UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20202021
Or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-35331
Acadia Healthcare Company, Inc.
(Exact name of registrant as specified in its charter)
|
|
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Delaware |
| 45-2492228 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
6100 Tower Circle, Suite 1000
Franklin, Tennessee 37067
(Address, including zip code, of registrant’s principal executive offices)
(615) 861-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
| Accelerated filer | ☐ Non-accelerated filer | ☐ | |
Smaller reporting company | ☐ |
| Emerging growth company | ☐ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
Common Stock, $.01 par value |
| ACHC |
| NASDAQ Global Select Market |
At May 5, 2020,April 30, 2021, there were 88,942,49989,739,084 shares of the registrant’s common stock outstanding.
ACADIA HEALTHCARE COMPANY, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Item 1. |
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| Condensed Consolidated Statements of | 2 |
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| Condensed Consolidated Statements of Comprehensive Income (Loss) | 3 |
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| 4 | |
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| 5 | |
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| Notes to Condensed Consolidated Financial Statements (Unaudited) | 6 |
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Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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PART I – FINANCIAL INFORMATION
Item 1. | Financial Statements |
Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| March 31, 2021 |
|
| December 31, 2020 |
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| (In thousands, except share and per share amounts) |
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ASSETS |
|
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Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 178,915 |
|
| $ | 378,697 |
|
Accounts receivable, net |
|
| 276,041 |
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|
| 273,551 |
|
Other current assets |
|
| 73,269 |
|
|
| 61,332 |
|
Current assets held for sale |
|
| — |
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|
| 1,809,815 |
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Total current assets |
|
| 528,225 |
|
|
| 2,523,395 |
|
Property and equipment, net |
|
| 1,654,732 |
|
|
| 1,622,896 |
|
Goodwill |
|
| 2,105,264 |
|
|
| 2,105,264 |
|
Intangible assets, net |
|
| 68,627 |
|
|
| 68,535 |
|
Deferred tax assets |
|
| 3,177 |
|
|
| 3,209 |
|
Operating lease right-of-use assets |
|
| 96,205 |
|
|
| 96,937 |
|
Other assets |
|
| 70,685 |
|
|
| 79,126 |
|
Total assets |
| $ | 4,526,915 |
|
| $ | 6,499,362 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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|
|
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Current portion of long-term debt |
| $ | 11,911 |
|
| $ | 153,478 |
|
Accounts payable |
|
| 91,505 |
|
|
| 87,815 |
|
Accrued salaries and benefits |
|
| 127,827 |
|
|
| 124,912 |
|
Current portion of operating lease liabilities |
|
| 18,696 |
|
|
| 18,916 |
|
Other accrued liabilities |
|
| 161,040 |
|
|
| 178,453 |
|
Derivative instrument liabilities |
|
| — |
|
|
| 84,584 |
|
Current liabilities held for sale |
|
| — |
|
|
| 660,027 |
|
Total current liabilities |
|
| 410,979 |
|
|
| 1,308,185 |
|
Long-term debt |
|
| 1,484,212 |
|
|
| 2,968,948 |
|
Deferred tax liabilities |
|
| 68,678 |
|
|
| 50,017 |
|
Operating lease liabilities |
|
| 83,731 |
|
|
| 84,029 |
|
Other liabilities |
|
| 124,616 |
|
|
| 133,412 |
|
Total liabilities |
|
| 2,172,216 |
|
|
| 4,544,591 |
|
Redeemable noncontrolling interests |
|
| 56,700 |
|
|
| 55,315 |
|
Equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value; 10,000,000 shares authorized, 0 shares issued |
|
| — |
|
|
| — |
|
Common stock, $0.01 par value; 180,000,000 shares authorized; 88,729,527 and 88,024,395 issued and outstanding at March 31, 2021 and December 31, 2020, respectively |
|
| 887 |
|
|
| 880 |
|
Additional paid-in capital |
|
| 2,597,781 |
|
|
| 2,580,327 |
|
Accumulated other comprehensive loss |
|
| — |
|
|
| (371,365 | ) |
Accumulated deficit |
|
| (300,669 | ) |
|
| (310,386 | ) |
Total equity |
|
| 2,297,999 |
|
|
| 1,899,456 |
|
Total liabilities and equity |
| $ | 4,526,915 |
|
| $ | 6,499,362 |
|
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
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| (In thousands, except share and per share amounts) |
| |||||
ASSETS |
|
|
|
|
|
|
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Current assets: |
|
|
|
|
|
|
|
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Cash and cash equivalents |
| $ | 81,004 |
|
| $ | 124,192 |
|
Accounts receivable, net |
|
| 339,505 |
|
|
| 339,775 |
|
Other current assets |
|
| 82,443 |
|
|
| 78,244 |
|
Total current assets |
|
| 502,952 |
|
|
| 542,211 |
|
Property and equipment, net |
|
| 3,151,739 |
|
|
| 3,224,034 |
|
Goodwill |
|
| 2,426,700 |
|
|
| 2,449,131 |
|
Intangible assets, net |
|
| 89,052 |
|
|
| 90,357 |
|
Deferred tax assets |
|
| 3,307 |
|
|
| 3,339 |
|
Operating lease right-of-use assets |
|
| 476,028 |
|
|
| 501,837 |
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Other assets |
|
| 68,217 |
|
|
| 68,233 |
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Total assets |
| $ | 6,717,995 |
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| $ | 6,879,142 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
| $ | 196,072 |
|
| $ | 43,679 |
|
Accounts payable |
|
| 134,693 |
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|
| 127,045 |
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Accrued salaries and benefits |
|
| 114,790 |
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|
| 122,552 |
|
Current portion of operating lease liabilities |
|
| 29,671 |
|
|
| 29,140 |
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Other accrued liabilities |
|
| 104,358 |
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| 141,160 |
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Total current liabilities |
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| 579,584 |
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| 463,576 |
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Long-term debt |
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| 2,944,820 |
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| 3,105,420 |
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Deferred tax liabilities |
|
| 85,405 |
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| 71,860 |
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Operating lease liabilities |
|
| 474,746 |
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|
| 502,252 |
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Derivative instrument liabilities |
|
| 9,015 |
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|
| 68,915 |
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Other liabilities |
|
| 126,767 |
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| 128,587 |
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Total liabilities |
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| 4,220,337 |
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| 4,340,610 |
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Redeemable noncontrolling interests |
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| 33,491 |
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| 33,151 |
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Equity: |
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Preferred stock, $0.01 par value; 10,000,000 shares authorized, 0 shares issued |
|
| — |
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|
| — |
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Common stock, $0.01 par value; 180,000,000 shares authorized; 87,842,302 and 87,715,591 issued and outstanding at March 31, 2020 and December 31, 2019, respectively |
|
| 878 |
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| 877 |
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Additional paid-in capital |
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| 2,561,218 |
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| 2,557,642 |
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Accumulated other comprehensive loss |
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| (493,138 | ) |
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| (414,884 | ) |
Retained earnings |
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| 395,209 |
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| 361,746 |
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Total equity |
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| 2,464,167 |
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| 2,505,381 |
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Total liabilities and equity |
| $ | 6,717,995 |
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| $ | 6,879,142 |
|
See accompanying notes.
1
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of IncomeOperations
(Unaudited)
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
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|
| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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| (In thousands, except per share amounts) |
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| (In thousands, except per share amounts) |
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Revenue |
| $ | 782,810 |
|
| $ | 760,617 |
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| $ | 551,199 |
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| $ | 509,217 |
|
Salaries, wages and benefits (including equity-based compensation expense of $4,979 and $6,101, respectively) |
|
| 440,316 |
|
|
| 429,579 |
| ||||||||
Salaries, wages and benefits (including equity-based compensation expense of $7,034 and $4,979, respectively) |
|
| 304,333 |
|
|
| 286,987 |
| ||||||||
Professional fees |
|
| 63,300 |
|
|
| 57,007 |
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|
| 31,617 |
|
|
| 31,051 |
|
Supplies |
|
| 31,971 |
|
|
| 29,957 |
|
|
| 21,322 |
|
|
| 22,196 |
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Rents and leases |
|
| 20,824 |
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|
| 20,307 |
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|
| 9,412 |
|
|
| 9,117 |
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Other operating expenses |
|
| 98,529 |
|
|
| 93,865 |
|
|
| 72,010 |
|
|
| 68,156 |
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Depreciation and amortization |
|
| 41,680 |
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|
| 40,580 |
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|
| 24,894 |
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|
| 22,835 |
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Interest expense, net |
|
| 42,785 |
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|
| 48,130 |
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|
| 29,027 |
|
|
| 42,565 |
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Debt extinguishment costs |
|
| 24,650 |
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|
| — |
| ||||||||
Transaction-related expenses |
|
| 3,549 |
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|
| 4,321 |
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|
| 4,610 |
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|
| 1,526 |
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Total expenses |
|
| 742,954 |
|
|
| 723,746 |
|
|
| 521,875 |
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|
| 484,433 |
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Income before income taxes |
|
| 39,856 |
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|
| 36,871 |
| ||||||||
Income from continuing operations before income taxes |
|
| 29,324 |
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|
| 24,784 |
| ||||||||
Provision for income taxes |
|
| 5,789 |
|
|
| 7,360 |
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|
| 6,204 |
|
|
| 5,806 |
|
Income from continuing operations |
|
| 23,120 |
|
|
| 18,978 |
| ||||||||
(Loss) income from discontinued operations, net of taxes |
|
| (12,641 | ) |
|
| 15,089 |
| ||||||||
Net income |
|
| 34,067 |
|
|
| 29,511 |
|
|
| 10,479 |
|
|
| 34,067 |
|
Net income attributable to noncontrolling interests |
|
| (604 | ) |
|
| (40 | ) |
|
| (762 | ) |
|
| (604 | ) |
Net income attributable to Acadia Healthcare Company, Inc. |
| $ | 33,463 |
|
| $ | 29,471 |
|
| $ | 9,717 |
|
| $ | 33,463 |
|
Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders: |
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|
|
|
|
|
|
| ||||||||
Basic |
| $ | 0.38 |
|
| $ | 0.34 |
| ||||||||
Diluted |
| $ | 0.38 |
|
| $ | 0.34 |
| ||||||||
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 |
| ||||||||
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|
|
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|
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| ||||||||
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 |
| ||||||||
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic |
|
| 87,765 |
|
|
| 87,505 |
|
|
| 88,242 |
|
|
| 87,765 |
|
Diluted |
|
| 87,971 |
|
|
| 87,694 |
|
|
| 89,941 |
|
|
| 87,971 |
|
See accompanying notes.
2
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) Income
(Unaudited)
|
| Three Months Ended March 31, |
| ||||||
|
| 2020 |
|
| 2019 |
| |||
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| (In thousands) |
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Net income |
| $ | 34,067 |
|
| $ | 29,511 |
| |
Other comprehensive loss: |
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|
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|
|
|
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| |
Foreign currency translation (loss) gain |
|
| (122,000 | ) |
|
| 44,481 |
| |
Gain (loss) on derivative instruments, net of tax of $16.3 million and $(3.5) million, respectively |
|
| 43,746 |
|
|
| (8,690 | ) | |
Other comprehensive (loss) income |
|
| (78,254 | ) |
|
| 35,791 |
| |
Comprehensive (loss) income |
|
| (44,187 | ) |
|
| 65,302 |
| |
Comprehensive income attributable to noncontrolling interests |
|
| (604 | ) |
|
| (40 | ) | |
Comprehensive (loss) income attributable to Acadia Healthcare Company, Inc. |
| $ | (44,791 | ) |
| $ | 65,262 |
|
|
| Three Months Ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
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| (In thousands) |
| |||||
Net income |
| $ | 10,479 |
|
| $ | 34,067 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Foreign currency translation loss |
|
| (4,260 | ) |
|
| (122,000 | ) |
Gain on derivative instruments, net of tax of $0.1 million and $16.3 million, respectively |
|
| 19 |
|
|
| 43,746 |
|
U.K. Sale |
|
| 375,606 |
|
|
| — |
|
Other comprehensive income (loss) |
|
| 371,365 |
|
|
| (78,254 | ) |
Comprehensive income (loss) |
|
| 381,844 |
|
|
| (44,187 | ) |
Comprehensive income attributable to noncontrolling interests |
|
| (762 | ) |
|
| (604 | ) |
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc. |
| $ | 381,082 |
|
| $ | (44,791 | ) |
See accompanying notes.
3
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Equity
(Unaudited)
(In thousands)
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated Other Comprehensive |
|
| Retained |
|
|
|
|
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated Other Comprehensive |
|
| Retained Earnings (Accumulated |
|
|
|
|
| ||||||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Loss |
|
| Earnings |
|
| Total |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Loss |
|
| Deficit) |
|
| Total |
| ||||||||||||
Balance at December 31, 2018 |
|
| 87,444 |
|
| $ | 874 |
|
| $ | 2,541,987 |
|
| $ | (462,377 | ) |
| $ | 252,823 |
|
| $ | 2,333,307 |
| ||||||||||||||||||||||||
Common stock issued under stock incentive plans |
|
| 149 |
|
|
| 2 |
|
|
| 291 |
|
|
| — |
|
|
| — |
|
|
| 293 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (1,620 | ) |
|
| — |
|
|
| — |
|
|
| (1,620 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 6,101 |
|
|
| — |
|
|
| — |
|
|
| 6,101 |
| ||||||||||||||||||||||||
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35,791 |
|
|
| — |
|
|
| 35,791 |
| ||||||||||||||||||||||||
Net income attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 29,471 |
|
|
| 29,471 |
| ||||||||||||||||||||||||
Balance at March 31, 2019 |
|
| 87,593 |
|
|
| 876 |
|
|
| 2,546,759 |
|
|
| (426,586 | ) |
|
| 282,294 |
|
|
| 2,403,343 |
| ||||||||||||||||||||||||
Common stock issued under stock incentive plans |
|
| 52 |
|
|
| — |
|
|
| 68 |
|
|
| — |
|
|
| — |
|
|
| 68 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (356 | ) |
|
| — |
|
|
| — |
|
|
| (356 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 4,182 |
|
|
| — |
|
|
| — |
|
|
| 4,182 |
| ||||||||||||||||||||||||
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (33,031 | ) |
|
| — |
|
|
| (33,031 | ) | ||||||||||||||||||||||||
Net income attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 48,140 |
|
|
| 48,140 |
| ||||||||||||||||||||||||
Balance at June 30, 2019 |
|
| 87,645 |
|
|
| 876 |
|
|
| 2,550,653 |
|
|
| (459,617 | ) |
|
| 330,434 |
|
|
| 2,422,346 |
| ||||||||||||||||||||||||
Common stock issued under stock incentive plans |
|
| 10 |
|
|
| 1 |
|
|
| 153 |
|
|
| — |
|
|
| — |
|
|
| 154 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (37 | ) |
|
| — |
|
|
| — |
|
|
| (37 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 4,039 |
|
|
| — |
|
|
| — |
|
|
| 4,039 |
| ||||||||||||||||||||||||
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (48,377 | ) |
|
| — |
|
|
| (48,377 | ) | ||||||||||||||||||||||||
Net income attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 42,566 |
|
|
| 42,566 |
| ||||||||||||||||||||||||
Balance at September 30, 2019 |
|
| 87,655 |
|
|
| 877 |
|
|
| 2,554,808 |
|
|
| (507,994 | ) |
|
| 373,000 |
|
|
| 2,420,691 |
| ||||||||||||||||||||||||
Common stock issued under stock incentive plans |
|
| 60 |
|
|
| — |
|
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| 54 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (205 | ) |
|
| — |
|
|
| — |
|
|
| (205 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 2,985 |
|
|
| — |
|
|
| — |
|
|
| 2,985 |
| ||||||||||||||||||||||||
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 93,110 |
|
|
| — |
|
|
| 93,110 |
| ||||||||||||||||||||||||
Net loss attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11,254 | ) |
|
| (11,254 | ) | ||||||||||||||||||||||||
Balance at December 31, 2019 |
|
| 87,715 |
|
|
| 877 |
|
|
| 2,557,642 |
|
|
| (414,884 | ) |
|
| 361,746 |
|
|
| 2,505,381 |
|
|
| 87,715 |
|
| $ | 877 |
|
| $ | 2,557,642 |
|
| $ | (414,884 | ) |
| $ | 361,746 |
|
| $ | 2,505,381 |
|
Common stock issued under stock incentive plans |
|
| 127 |
|
|
| 1 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 127 |
|
|
| 1 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 4,979 |
|
|
| — |
|
|
| — |
|
|
| 4,979 |
|
|
| — |
|
|
| — |
|
|
| 4,979 |
|
|
| — |
|
|
| — |
|
|
| 4,979 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (78,254 | ) |
|
| — |
|
|
| (78,254 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (78,254 | ) |
|
| — |
|
|
| (78,254 | ) |
Net income attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 33,463 |
|
|
| 33,463 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 33,463 |
|
|
| 33,463 |
|
Balance at March 31, 2020 |
|
| 87,842 |
|
| $ | 878 |
|
| $ | 2,561,218 |
|
| $ | (493,138 | ) |
| $ | 395,209 |
|
| $ | 2,464,167 |
|
|
| 87,842 |
|
|
| 878 |
|
|
| 2,561,218 |
|
|
| (493,138 | ) |
|
| 395,209 |
|
|
| 2,464,167 |
|
Common stock issued under stock incentive plans |
|
| 56 |
|
|
| 1 |
|
|
| 169 |
|
|
| — |
|
|
| — |
|
|
| 170 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (145 | ) |
|
| — |
|
|
| — |
|
|
| (145 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 5,808 |
|
|
| — |
|
|
| — |
|
|
| 5,808 |
| ||||||||||||||||||||||||
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,741 | ) |
|
| — |
|
|
| (7,741 | ) | ||||||||||||||||||||||||
Net income attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 41,079 |
|
|
| 41,079 |
| ||||||||||||||||||||||||
Balance at June 30, 2020 |
|
| 87,898 |
|
|
| 879 |
|
|
| 2,567,050 |
|
|
| (500,879 | ) |
|
| 436,288 |
|
|
| 2,503,338 |
| ||||||||||||||||||||||||
Common stock issued under stock incentive plans |
|
| 22 |
|
|
| — |
|
|
| 180 |
|
|
| — |
|
|
| — |
|
|
| 180 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (114 | ) |
|
| — |
|
|
| — |
|
|
| (114 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 5,471 |
|
|
| — |
|
|
| — |
|
|
| 5,471 |
| ||||||||||||||||||||||||
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60,766 |
|
|
| — |
|
|
| 60,766 |
| ||||||||||||||||||||||||
Net income attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 36,998 |
|
|
| 36,998 |
| ||||||||||||||||||||||||
Balance at September 30, 2020 |
|
| 87,920 |
|
|
| 879 |
|
|
| 2,572,587 |
|
|
| (440,113 | ) |
|
| 473,286 |
|
|
| 2,606,639 |
| ||||||||||||||||||||||||
Common stock issued under stock incentive plans |
|
| 104 |
|
|
| 1 |
|
|
| 1,676 |
|
|
| — |
|
|
| — |
|
|
| 1,677 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (182 | ) |
|
| — |
|
|
| — |
|
|
| (182 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 6,246 |
|
|
| — |
|
|
| — |
|
|
| 6,246 |
| ||||||||||||||||||||||||
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 68,748 |
|
|
| — |
|
|
| 68,748 |
| ||||||||||||||||||||||||
Net loss attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (783,672 | ) |
|
| (783,672 | ) | ||||||||||||||||||||||||
Balance at December 31, 2020 |
|
| 88,024 |
|
|
| 880 |
|
|
| 2,580,327 |
|
|
| (371,365 | ) |
|
| (310,386 | ) |
|
| 1,899,456 |
| ||||||||||||||||||||||||
Common stock issued under stock incentive plans |
|
| 705 |
|
|
| 7 |
|
|
| 12,733 |
|
|
| — |
|
|
| — |
|
|
| 12,740 |
| ||||||||||||||||||||||||
Common stock withheld for minimum statutory taxes |
|
| — |
|
|
| — |
|
|
| (4,521 | ) |
|
| — |
|
|
| — |
|
|
| (4,521 | ) | ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 7,034 |
|
|
| — |
|
|
| — |
|
|
| 7,034 |
| ||||||||||||||||||||||||
Other |
|
| — |
|
|
| — |
|
|
| 2,208 |
|
|
| — |
|
|
| — |
|
|
| 2,208 |
| ||||||||||||||||||||||||
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 371,365 |
|
|
| — |
|
|
| 371,365 |
| ||||||||||||||||||||||||
Net income attributable to Acadia Healthcare Company, Inc. |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,717 |
|
|
| 9,717 |
| ||||||||||||||||||||||||
Balance at March 31, 2021 |
|
| 88,729 |
|
|
| 887 |
|
|
| 2,597,781 |
|
|
| — |
|
|
| (300,669 | ) |
|
| 2,297,999 |
|
See accompanying notes.
