EX-99.1

EX-99.1 3 d195108dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The tables below set forth the unaudited pro forma condensed combined financial data for Acadia Healthcare Company, Inc. giving effect to Acadia’s purchase of Priory Group No. 1 Limited (“Priory”) on February 16, 2016 and the related issuance of common stock and debt financing transactions described herein.

The unaudited pro forma condensed combined statements of operations present income (loss) from continuing operations and give effect to each transaction as if it occurred on January 1, 2015.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 combines the audited consolidated statement of operations of Acadia, the unaudited consolidated statement of operations of CRC Health Group, Inc. (“CRC”) for the period prior to February 11, 2015, the unaudited consolidated statement of operations for Acadia’s other completed acquisitions for the periods prior to the respective acquisition dates and the audited consolidated statement of operations for Priory for the year ended December 31, 2015.

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2016 combines the unaudited consolidated statement of operations of Acadia and the unaudited consolidated statement of operations of Priory for the period prior to February 16, 2016.

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2015 combines the unaudited consolidated statement of operations of Acadia, the unaudited consolidated statement of operations of CRC for the period prior to February 11, 2015, the unaudited consolidated statement of operations for Acadia’s other completed acquisitions for the periods prior to the respective acquisition dates and the unaudited consolidated statement of operations for Priory for the three months ended March 31, 2015.

An unaudited pro forma condensed combined balance sheet is not presented as Priory was included in Acadia’s condensed consolidated balance sheet at March 31, 2016.

The unaudited pro forma condensed combined financial data has been prepared using the acquisition method of accounting for business combinations under U.S. GAAP. The adjustments necessary to fairly present the unaudited pro forma condensed combined financial data have been made based on available information and in the opinion of management are reasonable. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with this unaudited pro forma condensed combined financial data. The pro forma adjustments related to the purchase of Priory are preliminary and revisions to the fair value of assets acquired and liabilities assumed may have a significant impact on Acadia’s condensed consolidated balance sheet or the pro forma adjustments. A final valuation of assets acquired and liabilities assumed has not been completed and the completion of fair value determinations may result in changes in the values assigned to property and equipment and other assets acquired (including intangibles) and liabilities assumed.

The unaudited pro forma condensed combined financial data is for illustrative purposes only and does not purport to represent what our financial position or results of operations actually would have been had the events noted above in fact occurred on the assumed dates. Accordingly, the unaudited pro forma condensed combined financial information should not be used to project our financial position or results of operations for any future date or future period.

The unaudited pro forma condensed combined financial data should be read in conjunction with the consolidated financial statements and notes thereto of Acadia and Priory included in Acadia’s reports filed with the Securities and Exchange Commission.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2015

(In thousands, except per share amounts)


	Acadia(1)			Completed Acquisitions(2)			CRC(3)			Pro Forma Adjustments			Notes			Acadia Pro Forma			Priory(4a)			Pro Forma Adjustments			Notes			Pro Forma Combined
Revenue before provision for doubtful accounts	$	1,829,619		$	130,723		$	53,014		$	—					$	2,013,356		$	872,996		$	—					$	2,886,352
Provision for doubtful accounts		(35,127	)		(1,270	)		—			(1,206	)		(5)			(37,603	)		—			—						(37,603	)

Revenue		1,794,492			129,453			53,014			(1,206	)					1,957,753			872,996			—						2,848,749
Salaries, wages and benefits		973,732			73,639			31,288			—						1,078,659			482,169			—						1,560,828
Professional fees		116,463			6,280			5,136			—						127,879			48,145			—						176,024
Supplies		80,663			5,143			2,583			—						88,389			32,926			—						121,315
Rents and leases		32,528			2,794			2,023			—						37,345			44,539			—						81,884
Other operating expenses		206,746			12,258			5,708			—						224,712			82,771			—						307,483
Depreciation and amortization		63,550			3,602			2,459			(716	)		(6a)			68,895			76,895			(11,812	)		(6b)			133,978
Interest expense, net		106,742			1,005			8,883			2,835			(7a)			119,465			124,528			(45,727	)		(7b)			198,266
Provision for doubtful accounts		—			—			1,206			(1,206	)		(5)			—			—			—						—
Debt extinguishment costs		10,818			—			—			—						10,818			—			—						10,818
Gain on foreign currency derivatives		1,926			—			—			(1,926	)		(8)			—			—			—						—
Goodwill and asset impairments		—			—			—			—						—			44,267			—						44,267
Transaction-related expenses		36,571			—			1,712			(38,283	)		(9)			—			26,545			(26,545	)		(9)			—

