Acadia Healthcare Company, Inc.: Form 10-Q for the period ended Sep 30, 2023

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 are forward-looking statements.

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

• the impact of competition for staffing, labor shortages and higher turnover rates on our labor costs and profitability;
• the impact of increases in inflation and rising interest rates;
• compliance with laws and government regulations;
• our indebtedness, our ability to meet our debt obligations, and our ability to incur substantially more debt;
• the impact of payments received from the government and third-party payors on our revenue and results of operations;
• the impact of volatility in the global capital and credit markets, as well as significant developments in macroeconomic and

political conditions that are out of our control;

• the impact of general economic and employment conditions, including increased construction and other costs due to inflation, on our business and future results of operations;
• difficulties in successfully integrating the operations of acquired facilities or realizing the potential benefits and synergies of our acquisitions and joint ventures;
• our ability to recruit and retain quality psychiatrists and other physicians, nurses, counselors and other medical support personnel;
• 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;

• 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 outcome of pending litigation, including the Desert Hills Litigation;
• the impact of governmental investigations, regulatory actions and whistleblower lawsuits;
• any failure to comply with the terms of our corporate integrity agreement with the OIG;
• the impact of healthcare reform in the U.S.;
• our acquisition, joint venture and wholly-owned de novo strategies, which expose us to a variety of operational and financial risks, as well as legal and regulatory risks;
• the impact of state efforts to regulate the construction or expansion of healthcare facilities on our ability to operate and expand our operations;
• our ability to implement our business strategies;
• the impact of Medicaid eligibility determinations associated with the end of COVID-related Medicaid continuing coverage requirements;
• the impact of disruptions on our inpatient and outpatient volumes caused by pandemics, epidemics or outbreaks of

infectious diseases, such as the COVID-19 pandemic;

• our dependence on key management personnel, key executives and local facility management personnel, and the impact of any disruptions from the recent transition of various executives;
• our restrictive covenants, which may restrict our business and financing activities;
• the impact of adverse weather conditions and climate change, including the effects of hurricanes, wildfires and other natural

disasters, and any resulting outmigration;

• the risk of a cyber-security incident and any resulting adverse impact on our operations or violation of laws and regulations regarding information privacy;
• our future cash flow and earnings;
• the impact of our highly competitive industry on patient volumes;
• our ability to cultivate and maintain relationships with referral sources;
• 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;
• our potential inability to extend leases at expiration;
• the impact of controls designed to reduce inpatient services on our revenue;
• the impact of different interpretations of accounting principles on our results of operations or financial condition;
• the impact of environmental, health and safety laws and regulations, especially in locations where we have concentrated operations;
• the impact of laws and regulations relating to privacy and security of patient health information and standards for electronic transactions;
• the impact of a change in the mix of our earnings, adverse changes in our effective tax rate and adverse developments in tax laws generally;
• changes in interpretations, assumptions and expectations regarding recent tax legislation, including provisions of the CARES Act and additional guidance that may be issued by federal and state taxing authorities;
• failure to maintain effective internal control over financial reporting;
• the impact of fluctuations in our operating results, quarter to quarter earnings and other factors on the price of our securities; 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, 2023, we operated 253 behavioral healthcare facilities with approximately 11,100 beds in 39 states and Puerto Rico. During the nine months ended September 30, 2023, we added 396 beds, consisting of 204 to existing facilities and 192 added through the opening of two joint venture facilities, and we opened four CTCs. For the year ending December 31, 2023, we expect to add approximately 300 beds through additions to existing facilities, and we expect to open two wholly-owned facilities, two joint venture facilities and six CTCs.

We are the leading publicly traded pure-play provider of behavioral healthcare services in the U.S. 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 healthcare industry expertise. Management expects to take advantage of several strategies that are more accessible as a result of our increased size and geographic scale, including continuing a national marketing strategy to attract new 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, wholly-owned de novo facilities, joint ventures and bed additions in existing facilities.

