Acadia Healthcare Reports Third Quarter EPS of $0.53 and Adjusted EPS of $0.55

Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced financial results for the third quarter and nine months ended September 30, 2018. Revenue was $760.9 million for the third quarter, up 6.2% from $716.7 million for the third quarter of 2017. Net income attributable to Acadia stockholders for the third quarter of 2018 was $46.2 million, or $0.53 per diluted share, compared with $45.6 million, or $0.52 per diluted share, for the third quarter of 2017. Adjusted income attributable to Acadia stockholders per diluted share (adjusted EPS) was $0.55 for the third quarter of 2018, compared with $0.58 for the third quarter of 2017, which excludes transaction-related expenses of $2.4 million and $5.7 million for the third quarter of 2018 and 2017, respectively. A reconciliation of all non-GAAP financial results in this release appears beginning on page 7.

For the third quarter of 2018, Acadias total same facility revenue increased 6.2% compared with the third quarter of 2017, including a 2.4% increase in patient days and a 3.8% increase in revenue per patient day. Total same facility EBITDA margin declined 100 basis points to 23.9%. U.S. same facility revenue increased 7.2%, including a 3.3% increase in patient days and a 3.8% increase in revenue per patient day. U.S. same facility EBITDA margin increased 60 basis points to 27.4%. U.K. same facility revenue grew 4.4% for the third quarter of 2018 from the third quarter last year, including a 1.3% increase in patient days and a 3.1% increase in revenue per patient day. U.K. same facility EBITDA margin declined 450 basis points to 16.9%.

Joey Jacobs, Chairman and Chief Executive Officer of Acadia, remarked, Our U.S. operations performed well with favorable trends in all key operating metrics. However, the third quarter financial results for our operations in the U.K. were affected by a lower census and higher operating expenses than expected. Our operating costs were significantly higher, primarily due to the ongoing nursing and clinical staff shortage and our dependence on higher cost agency labor. Our census did not reach a sufficient level to absorb the higher wages and other operating costs, which adversely affected our margins for the third quarter.

During the third quarter, we added 132 beds to existing facilities, bringing the total up to 806 beds added to new and existing facilities since the end of the third quarter a year ago. For the full year 2018, we expect to add more than 800 beds to existing and new facilities, said Mr. Jacobs.

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Following the end of the third quarter, the Company signed definitive agreements for two acquisitions. Mission Treatment operates nine comprehensive treatment centers that provide medication-assisted treatment and counseling for people struggling with narcotics addiction in California, Nevada, Arizona and Oklahoma. Acadia also will acquire The Whittier Pavilion, a 71-bed inpatient psychiatric hospital located in Haverhill, Massachusetts. The hospital is part of the Whittier Health Network, a family owned and operated healthcare system that has provided hospital and community services since 1982.

Acadia today updated its financial guidance for 2018, consistent with the Companys performance for the first nine months of 2018 and its expectations for the fourth quarter of the year, as follows:

  • Revenue for 2018 of approximately $3.0 billion;
  • Adjusted EBITDA for 2018 in a range of $605 million to $610 million; and
  • Adjusted earnings per diluted share for 2018 in a range of $2.25 to $2.27.

The Companys 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, provision for income taxes, net interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for equity-based compensation expense, transaction-related expenses and debt extinguishment costs. Adjusted income is defined as net income adjusted for transaction-related expenses, tax reform impact, debt extinguishment costs and income tax effect of adjustments to income.

Acadia will hold a conference call to discuss its third quarter financial results at 9:00 a.m. Eastern Time on Tuesday, November 6, 2018. A live webcast of the conference call will be available at www.acadiahealthare.com in the Investors section of the website. The webcast of the conference call will be available through November 20, 2018.

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 relating to the U.K.s departure from the European Union; (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); (iii) Acadias ability to complete acquisitions and successfully integrate the operations of acquired facilities; (iv) Acadias 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, governmental investigations and adverse regulatory actions, which could adversely affect the price of our common stock and result in substantial payments and incremental regulatory burdens; (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, labor costs, client preferences, changes in competition and general economic or industry conditions that may prevent Acadia from realizing the expected benefits of its joint venture, de novo and other business strategies. These factors and others are more fully described in Acadias periodic reports and other filings with the SEC.

