Acadia Healthcare Reports Second Quarter GAAP EPS of $0.57 and Adjusted EPS of $0.66

FRANKLIN, Tenn.--()--Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced financial results for the second quarter and six months ended June 30, 2017. Revenue for the quarter was $715.9 million, a decline of 5.4% from $756.5 million for the second quarter of 2016. Net income attributable to Acadia stockholders was $49.6 million, or $0.57 per diluted share, for the second quarter of 2017 compared with $56.4 million, or $0.65 per diluted share, for the second quarter of 2016. Adjusted income from continuing operations attributable to Acadia stockholders per diluted share was $0.66 for the second quarter of 2017 compared with $0.73 for the second quarter of 2016. Similar to the first quarter of 2017, the results for the second quarter were impacted by the decline in the exchange rate of the British Pound Sterling to the U.S. dollar compared with the second quarter of 2016, as well as by the full comparable quarter impact of the divestiture of 22 facilities in the U.K. in the fourth quarter of 2016 relating to the Priory acquisition on February 16, 2016. A reconciliation of all non-GAAP financial results in this release appears beginning on page 8.

For the first six months of 2017, revenue was $1.40 billion, a 1.6% increase from $1.37 billion for the first half of 2016. Net income attributable to Acadia stockholders for the first half of 2017 was $84.6 million, or $0.97 per diluted share, versus $82.1 million, or $0.97 per diluted share, for the comparable period in 2016. Adjusted income from continuing operations attributable to Acadia stockholders per diluted share was $1.12 for the first six months of 2017 compared with $1.28 for the first six months of 2016.

On a pro forma basis, adjusting results for the U.K. divestitures, the decline of the exchange rate, and discontinued operations, Acadia’s revenue for the second quarter of 2017 increased 6.4% to $715.9 million compared with $672.9 million for the second quarter of 2016. Pro forma adjustments for the second quarter of 2016 included the negative impact from the U.K. divestitures of $43 million, $35 million for the decline in the exchange rate, and discontinued operations of $5 million. Acadia’s pro forma adjusted earnings per diluted share for the second quarter of 2017 increased 10.0% to $0.66, compared with $0.60 for the second quarter of 2016. Pro forma adjustments for the second quarter of 2016 included the negative impacts from the U.K. divestitures of $0.08 and the decline of the exchange rate of $0.05.

Joey Jacobs, Chairman and Chief Executive Officer of Acadia, commented, “Our second quarter financial results were consistent with our expectations for the quarter and financial guidance for the year. We achieved improved same facility revenue performance, with growth of 6.5% for the quarter on an increase of 4.6% in patient days and 1.8% in revenue per patient day. We were especially pleased with our same facility revenue growth for our U.S. facilities, which increased 7.8% for the second quarter, on an increase of 6.0% in patient days and 1.7% in revenue per patient day, while U.K. same facility revenues increased 4.0%, on growth of 2.8% and 1.1% in patient days and revenue per patient day, respectively.

“Our growth in same facility revenue for the second quarter resulted, in part, from the addition of 625 new beds to existing facilities in the 12 months ended June 30, 2017. During the second quarter, 91 new beds were added to existing facilities, and we expect to add approximately 800 new beds to existing facilities and three de novo facilities in 2017.”

For the second quarter of 2017, Acadia’s total same facility EBITDA margin was 26.4% compared with 26.7% for the second quarter of 2016. Acadia’s consolidated adjusted EBITDA was $162.2 million, or 22.7% of revenue, for the second quarter of 2017, compared with $172.2 million or 22.8% of revenue for the second quarter of 2016.

Acadia today adjusted its financial guidance for 2017 within the previously established ranges, as follows:

  • Revenue for 2017 in a range of $2.85 billion to $2.87 billion;
  • Adjusted EBITDA for 2017 in a range of $628 million to $635 million; and
  • Adjusted earnings per diluted share for 2017 in a range $2.42 to $2.47.

