For the Second Quarter and Six Months Ended June 30, 2008
CUPERTINO, Calif.--(Business Wire)--
Second sentence of Conference Call section should read: The number
to call within the United States is (888) 740-6142. (sted The number
to call within the United States is (800) 740-6142.)
The corrected release reads:
CRC HEALTH CORPORATION REPORTS OPERATING RESULTS
For the Second Quarter and Six Months Ended June 30, 2008
CRC Health Corporation ("CRC" or the "Company"), a leading
provider of substance abuse treatment and youth services through its
wholly owned consolidated subsidiaries, announced its results for the
second quarter and six months ended June 30, 2008, reflecting
contributions from acquisitions and continued organic growth.
The Company has three operating divisions: recovery division,
youth division, and healthy living division. The recovery division
provides substance abuse and behavioral disorder treatment services
through residential treatment facilities and outpatient treatment
clinics. The youth division provides educational programs for
underachieving young people through residential schools and wilderness
programs. The healthy living division provides adolescent and adult
weight management programs and treatment services for eating
disorders. For segment reporting purposes, the Company reports in two
segments: recovery and youth. The healthy living division is combined
with corporate/other as it does not meet the quantitative threshold
for separate segment reporting.
Comparative financial results and selected statistics for the
second quarter and six months ended June 30, 2007 have been presented
to conform to the Company's new organizational structure which became
effective on October 1, 2007.
For the quarter ended June 30, 2008, consolidated, adjusted pro
forma net revenue increased $2.0 million, or 1.6%, to $122.3 million
from $120.3 million during the same period in 2007. Second quarter
2008 adjusted pro forma earnings before interest, taxes, depreciation
and amortization ("EBITDA") decreased by $3.0 million, or 10.7%, to
$25.0 million compared to $28.0 million during the same period in
2007. Additionally the quarter ended June 30, 2008 showed adjusted pro
forma net revenue and adjusted pro forma EBITDA increases of $6.2
million, or 5.4%, and $4.6 million, or 22.2%, compared to the quarter
ended March 31, 2008.
Consolidated, adjusted pro forma net revenue for the six months
ended June 30, 2008 was $238.3 million which reflects a $4.5 million
or 1.9% increase from the same period in 2007. For the six months
ended June 30, 2008 adjusted pro forma EBITDA of $45.5 million
reflects a decrease of $7.7 million, or 14.5%, from the same period of
2007.
Historical Financial Results
Second Quarter and Six Months Ended June 30, 2008 Consolidated
Financial Results:
Recovery Division:
Three Months Ended June 30, 2008 Compared to Three Months Ended
June 30, 2007
-- Net revenue increased $6.7 million, or 9.3%, to $78.8 million
for the quarter from $72.1 million from the comparable
prior-year quarter. Same-facility net revenue increased $4.6
million, or 6.5%, to $75.9 million for the quarter from $71.3
million from the comparable prior-year quarter. The increase
in same-facility net revenue was driven by a 2.9% increase in
census and a 3.5% increase in rates.
-- Adjusted pro forma revenue increased $4.5 million, or 6.1%, to
$78.8 million for the quarter from $74.3 million from the
comparable prior-year quarter. Adjusted pro forma EBITDA
increased $0.8 million, or 3.3%, to $25.1 million for the
quarter from $24.3 million from the comparable prior-year
quarter.
-- Our recovery division incurred an increase of $5.1 million in
operating expenses. Recovery division, same-facility increase
in operating expenses was $3.5 million, or 7.5%,
acquisition-related increase was $1.0 million, and startup
related increases were $0.6 million.
Six Months Ended June 30, 2008 Compared to Six Months Ended
June 30, 2007
-- Net revenue increased $13.5 million, or 9.5%, to $156.0
million for the six months ended June 30, 2008 from $142.5
million from the comparable period. Same-facility net revenue
increased $9.3 million, or 6.6%, to $150.4 million for the six
months from $141.1 million from the comparable prior-year
period. The increase in same-facility net revenue was driven
by a 3.1% increase in census and a 3.4% increase in rates.
