AAC Holdings Completes Acquisition of AdCare, Inc.
Thursday, March 01, 2018 4:53:00 PM ET
AAC Holdings, Inc. (AAC ), announced today the completion of the acquisition of AdCare, Inc. ("AdCare") for total consideration of $85 million.
"We are thrilled to announce the closing of our acquisition of AdCare, which furthers our long-term strategy of diversifying our payor, region and treatment types," said Michael Cartwright, Chairman and Chief Executive Officer of AAC Holdings. "We look forward to adding AdCares seasoned management team and dedicated employees to the AAC family and expanding our footprint in the Northeast, in order to build upon AdCares over 30 years of exceptional clinical care and change the lives of those who seek our help."
AdCare, founded in 1986, is one of the leading providers of addiction treatment in New England with approximately 8,000 hospital and residential admissions and over 116,000 outpatient visits per year. AdCares facilities include a 114-bed hospital for substance abuse treatment, including detoxification and rehabilitation services, and five outpatient centers in Massachusetts and a 59-bed residential treatment center and two outpatient centers in Rhode Island. The acquisition also includes the purchase of 1-800-ALCOHOL(TM), a nationally recognized referral phone line, and other toll-free numbers that together generate approximately 50,000 calls per year.
David Hillis, Sr., Chief Executive Officer and Chairman of the Board of AdCare added, "Our leadership team and talented employees are very happy to be joining the team at AAC, which shares the same commitment to clinical excellence as AdCare and is the ideal partner to build upon the AdCare legacy. The opioid crisis in the Northeast continues to worsen, and there is an increasing need to deliver best in class treatment in in a variety of locations, types of treatments and payors. AACs national reputation and financial and operational strength will allow our team to extend the number of patients we can serve."
AdCare generated revenue, before the provision for bad debts, of $54 million and net income of $10 million for the twelve months ended September 30, 2017.
In connection with the acquisition of AdCare, AAC closed on the $65 million incremental term loan arranged by Credit Suisse Securities (USA) LLC, Deutsche Bank Securities, BMO Capital Markets Corp. and Whitney Bank (d/b/a Hancock Bank).
2018 Revised Outlook
In May 2014, the FASB issued Accounting Standards Codification (ASC) Topic 606, "Revenue from Contracts with Customers," a replacement of Revenue Recognition Topic 605. AAC adopted ASC 606 on January 1, 2018. Under ASC 606, the majority of our provision for doubtful accounts, which historically was reported as an operating expense, will now be reported as a direct reduction to revenue in 2018. This change in presentation will reduce revenues and operating expenses by the same amount and is not expected to have an effect on net income or earnings per share.
AAC is revising its guidance for the full year 2018 to include AdCare from the March 1, 2018 acquisition date. Results for 2018 full year guidance as set forth below have been provided for the 10 months inclusive of ASC 606, and for comparability only, 2018 full year guidance has also been provided excluding the impact of ASC 606 (dollars in millions, except share data):
Full Year 2018 Revised Guidance
As Currently Adjusted for
Reported Adoption of ASC 606
on January 1, 2018
Total Revenues $360 - $375 $325 - $340
Residential treatment facility revenue $285 - $290 $262 - $266
Outpatient and sober living facility revenue $44 - $50 $40 - $46
Client related diagnostic services revenue (includes point of care $18 - $21 $12 - $15
drug testing and client related diagnostic laboratory services
Non-client related revenue (includes third-party marketing, $13 - $14 $11 - $13
laboratory services and criminal justice services)
Adjusted EBITDA $68 - $72 $68 - $72
Adjusted Earnings per Diluted Common Share $0.75 - $0.80 $0.75 - $0.80
AAC expects an annual effective tax rate of 24% to 26% and diluted weighted-average common shares outstanding of approximately 24.5 million for the year.
This outlook above does not include the impact of any future acquisitions, transaction-related costs, litigation settlement or expenses related to legal defenses.
With respect to the "2018 Revised Outlook" above, reconciliation of adjusted EBITDA and adjusted earnings per diluted common share guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. This inability results from the inherent difficulty in forecasting generally and quantifying certain projected amounts that are necessary for such reconciliations. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliations, including de novo start-up and other expense and acquisition-related expenses. We expect these adjustments may have a potentially significant impact on future GAAP financial results.
About American Addiction Centers
American Addiction Centers is a leading provider of inpatient and outpatient substance abuse treatment services. We treat clients who are struggling with drug addiction, alcohol addiction and co-occurring mental/behavioral health issues. We currently operate substance abuse treatment facilities located throughout the United States. These facilities are focused on delivering effective clinical care and treatment solutions. For more information, please find us at AmericanAddictionCenters.org or follow us on Twitter.
Forward Looking Statements
This release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are made only as of the date of this release. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "may," "potential," "predicts," "projects," "should," "will," "would," and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements may include information concerning AAC Holdings, Inc.s (collectively with its subsidiaries; "AAC Holdings" or the "Company") possible or assumed future results of operations, including descriptions of the Companys revenue, profitability, outlook and overall business strategy. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from the information contained in the forward-looking statements. These risks, uncertainties and other factors include, without limitation: (i) our inability to effectively operate our facilities; (ii) our reliance on our sales and marketing program to continuously attract and enroll clients; (iii) a reduction in reimbursement rates by certain third-party payors for inpatient and outpatient services and diagnostics laboratory revenue; (iv) an increase in our provision for doubtful accounts based on the aging of receivables; (v) our failure to successfully achieve growth through acquisitions and de novo projects; (vi) the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of an acquisition; (vii) our failure to achieve anticipated financial results from contemplated and prior acquisitions, including the AdCare acquisition; (viii) a disruption in our ability to perform diagnostics laboratory services; (ix) maintaining compliance with applicable regulatory authorities, licensure and permits to operate our facilities and laboratories; (x) a disruption in our business and reputational and economic risks associated with the civil securities claims brought by shareholders or claims by various parties; (xi) inability to meet the covenants in our loan documents; (xii) our inability to effectively integrate acquired facilities; and (xiii) general economic conditions, as well as other risks discussed in the "Risk Factors" section of the Companys Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission. As a result of these factors, we cannot assure you that the forward-looking statements in this release will prove to be accurate. Investors should not place undue reliance upon forward-looking statements.
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SOURCE AAC Holdings, Inc.