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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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YOUTH SERVICES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(STATE OR OTHER JURISDICTION OF
INCORPORATION ORGANIZATION)
52-1715690
(I.R.S. EMPLOYER
OR IDENTIFICATION NO.)
2 PARK CENTER COURT, SUITE 200
OWINGS MILLS, MARYLAND 21117
(410) 356-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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WILLIAM P. MOONEY
CHIEF FINANCIAL OFFICER
YOUTH SERVICES INTERNATIONAL, INC.
2 PARK CENTER COURT, SUITE 200
OWINGS MILLS, MARYLAND 21117
(410) 356-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
MARK S. DEMILIO, ESQUIRE
MILES & STOCKBRIDGE, A PROFESSIONAL CORPORATION
10 LIGHT STREET
BALTIMORE, MARYLAND 21202
(410) 727-6464
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis, pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share..... 1,500,000 $15.125 $22,687,500 $6,875
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</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
YOUTH SERVICES INTERNATIONAL, INC.
1,500,000 SHARES OF COMMON STOCK
This Prospectus relates to the resale of up to 1,500,000 shares of the
common stock, par value $.01 per share (the "Common Stock"), of Youth Services
International, Inc., a Maryland corporation ("YSI" or the "Company"), by certain
shareholders thereof named herein (the "Selling Shareholders").
The shares registered hereby (the "Shares") will be sold by the Selling
Shareholders directly to purchasers. The Selling Shareholders will receive all
of the net proceeds from the sale of the Shares and will pay all the expenses of
registration of the Shares and all underwriting discounts and selling
commissions (other than those paid by the purchasers), if any, applicable to the
sale of the Shares.
The Selling Shareholders and any broker-dealers, agents or underwriters
that participate in the distribution of the Shares may be deemed to be
"underwriters," as such term is defined under Section 2(11) of the Securities
Act, and any commission or profit received by them in connection with the resale
of the Shares may be deemed to be underwriting commissions or discounts under
the Securities Act.
SEE "RISK FACTORS" COMMENCING ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE SHARES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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UNDERWRITING PROCEEDS TO
DISCOUNTS OR SELLING
PRICE TO PUBLIC COMMISSIONS(1) SHAREHOLDERS(2)
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<S> <C> <C> <C>
Per Unit............................. $15.125 $0.125 $15.00
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Total................................ $22,687,500 $187,500 $22,500,000
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</TABLE>
(1) The Shares will be placed with purchasers by Gilder Gagnon Howe & Co., as
placement agent, on a best efforts basis and will be open for thirty days,
without escrow.
(2) The Selling Shareholders will pay all expenses in connection with this
registration and the sale hereby, estimated to be approximately $48,182.
The date of this Prospectus is February , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10048, and copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web, the address of which is http:/www.sec.gov., that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission. Such reports, proxy statements and other information concerning the
Company also may be inspected at the offices of the Nasdaq Stock Market, Reports
Section, at 1735 K Street, Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (hereinafter, together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
securities covered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the securities covered by this
Prospectus, reference is made to the Registration Statement that is on file at
the offices of the Commission and may be obtained upon payment of the fee
prescribed by the Commission, may be examined without charge at the offices of
the Commission or may be obtained from the Commission's site on the World Wide
Web. Statements contained in this Prospectus as to the contents of any documents
referred to are not necessarily complete, and in each such incidence, are
qualified in all respects by reference to the applicable documents filed with
the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996;
(b) the Company's Current Reports on Form 8-K/A dated September 25,
1995; Form 8-K/A dated October 2, 1995; Form 8-K dated March 27, 1996 (as
filed with the SEC on April 10, 1996); and Form 8-K/A dated October 17,
1996;
(c) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1996;
(d) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1996; and
(e) the description of the Company's Common Stock contained in the
section titled "Description of Capital Stock" in the Preliminary Prospectus
included as part of the Company's Registration Statement on Form SB-2 (Reg.
No. 33-71958) as filed with the Commission on November 19, 1993 and
thereafter amended and incorporated by reference in the Company's
Registration Statement on Form 8-A filed with the Commission pursuant to
Section 12 of the Exchange Act, and any amendment or report filed for the
purpose of updating such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of the offering of securities hereunder shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained in a document
incorporated or deemed to be
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incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide, without charge, to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of
such person, a copy of any or all of the documents incorporated by reference
herein, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Youth Services International, Inc., 2 Park Center
Court, Suite 200, Owings Mills, Maryland 21117, Attention: Kendel S. Ehrlich,
Secretary, telephone: (410) 356-8600.
