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Press Release: Acadia Healthcare Reports Fourth Quarter 2019 Results

Acadia Healthcare Reports Fourth Quarter 2019 Results

Company Provides Full Year and First Quarter 2020 Guidance

FRANKLIN, Tenn.--(BUSINESS WIRE)--February 27, 2020--

Acadia Healthcare Company, Inc. (NASDAQ: ACHC) today announced financial results for the fourth quarter and year ended December 31, 2019, that were in line with the Company's previously issued guidance. Revenue was $780.2 million for the fourth quarter, up 4.9% from $743.5 million for the fourth quarter of 2018. Net loss attributable to Acadia stockholders for the fourth quarter of 2019 was $11.3 million, or $0.13 per diluted share, compared with a net loss of $331.6 million, or $3.80 per diluted share, for the fourth quarter of 2018.

For the fourth quarter, Acadia's total same facility revenue increased 4.5% compared with the fourth quarter of 2018, including a 0.4% increase in patient days and a 4.1% increase in revenue per patient day. Total same facility EBITDA margin increased 20 basis points to 22.0%. U.S. same facility revenue increased 5.5%, including a 2.4% increase in patient days and a 3.0% increase in revenue per patient day. U.S. same facility EBITDA margin increased 30 basis points to 25.0%. For the U.K. operations, same facility revenue was up 2.7% for the fourth quarter of 2019 from the fourth quarter last year, reflecting a 4.7% increase in revenue per patient day offset by a 2.0% decrease in patient days. U.K. same facility EBITDA margin declined 40 basis points to 16.1%. Acadia's consolidated adjusted EBITDA for the fourth quarter of 2019 was $144.4 million, compared with $133.9 million for the fourth quarter of 2018.

Results for the fourth quarter of 2019 include transaction-related expenses of $11.8 million, an impairment charge of $54.4 million, which relates to a non-cash impairment of property and equipment at certain closed facilities, and the income tax effect of adjustments to income of $9.9 million based on a tax rate of 18.1%. Adjusted income attributable to Acadia stockholders per diluted share was $0.51 for the fourth quarter of 2019.

A reconciliation of all non-GAAP financial results in this press release appears beginning on page 8.

Debbie Osteen, Chief Executive Officer of Acadia Healthcare Company, remarked, "Results for this quarter were in line with our expectations. Our U.S. facilities showed improvement across key metrics, as we continued to address and resolve certain facility issues that affected our results in the third quarter. Our U.K. facilities continue to see stability in their operating trends.

"During the fourth quarter, we added 171 beds to Acadia's operations, including 150 beds in our U.S. operations and 21 beds in the U.K. For the full year, we added 585 beds to existing and new facilities, including 519 beds in the U.S. Moving forward to 2020, we expect to add approximately 600 beds in the U.S. We are excited about the opportunities ahead for Acadia to extend our market reach and advance our position as a leading operator of behavioral healthcare facilities.

"We launched a formal process regarding the sale of our U.K. business in January 2020, following the U.K. elections and preliminary discussions with prospective buyers at the end of last year. Consistent with market practice for U.K. transactions of this nature, and in conjunction with our advisors, we solicited and now have received initial, non-binding offers to acquire our U.K. business from multiple bidders. We are currently in the second phase of the sale process, during which interested bidders will receive proposed transaction documents and complete their confirmatory due diligence. We will continue to work with our financial and legal advisors and will update the market when and as we determine it is appropriate," added Osteen.

Acadia today established its financial guidance for the full year 2020, as follows:

-- Revenue in a range of $3.28 billion to $3.34 billion;

-- Adjusted EBITDA in a range of $610 million to $630 million;

-- Adjusted earnings per diluted share in a range of $2.20 to $2.40;

-- Stock compensation expense of approximately $22 million;

-- Depreciation & amortization expense in a range of $175 million to $180
million;

-- Interest expense in a range of $172 million to $177 million;

-- Total weighted average shares outstanding (diluted) of approximately 88.1
million;

-- Operating cash flows in a range of $375 million to $410 million;

-- Total capital expenditures in a range of $330 million to $350 million,
including approximately $90 million for maintenance capital expenditures;

-- An exchange rate of $1.30 per British Pound Sterling; and

-- A tax rate of approximately 17%.

