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SECURITIES AND EXCHANGE COMMISSION
Exchange Act of 1934
þ | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
o | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: | ||
(2) | Aggregate number of securities to which transaction applies: | ||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
(4) | Proposed maximum aggregate value of transaction: | ||
(5) | Total fee paid: |
þ | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing: |
(1) | Amount previously paid: | ||
(2) | Form, Schedule or Registration Statement No.: | ||
(3) | Filing party: | ||
(4) | Date Filed: |
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The information in this proxy statement/prospectus is not complete and may be changed. The securities being offered by the use of this proxy statement/prospectus may not be issued until the registration statement filed with the Securities and Exchange Commission of which this proxy statement/prospectus is a part is declared effective. This proxy statement/prospectus is not an offer to sell these securities nor a solicitation of any offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
SUBJECT TO COMPLETION, DATED AUGUST 19, 2011
PROXY STATEMENT | PROSPECTUS |
President and Chief Executive Officer
PHC stockholders on or about , 2011
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200 Lake Street
Suite 102
Peabody, Massachusetts 01960
TO BE HELD ON , 2011
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199 Water Street, 26th Floor
New York, New York10038-3560
Banks and Brokers Call (212) 440-9800
All Others Call Toll-Free (888) 658-3624
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Six Months Ended | ||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||
2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Net patient service revenue | $ | 33,353 | $ | 51,821 | $ | 64,342 | $ | 32,472 | $ | 82,961 | ||||||||||
Salaries, wages and benefits* | 22,342 | 30,752 | 36,333 | 18,374 | 70,538 | |||||||||||||||
Professional fees | 952 | 1,977 | 3,612 | 1,240 | 3,130 | |||||||||||||||
Provision for doubtful accounts | 1,804 | 2,424 | 2,239 | 1,186 | 1,002 | |||||||||||||||
Other operating expenses** | 8,328 | 12,116 | 13,286 | 6,523 | 23,406 | |||||||||||||||
Depreciation and amortization | 740 | 967 | 976 | 480 | 1,001 | |||||||||||||||
Interest expense, net | 729 | 774 | 738 | 358 | 2,215 | |||||||||||||||
Income (loss) from continuing operations, before income taxes | (1,542 | ) | 2,811 | 7,158 | 4,311 | (18,331 | ) | |||||||||||||
Income tax provision (benefit) | 20 | 53 | 477 | 287 | 2,997 | |||||||||||||||
Income (loss) from continuing operations | (1,562 | ) | 2,758 | 6,681 | 4,024 | (21,328 | ) | |||||||||||||
(Loss) income from discontinued operations, net of income taxes | (156 | ) | 119 | (471 | ) | 96 | (58 | ) | ||||||||||||
Net income (loss) | $ | (1,718 | ) | $ | 2,877 | $ | 6,210 | $ | 4,120 | $ | (21,386 | ) | ||||||||
December 31, | June 30, | |||||||||||||||||||
2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Balance Sheet Data (as of end of period): | ||||||||||||||||||||
Cash and equivalents | $ | 45 | $ | 4,489 | $ | 8,614 | $ | 6,961 | $ | 3,456 | ||||||||||
Total assets | 32,274 | 41,254 | 45,412 | 42,938 | 260,203 | |||||||||||||||
Total debt | 11,062 | 10,259 | 9,984 | 10,103 | 140,313 | |||||||||||||||
Total members’ equity | 15,817 | 21,193 | 25,107 | 22,781 | 74,583 |
* | Salaries, wages and benefits for the six months ended June 30, 2011 includes $19.8 million of equity-based compensation expense recorded related to equity units issued in conjunction with the YFCS acquisition. |
** | Transaction-related expenses of $8.4 million are reflected in other operating expenses for the six months ended June 30, 2011. |
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Three Months Ended | ||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenue | $ | 180,646 | $ | 186,586 | $ | 184,386 | $ | 45,489 | $ | 45,686 | ||||||||||
Salaries and benefits | 110,966 | 113,870 | 113,931 | 27,813 | 29,502 | |||||||||||||||
Other operating expenses | 37,704 | 37,607 | 38,146 | 8,944 | 9,907 | |||||||||||||||
Provision for bad debts | 1,902 | (309 | ) | 525 | 56 | 208 | ||||||||||||||
Interest expense | 12,488 | 9,572 | 7,514 | 1,954 | 1,726 | |||||||||||||||
Depreciation and amortization | 9,419 | 7,052 | 3,456 | 914 | 819 | |||||||||||||||
Impairment of goodwill | — | — | 23,528 | — | — | |||||||||||||||
Income (loss) from continuing operations, before income taxes | 8,167 | 18,794 | (2,714 | ) | 5,808 | 3,524 | ||||||||||||||
Provision for income taxes | 3,132 | 7,133 | 5,032 | 2,267 | 1,404 | |||||||||||||||
Income (loss) from continuing operations | 5,035 | 11,661 | (7,746 | ) | 3,541 | 2,120 | ||||||||||||||
Income (loss) from discontinued operations, net of income taxes | 964 | (1,443 | ) | (4,060 | ) | (151 | ) | (64 | ) | |||||||||||
Net income (loss) | $ | 5,999 | $ | 10,218 | $ | (11,806 | ) | $ | 3,390 | $ | 2,056 | |||||||||
December 31, | March 31, | |||||||||||||||||||
2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Balance Sheet Data (as of end of period): | ||||||||||||||||||||
Cash and equivalents | $ | 20,874 | $ | 15,294 | $ | 5,307 | $ | 8,570 | $ | 4,009 | ||||||||||
Total assets | 271,446 | 254,620 | 217,530 | 249,748 | 216,609 | |||||||||||||||
Total debt | 138,234 | 112,127 | 86,073 | 98,831 | 84,304 | |||||||||||||||
Total stockholders’ equity | 102,696 | 113,921 | 102,126 | 117,311 | 104,182 |
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Fiscal Year Ended June 30, | ||||||||||||
2009 | 2010 | 2011 | ||||||||||
($ in thousands) | ||||||||||||
Income Statement Data: | ||||||||||||
Revenues | $ | 46,411 | $ | 53,077 | $ | 62,008 | ||||||
Patient care expenses | 23,835 | 26,307 | 30,236 | |||||||||
Contract expenses | 3,016 | 2,965 | 3,618 | |||||||||
Provision for doubtful accounts | 1,638 | 2,131 | 3,406 | |||||||||
Administrative expenses | 18,721 | 19,111 | 22,206 | |||||||||
Legal settlement | — | — | 446 | |||||||||
Operating income (loss) | (799 | ) | 2,563 | 2,096 | ||||||||
Other income including interest expense, net | (177 | ) | (37 | ) | (108 | ) | ||||||
Income (loss) before income taxes | (976 | ) | 2,526 | 1,988 | ||||||||
Provision for (benefit from) income taxes | 65 | 1,106 | 1,408 | |||||||||
Net income (loss) from continuing operations | (1,041 | ) | 1,420 | 580 | ||||||||
Net income (loss) from discontinued operations | (1,413 | ) | — | — | ||||||||
Net income (loss) | $ | (2,454 | ) | $ | 1,420 | $ | 580 | |||||
June 30, | ||||||||||||
2009 | 2010 | 2011 | ||||||||||
($ in thousands) | ||||||||||||
Balance Sheet Data (as of end of period): | ||||||||||||
Cash and equivalents | $ | 3,199 | $ | 4,540 | $ | 3,668 | ||||||
Total assets | 22,692 | 25,207 | 28,282 | |||||||||
Total debt | 2,241 | 2,557 | 2,239 | |||||||||
Total stockholders’ equity | 16,044 | 17,256 | 17,915 |
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December 31, 2010 | June 30, 2011 | |||||||
($ in thousands) | ||||||||
(Unaudited) | (Unaudited) | |||||||
Unaudited Pro Forma Condensed Combined Statement of Operations Data: | ||||||||
Revenue | $ | 320,298 | $ | 168,493 | ||||
Salaries, wages and benefits | 189,000 | 121,587 | ||||||
Professional fees | 18,245 | 9,180 | ||||||
Supplies | 15,305 | 8,152 | ||||||
Rent | 10,046 | 5,219 | ||||||
Other operating expenses | 32,723 | 17,683 | ||||||
Provision for doubtful accounts | 6,141 | 3,292 | ||||||
Depreciation and amortization | 4,777 | 2,378 | ||||||
Interest expense, net | 22,467 | 11,270 | ||||||
Impairment of goodwill | 23,528 | — | ||||||
Sponsor management fees | 90 | |||||||
Legal settlement | — | 446 | ||||||
Total expenses | 322,232 | 179,297 | ||||||
Income (loss) from continuing operations before income taxes | (1,934 | ) | (10,804 | ) | ||||
Provision for income taxes | 5,499 | 6,473 | ||||||
Income (loss) from continuing operations | $ | (7,433 | ) | $ | (17,277 | ) | ||
Unaudited Pro Forma Condensed Combined Balance Sheet Data (as of June 30, 2011): | ||||||||
Cash and equivalents | $ | 7,474 | ||||||
Total assets | 350,276 | |||||||
Total debt | 290,313 | |||||||
Total stockholders’ equity | 6,601 |
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Q: | Why are Acadia and PHC proposing the merger? (See pages 57 and 58) |
A: | Acadia and PHC are proposing the merger because they believe the resulting combined company will be a stronger, more competitive company capable of achieving greater financial strength, earning power, access to capital and growth potential than either company would have separately. | |
Acadia and PHC believe that the merger may result in a number of benefits, including the following positive factors that they believe will contribute to the success of the combined enterprise: | ||
• the opportunity to diversify service types and payor mix; | ||
• the ability to expand the number of facilities and beds and expand into additional new states; | ||
• Acadia’s and PHC’s facilities are complementary and their combination will increase geographic diversity; | ||
• the increased ability to access private and public equity markets, including for purposes of acting on attractive opportunities to further expand Acadia’s business; | ||
• Acadia’s management will provide additional resources and has a demonstrated record of achievement; | ||
• the opportunity to expand PHC’s internet and telephonic-based support services, which include crisis intervention, critical incidents coordination, employee counselor support, client monitoring, case management and health promotion; and | ||
• the opportunity for PHC stockholders to own 22.5% of the combined company on a fully diluted basis (as defined in the merger agreement). |
Q: | What percentage of Acadia will the former PHC stockholders own collectively immediately following the merger? (See page 53) |
A: | Upon completion of the merger, Acadia stockholders will retain 77.5% and the former PHC stockholders will own 22.5% of the combined company’s common stock issued and outstanding on a fully diluted basis (as defined in the merger agreement). |
Q: | What will PHC stockholders receive in exchange for PHC common stock in the merger? (See page 85) |
A: | Each share of PHC Class A Common Stock issued and outstanding immediately prior to the effective time will be converted into and become exchangeable for one-quarter (1/4) of one fully paid and nonassessable share of Acadia common stock, par value $0.01 per share. Each share of PHC Class B Common Stock issued and outstanding immediately prior to the effective time will be converted into and become exchangeable for (x) one-quarter (1/4) of one fully paid and nonassessable share of Acadia common stock, par value $0.01 per share and (y) and an amount of cash equal to $5.0 milliondivided bythe aggregate number of issued and outstanding shares of PHC Class B Common Stock immediately prior to the effective time of the merger (other than (i) any shares of PHC Class B Common Stock to be cancelled pursuant to the merger agreement and (ii) any share of PHC Class B Common Stock owned by a subsidiary of PHC). Based on shares of PHC Class B Common Stock outstanding as of May 23, 2011, this calculation would have resulted in a cash payment of $6.46 per share of PHC Class B Common Stock. |
Q: | Will PHC stockholders be able to trade the Acadia common stock that they receive in the merger? (See page 94) |
A: | Yes. Each of Acadia and PHC have agreed to cooperate and use reasonable best efforts to take all actions necessary to authorize for listing on NASDAQ the shares of Acadia common stock to be issued in the merger or if such listing is not possible, to be listed on NYSE Amex Stock Market or another securities exchange. In |
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addition, it is a condition to completion of the merger that the shares of Acadia common stock to be issued in the merger are authorized for listing on a national securities exchange or eligible for trading on the over the counter bulletin board. Acadia has applied to be listed on NASDAQ under the symbol ‘‘ACHC.” Please see the risk factors beginning on page 18 for a discussion of risks associated with these listings. |
Q: | Who will be the directors of Acadia following the merger? (See page 103) |
A: | Except as set forth below the following persons will be appointed to the Acadia board of directors as of immediately prior to the effective time of the merger and nominated for re-election and elected to the Acadia board of directors as follows: (i) Mr. Jacobs, as a Class III director and, after the expiration of his initial term as a director, for so long as he serves as the chief executive officer of Acadia or any of its subsidiaries; (ii) Mr. Shear, as a Class III director and, after the expiration of his initial term as a director, for one additional three-year term as a Class III director; (iii) Mr. Grieco, a Class II director designated by Mr. Shear and a current director of PHC; and (iv) four directors designated by Waud Capital Partners pursuant to the stockholders agreement to be entered into in connection with the consummation of the merger; provided that (A) so long as Waud Capital Partners retains voting control over at least 50% of the outstanding voting securities of Acadia, Waud Capital Partners will have the right to designate seven directors, four of which will be Class I directors and three of which will be Class II directors and (B) in the event Waud Capital Partners ceases to have voting control over at least 50% of the outstanding voting securities of Acadia, Waud Capital Partners will have the right to designate such number of directors of the total authorized number of directors in proportion to the total number of shares of Acadia over which Waud Capital Partners retains voting control relative to the total number of shares of Acadia then issued and outstanding (with the number of representatives rounded up to the next whole number in all cases); provided that all such rights will terminate when Waud Capital Partners ceases to hold at least 17.5% of Acadia’s outstanding voting securities. |
Q: | What constitutes a quorum for the special meeting? (See page 51) |
A: | A majority of the votes entitled to be cast by holders of issued and outstanding shares of PHC common stock must be present or represented by proxy to constitute a quorum for action on each of the matters to be voted upon at the special meeting. All shares of PHC common stock represented at the special meeting, including abstentions and broker non-votes, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the special meeting of the PHC stockholders. |
Q: | What stockholder approval is needed to complete the merger? (See page 50) |
A: | Approval of the merger agreement requires an affirmative vote of (i) at least two-thirds of the outstanding Class A Common Stock and Class B Common Stock entitled to vote, voting as a single class, (ii) at least two-thirds of the outstanding Class A Common Stock entitled to vote, voting as a single class and (iii) at least two-thirds of the outstanding Class B Common Stock entitled to vote, voting as a single class. | |
Each record holder of shares of PHC Class A Common Stock will be entitled at the special meeting to one vote for each share of PHC Class A Common Stock held on the record date. Each record holder of shares of PHC Class B Common Stock will be entitled at the special meeting to five votes for each share of PHC Class B Common Stock held on the record date on any matter on which they vote together with the holders of the Class A Common Stock. |
Q: | What vote of PHC’s stockholders is required to approve the non-binding, advisory proposal regarding certain merger-related executive compensation arrangements? (See page 50) |
A: | Approval of the non-binding, advisory proposal regarding certain merger-related executive compensation arrangements requires the affirmative vote of holders of majority of the outstanding shares of PHC Class A Common Stock and the outstanding shares of PHC Class B Common Stock present and voting (voting together, with the shares of Class B Common Stock casting five votes for each share held). Stockholders should note that the proposal regarding certain merger-related executive compensation arrangements is merely an advisory vote which will not be binding on PHC, Acadia or the Acadia board of directors. |
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Q: | What do I need to do now? (See page 51) |
A: | After reading and considering the information contained in and incorporated into this proxy statement/prospectus, please submit your proxy card according to the instructions on the enclosed proxy card as soon as possible. If you do not submit a proxy card or attend the special meeting and vote in person, your shares will not be represented or voted at the meeting. This will have the same effect as voting against the proposal to approve the merger agreement. |
Q: | If my shares of PHC common stock are held in “street name” by my bank or broker, will my bank or broker vote my shares for me? (See page 51) |
A: | Your bank or broker will vote your shares only if you provide instructions on how to vote by following the information provided to you by your bank or broker. | |
Without instructions from you on how to vote your shares, your bank or broker will not have discretionary authority to vote your shares on the matters currently proposed to be presented at the special meeting. As a result, your bank or broker may deliver a proxy card expressly indicating that it is NOT voting your shares. This indication that a broker is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will be counted for the purpose of determining the presence or absence of a quorum at the special meeting. However, a broker non-vote will not be entitled to vote on the proposal to approve the merger agreement, and thus a broker non-vote will have the effect of a vote against this proposal. |
Q: | What will happen if I abstain from voting or fail to vote? (See page 51) |
A: | With respect to the proposal to approve the merger agreement, if you abstain from voting on the proposal, fail to cast your vote in person or by proxy or if your shares are held by your broker or other nominee (i.e., in “street name”) and you fail to give voting instructions to your broker or other nominee on how to vote your shares, it will have the same effect as a vote “AGAINST” the proposal to approve the merger agreement. | |
With respect to the non-binding, advisory proposal regarding certain merger-related executive compensation and the proposal to approve any adjournment of the special meeting for the purpose of soliciting additional proxies, if you abstain from voting on either proposal, fail to cast your vote in person or by proxy or if you hold your shares in “street name” and fail to give voting instructions to your broker or other nominee on how to vote your shares, it will not have any effect on the outcome of the vote on such proposal. |
Q: | If I am a PHC stockholder, what do I do if I want to change my vote after I have submitted my proxy? (See page 51) |
A: | You may change your vote at any time before your proxy is voted at the special meeting. There are three ways for you to do this: | |
• by delivering to the clerk of PHC a signed notice that you wish to revoke your proxy; | ||
• by delivering to the clerk of PHC a signed and later-dated proxy; or | ||
• by attending the special meeting and voting in person. | ||
If your shares are held in “street name” by a bank or broker and you have instructed your bank or broker to vote your shares, you must follow your bank’s or broker’s instructions to change your vote. |
Q: | When do you expect the merger to be completed? (See page 53) |
A: | PHC and Acadia are working to complete the merger as quickly as possible. Acadia and PHC expect to complete the merger in the fourth quarter of 2011. |
Q: | Will the merger trigger the recognition of gain or loss for United States federal income tax purposes for PHC stockholders? (See page 77) |
A: | The closing of the merger is conditioned upon the receipt by PHC and Acadia of legal opinions that the merger will constitute a reorganization for United States federal income tax purposes. Assuming the merger constitutes a reorganization, subject to the limitations and qualifications described in “The Merger — Material United States Federal Income Tax Consequences of the Merger,” PHC stockholders whose shares of PHC common |
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stock are exchanged in the merger solely for shares of Acadia common stock will not recognize capital gain or loss for United States federal income tax purposes on the exchange (except to the extent they receive cash in lieu of a fractional share of Acadia common stock), and PHC stockholders whose shares of PHC common stock are exchanged in the merger for shares of Acadia common stock and cash will recognize capital gain (but not loss) realized on the exchange in an amount not exceeding the amount of cash received (excluding cash received in lieu of a fractional share of Acadia common stock). The tax consequences to PHC stockholders will depend on each stockholder’s own circumstances. This tax treatment may not apply to certain PHC stockholders, as described in “The Merger — Material United States Federal Income Tax Consequences of the Merger.” Determining the actual tax consequences of the merger to you may be complex and will depend on the facts of your own situation. You should consult your own tax advisors to fully understand the tax consequences to you of the merger, including estate, gift, state, local ornon-United States tax consequences of the merger. |
Q: | Should PHC stockholders send in their stock certificates now? (See page 87) |
A: | No. After the merger is completed, Acadia will send you written instructions for exchanging your PHC stock certificates for Acadia stock certificates. |
Q: | Whom should I call with questions? (See page 51) |
A: | Georgeson Inc. 199 Water Street, 26th Floor New York, New York10038-3560 Banks and Brokers Call(212) 440-9800 All Others Call Toll-Free (888) 658-3624 |
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• | Holders of Class B Common Stock of PHC will receive $5.0 million in aggregate cash consideration for shares of Class B Common Stock exchanged for shares of Acadia common stock in the merger. Mr. Shear, PHC’s current Chief Executive Officer, beneficially owns approximately 93.2% of PHC’s Class B Common Stock and will be entitled to receive cash merger consideration of approximately $4.7 million; | |
• | Mr. Shear, Mr. Boswell, PHC’s current Senior Vice President, and Ms. Wurts, PHC’s current Chief Financial Officer, are participants in the PHCchange-in-control supplemental benefit plan. Pursuant to such plan, upon the closing of the merger, Mr. Shear, Mr. Boswell and Ms. Wurts are entitled to receive certain change in control payments in the amount of approximately $1,530,000, $465,000 and $408,000, respectively; | |
• | Mr. Shear, Mr. Boswell and Ms. Wurts hold stock options to purchase shares of PHC Class A Common Stock, subject to various vesting provisions. Pursuant to the merger agreement, upon completion of the merger, Acadia will assume these options in accordance with their existing terms, with the number of shares and the exercise prices adjusted in accordance with the merger exchange rate. Mr. Shear currently holds 170,000 options exercisable at prices ranging from $1.08 per share to $2.95 per share, Mr. Boswell currently holds 85,000 options exercisable at prices ranging from $1.08 per share to $2.95 per share and Ms. Wurts currently holds 85,000 options exercisable at prices ranging from $1.08 per share to $2.95 per share; | |
• | Upon the closing of the merger, notwithstanding the terms and conditions of the corresponding PHC stock option plan or as otherwise set forth in a stock option agreement, with respect to the assumed PHC options granted to current PHC directors other than Mr. Shear, (i) all such assumed options will be fully vested at closing, and (ii) such assumed options will not terminate as a result of such holder ceasing or failing to be a director or employee and will be fully exercisable at any time prior to the expiration of the option term; |
• | Upon the closing of the merger, notwithstanding the terms and conditions of the corresponding stock option plan or otherwise set forth in Mr. Shear’s stock option agreement, with respect to the assumed PHC options granted to Mr. Shear, (i) all such assumed options shall be subject to the same vesting conditions to which they were subject prior to the assumption and (ii) the vested portion of such assumed options will not terminate as a result of Mr. Shear ceasing or failing to become a director or employee and, subject to satisfaction of the vesting conditions, will be fully exercisable at any time prior to the expiration of the option term; |
• | Upon the closing of the merger, Mr. Shear will become a director of Acadia and the Executive Vice Chairman of the Acadia board of directors and Mr. Boswell will become Acadia’s Senior Vice President and their new employment agreements will become effective upon the closing of the merger; and | |
• | Acadia will maintain all rights to indemnification existing in favor of the directors and officers of PHC and its subsidiaries for their acts and omissions occurring prior to the completion of the merger and will maintain the directors’ and officers’ liability insurance to cover any such liabilities for six years following the completion of the merger. |
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• | increase our vulnerability to adverse economic and industry conditions; | |
• | limit our ability to obtain additional financing for future working capital, capital expenditures, raw materials, strategic acquisitions and other general corporate requirements; | |
• | expose us to interest rate fluctuations because the interest on the debt under our the Senior Secured Credit Facility is imposed at variable rates; | |
• | require us to dedicate a substantial portion of our cash flow from operations to payments on our debt (including scheduled repayments on our outstanding term loan borrowings under the Senior Secured Credit Facility), thereby reducing the availability of our cash flow for operations and other purposes; | |
• | make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; | |
• | limit our ability to refinance indebtedness or increase the associated costs; | |
• | require us to sell assets to reduce debt or influence our decision about whether to do so; | |
• | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business; and | |
• | place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns. |
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• | a classified board of directors; | |
• | a prohibition on stockholder action through written consent (once Waud Capital Partners no longer beneficially own at least a majority of our outstanding common stock); | |
• | a requirement that special meetings of stockholders be called upon a resolution approved by a majority of our directors then in office; | |
• | advance notice requirements for stockholder proposals and nominations; and | |
• | the authority of the board of directors to issue preferred stock with such terms as the board of directors may determine. |
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• | the impact of payments received from the government and third-party payers on our revenues and results of operations; | |
• | the impact of the economic and employment conditions in the United States on our business and future results of operations; | |
• | the impact of recent health care reform; | |
• | the impact of our highly competitive industry on patient volumes; | |
• | the impact of recruitment and retention of quality psychiatrists and other physicians on our performance; | |
• | the impact of competition for staffing on our labor costs and profitability; | |
• | our dependence on key management personnel, key executives and our local facility management personnel; | |
• | compliance with laws and government regulations; | |
• | the impact of claims brought against our facilities; | |
• | the impact of governmental investigations, regulatory actions and whistleblower lawsuits; | |
• | difficulties in successfully integrating Acadia’s acquisition of YFCS and PHC (including Meadow Wood) or realizing the potential benefits of these acquisitions; | |
• | the impact on our growth strategy from difficulties in acquiring facilities in general and fromnot-for-profit entities due to regulatory scrutiny; | |
• | difficulties in improving the operations of the facilities we acquire; | |
• | the impact of unknown or contingent liabilities on facilities we acquire; | |
• | the impact of state efforts to regulate the construction or expansion of health care facilities on our ability to operate and expand our operations; | |
• | the impact of controls designed to reduce inpatient services on our revenues; | |
• | the impact of fluctuations in our operating results, quarter to quarter earnings and other factors on the price of our common stock; | |
• | the impact of different interpretations of accounting principles on our results of operations or financial condition; | |
• | the impact of an increase in uninsured and underinsured patients or the deterioration in the collectability of the accounts of such patients on our results of operations; and | |
• | the merger and the transactions contemplated by the merger agreement or the announcement thereof. |
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Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||||||||
($ in thousands, except per unit data) | ||||||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||
Net patient service revenue | $ | 8,542 | $ | 25,512 | $ | 33,353 | $ | 51,821 | $ | 64,342 | $ | 32,472 | $ | 82,961 | ||||||||||||||
Salaries, wages and benefits* | 7,269 | 19,212 | 22,342 | 30,752 | 36,333 | 18,374 | 70,538 | |||||||||||||||||||||
Professional fees | 1,103 | 1,349 | 952 | 1,977 | 3,612 | 1,240 | 3,130 | |||||||||||||||||||||
Provision for doubtful accounts | 304 | 991 | 1,804 | 2,424 | 2,239 | 1,186 | 1,002 | |||||||||||||||||||||
Other operating expenses** | 4,865 | 8,112 | 8,328 | 12,116 | 13,286 | 6,523 | 23,406 | |||||||||||||||||||||
Depreciation and amortization | 202 | 522 | 740 | 967 | 976 | 480 | 1,001 | |||||||||||||||||||||
Interest expense, net | 171 | 992 | 729 | 774 | 738 | 358 | 2,215 | |||||||||||||||||||||
Income (loss) from continuing operations, before income taxes | (5,372 | ) | (5,666 | ) | (1,542 | ) | 2,811 | 7,158 | 4,311 | (18,331 | ) | |||||||||||||||||
Income tax provision (benefit) | — | — | 20 | 53 | 477 | 287 | 2,997 | |||||||||||||||||||||
Income (loss) from continuing operations | (5,372 | ) | (5,666 | ) | (1,562 | ) | 2,758 | 6,681 | 4,024 | (21,328 | ) | |||||||||||||||||
(Loss) gain from discontinued operations, net of income taxes | (838 | ) | (3,208 | ) | (156 | ) | 119 | (471 | ) | 96 | (58 | ) | ||||||||||||||||
(Loss) income on disposal of discontinued operations, net of income taxes | — | (2,019 | ) | — | — | — | — | — | ||||||||||||||||||||
Net income (loss) | $ | (6,210 | ) | $ | (10,893 | ) | $ | (1,718 | ) | $ | 2,877 | $ | 6,210 | $ | 4,120 | $ | (21,386 | ) | ||||||||||
Income (loss) from continuing operations per unit | $ | (0.54 | ) | $ | (0.57 | ) | $ | (0.16 | ) | $ | 0.28 | $ | 0.67 | $ | 0.40 | $ | (2.13 | ) | ||||||||||
Cash dividends per unit | — | — | — | — | $ | 0.23 | $ | 0.08 | $ | 0.04 |
December 31, | June 30, | |||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data (as of end of period): | ||||||||||||||||||||||||||||
Cash and equivalents | $ | 28 | 1,681 | $ | 45 | $ | 4,489 | $ | 8,614 | $ | 6,961 | $ | 3,456 | |||||||||||||||
Total assets | 17,878 | 23,414 | 32,274 | 41,254 | 45,412 | 42,938 | 260,203 | |||||||||||||||||||||
Total debt | 3,889 | 11,608 | 11,062 | 10,259 | 9,984 | 10,103 | 140,313 | |||||||||||||||||||||
Total members’ equity | 7,568 | 7,135 | 15,817 | 21,193 | 25,107 | 22,781 | 74,583 |
* | Salaries wages and benefits for the six months ended June 30, 2011 includes $19.8 million of equity-based compensation expense recorded related to equity units issued in conjunction with the YFCS Acquisition. |
** | Transaction-related expenses of $8.4 million are reflected in other operating expenses for the six months ended June 30, 2011. |
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Three Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||
Revenue | $ | 149,837 | $ | 171,425 | $ | 180,646 | $ | 186,586 | $ | 184,386 | $ | 45,489 | $ | 45,686 | ||||||||||||||
Salaries and benefits | 88,870 | 105,754 | 110,966 | 113,870 | 113,931 | 27,813 | 29,502 | |||||||||||||||||||||
Other operating expenses | 32,216 | 36,799 | 37,704 | 37,607 | 38,146 | 8,944 | 9,907 | |||||||||||||||||||||
Provision for bad debts | 365 | 1,411 | 1,902 | (309 | ) | 525 | 56 | 208 | ||||||||||||||||||||
Interest expense | 14,280 | 14,768 | 12,488 | 9,572 | 7,514 | 1,954 | 1,726 | |||||||||||||||||||||
Depreciation and amortization | 8,846 | 9,890 | 9,419 | 7,052 | 3,456 | 914 | 819 | |||||||||||||||||||||
Impairment of goodwill | — | — | — | — | 23,528 | — | — | |||||||||||||||||||||
Income (loss) from continuing operations, before income taxes | 5,260 | 2,803 | 8,167 | 18,794 | (2,714 | ) | 5,808 | 3,524 | ||||||||||||||||||||
Provision for income taxes | 1,491 | 1,252 | 3,132 | 7,133 | 5,032 | 2,267 | 1,404 | |||||||||||||||||||||
Income (loss) from continuing operations | 3,769 | 1,551 | 5,035 | 11,661 | (7,746 | ) | 3,541 | 2,120 | ||||||||||||||||||||
Income (loss) from discontinued operations, net of income taxes | (2,160 | ) | 844 | 964 | (1,443 | ) | (4,060 | ) | (151 | ) | (64 | ) | ||||||||||||||||
Net income (loss) | $ | 1,609 | $ | 2,395 | $ | 5,999 | $ | 10,218 | $ | (11,806 | ) | $ | 3,390 | $ | 2,056 | |||||||||||||
December 31, | March 31, | |||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | ||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data (as of end of period): | ||||||||||||||||||||||||||||
Cash and equivalents | $ | 8,492 | $ | 6,875 | $ | 20,874 | $ | 15,294 | $ | 5,307 | $ | 8,570 | $ | 4,009 | ||||||||||||||
Total assets | 279,091 | 268,622 | 271,446 | 254,620 | 217,530 | 249,748 | 216,609 | |||||||||||||||||||||
Total debt | 151,102 | 139,687 | 138,234 | 112,127 | 86,073 | 98,831 | 84,304 | |||||||||||||||||||||
Total stockholders’ equity | 94,244 | 96,647 | 102,696 | 113,921 | 102,126 | 117,311 | 104,182 |
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Year Ended June 30, | ||||||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||
($ in thousands, except per share data) | ||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenues | $ | 40,563 | $ | 45,397 | $ | 46,411 | $ | 53,077 | $ | 62,008 | ||||||||||
Patient care expenses | 19,738 | 22,133 | 23,835 | 26,307 | 30,236 | |||||||||||||||
Contract expenses | 3,103 | 3,390 | 3,016 | 2,965 | 3,618 | |||||||||||||||
Provision for doubtful accounts | 1,933 | 1,311 | 1,638 | 2,131 | 3,406 | |||||||||||||||
Administrative expenses | 12,722 | 15,465 | 18,721 | 19,111 | 22,206 | |||||||||||||||
Legal settlement | — | — | — | — | 446 | |||||||||||||||
Operating income (loss) | 3,067 | 3,098 | (799 | ) | 2,563 | 2,096 | ||||||||||||||
Other income including interest expense, net | (8 | ) | (148 | ) | (177 | ) | (37 | ) | (108 | ) | ||||||||||
Income (loss) before income taxes | 3,059 | 2,950 | (976 | ) | 2,526 | 1,988 | ||||||||||||||
Provision for (benefit from) income taxes | 1,144 | 1,366 | 65 | 1,106 | 1,408 | |||||||||||||||
Net income (loss) from continuing operations | 1,915 | 1,584 | (1,041 | ) | 1,420 | 580 | ||||||||||||||
Net income (loss) from discontinued operations | (233 | ) | (1,259 | ) | (1,413 | ) | — | — | ||||||||||||
Net income (loss) | $ | 1,682 | $ | 325 | $ | (2,454 | ) | $ | 1,420 | $ | 580 | |||||||||
Net income (loss) from continuing operations per share of common stock | ||||||||||||||||||||
Basic | $ | 0.09 | $ | 0.02 | $ | (0.05 | ) | $ | 0.07 | $ | 0.03 | |||||||||
Diluted | $ | 0.09 | $ | 0.02 | $ | (0.05 | ) | $ | 0.07 | $ | 0.03 | |||||||||
Cash dividends per share of common stock | $ | — | $ | — | $ | — | $ | — | $ | — |
June 30, | ||||||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Balance Sheet Data (as of end of period): | ||||||||||||||||||||
Cash and equivalents | $ | 3,308 | $ | 3,142 | $ | 3,199 | $ | 4,540 | $ | 3,668 | ||||||||||
Total assets | 26,856 | 26,507 | 22,692 | 25,207 | 28,282 | |||||||||||||||
Total debt | 1,047 | 2,422 | 2,241 | 2,557 | 2,239 | |||||||||||||||
Total stockholders’ equity | 18,250 | 18,659 | 16,044 | 17,256 | 17,915 |
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As of June 30, 2011
PHC | ||||||||||||||||||||||||||||||||
Pro Forma | Pro Forma | |||||||||||||||||||||||||||||||
HHC | MeadowWood | Pro Forma | Merger | Pro Forma | ||||||||||||||||||||||||||||
Acadia(1) | PHC(3) | Delaware(4) | Adjustments | Notes | PHC | Adjustments | Notes | Combined | ||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 3,456 | $ | 3,669 | $ | 32 | $ | (32 | ) | (5) | $ | 4,191 | $ | (173 | ) | (13) | $ | 7,474 | ||||||||||||||
522 | (8) | |||||||||||||||||||||||||||||||
Accounts receivable, net | 22,560 | 11,079 | 1,482 | 12,561 | 35,121 | |||||||||||||||||||||||||||
Other current assets | 10,246 | 4,615 | 1,055 | (643 | ) | (5) | 5,027 | 15,273 | ||||||||||||||||||||||||
Total current assets | 36,262 | 19,363 | 2,569 | (153 | ) | 21,779 | (173 | ) | 57,868 | |||||||||||||||||||||||
Property and equipment, net | 55,313 | 4,713 | 8,108 | 1,566 | (7) | 14,387 | 107 | (12) | 69,807 | |||||||||||||||||||||||
Goodwill | 158,271 | 969 | 18,677 | (9,136 | ) | (7) | 10,510 | 35,176 | (12) | 203,957 | ||||||||||||||||||||||
Intangible assets, net | 936 | — | — | 700 | (7) | 700 | 1,100 | (12) | 2,736 | |||||||||||||||||||||||
Other assets | 9,421 | 3,237 | — | 1,399 | (8d) | 4,593 | 3,800 | (13) | 15,908 | |||||||||||||||||||||||
(43 | ) | (10) | (1,906 | ) | (10) | |||||||||||||||||||||||||||
Total assets | $ | 260,203 | $ | 28,282 | $ | 29,354 | $ | (5,667 | ) | $ | 51,969 | $ | 38,104 | $ | 350,276 | |||||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||||||
Current portion of long-term debt | $ | 6,750 | $ | 2,163 | $ | 52 | $ | (1,898 | ) | (9) | $ | 265 | $ | (265 | ) | (14) | $ | 6,750 | ||||||||||||||
(52 | ) | (5) | ||||||||||||||||||||||||||||||
Accounts payable | 6,705 | 2,890 | 157 | 3,047 | 9,752 | |||||||||||||||||||||||||||
Accrued salaries and benefits | 12,906 | 2,027 | 635 | (635 | ) | (5) | 2,027 | 14,933 | ||||||||||||||||||||||||
Other accrued liabilities | 6,873 | 2,387 | 457 | (401 | ) | (8b) | 2,138 | 9,011 | ||||||||||||||||||||||||
(305 | ) | (5) | ||||||||||||||||||||||||||||||
Total current liabilities | 33,234 | 9,467 | 1,301 | (3,291 | ) | 7,477 | (265 | ) | 40,446 | |||||||||||||||||||||||
Long-term debt | 133,563 | 57 | 53 | 26,178 | (9) | 26,235 | 123,765 | (14) | 283,563 | |||||||||||||||||||||||
(53 | ) | (5) | ||||||||||||||||||||||||||||||
Other liabilities | 18,823 | 843 | 27,744 | (27,744 | ) | (5) | 843 | 19,666 | ||||||||||||||||||||||||
Total liabilities | 185,620 | 10,367 | 29,098 | (4,910 | ) | 34,555 | 123,500 | 343,675 | ||||||||||||||||||||||||
Equity: | ||||||||||||||||||||||||||||||||
Member’s equity | — | — | 256 | (256 | ) | (6) | — | — | ||||||||||||||||||||||||
Common stock | 100 | 208 | — | 208 | (208 | ) | (6) | 226 | ||||||||||||||||||||||||
77 | (11) | |||||||||||||||||||||||||||||||
49 | (12) | |||||||||||||||||||||||||||||||
Additional paid-in capital | 105,557 | 28,221 | — | 28,221 | (28,221 | ) | (6) | 77,881 | ||||||||||||||||||||||||
(77 | ) | (11) | ||||||||||||||||||||||||||||||
46,842 | (12) | |||||||||||||||||||||||||||||||
(74,441 | ) | (13) | ||||||||||||||||||||||||||||||
Treasury stock | — | (1,809 | ) | — | (1,809 | ) | 1,809 | (6) | — | |||||||||||||||||||||||
Accumulated deficit | (31,074 | ) | (8,705 | ) | — | (388 | ) | (8c) | (9,206 | ) | 9,206 | (6) | (71,506 | ) | ||||||||||||||||||
(70 | ) | (8a) | (40,432 | ) | (13) | |||||||||||||||||||||||||||
(43 | ) | (10) | ||||||||||||||||||||||||||||||