Total expenses		1,629,739			104,721			60,998			(39,296	)					1,756,162			962,785			(84,084	)					2,634,863
Income (loss) from continuing operations before income taxes		164,753			24,732			(7,984	)		38,090						219,591			(89,789	)		84,084						213,886
Provision (benefit) for income taxes		53,388			7,303			3,034			12,612			(10)			70,269			(31,727	)		10,625			(10)			49,194

Income (loss) from continuing operations		111,365			17,429			(4,950	)		25,478						149,322			(58,062	)		73,432						164,692

Income (loss) from discontinued operations		111			—			(77	)		—						34			—			—						34

Net income		111,476			17,429			(5,027	)		25,478						149,356			(58,062	)		73,432						164,726
Net loss attributable to noncontrolling interests		1,078			—			—			—						1,078			—			—						1,078

Net income attributable to Acadia Healthcare Company, Inc.	$	112,554		$	17,429		$	(5,027	)	$	25,478					$	150,434		$	(58,062	)	$	73,432					$	165,804

Earnings per share-income (loss) from continuing operations:
Basic	$	1.65														$	2.13											$	1.92
Diluted	$	1.64														$	2.12											$	1.92

Weighted average shares:
Basic		68,085									2,514			(11a,11b	)		70,599						15,534			(11c	)		86,133
Diluted		68,391									2,514			(11a,11b	)		70,905						15,534			(11c	)		86,439

See accompanying notes to unaudited pro forma financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Three months Ended March 31, 2016

(In thousands, except per share amounts)


	Acadia(1)			Priory(4b)			Pro Forma Adjustments			Notes	Acadia Pro Forma
Revenue before provision for doubtful accounts	$	627,183		$	110,615		$	—			$	737,798
Provision for doubtful accounts		(10,370	)		—			—				(10,370	)

Revenue	$	616,813			110,615			—				727,428
Salaries, wages and benefits		341,028			61,593			—				402,621
Professional fees		39,991			8,300			—				48,291
Supplies		26,685			3,939			—				30,624
Rents and leases		14,806			5,524			—				20,330
Other operating expenses		70,247			10,836			—				81,083
Depreciation and amortization		27,975			9,114			(1,347	)	(6b)		35,742
Interest expense, net		37,714			38,953			(28,630	)	(7b)		48,037
Gain on foreign currency derivatives		(410	)		—			410		(8)		—
Transaction-related expenses		26,298			5,782			(32,080	)	(9)		—

Total expenses		584,334			144,041			(61,647	)			666,728
Income (loss) from continuing operations before income taxes		32,479			(33,426	)		61,647				60,700
Provision (benefit) for income taxes		7,110			2,931			3,920		(10)		13,961

Income (loss) from continuing operations		25,369			(36,357	)		57,727				46,739

Income (loss) from discontinued operations, net of income taxes		—			—			—				—

Net income		25,369			(36,357	)		57,727				46,739

Net loss attributable to noncontrolling interests		319			—			—				319

Net income attributable to Acadia Healthcare Company, Inc.	$	25,688		$	(36,357	)	$	57,727			$	47,058

Earnings per share–income (loss) from continuing operations:
Basic	$	0.31									$	0.54
Diluted	$	0.31									$	0.54

Weighted average shares:

Basic		82,943						3,429		(11c)		86,372
Diluted		83,420						3,429		(11c)		86,849

See accompanying notes to unaudited pro forma financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Three Months Ended March 31, 2015

(In thousands, except per share amounts)


	Acadia(1)			Completed Acquisitions(2)			CRC(3)			Pro Forma Adjustments			Notes	Acadia Pro Forma			Priory(4c)			Pro Forma Adjustments			Notes	Pro Forma Combined
Revenue before provision for doubtful accounts	$	374,158		$	58,106		$	53,014		$	—			$	485,278		$	208,181		$	—			$	693,459
Provision for doubtful accounts		(8,375	)		(363	)		—			(1,206	)	(5)		(9,944	)		—			—				(9,944	)

