UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20172022
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto
Commission File Number:001-35331
ACADIA HEALTHCARE COMPANY, INC.Acadia Healthcare Company, Inc.
(Exact name of registrant as specified in its charter)
6100 Tower Circle, Suite 1000 Franklin, Tennessee 37067 (Address, including zip code, of (615) 861-6000 (Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
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 Rule12b-2 of the Exchange Act). Yes ☐ No ☒
ACADIA HEALTHCARE COMPANY, INC. QUARTERLY REPORT ONFORM 10-Q TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION Acadia Healthcare Company, Inc. Condensed Consolidated Balance Sheets (Unaudited)
See accompanying notes. 1 Acadia Healthcare Company, Inc. Condensed Consolidated Statements of (Unaudited)
See accompanying notes. 2 Acadia Healthcare Company, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited)
See accompanying notes. 3 Acadia Healthcare Company, Inc. Condensed Consolidated (Unaudited) (In thousands)
See accompanying notes. 4 Acadia Healthcare Company, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
See accompanying notes. 5 Acadia Healthcare Company, Inc. Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.”) On January 19, 2021, the Company completed the sale of its operations in the United Kingdom (“U.K.”) to RemedcoUK Limited, a company organized under the laws of England and Basis of Presentation The business of the Company is conducted through limited liability companies, partnerships andC-corporations. The Company’s consolidated financial statements include the accounts of the Company and all subsidiaries controlled by the Company through 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 During March 2020, the global pandemic of the novel coronavirus known as COVID-19 (“COVID-19”) began to affect the Company’s facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. At many of the Company’s facilities, employees and/or patients have tested positive for COVID-19. The Company is committed to protecting the health of its communities and continues to respond to the evolving COVID- 19 situation while taking steps to provide quality care and protect the health and safety of patients and employees. Nevertheless, the Company could continue to be impacted by COVID-19 if new strains of the virus cause additional disruptions. The COVID-19 pandemic could have a material adverse effect on the Company’s 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 the prior
In 6 Accounting—Health and Welfare Benefit Plans that account for a transaction with a government by applying a grant or contribution accounting model by analogy to other accounting guidance (for example, a grant model within IAS 20, Accounting for
In March 2020, the FASB issued 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 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. The Company continues to evaluate the impact of ASU 2021-10 and does not expect a significant impact on the Company’s consolidated financial statements.
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 As the Company’s performance obligations relate to
The Company’s facilities and services provided by the facilities can generally be classified into the following categories: acute inpatient psychiatric facilities; specialty treatment facilities; and residential treatment centers. Acute inpatient psychiatric facilities. Acute inpatient psychiatric facilities provide a high level of care in order to stabilize patients that are either a threat to themselves or to others. The acute setting provides 24-hour observation, daily intervention and monitoring by psychiatrists. Specialty treatment facilities. Specialty treatment facilities include residential recovery facilities, eating disorder facilities and comprehensive treatment centers. The Company provides a comprehensive continuum of care for adults with addictive disorders and co-occurring mental disorders. Inpatient, including detoxification and rehabilitation, partial hospitalization and outpatient treatment programs give patients access to the least restrictive level of care. Residential treatment centers. Residential treatment centers treat patients with behavioral disorders in a non-hospital setting, including outdoor programs. The facilities balance therapy activities with social, academic and other activities. The table below presents total revenue attributed to each category (in thousands):
The Company receives payments from the following sources for services rendered in its 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”); and (iv) individual patients and clients. 7 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 the Company’s facilities have contracts containing variable consideration. However, it is unlikely a significant reversal of revenue will occur when the uncertainty is resolved, and therefore, the Company has included the variable consideration in the The following table presents the Company’s revenue by payor type and as a percentage of revenue (in thousands):
Contract liabilities consisted of unearned revenue from CMS’ Accelerated and Advance Payment Program and other advances. In April 2020, the Company received approximately $45 million from CMS’ Accelerated and Advance Payment Program for Medicare providers. Of the $45 million of advance payments received in 2020, the Company repaid approximately $25 million of advance payments during 2021 and made additional repayments of approximately $7 million and $15 million during the three and six month periods ended June 30, 2022, respectively. The Company will continue to repay the remaining balance throughout the rest of 2022. Contract liabilities of $20.2 million and $30.4 million are included in other accrued liabilities at June 30, 2022 and December 31, 2021, respectively, on the condensed consolidated balance sheets. A summary of the
The following table sets forth the computation of basic and diluted earnings per share for the three and
Approximately
The Company’s strategy is to acquire and
On
The
The fair values assigned to certain assets acquired and liabilities assumed by the Company have been estimated on a preliminary basis and are subject to change as new facts and circumstances emerge that were present at the date of acquisition. Specifically, the Company is further assessing the valuation of intangible assets and certain tax matters as well as certain receivables and assumed liabilities of CenterPointe. The qualitative factors comprising the goodwill acquired in the Transaction-related expenses Transaction-related expenses represent costs primarily related to legal, accounting, termination, restructuring, management transition, acquisition and other similar costs. Transaction-related expenses comprised the following costs for the three and
10
Other current assets consisted of the following (in thousands):
Property and equipment consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):
The Company has recorded assets held for sale within other current assets on the condensed consolidated balance sheets for closed properties actively marketed of $14.1 million and $15.8 million as of June 30, 2022 and December 31, 2021, respectively. During the second quarter of 2021, the Company opened a 260-bed replacement facility in Pennsylvania and recorded a non-cash property impairment charge of $23.2 million for the existing facility.
Other identifiable intangible assets and related accumulated amortization consisted of the following
All of the Company’s definite-lived intangible assets
The following
On January 19, 2021, the Company completed the U.K. Sale pursuant to a Share Purchase Agreement in which it sold all of the securities of AHC-WW Jersey Limited, a private limited liability company incorporated in Jersey and a subsidiary of the Company, which constituted the entirety of the Company’s U.K. business operations.The U.K. Sale resulted in approximately $1,525 million of gross proceeds before deducting the settlement of existing foreign currency hedging liabilities of $85 million based on the current British Pounds (“GBP”) to U.S. Dollars (“USD”) exchange rate, cash retained by the buyer and transaction costs. The Company used the net proceeds of approximately $1,425 million (excluding cash retained by the buyer) along with cash from the balance sheet to reduce debt by $1,640 million during the first quarter of 2021 as described in Note 12 – 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.
As part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the U.S. government announced it would offer $100 billion of relief to eligible healthcare providers. On April 24, 2020, then President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act (the “PPP Act”). Among other things, the PPP Act allocated $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion allocated under the PPP Act is in addition to the $100 billion allocated to healthcare providers for the same purposes in the CARES Act and has been disbursed to providers under terms and conditions similar to the CARES Act funds. During 2020, the Company participated in certain relief programs offered through the CARES Act, including receipt of approximately $34.9 million relating to the Public Health and Social Services Emergency Fund (the “PHSSE Fund”), also known as the Provider Relief Fund. During the fourth quarter of 2020, the Company recorded approximately $32.8 million of income from provider relief fund related to PHSSE funds received in 2020. 12 In 2021, the Company received $24.2 million of additional funds from the PHSSE Fund. During the fourth quarter of 2021, the Company recorded $17.9 million of income from provider relief fund related to PHSSE funds received. During the three months ended June 30, 2022, the Company received $7.7 million of additional funds from the PHSSE Fund and $14.2 million from the American Rescue Plan (“ARP”) Rural Payments for Hospitals. During the second quarter of 2022, the Company recorded $8.6 million of income from provider relief fund related to PHSSE funds received. The remaining unrecognized funds are included in other accrued liabilities on the consolidated balance sheets at June 30, 2022 and December 31, 2021. During 2020, the Company applied for and received approximately $45 million of payments from the CMS Accelerated and Advance Payment Program. Of the $45 million of advance payments received in 2020, the Company repaid approximately $25 million of advance payments during 2021 and made additional repayments of approximately $7 million and $15 million, respectively, during the three and six months ended June 30, 2022. The Company will continue to repay the remaining balance throughout the rest of 2022. In addition, the Company received a 2% increase in facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on April 1, 2022 and was eliminated effective July 1, 2022. The CARES Act also provides for certain federal income and other tax changes. The Company 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. The Company repaid half of the $39 million of payroll tax deferrals during the third quarter of 2021 and expects to repay the remaining portion in the second half of 2022, which is included in accrued salaries and benefits on the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021.
Other accrued liabilities consisted of the following (in thousands):
Long-term debt consisted of the following (in thousands):
13 New Credit Facility The Company entered into a new senior credit facility (the “New Credit Facility”) on March 17, 2021. This New Credit Facility provides for a $600.0 million senior secured revolving credit facility (the “Revolving Facility”) and a $425.0 million senior secured term loan facility (the “Term Loan Facility” and, together with the Revolving Facility, the “Senior Facilities”), each maturing on March 17, 2026 unless extended in accordance with the terms of the New Credit Facility. The Revolving Facility further provides for (i) up to $20.0 million to be utilized for the issuance of letters of credit and (ii) the availability of a swingline facility under which the Company may borrow up to $20.0 million. As a part of the closing of the New Credit Facility on March 17, 2021, the Company (i) refinanced and terminated the Company’s prior credit facilities under the Amended and Restated Credit Agreement, dated as of December 31, 2012 (the “Prior Credit Facility”) and (ii) financed the redemption of all of the Company’s outstanding 5.625% Senior Notes due 2023 (the “5.625% Senior Notes”). During the six months ended June 30, 2022, the Company repaid $85.0 million of the balance outstanding on the Revolving Facility. The Company had $511.6 million of availability under the Revolving Facility and had standby letters of credit outstanding of $3.4 million related to security for the payment of claims required by its workers’ compensation insurance program at June 30, 2022. The New Credit Facility requires quarterly term loan principal repayments for the Term Loan Facility of $5.3 million for September 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 17, 2026. The Company has the ability to increase the amount of the Senior Facilities, which may take the form of increases to the Revolving Facility or the Term Loan Facility or the issuance of one or more incremental term loan facilities (collectively, the “Incremental Facilities”), upon obtaining additional commitments from new or existing lenders and the satisfaction of customary conditions precedent for such Incremental Facilities. Such Incremental Facilities may not exceed the sum of (i) the greater of $480.0 million and an amount equal to 100% of Consolidated EBITDA (as defined in the New Credit Facility) of the Company and its Restricted Subsidiaries (as defined in the New Credit Facility) (as determined for the four fiscal quarter period most recently ended for which financial statements are available), and (ii) additional amounts so long as, after giving effect thereto, the Consolidated Senior Secured Net Leverage Ratio (as defined in the New Credit Facility) does not exceed 3.5 to 1.0. Subject to certain exceptions, substantially all of the Company’s existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries are required to guarantee the repayment of the Company’s obligations under the New Credit Facility. Borrowings under the Senior Facilities bear interest at a floating rate, which will initially be, at the Company’s option, either (i) adjusted LIBOR plus 1.50% or (ii) an alternative base rate plus 0.50% (in each case, subject to adjustment based on the Company’s consolidated total net leverage ratio). An unused fee initially set at 0.20% 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 June 30, 2022, the Company was in compliance with such covenants. Prior Credit Facility The Company entered into a senior secured credit facility (the “Senior Secured Credit Facility”) on April 1, 2011. On December 31, 2012, the Company entered into On January
14
Senior Notes
On
On
The indentures governing the The Senior Notes issued by the Company are guaranteed by each of the Company’s subsidiaries that guarantee the Company’s obligations under the The Company may redeem the Senior Notes at its option, in whole or part, at the dates and amounts set forth in the indentures.
On
each year. On March
On February 16, 2016, the Company 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 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
15
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 June 30, 2022, 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. The Company consolidates the operations of each facility based on its status as primary beneficiary, as further discussed in Note 14 – Variable Interest Entities. 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):
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 June 30, 2022, 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 the Company’s VIEs prohibit the Company from using the assets of each VIE to satisfy the obligations of other entities. Consolidated assets at June 30, 2022 and December 31, 2021 include total assets of variable interest entities of $364.5 million and $320.6 million, respectively, which cannot be used to settle the obligations of other entities. Consolidated liabilities at June 30, 2022 and December 31, 2021 include total liabilities of variable interest entities of $24.2 million and $24.1 million, respectively. 16 The consolidated VIEs assets and liabilities in the Company’s condensed consolidated balance sheets are shown below (in thousands):
Equity Incentive Plans The Company issues stock-based awards, including stock options, restricted stock and restricted stock units, to certain officers, employees andnon-employee directors under the Acadia Healthcare Company, Inc. Incentive Compensation Plan (the “Equity Incentive Plan”). The Company recognized The Company recognized a deferred income tax benefit of 17 Stock Options Stock option activity during
The Company’s estimate of expected volatility for stock options is based upon the volatility of
Restricted stock activity during 2021 and 2022 was as follows:
18 Restricted stock unit activity during 2021 and 2022 was as follows:
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. In addition to Company performance, these performance-based restricted stock units are subject to the continuing service of the employee during the 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 share. 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. The
The provision for income taxes for the three months ended As the
The carrying amounts reported for cash and cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value because of the short-term maturity of these instruments. The carrying amounts and fair values of the Company’s New Credit Facility, 5.500% Senior Notes and 5.000% Senior Notes at June 30, 2022 and December 31, 2021 were as follows (in thousands):
19 The Company’s New Credit Facility, 5.500% Senior Notes and 5.000% Senior Notes 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
Professional and General Liability A portion of the 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 On February 21, 2019, a purported stockholder filed a related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Davydov v. Joey A. Jacobs, et al., Case No. 3:19-cv-00167, which is pending in the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Section 10(b) and 14(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. On May 23, 2019, a purported stockholder filed a second related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Beard v. Jacobs, et al., Case No. 3:19-cv-0441, which is pending the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Sections 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duty, waste of corporate assets, unjust enrichment, and insider selling. On June 11, 2019, the Davydov and Beard actions were consolidated. On February 16, 2021, the parties filed a stipulation staying the case. On October 23, 2020, a purported stockholder filed a third related derivative action on behalf of the Company against former and current officers and directors in the lawsuit styled Pfenning v. Jacobs, et al., Case No. 2020-0915-JRS, which is pending in the Court of Chancery of the State of Delaware. The complaint alleges claims for breach of fiduciary duty. On February 17, 2021, the court entered an order staying the case. At this time, the Company is not able to quantify any potential liability in connection with this litigation because the cases are in their early stages. In the fall of 2017, the Office of Inspector General (“
The Company entered into foreign currency forward contracts during the
In conjunction with the
Assets (2): U.S. Facilities U.K. Facilities Corporate and Other
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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 Amended and Restated SeniorNew 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 the Company and its subsidiaries as of September 30, 2017 and December 31, 2016, and for the three and nine months ended September 30, 2017 and 2016. The information segregates the parent company (Acadia Healthcare Company, Inc.), the combined wholly-owned subsidiary guarantors at June 30, 2022 and December 31, 2021, and for the combinednon-guarantor subsidiaries and eliminations.six months ended June 30, 2022.