Acadia also established its financial guidance for the first quarter of 2020, as follows:

-- Revenue in a range of $795 million to $805 million;

-- Adjusted EBITDA in a range of $133 million to $137 million; and

-- Adjusted earnings per diluted share in a range of $0.37 to $0.42.

The Company's guidance does not include the impact of any future acquisitions, divestitures or transaction-related expenses.

Osteen concluded, "We expect to see continued improvement and high single-digit revenue growth and EBITDA margin improvement in the second half of 2020 for our U.S. facilities. Our first quarter guidance reflects the ongoing progress we continue to realize regarding the implementation of our facility improvement plans, operational improvement initiatives and numerous growth initiatives. With respect to our operational improvement initiatives, we believe we will achieve approximately $20 million in annualized cost savings by the end of 2020, which is in line with our original announcement in May of last year. We are pleased with our progress to date and look forward to realizing the incremental benefits of our strategy while we continue to support our patients with the highest quality of care. In the U.K., we anticipate our revenue growth will be driven by re-tooled beds coming back online and improved occupancy trends."

EBITDA is defined as net (loss) income adjusted for net income attributable to noncontrolling interests, provision for (benefit from) income taxes, net interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for equity-based compensation expense, transaction-related expenses, debt extinguishment costs, legal settlements expense and loss on impairment. Adjusted income is defined as net (loss) income adjusted for transaction-related expenses, tax reform impact, debt extinguishment costs, legal settlements expense, loss on impairment and income tax effect of adjustments to income.

Acadia will hold a conference call to discuss its fourth quarter financial results at 9:00 a.m. Eastern Time on Friday, February 28, 2020. A live webcast of the conference call will be available at www.acadiahealthcare.com in the "Investors" section of the website. The webcast of the conference call will be available through March 14, 2020.

Risk Factors

This news release contains forward-looking statements. Generally, words such as "may," "will," "should," "could," "anticipate," "expect," "intend," "estimate," "plan," "continue," and "believe" or the negative of or other variation on these and other similar expressions identify forward-looking statements. These forward-looking statements are made only as of the date of this news release. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are based on current expectations and involve risks and uncertainties and our future results could differ significantly from those expressed or implied by our forward-looking statements. Factors that may cause actual results to differ materially include, without limitation, (i) 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; (ii) the impact of fluctuations in foreign exchange rates, including the devaluation of the British Pound Sterling (GBP) relative to the U.S. Dollar (USD); (iii) Acadia's efforts to sell its U.K. operations may not result in any definitive transaction or enhance stockholder value; (iv) potential difficulties in successfully integrating the operations of acquired facilities or realizing the expected benefits and synergies of our acquisitions, joint ventures and de novo transactions; (v) Acadia's ability to add beds, expand services, enhance marketing programs and improve efficiencies at its facilities; (vi) potential reductions in payments received by Acadia from government and fourth-party payors; (vii) the occurrence of patient incidents, governmental investigations and adverse regulatory actions, which could adversely affect the price of our common stock and result in substantial payments and incremental regulatory burdens; (viii) the risk that Acadia may not generate sufficient cash from operations to service its debt and meet its working capital and capital expenditure requirements; and (ix) potential operating difficulties, labor costs, client preferences, changes in competition and general economic or industry conditions that may prevent Acadia from realizing the expected benefits of its business strategies. These factors and others are more fully described in Acadia's periodic reports and other filings with the SEC.

About Acadia

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Press Release: Acadia Healthcare Reports Fourth -2-

Acadia is a provider of behavioral healthcare services. At December 31, 2019, Acadia operated a network of 585 behavioral healthcare facilities with approximately 18,200 beds in 40 states, the United Kingdom and Puerto Rico. Acadia provides behavioral health and addiction services to its patients in a variety of settings, including inpatient psychiatric hospitals, specialty treatment facilities, residential treatment centers and outpatient clinics.

Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended
December 31, Year Ended December 31,
------------------------- --------------------------
2019 2018 2019 2018
------------ ----------- ----------- -------------
(In thousands, except per share amounts)

Revenue $780,232 $743,547 $3,107,462 $3,012,442

Salaries, wages and benefits
(including equity-based
compensation expense of
$2,985, $2,728, $17,307 and
$22,001, respectively) 428,781 413,162 1,717,180 1,659,348
Professional fees 63,395 60,437 240,983 227,425
Supplies 31,400 30,356 123,061 119,314
Rents and leases 21,369 19,892 82,229 80,282
Other operating expenses 93,916 88,521 375,433 354,498
Depreciation and
amortization 41,767 39,472 164,044 158,832
Interest expense, net 43,710 47,704 187,094 185,410
Debt extinguishment costs - 875 - 1,815
Legal settlements expense - 22,076 - 22,076
Loss on impairment 54,386 337,889 54,386 337,889
Transaction-related expenses 11,756 24,499 27,064 34,507
------- --------- --------- ---------
Total expenses 790,480 1,084,883 2,971,474 3,181,396
------- --------- --------- ---------
(Loss) income before income
taxes (10,248) (341,336) 135,988 (168,954)
Provision for (benefit from)
income taxes 65 (9,807) 25,866 6,532
------- --------- --------- ---------
Net (loss) income (10,313) (331,529) 110,122 (175,486)
Net income attributable to
noncontrolling interests (941) (108) (1,199) (264)
------- --------- --------- ---------
Net (loss) income
attributable to Acadia
Healthcare Company, Inc. $(11,254) $(331,637 ) $108,923 $(175,750 )
======= ========= ========= =========

Earnings per share
attributable to Acadia
Healthcare Company, Inc.
stockholders:
Basic $(0.13 ) $(3.80 ) $1.24 $(2.01 )
======= ========= ========= =========
Diluted $(0.13 ) $(3.80 ) $1.24 $(2.01 )
======= ========= ========= =========

Weighted-average shares
outstanding:
Basic 87,674 87,382 87,612 87,288
Diluted 87,674 87,382 87,816 87,288



Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

December 31,
--------------------------
2019 2018
----------- -------------
(In thousands)

ASSETS
Current assets:
Cash and cash equivalents $ 124,192 $ 50,510
Accounts receivable, net 339,775 318,087
Other current assets 78,244 81,820
--------- ---------
Total current assets 542,211 450,417
Property and equipment, net 3,224,034 3,107,766
Goodwill 2,449,131 2,396,412
Intangible assets, net 90,357 88,990
Deferred tax assets 3,339 3,468
Derivative instrument assets - 60,524
Operating lease right-of-use assets 501,837 -
Other assets 68,233 64,927
--------- ---------
Total assets $6,879,142 $6,172,504
========= =========


LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 43,679 $ 34,112
Accounts payable 127,045 117,740
Accrued salaries and benefits 122,552 113,299
Current portion of operating lease
liabilities 29,140 -
Other accrued liabilities 141,160 151,226
--------- ---------
Total current liabilities 463,576 416,377
Long-term debt 3,105,420 3,159,375
Deferred tax liabilities 71,860 80,372
Operating lease liabilities 502,252 -
Derivative instrument liabilities 68,915 -
Other liabilities 128,587 154,267
--------- ---------
Total liabilities 4,340,610 3,810,391
Redeemable noncontrolling interests 33,151 28,806
Equity:
Common stock 877 874
Additional paid-in capital 2,557,642 2,541,987
Accumulated other comprehensive loss (414,884) (462,377)
Retained earnings 361,746 252,823
--------- ---------
Total equity 2,505,381 2,333,307
--------- ---------
Total liabilities and equity $6,879,142 $6,172,504
========= =========



Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Year Ended December 31,
-----------------------------
2019 2018
-------------- -------------
(In thousands)
Operating activities:
Net income (loss) $ 110,122 $ (175,486)
Adjustments to reconcile net income
(loss) to net cash provided by
continuing operating activities:
Depreciation and amortization 164,044 158,832
Amortization of debt issuance costs 11,987 10,456
Equity-based compensation expense 17,307 22,001
Deferred income taxes 1,780 (9,714)
Debt extinguishment costs - 1,815
Legal settlements expense - 22,076
Loss on impairment 54,386 337,889
Other 4,035 12,371
Change in operating assets and
liabilities:
Accounts receivable, net (19,060) (16,821)
Other current assets (1,344) 13,864
Other assets (73) 2,762
Accounts payable and other
accrued liabilities (21,354) 26,054
Accrued salaries and benefits 7,820 15,748
Other liabilities 3,254 (5,219)
--------- ---------
Net cash provided by continuing
operating activities 332,904 416,628
Net cash used in discontinued operating
activities - (2,548)
--------- ---------
Net cash provided by operating
activities 332,904 414,080

Investing activities:
Cash paid for acquisitions, net of cash
acquired (45,677) -
Cash paid for capital expenditures (284,682) (341,462)
Cash paid for real estate acquisitions (7,618) (18,383)
Settlement of foreign currency
derivatives 105,008 -
Proceeds from sale of property and
equipment 18,076 8,248
Other 13,752 (9,367)
--------- ---------
Net cash used in investing activities (201,141) (360,964)

Financing activities:
Borrowings on revolving credit facility 76,573 -
Principal payments on revolving credit

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Press Release: Acadia Healthcare Reports Fourth -3-

facility (76,573) -
Principal payments on long-term debt (52,984) (39,738)
Repayment of long-term debt - (21,920)
Common stock withheld for minimum
statutory taxes, net (1,649) (3,407)
Distributions to noncontrolling
interests (154) -
Other (6,840) (2,265)
--------- ---------
Net cash used in financing activities (61,627) (67,330)

Effect of exchange rate changes on cash 3,546 (2,566)
--------- ---------

Net increase (decrease) in cash and
cash equivalents 73,682 (16,780 )
Cash and cash equivalents at beginning
of the period 50,510 67,290
--------- ---------
Cash and cash equivalents at end of the
period $ 124,192 $ 50,510
========= =========

Effect of acquisitions:
Assets acquired, excluding cash $ 49,715 $ -
Liabilities assumed (4,038) -
--------- ---------
Cash paid for acquisitions, net of cash
acquired $ 45,677 $ -
========= =========



Acadia Healthcare Company, Inc.
Operating Statistics
(Unaudited, Revenue in thousands)

Three Months Ended December 31, Year Ended December 31,
---------------------------------------- ----------------------------------------
2019 2018 % Change 2019 2018 % Change
-------------- -------------- -------- -------------- -------------- --------
Same Facility
Results (a,c)
Revenue $742,391 $710,304 4.5% $2,957,051 $2,813,676 5.1%
Patient Days 1,133,208 1,128,348 0.4% 4,547,523 4,480,163 1.5%
Admissions 42,977 42,372 1.4% 176,120 169,835 3.7%
Average
Length of
Stay (b) 26.4 26.6 -1.0% 25.8 26.4 -2.1%
Revenue per
Patient
Day $655 $630 4.1% $650 $628 3.5%
EBITDA
margin 22.0% 21.8% 20 bps 23.1% 23.9% -80 bps

U.S. Same
Facility
Results (a)
Revenue $488,112 $462,601 5.5% $1,955,730 $1,849,058 5.8%
Patient Days 635,929 620,977 2.4% 2,546,768 2,467,725 3.2%
Admissions 40,712 40,101 1.5% 166,774 160,310 4.0%
Average
Length of
Stay (b) 15.6 15.5 0.9% 15.3 15.4 -0.8%
Revenue per
Patient
Day $768 $745 3.0% $768 $749 2.5%
EBITDA
margin 25.0% 24.7% 30 bps 26.3% 26.6% -30 bps

U.K. Same
Facility
Results (a,c)
Revenue $254,279 $247,703 2.7% $1,001,321 $964,618 3.8%
Patient Days 497,279 507,371 -2.0% 2,000,755 2,012,438 -0.6%
Admissions 2,265 2,271 -0.3% 9,346 9,525 -1.9%
Average
Length of
Stay (b) 219.5 223.4 -1.7% 214.1 211.3 1.3%
Revenue per
Patient
Day $511 $488 4.7% $500 $479 4.4%
EBITDA
margin 16.1% 16.5% -40 bps 16.7% 18.9% -220 bps