About Acadia

Acadia is a provider of behavioral healthcare services. At September 30, 2018, Acadia operated a network of 586 behavioral healthcare facilities with approximately 18,000 beds in 40 states, the United Kingdom and Puerto Rico. Acadia provides behavioral health and addiction services to its patients in a variety of settings, including inpatient psychiatric hospitals, specialty treatment facilities, residential treatment centers and outpatient clinics.

 
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
       
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
(In thousands, except per share amounts)
 
Revenue before provision for doubtful accounts $ 760,916 $ 728,712 $ 2,268,895 $ 2,143,696
Provision for doubtful accounts       (11,998 )       (31,892 )
Revenue 760,916 716,714 2,268,895 2,111,804
 

Salaries, wages and benefits (including equity-based compensation expense of $5,225, $4,175, $19,273 and $19,007, respectively)

417,917 385,562 1,246,186 1,145,578
Professional fees 59,509 53,042 166,988 142,772
Supplies 29,461 28,652 88,958 85,000
Rents and leases 19,866 19,049 60,390 57,455
Other operating expenses 90,464 82,328 265,977 249,161
Depreciation and amortization 39,659 36,442 119,360 105,256
Interest expense, net 46,651 44,515 137,706 130,777
Debt extinguishment costs 940 810
Transaction-related expenses   2,353     5,665     10,008     18,836  
Total expenses   705,880     655,255     2,096,513     1,935,645  
Income before income taxes 55,036 61,459 172,382 176,159
Provision for income taxes   8,757     15,970     16,339     46,259  
Net income 46,279 45,489 156,043 129,900
Net (income) loss attributable to noncontrolling interests   (47 )   129     (156 )   306  
Net income attributable to Acadia Healthcare Company, Inc. $ 46,232   $ 45,618   $ 155,887   $ 130,206  
 

Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders:

Basic $ 0.53   $ 0.52   $ 1.79   $ 1.50  
Diluted $ 0.53   $ 0.52   $ 1.78   $ 1.50  
 
Weighted-average shares outstanding:
Basic 87,344 87,017 87,233 86,912
Diluted 87,537 87,172 87,386 87,038
 
 
Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
   
September 30, December 31,
2018 2017
(In thousands)
 
ASSETS
Current assets:
Cash and cash equivalents $ 48,928 $ 67,290
Accounts receivable, net 345,659 296,925
Other current assets   96,146     107,335  
Total current assets 490,733 471,550
Property and equipment, net 3,126,642 3,048,130
Goodwill 2,729,941 2,751,174
Intangible assets, net 91,259 87,348
Deferred tax assets 3,630 3,731
Derivative instrument assets 33,084 12,997
Other assets   54,295     49,572  
Total assets $ 6,529,584   $ 6,424,502  
 
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 33,264 $ 34,830
Accounts payable 133,914 102,299
Accrued salaries and benefits 109,151 99,047
Other accrued liabilities   114,414     141,213  
Total current liabilities 390,743 377,389
Long-term debt 3,181,962 3,205,058
Deferred tax liabilities 82,269 80,333
Other liabilities   165,663     166,434  
Total liabilities 3,820,637 3,829,214
Redeemable noncontrolling interests 28,698 22,417
Equity:
Common stock 874 871
Additional paid-in capital 2,535,377 2,517,545
Accumulated other comprehensive loss (440,462 ) (374,118 )
Retained earnings   584,460     428,573  
Total equity   2,680,249     2,572,871  
Total liabilities and equity $ 6,529,584   $ 6,424,502  
 
 
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
   
Nine Months Ended September 30,
2018 2017
(In thousands)
Operating activities:
Net income $ 156,043 $ 129,900
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization 119,360 105,256
Amortization of debt issuance costs 7,763 7,340
Equity-based compensation expense 19,273 19,007
Deferred income taxes (1,738 ) 29,416
Debt extinguishment costs 940 810
Other 3,025 10,672
Change in operating assets and liabilities:
Accounts receivable, net (43,252 ) (28,681 )
Other current assets 3,021 26,099
Other assets 3,868 (566 )
Accounts payable and other accrued liabilities 9,230 (26,381 )
Accrued salaries and benefits 11,049 (7,937 )
Other liabilities   149     7,677  
Net cash provided by continuing operating activities 288,731 272,612
Net cash used in discontinued operating activities   (2,548 )   (1,261 )
Net cash provided by operating activities 286,183 271,351
 
