This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as "may," "might," "will," "would," "should," "could" or the negative thereof. Generally, the words "anticipate," "believe," "continue," "expect," "intend," "estimate," "project," "plan" and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, many of which are outside of our control, which could cause our actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:
• the impact of the COVID-19 pandemic on our inpatients and outpatients
volumes or disruptions caused by other pandemics, epidemics or outbreaks
of infectious diseases; • the impact of vaccine and other pandemic-related mandates imposed by local, state and federal authorities on our business;
• the costs of providing care to our patients, including staff increases,
equipment and supply expenses resulting from the COVID-19 pandemic; • the impact of the retirement of
Debra K. Osteen, our former chief
leader, and our ability to integrate
• our significant indebtedness, our ability to meet our debts,
and our ability to incur significantly more debt;
• our ability to implement our business strategies, particularly in light of
the COVID-19 pandemic;
• the impact of payments received from the State and third-party payers
our revenues and results of operations;
• difficulties in successfully integrating the activities of acquired companies
facilities or realizing the potential benefits and synergies of our acquisitions and joint ventures; • our ability to recruit and retain quality psychiatrists and other physicians, nurses, counselors and other medical support personnel;
• the impact of competition for personnel on our labor costs and profitability;
• the impact of increases to our labor costs;
• the impact of general economic and employment conditions on our activities
and future operating results;
• the occurrence of incidents with patients, which could result in negative media
coverage, adversely affect the price of our securities and result in incremental regulatory burdens and governmental investigations; • our future cash flow and earnings;
• our covenants, which may restrict our operations and funding
• the impact of the economic situation and employment on our activities and
future results of operations; • the impact of adverse weather conditions, including the effects of hurricanes and wildfires; • compliance with laws and government regulations;
• the impact of claims brought against us or our facilities, including claims
damages for bodily injury, medical malpractice, overpayments,
Breach of Contract, Violation of Securities Laws, Liability and Employee Liability
claims; • the impact of governmental investigations, regulatory actions and whistleblower lawsuits;
• any failure to comply with the terms of our Business Integrity Agreement
with the OIG; • the impact of healthcare reform in the
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• the risk of a cybersecurity incident and any resulting negative impact on
our operations or violation of laws and regulations regarding the information
privacy; • the impact of our highly competitive industry on patient volumes;
• our dependence on key management personnel, key management personnel and
facilities management staff;
• our acquisition, joint venture and de novo wholly owned strategies, which
expose us to a variety of operational and financial risks, as well as legal and regulatory risks;
• the impact of state efforts to regulate the construction or expansion of
healthcare facilities on our ability to operate and expand our business;
• our potential inability to extend leases at expiration;
• the impact of controls aimed at reducing hospitalization services on our revenues;
• the impact of different interpretations of accounting principles on our
results of operations or financial condition;
• the impact of environmental, health and safety laws and regulations,
particularly in places where we have concentrated our operations;
• the impact of laws and regulations relating to the confidentiality and security of
patient health information and standards for electronic transactions;
• our ability to cultivate and maintain relationships with referral sources;
• the impact of a change in the composition of our earnings, adverse changes in our
the effective tax rate and adverse developments in tax laws generally;
• changes in interpretations, assumptions and expectations regarding the
tax laws, including provisions of the CARES Act and other
guidelines that may be issued by federal and state tax authorities;
• failure to maintain effective internal control over financial reporting;
• the impact of fluctuations in our operating results, from quarter to quarter
earnings and other factors on the price of our securities; • the impact of the trend for insurance companies and managed care
organizations to enter into sole-source contracts on our ability to obtain
patients; • the impact of value-based purchasing programs on our revenue; and
• the risks and uncertainties described from time to time in our documents
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.
