CRC Health Reports Operating Results for the Year and Quarter ended December 31, 2005
CUPERTINO, Calif., April 28 /PRNewswire/ -- CRC Health Corporation
(formerly known as CRC Health Group, Inc.) ("CRC"), the nation's largest
chemical dependency and behavioral disorder treatment provider, announced
its results for the year and quarter ended December 31, 2005, reflecting
contributions from its acquisition of Sierra Tucson in May 2005 and other
recent acquisitions (the "2005 acquisitions"), and continued organic
growth.
Bain Capital Partners' acquisition of CRC
On February 6, 2006, investment funds managed by Bain Capital Partners
("Bain") completed the acquisition of CRC for approximately $723 million.
As part of the transaction certain members of the CRC management team
partnered with Bain by retaining an equity stake in CRC. The acquisition
resulted in several large expenses for merger-related costs in the fourth
quarter. CRC's results excluding these unusual items can be derived from
the table reconciling net income to EBITDA to adjusted EBITDA presented
below.
Historical Financial Results
Fourth Quarter Financial Results
Net revenue for the fourth quarter of 2005 was $57.9 million. Net
income for the fourth quarter of 2005 was $4.9 million. Net income for the
fourth quarter of 2005 includes merger-related costs of $1.6 million, and
unrealized gains from interest rate swap market valuations of $0.5 million.
Twelve Month Financial Results
Consolidated net revenue increased $43.4 million, or 26.2%, to $209.0
million in 2005 from $165.6 million in 2004. This increase was attributable
to increases of $38.3 million, or 44.3%, in residential treatment net
revenue, and $4.9 million, or 6.2%, in opiate treatment net revenue. The
same facility growth in residential treatment net revenue was $10.5
million, or 12.2% and the same facility growth in opiate treatment net
revenue was 4.4%. The acquisition of Sierra Tucson in May 2005 accounted
for $21.9 million of the increase in net revenue and the acquisition of The
Life Healing Center in July 2004 accounted for $3.6 million of the increase
in net revenue. Net income from continuing operations for the year ended
December 31, 2005 was $18.0 million compared to net income from continuing
operations of $13.2 million in the corresponding period in 2004.
Net income for the twelve months ended December 31, 2005 includes
merger- related costs of $1.6 million, costs related to a previously
contemplated initial public offering, which offering did not occur, of $0.8
million, realized and unrealized gains from the termination of an interest
rate swap and related market valuations totaling $2.2 million, write-offs
of deferred financing costs of $2.2 million, and other expenses associated
with hurricanes and a corporate office relocation totaling $0.3 million.
Pro Forma Financial Results
Pro forma net revenue for the three months and year ended December 31,
2005 was $57.9 million and $226.8 million, respectively. Pro forma net
income for the three months and year ended December 31, 2005 was $1.6
million and $7.2 million, respectively. Pro forma adjusted EBITDA for the
three months and year ended December 31, 2005 was $16.1 million and $65.6
million, respectively.
CRC has presented pro forma results of operations for the periods
presented because (i) the 2005 historical results do not include full year
operating results for Sierra Tucson and the other 2005 acquisitions and
(ii) CRC's capital structure changed significantly on February 6, 2006 as a
result of the Bain acquisition and the related financing and other
transactions. Accordingly, CRC believes the pro forma results of operations
presented herein are useful in understanding the 2005 results.
In addition, in order to supplement its pro forma condensed
consolidated financial statements presented in accordance with accounting
principles generally accepted in the United States of America ("GAAP"), CRC
is providing a summary to show the computation of earnings before interest,
taxes, depreciation and amortization ("EBITDA"), as well as adjusted
EBITDA. Adjusted 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 credit
agreement dated February 6, 2006. CRC believes that the adjusted EBITDA
information presented provides useful information to both management and
investors concerning its ability to meet its future debt service 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.
The unaudited pro forma results of operations for the periods presented
give effect to the Bain acquisition and the 2005 acquisitions as if such
transactions had occurred on January 1, 2005 and the pro forma condensed
consolidated balance sheet as of December 31, 2005 gives effect to the Bain
acquisition and the related financing as if they had occurred on December
31, 2005. The pro forma adjustments are based upon available information
and certain assumptions that the Company believes are reasonable. The pro
forma condensed consolidated statements of operations is for informational
purposes only and does not purport to represent what our results of
operations or financial position would actually be if the Bain acquisition
and the 2005 acquisitions occurred at any date, nor does such information
purport to project the results of operations for any future period.
CRC Health Corporation (formerly CRC Health Group, Inc.)
