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Acadia Healthcare Company, Inc. - Quarter Report: 2019 September (Form 10-Q)

Table of contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

Commission File Number: 001-35331

 

Acadia Healthcare Company, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Delaware

 

45-2492228

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

6100 Tower Circle, Suite 1000

Franklin, Tennessee 37067

(Address, including zip code, of registrant’s principal executive offices)

(615) 861-6000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

  Non-accelerated filer

 

Smaller reporting company

 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, $.01 par value

 

ACHC

 

NASDAQ Global Select Market

At November 6, 2019, there were 88,569,587 shares of the registrant’s common stock outstanding.

 

 

 


Table of contents

 

 

ACADIA HEALTHCARE COMPANY, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

  

Financial Statements

1

 

 

 

 

  

Condensed Consolidated Balance Sheets (Unaudited)

1

 

 

 

 

  

Condensed Consolidated Statements of Income (Unaudited)

2

 

 

 

 

  

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

3

 

 

 

 

  

Condensed Consolidated Statements of Equity (Unaudited)

4

 

 

 

 

  

Condensed Consolidated Statements of Cash Flows (Unaudited)

5

 

 

 

 

  

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

 

 

 

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

 

 

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

42

 

 

 

Item 4.

  

Controls and Procedures

43

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

  

Legal Proceedings

44

 

 

 

Item 1A.

  

Risk Factors

44

 

 

 

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

45

 

 

 

Item 6.

  

Exhibits

46

 

 

SIGNATURES

47

 

 

 


Table of contents

 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Acadia Healthcare Company, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

 

 

(In thousands, except share and per

share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

92,900

 

 

$

50,510

 

Accounts receivable, net

 

 

350,225

 

 

 

318,087

 

Other current assets

 

 

93,788

 

 

 

81,820

 

Total current assets

 

 

536,913

 

 

 

450,417

 

Property and equipment, net

 

 

3,131,419

 

 

 

3,107,766

 

Goodwill

 

 

2,424,241

 

 

 

2,396,412

 

Intangible assets, net

 

 

89,028

 

 

 

88,990

 

Deferred tax assets

 

 

3,371

 

 

 

3,468

 

Derivative instrument assets

 

 

 

 

 

60,524

 

Operating lease right-of-use assets

 

 

479,881

 

 

 

 

Other assets

 

 

63,272

 

 

 

64,927

 

Total assets

 

$

6,728,125

 

 

$

6,172,504

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

41,287

 

 

$

34,112

 

Accounts payable

 

 

131,472

 

 

 

117,740

 

Accrued salaries and benefits

 

 

117,683

 

 

 

113,299

 

Current portion of operating lease liabilities

 

 

28,010

 

 

 

 

Other accrued liabilities

 

 

139,754

 

 

 

151,226

 

Total current liabilities

 

 

458,206

 

 

 

416,377

 

Long-term debt

 

 

3,133,635

 

 

 

3,159,375

 

Deferred tax liabilities

 

 

63,154

 

 

 

80,372

 

Operating lease liabilities

 

 

478,894

 

 

 

 

Derivative instrument liabilites

 

 

15,896

 

 

 

 

Other liabilities

 

 

125,285

 

 

 

154,267

 

Total liabilities

 

 

4,275,070

 

 

 

3,810,391

 

Redeemable noncontrolling interests

 

 

32,364

 

 

 

28,806

 

Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 10,000,000 shares authorized, no shares issued

 

 

 

 

 

 

Common stock, $0.01 par value; 180,000,000 shares authorized; 87,655,556

   and 87,444,473 issued and outstanding at September 30, 2019 and

   December 31, 2018, respectively

 

 

877

 

 

 

874

 

Additional paid-in capital

 

 

2,554,808

 

 

 

2,541,987

 

Accumulated other comprehensive loss

 

 

(507,994

)

 

 

(462,377

)

Retained earnings

 

 

373,000

 

 

 

252,823

 

Total equity

 

 

2,420,691

 

 

 

2,333,307

 

Total liabilities and equity

 

$

6,728,125

 

 

$

6,172,504

 

 

See accompanying notes.

1


Table of contents

 

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(In thousands, except per share amounts)

 

Revenue

 

$

777,251

 

 

$

760,916

 

 

$

2,327,230

 

 

$

2,268,895

 

Salaries, wages and benefits (including equity-based compensation

     expense of $4,039, $5,225, $14,322 and $19,273, respectively)

 

 

428,601

 

 

 

417,917

 

 

 

1,288,399

 

 

 

1,246,186

 

Professional fees

 

 

62,152

 

 

 

59,509

 

 

 

177,588

 

 

 

166,988

 

Supplies

 

 

30,790

 

 

 

29,461

 

 

 

91,661

 

 

 

88,958

 

Rents and leases

 

 

20,134

 

 

 

19,866

 

 

 

60,860

 

 

 

60,390

 

Other operating expenses

 

 

92,975

 

 

 

90,464

 

 

 

281,517

 

 

 

265,977

 

Depreciation and amortization

 

 

40,620

 

 

 

39,659

 

 

 

122,277

 

 

 

119,360

 

Interest expense, net

 

 

46,644

 

 

 

46,651

 

 

 

143,384

 

 

 

137,706

 

Debt extinguishment costs

 

 

 

 

 

 

 

 

 

 

 

940

 

Transaction-related expenses

 

 

5,775

 

 

 

2,353

 

 

 

15,308

 

 

 

10,008

 

Total expenses

 

 

727,691

 

 

 

705,880

 

 

 

2,180,994

 

 

 

2,096,513

 

Income before income taxes

 

 

49,560

 

 

 

55,036

 

 

 

146,236

 

 

 

172,382

 

Provision for income taxes

 

 

6,837

 

 

 

8,757

 

 

 

25,801

 

 

 

16,339

 

Net income

 

 

42,723

 

 

 

46,279

 

 

 

120,435

 

 

 

156,043

 

Net income attributable to noncontrolling interests

 

 

(157

)

 

 

(47

)

 

 

(258

)

 

 

(156

)

Net income attributable to Acadia Healthcare Company, Inc.

 

$

42,566

 

 

$

46,232

 

 

$

120,177

 

 

$

155,887

 

Earnings per share attributable to Acadia Healthcare Company, Inc.

    stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.49

 

 

$

0.53

 

 

$

1.37

 

 

$

1.79

 

Diluted

 

$

0.48

 

 

$

0.53

 

 

$

1.37

 

 

$

1.78

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

87,649

 

 

 

87,344

 

 

 

87,591

 

 

 

87,233

 

Diluted

 

 

87,859

 

 

 

87,537

 

 

 

87,805

 

 

 

87,386

 

 

See accompanying notes.

2


Table of contents

 

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

Net income

 

$

42,723

 

 

$

46,279

 

 

$

120,435

 

 

$

156,043

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(59,975

)

 

 

(31,959

)

 

 

(66,112

)

 

 

(82,778

)

Gain on derivative instruments, net of tax of $5.0 million,

    $2.4 million, $10.7 million and $5.6 million, respectively

 

 

11,598

 

 

 

7,380

 

 

 

20,495

 

 

 

16,434

 

Other comprehensive loss

 

 

(48,377

)

 

 

(24,579

)

 

 

(45,617

)

 

 

(66,344

)

Comprehensive (loss) income

 

 

(5,654

)

 

 

21,700

 

 

 

74,818

 

 

 

89,699

 

Comprehensive income attributable to noncontrolling interests

 

 

(157

)

 

 

(47

)

 

 

(258

)

 

 

(156

)

Comprehensive (loss) income attributable to Acadia Healthcare Company, Inc.

 

$

(5,811

)

 

$

21,653

 

 

$

74,560

 

 

$

89,543

 

 

See accompanying notes.

3


Table of contents

 

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at December 31, 2017

 

 

87,060

 

 

$

871

 

 

$

2,517,545

 

 

$

(374,118

)

 

$

428,573

 

 

$

2,572,871

 

Common stock issued under stock incentive plans

 

 

228

 

 

 

2

 

 

 

94

 

 

 

 

 

 

 

 

 

96

 

Common stock withheld for minimum statutory taxes

 

 

 

 

 

 

 

 

(2,126

)

 

 

 

 

 

 

 

 

(2,126

)

Equity-based compensation expense

 

 

 

 

 

 

 

 

6,919

 

 

 

 

 

 

 

 

 

6,919

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

72,727

 

 

 

 

 

 

72,727

 

Other

 

 

 

 

 

 

 

 

313

 

 

 

 

 

 

 

 

 

313

 

Net income attributable to Acadia Healthcare

   Company, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,819

 

 

 

50,819

 

Balance at March 31, 2018

 

 

87,288

 

 

 

873

 

 

 

2,522,745

 

 

 

(301,391

)

 

 

479,392

 

 

 

2,701,619

 

Common stock issued under stock incentive plans

 

 

42

 

 

 

 

 

 

128

 

 

 

 

 

 

 

 

 

128

 

Common stock withheld for minimum statutory taxes

 

 

 

 

 

 

 

 

(232

)

 

 

 

 

 

 

 

 

(232

)

Equity-based compensation expense

 

 

 

 

 

 

 

 

7,129

 

 

 

 

 

 

 

 

 

7,129

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(114,492

)

 

 

 

 

 

(114,492

)

Other

 

 

 

 

 

 

 

 

313

 

 

 

 

 

 

 

 

 

313

 

Net income attributable to Acadia Healthcare

   Company, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,836

 

 

 

58,836

 

Balance at June 30, 2018

 

 

87,330

 

 

 

873

 

 

 

2,530,083

 

 

 

(415,883

)

 

 

538,228

 

 

 

2,653,301

 

Common stock issued under stock incentive plans

 

 

33

 

 

 

1

 

 

 

19

 

 

 

 

 

 

 

 

 

20

 

Common stock withheld for minimum statutory taxes

 

 

 

 

 

 

 

 

(158

)

 

 

 

 

 

 

 

 

(158

)

Equity-based compensation expense

 

 

 

 

 

 

 

 

5,225

 

 

 

 

 

 

 

 

 

5,225

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(24,579

)

 

 

 

 

 

(24,579

)

Other

 

 

 

 

 

 

 

 

208

 

 

 

 

 

 

 

 

 

208

 

Net income attributable to Acadia Healthcare

   Company, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,232

 

 

 

46,232

 

Balance at September 30, 2018

 

 

87,363

 

 

 

874

 

 

 

2,535,377

 

 

 

(440,462

)

 

 

584,460

 

 

 

2,680,249

 

Common stock issued under stock incentive plans

 

 

81

 

 

 

 

 

 

130

 

 

 

 

 

 

 

 

 

130

 

Common stock withheld for minimum statutory taxes

 

 

 

 

 

 

 

 

(1,265

)

 

 

 

 

 

 

 

 

(1,265

)

Equity-based compensation expense

 

 

 

 

 

 

 

 

2,728

 

 

 

 

 

 

 

 

 

2,728

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(21,915

)

 

 

 

 

 

(21,915

)

Other

 

 

 

 

 

 

 

 

5,017

 

 

 

 

 

 

 

 

 

5,017

 

Net loss attributable to Acadia Healthcare

   Company, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(331,637

)

 

 

(331,637

)

Balance at December 31, 2018

 

 

87,444

 

 

 

874

 

 

 

2,541,987

 

 

 

(462,377

)

 

 

252,823

 

 

 

2,333,307

 

Common stock issued under stock incentive plans

 

 

149

 

 

 

2

 

 

 

291

 

 

 

 

 

 

 

 

 

293

 

Common stock withheld for minimum statutory taxes

 

 

 

 

 

 

 

 

(1,620

)

 

 

 

 

 

 

 

 

(1,620

)

Equity-based compensation expense

 

 

 

 

 

 

 

 

6,101

 

 

 

 

 

 

 

 

 

6,101

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

35,791

 

 

 

 

 

 

35,791

 

Net income attributable to Acadia Healthcare

   Company, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,471

 

 

 

29,471

 

Balance at March 31, 2019

 

 

87,593

 

 

 

876

 

 

 

2,546,759

 

 

 

(426,586

)

 

 

282,294

 

 

 

2,403,343

 

Common stock issued under stock incentive plans

 

 

52

 

 

 

 

 

 

68

 

 

 

 

 

 

 

 

 

68

 

Common stock withheld for minimum statutory taxes

 

 

 

 

 

 

 

 

(356

)

 

 

 

 

 

 

 

 

(356

)

Equity-based compensation expense

 

 

 

 

 

 

 

 

4,182

 

 

 

 

 

 

 

 

 

4,182

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(33,031

)

 

 

 

 

 

(33,031

)

Net income attributable to Acadia Healthcare

   Company, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,140

 

 

 

48,140

 

Balance at June 30, 2019

 

 

87,645

 

 

 

876

 

 

 

2,550,653

 

 

 

(459,617

)

 

 

330,434

 

 

 

2,422,346

 

Common stock issued under stock incentive plans

 

 

10

 

 

 

1

 

 

 

153

 

 

 

 

 

 

 

 

 

154

 

Common stock withheld for minimum statutory taxes

 

 

 

 

 

 

 

 

(37

)

 

 

 

 

 

 

 

 

(37

)

Equity-based compensation expense

 

 

 

 

 

 

 

 

4,039

 

 

 

 

 

 

 

 

 

4,039

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(48,377

)

 

 

 

 

 

(48,377

)

Net income attributable to Acadia Healthcare

   Company, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,566

 

 

 

42,566

 

Balance at September 30, 2019

 

 

87,655

 

 

$

877

 

 

$

2,554,808

 

 

$

(507,994

)

 

$

373,000

 

 

$

2,420,691

 

 

See accompanying notes.