COVID-19

During March 2020, the global pandemic of COVID-19 began to affect our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. economy and financial market. At many of our facilities, employees and/or patients have tested positive for COVID-19. We are committed to protecting the health of our communities and have been responding to the evolving COVID-19 situation while taking steps to provide quality care and protect the health and safety of our patients and employees. Over the last three years, all of our facilities have closely followed infectious disease protocols, as well as recommendations by the Centers for Disease Control and Prevention and local health officials.

CARES Act and Other Regulatory Matters

On March 27, 2020, the CARES Act was signed into law. The CARES Act is intended to provide over $2 trillion in stimulus benefits for the U.S. economy. Among other things, the CARES Act includes additional support for small businesses, expands unemployment benefits, makes forgivable loans available to small businesses, provides for certain federal income tax changes, and provides $500 billion for loans, loan guarantees, and other investments for or in U.S. businesses.

In addition, the CARES Act contains a number of provisions that are intended to assist healthcare providers as they combat the effects of the COVID-19 pandemic. Those provisions include, among others:

• an appropriation to the PHSSE Fund, also known as the Provider Relief Fund, to reimburse, through grants or other mechanisms, eligible healthcare providers and other approved entities for COVID-19-related expenses or lost revenue;
• the expansion of CMS’ Accelerated and Advance Payment Program;
• the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on

April 1, 2022 and was eliminated effective July 1, 2022; and

• waivers or temporary suspension of certain regulatory requirements.

The U.S. government initially announced it would offer $100 billion of relief to eligible healthcare providers through the PHSSE Fund. On April 24, 2020, then President Trump signed into law the PPP Act. Among other things, the PPP Act allocated $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion allocated under the PPP Act was in addition to the $100 billion allocated to healthcare providers for the same purposes in the CARES Act and has been disbursed to providers under terms and conditions similar to the CARES Act funds. In 2020, we received approximately $34.9 million of the funds distributed from the PHSSE Fund. During the fourth quarter of 2020, we recorded approximately $32.8 million of income from provider relief fund related to PHSSE Fund amounts received in 2020.

In 2021, we received $24.2 million of additional funds from the PHSSE Fund. During the fourth quarter of 2021, we recorded $17.9 million of income from provider relief fund related to the PHSSE Fund amounts received. During the year ended December 31, 2022, we received $7.7 million of additional funds from the PHSSE Fund and $14.2 million from the ARP Rural Payments for Hospitals. During the year ended December 31, 2022, we recorded $21.5 million of income from provider relief fund related to PHSSE Fund and ARP funds received. During the third quarter of 2023, we recorded $4.4 million of income from provider relief fund related to ARP funds received. The remaining unrecognized funds of $4.5 million and $9.0 million are included in other accrued liabilities on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively. We continue to evaluate our compliance with the terms and conditions to, and the financial impact of, these additional funds received, including potential repayment of the remaining balance.

Healthcare providers were required to sign an attestation confirming receipt of the PHSSE Fund amounts and agree to the terms and conditions of payment. Under the terms and conditions for receipt of the payment, we were allowed to use the funds to cover lost revenues and healthcare costs related to COVID-19, and we were required to properly and fully document the use of these funds to the U.S. Department of Health and Human Services. The reporting of the funds is subject to future audit for compliance with the terms and conditions. We recognized PHSSE Fund amounts to the extent we had qualifying COVID-19 expenses or lost revenues as permitted under the terms and conditions.

During 2020, we applied for and received approximately $45.2 million of payments from the CMS Accelerated and Advance Payment Program. Of the $45.2 million of advance payments received in 2020, we repaid approximately $25.1 million of advance payments during 2021 and made additional repayments of approximately $20.1 million during the year ended December 31, 2022 to eliminate the liability.

Under the CARES Act, we received a 2% increase in our facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on April 1, 2022 and was eliminated effective July 1, 2022.

