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AAC Holdings, Inc. Reports Second Quarter 2015 ResultsAAC Holdings, Inc. (NYSE: AAC) announced its results for the second quarter ended June 30, 2015. All comparisons included in this release are for the second quarter of 2015 to the second quarter of 2014 unless otherwise noted. Second Quarter 2015 Financial Highlights:
De Novo, Acquisition and Corporate Highlights:
Revenues in the second quarter of 2015 increased to $53.8 million compared with $29.1 million in the prior-year period and $42.8 million in the first quarter of 2015. Net income available to stockholders increased to $5.6 million, or $0.26 per diluted share, in the second quarter of 2015 compared with $0.5 million, or $0.03 per diluted share, in the prior-year period and $2.0 million, or $0.10 per diluted share, in the first quarter of 2015. Adjusted net income available to stockholders increased to $7.1 million, or $0.33 per diluted share, compared with $1.1 million, or $0.07 per diluted share, in the prior-year period and $3.2 million, or $0.15 per diluted share, in the first quarter of 2015. Adjusted EBITDA increased to $14.0 million compared with $4.2 million in the prior-year period and $8.2 million in the first quarter of 2015. Adjusted net income available to stockholders and Adjusted EBITDA are non-GAAP financial measures. A table reconciling both measures to net income is included in this release. "Operating metrics for the second quarter continued to outpace our expectations with strong inpatient and outpatient census, client admissions and lab volumes leading to a 230% increase in Adjusted EBITDA," noted Michael Cartwright, Chairman and Chief Executive Officer of AAC Holdings. "On the clinical front, our partnership with the Centerstone Institute to conduct clinical outcome studies is progressing well, and the strong reception from the rollout of an integrated outpatient services offering in Las Vegas and Arlington reinforces our plans for new outpatient centers across the country. We secured and completed several strategic investments in the quarter as well as made progress with our de novo pipeline that not only will diversify our business but also help us increase inbound demand for an inpatient bed count projected to exceed 1,200 beds by the end of 2016." De Novo Activity and Pipeline In April 2015, the Company completed the acquisition of an 84-bed hospital near Laguna Beach, California for an aggregate of $13.5 million. AAC began renovation of the facility in the second quarter of 2015 and has applied for a license to operate the facility as a Chemical Dependency Recovery Hospital. The Company anticipates it will invest an additional approximately $5.0 million for renovations and construction and has targeted completion for the first half of 2016. In April 2015, the Company received licensure for its new $2.4 million outpatient center in Arlington, Texas and began treating clients in the second quarter of 2015. The new outpatient center provides step-down capacity for AAC's Greenhouse residential facility. The Company began performing quantitative and confirmatory lab testing for California and Rhode Island in April 2015. AAC also began an 8,000-square-foot expansion of its lab in Brentwood that it expects to complete in the third quarter of 2015. The Company expects to begin operations at River Oaks, the 164-bed, $18.1 million residential facility near Tampa, Florida, in the fourth quarter of 2015. Acquisition Activity In April 2015, the Company completed the acquisition of Clinical Services of Rhode Island, an operator of three outpatient treatment facilities in Greenville, Portsmouth and South Kingstown, Rhode Island, for $665,000 in cash and 42,460 shares of the Company's common stock. In April 2015, the Company acquired certain marketing intangible assets with a value of $1.1 million for cash consideration of $0.5 million and 17,110 shares of the Company's common stock. In May 2015, the Company entered into a definitive agreement to acquire the assets of The Oxford Centre, an operator of a 76-bed residential treatment facility on 110 acres in Etta, Mississippi, and three outpatient centers in Oxford, Tupelo and Olive Branch, Mississippi, for $35.0 million in cash. The acquisition is expected to be completed during the third quarter of 2015. In July 2015, the Company acquired Referral Solutions Group, a leading online publisher in the substance abuse treatment industry with a comprehensive portfolio of websites and marketing assets, for $32.5 million in cash and 540,193 shares of the Company's common stock. The Company also acquired Taj Media, a premier digital marketing agency with significant experience in the substance abuse treatment industry, for $2.2 million in cash and 37,253 shares of the Company's common stock. Balance Sheet and Cash Flows from Operations As of June 30, 2015, AAC Holdings' balance sheet reflected cash and cash equivalents of $45.0 million and total debt of $75.9 million. Capital expenditures in the second quarter of 2015 totaled $8.5 million (excluding the acquisition of the 84-bed hospital property near Laguna Beach, California). Cash flows provided by operations totaled $9.1 million for the second quarter of 2015 compared with cash flows used by operations of $0.8 million in the prior-year period and cash flows used by operations of $2.5 million in the first quarter of 2015. Days sales outstanding (DSO) was 80 for the second quarter of 2015 compared with 83 for the prior-year period and 79 for the first quarter of 2015. 