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Acadia Healthcare Reports Third Quarter Adjusted Earnings Increase to $0.46 per Diluted Share on Revenue of $294.5 million

Announces Definitive Agreement for $1.175 Billion Acquisition of CRC Health Group

Raises 2014 Guidance for Adjusted Earnings per Diluted Share to Range of $1.52 to $1.53 from Previous Range of $1.44 to $1.46

FRANKLIN, Tenn.--(BUSINESS WIRE)--Oct. 29, 2014-- Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced financial results for the third quarter and nine months ended September 30, 2014. For the quarter, revenue increased 59.4% to $294.5 million from $184.7 million for the third quarter of 2013. Income from continuing operations was $25.5 million, or $0.43 per diluted share, for the third quarter of 2014 compared with $14.5 million, or $0.29 per diluted share, for the third quarter of 2013. Adjusted income from continuing operations rose 79.5% to $27.3 million for the third quarter of 2014 from $15.2 million for the third quarter of 2013, while adjusted income from continuing operations per diluted share increased 53.3% to $0.46 from $0.30. For the third quarter of 2014, the adjusted results exclude transaction-related expenses of $6.2 million and a gain on foreign currency derivatives of $1.5 million that was related to Acadia’s recent acquisition of Partnerships in Care (PiC). For the third quarter of 2013, the adjusted results exclude transaction-related expenses of $1.0 million. Weighted average shares outstanding increased 18.0% for the third quarter of 2014 from the third quarter of 2013 primarily due to the Company’s public equity offering in June, 2014. A reconciliation of all GAAP and non-GAAP financial results in this release is on pages 8 and 9.

Revenue for the first nine months of 2014 was $709.7 million, a 35.6% increase from $523.4 million for the first nine months of 2013. Income from continuing operations was $60.9 million, or $1.13 per diluted share, for the first nine months of 2014 compared with $30.9 million, or $0.61 per diluted share, for the same period in 2013. Adjusted income from continuing operations was $57.9 million for the first nine months of 2014, up 48.0% from $39.1 million for the first nine months of 2013, while adjusted income from continuing operations per diluted share increased 37.2% to $1.07 from $0.78. The adjusted results exclude a gain on foreign currency derivatives of $15.3 million for the first nine months of 2014, debt extinguishment costs of $9.4 million for the first nine months of 2013 and transaction-related expenses of $10.8 million and $3.8 million for the first nine months of 2014 and 2013, respectively. Weighted average shares outstanding increased 7.4% for the first nine months of 2014 from the same period in 2013.

“Acadia achieved very strong profitable growth for the third quarter of 2014, as both our organic and acquisition growth strategies produced strong results,” said Joey Jacobs, Chairman and Chief Executive Officer of Acadia. “We were pleased to complete the acquisition of PiC during the third quarter, which is the U.K.’s second-largest independent behavioral healthcare provider. The PiC transaction added 23 inpatient psychiatric facilities with over 1,200 licensed beds to Acadia’s operations and was meaningfully accretive to our third quarter results. In addition, during the third quarter we acquired McCallum Place, an eating disorder treatment facility with 85 beds offering residential, partial hospitalization and intensive outpatient treatment programs located in St. Louis, Missouri, and Austin, Texas.

“Today, we are also announcing a definitive agreement for the acquisition of CRC Health Group Inc., the nation’s largest specialized behavioral healthcare provider. CRC, headquartered in Cupertino, California, provides substance abuse treatment and other specialty programs through 36 residential facilities and 84 comprehensive treatment facilities that currently treat approximately 40,000 patients daily. These facilities are expected to produce aggregate revenues for 2014 of approximately $450 million and adjusted EBITDA of approximately $115 million. Consideration for the acquisition of privately held CRC is $1.175 billion, consisting of up to approximately 6.3 million shares of Acadia’s common stock and the assumption of CRC’s debt. We expect to complete this accretive transaction, which is subject to normal closing conditions, in the first quarter of 2015.

“Including the PiC and McCallum Place transactions in the third quarter, Acadia completed five acquisitions in the 12 months ended September 30, 2014, that brought 27 facilities and more than 1,500 licensed beds to the Company. During this 12 month period, we also added approximately 410 new beds to existing facilities and through the opening of two de novo facilities and one facility that was under construction when acquired in the second quarter last year. We added 40 of these new beds during the third quarter of 2014, including seven new beds within PiC.

