Acadia Healthcare Reports 78.1% Growth in Second Quarter Adjusted EPS to $0.57

Revenue More Than Doubles to $453.7 Million

Increases Guidance for 2015 Adjusted Earnings per Diluted Share to New Range of $2.15 to $2.18

FRANKLIN, Tenn.--()--Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced financial results for the second quarter and six months ended June 30, 2015. For the quarter, revenue increased 112.2% to $453.7 million from $213.8 million for the second quarter of 2014. Income from continuing operations was $33.8 million, or $0.49 per diluted share, for the second quarter of 2015 compared with $22.5 million, or $0.43 per diluted share, for the second quarter of 2014. Adjusted income from continuing operations increased 137.8% to $39.5 million for the second quarter of 2015 from $16.6 million for the second quarter of 2014, while adjusted income from continuing operations per diluted share increased 78.1% to $0.57 from $0.32. The adjusted results exclude transaction-related expenses of $7.2 million and $3.0 million for the second quarter of 2015 and 2014, respectively, a $1.0 million loss on foreign currency derivatives for the second quarter of 2015 and a $13.7 million gain on foreign currency derivatives for the second quarter of 2014. Weighted average shares outstanding increased 32.6% for the second quarter of 2015 from the second quarter of 2014, primarily due to the issuance of common stock in June 2014 and February and May 2015, the net proceeds of which have primarily been used to fund acquisitions. A reconciliation of all non-GAAP financial results in this release appears on pages 8 and 9.

For the first six months of 2015, revenue grew 97.4% to $819.4 million from $415.2 million for the first six months of 2014. Income from continuing operations for the first half of 2015 was $48.4 million, or $0.74 per diluted share, compared with $35.5 million, or $0.69 per diluted share, for the same period in 2014. Adjusted income from continuing operations increased 117.5% to $66.6 million for the first six months of 2015 from $30.6 million for the first six months of 2014, while adjusted income from continuing operations per diluted share increased 68.3% to $1.01 from $0.60. The adjusted results exclude transaction-related expenses of $25.6 million and $4.6 million for the first half of 2015 and 2014, respectively, a $0.9 million loss on foreign currency derivatives for the first half of 2015 and a $13.7 million gain on foreign currency derivatives for the first half of 2014. Weighted average shares outstanding increased 28.5% for the first six months of 2015 compared with the same period in 2014.

“For the second quarter of 2015, Acadia’s organic growth and acquisition strategies continued to drive outstanding financial results,” said Joey Jacobs, Chairman and Chief Executive Officer of Acadia. “While the July 1, 2014, acquisition of Partnerships in Care (PiC) and the February 11, 2015, acquisition of CRC Health Group (CRC) were the primary drivers of our growth for the latest quarter, we completed a total of 11 acquisitions in the 12 months ended June 30, 2015, adding 82 facilities with more than 4,300 inpatient beds and 88 comprehensive treatment centers.

“During the second quarter, we contributed to these totals with five acquisitions in the United Kingdom, which added 21 facilities and over 500 beds to PiC’s operations. As a result, PiC celebrated its first year anniversary as part of Acadia with 45 facilities and over 1,800 beds compared with 23 facilities and approximately 1,200 beds at the time of the acquisition.

“In addition to the accretive impact of acquisitions, our second quarter financial results benefited from strong organic growth that drove revenues and margin improvement. This growth primarily reflected the addition of approximately 400 beds for the 12 months ended June 30, 2015, to existing facilities and one de novo facility, including approximately 250 new beds added in the first half of 2015.

“Second quarter same facility revenue increased 9.0%, due largely to new beds added to the same facility base over the previous 12 months, as well as to our continuing initiatives to build revenue at each facility. Same facility patient days increased 7.4% compared with the second quarter last year, and same facility revenue per patient day rose 1.5%. The increased operating leverage generated by significant same facility revenue growth, combined with our efforts to improve facility productivity and efficiency, produced a 120 basis point increase in same facility EBITDA margin to 26.1% for the quarter. Acadia’s consolidated adjusted EBITDA for the second quarter of 2015 increased 136.6% to $105.8 million from $44.7 million for the second quarter of 2014, while our consolidated adjusted EBITDA margin increased 240 basis points to 23.3%.

“Since the end of the second quarter, we have completed an additional transaction in the U.K., acquiring a 15-bed inpatient facility, which is our first U.K. facility focused on addiction treatment. In addition, we completed the acquisition of our first inpatient behavioral health facility in Philadelphia, Pennsylvania, which operates approximately 150 beds. We believe Acadia is well positioned to continue executing its acquisition and organic growth strategies, with $72.5 million of cash flow from continuing operations for the second quarter of 2015 and full availability under our $300 million revolving credit facility.”