RISK FACTORS
In addition to the other information in this Prospectus, the following
information should be considered carefully by potential purchasers in evaluating
the Company and its business before making an investment in the securities
offered hereunder:
ALL SHARE AND PER SHARE AMOUNTS IN THIS PROSPECTUS HAVE BEEN ADJUSTED TO
REFLECT A 3-FOR-2 STOCK SPLIT (EFFECTED THROUGH A STOCK DIVIDEND OF ONE SHARE
FOR EVERY TWO SHARES OUTSTANDING OR RESERVED FOR ISSUANCE) EFFECTED MAY 24,
1996.
MANAGEMENT OF GROWTH
The Company has experienced significant growth since its inception and
expects to continue to grow in the foreseeable future. The Company's success
will depend in part on the ability of the Company to obtain and train qualified
personnel to handle the increasing number of youths in its care; to develop and
operate the information technology systems and financial controls to manage the
increased number of personnel, responsibilities and youths; to manage its
resources over a larger base of programs and activities; to integrate
efficiently and effectively the business and financial functions of any acquired
or other newly developed programs; and to integrate any acquired programs into
the Company's programmatic functions and philosophy. There can be no assurance
that the Company will be able to successfully accomplish such integration from
its historic acquisitions or that it will be able to do so on the larger scale
that may occur as the Company continues to grow.
CONTRACT REVENUES AND PROFIT
The Company's operations currently consist of programs that are based on
various contractual relationships. The Company's program revenues are generated
under the terms of these contracts that generally call for fixed per diem
payments that are based upon program occupancy. Such payments are recognized as
revenues for financial statement purposes as services are performed. One of the
Company's contracts contains a gross maximum price cost reimbursement provision
that results in the recognition of revenues as specific reimbursable costs are
incurred. The Company's ability to estimate and control its costs with respect
to all of these contracts is critical to its profitability.
DEPENDENCE UPON SIGNIFICANT CONTRACTS
Two of the Company's long-term contracts constituted, in the aggregate,
approximately 23.5% of the Company's revenues for the fiscal year ended June 30,
1996 (the contract to operate The Charles H. Hickey, Jr. School (15%) which
expires on June 30, 1998, and the contract to operate the Victor Cullen Academy
(8.5%) which expires on August 31, 1997). These contracts, will be subject to
competitive bidding when they expire. The Company's ability to maintain
profitable operations will be dependent upon, among other factors, the
successful continuance of its existing contracts and programs. There can be no
assurance that such contracts will be renewed or extended or that they will be
renewed or extended on terms favorable to the
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Company, that such programs will be continued or that the Company will be able
to maintain profitable operations.
POSSIBLE TERMINATION OF CONTRACTS AT THE DISCRETION OF GOVERNMENT AGENCIES
The terms of a number of the contracts with government agencies pursuant to
which the Company operates its programs provide that such contracts (i) are
subject to the ongoing appropriation by state legislatures and authorities of
sufficient funds, and (ii) may be terminated for any reason by providing the
Company notice of termination immediately or within specified periods of time
(ranging from 10 to 90 days) or otherwise at the "convenience" of the state and
local authorities. These terms give state and local authorities significant
discretion in terminating or modifying their contractual arrangements with the
Company. A number of state and local governments have experienced fiscal
pressures associated with a reduced tax base and other factors. Accordingly, the
Company's operations could be materially adversely affected by the termination
or modification of an agreement or agreements at any time for reasons that may
be outside of the Company's control.
GOVERNMENT CONTRACTS AND CONTRACTING PROCESS
Many of the Company's contracts are with government agencies. Government
contracts generally are subject to audits and investigations by government
agencies. These audits and investigations involve a review of the contractor's
performance on its contracts, as well as its pricing practices, its cost
structure and its compliance with applicable laws, regulations and standards. If
any costs are improperly charged to a contract, the costs are not reimbursable
and, if already reimbursed, will have to be refunded to the government agency.
Furthermore, if improper or illegal activities are discovered in the course of
any audits or investigations, the contractor may be subject to various civil and
criminal penalties and administrative sanctions, which may include termination
of contracts, forfeitures of profits, suspension of payments, fines and
suspension or debarment from doing business with the government agency.
Typically, the Company must invest significant time and resources to
prepare detailed analyses and proposals addressing the needs of a government
authority with which it seeks to do business. Such proposals must be reviewed by
appropriate government authorities before the contract is awarded. Accordingly,
new contracts tend to have long lead times from initiation of marketing efforts
to execution and are subject to significant uncertainty regarding successful
conclusion at all times during the process. There can be no assurance that
additional contracts will be obtained by the Company or continued once they are
obtained.