4
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 34,067 |
|
| $ | 29,511 |
|
| $ | 10,479 |
|
| $ | 34,067 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile net income to net cash provided by continuing operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 41,680 |
|
|
| 40,580 |
|
|
| 24,894 |
|
|
| 22,835 |
|
Amortization of debt issuance costs |
|
| 3,050 |
|
|
| 2,888 |
|
|
| 1,646 |
|
|
| 3,050 |
|
Equity-based compensation expense |
|
| 4,979 |
|
|
| 6,101 |
|
|
| 7,034 |
|
|
| 4,979 |
|
Deferred income taxes |
|
| 11,286 |
|
|
| (666 | ) |
|
| 3,962 |
|
|
| 11,264 |
|
Loss (income) from discontinued operations, net of taxes |
|
| 12,641 |
|
|
| (15,089 | ) | ||||||||
Debt extinguishment costs |
|
| 24,650 |
|
|
| — |
| ||||||||
Other |
|
| (107 | ) |
|
| 2,187 |
|
|
| 1,737 |
|
|
| (108 | ) |
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| (2,828 | ) |
|
| (11,980 | ) |
|
| (2,490 | ) |
|
| (4,214 | ) |
Other current assets |
|
| (19,131 | ) |
|
| (5,875 | ) |
|
| 75 |
|
|
| (18,276 | ) |
Other assets |
|
| (1,096 | ) |
|
| 295 |
|
|
| (3,570 | ) |
|
| (1,561 | ) |
Accounts payable and other accrued liabilities |
|
| (21,755 | ) |
|
| (15,701 | ) |
|
| (3,979 | ) |
|
| (19,115 | ) |
Accrued salaries and benefits |
|
| (6,030 | ) |
|
| (5,849 | ) |
|
| 2,915 |
|
|
| (6,347 | ) |
Other liabilities |
|
| 1,431 |
|
|
| 2,182 |
|
|
| (4,210 | ) |
|
| 5,101 |
|
Net cash provided by continuing operating activities |
|
| 75,784 |
|
|
| 16,586 |
| ||||||||
Net cash provided by discontinued operating activities |
|
| 253 |
|
|
| 28,960 |
| ||||||||
Net cash provided by operating activities |
|
| 45,546 |
|
|
| 43,673 |
|
|
| 76,037 |
|
|
| 45,546 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
| — |
|
|
| (40,400 | ) | ||||||||
Cash paid for capital expenditures |
|
| (69,547 | ) |
|
| (69,248 | ) |
|
| (58,682 | ) |
|
| (58,427 | ) |
Cash paid for real estate acquisitions |
|
| (3,149 | ) |
|
| (1,066 | ) | ||||||||
Proceeds from U.K. Sale |
|
| 1,511,020 |
|
|
| — |
| ||||||||
Settlement of foreign currency derivatives |
|
| (84,795 | ) |
|
| — |
| ||||||||
Proceeds from sale of property and equipment |
|
| 207 |
|
|
| 928 |
|
|
| 134 |
|
|
| 38 |
|
Other |
|
| (1,672 | ) |
|
| (315 | ) |
|
| 926 |
|
|
| (1,671 | ) |
Net cash used in investing activities |
|
| (74,161 | ) |
|
| (110,101 | ) | ||||||||
Net cash provided by (used in) continuing investing activities |
|
| 1,368,603 |
|
|
| (60,060 | ) | ||||||||
Net cash used in discontinued investing activities |
|
| — |
|
|
| (14,101 | ) | ||||||||
Net cash provided by (used in) investing activities |
|
| 1,368,603 |
|
|
| (74,161 | ) | ||||||||
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings on long-term debt |
|
| 425,000 |
|
|
| — |
| ||||||||
Borrowings on revolving credit facility |
|
| — |
|
|
| 71,573 |
|
|
| 430,000 |
|
|
| — |
|
Principal payments on revolving credit facility |
|
| (270,000 | ) |
|
| — |
| ||||||||
Principal payments on long-term debt |
|
| (10,621 | ) |
|
| (8,246 | ) |
|
| — |
|
|
| (10,621 | ) |
Repayment of long-term debt |
|
| (2,224,603 | ) |
|
| — |
| ||||||||
Payment of debt issuance costs |
|
| (9,935 | ) |
|
| — |
| ||||||||
Common stock withheld for minimum statutory taxes, net |
|
| (1,402 | ) |
|
| (1,327 | ) |
|
| 8,219 |
|
|
| (1,402 | ) |
Distributions to noncontrolling interests |
|
| (264 | ) |
|
| — |
|
|
| (377 | ) |
|
| (264 | ) |
Other |
|
| (1,143 | ) |
|
| (3,497 | ) |
|
| (6,793 | ) |
|
| (423 | ) |
Net cash (used in) provided by financing activities |
|
| (13,430 | ) |
|
| 58,503 |
| ||||||||
Net cash used in continuing financing activities |
|
| (1,648,489 | ) |
|
| (12,710 | ) | ||||||||
Net cash used in discontinued financing activities |
|
| — |
|
|
| (720 | ) | ||||||||
Net cash used in financing activities |
|
| (1,648,489 | ) |
|
| (13,430 | ) | ||||||||
Effect of exchange rate changes on cash |
|
| (1,143 | ) |
|
| 1,099 |
|
|
| 4,067 |
|
|
| (1,143 | ) |
Net decrease in cash and cash equivalents, including cash classified within current assets held for sale |
|
| (199,782 | ) |
|
| (43,188 | ) | ||||||||
Less: cash classified within current assets held for sale |
|
| — |
|
|
| (19,592 | ) | ||||||||
Net decrease in cash and cash equivalents |
|
| (43,188 | ) |
|
| (6,826 | ) |
|
| (199,782 | ) |
|
| (62,780 | ) |
Cash and cash equivalents at beginning of the period |
|
| 124,192 |
|
|
| 50,510 |
|
|
| 378,697 |
|
|
| 124,192 |
|
Cash and cash equivalents at end of the period |
| $ | 81,004 |
|
| $ | 43,684 |
|
| $ | 178,915 |
|
| $ | 61,412 |
|
Effect of acquisitions: |
|
|
|
|
|
|
|
| ||||||||
Assets acquired, excluding cash |
| $ | — |
|
| $ | 44,028 |
| ||||||||
Liabilities assumed |
|
| — |
|
|
| (3,628 | ) | ||||||||
Cash paid for acquisitions, net of cash acquired |
| $ | — |
|
| $ | 40,400 |
|
See accompanying notes.
5
Acadia Healthcare Company, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 20202021
(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.”), the United Kingdom (“U.K.”) and Puerto Rico. At March 31, 2020,2021, the Company operated 588228 behavioral healthcare facilities with approximately 18,20010,000 beds in 40 states the U.K. and Puerto Rico.
During 2019,On January 19, 2021, the Company commenced a review of strategic alternatives including those related to its U.K. operations and a potential sale of such operations. In January 2020, the Company launched a formal process regardingcompleted 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. business. Consistent with market practice forSale allowed us to reduce our indebtedness and focus on our U.S. operations. As a result of the U.K. transactions of this nature, and in conjunction with its advisors,Sale, the Company solicitedreported, for all periods presented, results of operations and has received initial, non-binding offers to acquire its U.K. business from multiple bidders. During the first quarter of 2020, the Company began the second phasecash flows of the sale process, during which interested bidders would receive proposed transaction documents and complete their confirmatory due diligence. WhileU.K. operations as discontinued operations in the interest from potential buyers has been strong, given evolving market dynamics related to the novel coronavirus (“COVID-19”) pandemic, the Company temporarily suspended the sale process in mid-March 2020 until market conditions recover.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, 20192020 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, 20192020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2020.26, 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 a limited numbermany 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 ismay adversely impactingimpact the Company’s business and likely will have an impact on its financial results that the Companymanagement is not currently able to quantify. Continued disruptionsDisruptions 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.
6
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
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 August 2018, theDecember 2019, FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)2019-12, "Income Taxes (Topic 740): Customer’sSimplifying the Accounting for Implementation Costs IncurredIncome 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 Cloud Computing Arrangement That Is a Service Contract” (“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 2018-15”). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-402 to determine which implementation costs to capitalize as assets. ASU 2018-152019-12 is effective for fiscal years and interim periods within those years, beginning after December 15, 2019. Early2020. Upon adoption, is permitted.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 2018-152019-12 on January 1, 2020.2021. There is no significant impact onto the Company’s consolidated financial statements.
3. | U.K. Sale |
In June 2016,On January 19, 2021, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): MeasurementCompany completed the U.K. Sale pursuant to a Share Purchase Agreement in which it sold all of Credit Lossesthe 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 Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment methodology with a new methodology that reflects expected credit lossesBritish Pounds (“GBP”) to US Dollars (“USD”) exchange rate, cash retained by the buyer and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted.transaction costs. The Company adopted ASU 2016-13 on January 1, 2020. There is no significant impact onused 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 financialbalance 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
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 |
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 within each of the Company’s segments.
U.S. Facilitiespayor.
The Company’s facilities in the United States (the “U.S. Facilities”) and services provided by the U.S. Facilitiesfacilities 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.
7
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
The table below presents total U.S. revenue attributed to each category (in thousands):
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Acute inpatient psychiatric facilities |
| $ | 239,414 |
|
| $ | 216,597 |
|
| $ | 267,359 |
|
| $ | 239,414 |
|
Specialty treatment facilities |
|
| 193,611 |
|
|
| 193,035 |
|
|
| 211,757 |
|
|
| 193,611 |
|
Residential treatment centers |
|
| 70,434 |
|
|
| 73,224 |
|
|
| 68,649 |
|
|
| 70,434 |
|
Outpatient community-based facilities |
|
| 5,758 |
|
|
| 5,104 |
|
|
| 3,434 |
|
|
| 5,758 |
|
Revenue |
| $ | 509,217 |
|
| $ | 487,960 |
|
| $ | 551,199 |
|
| $ | 509,217 |
|
The Company receives payments from the following sources for services rendered in our U.S. Facilities:facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services (“CMS”);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 U.S. Facilitiesfacilities 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 consolidatingconsolidated statements of income.operations. Bad debt expense for the three months ended March 31, 20202021 and 20192020 was not significant.
The following table presents the Company’s revenue by payor type and as a percentage of revenue in our U.S. Facilities (in thousands):
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||||
Commercial |
| $ | 143,142 |
|
|
| 28.1 | % |
| $ | 139,427 |
|
|
| 28.6 | % |
| $ | 162,702 |
|
|
| 29.5 | % |
| $ | 143,142 |
|
|
| 28.1 | % |
Medicare |
|
| 72,271 |
|
|
| 14.2 | % |
|
| 72,616 |
|
|
| 14.9 | % |
|
| 86,185 |
|
|
| 15.6 | % |
|
| 72,271 |
|
|
| 14.2 | % |
Medicaid |
|
| 260,044 |
|
|
| 51.1 | % |
|
| 239,191 |
|
|
| 49.0 | % |
|
| 274,620 |
|
|
| 49.8 | % |
|
| 260,044 |
|
|
| 51.1 | % |
Self-Pay |
|
| 27,034 |
|
|
| 5.3 | % |
|
| 31,732 |
|
|
| 6.5 | % |
|
| 22,443 |
|
|
| 4.1 | % |
|
| 27,034 |
|
|
| 5.3 | % |
Other |
|
| 6,726 |
|
|
| 1.3 | % |
|
| 4,994 |
|
|
| 1.0 | % |
|
| 5,249 |
|
|
| 1.0 | % |
|
| 6,726 |
|
|
| 1.3 | % |
Revenue |
| $ | 509,217 |
|
|
| 100.0 | % |
| $ | 487,960 |
|
|
| 100.0 | % |
| $ | 551,199 |
|
|
| 100.0 | % |
| $ | 509,217 |
|
|
| 100.0 | % |
U.K. Facilities
The Company’s facilities located in the United Kingdom (the “U.K. Facilities”) and services provided by the U.K. Facilities can generally be classified into the following categories: healthcare facilities; education and children’s services; and adult care facilities.
Healthcare facilities. Healthcare facilities provide psychiatric treatment and nursing for sufferers of mental disorders, including for patients whose risk of harm to others and risk of escape from hospitals cannot be managed safely within other mental health settings. In order to manage the risks involved with treating patients, the facility is managed through the application of a range of security measures depending on the level of dependency and risk exhibited by the patient.
Education and children’s services. Education and children’s services provide specialist education for children and young people with special educational needs, including autism, Asperger’s Syndrome, social, emotional and mental health, and specific learning
8
difficulties, such as dyslexia. The division also offers standalone children’s homes for children that require 52-week residential care to support complex and challenging behavior and fostering services.
Adult care facilities. Adult care focuses on care of individuals with a variety of learning difficulties, mental health illnesses and adult autism spectrum disorders. It also includes long-term, short-term and respite nursing care to high-dependency elderly individuals who are physically frail or suffering from dementia. Care is provided in a number of settings, including in residential care homes and through supported living.
The table below presents total U.K. revenue attributed to each category (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Healthcare facilities |
| $ | 148,137 |
|
| $ | 151,708 |
|
Education and Children’s Services |
|
| 46,666 |
|
|
| 46,122 |
|
Adult Care facilities |
|
| 78,790 |
|
|
| 74,827 |
|
Revenue |
| $ | 273,593 |
|
| $ | 272,657 |
|
On an annual basis, the Company receives payments from approximately 500 public funded sources in the U.K. (including the National Health Service (“NHS”), Clinical Commissioning Groups (“CCGs”) and local authorities in England, Scotland and Wales) and individual patients and clients. The Company determines the transaction price based on established billing rates by payor reduced by implicit price concessions. Implicit price concessions are insignificant in the U.K. Facilities.
The following table presents revenue by payor type and as a percentage of revenue in our U.K. Facilities (in thousands):
|
| Three Months Ended March 31, |
| |||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||
U.K. public funded sources |
| $ | 246,136 |
|
|
| 90.0 | % |
| $ | 245,413 |
|
|
| 90.0 | % |
Self-Pay |
|
| 26,915 |
|
|
| 9.8 | % |
|
| 26,814 |
|
|
| 9.8 | % |
Other |
|
| 542 |
|
|
| 0.2 | % |
|
| 430 |
|
|
| 0.2 | % |
Revenue |
| $ | 273,593 |
|
|
| 100.0 | % |
| $ | 272,657 |
|
|
| 100.0 | % |
The Company’s contractContract liabilities primarily consistconsisted 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 our U.K. Facilities due toApril 2021. Once repayment begins, the timing of payments received mainly in our education and children’s services and healthcare facilities.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 in the U.K. Facilities is as follows (in thousands):
Balance at December 31, 2019 |
| $ | 36,579 |
|
Payments received |
|
| 38,152 |
|
Revenue recognized |
|
| (42,787 | ) |
Foreign currency translation loss |
|
| (1,891 | ) |
Balance at March 31, 2020 |
| $ | 30,053 |
|
Balance at December 31, 2020 |
| $ | 47,196 |
|
Payments received |
|
| 2,436 |
|
Revenue recognized |
|
| (478 | ) |
Balance at March 31, 2021 |
| $ | 49,154 |
|
9
| Earnings Per Share |
The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 20202021 and 20192020 (in thousands, except per share amounts):
|
| Three Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Numerator: |
|
|
|
|
|
|
|
|
Net income attributable to Acadia Healthcare Company, Inc. |
| $ | 33,463 |
|
| $ | 29,471 |
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average shares outstanding for basic earnings per share |
|
| 87,765 |
|
|
| 87,505 |
|
Effect of dilutive instruments |
|
| 206 |
|
|
| 189 |
|
Shares used in computing diluted earnings per common share |
|
| 87,971 |
|
|
| 87,694 |
|
Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders: |
|
|
|
|
|
|
|
|
Basic |
| $ | 0.38 |
|
| $ | 0.34 |
|
Diluted |
| $ | 0.38 |
|
| $ | 0.34 |
|
|
| 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 2.90.7 million and 2.62.9 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, 20202021 and 2019,2020, respectively, because their effect would have been anti-dilutive.
|
|
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.
On April 1, 2019,Other current assets consisted of the Company completed the acquisition of Bradford Recovery Center (“Bradford”), a specialty treatment facility with 46 beds located in Millerton, Pennsylvania, for cash consideration of approximately $4.5 million.
On February 15, 2019, the Company completed the acquisition of Whittier Pavilion (“Whittier”), an inpatient psychiatric facility with 71 beds located in Haverhill, Massachusetts, for cash consideration of approximately $17.9 million. Also on February 15, 2019, the Company completed the acquisition of Mission Treatment (“Mission Treatment”) for cash consideration of approximately $22.5 million. Mission Treatment operates 9 comprehensive treatment centers in California, Nevada, Arizona and Oklahoma.
Transaction-related expenses
Transaction-related expenses primarily relate to termination, restructuring, U.K. sale, strategic review, management transition and other similar costs. Transaction-related expenses for the three months ended March 31, 2020 and 2019 were as followsfollowing (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Termination, restructuring, sale and strategic review costs |
| $ | 2,221 |
|
| $ | 2,282 |
|
Legal, accounting and other acquisition-related costs |
|
| 1,328 |
|
|
| 796 |
|
Management transition costs |
|
| — |
|
|
| 1,243 |
|
|
| $ | 3,549 |
|
| $ | 4,321 |
|
|
| 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
| Property and Equipment |
Property and equipment consisted of the following at March 31, 20202021 and December 31, 20192020 (in thousands):
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Land |
| $ | 429,601 |
|
| $ | 448,716 |
|
| $ | 144,399 |
|
| $ | 144,221 |
|
Building and improvements |
|
| 2,738,302 |
|
|
| 2,746,111 |
|
|
| 1,502,862 |
|
|
| 1,490,149 |
|
Equipment |
|
| 502,246 |
|
|
| 516,769 |
|
|
| 224,755 |
|
|
| 220,690 |
|
Construction in progress |
|
| 229,058 |
|
|
| 254,213 |
|
|
| 255,188 |
|
|
| 217,479 |
|
|
|
| 3,899,207 |
|
|
| 3,965,809 |
|
|
| 2,127,204 |
|
|
| 2,072,539 |
|
Less: accumulated depreciation |
|
| (747,468 | ) |
|
| (741,775 | ) |
|
| (472,472 | ) |
|
| (449,643 | ) |
Property and equipment, net |
| $ | 3,151,739 |
|
| $ | 3,224,034 |
|
| $ | 1,654,732 |
|
| $ | 1,622,896 |
|
The Company has recorded assets held for sale within other assets on the condensed consolidated balance sheets for closed properties being actively marketed of $30.3 million and $31.1 million at March 31, 2020 and December 31, 2019, respectively.
| Other Intangible Assets |
Other identifiable intangible assets and related accumulated amortization consisted of the following at March 31, 20202021 and December 31, 20192020 (in thousands):
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
| ||||||||||||||||||||
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract intangible assets |
| $ | 2,100 |
|
| $ | 2,100 |
|
| $ | (2,100 | ) |
| $ | (2,100 | ) | ||||||||||||||||
Non-compete agreements |
|
| 1,131 |
|
|
| 1,131 |
|
|
| (1,131 | ) |
|
| (1,131 | ) |
| $ | 1,131 |
|
| $ | 1,131 |
|
| $ | (1,131 | ) |
| $ | (1,131 | ) |
|
|
| 3,231 |
|
|
| 3,231 |
|
|
| (3,231 | ) |
|
| (3,231 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets not subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses and accreditations |
|
| 12,429 |
|
|
| 12,455 |
|
|
| — |
|
|
| — |
|
|
| 11,873 |
|
|
| 11,873 |
|
|
| 0 |
|
|
| 0 |
|
Trade names |
|
| 59,532 |
|
|
| 60,831 |
|
|
| — |
|
|
| — |
|
|
| 39,526 |
|
|
| 39,526 |
|
|
| 0 |
|
|
| 0 |
|
Certificates of need |
|
| 17,091 |
|
|
| 17,071 |
|
|
| — |
|
|
| — |
|
|
| 17,228 |
|
|
| 17,136 |
|
|
| 0 |
|
|
| 0 |
|
|
|
| 89,052 |
|
|
| 90,357 |
|
|
| — |
|
|
| — |
|
|
| 68,627 |
|
|
| 68,535 |
|
|
| 0 |
|
|
| 0 |
|
Total |
| $ | 92,283 |
|
| $ | 93,588 |
|
| $ | (3,231 | ) |
| $ | (3,231 | ) |
| $ | 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.
|
|
The Company’s lease portfolio primarily consists of finance and operating real estate leases integral for facility operations. The original termsAs part of the leases typically range from fiveCoronavirus 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, years with optional renewal periods. A minimal portion2020, 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 lease portfolio consistsnew Medicare claims. In August 2020, the Company received approximately $12.8 million of non-real estate leases, including copiers and equipment, which generally have lease termsadditional funds from the PHSSE Fund. In addition, the Company received a 2% increase in facilities’ Medicare reimbursement rate as a result of onethe temporary suspension of Medicare sequestration from May 1, 2020, to three years and have insignificant lease obligations.December 31, 2021.
The Company has electedCARES Act also provides for certain federal income and other tax changes, including an increase in the accounting policy practical expedients by classinterest expense tax deduction limitation and bonus depreciation of underlying asset in ASC 842 “Leases” to:qualified improvement property. Furthermore, under the CARES Act, (i) combine associated leasefor taxable years beginning before 2021, net operating loss (“NOL”) carryforwards and non-lease components into a single lease component;carrybacks may offset 100% of taxable income and (ii) exclude recording short-term leases as right-of-use assetsNOLs arising in 2018, 2019 and liabilities on the condensed consolidated balance sheets. Non-lease components, which are not significant overall, are combined with lease components.