Acadia Healthcare Company, Inc.
Condensed Consolidating Balance Sheets
September 30, 2017
(InSummarized balance sheet information (in thousands):
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 43,714 | $ | 31,947 | $ | — | $ | 75,661 | ||||||||||
Accounts receivable, net | — | 230,283 | 65,473 | — | 295,756 | |||||||||||||||
Other current assets | — | 68,978 | 23,429 | — | 92,407 | |||||||||||||||
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Total current assets | — | 342,975 | 120,849 | — | 463,824 | |||||||||||||||
Property and equipment, net | — | 1,042,800 | 1,923,415 | — | 2,966,215 | |||||||||||||||
Goodwill | — | 1,936,057 | 794,305 | — | 2,730,362 | |||||||||||||||
Intangible assets, net | — | 57,392 | 29,559 | — | 86,951 | |||||||||||||||
Deferred tax assets – noncurrent | 3,378 | — | 4,399 | (4,088 | ) | 3,689 | ||||||||||||||
Derivative instruments | 26,176 | — | — | — | 26,176 | |||||||||||||||
Investment in subsidiaries | 5,228,165 | — | — | (5,228,165 | ) | — | ||||||||||||||
Other assets | 490,535 | 53,903 | 8,375 | (487,444 | ) | 65,369 | ||||||||||||||
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Total assets | $ | 5,748,254 | $ | 3,433,127 | $ | 2,880,902 | $ | (5,719,697 | ) | $ | 6,342,586 | |||||||||
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Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 34,550 | $ | — | $ | 255 | $ | — | $ | 34,805 | ||||||||||
Accounts payable | — | 62,655 | 32,450 | — | 95,105 | |||||||||||||||
Accrued salaries and benefits | — | 68,271 | 31,622 | — | 99,893 | |||||||||||||||
Other accrued liabilities | 14,365 | 12,392 | 84,646 | — | 111,403 | |||||||||||||||
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Total current liabilities | 48,915 | 143,318 | 148,973 | — | 341,206 | |||||||||||||||
Long-term debt | 3,211,754 | — | 509,836 | (487,444 | ) | 3,234,146 | ||||||||||||||
Deferred tax liabilities – noncurrent | — | 36,341 | 49,419 | (4,088 | ) | 81,672 | ||||||||||||||
Other liabilities | — | 112,094 | 67,235 | — | 179,329 | |||||||||||||||
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| |||||||||||
Total liabilities | 3,260,669 | 291,753 | 775,463 | (491,532 | ) | 3,836,353 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Redeemable noncontrolling interests | — | — | 18,648 | — | 18,648 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total equity | 2,487,585 | 3,141,374 | 2,086,791 | (5,228,165 | ) | 2,487,585 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities and equity | $ | 5,748,254 | $ | 3,433,127 | $ | 2,880,902 | $ | (5,719,697 | ) | $ | 6,342,586 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Current assets |
| $ | 439,296 |
|
| $ | 422,113 |
|
Property and equipment, net |
|
| 1,572,705 |
|
|
| 1,525,569 |
|
Goodwill |
|
| 2,088,029 |
|
|
| 2,086,978 |
|
Total noncurrent assets |
|
| 3,941,079 |
|
|
| 3,893,087 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
| 421,142 |
|
|
| 385,044 |
|
Long-term debt |
|
| 1,368,301 |
|
|
| 1,460,046 |
|
Total noncurrent liabilities |
|
| 1,677,305 |
|
|
| 1,752,271 |
|
Redeemable noncontrolling interests |
|
| — |
|
|
| — |
|
Total equity |
|
| 2,281,928 |
|
|
| 2,177,885 |
|
Acadia Healthcare Company, Inc.
Condensed Consolidating Balance Sheets
December 31, 2016
(InSummarized operating results information (in thousands):
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 15,681 | $ | 41,382 | $ | — | $ | 57,063 | ||||||||||
Accounts receivable, net | — | 209,124 | 54,203 | — | 263,327 | |||||||||||||||
Other current assets | — | 61,724 | 45,813 | — | 107,537 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total current assets | — | 286,529 | 141,398 | — | 427,927 | |||||||||||||||
Property and equipment, net | — | 940,880 | 1,762,815 | — | 2,703,695 | |||||||||||||||
Goodwill | — | 1,935,260 | 745,928 | — | 2,681,188 | |||||||||||||||
Intangible assets, net | — | 56,676 | 26,634 | — | 83,310 | |||||||||||||||
Deferred tax assets – noncurrent | 13,522 | — | 4,606 | (14,348 | ) | 3,780 | ||||||||||||||
Derivative instruments | 73,509 | — | — | — | 73,509 | |||||||||||||||
Investment in subsidiaries | 4,885,865 | — | — | (4,885,865 | ) | — | ||||||||||||||
Other assets | 493,294 | 40,480 | 7,189 | (489,646 | ) | 51,317 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 5,466,190 | $ | 3,259,825 | $ | 2,688,570 | $ | (5,389,859 | ) | $ | 6,024,726 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 34,550 | $ | — | $ | 255 | $ | — | $ | 34,805 | ||||||||||
Accounts payable | — | 49,205 | 30,829 | — | 80,034 | |||||||||||||||
Accrued salaries and benefits | — | 72,835 | 32,233 | — | 105,068 | |||||||||||||||
Other accrued liabilities | 33,616 | 24,375 | 64,967 | — | 122,958 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total current liabilities | 68,166 | 146,415 | 128,284 | — | 342,865 | |||||||||||||||
Long-term debt | 3,230,300 | — | 512,350 | (489,646 | ) | 3,253,004 | ||||||||||||||
Deferred tax liabilities – noncurrent | — | 40,574 | 52,294 | (14,348 | ) | 78,520 | ||||||||||||||
Other liabilities | — | 101,938 | 62,921 | — | 164,859 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | 3,298,466 | 288,927 | 755,849 | (503,994 | ) | 3,839,248 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Redeemable noncontrolling interests | — | — | 17,754 | — | 17,754 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total equity | 2,167,724 | 2,970,898 | 1,914,967 | (4,885,865 | ) | 2,167,724 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities and equity | $ | 5,466,190 | $ | 3,259,825 | $ | 2,688,570 | $ | (5,389,859 | ) | $ | 6,024,726 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Six Months Ended June 30, 2022 |
| |
Revenue |
| $ | 1,169,393 |
|
Income before income taxes |
|
| 172,832 |
|
Net income |
|
| 131,065 |
|
Net income attributable to Acadia Healthcare Company, Inc. |
|
| 131,065 |
|
21
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Three Months Ended September 30, 2017
(In thousands)
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Revenue before provision for doubtful accounts | $ | — | $ | 440,423 | $ | 288,289 | $ | — | $ | 728,712 | ||||||||||
Provision for doubtful accounts | — | (10,310 | ) | (1,688 | ) | — | (11,998 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Revenue | — | 430,113 | 286,601 | — | 716,714 | |||||||||||||||
Salaries, wages and benefits | 4,175 | 225,001 | 156,386 | — | 385,562 | |||||||||||||||
Professional fees | — | 24,385 | 28,657 | — | 53,042 | |||||||||||||||
Supplies | — | 18,843 | 9,809 | — | 28,652 | |||||||||||||||
Rents and leases | — | 8,127 | 10,922 | — | 19,049 | |||||||||||||||
Other operating expenses | — | 55,077 | 27,251 | — | 82,328 | |||||||||||||||
Depreciation and amortization | — | 16,963 | 19,479 | — | 36,442 | |||||||||||||||
Interest expense, net | 15,933 | 19,304 | 9,278 | — | 44,515 | |||||||||||||||
Transaction-related expenses | — | 2,211 | 3,454 | — | 5,665 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses | 20,108 | 369,911 | 265,236 | — | 655,255 | |||||||||||||||
(Loss) income before income taxes | (20,108 | ) | 60,202 | 21,365 | — | 61,459 | ||||||||||||||
Equity in earnings of subsidiaries | 55,925 | — | — | (55,925 | ) | — | ||||||||||||||
(Benefit from) provision for income taxes | (9,672 | ) | 21,202 | 4,440 | — | 15,970 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) | 45,489 | 39,000 | 16,925 | (55,925 | ) | 45,489 | ||||||||||||||
Net loss attributable to noncontrolling interests | — | — | 129 | — | 129 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) attributable to Acadia Healthcare Company, Inc. | $ | 45,489 | $ | 39,000 | $ | 17,054 | $ | (55,925 | ) | $ | 45,618 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation gain | — | — | 69,622 | — | 69,622 | |||||||||||||||
Loss on derivative instruments | (9,402 | ) | — | — | — | (9,402 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive (loss) income | (9,402 | ) | — | 69,622 | — | 60,220 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc. | $ | 36,087 | $ | 39,000 | $ | 86,676 | $ | (55,925 | ) | $ | 105,838 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Three Months Ended September 30, 2016
(In thousands)
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Revenue before provision for doubtful accounts | $ | — | $ | 420,061 | $ | 324,741 | $ | — | $ | 744,802 | ||||||||||
Provision for doubtful accounts | — | (9,383 | ) | (754 | ) | — | (10,137 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Revenue | — | 410,678 | 323,987 | — | 734,665 | |||||||||||||||
Salaries, wages and benefits | 7,145 | 224,692 | 176,405 | — | 408,242 | |||||||||||||||
Professional fees | — | 21,140 | 26,547 | — | 47,687 | |||||||||||||||
Supplies | — | 19,467 | 11,088 | — | 30,555 | |||||||||||||||
Rents and leases | — | 8,759 | 10,981 | — | 19,740 | |||||||||||||||
Other operating expenses | — | 51,536 | 28,212 | — | 79,748 | |||||||||||||||
Depreciation and amortization | — | 15,105 | 21,313 | — | 36,418 | |||||||||||||||
Interest expense, net | 13,388 | 19,258 | 16,197 | — | 48,843 | |||||||||||||||
Debt extinguishment costs | 3,411 | — | — | — | 3,411 | |||||||||||||||
Loss on divestiture | — | — | 174,739 | — | 174,739 | |||||||||||||||
Gain on foreign currency derivatives | (15 | ) | — | — | — | (15 | ) | |||||||||||||
Transaction-related expenses | — | — | 1,111 | — | 1,111 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses | 23,929 | 359,957 | 466,593 | — | 850,479 | |||||||||||||||
(Loss) income before income taxes | (23,929 | ) | 50,721 | (142,606 | ) | — | (115,814 | ) | ||||||||||||
Equity in earnings of subsidiaries | (99,875 | ) | — | — | 99,875 | — | ||||||||||||||
(Benefit from) provision for income taxes | (5,594 | ) | 38,654 | (30,664 | ) | — | 2,396 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net (loss) income | (118,210 | ) | 12,067 | (111,942 | ) | 99,875 | (118,210 | ) | ||||||||||||
Net loss attributable to noncontrolling interests | — | — | 402 | — | 402 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net (loss) income attributable to Acadia Healthcare Company, Inc. | $ | (118,210 | ) | $ | 12,067 | $ | (111,540 | ) | $ | 99,875 | $ | (117,808 | ) | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive loss: | ||||||||||||||||||||
Foreign currency translation loss | — | — | (89,645 | ) | — | (89,645 | ) | |||||||||||||
Gain on derivative instruments | 6,387 | — | — | — | 6,387 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) | 6,387 | — | (89,645 | ) | — | (83,258 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Comprehensive (loss) income attributable to Acadia Healthcare Company, Inc. | $ | (111,823 | ) | $ | 12,067 | $ | (201,185 | ) | $ | 99,875 | $ | (201,066 | ) | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Nine Months Ended September 30, 2017
(In thousands)
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Revenue before provision for doubtful accounts | $ | — | $ | 1,311,937 | $ | 831,759 | $ | — | $ | 2,143,696 | ||||||||||
Provision for doubtful accounts | — | (28,007 | ) | (3,885 | ) | — | (31,892 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Revenue | — | 1,283,930 | 827,874 | — | 2,111,804 | |||||||||||||||
Salaries, wages and benefits | 19,007 | 675,206 | 451,365 | — | 1,145,578 | |||||||||||||||
Professional fees | — | 69,796 | 72,976 | — | 142,772 | |||||||||||||||
Supplies | — | 56,502 | 28,498 | — | 85,000 | |||||||||||||||
Rents and leases | — | 25,139 | 32,316 | — | 57,455 | |||||||||||||||
Other operating expenses | — | 164,596 | 84,565 | — | 249,161 | |||||||||||||||
Depreciation and amortization | — | 48,918 | 56,338 | — | 105,256 | |||||||||||||||
Interest expense, net | 46,392 | 57,054 | 27,331 | — | 130,777 | |||||||||||||||
Debt extinguishment costs | 810 | — | — | — | 810 | |||||||||||||||
Transaction-related expenses | — | 6,219 | 12,617 | — | 18,836 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses | 66,209 | 1,103,430 | 766,006 | — | 1,935,645 | |||||||||||||||
(Loss) income before income taxes | (66,209 | ) | 180,500 | 61,868 | — | 176,159 | ||||||||||||||
Equity in earnings of subsidiaries | 163,931 | — | — | (163,931 | ) | — | ||||||||||||||
(Benefit from) provision for income taxes | (32,178 | ) | 66,124 | 12,313 | — | 46,259 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) | 129,900 | 114,376 | 49,555 | (163,931 | ) | 129,900 | ||||||||||||||
Net loss attributable to noncontrolling interests | — | — | 306 | — | 306 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) attributable to Acadia Healthcare Company, Inc. | $ | 129,900 | $ | 114,376 | $ | 49,861 | $ | (163,931 | ) | $ | 130,206 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation gain | — | — | 188,744 | — | 188,744 | |||||||||||||||
Loss on derivative instruments | (24,354 | ) | — | — | — | (24,354 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive (loss) income | (24,354 | ) | — | 188,744 | — | 164,390 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc. | $ | 105,546 | $ | 114,376 | $ | 238,605 | $ | (163,931 | ) | $ | 294,596 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Nine Months Ended September 30, 2016
(In thousands)
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Revenue before provision for doubtful accounts | $ | — | $ | 1,245,227 | $ | 893,812 | $ | — | $ | 2,139,039 | ||||||||||