Our business strategy is to acquire and develop behavioral healthcare facilities and improve our operating results within our facilities and our other behavioral healthcare operations. We strive to improve the operating results of our facilities by providing high-quality services, expanding referral networks and marketing initiatives while meeting the increased demand for behavioral healthcare services through expansion of our current locations as well as developing new services within existing locations. At
March 31, 2022, we operated 238 behavioral healthcare facilities with approximately 10,600 beds in 40 states and Puerto Rico. During the three months ended March 31, 2022, we added 28 beds to existing facilities and opened one comprehensive treatment center ("CTC"). For the year ending December 31, 2022, we expect to add approximately 300 beds to existing facilities and expect to open two wholly-owned facilities, two joint venture facilities and at least six CTCs. We are the leading publicly traded pure-play provider of behavioral healthcare services in the United States. Management believes that we are positioned as a leading platform in a highly fragmented industry under the direction of an experienced management team that has significant industry expertise. Management expects to take advantage of several strategies that are more 23 --------------------------------------------------------------------------------
Table of contents accessible as a result of our increased size and geographic scale, including continuing a national marketing strategy to attract new patients and referral sources, increasing our volume of out-of-state referrals, providing a broader range of services to new and existing patients and clients and selectively pursuing opportunities to expand our facility and bed count in the
U.S.through acquisitions, wholly-owned de novo facilities, joint ventures and bed additions in existing facilities. On January 19, 2021, we completed the U. K. Salepursuant to a Share Purchase Agreement in which we sold all of the securities of AHC-WW Jersey Limited, a private limited liability company incorporated in Jersey and a subsidiary of the Company, which constituted the entirety of our U.K.business operations. The U. K. Saleresulted in approximately $1,525 millionof gross proceeds before deducting the settlement of existing foreign currency hedging liabilities of $85 millionbased on the current GBP to USD exchange rate, cash retained by the buyer and transaction costs. We used the net proceeds of approximately $1,425 million(excluding cash retained by the buyer) along with cash from the balance sheet to reduce debt by $1,640 millionduring the first quarter of 2021. As a result of the U. K. Sale, we reported, for all periods presented, results of operations and cash flows of the U.K.operations as discontinued operations in the accompanying financial statements.
March 2020, the global pandemic of COVID-19 began to affect our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S.and U.K.economies and financial markets. At many of our facilities, employees and/or patients have tested positive for COVID-19. We are committed to protecting the health of our communities and have been responding to the evolving COVID-19 situation while taking steps to provide quality care and protect the health and safety of our patients and employees. Over the last two years, all of our facilities have closely followed infectious disease protocols, as well as recommendations by the CDCand local health officials.
We have taken many steps to help minimize the impact of the virus on our patients and employees. For example, we:
• set up an internal COVID-19 working group;
• instituted social distancing practices and protective measures
our facilities, which included restricting or suspending visitor access,
screening of patients and staff entering our facilities based on criteria
established by the
CDCand local health officials, and testing and isolating patients when warranted;
• implemented plans to vaccinate all eligible employees at our facilities
that participate in CMS reimbursement programs; • secured contracts with additional distributors for supplies; • expanded telehealth capabilities; • implemented emergency planning in directly impacted markets; and • limited all non-essential business travel and suspended in-person trainings and conferences. We have developed additional supply chain management processes, which includes extensive tracking and delivery of key personal protective equipment ("PPE") and supplies and sharing resources across all facilities. We could experience supply chain disruptions and significant price increases in equipment, pharmaceuticals and medical supplies, particularly PPE. Pandemic-related staffing difficulties and equipment, pharmaceutical and medical supplies shortages may impact our ability to treat patients at our facilities. Such shortages could lead to us paying higher prices for supplies, equipment and labor and an increase in overtime hours paid to our employees.
