Notes to Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
1.
|
Description of Business and Basis of Presentation
|
Description of Business
Acadia Healthcare Company, Inc. (the “Company”) develops and operates inpatient psychiatric facilities, residential treatment centers, group homes, substance abuse facilities and facilities providing outpatient behavioral healthcare services to serve the behavioral health and recovery needs of communities throughout the United States (“U.S.”) and Puerto Rico. At March 31, 2021, the Company operated 228 behavioral healthcare facilities with approximately 10,000 beds in 40 states and Puerto Rico.
On January 19, 2021, the Company completed the sale of its United Kingdom (“U.K.”) operations to RemedcoUK Limited, a company organized under the laws of England and Wales and owned by funds managed or advised by Waterland Private Equity Fund VII (the “U.K. Sale”). The U.K. Sale allowed us to reduce our indebtedness and focus on our U.S. operations. As a result of the U.K. Sale, the Company reported, for all periods presented, results of operations and cash flows of the U.K. operations as discontinued operations in the accompanying financial statements. See Note 3 – U.K. Sale.
Basis of Presentation
The business of the Company is conducted through limited liability companies, partnerships and C-corporations. The Company’s consolidated financial statements include the accounts of the Company and all subsidiaries controlled by the Company through its direct or indirect ownership of majority interests and exclusive rights granted to the Company as the controlling member of an entity. All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation of our financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements as of that date. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2021. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
During March 2020, the global pandemic of the novel coronavirus known as COVID-19 (“COVID-19”) began to affect the Company’s facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. At many of the Company’s facilities, employees and/or patients have tested positive for COVID-19. The Company is committed to protecting the health of our communities and has been responding to the evolving COVID-19 situation while taking steps to provide quality care and protect the health and safety of patients and employees. All of the Company’s facilities are closely following infectious disease protocols, as well as recommendations by the Centers for Disease Control and Prevention (“CDC”) and local health officials. The Company has established an internal COVID-19 taskforce, taken steps to secure its supply chain, expanded telehealth capabilities and implemented emergency planning in directly impacted markets. Nevertheless, COVID-19 may adversely impact the Company’s business and have an impact on its financial results that management is not currently able to quantify. Disruptions to the Company’s business as a result of the COVID-19 pandemic could have a material adverse effect on its results of operations, financial condition, cash flows and ability to service its indebtedness and may affect the amounts reported in the consolidated financial statements including those related to collectability of accounts receivable as well as professional and general liability reserves, tax assets and liabilities and may result in a potential impairment of goodwill and long-lived assets.
Certain reclassifications have been made to prior years to conform to the current year presentation.
2.
|
Recently Issued Accounting Standards
|
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for or
6
Table of contents
recognizing the effects of reference rate reform on financial reporting and applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Entities may adopt ASU 2020-04 as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Management is evaluating the impact of ASU 2020-04 on the Company’s consolidated financial statements.
In December 2019, FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted ASU 2019-12 on January 1, 2021. There is no significant impact to the Company’s consolidated financial statements.
On January 19, 2021, the Company completed the U.K. Sale pursuant to a Share Purchase Agreement in which it sold all of the securities of AHC-WW Jersey Limited, a private limited liability company incorporated in Jersey and a subsidiary of the Company, which constituted the entirety of the Company’s U.K. business operations. The U.K. Sale resulted in approximately $1,525 million of gross proceeds before deducting the settlement of existing foreign currency hedging liabilities of $85 million based on the current British Pounds (“GBP”) to US Dollars (“USD”) exchange rate, cash retained by the buyer and transaction costs. The Company used the net proceeds of approximately $1,425 million (excluding cash retained by the buyer) along with cash from the balance sheet to reduce debt by $1,640 million during the first quarter of 2021 as described in Note 11 – Long-Term Debt.
As a result of the U.K. Sale, the Company reported, for all periods presented, results of operations and cash flows of the U.K. operations as discontinued operations in the accompanying financial statements. In December 2020, the Company’s U.K. operations met the criteria to be classified as assets held for sale. The carrying value of the U.K. operations was written down to fair value less costs to sell in the condensed consolidated balance sheets at December 31, 2020. This resulted in a loss on sale of $867.3 million, which includes approximately $356.2 million of non-cash goodwill impairment, within discontinued operations in the condensed consolidated statements of operations for the year ended December 31, 2020. For the three months ended March 31, 2021, an additional $14.3 million was recorded as loss on sale primarily resulting from an increase in the U.K. operations carrying value.
For the three months ended March 31, 2021 and 2020, results of operations of the U.K. operations were as follows (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenue
|
|
$
|
62,520
|
|
|
$
|
273,593
|
|
Salaries, wages and benefits
|
|
|
35,937
|
|
|
|
153,329
|
|
Professional fees
|
|
|
6,815
|
|
|
|
32,249
|
|
Supplies
|
|
|
2,217
|
|
|
|
9,775
|
|
Rents and leases
|
|
|
2,509
|
|
|
|
11,707
|
|
Other operating expenses
|
|
|
6,682
|
|
|
|
30,373
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
18,845
|
|
Interest expense, net
|
|
|
10
|
|
|
|
220
|
|
Loss on sale
|
|
|
14,254
|
|
|
|
—
|
|
Transaction-related expenses
|
|
|
6,265
|
|
|
|
2,023
|
|
Total expenses
|
|
|
74,689
|
|
|
|
258,521
|
|
(Loss) income from discontinued operations before income taxes
|
|
|
(12,169
|
)
|
|
|
15,072
|
|
Provision for (benefit from) income taxes
|
|
|
472
|
|
|
|
(17
|
)
|
(Loss) income from discontinued operations
|
|
$
|
(12,641
|
)
|
|
$
|
15,089
|
|
7
Table of contents
The major classes of assets and liabilities for the U.K. operations as of December 31, 2020 are shown below (in thousands):
Cash and cash equivalents
|
|
$
|
75,051
|
|
Accounts receivable, net
|
|
|
52,196
|
|
Other current assets
|
|
|
13,361
|
|
Current assets of discontinued operations
|
|
|
140,608
|
|
Property and equipment, net
|
|
|
1,297,923
|
|
Goodwill
|
|
|
—
|
|
Intangible assets, net
|
|
|
22,289
|
|
Operating lease right-of-use assets
|
|
|
341,289
|
|
Other assets
|
|
|
7,706
|
|
Total assets of discontinued operations
|
|
$
|
1,809,815
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
44,929
|
|
Current portion of operating lease liabilities
|
|
|
11,141
|
|
Other current liabilities
|
|
|
136,895
|
|
Current liabilities of discontinued operations
|
|
|
192,965
|
|
Operating lease liabilities
|
|
|
387,607
|
|
Deferred tax liabilities
|
|
|
57,230
|
|
Other liabilities
|
|
|
22,225
|
|
Total liabilities of discontinued operations
|
|
$
|
660,027
|
|
Revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and residential treatment. The services provided by the Company have no fixed duration and can be terminated by the patient or the facility at any time, and therefore, each treatment is its own stand-alone contract.