The Company’s 2017 financial guidance assumes an exchange rate of $1.25 per British Pound Sterling and a tax rate of approximately 25%. The Company’s guidance does not include the impact of any future acquisitions or transaction-related expenses. EBITDA is defined as net income adjusted for net (income) loss attributable to noncontrolling interests, income tax provision, net interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for equity-based compensation expense, debt extinguishment costs, gain on foreign currency derivatives and transaction-related expenses. Adjusted income is defined as net income adjusted for provision for income taxes, debt extinguishment costs, gain on foreign currency derivatives, transaction-related expenses and income tax provision reflecting tax effect of adjustments attributable to Acadia.

Acadia will hold a conference call to discuss its first quarter financial results at 9:00 a.m. Eastern Time on Friday, July 28, 2017. 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 11, 2017.

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) potential difficulties operating our business in light of political and economic instability in the U.K. and globally following the referendum in the U.K. on June 23, 2016, in which voters approved an exit from the European Union, or Brexit; (ii) the impact of fluctuations in foreign exchange rates, including the devaluation of the British Pound Sterling (GBP) relative to the U.S. Dollar (USD) following the Brexit vote; (iii) Acadia’s ability to complete acquisitions and successfully integrate the operations of acquired facilities, including Priory facilities; (iv) Acadia’s ability to add beds, expand services, enhance marketing programs and improve efficiencies at its facilities; (v) potential reductions in payments received by Acadia from government and third-party payors; (vi) the occurrence of patient incidents and governmental investigations, which could adversely affect the price of our common stock and result in incremental regulatory burdens; (vii) 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 (viii) 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 behavioral healthcare services. At June 30, 2017, Acadia operated a network of 576 behavioral healthcare facilities with approximately 17,300 beds in 39 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, residential treatment centers, outpatient clinics and therapeutic school-based programs.

             
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2017     2016     2017     2016  
(In thousands, except per share amounts)
 
Revenue before provision for doubtful accounts $ 725,643 $ 767,054 $ 1,414,984 $ 1,394,237
Provision for doubtful accounts   (9,747 )   (10,506 )   (19,894 )   (20,876 )
Revenue 715,896 756,548 1,395,090 1,373,361
 

Salaries, wages and benefits (including equity-based compensation expense of $7,436, $6,888, $14,832 and $13,844, respectively)

383,595 408,287 760,016 749,315
Professional fees 46,321 50,292 89,730 90,283
Supplies 28,639 31,209 56,348 57,894
Rents and leases 19,435 20,467 38,406 35,273
Other operating expenses 83,122 80,955 166,833 151,202
Depreciation and amortization 35,201 36,752 68,814 64,727
Interest expense, net 43,505 48,758 86,262 86,472
Debt extinguishment costs 810 - 810 -
Gain on foreign currency derivatives - (98 ) - (508 )
Transaction-related expenses   9,052     6,074     13,171     32,372  
Total expenses   649,680     682,696     1,280,390     1,267,030  
Income before income taxes 66,216 73,852 114,700 106,331
Provision for income taxes   16,578     18,261     30,289     25,371  
Net income 49,638 55,591 84,411 80,960
Net (income) loss attributable to noncontrolling interests   (8 )   854     177     1,173  
Net income attributable to Acadia Healthcare Company, Inc. $ 49,630   $ 56,445   $ 84,588   $ 82,133  
 
Earnings per share attributable to Acadia Healthcare

Company, Inc. stockholders:

Basic $ 0.57   $ 0.65   $ 0.97   $ 0.97  
Diluted $ 0.57   $ 0.65   $ 0.97   $ 0.97  
 
Weighted-average shares outstanding:
Basic 86,954 86,553 86,859 84,748
Diluted 87,080 86,876 86,997 85,052
 
Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
       

June 30,

2017

December 31,

2016

(In thousands)
 
ASSETS
Current assets:
Cash and cash equivalents $ 79,434 $ 57,063
Accounts receivable, net of allowance for doubtful accounts of

$40,992 and $38,916, respectively

288,106 263,327
Other current assets   91,972     107,537  
Total current assets 459,512 427,927
Property and equipment, net 2,866,086 2,703,695
Goodwill 2,710,333 2,681,188
Intangible assets, net 84,982 83,310
Deferred tax assets - noncurrent 3,719 3,780
Derivative instruments 43,753 73,509
Other assets   59,637     51,317  
Total assets $ 6,228,022   $ 6,024,726  
 
