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As filed with the Securities and Exchange
Commission on September 8, 2011
Registration
No. 333-175523
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Amendment No. 2
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ACADIA HEALTHCARE COMPANY,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction
of
incorporation or organization)
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8093
(Primary Standard Industrial
Classification Code Number)
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20-3879757
(I.R.S. Employer
Identification No.)
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830 Crescent Centre Drive,
Suite 610
Franklin, Tennessee 37067
(615) 861-6000
(Address, including
zip code, and telephone number, including area code, of
registrants principal executive offices)
Christopher
Howard, Executive Vice President, General Counsel and
Secretary
Acadia Healthcare Company, Inc.
830 Crescent Centre Drive, Suite 610
Franklin, Tennessee 37067
(615) 861-6000
(Name,
address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
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Carol Anne Huff
Richard W. Porter, P.C.
Kirkland & Ellis LLP
300 N. LaSalle
Chicago, IL 60654
(312) 862-2000
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Steven A. Cohen
Jeffrey E. Jordan
Arent Fox LLP
1050 Connecticut Avenue, NW
Washington, DC 20036
(202) 857-6000
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
Registration Statement becomes effective.
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer and
smaller reporting company in
Rule 12b-2
of the Securities Exchange Act of 1934 (Check One):
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
o Exchange
Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer):
o Exchange
Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender Offer):
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as
the Securities Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this proxy statement/prospectus is not complete
and may be changed. The securities being offered by the use of
this proxy statement/prospectus may not be issued until the
registration statement filed with the Securities and Exchange
Commission of which this proxy statement/prospectus is a part is
declared effective. This proxy statement/prospectus is not an
offer to sell these securities nor a solicitation of any offer
to buy these securities in any jurisdiction where the offer or
sale is not permitted.
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PRELIMINARY PROXY
STATEMENT/PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 2011
LETTER TO PHC STOCKHOLDERS
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PROXY
STATEMENT |
PROSPECTUS |
To the Stockholders of PHC, Inc.:
The Boards of Directors of PHC, Inc. (PHC) and
Acadia Healthcare Company, Inc. (Acadia) have
approved a merger combining PHC and Acadia.
If the merger is completed, PHC will become a wholly-owned
subsidiary of Acadia. The terms of the merger agreement provide
for Acadia to issue shares of its common stock to PHC
stockholders in exchange for all of the outstanding shares of
PHC, with holders of PHC Class A Common Stock receiving
one-quarter of a share of Acadia common stock for each share of
PHC common stock that they hold and holders of PHC Class B
Common Stock receiving one-quarter of a share of Acadia common
stock for each share of PHC Class B Common Stock that they
hold and an amount of cash equal to $5,000,000 divided by
the aggregate number of issued and outstanding shares of PHC
Class B Common Stock immediately prior to the effective
time of the merger (other than (i) any shares of PHC
Class B Common Stock to be cancelled pursuant to the merger
agreement and (ii) any share of PHC Class B Common
Stock owned by a subsidiary of PHC). Based on the number of
shares of PHC Class B Common Stock outstanding as of
May 23, 2011, this calculation would have resulted in a
cash payment of $6.46 per share of PHC Class B Common
Stock. Upon completion of the merger, Acadia stockholders will
retain 77.5% and the former PHC stockholders will own 22.5% of
Acadias common stock on a fully diluted basis (as defined
in the merger agreement). All of the outstanding options and
warrants to purchase PHC Class A Common Stock will be
assumed by Acadia in connection with the merger. The merger is
intended to qualify for federal income tax purposes as a
reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended.
PHC and Acadia anticipate that concurrent with the closing of
the merger, Acadias common stock will be listed for
trading on The NASDAQ National Market (NASDAQ) under
the symbol ACHC. Acadia has applied for listing on
NASDAQ and, in order to be listed, will be required to meet the
initial listing requirements established by NASDAQ. Following
the merger, PHC will be delisted from the NYSE Amex Stock Market.
You are requested, at the special meeting of PHC stockholders,
to approve the merger agreement. Your vote is important. We
cannot complete the merger unless the merger agreement is
approved by the affirmative vote of the holders of at least
(i) two-thirds of our outstanding Class A Common Stock
and Class B Common Stock, voting together as a single class
(with the holders of our Class A Common Stock having one
vote per share and the holders of our Class B Common Stock
having five votes per share), (ii) two-thirds of our
outstanding Class A Common Stock, voting as a separate
class and (iii) two-thirds of our outstanding Class B
Common Stock, voting as a separate class. The PHC board of
directors recommends that you vote FOR approval of the merger
agreement.
The proxy statement/prospectus provides you with detailed
information about Acadia, PHC, the merger agreement and the
proposed merger. We encourage you to read and carefully consider
the proxy statement/prospectus in its entirety. For a discussion
of significant matters that should be considered before voting
at the special meeting, see Risk Factors beginning
on page 18.
Your vote is important regardless of the number of shares you
own. Even if you plan to attend the special meeting, you may
vote your shares via the toll-free telephone number or via the
Internet, or you may complete, sign and date the enclosed proxy
card or voting instruction card and return it in the enclosed,
postage-paid envelope. Instructions regarding all three methods
of voting are contained on the proxy card and voting instruction
card and in the attached proxy statement/prospectus. If you
attend the annual meeting and prefer to vote in person, you may
do so in accordance with the procedures described in the
accompanying proxy statement/prospectus. If you hold shares in
the name of a brokerage firm, bank, nominee or other
institution, you must provide a proxy from that institution in
order to vote your shares at the special meeting, except as
otherwise discussed in the proxy statement/prospectus.
Sincerely,
Bruce A. Shear
President and Chief Executive Officer
Peabody, Massachusetts
,
2011
Important Notice Regarding the Availability of Proxy Materials
for the Special Meeting: The proxy statement/prospectus is
available at www.proxyvote.com.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of this
transaction or the Acadia common stock to be issued in the PHC
merger or determined whether this proxy statement/prospectus is
accurate or adequate. Any representation to the contrary is a
criminal offense.
This proxy
statement/prospectus is
dated ,
2011, and is first being mailed to
PHC stockholders on or
about ,
2011
NOTICE OF MEETING
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD
ON ,
2011
Dear PHC Stockholder:
You are cordially invited to attend a special meeting of
Stockholders of PHC, Inc. (PHC), which will be held
on ,
2011, at a.m., at the corporate offices of PHC,
Inc., 200 Lake Street, Suite 102, Peabody, Massachusetts
01960, for the purpose of acting upon the following proposals:
1. To consider and vote on a proposal to approve the
Agreement and Plan of Merger, dated as of May 23, 2011,
among PHC, Inc., Acadia Healthcare Company, Inc. and Acadia
Merger Sub, LLC, a wholly-owned subsidiary of Acadia (the
merger agreement), pursuant to which PHC will merge
with and into Acadia Merger Sub, LLC;
2. To consider and cast an advisory vote on the
compensation to be received by PHCs named executive
officers in connection with the merger;
3. To consider and vote on a proposal to approve the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies, in the event that there are not
sufficient votes at the time of such adjournment to approve the
merger agreement; and
4. To transact such other business as may properly come
before the meeting or any adjournments thereof.
The PHC board of directors recommends that you vote FOR the
resolution to approve the merger agreement. The PHC board of
directors has fixed the close of business on September 2, 2011
as the record date for determination of stockholders entitled to
notice of, and to vote at, the special meeting and at any
adjournments or postponements thereof.
Stockholders are entitled to appraisal rights under the
Massachusetts Business Corporation Act (the MBCA) in
connection with the merger. Any stockholder seeking to assert
appraisal rights should carefully follow the procedures
described in the accompanying proxy statement/prospectus. A copy
of the applicable provisions of the MBCA is attached as
Annex B to the accompanying proxy statement/prospectus.
By order of the Board of Directors of PHC
Paula C. Wurts, Clerk
Peabody, Massachusetts
,
2011
TABLE OF
CONTENTS
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iii
SUMMARY
This summary highlights selected information contained
elsewhere in this proxy statement/prospectus relating to the
merger. To understand the merger and related transactions fully
and for a more complete description of the merger and other
transactions contemplated by the merger agreement, you should
carefully read this entire proxy statement/prospectus as well as
the additional documents to which it refers, including the
merger agreement attached to this proxy statement/prospectus as
Annex A. For instructions on obtaining more information,
see Who Can Answer Other Questions on
page 8.
Parties
to the Merger (See pages 120 and 152)
Acadia Healthcare Company, Inc.
(Acadia). Founded in December 2005,
Acadia is a leading provider of behavioral health care services
in the United States. Acadia operates 19 inpatient behavioral
health care facilities in 13 states. On April 1, 2011,
Acadia acquired Youth & Family Centered Services, Inc.
(YFCS), the largest private, for-profit provider of
behavioral health, education and long term support services
exclusively for abused and neglected children and adolescents.
YFCS services include residential treatment care,
community-based services, acute care, specialized education
services, therapeutic group homes, therapeutic foster care and
medical and behavioral services. The address of Acadias
principal executive offices is 830 Crescent Centre Drive, Suite
610, Franklin, TN 37067.
Acadia Merger Sub, LLC (Merger
Sub). Acadia Merger Sub, LLC is a
wholly-owned subsidiary of Acadia that was recently formed in
Delaware solely for the purpose of completing the merger. It
does not conduct any business and has no material assets. Its
principal executive offices have the same address and telephone
number as Acadia.
PHC, Inc. (PHC). PHC is a national
healthcare company, which, through wholly-owned subsidiaries,
provides psychiatric services to individuals who have behavioral
health disorders, including alcohol and drug dependency, and to
individuals in the gaming and transportation industries.
PHCs subsidiaries operate various substance abuse
treatment and psychiatric facilities in Delaware, Michigan,
Nevada, Pennsylvania, Utah and Virginia. PHC provides
management, administrative and help line services through
contracts with major railroads and operates a call center
through a contract with Wayne County, Michigan. PHC also
operates a website, Wellplace.com, which provides education and
training for behavioral health professionals and internet
support services to all of PHCs subsidiaries. On
July 1, 2011, PHC acquired substantially all of the assets
of HHC Delaware, Inc. and its subsidiary (HHC
Delaware), relating to MeadowWood Behavioral Health System
(the assets acquired are referred to in this proxy
statement/prospectus as MeadowWood), an acute care
psychiatric hospital located in New Castle, Delaware, with 58
beds providing services to adults suffering with mental illness
and substance abuse. PHC was incorporated in 1976 and is a
Massachusetts corporation with corporate offices located at 200
Lake Street, Suite 102, Peabody, MA 01960.
The Combined Company. The combined
companys corporate name will be Acadia Healthcare Company,
Inc. Acadia will do business as Pioneer Behavioral Health
following the effective time of the merger. The combined company
will be the leading publicly traded pure-play provider of
inpatient behavioral health care services based upon the number
of licensed beds. Acadias principal executive office
located in Franklin, Tennessee will be the combined
companys principal executive office. Upon the completion
of the merger, Acadia stockholders will own 77.5% and PHC
stockholders will own 22.5% of the combined companys
issued and outstanding common stock on a fully diluted basis.
Fully diluted (as defined in the merger agreement
and as used in this proxy statement/prospectus with respect to a
partys post-closing ownership percentage in the combined
company) means the sum of (i) the aggregate number of
shares of Acadia common stock issued and outstanding immediately
prior to the effective time of the merger, plus (ii) the
aggregate number of shares of Acadia common stock into which
shares of PHC Class A Common Stock and Class B Common
Stock issued and outstanding immediately prior to the effective
time of the merger will be converted in accordance with the
merger agreement, plus (iii) the aggregate number of shares
of Acadia common stock issuable pursuant to PHC stock options
and warrants issued and outstanding immediately prior to the
effective time of the merger that have an exercise price equal
to or less than the average per share closing prices of PHC
Class A Common Stock as reported on AMEX for the ten full
trading days ending on May 20, 2011. Acadia has applied for
listing of its common stock to be issued in the merger on
NASDAQ. Joey A. Jacobs, the Chairman and Chief Executive Officer
of Acadia, will become the Chairman and Chief Executive
1
Officer of the combined company. Bruce A. Shear,
President & Chief Executive Officer of PHC, will
become the Executive Vice Chairman and a member of the board of
directors of the combined company.
From and after the effective time of the merger, unless
otherwise contemplated by Acadias certificate of
incorporation, the authorized number of directors on the Acadia
board of directors will be established and maintained at 12, and
the Acadia board of directors will be divided into three classes
designated as Class I, Class II and Class III.
The term of office of the initial Class I directors will
expire at the first annual meeting of stockholders after the
merger, the term of office of the initial Class II
directors will expire at the second succeeding annual meeting of
stockholders after the merger and the term of office of the
initial Class III directors will expire at the third
succeeding annual meeting of the stockholders after the merger.
At each annual meeting of stockholders after the merger,
directors elected to replace those of a class whose terms expire
at such annual meeting will be elected to hold office until the
third succeeding annual meeting after their election and until
their respective successors will have been duly elected and
qualified.
Except as set forth below, the following persons will be
appointed to the Acadia board of directors as of immediately
prior to the effective time of the merger and nominated for
re-election and elected to the Acadia board of directors as
follows: (i) Mr. Jacobs, as a Class III director
and, after the expiration of his initial term as a director, for
so long as he serves as the chief executive officer of Acadia or
any of its subsidiaries; (ii) Mr. Shear, as a
Class III director and, after the expiration of his initial
term as a director, for one additional three-year term as a
Class III director; (iii) William F. Grieco, a
Class II director designated by Mr. Shear and a
current director of PHC; and (iv) four directors designated
by Waud Capital Partners. Pursuant to the stockholders agreement
to be entered into in connection with the consummation of the
merger; provided that (A) so long as Waud Capital Partners,
L.L.C. and certain of its affiliates (collectively, Waud
Capital Partners) retain voting control over at least 50%
of the outstanding voting securities of Acadia, Waud Capital
Partners will have the right to designate seven directors, four
of which will be Class I directors and three of which will
be Class II directors and (B) in the event Waud
Capital Partners ceases to have voting control over at least 50%
of the outstanding voting securities of Acadia, Waud Capital
Partners will have the right to designate such number of
directors of the total authorized number of directors in
proportion to the total number of shares of Acadia over which
Waud Capital Partners retains voting control relative to the
total number of shares of Acadia then issued and outstanding
(with the number of representatives rounded up to the next whole
number in all cases); provided that all such rights will
terminate when Waud Capital Partners ceases to hold at least
17.5% of Acadias outstanding voting securities.
Risks
Associated with Acadia, PHC and the Merger (See
page 18)
The merger poses a number of risks to each company and its
respective stockholders. In addition, both Acadia and PHC are
subject to various risks associated with their businesses and
their industry. These risks are discussed in detail under the
caption Risk Factors beginning on page 18. You
are encouraged to read and consider all of these risks carefully.
Special
Meeting of the PHC Stockholders (See page 50)
The purpose of the special meeting is to hold a vote on the
merger agreement and related matters. The special meeting will
be held
on ,
2011, at a.m., local time, at PHCs
headquarters located at 200 Lake Street, Suite 102,
Peabody, MA 01960.
Recommendation
of the PHC Board of Directors (See page 51)
After careful consideration, the PHC board of directors has
unanimously (with Mr. Shear abstaining) approved the merger
agreement and determined that the merger agreement is fair to,
and in the best interests of, the stockholders of PHC.
Therefore, the PHC board of directors recommends PHC
stockholders vote FOR the approval of the merger agreement.
Opinion
of Stout Risius Ross, Inc. (See page 61)
In connection with the merger, Stout Risius Ross, Inc.
(SRR) delivered a written opinion to the PHC board
of directors as to the fairness, from a financial point of view,
as of the date of their opinion, to the holders of PHCs
Class A Common Stock and Class B Common Stock
(collectively, the PHC common stock), of the merger
2
consideration to be received by such holders (in the aggregate),
and to the holders of PHCs Class A Common Stock, of
the merger consideration to be received by such holders (in the
aggregate). The full text of SRRs written opinion, dated
May 19, 2011, is attached hereto as Annex C. You are
encouraged to read this opinion carefully in its entirety for a
description of the procedures followed, assumptions made,
matters considered and limitations on the review undertaken.
SRRs opinion is addressed to the PHC board of directors
and does not constitute a recommendation to any stockholder as
to any matters relating to the merger.
Acadias
Financing for the Merger (See page 76)
In connection with the merger, Acadia has entered into a second
amendment, dated July 12, 2011 (the Second
Amendment), to its senior secured credit facility (the
Senior Secured Credit Facility). The Second
Amendment will, among other things, permit the merger and other
transactions contemplated by the merger agreement. The
effectiveness of the Second Amendment is subject to certain
closing conditions as described in Acadia
Managements Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital
Resources Following the Merger, including
consummation of the merger and related transactions on or prior
to December 15, 2011.
In connection with the merger agreement, Acadia received an
amended and restated debt commitment letter, dated July 12,
2011 (the Debt Commitment Letter), from Jefferies
Finance LLC (Jefferies Finance) to provide a senior
unsecured bridge loan facility of up to $150 million in the
event that $150 million of senior unsecured notes (the
Senior Notes) are not issued by Acadia to finance
the merger (the Bridge Facility). Net proceeds from
the issuance of $150 million of Senior Notes or, if the
Senior Notes are not issued, drawings under the
$150 million Bridge Facility will be used, in addition to
existing cash balances, to pay the aggregate $5.0 million
in cash payable to holders of PHC Class B Common Stock in
connection with the merger, pay a dividend to Acadias
existing stockholders, refinance certain existing indebtedness
of PHC and pay fees and expenses incurred in connection with the
merger. Acadia expects to issue $150.0 million in aggregate
principal amount of the Senior Notes
and/or
borrow $150.0 million in aggregate principal amount under
the Bridge Facility. A portion of the borrowings will be used to
make a payment to Waud Capital in connection with the
termination of the Professional Services Agreement between
Acadia and Waud Capital (as more fully described in Acadia
Interested Transactions Professional Services
Agreement, the Professional Services
Agreement) and to pay a dividend to the stockholders of
Acadia immediately prior to the merger. The aggregate amount of
such payments will be between $90 million and
$80 million depending on the amount of net cash available
after repayment of PHCs indebtedness, the Class B
merger consideration and fees and expenses related to the
merger. We refer to such amount as the net proceeds.
For a description of this calculation, see The Merger
Agreement Acadia Dividend. To the extent the
amount available for such payments is less than
$90 million, up to $10 million may be paid to
Acadias stockholders in the form of promissory notes (each
a Deficit Note) issued by Acadia. Pursuant to the
terms of the merger agreement, it is a condition to the
obligation of both PHC and Acadia to complete the merger that
the net proceeds not be less than $80 million. The first
$15.6 million of the net proceeds will be used to make a
payment to Waud Capital in connection with the termination of
the Professional Services Agreement, with the remainder
(including any Deficit Notes) issued to Acadia stockholders
immediately prior to the merger as a dividend.
The Bridge Facility commitment is subject to certain closing
conditions described under Acadia Managements
Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital
Resources Following the Merger. The Bridge
Facility commitment will terminate on December 15, 2011 if
the closing of the Bridge Facility has not been consummated on
or before such date or if the merger agreement has been
terminated or if the merger has been abandoned. In addition, the
commitments to provide and arrange unsecured bridge loans will
terminate upon the issuance of the Senior Notes.
Each of Acadia and PHC is obligated under the merger agreement
to use its reasonable best efforts to arrange the debt financing
on the terms contemplated. The receipt of the debt financing on
the terms and conditions set forth in the Debt Commitment Letter
is a condition to the obligation of both Acadia and PHC to
consummate the merger.
Record
Date (See page 50)
The PHC board of directors has fixed the close of business on
September 2, 2011, as the record date for determining the
holders of PHCs Class A Common Stock and Class B
Common Stock entitled to notice of and to
3
vote at the special meeting. As of the record date, PHC had
18,764,118 shares of Class A Common Stock and
773,717 shares of Class B Common Stock outstanding.
Vote
Required and Voting Power (See page 50)
PHC stockholders are being asked to vote on a proposal to
approve the merger agreement. The merger agreement provides that
it is a condition to completion of the merger that the proposal
to approve the merger agreement be approved by the stockholders
of PHC. Approval of this proposal requires an affirmative vote
of (i) at least two-thirds of the outstanding Class A
Common Stock and Class B Common Stock entitled to vote,
voting as a single class, (ii) at least two-thirds of the
outstanding Class A Common Stock entitled to vote, voting
as a single class and (iii) at least two-thirds of the
outstanding Class B Common Stock entitled to vote, voting
as a single class.
Each record holder of shares of PHC Class A Common Stock
will be entitled at the special meeting to one vote for each
share of PHC Class A Common Stock held on the record date.
Each record holder of shares of PHC Class B Common Stock
will be entitled at the special meeting to five votes for each
share of PHC Class B Common Stock held on the record date
on any matter on which they vote together with the holders of
the Class A Common Stock.
Conversion
of PHC Shares (See page 85)
Each share of PHC Class A Common Stock issued and
outstanding immediately prior to the effective time (other than
(i) any shares of PHC Class A Common Stock to be
cancelled pursuant to the merger agreement, (ii) any shares
of PHC Class A Common Stock owned by any PHC subsidiary and
(iii) any shares held by stockholders that properly demand
and perfect their appraisal rights under the Massachusetts
Business Corporation Act (MBCA) and the merger
agreement (Excluded Shares)) will be converted into
and become exchangeable for one-quarter
(1/4)
of one fully paid and nonassessable share of Acadia common
stock, par value $0.01 per share. Each share of PHC Class B
Common Stock issued and outstanding immediately prior to the
effective time (other than the Excluded Shares) will be
converted into and become exchangeable for (x) one-quarter
(1/4)
of one fully paid and nonassessable share of Acadia common
stock, par value $0.01 per share and (y) an amount of cash
equal to $5.0 million divided by the aggregate
number of issued and outstanding shares of PHC Class B
Common Stock immediately prior to the effective time of the
merger (other than (i) any shares of PHC Class B
Common Stock to be cancelled pursuant to the merger agreement
and (ii) any share of PHC Class B Common Stock owned
by a subsidiary of PHC). Based on the number of shares of PHC
Class B Common Stock outstanding as of May 23, 2011,
this calculation would have resulted in a cash payment of $6.46
per share of PHC Class B Common Stock.
Voting
Agreement (See page 101)
The directors and executive officers of PHC, who as of
May 23, 2011 held in the aggregate approximately 11% of the
outstanding PHC Class A Common Stock, 93.2% of PHC
Class B Common Stock and 24.8% of the outstanding voting
power of the PHC Class A Common Stock and the PHC
Class B Common Stock voting together as a single class,
have agreed to vote their shares in favor of approval of the
merger agreement.
Interests
of PHCs Directors and Executive Officers (See
page 82)
Upon completion of the merger and the issuance of Acadia common
stock in the merger, the directors and executive officers of PHC
will collectively beneficially own approximately 3.2% of the
outstanding stock of Acadia, calculated on the basis set forth
under Beneficial Ownership of Acadia Common Stock After
the Merger.
The directors and executive officers of PHC have interests in
the merger that are different from, and in addition to, the
interests of PHC stockholders generally.
Pursuant to the merger agreement, upon completion of the merger,
holders of PHCs Class B Common Stock will
collectively receive cash consideration in the merger of $5.0
million. Mr. Shear, PHCs current Chief Executive
Officer, beneficially owns approximately 93.2% of PHCs
Class B Common Stock and will be entitled to receive cash
merger consideration of approximately $4.7 million.
Mr. Shear, Robert H. Boswell, PHCs current Senior
Vice President, and Paula C. Wurts, PHCs current Chief
Financial Officer, are participants in the PHC
change-in-control
supplemental benefit plan for certain executive
4
employees. Pursuant to such plan, upon the closing of the
merger, Mr. Shear, Mr. Boswell and Ms. Wurts are
entitled to receive change in control payments of approximately
$1,530,000, $465,000 and $408,000, respectively, payable as soon
as practicable, but in no event later than 30 days,
following the date of the closing of the merger.
Mr. Shear, Mr. Boswell and Ms. Wurts hold stock
options to purchase shares of PHC Class A Common Stock,
subject to various vesting provisions. Pursuant to the merger
agreement, upon completion of the merger, Acadia will assume
these options in accordance with their existing terms, with the
number of shares and the exercise prices adjusted in accordance
with the merger exchange rate. Mr. Shear currently holds
170,000 options exercisable at prices ranging from $1.08 per
share to $2.95 per share, Mr. Boswell currently holds
85,000 options exercisable at prices ranging from $1.08 per
share to $2.95 per share and Ms. Wurts currently holds
85,000 options exercisable at prices ranging from $1.08 per
share to $2.95 per share.
Upon the closing of the merger, notwithstanding the terms and
conditions of the corresponding PHC stock option plan or as
otherwise set forth in a stock option agreement, with respect to
the assumed PHC options granted to current PHC directors,
(i) all such assumed options (other than those held by
Mr. Shear) will be fully vested at closing, and
(ii) such assumed options will not terminate as a result of
such holder ceasing or failing to be a director or employee and
will be fully exercisable at any time prior to the expiration of
the option term.
After the closing of the merger, Messrs. Shear and Boswell
are expected to be employed by the combined company pursuant to
employment agreements which are to become effective upon the
closing of the merger.
Upon the closing of the merger, Mr. Shear will join the
Acadia board of directors. In addition, upon the closing of the
merger, Mr. Shear will become Acadias Executive Vice
Chairman. After the closing of the merger, Messrs. Shear
and Boswell may receive stock options to purchase shares of
Acadia common stock.
Structure
and Effects of the Merger (See page 85)
At the completion of the merger, PHC will be merged with and
into Merger Sub, and Merger Sub will continue as the surviving
company of the merger and a wholly-owned subsidiary of Acadia.