As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in Accounting Standards Codification (“ASC”) ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize the revenue. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to remain admitted in our facilities.
The Company disaggregates revenue from contracts with customers by service type and by payor.
The Company’s facilities in the United States (the “U.S. Facilities”) and services provided by the facilities can generally be classified into the following categories: acute inpatient psychiatric facilities; specialty treatment facilities; residential treatment centers; and outpatient community-based facilities.
Acute inpatient psychiatric facilities. Acute inpatient psychiatric facilities provide a high level of care in order to stabilize patients that are either a threat to themselves or to others. The acute setting provides 24-hour observation, daily intervention and monitoring by psychiatrists.
Specialty treatment facilities. Specialty treatment facilities include residential recovery facilities, eating disorder facilities and comprehensive treatment centers. The Company provides a comprehensive continuum of care for adults with addictive disorders and co-occurring mental disorders. Inpatient, including detoxification and rehabilitation, partial hospitalization and outpatient treatment programs give patients access to the least restrictive level of care.
Residential treatment centers. Residential treatment centers treat patients with behavioral disorders in a non-hospital setting, including outdoor programs. The facilities balance therapy activities with social, academic and other activities.
Outpatient community-based facilities. Outpatient community-based programs are designed to provide therapeutic treatment to children and adolescents who have a clinically-defined emotional, psychiatric or chemical dependency disorder while enabling the youth to remain at home and within their community.
8
Table of contents
The table below presents total revenue attributed to each category (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Acute inpatient psychiatric facilities
|
|
$
|
267,359
|
|
|
$
|
239,414
|
|
Specialty treatment facilities
|
|
|
211,757
|
|
|
|
193,611
|
|
Residential treatment centers
|
|
|
68,649
|
|
|
|
70,434
|
|
Outpatient community-based facilities
|
|
|
3,434
|
|
|
|
5,758
|
|
Revenue
|
|
$
|
551,199
|
|
|
$
|
509,217
|
|
The Company receives payments from the following sources for services rendered in our facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by CMS; and (iv) individual patients and clients.
The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. Implicit price concessions are based on historical collection experience. Most of our facilities have contracts containing variable consideration. However, it is unlikely a significant reversal of revenue will occur when the uncertainty is resolved, and therefore, the Company has included the variable consideration in the estimated transaction price. Subsequent changes resulting from a patient’s ability to pay are recorded as bad debt expense, which is included as a component of other operating expenses in the condensed consolidated statements of operations. Bad debt expense for the three months ended March 31, 2021 and 2020 was not significant.
The following table presents the Company’s revenue by payor type and as a percentage of revenue (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Commercial
|
|
$
|
162,702
|
|
|
|
29.5
|
%
|
|
$
|
143,142
|
|
|
|
28.1
|
%
|
Medicare
|
|
|
86,185
|
|
|
|
15.6
|
%
|
|
|
72,271
|
|
|
|
14.2
|
%
|
Medicaid
|
|
|
274,620
|
|
|
|
49.8
|
%
|
|
|
260,044
|
|
|
|
51.1
|
%
|
Self-Pay
|
|
|
22,443
|
|
|
|
4.1
|
%
|
|
|
27,034
|
|
|
|
5.3
|
%
|
Other
|
|
|
5,249
|
|
|
|
1.0
|
%
|
|
|
6,726
|
|
|
|
1.3
|
%
|
Revenue
|
|
$
|
551,199
|
|
|
|
100.0
|
%
|
|
$
|
509,217
|
|
|
|
100.0
|
%
|
Contract liabilities primarily consisted of unearned revenue from CMS’ Accelerated and Advance Payment Program. In April 2020, the Company received approximately $45 million from CMS’ Accelerated and Advance Payment Program for Medicare providers, which the Company expects to repay over the 12-month period beginning in April 2021. Once repayment begins, the amount will be recouped from the Company’s new Medicare claims. Contract liabilities are included in other accrued liabilities for the three months ended March 31, 2021 and, for December 31, 2020, $35.9 million is included in other accrued liabilities and $11.3 million in other liabilities on the condensed consolidated balance sheets. A summary of the activity in unearned revenue is as follows (in thousands):
Balance at December 31, 2020
|
|
$
|
47,196
|
|
Payments received
|
|
|
2,436
|
|
Revenue recognized
|
|
|
(478
|
)
|
Balance at March 31, 2021
|
|
$
|
49,154
|
|
9
Table of contents
The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2021 and 2020 (in thousands, except per share amounts):
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Acadia
Healthcare Company, Inc.
|
|
$
|
22,358
|
|
|
$
|
18,374
|
|
(Loss) income from discontinued operations
|
|
|
(12,641
|
)
|
|
|
15,089
|
|
Net income attributable to Acadia Healthcare
Company, Inc.
|
|
$
|
9,717
|
|
|
$
|
33,463
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding for basic
earnings per share
|
|
|
88,242
|
|
|
|
87,765
|
|
Effects of dilutive instruments
|
|
|
1,699
|
|
|
|
206
|
|
Shares used in computing diluted earnings per
common share
|
|
|
89,941
|
|
|
|
87,971
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Acadia
Healthcare Company, Inc. stockholders:
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Acadia
Healthcare Company, Inc.
|
|
$
|
0.25
|
|
|
$
|
0.21
|
|
(Loss) income from discontinued operations
|
|
|
(0.14
|
)
|
|
|
0.17
|
|
Net income attributable to Acadia Healthcare
Company, Inc.
|
|
$
|
0.11
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Acadia
Healthcare Company, Inc. stockholders:
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Acadia
Healthcare Company, Inc.
|
|
$
|
0.25
|
|
|
$
|
0.21
|
|
(Loss) income from discontinued operations
|
|
|
(0.14
|
)
|
|
|
0.17
|
|
Net income attributable to Acadia Healthcare
Company, Inc.
|
|
$
|
0.11
|
|
|
$
|
0.38
|
|
Approximately 0.7 million and 2.9 million shares of common stock issuable upon exercise of outstanding stock option awards were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2021 and 2020, respectively, because their effect would have been anti-dilutive.
