Acadia Healthcare Company, Inc.: Form 10-Q for the period ended Sep 30, 2024
Filed with the SEC on Oct 30, 2024 and accepted by EDGAR at Oct 30, 2024, 20:31 ET.
Management's discussion and analysis
As filed, 43,475 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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 inflation and interest rate volatility;
- 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;
- the impact of internal or governmental investigations, regulatory actions and whistleblower lawsuits;
- 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;
- the impact of carrying a large self-insured retention, the possibilities of being responsible for significant amounts not covered by insurance, premium increases and insurance not being available on acceptable terms because of our claims experience;
- 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-19 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;
- the impact on our business if our information systems fail or our databases are destroyed or damaged;
- 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 become the indispensable behavioral healthcare provider for the high-acuity and complex needs patient population. We are committed to providing the communities we serve with high-quality, cost-effective behavioral healthcare services, while growing our business, increasing profitability and creating long-term value for our stockholders. This strategy includes five growth pathways: expansions of existing facilities, joint venture partnerships, de novo facilities, acquisitions and expansion across our continuum of care. At September 30, 2024, we operated 260 behavioral healthcare facilities with approximately 11,300 beds in 38 states and Puerto Rico. During the nine months ended September 30, 2024, we added 275 beds, consisting of 67 beds to existing facilities and 208 beds added through the opening of four wholly-owned facilities.
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 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.
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, 2024 Amount% | 2023 Amount% | Nine Months Ended September 30, 2024 Amount% | 2023 Amount% | |||||
|---|---|---|---|---|---|---|---|---|
| Revenue | $815,634 | 100.0% | $750,334 | 100.0% | $2,379,725 | 100.0% | $2,185,938 | 100.0% |
| Salaries, wages and benefits | 428,147 | 52.5% | 394,150 | 52.5% | 1,265,427 | 53.2% | 1,171,960 | 53.6% |
| Professional fees | 48,498 | 5.9% | 45,540 | 6.1% | 142,236 | 6.0% | 130,468 | 6.0% |
| Supplies | 29,623 | 3.6% | 27,147 | 3.6% | 84,153 | 3.5% | 79,312 | 3.6% |
| Rents and leases | 12,389 | 1.5% | 11,731 | 1.6% | 36,141 | 1.5% | 34,880 | 1.6% |
| Other operating expenses | 112,137 | 13.8% | 104,048 | 13.9% | 322,900 | 13.6% | 290,798 | 13.3% |
| Income from provider relief fund | — | 0.0% | (4,442) | -0.6% | — | 0.0% | (4,442) | -0.2% |
| Depreciation and amortization | 37,641 | 4.6% | 33,388 | 4.4% | 110,054 | 4.6% | 96,969 | 4.4% |
| Interest expense | 29,924 | 3.7% | 20,742 | 2.8% | 86,297 | 3.6% | 61,651 | 2.8% |
| Legal settlements expense | — | 0.0% | 394,181 | 52.5% | — | 0.0% | 394,181 | 18.0% |
| Loss on impairment | 10,459 | 1.3% | — | 0.0% | 11,459 | 0.5% | 8,694 | 0.4% |
| Transaction, legal and other costs | 8,249 | 1.0% | 11,247 | 1.5% | 17,187 | 0.7% | 26,792 | 1.2% |
| Total expenses | 717,067 | 87.9% | 1,037,732 | 138.3% | 2,075,854 | 87.2% | 2,291,263 | 104.7% |
| Income (loss) before income taxes | 98,567 | 12.1% | (287,398) | -38.3% | 303,871 | 12.8% | (105,325) | -4.7% |
| Provision for (benefit from) income taxes | 27,199 | 3.3% | (71,873) | -9.6% | 72,916 | 3.1% | (29,907) | -1.3% |
| Net income (loss) | 71,368 | 8.8% | (215,525) | -28.7% | 230,955 | 9.7% | (75,418) | -3.5% |
| Net income attributable to noncontrolling interests | (3,236) | -0.4% | (2,185) | -0.3% | (7,958) | -0.3% | (3,978) | -0.2% |
| Net income (loss) attributable to Acadia Healthcare Company, Inc. | $68,132 | 8.4% | $(217,710) | -29.0% | $222,997 | 9.4% | $(79,396) | -3.6% |
We believe that we are well positioned to help meet the growing demand for behavioral healthcare services and recorded revenue growth of 8.7% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Similar with many other healthcare providers and other industries across the country, we continue to navigate a tight labor market. While we experienced higher wage inflation recently 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 38 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, 2024 compared to the same periods in 2023:
| Same Facility Results (a) | Three Months Ended | Nine Months Ended |
|---|---|---|
| Revenue growth | 8.6% | 8.7% |
| Patient days growth | 4.7% | 3.2% |
| Admissions growth | 2.0% | 0.3% |
| Average length of stay change (b) | 2.7% | 2.8% |
| Revenue per patient day growth | 3.6% | 5.3% |
| Adjusted EBITDA margin change (c) | 40 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) Adjusted EBITDA is defined as income before provision for income taxes, equity-based compensation expense, loss on impairment, transaction, legal and other costs, interest expense, legal settlement 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. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue.