Provision for doubtful accounts | — | (28,318 | ) | (2,695 | ) | — | (31,013 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Revenue | — | 1,216,909 | 891,117 | — | 2,108,026 | |||||||||||||||
Salaries, wages and benefits | 20,989 | 648,669 | 487,899 | — | 1,157,557 | |||||||||||||||
Professional fees | — | 66,967 | 71,003 | — | 137,970 | |||||||||||||||
Supplies | — | 57,456 | 30,993 | — | 88,449 | |||||||||||||||
Rents and leases | — | 25,857 | 29,156 | — | 55,013 | |||||||||||||||
Other operating expenses | — | 151,485 | 79,465 | — | 230,950 | |||||||||||||||
Depreciation and amortization | — | 42,072 | 59,073 | — | 101,145 | |||||||||||||||
Interest expense, net | 37,452 | 57,394 | 40,469 | — | 135,315 | |||||||||||||||
Debt extinguishment costs | 3,411 | — | — | — | 3,411 | |||||||||||||||
Loss on divestiture | — | — | 174,739 | — | 174,739 | |||||||||||||||
Gain on foreign currency derivatives | (523 | ) | — | — | — | (523 | ) | |||||||||||||
Transaction-related expenses | — | 25,624 | 7,859 | — | 33,483 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses | 61,329 | 1,075,524 | 980,656 | — | 2,117,509 | |||||||||||||||
(Loss) income before income taxes | (61,329 | ) | 141,385 | (89,539 | ) | — | (9,483 | ) | ||||||||||||
Equity in earnings of subsidiaries | 8,937 | — | — | (8,937 | ) | — | ||||||||||||||
(Benefit from) provision for income taxes | (15,142 | ) | 62,247 | (19,338 | ) | — | 27,767 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net (loss) income | (37,250 | ) | 79,138 | (70,201 | ) | (8,937 | ) | (37,250 | ) | |||||||||||
Net loss attributable to noncontrolling interests | — | — | 1,575 | — | 1,575 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net (loss) income attributable to Acadia Healthcare Company, Inc. | $ | (37,250 | ) | $ | 79,138 | $ | (68,626 | ) | $ | (8,937 | ) | $ | (35,675 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive loss: | ||||||||||||||||||||
Foreign currency translation loss | — | — | (351,528 | ) | — | (351,528 | ) | |||||||||||||
Gain on derivative instruments | 30,306 | — | — | — | 30,306 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income (loss) | 30,306 | — | (351,528 | ) | — | (321,222 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Comprehensive (loss) income attributable to Acadia Healthcare Company, Inc. | $ | (6,944 | ) | $ | 79,138 | $ | (420,154 | ) | $ | (8,937 | ) | $ | (356,897 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2017
(In thousands)
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income (loss) | $ | 129,900 | $ | 114,376 | $ | 49,555 | $ | (163,931 | ) | $ | 129,900 | |||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by continuing operating activities: | ||||||||||||||||||||
Equity in earnings of subsidiaries | (163,931 | ) | — | — | 163,931 | — | ||||||||||||||
Depreciation and amortization | — | 48,918 | 56,338 | — | 105,256 | |||||||||||||||
Amortization of debt issuance costs | 7,652 | — | (312 | ) | — | 7,340 | ||||||||||||||
Equity-based compensation expense | 19,007 | — | — | — | 19,007 | |||||||||||||||
Deferred income tax expense | 156 | 22,401 | 6,859 | — | 29,416 | |||||||||||||||
Debt extinguishment costs | 810 | — | — | — | 810 | |||||||||||||||
Other | 4,216 | 1,727 | 4,729 | — | 10,672 | |||||||||||||||
Change in operating assets and liabilities, net of effect of acquisitions: | ||||||||||||||||||||
Accounts receivable, net | — | (21,183 | ) | (7,498 | ) | — | (28,681 | ) | ||||||||||||
Other current assets | — | 1,126 | 24,973 | — | 26,099 | |||||||||||||||
Other assets | 3,479 | (705 | ) | 139 | (3,479 | ) | (566 | ) | ||||||||||||
Accounts payable and other accrued liabilities | — | (22,372 | ) | (4,009 | ) | — | (26,381 | ) | ||||||||||||
Accrued salaries and benefits | — | (4,759 | ) | (3,178 | ) | — | (7,937 | ) | ||||||||||||
Other liabilities | — | 4,084 | 3,593 | — | 7,677 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash provided by (used in) continuing operating activities | 1,289 | 143,613 | 131,189 | (3,479 | ) | 272,612 | ||||||||||||||
Net cash used in discontinued operating activities | — | (1,261 | ) | — | — | (1,261 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash provided by (used in) operating activities | 1,289 | 142,352 | 131,189 | (3,479 | ) | 271,351 | ||||||||||||||
Investing activities: | ||||||||||||||||||||
Cash paid for capital expenditures | — | (114,130 | ) | (79,687 | ) | — | (193,817 | ) | ||||||||||||
Cash paid for real estate acquisitions | — | (33,297 | ) | — | — | (33,297 | ) | |||||||||||||
Other | — | (7,984 | ) | 1,922 | — | (6,062 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash used in investing activities | — | (155,411 | ) | (77,765 | ) | — | (233,176 | ) | ||||||||||||
Financing activities: | ||||||||||||||||||||
Principal payments on long-term debt | (25,913 | ) | — | (3,479 | ) | 3,479 | (25,913 | ) | ||||||||||||
Common stock withheld for minimum statutory taxes, net | (3,278 | ) | — | — | — | (3,278 | ) | |||||||||||||
Other | — | 1,649 | — | — | 1,649 | |||||||||||||||
Cash provided by (used in) intercompany activity | 27,902 | 39,443 | (67,345 | ) | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash (used in) provided by financing activities | (1,289 | ) | 41,092 | (70,824 | ) | 3,479 | (27,542 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Effect of exchange rate changes on cash | — | — | 7,965 | — | 7,965 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net increase in cash and cash equivalents | — | 28,033 | (9,435 | ) | — | 18,598 | ||||||||||||||
Cash and cash equivalents at beginning of the period | — | 15,681 | 41,382 | — | 57,063 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash and cash equivalents at end of the period | $ | — | $ | 43,714 | $ | 31,947 | $ | — | $ | 75,661 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2016
(In thousands)
| Parent | Combined Subsidiary Guarantors | Combined Non- Guarantors | Consolidating Adjustments | Total Consolidated Amounts | ||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net (loss) income | $ | (37,250 | ) | $ | 79,138 | $ | (70,201 | ) | $ | (8,937 | ) | $ | (37,250 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by continuing operating activities: | ||||||||||||||||||||
Equity in earnings of subsidiaries | (8,937 | ) | — | — | 8,937 | — | ||||||||||||||
Depreciation and amortization | — | 42,072 | 59,073 | — | 101,145 | |||||||||||||||
Amortization of debt issuance costs | 8,035 | — | (321 | ) | — | 7,714 | ||||||||||||||
Equity-based compensation expense | 20,989 | — | — | — | 20,989 | |||||||||||||||
Deferred income tax (benefit) expense | — | 26,381 | (524 | ) | — | 25,857 | ||||||||||||||
Debt extinguishment costs | 3,411 | — | — | — | 3,411 | |||||||||||||||
Loss on divestiture | — | — | 174,739 | — | 174,739 | |||||||||||||||
Gain on foreign currency derivatives | (523 | ) | — | — | — | (523 | ) | |||||||||||||
Other | — | 826 | (95 | ) | — | 731 | ||||||||||||||
Change in operating assets and liabilities, net of effect of acquisitions: | ||||||||||||||||||||
Accounts receivable, net | — | (26,055 | ) | 13,476 | — | (12,579 | ) | |||||||||||||
Other current assets | — | (4,901 | ) | (8,072 | ) | — | (12,973 | ) | ||||||||||||
Other assets | (2,780 | ) | (818 | ) | (316 | ) | 2,780 | (1,134 | ) | |||||||||||
Accounts payable and other accrued liabilities | — | 31,633 | (29,566 | ) | — | 2,067 | ||||||||||||||
Accrued salaries and benefits | — | 3,527 | (14,286 | ) | — | (10,759 | ) | |||||||||||||
Other liabilities | — | 5,975 | (2,229 | ) | — | 3,746 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash (used in) provided by continuing operating activities | (17,055 | ) | 157,778 | 121,678 | 2,780 | 265,181 | ||||||||||||||
Net cash used in discontinued operating activities | — | (5,524 | ) | — | — | (5,524 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash (used in) provided by operating activities | (17,055 | ) | 152,254 | 121,678 | 2,780 | 259,657 | ||||||||||||||
Investing activities: | ||||||||||||||||||||
Cash paid for acquisitions, net of cash acquired | — | (103,189 | ) | (580,096 | ) | — | (683,285 | ) | ||||||||||||
Cash paid for capital expenditures | — | (142,626 | ) | (107,335 | ) | — | (249,961 | ) | ||||||||||||
Cash paid for real estate acquisitions | — | (26,146 | ) | (11,801 | ) | — | (37,947 | ) | ||||||||||||
Settlement of foreign currency derivatives | — | 523 | — | — | 523 | |||||||||||||||
Other | — | (1,135 | ) | — | — | (1,135 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash used in investing activities | — | (272,573 | ) | (699,232 | ) | — | (971,805 | ) | ||||||||||||
Financing activities: | ||||||||||||||||||||
Borrowings on long-term debt | 1,480,000 | — | — | — | 1,480,000 | |||||||||||||||
Borrowings on revolving credit facility | 179,000 | — | — | — | 179,000 | |||||||||||||||
Principal payments on revolving credit facility | (166,000 | ) | — | — | — | (166,000 | ) | |||||||||||||
Principal payments on long-term debt | (46,069 | ) | — | (2,780 | ) | 2,780 | (46,069 | ) | ||||||||||||
Repayment of assumed debt | (1,348,389 | ) | — | — | — | (1,348,389 | ) | |||||||||||||
Payment of debt issuance costs | (35,748 | ) | — | — | — | (35,748 | ) | |||||||||||||
Issuance of common stock | 685,097 | — | — | — | 685,097 | |||||||||||||||
Common stock withheld for minimum statutory taxes, net | (7,917 | ) | — | — | — �� | (7,917 | ) | |||||||||||||
Other | — | (1,821 | ) | — | — | (1,821 | ) | |||||||||||||
Cash (used in) provided by intercompany activity | (722,919 | ) | 125,313 | 603,166 | (5,560 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net cash provided by (used in) financing activities | 17,055 | 123,492 | 600,386 | (2,780 | ) | 738,153 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Effect of exchange rate changes on cash | — | — | (9,469 | ) | — | (9,469 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net increase in cash and cash equivalents | — | 3,173 | 13,363 | — | 16,536 | |||||||||||||||
Cash and cash equivalents at beginning of the period | — | 1,987 | 9,228 | — | 11,215 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash and cash equivalents at end of the period | $ | — | $ | 5,160 | $ | 22,591 | $ | — | $ | 27,751 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
This Quarterly Report on Form10-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 contained 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 of the COVID-19 pandemic on our inpatient and outpatient volumes, or disruptions caused by other pandemics, epidemics or outbreaks of infectious diseases; |
• | the impact of vaccine and other pandemic-related mandates imposed by local, state and federal authorities on our business; |
• | costs of providing care to our patients, including increased staffing, equipment and supply expenses resulting from the COVID-19 pandemic; |
• | the impact of the retirement of Debra K. Osteen, our former chief executive officer, and our ability to integrate Christopher H. Hunter, our new chief executive officer; |
• | the impact of competition for staffing on our labor costs and profitability; |
• | the impact of increases to our labor costs; |
• | the impact of general economic and employment conditions, including inflation, on our business and future results of operations; |
• | 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 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 COVID-19 pandemic; |
• | the impact of payments received from the government and third-party payors on our revenue and results of operations; |
• | 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; |
• | our future cash flow and earnings; |
• | our restrictive covenants, which may restrict our business and financing activities; |
• | the impact of adverse weather conditions, including the effects of hurricanes and wildfires; |
• | 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; |
• | any failure to comply with the terms of our corporate integrity agreement with the OIG; |
• | the impact of healthcare reform in the U.S.; |
22
• | the risk of a cyber-security incident and any resulting adverse impact on our operations or violation of laws and regulations regarding information privacy; |
• | the impact of our highly competitive industry on patient volumes; |
• | our dependence on key management personnel, key executives and local facility management personnel; |
• | our acquisition, joint venture and wholly-owned 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 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 earnings, adverse changes in our effective tax rate and adverse developments in tax laws generally; |
• | 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 Form10-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 SeptemberJune 30, 2017,2022, we operated 579239 behavioral healthcare facilities with approximately 17,40010,600 beds in 39 states the U.K. and Puerto Rico. During the ninesix months ended SeptemberJune 30, 2017,2022, we added 35278 beds to existing facilities.facilities and opened two comprehensive treatment centers (“CTCs”). For the year ending December 31, 2017,2022, we expect to add approximately 800 total300 beds exclusive of acquisitions.to existing facilities and expect to open one wholly-owned facility, two joint venture facilities and at least six CTCs.