Total equity | 74,583 | 17,915 | 256 | (757 | ) | 17,414 | (85,396 | ) | 6,601 | |||||||||||||||||||||||
Total liabilities and equity | $ | 260,203 | $ | 28,282 | $ | 29,354 | $ | (5,667 | ) | $ | 51,969 | $ | 38,104 | $ | 350,276 | |||||||||||||||||
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For the Six Months Ended June 30, 2011
Acadia | PHC | |||||||||||||||||||||||||||||||||||||||||||||
Pro Forma | Pro Forma | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||
Acadia | YFCS | Pro Forma | HHC | MeadowWood | Pro Forma | Merger | Pro Forma | |||||||||||||||||||||||||||||||||||||||
Healthcare(1) | YFCS(2) | Adjustments | Notes | Acadia | PHC(3) | Delaware(4) | Adjustments | Notes | PHC | Adjustments | Notes | Combined | ||||||||||||||||||||||||||||||||||
($ in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 82,961 | $ | 45,686 | $ | 128,647 | $ | 32,305 | $ | 7,541 | $ | $ | 39,846 | $ | 168,493 | |||||||||||||||||||||||||||||||
Salaries, wages and benefits | 70,538 | 29,502 | 100,040 | 16,800 | 4,747 | 21,547 | 121,587 | |||||||||||||||||||||||||||||||||||||||
Professional fees | 3,130 | — | 1,901 | (15) | 5,031 | 3,695 | 454 | 4,149 | 9,180 | |||||||||||||||||||||||||||||||||||||
Supplies | 4,282 | — | 2,204 | (15) | 6,486 | 1,197 | 469 | 1,666 | 8,152 | |||||||||||||||||||||||||||||||||||||
Rents and leases | 2,062 | — | 1,320 | (15) | 3,382 | 1,818 | 19 | 1,837 | 5,219 | |||||||||||||||||||||||||||||||||||||
Other operating expenses | 8,110 | 9,907 | (5,425 | ) | (15) | 12,592 | 4,455 | 636 | 5,091 | 17,683 | ||||||||||||||||||||||||||||||||||||
Provision for doubtful accounts | 1,002 | 208 | 1,210 | 1,743 | 339 | 2,082 | 3,292 | |||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 1,001 | 819 | (294 | ) | (18a) | 1,526 | 559 | 179 | 31 | (18b) | 769 | 83 | (18c) | 2,378 | ||||||||||||||||||||||||||||||||
Interest expense, net | 2,215 | 1,726 | (169 | ) | (19a) | 3,772 | (15 | ) | 224 | 768 | (19b) | 977 | 6,521 | (19c) | 11,270 | |||||||||||||||||||||||||||||||
Sponsor management fees | 590 | — | 590 | — | — | — | (500 | ) | (22) | 90 | ||||||||||||||||||||||||||||||||||||
Transaction-related expenses | 8,362 | — | (8,362 | ) | (16) | — | 1,608 | — | (1,608 | ) | (16) | — | — | |||||||||||||||||||||||||||||||||
Legal settlement | — | — | — | 446 | — | 446 | 446 | |||||||||||||||||||||||||||||||||||||||
Total expenses | 101,292 | 42,162 | (8,825 | ) | 134,629 | 32,306 | 7,067 | (809 | ) | 38,564 | 6,104 | 179,297 | ||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | (18,331 | ) | 3,524 | 8,825 | (5,982 | ) | (1 | ) | 474 | 809 | 1,282 | (6,104 | ) | (10,804 | ) | |||||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 2,997 | 1,404 | (133 | ) | (20) | 7,798 | 600 | 193 | 324 | (21) | 1,117 | (2,442 | ) | (21) | 6,473 | |||||||||||||||||||||||||||||||
3,530 | (21) | |||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | (21,328 | ) | $ | 2,120 | $ | 5,428 | $ | (13,780 | ) | $ | (601 | ) | $ | 281 | $ | 485 | $ | 165 | $ | (3,662 | ) | $ | (17,277 | ) | |||||||||||||||||||||
Earnings per unit/share — income (loss) from continuing operations: | ||||||||||||||||||||||||||||||||||||||||||||||
Basic | $ | (2.13 | ) | $ | (0.77 | ) | ||||||||||||||||||||||||||||||||||||||||
Diluted | $ | (2.13 | ) | $ | (0.76 | ) | ||||||||||||||||||||||||||||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||||||||||||||||||||||||
Basic | 10,000,000 | 12,554,223 | (23) | 22,554,223 | ||||||||||||||||||||||||||||||||||||||||||
Diluted | 10,000,000 | 12,659,476 | (23) | 22,659,476 | ||||||||||||||||||||||||||||||||||||||||||
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For the Year Ended December 31, 2010
Acadia | PHC | |||||||||||||||||||||||||||||||||||||||||||||
Pro Forma | Pro Forma | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||
Acadia | YFCS | Pro Forma | HHC | MeadowWood | Pro Forma | Merger | Pro Forma | |||||||||||||||||||||||||||||||||||||||
Healthcare(1) | YFCS(2) | Adjustments | Notes | Acadia | PHC(3) | Delaware(4) | Adjustments | Notes | PHC | Adjustments | Notes | Combined | ||||||||||||||||||||||||||||||||||
($ in thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 64,342 | $ | 184,386 | $ | 248,728 | $ | 57,269 | $ | 14,301 | $ | $ | 71,570 | $ | 320,298 | |||||||||||||||||||||||||||||||
Salaries, wages and benefits | 36,333 | 113,931 | 1,239 | (17) | 151,503 | 28,647 | 8,850 | 37,497 | 189,000 | |||||||||||||||||||||||||||||||||||||
Professional fees | 3,612 | — | 6,724 | (15) | 8,953 | 8,401 | 891 | 9,292 | 18,245 | |||||||||||||||||||||||||||||||||||||
(1,383 | ) | (16) | ||||||||||||||||||||||||||||||||||||||||||||
Supplies | 3,709 | — | 8,380 | (15) | 12,089 | 2,319 | 897 | 3,216 | 15,305 | |||||||||||||||||||||||||||||||||||||
Rents | 1,288 | — | 5,244 | (15) | 6,532 | 3,494 | 20 | 3,514 | 10,046 | |||||||||||||||||||||||||||||||||||||
Other operating expenses | 8,289 | 38,146 | (20,348 | ) | (15) | 24,848 | 6,644 | 1,231 | 7,875 | 32,723 | ||||||||||||||||||||||||||||||||||||
(1,239 | ) | (17) | ||||||||||||||||||||||||||||||||||||||||||||
Provision for doubtful accounts | 2,239 | 525 | 2,764 | 2,866 | 511 | 3,377 | 6,141 | |||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 976 | 3,456 | (1,359 | ) | (18a) | 3,073 | 1,129 | 308 | 112 | (18b) | 1,549 | 155 | (18c) | 4,777 | ||||||||||||||||||||||||||||||||
Interest expense, net | 738 | 7,514 | (953 | ) | (19a) | 7,299 | 148 | 524 | 1,444 | (19b) | 2,116 | 13,052 | (19c) | 22,467 | ||||||||||||||||||||||||||||||||
Impairment of goodwill | — | 23,528 | 23,528 | — | — | — | 23,528 | |||||||||||||||||||||||||||||||||||||||
Total expenses | 57,184 | 187,100 | (3,695 | ) | 240,589 | 53,648 | 13,232 | 1,556 | 68,436 | 13,207 | 322,232 | |||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | 7,158 | (2,714 | ) | 3,695 | 8,139 | 3,621 | 1,069 | (1,556 | ) | 3,134 | (13,207 | ) | (1,934 | ) | ||||||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 477 | 5,032 | 2,448 | (20) | 9,435 | 1,532 | 437 | (622 | ) | (21) | 1,347 | (5,283 | ) | (21) | 5,499 | |||||||||||||||||||||||||||||||
1,478 | (21) | |||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 6,681 | $ | (7,746 | ) | $ | (231 | ) | $ | (1,296 | ) | $ | 2,089 | $ | 632 | $ | (934 | ) | $ | 1,787 | $ | (7,924 | ) | $ | (7,433 | ) | ||||||||||||||||||||
Earnings per unit/share — income (loss) from continuing operations: | ||||||||||||||||||||||||||||||||||||||||||||||
Basic | $ | 0.67 | $ | (0.33 | ) | |||||||||||||||||||||||||||||||||||||||||
Diluted | $ | 0.67 | $ | (0.33 | ) | |||||||||||||||||||||||||||||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||||||||||||||||||||||||
Basic | 10,000,000 | 12,579,198 | (23) | 22,579,198 | ||||||||||||||||||||||||||||||||||||||||||
Diluted | 10,000,000 | 12,602,672 | (23) | 22,602,672 | ||||||||||||||||||||||||||||||||||||||||||
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(1) | The amounts in this column represent, for Acadia, actual balances as of June 30, 2011 or actual results for the periods presented. |
(2) | The amounts in this column represent, for YFCS, actual results for the periods from January 1, 2011 to the April 1, 2011 acquisition date and for the year ended December 31, 2010. |
(3) | The amounts in this column represent, for PHC, actual balances as of June 30, 2011 or actual results for the periods presented. The condensed consolidated statements of operations of PHC have been reclassified to conform to Acadia’s expense classification policies. |
(4) | The amounts in this column represent, for HHC Delaware, actual balances as of June 30, 2011 or actual results for the periods presented. |
(5) | Represents the elimination of $32 of cash, $643 of deferred tax assets, $52 of current capital lease liabilities, $53 of long-term capital lease liabilities, $635 of accrued salaries and benefits, $305 of other accrued liabilities, $954 of deferred tax liabilities and a $26,790 payable to MeadowWood’s former parent company not acquired by PHC in the MeadowWood acquisition. |
(6) | Reflects the elimination of the equity accounts and accumulated earnings of HHC Delaware and PHC. |
(7) | Represents the adjustments to acquired property and equipment and license intangible assets based on preliminary estimates of fair value and the adjustment to goodwill derived from the difference in the estimated total consideration transferred and the estimated fair value of assets acquired and liabilities assumed by PHC in the MeadowWood acquisition, calculated as follows: |
Consideration transferred | $ | 21,500 | ||
Accounts receivable | 1,482 | |||
Other current assets | 412 | |||
Property and equipment | 9,674 | |||
Licenses | 700 | |||
Accounts payable | (157 | ) | ||
Other accrued liabilities | (152 | ) | ||
Fair value of assets acquired less liabilities assumed | 11,959 | |||
Estimated goodwill | 9,541 | |||
Less: Historical goodwill | (18,677 | ) | ||
Goodwill adjustment | $ | (9,136 | ) | |
The acquired assets and liabilities assumed will be recorded at their estimated fair values as of the closing date of the MeadowWood acquisition. Estimated goodwill is based upon a determination of the fair value of assets acquired and liabilities assumed that is preliminary and subject to revision as the value of total consideration is finalized and additional information related to the fair value of property and equipment and other assets acquired and liabilities assumed becomes available. The actual determination of the fair value of assets acquired and liabilities assumed will differ from that assumed in these unaudited pro forma condensed combined financial statements and such differences may be material. |
(8) | Represents a $522 increase in cash as a result of the MeadowWood acquisition. The sources and uses of cash for the MeadowWood acquisition were as follows: |
Sources: | ||||
Incurrence of indebtedness under PHC’s senior credit facility | $ | 26,500 | ||
Uses: | ||||
Cash consideration paid for MeadowWood | (21,500 | ) | ||
Repayment of existing debt | (2,220 | ) | ||
Transaction costs(a) | (2,258 | ) | ||
Net cash adjustment | $ | 522 | ||
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(a) | The transaction costs paid at closing of $2,258 include $577 of acquisition-related costs, $1,611 of debt financing costs and debt prepayment penalties of $70 |
(b) | Represents $401 of transaction-related expenses accrued as of June 30, 2011, including $189 of acquisition-related costs and $212 of capitalized debt financing costs |
(c) | Represents acquisition-related costs of $577 less $189 accrued as of June 30, 2011 |
(d) | Represents debt financing costs of $1,611 less $212 already deferred as of June 30, 2011 |
(9) | Represents the effect of the MeadowWood acquisition on the current portion and long-term portion of total debt, as follows: |
Current Portion | Long-term Portion | Total Debt | ||||||||||
Repayment of PHC historical debt | $ | (2,163 | ) | $ | (57 | ) | $ | (2,220 | ) | |||
Incurrence of indebtedness under PHC’s senior credit facility | 265 | 26,235 | 26,500 | |||||||||
Adjustments | $ | (1,898 | ) | $ | 26,178 | $ | 24,280 | |||||
(10) | Represents the elimination of PHC deferred financing costs in connection with the repayment of debt. |
(11) | Acadia plans to effect a stock split or issuance on or prior to the closing of the Merger with PHC such that approximately 17,676,101 shares of common stock will be issued and outstanding. Thus, on a pro forma basis, common stock has been increased by $77 based on the increase of 7,676,101 shares of common stock ($0.01 par value), and additional paid-in capital has been decreased by $77. |
(12) | Represents the adjustments to acquired property and equipment and intangible assets based on preliminary estimates of fair value and the adjustment to goodwill derived from the difference in the estimated total consideration transferred by Acadia and the estimated fair value of assets acquired and liabilities assumed by Acadia in the PHC merger, calculated as follows: |
Estimated equity consideration(a) | $ | 46,891 | ||
Estimated repayment of indebtedness under PHC’s senior credit facility | 26,500 | |||
Estimated cash consideration to Class B common stockholders | 5,000 | |||
Estimated total consideration | 78,391 | |||
Cash and cash equivalents | 4,191 | |||
Accounts receivable | 12,561 | |||
Other current assets | 5,027 | |||
Property and equipment | 14,494 | |||
Intangible assets | 1,800 | |||
Other long-term assets | 2,687 | |||
Accounts payable | (3,047 | ) | ||
Accrued salaries and benefits | (2,027 | ) | ||
Other accrued liabilities | (2,138 | ) | ||
Other long-term liabilities | (843 | ) | ||
Fair value of assets acquired less liabilities assumed | 32,705 | |||
Estimated goodwill | 45,686 | |||
Less: Historical goodwill | (10,510 | ) | ||
Goodwill adjustment | $ | (35,176 | ) | |
(a) | The estimated fair value of Acadia common shares issuable to PHC stockholders is based on total outstanding PHC Class A and Class B shares of 19,537,835 as of June 30, 2011 multiplied by a current stock price of $2.40. The fair value of equity consideration will be adjusted based on the fair value of |
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Acadia common stock distributed to PHC stockholders upon closing of the Merger. The equity consideration is reflected as a $49 increase in common stock based on the conversion of each PHC share into one-quarter of a share of Acadia common stock ($0.01 par value) and a $46,842 increase in additional paid-in capital. |
The acquired assets and liabilities assumed will be recorded at their estimated fair values as of the closing date of the Merger. Estimated goodwill is based upon a determination of the fair value of assets acquired and liabilities assumed that is preliminary and subject to revision as the value of total consideration is finalized and additional information related to the fair value of property and equipment and other assets (including intangible assets) acquired and liabilities assumed becomes available. The actual determination of the fair value of assets acquired and liabilities assumed will differ from that assumed in these unaudited pro forma condensed combined financial statements and such differences may be material. Qualitative factors comprising goodwill include efficiencies derived through synergies expected by the elimination of certain redundant corporate functions and expenses, the ability to leverage call center referrals to a broader provider base, coordination of services provided across the combined network of facilities, achievement of operating efficiencies by benchmarking performance and applying best practices throughout the combined company. |
(13) | Represents a $173 decrease in cash as a result of the merger. The sources and uses of cash in connection with the merger are expected to be as follows: |
Sources: | ||||
Issuance of $150,000 of Senior Notes | $ | 150,000 | ||
Uses: | ||||
Dividend to be paid to Acadia stockholders | (74,441 | ) | ||
Repayment of indebtedness under PHC’s senior credit facility | (26,500 | ) | ||
Cash portion of PHC merger consideration | (5,000 | ) | ||
Transaction costs(a) | (44,232 | ) | ||
Cash adjustment | $ | (173 | ) | |
(a) | Costs incurred in connection with the PHC merger and related transactions are estimated to be $19,873 of acquisition-related expenses (including approximately $2,403 of change in control payments due to certain PHC executives), $20,559 to terminate the Professional Services Agreement and $3,800 of debt financing costs associated with the Senior Notes and the amendment to the Senior Secured Credit Facility. |
(14) | Represents the effect of the merger on the current portion and long-term portion of total debt, as follows: |
Current Portion | Long-term Portion | Total Debt | ||||||||||
Repayment of indebtedness under PHC’s senior credit facility | (265 | ) | (26,235 | ) | (26,500 | ) | ||||||
Issuance of Senior Notes | — | 150,000 | 150,000 | |||||||||
Adjustments | $ | (265 | ) | $ | 123,765 | $ | 123,500 | |||||
(15) | Reflects the reclassification from YFCS other operating expenses of: (a) professional fees of $1,901 and $6,724 for the three months ended March 31, 2011 and the twelve months ended December 31, 2010, respectively, (b) supplies expense of $2,204 and $8,380 for the three months ended March 31, 2011 and the twelve months ended December 31, 2010, respectively, and (c) rent expense of $1,320 and $5,244 for the three months ended March 31, 2011 and the twelve months ended December 31, 2010, respectively, to conform to Acadia’s classification of expenses. |
(16) | Reflects the removal of acquisition-related expenses included in the historical statements of operations of Acadia and YFCS relating to Acadia’s acquisition of YFCS and the merger between Acadia and PHC. Acadia recorded $8,362 and $849 of acquisition-related expenses in the six months ended June 30, 2011 and the twelve months ended December 31, 2010, respectively. YFCS recorded $534 of acquisition-related expenses |
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in the twelve months ended December 31, 2010. PHC recorded $1,608 of acquisition-related and sale-related expenses in the six months ended June 30, 2011. |
(17) | Reflects the reclassification of workers’ compensation insurance expense of $1,239 for the twelve months ended December 31, 2010 to salaries, wages and benefits. |
(18) | Represents the adjustments to depreciation and amortization expense as a result of recording the property and equipment and intangible assets at preliminary estimates of fair value as of the respective dates of the acquisitions, as follows: |
(a) | YFCS acquisition: |
Useful | Three Months | Twelve Months | ||||||||||||||||
Lives | Monthly | Ended | Ended | |||||||||||||||
Amount | (In Years) | Depreciation | March 31, 2011 | December 31, 2010 | ||||||||||||||
Land | $ | 5,122 | N/A | $ | — | $ | — | $ | — | |||||||||
Land improvements | 2,694 | 10 | 22 | 66 | 264 | |||||||||||||
Building and improvements | 21,832 | 25, or lease term | 73 | 219 | 876 | |||||||||||||
Equipment | 2,024 | 3-7 | 53 | 159 | 636 | |||||||||||||
Construction in progress | 239 | N/A | — | — | — | |||||||||||||
31,911 | 148 | 444 | 1,776 | |||||||||||||||
Non-compete intangible asset | 321 | 1 | 27 | 81 | 321 | |||||||||||||
Total depreciation and amortization | 525 | 2,097 | ||||||||||||||||
Less: historical depreciation and amortization expense | (819 | ) | (3,456 | ) | ||||||||||||||
Depreciation and amortization expense adjustment | $ | (294 | ) | $ | (1,359 | ) | ||||||||||||
(b) | MeadowWood acquisition: |
�� | ||||||||||||||||||
Useful | Six Months | Twelve Months | ||||||||||||||||
Lives | Monthly | Ended | Ended | |||||||||||||||
Amount | (In Years) | Depreciation | June 30, 2011 | December 31, 2010 | ||||||||||||||
Land | $ | 1,420 | N/A | $ | — | $ | — | $ | — | |||||||||
Building and improvements | 7,700 | 25 | 26 | 156 | 312 | |||||||||||||
Equipment | 554 | 3-7 | 9 | 54 | 108 | |||||||||||||
9,674 | 35 | 210 | 420 | |||||||||||||||
Indefinite-lived license intangibles | 700 | N/A | — | — | — | |||||||||||||
Total depreciation and amortization | 210 | 420 | ||||||||||||||||
Less: historical depreciation and amortization expense | (179 | ) | (308 | ) | ||||||||||||||
Depreciation and amortization expense adjustment | $ | 31 | $ | 112 | ||||||||||||||
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(c) | PHC acquisition: |
Useful | Six Months | Twelve Months | ||||||||||||||||
Lives | Monthly | Ended | Ended | |||||||||||||||
Amount | (In Years) | Depreciation | June 30, 2011 | December 31, 2010 | ||||||||||||||
Land | $ | 1,540 | N/A | $ | — | $ | — | $ | — | |||||||||
Building and improvements | 11,150 | 25, or lease term | 93 | 558 | 1,116 | |||||||||||||
Equipment | 1,804 | 3-7 | 30 | 180 | 360 | |||||||||||||
14,494 | 123 | 738 | 1,476 | |||||||||||||||
Indefinite-lived license intangibles | 700 | N/A | — | — | — | |||||||||||||
Customer contract intangibles | 1,100 | 5 | 19 | 114 | 228 | |||||||||||||
Total depreciation and amortization | 852 | 1,704 | ||||||||||||||||
Less: PHC pro forma depreciation and amortization expense | (769 | ) | (1,549 | ) | ||||||||||||||
Depreciation and amortization expense adjustment | $ | 83 | $ | 155 | ||||||||||||||
(19) | Represents adjustments to interest expense to give effect to the Senior Secured Credit Facility entered into by Acadia on April 1, 2011, the debt incurred by PHC to fund the MeadowWood acquisition, and the amendment of the Senior Secured Credit Facility and the Senior Notes to be issued on the closing date of the merger. |
(a) | The YFCS pro forma interest expense adjustment assumes that the interest rate of 4.2% at April 1, 2011, the closing date of the YFCS acquisition and the Senior Secured Credit Facility, was in effect for the entire period, as follows: |
Six Months | Twelve Months | |||||||
Ended | Ended | |||||||
June 30, 2011 | December 31, 2010 | |||||||
Interest related to Senior Credit Facility | $ | 1,489 | $ | 6,134 | ||||
Amortization of debt discount and deferred loan costs | 291 | 1,165 | ||||||
1,780 | 7,299 | |||||||
Less: historical interest expense of Acadia and YFCS | (1,949 | ) | (8,252 | ) | ||||
Interest expense adjustment | $ | (169 | ) | $ | (953 | ) | ||
(b) | The PHC pro forma interest expense adjustment assumes that the interest rate of 7.25% at July 1, 2011, the closing date of the loans under PHC’s senior credit facility funding the MeadowWood acquisition, was in effect for the entire period, as follows: |
Six Months | Twelve Months | |||||||
Ended | Ended | |||||||
June 30, 2011 | December 31, 2010 | |||||||
Interest related to PHC’s senior credit facility | $ | 950 | $ | 1,914 | ||||
Amortization of debt discount and deferred loan costs | 191 | 381 | ||||||
1,141 | 2,295 | |||||||
Less: historical interest expense of PHC and MeadowWood | (373 | ) | (851 | ) | ||||
Interest expense adjustment | $ | 768 | $ | 1,444 | ||||
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(c) | The pro forma interest expense adjustment for the merger assumes that the Senior Notes will have an interest rate of 9.25%, which represents an estimate of the fixed interest rate of the Senior Notes based on current market interest rates, and reflects a 0.50% increase in the interest rate applicable to the Senior Secured Credit Facility related to the amendment, as follows: |
Six Months | Twelve Months | |||||||
Ended | Ended | |||||||
June 30, 2011 | December 31, 2010 | |||||||
Interest related to Senior Notes | $ | 6,938 | $ | 13,875 | ||||
Interest related to Senior Credit Facility amendment | 344 | 712 | ||||||
Amortization of debt discount and deferred loan costs | 380 | 760 | ||||||
7,662 | 15,347 | |||||||
Less: Interest related to PHC’s senior credit facility to be repaid in connection with the merger | (1,141 | ) | (2,295 | ) | ||||
Interest expense adjustment | $ | 6,521 | $ | 13,052 | ||||
(20) | Reflects a decrease in income taxes of $133 for the six months ended June 30, 2011 and an increase in income taxes of $2,448 for the twelve months ended December 31, 2010 to give effect to the election by Acadia Healthcare Company, LLC to be treated as a taxable corporation on April 1, 2011. |
(21) | Reflects adjustments to income taxes to reflect the impact of the above pro forma adjustments applying combined federal and state statutory tax rates for the respective periods. |
(22) | Represents the elimination of advisory fees paid to Waud Capital Partners pursuant to our professional services agreement dated April 1, 2011. The adjustment to eliminate advisory fees is factually supportable and directly attributable to the Merger given the termination of the professional services agreement in connection with the Merger and is expected to have a continuing impact. |
(23) | Adjustments to weighted average shares used to compute basic and diluted earnings perunit/share are as follows: |
Basic earnings perunit/share |
• | Prior to the closing of the merger, Acadia will effect a stock split or issuance such that Acadia stockholders immediately prior to the closing of the merger will own 77.5% of the combined company’s issued and outstanding common stock on a fully diluted basis (as defined in the merger agreement) and approximately 17,676,101 shares of common stock will be issued and outstanding. |
• | The conversion and exchange of each Class A and Class B common share of PHC, Inc. for one-quarter (1/4) of a share of common stock of Acadia Healthcare Company, Inc. The estimated issuance of Acadia common stock based on theone-to-four conversion rate and the weighted average shares outstanding for the respective periods is 4,878,122 and 4,903,097 for the six months ended June 30, 2011 and the twelve months ended December 31, 2010, respectively. Weighted average shares outstanding are derived from PHC, Inc. consolidated financial statements for the respective periods. |
Diluted earnings perunit/share |
• | The adjustments described above related to basic earnings perunit/share. |
• | The conversion of outstanding PHC employee stock options and warrants into substantially equivalent Acadia stock options and warrants. The estimated incremental dilutive effect of the stock options and warrants, derived from the consolidated financial statements of PHC, Inc. based on theone-to-four conversion rate applicable to such awards, is 105,253 and 23,474 for the six months ended June 30, 2011 and the twelve months ended December 31, 2010, respectively. |
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December 31, 2010 | ||||||||||||||||||||
Acadia | PHC | |||||||||||||||||||
Pro Forma | ||||||||||||||||||||
Pro Forma | Equivalent of | |||||||||||||||||||
Pro Forma | for YFCS | One Acadia | ||||||||||||||||||
Historical(1) | for YFCS | and Merger | Historical | Share(2) | ||||||||||||||||
Net income (loss) per share attributable to common stockholders | ||||||||||||||||||||
Basic | $ | 0.62 | $ | (0.58 | ) | $ | (0.53 | ) | $ | 0.11 | $ | (0.13 | ) | |||||||
Diluted | 0.62 | (0.58 | ) | (0.53 | ) | 0.11 | (0.13 | ) | ||||||||||||
Shares used in calculating income (loss) per share attributable to common stockholders: | ||||||||||||||||||||
Basic | 10,000,000 | 10,000,000 | 22,579,198 | 19,612,388 | ||||||||||||||||
Diluted | 10,000,000 | 10,000,000 | 22,602,672 | 19,706,284 |
June 30, 2011 | ||||||||||||||||||||
Acadia | PHC | |||||||||||||||||||
Pro Forma | ||||||||||||||||||||
Pro Forma | Equivalent of | |||||||||||||||||||
Pro Forma | for YFCS | One Acadia | ||||||||||||||||||
Historical(1) | for YFCS | and Merger | Historical | Share(2) | ||||||||||||||||
Net income (loss) per share attributable to common stockholders | ||||||||||||||||||||
Basic | $ | (2.14 | ) | $ | (1.39 | ) | $ | (0.77 | ) | $ | (0.03 | ) | $ | (0.19 | ) | |||||
Diluted | (2.14 | ) | (1.39 | ) | (0.77 | ) | (0.03 | ) | (0.19 | ) | ||||||||||
Book value per share | ||||||||||||||||||||
Basic | $ | 7.46 | $ | 7.46 | $ | 0.29 | $ | 0.92 | $ | 0.07 | ||||||||||
Diluted | 7.46 | 7.46 | 0.29 | 0.91 | 0.07 | |||||||||||||||
Shares used in calculating net income (loss) per share and book value per share attributable to common stockholders: | ||||||||||||||||||||
Basic | 10,000,000 | 10,000,000 | 22,554,223 | 19,512,489 | ||||||||||||||||
Diluted | 10,000,000 | 10,000,000 | 22,659,476 | 19,698,086 |
(1) | All Acadia share numbers have been restated for the stock split effected by means of a stock dividend on May 20, 2011 such that 10,000,000 shares of common stock were issued and outstanding on such date. An additional stock split or issuance will be effected immediately prior to the merger to the extent required in order |
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for the Acadia common stock outstanding immediately prior to the merger to represent 77.5% of the common stock on fully diluted basis (as defined in the merger agreement) post-merger. | ||
(2) | These amounts were calculated by applying the exchange ratio of 0.25 to the Acadia per share amounts giving effect to the YFCS acquisition and the merger. |
Price Range | ||||||||
Period | High | Low | ||||||
Fiscal Year Ended June 30, 2011 | ||||||||
First Quarter (July 1, 2010 — September 30, 2010) | $ | 1.34 | $ | 1.04 | ||||
Second Quarter (October 1, 2010 — December 31, 2010) | 1.80 | 1.31 | ||||||
Third Quarter (January 1, 2011 — March 31, 2011) | 2.74 | 1.61 | ||||||
Fourth Quarter (April 1, 2011 — June 30, 2011) | 3.61 | 2.19 | ||||||
Fiscal Year Ended June 30, 2010 | ||||||||
First Quarter (July 1, 2009 — September 30, 2009) | $ | 1.70 | $ | 1.22 | ||||
Second Quarter (October 1, 2009 — December 31, 2009) | $ | 1.34 | $ | 0.99 | ||||
Third Quarter (January 1, 2010 — March 31, 2010) | $ | 1.55 | $ | 1.06 | ||||
Fourth Quarter (April 1, 2010 — June 30, 2010) | $ | 1.35 | $ | 0.98 |
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• | to consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of May 23, 2011, by and among PHC, Acadia Healthcare, Inc. and Acadia Merger Sub, LLC, a wholly-owned subsidiary of Acadia, pursuant to which PHC will be merged with and into Merger Sub; | |
• | to consider and cast an advisory vote on the compensation to be received by PHC’s named executive officers in connection with the merger; | |
• | to consider and vote on a proposal to approve the adjournment of the special meeting, if necessary, to solicit additional proxies, in the event that there are not sufficient votes at the time of the adjournment to approve the merger agreement; and | |
• | To transact such other business as may properly come before the meeting or any adjournments thereof. |
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• | by delivering to the clerk of PHC a signed notice of revocation; | |
• | by delivering to the clerk of PHC a later-dated, signed proxy; or | |
• | by attending the special meeting of PHC stockholders and voting in person. |
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• | PHC desired a combination in which PHC stockholders would participate in the growth of the combined company; | |
• | In view of PHC’s recent growth and prospects, PHC’s contribution to the combination should take into account PHC’s 12 month projections as well as its recent historical performance; and | |
• | Any acquisition must fairly compensate the holders of PHC’s Class B Common Stock for their control rights, including their right to elect a majority of PHC’s directors and their right to five votes per share. |
• | PHC stockholders would receive common stock constituting 22.5% of the combined company, on a fully diluted basis (as defined in the merger agreement), and Acadia stockholders would receive common stock constituting 77.5% of the combined company, on a fully diluted basis (as defined in the merger agreement); | |
• | Based upon the relative values of PHC and Acadia and in order to achieve the proposed 22.5% — 77.5% proportion, Acadia stockholders would receive a distribution of approximately $90 million in cash; |
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• | In order to induce holders of PHC’s Class B Common Stock to give up their control rights and exchange their Class B Common Stock for ordinary common stock, PHC stockholders would receive common stock constituting 22.5% of the combined company, on a fully diluted basis (as defined in the merger agreement), and holders of PHC’s Class B Common Stock would recapitalize into common stock of the combined company and receive an aggregate of $5 million in cash; | |
• | Mr. Shear would serve as Vice Chairman of the combined company and, along with another representative designated by Mr. Shear, would serve as a director of the combined company; | |
• | the senior executive officers of PHC would enter into employment agreements on terms and conditions satisfactory to the parties and the employees; and | |
• | PHC, Waud Capital Partners and specified other stockholders would enter into an investment agreement that would provide certain rights in favor of Waud Capital Partners, including registration rights and such other rights as agreed to by the parties. |
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• | the opportunity to diversify service types and payor mix; | |
• | the ability to expand the number of facilities and beds and expand into additional new states; | |
• | Acadia’s and PHC’s facilities are complementary and their combination will increase geographic diversity; | |
• | the increased ability to access private and public equity markets, including for purposes of acting on attractive opportunities to further expand Acadia’s business; | |
• | Acadia’s management will provide additional resources and has a demonstrated record of achievement; | |
• | the opportunity to expand PHC’s internet and telephonic-based support services, which include crisis intervention, critical incidents coordination, employee counselor support, client monitoring, case management and health promotion; | |
• | the opportunity to retain 77.5% of the combined company while achieving partial liquidity through a pre-merger dividend; | |
• | the fact that the merger will provide Acadia stockholders, who currently hold shares in a private company, with shares of common stock in a publicly traded company, which would provide liquidity to Acadia stockholders; | |
• | the increased ability to access private and public equity markets, including for purposes of acting on attractive opportunities to further expand Acadia’s business; and | |
• | its understanding of Acadia’s business, operations, financial condition and prospects, and of PHC’s business, operations, financial condition and prospects. |
• | the risk that the potential benefits of the merger might not be realized; | |
• | the risk that the merger may not be completed; | |
• | the challenges, costs, resource constraints and risks of entering into the merger agreement and integrating the businesses of Acadia and PHC and the potential management, customer and employee disruption that may be associated with the merger; | |
• | the amount of indebtedness required to finance the merger and the related restrictions to which the combined company would be subject; and | |
• | various other applicable risks associated with the combined company and the merger, including those described under the section entitled “Risk Factors” beginning on page 18 of this proxy statement/prospectus. |
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• | its knowledge of PHC’s business, operations, financial condition, earnings and prospects, as well as the risks in achieving those prospects; | |
• | its belief that the merger is more favorable to PHC’s stockholders than any other alternative reasonably available, including the alternative of remaining a stand-alone, independent company and seeking to grow by pursuing acquisitions and the alternative of seeking another merger partner, as well as the potential rewards, risks and uncertainties associated with those alternatives; | |
• | the judgment, advice and analysis of PHC’s senior management with respect to the potential benefits of the merger, based on the business, financial, accounting and legal due diligence investigations performed with respect to Acadia; | |
• | the opinion of SRR to the PHC board of directors that the merger consideration specified in the merger agreement was fair, from a financial point of view, to the holders of PHC Class A Common Stock (in the aggregate) and to the holders of all of the PHC common stock (in the aggregate), as of the date thereof; | |
• | historical information concerning Acadia’s business, financial performance and condition, funding ability, operations, management and competitive position and the related prospects for the combined company; | |
• | the fact that financial and other terms and conditions of the merger agreement were the product of extensive arm’s-length negotiations among the parties and were designed to provide as much certainty as was possible that the merger would ultimately be consummated on a timely basis; | |
• | the fact that Acadia obtained a firm commitment for the financing necessary to complete the merger and the associated transactions, including the fact that Jefferies Finance, an affiliate of Jefferies, with PHC’s prior consent, provided the commitment; | |
• | the fact that negotiations were conducted under the oversight of a lead independent director who is not an employee of PHC; | |
• | the fact that the lead independent director selected SRR to provide its opinion to the PHC board of directors as to the fairness of the merger consideration from a financial point of view; | |
• | the fact that the merger agreement must be approved by the affirmative vote of the holders of at least two-thirds of the outstanding shares of PHC Class A Common Stock, voting separately, as well as the vote of the holders of the PHC Class A Common Stock and the PHC Class B Common Stock voting together; | |
• | the current conditions in the behavioral health market and the positioning of the combined company within that market after the merger; | |
• | the current conditions of the equity and debt market, as it relates to PHC’s ability to raise additional capital from new investors for the continued growth of PHC’s business, and as it relates to the potential prospects for the combined company; and | |
• | the impact of the merger on PHC’s employees. |
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• | Acadia’s assembled set of seasoned behavioral health facilities; | |
• | PHC’s and Acadia’s facilities are complementary and their combination will increase geographic diversity; | |
• | the combination of the businesses will diversify the revenue and the payor base; | |
• | the combination of the businesses will improve the scale of operations and operating leverage; | |
• | Acadia’s management will provide additional resources and has a demonstrated record of achievement; | |
• | the combined company will provide a platform for additional acquisitions; | |
• | the opportunity to own 22.5% of the combined company on a fully diluted basis (as defined in the merger agreement); | |
• | the combined company’s greater outstanding equity should result in increased stock liquidity and research coverage; and | |
• | the combined company should have a greater range of options to access private and public equity and debt markets to fund future capital needs, which are likely be greater than the options available to PHC alone. |
• | the risk that the potential benefits of the merger might not be realized; | |
• | the risk that Acadia’s stockholders will control the combined company and the fact that Acadia’s stock ownership is concentrated in the hands of relatively few stockholders; | |
• | the amount of indebtedness required to finance the merger and the related restrictions to which the combined company would be subject; | |
• | the interests that PHC’s directors and executive officers have with respect to the merger, in addition to their interests as holders of PHC Class A Common Stock, as described in “The Merger — Interests of PHC’s Directors and Executive Officers”; | |
• | the possible diversion of management attention for an extended period of time; | |
• | the substantial expenses expected to be incurred in connection with the merger; | |
• | the risk that the merger may not be completed; and | |
• | various other applicable risks associated with the combined company and the merger, including those described under the section entitled “Risk Factors” beginning on page 18 of this proxy statement/prospectus. |
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• | PHC’s10-K filings for the fiscal years ended June 30, 2006 through 2010; | |
• | PHC’s10-Q filing for the quarter ended March 31, 2011; | |
• | Acadia Holdings’ audited financial statements for the years ending December 31, 2006 though 2010; | |
• | YFCS’ audited financial statements for the years ending December 31, 2006 through 2010; |
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• | Acadia Holdings’ internally prepared unaudited financial statements for the three-month periods ended March 31, 2010 and 2011; | |
• | YFCS’ internally prepared unaudited financial statements for the three-month periods ended March 31, 2010 and 2011; | |
• | draft of the merger agreement, dated May 19, 2011; | |
• | PHC’s five-year financial forecast (including MeadowWood) for the fiscal years ending December 31, 2011 through 2015 and subsequent long-term growth rates prepared by PHC management; | |