Other current assets consisted of the following (in thousands):
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Assets held for sale
|
|
$
|
16,991
|
|
|
$
|
—
|
|
Prepaid expenses
|
|
|
15,227
|
|
|
|
19,480
|
|
Workers’ compensation deposits – current portion
|
|
|
12,000
|
|
|
|
12,000
|
|
Other receivables
|
|
|
8,903
|
|
|
|
10,025
|
|
Insurance receivable – current portion
|
|
|
6,917
|
|
|
|
6,792
|
|
Income taxes receivable
|
|
|
5,255
|
|
|
|
897
|
|
Inventory
|
|
|
4,579
|
|
|
|
4,851
|
|
Cost report receivable
|
|
|
2,063
|
|
|
|
5,818
|
|
Other
|
|
|
1,334
|
|
|
|
1,469
|
|
Other current assets
|
|
$
|
73,269
|
|
|
$
|
61,332
|
|
10
Table of contents
7.
|
Property and Equipment
|
Property and equipment consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Land
|
|
$
|
144,399
|
|
|
$
|
144,221
|
|
Building and improvements
|
|
|
1,502,862
|
|
|
|
1,490,149
|
|
Equipment
|
|
|
224,755
|
|
|
|
220,690
|
|
Construction in progress
|
|
|
255,188
|
|
|
|
217,479
|
|
|
|
|
2,127,204
|
|
|
|
2,072,539
|
|
Less: accumulated depreciation
|
|
|
(472,472
|
)
|
|
|
(449,643
|
)
|
Property and equipment, net
|
|
$
|
1,654,732
|
|
|
$
|
1,622,896
|
|
8.
|
Other Intangible Assets
|
Other identifiable intangible assets and related accumulated amortization consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-compete agreements
|
|
$
|
1,131
|
|
|
$
|
1,131
|
|
|
$
|
(1,131
|
)
|
|
$
|
(1,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses and accreditations
|
|
|
11,873
|
|
|
|
11,873
|
|
|
|
—
|
|
|
|
—
|
|
Trade names
|
|
|
39,526
|
|
|
|
39,526
|
|
|
|
—
|
|
|
|
—
|
|
Certificates of need
|
|
|
17,228
|
|
|
|
17,136
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
68,627
|
|
|
|
68,535
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
69,758
|
|
|
$
|
69,666
|
|
|
$
|
(1,131
|
)
|
|
$
|
(1,131
|
)
|
All of the Company’s definite-lived intangible assets are fully amortized. The Company’s licenses and accreditations, trade names and certificate of need intangible assets have indefinite lives and are, therefore, not subject to amortization.
As part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the U.S. government announced it would offer $100 billion of relief to eligible healthcare providers. On April 24, 2020, then President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act (the “PPP Act”). Among other things, the PPP Act allocated $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion allocated under the PPP Act is in addition to the $100 billion allocated to healthcare providers for the same purposes in the CARES Act and has been disbursed to providers under terms and conditions similar to the CARES Act funds. During the three months ended June 30, 2020, the Company participated in certain relief programs offered through the CARES Act, including receipt of approximately $19.7 million relating to the initial portions of the Public Health and Social Services Emergency Fund (“PHSSE Fund”), also known as the Provider Relief Fund, and approximately $45 million of payments from the Centers for Medicare and Medicaid Services’ (“CMS”) Accelerated and Advance Payment Program. The Company expects to repay these funds over a 12-month period beginning in April 2021. Once repayment begins, the amount will be recouped from the Company’s new Medicare claims. In August 2020, the Company received approximately $12.8 million of additional funds from the PHSSE Fund. In addition, the Company received a 2% increase in facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020, to December 31, 2021.
The CARES Act also provides for certain federal income and other tax changes, including an increase in the interest expense tax deduction limitation and bonus depreciation of qualified improvement property. Furthermore, under the CARES Act, (i) for taxable years beginning before 2021, net operating loss (“NOL”) carryforwards and carrybacks may offset 100% of taxable income and (ii) NOLs arising in 2018, 2019 and 2020 taxable years may be carried back to each of the preceding five years to generate a refund. As a result, in 2019 and 2020 the Company received a benefit, in the form of refunds and lower future tax payments, of $51.6 million, consisting of $22.8 million related to interest expense, $20.5 million related to qualified improvement property legislation and an $8.3
11
Table of contents
million permanent benefit due to loss being able to be carried back at a 35% tax rate to offset income in tax years prior to 2018 (21% for tax years after 2017). The Company also received a cash benefit of approximately $39 million for 2020 relating to the delay of payment of the employer portion of Social Security payroll taxes, as enacted by the CARES Act.
During the fourth quarter of 2020, the Company recorded $32.8 million of other income in the consolidated statement of operations related to $34.9 million of PHSSE funds received from April through December 2020. The Company’s recognition of this income was based on revised guidance in the Consolidated Appropriations Act, 2021 enacted in December 2020. The Company continues to evaluate its compliance with the terms and conditions to, and the financial impact of, funds received under the CARES Act and other government relief programs.
10.
|
Other Accrued Liabilities
|
Other accrued liabilities consisted of the following (in thousands):
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Unearned revenue
|
|
$
|
49,154
|
|
|
$
|
35,946
|
|
Finance lease liabilities
|
|
|
32,022
|
|
|
|
32,188
|
|
Accrued expenses
|
|
|
29,168
|
|
|
|
28,452
|
|
Accrued interest
|
|
|
17,781
|
|
|
|
40,479
|
|
Insurance liability – current portion
|
|
|
9,700
|
|
|
|
9,700
|
|
Government relief funds
|
|
|
6,285
|
|
|
|
5,495
|
|
Accrued property taxes
|
|
|
6,143
|
|
|
|
6,763
|
|
Income taxes payable
|
|
|
6,080
|
|
|
|
16,345
|
|
Other
|
|
|
4,707
|
|
|
|
3,085
|
|
Other accrued liabilities
|
|
$
|
161,040
|
|
|
$
|
178,453
|
|
11.Long-Term Debt
Long-term debt consisted of the following (in thousands):
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
New Credit Facility:
|
|
|
|
|
|
|
|
|
Term Loan A
|
|
$
|
425,000
|
|
|
$
|
—
|
|
Revolving Line of Credit
|
|
|
160,000
|
|
|
|
—
|
|
Prior Credit Facility:
|
|
|
|
|
|
|
|
|
Senior Secured Term A Loan
|
|
|
—
|
|
|
|
311,733
|
|
Senior Secured Term B Loans
|
|
|
—
|
|
|
|
872,870
|
|
Senior Secured Revolving Line of Credit
|
|
|
—
|
|
|
|
—
|
|
5.625% Senior Notes due 2023
|
|
|
—
|
|
|
|
650,000
|
|
6.500% Senior Notes due 2024
|
|
|
—
|
|
|
|
390,000
|
|
5.500% Senior Notes due 2028
|
|
|
450,000
|
|
|
|
450,000
|
|
5.000% Senior Notes due 2029
|
|
|
475,000
|
|
|
|
475,000
|
|
Other long-term debt
|
|
|
3,319
|
|
|
|
3,625
|
|
Less: unamortized debt issuance costs, discount and
premium
|
|
|
(17,196
|
)
|
|
|
(30,802
|
)
|
|
|
|
1,496,123
|
|
|
|
3,122,426
|
|
Less: current portion
|
|
|
(11,911
|
)
|
|
|
(153,478
|
)
|
Long-term debt
|
|
$
|
1,484,212
|
|
|
$
|
2,968,948
|
|
12
Table of contents
New Credit Facility
The Company entered into a new credit agreement (the “New Credit Facility”) on March 17, 2021. This New Credit Facility provides for a $600.0 million senior secured revolving credit facility (the “Revolving Facility”) and a $425.0 million senior secured term loan facility (the “Term Loan Facility” and, together with the Revolving Facility, the “Senior Facilities”), each maturing on March 17, 2026 unless extended in accordance with the terms of the New Credit Facility. The Revolving Facility further provides for (i) up to $20.0 million to be utilized for the issuance of letters of credit and (ii) the availability of a swingline facility under which the Company may borrow up to $20.0 million.