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 34,805 $ 34,805
Accounts payable 81,399 80,034
Accrued salaries and benefits 97,819 105,068
Other accrued liabilities   132,944     122,958  
Total current liabilities 346,967 342,865
Long-term debt 3,240,473 3,253,004
Deferred tax liabilities - noncurrent 74,467 78,520
Other liabilities   171,678     164,859  
Total liabilities 3,833,585 3,839,248
Redeemable noncontrolling interests 17,577 17,754
Equity:
Common stock 870 867
Additional paid-in capital 2,508,064 2,496,288
Accumulated other comprehensive loss (445,400 ) (549,570 )
Retained earnings   313,326     220,139  
Total equity   2,376,860     2,167,724  
Total liabilities and equity $ 6,228,022   $ 6,024,726  
 
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
       
Six Months Ended June 30,
  2017     2016  
(In thousands)
Operating activities:
Net income $ 84,411 $ 80,960
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization 68,814 64,727
Amortization of debt issuance costs 4,845 4,956
Equity-based compensation expense 14,832 13,844
Deferred income tax expense 17,096 16,821
Debt extinguishment costs 810 -
Gain on foreign currency derivatives - (508 )
Other 6,558 704
Change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net (22,404 ) (18,982 )
Other current assets 20,457 (7,256 )
Other assets 1,809 1,582
Accounts payable and other accrued liabilities (4,893 ) 29,101
Accrued salaries and benefits (9,157 ) (3,846 )
Other liabilities   5,257     3,728  
Net cash provided by continuing operating activities 188,435 185,831
Net cash used in discontinued operating activities   (829 )   (2,973 )
Net cash provided by operating activities 187,606 182,858
 
Investing activities:
Cash paid for acquisitions, net of cash acquired - (683,285 )
Cash paid for capital expenditures (117,521 ) (177,718 )
Cash paid for real estate acquisitions (22,850 ) (28,439 )
Settlement of foreign currency derivatives - 508
Other   (5,938 )   (1,084 )
Net cash used in investing activities (146,309 ) (890,018 )
 
Financing activities:
Borrowings on long-term debt - 1,480,000
Borrowings on revolving credit facility - 158,000
Principal payments on revolving credit facility - (166,000 )
Principal payments on long-term debt (17,275 ) (29,869 )
Repayment of assumed debt - (1,348,389 )
Payment of debt issuance costs - (35,511 )
Issuance of common stock, net - 685,097
Common stock withheld for minimum statutory taxes, net (3,678 ) (7,365 )
Other   (2,270 )   (823 )
Net cash (used in) provided by financing activities   (23,223 )   735,140  
 
Effect of exchange rate changes on cash   4,297     (8,479 )
 
Net increase in cash and cash equivalents 22,371 19,501
Cash and cash equivalents at beginning of the period   57,063     11,215  
Cash and cash equivalents at end of the period $ 79,434   $ 30,716  
$ -
Effect of acquisitions:
Assets acquired, excluding cash $ - $ 2,504,223
Liabilities assumed - (1,604,056 )
Issuance of common stock in connection with acquisition   -     (216,882 )
Cash paid for acquisitions, net of cash acquired $ -   $ 683,285  
                               
Acadia Healthcare Company, Inc.
Operating Statistics
(Unaudited, Revenue in thousands)
 
Three Months Ended June 30, Six Months Ended June 30,
  2017     2016   % Change   2017     2016   % Change  
Same Facility Results (a,d)
Revenue $ 681,910 $ 640,526 6.5 % $ 1,221,421 $ 1,155,465 5.7 %
Patient Days 1,109,738 1,061,324 4.6 % 1,949,331 1,866,681 4.4 %
Admissions 39,610 37,305 6.2 % 76,985 71,676 7.4 %
Average Length of Stay (b) 28.0 28.4 -1.5 % 25.3 26.0 -2.8 %
Revenue per Patient Day $ 614 $ 604 1.8 % $ 627 $ 619 1.2 %
EBITDA margin 26.4 % 26.7 % -30 bps 26.0 % 26.3 % -30 bps
 