• | Acadia’s five-year financial forecast (including YFCS) for the fiscal years ending December 31, 2011 through 2015 and subsequent growth rates prepared by Acadia management; | |
• | combined (both PHC and Acadia) five-year financial forecast for the fiscal years ending December 31, 2011 through 2015 and subsequent long-term growth rates prepared by PHC and Acadia management; | |
• | a review of publicly available financial data of certain publicly traded companies that SRR deemed relevant; | |
• | a review of publicly available information regarding certain publicly available merger and acquisition transactions that SRR deemed relevant; | |
• | a review of other financial and other information for PHC and Acadia that was publicly available or provided to SRR by management of PHC or Holdings; | |
• | discussions with PHC and Acadia management concerning their business, industry, history, and prospects; | |
• | discussions with PHC’s financial advisors, Jefferies; and | |
• | an analysis of other facts and data resulting in our conclusions. |
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• | Universal Health Services, Inc., | |
• | Tenet Healthcare Corp., | |
• | The GEO Group, Inc., | |
• | Health Management Associates, Inc., | |
• | Lifepoint Hospitals Inc., and | |
• | Community Health Systems, Inc. |
EV/NFY | EV/NFY+1 | |||||||||||
Company | EV | EBITDA | EBITDA | |||||||||
(In millions | ||||||||||||
of U.S. dollars) | ||||||||||||
Universal Health Services Inc. | $ | 9,348.8 | 7.9 | x | 7.4 | x | ||||||
Tenet Healthcare Corp. | 7,794.0 | 6.3 | x | 6.0 | x | |||||||
The GEO Group, Inc. | 3,018.7 | 9.7 | x | 8.7 | x | |||||||
Health Management Associates Inc. | 5,812.0 | 7.2 | x | 6.7 | x | |||||||
Lifepoint Hospitals Inc. | 3,571.9 | 6.7 | x | 6.3 | x | |||||||
Community Health Systems, Inc. | 11,929.7 | 6.4 | x | 6.1 | x | |||||||
Low | 3,018.7 | 6.3 | x | 6.0 | x | |||||||
High | 11,929.7 | 9.7 | x | 8.7 | x | |||||||
Mean | 6,912.5 | 7.4 | x | 6.9 | x | |||||||
Median | 6,803.0 | 7.0 | x | 6.5 | x |
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Date | Indicated Multiples | |||||||
Announced | Target | Acquirer | EV/LTM EBITDA | |||||
3/16/2011 | MeadowWood Behavioral Health System | PHC, Inc. | n/a | |||||
2/8/2011 | RehabCare Group Inc. | Kindred Healthcare Inc. | 7.7 | x | ||||
11/22/2010 | Cocentra, Inc. | Humana, Inc. | n/a | |||||
7/27/2010 | Wuesthoff Health System, Inc. | Health Management Associates, Inc. | n/a | |||||
5/27/2010 | Shands HealthCare | Health Management Associates, Inc. | n/a | |||||
5/17/2010 | Psychiatric Solutions, Inc. | Universal Health Services, Inc. | 9.4 | x | ||||
4/19/2010 | Cornell Companies, Inc. | The GEO Group, Inc. | 8.3 | x | ||||
4/1/2010 | Clark Regional Medical Center, Inc. | Lifepoint Hospitals Inc. | n/a | |||||
3/31/2010 | University Community Health, Inc. | Adventist Health System, Inc. | n/a | |||||
4/14/2009 | Brotman Medical Center, Inc. | Prospect Hospital Advisory Services, Inc. | 6.8 | x | ||||
11/4/2008 | Correctional Mental Health Services LLC | Conmed Healthcare Management, Inc. | n/a | |||||
11/27/2007 | Community Health Systems, Inc. | Capella Healthcare, Inc. | n/a | |||||
Low | 6.8 | x | ||||||
High | 9.4 | x | ||||||
Mean | 8.1 | x | ||||||
Median | 8.0 | x |
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Indicated Range of Value as of 5/17/2011 | ||||||||
In thousands of | ||||||||
U.S. dollars | ||||||||
Discounted Cash Flow Method | $ | 67,300 | $ | 78,400 | ||||
Guideline Public Company Method | 71,200 | 76,800 | ||||||
Mergerand Acquisition Method | 68,800 | 73,400 | ||||||
Indicated Enterprise Value | $ | 69,100 | $ | 76,200 | ||||
Less: Interest-Bearing Debt | (23,500 | ) | (23,500 | ) | ||||
Add: Cash and Cash Equivalents | 504 | 504 | ||||||
Add: Investments in Unconsolidated Subsidiaries | 1,037 | 1,037 | ||||||
Total Adjustments to Enterprise Value | (21,959 | ) | (21,959 | ) | ||||
Indicated Value of Equity | 47,141 | 54,241 | ||||||
Divided by: Diluted Weighted Average Shares Outstanding | 19,872 | 19,872 | ||||||
Indicated Value of Equity Per Share | $ | 2.37 | $ | 2.73 | ||||
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Indicated Range of Value | ||||||||
as of 5/17/2011 | ||||||||
In thousands of U.S. dollars | ||||||||
Discounted Cash Flow Method | $ | 356,400 | $ | 432,300 | ||||
Guideline Public Company Method | 364,800 | 386,900 | ||||||
Merger and Acquisition Method | 362,400 | 383,700 | ||||||
Indicated Enterprise Value | $ | 361,200 | $ | 401,000 | ||||
Less: Interest-Bearing Debt | (145,000 | ) | (145,000 | ) | ||||
Add: Cash and Cash Equivalents | 8,028 | 8,028 | ||||||
Total Adjustments to Enterprise Value | (136,972 | ) | (136,972 | ) | ||||
Indicated Value of Equity | $ | 224,228 | $ | 264,028 | ||||
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Indicated Range of Value | ||||||||
as of 5/17/2011 | ||||||||
In thousands of U.S. dollars | ||||||||
Discounted Cash Flow Method | $ | 516,400 | $ | 646,900 | ||||
Guideline Public Company Method | 499,000 | 528,500 | ||||||
Merger and Acquisition Method | 496,800 | 552,000 | ||||||
Indicated Enterprise Value | $ | 504,100 | $ | 575,800 | ||||
Less: Pro Forma Interest-Bearing Debt | (293,500 | ) | (293,500 | ) | ||||
Add: Pro Forma Cash and Cash Equivalents | 10,082 | 10,082 | ||||||
Total Adjustments to Enterprise Value | (283,418 | ) | (283,418 | ) | ||||
Indicated Value of Equity | $ | 220,682 | $ | 292,382 | ||||
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Indicated Range of Value as of 5/17/2011 | ||||||||
In thousands of | ||||||||
U.S. dollars | ||||||||
Indicated Range of Equity Value — PHC | $ | 47,141 | $ | 54,241 | ||||
Indicated Range of Equity Value — Acadia | 224,228 | 264,028 | ||||||
Total Combined Equity Value (Pre-Merger) | $ | 271,369 | $ | 318,269 | ||||
PHC % of Total Consideration | 15.1 | %[a] | 19.5 | %[b] | ||||
[a] | Calculated based on the low-end of the range for PHC and the high-end of the range for Acadia. | |
[b] | Calculated based on the high-end of the range for PHC and the low-end of the range for Acadia. |
Indicated Range of Value as of 5/17/2011 | ||||||||
In thousands of | ||||||||
U.S. dollars | ||||||||
Indicated Equity Value of Combined Company | $ | 220,682 | $ | 292,382 | ||||
Add: Cash Payments to PHC/Acadia Shareholders | 95,000 | 95,000 | ||||||
Total Value to PHC/Acadia Stockholders | $ | 315,682 | $ | 387,382 | ||||
22.5% Equity Interest Received By PHC Stockholders on a Fully-Diluted Basis | $ | 49,654 | $ | 65,786 | ||||
Add: Cash Payment to PHC Class B Stockholders | 5,000 | 5,000 | ||||||
Total Consideration to PHC Stockholders | $ | 54,654 | $ | 70,786 | ||||
% Allocation | 17.3 | % | 18.3 | % | ||||
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Indicated Range of Value as of 5/17/2011 | ||||||||
In thousands of | ||||||||
U.S. dollars | ||||||||
Indicated Equity Value of Combined Company | $ | 220,682 | $ | 292,382 | ||||
Divided by: Diluted Weighted Average Shares Outstanding[a] | 22,080 | 22,080 | ||||||
Post-Transaction Equity Value Per Share | $ | 9.99 | $ | 13.24 | ||||
Post-Transaction PHC Share Equivalent[b] | $ | 2.50 | $ | 3.31 | ||||
Pre-Transaction Equity Value Per Share | $ | 2.37 | $ | 2.73 | ||||
[a] | Based on 19,872,000 pre-merger shares of PHC divided by 22.5% and multiplied by the 1/4 exchange ratio. | |
[b] | Based on an exchange ratio of 1/4 share of the combined company Common Stock for each share of PHC Common Stock. |
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2011E | 2012E | 2013E | 2014E | 2015E | ||||||||||||||||
Income Statement Data | ||||||||||||||||||||
Net revenue | $ | 79.3 | $ | 90.0 | $ | 93.2 | $ | 96.5 | $ | 99.8 | ||||||||||
EBIT(1) | 8.0 | 10.7 | 11.7 | 13.4 | 15.2 | |||||||||||||||
Adjusted EBITDA(2) | 8.9 | 13.4 | 14.9 | 16.5 | 18.3 | |||||||||||||||
Net Income | 3.6 | 4.2 | 4.5 | 5.9 | 7.1 | |||||||||||||||
Balance Sheet Data (as of end of period) | ||||||||||||||||||||
Cash | $ | 1.3 | $ | 4.5 | $ | 9.6 | $ | 15.3 | $ | 21.9 | ||||||||||
Accounts receivable, total | 10.3 | 11.0 | 11.05 | 11.9 | 12.3 | |||||||||||||||
Other current assets | 4.5 | 4.8 | 5.1 | 5.2 | 5.4 | |||||||||||||||
Total current assets | 16.1 | 20.3 | 26.1 | 32.4 | 39.7 | |||||||||||||||
Restricted cash | — | — | — | — | — | |||||||||||||||
Property, plant & equipment | 11.6 | 12.1 | 12.1 | 12.1 | 12.1 | |||||||||||||||
Goodwill | 23.9 | 23.9 | 23.9 | 23.9 | 23.9 | |||||||||||||||
Other long term assets | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | |||||||||||||||
Deferred financing fees | 1.6 | 1.4 | 0.3 | — | — | |||||||||||||||
Total assets | $ | 57.2 | $ | 61.7 | $ | 66.4 | $ | 72.4 | $ | 79.7 | ||||||||||
Accounts payable | $ | 1.9 | $ | 2.0 | $ | 2.0 | $ | 2.1 | $ | 2.1 | ||||||||||
Accrued liabilities | 3.5 | 3.7 | 3.8 | 3.9 | 3.9 | |||||||||||||||
Other current liabilities | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | |||||||||||||||
Current long term debt | — | — | — | — | — | |||||||||||||||
Total current liabilities | 5.4 | 5.7 | 5.9 | 6.0 | 6.1 | |||||||||||||||
Revolving credit facility | — | — | — | — | — | |||||||||||||||
Term loan issued | 23.5 | 23.5 | 23.5 | 23.5 | 23.5 | |||||||||||||||
Other | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | |||||||||||||||
Total liabilities | $ | 36.3 | $ | 36.6 | $ | 36.8 | $ | 37.0 | $ | 37.0 | ||||||||||
Total equity | $ | 20.9 | $ | 25.1 | $ | 29.6 | $ | 35.6 | $ | 42.7 | ||||||||||
Total liabilities and equity | $ | 57.2 | $ | 61.7 | $ | 66.4 | $ | 72.4 | $ | 79.7 | ||||||||||
Cash Flow Data | ||||||||||||||||||||
Total cash flow from operations | $ | 4.3 | $ | 7.2 | $ | 8.2 | $ | 8.9 | $ | 9.8 | ||||||||||
Capital expenditures | (1.3 | ) | (3.2 | ) | (3.2 | ) | (3.1 | ) | (3.1 | ) | ||||||||||
Total cash flow from investing | (2.6 | ) | (4.0 | ) | (3.2 | ) | (3.1 | ) | (3.1 | ) | ||||||||||
Total cash flow from financing | — | — | — | — | — |
(1) | Defined as earnings before interest and taxes. | |
(2) | Defined as earnings before interest, taxes, depreciation and amortization, as adjusted for extraordinary ornon-recurring items. |
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2011E | 2012E | 2013E | 2014E | 2015E | ||||||||||||||||
Income Statement Data | ||||||||||||||||||||
Net Revenue | $ | 258.7 | $ | 275.2 | $ | 299.4 | $ | 329.5 | $ | 347.5 | ||||||||||
EBIT(1) | 35.8 | 37.3 | 43.8 | 54.7 | 58.8 | |||||||||||||||
Adjusted EBITDA(2) | 42.6 | 45.9 | 49.8 | 61.0 | 65.9 | |||||||||||||||
Net income | 18.3 | 18.2 | 22.1 | 28.6 | 31.1 | |||||||||||||||
Balance Sheet Data (as of end of period) | ||||||||||||||||||||
Cash | $ | 15.7 | $ | 32.4 | $ | 52.5 | $ | 79.1 | $ | 109.3 | ||||||||||
Accounts receivable, total | 22.7 | 24.1 | 27.3 | 30.1 | 31.7 | |||||||||||||||
Other current assets | 7.6 | 8.1 | 9.1 | 10.1 | 10.6 | |||||||||||||||
Total current assets | 46.0 | 64.6 | 89.0 | 119.2 | 151.7 | |||||||||||||||
Property, plant & equipment | 46.7 | 47.6 | 48.0 | 48.3 | 48.3 | |||||||||||||||
Goodwill | 146.0 | 146.0 | 146.0 | 146.0 | 146.0 | |||||||||||||||
Other long term assets | 30.2 | 30.2 | 30.2 | 30.2 | 30.2 | |||||||||||||||
Deferred financing fees | — | — | — | — | — | |||||||||||||||
Total assets | $ | 268.9 | $ | 288.4 | $ | 313.2 | $ | 343.7 | $ | 376.1 | ||||||||||
Accounts payable | $ | 4.1 | $ | 4.4 | $ | 4.9 | $ | 5.3 | $ | 5.5 | ||||||||||
Accrued liabilities | 7.7 | 8.2 | 9.2 | 9.9 | 10.4 | |||||||||||||||
Other current liabilities | 9.0 | 9.6 | 10.8 | 11.6 | 12.2 | |||||||||||||||
Current long term debt | — | — | — | — | — | |||||||||||||||
Total current liabilities | 20.9 | 22.2 | 24.8 | 26.7 | 28.1 | |||||||||||||||
New revolver | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | |||||||||||||||
Term Loan A | 135.0 | 135.0 | 135.0 | 135.0 | 135.0 | |||||||||||||||
Deferred tax | — | — | — | — | — | |||||||||||||||
Other | 16.6 | 16.6 | 16.6 | 16.6 | 16.6 | |||||||||||||||
Total liabilities | 182.4 | 183.7 | 186.4 | 188.3 | 189.6 | |||||||||||||||
Total equity | 86.4 | 104.7 | 126.8 | 155.4 | 186.5 | |||||||||||||||
Total liabilities and equity | $ | 268.9 | $ | 288.4 | $ | 313.2 | $ | 343.7 | $ | 376.1 | ||||||||||
Cash Flow Data | ||||||||||||||||||||
Total cash flow from operations | $ | 14.5 | $ | 26.2 | $ | 26.5 | $ | 33.2 | $ | 37.3 | ||||||||||
Capital expenditures | (9.1 | ) | (9.5 | ) | (6.4 | ) | (6.7 | ) | (7.1 | ) | ||||||||||
Total cash flow from investing | (9.1 | ) | (9.5 | ) | (6.4 | ) | (6.7 | ) | (7.1 | ) | ||||||||||
Total cash flow from financing | — | — | — | — | — |
(1) | Defined as earnings before interest and taxes. | |
(2) | Defined as earnings before interest, taxes, depreciation and amortization, as adjusted for extraordinary ornon-recurring items. |
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2011E | 2012E | 2013E | 2014E | 2015E | ||||||||||||||||
Income Statement Data | ||||||||||||||||||||
Net Revenue | $ | 338.0 | $ | 365.2 | $ | 392.6 | $ | 426.0 | $ | 447.4 | ||||||||||
EBIT(1) | 43.7 | 48.0 | 55.5 | 68.1 | 74.0 | |||||||||||||||
Adjusted EBITDA(2) | 55.0 | 62.6 | 68.1 | 81.0 | 87.6 | |||||||||||||||
Net Income | 15.8 | 18.8 | 23.8 | 32.1 | 36.6 | |||||||||||||||
Balance Sheet Data (as of end of period) | ||||||||||||||||||||
Cash | $ | 1.0 | $ | 1.0 | $ | 1.0 | $ | 1.0 | $ | 1.0 | ||||||||||
Accounts receivable, total | 32.7 | 34.8 | 38.7 | 42.0 | 44.1 | |||||||||||||||
Other current assets | 11.9 | 12.7 | 14.1 | 15.3 | 16.1 | |||||||||||||||
Total current assets | 45.7 | 48.6 | 53.9 | 58.4 | 61.2 | |||||||||||||||
Property, plant & equipment | 58.3 | 59.8 | 60.1 | 60.4 | 60.4 | |||||||||||||||
Goodwill | 357.3 | 357.3 | 357.3 | 357.3 | 357.3 | |||||||||||||||
Other long term assets | 34.2 | 34.2 | 34.2 | 34.2 | 34.2 | |||||||||||||||
Deferred financing fees | 7.0 | 5.8 | 4.7 | 3.6 | 2.5 | |||||||||||||||
Total assets | $ | 502.4 | $ | 505.6 | $ | 510.1 | $ | 513.9 | $ | 515.6 | ||||||||||
Accounts payable | $ | 10.5 | $ | 11.1 | $ | 12.2 | $ | 13.0 | $ | 13.5 | ||||||||||
Accrued liabilities | 11.2 | 11.8 | 13.0 | 13.8 | 14.4 | |||||||||||||||
Other current liabilities | 9.4 | 9.9 | 10.9 | 11.5 | 12.0 | |||||||||||||||
Total current liabilities | 31.1 | 32.9 | 36.1 | 38.3 | 39.9 | |||||||||||||||
Acadia revolving credit facility | — | — | — | — | — | |||||||||||||||
Acadia term loan | 120.7 | 103.3 | 80.8 | 50.2 | 13.7 | |||||||||||||||
High yield bonds issued | 150.0 | 150.0 | 150.0 | 150.0 | 150.0 | |||||||||||||||
Deferred tax | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | |||||||||||||||
Total liabilities | 325.7 | 310.1 | 290.8 | 262.4 | 227.6 | |||||||||||||||
Total equity | 176.7 | 195.5 | 219.3 | 251.4 | 288.0 | |||||||||||||||
Total liabilities and equity | $ | 502.4 | $ | 505.6 | $ | 510.1 | $ | 513.9 | $ | 515.6 | ||||||||||
Cash Flow Data | ||||||||||||||||||||
Total cash flow from operations | $ | 25.2 | $ | 30.1 | $ | 32.0 | $ | 40.4 | $ | 46.7 | ||||||||||
Capital expenditures | (10.4 | ) | (12.7 | ) | (9.5 | ) | (9.8 | ) | (10.2 | ) | ||||||||||
Total cash flow from investing | (10.4 | ) | (12.7 | ) | (9.5 | ) | (9.8 | ) | (10.2 | ) | ||||||||||
Total cash flow from financing | (22.8 | ) | (17.4 | ) | (22.5 | ) | (30.6 | ) | (36.4 | ) |
(1) | Defined as earnings before interest and taxes. | |
(2) | Defined as earnings before interest, taxes, depreciation and amortization, as adjusted for extraordinary ornon-recurring items. |
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• | a bank, insurance company or other financial institution; | |
• | a tax-exempt organization; | |
• | a mutual fund; | |
• | a holder that, for U.S. federal income tax purposes, is not a “United States person” within the meaning of Section 7701(a)(30) of the Code; | |
• | a holder who acquired its PHC common stock pursuant to the exercise of an employee stock option or right or otherwise as compensation; | |
• | a U.S. expatriate; | |
• | an entity or arrangement treated as a partnership for U.S. federal income tax purposes or an investor in such partnership; | |
• | a dealer in securities; | |
• | a holder who has a functional currency other than the United States dollar; | |
• | a holder who holds PHC common stock as part of a hedge, straddle or conversion transaction; | |
• | a holder liable for the alternative minimum tax; or | |
• | a trader in securities who elects to apply amark-to-market method of accounting. |
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• | a holder will not recognize capital gain or loss on the exchange (except as described below in connection with receipt of cash in lieu of a fractional share); | |
• | a holder will have an aggregate tax basis in the shares of Acadia common stock received in the exchange (including a fractional share of Acadia common stock for which cash is received) equal to the stockholder’s aggregate tax basis in its shares of PHC common stock surrendered; | |
• | the holding period of the shares of Acadia common stock received in the exchange will include the holding period of the shares of PHC common stock surrendered in exchange therefor; | |
• | a holder receiving cash in lieu of a fractional share of Acadia common stock will generally be treated as if it received the fractional share in the merger and then received cash in redemption thereof. It should generally recognize capital gain or loss equal to the difference, if any, between the amount of cash received and the tax basis in the fractional share (determined as described above). Any gain or loss recognized will be long-term capital gain or loss if, as of the effective time, the shares of PHC common stock exchanged were held for more than one year. |
• | a holder will recognize capital gain (but not loss) realized on the exchange in an amount not exceeding the amount of cash received (excluding cash received in lieu of a fractional share of Acadia common stock). Any gain recognized will be long-term capital gain if, as of the effective time, the shares of PHC common stock exchanged were held for more than one year unless the holder’s receipt of cash has the effect of a dividend distribution, as described below; | |
• | a holder will have an aggregate tax basis in the shares of Acadia common stock received in the exchange (including a fractional share of Acadia common stock for which cash is received) equal to the stockholder’s aggregate tax basis in its shares of PHC common stock surrendered, reduced by the amount of cash received (excluding cash received in lieu of a fractional share of Acadia common stock) and increased by the amount of any gain recognized by the holder in the exchange (but excluding any gain or loss from the deemed receipt and redemption of any fractional share); |
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• | the holding period of the shares of Acadia common stock received in the exchange will include the holding period of the shares of PHC common stock surrendered in exchange therefor; and | |
• | a holder will recognize capital gain or loss with respect to cash received in lieu of a fractional share of Acadia common stock equal to the difference, if any, between the amount of cash received and the tax basis in the fractional share (determined as described above). Any gain or loss recognized will be long-term capital gain or loss if, as of the effective time, the shares of PHC common stock exchanged were held for more than one year. |
• | before the vote to approve the merger agreement is taken, a PHC stockholder electing to exercise his or her appraisal rights must deliver to PHC written notice of such stockholder’s intent to demand payment for his or her shares if the merger is completed. The written notice should be delivered to Paula C. Wurts, Clerk, PHC, Inc., 200 Lake Street, Suite 102, Peabody, MA 01960. PHC recommends you send your notice by registered or certified mail, return receipt requested; and | |
• | a PHC stockholder electing to exercise his or her appraisal rights mustNOTvote in favor of the proposal to approve the merger agreement. If a stockholder returns a signed proxy but does not specify a vote against the |
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proposal to approve the merger agreement or a direction to abstain, the proxy will be votedFORthe merger agreement, which will have the effect of waiving that stockholder’s appraisal rights. |
• | where the form must be returned, where certificates for shares must be deposited and the date by which such certificates must be deposited; | |
• | the date on which the form is due, which will not be fewer than 40 nor more than 60 days after the date the appraisal notice and form are sent, and notice that the stockholder shall have waived the right to demand appraisal with respect to such shares unless the form is received by the specified date; | |
• | PHC’s estimate of the fair value of the shares; | |
• | that, if requested in writing, PHC will provide within 10 days after the date on which all forms are due, the number of stockholders who have returned the forms and the total number of shares owned by such stockholders; and | |
• | the date by which the stockholder may withdraw his or her notice of intent to demand appraisal rights, which date will be within 20 days after the date on which all forms are due. |
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• | PHC’s financial statements; | |
• | a statement of PHC’s estimate of the fair value of the shares, which estimate will equal or exceed the estimate given with the appraisal notice; and | |
• | a statement that stockholders may demand further payment if the stockholder is dissatisfied with the payment or offer in accordance with the procedures set forth in Section 13.26 of the MBCA (as described below). |
• | of the information in PHC’s financial statements; | |
• | of PHC’s estimate of the fair value of the shares, which estimate will equal or exceed the estimate given with the appraisal notice; | |
• | that the stockholders may accept the estimate of fair value, plus interest, in full satisfaction of their demands or demand appraisal under Section 13.26 of the MBCA (as described below); | |
• | that those stockholders who wish to accept PHC’s offer shall notify PHC of their acceptance within 30 days after receiving such offer; and | |
• | that those stockholders who do not satisfy the requirements for demanding appraisal under Section 13.26 of the MBCA shall be deemed to have accepted PHC’s offer. |
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• | corporate organization, good standing, qualification to do business and subsidiaries; | |
• | absence of a breach of the certificate of incorporation, bylaws, law or material agreement as a result of the merger; | |
• | capitalization; | |
• | authority to enter into the merger agreement; | |
• | permits required to conduct business and compliance with those permits; | |
• | compliance with applicable legal requirements; | |
• | financial statements; | |
• | the absence of any undisclosed liabilities; | |
• | the accuracy of information supplied in this proxy statement/prospectus; |
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• | the absence of certain changes or events since December 31, 2010; | |
• | the absence of litigation; | |
• | certain restrictions of business activities; | |
• | owned and leased real property; | |
• | intellectual property matters; | |
• | employee benefit plans and other employment matters; | |
• | labor relations; | |
• | taxes, tax returns and audits; | |
• | material contracts; | |
• | insurance; | |
• | environmental matters; | |
• | the approval of the merger and related matters by the board of directors; | |
• | payments required to be made to brokers and agents in connection with the merger; | |
• | transactions with related parties; and | |
• | fees and expenses. |
• | amending or proposing to amend, as the case may be, its certificate of formation, limited liability company agreement, articles of organization or bylaws (or other comparable organizational documents); | |
• | splitting, combining, reclassifying, purchasing, repurchasing, redeeming, otherwise acquiring, declaring, setting aside, establishing a record date for, making or paying any dividend or distribution (whether in cash, stock, property or otherwise) in respect of, or entering into any contract with respect to the voting of, any membership interests, shares of capital stock or other equity securities of it or its subsidiaries; | |
• | issuing, delivering, selling, pledging, transferring, disposing of or encumbering any shares of capital stock or other equity securities of it or its subsidiaries, or any securities convertible into or exchangeable for, or any options, warrants or other rights of any kind to acquire any such shares of such capital stock or other equity securities of it or its subsidiaries; | |
• | increasing the salaries, bonuses or other compensation and benefits payable or that could become payable by it or any of its subsidiaries to any of their respective directors, limited liability company managers, officers, stockholders, members, employees or other service providers, except, solely with respect to employees who are not officers or directors, in the ordinary course of business consistent with past practice; | |
• | entering into any new or amending in any material respect, any employment, severance, retention or change in control agreement with any past or present director, limited liability company manager, officer, stockholder, member, employee or other service provider of it or its subsidiaries; |
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• | promoting any officers or employees, except in the ordinary course of business consistent with past practice or as the result of the termination or resignation of any officer or employee; | |
• | acquiring by merging, consolidating with or purchasing any equity securities, a substantial portion of the assets of, or by any other manner any interest in, or making any loan, advance or capital contribution to or investment in, any business, corporation, partnership, association or other business organization or any division thereof or any assets thereof, other than acquisitions in the ordinary course of business not exceeding $25,000,000 in the aggregate; | |
• | transferring, licensing, selling, leasing, assigning or otherwise disposing of any material assets by merger, consolidation, sale of stock or assets, or otherwise, including the capital stock or other equity securities of it or its subsidiaries; | |
• | granting any lien on any of the assets of it or its subsidiaries; | |
• | adopting, entering into or effecting a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of it or its subsidiaries; | |
• | redeeming, repurchasing, prepaying, defeasing, canceling, incurring or otherwise acquiring, or modifying the terms of, any indebtedness for borrowed money or assuming, guaranteeing or endorsing, or otherwise become responsible for, any such indebtedness of any business, corporation, partnership, association or other business organization; | |
• | issuing or selling any debt securities or options, warrants, calls or other rights to acquire any debt securities of it or its subsidiaries or assuming, guaranteeing or endorsing, or otherwise becoming responsible for, any debt securities of any business, corporation, partnership, association or other business organization; | |
• | making any capital expenditures, capital additions or capital improvements having a cost in excess of $250,000 (by Acadia) or $100,000 (by PHC), except for capital expenditures that are contemplated by Acadia’s or PHC’s existing plans for annual capital expenditures for the fiscal year ending December 31, 2011 (for Acadia) or June 30, 2011 (for PHC), or failing to make any capital expenditures, capital additions or capital improvements contemplated by such existing plans; | |
• | entering into or amending or modifying in any material respect, or terminating or consenting to the termination of any material contract; | |
• | waiving any material default under, or releasing, settling or compromising any material claim against it or liability or obligation owing to it under any material contract; | |
• | instituting, settling, releasing, waiving or compromising any action (i) pending or threatened before any arbitrator, court or other governmental authority involving the payment of monetary damages by it or its subsidiaries of any amount exceeding $250,000 (by Acadia) or $100,0000 (by PHC), (ii) involving any current, former or purported holder or group of holders of the capital stock or other equity securities of it or its subsidiaries or (iii) which settlement involves a conduct remedy or injunctive or similar relief or has a restrictive impact on the business of it or its subsidiaries; | |
• | making any change in financial accounting methods, principles, policies, procedures or practices; | |
• | making, changing or rescinding any tax election, filing any amended tax return, entering into any closing agreement relating to taxes, waiving or extending the statute of limitations in respect of material taxes or settling or compromising any tax liability in excess of $100,000 (by Acadia) or $50,000 (by PHC); | |
• | entering into any material agreement, agreement in principle, letter of intent, memorandum of understanding or similar contract with respect to any joint venture, strategic partnership or alliance; | |
• | abandoning, encumbering, conveying title (in whole or in part), exclusively licensing or granting any right or other licenses to intellectual property rights owned by it or its subsidiaries; | |
• | failing to maintain in full force and effect the existing insurance policies covering it and its subsidiaries and its and their respective properties, assets and businesses; |
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• | effecting or permitting a “plant closing” or “mass layoff” as those terms are defined in the Worker Adjustment Retraining and Notification Act without complying with the notice requirements and all other provisions of such act; | |
• | entering into or modifying or amending in any material respect or terminating any collective bargaining agreement with any labor union; and | |
• | agreeing to take any of the actions described above. |
• | to promptly prepare and file this proxy statement/prospectus, and Acadia will prepare and file the registration statement in which the proxy statement/prospectus is to be included; | |
• | to cooperate with each other in the preparation and filing of the proxy statement/prospectus; | |
• | to promptly notify one another of any comments from the SEC with respect to the proxy statement/prospectus; | |
• | to provide to the other party or its representatives access, at reasonable times upon prior notice, to its and its subsidiaries’ officers, employees, agents, representatives, properties, offices, facilities, books and records; and | |
• | to furnish promptly such information concerning its and its subsidiaries’ business, properties, contracts, assets, liabilities and personnel as the other party or its representatives may reasonably request. |
• | to mail the proxy statement/prospectus to its stockholders at the earliest practicable time after the registration statement is declared effective by the SEC; | |
• | to promptly take all steps necessary to hold and convene its stockholders’ meeting as soon as reasonably practicable after this proxy statement is cleared by the SEC and this registration statement is declared effective, and take all reasonable lawful action to solicit from its stockholders proxies in favor of adoption of the merger agreement; and | |
• | that its board of directors will recommend (and reaffirm its recommendation of) the adoption of the merger agreement and the merger to its stockholders, and, except in certain circumstances, neither the board of PHC nor any committee thereof will withdraw, amend or modify the recommendation. |
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• | initiate, solicit, propose, encourage (including by providing information) or take any action to facilitate any inquiries or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, an acquisition proposal; | |
• | engage in, continue or otherwise participate in any discussions or negotiations regarding, or provide any information or data concerning PHC or any of its subsidiaries to any business, corporation, partnership, association or other business organization relating to, any acquisition proposal; | |
• | provide any information or data concerning PHC or any of its subsidiaries to any business, corporation, partnership, association or other business organization pursuant to any commercial arrangement, joint venture arrangement, or other existing agreement or arrangement; | |
• | grant any waiver, amendment or release under any standstill or confidentiality agreement or any takeover, anti-takeover, moratorium, “fair price”, “control share” or other similar law applicable to PHC, or otherwise knowingly facilitate any effort or attempt by any business, corporation, partnership, association or other business organization to make an acquisition proposal; and | |
• | approve, endorse, recommend, or execute or enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement or other similar agreement relating to an acquisition proposal. |
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• | provide information in response to an unsolicited bona fide written acquisition proposal after the date of the merger agreement if and only if, prior to providing such information, PHC has received from the third party requesting such information an executed confidentiality agreement; and | |
• | engage or participate in any discussions or negotiations with any third party who has made an unsolicited bona fide written acquisition proposal. |
• | the PHC board of directors determines in good faith, after consultation with its independent financial advisor and outside legal counsel, that failure to do so would be inconsistent with its fiduciary obligations under applicable laws; | |
• | PHC has complied with its obligations with respect to solicitations; | |
• | PHC has provided prior written notice to Acadia at least five business days in advance, which states that PHC received a bona fide written acquisition proposal that was not withdrawn and that the PHC board of directors concludes in good faith constitutes a superior proposal and, absent any revision to the terms and conditions of the merger agreement, the PHC board of directors has resolved to adversely change its recommendation for the merger; and | |
• | prior to changing the PHC board recommendation for approval of the merger, PHC will, and will cause its representatives to, (i) negotiate with Acadia and its financial and legal advisors in good faith (to the extent Acadia desires to negotiate) to make such adjustments in the terms and conditions of the agreement, so that such acquisition proposal would cease to constitute a superior proposal, and (ii) permit Acadia and its financial and legal advisors to make a presentation to the PHC board of directors regarding the agreement and any adjustments with respect thereto (to the extent Acadia desires to make such presentation). |
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• | the SEC will have declared the registration statement effective, and no stop order will have been issued or proceedings initiated or threatened by the SEC suspending the effectiveness of the registration statement or any part thereof; |
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• | the PHC stockholder approval must be obtained in accordance with Massachusetts Law; | |
• | no governmental authority will have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order that is in effect and that has the effect of making the merger illegal or otherwise prohibiting completion of the merger and there will not be any pending or overtly threatened suit or action by any court of competent jurisdiction or other restraint or prohibition of any governmental authority; | |
• | the expiration or early termination of the waiting period applicable to the transaction under the Hart-Scott Rodino Act, if required, and the acquisition of all other material foreign antitrust requirements required to consummate the transaction; | |
• | (i) Acadia will have obtained debt financing in the amounts described in, and on the terms and conditions set forth in, the Debt Commitment Letter, (ii) Acadia will have received an opinion that its and its subsidiaries’ total consolidated liabilities will not exceed their total consolidated assets immediately after giving effect to the merger and the other transactions contemplated thereby and (iii) the net proceeds to be distributed to Acadia Holdings’ existing members will be equal to or greater than $80,000,000 (and as a result, the aggregate principal amount of the Deficit Note(s) shall not exceed $10,000,000); and | |
• | the shares of Acadia common stock to be issued in the merger will have been authorized for listing on a national securities exchange or be eligible for trading on the over the counter bulletin board. |
• | the representations and warranties of PHC contained in the merger agreement relating to organization, standing and power, subsidiaries, capitalization, authority, absence of certain changes, stockholder vote and PHC board approval must be true and correct in all respects as of the date of the merger agreement and as of the closing date as if made at and as of the closing date; | |
• | other than the representations and warranties listed in the prior paragraph and relating to SEC filings and undisclosed liabilities, the representations and warranties of PHC contained in the merger agreement must be true and correct as of the date of the merger agreement and as of the closing date, except (i) where the failure to be true and correct would not reasonably be expected to have a material adverse effect on PHC, or (ii) to the extent such representations and warranties expressly relate to an earlier date, in which case such representations must have been true and correct as of such earlier date; | |
• | the representations and warranties of PHC contained in the merger agreement relating to SEC filings and undisclosed liabilities must be true and correct in all material respects as of the date of the merger agreement and as of the closing date as if made at and as of the closing date; | |
• | PHC must have performed or complied in all material respects with the agreements and covenants required by the merger agreement to be performed or complied with by it on or prior to the closing date; | |
• | since the date of the merger agreement, there must not have been or occurred any material adverse effect with respect to PHC; | |
• | Acadia must have received a certificate, signed by the chief executive officer or chief financial officer of PHC, certifying that the following requirements have been satisfied: (i) the representations and warranties are true and correct as of a certain date and (ii) the requisite agreements and covenants have been complied with; | |
• | Acadia must have been provided with any third party consents or approvals PHC is required to obtain in connection with the merger; | |
• | the directors and officers of PHC required to resign as set forth in the merger agreement must have resigned as directors and officers of PHC; |
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• | Acadia and PHC and their respective subsidiaries must have timely obtained from each governmental authority all approvals, waivers and consents, if any, necessary for the consummation of or in connection with the transactions contemplated by the merger agreement; | |
• | Acadia must have received an opinion by its legal counsel with respect to federal income tax purposes, which states that: (i) the merger will constitute a “reorganization” within the meaning of Section 368(a) of the Code and (ii) Acadia and PHC will each be a party to that reorganization within the meaning of Section 368(b) of the Code; |
• | PHC must have received an opinion of its special counsel, substantially in the form attached to the merger agreement, that the merger consideration to be paid to holders of PHC’s common stock does not violate PHC’s articles of organization or bylaws or the Massachusetts Business Corporation Act, subject to the assumptions and exclusions contained in such opinion; |