Treatment
of PHC Stock Options and Warrants to Purchase PHC Stock (See
pages 85 and 86)
After the completion of the merger, each outstanding PHC option
granted under PHCs stock option plans will be assumed by
Acadia and will be converted into an option to purchase
one-quarter of one share of Acadia common stock and each warrant
to purchase one share of PHC stock will be assumed by Acadia and
will be converted into a warrant to purchase one-quarter of one
share of Acadia common stock. Except with respect to stock
options previously granted to PHC directors (other than
Mr. Shear), as further described in The Merger
Agreement Assumption of Stock Options, each
assumed option and warrant will be subject to the same terms and
conditions (including expiration date and exercise provisions as
contemplated by the applicable award agreement) as were
applicable to the corresponding option or warrant, as
applicable, immediately prior to the effective time of the
merger.
Completion
and Effectiveness of the Merger (See page 85)
Acadia and PHC expect to complete the merger when all of the
conditions to completion of the merger contained in the merger
agreement have been satisfied or waived. The merger will become
effective upon the filing of a certificate of merger with the
Secretary of State of the State of Delaware and the Secretary of
the Commonwealth of Massachusetts.
Acadia and PHC are working toward satisfying the conditions to
the merger and expect to complete the merger in the fourth
quarter of 2011.
Restrictions
on Solicitation of Alternative Transactions by PHC (See
page 91)
The merger agreement contains restrictions on the ability of PHC
to solicit or engage in discussions or negotiations with a third
party with respect to a proposal to acquire a significant
interest in the equity or assets of PHC. Notwithstanding these
restrictions, the merger agreement provides that, under
specified circumstances, if PHC receives an unsolicited proposal
from a third party to acquire a significant interest in PHC that
PHC may engage in discussions or
5
negotiations with a third party if the PHC board of directors
determines in good faith, after consultation with outside legal
counsel, that failure to take such action would be inconsistent
with the directors fiduciary duties under applicable laws,
and the PHC board of directors determines in good faith, based
on the information then available and after consultation with
its independent financial advisor and outside legal counsel,
that such acquisition proposal either constitutes a superior
proposal or is reasonably likely to result in a superior
proposal.
Conditions
to the Completion of the Merger (See page 96)
Acadias and PHCs obligations to complete the merger
are subject to certain conditions described under the heading
The Merger Agreement Conditions to the
Merger.
Termination
of the Merger Agreement and Payment of Certain Termination Fees
(See page 98)
Acadia and PHC may terminate the merger agreement by mutual
agreement and under certain other circumstances. Acadia and PHC
have agreed that if the merger agreement is terminated under the
circumstances described under The Merger
Agreement Termination Fee, PHC will pay Acadia
$3,000,000 in fees.
Fees and
Expenses; Expense Reimbursement (See pages 99 and
100)
The merger agreement provides that, except in circumstances
described below, regardless of whether the merger is completed,
Acadia and PHC will each pay their own expenses incurred in
connection with the merger, except that Acadia and PHC will pay
75% and 25%, respectively, of all fees and expenses, other than
attorneys and accountants fees, incurred in relation
to the printing and filing with the Securities and Exchange
Commission (the SEC) of the registration statement
of which this proxy statement/prospectus is a part, the proxy
statement/prospectus
and any amendments or supplements to any of such filings, the
filing fees under any applicable antitrust law or regulation or
state blue sky laws or the listing fees incurred in
obtaining (or attempting to obtain) listing
and/or
eligibility on NASDAQ or another national securities exchange.
In the event the merger agreement is terminated by PHC due to
the fact that Acadia or Merger Sub has breached any of its
covenants, agreements, representations or warranties set forth
in the merger agreement such that a condition related to
PHCs obligation to close would not be satisfied, then
Acadia will pay all of PHCs reasonably documented
out-of-pocket
fees and expenses (including reasonable legal fees and expenses)
actually incurred by PHC and its affiliates on or prior to the
termination of merger agreement in connection with the
transactions contemplated by the merger agreement, which amount
will in no event exceed $1,000,000 in the aggregate and shall be
paid in four annual installments, with the first annual
installment due within two business days of such termination,
and the remaining payments being made on the first, second and
third anniversary of such termination date.
In the event the merger agreement is terminated by Acadia under
circumstances in which the termination fee is not then payable,
due to the fact that (i) PHC has breached any of its
covenants, agreements, representations or warranties such that a
condition related to Acadias obligation to close would not
be satisfied or (ii) the supplement to the disclosure
schedules delivered to Acadia in connection with PHCs
recent acquisition of MeadowWood would cause a breach of a PHC
representation or warranty such that a condition related to
Acadias obligation to close would not be satisfied, then
PHC will pay all of Acadias reasonably documented
out-of-pocket
fees and expenses (including reasonable legal fees and expenses)
actually incurred by Acadia and its affiliates on or prior to
the termination of the merger agreement in connection with the
transactions contemplated by the merger agreement, which amount
will in no event exceed $1,000,000 in the aggregate and shall be
paid in four annual installments, with the first annual
installment due within two business days of such termination,
and the remaining payments being made on the first, second and
third anniversary of such termination date.
Stockholders
Agreement (See page 182)
Acadia, certain members of Acadias management and Waud
Capital Partners and certain of its affiliates will enter into a
stockholders agreement in connection with the consummation of
the merger. The stockholders agreement will contain certain
voting agreements and transfer restrictions with respect to
equity of Acadia held by the stockholders party to the
stockholders agreement and impose certain negative and
affirmative covenants on
6
Acadia and its subsidiaries. The stockholders agreement will
also grant certain board nomination, information and consent
rights to Waud Capital Partners. See Stockholders
Agreement for a description of the agreement.
Material
United States Federal Tax Consequences of the Merger (See
page 77)
The closing of the merger is conditioned upon the receipt by
Acadia and PHC of opinions that the merger will constitute a
reorganization for United States federal income tax purposes and
that Acadia and PHC will be parties to the reorganization for
United States federal income tax purposes. Assuming the merger
constitutes a reorganization, subject to the limitations and
qualifications described in The Merger
Material United States Federal Income Tax Consequences of the
Merger, PHC stockholders whose shares of PHC common stock
are exchanged in the merger solely for shares of Acadia common
stock will not recognize capital gain or loss for United States
federal income tax purposes on the exchange (except to the
extent they receive cash in lieu of a fractional share of Acadia
common stock), and PHC stockholders whose shares of PHC common
stock are exchanged in the merger for shares of Acadia common
stock and cash will recognize capital gain (but not loss)
realized on the exchange in an amount not exceeding the amount
of cash received (excluding cash received in lieu of a
fractional share of Acadia common stock). This tax treatment may
not apply to certain PHC stockholders, as described in The
Merger Material United States Federal Income Tax
Consequences of the Merger. Determining the actual tax
consequences of the merger to you may be complex and will depend
on the facts of your own situation. You should consult your own
tax advisors to fully understand the tax consequences to you of
the merger, including estate, gift, state, local or
non-United
States tax consequences of the merger.
Accounting
Treatment of the Merger (See page 76)
In accordance with accounting principles generally accepted in
the United States of America (GAAP), Acadia will
account for the acquisition of shares of PHC Class A Common
Stock and Class B Common Stock through the merger under the
acquisition method of accounting for business combinations.
Dissenters
Rights (See page 87)
Holders of shares of PHC Class A Common Stock and
Class B Common Stock that are issued and outstanding
immediately prior to the effective time who have not voted in
favor of or consented in writing to the merger and who have
properly demanded and perfected their rights to be paid the fair
value of such shares in accordance with Section 13.02 of
the MBCA, will not have such shares converted into or
exchangeable for the right to receive merger consideration and
will be entitled only to receive payment of the fair value of
such shares, in accordance with Section 13.02 of the MBCA,
unless and until such stockholder withdraws or effectively loses
the right to dissent.
Surrender
of PHC Stock Certificates (See page 87)
Following the effective time of the merger, Acadia will cause a
letter of transmittal to be mailed to all holders of PHC
Class A Common Stock and Class B Common Stock
containing instructions for surrendering their certificates.
Certificates should not be surrendered until the letter of
transmittal is received, fully completed and returned as
instructed in the letter of transmittal.
Regulatory
Approvals (See page 83)
We do not believe that notification will be required under the
Hart-Scott-Rodino
Antitrust Act of 1976, as amended (the HSR Act), and
the rules promulgated thereunder. However, given uncertainties
regarding the future market price of the publicly traded stock
of PHC and the uncertain closing date, we cannot currently
predict with certainty whether notification will be required
under the HSR Act. If such notification is required, the merger
cannot be completed until each of Acadia and PHC files a
notification and report form with the FTC and the Antitrust
Division of the Department of Justice under the HSR Act and the
applicable waiting period has expired or been terminated.
Acadia
and/or PHC
currently intend to obtain approvals from, file new license
and/or
permit applications with, or provide notice to applicable
governmental authorities in connection with the merger. The
approval of such governmental authorities, if any, is not a
condition to Acadia or PHCs obligation to complete the
merger except where the failure to obtain any such approval
would reasonably be expected to have a Pioneer Material
Adverse
7
Effect or an Acadia Material Adverse Effect
(each as defined in the merger agreement) or a material adverse
effect on the parties ability to consummate such
transactions.
Litigation
Regarding the Merger (See page 84)
In connection with the merger, a putative stockholder class
action lawsuit (as amended) has been filed in Massachusetts
state court. A second lawsuit has also been filed in federal
district court in Massachusetts making essentially the same
allegations against the same defendants. PHC, Acadia and Merger
Sub believe that these lawsuits are without merit and intend to
defend them vigorously.
Comparison
of Acadia and PHC Stockholder Rights (See
page 186)
Upon completion of the merger, PHC stockholders will become
stockholders of Acadia. The internal affairs of Acadia will be
governed by Acadias amended and restated certificate of
incorporation and amended and restated bylaws attached hereto as
Annexes D and E. The internal affairs of PHC are governed
by PHCs restated articles of organization and bylaws. Due
to differences between the governing documents of Acadia and
PHC, the merger will result in PHC stockholders having different
rights once they become Acadia stockholders.
Who Can
Answer Other Questions
If you have any questions about the mergers or the other
transactions contemplated by the merger agreement or, if you are
a PHC stockholder, how to submit your proxy or would like
additional copies of this proxy statement/prospectus, you should
contact PHCs proxy solicitor:
Georgeson Inc.
199 Water Street, 26th Floor
New York, New York
10038-3560
Banks and Brokers Call (212) 440-9800
All Others Call Toll-Free (888) 658-3624
8
Summary
Historical Condensed Consolidated Financial Data and Pro Forma
Condensed Combined Financial Data
Acadia
Historical Financial Data
The following table sets forth summary historical condensed
consolidated financial data for Acadia Healthcare Company, Inc.
and its subsidiaries on a consolidated basis for the periods
ended and at the dates indicated and does not give effect to
YFCS operating results prior to April 1, 2011 or the
consummation of the merger. Acadia has derived the historical
consolidated financial data as of December 31, 2009 and
2010 and for each of the three years in the period ended
December 31, 2010 from Acadia Healthcare Company,
LLCs audited consolidated financial statements included
elsewhere in this proxy statement/prospectus. Acadia has derived
the summary consolidated financial data as of and for the six
months ended June 30, 2010 and 2011 from Acadia Healthcare
Company, Inc.s unaudited interim condensed consolidated
financial statements included elsewhere in this proxy
statement/prospectus. Acadia has derived the summary
consolidated financial data as of December 31, 2008 from Acadia
Healthcare Company, LLCs audited consolidated financial
statements not included in this proxy statement/prospectus. The
results for the six months ended June 30, 2010 and 2011 are
not necessarily indicative of the results that may be expected
for the entire fiscal year. The summary consolidated financial
data below should be read in conjunction with Acadia
Managements Discussion and Analysis of Financial Condition
and Results of Operations, Unaudited Pro Forma
Condensed Combined Financial Statements and Acadia
Healthcare Company, LLCs consolidated financial statements
and the notes thereto included elsewhere in this proxy
statement/prospectus. On May 13, 2011, Acadia Healthcare
Company, LLC elected to convert to a corporation (Acadia
Healthcare Company, Inc.) in accordance with Delaware law.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net patient service revenue
|
|
$
|
33,353
|
|
|
$
|
51,821
|
|
|
$
|
64,342
|
|
|
$
|
32,472
|
|
|
$
|
82,961
|
|
Salaries, wages and benefits*
|
|
|
22,342
|
|
|
|
30,752
|
|
|
|
36,333
|
|
|
|
18,374
|
|
|
|
70,538
|
|
Professional fees
|
|
|
952
|
|
|
|
1,977
|
|
|
|
3,612
|
|
|
|
1,240
|
|
|
|
3,130
|
|
Provision for doubtful accounts
|
|
|
1,804
|
|
|
|
2,424
|
|
|
|
2,239
|
|
|
|
1,186
|
|
|
|
1,002
|
|
Other operating expenses**
|
|
|
8,328
|
|
|
|
12,116
|
|
|
|
13,286
|
|
|
|
6,523
|
|
|
|
23,406
|
|
Depreciation and amortization
|
|
|
740
|
|
|
|
967
|
|
|
|
976
|
|
|
|
480
|
|
|
|
1,001
|
|
Interest expense, net
|
|
|
729
|
|
|
|
774
|
|
|
|
738
|
|
|
|
358
|
|
|
|
2,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, before income taxes
|
|
|
(1,542
|
)
|
|
|
2,811
|
|
|
|
7,158
|
|
|
|
4,311
|
|
|
|
(18,331
|
)
|
Income tax provision (benefit)
|
|
|
20
|
|
|
|
53
|
|
|
|
477
|
|
|
|
287
|
|
|
|
2,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(1,562
|
)
|
|
|
2,758
|
|
|
|
6,681
|
|
|
|
4,024
|
|
|
|
(21,328
|
)
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(156
|
)
|
|
|
119
|
|
|
|
(471
|
)
|
|
|
96
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,718
|
)
|
|
$
|
2,877
|
|
|
$
|
6,210
|
|
|
$
|
4,120
|
|
|
$
|
(21,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
Balance Sheet Data (as of end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
45
|
|
|
$
|
4,489
|
|
|
$
|
8,614
|
|
|
$
|
6,961
|
|
|
$
|
3,456
|
|
Total assets
|
|
|
32,274
|
|
|
|
41,254
|
|
|
|
45,412
|
|
|
|
42,938
|
|
|
|
260,203
|
|
Total debt
|
|
|
11,062
|
|
|
|
10,259
|
|
|
|
9,984
|
|
|
|
10,103
|
|
|
|
140,313
|
|
Total members equity
|
|
|
15,817
|
|
|
|
21,193
|
|
|
|
25,107
|
|
|
|
22,781
|
|
|
|
74,583
|
|
|
|
|
* |
|
Salaries, wages and benefits for the six months ended
June 30, 2011 includes $19.8 million of equity-based
compensation expense recorded related to equity units issued in
conjunction with the YFCS acquisition. |
|
|
|
** |
|
Expenses of $8.4 million related to the YFCS acquisition
and PHC merger are reflected in other operating expenses for the
six months ended June 30, 2011. |
9
YFCS
Historical Financial Data
The following table sets forth summary historical condensed
consolidated financial data for YFCS and its subsidiaries on a
consolidated basis for the periods ended and at the dates
indicated and does not give effect to Acadias acquisition
of YFCS or the consummation of the merger . Acadia has derived
the historical consolidated financial data as of
December 31, 2009 and 2010 and for each of the three years
in the period ended December 31, 2010 from YFCS
audited consolidated financial statements included elsewhere in
this proxy statement/prospectus. Acadia has derived the summary
consolidated financial data as of and for the three months ended
March 31, 2010 and 2011 from YFCS unaudited interim
condensed consolidated financial statements included elsewhere
in this proxy statement/prospectus. Acadia has derived the
summary consolidated financial data as of December 31, 2008 from
YFCS audited consolidated financial statements not
included in this proxy statement/prospectus. The results for the
three months ended March 31, 2010 and 2011 are not
necessarily indicative of the results that may have been
expected for the entire fiscal year. The summary financial data
below should be read in conjunction with Acadia
Managements Discussion and Analysis of Financial Condition
and Results of Operations YFCS Acquisition and
Unaudited Pro Forma Condensed Combined Financial
Statements and YFCS consolidated financial
statements and the notes thereto included elsewhere in this
proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
180,646
|
|
|
$
|
186,586
|
|
|
$
|
184,386
|
|
|
$
|
45,489
|
|
|
$
|
45,686
|
|
Salaries and benefits
|
|
|
110,966
|
|
|
|
113,870
|
|
|
|
113,931
|
|
|
|
27,813
|
|
|
|
29,502
|
|
Other operating expenses
|
|
|
37,704
|
|
|
|
37,607
|
|
|
|
38,146
|
|
|
|
8,944
|
|
|
|
9,907
|
|
Provision for bad debts
|
|
|
1,902
|
|
|
|
(309
|
)
|
|
|
525
|
|
|
|
56
|
|
|
|
208
|
|
Interest expense
|
|
|
12,488
|
|
|
|
9,572
|
|
|
|
7,514
|
|
|
|
1,954
|
|
|
|
1,726
|
|
Depreciation and amortization
|
|
|
9,419
|
|
|
|
7,052
|
|
|
|
3,456
|
|
|
|
914
|
|
|
|
819
|
|
Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
23,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, before income taxes
|
|
|
8,167
|
|
|
|
18,794
|
|
|
|
(2,714
|
)
|
|
|
5,808
|
|
|
|
3,524
|
|
Provision for income taxes
|
|
|
3,132
|
|
|
|
7,133
|
|
|
|
5,032
|
|
|
|
2,267
|
|
|
|
1,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
5,035
|
|
|
|
11,661
|
|
|
|
(7,746
|
)
|
|
|
3,541
|
|
|
|
2,120
|
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
964
|
|
|
|
(1,443
|
)
|
|
|
(4,060
|
)
|
|
|
(151
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
5,999
|
|
|
$
|
10,218
|
|
|
$
|
(11,806
|
)
|
|
$
|
3,390
|
|
|
$
|
2,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
|
Balance Sheet Data (as of end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
20,874
|
|
|
$
|
15,294
|
|
|
$
|
5,307
|
|
|
$
|
8,570
|
|
|
$
|
4,009
|
|
Total assets
|
|
|
271,446
|
|
|
|
254,620
|
|
|
|
217,530
|
|
|
|
249,748
|
|
|
|
216,609
|
|
Total debt
|
|
|
138,234
|
|
|
|
112,127
|
|
|
|
86,073
|
|
|
|
98,831
|
|
|
|
84,304
|
|
Total stockholders equity
|
|
|
102,696
|
|
|
|
113,921
|
|
|
|
102,126
|
|
|
|
117,311
|
|
|
|
104,182
|
|
10
PHC
Historical Financial Data
The following table sets forth summary historical condensed
consolidated financial data for PHC and its subsidiaries on a
consolidated basis for the periods ended and at the dates
indicated and does not give effect to the recently completed
MeadowWood acquisition completed on July 1, 2011 or the
consummation of the merger. PHC has derived the historical
consolidated financial data as of June 30, 2010 and 2011
and for each of the two years in the period ended June 30,
2011 from PHCs audited financial statements included
elsewhere in this proxy statement/prospectus. Certain amounts
for all periods presented have been reclassified to be
consistent with Acadias financial information. PHC has
derived the historical consolidated financial data as of
June 30, 2009 and for the year ended June 30, 2009
from PHCs audited financial statements not included in
this proxy statement/prospectus. The summary financial data
below should be read in conjunction with the PHC
Managements Discussion and Analysis of Financial Condition
and Results of Operations and Unaudited Pro Forma
Condensed Combined Financial Statements and PHCs
consolidated financial statements and the notes thereto included
elsewhere in this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
46,411
|
|
|
$
|
53,077
|
|
|
$
|
62,008
|
|
Patient care expenses
|
|
|
23,835
|
|
|
|
26,307
|
|
|
|
30,236
|
|
Contract expenses
|
|
|
3,016
|
|
|
|
2,965
|
|
|
|
3,618
|
|
Provision for doubtful accounts
|
|
|
1,638
|
|
|
|
2,131
|
|
|
|
3,406
|
|
Administrative expenses
|
|
|
18,721
|
|
|
|
19,111
|
|
|
|
22,206
|
|
Legal settlement
|
|
|
|
|
|
|
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(799
|
)
|
|
|
2,563
|
|
|
|
2,096
|
|
Other income including interest expense, net
|
|
|
(177
|
)
|
|
|
(37
|
)
|
|
|
(108
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(976
|
)
|
|
|
2,526
|
|
|
|
1,988
|
|
Provision for (benefit from) income taxes
|
|
|
65
|
|
|
|
1,106
|
|
|
|
1,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(1,041
|
)
|
|
|
1,420
|
|
|
|
580
|
|
Net income (loss) from discontinued operations
|
|
|
(1,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,454
|
)
|
|
$
|
1,420
|
|
|
$
|
580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
|
Balance Sheet Data (as of end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
3,199
|
|
|
$
|
4,540
|
|
|
$
|
3,668
|
|
Total assets
|
|
|
22,692
|
|
|
|
25,650
|
|
|
|
28,282
|
|
Total debt
|
|
|
2,241
|
|
|
|
2,557
|
|
|
|
2,239
|
|
Total stockholders equity
|
|
|
16,044
|
|
|
|
17,256
|
|
|
|
17,915
|
|
11
Summary
Unaudited Pro Forma Condensed Combined Financial
Data
The following summary unaudited pro forma condensed combined
statements of operations for the six months ended June 30,
2011 and year ended December 31, 2010 reflect
(i) Acadias acquisition of YFCS on April 1,
2011, (ii) PHCs acquisition of MeadowWood on
July 1, 2011 and (iii) consummation of the merger and
related transactions, as if the transactions had occurred on
June 30, 2011 for the unaudited pro forma combined balance
sheet and January 1, 2010 for the unaudited pro forma
condensed statements of operations. The YFCS acquisition is
reflected in Acadias consolidated balance sheet as of
June 30, 2011 and the following unaudited pro forma
condensed combined balance sheet data as of June 30, 2011
reflects the MeadowWood acquisition and the consummation of the
merger and related transactions as if each had occurred on
June 30, 2011.
The unaudited pro forma condensed combined financial data is
based on the historical financial statements of Acadia, YFCS,
PHC and HHC Delaware and certain assumptions and adjustments as
discussed in the section entitled Unaudited Pro Forma
Condensed Combined Financial Information beginning on
page 37 of this proxy statement/prospectus, including
assumptions relating to the fair value of consideration
transferred, assets acquired and liabilities assumed in the
acquisitions of YFCS, MeadowWood and PHC. MeadowWood was
acquired in an asset acquisition. The assets acquired consisted
of substantially all of the assets of HHC Delaware. The pro
forma adjustments reflect the elimination of any assets of HHC
Delaware not acquired by PHC. The fiscal years of Acadia, YFCS
and HHC Delaware end December 31 while the fiscal year of PHC
ends on June 30. The combined company will use
Acadias fiscal year ending December 31. The unaudited
pro forma condensed combined balance sheet data combines
Acadias unaudited consolidated balance sheet as of
June 30, 2011 with the consolidated balance sheet of PHC
and the unaudited condensed consolidated balance sheet of HHC
Delaware as of June 30, 2011. The unaudited pro forma
condensed combined statement of operations for the year ended
December 31, 2010 combines Acadias audited
consolidated statement of operations for the year ended
December 31, 2010 with the audited consolidated statement
of operations of YFCS for the year ended December 31, 2010,
the audited consolidated statement of operations of HHC
Delaware for the year ended December 31, 2010 and the
unaudited condensed consolidated statement of operations of PHC
for the twelve months ended December 31, 2010 (which was
derived from the audited consolidated statement of operations of
PHC for the fiscal year ended June 30, 2010 less the
unaudited condensed consolidated statement of operations of PHC
for the six months ended December 31, 2009 plus the
unaudited condensed consolidated statement of operations of PHC
for the six months ended December 31, 2010). The unaudited
pro forma condensed combined statement of operations for the six
months ended June 30, 2011 combines Acadias unaudited
condensed consolidated statement of operations for the six
months ended June 30, 2011 with the unaudited condensed
consolidated statement of operations of YFCS from
January 1, 2011 through the date of the YFCS acquisition,
the unaudited condensed consolidated statement of operations of
HHC Delaware for the six months ended June 30, 2011 and
the unaudited condensed consolidated statement of operations of
PHC for the six months ended June 30, 2011 (which was
derived from the audited consolidated statement of operations of
PHC for the fiscal year ended June 30, 2011 less the
unaudited condensed consolidated statement of operations of PHC
for the six months ended December 31, 2010). The
adjustments necessary to fairly present the unaudited pro forma
condensed combined financial data have been made based on
available information and in the opinion of management are
reasonable. Assumptions underlying the pro forma adjustments are
described in the section of this proxy statement/prospectus
entitled Unaudited Pro Forma Condensed Combined Financial
Information beginning on page 37 of this proxy
statement/prospectus. and other information included in this
proxy statement/prospectus. The following should be read in
conjunction with the Selected Historical Financial
Information, Acadia Managements Discussion and
Analysis of Financial Condition and Results of Operations,
PHC Managements Discussion and Analysis of Financial
Condition and Results of Operations, the consolidated
financial statements and the notes thereto included elsewhere in
this proxy statement/prospectus and other information included
in this proxy statement/prospectus.