Three months ended September 30, 2024 compared to the three months ended September 30, 2023
Revenue. Revenue increased $65.3 million, or 8.7%, to $815.6 million for the three months ended September 30, 2024 from $750.3 million for the three months ended September 30, 2023. Same facility revenue increased $63.2 million, or 8.6%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, resulting from an increase in same facility revenue per day of 3.6% and same facility growth in patient days of 4.7%. Consistent with same facility revenue growth in 2023, the growth in same facility patient days for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 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 $428.1 million for the three months ended September 30, 2024 compared to $394.2 million for the three months ended September 30, 2023, an increase of $33.9 million. SWB expense included $9.5 million and $8.2 million of equity-based compensation expense for the three months ended September 30, 2024 and 2023, respectively. Excluding equity-based compensation expense, SWB expense was $418.6 million, or 51.3% of revenue, for the three months ended September 30, 2024, compared to $386.0 million, or 51.4% of revenue, for the three months ended September 30, 2023. Same facility SWB expense was $377.7 million for the three months ended September 30, 2024, or 47.1% of revenue, compared to $352.4 million for the three months ended September 30, 2023, or 47.7% of revenue.
Professional fees. Professional fees were $48.5 million for the three months ended September 30, 2024, or 5.9% of revenue, compared to $45.5 million for the three months ended September 30, 2023, or 6.1% of revenue. Same facility professional fees were $42.8 million for the three months ended September 30, 2024, or 5.3% of revenue, compared to $40.4 million for the three months ended September 30, 2023, or 5.5% of revenue.
Supplies. Supplies expense was $29.6 million for the three months ended September 30, 2024, or 3.6% of revenue, compared to $27.1 million for the three months ended September 30, 2023, or 3.6% of revenue. Same facility supplies expense was $28.9 million for the three months ended September 30, 2024, or 3.6% of revenue, compared to $26.4 million for the three months ended September 30, 2023, or 3.6% of revenue.
Rents and leases. Rents and leases were $12.4 million for the three months ended September 30, 2024, or 1.5% of revenue, compared to $11.7 million for the three months ended September 30, 2023, or 1.6% of revenue. Same facility rents and leases were $10.9 million for the three months ended September 30, 2024, or 1.4% of revenue, compared to $10.6 million for the three months ended September 30, 2023, or 1.4% 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 $112.1 million for the three months ended September 30, 2024, or 13.8% of revenue, compared to $104.0 million for the three months ended September 30, 2023, or 13.9% of revenue. Same facility other operating expenses were 103.6 million for the three months ended September 30, 2024, or 12.9% of revenue, compared to $97.1 million for the three months ended September 30, 2023, or 13.1% 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.
Depreciation and amortization. Depreciation and amortization expense was $37.6 million for the three months ended September 30, 2024, or 4.6% of revenue, compared to $33.4 million for the three months ended September 30, 2023, or 4.4% of revenue.