Acadia today increased its guidance for 2015 adjusted earnings per diluted share to a range of $2.15 to $2.18 from the previous range of $2.12 to $2.15. The Company’s guidance does not include the impact of any future acquisitions or transaction-related expenses.

Acadia will hold a conference call to discuss its second quarter financial results at 9:00 a.m. Eastern Time on Wednesday, August 5, 2015. 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 August 21, 2015.

Risk Factors

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

About Acadia

Acadia is a provider of inpatient behavioral healthcare services. Acadia operates a network of 225 behavioral healthcare facilities with approximately 9,200 beds in 37 states, the United Kingdom and Puerto Rico. Acadia provides psychiatric and chemical dependency services to its patients in a variety of settings, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs.

 
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
       
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
(In thousands, except per share amounts)
 
Revenue before provision for doubtful accounts $ 461,798 $ 220,664 $ 835,956 $ 426,783
Provision for doubtful accounts   (8,138 )   (6,861 )   (16,513 )   (11,562 )
Revenue 453,660 213,803 819,443 415,221
 

Salaries, wages and benefits (including equity-based compensation expense of $5,355, $2,406, $9,249 and $4,170, respectively)

243,302 122,473 449,173 240,048
Professional fees 30,029 10,891 52,456 21,273
Supplies 20,542 10,596 36,796 20,660
Rents and leases 8,211 2,889 14,097 5,658
Other operating expenses 51,128 24,646 91,655 47,756
Depreciation and amortization 14,926 5,935 28,030 11,371
Interest expense, net 28,049 9,730 50,195 19,437
Loss (gain) on foreign currency derivatives 961 (13,735 ) 908 (13,735 )
Transaction-related expenses   7,157     3,016     25,573     4,595  
Total expenses   404,305     176,441     748,883     357,063  
Income from continuing operations before income taxes 49,355 37,362 70,560 58,158
Provision for income taxes   15,512     14,905     22,125     22,680  
Income from continuing operations 33,843 22,457 48,435 35,478
Income (loss) from discontinued operations, net of income taxes   1     (6 )   3     31  
Net income $ 33,844   $ 22,451   $ 48,438   $ 35,509  
 
Basic earnings per share:
Income from continuing operations $ 0.50 $ 0.43 $ 0.74 $ 0.70
Income (loss) from discontinued operations   -     -     -     -  
Net income $ 0.50   $ 0.43   $ 0.74   $ 0.70  
 
Diluted earnings per share:
Income from continuing operations $ 0.49 $ 0.43 $ 0.74 $ 0.69
Income (loss) from discontinued operations   -     -     -     -  
Net income $ 0.49   $ 0.43   $ 0.74   $ 0.69  
 
Weighted-average shares outstanding:
Basic 68,296 51,616 65,429 50,872
Diluted 68,735 51,819 65,782 51,174
 

 
Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
   
June 30, December 31,
2015 2014
(In thousands)
 
ASSETS
Current assets:
Cash and cash equivalents $ 34,572 $ 94,040

Accounts receivable, net of allowance for doubtful accounts of $26,233 and $22,449, respectively

182,315 118,378
Deferred tax assets 38,693 20,155
Other current assets   70,325     41,570  
Total current assets 325,905 274,143
Property and equipment, net 1,455,390 1,069,700
Goodwill 1,946,028 802,986
Intangible assets, net 58,514 21,636
Deferred tax assets - noncurrent 33,966 13,141
Other assets   106,582     41,984  
Total assets $ 3,926,385   $ 2,223,590  
 
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 38,652 $ 26,965
Accounts payable 58,714 48,696
Accrued salaries and benefits 77,545 59,317
Other accrued liabilities   68,197     30,956  
Total current liabilities 243,108 165,934
Long-term debt 1,914,555 1,069,305
Deferred tax liabilities - noncurrent 20,200 63,880
Other liabilities   82,218     43,506  
Total liabilities 2,260,081 1,342,625
Equity:
Common stock 706 592
Additional paid-in capital 1,567,304 847,301
Accumulated other comprehensive loss (51,586 ) (68,370 )
Retained earnings   149,880     101,442  
Total equity   1,666,304     880,965  
Total liabilities and equity $ 3,926,385   $ 2,223,590  
 