The CARES Act also provided for certain federal income and other tax changes. We received a cash benefit of approximately $39.3 million for 2020 relating to the delay of payment of the employer portion of Social Security payroll taxes. We repaid half of the $39.3 million of payroll tax deferrals during the third quarter of 2021 and repaid the remaining portion in the third quarter of 2022 to eliminate the liability.

These regulatory changes were temporary and expired at the end of the COVID-19 public health emergency on May 11, 2023.

We are continuing to evaluate the terms and conditions and financial impact of funds received under the CARES Act and other government relief programs.

Results of Operations

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

We believe that we are well positioned to help meet the growing demand for behavioral health services and we recorded a revenue growth rate of 13.0% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Similar to many other healthcare providers and other industries across the country, we continue to navigate a tight labor market. While we experienced higher wage inflation in the nine months ended September 30, 2023 compared to long-term historical averages, we have seen stability in our labor costs and our proactive focus helps us manage through this environment. We remain focused on ensuring that we have the level of staff to meet the demand in our markets across our 39 states and Puerto Rico.

The following table sets forth percent changes in same facility operating data for the three and nine months ended September 30, 2023 compared to the same periods in 2022:

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

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

(c) Adjusted EBITDA is defined as income before provision for income taxes, equity-based compensation expense, loss on impairment, transaction-related expenses, interest expense, legal settlements expense and depreciation and amortization. Management uses Adjusted EBITDA as an analytical indicator to measure performance and to develop strategic objectives and operating plans. Adjusted EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Adjusted EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

(d) For each of the three and nine months ended September 30, 2023, excludes income from provider relief fund of $4.4 million. For the three and nine months ended September 30, 2022, excludes income from provider relief fund of $7.7 million and $16.2 million, respectively.

Three months ended September 30, 2023 compared to the three months ended September 30, 2022

Revenue. Revenue increased $83.6 million, or 12.5%, to $750.3 million for the three months ended September 30, 2023 from $666.7 million for the three months ended September 30, 2022. Same facility revenue increased $85.5 million, or 13.0%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, resulting from an increase in same facility revenue per day of 6.6%, same facility growth in patient days of 6.0% and same facility growth in admissions of 5.1%. Consistent with same facility revenue growth in 2022, the growth in same facility patient days for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $394.2 million for the three months ended September 30, 2023 compared to $352.6 million for the three months ended September 30, 2022, an increase of $41.6 million. SWB expense included $8.2 million and $7.2 million of equity-based compensation expense for the three months ended September 30, 2023 and 2022, respectively. Excluding equity-based compensation expense, SWB expense was $386.0 million, or 51.4% of revenue, for the three months ended September 30, 2023, compared to $345.4 million, or 51.8% of revenue, for the three months ended September 30, 2022. The increase in SWB expense relates to incremental staff to support volume growth as well as wage inflation. Same facility SWB expense was $352.0 million for the three months ended September 30, 2023, or 47.3% of revenue, compared to $315.9 million for the three months ended September 30, 2022, or 47.9% of revenue.

Professional fees. Professional fees were $45.5 million for the three months ended September 30, 2023, or 6.1% of revenue, compared to $40.4 million for the three months ended September 30, 2022, or 6.1% of revenue. Same facility professional fees were $40.7 million for the three months ended September 30, 2023, or 5.5% of revenue, compared to $36.9 million for the three months ended September 30, 2022, or 5.6% of revenue.

Supplies. Supplies expense was $27.1 million for the three months ended September 30, 2023, or 3.6% of revenue, compared to $25.6 million for the three months ended September 30, 2022, or 3.8% of revenue. Same facility supplies expense was $26.7 million for the three months ended September 30, 2023, or 3.6% of revenue, compared to $25.2 million for the three months ended September 30, 2022, or 3.8% of revenue.