4


Table of contents

 

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

120,435

 

 

$

156,043

 

Adjustments to reconcile net income to net cash provided by continuing operating

   activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

122,277

 

 

 

119,360

 

Amortization of debt issuance costs

 

 

8,926

 

 

 

7,763

 

Equity-based compensation expense

 

 

14,322

 

 

 

19,273

 

Deferred income taxes

 

 

5,150

 

 

 

(1,738

)

Debt extinguishment costs

 

 

 

 

 

940

 

Other

 

 

4,444

 

 

 

3,025

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(32,956

)

 

 

(43,252

)

Other current assets

 

 

(3,912

)

 

 

3,021

 

Other assets

 

 

530

 

 

 

3,868

 

Accounts payable and other accrued liabilities

 

 

(35,610

)

 

 

9,230

 

Accrued salaries and benefits

 

 

4,813

 

 

 

11,049

 

Other liabilities

 

 

5,110

 

 

 

149

 

Net cash provided by continuing operating activities

 

 

213,529

 

 

 

288,731

 

Net cash used in discontinued operating activities

 

 

 

 

 

(2,548

)

Net cash provided by operating activities

 

 

213,529

 

 

 

286,183

 

Investing activities:

 

 

 

 

 

 

 

 

Cash paid for acquisitions, net of cash acquired

 

 

(44,900

)

 

 

 

Cash paid for capital expenditures

 

 

(202,722

)

 

 

(249,989

)

Cash paid for real estate acquisitions

 

 

(6,976

)

 

 

(9,391

)

Settlement of foreign currency derivatives

 

 

105,008

 

 

 

 

Other

 

 

12,398

 

 

 

(3,114

)

Net cash used in investing activities

 

 

(137,192

)

 

 

(262,494

)

Financing activities:

 

 

 

 

 

 

 

 

Borrowings on revolving credit facility

 

 

76,573

 

 

 

 

Principal payments on revolving credit facility

 

 

(76,573

)

 

 

 

Principal payments on long-term debt

 

 

(24,738

)

 

 

(31,492

)

Common stock withheld for minimum statutory taxes, net

 

 

(1,498

)

 

 

(2,272

)

Other

 

 

(5,923

)

 

 

(6,973

)

Net cash used in financing activities

 

 

(32,159

)

 

 

(40,737

)

Effect of exchange rate changes on cash

 

 

(1,788

)

 

 

(1,314

)

Net increase (decrease) in cash and cash equivalents

 

 

42,390

 

 

 

(18,362

)

Cash and cash equivalents at beginning of the period

 

 

50,510

 

 

 

67,290

 

Cash and cash equivalents at end of the period

 

$

92,900

 

 

$

48,928

 

Effect of acquisitions:

 

 

 

 

 

 

 

 

Assets acquired, excluding cash

 

 

48,594

 

 

 

 

Liabilities assumed

 

 

(3,694

)

 

 

 

Cash paid for acquisitions, net of cash acquired

 

$

44,900

 

 

$

 

 

See accompanying notes.

 

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Table of contents

 

Acadia Healthcare Company, Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2019

(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 September 30, 2019, the Company operated 589 behavioral healthcare facilities with approximately 18,000 beds in 40 states, the U.K. and Puerto Rico.

During the nine months ended September 30, 2019, the Company commenced a review of strategic alternatives including those related to its U.K. operations and a potential sale of such operations. The likelihood and form of strategic alternative that the Company may pursue for its U.K. operations remains uncertain.

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, 2018 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, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2019. 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.

Certain reclassifications have been made to prior years to conform to the current year presentation.

2.

Recently Issued Accounting Standards

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 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. Management is evaluating the impact of ASU 2018-15 on the Company’s consolidated financial statements.

In August 2017, FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). ASU 2017-12 amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in the financial statements and simplifies the application of hedge accounting in certain situations. ASU 2017-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted ASU 2017-02 on January 1, 2019. There is no significant impact on the Company’s consolidated financial statements.

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In March 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). ASU 2016-02’s core principle is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. ASU 2016-02 requires application either retrospectively to each prior reporting period presented in the financial statements or retrospectively at the beginning of the period of adoption. The Company adopted ASU 2016-02 retrospectively at the beginning of the period of adoption. Prior periods have not been adjusted. On January 1, 2019, the Company recorded right-of-use assets and lease liabilities of $500.3 million and $526.6 million, respectively, as described in Note 8 – Leases.  

3.

Revenue

Revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and residential treatment. The services provided by the Company have no fixed duration and can be terminated by the patient or the facility at any time, and therefore, each treatment is its own stand-alone contract.

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in Accounting Standards Codification (“ASC”) ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize the revenue. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to remain admitted in our facilities.

The Company disaggregates revenue from contracts with customers by service type and by payor within each of the Company’s segments.

U.S. 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.

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Acute inpatient psychiatric facilities

 

$

233,141

 

 

$

208,885

 

 

$

678,866

 

 

$

608,311

 

Specialty treatment facilities

 

 

201,169

 

 

 

198,107

 

 

 

595,473

 

 

 

575,536

 

Residential treatment centers

 

 

69,681

 

 

 

72,351

 

 

 

216,989

 

 

 

218,041

 

Outpatient community-based facilities

 

 

5,392

 

 

 

9,283

 

 

 

15,828

 

 

 

30,613

 

Revenue

 

$

509,383

 

 

$

488,626

 

 

$

1,507,156

 

 

$

1,432,501

 

 

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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 and nine months ended September 30, 2019 and 2018 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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Commercial

 

$

140,315

 

 

 

27.5

%

 

$

146,439

 

 

 

30.0

%

 

$

426,659

 

 

 

28.3

%

 

$

431,337

 

 

 

30.1

%

Medicare

 

 

76,906

 

 

 

15.1

%

 

 

73,528

 

 

 

15.0

%

 

 

223,027

 

 

 

14.8

%

 

 

210,307

 

 

 

14.7

%

Medicaid

 

 

256,370

 

 

 

50.3

%

 

 

229,390

 

 

 

46.9

%

 

 

750,631

 

 

 

49.8

%

 

 

668,236

 

 

 

46.6

%

Self-Pay

 

 

30,626

 

 

 

6.0

%

 

 

33,559

 

 

 

6.9

%

 

 

91,982

 

 

 

6.1

%

 

 

103,845

 

 

 

7.3

%

Other

 

 

5,166

 

 

 

1.1

%

 

 

5,710

 

 

 

1.2

%

 

 

14,857

 

 

 

1.0

%

 

 

18,776

 

 

 

1.3

%

Revenue

 

$

509,383

 

 

 

100.0

%

 

$

488,626

 

 

 

100.0

%

 

$

1,507,156

 

 

 

100.0

%

 

$

1,432,501

 

 

 

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 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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Healthcare facilities

 

$

148,138

 

 

$

150,589

 

 

$

455,399

 

 

$

464,098

 

Education and Children’s Services

 

 

43,388

 

 

 

45,795

 

 

 

135,652

 

 

 

141,945

 

Adult Care facilities

 

 

76,342

 

 

 

75,906

 

 

 

229,023

 

 

 

230,351

 

Revenue

 

$

267,868

 

 

$

272,290

 

 

$

820,074

 

 

$

836,394

 

 

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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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

U.K. public funded sources

 

$

242,747

 

 

 

90.6

%

 

$

245,919

 

 

 

90.3

%

 

$

740,492

 

 

 

90.3

%

 

$

756,094

 

 

 

90.4

%

Self-Pay

 

 

24,430

 

 

 

9.1

%

 

 

26,159

 

 

 

9.6

%

 

 

77,895

 

 

 

9.5

%

 

 

78,499

 

 

 

9.4

%

Other

 

 

691

 

 

 

0.3

%

 

 

212

 

 

 

0.1

%

 

 

1,687

 

 

 

0.2

%

 

 

1,801

 

 

 

0.2

%

Revenue

 

$

267,868

 

 

 

100.0

%

 

$

272,290

 

 

 

100.0

%

 

$

820,074

 

 

 

100.0

%

 

$

836,394

 

 

 

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, 2018

 

$

31,239

 

Payments received

 

 

128,866

 

Revenue recognized

 

 

(124,067

)

Foreign currency translation loss

 

 

(1,791

)

Balance at September 30, 2019

 

$

34,247

 

 

4.

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2019 and 2018 (in thousands, except per share amounts):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Acadia Healthcare

   Company, Inc.

 

$

42,566

 

 

$

46,232

 

 

$

120,177

 

 

$

155,887

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for basic

   earnings per share

 

 

87,649

 

 

 

87,344

 

 

 

87,591

 

 

 

87,233

 

Effect of dilutive instruments

 

 

210

 

 

 

193

 

 

 

214

 

 

 

153

 

Shares used in computing diluted earnings per

   common share

 

 

87,859

 

 

 

87,537

 

 

 

87,805

 

 

 

87,386

 

Earnings per share attributable to Acadia Healthcare

   Company, Inc. stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.49

 

 

$

0.53

 

 

$

1.37

 

 

$

1.79

 

Diluted

 

$

0.48

 

 

$

0.53

 

 

$

1.37

 

 

$

1.78

 

 

Approximately 1.9 million and 1.6 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 September 30, 2019 and 2018, respectively, because their effect would have been anti-dilutive. Approximately 2.4 million and 1.9 million shares of common stock issuable upon exercise of outstanding stock option awards were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2019 and 2018, respectively, because their effect would have been anti-dilutive. 

 

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5.

Acquisitions

The Company’s strategy is to acquire and develop behavioral healthcare facilities and improve operating results within its facilities and its other behavioral healthcare operations.

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, strategic review and other acquisition-related costs. Transaction-related expenses for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands):

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Termination, restructuring and strategic review costs

 

$

5,541

 

 

$

1,443

 

 

$

13,858

 

 

$

6,844

 

Legal, accounting and other acquisition-related costs

 

 

234

 

 

 

910

 

 

 

1,450

 

 

 

3,164

 

 

 

$

5,775

 

 

$

2,353

 

 

$

15,308

 

 

$

10,008

 

 

6.

Property and Equipment

Property and equipment consisted of the following at September 30, 2019 and December 31, 2018 (in thousands):

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Land

 

$

437,214

 

 

$

430,771

 

Building and improvements

 

 

2,555,105

 

 

 

2,423,594

 

Equipment

 

 

462,865

 

 

 

444,538

 

Construction in progress

 

 

231,581

 

 

 

294,848

 

 

 

 

3,686,765

 

 

 

3,593,751

 

Less: accumulated depreciation

 

 

(555,346

)

 

 

(485,985

)

Property and equipment, net

 

$

3,131,419

 

 

$

3,107,766

 

 

During the first quarter of 2019, the Company closed a 168-bed residential treatment center in Albuquerque, New Mexico. The Company is currently evaluating options for the future use of this property. During the third quarter of 2019, the Company closed a 108-bed residential treatment center in Butte, Montana, which was recorded as assets held for sale within other assets on the condensed consolidated balance sheets at September 30, 2019. The Company has recorded assets held for sale of $22.9 million and $17.0 million at September 30, 2019 and December 31, 2018, respectively.

 

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7.

Other Intangible Assets

Other identifiable intangible assets and related accumulated amortization consisted of the following at September 30, 2019 and December 31, 2018 (in thousands):

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

 

September 30,

2019

 

 

December 31,

2018

 

 

September 30,

2019

 

 

December 31,

2018

 

Intangible assets subject to amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract intangible assets

 

$

2,100

 

 

$

2,100

 

 

$

(2,100

)

 

$

(2,100

)

Non-compete agreements

 

 

1,131

 

 

 

1,147

 

 

 

(1,131

)

 

 

(1,147

)

 

 

 

3,231

 

 

 

3,247

 

 

 

(3,231

)

 

 

(3,247

)

Intangible assets not subject to amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Licenses and accreditations

 

 

12,586

 

 

 

12,343

 

 

 

 

 

 

 

Trade names

 

 

59,412

 

 

 

60,109

 

 

 

 

 

 

 

Certificates of need

 

 

17,030

 

 

 

16,538

 

 

 

 

 

 

 

 

 

 

89,028

 

 

 

88,990

 

 

 

 

 

 

 

Total

 

$

92,259

 

 

$

92,237

 

 

$

(3,231

)

 

$

(3,247

)

 

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.

 

8.

Leases

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.

In March 2016, the FASB issued ASU 2016-02. ASU 2016-02’s core principle is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information. The Company adopted ASU 2016-02 retrospectively at the beginning of the period of adoption. Prior periods have not been adjusted.  

The Company has elected the package of practical expedients offered in the transition guidance which allows management not to reassess lease identification, lease classification and initial direct costs. The Company also elected the accounting policy practical expedients by class of underlying asset 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.

On January 1, 2019, the Company recorded right-of-use assets and lease liabilities on the condensed consolidated balance sheet of $500.3 million and $526.6 million, respectively, for non-cancelable real estate operating leases with original lease terms in excess of one year. Finance leases remained on the condensed consolidated balance sheets as required by previous accounting guidance. The Company reviews service agreements for embedded leases and records right-of-use assets and liabilities as necessary.

Operating lease liabilities were 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, incremental borrowing rates were calculated based on information available at the later of the lease commencement date or January 1, 2019. Incremental borrowing rates reflect the Company’s estimated interest rates for collateralized borrowings over similar lease terms.

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Lease Position

At September 30, 2019, the Company recorded the following on the condensed consolidated balance sheet (in thousands):

Right-of-Use Assets

 

Balance Sheet Classification

 

September 30, 2019

 

Finance lease right-of-use assets

 

Property and equipment, net

 

$

44,326

 

Operating lease right-of-use assets

 

Operating lease right-of-use assets

 

 

479,881

 

Total

 

 

 

$

524,207

 

 

 

 

 

 

 

 

Lease Liabilities

 

Balance Sheet Classification

 

September 30, 2019

 

Current:

 

 

 

 

 

 

Finance lease liabilities

 

Other accrued liabilities

 

$

6,684

 

Operating lease liabilities

 

Current portion of operating lease liabilities

 

 

28,010

 

Noncurrent:

 

 

 

 

 

 

Finance lease liabilities

 

Other liabilities

 

 

43,776

 

Operating lease liabilities

 

Operating lease liabilities

 

 

478,894

 

Total

 

 

 

$

557,364

 

Weighted-average remaining lease terms and discount rates at September 30, 2019 were as follows:

 

 

 

 

 

Weighted-average remaining lease term (in years):

 

 

 

 

Finance

 

7.1

 

Operating

 

19.4

 

 

 

 

 

 

Weighted-average discount rate:

 

 

 

 

Finance

 

 

6.4

%

Operating

 

 

6.3

%

Lease Costs

The Company recorded the following lease costs for the three and nine months ended September 30, 2019 (in thousands):

 

Three Months Ended September 30, 2019

 

 

Nine Months Ended

September 30, 2019

 

Finance lease costs:

 

 

 

 

 

 

 

Depreciation of leased assets

 

1,036

 

 

 

3,295

 

Interest of lease liabilities

 

977

 

 

 

2,973

 

Total finance lease costs

$

2,013

 

 

$

6,268

 

 

 

 

 

 

 

 

 

Operating lease costs

 

15,873

 

 

 

48,639

 

Variable lease costs

 

1,229

 

 

 

3,159

 

Short term lease costs

 

1,378

 

 

 

4,308

 

Other lease costs

 

1,654

 

 

 

4,754

 

Total rents and leases

$

20,134

 

 

$

60,860

 

 

 

 

 

 

 

 

 

Total lease costs

$

22,147

 

 

$

67,128

 

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Other

Undiscounted cash flows for finance and operating leases recorded on the condensed consolidated balance sheet were as follows at September 30, 2019 (in thousands):

 

 

Finance Leases

 

 

Operating Leases

 

For the three months ending December 31, 2019

 

$

1,926

 

 

$

15,052

 

2020

 

 

7,071

 

 

 

58,702

 

2021

 

 

35,262

 

 

 

55,092

 

2022

 

 

2,386

 

 

 

50,379

 

2023

 

 

1,194

 

 

 

46,893

 

Thereafter

 

 

26,094

 

 

 

691,763

 

Total minimum lease payments

 

 

73,933

 

 

 

917,881

 

Less: amount of lease payments representing interest

 

 

23,473

 

 

 

410,977

 

Present value of future minimum lease payments

 

 

50,460

 

 

 

506,904

 

Less: Current portion of lease liabilities

 

 

6,684

 

 

 

28,010

 

Noncurrent lease liabilities

 

$

43,776

 

 

$

478,894

 

Supplemental data for the nine months ended September 30, 2019 was as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

Operating cash flows for operating leases

$

45,576

 

Operating cash flows for finance leases

$

2,973

 

Financing cash flows for finance leases

$

2,701

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

Operating leases

$

15,623

 

Finance leases

$

2,457

 

 

 

9.Long-Term Debt

Long-term debt consisted of the following (in thousands):

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Amended and Restated Senior Credit Facility:

 

 

 

 

 

 

 

 

Senior Secured Term A Loans

 

$

351,500

 

 

$

365,750

 

Senior Secured Term B Loans

 

 

1,362,424

 

 

 

1,372,912

 

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

 

 

5,110

 

 

 

5,953

 

Less: unamortized debt issuance costs, discount and

   premium

 

 

(34,112

)

 

 

(41,128

)

 

 

 

3,174,922

 

 

 

3,193,487

 

Less: current portion

 

 

(41,287

)

 

 

(34,112

)

Long-term debt

 

$

3,133,635

 

 

$

3,159,375

 

 

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”).

