Acadia Healthcare(ACHC) - 2023 Q3 - Quarterly Report

PART I PART I – FINANCIAL INFORMATION This section presents the company's financial statements and related disclosures for the period ended September 30, 2023 Financial Statements The company's Q3 2023 financial statements reflect revenue growth, a significant net loss due to a $394.2 million legal settlement, and increased assets and liabilities Condensed Consolidated Balance Sheets As of September 30, 2023, total assets increased to $5.35 billion and total liabilities rose to $2.54 billion, primarily due to a significant increase in accrued legal settlement liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $703,475 | $506,125 | | Total assets | $5,346,218 | $4,987,901 | | Total current liabilities | $864,890 | $388,326 | | Other accrued liabilities | $539,947 | $110,592 | | Total liabilities | $2,536,074 | $2,086,917 | | Total equity | $2,712,562 | $2,812,727 | Condensed Consolidated Statements of Operations Q3 2023 revenue grew to $750.3 million, but a $394.2 million legal settlement resulted in a net loss of $217.7 million, contrasting with prior year's net income Q3 2023 vs Q3 2022 Statement of Operations (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Revenue | $750,334 | $666,732 | | Legal settlements expense | $394,181 | $0 | | (Loss) income before income taxes | $(287,398) | $97,102 | | Net (loss) income attributable to Acadia | $(217,710) | $71,099 | | Diluted (Loss) earnings per share | $(2.39) | $0.78 | Nine Months 2023 vs 2022 Statement of Operations (in thousands, except per share data) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Revenue | $2,185,938 | $1,935,104 | | Legal settlements expense | $394,181 | $0 | | (Loss) income before income taxes | $(105,325) | $286,071 | | Net (loss) income attributable to Acadia | $(79,396) | $212,015 | | Diluted (Loss) earnings per share | $(0.87) | $2.31 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $346.0 million for the nine months ended September 30, 2023, driven by non-cash charges, despite higher cash used in investing activities Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $346,036 | $267,025 | | Net cash used in investing activities | $(287,051) | $(213,810) | | Net cash used in financing activities | $(57,043) | $(93,609) | | Net increase (decrease) in cash | $1,942 | $(40,394) | Notes to Condensed Consolidated Financial Statements Notes detail company operations, revenue sources, and debt, highlighting the $394.2 million legal settlement liability for the Desert Hills Litigation - As of September 30, 2023, the Company operated 253 behavioral healthcare facilities with approximately 11,100 beds in 39 states and Puerto Rico[16] Revenue by Service Type (in thousands) | Service Type | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Acute inpatient psychiatric facilities | $382,406 | $340,929 | | Specialty treatment facilities | $158,705 | $145,799 | | Comprehensive treatment centers | $129,645 | $106,679 | | Residential treatment centers | $79,578 | $73,325 | Revenue by Payor Type (Q3 2023 vs Q3 2022) | Payor | Q3 2023 % | Q3 2022 % | | :--- | :--- | :--- | | Medicaid | 53.4% | 51.5% | | Commercial | 28.3% | 29.0% | | Medicare | 15.6% | 15.2% | | Self-Pay | 2.1% | 3.0% | - On October 30, 2023, the company entered into settlement agreements for the Desert Hills Litigation for an aggregate amount of $400.0 million, with a legal settlements liability of $394.2 million recorded at September 30, 2023[49] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth driven by increased patient volumes, acknowledging the $394.2 million legal settlement's impact on net income, while affirming sufficient liquidity for the payment - For the year ending December 31, 2023, the company expects to add approximately 300 beds to existing facilities and open two wholly-owned facilities, two joint venture facilities, and six Comprehensive Treatment Centers (CTCs)[78] Same Facility Operating Data Growth (Q3 2023 vs Q3 2022) | Metric | % Change | | :--- | :--- | | Revenue growth | 13.0% | | Patient days growth | 6.0% | | Admissions growth | 5.1% | | Revenue per patient day growth | 6.6% | - The company intends to pay the $400.0 million Desert Hills settlement from a combination of insurance, cash on hand, and existing credit lines, and believes existing liquidity will be sufficient[121] - As of September 30, 2023, the company had $516.5 million of availability under its Revolving Facility[123] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its $434.5 million variable-rate debt, with a 1% rate increase impacting pretax income by $4.3 million - The company's interest expense is sensitive to market interest rates, with $434.5 million of variable-rate debt outstanding at September 30, 2023[135] - A hypothetical 1% increase in interest rates would decrease the company's pretax income by approximately $4.3 million on an annual basis[135] Controls and Procedures Disclosure controls and procedures were deemed effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[136] - No changes in internal control over financial reporting occurred during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, internal controls[137] PART II PART II – OTHER INFORMATION This section provides additional information beyond the financial statements, including legal proceedings, risk factors, equity transactions, and exhibits Legal Proceedings This section refers to Note 12 for details on legal matters, particularly the Desert Hills Litigation, which led to a $394.2 million charge and a $400 million settlement - Information regarding legal proceedings is detailed in Note 12 of the financial statements, which covers the significant Desert Hills Litigation[139][49] Risk Factors No material changes to previously disclosed risk factors were reported in the current period - There have been no material changes to the risk factors disclosed in the company's prior periodic reports[140] Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Repurchases of Equity Securities During Q3 2023, the company withheld 14,390 common shares for employee tax obligations related to restricted stock vesting, not part of a repurchase plan Shares Withheld for Tax Obligations (Q3 2023) | Period | Total Number of Shares Purchased | | :--- | :--- | | July 2023 | 6,082 | | August 2023 | 3,542 | | September 2023 | 4,766 | | Total | 14,390 | Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2023 - During the three months ended September 30, 2023, none of the Company's directors or officers adopted or terminated any Rule 10b5-1 trading arrangement[143] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, and required certifications - The report includes several exhibits, such as executive employment agreements, separation agreements, and certifications required by the Sarbanes-Oxley Act[145]