We are the leading publicly traded pure-play provider of behavioral healthcare services with operations in the U.S. and the U.K.United States. 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
23
patients and referral sources, increasing our volume ofout-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.SU.S. through acquisitions, wholly-owned de novo facilities, joint ventures and U.K.
Acquisitions
2016 U.S. Acquisitionsbed additions in existing facilities.
On June 1, 2016,January 19, 2021, we completed the acquisitionU.K. Sale pursuant to a Share Purchase Agreement in which we sold all of Pocono Mountain, an inpatient psychiatric facility with 108 beds locatedthe securities of AHC-WW Jersey Limited, a private limited liability company incorporated in Henryville, Pennsylvania, forJersey and a subsidiary of the Company, which constituted the entirety of our U.K. business operations.The U.K. Sale resulted in approximately $1,525 million of gross proceeds before deducting the settlement of existing foreign currency hedging liabilities of $85 million based on the current GBP to USD exchange rate, cash considerationretained by the buyer and transaction costs. We used the net proceeds of approximately $25.4 million.
On May 1, 2016, we completed$1,425 million (excluding cash retained by the acquisitionbuyer) along with cash from the balance sheet to reduce debt by $1,640 million during the first quarter of TrustPoint, an inpatient psychiatric facility with 100 beds located in Murfreesboro, Tennessee, for cash consideration of approximately $62.7 million.
On April 1, 2016, we completed the acquisition of Serenity Knolls, an inpatient psychiatric facility with 30 beds located in Forest Knolls, California, for cash consideration of approximately $10.0 million.
Priory
On February 16, 2016, we completed the acquisition of Priory for a total purchase price of approximately $2.2 billion, including cash consideration of approximately $1.9 billion and the issuance of 4,033,561 shares of our common stock to shareholders of Priory. Priory was the leading independent provider of behavioral healthcare services in the U.K. operating 324 facilities with approximately 7,100 beds at the acquisition date.
The CMA in the U.K. reviewed our acquisition of Priory. On July 14, 2016, the CMA announced that our acquisition of Priory was referred for a phase 2 investigation unless we offered acceptable undertakings to address the CMA’s competition concerns relating to the provision of behavioral healthcare services in certain markets. On July 28, 2016, the CMA announced that we had offered undertakings to address the CMA’s concerns and that, in lieu of a phase 2 investigation, the CMA would consider our undertakings.
On October 18, 2016, we signed a definitive agreement with BC Partners for the sale of 21 existing U.K. behavioral health facilities and one de novo behavioral health facility with an aggregate of approximately 1,000 beds. On November 10, 2016, the CMA accepted our undertakings to sell the U.K. Disposal Group to BC Partners and confirmed that the divestiture satisfied the CMA’s concerns about the impact of our acquisition of Priory on competition for the provision of behavioral healthcare services in certain markets in the U.K. 2021. As a result of the CMA’s acceptanceU.K. Sale, we reported, for all periods presented, results of our undertakings, our acquisition of Priory was not referred for a phase 2 investigation. On November 30, 2016, we completed the saleoperations and cash flows of the U.K. Disposal Groupoperations as discontinued operations in the accompanying financial statements.
COVID-19
During March 2020, the global pandemic of COVID-19 began to BC Partnersaffect 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 manyof our facilities, employees and/or patients have tested positive for £320 million cash.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. Over the last two years, all of our facilities have closely followed infectious disease protocols, as well as recommendations by the CDC and local health officials.
We have taken numerous steps to help minimize the impact of the virus on our patients and employees. For example, we:
• | established an internal COVID-19 taskforce; |
• | instituted social distancing practices and protective measures throughout our facilities, which included restricting or suspending visitor access, screening patients and staff who enter our facilities based on criteria established by the CDC and local health officials, and testing and isolating patients when warranted; |
• | implemented plans to vaccinate all eligible employees at our facilities that participate in CMS reimbursement programs; |
• | secured contracts with additional distributors for supplies; |
• | expanded telehealth capabilities; |
• | implemented emergency planning in directly impacted markets; and |
• | limited all non-essential business travel and suspended in-person trainings and conferences. |
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. We could experience supply chain disruptions and 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.
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 conjunction withaddition, the sale,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 to the PHSSE Fund to reimburse, through grants or other mechanisms, eligible healthcare providers and other approved entities for COVID-19-related expenses or lost revenue; |
• | the expansion of CMS’ Accelerated and Advance Payment Program; |
24
• | the temporary suspension of Medicare sequestration; and |
• | waivers or temporary suspension of certain regulatory requirements. |
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 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. In 2020, we received approximately $34.9 million of the funds distributed from the PHSSE Fund. During the fourth quarter of 2020, the Company recorded approximately $32.8 million of income from provider relief fund related to PHSSE funds received in 2020.
In 2021, we received $24.2 million of additional funds from the PHSSE Fund. During the fourth quarter of 2021, we recorded $17.9 million of income from provider relief fund related to the PHSSE funds received. During the three months ended June 30, 2022, we received $7.7 million of additional funds from the PHSSE Fund and $14.2 million from the ARP Rural Payments for Hospitals. During the second quarter of 2022, we recorded $8.6 million of income from provider relief fund related to PHSSE funds received. We continue to evaluate our compliance with the terms and conditions to, and the financial impact of, these additional funds received.
Using existing authority and certain expanded authority under the CARES Act, the U.S. Department of Health & Human Services (“HHS”) expanded CMS’ Accelerated and Advance Payment Program to a lossbroader group of Medicare Part A and Part B providers for the duration of the COVID-19 pandemic. Under the program, certain of our facilities were eligible to request up to 100% of their Medicare payment amount for a three-month period. Under the original terms of the program, the repayment of these accelerated/advanced payments would have begun 120 days after the date of the issuance of the payment and the amounts advanced to our facilities would have been recouped from new Medicare claims as a 100% offset. Our facilities would 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 is 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 divestitureoutstanding amounts due at the end of $174.7the repayment period from 10% to 4%. We applied for and received approximately $45 million in 2020 from this program. Of the $45 million of advance payments received in 2020, we repaid approximately $25 million of advance payments during 2021 and made additional repayments of approximately $7 million and $15 million, respectively, during the three and six month periods ended June 30, 2022. We will continue to repay the remaining balance throughout the rest of 2022.
Under the CARES Act, we also received a 2% increase in our facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on April 1, 2022 and was eliminated effective July 1, 2022.
The CARES Act also provides for certain federal income and other tax changes. We 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. We repaid half of the $39 million of payroll tax deferrals during the third quarter of 2021 and expect to repay the remaining portion in the second half of 2022.
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 continuing to evaluate the terms and conditions and financial impact of funds received under the CARES Act and other government relief programs.
25
Results of Operations
The following table illustrates our consolidated statementsresults of operations for the threerespective periods shown (dollars in thousands):
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| ||||||||
Revenue |
| $ | 651,719 |
|
|
| 100.0 | % |
| $ | 582,156 |
|
|
| 100.0 | % |
| $ | 1,268,372 |
|
|
| 100.0 | % |
| $ | 1,133,355 |
|
|
| 100.0 | % |
Salaries, wages and benefits |
|
| 339,388 |
|
|
| 52.1 | % |
|
| 309,233 |
|
|
| 53.1 | % |
|
| 675,150 |
|
|
| 53.2 | % |
|
| 613,566 |
|
|
| 54.1 | % |
Professional fees |
|
| 40,440 |
|
|
| 6.2 | % |
|
| 34,696 |
|
|
| 6.0 | % |
|
| 77,351 |
|
|
| 6.1 | % |
|
| 66,313 |
|
|
| 5.9 | % |
Supplies |
|
| 25,022 |
|
|
| 3.8 | % |
|
| 22,633 |
|
|
| 3.9 | % |
|
| 48,721 |
|
|
| 3.8 | % |
|
| 43,955 |
|
|
| 3.9 | % |
Rents and leases |
|
| 11,192 |
|
|
| 1.7 | % |
|
| 9,620 |
|
|
| 1.7 | % |
|
| 22,441 |
|
|
| 1.8 | % |
|
| 19,032 |
|
|
| 1.7 | % |
Other operating expenses |
|
| 84,937 |
|
|
| 13.0 | % |
|
| 73,751 |
|
|
| 12.7 | % |
|
| 166,362 |
|
|
| 13.1 | % |
|
| 145,761 |
|
|
| 12.9 | % |
Income from provider relief fund |
|
| (8,550 | ) |
|
| -1.3 | % |
|
| — |
|
|
| 0.0 | % |
|
| (8,550 | ) |
|
| -0.7 | % |
|
| — |
|
|
| 0.0 | % |
Depreciation and amortization |
|
| 29,128 |
|
|
| 4.5 | % |
|
| 25,650 |
|
|
| 4.4 | % |
|
| 58,054 |
|
|
| 4.6 | % |
|
| 50,544 |
|
|
| 4.5 | % |
Interest expense |
|
| 16,565 |
|
|
| 2.5 | % |
|
| 16,687 |
|
|
| 2.9 | % |
|
| 32,352 |
|
|
| 2.6 | % |
|
| 45,714 |
|
|
| 4.0 | % |
Debt extinguishment costs |
|
| — |
|
|
| 0.0 | % |
|
| — |
|
|
| 0.0 | % |
|
| — |
|
|
| 0.0 | % |
|
| 24,650 |
|
|
| 2.2 | % |
Loss on impairment |
|
| — |
|
|
| 0.0 | % |
|
| 23,214 |
|
|
| 4.0 | % |
|
| — |
|
|
| 0.0 | % |
|
| 23,214 |
|
|
| 2.0 | % |
Transaction-related expenses |
|
| 3,940 |
|
|
| 0.6 | % |
|
| 1,675 |
|
|
| 0.3 | % |
|
| 7,522 |
|
|
| 0.6 | % |
|
| 6,285 |
|
|
| 0.6 | % |
Total expenses |
|
| 542,062 |
|
|
| 83.1 | % |
|
| 517,159 |
|
|
| 89.0 | % |
|
| 1,079,403 |
|
|
| 85.1 | % |
|
| 1,039,034 |
|
|
| 91.8 | % |
Income from continuing operations before income taxes |
|
| 109,657 |
|
|
| 16.9 | % |
|
| 64,997 |
|
|
| 11.0 | % |
|
| 188,969 |
|
|
| 14.9 | % |
|
| 94,321 |
|
|
| 8.2 | % |
Provision for income taxes |
|
| 27,725 |
|
|
| 4.3 | % |
|
| 19,333 |
|
|
| 3.3 | % |
|
| 45,127 |
|
|
| 3.6 | % |
|
| 25,537 |
|
|
| 2.3 | % |
Income from continuing operations |
|
| 81,932 |
|
|
| 12.6 | % |
|
| 45,664 |
|
|
| 7.8 | % |
|
| 143,842 |
|
|
| 11.3 | % |
|
| 68,784 |
|
|
| 6.1 | % |
Loss from discontinued operations, net of taxes |
|
| — |
|
|
| 0.0 | % |
|
| — |
|
|
| 0.0 | % |
|
| — |
|
|
| 0.0 | % |
|
| (12,641 | ) |
|
| -1.1 | % |
Net income |
|
| 81,932 |
|
|
| 12.6 | % |
|
| 45,664 |
|
|
| 7.8 | % |
|
| 143,842 |
|
|
| 11.3 | % |
|
| 56,143 |
|
|
| 5.0 | % |
Net income attributable to noncontrolling interests |
|
| (1,853 | ) |
|
| -0.3 | % |
|
| (1,150 | ) |
|
| -0.2 | % |
|
| (2,926 | ) |
|
| -0.2 | % |
|
| (1,912 | ) |
|
| -0.2 | % |
Net income attributable to Acadia Healthcare Company, Inc. |
| $ | 80,079 |
|
|
| 12.3 | % |
| $ | 44,514 |
|
|
| 7.6 | % |
| $ | 140,916 |
|
|
| 11.1 | % |
| $ | 54,231 |
|
|
| 4.7 | % |
At June 30, 2022, we operated 239 behavioral healthcare facilities with approximately 10,600 beds in 39 states and nine months ended September 30, 2016. The loss on divestiture consistedPuerto Rico. For all periods presented, results of an allocation of goodwill to the U.K. Disposal Group of $106.9 million, loss on the sale of properties of $42.2 millionoperations and estimated transaction-related expenses of $25.6 million. The allocation of goodwill was based on the fair valuecash flows of the U.K. Disposal Group relativeoperations are reported as discontinued operations in the accompanying financial statements.
We are encouraged by the favorable trends in our business and believe we are well positioned to capitalize on the expected growth in demand for behavioral health services. As with many other healthcare providers and other industries across the country, we are currently dealing with a tight labor market. However, we believe the diversity of our markets and service lines and our proactive focus helps us manage through this environment. We remain focused on ensuring that we have the level of staff to meet the demand in our markets.
