CRC Health Corporation Reports Operating Results for the Three and Six Months Ended June 30, 2013
CRC Health Corporation Reports Operating Results for the Three and Six Months Ended June 30, 2013
CUPERTINO, Calif.--(BUSINESS WIRE)-- CRC Health Corporation, a leading provider of substance abuse treatment and adolescent youth services, announced its results for the three and six months ended June 30, 2013.
"During the second quarter of 2013, we delivered revenue growth in our recovery business, driven by both our CTCs and our residential recovery businesses, while our youth business struggled to achieve growth due to lack of demand in the marketplace and our weight management businesses continued to stabilize. We recently announced some changes to our youth and weight management business footprint. As health care needs evolve we sometimes need to make difficult changes. The future is promising as we continue to invest in areas that position us well for the dramatic changes occurring given healthcare reform," said R. Andrew Eckert, Chief Executive Officer.
Three Months Ended June 30, 2013 Operating Results:
Net client service revenues for the three months ended June 30, 2013 increased $3.6 million, or 3.1%, to $118.6 million compared to the same period in 2012. For the three months ended June 30, 2013, operating income decreased $14.3 million, or 69.5%, compared to the same period in 2012. Adjusted EBITDA decreased $0.9 million, or 3.3%, compared to the same period in 2012.
The following table presents our net client service revenues, operating income (loss), Adjusted EBITDA and Adjusted EBITDA margin by division (in thousands, except for percentages):
Three Months Ended June 30, | ||||||||||||||||
2013 vs 2012 | ||||||||||||||||
2013 | 2012 | $ Change | % Change | |||||||||||||
Net client service revenues: | ||||||||||||||||
Recovery | $ | 94,269 | $ | 88,513 | $ | 5,756 | 6.5 | % | ||||||||
Youth | 17,556 | 19,823 | (2,267 | ) | (11.4 | ) | % | |||||||||
Weight Management | 6,741 | 6,623 | 118 | 1.8 | % | |||||||||||
Corporate | 9 | 18 | (9 | ) | (50.0 | ) | % | |||||||||
Total net client service revenues | $ | 118,575 | $ | 114,977 | $ | 3,598 | 3.1 | % | ||||||||
Operating income (loss): | ||||||||||||||||
Recovery | $ | 28,817 | $ | 28,083 | $ | 734 | 2.6 | % | ||||||||
Youth | (8,958 | ) | 1,534 | (10,492 | ) | * | ||||||||||
Weight Management | (1,894 | ) | (454 | ) | (1,440 | ) | * | |||||||||
Corporate | (11,665 | ) | (8,515 | ) | (3,150 | ) | (37.0 | ) | % | |||||||
Total operating income | $ | 6,300 | $ | 20,648 | $ | (14,348 | ) | (69.5 | ) | % | ||||||
Adjusted EBITDA: | ||||||||||||||||
Recovery | $ | 32,157 | $ | 31,089 | $ | 1,068 | 3.4 | % | ||||||||
Youth | 57 | 2,365 | (2,308 | ) | (97.6 | ) | % | |||||||||
Weight Management | 1,012 | 7 | 1,005 | * | ||||||||||||
Corporate | (5,926 | ) | (5,239 | ) | (687 | ) | (13.1 | ) | % | |||||||
Total Adjusted EBITDA | $ | 27,300 | $ | 28,222 | $ | (922 | ) | (3.3 | ) | % | ||||||
Adjusted EBITDA margin:(1) | ||||||||||||||||
Recovery | 34.1 | % | 35.1 | % | ||||||||||||
Youth | 0.3 | % | 11.9 | % | ||||||||||||
Weight Management | 15.0 | % | 0.1 | % | ||||||||||||
Total Adjusted EBITDA margin | 23.0 | % | 24.5 | % | ||||||||||||
(1) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net client service revenues.
* Not meaningful
Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012
Recovery:
Net client service revenues increased $5.8 million, or 6.5%, primarily due to a $3.6 million increase in our residential facilities and a $2.1 million increase in our CTC facilities. The increase in revenues at our residential facilities was driven in part by the re-opening of New Life Lodge in April 2012, and certain bed expansions at two residential facilities in Pennsylvania. The increase in revenues at our CTC facilities was primarily due to increased patient days at our facilities driven by marketing programs and clinically appropriate retention efforts.