“The new beds added to existing U.S. facilities in our same facility base since the end of the third quarter last year significantly contributed to same facility revenue growth of 9.9% in our operations for the third quarter of 2014. We also continuously work to drive same-facility revenue growth through facility specific initiatives to generate additional revenue growth in every facility. The growth in same-facility revenue for the third quarter reflected an 11.2% increase in patient days for the quarter and 1.2% lower revenue per patient day.

“The substantial increase in same facility revenue growth for the third quarter, combined with increased operating efficiencies, produced a 130 basis point increase in our same facility EBITDA margin to 25.8%. The Company’s adjusted consolidated EBITDA increased 69.1% to $65.1 million for the third quarter of 2014, which is 22.1% of revenue compared with 20.8% for the third quarter last year.

“We continue to evaluate potential acquisitions in the highly fragmented behavioral healthcare markets in the U.S. and the U.K., as well as to add new beds in existing facilities. We are well positioned to finance these growth strategies, with availability under our revolving credit facility of approximately $136 million at September 30, 2014 and with substantial net cash flows from continuing operations, which totaled approximately $40 million for the third quarter and $69 million for the first nine months of 2014. Our ratio of total net debt to trailing 12 months adjusted EBITDA was approximately 4.0 at the end of the third quarter compared with 4.2 at the end of the second quarter of 2014.”

Acadia today raised its guidance for 2014 adjusted earnings per diluted share to a range of $1.52 to $1.53 from the previous range of $1.44 to $1.46. The Company’s guidance does not include the impact of any future acquisitions or transaction-related expenses.

Acadia will hold a conference call to discuss its third quarter financial results and the pending CRC transaction at 9:00 a.m. Eastern Time on Thursday, October 30, 2014. A live webcast of the conference call will be available at www.acadiahealthcare.com in the “Investor Relations” section of the website. The webcast of the conference call will be available through November 14, 2014.

Risk Factors

This news release contains forward-looking statements. Generally words such as “may,” “will,” “should,” “could,” “anticipate,” “expect,” “intend,” “estimate,” “plan,” “continue,” and “believe” or the negative of or other variation on these and other similar expressions identify forward-looking statements. These forward-looking statements are made only as of the date of this news release. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are based on current expectations and involve risks and uncertainties and our future results could differ significantly from those expressed or implied by our forward-looking statements. Factors that may cause actual results to differ materially include, without limitation, (i) Acadia’s ability to complete acquisitions, including the acquisition of CRC, and successfully integrate the operations of acquired facilities, including the PiC facilities; (ii) Acadia’s ability to add beds, expand services, enhance marketing programs and improve efficiencies at its facilities; (iii) potential reductions in payments received by Acadia from the government and third-party payors; (iv) the occurrence of patient incidents, which could adversely affect the price of our common stock and result in incremental regulatory burdens and governmental investigations; (v) the risk that Acadia may not generate sufficient cash from operations to service its debt and meet its working capital and capital expenditure requirements; and (vi) potential operating difficulties, client preferences, changes in competition and general economic or industry conditions that may prevent Acadia from realizing the expected benefits of its business strategy. These factors and others are more fully described in Acadia’s periodic reports and other filings with the SEC.

About Acadia

Acadia is a provider of inpatient behavioral healthcare services. Acadia operates a network of 76 behavioral healthcare facilities with approximately 5,800 licensed beds in 24 states, the United Kingdom and Puerto Rico. Acadia provides psychiatric and chemical dependency services to its patients in a variety of settings, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs.