As a part of the closing of the New Credit Facility on March 17, 2021, the Company (i) refinanced and terminated the Company’s prior credit facilities under the Amended and Restated Credit Agreement, dated as of December 31, 2012 (the “Prior Credit Facility”) and (ii) financed the redemption of all of the Company’s outstanding 5.625% Senior Notes due 2023 (the “5.625% Senior Notes”).
The Company had $422.0 million of availability under the Revolving Facility and had standby letters of credit outstanding of $18.0 million related to security for the payment of claims required by its workers’ compensation insurance program at March 31, 2021.
The New Credit Facility requires quarterly term loan principal repayments for the Term Loan Facility of $2.7 million for June 30, 2021 to March 31, 2022, $5.3 million for June 30, 2022 to March 31, 2024, $8.0 million for June 30, 2024 to March 31, 2025, $10.6 million for June 30, 2025 to December 31, 2025, with the remaining principal balance of the Term Loan Facility due on the maturity date of March 31, 2026.
The Company has the ability to increase the amount of the Senior Facilities, which may take the form of increases to the Revolving Facility or the Term Loan Facility or the issuance of one or more incremental term loan facilities (collectively, the “Incremental Facilities”), upon obtaining additional commitments from new or existing lenders and the satisfaction of customary conditions precedent for such Incremental Facilities. Such Incremental Facilities may not exceed the sum of (i) the greater of $480.0 million and an amount equal to 100% of Consolidated EBITDA (as defined in the New Credit Facility) of the Company and its Restricted Subsidiaries (as defined in the New Credit Facility) (as determined for the four fiscal quarter period most recently ended for which financial statements are available), and (ii) additional amounts so long as, after giving effect thereto, the Consolidated Senior Secured Net Leverage Ratio (as defined in the New Credit Facility) does not exceed 3.5 to 1.0.
Subject to certain exceptions, substantially all of the Company’s existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries are required to guarantee the repayment of the Company’s obligations under the New Credit Facility. Borrowings under the Senior Facilities bear interest at a floating rate, which will initially be, at the Company’s option, either (i) adjusted LIBOR plus 1.75% or (ii) an alternative base rate plus 0.75% (in each case, subject to adjustment based on the Company’s consolidated total net leverage ratio). An unused fee initially set at 0.25% per annum (subject to adjustment based on the Company’s consolidated total net leverage ratio) is payable quarterly in arrears based on the actual daily undrawn portion of the commitments in respect of the Revolving Facility.
The New Credit Facility contains customary representations and affirmative and negative covenants, including limitations on the Company’s and its subsidiaries’ ability to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, pay junior indebtedness and enter into affiliate transactions, in each case, subject to customary exceptions. In addition, the New Credit Facility contains financial covenants requiring the Company on a consolidated basis to maintain, as of the last day of any consecutive four fiscal quarter period, a consolidated total net leverage ratio of not more than 5.0 to 1.0 and an interest coverage ratio of at least 3.0 to 1.0. The New Credit Facility also includes events of default customary for facilities of this type and upon the occurrence of such events of default, among other things, all outstanding loans under the Senior Facilities may be accelerated and/or the lenders’ commitments terminated. At March 31, 2021, the Company was in compliance with such covenants.
Prior Credit Facility
The Company entered into a senior secured credit facility (the “Senior Secured Credit Facility”) on April 1, 2011. On December 31, 2012, the Company entered into the Prior Credit Facility which amended and restated the Senior Secured Credit Facility. The Company has amended the Prior Credit Facility from time to time as described in the Company’s prior filings with the SEC.
On April 21, 2020, the Company entered into the Thirteenth Amendment (the “Thirteenth Amendment”) to the Prior Credit Facility. The Thirteenth Amendment amended the Consolidated Leverage Ratio in the prior covenant to increase such leverage ratio for the rest of 2020.
On November 13, 2020, the Company entered into the Fourth Repricing Facilities Amendment (the “Fourth Repricing Facilities Amendment”) to the Prior Credit Facility. The Fourth Repricing Facilities Amendment extended the maturity date of each of the prior
13
Table of contents
revolving line of credit and the prior TLA Facility from November 30, 2021 to November 30, 2022. The Fourth Repricing Facilities Amendment also (1) replaced the revolving line of credit in an aggregate committed amount of $500.0 million with an aggregate committed amount of approximately $459.0 million and (2) replaced the TLA Facility aggregate outstanding principal amount of approximately $352.4 million with an aggregate principal amount of approximately $318.9 million. The interest rate margin applicable to both facilities remained unchanged from the prior facilities, and the commitment fee applicable to the new revolving line of credit also remained unchanged from the prior revolving line of credit. In connection with the Fourth Repricing Facilities Amendment, the Company recorded a debt extinguishment charge of $1.0 million, including the write-off of discount and deferred financing costs, which was recorded in debt extinguishment costs in the consolidated statements of operations for the year ended December 31, 2020.
On January 5, 2021, the Company made a voluntary payment of $105.0 million on the Tranche B-4 Facility. On January 19, 2021, the Company used a portion of the net proceeds from the U.K. Sale to repay the outstanding balances of $311.7 million of its TLA Facility and $767.9 million of its Tranche B-4 Facility of the Prior Credit Facility. At March 31, 2021, in connection with the termination of the Prior Credit Facility, the Company recorded a debt extinguishment charge of $10.9 million, including the write-off of discount and deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.
Senior Notes
5.500% Senior Notes due 2028
On June 24, 2020, the Company issued $450.0 million of 5.500% Senior Notes due 2028 (the “5.500% Senior Notes”). The 5.500% Senior Notes mature on July 1, 2028 and bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021.
5.000% Senior Notes due 2029
On October 14, 2020, the Company issued $475.0 million of 5.000% Senior Notes due 2029 (the “5.000% Senior Notes”). The 5.000% Senior Notes mature on April 15, 2029 and bear interest at a rate of 5.000% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2021. The Company used the net proceeds of the 5.000% Senior Notes to prepay approximately $453.3 million of the outstanding borrowings on our existing Tranche B-3 Facility and used the remaining net proceeds for general corporate purposes and to pay related fees and expenses in connection with the offering. In connection with the 5.000% Senior Notes, the Company recorded a debt extinguishment charge of $2.9 million, including the write-off of discount and deferred financing costs of the Tranche B-3 Facility, which was recorded in debt extinguishment costs in the consolidated statements of operations for the year ended December 31, 2020.
The indentures governing the 5.500% Senior Notes and the 5.000% Senior Notes (together, the “Senior Notes”) contain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; (vi) merge, consolidate or sell substantially all of the Company’s assets; and (vii) create liens on assets.
The Senior Notes issued by the Company are guaranteed by each of the Company’s subsidiaries that guarantee the Company’s obligations under the New Credit Facility at March 31, 2021. The guarantees are full and unconditional and joint and several.
The Company may redeem the Senior Notes at its option, in whole or part, at the dates and amounts set forth in the indentures.
