UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

January 25, 2012

Date of report (Date of earliest event reported)

 

 

CRC HEALTH CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   333-135172   73-1650429

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

20400 Stevens Creek Boulevard,

Suite 600, Cupertino, California

  95014
(Address of Principal Executive Offices)   (Zip code)

(877) 272-8668

(Registrant’s Telephone Number, including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition

As previously reported, during the three months ended June 30, 2011, CRC Health Corporation (“CRC” or “the Company”) changed its managerial and financial reporting structure. As a result of this change, the Company identified its new reportable segments as the recovery, youth and weight management divisions. Prior to this change, the Company had two reportable segments: the recovery and healthy living divisions. The weight management division was previously reported under the healthy living division. In addition, as previously reported in October 2011, the Company restated its financial statements for certain periods. The following presentation contains the Company’s operating segment results and selected financial data from 2008 to September 30, 2011 by quarter in accordance with the revised segments based on its continuing operations as of September 30, 2011.

Non-GAAP Financial Measures

Adjusted Pro Forma EBITDA and EBITDA are supplemental non-GAAP financial measures that CRC believes provide useful information to both management and investors concerning its ability to comply with certain covenants tied to these measures in its borrowing arrangements and to meet its future debt obligations. CRC also believes that reporting of these items allows management and investors to better compare CRC’s financial performance from period-to-period, and to better compare CRC’s financial performance with that of its competitors.

Adjusted Pro Forma EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations, further adjusted for the items listed in the tables titled “Reconciliation of consolidated net income (loss) to EBITDA and Adjusted Pro Forma EBITDA”. Adjusted Pro Forma EBITDA takes into account all adjustments which are excluded from EBITDA for purposes of various covenants in the indenture governing CRC’s 10  3/4 % senior subordinated notes due 2016 and its senior secured credit facility, as amended to date. Additionally, Adjusted Pro Forma EBITDA is calculated on a consolidated basis and does not give effect to discontinued operations presentation.

When CRC completes acquisitions during a reporting period, it presents its results of operations on a Pro Forma basis assuming that the acquisition had been completed at the beginning of each period. The Pro Forma adjustments are based upon available information and certain assumptions that CRC believes are reasonable. CRC’s Pro Forma results are for informational purposes only and do not purport to represent what CRC’s results of operations or financial position would have been if the acquisitions had actually been completed at the beginning of such period, nor does such information purport to project the results of operations for any future period.

The presentation of these supplemental non-GAAP financial measures is not meant to be considered in isolation of, or as a substitute for, net income (loss) or other financial results prepared in accordance with GAAP.

 

2


Net Revenue for 2011 (in thousands):

 

     Quarter Ended      Year to Date  
     March 31,
2011
     June 30,
2011
     September 30,
2011
     September 30,
2011
 

Recovery

   $ 85,722       $ 89,354       $ 86,636       $ 261,712   

Youth

     14,258         19,036         20,708         54,002   

Weight Management

     6,128         7,781         11,909         25,818   

Corporate

     43         36         33         112   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 106,151       $ 116,207       $ 119,286       $ 341,644   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss) for 2011 (in thousands):

 

     Quarter Ended     Year to date  
     March 31,
2011
    June 30,
2011
    September 30,
2011
    September 30,
2011
 

Recovery

   $ 28,167      $ 30,665      $ 25,937      $ 84,769   

Youth

     (5,347     75        2,440        (2,832

Weight Management

     775        41        3,037        3,853   

Corporate

     (9,224     (8,237     (7,179     (24,640
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 14,371      $ 22,544      $ 24,235      $ 61,150   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Pro Forma EBITDA for 2011 (in thousands):

 

     Quarter Ended     Year to date  
     March 31,
2011
    June 30,
2011
    September 30,
2011
    September 30,
2011
 

Recovery

   $ 30,844      $ 33,598      $ 28,708      $ 93,150   

Youth

     (2,088     1,165        2,902        1,979   

Weight Management

     1,035        1,271        3,348        5,654   

Corporate

     (5,522     (5,447     (4,796     (15,765
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 24,269      $ 30,587      $ 30,162      $ 85,018   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

