Notes to Condensed Consolidated Financial Statements
March 31, 2020
(Unaudited)
1.
|
Description of Business and Basis of Presentation
|
Description of Business
Acadia Healthcare Company, Inc. (the “Company”) develops and operates inpatient psychiatric facilities, residential treatment centers, group homes, substance abuse facilities and facilities providing outpatient behavioral healthcare services to serve the behavioral health and recovery needs of communities throughout the United States (“U.S.”), the United Kingdom (“U.K.”) and Puerto Rico. At March 31, 2020, the Company operated 588 behavioral healthcare facilities with approximately 18,200 beds in 40 states, the U.K. and Puerto Rico.
During 2019, the Company commenced a review of strategic alternatives including those related to its U.K. operations and a potential sale of such operations. In January 2020, the Company launched a formal process regarding the sale of its U.K. business. Consistent with market practice for U.K. transactions of this nature, and in conjunction with its advisors, the Company solicited and has received initial, non-binding offers to acquire its U.K. business from multiple bidders. During the first quarter of 2020, the Company began the second phase of the sale process, during which interested bidders would receive proposed transaction documents and complete their confirmatory due diligence. While the interest from potential buyers has been strong, given evolving market dynamics related to the novel coronavirus (“COVID-19”) pandemic, the Company temporarily suspended the sale process in mid-March 2020 until market conditions recover.
Basis of Presentation
The business of the Company is conducted through limited liability companies, partnerships and C-corporations. The Company’s consolidated financial statements include the accounts of the Company and all subsidiaries controlled by the Company through its direct or indirect ownership of majority interests and exclusive rights granted to the Company as the controlling member of an entity. All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation of our financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The condensed consolidated balance sheet at December 31, 2019 has been derived from the audited financial statements as of that date. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2020. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
During March 2020, the global pandemic of COVID-19 began to affect the Company’s facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. At a limited number of facilities, employees and/or patients have tested positive for COVID-19. The Company is committed to protecting the health of our communities and has been responding to the evolving COVID-19 situation while taking steps to provide quality care and protect the health and safety of patients and employees. All of the Company’s facilities are closely following infectious disease protocols, as well as recommendations by the Centers for Disease Control and Prevention (“CDC”) and local health officials. The Company has established an internal COVID-19 taskforce, taken steps to secure its supply chain, expanded telehealth capabilities and implemented emergency planning in directly impacted markets. Nevertheless, COVID-19 is adversely impacting the Company’s business and likely will have an impact on its financial results that the Company is not currently able to quantify. Continued disruptions to the Company’s business as a result of the COVID-19 pandemic could have a material adverse effect on its results of operations, financial condition, cash flows and ability to service its indebtedness and may affect the amounts reported in the consolidated financial statements including those related to collectability of accounts receivable as well as professional and general liability reserves, tax assets and liabilities and may result in a potential impairment of goodwill and long-lived assets.
Certain reclassifications have been made to prior years to conform to the current year presentation.
6
Table of contents
2.
|
Recently Issued Accounting Standards
|
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting and applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Entities may adopt ASU 2020-04 as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Management is evaluating the impact of ASU 2020-04 on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-402 to determine which implementation costs to capitalize as assets. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company adopted ASU 2018-15 on January 1, 2020. There is no significant impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment methodology with a new methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company adopted ASU 2016-13 on January 1, 2020. There is no significant impact on the Company’s consolidated financial statements.
Revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and residential treatment. The services provided by the Company have no fixed duration and can be terminated by the patient or the facility at any time, and therefore, each treatment is its own stand-alone contract.
As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in Accounting Standards Codification (“ASC”) ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize the revenue. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to remain admitted in our facilities.
The Company disaggregates revenue from contracts with customers by service type and by payor within each of the Company’s segments.
U.S. Facilities
The Company’s facilities in the United States (the “U.S. Facilities”) and services provided by the U.S. Facilities can generally be classified into the following categories: acute inpatient psychiatric facilities; specialty treatment facilities; residential treatment centers; and outpatient community-based facilities.
Acute inpatient psychiatric facilities. Acute inpatient psychiatric facilities provide a high level of care in order to stabilize patients that are either a threat to themselves or to others. The acute setting provides 24-hour observation, daily intervention and monitoring by psychiatrists.
Specialty treatment facilities. Specialty treatment facilities include residential recovery facilities, eating disorder facilities and comprehensive treatment centers. The Company provides a comprehensive continuum of care for adults with addictive disorders and co-occurring mental disorders. Inpatient, including detoxification and rehabilitation, partial hospitalization and outpatient treatment programs give patients access to the least restrictive level of care.
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Residential treatment centers. Residential treatment centers treat patients with behavioral disorders in a non-hospital setting, including outdoor programs. The facilities balance therapy activities with social, academic and other activities.
Outpatient community-based facilities. Outpatient community-based programs are designed to provide therapeutic treatment to children and adolescents who have a clinically-defined emotional, psychiatric or chemical dependency disorder while enabling the youth to remain at home and within their community.
The table below presents total U.S. revenue attributed to each category (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Acute inpatient psychiatric facilities
|
|
$
|
239,414
|
|
|
$
|
216,597
|
|
Specialty treatment facilities
|
|
|
193,611
|
|
|
|
193,035
|
|
Residential treatment centers
|
|
|
70,434
|
|
|
|
73,224
|
|
Outpatient community-based facilities
|
|
|
5,758
|
|
|
|
5,104
|
|
Revenue
|
|
$
|
509,217
|
|
|
$
|
487,960
|
|
The Company receives payments from the following sources for services rendered in our U.S. Facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services (“CMS”); and (iv) individual patients and clients.
The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. Implicit price concessions are based on historical collection experience. Most of our U.S. Facilities have contracts containing variable consideration. However, it is unlikely a significant reversal of revenue will occur when the uncertainty is resolved, and therefore, the Company has included the variable consideration in the estimated transaction price. Subsequent changes resulting from a patient’s ability to pay are recorded as bad debt expense, which is included as a component of other operating expenses in the condensed consolidating statements of income. Bad debt expense for the three months ended March 31, 2020 and 2019 was not significant.
The following table presents revenue by payor type and as a percentage of revenue in our U.S. Facilities (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Commercial
|
|
$
|
143,142
|
|
|
|
28.1
|
%
|
|
$
|
139,427
|
|
|
|
28.6
|
%
|
Medicare
|
|
|
72,271
|
|
|
|
14.2
|
%
|
|
|
72,616
|
|
|
|
14.9
|
%
|
Medicaid
|
|
|
260,044
|
|
|
|
51.1
|
%
|
|
|
239,191
|
|
|
|
49.0
|
%
|
Self-Pay
|
|
|
27,034
|
|
|
|
5.3
|
%
|
|
|
31,732
|
|
|
|
6.5
|
%
|
Other
|
|
|
6,726
|
|
|
|
1.3
|
%
|
|
|
4,994
|
|
|
|
1.0
|
%
|
Revenue
|
|
$
|
509,217
|
|
|
|
100.0
|
%
|
|
$
|
487,960
|
|
|
|
100.0
|
%
|
U.K. Facilities
The Company’s facilities located in the United Kingdom (the “U.K. Facilities”) and services provided by the U.K. Facilities can generally be classified into the following categories: healthcare facilities; education and children’s services; and adult care facilities.
Healthcare facilities. Healthcare facilities provide psychiatric treatment and nursing for sufferers of mental disorders, including for patients whose risk of harm to others and risk of escape from hospitals cannot be managed safely within other mental health settings. In order to manage the risks involved with treating patients, the facility is managed through the application of a range of security measures depending on the level of dependency and risk exhibited by the patient.
Education and children’s services. Education and children’s services provide specialist education for children and young people with special educational needs, including autism, Asperger’s Syndrome, social, emotional and mental health, and specific learning
8
Table of contents
difficulties, such as dyslexia. The division also offers standalone children’s homes for children that require 52-week residential care to support complex and challenging behavior and fostering services.
Adult care facilities. Adult care focuses on care of individuals with a variety of learning difficulties, mental health illnesses and adult autism spectrum disorders. It also includes long-term, short-term and respite nursing care to high-dependency elderly individuals who are physically frail or suffering from dementia. Care is provided in a number of settings, including in residential care homes and through supported living.
The table below presents total U.K. revenue attributed to each category (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Healthcare facilities
|
|
$
|
148,137
|
|
|
$
|
151,708
|
|
Education and Children’s Services
|
|
|
46,666
|
|
|
|
46,122
|
|
Adult Care facilities
|
|
|
78,790
|
|
|
|
74,827
|
|
Revenue
|
|
$
|
273,593
|
|
|
$
|
272,657
|
|
On an annual basis, the Company receives payments from approximately 500 public funded sources in the U.K. (including the National Health Service (“NHS”), Clinical Commissioning Groups (“CCGs”) and local authorities in England, Scotland and Wales) and individual patients and clients. The Company determines the transaction price based on established billing rates by payor reduced by implicit price concessions. Implicit price concessions are insignificant in the U.K. Facilities.
The following table presents revenue by payor type and as a percentage of revenue in our U.K. Facilities (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
U.K. public funded sources
|
|
$
|
246,136
|
|
|
|
90.0
|
%
|
|
$
|
245,413
|
|
|
|
90.0
|
%
|
Self-Pay
|
|
|
26,915
|
|
|
|
9.8
|
%
|
|
|
26,814
|
|
|
|
9.8
|
%
|
Other
|
|
|
542
|
|
|
|
0.2
|
%
|
|
|
430
|
|
|
|
0.2
|
%
|
Revenue
|
|
$
|
273,593
|
|
|
|
100.0
|
%
|
|
$
|
272,657
|
|
|
|
100.0
|
%
|
The Company’s contract liabilities primarily consist of unearned revenue in our U.K. Facilities due to the timing of payments received mainly in our education and children’s services and healthcare facilities. Contract liabilities are included in other accrued liabilities on the condensed consolidated balance sheets. A summary of the activity in unearned revenue in the U.K. Facilities is as follows (in thousands):
Balance at December 31, 2019
|
|
$
|
36,579
|
|
Payments received
|
|
|
38,152
|
|
Revenue recognized
|
|
|
(42,787
|
)
|
Foreign currency translation loss
|
|
|
(1,891
|
)
|
Balance at March 31, 2020
|
|
$
|
30,053
|
|
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Table of contents
The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019 (in thousands, except per share amounts):
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income attributable to Acadia Healthcare
Company, Inc.
|
|
$
|
33,463
|
|
|
$
|
29,471
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding for basic
earnings per share
|
|
|
87,765
|
|
|
|
87,505
|
|
Effect of dilutive instruments
|
|
|
206
|
|
|
|
189
|
|
Shares used in computing diluted earnings per
common share
|
|
|
87,971
|
|
|
|
87,694
|
|
Earnings per share attributable to Acadia Healthcare
Company, Inc. stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.38
|
|
|
$
|
0.34
|
|
Diluted
|
|
$
|
0.38
|
|
|
$
|
0.34
|
|
Approximately 2.9 million and 2.6 million shares of common stock issuable upon exercise of outstanding stock option awards were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2020 and 2019, respectively, because their effect would have been anti-dilutive.