Interest expense. Interest expense was $29.9 million for the three months ended September 30, 2024 compared to $20.7 million for the three months ended September 30, 2023. The increase in interest expense was primarily the result of borrowings under the Credit Facility during 2024.
Legal settlements expense. Legal settlements expense for the three months ended September 30, 2023 was $394.2 million associated with the Desert Hills Litigation.
Loss on impairment. During the third quarter of 2024, we recorded non-cash property impairment charges totaling $10.5 million related to certain closed facilities. The non-cash impairment charges included indefinite-lived intangible asset impairment of $0.3 million, property impairment of $8.8 million and operating lease right-of-use asset impairment of $1.4 million.
Transaction, legal and other costs. Transaction, legal and other costs were $8.2 million for the three months ended September 30, 2024, compared to $11.2 million for the three months ended September 30, 2023. Transaction, legal and other costs represent legal, accounting, government investigation, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands).
| Three Months Ended September 30, 2024 | 2023 | |
|---|---|---|
| Legal, accounting and other acquisition-related costs | $6,041 | $4,196 |
| Management transition costs | 1,490 | 3,615 |
| Termination and restructuring costs | 718 | 3,436 |
| $8,249 | $11,247 |
Provision for (benefit from) income taxes. For the three months ended September 30, 2024, the provision for income taxes was $27.2 million, reflecting an effective tax rate of 27.6%, compared to a benefit from income taxes of $(71.9) million, reflecting an effective tax rate of 25.0%, for the three months ended September 30, 2023.
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, 2024 compared to the nine months ended September 30, 2023
Revenue. Revenue increased $193.8 million, or 8.9%, to $2,379.7 million for the nine months ended September 30, 2024 from $2,185.9 million for the nine months ended September 30, 2023. Same facility revenue increased $186.5 million, or 8.7%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, resulting from an increase in same facility revenue per day of 5.3% and same facility growth in patient days of 3.2%. Consistent with same facility revenue growth in 2023, the growth in same facility patient days for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 resulted from the addition of beds to our existing facilities and ongoing demand for our services.
Salaries, wages and benefits. SWB expense was $1,265.4 million for the nine months ended September 30, 2024 compared to $1,172.0 million for the nine months ended September 30, 2023, an increase of $93.5 million. SWB expense included $27.0 million and $23.1 million of equity-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively. Excluding equity-based compensation expense, SWB expense was $1,238.4 million, or 52.0% of revenue, for the nine months ended September 30, 2024, compared to $1,148.8 million, or 52.6% of revenue, for the nine months ended September 30, 2023. Same facility SWB expense was $1,113.3 million for the nine months ended September 30, 2024, or 47.7% of revenue, compared to $1,037.4 million for the nine months ended September 30, 2023, or 48.3% of revenue.
Professional fees. Professional fees were $142.2 million for the nine months ended September 30, 2024, or 6.0% of revenue, compared to $130.5 million for the nine months ended September 30, 2023, or 6.0% of revenue. Same facility professional fees were $123.8 million for the nine months ended September 30, 2024, or 5.3% of revenue, compared to $117.0 million for the nine months ended September 30, 2023, or 5.4% of revenue.
Supplies. Supplies expense was $84.2 million for the nine months ended September 30, 2024, or 3.5% of revenue, compared to $79.3 million for the nine months ended September 30, 2023, or 3.6% of revenue. Same facility supplies expense was $82.0 million for the nine months ended September 30, 2024, or 3.5% of revenue, compared to $77.2 million for the nine months ended September 30, 2023, or 3.6% of revenue.
Rents and leases. Rents and leases were $36.1 million for the nine months ended September 30, 2024, or 1.5% of revenue, compared to $34.9 million for the nine months ended September 30, 2023, or 1.6% of revenue. Same facility rents and leases were $32.4 million for the nine months ended September 30, 2024, or 1.4% of revenue, compared to $31.7 million for the nine months ended September 30, 2023, or 1.5% 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 $322.9 million for the nine months ended September 30, 2024, or 13.6% of revenue, compared to $290.8 million for the nine months ended September 30, 2023, or 13.3% of revenue. Same facility other operating expenses were $298.6 million for the nine months ended September 30, 2024, or 12.8% of revenue, compared to $270.4 million for the nine months ended September 30, 2023, 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.