• | PHC must have consummated its acquisition of the MeadowWood assets; and | |
• | Acadia and certain of its stockholders must have entered into the stockholders agreement, substantially in the form attached to the merger agreement. |
• | the representations and warranties of Acadia contained in the merger agreement relating to organization, standing and power, subsidiaries, capitalization, authority, absence of certain changes or events and Acadia board approval must be true and correct as of the date of the merger agreement and as of the closing date as if made at and as of the closing date; | |
• | other than the representations and warranties listed in the prior paragraph and relating to financial statements, the representations and warranties of Acadia contained in the merger agreement must be true and correct as of the date of the merger agreement and as of the closing date, except (i) where the failure to be true and correct would not reasonably be expected to have a material adverse effect on Acadia, or (ii) to the extent such representations and warranties expressly relate to an earlier date, in which case such representations must have been true and correct as of such earlier date; | |
• | the representations and warranties of Acadia contained in the merger agreement relating to financial statements must be true and correct in all material respects as of the date of the merger agreement and as of the closing date as if made at and as of the closing date; | |
• | Acadia must have performed or complied in all material respects with the agreements and covenants required by the merger agreement to be performed or complied with by it on or prior to the closing date; | |
• | since the date of the merger agreement, there must not have been or occurred any material adverse effect with respect to Acadia; | |
• | PHC must have received a certificate, signed by the chief executive officer or chief financial officer of Acadia, certifying that the following requirements have been satisfied: (i) the representations and warranties are true and correct as of a certain date and (ii) the requisite agreements and covenants have been complied with; | |
• | PHC must have been provided with any third party consents or approvals Acadia is required to obtain in connection with the merger; and | |
• | PHC must have received an opinion by its legal counsel with respect to federal income tax purposes, which states that: (i) the merger will constitute a “reorganization” within the meaning of Section 368(a) of the Code and (ii) Acadia and PHC will each be a party to that reorganization within the meaning of Section 368(b) of the Code. |
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• | if the merger has not been consummated by 11:59 p.m., New York City Time, on December 15, 2011 (the “End Date”); provided, however, that such right to terminate the merger agreement shall not be available to PHC if PHC has not obtained stockholder approval; | |
• | if an order of any governmental authority having competent jurisdiction is entered enjoining PHC, Acadia or Merger Sub from consummating the merger and has become final and nonappealable; provided, however, that such right to terminate the merger agreement shall not be available to any party whose breach of any provision of the merger agreement results in the imposition of any such order or the failure of such order to be resisted, resolved or lifted, as applicable; | |
• | if any law that makes consummation of the merger illegal or otherwise prohibited (unless the consummation of the merger in violation of such law would not have a material adverse effect on PHC); provided, however, that such right to terminate the merger agreement shall not be available to any party whose breach of any provision of the merger agreement results in the imposition of any such order or the failure of such order to be resisted, resolved or lifted, as applicable; or | |
• | if PHC has not obtained stockholder approval. |
• | if Acadia or Merger Sub has breached any of the covenants or agreements contained in the merger agreement to be complied with by Acadia or Merger Sub such that PHC’s closing condition regarding such covenants or agreements would not be satisfied, and such breach is incapable of being cured by the End Date or is not cured within thirty (30) calendar days after Acadia or Merger Sub receives written notice of such breach from PHC; provided that PHC will not have the right to terminate the merger agreement pursuant to this paragraph if, at the time of the termination, Acadia or Merger Sub would be unable to satisfy their closing condition because PHC is in breach of any of its covenants or agreements; | |
• | if there exists a breach of any of the representations or warranties of Acadia or Merger Sub contained in the merger agreement such that PHC’s closing condition regarding such representations or warranties would not be satisfied, and such breach is incapable of being cured by the End Date or is not cured within thirty (30) calendar days after Acadia or Merger Sub receives written notice of such breach from PHC; provided that PHC will not have the right to terminate the merger agreement pursuant to this paragraph if, at the time of the termination, Acadia and Merger Sub would be unable to satisfy their closing condition because PHC is in breach of any of its representations or warranties; or | |
• | if, prior to the obtaining of the PHC stockholder approval, the PHC board of directors or any committee thereof has adversely changed its recommendation to approve the merger. |
• | if PHC has breached any of the covenants or agreements contained in the merger agreement to be complied with by PHC such that Acadia’s closing condition regarding such covenants or agreements would not be satisfied, and such breach is incapable of being cured by the End Date or is not cured within thirty (30) calendar days after PHC receives written notice of such breach from Acadia; provided that Acadia will not have the right to terminate the merger agreement pursuant to this paragraph if, at the time of the termination, PHC would be unable to satisfy its closing condition because Acadia or Merger Sub is in breach of any of their covenants or agreements; |
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• | if there exists a breach of any of the representations or warranties of PHC contained in the merger agreement such that Acadia’s closing condition regarding such representations or warranties would not be satisfied, and such breach is incapable of being cured by the End Date or is not cured within thirty (30) calendar days after PHC receives written notice of such breach from PHC; provided that Acadia will not have the right to terminate the merger agreement pursuant to this paragraph if, at the time of the termination, PHC would be unable to satisfy its closing condition because Acadia or Merger Sub is in breach of any of their representations or warranties; or | |
• | if, prior to the obtaining of the PHC stockholder approval, the PHC board of directors or any committee thereof has adversely changed its recommendation to approve the merger; or | |
• | if after the completion of the MeadowWood asset purchase and the additions, revisions and modifications to the supplemental disclosures provided by PHC to Acadia, Acadia would be unable to satisfy its closing condition because PHC representations or warranties are no longer true and correct in all respects as of the date of delivery of the MeadowWood disclosure schedule supplement. |
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• | extend the time for the performance of any of the obligations or other acts of the other parties; | |
• | waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant thereto; or | |
• | waive compliance with any of the agreements or conditions contained in the merger agreement. |
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• | the merger and the transactions contemplated by the merger agreement or the announcement thereof; | |
• | compliance with the terms of the merger agreement or the taking of any action consented to or requested by PHC or, in the case of Acadia, Merger Sub; | |
• | any change in accounting requirements or principles required by GAAP, or any interpretations thereof; | |
• | the United States economy in general; or | |
• | the behavioral healthcare industry in general. |
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Name | Age | Position/Affiliation | ||||
Joey A. Jacobs | 58 | Chairman, Director & Chief Executive Officer | ||||
Bruce A. Shear | 57 | Executive Vice Chairman and Director | ||||
Brent Turner | 45 | Co-President | ||||
Trey Carter | 45 | Co-President | ||||
Ron Fincher | 58 | Chief Operating Officer | ||||
Jack E. Polson | 45 | Chief Financial Officer | ||||
Christopher L. Howard | 45 | Executive Vice President, General Counsel | ||||
Reeve B. Waud | 47 | Director | ||||
Charles E. Edwards | 33 | Director | ||||
Matthew A. London | 29 | Director | ||||
Gary A. Mecklenburg | 65 | Director | ||||
William F. Grieco | 59 | Director |
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• | overseeing and monitoring the integrity of its financial statements, its compliance with legal and regulatory requirements as they relate to financial statements or accounting matters and its internal accounting and financial controls; | |
• | preparing the report that SEC rules require be included in its annual proxy statement; | |
• | overseeing and monitoring its independent registered public accounting firm’s qualifications, independence and performance; | |
• | providing the board with the results of its monitoring and recommendations; and | |
• | providing to the board additional information and materials as it deems necessary to make the board aware of significant financial matters that require the attention of the board. |
• | reviewing and approving for the chief executive officer and other executive officers (a) the annual base salary, (b) the annual incentive bonus, including the specific goals and amount, (c) equity compensation, (d) employment agreements, severance arrangements and change in control arrangements, and (e) any other benefits, compensations, compensation policies or arrangements; | |
• | reviewing and making recommendations to the board regarding the compensation policy for such other officers as directed by the board; | |
• | preparing a report to be included in the annual proxy statement that describes: (a) the criteria on which compensation paid to the chief executive officer for the last completed fiscal year is based; (b) the relationship of such compensation to our performance; and (c) the committee’s executive compensation policies applicable to executive officers; and | |
• | acting as administrator of Acadia’s current benefit plans and making recommendations to the Acadia board of directors with respect to amendments to the plans, changes in the number of shares reserved for issuance thereunder and regarding other benefit plans proposed for adoption. |
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• | reviewing board structure, composition and practices, and making recommendations on these matters to the board; | |
• | reviewing, soliciting and making recommendations to the board and stockholders with respect to candidates for election to the board; and | |
• | overseeing compliance by the chief executive officer and senior financial officers with the Code of Business Conduct and Ethics. |
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Reeve B. Waud
Charles E. Edwards
Matthew A. London
Gary A. Mecklenburg
Change in | ||||||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||||||||
Non-Qualified | ||||||||||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||||||||||
Base | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||||||||||
Fiscal | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($)(2) | ($) | ($) | ($) | ($) | ($)(4) | ($) | |||||||||||||||||||||||||||
Trey Carter(1) | 2010 | 317,119 | 222,232 | — | (3) | — | — | — | 4,579 | 543,930 |
(1) | Mr. Carter served as Acadia’s Chief Executive Officer from May 2007 until February 2011. In February 2011, he was appointed as a Co-President of Acadia and will serve in such capacity following the merger. | |
(2) | Bonus amounts were earned in fiscal year 2010 and paid in fiscal year 2011. | |
(3) | Mr. Carter received a grant of 6,500 shares of Class B Common Units and 400 shares of Class B Preferred Units in fiscal 2010. The grant date fair value of such rewards was determined to be de minimis. These awards vest only upon certain change of control events. | |
(4) | Acadia allows employees to cash-in up to 40 hours of accrued vacation time payable at 75% of its accrued value. |
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Change in | ||||||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||||||||
Non-Qualified | ||||||||||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||||||||||
Base | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||||||||||
Name and Principal | Fiscal | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||||
Position | Year | ($) | ($) | ($) | ($)(2) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||
Bruce A. Shear(1) | 2011 | 516,650 | 49,000 | — | 10,760 | — | — | 40,656 | (3) | 617,066 | ||||||||||||||||||||||||||
2010 | 468,369 | 49,000 | — | 17,199 | — | — | 22,719 | (4) | 557,287 | |||||||||||||||||||||||||||
2009 | 453,846 | — | — | 42,648 | — | — | 13,685 | (5) | 510,179 |
(1) | Mr. Shear has served (and currently serves) as the President, Chief Executive Officer of PHC since 1980. It is anticipated that he will serve as the Executive Vice Chairman and a member of the Acadia board of directors after consummation of the merger. | |
(2) | These amounts represent the aggregate grant date fair value of stock option awards granted during the fiscal year. |
(3) | This amount represents $11,497 contributed by PHC to PHC’s Executive Employee Benefit Plan on behalf of Mr. Shear, $13,154 in premiums paid by PHC with respect to life and disability insurance for the benefit of Mr. Shear, $2,955 in personal use of a company car used by Mr. Shear and $13,050 intrinsic value of stock options exercised by Mr. Shear. |
(4) | This amount represents $9,837 contributed by PHC to PHC’s Executive Employee Benefit Plan on behalf of Mr. Shear, $3,520 in premiums paid by PHC with respect to life and disability insurance for the benefit of Mr. Shear and $9,362 in personal use of a company car used by Mr. Shear. |
(5) | This amount represents $8,894 contributed by PHC to PHC’s Executive Employee Benefit Plan on behalf of Mr. Shear, $3,706 in premiums paid by PHC with respect to life and disability insurance for the benefit of Mr. Shear and $1,085 in personal use of a company car used by Mr. Shear. |
Estimated | ||||||||||||||||||||||||||||
Future | All Other | |||||||||||||||||||||||||||
Payouts | Stock | |||||||||||||||||||||||||||
Estimated Future Payouts | Under | Awards: | Grant | |||||||||||||||||||||||||
Under | Equity | Number of | Date Fair | |||||||||||||||||||||||||
Non-Equity Incentive Plan | Incentive | Shares of | Value of | |||||||||||||||||||||||||
Awards(1) | Plan | Stock or | Stock | |||||||||||||||||||||||||
Grant | Threshold | Target | Maximum | Awards | Units | Awards | ||||||||||||||||||||||
Name | Date | ($) | ($) | ($) | (#)(2) | (#) | ($)(3) | |||||||||||||||||||||
Trey Carter | 1/4/2010 | 6,500 | (4) | — | 0 | |||||||||||||||||||||||
1/4/2010 | 400 | (4) | — | 0 | ||||||||||||||||||||||||
2/24/2011 | — | 126,990 | 203,183 | — | — | — | ||||||||||||||||||||||
1/4/2010 | — | 40,000 | — | — | — | — |
(1) | See “Compensation Discussion and Analysis — Intended Objectives of Acadia’s Executive Compensation Program; Elements of Compensation — Cash Bonuses” for a discussion of Acadia’s annual incentive plan. | |
(2) | All of the equity incentive plans awards granted in the fiscal year are performance based awards that would have vested upon the occurrence of a “Change of Control” (as defined in the Prior LLC Agreement) in which Waud Capital Partners achieves a targeted internal rate of return. All of these awards were reclassified into Class B Units in connection with Acadia Holdings’ entry into the Acadia Holdings LLC Agreement on April 1, 2011. |
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(3) | The grant date fair value of the awards reflected in this column was determined to be de minimis. There awards were subject to vesting only upon certain change of control events. | |
(4) | Represents 6,500 Class B Common Units and 400 Class B Preferred Units of Acadia Holdings, which were reclassified into Class B Units of Acadia Holdings on April 1, 2011. |
Equity | ||||||||||||
Incentive Plan | ||||||||||||
Awards: | ||||||||||||
Market or | ||||||||||||
Equity Incentive | Payout Value | |||||||||||
Plan Awards: | of Unearned | |||||||||||
Number of | Shares, Units | |||||||||||
Unearned Shares, | or Other | |||||||||||
Units or Other | Rights That | |||||||||||
Grant | Rights That Have | Have Not | ||||||||||
Name | Date | Not Vested (#) | Vested ($) | |||||||||
Trey Carter(1) | 1/4/2010 | 6,500 | (1) | $ | 1,302,000 | |||||||
1/4/2010 | 400 | (1) | 800,000 |
(1) | Represents Class B Common Units and Class B Preferred Units of Acadia Holdings, which were reclassified into Class B Units of Acadia Holdings on April 1, 2011. |
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | ||||||||||||||
Options | Options | Exercise | Option | |||||||||||||
(#) | (#) | Price | Expiration | |||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | ||||||||||||
Bruce A. Shear | 15,000 | — | 2.06 | 10/14/12 | ||||||||||||
15,000 | — | 2.95 | 10/31/12 | |||||||||||||
20,000 | — | 2.90 | 11/14/12 | |||||||||||||
20,000 | — | 2.75 | 2/18/13 | |||||||||||||
50,000 | — | 1.25 | 11/28/13 | |||||||||||||
15,000 | 5,000 | (1) | 1.20 | 6/15/14 | ||||||||||||
7,500 | 7,500 | (2) | 1.08 | 12/14/14 | ||||||||||||
7,500 | 7,500 | (2) | 1.08 | 12/14/14 |
(1) | The additional 5,000 unvested options are scheduled to vest on June 15, 2012. |
(2) | The additional 15,000 unvested options are scheduled to vest 7,500 on December 14, 2011 and 7,500 on December 14, 2012. |
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Termination | ||||||||||||||||||||||
Following | ||||||||||||||||||||||
Change-in- | Death or | |||||||||||||||||||||
For Cause | Not for Cause | Control | Disability | Retirement | ||||||||||||||||||
Name | Element | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||
Trey Carter | Salary | — | 317,474 | — | — | — | ||||||||||||||||
Bonus | — | — | — | — | — | |||||||||||||||||
Benefits | — | — | — | — | — | |||||||||||||||||
Acadia Holdings Units | — | — | 2,102,000 | — | — | |||||||||||||||||
Totals | — | — | — | — | — | |||||||||||||||||
Bruce A. Shear(2) | Salary | — | — | 1,529,951 | 519,000 | — | ||||||||||||||||
Bonus | — | — | — | — | — | |||||||||||||||||
Benefits | — | — | — | 1,490,948 | (3) | — | ||||||||||||||||
Stock Options | — | — | — | — | — | |||||||||||||||||
Totals | — | — | 1,529,951 | 2,009,948 | — |
(1) | Amounts set forth in this table for Mr. Carter assume that the triggering event occurred as of December 31, 2010. They do not take into account any amounts to which Mr. Carter may be entitled under his Acadia Employment Agreement, which he entered into on March 29, 2011. |
(2) | Amounts set forth in this table for Mr. Shear assume that the triggering occurred as of June 30, 2011. They do not take into account any amounts to which Mr. Shear may be entitled under his Acadia Employment Agreement which he entered into on May 23, 2011. |
(3) | In the event of disability, Mr. Shear would have been entitled to receive a disability benefit of $990,948 paid out over four years. In the event of his death, Mr. Shear’s survivors would have received a $500,000 death benefit under a PHC paid life insurance policy. |
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Fees | ||||||||||||||||
Earned or | Stock | All Other | ||||||||||||||
Paid in | Awards | Compensation | ||||||||||||||
Director | Cash ($) | ($) | ($) | Total ($) | ||||||||||||
Mr. Mecklenburg | $ | 60,000 | — | — | $ | 60,000 |
Fees | ||||||||||||||||
Earned or | Option | All Other | ||||||||||||||
Paid in | Awards | Compensation | ||||||||||||||
Director | Cash ($) | ($)(1) | ($) | Total ($) | ||||||||||||
Mr. Grieco | $ | 27,000 | 23,432 | 17,300(2 | ) | $ | 67,732 |
(1) | This amount represents the aggregate grant date fair value of stock option awards granted during the fiscal year. |
(2) | This amount represents the intrinsic value of stock options exercised. |
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Percentage of Net | ||||
Revenue for the Year | ||||
Ended December 31, | ||||
Facility/Service | 2010 | |||
(Unaudited) | ||||
Inpatient facilities/acute care | 19.9 | % | ||
Residential treatment centers | 43.0 | % | ||
Group home, therapeutic group home and foster care | 3.2 | % | ||
Substance abuse facilities | 1.5 | % | ||
Community-based services | 27.2 | % | ||
Specialized educational services | 4.7 | % | ||
Other behavioral services | 0.5 | % |
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• | Health reform and the expansion of health insurance coverage may increase the number of patients seeking behavioral health services as payment issues are the primary reasons for people not seeking mental health and substance abuse treatment. | |
• | Expanded coverage should reduce uncollectible accounts receivable. | |
• | The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the “MHPAEA”) provides for equal coverage between psychiatric or mental health services and conventional medical health services and forbids employers and insurers from placing stricter limits on mental health care compared to other health conditions. | |
• | Expanded coverage has in turn increased awareness and acceptance of mental health and substance abuse diseases. | |
• | Mental health and substance abuse treatment in the United States is projected to grow from approximately $121 billion in 2003 to approximately $239 billion in 2014 at a compound annual growth rate of approximately 6.4%. | |
• | Approximately 6% of people in the United States suffer from a seriously debilitating mental illness and over 20% of children, either currently or at some point during their life, have had a seriously debilitating mental disorder. |
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Type of | ||||||||||||||
Acadia or | Facility or | Certificate | # of | |||||||||||
YFCS | Key | of Need | Licensed | |||||||||||
Facility | Facility | Services(1) | City | State | State? | Beds | Owned/Leased | |||||||
Vermillion | Acadia | IPF | Lafayette | LA | No | 56 | Leased | |||||||
Abilene | Acadia | IPF | Abilene | TX | No | 60 | Owned | |||||||
Riverwoods | Acadia | IPF | Riverdale | GA | Yes | 55 | Owned | |||||||
Montana | Acadia | RTC | Butte | MT | Yes | 68 | Owned | |||||||
The Village | Acadia | RTC | Louisville | TN | Yes | 145 | Leased | |||||||
Acadiana | Acadia | SAC | Lafayette | LA | No | 42 | Leased | |||||||
Casa Grande(2) | YFCS | RTC | Casa Grande | AZ | No | 32 | Owned | |||||||
Parc Place | YFCS | RTC, ES | Chandler | AZ | No | 87 | Owned | |||||||
Desert Hills | YFCS | AC, RTC, TFC, ES and CBS | Albuquerque | NM | No | 100 | Owned | |||||||
Lakeland | YFCS | AC, RTC and ES | Springfield | MO | Yes | 149 | Owned | |||||||
Milcreek-AR | YFCS | RTC, MR and ES | Fordyce | AR | Yes | 172 | Leased | |||||||
Ascent | YFCS | MBS, ES and CBS | Jonesboro | AR | Yes | N/A | Owned | |||||||
Milcreek-Pontotoc | YFCS | RTC, CBS and ES | Pontotoc | MS | Yes | 51 | Leased | |||||||
Milcreek-Magee | YFCS | RTC, MR, TGH, CBS and ES | Magee | MS | Yes | 205 | Leased | |||||||
PsychSolutions | YFCS | CBS | Miami | FL | Yes | N/A | Leased | |||||||
Southwood | YFCS | AC, RTC, ES and CBS | Pittsburgh | PA | No | 112 | Owned | |||||||
Options | YFCS | RTC, ES and GH | Indianapolis | IN | No | 98 | Leased | |||||||
Resource | YFCS | RTC, CBS and ES | Indianapolis | IN | No | 90 | Leased | |||||||
Resolute | YFCS | RTC, GH, ES and CBS | Indianapolis | IN | No | 86 | Leased |
(1) | The following definitions apply to the services listed in this column:“IPF” means inpatient psychiatric facility; “RTC” means residential treatment care; “AC” means acute care; “GH” means group home; “TGH” means therapeutic group home; “CBS” means community-based services; “ES” means specialized educational services; “TFC” means therapeutic foster care; “MR” means mentally retarded; “MBS” means medical and behavioral services; and “SAC” means substance abuse center. | |
(2) | Scheduled to re-open fourth quarter 2011. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Six Months Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||||||||
Revenue | $ | 82,961 | 100.0 | % | $ | 32,472 | 100.0 | % | $ | 64,342 | 100.0 | % | $ | 51,821 | 100.0 | % | $ | 33,353 | 100.0 | % | ||||||||||||||||||||
Salaries, wages and benefits | 70,538 | 85.0 | % | 18,374 | 56.6 | % | 36,333 | 56.5 | % | 30,752 | 59.3 | % | 22,342 | 67.0 | % | |||||||||||||||||||||||||
Professional fees | 3,130 | 3.8 | % | 1,240 | 3.8 | % | 3,612 | 5.6 | % | 1,977 | 3.8 | % | 952 | 2.9 | % | |||||||||||||||||||||||||
Supplies | 4,282 | 5.2 | % | 1,841 | 5.7 | % | 3,709 | 5.8 | % | 2,841 | 5.5 | % | 2,076 | 6.2 | % | |||||||||||||||||||||||||
Rents and leases | 2,062 | 2.5 | % | 636 | 2.0 | % | 1,288 | 2.0 | % | 885 | 1.7 | % | 852 | 2.6 | % | |||||||||||||||||||||||||
Other operating expenses | 8,110 | 9.8 | % | 4,046 | 12.5 | % | 8,289 | 12.9 | % | 8,390 | 16.2 | % | 5,400 | 16.2 | % | |||||||||||||||||||||||||
Provision for doubtful accounts | 1,002 | 1.2 | % | 1,186 | 3.7 | % | 2,239 | 3.5 | % | 2,424 | 4.7 | % | 1,804 | 5.4 | % | |||||||||||||||||||||||||
Depreciation and amortization | 1,001 | 1.2 | % | 480 | 1.5 | % | 976 | 1.5 | % | 967 | 1.9 | % | 740 | 2.2 | % | |||||||||||||||||||||||||
Interest expense | 2,215 | 2.7 | % | 358 | 1.1 | % | 738 | 1.1 | % | 774 | 1.5 | % | 729 | 2.2 | % | |||||||||||||||||||||||||
Sponsor management fees | 590 | 0.7 | % | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Transaction-related expenses | 8,362 | 10.1 | % | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
101,292 | 122.1 | % | 28,161 | 28,161 | % | 57,184 | 88.9 | % | 49,010 | 94.6 | % | 34,895 | 104.6 | % | ||||||||||||||||||||||||||
Income (loss) from continuing operations, before income taxes | (18,331 | ) | (22.1 | )% | 4,311 | 13.3 | % | 7,158 | 11.1 | % | 2,811 | 5.4 | % | (1,542 | ) | (4.6 | )% | |||||||||||||||||||||||
Provision for income taxes | 2,997 | 3.6 | % | 994 | 3.1 | % | 477 | 0.7 | % | 53 | 0.1 | % | 20 | 0.1 | % | |||||||||||||||||||||||||
Income (loss) from continuing operations | $ | (21,328 | ) | (25.7 | )% | $ | 3,317 | 10.2 | % | $ | 6,681 | 10.4 | % | $ | 2,758 | 5.3 | % | $ | (1,562 | ) | (4.7 | )% | ||||||||||||||||||
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• | the affirmative covenants include the following: (i) delivery of financial statements and other customary financial information; (ii) notices of events of default and other material events; (iii) maintenance of existence, ability to conduct business, properties, insurance and books and records; (iv) payment of taxes; (v) lender inspection rights; (vi) compliance with laws; (vii) use of proceeds; (viii) interest rate hedging; (ix) further assurances; and (x) additional collateral and guarantor requirements. |
• | the negative covenants include limitations on the following: (i) liens; (ii) debt (including guaranties); (iii) investments; (iv) fundamental changes (including mergers, consolidations and liquidations); (v) dispositions; (vi) sale leasebacks; (vii) affiliate transactions and the payment of management fees; (viii) burdensome agreements; (ix) restricted payments; (x) use of proceeds; (xi) ownership of subsidiaries; (xii) changes to line of business; (xiii) changes to organizational documents, legal name, form of entity and fiscal year; (xiv) capital expenditures (not to exceed 4.0% of total revenues of Acadia and its subsidiaries and including a 100% carry-forward of unused amounts to the immediately succeeding fiscal year); (xv) operations of Acadia (other than as a passive holding company); and (xvi) amendments to certain material agreements. Acadia is generally not permitted to issue dividends or distributions other than with respect to the following: (w) certain tax distributions; (x) the repurchase of equity held by employees, officers or directors upon the occurrence of death, disability or termination subject to cap of $500,000 in any fiscal year and compliance with certain other conditions; (y) in the form of capital stock; and (z) scheduled payments of deferred purchase price, working capital adjustments and similar payments pursuant to the merger agreement or any permitted acquisition. |
• | The financial covenants include maintenance of the following: |
Maximum Consolidated | ||||
Fiscal Quarter of the Parent | Leverage Ratio | |||
June 30, 2011 | 4.25:1.0 | |||
September 30, 2011 | 4.25:1.0 | |||
December 31, 2011 | 4.25:1.0 | |||
March 31, 2012 | 4.25:1.0 | |||
June 30, 2012 | 4.00:1.0 | |||
September 30, 2012 | 4.00:1.0 | |||
December 31, 2012 | 3.75:1.0 | |||
March 31, 2013 | 3.75:1.0 | |||
June 30, 2013 | 3.75:1.0 | |||
September 30, 2013 | 3.75:1.0 | |||
December 31, 2013 and each fiscal quarter ending thereafter | 3.00:1.0 |
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• | the aggregate principal amount of indebtedness incurred under the Bridge Facility, the Senior Notes and the Deficit Notes may not exceed $150 million (plus any accrued interest, fees and premiums in connection with refinancing the Bridge Facility with the Senior Notes); |
• | the Senior Notes must have a maturity 181 days beyond the maturity of the Senior Secured Credit Facility; |
• | the interest rate (including any OID) shall not exceed the interest rate cap for the Bridge Facility and Senior Notes (plus any default interest and up to 1.00% per annum of liquidated damages in the form of increased interest); | |
• | the Bridge Facility may only be subject to mandatory redemptions or prepayments (i) in connection with a change of control, (ii) with proceeds of equity, asset sale dispositions or indebtedness, in each case to the extent not required to prepay amounts owed under the Senior Secured Credit Facility and (iii) excess cash flow after repayment in full of all obligations under the Senior Secured Credit Facility (and any refinancings, renewals or restatements) and termination of any commitment thereunder; | |
• | the Senior Notes may only be subject to mandatory prepayments in connection with a change of control or as a result of an asset sale; | |
• | unless approved by the administrative agent, the indebtedness may not be subject to covenants or events of default that are materially more restrictive than covenants and events of default that are usual and customary for senior unsecured high yield notes giving due regard to prevailing conditions in the syndicated loan and financial markets and operational requirements of Acadia and its subsidiaries (it being understood and agreed that the covenants of the Bridge Facility will be incurrence based covenants based on those contained in the preliminary offering memorandum used to market customary senior unsecured high yield notes); | |
• | the indebtedness may not be subject to any scheduled principal payments (other than on the maturity date); and | |
• | delivery of certain financial covenant calculations. |
Pricing | Consolidated Senior Secured | Eurodollar Rate | Base Rate | Commitment | ||||||||||||
Tier | Leverage Ratio | Loans | Loans | Fee | ||||||||||||
1 | <2.75:1.0 | 3.50 | % | 2.50 | % | 0.45 | % | |||||||||
2 | ³2.75:1.0 but <3.25:1.0 | 3.75 | % | 2.75 | % | 0.50 | % | |||||||||
3 | ³3.25:1.0 but <3.75:1.0 | 4.00 | % | 3.00 | % | 0.50 | % | |||||||||
4 | ³3.75:1.0 but <5.00:1.0 | 4.25 | % | 3.25 | % | 0.55 | % | |||||||||
5 | ³5.00:1.0 | 4.50 | % | 3.50 | % | 0.55 | % |
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• | the completion of the merger on or prior to December 15, 2011; | |
• | consummation of the merger substantially in accordance with the terms of the merger agreement and other material acquisition agreements as in effect on the date of the Second Amendment; provided that if such material acquisition agreements have been amended, modified or supplemented, the administrative agent shall have consented to such amendment, modification or supplement to the extent such amendment, modification or supplement would be material and adverse to the lenders; | |
• | absence of an “Acadia Material Adverse Effect” or a “Phoenix Material Adverse Effect” each as defined in the merger agreement; | |
• | repayment of certain indebtedness, other than agreed upon indebtedness and incurrence of the Senior Notes or Bridge Facility; | |
• | receipt of agreed upon financial statements, projections and consents necessary to consummate the transaction contemplated by the merger agreement; | |
• | payment of fees and expenses required by the Second Amendment; | |
• | compliance with a 5.85:1.00 pro forma closing date total leverage ratio; | |
• | compliance with a $53.5 million pro forma closing date minimum EBITDA condition; | |
• | at least $20.0 million of availability under the revolving line of credit under the Senior Secured Credit Facility; and | |
• | other customary financing conditions more fully set forth in the Second Amendment, including without limitation the absence of a “Default” four business days prior to the closing date and an “Event of Default” on the date of closing (and after giving effect to the transaction) (each as defined in the credit agreement governing the Senior Secured Credit Facility). |
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• | consummation of the merger in accordance with the terms of the merger agreement as in effect on the date of the Debt Commitment Letter, which merger agreement, if amended, modified or supplemented must be with the consent of Jefferies Finance to the extent such amendment, modification or supplement would be material and adverse to the lenders; | |
• | repayment of certain indebtedness, other than agreed upon indebtedness (including the Senior Secured Credit Facility and the Deficit Notes); | |
• | receipt of agreed upon financial statements, projections and consents necessary to consummate the transactions contemplated by the merger agreement; | |
• | the absence of an Acadia Material Adverse Effect or a Phoenix Material Adverse Effect (each as defined in the merger agreement); | |
• | payment of fees and expenses required by the Debt Commitment Letter; | |
• | compliance by Acadia with the covenant contained in the Debt Commitment Letter which provides that prior to and during the syndication of the bridge facility, and subject to certain exceptions, there being no offer or sale of any debt facility, debt or preferred equity security by Acadia, PHC or any of subsidiaries; | |
• | compliance with a 5.85:1.00 pro forma closing date total leverage ratio; | |
• | compliance with a $53.5 million pro forma closing date minimum EBITDA condition; | |
• | the absence of any amendment modification or supplements to the Senior Secured Credit Facility unless approved by Jefferies Finance (such approval not to be unreasonably withheld, delayed or conditioned); | |
• | the amount of the loans funded under the Bridge Facility (together with any Senior Notes) is at least $150.0 million; | |
• | a 15 business day period prior to the completion of the merger to market the senior unsecured notes; and | |
• | other customary financing conditions more fully set forth in the Debt Commitment Letter. |
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Payments Due by Period | ||||||||||||||||||||
Within | During | During | After | |||||||||||||||||
1 Year | Years 2-3 | Years 4-5 | 5 Years | Total | ||||||||||||||||
Long-term debt | $ | 6,750 | $ | 22,781 | $ | 110,782 | $ | — | $ | 140,313 | ||||||||||
Operating leases | 6,395 | 8,463 | 3,140 | 1,531 | 19,509 | |||||||||||||||
Purchase and other obligations(a) | 2,112 | — | — | — | 2,112 | |||||||||||||||
Total obligations and commitments | $ | 15,237 | $ | 31,244 | $ | 113,922 | $ | 1,531 | $ | 161,934 | ||||||||||
(a) | Amounts relate to future purchase obligations, including commitments to purchase property and equipment or complete existing capital projects in future periods. |
Year Ended December 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2010 | 2009 | 2011 | 2010 | |||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||
Revenue | $ | 184,386 | 100.0 | % | $ | 186,586 | 100.0 | % | $ | 45,686 | 100.0 | % | $ | 45,489 | 100.0 | % | ||||||||||||||||
Salaries and benefits | 113,931 | 61.8 | % | 113,870 | 61.0 | % | 29,502 | 64.6 | % | 27,813 | 61.1 | % | ||||||||||||||||||||
Other operating expenses | 38,146 | 20.7 | % | 37,607 | 20.2 | % | 9,907 | 21.7 | % | 8,944 | 19.7 | % | ||||||||||||||||||||
Provision for bad debts | 525 | 0.3 | % | (309 | ) | (0.2 | )% | 208 | 0.5 | % | 56 | 0.1 | % | |||||||||||||||||||
Interest | 7,514 | 4.1 | % | 9,572 | 5.1 | % | 1,726 | 3.8 | % | 1,954 | 4.3 | % | ||||||||||||||||||||
Depreciation and amortization | 3,456 | 1.9 | % | 7,052 | 3.8 | % | 819 | 1.8 | % | 914 | 2.0 | % | ||||||||||||||||||||
Impairment of goodwill | 23,528 | 12.8 | % | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | ||||||||||||||||||||
Total expenses | 187,100 | 101.5 | % | 167,792 | 89.9 | % | 42,162 | 92.3 | % | 39,681 | 87.2 | % | ||||||||||||||||||||
Income from continuing operations, before income taxes | (2,714 | ) | (1.5 | )% | 18,794 | 10.1 | % | 3,524 | 7.7 | % | 5,808 | 12.8 | % | |||||||||||||||||||
Income taxes | 5,032 | 2.7 | % | 7,133 | 3.8 | % | 1,404 | 3.1 | % | 2,267 | 5.0 | % | ||||||||||||||||||||
Income from continuing operations | $ | (7,746 | ) | (4.2 | )% | $ | 11,661 | 6.2 | % | $ | 2,120 | 4.6 | % | $ | 3,541 | 7.8 | % | |||||||||||||||
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Six Months Ended | Year Ended | |||||||||||||||
June 30, 2011* | December 31, 2010 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Private Pay | 2,481 | 1.9% | 1,969 | 3.1% | ||||||||||||
Commercial | 13,106 | 10.2% | 22,024 | 34.2% | ||||||||||||
Medicare | 7,197 | 5.6% | 13,061 | 20.3% | ||||||||||||
Medicaid | 105,863 | 82.3% | 27,288 | 42.4% | ||||||||||||
Total | 128,647 | 64,342 | ||||||||||||||
* | Revenues for the six months ended June 30, 2011 are combined with pre-acquisition YFCS revenues on a pro-forma basis to illustrate current expected payor mix. |
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Current | 30-60 | 60-90 | 90-120 | 120-150 | >150 | Total | ||||||||||||||||||||||
Private Pay | $ | 90 | $ | 72 | $ | 73 | $ | 76 | $ | 1 | $ | 54 | $ | 366 | ||||||||||||||
Commercial | 918 | 496 | 142 | 126 | 46 | 15 | 1,744 | |||||||||||||||||||||
Medicare | 867 | 67 | 55 | 11 | 9 | 23 | 1,033 | |||||||||||||||||||||
Medicaid | 1,608 | 503 | 111 | 40 | 17 | 48 | 2,327 | |||||||||||||||||||||
Total | $ | 3,484 | $ | 1,138 | $ | 381 | $ | 252 | $ | 74 | $ | 140 | $ | 5,469 | ||||||||||||||
Current | 30-60 | 60-90 | 90-120 | 120-150 | >150 | Total | ||||||||||||||||||||||
Private Pay | $ | 65 | $ | 81 | $ | 17 | $ | 39 | $ | 21 | $ | 3 | $ | 228 | ||||||||||||||
Commercial | 1,875 | 375 | 309 | 100 | 30 | 70 | 2,758 | |||||||||||||||||||||
Medicare | 1,350 | 70 | 33 | 25 | 16 | 18 | 1,513 | |||||||||||||||||||||
Medicaid | 14,754 | 1,332 | 1,024 | 485 | 285 | 180 | 18,062 | |||||||||||||||||||||
Total | $ | 18,044 | $ | 1,859 | $ | 1,384 | $ | 650 | $ | 352 | $ | 271 | $ | 22,560 | ||||||||||||||
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Amount and Nature | ||||||||
of Beneficial | Percent of | |||||||
Name and Address of Beneficial Owner | Ownership | Class(1) | ||||||
Waud Capital Partners 300 North LaSalle Street, Suite 4900 Chicago, IL 60654(2) | 8,035,310 | 80.4 | % | |||||
Joey A. Jacobs(3) | 756,037 | 7.6 | % |
Amount and Nature | ||||||||
of Beneficial | ||||||||
Name of Beneficial Owner | Ownership | Percent of Class(1) | ||||||