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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 March 22, 2018, the Company entered into a Second Repricing Facilities Amendment (the “Second Repricing Facilities Amendment”) to the Amended and Restated Credit Agreement. The Second Repricing Facilities Amendment (i) replaced the Term Loan B Facility Tranche B-1 (the “Tranche B-1 Facility”) and the Term Loan B Facility Tranche B-2 (the “Tranche B-2 Facility”) with a new Term Loan B facility Tranche B-3 (the “Tranche B-3 Facility”) and a new Term Loan B facility Tranche B-4 (the “Tranche B-4 Facility”), respectively, and (ii) reduced the Applicable Rate from 2.75% to 2.50% in the case of Eurodollar Rate loans and reduced the Applicable Rate from 1.75% to 1.50% in the case of Base Rate Loans.

On March 29, 2018, the Company entered into a Third Repricing Facilities Amendment to the Amended and Restated Credit Agreement (the “Third Repricing Facilities Amendment”, and together with the Second Repricing Facilities Amendment, the “Repricing Facilities Amendments”). The Third Repricing Facilities Amendment replaced the existing revolving credit facility and Term Loan A facility (“TLA Facility”) with a new revolving credit facility and TLA Facility, respectively. The Company’s line of credit on its revolving credit facility remains at $500.0 million and the Third Repricing Facility Amendment reduced the size of the TLA Facility from $400.0 million to $380.0 million to reflect the then current outstanding principal. The Third Repricing Facilities Amendment reduced the Applicable Rate by 25 basis points for the revolving credit facility and the TLA Facility by amending the definition of “Applicable Rate.”

In connection with the Repricing Facilities Amendments, the Company recorded a debt extinguishment charge of $0.9 million, including the discount and write-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of income.

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.

The Company had $485.1 million of availability under the revolving line of credit and had standby letters of credit outstanding of $14.9 million related to security for the payment of claims required by its workers’ compensation insurance program at September 30, 2019. Borrowings under the revolving line of credit are subject to customary conditions precedent to borrowing. The Amended and Restated Credit Agreement requires quarterly term loan principal repayments of our TLA Facility of $4.8 million for December 31, 2019, $7.1 million for March 31, 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 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 due on February 11, 2022. The Company is required to repay the Tranche B-4 Facility in equal quarterly installments of approximately $2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-4 Facility due on February 16, 2023. On April 17, 2018, the Company made an additional payment of $15.0 million, including $5.1 million on the Tranche B-3 Facility and $9.9 million on the Tranche B-4 Facility.

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 September 30, 2019. 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

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(iii) the Eurodollar Rate plus 1.00%. At September 30, 2019, 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.

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 September 30, 2019, 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.

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 September 30, 2019, 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 which 2,784,810 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

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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 $4.0 million and $5.2 million in equity-based compensation expense for the three months ended September 30, 2019 and 2018, respectively, and $14.3 million and $19.3 million for the nine months ended September 30, 2019 and 2018, respectively. At September 30, 2019, there was $41.1 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 1.3 years.

At September 30, 2019, there were no warrants outstanding and exercisable. The Company recognized a deferred income tax benefit of $1.3 million and $1.4 million for the three months ended September 30, 2019 and 2018, respectively, related to equity-based compensation expense. The Company recognized a deferred income tax benefit of $4.1 million and $5.2 million for the nine months ended September 30, 2019 and 2018, respectively, related to equity-based compensation expense.

Stock Options

Stock option activity during 2018 and 2019 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, 2018

 

 

974,566

 

 

$

47.89

 

 

 

7.46

 

 

$

3,802

 

Options granted

 

 

374,700

 

 

 

37.54

 

 

 

9.21

 

 

 

246

 

Options exercised

 

 

(20,989

)

 

 

17.83

 

 

N/A

 

 

 

383

 

Options cancelled

 

 

(128,737

)

 

 

50.83

 

 

N/A

 

 

N/A

 

Options outstanding at December 31, 2018

 

 

1,199,540

 

 

 

44.64

 

 

 

7.26

 

 

 

2,717

 

Options granted

 

 

605,200

 

 

 

28.50

 

 

 

9.47

 

 

 

1,213

 

Options exercised

 

 

(48,621

)

 

 

21.14

 

 

N/A

 

 

 

496

 

Options cancelled

 

 

(322,589

)

 

 

41.29

 

 

N/A

 

 

N/A

 

Options outstanding at September 30, 2019

 

 

1,433,530

 

 

$

39.35

 

 

 

7.81

 

 

$

1,731

 

Options exercisable at December 31, 2018

 

 

534,164

 

 

$

44.98

 

 

 

5.73

 

 

$

2,386

 

Options exercisable at September 30, 2019

 

 

529,639

 

 

$

47.97

 

 

 

6.02

 

 

$

658

 

 

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 nine months ended September 30, 2019 and year ended December 31, 2018:

 

 

September 30,

2019

 

 

December 31,

2018

 

Weighted average grant-date fair value of options

 

$

17.59

 

 

$

13.67

 

Risk-free interest rate

 

 

2.4

%

 

 

2.2

%

Expected volatility

 

 

38

%

 

 

37

%

Expected life (in years)

 

 

5.0

 

 

 

5.1

 

 

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.

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Other Stock-Based Awards

Restricted stock activity during 2018 and 2019 was as follows:

 

 

 

Number of

Shares

 

 

Weighted

Average

Grant-Date

Fair Value

 

Unvested at January 1, 2018

 

 

809,868

 

 

$

50.19

 

Granted

 

 

480,137

 

 

 

36.84

 

Cancelled

 

 

(88,989

)

 

 

47.57

 

Vested

 

 

(395,959

)

 

 

50.41

 

Unvested at December 31, 2018

 

 

805,057

 

 

$

42.40

 

Granted

 

 

700,937

 

 

 

28.77

 

Cancelled

 

 

(353,646

)

 

 

33.32

 

Vested

 

 

(250,392

)

 

 

47.16

 

Unvested at September 30, 2019

 

 

901,956

 

 

$

34.05

 

 

Restricted stock unit activity during 2018 and 2019 was as follows:

 

 

 

Number of

Units

 

 

Weighted

Average

Grant-Date

Fair Value

 

Unvested at January 1, 2018

 

 

360,909

 

 

$

50.04

 

Granted

 

 

285,358

 

 

 

42.26

 

Cancelled

 

 

(89,173

)

 

 

55.44

 

Vested

 

 

(72,983

)

 

 

49.64

 

Unvested at December 31, 2018

 

 

484,111

 

 

$

44.52

 

Granted

 

 

234,408

 

 

 

34.54

 

Cancelled

 

 

(267,161

)

 

 

45.20

 

Vested

 

 

 

 

 

 

Unvested at September 30, 2019

 

 

451,358

 

 

$

38.94

 

 

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 2019 and 2018 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 2019 and 2018 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.

11.

Income Taxes

The provision for income taxes for the three months ended September 30, 2019 and 2018 reflects effective tax rates of 13.8% and 15.9%, respectively. The decrease in the effective rate for the three months ended September 30, 2019 was primarily attributable

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to the release of an income tax uncertainty reserve related to the deductibility of equity-based compensation and the taxable gain on the foreign currency derivatives settlement in August 2019, which allowed the Company to deduct more interest.

The provision for income taxes for the nine months ended September 30, 2019 and 2018 reflects effective tax rates of 17.6% and 9.5%, respectively. The increase in the effective tax rate for the nine months ended September 30, 2019 was primarily attributable to a discrete benefit of $10.5 million recorded during the nine months ended September 30, 2018 related to a change in the provisional amount recorded at December 31, 2017 in connection with the Tax Cuts and Jobs Act (the “Tax Act”).

12.

Derivatives

The Company entered into foreign currency forward contracts during the three and nine months ended September 30, 2019 and 2018 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 amounts 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 is included in investing activities in the condensed consolidated statement of cash flows. The related gain from this termination is included in accumulated other comprehensive loss in accordance with ASC 815-30-40-1.

In August 2019, 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 2018 and the nine months ended September 30, 2019 as qualifying hedging instruments and is accounting for these derivatives as net investment hedges. The fair values of these derivatives at September 30, 2019 and December 31, 2018 of $(15.9) million and $60.5 million, respectively, are recorded as derivative instrument liabilities and assets, respectively, on the condensed consolidated balance sheets. During the three months ended September 30, 2019, 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 September 30, 2019 and December 31, 2018 were as follows (in thousands):

 

 

 

Carrying Amount

 

 

Fair Value

 

 

 

September 30,

2019

 

 

December 31,

2018

 

 

September 30,

2019

 

 

December 31,

2018

 

Amended and Restated Senior Credit Facility

 

$

1,694,623

 

 

$

1,715,338

 

 

$

1,694,623

 

 

$

1,715,338

 

6.125% Senior Notes due 2021

 

$

149,101

 

 

$

148,657

 

 

$

149,287

 

 

$

147,542

 

5.125% Senior Notes due 2022

 

$

297,554

 

 

$

296,946

 

 

$

299,786

 

 

$

283,583

 

5.625% Senior Notes due 2023

 

$

644,393

 

 

$

643,289

 

 

$

656,475

 

 

$

609,516

 

6.500% Senior Notes due 2024

 

$

384,141

 

 

$

383,304

 

 

$

399,507

 

 

$

369,888

 

Other long-term debt

 

$

5,110

 

 

$

5,953

 

 

$

5,110

 

 

$

5,953

 

Derivative instrument (liabilities) assets

 

$

(15,896

)

 

$

60,524

 

 

$

(15,896

)

 

$

60,524

 

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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.  

During the second quarter of 2019, the Company reached a settlement with the U.S. Attorney’s Office for the Southern District of West Virginia relating to the manner in which seven of our comprehensive treatment centers in West Virginia had historically billed lab claims to the West Virginia Medicaid Program. The Company paid the government $17.0 million during the three months ended June 30, 2019 and entered into a corporate integrity agreement with the Office of Inspector General imposing customary compliance obligations on our subsidiary, CRC Health.  

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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 September 30, 2019, the Company operated five facilities through non-wholly owned subsidiaries and owns between 60% and 85% 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 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, 2018

 

$

28,806

 

Acquisition of redeemable noncontrolling interests

 

 

3,300

 

Net income attributable to noncontrolling interests

 

 

258

 

Balance at September 30, 2019

 

$

32,364

 

 

16.

Other Current Assets

Other current assets consisted of the following (in thousands):

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Prepaid expenses

 

$

28,495

 

 

$

30,802

 

Other receivables

 

 

17,485

 

 

 

19,205

 

Cost report receivable

 

 

12,485

 

 

 

10,340

 

Notes receivable

 

 

11,875

 

 

 

 

Workers’ compensation deposits – current portion

 

 

10,000

 

 

 

10,000

 

Income taxes receivable

 

 

5,001

 

 

 

2,380

 

Inventory

 

 

4,337

 

 

 

5,055

 

Insurance receivable – current portion

 

 

2,049

 

 

 

2,049

 

Other

 

 

2,061

 

 

 

1,989

 

Other current assets

 

$

93,788

 

 

$

81,820

 

 

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17.

Other Accrued Liabilities

Other accrued liabilities consisted of the following (in thousands):

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Accrued expenses

 

$

47,067

 

 

$

44,938

 

Unearned income

 

 

35,278

 

 

 

32,154

 

Income taxes payable

 

 

25,318

 

 

 

3,041

 

Accrued interest

 

 

11,134

 

 

 

32,838

 

Finance lease liabilities

 

 

6,684

 

 

 

445

 

Accrued property taxes

 

 

6,537

 

 

 

4,136

 

Insurance liability – current portion

 

 

4,956

 

 

 

4,956

 

Accrued legal settlements

 

 

 

 

 

22,076

 

Other

 

 

2,780

 

 

 

6,642

 

Other accrued liabilities

 

$

139,754

 

 

$

151,226

 

 

18.

Segment Information

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 September 30, 2019, the U.S. Facilities segment included 224 behavioral healthcare facilities with approximately 9,300 beds in 40 states and Puerto Rico, and the U.K. Facilities segment included 365 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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   U.S. Facilities

 

$

509,383

 

 

$

488,626

 

 

$

1,507,156

 

 

$

1,432,501

 

   U.K. Facilities

 

 

267,868

 

 

 

272,290

 

 

 

820,074

 

 

 

836,394

 

   Corporate and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

777,251

 

 

$

760,916

 

 

$

2,327,230

 

 

$

2,268,895

 

Segment EBITDA (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   U.S. Facilities

 

$

127,087

 

 

$

128,537

 

 

$

381,491

 

 

$

375,663

 

   U.K. Facilities

 

 

40,726

 

 

 

40,735

 

 

 

126,617

 

 

 

146,081

 

   Corporate and Other

 

 

(21,175

)

 

 

(20,348

)

 

 

(66,581

)

 

 

(62,075

)

 

 

$

146,638

 

 

$

148,924

 

 

$

441,527

 

 

$

459,669

 

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Segment EBITDA (1)

 

$

146,638

 

 

$

148,924

 

 

$

441,527

 

 

$

459,669

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

(4,039

)

 

 

(5,225

)

 

 

(14,322

)

 

 

(19,273

)

Transaction-related expenses

 

 

(5,775

)

 

 

(2,353

)

 

 

(15,308

)

 

 

(10,008

)

Debt extinguishment costs

 

 

 

 

 

 

 

 

 

 

 

(940

)

Interest expense, net

 

 

(46,644

)

 

 

(46,651

)

 

 

(143,384

)

 

 

(137,706

)

Depreciation and amortization

 

 

(40,620

)

 

 

(39,659

)

 

 

(122,277

)

 

 

(119,360

)

Income before income taxes

 

$

49,560

 

 

$

55,036

 

 

$

146,236

 

 

$

172,382

 

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U.S. Facilities

 

 

U.K. Facilities

 

 

Corporate

and Other

 

 

Consolidated

 

Goodwill:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2019

 

$

2,044,837

 

 

$

351,575

 

 

$

 

 

$

2,396,412

 

Increase from 2019 acquisitions

 

 

36,567

 

 

 

 

 

 

 

 

 

36,567

 

Increase from contribution of redeemable noncontrolling interests

 

 

3,300

 

 

 

 

 

 

 

 

 

3,300

 

Foreign currency translation loss

 

 

 

 

 

(12,038

)

 

 

 

 

 

(12,038

)

Balance at September 30, 2019

 

$

2,084,704

 

 

$

339,537

 

 

$

 

 

$

2,424,241

 

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Assets (2):

 

 

 

 

 

 

 

 

U.S. Facilities

 

$

4,032,623

 

 

$

3,779,040

 

U.K. Facilities

 

 

2,472,274

 

 

 

2,175,809

 

Corporate and Other

 

 

223,228

 

 

 

217,655

 

 

 

$

6,728,125

 

 

$

6,172,504

 

 

(1)

Segment EBITDA is defined as income before provision for income taxes, equity-based compensation expense, transaction-related expenses, debt extinguishment costs, 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 $1.4 billion, U.K. Facilities of $1.6 billion and corporate and other of $57.2 million at September 30, 2019. 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 $44.9 million at December 31, 2018.