Depreciation and amortization. Depreciation and amortization expense was $110.1 million for the nine months ended September 30, 2024, or 4.6% of revenue, compared to $97.0 million for the nine months ended September 30, 2023, or 4.4% of revenue.
Interest expense. Interest expense was $86.3 million for the nine months ended September 30, 2024 compared to $61.7 million for the nine months ended September 30, 2023. The increase in interest expense was primarily the result of borrowings under the Credit Facility during 2024.
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 nine months ended September 30, 2024, we recorded non-cash property impairment charges totaling $11.5 million related to certain closed facilities. The non-cash impairment charges included indefinite-lived intangible asset impairment of $0.3 million, property impairment of $9.8 million and operating lease right-of-use asset impairment of $1.4 million. During the nine months ended September 30, 2023, we recorded non-cash impairment charges totaling $8.7 million related to the closure of certain facilities. The non-cash impairment charges included 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, legal and other costs. Transaction, legal and other costs were $17.2 million for the nine months ended September 30, 2024, compared to $26.8 million for the nine months ended September 30, 2023. Transaction, legal and other costs represent legal, accounting, government investigation, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands).
| Nine Months Ended September 30, 2024 | 2023 | |
|---|---|---|
| Legal, accounting and other acquisition-related costs | $15,365 | $6,761 |
| Management transition costs | 3,085 | 14,590 |
| Termination and restructuring costs | (1,263) | 5,441 |
| $17,187 | $26,792 |
Provision for (benefit from) income taxes. For the nine months ended September 30, 2024, the provision for income taxes was $72.9 million, reflecting an effective tax rate of 24.0%, compared to a benefit from income taxes of $(29.9) million, reflecting an effective tax rate of 28.4%, for the nine months ended September 30, 2023.
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 other programs; 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, 2024 and 2023 (dollars in thousands):
| Three Months Ended September 30, 2024 Amount% | 2023 Amount% | Nine Months Ended September 30, 2024 Amount% | 2023 Amount% | |||||
|---|---|---|---|---|---|---|---|---|
| Commercial | $216,050 | 26.5% | $212,328 | 28.3% | $621,702 | 26.1% | $625,330 | 28.6% |
| Medicare | 118,022 | 14.5% | 117,348 | 15.6% | 339,117 | 14.3% | 335,819 | 15.4% |
| Medicaid | 454,319 | 55.7% | 400,483 | 53.4% | 1,343,081 | 56.4% | 1,156,766 | 52.9% |
| Self-Pay | 14,824 | 1.8% | 15,524 | 2.1% | 44,764 | 1.9% | 52,026 | 2.4% |
| Other | 12,419 | 1.5% | 4,651 | 0.6% | 31,061 | 1.3% | 15,997 | 0.7% |
| Revenue | $815,634 | 100.0% | $750,334 | 100.0% | $2,379,725 | 100.0% | $2,185,938 | 100.0% |
The following tables present a summary of our aging of accounts receivable at September 30, 2024 and December 31, 2023:
September 30, 2024
| Current | 30-90 | 90-150 | >150 | Total | |
|---|---|---|---|---|---|
| Commercial | 18.2% | 4.2% | 2.4% | 8.6% | 33.4% |
| Medicare | 9.4% | 1.5% | 0.5% | 1.1% | 12.5% |
| Medicaid | 35.1% | 4.9% | 2.4% | 4.5% | 46.9% |
| Self-Pay | 1.3% | 1.8% | 1.5% | 2.6% | 7.2% |
| Other | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Total | 64.0% | 12.4% | 6.8% | 16.8% | 100.0% |
December 31, 2023
| Current | 30-90 | 90-150 | >150 | Total | |
|---|---|---|---|---|---|
| Commercial | 17.3% | 5.4% | 3.1% | 9.5% | 35.3% |
| Medicare | 9.3% | 1.4% | 0.5% | 1.1% | 12.3% |
| Medicaid | 33.4% | 5.4% | 2.5% | 4.7% | 46.0% |
| Self-Pay | 1.4% | 1.3% | 1.2% | 2.5% | 6.4% |
| Other | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Total | 61.4% | 13.5% | 7.3% | 17.8% | 100.0% |
Liquidity and Capital Resources
Cash provided by operating activities for the nine months ended September 30, 2024 was $13.0 million compared to $346.0 million for the nine months ended September 30, 2023. Days sales outstanding at September 30, 2024 was 43 days compared to 45 days at December 31, 2023.
