Market Overview

Acadia Healthcare Reports Second Quarter EPS of $0.67 and Adjusted EPS of $0.70

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Revenue Increases to $765.7 Million on 5.2% Growth in Same Facility
Revenue

Updates 2018 Financial Guidance

Acadia Healthcare Company, Inc. (NASDAQ:ACHC) today announced financial
results for the second quarter and six months ended June 30, 2018.
Revenue was $765.7 million for the quarter, up 7.0% from $715.9 million
for the second quarter of 2017. Net income attributable to Acadia
stockholders for the second quarter of 2018 was $58.8 million, or $0.67
per diluted share, compared with $49.6 million, or $0.57 per diluted
share, for the second quarter of 2017. Adjusted income attributable to
Acadia stockholders per diluted share ("adjusted EPS") was $0.70 for the
second quarter of 2018, a 6.1% increase from $0.66 for the second
quarter of 2017, which excludes transaction-related expenses of $2.9
million and $9.1 million for the second quarter of 2018 and 2017,
respectively, as well as debt extinguishment costs of $0.8 million for
the second quarter last year. A reconciliation of all non-GAAP financial
results in this release appears beginning on page 7.

Joey Jacobs, Chairman and Chief Executive Officer of Acadia, remarked,
"We are pleased to report that growth in Acadia's revenue and adjusted
EPS met our expectations for the second quarter. Our revenue growth was
primarily driven by the addition of nearly 900 beds during the 12 months
ended June 30, 2018. We added 155 of these beds during the second
quarter, including 67 beds to existing facilities in the U.S. and U.K.
and an 88-bed de novo facility through our joint-venture with Erlanger
Health System. For the full year 2018, we expect to add more than 800
beds to existing and new facilities."

For the second quarter of 2018, Acadia's total same facility revenue
increased 5.2% compared with the second quarter of 2017, including a
1.7% increase in patient days and a 3.4% increase in revenue per patient
day. Total same facility EBITDA margin declined 60 basis points to
25.7%. U.S. same facility revenue increased 5.0%, including a 1.9%
increase in patient days and a 3.1% increase in revenue per patient day.
U.S. same facility EBITDA margin declined 30 basis points to 28.1%. U.K.
same facility revenue grew 5.6% for the second quarter of 2018 from the
second quarter last year, including a 1.6% increase in patient days and
a 3.9% increase in revenue per patient day. U.K. same facility EBITDA
margin declined 110 basis points to 21.3%.

Acadia today updated its financial guidance for 2018 to reflect a lower
exchange rate in the second half of the year as well as higher interest
rates. The Company now assumes an exchange rate of $1.30 per British
Pound Sterling and interest expense to be approximately $95 million for
the second half of the year. The updated guidance is as follows:

  • Revenue for 2018 in a range of $3.02 billion to $3.06 billion;
  • Adjusted EBITDA for 2018 in a range of $632 million to $639 million;
    and
  • Adjusted earnings per diluted share for 2018 in a range of $2.52 to
    $2.56.

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

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

Acadia will hold a conference call to discuss its first quarter
financial results at 9:00 a.m. Eastern Time on Tuesday, July 31, 2018. A
live webcast of the conference call will be available at www.acadiahealthare.com
in the "Investors" section of the website. The webcast of the conference
call will be available through August 14, 2018.

Risk Factors

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

About Acadia

Acadia is a provider of behavioral healthcare services. At June 30,
2018, Acadia operated a network of 585 behavioral healthcare facilities
with approximately 17,900 beds in 40 states, the United Kingdom and
Puerto Rico. Acadia provides behavioral health and addiction services to
its patients in a variety of settings, including inpatient psychiatric
hospitals, specialty treatment facilities, residential treatment centers
and outpatient clinics.

               
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
(In thousands, except per share amounts)
 
Revenue before provision for doubtful accounts $ 765,738 $ 725,643 $ 1,507,979 $ 1,414,984
Provision for doubtful accounts   -     (9,747 )   -     (19,894 )
Revenue 765,738 715,896 1,507,979 1,395,090
 

Salaries, wages and benefits (including equity-based compensation
expense of $7,129, $7,436, $14,048 and $14,832, respectively)