NOT-FOR-PROFIT ORGANIZATIONS
The Company has conducted and will conduct a portion of its business
pursuant to subcontracts or similar relationships with not-for- profit entities
organized under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), that have obtained status as organizations exempt from
federal income taxation under Section 501(a) of the Code. State governments,
agencies or licensing authorities that contract with the not-for-profit
organizations are eligible to receive matching funds from the federal government
as a partial reimbursement for certain program expenses charged by the Company.
If the exempt status of any of these not-for-profit organizations is revoked,
the state governments, agencies or licensing authorities may be denied federal
matching funds and may reduce their placement of students with, or the use of,
such organization, causing a loss of gross revenues to the Company. In addition,
in such event, these organizations would be taxed on their net income, if any,
which could adversely affect their ability to pay the Company pursuant to their
subcontracts.
GOVERNMENTAL LIMITATIONS AND REGULATIONS
The industry in which the Company operates is subject to extensive federal,
state and local regulation including stringent licensing requirements. Failure
to comply with any applicable laws, rules or regulations or to maintain its
licenses could have a material adverse effect on the Company's business,
financial condition and results of operations. Furthermore, the current and
future operations of the Company may be subject to
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additional regulations as a result of, among other factors, new statutes and
regulations and changes in the manner in which existing statutes and regulations
are or may be interpreted or applied. Any such additional regulations may have a
material adverse effect on the Company's business, financial condition and
results of operations.
In the course of the Company's business, licensing authorities may place
certain provisions on program operations that are required to be resolved in
order to maintain a license. During such provisional period, the Company may not
be able to obtain approvals for increases in licensed capacity and may
experience other limitations.
The Company's ability to implement its business strategy may be
significantly affected by the legal power and structures of the state and local
governments with which the Company does or seeks to do business. The Company
believes that the laws of many states neither specifically authorize nor
prohibit governments from entering into contracts with private sector companies
for the types of services offered by the Company. It is possible that a third
party could challenge a government's decision to award a contract to the Company
in such a situation. In certain jurisdictions, governments may be altogether
precluded by law from entering into management contracts with private sector
companies. Also, while privatization of services has been used in one form or
another by many states, there can be no assurance that state and local
governments will continue to utilize private vendors to manage facilities and/or
programs for juvenile offenders. In addition, many state and local governments
are required to enter into a competitive bidding procedure before awarding
contracts for products or services. The laws of certain jurisdictions may also
require the Company to award subcontracts on a competitive basis and to
subcontract to varying degrees with businesses owned by women or minorities. It
is possible that a third party could challenge sole-source awards to the Company
or the Company's subcontracts as inconsistent with competitive bidding or
minority contracting requirements.
The health care industry is subject to extensive regulation by federal,
state and local governments, including regulations under Medicare, Medicaid and
Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS")
programs. Certain of the Company's programs, including its RTC's, are subject to
such regulation. Failure to comply with such laws and regulations can cause
fines and other penalties to the Company and can cause expulsion from Medicare,
Medicaid, CHAMPUS or other program involvement which sanctions could have a
material adverse affect on the Company. Government-imposed limitations on
Medicare and Medicaid reimbursement have placed downward pressures on rates
charged under these programs and have caused the private sector to bear a
greater share of increasing health care costs. As a result of the continued
escalation of health care costs and the inability of many individuals to obtain
health insurance, numerous proposals have been or may be considered in the
United States Congress and various state legislatures relating to health care
reform. Certain measures, if adopted, could affect the rates charged by the
Company for certain of its services, could affect the manner in which care must
be provided or could otherwise have a material adverse affect on the Company's
business.
The Company believes it is in compliance in all material respects with all
applicable rules and regulations.
POTENTIAL THIRD-PARTY LIABILITY
Many aspects of the Company's operations involve risks of liability,
including potential third-party claims by students or other persons for personal
injury or other damage resulting from contact with the Company's facilities,
programs, personnel or students (including students who leave the Company's
facilities without Company authorization and cause bodily injury or property
damage). Furthermore, the Company's contracts often require the Company to
indemnify and hold the respective government agency harmless from and against
any damages to which the government agency may become subject by reason of the
Company's operations. The Company carries general liability insurance that
provides coverage for certain liability risks faced by the Company, including
accident and personal injury (including bodily injury or property damage to a
third party where the Company is found to be negligent in its supervision
practices). There can be no assurance, however, that the Company's insurance
will be adequate to cover any potential third-party claims.