       
Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
September 30, December 31,
2014 2013
(In thousands)
 
ASSETS
Current assets:
Cash and cash equivalents $ 42,179 $ 4,569

Accounts receivable, net of allowance for doubtful accounts of $21,730 and $18,345, respectively

130,253 95,885
Deferred tax assets 19,782 15,703
Other current assets   37,626     28,969
Total current assets 229,840 145,126
Property and equipment, net 1,026,378 370,109
Goodwill 804,647 661,549
Intangible assets, net 21,621 20,568
Deferred tax assets - noncurrent 15,933 -
Other assets   42,049     27,307
Total assets $ 2,140,468   $ 1,224,659
 
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 13,320 $ 15,195
Accounts payable 43,260 36,026
Accrued salaries and benefits 56,213 37,721
Other accrued liabilities   29,747     25,748
Total current liabilities 142,540 114,690
Long-term debt 1,016,002 601,941
Deferred tax liabilities - noncurrent 64,771 7,971
Other liabilities   30,579     19,347
Total liabilities 1,253,892 743,949
Equity:
Common stock 592 501
Additional paid-in capital 843,528 461,807
Accumulated other comprehensive loss (36,857 ) -
Retained earnings   79,313     18,402
Total equity   886,576     480,710
Total liabilities and equity $ 2,140,468   $ 1,224,659
 

 
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
               
Three Months Ended

September 30,

Nine Months Ended

September 30,

2014 2013 2014 2013
(In thousands, except per share amounts)
 
Revenue before provision for doubtful accounts $ 303,001 $ 190,574 $ 729,784 $ 539,230
Provision for doubtful accounts   (8,522 )   (5,872 )   (20,084 )   (15,821 )
Revenue 294,479 184,702 709,700 523,409
 

Salaries, wages and benefits (including equity-based compensation expense of $2,805, $1,331, $6,975 and $3,744, respectively)

168,632 103,789 408,680 298,904
Professional fees 14,878 8,956 36,151 27,294
Supplies 14,062 9,806 34,722 28,017
Rents and leases 3,214 2,656 8,872 7,377
Other operating expenses 31,432 22,345 79,188 59,424
Depreciation and amortization 10,325 4,414 21,696 12,248
Interest expense, net 14,068 9,465 33,505 27,672
Debt extinguishment costs - - - 9,350
Gain on foreign currency derivatives (1,527 ) - (15,262 ) -
Transaction-related expenses   6,239     984     10,834     3,813  
Total expenses   261,323     162,415     618,386     474,099  
Income from continuing operations before income taxes 33,156 22,287 91,314 49,310
Provision for income taxes   7,703     7,741     30,383     18,439  
Income from continuing operations 25,453 14,546 60,931 30,871
Loss from discontinued operations, net of income taxes   (51 )   (182 )   (20 )   (572 )
Net income $ 25,402   $ 14,364   $ 60,911   $ 30,299  
 
Basic earnings per share:
Income from continuing operations $ 0.43 $ 0.29 $ 1.14 $ 0.62
Loss from discontinued operations   -     -     -     (0.01 )
Net income $ 0.43   $ 0.29   $ 1.14   $ 0.61  
 
Diluted earnings per share:
Income from continuing operations $ 0.43 $ 0.29 $ 1.13 $ 0.61
Loss from discontinued operations   -     -     -     (0.01 )
Net income $ 0.43   $ 0.29   $ 1.13   $ 0.60  
 
Weighted-average shares outstanding:
Basic 59,175 50,040 53,670 49,987
Diluted 59,409 50,343 53,922 50,213
 

 
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
       
Nine Months Ended

September 30,

2014 2013
(In thousands)
 
Operating activities:
Net income $ 60,911 $ 30,299

Adjustments to reconcile net income to net cash provided by continuing operating activities:

Depreciation and amortization 21,696 12,248
Amortization of debt issuance costs 2,229 1,686
Equity-based compensation expense 6,975 3,744
Deferred income tax expense 4,645 10,545
Loss from discontinued operations, net of taxes 20 572
Debt extinguishment costs - 9,350
Gain on foreign currency derivatives (15,262 ) -
Other 163 16
Change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net (25,395 ) (18,378 )
Other current assets 1,322 (5,657 )
Other assets (2,086 ) (1,676 )
Accounts payable and other accrued liabilities 1,078 2,596
Accrued salaries and benefits 8,972 (2,114 )
Other liabilities   3,805     3,538  
Net cash provided by continuing operating activities 69,073 46,769
Net cash used in discontinued operating activities   (27 )   (541 )
Net cash provided by operating activities 69,046 46,228
 