Joey A. Jacobs(3) | 756,037 | 7.6 | % | |||||
Trey Carter(4) | 178,224 | 1.8 | % | |||||
Reeve B. Waud(2) | 8,035,310 | 80.4 | % | |||||
Charles E. Edwards(2) | — | 0 | % | |||||
Matthew A. London(2) | — | 0 | % | |||||
Gary A. Mecklenburg(2) | 3,361 | * | ||||||
All Directors and Named Executive Officers as a Group | 8,972,932 | 89.8 | % |
* | Represents negligible amount |
(1) | Based on 10,000,000 shares of Acadia common stock outstanding as of August 18, 2011. |
(2) | The reported shares of Acadia common stock are owned of record as follows: (i) 1,499,237 shares by Waud Capital Partners II, L.P. (“WCP II”), (ii) 2,740,843 shares by Waud Capital Partners QP II, L.P. (“Waud QP II”), (iii) 477,039 shares by the Reeve B. Waud 2011 Family Trust, (iv) 53,004 shares by Waud Family Partners, L.P. (“WFP LP”), (v) 418,301 shares by WCP FIF II (Acadia), L.P. (“WCP FIF II”), (vi) 428,412 shares by Waud Capital Affiliates II, L.L.C. (“Waud Affiliates II”), (vii) 219,861 shares by Waud Capital Affiliates III, L.L.C. (“Waud Affiliates III”), (viii) 597,204 shares by WCP FIF III (Acadia), L.P. (“WCP FIF III”), (ix) 1,360,771 shares by Waud Capital Partners QP III, L.P. (“Waud QP III”) and (x) 240,638 shares by Waud Capital Partners III, L.P. (“WCP III”). Waud Capital Partners Management II, L.P. (“WCPM II”), as the general partner of WCP II, Waud QP II, WCP FIF II and the Manager of Waud Affiliates II and Waud Capital Partners II, L.L.C. (“Waud II LLC”), as the general partner of WCPM III, may be deemed to share beneficial ownership of the shares held of record by such entities. Waud Capital Partners Management III, L.P. (“WCPM III”), as the general partner of WCP FIF III, Waud QP III and WCP III and the Manager of Waud Affiliates III, and Waud Capital Partners III, L.L.C. (“Waud III LLC”), as the general partner of WCPM III, may be deemed to share beneficial ownership of the shares held of record by such entities. Reeve Waud may be deemed to |
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beneficially own the units held by each of the above entities by virtue of his (A) making decisions for the Limited Partner Committee of each of WCPM II and WCPM III, (B) being the manager of Waud II LLC and Waud III LLC and WFP LP and (iii) being the investment advisor of the Reeve B. Waud 2011 Family Trust. The address for Messrs. Edwards, London and Mecklenburg is c/o Waud Capital Partners, LLC, 300 North LaSalle Street, Suite 4900, Chicago, IL 60654. | ||
(3) | The reported shares of Acadia common stock are owned of record by the Joey A. Jacobs 2011 Grantor Retained Annuity Trust (Acadia). The address for Mr. Jacobs is c/o Acadia Healthcare Company, Inc., 830 Crescent Centre Drive, Suite 610, Franklin, TN 37067. | |
(4) | The address for Mr. Carter is c/o Acadia Healthcare Company, Inc., 830 Crescent Centre Drive, Suite 610, Franklin, TN 37067. |
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Year Ended June 30, | ||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Inpatient | ||||||||||||||||||||
Net patient service revenues | $ | 36,693,784 | $ | 29,743,377 | $ | 23,634,602 | $ | 22,327,159 | $ | 21,508,417 | ||||||||||
Net revenues per patient day(1) | $ | 542 | $ | 477 | $ | 438 | $ | 383 | $ | 395 | ||||||||||
Average occupancy rate(2) | 78.7 | % | 75.7 | % | 69.7 | % | 85.0 | % | 83.0 | % | ||||||||||
Total number of licensed beds at the end of the period | 285 | 260 | 260 | 244 | 180 | |||||||||||||||
Source of Revenues: | ||||||||||||||||||||
Private(3) | 59.0 | % | 56.2 | % | 54.9 | % | 48.2 | % | 50.2 | % | ||||||||||
Government(4) | 41.0 | % | 43.8 | % | 45.1 | % | 51.8 | % | 49.8 | % | ||||||||||
Partial Hospitalization and Outpatient | ||||||||||||||||||||
Net Revenues: | ||||||||||||||||||||
Individual | $ | 8,792,896 | $ | 7,325,916 | $ | 5,800,090 | $ | 6,603,002 | $ | 6,518,115 | ||||||||||
Contract | $ | 12,009,055 | $ | 12,578,102 | $ | 13,165,271 | $ | 11,925,916 | $ | 7,995,997 | ||||||||||
Sources of revenues: | ||||||||||||||||||||
Private | 98.6 | % | 98.9 | % | 99.1 | % | 99.1 | % | 98.6 | % | ||||||||||
Government | 1.4 | % | 1.1 | % | 0.9 | % | 0.9 | % | 1.4 | % | ||||||||||
Other Services: | ||||||||||||||||||||
Contract Services (Wellplace)(5) | $ | 4,512,144 | $ | 3,429,831 | $ | 3,811,056 | $ | 4,541,260 | $ | 4,540,634 |
(1) | Net revenues per patient day equals net patient service revenuesdivided bytotal patient days excluding bed days provided by the Seven Hills subsidiary under the Harmony capitated contract. | |
(2) | Average occupancy rates were obtained by dividing the total number of patient days in each period including capitated contract bed days by the number of beds available in such period. |
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(3) | Private pay percentage is the percentage of total patient revenue derived from all payors other than Medicare and Medicaid and county programs. | |
(4) | Government pay percentage is the percentage of total patient revenue derived from the Medicare and Medicaid and county programs. | |
(5) | Wellplace provides contract support services including clinical support, referrals management and professional services for a number of PHC’s national contracts and operates the Wayne County Michigan call center. |
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Treatment | Contract | |||||||
Twelve Months Ended | Services | Services | ||||||
06/30/2011 | 61 | 69 | ||||||
06/30/2010 | 61 | 53 |
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Net Revenue by Payor | ||||||||||||||||
For the Twelve Months Ended June 30 | ||||||||||||||||
2011 | 2010 | |||||||||||||||
$ | % | $ | % | |||||||||||||
(In thousands) | ||||||||||||||||
Private Pay | $ | 4,881 | 8 | $ | 3,495 | 7 | ||||||||||
Commercial | 37,288 | 65 | 32,915 | 66 | ||||||||||||
Medicare* | 6,188 | 11 | 3,237 | 7 | ||||||||||||
Medicaid | 9,139 | 16 | 10,000 | 20 | ||||||||||||
Net Revenue | $ | 57,496 | $ | 49,647 | ||||||||||||
* | Includes Medicare settlement revenue as noted above. |
Payor | Current | Over 30 | Over 60 | Over 90 | Over 120 | Over 150 | Over 270 | Over 360 | Total | |||||||||||||||||||||||||||
Private Pay | $ | 136 | $ | 248 | $ | 248 | $ | 190 | $ | 153 | $ | 361 | $ | 2 | $ | 22 | $ | 1,360 | ||||||||||||||||||
Commercial | 3,540 | 1,043 | 440 | 312 | 159 | 261 | — | 9 | 5,764 | |||||||||||||||||||||||||||
Medicare | 582 | 116 | 64 | 153 | 115 | 83 | — | — | 1,113 | |||||||||||||||||||||||||||
Medicaid | 1,747 | 204 | 112 | 153 | 55 | 58 | 1 | 4 | 2,334 | |||||||||||||||||||||||||||
Total | $ | 6,005 | $ | 1,611 | $ | 864 | $ | 808 | $ | 482 | $ | 763 | $ | 3 | $ | 35 | $ | 10,571 | ||||||||||||||||||
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Payor | Current | Over 30 | Over 60 | Over 90 | Over 120 | Over 150 | Over 270 | Over 360 | Payor | |||||||||||||||||||||||||||
Private Pay | $ | — | $ | 62 | $ | 45 | $ | 50 | $ | 60 | $ | 137 | $ | 13 | $ | 151 | $ | 518 | ||||||||||||||||||
Commercial | 3,074 | 795 | 529 | 364 | 285 | 374 | 27 | 52 | 5,500 | |||||||||||||||||||||||||||
Medicare | 349 | 82 | 19 | 4 | 7 | 23 | — | — | 484 | |||||||||||||||||||||||||||
Medicaid | 1,537 | 145 | 46 | 57 | 35 | 20 | 5 | 4 | 1,849 | |||||||||||||||||||||||||||
Total | $ | 4,960 | $ | 1,084 | $ | 639 | $ | 475 | $ | 387 | $ | 554 | $ | 45 | $ | 207 | $ | 8,351 | ||||||||||||||||||
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2011 | 2010 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
($ in thousands) | ||||||||||||||||
Statements of Operations Data: | ||||||||||||||||
Revenues | $ | 62,008 | 100.0 | $ | 53,077 | 100.0 | ||||||||||
Cost and Expenses: | ||||||||||||||||
Patient care expenses | 30,235 | 48.8 | 26,307 | 49.5 | ||||||||||||
Contract expenses | 3,618 | 5.8 | 2,965 | 5.6 | ||||||||||||
Provision for doubtful accounts | 3,406 | 5.5 | 2,131 | 4.0 | ||||||||||||
Administrative expenses | 22,206 | 35.8 | 19,111 | 36.0 | ||||||||||||
Legal settlement | 446 | 0.7 | — | — | ||||||||||||
Interest expense | 311 | 0.5 | 326 | 0.6 | ||||||||||||
Other income including interest income, net | (202 | ) | (0.3 | ) | (289 | ) | (0.5 | ) | ||||||||
Total expenses | 60,020 | 96.8 | 50,551 | 95.2 | ||||||||||||
Income before income taxes | 1,988 | 3.2 | 2,526 | 4.8 | ||||||||||||
Provision for income taxes | 1,408 | 2.3 | 1,106 | 2.1 | ||||||||||||
Net income applicable to common shareholders | $ | 580 | 0.9 | $ | 1,420 | 2.7 | ||||||||||
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Year Ending | Term Notes | Capital Leases | Operating | |||||||||||||||||||||
June 30, | Principal | Interest | Principal | Interest | Leases | Total* | ||||||||||||||||||
2012 | $ | 348 | $ | 8 | $ | 20 | $ | — | $ | 3,481 | $ | 3,857 | ||||||||||||
2013 | 57 | 3 | — | — | 3,067 | 3,127 | ||||||||||||||||||
2014 | — | — | — | — | 2,832 | 2,832 | ||||||||||||||||||
2015 | — | — | — | — | 2,533 | 2,533 | ||||||||||||||||||
2016 | — | — | — | — | 2,379 | 2,379 | ||||||||||||||||||
Thereafter | — | — | — | — | 5,279 | 5,279 | ||||||||||||||||||
Total | $ | 405 | $ | 11 | $ | 20 | $ | — | $ | 19,571 | $ | 20,007 | ||||||||||||
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* | Total does not include the amount due under the revolving credit note of $1,814,877. This amount represents amounts advanced on the accounts receivable funding described below and is shown as a current note payable in the accompanying financial statements. |
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Amount and Nature | ||||||||
of Beneficial | ||||||||
Name and Address of Beneficial Owner | Ownership(11) | Percent of Class | ||||||
Marathon Capital Mgmt, LLC | 2,022,700 | 10.4 | % | |||||
4 North Park Drive, Suite 106 Hunt Valley, MD 21030 | ||||||||
Camden Partners Capital Management LLC | 1,365,428 | 6.9 | % | |||||
500 East Pratt Street, Suite 1200 Baltimore, MD 21202 | ||||||||
RENN Capital Group | 1,483,900 | 7.6 | % | |||||
8080 N. Central Expy, Suite 210 LB 59 Dallas, TX 75206 |
Amount and Nature | ||||||||
of Beneficial | ||||||||
Name of Beneficial Owner | Ownership(12) | Percent of Class | ||||||
Class A Common Stock | ||||||||
Bruce A. Shear | 764,755 | (1) | 4.0 | % | ||||
Robert H. Boswell | 276,682 | (2) | 1.5 | % | ||||
Paula C. Wurts | 225,816 | (3) | 1.2 | % | ||||
Howard W. Phillips | 243,750 | (4) | 1.3 | % | ||||
Donald E. Robar | 229,167 | (5) | 1.2 | % | ||||
William F. Grieco | 324,500 | (6) | 1.7 | % | ||||
David E. Dangerfield | 144,940 | (7) | * | |||||
Douglas J. Smith | 5,000 | (8) | * | |||||
All Directors and Officers as a Group (8 persons) | 2,214,610 | (9) | 11.3 | % | ||||
Class B Common Stock (10) | ||||||||
Bruce A. Shear | 721,259 | 93.2 | % | |||||
All Directors and Officers as a Group (8 persons) | 721,259 | 93.2 | % |
(1) | Includes 150,000 shares of Class A Common Stock issuable pursuant to currently exercisable stock options, having an exercise price range of $1.08 to $2.95 per share. | |
(2) | Includes 70,000 shares of Class A Common Stock issuable pursuant to currently exercisable stock options at an exercise price range of $1.08 to $2.95 per share. | |
(3) | Includes 70,000 shares of Class A Common Stock issuable pursuant to currently exercisable stock options, having an exercise price range of $1.08 to $2.95 per share. | |
(4) | Includes 90,000 shares of Class A Common Stock issuable pursuant to currently exercisable stock options having an exercise price range of $1.08 to $3.18 per share. | |
(5) | Includes 125,000 shares of Class A Common Stock issuable pursuant to currently exercisable stock options having an exercise price range of $1.08 to $3.18 per share. | |
(6) | Includes 162,500 shares of Class A Common Stock issuable pursuant to currently exercisable stock options, having an exercise price range of $.55 to $3.18 per share. | |
(7) | Includes 115,000 shares of Class A Common Stock issuable pursuant to currently exercisable stock options, having an exercise price range of $1.08 to $3.18 per share. |
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(8) | Includes 5,000 shares of Class A Common Stock issuable pursuant to currently exercisable stock options, having an exercise price of $1.65 per share. | |
(9) | Includes an aggregate of 787,500 shares of Class A Common Stock issuable pursuant to currently exercisable stock options. Of those options, 80,000 have an exercise price of $3.18 per share, 30,000 have an exercise price of $2.95 per share, 40,000 have an exercise price of $2.90 per share, 80,000 have an exercise price of $2.84 per share, 30,000 have an exercise price of $2.83 per share, 40,000 have an exercise price of $2.75 per share, 60,000 have an exercise price of $2.11 per share, 30,000 have an exercise price of $2.06 per share, 25,000 have an exercise price of $1.65 per share, 60,000 have an exercise price of $1.50 per share, 30,000 have an exercise price of $1.48 per share, 20,000 have an exercise price of $1.33 per share, 80,000 have an exercise price of $1.25 per share, 60,000 have an exercise price of $1.20 per share, 85,000 have an exercise price of $1.08 per share, 10,000 have an exercise price of $.75 per share, 10,000 have an exercise price of $0.74 per share and 17,500 have an exercise price of $0.55 per share. | |
(10) | Each share of Class B Common Stock is convertible into one share of Class A Common Stock automatically upon any sale or transfer or at any time at the option of the holder. | |
(11) | “Amount and Nature of Beneficial Ownership”. Each share of Class A Common Stock is entitled to one vote per share and each share of Class B Common Stock is entitled to five votes per share on all matters on which stockholders may vote (except that the holders of the Class A Common Stock are entitled to elect two members of the PHC board of directors and holders of the Class B Common Stock are entitled to elect all the remaining members of the PHC board of directors). |
Bruce A. Shear | 19.19 | % | ||
All Directors and Officers as a Group (8 persons) | 24.85 | % |
Related Party | Amount | |||
Eric E. Shear | $ | 200,000 | ||
Stephen J. Shear | 75,000 |
Related Party | Number of Shares | Amount | ||||||
Camden Partners Limited Partnership, Camden Partners II Limited Partnership and Camden Partners Capital Management, LLC | 146,024 | $ | 235,099 | |||||
First Quadrant Mercury, L.P. | 53,976 | $ | 86,901 | |||||
Total | 200,000 | 322,000 | ||||||
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• | each person or group who is expected to own beneficially more than 5% of Acadia’s outstanding common stock (after giving effect to the merger); | |
• | each person who is expected to be an executive officer following the merger; |
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• | each person who is expected to be a director following the merger; and | |
• | all of our executive officers and directors as a group following the merger. |
Percentage of | ||||||
Shares | ||||||
Shares | Beneficially | |||||
Beneficially | Owned after | |||||
Name | Owned | the Merger | ||||
5% Stockholders: | ||||||
Waud Capital Partners(1) | 14,203,294 | 78.3% | ||||
300 North LaSalle Street, Suite 4900 Chicago, IL 60654(1) | ||||||
Joey A. Jacobs(2) | 1,395,406 | (2) | 6.2% | |||
Executive Officers and Directors: | ||||||
Joey A. Jacobs(2) | 1,395,406 | (2) | 6.2% | |||
Bruce A. Shear(3)(5) | 344,028 | (3) | 1.7% | |||
Brent Turner(6) | 355,170 | 1.6% | ||||
Trey Carter(7) | 315,030 | 1.4% | ||||
Ron Fincher(7) | 300,494 | 1.3% | ||||
Jack E. Polson(7) | 295,868 | 1.3% | ||||
Chris Howard(7) | 295,868 | 1.3% | ||||
Reeve B. Waud(1) | 14,203,294 | 78.3% | ||||
Charles E. Edwards(1) | — | 0% | ||||
Matthew A. London(1) | — | 0% | ||||
Gary A. Mecklenburg(1) | 5,941 | * | ||||
William F. Grieco(4)(5) | 40,500 | * | ||||
All executive officers and directors as a group (12 persons) | 17,551,599 | 93.1% |
* | Represents beneficial ownership of less than 1% of our outstanding common stock. |
(1) | The reported shares of Acadia common stock are owned of record as follows: (i) 2,650,066 shares by WCP II, (ii) 4,844,741 shares by Waud QP II, (iii) 843,220 shares by the Reeve B. Waud 2011 Family Trust, (iv) 93,691 shares by WFP LP, (v) 739,392 shares by WCP FIF II, (vi) 757,265 shares by Waud Affiliates II, (vii) 388,629 shares by Waud Affiliates III (viii) 1,055,623 shares by WCP FIF III, (ix) 2,405,313 shares by Waud QP III and (x) 425,354 shares by WCP III. WCPM II as the general partner of WCP II, Waud QP II, WCP FIF II and the Manager of Waud Affiliates II and Waud II LLC, as the general partner of WCPM III, may be deemed to share |
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beneficial ownership of the shares held of record by such entities. WCPM III, as the general partner of WCP FIF III, Waud QP III and WCP III and the Manager of Waud Affiliates III, and Waud III LLC, as the general partner of WCPM III, may be deemed to share beneficial ownership of the shares held of record by such entities. Reeve Waud may be deemed to beneficially own the shares of common stock held by each of the above entities by virtue of his (A) making decisions for the Limited Partner Committee of each of WCPM II and WCPM III, (B) being the manager of Waud II LLC and Waud III LLC and WFP LP and (iii) being the investment advisor of the Reeve B. Waud 2011 Family Trust. The address for Messrs. Edwards, London and Mecklenburg is c/o Waud Capital Partners, LLC, 300 North LaSalle Street, Suite 4900, Chicago, IL 60654. As described under “Stockholders Agreement”, in connection with the merger, Waud Capital Partners and certain of its affiliates will enter into a stockholders agreement with Acadia’s and certain members of Acadia’s management. The members of Acadia’s management party to the Stockholders Agreement will grant Waud Capital Partners II, L.P. a proxy to vote their shares in connection with the election and removal of directors and certain other matters in the manner directed by the holders of a majority of the stock held by Waud Capital Partners. As a result of the foregoing, Waud Capital Partners and Mr. Waud may be deemed to share beneficial ownership of the 17,676,101 shares held by the members of Acadia’s management that have granted Waud Capital Partners a proxy pursuant to the Stockholders Agreement. |
(2) | The reported shares of Acadia common stock are owned of record by the Joey A. Jacobs 2011 Grantor Retained Annuity Trust (Acadia). Includes 1,336,378 shares of Acadia common stock that would have been held by Mr. Jacobs as of August 18, 2011 assuming the dissolution of Acadia Holdings. The remaining 59,028 shares represent shares of Acadia common stock issuable to the Joey A. Jacobs 2011 Grantor Retained Annuity Trust (Acadia) (the “Jacobs Trust”) in connection with the merger in exchange for 236,115 shares of PHC Class A Common Stock held by the Jacobs Trust as of August 18, 2011. The address for Mr. Jacobs is c/o Acadia Healthcare Company, Inc., 830 Crescent Centre Drive, Suite 610, Franklin, TN 37067. |
(3) | Represents 614,755 shares of PHC Class A Common Stock and 721,357 of PHC Class B Common Stock held by Mr. Shear as of August 18, 2011, which will be exchangeable into shares of Acadia common stock in connection with the merger. This amount also includes 150,000 shares of PHC Class A Common Stock issuable pursuant to currently exercisable stock options, having an exercise price range of $1.08 to $2.95 per share. |
(4) | Represents 162,000 shares of PHC Class A Common Stock held by Mr. Grieco as of August 18, 2011, which will be exchangeable into shares of Acadia common stock in connection with the merger. This amount also includes 162,500 shares of Class A Common Stock issuable pursuant to currently exercisable stock options, having an exercise price range of $0.55 to $3.18 per share. |
(5) | The address for Messrs. Shear and Grieco is c/o PHC, Inc., 200 Lake Street, Suite 102, Peabody, MA 01960. |
(6) | The reported shares of Acadia common stock are owned of record by the William Brent Turner 2011 Grantor Retained Annuity Trust. The address for Mr. Turner isc/o Acadia Healthcare Company, Inc., 830 Crescent Centre Drive, Suite 610, Franklin, TN 37067. |
(7) | The address for Messrs. Carter, Fincher, Polson and Howard isc/o Acadia Healthcare Company, Inc., 830 Crescent Centre Drive, Suite 610, Franklin, TN 37067. |
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Authorized Shares | ||
Acadia is authorized to issue 90,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per. | PHC is authorized to issue 20,000,000 shares of Class A Common Stock, par value $0.01 per share, 2,000,000 shares of Class B Common Stock, par value $0.01 per share, 200,000 shares of Class C Common Stock, par value $0.01 per share and 1,000,000 shares of preferred stock, par value $0.01 per share. | |
Board Authority to Issue Capital Stock | ||
The board of directors is authorized, without stockholder approval, to issue shares of common stock. The board of directors is also authorized, without stockholder approval, to create and issue preferred stock in one or more new series and to determine the preferences, voting powers, qualifications, and special or relative rights or privileges of any such series. | The board of directors is authorized, without stockholder approval, to issue shares of its authorized common or preferred stock for such purposes, in such amounts, to such persons, for such consideration, and in the case of preferred stock, in one or more series or classes, all as the board of directors in its discretion may determine. | |
Dividends | ||
Dividends may be declared by the board of directors upon shares of capital stock of Acadia in accordance with applicable law and subject to the right of any preferred stock then outstanding. Such dividends may be payable in cash, in property or in shares of capital stock of Acadia. Before payment of any dividend, there may be set aside out of any funds of Acadia available for dividends such sum or sums as the board of directors from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of Acadia or for such other purpose as the board of directors may think conducive to the interests of Acadia. The board of directors may modify or abolish any such reserves in the manner in which they were created. | Under PHC’s articles of organization, when, as, and if dividends are declared by the board of directors on the Common Stock, whether payable in cash, in property, or in securities of the corporation, the holders of Common Stock shall be entitled to share equally in and to receive, in accordance with the number of shares of Common Stock held by each such holder, all such dividends, except that if dividends are declared that are payable in Common Stock, such stock dividends shall be payable at the same rate on each class of Common Stock and shall be payable only in shares of Class A Common Stock to holders of Class A Common Stock and only in shares of Class B Common Stock to holders of Class B Common Stock. | |
Liquidation | ||
The DGCL provides that upon the dissolution or liquidation of Acadia, whether voluntary or involuntary, holders of common stock will be entitled to share ratably, and receive equal and substantially identical distributions of, all assets of the Acadia available for distribution to its stockholders, subject to any preferential or other rights of any then outstanding preferred stock. | Under PHC’s articles of organization, if the corporation is liquidated, dissolved or wound up, whether voluntarily or involuntarily, after there shall have been paid or set aside for the holders of all shares of the preferred stock then outstanding the full preferential amounts to which they may be entitled, if any, under the resolutions authorizing the issuance of such preferred stock, the net assets of the corporation remaining thereafter shall be distributed equally to each share of Class A Common Stock and Class B Common Stock. |
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STOCKHOLDERS | ||
Voting Rights | ||
Acadia’s certificate of incorporation and bylaws provide that, except as otherwise provided by the DGCL, the certificate of incorporation and bylaws, and the certificate of designation relating to any outstanding class or series of preferred stock, every stockholder shall at every meeting of the stockholders of Acadia be entitled to one vote in person or by proxy for each share of capital stock held by such stockholder. When holders of a majority of the voting power of all outstanding shares of capital stock of Acadia entitled to vote is present in person or represented by proxy, the affirmative vote of the majority of voting power of capital stock of Acadia present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of its stockholders, unless by express provisions of an applicable law, the rules of any stock exchange upon which the Acadia’s securities are listed, or other voting thresholds for certain actions as specifically set forth in the certificate of incorporation, in which case such express provision shall govern and control the decision of such question. | PHC’s articles of organization provide that the corporation shall have a board of directors with not less than five members, of which two shall be elected by the holders of Class A Common Stock voting as a class and the remainder shall be elected by the holders of Class B Common Stock voting as a class. | |
The stockholders agreement to be entered into among Acadia and the stockholders named therein in connection with the closing of the merger will provide that so long as the WCP Investors (as defined therein) retain voting control over at least 50% of the outstanding voting securities of Acadia, the WCP Investors will have the right to designate seven representatives to the board of directors, four of which will be designated as Class I directors and three of which will be designated as Class II directors. From and after the date on which the WCP Investors cease to have voting control over at least 50% of the outstanding voting securities of Acadia and for so long as the WCP Investors hold at least 17.5% of the outstanding voting securities of Acadia, the WCP Investors will have the right to designate at least such number of directors to the board of directors that, when compared to the authorized number of directors on the board of directors, is not less than proportional to the total number of shares of common stock and other equity securities of Acadia and its subsidiaries over which the WCP Investors retain voting control relative to the total number of shares of common stock and other equity securities of Acadia and its subsidiaries then issued and outstanding. | ||
From and after such time as the WCP Investors cease to hold at least 17.5% of the outstanding voting securities of Acadia, the WCP Investors will |
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have no right to designate any representative to the board of directors. Notwithstanding the foregoing, the stockholders agreement will provide that no reduction in the number of shares of common stock and other equity securities of Acadia and its subsidiaries over which the WCP Investors retain voting control will shorten the term of any incumbent director on the board of directors. | ||
Voting Rights in Extraordinary Transactions | ||
The DGCL requires approval of a consolidation, merger, dissolution or sale, lease or exchange of all or substantially all of the assets of Acadia by the affirmative vote of a majority of all votes entitled to be cast on the matter. Approval by a surviving corporation’s stockholders of a plan of merger is not required if: (1) the agreement of merger does not amend in any respect the certificate of incorporation; (2) each share of stock of such constituent corporation outstanding immediately prior to the effective date of the merger is to be an identical outstanding or treasury share of the surviving corporation after the effective date of the merger; and (3) the number of shares of common stock to be issued in connection with the merger does not exceed 20% of the shares of common stock of the corporation outstanding prior to the merger. | Pursuant to the MBCA, a plan of merger or share exchange requires adoption by the board of directors and the affirmative vote of two-thirds of all the shares entitled to vote generally on the matter. Additionally, in certain cases, the plan of merger or share exchange may require the affirmative vote of two-thirds of all of the shares of a class or series of shares voting as a separate voting group. Approval by a corporation’s stockholders of a plan of merger or share exchange is not required if: (1) the corporation will survive the merger or is the acquiring corporation in a share exchange; (2) its articles of organization will not be changed except for amendments by the board of directors that do not require stockholder approval; (3) each stockholder of the corporation whose shares were outstanding immediately before the effective date of the merger or share exchange will hold the same number of shares, with identical preferences, limitations, and relative rights, immediately after the effective date of the merger or share exchange; (4) the number of shares to be issued in connection with the merger does not exceed 20% of the shares of the corporation of the same class or series outstanding prior to the merger; and (5) a domestic parent corporation that owns at least 90% of the voting power of the outstanding shares entitled to vote on the matter of a subsidiary merges with such subsidiary. | |
Amendment to Charter | ||
The DGCL provides that in order to amend the certificate of incorporation, the board of directors must adopt a resolution that then must be approved by the affirmative vote of a majority of the voting power of the outstanding stock entitled to vote thereon, unless a greater vote is specified in the certificate of incorporation, and subject to any additional vote required by any series of preferred stock. Acadia’s amended and restated certificate of incorporation will provide that the articles relating to the following topics may only be amended, altered, changed or repealed by the affirmative vote of the holders of at least a | Under the MBCA, most amendments to a corporation’s articles of organization require approval of the board of directors and the affirmative vote of two-thirds of all the shares entitled to vote generally. Additionally, in certain cases, an amendment to the corporation’s articles of organization may require the affirmative vote of two-thirds of all of the shares of a class or series of shares voting as a separate voting group. Amendments to a corporation’s articles of organization may be made with the approval of a majority of the corporation’s outstanding shares in connection with (1) an increase or reduction in the | |
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majority of the voting power of all of Acadia’s outstanding shares of capital stock entitled to vote generally in the election of directors, other than shares of any “Interested Stockholder” (as defined in Acadia’s amended and restated certificate of incorporation: Board of Directors (Article Six); Limitation of Director Liability (Article Seven); Limitations on Written Consent/Special Meetings (Article Eight); Business Combinations (Article Ten); Poison Pill (Article Eleven); Amendments (Article Twelve); Forum Selection (Article Thirteen); and Severability (Article Fourteen). Acadia’s amended and restated certificate of incorporation will also provide that Article Nine, which deals with corporate opportunity, may only be amended, altered or repealed by a vote of 80% of the voting power of all of Acadia’s shares of common stock then outstanding, voting together as a single class. See “Description of Acadia Capital Stock — Corporate Opportunity.” | corporation’s capital stock of any class or series then authorized, (2) a change in the corporation’s authorized shares into a different number of shares or the exchange thereof pro rata for a different number of shares of the same class or series or (3) a change of the corporation’s name. | |
Amendment to Bylaws | ||
Under the DGCL, holders of a majority of the voting power of a corporation and, when provided in the certificate of incorporation, the directors of the corporation, have the power to adopt, amend and repeal the bylaws of a corporation. Acadia’s certificate of incorporation authorizes the board of directors to amend Acadia’s bylaws. | Pursuant to the MBCA, the power to make, amend or repeal bylaws shall be vested in the stockholders, unless the board of directors is otherwise authorized to do so pursuant to the articles of organization. PHC’s articles of organization and bylaws provide that the bylaws may be altered, amended or repealed by the board of directors, except with respect to any provision which by law, by the articles of organization or by the bylaws themselves requires action by the stockholders. | |
Special Meeting of Stockholders | ||
Delaware law permits special meetings of stockholders to be called by the board of directors and any other persons specified by the certificate of incorporation or bylaws. Delaware law permits but does not require that stockholders be given the right to call special meetings. The Acadia bylaws provide that special meetings of stockholders may only be called in the manner provided in Acadia’s certificate of incorporation as then in effect. Business transacted at any special meeting of stockholders shall be limited to business brought by or at the direction of the board of directors. The board of directors may postpone or reschedule any previously scheduled special meeting. | The MBCA provides that a corporation shall hold a special meeting of its stockholders if called by the board of directors or person authorized to do so by the articles of organization or bylaws of the corporation or, unless otherwise provided in the articles of organization or bylaws, if the holders of at least 40% of all the votes entitled to be cast on any issue to be considered at the proposed special meeting sign, date and deliver to the corporation’s secretary one or more written demands. PHC’s bylaws provide that a special meeting can be called by the President or by the board of directors and shall be called by the secretary, or in the case of the death, absence, incapacity or refusal of the secretary, by any other officer, if one or more stockholders who hold at least one-tenth part in interest of the capital stock entitled to vote on any issue to be considered at the proposed | |
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special meeting deliver a written application. | ||
Stockholder Proposals and Nominations | ||
Acadia’s certificate of incorporation and bylaws contain no restrictions on nominations for directors by stockholders and do not require any advance notice for nominations or other business to be properly brought by a stockholder before a stockholders meeting. | To be timely under PHC’s bylaws, advance written notice of a stockholder proposals, including a stockholder’s nomination of a person to serve as a director of PHC, must be delivered to the secretary of PHC at its principal executive offices not less than 120 days prior to the date of the corporation’s proxy statement released to stockholders in connection with the previous year’s annual meeting of stockholders. | |
Appraisal/Dissenters Rights | ||
Under the DGCL, a stockholder of a Delaware corporation who has not voted in favor of, nor consented in writing to, a merger or consolidation in which the corporation is participating generally has the right to an appraisal of the fair value of the stockholder’s shares of stock, subject to specified procedural requirements. The DGCL does not confer appraisal rights, however, if the corporation’s stock is either (1) listed on a national securities exchange or (2) held of record by more than 2,000 holders. | The MBCA provides that dissenters’ right of appraisal are only available in connection with (1) mergers if stockholder approval is required or if the corporation is a subsidiary that is merged with its parent, unless stockholders are receiving only cash or marketable securities as consideration, so long as no director, officer or controlling stockholder has a direct or indirect financial interest in the merger other than in their capacities as such; (2) share exchanges to which the corporation is a party as the corporation whose shares will be acquired and the shares being received are not marketable securities, so long as no director, officer or controlling stockholder has a direct or indirect financial interest in the merger other than in their capacities as such; (3) sales of substantially all of the assets (other than certain redemptions, dissolutions, liquidations and court-ordered sales); (4) certain amendments to the articles of organization that materially and adversely affect rights in respect of a dissenter’s shares; and (5) certain corporate conversions. | |
BOARD OF DIRECTORS | ||
Duties of Directors | ||
Under the DGCL, the standards of conduct for directors are governed by court case law. | Under the MBCA, a Massachusetts director is required to discharge his or her duties: (1) in good faith; (2) with the care that a person in a like position would reasonably believe appropriate |
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duty of loyalty requires directors to refrain from self-dealing and the duty of care requires directors in managing the corporate affairs to use that level of care which ordinarily careful and prudent persons would use in similar circumstances. When directors act consistently with their duties of loyalty and care, their decisions generally are presumed to be valid under the business judgment rule. | under similar circumstances; and (3) in a manner the director reasonably believes to be in the best interests of the corporation. |
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Number of Directors | ||
Delaware law provides that the board of directors of a Delaware corporation shall consist of one or more directors as fixed by the corporation’s certificate of incorporation or bylaws. Acadia’s certificate of incorporation and bylaws provide that the number of directors shall be determined by a resolution of the majority of the directors or stockholders at the annual meeting of stockholders. Acadia currently has five directors. | The MBCA provides that the board of directors of a Massachusetts corporation shall consist of one or more directors as specified or fixed by the corporation’s articles of organization or bylaws. PHC’s articles of organization provide that the number of directors will be not less than five, two of which shall be elected by the holders of Class A Common Stock voting as a class, and the remainder shall be elected by the holders of Class B Common Stock voting as a class. PHC currently has six directors. | |
Classification | ||
Delaware law permits, but does not require, a Delaware corporation to provide in its certificate of incorporation or in a stockholder adopted bylaw or initial bylaw for a classified board of directors, dividing the board of directors into up to three classes of directors with staggered terms of office. Acadia’s certificate of incorporation provides that the directors of Acadia are divided into three classes (Class I, Class II and Class III) as nearly equal in size as practicable. The term of office of Class I, Class II and Class III directors will expire at Acadia’s annual meetings in 2012, 2013 and 2014, respectively. At each annual election of directors, the directors chosen to succeed those whose terms have then expired are identified as being of the same class as the directors they succeed and are elected for a term expiring at the third succeeding annual election of directors. | Massachusetts law permits, but does not require, a Massachusetts corporation to have a classified board of directors. Neither PHC’s articles of organization or bylaws provide for a classified board of directors. | |
Removal | ||