The Company’s strategy is to acquire and develop behavioral healthcare facilities and improve operating results within its facilities and its other behavioral healthcare operations.
On April 1, 2019, the Company completed the acquisition of Bradford Recovery Center (“Bradford”), a specialty treatment facility with 46 beds located in Millerton, Pennsylvania, for cash consideration of approximately $4.5 million.
On February 15, 2019, the Company completed the acquisition of Whittier Pavilion (“Whittier”), an inpatient psychiatric facility with 71 beds located in Haverhill, Massachusetts, for cash consideration of approximately $17.9 million. Also on February 15, 2019, the Company completed the acquisition of Mission Treatment (“Mission Treatment”) for cash consideration of approximately $22.5 million. Mission Treatment operates nine comprehensive treatment centers in California, Nevada, Arizona and Oklahoma.
Transaction-related expenses
Transaction-related expenses primarily relate to termination, restructuring, U.K. sale, strategic review, management transition and other similar costs. Transaction-related expenses for the three months ended March 31, 2020 and 2019 were as follows (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Termination, restructuring, sale and strategic review costs
|
|
$
|
2,221
|
|
|
$
|
2,282
|
|
Legal, accounting and other acquisition-related costs
|
|
|
1,328
|
|
|
|
796
|
|
Management transition costs
|
|
|
—
|
|
|
|
1,243
|
|
|
|
$
|
3,549
|
|
|
$
|
4,321
|
|
10
Table of contents
6.
|
Property and Equipment
|
Property and equipment consisted of the following at March 31, 2020 and December 31, 2019 (in thousands):
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Land
|
|
$
|
429,601
|
|
|
$
|
448,716
|
|
Building and improvements
|
|
|
2,738,302
|
|
|
|
2,746,111
|
|
Equipment
|
|
|
502,246
|
|
|
|
516,769
|
|
Construction in progress
|
|
|
229,058
|
|
|
|
254,213
|
|
|
|
|
3,899,207
|
|
|
|
3,965,809
|
|
Less: accumulated depreciation
|
|
|
(747,468
|
)
|
|
|
(741,775
|
)
|
Property and equipment, net
|
|
$
|
3,151,739
|
|
|
$
|
3,224,034
|
|
The Company has recorded assets held for sale within other assets on the condensed consolidated balance sheets for closed properties being actively marketed of $30.3 million and $31.1 million at March 31, 2020 and December 31, 2019, respectively.
7.
|
Other Intangible Assets
|
Other identifiable intangible assets and related accumulated amortization consisted of the following at March 31, 2020 and December 31, 2019 (in thousands):
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract intangible assets
|
|
$
|
2,100
|
|
|
$
|
2,100
|
|
|
$
|
(2,100
|
)
|
|
$
|
(2,100
|
)
|
Non-compete agreements
|
|
|
1,131
|
|
|
|
1,131
|
|
|
|
(1,131
|
)
|
|
|
(1,131
|
)
|
|
|
|
3,231
|
|
|
|
3,231
|
|
|
|
(3,231
|
)
|
|
|
(3,231
|
)
|
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses and accreditations
|
|
|
12,429
|
|
|
|
12,455
|
|
|
|
—
|
|
|
|
—
|
|
Trade names
|
|
|
59,532
|
|
|
|
60,831
|
|
|
|
—
|
|
|
|
—
|
|
Certificates of need
|
|
|
17,091
|
|
|
|
17,071
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
89,052
|
|
|
|
90,357
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
92,283
|
|
|
$
|
93,588
|
|
|
$
|
(3,231
|
)
|
|
$
|
(3,231
|
)
|
All of the Company’s definite-lived intangible assets are fully amortized. The Company’s licenses and accreditations, trade names and certificate of need intangible assets have indefinite lives and are, therefore, not subject to amortization.
The Company’s lease portfolio primarily consists of finance and operating real estate leases integral for facility operations. The original terms of the leases typically range from five to 30 years with optional renewal periods. A minimal portion of the Company’s lease portfolio consists of non-real estate leases, including copiers and equipment, which generally have lease terms of one to three years and have insignificant lease obligations.
The Company has elected the accounting policy practical expedients by class of underlying asset in ASC 842 “Leases” to: (i) combine associated lease and non-lease components into a single lease component; and (ii) exclude recording short-term leases as right-of-use assets and liabilities on the condensed consolidated balance sheets. Non-lease components, which are not significant overall, are combined with lease components.
Operating lease liabilities are recorded as the present value of remaining lease payments not yet paid for the lease term discounted using the incremental borrowing rate associated with each lease. Operating lease right-of-use assets represent operating lease liabilities adjusted for prepayments, accrued lease payments, lease incentives and initial direct costs. Certain of the Company’s leases include renewal or termination options. Calculation of operating lease right-of-use assets and liabilities include the initial lease term unless it is reasonably certain a renewal or termination option will be exercised. Variable components of lease payments fluctuating with a future index or rate, as well as those related to common area maintenance costs, are not included in determining lease payments and are expensed as incurred. Most of the Company’s leases do not contain implicit borrowing rates, and therefore,
11
Table of contents
incremental borrowing rates are calculated based on information available at the lease commencement date. Incremental borrowing rates reflect the Company’s estimated interest rates for collateralized borrowings over similar lease terms. Additionally, the Company reviews service agreements for embedded lease and right-of-use assets and liabilities as necessary.
Lease Position
The Company recorded the following at March 31, 2020 and December 31, 2019 on the condensed consolidated balance sheets (in thousands):
Right-of-Use Assets
|
|
Balance Sheet Classification
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Finance lease right-of-use assets
|
|
Property and equipment, net
|
|
$
|
43,760
|
|
|
$
|
44,370
|
|
Operating lease right-of-use assets
|
|
Operating lease right-of-use assets
|
|
|
476,028
|
|
|
|
501,837
|
|
Total
|
|
|
|
$
|
519,788
|
|
|
$
|
546,207
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Liabilities
|
|
Balance Sheet Classification
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Finance lease liabilities
|
|
Other accrued liabilities
|
|
$
|
6,637
|
|
|
$
|
6,819
|
|
Operating lease liabilities
|
|
Current portion of operating lease liabilities
|
|
|
29,671
|
|
|
|
29,140
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
Finance lease liabilities
|
|
Other liabilities
|
|
|
43,295
|
|
|
|
43,662
|
|
Operating lease liabilities
|
|
Operating lease liabilities
|
|
|
474,746
|
|
|
|
502,252
|
|
Total
|
|
|
|
$
|
554,349
|
|
|
$
|
581,873
|
|
Weighted-average remaining lease terms and discount rates were as follows at March 31, 2020 and December 31, 2019:
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Weighted-average remaining lease term (in years):
|
|
|
|
|
|
|
|
|
Finance
|
|
6.7
|
|
|
6.9
|
|
Operating
|
|
|
19.0
|
|
|
19.4
|
|
|
|
|
|
|
|
|
|
|
Weighted-average discount rate:
|
|
|
|
|
|
|
|
|
Finance
|
|
|
6.4
|
%
|
|
|
6.4
|
%
|
Operating
|
|
|
6.3
|
%
|
|
|
6.3
|
%
|
Lease Costs
The Company recorded the following lease costs for the three months ended March 31, 2020 and 2019 (in thousands):
|
Three Months Ended March 31,
|
|
|
2020
|
|
|
2019
|
|
Finance lease costs:
|
|
|
|
|
|
|
|
Depreciation of leased assets
|
|
1,137
|
|
|
|
1,123
|
|
Interest of lease liabilities
|
|
997
|
|
|
|
997
|
|
Total finance lease costs
|
$
|
2,134
|
|
|
$
|
2,120
|
|
|
|
|
|
|
|
|
|
Operating lease costs
|
|
16,481
|
|
|
|
16,529
|
|
Variable lease costs
|
|
1,310
|
|
|
|
886
|
|
Short term lease costs
|
|
1,147
|
|
|
|
1,447
|
|
Other lease costs
|
|
1,886
|
|
|
|
1,445
|
|
Total rents and leases
|
$
|
20,824
|
|
|
$
|
20,307
|
|
|
|
|
|
|
|
|
|
Total lease costs
|
$
|
22,958
|
|
|
$
|
22,427
|
|
12
Table of contents
Other
Undiscounted cash flows for finance and operating leases recorded on the condensed consolidated balance sheets were as follows at March 31, 2020 (in thousands):
|
|
Finance Leases
|
|
|
Operating Leases
|
|
For the nine months ending December 31, 2020
|
|
$
|
5,549
|
|
|
$
|
45,846
|
|
2021
|
|
|
35,726
|
|
|
|
58,023
|
|
2022
|
|
|
2,845
|
|
|
|
52,956
|
|
2023
|
|
|
1,620
|
|
|
|
48,544
|
|
2024
|
|
|
1,027
|
|
|
|
46,312
|
|
Thereafter
|
|
|
25,088
|
|
|
|
650,931
|
|
Total minimum lease payments
|
|
|
71,855
|
|
|
|
902,612
|
|
Less: amount of lease payments representing interest
|
|
|
21,923
|
|
|
|
398,195
|
|
Present value of future minimum lease payments
|
|
|
49,932
|
|
|
|
504,417
|
|
Less: Current portion of lease liabilities
|
|
|
6,637
|
|
|
|
29,671
|
|
Noncurrent lease liabilities
|
|
$
|
43,295
|
|
|
$
|
474,746
|
|
Supplemental data for the three months ended March 31, 2020 and 2019 was as follows (in thousands):
|
Three Months Ended March 31,
|
|
|
2020
|
|
|
2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
Operating cash flows for operating leases
|
$
|
15,836
|
|
|
$
|
15,809
|
|
Operating cash flows for finance leases
|
$
|
997
|
|
|
$
|
997
|
|
Financing cash flows for finance leases
|
$
|
878
|
|
|
$
|
846
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
Operating leases
|
$
|
6,082
|
|
|
$
|
3,662
|
|
Finance leases
|
$
|
953
|
|
|
$
|
1,027
|
|
9.Long-Term Debt
Long-term debt consisted of the following (in thousands):
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Amended and Restated Senior Credit Facility:
|
|
|
|
|
|
|
|
|
Senior Secured Term A Loan
|
|
$
|
339,625
|
|
|
$
|
346,750
|
|
Senior Secured Term B Loans
|
|
|
1,335,432
|
|
|
|
1,338,928
|
|
Senior Secured Revolving Line of Credit
|
|
|
—
|
|
|
|
—
|
|
6.125% Senior Notes due 2021
|
|
|
150,000
|
|
|
|
150,000
|
|
5.125% Senior Notes due 2022
|
|
|
300,000
|
|
|
|
300,000
|
|
5.625% Senior Notes due 2023
|
|
|
650,000
|
|
|
|
650,000
|
|
6.500% Senior Notes due 2024
|
|
|
390,000
|
|
|
|
390,000
|
|
Other long-term debt
|
|
|
4,533
|
|
|
|
4,821
|
|
Less: unamortized debt issuance costs, discount and
premium
|
|
|
(28,698
|
)
|
|
|
(31,400
|
)
|
|
|
|
3,140,892
|
|
|
|
3,149,099
|
|
Less: current portion
|
|
|
(196,072
|
)
|
|
|
(43,679
|
)
|
Long-term debt
|
|
$
|
2,944,820
|
|
|
$
|
3,105,420
|
|
13
Table of contents
Amended and Restated Senior Credit Facility
The Company entered into a senior secured credit facility (the “Senior Secured Credit Facility”) on April 1, 2011. On December 31, 2012, the Company entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated the Senior Secured Credit Facility (the “Amended and Restated Senior Credit Facility”). The Company has amended the Amended and Restated Credit Agreement from time to time as described in the Company’s prior filings with the SEC.
