Mar 27 2010
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 fourth quarter
and twelve months ended December 31, 2009.
“EBITDA Attributable
to CRC Health Corporation GAAP Net Loss”
The Company has two operating divisions: recovery 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 healthy living
division includes therapeutic educational programs and treatment
services for adolescent youth as well as treatment services for eating
disorders, obesity, and weight management serving all age groups.
Adolescent and youth treatment services include therapeutic boarding
schools and educational outdoor programs for children, adolescents, and
young adults struggling with academic, emotional, and behavioral issues.
For the year ended December 31, 2009, consolidated net revenue decreased
$24.6 million, or 5.4%, to $429.6 million in 2009 from $454.2 million in
2008. Additionally, during the year ended 2009, consolidated operating
expenses decreased $136.9 million or 25.5% to $399.2 million from $536.1
million. Excluding asset impairment of $2.3 million and goodwill
impairment of $30.5 million in 2009 and an asset impairment of $4.5
million and goodwill impairment of $142.2 million in 2008, operating
expenses decreased $23.0 million, or 5.9%, to $366.4 million in 2009
from $389.4 million in 2008. Excluding impairments, operating income
(loss) decreased $1.7 million, or 2.6%, to $63.2 million in 2009 from
$64.9 million in 2008. However, operating margins increased to 14.7%
from 14.3% reflecting a lower cost structure and expense controls year
over year.
For the fourth quarter ended December 31, 2009, consolidated net revenue
decreased $1.9 million or 1.8% to $104.7 million compared to the same
period in 2008. Excluding combined asset and goodwill impairments
of $5.6 million in 2009 and $4.5 million in 2008, fourth quarter 2009
consolidated operating expenses decreased $4.0 million, or 4.2%, to
$90.7 million from $94.7 million in the same period of 2008.
For the twelve months ended December 31, 2009, adjusted pro forma
earnings before interest, taxes, depreciation and amortization
(“EBITDA”) increased $1.2 million or 1.2% to $98.9 million from $97.7
million resulting in adjusted pro forma EBITDA margins of 23.0% and
21.4% in 2009 and 2008, respectively. Fourth quarter adjusted pro forma
EBITDA increased $2.3 million, or 10.9%, to $23.4 million in 2009 from
$21.1 million in 2008 with corresponding adjusted pro forma EBITDA
margins of 22.4% and 19.9% for 2009 and 2008, respectively.
At December 31, 2009, the Company substantially completed activities
under its restructuring plan initiated in the fourth quarter of 2008
(the “FY08 Plan”). The purpose of the plan was to further align the
Company’s resources with its strategic business plan through workforce
reductions, facility consolidations, and facility exit actions. Actions
under the FY08 Plan were primarily focused on facilities which had been
negatively impacted by the economic crisis and the depressed credit
markets. Remaining actions under the FY08 plan primarily include minimum
lease payments for facilities which were closed but for which the
Company still maintains lease obligations through 2016. In total,
facilities discontinued under the FY08 plan include five facilities in
2009 and ten facilities in 2008. Of the fifteen facilities discontinued,
four facilities were sold. At December 31, 2009, the Company has
incurred $3.6 million in liabilities related to activities under the
FY08 plan.
Facilities which have been held for sale, or otherwise disposed of as of
December 31, 2009 are reflected as discontinued operations in the
Company’s consolidated statements of operations and in its consolidated
balance sheets.
Additionally, during 2009, the Company initiated a private student loan
program to assist students and families access its adolescent and young
adult treatment services within the Company's healthy living
division. At December 31, 2009, the Company had made approximately $4.0
million in loans related to its student loan program.
Historical Financial Results
Fourth Quarter and Twelve Months Ended December 31, 2009 Consolidated
Financial Results:
Recovery Division:
Three Months Ended December 31, 2009 Compared to Three Months
Ended December 31, 2008
-
Net revenue increased $3.0 million, or 3.9%, to $79.9 million for the
quarter from $76.9 million from the comparable prior-year
quarter. Same-facility net revenue increased $3.0 million, or 3.9%, to
$79.9 million for the quarter from $76.9 million from the comparable
prior-year quarter. The increase in same-facility net revenue was
primarily driven by a 3.1% increase in census.
-
Our recovery division incurred an operating expense decrease of $5.2
million, or 8.8%, to $54.5 million primarily due to a decrease of $4.5
million in non-cash asset impairment charge. Excluding the effects
of impairment, recovery division operating expenses remained
essentially unchanged for the fourth quarter of 2009 compared to the
same period in the prior year. Recovery division
same-facility decrease in operating expenses was $4.8 million, or
8.7%, representing a decline in operating expenses year over year due
to a decrease of $4.2 million in non-cash asset impairment. Excluding
impairments, same facility operating expenses were unchanged for the
fourth quarter of 2009 compared to the same period in the prior year.
-
Adjusted pro forma revenue increased $3.0 million, or 3.9%, to $79.9
million for the quarter from $76.9 million from the comparable
prior-year quarter. Adjusted pro forma EBITDA increased $4.5 million,
or 18.7%, to $28.6 million for the quarter from $24.1 million from the
comparable prior-year quarter.