5.625% Senior Notes due 2023
On February 11, 2015, the Company issued $375.0 million of 5.625% Senior Notes. On September 21, 2015, the Company issued $275.0 million of additional 5.625% Senior Notes. The additional notes formed a single class of debt securities with the 5.625% Senior Notes issued in February 2015. Giving effect to this issuance, the Company has outstanding an aggregate of $650.0 million of 5.625% Senior Notes. The 5.625% Senior Notes mature on February 15, 2023 and bear interest at a rate of 5.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year. On March 17, 2021, the Company redeemed the 5.625% Senior Notes.
6.500% Senior Notes due 2024
On February 16, 2016, the Company issued $390.0 million of 6.500% Senior Notes due 2024 (the “6.500% Senior Notes”). The 6.500% Senior Notes mature on March 1, 2024 and bear interest at a rate of 6.500% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2016. On March 1, 2021, the Company redeemed the 6.500% Senior Notes.
14
Table of contents
Redemption of 5.625% Senior Notes and 6.500% Senior Notes
On January 29, 2021, the Company issued conditional notices of full redemption providing for the redemption in full of $650 million of 5.625% Senior Notes and $390 million of 6.500% Senior Notes to the holders of such notes.
On March 1, 2021, the Company satisfied and discharged the indentures governing the 6.500% Senior Notes. In connection with the redemption of the 6.500% Senior Notes, the Company recorded debt extinguishment costs of $10.5 million, including $6.3 million cash paid for breakage costs and the write-off of deferred financing costs of $4.2 million in the condensed consolidated statements of operations.
On March 17, 2021, the Company satisfied and discharged the indentures governing the 5.625% Senior Notes. In connection with the redemption of the 5.625% Senior Notes, the Company recorded debt extinguishment costs of $3.3 million, including the write-off of deferred financing and premiums costs in the condensed consolidated statements of operations.
6.125% Senior Notes due 2021
On March 12, 2013, the Company issued $150.0 million of 6.125% Senior Notes due 2021 (the “6.125% Senior Notes”). The 6.125% Senior Notes mature on March 15, 2021 and bear interest at a rate of 6.125% per annum, payable semi-annually in arrears on March 15 and September 15 of each year. On June 24, 2020, the Company redeemed the 6.125% Senior Notes.
5.125% Senior Notes due 2022
On July 1, 2014, the Company issued $300.0 million of 5.125% Senior Notes due 2022 (the “5.125% Senior Notes”). The 5.125% Senior Notes mature on July 1, 2022 and bear interest at a rate of 5.125% per annum, payable semi-annually in arrears on January 1 and July 1 of each year. On June 24, 2020, the Company redeemed the 5.125% Senior Notes.
Redemption of 6.125% Senior Notes and 5.125% Senior Notes
On June 10, 2020, the Company issued conditional notices of full redemption providing for the redemption in full of the 6.125% Senior Notes and 5.125% Senior Notes on July 10, 2020 (the “Redemption Date”), in each case at a redemption price equal to 100.0% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including the Redemption Date (the “Redemption Price”). On June 24, 2020, the Company satisfied and discharged the indentures governing the 6.125% Senior Notes and the 5.125% Senior Notes by irrevocably depositing with a trustee sufficient funds equal to the Redemption Price for the 6.125% Senior Notes and the 5.125% Senior Notes and otherwise complying with the terms in the indentures relating to the satisfaction and discharge of the 6.125% Senior Notes and the 5.125% Senior Notes. In connection with the redemption of the 6.125% Senior Notes and the 5.125% Senior Notes, the Company recorded a debt extinguishment charge of $3.3 million, including the write-off of the deferred financing and other costs in the consolidated statements of operations for the year ended December 31, 2020.
12.
|
Noncontrolling Interests
|
Noncontrolling interests in the consolidated financial statements represents the portion of equity held by noncontrolling partners in the Company’s non-wholly owned subsidiaries. At March 31, 2021, the Company operated six facilities through non-wholly owned subsidiaries. The Company owns between 60% and 86% of the equity interests of these entities and noncontrolling partners own the remaining equity interests. The initial value of the noncontrolling interests is based on the fair value of contributions, and the Company consolidates the operations of each facility based on its equity ownership and its control of the entity. The noncontrolling interests are reflected as redeemable noncontrolling interests on the accompanying condensed consolidated balance sheets based on put rights that could require the Company to purchase the noncontrolling interests upon the occurrence of a change in control.
The components of redeemable noncontrolling interests are as follows (in thousands):
Balance at December 31, 2020
|
|
$
|
55,315
|
|
Contribution of redeemable noncontrolling interests
|
|
|
1,000
|
|
Net income attributable to noncontrolling interests
|
|
|
762
|
|
Dividend payments to noncontrolling interests
|
|
|
(377
|
)
|
Balance at March 31, 2021
|
|
$
|
56,700
|
|
15
Table of contents
13.
|
Variable Interest Entities
|
For legal entities where the Company has a financial relationship, the Company evaluates whether it has a variable interest and determines if the entity is considered a variable interest entity (“VIE”). If the Company concludes an entity is a VIE and the Company is the primary beneficiary, the entity is consolidated. The primary beneficiary analysis is a qualitative analysis based on power and benefits. A reporting entity has a controlling financial interest in a VIE and must consolidate the VIE if it has both power and benefits. It must have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE.
At March 31, 2021, the Company operated six facilities through non-wholly owned subsidiaries. The Company owns between 60% and 86% of the equity interests of these entities, and noncontrolling partners own the remaining equity interests. The Company manages each of these facilities, is responsible for the day to day operations and, therefore, has the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or receive benefits from the VIE that could potentially be significant to the VIE. These activities include, but are not limited to, behavioral healthcare services, human resource and employment-related decisions, marketing and finance. The terms of the agreements governing each of our VIEs prohibit us from using the assets of each VIE to satisfy the obligations of other entities. Consolidated assets at March 31, 2021 and December 31, 2020 include total assets of variable interest entities of $269.9 million and $261.7 million, respectively, which cannot be used to settle the obligations of other entities. Consolidated liabilities at March 31, 2021 and December 31, 2020 include total liabilities of variable interest entities of $26.2 million and $26.1 million, respectively.