3


The following is a reconciliation of CRC’s consolidated net income (loss) to EBITDA and Adjusted Pro Forma EBITDA for 2011 (in thousands):

 

     Quarter Ended     Year to Date  
     March 31,
2011
    June 30,
2011
    September 30,
2011
    September 30,
2011
 

Net income (loss)

   $ (887   $ 4,352      $ 2,750      $ 6,215   
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

     4,903        4,842        5,008        14,753   

Income tax expense (benefit)

     (687     3,355        4,014        6,682   

Interest expense

     11,757        12,165        10,237        34,159   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     15,086        24,714        22,009        61,809   
  

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTMENTS TO EBITDA:

        

Discontinued operations

     776        1,622        1,637        4,035   

Asset impairment

     4,401        —          —          4,401   

Non-impairment restructuring activities

     1,905        1,386        5,383        8,674   

Stock-based compensation expense

     736        621        703        2,060   

Foreign exchange translation

     1        2        32        35   

Loss (gain) on fixed asset disposal

     (29     (3     (94     (126

Management fees

     891        665        399        1,955   

Debt refinancing costs

     542        1,368        98        2,008   

Other non-recurring costs

     (40     212        (5     167   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to EBITDA

     9,183        5,873        8,153        23,209   
  

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED PRO FORMA EBITDA

   $ 24,269      $ 30,587      $ 30,162      $ 85,018   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

4


Net Revenue for 2010 (in thousands):

 

     Quarter Ended      Year Ended  
     March 31,
2010
     June 30,
2010
     September 30,
2010
     December 31,
2010
     December 31,
2010
 

Recovery

   $ 78,666       $ 83,298       $ 82,963       $ 81,617       $ 326,544   

Youth

     14,902         17,761         19,104         14,688         66,455   

Weight Management

     5,017         7,388         11,304         4,863         28,572   

Corporate

     51         49         51         42         193   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 98,636       $ 108,496       $ 113,422       $ 101,210       $ 421,764   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss) for 2010 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2010
    June 30,
2010
    September 30,
2010
    December 31,
2010
    December 31,
2010
 

Recovery

   $ 25,403      $ 29,272      $ 28,198      $ 25,761      $ 108,634   

Youth

     (2,892     (51,869     (10,209     (2,825     (67,795

Weight Management

     (550     (28     2,809        (393     1,838   

Corporate

     (7,672     (7,607     (8,891     (7,455     (31,625
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 14,289      $ (30,232   $ 11,907      $ 15,088      $ 11,052   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Pro Forma EBITDA for 2010 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2010
    June 30,
2010
    September 30,
2010
    December 31,
2010
    December 31,
2010
 

Recovery

   $ 27,965      $ 31,893      $ 30,908      $ 28,909      $ 119,675   

Youth

     (1,291     410        1,611        (1,589     (859

Weight Management

     (293     569        3,093        (236     3,133   

Corporate

     (4,937     (4,706     (4,583     (4,613     (18,839
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 21,444      $ 28,166      $ 31,029      $ 22,471      $ 103,110   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

5


The following is a reconciliation of CRC’s consolidated net income (loss) to EBITDA and Adjusted Pro Forma EBITDA for 2010 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2010
    June 30,
2010
    September 30,
2010
    December 31,
2010
    December 31,
2010
 

Net income (loss)

   $ 1,242      $ (44,562   $ (5,099   $ 2,316      $ (46,103
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

     5,561        5,322        5,044        5,018        20,945   

Income tax expense (benefit)

     954        (8,030     (33     779        (6,330

Interest expense

     10,806        10,712        10,736        10,530        42,784   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     18,563        (36,558     10,648        18,643        11,296   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTMENTS TO EBITDA:

          