Committed offenders often seek redress in federal courts pursuant to
federal civil rights statutes for alleged violations of their constitutional
rights caused by the overall condition of their confinement or by
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specific conditions or incidents. The Company may be subject to liability if any
such claim or proceeding is made or instituted against the Company or the state
with which the Company contracts or subcontracts.
The operation of the Company's business also exposes it to a greater than
average risk of charges by employees of age or race discrimination filed with
the Equal Employment Opportunity Commission and equivalent state agencies and
related civil litigation. While the Company's management believes that these
claims and charges represent matters that arise in the ordinary course of
business for companies engaged in its industry, the defense of these claims can
be labor intensive and expensive.
PUBLIC SCRUTINY
The business of the Company is highly visible to the public and,
consequently, negative public reaction to the Company's policies or actions, or
to the statements or actions of juveniles in its care could adversely affect the
Company's ability to obtain additional programs or expand existing programs or
could otherwise adversely affect the Company's business. It is also possible
that, even absent such negative reaction to the Company, communities may object
to facilities such as the Company's which objections could materially, adversely
affect the ability of the Company to establish new programs or expand existing
programs.
ABILITY TO ATTRACT KEY PERSONNEL
The Company's operations depend to a great extent upon the efforts of its
executive officers, program directors and certain other key personnel to obtain
contracts, to operate and develop programs and to administer the Company's
business. In addition, the Company's ability to perform under new contracts will
depend, in part, on its ability to attract or retain additional qualified
personnel. There is significant competition for qualified teachers, counselors,
health care providers, program managers, administrators and other key personnel,
and there can be no assurance that the Company will be successful in recruiting
or training a sufficient number of employees of the requisite caliber to enable
the Company to operate its business and implement its strategy as planned.
ANTITAKEOVER AND CHANGE-IN-CONTROL PROVISIONS
Pursuant to the Company's Charter, the Company's Board of Directors has the
authority to issue shares of preferred stock and to determine the rights,
preferences, privileges and restrictions of such shares without any further vote
or action by the stockholders. The issuance of preferred stock under certain
circumstances could have the effect of delaying or preventing a change in
control of the Company. In addition, the Maryland General Corporation Law
establishes special requirements with respect to "business combinations" between
Maryland corporations and "interested stockholders" unless exemptions are
applicable. Among other things, the law prohibits, for a period of five years,
after the date on which a stockholder becomes an "interested stockholder," a
merger and other transactions between a company and an interested stockholder
and requires a supermajority vote for such transactions after the end of such
five-year period. In this regard, the Board of Directors of the Company has
exempted Gilder Gagnon Howe & Co. (see "Plan of Distribution") and its
affiliates, to the extent any of them shall become "interested stockholders,"
from the prohibitions of this law. The Maryland General Corporation Law also
imposes limitations on the voting rights of shares of capital stock acquired by
stockholders in a "control share acquisition." These provisions of the Maryland
General Corporation Law could have the effect of delaying or preventing a change
in control of the Company.
In addition, the Exchange Offer Debentures provide the holders thereof the
right to cause the Company to redeem such debentures upon the occurrence of a
Change in Control (as defined in the Indenture). Such provision may make more
difficult and have the effect of delaying or preventing a change in control of
the Company.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been volatile. There
also have been periods of extreme fluctuation in the stock market that, in many
cases, were unrelated to the operating performance of, or announcements
concerning, the issuers of the affected securities. Securities of issuers having
relatively
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limited capitalization or securities recently issued in a public offering are
particularly susceptible to change based on the short-term trading strategies of
certain investors. The trading price of the Common Stock could be subject to
wide fluctuation resulting from quarter-to-quarter variations in operating
results, new announcements, legislative developments, trading volume, general
market trends and other factors. There can be no assurance that the price of the
Company's Common Stock will be maintained at its current level.
SHARES ELIGIBLE FOR FUTURE SALE
A sale of a substantial amount of the Company's Common Stock in the public
market, including "restricted" shares held by Company stockholders, could
adversely affect the market price of the Common Stock. Except for the Shares,
substantially all of the Company's issued and outstanding shares as of January
31, 1997 are freely tradable, subject, in certain circumstances, to Rule 144
under the Securities Act of 1933. Upon the effectiveness of the Registration
Statement of which this Prospectus is part, the Shares will become issuable and
tradable pursuant to this Prospectus. In addition, a registration statement is
currently in effect with respect to up to 2,534,082 shares of Common Stock
issuable upon conversion of the Company's 7% Convertible Subordinated Debentures
Due 2006 (the "Conversion Shares"). No prediction can be made as to the effect,
if any, that future sales of additional shares of Common Stock (including the
Shares and the Conversion Shares) or the availability of such shares for sale
will have on the market price of the Common Stock prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for the
Common Stock and could impair the ability of the Company to raise capital
through the sale of its equity securities.