On February 6, 2019, the Company entered into the Eleventh Amendment (the “Eleventh Amendment”) to the Amended and Restated Credit Agreement. The Eleventh Amendment, among other things, amended the definition of “Consolidated EBITDA” to remove the cap on non-cash charges, losses and expenses related to the impairment of goodwill, which in turn provided increased flexibility to the Company in terms of the Company’s financial covenants.
On February 27, 2019, the Company entered into the Twelfth Amendment (the “Twelfth Amendment”) to the Amended and Restated Credit Agreement. The Twelfth Amendment, among other things, modified certain definitions, including “Consolidated EBITDA”, and increased our permitted Maximum Consolidated Leverage Ratio, thereby providing increased flexibility to the Company in terms of the Company’s financial covenants.
On April 21, 2020, the Company entered into the Thirteenth Amendment (the “Thirteenth Amendment”) to the Amended and Restated Credit Agreement. The Thirteenth Amendment amended the Consolidated Leverage Ratio in the existing covenant to increase the leverage ratio for the rest of 2020.
The Company had $485.0 million of availability under the revolving line of credit and had standby letters of credit outstanding of $15.0 million related to security for the payment of claims required by its workers’ compensation insurance program at March 31, 2020. In early April 2020, the Company borrowed $100.0 million on the revolving line of credit to enhance its cash position in response to the potential impact of COVID-19 on the Company’s future liquidity. Borrowings under the revolving line of credit are subject to customary conditions precedent to borrowing.
The Amended and Restated Credit Agreement requires quarterly term loan principal repayments of our Term Loan A facility (“TLA Facility”) of $7.1 million for June 30, 2020 to December 31, 2020, and $9.5 million for March 31, 2021 to September 30, 2021, with the remaining principal balance of the TLA Facility due on the maturity date of November 30, 2021. The Company is required to repay the Term Loan B facility Tranche B-3 (the “Tranche B-3 Facility”) in equal quarterly installments of $1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-3 Facility of $447.3 million due on February 11, 2022. The Company is required to repay the Term Loan B facility Tranche B-4 (the “Tranche B-4 Facility”) in equal quarterly installments of approximately $2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-4 Facility of $854.4 million due on February 16, 2023.
Borrowings under the Amended and Restated Senior Credit Facility are guaranteed by each of the Company’s wholly-owned domestic subsidiaries (other than certain excluded subsidiaries) and are secured by a lien on substantially all of the assets of the Company and such subsidiaries. Borrowings with respect to the TLA Facility and the Company’s revolving credit facility (collectively, “Pro Rata Facilities”) under the Amended and Restated Credit Agreement bear interest at a rate tied to Acadia’s Consolidated Leverage Ratio (defined as consolidated funded debt net of up to $50.0 million of unrestricted and unencumbered cash to consolidated EBITDA, in each case as defined in the Amended and Restated Credit Agreement). The Applicable Rate (as defined in the Amended and Restated Credit Agreement) for the Pro Rata Facilities was 2.50% for Eurodollar Rate Loans (as defined in the Amended and Restated Credit Agreement) and 1.50% for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) at March 31, 2020. Eurodollar Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) (based upon the LIBOR Rate (as defined in the Amended and Restated Credit Agreement) prior to commencement of the interest rate period). Base Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.00%. At March 31, 2020, the Pro Rata Facilities bore interest at a rate of LIBOR plus 2.50%. In addition, the Company is required to pay a commitment fee on undrawn amounts under the revolving line of credit.
Eurodollar Rate Loans with respect to the Tranche B-3 Facility bear interest at the Tranche B-3 Facility Applicable Rate (as defined below) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period). Base Rate Loans bear interest at the Tranche B-3 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Tranche B-3 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%. The Tranche B-4 Facility bears interest as follows: Eurodollar Rate Loans bear interest at the Applicable Rate (as defined in the Amended and Restated Credit Agreement) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the
14
Table of contents
interest rate period) and Base Rate Loans bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%.
The Amended and Restated Credit Agreement requires the Company and its subsidiaries to comply with customary affirmative, negative and financial covenants, including a fixed charge coverage ratio, consolidated leverage ratio and senior secured leverage ratio. The Company may be required to pay all of its indebtedness immediately if it defaults on any of the numerous financial or other restrictive covenants contained in any of its material debt agreements. At March 31, 2020, the Company was in compliance with such covenants.
Senior Notes
6.125% Senior Notes due 2021
On March 12, 2013, the Company issued $150.0 million of 6.125% Senior Notes due 2021 (the “6.125% Senior Notes”). The 6.125% Senior Notes mature on March 15, 2021 and bear interest at a rate of 6.125% per annum, payable semi-annually in arrears on March 15 and September 15 of each year. At March 31, 2020, the 6.125% Senior Notes are included in current portion of debt on the condensed consolidated balance sheet.
5.125% Senior Notes due 2022
On July 1, 2014, the Company issued $300.0 million of 5.125% Senior Notes due 2022 (the “5.125% Senior Notes”). The 5.125% Senior Notes mature on July 1, 2022 and bear interest at a rate of 5.125% per annum, payable semi-annually in arrears on January 1 and July 1 of each year.
5.625% Senior Notes due 2023
On February 11, 2015, the Company issued $375.0 million of 5.625% Senior Notes due 2023 (the “5.625% Senior Notes”). On September 21, 2015, the Company issued $275.0 million of additional 5.625% Senior Notes. The additional notes formed a single class of debt securities with the 5.625% Senior Notes issued in February 2015. Giving effect to this issuance, the Company has outstanding an aggregate of $650.0 million of 5.625% Senior Notes. The 5.625% Senior Notes mature on February 15, 2023 and bear interest at a rate of 5.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year.
6.500% Senior Notes due 2024
On February 16, 2016, the Company issued $390.0 million of 6.500% Senior Notes due 2024 (the “6.500% Senior Notes”). The 6.500% Senior Notes mature on March 1, 2024 and bear interest at a rate of 6.500% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2016.
The indentures governing the 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes and 6.500% Senior Notes (together, the “Senior Notes”) contain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; (vi) merge, consolidate or sell substantially all of the Company’s assets; and (vii) create liens on assets.
The Senior Notes issued by the Company are guaranteed by each of the Company’s subsidiaries that guarantee the Company’s obligations under the Amended and Restated Senior Credit Facility. The guarantees are full and unconditional and joint and several.
The Company may redeem the Senior Notes at its option, in whole or part, at the dates and amounts set forth in the indentures.
10.
|
Equity-Based Compensation
|
Equity Incentive Plans
The Company issues stock-based awards, including stock options, restricted stock and restricted stock units, to certain officers, employees and non-employee directors under the Acadia Healthcare Company, Inc. Incentive Compensation Plan (the “Equity Incentive Plan”). At March 31, 2020, a maximum of 8,200,000 shares of the Company’s common stock were authorized for issuance as stock options, restricted stock and restricted stock units or other share-based compensation under the Equity Incentive Plan, of
15
Table of contents
which 1,024,052 were available for future grant. Stock options may be granted for terms of up to ten years. The Company recognizes expense on all share-based awards on a straight-line basis over the requisite service period of the entire award. Grants to employees generally vest in annual increments of 25% each year, commencing one year after the date of grant. The exercise prices of stock options are equal to the most recent closing price of the Company’s common stock on the most recent trading date prior to the date of grant.
