Withdraws Full-Year 2020 Guidance Due To
COVID-19 Uncertainty
Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced
financial results for the first quarter ended March 31, 2020, and
provided an update on the impact of the COVID-19 pandemic.
Clinical and Operating Response to COVID-19
Throughout the COVID-19 crisis, Acadia’s top priorities have
been and continue to be the health and safety of our patients and
employees. The Company’s 40,000 employees are providing care to
approximately 75,000 patients daily across our network of 588
facilities in the U.S., U.K. and Puerto Rico. In the weeks and
months ahead, behavioral healthcare providers like Acadia will
continue to play an essential role in caring for patients who need
treatment. Our strong local leadership and staff in our facilities
are very focused on meeting that demand and providing our patients
with high-quality care. In response to the COVID-19 pandemic, the
Company has taken the following actions, among others:
- The Company implemented recommended precautionary measures to
ensure the ongoing safety and well-being of everyone in our
facilities. These steps include applying robust screening
procedures for all patients and employees, restricting or
suspending visitor access to our facilities, and limiting group
therapy, among many others.
- All facilities are closely following infectious disease
protocols, as well as recommendations by the CDC and local health
officials.
- In support of stay-at-home orders, the Company increased
utilization of technologies to better serve market demand,
including telehealth options for patients and virtual visitations
for families.
- The Company developed additional supply chain management
processes, including extensive tracking and delivery of key
personal protective equipment (PPE) and supplies, and sharing
resources across all of our facilities.
- The Company established a taskforce of key leaders that meets
daily to address concerns, develop action plans and monitor
responses throughout our facilities.
- The Company commenced a national behavioral health crisis
hotline designed to offer immediate assistance to anyone in need of
mental health or addiction treatment. The centralized 24/7 crisis
line, 1-833-TREATBH, offers immediate, no-charge, clinically
approved assessments to support underserved communities and connect
patients with the treatment they need.
First Quarter Results
Revenue was $782.8 million for the first quarter, up 2.9% from
$760.6 million from the first quarter of 2019. Net income
attributable to Acadia stockholders for the first quarter of 2020
was $33.5 million, or $0.38 per diluted share, compared to net
income of $29.5 million, or $0.34 per diluted share, for the first
quarter of 2019.
Results for the first quarter of 2020 include
transaction-related expenses of $3.5 million and the income tax
effect of adjustments to income of $0.3 million. Adjusted income
attributable to Acadia stockholders per diluted share was $0.42 for
the first quarter of 2020. A reconciliation of all non-GAAP
financial results in this press release appears beginning on page
10.
Acadia’s consolidated adjusted EBITDA for the first quarter of
2020 was $132.8 million, compared to $136.0 million for the first
quarter of 2019.
U.S. same facility revenue increased 4.1%, including a 2.9%
increase in patient days and a 1.2% increase in revenue per patient
day, compared to the first quarter of 2019. U.S. same facility
EBITDA margin was 24.1% for the first quarter of 2020.
For the U.K. operations, same facility revenue increased 1.9%
for the first quarter of 2020 from the first quarter last year,
reflecting a 3.0% increase in revenue per patient day partially
offset by a 1.0% decrease in patient days. U.K. same facility
EBITDA margin was 14.9% for the first quarter of 2020.
Debbie Osteen, Chief Executive Officer of Acadia Healthcare
Company, remarked, “We are pleased with our performance for the
quarter. Our first quarter results met our expectations despite the
challenging environment in the latter part of the quarter. For our
U.S. operations, same facility patient days increased more than 4%
through the first two months of the year compared to the prior
year. The COVID-19 pandemic affected our business starting in late
March and caused same facility patient day volumes to decline 3% in
the last two weeks of the month relative to the same period last
year. Similarly, in the U.K., same facility patient days were flat
through the first two months of 2020 and then declined 3% in the
last two weeks of March compared to the same period last year.”
U.S. Update
In April, the Company continued to experience declines in
volumes that management believes resulted from a number of
temporary factors related to the COVID-19 pandemic, including the
impact of the pandemic on traditional referral sources such as
emergency rooms and medical professionals; the stay-at-home orders
implemented by many states; and various travel restrictions, which
adversely affected certain facilities with national referral
networks. In the month of April, our volumes declined 7% compared
to last year, reflecting continuing deterioration in the first two
weeks of the month with signs of stabilization and improvement
during the last two weeks. The demand for our services remains
strong across the portfolio, and we expect to see continued
improvement as restrictions are lifted.