Acadia’s certificate of incorporation provides that, subject to the rights of the holders of any series of preferred stock then outstanding, to the fullest extent permitted by law, (1) until such date as the WCP Investors (as defined therein) no longer beneficially own at least 17.5% of the outstanding common stock of the Acadia, a director may be removed at any time, either for or without cause, only upon either (a) the affirmative vote of the holders of eighty percent (80%) of the voting power of the capital stock of Acadia outstanding and entitled to vote thereon or (b) if such director is being removed at the request of the person(s) entitled to designate such director in accordance with the stockholders agreement, by the affirmative vote of the holders of a majority of the voting power of the stock outstanding and entitled to vote thereon; and (ii) from and after the date that WCP Investors no longer beneficially own at least 17.5% of the outstanding common stock of the Acadia, a | PHC’s bylaws provide that PHC directors may be removed with or without cause by the vote of a majority of the class of shares issued, outstanding and entitled to vote in the election of said director. |
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director may be removed from office only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of the capital stock of Acadia outstanding and entitled to vote thereon. | ||
Vacancies | ||
Acadia’s certificate of incorporation and bylaws provide that vacancies among directors, however occurring, are to be filled by the vote of the majority of the remaining directors then in office. The directors so chosen will hold office until the next succeeding annual meeting and until their successors are elected or qualified. | The MBCA and PHC’s bylaws provide that in the event of vacancies in the board, such vacancy may be filled by the affirmative vote of a majority of the remaining directors (even though less than a quorum) or by a majority of the class of stockholders which elected the director whose office has been vacated. Directors so chosen will hold office until the next annual meeting and their successors are elected or qualified. | |
Special Meetings of the Board | ||
Special meetings of the board of directors may be held at any time and place, within or outside the State of Delaware, designated by the President on his own behalf or at the request of two or more directors or one director in the event that there is only one director in office. | PHC’s bylaws provide that special meetings of the board of directors may be called at any time by the President, Secretary or by any director. | |
Director Liability and Indemnification | ||
Under Delaware law, a certificate of incorporation may contain a provision limiting or eliminating a director’s personal liability to the corporation or its stockholders for monetary damages for a director’s breach of fiduciary duty subject to certain limitations. | As permitted under the MBCA, PHC’s articles of organization provide that directors shall not be personally liable to PHC or its stockholders for monetary damages for breach of fiduciary duty except for liability: | |
Acadia’s certificate of incorporation provides that no director shall be personally liable to Acadia or its stockholders for monetary damages for breach of fiduciary duty by such director as a director, except with respect to liability: | (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders; |
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corporation, or serving at the request of such corporation in such capacity for another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of such corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. | extent the individual had no reasonable cause to believe that his or her conduct was unlawful. | |
The DGCL also permits indemnification by a corporation under similar circumstances for expenses (including attorneys’ fees) actually and reasonably incurred by such persons in connection with the defense or settlement of an action or suit by or in the right of the corporation to procure a judgment in its favor, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to such corporation unless the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. | ||
To the extent a present or former director or officer is successful in the defense of such an action, suit or proceeding, the corporation is required by the DGCL to indemnify such person for actual and reasonable expenses incurred thereby. | ||
Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it is ultimately determined that such person is not entitled to be so indemnified. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate. | ||
The DGCL provides that the indemnification described above shall not be deemed exclusive of other indemnification that may be granted by a |
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corporation pursuant to its by-laws, disinterested directors’ vote, shareholders’ vote, and agreement or otherwise. | ||
The DGCL also provides corporations with the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation in a similar capacity for another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or her and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability as described above. | ||
Acadia’s certificate of incorporation authorizes Acadia to indemnify directors and officers through bylaw provisions or agreements with directors and officers. Acadia’s bylaws provides for the indemnification of directors and officers to the fullest extent authorized under Delaware law. Acadia’s bylaws also provide for advancement of expenses to its directors and officers upon receipt of an undertaking by the director or officer to repay the amount advanced if it is ultimately determined that he or she is not entitled to indemnification. | The MBCA also permits a corporation to advance to a director or officer reasonable expenses incurred in connection with any proceeding arising because he or she is a director or officer of the corporation, subject to the receipt of a written undertaking by the director or officer to repay any funds advanced if he or she is not entitled to mandatory indemnification and if it is ultimately determined that he or she did not meet the relevant standard of conduct. | |
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CORPORATE OPPORTUNITY | ||
The DGCL permits a Delaware corporation to renounce, in its certificate of incorporation or by action of its board of directors, any interest or expectancy of the corporation in, or in being offered an opportunity to participate in, specified business opportunities or specified classes or categories of business opportunities that are presented to the corporation or one of its officers, directors or stockholders. Acadia’s amended and restated certificate of incorporation will provide that, among other things, (i) Acadia and its Subsidiaries shall have no interest or expectancy in any corporate opportunity of Waud Capital Partners or certain of its affiliates or related | The MBCA contains no comparable “corporate opportunity” provision. | |
persons and no expectation that such corporate opportunity be offered to Acadia or its Subsidiaries; (ii) Waud Capital Partners and certain of its affiliates and related persons shall have the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly: (A) engage in the same, similar or competing business activities or lines of business as Acadia or its Subsidiaries, (B) do business with any client or customer of Acadia or its Subsidiaries, (C) make investments in competing businesses of Acadia or its Subsidiaries, and such acts shall not be deemed wrongful or improper; (iii) Waud Capital Partners and certain of its affiliates and related persons shall not be liable to Acadia, its stockholders or its Subsidiaries for breach of any duty (contractual or otherwise), including without limitation fiduciary duties, by reason of any such activities or of such Person’s participation therein; and (iv) in the event that Waud Capital Partners or certain of its affiliates or related persons acquires knowledge of a potential transaction or matter that may be a corporate opportunity for Acadia or its Subsidiaries, on the one hand, and Waud Capital Partners or certain of its affiliates or related persons, on the other hand, or any other Person, Waud Capital Partners and such affiliates and related persons shall not have any duty (contractual or otherwise), including without limitation fiduciary duties, to communicate, present or offer such corporate opportunity to Acadia or its Subsidiaries and shall not be liable to Acadia, its stockholders or its Subsidiaries for breach of any duty (contractual or otherwise), including without limitation fiduciary duties, by reason of the fact that Waud Capital Partners or certain of its affiliates or related persons directly or indirectly pursues or acquires such opportunity for itself, directs, sells, assigns or transfers such opportunity to another Person, or does not |
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present or communicate such opportunity to Acadia or its Subsidiaries, even though such corporate opportunity may be of a character that, if presented to Acadia or its Subsidiaries, could be taken by Acadia or its Subsidiaries. |
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STATE ANTITAKOVER STATUTES | ||
Business Combinations | ||
Acadia is subject to Section 203 of the DGCL, which prohibits a corporation from engaging in a “business combination” with an “interested stockholder,” defined as a stockholder who, together with his associates and affiliates, owns, or if the person is an affiliate of the corporation and did own within the last three years, 15% or more of the outstanding voting stock of the corporation, within three years after the person or entity becomes an interested stockholder, unless: | Massachusetts has adopted a “Business Combination” statute. In general, a Massachusetts corporation is prohibited from engaging in certain business combinations (defined by the statute to include certain mergers and consolidations, dispositions of assets and issuances of securities as well as certain other transactions) with an interested stockholder (defined by the statute to include holders of 5% or more of the outstanding stock of the corporation and holders of 15% or more of the outstanding stock of the corporation for such persons eligible to file Schedule 13G with the SEC) for a period of three years following the date that such stockholder became an interested stockholder, except under certain circumstances, which include: | |
• a merger or consolidation with the interested stockholder or with any other corporation or other entity if the merger or consolidation is caused by the interested stockholder; | ||
• a sale or other disposition to or with the interested stockholder of assets with an aggregate market value equal to 10% or more of either the aggregate market value of all assets of the corporation or the aggregate market value of all of the outstanding stock of the corporation; • with some exceptions, any transaction resulting in the issuance or transfer by the corporation or any majority-owned subsidiary of any stock of the corporation or subsidiary to the interested stockholder; • any transaction involving the corporation or a majority- owned subsidiary that has the effect of increasing the proportionate share of the stock of |
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the corporation or subsidiary owned by the interested stockholder; or • any receipt by the interested stockholder of the benefit of any loans or other financial benefits provided by the corporation or any majority-owned subsidiary. | ||
Control Share Acquisitions | ||
The DGCL does not contain a control share acquisition statute. | Massachusetts has adopted a “Control Share Acquisition” statute. In general, any person who makes an offer to acquire, or acquires, shares of stock of a Massachusetts corporation that, when combined with shares already owned, would increase such person’s ownership to at least 20%, 331/3% or a majority of the voting stock of such corporation, must obtain the approval of a majority of shares held by all stockholders, excluding shares held by such person and the inside directors and officers of the corporation, in order to vote the shares acquired within 90 days before or after the acquisition. | |
PHC has not opted out of the control share acquisition statute. |
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Name | Element | Amount | ||||
Bruce A. Shear | Salary | $ | 1,530,000 | |||
Bonus | — | |||||
Benefits | — | |||||
Stock Options | — | |||||
Totals | $ | 1,530,000 | ||||
Robert A. Boswell | Salary | $ | 465,000 | |||
Bonus | — | |||||
Benefits | — | |||||
Stock Options | — | |||||
Totals | $ | 465,000 | ||||
Paula C. Wurts | Salary | $ | 408,000 | |||
Bonus | — | |||||
Benefits | — | |||||
Stock Options | — | |||||
Totals | $ | 408,000 |
202
Table of Contents
203
Table of Contents
204
Table of Contents
ACADIA HEALTHCARE COMPANY, LLC CONSOLIDATED FINANCIAL STATEMENTS | ||||
Unaudited Condensed Consolidated Financial Statements | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
Audited Consolidated Financial Statements | ||||
F-15 | ||||
F-16 | ||||
F-17 | ||||
F-18 | ||||
F-19 | ||||
F-20 | ||||
YOUTH AND FAMILY CENTERED SERVICES, INC. FINANCIAL STATEMENTS | ||||
Unaudited Condensed Consolidated Financial Statements | ||||
F-39 | ||||
F-40 | ||||
F-41 | ||||
F-42 | ||||
Audited Consolidated Financial Statements | ||||
F-48 | ||||
F-49 | ||||
F-50 | ||||
F-51 | ||||
F-52 | ||||
F-53 | ||||
PHC, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS | ||||
Audited Consolidated Financial Statements | ||||
F-70 | ||||
F-71 | ||||
F-72 | ||||
F-73 | ||||
F-74 | ||||
F-75 | ||||
HHC DELAWARE, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS | ||||
F-98 | ||||
F-99 | ||||
F-100 | ||||
F-101 | ||||
F-102 |
F-1
Table of Contents
Unaudited pro forma | ||||||||||||
June 30, 2011 | December 31, 2010 | as of June 30, 2011 | ||||||||||
(Unaudited) | ||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 3,456 | $ | 8,614 | $ | 3,456 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1,860 and $1,144, respectively | 22,560 | 5,469 | 22,560 | |||||||||
Other current assets | 10,246 | 2,876 | 10,246 | |||||||||
Total current assets | 36,262 | 16,959 | 36,262 | |||||||||
Property and equipment, net | 55,313 | 18,752 | 55,313 | |||||||||
Goodwill | 158,271 | 9,157 | 158,271 | |||||||||
Intangible assets, net | 936 | 544 | 936 | |||||||||
Other assets | 9,421 | — | 9,421 | |||||||||
Total assets | $ | 260,203 | $ | 45,412 | $ | 260,203 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term debt | $ | 6,750 | $ | 9,984 | $ | 6,750 | ||||||
Accounts payable | 6,705 | 834 | 6,705 | |||||||||
Accrued salaries and benefits | 12,906 | 3,070 | 12,906 | |||||||||
Other accrued liabilities | 6,873 | 4,171 | 6,873 | |||||||||
Dividend payable | — | — | 74,441 | |||||||||
Total current liabilities | 33,234 | 18,059 | 107,675 | |||||||||
Long-term debt | 133,563 | — | 133,563 | |||||||||
Other liabilities | 18,823 | 2,246 | 18,823 | |||||||||
Total liabilities | 185,620 | 20,305 | 260,061 | |||||||||
Equity: | ||||||||||||
Member’s equity | — | 25,107 | — | |||||||||
Common stock, $0.01 par value; 100,000,000 shares authorized; 10,000,000 issued and outstanding as of June 30, 2011 | 100 | — | 100 | |||||||||
Additional paid-in capital | 105,557 | — | 31,116 | |||||||||
Accumulated deficit | (31,074 | ) | — | (31,074 | ) | |||||||
Total equity | 74,583 | 25,107 | 142 | |||||||||
Total liabilities and equity | $ | 260,203 | $ | 45,412 | $ | 260,203 | ||||||
F-2
Table of Contents
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands, except share and per share amounts) | ||||||||
Revenue | $ | 82,961 | $ | 32,472 | ||||
Salaries, wages and benefits (including equity-based compensation expense of $19,843 for the three months and six months ended June 30, 2011) | 70,538 | 18,374 | ||||||
Professional fees | 3,130 | 1,240 | ||||||
Supplies | 4,282 | 1,841 | ||||||
Rents and leases | 2,062 | 636 | ||||||
Other operating expenses | 8,110 | 4,046 | ||||||
Provision for doubtful accounts | 1,002 | 1,186 | ||||||
Depreciation and amortization | 1,001 | 480 | ||||||
Interest expense | 2,215 | 358 | ||||||
Sponsor management fees | 590 | — | ||||||
Transaction-related expenses | 8,362 | — | ||||||
Total expenses | 101,292 | 28,161 | ||||||
Income (loss) from continuing operations before income taxes | (18,331 | ) | 4,311 | |||||
Provision for income taxes | 2,997 | 287 | ||||||
Income (loss) from continuing operations | (21,328 | ) | 4,024 | |||||
Income (loss) from discontinued operations, net of income taxes | (58 | ) | 96 | |||||
Net income (loss) | $ | (21,386 | ) | $ | 4,120 | |||
Pro forma benefit from income taxes | (133 | ) | ||||||
Pro forma net loss | (21,253 | ) | ||||||
Basic earnings per share: | ||||||||
Income (loss) from continuing operations | $ | (2.13 | ) | $ | 0.40 | |||
Income (loss) from discontinued operations | $ | (0.01 | ) | $ | 0.01 | |||
Net income (loss) | $ | (2.14 | ) | $ | 0.41 | |||
Diluted earnings per share: | ||||||||
Income (loss) from continuing operations | $ | (2.13 | ) | $ | 0.40 | |||
Income (loss) from discontinued operations | $ | (0.01 | ) | $ | 0.01 | |||
Net income (loss) | $ | (2.14 | ) | $ | 0.41 | |||
Pro forma net income (loss) per share: | ||||||||
Basic | $ | (2.13 | ) | |||||
Diluted | $ | (2.13 | ) | |||||
Shares outstanding: | ||||||||
Basic | 10,000,000 | 10,000,000 | ||||||
Diluted | 10,000,000 | 10,000,000 |
F-3
Table of Contents
Member’s | Common Stock | Accumulated | ||||||||||||||||||||||
Equity | Shares | Amount | APIC | Deficit | Total | |||||||||||||||||||
(In thousands, except share amounts) | ||||||||||||||||||||||||
Balance at December 31, 2010 | $ | 25,107 | — | $ | — | $ | — | $ | — | $ | 25,107 | |||||||||||||
Distributions | (375 | ) | — | — | — | — | (375 | ) | ||||||||||||||||
Reclassification of management liability awards to equity awards | 365 | — | — | — | — | 365 | ||||||||||||||||||
Contribution from Holdings | 51,029 | — | — | — | — | 51,029 | ||||||||||||||||||
Conversion from limited liability company to corporation | (76,126 | ) | 10,000,000 | 100 | 85,714 | (9,688 | ) | — | ||||||||||||||||
Equity-based compensation expense | — | — | — | 19,843 | — | 19,843 | ||||||||||||||||||
Net loss | — | — | — | — | (21,386 | ) | (21,386 | ) | ||||||||||||||||
Balance at June 30, 2011 | $ | — | 10,000,000 | $ | 100 | $ | 105,557 | $ | (31,074 | ) | $ | 74,583 | ||||||||||||
F-4
Table of Contents
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Operating activities: | ||||||||
Net income (loss) | $ | (21,386 | ) | $ | 4,120 | |||
Adjustments to reconcile net income (loss) to net cash provided by continuing operating activities: | ||||||||
Depreciation and amortization | 1,001 | 480 | ||||||
Provision for bad debts | 1,002 | 1,186 | ||||||
Amortization of debt issuance costs | 336 | — | ||||||
Equity-based compensation | 19,843 | — | ||||||
Deferred income tax expense | 753 | (707 | ) | |||||
Other | (171 | ) | — | |||||
Loss (income) from discontinued operations, net of taxes | 90 | (96 | ) | |||||
Change in operating assets and liabilities, net of effect of acquisitions: | ||||||||
Accounts receivable | (579 | ) | (1,185 | ) | ||||
Other current assets | (660 | ) | 473 | |||||
Accounts payable | 3,159 | 954 | ||||||
Accrued salaries and benefits | 986 | 617 | ||||||
Other accrued expenses | (1,186 | ) | (1,002 | ) | ||||
Other liabilities | 680 | (12 | ) | |||||
Net cash provided by continuing operating activities | 3,868 | 4,828 | ||||||
Net cash provided by (used in) discontinued operating activities | (356 | ) | 71 | |||||
Net cash provided by operating activities | 3,512 | 4,899 | ||||||
Investing activities: | ||||||||
Cash paid for acquisitions, net of cash acquired | (178,014 | ) | — | |||||
Cash paid for capital expenditures | (3,212 | ) | (228 | ) | ||||
Cash paid for real estate acquisition | (2,150 | ) | — | |||||
Other | (472 | ) | (356 | ) | ||||
Net cash used in continuing investing activities | (183,848 | ) | (584 | ) | ||||
Financing activities: | ||||||||
Borrowings on long-term debt | 135,000 | — | ||||||
Net increase in revolving credit facility | 7,000 | — | ||||||
Principal payments on long-term debt | (1,688 | ) | (156 | ) | ||||
Repayment of long-term debt | (9,984 | ) | — | |||||
Payment of debt issuance costs | (5,804 | ) | — | |||||
Contribution from Holdings | 51,029 | — | ||||||
Distributions to equity holders | (375 | ) | (1,687 | ) | ||||
Net cash provided by (used in) financing activities | 175,178 | (1,843 | ) | |||||
Net increase (decrease) in cash and cash equivalents | (5,158 | ) | 2,472 | |||||
Cash and cash equivalents at beginning of the period | 8,614 | 4,489 | ||||||
Cash and cash equivalents at end of the period | $ | 3,456 | $ | 6,961 | ||||
Effect of acquisitions: | ||||||||
Assets acquired, excluding cash | $ | 205,433 | $ | — | ||||
Liabilities assumed | (27,419 | ) | — | |||||
Cash paid for acquisitions, net of cash acquired | $ | 178,014 | $ | — | ||||
F-5
Table of Contents
1. | Description of the Business |
2. | Basis of Presentation |
3. | Acquisitions |
F-6
Table of Contents
Cash | $ | 33 | ||
Accounts receivable | 17,606 | |||
Prepaid expenses and other current assets | 4,262 | |||
Property and equipment | 31,911 | |||
Goodwill | 149,114 | |||
Non-compete intangible assets | 321 | |||
Other long-term assets | 2,219 | |||
Total assets acquired | 205,466 | |||
Accounts payable | 3,028 | |||
Accrued salaries and benefits | 8,878 | |||
Other accrued expenses | 2,952 | |||
Other long-term liabilities | 12,561 | |||
Total liabilities assumed | 27,419 | |||
Net assets acquired | $ | 178,047 | ||
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
Revenue | $ | 128,647 | $ | 124,898 | ||||
Income (loss) from continuing operations, before income taxes | $ | (1,152 | ) | $ | 16,198 |
F-7
Table of Contents
4. | Goodwill and Other Intangible Assets |
Balance at December 31, 2010 | $ | 9,157 | ||
YFCS acquisition | 149,114 | |||
Balance at June 30, 2011 | $ | 158,271 | ||
Gross Carrying Amount | Accumulated Amortization | |||||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Intangible assets subject to amortization: | ||||||||||||||||
Trademarks | $ | 85 | $ | 85 | $ | (71 | ) | $ | (64 | ) | ||||||
Non-compete agreements | 588 | 266 | (319 | ) | (207 | ) | ||||||||||
673 | 351 | (390 | ) | (271 | ) | |||||||||||
Intangible assets not subject to amortization: | ||||||||||||||||
Medicare licenses | 129 | 129 | — | — | ||||||||||||
Certificate of need | 524 | 335 | — | — | ||||||||||||
653 | 464 | — | — | |||||||||||||
Intangible assets, net | $ | 1,326 | $ | 815 | $ | (390 | ) | $ | (271 | ) | ||||||
5. | Property and Equipment |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Land | $ | 11,070 | $ | 3,254 | ||||
Building and improvements | 37,692 | 15,606 | ||||||
Equipment | 5,166 | 2,626 | ||||||
Construction in progress | 5,590 | 589 | ||||||
59,518 | 22,075 | |||||||
Accumulated depreciation and amortization | (4,205 | ) | (3,323 | ) | ||||
$ | 55,313 | $ | 18,752 | |||||
6. | Discontinued Operations |
F-8
Table of Contents
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
Revenue | $ | 50 | $ | 1,387 | ||||
Net income from discontinued operations | $ | (90 | ) | $ | 96 | |||
7. | Long-Term Debt |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Senior Secured Credit Facility: | ||||||||
Senior Secured Term Loans | $ | 133,313 | $ | — | ||||
Senior Secured Revolving Line of Credit | 7,000 | — | ||||||
Secured Promissory Notes | — | 9,984 | ||||||
140,313 | 9,984 | |||||||
Less: current portion | (6,750 | ) | (9,984 | ) | ||||
Long-term debt | $ | 133,563 | $ | — | ||||
F-9
Table of Contents
8. | Equity Arrangements |
9. | Equity-Based Compensation |
F-10
Table of Contents
10. | Earnings Per Share |
11. | Income Taxes |
F-11
Table of Contents
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Net operating losses and tax credit carryforwards — federal and state | $ | 996 | $ | 691 | ||||
Intangibles | — | 44 | ||||||
Fixed asset basis difference | 1,655 | — | ||||||
Prepaid items | 57 | 57 | ||||||
Bad debt allowance | 664 | 6 | ||||||
Accrued compensation and severance | 1,587 | 74 | ||||||
Accrued expenses | 485 | 376 | ||||||
Insurance reserves | 306 | 315 | ||||||
Other assets | 17 | 21 | ||||||
Valuation allowance | (656 | ) | (447 | ) | ||||
Total deferred tax assets | 5,111 | 1,137 | ||||||
Prepaid items | (84 | ) | — | |||||
Intangibles | (14,706 | ) | — | |||||
Total deferred tax liabilities | (14,790 | ) | (947 | ) | ||||
Net deferred tax asset (liability) | $ | (9,679 | ) | $ | 190 | |||
12. | Fair Value Measurements |
Balance at | ||||||||||||||||
June 30, | ||||||||||||||||
Level 1 | �� | Level 2 | Level 3 | 2011 | ||||||||||||
Cash and cash equivalents | $ | 3,456 | $ | — | $ | — | $ | 3,456 | ||||||||
Balance at | ||||||||||||||||
December 31, | ||||||||||||||||
Level 1 | Level 2 | Level 3 | 2010 | |||||||||||||
Cash and cash equivalents | $ | 8,614 | $ | — | $ | — | $ | 8,614 | ||||||||
F-12
Table of Contents
13. | Commitments and Contingencies |
14. | Recently Issued Accounting Standards |
F-13
Table of Contents
F-14
Table of Contents
July 12, 2011
F-15
Table of Contents
December 31 | ||||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,614,480 | $ | 4,489,292 | ||||
Receivables, net of allowances from doubtful accounts of approximately $1,144,000 and $1,374,000 at December 31, 2010 and 2009, respectively | 5,469,203 | 6,011,354 | ||||||
Third-party receivables | — | 641,487 | ||||||
Inventory | 217,906 | 113,164 | ||||||
Deposits | 637,059 | 616,725 | ||||||
Deferred tax asset | 573,235 | 353,408 | ||||||
Income taxes receivable | 120,604 | — | ||||||
Other receivables | 536,284 | 266,636 | ||||||
Prepaid expenses | 771,858 | 708,011 | ||||||
Other current assets | 18,000 | 14,613 | ||||||
Total current assets | 16,958,629 | 13,214,690 | ||||||
Property, plant, and equipment, net | 18,751,563 | 18,403,429 | ||||||
Goodwill | 9,156,984 | 9,156,984 | ||||||
Other intangible assets, net | 544,419 | 478,594 | ||||||
Total assets | $ | 45,411,595 | $ | 41,253,697 | ||||
LIABILITIES AND MEMBERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 833,503 | $ | 1,256,537 | ||||
Accrued liabilities | 2,248,722 | 1,655,890 | ||||||
Accrued payroll and related expenses | 3,069,958 | 2,994,535 | ||||||
Current portion of long-term debt | 9,983,599 | 10,258,654 | ||||||
Current portion of accrued insurance liabilities | 379,332 | 381,318 | ||||||
Third party settlements | 78,396 | — | ||||||
Other current liabilities | 1,465,917 | 1,030,294 | ||||||
Total current liabilities | 18,059,427 | 17,577,228 | ||||||
Deferred tax liability | 383,818 | 308,986 | ||||||
Other liabilities | 419,802 | 484,625 | ||||||
Accrued insurance liabilities, net of current portion | 1,441,877 | 1,689,527 | ||||||
Total liabilities | 20,304,924 | 20,060,366 | ||||||
Member’s equity | 25,106,671 | 21,193,331 | ||||||
Total liabilities and member’s equity | $ | 45,411,595 | $ | 41,253,697 | ||||
F-16
Table of Contents
Year Ended December 31 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net patient service revenue | $ | 64,342,426 | $ | 51,821,294 | $ | 33,353,084 | ||||||
Salaries, wages, and benefits | 36,332,883 | 30,752,435 | 22,342,489 | |||||||||
Professional fees | 3,612,484 | 1,976,670 | 951,918 | |||||||||
Supplies | 3,708,846 | 2,840,830 | 2,076,364 | |||||||||
Rentals and leases | 1,287,668 | 884,936 | 851,723 | |||||||||
Other operating expenses | 8,289,531 | 8,390,617 | 5,399,655 | |||||||||
Provision for bad debts | 2,238,902 | 2,424,283 | 1,803,930 | |||||||||
Depreciation and amortization | 976,260 | 966,574 | 739,824 | |||||||||
Interest expense | 738,208 | 773,752 | 729,043 | |||||||||
57,184,782 | 49,010,097 | 34,894,946 | ||||||||||
Income (loss) from continuing operations, before income taxes | 7,157,644 | 2,811,197 | (1,541,862 | ) | ||||||||
Income taxes | (476,546 | ) | (53,390 | ) | (20,000 | ) | ||||||
Income (loss) from continuing operations | 6,681,098 | 2,757,807 | (1,561,862 | ) | ||||||||
(Loss) income from discontinued operations, net of income taxes | (471,121 | ) | 118,812 | (155,996 | ) | |||||||
Net income (loss) | $ | 6,209,977 | $ | 2,876,619 | $ | (1,717,858 | ) | |||||
Unaudited proforma income tax expense | (2,448,357 | ) | ||||||||||
Unaudited proforma net income | $ | 3,761,620 | ||||||||||
Basic earnings per unit: | ||||||||||||
Income (loss) from continuing operations | $ | 0.67 | $ | 0.28 | $ | (0.16 | ) | |||||
(Loss) income from discontinued operations | $ | (0.05 | ) | $ | 0.01 | $ | (0.02 | ) | ||||
Net income (loss) | $ | 0.62 | $ | 0.29 | $ | (0.17 | ) | |||||
Diluted earnings per unit: | ||||||||||||
Income (loss) from continuing operations | $ | 0.67 | $ | 0.28 | $ | (0.16 | ) | |||||
(Loss) income from discontinued operations | $ | (0.05 | ) | $ | 0.01 | $ | (0.02 | ) | ||||
Net income (loss) | $ | 0.62 | $ | 0.29 | $ | (0.17 | ) | |||||
Unaudited proforma net income per unit: | ||||||||||||
Basic | $ | 0.38 | ||||||||||
Diluted | $ | 0.38 | ||||||||||
Units outstanding: | ||||||||||||
Basic | 10,000,000 | 10,000,000 | 10,000,000 | |||||||||
Diluted | 10,000,000 | 10,000,000 | 10,000,000 |
F-17
Table of Contents
Member’s Equity | ||||
Balance at December 31, 2007 | $ | 7,134,966 | ||
Capital contributions | 10,395,104 | |||
Other | 4,500 | |||
Net loss | (1,717,858 | ) | ||
Balance at December 31, 2008 | 15,816,712 | |||
Capital contributions | 2,500,000 | |||
Net income | 2,876,619 | |||
Balance at December 31, 2009 | 21,193,331 | |||
Distributions | (2,296,637 | ) | ||
Net income | 6,209,977 | |||
Balance at December 31, 2010 | $ | 25,106,671 | ||
F-18
Table of Contents
Year Ended December 31 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Operating activities | ||||||||||||
Net income (loss) | $ | 6,209,977 | $ | 2,876,619 | $ | (1,717,858 | ) | |||||
Loss (income) from discontinued operations, net of income taxes | 471,121 | (118,812 | ) | 155,996 | ||||||||
Income (loss) from continuing operations, net of income taxes | 6,681,098 | 2,757,807 | (1,561,862 | ) | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) provided by operating activities: | ||||||||||||
Provision for bad debts | 2,238,902 | 2,424,283 | 1,803,930 | |||||||||
Deferred income tax benefit | (144,995 | ) | — | — | ||||||||
Depreciation and amortization | 976,260 | 996,631 | 739,824 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (2,174,135 | ) | (2,993,769 | ) | (3,378,594 | ) | ||||||
Deposits | (20,334 | ) | (472,876 | ) | (11,549 | ) | ||||||
Prepaid expenses and other assets | (282,016 | ) | (111,093 | ) | (915,255 | ) | ||||||
Income taxes receivable | (120,604 | ) | — | — | ||||||||
Inventory | (104,742 | ) | 26,909 | (78,355 | ) | |||||||
Third-party settlements | 563,379 | (657,811 | ) | (103,828 | ) | |||||||
Accounts payable and accrued expenses | 540,598 | 2,065,553 | 396,933 | |||||||||
Accrued payroll and related expenses | 186,651 | 1,368,821 | 552,321 | |||||||||
Related-party payable | — | (206,724 | ) | 186,013 | ||||||||
Insurance reserves | (249,636 | ) | 851,680 | 317,435 | ||||||||
Net cash provided by (used in) operating activities of continued operations | 8,090,426 | 6,049,411 | (2,052,987 | ) | ||||||||
Net cash provided by (used in) operating activities of discontinued operations | 104,668 | 118,812 | (64,920 | ) | ||||||||
Net cash provided by (used in) operating activities | 8,195,094 | 6,168,223 | (2,117,907 | ) | ||||||||
Investing activities | ||||||||||||
Purchases of property and equipment | (1,495,412 | ) | (333,864 | ) | (351,186 | ) | ||||||
Acquisitions, net of cash acquired | — | (3,142,195 | ) | (9,072,725 | ) | |||||||
Net cash used in investing activities of continuing operations | (1,495,412 | ) | (3,476,059 | ) | (9,423,911 | ) | ||||||
Net cash (used in) provided by investing activities of discontinued operations | (2,802 | ) | 65,413 | 68,633 | ||||||||
Net cash used in investing activities | (1,498,214 | ) | (3,410,646 | ) | (9,355,278 | ) | ||||||
Financing activities | ||||||||||||
Proceeds from issuance of debt | — | — | 3,968,156 | |||||||||
Capital contributions | — | 2,500,000 | 10,395,104 | |||||||||
Capital distributions | (2,296,637 | ) | — | — | ||||||||
Other | — | — | 4,500 | |||||||||
Principal payments on debt | (275,055 | ) | (813,516 | ) | (4,525,209 | ) | ||||||
Net cash (used in) provided by financing activities of continuing operations | (2,571,692 | ) | 1,686,484 | 9,842,551 | ||||||||
Net cash provided by financing activities of discontinuing operations | — | — | (5,184 | ) | ||||||||
Net cash (used in) provided by financing activities | (2,571,692 | ) | 1,686,484 | 9,837,367 | ||||||||
Change in cash and cash equivalents | 4,125,188 | 4,444,061 | (1,635,818 | ) | ||||||||
Cash and cash equivalents at beginning of year | 4,489,292 | 45,231 | 1,681,049 | |||||||||
Cash and cash equivalents at end of year | $ | 8,614,480 | $ | 4,489,292 | $ | 45,231 | ||||||
Supplemental disclosure of cash flow information | ||||||||||||
Cash paid for interest | $ | 587,088 | $ | 534,088 | $ | 634,908 | ||||||
F-19
Table of Contents
1. | Description of the Business |
2. | Summary of Significant Accounting Policies |
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2010 | 2009 | 2008 | ||||||||||
Medicare | 23 | % | 22 | % | 22 | % | ||||||
Medicaid | 39 | 40 | 41 | |||||||||
Commercial | 30 | 33 | 34 | |||||||||
Self-pay and other | 8 | 5 | 3 | |||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
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3. | Acquisitions |
2008 | ||||
Atlanta | ||||
Fair value of assets acquired, excluding cash: | ||||
Land | $ | 820,000 | ||
Land improvements | 110,000 | |||
Property, plant, and equipment | 7,211,000 | |||
Furniture | 111,700 | |||
Identifiable intangible assets | 200,000 | |||
Goodwill | 666,745 | |||
Total assets acquired | $ | 9,119,445 |
2009 | ||||
Acadiana | ||||
Fair value of assets acquired, excluding cash: | ||||
Vehicles | $ | 39,815 | ||
Goodwill | 2,746,982 | |||
Identifiable intangible assets | 175,000 | |||
Total assets acquired | $ | 2,961,797 | ||
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2009 | ||||
The Village | ||||
Fair value of assets acquired, excluding cash: | ||||
Vehicles | $ | 40,980 | ||
Property, plant and equipment | 59,005 | |||
Total assets acquired | $ | 99,985 | ||
Cash | $ | 33 | ||
Accounts receivable | 17,606 | |||
Prepaid expenses and other current assets | 4,262 | |||
Property and equipment | 31,911 | |||
Goodwill | 149,114 | |||
Non-compete intangible assets | 321 | |||
Other long-term assets | 2,219 | |||
Total assets acquired | 205,466 | |||
Accounts payable | 3,028 | |||
Accrued salaries and benefits | 8,878 | |||
Other accrued expenses | 2,952 | |||
Other long-term liabilities | 12,561 | |||
Total liabilities assumed | 27,419 | |||
Net assets acquired | $ | 178,047 | ||
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Income (Loss) | ||||||||
from Continuing | ||||||||
Operations, | ||||||||
Net Patient | before Income | |||||||
Service Revenue | Taxes | |||||||
Atlanta actual from September 15, 2008 to December 31, 2008 | $ | 2,311,255 | $ | (4,929 | ) | |||
Acadiana actual from March 5, 2009 to December 31, 2009 | $ | 2,646,957 | $ | 471,788 | ||||
The Village actual from November 2, 2009 to December 31, 2009 | $ | 999,724 | $ | (146,125 | ) |
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net patient service revenue | $ | 248,728,426 | $ | 56,546,150 | $ | 47,249,190 | ||||||
Income (loss) from continuing operations, before income taxes | $ | 4,443,644 | $ | 1,057,711 | $ | (2,272,996 | ) | |||||
4. | Discontinued Operations |
2010 | 2009 | 2008 | ||||||||||
Net patient service revenue | $ | 2,010,867 | $ | 3,209,814 | $ | 3,187,607 | ||||||
Net (loss) gain from discontinued operations | $ | (471,121 | ) | $ | 118,812 | $ | (155,996 | ) | ||||
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5. | Formation and Member’s Equity |
Class A Preferred | ||||||||||||||||||||||||||||||||||||||||
Units | Class B Preferred Units | Class A Common Units | Class B Common Units | Accumulated | ||||||||||||||||||||||||||||||||||||
Units | Amounts | Units | Amount | Units | Amount | Units | Amount | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 202,950 | $ | 26,304,546 | — | $ | — | 200,500 | $ | 200,500 | — | $ | — | $ | (19,370,080 | ) | $ | 7,134,966 | |||||||||||||||||||||||
Capital contributions | — | 10,395,104 | — | — | — | — | — | — | — | 10,395,104 | ||||||||||||||||||||||||||||||
Accrued preferred unit return | — | 3,112,542 | — | — | — | — | — | — | (3,112,542 | ) | — | |||||||||||||||||||||||||||||
Other | — | — | — | — | 4,500 | 4,500 | — | — | — | 4,500 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (1,717,858 | ) | (1,717,858 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2008 | 202,950 | 39,812,192 | — | — | 205,000 | 205,000 | — | — | (24,200,480 | ) | 15,816,712 | |||||||||||||||||||||||||||||
Capital contributions | — | 2,500,000 | — | — | — | — | — | — | — | 2,500,000 | ||||||||||||||||||||||||||||||
Accrued preferred unit return | — | 4,346,800 | — | — | — | — | — | — | (4,346,800 | ) | — | |||||||||||||||||||||||||||||
Other | 247,005 | (111,106 | ) | — | — | 249,500 | (2,000 | ) | — | — | 113,106 | — | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | 2,876,619 | 2,876,619 | ||||||||||||||||||||||||||||||
Balance at December 31, 2009 | 449,955 | 46,547,886 | — | — | 454,500 | 203,000 | — | — | (25,557,555 | ) | 21,193,331 | |||||||||||||||||||||||||||||
Distributions | (1,980 | ) | (2,296,637 | ) | — | — | (2,000 | ) | — | — | — | — | (2,296,637 | ) | ||||||||||||||||||||||||||
Accrued preferred unit return | — | 4,851,643 | — | — | — | — | — | — | (4,851,643 | ) | — | |||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | 6,209,977 | 6,209,977 | ||||||||||||||||||||||||||||||
Balance at December 31, 2010 | 447,975 | $ | 49,102,892 | — | $ | — | 452,500 | $ | 203,000 | — | $ | — | $ | (24,199,221 | ) | $ | 25,106,671 | |||||||||||||||||||||||
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6. | Concentrations of Credit Risk |
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7. | Property and Equipment |
2010 | 2009 | |||||||
Land | $ | 3,254,130 | $ | 3,253,180 | ||||
Building and improvements | 14,914,201 | 14,742,343 | ||||||
Leasehold improvements | 691,900 | 508,299 | ||||||
Equipment | 1,783,458 | 1,502,800 | ||||||
Furniture and fixtures | 842,865 | 684,268 | ||||||
21,486,554 | 20,690,890 | |||||||
Accumulated depreciation and amortization | (3,323,315 | ) | (2,359,636 | ) | ||||
Construction in progress | 588,324 | 72,176 | ||||||
$ | 18,751,563 | $ | 18,403,429 | |||||
8. | Goodwill and Other Intangible Assets |
2010 | 2009 | |||||||
Beginning balance | $ | 9,156,984 | $ | 6,395,002 | ||||
Additions through acquisitions | — | 2,761,982 | ||||||
Ending balance | $ | 9,156,984 | $ | 9,156,984 | ||||
2010 | 2009 | |||||||
Intangible assets subject to amortization: | ||||||||
Cost: | ||||||||
Trademarks | $ | 85,000 | $ | 85,000 | ||||
Noncompete | 266,000 | 285,000 | ||||||
351,000 | 370,000 | |||||||
Less accumulated amortization | (270,800 | ) | (175,406 | ) | ||||
80,200 | 194,594 | |||||||
Intangible assets not subject to amortization: | ||||||||
Medicare licenses | 128,922 | 134,000 | ||||||
Certificate of Need | 335,297 | 150,000 | ||||||
464,219 | 284,000 | |||||||
Intangible assets, net | $ | 544,419 | $ | 478,594 | ||||
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Trademarks | 5.0 | |||
Noncompete | 3.4 | |||
Total weighted average | 3.8 |
2011 | $ | 50,617 | ||
2012 | 23,333 | |||
2013 | 5,000 | |||
2014 | 1,250 | |||
$ | 80,200 | |||
9. | Debt |
2010 | 2009 | |||||||
Secured Promissory note (secured by the physical assets of Acadia) with interest payments due monthly for the first 12 months and interest and principal payments thereafter with the total outstanding amount due on December 31, 2010 (see below), bearing interest at a variable rate. | $ | 6,515,443 | $ | 6,790,498 | ||||
Secured Promissory note (secured by the assets of Acadia) with interest payments due on a monthly basis and principal and all remaining interest due December 31, 2010 (see below), bearing interest at a variable rate. | 3,468,156 | 3,468,156 | ||||||
Unsecured Promissory notes from the Majority Holder with all principal and interest payments due on April 6, 2009, bearing interest at a fixed rate of 12%. | — | — | ||||||
9,983,599 | 10,258,654 | |||||||