Operating lease liabilities are recorded as the present value of remaining lease payments not yet paid for the lease term discounted using the incremental borrowing rate associated with2020 taxable years may be carried back to each lease. Operating lease right-of-use assets represent operating lease liabilities adjusted for prepayments, accrued lease payments, lease incentives and initial direct costs. Certain of the Company’s leases include renewal or termination options. Calculationpreceding five years to generate a refund. As a result, in 2019 and 2020 the Company received a benefit, in the form of operating lease right-of-use assetsrefunds and liabilities include the initial lease term unless it is reasonably certain a renewal or termination option will be exercised. Variable componentslower future tax payments, of lease payments fluctuating with a future index or rate, as well as those$51.6 million, consisting of $22.8 million related to common area maintenance costs, are not included in determining lease paymentsinterest expense, $20.5 million related to qualified improvement property legislation and are expensed as incurred. Most of the Company’s leases do not contain implicit borrowing rates, and therefore,an $8.3
11
incremental borrowing rates are calculatedmillion 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 information available atrevised guidance in the lease commencement date. Incremental borrowing rates reflect the Company’s estimated interest rates for collateralized borrowings over similar lease terms. Additionally, the Company reviews service agreements for embedded lease and right-of-use assets and liabilities as necessary.
Lease Position
Consolidated Appropriations Act, 2021 enacted in December 2020. The Company recordedcontinues to evaluate its compliance with the following at March 31, 2020terms and December 31, 2019 onconditions to, and the condensed consolidated balance sheetsfinancial 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):
Right-of-Use Assets |
| Balance Sheet Classification |
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Finance lease right-of-use assets |
| Property and equipment, net |
| $ | 43,760 |
|
| $ | 44,370 |
|
Operating lease right-of-use assets |
| Operating lease right-of-use assets |
|
| 476,028 |
|
|
| 501,837 |
|
Total |
|
|
| $ | 519,788 |
|
| $ | 546,207 |
|
|
|
|
|
|
|
|
|
|
|
|
Lease Liabilities |
| Balance Sheet Classification |
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Current: |
|
|
|
|
|
|
|
|
|
|
Finance lease liabilities |
| Other accrued liabilities |
| $ | 6,637 |
|
| $ | 6,819 |
|
Operating lease liabilities |
| Current portion of operating lease liabilities |
|
| 29,671 |
|
|
| 29,140 |
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
Finance lease liabilities |
| Other liabilities |
|
| 43,295 |
|
|
| 43,662 |
|
Operating lease liabilities |
| Operating lease liabilities |
|
| 474,746 |
|
|
| 502,252 |
|
Total |
|
|
| $ | 554,349 |
|
| $ | 581,873 |
|
|
| 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 |
|
Weighted-average remaining lease terms and discount rates were as follows at March 31, 2020 and December 31, 2019:
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Weighted-average remaining lease term (in years): |
|
|
|
|
|
|
|
|
Finance |
| 6.7 |
|
| 6.9 |
| ||
Operating |
|
| 19.0 |
|
| 19.4 |
| |
|
|
|
|
|
|
|
|
|
Weighted-average discount rate: |
|
|
|
|
|
|
|
|
Finance |
|
| 6.4 | % |
|
| 6.4 | % |
Operating |
|
| 6.3 | % |
|
| 6.3 | % |
Lease Costs
The Company recorded
11.Long-Term Debt
Long-term debt consisted of the following lease costs for the three months ended March 31, 2020 and 2019 (in thousands):
| Three Months Ended March 31, |
| |||||
| 2020 |
|
| 2019 |
| ||
Finance lease costs: |
|
|
|
|
|
|
|
Depreciation of leased assets |
| 1,137 |
|
|
| 1,123 |
|
Interest of lease liabilities |
| 997 |
|
|
| 997 |
|
Total finance lease costs | $ | 2,134 |
|
| $ | 2,120 |
|
|
|
|
|
|
|
|
|
Operating lease costs |
| 16,481 |
|
|
| 16,529 |
|
Variable lease costs |
| 1,310 |
|
|
| 886 |
|
Short term lease costs |
| 1,147 |
|
|
| 1,447 |
|
Other lease costs |
| 1,886 |
|
|
| 1,445 |
|
Total rents and leases | $ | 20,824 |
|
| $ | 20,307 |
|
|
|
|
|
|
|
|
|
Total lease costs | $ | 22,958 |
|
| $ | 22,427 |
|
|
| 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
Other
Undiscounted cash flowsNew Credit Facility
The Company entered into a new credit agreement (the “New Credit Facility”) on March 17, 2021. This New Credit Facility provides for financea $600.0 million senior secured revolving credit facility (the “Revolving Facility”) and operating leases recordeda $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 condensed consolidated balance sheets wereterms 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 followsof 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, 2020 (in thousands):2021.
|
| Finance Leases |
|
| Operating Leases |
| ||
For the nine months ending December 31, 2020 |
| $ | 5,549 |
|
| $ | 45,846 |
|
2021 |
|
| 35,726 |
|
|
| 58,023 |
|
2022 |
|
| 2,845 |
|
|
| 52,956 |
|
2023 |
|
| 1,620 |
|
|
| 48,544 |
|
2024 |
|
| 1,027 |
|
|
| 46,312 |
|
Thereafter |
|
| 25,088 |
|
|
| 650,931 |
|
Total minimum lease payments |
|
| 71,855 |
|
|
| 902,612 |
|
Less: amount of lease payments representing interest |
|
| 21,923 |
|
|
| 398,195 |
|
Present value of future minimum lease payments |
|
| 49,932 |
|
|
| 504,417 |
|
Less: Current portion of lease liabilities |
|
| 6,637 |
|
|
| 29,671 |
|
Noncurrent lease liabilities |
| $ | 43,295 |
|
| $ | 474,746 |
|
Supplemental dataThe New Credit Facility requires quarterly term loan principal repayments for the three months endedTerm Loan Facility of $2.7 million for June 30, 2021 to March 31, 20202022, $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 2019the 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 as follows (in thousands):
| Three Months Ended March 31, |
| |||||
| 2020 |
|
| 2019 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
Operating cash flows for operating leases | $ | 15,836 |
|
| $ | 15,809 |
|
Operating cash flows for finance leases | $ | 997 |
|
| $ | 997 |
|
Financing cash flows for finance leases | $ | 878 |
|
| $ | 846 |
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
Operating leases | $ | 6,082 |
|
| $ | 3,662 |
|
Finance leases | $ | 953 |
|
| $ | 1,027 |
|
in compliance with such covenants.
9.Long-Term Debt
Long-term debt consisted of the following (in thousands):
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Amended and Restated Senior Credit Facility: |
|
|
|
|
|
|
|
|
Senior Secured Term A Loan |
| $ | 339,625 |
|
| $ | 346,750 |
|
Senior Secured Term B Loans |
|
| 1,335,432 |
|
|
| 1,338,928 |
|
Senior Secured Revolving Line of Credit |
|
| — |
|
|
| — |
|
6.125% Senior Notes due 2021 |
|
| 150,000 |
|
|
| 150,000 |
|
5.125% Senior Notes due 2022 |
|
| 300,000 |
|
|
| 300,000 |
|
5.625% Senior Notes due 2023 |
|
| 650,000 |
|
|
| 650,000 |
|
6.500% Senior Notes due 2024 |
|
| 390,000 |
|
|
| 390,000 |
|
Other long-term debt |
|
| 4,533 |
|
|
| 4,821 |
|
Less: unamortized debt issuance costs, discount and premium |
|
| (28,698 | ) |
|
| (31,400 | ) |
|
|
| 3,140,892 |
|
|
| 3,149,099 |
|
Less: current portion |
|
| (196,072 | ) |
|
| (43,679 | ) |
Long-term debt |
| $ | 2,944,820 |
|
| $ | 3,105,420 |
|
13
Amended and Restated SeniorPrior 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 an Amended and Restatedthe Prior Credit Agreement (the “Amended and Restated Credit Agreement”)Facility which amended and restated the Senior Secured Credit Facility (the “Amended and Restated Senior Credit Facility”).Facility. The Company has amended the Amended and RestatedPrior Credit AgreementFacility from time to time as described in the Company’s prior filings with the SEC.
On February 6, 2019, the Company entered into the Eleventh Amendment (the “Eleventh Amendment”) to the Amended and Restated Credit Agreement. The Eleventh Amendment, among other things, amended the definition of “Consolidated EBITDA” to remove the cap on non-cash charges, losses and expenses related to the impairment of goodwill, which in turn provided increased flexibility to the Company in terms of the Company’s financial covenants.
On February 27, 2019, the Company entered into the Twelfth Amendment (the “Twelfth Amendment”) to the Amended and Restated Credit Agreement. The Twelfth Amendment, among other things, modified certain definitions, including “Consolidated EBITDA”, and increased our permitted Maximum Consolidated Leverage Ratio, thereby providing increased flexibility to the Company in terms of the Company’s financial covenants.
On April 21, 2020, the Company entered into the Thirteenth Amendment (the “Thirteenth Amendment”) to the Amended and RestatedPrior Credit Agreement.Facility. The Thirteenth Amendment amended the Consolidated Leverage Ratio in the existingprior covenant to increase thesuch leverage ratio for the rest of 2020.
The Company had $485.0 million of availability under the revolving line of credit and had standby letters of credit outstanding of $15.0 million related to security for the payment of claims required by its workers’ compensation insurance program at March 31, 2020. In early AprilOn November 13, 2020, the Company borrowed $100.0 million onentered into the revolving line of credit to enhance its cash position in responseFourth Repricing Facilities Amendment (the “Fourth Repricing Facilities Amendment”) to the potential impact of COVID-19 on the Company’s future liquidity. Borrowings under the revolving line of credit are subject to customary conditions precedent to borrowing.
Prior Credit Facility. The Amended and Restated Credit Agreement requires quarterly term loan principal repayments of our Term Loan A facility (“TLA Facility”) of $7.1 million for June 30, 2020 to December 31, 2020, and $9.5 million for March 31, 2021 to September 30, 2021, with the remaining principal balance of the TLA Facility due onFourth Repricing Facilities Amendment extended the maturity date of November 30, 2021. The Company is required to repay the Term Loan B facility Tranche B-3 (the “Tranche B-3 Facility”) in equal quarterly installments of $1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-3 Facility of $447.3 million due on February 11, 2022. The Company is required to repay the Term Loan B facility Tranche B-4 (the “Tranche B-4 Facility”) in equal quarterly installments of approximately $2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-4 Facility of $854.4 million due on February 16, 2023.
Borrowings under the Amended and Restated Senior Credit Facility are guaranteed by each of the Company’s wholly-owned domestic subsidiaries (other than certain excluded subsidiaries) and are secured by a lien on substantially all of the assets of the Company and such subsidiaries. Borrowings with respect to the TLA Facility and the Company’s revolving credit facility (collectively, “Pro Rata Facilities”) under the Amended and Restated Credit Agreement bear interest at a rate tied to Acadia’s Consolidated Leverage Ratio (defined as consolidated funded debt net of up to $50.0 million of unrestricted and unencumbered cash to consolidated EBITDA, in each case as defined in the Amended and Restated Credit Agreement). The Applicable Rate (as defined in the Amended and Restated Credit Agreement) for the Pro Rata Facilities was 2.50% for Eurodollar Rate Loans (as defined in the Amended and Restated Credit Agreement) and 1.50% for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) at March 31, 2020. Eurodollar Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) (based upon the LIBOR Rate (as defined in the Amended and Restated Credit Agreement) prior to commencement of the interest rate period). Base Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.00%. At March 31, 2020, the Pro Rata Facilities bore interest at a rate of LIBOR plus 2.50%. In addition, the Company is required to pay a commitment fee on undrawn amounts under the revolving line of credit.
Eurodollar Rate Loans with respect to the Tranche B-3 Facility bear interest at the Tranche B-3 Facility Applicable Rate (as defined below) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period). Base Rate Loans bear interest at the Tranche B-3 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Tranche B-3 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%. The Tranche B-4 Facility bears interest as follows: Eurodollar Rate Loans bear interest at the Applicable Rate (as defined in the Amended and Restated Credit Agreement) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the
1413
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 period)margin applicable to both facilities remained unchanged from the prior facilities, and Base Rate Loans bear interest at the Applicable Rate pluscommitment fee applicable to the highestnew revolving line of (i)credit also remained unchanged from the federal funds rate plus 0.50%, (ii)prior revolving line of credit. In connection with the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%.
The Amended and Restated Credit Agreement requiresFourth Repricing Facilities Amendment, the Company recorded a debt extinguishment charge of $1.0 million, including the write-off of discount and its subsidiariesdeferred 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 comply with customary affirmative, negative and financial covenants, including a fixed charge coverage ratio, consolidated leverage ratio and senior secured leverage ratio. The Company may be required to pay allrepay the outstanding balances of $311.7 million of its indebtedness immediately if it defaults on anyTLA Facility and $767.9 million of its Tranche B-4 Facility of the numerous financial or other restrictive covenants contained in any of its material debt agreements.Prior Credit Facility. At March 31, 2020,2021, 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 compliance with such covenants.debt extinguishment costs in the condensed consolidated statements of operations.
Senior Notes
6.125%5.500% Senior Notes due 20212028
On March 12, 2013,June 24, 2020, the Company issued $150.0$450.0 million of 6.125%5.500% Senior Notes due 20212028 (the “6.125%“5.500% Senior Notes”). The 6.125%5.500% Senior Notes mature on March 15, 2021July 1, 2028 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. At March 31, 2020, the 6.125% Senior Notes are included in current portion of debt on the condensed consolidated balance sheet.
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%5.500% per annum, payable semi-annually in arrears on January 1 and July 1 of each year.year, commencing on January 1, 2021.
5.625%5.000% Senior Notes due 20232029
On February 11, 2015,October 14, 2020, the Company issued $375.0$475.0 million of 5.625%5.000% Senior Notes due 20232029 (the “5.625%“5.000% 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%5.000% Senior Notes mature on FebruaryApril 15, 20232029 and bear interest at a rate of 5.625%5.000% per annum, payable semi-annually in arrears on FebruaryApril 15 and AugustOctober 15 of each year.
6.500%year, commencing on April 15, 2021. The Company used the net proceeds of the 5.000% Senior Notes due 2024
On February 16, 2016,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 issued $390.0recorded a debt extinguishment charge of $2.9 million, including the write-off of 6.500% Senior Notes due 2024 (the “6.500% Senior Notes”). The 6.500% Senior Notes mature on March 1, 2024discount and bear interest at a ratedeferred financing costs of 6.500% per annum, payable semi-annuallythe Tranche B-3 Facility, which was recorded in arrears on March 1 and September 1debt extinguishment costs in the consolidated statements of eachoperations for the year beginning on September 1, 2016.ended December 31, 2020.
The indentures governing the 6.125% Senior Notes, 5.125% Senior Notes, 5.625%5.500% Senior Notes and 6.500%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 Amended and Restated SeniorNew Credit Facility.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
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.
| 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 6 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
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 6 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
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, 2020,2021, 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
15
which 1,024,052442,139 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 $5.0$7.0 million and $6.1$5.0 million in equity-based compensation expense for the three months ended March 31, 20202021 and 2019,2020, respectively. At March 31, 2020,2021, there was $50.8$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 1.51.6 years.
At March 31, 2020, there were 0 warrants outstanding and exercisable. The Company recognized a deferred income tax benefit of $1.3$1.8 million and $1.6$1.3 million for the three months ended March 31, 20202021 and 2019,2020, respectively, related to equity-based compensation expense.
Stock Options
Stock option activity during 20192020 and 20202021 was as follows (aggregate intrinsic value in thousands):follows:
|
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term (in years) |
|
| Aggregate Intrinsic Value |
|
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term (in years) |
|
| Aggregate Intrinsic Value (in thousands) |
| ||||||||
Options outstanding at January 1, 2019 |
|
| 1,199,540 |
|
| $ | 44.64 |
|
|
| 7.26 |
|
| $ | 2,717 |
| ||||||||||||||||
Options outstanding at January 1, 2020 |
|
| 1,360,068 |
|
| $ | 39.40 |
|
|
| 7.57 |
|
| $ | 1,650 |
| ||||||||||||||||
Options granted |
|
| 605,200 |
|
|
| 28.50 |
|
|
| 9.21 |
|
|
| 1,343 |
|
|
| 507,600 |
|
|
| 33.13 |
|
|
| 9.18 |
|
|
| 157 |
|
Options exercised |
|
| (55,671 | ) |
|
| 19.05 |
|
| N/A |
|
|
| 658 |
|
|
| (68,700 | ) |
|
| 29.15 |
|
| N/A |
|
|
| 854 |
| ||
Options cancelled |
|
| (389,001 | ) |
|
| 40.84 |
|
| N/A |
|
| N/A |
|
|
| (288,662 | ) |
|
| 39.67 |
|
| N/A |
|
| N/A |
| ||||
Options outstanding at December 31, 2019 |
|
| 1,360,068 |
|
|
| 39.40 |
|
|
| 7.57 |
|
|
| 1,650 |
| ||||||||||||||||
Options outstanding at December 31, 2020 |
|
| 1,510,306 |
|
|
| 37.56 |
|
|
| 7.35 |
|
|
| 1,414 |
| ||||||||||||||||
Options granted |
|
| 443,200 |
|
|
| 33.72 |
|
|
| 9.91 |
|
|
| — |
|
|
| 282,320 |
|
|
| 57.14 |
|
|
| 10.01 |
|
|
| — |
|
Options exercised |
|
| — |
|
|
| — |
|
| N/A |
|
|
| — |
|
|
| (352,297 | ) |
|
| 36.16 |
|
| N/A |
|
|
| 7,300 |
| ||
Options cancelled |
|
| (105,462 | ) |
|
| 41.00 |
|
| N/A |
|
| N/A |
|
|
| (34,725 | ) |
|
| 37.44 |
|
| N/A |
|
| N/A |
| ||||
Options outstanding at March 31, 2020 |
|
| 1,697,806 |
|
| $ | 37.81 |
|
|
| 7.97 |
|
| $ | 659 |
| ||||||||||||||||
Options exercisable at December 31, 2019 |
|
| 513,290 |
|
| $ | 48.08 |
|
|
| 5.88 |
|
| $ | 512 |
| ||||||||||||||||
Options exercisable at March 31, 2020 |
|
| 702,956 |
|
| $ | 44.08 |
|
|
| 6.36 |
|
| $ | 479 |
| ||||||||||||||||
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
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, 20202021 and year ended December 31, 2019:2020:
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Weighted average grant-date fair value of options |
| $ | 12.29 |
|
| $ | 17.59 |
|
| $ | 26.53 |
|
| $ | 12.37 |
|
Risk-free interest rate |
|
| 1.6 | % |
|
| 2.4 | % |
|
| 2.3 | % |
|
| 1.6 | % |
Expected volatility |
|
| 39 | % |
|
| 38 | % |
|
| 51 | % |
|
| 41 | % |
Expected life (in years) |
|
| 5.0 |
|
|
| 5.0 |
|
|
| 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.
16
Other Stock-Based Awards
Restricted stock activity during 20192020 and 20202021 was as follows:
|
| Number of Shares |
|
| Weighted Average Grant-Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant-Date Fair Value |
| ||||
Unvested at January 1, 2019 |
|
| 805,057 |
|
| $ | 42.40 |
| ||||||||
Unvested at January 1, 2020 |
|
| 805,136 |
|
| $ | 34.14 |
| ||||||||
Granted |
|
| 700,937 |
|
|
| 28.77 |
|
|
| 637,312 |
|
|
| 25.82 |
|
Cancelled |
|
| (389,684 | ) |
|
| 33.50 |
|
|
| (129,683 | ) |
|
| 34.56 |
|
Vested |
|
| (311,174 | ) |
|
| 44.23 |
|
|
| (289,769 | ) |
|
| 35.88 |
|
Unvested at December 31, 2019 |
|
| 805,136 |
|
| $ | 34.14 |
| ||||||||
Unvested at December 31, 2020 |
|
| 1,022,996 |
|
| $ | 28.41 |
| ||||||||
Granted |
|
| 511,006 |
|
|
| 25.37 |
|
|
| 242,900 |
|
|
| 55.97 |
|
Cancelled |
|
| (57,782 | ) |
|
| 35.55 |
|
|
| (15,675 | ) |
|
| 32.50 |
|
Vested |
|
| (160,398 | ) |
|
| 36.73 |
|
|
| (269,733 | ) |
|
| 29.33 |
|
Unvested at March 31, 2020 |
|
| 1,097,962 |
|
| $ | 29.61 |
| ||||||||
Unvested at March 31, 2021 |
|
| 980,488 |
|
| $ | 34.92 |
|
Restricted stock unit activity during 20192020 and 20202021 was as follows:
|
| Number of Units |
|
| Weighted Average Grant-Date Fair Value |
|
| Number of Units |
|
| Weighted Average Grant-Date Fair Value |
| ||||
Unvested at January 1, 2019 |
|
| 484,111 |
|
| $ | 44.52 |
| ||||||||
Unvested at January 1, 2020 |
|
| 447,357 |
|
| $ | 38.89 |
| ||||||||
Granted |
|
| 234,408 |
|
|
| 34.54 |
|
|
| 583,680 |
|
|
| 10.60 |
|
Performance adjustment |
|
| 117,772 |
|
|
| 13.50 |
| ||||||||
Cancelled |
|
| (271,162 | ) |
|
| 45.17 |
|
|
| (63,056 | ) |
|
| 43.35 |
|
Vested |
|
| — |
|
|
| — |
|
|
| (12,691 | ) |
|
| 42.09 |
|
Unvested at December 31, 2019 |
|
| 447,357 |
|
| $ | 38.89 |
| ||||||||
Unvested at December 31, 2020 |
|
| 1,073,062 |
|
| $ | 20.15 |
| ||||||||
Granted |
|
| 583,680 |
|
|
| 10.60 |
|
|
| — |
|
|
| — |
|
Performance adjustment |
|
| 120,919 |
|
|
| 19.48 |
| ||||||||
Cancelled |
|
| (10,123 | ) |
|
| 42.09 |
|
|
| — |
|
|
| — |
|
Vested |
|
| (12,691 | ) |
|
| 42.09 |
|
|
| (184,051 | ) |
|
| 42.30 |
|
Unvested at March 31, 2020 |
|
| 1,008,223 |
|
| $ | 22.44 |
| ||||||||
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
share. Additionally, the number of shares issuable pursuant to restricted stock units granted during 20202021 and 20192020 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 20202021 and 20192020 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.
| Acquisitions |
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 |
|
17. | Income Taxes |
The provision for income taxes for the three months ended March 31, 20202021 and 20192020 reflects effective tax rates of 14.5%21.2% and 20.0%23.4%, respectively. The decrease in the effective tax rate for the three months ended March 31, 20202021 was primarily attributable to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The Company recorded a discrete benefit during the three
17
months ended March 31, 2020 resulting from a change in the Company’s valuation allowancepermanent deduction related to a decrease in the deferred tax asset on carried forward interest.equity-based compensation.