The Company recognized $5.0 million and $6.1 million in equity-based compensation expense for the three months ended March 31, 2020 and 2019, respectively. At March 31, 2020, there was $50.8 million of unrecognized compensation expense related to unvested options, restricted stock and restricted stock units, which is expected to be recognized over the remaining weighted average vesting period of 1.5 years.
At March 31, 2020, there were no warrants outstanding and exercisable. The Company recognized a deferred income tax benefit of $1.3 million and $1.6 million for the three months ended March 31, 2020 and 2019, respectively, related to equity-based compensation expense.
Stock Options
Stock option activity during 2019 and 2020 was as follows (aggregate intrinsic value in thousands):
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Options outstanding at January 1, 2019
|
|
|
1,199,540
|
|
|
$
|
44.64
|
|
|
|
7.26
|
|
|
$
|
2,717
|
|
Options granted
|
|
|
605,200
|
|
|
|
28.50
|
|
|
|
9.21
|
|
|
|
1,343
|
|
Options exercised
|
|
|
(55,671
|
)
|
|
|
19.05
|
|
|
N/A
|
|
|
|
658
|
|
Options cancelled
|
|
|
(389,001
|
)
|
|
|
40.84
|
|
|
N/A
|
|
|
N/A
|
|
Options outstanding at December 31, 2019
|
|
|
1,360,068
|
|
|
|
39.40
|
|
|
|
7.57
|
|
|
|
1,650
|
|
Options granted
|
|
|
443,200
|
|
|
|
33.72
|
|
|
|
9.91
|
|
|
|
—
|
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
N/A
|
|
|
|
—
|
|
Options cancelled
|
|
|
(105,462
|
)
|
|
|
41.00
|
|
|
N/A
|
|
|
N/A
|
|
Options outstanding at March 31, 2020
|
|
|
1,697,806
|
|
|
$
|
37.81
|
|
|
|
7.97
|
|
|
$
|
659
|
|
Options exercisable at December 31, 2019
|
|
|
513,290
|
|
|
$
|
48.08
|
|
|
|
5.88
|
|
|
$
|
512
|
|
Options exercisable at March 31, 2020
|
|
|
702,956
|
|
|
$
|
44.08
|
|
|
|
6.36
|
|
|
$
|
479
|
|
Fair values are estimated using the Black-Scholes option pricing model. The following table summarizes the grant-date fair value of options and the assumptions used to develop the fair value estimates for options granted during the three months ended March 31, 2020 and year ended December 31, 2019:
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Weighted average grant-date fair value of options
|
|
$
|
12.29
|
|
|
$
|
17.59
|
|
Risk-free interest rate
|
|
|
1.6
|
%
|
|
|
2.4
|
%
|
Expected volatility
|
|
|
39
|
%
|
|
|
38
|
%
|
Expected life (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
The Company’s estimate of expected volatility for stock options is based upon the volatility of our stock price over the expected life of the award. The risk-free interest rate is the approximate yield on U.S. Treasury Strips having a life equal to the expected option life on the date of grant. The expected life is an estimate of the number of years an option will be held before it is exercised.
16
Table of contents
Other Stock-Based Awards
Restricted stock activity during 2019 and 2020 was as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Unvested at January 1, 2019
|
|
|
805,057
|
|
|
$
|
42.40
|
|
Granted
|
|
|
700,937
|
|
|
|
28.77
|
|
Cancelled
|
|
|
(389,684
|
)
|
|
|
33.50
|
|
Vested
|
|
|
(311,174
|
)
|
|
|
44.23
|
|
Unvested at December 31, 2019
|
|
|
805,136
|
|
|
$
|
34.14
|
|
Granted
|
|
|
511,006
|
|
|
|
25.37
|
|
Cancelled
|
|
|
(57,782
|
)
|
|
|
35.55
|
|
Vested
|
|
|
(160,398
|
)
|
|
|
36.73
|
|
Unvested at March 31, 2020
|
|
|
1,097,962
|
|
|
$
|
29.61
|
|
Restricted stock unit activity during 2019 and 2020 was as follows:
|
|
Number of
Units
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
Unvested at January 1, 2019
|
|
|
484,111
|
|
|
$
|
44.52
|
|
Granted
|
|
|
234,408
|
|
|
|
34.54
|
|
Cancelled
|
|
|
(271,162
|
)
|
|
|
45.17
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
Unvested at December 31, 2019
|
|
|
447,357
|
|
|
$
|
38.89
|
|
Granted
|
|
|
583,680
|
|
|
|
10.60
|
|
Cancelled
|
|
|
(10,123
|
)
|
|
|
42.09
|
|
Vested
|
|
|
(12,691
|
)
|
|
|
42.09
|
|
Unvested at March 31, 2020
|
|
|
1,008,223
|
|
|
$
|
22.44
|
|
Restricted stock awards are time-based vesting awards that vest over a period of three or four years and are subject to continuing service of the employee or non-employee director over the ratable vesting periods. The fair values of the restricted stock awards were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.
Restricted stock units are granted to employees and are subject to Company performance compared to pre-established targets and Company performance compared to peers. In addition to Company performance, these performance-based restricted stock units are subject to the continuing service of the employee during the two- or three-year period covered by the awards. The performance condition for the restricted stock units is based on the Company’s achievement of annually established targets for diluted earnings per share. Additionally, the number of shares issuable pursuant to restricted stock units granted during 2020 and 2019 are subject to adjustment based on the Company’s three-year annualized total stockholder return relative to a peer group consisting of S&P 1500 companies within the Healthcare Providers & Services 6 digit GICS industry group and selected other companies deemed to be peers. The number of shares issuable at the end of the applicable vesting period of restricted stock units ranges from 0% to 200% of the targeted units based on the Company’s actual performance compared to the targets and, for 2020 and 2019 awards, performance compared to peers.
The fair values of restricted stock units were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date for units subject to performance conditions, or at its Monte-Carlo simulation value for units subject to market conditions.
The provision for income taxes for the three months ended March 31, 2020 and 2019 reflects effective tax rates of 14.5% and 20.0%, respectively. The decrease in the effective tax rate for the three months ended March 31, 2020 was primarily attributable to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The Company recorded a discrete benefit during the three
17
Table of contents
months ended March 31, 2020 resulting from a change in the Company’s valuation allowance related to a decrease in the deferred tax asset on carried forward interest.
As we continue to monitor tax implications of the CARES Act and other state, federal and foreign stimulus and tax legislation, we may make adjustments to our estimates and record additional amounts for tax assets and liabilities. Additionally, market disruption due to COVID-19 may affect the Company’s ability to realize our deferred tax assets. Any adjustments to our tax assets and liabilities could materially impact our provision for income taxes and our effective tax rate in the periods in which they are made.
The Company periodically enters into foreign currency forward contracts in connection with certain transfers of cash between the U.S. and U.K. under the Company’s cash management and foreign currency risk management programs. Foreign currency forward contracts limit the economic risk of changes in the exchange rate between U.S. Dollars (“USD”) and British Pounds (“GBP”) associated with cash transfers.
In May 2016, the Company entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency risk by effectively converting a portion of its fixed-rate USD-denominated senior notes, including the semi-annual interest payments thereafter, to fixed-rate GBP-denominated debt of £449.3 million. In August 2019, the Company terminated its existing net investment cross currency swap derivatives of $105.0 million. Cash received from the termination of the cross currency swap derivatives was included in investing activities in the condensed consolidated statement of cash flows. The related gain from this termination was included in accumulated other comprehensive loss in accordance with ASC 815-30-40-1.
In August 2019, the Company also entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency risk by effectively converting a portion of its fixed-rate USD-denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rate GBP-denominated debt of £538.1 million. During the term of the swap agreements, the Company will receive semi-annual interest payments in USD from the counterparties at fixed interest rates, and the Company will make semi-annual interest payments in GBP to the counterparties at fixed interest rates. The interest payments under the cross-currency swap agreements result in £25.4 million of annual cash flows from the Company’s U.K. business being converted to $35.8 million.
The Company has designated the cross currency swap agreements and forward contracts entered into during 2019 and the three months ended March 31, 2020 as qualifying hedging instruments and is accounting for these derivatives as net investment hedges. The fair values of these derivatives at March 31, 2020 and December 31, 2019 of $(9.0) million and $(68.9) million, respectively, are recorded as derivative instrument liabilities on the condensed consolidated balance sheets. During the three months ended March 31, 2020, the Company elected the spot method for recording its net investment hedges. Gains and losses resulting from the settlement of the excluded components are recorded in interest expense on the condensed consolidated statements of income. Gains and losses resulting from fair value adjustments to the cross currency swap agreements are recorded in accumulated other comprehensive loss as the swaps are effective in hedging the designated risk. Cash flows related to the cross currency swap derivatives are included in operating activities in the condensed consolidated statements of cash flows.
13.
|
Fair Value Measurements
|
The carrying amounts reported for cash and cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value because of the short-term maturity of these instruments.
The carrying amounts and fair values of the Company’s Amended and Restated Senior Credit Facility, 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes, 6.500% Senior Notes, other long-term debt and derivative instruments at March 31, 2020 and December 31, 2019 were as follows (in thousands):
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Amended and Restated Senior Credit Facility
|
|
$
|
1,659,098
|
|
|
$
|
1,668,062
|
|
|
$
|
1,659,098
|
|
|
$
|
1,668,062
|
|
6.125% Senior Notes due 2021
|
|
$
|
149,409
|
|
|
$
|
149,254
|
|
|
$
|
144,927
|
|
|
$
|
149,441
|
|
5.125% Senior Notes due 2022
|
|
$
|
297,973
|
|
|
$
|
297,761
|
|
|
$
|
283,998
|
|
|
$
|
299,994
|
|
5.625% Senior Notes due 2023
|
|
$
|
645,156
|
|
|
$
|
644,771
|
|
|
$
|
607,995
|
|
|
$
|
655,249
|
|
6.500% Senior Notes due 2024
|
|
$
|
384,723
|
|
|
$
|
384,430
|
|
|
$
|
374,143
|
|
|
$
|
398,366
|
|
Other long-term debt
|
|
$
|
4,533
|
|
|
$
|
4,821
|
|
|
$
|
4,533
|
|
|
$
|
4,821
|
|
Derivative instrument liabilities
|
|
$
|
(9,015
|
)
|
|
$
|
(68,915
|
)
|
|
$
|
(9,015
|
)
|
|
$
|
(68,915
|
)
|
18
Table of contents
The Company’s Amended and Restated Senior Credit Facility, 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes, 6.500% Senior Notes and other long-term debt were categorized as Level 2 in the GAAP fair value hierarchy. Fair values were based on trading activity among the Company’s lenders and the average bid and ask price as determined using published rates.