The consolidated VIEs assets and liabilities in the Company’s condensed consolidated balance sheets are shown below (in thousands):
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,657
|
|
|
$
|
15,151
|
|
Accounts receivable, net
|
|
|
21,007
|
|
|
|
18,507
|
|
Other current assets
|
|
|
1,454
|
|
|
|
1,461
|
|
Total current assets
|
|
|
41,118
|
|
|
|
35,119
|
|
Property and equipment, net
|
|
|
177,449
|
|
|
|
175,103
|
|
Goodwill
|
|
|
34,945
|
|
|
|
34,945
|
|
Intangible assets, net
|
|
|
9,581
|
|
|
|
9,581
|
|
Operating lease right-of-use assets
|
|
|
6,834
|
|
|
|
6,909
|
|
Total assets
|
|
$
|
269,927
|
|
|
$
|
261,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
3,427
|
|
|
$
|
4,143
|
|
Accrued salaries and benefits
|
|
|
5,024
|
|
|
|
4,357
|
|
Current portion of operating lease liabilities
|
|
|
172
|
|
|
|
164
|
|
Other accrued liabilities
|
|
|
8,561
|
|
|
|
8,366
|
|
Total current liabilities
|
|
|
17,184
|
|
|
|
17,030
|
|
Operating lease liabilities
|
|
|
6,819
|
|
|
|
6,863
|
|
Other liabilities
|
|
|
2,166
|
|
|
|
2,166
|
|
Total liabilities
|
|
$
|
26,169
|
|
|
$
|
26,059
|
|
16
Table of contents
14.
|
Accumulated Other Comprehensive Loss
|
The components of accumulated other comprehensive loss are as follows (in thousands):
|
|
Foreign Currency
Translation
Adjustments
|
|
|
Change in Fair
Value of
Derivative
Instruments
|
|
|
Pension Plan
|
|
|
Total
|
|
Balance at December 31, 2020
|
|
$
|
(373,101
|
)
|
|
$
|
13,686
|
|
|
$
|
(11,950
|
)
|
|
$
|
(371,365
|
)
|
Foreign currency translation (loss) gain
|
|
|
(4,293
|
)
|
|
|
—
|
|
|
|
33
|
|
|
|
(4,260
|
)
|
Gain on derivative instruments, net of tax of $0.1
million
|
|
|
—
|
|
|
|
19
|
|
|
|
—
|
|
|
|
19
|
|
U.K. Sale
|
|
|
377,394
|
|
|
|
(13,705
|
)
|
|
|
11,917
|
|
|
|
375,606
|
|
Balance at March 31, 2021
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
15.
|
Equity-Based Compensation
|
Equity Incentive Plans
The Company issues stock-based awards, including stock options, restricted stock and restricted stock units, to certain officers, employees and non-employee directors under the Acadia Healthcare Company, Inc. Incentive Compensation Plan (the “Equity Incentive Plan”). At March 31, 2021, a maximum of 8,200,000 shares of the Company’s common stock were authorized for issuance as stock options, restricted stock and restricted stock units or other share-based compensation under the Equity Incentive Plan, of which 442,139 were available for future grant. Stock options may be granted for terms of up to ten years. The Company recognizes expense on all share-based awards on a straight-line basis over the requisite service period of the entire award. Grants to employees generally vest in annual increments of 25% each year, commencing one year after the date of grant. The exercise prices of stock options are equal to the most recent closing price of the Company’s common stock on the most recent trading date prior to the date of grant.
The Company recognized $7.0 million and $5.0 million in equity-based compensation expense for the three months ended March 31, 2021 and 2020, respectively. At March 31, 2021, there was $47.8 million of unrecognized compensation expense related to unvested options, restricted stock and restricted stock units, which is expected to be recognized over the remaining weighted average vesting period of 1.6 years.
The Company recognized a deferred income tax benefit of $1.8 million and $1.3 million for the three months ended March 31, 2021 and 2020, respectively, related to equity-based compensation expense.
Stock Options
Stock option activity during 2020 and 2021 was as follows:
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
|
|
Aggregate
Intrinsic
Value (in thousands)
|
|
Options outstanding at January 1, 2020
|
|
|
1,360,068
|
|
|
$
|
39.40
|
|
|
|
7.57
|
|
|
$
|
1,650
|
|
Options granted
|
|
|
507,600
|
|
|
|
33.13
|
|
|
|
9.18
|
|
|
|
157
|
|
Options exercised
|
|
|
(68,700
|
)
|
|
|
29.15
|
|
|
N/A
|
|
|
|
854
|
|
Options cancelled
|
|
|
(288,662
|
)
|
|
|
39.67
|
|
|
N/A
|
|
|
N/A
|
|
Options outstanding at December 31, 2020
|
|
|
1,510,306
|
|
|
|
37.56
|
|
|
|
7.35
|
|
|
|
1,414
|
|
Options granted
|
|
|
282,320
|
|
|
|
57.14
|
|
|
|
10.01
|
|
|
|
—
|
|
Options exercised
|
|
|
(352,297
|
)
|
|
|
36.16
|
|
|
N/A
|
|
|
|
7,300
|
|
Options cancelled
|
|
|
(34,725
|
)
|
|
|
37.44
|
|
|
N/A
|
|
|
N/A
|
|
Options outstanding at March 31, 2021
|
|
|
1,405,604
|
|
|
$
|
41.85
|
|
|
|
7.88
|
|
|
$
|
19,300
|
|
Options exercisable at December 31, 2020
|
|
|
596,606
|
|
|
$
|
45.37
|
|
|
|
5.55
|
|
|
$
|
543
|
|
Options exercisable at March 31, 2021
|
|
|
524,509
|
|
|
$
|
44.58
|
|
|
|
6.09
|
|
|
$
|
6,183
|
|
17
Table of contents
Fair values are estimated using the Black-Scholes option pricing model. The following table summarizes the grant-date fair value of options and the assumptions used to develop the fair value estimates for options granted during the three months ended March 31, 2021 and year ended December 31, 2020:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Weighted average grant-date fair value of options
|
|
$
|
26.53
|
|
|
$
|
12.37
|
|
Risk-free interest rate
|
|
|
2.3
|
%
|
|
|
1.6
|
%
|
Expected volatility
|
|
|
51
|
%
|
|
|
41
|
%
|
Expected life (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
The Company’s estimate of expected volatility for stock options is based upon the volatility of our stock price over the expected life of the award. The risk-free interest rate is the approximate yield on U.S. Treasury Strips having a life equal to the expected option life on the date of grant. The expected life is an estimate of the number of years an option will be held before it is exercised.
Other Stock-Based Awards
Restricted stock activity during 2020 and 2021 was as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Unvested at January 1, 2020
|
|
|
805,136
|
|
|
$
|
34.14
|
|
Granted
|
|
|
637,312
|
|
|
|
25.82
|
|
Cancelled
|
|
|
(129,683
|
)
|
|
|
34.56
|
|
Vested
|
|
|
(289,769
|
)
|
|
|
35.88
|
|
Unvested at December 31, 2020
|
|
|
1,022,996
|
|
|
$
|
28.41
|
|
Granted
|
|
|
242,900
|
|
|
|
55.97
|
|
Cancelled
|
|
|
(15,675
|
)
|
|
|
32.50
|
|
Vested
|
|
|
(269,733
|
)
|
|
|
29.33
|
|
Unvested at March 31, 2021
|
|
|
980,488
|
|
|
$
|
34.92
|
|
Restricted stock unit activity during 2020 and 2021 was as follows:
|
|
Number of
Units
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Unvested at January 1, 2020
|
|
|
447,357
|
|
|
$
|
38.89
|
|
Granted
|
|
|
583,680
|
|
|
|
10.60
|
|
Performance adjustment
|
|
|
117,772
|
|
|
|
13.50
|
|
Cancelled
|
|
|
(63,056
|
)
|
|
|
43.35
|
|
Vested
|
|
|
(12,691
|
)
|
|
|
42.09
|
|
Unvested at December 31, 2020
|
|
|
1,073,062
|
|
|
$
|
20.15
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
Performance adjustment
|
|
|
120,919
|
|
|
|
19.48
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
(184,051
|
)
|
|
|
42.30
|
|
Unvested at March 31, 2021
|
|
|
1,009,930
|
|
|
$
|
16.03
|
|
Restricted stock awards are time-based vesting awards that vest over a period of three or four years and are subject to continuing service of the employee or non-employee director over the ratable vesting periods. The fair values of the restricted stock awards were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.