Less current portion | 9,983,599 | 10,258,654 | ||||||
$ | — | $ | — | |||||
10. | Commitments and Contingencies |
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Year ended December 31, | ||||
2011 | $ | 1,027,274 | ||
2012 | 1,062,025 | |||
2013 | 1,040,907 | |||
2014 | 965,827 | |||
2015 Thereafter | 925,505 | |||
Thereafter | 1,758,118 | |||
Total minimum rental obligations | $ | 6,779,656 | ||
11. | Employee Benefit Plan |
12. | Related-Party Transactions |
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13. | Income Taxes |
Year Ended December 31 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Current expense | $ | 621,541 | $ | 53,390 | $ | 20,000 | ||||||
Deferred benefit | (144,995 | ) | — | — | ||||||||
Provision for income taxes | $ | 476,546 | $ | 53,390 | $ | 20,000 | ||||||
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Year Ended December 31 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Federal statutory rate | 34.0 | % | 34.0 | % | 34.0 | % | ||||||
State taxes, net of federal benefit | 1.2 | (1.0 | ) | (1.0 | ) | |||||||
Non-Deductible items | 0.1 | (1.0 | ) | — | ||||||||
Change in Valuation Allowance | (2.7 | ) | — | — | ||||||||
Other | (26.3 | ) | (34.0 | ) | (34.0 | ) | ||||||
Effective tax rate | 6.3 | % | (2.0 | )% | (1.0 | )% | ||||||
December 31 | ||||||||
2010 | 2009 | |||||||
Net operating losses and tax credit carry forwards — federal and state | $ | 690,928 | $ | 1,279,918 | ||||
Intangibles | 43,861 | 27,502 | ||||||
Prepaid items | 57,135 | 56,746 | ||||||
Bad debt allowance | 5,785 | 10,069 | ||||||
Accrued compensation | 73,776 | 75,284 | ||||||
Accrued expenses | 376,301 | 397,344 | ||||||
Insurance reserves | 314,637 | 420,297 | ||||||
Other assets | 20,713 | 19,683 | ||||||
Valuation allowance | (446,973 | ) | (1,367,430 | ) | ||||
Total deferred tax assets | 1,136,163 | 919,413 | ||||||
Fixed asset basis difference | (946,746 | ) | (874,991 | ) | ||||
Total deferred tax liabilities | (946,746 | ) | (874,991 | ) | ||||
Net deferred taxes | $ | 189,417 | $ | 44,422 | ||||
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14. | Fair Value of Financial Instruments |
• | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
• | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
• | Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Balance as of | ||||||||||||||||
December 31, | ||||||||||||||||
Level 1 | Level 2 | Level 3 | 2010 | |||||||||||||
Cash and cash equivalents | $ | 8,614,480 | $ | — | $ | — | $ | 8,614,480 | ||||||||
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Balance as of | ||||||||||||||||
December 31, | ||||||||||||||||
Level 1 | Level 2 | Level 3 | 2009 | |||||||||||||
Cash and cash equivalents | $ | 4,489,292 | $ | — | $ | — | $ | 4,489,292 | ||||||||
15. | Other Information |
Additions | Accounts | |||||||||||||||
Balances at | Charged to | Written off, | ||||||||||||||
Beginning of | Costs and | Net of | Balances at | |||||||||||||
Period | Expenses | Recoveries | End of Period | |||||||||||||
Allowance for doubtful accounts: | ||||||||||||||||
Year ended December 31, 2008 | $ | 1,239,232 | 1,803,930 | 1,934,076 | $ | 1,109,086 | ||||||||||
Year ended December 31, 2009 | $ | 1,109,086 | 2,424,283 | 2,159,782 | $ | 1,373,587 | ||||||||||
Year ended December 31, 2010 | $ | 1,373,587 | 2,238,452 | 2,468,495 | $ | 1,143,544 |
16. | Subsequent Events |
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Quarter Ended | Year Ended | |||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(Amount in thousand) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 4,009 | $ | 5,307 | ||||
Patient accounts receivable, net of allowances for doubtful accounts of $964 and $1,215, respectively. | 17,736 | 16,693 | ||||||
Deferred tax assets | 1,514 | 1,499 | ||||||
Prepaid expenses and other current assets | 1,899 | 2,093 | ||||||
Total Current Assets | 25,158 | 25,592 | ||||||
Property and equipment, net | 26,379 | 26,457 | ||||||
Goodwill | 133,974 | 133,974 | ||||||
Other intangibles, net of accumulated amortization of $6,538 and $6,909, respectively. | 28,752 | 29,081 | ||||||
Debt issuance costs, net of accumulated amortization of $3,593 and $3,423, respectively. | 1,330 | 1,500 | ||||||
Other noncurrent assets | 1,016 | 926 | ||||||
Total Assets | $ | 216,609 | $ | 217,530 | ||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 3,028 | $ | 3,666 | ||||
Accrued salaries and wages | 5,248 | 6,417 | ||||||
Other accrued expenses | 5,405 | 4,439 | ||||||
Current maturities of long-term debt | 1,248 | 1,247 | ||||||
Total Current Liabilities | 14,929 | 15,769 | ||||||
Senior secured notes | 52,281 | 54,071 | ||||||
Senior subordinated notes | 30,775 | 30,755 | ||||||
Deferred tax liability | 12,546 | 12,261 | ||||||
Other noncurrent liabilities | 1,896 | 2,548 | ||||||
Total Liabilities | 112,427 | 115,404 | ||||||
Stockholders’ Equity | ||||||||
Series A Convertible Preferred Stock, $.0001 par value, 90,000,000 shares authorized, 83,609,009, issued and outstanding at March 31, 2011 and December 31, 2010, respectively. | 8 | 8 | ||||||
Series B Convertible Preferred Stock, $.0001 par value, 90,000,000 shares authorized, none issued and outstanding at March 31, 2011 and December 31, 2010, respectively. | — | — | ||||||
Redeemable Preferred Stock, $.0001 par value, 90,000,000 shares authorized, none issued and outstanding at March 31, 2011 and December 31, 2010, respectively. | — | — | ||||||
Common stock, $.0001 par value, 105,000,000 shares authorized, 85,398 issued and outstanding at March 31, 2011 and December 31, 2010, respectively. | — | — | ||||||
Additional paid-in capital | 100,183 | 99,577 | ||||||
Retained earnings | 3,991 | 2,541 | ||||||
Total Stockholders’ Equity | 104,182 | 102,126 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 216,609 | $ | 217,530 | ||||
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Quarter Ended | ||||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
(Amount in thousand) | ||||||||
(Unaudited) | ||||||||
Net Operating Revenues | $ | 45,686 | $ | 45,489 | ||||
Expenses: | ||||||||
Salaries and benefits | 29,502 | 27,813 | ||||||
Other operating expenses | 9,914 | 8,945 | ||||||
Provision for bad debts | 208 | 56 | ||||||
Interest and amortization of debt costs | 1,726 | 1,954 | ||||||
Depreciation and amortization | 819 | 914 | ||||||
Total Expenses | 42,169 | 39,682 | ||||||
Income from continuing operations | 3,517 | 5,807 | ||||||
Gain on the sale of assets | 7 | 1 | ||||||
Income from continuing operations before income taxes | 3,524 | 5,808 | ||||||
Provision for income taxes | 1,404 | 2,267 | ||||||
Income from continuing operations | 2,120 | 3,541 | ||||||
Discontinued Operations: | ||||||||
Loss from operations and abandonment of discontinued facility | (106 | ) | (247 | ) | ||||
Income tax benefit | 42 | 96 | ||||||
Loss from discontinued operations | (64 | ) | (151 | ) | ||||
Net Income | $ | 2,056 | $ | 3,390 | ||||
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Quarter Ended | ||||||||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
(Amount in thousand) | ||||||||
(Unaudited) | ||||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 2,056 | $ | 3,390 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Deferred income taxes | 269 | 259 | ||||||
Depreciation and amortization | 819 | 951 | ||||||
Gain on the sale of fixed assets | (7 | ) | (1 | ) | ||||
Amortization of discount on debt and other financing costs | 215 | 183 | ||||||
Changes in operating assets and liabilities: | ||||||||
Patient accounts receivable | (1,044 | ) | (3,120 | ) | ||||
Prepaid expenses and other assets | 72 | 247 | ||||||
Accounts payable and accrued expenses | (1,494 | ) | 4,728 | |||||
Net Cash Provided by Operating Activities | 886 | 6,637 | ||||||
Cash Flows from Investing Activities | ||||||||
Purchases of property and equipment | (403 | ) | (78 | ) | ||||
Proceeds from the sale of fixed assets | 8 | 1 | ||||||
Net Cash Used in Investing Activities | (395 | ) | (77 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Payments on senior term loan | (1,800 | ) | (13,300 | ) | ||||
Other long-term borrowings/(payments) — net | 11 | 15 | ||||||
Net Cash Used in Financing Activities | (1,789 | ) | (13,285 | ) | ||||
Net Change in Cash and Cash Equivalents | (1,298 | ) | (6,725 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 5,307 | 15,294 | ||||||
Cash and Cash Equivalents at End of Period | $ | 4,009 | $ | 8,569 | ||||
Interest Paid | $ | 585 | $ | 580 | ||||
Income Taxes Paid | $ | 65 | $ | 838 |
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Note 2 — | Acquisitions and Dispositions |
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Note 3 — | Property and Equipment |
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
Land and improvements | $ | 5,423 | $ | 5,423 | ||||
Buildings and improvements | 28,693 | 28,521 | ||||||
Furniture, fixtures and equipment | 9,197 | 8,990 | ||||||
Total property and equipment | 43,313 | 42,934 | ||||||
Less: accumulated depreciation | (16,934 | ) | (16,477 | ) | ||||
Property and equipment, net | $ | 26,379 | $ | 26,457 | ||||
Note 4 — | Intangible Assets |
March 31, 2011 | December 31, 2010 | |||||||||||||||
Gross | Accumulated | Gross | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(Unaudited) | ||||||||||||||||
Amortizable intangible assets: | ||||||||||||||||
Customer Relationships | $ | 11,900 | $ | 6,470 | $ | 11,900 | $ | 6,142 | ||||||||
Covenants not to compete | 70 | 68 | 770 | 767 | ||||||||||||
Unamortizable intangible assets: | ||||||||||||||||
Trade names | 13,620 | — | 13,620 | — | ||||||||||||
Certificates of need | 9,700 | — | 9,700 | — | ||||||||||||
Total | $ | 35,290 | $ | 6,538 | $ | 35,990 | $ | 6,909 | ||||||||
Note 5 — | Senior and Subordinated Debt |
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Note 6 — | Commitments and Contingencies |
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Note 7 — | Shareholders’ Equity |
Note 8 — | Income Taxes |
Note 9 — | Subsequent Events |
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December 31, | ||||||||
2009 | 2010 | |||||||
(Amounts in thousands) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 15,294 | $ | 5,307 | ||||
Patient accounts receivable, net of allowances for doubtful accounts of $735 and $1,215, respectively. | 15,365 | 16,693 | ||||||
Deferred tax assets | 461 | 1,499 | ||||||
Prepaid expenses and other current assets | 2,839 | 2,093 | ||||||
Total Current Assets | 33,959 | 25,592 | ||||||
Property and equipment, net | 28,333 | 26,457 | ||||||
Goodwill | 157,502 | 133,974 | ||||||
Other intangibles, net of accumulated amortization of $5,475 and $6,909, respectively. | 30,515 | 29,081 | ||||||
Debt issuance costs, net of accumulated amortization of $2,744 and $3,423, respectively. | 2,179 | 1,500 | ||||||
Other noncurrent assets | 2,132 | 926 | ||||||
Total Assets | $ | 254,620 | $ | 217,530 | ||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 1,548 | $ | 3,666 | ||||
Accrued salaries and wages | 6,066 | 6,417 | ||||||
Other accrued expenses | 4,349 | 4,439 | ||||||
Current maturities of long-term debt | 13,273 | 1,247 | ||||||
Total Current Liabilities | 25,236 | 15,769 | ||||||
Senior secured notes | 68,178 | 54,071 | ||||||
Senior subordinated notes | 30,676 | 30,755 | ||||||
Deferred tax liability | 13,893 | 12,261 | ||||||
Other noncurrent liabilities | 2,716 | 2,548 | ||||||
Total Liabilities | 140,699 | 115,404 | ||||||
Stockholders’ Equity | ||||||||
Series A Convertible Preferred Stock, $.0001 par value, 90,000,000 shares authorized, 83,609,009, issued and outstanding at December 31, 2009 and 2010. | 8 | 8 | ||||||
Series B Convertible Preferred Stock, $.0001 par value, 90,000,000 shares authorized, none issued and outstanding at December 31, 2009 and 2010. | — | — | ||||||
Redeemable Preferred Stock, $.0001 par value, 90,000,000 shares authorized, none issued and outstanding at December 31, 2009 and 2010. | — | — | ||||||
Common stock, $.0001 par value, 105,000,000 shares authorized, 85,398 issued and outstanding at December 31, 2009 and 2010, respectively. | — | — | ||||||
Additional paid-in capital | 97,119 | 99,577 | ||||||
Retained earnings | 16,794 | 2,541 | ||||||
Total Stockholders’ Equity | 113,921 | 102,126 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 254,620 | $ | 217,530 | ||||
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For the Years Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Amounts in thousands) | ||||||||||||
Net Operating Revenues | $ | 180,646 | $ | 186,586 | $ | 184,386 | ||||||
Expenses: | ||||||||||||
Salaries and benefits | 110,966 | 113,870 | 113,931 | |||||||||
Other operating expenses | 37,648 | 37,592 | 38,155 | |||||||||
Provision for (recoveries of) bad debts | 1,902 | (309 | ) | 525 | ||||||||
Interest and amortization of debt costs | 12,488 | 9,572 | 7,514 | |||||||||
Depreciation and amortization | 9,419 | 7,052 | 3,456 | |||||||||
Impairment of goodwill | — | — | 23,528 | |||||||||
Total Expenses | 172,423 | 167,777 | 187,109 | |||||||||
Income/(Loss) from continuing operations | 8,223 | 18,809 | (2,723 | ) | ||||||||
Gain/(Loss) on the sale of assets | (56 | ) | (15 | ) | 9 | |||||||
Income/(Loss) from continuing operations before income taxes | 8,167 | 18,794 | (2,714 | ) | ||||||||
Provision for income taxes | 3,132 | 7,133 | 5,032 | |||||||||
Income/(Loss) from continuing operations | 5,035 | 11,661 | (7,746 | ) | ||||||||
Discontinued Operations: | ||||||||||||
Income (loss) from operations and abandonment of discontinued facility | 1,654 | (2,356 | ) | (6,068 | ) | |||||||
Income tax benefit (expense) | (690 | ) | 913 | 2,008 | ||||||||
Income (loss) from discontinued operations | 964 | (1,443 | ) | (4,060 | ) | |||||||
Net Income/(Loss) | 5,999 | 10,218 | (11,806 | ) | ||||||||
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Additional | Total | |||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Retained | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||||||||
Balance at December 31, 2007 | 81,802 | $ | 8 | 31 | $ | — | $ | 91,483 | $ | 5,156 | $ | 96,647 | ||||||||||||||||
Preferred Stock Undeclared Dividends | — | — | — | — | 2,264 | (2,264 | ) | — | ||||||||||||||||||||
Stock Options Exercised | — | — | 54 | — | 11 | — | 11 | |||||||||||||||||||||
Stock Based Compensation | — | — | — | — | 8 | — | 8 | |||||||||||||||||||||
Excess Tax Benefit Resulting from Stock Options Exercised | — | — | — | — | 31 | — | 31 | |||||||||||||||||||||
Net Income | — | — | — | — | — | 5,999 | 5,999 | |||||||||||||||||||||
Balance at December 31, 2008 | 81,802 | $ | 8 | 85 | $ | — | 93,797 | $ | 8,891 | $ | 102,696 | |||||||||||||||||
Preferred Stock Undeclared Dividends | — | — | — | — | 2,315 | (2,315 | ) | — | ||||||||||||||||||||
Stock Options Exercised | 1,807 | — | — | — | 308 | — | 308 | |||||||||||||||||||||
Stock Based Compensation | — | — | — | — | 9 | — | 9 | |||||||||||||||||||||
Excess Tax Benefit Resulting from Stock Options Exercised | — | — | — | — | 690 | — | 690 | |||||||||||||||||||||
Net Income | — | — | — | — | — | 10,218 | 10,218 | |||||||||||||||||||||
Balance at December 31, 2009 | 83,609 | 8 | 85 | — | 97,119 | 16,794 | 113,921 | |||||||||||||||||||||
Preferred Stock Undeclared Dividends | — | — | — | — | 2,447 | (2,447 | ) | — | ||||||||||||||||||||
Stock Based Compensation | — | — | — | — | 11 | — | 11 | |||||||||||||||||||||
Net Loss | — | — | — | — | — | (11,806 | ) | (11,806 | ) | |||||||||||||||||||
Balance at December 31, 2010 | 83,609 | $ | 8 | 85 | $ | — | $ | 99,577 | $ | 2,541 | $ | 102,126 | ||||||||||||||||
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For the Years Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Amounts in thousands) | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net income (loss) | $ | 5,999 | $ | 10,218 | $ | (11,806 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Deferred income taxes | (960 | ) | 1,076 | (2,670 | ) | |||||||
Stock based compensation | 8 | 9 | 11 | |||||||||
Depreciation and amortization | 9,627 | 7,210 | 3,587 | |||||||||
Impairment of tangible assets and goodwill | — | — | 24,583 | |||||||||
Loss on the sale of fixed assets | 56 | 15 | (9 | ) | ||||||||
Amortization of discount on debt and deferred financing costs | 910 | 773 | 827 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Patient accounts receivable | 1,401 | 2,926 | (1,327 | ) | ||||||||
Prepaid expenses and other assets | 920 | 1,129 | 1,826 | |||||||||
Accounts payable and accrued expenses | (1,096 | ) | (2,379 | ) | 2,390 | |||||||
Net Cash Provided by Operating Activities | 16,865 | 20,977 | 17,412 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Purchases of property and equipment | (2,367 | ) | (1,492 | ) | (1,316 | ) | ||||||
Proceeds from the sale of fixed assets | 13 | 18 | 19 | |||||||||
Acquisition costs | 1,000 | |||||||||||
Net Cash Used in Investing Activities | (1,354 | ) | (1,474 | ) | (1,297 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from issuance of preferred stock | — | 308 | — | |||||||||
Proceeds from issuance of common stock | 11 | |||||||||||
Excess tax benefits related to stock option exercise | 31 | 690 | — | |||||||||
Payments on senior term loan | (1,200 | ) | (25,700 | ) | (26,100 | ) | ||||||
Payments on capital leases | (308 | ) | (359 | ) | — | |||||||
Other long-term borrowings/(payments) — net | (46 | ) | (22 | ) | (2 | ) | ||||||
Net Cash Used in Financing Activities | (1,512 | ) | (25,083 | ) | (26,102 | ) | ||||||
Net Change in Cash and Cash Equivalents | 13,999 | (5,580 | ) | (9,987 | ) | |||||||
Cash and Cash Equivalents at Beginning of Period | 6,875 | 20,874 | 15,294 | |||||||||
Cash and Cash Equivalents at End of Period | $ | 20,874 | $ | 15,294 | $ | 5,307 | ||||||
Interest Paid | $ | 11,931 | $ | 9,505 | $ | 7,274 | ||||||
Income Taxes Paid | $ | 4,014 | $ | 4,969 | $ | 6,032 |
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1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
December 31, | ||||||||||||||||
2009 | 2010 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Private Pay | 1,324 | 0.7% | 1,001 | 0.6% | ||||||||||||
Commercial | 4,937 | 2.7% | 4,656 | 2.5% | ||||||||||||
Medicaid | 180,325 | 96.6% | 178,729 | 96.9% | ||||||||||||
Total | 186,586 | 184,386 |
Current | 30-60 | 60-90 | 90-120 | 120-150 | >150 | Total | ||||||||||||||||||||||
Private Pay | $ | 100 | $ | 70 | $ | 7 | $ | 2 | $ | 4 | $ | — | $ | 183 | ||||||||||||||
Commercial | 457 | 174 | 34 | 20 | 34 | 17 | 736 | |||||||||||||||||||||
Medicaid | 10,289 | 1,858 | 678 | 1,276 | 310 | 35 | 14,446 | |||||||||||||||||||||
Total | $ | 10,846 | $ | 2,102 | $ | 719 | $ | 1,298 | $ | 348 | $ | 52 | $ | 15,365 | ||||||||||||||
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Current | 30-60 | 60-90 | 90-120 | 120-150 | >150 | Total | ||||||||||||||||||||||
Private Pay | $ | 139 | $ | 14 | $ | 6 | $ | 6 | $ | 3 | $ | — | $ | 168 | ||||||||||||||
Commercial | 591 | 179 | 88 | 26 | 7 | 50 | 941 | |||||||||||||||||||||
Medicaid | 10,749 | 2,681 | 633 | 1,215 | 204 | 102 | 15,584 | |||||||||||||||||||||
Total | $ | 11,479 | $ | 2,874 | $ | 727 | $ | 1,247 | $ | 214 | $ | 152 | $ | 16,693 | ||||||||||||||
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Balance at December 31, 2009 | $ | 157,502 | ||
Impairment losses | (23,528 | ) | ||
Balance at December 31, 2010 | $ | 133,974 | ||
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December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Weighted average grant-date fair value of options | $ | 0.08 | $ | 0.08 | $ | 0.09 | ||||||
Risk-free interest rate | 3.8 | % | 2.7 | % | 3.7 | % | ||||||
Expected Volatility | 42.2 | % | 41.0 | % | 45.0 | % | ||||||
Expected life in years | 5.0 | 5.0 | 5.0 | |||||||||
Dividend yield | — | — | — |
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• | Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities; | |
• | Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets, but corroborated by market data; and | |
• | Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available. |
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2. | ACQUISITIONS/DISPOSITIONS |
3. | PROPERTY AND EQUIPMENT |
December 31, | ||||||||
2009 | 2010 | |||||||
Land and improvements | $ | 5,392 | $ | 5,423 | ||||
Buildings and improvements | 30,247 | 28,521 | ||||||
Furniture, fixtures and equipment | 8,290 | 8,990 | ||||||
Total property and equipment | 43,929 | 42,934 | ||||||
Less: accumulated depreciation | (15,596 | ) | (16,477 | ) | ||||
Property and equipment, net | $ | 28,333 | $ | 26,457 | ||||
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4. | INTANGIBLE ASSETS |
December 31, | ||||||||||||||||
2009 | 2010 | |||||||||||||||
Gross | Accumulated | Gross | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Amortizable intangible assets: | ||||||||||||||||
Customer Relationships | $ | 11,900 | $ | 4,720 | $ | 11,900 | $ | 6,142 | ||||||||
Covenants not to compete | 770 | 755 | 770 | 767 | ||||||||||||
Unamortizable intangible assets: | ||||||||||||||||
Trade names | 13,620 | — | 13,620 | — | ||||||||||||
Certificates of need | 9,700 | — | 9,700 | — | ||||||||||||
Total | $ | 35,990 | $ | 5,475 | $ | 35,990 | $ | 6,909 | ||||||||
Future | ||||
Year | Amortization | |||
2011 | $ | 1,312 | ||
2012 | 1,175 | |||
2013 | 1,051 | |||
2014 | 942 | |||
2015 | 844 | |||
Thereafter | 437 | |||
Total | $ | 5,761 | ||
5. | LONG TERM DEBT |
December 31, | ||||||||
2009 | 2010 | |||||||
Revolving Loan | $ | — | $ | — | ||||
Senior Secured Term Loan | 81,300 | 55,200 | ||||||
Senior Unsecured Subordinated Loans | 31,000 | 31,000 | ||||||
Unamortized Discount on Warrants | (324 | ) | (245 | ) | ||||
Capital Lease Obligation (See Note 7) | 55 | — | ||||||
Other Notes | 96 | 118 | ||||||
Total Long-Term Debt | 112,127 | 86,073 | ||||||
Less: Current Portion of Long-Term Debt | (13,273 | ) | (1,247 | ) | ||||
Total Non-Current Portion of Long-Term Debt | $ | 98,854 | $ | 84,826 | ||||
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Year | Term Loan | |||
2011 | $ | 1,200 | ||
2012 | 1,200 | |||
2013 | 52,800 | |||
Total | $ | 55,200 | ||
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Year | Amount | |||
2011 | $ | 1,247 | ||
2012 | 1,230 | |||
2013 | 52,825 | |||
2014 | 30,765 | |||
2015 | 5 | |||
Total | $ | 86,072 | ||
6. | STOCK — BASED COMPENSATION |
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Weighted | ||||||||||||||||
Option | Weighted | Average | ||||||||||||||
Price | Average | Remaining | ||||||||||||||
Number of | per | Exercise | Contractual | |||||||||||||
Shares | Share | Price | Term (in Years) | |||||||||||||
Outstanding at December 31, 2007 | 9,044 | $ | 0.20 | $ | 0.20 | 7.14 | ||||||||||
Granted | 150 | $ | 0.20 | $ | 0.20 | n/a | ||||||||||
Exercised | (54 | ) | $ | 0.20 | $ | 0.20 | n/a | |||||||||
Forfeited | (139 | ) | $ | 0.20 | $ | 0.20 | n/a | |||||||||
Outstanding at December 31, 2008 | 9,001 | $ | 0.20 | $ | 0.20 | 6.16 | ||||||||||
Granted | 242 | $ | 0.20 | $ | 0.20 | n/a | ||||||||||
Exercised | — | $ | 0.20 | $ | 0.20 | n/a | ||||||||||
Forfeited | (1,578 | ) | $ | 0.20 | $ | 0.20 | n/a | |||||||||
Outstanding at December 31, 2009 | 7,665 | $ | 0.20 | $ | 0.20 | 5.27 | ||||||||||
Granted | 287 | $ | 0.20 | $ | 0.20 | n/a | ||||||||||
Exercised | — | $ | 0.20 | $ | 0.20 | n/a | ||||||||||
Forfeited | (295 | ) | $ | 0.20 | $ | 0.20 | n/a | |||||||||
Outstanding at December 31, 2010 | 7,657 | $ | 0.20 | $ | 0.20 | 4.50 | ||||||||||
Options Outstanding | Options Exercisable | |||||||||
Weighted | ||||||||||
Weighted | Average | Weighted | ||||||||
Average | Remaining | Average | ||||||||
Number of | Exercise | Contractual | Exercise | |||||||
Exercise Price | Shares | Price | Term (in Years) | Exercisable | Price | |||||
$0.20 | 7,657 | $0.20 | 4.5 | 7,133 | $0.20 | |||||
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7. | COMMITMENTS AND CONTINGENCIES |
Building and Land | $ | 1,885 | ||
Less: accumulated depreciation | (1,885 | ) | ||
Total assets held under capital leases | $ | — | ||
Operating | ||||
Year | Leases | |||
2011 | $ | 5,341 | ||
2012 | 4,230 | |||
2013 | 2,136 | |||
2014 | 1,049 | |||
2015 | 214 | |||
Thereafter | 6 | |||
Total minimum lease payments | $ | 12,976 | ||
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F-64
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8. | EMPLOYEE BENEFIT PLAN |
9. | INCOME TAXES |
2008 | 2009 | 2010 | ||||||||||
Current: | ||||||||||||
Federal | $ | 3,487 | $ | 5,286 | $ | 6,018 | ||||||
State | 494 | 677 | 713 | |||||||||
Deferred: | ||||||||||||
Federal | (700 | ) | 1,003 | (1,518 | ) | |||||||
State | (149 | ) | 167 | (181 | ) | |||||||
Provision for income taxes from continuing operations | $ | 3,132 | $ | 7,133 | $ | 5,032 | ||||||
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December 31, | ||||||||
2009 | 2010 | |||||||
Deferred Tax Assets: | ||||||||
Accrued Vacation | 288 | 452 | ||||||
Accrued Bonus | 170 | 158 | ||||||
Health Claims Reserve | — | 720 | ||||||
Bad Debt Allowance | 291 | 447 | ||||||
Depreciation | 1,060 | 897 | ||||||
Noncompete Agreement | 250 | 228 | ||||||
Professional Liability Reserve | 661 | 587 | ||||||
Capital Lease Adjustment | 557 | — | ||||||
Post Acq State NOLs | 338 | 339 | ||||||
Other | 69 | 50 | ||||||
Total Gross Deferred Tax Assets | 3,684 | 3,878 | ||||||
Deferred Tax Liabilities: | ||||||||
Prepaid Expense | (299 | ) | (292 | ) | ||||
Goodwill | (7,791 | ) | (6,269 | ) | ||||
Purchase Accounting: Capital Lease | (557 | ) | — | |||||
Acquired Intangibles | (7,692 | ) | (7,485 | ) | ||||
Transaction Costs | (516 | ) | (331 | ) | ||||
Other | (20 | ) | (15 | ) | ||||
Total Gross Deferred Tax Liabilities | (16,875 | ) | (14,392 | ) | ||||
Valuation Allowance | (241 | ) | (248 | ) | ||||
Net Deferred Tax Liability | (13,432 | ) | (10,762 | ) | ||||
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December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Federal statutory rate | 34.0 | % | 34.0 | % | 34.0 | % | ||||||
State taxes, net of federal benefit | 4.4 | 4.6 | (21.2 | ) | ||||||||
Goodwill impairment | — | — | (196.0 | ) | ||||||||
Other permanent items | (0.10 | ) | (0.7 | ) | (2.2 | ) | ||||||
38.3 | % | 37.9 | % | (185.4 | )% | |||||||
10. | CAPITAL STOCK |
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11. | SUBSEQUENT EVENTS |
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F-70
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June 30, | ||||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,668,521 | $ | 4,540,278 | ||||
Accounts receivable, net of allowance for doubtful accounts of $5,049,892 and $3,002,323 at June 30, 2011 and 2010, respectively | 11,078,840 | 8,776,283 | ||||||
Prepaid expenses | 561,044 | 490,662 | ||||||
Other receivables and advances | 2,135,435 | 743,454 | ||||||
Deferred tax assets | 1,919,435 | 1,145,742 | ||||||
Total current assets | 19,363,275 | 15,696,419 | ||||||
Restricted cash | — | 512,197 | ||||||
Accounts receivable, non-current | 27,168 | 17,548 | ||||||
Other receivables | 43,152 | 58,169 | ||||||
Property and equipment, net | 4,713,132 | 4,527,376 | ||||||
Deferred financing costs, net of amortization of $729,502 and $582,971 at June 30, 2011 and 2010, respectively | 549,760 | 189,270 | ||||||
Goodwill | 969,098 | 969,098 | ||||||
Deferred tax assets- long term | 647,743 | 1,495,144 | ||||||
Other assets | 1,968,662 | 2,184,749 | ||||||
Total assets | $ | 28,281,990 | $ | 25,649,970 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 348,081 | $ | 796,244 | ||||
Revolving credit note | 1,814,877 | 1,336,025 | ||||||
Current portion of obligations under capital leases | 19,558 | 112,909 | ||||||
Accounts payable | 2,890,362 | 2,036,803 | ||||||
Accrued payroll, payroll taxes and benefits | 2,026,911 | 2,152,724 | ||||||
Accrued expenses and other liabilities | 2,237,982 | 1,040,487 | ||||||
Income taxes payable | 129,160 | 23,991 | ||||||
Total current liabilities | 9,466,931 | 7,499,183 | ||||||
Long-term debt, less current maturities | 56,702 | 292,282 | ||||||
Obligations under capital leases | — | 19,558 | ||||||
Long-term accrued liabilities | 843,296 | 582,953 | ||||||
Total liabilities | 10,366,929 | 8,393,976 | ||||||
Commitments and contingent liabilities (Note I) | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, 1,000,000 shares authorized, none issued | — | — | ||||||
Class A Common Stock, $.01 par value; 30,000,000 shares authorized, 19,978,211 and 19,867,826 shares issued at June 30, 2011 and 2010, respectively | 199,782 | 198,679 | ||||||
Class B Common Stock, $.01 par value; 2,000,000 shares authorized, 773,717 and 775,021 issued and outstanding at June 30, 2011 and 2010, respectively, each convertible into one share of Class A Common Stock | 7,737 | 7,750 | ||||||
Additional paid-in capital | 28,220,835 | 27,927,536 | ||||||
Treasury stock, 1,214,093 and 1,040,598 Class A common shares at cost at | ||||||||
June 30, 2011 and 2010, respectively | (1,808,734 | ) | (1,593,407 | ) | ||||
Accumulated deficit | (8,704,559 | ) | (9,284,564 | ) | ||||
Total stockholders’ equity | 17,915,061 | 17,255,994 | ||||||
Total liabilities and stockholders’ equity | $ | 28,281,990 | $ | 25,649,970 | ||||
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For the Years Ended June 30, | ||||||||
2011 | 2010 | |||||||
Revenues: | ||||||||
Patient care, net | $ | 57,495,735 | $ | 49,647,395 | ||||
Contract support services | 4,512,144 | 3,429,831 | ||||||
Total revenues | 62,007,879 | 53,077,226 | ||||||
Operating expenses: | ||||||||
Patient care expenses | 30,234,829 | 26,306,828 | ||||||
Cost of contract support services | 3,617,509 | 2,964,621 | ||||||
Provision for doubtful accounts | 3,406,443 | 2,131,392 | ||||||
Administrative expenses | 22,206,455 | 19,110,638 | ||||||
Legal settlement | 446,320 | — | ||||||
Total operating expenses | 59,911,556 | 50,513,479 | ||||||
Income from operations | 2,096,323 | 2,563,747 | ||||||
Other income (expense): | ||||||||
Interest income | 263,523 | 142,060 | ||||||
Interest expense | (310,673 | ) | (326,582 | ) | ||||
Other income, net | (61,232 | ) | 146,537 | |||||
Total other expense, net | (108,382 | ) | (37,985 | ) | ||||
Income before income taxes | 1,987,941 | 2,525,762 | ||||||
Provision for income taxes | 1,407,936 | 1,106,100 | ||||||
Net income applicable to common shareholders | $ | 580,005 | $ | 1,419,662 | ||||
Basic net income per common share | $ | 0.03 | $ | 0.07 | ||||
Basic weighted average number of shares outstanding | 19,504,943 | 19,813,783 | ||||||
Fully diluted net income per common share | $ | 0.03 | $ | 0.07 | ||||
Fully diluted weighted average number of shares outstanding | 19,787,461 | 19,914,954 | ||||||
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Class A | Class B | Additional | Class A | |||||||||||||||||||||||||||||||||
Common Stock | Common Stock | Paid-in | Treasury Stock | Accumulated | ||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Total | ||||||||||||||||||||||||||||
Balance — June 30, 2009 | 19,840,793 | $ | 198,408 | 775,080 | $ | 7,751 | $ | 27,667,597 | 626,541 | $ | (1,125,707 | ) | $ | (10,704,226 | ) | $ | 16,043,823 | |||||||||||||||||||
Stock-based compensation expense | 221,404 | 221,404 | ||||||||||||||||||||||||||||||||||
Issuance of shares for options exercised | 2,000 | 20 | 1,600 | 1,620 | ||||||||||||||||||||||||||||||||
Issuance of employee stock purchase plan shares | 24,974 | 250 | 36,935 | 37,185 | ||||||||||||||||||||||||||||||||
Purchase of treasury shares | ||||||||||||||||||||||||||||||||||||
Conversion from Class B to Class A | 59 | 1 | (59 | ) | (1 | ) | 414,057 | (467,700 | ) | (467,700 | ) | |||||||||||||||||||||||||
Net income | 1,419,662 | 1,419,662 | ||||||||||||||||||||||||||||||||||
Balance — June 30, 2010 | 19,867,826 | 198,679 | 775,021 | 7,750 | 27,927,536 | 1,040,598 | (1,593,407 | ) | (9,284,564 | ) | 17,255,994 | |||||||||||||||||||||||||
Stock-based compensation expense | 164,916 | 164,916 | ||||||||||||||||||||||||||||||||||
Issuance of shares for options exercised | 95,000 | 950 | 102,790 | 103,740 | ||||||||||||||||||||||||||||||||
Fair value of warrants issued | 11,626 | 11,626 | ||||||||||||||||||||||||||||||||||
Issuance of employee stock purchase plan shares | 14,081 | 140 | 13,967 | 14,107 | ||||||||||||||||||||||||||||||||
Purchase of treasury shares | 173,495 | (215,327 | ) | (215,327 | ) | |||||||||||||||||||||||||||||||
Conversion from Class B to Class A | 1,304 | 13 | (1,304 | ) | (13 | ) | ||||||||||||||||||||||||||||||
Net income | 580,005 | 580,005 | ||||||||||||||||||||||||||||||||||
Balance — June 30, 2011 | 19,978,211 | $ | 199,782 | 773,717 | $ | 7,737 | $ | 28,220,835 | 1,214,093 | $ | (1,808,734 | ) | $ | (8,704,559 | ) | $ | 17,915,061 | |||||||||||||||||||
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For the Years Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 580,005 | $ | 1,419,662 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Non-cash (gain)/loss on equity method investments | (25,864 | ) | (17,562 | ) | ||||
Loss on disposal of property and equipment | — | 3,831 | ||||||
Depreciation and amortization | 1,105,249 | 1,156,569 | ||||||
Non-cash interest expense | 146,531 | 146,531 | ||||||
Deferred income taxes | 73,708 | 185,093 | ||||||
Fair value of warrants | 11,626 | — | ||||||
Stock-based compensation | 164,916 | 221,404 | ||||||
Provision for doubtful accounts | 3,406,443 | 2,131,392 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts and other receivables | (6,256,335 | ) | (4,475,536 | ) | ||||
Prepaid expenses and other current assets | (70,382 | ) | (15,136 | ) | ||||
Other assets | 524,438 | 12,910 | ||||||
Accounts payable | 670,548 | 656,755 | ||||||
Accrued expenses and other liabilities | 1,408,237 | 768,017 | ||||||
Net cash provided by operations | 1,739,120 | 2,193,930 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of property and equipment | (1,081,810 | ) | (751,843 | ) | ||||
Purchase of licenses | (52,466 | ) | (22,208 | ) | ||||
Equity investment in unconsolidated subsidiary | 72,980 | 33,528 | ||||||
Investment in note receivable | (1,001,934 | ) | — | |||||
Principal receipts on note receivable | 162,685 | — | ||||||
Net cash used in investing activities | (1,900,545 | ) | (740,523 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment on revolving debt, net | 478,852 | 472,621 | ||||||
Principal payments on long-term debt and capital lease obligations | (796,652 | ) | (156,199 | ) | ||||
Cash paid for deferred financing costs | (295,052 | ) | — | |||||
Purchase of treasury stock | (215,327 | ) | (467,700 | ) | ||||
Proceeds from issuance of common stock, net | 117,847 | 38,805 | ||||||
Net cash used in financing activities | (710,332 | ) | (112,473 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (871,757 | ) | 1,340,934 | |||||
Beginning cash and cash equivalents | 4,540,278 | 3,199,344 | ||||||
Cash and cash equivalents, end of year | $ | 3,668,521 | $ | 4,540,278 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 164,141 | $ | 180,048 | ||||
Income taxes | 1,248,147 | 864,525 | ||||||
Supplemental disclosure of non-cash financing and investing transactions: | ||||||||
Conversion of Class B to Class A common stock | $ | 13 | $ | 59 | ||||
Accrued and unpaid deferred financing costs | 211,922 | — |
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NOTE A — | THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Assets | Estimated Useful Life | |
Buildings | 39 years | |
Furniture and equipment | 3 through 10 years | |
Motor vehicles | 5 years | |
Leasehold improvements | Lesser of useful life or term of lease (2 to 10 years) |
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• Level 1: | Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
• Level 2: | Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
• Level 3: | Unobservable inputs that reflect the reporting entity’s own assumptions. |
Years Ended June 30, | ||||||||
2011 | 2010 | |||||||
Weighted average shares outstanding — basic | 19,504,943 | 19,813,783 | ||||||
Employee stock options and warrants | 282,518 | 101,171 | ||||||
Weighted average shares outstanding — fully diluted | 19,787,461 | 19,914,954 | ||||||
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Years Ended June 30, | ||||||||
2011 | 2010 | |||||||
Employee stock options | 502,250 | 921,500 | ||||||
Warrants | 363,000 | 343,000 | ||||||
Total | 865,250 | 1,264,500 | ||||||
Year Ended | Year Ended | |||||||
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
Directors fees | $ | 75,845 | $ | 63,870 | ||||
Employee compensation | 89,071 | 157,534 | ||||||
Total | $ | 164,916 | $ | 221,404 | ||||
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Year Ended June 30, | ||||
2011 | 2010 | |||
Risk free interest rate | 2.50% | 2.30% - 3.48% | ||
Expected dividend yield | — | — | ||
Expected lives | 5 - 10 years | 5 - 10 years | ||
Expected volatility | 61.61% - 72.06% | 60.66% - 61.63% |
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NOTE B — | NOTE RECEIVABLE |
NOTE C — | OTHER EXPENSE |
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NOTE D — | PROPERTY AND EQUIPMENT |
As of June 30, | ||||||||
2011 | 2010 | |||||||
Land | $ | 69,259 | $ | 69,259 | ||||
Buildings | 1,136,963 | 1,136,963 | ||||||
Furniture and equipment | 4,285,785 | 3,913,670 | ||||||
Motor vehicles | 173,492 | 152,964 | ||||||
Leasehold improvements | 5,020,183 | 4,332,770 | ||||||
10,685,682 | 9,605,626 | |||||||
Less accumulated depreciation and amortization | 5,972,550 | 5,078,250 | ||||||
Property and equipment, net | $ | 4,713,132 | $ | 4,527,376 | ||||
NOTE E — | GOODWILL AND OTHER INTANGIBLE ASSETS: |
NOTE F — | OTHER ASSETS |
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As of June 30, | ||||||||
Description | 2011 | 2010 | ||||||
Software development & license fees | $ | 790,225 | $ | 947,358 | ||||
Investment in unconsolidated subsidiary | 990,216 | 1,037,331 | ||||||
Deposits and other assets | 188,221 | 200,060 | ||||||
Total | $ | 1,968,662 | $ | 2,184,749 | ||||
Year Ending June 30, | Amount | |||
2012 | $ | 183,943 | ||
2013 | 172,389 | |||
2014 | 169,327 | |||
2015 | 48,274 | |||
2016 | 2,322 | |||
Thereafter | 213,970 | |||
$ | 790,225 | |||
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NOTE G — | NOTES PAYABLE AND LONG-TERM DEBT |
As of June 30, | ||||||||
2011 | 2010 | |||||||
Term mortgage note payable with monthly principal installments of $50,000 beginning July 1, 2007 increasing to $62,500 July 1, 2009 until the loan terminates. The note bears interest at prime (3.25% at June 30, 2011) plus 0.75% but not less than 6.25% and is collateralized by all of the assets of the Company and its material subsidiaries | $ | 297,500 | $ | 935,000 | ||||
Mortgage note due in monthly installments of $4,850 including interest at 9% through July 1, 2012, when the remaining principal balance is payable, collateralized by a first mortgage on the PHC of Virginia, Inc, Mount Regis Center facility | 107,283 | 153,526 | ||||||
Total | 404,783 | 1,088,526 | ||||||
Less current maturities | 348,081 | 796,244 | ||||||
Long-term portion | $ | 56,702 | $ | 292,282 | ||||
Year Ending June 30, | Amount | |||
2012 | $ | 348,081 | ||
2013 | 56,702 | |||
$ | 404,783 | |||
NOTE H — | CAPITAL LEASE OBLIGATION |
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June 30, | ||||||||
2011 | 2010 | |||||||
Equipment and software | $ | 321,348 | $ | 338,936 | ||||
Less accumulated amortization and depreciation | (183,627 | ) | (153,774 | ) | ||||
$ | 137,721 | $ | 185,162 | |||||
NOTE I — | ACCRUED EXPENSES AND OTHER LIABILITIES |
June 30, | ||||||||
2011 | 2010 | |||||||
Accrued contract expenses | $ | 702,054 | $ | 503,636 | ||||
Accrued legal and accounting | 1,127,623 | 313,313 | ||||||
Accrued operating expenses | 1,251,601 | 806,491 | ||||||
Total | 3,081,278 | 1,623,440 | ||||||
Less long-term accrued expenses | 843,296 | 582,953 | ||||||
Accrued expenses current | $ | 2,237,982 | $ | 1,040,487 | ||||
NOTE J — | INCOME TAXES |
Years Ended June 30, | ||||||||
2011 | 2010 | |||||||
Deferred tax asset: | ||||||||
Stock based compensation | $ | 37,800 | $ | 33,382 | ||||
Allowance for doubtful accounts | 1,918,939 | 1,140,871 | ||||||
Transaction costs | 193,791 | — | ||||||
Depreciation | 24,827 | 446,825 | ||||||