-- Adjusted pro forma revenue increased $9.5 million, or 6.5%, to
$156.0 million for the six months ended June 30, 2008 from
$146.5 million from the comparable period in the prior year.
Adjusted pro forma EBITDA increased $1.3 million, or 2.7%, to
$48.3 million for the six months from $47.0 million from the
comparable prior-year period.
-- Our recovery division incurred an increase of $10.9 million,
or 10.7%, in operating expenses. Recovery division,
same-facility increase in operating expenses was $8.0 million,
or 9.1%, and acquisition-related increase was $2.1 million
while startups and divisional administrative costs contributed
$0.8 million in operating expenses.
Youth Division:
Three Months Ended June 30, 2008 Compared to Three Months Ended
June 30, 2007
-- Net revenue decreased $2.3 million, or 6.0%, to $36.2 million
for the quarter from $38.5 million from the comparable
prior-year quarter. Same-facility net revenue decreased $3.9
million, or 10.3%, to $34.4 million for the quarter from $38.3
million from the comparable prior-year quarter. The decrease
in same-facility net revenue was driven by a 15.0% decrease in
census partially offset by a 5.6% increase in rates. The
decrease in census was significantly impacted by a single
therapeutic boarding school that experienced a significant
increase in student graduations during the second half of 2007
and has yet to recover the lost census. Excluding the impact
of this one program, same facility census declined 6.3% across
the rest of the youth programs.
-- Our youth division incurred a decrease of $0.6 million in
operating expense, or 1.8%, mostly related to decreases in
census.
-- Adjusted pro forma revenue decreased $2.8 million, or 7.2%, to
$36.2 million for the quarter from $39.0 million from the
comparable prior-year quarter. Adjusted pro forma EBITDA
decreased $2.6 million, or 36.9%, to $4.4 million for the
quarter from $7.0 million from the comparable prior-year
quarter. Excluding the impact of the aforementioned
therapeutic boarding school, the decrease in adjusted pro
forma EBITDA was $1.0 million, or 16.9%.
Six Months Ended June 30, 2008 Compared to Six Months Ended
June 30, 2007
-- Net revenue decreased $3.4 million, or 4.8%, to $69.1 million
for the six months ended June 30, 2008 from $72.5 million from
the comparable prior-year period. Same-facility net revenue
decreased $8.2 million, or 11.1%, to $66.1 million for the six
months from $74.3 million from the comparable prior-year
period. The decrease in same-facility net revenue was driven
by a 16.1% decrease in census partially offset by a 5.9%
increase in rates. The decrease in census was significantly
impacted by a single therapeutic boarding school that
experienced a significant increase in student graduations
during the second half of 2007 and has yet to recover the lost
census. Excluding the impact of this one program, same
facility census declined 6.8% across the rest of the youth
programs.
-- Adjusted pro forma revenue decreased $6.0 million, or 7.6%, to
$69.1 million for the six months from $75.1 million from the
comparable period in the prior year. Adjusted pro forma EBITDA
decreased $6.5 million, or 50.0%, to $6.5 million for the six
months from $13.0 million from the comparable period in the
prior year. Excluding the impact of the aforementioned
therapeutic boarding school, the decrease in adjusted pro
forma EBITDA was $3.2 million, or 29.8%.
-- Our youth division incurred an operating expense decrease of
$0.2 million, or 0.3% reflecting lower costs related to
decreases in census.
Corporate/Other:
Three Months Ended June 30, 2008 Compared to Three Months Ended
June 30, 2007
-- Net revenue increased $2.1 million, or 40.0%, to $7.3 million
for the quarter from $5.2 million from the comparable
prior-year quarter. Operating expenses increased $3.1 million
or 66.2% in our healthy living division and $0.4 million or
6.0% in corp/other.