Restricted stock units are granted to employees and are subject to Company performance compared to pre-established targets and Company performance compared to peers. In addition to Company performance, these performance-based restricted stock units are subject to the continuing service of the employee during the two- or three-year period covered by the awards. The performance condition for the restricted stock units is based on the Company’s achievement of annually established targets for diluted earnings per
18
Table of contents
share. Additionally, the number of shares issuable pursuant to restricted stock units granted during 2021 and 2020 are subject to adjustment based on the Company’s three-year annualized total stockholder return relative to a peer group consisting of S&P 1500 companies within the Healthcare Providers & Services 6 digit GICS industry group and selected other companies deemed to be peers. The number of shares issuable at the end of the applicable vesting period of restricted stock units ranges from 0% to 200% of the targeted units based on the Company’s actual performance compared to the targets and, for 2021 and 2020 awards, performance compared to peers.
The fair values of restricted stock units were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date for units subject to performance conditions, or at its Monte-Carlo simulation value for units subject to market conditions.
The Company’s strategy is to acquire and develop behavioral healthcare facilities and improve operating results within its facilities and its other behavioral healthcare operations.
Transaction-related expenses represent primarily related to termination, restructuring, strategic review, acquisition and other similar costs. Transaction-related expenses for the three months ended March 31, 2021 and 2020 were as follows (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Termination, restructuring and strategic review costs
|
|
$
|
2,823
|
|
|
$
|
396
|
|
Legal, accounting and other acquisition-related costs
|
|
|
1,787
|
|
|
|
1,130
|
|
|
|
$
|
4,610
|
|
|
$
|
1,526
|
|
The provision for income taxes for the three months ended March 31, 2021 and 2020 reflects effective tax rates of 21.2% and 23.4%, respectively. The decrease in the effective tax rate for the three months ended March 31, 2021 was primarily attributable to the Company’s permanent deduction related to equity-based compensation.
As the Company continues to monitor tax implications of the CARES Act and other state, federal and foreign stimulus and tax legislation, we may make adjustments to our estimates and record additional amounts for tax assets and liabilities. Additionally, market disruption due to COVID-19 may affect the Company’s ability to realize our deferred tax assets. Any adjustments to our tax assets and liabilities could materially impact our provision for income taxes and our effective tax rate in the periods in which they are made.
18.
|
Fair Value Measurements
|
The carrying amounts reported for cash and cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value because of the short-term maturity of these instruments.
The carrying amounts and fair values of the Company’s New Credit Facility, Prior Credit Facility, 5.625% Senior Notes, 6.500% Senior Notes, 5.500% Senior Notes, 5.000% Senior Notes other long-term debt and derivative instruments at March 31, 2021 and December 31, 2020 were as follows (in thousands):
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
New Credit Facility
|
|
$
|
581,075
|
|
|
$
|
—
|
|
|
$
|
581,075
|
|
|
$
|
—
|
|
Prior Credit Facility
|
|
$
|
—
|
|
|
$
|
1,175,437
|
|
|
$
|
—
|
|
|
$
|
1,175,437
|
|
5.625% Senior Notes due 2023
|
|
$
|
—
|
|
|
$
|
646,344
|
|
|
$
|
—
|
|
|
$
|
647,960
|
|
6.500% Senior Notes due 2024
|
|
$
|
—
|
|
|
$
|
385,636
|
|
|
$
|
—
|
|
|
$
|
393,850
|
|
5.500% Senior Notes due 2028
|
|
$
|
443,325
|
|
|
$
|
443,139
|
|
|
$
|
466,733
|
|
|
$
|
475,931
|
|
5.000% Senior Notes due 2029
|
|
$
|
468,404
|
|
|
$
|
468,245
|
|
|
$
|
486,063
|
|
|
$
|
499,852
|
|
Other long-term debt
|
|
$
|
3,319
|
|
|
$
|
3,625
|
|
|
$
|
3,319
|
|
|
$
|
3,625
|
|
Derivative instrument liabilities
|
|
$
|
—
|
|
|
$
|
84,584
|
|
|
$
|
—
|
|
|
$
|
84,584
|
|
The Company’s New Credit Facility, Prior Credit Facility, 5.625% Senior Notes, 6.500% Senior Notes, 5.500% Senior Notes, 5.000% Senior Notes and other long-term debt were categorized as Level 2 in the GAAP fair value hierarchy. Fair values were based on trading activity among the Company’s lenders and the average bid and ask price as determined using published rates.
19
Table of contents
The fair values of the derivative instruments were categorized as Level 2 in the GAAP fair value hierarchy and were based on observable market inputs including applicable exchange rates and interest rates.
19.Commitments and Contingencies
Professional and General Liability
A portion of the Company’s professional liability risks are insured through a wholly-owned insurance subsidiary. The Company is self-insured for professional liability claims up to $3.0 million per claim and has obtained reinsurance coverage from a third party to cover claims in excess of the retention limit. The reinsurance policy has a coverage limit of $75.0 million in the aggregate. The Company’s reinsurance receivables are recognized consistent with the related liabilities and include known claims and any incurred but not reported claims that are covered by current insurance policies in place.
Legal Proceedings
The Company is, from time to time, subject to various claims, lawsuits, governmental investigations and regulatory actions, including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employment related claims. In these actions, plaintiffs request a variety of damages, including, in some instances, punitive and other types of damages that may not be covered by insurance. In addition, healthcare companies are subject to numerous investigations by various governmental agencies. Certain of the Company’s individual facilities have received, and from time to time, other facilities may receive, subpoenas, civil investigative demands, audit requests and other inquiries from, and may be subject to investigation by, federal and state agencies. These investigations can result in repayment obligations, and violations of the False Claims Act can result in substantial monetary penalties and fines, the imposition of a corporate integrity agreement and exclusion from participation in governmental health programs. In addition, the federal False Claims Act permits private parties to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions.
On April 1, 2019, a consolidated complaint was filed against the Company and certain former and current officers in the lawsuit styled St. Clair County Employees’ Retirement System v. Acadia Healthcare Company, Inc., et al., Case No. 3:19-cv-00988, which is pending in the United States District Court for the Middle District of Tennessee. The complaint purports to be brought on behalf of a class consisting of all persons (other than defendants) who purchased securities of the Company between April 30, 2014 and November 15, 2018, and alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. At this time, we are not able to quantify any potential liability in connection with this litigation because the case is in its early stages.