CARES Act and other regulatory developments
March 27, 2020, the CARES Act was signed into law. The CARES Act is intended to provide over $2 trillionin stimulus benefits for the U.S.economy. Among other things, the CARES Act includes additional support for small businesses, expands unemployment benefits, makes forgivable loans available to small businesses, provides for certain federal income tax changes, and provides $500 billionfor loans, loan guarantees, and other investments for or in U.S.businesses. In addition, the CARES Act contains a number of provisions that are intended to assist healthcare providers as they combat the effects of the COVID-19 pandemic. Those provisions include, among others:
• an assignment to
mechanisms, eligible healthcare providers and other approved entities for
COVID-19-related expenses or lost revenue; • the expansion of CMS' Accelerated and Advance Payment Program; 24
-------------------------------------------------------------------------------- Table of contents • the temporary suspension of Medicare sequestration from
May 1, 2020, to
March 31, 2022; and • waivers or temporary suspension of certain regulatory requirements. The U.S.government initially announced it would offer $100 billionof relief to eligible healthcare providers through the PHSSE Fund. On April 24, 2020, then President Trumpsigned into law the PPP Act. Among other things, the PPP Act allocated $75 billionto eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billionallocated under the PPP Act is in addition to the $100 billionallocated to healthcare providers for the same purposes in the CARES Act and has been disbursed to providers under terms and conditions similar to the CARES Act funds. We received approximately $19.7 millionof the initial funds distributed from the PHSSE Fundin April 2020. We received an additional $12.8 millionfrom the PHSSE Fundin August 2020. In April 2021, we received $24.2 millionof additional funds from the PHSSE Fund. During the fourth quarter of 2021, we recorded $17.9 millionof income from provider relief fund related to the PHSSE funds received in 2021. We continue to evaluate our compliance with the terms and conditions to, and the financial impact of, these additional funds received. Using existing authority and certain expanded authority under the CARES Act, the U.S. Department of Health & Human Services("HHS") expanded CMS' Accelerated and Advance Payment Program to a broader group of Medicare Part A and Part B providers for the duration of the COVID-19 pandemic. Under the program, certain of our facilities were eligible to request up to 100% of their Medicare payment amount for a three-month period. Under the original terms of the program, the repayment of these accelerated/advanced payments would have begun 120 days after the date of the issuance of the payment and the amounts advanced to our facilities would have been recouped from new Medicare claims as a 100% offset. Our facilities would have had 210 days from the date the accelerated or advance payment was made to repay the amounts that they owe. On October 1, 2020, Congressamended the terms of the Accelerated and Advance Payment Program to extend the term of the loan and adjust the repayment process. Under the new terms of the program, all providers will have 29 months from the date of their first program payment to repay the full amount of the accelerated or advance payments they have received. The revised terms extend the period before repayment begins from 210 days to one year from the date that payment under the program was received. Once the repayment period begins, the offset is limited to 25% of new claims during the first 11 months of repayment and 50% of new claims during the final 6 months. The revised program terms also lower the interest rate on outstanding amounts due at the end of the repayment period from 10% to 4%. We applied for and received approximately $45 millionin April 2020from this program. Of the $45 millionof advance payments received in 2020, we repaid approximately $25 millionof advance payments during 2021 and made additional payments of approximately $8 millionduring the three months ended March 31, 2022. We will continue to repay the remaining balance throughout the rest of 2022.
Under the CARES Act, we also received a 2% increase in our facilities’ Medicare reimbursement rate following the temporary suspension of Medicare sequestration from
The CARES Act also provides for certain federal income and other tax changes. We received a cash benefit of approximately
$39 millionfor 2020 relating to the delay of payment of the employer portion of Social Securitypayroll taxes. We repaid half of the $39 millionof payroll tax deferrals during the third quarter of 2021 and expect to repay the remaining portion in the second half of 2022. In addition to the financial and other relief that has been provided by the federal government through the CARES Act and other legislation passed by Congress, CMS and many state governments have also issued waivers and temporary suspensions of healthcare facility licensure, certification, and reimbursement requirements in order to provide hospitals, physicians, and other healthcare providers with increased flexibility to meet the challenges presented by the COVID-19 pandemic. For example, CMS and many state governments have temporarily eased regulatory requirements and burdens for delivering and being reimbursed for healthcare services provided remotely through telemedicine. CMS has also temporarily waived many provisions of the Stark law, including many of the provisions affecting our relationships with physicians. Many states have also suspended the enforcement of certain regulatory requirements to ensure that healthcare providers have sufficient capacity to treat COVID-19 patients. These regulatory changes are temporary, with most slated to expire at the end of the declared COVID-19 public health emergency.
We continue to evaluate the terms and conditions and financial impact of funds received under the CARES Act and other government assistance programs.