26
The following table sets forth percent changes in same facility operating data for the three and six months ended June 30, 2022 compared to the total fair valuesame period in 2021:
|
| Three Months Ended |
|
| Six Months Ended |
| ||
U.S. Same Facility Results (a) |
|
|
|
|
|
|
|
|
Revenue growth |
| 8.5% |
|
| 8.5% |
| ||
Patient days growth |
| 0.7% |
|
| 1.4% |
| ||
Admissions growth |
| -4.5% |
|
| -3.6% |
| ||
Average length of stay change (b) |
| 5.4% |
|
| 5.2% |
| ||
Revenue per patient day growth |
| 7.8% |
|
| 7.0% |
| ||
Adjusted EBITDA margin change (c) |
| 270 bps |
|
| 210 bps |
| ||
Adjusted EBITDA margin excluding income from provider relief fund (d) |
| 130 bps |
|
| 140 bps |
| ||
(a) | Results for the periods presented include facilities we have operated more than one year and exclude certain closed services. |
(b) | Average length of stay is defined as patient days divided by admissions. |
(c) | Adjusted EBITDA is defined as income before provision for income taxes, equity-based compensation expense, debt extinguishment costs, loss on impairment, transaction-related expenses, interest expense and depreciation and amortization. Management uses Adjusted EBITDA as an analytical indicator to measure performance and to develop strategic objectives and operating plans. 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. Adjusted EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. |
(d) | For the three and six months ended June 30, 2022, excludes income from provider relief fund of $8.6 million. |
Three months ended June 30, 2022 compared to the three months ended June 30, 2021
Revenue. Revenue increased $69.6 million, or 11.9%, to $651.7 million for the three months ended June 30, 2022 from $582.2 million for the three months ended June 30, 2021. The increase includes revenue generated from our acquisition of CenterPointe on December 31, 2021 and one-time payments of approximately $5.4 million from one of the Company’sstates in which we operate during the three months ended June 30, 2022. Same facility revenue increased $49.1 million, or 8.5%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, resulting from an increase in same facility revenue per day of 7.8% and same facility growth in patient days of 0.7%. Consistent with same facility growth in 2021, the growth in same facility patient days for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 resulted from the addition of beds to our existing facilities and ongoing demand for our services.
Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $339.4 million for the three months ended June 30, 2022 compared to $309.2 million for the three months ended June 30, 2021, an increase of $30.2 million. SWB expense included $6.6 million and $9.0 million of equity-based compensation expense for the three months ended June 30, 2022 and 2021, respectively. Excluding equity-based compensation expense, SWB expense was $332.8 million, or 51.1% of revenue, for the three months ended June 30, 2022, compared to $300.2 million, or 51.6% of revenue, for the three months ended June 30, 2021. The increase in SWB expense relates to SWB expense incurred by the CenterPointe acquisition on December 31, 2021 and incremental staff to support volume growth as well as wage inflation. Same facility SWB expense was $295.5 million for the three months ended June 30, 2022, or 47.2% of revenue, compared to $277.4 million for the three months ended June 30, 2021, or 48.0% of revenue.
Professional fees. Professional fees were $40.4 million for the three months ended June 30, 2022, or 6.2% of revenue, compared to $34.7 million for the three months ended June 30, 2021, or 6.0% of revenue. Same facility professional fees were $34.5 million for the three months ended June 30, 2022, or 5.5% of revenue, compared to $31.4 million, for the three months ended June 30, 2021, or 5.4% of revenue.
27
Supplies. Supplies expense was $25.0 million for the three months ended June 30, 2022, or 3.8% of revenue, compared to $22.6 million for the three months ended June 30, 2021, or 3.9% of revenue. Same facility supplies expense was $23.8 million for the three months ended June 30, 2022, or 3.8% of revenue, compared to $22.5 million for the three months ended June 30, 2021, or 3.9% of revenue.
Rents and leases. Rents and leases were $11.2 million for the three months ended June 30, 2022, or 1.7% of revenue, compared to $9.6 million for the three months ended June 30, 2021, or 1.7% of revenue. Same facility rents and leases were $9.1 million for the three months ended June 30, 2022, or 1.4% of revenue, compared to $8.7 million for the three months ended June 30, 2021, or 1.5% 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 $84.9 million for the three months ended June 30, 2022, or 13.0% of revenue, compared to $73.8 million for the three months ended June 30, 2021, or 12.7% of revenue. Same facility other operating expenses were $76.3 million for the three months ended June 30, 2022, or 12.2% of revenue, compared to $72.6 million for the three months ended June 30, 2021, or 12.6% of revenue.
Income from provider relief fund. For the three months ended June 30, 2022, we recorded $8.6 million in income from provider relief fund related to PHSSE funds received in 2021.
Depreciation and amortization. Depreciation and amortization expense was $29.1 million for the three months ended June 30, 2022, or 4.5% of revenue, compared to $25.7 million for the three months ended June 30, 2021, or 4.4% of revenue.
Interest expense. Interest expense was $16.6 million for the three months ended June 30, 2022 compared to $16.7 million for the three months ended June 30, 2021.
Loss on impairment. During the second quarter of 2021, we opened a 260-bed replacement facility in Pennsylvania and recorded a non-cash property impairment charge of $23.2 million for the existing facility.
Transaction-related expenses. Transaction-related expenses were $3.9 million for the three months ended June 30, 2022, compared to $1.7 million for the three months ended June 30, 2021. Transaction-related expenses represent legal, accounting, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands).
| Three Months Ended June 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
Legal, accounting and other acquisition-related costs | $ | 2,087 |
|
| $ | 1,305 |
|
Termination and restructuring costs |
| 688 |
|
|
| 370 |
|
Management transition costs |
| 1,165 |
|
|
| — |
|
| $ | 3,940 |
|
| $ | 1,675 |
|
Provision for income taxes. For the three months ended June 30, 2022, the provision for income taxes was $27.7 million, reflecting an effective tax rate of 25.3%, compared to $19.3 million, reflecting an effective tax rate of 29.7%, for the three months ended June 30, 2021.
As we continue to monitor the implications of potential tax legislation in each of our jurisdictions, we may adjust our estimates and record additional amounts for tax assets and liabilities. 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.
28
Six months ended June 30, 2022 compared to the six months ended June 30, 2021
Revenue. Revenue increased $135.0 million, or 11.9%, to $1,268.4 million for the six months ended June 30, 2022 from $1,133.4 million for the six months ended June 30, 2021. The increase includes revenue generated from our acquisition of CenterPointe on December 31, 2021 and one-time payments of approximately $5.4 million from one of the states in which we operate during the six months ended June 30, 2022. Same facility revenue increased $95.9 million, or 8.5%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, resulting from an increase in same facility revenue per day of 7.0% and same facility growth in patient days of 1.4%. Consistent with same facility growth in 2021, the growth in same facility patient days for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 resulted from the addition of beds to our existing facilities and ongoing demand for our services.
Salaries, wages and benefits. SWB expense was $675.2 million for the six months ended June 30, 2022 compared to $613.6 million for the six months ended June 30, 2021, an increase of $61.6 million. SWB expense included $14.5 million and $16.1 million of equity-based compensation expense for the six months ended June 30, 2022 and 2021, respectively. Excluding equity-based compensation expense, SWB expense was $660.6 million, or 52.1% of revenue, for the six months ended June 30, 2022, compared to $597.5 million, or 52.7% of revenue, for the six months ended June 30, 2021. The increase in SWB expense relates to SWB expense incurred by the CenterPointe acquisition on December 31, 2021 and incremental staff to support volume growth as well as wage inflation. Same facility SWB expense was $586.3 million for the six months ended June 30, 2022, or 48.1% of revenue, compared to $551.6 million for the six months ended June 30, 2021, or 49.1% of revenue.
Professional fees. Professional fees were $77.4 million for the six months ended June 30, 2022, or 6.1% of revenue, compared to $66.3 million for the six months ended June 30, 2021, or 5.9% of revenue. Same facility professional fees were $65.9 million for the six months ended June 30, 2022, or 5.4% of revenue, compared to $59.7 million, for the six months ended June 30, 2021, or 5.3% of revenue.
Supplies. Supplies expense was $48.7 million for the six months ended June 30, 2022, or 3.8% of revenue, compared to $44.0 million for the six months ended June 30, 2021, or 3.9% of revenue. Same facility supplies expense was $46.2 million for the six months ended June 30, 2022, or 3.8% of revenue, compared to $43.7 million for the six months ended June 30, 2021, or 3.9% of revenue.
Rents and leases. Rents and leases were $22.4 million for the six months ended June 30, 2022, or 1.8% of revenue, compared to $19.0 million for the six months ended June 30, 2021, or 1.7% of revenue. Same facility rents and leases were $18.2 million for the six months ended June 30, 2022, or 1.5% of revenue, compared to $17.3 million for the six months ended June 30, 2021, or 1.5% 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 $166.4 million for the six months ended June 30, 2022, or 13.1% of revenue, compared to $145.8 million for the six months ended June 30, 2021, or 12.9% of revenue. Same facility other operating expenses were $150.4 million for the six months ended June 30, 2022, or 12.3% of revenue, compared to $142.2 million for the six months ended June 30, 2021, or 12.7% of revenue.
Income from provider relief fund. For the six months ended June 30, 2022, we recorded $8.6 million in income from provider relief fund related to PHSSE funds received in 2021.
Depreciation and amortization. Depreciation and amortization expense was $58.1 million for the six months ended June 30, 2022, or 4.6% of revenue, compared to $50.5 million for the six months ended June 30, 2021, or 4.5% of revenue.
Interest expense. Interest expense was $32.4 million for the six months ended June 30, 2022 compared to $45.7 million for the six months ended June 30, 2021. The decrease in interest expense was primarily due to debt repayments in connection with the U.K. Facilities segment.Sale.
Debt extinguishment costs. Debt extinguishment costs were $24.7 million for the six months ended June 30, 2021 and represented $6.3 million of cash charges and $18.4 million of non-cash charges in connection with the redemption of the 5.625% Senior Notes and the 6.500% Senior Notes and the termination of the Prior Credit Facility.
Loss on impairment. Loss on impairment was $23.2 million for the six months ended June 30, 2021. During the second quarter of 2021, we opened a 260-bed replacement facility in Pennsylvania and recorded a non-cash property impairment charge of $23.2 million for the existing facility.
29
Transaction-related expenses. Transaction-related expenses were $7.5 million for the six months ended June 30, 2022, compared to $6.3 million for the six months ended June 30, 2021. Transaction-related expenses represent legal, accounting, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands).
| Six Months Ended June 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
Legal, accounting and other acquisition-related costs | $ | 2,676 |
|
| $ | 3,092 |
|
Termination and restructuring costs |
| 2,646 |
|
|
| 3,193 |
|
Management transition costs |
| 2,200 |
|
|
| — |
|
| $ | 7,522 |
|
| $ | 6,285 |
|
Provision for income taxes. For the six months ended June 30, 2022, the provision for income taxes was $45.1 million, reflecting an effective tax rate of 23.9%, compared to $25.5 million, reflecting an effective tax rate of 27.1%, for the six months ended June 30, 2021.