Preliminary estimates of the fair value of assets acquired and
liabilities assumed in the YFCS, MeadowWood and PHC acquisitions
have been incorporated into the unaudited condensed combined
financial information. The finalization of the fair value of
assets acquired and liabilities assumed will most likely result
in changes in the values assigned to property and equipment and
other assets acquired and liabilities assumed. The unaudited pro
forma condensed combined financial data is for illustrative
purposes only and does not purport to represent what
Acadias
12
financial position or results of operations actually would have
been had the events noted above in fact occurred on the assumed
dates or to project our financial position or results of
operations for any future date or future period.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
June 30, 2011
|
|
|
|
($ in thousands)
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Unaudited Pro Forma Condensed Combined Statement of
Operations Data:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
320,298
|
|
|
$
|
168,493
|
|
Salaries, wages and benefits
|
|
|
189,000
|
|
|
|
121,587
|
|
Professional fees
|
|
|
18,245
|
|
|
|
9,180
|
|
Supplies
|
|
|
15,305
|
|
|
|
8,152
|
|
Rent
|
|
|
10,046
|
|
|
|
5,219
|
|
Other operating expenses
|
|
|
32,723
|
|
|
|
17,683
|
|
Provision for doubtful accounts
|
|
|
6,141
|
|
|
|
3,292
|
|
Depreciation and amortization
|
|
|
4,777
|
|
|
|
2,378
|
|
Interest expense, net
|
|
|
22,467
|
|
|
|
11,270
|
|
Impairment of goodwill
|
|
|
23,528
|
|
|
|
|
|
Sponsor management fees
|
|
|
|
|
|
|
90
|
|
Legal settlement
|
|
|
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
322,232
|
|
|
|
179,297
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(1,934
|
)
|
|
|
(10,804
|
)
|
Provision for income taxes
|
|
|
5,499
|
|
|
|
6,473
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(7,433
|
)
|
|
$
|
(17,277
|
)
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed Combined Balance Sheet Data (as
of June 30, 2011):
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
|
|
|
|
$
|
7,474
|
|
Total assets
|
|
|
|
|
|
|
352,002
|
|
Total debt
|
|
|
|
|
|
|
290,313
|
|
Total stockholders equity
|
|
|
|
|
|
|
8,144
|
|
The foregoing unaudited pro forma condensed combined financial
data does not give effect to any anticipated cost savings or
synergies. For a discussion of anticipated cost savings and
synergies, see page 133 in Acadia Managements
Discussion and Analysis of Financial Condition and Results of
Operations Anticipated Synergies, Cost Savings and
Revenue Improvements.
13
QUESTIONS
AND ANSWERS ABOUT THE MERGER
The following are some questions that you, as a stockholder
of PHC, may have regarding the merger and the other matters
being considered at the special meeting and brief answers to
those questions. Acadia and PHC urge you to read carefully the
remainder of this proxy statement/prospectus, including the
documents attached to this proxy statement/prospectus.
|
|
|
Q: |
|
Why are Acadia and PHC proposing the merger? (See
pages 57 and 58) |
|
A: |
|
Acadia and PHC are proposing the merger because they believe the
resulting combined company will be a stronger, more competitive
company capable of achieving greater financial strength, earning
power, access to capital and growth potential than either
company would have separately. |
|
|
|
Acadia and PHC believe that the merger may result in a number of
benefits, including the following positive factors that they
believe will contribute to the success of the combined
enterprise: |
|
|
|
the opportunity to diversify service types and payor
mix;
|
|
|
|
the ability to expand the number of facilities and
beds and expand into additional new states;
|
|
|
|
Acadias and PHCs facilities are
complementary and their combination will increase geographic
diversity;
|
|
|
|
the increased ability to access private and public
equity markets, including for purposes of acting on attractive
opportunities to further expand Acadias business;
|
|
|
|
Acadias management will provide additional
resources and has a demonstrated record of achievement;
|
|
|
|
the opportunity to expand PHCs internet and
telephonic-based support services, which include crisis
intervention, critical incidents coordination, employee
counselor support, client monitoring, case management and health
promotion; and
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the opportunity for PHC stockholders to own 22.5% of
the combined company on a fully diluted basis (as defined in the
merger agreement).
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Q: |
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What percentage of Acadia will the former PHC stockholders
own collectively immediately following the merger? (See
page 53) |
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A: |
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Upon completion of the merger, Acadia stockholders will retain
77.5% and the former PHC stockholders will own 22.5% of the
combined companys common stock issued and outstanding on a
fully diluted basis (as defined in the merger agreement). |
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Q: |
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What will PHC stockholders receive in exchange for PHC common
stock in the merger? (See page 85) |
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A: |
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Each share of PHC Class A Common Stock issued and
outstanding immediately prior to the effective time will be
converted into and become exchangeable for one-quarter
(1/4)
of one fully paid and nonassessable share of Acadia common
stock, par value $0.01 per share. Each share of PHC Class B
Common Stock issued and outstanding immediately prior to the
effective time will be converted into and become exchangeable
for (x) one-quarter
(1/4)
of one fully paid and nonassessable share of Acadia common
stock, par value $0.01 per share and (y) and an amount of
cash equal to $5.0 million divided by the aggregate
number of issued and outstanding shares of PHC Class B
Common Stock immediately prior to the effective time of the
merger (other than (i) any shares of PHC Class B
Common Stock to be cancelled pursuant to the merger agreement
and (ii) any share of PHC Class B Common Stock owned
by a subsidiary of PHC). Based on shares of PHC Class B
Common Stock outstanding as of May 23, 2011, this
calculation would have resulted in a cash payment of $6.46 per
share of PHC Class B Common Stock. |
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Q: |
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Will PHC stockholders be able to trade the Acadia common
stock that they receive in the merger? (See page 94) |
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A: |
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Yes. Each of Acadia and PHC have agreed to cooperate and use
reasonable best efforts to take all actions necessary to
authorize for listing on NASDAQ the shares of Acadia common
stock to be issued in the merger or if such listing is not
possible, to be listed on NYSE Amex Stock Market or another
securities exchange. In |
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addition, it is a condition to completion of the merger that the
shares of Acadia common stock to be issued in the merger are
authorized for listing on a national securities exchange or
eligible for trading on the over the counter bulletin board.
Acadia has applied to be listed on NASDAQ under the symbol
ACHC. Please see the risk factors beginning on
page 18 for a discussion of risks associated with these
listings. |
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Q: |
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Who will be the directors of Acadia following the merger?
(See page 103) |
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A: |
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Except as set forth below the following persons will be
appointed to the Acadia board of directors as of immediately
prior to the effective time of the merger and nominated for
re-election and elected to the Acadia board of directors as
follows: (i) Mr. Jacobs, as a Class III director
and, after the expiration of his initial term as a director, for
so long as he serves as the chief executive officer of Acadia or
any of its subsidiaries; (ii) Mr. Shear, as a
Class III director and, after the expiration of his initial
term as a director, for one additional three-year term as a
Class III director; (iii) Mr. Grieco, a
Class II director designated by Mr. Shear and a
current director of PHC; and (iv) four directors designated
by Waud Capital Partners pursuant to the stockholders agreement
to be entered into in connection with the consummation of the
merger; provided that (A) so long as Waud Capital Partners
retains voting control over at least 50% of the outstanding
voting securities of Acadia, Waud Capital Partners will have the
right to designate seven directors, four of which will be
Class I directors and three of which will be Class II
directors and (B) in the event Waud Capital Partners ceases to
have voting control over at least 50% of the outstanding voting
securities of Acadia, Waud Capital Partners will have the right
to designate such number of directors of the total authorized
number of directors in proportion to the total number of shares
of Acadia over which Waud Capital Partners retains voting
control relative to the total number of shares of Acadia then
issued and outstanding (with the number of representatives
rounded up to the next whole number in all cases); provided that
all such rights will terminate when Waud Capital Partners ceases
to hold at least 17.5% of Acadias outstanding voting
securities. |
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Q: |
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What constitutes a quorum for the special meeting? (See
page 51) |
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A: |
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A majority of the votes entitled to be cast by holders of issued
and outstanding shares of PHC common stock must be present or
represented by proxy to constitute a quorum for action on each
of the matters to be voted upon at the special meeting. All
shares of PHC common stock represented at the special meeting,
including abstentions and broker non-votes, will be treated as
present for purposes of determining the presence or absence of a
quorum for all matters voted on at the special meeting of the
PHC stockholders. |
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Q: |
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What stockholder approval is needed to complete the merger?
(See page 50) |
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A: |
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Approval of the merger agreement requires an affirmative vote of
(i) at least two-thirds of the outstanding Class A
Common Stock and Class B Common Stock entitled to vote,
voting as a single class, (ii) at least two-thirds of the
outstanding Class A Common Stock entitled to vote, voting
as a single class and (iii) at least two-thirds of the
outstanding Class B Common Stock entitled to vote, voting
as a single class. |
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Each record holder of shares of PHC Class A Common Stock
will be entitled at the special meeting to one vote for each
share of PHC Class A Common Stock held on the record date.
Each record holder of shares of PHC Class B Common Stock
will be entitled at the special meeting to five votes for each
share of PHC Class B Common Stock held on the record date
on any matter on which they vote together with the holders of
the Class A Common Stock. |
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Q: |
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What vote of PHCs stockholders is required to approve
the non-binding, advisory proposal regarding certain
merger-related executive compensation arrangements? (See
pages 50 and 200) |
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A: |
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Approval of the non-binding, advisory proposal regarding certain
merger-related executive compensation arrangements requires the
affirmative vote of holders of majority of the outstanding
shares of PHC Class A Common Stock and the outstanding
shares of PHC Class B Common Stock present and voting
(voting together, with the shares of Class B Common Stock
casting five votes for each share held). Stockholders should
note that the proposal regarding certain merger-related
executive compensation arrangements is merely an advisory vote
which will not be binding on PHC, Acadia or the Acadia board of
directors. |
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Q: |
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What do I need to do now? (See page 51) |
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A: |
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After reading and considering the information contained in and
incorporated into this proxy statement/prospectus, please submit
your proxy card according to the instructions on the enclosed
proxy card as soon as possible. If you do not submit a proxy
card or attend the special meeting and vote in person, your
shares will not be represented or voted at the meeting. This
will have the same effect as voting against the proposal to
approve the merger agreement. |
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Q: |
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If my shares of PHC common stock are held in street
name by my bank or broker, will my bank or broker vote my
shares for me? (See page 51) |
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A: |
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Your bank or broker will vote your shares only if you provide
instructions on how to vote by following the information
provided to you by your bank or broker. |
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Without instructions from you on how to vote your shares, your
bank or broker will not have discretionary authority to vote
your shares on the matters currently proposed to be presented at
the special meeting. As a result, your bank or broker may
deliver a proxy card expressly indicating that it is NOT voting
your shares. This indication that a broker is not voting your
shares is referred to as a broker non-vote. Broker
non-votes will be counted for the purpose of determining the
presence or absence of a quorum at the special meeting. However,
a broker non-vote will not be entitled to vote on the proposal
to approve the merger agreement, and thus a broker non-vote will
have the effect of a vote against this proposal. |
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Q: |
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What will happen if I abstain from voting or fail to vote?
(See page 51) |
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A: |
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With respect to the proposal to approve the merger agreement, if
you abstain from voting on the proposal, fail to cast your vote
in person or by proxy or if your shares are held by your broker
or other nominee (i.e., in street name) and you fail
to give voting instructions to your broker or other nominee on
how to vote your shares, it will have the same effect as a vote
AGAINST the proposal to approve the merger agreement. |
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With respect to the non-binding, advisory proposal regarding
certain merger-related executive compensation and the proposal
to approve any adjournment of the special meeting for the
purpose of soliciting additional proxies, if you abstain from
voting on either proposal, fail to cast your vote in person or
by proxy or if you hold your shares in street name
and fail to give voting instructions to your broker or other
nominee on how to vote your shares, it will not have any effect
on the outcome of the vote on such proposal. |
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Q: |
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If I am a PHC stockholder, what do I do if I want to change
my vote after I have submitted my proxy? (See page 52) |
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A: |
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You may change your vote at any time before your proxy is voted
at the special meeting. There are three ways for you to do this: |
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by delivering to the clerk of PHC a signed notice
that you wish to revoke your proxy;
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by delivering to the clerk of PHC a signed and
later-dated proxy; or
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by attending the special meeting and voting in
person.
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If your shares are held in street name by a bank or
broker and you have instructed your bank or broker to vote your
shares, you must follow your banks or brokers
instructions to change your vote. |
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Q: |
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When do you expect the merger to be completed? (See
page 85) |
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A: |
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PHC and Acadia are working to complete the merger as quickly as
possible. Acadia and PHC expect to complete the merger in the
fourth quarter of 2011. |
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Q: |
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Will the merger trigger the recognition of gain or loss for
United States federal income tax purposes for PHC stockholders?
(See page 77) |
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A: |
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The closing of the merger is conditioned upon the receipt by PHC
and Acadia of legal opinions that the merger will constitute a
reorganization for United States federal income tax purposes.
Assuming the merger constitutes a reorganization, subject to the
limitations and qualifications described in The
Merger Material United States Federal Income Tax
Consequences of the Merger, PHC stockholders whose shares
of PHC common |
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stock are exchanged in the merger solely for shares of Acadia
common stock will not recognize capital gain or loss for United
States federal income tax purposes on the exchange (except to
the extent they receive cash in lieu of a fractional share of
Acadia common stock), and PHC stockholders whose shares of PHC
common stock are exchanged in the merger for shares of Acadia
common stock and cash will recognize capital gain (but not loss)
realized on the exchange in an amount not exceeding the amount
of cash received (excluding cash received in lieu of a
fractional share of Acadia common stock). The tax consequences
to PHC stockholders will depend on each stockholders own
circumstances. This tax treatment may not apply to certain PHC
stockholders, as described in The Merger
Material United States Federal Income Tax Consequences of the
Merger. Determining the actual tax consequences of the
merger to you may be complex and will depend on the facts of
your own situation. You should consult your own tax advisors to
fully understand the tax consequences to you of the merger,
including estate, gift, state, local or
non-United
States tax consequences of the merger. |
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Q: |
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Should PHC stockholders send in their stock certificates now?
(See page 87) |
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A: |
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No. After the merger is completed, Acadia will send you
written instructions for exchanging your PHC stock certificates
for Acadia stock certificates. |
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Q: |
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Whom should I call with questions? (See page 51) |
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A: |
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Georgeson Inc.
199 Water Street, 26th Floor
New York, New York
10038-3560
Banks and Brokers Call
(212) 440-9800
All Others Call Toll-Free (888) 658-3624 |
17
RISK
FACTORS
You should carefully consider the following risk factors,
together with all of the other information included in this
proxy statement/prospectus, before you decide whether to vote or
direct your vote to be cast to approve the merger or the merger
agreement. References to we, us and
our in this Risk Factor section refer to
the operations of the combined company following completion of
the merger.
Risks
Related to the Merger
The
directors and executive officers of PHC have interests that
differ from those of PHC stockholders.
The directors and executive officers of PHC have interests in
the merger as individuals that are different from, and in
addition to, the interests of PHC stockholders generally,
including the following:
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Holders of Class B Common Stock of PHC will receive
$5.0 million in aggregate cash consideration for shares of
Class B Common Stock exchanged for shares of Acadia common
stock in the merger. Mr. Shear, PHCs current Chief
Executive Officer, beneficially owns approximately 93.2% of
PHCs Class B Common Stock and will be entitled to
receive cash merger consideration of approximately
$4.7 million;
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Mr. Shear, Mr. Boswell, PHCs current Senior Vice
President, and Ms. Wurts, PHCs current Chief
Financial Officer, are participants in the PHC
change-in-control
supplemental benefit plan. Pursuant to such plan, upon the
closing of the merger, Mr. Shear, Mr. Boswell and
Ms. Wurts are entitled to receive certain change in control
payments in the amount of approximately $1,530,000, $465,000 and
$408,000, respectively;
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Mr. Shear, Mr. Boswell and Ms. Wurts hold stock
options to purchase shares of PHC Class A Common Stock,
subject to various vesting provisions. Pursuant to the merger
agreement, upon completion of the merger, Acadia will assume
these options in accordance with their existing terms, with the
number of shares and the exercise prices adjusted in accordance
with the merger exchange rate. Mr. Shear currently holds
170,000 options exercisable at prices ranging from $1.08 per
share to $2.95 per share, Mr. Boswell currently holds
85,000 options exercisable at prices ranging from $1.08 per
share to $2.95 per share and Ms. Wurts currently holds
85,000 options exercisable at prices ranging from $1.08 per
share to $2.95 per share;
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Upon the closing of the merger, notwithstanding the terms and
conditions of the corresponding PHC stock option plan or as
otherwise set forth in a stock option agreement, with respect to
the assumed PHC options granted to current PHC directors other
than Mr. Shear, (i) all such assumed options will be
fully vested at closing, and (ii) such assumed options will
not terminate as a result of such holder ceasing or failing to
be a director or employee and will be fully exercisable at any
time prior to the expiration of the option term;
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Upon the closing of the merger, notwithstanding the terms and
conditions of the corresponding stock option plan or otherwise
set forth in Mr. Shears stock option agreement, with
respect to the assumed PHC options granted to Mr. Shear,
(i) all such assumed options shall be subject to the same
vesting conditions to which they were subject prior to the
assumption and (ii) the vested portion of such assumed
options will not terminate as a result of Mr. Shear ceasing
or failing to become a director or employee and, subject to
satisfaction of the vesting conditions, will be fully
exercisable at any time prior to the expiration of the option
term;
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Upon the closing of the merger, Mr. Shear will become a
director of Acadia and the Executive Vice Chairman of the Acadia
board of directors and Mr. Boswell will become
Acadias Senior Vice President and their new employment
agreements will become effective upon the closing of the
merger; and
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Acadia will maintain all rights to indemnification existing in
favor of the directors and officers of PHC and its subsidiaries
for their acts and omissions occurring prior to the completion
of the merger and will maintain the directors and
officers liability insurance to cover any such liabilities
for six years following the completion of the merger.
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In addition, you should be aware that Mr. Shear has a
significant relationship with PHC due to his position as a
current director of PHC and will have a significant relationship
with Acadia following the merger as a future director of Acadia,
which is why his assumed options will be treated differently
than those of the other PHC
18
directors. This relationship may have influenced his decision to
vote his PHC Class B Common Stock in favor of the merger
agreement. Mr. Shear abstained from the vote of the PHC
directors on the merger.
PHC stockholders should consider whether these interests may
have influenced these directors and executive officers to vote
in favor of the merger agreement and to recommend that PHC
stockholders vote in favor of the merger agreement.
Following
the merger the combined company will have a substantial amount
of indebtedness, which could adversely affect our financial
health.
Following the merger the combined company will have a
substantial amount of indebtedness. As of June 30, 2011, on
a pro forma basis giving effect to the merger, the combined
company would have had approximately $290 million of total
indebtedness and approximately $23 million of available
borrowing capacity under its revolving credit facility. Between
$80.0 million and $90.0 million of Acadias
borrowings under the Senior Notes
and/or
Bridge Facility shall be used to pay a dividend to Acadias
existing shareholders and to make a payment to Waud Capital
Partners in connection with the termination of the Professional
Services Agreement. For a description of the expected financing
for the merger, see The Merger Acadias
Financing for the Merger and Unaudited Pro Forma
Condensed Consolidated Financial Statements.
Our substantial level of indebtedness could have important
consequences to you. For example, it could:
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increase our vulnerability to adverse economic and industry
conditions;
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limit our ability to obtain additional financing for future
working capital, capital expenditures, raw materials, strategic
acquisitions and other general corporate requirements;
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expose us to interest rate fluctuations because the interest on
the debt under our the Senior Secured Credit Facility is imposed
at variable rates;
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our debt (including scheduled
repayments on our outstanding term loan borrowings under the
Senior Secured Credit Facility), thereby reducing the
availability of our cash flow for operations and other purposes;
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make it more difficult for us to satisfy our obligations to our
lenders, resulting in possible defaults on and acceleration of
such indebtedness;
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limit our ability to refinance indebtedness or increase the
associated costs;
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require us to sell assets to reduce debt or influence our
decision about whether to do so;
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limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate or prevent
us from carrying out capital spending that is necessary or
important to our growth strategy and efforts to improve
operating margins or our business; and
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place us at a competitive disadvantage compared to any
competitors that have less debt or comparable debt at more
favorable interest rates and that, as a result, may be better
positioned to withstand economic downturns.
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We
will incur substantial expenses related to the merger and issue
a significant cash dividend to Acadias stockholders prior
to the merger in connection with the merger.
Acadia and PHC estimate that they will incur aggregate costs of
approximately $40.6 million associated with the merger, as
well as severance costs relating to employees of PHC of
approximately $3.7 million. In addition, the combined
company expects to incur certain costs in connection with the
integration of the two companies. Such costs cannot now be
reasonably estimated, because they depend on future decisions to
be made by management of the combined company, but they could be
material. Between $80.0 million and $90.0 million of
Acadias borrowings under the Senior Notes
and/or
Bridge Facility shall be used to pay a dividend to Acadias
existing shareholders and to make a payment to Waud Capital
Partners in connection with the termination of the Professional
Services Agreement.
19
PHC
stockholders will have a reduced ownership and voting interest
after the merger and will exercise less influence over
management of the combined company following the
merger.
After the merger, PHC stockholders will own a significantly
smaller percentage of Acadia than they currently own of PHC.
Following completion of the merger, PHC stockholders will own
22.5% of the combined company on a fully diluted basis (as
defined in the merger agreement). Consequently, PHC stockholders
will be able to exercise less influence over the management and
policies of Acadia than they currently exercise over the
management and policies of PHC.
If we
do not successfully integrate the operations of Acadia and PHC
and realize the expected benefits of the merger, our results of
operations could be adversely affected.
Achieving the expected benefits of the merger will depend in
part upon the retention of the chief executive officer, chief
financial officer, medical director, physicians and other key
personnel at the facilities owned and operated by Acadia and PHC
and the successful integration of the operations, medical and
management personnel, suppliers and technology of Acadia and PHC
in a timely and efficient manner. Retention and integration
efforts may be difficult and unpredictable because of possible
cultural conflicts and different opinions on technical
decisions, strategic plans and other decisions. We do not know
whether we will be successful in these retention and integration
efforts and cannot give assurances that we will realize the
expected benefits of the merger.
In addition, successful integration of the operations of Acadia
and PHC may place a significant burden on our management and
internal resources. The diversion of managements attention
and any difficulties encountered in the transition and
integration process could have an adverse effect on the future
business, financial condition and operating results of the
combined company.
Although
the PHC board of directors received a fairness
opinion with respect to some aspects of the merger
consideration, the opinion is limited and does not address the
fairness of all aspects of the merger.
SRR has delivered to the PHC board of directors an opinion dated
May 19, 2011 to the effect that, as of that date and
subject to the assumptions made, matters considered and
limitations as set forth therein, (i) the merger
consideration to be received by the holders of outstanding
shares of PHCs Class A Common Stock and Class B
Common Stock (in the aggregate) was fair, from a financial point
of view, to such holders, and (ii) the merger consideration
to be received by the holders of the outstanding shares of
PHCs Class A Common Stock (in the aggregate) was
fair, from a financial point of view, to such holders. SRR was
not requested to opine as to, and its opinion does not in any
manner address: (A) PHCs underlying business decision
to proceed with or effect the merger, (B) the amount of the
merger consideration to be paid to holders of PHCs
Class B Common Stock, the amount of any distribution paid
to Acadia stockholders, the allocation of the merger
consideration among the PHC stockholders or the amount per share
of the merger consideration, the amount of the merger
consideration paid to the holders of PHCs Class A
Common Stock relative to the merger consideration paid to the
holders of PHCs Class B Common Stock or relative to
the merger consideration paid to all holders of PHC common
stock, the amount of any payments made to PHC directors,
officers or employees relative to the amount of the merger
consideration paid to the holders of PHCs common stock or
any other term or condition or any agreement or document related
to, or the form or any other portion or aspect of, the merger,
except as expressly stated in its opinion letter, or
(C) the solvency, creditworthiness or fair value of PHC,
Acadia or any other participant in the merger under any
applicable laws relating to bankruptcy, insolvency or similar
matters.
Risks
Affecting Acadia, PHC and the Combined Company
Our
revenues and results of operations are significantly affected by
payments received from the government and third-party
payers.
A significant portion of our revenues is from the government,
principally Medicare and Medicaid. For the year ended
December 31, 2010, Acadia derived approximately 68% of its
revenues (on a pro forma basis giving effect to the YFCS
acquisition) from the Medicare and Medicaid programs. PHC
derived approximately 27% of its revenues from such programs for
the fiscal year ended June 30, 2010 (on a pro forma basis
giving effect to the MeadowWood
20
acquisition). Changes in government health care programs may
reduce the reimbursement we receive and could adversely affect
our business and results of operations.
Changes in these government programs in recent years have
resulted in limitations on reimbursement and, in some cases,
reduced levels of reimbursement for healthcare services.
Payments from federal and state government programs are subject
to statutory and regulatory changes, administrative rulings,
interpretations and determinations, requirements for utilization
review, and federal and state funding restrictions, all of which
could materially increase or decrease program payments, as well
as affect the cost of providing service to patients and the
timing of payments to facilities. We are unable to predict the
effect of recent and future policy changes on our operations. In
addition, since most states operate with balanced budgets and
since the Medicaid program is often a states largest
program, some states can be expected to enact or consider
enacting legislation formulated to reduce their Medicaid
expenditures. Furthermore, the current economic downturn has
increased the budgetary pressures on the federal government and
many states, which may negatively affect the availability of
taxpayer funds for Medicare and Medicaid programs. If the rates
paid or the scope of services covered by government payers are
reduced, there could be a material adverse effect on our
business, financial position and results of operations.
On August 2, 2011, the Budget Control Act of 2011 (the
Budget Control Act) was enacted into law. The Budget
Control Act imposes annual spending limits on many federal
agencies and programs aimed at reducing budget deficits by
$917 billion between 2012 and 2021, according to a report
released by the Congressional Budget Office. The Budget Control
Act also establishes a bipartisan joint select committee of
Congress that is responsible for developing recommendations to
reduce future federal budget deficits by an additional $1.2
trillion over 10 years. If the joint select committee is
unable to reach an agreement,
across-the-board
cuts to mandatory and discretionary federal spending could be
automatically implemented, which could result in reductions of
payments to Medicare providers of up to 2%. We cannot predict if
reductions to future Medicare or other government payments to
providers will be implemented as a result of the Budget Control
Act or what impact, if any, the Budget Control Act will have on
our business or results of operations.