Rents and leases. Rents and leases were $11.7 million for the three months ended September 30, 2023, or 1.6% of revenue, compared to $11.3 million for the three months ended September 30, 2022, or 1.7% of revenue. Same facility rents and leases were $10.6 million for the three months ended September 30, 2023, or 1.4% of revenue, compared to $10.5 million for the three months ended September 30, 2022, or 1.6% 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 $104.0 million for the three months ended September 30, 2023, or 13.9% of revenue, compared to $89.0 million for the three months ended September 30, 2022, or 13.3% of revenue. Same facility other operating expenses were $97.2 million for the three months ended September 30, 2023, or 13.1% of revenue, compared to $83.3 million for the three months ended September 30, 2022, or 12.6% of revenue.

Income from provider relief fund. For the three months ended September 30, 2023, we recorded $4.4 million in income from provider relief fund related to ARP funds received in 2022, compared to $7.7 million in income from provider relief fund related to PHSSE Fund amounts received in 2022 for the three months ended September 30, 2022.

Depreciation and amortization. Depreciation and amortization expense was $33.4 million for the three months ended September 30, 2023, or 4.4% of revenue, compared to $29.6 million for the three months ended September 30, 2022, or 4.4% of revenue.

Interest expense. Interest expense was $20.7 million for the three months ended September 30, 2023, compared to $18.0 million for the three months ended September 30, 2022. The increase in interest expense was primarily a result of higher interest rates applicable to our variable rate debt.

Legal settlements expense. Legal settlements expense for the three months ended September 30, 2023 was $394.2 million associated with the Desert Hills Litigation.

Transaction-related expenses. Transaction-related expenses were $11.2 million for the three months ended September 30, 2023, compared to $10.9 million for the three months ended September 30, 2022. Transaction-related expenses represent legal, accounting, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands).

(Benefit from) provision for income taxes. For the three months ended September 30, 2023, the benefit from income taxes was $(71.9) million, reflecting an effective tax rate of 25.0%, compared to the provision for income taxes of $24.1 million, reflecting an effective tax rate of 24.8%, for the three months ended September 30, 2022.

As we continue to monitor the implications of potential tax legislation in each of our jurisdictions, we may adjust our estimates and record additional amounts for tax assets and liabilities. Any adjustments to our tax assets and liabilities could materially impact our provision for income taxes and our effective tax rate in the periods in which they are made.

Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

Revenue. Revenue increased $250.8 million, or 13.0%, to $2,185.9 million for the nine months ended September 30, 2023 from $1,935.1 million for the nine months ended September 30, 2022. Same facility revenue increased $240.9 million, or 12.5%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, resulting from an increase in same facility revenue per day of 6.4%, same facility growth in admissions of 6.0% and same facility growth in patient days of 5.8%. Consistent with same facility revenue growth in 2022, the growth in same facility patient days for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

Salaries, wages and benefits. SWB expense was $1,172.0 million for the nine months ended September 30, 2023 compared to $1,027.7 million for the nine months ended September 30, 2022, an increase of $144.2 million. SWB expense included $23.1 million and $21.7 million of equity-based compensation expense for the nine months ended September 30, 2023 and 2022, respectively. Excluding equity-based compensation expense, SWB expense was $1,148.8 million, or 52.6% of revenue, for the nine months ended September 30, 2023, compared to $1,006.0 million, or 52.0% of revenue, for the nine months ended September 30, 2022. The increase in SWB expense relates to incremental staff to support volume growth as well as wage inflation. Same facility SWB expense was $1,040.6 million for the nine months ended September 30, 2023, or 48.2% of revenue, compared to $927.2 million for the nine months ended September 30, 2022, or 48.3% of revenue.

Professional fees. Professional fees were $130.5 million for the nine months ended September 30, 2023, or 6.0% of revenue, compared to $117.7 million for the nine months ended September 30, 2022, or 6.1% of revenue. Same facility professional fees were $116.0 million for the nine months ended September 30, 2023, or 5.4% of revenue, compared to $108.2 million for the nine months ended September 30, 2022, or 5.6% of revenue.