USE OF PROCEEDS
The Selling Shareholders will receive all of the net proceeds from the
resales of the Shares, and the Company will not receive any of the proceeds from
such sales. Mr. Hindman has informed the Company that he intends to exercise his
options to purchase 480,000 shares of Common Stock in connection with his sale
of Shares pursuant hereto. The Company will receive the aggregate exercise price
of $1,000,000 from such exercise, if it occurs.
THE COMPANY
Youth Services International, Inc. (the "Company" or "YSI") is a leading
national provider of private educational, developmental and rehabilitative
programs which are designed to impact dramatically the thinking and behavior of
troubled youth. The Company's programs focus on troubled youths who either have
been adjudicated as delinquents or suffer from behavioral problems with the
objective of effectively preparing them to become responsible self-sufficient
taxpayers. The Company develops and operates a wide range of programs designed
to promote accountability, respect and discipline through highly structured,
physically demanding, intensely scheduled and intellectually challenging
activities. In conjunction with these programs, the Company offers troubled
youth a broad range of residential programs including juvenile justice
academies, residential treatment centers, boot camps, group homes and foster
homes, as well as non-residential services including aftercare, tracking,
counseling, partial care and day treatment services.
Initially, the Company was established to capitalize on emerging
opportunities in the privatization of juvenile justice programs by state and
local governments. Management believes that increasing cost containment
pressures at all levels of government coupled with the inability of many
government agencies to deliver economic and effective programs to a rapidly
increasing number of juvenile offenders will continue to accelerate the
privatization of juvenile justice services within the youth care industry. In
response to increasing demand for additional youth care services from both state
and local governments as well as managed care and insurance companies, the
Company has expanded and diversified its range of service offerings to include
behavioral health programs thereby further broadening its continuum of care.
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of 70,000,000 shares of Common
Stock, par value $.01 per share (the "Common Stock"). As of January 31, 1997,
there were issued and outstanding 9,379,614 shares of Common Stock that were
held of record by 419 persons.
SELLING SECURITY HOLDERS
The following table sets forth, as of January 31, 1997, (i) the name of
each Selling Shareholder, (ii) the number (and percentage) of shares of Common
Stock beneficially owned by each Selling Shareholder, (iii) the number of Shares
offered for resale hereunder by each Selling Shareholder, and (iv) the number
(and percentage) of shares of Common Stock to be held by each Selling
Shareholder after the completion of such resales.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO SALES AFTER SALES
------------------------- SHARES TO -----------------------
SELLING SHAREHOLDER SHARES PERCENT BE SOLD SHARES PERCENT
- ----------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
W. James Hindman............. 2,179,943(1) 22.1% 1,250,000 929,943 9.4%
Henry D. Felton.............. 564,135(2) 6.0% 250,000 314,135 3.3%
</TABLE>
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(1) Includes 480,000 shares issuable pursuant to options granted to Mr. Hindman
that are exercisable within 60 days. Mr. Hindman has informed the Company
that he intends to exercise all of his options, at an aggregate exercise
price of $1,000,000, in connection with his sale of Shares pursuant hereto.
Excludes 105,000 shares that are beneficially owned by Mr. Hindman's wife,
and 34,785 shares issuable upon exercise of a warrant issued to Mrs.
Hindman. Mr. Hindman is the Chairman of the Board of the Company and served
as its Chief Executive Officer until August, 1996.
(2) Includes 94,100 shares issuable pursuant to options granted to Mr. Felton
that are exercisable within 60 days. Mr. Felton is a director of the Company
and served as its President and Chief Operating Officer until November,
1996.
Mr. Hindman has informed the Company that upon completion of the sale of
his Shares pursuant hereto that he will resign as Chairman of the Board of the
Company (but will remain as director and Chairman of the Executive Committee).
The Board of Directors has elected Timothy P. Cole to be Chairman of the Board.
The directors also appointed Mr. Hindman Chairman Emeritus.
PLAN OF DISTRIBUTION
The Shares will be sold to purchasers directly by the Selling Shareholders.