In addition to changes in government reimbursement programs, our
ability to negotiate favorable contracts with private payers,
including managed care providers, significantly affects the
revenues and operating results of our facilities.
We expect continued third-party efforts to aggressively manage
reimbursement levels and cost controls. Reductions in
reimbursement amounts received from third-party payers could
have a material adverse effect on our financial position and our
results of operations.
A
worsening of the economic and employment conditions in the
United States could materially affect our business and future
results of operations.
During periods of high unemployment, governmental entities often
experience budget deficits as a result of increased costs and
lower than expected tax collections. These budget deficits at
the federal, state and local levels have decreased, and may
continue to decrease, spending for health and human service
programs, including Medicare and Medicaid, which are significant
payer sources for our facilities. In periods of high
unemployment, we also face the risk of potential declines in the
population covered under managed care agreements, patient
decisions to postpone or decide against receiving behavioral
health services, potential increases in the uninsured and
underinsured populations we serve and further difficulties in
collecting patient co-payment and deductible receivables.
Furthermore, the availability of liquidity and credit to fund
the continuation and expansion of many business operations
worldwide has been limited in recent years. Our ability to
access the capital markets on acceptable terms may be severely
restricted at a time when we would like, or need, access to
those markets, which could have a negative impact on our growth
plans, our flexibility to react to changing economic and
business conditions and our ability to refinance existing debt
(including indebtedness under the Senior Secured Credit
Facility). The current economic downturn or other economic
conditions could also adversely affect the counterparties to our
agreements, including the lenders under the Acadia Senior
Secured Facility, causing them to fail to meet their obligations
to us.
21
If we
fail to comply with extensive laws and government regulations,
we could suffer penalties or be required to make significant
changes to our operations.
Our industry is required to comply with extensive and complex
laws and regulations at the federal, state and local government
levels relating to, among other things: billing practices and
prices for services; relationships with psychiatrists,
physicians and other referral sources; necessity and quality of
medical care; condition and adequacy of facilities;
qualifications of medical and support personnel;
confidentiality, maintenance and security issues associated with
health-related information and patient personal information and
medical records; the screening, stabilization
and/or
transfer of patients who have emergency medical conditions;
certification, licensure and accreditation of our facilities;
operating policies and procedures, activities regarding
competitors; and addition or expansion of facilities and
services.
Among these laws are the Anti-Kickback Statute, the Stark Law,
the federal False Claims Act and similar state laws. These laws,
and particularly the Anti-Kickback Statute and the Stark Law,
impact the relationships that we may have with psychiatrists and
other referral sources. We have a variety of financial
relationships with physicians who refer patients to our
facilities, including employment contracts, leases and
professional service agreements. These laws govern those
relationships. The Office of the Inspector General of the
Department of Health and Human Services (the OIG)
has enacted safe harbor regulations that outline practices that
are deemed protected from prosecution under the Anti-Kickback
Statute. While we endeavor to comply with applicable safe
harbors, certain of our current arrangements with physicians and
other referral sources may not qualify for safe harbor
protection. Failure to meet a safe harbor does not mean that the
arrangement necessarily violates the Anti-Kickback Statute, but
may subject it to greater scrutiny. We cannot offer assurances
that practices that are outside of a safe harbor will not be
found to violate the Anti-Kickback Statute. Allegations of
violations of the Anti-Kickback Statute may be brought under the
federal Civil Monetary Penalty Law, which requires a lower
burden of proof than other fraud and abuse laws, including the
Anti-Kickback Statute.
These laws and regulations are extremely complex, and, in many
cases, we do not have the benefit of regulatory or judicial
interpretation. In the future, it is possible that different
interpretations or enforcement of these laws and regulations
could subject our current or past practices to allegations of
impropriety or illegality or could require us to make changes in
our facilities, equipment, personnel, services, capital
expenditure programs and operating expenses. A determination
that we have violated one or more of these laws could subject us
to liabilities, including civil penalties (including the loss of
our licenses to operate one or more facilities), exclusion of
one or more facilities from participation in the Medicare,
Medicaid and other federal and state health care programs and,
for violations of certain laws and regulations, criminal
penalties. Even the public announcement that we are being
investigated for possible violations of these laws could have a
material adverse effect on our business, financial condition or
results of operations, and our business reputation could suffer.
In addition, we cannot predict whether other legislation or
regulations at the federal or state level will be adopted, what
form such legislation or regulations may take or what their
impact on us may be.
We may
be required to spend substantial amounts to comply with
legislative and regulatory initiatives relating to privacy and
security of patient health information and standards for
electronic transactions.
There are currently numerous legislative and regulatory
initiatives at the federal and state levels addressing patient
privacy and security concerns. In particular, federal
regulations issued under the Health Insurance Portability and
Accountability Act of 1996, or HIPAA, require our facilities to
comply with standards to protect the privacy, security and
integrity of health care information. These regulations have
imposed extensive administrative requirements, technical and
physical information security requirements, restrictions on the
use and disclosure of individually identifiable patient health
and related financial information and have provided patients
with additional rights with respect to their health information.
Compliance with these regulations requires substantial
expenditures, which could negatively impact our financial
results. In addition, our management has spent, and may spend in
the future, substantial time and effort on compliance measures.
Violations of the privacy and security regulations could subject
our inpatient facilities to civil penalties of up to $25,000 per
calendar year for each provision contained in the privacy and
security regulations that are violated and criminal penalties of
up to $250,000 per violation for certain other violations, in
each case with the size of such
22
penalty based on certain factors. Because there is no
significant history of enforcement efforts by the federal
government at this time, it is not possible to ascertain the
likelihood of enforcement efforts in connection with these
regulations or the potential for fines and penalties that may
result from the violation of the regulations.
We may
be subject to liabilities from claims brought against our
facilities.
We are subject to medical malpractice lawsuits and other legal
actions in the ordinary course of business. Some of these
actions may involve large claims, as well as significant defense
costs. We cannot predict the outcome of these lawsuits or the
effect that findings in such lawsuits may have on us. All
professional and general liability insurance we purchase is
subject to policy limitations. We believe that, based on our
past experience and actuarial estimates, our insurance coverage
is adequate considering the claims arising from the operations
of our facilities. While we continuously monitor our coverage,
our ultimate liability for professional and general liability
claims could change materially from our current estimates. If
such policy limitations should be partially or fully exhausted
in the future, or payments of claims exceed our estimates or are
not covered by our insurance, it could have a material adverse
effect on our operations.
We
have been and could become the subject of governmental
investigations, regulatory actions and whistleblower
lawsuits.
Healthcare companies are subject to numerous investigations by
various governmental agencies. Further, under the federal False
Claims Act, private parties are permitted to bring qui tam or
whistleblower lawsuits against companies that submit
false claims for payments to, or improperly retain overpayments
from, the government. Because qui tam lawsuits are filed under
seal, we could be named in one or more such lawsuits of which we
are not aware.
Certain of our facilities have received, and other facilities
may receive, government inquiries from, and may be subject to
investigation by, federal and state agencies. Depending on
whether the underlying conduct in these or future inquiries or
investigations could be considered systemic, their resolution
could have a material adverse effect on our financial position,
results of operations and liquidity.
If any of our existing health care facilities lose their
accreditation or any of our new facilities fail to receive
accreditation, such facilities could become ineligible to
receive reimbursement under Medicare or Medicaid.
The construction and operation of healthcare facilities are
subject to extensive federal, state and local regulation
relating to, among other things, the adequacy of medical care,
equipment, personnel, operating policies and procedures, fire
prevention, rate-setting and compliance with building codes and
environmental protection. Additionally, such facilities are
subject to periodic inspection by government authorities to
assure their continued compliance with these various standards.
We are
subject to uncertainties regarding recent health care reform,
which represents a significant change to the health care
industry.
On March 23, 2010, President Obama signed into law the
Patient Protection and Affordable Care Act (the
PPACA). The Healthcare and Education Reconciliation
Act of 2010 (the Reconciliation Act), which contains
a number of amendments to the PPACA, was signed into law on
March 30, 2010. Two primary goals of the PPACA, combined
with the Reconciliation Act (collectively referred to as the
Health Reform Legislation), are to provide for
increased access to coverage for healthcare and to reduce
healthcare-related expenses.
The expansion of health insurance coverage under the Health
Reform Legislation may increase the number of patients using our
facilities who have either private or public program coverage.
In addition, a disproportionately large percentage of new
Medicaid coverage is likely to be in states that currently have
relatively low income eligibility requirements and may include
states where we have facilities. Furthermore, as a result of the
Health Reform Legislation, there may be a reduction in uninsured
patients, which should reduce our expense from uncollectible
accounts receivable.
Notwithstanding the foregoing, the Health Reform Legislation
makes a number of other changes to Medicare and Medicaid which
we believe may have an adverse impact on us. The Health Reform
Legislation revises
23
reimbursement under the Medicare and Medicaid programs to
emphasize the efficient delivery of high quality care and
contains a number of incentives and penalties under these
programs to achieve these goals. The Health Reform Legislation
provides for decreases in the annual market basket update for
federal fiscal years 2010 through 2019, a productivity offset to
the market basket update beginning October 1, 2011 for
Medicare Part B reimbursable items and services and
beginning October 1, 2012 for Medicare inpatient hospital
services. The Health Reform Legislation will reduce Medicare and
Medicaid disproportionate share payments beginning in 2014,
which would adversely impact the reimbursement we receive under
these programs.
The various provisions in the Health Reform Legislation that
directly or indirectly affect reimbursement are scheduled to
take effect over a number of years. Health Reform Legislation
provisions are likely to be affected by the incomplete nature of
implementing regulations or expected forthcoming interpretive
guidance, gradual implementation, future legislation, and
possible judicial nullification of all or certain provisions of
the Health Reform Legislation. Further Health Reform Legislation
provisions, such as those creating the Medicare Shared Savings
Program and the Independent Payment Advisory Board, create
certain flexibilities in how healthcare may be reimbursed by
federal programs in the future. Thus, we cannot predict the
impact of the Health Reform Legislation on our future
reimbursement at this time.
The Health Reform Legislation also contains provisions aimed at
reducing fraud and abuse in healthcare. The Health Reform
Legislation amends several existing laws, including the federal
Anti-Kickback Statute (the Anti-Kickback Statute)
and the False Claims Act, making it easier for government
agencies and private plaintiffs to prevail in lawsuits brought
against healthcare providers. Congress revised the intent
requirement of the
Anti-Kickback
Statute to provide that a person is not required to have
actual knowledge or specific intent to commit a violation
of the Anti-Kickback Statute in order to be found guilty
of violating such law. The Health Reform Legislation also
provides that any claims for items or services that violate the
Anti-Kickback Statute are also considered false claims for
purposes of the federal civil False Claims Act. The Health
Reform Legislation provides that a healthcare provider that
knowingly retains an overpayment in excess of 60 days is
subject to the federal civil False Claims Act. The Health Reform
Legislation also expands the Recovery Audit Contractor program
to Medicaid. These amendments also make it easier for severe
fines and penalties to be imposed on healthcare providers that
violate applicable laws and regulations.
The impact of the Health Reform Legislation on each of our
facilities may vary. Because Health Reform Legislation
provisions are effective at various times over the next several
years and in light of federal lawsuits challenging the
constitutionality of the Health Reform Legislation, we
anticipate that many of the provisions in the Health Reform
Legislation may be subject to further revision or judicial
nullification. We cannot predict the impact the Health Reform
Legislation may have on our business, results of operations,
cash flow, capital resources and liquidity, or whether we will
be able to successfully adapt to the changes required by the
Health Reform Legislation.
We
operate in a highly competitive industry, and competition may
lead to declines in patient volumes.
The healthcare industry is highly competitive, and competition
among healthcare providers (including hospitals) for patients,
psychiatrists and other healthcare professionals has intensified
in recent years. There are other healthcare facilities that
provide behavioral and other mental health services comparable
to at least some of those offered by our facilities in each of
the geographical areas in which we operate. Some of our
competitors are owned by tax-supported governmental agencies or
by nonprofit corporations and may have certain financial
advantages not available to us, including endowments, charitable
contributions, tax-exempt financing and exemptions from sales,
property and income taxes.
If our competitors are better able to attract patients, recruit
and retain psychiatrists, physicians and other healthcare
professionals, expand services or obtain favorable managed care
contracts at their facilities, we may experience a decline in
patient volume and our business may be harmed.
The
trend by insurance companies and managed care organizations to
enter into sole source contracts may limit our ability to obtain
patients.
Insurance companies and managed care organizations are entering
into sole source contracts with healthcare providers, which
could limit our ability to obtain patients. Private insurers,
managed care organizations and, to a
24
lesser extent, Medicaid and Medicare, are beginning to carve-out
specific services, including mental health and substance abuse
services, and establish small, specialized networks of providers
for such services at fixed reimbursement rates. Continued growth
in the use of carve-out arrangements could materially adversely
affect our business to the extent we are not selected to
participate in such smaller specialized networks or if the
reimbursement rate is not adequate to cover the cost of
providing the service.
Our
performance depends on our ability to recruit and retain quality
psychiatrists and other physicians.
The success and competitive advantage of our facilities depends,
in part, on the number and quality of the psychiatrists and
other physicians on the medical staffs of our facilities and our
maintenance of good relations with those medical professionals.
Although we employ psychiatrists and other physicians at many of
our facilities, psychiatrists and other physicians generally are
not employees of our facilities, and, in a number of our
markets, they have admitting privileges at hospitals providing
acute or inpatient behavioral health services. Such physicians
(including psychiatrists) may terminate their affiliation with
us at any time or admit their patients to competing healthcare
facilities or hospitals. If we are unable to attract and retain
sufficient numbers of quality psychiatrists and other physicians
by providing adequate support personnel and facilities that meet
the needs of those psychiatrists and other physicians, they may
be discouraged from referring patients to our facilities and our
results of operations may decline.
It may
become difficult for us to attract and retain an adequate number
of psychiatrists and other physicians to practice in certain of
the communities in which our facilities are located. Our failure
to recruit psychiatrists and other physicians to these
communities or the loss of such medical professionals in these
communities could make it more difficult to attract patients to
our facilities and thereby may have a material adverse effect on
our business, financial condition and results of
operations.
Additionally, our ability to recruit psychiatrists and other
physicians is closely regulated. The form, amount and duration
of assistance we can provide to recruited psychiatrists and
other physicians is limited by the federal physician
self-referral law (the Stark Law), the Anti-Kickback
Statute, state anti-kickback statutes, and related regulations.
For example, the Stark Law requires, among other things, that
recruitment assistance can only be provided to psychiatrists and
other physicians who meet certain geographic and practice
requirements, that the amount of assistance cannot be changed
during the term of the recruitment agreement, and that the
recruitment payments cannot generally benefit psychiatrists and
other physicians currently in practice in the community beyond
recruitment costs actually incurred by them.
Our
facilities face competition for staffing that may increase our
labor costs and reduce our profitability.
Our operations depend on the efforts, abilities, and experience
of our management and medical support personnel, including our
therapists, nurses, pharmacists and mental health technicians,
as well as our psychiatrists and other physicians. We compete
with other healthcare providers in recruiting and retaining
qualified management, physicians (including psychiatrists) and
support personnel responsible for the daily operations of our
facilities.
The nationwide shortage of nurses and other medical support
personnel has been a significant operating issue facing us and
other healthcare providers. This shortage may require us to
enhance wages and benefits to recruit and retain nurses and
other medical support personnel or require us to hire more
expensive temporary or contract personnel. In addition, certain
of our facilities are required to maintain specified
nurse-staffing levels. To the extent we cannot meet those
levels, we may be required to limit the services provided by
these facilities, which would have a corresponding adverse
effect on our net operating revenues.
Increased labor union activity is another factor that could
adversely affect our labor costs. To date, labor unions
represent employees at only three of our facilities. Although we
are not aware of any union organizing activity at any of our
other facilities, we are unable to predict whether any such
activity will take place in the future. To the extent that a
greater portion of our employee base unionizes, it is possible
that our labor costs could increase materially.
25
We cannot predict the degree to which we will be affected by the
future availability or cost of attracting and retaining talented
medical support staff. If our general labor and related expenses
increase, we may not be able to raise our rates correspondingly.
Our failure to either recruit and retain qualified management,
nurses and other medical support personnel or control our labor
costs could harm our results of operations.
We
depend heavily on key management personnel and the departure of
one or more of our key executives or a significant portion of
our local facility management personnel could harm our
business.
The expertise and efforts of our senior executives and the chief
executive officer, chief financial officer, medical director,
physicians and other key members of our facility management
personnel are critical to the success of our business. The loss
of the services of one or more of our senior executives or of a
significant portion of our facility management personnel could
significantly undermine our management expertise and our ability
to provide efficient, quality healthcare services at our
facilities, which could harm our business.
We
could face risks associated with, or arising out of,
environmental, health and safety laws and
regulations.
We are subject to various federal, state and local laws and
regulations that (i) regulate certain activities and
operations that may have environmental or health and safety
effects, such as the generation, handling and disposal of
medical wastes, (ii) impose liability for costs of cleaning
up, and damages to natural resources from, past spills, waste
disposals on and off-site, or other releases of hazardous
materials or regulated substances, and (iii) regulate
workplace safety. Compliance with these laws and regulations
could increase our costs of operation. Violation of these laws
may subject us to significant fines, penalties or disposal
costs, which could negatively impact our results of operations,
financial position or cash flows. We could be responsible for
the investigation and remediation of environmental conditions at
currently or formerly operated or leased sites, as well as for
associated liabilities, including liabilities for natural
resource damages, third party property damage or personal injury
resulting from lawsuits that could be brought by the government
or private litigants, relating to our operations, the operations
of facilities or the land on which our facilities are located.
We may be subject to these liabilities regardless of whether we
lease or own the facility, and regardless of whether such
environmental conditions were created by us or by a prior owner
or tenant, or by a third party or a neighboring facility whose
operations may have affected such facility or land. That is
because liability for contamination under certain environmental
laws can be imposed on current or past owners or operators of a
site without regard to fault. We cannot assure you that
environmental conditions relating to our prior, existing or
future sites or those of predecessor companies whose liabilities
we may have assumed or acquired will not have a material adverse
affect on our business.
Acadia
may not be able to successfully integrate its acquisition of
YFCS or realize the potential benefits of the acquisition, which
could cause an adverse effect on the combined
company.
Acadia may not be able to combine successfully the operations of
YFCS with its operations, and, even if such integration is
accomplished, Acadia may never realize the potential benefits of
the acquisition. The integration of YFCS with the Acadia
operations requires significant attention from management, may
impose substantial demands on Acadias operations or other
projects and may impose challenges on the combined business
including, but not limited to, consistencies in business
standards, procedures, policies and business cultures. The
integration of YFCS also involves a significant capital
commitment, and the return that Acadia achieves on any capital
invested may be less than the return that Acadia would achieve
on our other projects or investments. Furthermore, we cannot
assure you that the combined company will achieve anticipated
cost savings and synergies in a timely manner or at all. Any of
these factors could cause delays or increased costs of combining
YFCS with Acadia and could adversely affect our operations,
financial results and liquidity.
Our
growth strategy depends, in part, on acquisitions, and we may
not be able to continue to acquire facilities that meet our
target criteria.
Acquisitions of other behavioral healthcare facilities are a key
element of our growth strategy. We face competition for
acquisition candidates primarily from other for-profit
healthcare companies, as well as from
not-for-profit
entities. Some of our competitors have greater resources than we
do. Our principal competitors for
26
acquisitions have included Universal Health Services, Inc.
(UHS), Aurora Behavioral Health Care
(Aurora) and Ascend Health Corporation
(Ascend). Also, suitable acquisitions may not be
accomplished due to unfavorable terms.
Further, the cost of an acquisition could result in a dilutive
effect on our results of operations, depending on various
factors, including the amount paid for an acquired facility, the
acquired facilitys results of operations, the fair value
of assets acquired and liabilities assumed, effects of
subsequent legislation and limits on rate increases.
We may
not achieve all of the expected benefits from synergies, cost
savings and recent improvements to our revenue
base.
Although we have identified certain synergies and cost savings
in connection with the merger, as well as recent improvements to
our revenue base, we may not realize any benefits from expected
operating improvements. The improvements to our revenue base
result from a rate increase on one of our contracts effective in
March 2011 and the expansion of one of our existing contracts in
December 2010. In an effort to illustrate the impact of these
items on our operating income, we have made an estimate of the
impact of these improvements for 2010, even though they were not
effective for the entire 2010 fiscal year. In addition, we have
made an estimate of start up losses at the Seven Hills
Behavioral Center, which was opened in the fourth quarter of
2008 and became CMS certified in July 2010, because we incurred
certain of these start up losses in 2010 but do not expect to
incur them in the future. See Acadia Managements
Discussion and Analysis of Financial Condition and Results of
Operations Anticipated Synergies, Cost Savings and
Revenue Improvements. Although these estimates are
presented in Acadia Managements Discussion and
Analysis of Financial Condition and Results of
Operations Anticipated Synergies, Cost Savings and
Revenue Improvements with numerical specificity, they are
inherently uncertain and are not intended to represent what our
financial position or results of operations might be for any
future period. Our ability to realize the expected benefits from
these improvements are subject to significant business, economic
and competitive uncertainties and contingencies, many of which
are beyond our control, such as changes to government regulation
governing or otherwise impacting the behavioral health care
industry, reductions in reimbursement rates from third party
payors, reductions in service levels under our contracts,
operating difficulties, client preferences, changes in
competition and general economic or industry conditions. If we
are unsuccessful in implementing these improvements or if we do
not achieve our expected results, it may adversely impact our
results of operations.
If we
are unable to improve the operations of the facilities we
acquire, our growth strategy may be adversely
affected.
We may be unable to timely and effectively integrate the
facilities that we acquire (including from YFCS and PHC) with
our ongoing operations. We may experience delays in implementing
operating procedures and systems in newly acquired facilities.
Integrating a new facility could be expensive and time consuming
and could disrupt our ongoing business, negatively affect cash
flow and distract management and other key personnel. In
addition, some of the facilities we acquired may have had
significantly lower operating margins than the facilities we
operated prior to the time of our acquisition thereof or had
operating losses prior to such acquisition. If we fail to
improve the operating margins of the facilities we acquire,
operate such facilities profitably or effectively integrate the
operations of acquired facilities, our results of operations
could be negatively impacted.
If we
acquire facilities with unknown or contingent liabilities, we
could become liable for material obligations.
Facilities that we acquire may have unknown or contingent
liabilities, including, but not limited to, liabilities for
failure to comply with healthcare laws and regulations. Although
we typically attempt to exclude significant liabilities from our
acquisition transactions and seek indemnification from the
sellers of such facilities for at least a portion of these
matters, we may experience difficulty enforcing those
obligations or we may incur material liabilities for the past
activities of acquired facilities. Such liabilities and related
legal or other costs
and/or
resulting damage to a facilitys reputation could
negatively impact our business.
27
State
efforts to regulate the construction or expansion of health care
facilities could impair our ability to operate and expand our
operations.
A majority of the states in which we operate facilities have
enacted Certificates of Need (CON) laws as a
condition to the construction or expansion of healthcare
facilities, to make certain capital expenditures or to make
changes in services or bed capacity. In giving approval, these
states consider the need for additional or expanded healthcare
facilities or services. Our failure to obtain necessary state
approval could result in our inability to acquire a targeted
facility, complete a desired expansion or make a desired
replacement, make a facility ineligible to receive reimbursement
under the Medicare or Medicaid programs, result in the
revocation of a facilitys license or impose civil or
criminal penalties on us, any of which could harm our business.
In addition, significant CON reforms have been proposed in a
number of states that would increase the capital spending
thresholds and provide exemptions of various services from
review requirements. In the past, we have not experienced any
material adverse effects from those requirements, but we cannot
predict the impact of these changes upon our operations.
Controls
designed to reduce inpatient services may reduce our
revenues.
Controls imposed by Medicare, Medicaid and commercial
third-party payers designed to reduce admissions and lengths of
stay, commonly referred to as utilization review,
have affected and are expected to continue to affect our
facilities. Utilization review entails the review of the
admission and course of treatment of a patient by health plans.
Inpatient utilization, average lengths of stay and occupancy
rates continue to be negatively affected by payer-required
preadmission authorization and utilization review and by payer
pressure to maximize outpatient and alternative healthcare
delivery services for less acutely ill patients. Efforts to
impose more stringent cost controls are expected to continue.
For example, the Health Reform Legislation potentially expands
the use of prepayment review by Medicare contractors by
eliminating statutory restrictions on its use. Utilization
review is also a requirement of most non-governmental
managed-care organizations and other third-party payers.
Although we are unable to predict the effect these controls and
changes will have on our operations, significant limits on the
scope of services reimbursed and on reimbursement rates and fees
could have a material adverse effect on our business and results
of operations.
We
expect that our stock price will experience significant
volatility due to external factors in our quarterly operating
results.
We intend that our common stock will trade on NASDAQ. Acadia is
currently a private company and its common stock does not
currently trade on an exchange. Historically, PHCs common
stock has generally experienced relatively low daily trading
volumes in relation to the aggregate number of shares
outstanding. Many economic and seasonal factors outside of our
control could cause fluctuations in our quarterly earnings and
adversely affect the price of our common stock. These factors
include certain of the risks discussed herein, demographic
changes, operating results of other behavioral healthcare
companies (including hospitals providing such services), changes
in our financial estimates or recommendations of securities
analysts, speculation in the press or investment community, the
possible effects of war, terrorist and other hostilities,
adverse weather conditions, managed care contract negotiations
and terminations, changes in general conditions in the economy
or the financial markets, or other developments affecting the
health care industry. If we are unable to operate our facilities
as profitably as our stockholders expect us to in the future,
the market price of our common stock will likely decline as
stockholders could sell shares of our common stock when it
becomes apparent that the market expectations may not be met.