416,741 383,595 828,269 760,016
Professional fees 53,461 46,321 107,479 89,730
Supplies 30,133 28,639 59,497 56,348
Rents and leases 20,236 19,435 40,524 38,406
Other operating expenses 87,282 83,122 175,513 166,833
Depreciation and amortization 39,928 35,201 79,701 68,814
Interest expense, net 45,812 43,505 91,055 86,262
Debt extinguishment costs - 810 940 810
Transaction-related expenses   2,887     9,052     7,655     13,171  
Total expenses   696,480     649,680     1,390,633     1,280,390  
Income before income taxes 69,258 66,216 117,346 114,700
Provision for income taxes   10,368     16,578     7,582     30,289  
Net income 58,890 49,638 109,764 84,411
Net (income) loss attributable to noncontrolling interests   (54 )   (8 )   (109 )   177  
Net income attributable to Acadia Healthcare Company, Inc. $ 58,836   $ 49,630   $ 109,655   $ 84,588  
 

Earnings per share attributable to Acadia Healthcare Company, Inc.
stockholders:

Basic $ 0.67   $ 0.57   $ 1.26   $ 0.97  
Diluted $ 0.67   $ 0.57   $ 1.26   $ 0.97  
 
Weighted-average shares outstanding:
Basic 87,303 86,954 87,205 86,859
Diluted 87,467 87,080 87,351 86,997

       
Acadia Healthcare Company, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
June 30, December 31,
  2018     2017  
(In thousands)
 
ASSETS
Current assets:
Cash and cash equivalents $ 79,463 $ 67,290
Accounts receivable, net 329,256 296,925
Other current assets   80,503     107,335  
Total current assets 489,222 471,550
Property and equipment, net 3,103,331 3,048,130
Goodwill 2,739,303 2,751,174
Intangible assets, net 91,566 87,348
Deferred tax assets 3,664 3,731
Derivative instrument assets 24,989 12,997
Other assets   51,072     49,572  
Total assets $ 6,503,147   $ 6,424,502  
 
 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 33,264 $ 34,830
Accounts payable 130,228 102,299
Accrued salaries and benefits 102,840 99,047
Other accrued liabilities   127,786     141,213  
Total current liabilities 394,118 377,389
Long-term debt 3,187,788 3,205,058
Deferred tax liabilities 78,340 80,333
Other liabilities   160,809     166,434  
Total liabilities 3,821,055 3,829,214
Redeemable noncontrolling interests 28,791 22,417
Equity:
Common stock 873 871
Additional paid-in capital 2,530,083 2,517,545
Accumulated other comprehensive loss (415,883 ) (374,118 )
Retained earnings   538,228     428,573  
Total equity   2,653,301     2,572,871  
Total liabilities and equity $ 6,503,147   $ 6,424,502  

         
Acadia Healthcare Company, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
  2018     2017  
(In thousands)
Operating activities:
Net income $ 109,764 $ 84,411
Adjustments to reconcile net income to net cash provided by
continuing operating activities:
Depreciation and amortization 79,701 68,814
Amortization of debt issuance costs 5,124 4,845
Equity-based compensation expense 14,048 14,832
Deferred income taxes (3,978 ) 17,096
Debt extinguishment costs 940 810
Other 1,040 6,558
Change in operating assets and liabilities:
Accounts receivable, net (26,104 ) (22,404 )
Other current assets 9,953 20,457
Other assets 2,761 1,809
Accounts payable and other accrued liabilities 21,066 (4,893 )
Accrued salaries and benefits 4,364 (9,157 )
Other liabilities   (793 )   5,257  
Net cash provided by continuing operating activities 217,886 188,435
Net cash used in discontinued operating activities   (572 )   (829 )
Net cash provided by operating activities 217,314 187,606
 
Investing activities:
Cash paid for capital expenditures (161,555 ) (117,521 )
Cash paid for real estate acquisitions (8,857 ) (22,850 )
Other   (3,337 )   (5,938 )
Net cash used in investing activities (173,749 ) (146,309 )
 
Financing activities:
Principal payments on long-term debt (23,246 ) (17,275 )
Common stock withheld for minimum statutory taxes, net (2,134 ) (3,678 )
Other   (5,172 )   (2,270 )
Net cash used in financing activities (30,552 ) (23,223 )
 
Effect of exchange rate changes on cash   (840 )   4,297  
 
Net increase in cash and cash equivalents 12,173 22,371
Cash and cash equivalents at beginning of the period   67,290     57,063  
Cash and cash equivalents at end of the period $ 79,463   $ 79,434  

               
Acadia Healthcare Company, Inc.
Operating Statistics
(Unaudited, Revenue in thousands)
 