U.K. Update
Beginning in late March, our U.K. operations also faced
temporary disruptions from the impact of stay‑at‑home orders on the
referral and commissioning process. While the volume impact in the
U.K. has been limited due to the longer length of stay for many of
our service lines, certain services with a shorter length of stay
have been impacted. While we believe the interest from potential
buyers remains strong, the sale process of our U.K. business
remains temporarily suspended until market conditions recover.
COVID-19 Guidance Update
The full impact of COVID-19 on the Company’s operations and
financial results during 2020 will depend on, among other things,
the length of time and severity of the pandemic, the lifting of
stay-at-home orders and state restrictions, the timing and phasing
of the economic reopening, and the willingness of patients to
travel. We cannot reasonably estimate the impact that these factors
will have on our financial results for 2020 at this time. As a
result of these factors and the general uncertainty related to the
COVID-19 pandemic, Acadia today is withdrawing its 2020 financial
guidance previously issued in its earnings release dated February
27, 2020. The Company continues to be confident of its long-term
growth opportunities based on the increasing need for mental health
and addiction treatment services.
Cash and Liquidity
Acadia’s balance sheet remains strong with ample liquidity and
capital to invest in and grow our business. As of March 31, 2020,
the Company had $81 million in cash and cash equivalents plus
availability under our $500 million revolving credit facility.
Additionally, the payments described below relating to the
Coronavirus Aid, Relief, and Economic Security (CARES) Act are
expected to provide approximately $100 million of incremental cash
during the second quarter of 2020.
As announced in our current report on Form 8-K filed with the
Securities and Exchange Commission on April 22, 2020, the Company
amended its amended and restated credit agreement dated as of
December 31, 2012, to increase the maximum covenant levels for the
Company’s consolidated leverage ratio from 5.75x to 6.50x for the
quarters ended June 30, 2020 and September 30, 2020 and from 5.50x
to 6.25x for the quarter ended December 31, 2020. The amended
credit agreement provides greater near-term financial flexibility
in light of the ongoing COVID-19 pandemic.
As part of our ongoing review of the business and efforts to
enhance our financial flexibility, the Company has taken a number
of actions including implementing certain cost reduction
initiatives at the facility and corporate level. Management also
conducted a thorough evaluation of all capital expenditure projects
planned for 2020. The Company has elected to decrease its 2020
expansion capital expenditures by $35 million, from the initial
range of $240 to $260 million to a revised range of $205 to $225
million. Additional capital deployment actions will be evaluated by
management.
“We continue to make prudent investments to serve our patients’
needs, ensure the safety and well-being of everyone in our
facilities, and prepare for the mental and emotional impacts that
this pandemic could produce in the months ahead. We added 78 beds
to our U.S. operations during the first quarter. We are working to
open three de novos facilities later in 2020, including two
facilities with joint venture partners. We believe that the demand
for mental health and substance use treatment is not discretionary
or elective, and we are positioning the Company to meet the
long-term demand,” added Osteen.
The Coronavirus Aid, Relief, and Economic Security
Act
The Company is closely monitoring the impact of legislative
actions including the passing into law of the CARES Act in late
March and believes it will benefit from the following portions of
the recent legislation.
- Reimbursement to Hospitals &
Healthcare Providers: A “Public Health and Social Services
Emergency Fund” of $100 billion has been established to prevent,
prepare for, and respond to COVID-19 by reimbursing, through grants
or other mechanisms, eligible healthcare providers for expenses or
lost revenues that are attributable to COVID-19. An additional $75
billion was approved in April 2020. Acadia received approximately
$20 million of the initial funds distributed in April and is
evaluating the impact of these and any additional payments.
- Medicare Accelerated and Advance Payment
Program: Medicare has offered advance payments equal to our
Medicare revenue for a three-month period. Acadia applied for and
received approximately $45 million of advance payments in April
2020, which the Company expects to repay over a three-month period
from August to November 2020.
- Temporary Suspension of Medicare
Sequestration: Medicare claim reimbursements have been
automatically reduced by 2% through Medicare sequestration. The
lifting of the 2% reduction from May 1, 2020 to December 31, 2020
results in an expected earnings and cash benefit of approximately
$3 million in 2020.
- Delay of Payment of Employer Payroll
Taxes: The employer portion of Social Security payroll taxes
for the period from March 27, 2020 to December 31, 2020 can be
deferred and paid in two equal installments at the end of 2021 and
2022, resulting in an expected cash benefit of approximately $39
million for 2020.
- Interest Deductibility Limitation:
As part of The Tax Cuts and Jobs Act of 2017, the Company’s
interest deduction was limited to 30% of the Adjusted Taxable
Income. Within the CARES Act, this interest expense deduction
threshold was increased to 50% of Adjusted Taxable Income for the
2019 and 2020 tax years, making Acadia's interest expense fully
deductible. This change provides a cash flow benefit in the form of
refunds and/or lower tax payments of approximately $16 million
related to our 2019 interest expense and between $15 million and
$20 million for the related to the 2020 interest expense.