U.S. Same Facility Results (a)
Revenue $ 452,729 $ 420,063 7.8 % $ 871,581 $ 817,202 6.7 %
Patient Days 616,200 581,136 6.0 % 1,200,005 1,133,152 5.9 %
Admissions 37,436 35,204 6.3 % 73,753 68,680 7.4 %
Average Length of Stay (b) 16.5 16.5 -0.3 % 16.3 16.5 -1.4 %
Revenue per Patient Day $ 735 $ 723 1.7 % $ 726 $ 721 0.7 %
EBITDA margin 28.4 % 28.6 % -20 bps 27.4 % 27.9 % -50 bps
 
U.K. Same Facility Results (a,d)
Revenue $ 229,181 $ 220,463 4.0 % $ 349,840 $ 338,263 3.4 %
Patient Days 493,538 480,188 2.8 % 749,326 733,529 2.2 %
Admissions 2,174 2,101 3.5 % 3,232 2,996 7.9 %
Average Length of Stay (b) 227.0 228.6 -0.7 % 231.8 244.8 -5.3 %
Revenue per Patient Day $ 464 $ 459 1.1 % $ 467 $ 461 1.2 %
EBITDA margin 22.4 % 23.0 % -60 bps 22.4 % 22.6 % -20 bps
 
 
 
U.S. Facility Results (c)
Revenue $ 461,414 $ 425,507 8.4 % $ 901,637 $ 829,548 8.7 %
Patient Days 624,984 582,232 7.3 % 1,231,511 1,135,535 8.5 %
Admissions 38,125 35,438 7.6 % 76,481 69,275 10.4 %
Average Length of Stay (b) 16.4 16.4 -0.2 % 16.1 16.4 -1.8 %
Revenue per Patient Day $ 738 $ 731 1.0 % $ 732 $ 731 0.2 %
EBITDA margin 27.8 % 27.8 % 0 bps 26.7 % 27.2 % -50 bps
 
U.K. Facility Results (c,d)
Revenue $ 254,482 $ 247,362 2.9 % $ 493,453 $ 399,653 23.5 %
Patient Days 684,195 685,256 -0.2 % 1,355,915 1,091,902 24.2 %
Admissions 2,457 2,450 0.3 % 5,046 3,841 31.4 %
Average Length of Stay (b) 278.5 279.7 -0.4 % 268.7 284.3 -5.5 %
Revenue per Patient Day $ 372 $ 361 3.0 % $ 364 $ 366 -0.6 %
EBITDA margin 20.5 % 21.2 % -70 bps 19.5 % 20.8 % -130 bps
 
Total Facility Results (c,d)
Revenue $ 715,896 $ 672,869 6.4 % $ 1,395,090 $ 1,229,201 13.5 %
Patient Days 1,309,179 1,267,488 3.3 % 2,587,426 2,227,437 16.2 %
Admissions 40,582 37,888 7.1 % 81,527 73,116 11.5 %
Average Length of Stay (b) 32.3 33.5 -3.6 % 31.7 30.5 4.2 %
Revenue per Patient Day $ 547 $ 531 3.0 % $ 539 $ 552 -2.3 %
EBITDA margin 25.2 % 25.4 % -20 bps 24.1 % 25.1 % -100 bps
 
(a) Same-facility results for the periods presented exclude the 22 divested facilities in the U.K. that were sold on November 30, 2016, the elderly care division of our U.K. operations and other closed services.
(b) Average length of stay is defined as patient days divided by admissions.
(c) Total Facility results for the periods presented exclude the 22 divested facilities in the U.K. that were sold on November 30, 2016 and other closed services.
(d) Revenue and revenue per patient day for the three and six months ended June 30, 2016 are adjusted to reflect the foreign currency exchange rate for the comparable period of 2017 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 and six months ended June 30, 2016 is 1.28 and 1.26, respectively.
             