The fair values of the derivative instruments were categorized as Level 2 in the GAAP fair value hierarchy and were based on observable market inputs including applicable exchange rates and interest rates.
14.
|
Commitments and Contingencies
|
Professional and General Liability
A portion of the Company’s professional liability risks are insured through a wholly-owned insurance subsidiary. The Company is self-insured for professional liability claims up to $3.0 million per claim and has obtained reinsurance coverage from a third party to cover claims in excess of the retention limit. The reinsurance policy has a coverage limit of $75.0 million in the aggregate. The Company’s reinsurance receivables are recognized consistent with the related liabilities and include known claims and any incurred but not reported claims that are covered by current insurance policies in place.
Legal Proceedings
The Company is, from time to time, subject to various claims, lawsuits, governmental investigations and regulatory actions, including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employment related claims. In these actions, plaintiffs request a variety of damages, including, in some instances, punitive and other types of damages that may not be covered by insurance. In addition, healthcare companies are subject to numerous investigations by various governmental agencies. Certain of the Company’s individual facilities have received, and from time to time, other facilities may receive, subpoenas, civil investigative demands, audit requests and other inquiries from, and may be subject to investigation by, federal and state agencies. These investigations can result in repayment obligations, and violations of the False Claims Act can result in substantial monetary penalties and fines, the imposition of a corporate integrity agreement and exclusion from participation in governmental health programs. In addition, the federal False Claims Act permits private parties to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions.
On April 1, 2019, a consolidated complaint was filed against the Company and certain former and current officers in the lawsuit styled St. Clair County Employees’ Retirement System v. Acadia Healthcare Company, Inc., et al., Case No. 3:19-cv-00988, which is pending in the United States District Court for the Middle District of Tennessee. The complaint purports to be brought on behalf of a class consisting of all persons (other than defendants) who purchased securities of the Company between April 30, 2014 and November 15, 2018, and alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. At this time, we are not able to quantify any potential liability in connection with this litigation because the case is in its early stages.
On February 21, 2019, a purported stockholder filed a related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Davydov v. Joey A. Jacobs, et al., Case No. 3:19-cv-00167, which is pending in the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Section 10(b) and 14(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. On May 23, 2019, a purported stockholder filed a second related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Beard v. Jacobs, et al., Case No. 3:19-cv-0441, which is pending the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Sections 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duty, waste of corporate assets, unjust enrichment, and insider selling. On June 11, 2019, the Davydov and Beard actions were consolidated and ordered stayed pending a ruling on the motion to dismiss that was filed in the St. Clair County v. Acadia Healthcare case described above. At this time, we are not able to quantify any potential liability in connection with this litigation because the cases are in their early stages.
On April 25, 2018, plaintiff filed Pence v. Sober Living By the Sea, Inc. - 30-2018-00988742-CU-OE-CXC, Orange County Superior Court (Pence I). On July 13, 2018, plaintiff next filed Pence v. Sober Living by the Sea, Inc.; Acadia Healthcare Company, Inc. - 30-2018-01005317-CU-OE-CJC, Orange County Superior Court (Pence II). These cases have now been consolidated before the same judge in the Complex Litigation Department of the Orange County Superior Court. The complaints allege various wage and hour violations under California law on behalf of a putative class of all non-exempt California employees of Acadia and various subsidiaries, going back to April 25, 2014, and on behalf of purportedly aggrieved non-exempt employees under California’s Private Attorney General Act (“PAGA”). The claims include (1) failure to provide overtime wages; (2); failure to provide minimum wages;
19
Table of contents
(3) failure to provide meal periods; (4) failure to provide rest periods; (5); failure to pay wages due at termination; (6) failure to provide accurate wage statements; (7) violations of California Business and Professions Code section 17200; and (8) civil penalties under California Labor Code section 2699 (PAGA). At this time, we are unable to quantify any potential liability in connection with this litigation because the cases are in their early stages.
In the fall of 2017, the Office of Inspector General issued subpoenas to three of the Company’s facilities requesting certain documents from January 2013 to the date of the subpoenas. The U.S. Attorney’s Office for the Middle District of Florida issued a civil investigative demand to one of the Company’s facilities in December 2017 requesting certain documents from November 2012 to the date of the demand. In April 2019, the Office of Inspector General issued subpoenas relating to six additional facilities requesting certain documents and information from January 2013 to the date of the subpoenas. The government’s investigation of each of these facilities is focused on claims not eligible for payment because of alleged violations of certain regulatory requirements relating to, among other things, medical necessity, admission eligibility, discharge decisions, length of stay and patient care issues. The Company is cooperating with the government’s investigation but is not able to quantify any potential liability in connection with these investigations.
15.
|
Noncontrolling Interests
|
Noncontrolling interests in the consolidated financial statements represents the portion of equity held by noncontrolling partners in the Company’s non-wholly owned subsidiaries. At March 31, 2020, the Company operated five facilities through non-wholly owned subsidiaries and owns between 60% and 86% of the equity interests, and noncontrolling partners own the remaining equity interests. The initial value of the noncontrolling interests is based on the fair value of contributions, and the Company consolidates the operations of each facility based on its equity ownership and its control of the entity. The noncontrolling interests are reflected as redeemable noncontrolling interests on the accompanying condensed consolidated balance sheets based on put rights that could require the Company to purchase the noncontrolling interests upon the occurrence of a change in control.
The components of redeemable noncontrolling interests are as follows (in thousands):
Balance at December 31, 2019
|
|
$
|
33,151
|
|
Net income attributable to noncontrolling interests
|
|
|
604
|
|
Dividend payments to noncontrolling interests
|
|
|
(264
|
)
|
Balance at March 31, 2020
|
|
$
|
33,491
|
|
Other current assets consisted of the following (in thousands):
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Prepaid expenses
|
|
$
|
22,161
|
|
|
$
|
23,708
|
|
Cost report receivable
|
|
|
14,402
|
|
|
|
13,723
|
|
Other receivables
|
|
|
14,257
|
|
|
|
16,097
|
|
Workers’ compensation deposits – current portion
|
|
|
10,000
|
|
|
|
10,000
|
|
Income taxes receivable
|
|
|
9,358
|
|
|
|
5,579
|
|
Insurance receivable – current portion
|
|
|
5,739
|
|
|
|
3,030
|
|
Inventory
|
|
|
4,882
|
|
|
|
4,759
|
|
Other
|
|
|
1,644
|
|
|
|
1,348
|
|
Other current assets
|
|
$
|
82,443
|
|
|
$
|
78,244
|
|
20
Table of contents
17.
|
Other Accrued Liabilities
|
Other accrued liabilities consisted of the following (in thousands):
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Accrued expenses
|
|
$
|
41,131
|
|
|
$
|
50,614
|
|
Unearned income
|
|
|
31,631
|
|
|
|
38,475
|
|
Accrued interest
|
|
|
11,660
|
|
|
|
33,323
|
|
Finance lease liabilities
|
|
|
6,637
|
|
|
|
6,819
|
|
Insurance liability – current portion
|
|
|
4,731
|
|
|
|
4,731
|
|
Accrued property taxes
|
|
|
4,222
|
|
|
|
4,755
|
|
Other
|
|
|
4,346
|
|
|
|
2,443
|
|
Other accrued liabilities
|
|
$
|
104,358
|
|
|
$
|
141,160
|
|
The Company operates in one line of business, which is operating acute inpatient psychiatric facilities, specialty treatment facilities, residential treatment centers and facilities providing outpatient behavioral healthcare services. As management reviews the operating results of its U.S. Facilities and its U.K. Facilities separately to assess performance and make decisions, the Company’s operating segments include our U.S. Facilities and U.K. Facilities. At March 31, 2020, the U.S. Facilities segment included 228 behavioral healthcare facilities with approximately 9,600 beds in 40 states and Puerto Rico, and the U.K. Facilities segment included 360 behavioral healthcare facilities with approximately 8,700 beds in the U.K.