As we continuethe 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.
|
|
The Company periodically enters into foreign currency forward contracts 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 U.S. Dollars (“USD”) and British Pounds (“GBP”) associated with cash transfers.
In May 2016, the Company 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 thereafter, to fixed-rate GBP-denominated debt of £449.3 million. In August 2019, the Company terminated its existing net investment cross currency swap derivatives of $105.0 million. Cash received from the termination of the cross currency swap derivatives was included in investing activities in the condensed consolidated statement of cash flows. The related gain from this termination was included in accumulated other comprehensive loss in accordance with ASC 815-30-40-1.
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 will receive semi-annual interest payments in USD from the counterparties at fixed interest rates, and the Company will make semi-annual interest payments in GBP to the counterparties at fixed interest rates. The interest payments under the cross-currency swap agreements result in £25.4 million of annual cash flows from the Company’s U.K. business being converted to $35.8 million.
The Company has designated the cross currency swap agreements and forward contracts entered into during 2019 and the three months ended March 31, 2020 as qualifying hedging instruments and is accounting for these derivatives as net investment hedges. The fair values of these derivatives at March 31, 2020 and December 31, 2019 of $(9.0) million and $(68.9) million, respectively, are recorded as derivative instrument liabilities on the condensed consolidated balance sheets. During the three months ended March 31, 2020, the Company elected the spot method for recording its net investment hedges. Gains and losses resulting from the settlement of the excluded components are recorded in interest expense on the condensed consolidated statements of income. Gains and losses resulting from fair value adjustments to the cross currency swap agreements are recorded in accumulated other comprehensive loss as the swaps are effective in hedging the designated risk. Cash flows related to the cross currency swap derivatives are included in operating activities in the condensed consolidated statements of cash flows.
| 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 Amended and Restated SeniorNew Credit Facility, 6.125% Senior Notes, 5.125% Senior Notes,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, 20202021 and December 31, 20192020 were as follows (in thousands):
|
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
| ||||||||||||||||||||
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| March 31, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||
Amended and Restated Senior Credit Facility |
| $ | 1,659,098 |
|
| $ | 1,668,062 |
|
| $ | 1,659,098 |
|
| $ | 1,668,062 |
| ||||||||||||||||
6.125% Senior Notes due 2021 |
| $ | 149,409 |
|
| $ | 149,254 |
|
| $ | 144,927 |
|
| $ | 149,441 |
| ||||||||||||||||
5.125% Senior Notes due 2022 |
| $ | 297,973 |
|
| $ | 297,761 |
|
| $ | 283,998 |
|
| $ | 299,994 |
| ||||||||||||||||
New Credit Facility |
| $ | 581,075 |
|
| $ | — |
|
| $ | 581,075 |
|
| $ | — |
| ||||||||||||||||
Prior Credit Facility |
| $ | — |
|
| $ | 1,175,437 |
|
| $ | — |
|
| $ | 1,175,437 |
| ||||||||||||||||
5.625% Senior Notes due 2023 |
| $ | 645,156 |
|
| $ | 644,771 |
|
| $ | 607,995 |
|
| $ | 655,249 |
|
| $ | — |
|
| $ | 646,344 |
|
| $ | — |
|
| $ | 647,960 |
|
6.500% Senior Notes due 2024 |
| $ | 384,723 |
|
| $ | 384,430 |
|
| $ | 374,143 |
|
| $ | 398,366 |
|
| $ | — |
|
| $ | 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 |
| $ | 4,533 |
|
| $ | 4,821 |
|
| $ | 4,533 |
|
| $ | 4,821 |
|
| $ | 3,319 |
|
| $ | 3,625 |
|
| $ | 3,319 |
|
| $ | 3,625 |
|
Derivative instrument liabilities |
| $ | (9,015 | ) |
| $ | (68,915 | ) |
| $ | (9,015 | ) |
| $ | (68,915 | ) |
| $ | — |
|
| $ | 84,584 |
|
| $ | — |
|
| $ | 84,584 |
|
18
The Company’s Amended and Restated SeniorNew Credit Facility, 6.125% Senior Notes, 5.125% Senior Notes,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
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. |
|
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 consolidatedconsolidated. 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 ordered stayed pending a ruling on the motion to dismiss that was filedcurrent officers and directors in the lawsuit styled St. Clair CountyPfenning v. Acadia HealthcareJacobs, et al., case described above.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;
19
(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). At this time, we are unableDuring the second quarter of 2020, the Company recorded approximately $4.0 million to quantify any potential liabilitytransaction-related expenses in connection with this litigation because the cases are in their early stages. condensed consolidated statements of operations based on the Company’s expected settlement and legal fees.
20
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 Office of Inspector GeneralOIG 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.
|
|
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, 2020, the Company operated 5 facilities through non-wholly owned subsidiaries and owns between 60% and 86% of the equity interests, 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, 2019 |
| $ | 33,151 |
|
Net income attributable to noncontrolling interests |
|
| 604 |
|
Dividend payments to noncontrolling interests |
|
| (264 | ) |
Balance at March 31, 2020 |
| $ | 33,491 |
|
|
|
Other current assets consisted of the following (in thousands):
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Prepaid expenses |
| $ | 22,161 |
|
| $ | 23,708 |
|
Cost report receivable |
|
| 14,402 |
|
|
| 13,723 |
|
Other receivables |
|
| 14,257 |
|
|
| 16,097 |
|
Workers’ compensation deposits – current portion |
|
| 10,000 |
|
|
| 10,000 |
|
Income taxes receivable |
|
| 9,358 |
|
|
| 5,579 |
|
Insurance receivable – current portion |
|
| 5,739 |
|
|
| 3,030 |
|
Inventory |
|
| 4,882 |
|
|
| 4,759 |
|
Other |
|
| 1,644 |
|
|
| 1,348 |
|
Other current assets |
| $ | 82,443 |
|
| $ | 78,244 |
|
20
|
|
Other accrued liabilities consisted of the following (in thousands):
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Accrued expenses |
| $ | 41,131 |
|
| $ | 50,614 |
|
Unearned income |
|
| 31,631 |
|
|
| 38,475 |
|
Accrued interest |
|
| 11,660 |
|
|
| 33,323 |
|
Finance lease liabilities |
|
| 6,637 |
|
|
| 6,819 |
|
Insurance liability – current portion |
|
| 4,731 |
|
|
| 4,731 |
|
Accrued property taxes |
|
| 4,222 |
|
|
| 4,755 |
|
Other |
|
| 4,346 |
|
|
| 2,443 |
|
Other accrued liabilities |
| $ | 104,358 |
|
| $ | 141,160 |
|
|
|
The Company operatesentered into foreign currency forward contracts during the year ended December 31, 2020 in one lineconnection with certain transfers of business, which is operating acute inpatient psychiatric facilities, specialty treatment facilities, residential treatment centerscash between the U.S. and facilities providing outpatient behavioral healthcare services. AsU.K. under the Company’s cash management reviewsand foreign currency risk management programs. Foreign currency forward contracts limit the operating resultseconomic 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 U.S. Facilitiesfixed-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 its U.K. Facilities separatelythe Company made semi-annual interest payments in GBP to assess performance and make decisions,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 operating segments include our U.S. FacilitiesU.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 U.K. Facilities. At Marchoutstanding 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 U.S. Facilities segment included 228 behavioral healthcare facilities with approximately 9,600 beds in 40 states and Puerto Rico, andnet proceeds received from the U.K. Facilities segment included 360 behavioral healthcare facilities with approximately 8,700 bedsSale in the U.K.condensed consolidated statement of cash flows.
The following tables set forthCompany designated the financial information bycross 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 segment, including a reconciliationactivities in the condensed consolidated statements of Segment EBITDA to income before income taxes (in thousands):cash flows.
|
| Three Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Revenue: |
|
|
|
|
|
|
|
|
U.S. Facilities |
| $ | 509,217 |
|
| $ | 487,960 |
|
U.K. Facilities |
|
| 273,593 |
|
|
| 272,657 |
|
Corporate and Other |
|
| — |
|
|
| — |
|
|
| $ | 782,810 |
|
| $ | 760,617 |
|
Segment EBITDA (1): |
|
|
|
|
|
|
|
|
U.S. Facilities |
| $ | 120,074 |
|
| $ | 119,008 |
|
U.K. Facilities |
|
| 36,168 |
|
|
| 40,056 |
|
Corporate and Other |
|
| (23,393 | ) |
|
| (23,061 | ) |
|
| $ | 132,849 |
|
| $ | 136,003 |
|
|
| Three Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Segment EBITDA (1) |
| $ | 132,849 |
|
| $ | 136,003 |
|
Less: |
|
|
|
|
|
|
|
|
Equity-based compensation expense |
|
| (4,979 | ) |
|
| (6,101 | ) |
Transaction-related expenses |
|
| (3,549 | ) |
|
| (4,321 | ) |
Interest expense, net |
|
| (42,785 | ) |
|
| (48,130 | ) |
Depreciation and amortization |
|
| (41,680 | ) |
|
| (40,580 | ) |
Income before income taxes |
| $ | 39,856 |
|
| $ | 36,871 |
|
21
|
| U.S. Facilities |
|
| U.K. Facilities |
|
| Corporate and Other |
|
| Consolidated |
| ||||
Goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
| $ | 2,085,104 |
|
| $ | 689,902 |
|
| $ | — |
|
| $ | 2,775,006 |
|
Accumulated impairment loss |
|
| — |
|
|
| (325,875 | ) |
|
| — |
|
|
| (325,875 | ) |
Net goodwill at January 1, 2020 |
|
| 2,085,104 |
|
|
| 364,027 |
|
|
| — |
|
|
| 2,449,131 |
|
Prior period purchase price adjustments |
|
| (13 | ) |
|
| — |
|
|
| — |
|
|
| (13 | ) |
Foreign currency translation gain |
|
| — |
|
|
| (22,418 | ) |
|
| — |
|
|
| (22,418 | ) |
Balance at March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 2,085,091 |
|
|
| 667,484 |
|
|
| — |
|
|
| 2,752,575 |
|
Accumulated impairment loss |
|
| — |
|
|
| (325,875 | ) |
|
| — |
|
|
| (325,875 | ) |
Net goodwill at March 31, 2020 |
| $ | 2,085,091 |
|
| $ | 341,609 |
|
| $ | — |
|
| $ | 2,426,700 |
|
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Assets (2): |
|
|
|
|
|
|
|
|
U.S. Facilities |
| $ | 4,083,825 |
|
| $ | 4,037,968 |
|
U.K. Facilities |
|
| 2,443,498 |
|
|
| 2,610,357 |
|
Corporate and Other |
|
| 190,672 |
|
|
| 230,817 |
|
|
| $ | 6,717,995 |
|
| $ | 6,879,142 |
|
|
|
|
|
|
|
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, 2019 |
| $ | (434,633 | ) |
| $ | 24,958 |
|
| $ | (5,209 | ) |
| $ | (414,884 | ) | |
Foreign currency translation (loss) gain |
|
| (122,321 | ) |
|
| — |
|
|
| 321 |
|
|
| (122,000 | ) | |
Gain on derivative instruments, net of tax of $16.3 million |
|
| — |
|
|
| 43,746 |
|
|
| — |
|
|
| 43,746 |
| |
Balance at March 31, 2020 |
| $ | (556,954 | ) |
| $ | 68,704 |
|
| $ | (4,888 | ) |
| $ | (493,138 | ) |
22
| Financial Information for the Company and Its Subsidiaries |
The Company conducts substantially all of its business through its subsidiaries. The 6.125% Senior Notes, 5.125% Senior Notes, 5.625%5.500% Senior Notes and 6.500%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 AmendedNew Credit Facility. The 5.625% Senior Notes, 6.500% Senior Notes, 5.500% Senior Notes and Restated5.000% 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 consolidating financial information for Acadia Healthcare Company, Inc. and the Company and its subsidiariescombined wholly-owned subsidiary guarantors at March 31, 20202021 and December 31, 2019,2020, and for the three months ended March 31, 2020 and 2019. The2021.
Summarized balance sheet information segregates the parent company (Acadia Healthcare Company, Inc.), the combined wholly-owned subsidiary guarantors, the combined non-guarantor subsidiaries and eliminations.
Acadia Healthcare Company, Inc.
Condensed Consolidating Balance Sheets
March 31, 2020
(In(in thousands)
:
|
| Parent |
|
| Combined Subsidiary Guarantors |
|
| Combined Non- Guarantors |
|
| Consolidating Adjustments |
|
| Total Consolidated Amounts |
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | — |
|
| $ | 51,340 |
|
| $ | 29,664 |
|
| $ | — |
|
| $ | 81,004 |
|
Accounts receivable, net |
|
| — |
|
|
| 272,098 |
|
|
| 67,407 |
|
|
| — |
|
|
| 339,505 |
|
Other current assets |
|
| — |
|
|
| 65,346 |
|
|
| 17,097 |
|
|
| — |
|
|
| 82,443 |
|
Total current assets |
|
| — |
|
|
| 388,784 |
|
|
| 114,168 |
|
|
| — |
|
|
| 502,952 |
|
Property and equipment, net |
|
| — |
|
|
| 1,348,045 |
|
|
| 1,803,694 |
|
|
| — |
|
|
| 3,151,739 |
|
Goodwill |
|
| — |
|
|
| 1,992,332 |
|
|
| 434,368 |
|
|
| — |
|
|
| 2,426,700 |
|
Intangible assets, net |
|
| — |
|
|
| 58,312 |
|
|
| 30,740 |
|
|
| — |
|
|
| 89,052 |
|
Deferred tax assets |
|
| 1,303 |
|
|
| — |
|
|
| 3,307 |
|
|
| (1,303 | ) |
|
| 3,307 |
|
Investment in subsidiaries |
|
| 5,390,417 |
|
|
| — |
|
|
| — |
|
|
| (5,390,417 | ) |
|
| — |
|
Operating lease right-of-use assets |
|
| — |
|
|
| 98,166 |
|
|
| 377,862 |
|
|
| — |
|
|
| 476,028 |
|
Other assets |
|
| 234,014 |
|
|
| 48,597 |
|
|
| 12,214 |
|
|
| (226,608 | ) |
|
| 68,217 |
|
Total assets |
| $ | 5,625,734 |
|
| $ | 3,934,236 |
|
| $ | 2,776,353 |
|
| $ | (5,618,328 | ) |
| $ | 6,717,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
| $ | 196,072 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 196,072 |
|
Accounts payable |
|
| — |
|
|
| 97,196 |
|
|
| 37,497 |
|
|
| — |
|
|
| 134,693 |
|
Accrued salaries and benefits |
|
| — |
|
|
| 82,072 |
|
|
| 32,718 |
|
|
| — |
|
|
| 114,790 |
|
Current portion of operating lease liabilities |
|
| — |
|
|
| 18,571 |
|
|
| 11,100 |
|
|
| — |
|
|
| 29,671 |
|
Other accrued liabilities |
|
| 11,660 |
|
|
| 26,021 |
|
|
| 66,677 |
|
|
| — |
|
|
| 104,358 |
|
Total current liabilities |
|
| 207,732 |
|
|
| 223,860 |
|
|
| 147,992 |
|
|
| — |
|
|
| 579,584 |
|
Long-term debt |
|
| 2,944,820 |
|
|
| — |
|
|
| 226,608 |
|
|
| (226,608 | ) |
|
| 2,944,820 |
|
Deferred tax liabilities |
|
| — |
|
|
| 41,087 |
|
|
| 45,621 |
|
|
| (1,303 | ) |
|
| 85,405 |
|
Operating lease liabilities |
|
| — |
|
|
| 85,577 |
|
|
| 389,169 |
|
|
| — |
|
|
| 474,746 |
|
Derivative instrument liabilities |
|
| 9,015 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,015 |
|
Other liabilities |
|
| — |
|
|
| 110,923 |
|
|
| 15,844 |
|
|
| — |
|
|
| 126,767 |
|
Total liabilities |
|
| 3,161,567 |
|
|
| 461,447 |
|
|
| 825,234 |
|
|
| (227,911 | ) |
|
| 4,220,337 |
|
Redeemable noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 33,491 |
|
|
| — |
|
|
| 33,491 |
|
Total equity |
|
| 2,464,167 |
|
|
| 3,472,789 |
|
|
| 1,917,628 |
|
|
| (5,390,417 | ) |
|
| 2,464,167 |
|
Total liabilities and equity |
| $ | 5,625,734 |
|
| $ | 3,934,236 |
|
| $ | 2,776,353 |
|
| $ | (5,618,328 | ) |
| $ | 6,717,995 |
|
|
| 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 |
|
23
Acadia Healthcare Company, Inc.