Revenue		365,783			57,743			53,014			(1,206	)			475,334			208,181			—				683,515
Salaries, wages and benefits		205,871			33,206			31,288			—				270,365			117,034			—				387,399
Professional fees		22,427			2,965			5,136			—				30,528			9,966			—				40,494
Supplies		16,254			2,209			2,583			—				21,046			7,767			—				28,813
Rents and leases		5,886			1,493			2,023			—				9,402			10,875			—				20,277
Other operating expenses		40,527			5,415			5,708			—				51,650			21,658			—				73,308
Depreciation and amortization		13,104			1,829			2,459			(716	)	(6a)		16,676			18,912			(2,779	)	(6b)		32,809
Interest expense, net		22,146			905			8,883			(2,727	)	(7a)		29,207			30,016			(10,315	)	(7b)		48,908
Provision for doubtful accounts		—			—			1,206			(1,206	)	(5)		—			—			—				—
Gain on foreign currency derivatives		(53	)		—			—			53		(8)		—			—			—				—
Transaction-related expenses		18,416			—			1,712			(20,128	)	(9)		—			—			—				—

Total expenses		344,578			48,022			60,998			(24,724	)			428,874			216,228			(13,094	)			632,007
Income (loss) from continuing operations before income taxes		21,205			9,721			(7,984	)		23,518				46,460			(8,047	)		13,094				51,508
Provision (benefit) for income taxes		6,613			2,721			(3,034	)		8,567		(10)		14,867			211			(3,231	)	(10)		11,847

Income (loss) from continuing operations		14,592			7,000			(4,950	)		14,951				31,593			(8,258	)		16,325				39,661

Income (loss) from discontinued operations, net of income taxes		2			—			(77	)						(75	)		—			—				(75	)

Net income		14,594			7,000			(5,027	)		14,951				31,518			(8,258	)		16,325				39,586
Net loss attributable to noncontrolling interests		—			—			—			—				—			—			—				—

Net income attributable to Acadia Healthcare Company, Inc.	$	14,594		$	7,000		$	(5,027	)	$	14,951			$	31,518		$	(8,258	)	$	16,325			$	39,586

Earnings per share-income (loss) from continuing operations:
Basic	$	0.23												$	0.45									$	0.46
Diluted	$	0.23												$	0.45									$	0.46

Weighted average shares:
Basic		62,530									7,897		(11a,11b)		70,427						15,534		(11c)		85,961
Diluted		62,894									7,897		(11a,11b)		70,791						15,534		(11c)		86,325

See accompanying notes to unaudited pro forma financial information.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(In thousands, except per share amounts)

(1)	The amounts in this column represent Acadia actual results for the periods presented.

(2)

The amounts in this column represent pro forma adjustments for Acadia’s completed acquisitions of (a) Quality Addiction Management, Inc. on March 1, 2015, (b) two facilities from Choice Lifestyles on April 1, 2015, (c) Pastoral Care Group on April 1, 2015, (d) Mildmay Oaks on April 1, 2015, (e) one facility from Choice Lifestyles on June 1, 2015, (f) fifteen facilities from Care UK Limited on June 1, 2015, (g) The Manor Clinic on July 1, 2015, (h) Belmont on July 1, 2015, (i) three facilities from the Danshell Group on September 1, 2015, (j) two facilities from Health and Social Care Partnerships on September 1, 2015, (k) Manor Hall on September 1, 2015, (l) Meadow View on October 1, 2015, (m) one facility from Health and Social Care Partnerships on November 1, 2015, (n) Duffy’s Napa Valley Rehab on November 1, 2015, (o) Discovery House-Group, Inc. on November 1, 2015 and (p) MMO Behavioral Health Systems on December 1, 2015. None of these acquisitions was individually material. Each acquisition is reflected in the adjustments up to its acquisition date.

(3)	The amounts in this column represent CRC actual results for the periods presented prior to the acquisition date of February 11, 2015.

(4)

The historical financial statements of Priory were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board in British Pounds Sterling (“GBP”) and have been adjusted to: (i) translate the financial statements to U.S. dollars based on the historical exchange rates below and (ii) to conform to Acadia’s financial statement presentation. No material differences between U.S. GAAP and IFRS have been identified with respect to Priory.