Cash used in investing activities for the nine months ended September 30, 2024 was $533.1 million compared to $287.1 million for the nine months ended September 30, 2023. Cash used in investing activities for the nine months ended September 30, 2024 primarily consisted of $486.9 million of cash paid for capital expenditures, $53.6 million of cash paid for acquisitions and $2.9 million of other, offset by $10.2 million of proceeds from sales of property and equipment. Cash paid for capital expenditures for the nine months ended September 30, 2024 was $486.9 million, consisting of routine or maintenance capital expenditures of $71.3 million and expansion capital expenditures of $415.6 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, 2024. 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.
Cash provided by financing activities for the nine months ended September 30, 2024 was $502.2 million compared to cash used in financing activities of $57.0 million for the nine months ended September 30, 2023. Cash provided by financing activities for the nine months ended September 30, 2024 consisted of borrowings on long-term debt of $350.0 million, borrowings on revolving credit facility of $210.0 million and contributions from noncontrolling partners in joint ventures of $3.5 million, offset by principal payments on long-term debt of $41.0 million, principal payments on revolving credit facility of $15.0 million, distributions to noncontrolling partners in joint ventures of $3.0 million, payment of debt issuance costs of $1.5 million and repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises of $0.8 million. 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.
We had total available cash and cash equivalents of $82.1 million and $100.1 million at September 30, 2024 and December 31, 2023, respectively, of which approximately $5.9 million and $11.3 million, respectively, was held by our foreign subsidiaries. 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 10 – Commitments and Contingencies in the accompanying notes to our condensed consolidated financial statements, on October 30, 2023, we entered into settlement agreements in connection with the Cases. The settlement agreements were approved by the District Court in December 2023 and fully resolve each of the Cases with no admission of liability or wrongdoing by us. On January 19, 2024, pursuant to the terms of the settlement agreements, we paid an aggregate amount of $400.0 million in exchange for the release and discharge of all claims arising from, relating to, concerning or with respect to all harm, injuries or damages asserted in the Cases or that may be asserted in the future by the plaintiffs in the Cases.
Credit Facility
On March 17, 2021, we entered into the Credit Facility, which provides for a $600.0 million Revolving Facility and a Term Loan Facility in an initial principal amount of $425.0 million, each maturing on March 17, 2026. The Revolving Facility further provides for a $20.0 million subfacility for the issuance of letters of credit.
As a part of the closing of the Credit Facility on March 17, 2021, we (i) refinanced and terminated our prior credit facilities under an amended and restated credit agreement, dated as of December 31, 2012 and (ii) financed the redemption of all of our outstanding 5.625% Senior Notes due 2023.
On March 30, 2023, we entered into the First Amendment, which replaced LIBOR as the reference rate applicable to borrowings under the Credit Facility with Adjusted Term SOFR. After giving effect to the First Amendment, borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (i) Adjusted Term SOFR plus a margin ranging from 1.375% to 2.250% or (ii) a base rate plus a margin ranging from 0.375% to 1.250%, in each case, depending on our consolidated total net leverage ratio. In addition, an unused fee that varies according to our consolidated total net leverage ratio ranging 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.