Condensed Consolidating Balance Sheets
December 31, 2019
(In thousands)
|
| Parent |
|
| Combined Subsidiary Guarantors |
|
| Combined Non- Guarantors |
|
| Consolidating Adjustments |
|
| Total Consolidated Amounts |
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | — |
|
| $ | 98,943 |
|
| $ | 25,249 |
|
| $ | — |
|
| $ | 124,192 |
|
Accounts receivable, net |
|
| — |
|
|
| 266,864 |
|
|
| 72,911 |
|
|
| — |
|
|
| 339,775 |
|
Other current assets |
|
| — |
|
|
| 61,508 |
|
|
| 16,736 |
|
|
| — |
|
|
| 78,244 |
|
Total current assets |
|
| — |
|
|
| 427,315 |
|
|
| 114,896 |
|
|
| — |
|
|
| 542,211 |
|
Property and equipment, net |
|
| — |
|
|
| 1,313,830 |
|
|
| 1,910,204 |
|
|
| — |
|
|
| 3,224,034 |
|
Goodwill |
|
| — |
|
|
| 1,992,344 |
|
|
| 456,787 |
|
|
| — |
|
|
| 2,449,131 |
|
Intangible assets, net |
|
| — |
|
|
| 58,291 |
|
|
| 32,066 |
|
|
| — |
|
|
| 90,357 |
|
Deferred tax assets – noncurrent |
|
| 1,403 |
|
|
| — |
|
|
| 3,339 |
|
|
| (1,403 | ) |
|
| 3,339 |
|
Operating lease right-of-use assets |
|
| — |
|
|
| 97,396 |
|
|
| 404,441 |
|
|
| — |
|
|
| 501,837 |
|
Investment in subsidiaries |
|
| 5,521,340 |
|
|
| — |
|
|
| — |
|
|
| (5,521,340 | ) |
|
| — |
|
Other assets |
|
| 233,975 |
|
|
| 48,949 |
|
|
| 13,127 |
|
|
| (227,818 | ) |
|
| 68,233 |
|
Total assets |
| $ | 5,756,718 |
|
| $ | 3,938,125 |
|
| $ | 2,934,860 |
|
| $ | (5,750,561 | ) |
| $ | 6,879,142 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
| $ | 43,679 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 43,679 |
|
Accounts payable |
|
| — |
|
|
| 87,165 |
|
|
| 39,880 |
|
|
| — |
|
|
| 127,045 |
|
Accrued salaries and benefits |
|
| — |
|
|
| 89,483 |
|
|
| 33,069 |
|
|
| — |
|
|
| 122,552 |
|
Current portion of operating lease liabilities |
|
| — |
|
|
| 17,967 |
|
|
| 11,173 |
|
|
| — |
|
|
| 29,140 |
|
Other accrued liabilities |
|
| 33,323 |
|
|
| 22,672 |
|
|
| 85,165 |
|
|
| — |
|
|
| 141,160 |
|
Total current liabilities |
|
| 77,002 |
|
|
| 217,287 |
|
|
| 169,287 |
|
|
| — |
|
|
| 463,576 |
|
Long-term debt |
|
| 3,105,420 |
|
|
| — |
|
|
| 227,818 |
|
|
| (227,818 | ) |
|
| 3,105,420 |
|
Deferred tax liabilities – noncurrent |
|
| — |
|
|
| 21,858 |
|
|
| 51,405 |
|
|
| (1,403 | ) |
|
| 71,860 |
|
Operating lease liabilities |
|
| — |
|
|
| 85,365 |
|
|
| 416,887 |
|
|
| — |
|
|
| 502,252 |
|
Derivative instrument liabilities |
|
| 68,915 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 68,915 |
|
Other liabilities |
|
| — |
|
|
| 110,445 |
|
|
| 18,142 |
|
|
| — |
|
|
| 128,587 |
|
Total liabilities |
|
| 3,251,337 |
|
|
| 434,955 |
|
|
| 883,539 |
|
|
| (229,221 | ) |
|
| 4,340,610 |
|
Redeemable noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 33,151 |
|
|
| — |
|
|
| 33,151 |
|
Total equity |
|
| 2,505,381 |
|
|
| 3,503,170 |
|
|
| 2,018,170 |
|
|
| (5,521,340 | ) |
|
| 2,505,381 |
|
Total liabilities and equity |
| $ | 5,756,718 |
|
| $ | 3,938,125 |
|
| $ | 2,934,860 |
|
| $ | (5,750,561 | ) |
| $ | 6,879,142 |
|
2422
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Three Months Ended March 31, 2020
(In thousands)
|
| Parent |
|
| Combined Subsidiary Guarantors |
|
| Combined Non- Guarantors |
|
| Consolidating Adjustments |
|
| Total Consolidated Amounts |
| |||||
Revenue |
| $ | — |
|
| $ | 474,612 |
|
| $ | 308,198 |
|
| $ | — |
|
| $ | 782,810 |
|
Salaries, wages and benefits |
|
| 4,979 |
|
|
| 261,603 |
|
|
| 173,734 |
|
|
| — |
|
|
| 440,316 |
|
Professional fees |
|
| — |
|
|
| 28,558 |
|
|
| 34,742 |
|
|
| — |
|
|
| 63,300 |
|
Supplies |
|
| — |
|
|
| 20,859 |
|
|
| 11,112 |
|
|
| — |
|
|
| 31,971 |
|
Rents and leases |
|
| — |
|
|
| 8,883 |
|
|
| 11,941 |
|
|
| — |
|
|
| 20,824 |
|
Other operating expenses |
|
| — |
|
|
| 63,819 |
|
|
| 34,710 |
|
|
| — |
|
|
| 98,529 |
|
Depreciation and amortization |
|
| — |
|
|
| 21,046 |
|
|
| 20,634 |
|
|
| — |
|
|
| 41,680 |
|
Interest expense, net |
|
| 14,460 |
|
|
| 24,159 |
|
|
| 4,166 |
|
|
| — |
|
|
| 42,785 |
|
Transaction-related expenses |
|
| — |
|
|
| 1,525 |
|
|
| 2,024 |
|
|
| — |
|
|
| 3,549 |
|
Total expenses |
|
| 19,439 |
|
|
| 430,452 |
|
|
| 293,063 |
|
|
| — |
|
|
| 742,954 |
|
(Loss) income before income taxes |
|
| (19,439 | ) |
|
| 44,160 |
|
|
| 15,135 |
|
|
| — |
|
|
| 39,856 |
|
Equity in earnings of subsidiaries |
|
| 48,353 |
|
|
| — |
|
|
| — |
|
|
| (48,353 | ) |
|
| — |
|
(Benefit from) provision for income taxes |
|
| (5,153 | ) |
|
| 11,712 |
|
|
| (770 | ) |
|
| — |
|
|
| 5,789 |
|
Net income (loss) |
|
| 34,067 |
|
|
| 32,448 |
|
|
| 15,905 |
|
|
| (48,353 | ) |
|
| 34,067 |
|
Net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| (604 | ) |
|
| — |
|
|
| (604 | ) |
Net income (loss) attributable to Acadia Healthcare Company, Inc. |
| $ | 34,067 |
|
| $ | 32,448 |
|
| $ | 15,301 |
|
| $ | (48,353 | ) |
| $ | 33,463 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| (122,000 | ) |
|
| — |
|
|
| (122,000 | ) |
Loss on derivative instruments |
|
| 43,746 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 43,746 |
|
Other comprehensive income (loss) |
|
| 43,746 |
|
|
| — |
|
|
| (122,000 | ) |
|
| — |
|
|
| (78,254 | ) |
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc. |
| $ | 77,813 |
|
| $ | 32,448 |
|
| $ | (106,699 | ) |
| $ | (48,353 | ) |
| $ | (44,791 | ) |
25
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Three Months Ended March 31, 2019
(In thousands)
|
| Parent |
|
| Combined Subsidiary Guarantors |
|
| Combined Non- Guarantors |
|
| Consolidating Adjustments |
|
| Total Consolidated Amounts |
| |||||
Revenue |
| $ | — |
|
| $ | 459,818 |
|
| $ | 300,799 |
|
| $ | — |
|
| $ | 760,617 |
|
Salaries, wages and benefits |
|
| 6,101 |
|
|
| 254,942 |
|
|
| 168,536 |
|
|
| — |
|
|
| 429,579 |
|
Professional fees |
|
| — |
|
|
| 25,368 |
|
|
| 31,639 |
|
|
| — |
|
|
| 57,007 |
|
Supplies |
|
| — |
|
|
| 19,384 |
|
|
| 10,573 |
|
|
| — |
|
|
| 29,957 |
|
Rents and leases |
|
| — |
|
|
| 8,403 |
|
|
| 11,904 |
|
|
| — |
|
|
| 20,307 |
|
Other operating expenses |
|
| — |
|
|
| 59,390 |
|
|
| 34,475 |
|
|
| — |
|
|
| 93,865 |
|
Depreciation and amortization |
|
| — |
|
|
| 19,605 |
|
|
| 20,975 |
|
|
| — |
|
|
| 40,580 |
|
Interest expense, net |
|
| 19,578 |
|
|
| 23,018 |
|
|
| 5,534 |
|
|
| — |
|
|
| 48,130 |
|
Transaction-related expenses |
|
| — |
|
|
| 3,218 |
|
|
| 1,103 |
|
|
| — |
|
|
| 4,321 |
|
Total expenses |
|
| 25,679 |
|
|
| 413,328 |
|
|
| 284,739 |
|
|
| — |
|
|
| 723,746 |
|
(Loss) income before income taxes |
|
| (25,679 | ) |
|
| 46,490 |
|
|
| 16,060 |
|
|
| — |
|
|
| 36,871 |
|
Equity in earnings of subsidiaries |
|
| 48,157 |
|
|
| — |
|
|
| — |
|
|
| (48,157 | ) |
|
| — |
|
(Benefit from) provision for income taxes |
|
| (7,033 | ) |
|
| 17,065 |
|
|
| (2,672 | ) |
|
| — |
|
|
| 7,360 |
|
Net income (loss) |
|
| 29,511 |
|
|
| 29,425 |
|
|
| 18,732 |
|
|
| (48,157 | ) |
|
| 29,511 |
|
Net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| (40 | ) |
|
| — |
|
|
| (40 | ) |
Net income (loss) attributable to Acadia Healthcare Company, Inc. |
| $ | 29,511 |
|
| $ | 29,425 |
|
| $ | 18,692 |
|
| $ | (48,157 | ) |
| $ | 29,471 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| 44,481 |
|
|
| — |
|
|
| 44,481 |
|
Loss on derivative instruments |
|
| (8,690 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,690 | ) |
Other comprehensive income (loss) |
|
| (8,690 | ) |
|
| — |
|
|
| 44,481 |
|
|
| — |
|
|
| 35,791 |
|
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc. |
| $ | 20,821 |
|
| $ | 29,425 |
|
| $ | 63,173 |
|
| $ | (48,157 | ) |
| $ | 65,262 |
|
26
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2020
(In thousands)
|
| Parent |
|
| Combined Subsidiary Guarantors |
|
| Combined Non- Guarantors |
|
| Consolidating Adjustments |
|
| Total Consolidated Amounts |
| |||||
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 34,067 |
|
| $ | 32,448 |
|
| $ | 15,905 |
|
| $ | (48,353 | ) |
| $ | 34,067 |
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
| (48,353 | ) |
|
| — |
|
|
| — |
|
|
| 48,353 |
|
|
| — |
|
Depreciation and amortization |
|
| — |
|
|
| 21,046 |
|
|
| 20,634 |
|
|
| — |
|
|
| 41,680 |
|
Amortization of debt issuance costs |
|
| 3,050 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,050 |
|
Equity-based compensation expense |
|
| 4,979 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,979 |
|
Deferred income taxes |
|
| 101 |
|
|
| 11,044 |
|
|
| 141 |
|
|
| — |
|
|
| 11,286 |
|
Other |
|
| (101 | ) |
|
| (9 | ) |
|
| 3 |
|
|
| — |
|
|
| (107 | ) |
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| — |
|
|
| (5,234 | ) |
|
| 2,406 |
|
|
| — |
|
|
| (2,828 | ) |
Other current assets |
|
| — |
|
|
| (17,887 | ) |
|
| (1,244 | ) |
|
| — |
|
|
| (19,131 | ) |
Other assets |
|
| 82 |
|
|
| (1,593 | ) |
|
| 497 |
|
|
| (82 | ) |
|
| (1,096 | ) |
Accounts payable and other accrued liabilities |
|
| — |
|
|
| 17,726 |
|
|
| (39,481 | ) |
|
| — |
|
|
| (21,755 | ) |
Accrued salaries and benefits |
|
| — |
|
|
| (7,411 | ) |
|
| 1,381 |
|
|
| — |
|
|
| (6,030 | ) |
Other liabilities |
|
| — |
|
|
| 2,803 |
|
|
| (1,372 | ) |
|
| — |
|
|
| 1,431 |
|
Net cash (used in) provided by operating activities |
|
| (6,175 | ) |
|
| 52,933 |
|
|
| (1,130 | ) |
|
| (82 | ) |
|
| 45,546 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for capital expenditures |
|
| — |
|
|
| (48,264 | ) |
|
| (21,283 | ) |
|
| — |
|
|
| (69,547 | ) |
Cash paid for real estate acquisitions |
|
| — |
|
|
| (3,149 | ) |
|
| — |
|
|
| — |
|
|
| (3,149 | ) |
Proceeds from sale of property and equipment |
|
| — |
|
|
| 207 |
|
|
| — |
|
|
| — |
|
|
| 207 |
|
Other |
|
| — |
|
|
| (1,672 | ) |
|
| — |
|
|
| — |
|
|
| (1,672 | ) |
Net cash used in investing activities |
|
| — |
|
|
| (52,878 | ) |
|
| (21,283 | ) |
|
| — |
|
|
| (74,161 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
| (10,621 | ) |
|
| — |
|
|
| (82 | ) |
|
| 82 |
|
|
| (10,621 | ) |
Common stock withheld for minimum statutory taxes, net |
|
| (1,402 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| (264 | ) |
|
| — |
|
|
| (264 | ) |
Other |
|
| — |
|
|
| (423 | ) |
|
| (720 | ) |
|
| — |
|
|
| (1,143 | ) |
Cash provided by (used in) intercompany activity |
|
| 18,198 |
|
|
| (47,235 | ) |
|
| 29,037 |
|
|
| — |
|
|
| — |
|
Net cash provided by (used in) in financing activities |
|
| 6,175 |
|
|
| (47,658 | ) |
|
| 27,971 |
|
|
| 82 |
|
|
| (13,430 | ) |
Effect of exchange rate changes on cash |
|
| — |
|
|
| — |
|
|
| (1,143 | ) |
|
| — |
|
|
| (1,143 | ) |
Net (decrease) increase in cash and cash equivalents |
|
| — |
|
|
| (47,603 | ) |
|
| 4,415 |
|
|
| — |
|
|
| (43,188 | ) |
Cash and cash equivalents at beginning of the period |
|
| — |
|
|
| 98,943 |
|
|
| 25,249 |
|
|
| — |
|
|
| 124,192 |
|
Cash and cash equivalents at end of the period |
| $ | — |
|
| $ | 51,340 |
|
| $ | 29,664 |
|
| $ | — |
|
| $ | 81,004 |
|
27
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2019
(In thousands)
|
| Parent |
|
| Combined Subsidiary Guarantors |
|
| Combined Non- Guarantors |
|
| Consolidating Adjustments |
|
| Total Consolidated Amounts |
| |||||
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 29,511 |
|
| $ | 29,425 |
|
| $ | 18,732 |
|
| $ | (48,157 | ) |
| $ | 29,511 |
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
| (48,157 | ) |
|
| — |
|
|
| — |
|
|
| 48,157 |
|
|
| — |
|
Depreciation and amortization |
|
| — |
|
|
| 19,605 |
|
|
| 20,975 |
|
|
| — |
|
|
| 40,580 |
|
Amortization of debt issuance costs |
|
| 2,888 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,888 |
|
Equity-based compensation expense |
|
| 6,101 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,101 |
|
Deferred income taxes |
|
| (254 | ) |
|
| (678 | ) |
|
| 266 |
|
|
| — |
|
|
| (666 | ) |
Other |
|
| 1,993 |
|
|
| 253 |
|
|
| (59 | ) |
|
| — |
|
|
| 2,187 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| — |
|
|
| (15,693 | ) |
|
| 3,713 |
|
|
| — |
|
|
| (11,980 | ) |
Other current assets |
|
| — |
|
|
| (5,484 | ) |
|
| (391 | ) |
|
| — |
|
|
| (5,875 | ) |
Other assets |
|
| 2,665 |
|
|
| (353 | ) |
|
| 648 |
|
|
| (2,665 | ) |
|
| 295 |
|
Accounts payable and other accrued liabilities |
|
| — |
|
|
| (7,100 | ) |
|
| (8,601 | ) |
|
| — |
|
|
| (15,701 | ) |
Accrued salaries and benefits |
|
| — |
|
|
| (7,872 | ) |
|
| 2,023 |
|
|
| — |
|
|
| (5,849 | ) |
Other liabilities |
|
| — |
|
|
| 3,317 |
|
|
| (1,135 | ) |
|
| — |
|
|
| 2,182 |
|
Net cash (used in) provided by operating activities |
|
| (5,253 | ) |
|
| 15,420 |
|
|
| 36,171 |
|
|
| (2,665 | ) |
|
| 43,673 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
| — |
|
|
| (40,400 | ) |
|
| — |
|
|
| — |
|
|
| (40,400 | ) |
Cash paid for capital expenditures |
|
| — |
|
|
| (45,231 | ) |
|
| (24,017 | ) |
|
| — |
|
|
| (69,248 | ) |
Cash paid for real estate acquisitions |
|
| — |
|
|
| (1,066 | ) |
|
| — |
|
|
| — |
|
|
| (1,066 | ) |
Proceeds from sale of property and equipment |
|
| — |
|
|
| 836 |
|
|
| 92 |
|
|
| — |
|
|
| 928 |
|
Other |
|
| — |
|
|
| (315 | ) |
|
| — |
|
|
| — |
|
|
| (315 | ) |
Net cash used in investing activities |
|
| — |
|
|
| (86,176 | ) |
|
| (23,925 | ) |
|
| — |
|
|
| (110,101 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings on revolving credit facility |
|
| 71,573 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 71,573 |
|
Principal payments on long-term debt |
|
| (8,246 | ) |
|
| — |
|
|
| (2,665 | ) |
|
| 2,665 |
|
|
| (8,246 | ) |
Common stock withheld for minimum statutory taxes, net |
|
| (1,327 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,327 | ) |
Other |
|
| (2,375 | ) |
|
| (442 | ) |
|
| (680 | ) |
|
| — |
|
|
| (3,497 | ) |
Cash (used in) provided by intercompany activity |
|
| (54,372 | ) |
|
| 56,570 |
|
|
| (2,198 | ) |
|
| — |
|
|
| — |
|
Net cash provided by (used in) in financing activities |
|
| 5,253 |
|
|
| 56,128 |
|
|
| (5,543 | ) |
|
| 2,665 |
|
|
| 58,503 |
|
Effect of exchange rate changes on cash |
|
| — |
|
|
| — |
|
|
| 1,099 |
|
|
| — |
|
|
| 1,099 |
|
Net (decrease) increase in cash and cash equivalents |
|
| — |
|
|
| (14,628 | ) |
|
| 7,802 |
|
|
| — |
|
|
| (6,826 | ) |
Cash and cash equivalents at beginning of the period |
|
| — |
|
|
| 32,471 |
|
|
| 18,039 |
|
|
| — |
|
|
| 50,510 |
|
Cash and cash equivalents at end of the period |
| $ | — |
|
| $ | 17,843 |
|
| $ | 25,841 |
|
| $ | — |
|
| $ | 43,684 |
|
28
|
|
On April 21, 2020, the Company entered into the Thirteenth Amendment to the Amended and Restated Credit Agreement. The Thirteenth Amendment amended the Consolidated Leverage Ratio in the existing covenant, to increase the leverage ratio for the rest of 2020. Additionally, in early April 2020, the Company borrowed $100.0 million on its revolving line of credit to enhance its cash position in response to the potential impact of COVID-19 on the Company’s future liquidity.
As part of the CARES Act, the U.S. government announced it would offer $100 billion of relief to eligible healthcare providers. The Company received approximately $20 million of the initial funds distributed in April 2020. The Company is evaluating the terms and conditions and financial impact of any funds received under the CARES Act and other government relief programs.
Using existing authority and certain expanded authority under the CARES Act, the U.S. Department of Health and Human Services (“HHS”) has expanded CMS’ Accelerated and Advance Payment Program to a broader group of Medicare Part A and Part B providers for the duration of the COVID-19 pandemic. Under the program, our facilities may request up to 100% of their Medicare payment amount for a three-month period. The repayment of these accelerated/advanced payments does not begin until 120 days after the date of the issuance of the payment. Once the repayment period starts, the amounts previously advanced to the provider or supplier will be recouped from the provider’s or supplier’s new Medicare claims. Facilities will generally have 210 days from the date the accelerated or advance payment was made to repay the amounts that they owe. The Company applied for and received approximately $45 million in April 2020 from this program, which the Company expects to repay over a three-month period from August to November 2020.
29
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “would,” “should,” “could” or the negative thereof. Generally, the words “anticipate,” “believe,” “continue,” “expect,” “intend,” “estimate,” “project,” “plan” and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are forward-looking statements.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, many of which are outside of our control, which could cause our actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:
| • | the impact |
| • |
|
| • | costs of providing care to our patients, including increased staffing, equipment and supply expenses resulting from the COVID-19 pandemic; |
| • | our significant indebtedness, our ability to meet our debt obligations, and our ability to incur substantially more debt; |
| • | our ability to implement our business strategies, especially in light of the |
|
|
|
• |
|
|
|
| the impact of payments received from the government and third-party payors on our revenue and results of |
| • | difficulties in successfully integrating the operations of acquired facilities or realizing the potential benefits and synergies of our acquisitions and joint ventures; |
| • | our ability to recruit and retain quality psychiatrists and other physicians, nurses, counselors and other medical support personnel; |
| • | the impact of competition for staffing on our labor costs and profitability; |
| • | the impact of increases to our labor |
| • | the occurrence of patient incidents, which could result in negative media coverage, adversely affect the price of our securities and result in incremental regulatory burdens and governmental investigations; |
| • | our future cash flow and earnings; |
| • | our restrictive covenants, which may restrict our business and financing activities; |
| • | our ability to make payments on our financing arrangements; |
| • | the impact of the economic and employment conditions |
| • | the impact of adverse weather conditions, including the effects of hurricanes; |
| • | compliance with laws and government regulations; |
| • | the impact of claims brought against us or our facilities including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employee related claims; |
| • | the impact of governmental investigations, regulatory actions and whistleblower lawsuits; |
30
| • | any failure to comply with the terms of the Company’s corporate integrity |
| • | the impact of healthcare reform in the U.S. and abroad, including the potential repeal, replacement or modification of the Patient Protection and Affordable Care Act; |
| • | the impact of our highly competitive industry on patient volumes; |
| • | our dependence on key management personnel, key executives and local facility management personnel; |
23
| • | our acquisition, joint venture and de novo strategies, which expose us to a variety of operational and financial risks, as well as legal and regulatory risks; |
| • | the impact of state efforts to regulate the construction or expansion of healthcare facilities on our ability to operate and expand our operations; |
| • | our potential inability to extend leases at expiration; |
| • | the impact of controls designed to reduce inpatient services on our revenue; |
| • | the impact of different interpretations of accounting principles on our results of operations or financial condition; |
| • | the impact of environmental, health and safety laws and regulations, especially in locations where we have concentrated operations; |
| • |
|
| the risk of a cyber-security incident and any resulting violation of laws and regulations regarding information privacy or other negative impact; |
| • | the impact of laws and regulations relating to privacy and security of patient health information and standards for electronic transactions; |
| • | our ability to cultivate and maintain relationships with referral sources; |
| • | the impact of a change in the mix of our |
| • | changes in interpretations, assumptions and expectations regarding recent tax legislation, including provisions of the CARES Act and additional guidance that may be issued by federal and state taxing authorities; |
| • | failure to maintain effective internal control over financial reporting; |
| • | the impact of fluctuations in our operating results, quarter to quarter earnings and other factors on the price of our securities; |
| • | the impact of the trend for insurance companies and managed care organizations to enter into sole source contracts on our ability to obtain patients; |
| • | the impact of value-based purchasing programs on our revenue; and |
| • | those risks and uncertainties described from time to time in our filings with the SEC. |
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.