 

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, 2018

 

$

(504,528

)

 

$

43,966

 

 

$

(1,815

)

 

$

(462,377

)

Foreign currency translation (loss) gain

 

 

(66,174

)

 

 

 

 

 

62

 

 

 

(66,112

)

Gain on derivative instruments, net of tax of $10.7

   million

 

 

 

 

 

20,495

 

 

 

 

 

 

20,495

 

Balance at September 30, 2019

 

$

(570,702

)

 

$

64,461

 

 

$

(1,753

)

 

$

(507,994

)

 

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 September 30, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019 and 2018. The information segregates the parent company (Acadia Healthcare Company, Inc.), the combined wholly-owned subsidiary guarantors, the combined non-guarantor subsidiaries and eliminations.

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Acadia Healthcare Company, Inc.

Condensed Consolidating Balance Sheets

September 30, 2019

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

 

$

63,066

 

 

$

29,834

 

 

$

 

 

$

92,900

 

Accounts receivable, net

 

 

 

 

 

282,407

 

 

 

67,818

 

 

 

 

 

 

350,225

 

Other current assets

 

 

 

 

 

78,992

 

 

 

14,796

 

 

 

 

 

 

93,788

 

Total current assets

 

 

 

 

 

424,465

 

 

 

112,448

 

 

 

 

 

 

536,913

 

Property and equipment, net

 

 

 

 

 

1,313,560

 

 

 

1,817,859

 

 

 

 

 

 

3,131,419

 

Goodwill

 

 

 

 

 

1,991,944

 

 

 

432,297

 

 

 

 

 

 

2,424,241

 

Intangible assets, net

 

 

 

 

 

58,410

 

 

 

30,618

 

 

 

 

 

 

89,028

 

Deferred tax assets

 

 

1,999

 

 

 

 

 

 

3,371

 

 

 

(1,999

)

 

 

3,371

 

Investment in subsidiaries

 

 

5,369,355

 

 

 

 

 

 

 

 

 

(5,369,355

)

 

 

 

Operating lease right-of-use assets

 

 

 

 

 

99,517

 

 

 

380,364

 

 

 

 

 

 

479,881

 

Other assets

 

 

251,289

 

 

 

55,571

 

 

 

4,681

 

 

 

(248,269

)

 

 

63,272

 

Total assets

 

$

5,622,643

 

 

$

3,943,467

 

 

$

2,781,638

 

 

$

(5,619,623

)

 

$

6,728,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

41,287

 

 

$

 

 

$

 

 

$

 

 

$

41,287

 

Accounts payable

 

 

 

 

 

93,817

 

 

 

37,655

 

 

 

 

 

 

131,472

 

Accrued salaries and benefits

 

 

 

 

 

87,206

 

 

 

30,477

 

 

 

 

 

 

117,683

 

Current portion of operating lease liabilities

 

 

 

 

 

17,595

 

 

 

10,415

 

 

 

 

 

 

28,010

 

Other accrued liabilities

 

 

11,134

 

 

 

48,150

 

 

 

80,470

 

 

 

 

 

 

139,754

 

Total current liabilities

 

 

52,421

 

 

 

246,768

 

 

 

159,017

 

 

 

 

 

 

458,206

 

Long-term debt

 

 

3,133,635

 

 

 

 

 

 

248,269

 

 

 

(248,269

)

 

 

3,133,635

 

Deferred tax liabilities

 

 

 

 

 

17,419

 

 

 

47,734

 

 

 

(1,999

)

 

 

63,154

 

Operating lease liabilities

 

 

 

 

 

87,700

 

 

 

391,194

 

 

 

 

 

 

478,894

 

Derivative instrument liabilities

 

 

15,896

 

 

 

 

 

 

 

 

 

 

 

 

15,896

 

Other liabilities

 

 

 

 

 

110,037

 

 

 

15,248

 

 

 

 

 

 

125,285

 

Total liabilities

 

 

3,201,952

 

 

 

461,924

 

 

 

861,462

 

 

 

(250,268

)

 

 

4,275,070

 

Redeemable noncontrolling interests

 

 

 

 

 

 

 

 

32,364

 

 

 

 

 

 

32,364

 

Total equity

 

 

2,420,691

 

 

 

3,481,543

 

 

 

1,887,812

 

 

 

(5,369,355

)

 

 

2,420,691

 

Total liabilities and equity

 

$

5,622,643

 

 

$

3,943,467

 

 

$

2,781,638

 

 

$

(5,619,623

)

 

$

6,728,125

 

 

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Acadia Healthcare Company, Inc.

Condensed Consolidating Balance Sheets

December 31, 2018

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

 

$

32,471

 

 

$

18,039

 

 

$

 

 

$

50,510

 

Accounts receivable, net

 

 

 

 

 

248,218

 

 

 

69,869

 

 

 

 

 

 

318,087

 

Other current assets

 

 

 

 

 

60,160

 

 

 

21,660

 

 

 

 

 

 

81,820

 

Total current assets

 

 

 

 

 

340,849

 

 

 

109,568

 

 

 

 

 

 

450,417

 

Property and equipment, net

 

 

 

 

 

1,219,803

 

 

 

1,887,963

 

 

 

 

 

 

3,107,766

 

Goodwill

 

 

 

 

 

1,936,057

 

 

 

460,355

 

 

 

 

 

 

2,396,412

 

Intangible assets, net

 

 

 

 

 

56,611

 

 

 

32,379

 

 

 

 

 

 

88,990

 

Deferred tax assets – noncurrent

 

 

1,841

 

 

 

 

 

 

3,468

 

 

 

(1,841

)

 

 

3,468

 

Derivative instruments

 

 

60,524

 

 

 

 

 

 

 

 

 

 

 

 

60,524

 

Investment in subsidiaries

 

 

5,190,771

 

 

 

 

 

 

 

 

 

(5,190,771

)

 

 

 

Other assets

 

 

306,495

 

 

 

52,824

 

 

 

9,548

 

 

 

(303,940

)

 

 

64,927

 

Total assets

 

$

5,559,631

 

 

$

3,606,144

 

 

$

2,503,281

 

 

$

(5,496,552

)

 

$

6,172,504

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

34,112

 

 

$

 

 

$

 

 

$

 

 

$

34,112

 

Accounts payable

 

 

 

 

 

79,463

 

 

 

38,277

 

 

 

 

 

 

117,740

 

Accrued salaries and benefits

 

 

 

 

 

84,150

 

 

 

29,149

 

 

 

 

 

 

113,299

 

Other accrued liabilities

 

 

32,837

 

 

 

42,062

 

 

 

76,327

 

 

 

 

 

 

151,226

 

Total current liabilities

 

 

66,949

 

 

 

205,675

 

 

 

143,753

 

 

 

 

 

 

416,377

 

Long-term debt

 

 

3,159,375

 

 

 

 

 

 

303,940

 

 

 

(303,940

)

 

 

3,159,375

 

Deferred tax liabilities – noncurrent

 

 

 

 

 

31,874

 

 

 

50,339

 

 

 

(1,841

)

 

 

80,372

 

Other liabilities

 

 

 

 

 

107,866

 

 

 

46,401

 

 

 

 

 

 

154,267

 

Total liabilities

 

 

3,226,324

 

 

 

345,415

 

 

 

544,433

 

 

 

(305,781

)

 

 

3,810,391

 

Redeemable noncontrolling interests

 

 

 

 

 

 

 

 

28,806

 

 

 

 

 

 

28,806

 

Total equity

 

 

2,333,307

 

 

 

3,260,729

 

 

 

1,930,042

 

 

 

(5,190,771

)

 

 

2,333,307

 

Total liabilities and equity

 

$

5,559,631

 

 

$

3,606,144

 

 

$

2,503,281

 

 

$

(5,496,552

)

 

$

6,172,504

 

 

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Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended September 30, 2019

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Revenue

 

$

 

 

$

476,722

 

 

$

300,529

 

 

$

 

 

$

777,251

 

Salaries, wages and benefits

 

 

4,039

 

 

 

258,166

 

 

 

166,396

 

 

 

 

 

 

428,601

 

Professional fees

 

 

 

 

 

27,955

 

 

 

34,197

 

 

 

 

 

 

62,152

 

Supplies

 

 

 

 

 

20,291

 

 

 

10,499

 

 

 

 

 

 

30,790

 

Rents and leases

 

 

 

 

 

8,771

 

 

 

11,363

 

 

 

 

 

 

20,134

 

Other operating expenses

 

 

 

 

 

60,730

 

 

 

32,245

 

 

 

 

 

 

92,975

 

Depreciation and amortization

 

 

 

 

 

20,588

 

 

 

20,032

 

 

 

 

 

 

40,620

 

Interest expense, net

 

 

19,109

 

 

 

22,876

 

 

 

4,659

 

 

 

 

 

 

46,644

 

Transaction-related expenses

 

 

 

 

 

4,326

 

 

 

1,449

 

 

 

 

 

 

5,775

 

Total expenses

 

 

23,148

 

 

 

423,703

 

 

 

280,840

 

 

 

 

 

 

727,691

 

(Loss) income before income taxes

 

 

(23,148

)

 

 

53,019

 

 

 

19,689

 

 

 

 

 

 

49,560

 

Equity in earnings of subsidiaries

 

 

60,296

 

 

 

 

 

 

 

 

 

(60,296

)

 

 

 

(Benefit from) provision for income taxes

 

 

(5,575

)

 

 

15,273

 

 

 

(2,861

)

 

 

 

 

 

6,837

 

Net income (loss)

 

 

42,723

 

 

 

37,746

 

 

 

22,550

 

 

 

(60,296

)

 

 

42,723

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(157

)

 

 

 

 

 

(157

)

Net income (loss) attributable to Acadia

   Healthcare Company, Inc.

 

$

42,723

 

 

$

37,746

 

 

$

22,393

 

 

$

(60,296

)

 

$

42,566

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

(59,975

)

 

 

 

 

 

(59,975

)

Gain on derivative instruments

 

 

11,598

 

 

 

 

 

 

 

 

 

 

 

 

11,598

 

Other comprehensive income (loss)

 

 

11,598

 

 

 

 

 

 

(59,975

)

 

 

 

 

 

(48,377

)

Comprehensive income (loss) attributable to Acadia

    Healthcare Company, Inc.

 

$

54,321

 

 

$

37,746

 

 

$

(37,582

)

 

$

(60,296

)

 

$

(5,811

)

 

25


Table of contents

 

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended September 30, 2018

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Revenue

 

$

 

 

$

458,061

 

 

$

302,855

 

 

$

 

 

$

760,916

 

Salaries, wages and benefits

 

 

5,225

 

 

 

245,599

 

 

 

167,093

 

 

 

 

 

 

417,917

 

Professional fees

 

 

 

 

 

24,152

 

 

 

35,357

 

 

 

 

 

 

59,509

 

Supplies

 

 

 

 

 

19,139

 

 

 

10,322

 

 

 

 

 

 

29,461

 

Rents and leases

 

 

 

 

 

8,294

 

 

 

11,572

 

 

 

 

 

 

19,866

 

Other operating expenses

 

 

 

 

 

57,495

 

 

 

32,969

 

 

 

 

 

 

90,464

 

Depreciation and amortization

 

 

 

 

 

18,857

 

 

 

20,802

 

 

 

 

 

 

39,659

 

Interest expense, net

 

 

17,225

 

 

 

22,768

 

 

 

6,658

 

 

 

 

 

 

46,651

 

Transaction-related expenses

 

 

 

 

 

702

 

 

 

1,651

 

 

 

 

 

 

2,353

 

Total expenses

 

 

22,450

 

 

 

397,006

 

 

 

286,424

 

 

 

 

 

 

705,880

 

(Loss) income before income taxes

 

 

(22,450

)

 

 

61,055

 

 

 

16,431

 

 

 

 

 

 

55,036

 

Equity in earnings of subsidiaries

 

 

62,854

 

 

 

 

 

 

 

 

 

(62,854

)

 

 

 

(Benefit from) provision for income taxes

 

 

(5,875

)

 

 

11,666

 

 

 

2,966

 

 

 

 

 

 

8,757

 

Net income (loss)

 

 

46,279

 

 

 

49,389

 

 

 

13,465

 

 

 

(62,854

)

 

 

46,279

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(47

)

 

 

 

 

 

(47

)

Net income (loss) attributable to Acadia

   Healthcare Company, Inc.

 

$

46,279

 

 

$

49,389

 

 

$

13,418

 

 

$

(62,854

)

 

$

46,232

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

(31,959

)

 

 

 

 

 

(31,959

)

Gain on derivative instruments

 

 

7,380

 

 

 

 

 

 

 

 

 

 

 

 

7,380

 

Other comprehensive income (loss)

 

 

7,380

 

 

 

 

 

 

(31,959

)

 

 

 

 

 

(24,579

)

Comprehensive income (loss) attributable to Acadia

    Healthcare Company, Inc.