As we continue to monitor the implications of potential tax legislation in each of our jurisdictions, we may adjust our estimates and record additional amounts for tax assets and liabilities. 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, Clinical Commissioning Groups and local authorities in England, Scotland and Wales) and (v)(iv) individual patients and clients. Revenue is recorded inWe determine the period in which services are provided attransaction price based on established billing rates lessreduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on amounts reimbursable by Medicare or Medicaid under provisions of cost or prospective reimbursement formulas or amounts due from other third-party payors at contractually determined rates.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 before provision for doubtful accounts for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| |||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | Amount | % |
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
|
| Amount |
|
| % |
| |||||||||||||||||||||||||||||||||
Commercial | $ | 142,870 | 19.6 | % | $ | 136,014 | 18.3 | % | $ | 431,818 | 20.2 | % | $ | 398,011 | 18.6 | % |
| $ | 201,674 |
|
|
| 30.9 | % |
| $ | 178,846 |
|
|
| 30.7 | % |
| $ | 396,367 |
|
|
| 31.2 | % |
| $ | 341,548 |
|
|
| 30.1 | % | ||||||||||||||||
Medicare | 73,593 | 10.1 | % | 70,563 | 9.5 | % | 212,992 | 9.9 | % | 198,183 | 9.3 | % |
|
| 96,791 |
|
|
| 14.8 | % |
|
| 90,494 |
|
|
| 15.5 | % |
|
| 191,373 |
|
|
| 15.1 | % |
|
| 176,679 |
|
|
| 15.6 | % | ||||||||||||||||||||
Medicaid | 199,592 | 27.4 | % | 182,432 | 24.5 | % | 587,705 | 27.4 | % | 542,594 | 25.4 | % |
|
| 326,277 |
|
|
| 50.1 | % |
|
| 282,416 |
|
|
| 48.5 | % |
|
| 626,191 |
|
|
| 49.4 | % |
|
| 557,036 |
|
|
| 49.1 | % | ||||||||||||||||||||
NHS | 236,778 | 32.5 | % | 278,524 | 37.4 | % | 694,059 | 32.4 | % | 771,496 | 36.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Self-Pay | 68,257 | 9.4 | % | 68,608 | 9.2 | % | 186,154 | 8.7 | % | 200,451 | 9.4 | % |
|
| 18,701 |
|
|
| 2.9 | % |
|
| 23,434 |
|
|
| 4.0 | % |
|
| 38,486 |
|
|
| 3.0 | % |
|
| 45,877 |
|
|
| 4.0 | % | ||||||||||||||||||||
Other | 7,622 | 1.0 | % | 8,661 | 1.1 | % | 30,968 | 1.4 | % | 28,304 | 1.2 | % |
|
| 8,276 |
|
|
| 1.3 | % |
|
| 6,966 |
|
|
| 1.3 | % |
|
| 15,955 |
|
|
| 1.3 | % |
|
| 12,215 |
|
|
| 1.2 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue before provision for doubtful accounts | 728,712 | 100.0 | % | 744,802 | 100.0 | % | 2,143,696 | 100.0 | % | 2,139,039 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for doubtful accounts | (11,998 | ) | (10,137 | ) | (31,892 | ) | (31,013 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 716,714 | $ | 734,665 | $ | 2,111,804 | $ | 2,108,026 |
| $ | 651,719 |
|
|
| 100.0 | % |
| $ | 582,156 |
|
|
| 100.0 | % |
| $ | 1,268,372 |
|
|
| 100.0 | % |
| $ | 1,133,355 |
|
|
| 100.0 | % | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following tables present a summary of our aging of accounts receivable as of Septemberat June 30, 20172022 and December 31, 2016:
September 30, 20172021:
| Current | 30-90 | 90-150 | >150 | Total | ||||||||||||||||
Commercial | 17.3 | % | 7.6 | % | 3.5 | % | 6.1 | % | 34.5 | % | ||||||||||
Medicare | 9.9 | % | 1.8 | % | 0.7 | % | 1.3 | % | 13.7 | % | ||||||||||
Medicaid | 20.5 | % | 5.2 | % | 2.2 | % | 5.4 | % | 33.3 | % | ||||||||||
NHS | 8.0 | % | 1.3 | % | 0.2 | % | — | % | 9.5 | % | ||||||||||
Self-Pay | 1.2 | % | 1.3 | % | 1.3 | % | 3.0 | % | 6.8 | % | ||||||||||
Other | 0.9 | % | 0.4 | % | 0.2 | % | 0.7 | % | 2.2 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 57.8 | % | 17.6 | % | 8.1 | % | 16.5 | % | 100.0 | % | ||||||||||
| December 31, 2016 | ||||||||||||||||||||
| Current | 30-90 | 90-150 | >150 | Total | ||||||||||||||||
Commercial | 15.8 | % | 8.5 | % | 3.0 | % | 5.3 | % | 32.6 | % | ||||||||||
Medicare | 12.0 | % | 1.6 | % | 0.8 | % | 1.2 | % | 15.6 | % | ||||||||||
Medicaid | 18.7 | % | 6.5 | % | 2.9 | % | 5.5 | % | 33.6 | % | ||||||||||
NHS | 5.1 | % | 3.4 | % | 0.6 | % | 0.4 | % | 9.5 | % | ||||||||||
Self-Pay | 1.8 | % | 1.5 | % | 1.5 | % | 3.3 | % | 8.1 | % | ||||||||||
Other | 0.1 | % | 0.1 | % | 0.1 | % | 0.3 | % | 0.6 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 53.5 | % | 21.6 | % | 8.9 | % | 16.0 | % | 100.0 | % | ||||||||||
Results of Operations
The following table illustrates our consolidated results of operations for the respective periods shown (dollars in thousands):June 30, 2022
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||
Revenue before provision for doubtful accounts | $ | 728,712 | $ | 744,802 | $ | 2,143,696 | $ | 2,139,039 | ||||||||||||||||||||||||
Provision for doubtful accounts | (11,998 | ) | (10,137 | ) | (31,892 | ) | (31,013 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Revenue | 716,714 | 100.0 | % | 734,665 | 100.0 | % | 2,111,804 | 100. | % | 2,108,026 | 100.0 | % | ||||||||||||||||||||
Salaries, wages and benefits | 385,562 | 53.8 | % | 408,242 | 55.6 | % | 1,145,578 | 54.2 | % | 1,157,557 | 54.9 | % | ||||||||||||||||||||
Professional fees | 53,042 | 7.4 | % | 47,687 | 6.5 | % | 142,772 | 6.8 | % | 137,970 | 6.5 | % | ||||||||||||||||||||
Supplies | 28,652 | 4.0 | % | 30,555 | 4.2 | % | 85,000 | 4.0 | % | 88,449 | 4.2 | % | ||||||||||||||||||||
Rents and leases | 19,049 | 2.6 | % | 19,740 | 2.7 | % | 57,455 | 2.7 | % | 55,013 | 2.6 | % | ||||||||||||||||||||
Other operating expenses | 82,328 | 11.5 | % | 79,748 | 10.9 | % | 249,161 | 11.8 | % | 230,950 | 11.0 | % | ||||||||||||||||||||
Depreciation and amortization | 36,442 | 5.1 | % | 36,418 | 5.0 | % | 105,256 | 5.0 | % | 101,145 | 4.8 | % | ||||||||||||||||||||
Interest expense | 44,515 | 6.2 | % | 48,843 | 6.6 | % | 130,777 | 6.2 | % | 135,315 | 6.4 | % | ||||||||||||||||||||
Debt extinguishment costs | — | 0.0 | % | 3,411 | 0.5 | % | 810 | 0.1 | % | 3,411 | 0.2 | % | ||||||||||||||||||||
Loss on divestiture | — | 0.0 | % | 174,739 | 23.8 | % | — | 0.0 | % | 174,739 | 8.3 | % | ||||||||||||||||||||
Gain on foreign currency derivatives | — | 0.0 | % | (15 | ) | (0.1 | )% | — | 0.0 | % | (523 | ) | (0.1 | )% | ||||||||||||||||||
Transaction-related expenses | 5,665 | 0.8 | % | 1,111 | 0.1 | % | 18,836 | 0.9 | % | 33,483 | 1.6 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total expenses | 655,255 | 91.4 | % | 850,479 | 115.8 | % | 1,935,645 | 91.7 | % | 2,117,509 | 100.4 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Income (loss) before income taxes | 61,459 | 8.6 | % | (115,814 | ) | (15.8 | )% | 176,159 | 8.3 | % | (9,483 | ) | (0.4 | )% | ||||||||||||||||||
Provision for income taxes | 15,970 | 2.2 | % | 2,396 | 0.3 | % | 46,259 | 2.1 | % | 27,767 | 1.3 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Net income (loss) | $ | 45,489 | 6.4 | % | $ | (118,210 | ) | (16.1 | )% | $ | 129,900 | 6.2 | % | $ | (37,250 | ) | (1.7 | )% | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
| Current |
|
| 30-90 |
|
| 90-150 |
|
| >150 |
|
| Total |
| |||||
Commercial |
|
| 20.4 | % |
|
| 5.6 | % |
|
| 2.9 | % |
|
| 8.4 | % |
|
| 37.3 | % |
Medicare |
|
| 11.6 | % |
|
| 1.3 | % |
|
| 0.5 | % |
|
| 1.2 | % |
|
| 14.6 | % |
Medicaid |
|
| 30.4 | % |
|
| 3.0 | % |
|
| 2.1 | % |
|
| 5.0 | % |
|
| 40.5 | % |
Self-Pay |
|
| 1.3 | % |
|
| 1.5 | % |
|
| 1.6 | % |
|
| 2.8 | % |
|
| 7.2 | % |
Other |
|
| 0.2 | % |
|
| 0.2 | % |
|
| 0.0 | % |
|
| 0.0 | % |
|
| 0.4 | % |
Total |
|
| 63.9 | % |
|
| 11.6 | % |
|
| 7.1 | % |
|
| 17.4 | % |
|
| 100.0 | % |
Three months ended September 30, 2017 compared to the three months ended September 30, 2016
Revenue before provision for doubtful accounts. Revenue before provision for doubtful accounts decreased $16.1 million, or 2.2%, to $728.7 million for the three months ended September 30 2017 from $744.8 million for the three months ended September 30, 2016. The decrease related primarily to the reduction in revenue before provision for doubtful accounts related to the U.K. Divestiture of $45.4 million offset by same facility patient day growth. Same-facility revenue before provision for doubtful accounts increased by $37.8 million, or 5.7%, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, resulting from same-facility growth in patient days of 3.5% and an increase in same-facility revenue per day of 1.9%. Consistent with the same-facility patient day growth in 2016, the growth in same-facility patient days for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 resulted from the addition of beds to our existing facilities and ongoing demand for our services.
Provision for doubtful accounts. The provision for doubtful accounts was $12.0 million for the three months ended September 30, 2017, or 1.6% of revenue before provision for doubtful accounts, compared to $10.1 million for the three months ended September 30, 2016, or 1.4% of revenue before provision for doubtful accounts.
Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $385.6 million for the three months ended September 30, 2017 compared to $408.2 million for the three months ended September 30, 2016, a decrease of $22.6 million. SWB expense included $4.2 million and $7.1 million of equity-based compensation expense for the three months ended September 30, 2017 and 2016, respectively. Excluding equity-based compensation expense, SWB expense was $381.4 million, or 53.2% of revenue, for the three months ended September 30, 2017, compared to $401.1 million, or 54.6% of revenue, for the three months ended September 30, 2016. The $19.7 million decrease in SWB expense, excluding equity-based compensation expense, was primarily attributable to the reduction in expense related to the U.K. Divestiture. Same-facility SWB expense was $351.3 million for the three months ended September 30, 2017, or 51.1% of revenue, compared to $338.1 million for the three months ended September 30, 2016, or 51.9% of revenue.
Professional fees. Professional fees were $53.0 million for the three months ended September 30, 2017, or 7.4% of revenue, compared to $47.7 million for the three months ended September 30, 2016, or 6.5% of revenue. The $5.3 million increase was primarily attributable to higher contract labor costs in our U.K. Facilities offset by the reduction in expense related to the U.K. Divestiture. Same-facility professional fees were $45.1 million for the three months ended September 30, 2017, or 6.6% of revenue, compared to $37.6 million, for the three months ended September 30, 2016, or 5.7% of revenue.
Supplies.Supplies expense was $28.7 million for the three months ended September 30, 2017, or 4.0% of revenue, compared to $30.6 million for the three months ended September 30, 2016, or 4.2% of revenue. The $1.9 million decrease was primarily attributable to the reduction in expense related to the U.K. Divestiture. Same-facility supplies expense was $26.8 million for the three months ended September 30, 2017, or 3.9% of revenue, compared to $26.4 million for the three months ended September 30, 2016, or 4.0% of revenue.
Rents and leases. Rents and leases were $19.1 million for the three months ended September 30, 2017, or 2.7% of revenue, compared to $19.7 million for the three months ended September 30, 2016, or 2.7% of revenue. Same-facility rents and leases were $15.4 million for the three months ended September 30, 2017, or 2.2% of revenue, compared to $16.0 million for the three months ended September 30, 2016, or 2.5% 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 $82.3 million for the three months ended September 30, 2017, or 11.5% of revenue, compared to $79.7 million for the three months ended September 30, 2016, or 10.9% of revenue. Same-facility other operating expenses were $77.2 million for the three months ended September 30, 2017, or 11.3% of revenue, compared to $70.7 million for the three months ended September 30, 2016, or 10.9% of revenue.
Depreciation and amortization. Depreciation and amortization expense was $36.4 million for the three months ended September 30, 2017, or 5.1% of revenue, compared to $36.4 million for the three months ended September 30, 2016, or 5.0% of revenue. The slight change in depreciation and amortization was attributable to reduction in expense related to the U.K. Divestiture offset by depreciation associated with capital expenditures during 2016 and 2017.
Interest expense. Interest expense was $44.5 million for the three months ended September 30, 2017 compared to $48.8 million for the three months ended September 30, 2016. The decrease in interest expense was primarily a result of the debt paydown on November 30, 2016 using proceeds from the U.K. Divestiture. Interest expense was also impacted by lower interest rates in connection with amendments to the Amended and Restated Senior Credit Facility offset by higher interest rates applicable to our variable rate debt.
Debt extinguishment costs. The debt extinguishment costs for the three months ended September 30, 2016 represent $3.4 million of charges recorded in connection with the TrancheB-2 Repricing Amendment.
Loss on divestiture. As part of our divestiture in the U.K., we recorded $174.7 million of loss on divestiture for the three months ended September 30, 2016, which included an allocation of goodwill to the U.K. Disposal Group of approximately $106.9 million, estimated transaction-related expenses of approximately $25.6 million and a loss on the sale of property of $42.2 million.
Gain on foreign currency derivatives. We entered into foreign currency forward contracts during the three months ended September 30, 2016 in connection with (i) acquisitions in the U.K. and (ii) transfers of cash between the U.S. and U.K. under our cash management and foreign currency risk management programs. Exchange rate changes between the contract date and the settlement date resulted in a gain on foreign currency derivatives of $15,000 for the three months ended September 30, 2016.
Transaction-related expenses. Transaction-related expenses were $5.7 million for the three months ended September 30, 2017 compared to $1.1 million for the three months ended September 30, 2016. Transaction-related expenses represent costs incurred in the respective periods, primarily related to the 2016 Acquisitions, the U.K. Divestiture and related integration efforts, as summarized below (in thousands):
| Three Months Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
Legal, accounting and other costs | $ | 3,845 | $ | 1,111 | ||||
Severance and contract termination costs | 1,820 | — | ||||||
|
|
|
| |||||
| $ | 5,665 | $ | 1,111 | |||||
|
|
|
| |||||
Provision for income taxes. For the three months ended September 30, 2017, the provision for income taxes was $16.0 million, reflecting an effective tax rate of 26.0%, compared to $2.4 million, reflecting an effective tax rate of (2.1)%, for the three months ended September 30, 2016. The increase in the effective tax rate for the three and nine months ended September 30, 2017 was primarily attributable to the disparity in the accounting treatment and the tax treatment of the U.K. Divestiture, the reduction in ongoing U.K. earnings as a result of the U.K. Divestiture, changes in the foreign exchange rate between USD and GBP and the adoption of ASU2016-09.
Nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
Revenue before provision for doubtful accounts. Revenue before provision for doubtful accounts increased $4.7 million, or 0.2%, to $2.1 billion for the nine months ended September 30, 2017 from $2.1 billion for the nine months ended September 30, 2016. The increase related primarily to revenue generated during the nine months ended September 30, 2017 from the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, offset by the reduction in revenue before provision for doubtful accounts related to the U.K. Divestiture of $129.1 million and the decline in the exchange rate between USD and GBP of $64.5 million. Same-facility revenue before provision for doubtful accounts increased $103.7 million, or 5.7%, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, resulting from same-facility growth in patient days of 4.1% and an increase in same-facility revenue per day of 1.5%. Consistent with the same-facility patient day growth in 2016, the growth in same-facility patient days for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 resulted from the addition of beds to our existing facilities and ongoing demand for our services.