Acadia’s Commitment to Our Communities
“These are difficult times for everyone. Mental health and
addiction issues have not subsided – and likely increased – during
this crisis. Acadia will continue to answer the calls for help from
our vulnerable and at‑risk populations, while taking all
recommended precautions to keep everyone in our facilities safe.
Looking ahead, we believe there will be a significant need for our
services as the spread of this virus is curtailed and society
begins to recover from the effects of the state and local
shutdowns. We have the resources, care options and network to meet
that demand. We have strong local leadership and staff in our
facilities who continue to support and provide our patients with
high-quality care every day. We remain well-positioned in the
markets that we serve and will continue to make disciplined capital
allocations to support market demand and grow our business in the
future,” concluded Osteen.
Acadia will hold a conference call to discuss its first quarter
financial results at 9:00 a.m. Eastern Time on Tuesday, May 5,
2020. A live webcast of the conference call will be available at
www.acadiahealthcare.com in the “Investors” section of the website.
The webcast of the conference call will be available through May
19, 2020.
About Acadia
Acadia is a leading provider of behavioral healthcare services.
As of March 31, 2020, Acadia operated a network of 588 behavioral
healthcare facilities with approximately 18,200 beds in 40 states,
the United Kingdom and Puerto Rico. Acadia provides behavioral
health and addiction services to its patients in a variety of
settings, including inpatient psychiatric hospitals, specialty
treatment facilities, residential treatment centers and outpatient
clinics.
Forward-Looking Information
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) the impact of the COVID-19 pandemic, including, without
limitation, the continuing reduction in our inpatient and
outpatient volumes; increased costs relating to labor, supply chain
and other expenditures; and increased difficulty in collecting
patient accounts receivable as the unemployment rate and number of
underinsured and uninsured patients rise; (ii) potential
difficulties operating our business in light of political and
economic instability in the U.K. and globally relating to the
U.K.’s departure from the European Union; (iii) the impact of
fluctuations in foreign exchange rates, including the devaluation
of the British Pound Sterling (GBP) relative to the U.S. Dollar
(USD); (iv) Acadia’s efforts to sell its U.K. operations may not
result in any definitive transaction or enhance stockholder value;
(v) potential difficulties in successfully integrating the
operations of acquired facilities or realizing the expected
benefits and synergies of our acquisitions, joint ventures and de
novo transactions; (vi) Acadia’s ability to add beds, expand
services, enhance marketing programs and improve efficiencies at
its facilities; (vii) potential reductions in payments received by
Acadia from government and third-party payors; (viii) the
occurrence of patient incidents, governmental investigations and
adverse regulatory actions, which could adversely affect the price
of our common stock and result in substantial payments and
incremental regulatory burdens; (ix) the risk that Acadia may not
generate sufficient cash from operations to service its debt and
meet its working capital and capital expenditure requirements, as
well as risks associated with disruptions in the financial markets
and financial institutions due to the COVID-19 pandemic; and (x)
potential operating difficulties, labor costs, client preferences,
changes in competition and general economic or industry conditions
that may prevent Acadia from realizing the expected benefits of its
business strategies. These factors and others are more fully
described in Acadia’s periodic reports and other filings with the
SEC.
Acadia Healthcare Company, Inc. Condensed Consolidated
Statements of Operations (Unaudited) Three
Months Ended March 31,
2020
2019
(In thousands, except per share amounts) Revenue
$
782,810
$
760,617
Salaries, wages and benefits (including equity-based
compensationexpense of $4,979 and $6,101, respectively)
440,316
429,579
Professional fees
63,300
57,007
Supplies
31,971
29,957
Rents and leases
20,824
20,307
Other operating expenses
98,529
93,865
Depreciation and amortization
41,680
40,580
Interest expense, net
42,785
48,130
Transaction-related expenses
3,549
4,321
Total expenses
742,954
723,746
Income before income taxes
39,856
36,871
Provision for income taxes
5,789
7,360
Net income
34,067
29,511
Net income attributable to noncontrolling interests
(604)
(40)
Net income attributable to Acadia Healthcare Company, Inc.