Table of contents Results of Operations
The following table illustrates our consolidated results of operations for the respective periods indicated (in thousands of dollars):
Three Months Ended March 31, 2022 2021 Amount % Amount % Revenue
$ 616,653100.0 % $ 551,199100.0 % Salaries, wages and benefits 335,762 54.4 % 304,333 55.2 % Professional fees 36,911 6.0 % 31,617 5.7 % Supplies 23,699 3.8 % 21,322 3.9 % Rents and leases 11,249 1.8 % 9,412 1.7 % Other operating expenses 81,425 13.2 % 72,010 13.1 % Depreciation and amortization 28,926 4.7 % 24,894 4.5 % Interest expense 15,787 2.6 % 29,027 5.3 % Debt extinguishment costs - 0.0 % 24,650 4.5 % Transaction-related expenses 3,582 0.6 % 4,610 0.8 % Total expenses 537,341 87.1 % 521,875 94.7 % Income from continuing operations before income taxes 79,312 12.9 % 29,324 5.3 % Provision for income taxes 17,402 2.8 % 6,204 1.1 % Income from continuing operations 61,910 10.0 % 23,120 4.2 % Loss from discontinued operations, net of taxes - 0.0 % (12,641 ) -2.3 % Net income 61,910 10.0 % 10,479 1.9 % Net income attributable to noncontrolling interests (1,073 ) -0.2 % (762 ) -0.1 % Net income attributable to Acadia HealthcareCompany, Inc. $ 60,8379.9 % $ 9,7171.8 %
We are encouraged by the favorable trends in our business and believe we are well positioned to capitalize on the expected growth in demand for behavioral health services. As with many other healthcare providers and other industries across the country, we are currently dealing with a tight labor market. However, we believe the diversity of our markets and service lines and our proactive focus helps us manage through this environment. We remain focused on ensuring that we have the level of staff to meet the demand in our markets.
The following table shows the percentage changes in operating data for the same facilities for the three months ended
U.S.Same Facility Results (a) Revenue growth 8.6% Patient days growth 2.2% Admissions growth -2.6% Average length of stay change (b) 4.9% Revenue per patient day growth 6.2% Adjusted EBITDA margin change (c) 150 bps (a) Results for the periods presented include facilities we have operated more than one year and exclude certain closed services.
(b) Average length of stay is defined as patient days divided by admissions.
(c) Adjusted EBITDA is defined as income before provision for income taxes, equity-based compensation expense, debt extinguishment costs, transaction-related expenses, interest expense and 26
-------------------------------------------------------------------------------- Table of contents depreciation and amortization. Management uses Adjusted EBITDA as an analytical indicator to measure performance and to develop strategic objectives and operating plans. Adjusted EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Adjusted EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.
Three months completed
Revenue. Revenue increased
$65.5 million, or 11.9%, to $616.7 millionfor the three months ended March 31, 2022from $551.2 millionfor the three months ended March 31, 2021. Same facility revenue increased $46.8 million, or 8.6%, for the three months ended March 31, 2022compared to the three months ended March 31, 2021, resulting from same facility growth in patient days of 2.2% and an increase in same facility revenue per day of 6.2%. Consistent with same facility growth in 2021, the growth in same facility patient days for the three months ended March 31, 2022compared to the three months ended March 31, 2021resulted from the addition of beds to our existing facilities and ongoing demand for our services. Salaries, wages and benefits. Salaries, wages and benefits ("SWB") expense was $335.8 millionfor the three months ended March 31, 2022compared to $304.3 millionfor the three months ended March 31, 2021, an increase of $31.5 million. SWB expense included $7.9 millionand $7.0 millionof equity-based compensation expense for the three months ended March 31, 2022and 2021, respectively. Excluding equity-based compensation expense, SWB expense was $327.9 million, or 53.2% of revenue, for the three months ended March 31, 2022, compared to $297.3 million, or 53.9% of revenue, for the three months ended March 31, 2021. The increase in SWB expense relates to incremental staff to support volume growth as well as wage inflation. Same facility SWB expense was $290.8 millionfor the three months ended March 31, 2022, or 49.1% of revenue, compared to $274.2 millionfor the three months ended March 31, 2021, or 50.3% of revenue. Professional fees. Professional fees were $36.9 millionfor the three months ended March 31, 