Supplies. Supplies expense was $79.3 million for the nine months ended September 30, 2023, or 3.6% of revenue, compared to $74.3 million for the nine months ended September 30, 2023, or 3.8% of revenue. Same facility supplies expense was $77.9 million for the nine months ended September 30, 2023, or 3.6% of revenue, compared to $73.5 million for the nine months ended September 30, 2022, or 3.8% of revenue.

Rents and leases. Rents and leases were $34.9 million for the nine months ended September 30, 2023, or 1.6% of revenue, compared to $33.8 million for the nine months ended September 30, 2022, or 1.7% of revenue. Same facility rents and leases were $31.9 million for the nine months ended September 30, 2023, or 1.5% of revenue, compared to $31.5 million for the nine months ended September 30, 2022, or 1.6% 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 $290.8 million for the nine months ended September 30, 2023, or 13.3% of revenue, compared to $255.4 million for the nine months ended September 30, 2022, or 13.2% of revenue. Same facility other operating expenses were $270.5 million for the nine months ended September 30, 2023, or 12.5% of revenue, compared to $242.9 million for the nine months ended September 30, 2022, or 12.6% of revenue.

Income from provider relief fund. For the nine months ended September 30, 2023, we recorded $4.4 million in income from provider relief fund related to ARP funds received in 2022, compared to $16.2 million in income from provider relief fund related to PHSSE Fund amounts and ARP funds received in 2021 and 2022 for the nine months ended September 30, 2022.

Depreciation and amortization. Depreciation and amortization expense was $97.0 million for the nine months ended September 30, 2023, or 4.4% of revenue, compared to $87.6 million for the nine months ended September 30, 2022, or 4.5% of revenue.

Interest expense. Interest expense was $61.7 million for the nine months ended September 30, 2023 ,compared to $50.4 million for the nine months ended September 30, 2022. The increase in interest expense was primarily a result of higher interest rates applicable to our variable rate debt.

Legal settlements expense. Legal settlements expense for the nine months ended September 30, 2023 was $394.2 million associated with the Desert Hills Litigation.

Loss on impairment. During the second quarter of 2023, we recorded non-cash impairment charges totaling $8.7 million related to the closure of certain facilities. The non-cash impairment charges include an indefinite-lived intangible asset impairment of $4.7 million, property impairment of $2.0 million and operating lease right-of-use asset impairment of $2.0 million.

Transaction-related expenses. Transaction-related expenses were $26.8 million for the nine months ended September 30, 2023, compared to $18.4 million for the nine months ended September 30, 2022. Transaction-related expenses represent legal, accounting, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands).

(Benefit from) provision for income taxes. For the nine months ended September 30, 2023, the benefit from income taxes was $(29.9) million, reflecting an effective tax rate of 28.4%, compared to the provision for income taxes of $69.2 million, reflecting an effective tax rate of 24.2%, for the nine months ended September 30, 2022.

As we continue to monitor the implications of potential tax legislation in each of our jurisdictions, we may adjust our estimates and record additional amounts for tax assets and liabilities. Any adjustments to our tax assets and liabilities could materially impact our provision for income taxes and our effective tax rate in the periods in which they are made.

Revenue

Our revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and adolescent residential treatment. We receive payments from the following sources for services rendered in our facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by CMS; and (iv) 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.

The following table presents revenue by payor type and as a percentage of revenue for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

The following tables present a summary of our aging of accounts receivable at September 30, 2023 and December 31, 2022:

September 30, 2023

26

December 31, 2022

Liquidity and Capital Resources

Cash provided by operating activities for the nine months ended September 30, 2023 was $346.0 million compared to $267.0 million for the nine months ended September 30, 2022. Days sales outstanding were 44 days at September 30, 2023 and December 31, 2022.