		GBP/USD
March 31, 2016	Spot Rate	$	1.4368
Year ended December 31, 2015	Average Rate	$	1.5284
Three months ended March 31, 2016	Average Rate	$	1.4433
Three months ended March 31, 2015	Average Rate	$	1.5155

(a)

The amounts below represent actual results for the year ended December 31, 2015.


	Priory (in £ thousands, in IFRS)			Priory (in $ thousands, in U.S. GAAP)
Revenue before provision for doubtful accounts	£	571,183		$	872,996
Provision for doubtful accounts		—			—

Revenue		571,183			872,996
Salaries, wages and benefits		315,473			482,169
Professional fees		31,500			48,145
Supplies		21,543			32,926
Rents and leases		29,141			44,539
Other operating expenses		54,155			82,771
Depreciation and amortization		50,311			76,895
Interest expense, net		81,476			124,528
Asset impairment		28,963			44,267
Transaction-related expenses		17,368			26,545

Total expenses		629,930			962,785
(Loss) income from continuing operations before income taxes		(58,747	)		(89,789	)
Benefit for income taxes		(20,758	)		(31,727	)

Loss from continuing operations	£	(37,989	)	$	(58,062	)

(b)

The amounts below represent actual results for the period from January 1, 2016 to February 15, 2016.


	Priory (in £ thousands, in IFRS)			Priory (in $ thousands, in U.S. GAAP)
Revenue before provision for doubtful accounts	£	76,640		$	110,615
Provision for doubtful accounts		—			—

Revenue		76,640			110,615
Salaries, wages and benefits		42,675			61,593
Professional fees		5,751			8,300
Supplies		2,729			3,939
Rents and leases		3,827			5,524
Other operating expenses		7,508			10,836
Depreciation and amortization		6,315			9,114
Interest expense, net		26,989			38,953
Transaction-related expenses		4,006			5,782

Total expenses		99,800			144,041
(Loss) income from continuing operations before income taxes		(23,160	)		(33,426	)
Benefit for income taxes		2,031			2,931

Loss from continuing operations	£	(25,191	)	$	(36,357	)

(c)

The amounts below represent actual results for the three months ended March 31, 2015.


	Priory (in £ thousands, in IFRS)			Priory (in $ thousands, in U.S. GAAP)
Revenue before provision for doubtful accounts	£	137,368		$	208,181
Provision for doubtful accounts		—			—

Revenue		137,368			208,181
Salaries, wages and benefits		77,225			117,034
Professional fees		6,576			9,966
Supplies		5,125			7,767
Rents and leases		7,176			10,875
Other operating expenses		14,291			21,658
Depreciation and amortization		12,479			18,912
Interest expense, net		19,806			30,016
Transaction-related expenses		—			—

Total expenses		142,678			216,228
(Loss) income from continuing operations before income taxes		(5,310	)		(8,047	)
Benefit for income taxes		139			211

Loss from continuing operations	£	(5,449	)	$	(8,258	)

(5)	Reflects reclassification of CRC provision for doubtful accounts to conform to Acadia historical presentation.

(6)	Represents the adjustments to depreciation and amortization expense as a result of recording the property and equipment and intangible assets at preliminary estimates of fair value as of the date of the acquisitions, as follows:

(a):

CRC:


	Amount		Useful Lives (in years)		Monthly Depreciation		Year Ended December 31, 2015			Three Months Ended March 31, 2015
Land		24,597		N/A	$	—	$	—		$	—
Building and improvements		88,705		10-40		586		957			954
Equipment		20,492		3-10		481		786			817
Construction in progress		2,369		N/A		—		—			—

		136,163				1,067		1,743			1,743
Indefinite-lived intangible assets		37,000		N/A		—		—			—

Total depreciation and amortization expense								1,743			1,743
Less: historical depreciation and amortization expense of CRC								(2,459	)		(2,459	)

Depreciation and amortization expense adjustment							$	(716	)	$	(716	)

(b):

Priory:


	Amount		Useful Lives (in years)		Monthly Depreciation		Year Ended December 31, 2015			Three Months Ended March 31, 2016			Three Months Ended March 31, 2015
Land	$	619,716		N/A	$	—	$	—		$	—		$	—
Building and improvements		756,666		40		1,584		20,123			2,401			4,988
Equipment		199,408		3-10		3,538		44,960			5,366			11,145
Construction in progress		12,923		N/A		—		—			—			—