$
33,463
$
29,471
Earnings per share attributable to Acadia Healthcare
Company, Inc.stockholders: Basic
$
0.38
$
0.34
Diluted
$
0.38
$
0.34
Weighted-average shares outstanding: Basic
87,765
87,505
Diluted
87,971
87,694
Acadia Healthcare Company, Inc. Condensed Consolidated
Balance Sheets (Unaudited) March 31,
December 31,
2020
2019
(In thousands) ASSETS Current assets: Cash and
cash equivalents
$
81,004
$
124,192
Accounts receivable, net
339,505
339,775
Other current assets
82,443
78,244
Total current assets
502,952
542,211
Property and equipment, net
3,151,739
3,224,034
Goodwill
2,426,700
2,449,131
Intangible assets, net
89,052
90,357
Deferred tax assets
3,307
3,339
Operating lease right-of-use assets
476,028
501,837
Other assets
68,217
68,233
Total assets
$
6,717,995
$
6,879,142
LIABILITIES AND EQUITY Current liabilities:
Current portion of long-term debt
$
196,072
$
43,679
Accounts payable
134,693
127,045
Accrued salaries and benefits
114,790
122,552
Current portion of operating lease liabilities
29,671
29,140
Other accrued liabilities
104,358
141,160
Total current liabilities
579,584
463,576
Long-term debt
2,944,820
3,105,420
Deferred tax liabilities
85,405
71,860
Operating lease liabilities
474,746
502,252
Derivative instrument liabilities
9,015
68,915
Other liabilities
126,767
128,587
Total liabilities
4,220,337
4,340,610
Redeemable noncontrolling interests
33,491
33,151
Equity: Common stock
878
877
Additional paid-in capital
2,561,218
2,557,642
Accumulated other comprehensive loss
(493,138)
(414,884)
Retained earnings
395,209
361,746
Total equity
2,464,167
2,505,381
Total liabilities and equity
$
6,717,995
$
6,879,142
Acadia Healthcare Company, Inc. Condensed Consolidated
Statements of Cash Flows (Unaudited)
Three Months Ended March
31,
2020
2019
(In thousands) Operating activities: Net income
$
34,067
$
29,511
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
41,680
40,580
Amortization of debt issuance costs
3,050
2,888
Equity-based compensation expense
4,979
6,101
Deferred income taxes
11,286
(666)
Other
(107)
2,187
Change in operating assets and liabilities: Accounts receivable,
net
(2,828)
(11,980)
Other current assets
(19,131)
(5,875)
Other assets
(1,096)
295
Accounts payable and other accrued liabilities
(21,755)
(15,701)
Accrued salaries and benefits
(6,030)
(5,849)
Other liabilities
1,431
2,182
Net cash provided by operating activities
45,546
43,673
Investing activities: Cash paid for acquisitions, net
of cash acquired
-
(40,400)
Cash paid for capital expenditures
(69,547)
(69,248)
Cash paid for real estate acquisitions
(3,149)
(1,066)
Proceeds from sale of property and equipment
207
928
Other
(1,672)
(315)
Net cash used in investing activities
(74,161)
(110,101)
Financing activities: Borrowings on revolving credit
facility
-
71,573
Principal payments on long-term debt
(10,621)
(8,246)
Common stock withheld for minimum statutory taxes, net
(1,402)
(1,327)
Distributions to noncontrolling interests
(264)
-
Other
(1,143)
(3,497)
Net cash (used in) provided by financing activities
(13,430)
58,503
Effect of exchange rate changes on cash
(1,143)
1,099
Net decrease in cash and cash equivalents
(43,188)
(6,826)
Cash and cash equivalents at beginning of the period
124,192
50,510
Cash and cash equivalents at end of the period
$
81,004
$
43,684
Effect of acquisitions: Assets acquired, excluding
cash
$
-
$
44,028
Liabilities assumed
-
(3,628)
Cash paid for acquisitions, net of cash acquired
$
-
$
40,400
Acadia Healthcare Company, Inc. Operating Statistics
(Unaudited, Revenue in thousands) Three Months
Ended March 31,
2020
2019
% Change
Same Facility Results (a,c) Revenue
$
750,454
$
725,999
3.4%
Patient Days
1,138,733
1,125,625
1.2%
Admissions
44,672
44,466
0.5%
Average Length of Stay (b)
25.5
25.3
0.7%
Revenue per Patient Day
$
659
$
645
2.2%
EBITDA margin
21.1%
22.1%
-100 bps U.S. Same Facility Results (a) Revenue
$
501,151
$
481,410
4.1%
Patient Days
646,314
628,171
2.9%
Admissions
42,470
42,082
0.9%
Average Length of Stay (b)
15.2
14.9
1.9%
Revenue per Patient Day
$
775
$
766
1.2%
EBITDA margin
24.1%
25.0%
-90 bps U.K. Same Facility Results (a,c) Revenue
$
249,303
$
244,589
1.9%
Patient Days
492,419
497,454
-1.0%
Admissions
2,202
2,384
-7.6%
Average Length of Stay (b)
223.6
208.7
7.2%
Revenue per Patient Day
$
506
$
492
3.0%
EBITDA margin