Discontinued operations

     1,022        862        1,214        815        3,913   

Asset impairment

     —          18,009        2,494        660        21,163   

Goodwill impairment

     —          43,671        9,052        —          52,723   

Non-impairment restructuring activities

     82        200        6,160        439        6,881   

Stock-based compensation expense

     1,172        1,173        99        878        3,322   

Foreign exchange translation

     (3     2        13        3        15   

Loss (gain) on fixed asset disposal

     (5     (9     56        116        158   

Management fees

     545        674        1,240        1,031        3,490   

Debt costs

     70        71        65        65        271   

Non-cash rent adjustments

     —          (17     (12     (15     (44

Franchise taxes

     (2     —          —          (164     (166

Settlement of insurance brokerage antitrust litigation

     —          88        —          —          88   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to EBITDA

     2,881        64,724        20,381        3,828        91,814   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED PRO FORMA EBITDA

   $ 21,444      $ 28,166      $ 31,029      $ 22,471      $ 103,110   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

6


Net Revenue for 2009 (in thousands):

 

     Quarter Ended      Year Ended  
     March 31,
2009
     June 30,
2009
     September 30,
2009
     December 31,
2009
     December 31,
2009
 

Recovery

   $ 74,647       $ 77,982       $ 78,105       $ 79,657       $ 310,391   

Youth

     17,021         18,238         19,658         14,550         69,467   

Weight Management

     4,704         6,233         9,459         5,097         25,493   

Corporate

     66         63         59         53         241   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 96,438       $ 102,516       $ 107,281       $ 99,357       $ 405,592   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss) for 2009 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2009
    June 30,
2009
    September 30,
2009
    December 31,
2009
    December 31,
2009
 

Recovery

   $ 20,474      $ 25,533      $ 25,755      $ 26,245      $ 98,007   

Youth

     (2,161     (110     (24,884     (8,588     (35,743

Weight Management

     (925     110        2,305        (119     1,371   

Corporate

     (7,803     (8,512     (7,019     (7,857     (31,191
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 9,585      $ 17,021      $ (3,843   $ 9,681      $ 32,444   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Pro Forma EBITDA for 2009 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2009
    June 30,
2009
    September 30,
2009
    December 31,
2009
    December 31,
2009
 

Recovery

   $ 23,584      $ 28,266      $ 28,921      $ 29,272      $ 110,043   

Youth

     429        2,003        3,522        (1,156     4,798   

Weight Management

     (611     496        2,660        99        2,644   

Corporate

     (4,992     (5,543     (4,037     (3,633     (18,205
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 18,410      $ 25,222      $ 31,066      $ 24,582      $ 99,280   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

7


The following is a reconciliation of CRC’s consolidated net income (loss) to EBITDA and Adjusted Pro Forma EBITDA for 2009 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2009
    June 30,
2009
    September 30,
2009
    December 31,
2009
    December 31,
2009
 

Net income (loss)

   $ (1,271   $ 2,287      $ (20,470   $ (7,623   $ (27,077
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

     5,911        5,799        5,860        5,734        23,304   

Income tax expense (benefit)

     (2,904     2,229        369        (2,638     (2,944

Interest expense

     11,954        11,869        11,522        9,943        45,288   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     13,690        22,184        (2,719     5,416        38,571   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTMENTS TO EBITDA:

          

Discontinued operations

     15        136        782        1,365        2,298   

Asset impairment

     1,417        —          3,143        6,940        11,500   

Goodwill impairment

     —          —          26,611        5,578        32,189   

Non-impairment restructuring activities

     1,442        709        468        1,105        3,724   

Stock-based compensation expense

     1,251        1,249        1,232        1,234        4,966   

Foreign exchange translation

     1        (8     28        (29     (8

Loss (gain) on fixed asset disposal

     72        98        429        706        1,305   

Management fees

     559        680        806        1,431        3,476   

Transaction expenses

     (19     136        —          (33     84   

Write-off of cancelled acquisitions

     (22     84        —          —          62   

Non-cash rent adjustments

     —          —          —          402        402   

Non-cash charge for insurance adjustment

     —          —          —          494        494   

Noncontrolling interest

     (128     9        147        (90     (62

Franchise taxes

     47        (55     44        44        80   

Other non-recurring costs

     3        —          95        19        117   

Settlement of insurance brokerage antitrust litigation

     82        —          —          —          82   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to EBITDA