Condensed Consolidated Statements of Operations
(in thousands)
Three
12 Months 12 Months Months
Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31,
2004 2005 2005
(unaudited)
Net revenue:
Net client service revenue $163,705 $205,833 $56,626
Other revenue 1,898 3,189 1,319
Net revenue 165,603 209,022 57,945
Operating expenses:
Salaries and benefits 77,784 96,241 26,118
Supplies and facilities cost 41,588 54,827 16,027
Insurance 2,511 2,305 632
Provision for bad debts 2,834 3,041 1,158
Depreciation and amortization 3,699 3,891 1,162
Operating expenses 128,416 160,305 45,097
Income (loss) from operations 37,187 48,717 12,848
Interest expense (13,965) (19,814) (5,987)
Other financing costs - (2,185) -
Other income (expense) (12) 2,199 449
Income (loss) from continuing operations
before income taxes 23,210 28,917 7,310
Income tax expense (benefit) 9,996 10,916 2,457
Net income from continuing operations $13,214 $18,001 $4,853
CRC Health Corporation (formerly CRC Health Group, Inc.)
Pro Forma Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)
12 Months Three Months
Ended Ended
Dec. 31, Dec. 31,
2005 2005
Net revenue:
Net client service revenue $222,907 $56,626
Other revenue 3,882 1,319
Net revenue 226,789 57,945
Operating expenses:
Salaries and benefits 102,244 26,118
Supplies and facilities cost 59,329 15,971
Insurance 2,649 632
Provision for bad debts 3,022 1,158
Depreciation and amortization 8,433 2,137
Operating expenses 175,677 46,016
Income (loss) from operations 51,112 11,929
Interest expense (42,163) (10,533)
Other income (expense) 1,652 449
Income (loss) from continuing operations
before income taxes 10,601 1,845
Income tax expense (benefit) 3,416 218
Net income from continuing operations $7,185 $1,627
CRC Health Corporation (formerly CRC Health Group, Inc.)
Reconciliation of Pro Forma Net Income from Continuing Operations to
EBITDA to Adjusted EBITDA
(in thousands)
(unaudited)
12 Months Three Months
Ended Ended
Dec. 31, Dec. 31,
2005 2005
Net income from continuing operations $7,185 $1,627
Interest expense 42,163 10,533
Income tax expense (benefit) 3,416 218
Depreciation and amortization 8,433 2,137
EBITDA 61,197 14,515
Expenses of prior owners of acquired
businesses 808 -
Expenses incurred in anticipation of a
contemplated public offering 824
Expenses incurred related to the Bain
acquisition 1,241 1,241
Unrecognized profit on deferred
revenue from the Sierra Tucson acquisition 466
Management fees to Triod 147 -
Expense related to forgiveness of loan to CEO 205 205
Hurricane losses 191
Corporate office relocation expenses 80
Gain on termination of interest rate swap (1,643) (454)
Loss on fixed asset disposals 103 48
Management fees to Bain 2,000 500
Adjusted EBITDA $65,619 $16,055
CRC Health Corporation (formerly CRC Health Group, Inc.)
Condensed Consolidated Balance Sheets
(in thousands)
Historical Pro Forma
Dec. 31, 2005 Dec. 31, 2005
Assets
Current assets
Cash $5,077 $1,405
Accounts receivable - net 23,418 23,418
Prepaid expenses 4,510 4,808
Income taxes receivable - 9,602
Other current assets 7,096 5,453
Total current assets 40,101 44,686
Property and equipment - net 49,074 64,531
Goodwill 265,977 456,035
Intangibles - net 60,008 286,500
Other assets 8,994 23,271
Total assets $424,154 $875,023
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $5,348 $5,348
Other current liabilities 20,919 16,298
Revolving credit facility 9,500 4,300
Current portion of long-term debt 2,050 2,450
Total current liabilities 37,817 28,396
Long-term debt - less current portion 248,381 439,572
Deferred income taxes 9,877 112,350
Other long-term liabilities 469 230
Total liabilities 296,544 580,548
Mandatorily redeemable stock 115,625 -
Stockholders' equity (deficit) 11,985 294,475
$424,154 $875,023
CRC Health Corporation (formerly CRC Health Group, Inc.)
Selected Statistics
Three Months 12 Months
Ended Ended
Dec. 31, Dec. 31,
2005 2005
Residential treatment facilities data
Number of inpatient
facilities - end of period 21 21
Number of outpatient
facilities - end of period 18 18
Available beds - end of period 1,332 1,332
Average daily census 1,161.5 1,080.7
Occupancy rate 87.2% 88.1%
Net revenue per patient day $338.00 $316.53
Opiate treatment clinics data
Number of opiated treatment
clinics - end of period 49 49
Average daily census 21,409.3 21,053.8
Net revenue per patient day $10.95 $10.91
Reports and Conference Call
Per the requirements of the indenture governing CRC's 10 3/4% senior
subordinated notes due 2016, CRC has filed its 2005 audited financial
statements and associated MD&A with the indenture trustee. Note holders
wishing to review these documents should contact the trustee directly
(Richard Prokosch, U.S. Bank, RICHARD.PROKOSCH@usbank.com). CRC intends to
conduct a conference call to discuss its results in conjunction with the
release of its Q1 2006 financial results this coming May.
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; changes in applicable
regulations or a government investigation or assertion that CRC has
violated applicable regulations; 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 opiate 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; CRC's substantial indebtedness; and certain
restrictive covenants in CRC's debt documents.
SOURCE Robert Weiner Associates; CRC Health Corporation
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