The interest rates and the unused line fee on unused commitments related to the Credit Facility are based upon the following pricing tiers:
| Pricing Tier | Consolidated Total Net Leverage Ratio | SOFR Loans | Base Rate Loans | Commitment Fee |
|---|---|---|---|---|
| 1 | ≥ 4.50:1.0 | 2.250% | 1.250% | 0.350% |
| 2 | <4.50:1.0 but ≥ 3.75:1.0 | 2.000% | 1.000% | 0.300% |
| 3 | <3.75:1.0 but ≥ 3.00:1.0 | 1.750% | 0.750% | 0.250% |
| 4 | <3.00:1.0 but ≥ 2.25:1.0 | 1.500% | 0.500% | 0.200% |
| 5 | <2.25:1.0 | 1.375% | 0.375% | 0.200% |
On January 18, 2024, we entered into the Second Amendment, which provides for the incurrence of $350.0 million of Incremental Term Loans. Such Incremental Term Loans are structured as an increase of the Term Loan Facility. The maturity date, the leverage-based pricing grid, mandatory prepayment events and other terms applicable to the Incremental Term Loans are substantially identical to those applicable to the initial $425.0 million term loans incurred under the Term Loan Facility. After giving effect to the Incremental Term Loans, the Credit Facility requires quarterly principal repayments for the Term Loan Facility of approximately $15.4 million for each quarter ending from December 31, 2024 to March 31, 2025 and $20.5 million for each quarter ending from June 30, 2025 to December 31, 2025. The remaining outstanding principal balance of the Term Loan Facility is due on the maturity date of March 17, 2026.
We have the ability to increase the amount of the Credit Facility, which may take the form of increases to the Revolving Facility or the Term Loan Facility or the issuance of one or more 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 Incremental Fixed Basket and (ii) the Incremental Ratio Basket. The Incremental Term Loans were incurred in reliance on the Incremental Ratio Basket, leaving the full amount of the Incremental Fixed Basket available for any future Incremental Facilities.
Subject to certain exceptions, substantially all of our existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries are required to guarantee the repayment of our obligations under the Credit Facility. We and such guarantor subsidiaries have granted a security interest in substantially all personal property assets as collateral for the obligations under the Credit Facility.
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 4.5 to 1.0 (which may be increased to 5.0 to 1.0 for a period of up to four consecutive fiscal quarters following the consummation of certain material acquisitions) 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 such events of default, among other things, all outstanding loans under the Credit Facility may be accelerated, the lenders’ commitments terminated, and/or the lenders may exercise collateral remedies. At September 30, 2024, we were in compliance with all financial covenants.
During the nine months ended September 30, 2024, we borrowed $210.0 million on the Revolving Facility and repaid $15.0 million of the balance outstanding. 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 $321.5 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, 2024.
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, commencing on January 1, 2021.
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, commencing on April 15, 2021.
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 guaranteed our obligations under the 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.
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 condensed 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, 2024 and December 31, 2023, and for the nine months ended September 30, 2024.
Summarized balance sheet information (in thousands):
| September 30, 2024 | December 31, 2023 | |
|---|---|---|
| Current assets | $463,883 | $442,813 |
| Property and equipment, net | 1,769,863 | 1,656,941 |
| Goodwill | 2,144,452 | 2,105,563 |
| Total noncurrent assets | 4,197,096 | 4,043,891 |
| Current liabilities | 533,514 | 827,648 |
| Long-term debt | 1,804,825 | 1,342,548 |
| Total noncurrent liabilities | 2,035,032 | 1,503,345 |
| Redeemable noncontrolling interests | — | — |
| Total equity | 2,092,433 | 2,155,711 |
Summarized operating results information (in thousands):
| Nine Months Ended September 30, 2024 | |
|---|---|
| Revenue | $2,009,568 |
| Income before income taxes | 244,772 |
| Net income | 214,374 |
| Net income attributable to Acadia Healthcare Company, Inc. | 214,374 |
Contractual Obligations
The following table presents a summary of contractual obligations at September 30, 2024 (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) | $180,075 | $1,005,285 | $516,063 | $492,813 | $2,194,236 |
| Operating lease liabilities (b) | 34,267 | 48,161 | 30,653 | 62,961 | 176,042 |
| Finance lease liabilities | 1,081 | 2,178 | 2,178 | 19,916 | 25,353 |
| Total obligations and commitments | $215,423 | $1,055,624 | $548,894 | $575,690 | $2,395,631 |
(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, 2024.