The sales will be placed by Gilder Gagnon Howe & Co., registered broker-dealers,
("Gilder"), as placement agent for the Selling Shareholders. The Selling
Shareholders, Gilder and any underwriters, broker-dealers or agents that
participate in the distribution of the Shares may be deemed to be
"underwriters," as such term is defined in Section 2(11) of the Securities Act
and any profit on the sale of the Shares by them and any discounts, commissions,
concessions or other compensation received by any such underwriter,
broker-dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Shares will be sold by the Selling Shareholders and placed by Gilder
pursuant to a Placement Agreement among them and the Company (the "Placement
Agreement") at a price per Share as negotiated between the Selling Shareholders
and Gilder. The Company has been informed that such parties have reached an
agreement in principal that the Shares will be sold to purchasers at a price of
$15.125 per Share and that the Selling Shareholders will pay Gilder a placement
fee of $0.125 per Share. Gilder will charge commissions to the purchasers that
will not exceed normal brokers commissions. Among the factors considered in the
negotiation of such price were the market price of the stock at the time of such
negotiations, an assessment of the Company's management and prospects, the
difficulty of selling or purchasing such a large number of shares otherwise then
pursuant to this offering and other factors.
At the time the offering of the Shares is made, if required, a prospectus
supplement will be distributed that will set forth the names of the Selling
Shareholders, the aggregate amount of the Shares, the number of such securities
owned prior to and after the completion of any such offering, and, to the extent
required, the terms of the offering, including the name or names of any
underwriters, broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
8
<PAGE> 10
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares will be offered or sold in such jurisdictions only through registered
or licensed broker-dealers. In addition, in certain jurisdictions, the Shares
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdictions or an exemption from registration or qualification is
available and is complied therewith.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may be limited in its ability to engage
in market activities with respect to such Shares. In addition, without
limitation on the foregoing, each Selling Shareholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales by the
Selling Shareholders of any of the Shares. All of the foregoing may affect the
marketability of the Shares.
All expenses of the registration of the Shares will be paid by the Selling
Shareholders, including, without limitation, Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; and all underwriting
discounts and selling commissions, if any. The Company and the Selling
Shareholders may provide certain representations and warranties and
indemnification to Gilder in the Placement Agreement, including indemnification
against certain liabilities under the Securities Act of 1933, as amended.
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Miles &
Stockbridge, A Professional Corporation, 10 Light Street, Baltimore, Maryland
21202.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference herein from the Company's Annual Report on Form 10-K as of June 30,
1996 for each of the years ended June 30, 1994, 1995 and 1996 have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report thereon included therein and incorporated herein by reference. Such
financial statements have been incorporated herein by reference in reliance upon
the reports of such firm and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Introspect Healthcare, Corporation as of and
for the year ended June 30, 1996 incorporated by reference herein from the
Company's Current Report on Form 8-K/A dated October 17, 1996 have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report thereon included therein and incorporated herein by reference. Such
financial statements have been incorporated herein by reference in reliance upon
the reports of such firm and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Tampa Bay Academy, Ltd. and the financial
statements of American Residential Centers, Inc. as of and for the years ended
December 31, 1993, 1994 and 1995 incorporated by reference herein from the
Company's Current Report on Form 8-K dated March 27, 1996 (as filed with the SEC
on April 10, 1996) have been audited by Bair, Rupp, Simpson & Zorger, Inc.,
independent public accountants, as indicated in their report thereon included
therein and incorporated herein by reference in reliance upon the reports of
such firm and upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Desert Hills Center for Youth and Families of
New Mexico, Inc. as of and for the year ended June 30, 1995 incorporated by
reference herein from the Company's Current Report on Form 8-K/A dated September
25, 1995, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report thereon included therein and
incorporated herein by reference in reliance upon the reports of such firm and
upon the authority of such firm as experts in accounting and auditing. The
financial statements of Desert Hills Center for Youth and Families of New
Mexico, Inc. as of and for the years ended June 30, 1993 and 1994 incorporated
by reference herein from the Company's Current Report on Form 8-K/A dated
September 25, 1995, have been audited by Addison, Roberts and Ludwig, P.C.,
independent public accountants, as indicated in their report thereon included
therein and incorporated herein by reference in reliance upon the reports of
such firm and upon the authority of such firm as experts in accounting and
auditing.