Operating income increased $0.7 million, or 2.6%. The increase was primarily the result of increase in net client service revenues noted above, offset by increase in operating expenses at our residential facilities due to increases in salaries, wages and benefits, outside services and other operating costs associated with increased patient days, and increase in operating expenses at our CTC facilities due to increased marketing activities and employee salaries, wages and benefits associated with increased patient days.
Adjusted EBITDA increased $1.1 million to $32.2 million from the comparable prior period.
Youth:
Net client service revenues decreased by $2.3 million, or 11.4%, due primarily to a decrease in patient days at our residential facilities.
Operating income decreased $10.5 million to an operating loss, primarily due to $8.0 million of asset impairments recorded in the second quarter of fiscal 2013 and a decrease in net client service revenues noted above.
Adjusted EBITDA decreased $2.3 million from the comparable prior period.
Weight Management:
Net client service revenues increased by $0.1 million, or 1.8%, primarily due to increases in patient days in our adult residential weight loss facility offset by a decrease in patient days in our adolescent weight loss programs.
Operating income decreased $1.4 million to an operating loss, primarily due to $2.9 million of asset impairments recorded in the second quarter of fiscal 2013, offset by a decrease in salaries, wages and benefits.
Adjusted EBITDA increased $1.0 million from the comparable prior period.
Corporate:
Operating income decreased $3.2 million, or 37.0%, primarily due to a $2.5 million increase in legal expenses in the second quarter of fiscal 2013 and a $0.7 million increase in salaries, wages and benefits.
Adjusted EBITDA decreased $0.7 million from the comparable prior period.
Six Months Ended June 30, 2013 Operating Results:
Net client service revenues for the six months ended June 30, 2013 increased $6.0 million, or 2.7%, to $229.2 million compared to the same period in 2012. For the six months ended June 30, 2013, operating income decreased $14.5 million, or 41.7%, compared to the same period in 2012. Adjusted EBITDA decreased $0.8 million, or 1.7%, compared to the same period in 2012.
The following table presents our net client service revenues, operating income (loss), Adjusted EBITDA and Adjusted EBITDA margin by division (in thousands, except for percentages):
Six Months Ended June 30, | ||||||||||||||||
2013 vs 2012 | ||||||||||||||||
2013 | 2012 | $ Change | % Change | |||||||||||||
Net client service revenues: | ||||||||||||||||
Recovery | $ | 184,944 | $ | 175,609 | $ | 9,335 | 5.3 | % | ||||||||
Youth | 32,494 | 36,125 | (3,631 | ) | (10.1 | ) | % | |||||||||
Weight Management | 11,701 | 11,423 | 278 | 2.4 | % | |||||||||||
Corporate | 20 | 42 | (22 | ) | (52.4 | ) | % | |||||||||
Total net client service revenues | $ | 229,159 | $ | 223,199 | $ | 5,960 | 2.7 | % | ||||||||
Operating income (loss): | ||||||||||||||||
Recovery | $ | 54,708 | $ | 53,077 | $ | 1,631 | 3.1 | % | ||||||||
Youth | (11,586 | ) | 38 | (11,624 | ) | * | ||||||||||
Weight Management | (1,956 | ) | (1,023 | ) | (933 | ) | (91.2 | ) | % | |||||||
Corporate | (20,868 | ) | (17,265 | ) | (3,603 | ) | (20.9 | ) | % | |||||||
Total operating income | $ | 20,298 | $ | 34,827 | $ | (14,529 | ) | (41.7 | ) | % | ||||||
Adjusted EBITDA: | ||||||||||||||||
Recovery | $ | 61,031 | $ | 58,976 | $ | 2,055 | 3.5 | % | ||||||||
Youth | (1,875 | ) | 1,678 | (3,553 | ) | * | ||||||||||
Weight Management | 1,184 | (341 | ) | 1,525 | * | |||||||||||
Corporate | (11,982 | ) | (11,139 | ) | (843 | ) | (7.6 | ) | % | |||||||
Total Adjusted EBITDA | $ | 48,358 | $ | 49,174 | $ | (816 | ) | (1.7 | ) | % | ||||||
Adjusted EBITDA margin:(1) | ||||||||||||||||
Recovery | 33.0 | % | 33.6 | % | ||||||||||||
Youth | -5.8 | % | 4.6 | % | ||||||||||||
Weight Management | 10.1 | % | -3.0 | % | ||||||||||||
Total Adjusted EBITDA margin | 21.1 | % | 22.0 | % | ||||||||||||
(1) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net client service revenues.