14.9%
16.3%
-140 bps U.S. Facility Results Revenue
$
509,217
$
487,960
4.4%
Patient Days
658,002
640,324
2.8%
Admissions
43,603
42,252
3.2%
Average Length of Stay (b)
15.1
15.2
-0.4%
Revenue per Patient Day
$
774
$
762
1.6%
EBITDA margin
23.6%
24.4%
-80 bps U.K. Facility Results (c) Revenue
$
273,593
$
268,059
2.1%
Patient Days
657,269
664,393
-1.1%
Admissions
2,618
2,758
-5.1%
Average Length of Stay (b)
251.1
240.9
4.2%
Revenue per Patient Day
$
416
$
403
3.2%
EBITDA margin
13.2%
14.7%
-150 bps Total Facility Results (c) Revenue
$
782,810
$
756,019
3.5%
Patient Days
1,315,271
1,304,717
0.8%
Admissions
46,221
45,010
2.7%
Average Length of Stay (b)
28.5
29.0
-1.8%
Revenue per Patient Day
$
595
$
579
2.7%
EBITDA margin
20.0%
20.9%
-90 bps (a) Results for the periods presented exclude the
elderly care division of our U.K. operations and certain closed
services. (b) Average length of stay is defined as patient days
divided by admissions. (c) Revenue and revenue per patient day for
the three months ended March 31, 2019 is adjusted to reflect the
foreign currency exchange rate for the comparable period of 2020 in
order to eliminate the effect of changes in the exchange rate. The
exchange rate used in the adjusted revenue and revenue per patient
day amounts for the three months ended March 31, 2019 is 1.28.
Acadia Healthcare Company, Inc. Reconciliation of Net
Income Attributable to Acadia Healthcare Company, Inc. to Adjusted
EBITDA (Unaudited) Three Months Ended March
31,
2020
2019
(in thousands) Net income attributable to Acadia
Healthcare Company, Inc.
$
33,463
$
29,471
Net income attributable to noncontrolling interests
604
40
Provision for income taxes
5,789
7,360
Interest expense, net
42,785
48,130
Depreciation and amortization
41,680
40,580
EBITDA
124,321
125,581
Adjustments: Equity-based compensation expense (a)
4,979
6,101
Transaction-related expenses (b)
3,549
4,321
Adjusted EBITDA
$
132,849
$
136,003
See footnotes on page 12.
Acadia Healthcare
Company, Inc. Reconciliation of Adjusted Income Attributable
to Acadia Healthcare Company, Inc. to Net Income
Attributable to Acadia Healthcare Company, Inc.
(Unaudited) Three Months Ended March 31,
2020
2019
(in thousands, except per share amounts) Net income
attributable to Acadia Healthcare Company, Inc.
$
33,463
$
29,471
Adjustments to income: Transaction-related expenses (b)
3,549
4,321
Income tax effect of adjustments to income (c)
(344)
549
Adjusted income attributable to Acadia Healthcare Company, Inc.
$
36,668
$
34,341
Weighted-average shares outstanding - diluted
87,971
87,694
Adjusted income attributable to Acadia Healthcare Company,
Inc.per diluted share
$
0.42
$
0.39
See footnotes on page 12.
Acadia Healthcare
Company, Inc. Footnotes We have included certain
financial measures in this press release, including EBITDA,
Adjusted EBITDA, and Adjusted income, 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 net income
attributable to noncontrolling interests, provision for income
taxes, net interest expense and depreciation and amortization. We
define Adjusted EBITDA as EBITDA adjusted for equity-based
compensation expense and transaction-related expenses. We define
Adjusted income as net income (loss) adjusted for
transaction-related expenses and income tax effect of adjustments
to income. EBITDA, Adjusted EBITDA, and Adjusted income 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 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 may not be comparable to similarly
titled measures of other companies. We have included information
concerning EBITDA, Adjusted EBITDA, and Adjusted income 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 when reporting their
results. Our presentation of EBITDA, Adjusted EBITDA, and Adjusted
income 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 transaction-related expenses incurred by
Acadia primarily related to termination, restructuring, U.K. sale,
strategic review, management transition and other similar costs.
(c) Represents the income tax effect of adjustments to
income based on tax rates of 14.3% and 16.6% for the three months
ended March 31, 2020 and 2019, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200504005676/en/
Gretchen Hommrich Director, Investor Relations (615)
861-6000
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