9
<PAGE> 11
- ------------------------------------------------------
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- ------------------------------------------------------
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF ITS AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 2
Risk Factors.......................... 3
Use of Proceeds....................... 7
The Company........................... 7
Description of Capital Stock.......... 7
Selling Shareholders.................. 8
Plan of Distribution.................. 8
Legal Matters......................... 9
Experts............................... 9
</TABLE>
YOUTH SERVICES
INTERNATIONAL, INC.
1,500,000 SHARES
OF
COMMON STOCK
------------------------
PROSPECTUS
------------------------
DATED FEBRUARY , 1997
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the offering described in this Registration Statement. All of
these expenses will be paid in full (or reimbursed to the Company in full) by
the Selling Shareholders. There are no underwriting discounts or commissions
payable by the Company in connection with the offering described in this
Registration Statement. All amounts are estimated except the Securities and
Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 8,182
Legal fees and expenses............................................ 20,000
Accounting fees and expenses....................................... 10,000
Printing and engraving fees and expenses........................... 5,000
Miscellaneous...................................................... 5,000
-------
$48,182
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Charter and Bylaws of the Company provide that, among other matters, to
the fullest extent permitted by the Maryland General Corporation Law as it may
be amended from time to time, current and former directors, officers, employees
and agents of the Company, and those persons who serve or have served, at the
Company's request, as a director, officer, partner, trustee, employee or agent
of another entity or enterprise shall be indemnified against any and all
liabilities and expenses incurred in connection with their services in such
capacities. Other provisions of the Charter and Bylaws provide that the Company
shall advance expenses to its officers and directors and other persons to the
same extent it shall indemnify such persons.
Furthermore, the Charter of the Company provides that, to the fullest
extent permitted by the Maryland General Corporation Law as it may be amended
from time to time, no director or officer of the Company shall be liable to the
Company or its stockholders for monetary damages arising out of events occurring
at the time such person is serving as a director or officer, regardless of
whether such person is a director or officer at the time of a proceeding in
which liability is asserted. Under current Maryland law, the effect of this
provision is to eliminate the rights of the Company and its stockholders to
recover monetary damages from a director or officer except (i) to the extent
that it is proved that the director or officer actually received an improper
personal benefit in money, property or services, or (ii) to the extent that a
judgment or other final adjudication adverse to the person is entered in a
proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. In situations to
which the Charter provision applies, the remedies available to the Company or a
stockholder are limited to equitable remedies such as injunction or rescission.
The Company currently maintains director and officer liability insurance
coverage for officers and directors.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
5 Opinion of Miles & Stockbridge, A Professional Corporation.
23(a)(1) Consent of Arthur Andersen LLP with respect to the Consolidated Financial
Statements of the Company.
23(a)(2) Consent of Arthur Andersen LLP with respect to the financial statements of Desert
Hills Center for Youth and Families, Inc.
</TABLE>
II-1
<PAGE> 13
<TABLE>
<C> <S>
23(b) Consent of Addison, Roberts & Ludwig, P.C. with respect to the financial
statements of Desert Hills Center for Youth and Families, Inc.
23(c) Consent of Bair, Rupp, Simpson & Zorger, Inc. with respect to the financial
statements of Tampa Bay Academy, Ltd. and American Residential Centers, Inc.*
23(d) Consent of Arthur Andersen LLP with respect to the financial statements of
Introspect Healthcare Corporation.
23(e) Consent of Miles & Stockbridge, A Professional Corporation (included in Exhibit
5).
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions of the Placement Agreement or other
agreements, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes:
(1) For determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 14
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF BALTIMORE, STATE OF MARYLAND, AS OF THE 10TH DAY OF
FEBRUARY, 1997.
YOUTH SERVICES INTERNATIONAL, INC.
By: /s/ TIMOTHY P. COLE
------------------------------------
TIMOTHY P. COLE
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
/s/ W. JAMES HINDMAN Chairman of the Board February 10, 1997
- ---------------------------------------------
W. JAMES HINDMAN
/s/ TIMOTHY P. COLE Vice Chairman of the Board February 10, 1997
- --------------------------------------------- and Chief Executive Officer
TIMOTHY P. COLE (Principal Executive Officer)
/s/ WILLIAM P. MOONEY Chief Financial Officer & February 10, 1997
- --------------------------------------------- Treasurer (Principal
WILLIAM P. MOONEY Financial Officer and
Principal
Accounting Officer)
/s/ HENRY D. FELTON Director February 10, 1997
- ---------------------------------------------
HENRY D. FELTON
/s/ J. DONALD BLACK Director February 10, 1997
- ---------------------------------------------
J. DONALD BLACK
/s/ MAYER KANTER Director February 10, 1997
- ---------------------------------------------
MAYER KANTER
/s/ CYNTHIA K. HINDMAN, M.D. Director February 10, 1997
- ---------------------------------------------
CYNTHIA K. HINDMAN, M.D.