Difference between book and tax bases of intangible assets | 391,325 | 855,786 | ||||||
Credits | — | 210,186 | ||||||
Operating loss carryforward | — | 99,068 | ||||||
Other | 496 | 4,871 | ||||||
Gross deferred tax asset | $ | 2,567,178 | $ | 2,790,989 | ||||
Less valuation allowance | — | (150,103 | ) | |||||
Net deferred tax asset | $ | 2,567,178 | $ | 2,640,886 | ||||
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Years Ended June 30, | ||||||||
2011 | 2010 | |||||||
Net deferred tax asset: | ||||||||
Current portion | $ | 1,919,435 | $ | 1,145,742 | ||||
Long-term portion | 647,743 | 1,495,144 | ||||||
$ | 2,567,178 | $ | 2,640,886 | |||||
2011 | 2010 | |||||||
Current | ||||||||
Federal | $ | 772,611 | $ | 313,232 | ||||
State | 561,617 | 607,775 | ||||||
1,334,228 | 921,007 | |||||||
Deferred | ||||||||
Federal | (62,768 | ) | 330,222 | |||||
State | 136,476 | (145,129 | ) | |||||
73,708 | 185,093 | |||||||
Income tax provision | $ | 1,407,936 | $ | 1,106,100 | ||||
2011 | 2010 | |||||||
Income tax provision at federal statutory rate | 34.0 | % | 34.0 | % | ||||
Increase (decrease) in tax resulting from: | ||||||||
State tax provision, net of federal benefit | 23.16 | 11.77 | ||||||
Non-deductible expenses | 1.93 | 3.65 | ||||||
Transaction costs | 18.77 | 0.00 | ||||||
Change in valuation allowance | (7.55 | ) | 0.35 | |||||
Prior year refunds | (0.62 | ) | (8.49 | ) | ||||
Other, net | 1.11 | 2.49 | ||||||
Effective income tax rate | 70.80 | % | 43.77 | % | ||||
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NOTE K — | COMMITMENTS AND CONTINGENT LIABILITIES |
Year Ending June 30, | Amount | |||
2012 | $ | 3,480,838 | ||
2013 | 3,066,926 | |||
2014 | 2,831,549 | |||
2015 | 2,533,014 | |||
2016 | 2,379,368 | |||
Thereafter | 5,279,168 | |||
$ | 19,570,863 | |||
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NOTE L — | STOCKHOLDERS’ EQUITY AND STOCK PLANS |
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Number | Weighted-Average | |||||||||||||||
of | Exercise | Remaining | Aggregate | |||||||||||||
Shares | Price | Contractual Term | Intrinsic Value | |||||||||||||
Outstanding balance — June 30, 2009 | 1,544,250 | $ | 1.98 | |||||||||||||
Granted | 235,000 | 1.09 | ||||||||||||||
Exercised | (2,000 | ) | 0.81 | $ | 680 | |||||||||||
Expired | (218,750 | ) | 1.70 | |||||||||||||
Outstanding balance — June 30, 2010 | 1,558,500 | 1.89 | ||||||||||||||
Granted | 112,000 | 1.65 | ||||||||||||||
Exercised | (95,000 | ) | 1.09 | $ | 98,560 | |||||||||||
Expired | (288,250 | ) | 2.32 | |||||||||||||
Outstanding balance — June 30, 2011 | 1,287,250 | 1.83 | 3.83 years | $ | 1,887,125 | |||||||||||
Exercisable at June 30, 2011 | 1,034,186 | 1.96 | 3.29 years | $ | 1,388,225 | |||||||||||
Exercisable at June 30, 2010 | 1,189,372 | $ | 2.01 | 3.02 years | $ | 58,773 | ||||||||||
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Date of | Number of | Exercise Price | Expiration | |||||||||
Issuance | Description | Shares | Per Share | Date | ||||||||
06/13/2007 | Warrants issued in conjunction with long-term debt transaction, $456,880 recorded as deferred financing costs | 250,000 | $ | 3.09 | June 2017 | |||||||
09/01/2007 | Warrants issued for consulting services $7,400 charged to professional fees | 6,000 | $ | 3.50 | Sept 2012 | |||||||
10/01/2007 | Warrants issued for consulting services $6,268 charged to professional fees | 6,000 | $ | 3.50 | Oct 2012 | |||||||
11/01/2007 | Warrants issued for consulting services $6,013 charged to professional fees | 6,000 | $ | 3.50 | Nov 2012 | |||||||
12/01/2007 | Warrants issued for consulting services $6,216 charged to professional fees | 6,000 | $ | 3.50 | Dec 2012 | |||||||
01/01/2008 | Warrants issued for consulting services $7,048 charged to professional fees | 6,000 | $ | 3.50 | Jan 2013 | |||||||
02/01/2008 | Warrants issued for consulting services $5,222 charged to professional fees | 6,000 | $ | 3.50 | Feb 2013 | |||||||
03/01/2008 | Warrants issued for consulting services $6,216 charged to professional fees | 6,000 | $ | 3.50 | Mar 2013 | |||||||
04/01/2008 | Warrants issued for consulting services $5,931 charged to professional fees | 6,000 | $ | 3.50 | Apr 2013 | |||||||
05/01/2008 | Warrants issued for consulting services $6,420 charged to professional fees | 6,000 | $ | 3.50 | May 2013 | |||||||
06/01/2008 | Warrants issued for consulting services $6,215 charged to professional fees | 6,000 | $ | 3.50 | June 2013 | |||||||
07/01/2008 | Warrants issued for consulting services $5,458 charged to professional fees | 6,000 | $ | 3.50 | Jul 2013 | |||||||
08/01/2008 | Warrants issued for consulting services $4,914 charged to professional fees | 6,000 | $ | 3.50 | Aug 2013 | |||||||
09/01/2008 | Warrants issued for consulting services $5,776 charged to professional fees | 6,000 | $ | 3.50 | Sep 2013 | |||||||
10/01/2008 | Warrants issued for consulting services $2,603 charged to professional fees | 3,000 | $ | 3.50 | Oct 2013 | |||||||
11/01/2008 | Warrants issued for consulting services $1,772 charged to professional fees | 3,000 | $ | 3.50 | Nov 2013 | |||||||
12/01/2008 | Warrants issued for consulting services $780 charged to professional fees | 3,000 | $ | 3.50 | Dec 2013 | |||||||
01/01/2009 | Warrants issued for consulting services $725 charged to professional fees | 3,000 | $ | 3.50 | Jan 2014 | |||||||
02/01/2009 | Warrants issued for consulting services $639 charged to professional fees | 3,000 | $ | 3.50 | Feb 2014 | |||||||
08/16/2010 | Warrants issued for consulting services $11,626 charged to professional fees | 20,000 | $ | 1.24 | Aug 2013 |
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Outstanding balance — June 30, 2009 | 343,000 | |||
Warrants issued | — | |||
Exercised | — | |||
Expired | — | |||
Outstanding balance — June 30, 2010 | 343,000 | |||
Warrants issued | 20,000 | |||
Exercised | — | |||
Expired | — | |||
Outstanding balance — June 30, 2011 | 363,000 | |||
NOTE M — | BUSINESS SEGMENT INFORMATION |
Behavioral | ||||||||||||||||||||||||||||
Health | ||||||||||||||||||||||||||||
Treatment | Contract | Administrative | ||||||||||||||||||||||||||
Services | Services | Services | Eliminations | Total | ||||||||||||||||||||||||
For the year ended June 30, 2011 | ||||||||||||||||||||||||||||
Revenues — external customers | $ | 57,495,735 | $ | 4,512,144 | $ | — | $ | — | $ | 62,007,879 | ||||||||||||||||||
Revenues — intersegment | 4,175,005 | — | 5,193,356 | (9,368,361 | ) | — | ||||||||||||||||||||||
Segment net income (loss) | 7,392,658 | 915,754 | (7,728,407 | ) | — | 580,005 | ||||||||||||||||||||||
Total assets | 19,523,739 | 1,250,903 | 7,507,348 | — | 28,281,990 | |||||||||||||||||||||||
Capital expenditures | 852,359 | 215,089 | 14,362 | — | 1,081,810 | |||||||||||||||||||||||
Depreciation & amortization | 856,220 | 92,615 | 156,413 | — | 1,105,248 | |||||||||||||||||||||||
Goodwill | 969,098 | — | — | — | 969,098 | |||||||||||||||||||||||
Interest expense | 155,926 | — | 154,747 | — | 310,673 | |||||||||||||||||||||||
Net income (loss) from equity method investments | 7,340 | — | 18,524 | — | 25,864 | |||||||||||||||||||||||
Equity from equity method investments | 72,980 | — | — | — | 72,980 | |||||||||||||||||||||||
Income tax expense | — | — | 1,407,936 | — | 1,407,936 |
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Behavioral | ||||||||||||||||||||||||||||
Health | ||||||||||||||||||||||||||||
Treatment | Contract | Administrative | ||||||||||||||||||||||||||
Services | Services | Services | Eliminations | Total | ||||||||||||||||||||||||
For the year ended June 30, 2010 | ||||||||||||||||||||||||||||
Revenues — external customers | $ | 49,647,395 | $ | 3,429,831 | $ | — | $ | — | $ | 53,077,226 | ||||||||||||||||||
Revenues — intersegment | 4,002,558 | — | 4,999,992 | (9,002,550 | ) | — | ||||||||||||||||||||||
Segment net income (loss) | 6,607,215 | 465,297 | (5,652,850 | ) | — | 1,419,662 | ||||||||||||||||||||||
Total assets | 16,214,982 | 630,558 | 8,804,430 | — | 25,649,970 | |||||||||||||||||||||||
Capital expenditures | 630,867 | 19,128 | 101,848 | — | 751,843 | |||||||||||||||||||||||
Depreciation & amortization | 827,811 | 79,835 | 248,923 | — | 1,156,569 | |||||||||||||||||||||||
Goodwill | 969,098 | — | — | — | 969,098 | |||||||||||||||||||||||
Interest expense | 161,065 | — | 165,517 | — | 326,582 | |||||||||||||||||||||||
Net income (loss) from equity method investments | 4,484 | — | 13,078 | — | 17,562 | |||||||||||||||||||||||
Equity from equity method investments | 33,528 | — | — | — | 33,528 | |||||||||||||||||||||||
Income tax expense | — | — | 1,106,100 | — | 1,106,100 |
NOTE N — | QUARTERLY INFORMATION (Unaudited) |
2011 | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||||||||||||
Revenue | $ | 15,071,420 | $ | 14,631,938 | $ | 15,455,635 | $ | 16,848,886 | ||||||||
Income (loss) from operations | 1,236,392 | 728,522 | 529,882 | (398,473 | ) | |||||||||||
Provision for income taxes | 557,027 | 251,270 | 299,266 | 300,373 | ||||||||||||
Net income (loss) available to common shareholders | 678,615 | 502,986 | 64,525 | (666,121 | )* | |||||||||||
Basic net income per common share | $ | 0.03 | $ | 0.03 | — | $ | (0.03 | ) | ||||||||
Basic weighted average number of shares outstanding | 19,532,095 | 19,462,818 | 19,500,873 | 19,524,104 | ||||||||||||
Fully diluted net income per common share | $ | 0.03 | $ | 0.03 | — | $ | (0.03 | ) | ||||||||
Fully diluted weighted average number of shares outstanding | 19,603,138 | 19,593,689 | 19,872,067 | 19,524,104 | ||||||||||||
* | During the quarter ended June 30, 2011, the Company incurred approximately $1,607,700 of transaction costs associated with the MeadowWood acquisition and Acadia merger (See Note P). |
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2010 | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||||||||||||
Revenue | $ | 12,647,428 | $ | 12,864,563 | $ | 13,532,174 | $ | 14,033,061 | ||||||||
Income from operations | 355,898 | 513,705 | 781,440 | 921,704 | ||||||||||||
Provision for income taxes | 133,431 | 248,619 | 289,031 | 435,019 | ||||||||||||
Net income available to common shareholders | 223,604 | 288,239 | 469,172 | 438,647 | ||||||||||||
Basic net income per common share | 0.01 | 0.01 | 0.02 | 0.02 | ||||||||||||
Basic weighted average number of shares outstanding | 19,997,549 | 19,800,509 | 19,762,241 | 19,692,391 | ||||||||||||
Fully diluted net income per common share | 0.01 | 0.01 | 0.02 | 0.02 | ||||||||||||
Fully diluted weighted average number of shares outstanding | 20,141,989 | 19,855,419 | 19,861,449 | 19,766,855 | ||||||||||||
NOTE O — | EMPLOYEE RETIREMENT PLAN |
NOTE P — | SUBSEQUENT EVENTS |
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Cash purchase price (subject to adjustment) | $ | 21,500,000 | ||
Accounts Receivables (net) | $ | 1,796,781 | ||
Prepaid expenses and other current assets | 97,134 | |||
Land | 1,420,000 | |||
Building and Improvements | 7,700,300 | |||
Furniture and Equipment | 553,763 | |||
Licenses | 700,000 | |||
Goodwill | 9,541,046 | |||
Accounts Payable | (157,484 | ) | ||
Accrued expenses and other current liabilities | (151,540 | ) | ||
$ | 21,500,000 | |||
Year Ended June 30, | ||||||||
(unaudited) | ||||||||
2011 | 2010 | |||||||
Revenues | $ | 76,621,243 | $ | 66,820,062 | ||||
Net income | $ | 1,019,112 | $ | 2,104,228 | ||||
Net income per common share | $ | 0.05 | $ | 0.11 | ||||
Fully diluted weighted average shares outstanding | 19,787,461 | �� | 19,914,954 | |||||
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Predecessor | ||||||||||||
December 31, | December 31, | June 30, | ||||||||||
2010 | 2009 | 2011 | ||||||||||
(Unaudited) | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 197,197 | $ | 240,642 | $ | 32,271 | ||||||
Accounts receivable, less allowance for doubtful accounts of $1,137,478 , $1,459,521 and $1,406,143 (unaudited), respectively | 1,371,276 | 1,835,603 | 1,481,772 | |||||||||
Third party settlements | 505,988 | 795,151 | 315,009 | |||||||||
Deferred tax assets | 558,057 | 655,445 | 642,587 | |||||||||
Other current assets | 144,579 | 149,407 | 97,135 | |||||||||
Total current assets | 2,777,097 | 3,676,248 | 2,568,774 | |||||||||
Property and equipment: | ||||||||||||
Land | 1,240,291 | 1,110,311 | 1,240,291 | |||||||||
Buildings and improvements | 6,899,017 | 6,253,181 | 7,104,910 | |||||||||
Equipment | 635,229 | 471,149 | 692,158 | |||||||||
Construction in progress | 248,507 | 237,316 | 147,528 | |||||||||
Less accumulated depreciation | (903,869 | ) | (595,965 | ) | (1,077,096 | ) | ||||||
8,119,175 | 7,475,992 | 8,107,791 | ||||||||||
Goodwill | 18,629,020 | 11,221,124 | 677,584 | |||||||||
Other assets | 141,413 | 297,120 | — | |||||||||
Total assets | $ | 29,666,705 | $ | 22,670,484 | $ | 29,354,149 | ||||||
LIABILITIES AND INVESTED EQUITY (DEFICIT) | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 298,354 | $ | 286,813 | $ | 157,484 | ||||||
Salaries and benefits payable | 398,571 | 360,090 | 634,970 | |||||||||
Income taxes payable | 193,975 | 45,357 | 419,915 | |||||||||
Other accrued liabilities | 81,050 | 47,442 | 36,570 | |||||||||
Current portion of long-term debt | 140,153 | 114,614 | 52,163 | |||||||||
Total current liabilities | 1,112,103 | 854,316 | 301,102 | |||||||||
Long-term debt, less current portion | 6,648,128 | 6,706,683 | 53,283 | |||||||||
Deferred tax liability | 902,248 | 712,055 | 953,476 | |||||||||
Due to Parent | 21,028,879 | 14,277,002 | 26,789,900 | |||||||||
Total liabilities | 29,691,358 | 22,550,056 | 29,097,761 | |||||||||
Invested equity (deficit): | ||||||||||||
Net investment by Parent | (24,653 | ) | 120,428 | 256,388 | ||||||||
Total liabilities and invested equity (deficit) | $ | 29,666,705 | $ | 22,670,484 | $ | 29,354,149 | ||||||
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Predecessor | Predecessor | |||||||||||||||||||
November 16, 2010 | January 1, 2010 | Year Ended | Six Months | Six Months | ||||||||||||||||
through | through | December 31, | Ended June 30, | Ended June 30, | ||||||||||||||||
December 31, 2010 | November 15, 2010 | 2009 | 2011 | 2010 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
Revenue | $ | 1,585,216 | $ | 12,715,648 | $ | 13,831,469 | $ | 7,540,989 | $ | 7,228,489 | ||||||||||
Operating expenses: | ||||||||||||||||||||
Salaries, wages and employee benefits | 1,074,916 | 7,775,193 | 8,359,494 | 4,746,244 | 4,420,813 | |||||||||||||||
Professional fees | 121,295 | 770,315 | 914,722 | 454,048 | 433,722 | |||||||||||||||
Supplies | 102,673 | 793,846 | 800,749 | 469,425 | 450,421 | |||||||||||||||
Rentals and leases | 1,545 | 19,145 | 36,439 | 19,103 | 10,296 | |||||||||||||||
Other operating expenses | 96,521 | 703,815 | 809,517 | 410,478 | 355,393 | |||||||||||||||
Provision for doubtful accounts | 75,483 | 436,249 | 483,388 | 339,449 | 234,435 | |||||||||||||||
Depreciation and amortization | 39,849 | 268,232 | 292,689 | 178,806 | 152,244 | |||||||||||||||
Management fees allocated by the Parent | 47,556 | 382,427 | 464,429 | 226,230 | 221,538 | |||||||||||||||
Interest expense | 66,579 | 456,509 | 533,391 | 223,546 | 261,400 | |||||||||||||||
Total operating expenses | 1,626,417 | 11,605,731 | 12,694,818 | 7,067,309 | 6,540,262 | |||||||||||||||
Income (loss) before income taxes | (41,201 | ) | 1,109,917 | 1,136,651 | 473,680 | 688,227 | ||||||||||||||
Provision (benefit) for income taxes | (16,548 | ) | 452,747 | 462,058 | 192,639 | 280,730 | ||||||||||||||
Net income (loss) | (24,653 | ) | 657,170 | 674,593 | 281,041 | 407,497 | ||||||||||||||
Invested equity (deficit): | ||||||||||||||||||||
Beginning of period | 777,598 | 120,428 | (554,165 | ) | (24,653 | ) | 120,428 | |||||||||||||
Elimination of predecessor invested equity | (777,598 | ) | — | — | — | — | ||||||||||||||
End of period | $ | (24,653 | ) | $ | 777,598 | $ | 120,428 | $ | 256,388 | $ | 527,925 | |||||||||
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Predecessor | Predecessor | |||||||||||||||||||
November 16, 2010 | January 1, 2010 | Year Ended | Six Months | Six Months | ||||||||||||||||
through | through | December 31, | Ended June 30, | Ended June 30, | ||||||||||||||||
December 31, 2010 | November 15, 2010 | 2009 | 2011 | 2010 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income (loss) | $ | (24,653 | ) | $ | 657,170 | $ | 674,593 | $ | 281,041 | $ | 407,497 | |||||||||
Adjustments to reconcile net income (loss) to net cash provided by continuing operating activities: | ||||||||||||||||||||
Depreciation and amortization | 39,849 | 268,232 | 292,689 | 178,806 | 152,244 | |||||||||||||||
Provision for bad debts | 75,483 | 436,249 | 483,388 | 339,449 | 234,435 | |||||||||||||||
Deferred income taxes | (131,664 | ) | 419,245 | 416,701 | (33,302 | ) | 192,763 | |||||||||||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||||||||||||
Accounts receivable | 273,343 | (320,748 | ) | (460,881 | ) | (449,945 | ) | (263,246 | ) | |||||||||||
Third party settlements | (22,650 | ) | 311,813 | (416,735 | ) | 190,979 | 347,419 | |||||||||||||
Prepaid expenses and other current assets | 35,402 | (30,574 | ) | (35,513 | ) | 47,444 | 47,950 | |||||||||||||
Other assets | (13,185 | ) | 168,892 | 50,807 | 141,413 | 63,617 | ||||||||||||||
Accounts payable and accrued expenses | 230,408 | (218,867 | ) | 206,737 | (140,870 | ) | (187,760 | ) | ||||||||||||
Income taxes payable | 115,116 | 33,502 | 45,357 | 225,940 | 87,967 | |||||||||||||||
Salaries and benefits payable | (237,420 | ) | 275,901 | (227,230 | ) | 236,399 | 271,923 | |||||||||||||
Other current liabilities | 43,363 | (9,755 | ) | (76,627 | ) | (44,480 | ) | (6,905 | ) | |||||||||||
Net cash provided by (used in) operating activities | 383,392 | 1,991,060 | 953,286 | 972,874 | 1,347,904 | |||||||||||||||
Investing activities: | ||||||||||||||||||||
Capital purchases of leasehold improvements and equipment | (310,380 | ) | (564,760 | ) | (374,729 | ) | (167,422 | ) | (382,472 | ) | ||||||||||
Net cash used in investing activities | (310,380 | ) | (564,760 | ) | (374,729 | ) | (167,422 | ) | (382,472 | ) | ||||||||||
Financing activities: | ||||||||||||||||||||
Principal payments on long-term debt, including capital leases | (10,519 | ) | (98,621 | ) | (84,674 | ) | (59,678 | ) | (53,044 | ) | ||||||||||
Advances from (transfers to) Parent, net | 6,098 | (1,439,715 | ) | (435,589 | ) | (910,700 | ) | (916,336 | ) | |||||||||||
Net cash provided by (used in) financing activities | (4,421 | ) | (1,538,336 | ) | (520,263 | ) | (970,378 | ) | (969,380 | ) | ||||||||||
Net (decrease) increase in cash | 68,591 | (112,036 | ) | 58,294 | (164,926 | ) | (3,948 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 128,606 | 240,642 | 182,348 | 197,197 | 240,642 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 197,197 | $ | 128,606 | $ | 240,642 | $ | 32,271 | $ | 236,694 | ||||||||||
Significant non-cash transaction: | ||||||||||||||||||||
Payoff of mortgage loan by Parent | $ | — | $ | — | $ | — | $ | 6,623,158 | $ | — | ||||||||||
Cash paid for interest | $ | 47,153 | $ | 476,407 | $ | 533,873 | $ | 210,319 | $ | 244,840 |
F-101
Table of Contents
1. | Summary of Significant Accounting Policies |
F-102
Table of Contents
F-103
Table of Contents
2. | Due to Parent |
F-104
Table of Contents
3. | Commitments and Contingencies |
4. | Long-Term Debt |
Predecessor | ||||||||||||
December 31, | December 31, | June 30, | ||||||||||
2010 | 2009 | 2011 | ||||||||||
(Unaudited) | ||||||||||||
Mortgage loan on facility, maturing in 2036 bearing a fixed interest rate of 6.99% | $ | 6,662,010 | $ | 6,750,776 | $ | — | ||||||
Capital lease obligations | 126,271 | 70,521 | 105,446 | |||||||||
6,788,281 | 6,821,297 | 105,446 | ||||||||||
Less current portion | 140,153 | 114,614 | 52,163 | |||||||||
Long-term debt | $ | 6,648,128 | $ | 6,706,683 | $ | 53,283 | ||||||
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Table of Contents
2011 | $ | 140,153 | ||
2012 | 144,624 | |||
2013 | 145,021 | |||
2014 | 120,407 | |||
2015 | 125,774 | |||
Thereafter | 6,112,302 | |||
Total | $ | 6,788,281 | ||
5. | Operating Leases |
2011 | $ | 14,461 | ||
2012 | 14,461 | |||
2013 | 14,461 | |||
2014 | 14,461 | |||
2015 | 14,461 | |||
Total | $ | 72,305 | ||
6. | Income Taxes |
F-106
Table of Contents
Predecessor | Predecessor | |||||||||||||||||||
November 16, 2010 | January 1, 2010 | Six Months | Six Months | |||||||||||||||||
through | through | Year Ended | Ended | Ended | ||||||||||||||||
December 31, 2010 | November 15, 2010 | December 31, 2009 | June 30, 2011 | June 30, 2010 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Current: | ||||||||||||||||||||
Federal | $ | 115,116 | $ | 33,502 | $ | 45,357 | $ | 225,940 | $ | 87,967 | ||||||||||
State | — | — | — | — | — | |||||||||||||||
115,116 | 33,502 | 45,357 | 225,940 | 87,967 | ||||||||||||||||
Deferred: | ||||||||||||||||||||
Federal | (128,119 | ) | 322,359 | 317,827 | (74,526 | ) | 132,688 | |||||||||||||
State | (3,545 | ) | 96,886 | 98,874 | 41,225 | 60,075 | ||||||||||||||
(131,664 | ) | 419,245 | 416,701 | (33,301 | ) | 192,763 | ||||||||||||||
Provision (benefit) for income taxes | $ | (16,548 | ) | $ | 452,747 | $ | 462,058 | $ | 192,639 | $ | 280,730 | |||||||||
Predecessor | Predecessor | |||||||||||||||||||
November 16, 2010 | January 1, 2010 | Six Months | Six Months | |||||||||||||||||
through | through | Year Ended | Ended | Ended | ||||||||||||||||
December 31, 2010 | November 15, 2010 | December 31, 2009 | June 30, 2011 | June 30, 2010 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Federal tax | $ | (14,420 | ) | $ | 388,471 | $ | 397,828 | $ | 165,788 | $ | 240,879 | |||||||||
State income taxes (net of federal) | (2,304 | ) | 62,976 | 64,268 | 26,795 | 39,049 | ||||||||||||||
Other | 176 | 1,300 | (38 | ) | 56 | 802 | ||||||||||||||
Provision (benefit) for income taxes | $ | (16,548 | ) | $ | 452,747 | $ | 462,058 | $ | 192,639 | $ | 280,730 | |||||||||
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Predecessor | ||||||||||||
December 31, 2010 | December 31, 2009 | June 30, 2011 | ||||||||||
(Unaudited) | ||||||||||||
Deferred Tax Assets: | ||||||||||||
Net operating loss carryforwards | $ | 83,446 | $ | 111,300 | $ | 46,885 | ||||||
Allowance for doubtful accounts | 444,814 | 564,854 | 563,547 | |||||||||
Accrued liabilities | 108,044 | 85,344 | 109,305 | |||||||||
Other | 9,144 | 5,247 | 10,118 | |||||||||
Total deferred tax assets | 645,448 | 766,745 | 729,825 | |||||||||
Deferred tax liabilities: | ||||||||||||
Intangible assets | (322,174 | ) | (232,236 | ) | (367,083 | ) | ||||||
Property and equipment | (667,465 | ) | (586,278 | ) | (673,661 | ) | ||||||
Other | — | (4,841 | ) | — | ||||||||
Total deferred tax liabilities | (989,639 | ) | (823,355 | ) | (1,040,744 | ) | ||||||
Total net deferred tax liability | $ | (344,191 | ) | $ | (56,610 | ) | $ | (310,889 | ) | |||
7. | Employee Benefit Plan |
8. | Subsequent Events |
F-108
Table of Contents
among
PHC, INC.,
ACADIA HEALTHCARE COMPANY, INC.
and
ACADIA MERGER SUB, LLC
Dated as of May 23, 2011
Table of Contents
Page | ||||||||
ARTICLE I THE MERGER | ||||||||
Section 1.01 | The Merger | A-1 | ||||||
Section 1.02 | Closing | A-1 | ||||||
Section 1.03 | Effective Time | A-2 | ||||||
Section 1.04 | Effect of the Merger | A-2 | ||||||
Section 1.05 | Governing Documents of the Surviving Company | A-2 | ||||||
Section 1.06 | Governing Documents of Acadia | A-2 | ||||||
Section 1.07 | Managers and Officers | A-2 | ||||||
ARTICLE II EFFECT OF THE MERGER ON SECURITIES | ||||||||
Section 2.01 | Conversion of Securities | A-2 | ||||||
Section 2.02 | Exchange of Certificates | A-3 | ||||||
Section 2.03 | Dissenters’ Rights | A-5 | ||||||
Section 2.04 | Stock Transfer Books | A-5 | ||||||
Section 2.05 | Pioneer Options and Stock-Based Awards | A-6 | ||||||
Section 2.06 | Acadia Common Stock | A-6 | ||||||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACADIA AND MERGER SUB | ||||||||
Section 3.01 | Organization, Standing and Power; Subsidiaries | A-7 | ||||||
Section 3.02 | Acadia Organizational Documents | A-7 | ||||||
Section 3.03 | Capitalization | A-7 | ||||||
Section 3.04 | Authority Relative to This Agreement | A-8 | ||||||
Section 3.05 | No Conflict; Required Filings and Consents | A-9 | ||||||
Section 3.06 | Permits; Compliance | A-9 | ||||||
Section 3.07 | Financial Statements; Undisclosed Liabilities | A-10 | ||||||
Section 3.08 | Information Supplied | A-10 | ||||||
Section 3.09 | Absence of Certain Changes or Events | A-11 | ||||||
Section 3.10 | Absence of Litigation; Restrictions of Business Activities | A-11 | ||||||
Section 3.11 | Title to Property | A-11 | ||||||
Section 3.12 | Intellectual Property | A-11 | ||||||
Section 3.13 | Employee Benefit Plans | A-12 | ||||||
Section 3.14 | Labor and Employment Matters | A-13 | ||||||
Section 3.15 | Taxes | A-14 | ||||||
Section 3.16 | Acadia Material Contracts | A-15 | ||||||
Section 3.17 | Insurance | A-16 | ||||||
Section 3.18 | Environmental Matters | A-16 | ||||||
Section 3.19 | Acadia Board Approval; No Vote Required | A-16 | ||||||
Section 3.20 | Brokers | A-16 | ||||||
Section 3.21 | Acadia Related Party Transactions | A-16 | ||||||
Section 3.22 | Estimated Acadia Fees and Expenses | A-17 | ||||||
Section 3.23 | Interested Stockholder | A-17 | ||||||
Section 3.24 | Representations Complete | A-17 |
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Page | ||||||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PIONEER | ||||||||
Section 4.01 | Organization, Standing and Power; Subsidiaries | A-17 | ||||||
Section 4.02 | Pioneer Organizational Documents | A-17 | ||||||
Section 4.03 | Capitalization | A-18 | ||||||
Section 4.04 | Authority Relative to This Agreement | A-19 | ||||||
Section 4.05 | No Conflict; Required Filings and Consents | A-19 | ||||||
Section 4.06 | Permits; Compliance | A-19 | ||||||
Section 4.07 | SEC Filings; Undisclosed Liabilities | A-20 | ||||||
Section 4.08 | Information Supplied | A-21 | ||||||
Section 4.09 | Absence of Certain Changes or Events | A-21 | ||||||
Section 4.10 | Absence of Litigation; Restrictions of Business Activities | A-21 | ||||||
Section 4.11 | Title to Property | A-21 | ||||||
Section 4.12 | Intellectual Property | A-22 | ||||||
Section 4.13 | Employee Benefit Plans | A-22 | ||||||
Section 4.14 | Labor and Employment Matters | A-23 | ||||||
Section 4.15 | Taxes | A-24 | ||||||
Section 4.16 | Pioneer Material Contracts | A-25 | ||||||
Section 4.17 | Insurance | A-26 | ||||||
Section 4.18 | Environmental Matters | A-26 | ||||||
Section 4.19 | Pioneer Board Approval; Vote Required | A-27 | ||||||
Section 4.20 | Opinion of Financial Advisor | A-27 | ||||||
Section 4.21 | Brokers | A-27 | ||||||
Section 4.22 | Pioneer Related Party Transactions | A-27 | ||||||
Section 4.23 | Estimated Pioneer Fees and Expenses | A-27 | ||||||
Section 4.24 | Representations Complete | A-27 | ||||||
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER | ||||||||
Section 5.01 | Conduct of Business by Acadia Pending the Merger | A-28 | ||||||
Section 5.02 | Conduct of Business by Pioneer Pending the Merger | A-30 | ||||||
Section 5.03 | Pioneer’s Pending Acquisition | A-32 | ||||||
32ARTICLE VI ADDITIONAL AGREEMENTS | ||||||||
Section 6.01 | Proxy Statement; Registration Statement | A-32 | ||||||
Section 6.02 | Pioneer Shareholders’ Meeting | A-33 | ||||||
Section 6.03 | Access to Information; Confidentiality | A-34 | ||||||
Section 6.04 | Solicitation By Pioneer | A-35 | ||||||
Section 6.05 | Directors’ and Officers’ Indemnification and Insurance | A-37 | ||||||
Section 6.06 | Employee Benefits Matters | A-38 | ||||||
Section 6.07 | Further Action | A-38 | ||||||
Section 6.08 | Update Disclosure; Breaches | A-40 | ||||||
Section 6.09 | Stock Exchange Listing | A-40 | ||||||
Section 6.10 | Section 16 Matters | A-41 | ||||||
Section 6.11 | Takeover Statutes | A-41 | ||||||
Section 6.12 | Deregistration | A-41 | ||||||
Section 6.13 | Tax Free Reorganization Treatment | A-41 | ||||||
Section 6.14 | Public Announcements | A-41 |
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Page | ||||||||
Section 6.15 | Transfer Taxes | A-42 | ||||||
Section 6.16 | Other Actions | A-42 | ||||||
Section 6.17 | Financing | A-42 | ||||||
Section 6.18 | Pioneer Stock Purchase Plans | A-43 | ||||||
Section 6.19 | Obligations of Acadia and Merger Sub | A-43 | ||||||
Section 6.20 | Fees and Expenses | A-43 | ||||||
Section 6.21 | Peabody Office | A-43 | ||||||
Section 6.22 | Company Name | A-43 | ||||||
ARTICLE VII CONDITIONS TO THE MERGER | ||||||||
Section 7.01 | Conditions to the Obligations of Each Party | A-43 | ||||||
Section 7.02 | Conditions to the Obligations of Acadia | A-44 | ||||||
Section 7.03 | Conditions to the Obligations of Pioneer | A-45 | ||||||
Section 7.04 | Reliance on Article VII | A-46 | ||||||
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER | ||||||||
Section 8.01 | Termination | A-46 | ||||||
Section 8.02 | Effect of Termination; Termination Fee and Expense Reimbursement | A-47 | ||||||
Section 8.03 | Extension; Waiver | A-49 | ||||||
Section 8.04 | Amendment | A-49 | ||||||
ARTICLE IX GENERAL PROVISIONS | ||||||||
Section 9.01 | Certain Definitions | A-49 | ||||||
Section 9.02 | Non-Survival of Representations, Warranties and Agreements | A-55 | ||||||
Section 9.03 | Notices | A-55 | ||||||
Section 9.04 | Interpretation | A-56 | ||||||
Section 9.05 | Disclosure Schedules | A-56 | ||||||
Section 9.06 | Severability | A-56 | ||||||
Section 9.07 | Disclaimer of Other Representations and Warranties | A-56 | ||||||
Section 9.08 | Entire Agreement; Assignment | A-57 | ||||||
Section 9.09 | Parties in Interest | A-57 | ||||||
Section 9.10 | Remedies | A-57 | ||||||
Section 9.11 | Governing Law; Jurisdiction | A-57 | ||||||
Section 9.12 | WAIVER OF JURY TRIAL | A-57 | ||||||
Section 9.13 | Headings | A-58 | ||||||
Section 9.14 | Counterparts | A-58 | ||||||
Exhibit A | Form of Pioneer Voting Agreement | |||||||
Exhibit B | Form of Amended and Restated Certificate of Incorporation | |||||||
Exhibit C | Form of Amended and Restated Bylaws | |||||||
Exhibit D | Form of Opinion of Special Counsel | |||||||
Exhibit E | Stockholders Agreement | |||||||
Exhibit F | Acadia Tax Certificate | |||||||
Exhibit G | Deficit Note | |||||||
Exhibit H | Pioneer Tax Certificate |
A-iii
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Defined Term | Location of Definition | |||
Acadia | Preamble | |||
Acadia Balance Sheet | § 3.11 | |||
Acadia Board | Recitals | |||
Acadia Common Stock | § 2.01(a) | |||
Acadia Disclosure Schedule | Preamble to Article III | |||
Acadia Expenses | § 8.02(i) | |||
Acadia Financials | § 3.07(a) | |||
Acadia Material Contract | § 3.16 | |||
Acadia Member Approval | § 3.19(b) | |||
Acadia Organizational Documents | § 3.02 | |||
Acadia Permits | § 3.06 | |||
Acadia Plans | § 3.13(a) | |||
Acadia Reimburse Expenses | §8.02(c) | |||
Acadia Stock | § 3.03(a) | |||
Acadia Stockholders | Recitals | |||
Action | § 3.10 | |||
Agreement | Preamble | |||
Alternative Acquisition Agreement | § 6.04(c)(ii) | |||
Assumed Stock Option | § 2.05(b) | |||
Assumed Warrant | § 2.05(c) | |||
Certificate of Merger | § 1.03 | |||
Certificates | § 2.02(a) | |||
Certified Shares | § 2.02(a) | |||
Class A Merger Consideration | § 2.01(a) | |||
Class B Merger Consideration | § 2.01(a) | |||
Closing | § 1.02 | |||
Closing Excess Shares | § 2.01(e) | |||
Code | Recitals | |||
Common Stock Trust | § 2.01(e)(iii) | |||
Confidentiality Agreement | § 6.03(b) | |||
Debt Commitment Letters | § 6.16 | |||
Delaware Act | Recitals | |||
Delaware Law | Recitals | |||
D&O Insurance | § 6.05(b) | |||
Effective Time | § 1.03 | |||
End Date | § 8.01(b)(i) | |||
Environmental Laws | § 3.18(a) | |||
ERISA | § 3.13(a) | |||
Estimated Acadia Fees and Expenses | § 3.22 | |||
Estimated Pioneer Fees and Expenses | § 4.23 | |||
Exchange Act | § 3.05(b) | |||
Exchange Agent | § 2.02(a) | |||
Exchange Fund | § 2.02(a) |
A-iv
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Defined Term | Location of Definition | |||
Financing | § 6.17 | |||
Form S-4 | § 3.05(b) | |||
GAAP | § 3.07(c) | |||
Government Program | § 3.05(b) | |||
Governmental Authority | § 3.05(b) | |||
HSR Act | § 3.05(b) | |||
Indemnified Party | § 6.05(a) | |||
Interim Pioneer Financials | § 4.07(a) | |||
IRS | § 3.13(c) | |||
Massachusetts Law | § 6.02(a) | |||
MeadowWood Schedule Supplement | § 6.08(b) | |||
Merger | Recitals | |||
Merger Consideration | § 2.01(a) | |||
Merger Sub | Preamble | |||
Nasdaq | § 7.02(g) | |||
Non-Paying Party | § 8.02(d) | |||
Notice Period | § 6.04(d)(iii) | |||
Order | § 3.10 | |||
Pioneer | Preamble | |||
Pioneer Board | Recitals | |||
Pioneer Balance Sheet | § 4.11 | |||
Pioneer Board Adverse Recommendation Change | § 6.04(c) | |||
Pioneer Board Recommendation | § 4.19(a) | |||
Pioneer Class A Common Stock | § 4.03(a) | |||
Pioneer Class B Common Stock | § 4.03(a) | |||
Pioneer Class C Common Stock | § 4.03(a) | |||
Pioneer Disclosure Schedule | Preamble to Article IV | |||
Pioneer Expenses | § 8.02(c)(ii) | |||
Pioneer Financial Advisor | § 4.21 | |||
Pioneer Financials | § 4.07 | |||
Pioneer Material Contract | § 4.16 | |||
Pioneer Organizational Documents | § 4.02 | |||
Pioneer Permits | § 4.06 | |||
Pioneer Preferred Stock | § 4.03(a) | |||
Pioneer Shareholders | Recitals | |||
Pioneer Shareholders’ Meeting | § 6.02(a) | |||
Pioneer Stock | § 4.03(a) | |||
Pioneer Stock Option | § 2.05(b) | |||
Pioneer Voting Agreement | Recitals | |||
Pioneer Warrant | § 2.05(c) | |||
Pre-Merger Acadia Stock | § 2.06(a) | |||
Proxy Statement/Prospectus | § 3.05(b) | |||
Record Date | § 6.02(b) | |||
Replacement Plans | § 6.07(a) |
A-v
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Defined Term | Location of Definition | |||
SEC | § 3.05(b) | |||
SEC Reports | § 4.07 | |||
Securities Act | § 3.05(b) | |||
Surviving Company | § 1.01 | |||
Transactions | Recitals | |||
Voting Acadia Debt | § 3.03(c) | |||
Voting Pioneer Debt | § 4.03(c) | |||
WARN Act | § 3.14(d) | |||
YFCS Financials | § 3.07(b) |
A-vi
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725 Cool Springs Blvd., Suite 600
Franklin, TN 37067
Facsimile No:
Attention: Chris Howard
Acadia Healthcare Holdings, LLC c/o Waud Capital Partners, LLC 300 North LaSalle Street — Suite 4900 Chicago, Illinois 60654 Attention: | Reeve B. Waud Charles E. Edwards |
Kirkland & Ellis LLP 300 North LaSalle Street Chicago, Illinois 60654 Facsimile No:(312) 862-2000 Attention: | Richard W. Porter, P.C. Carol Anne Huff |
A-55
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200 Lake Street, Suite 102
Peabody, MA 01960
Facsimile No:(978) 536-2677
Attention: Bruce A. Shear
1050 Connecticut Avenue, NW
Washington, DC20036-5339
Facsimile No: (202)857-6395
Attention: Steven A. Cohen
A-56
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A-57
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A-58
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By | /s/ Bruce A. Shear |
Name: Bruce A. Shear Title: | President and Chief Executive Officer |
By | /s/ Joey Jacobs |
Name: Joey Jacobs Title: | Chief Executive Officer |
By | /s/ Joey Jacobs |
Name: Joey Jacobs Title: | Chief Executive Officer |
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Pioneer Stockholders Party to Voting Agreements
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(Massachusetts General Laws, Chapter 156D)
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• | PHC’s10-K filings for the fiscal years ended June 30, 2006 through 2010; | |
• | PHC’s10-Q filing for the quarter ended March 31, 2011; |
• | Youth and Family Centered Services’ (“YFCS”) audited financial statements for the years ending December 31, 2006 through 2010; | |
• | Holdings’ internally prepared unaudited financial statements for the three-month periods ended March 31, 2010 and 2011; | |
• | YFCS’ internally prepared unaudited financial statements for the three-month periods ended March 31, 2010 and 2011; | |
• | Draft of the Merger Agreement, dated May 19, 2011; | |
• | PHC’s five-year financial forecast for the fiscal years ending December 31, 2011 through 2015 and subsequent growth rates prepared by PHC management; | |
• | Holdings’ five-year financial forecast (including YFCS) for the fiscal years ending December 31, 2011 through 2015 and subsequent growth rates prepared by Holdings management; | |
• | Combined (both PHC and Holdings) five-year financial forecast for the fiscal years ending December 31, 2011 through 2015 and subsequent growth rates prepared by PHC and Holdings management; | |
• | A review of publicly available financial data of certain publicly traded companies that we deemed relevant; | |
• | A review of publicly available information regarding certain publicly available merger and acquisition transactions that we deemed relevant; | |
• | A review of other financial and other information for PHC and Holdings that was publicly available or provided to us by management of PHC or Holdings; | |
• | Discussions with PHC and Holdings management concerning their business, industry, history, and prospects; | |
• | Discussions with PHC’s financial advisors, Jefferies & Company, Inc.; and |
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of §§242 and 245 of the General Corporation Law
of the State of Delaware
By: | /s/ Joey Jacobs |
Its: | Chief Executive Officer |
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OF
ACADIA HEALTHCARE COMPANY, INC.
(Adopted as of , 2011)
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PHC, INC.
SPECIAL MEETING OF STOCKHOLDERS
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PHC, INC. 200 LAKE STREET SUITE 102 PEABODY, MA 01960 | VOTE BY INTERNET — WWW.PROXYVOTE.COM Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | ||
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | ||
VOTE BYPHONE — 1-800-690-6903 | ||
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL | ||
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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FOR | AGAINST | ABSTAIN | ||||
1. To consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of May 23, 2011, among PHC, Inc., Acadia Healthcare Company, Inc. and Acadia Merger Sub, LLC, a wholly-owned subsidiary of Acadia, pursuant to which PHC will merge with and into Acadia Merger Sub, LLC | o | o | o | |||
2. To consider and cast an advisory vote on the compensation to be received by PHC’s named executive officers in connection with the merger | o | o | o | |||
3. To consider and vote on a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of such adjournment to approve the merger agreement | o | o | o |
Please indicate if you plan to attend this meeting | o Yes | o No | For address changes and/or comments, please check this box o and write them on the back where indicated |
Signature (PLEASE SIGN | ||||||
Signature (PLEASE SIGN WITHIN BOX) | Date | WITHIN BOX) | Date | |||
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SPECIAL MEETING OF STOCKHOLDERS
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PHC, INC. 200 LAKE STREET SUITE 102 PEABODY, MA 01960 | VOTE BY INTERNET — WWW.PROXYVOTE.COM Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | |
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | ||
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | ||
VOTE BYPHONE — 1-800-690-6903 | ||
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | ||
VOTE BY MAIL | ||
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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FOR | AGAINST | ABSTAIN | ||||
1. To consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of May 23, 2011, among PHC, Inc., Acadia Healthcare Company, Inc. and Acadia Merger Sub, LLC, a wholly-owned subsidiary of Acadia, pursuant to which PHC will merge with and into Acadia Merger Sub, LLC | o | o | o | |||
2. To consider and cast an advisory vote on the compensation to be received by PHC’s named executive officers in connection with the merger | o | o | o | |||
3. To consider and vote on a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are not sufficient votes at the time of such adjournment to approve the merger agreement | o | o | o |
Please indicate if you plan to attend this meeting | o Yes | o No | For address changes and/or comments, please check this box o and write them on the back where indicated |
Signature (PLEASE SIGN WITHIN BOX) | Date | Signature (PLEASE SIGN WITHIN BOX) | Date | |||