 

$

53,659

 

 

$

49,389

 

 

$

(18,541

)

 

$

(62,854

)

 

$

21,653

 

26


Table of contents

 

 

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Nine Months Ended September 30, 2019

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Revenue

 

$

 

 

$

1,416,790

 

 

$

910,440

 

 

$

 

 

$

2,327,230

 

Salaries, wages and benefits

 

 

14,322

 

 

 

767,764

 

 

 

506,313

 

 

 

 

 

 

1,288,399

 

Professional fees

 

 

 

 

 

79,663

 

 

 

97,925

 

 

 

 

 

 

177,588

 

Supplies

 

 

 

 

 

59,753

 

 

 

31,908

 

 

 

 

 

 

91,661

 

Rents and leases

 

 

 

 

 

25,890

 

 

 

34,970

 

 

 

 

 

 

60,860

 

Other operating expenses

 

 

 

 

 

181,639

 

 

 

99,878

 

 

 

 

 

 

281,517

 

Depreciation and amortization

 

 

 

 

 

60,210

 

 

 

62,067

 

 

 

 

 

 

122,277

 

Interest expense, net

 

 

58,825

 

 

 

69,380

 

 

 

15,179

 

 

 

 

 

 

143,384

 

Transaction-related expenses

 

 

 

 

 

12,122

 

 

 

3,186

 

 

 

 

 

 

15,308

 

Total expenses

 

 

73,147

 

 

 

1,256,421

 

 

 

851,426

 

 

 

 

 

 

2,180,994

 

(Loss) income before income taxes

 

 

(73,147

)

 

 

160,369

 

 

 

59,014

 

 

 

 

 

 

146,236

 

Equity in earnings of subsidiaries

 

 

174,337

 

 

 

 

 

 

 

 

 

(174,337

)

 

 

 

(Benefit from) provision for income taxes

 

 

(19,245

)

 

 

57,636

 

 

 

(12,590

)

 

 

 

 

 

25,801

 

Net income (loss)

 

 

120,435

 

 

 

102,733

 

 

 

71,604

 

 

 

(174,337

)

 

 

120,435

 

Net gain attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(258

)

 

 

 

 

 

(258

)

Net income (loss) attributable to Acadia

   Healthcare Company, Inc.

 

$

120,435

 

 

$

102,733

 

 

$

71,346

 

 

$

(174,337

)

 

$

120,177

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

(66,112

)

 

 

 

 

 

(66,112

)

Gain on derivative instruments

 

 

20,495

 

 

 

 

 

 

 

 

 

 

 

 

20,495

 

Other comprehensive income (loss)

 

 

20,495

 

 

 

 

 

 

(66,112

)

 

 

 

 

 

(45,617

)

Comprehensive income (loss) attributable to Acadia

    Healthcare Company, Inc.

 

$

140,930

 

 

$

102,733

 

 

$

5,234

 

 

$

(174,337

)

 

$

74,560

 

 


27


Table of contents

 

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Nine Months Ended September 30, 2018

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Revenue

 

$

 

 

$

1,347,468

 

 

$

921,427

 

 

$

 

 

 

2,268,895

 

Salaries, wages and benefits

 

 

19,273

 

 

 

724,650

 

 

 

502,263

 

 

 

 

 

 

1,246,186

 

Professional fees

 

 

 

 

 

73,100

 

 

 

93,888

 

 

 

 

 

 

166,988

 

Supplies

 

 

 

 

 

57,143

 

 

 

31,815

 

 

 

 

 

 

88,958

 

Rents and leases

 

 

 

 

 

24,844

 

 

 

35,546

 

 

 

 

 

 

60,390

 

Other operating expenses

 

 

 

 

 

168,923

 

 

 

97,054

 

 

 

 

 

 

265,977

 

Depreciation and amortization

 

 

 

 

 

55,640

 

 

 

63,720

 

 

 

 

 

 

119,360

 

Interest expense, net

 

 

47,307

 

 

 

69,954

 

 

 

20,445

 

 

 

 

 

 

137,706

 

Debt extinguishment costs

 

 

940

 

 

 

 

 

 

 

 

 

 

 

 

940

 

Transaction-related expenses

 

 

 

 

 

7,382

 

 

 

2,626

 

 

 

 

 

 

10,008

 

Total expenses

 

 

67,520

 

 

 

1,181,636

 

 

 

847,357

 

 

 

 

 

 

2,096,513

 

(Loss) income before income taxes

 

 

(67,520

)

 

 

165,832

 

 

 

74,070

 

 

 

 

 

 

172,382

 

Equity in earnings of subsidiaries

 

 

206,204

 

 

 

 

 

 

 

 

 

(206,204

)

 

 

 

(Benefit from) provision for income taxes

 

 

(17,359

)

 

 

22,985

 

 

 

10,713

 

 

 

 

 

 

16,339

 

Net income (loss)

 

 

156,043

 

 

 

142,847

 

 

 

63,357

 

 

 

(206,204

)

 

 

156,043

 

Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

(156

)

 

 

 

 

 

(156

)

Net income (loss) attributable to Acadia

   Healthcare Company, Inc.

 

$

156,043

 

 

$

142,847

 

 

$

63,201

 

 

$

(206,204

)

 

$

155,887

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

(82,778

)

 

 

 

 

 

(82,778

)

Gain on derivative instruments

 

 

16,434

 

 

 

 

 

 

 

 

 

 

 

 

16,434

 

Other comprehensive income (loss)

 

 

16,434

 

 

 

 

 

 

(82,778

)

 

 

 

 

 

(66,344

)

Comprehensive income (loss) attributable to Acadia

    Healthcare Company, Inc.

 

$

172,477

 

 

$

142,847

 

 

$

(19,577

)

 

$

(206,204

)

 

$

89,543

 

 


28


Table of contents

 

 

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2019

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

120,435

 

 

$

102,733

 

 

$

71,604

 

 

$

(174,337

)

 

$

120,435

 

Adjustments to reconcile net income (loss)

   to net cash (used in) provided by continuing

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

 

(174,337

)

 

 

 

 

 

 

 

 

174,337

 

 

 

 

Depreciation and amortization

 

 

 

 

 

60,210

 

 

 

62,067

 

 

 

 

 

 

122,277

 

Amortization of debt issuance costs

 

 

8,926

 

 

 

 

 

 

 

 

 

 

 

 

8,926

 

Equity-based compensation expense

 

 

14,322

 

 

 

 

 

 

 

 

 

 

 

 

14,322

 

Deferred income taxes

 

 

(158

)

 

 

4,517

 

 

 

791

 

 

 

 

 

 

5,150

 

Other

 

 

2,606

 

 

 

1,643

 

 

 

195

 

 

 

 

 

 

4,444

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

 

 

 

(28,918

)

 

 

(4,038

)

 

 

 

 

 

(32,956

)

Other current assets

 

 

 

 

 

(2,845

)

 

 

(1,067

)

 

 

 

 

 

(3,912

)

Other assets

 

 

3,847

 

 

 

(1,136

)

 

 

1,666

 

 

 

(3,847

)

 

 

530

 

Accounts payable and other accrued liabilities

 

 

 

 

 

(29,543

)

 

 

(6,067

)

 

 

 

 

 

(35,610

)

Accrued salaries and benefits

 

 

 

 

 

2,008

 

 

 

2,805

 

 

 

 

 

 

4,813

 

Other liabilities

 

 

 

 

 

16,058

 

 

 

(10,948

)

 

 

 

 

 

5,110

 

Net cash (used in) provided by operating activities

 

 

(24,359

)

 

 

124,727

 

 

 

117,008

 

 

 

(3,847

)

 

 

213,529

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for acquisitions, net of cash acquired

 

 

 

 

 

(44,900

)

 

 

 

 

 

 

 

 

(44,900

)

Cash paid for capital expenditures

 

 

 

 

 

(135,242

)

 

 

(67,480

)

 

 

 

 

 

(202,722

)

Cash paid for real estate acquisitions

 

 

 

 

 

(6,976

)

 

 

 

 

 

 

 

 

(6,976

)

Settlement of foreign currency derivatives

 

 

105,008

 

 

 

 

 

 

 

 

 

 

 

 

105,008

 

Other

 

 

 

 

 

7,615

 

 

 

4,783

 

 

 

 

 

 

12,398

 

Net cash provided by (used in) investing activities

 

 

105,008

 

 

 

(179,503

)

 

 

(62,697

)

 

 

 

 

 

(137,192

)

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings on revolving credit facility

 

 

76,573

 

 

 

 

 

 

 

 

 

 

 

 

76,573

 

Principal payments on revolving credit facility

 

 

(76,573

)

 

 

 

 

 

 

 

 

 

 

 

(76,573

)

Principal payments on long-term debt

 

 

(24,738

)

 

 

 

 

 

(3,847

)

 

 

3,847

 

 

 

(24,738

)

Common stock withheld for minimum statutory taxes, net

 

 

(1,498

)

 

 

 

 

 

 

 

 

 

 

 

(1,498

)

Other

 

 

(2,375

)

 

 

(1,580

)

 

 

(1,968

)

 

 

 

 

 

(5,923

)

Cash (used in) provided by intercompany activity

 

 

(52,038

)

 

 

86,951

 

 

 

(34,913

)

 

 

 

 

 

 

Net cash (used in) provided by in financing activities

 

 

(80,649

)

 

 

85,371

 

 

 

(40,728

)

 

 

3,847

 

 

 

(32,159

)

Effect of exchange rate changes on cash

 

 

 

 

 

 

 

 

(1,788

)

 

 

 

 

 

(1,788

)

Net increase in cash and cash equivalents

 

 

 

 

 

30,595

 

 

 

11,795

 

 

 

 

 

 

42,390

 

Cash and cash equivalents at beginning of the period

 

 

 

 

 

32,471

 

 

 

18,039

 

 

 

 

 

 

50,510

 

Cash and cash equivalents at end of the period

 

$

 

 

$

63,066

 

 

$

29,834

 

 

$

 

 

$

92,900

 

 

29


Table of contents

 

 

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2018

(In thousands)

 

 

 

Parent

 

 

Combined

Subsidiary

Guarantors

 

 

Combined

Non-

Guarantors

 

 

Consolidating

Adjustments

 

 

Total

Consolidated

Amounts

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

156,043

 

 

$

142,847

 

 

$

63,357

 

 

$

(206,204

)

 

$

156,043

 

Adjustments to reconcile net income (loss) to

   net cash (used in) provided by continuing

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

 

(206,204

)

 

 

 

 

 

 

 

 

206,204

 

 

 

 

Depreciation and amortization

 

 

 

 

 

55,640

 

 

 

63,720

 

 

 

 

 

 

119,360

 

Amortization of debt issuance costs

 

 

8,065

 

 

 

 

 

 

(302

)

 

 

 

 

 

7,763

 

Equity-based compensation expense

 

 

19,273

 

 

 

 

 

 

 

 

 

 

 

 

19,273

 

Deferred income taxes

 

 

74

 

 

 

(2,398

)

 

 

586

 

 

 

 

 

 

(1,738

)

Debt extinguishment costs

 

 

940

 

 

 

 

 

 

 

 

 

 

 

 

940

 

Other

 

 

1,948

 

 

 

1,219

 

 

 

(142

)

 

 

 

 

 

3,025

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

 

 

 

(39,644

)

 

 

(3,608

)

 

 

 

 

 

(43,252

)

Other current assets

 

 

 

 

 

7,898

 

 

 

(4,877

)

 

 

 

 

 

3,021

 

Other assets

 

 

4,596

 

 

 

3,763

 

 

 

105

 

 

 

(4,596

)

 

 

3,868

 

Accounts payable and other accrued liabilities

 

 

 

 

 

7,835

 

 

 

1,395

 

 

 

 

 

 

9,230

 

Accrued salaries and benefits

 

 

 

 

 

11,100

 

 

 

(51

)

 

 

 

 

 

11,049

 

Other liabilities

 

 

 

 

 

4,548

 

 

 

(4,399

)

 

 

 

 

 

149

 

Net cash (used in) provided by continuing operating

     activities

 

 

(15,265

)

 

 

192,808

 

 

 

115,784

 

 

 

(4,596

)

 

 

288,731

 

Net cash used in discontinued operating activities

 

 

 

 

 

(2,548

)

 

 

 

 

 

 

 

 

(2,548

)

Net cash (used in) provided by operating activities

 

 

(15,265

)

 

 

190,260

 

 

 

115,784

 

 

 

(4,596

)

 

 

286,183

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for capital expenditures

 

 

 

 

 

(149,402

)

 

 

(100,587

)

 

 

 

 

 

(249,989

)

Cash paid for real estate acquisitions

 

 

 

 

 

(9,391

)

 

 

 

 

 

 

 

 

(9,391

)

Other

 

 

 

 

 

(5,718

)

 

 

2,604

 

 

 

 

 

 

(3,114

)

Net cash used in investing activities

 

 

 

 

 

(164,511

)

 

 

(97,983

)

 

 

 

 

 

(262,494

)

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments on long-term debt

 

 

(31,492

)

 

 

(169

)

 

 

(4,427

)

 

 

4,596

 

 

 

(31,492

)

Common stock withheld for minimum statutory taxes, net

 

 

(2,272

)

 

 

 

 

 

 

 

 

 

 

 

(2,272

)

Other

 

 

(1,742

)

 

 

(2,885

)

 

 

(2,346

)

 

 

 

 

 

(6,973

)

Cash provided by (used in) intercompany activity

 

 

50,771

 

 

 

(37,257

)

 

 

(13,514

)

 

 

 

 

 

 

Net cash provided by (used in) in financing activities

 

 

15,265

 

 

 

(40,311

)

 

 

(20,287

)

 

 

4,596

 

 

 

(40,737

)

Effect of exchange rate changes on cash

 

 

 

 

 

 

 

 

(1,314

)

 

 

 

 

 

(1,314

)

Net decrease in cash and cash equivalents

 

 

 

 

 

(14,562

)

 

 

(3,800

)

 

 

 

 

 

(18,362

)

Cash and cash equivalents at beginning of the period

 

 

 

 

 

46,860

 

 

 

20,430

 

 

 

 

 

 

67,290

 

Cash and cash equivalents at end of the period

 

$

 

 

$

32,298

 

 

$

16,630

 

 

$

 

 

$

48,928

 

 

 

 

 

 

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “would,” “should,” “could” or the negative thereof. Generally, the words “anticipate,” “believe,” “continue,” “expect,” “intend,” “estimate,” “project,” “plan” and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, many of which are outside of our control, which could cause our actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:

 

our significant indebtedness, our ability to meet our debt obligations, and our ability to incur substantially more debt;

 

difficulties in successfully integrating the operations of acquired facilities or realizing the potential benefits and synergies of our acquisitions and joint ventures;

 

our ability to implement our business strategies in the U.S. and the U.K.;

 

our ability to successfully implement the strategic initiatives that we adopted following our review of our business in early 2019;

 

potential difficulties operating our business in light of political and economic instability in the U.K. and globally relating to the U.K.’s departure from the European Union;

 

the impact of fluctuations in foreign exchange rates, including the devaluations of the GBP relative to the USD;

 

the impact of payments received from the government and third-party payors on our revenue and results of operations including the significant dependence of our U.K. facilities on payments received from the NHS;

 

our ability to recruit and retain quality psychiatrists and other physicians, nurses, counselors and other medical support personnel;

 

the impact of competition for staffing on our labor costs and profitability;

 

the impact of increases to our labor costs in the U.S. and the U.K.;