		1,588,713				5,122		65,083			7,767			16,133
Indefinite-lived intangible assets		42,999		N/A		—		—			—			—

Depreciation and amortization expense								65,083			7,767			16,133
Less: historical depreciation and amortization expense								(76,895	)		(9,114	)		(18,912	)

Depreciation and amortization expense adjustment							$	(11,812	)	$	(1,347	)	$	(2,779	)

(7)	Represents an adjustment to interest expense to give effect to the following transactions:

(a)

CRC and other completed acquisitions


	Year Ended December 31, 2015			Three Months Ended March 31, 2015
Interest related to 5.625% Senior Notes due 2023	$	13,828		$	6,526
Interest related to Term Loan B		2,892			2,892
Interest related to paydown of $97,500 of 12.875% Notes		(8,892	)		(3,138	)
Interest related to revolving line of credit paydown, net of borrowing		4,219			500
Interest related to amortization of deferred financing costs		676			281
Less: historical interest expense of CRC		(8,883	)		(8,883	)
Less: historical interest expense of other completed acquisitions		(1,005	)		(905	)

Interest expense adjustment	$	2,835		$	(2,727	)

(b)

Priory


	Year Ended December 31, 2015			Three Months Ended March 31, 2016			Three Months Ended March 31, 2015
Interest related to new TLA (i)	$	4,725		$	591		$	1,181
Interest related to new TLB (ii)		45,363			5,670			11,341
Interest related to 6.500% Senior Notes due 2024		25,350			3,169			6,338
Interest related to revolving line of credit paydown, net borrowing (iii)		(3,780	)		—			(945	)
Interest related to amortization of deferred financing costs		7,143			893			1,786
Historical Priory interest expense		(124,528	)		(38,953	)		(30,016	)

Interest expense adjustment	$	(45,727	)	$	(28,630	)	$	(10,315	)

(i)

An increase or decrease of 0.125% in the assumed interest rate of 3.5% would result in a change of $0.2 million and less than $0.1 million and less than $0.1 million for the year ended December 31, 2015 and three months ended March 31, 2016 and 2015, respectively.

(ii)

An increase or decrease of 0.125% in the assumed interest rate of 4.75% would result in a change of $1.2 million, $0.2 million and $0.3 million for the year ended December 31, 2015 and three months ended March 31, 2016 and 2015, respectively.

(iii)

An increase or decrease of 0.125% in the assumed interest rate of 3.5% would result in a change of $0.1 million, and less than $0.1 million for the year ended December 31, 2015 and three months ended March 31, 2016 and 2015.

(8)	Represents the change in fair value of foreign currency derivatives purchased by Acadia related to its investments in the U.K. This expense is omitted in the pro forma statement of operations as it is non-recurring and directly related to such transactions.

(9)	Reflects the removal of acquisition-related expenses included in the historical statements of operations.

(10)	Reflects adjustments to income taxes to reflect the impact of the above pro forma adjustments applying combined U.S. federal and state statutory tax rates and U.K. statutory rates.

(11)	Represents adjustments to weighted average shares used to compute basic and diluted earnings per share for the following:

(a)

To reflect the effect of 5,975,326 shares of common stock issued by Acadia in February 2015, which resulted in an increase in the weighted average shares outstanding of 671,201 for the year ended December 31, 2015 and 2,722,093 for the three months ended March 31, 2015, on a pro forma basis. The proceeds of Acadia’s offering of such common stock were used to partially fund Acadia’s acquisition of CRC on February 11, 2015.

(b)

To reflect the effect of 5,175,000 shares of common stock issued by Acadia in May 2015, which resulted in an increase in the weighted average shares outstanding of 1,843,151 for the year ended December 31, 2015 and 5,175,000 for the three months ended March 31, 2015 on a pro forma basis. The proceeds of Acadia’s offering of such common stock was used to repay outstanding indebtedness and fund acquisitions.

(c)

To reflect the effect of 11,500,000 shares of common stock issued by Acadia in January 2016 and the issuance of 4,033,561 shares of common stock issued in connection with the acquisition of Priory, which resulted in an increase of weighted average shares outstanding of 15,533,561 for each of the year ended December 31, 2015 and three months ended March 31, 2015 and 3,429,053 for the three months ended March 31, 2016, on a pro forma basis.