Three Months Ended June 30, Six Months Ended June 30,
  2018   2017 % Change   2018   2017 % Change
Same Facility Results (a,d)
Revenue $ 730,681 $ 694,730 5.2% $ 1,440,285 $ 1,366,845 5.4%
Patient Days 1,127,834 1,108,621 1.7% 2,226,128 2,185,539 1.9%
Admissions 41,930 40,279 4.1% 82,900 80,534 2.9%
Average Length of Stay (b) 26.9 27.5 -2.3% 26.9 27.1 -1.0%
Revenue per Patient Day $ 648 $ 627 3.4% $ 647 $ 625 3.5%
EBITDA margin 25.7% 26.3% -60 bps 25.0% 25.1% -10 bps
 
U.S. Same Facility Results (a)
Revenue $ 474,266 $ 451,805 5.0% $ 932,989 $ 884,091 5.5%
Patient Days 627,400 615,951 1.9% 1,236,700 1,213,215 1.9%
Admissions 39,564 37,992 4.1% 78,109 75,900 2.9%
Average Length of Stay (b) 15.9 16.2 -2.2% 15.8 16.0 -0.9%
Revenue per Patient Day $ 756 $ 734 3.1% $ 754 $ 729 3.5%
EBITDA margin 28.1% 28.4% -30 bps 27.2% 27.2% 0 bps
 
U.K. Same Facility Results (a,d)
Revenue $ 256,415 $ 242,925 5.6% $ 507,296 $ 482,754 5.1%
Patient Days 500,434 492,670 1.6% 989,428 972,324 1.8%
Admissions 2,366 2,287 3.5% 4,791 4,634 3.4%
Average Length of Stay (b) 211.5 215.4 -1.8% 206.5 209.8 -1.6%
Revenue per Patient Day $ 512 $ 493 3.9% $ 513 $ 496 3.3%
EBITDA margin 21.3% 22.4% -110 bps 20.8% 21.2% -40 bps
 
 
U.S. Facility Results (c)
Revenue $ 481,470 $ 461,067 4.4% $ 943,875 $ 900,965 4.8%
Patient Days 635,766 624,047 1.9% 1,248,655 1,224,499 2.0%
Admissions 40,519 38,092 6.4% 79,451 76,063 4.5%
Average Length of Stay (b) 15.7 16.4 -4.2% 15.7 16.1 -2.4%
Revenue per Patient Day $ 757 $ 739 2.5% $ 756 $ 736 2.7%
EBITDA margin 27.0% 27.9% -90 bps 26.2% 26.7% -50 bps
 
U.K. Facility Results (c,d)
Revenue $ 284,268 $ 270,716 5.0% $ 564,104 $ 539,221 4.6%
Patient Days 676,901 684,195 -1.1% 1,342,472 1,355,915 -1.0%
Admissions 2,712 2,611 3.9% 5,474 5,313 3.0%
Average Length of Stay (b) 249.6 262.0 -4.8% 245.2 255.2 -3.9%
Revenue per Patient Day $ 420 $ 396 6.1% $ 420 $ 398 5.7%
EBITDA margin 19.1% 20.4% -130 bps 18.7% 19.5% -80 bps
 
Total Facility Results (c,d)
Revenue $ 765,738 $ 731,783 4.6% $ 1,507,979 $ 1,440,186 4.7%
Patient Days 1,312,667 1,308,242 0.3% 2,591,127 2,580,414 0.4%
Admissions 43,231 40,703 6.2% 84,925 81,376 4.4%
Average Length of Stay (b) 30.4 32.1 -5.5% 30.5 31.7 -3.8%
Revenue per Patient Day $ 583 $ 559 4.3% $ 582 $ 558 4.3%
EBITDA margin 24.1% 25.1% -100 bps 23.4% 24.0% -60 bps
 
(a) Results for the periods presented exclude the elderly care
division of our U.K. operations and certain closed services.
(b) Average length of stay is defined as patient days divided by
admissions.
(c) Results for the periods presented exclude certain closed
services.
(d) Revenue and revenue per patient day for the three and six months
ended June 30, 2017 is adjusted to reflect the foreign currency
exchange rate for the comparable periods of 2018 in order to
eliminate the effect of changes in the exchange rate. The exchange
rate used in the adjusted revenue and revenue per patient day
amounts for the three and six months ended June 30, 2017 is 1.36 and
1.38, respectively.