2022, or 6.0% of revenue, compared to $31.6 millionfor the three months ended March 31, 2021, or 5.7% of revenue. Same facility professional fees were $31.4 millionfor the three months ended March 31, 2022, or 5.3% of revenue, compared to $28.3 million, for the three months ended March 31, 2021, or 5.2% of revenue. Supplies. Supplies expense was $23.7 millionfor the three months ended March 31, 2022, or 3.8% of revenue, compared to $21.3 millionfor the three months ended March 31, 2021, or 3.9% of revenue. Same facility supplies expense was $22.4 millionfor the three months ended March 31, 2022, or 3.8% of revenue, compared to $21.2 millionfor the three months ended March 31, 2021, or 3.9% of revenue. Rents and leases. Rents and leases were $11.2 millionfor the three months ended March 31, 2022, or 1.8% of revenue, compared to $9.4 millionfor the three months ended March 31, 2021, or 1.7% of revenue. Same facility rents and leases were $9.1 millionfor the three months ended March 31, 2022, or 1.5% of revenue, compared to $8.5 millionfor the three months ended March 31, 2021, or 1.6% of revenue. Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses. Other operating expenses were $81.4 millionfor the three months ended March 31, 2022, or 13.2% of revenue, compared to $72.0 millionfor the three months ended March 31, 2021, or 13.1% of revenue. Same facility other operating expenses were $74.1 millionfor the three months ended March 31, 2022, or 12.5% of revenue, compared to $69.6 millionfor the three months ended March 31, 2021, or 12.8% of revenue. Depreciation and amortization. Depreciation and amortization expense was $28.9 millionfor the three months ended March 31, 2022, or 4.7% of revenue, compared to $24.9 millionfor the three months ended March 31, 2021, or 4.5% of revenue. Interest expense. Interest expense was $15.8 millionfor the three months ended March 31, 2022compared to $29.0 millionfor the three months ended March 31, 2021. The decrease in interest expense was primarily due to debt repayments in connection with the U. K. Salein January 2021. 27 --------------------------------------------------------------------------------
Table of contents Transaction-related expenses. Transaction-related expenses were
$3.6 millionfor the three months ended March 31, 2022, compared to $4.6 millionfor the three months ended March 31, 2021. Transaction-related expenses represent legal, accounting, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective period, as summarized below (in thousands). Three Months Ended March 31, 20222021
Legal, accounting and other costs related to the acquisition
Termination and restructuring costs
Management transition costs 1,035 -
$ 3,582 $ 4,610Provision for income taxes. For the three months ended March 31, 2022, the provision for income taxes was $17.4 million, reflecting an effective tax rate of 21.9%, compared to $6.2 million, reflecting an effective tax rate of 21.2%, for the three months ended March 31, 2021. As we continue to monitor the implications of potential tax legislation in each of our jurisdictions, we may adjust our estimates and record additional amounts for tax assets and liabilities. Any adjustments to our tax assets and liabilities could materially impact our provision for income taxes and our effective tax rate in the periods in which they are made.
Our revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and adolescent residential treatment. We receive payments from the following sources for services rendered in our facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by CMS; and (iv) individual patients and clients. We determine the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. Implicit price concessions are based on historical collection experience. The following table presents revenue by payor type and as a percentage of revenue for the three months ended
March 31, 2022and 2021 (dollars in thousands): Three Months Ended March 31, 2022 2021 Amount % Amount % Commercial $ 194,69331.6 % $ 162,70229.5 % Medicare 94,582 15.3 % 86,185 15.6 % Medicaid 299,914 48.6 % 274,620 49.8 % Self-Pay 19,785 3.2 % 22,443 4.1 % Other 7,679 1.3 % 5,249 1.0 % Revenue $ 616,653100.0 % $ 551,199100.0 %
The following tables provide a summary of the age of our accounts receivable as of
March 31, 2022Current 30-90 90-150 >150 Total Commercial 21.8 % 5.5 % 2.8 % 8.4 % 38.5 % Medicare 10.7 % 1.5 % 0.4 % 1.5 % 14.1 % Medicaid 30.4 % 2.6 % 1.9 % 5.3 % 40.2 % Self-Pay 1.3 % 1.6 % 1.3 % 2.6 % 6.8 % Other 0.2 % 0.1 % 0.0 % 0.1 % 0.4 % Total 64.4 % 11.3 % 6.4 % 17.9 % 100.0 % 28