On February 21, 2019, a purported stockholder filed a related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Davydov v. Joey A. Jacobs, et al., Case No. 3:19-cv-00167, which is pending in the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Section 10(b) and 14(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. On May 23, 2019, a purported stockholder filed a second related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Beard v. Jacobs, et al., Case No. 3:19-cv-0441, which is pending the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Sections 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duty, waste of corporate assets, unjust enrichment, and insider selling. On June 11, 2019, the Davydov and Beard actions were consolidated. On February 16, 2021, the parties filed a stipulation staying the case. On October 23, 2020, a purported stockholder filed a third related derivative action on behalf of the Company against former and current officers and directors in the lawsuit styled Pfenning v. Jacobs, et al., Case No. 2020-0915-JRS, which is pending in the Court of Chancery of the State of Delaware. The complaint alleges claims for breach of fiduciary duty. On February 17, 2021, the court entered an order staying the case. At this time, we are not able to quantify any potential liability in connection with this litigation because the cases are in their early stages.
On April 25, 2018, plaintiff filed Pence v. Sober Living By the Sea, Inc. - 30-2018-00988742-CU-OE-CXC, Orange County Superior Court (Pence I). On July 13, 2018, plaintiff next filed Pence v. Sober Living by the Sea, Inc.; Acadia Healthcare Company, Inc. - 30-2018-01005317-CU-OE-CJC, Orange County Superior Court (Pence II). These cases have now been consolidated before the same judge in the Complex Litigation Department of the Orange County Superior Court. The complaints allege various wage and hour violations under California law on behalf of a putative class of all non-exempt California employees of Acadia and various subsidiaries, going back to April 25, 2014, and on behalf of purportedly aggrieved non-exempt employees under California’s Private Attorney General Act (“PAGA”). The claims include (1) failure to provide overtime wages; (2); failure to provide minimum wages; (3) failure to provide meal periods; (4) failure to provide rest periods; (5); failure to pay wages due at termination; (6) failure to provide accurate wage statements; (7) violations of California Business and Professions Code section 17200; and (8) civil penalties under California Labor Code section 2699 (PAGA). During the second quarter of 2020, the Company recorded approximately $4.0 million to transaction-related expenses in the condensed consolidated statements of operations based on the Company’s expected settlement and legal fees.
20
Table of contents
In the fall of 2017, the Office of Inspector General (“OIG”) issued subpoenas to three of the Company’s facilities requesting certain documents from January 2013 to the date of the subpoenas. The U.S. Attorney’s Office for the Middle District of Florida issued a civil investigative demand to one of the Company’s facilities in December 2017 requesting certain documents from November 2012 to the date of the demand. In April 2019, the OIG issued subpoenas relating to six additional facilities requesting certain documents and information from January 2013 to the date of the subpoenas. The government’s investigation of each of these facilities is focused on claims not eligible for payment because of alleged violations of certain regulatory requirements relating to, among other things, medical necessity, admission eligibility, discharge decisions, length of stay and patient care issues. The Company is cooperating with the government’s investigation but is not able to quantify any potential liability in connection with these investigations.
The Company entered into foreign currency forward contracts during the year ended December 31, 2020 in connection with certain transfers of cash between the U.S. and U.K. under the Company’s cash management and foreign currency risk management programs. Foreign currency forward contracts limit the economic risk of changes in the exchange rate between USD and GBP associated with cash transfers.
In August 2019, the Company also entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency risk by effectively converting a portion of its fixed-rate USD-denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rate GBP-denominated debt of £538.1 million. During the term of the swap agreements, the Company received semi-annual interest payments in USD from the counterparties at fixed interest rates, and the Company made semi-annual interest payments in GBP to the counterparties at fixed interest rates. The interest payments under the cross-currency swap agreements resulted in £25.4 million of annual cash flows from the Company’s U.K. business being converted to $35.8 million.
In conjunction with the U.K. Sale in January 2021, the Company settled its cross currency swap liability and outstanding forward contracts. Cash received from the settlement of the cross currency swap derivatives and forward contracts outstanding at December 31, 2020 are included in investing activities as part of the net proceeds received from the U.K. Sale in the condensed consolidated statement of cash flows.
The Company designated the cross currency swap agreements and forward contracts entered into during 2020 as qualifying hedging instruments and accounted for these derivatives as net investment hedges. The fair value of these derivatives at December 31, 2020 of $84.6 million is recorded as derivative instrument liabilities in the condensed consolidated balance sheets. During 2019, the Company elected the spot method for recording its net investment hedges. Gains and losses resulting from the settlement of the excluded components were recorded in interest expense on the condensed consolidated statements of operations. Gains and losses resulting from fair value adjustments to the cross currency swap agreements were recorded in accumulated other comprehensive loss as the swaps are effective in hedging the designated risk. These gains and losses were considered in the carrying value of the U.K. operations and included in the loss on the U.K. Sale recorded in December 31, 2020 and January 2021. Prior to the U.K. Sale, cash flows related to the cross currency swap derivatives are included in operating activities in the condensed consolidated statements of cash flows.
21
Table of contents
21.
|
Financial Information for the Company and Its Subsidiaries
|
The Company conducts substantially all of its business through its subsidiaries. The 5.500% Senior Notes and 5.000% Senior Notes are jointly and severally guaranteed on an unsecured senior basis by all of the Company’s subsidiaries that guarantee the Company’s obligations under the New Credit Facility. The 5.625% Senior Notes, 6.500% Senior Notes, 5.500% Senior Notes and 5.000% Senior Notes were jointly and severally guaranteed on an unsecured senior basis by all of the Company’s subsidiaries that guarantee the Company’s obligations under the Prior Credit Facility. Summarized financial information is presented below is consistent with the condensed consolidated financial statements of the Company, except transactions between combining entities have been eliminated. Financial information for the combined non-guarantor entities has been excluded. Presented below is condensed financial information for Acadia Healthcare Company, Inc. and the combined wholly-owned subsidiary guarantors at March 31, 2021 and December 31, 2020, and for the three months ended March 31, 2021.
Summarized balance sheet information (in thousands):
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Current assets
|
|
$
|
469,786
|
|
|
$
|
654,735
|
|
Property and equipment, net
|
|
|
1,451,690
|
|
|
|
1,421,875
|
|
Goodwill
|
|
|
1,992,305
|
|
|
|
1,992,305
|
|
Total noncurrent assets
|
|
|
3,661,678
|
|
|
|
3,640,809
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
390,351
|
|
|
|
626,419
|
|
Long-term debt
|
|
|
1,458,735
|
|
|
|
2,786,125
|
|
Total noncurrent liabilities
|
|
|
1,728,106
|
|
|
|
3,045,981
|
|
Redeemable noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
Total equity
|
|
|
2,013,007
|
|
|
|
623,144
|
|
Summarized operating results information (in thousands):
|
|
Three Months Ended
March 31, 2021
|
|
Revenue
|
|
$
|
509,173
|
|
Income before income taxes
|
|
|
24,287
|
|
Net income
|
|
|
19,210
|
|
Net income attributable to Acadia Healthcare Company, Inc.
|
|
|
19,210
|
|
22
Table of contents