Cash used in investing activities for the nine months ended September 30, 2023 was $287.1 million compared to $213.8 million for the nine months ended September 30, 2022. Cash used in investing activities for the nine months ended September 30, 2023 primarily consisted of $285.4 million of cash paid for capital expenditures, $1.9 million of other and $0.3 million of cash paid for acquisitions, net of cash acquired, offset by $0.6 million of proceeds from sales of property and equipment. Cash paid for capital expenditures for the nine months ended September 30, 2023 was $285.4 million, consisting of routine or maintenance capital expenditures of $73.9 million and expansion capital expenditures of $211.5 million. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue. Routine or maintenance capital expenditures, including information technology capital expenditures, were approximately 3% of revenue for the nine months ended September 30, 2023. Cash used in investing activities for the nine months ended September 30, 2022 primarily consisted of $208.8 million of cash paid for capital expenditures and $6.8 million of other, offset by $1.8 million of proceeds from the sale of property and equipment. Cash paid for capital expenditures for the nine months ended September 30, 2022 consisted of $47.0 million of routine capital expenditures and $161.8 million of expansion capital expenditures.

Cash used in financing activities for the nine months ended September 30, 2023 was $57.0 million compared to $93.6 million for the nine months ended September 30, 2022. Cash used in financing activities for the nine months ended September 30, 2023 consisted of repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises of $45.2 million, principal payments on revolving credit facility of $35.0 million, principal payments on long-term debt of $15.9 million and distributions to noncontrolling partners in joint ventures of $3.5 million, offset by borrowings on revolving credit facility of $40.0 million and contributions from noncontrolling partners in joint ventures of $2.5 million. Cash used in financing activities for the nine months ended September 30, 2022 primarily consisted of principal payments on revolving credit facility of $85.0 million, principal payments on long-term debt of $13.3 million, repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises of $7.5 million and distributions to noncontrolling partners in joint ventures of $1.0 million, offset by $13.2 million of contributions from noncontrolling partners in joint ventures.

We had total available cash and cash equivalents of $99.6 million and $97.6 million at September 30, 2023 and December 31, 2022, respectively, of which approximately $8.5 million and $3.7 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.

Desert Hills Litigation

As described in more detail in Note 12 – Commitments and Contingencies in the accompanying notes to our consolidated financial statements, on October 30, 2023, we entered into settlement agreements in connection with each of the Cases, which are subject to approval by the District Court. We currently intend to pay the aggregate cash settlement of $400.0 million with a combination of insurance proceeds, cash on hand and our existing credit lines. The settlement amounts must be paid within 30 days of the District Court’s approval of the settlement agreements.

Though we expect the payment of the settlement amounts to have a material impact on our liquidity, we believe existing cash on hand, cash flows from operations and the availability under our revolving line of credit will be sufficient to meet our expected liquidity needs during the next 12 months and beyond.

Credit Facility

We entered into a credit agreement establishing a new Credit Facility on March 17, 2021. The Credit Facility provides for a $600.0 million Revolving Facility and a $425.0 million Term Loan Facility, with each maturing on March 17, 2026. The Revolving Facility further provides for (i) up to $20.0 million which may be utilized for the issuance of letters of credit and (ii) the availability of a swingline facility under which we may borrow up to $20.0 million.

On March 30, 2023, we entered into the First Amendment. The First Amendment replaced LIBOR with Adjusted Term SOFR. Borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate of Bank of America or (iii) Adjusted Term SOFR for a one month interest period or (b) Adjusted Term SOFR, in each case plus an applicable margin that varies according to our total leverage ratio from 0.375% to 1.250% in the case of base rate loans and from 1.375% to 2.250% in the case of Adjusted Term SOFR loans. In addition, an unused fee that varies according to our total leverage ratio from 0.200% to 0.350% is payable quarterly in arrears based on the average daily undrawn portion of the commitments in respect of the Revolving Facility.

During the nine months ended September 30, 2023, we borrowed $40.0 million on the Revolving Facility and repaid $35.0 million of the balance outstanding. We had $516.5 million of availability under the Revolving Facility and had standby letters of credit outstanding of $3.5 million related to security for the payment of claims required by our workers’ compensation insurance program at September 30, 2023.