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December 31, 2021Current 30-90 90-150 >150 Total Commercial 20.1 % 6.2 % 2.6 % 8.2 % 37.1 % Medicare 11.3 % 1.7 % 0.5 % 2.0 % 15.5 % Medicaid 28.6 % 3.5 % 2.0 % 5.6 % 39.7 % Self-Pay 1.3 % 1.4 % 1.4 % 3.0 % 7.1 % Other 0.1 % 0.1 % 0.2 % 0.2 % 0.6 % Total 61.4 % 12.9 % 6.7 % 19.0 % 100.0 %
Cash and capital resources
Cash provided by continuing operating activities for the three months ended
March 31, 2022was $76.8 millioncompared to $75.8 millionfor the three months ended March 31, 2021. Operating cash flows for the three months ended March 31, 2022included net government relief funds paid of approximately $7.6 millionfor repayment of Medicare advance payments. Operating cash flows were impacted by an increase in earnings, a reduction in cash paid for interest and an increase in tax payments during the three months ended March 31, 2022. Days sales outstanding were 44 days at March 31, 2022compared to 42 days at December 31, 2021. Cash used in investing activities for the three months ended March 31, 2022was $49.7 millioncompared to cash provided by investing activities of $1,367.6 millionfor the three months ended March 31, 2021. Cash used in investing activities for the three months ended March 31, 2022primarily consisted of $50.5 millionof cash paid for capital expenditures and $0.5 millionof other, offset by $1.3 millionof proceeds from sales of property and equipment. Cash paid for capital expenditures for the three months ended March 31, 2022consisted of $12.0 millionof routine capital expenditures and $38.5 millionof expansion capital expenditures. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue. Routine or maintenance capital expenditures were approximately 2% of revenue for the three months ended March 31, 2022. Cash provided by investing activities for the three months ended March 31, 2021primarily consisted of $1,511.0 millionof proceeds from the U. K. Saleand $0.1 millionof proceeds from the sale of property and equipment, offset by $84.8 millionfor settlement of foreign currency derivatives, $58.7 millionof cash paid for capital expenditures and $0.1 millionof other. Cash paid for capital expenditures for the three months ended March 31, 2021consisted of $7.7 millionof routine capital expenditures and $51.0 millionof expansion capital expenditures. Cash used in financing activities for the three months ended March 31, 2022was $20.5 millioncompared to $1,647.5 millionfor the three months ended March 31, 2021. Cash used in financing activities for the three months ended March 31, 2022consisted of repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises of $11.7 million, principal payments on revolving credit facility of $10.0 million, principal payments on long-term debt of $2.7 millionand distributions to noncontrolling partners in joint ventures of $0.4 million, offset by $4.3 millionof contributions from noncontrolling partners in joint ventures. Cash used in financing activities for the three months ended March 31, 2021primarily consisted of repayment of long-term debt of $2,224.6 million, payment of debt issuance costs of $9.9 million, principal payments on revolving credit facility of $270.0 million, other of $6.8 millionand $0.4 millionof distributions to noncontrolling partners in joint ventures, offset by borrowings on long-term debt of $425.0 million, borrowings on revolving credit facility of $430.0 million, repurchase of shares for payroll tax withholding, net of proceeds from stock option exercises of $8.2 millionand $1.0 millionof contributions from noncontrolling partners in joint ventures. We had total available cash and cash equivalents of $140.4 millionand $133.8 millionat March 31, 2022and December 31, 2021, respectively, of which approximately $22.1 millionand $20.1 millionwas held by our foreign subsidiaries, respectively. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S.We believe existing cash on hand, cash flows from operations, the availability under our revolving line of credit and cash from additional financing will be sufficient to meet our expected liquidity needs during the next 12 months.
New credit facility
We entered into a New Credit Facility on
March 17, 2021. The New Credit Facility provides for a $600.0 millionRevolving Facility and a $425.0 millionTerm Loan Facility with each maturing on March 17, 2026unless extended in accordance with the terms of the New Credit Facility. The Revolving Facility further provides for (i) up to $20.0 millionto be utilized for the issuance of letters of credit and (ii) the availability of a swingline facility under which we may borrow up to $20.0 million.