* Not meaningful
Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012
Recovery:
Net client service revenues increased $9.3 million, or 5.3%, primarily due to a $5.1 million increase in our residential facilities and a $4.3 million increase in our CTC facilities. The increase in revenues at our residential facilities was driven in part by the re-opening of New Life Lodge in April 2012, and certain bed expansions at two residential facilities in Pennsylvania. The increase in revenues at our CTC facilities was primarily due to increased patient days at our facilities driven by marketing programs and clinically appropriate retention efforts.
Operating income increased $1.6 million, or 3.1%. The increase was primarily the result of increase in net client service revenues noted above, offset by increase in operating expenses at our residential facilities due to increases in salaries, wages and benefits, outside services and other operating costs associated with increased patient days, and increase in operating expenses at our CTC facilities due to increased marketing activities and employee salaries, wages and benefits associated with increased patient days.
Adjusted EBITDA increased $2.1 million to $61.0 million from the comparable prior period.
Youth:
Net client service revenues decreased by $3.6 million, or 10.1%, due primarily to a decrease in patient days at our residential facilities.
Operating income decreased $11.6 million to an operating loss, primarily due to $8.0 million of asset impairments recorded in the second quarter of fiscal 2013 and the decrease in net client service revenues noted above.
Adjusted EBITDA decreased $3.6 million from the comparable prior period.
Weight Management:
Net client service revenues increased by $0.3 million, or 2.4%, primarily due to increases in patient days in our adult residential weight loss facility offset by a decrease in patient days in our adolescent weight loss programs.
Operating income decreased $0.9 million to an operating loss, primarily due to $2.9 million of asset impairments recorded in the second quarter of fiscal 2013, offset by a decrease in salaries, wages and benefits.
Adjusted EBITDA increased $1.5 million from the comparable prior period.
Corporate:
Operating income decreased $3.6 million, or 20.9%, primarily due to a $2.5 million increase in legal expenses in the second quarter of fiscal 2013 and a $1.1 million increase in salaries, wages and benefits.
Adjusted EBITDA decreased $0.8 million from the comparable prior period.
Non-GAAP Financial Measures:
Under the terms of our borrowing arrangements, we are required to comply with various covenants, including the maintenance of certain financial ratios, the calculations of which are based on Adjusted EBITDA, as defined in our credit agreements. As of June 30, 2013, we were in compliance with all such covenants. A breach of these could result in a default under our credit facilities and in our being unable to borrow additional amounts under our revolving credit facility. If an event of default occurs, the lenders could elect to declare all amounts borrowed under our credit facilities to be immediately due and payable and the lenders under our term loans and revolving credit facility could proceed against the collateral securing the indebtedness.
The computation of Adjusted EBITDA is provided below to provide an understanding of the impact that Adjusted EBITDA has on our ability to comply with certain covenants in our borrowing arrangements that are tied to these measures and to borrow under the credit facility. Adjusted EBITDA should not be considered as an alternative to net income (loss) or cash flows from operating activities (which are determined in accordance with GAAP) and is not being presented as an indicator of operating performance or a measure of liquidity. Other companies may define Adjusted EBITDA differently and as a result, such measures may not be comparable to our Adjusted EBITDA.
The following table reconciles our net income (loss) to our Adjusted EBITDA (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net Income (Loss) Attributable to CRC Health Corporation: | $ | (3,601 | ) | $ | 4,394 | $ | (2,214 | ) | $ | 5,053 | |||||
Depreciation and amortization (1) | 5,332 | 5,079 | 10,187 | 10,008 | |||||||||||
Income tax expense (benefit) (1) | (2,545 | ) | 3,191 | (1,499 | ) | 3,892 | |||||||||
Interest expense | 12,163 | 12,552 | 23,642 | 24,338 | |||||||||||
EBITDA | 11,349 | 25,216 | 30,116 | 43,291 | |||||||||||
Adjustments to EBITDA: | |||||||||||||||
Discontinued operations | 381 | 559 | 603 | 1,187 | |||||||||||
Asset impairments (1) | 10,859 | — | 10,859 | — | |||||||||||
Non-impairment restructuring activities (1) | 218 | 212 | 384 | 930 | |||||||||||
Stock-based compensation expense | 774 | 531 | 1,332 | 1,016 | |||||||||||
Foreign exchange translation | (1 | ) | 1 | 33 | (28 | ) | |||||||||
Loss on disposal of property and equipment (1) | 98 | ||||||||||||||