Investing activities:
Cash paid for acquisitions, net of cash acquired (722,797 ) (135,605 )
Cash paid for capital expenditures (70,680 ) (50,678 )
Cash paid for real estate acquisitions (22,247 ) (4,676 )
Settlement of foreign currency derivatives 15,262 -
Other   (733 )   (1,088 )
Net cash used in investing activities (801,195 ) (192,047 )
 
Financing activities:
Borrowings on long-term debt 307,500 150,000
Borrowings on revolving credit facility 230,500 27,500
Principal payments on revolving credit facility (120,000 ) (8,000 )
Principal payments on long-term debt (5,625 ) (5,625 )
Repayment of long-term debt - (52,500 )
Payment of debt issuance costs (10,909 ) (4,307 )
Payment of premium on note redemption - (6,759 )
Issuance of common stock, net 374,431 -
Common stock withheld for minimum statutory taxes, net (3,477 ) (1,120 )
Excess tax benefit from equity awards 3,779 1,265
Cash paid for contingent consideration   (5,000 )   -  
Net cash provided by financing activities   771,199     100,454  
 
Effect of exchange rate changes on cash   (1,440 )   -  
 
Net increase (decrease) in cash and cash equivalents 37,610 (45,365 )
Cash and cash equivalents at beginning of the period   4,569     49,399  
Cash and cash equivalents at end of the period $ 42,179   $ 4,034  

 

 

Effect of acquisitions:
Assets acquired, excluding cash $ 802,767 $ 163,706
Liabilities assumed (78,003 ) (16,417 )
Prior year deposits paid for acquisitions (500 ) (11,684 )
Contingent consideration issued in connection with acquisition   (1,467 )   -  
Cash paid for acquisitions, net of cash acquired $ 722,797   $ 135,605  
 

 
Acadia Healthcare Company, Inc.
Operating Statistics
(Unaudited)
(Revenue in thousands)
                       
Three Months Ended

September 30,

Nine Months Ended

September 30,

2014 2013 % Change 2014 2013 % Change
Same Facility Results
Revenue $ 202,344 $ 184,071 9.9% $ 575,735 $ 521,368 10.4%
Patient Days 307,247 276,193 11.2% 866,025 788,383 9.8%
Admissions 17,763 14,804 20.0% 48,331 41,870 15.4%
Average Length of Stay (a) 17.3 18.7 -7.3% 17.9 18.8 -4.8%
 
Revenue per Patient Day $ 659 $ 666 -1.2% $ 665 $ 661 0.5%
EBITDA margin 25.8 % 24.5 %

130 bps

26.0 % 24.2 %

180 bps

 
U.S. Facility Results
Revenue $ 217,427 $ 184,071 18.1% $ 630,825 $ 521,368 21.0%
Patient Days 326,479 276,193 18.2% 939,246 788,383 19.1%
Admissions 19,949 14,804 34.8% 56,775 41,870 35.6%
Average Length of Stay (a) 16.4 18.7 -12.3% 16.5 18.8 -12.1%
 
Revenue per Patient Day $ 666 $ 666 -0.1% $ 672 $ 661 1.6%
EBITDA margin 24.8 % 24.5 %

30 bps

24.5 % 24.2 %

30 bps

 
U.K. Facility Results
Revenue $ 76,026 $ 76,026
Patient Days 95,375 95,375
Admissions 319 319
Average Length of Stay (a) 299.0 299.0
 
Revenue per Patient Day $ 797 $ 797
EBITDA margin 26.6 % 26.6 %
 
Total Facility Results
Revenue $ 293,453 $ 184,071 59.4% $ 706,851 $ 521,368 35.6%
Patient Days 421,854 276,193 52.7% 1,034,621 788,383 31.2%
Admissions 20,268 14,804 36.9% 57,094 41,870 36.4%
Average Length of Stay (a) 20.8 18.7 11.6% 18.1 18.8 -3.8%
 
Revenue per Patient Day $ 696 $ 666 4.4% $ 683 $ 661 3.3%
EBITDA margin 25.2 % 24.5 %

70 bps

24.7 % 24.2 %

50 bps

 
(a) Average length of stay is defined as patient days divided by admissions.
 