U.S. Facility
Results
Revenue $501,225 $472,194 6.1% $2,008,381 $1,904,695 5.4%
Patient Days 652,415 639,687 2.0% 2,613,164 2,538,737 2.9%
Admissions 42,222 40,322 4.7% 172,320 161,387 6.8%
Average
Length of
Stay (b) 15.5 15.9 -2.6% 15.2 15.7 -3.6%
Revenue per
Patient
Day $768 $738 4.1% $769 $750 2.4%
EBITDA
margin 24.3% 23.8% 50 bps 25.1% 25.6% -50 bps

U.K. Facility
Results (c)
Revenue $279,007 $271,630 2.7% $1,099,081 $1,059,733 3.7%
Patient Days 664,709 678,162 -2.0% 2,673,715 2,702,551 -1.1%
Admissions 2,626 2,550 3.0% 10,786 10,776 0.1%
Average
Length of
Stay (b) 253.1 265.9 -4.8% 247.9 250.8 -1.2%
Revenue per
Patient
Day $420 $401 4.8% $411 $392 4.8%
EBITDA
margin 14.4% 14.6% -20 bps 15.2% 16.7% -150 bps

Total Facility
Results (c)
Revenue $780,232 $743,824 4.9% $3,107,462 $2,964,428 4.8%
Patient Days 1,317,124 1,317,849 -0.1% 5,286,879 5,241,288 0.9%
Admissions 44,848 42,872 4.6% 183,106 172,163 6.4%
Average
Length of
Stay (b) 29.4 30.7 -4.5% 28.9 30.4 -5.2%
Revenue per
Patient
Day $592 $564 5.0% $588 $566 3.9%
EBITDA
margin 20.8% 20.5% 30 bps 21.6% 22.5% -90 bps

(a) Results for the periods presented exclude the elderly care division of our U.K. operations 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 months and year ended December 31, 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. The exchange rate used in the adjusted
revenue and revenue per patient day amounts for the three months and year ended December 31, 2018
is 1.29 and 1.28, respectively.



Acadia Healthcare Company, Inc.
Reconciliation of Net Income Attributable to Acadia Healthcare Company,
Inc. to Adjusted EBITDA
(Unaudited)

Three Months Ended Year Ended December
December 31, 31,
------------------------ --------------------
2019 2018 2019 2018
------------ ---------- -------- ----------
(in thousands)

Net (loss) income
attributable to Acadia
Healthcare Company,
Inc. $(11,254) $(331,637) $108,923 $(175,750)
Net income attributable
to noncontrolling
interests 941 108 1,199 264
Provision for (benefit
from) income taxes 65 (9,807 ) 25,866 6,532
Interest expense, net 43,710 47,704 187,094 185,410
Depreciation and
amortization 41,767 39,472 164,044 158,832
------- -------- ------- --------
EBITDA 75,229 (254,160) 487,126 175,288

Adjustments:
Equity-based
compensation expense
(a) 2,985 2,728 17,307 22,001
Transaction-related
expenses (b) 11,756 24,499 27,064 34,507
Debt extinguishment
costs (c) - 875 - 1,815
Legal settlements
expense (d) - 22,076 - 22,076
Loss on impairment
(e) 54,386 337,889 54,386 337,889
------- -------- ------- --------
Adjusted EBITDA $144,356 $133,907 $585,883 $593,576
======= ======== ======= ========

See footnotes on page
10.



Acadia Healthcare Company, Inc.
Reconciliation of Adjusted Income Attributable to Acadia Healthcare
Company, Inc. to
Net Income Attributable to Acadia Healthcare Company, Inc.
(Unaudited)

Three Months Ended Year Ended December
December 31, 31,
------------------------ ---------------------
2019 2018 2019 2018
------------ ---------- --------- ----------
(in thousands, except per share amounts)

Net (loss) income
attributable to Acadia
Healthcare Company,
Inc. $(11,254) $(331,637) $108,923 $(175,750)

Adjustments to income:
Transaction-related
expenses (b) 11,756 24,499 27,064 34,507

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