Acadia Healthcare Company, Inc.
Reconciliation of Net Income Attributable to Acadia Healthcare Company, Inc. to Adjusted EBITDA
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2017   2016     2017     2016  
(in thousands)
 
Net income attributable to Acadia Healthcare Company, Inc. $ 49,630 $ 56,445 $ 84,588 $ 82,133
Net income (loss) attributable to noncontrolling interests 8 (854 ) (177 ) (1,173 )
Provision for income taxes 16,578 18,261 30,289 25,371
Interest expense, net 43,505 48,758 86,262 86,472
Depreciation and amortization   35,201   36,752     68,814     64,727  
EBITDA 144,922 159,362 269,776 257,530
 
Adjustments:
Equity-based compensation expense (a) 7,436 6,888 14,832 13,844
Debt extinguishment costs (b) 810 - 810 -
Gain on foreign currency derivatives (c) - (98 ) - (508 )
Transaction-related expenses (d)   9,052   6,074     13,171     32,372  
Adjusted EBITDA $ 162,220 $ 172,226   $ 298,589   $ 303,238  
 
See footnotes on page 10.
             
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 June 30, Six Months Ended June 30,
  2017     2016     2017     2016  
(in thousands, except per share amounts)
 
Net income attributable to Acadia Healthcare Company, Inc. $ 49,630 $ 56,445 $ 84,588 $ 82,133
Provision for income taxes   16,578     18,261     30,289     25,371  

Income attributable to Acadia Healthcare Company, Inc. before income taxes

66,208 74,706 114,877 107,504
 
Adjustments to income:
Debt extinguishment costs (b) 810 - 810 -
Gain on foreign currency derivatives (c) - (98 ) - (508 )
Transaction-related expenses (d) 9,052 6,074 13,171 32,372
Income tax provision reflecting tax effect of adjustments to income (e)   (18,846 )   (17,530 )   (31,758 )   (30,382 )
Adjusted income attributable to Acadia Healthcare Company, Inc. $ 57,224 $ 63,152 $ 97,100 $ 108,986
 
Weighted-average shares outstanding - diluted 87,080 86,876 86,997 85,052
 

Adjusted income attributable to Acadia Healthcare Company, Inc. per diluted share

$ 0.66   $ 0.73   $ 1.12   $ 1.28  
 
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, 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) loss attributable to noncontrolling interests, income tax provision, net interest expense 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. We define Adjusted income as net income adjusted for provision for income taxes, debt extinguishment costs, gain on foreign currency derivatives, transaction-related expenses and income tax provision reflecting tax effect of adjustments attributable to Acadia.
 
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.
 
The Company is not able to provide a reconciliation of projected Adjusted EBITDA and adjusted earnings per diluted share, where provided, to expected results due to the unknown effect, timing and potential significance of transaction-related expenses and the tax effect of such expenses.
 
(a) Represents the equity-based compensation expense of Acadia.
 
(b) For the three and six months ended June 30, 2017, represents debt extinguishment costs recorded in connection with the Third Repricing Amendment to the Amended and Restated Credit Agreement, including the discount and write-off of deferred financing costs.
 
(c) Represents the change in fair value of foreign currency derivatives purchased by Acadia related to (i) acquisitions in the U.K. and (ii) transfers of cash between the U.S. and U.K. under the Company’s cash management and foreign currency risk management programs.
 
(d) Represents transaction-related expenses incurred by Acadia related to acquisitions and integration efforts.
 
(e) Represents the income tax provision adjusted to reflect the tax effect of the adjustments to income based on tax rates of 24.8% and 21.7% for the three months ended June 30, 2017 and 2016, respectively, and 24.6% and 21.8% for the six months ended June 30, 2017 and 2016, respectively. The adjusted income tax provision for the six months ended June 30, 2017 excludes the impact of adopting ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting” of approximately $1.7 million.

Contacts

Acadia Healthcare Company, Inc.
Gretchen Hommrich, 615-861-6000
Director, Investor Relations

Contacts

Acadia Healthcare Company, Inc.
Gretchen Hommrich, 615-861-6000
Director, Investor Relations