The Credit Facility requires quarterly term loan principal repayments for our Term Loan Facility of $5.3 million for December 31, 2023 to March 31, 2024, $8.0 million for June 30, 2024 to March 31, 2025 and $10.6 million for June 30, 2025 to December 31, 2025, with the remaining principal balance of the Term Loan Facility due on the maturity date of March 17, 2026.

We have the ability to increase the amount of the Senior Facilities, which may take the form of increases to the Revolving Facility or the Term Loan Facility or the issuance of the Incremental Facilities, upon obtaining additional commitments from new or existing lenders and the satisfaction of customary conditions precedent for such Incremental Facilities. Such Incremental Facilities may not exceed the sum of (i) the greater of $480.0 million and an amount equal to 100% of our Consolidated EBITDA (as defined in the Credit Facility), and (ii) additional amounts that would not cause the Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Facility) to exceed 3.5 to 1.0.

Subject to certain exceptions, substantially all of our existing and subsequently acquired or organized direct or indirect wholly-owned subsidiaries are required to guarantee the repayment of obligations under the Credit Facility. We and such guarantor subsidiaries have granted a security interest on substantially all personal property assets as

collateral for the obligations under the Credit Facility.

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

The Credit Facility contains customary representations and affirmative and negative covenants, including limitations on our ability and our subsidiaries’ ability to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, pay junior indebtedness and enter into affiliate transactions, in each case, subject to customary exceptions. In addition, the Credit Facility contains financial covenants requiring us on a consolidated basis to maintain, as of the last day of any consecutive four fiscal quarter period, a consolidated total net leverage ratio of not more than 5.0 to 1.0 and an interest coverage ratio of at least 3.0 to 1.0. The Credit Facility also includes events of default customary for facilities of this type and upon the occurrence of any such event of default, among other things, all outstanding loans under the Senior Facilities may be accelerated, the lenders’ commitments may be terminated, and/or the lenders may exercise collateral remedies. At September 30, 2023, we were in compliance with all financial covenants.

Senior Notes

5.500% Senior Notes due 2028

On June 24, 2020, we issued $450.0 million of 5.500% Senior Notes. The 5.500% Senior Notes mature on July 1, 2028, and bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on January 1 and July 1 of each year.

5.000% Senior Notes due 2029

On October 14, 2020, we issued $475.0 million of 5.000% Senior Notes. The 5.000% Senior Notes mature on April 15, 2029, and bear interest at a rate of 5.000% per annum, payable semi-annually in arrears on April 15 and October 15 of each year.

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.

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

Supplemental Guarantor Financial Information

We conduct substantially all of our business through our subsidiaries. The Senior Notes are jointly and severally guaranteed on an unsecured senior basis by all of our subsidiaries that guarantee our obligations under the Credit Facility. The summarized financial information presented below is consistent with our consolidated financial statements, except transactions between combining entities have been eliminated. Financial information for our combined non-guarantor entities has been excluded pursuant to SEC Regulation S-X Rule 13-01. Presented below is condensed financial information for our combined wholly-owned subsidiary guarantors at September 30, 2023 and December 31, 2022, and for the nine months ended September 30, 2023.

Summarized balance sheet information (in thousands):

Summarized operating results information (in thousands):

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Contractual Obligations

The following table presents a summary of contractual obligations at September 30, 2023 (in thousands):

(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, 2023.

(b) Amounts exclude variable components of lease payments.

Critical Accounting Policies

There have been no material changes in our critical accounting policies at September 30, 2023 from those described in our Annual Report on Form 10-K for the year ended December 31, 2022.

Interest Rate Risk

Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at September 30, 2023 was composed of $915.5 million of fixed-rate debt and $434.5 million of variable-rate debt with interest based on Adjusted Term SOFR plus an applicable margin. Based on our borrowing level at September 30, 2023, a hypothetical 1% increase in interest rates would decrease our pretax income on an annual basis by approximately $4.3 million.

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, 2023, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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, 2022 and Part II, “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (collectively, the “Periodic Reports”). As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in the Periodic Reports. 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.