The stock markets have experienced volatility that has often
been unrelated to operating performance. These broad market
fluctuations may adversely affect the trading price of our
common stock and cause significant volatility in the market
price of our common stock.
28
If the
ownership of Acadia common stock following the completion of the
merger continues to be highly concentrated, it may prevent you
and other stockholders from influencing significant corporate
decisions and may result in conflicts of interest that could
cause Acadias stock price to decline.
Waud Capital Partners and Acadias executive officers,
directors and their affiliates will beneficially own 77.5% of
the outstanding shares of Acadia common stock on a fully diluted
basis (as defined in the merger agreement) following the
completion of the merger. Accordingly, Waud Capital Partners and
these executive officers, directors and their affiliates, acting
as a group, will have substantial influence over the outcome of
corporate actions requiring stockholder approval, including the
election of directors, any merger, consolidation or sale of all
or substantially all of our assets or any other significant
corporate transactions. These stockholders may also delay or
prevent a change of control of us, even if such a change of
control would benefit our other stockholders. The significant
concentration of stock ownership may cause the trading price of
our common stock to decline due to investor perception that
conflicts of interest may exist or arise.
Additionally, the stockholders agreement to be entered into by
Acadia, Waud Capital Partners and certain of its affiliates and
certain members of Acadia and PHC management in connection with
the merger will grant Waud Capital Partners certain board
nomination, information and consent rights. It will also impose
certain restrictions on Acadias business and operations
for so long as Waud Capital Partners and its affiliates hold at
least 17.5% of Acadias outstanding voting securities. See
Stockholders Agreement for a description of this
agreement and the related restrictions.
We are
a controlled company, controlled by Waud Capital
Partners, whose interest in our business may be different from
ours or yours.
After consummation of the merger, Waud Capital Partners will
control approximately 63.0% of the voting power of our common
stock and be able to elect a majority of our board of directors.
As a result, we will be considered a controlled
company for the purposes of the NASDAQ listing
requirements. As a controlled company, we will be
permitted to, and we intend to, opt out of the NASDAQ listing
requirements that would otherwise require a majority of the
members of our board of directors to be independent and require
that we either establish a compensation committee and a
nominating and governance committee, each comprised entirely of
independent directors, or otherwise ensure that the compensation
of our executive officers and nominees for directors are
determined or recommended to our board of directors by the
independent members of our board of directors. The NASDAQ
listing requirements are intended to ensure that directors who
meet the independence standard are free of any conflicting
interest that could influence their actions as directors. It is
possible that the interests of Waud Capital Partners may in some
circumstances conflict with our interests and the interests of
our other stockholders.
If
securities or industry analysts do not publish research or
reports about our business, if they were to change their
recommendations regarding Acadia stock adversely or if the
operating results of the combined company do not meet their
expectations, Acadias stock price and trading volume could
decline.
Following the merger, the trading market for Acadias
common stock will be influenced by the research and reports that
industry or securities analysts publish about the combined
company. If one or more of these analysts cease coverage of
Acadia or fail to regularly publish reports on Acadia, we could
lose visibility in the financial markets, which in turn could
cause Acadias stock price or trading volume to decline.
Moreover, if one or more of the analysts who cover Acadia
downgrade its stock or if the operating results of the combined
company do not meet their expectations, Acadias stock
price could decline.
Future
sales of common stock by Acadias existing stockholders may
cause the Acadia stock price to fall.
The market price of Acadias common stock could decline as
a result of sales by Acadias then existing stockholders in
the market after the completion of the merger, or the perception
that these sales could occur. These sales might also make it
more difficult for Acadia to sell equity securities at a time
and price that it deems appropriate.
29
Waud Capital Partners and certain of its affiliates, along with
certain members of our management, have certain demand and
piggyback registration rights with respect to shares of Acadia
common stock beneficially owned by them. The presence of
additional shares of Acadia common stock trading in the public
market, as a result of the exercise of such registration rights,
may have an adverse effect on the market price of Acadias
securities.
Different
interpretations of accounting principles could have a material
adverse effect on our results of operations or financial
condition.
Generally accepted accounting principles are complex,
continually evolving and may be subject to varied interpretation
by us, our independent registered public accounting firm and the
SEC. Such varied interpretations could result from differing
views related to specific facts and circumstances. Differences
in interpretation of generally accepted accounting principles
could have a material adverse effect on our financial position
or results of operations.
Although
we have facilities in 18 states, we have substantial
operations in each of Arkansas, Indiana, Michigan, Mississippi
and Nevada, which makes us sensitive to regulatory, economic,
environmental and competitive conditions and changes in those
states.
We operated 29 treatment facilities as of June 30,
2011 (on a pro forma basis giving effect to the merger,
including PHCs acquisition of MeadowWood), 14 of which are
located in Arkansas, Indiana, Michigan, Mississippi or Nevada.
Our revenues in those states represented approximately 53% of
our consolidated revenue for the year ended December 31,
2010 (on a pro forma basis giving effect to the YFCS acquisition
and the merger, including PHCs acquisition of MeadowWood).
This concentration makes us particularly sensitive to
legislative, regulatory, economic, environmental and competition
changes in those states. Any material change in the current
payment programs or regulatory, economic, environmental or
competitive conditions in these states could have a
disproportionate effect on our overall business results.
In addition, our facilities in Florida, Louisiana and
Mississippi and other areas across the Gulf Coast (including
Texas) are located in hurricane-prone areas. In the past,
hurricanes have had a disruptive effect on the operations of our
facilities in the Gulf Coast and the patient populations in
those states. Our business activities could be marked by a
particularly active hurricane season or even a single storm, and
our property insurance may not be adequate to cover losses from
such storms or other natural disasters.
An
increase in uninsured and underinsured patients or the
deterioration in the collectability of the accounts of such
patients could harm our results of operations.
Collection of receivables from third-party payers and patients
is critical to our operating performance. Our primary collection
risks relate to uninsured patients and the portion of the bill
that is the patients responsibility, which primarily
includes co-payments and deductibles. We estimate our provisions
for doubtful accounts based on general factors such as payer
source, the agings of the receivables and historical collection
experience. At December 31, 2010, the combined
companys allowance for doubtful accounts represented
approximately 19% of its accounts receivable balance as of such
date (calculated on a pro forma basis to give effect to the YFCS
acquisition, the MeadowWood acquisition and the merger). We
routinely review accounts receivable balances in conjunction
with these factors and other economic conditions that might
ultimately affect the collectability of the patient accounts and
make adjustments to our allowances as warranted. Significant
changes in business office operations, payer mix, economic
conditions or trends in federal and state governmental health
coverage (including implementation of the Health Reform
Legislation) could affect our collection of accounts receivable,
cash flow and results of operations. If we experience unexpected
increases in the growth of uninsured and underinsured patients
or in bad debt expenses, our results of operations will be
harmed.
30
Provisions
of our charter documents following the completion of the merger
or Delaware law could delay or prevent an acquisition of us,
even if the acquisition would be beneficial to our stockholders,
and could make it more difficult for you to change
management.
Provisions of our amended and restated certificate of
incorporation and amended and restated bylaws following the
completion of the merger may discourage, delay or prevent a
merger, acquisition or other change in control that stockholders
may consider favorable, including transactions in which
stockholders might otherwise receive a premium for their shares.
This is because these provisions may prevent or frustrate
attempts by stockholders to replace or remove our management
following the completion of the merger. These provisions include:
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a classified board of directors;
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a prohibition on stockholder action through written consent
(once Waud Capital Partners no longer beneficially own at least
a majority of our outstanding common stock);
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a requirement that special meetings of stockholders be called
upon a resolution approved by a majority of our directors then
in office;
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advance notice requirements for stockholder proposals and
nominations; and
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the authority of the board of directors to issue preferred stock
with such terms as the board of directors may determine.
|
Section 203 of the Delaware General Corporation Law (the
DGCL) prohibits a publicly held Delaware corporation
from engaging in a business combination with an interested
stockholder, generally a person that together with its
affiliates owns or within the last three years has owned 15% of
voting stock, for a period of three years after the date of the
transaction in which the person became an interested
stockholder, unless the business combination is approved in a
prescribed manner. Although we have elected not to be subject to
Section 203 of the DGCL, Acadias amended and restated
certificate of incorporation will contain provisions that have
the same effect as Section 203, except that they will
provide that both Waud Capital Partners, its affiliates and any
investment fund managed by Waud Capital Partners and any persons
to whom Waud Capital Partners sells at least five percent (5%)
of outstanding voting stock of Acadia will be deemed to have
been approved by our board of directors, and thereby not subject
to the restrictions set forth in Acadias amended and
restated certificate of incorporation that have the same effect
as Section 203 of the DGCL. Accordingly, the provision in
Acadias amended and restated certificate of incorporation
that adopts a modified version of Section 203 of the DGCL
may discourage, delay or prevent a change in control of us.
As a result of these provisions in our charter documents
following the completion of the merger and Delaware law, the
price investors may be willing to pay in the future for shares
of our common stock may be limited.
Acadia
does not anticipate paying any cash dividends in the foreseeable
future.
Following the completion of the merger and the payment of the
dividend to holders of Acadias common stock prior to the
merger, Acadia intends to retain its future earnings, if any,
for use in the business of the combined company or for other
corporate purposes and does not anticipate that cash dividends
in respect to common stock will be paid in the foreseeable
future. Any decision as to the future payment of dividends will
depend on the results of operations, the financial position of
the combined company and such other factors, as the Acadia board
of directors, in its discretion, deems relevant. In addition,
the terms of Acadias existing debt substantially limit its
ability to pay these dividends. We anticipate that the
indebtedness incurred in connection with the merger will also
substantially limit Acadias ability to pay dividends. As a
result, capital appreciation, if any, of Acadia common stock
will be your sole source of gain for the foreseeable future.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The SEC encourages companies to disclose forward-looking
information so that investors can better understand a
companys future prospects and make informed investment
decisions. This proxy statement/prospectus contains
forward-looking statements. All statements included
in this proxy statement/prospectus or made by management of
Acadia or PHC, other than statements of historical fact
regarding Acadia or PHC, are forward-looking statements.
31
Factors that could cause actual results to differ materially
from those forward-looking statements included in this
prospectus include, among others:
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the impact of payments received from the government and
third-party payers on our revenues and results of operations;
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the impact of the economic and employment conditions in the
United States on our business and future results of operations;
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the impact of recent health care reform;
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the impact of our highly competitive industry on patient volumes;
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the impact of recruitment and retention of quality psychiatrists
and other physicians on our performance;
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the impact of competition for staffing on our labor costs and
profitability;
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our dependence on key management personnel, key executives and
our local facility management personnel;
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compliance with laws and government regulations;
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the impact of claims brought against our facilities;
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the impact of governmental investigations, regulatory actions
and whistleblower lawsuits;
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difficulties in successfully integrating Acadias
acquisition of YFCS and PHC (including Meadow Wood) or realizing
the potential benefits of these acquisitions;
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the impact on our growth strategy from difficulties in acquiring
facilities in general and from
not-for-profit
entities due to regulatory scrutiny;
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difficulties in improving the operations of the facilities we
acquire;
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the impact of unknown or contingent liabilities on facilities we
acquire;
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the impact of state efforts to regulate the construction or
expansion of health care facilities on our ability to operate
and expand our operations;
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the impact of controls designed to reduce inpatient services on
our revenues;
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the impact of fluctuations in our operating results, quarter to
quarter earnings and other factors on the price of our common
stock;
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the impact of different interpretations of accounting principles
on our results of operations or financial condition;
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the impact of an increase in uninsured and underinsured patients
or the deterioration in the collectability of the accounts of
such patients on our results of operations;
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the impact of legislative and regulatory initiatives relating to
privacy and security of patient health information and standards
for electronic transactions;
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the possibility that any of our existing health care facilities
lose their accreditation or any of our new facilities fail to
receive accreditation;
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the impact of the trend for insurance companies and managed care
organizations to enter into sole source contracts on our ability
to obtain patients;
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our status as a controlled company; and
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the merger and the transactions contemplated by the merger
agreement or the announcement thereof.
|
This proxy statement/prospectus contains forward-looking
statements based on current projections about operations,
industry, financial condition and liquidity. Words such as
will, should, anticipate,
predict, potential,
estimate, expect, continue,
may, project, intend,
plan, believe and words and terms of
32
similar substance used in connection with any discussion of
future operating or financial performance, the merger or the
business of the combined company identify forward-looking
statements. In addition, any statements that refer to
expectations, projections or other characterizations of future
events or circumstances, including any underlying assumptions,
are forward-looking statements. Those statements are not
guarantees of future performance and are subject to risks,
uncertainties and assumptions that are difficult to predict.
Therefore, actual results could differ materially and adversely
from these forward-looking statements.
All forward-looking statements reflect present expectations of
future events by Acadias and PHCs management and are
subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described
in the forward-looking statements. In addition to the risks
related to the businesses of Acadia, PHC and the combined
company, the uncertainty concerning the completion of the merger
and the matters discussed above under Risk Factors,
among others, could cause actual results to differ materially
from those described in the forward-looking statements. These
factors include the relative valuations of Acadia and PHC, the
markets difficulty in valuing the combined business, the
possible failure to realize the anticipated benefits of the
merger and the conflicts of interest of directors recommending
the merger. Investors are cautioned not to place undue reliance
on the forward-looking statements. Neither Acadia nor PHC is
under any obligation, and each expressly disclaims any
obligation, to update or alter any forward-looking statements,
whether as a result of new information, future events or
otherwise.
33
SELECTED
HISTORICAL FINANCIAL INFORMATION
Acadia
Historical Financial Data
The selected financial data presented below as of and for the
fiscal years ended December 31, 2006, 2007, 2008, 2009 and
2010 and as of and for the six months ended June 30, 2010
and 2011 do not give effect to the YFCS operating results prior
to April 1, 2011 or the consummation of the merger. Acadia
has derived the selected consolidated financial data presented
below as of December 31, 2009 and 2010 and for each of the
three years in the period ended December 31, 2010 from
Acadia Healthcare Company, LLCs audited consolidated
financial statements included elsewhere in this proxy
statement/prospectus. Acadia has derived the selected
consolidated financial data presented below as of
December 31, 2006, 2007 and 2008 and for each of the two
years in the period ended December 31, 2007 from Acadia
Healthcare Company, LLCs audited consolidated financial
statements not included in this proxy statement/prospectus.
Acadia has derived the selected consolidated financial data
presented below as of and for the six months ended June 30,
2010 and 2011 from Acadia Healthcare Company, Inc.s
unaudited interim condensed consolidated financial statements
included elsewhere in this proxy statement/prospectus. The
results for the six months ended June 30, 2010 and 2011 are
not necessarily indicative of the results that may be expected
for the entire fiscal year. The selected consolidated financial
data below should be read in conjunction with the Acadia
Managements Discussion and Analysis of Financial Condition
and Results of Operations and Unaudited Pro Forma
Condensed Combined Financial Statements and Acadia
Healthcare Company, LLCs consolidated financial statements
and the notes thereto included elsewhere in this proxy
statement/prospectus. In addition to the acquisitions described
in the notes to the consolidated financial statements included
elsewhere in this proxy statement/prospectus, Acadia completed
the acquisitions of the Vermillion and Montana facilities in
2006 and the Abilene facility in 2007. On May 13, 2011,
Acadia Healthcare Company, LLC elected to convert to a
corporation (Acadia Healthcare Company, Inc.) in accordance with
Delaware law.
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Six Months Ended
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Year Ended December 31,
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June 30,
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2006
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2007
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2008
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2009
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2010
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2010
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2011
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($ in thousands, except per unit data)
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Income Statement Data:
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|
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Net patient service revenue
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$
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8,542
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$
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25,512
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$
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33,353
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$
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51,821
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$
|
64,342
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$
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32,472
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$
|
82,961
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Salaries, wages and benefits*
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|
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7,269
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|
|
|
19,212
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|
|
|
22,342
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|
|
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30,752
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36,333
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|
18,374
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|
|
|
70,538
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Professional fees
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|
1,103
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|
|
1,349
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|
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952
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|
|
|
1,977
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|
|
|
3,612
|
|
|
|
1,240
|
|
|
|
3,130
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Provision for doubtful accounts
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|
304
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|
|
|
991
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|
|
|
1,804
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|
|
|
2,424
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|
|
|
2,239
|
|
|
|
1,186
|
|
|
|
1,002
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Other operating expenses**
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|
4,865
|
|
|
|
8,112
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|
|
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8,328
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|
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12,116
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13,286
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|
|
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6,523
|
|
|
|
23,406
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Depreciation and amortization
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|
202
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|
|
|
522
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|
|
740
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|
|
|
967
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|
|
|
976
|
|
|
|
480
|
|
|
|
1,001
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Interest expense, net
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|
171
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|
|
|
992
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|
|
|
729
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|
|
|
774
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|
|
738
|
|
|
|
358
|
|
|
|
2,215
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|
|
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|
|
|
|
|
|
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Income (loss) from continuing operations, before income taxes
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(5,372
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)
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|
(5,666
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)
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|
|
(1,542
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)
|
|
|
2,811
|
|
|
|
7,158
|
|
|
|
4,311
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|
|
|
(18,331
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)
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Income tax provision (benefit)
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|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
53
|
|
|
|
477
|
|
|
|
287
|
|
|
|
2,997
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Income (loss) from continuing operations
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|
(5,372
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)
|
|
|
(5,666
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)
|
|
|
(1,562
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)
|
|
|
2,758
|
|
|
|
6,681
|
|
|
|
4,024
|
|
|
|
(21,328
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)
|
(Loss) gain from discontinued operations, net of income taxes
|
|
|
(838
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)
|
|
|
(3,208
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)
|
|
|
(156
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)
|
|
|
119
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|
|
|
(471
|
)
|
|
|
96
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|
|
|
(58
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)
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(Loss) income on disposal of discontinued operations, net of
income taxes
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|
|
|
|
|
|
(2,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net income (loss)
|
|
$
|
(6,210
|
)
|
|
$
|
(10,893
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)
|
|
$
|
(1,718
|
)
|
|
$
|
2,877
|
|
|
$
|
6,210
|
|
|
$
|
4,120
|
|
|
$
|
(21,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per unit
|
|
$
|
(0.54
|
)
|
|
$
|
(0.57
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.28
|
|
|
$
|
0.67
|
|
|
$
|
0.40
|
|
|
$
|
(2.13
|
)
|
Cash dividends per unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.23
|
|
|
$
|
0.08
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
Balance Sheet Data (as of end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
28
|
|
|
|
1,681
|
|
|
$
|
45
|
|
|
$
|
4,489
|
|
|
$
|
8,614
|
|
|
$
|
6,961
|
|
|
$
|
3,456
|
|
Total assets
|
|
|
17,878
|
|
|
|
23,414
|
|
|
|
32,274
|
|
|
|
41,254
|
|
|
|
45,412
|
|
|
|
42,938
|
|
|
|
260,203
|
|
Total debt
|
|
|
3,889
|
|
|
|
11,608
|
|
|
|
11,062
|
|
|
|
10,259
|
|
|
|
9,984
|
|
|
|
10,103
|
|
|
|
140,313
|
|
Total members equity
|
|
|
7,568
|
|
|
|
7,135
|
|
|
|
15,817
|
|
|
|
21,193
|
|
|
|
25,107
|
|
|
|
22,781
|
|
|
|
74,583
|
|
|
|
|
* |
|
Salaries wages and benefits for the six months ended
June 30, 2011 includes $19.8 million of equity-based
compensation expense recorded related to equity units issued in
conjunction with the YFCS Acquisition. |
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|
|
** |
|
Expenses of $8.4 million related to the YFCS acquisition
and PHC merger are reflected in other operating expenses for the
six months ended June 30, 2011. |
34
YFCS
Historical Financial Data
The selected financial data presented below as of and for the
fiscal years ended December 31, 2006, 2007, 2008, 2009 and
2010 and as of and for the three months ended March 31,
2010 and 2011 do not give effect to Acadias acquisition of
YFCS or the consummation of the merger. Acadia has derived the
selected financial data presented below for the fiscal years
ended December 31, 2009 and 2010 and for each of the three
years in the period ended December 31, 2010 from YFCS
audited consolidated financial statements included elsewhere in
this proxy statement/prospectus. Acadia has derived the selected
consolidated financial data presented below for the fiscal years
ended December 31, 2006, 2007 and 2008 and for each of the
two years in the period ended December 31, 2007 from
YFCS audited financial statements not included in this
proxy statement/prospectus. Acadia has derived the selected
consolidated financial data presented below as of and for the
three months ended March 31, 2010 and 2011 from YFCS
unaudited interim condensed consolidated financial statements
included elsewhere in this proxy statement/prospectus. The
results for the three months ended March 31, 2010 and 2011
are not necessarily indicative of the results that may have been
expected for the entire fiscal year. The selected consolidated
financial data below should be read in conjunction with the
Acadia Managements Discussion and Analysis of
Financial Condition and Results of Operations YFCS
Acquisition and Unaudited Pro Forma Condensed
Combined Financial Statements and YFCS consolidated
financial statements and the notes thereto included elsewhere in
this proxy statement/prospectus.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
149,837
|
|
|
$
|
171,425
|
|
|
$
|
180,646
|
|
|
$
|
186,586
|
|
|
$
|
184,386
|
|
|
$
|
45,489
|
|
|
$
|
45,686
|
|
Salaries and benefits
|
|
|
88,870
|
|
|
|
105,754
|
|
|
|
110,966
|
|
|
|
113,870
|
|
|
|
113,931
|
|
|
|
27,813
|
|
|
|
29,502
|
|
Other operating expenses
|
|
|
32,216
|
|
|
|
36,799
|
|
|
|
37,704
|
|
|
|
37,607
|
|
|
|
38,146
|
|
|
|
8,944
|
|
|
|
9,907
|
|
Provision for bad debts
|
|
|
365
|
|
|
|
1,411
|
|
|
|
1,902
|
|
|
|
(309
|
)
|
|
|
525
|
|
|
|
56
|
|
|
|
208
|
|
Interest expense
|
|
|
14,280
|
|
|
|
14,768
|
|
|
|
12,488
|
|
|
|
9,572
|
|
|
|
7,514
|
|
|
|
1,954
|
|
|
|
1,726
|
|
Depreciation and amortization
|
|
|
8,846
|
|
|
|
9,890
|
|
|
|
9,419
|
|
|
|
7,052
|
|
|
|
3,456
|
|
|
|
914
|
|
|
|
819
|
|
Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, before income taxes
|
|
|
5,260
|
|
|
|
2,803
|
|
|
|
8,167
|
|
|
|
18,794
|
|
|
|
(2,714
|
)
|
|
|
5,808
|
|
|
|
3,524
|
|
Provision for income taxes
|
|
|
1,491
|
|
|
|
1,252
|
|
|
|
3,132
|
|
|
|
7,133
|
|
|
|
5,032
|
|
|
|
2,267
|
|
|
|
1,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
3,769
|
|
|
|
1,551
|
|
|
|
5,035
|
|
|
|
11,661
|
|
|
|
(7,746
|
)
|
|
|
3,541
|
|
|
|
2,120
|
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
(2,160
|
)
|
|
|
844
|
|
|
|
964
|
|
|
|
(1,443
|
)
|
|
|
(4,060
|
)
|
|
|
(151
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,609
|
|
|
$
|
2,395
|
|
|
$
|
5,999
|
|
|
$
|
10,218
|
|
|
$
|
(11,806
|
)
|
|
$
|
3,390
|
|
|
$
|
2,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
|
Balance Sheet Data (as of end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
8,492
|
|
|
$
|
6,875
|
|
|
$
|
20,874
|
|
|
$
|
15,294
|
|
|
$
|
5,307
|
|
|
$
|
8,570
|
|
|
$
|
4,009
|
|
Total assets
|
|
|
279,091
|
|
|
|
268,622
|
|
|
|
271,446
|
|
|
|
254,620
|
|
|
|
217,530
|
|
|
|
249,748
|
|
|
|
216,609
|
|
Total debt
|
|
|
151,102
|
|
|
|
139,687
|
|
|
|
138,234
|
|
|
|
112,127
|
|
|
|
86,073
|
|
|
|
98,831
|
|
|
|
84,304
|
|
Total stockholders equity
|
|
|
94,244
|
|
|
|
96,647
|
|
|
|
102,696
|
|
|
|
113,921
|
|
|
|
102,126
|
|
|
|
117,311
|
|
|
|
104,182
|
|
35
PHC
Historical Financial Data
The selected financial data presented below for the fiscal years
ended June 30, 2007, 2008, 2009, 2010 and 2011 do not give
effect to the recently completed MeadowWood acquisition or
consummation of the merger. PHC has derived the selected
financial data presented below as of June 30, 2010 and 2011
and for each of the two years in the period ended June 30,
2011 from PHCs audited consolidated financial statements
included elsewhere in this proxy statement/prospectus. PHC has
derived the selected financial data presented below as of
June 30, 2007, 2008 and 2009 and for each of the three
years in the period ended June 30, 2009 from PHCs
audited consolidated financial statements not included in this
proxy statement/prospectus. Certain amounts for all periods
presented have been reclassified to be consistent with
Acadias financial information. The selected financial data
below should be read in conjunction with PHC
Managements Discussion and Analysis of Financial Condition
and Results of Operations and Unaudited Pro Forma
Condensed Combined Financial Statements and PHCs
consolidated financial statements and the notes thereto included
elsewhere in this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands, except per share data)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
40,563
|
|
|
$
|
45,397
|
|
|
$
|
46,411
|
|
|
$
|
53,077
|
|
|
$
|
62,008
|
|
Patient care expenses
|
|
|
19,738
|
|
|
|
22,133
|
|
|
|
23,835
|
|
|
|
26,307
|
|
|
|
30,236
|
|
Contract expenses
|
|
|
3,103
|
|
|
|
3,390
|
|
|
|
3,016
|
|
|
|
2,965
|
|
|
|
3,618
|
|
Provision for doubtful accounts
|
|
|
1,933
|
|
|
|
1,311
|
|
|
|
1,638
|
|
|
|
2,131
|
|
|
|
3,406
|
|
Administrative expenses
|
|
|
12,722
|
|
|
|
15,465
|
|
|
|
18,721
|
|
|
|
19,111
|
|
|
|
22,206
|
|
Legal settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
3,067
|
|
|
|
3,098
|
|
|
|
(799
|
)
|
|
|
2,563
|
|
|
|
2,096
|
|
Other income including interest expense, net
|
|
|
(8
|
)
|
|
|
(148
|
)
|
|
|
(177
|
)
|
|
|
(37
|
)
|
|
|
(108
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
3,059
|
|
|
|
2,950
|
|
|
|
(976
|
)
|
|
|
2,526
|
|
|
|
1,988
|
|
Provision for (benefit from) income taxes
|
|
|
1,144
|
|
|
|
1,366
|
|
|
|
65
|
|
|
|
1,106
|
|
|
|
1,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
1,915
|
|
|
|
1,584
|
|
|
|
(1,041
|
)
|
|
|
1,420
|
|
|
|
580
|
|
Net income (loss) from discontinued operations
|
|
|
(233
|
)
|
|
|
(1,259
|
)
|
|
|
(1,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,682
|
|
|
$
|
325
|
|
|
$
|
(2,454
|
)
|
|
$
|
1,420
|
|
|
$
|
580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations per share of common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.10
|
|
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.07
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.10
|
|
|
$
|
0.08
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.07
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share of common stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
|
($ in thousands)
|
|
|
Balance Sheet Data (as of end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
3,308
|
|
|
$
|
3,142
|
|
|
$
|
3,199
|
|
|
$
|
4,540
|
|
|
$
|
3,668
|
|
Total assets
|
|
|
26,856
|
|
|
|
26,507
|
|
|
|
22,692
|
|
|
|
25,650
|
|
|
|
28,282
|
|
Total debt
|
|
|
2,566
|
|
|
|
2,422
|
|
|
|
2,241
|
|
|
|
2,557
|
|
|
|
2,239
|
|
Total stockholders equity
|
|
|
18,250
|
|
|
|
18,659
|
|
|
|
16,044
|
|
|
|
17,256
|
|
|
|
17,915
|
|
36
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following tables set forth the unaudited pro forma condensed
combined financial data for Acadia, YFCS, PHC and MeadowWood as
a combined company, giving effect to (1) Acadias
acquisition of YFCS and the related debt and equity financing
transactions on April 1, 2011, (2) PHCs
acquisition of MeadowWood and related debt financing transaction
on July 1, 2011 and (3) Acadias merger with PHC
and the related transactions described elsewhere in this proxy
statement/prospectus, as if the transactions had occurred on
June 30, 2011 for the unaudited pro forma condensed
combined balance sheet and January 1, 2010 for the
unaudited pro forma condensed combined statements of operations.