The following tables set forth the financial information by operating segment, including a reconciliation of Segment EBITDA to income before income taxes (in thousands):
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue:
|
|
|
|
|
|
|
|
|
U.S. Facilities
|
|
$
|
509,217
|
|
|
$
|
487,960
|
|
U.K. Facilities
|
|
|
273,593
|
|
|
|
272,657
|
|
Corporate and Other
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
782,810
|
|
|
$
|
760,617
|
|
Segment EBITDA (1):
|
|
|
|
|
|
|
|
|
U.S. Facilities
|
|
$
|
120,074
|
|
|
$
|
119,008
|
|
U.K. Facilities
|
|
|
36,168
|
|
|
|
40,056
|
|
Corporate and Other
|
|
|
(23,393
|
)
|
|
|
(23,061
|
)
|
|
|
$
|
132,849
|
|
|
$
|
136,003
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Segment EBITDA (1)
|
|
$
|
132,849
|
|
|
$
|
136,003
|
|
Less:
|
|
|
|
|
|
|
|
|
Equity-based compensation expense
|
|
|
(4,979
|
)
|
|
|
(6,101
|
)
|
Transaction-related expenses
|
|
|
(3,549
|
)
|
|
|
(4,321
|
)
|
Interest expense, net
|
|
|
(42,785
|
)
|
|
|
(48,130
|
)
|
Depreciation and amortization
|
|
|
(41,680
|
)
|
|
|
(40,580
|
)
|
Income before income taxes
|
|
$
|
39,856
|
|
|
$
|
36,871
|
|
21
Table of contents
|
|
U.S. Facilities
|
|
|
U.K. Facilities
|
|
|
Corporate
and Other
|
|
|
Consolidated
|
|
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
2,085,104
|
|
|
$
|
689,902
|
|
|
$
|
—
|
|
|
$
|
2,775,006
|
|
Accumulated impairment loss
|
|
|
—
|
|
|
|
(325,875
|
)
|
|
|
—
|
|
|
|
(325,875
|
)
|
Net goodwill at January 1, 2020
|
|
|
2,085,104
|
|
|
|
364,027
|
|
|
|
—
|
|
|
|
2,449,131
|
|
Prior period purchase price adjustments
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
Foreign currency translation gain
|
|
|
—
|
|
|
|
(22,418
|
)
|
|
|
—
|
|
|
|
(22,418
|
)
|
Balance at March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
2,085,091
|
|
|
|
667,484
|
|
|
|
—
|
|
|
|
2,752,575
|
|
Accumulated impairment loss
|
|
|
—
|
|
|
|
(325,875
|
)
|
|
|
—
|
|
|
|
(325,875
|
)
|
Net goodwill at March 31, 2020
|
|
$
|
2,085,091
|
|
|
$
|
341,609
|
|
|
$
|
—
|
|
|
$
|
2,426,700
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Assets (2):
|
|
|
|
|
|
|
|
|
U.S. Facilities
|
|
$
|
4,083,825
|
|
|
$
|
4,037,968
|
|
U.K. Facilities
|
|
|
2,443,498
|
|
|
|
2,610,357
|
|
Corporate and Other
|
|
|
190,672
|
|
|
|
230,817
|
|
|
|
$
|
6,717,995
|
|
|
$
|
6,879,142
|
|
(1)
|
Segment EBITDA is defined as income before provision for income taxes, equity-based compensation expense, transaction-related expenses, interest expense and depreciation and amortization. The Company uses Segment EBITDA as an analytical indicator to measure the performance of the Company’s segments and to develop strategic objectives and operating plans for those segments. Segment EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Segment EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from Segment EBITDA are significant components in understanding and assessing financial performance. Because Segment EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.
|
(2)
|
Assets include property and equipment for the U.S. Facilities of $1.5 billion, U.K. Facilities of $1.6 billion and corporate and other of $57.3 million at March 31, 2020. Assets include property and equipment for the U.S. Facilities of $1.4 billion, U.K. Facilities of $1.7 billion and corporate and other of $50.9 million at December 31, 2019.
|
19.
|
Accumulated Other Comprehensive Loss
|
The components of accumulated other comprehensive loss are as follows (in thousands):
|
|
Foreign Currency
Translation
Adjustments
|
|
|
Change in Fair
Value of
Derivative
Instruments
|
|
|
Pension Plan
|
|
|
Total
|
|
Balance at December 31, 2019
|
|
$
|
(434,633
|
)
|
|
$
|
24,958
|
|
|
$
|
(5,209
|
)
|
|
$
|
(414,884
|
)
|
Foreign currency translation (loss) gain
|
|
|
(122,321
|
)
|
|
|
—
|
|
|
|
321
|
|
|
|
(122,000
|
)
|
Gain on derivative instruments, net of tax of $16.3
million
|
|
|
—
|
|
|
|
43,746
|
|
|
|
—
|
|
|
|
43,746
|
|
|
Balance at March 31, 2020
|
|
$
|
(556,954
|
)
|
|
$
|
68,704
|
|
|
$
|
(4,888
|
)
|
|
$
|
(493,138
|
)
|
22
Table of contents
20.
|
Financial Information for the Company and Its Subsidiaries
|
The Company conducts substantially all of its business through its subsidiaries. The 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes and 6.500% Senior Notes are jointly and severally guaranteed on an unsecured senior basis by all of the Company’s subsidiaries that guarantee the Company’s obligations under the Amended and Restated Senior Credit Facility. Presented below is condensed consolidating financial information for the Company and its subsidiaries at March 31, 2020 and December 31, 2019, and for the three months ended March 31, 2020 and 2019. The information segregates the parent company (Acadia Healthcare Company, Inc.), the combined wholly-owned subsidiary guarantors, the combined non-guarantor subsidiaries and eliminations.
Acadia Healthcare Company, Inc.
Condensed Consolidating Balance Sheets
March 31, 2020
(In thousands)
|
|
Parent
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantors
|
|
|
Consolidating
Adjustments
|
|
|
Total
Consolidated
Amounts
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
51,340
|
|
|
$
|
29,664
|
|
|
$
|
—
|
|
|
$
|
81,004
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
272,098
|
|
|
|
67,407
|
|
|
|
—
|
|
|
|
339,505
|
|
Other current assets
|
|
|
—
|
|
|
|
65,346
|
|
|
|
17,097
|
|
|
|
—
|
|
|
|
82,443
|
|
Total current assets
|
|
|
—
|
|
|
|
388,784
|
|
|
|
114,168
|
|
|
|
—
|
|
|
|
502,952
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
1,348,045
|
|
|
|
1,803,694
|
|
|
|
—
|
|
|
|
3,151,739
|
|
Goodwill
|
|
|
—
|
|
|
|
1,992,332
|
|
|
|
434,368
|
|
|
|
—
|
|
|
|
2,426,700
|
|
Intangible assets, net
|
|
|
—
|
|
|
|
58,312
|
|
|
|
30,740
|
|
|
|
—
|
|
|
|
89,052
|
|
Deferred tax assets
|
|
|
1,303
|
|
|
|
—
|
|
|
|
3,307
|
|
|
|
(1,303
|
)
|
|
|
3,307
|
|
Investment in subsidiaries
|
|
|
5,390,417
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,390,417
|
)
|
|
|
—
|
|
Operating lease right-of-use assets
|
|
|
—
|
|
|
|
98,166
|
|
|
|
377,862
|
|
|
|
—
|
|
|
|
476,028
|
|
Other assets
|
|
|
234,014
|
|
|
|
48,597
|
|
|
|
12,214
|
|
|
|
(226,608
|
)
|
|
|
68,217
|
|
Total assets
|
|
$
|
5,625,734
|
|
|
$
|
3,934,236
|
|
|
$
|
2,776,353
|
|
|
$
|
(5,618,328
|
)
|
|
$
|
6,717,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
196,072
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
196,072
|
|
Accounts payable
|
|
|
—
|
|
|
|
97,196
|
|
|
|
37,497
|
|
|
|
—
|
|
|
|
134,693
|
|
Accrued salaries and benefits
|
|
|
—
|
|
|
|
82,072
|
|
|
|
32,718
|
|
|
|
—
|
|
|
|
114,790
|
|
Current portion of operating lease liabilities
|
|
|
—
|
|
|
|
18,571
|
|
|
|
11,100
|
|
|
|
—
|
|
|
|
29,671
|
|
Other accrued liabilities
|
|
|
11,660
|
|
|
|
26,021
|
|
|
|
66,677
|
|
|
|
—
|
|
|
|
104,358
|
|
Total current liabilities
|
|
|
207,732
|
|
|
|
223,860
|
|
|
|
147,992
|
|
|
|
—
|
|
|
|
579,584
|
|
Long-term debt
|
|
|
2,944,820
|
|
|
|
—
|
|
|
|
226,608
|
|
|
|
(226,608
|
)
|
|
|
2,944,820
|
|
Deferred tax liabilities
|
|
|
—
|
|
|
|
41,087
|
|
|
|
45,621
|
|
|
|
(1,303
|
)
|
|
|
85,405
|
|
Operating lease liabilities
|
|
|
—
|
|
|
|
85,577
|
|
|
|
389,169
|
|
|
|
—
|
|
|
|
474,746
|
|
Derivative instrument liabilities
|
|
|
9,015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,015
|
|
Other liabilities
|
|
|
—
|
|
|
|
110,923
|
|
|
|
15,844
|
|
|
|
—
|
|
|
|
126,767
|
|
Total liabilities
|
|
|
3,161,567
|
|
|
|
461,447
|
|
|
|
825,234
|
|
|
|
(227,911
|
)
|
|
|
4,220,337
|
|
Redeemable noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
33,491
|
|
|
|
—
|
|
|
|
33,491
|
|
Total equity
|
|
|
2,464,167
|
|
|
|
3,472,789
|
|
|
|
1,917,628
|
|
|
|
(5,390,417
|
)
|
|
|
2,464,167
|
|
Total liabilities and equity
|
|
$
|
5,625,734
|
|
|
$
|
3,934,236
|
|
|
$
|
2,776,353
|
|
|
$
|
(5,618,328
|
)
|
|
$
|
6,717,995
|
|
23
Table of contents
Acadia Healthcare Company, Inc.