2015 Outlook Based on the second quarter performance and its outlook for the second half of the year, the Company is increasing its guidance for 2015. This outlook does not include the impact of Sunrise House Foundation, The Oxford Centre, or any future acquisitions, transaction-related costs, and expenses related to legal defenses in California. Revenues for the full year 2015 are expected to be in the range of $185 million to $195 million; Adjusted EBITDA is expected to be in the range of $40 million to $42 million; and Adjusted Earnings per Diluted Share is expected to be in the range of $0.75 to $0.80. These estimates are based on acquisitions closed to date; utilization of the current 587 inpatient beds to remain in the 85% to 90% range for 2015; average daily residential revenue to be in the low-to-mid $900-range; benefit from our new outpatient centers; an economic benefit from the new River Oaks facility in the fourth quarter of 2015; an annual effective tax rate of 38% to 40%; and approximately 21.8 million diluted weighted-average shares outstanding. Earnings Conference Call The Company will host a conference call and live audio webcast, both open for the general public to hear, on Wednesday, July 29, 2015, at 6:30 p.m. ET to discuss second quarter results and business highlights. The number to call for this interactive teleconference is (412) 542-4144. A replay of the conference call will be available through August 5, 2015, by dialing (412) 317-0088 and entering the replay access code: 10069750. The live audio webcast of the Company's quarterly conference call will be available online in the Investor Relations section of the Company's website at www.americanaddictioncenters.com. The online replay will be available in the Investor Relations section of the Company's website one hour after the call. About American Addiction Centers American Addiction Centers is a leading provider of inpatient substance abuse treatment services. We treat adults as well as adolescents who are struggling with drug addiction, alcohol addiction, and co-occurring mental/behavioral health issues. We operate 12 substance abuse treatment facilities and one mental health facility specializing in binge eating disorders. 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.com or follow us on Twitter @AAC_Tweet. 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; "Holdings" or the "Company") possible or assumed future results of operations, including descriptions of Holdings' revenues, 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 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 point of care and quantitative lab testing; (iv) our failure to successfully achieve growth through acquisitions and de novo expansions; (v) uncertainties regarding the timing of the closing of pending acquisitions and the integration thereof; (vi) our failure to achieve anticipated financial results from contemplated acquisitions; (vii) the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the acquisitions; (viii) a disruption in our ability to perform diagnostic drug testing services; (ix) maintaining compliance with applicable regulatory authorities, licensure and permits to operate our facilities and lab; (x) a disruption in our business related to the recent indictment of certain of our subsidiaries and current and former employees; and (xi) general economic conditions, as well as other risks discussed in the "Risk Factors" section of the Company's 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.
Adjusted EBITDA, adjusted net income available to AAC Holdings, Inc. common stockholders, and adjusted diluted earnings per share (herein collectively referred to as "Non-GAAP Disclosures") are "non-GAAP financial measures" as defined under the rules and regulations promulgated by the U.S. Securities and Exchange Commission. Management defines Adjusted EBITDA as net income adjusted for interest expense, depreciation and amortization expense, income tax expense, stock-based compensation and related tax reimbursements, litigation settlement, reorganization expense (which includes certain reorganization transactions completed in April 2014 (the "Reorganization Transactions") and expenses associated with the amendment and restatement of our prior credit facility in April 2014), acquisition-related expense and de novo start-up expense. Where applicable, these include professional services for accounting, legal, valuation services and licensing expenses. Management defines Adjusted Net Income Available to AAC Holdings, Inc. common stockholders as net income available to AAC Holdings, Inc. common stockholders adjusted for the redemption of BHR Series A Preferred Units, litigation settlement, reorganization expense (which includes the Reorganization Transactions and expenses associated with the amendment and restatement of our prior credit facility in April 2014), acquisition-related expense and de novo start-up expense and the income tax effect of the non-GAAP adjustments at the then applicable effective tax rate. The Non-GAAP Disclosures are considered supplemental measures of the Company's performance and are not required by, or presented in accordance with, generally accepted accounting principles, or GAAP. The Non-GAAP Disclosures are not measures of the Company's financial performance under GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP. Management has included information concerning Non-GAAP Disclosures because they believe that such information is used by certain investors as a measure of a company's historical performance. Management believes 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 and Adjusted EBITDA when reporting their results. Because Non-GAAP Disclosures are not determined in accordance with GAAP, they are subject to varying calculations and may not be comparable to similarly titled measures of other companies. Management's presentation of Non-GAAP Disclosures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
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