-- Adjusted pro forma revenue increased $0.3 million, or 4.5%, to
$7.3 million for the quarter from $7.0 million from the
comparable prior-year quarter. Adjusted pro forma EBITDA
decreased $1.2 million, or 35.5%, to a loss of $4.4 million
for the quarter from a loss of $3.3 million from the
comparable prior-year quarter. The increase in the loss is
attributable to increases in start-up losses in both eating
disorder and weight management programs, increased operating
expenses associated with the growth in our adolescent weight
management summer camps, and increases in corporate
administrative expenses.
Six Months Ended June 30, 2008 Compared to Six Months Ended
June 30, 2007
-- Net revenue increased $4.5 million, or 50.7%, to $13.3 million
for the six months ended June 30, 2008 from $8.8 million from
the comparable prior-year period. Operating expenses increased
$6.3 million or 76.8% in our healthy living division and $1.1
million or 8.9% in corp/other.
-- Adjusted pro forma revenue increased $1.0 million, or 8.2%, to
$13.3 million for the six months from $12.2 million from the
comparable period in the prior year. Adjusted pro forma EBITDA
decreased $2.5 million, or 36.0%, to a loss of $9.3 million
for the six months from a loss of $6.9 million from the
comparable period in the prior year. The increase in the loss
is attributable to increases in start-up losses in both eating
disorder and weight management programs, increased operating
expenses associated with the growth in our adolescent weight
management summer camps, and increases in corporate
administrative expenses.
The unaudited adjusted pro forma EBITDA for the periods presented
gives effect to all acquisitions in 2007 as if they had occurred on
January 1, 2007. The pro forma adjustments are based upon available
information and certain assumptions that CRC believes are reasonable.
The pro forma adjusted EBITDA is for informational purposes only and
does not purport to represent what CRC's result of operations or
financial position would have been if the acquisitions in 2007
occurred at any date, nor does such information purport to project the
results of operations for any future period.
Net income as a percentage of consolidated net revenue for the
three months ended June 30, 2008 was 3.1% compared to 2.5% for the
same period in 2007. For the six months ended June 30, 2008, net
income as a percentage of consolidated net revenue was 1.0% compared
to 1.3% for the comparable period in 2007. The decrease in net income
percentage was primarily due to increased operating expenses of
acquisitions made in the quarter ended September 30, 2007.
In order to supplement its condensed consolidated financial
statements presented in accordance with GAAP, CRC is providing a
summary to show the computation of EBITDA, as well as adjusted pro
forma EBITDA. Adjusted pro forma EBITDA takes into account certain
adjustments which are excluded from EBITDA for purposes of various
covenants in the indenture governing CRC's 10 3/4% senior subordinated
notes due 2016 and its senior secured credit facility, as amended to
date. CRC believes that the adjusted pro forma EBITDA information
presented provides useful information to both management and investors
concerning its ability to meet its future debt obligations and to
comply with certain covenants in its borrowing arrangements that are
tied to these measures. CRC also believes that including the effect of
these items allows management and investors to better compare CRC's
financial performance from period-to-period, and to better compare
CRC's financial performance with that of its competitors. The
presentation of this additional information is not meant to be
considered in isolation of, or as a substitute for, results prepared
in accordance with GAAP.