Condensed Consolidating Balance Sheets
December 31, 2019
(In thousands)
|
|
Parent
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantors
|
|
|
Consolidating
Adjustments
|
|
|
Total
Consolidated
Amounts
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
98,943
|
|
|
$
|
25,249
|
|
|
$
|
—
|
|
|
$
|
124,192
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
266,864
|
|
|
|
72,911
|
|
|
|
—
|
|
|
|
339,775
|
|
Other current assets
|
|
|
—
|
|
|
|
61,508
|
|
|
|
16,736
|
|
|
|
—
|
|
|
|
78,244
|
|
Total current assets
|
|
|
—
|
|
|
|
427,315
|
|
|
|
114,896
|
|
|
|
—
|
|
|
|
542,211
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
1,313,830
|
|
|
|
1,910,204
|
|
|
|
—
|
|
|
|
3,224,034
|
|
Goodwill
|
|
|
—
|
|
|
|
1,992,344
|
|
|
|
456,787
|
|
|
|
—
|
|
|
|
2,449,131
|
|
Intangible assets, net
|
|
|
—
|
|
|
|
58,291
|
|
|
|
32,066
|
|
|
|
—
|
|
|
|
90,357
|
|
Deferred tax assets – noncurrent
|
|
|
1,403
|
|
|
|
—
|
|
|
|
3,339
|
|
|
|
(1,403
|
)
|
|
|
3,339
|
|
Operating lease right-of-use assets
|
|
|
—
|
|
|
|
97,396
|
|
|
|
404,441
|
|
|
|
—
|
|
|
|
501,837
|
|
Investment in subsidiaries
|
|
|
5,521,340
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,521,340
|
)
|
|
|
—
|
|
Other assets
|
|
|
233,975
|
|
|
|
48,949
|
|
|
|
13,127
|
|
|
|
(227,818
|
)
|
|
|
68,233
|
|
Total assets
|
|
$
|
5,756,718
|
|
|
$
|
3,938,125
|
|
|
$
|
2,934,860
|
|
|
$
|
(5,750,561
|
)
|
|
$
|
6,879,142
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
43,679
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,679
|
|
Accounts payable
|
|
|
—
|
|
|
|
87,165
|
|
|
|
39,880
|
|
|
|
—
|
|
|
|
127,045
|
|
Accrued salaries and benefits
|
|
|
—
|
|
|
|
89,483
|
|
|
|
33,069
|
|
|
|
—
|
|
|
|
122,552
|
|
Current portion of operating lease liabilities
|
|
|
—
|
|
|
|
17,967
|
|
|
|
11,173
|
|
|
|
—
|
|
|
|
29,140
|
|
Other accrued liabilities
|
|
|
33,323
|
|
|
|
22,672
|
|
|
|
85,165
|
|
|
|
—
|
|
|
|
141,160
|
|
Total current liabilities
|
|
|
77,002
|
|
|
|
217,287
|
|
|
|
169,287
|
|
|
|
—
|
|
|
|
463,576
|
|
Long-term debt
|
|
|
3,105,420
|
|
|
|
—
|
|
|
|
227,818
|
|
|
|
(227,818
|
)
|
|
|
3,105,420
|
|
Deferred tax liabilities – noncurrent
|
|
|
—
|
|
|
|
21,858
|
|
|
|
51,405
|
|
|
|
(1,403
|
)
|
|
|
71,860
|
|
Operating lease liabilities
|
|
|
—
|
|
|
|
85,365
|
|
|
|
416,887
|
|
|
|
—
|
|
|
|
502,252
|
|
Derivative instrument liabilities
|
|
|
68,915
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,915
|
|
Other liabilities
|
|
|
—
|
|
|
|
110,445
|
|
|
|
18,142
|
|
|
|
—
|
|
|
|
128,587
|
|
Total liabilities
|
|
|
3,251,337
|
|
|
|
434,955
|
|
|
|
883,539
|
|
|
|
(229,221
|
)
|
|
|
4,340,610
|
|
Redeemable noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
33,151
|
|
|
|
—
|
|
|
|
33,151
|
|
Total equity
|
|
|
2,505,381
|
|
|
|
3,503,170
|
|
|
|
2,018,170
|
|
|
|
(5,521,340
|
)
|
|
|
2,505,381
|
|
Total liabilities and equity
|
|
$
|
5,756,718
|
|
|
$
|
3,938,125
|
|
|
$
|
2,934,860
|
|
|
$
|
(5,750,561
|
)
|
|
$
|
6,879,142
|
|
24
Table of contents
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Three Months Ended March 31, 2020
(In thousands)
|
|
Parent
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantors
|
|
|
Consolidating
Adjustments
|
|
|
Total
Consolidated
Amounts
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
474,612
|
|
|
$
|
308,198
|
|
|
$
|
—
|
|
|
$
|
782,810
|
|
Salaries, wages and benefits
|
|
|
4,979
|
|
|
|
261,603
|
|
|
|
173,734
|
|
|
|
—
|
|
|
|
440,316
|
|
Professional fees
|
|
|
—
|
|
|
|
28,558
|
|
|
|
34,742
|
|
|
|
—
|
|
|
|
63,300
|
|
Supplies
|
|
|
—
|
|
|
|
20,859
|
|
|
|
11,112
|
|
|
|
—
|
|
|
|
31,971
|
|
Rents and leases
|
|
|
—
|
|
|
|
8,883
|
|
|
|
11,941
|
|
|
|
—
|
|
|
|
20,824
|
|
Other operating expenses
|
|
|
—
|
|
|
|
63,819
|
|
|
|
34,710
|
|
|
|
—
|
|
|
|
98,529
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
21,046
|
|
|
|
20,634
|
|
|
|
—
|
|
|
|
41,680
|
|
Interest expense, net
|
|
|
14,460
|
|
|
|
24,159
|
|
|
|
4,166
|
|
|
|
—
|
|
|
|
42,785
|
|
Transaction-related expenses
|
|
|
—
|
|
|
|
1,525
|
|
|
|
2,024
|
|
|
|
—
|
|
|
|
3,549
|
|
Total expenses
|
|
|
19,439
|
|
|
|
430,452
|
|
|
|
293,063
|
|
|
|
—
|
|
|
|
742,954
|
|
(Loss) income before income taxes
|
|
|
(19,439
|
)
|
|
|
44,160
|
|
|
|
15,135
|
|
|
|
—
|
|
|
|
39,856
|
|
Equity in earnings of subsidiaries
|
|
|
48,353
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(48,353
|
)
|
|
|
—
|
|
(Benefit from) provision for income taxes
|
|
|
(5,153
|
)
|
|
|
11,712
|
|
|
|
(770
|
)
|
|
|
—
|
|
|
|
5,789
|
|
Net income (loss)
|
|
|
34,067
|
|
|
|
32,448
|
|
|
|
15,905
|
|
|
|
(48,353
|
)
|
|
|
34,067
|
|
Net income attributable to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
(604
|
)
|
|
|
—
|
|
|
|
(604
|
)
|
Net income (loss) attributable to Acadia
Healthcare Company, Inc.
|
|
$
|
34,067
|
|
|
$
|
32,448
|
|
|
$
|
15,301
|
|
|
$
|
(48,353
|
)
|
|
$
|
33,463
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain
|
|
|
—
|
|
|
|
—
|
|
|
|
(122,000
|
)
|
|
|
—
|
|
|
|
(122,000
|
)
|
Loss on derivative instruments
|
|
|
43,746
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43,746
|
|
Other comprehensive income (loss)
|
|
|
43,746
|
|
|
|
—
|
|
|
|
(122,000
|
)
|
|
|
—
|
|
|
|
(78,254
|
)
|
Comprehensive income (loss) attributable to Acadia
Healthcare Company, Inc.
|
|
$
|
77,813
|
|
|
$
|
32,448
|
|
|
$
|
(106,699
|
)
|
|
$
|
(48,353
|
)
|
|
$
|
(44,791
|
)
|
25
Table of contents
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
Three Months Ended March 31, 2019
(In thousands)
|
|
Parent
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantors
|
|
|
Consolidating
Adjustments
|
|
|
Total
Consolidated
Amounts
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
459,818
|
|
|
$
|
300,799
|
|
|
$
|
—
|
|
|
$
|
760,617
|
|
Salaries, wages and benefits
|
|
|
6,101
|
|
|
|
254,942
|
|
|
|
168,536
|
|
|
|
—
|
|
|
|
429,579
|
|
Professional fees
|
|
|
—
|
|
|
|
25,368
|
|
|
|
31,639
|
|
|
|
—
|
|
|
|
57,007
|
|
Supplies
|
|
|
—
|
|
|
|
19,384
|
|
|
|
10,573
|
|
|
|
—
|
|
|
|
29,957
|
|
Rents and leases
|
|
|
—
|
|
|
|
8,403
|
|
|
|
11,904
|
|
|
|
—
|
|
|
|
20,307
|
|
Other operating expenses
|
|
|
—
|
|
|
|
59,390
|
|
|
|
34,475
|
|
|
|
—
|
|
|
|
93,865
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
19,605
|
|
|
|
20,975
|
|
|
|
—
|
|
|
|
40,580
|
|
Interest expense, net
|
|
|
19,578
|
|
|
|
23,018
|
|
|
|
5,534
|
|
|
|
—
|
|
|
|
48,130
|
|
Transaction-related expenses
|
|
|
—
|
|
|
|
3,218
|
|
|
|
1,103
|
|
|
|
—
|
|
|
|
4,321
|
|
Total expenses
|
|
|
25,679
|
|
|
|
413,328
|
|
|
|
284,739
|
|
|
|
—
|
|
|
|
723,746
|
|
(Loss) income before income taxes
|
|
|
(25,679
|
)
|
|
|
46,490
|
|
|
|
16,060
|
|
|
|
—
|
|
|
|
36,871
|
|
Equity in earnings of subsidiaries
|
|
|
48,157
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(48,157
|
)
|
|
|
—
|
|
(Benefit from) provision for income taxes
|
|
|
(7,033
|
)
|
|
|
17,065
|
|
|
|
(2,672
|
)
|
|
|
—
|
|
|
|
7,360
|
|
Net income (loss)
|
|
|
29,511
|
|
|
|
29,425
|
|
|
|
18,732
|
|
|
|
(48,157
|
)
|
|
|
29,511
|
|
Net income attributable to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
(40
|
)
|
Net income (loss) attributable to Acadia
Healthcare Company, Inc.
|
|
$
|
29,511
|
|
|
$
|
29,425
|
|
|
$
|
18,692
|
|
|
$
|
(48,157
|
)
|
|
$
|
29,471
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain
|
|
|
—
|
|
|
|
—
|
|
|
|
44,481
|
|
|
|
—
|
|
|
|
44,481
|
|
Loss on derivative instruments
|
|
|
(8,690
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,690
|
)
|
Other comprehensive income (loss)
|
|
|
(8,690
|
)
|
|
|
—
|
|
|
|
44,481
|
|
|
|
—
|
|
|
|
35,791
|
|
Comprehensive income (loss) attributable to Acadia
Healthcare Company, Inc.