 
Acadia Healthcare Company, Inc.
Reconciliation of Net Income to Adjusted EBITDA
(Unaudited)
               
Three Months Ended

September 30,

Nine Months Ended

September 30,

2014 2013 2014 2013
(in thousands)
 
Net income $ 25,402 $ 14,364 $ 60,911 $ 30,299
Loss from discontinued operations 51 182 20 572
Provision for income taxes 7,703 7,741 30,383 18,439
Interest expense, net 14,068 9,465 33,505 27,672
Depreciation and amortization   10,325     4,414   21,696     12,248
EBITDA 57,549 36,166 146,515 89,230
 
Adjustments:
Equity-based compensation expense (a) 2,805 1,331 6,975 3,744
Debt extinguishment costs (b) - - - 9,350
Gain on foreign currency derivatives (c) (1,527 ) - (15,262 ) -
Transaction-related expenses (d)   6,239     984   10,834     3,813
Adjusted EBITDA $ 65,066   $ 38,481 $ 149,062   $ 106,137
 
See footnotes on page 10.
 

 
Acadia Healthcare Company, Inc.
Reconciliation of Adjusted Income from Continuing Operations to Income from
Continuing Operations
(Unaudited)
               
Three Months Ended

September 30,

Nine Months Ended

September 30,

2014 2013 2014 2013
(in thousands, except per share amounts)
 
Income from continuing operations $ 25,453 $ 14,546 $ 60,931 $ 30,871
Provision for income taxes   7,703     7,741     30,383     18,439  
Income from continuing operations before income taxes 33,156 22,287 91,314 49,310
 
Adjustments to income from continuing operations:
Debt extinguishment costs (b) - - - 9,350
Gain on foreign currency derivatives (c) (1,527 ) - (15,262 ) -
Transaction-related expenses (d) 6,239 984 10,834 3,813

Income tax provision reflecting tax effect of adjustments to income from continuing operations (e)

  (10,603 )   (8,082 )   (29,016 )   (23,359 )
Adjusted income from continuing operations $ 27,265 $ 15,189 $ 57,870 $ 39,114
 
Weighted-average shares outstanding - diluted 59,409 50,343 53,922 50,213
 
Adjusted income from continuing operations per diluted share $ 0.46   $ 0.30   $ 1.07   $ 0.78  
 
See footnotes on page 10.
 

 
Acadia Healthcare Company, Inc.
Footnotes
 
We have included certain financial measures in this press release, including EBITDA, Adjusted EBITDA and Adjusted income from continuing operations, which are “non-GAAP financial measures” as defined under the rules and regulations promulgated by the SEC. We define EBITDA as net income adjusted for loss (income) from discontinued operations, net interest expense, income tax provision and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted for equity-based compensation expense, debt extinguishment costs, gain on foreign currency derivatives and transaction-related expenses.
 
EBITDA, Adjusted EBITDA and Adjusted income from continuing operations are supplemental measures of our performance and are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). EBITDA, Adjusted EBITDA and Adjusted income from continuing operations are not measures of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as measures of our liquidity. Our measurements of EBITDA, Adjusted EBITDA and Adjusted income from continuing operations may not be comparable to similarly titled measures of other companies. We have included information concerning EBITDA, Adjusted EBITDA and Adjusted income from continuing operations in this press release because we believe that such information is used by certain investors as measures of a company’s historical performance. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present EBITDA, Adjusted EBITDA and Adjusted income from continuing operations when reporting their results. Our presentation of EBITDA, Adjusted EBITDA and Adjusted income from continuing operations should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
 

(a) Represents the equity-based compensation expense of Acadia.

 
(b) Represents debt extinguishment costs related to the repayment of $52.5 million of the Company's 12.875% Senior Notes due 2018 on March 12, 2013, including a prepayment premium of $6.8 million and the write-off of $2.6 million of deferred financing costs.
 
(c) Represents the change in fair value of foreign currency derivatives purchased by Acadia related to its acquisition of Partnerships in Care on July 1, 2014.
 
(d) Represents transaction-related expenses incurred by Acadia related to acquisitions.
 
(e) Represents the income tax provision adjusted to reflect the tax effect of the adjustments to income from continuing operations based on tax rates of 28.0% for the three months ended September 30, 2014 and 33.4% for the nine months ended September 30, 2014.

Source: Acadia Healthcare Company, Inc.

Acadia Healthcare Company, Inc.
Brent Turner, 615-861-6000
President

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