Acadia Healthcare Company, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Acadia operates behavioral-health facilities in the U.S. and Puerto Rico. At quarter-end it operated 228 facilities with approximately 10,000 beds in 40 states and Puerto Rico. The U.K. business was sold on January 19, 2021; its results are presented as discontinued operations for both periods.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue from continuing operations | $551.2 million | $509.2 million |
| Income from continuing operations | $23.1 million | $19.0 million |
| Continuing-operations pretax margin | 5.3% | 4.7% |
| Continuing-operations net margin | 4.2% | 3.6% |
| Net income attributable to Acadia | $9.7 million | $33.5 million |
| Basic and diluted EPS | $0.11 | $0.38 |
| Cash from continuing operating activities | $75.8 million | $16.6 million |
| Capital expenditures | $58.7 million | $58.4 million |
Revenue increased 8.2%. U.S. same-facility revenue grew 7.4%, reflecting 2.7% growth in patient days and 4.5% growth in revenue per patient day. Same-facility admissions rose 0.8%; average length of stay increased 1.9%. Adjusted EBITDA margin expanded 280 basis points, but the filing excerpt does not provide the absolute Adjusted EBITDA value.
Cash and cash equivalents were $178.9 million at March 31, down from $378.7 million at year-end. The company reported $1.496 billion of debt carrying value, down from $3.122 billion at December 31, 2020. It had $422 million available under its new revolving facility and $18 million of standby letters of credit. Operating cash flow increased year over year, which management attributed to higher earnings, lower cash interest paid and favorable working-capital trends.
Material changes and unusual items
- The U.K. sale generated approximately $1.525 billion of gross proceeds. Net proceeds of approximately $1.425 billion, together with balance-sheet cash, funded $1.640 billion of first-quarter debt reduction. Acadia recorded a further $14.3 million U.K. sale loss in Q1; a $867.3 million sale-related loss, including $356.2 million of goodwill impairment, had been recorded in 2020.
- Acadia entered a new credit facility on March 17, 2021: a $425 million term loan and a $600 million revolving facility, both maturing in 2026. It refinanced and terminated its prior credit facility and redeemed its $650 million 5.625% notes and $390 million 6.5% notes. Q1 debt-extinguishment costs were $24.7 million, including $6.3 million of cash charges and $18.4 million of non-cash charges.
- Continuing-operations interest expense declined to $29.0 million from $42.6 million, primarily due to debt repayments. Despite higher continuing income, total net income attributable to Acadia fell because discontinued operations shifted from $15.1 million of income to a $12.6 million loss in Q1 2021.
- Revenue mix remained heavily government-funded: Medicaid was 49.8%, Medicare 15.6%, commercial 29.5%, self-pay 4.1% and other 1.0%.
Outlook, commentary and risks
Management expects to add approximately 300 beds at existing facilities, add 170 beds through one wholly owned facility and one joint venture, and open 11 comprehensive treatment centers in 2021. Management stated that cash on hand, operating cash flows, revolving-credit availability and potential additional financing should meet expected liquidity needs for the next 12 months. No earnings or revenue guidance was provided in the filing text.
The company cited ongoing COVID-19 uncertainty, including potential impacts on patient volumes, staffing, supply costs, collections, cash flows and asset values. It also noted that approximately $45 million received through the CMS Accelerated and Advance Payment Program is expected to be repaid through Medicare-claim recoupments beginning in April 2021. Other risks include significant indebtedness and covenants, labor recruitment and retention, reimbursement and regulatory changes, and litigation or governmental investigations. Acadia reported compliance with its new credit-facility financial covenants at quarter-end. Several securities, derivative and employment-related cases, as well as government investigations concerning facility practices, remained unresolved; potential liability was not quantifiable for certain matters.
Investor verification points
- Confirm the net debt reduction and ongoing interest burden after the U.K. sale, note redemptions and refinancing.
- Track same-facility patient volumes, revenue per patient day, staffing costs and the 2021 bed and treatment-center expansion plan.
- Assess the timing and effect of CMS payment recoupments, government-relief compliance and Medicaid/Medicare reimbursement.
- Monitor COVID-19 effects on operations and collections, and developments in the disclosed litigation and regulatory investigations.
- Review the new facility’s floating-rate exposure, covenant headroom and $422 million of reported revolver availability.