Overview
Our business strategy is to acquire and develop behavioral healthcare facilities and improve our operating results within our facilities and our other behavioral healthcare operations. We strive to improve the operating results of our facilities by providing high-quality services, expanding referral networks and marketing initiatives while meeting the increased demand for behavioral healthcare services through expansion of our current locations as well as developing new services within existing locations. At March 31, 2020,2021, we operated 588228 behavioral healthcare facilities with approximately 18,20010,000 beds in 40 states the U.K. and Puerto Rico. During the
31
three months ended March 31, 2020,2021, we added 8092 beds to existing facilities.facilities and opened two comprehensive treatment centers (“CTCs”). For the year ending December 31, 2020,2021, we expect to add between 500approximately 300 beds to existing facilities, 170 beds through the opening of one wholly-owned facility and 600 total beds exclusive of acquisitions.one joint venture facility and expect to open 11 CTCs.
We are the leading publicly traded pure-play provider of behavioral healthcare services with operations in the U.S. and the U.K. Management believes that we are positioned as a leading platform in a highly fragmented industry under the direction of an experienced management team that has significant industry expertise. Management expects to take advantage of several strategies that are more accessible as a result of our increased size and geographic scale, including continuing a national marketing strategy to attract new patients and referral sources, increasing our volume of out-of-state referrals, providing a broader range of services to new and existing patients and clients and selectively pursuing opportunities to expand our facility and bed count in the U.S. through acquisitions, de novo facilities, joint ventures and bed additions in existing facilities.
During 2019,24
On January 19, 2021, we commencedcompleted the U.K. Sale pursuant to a reviewShare Purchase Agreement in which we sold all of strategic alternatives including those related to our U.K. operationsthe securities of AHC-WW Jersey Limited, a private limited liability company incorporated in Jersey and a potential salesubsidiary of such operations. In January 2020, we launched a formal process regarding the saleCompany, which constituted the entirety of our U.K. business. Consistentbusiness 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 GBP to USD exchange rate, cash retained by the buyer and transaction costs. We used the net proceeds of approximately $1,425 million (excluding cash retained by the buyer) along with market practice for U.K. transactions of this nature, and in conjunction with our advisors, we solicited and have received initial, non-binding offerscash from the balance sheet to acquire our U.K. business from multiple bidders. Duringreduce debt by $1,640 million during the first quarter of 2020, we began the second phase2021. As a result of the sale process, during which interested bidders would receive proposed transaction documentsU.K. Sale, we reported, for all periods presented, results of operations and complete their confirmatory due diligence. Whilecash flows of the interest from potential buyers has been strong, given evolving market dynamics related toU.K. operations as discontinued operations in the COVID-19 pandemic, we temporarily suspended the sale process in mid-March 2020 until market conditions recover.accompanying financial statements.
COVID-19
During March 2020, the global pandemic of COVID-19 began to affect our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. At a limited number manyof our facilities, employees and/or patients have tested positive for COVID-19. We are committed to protecting the health of our communities and have been responding to the evolving COVID-19 situation while taking steps to provide quality care and protect the health and safety of our patients and employees. All of our facilities are closely following infectious disease protocols, as well as recommendations by the CDC and local health officials. We have established an internal COVID-19 taskforce, developed additional supply chain management processes, expanded telehealth capabilities and implemented emergency planning in directly impacted markets.
We have taken numerous steps across our facilities to help minimize the impact of the virus.virus on our patients and employees. For example, we:
| • |
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• | instituted social distancing practices and protective measures throughout our facilities, which includes restricting or suspending visitor access, limiting group therapy and screening patients and staff who enter our facilities based on criteria established by the |
| • | have |
• | expanded telehealth capabilities; |
• | implemented emergency planning in directly impacted markets; |
• | limited all non-essential business travel; and |
| • |
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COVID-19 is adversely impacting our business and likely will have an impact on our financial results that we are not currently able to quantify. For example, due in part to local, state and federal guidelines as well as recommendations from medical officials regarding stay-at-home orders, social distancing practices and self-quarantine in response to the COVID-19 pandemic, we have seen a decline in referrals, particularly from emergency rooms and medical professionals. In addition, restrictive measures adopted or encouraged by federal, state and local governments, such as travel bans and stay-at-home orders, have reduced patient volume at our facilities more generally. As a result, many of our facilities are experiencing significantly lower average daily census (“ADC”). The impact on our facilities varies based on the market in which the facility operates and the type of facility. For the month of April 2020, ADC at our U.S. Facilities declined approximately 7% compared to the same period in the prior year, reflecting continuing deterioration in the first two weeks with signs of stabilization and improvement during the last two weeks. For the month of April 2020, we have seen stability in ADC at our U.K. Facilities ending the month at an approximately 5% decline compared to the same period in the prior year.It is difficult to predict the impact of COVID-19 on our patient volume, and, once restrictions are eased, we cannot predict the timing of returning to pre-COVID volumes, if at all.
We have developed additional supply chain management processes, which includes extensive tracking and delivery of key personal protective equipment (“PPE”) and supplies and sharing resources across all facilities. However, we are also experiencing supply chain disruptions and could experience significant price increases in equipment, pharmaceuticals and medical supplies, particularly PPE. Pandemic-related staffing difficulties and equipment, pharmaceutical and medical supplies shortages may impact our
32
ability to treat patients at our facilities. Such shortages could lead to us paying higher prices for supplies, equipment and labor and an increase in overtime hours paid to our employees.
At March 31, 2020, we had approximately $81.0 million of cash and cash equivalents and approximately $485.0 million of available borrowing capacity under our revolving line of credit. In early April 2020, we borrowed $100.0 million on our revolving line of credit to enhance our cash position in response to the potential impact of COVID-19 on our future liquidity. In response to the estimated financial impact of the COVID-19 pandemic, we are pursuing various actions intended to enhance our financial flexibility including, among other things, the benefits described in the “CARES Act and other Regulatory Developments” herein.In addition,we are evaluating and undertaking certain additional steps to mitigate the financial impact, including:
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Although we are reviewing potential liquidity and intend to seek any available benefits under the CARES Act, including those described herein, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you we will be able to access such benefits in a timely manner or at all. In addition, procuring these benefits and otherwise responding to the global pandemic is likely to require us to dedicate additional management resources.
For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources” and “Risk Factors—Risks Related to Our Business—The COVID-19 global pandemic is affecting our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the U.S. and U.K. economies remain unstable for a significant amount of time or if patient volumes at our facilities do not recover quickly.”
CARES Act and Other Regulatory Developments
On March 27, 2020, the CARES Act was signed into law. The CARES Act is intended to provide over $2 trillion in stimulus benefits for the U.S. economy. Among other things, the CARES Act includes additional support for small businesses, expands unemployment benefits, makes forgivable loans available to small businesses, provides for certain federal income tax changes, and provides $500 billion for loans, loan guarantees, and other investments for or in U.S. businesses.
In addition, the CARES Act contains a number of provisions that are intended to assist healthcare providers as they combat the effects of the COVID-19 pandemic. Those provisions include, among others:
| • | an appropriation of $100 billion to the |
| • | the expansion of CMS’ Accelerated and Advance Payment Program; |
| • | the temporary suspension of Medicare sequestration from May 1, 2020, to December 31, |
| • | waivers or temporary suspension of certain regulatory requirements. |
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As noted above, the U.S. government initially announced it would offer $100 billion of relief to eligible healthcare providers through the PHSSE Fund. On April 24, 2020, then President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act (the “New PPP Act”).Act. Among other things, the New PPP Act allocatesallocated $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion allocated under the New PPP Act is in addition to the $100 billion allocated to healthcare providers for the same purposes in the CARES Act and will likely behas been disbursed to providers under terms and conditions similar to the CARES Act funds. We have received approximately $20$19.7 million of the initial PHSSE funds distributed in April 2020. We received approximately $12.8 million of additional PHSSE funds in August 2020.
33
TableDuring the fourth quarter of contents2020, we recorded $32.8 million of other income in the consolidated statements of operations related to $34.9 million of PHSSE funds received from April through December 2020. Our recognition of this income was based on revised guidance in the Consolidated Appropriations Act, 2021 enacted in December 2020.
Using existing authority and certain expanded authority under the CARES Act, HHS has expanded CMS’ Accelerated and Advance Payment Program to a broader group of Medicare Part A and Part B providers for the duration of the COVID-19 pandemic. Under the program, our facilities maywere eligible to request up to 100% of their Medicare payment amount for a three-month period. TheUnder the original terms of the program, the repayment of these accelerated/advanced payments does not begin untilwould have begun 120 days after the date of the issuance of the payment. Once the repayment period starts,payment and the amounts previously advanced to the provider or supplier will beour facilities would have been recouped from the provider’s or supplier’s new Medicare claims.claims as a 100% offset. Our facilities will generallywould have had 210 days from the date the accelerated or advance payment was made to repay the amounts that they owe.
On October 1, 2020, Congress amended the terms of the Accelerated and Advance Payment Program to extend the term of the loan and adjust the repayment process. Under the new terms of the program, all providers will have 29 months from the date of their first program payment to repay the full amount of the accelerated or advance payments they have received. The revised terms extend the period before repayment begins from 210 days to one year from the date that payment under the program was received. Once the repayment period begins, the offset will be limited to 25% of new claims during the first 11 months of repayment and 50% of new claims during the final 6 months. The revised program terms also lower the interest rate on outstanding amounts due at the end of the repayment period from 10% to 4%. We applied for and received approximately $45 million in April 2020 from this program, which we expect to repay over a three-monththe 12-month period from August to November 2020.beginning April 2021.
Also under the CARES Act, we anticipatereceived a 2% increase in our facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020 to December 31, 2020.2021.
The CARES Act also provides for certain federal income and other tax changes, including an increase in the interest expense tax deduction limitation the deferral of the employer portion of Social Security payroll taxes, refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds and bonus depreciation of qualified improvement property. The federal income tax changes brought about byFurthermore, under the CARES Act, are complex(i) for taxable years beginning before 2021, NOL carryforwards and further guidance is expected. We are still reviewingcarrybacks may offset 100% of taxable income and determining the extent(ii) NOLs arising in 2018, 2019 and 2020 taxable years may be carried back to which the tax provisionseach of the CARES Act will affectpreceding five years to generate a refund. As a result, in 2019 and 2020 we received a benefit, in the Company.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 million permanent benefit due to the 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). We expectalso 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. Withintaxes, as enacted by the CARES Act, the interest expense deduction threshold was increased to 50% of Adjusted Taxable Income for 2019 and 2020 tax years, making our interest expense fully deductible. As a result, we expect a cash benefit in the form of refunds and/or lower tax payments of approximately $16 million related to our 2019 interest expense and between $15 million and $20 million related to our 2020 interest expense.Act.
In addition to the financial and other relief that has been provided by the federal government through the CARES Act and other legislation passed by Congress, CMS and many state governments have also issued waivers and temporary suspensions of healthcare facility licensure, certification, and reimbursement requirements in order to provide hospitals, physicians, and other healthcare providers with increased flexibility to meet the challenges presented by the COVID-19 pandemic. For example, CMS and many state governments have temporarily eased regulatory requirements and burdens for delivering and being reimbursed for healthcare services provided remotely through telemedicine. CMS has also temporarily waived many provisions of the Stark law, including many of the provisions affecting our relationships with physicians. Many states have also suspended the enforcement of certain regulatory requirements to ensure that healthcare providers have sufficient capacity to treat COVID-19 patients. These regulatory changes are temporary, with most slated to expire at the end of the declared COVID-19 public health emergency.
We are evaluatingcontinuing to evaluate the terms and conditions and financial impact of funds received under the CARES Act and other government relief programs.
On April 24, 2020 President Trump signed into law the New PPP Act. Among other things, the New PPP Act allocates $75 billion to Medicare and Medicaid participating hospitals and other healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion dollars allocated under the New PPP Act is in addition to the $100 billion allocated to healthcare providers for the same purposes in the CARES Act, and will likely be disbursed to providers under terms and conditions similar to the CARES Act funds.
Acquisitions
On April 1, 2019, the Company completed the acquisition of Bradford, a specialty treatment facility with 46 beds located in Millerton, Pennsylvania, for cash consideration of approximately $4.5 million.
On February 15, 2019, the Company completed the acquisition of Whittier, an inpatient psychiatric facility with 71 beds located in Haverhill, Massachusetts, for cash consideration of approximately $17.9 million. Also on February 15, 2019, the Company completed the acquisition of Mission Treatment for cash consideration of approximately $22.5 million. Mission Treatment operates nine comprehensive treatment centers in California, Nevada, Arizona and Oklahoma.
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Results of Operations
The following table illustrates our consolidated results of operations for the respective periods shown (dollars in thousands):
|
| Three Months Ended March 31, |
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| Three Months Ended March 31, |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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| Amount |
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| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||||
Revenue |
| $ | 782,810 |
|
|
| 100.0 | % |
| $ | 760,617 |
|
|
| 100.0 | % |
| $ | 551,199 |
|
|
| 100.0 | % |
| $ | 509,217 |
|
|
| 100.0 | % |
Salaries, wages and benefits |
|
| 440,316 |
|
|
| 56.2 | % |
|
| 429,579 |
|
|
| 56.5 | % |
|
| 304,333 |
|
|
| 55.2 | % |
|
| 286,987 |
|
|
| 56.4 | % |
Professional fees |
|
| 63,300 |
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|
| 8.1 | % |
|
| 57,007 |
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|
| 7.5 | % |
|
| 31,617 |
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|
| 5.7 | % |
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| 31,051 |
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| 6.1 | % |
Supplies |
|
| 31,971 |
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| 4.1 | % |
|
| 29,957 |
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|
| 3.9 | % |
|
| 21,322 |
|
|
| 3.9 | % |
|
| 22,196 |
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|
| 4.4 | % |
Rents and leases |
|
| 20,824 |
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|
| 2.7 | % |
|
| 20,307 |
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|
| 2.7 | % |
|
| 9,412 |
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|
| 1.7 | % |
|
| 9,117 |
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|
| 1.8 | % |
Other operating expenses |
|
| 98,529 |
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|
| 12.6 | % |
|
| 93,865 |
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|
| 12.3 | % |
|
| 72,010 |
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|
| 13.1 | % |
|
| 68,156 |
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|
| 13.4 | % |
Depreciation and amortization |
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| 41,680 |
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| 5.3 | % |
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| 40,580 |
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| 5.3 | % |
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| 24,894 |
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|
| 4.5 | % |
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| 22,835 |
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|
| 4.5 | % |
Interest expense |
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| 42,785 |
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| 5.5 | % |
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| 48,130 |
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| 6.3 | % |
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| 29,027 |
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| 5.3 | % |
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| 42,565 |
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| 8.4 | % |
Debt extinguishment costs |
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| 24,650 |
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| 4.5 | % |
|
| — |
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|
| 0.0 | % | ||||||||||||||||
Transaction-related expenses |
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| 3,549 |
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|
| 0.4 | % |
|
| 4,321 |
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|
| 0.6 | % |
|
| 4,610 |
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|
| 0.8 | % |
|
| 1,526 |
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|
| 0.3 | % |
Total expenses |
|
| 742,954 |
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|
| 94.9 | % |
|
| 723,746 |
|
|
| 95.1 | % |
|
| 521,875 |
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|
| 94.7 | % |
|
| 484,433 |
|
|
| 95.3 | % |
Income before income taxes |
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| 39,856 |
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| 5.1 | % |
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| 36,871 |
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|
| 4.9 | % | ||||||||||||||||
Income from continuing operations before income taxes |
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| 29,324 |
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|
| 5.3 | % |
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| 24,784 |
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|
| 4.7 | % | ||||||||||||||||
Provision for income taxes |
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| 5,789 |
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|
| 0.7 | % |
|
| 7,360 |
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|
| 1.0 | % |
|
| 6,204 |
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|
| 1.1 | % |
|
| 5,806 |
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|
| 1.1 | % |
Income from continuing operations |
|
| 23,120 |
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|
| 4.2 | % |
|
| 18,978 |
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|
| 3.6 | % | ||||||||||||||||
(Loss) income from discontinued operations, net of taxes |
|
| (12,641 | ) |
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| -2.3 | % |
|
| 15,089 |
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|
| 3.0 | % | ||||||||||||||||
Net income |
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| 34,067 |
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|
| 4.4 | % |
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| 29,511 |
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|
| 3.9 | % |
|
| 10,479 |
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|
| 1.9 | % |
|
| 34,067 |
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|
| 6.6 | % |
Net income attributable to noncontrolling interests |
|
| (604 | ) |
|
| -0.1 | % |
|
| (40 | ) |
|
| 0.0 | % |
|
| (762 | ) |
|
| -0.1 | % |
|
| (604 | ) |
|
| -0.1 | % |
Net income attributable to Acadia Healthcare Company, Inc. |
| $ | 33,463 |
|
|
| 4.3 | % |
| $ | 29,471 |
|
|
| 3.9 | % |
| $ | 9,717 |
|
|
| 1.8 | % |
| $ | 33,463 |
|
|
| 6.5 | % |
Segments
At March 31, 2020, the U.S. Facilities segment included2021, we operated 228 behavioral healthcare facilities with approximately 9,60010,000 beds in 40 states and Puerto Rico,Rico. For all periods presented, results of operations and cash flows of the U.K. Facilities segment included 360 behavioral healthcare facilities with approximately 8,700 bedsoperations are reported as discontinued operations in the U.K.accompanying financial statements.
The following table sets forth percent changes in same facility operating data for our U.S. Facilities for the three months ended March 31, 20202021 compared to the same period in 2019:2020:
Three Months Ended | ||||
U.S. Same Facility Results (a) |
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Revenue growth |
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Patient days growth |
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Admissions growth |
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Average length of stay change (b) |
| 1.9% |
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Revenue per patient day growth |
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Adjusted EBITDA margin change (c) |
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| (a) | Results for the periods presented include facilities we have operated more than one year and exclude certain closed services. |
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| (b) | Average length of stay is defined as patient days divided by admissions. |
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(c) SegmentAdjusted EBITDA is defined as income before provision for income taxes, equity-based compensation expense, debt extinguishment costs, transaction-related expenses, interest expense and depreciation and amortization. Management uses SegmentAdjusted EBITDA as an analytical indicator to measure the performance of our segments and to develop strategic objectives and operating plans for those segments. Segmentplans. Adjusted EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. SegmentAdjusted EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from SegmentAdjusted EBITDA are significant components in understanding and assessing financial performance. Because SegmentAdjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, SegmentAdjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.
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Results in our U.S. Facilities for the three months ended March 31 2020, were affected by actions taken to curtail the spread of COVID-19. Volumes declined in late March 2020 as a result of the impact of the pandemic on traditional referral sources, such as emergency rooms and medical professionals; the stay-at-home orders implemented by many states; and the effects of the travel restrictions on certain facilities with national referral networks. Same facility patient days increased more than 4% through the first two months of 2020 compared to the same period in the prior year. The COVID-19 pandemic affected our business starting in late March 2020 and caused same facility patient day volumes to decline approximately 3% in the last two weeks of the month relative to the same period in the prior year.
The following table sets forth percent changes in same facility operating data for our U.K. Facilities for the three months ended March 31, 2020 compared to the same period in 2019:
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Results in our U.K. Facilities for the three months ended March 31 2020 were also affected by actions taken to curtail the spread of COVID-19. Beginning in late March 2020, our U.K. operations faced temporary disruptions from the stay-at-home orders implemented in the U.K. on the referral and commissioning process. While the volume impact in the U.K. has been limited due to the longer length of stay for many of our service lines, certain services with a shorter length of stay have been impacted. In our U.K. Facilities, same facility patient days were flat through the first two months of 2020 and then declined approximately 3% in the last two weeks of March 2020 compared to the same period in the prior year.
Three months ended March 31, 20202021 compared to the three months ended March 31, 20192020
Revenue. Revenue increased $22.2$42.0 million, or 2.9%8.2%, to $782.8$551.2 million for the three months ended March 31, 20202021 from $760.6$509.2 million for the three months ended March 31, 2019 resulting from same facility revenue growth of 3.4% offset by $4.6 million as a result of the decrease in the exchange rate between USD and GBP. During the three months ended March 31, 2020, we generated $509.2 million of revenue, or 65.0% of our total revenue, from our U.S. Facilities and $273.6 million of revenue, or 35.0% of our total revenue, from our U.K. Facilities. During the three months ended March 31, 2019, we generated $488.0 million of revenue, or 64.2% of our total revenue, from our U.S. Facilities and $272.7 million of revenue, or 35.8% of our total revenue, from our U.K. Facilities.
U.S. same2020. Same facility revenue increased by $19.7$37.5 million, or 4.1%7.4%, for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019,2020, resulting from same facility growth in patient days of 2.9%2.7% and an increase in same facility revenue per day of 1.2%4.5%. Consistent with the same facility patient day growth in 2019,2020, the growth in same facility patient days for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019,2020 resulted from the addition of beds to our existing facilities and ongoing demand for our services. U.K. same facility revenue increased by $4.7 million, or 1.9%, for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, resulting from an increase in same facility revenue per day of 3.0% offset by a decline in same facility patient days of 1.0%.
Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $440.3$304.3 million for the three months ended March 31, 2021 compared to $287.0 million for the three months ended March 31, 2020, compared to $429.6 million for the three months ended March 31, 2019, an increase of $10.7$17.3 million. SWB expense included $5.0$7.0 million and $6.1$5.0 million of equity-based compensation expense for the three months ended March 31, 20202021 and 2019,2020, respectively. Excluding equity-based compensation expense, SWB expense was $435.3$297.3 million, or 55.6%53.9% of revenue, for the three months ended March 31, 2020,2021, compared to $423.5$282.0 million, or 55.7%55.4% of revenue, for the three months ended March 31, 2019.2020. Same facility SWB expense was $396.3$274.6 million for the three months ended March 31, 2021, or 50.3% of revenue, compared to $263.0 million for the three months ended March 31, 2020, or 52.8%51.8% of revenue, compared to $383.1revenue.
Professional fees. Professional fees were $31.6 million for the three months ended March 31, 2019,2021, or 52.8%5.7% of revenue.
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Professional fees. Professional fees were $63.3revenue, compared to $31.1 million for the three months ended March 31, 2020, or 8.1%6.1% of revenue, compared to $57.0revenue. Same facility professional fees were $28.1 million for the three months ended March 31, 2019,2021, or 7.5%5.1% of revenue. The increase in professional fees was primarily the result of higher cost agency labor required in certain markets, which was partially attributablerevenue, compared to COVID-19. Same facility professional fees were $55.9$27.8 million, for the three months ended March 31, 2020, or 7.4%5.5% of revenue, compared to $49.8revenue.
Supplies. Supplies expense was $21.3 million for the three months ended March 31, 2019,2021, or 6.8%3.9% of revenue.
Supplies. Supplies expense was $32.0revenue, compared to $22.2 million for the three months ended March 31, 2020, or 4.1%4.4% of revenue, compared to $30.0revenue. Same facility supplies expense was $21.1 million for the three months ended March 31, 2019,2021, or 3.9% of revenue. The increase in supplies was primarily the result of COVID-19 related supply purchases, particularly PPE. Same facility supplies expense was $30.2revenue, compared to $22.1 million for the three months ended March 31, 2020, or 4.0% of revenue, compared to $28.2 million for the three months ended March 31, 2019, or 3.9%4.3% of revenue.
Rents and leases. Rents and leases were $20.8$9.4 million for the three months ended March 31, 2021, or 1.7% of revenue compared to $9.1 million for the three months ended March 31, 2020, or 2.7%1.8% of revenue compared to $20.3revenue. Same facility rents and leases were $8.5 million for the three months ended March 31, 2019,2021, or 2.7%1.6% of revenue. Same facility rents and leases were $17.1revenue, compared to $8.4 million for the three months ended March 31, 2020, or 2.3% of revenue, compared to $16.3 million for the three months ended March 31, 2019, or 2.2%1.6% of revenue.
Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses. Other operating expenses were $98.5$72.0 million for the three months ended March 31, 2021, or 13.1% of revenue, compared to $68.2 million for the three months ended March 31, 2020, or 12.6%13.4% of revenue, compared to $93.9revenue. Same facility other operating expenses were $68.7 million for the three months ended March 31, 2019,2021, or 12.3%12.6% of revenue. Same facility other operating expenses were $93.2revenue, compared to $66.4 million for the three months ended March 31, 2020, or 12.4% of revenue, compared to $88.3 million for the three months ended March 31, 2019, or 12.1%13.1% of revenue.
Depreciation and amortization. Depreciation and amortization expense was $41.7$24.9 million for the three months ended March 31, 2021, or 4.5% of revenue, compared to $22.8 million for the three months ended March 31, 2020, or 5.3%4.5% of revenue, compared to $40.6revenue.
Interest expense. Interest expense was $29.0 million for the three months ended March 31, 2019, or 5.3% of revenue.
Interest expense. Interest expense was $42.82021 compared to $42.6 million for the three months ended March 31, 2020 compared2020. The decrease in interest expense was primarily due to $48.1debt repayments in connection with the U.K. Sale.
Debt extinguishment costs. Debt extinguishment costs were $24.7 million for the three months ended March 31, 2019. The decrease2021 and represented $6.3 million of cash charges and $18.4 million of non-cash charges in interest expense was primarily a resultconnection with the redemption of lower interest rates applicable to our variable rate debt.the 5.625% Senior Notes and 6.500% Senior Notes and the termination of the Prior Credit Facility.
Transaction-related expenses. Transaction-related expenses were $3.5$4.6 million for the three months ended March 31, 20202021 compared to $4.3$1.5 million for the three months ended March 31, 2019.2020. Transaction-related expenses primarily relate to termination, restructuring, U.K. sale, strategic review management transition and other similar costs incurred in the respective periods, as summarized below (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 |
|
|
| Three Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Termination, restructuring, sale and strategic review costs |
| $ | 2,221 |
|
| $ | 2,282 |
|
Legal, accounting and other acquisition-related costs |
|
| 1,328 |
|
|
| 796 |
|
Management transition costs |
|
| — |
|
|
| 1,243 |
|
|
| $ | 3,549 |
|
| $ | 4,321 |
|
28
Provision for income taxes. For the three months ended March 31, 2020,2021, the provision for income taxes was $6.2 million, reflecting an effective tax rate of 21.2%, compared to $5.8 million, reflecting an effective tax rate of 14.5%, compared to $7.4 million, reflecting an effective tax rate of 20.0%23.4%, for the three months ended March 31, 2019.2020. The decrease in the effective tax rate for the three months ended March 31, 20202021 was primarily attributable to the application of the CARES Act. We recorded a discrete benefit during the three months ended March 31, 2020 resulting from a change in our valuation allowancepermanent deduction related to a decrease in the deferred tax asset on carried forward interest.equity-based compensation.
As we continue 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.
Revenue
Our revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and adolescent residential treatment. We receive 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; (iv) publicly funded sources in the U.K. (including the NHS, CCGs
37
and local authorities in England, Scotland and Wales) and (v)(iv) individual patients and clients. We determine 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.
The following table presents revenue by payor type and as a percentage of revenue in our U.S. Facilities for the three months ended March 31, 20202021 and 20192020 (dollars in thousands):
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||||
Commercial |
| $ | 143,142 |
|
|
| 28.1 | % |
| $ | 139,427 |
|
|
| 28.6 | % |
| $ | 162,702 |
|
|
| 29.5 | % |
| $ | 143,142 |
|
|
| 28.1 | % |
Medicare |
|
| 72,271 |
|
|
| 14.2 | % |
|
| 72,616 |
|
|
| 14.9 | % |
|
| 86,185 |
|
|
| 15.6 | % |
|
| 72,271 |
|
|
| 14.2 | % |
Medicaid |
|
| 260,044 |
|
|
| 51.1 | % |
|
| 239,191 |
|
|
| 49.0 | % |
|
| 274,620 |
|
|
| 49.8 | % |
|
| 260,044 |
|
|
| 51.1 | % |
Self-Pay |
|
| 27,034 |
|
|
| 5.3 | % |
|
| 31,732 |
|
|
| 6.5 | % |
|
| 22,443 |
|
|
| 4.1 | % |
|
| 27,034 |
|
|
| 5.3 | % |
Other |
|
| 6,726 |
|
|
| 1.3 | % |
|
| 4,994 |
|
|
| 1.0 | % |
|
| 5,249 |
|
|
| 1.0 | % |
|
| 6,726 |
|
|
| 1.3 | % |
Revenue |
| $ | 509,217 |
|
|
| 100.0 | % |
| $ | 487,960 |
|
|
| 100.0 | % |
| $ | 551,199 | �� |
|
| 100.0 | % |
| $ | 509,217 |
|
|
| 100.0 | % |
The following table presents revenue by payor type and as a percentage of revenue in our U.K. Facilities for the three months ended March 31, 2020 and 2019 (dollars in thousands):
|
| Three Months Ended March 31, |
| |||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||
U.K. public funded sources |
| $ | 246,136 |
|
|
| 90.0 | % |
| $ | 245,413 |
|
|
| 90.0 | % |
Self-Pay |
|
| 26,915 |
|
|
| 9.8 | % |
|
| 26,814 |
|
|
| 9.8 | % |
Other |
|
| 542 |
|
|
| 0.2 | % |
|
| 430 |
|
|
| 0.2 | % |
Revenue |
| $ | 273,593 |
|
|
| 100.0 | % |
| $ | 272,657 |
|
|
| 100.0 | % |
The following tables present a summary of our aging of accounts receivable at March 31, 20202021 and December 31, 2019:2020:
March 31, 20202021
|
| Current |
|
| 30-90 |
|
| 90-150 |
|
| >150 |
|
| Total |
|
| Current |
|
| 30-90 |
|
| 90-150 |
|
| >150 |
|
| Total |
| ||||||||||
Commercial |
|
| 16.1 | % |
|
| 5.7 | % |
|
| 2.8 | % |
|
| 6.6 | % |
|
| 31.2 | % |
|
| 22.5 | % |
|
| 5.6 | % |
|
| 2.6 | % |
|
| 6.5 | % |
|
| 37.2 | % |
Medicare |
|
| 10.4 | % |
|
| 2.0 | % |
|
| 0.6 | % |
|
| 1.3 | % |
|
| 14.3 | % |
|
| 13.0 | % |
|
| 1.8 | % |
|
| 0.6 | % |
|
| 1.8 | % |
|
| 17.2 | % |
Medicaid |
|
| 23.6 | % |
|
| 5.2 | % |
|
| 3.3 | % |
|
| 6.6 | % |
|
| 38.7 | % |
|
| 25.5 | % |
|
| 3.7 | % |
|
| 1.9 | % |
|
| 7.1 | % |
|
| 38.2 | % |
U.K. public funded sources |
|
| 4.7 | % |
|
| 2.9 | % |
|
| 0.0 | % |
|
| 0.0 | % |
|
| 7.6 | % | ||||||||||||||||||||
Self-Pay |
|
| 1.6 | % |
|
| 1.7 | % |
|
| 1.2 | % |
|
| 2.8 | % |
|
| 7.3 | % |
|
| 1.5 | % |
|
| 1.7 | % |
|
| 1.2 | % |
|
| 2.3 | % |
|
| 6.7 | % |
Other |
|
| 0.5 | % |
|
| 0.2 | % |
|
| 0.1 | % |
|
| 0.1 | % |
|
| 0.9 | % |
|
| 0.2 | % |
|
| 0.2 | % |
|
| 0.1 | % |
|
| 0.2 | % |
|
| 0.7 | % |
Total |
|
| 56.9 | % |
|
| 17.7 | % |
|
| 8.0 | % |
|
| 17.4 | % |
|
| 100.0 | % |
|
| 62.7 | % |
|
| 13.0 | % |
|
| 6.4 | % |
|
| 17.9 | % |
|
| 100.0 | % |
December 31, 20192020
|
| Current |
|
| 30-90 |
|
| 90-150 |
|
| >150 |
|
| Total |
|
| Current |
|
| 30-90 |
|
| 90-150 |
|
| >150 |
|
| Total |
| ||||||||||
Commercial |
|
| 15.2 | % |
|
| 6.2 | % |
|
| 3.9 | % |
|
| 6.3 | % |
|
| 31.6 | % |
|
| 19.8 | % |
|
| 5.6 | % |
|
| 2.2 | % |
|
| 6.3 | % |
|
| 33.9 | % |
Medicare |
|
| 10.3 | % |
|
| 1.4 | % |
|
| 0.4 | % |
|
| 0.9 | % |
|
| 13.0 | % |
|
| 12.0 | % |
|
| 1.2 | % |
|
| 0.6 | % |
|
| 1.5 | % |
|
| 15.3 | % |
Medicaid |
|
| 23.3 | % |
|
| 5.9 | % |
|
| 3.4 | % |
|
| 6.8 | % |
|
| 39.4 | % |
|
| 27.4 | % |
|
| 4.7 | % |
|
| 2.7 | % |
|
| 8.6 | % |
|
| 43.4 | % |
U.K. public funded sources |
|
| 6.3 | % |
|
| 1.6 | % |
|
| 0.0 | % |
|
| 0.0 | % |
|
| 7.9 | % | ||||||||||||||||||||
Self-Pay |
|
| 1.8 | % |
|
| 1.4 | % |
|
| 1.4 | % |
|
| 2.5 | % |
|
| 7.1 | % |
|
| 1.5 | % |
|
| 1.4 | % |
|
| 1.3 | % |
|
| 2.5 | % |
|
| 6.7 | % |
Other |
|
| 0.6 | % |
|
| 0.2 | % |
|
| 0.1 | % |
|
| 0.1 | % |
|
| 1.0 | % |
|
| 0.0 | % |
|
| 0.3 | % |
|
| 0.1 | % |
|
| 0.3 | % |
|
| 0.7 | % |
Total |
|
| 57.5 | % |
|
| 16.7 | % |
|
| 9.2 | % |
|
| 16.6 | % |
|
| 100.0 | % |
|
| 60.7 | % |
|
| 13.2 | % |
|
| 6.9 | % |
|
| 19.2 | % |
|
| 100.0 | % |
3829
Liquidity and Capital Resources
Cash provided by continuing operating activities for the three months ended March 31, 20202021 was $45.5$75.8 million compared to $43.7$16.6 million for the three months ended March 31, 2019.2020. The increase in operating cash flows primarily relates to an increase in earnings, a reduction in cash paid for interest and favorable working capital trends. Days sales outstanding were 3945 days atfor March 31, 20202021 compared to 4047 days at December 31, 2019.2020.
Cash used inprovided by continuing investing activities for the three months ended March 31, 20202021 was $74.2$1,368.6 million compared to $110.1cash used in continuing investing activities of $60.1 million for the three months ended March 31, 2019.2020. Cash used inprovided by investing activities for the three months ended March 31, 20202021 primarily consisted of $69.5$1,511.0 million of proceeds from U.K. Sale, $0.9 million of other and $0.1 million of proceeds from the sale of property and equipment offset by $84.8 million of settlement of foreign currency derivatives and $58.7 million of cash paid for capital expenditures, $3.1 million of cash paid for real estate and other of $1.7 million, offset by proceeds from sale of property and equipment of $0.2 million.expenditures. Cash paid for capital expenditures for the three months ended March 31, 20202021 consisted of $24.1$7.7 million of routine capital expenditures and $45.4$51.0 million of expansion capital expenditures. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue. Routine or maintenance capital expenditures were 3.1%1.4% of revenue for the three months ended March 31, 2020.2021. Cash used in continuing investing activities for the three months ended March 31, 20192020 primarily consisted of cash paid for acquisitions of $40.4 million, $69.2$58.4 million of cash paid for capital expenditures and $1.1 million of cash paid for real estate and other of $0.3 million offset by proceeds from sale of property and equipment of $0.9$1.7 million. Cash paid for capital expenditures for the three months ended March 31, 20192020 consisted of $18.5$10.9 million of cash paid for routine capital expenditures and $50.7$44.4 million of expansion capital expenditures.
Cash used in continuing financing activities for the three months ended March 31, 2021 was $1,648.5 million compared $12.7 million for the three months ended March 31, 2020. Cash used in continuing financing activities for the three months ended March 31, 2021 consisted of repayment of long-term debt of $2,224.6 million, principal payments on revolving credit facility of $270.0 million, payment of debt issuance costs of $9.9 million, distributions to noncontrolling interests of $0.4 million and other of $6.8 million offset by common stock withheld for minimum statutory taxes of $8.2 million, borrowings of long-term debt of $425.0 million and borrowings on revolving credit facility of $430.0 million. Cash used in continuing financing activities for the three months ended March 31, 2020 was $13.4 million compared to cash provided by financing activities of $58.5 million for the three months ended March 31, 2019. Cash used in financing activities for the three months ended March 31, 2020primarily consisted of principal payments of long-term debt of $10.6 million, common stock withheld for minimum statutory taxes of $1.4 million, $0.3 million of distributions to noncontrolling interests of $0.3 millioninterest and other of $1.1 million. Cash provided by financing activities for the three months ended March 31, 2019 primarily consisted of borrowings on revolving credit facility of $71.6 million offset by principal payments of long-term debt of $8.2 million, common stock withheld for minimum statutory taxes of $1.3 million and other of $3.5$0.4 million.
We had total available cash and cash equivalents of $81.0$178.9 million and $124.2$378.7 million at March 31, 20202021 and December 31, 2019,2020, respectively, of which approximately $26.1$11.1 million and $23.2$17.0 million was held by our foreign subsidiaries, respectively. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention to permanently reinvest our foreign cash and cash equivalents outside of the U.S.
In April 2020 we were able to take advantage of certain relief programs offered through the CARES Act, including receipt of approximately $20 million relating to the initial portions of the PHSSE funds and approximately $45 million of payments from the CMS’ Accelerated and Advance Payment Program. We anticipate receiving additional PHSSE Fund grants in future disbursements. We further anticipate a 2% increase in our facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration provided for in the CARES Act.
We believe existing cash on hand, cash flows from operations, the availability under our revolving line of credit and cash from additional financing wouldwill be sufficient to meet our expected liquidity needs during the next 12 months.
AmendedNew Credit Facility
We entered into a New Credit Facility on March 17, 2021. This New Credit Facility provides for a $600.0 million Revolving Facility and Restateda $425.0 million Term Loan Facility with 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 we may borrow up to $20.0 million.
As a part of the closing of the New Credit Facility on March 17, 2021, we (i) refinanced and terminated our Prior Credit Facility and (ii) financed the redemption of all of our outstanding 5.625% Senior Notes.
We 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 our workers’ compensation insurance program at March 31, 2021.
The New Credit Facility requires quarterly term loan principal repayments for our 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.
We have 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 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 our Consolidated EBITDA (as defined in the New Credit Facility) 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.
30
Subject to certain exceptions, substantially all of our existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries are required to guarantee the repayment of its obligations under the New Credit Facility. Borrowings under the Senior Facilities bear interest at a floating rate, which will initially be, at our 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 interest rates and the unused line fee on unused commitments related to the Senior Facilities are based upon the following pricing tiers:
Pricing Tier |
| Consolidated Total Net Leverage Ratio |
| Eurodollar Rate Loans and Letter of Credit Fees |
|
| Base Rate and Swing Line Loans |
|
| Commitment Fee |
| |||
1 |
| ≥ 4.50:1.0 |
|
| 2.250 | % |
|
| 1.250 | % |
|
| 0.350 | % |
2 |
| <4.50:1.0 but ≥ 3.75:1.0 |
|
| 2.000 | % |
|
| 1.000 | % |
|
| 0.300 | % |
3 |
| <3.75:1.0 but ≥ 3.00:1.0 |
|
| 1.750 | % |
|
| 0.750 | % |
|
| 0.250 | % |
4 |
| <3.00:1.0 but ≥ 2.25:1.0 |
|
| 1.500 | % |
|
| 0.500 | % |
|
| 0.200 | % |
5 |
| <2.25:1.0 |
|
| 1.375 | % |
|
| 0.375 | % |
|
| 0.200 | % |
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
We entered into the Senior Secured Credit Facility on April 1, 2011. On December 31, 2012, we entered into the Amended and RestatedPrior Credit AgreementFacility which amended and restated the Senior Secured Credit Facility. We have amended the Amended and RestatedPrior Credit AgreementFacility from time to time as described in our prior filings with the SEC.
On February 6, 2019, we entered into the Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment, among other things, amended the definition of “Consolidated EBITDA” to remove the cap on non-cash charges, losses and expenses related to the impairment of goodwill, which in turn provided increased flexibility to us in terms of our financial covenants.
On February 27, 2019, we entered into the Twelfth Amendment to the Amended and Restated Credit Agreement. The Twelfth Amendment, among other things, modified certain definitions, including “Consolidated EBITDA”, and increased our permitted Maximum Consolidated Leverage Ratio, thereby providing increased flexibility to us in terms of our financial covenants.
On April 21, 2020, we entered into the Thirteenth Amendment to the Amended and RestatedPrior Credit Agreement.Facility. The Thirteenth Amendment amended the Consolidated Leverage Ratio in the existingprior covenant to increase thesuch leverage ratio for the rest of 2020.
39On November 13, 2020, we entered into the Fourth Repricing Facilities Amendment to the Prior Credit Facility. The Fourth Repricing Facilities Amendment extended the maturity date of each of the prior 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, we 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 at December 31, 2020.
On January 5, 2021, we made a voluntary payment of $105.0 million on the Tranche B-4 Facility. On January 19, 2021, we 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, we 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.
31
We had $485.0 million of availability under the revolving line of credit and had standby letters of credit outstanding of $15.0 million related to security for the payment of claims required by our workers’ compensation insurance program at March 31, 2020. In early April 2020, we borrowed $100.0 million on the revolving line of credit to enhance our cash position in response to the potential impact of COVID-19 on our future liquidity. Borrowings under the revolving line of credit are subject to customary conditions precedent to borrowing.
The Amended and Restated Credit Agreement requires quarterly term loan principal repayments of our TLA Facility of $7.1 million for September 30, 2020 to December 31, 2020, and $9.5 million for March 31, 2021 to September 30, 2021, with the remaining principal balance of the TLA Facility due on the maturity date of November 30, 2021. We are required to repay the Tranche B-3 Facility in equal quarterly installments of $1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-3 Facility of $447.3 million due on February 11, 2022. We are required to repay the Tranche B-4 Facility in equal quarterly installments of approximately $2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-4 Facility of $854.4 million due on February 16, 2023.