       
Acadia Healthcare Company, Inc.
Reconciliation of Net Income Attributable to Acadia Healthcare
Company, Inc. to Adjusted EBITDA
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2018   2017   2018   2017  
(in thousands)
 
Net income attributable to Acadia Healthcare Company, Inc. $ 58,836 $ 49,630 $ 109,655 $ 84,588
Net income (loss) attributable to noncontrolling interests 54 8 109 (177 )
Provision for income taxes 10,368 16,578 7,582 30,289
Interest expense, net 45,812 43,505 91,055 86,262
Depreciation and amortization   39,928   35,201   79,701   68,814  
EBITDA 154,998 144,922 288,102 269,776
 
Adjustments:
Equity-based compensation expense (a) 7,129 7,436 14,048 14,832
Transaction-related expenses (b) 2,887 9,052 7,655 13,171
Debt extinguishment costs (c)   -   810   940   810  
Adjusted EBITDA $ 165,014 $ 162,220 $ 310,745 $ 298,589  
 

See footnotes on page 9.

       
Acadia Healthcare Company, Inc.
Reconciliation of Adjusted Income Attributable to Acadia
Healthcare Company, Inc. to
Net Income Attributable to Acadia Healthcare Company, Inc.
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
(in thousands, except per share amounts)
 
Net income attributable to Acadia Healthcare Company, Inc. $ 58,836 $ 49,630 $ 109,655 $ 84,588
 
Adjustments to income:
Transaction-related expenses (b) 2,887 9,052 7,655 13,171
Tax reform impact (d) - - (10,472 ) -
Debt extinguishment costs (c) - 810 940 810
Income tax effect of adjustments to income (e)   (554 )   (2,268 )   (1,415 )   (1,469 )
Adjusted income attributable to Acadia Healthcare Company, Inc. $ 61,169   $ 57,224   $ 106,363   $ 97,100  
 
Weighted-average shares outstanding - diluted 87,467 87,080 87,351 86,997
 

Adjusted income attributable to Acadia Healthcare Company, Inc.
per diluted share

$ 0.70   $ 0.66   $ 1.22   $ 1.12  
 
See footnotes on page 9.

 
Acadia Healthcare Company, Inc.
Footnotes
   
We have included certain financial measures in this press release,
including EBITDA, Adjusted EBITDA, and Adjusted income, which are
"non-GAAP financial measures" as defined under the rules and
regulations promulgated by the SEC. We define EBITDA as net income
adjusted for net income (loss) attributable to noncontrolling
interests, provision for income taxes, net interest expense and
depreciation and amortization. We define Adjusted EBITDA as EBITDA
adjusted for equity-based compensation expense, transaction-related
expenses and debt extinguishment costs. We define Adjusted income as
net income adjusted for transaction-related expenses, tax reform
impact, debt extinguishment costs and income tax effect of
adjustments to income.
 
EBITDA, Adjusted EBITDA, and Adjusted income are supplemental
measures of our performance and are not required by, or presented in
accordance with, generally accepted accounting principles in the
United States ("GAAP"). EBITDA, Adjusted EBITDA, and Adjusted income
are not measures of our financial performance under GAAP and should
not be considered as alternatives to net income or any other
performance measures derived in accordance with GAAP or as an
alternative to cash flow from operating activities as measures of
our liquidity. Our measurements of EBITDA, Adjusted EBITDA, and
Adjusted income may not be comparable to similarly titled measures
of other companies. We have included information concerning EBITDA,
Adjusted EBITDA, and Adjusted income in this press release because
we believe that such information is used by certain investors as
measures of a company's historical performance. We believe these
measures are frequently used by securities analysts, investors and
other interested parties in the evaluation of issuers of equity
securities, many of which present EBITDA, Adjusted EBITDA, and
Adjusted income when reporting their results. Our presentation of
EBITDA, Adjusted EBITDA, and Adjusted income should not be construed
as an inference that our future results will be unaffected by
unusual or nonrecurring items.
 
The Company is not able to provide a reconciliation of projected
Adjusted EBITDA and adjusted earnings per diluted share, where
provided, to expected results due to the unknown effect, timing and
potential significance of transaction-related expenses and the tax
effect of such expenses.
 
(a) Represents the equity-based compensation expense of Acadia.
 
(b) Represents transaction-related expenses incurred by Acadia
related to acquisitions and integration efforts.
 
(c) Represents debt extinguishment costs recorded in connection with
the Amended and Restated Credit Agreement, including the discount
and write-off of deferred financing costs.
 
(d) Represents tax benefit related to a change in the Company's
provisional amounts recorded at December 31, 2017 related to the
enactment of the Tax Cuts and Jobs Act.
 
(e) Represents the income tax effect of adjustments to income based
on tax rates of 15.2% and 24.8% for the three months ended June 30,
2018 and 2017, respectively, and 15.5% and 24.6% for the six months
ended June 30, 2018 and 2017, respectively.

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