As part of the closing of the new credit facility on
In the three months ended
Table of contents The New Credit Facility requires quarterly term loan principal repayments for our Term Loan Facility of
$5.3 millionfor June 30, 2022to March 31, 2024, $8.0 millionfor June 30, 2024to March 31, 2025, $10.6 millionfor June 30, 2025to December 31, 2025, with the remaining principal balance of the Term Loan Facility due on the maturity date of March 17, 2026. We have the ability to increase the amount of the Senior Facilities, which may take the form of increases to the Revolving Facility or the Term Loan Facility or the issuance of one or more Incremental Facilities, upon obtaining additional commitments from new or existing lenders and the satisfaction of customary conditions precedent for such Incremental Facilities. Such Incremental Facilities may not exceed the sum of (i) the greater of $480.0 millionand an amount equal to 100% of our Consolidated EBITDA (as defined in the New Credit Facility) and its Restricted Subsidiaries (as defined in the New Credit Facility) (as determined for the four fiscal quarter period most recently ended for which financial statements are available), and (ii) additional amounts so long as, after giving effect thereto, the Consolidated Senior Secured Net Leverage Ratio (as defined in the New Credit Facility) does not exceed 3.5 to 1.0. Subject to certain exceptions, substantially all of our existing and subsequently acquired or organized direct or indirect wholly-owned U.S.subsidiaries are required to guarantee the repayment of its obligations under the New Credit Facility. Borrowings under the Senior Facilities bear interest at a floating rate, which will initially be, at our option, either (i) adjusted LIBOR plus 1.50% or (ii) an alternative base rate plus 0.50% (in each case, subject to adjustment based on our consolidated total net leverage ratio). An unused fee initially set at 0.20% per annum (subject to adjustment based on the our consolidated total net leverage ratio) is payable quarterly in arrears based on the actual daily undrawn portion of the commitments in respect of the Revolving Facility.
Unused interest rates and line charges on unused senior facility commitments are based on the following pricing tiers:
Eurodollar Rate Consolidated Total Loans Net and Letter of Base Rate and Commitment Pricing Tier Leverage Ratio Credit Fees Swing Line Loans Fee 1 ? 4.50:1.0 2.250 % 1.250 % 0.350 % 2 <4.50:1.0 but ? 3.75:1.0 2.000 % 1.000 % 0.300 % 3 <3.75:1.0 but ? 3.00:1.0 1.750 % 0.750 % 0.250 % 4 <3.00:1.0 but ? 2.25:1.0 1.500 % 0.500 % 0.200 % 5 <2.25:1.0 1.375 % 0.375 % 0.200 % The New Credit Facility contains customary representations and affirmative and negative covenants, including limitations on the Company's and its subsidiaries' ability to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, pay junior indebtedness and enter into affiliate transactions, in each case, subject to customary exceptions. In addition, the New Credit Facility contains financial covenants requiring us on a consolidated basis to maintain, as of the last day of any consecutive four fiscal quarter period, a consolidated total net leverage ratio of not more than 5.0 to 1.0 and an interest coverage ratio of at least 3.0 to 1.0. The New Credit Facility also includes events of default customary for facilities of this type and upon the occurrence of such events of default, among other things, all outstanding loans under the Senior Facilities may be accelerated and/or the lenders' commitments terminated. At
March 31, 2022, we were in compliance with such covenants. Prior Credit Facility
We entered into the senior secured credit facility on
January 5, 2021, we made a voluntary payment of $105.0 millionon the Tranche B-4 Facility. On January 19, 2021, we used a portion of the net proceeds from the U. K. Saleto repay the outstanding balances of $311.7 millionof our TLA Facility and $767.9 millionof our Tranche B-4 Facility of the Prior Credit Facility. During the three months ended March 31, 2021, in connection with the termination of the Prior Credit Facility, we recorded a debt extinguishment charge of $10.9 million, including the write-off of discount and deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statement of operations.