     4,720        3,038        33,785        19,166        60,709   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED PRO FORMA EBITDA

   $ 18,410      $ 25,222      $ 31,066      $ 24,582      $ 99,280   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

8


Net Revenue for 2008 (in thousands):

 

     Quarter Ended      Year Ended  
     March 31,
2008
     June 30,
2008
     September 30,
2008
     December 31,
2008
     December 31,
2008
 

Recovery

   $ 76,067       $ 77,626       $ 78,248       $ 76,389       $ 308,330   

Youth

     20,417         23,354         25,146         18,132         87,049   

Weight Management

     5,784         7,232         9,570         4,830         27,416   

Corporate

     98         86         56         64         304   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 102,366       $ 108,298       $ 113,020       $ 99,415       $ 423,099   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss) for 2008 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2008
    June 30,
2008
    September 30,
2008
    December 31,
2008
    December 31,
2008
 

Recovery

   $ 21,066      $ 22,704      $ 23,840      $ 17,087      $ 84,697   

Youth

     (928     1,198        (139,789     809        (138,710

Weight Management

     (561     1        1,733        (413     760   

Corporate

     (6,577     (6,384     (7,088     (8,468     (28,517
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 13,000      $ 17,519      $ (121,304   $ 9,015      $ (81,770
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Pro Forma EBITDA for 2008 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2008
    June 30,
2008
    September 30,
2008
    December 31,
2008
    December 31,
2008
 

Recovery

   $ 23,774      $ 25,536      $ 26,608      $ 24,062      $ 99,980   

Youth

     1,025        3,158        4,431        1,035        9,649   

Weight Management

     (322     205        2,010        (136     1,757   

Corporate

     (4,224     (4,142     (4,326     (4,160     (16,852
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 20,253      $ 24,757      $ 28,723      $ 20,801      $ 94,534   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

9


The following is a reconciliation of CRC’s consolidated net income (loss) to EBITDA and Adjusted Pro Forma EBITDA for 2008 (in thousands):

 

     Quarter Ended     Year Ended  
     March 31,
2008
    June 30,
2008
    September 30,
2008
    December 31,
2008
    December 31,
2008
 

Net income (loss)

   $ (1,476   $ 3,791      $ (139,894   $ (2,555   $ (140,134
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

     5,610        5,877        5,967        5,636        23,090   

Income tax expense (benefit)

     (1,319     2,842        (19,222     417        (17,282

Interest expense

     14,517        12,505        13,126        13,975        54,123   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     17,332        25,015        (140,023     17,473        (80,203
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTMENTS TO EBITDA:

          

Discontinued operations

     (416     (519     (52     326        (661

Asset impairment

     —          —          23,880        6,956        30,836   

Goodwill impairment

     —          —          142,238        (1,068     141,170   

Non-impairment restructuring activities

     —          —          —          1,584        1,584   

Stock-based compensation expense

     1,155        989        1,466        2,109        5,719   

Foreign exchange translation

     —          —          35        (7     28   

Loss (gain) on fixed asset disposal

     (46     45        (20     89        68   

Management fees

     545        555        530        545        2,175   

Transaction expenses

     —          —          —          854        854   

Write-off of cancelled acquisitions

     86        38        116        —          240   

Noncontrolling interest

     (303     (54     301        (97     (153

Franchise taxes

     44        44        39        44        171   

(Gain) loss on sale of interest rate swap

     1,618        (1,585     1        (35     (1

(Gain) on debt retirement

     —          —          —          (8,086     (8,086

Other non-recurring costs

     —          8        —          114        122   

Pre-acquisition Adjusted EBITDA from acquisitions

     238        221        212        —          671   

Settlement of insurance brokerage antitrust litigation

  

          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to EBITDA

     2,921        (258     168,746        3,328        174,737   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED PRO FORMA EBITDA

   $ 20,253      $ 24,757      $ 28,723      $ 20,801      $ 94,534   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: January 25, 2012

 

CRC HEALTH CORPORATION
By:  

/s/ LEANNE M. STEWART

Name:   LeAnne M. Stewart
Title:  

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

 

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