Twelve Months Ended December 31, 2009 Compared to Twelve
Months Ended December 31, 2008
-
Net revenue increased $2.5 million, or 0.8%, to $311.8 million for
the twelve months ended December 31, 2009 from $309.3 million from the
comparable prior-year period. Same-facility net revenue decreased $0.2
million, or 0.1%, to $309.0 million for the twelve months from $309.2
million from the comparable prior-year period. The decrease in
same-facility net revenue was driven by a same-facility decrease of
$7.4 million, or 3.7% in residential facilities offset by increases of
$7.0 million, or 6.6% in comprehensive treatment centers ("CTCs") and
$0.2 million in outpatient services. Year over year census increased
4.6%.
-
Our recovery division incurred a decrease of $10.0 million, or 4.5%,
in operating expenses to $214.4 million from $224.4 million year over
year. Recovery division, same-facility operating expenses decreased
$11.4 million, or 5.6% to $192.4 million. Excluding non-cash asset
impairment charges of $4.5 million in 2008, total operating expenses
for 2009 decreased $5.5 million or 2.5% to $214.4 million and
same-facility operating expenses decreased $6.9 million or 3.4% to
$192.4 million. The decrease in operating expenses within the recovery
division resulted from cost control actions as well as from the sale
and closure of facilities under the FY08 restructuring plan.
-
Adjusted pro forma revenue decreased $0.7 million, or 0.2%, to $311.8
million for the twelve months ended December 31, 2009 from $312.5
million from the comparable prior-year period. Adjusted pro forma
EBITDA increased $8.9 million, or 8.9%, to $109.4 million for
the twelve months from $100.5 million from the comparable prior-year
period.
Healthy Living Division:
Three Months Ended December 31, 2009 Compared to Three Months
Ended December 31, 2008
-
Net revenue decreased $4.9 million, or 16.5%, to $24.8 million for the
quarter from $29.7 million from the comparable prior-year
quarter. Same-facility net revenue decreased $4.8 million, or 16.1%,
to $24.8 million for the quarter from $29.5 million from the
comparable prior-year quarter. The decrease in same-facility net
revenue was driven by a 12.4% decrease in census and a 3.7% increase
in rates. The decrease in census during the quarter was significantly
impacted by the economic downturn as well as by a decrease in the
availability of credit to families.
-
Our healthy living division incurred an increase of $3.3 million in
operating expense, or 10.7%, primarily driven by an increase of $5.6
million in non-cash goodwill impairment charges slightly offset by
decreases in net operating expenses related to facility closures and
restructuring activities.
-
Adjusted pro forma revenue decreased $4.9 million, or 16.4%, to $24.8
million for the quarter from $29.7 million from the comparable
prior-year quarter. Adjusted pro forma EBITDA decreased $2.7 million,
or 225.0%, to $(1.5) million for the quarter from $1.2 million from
the comparable prior-year quarter.
Twelve Months Ended December 31, 2009 Compared to Twelve
Months Ended December 31, 2008
-
Net revenue decreased $27.0 million, or 18.7%, to $117.5 million for
the twelve months ended December 31, 2009 from $144.5 million from the
comparable prior-year period. Same-facility net revenue decreased
$27.8 million, or 19.3%, to $116.4 million for the twelve months from
$144.2 million from the comparable prior-year period. The decrease in
same-facility net revenue was primarily driven by a $14.8 million, or
18.2% decrease in same-facility residential boarding schools and a
$10.1 million, or 28.4% decrease in outdoor camps, and $2.8 million
decrease in weight management. Overall, there has been a significant
lessening of demand for healthy living division services as a result
of declining economic conditions and the inability of families to
access the credit markets to fund the cost of our programs.
-
Our healthy living division incurred a net operating expense decrease
of $129.4 million, or 45.8%, due to a decrease in non-cash goodwill
impairment charges of $109.5 million and by reductions in other
operating expenses. Excluding the impairment charges, healthy
living division operating expenses decreased by $19.9 million, or
14.2%, compared to the same period in 2008 primarily due to decreases
in salaries and in supplies, facilities, and other costs relating to
facility closures and restructuring activities.
-
Adjusted pro forma revenue decreased $27.0 million, or 18.7%, to
$117.5 million for the twelve months from $144.5 million from the
comparable prior-year period. Adjusted pro forma EBITDA decreased $6.3
million, or 45.0%, to $7.7 million for the twelve months from $14.0
million from the comparable prior-year period.
Corporate:
Three Months Ended December 31, 2009 Compared to Three Months
Ended December 31, 2008
-
Our corporate division incurred an operating expense decrease of $1.0
million or 11.4% to $7.6 million from $8.6 million.
-
Adjusted pro forma EBITDA increased $0.5 million, or 11.9%, to $(3.7)
million from $(4.2) million from the comparable prior-year quarter.
Twelve Months Ended December 31, 2009 Compared to Twelve
Months Ended December 31, 2008
-
Our corporate division incurred a net operating expense increase of
$2.5 million, or 8.7%, to $31.4 million from $28.9 million due
primarily to increases in salaries and benefits relating to the
consolidation of certain healthy living division administrative
functions into the corporate administrative function.
-
Adjusted pro forma EBITDA decreased $1.4 million, or 8.3%, to $(18.2)
million from $(16.8) million from the comparable prior-year period.
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 2008 occurred at any date, nor does
such information purport to project the results of operations for any
future period.
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 10¾% senior subordinated notes due 2016 and
its senior secured credit facility, as amended to date. Additionally,
EBITDA analysis is done on a consolidated basis and does not give effect
to discontinued operations presentation. 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.