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