 
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
   
Six Months Ended June 30,
2015 2014
(In thousands)
Operating activities:
Net income $ 48,438 $ 35,509
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization 28,030 11,371
Amortization of debt issuance costs 3,218 1,334
Equity-based compensation expense 9,249 4,170
Deferred income tax expense 24,682 9,097
Income from discontinued operations, net of taxes (3 ) (31 )
Loss (gain) on foreign currency derivatives 908 (13,735 )
Other 692 25
Change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net (10,442 ) (15,303 )
Other current assets (13,048 ) (4,792 )
Other assets (1,218 ) (578 )
Accounts payable and other accrued liabilities (4,313 ) (1,300 )
Accrued salaries and benefits (225 ) 1,782
Other liabilities   4,619     1,701  
Net cash provided by continuing operating activities 90,587 29,250
Net cash provided by (used in) discontinued operating activities   554     (11 )
Net cash provided by operating activities 91,141 29,239
 
Investing activities:
Cash paid for acquisitions, net of cash acquired (286,734 ) (10,000 )
Cash paid for capital expenditures (122,035 ) (43,323 )
Cash paid for real estate acquisitions (3,428 ) (18,326 )
Settlement of foreign currency derivatives (908 ) -
Other   (481 )   (439 )
Net cash used in investing activities (413,586 ) (72,088 )
 
Financing activities:
Borrowings on long-term debt 875,000 7,500
Borrowings on revolving credit facility 180,000 59,500
Principal payments on revolving credit facility (180,000 ) (113,000 )
Principal payments on long-term debt (15,875 ) (3,750 )
Repayment of assumed CRC debt (904,467 ) -
Payment of debt issuance costs (22,775 ) (5,810 )
Issuance of common stock, net 331,530 374,336
Common stock withheld for minimum statutory taxes, net (7,826 ) (2,981 )
Excess tax benefit from equity awards 6,327 3,479
Cash paid for contingent consideration - (3,250 )
Other   (150 )   -  
Net cash provided by financing activities   261,764     316,024  
   
Effect of exchange rate changes on cash   1,213     -  
 
Net (decrease) increase in cash and cash equivalents (59,468 ) 273,175
Cash and cash equivalents at beginning of the period   94,040     4,569  
Cash and cash equivalents at end of the period $ 34,572   $ 277,744  
 
Effect of acquisitions:
Assets acquired, excluding cash $ 1,636,164 $ 10,500
Liabilities assumed (1,009,944 ) -
Issuance of common stock in connection with acquisition (380,210 ) -
Deposits paid for acquisitions 40,724 -
Prior year deposits paid for acquisitions   -     (500 )
Cash paid for acquisitions, net of cash acquired $ 286,734   $ 10,000  
 

 
Acadia Healthcare Company, Inc.
Operating Statistics
(Unaudited)
(Revenue in thousands)
               
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 % Change 2015 2014 % Change
Same Facility Results
Revenue $ 228,622 $ 209,815 9.0% $ 444,147 $ 407,182 9.1%
Patient Days 333,264 310,336 7.4% 655,709 602,096 8.9%
Admissions 21,369 18,408 16.1% 42,082 35,828 17.5%
Average Length of Stay (b) 15.6 16.9 -7.5% 15.6 16.8 -7.3%
Revenue per Patient Day $ 686 $ 676 1.5% $ 677 $ 676 0.2%
EBITDA margin 26.1 % 24.9 % 120 bps 25.3 % 24.3 % 100 bps
 
U.S. Facility Results
Revenue $ 366,886 $ 212,834 72.4% $ 657,393 $ 413,398 59.0%
Patient Days 517,423 315,710 63.9% 941,836 612,767 53.7%
Admissions 30,121 18,908 59.3% 55,565 36,826 50.9%
Average Length of Stay (b) 17.2 16.7 2.9% 17.0 16.6 1.9%
Revenue per Patient Day $ 709 $ 674 5.2% $ 698 $ 675 3.5%
EBITDA margin 27.9 % 24.9 % 300 bps 27.2 % 24.3 % 290 bps
 
U.K. Facility Results
Revenue $ 84,927 $ 158,242
Patient Days 125,085 228,920
Admissions 336 585
Average Length of Stay (b) 372.3 391.3
Revenue per Patient Day $ 679 $ 691
EBITDA margin 24.0 % 24.8 %
 
Total Facility Results
Revenue $ 451,813 $ 212,834 112.3% $ 815,635 $ 413,398 97.3%
Patient Days 642,508 315,710 103.5% 1,170,756 612,767 91.1%
Admissions 30,457 18,908 61.1% 56,150 36,826 52.5%
Average Length of Stay (b) 21.1 16.7 26.3% 20.9 16.6 25.3%
Revenue per Patient Day $ 703 $ 674 4.3% $ 697 $ 675 3.3%
EBITDA margin 27.2 % 24.9 % 230 bps 26.7 % 24.3 % 240 bps
 
(a) Same-facility results for the three and six months ended June 30, 2015 and 2014 exclude one facility that is converting its residential treatment beds to acute psychiatric treatment beds. The transition is expected to be completed in the fourth quarter of 2015.
(b) Average length of stay is defined as patient days divided by admissions.
 