/s/ MARTIN V. MARSHALL Director February 10, 1997
- ---------------------------------------------
MARTIN V. MARSHALL
Director February 10, 1997
- ---------------------------------------------
JACQUES T. SCHLENGER
/s/ ALAN J. ANDREINI Director February 10, 1997
- ---------------------------------------------
ALAN J. ANDREINI
</TABLE>
II-3
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. ITEM NO.
- -------- ---------------------------------------------------------------------------- -----
<C> <S> <C>
5 Opinion of Miles & Stockbridge, A Professional Corporation..................
23(a)(1) Consent of Arthur Andersen LLP with respect to the Consolidated Financial
Statements of the Company. .................................................
23(a)(2) Consent of Arthur Andersen LLP with respect to the financial statements of
Desert Hills Center for Youth and Families, Inc. ...........................
23(b) Consent of Addison, Roberts & Ludwig, P.C. with respect to the financial
statements of Desert Hills Center for Youth and Families, Inc. .............
23(c) Consent of Bair, Rupp, Simpson & Zorger, Inc. with respect to the financial
statements of Tampa Bay Academy, Ltd. and American Residential Centers,
Inc.*.......................................................................
23(d) Consent of Arthur Andersen LLP with respect to the financial statements of
Introspect Healthcare Corporation. .........................................
23(e) Consent of Miles & Stockbridge, A Professional Corporation (included in
Exhibit 5). ................................................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 5
February 11, 1997
Youth Services International, Inc.
2 Park Center Court, Suite 200
Owings Mills, MD 21117
Gentlemen:
In connection with the registration under the Securities Act of 1933,
as amended, pursuant to a registration statement on Form S-3 (the "Registration
Statement) of the resale of up to 1,800,000 shares (the "Shares") of common
stock, par value $.01 per share, of Youth Services International, Inc. to be
sold by the selling shareholders named in the Registration Statement, we have
examined such corporate records, certificates and documents as we deemed
necessary for the purpose of rendering this opinion. In rendering our opinions,
we have assumed the authenticity of all documents submitted to us as originals,
the genuineness of all signatures and the conformity to authentic originals of
all documents submitted to us as copies.
Based on the foregoing, we are of the opinion that the Shares have
been duly authorized and are legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving our consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations promulgated by
the Securities and Exchange Commission thereunder.
Very truly yours,
MILES & STOCKBRIDGE,
a Professional Corporation
By: /s/ MARK S. DEMILIO
------------------------
Principal
<PAGE> 1
EXHIBIT 23(a)(1)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 of our report dated
September 12, 1996 on the financial statements of Youth Services
International, Inc. and subsidiaries as of June 30, 1995 and 1996 and for the
years ended June 30, 1994, 1995, and 1996 and to all references to our Firm
included in or made a part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
- -------------------------
Baltimore, Maryland
February 10, 1997
<PAGE> 1
EXHIBIT 23(a)(2)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated November 15, 1995 on the financial statements of Desert Hills Center for
Youth and Families of New Mexico, Inc. as of June 30, 1995 and for the year
then ended incorporated by reference in this Registration Statement on
Form S-3.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
Baltimore, Maryland
February 10, 1997
<PAGE> 1
EXHIBIT 23(b)
[ADDISON, ROBERTS & LUDWIG, P.C. LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the Incorporation by reference in this Registration
Statement on Form S-3 of our report dated November 28, 1994, except for
notes 11, 12 and 13 as to which the date is May 23, 1995 of the financial
statements of Desert Hills Center for Youth and Families of New Mexico, Inc. (a
wholly-owned subsidiary of Introspect HealthCare Corporation).
/s/ ADDISON, ROBERTS & LUDWIG, P.C.
Tucson, Arizona
February 10, 1997
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated September 6, 1996 (except with respect to the
matter discussed in Note 11 to the consolidated financial statements, as to
which the date is September 11, 1996) on the consolidated financial statements
of Introspect HealthCare Corporation and Subsidiaries as of June 30, 1996 and
for the year then ended included in Youth Services International Inc.'s amended
Form 8-K (Commission File No. 0-23284) and to all references to our Firm
included in this Form S-3.
/s/ ARTHUR ANDERSEN LLP
- -------------------------
Baltimore, Maryland
February 10, 1997