 

the occurrence of patient incidents, which could result in negative media coverage, adversely affect the price of our securities and result in incremental regulatory burdens and governmental investigations;

 

our future cash flow and earnings;

 

our restrictive covenants, which may restrict our business and financing activities;

 

our ability to make payments on our financing arrangements;

 

the impact of the economic and employment conditions in the U.S. and the U.K. on our business and future results of operations;

 

compliance with laws and government regulations;

 

the impact of claims brought against us or our facilities including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employee related claims;

 

the impact of governmental investigations, regulatory actions and whistleblower lawsuits;

 

the impact of healthcare reform in the U.S. and abroad, including the potential repeal, replacement or modification of the Patient Protection and Affordable Care Act;

 

the impact of adverse weather conditions, including the effects of hurricanes;

 

the impact of our highly competitive industry on patient volumes;

 

our dependence on key management personnel, key executives and local facility management personnel;

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our acquisition, joint venture and de novo strategies, which expose us to a variety of operational and financial risks, as well as legal and regulatory risks;

 

the impact of state efforts to regulate the construction or expansion of healthcare facilities on our ability to operate and expand our operations;

 

our potential inability to extend leases at expiration;

 

the impact of controls designed to reduce inpatient services on our revenue;

 

the impact of different interpretations of accounting principles on our results of operations or financial condition;

 

the impact of environmental, health and safety laws and regulations, especially in locations where we have concentrated operations;

 

the 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;

 

the risk of a cyber-security incident and any resulting violation of laws and regulations regarding information privacy or other negative impact;

 

the impact of laws and regulations relating to privacy and security of patient health information and standards for electronic transactions;

 

our ability to cultivate and maintain relationships with referral sources;

 

the impact of a change in the mix of our U.S. and U.K. earnings, adverse changes in our effective tax rate and adverse developments in tax laws generally;

 

changes in interpretations, assumptions and expectations regarding the Tax Act, including additional guidance that may be issued by federal and state taxing authorities;

 

failure to maintain effective internal control over financial reporting;

 

the impact of fluctuations in our operating results, quarter to quarter earnings and other factors on the price of our securities;

 

the impact of the trend for insurance companies and managed care organizations to enter into sole source contracts on our ability to obtain patients;

 

the impact of value-based purchasing programs on our revenue; and

 

those risks and uncertainties described from time to time in our filings with the SEC.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.

Overview

Our business strategy is to acquire and develop behavioral healthcare facilities and improve our operating results within our facilities and our other behavioral healthcare operations. We strive to improve the operating results of our facilities by providing high-quality services, expanding referral networks and marketing initiatives while meeting the increased demand for behavioral healthcare services through expansion of our current locations as well as developing new services within existing locations. At September 30, 2019, we operated 589 behavioral healthcare facilities with approximately 18,000 beds in 40 states, the U.K. and Puerto Rico. During the nine months ended September 30, 2019, we acquired 11 facilities and added 414 beds (exclusive of acquisitions), including 254 added to existing facilities and 160 added through the opening of two de novo facilities. For the year ending December 31, 2019, we expect to add approximately 650 total beds exclusive of acquisitions.

We are the leading publicly traded pure-play provider of behavioral healthcare services, with operations in the U.S. and the U.K. Management believes that we are positioned as a leading platform in a highly fragmented industry under the direction of an experienced management team that has significant industry expertise. Management expects to take advantage of several strategies that are more accessible as a result of our increased size and geographic scale, including continuing a national marketing strategy to attract

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new patients and referral sources, increasing our volume of out-of-state referrals, providing a broader range of services to new and existing patients and clients and selectively pursuing opportunities to expand our facility and bed count in the U.S. through acquisitions, de novo facilities, joint ventures and bed additions in existing facilities.

During the nine months ended September 30, 2019, we commenced a review of strategic alternatives including those related to our U.K. operations and a potential sale of such operations. The likelihood and form of strategic alternative that we may pursue for our U.K. operations remains uncertain.

Acquisitions

On April 1, 2019, the Company completed the acquisition of Bradford, a specialty treatment facility with 46 beds located in Millerton, Pennsylvania for cash consideration of approximately $4.5 million.

On February 15, 2019, the Company completed the acquisition of Whittier, an inpatient psychiatric facility with 71 beds located in Haverhill, Massachusetts, for cash consideration of approximately $17.9 million. Also on February 15, 2019, the Company completed the acquisition of Mission Treatment for cash consideration of approximately $22.5 million. Mission Treatment operates nine comprehensive treatment centers in California, Nevada, Arizona and Oklahoma.

 

Results of Operations

The following table illustrates our consolidated results of operations for the respective periods shown (dollars in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Revenue

 

$

777,251

 

 

 

100.0

%

 

$

760,916

 

 

 

100.0

%

 

$

2,327,230

 

 

 

100.0

%

 

$

2,268,895

 

 

 

100.0

%

Salaries, wages and benefits

 

 

428,601

 

 

 

55.1

%

 

 

417,917

 

 

 

54.9

%

 

 

1,288,399

 

 

 

55.4

%

 

 

1,246,186

 

 

 

54.9

%

Professional fees

 

 

62,152

 

 

 

8.0

%

 

 

59,509

 

 

 

7.8

%

 

 

177,588

 

 

 

7.6

%

 

 

166,988

 

 

 

7.4

%

Supplies

 

 

30,790

 

 

 

4.0

%

 

 

29,461

 

 

 

3.9

%

 

 

91,661

 

 

 

3.9

%

 

 

88,958

 

 

 

3.9

%

Rents and leases

 

 

20,134

 

 

 

2.6

%

 

 

19,866

 

 

 

2.6

%

 

 

60,860

 

 

 

2.6

%

 

 

60,390

 

 

 

2.7

%

Other operating expenses

 

 

92,975

 

 

 

12.0

%

 

 

90,464

 

 

 

11.9

%

 

 

281,517

 

 

 

12.1

%

 

 

265,977

 

 

 

11.7

%

Depreciation and amortization

 

 

40,620

 

 

 

5.2

%

 

 

39,659

 

 

 

5.2

%

 

 

122,277

 

 

 

5.3

%

 

 

119,360

 

 

 

5.3

%

Interest expense

 

 

46,644

 

 

 

6.0

%

 

 

46,651

 

 

 

6.1

%

 

 

143,384

 

 

 

6.2

%

 

 

137,706

 

 

 

6.1

%

Debt extinguishment costs

 

 

 

 

 

0.0

%

 

 

 

 

 

0.0

%

 

 

 

 

 

0.0

%

 

 

940

 

 

 

0.0

%

Transaction-related expenses

 

 

5,775

 

 

 

0.7

%

 

 

2,353

 

 

 

0.3

%

 

 

15,308

 

 

 

0.7

%

 

 

10,008

 

 

 

0.4

%

Total expenses

 

 

727,691

 

 

 

93.6

%

 

 

705,880

 

 

 

92.7

%

 

 

2,180,994

 

 

 

93.8

%

 

 

2,096,513

 

 

 

92.4

%

Income before income taxes

 

 

49,560

 

 

 

6.4

%

 

 

55,036

 

 

 

7.3

%

 

 

146,236

 

 

 

6.2

%

 

 

172,382

 

 

 

7.6

%

Provision for income taxes

 

 

6,837

 

 

 

0.9

%

 

 

8,757

 

 

 

1.2

%

 

 

25,801

 

 

 

1.1

%

 

 

16,339

 

 

 

0.7

%

Net income

 

 

42,723

 

 

 

5.5

%

 

 

46,279

 

 

 

6.1

%

 

 

120,435

 

 

 

5.1

%

 

 

156,043

 

 

 

6.9

%

Net income attributable to noncontrolling

      interests

 

 

(157

)

 

 

0.0

%

 

 

(47

)

 

 

0.0

%

 

 

(258

)

 

 

0.0

%

 

 

(156

)

 

 

0.0

%

Net income attributable to Acadia Healthcare

     Company, Inc.

 

$

42,566

 

 

 

5.5

%

 

$

46,232

 

 

 

6.1

%

 

$

120,177

 

 

 

5.1

%

 

$

155,887

 

 

 

6.9

%

 

Segments

At September 30, 2019, the U.S. Facilities segment included 224 behavioral healthcare facilities with approximately 9,300 beds in 40 states and Puerto Rico, and the U.K. Facilities segment included 365 behavioral healthcare facilities with approximately 8,700 beds in the U.K.

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The following table sets forth percent changes in same facility operating data for our U.S. Facilities for the three and nine months ended September 30, 2019 compared to the same periods in 2018:

 

 

Three Months Ended

 

 

Nine Months Ended

 

U.S. Same Facility Results (a)

 

 

 

 

 

 

 

 

Revenue growth

 

4.9%

 

 

5.9%

 

Patient days growth

 

2.8%

 

 

3.5%

 

Admissions growth

 

4.7%

 

 

4.9%

 

Average length of stay change (b)

 

-1.8%

 

 

-1.3%

 

Revenue per patient day growth

 

2.0%

 

 

2.3%

 

EBITDA margin change (c,d)

 

-140 bps

 

 

-50 bps

 

 

 

(a)

Results for the periods presented include facilities we have operated more than one year and exclude certain closed services.

 

 

(b)

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

 

(c)   Segment EBITDA is defined as income before provision for income taxes, equity-based compensation expense, transaction-related expenses, debt extinguishment costs, interest expense and depreciation and amortization. Management uses Segment EBITDA as an analytical indicator to measure the performance of our 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.

 

(d)

During the three months ended September 30, 2019, certain of our U.S. facilities faced operational issues that negatively affected U.S. EBITDA margin. We believe these operational issues are temporary.

 

The following table sets forth percent changes in same facility operating data for our U.K. Facilities for the three and nine months ended September 30, 2019 compared to the same periods in 2018:

 

 

Three Months Ended

 

 

Nine Months Ended

 

U.K. Same Facility Results (a,c)

 

 

 

 

 

 

 

 

Revenue growth

 

4.0%

 

 

4.2%

 

Patient days growth

 

-1.1%

 

 

-0.1%

 

Admissions growth

 

-1.5%

 

 

-2.4%

 

Average length of stay change (b)

 

0.5%

 

 

2.3%

 

Revenue per patient day growth

 

5.1%

 

 

4.3%

 

EBITDA margin change (d,e)

 

-30 bps

 

 

-270 bps

 

 

 

(a)

Results for the periods presented include facilities we have operated more than one year and exclude the elderly care division and certain closed services.

 

 

(b)

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

 

 

(c)

Revenue and revenue per patient day for the three and nine months ended September 30, 2018 is adjusted to reflect the foreign currency exchange rate for the comparable periods of 2019 in order to eliminate the effect of changes in the exchange rate.

 

 

(d)

See definition of Segment EBITDA in U.S. Same Facility Results table above.

 

 

(e)

For the nine months ended September 30, 2019, U.K. EBITDA margin was affected by lower census and higher operating expenses including labor in particular.

 

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Three months ended September 30, 2019 compared to the three months ended September 30, 2018

Revenue. Revenue increased $16.3 million, or 2.1%, to $777.3 million for the three months ended September 30, 2019 from $760.9 million for the three months ended September 30, 2018 resulting from same facility revenue growth of 4.6% offset by $14.6 million as a result of the decrease in the exchange rate between USD and GBP. During the three months ended September 30, 2019, we generated $509.4 million of revenue, or 65.5% of our total revenue, from our U.S. Facilities and $267.9 million of revenue, or 34.5% of our total revenue, from our U.K. Facilities. During the three months ended September 30, 2018, we generated $488.6 million of revenue, or 64.2% of our total revenue, from our U.S. Facilities and $272.3 million of revenue, or 35.8% of our total revenue, from our U.K. Facilities.

U.S. same facility revenue increased by $23.2 million, or 4.9%, for the three months ended September 30, 2019 compared to the three months ended September 30, 2018, resulting from same facility growth in patient days of 2.8% and an increase in same facility revenue per day of 2.0%. Consistent with the same facility patient day growth in 2018, the growth in same facility patient days for the three months ended September 30, 2019 compared to the three months ended September 30, 2018, resulted from the addition of beds to our existing facilities and ongoing demand for our services. U.K. same facility revenue increased by $9.3 million, or 4.0%, for the three months ended September 30, 2019 compared to the three months ended September 30, 2018, resulting from an increase in same facility revenue per day of 5.1% offset by a decline in same facility patient days of 1.1%.

Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $428.6 million for the three months ended September 30, 2019 compared to $417.9 million for the three months ended September 30, 2018, an increase of $10.7 million. SWB expense included $4.0 million and $5.2 million of equity-based compensation expense for the three months ended September 30, 2019 and 2018, respectively. Excluding equity-based compensation expense, SWB expense was $424.6 million, or 54.6% of revenue, for the three months ended September 30, 2019, compared to $412.7 million, or 54.2% of revenue, for the three months ended September 30, 2018. Same facility SWB expense was $386.0 million for the three months ended September 30, 2019, or 52.0% of revenue, compared to $364.4 million for the three months ended September 30, 2018, or 51.4% of revenue.

Professional fees. Professional fees were $62.2 million for the three months ended September 30, 2019, or 8.0% of revenue, compared to $59.5 million for the three months ended September 30, 2018, or 7.8% of revenue. Same facility professional fees were $54.2 million for the three months ended September 30, 2019, or 7.3% of revenue, compared to $50.3 million, for the three months ended September 30, 2018, or 7.1% of revenue.

Supplies. Supplies expense was $30.8 million for the three months ended September 30, 2019, or 4.0% of revenue, compared to $29.5 million for the three months ended September 30, 2018, or 3.9% of revenue. Same facility supplies expense was $28.8 million for the three months ended September 30, 2019, or 3.9% of revenue, compared to $27.0 million for the three months ended September 30, 2018, or 3.8% of revenue.

Rents and leases. Rents and leases were $20.1 million for the three months ended September 30, 2019, or 2.6% of revenue compared to $19.9 million for the three months ended September 30, 2018, or 2.6% of revenue. Same facility rents and leases were $16.4 million for the three months ended September 30, 2019, or 2.2% of revenue, compared to $15.4 million for the three months ended September 30, 2018, or 2.2% of revenue.

Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses. Other operating expenses were $93.0 million for the three months ended September 30, 2019, or 12.0% of revenue, compared to $90.5 million for the three months ended September 30, 2018, or 11.9% of revenue. Same facility other operating expenses were $86.9 million for the three months ended September 30, 2019, or 11.7% of revenue, compared to $82.9 million for the three months ended September 30, 2018, or 11.7% of revenue.

Depreciation and amortization. Depreciation and amortization expense was $40.6 million for the three months ended September 30, 2019, or 5.2% of revenue, compared to $39.7 million for the three months ended September 30, 2018, or 5.2% of revenue.

Interest expense. Interest expense was $46.6 million for the three months ended September 30, 2019 compared to $46.7 million for the three months ended September 30, 2018.