|
|
$
|
20,821
|
|
|
$
|
29,425
|
|
|
$
|
63,173
|
|
|
$
|
(48,157
|
)
|
|
$
|
65,262
|
|
26
Table of contents
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2020
(In thousands)
|
|
Parent
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantors
|
|
|
Consolidating
Adjustments
|
|
|
Total
Consolidated
Amounts
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
34,067
|
|
|
$
|
32,448
|
|
|
$
|
15,905
|
|
|
$
|
(48,353
|
)
|
|
$
|
34,067
|
|
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
|
|
(48,353
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
48,353
|
|
|
|
—
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
21,046
|
|
|
|
20,634
|
|
|
|
—
|
|
|
|
41,680
|
|
Amortization of debt issuance costs
|
|
|
3,050
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,050
|
|
Equity-based compensation expense
|
|
|
4,979
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,979
|
|
Deferred income taxes
|
|
|
101
|
|
|
|
11,044
|
|
|
|
141
|
|
|
|
—
|
|
|
|
11,286
|
|
Other
|
|
|
(101
|
)
|
|
|
(9
|
)
|
|
|
3
|
|
|
|
—
|
|
|
|
(107
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
(5,234
|
)
|
|
|
2,406
|
|
|
|
—
|
|
|
|
(2,828
|
)
|
Other current assets
|
|
|
—
|
|
|
|
(17,887
|
)
|
|
|
(1,244
|
)
|
|
|
—
|
|
|
|
(19,131
|
)
|
Other assets
|
|
|
82
|
|
|
|
(1,593
|
)
|
|
|
497
|
|
|
|
(82
|
)
|
|
|
(1,096
|
)
|
Accounts payable and other accrued liabilities
|
|
|
—
|
|
|
|
17,726
|
|
|
|
(39,481
|
)
|
|
|
—
|
|
|
|
(21,755
|
)
|
Accrued salaries and benefits
|
|
|
—
|
|
|
|
(7,411
|
)
|
|
|
1,381
|
|
|
|
—
|
|
|
|
(6,030
|
)
|
Other liabilities
|
|
|
—
|
|
|
|
2,803
|
|
|
|
(1,372
|
)
|
|
|
—
|
|
|
|
1,431
|
|
Net cash (used in) provided by operating activities
|
|
|
(6,175
|
)
|
|
|
52,933
|
|
|
|
(1,130
|
)
|
|
|
(82
|
)
|
|
|
45,546
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for capital expenditures
|
|
|
—
|
|
|
|
(48,264
|
)
|
|
|
(21,283
|
)
|
|
|
—
|
|
|
|
(69,547
|
)
|
Cash paid for real estate acquisitions
|
|
|
—
|
|
|
|
(3,149
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,149
|
)
|
Proceeds from sale of property and equipment
|
|
|
—
|
|
|
|
207
|
|
|
|
—
|
|
|
|
—
|
|
|
|
207
|
|
Other
|
|
|
—
|
|
|
|
(1,672
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,672
|
)
|
Net cash used in investing activities
|
|
|
—
|
|
|
|
(52,878
|
)
|
|
|
(21,283
|
)
|
|
|
—
|
|
|
|
(74,161
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt
|
|
|
(10,621
|
)
|
|
|
—
|
|
|
|
(82
|
)
|
|
|
82
|
|
|
|
(10,621
|
)
|
Common stock withheld for minimum statutory taxes, net
|
|
|
(1,402
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,402
|
)
|
Distributions to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
(264
|
)
|
|
|
—
|
|
|
|
(264
|
)
|
Other
|
|
|
—
|
|
|
|
(423
|
)
|
|
|
(720
|
)
|
|
|
—
|
|
|
|
(1,143
|
)
|
Cash provided by (used in) intercompany activity
|
|
|
18,198
|
|
|
|
(47,235
|
)
|
|
|
29,037
|
|
|
|
—
|
|
|
|
—
|
|
Net cash provided by (used in) in financing activities
|
|
|
6,175
|
|
|
|
(47,658
|
)
|
|
|
27,971
|
|
|
|
82
|
|
|
|
(13,430
|
)
|
Effect of exchange rate changes on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,143
|
)
|
|
|
—
|
|
|
|
(1,143
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
—
|
|
|
|
(47,603
|
)
|
|
|
4,415
|
|
|
|
—
|
|
|
|
(43,188
|
)
|
Cash and cash equivalents at beginning of the period
|
|
|
—
|
|
|
|
98,943
|
|
|
|
25,249
|
|
|
|
—
|
|
|
|
124,192
|
|
Cash and cash equivalents at end of the period
|
|
$
|
—
|
|
|
$
|
51,340
|
|
|
$
|
29,664
|
|
|
$
|
—
|
|
|
$
|
81,004
|
|
27
Table of contents
Acadia Healthcare Company, Inc.
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2019
(In thousands)
|
|
Parent
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantors
|
|
|
Consolidating
Adjustments
|
|
|
Total
Consolidated
Amounts
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
29,511
|
|
|
$
|
29,425
|
|
|
$
|
18,732
|
|
|
$
|
(48,157
|
)
|
|
$
|
29,511
|
|
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
|
|
(48,157
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
48,157
|
|
|
|
—
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
19,605
|
|
|
|
20,975
|
|
|
|
—
|
|
|
|
40,580
|
|
Amortization of debt issuance costs
|
|
|
2,888
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,888
|
|
Equity-based compensation expense
|
|
|
6,101
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,101
|
|
Deferred income taxes
|
|
|
(254
|
)
|
|
|
(678
|
)
|
|
|
266
|
|
|
|
—
|
|
|
|
(666
|
)
|
Other
|
|
|
1,993
|
|
|
|
253
|
|
|
|
(59
|
)
|
|
|
—
|
|
|
|
2,187
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
(15,693
|
)
|
|
|
3,713
|
|
|
|
—
|
|
|
|
(11,980
|
)
|
Other current assets
|
|
|
—
|
|
|
|
(5,484
|
)
|
|
|
(391
|
)
|
|
|
—
|
|
|
|
(5,875
|
)
|
Other assets
|
|
|
2,665
|
|
|
|
(353
|
)
|
|
|
648
|
|
|
|
(2,665
|
)
|
|
|
295
|
|
Accounts payable and other accrued liabilities
|
|
|
—
|
|
|
|
(7,100
|
)
|
|
|
(8,601
|
)
|
|
|
—
|
|
|
|
(15,701
|
)
|
Accrued salaries and benefits
|
|
|
—
|
|
|
|
(7,872
|
)
|
|
|
2,023
|
|
|
|
—
|
|
|
|
(5,849
|
)
|
Other liabilities
|
|
|
—
|
|
|
|
3,317
|
|
|
|
(1,135
|
)
|
|
|
—
|
|
|
|
2,182
|
|
Net cash (used in) provided by operating activities
|
|
|
(5,253
|
)
|
|
|
15,420
|
|
|
|
36,171
|
|
|
|
(2,665
|
)
|
|
|
43,673
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired
|
|
|
—
|
|
|
|
(40,400
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(40,400
|
)
|
Cash paid for capital expenditures
|
|
|
—
|
|
|
|
(45,231
|
)
|
|
|
(24,017
|
)
|
|
|
—
|
|
|
|
(69,248
|
)
|
Cash paid for real estate acquisitions
|
|
|
—
|
|
|
|
(1,066
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,066
|
)
|
Proceeds from sale of property and equipment
|
|
|
—
|
|
|
|
836
|
|
|
|
92
|
|
|
|
—
|
|
|
|
928
|
|
Other
|
|
|
—
|
|
|
|
(315
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(315
|
)
|
Net cash used in investing activities
|
|
|
—
|
|
|
|
(86,176
|
)
|
|
|
(23,925
|
)
|
|
|
—
|
|
|
|
(110,101
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings on revolving credit facility
|
|
|
71,573
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
71,573
|
|
Principal payments on long-term debt
|
|
|
(8,246
|
)
|
|
|
—
|
|
|
|
(2,665
|
)
|
|
|
2,665
|
|
|
|
(8,246
|
)
|
Common stock withheld for minimum statutory taxes, net
|
|
|
(1,327
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,327
|
)
|
Other
|
|
|
(2,375
|
)
|
|
|
(442
|
)
|
|
|
(680
|
)
|
|
|
—
|
|
|
|
(3,497
|
)
|
Cash (used in) provided by intercompany activity
|
|
|
(54,372
|
)
|
|
|
56,570
|
|
|
|
(2,198
|
)
|
|
|
—
|
|
|
|
—
|
|
Net cash provided by (used in) in financing activities
|
|
|
5,253
|
|
|
|
56,128
|
|
|
|
(5,543
|
)
|
|
|
2,665
|
|
|
|
58,503
|
|
Effect of exchange rate changes on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
1,099
|
|
|
|
—
|
|
|
|
1,099
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
—
|
|
|
|
(14,628
|
)
|
|
|
7,802
|
|
|
|
—
|
|
|
|
(6,826
|
)
|
Cash and cash equivalents at beginning of the period
|
|
|
—
|
|
|
|
32,471
|
|
|
|
18,039
|
|
|
|
—
|
|
|
|
50,510
|
|
Cash and cash equivalents at end of the period
|
|
$
|
—
|
|
|
$
|
17,843
|
|
|
$
|
25,841
|
|
|
$
|
—
|
|
|
$
|
43,684
|
|
28
Table of contents
On April 21, 2020, the Company entered into the Thirteenth Amendment to the Amended and Restated Credit Agreement. The Thirteenth Amendment amended the Consolidated Leverage Ratio in the existing covenant, to increase the leverage ratio for the rest of 2020. Additionally, in early April 2020, the Company borrowed $100.0 million on its revolving line of credit to enhance its cash position in response to the potential impact of COVID-19 on the Company’s future liquidity.
As part of the CARES Act, the U.S. government announced it would offer $100 billion of relief to eligible healthcare providers. The Company received approximately $20 million of the initial funds distributed in April 2020. The Company is evaluating the terms and conditions and financial impact of any funds received under the CARES Act and other government relief programs.
Using existing authority and certain expanded authority under the CARES Act, the U.S. Department of Health and Human Services (“HHS”) has expanded CMS’ Accelerated and Advance Payment Program to a broader group of Medicare Part A and Part B providers for the duration of the COVID-19 pandemic. Under the program, our facilities may request up to 100% of their Medicare payment amount for a three-month period. The repayment of these accelerated/advanced payments does not begin until 120 days after the date of the issuance of the payment. Once the repayment period starts, the amounts previously advanced to the provider or supplier will be recouped from the provider’s or supplier’s new Medicare claims. Facilities will generally have 210 days from the date the accelerated or advance payment was made to repay the amounts that they owe. The Company applied for and received approximately $45 million in April 2020 from this program, which the Company expects to repay over a three-month period from August to November 2020.
29
Table of contents