AAC Holdings Announces Comprehensive Plan to Drive Operational Efficiency and Long-Term Value Creation; $15 Million Cost Reduction Program Implemented

Friday, December 7, 2018 Alcohol & Drug Abuse News
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NASHVILLE, Tenn., Dec. 7, 2018 /PRNewswire/ -- AAC Holdings, Inc. (the "Company" or "AAC") announced that AAC's management

team and Board of Directors have conducted a review of the Company and its performance and remain optimistic about the underlying market conditions, AAC's position as the largest independent provider of drug and alcohol addiction treatment services in
the U.S., and the opportunity to create sustainable value for AAC's shareholders.

AAC participates in an addressable market that management believes is in excess of $30 billion with attractive underlying industry trends, contributing to market growth in excess of 4% per annum. First and foremost, AAC is committed to providing the best care possible for its patients and has taken a leadership role in the industry with its landmark patient outcomes studies. With three years of research from over 4,000 patients, AAC was able to demonstrate meaningfully differentiated clinical outcomes compared to national benchmarks. Notwithstanding the issues that contributed to lower than expected revenue growth since July 2018, the Company currently expects to be able to grow its top line revenue in 2019 at or better than the industry growth rate long-term, driving corresponding improvements in profitability and cash flow generation.

The Company is poised to reap the near-term benefits of strategic initiatives implemented during 2018. These initiatives include:

  • Key hires of Michael Nanko as President and Chief Operating Officer, Stephen Ebbett as Chief Digital & Marketing Office and Dr. Larry Weinstein as Chief Medical Officer;
  • The implementation of new technology used to interact with prospective patients;
  • Revising admissions compensation structure and training to improve best practices; and
  • Realigning our organizational structure to improve operational efficiency.

AAC also announced today a cost reduction initiative to improve operating performance across the organization. "We fully realize that our recent performance was unacceptable," said Michael Cartwright, Chairman and Chief Executive Officer of AAC. "We hit unanticipated headwinds in August that caused a significant decline in call volume and led to lower census. We have made significant investments in a corporate infrastructure meant to support a larger business than we have today and that is why we are taking action to streamline the organization."

AAC's implemented cost reduction program is currently expected to reduce the Company's total expenses on an annualized basis by approximately $15 million and includes an aggregate reduction of approximately 200 positions across the Company. The actions taken include:

  • The consolidation of the San Diego outpatient and sober-living facilities into the Laguna operations in California to provide more efficient operations and stronger financial performance. The Company expects this consolidation to be fully executed prior to December 31, 2018;
  • A strategic alternative for Townsend operations in Louisiana; and
  • Effective November 30, 2018, a reduction of approximately 100 positions, including corporate functions, which is intended to align staffing levels with current occupancy.   

The Company currently expects to incur less than approximately $1 million in one-time cash expenditures to fully execute the initiatives outlined above, the majority of which we expect to be incurred during 2019.  These cost reduction efforts were not included in the Company's 2018 guidance released on November 6, 2018.

About American Addiction Centers

American Addiction Centers is a leading provider of inpatient and outpatient substance abuse treatment services. We treat clients who are struggling with drug addiction, alcohol addiction and co-occurring mental/behavioral health issues. We currently operate substance abuse treatment facilities located throughout the United States. These facilities are focused on delivering effective clinical care and treatment solutions. For more information, please find us at AmericanAddictionCenters.org or follow us on Twitter.

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws.  These forward-looking statements are made only as of the date of this release.  In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "may," "potential," "predicts," "projects," "should," "will," "would," and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words.  Forward-looking statements may include information concerning AAC Holdings, Inc.'s (collectively with its subsidiaries; "AAC Holdings" or the "Company") possible or assumed future results of operations, including descriptions of the Company's revenue, profitability, outlook and overall business strategy.  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from the information contained in the forward-looking statements.  These risks, uncertainties and other factors include, without limitation: (i) our inability to effectively operate our facilities; (ii) our reliance on our sales and marketing program to continuously attract and enroll clients; (iii) a reduction in reimbursement rates (or failure to pay) by certain third-party payors for inpatient and outpatient services and point-of-care and definitive lab testing; (iv) our failure to successfully achieve growth through acquisitions and de novo projects; (v) the possibility that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of an acquisition; (vi) our failure to achieve anticipated financial results from contemplated and prior acquisitions; (vii) a disruption in our ability to perform diagnostic laboratory services; (viii) maintaining compliance with applicable regulatory authorities, licensure and permits to operate our facilities and laboratories; (ix) a disruption in our business and reputational and economic risks associated with civil claims by various parties; (x) inability to meet the covenants in our loan documents or lack of borrowing capacity; (xi) our inability to effectively integrate acquired facilities; and (xii) general economic conditions, as well as other risks discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2017, the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2018, the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2018 and other filings with the Securities and Exchange Commission.  As a result of these factors, we cannot assure you that the forward-looking statements in this release will prove to be accurate.  Investors should not place undue reliance upon forward-looking statements.

 

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SOURCE American Addiction Centers



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