with the acquisition of The Brown Schools. (9) Reflects the elimination of duplicative costs related to executive compensation, the former board of directors of Ramsay and other administrative fees and expenses which are directly related to the acquisition of Ramsay. (10) Represents the elimination of historical interest expense and the recording of interest expense relating to the financing of the acquisition of Ramsay and the Financing Transactions based on an assumed interest rate for the notes. (11) Reflects the expected provision for income taxes resulting from the acquisition of Ramsay. For Ramsay's twelve months ended March 31, 2003, no income taxes were recorded for the period from April 1, 2002 to December 31, 2002 due to Ramsay's net deferred tax valuation allowance. (12) Reflects pay-in-kind dividends related to the issuance of $12,500 of Psychiatric Solutions' series A convertible preferred stock concurrently with the acquisition of Ramsay. (13) Reflects adjustment to depreciation and amortization resulting from changes in the valuation of Riveredge Hospital's and PMR's fixed assets to reflect their appraised value. (14) Represents the elimination of historical interest expense and the recording of interest expense relating to the financing of the acquisitions of Riveredge Hospital and PMR. (15) Reflects lost interest income due to the reduction in cash, cash equivalents and short-term investments balances. (16) Represents the elimination of a federal income tax provision as a result of the net deferred tax valuation allowance. (17) Reflects the reversal of accrued payouts to Riveredge Hospital option holders. (18) Other operating expenses are comprised of (a) for Psychiatric Solutions, other operating expenses plus supplies expense, (b) for Riveredge Hospital, other operating expenses plus supplies, contract services, insurance, utilities, real estate taxes less rentals and leases, (c) for PMR, other operating expenses plus research and development expenses, (d) for The Brown Schools, other operating expenses plus supplies and management fees, (e) for The Brown Schools of Oklahoma, other operating expenses plus supplies, purchased services and management fees and (f) for Ramsay, other operating expenses less professional fees and rentals and leases. 8