5.500% senior bonds due 2028
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2028 and bears interest at the rate of 5.500% per annum, payable semi-annually in arrears on
5.000% senior bonds due 2029
October 14, 2020, we issued $475.0 millionof 5.000% Senior Notes. The 5.000% Senior Notes mature on April 15, 2029and bear interest at a rate of 5.000% per annum, payable semi-annually in arrears on April 15and October 15of each year, commencing on April 15, 2021. We used the net proceeds of the 5.000% Senior Notes to prepay approximately $453.3 millionof the outstanding borrowings on our existing Tranche B-3 Facility and used the remaining net proceeds for general corporate purposes and to pay related fees and expenses in connection with the offering. In connection with the 5.000% Senior Notes, we recorded a debt extinguishment charge of $2.9 million, including the write-off of discount and deferred financing costs of the Tranche B-3 Facility, which was recorded in debt extinguishment costs in the consolidated statement of operations for the year ended December 31, 2020. The indentures governing the Senior Notes contain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; (vi) merge, consolidate or sell substantially all of our assets; and (vii) create liens on assets. The Senior Notes issued by us are guaranteed by each of our subsidiaries that guaranteed our obligations under the New Credit Facility. The guarantees are full and unconditional and joint and several.
We may redeem the Senior Notes at our option, in whole or in part, on the dates and in the amounts set forth in the Indentures.
5.625% senior bonds due 2023
February 11, 2015, we issued $375.0 millionof 5.625% Senior Notes due 2023. On September 21, 2015, we issued $275.0 millionof additional 5.625% Senior Notes. The additional notes formed a single class of debt securities with the 5.625% Senior Notes issued in February 2015. Giving effect to this issuance, we had outstanding an aggregate of $650.0 millionof 5.625% Senior Notes. The 5.625% Senior Notes were to mature on February 15, 2023and bear interest at a rate of 5.625% per annum, payable semi-annually in arrears on February 15and August 15of each year. On March 17, 2021, we redeemed the 5.625% Senior Notes.
6.500% senior bonds due 2024
February 16, 2016, we issued $390.0 millionof 6.500% Senior Notes due 2024. The 6.500% Senior Notes were to mature on March 1, 2024and bear interest at a rate of 6.500% per annum, payable semi-annually in arrears on March 1and September 1of each year, beginning on September 1, 2016. On March 1, 2021, we redeemed the 6.500% Senior Notes.
Redemption of the 5.625% Senior Notes and 6.500% Senior Notes
March 1, 2021, we satisfied and discharged the indentures governing the 6.500% Senior Notes. In connection with the redemption of the 6.500% Senior Notes, we recorded debt extinguishment costs of $10.5 million, including $6.3 millioncash paid for breakage costs and the write-off of deferred financing costs of $4.2 millionin the condensed consolidated statement of operations.
Contractual Obligations The following table presents a summary of contractual obligations at
March 31, 2022(in thousands): Payments Due by Period Less Than More Than 1 Year 1-3 Years 3-5 Years 5 Years Total Long-term debt (a) $ 81,609 $ 172,465 $ 605,687 $ 1,009,375 $ 1,869,136Operating lease liabilities (b) 31,539 52,837 35,775 66,748 186,899 Finance lease liabilities 990 2,021
2,178 22,638 27,827 Total obligations and commitments
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(a) Amounts include required principal and interest payments. The projected
interest payments reflect prevailing interest rates on our variable rates
(b) The amounts exclude the variable components of rents.
Critical accounting policies
Our goodwill and other indefinite-lived intangible assets, which consist of licenses and accreditations, trade names and certificates of need intangible assets that are not amortized, are evaluated for impairment annually during the fourth quarter or more frequently if events indicate the carrying value of a reporting unit may not be recoverable. Subsequent to the U.
K. Sale, as of our impairment test on October 1, 2021, we had one reporting unit, behavioral health services. The fair value of our behavioral health services reporting unit substantially exceeded its carrying value, and therefore no impairment was recorded. There have been no material changes in our critical accounting policies at March 31, 2022from those described in our Annual Report on Form 10-K for the year ended December 31, 2021. Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk
Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at
March 31, 2022was composed of $913.2 millionof fixed-rate debt and $571.9 millionof variable-rate debt with interest based on LIBOR plus an applicable margin. A hypothetical 10% increase in interest rates (which would equate to a 0.20% higher rate on our variable rate debt) would decrease our net income and cash flows by $0.8 millionon an annual basis based upon our borrowing level at March 31, 2022. Item 4. Controls and Procedures
Assessment of Disclosure Controls and Procedures
As of the end of the period covered by this report, our management conducted an evaluation, with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC'srules and forms and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting during the three months ended
March 31, 2022that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. 32 --------------------------------------------------------------------------------
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