Borrowings under the Amended and Restated Credit Agreement are guaranteed by each of our wholly-owned domestic subsidiaries (other than certain excluded subsidiaries) and are secured by a lien on substantially all of the Company and such subsidiaries’ assets. Borrowings with respect to the TLA Facility and our revolving credit facility (collectively, “Pro Rata Facilities”) under the Amended and Restated Credit Agreement bear interest at a rate tied to our Consolidated Leverage Ratio (defined as consolidated funded debt net of up to $50.0 million of unrestricted and unencumbered cash to consolidated EBITDA, in each case as defined in the Amended and Restated Credit Agreement). The Applicable Rate (as defined in the Amended and Restated Credit Agreement) for the Pro Rata Facilities was 2.50% for Eurodollar Rate Loans (as defined in the Amended and Restated Credit Agreement) and 1.50% for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) at March 31, 2020. Eurodollar Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) (based upon the LIBOR Rate (as defined in the Amended and Restated Credit Agreement) prior to commencement of the interest rate period). Base Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. At March 31, 2020, the Pro Rata Facilities bore interest at a rate of LIBOR plus 2.50%. In addition, we are required to pay a commitment fee on undrawn amounts under our revolving credit facility.
The interest rates and the unused line fee on unused commitments related to the Pro Rata Facilities are based upon the following pricing tiers:
Pricing Tier |
| Consolidated Leverage Ratio |
| Eurodollar Rate Loans |
|
| Base Rate Loans |
|
| Commitment Fee |
| |||
1 |
| < 3.50:1.0 |
|
| 1.50 | % |
|
| 0.50 | % |
|
| 0.20 | % |
2 |
| >3.50:1.0 but < 4.00:1.0 |
|
| 1.75 | % |
|
| 0.75 | % |
|
| 0.25 | % |
3 |
| >4.00:1.0 but < 4.50:1.0 |
|
| 2.00 | % |
|
| 1.00 | % |
|
| 0.30 | % |
4 |
| >4.50:1.0 but < 5.25:1.0 |
|
| 2.25 | % |
|
| 1.25 | % |
|
| 0.35 | % |
5 |
| >5.25:1.0 |
|
| 2.50 | % |
|
| 1.50 | % |
|
| 0.40 | % |
Eurodollar Rate Loans with respect to the Tranche B-3 Facility bear interest at the Tranche B-3 Facility Applicable Rate (as defined below) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period). Base Rate Loans bear interest at the Tranche B-3 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Tranche B-3 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%. The Tranche B-4 Facility bears interest as follows: Eurodollar Rate Loans bear interest at the Applicable Rate (as defined in the Amended and Restated Credit Agreement) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period) and Base Rate Loans bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%.
The lenders who provided the Tranche B-3 Facility and Tranche B-4 Facility are not entitled to benefit from our maintenance of the financial covenants under the Amended and Restated Credit Agreement. Accordingly, if we fail to maintain the financial covenants, such failure shall not constitute an event of default under the Amended and Restated Credit Agreement with respect to the Tranche B-3 Facility or Tranche B-4 Facility until and unless the Amended and Restated Senior Credit Facility is accelerated or the commitment of the lenders to make further loans is terminated.
40
The Amended and Restated Credit Agreement requires us and our subsidiaries to comply with customary affirmative, negative and financial covenants, including a fixed charge coverage ratio, consolidated leverage ratio and consolidated senior secured leverage ratio. We may be required to pay all of our indebtedness immediately if we default on any of the numerous financial or other restrictive covenants contained in any of our material debt agreements. Set forth below is a brief description of such covenants, all of which are subject to customary exceptions, materiality thresholds and qualifications:
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At March 31, 2020, we were in compliance with all of the above covenants.
Senior Notes
6.125% Senior Notes Due 2021
On March 12, 2013, we issued $150.0 million of 6.125%5.500% Senior Notes due 2021.2028
On June 24, 2020, we issued $450.0 million of 5.500% Senior Notes due 2028. The 6.125%5.500% Senior Notes mature on March 15, 2021July 1, 2028 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. At March 31, 2020, the 6.125% Senior Notes are included in current portion of debt on the condensed consolidated balance sheet.
5.125% Senior Notes due 2022
On July 1, 2014, we issued $300.0 million of 5.125% Senior Notes due 2022. The 5.125% Senior Notes mature on July 1, 2022 and bear interest at a rate of 5.125%5.500% per annum, payable semi-annually in arrears on January 1 and July 1 of each year.year, commencing on January 1, 2021.
5.625%5.000% Senior Notes due 20232029
On February 11, 2015,October 14, 2020, we issued $375.0$475.0 million of 5.625% Senior Notes due 2023. On September 21, 2015, we issued $275.0 million of additional 5.625%5.000% 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, we have outstanding an aggregate of $650.0 million of 5.625% Senior Notes. The 5.625%5.000% Senior Notes mature on FebruaryApril 15, 20232029 and bear interest at a rate of 5.625%5.000% per annum, payable semi-annually in arrears on FebruaryApril 15 and AugustOctober 15 of each year.
41
Tableyear, commencing on April 15, 2021. We used the net proceeds of contents
6.500%the 5.000% Senior Notes due 2024
On February 16, 2016, we issued $390.0to prepay approximately $453.3 million of 6.500%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, due 2024. The 6.500% Senior Notes mature on March 1, 2024we recorded a debt extinguishment charge of $2.9 million, including the write-off of discount and bear interest at a ratedeferred financing costs of 6.500% per annum, payable semi-annuallythe Tranche B-3 Facility, which was recorded in arrears on March 1 and September 1debt extinguishment costs in the consolidated statements of eachoperations for the year beginning on September 1, 2016.ended December 31, 2020.
The indentures governing the Senior Notes contain covenants that, among other things, limit our ability and the ability of our 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 our assets; and (vii) create liens on assets.
The Senior Notes issued by us are guaranteed by each of our subsidiaries that guarantee our obligations under the Amended and Restated SeniorPrior Credit Facility. The guarantees are full and unconditional and joint and several.
We may redeem the Senior Notes at our 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, we issued $375.0 million of 5.625% Senior Notes due 2023. On September 21, 2015, we 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, we have 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, we redeemed the 5.625% Senior Notes.
6.500% Senior Notes due 2024
On February 16, 2016, we issued $390.0 million of 6.500% Senior Notes due 2024. 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, we redeemed the 6.500% Senior Notes.
Redemption of 5.625% Senior Notes and 6.500% Senior Notes
On January 29, 2021, we 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, we satisfied and discharged the indentures governing the 6.500% Senior Notes. In connection with the redemption of the 6.500% Senior Notes, we 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, we issued $150.0 million of 6.125% Senior Notes due 2021. 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, we redeemed the 6.125% Senior Notes.
32
5.125% Senior Notes due 2022
On July 1, 2014, we issued $300.0 million of 5.125% Senior Notes due 2022. 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, we redeemed the 5.125% Senior Notes.
Redemption of 6.125% Senior Notes and 5.125% Senior Notes
On June 10, 2020, we issued conditional notices of full redemption providing for the redemption in full of the 6.125% Senior Notes and 5.125% Senior Notes on Redemption Date, in each case at the Redemption Price. On June 24, 2020, we 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, we 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.
Contractual Obligations
The following table presents a summary of contractual obligations at March 31, 20202021 (dollars in thousands):
|
| Payments Due by Period |
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| Payments Due by Period |
| ||||||||||||||||||||||||||||||||||
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| Less Than 1 Year |
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| 1-3 Years |
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| 3-5 Years |
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| More Than 5 Years |
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| Total |
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| Less Than 1 Year |
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| 1-3 Years |
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| 3-5 Years |
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| More Than 5 Years |
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| Total |
| ||||||||||
Long-term debt (a) |
| $ | 342,681 |
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| $ | 2,812,016 |
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| $ | 415,366 |
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| $ | — |
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| $ | 3,570,063 |
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| $ | 72,421 |
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| $ | 164,291 |
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| $ | 647,998 |
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| $ | 1,057,875 |
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| $ | 1,942,585 |
|
Operating lease liabilities (b) |
|
| 60,759 |
|
|
| 108,659 |
|
|
| 93,414 |
|
|
| 639,780 |
|
|
| 902,612 |
|
|
| 24,642 |
|
|
| 38,465 |
|
|
| 26,268 |
|
|
| 51,895 |
|
|
| 141,270 |
|
Finance lease liabilities |
|
| 7,292 |
|
|
| 37,314 |
|
|
| 2,432 |
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|
| 24,817 |
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|
| 71,855 |
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|
| 32,205 |
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|
| 1,980 |
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|
| 2,120 |
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| 23,728 |
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| 60,033 |
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Total obligations and commitments |
| $ | 410,732 |
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| $ | 2,957,989 |
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| $ | 511,212 |
|
| $ | 664,597 |
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| $ | 4,544,530 |
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| $ | 129,268 |
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| $ | 204,736 |
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| $ | 676,386 |
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| $ | 1,133,498 |
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| $ | 2,143,888 |
|
(a) | Amounts include required principal and interest payments. The projected interest payments reflect the interest rates in place on our variable-rate debt at March 31, |
(b) | Amounts exclude variable components of lease payments. |
Off-Balance Sheet Arrangements
At March 31, 2020,2021, we had standby letters of credit outstanding of $15.0$18.0 million related to security for the payment of claims as required by our workers’ compensation insurance program.
Critical Accounting Policies
Our goodwill and other indefinite-lived intangible assets, which consist of licenses and accreditations, trade names and certificates of need intangible assets that are not amortized, are evaluated for impairment annually during the fourth quarter or more frequently if events indicate the carrying value of a reporting unit may not be recoverable. We haveAs of our most recent impairment test on October 1, 2020, we had two operating segments for segment reporting purposes, U.S. Facilities and U.K. Facilities, each of which representsrepresented a reporting unit for purposes of the Company’sour goodwill impairment test.
Our annual goodwill impairment and other indefinite-lived intangible assets test performed as of October 1, 2019 resulted in no impairment charges.
During late March 2020 results in our U.S. Facilities and U.K. Facilities were affected by actions taken to curtail the spread of COVID-19. Based onconsidered recent financial performance, including the impacts of COVID-19 on certain portions of the U.K. business. The 2020 impairment test of the U.K. Facilities indicated carrying value of the reporting unit exceeded the estimated fair value and current forecasts, we believe it is more likely than not thatresulted in a non-cash loss on impairment of the fair valuesremaining goodwill of eachthe U.K. Facilities of $356.2 million. As of our reporting units exceeds the carrying values of each reporting unit. At March 31, 2020, no impairment indicators were present. Therefore, a quantitative impairment test was not required. We will continue to monitor our business, financial performance and forecasts for indicators of impairment prior to our annual impairment test on October 1, 2020. Continued disruptions to2020, the fair value of our business as a result of COVID-19 pandemic could have a material adverse effect on our results of operations, financial condition, cash flowsU.S Facilities reporting unit substantially exceeded its carrying value, and ability to service our indebtedness and may affect the amounts reported in the consolidated financial statements including those relatedtherefore no impairment was recorded.
Due to the potentialclassification of the U.K. Facilities in discontinued operations, we have one operating segment, behavioral health services, for segment reporting purposes. The behavioral healthcare services operating segment represents one reporting unit for future goodwill impairment of goodwill and long-lived assets.tests.
42
There have been no material changes in our critical accounting policies at March 31, 20202021 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.
33
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Interest Rate Risk
Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at March 31, 20202021 was composed of $1.3 billion$915.0 million of fixed-rate debt and $1.6 billion$581.1 million of variable-rate debt with interest based on LIBOR plus an applicable margin. A hypothetical 10% increase in interest rates (which would equate to a 0.35%0.19% higher rate on our variable rate debt) would decrease our net income and cash flows by $3.2$0.8 million on an annual basis based upon our borrowing level at March 31, 2020.
LIBOR and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences. The U.K.’s Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR rates after 2021, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve. If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future debt obligations may be adversely affected. Management continues to evaluate new and existing contracts for the potential impact of the discontinuation of LIBOR.
Foreign Currency Risk
The functional currency for our U.K. facilities is the British pound or GBP. Our revenue and earnings are sensitive to changes in the GBP to USD exchange rate from the translation of our earnings into USD at exchange rates that may fluctuate. Based upon the level of our U.K. operations relative to the Company as a whole, a hypothetical 10% change in the exchange rate (which would equate to an increase or decrease in the exchange rate of 0.13) would cause a change in our net income of $6.9 million on an annual basis.
In May 2016, we entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency exchange risk by effectively converting a portion of our fixed-rate USD denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rate, GBP-denominated debt of £449.3 million. In August 2019, we terminated our existing net investment cross currency swap derivatives of $105.0 million. Cash received from the termination of the cross currency swap derivatives is included in investing activities in the condensed consolidated statement of cash flows. The related gain from this termination is included in accumulated other comprehensive loss in accordance with ASC 815-30-40-1.
In August 2019, we 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 our 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, we will receive semi-annual interest payments in USD from the counterparties at fixed interest rates, and we will make semi-annual interest payments in GBP to the counterparties at fixed interest rates. The interest payments under the cross-currency swap agreements result in £25.4 million of annual cash flows from our U.K. business being converted to $35.8 million. The cross currency swap agreements limit the impact of changes in the exchange rate on our cash flows and leverage.2021.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our management conducted an evaluation, with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended March 31, 20202021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
4334
PART II – OTHER INFORMATION
Item 1. | Legal Proceedings |
We are, from timeInformation with respect 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 our individual facilities have received, and from time to time, other facilities may receive, subpoenas, civil investigative demands, audit requests and other inquiries from, andthis item may be subject to investigation by, federalfound in Note 19—Commitments 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 officersContingencies in the lawsuit styled St. Clair County Employees’ Retirement System v. Acadia Healthcare Company, Inc., et al., Case No. 3:19-cv-00988,accompanying notes to our consolidated financial statements beginning on Page 6 of this Quarterly Report on Form 10-Q, which information 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 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 and ordered stayed pending a ruling on the motion to dismiss that was filed in the St. Clair County v. Acadia Healthcare case described above. 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 Livingincorporated herein 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). At this time, we are unable to quantify any potential liability in connection with this litigation because the cases are in their early stages.
In the fall of 2017, Office of Inspector General issued subpoenas to three of our 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 our facilities in December 2017 requesting certain documents from November 2012 to the date of the demand. In April 2019, the Office of Inspector General 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. We are cooperating with the government’s investigation but are not able to quantify any potential liability in connection with these investigations.
44
reference.
Item 1A. | Risk Factors |
In addition to the other information set forth in this report, an investor should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The Company has updated and supplemented certain risk factors previously disclosed in its periodic reports filed with the Securities and Exchange Commission as set forth below.2020. The risks described herein and those in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019,2020, are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems immaterial also may materially, adversely affect the Company’s business, financial condition, operating results or cash flows.
The COVID-19 global pandemic is affecting our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the U.S. and U.K. economies remain unstable for a significant amount of time or if patient volumes at our facilities do not recover quickly.
The global pandemic of COVID-19 is affecting our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. COVID-19 is still rapidly evolving and much of its impact remains unknown and difficult to predict; however, it has adversely affected our business operations in recent weeks, is expected to impact our financial performance for the second quarter of 2020, and potentially could negatively impact our financial performance for the year ending December 31, 2020 or longer.
COVID-19 may result in fewer referrals to our facilities and lower voluntary admissions as individuals may be less inclined to leave their homes and seek treatment all of which could result in reduced admissions and patient volumes. If employees and/or patients at a facility are infected with COVID-19, there is a risk that the virus could spread to others at the facility and impact the operations of such facility. It is difficult to predict the duration of lower patient volume, and, once restrictions are eased, we cannot predict the timing of returning to pre-COVID volumes, if at all.
We are also experiencing supply chain disruptions and could experience significant price increases, in equipment, pharmaceuticals and medical supplies, particularly PPE. Pandemic-related staffing difficulties and equipment, pharmaceutical and medical supplies shortages may impact our ability to treat patients at our facilities. Such shortages could lead to us paying higher prices for supplies, equipment and labor and an increase in overtime hours paid to our employees. In recent periods, we have experienced higher staffing costs particularly in our U.K. Facilities, which issues could be amplified as a result of COVID-19 and increased competition and cost for nurses and other healthcare personnel needed for our business.
Steps that we are taking to mitigate the financial impact may have negative impacts on our financial condition and results of operations, including:
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Even after taking into account the actions described above intended to increase financial flexibility, the volume reductions we are experiencing will likely result in materially higher losses and material decreases in Adjusted EBITDA during the second quarter of 2020 and potentially for subsequent quarters. We cannot predict if or when utilization may return to normal.
Broad economic factors resulting from COVID-19, including increasing unemployment rates and reduced consumer spending, could also negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables. Business closings and layoffs in the areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services as rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working
45
capital. If general economic conditions continue to deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed.
In addition, our results and financial condition may be further adversely affected by future federal or state laws, regulations, orders, or other governmental or regulatory actions addressing the current COVID-19 pandemic or the U.S. or U.K. healthcare systems, which, if adopted, could result in direct or indirect restrictions to our business, financial condition, results of operations and cash flow. We may also be subject to negative press and/or lawsuits from patients, employees and others exposed to COVID-19 at our facilities. Such actions may involve large demands, as well as substantial costs to resolve. Our professional and general liability insurance may not cover all claims against us.
Furthermore, the COVID-19 pandemic has caused disruption in the financial markets and the businesses of financial institutions. These factors have caused a slowdown in the decision-making of these institutions, which may affect the timing on which we may obtain any additional funding. As a result, there can be no assurance that we will be able to access additional funds on terms acceptable to us, if at all.
As previously disclosed, we have suspended our pursuit of a strategic transaction for our U.K. business and there is no assurance as to the timing, terms or viability of a restart of such a process which could have a material adverse effect on our business plans and financial condition. In addition, we may not be able to pursue organic growth initiatives and/or acquisition and joint venture opportunities previously planned or expected for our business.
The foregoing and other continued disruptions to our business as a result of the COVID-19 pandemic have had and are likely to continue to have a material adverse effect on our business and could have a material adverse effect on our results of operations, financial condition, cash flows and our ability to service our indebtedness. Additionally, the COVID-19 pandemic (including governmental responses, broad economic impacts and market disruptions) has heightened the materiality of certain other risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019.
Finally, although we are reviewing and intend to seek any available benefits under the CARES Act, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. Certain of the programs we seek to access under the CARES Act have not previously been administered on the present scale or at all. Government or third party program administrators may be unable to cope with the volume of applications in the near term and any benefits we receive may not be as extensive as we currently estimate, may impose additional conditions and restrictions on our operations or may otherwise provide less relief than we contemplate. Accessing these programs and our response to the COVID-19 pandemic have required our management team to devote extensive resources and is likely to continue to do so in the near future, which may negatively affect our ability to implement our business plan and respond to opportunities.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
During the three months ended March 31, 2020,2021, the Company withheld shares of Company common stock to satisfy employee minimum statutory tax withholding obligations payable upon the vesting of restricted stock, as follows:
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
|
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||||||
January 1 – January 31 |
|
| 5,651 |
|
| $ | 33.22 |
|
|
| — |
|
|
| — |
|
|
| 15,301 |
|
| $ | 18.00 |
|
|
| — |
|
|
| — |
|
February 1 – February 29 |
|
| 14,450 |
|
|
| 31.99 |
|
|
| — |
|
|
| — |
| ||||||||||||||||
February 1 – February 28 |
|
| 28,352 |
|
|
| 34.19 |
|
|
| — |
|
|
| — |
| ||||||||||||||||
March 1 – March 31 |
|
| 26,277 |
|
|
| 26.92 |
|
|
| — |
|
|
| — |
|
|
| 42,296 |
|
|
| 26.68 |
|
|
| — |
|
|
| — |
|
Total |
|
| 46,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 85,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4635
Item 6. | Exhibits |
Exhibit No. |
| Exhibit Description |
|
| |
3.1 |
| Amended and Restated Certificate of Incorporation, as amended. (1) |
|
| |
3.2 |
| Amended and Restated Bylaws of the Company, as amended. (1)
|
10.1 |
| |
10.2 | ||
22* | List of Subsidiary Guarantors and Issuers of Guaranteed Securities. | |
|
|
|
31.1* |
| |
|
| |
31.2* |
| |
|
| |
32* |
| |
|
| |
101.INS** |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document. |
|
| |
101.SCH** |
| Inline XBRL Taxonomy Extension Schema Document. |
|
| |
101.CAL** |
| Inline XBRL Taxonomy Calculation Linkbase Document. |
|
| |
101.DEF** |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
| |
101.LAB** |
| Inline XBRL Taxonomy Label Linkbase Document. |
|
| |
101.PRE** |
| Inline XBRL Taxonomy Presentation Linkbase Document. |
|
|
|
104 |
| The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, |
(1) | Incorporated by reference to exhibits filed with the Company’s Current Report on Form 8-K filed May 25, 2017 (File No. 001-35331). |
(2) | Incorporated by reference to exhibits filed with the Company’s Current Report on Form 8-K filed |
* | Filed herewith. |
** The XBRL related information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
4736
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Acadia Healthcare Company, Inc. | ||
|
| |
By: |
| /s/ David M. Duckworth |
|
| David M. Duckworth |
|
| Chief Financial Officer |
Dated: May 5, 2020April 30, 2021
4837