Investing activities:
Cash paid for capital expenditures (249,989 ) (193,817 )
Cash paid for real estate acquisitions (9,391 ) (33,297 )
Other   (3,114 )   (6,062 )
Net cash used in investing activities (262,494 ) (233,176 )
 
Financing activities:
Principal payments on long-term debt (31,492 ) (25,913 )
Common stock withheld for minimum statutory taxes, net (2,272 ) (3,278 )
Other   (6,973 )   1,649  
Net cash used in financing activities (40,737 ) (27,542 )
 
Effect of exchange rate changes on cash   (1,314 )   7,965  
 
Net (decrease) increase in cash and cash equivalents (18,362 ) 18,598
Cash and cash equivalents at beginning of the period   67,290     57,063  
Cash and cash equivalents at end of the period $ 48,928 $ 75,661
 
 
Acadia Healthcare Company, Inc.
Operating Statistics
(Unaudited, Revenue in thousands)
           
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 % Change 2018 2017 % Change
Same Facility Results (a,d)
Revenue $ 724,341 $ 681,983 6.2% $ 2,164,626 $ 2,048,828 5.7%
Patient Days 1,142,991 1,116,568 2.4% 3,369,119 3,302,107 2.0%
Admissions 42,641 40,444 5.4% 125,541 120,978 3.8%
Average Length of Stay (b) 26.8 27.6 -2.9% 26.8 27.3 -1.7%
Revenue per Patient Day $ 634 $ 611 3.8% $ 642 $ 620 3.6%
EBITDA margin 23.9% 24.9% -100 bps 24.6% 25.0% -40 bps
 
U.S. Same Facility Results (a)
Revenue $ 478,910 $ 446,807 7.2% $ 1,411,899 $ 1,330,898 6.1%
Patient Days 637,909 617,734 3.3% 1,874,609 1,830,949 2.4%
Admissions 40,202 37,970 5.9% 118,311 113,870 3.9%
Average Length of Stay (b) 15.9 16.3 -2.5% 15.8 16.1 -1.5%
Revenue per Patient Day $ 751 $ 723 3.8% $ 753 $ 727 3.6%
EBITDA margin 27.4% 26.8% 60 bps 27.3% 27.1% 20 bps
 
U.K. Same Facility Results (a,d)
Revenue $ 245,431 $ 235,176 4.4% $ 752,727 $ 717,930 4.8%
Patient Days 505,082 498,834 1.3% 1,494,510 1,471,158 1.6%
Admissions 2,439 2,474 -1.4% 7,230 7,108 1.7%
Average Length of Stay (b) 207.1 201.6 2.7% 206.7 207.0 -0.1%
Revenue per Patient Day $ 486 $ 471 3.1% $ 504 $ 488 3.2%
EBITDA margin 16.9% 21.4% -450 bps 19.5% 21.3% -180 bps
 
 
U.S. Facility Results (c)
Revenue $ 488,626 $ 453,650 7.7% $ 1,432,501 $ 1,354,615 5.7%
Patient Days 650,395 621,648 4.6% 1,899,050 1,846,147 2.9%
Admissions 41,614 38,034 9.4% 121,065 114,097 6.1%
Average Length of Stay (b) 15.6 16.3 -4.4% 15.7 16.2 -3.1%
Revenue per Patient Day $ 751 $ 730 2.9% $ 754 $ 734 2.8%
EBITDA margin 26.3% 26.2% 10 bps 26.2% 26.5% -30 bps
 
U.K. Facility Results (c,d)
Revenue $ 272,290 $ 261,810 4.0% $ 836,394 $ 801,031 4.4%
Patient Days 681,917 692,509 -1.5% 2,024,389 2,048,424 -1.2%
Admissions 2,752 2,795 -1.5% 8,226 8,108 1.5%
Average Length of Stay (b) 247.8 247.8 0.0% 246.1 252.6 -2.6%
Revenue per Patient Day $ 399 $ 378 5.6% $ 413 $ 391 5.7%
EBITDA margin 15.0% 19.3% -430 bps 17.5% 19.4% -190 bps
 
Total Facility Results (c,d)
Revenue $ 760,916 $ 715,460 6.4% $ 2,268,895 $ 2,155,646 5.3%
Patient Days 1,332,312 1,314,157 1.4% 3,923,439 3,894,571 0.7%
Admissions 44,366 40,829 8.7% 129,291 122,205 5.8%
Average Length of Stay (b) 30.0 32.2 -6.7% 30.3 31.9 -4.8%
Revenue per Patient Day $ 571 $ 544 4.9% $ 578 $ 554 4.5%
EBITDA margin 22.2% 23.7% -150 bps 23.0% 23.9% -90 bps
 

(a)

Results for the periods presented exclude the elderly care division of our U.K. operations and certain closed services.