Transaction-related expenses. Transaction-related expenses were $5.8 million for the three months ended September 30, 2019 compared to $2.4 million for the three months ended September 30, 2018. Transaction-related expenses primarily relate to

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termination, restructuring, strategic review and other acquisition-related costs incurred in the respective periods, as summarized below (in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

2019

 

 

2018

 

Termination, restructuring and strategic review costs

 

$

5,541

 

 

$

1,443

 

Legal, accounting and other acquisition-related costs

 

 

234

 

 

 

910

 

 

 

$

5,775

 

 

$

2,353

 

 

Provision for income taxes. For the three months ended September 30, 2019, the provision for income taxes was $6.8 million, reflecting an effective tax rate of 13.8%, compared to $8.8 million, reflecting an effective tax rate of 15.9%, for the three months ended September 30, 2018. The decrease in the effective tax rate for the three months ended September 30, 2019 was primarily attributable to the release of an income tax uncertainty reserve related to the deductibility of equity-based compensation and the taxable gain on the foreign currency derivatives settlement in August 2019, which allowed us to deduct more interest.

Nine months ended September 30, 2019 compared to the nine months ended September 30, 2018

Revenue. Revenue increased $58.3 million, or 2.6%, to $2.3 billion for the nine months ended September 30, 2019 from $2.3 billion for the nine months ended September 30, 2018 resulting from same facility revenue growth of 5.3% offset by $48.3 million as a result of the decrease in the exchange rate between USD and GBP. During the nine months ended September 30, 2019, we generated $1.5 billion of revenue, or 64.8% of our total revenue, from our U.S. Facilities and $820.1 million of revenue, or 35.2% of our total revenue, from our U.K. Facilities. During the nine months ended September 30, 2018, we generated $1.4 billion of revenue, or 63.1% of our total revenue, from our U.S. Facilities and $836.4 million of revenue, or 36.9% of our total revenue, from our U.K. Facilities.

U.S. same facility revenue increased by $81.2 million, or 5.9%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, resulting from same facility growth in patient days of 3.5% and an increase in same facility revenue per day of 2.3%. Consistent with the same facility patient day growth in 2018, the growth in same facility patient days for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, resulted from the addition of beds to our existing facilities and ongoing demand for our services. U.K. same facility revenue increased by $30.1 million, or 4.2%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, resulting from an increase in same facility revenue per day of 4.3% offset by a slight decline in same facility patient days of 0.1%.

Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $1.3 billion for the nine months ended September 30, 2019 compared to $1.2 billion for the nine months ended September 30, 2018, an increase of $42.2 million. SWB expense included $14.3 million and $19.3 million of equity-based compensation expense for the nine months ended September 30, 2019 and 2018, respectively. Excluding equity-based compensation expense, SWB expense was $1.3 billion, or 54.7% of revenue, for the nine months ended September 30, 2019, compared to $1.2 billion, or 54.1% of revenue, for the nine months ended September 30, 2018. Same facility SWB expense was $1.1 billion for the nine months ended September 30, 2019, or 51.8% of revenue, compared to $1.1 billion for the nine months ended September 30, 2018, or 51.2% of revenue.

Professional fees. Professional fees were $177.6 million for the nine months ended September 30, 2019, or 7.6% of revenue, compared to $167.0 million for the nine months ended September 30, 2018, or 7.4% of revenue. Same facility professional fees were $153.9 million for the nine months ended September 30, 2019, or 7.0% of revenue, compared to $139.1 million, for the nine months ended September 30, 2018, or 6.6% of revenue.

Supplies. Supplies expense was $91.7 million for the nine months ended September 30, 2019, or 3.9% of revenue, compared to $89.0 million for the nine months ended September 30, 2018, or 3.9% of revenue. Same facility supplies expense was $85.2 million for the nine months ended September 30, 2019, or 3.8% of revenue, compared to $80.9 million for the nine months ended September 30, 2018, or 3.8% of revenue.

Rents and leases. Rents and leases were $60.9 million for the nine months ended September 30, 2019, or 2.6% of revenue, compared to $60.4 million for the nine months ended September 30, 2018, or 2.7% of revenue. Same facility rents and leases were $49.2 million for the nine months ended September 30, 2019, or 2.2% of revenue, compared to $46.6 million for the nine months ended September 30, 2018, or 2.2% of revenue.

Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses. Other operating expenses were $281.5 million for the nine months ended September 30, 2019, or

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12.1% of revenue, compared to $266.0 million for the nine months ended September 30, 2018, or 11.7% of revenue. Same facility other operating expenses were $260.7 million for the nine months ended September 30, 2019, or 11.8% of revenue, compared to $242.1 million for the nine months ended September 30, 2018, or 11.5% of revenue.

Depreciation and amortization. Depreciation and amortization expense was $122.3 million for the nine months ended September 30, 2019, or 5.3% of revenue, compared to $119.4 million for the nine months ended September 30, 2018, or 5.3% of revenue.

Interest expense. Interest expense was $143.4 million for the nine months ended September 30, 2019 compared to $137.7 million for the nine months ended September 30, 2018. The increase in interest expense was primarily a result of higher interest rates applicable to our variable-rate debt slightly offset by the lower interest rates as a result of the Repricing Facilities Amendments to the Amended and Restated Credit Agreement.

Debt extinguishment costs. Debt extinguishment costs for the nine months ended September 30, 2018 represent $0.6 million of cash charges and $0.3 million of non-cash charges recorded in connection with the Repricing Facilities Amendments to the Amended and Restated Credit Agreement.

Transaction-related expenses. Transaction-related expenses were $15.3 million for the nine months ended September 30, 2019 compared to $10.0 million for the nine months ended September 30, 2018. Transaction-related expenses primarily relate to termination, restructuring, strategic review and other acquisition-related costs incurred in the respective periods, as summarized below (in thousands):

 

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

Termination, restructuring and strategic review costs

 

$

13,858

 

 

$

6,844

 

Legal, accounting and other acquisition-related costs

 

 

1,450

 

 

 

3,164

 

 

 

$

15,308

 

 

$

10,008

 

 

Provision for income taxes. For the nine months ended September 30, 2019, the provision for income taxes was $25.8 million, reflecting an effective tax rate of 17.6%, compared to the provision for income taxes of $16.3 million, reflecting an effective tax rate of 9.5%, for the nine months ended September 30, 2018. The increase in the effective tax rate for the nine months ended September 30, 2019 was primarily attributable to a discrete benefit of $10.5 million during the nine months ended September 30, 2018 related to the change in the provisional amount recorded at December 31, 2017 in connection with the Tax Act.

Revenue

Our revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and adolescent residential treatment. We receive payments from the following sources for services rendered in our facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by CMS; (iv) publicly funded sources in the U.K. (including the NHS, CCGs and local authorities in England, Scotland and Wales) and (v) individual patients and clients. We determine the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. Implicit price concessions are based on historical collection experience.

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The following table presents revenue by payor type and as a percentage of revenue in our U.S. Facilities for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

Commercial

 

$

140,315

 

 

 

27.5

%

 

$

146,439

 

 

 

30.0

%

 

$

426,659

 

 

 

28.3

%

 

$

431,337

 

 

 

30.1

%

Medicare

 

 

76,906

 

 

 

15.1

%

 

 

73,528

 

 

 

15.0

%

 

 

223,027

 

 

 

14.8

%

 

 

210,307

 

 

 

14.7

%

Medicaid

 

 

256,370

 

 

 

50.3

%

 

 

229,390

 

 

 

46.9

%

 

 

750,631

 

 

 

49.8

%

 

 

668,236

 

 

 

46.6

%

Self-Pay

 

 

30,626

 

 

 

6.0

%

 

 

33,559

 

 

 

6.9

%

 

 

91,982

 

 

 

6.1

%

 

 

103,845

 

 

 

7.3

%

Other

 

 

5,166

 

 

 

1.1

%

 

 

5,710

 

 

 

1.2

%

 

 

14,857

 

 

 

1.0

%

 

 

18,776

 

 

 

1.3

%

Revenue

 

$

509,383

 

 

 

100.0

%

 

$

488,626

 

 

 

100.0

%

 

$

1,507,156

 

 

 

100.0

%

 

$

1,432,501

 

 

 

100.0

%

 

The following table presents revenue by payor type and as a percentage of revenue in our U.K. Facilities for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

U.K. public funded sources

 

$

242,747

 

 

 

90.6

%

 

$

245,919

 

 

 

90.3

%

 

$

740,492

 

 

 

90.3

%

 

$

756,094

 

 

 

90.4

%

Self-Pay

 

 

24,430

 

 

 

9.1

%

 

 

26,159

 

 

 

9.6

%

 

 

77,895

 

 

 

9.5

%

 

 

78,499

 

 

 

9.4

%

Other

 

 

691

 

 

 

0.3

%

 

 

212

 

 

 

0.1

%

 

 

1,687

 

 

 

0.2

%

 

 

1,801

 

 

 

0.2

%

Revenue

 

$

267,868

 

 

 

100.0

%

 

$

272,290

 

 

 

100.0

%

 

$

820,074

 

 

 

100.0

%

 

$

836,394

 

 

 

100.0

%

 

The following tables present a summary of our aging of accounts receivable at September 30, 2019 and December 31, 2018:

September 30, 2019

 

 

Current

 

 

30-90

 

 

90-150

 

 

>150

 

 

Total

 

Commercial

 

 

16.5

%

 

 

6.1

%

 

 

3.3

%

 

 

5.5

%

 

 

31.4

%

Medicare

 

 

10.7

%

 

 

1.4

%

 

 

0.4

%

 

 

0.9

%

 

 

13.4

%

Medicaid

 

 

24.5

%

 

 

5.0

%

 

 

3.2

%

 

 

7.1

%

 

 

39.8

%

U.K. public funded sources

 

 

6.8

%

 

 

0.4

%

 

 

0.0

%

 

 

0.0

%

 

 

7.2

%

Self-Pay

 

 

1.6

%

 

 

1.5

%

 

 

1.4

%

 

 

2.7

%

 

 

7.2

%

Other

 

 

0.7

%

 

 

0.1

%

 

 

0.1

%

 

 

0.1

%

 

 

1.0

%

Total

 

 

60.8

%

 

 

14.5

%

 

 

8.4

%

 

 

16.3

%

 

 

100.0

%

 

December 31, 2018

 

 

Current

 

 

30-90

 

 

90-150

 

 

>150

 

 

Total

 

Commercial

 

 

14.8

%

 

 

6.3

%

 

 

2.7

%

 

 

5.3

%

 

 

29.1

%

Medicare

 

 

9.8

%

 

 

1.8

%

 

 

0.6

%

 

 

0.9

%

 

 

13.1

%

Medicaid

 

 

22.4

%

 

 

6.4

%

 

 

3.4

%

 

 

7.4

%

 

 

39.6

%

U.K. public funded sources

 

 

6.0

%

 

 

2.4

%

 

 

0.0

%

 

 

0.0

%

 

 

8.4

%

Self-Pay

 

 

1.8

%

 

 

1.7

%

 

 

1.7

%

 

 

3.2

%

 

 

8.4

%

Other

 

 

0.4

%

 

 

0.3

%

 

 

0.2

%

 

 

0.5

%

 

 

1.4

%

Total

 

 

55.2

%

 

 

18.9

%

 

 

8.6

%

 

 

17.3

%

 

 

100.0

%

 

 

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Liquidity and Capital Resources

Cash provided by continuing operating activities for the nine months ended September 30, 2019 was $213.5 million compared to $288.7 million for the nine months ended September 30, 2018. The decrease in cash provided by continuing operating activities was primarily attributable to the decline in earnings in our U.K. Facilities, legal settlement payments and an increase in net cash paid for taxes. Days sales outstanding were 41 days at September 30, 2019 compared to 39 at December 31, 2018, respectively. At September 30, 2019 and December 31, 2018, we had working capital of $78.7 million and $34.0 million, respectively.

Cash used in investing activities for the nine months ended September 30, 2019 was $137.2 million compared to $262.5 million for the nine months ended September 30, 2018. Cash used in investing activities for the nine months ended September 30, 2019 primarily consisted of cash paid for acquisitions of $44.9 million, $202.7 million of cash paid for capital expenditures, $7.0 million of cash paid for real estate offset by settlement of foreign currency derivatives of $105.0 million and other of $12.4 million. Cash paid for capital expenditures for the nine months ended September 30, 2019 consisted of $61.6 million of routine capital expenditures and $141.1 million of expansion capital expenditures. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue. Routine or maintenance capital expenditures were 2.6% of revenue for the nine months ended September 30, 2019. Cash used in investing activities for the nine months ended September 30, 2018 primarily consisted of $250.0 million of cash paid for capital expenditures, $9.4 million of cash paid for real estate and other of $3.1 million. Cash paid for capital expenditures for the nine months ended September 30, 2018 consisted of $53.0 million of cash paid for routine capital expenditures and $197.0 million of expansion capital expenditures.

Cash used in financing activities for the nine months ended September 30, 2019 was $32.2 million compared to $40.7 million for the nine months ended September 30, 2018. Cash used in financing activities for the nine months ended September 30, 2019 consisted of borrowings on revolving credit facility of $76.6 million offset by principal payments of long-term debt of $24.7 million, principal payments on revolving credit facility of $76.6 million, common stock withheld for minimum statutory taxes of $1.5 million and other of $5.9 million. Cash used in financing activities for the nine months ended September 30, 2018 primarily consisted of principal payments of long-term debt of $31.5 million, common stock withheld for minimum statutory taxes of $2.3 million and other of $7.0 million.

We had total available cash and cash equivalents of $92.9 million and $50.5 million at September 30, 2019 and December 31, 2018, respectively, of which approximately $28.9 million and $18.0 million was held by our foreign subsidiaries, respectively. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention to permanently reinvest our foreign cash and cash equivalents outside of the U.S.

Amended and Restated Senior Credit Facility

We entered into the Senior Secured Credit Facility on April 1, 2011. On December 31, 2012, we entered into the Amended and Restated Credit Agreement which amended and restated the Senior Secured Credit Facility. We have amended the Amended and Restated Credit Agreement from time to time as described in our prior filings with the SEC.

On March 22, 2018, we entered into a Second Repricing Facilities Amendment to the Amended and Restated Credit Agreement. The Second Repricing Facilities Amendment (i) replaced the Tranche B-1 Facility and the Tranche B-2 Facility with a new Tranche B-3 Facility and a new Tranche B-4 Facility, respectively, and (ii) reduced the Applicable Rate from 2.75% to 2.50% in the case of Eurodollar Rate loans and reduced the Applicable Rate from 1.75% to 1.50% in the case of Base Rate Loans.