Acadias condensed consolidated balance sheet as of
June 30, 2011 reflects the acquisition of YFCS and related
debt and equity transactions and Acadias condensed
consolidated statement of operations reflects the results of
YFCS operations for the period from April 1, 2011 to
June 30, 2011.
MeadowWood was acquired by PHC in an asset acquisition. The
assets acquired consisted of substantially all of the assets of
HHC Delaware. The pro forma adjustments reflect the elimination
of any assets of HHC Delaware not acquired by PHC. The fiscal
years of Acadia, YFCS and HHC Delaware end December 31 while the
fiscal year of PHC ends on June 30. The combined company
will use Acadias fiscal year ending December 31. The
unaudited pro forma condensed combined balance sheet combines
Acadias unaudited consolidated balance sheet as of June
30, 2011 with the consolidated balance sheet of PHC and the
unaudited condensed consolidated balance sheet of HHC Delaware
as of June 30, 2011. The unaudited pro forma condensed combined
statement of operations for the year ended December 31,
2010 combines Acadias audited consolidated statement of
operations for the year ended December 31, 2010 with the
audited consolidated statement of operations of YFCS for the
year ended December 31, 2010, the audited consolidated
statement of operations of HHC Delaware for the year ended
December 31, 2010 and the unaudited condensed consolidated
statement of operations of PHC for the twelve months ended
December 31, 2010 (which was derived from the audited
consolidated statement of operations of PHC for the fiscal year
ended June 30, 2010 less the unaudited condensed
consolidated statement of operations of PHC for the six months
ended December 31, 2009 plus the unaudited condensed
consolidated statement of operations of PHC for the six months
ended December 31, 2010). The unaudited pro forma condensed
combined statement of operations for the six months ended
June 30, 2011 combines Acadias unaudited condensed
consolidated statement of operations for the six months ended
June 30, 2011 with the unaudited condensed consolidated
statement of operations of YFCS from January 1, 2011
through the date of the YFCS acquisition, the unaudited
condensed consolidated statement of operations of HHC Delaware
for the six months ended June 30, 2011 and the unaudited
condensed consolidated statement of operations of PHC for the
six months ended June 30, 2011 (which was derived from the
audited consolidated statement of operations of PHC for the
fiscal year ended June 30, 2011 less the unaudited
condensed consolidated statement of operations of PHC for the
six months ended December 31, 2010).
The unaudited pro forma condensed combined financial data has
been prepared using the acquisition method of accounting for
business combinations under GAAP. The adjustments necessary to
fairly present the unaudited pro forma condensed combined
financial data have been made based on available information and
in the opinion of management are reasonable. Assumptions
underlying the pro forma adjustments are described in the
accompanying notes, which should be read in conjunction with
this unaudited pro forma condensed combined financial data. The
pro forma adjustments are preliminary and revisions to the fair
value of assets acquired and liabilities assumed and the
financing of the transactions may have a significant impact on
the pro forma adjustments. A final valuation of assets acquired
and liabilities assumed in the YFCS, MeadowWood and PHC
acquisitions cannot be made prior to the completion of the
merger and the completion of fair value determinations will most
likely result in changes in the values assigned to property and
equipment and other assets (including intangibles) acquired and
liabilities assumed.
The unaudited pro forma condensed combined financial data is for
illustrative purposes only and does not purport to represent
what Acadias financial position or results of operations
actually would have been had the events noted above in fact
occurred on the assumed dates or to project our financial
position or results of operations for any future date or future
period.
The unaudited pro forma condensed combined financial data does
not reflect the effects of any future restructuring activities
or operating efficiencies pertaining to the combined operations
(for a discussion of anticipated cost savings and synergies, see
page 133 of Acadia Managements Discussion and
Analysis of
37
Financial Condition and Results of Operations
Anticipated Synergies, Cost Savings and Revenue
Improvements).
The unaudited pro forma condensed combined financial data should
be read in conjunction with Selected Historical Financial
Information, Acadia Managements Discussion and
Analysis of Financial Condition and Results of Operations,
PHC Managements Discussion and Analysis of
Financial Condition and Results of Operations and the
consolidated financial statements and the notes thereto of
Acadia, YFCS, PHC and MeadowWood included elsewhere in this
proxy statement/prospectus.
38
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PHC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HHC
|
|
|
MeadowWood
|
|
|
|
|
Pro Forma
|
|
|
Merger
|
|
|
|
|
Pro Forma
|
|
|
|
Acadia(1)
|
|
|
PHC(3)
|
|
|
Delaware(4)
|
|
|
Adjustments
|
|
|
Notes
|
|
PHC
|
|
|
Adjustments
|
|
|
Notes
|
|
Combined
|
|
|
|
($ in thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,456
|
|
|
$
|
3,669
|
|
|
$
|
32
|
|
|
$
|
(32
|
)
|
|
(5)
|
|
$
|
4,191
|
|
|
$
|
(173
|
)
|
|
(13)
|
|
$
|
7,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
522
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
22,560
|
|
|
|
11,079
|
|
|
|
1,482
|
|
|
|
|
|
|
|
|
|
12,561
|
|
|
|
|
|
|
|
|
|
35,121
|
|
Other current assets
|
|
|
10,246
|
|
|
|
4,615
|
|
|
|
1,055
|
|
|
|
(643
|
)
|
|
(5)
|
|
|
5,027
|
|
|
|
|
|
|
|
|
|
15,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
36,262
|
|
|
|
19,363
|
|
|
|
2,569
|
|
|
|
(153
|
)
|
|
|
|
|
21,779
|
|
|
|
(173
|
)
|
|
|
|
|
57,868
|
|
Property and equipment, net
|
|
|
55,313
|
|
|
|
4,713
|
|
|
|
8,108
|
|
|
|
1,566
|
|
|
(7)
|
|
|
14,387
|
|
|
|
107
|
|
|
(12)
|
|
|
69,807
|
|
Goodwill
|
|
|
158,271
|
|
|
|
969
|
|
|
|
18,677
|
|
|
|
(9,136
|
)
|
|
(7)
|
|
|
10,510
|
|
|
|
37,550
|
|
|
(12)
|
|
|
206,331
|
|
Intangible assets, net
|
|
|
936
|
|
|
|
|
|
|
|
|
|
|
|
700
|
|
|
(7)
|
|
|
700
|
|
|
|
1,100
|
|
|
(12)
|
|
|
2,736
|
|
Other assets
|
|
|
9,421
|
|
|
|
3,237
|
|
|
|
|
|
|
|
1,399
|
|
|
(8d)
|
|
|
4,593
|
|
|
|
3,800
|
|
|
(13)
|
|
|
15,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(648
|
)
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
(10)
|
|
|
|
|
|
|
(1,906
|
)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
260,203
|
|
|
$
|
28,282
|
|
|
$
|
29,354
|
|
|
$
|
(5,667
|
)
|
|
|
|
$
|
51,969
|
|
|
$
|
39,830
|
|
|
|
|
$
|
352,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
6,750
|
|
|
$
|
2,163
|
|
|
$
|
52
|
|
|
$
|
(1,898
|
)
|
|
(9)
|
|
$
|
265
|
|
|
$
|
(265
|
)
|
|
(14)
|
|
$
|
6,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
6,705
|
|
|
|
2,890
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
3,047
|
|
|
|
|
|
|
|
|
|
9,752
|
|
Accrued salaries and benefits
|
|
|
12,906
|
|
|
|
2,027
|
|
|
|
635
|
|
|
|
(635
|
)
|
|
(5)
|
|
|
2,027
|
|
|
|
|
|
|
|
|
|
14,933
|
|
Other accrued liabilities
|
|
|
6,873
|
|
|
|
2,387
|
|
|
|
457
|
|
|
|
(401
|
)
|
|
(8b)
|
|
|
2,138
|
|
|
|
|
|
|
|
|
|
9,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(305
|
)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
33,234
|
|
|
|
9,467
|
|
|
|
1,301
|
|
|
|
(3,291
|
)
|
|
|
|
|
7,477
|
|
|
|
(265
|
)
|
|
|
|
|
40,446
|
|
Long-term debt
|
|
|
133,563
|
|
|
|
57
|
|
|
|
53
|
|
|
|
26,178
|
|
|
(9)
|
|
|
26,235
|
|
|
|
123,765
|
|
|
(14)
|
|
|
283,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53
|
)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
18,823
|
|
|
|
843
|
|
|
|
27,744
|
|
|
|
(27,744
|
)
|
|
(5)
|
|
|
843
|
|
|
|
183
|
|
|
(12)
|
|
|
19,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
185,620
|
|
|
|
10,367
|
|
|
|
29,098
|
|
|
|
(4,910
|
)
|
|
|
|
|
34,555
|
|
|
|
123,683
|
|
|
|
|
|
343,858
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members equity
|
|
|
|
|
|
|
|
|
|
|
256
|
|
|
|
(256
|
)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
100
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208
|
|
|
|
(208
|
)
|
|
(6)
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
(12)
|
|
|
|
|
Additional paid-in capital
|
|
|
105,557
|
|
|
|
28,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,221
|
|
|
|
(28,221
|
)
|
|
(6)
|
|
|
79,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77
|
)
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,495
|
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(74,441
|
)
|
|
(13)
|
|
|
|
|
Treasury stock
|
|
|
|
|
|
|
(1,809
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,809
|
)
|
|
|
1,809
|
|
|
(6)
|
|
|
|
|
Accumulated deficit
|
|
|
(31,074
|
)
|
|
|
(8,705
|
)
|
|
|
|
|
|
|
(388
|
)
|
|
(8c)
|
|
|
(9,206
|
)
|
|
|
9,206
|
|
|
(6)
|
|
|
(71,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70
|
)
|
|
(8a)
|
|
|
|
|
|
|
(40,432
|
)
|
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
(10)
|
|
|
|
|
|
|
(110
|
)
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
74,583
|
|
|
|
17,915
|
|
|
|
256
|
|
|
|
(757
|
)
|
|
|
|
|
17,414
|
|
|
|
(83,853
|
)
|
|
|
|
|
8,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
260,203
|
|
|
$
|
28,282
|
|
|
$
|
29,354
|
|
|
$
|
(5,667
|
)
|
|
|
|
$
|
51,969
|
|
|
$
|
39,830
|
|
|
|
|
$
|
352,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma financial
information.
39
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acadia
|
|
|
PHC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
Acadia
|
|
|
|
|
|
YFCS
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
HHC
|
|
|
MeadowWood
|
|
|
|
|
Pro Forma
|
|
|
Merger
|
|
|
|
|
Pro Forma
|
|
|
|
Healthcare(1)
|
|
|
YFCS(2)
|
|
|
Adjustments
|
|
|
Notes
|
|
Acadia
|
|
|
PHC(3)
|
|
|
Delaware(4)
|
|
|
Adjustments
|
|
|
Notes
|
|
PHC
|
|
|
Adjustments
|
|
|
Notes
|
|
Combined
|
|
|
|
($ in thousands, except share and per share amounts)
|
|
|
Revenue
|
|
$
|
82,961
|
|
|
$
|
45,686
|
|
|
|
|
|
|
|
|
$
|
128,647
|
|
|
$
|
32,305
|
|
|
$
|
7,541
|
|
|
$
|
|
|
|
|
|
$
|
39,846
|
|
|
|
|
|
|
|
|
$
|
168,493
|
|
Salaries, wages and benefits
|
|
|
70,538
|
|
|
|
29,502
|
|
|
|
|
|
|
|
|
|
100,040
|
|
|
|
16,800
|
|
|
|
4,747
|
|
|
|
|
|
|
|
|
|
21,547
|
|
|
|
|
|
|
|
|
|
121,587
|
|
Professional fees
|
|
|
3,130
|
|
|
|
|
|
|
|
1,901
|
|
|
(15)
|
|
|
5,031
|
|
|
|
3,695
|
|
|
|
454
|
|
|
|
|
|
|
|
|
|
4,149
|
|
|
|
|
|
|
|
|
|
9,180
|
|
Supplies
|
|
|
4,282
|
|
|
|
|
|
|
|
2,204
|
|
|
(15)
|
|
|
6,486
|
|
|
|
1,197
|
|
|
|
469
|
|
|
|
|
|
|
|
|
|
1,666
|
|
|
|
|
|
|
|
|
|
8,152
|
|
Rents and leases
|
|
|
2,062
|
|
|
|
|
|
|
|
1,320
|
|
|
(15)
|
|
|
3,382
|
|
|
|
1,818
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
1,837
|
|
|
|
|
|
|
|
|
|
5,219
|
|
Other operating expenses
|
|
|
8,110
|
|
|
|
9,907
|
|
|
|
(5,425
|
)
|
|
(15)
|
|
|
12,592
|
|
|
|
4,455
|
|
|
|
636
|
|
|
|
|
|
|
|
|
|
5,091
|
|
|
|
|
|
|
|
|
|
17,683
|
|
Provision for doubtful accounts
|
|
|
1,002
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
1,210
|
|
|
|
1,743
|
|
|
|
339
|
|
|
|
|
|
|
|
|
|
2,082
|
|
|
|
|
|
|
|
|
|
3,292
|
|
Depreciation and amortization
|
|
|
1,001
|
|
|
|
819
|
|
|
|
(294
|
)
|
|
(18a)
|
|
|
1,526
|
|
|
|
559
|
|
|
|
179
|
|
|
|
31
|
|
|
(18b)
|
|
|
769
|
|
|
|
83
|
|
|
(18c)
|
|
|
2,378
|
|
Interest expense, net
|
|
|
2,215
|
|
|
|
1,726
|
|
|
|
(169
|
)
|
|
(19a)
|
|
|
3,772
|
|
|
|
(15
|
)
|
|
|
224
|
|
|
|
768
|
|
|
(19b)
|
|
|
977
|
|
|
|
6,521
|
|
|
(19c)
|
|
|
11,270
|
|
Sponsor management fees
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500
|
)
|
|
(22)
|
|
|
90
|
|
Transaction-related expenses
|
|
|
8,362
|
|
|
|
|
|
|
|
(8,362
|
)
|
|
(16)
|
|
|
|
|
|
|
1,608
|
|
|
|
|
|
|
|
(1,608
|
)
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
101,292
|
|
|
|
42,162
|
|
|
|
(8,825
|
)
|
|
|
|
|
134,629
|
|
|
|
32,306
|
|
|
|
7,067
|
|
|
|
(809
|
)
|
|
|
|
|
38,564
|
|
|
|
6,104
|
|
|
|
|
|
179,297
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(18,331
|
)
|
|
|
3,524
|
|
|
|
8,825
|
|
|
|
|
|
(5,982
|
)
|
|
|
(1
|
)
|
|
|
474
|
|
|
|
809
|
|
|
|
|
|
1,282
|
|
|
|
(6,104
|
)
|
|
|
|
|
(10,804
|
)
|
Provision (benefit) for income taxes
|
|
|
2,997
|
|
|
|
1,404
|
|
|
|
(133
|
)
|
|
(20)
|
|
|
7,798
|
|
|
|
600
|
|
|
|
193
|
|
|
|
324
|
|
|
(21)
|
|
|
1,117
|
|
|
|
(2,442
|
)
|
|
(21)
|
|
|
6,473
|
|
|
|
|
|
|
|
|
|
|
|
|
3,530
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(21,328
|
)
|
|
$
|
2,120
|
|
|
$
|
5,428
|
|
|
|
|
$
|
(13,780
|
)
|
|
$
|
(601
|
)
|
|
$
|
281
|
|
|
$
|
485
|
|
|
|
|
$
|
165
|
|
|
$
|
(3,662
|
)
|
|
|
|
$
|
(17,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per unit/share income (loss) from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(2.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(2.13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,554,223
|
|
|
(23)
|
|
|
22,554,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,659,476
|
|
|
(23)
|
|
|
22,659,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma financial
information.
40
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acadia
|
|
|
PHC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
Acadia
|
|
|
|
|
|
YFCS
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
HHC
|
|
|
MeadowWood
|
|
|
|
|
Pro Forma
|
|
|
Merger
|
|
|
|
|
Pro Forma
|
|
|
|
Healthcare(1)
|
|
|
YFCS(2)
|
|
|
Adjustments
|
|
|
Notes
|
|
Acadia
|
|
|
PHC(3)
|
|
|
Delaware(4)
|
|
|
Adjustments
|
|
|
Notes
|
|
PHC
|
|
|
Adjustments
|
|
|
Notes
|
|
Combined
|
|
|
|
($ in thousands, except share and per share amounts)
|
|
|
Revenue
|
|
$
|
64,342
|
|
|
$
|
184,386
|
|
|
|
|
|
|
|
|
$
|
248,728
|
|
|
$
|
57,269
|
|
|
$
|
14,301
|
|
|
$
|
|
|
|
|
|
$
|
71,570
|
|
|
|
|
|
|
|
|
$
|
320,298
|
|
Salaries, wages and benefits
|
|
|
36,333
|
|
|
|
113,931
|
|
|
|
1,239
|
|
|
(17)
|
|
|
151,503
|
|
|
|
28,647
|
|
|
|
8,850
|
|
|
|
|
|
|
|
|
|
37,497
|
|
|
|
|
|
|
|
|
|
189,000
|
|
Professional fees
|
|
|
3,612
|
|
|
|
|
|
|
|
6,724
|
|
|
(15)
|
|
|
8,953
|
|
|
|
8,401
|
|
|
|
891
|
|
|
|
|
|
|
|
|
|
9,292
|
|
|
|
|
|
|
|
|
|
18,245
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,383
|
)
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplies
|
|
|
3,709
|
|
|
|
|
|
|
|
8,380
|
|
|
(15)
|
|
|
12,089
|
|
|
|
2,319
|
|
|
|
897
|
|
|
|
|
|
|
|
|
|
3,216
|
|
|
|
|
|
|
|
|
|
15,305
|
|
Rents
|
|
|
1,288
|
|
|
|
|
|
|
|
5,244
|
|
|
(15)
|
|
|
6,532
|
|
|
|
3,494
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
3,514
|
|
|
|
|
|
|
|
|
|
10,046
|
|
Other operating expenses
|
|
|
8,289
|
|
|
|
38,146
|
|
|
|
(20,348
|
)
|
|
(15)
|
|
|
24,848
|
|
|
|
6,644
|
|
|
|
1,231
|
|
|
|
|
|
|
|
|
|
7,875
|
|
|
|
|
|
|
|
|
|
32,723
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,239
|
)
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts
|
|
|
2,239
|
|
|
|
525
|
|
|
|
|
|
|
|
|
|
2,764
|
|
|
|
2,866
|
|
|
|
511
|
|
|
|
|
|
|
|
|
|
3,377
|
|
|
|
|
|
|
|
|
|
6,141
|
|
Depreciation and amortization
|
|
|
976
|
|
|
|
3,456
|
|
|
|
(1,359
|
)
|
|
(18a)
|
|
|
3,073
|
|
|
|
1,129
|
|
|
|
308
|
|
|
|
112
|
|
|
(18b)
|
|
|
1,549
|
|
|
|
155
|
|
|
(18c)
|
|
|
4,777
|
|
Interest expense, net
|
|
|
738
|
|
|
|
7,514
|
|
|
|
(953
|
)
|
|
(19a)
|
|
|
7,299
|
|
|
|
148
|
|
|
|
524
|
|
|
|
1,444
|
|
|
(19b)
|
|
|
2,116
|
|
|
|
13,052
|
|
|
(19c)
|
|
|
22,467
|
|
Impairment of goodwill
|
|
|
|
|
|
|
23,528
|
|
|
|
|
|
|
|
|
|
23,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
57,184
|
|
|
|
187,100
|
|
|
|
(3,695
|
)
|
|
|
|
|
240,589
|
|
|
|
53,648
|
|
|
|
13,232
|
|
|
|
1,556
|
|
|
|
|
|
68,436
|
|
|
|
13,207
|
|
|
|
|
|
322,232
|
|
Income (loss) from continuing operations before income taxes
|
|
|
7,158
|
|
|
|
(2,714
|
)
|
|
|
3,695
|
|
|
|
|
|
8,139
|
|
|
|
3,621
|
|
|
|
1,069
|
|
|
|
(1,556
|
)
|
|
|
|
|
3,134
|
|
|
|
(13,207
|
)
|
|
|
|
|
(1,934
|
)
|
Provision (benefit) for income taxes
|
|
|
477
|
|
|
|
5,032
|
|
|
|
2,448
|
|
|
(20)
|
|
|
9,435
|
|
|
|
1,532
|
|
|
|
437
|
|
|
|
(622
|
)
|
|
(21)
|
|
|
1,347
|
|
|
|
(5,283
|
)
|
|
(21)
|
|
|
5,499
|
|
|
|
|
|
|
|
|
|
|
|
|
1,478
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
6,681
|
|
|
$
|
(7,746
|
)
|
|
$
|
(231
|
)
|
|
|
|
$
|
(1,296
|
)
|
|
$
|
2,089
|
|
|
$
|
632
|
|
|
$
|
(934
|
)
|
|
|
|
$
|
1,787
|
|
|
$
|
(7,924
|
)
|
|
|
|
$
|
(7,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per unit/share income (loss) from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,579,198
|
|
|
(23)
|
|
|
22,579,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
10,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,602,672
|
|
|
(23)
|
|
|
22,602,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma financial
information.