Provision for doubtful accounts. The provision for doubtful accounts was $31.9 million for the nine months ended September 30, 2017, or 1.5% of revenue before provision for doubtful accounts, compared to $31.0 million for the nine months ended September 30, 2016, or 1.4% of revenue before provision for doubtful accounts.
Salaries, wages and benefits. SWB expense was $1.2 billion for both the nine months ended September 30, 2017 and 2016. SWB expense included $19.0 million and $21.0 million of equity-based compensation expense for the nine months ended September 30, 2017 and 2016, respectively. Excluding equity-based compensation expense, SWB expense was $1.1 billion, or 53.3% of revenue, for the nine months ended September 30, 2017, compared to $1.1 billion, or 53.9% of revenue, for the nine months ended September 30, 2016. The slight decrease in SWB expense, excluding equity-based compensation expense, was primarily attributable to the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP offset by SWB expense incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory. Same-facility SWB expense was $967.2 million for the nine months ended September 30, 2017, or 50.7% of revenue, compared to $920.4 million for the nine months ended September 30, 2016, or 50.9% of revenue.
Professional fees. Professional fees were $142.8 million for the nine months ended September 30, 2017, or 6.8% of revenue, compared to $138.0 million for the nine months ended September 30, 2016, or 6.5% of revenue. The $4.8 million increase was primarily attributable to professional fees incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, and higher contract labor costs in the U.K. Facilities offset by the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP. Same-facility professional fees were $114.6 million for the nine months ended September 30, 2017, or 6.0% of revenue, compared to $104.9 million, for the nine months ended September 30, 2016, or 5.8% of revenue.
Supplies.Supplies expense was $85.0 million for the nine months ended September 30, 2017, or 4.0% of revenue, compared to $88.4 million for the nine months ended September 30, 2016, or 4.2% of revenue. The $3.4 million decrease was primarily attributable to the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP slightly offset by supplies expense incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory. Same-facility supplies expense was $76.0 million for the nine months ended September 30, 2017, or 4.0% of revenue, compared to $73.9 million for the nine months ended September 30, 2016, or 4.1% of revenue.
Rents and leases. Rents and leases were $57.5 million for the nine months ended September 30, 2017, or 2.7% of revenue, compared to $55.0 million for the nine months ended September 30, 2016, or 2.6% of revenue. The $2.4 million increase was primarily attributable to rents and leases incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, slightly offset by the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP. Same-facility rents and leases were $42.3 million for the nine months ended September 30, 2017, or 2.2% of revenue, compared to $42.3 million for the nine months ended September 30, 2016, or 2.3% 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 $249.2 million for the nine months ended September 30, 2017, or 11.8% of revenue, compared to $231.0 million for the nine months ended September 30, 2016, or 11.0% of revenue. The $18.2 million increase was primarily attributable to other operating expenses incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, slightly offset by the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP. Same-facility other operating expenses were $220.0 million for the nine months ended September 30, 2017, or 11.4% of revenue, compared to $198.5 million for the nine months ended September 30, 2016, or 10.9% of revenue.
Depreciation and amortization. Depreciation and amortization expense was $105.3 million for the nine months ended September 30, 2017, or 5.0% of revenue, compared to $101.1 million for the nine months ended September 30, 2016, or 4.8% of revenue. The increase in depreciation and amortization was attributable to depreciation associated with capital expenditures during 2016 and 2017 and real estate acquired as part of the 2016 Acquisitions, particularly the acquisition of Priory, offset by reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP.
Interest expense. Interest expense was $130.8 million for the nine months ended September 30, 2017 compared to $135.3 million for the nine months ended September 30, 2016. The decrease in interest expense was primarily a result of the lower interest rates in connection with amendments to the Amended and Restated Senior Credit Facility and the debt paydown on November 30, 2016 using proceeds from the U.K. Divestiture. Interest expense was also impacted by higher interest rates applicable to our variable rate debt, borrowings under the Amended and Restated Senior Credit Facility and the issuance of the 6.500% Senior Notes on February 16, 2016.
Debt extinguishment costs. Debt extinguishment costs for the nine months ended September 30, 2017 represent $0.5 million of charges and $0.3 ofnon-cash charges recorded in connection with the Third Repricing Amendment to the Amended and Restated Senior Credit Facility. The debt extinguishment costs for the nine months ended September 30, 2016 represent $3.4 million of charges recorded in connection with the TrancheB-2 Repricing Amendment.
Loss on divestiture. As part of our divestiture in the U.K., we recorded $174.7 million of loss on divestiture for the nine months ended September 30, 2016, which included an allocation of goodwill to the U.K. Disposal Group of approximately $106.9 million, estimated transaction-related expenses of approximately $25.6 million and a loss on the sale of property of $42.2 million.
Gain on foreign currency derivatives. We entered into foreign currency forward contracts during the nine months ended September 30, 2016 in connection with (i) acquisitions in the U.K. and (ii) transfers of cash between the U.S. and the U.K. under our cash management and foreign currency risk management programs. Exchange rate changes between the contract date and the settlement date resulted in a gain on foreign currency derivatives of $0.5 million for the nine months ended September 30, 2016.
Transaction-related expenses. Transaction-related expenses were $18.8 million for the nine months ended September 30, 2017 compared to $33.5 million for the nine months ended September 30, 2016. Transaction-related expenses represent costs incurred in the respective periods, primarily related to the 2016 Acquisitions, the U.K. Divestiture and related integration efforts, as summarized below (in thousands):December 31, 2021
| Nine Months Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
Legal, accounting and other costs | $ | 7,286 | $ | 17,212 | ||||
Severance and contract termination costs | 11,550 | 1,421 | ||||||
Advisory and financing commitment fees | — | 14,850 | ||||||
|
|
|
| |||||
| $ | 18,836 | $ | 33,483 | |||||
|
|
|
| |||||
|
| Current |
|
| 30-90 |
|
| 90-150 |
|
| >150 |
|
| Total |
| |||||
Commercial |
|
| 20.1 | % |
|
| 6.2 | % |
|
| 2.6 | % |
|
| 8.2 | % |
|
| 37.1 | % |
Medicare |
|
| 11.3 | % |
|
| 1.7 | % |
|
| 0.5 | % |
|
| 2.0 | % |
|
| 15.5 | % |
Medicaid |
|
| 28.6 | % |
|
| 3.5 | % |
|
| 2.0 | % |
|
| 5.6 | % |
|
| 39.7 | % |
Self-Pay |
|
| 1.3 | % |
|
| 1.4 | % |
|
| 1.4 | % |
|
| 3.0 | % |
|
| 7.1 | % |
Other |
|
| 0.1 | % |
|
| 0.1 | % |
|
| 0.2 | % |
|
| 0.2 | % |
|
| 0.6 | % |
Total |
|
| 61.4 | % |
|
| 12.9 | % |
|
| 6.7 | % |
|
| 19.0 | % |
|
| 100.0 | % |
Provision for income taxes. For the nine months ended September 30, 2017, the provision for income taxes was $46.3 million, reflecting an effective tax rate of 26.3%, compared to $27.8 million, reflecting an effective tax rate of (292.8)%, for the nine months ended September 30, 2016. The increase in the effective tax rate for the three and nine months ended September 30, 2017 was primarily attributable to the disparity in the accounting treatment and the tax treatment of the U.K. Divestiture, the reduction in ongoing U.K. earnings as a result of the U.K. Divestiture, changes in the foreign exchange rate between USD and GBP and the adoption of ASU2016-09.
Liquidity and Capital Resources
Cash provided by continuing operating activities for the ninesix months ended SeptemberJune 30, 20172022 was $272.6$226.0 million compared to $265.2$166.3 million for the ninesix months ended SeptemberJune 30, 2016. The2021. Operating cash flows included net government relief funds of approximately $(1.2) million for the six months ended June 30, 2022 compared to net government relief funds of approximately $16.9 million for the six months ended June 30, 2021. Operating cash flows were impacted by an increase in earnings, a reduction in cash provided by continuing operating activities was primarily attributable to cash provided by operating activities from our 2016 Acquisitions offset bypaid for interest and an increase in tax payments during the U.K. Divestiture and the decline in the exchange rate between USD and GBP.six months ended June 30, 2022. Days sales outstanding were 38 as of September42 days at both June 30, 2017 compared to 34 as of December 31, 2016. As of September 30, 20172022 and December 31, 2016, we had working capital of $122.6 million and $85.1 million, respectively.2021.
Cash used in investing activities for the ninesix months ended SeptemberJune 30, 20172022 was $233.2$135.8 million compared to $971.8cash provided by investing activities of $1,317.3 million for the ninesix months ended SeptemberJune 30, 2016.2021. Cash used in investing activities for the ninesix months ended SeptemberJune 30, 20172022 primarily consisted of $193.8$132.4 million of cash paid for capital expenditures and $33.3$5.0 million of cash paid for real estate.other, offset by $1.7 million of proceeds from sales of property and equipment. Cash paid for capital expenditures for the ninesix months ended SeptemberJune 30, 20172022 consisted of $52.1$32.2 million of routine capital expenditures and $141.7$100.2 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 2.5%approximately 3% of revenue for the ninesix months ended SeptemberJune 30, 2017.2022. Cash used inprovided by investing activities for the ninesix months ended SeptemberJune 30, 20162021 primarily consisted of $683.3$1,511.0 million of cash paidproceeds from the U.K. Sale, $3.2 million of other and $0.9 million of proceeds from the sale of property and equipment, offset by $84.8 million for acquisitions, $250.0settlement of foreign currency derivatives and $113.0 million of cash paid for capital expenditures. Cash paid for capital expenditures for the six months ended June 30, 2021 consisted of $18.0 million of routine capital expenditures and $37.9$95.0 million of cash paid for real estate acquisitions.expansion capital expenditures.
Cash used in financing activities for the ninesix months ended SeptemberJune 30, 20172022 was $27.5$95.6 million compared to cash provided by financing activities of $738.2$1,681.1 million for the ninesix months ended SeptemberJune 30, 2016.2021. Cash used in financing activities for the ninesix months ended SeptemberJune 30, 2017 primarily2022 consisted of principal payments on revolving credit facility of $85.0 million, repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises of $9.9 million, principal payments on long-term debt of $25.9$8.0 million and common stock withheld for minimum statutory taxesdistributions to noncontrolling partners in joint ventures of $3.3 million.$0.8 million, offset by $8.0 million of contributions from noncontrolling partners in joint ventures. Cash provided byused in financing activities for the ninesix months ended SeptemberJune 30, 20162021 primarily consisted of borrowings onrepayment of long-term debt of $1.5 billion, borrowings on our revolving credit facility of $179.0$2,227.9 million, issuance of common stock of $685.1 million, partially offset by repayment of assumed Priory debt of $1.3 billion, paymentprincipal payments on revolving credit facility of $166.0$305.0 million, payment of debt issuance costs of $35.8$8.0 million, principal paymentsother of $6.9 million and $0.6 million of distributions to noncontrolling partners in joint ventures, offset by borrowings on long-term debt of $46.1$425.0 million, borrowings on revolving credit facility of $430.0 million, repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises of $13.3 million and common stock withheld for minimum statutory taxes$1.8 million of $7.9 million.contributions from noncontrolling partners in joint ventures.
We had total available cash and cash equivalents of $75.7$128.4 million and $57.1$133.8 million as of Septemberat June 30, 20172022 and December 31, 2016,2021, respectively, of which approximately $31.9$25.0 million and $41.4$20.1 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
We believe existing cash on hand, cash flows from operations, the availability under our current intention to permanently reinvest our foreign cashrevolving line of credit and cash equivalents outside offrom additional financing will be sufficient to meet our expected liquidity needs during the U.S. If we were to repatriate foreign cash to the U.S., we may be required to accruenext 12 months.
New Credit Facility
We entered into a New Credit Facility on March 17, 2021. The New Credit Facility provides for a $600.0 million Revolving Facility and pay U.S. taxesa $425.0 million Term Loan Facility with each maturing on March 17, 2026 unless extended in accordance with applicable U.S. tax rules and regulations as a resultthe terms of the repatriation.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.
Amended and Restated SeniorAs 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.
31
During the six months ended June 30, 2022, we repaid $85.0 million of the balance outstanding on the Revolving Facility. We had $511.6 million of availability under the Revolving Facility and had standby letters of credit outstanding of $3.4 million related to security for the payment of claims required by our workers’ compensation insurance program at June 30, 2022.
The New Credit Facility requires quarterly term loan principal repayments for our Term Loan Facility of $5.3 million for September 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 17, 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.
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 1.50% or (ii) an alternative base rate plus 0.50% (in each case, subject to adjustment based on our consolidated total net leverage ratio). An unused fee initially set at 0.20% per annum (subject to adjustment based on our 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 us 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 June 30, 2022, we were 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 January 25, 2016,5, 2021, we entered intomade a voluntary payment of $105.0 million on the Ninth Amendment to our Amended and Restated Credit Agreement. The Ninth Amendment modified certain definitions and provides increased flexibility to us in terms of our financial covenants. Our baskets for permitted investments were also increased to provide increased flexibility for us to invest innon-wholly owned subsidiaries, joint ventures and foreign subsidiaries. As a result of the Ninth Amendment,Tranche B-4 Facility. On January 19, 2021, we may invest innon-wholly owned subsidiaries and joint ventures up to 10.0% of our and our subsidiaries’ total assets in any consecutive four fiscal quarter period, and up to 12.5% of our and our subsidiaries’ total assets during the term of the Amended and Restated Credit Agreement. We may also invest in foreign subsidiaries that are not loan parties up to 10% of our and our subsidiaries’ total assets in any consecutive four fiscal quarter period, and up to 15% of our and our subsidiaries’ total assets during the term of the Amended and Restated Credit Agreement. The foregoing permitted investments are subject to an aggregate cap of 25% of our and our subsidiaries’ total assets in any fiscal year.