On March 29, 2018, we entered into a Third Repricing Facilities Amendment to the Amended and Restated Credit Agreement. The Third Repricing Facilities Amendment replaced the existing revolving credit facility and TLA Facility with a new revolving credit facility and TLA Facility, respectively. Our line of credit on the revolving credit facility remains at $500.0 million and the Third Repricing Facility Amendment reduced the size of the TLA Facility from $400.0 million to $380.0 million to reflect the then current outstanding principal. The Third Repricing Facilities Amendment reduced the Applicable Rate for the revolving credit facility and the TLA Facility by amending the definition of “Applicable Rate” and replacing the rate table therein with the table set forth below.

In connection with the Repricing Facilities Amendments, we recorded a debt extinguishment charge of $0.9 million, including the discount and write-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of income.

On February 6, 2019, we entered into the Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment, among other things, amended the definition of “Consolidated EBITDA” to remove the cap on non-cash charges, losses

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and expenses related to the impairment of goodwill, which in turn provided increased flexibility to us in terms of our financial covenants.

On February 27, 2019, we entered into the Twelfth Amendment to the Amended and Restated Credit Agreement. The Twelfth Amendment, among other things, modified certain definitions, including “Consolidated EBITDA”, and increased our permitted Maximum Consolidated Leverage Ratio, thereby providing increased flexibility to us in terms of our financial covenants.

We had $485.1 million of availability under the revolving line of credit and had standby letters of credit outstanding of $14.9 million related to security for the payment of claims required by our workers’ compensation insurance program at September 30, 2019. Borrowings under the revolving line of credit are subject to customary conditions precedent to borrowing. The Amended and Restated Credit Agreement requires quarterly term loan principal repayments of our TLA Facility of $4.8 million for December 31, 2019, $7.1 million for March 31, 2020 to December 31, 2020, and $9.5 million for March 31, 2021 to September 30, 2021, with the remaining principal balance of the TLA Facility due on the maturity date of November 30, 2021. We are required to repay the Tranche B-3 Facility in equal quarterly installments of $1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-3 Facility due on February 11, 2022. We are required to repay the Tranche B-4 Facility in equal quarterly installments of approximately $2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the Tranche B-4 Facility due on February 16, 2023. On April 17, 2018, we made an additional payment of $15.0 million, including $5.1 million on the Tranche B-3 Facility and $9.9 million on the Tranche B-4 Facility.

Borrowings under the Amended and Restated Credit Agreement are guaranteed by each of our wholly-owned domestic subsidiaries (other than certain excluded subsidiaries) and are secured by a lien on substantially all of the Company and such subsidiaries’ assets. Borrowings with respect to the TLA Facility and our revolving credit facility (collectively, “Pro Rata Facilities”) under the Amended and Restated Credit Agreement bear interest at a rate tied to our Consolidated Leverage Ratio (defined as consolidated funded debt net of up to $50.0 million of unrestricted and unencumbered cash to consolidated EBITDA, in each case as defined in the Amended and Restated Credit Agreement). The Applicable Rate (as defined in the Amended and Restated Credit Agreement) for the Pro Rata Facilities was 2.50% for Eurodollar Rate Loans (as defined in the Amended and Restated Credit Agreement) and 1.50% for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) at September 30, 2019. Eurodollar Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) (based upon the LIBOR Rate (as defined in the Amended and Restated Credit Agreement) prior to commencement of the interest rate period). Base Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. At September 30, 2019, the Pro Rata Facilities bore interest at a rate of LIBOR plus 2.50%. In addition, we are required to pay a commitment fee on undrawn amounts under our revolving credit facility.

The interest rates and the unused line fee on unused commitments related to the Pro Rata Facilities are based upon the following pricing tiers:

 

Pricing Tier

 

Consolidated Leverage Ratio

 

Eurodollar Rate

Loans

 

 

Base Rate

Loans

 

 

Commitment

Fee

 

1

 

< 3.50:1.0

 

 

1.50

%

 

 

0.50

%

 

 

0.20

%

2

 

>3.50:1.0 but < 4.00:1.0

 

 

1.75

%

 

 

0.75

%

 

 

0.25

%

3

 

>4.00:1.0 but < 4.50:1.0

 

 

2.00

%

 

 

1.00

%

 

 

0.30

%

4

 

>4.50:1.0 but < 5.25:1.0

 

 

2.25

%

 

 

1.25

%

 

 

0.35

%

5

 

>5.25:1.0

 

 

2.50

%

 

 

1.50

%

 

 

0.40

%

 

Eurodollar Rate Loans with respect to the Tranche B-3 Facility bear interest at the Tranche B-3 Facility Applicable Rate (as defined below) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period). Base Rate Loans bear interest at the Tranche B-3 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Tranche B-3 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%. The Tranche B-4 Facility bears interest as follows: Eurodollar Rate Loans bear interest at the Applicable Rate (as defined in the Amended and Restated Credit Agreement) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period) and Base Rate Loans bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%.

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The lenders who provided the Tranche B-3 Facility and Tranche B-4 Facility are not entitled to benefit from our maintenance of the financial covenants under the Amended and Restated Credit Agreement. Accordingly, if we fail to maintain the financial covenants, such failure shall not constitute an event of default under the Amended and Restated Credit Agreement with respect to the Tranche B-3 Facility or Tranche B-4 Facility until and unless the Amended and Restated Senior Credit Facility is accelerated or the commitment of the lenders to make further loans is terminated.

The Amended and Restated Credit Agreement requires us and our subsidiaries to comply with customary affirmative, negative and financial covenants, including a fixed charge coverage ratio, consolidated leverage ratio and consolidated senior secured leverage ratio. We may be required to pay all of our indebtedness immediately if we default on any of the numerous financial or other restrictive covenants contained in any of our material debt agreements. Set forth below is a brief description of such covenants, all of which are subject to customary exceptions, materiality thresholds and qualifications:

 

a)

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) further assurances; and (ix) additional collateral and guarantor requirements.

 

b)

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; (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, state of formation, form of entity and fiscal year; (xiv) prepayment or redemption of certain senior unsecured debt; and (xv) amendments to certain material agreements. We are 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.

 

c)

The financial covenants include maintenance of the following:

 

the fixed charge coverage ratio may not be less than 1.25:1.00 as of the end of any fiscal quarter;

 

the consolidated leverage ratio may not be greater than the following levels as of the end of each fiscal quarter listed below:

 

 

 

March 31

 

June 30

 

September 30

 

December 31

2019

 

6.25x

 

6.25x

 

6.25x

 

6.00x

2020

 

5.75x

 

5.75x

 

5.75x

 

5.50x

2021

 

5.25x

 

5.25x

 

5.00x

 

5.00x

 

 

the consolidated senior secured leverage ratio may not be greater than 3.50x as of the end of each fiscal quarter.

 

At September 30, 2019, we were in compliance with all of the above covenants.

Senior Notes

6.125% Senior Notes Due 2021

On March 12, 2013, we issued $150.0 million of 6.125% Senior Notes due 2021. The 6.125% Senior Notes mature on March 15, 2021 and bear interest at a rate of 6.125% per annum, payable semi-annually in arrears on March 15 and September 15 of each year.

5.125% Senior Notes due 2022

On July 1, 2014, we issued $300.0 million of 5.125% Senior Notes due 2022. The 5.125% Senior Notes mature on July 1, 2022 and bear interest at a rate of 5.125% per annum, payable semi-annually in arrears on January 1 and July 1 of each year.

5.625% Senior Notes due 2023

On February 11, 2015, we issued $375.0 million of 5.625% Senior Notes due 2023. On September 21, 2015, we issued $275.0 million of additional 5.625% Senior Notes. The additional notes formed a single class of debt securities with the 5.625%

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Senior Notes issued in February 2015. Giving effect to this issuance, we have outstanding an aggregate of $650.0 million of 5.625% Senior Notes. The 5.625% Senior Notes mature on February 15, 2023 and bear interest at a rate of 5.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year.

6.500% Senior Notes due 2024

On February 16, 2016, we issued $390.0 million of 6.500% Senior Notes due 2024. The 6.500% Senior Notes mature on March 1, 2024 and bear interest at a rate of 6.500% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2016.

The indentures governing the Senior Notes contain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; (vi) merge, consolidate or sell substantially all of our assets; and (vii) create liens on assets.

The Senior Notes issued by us are guaranteed by each of our subsidiaries that guarantee our obligations under the Amended and Restated Senior Credit Facility. The guarantees are full and unconditional and joint and several.

We may redeem the Senior Notes at our option, in whole or part, at the dates and amounts set forth in the indentures.

Contractual Obligations

The following table presents a summary of contractual obligations at September 30, 2019 (dollars in thousands):

 

 

 

Payments Due by Period

 

 

 

Less Than

1 Year

 

 

1-3 Years

 

 

3-5 Years

 

 

More Than

5 Years

 

 

Total

 

Long-term debt (a)

 

$

207,253

 

 

$

1,542,818

 

 

$

1,986,134

 

 

$

 

 

$

3,736,205

 

Operating lease liabilities (b)

 

 

59,379

 

 

 

107,433

 

 

 

93,093

 

 

 

657,976

 

 

 

917,881

 

Finance lease liabilities

 

 

7,319

 

 

 

38,868

 

 

 

2,395

 

 

 

25,351

 

 

 

73,933

 

Total obligations and commitments

 

$

273,951

 

 

$

1,689,119

 

 

$

2,081,622

 

 

$

683,327

 

 

$

4,728,019

 

 

(a)

Amounts include required principal and interest payments. The projected interest payments reflect the interest rates in place on our variable-rate debt at September 30, 2019.

(b)

Amounts exclude variable components of lease payments.

Off-Balance Sheet Arrangements

At September 30, 2019, we had standby letters of credit outstanding of $14.9 million related to security for the payment of claims as required by our workers’ compensation insurance program.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at September 30, 2019 was composed of $1.5 billion of fixed-rate debt and $1.7 billion of variable-rate debt with interest based on LIBOR plus an applicable margin. A hypothetical 10% increase in interest rates (which would equate to a 0.46% higher rate on our variable rate debt) would decrease our net income and cash flows by $4.9 million on an annual basis based upon our borrowing level at September 30, 2019.

 LIBOR and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences. The U.K.’s Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR rates after 2021, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve. If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future debt obligations may be adversely affected. Management continues to evaluate new and existing contracts for the potential impact of the discontinuation of LIBOR.

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Foreign Currency Risk

The functional currency for our U.K. facilities is the British pound or GBP. Our revenue and earnings are sensitive to changes in the GBP to USD exchange rate from the translation of our earnings into USD at exchange rates that may fluctuate. Based upon the level of our U.K. operations relative to the Company as a whole, a hypothetical 10% change in the exchange rate (which would equate to an increase or decrease in the exchange rate of 0.13) would cause a change in our net income of $7.2 million on an annual basis.

In May 2016, we entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency exchange risk by effectively converting a portion of our fixed-rate USD denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rate, GBP-denominated debt of £449.3 million. In August 2019, we terminated our existing net investment cross currency swap derivatives of $105.0 million. Cash received from the termination of the cross currency swap derivatives is included in investing activities in the condensed consolidated statement of cash flows. The related gain from this termination is included in accumulated other comprehensive loss in accordance with ASC 815-30-40-1.

In August 2019, we also entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency risk by effectively converting a portion of our fixed-rate USD-denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rate GBP-denominated debt of £538.1 million. During the term of the swap agreements, we will receive semi-annual interest payments in USD from the counterparties at fixed interest rates, and we will make semi-annual interest payments in GBP to the counterparties at fixed interest rates. The interest payments under the cross-currency swap agreements result in £25.4 million of annual cash flows from our U.K. business being converted to $35.8 million (at a 1.41 exchange rate). The cross currency swap agreements limit the impact of changes in the exchange rate on our cash flows and leverage.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our management conducted an evaluation, with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended September 30, 2019 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.

We are, 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 our 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 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.  

In the fall of 2017, Office of Inspector General issued subpoenas to three of our facilities requesting certain documents from January 2013 to the date of the subpoenas. The U.S. Attorney’s Office for the Middle District of Florida issued a civil investigative demand to one of our facilities in December 2017 requesting certain documents from November 2012 to the date of the demand. In April 2019, the Office of Inspector General issued subpoenas relating to six additional facilities requesting certain documents and information from January 2013 to the date of the subpoenas. The government’s investigation of each of these facilities is focused on claims not eligible for payment because of alleged violations of certain regulatory requirements relating to, among other things, medical necessity, admission eligibility, discharge decisions, length of stay and patient care issues. We are cooperating with the government’s investigation but are not able to quantify any potential liability in connection with these investigations.

Item 1A.

Risk Factors

In addition to the other information set forth in this report, an investor should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The risks, as described in in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems immaterial also may materially, adversely affect the Company’s business, financial condition, operating results or cash flows.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2019, the Company withheld shares of Company common stock to satisfy employee minimum statutory tax withholding obligations payable upon the vesting of restricted stock, as follows:

 

Period

 

Total Number

of Shares

Purchased

 

 

Average Price

Paid per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 

 

Maximum Number

of Shares that

May Yet Be

Purchased Under

the Plans

or Programs

 

July 1 – July 31

 

 

549

 

 

$

33.45

 

 

 

 

 

 

 

August 1 – August 31

 

 

779

 

 

 

27.68

 

 

 

 

 

 

 

September 1 – September 30

 

 

175

 

 

 

31.94

 

 

 

 

 

 

 

Total

 

 

1,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Item 6.

Exhibits

 

Exhibit No.

  

Exhibit Description

 

 

  3.1

  

Amended and Restated Certificate of Incorporation, as amended. (1)

 

 

  3.2

 

Amended and Restated Bylaws of the Company, as amended. (1)

 

 

 

10.1

 

Employment Agreement, dated July 31, 2019, by and between Acadia Management Company, Inc. and John S. Hollinsworth. (2)

 

 

 

10.2

 

Employment Agreement, dated August 6, 2019, by and between Acadia Management Company, Inc. and Laurence L. Harrod. (3)

 

 

 

31.1*

  

Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

31.2*

  

Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

32*

  

Certification of Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101.INS**

  

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

 

 

101.SCH**

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

101.CAL**

  

Inline XBRL Taxonomy Calculation Linkbase Document.

 

 

101.DEF**

  

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

 

101.LAB**

  

Inline XBRL Taxonomy Label Linkbase Document.

 

 

101.PRE**

  

Inline XBRL Taxonomy Presentation Linkbase Document.

 

 

 

104

 

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, has been formatted in Inline XBRL.

 

(1)

Incorporated by reference to exhibits filed with the Company’s Current Report on Form 8-K filed May 25, 2017 (File No. 001-35331).

(2)

Incorporated by reference to exhibits filed with the Company’s Amendment No. 1 to the Current Report on Form 8-K filed August 6, 2019 (File No. 001-35331).

(3)

Incorporated by reference to exhibits filed with the Company’s Current Report on Form 8-K filed August 6, 2019 (File No. 001-35331).

*

Filed herewith.

**     The XBRL related information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Acadia Healthcare Company, Inc.

 

 

By:

 

/s/ David M. Duckworth

 

 

David M. Duckworth

 

 

Chief Financial Officer

Dated: November 6, 2019

 

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