 
Acadia Healthcare Company, Inc.
Reconciliation of Net Income to Adjusted EBITDA
(Unaudited)
       
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
(in thousands)
 
Net income $ 33,844 $ 22,451 $ 48,438 $ 35,509
Income from discontinued operations (1 ) 6 (3 ) (31 )
Provision for income taxes 15,512 14,905 22,125 22,680
Interest expense, net 28,049 9,730 50,195 19,437
Depreciation and amortization   14,926     5,935     28,030     11,371  
EBITDA 92,330 53,027 148,785 88,966
 
Adjustments:
Equity-based compensation expense (a) 5,355 2,406 9,249 4,170

Loss (gain) on foreign currency derivatives (b)

961 (13,735 ) 908 (13,735 )
Transaction-related expenses (c)   7,157     3,016     25,573     4,595  
Adjusted EBITDA $ 105,803   $ 44,714   $ 184,515   $ 83,996  
 
See footnotes on page 10.
 

 
Acadia Healthcare Company, Inc.
Reconciliation of Adjusted Income from Continuing Operations to Income from
Continuing Operations
(Unaudited)
       
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
(in thousands, except per share amounts)
 
Income from continuing operations $ 33,843 $ 22,457 $ 48,435 $ 35,478
Provision for income taxes   15,512     14,905     22,125     22,680  
Income from continuing operations before income taxes 49,355 37,362 70,560 58,158
 
Adjustments to income from continuing operations:
Loss (gain) on foreign currency derivatives (b) 961 (13,735 ) 908 (13,735 )
Transaction-related expenses (c) 7,157 3,016 25,573 4,595

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

  (18,006 )   (10,047 )   (30,470 )   (18,406 )
Adjusted income from continuing operations $ 39,467 $ 16,596 $ 66,571 $ 30,612
 
Weighted-average shares outstanding - diluted 68,735 51,819 65,782 51,174
 
Adjusted income from continuing operations per diluted share $ 0.57   $ 0.32   $ 1.01   $ 0.60  
 
See footnotes on page 10.
 

 
Acadia Healthcare Company, Inc.
Footnotes
   
We have included certain financial measures in this press release, including EBITDA, Adjusted EBITDA and Adjusted income from continuing operations, which are “non-GAAP financial measures” as defined under the rules and regulations promulgated by the SEC. We define EBITDA as net income adjusted for loss from discontinued operations, net interest expense, income tax provision and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted for equity-based compensation expense, debt extinguishment costs, gain on foreign currency derivatives and transaction-related expenses.
 
EBITDA, Adjusted EBITDA and Adjusted income from continuing operations are supplemental measures of our performance and are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). EBITDA, Adjusted EBITDA and Adjusted income from continuing operations are not measures of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as measures of our liquidity. Our measurements of EBITDA, Adjusted EBITDA and Adjusted income from continuing operations may not be comparable to similarly titled measures of other companies. We have included information concerning EBITDA, Adjusted EBITDA and Adjusted income from continuing operations in this press release because we believe that such information is used by certain investors as measures of a company’s historical performance. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present EBITDA, Adjusted EBITDA and Adjusted income from continuing operations when reporting their results. Our presentation of EBITDA, Adjusted EBITDA and Adjusted income from continuing operations should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
 
(a) Represents the equity-based compensation expense of Acadia.
 
(b) Represents the change in fair value of foreign currency derivatives purchased by Acadia related to acquisitions in the U.K. in April and June 2015 and July 2014.
 
(c) Represents transaction-related expenses incurred by Acadia related to acquisitions.
 
(d) Represents the income tax provision adjusted to reflect the tax effect of the adjustments to income from continuing operations based on tax rates of 31.3% and 37.7% for the three months ended June 30, 2015 and 2014, respectively, and 31.4% and 37.6% for the six months ended June 30, 2015 and 2014, respectively.

Contacts

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

Contacts

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