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CRC HEALTH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, 2008 AND DECEMBER 31, 2007
(In thousands, except share amounts)
June 30, December 31,
2008 2007
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,369 $ 5,118
Accounts receivable, net of allowance for
doubtful accounts of $5,725 in 2008 and
$6,901 in 2007 31,630 31,910
Prepaid expenses 8,113 7,544
Other current assets 1,673 2,120
Income taxes receivable -- 193
Deferred income taxes 6,599 6,599
----------- ------------
Total current assets 58,384 53,484
PROPERTY AND EQUIPMENT--Net 128,132 122,937
GOODWILL 731,396 730,684
INTANGIBLE ASSETS--Net 386,206 390,388
OTHER ASSETS 22,818 24,798
----------- ------------
TOTAL ASSETS $1,326,936 $ 1,322,291
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LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,702 $ 7,014
Accrued liabilities 39,040 37,582
Current portion of long-term debt 39,476 35,603
Other current liabilities 31,550 29,824
----------- ------------
Total current liabilities 116,768 110,023
LONG-TERM DEBT--Less current portion 609,829 612,764
OTHER LIABILITIES 5,856 7,514
DEFERRED INCOME TAXES 144,838 145,867
----------- ------------
Total liabilities 877,291 876,168
----------- ------------
COMMITMENTS AND CONTINGENCIES (Note 11)
MINORITY INTEREST 17 374
STOCKHOLDER'S EQUITY:
Common stock, $0.001 par value--1,000
shares authorized; 1,000 shares issued and
outstanding at June 30, 2008 and December
31, 2007 -- --
Additional paid-in capital 440,606 438,608
Retained earnings 9,374 7,141
Accumulated other comprehensive income (352) --
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Total stockholder's equity 449,628 445,749
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,326,936 $ 1,322,291
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CRC HEALTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(In thousands)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
---------------------------------------
NET REVENUE:
Net client service revenue $120,284 $114,384 $234,368 $220,866
Other revenue 2,008 1,409 3,979 2,857
---------------------------------------
Total net revenue 122,292 115,793 238,347 223,723
---------------------------------------
OPERATING EXPENSES:
Salaries and benefits 61,288 56,380 122,530 111,688
Supplies, facilities and
other operating costs 36,058 33,384 70,654 64,161
Provision for doubtful
accounts 1,641 1,525 3,295 3,028
Depreciation and
amortization 5,840 5,621 11,414 10,913
---------------------------------------
Total operating expenses 104,827 96,910 207,893 189,790
---------------------------------------
INCOME FROM OPERATIONS 17,465 18,883 30,454 33,933
INTEREST EXPENSE, NET (12,505) (14,813) (27,022) (29,802)
OTHER INCOME (EXPENSE) 1,585 766 (33) 458
---------------------------------------
INCOME BEFORE INCOME TAXES 6,545 4,836 3,399 4,589
INCOME TAX EXPENSE 2,842 1,974 1,523 1,873
MINORITY INTEREST IN LOSS OF
SUBSIDIARIES (54) (52) (357) (152)
---------------------------------------
NET INCOME $ 3,757 $ 2,914 $ 2,233 $ 2,868
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Reconciliation of GAAP "Cash Flows Provided By Operating Activities"
to non-GAAP "EBITDA" from continuing operations and Reconciliation of
non-GAAP "EBITDA" from continuing operations to GAAP "Net Income"
(In thousands) (unaudited)
----------------------------------------------------------------------
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
---------------------------------------
Cash flows provided by
operating activities $ 26,880 $ 20,732 $ 20,831 $ 20,976
Amortization of debt discount
and other financing costs (1,124) (1,153) (2,225) (2,248)
Stock-based compensation (1,065) (1,055) (2,303) (2,143)
Deferred income taxes 512 428 1,029 870
Net effect of changes in non-
current net assets (468) (212) 78 (410)
Net effect of working capital
changes (15,138) (10,205) (3,763) (3,264)
Interest expense, net 12,505 14,813 27,022 29,802
Income tax expense 2,842 1,974 1,523 1,873
---------------------------------------
EBITDA from continuing
operations 24,944 25,322 42,192 45,456
---------------------------------------
Interest expense, net (12,505) (14,813) (27,022) (29,802)
Income tax expense (2,842) (1,974) (1,523) (1,873)
Depreciation and amortization (5,840) (5,621) (11,414) (10,913)
---------------------------------------
Net income $ 3,757 $ 2,914 $ 2,233 $ 2,868
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Reconciliation of non-GAAP "EBITDA from continuing operations" to non-
GAAP "Adjusted pro forma EBITDA"
(In thousands) (unaudited)