(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, 2024 from those described in our Annual Report on Form 10-K for the year ended December 31, 2023.
Market risk
As filed, 485 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Interest Rate Risk
Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at September 30, 2024 was composed of $917.1 million of fixed-rate debt and $959.4 million of variable-rate debt with interest based on Adjusted Term SOFR plus an applicable margin. Based on our borrowing level at September 30, 2024, a hypothetical 1% increase in interest rates would decrease our pretax income on an annual basis by approximately $9.6 million.
Controls and procedures
As filed, 1,261 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Risk factors
As filed, 3,542 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
In addition to the other information set forth in this report, an investor should carefully consider the factors discussed below and in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which are incorporated herein by reference. The risks described herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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.
We are and in the future could become the subject of additional governmental investigations, regulatory actions, whistleblower lawsuits and other legal proceedings.
Healthcare companies in the U.S. may be subject to 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 reports and other inquiries from, and may be subject to investigation by, federal and state agencies. See Note 10 – Commitments and Contingencies in the accompanying notes to our condensed consolidated financial statements of this Quarterly Report on Form 10-Q for additional information about pending investigations. These investigations can result in repayment obligations, substantial monetary penalties and fines, the imposition of a corporate integrity agreement, exclusion from participation in governmental health programs, negative publicity and, in certain cases, criminal penalties. Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings, as well as defending ourselves in and resolving such matters, has caused and will continue to cause us to incur significant costs, including legal expense and the diversion of management resources, which could have a material adverse effect on our business, financial condition and results of operations. In addition, governmental investigations, regulatory actions and other legal proceedings could result in us becoming the subject of negative publicity or unfavorable media attention, whether warranted or unwarranted, that could have a significant, adverse effect on the trading price of our common stock or adversely impact our reputation.
Further, under the False Claims Act, private parties are permitted to bring qui tam or “whistleblower” lawsuits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Because qui tam lawsuits are filed under seal, we could be named in one or more such lawsuits of which we are not aware. We may also be subject to substantial reputational harm as a result of the public announcement of any investigation into such claims.
Other than as described in Note 10 – Commitments and Contingencies in the accompanying notes to our condensed consolidated financial statements of this Quarterly Report on Form 10-Q, we cannot predict the ultimate outcomes of the various legal proceedings and regulatory matters to which we are or may be subject from time to time, including those described in the aforementioned sections of this report, or the timing of their resolution or the ultimate losses or impact of developments in those matters, which could have a material adverse effect on our business, reputation, financial condition and results of operations.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2024-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2024-07-01 to 2024-09-30 | $815.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2024-01-01 to 2024-09-30 | $2.38bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Income tax | 3 months2024-07-01 to 2024-09-30 | $27.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2024-01-01 to 2024-09-30 | $72.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2024-07-01 to 2024-09-30 | $68.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months2024-01-01 to 2024-09-30 | $223.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2024-07-01 to 2024-09-30 | $0.74 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2024-01-01 to 2024-09-30 | $2.42 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2024-07-01 to 2024-09-30 | $0.74 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2024-01-01 to 2024-09-30 | $2.44 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2024-07-01 to 2024-09-30 | 92,188,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2024-01-01 to 2024-09-30 | 92,119,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2024-01-01 to 2024-09-30 | $13.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2024-01-01 to 2024-09-30 | $486.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2024-09-30 | $82.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2024-09-30 | $652.1m | us-gaap:AssetsCurrent |
| Total assets | At period end2024-09-30 | $5.87bn | us-gaap:Assets |
| Current liabilities | At period end2024-09-30 | $609.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2024-09-30 | $2.72bn | us-gaap:Liabilities |
| Long-term debt | At period end2024-09-30 | $1.80bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | At period end2024-09-30 | $71.7m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | At period end2024-09-30 | $3.03bn | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0000950170-24-119044. Last ingested by Listed: Oct 24, 2026, 15:13 ET. Listed shows no prices and gives no investment advice.