41
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
($ in thousands)
|
|
|
(1) |
|
The amounts in this column represent, for Acadia, actual
balances as of June 30, 2011 or actual results for the
periods presented. |
|
(2) |
|
The amounts in this column represent, for YFCS, actual results
for the periods from January 1, 2011 to the April 1,
2011 acquisition date and for the year ended December 31,
2010. |
|
(3) |
|
The amounts in this column represent, for PHC, actual balances
as of June 30, 2011 or actual results for the periods
presented. The condensed consolidated statements of operations
of PHC have been reclassified to conform to Acadias
expense classification policies. |
|
(4) |
|
The amounts in this column represent, for HHC Delaware, actual
balances as of June 30, 2011 or actual results for the
periods presented. |
|
(5) |
|
Represents the elimination of $32 of cash, $643 of deferred tax
assets, $52 of current capital lease liabilities, $53 of
long-term capital lease liabilities, $635 of accrued salaries
and benefits, $305 of other accrued liabilities, $954 of
deferred tax liabilities and a $26,790 payable to
MeadowWoods former parent company not acquired by PHC in
the MeadowWood acquisition. |
|
(6) |
|
Reflects the elimination of the equity accounts and accumulated
earnings of HHC Delaware and PHC. |
|
(7) |
|
Represents the adjustments to acquired property and equipment
and license intangible assets based on preliminary estimates of
fair value and the adjustment to goodwill derived from the
difference in the estimated total consideration transferred and
the estimated fair value of assets acquired and liabilities
assumed by PHC in the MeadowWood acquisition, calculated as
follows: |
|
|
|
|
|
Consideration transferred
|
|
$
|
21,500
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,482
|
|
Other current assets
|
|
|
412
|
|
Property and equipment
|
|
|
9,674
|
|
Licenses
|
|
|
700
|
|
Accounts payable
|
|
|
(157
|
)
|
Other accrued liabilities
|
|
|
(152
|
)
|
|
|
|
|
|
Fair value of assets acquired less liabilities assumed
|
|
|
11,959
|
|
|
|
|
|
|
Estimated goodwill
|
|
|
9,541
|
|
Less: Historical goodwill
|
|
|
(18,677
|
)
|
|
|
|
|
|
Goodwill adjustment
|
|
$
|
(9,136
|
)
|
|
|
|
|
|
|
|
|
|
|
The acquired assets and liabilities assumed will be recorded at
their estimated fair values as of the closing date of the
MeadowWood acquisition. Estimated goodwill is based upon a
determination of the fair value of assets acquired and
liabilities assumed that is preliminary and subject to revision
as the value of total consideration is finalized and additional
information related to the fair value of property and equipment
and other assets acquired and liabilities assumed becomes
available. The actual determination of the fair value of assets
acquired and liabilities assumed will differ from that assumed
in these unaudited pro forma condensed combined financial
statements and such differences may be material. |
|
(8) |
|
Represents a $522 increase in cash as a result of the MeadowWood
acquisition. The sources and uses of cash for the MeadowWood
acquisition were as follows: |
|
|
|
|
|
Sources:
|
|
|
|
|
Incurrence of indebtedness under PHCs senior credit
facility
|
|
$
|
26,500
|
|
Uses:
|
|
|
|
|
Cash consideration paid for MeadowWood
|
|
|
(21,500
|
)
|
Repayment of existing debt
|
|
|
(2,220
|
)
|
Transaction costs(a)
|
|
|
(2,258
|
)
|
|
|
|
|
|
Net cash adjustment
|
|
$
|
522
|
|
|
|
|
|
|
42
|
|
|
(a) |
|
The transaction costs paid at closing of $2,258 include $577 of
acquisition-related costs, $1,611 of debt financing costs and
debt prepayment penalties of $70 |
|
(b) |
|
Represents $401 of transaction-related expenses accrued as of
June 30, 2011, including $189 of acquisition-related costs
and $212 of capitalized debt financing costs |
|
(c) |
|
Represents acquisition-related costs of $577 less $189 accrued
as of June 30, 2011 |
|
(d) |
|
Represents debt financing costs of $1,611 less $212 already
deferred as of June 30, 2011 |
|
|
|
(9) |
|
Represents the effect of the MeadowWood acquisition on the
current portion and long-term portion of total debt, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Portion
|
|
|
Long-term Portion
|
|
|
Total Debt
|
|
|
Repayment of PHC historical debt
|
|
$
|
(2,163
|
)
|
|
$
|
(57
|
)
|
|
$
|
(2,220
|
)
|
Incurrence of indebtedness under PHCs senior credit
facility
|
|
|
265
|
|
|
|
26,235
|
|
|
|
26,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
$
|
(1,898
|
)
|
|
$
|
26,178
|
|
|
$
|
24,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|
Represents the elimination of PHC deferred financing costs in
connection with the repayment of debt. |
|
(11) |
|
Acadia plans to effect a stock split or issuance on or prior to
the closing of the Merger with PHC such that approximately
17,676,101 shares of common stock will be issued and
outstanding. Thus, on a pro forma basis, common stock has been
increased by $77 based on the increase of 7,676,101 shares
of common stock ($0.01 par value), and additional paid-in
capital has been decreased by $77. |
|
(12) |
|
Represents the adjustments to acquired property and equipment
and intangible assets based on preliminary estimates of fair
value and the adjustment to goodwill derived from the difference
in the estimated total consideration transferred by Acadia and
the estimated fair value of assets acquired and liabilities
assumed by Acadia in the PHC merger, calculated as follows: |
|
|
|
|
|
Estimated equity consideration(a)
|
|
$
|
46,891
|
|
Estimated fair value of vested replacement share-based awards
|
|
|
1,543
|
|
Estimated repayment of indebtedness under PHCs senior
credit facility
|
|
|
26,500
|
|
Estimated cash consideration to Class B common stockholders
|
|
|
5,000
|
|
|
|
|
|
|
Estimated total consideration
|
|
|
79,934
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
4,191
|
|
Accounts receivable
|
|
|
12,561
|
|
Other current assets
|
|
|
5,027
|
|
Property and equipment
|
|
|
14,494
|
|
Contract-based and other intangible assets
|
|
|
1,800
|
|
Other long-term assets
|
|
|
2,039
|
|
Accounts payable
|
|
|
(3,047
|
)
|
Accrued salaries and benefits
|
|
|
(2,027
|
)
|
Other accrued liabilities
|
|
|
(2,138
|
)
|
Deferred tax liability-long-term(b)
|
|
|
(183
|
)
|
Other long-term liabilities
|
|
|
(843
|
)
|
|
|
|
|
|
Fair value of assets acquired less liabilities assumed
|
|
|
31,874
|
|
|
|
|
|
|
Estimated goodwill
|
|
|
48,060
|
|
Less: Historical goodwill
|
|
|
(10,510
|
)
|
|
|
|
|
|
Goodwill adjustment
|
|
$
|
37,550
|
|
|
|
|
|
|
|
|
|
(a) |
|
The estimated fair value of Acadia common shares issuable to PHC
stockholders is based on total outstanding PHC Class A and
Class B shares of 19,537,835 as of June 30, 2011
multiplied by a current stock price of $2.40. The fair value of
equity consideration will be adjusted based on the fair value of |
43
|
|
|
|
|
Acadia common stock distributed to PHC stockholders upon
closing of the Merger. The equity consideration is reflected as
a $49 increase in common stock based on the conversion of each
PHC share into one-quarter of a share of Acadia common stock
($0.01 par value) and a $46,842 increase in additional
paid-in capital. The total increase in additional paid-in
capital of $48,495 also includes the estimated fair value of the
vested portion of replacement equity-based awards of $1,543 and
the $110 charge resulting from the accelerated vesting of the
stock options held by PHC directors. |
|
|
|
(b) |
|
The deferred tax liability of $183 represents the
reclassification of PHCs deferred tax asset of $648 from
other assets to other liabilities less acquisition adjustments
of $831 related to book and tax basis differences in intangible
assets acquired. |
|
|
|
|
|
The acquired assets and liabilities assumed will be recorded at
their estimated fair values as of the closing date of the
Merger. Estimated goodwill is based upon a determination of the
fair value of assets acquired and liabilities assumed that is
preliminary and subject to revision as the value of total
consideration is finalized and additional information related to
the fair value of property and equipment and other assets
(including intangible assets) acquired and liabilities assumed
becomes available. The actual determination of the fair value of
assets acquired and liabilities assumed will differ from that
assumed in these unaudited pro forma condensed combined
financial statements and such differences may be material.
Qualitative factors comprising goodwill include efficiencies
derived through synergies expected by the elimination of certain
redundant corporate functions and expenses, the ability to
leverage call center referrals to a broader provider base,
coordination of services provided across the combined network of
facilities, achievement of operating efficiencies by
benchmarking performance and applying best practices throughout
the combined company. |
|
|
|
(13) |
|
Represents a $173 decrease in cash as a result of the merger.
The sources and uses of cash in connection with the merger are
expected to be as follows: |
|
|
|
|
|
|
|
|
|
|
Sources:
|
|
|
|
|
Issuance of $150,000 of Senior Notes
|
|
$
|
150,000
|
|
Uses:
|
|
|
|
|
Dividend to be paid to Acadia stockholders
|
|
|
(74,441
|
)
|
Repayment of indebtedness under PHCs senior credit facility
|
|
|
(26,500
|
)
|
Cash portion of PHC merger consideration
|
|
|
(5,000
|
)
|
Transaction costs(a)
|
|
|
(44,232
|
)
|
|
|
|
|
|
Cash adjustment
|
|
$
|
(173
|
)
|
|
|
|
|
|
|
|
|
(a) |
|
Costs incurred in connection with the PHC merger and related
transactions are estimated to be $19,873 of acquisition-related
expenses (including approximately $2,403 of change in control
payments due to certain PHC executives), $20,559 to terminate
the Professional Services Agreement and $3,800 of debt financing
costs associated with the Senior Notes, the amendment to the
Senior Secured Credit Facility and the Debt Commitment Letter. |
|
|
|
(14) |
|
Represents the effect of the merger on the current portion and
long-term portion of total debt, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Portion
|
|
|
Long-term Portion
|
|
|
Total Debt
|
|
|
Repayment of indebtedness under PHCs senior credit facility
|
|
|
(265
|
)
|
|
|
(26,235
|
)
|
|
|
(26,500
|
)
|
Issuance of Senior Notes
|
|
|
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
$
|
(265
|
)
|
|
$
|
123,765
|
|
|
$
|
123,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15) |
|
Reflects the reclassification from YFCS other operating expenses
of: (a) professional fees of $1,901 and $6,724 for the
three months ended March 31, 2011 and the twelve months
ended December 31, 2010, respectively, (b) supplies
expense of $2,204 and $8,380 for the three months ended
March 31, 2011 and the twelve months ended
December 31, 2010, respectively, and (c) rent expense
of $1,320 and $5,244 for the three months ended March 31,
2011 and the twelve months ended December 31, 2010,
respectively, to conform to Acadias classification of
expenses. |
|
(16) |
|
Reflects the removal of acquisition-related expenses included in
the historical statements of operations of Acadia and YFCS
relating to Acadias acquisition of YFCS and the merger
between Acadia and PHC. Acadia recorded $8,362 and $849 of
acquisition-related expenses in the six months ended
June 30, 2011 and the |
44
|
|
|
|
|
twelve months ended December 31, 2010, respectively. YFCS
recorded $534 of acquisition-related expenses in the twelve
months ended December 31, 2010. PHC recorded $1,608 of
acquisition-related and sale-related expenses in the six months
ended June 30, 2011. |
|
(17) |
|
Reflects the reclassification of workers compensation
insurance expense of $1,239 for the twelve months ended
December 31, 2010 to salaries, wages and benefits. |
|
(18) |
|
Represents the adjustments to depreciation and amortization
expense as a result of recording the property and equipment and
intangible assets at preliminary estimates of fair value as of
the respective dates of the acquisitions, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
|
|
Three Months
|
|
|
Twelve Months
|
|
|
|
|
|
|
Lives
|
|
Monthly
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Amount
|
|
|
(In Years)
|
|
Depreciation
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Land
|
|
$
|
5,122
|
|
|
N/A
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Land improvements
|
|
|
2,694
|
|
|
10
|
|
|
22
|
|
|
|
66
|
|
|
|
264
|
|
Building and improvements
|
|
|
21,832
|
|
|
25, or
lease term
|
|
|
73
|
|
|
|
219
|
|
|
|
876
|
|
Equipment
|
|
|
2,024
|
|
|
3-7
|
|
|
53
|
|
|
|
159
|
|
|
|
636
|
|
Construction in progress
|
|
|
239
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,911
|
|
|
|
|
|
148
|
|
|
|
444
|
|
|
|
1,776
|
|
Non-compete intangible asset
|
|
|
321
|
|
|
1
|
|
|
27
|
|
|
|
81
|
|
|
|
321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
525
|
|
|
|
2,097
|
|
Less: historical depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
(819
|
)
|
|
|
(3,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense adjustment
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(294
|
)
|
|
$
|
(1,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The adjustment to decrease depreciation and amortization expense
relates to the excess of the historical amortization of the
pre-acquisition intangible assets of YFCS over the amortization
expense resulting from the intangible assets identified by
Acadia in its acquisition of YFCS. |
|
|
|
(b) |
|
MeadowWood acquisition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
|
|
Six Months
|
|
|
Twelve Months
|
|
|
|
|
|
|
Lives
|
|
Monthly
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Amount
|
|
|
(In Years)
|
|
Depreciation
|
|
|
June 30, 2011
|
|
|
December 31, 2010
|
|
|
Land
|
|
$
|
1,420
|
|
|
N/A
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Building and improvements
|
|
|
7,700
|
|
|
25
|
|
|
26
|
|
|
|
156
|
|
|
|
312
|
|
Equipment
|
|
|
554
|
|
|
3-7
|
|
|
9
|
|
|
|
54
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,674
|
|
|
|
|
|
35
|
|
|
|
210
|
|
|
|
420
|
|
Indefinite-lived license intangibles
|
|
|
700
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
210
|
|
|
|
420
|
|
Less: historical depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
(179
|
)
|
|
|
(308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense adjustment
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31
|
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
|
|
Six Months
|
|
|
Twelve Months
|
|
|
|
|
|
|
Lives
|
|
Monthly
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Amount
|
|
|
(In Years)
|
|
Depreciation
|
|
|
June 30, 2011
|
|
|
December 31, 2010
|
|
|
Land
|
|
$
|
1,540
|
|
|
N/A
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Building and improvements
|
|
|
11,150
|
|
|
25, or
lease term
|
|
|
93
|
|
|
|
558
|
|
|
|
1,116
|
|
Equipment
|
|
|
1,804
|
|
|
3-7
|
|
|
30
|
|
|
|
180
|
|
|
|
360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,494
|
|
|
|
|
|
123
|
|
|
|
738
|
|
|
|
1,476
|
|
Indefinite-lived license intangibles
|
|
|
700
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer contract intangibles
|
|
|
1,100
|
|
|
5
|
|
|
19
|
|
|
|
114
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
852
|
|
|
|
1,704
|
|
Less: PHC pro forma depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
(769
|
)
|
|
|
(1,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense adjustment
|
|
|
|
|
|
|
|
|
|
|
|
$
|
83
|
|
|
$
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19) |
|
Represents adjustments to interest expense to give effect to the
Senior Secured Credit Facility entered into by Acadia on
April 1, 2011, the debt incurred by PHC to fund the
MeadowWood acquisition, and the amendment of the Senior Secured
Credit Facility and the Senior Notes to be issued on the closing
date of the merger. |
|
|
|
(a) |
|
The YFCS pro forma interest expense adjustment assumes that the
interest rate of 4.2% at April 1, 2011, the closing date of
the YFCS acquisition and the Senior Secured Credit Facility, was
in effect for the entire period, as follows: |
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
Twelve Months
|
|
|
Ended
|
|
Ended
|
|
|
June 30, 2011
|
|
December 31, 2010
|
|
Interest related to Senior Credit Facility
|
|
$
|
1,489
|
|
|
$
|
6,134
|
|
Amortization of debt discount and deferred loan costs
|
|
|
291
|
|
|
|
1,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,780
|
|
|
|
7,299
|
|
Less: historical interest expense of Acadia and YFCS
|
|
|
(1,949
|
)
|
|
|
(8,252
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense adjustment
|
|
$
|
(169
|
)
|
|
$
|
(953
|
)
|
|
|
|
|
|
|
|
|
|
An increase or decrease of 0.125% in the assumed interest rate
would result in a change in interest expense of $43 and $178 for
the six months ended June 30, 2011 and twelve months ended
December 31, 2010, respectively.
|
|
|
(b) |
|
The PHC pro forma interest expense adjustment assumes that the
interest rate of 7.25% at July 1, 2011, the closing date of
the loans under PHCs senior credit facility funding the
MeadowWood acquisition, was in effect for the entire period, as
follows: |
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
Twelve Months
|
|
|
Ended
|
|
Ended
|
|
|
June 30, 2011
|
|
December 31, 2010
|
|
Interest related to PHCs senior credit facility
|
|
$
|
950
|
|
|
$
|
1,914
|
|
Amortization of debt discount and deferred loan costs
|
|
|
191
|
|
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,141
|
|
|
|
2,295
|
|
Less: historical interest expense of PHC and MeadowWood
|
|
|
(373
|
)
|
|
|
(851
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense adjustment
|
|
$
|
768
|
|
|
$
|
1,444
|
|
|
|
|
|
|
|
|
|
|
46
An increase or decrease of 0.125% in the assumed interest rate
would result in a change in interest expense of $16 and $33 for
the six months ended June 30, 2011 and twelve months ended
December 31, 2010, respectively.
|
|
|
(c) |
|
The pro forma interest expense adjustment for the merger assumes
that the Senior Notes will have an interest rate of 9.25%, which
represents an estimate of the fixed interest rate of the Senior
Notes based on current market interest rates, and reflects a
0.50% increase in the interest rate applicable to the Senior
Secured Credit Facility related to the amendment, as follows: |
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
Twelve Months
|
|
|
Ended
|
|
Ended
|
|
|
June 30, 2011
|
|
December 31, 2010
|
|
Interest related to Senior Notes
|
|
$
|
6,938
|
|
|
$
|
13,875
|
|
Interest related to Senior Credit Facility amendment
|
|
|
344
|
|
|
|
712
|
|
Amortization of debt discount and deferred loan costs
|
|
|
380
|
|
|
|
760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,662
|
|
|
|
15,347
|
|
Less: Interest related to PHCs senior credit facility to
be repaid in connection with the merger
|
|
|
(1,141
|
)
|
|
|
(2,295
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense adjustment
|
|
$
|
6,521
|
|
|
$
|
13,052
|
|
|
|
|
|
|
|
|
|
|
An increase or decrease of 0.125% in the assumed interest rate
would result in a change in interest expense of $178 and $366
for the six months ended June 30, 2011 and twelve months
ended December 31, 2010, respectively.
|
|
|
(20) |
|
Reflects a decrease in income taxes of $133 for the six months
ended June 30, 2011 and an increase in income taxes of
$2,448 for the twelve months ended December 31, 2010 to
give effect to the election by Acadia Healthcare Company, LLC to
be treated as a taxable corporation on April 1, 2011. |
|
(21) |
|
Reflects adjustments to income taxes to reflect the impact of
the above pro forma adjustments applying combined federal and
state statutory tax rates for the respective periods. |
|
(22) |
|
Represents the elimination of advisory fees paid to Waud Capital
Partners pursuant to our professional services agreement dated
April 1, 2011. The adjustment to eliminate advisory fees is
factually supportable and directly attributable to the Merger
given the termination of the professional services agreement in
connection with the Merger and is expected to have a continuing
impact. |
|
(23) |
|
Adjustments to weighted average shares used to compute basic and
diluted earnings per
unit/share
are as follows: |
|
|
|
Basic earnings per
unit/share |
|
|
|
|
|
Prior to the closing of the merger, Acadia will effect a stock
split or issuance such that Acadia stockholders immediately
prior to the closing of the merger will own 77.5% of the
combined companys issued and outstanding common stock on a
fully diluted basis (as defined in the merger agreement) and
approximately 17,676,101 shares of common stock will be issued
and outstanding. |
|
|
|
The conversion and exchange of each Class A and
Class B common share of PHC, Inc. for one-quarter
(1/4)
of a share of common stock of Acadia Healthcare Company, Inc.
The estimated issuance of Acadia common stock based on the
one-to-four
conversion rate and the weighted average shares outstanding for
the respective periods is 4,878,122 and 4,903,097 for the six
months ended June 30, 2011 and the twelve months ended
December 31, 2010, respectively. Weighted average shares
outstanding are derived from PHC, Inc. consolidated financial
statements for the respective periods. |
|
|
|
|
|
Diluted earnings per
unit/share |
|
|
|
|
|
The adjustments described above related to basic earnings per
unit/share. |
|
|
|
The conversion of outstanding PHC employee stock options and
warrants into substantially equivalent Acadia stock options and
warrants. The estimated incremental dilutive effect of the stock
options and warrants, derived from the consolidated financial
statements of PHC, Inc. based on the
one-to-four
conversion rate applicable to such awards, is 105,253 and 23,474
for the six months ended June 30, 2011 and the twelve
months ended December 31, 2010, respectively. |
47
COMPARATIVE
PER SHARE INFORMATION
The following table sets forth selected historical share, net
income (loss) per share and book value per share information of
Acadia and PHC. The table also sets forth the Acadia unaudited
pro forma share, net income (loss) per share and book value per
share information after giving effect to (i) the YFCS
acquisition and (ii) both the YFCS acquisition and the
merger (including PHCs acquisition of MeadowWood). The pro
forma equivalent information of PHC was derived by multiplying
the pro forma share, net income (loss) per share and book value
per share information by the exchange ratio of 0.25. You should
read this information in conjunction with the selected
historical financial information included elsewhere in this
proxy statement/prospectus. The unaudited pro forma share, net
income (loss) per share and book value per share information is
derived from, and should be read in conjunction with, the
Unaudited Pro Forma Condensed Combined Financial Statements and
related notes included in this proxy statement/prospectus. The
historical share, net income (loss) per share and book value per
share information of Acadia is derived from the audited
consolidated financial statements of Acadia as of and for the
fiscal year ended December 31, 2010 and the unaudited
condensed consolidated financial statements of Acadia as of and
for the six months ended June 30, 2011. PHCs
fiscal year ends on June 30. Accordingly, PHCs net
income (loss), basic and diluted net income (loss) per common
share, and the number of shares used in the computation of basic
and diluted earnings per common share for the year ended
December 31, 2010, were not obtained from PHCs annual
audited financial statements. PHCs financial data
presented in this table has been prepared assuming a December 31
fiscal year end. See the unaudited pro forma condensed combined
financial statements contained elsewhere in this proxy
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
Acadia
|
|
PHC
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Equivalent of
|
|
|
|
|
Pro Forma
|
|
for YFCS
|
|
|
|
One Acadia
|
|
|
Historical(1)
|
|
for YFCS
|
|
and Merger
|
|
Historical
|
|
Share(2)
|
|
Net income (loss) per share attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.62
|
|
|
$
|
(0.58
|
)
|
|
$
|
(0.53
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.13
|
)
|
Diluted
|
|
|
0.62
|
|
|
|
(0.58
|
)
|
|
|
(0.53
|
)
|
|
|
0.11
|
|
|
|
(0.13
|
)
|
Shares used in calculating income (loss) per share attributable
to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
22,579,198
|
|
|
|
19,612,388
|
|
|
|
|
|
Diluted
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
22,602,672
|
|
|
|
19,706,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011
|
|
|
|
Acadia
|
|
|
PHC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
Equivalent of
|
|
|
|
|
|
|
Pro Forma
|
|
|
for YFCS
|
|
|
|
|
|
One Acadia
|
|
|
|
Historical(1)
|
|
|
for YFCS
|
|
|
and Merger
|
|
|
Historical
|
|
|
Share(2)
|
|
|
Net income (loss) per share attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(2.14
|
)
|
|
$
|
(1.39
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.19
|
)
|
Diluted
|
|
|
(2.14
|
)
|
|
|
(1.39
|
)
|
|
|
(0.77
|
)
|
|
|
(0.03
|
)
|
|
|
(0.19
|
)
|
Book value per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
7.46
|
|
|
$
|
7.46
|
|
|
$
|
0.29
|
|
|
$
|
0.92
|
|
|
$
|
0.07
|
|
Diluted
|
|
|
7.46
|
|
|
|
7.46
|
|
|
|
0.29
|
|
|
|
0.91
|
|
|
|
0.07
|
|
Shares used in calculating net income (loss) per share and book
value per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
22,554,223
|
|
|
|
19,512,489
|
|
|
|
|
|
Diluted
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
|
|
22,659,476
|
|
|
|
19,698,086
|
|
|
|
|
|
|
|
|
(1) |
|
All Acadia share numbers have been restated for the stock split
effected by means of a stock dividend on May 20, 2011 such
that 10,000,000 shares of common stock were issued and
outstanding on such date. An additional stock split or issuance
will be effected immediately prior to the merger to the extent
required in order |
48
|
|
|
|
|
for the Acadia common stock outstanding immediately prior to the
merger to represent 77.5% of the common stock on fully diluted
basis (as defined in the merger agreement) post-merger. |
|
(2) |
|
These amounts were calculated by applying the exchange ratio of
0.25 to the Acadia per share amounts giving effect to the YFCS
acquisition and the merger. |
MARKET
PRICE AND DIVIDEND INFORMATION
PHC
PHCs common stock currently trades on the NYSE Amex Stock
Market under the symbol PHC. The following table
shows the high and low sales price for the Class A Common
Stock by quarter, as reported by the NYSE Amex for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
Price Range
|
|
Period
|
|
High
|
|
|
Low
|
|
|
Fiscal Year Ended June 30, 2011
|
|
|
|
|
|
|
|
|
First Quarter (July 1, 2010 September 30,
2010)
|
|
$
|
1.34
|
|
|
$
|
1.04
|
|
Second Quarter (October 1, 2010
December 31, 2010)
|
|
|
1.80
|
|
|
|
1.31
|
|
Third Quarter (January 1, 2011 March 31,
2011)
|
|
|
2.74
|
|
|
|
1.61
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Fourth Quarter (April 1, 2011 June 30,
2011)
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3.61
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2.19
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Fiscal Year Ended June 30, 2010
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First Quarter (July 1, 2009 September 30,
2009)
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$
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1.70
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$
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1.22
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Second Quarter (October 1, 2009
December 31, 2009)
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$
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1.34
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$
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0.99
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Third Quarter (January 1, 2010 March 31,
2010)
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$
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1.55
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$
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1.06
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Fourth Quarter (April 1, 2010 June 30,
2010)
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$
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1.35
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$
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0.98
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On May 23, 2011, the last full trading day immediately
preceding the public announcement date of the merger, and on
August 17, 2011, the most recent practicable date prior to
the mailing of this proxy statement/prospectus, the last
reported sales prices of PHCs Class A Common Stock,
as reported by the NYSE Amex Stock Market, were $3.00 and $2.40
per share, respectively. You are encouraged to obtain current
trading prices for PHCs Class A Common Stock in
considering whether to vote to approve the merger. As of
September 2, 2011, there were approximately 645 holders of
record of PHCs Class A Common Stock and approximately
297 holders of record of PHCs Class B Common
Stock. PHC has not paid cash dividends on its common stock and
has no intention to do so in the foreseeable future.
