New analysis of cash collections throws up $65M of red flags
The leaders, directors and accounting firm of AAC Holdings say the provider of addiction treatment services will need to restate its financial reports by about $40 million since the beginning of 2016 and another roughly $25 million before that.
In a filing with the Securities and Exchange Commission late Friday, AAC officials say they see the need to materially revise their estimates for revenues, accounts receivable, bad debt allowances after using newly developed analytics tools to review their cash collection trends. As a result, AAC’s net losses of $20.3 million for the first nine months of last year will grow by $11.8 million while its 2017 and 2016 losses of $25.1 million and $5.7 million will get worse by $14.3 million and $13.5 million, respectively. In addition, results from earlier years will be hurt by about $24.7 million.
These revisions — AAC execs say they are all preliminary — will be different from a change made last year to estimates of the collectibility of accounts receivable, which focused on partial payments from a commercial insurer. But they have led AAC’s management, directors and accountants to come to the conclusion that they will need to report a material weakness in the company’s financial reporting processes and controls. That will come with “certain remedial actions” likely to cost a good bit of money and do nothing to alleviate some investors’ concerns about its operations — which in some cases go back to not long after the company went public.
AAC’s notice to the SEC comes three weeks after former Diversicare Chief Compliance Officer Karen Abbott started in the same role at the Brentwood-based company. Former compliance leader Tom Doub, who also has been AAC’s chief clinical officer, will leave the company June 30. Chairman and CEO Michael Cartwright and his team last month also said that fourth-quarter results were hurt more than expected by the patient census drop that started last summer when Google changed some search algorithms.
Shares of AAC (Ticker: AAC) rose more than 4 percent to $1.84 Friday before the company filed its latest notice with the SEC. The stock, which was listed at $15 in October 2014, has lost about three-fourths of its value in the past six months.