(b)

Average length of stay is defined as patient days divided by admissions.

(c)

Results for the periods presented exclude certain closed services.

(d)

Revenue and revenue per patient day for the three and nine months ended September 30, 2017 is adjusted to reflect the foreign currency exchange rate for the comparable periods of 2018 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 nine months ended September 30, 2017 is 1.30 and 1.35, respectively.

 
 
Acadia Healthcare Company, Inc.
Reconciliation of Net Income Attributable to Acadia Healthcare Company, Inc. to Adjusted EBITDA
(Unaudited)
       
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
(in thousands)
 
Net income attributable to Acadia Healthcare Company, Inc. $ 46,232 $ 45,618 $ 155,887 $ 130,206
Net income (loss) attributable to noncontrolling interests 47 (129 ) 156 (306 )
Provision for income taxes 8,757 15,970 16,339 46,259
Interest expense, net 46,651 44,515 137,706 130,777
Depreciation and amortization   39,659   36,442     119,360   105,256  
EBITDA 141,346 142,416 429,448 412,192
 
Adjustments:
Equity-based compensation expense (a) 5,225 4,175 19,273 19,007
Transaction-related expenses (b) 2,353 5,665 10,008 18,836
Debt extinguishment costs (c)         940   810  
Adjusted EBITDA $ 148,924 $ 152,256   $ 459,669 $ 450,845  
 
See footnotes on page 9.
 
 
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 September 30, Nine Months Ended September 30,
2018 2017

2018

2017
(in thousands, except per share amounts)
 
Net income attributable to Acadia Healthcare Company, Inc. $ 46,232 $ 45,618 $ 155,887 $ 130,206
 
Adjustments to income:
Transaction-related expenses (b) 2,353 5,665 10,008 18,836
Tax reform impact (d) (10,472 )
Debt extinguishment costs (c) 940 810
Income tax effect of adjustments to income (e)   (406 )   (1,045 )   (1,821 )   (2,514 )
Adjusted income attributable to Acadia Healthcare Company, Inc. $ 48,179   $ 50,238   $ 154,542   $ 147,338  
 
Weighted-average shares outstanding – diluted 87,537 87,172 87,386 87,038
 

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

$ 0.55   $ 0.58   $ 1.77   $ 1.69  
 
See footnotes on page 9.
 
 
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, provision for income taxes, net interest expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted for equity-based compensation expense, transaction-related expenses and debt extinguishment costs. We define Adjusted income as net income adjusted for transaction-related expenses, tax reform impact, debt extinguishment costs and income tax effect of adjustments to income.
 
EBITDA, Adjusted EBITDA, and Adjusted income are supplemental measures of our performance and are not required by, or presented in accordance with, generally accepted accounting principles in the United States (GAAP). EBITDA, Adjusted EBITDA, and Adjusted income are not measures of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as measures of our liquidity. Our measurements of EBITDA, Adjusted EBITDA, and Adjusted income may not be comparable to similarly titled measures of other companies. We have included information concerning EBITDA, Adjusted EBITDA, and Adjusted income in this press release because we believe that such information is used by certain investors as measures of a companys 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) Represents transaction-related expenses incurred by Acadia related to acquisitions and integration efforts.
 
(c) Represents debt extinguishment costs recorded in connection with the Amended and Restated Credit Agreement, including the discount and write-off of deferred financing costs.
 
(d) Represents tax benefit related to a change in the Companys provisional amounts recorded at December 31, 2017 related to the enactment of the Tax Cuts and Jobs Act.
 
(e) Represents the income tax effect of adjustments to income based on tax rates of 16.0% and 25.3% for the three months ended September 30, 2018 and 2017, respectively, and 15.6% and 24.9% for the nine months ended September 30, 2018 and 2017, respectively.
 

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

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