On February 16, 2016, we entered into the Second Incremental Facility Amendment to our Amended and Restated Credit Agreement. The Second Incremental Amendment activated a new $955.0 million incremental Term Loan B facility and added $135.0 million to the Term Loan A facility to our Amended and Restated Senior Secured Credit Facility, subject to limited conditionality provisions. Borrowings under the New TLB Facility were used to fund a portion of the purchase price fornet proceeds from the acquisitionU.K. Sale to repay the outstanding balances of Priory and the fees and expenses for such acquisition and the related financing transactions. Borrowings under the$311.7 million of our TLA Facility were used to pay down the majorityand $767.9 million of our $300.0 million revolving credit facility.
On May 26, 2016, we entered intoTranche B-4 Facility of the TrancheB-1 Repricing Amendment toPrior Credit Facility. During the Amended and Restated Credit Agreement. The TrancheB-1 Repricing Amendment reduced the Applicable Rate with respect to the Existing TLB Facility from 3.5% to 3.0%six months ended June 30, 2021, in the case of Eurodollar Rate loans and 2.5% to 2.0% in the case of Base Rate Loans.
On September 21, 2016, we entered into the TrancheB-2 Repricing Amendment to the Amended and Restated Credit Agreement. The TrancheB-2 Repricing Amendment reduced the Applicable Rate with respect to the New TLB Facility from 3.75% to 3.00% in the case of Eurodollar Rate loans and 2.75% to 2.00% in the case of Base Rate Loans. In connection with the TrancheB-2 Repricing Amendment,termination of the Prior Credit Facility, we recorded a debt extinguishment charge of $3.4$10.9 million, including the write-off of discount andwrite-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statementsstatement of operations.
On November 22, 2016, we entered into the Tenth Amendment to the Amended and Restated Credit Agreement. The Tenth Amendment, among other things, (i) amended the negative covenant regarding dispositions, (ii) modified the collateral package to release any real property with a fair market value of less than $5.0 million and (iii) changed certain investment, indebtedness and lien baskets.
On November 30, 2016, we entered into the Refinancing Facilities Amendment to the Amended and Restated Credit Agreement. The Refinancing Amendment increased our line of credit on our revolving credit facility to $500.0 million from $300.0 million and reduced our TLA Facility to $400.0 million from $600.6 million. In addition, the Refinancing Amendment extended the maturity date for the Refinancing Facilities to November 30, 2021 from February 13, 2019, and lowered our effective interest rate on our line of credit on our revolving credit facility and TLA Facility by 50 basis points. In connection with the Refinancing Amendment, we recorded a debt extinguishment charge of $0.8 million, including thewrite-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.32
On May 10, 2017, we entered into the Third Repricing Amendment to the Amended and Restated Credit Agreement. The Third Repricing Amendment reduced the Applicable Rate with respect to the Existing TLB Facility and the New TLB Facility from 3.0% to 2.75% in the case of Eurodollar Rate loans and 2.0% to 1.75% in the case of Base Rate Loans. In connection with the Third Repricing Amendment, we recorded a debt extinguishment charge of $0.8 million, including the discount andwrite-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.
We had $493.5 million of availability under the revolving line of credit and had standby letters of credit outstanding of $6.5 million related to security for the payment of claims required by our workers’ compensation insurance program as of September 30, 2017. 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 $5.0 million for September 30, 2017 to December 31, 2019, $7.5 million for March 31, 2020 to December 31, 2020, and $10.0 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 Existing TLB Facility in equal quarterly installments of $1.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Existing TLB Facility due on February 11, 2022. We are required to repay the New TLB Facility in equal quarterly installments of approximately $2.4 million on the last business day of each March, June, September and December, with the outstanding principal balance of the New TLB Facility 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 our 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 $40.0 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 2.75% for Eurodollar Rate Loans (as defined in the Amended and Restated Credit Agreement) and 1.75% for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) at September 30, 2017. 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%. As of September 30, 2017, the Pro Rata Facilities bore interest at a rate of LIBOR plus 2.75%. 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 | 1.75 | % | 0.75 | % | 0.20 | % | |||||||
2 | >3.50:1.0 but < 4.00:1.0 | 2.00 | % | 1.00 | % | 0.25 | % | |||||||
3 | >4.00:1.0 but < 4.50:1.0 | 2.25 | % | 1.25 | % | 0.30 | % | |||||||
4 | >4.50:1.0 but < 5.25:1.0 | 2.50 | % | 1.50 | % | 0.35 | % | |||||||
5 | >5.25:1.0 | 2.75 | % | 1.75 | % | 0.40 | % | |||||||
Eurodollar Rate Loans with respect to the Existing TLB Facility bear interest at the Existing TLB 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 Existing TLB 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 “Existing TLB Applicable Rate” means, with respect to Eurodollar Rate Loans, 3.0%, and with respect to Base Rate Loans, 2.0%. The New TLB 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, 3.0%, and with respect to Base Rate Loans, 2.0%.
The lenders who provided the Existing TLB Facility and New TLB Facility are not entitled to benefit from our maintenance of its financial covenants under the Amended and Restated Credit Agreement. Accordingly, if we fail to maintain its financial covenants, such failure shall not constitute an event of default under the Amended and Restated Credit Agreement with respect to the Existing TLB Facility or the New TLB 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.
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:
| March 31 | June 30 | September 30 | December 31 | |||||||||||||
| 2017 | 6.75 | x | 6.75 | x | 6.50 | x | 6.50 | x | ||||||||
| 2018 | 6.50 | x | 6.25 | x | 6.00 | x | 6.00 | x | ||||||||
| 2019 | 5.75 | x | 5.75 | x | 5.50 | x | 5.50 | x | ||||||||
| 2020 | 5.25 | x | 5.25 | x | 5.25 | x | 5.00 | x | ||||||||
| ||||
|
As of September 30, 2017, 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.
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.
6.500%year, commencing on April 15, 2021. We used the net proceeds of 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 statement 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 itsour 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 guaranteeguaranteed our obligations under the Amended and Restated SeniorNew Credit Facility. The guarantees are full and unconditional and joint and several.
We may redeem the Senior Notes at itsour option, in whole or part, at the dates and amounts set forth in the indentures.
9.0% and 9.5% Revenue Bonds5.625% Senior Notes due 2023
On NovemberFebruary 11, 2012,2015, 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 had outstanding an aggregate of $650.0 million of 5.625% Senior Notes. The 5.625% Senior Notes were to 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 were to 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 acquisition of Park Royal, we assumed debt of $23.0 million. The fair market valueredemption of the 6.500% Senior Notes, we recorded debt assumed was $25.6extinguishment costs of $10.5 million, including $6.3 million cash paid for breakage costs and resultedthe write-off of deferred financing costs of $4.2 million in a debt premium balance being recorded as of the acquisition date. The debt consisted of $7.5 million and $15.5 million of Lee County (Florida) Industrial Development Authority Healthcare Facilities Revenue Bonds, Series 2010 with stated interest rates of 9.0% and 9.5%, respectively. The 9.0% bonds in the amount of $7.5 million have a maturity date of December 1, 2030 and require yearly principal payments beginning in 2013. The 9.5% bonds in the amount of $15.5 million have a maturity date of December 1, 2040 and require yearly principal payments beginning in 2031. The principal payments establish a bond-sinking fund to be held with the trustee and shall be sufficient to redeem the principal amounts of the 9.0% and 9.5% Revenue Bonds on their respective maturity dates. As of September 30, 2017 and December 31, 2016, $2.3 million was recorded within other assets on the condensed consolidated balance sheets related tostatement of operations.
On March 17, 2021, we satisfied and discharged the debt service reserve fund requirements. The yearly principal payments, which establish a bond sinking fund, will increaseindentures governing the debt service reserve fund requirements. The bond premium amount of $2.6 million is amortized as a reduction of interest expense over5.625% Senior Notes. In connection with the liferedemption of the 9.0%5.625% Senior Notes, we recorded debt extinguishment costs of $3.3 million, including the write-off of deferred financing and 9.5% Revenue Bonds usingpremiums costs in the effective interest method.condensed consolidated statement of operations.
33
Contractual Obligations
The following table presents a summary of contractual obligations as of Septemberat June 30, 2017 (dollars in2022 (in thousands):
| Payments Due by Period |
| Payments Due by Period |
| |||||||||||||||||||||||||||||||||||||
| Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | Total |
| Less Than 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More Than 5 Years |
|
| Total |
| |||||||||||||||||||||
Long-term debt (a) | $ | 196,142 | $ | 395,699 | $ | 1,534,207 | $ | 2,048,740 | $ | 4,174,788 |
| $ | 85,773 |
|
| $ | 185,580 |
|
| $ | 594,806 |
|
| $ | 997,250 |
|
| $ | 1,863,409 |
| ||||||||||
Operating leases | 67,856 | 122,996 | 105,816 | 836,723 | 1,133,391 | |||||||||||||||||||||||||||||||||||
Purchase and other obligations (b) | 4,365 | 7,357 | 34,603 | 27,332 | 73,657 | |||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Operating lease liabilities (b) |
|
| 31,420 |
|
|
| 52,245 |
|
|
| 33,883 |
|
|
| 67,113 |
|
|
| 184,661 |
| ||||||||||||||||||||
Finance lease liabilities |
|
| 990 |
|
|
| 2,046 |
|
|
| 2,178 |
|
|
| 22,366 |
|
|
| 27,580 |
| ||||||||||||||||||||
Total obligations and commitments | $ | 268,363 | $ | 526,052 | $ | 1,674,626 | $ | 2,912,795 | $ | 5,381,836 |
| $ | 118,183 |
|
| $ | 239,871 |
|
| $ | 630,867 |
|
| $ | 1,086,729 |
|
| $ | 2,075,650 |
| ||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
(a) | Amounts include required principal and interest payments. The projected interest payments reflect the interest rates in place on our variable-rate debt |
(b) | Amounts exclude variable components of |
Off-Balance Sheet ArrangementsCritical Accounting Policies
AsOur goodwill and other indefinite-lived intangible assets, which consist of September 30, 2017,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.
Subsequent to the U.K. Sale, as of our impairment test on October 1, 2021, we had standby lettersone reporting unit, behavioral health services. The fair value of credit outstanding of $6.5 million related to securityour behavioral health services reporting unit substantially exceeded its carrying value, and therefore no impairment was recorded.
There have been no material changes in our critical accounting policies at June 30, 2022 from those described in our Annual Report on Form 10-K for the payment of claims as required by our workers’ compensation insurance program.year ended December 31, 2021.
Interest Rate Risk
Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at SeptemberJune 30, 20172022 was composed of $1.5 billion$913.5 million of fixed-rate debt and $1.8 billion$491.8 million of variable-rate debt with interest based on LIBOR plus an applicable margin. ABased on our borrowing level at June 30, 2022, a hypothetical 10%1% increase in interest rates (which would equate to a 0.39% higher rate on our variable rate debt) would decrease our netpretax income and cash flows by $4.5 million on an annual basis based upon our borrowing level at September 30, 2017.
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 $10.3 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 £449.3approximately $5 million. The cross currency swap agreements limit the impact of changes in the exchange rate on our cash flows and leverage. Following the Brexit vote, the GBP dropped to its lowest level against the USD in more than 30 years. If the exchange rate remains low, our results of operations will be negatively impacted in future periods.
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 inRules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”))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 SeptemberJune 30, 20172022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
34
We are, from timeInformation with respect to time, subject to various claimsthis item may be found in Note 18 – Commitments and legal actions that ariseContingencies in the ordinary courseaccompanying notes to our consolidated financial statements of our business, including claims for damages for personal injuries, medical malpractice, breach of contract, 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 coveredthis Quarterly Report on Form 10-Q, which information is incorporated herein by insurance. In the opinion of management, we are not currently a party to any proceeding that would have a material adverse effect on our business, financial condition or results of operations.reference.
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 Form10-K for the year ended December 31, 2016.2021. The risks as described in the Company’s Annual Report on Form10-K for the year ended December 31, 2016,2021, 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.
During the three months ended SeptemberJune 30, 2017,2022, 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 | ||||||||||||
July 1 – July 31 | 4,400 | $ | 50.08 | — | — | |||||||||||
August 1 – August 31 | 3,016 | 50.29 | — | — | ||||||||||||
September 1 – September 30 | 198 | 47.28 | — | — | ||||||||||||
|
| |||||||||||||||
Total | 7,614 | |||||||||||||||
|
| |||||||||||||||
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 |
| ||||
April 1 – April 30 |
|
| 1,637 |
|
| $ | 68.18 |
|
|
| — |
|
|
| — |
|
May 1 – May 31 |
|
| 2,135 |
|
|
| 67.88 |
|
|
| — |
|
|
| — |
|
June 1 – June 30 |
|
| 175 |
|
|
| 64.90 |
|
|
| — |
|
|
| — |
|
Total |
|
| 3,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Exhibit No. | Exhibit Description | |
3.1 | ||
3.2 | Amended and Restated Bylaws of the Company, as | |
10.1 | ||
22 | List of Subsidiary Guarantors and Issuers of Guaranteed Securities. (3) | |
31.1* | ||
31.2* | ||
32* | ||
101.INS** | Inline XBRL Instance | |
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 | |
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 June 30, 2022, has been formatted in Inline XBRL. | |
(1) | Incorporated by reference to exhibits filed with the Company’s Current Report on Form8-K filed May 25, 2017 (FileNo. 001-35331). |
(2) | Incorporated by reference to exhibits filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (File No. 001-35331). |
(3) | Incorporated by reference to exhibits filed with the Company’s Annual Report on Form 10-K for year ended December 31, 2021 (File No. 001-35331). |
* | Filed herewith. |
** | The XBRL related information in Exhibit 101 to this quarterly report on Form10-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. |
36
Pursuant to the requirements of the Securities Exchange 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: October 25, 2017
4537