----------------------------------------------------------------------
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-----------------------------------
EBITDA from continuing operations $24,944 $25,322 $42,192 $45,456
Pre-acquisition Adjusted EBITDA
from other acquisitions in 2007 - 1,433 - 2,426
Unrecognized profit on deferred
revenue - 489 - 2,588
Stock-based compensation expense 1,065 1,055 2,303 2,143
Additional stock based
compensation (6) - - -
(Gain) loss on interest rate swap (1,585) (768) 33 (462)
Loss (gain) on fixed asset
disposal 45 - (1) (10)
Management fees to Sponsor 555 532 1,101 1,032
Write-off of cancelled
acquisitions 38 - 124 -
Minority interest in loss of
subsidiaries (54) (52) (357) (152)
Franchise taxes 44 - 88 145
Write-off of miscellaneous
accounts (non-cash) 8 (4) 8 43
-----------------------------------
Adjusted Pro forma EBITDA $25,054 $28,007 $45,491 $53,209
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CRC Health Corporation Six Months Six Months
Selected Statistics Ended Ended
June 30, June 30,
2008 2007
----------- -----------
Recovery Division:
Number of inpatient facilities - end of period 28 25
Number of outpatient facilities - end of
period 15 14
Number of comprehensive treatment clinics
(CTC) - end of period 63 60
Available beds - end of period 1,527 1,448
Patient Days - Inpatient 277,900 259,876
Occupancy rate 81.1% 83.8%
Net revenue per patient day - inpatient $ 366.71 $ 353.23
Patient Days - CTC 4,709,050 4,507,729
Net revenue per patient day - CTC $ 11.48 $ 11.20
Youth Division:
Number of facilities - end of period 29 28
Patient days 233,191 273,098
Net revenue per patient day $ 296.24 $ 274.83
Healthy Living Division:
Number of facilities - end of period 17 12
Patient days 42,163 28,167
Net revenue per patient day $ 309.94 $ 303.44
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Conference Call
CRC will host a conference call, open to all interested parties,
on Thursday, August 14, 2008 beginning at 9:15 AM Pacific Daylight
Time (12:15 PM Eastern Daylight Time). The number to call within the
United States is (888) 740-6142. Participants outside the United
States should call (913) 312-1403. The conference ID is 8279047. A
replay of the conference call will be available starting three hours
after the completion of the call until 9:59 PM Pacific Daylight Time
Thursday, August 21, 2008. The replay number for callers within the
United States is (888) 203-1112 or (719) 457-0820 from outside the
United States and the conference ID for all callers is 8279047.
Forward-Looking Statements
This press release includes or may include "forward-looking
statements." All statements included herein, other than statements of
historical fact, may constitute forward-looking statements. Although
CRC believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Important factors that could
cause actual results to differ materially from those expressed or
implied by such forward-looking statements include, among others, the
following factors: changes in government reimbursement for CRC's
services; CRC's substantial indebtedness; changes in applicable
regulations or a government investigation or assertion that CRC has
violated applicable regulations; attempts by local residents to force
our closure or relocation; the potentially difficult, unsuccessful or
costly integration of recently acquired operations and future
acquisitions; the potentially difficult, unsuccessful or costly
opening and operating of new treatment facilities; the possibility
that commercial payors for CRC's services may undertake future cost
containment initiatives; the limited number of national suppliers of
methadone used in CRC's outpatient treatment clinics; the failure to
maintain established relationships or cultivate new relationships with
patient referral sources; shortages in qualified healthcare workers;
natural disasters such as hurricanes, earthquakes and floods;
competition that limits CRC's ability to grow; the potentially costly
implementation of new information systems to comply with federal and
state initiatives relating to patient privacy, security of medical
information and electronic transactions; the potentially costly
implementation of accounting and other management systems and
resources in response to financial reporting and other requirements;
the loss of key members of CRC's management; claims asserted against
CRC or lack of adequate available insurance; and certain restrictive
covenants in CRC's debt documents.
CRC Health Corporation
Kevin Hogge, 877-637-6237
Chief Financial Officer
Copyright Business Wire 2008