Acadia
Acadias common stock is not listed for trading on any
securities exchange, and Acadia has not previously filed reports
with the SEC. Upon completion of the merger, it is anticipated
that Acadias common stock will be listed on NASDAQ, and
Acadia will be an SEC reporting company.
Acadia has never declared or paid cash dividends on its capital
stock other than the dividend to be paid to Acadia stockholders
immediately prior to the merger. Acadia does not anticipate
paying any cash dividends on its capital stock in the
foreseeable future and will be substantially restricted from
doing so under the terms of the agreements governing its
indebtedness following the merger. See Acadia
Managements Discussion and Analysis of Financial Condition
and Results of Operations Liquidity and Capital
Resources.
49
THE
SPECIAL MEETING OF PHC STOCKHOLDERS
Date,
Time and Place
The special meeting of PHC stockholders will be held
on ,
2011, at :00 a.m., local time, at the corporate
offices of PHC, 200 Lake Street, Suite 102, Peabody,
Massachusetts 01960.
Matters
to be Considered at the Special Meeting of PHC
Stockholders
At the special meeting of PHC stockholders, and any adjournments
thereof, PHC stockholders will be asked:
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to consider and vote on a proposal to approve the Agreement and
Plan of Merger, dated as of May 23, 2011, by and among PHC,
Acadia Healthcare, Inc. and Acadia Merger Sub, LLC, a
wholly-owned subsidiary of Acadia, pursuant to which PHC will be
merged with and into Merger Sub;
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to consider and cast an advisory vote on the compensation to be
received by PHCs named executive officers in connection
with the merger;
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to consider and vote on a proposal to approve the adjournment of
the special meeting, if necessary, to solicit additional
proxies, in the event that there are not sufficient votes at the
time of the adjournment to approve the merger agreement; and
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To transact such other business as may properly come before the
meeting or any adjournments thereof.
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Record
Date
The PHC board of directors has fixed September 2, 2011, as the
record date for determination of PHC stockholders entitled to
notice of, and to vote at, the special meeting of PHC
stockholders and any adjournments thereof. As of the close of
business on the record date for the special meeting of PHC
stockholders, there were 18,764,118 shares of PHC
Class A Common Stock outstanding and entitled to vote, held
by approximately 645 holders of record, and 773,717 shares
of PHC Class B Common Stock outstanding and entitled to
vote, held by approximately 297 holders of record.
Votes
Required
Approval of the merger agreement will require the affirmative
vote of the holders of at least (i) two-thirds of the
outstanding Class A Common Stock and Class B Common
Stock, voting together as a single class (with the holders of
the Class A Common Stock having one vote per share and the
holders of the Class B Common Stock having five votes per
share), (ii) two-thirds of the outstanding Class A
Common Stock, voting as a separate class and
(iii) two-thirds of the outstanding Class B Common
Stock, voting as a separate class.
Advisory approval of the change in control payments to be made
to PHCs named executive officers and approval of any
necessary adjournment will each require the affirmative vote of
the holders of a majority of the Class A Common Stock and
the Class B Common Stock casting votes at the special
meeting, voting together as a single class (with the holders of
the Class A Common Stock having one vote per share and the
holders of the Class B Common Stock having five votes per
share).
As of the record date for the special meeting of PHC
stockholders, the directors and executive officers of PHC and
their affiliates owned approximately 11% of the outstanding
shares of PHC Class A Common Stock, approximately 93% of
the outstanding shares of PHC Class B Common Stock and
approximately 25% of the outstanding voting power of the PHC
Class A Common Stock and the PHC Class B Common Stock
voting together as a single class. Each of PHCs directors
and executive officers has entered into a voting agreement with
Acadia
50
dated as of May 23, 2011, pursuant to which they have
agreed to vote all shares of PHC capital stock owned by them as
of the record date in favor of the proposal to approve the
merger agreement. See The Voting Agreement.
Quorum
and Abstentions
The presence of a quorum is separately determined with respect
to each matter to be acted on at the special meeting. The
presence, in person or by proxy, of the holders of shares having
the right to cast a majority of the votes which may be cast with
respect to such matter constitutes the required quorum for such
matter. Abstentions will be included in determining the number
of shares present at the special meeting of PHC stockholders for
the purpose of determining the presence of a quorum.
Abstaining from the vote on the proposal to approve the merger
agreement will have the effect of a vote against this proposal.
The failure of a PHC stockholder to return a proxy or to vote in
person, or if a stockholders shares are held by a broker
or other nominee (i.e., in street name), the failure
to give voting instructions to the broker or other nominee on
how to vote the shares, also will have the effect of a vote
against this proposal. Shares abstaining from the advisory vote
on the compensation of the named executive officers or the vote
on the proposal to approve the adjournment of the special
meeting to solicit additional proxies will have no effect on the
vote with respect to these proposals because approval of each of
these proposals requires a majority of votes cast with respect
to the proposal at the special meeting.
PHC stockholders are encouraged to return the enclosed proxy
card marked to indicate their vote as described in the
instructions accompanying the proxy card.
Recommendation
of Board of Directors
After careful consideration, the PHC board of directors has
unanimously (with Mr. Shear abstaining) approved the merger
agreement and determined that the merger agreement is fair to,
and in the best interests of, the stockholders of PHC.
Therefore, the PHC board of directors recommends PHC
stockholders vote FOR the approval of the merger agreement.
In considering this recommendation, PHC stockholders should be
aware that the PHC directors and executive officers have
interests in the merger that are different from, or in addition
to, those of other PHC stockholders generally. See The
Merger Interests of PHCs Directors and
Executive Officers.
Solicitation
of Proxies
PHC and Acadia shall bear 25% and 75%, respectively, of the
aggregate fees and expenses incurred in connection with the
filing with the SEC, printing and mailing of this proxy
statement/prospectus. Solicitation of proxies by mail may be
supplemented by telephone, facsimile and other electronic means,
advertisements and personal solicitation by the directors,
officers or employees of PHC. No additional compensation will be
paid to directors, officers or employees for those solicitation
efforts. PHC has engaged Georgeson Inc. (Georgeson)
to assist in the solicitation of proxies for the special
meeting, and PHC has agreed to pay Georgeson a fee of $8,500 and
will reimburse them for reasonable out of pocket expenses
incurred in connection with the solicitation.
Voting of
Proxies
PHC requests that its stockholders complete, date and sign the
enclosed proxy card and promptly return it by mail in the
accompanying envelope in accordance with the instructions
accompanying the proxy card. All properly signed and dated
proxies that PHC receives prior to the vote at the special
meeting of PHC stockholders, and not subsequently revoked, will
be voted in accordance with the instructions indicated on the
proxies. All properly signed and dated proxies received by PHC
prior to the vote at the special meeting that do not contain any
direction as to how to vote in regards to any or all of the
proposals will be voted for approval of any proposal in regards
to which no directions are provided.
51
Stockholders may revoke their proxies at any time prior to their
use:
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by delivering to the clerk of PHC a signed notice of revocation;
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by delivering to the clerk of PHC a later-dated, signed
proxy; or
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by attending the special meeting of PHC stockholders and voting
in person.
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Attendance at the special meeting of PHC stockholders does not
in itself constitute the revocation of a proxy.
Even if a PHC stockholder plans to attend the special meeting in
person, PHC requests that the stockholder sign and return the
enclosed proxy card as described in the proxy
statement/prospectus and in accordance with the instructions
accompanying the proxy card, thus ensuring that the shares held
by the stockholder will be represented at the special meeting.
If a PHC stockholder does attend the special meeting and wishes
to vote in person, he or she may withdraw the proxy and vote in
person.
52
THE
MERGER
General
Description of the Merger
At the effective time of the merger, PHC will merge with and
into Merger Sub. PHC stockholders will receive one-quarter of a
share of Acadia common stock in exchange for each share of PHC
common stock they own. In addition, holders of PHC Class B
Common Stock will receive their pro rata share of
$5.0 million of cash consideration for each share of PHC
Class B Common Stock exchanged in the merger. PHC warrant
holders holding warrants will receive warrants to purchase
one-quarter of a share of Acadia common stock for each share of
PHC common stock subject to such warrants. PHC option holders
holding options, whether vested or unvested, will receive
options to purchase one-quarter of a share of Acadia common
stock for each share of PHC common stock subject to such options.
Upon completion of the merger, Acadia stockholders will retain
77.5% of the combined company on a fully diluted basis (as
defined in the merger agreement) and the former PHC stockholders
will receive 22.5% of the combined company on a fully diluted
basis (as defined in the merger agreement).
Background
of the Merger
Mr. Jacobs, Acadias Chairman and Chief Executive
Officer, and other members of Acadias current management
team were previously executive officers of Psychiatric
Solutions, Inc. (PSI), a publicly traded behavioral
health care company that owned and operated 95 inpatient
facilities with approximately 11,000 beds in 32 states,
Puerto Rico and the U.S. Virgin Islands. Mr. Jacobs
was a founder of PSI and served as its Chairman, Chief Executive
Officer and President from 1997 to the time of its sale to
Universal Health Services, Inc. (UHS) in November
2010. Mr. Jacobs and the senior management team grew PSI
from a market capitalization of approximately $50 million
when it went public in July 2002, to over $1.8 billion in
November 2010.
Mr. Jacobs and Mr. Shear, PHCs Chief Executive
Officer, have served together as directors of the National
Association of Psychiatric Hospital Systems (NAPHS)
for several years. Mr. Jacobs also was familiar with PHC
and its business from his experience as Chairman, Chief
Executive Officer and President of PSI. In 2008, PSI approached
PHC about a possible combination of the two companies and in
connection therewith, Messrs. Jacobs and Shear discussed
the possible combination, although the discussions never
progressed beyond the exploratory stage. Following the sale of
PSI to UHS in November 2010, Mr. Jacobs called
Mr. Shear and during that conversation, they arranged to
meet in person.
In December 2010, Mr. Jacobs and Mr. Shear met to
discuss PHCs strategic plans, including the possibility of
Mr. Jacobs and other former PSI senior executive officers
joining PHC. Concurrently, Mr. Jacobs discussed with
representatives of Acadia and Waud Capital Partners the
possibility of Mr. Jacobs and other former PSI senior
executive officers joining Acadia. On January 31, 2011,
Mr. Jacobs and other former PSI senior executive officers
entered into employment agreements with Acadia.
On January 31, 2011, Mr. Jacobs contacted
Mr. Shear and informed him that he and other former PSI
executive officers had entered into employment agreements with
Acadia. Messrs. Jacobs and Shear further discussed a possible
strategic combination of Acadia and PHC and agreed it would be
helpful to meet with Jefferies & Company, Inc.
(Jefferies). Jefferies had previously been retained
by PHC to act as a financing source in connection with
PHCs proposed acquisition of MeadowWood, which PHC was
exploring at that time.
On January 31, 2011, Mr. Shear updated the PHC board
of directors on his discussions with Mr. Jacobs and
discussed the possibility of a strategic combination of PHC and
Acadia. Mr. Shear indicated to the PHC board of directors
that if the companies combined operations, Mr. Shear
believed that Mr. Jacobs would be able to generate further
growth through additional acquisitions by virtue of his
experience at PSI.
On February 2, 2011, Mr. Jacobs and Brent Turner,
Co-President of Acadia, met with Mr. Shear and
representatives of Jefferies in Fort Lauderdale, Florida to
discuss a possible strategic combination of Acadia and PHC,
including initial discussions regarding relative valuations and
deal terms.
53
Following the February 2, 2011 meeting, the parties
continued discussions regarding the possible combination on
periodic conference calls. On February 8, 2011,
Mr. Shear and representatives from Acadia, Waud Capital
Partners and Jefferies met in Chicago, Illinois to further
discuss the possible combination of Acadia and PHC.
After the February 8, 2011 meeting, the parties continued
to share models regarding the possible combination and further
discussed potential terms.
During these discussions, Mr. Shear expressed several
principles which guided the discussions on behalf of PHC:
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PHC desired a combination in which PHC stockholders would
participate in the growth of the combined company;
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In view of PHCs recent growth and prospects, PHCs
contribution to the combination should take into account
PHCs 12 month projections as well as its recent
historical performance; and
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Any acquisition must fairly compensate the holders of PHCs
Class B Common Stock for their control rights, including
their right to elect a majority of PHCs directors and
their right to five votes per share.
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On February 18, 2011, Mr. Shear updated the PHC board of
directors on discussions with Acadia and the PHC board of
directors approved PHCs retention of Jefferies to act as
exclusive advisor in connection with a possible combination of
Acadia and PHC.
On February 24, 2011, representatives of Acadia, Waud
Capital Partners, Jefferies and a potential acquisition target
met in Chicago, Illinois to have preliminary discussions
regarding a possible combination with Acadia and PHC. The
parties elected not to pursue this opportunity at that time due
to differences of opinion with the potential target over
valuation issues and complexities of structuring a three-way
combination.
On March 7, 2011, the NAPHS held its annual meeting in
Washington, D.C. While attending this meeting,
Mr. Turner and Mr. Shear continued their discussions
regarding the terms of a possible transaction between Acadia and
PHC. In subsequent discussions the parties agreed to discuss a
letter of intent reflecting proposed terms.
On March 16, 2011, Mr. Shear further updated the PHC
board of directors on discussions with Acadia.
On March 22, 2011, Acadia delivered a letter of intent to
the PHC board of directors. The parties and their respective
counsel negotiated the letter of intent between March 23,
2011 and March 28, 2011.
On March 28, 2011, the PHC board of directors met to
consider the proposed letter of intent. Jefferies made a
presentation to the PHC board of directors, describing reasons
for a combination of PHC and Acadia and providing background
information with respect to Acadia, a summary of the transaction
proposed by the letter of intent and pro forma financial
information for the proposed combined company. The PHC board of
directors discussed the presentation and the letter of
intent and authorized PHCs execution of the letter of
intent. The PHC board of directors also appointed
Mr. William Grieco as the lead independent director with
respect to the following: (i) discussions regarding the
combination; (ii) working with PHCs Chief Executive
Officer and management team; (iii) facilitating discussions
amongst the members of the PHC board of directors;
(iv) interacting with external advisors; and
(v) assisting with PHC stockholder communications.
Mr. Grieco was further directed to interview, select and
engage a financial advisory firm without an interest in the
completion of the transaction to evaluate the fairness of the
proposed combination from a financial point of view, in light of
Jefferies potential role in providing financing to the
combined company. The PHC board of directors did not form a
special committee based upon its determination that, other than
Mr. Shear, none of the directors had interests in the
proposed transaction that would prevent them from making an
independent evaluation of the transaction, its appointment of
Mr. Grieco as lead independent director and its
determination, based upon the advice of counsel, that under
applicable Massachusetts law a special committee was not
required to be appointed under the circumstances of the proposed
transaction.
The letter of intent that was signed on March 28, 2011 was
non-binding, except that PHC granted exclusivity to Acadia and
the parties agreed to maintain confidentiality regarding the
proposed transaction. The letter of intent reflected that:
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PHC stockholders would receive common stock constituting 22.5%
of the combined company, on a fully diluted basis (as defined in
the merger agreement), and Acadia stockholders would receive
common stock constituting 77.5% of the combined company, on a
fully diluted basis (as defined in the merger agreement);
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Based upon the relative values of PHC and Acadia and in order to
achieve the proposed 22.5% 77.5% proportion, Acadia
stockholders would receive a distribution of approximately
$90 million in cash;
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In order to induce holders of PHCs Class B Common
Stock to give up their control rights and exchange their
Class B Common Stock for ordinary common stock, PHC
stockholders would receive common stock constituting 22.5% of
the combined company, on a fully diluted basis (as defined in
the merger agreement), and holders of PHCs Class B
Common Stock would recapitalize into common stock of the
combined company and receive an aggregate of $5 million in
cash;
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Mr. Shear would serve as Vice Chairman of the combined
company and, along with another representative designated by
Mr. Shear, would serve as a director of the combined
company;
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the senior executive officers of PHC would enter into employment
agreements on terms and conditions satisfactory to the parties
and the employees; and
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PHC, Waud Capital Partners and specified other stockholders
would enter into an investment agreement that would provide
certain rights in favor of Waud Capital Partners, including
registration rights and such other rights as agreed to by the
parties.
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In reaching agreement to the proposed 22.5%-77.5%
post-merger
split of ownership interests in Acadia and the $90 million
distribution of cash to the Acadia stockholders, the parties
considered a number of factors, including the following:
(i) the respective trailing 12 month revenue and
adjusted EBITDA for each of Acadia and PHC; (ii) the
relative contributions of each party to the proposed combined
company; (iii) the opportunity to improve the operations at
each partys facilities; (iii) the proven record of
substantial growth demonstrated by Acadias senior
management team; and (iv) the opportunity for PHCs
stockholders to own a substantial percentage of the combined
company.
On March 30, 2011, Mr. Grieco engaged Pepper Hamilton
LLP (Pepper Hamilton) on behalf of PHC to provide
advice regarding Massachusetts corporate law in connection with
the proposed combination with Acadia. Pepper Hamilton was also
engaged to represent Messrs. Shear and Boswell in
connection with related employment agreement negotiations.
On March 31, 2011, the parties entered into a
confidentiality agreement and began due diligence and
Kirkland & Ellis LLP (Kirkland &
Ellis), outside counsel to Acadia, delivered an initial
draft of a merger agreement to Arent Fox LLP (Arent
Fox), outside counsel to PHC. Mr. Shear and
Mr. Grieco reviewed the draft agreement and provided
comments on key issues to Arent Fox. On April 6, 2011,
representatives of Kirkland & Ellis and Arent Fox
discussed the draft merger agreement and the proposed structure.
A meeting was held in Franklin, Tennessee on April 8, 2011
to discuss the structure and proposed terms of the transaction
and proposed financing for the transaction. Mr. Shear and
other representatives from PHC, representatives from Jefferies,
members of Acadias management team, representatives from
Waud Capital Partners, representatives from Kirkland &
Ellis, representatives from Arent Fox, representatives from
Ernst & Young LLP, Acadias accountants, and BDO
USA, LLP, PHCs accountants, were either in attendance or
participated by telephone. Discussions were also held between
Mr. Jacobs, other members of Acadia management,
Mr. Shear and a representative from Jefferies with respect
to the proposed terms of the employment agreements of
Messrs. Shear and Boswell with the combined company.
On April 18, 2011, Arent Fox provided Kirkland &
Ellis with a revised draft of the merger agreement.
During the weeks of April 18th and April 25th,
the parties and their respective counsel continued to discuss
the merger agreement and the proposed structure of the
transaction and the parties continued to conduct their
respective due diligence. In particular, the parties decided to
revise the merger agreement to reflect that PHC would merge with
and into a subsidiary of Acadia and that Acadia would issue
common stock to the former PHC stockholders representing 22.5%
of the combined company on a fully diluted basis (as defined in
the merger agreement).
On April 25, 2011, Mr. Shear and Mr. Grieco
updated the PHC board of directors on discussions with Acadia,
including the engagement of accountants to conduct financial due
diligence. The PHC board of directors provided Mr. Shear
and Mr. Grieco comments on the key issues and instructions
with respect to due diligence. Following the meeting,
Mr. Grieco retained SRR on behalf of the PHC board of
directors to provide an opinion to the PHC board of directors
with respect to the fairness, from a financial point of view of
(i) the proposed merger consideration to be
55
received by holders of PHCs common stock (in the
aggregate) and (ii) the proposed merger consideration to be
received by holders of PHCs Class A Common Stock (in
the aggregate). On May 2, 2011, representatives of SRR met
with Mr. Shear, Mr. Grieco and other members of PHC
management in Peabody, Massachusetts in connection with
SRRs review of PHC, and on May 5, 2011,
representatives of SRR met with Acadia management in Franklin,
Tennessee in connection with SRRs review of Acadia.
On May 3, 2011, Kirkland & Ellis distributed a
revised draft of the merger agreement to Arent Fox that
reflected a structure in which PHC would merge with and into an
Acadia entity. After discussing the revised draft,
Kirkland & Ellis distributed a further revised draft
of the merger agreement to Arent Fox on May 9, 2011 that
reflected the status of negotiations to date.
On May 9, 2011, a meeting of the PHC board of directors was
held in Peabody, Massachusetts at which Jefferies presented a
summary of the combination, including a discussion of certain
deal terms, financing and pro forma financial statements for the
combined company. Mr. Shear and Jefferies, based upon their
familiarity with the participants in the behavioral health
market, and Jefferies based upon its familiarity with potential
financial investors in the behavioral health market, discussed
with the PHC board of directors the absence of other viable
candidates for a combination with PHC. Because the PHC board of
directors, based upon discussions with its financial advisor,
believed that a strategic combination of Acadia and PHC would
best maximize the value to PHC stockholders in a transaction and
there was an absence of other viable merger candidates, the PHC
board of directors determined not to actively solicit potential
alternative transactions. Instead, the PHC board of directors
determined to confirm that there were no reasonably available
alternative transactions by including in the merger agreement
customary provisions permitting the PHC board of directors to
terminate the agreement and pursue any superior alternate
transaction that might arise following the announcement of an
agreement with Acadia.
Following the May 9th meeting, Mr. Grieco
discussed the revised draft merger agreement with the PHC board
members and collected their comments. He then discussed his
comments and the other directors comments with PHC
management and Arent Fox. During the week of May 9th,
Mr. Shear and Mr. Grieco continued to review the draft
merger agreement and provided comments to Arent Fox, Jefferies
and Acadia.
On May 11, 2011, Arent Fox delivered to
Kirkland & Ellis a revised draft of the merger
agreement reflecting the status of current negotiations.
On May 12, 2011, Jefferies Finance delivered to Acadia a
draft commitment letter and a draft engagement letter with
respect to Jefferies Finances proposed financing of the
combination.
During the negotiations regarding the merger agreement, the
parties negotiated closing conditions, covenants and termination
provisions of the merger agreement, including the termination
fee and expense reimbursement provisions set forth in the merger
agreement. Acadia had initially requested a termination fee of
$5 million. PHC rejected this proposal, at which point
Acadia proposed a termination fee of up to $3 million.
Subsequently, PHC proposed a fee of $2 million payable by
PHC upon its acceptance of a superior offer and a
break-up fee
of $6 million payable by Acadia. Acadia proposed that
PHCs fee would be payable upon the happening of specified
events, including termination due to a failure to consummate the
merger by the end date, failure to receive stockholder approval
or breach by PHC of its representations and warranties.
Following extensive negotiation, the parties agreed that PHC may
adversely change its recommendation under certain circumstances
if it receives a superior proposal, as described in the merger
agreement. PHC would pay Acadia a termination fee of
$3 million in the event the merger agreement is terminated
because the PHC board of directors has adversely changed its
recommendation to approve the merger or if PHC enters into or
consummates an alternative transaction within 12 months of
the merger agreement being terminated because the merger has not
been consummated by the December 15, 2011, PHC has not
obtained the required stockholder approval or PHC would be
unable to satisfy its closing conditions regarding its covenants
and agreements or representations and warranties. Additionally,
if either party terminates the merger agreement as a result of
the other party breaching any of its covenants, agreements,
representations or warranties such that a condition related to
close would not be satisfied (and the termination fee is not
otherwise payable in connection with such termination), the
breaching party will pay (in four annual payments) up to
$1 million of the non-breaching parties reasonably
documented
out-of-pocket
fees and expenses (including reasonable legal fees and expenses)
actually incurred in connection with the transactions
contemplated by the merger agreement, with the first
56
annual installment due within two business days of such
termination, and the remaining payments being made on the first,
second and third anniversary of such termination date.
During the weeks of May 9th and May 16th,
Kirkland & Ellis and Acadia continued to negotiate
with Jefferies Finance and its counsel the terms of the proposed
debt financing.
On May 13, 2011, the Acadia board of directors held a
telephonic meeting. Kirkland & Ellis and members of
Acadias management also attended the meeting
telephonically. Acadias CFO reviewed the financial terms
of the proposed merger. Kirkland & Ellis reviewed the
terms of the merger agreement.
On May 15, 2011, Kirkland & Ellis distributed a
revised draft of the merger agreement to Arent Fox, reflecting
the status of continued negotiations.
The Acadia board of directors held a subsequent telephonic
meeting on May 16, 2011. At this meeting,
Kirkland & Ellis reviewed the terms of the merger
agreement with the Acadia board of directors. Acadias
General Counsel and representatives of Kirkland &
Ellis reviewed with the Acadia board of directors additional due
diligence findings and representatives of Kirkland &
Ellis reviewed the terms of the merger agreement. After further
discussion, the Acadia board of directors then approved
Acadias entering into the merger agreement and authorized
Acadia management to finalize the merger agreement.
On May 16, 2011, Mr. Shear and Mr. Grieco updated
the PHC board of directors on the proposed revised terms of the
merger agreement and reviewed remaining concerns with the PHC
board members.
On May 17th, 19th, 20th and 22nd, Kirkland &
Ellis distributed revised drafts of the merger agreement to
Arent Fox, reflecting, in each case, the status of negotiations
at that time.
On May 19, 2011, the PHC board of directors met to consider
the proposed merger. Arent Fox, Jefferies and Mr. Grieco
reviewed the principal terms of the merger agreement and related
agreements, and SRR reviewed the financial analysis that it had
performed related to the consideration to be paid in the
proposed merger. After further discussion of the proposed
transaction, SRR provided the PHC board of directors with its
opinion that, as of that date, based upon certain assumptions
and qualifications, (i) the merger consideration to be
received by the holders of outstanding PHC common stock (in the
aggregate) is fair, from a financial point of view, to such
holders and (ii) the consideration to be paid to holders of
the PHC Class A Common Stock (in the aggregate) is fair,
from a financial point of view, to such holders. After further
discussion, the PHC board of directors unanimously voted (with
Mr. Shear abstaining from the vote) to approve the merger
agreement and authorized management to enter into the merger
agreement on behalf of PHC and submit the merger agreement to
PHCs stockholders for approval, subject to finalization of
the me