Delaware

45-2492228

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6100 Tower Circle, Suite 1000

Franklin, Tennessee 37067

(Address, including zip code, of registrant’s principal executive offices)

(615) 861-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large accelerated filer	☒		Accelerated filer	☐ Non-accelerated filer	☐
~~Large accelerated filer~~		☒		~~Accelerated filer~~		☐

~~Non-accelerated~~ ~~filer~~		~~☐ (Do not check if a smaller reporting company)~~		Smaller reporting company	☐	☐

				Emerging growth company	☐	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

AsSecurities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $.01 par value	ACHC	NASDAQ Global Select Market

At October ~~25, 2017,~~30, 2020, there were ~~87,853,599~~88,991,252 shares of the registrant’s common stock outstanding.

Table of contents

ACADIA HEALTHCARE COMPANY, INC.

QUARTERLY REPORT ONFORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements			1

	Condensed Consolidated Balance Sheets (Unaudited) ~~as of September 30, 2017 and December 31, 2016~~			1

	Condensed Consolidated Statements of ~~Operations~~Income (Unaudited) ~~for the Three and Nine Months Ended September 30, 2017 and 2016~~			2

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) ~~for the Three and Nine Months Ended September 30, 2017 and 2016~~			3

	Condensed Consolidated ~~Statement~~Statements of Equity (Unaudited) ~~for the Nine Months Ended September 30, 2017~~			4

	Condensed Consolidated Statements of Cash Flows (Unaudited) ~~for the Nine Months Ended September 30, 2017 and 2016~~			5

	Notes to Condensed Consolidated Financial Statements (Unaudited)			6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			29	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			41

Item 4.	Controls and Procedures			42
		41

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings			43	42

Item 1A.	Risk Factors			43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			43	45

Item 6.	Exhibits			44
		46
~~SIGNATURES~~
SIGNATURES			45	47

Table of contents

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Acadia Healthcare Company, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	September 30, 2017			December 31, 2016			September 30, 2020			December 31, 2019
	(In thousands, except share and per share amounts)						(In thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	75,661		$	57,063		$	338,702		$	124,192
Accounts receivable, net of allowance for doubtful accounts of $41,786 and $38,916, respectively		295,756			263,327
Accounts receivable, net								333,231			339,775
Other current assets		92,407			107,537			84,477			78,244

Total current assets		463,824			427,927			756,410			542,211
Property and equipment, net		2,966,215			2,703,695			3,253,720			3,224,034
Goodwill		2,730,362			2,681,188			2,460,722			2,449,131
Intangible assets, net		86,951			83,310			90,023			90,357
Deferred tax assets – noncurrent		3,689			3,780
Derivative instruments		26,176			73,509
Deferred tax assets								3,242			3,339
Operating lease right-of-use assets								464,596			501,837
Other assets		65,369			51,317			76,432			68,233

Total assets	$	6,342,586		$	6,024,726		$	7,105,145		$	6,879,142

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	34,805		$	34,805		$	50,858		$	43,679
Accounts payable		95,105			80,034			130,395			127,045
Accrued salaries and benefits		99,893			105,068			138,476			122,552
Current portion of operating lease liabilities								30,433			29,140
Other accrued liabilities		111,403			122,958			251,177			141,160

Total current liabilities		341,206			342,865			601,339			463,576
Long-term debt		3,234,146			3,253,004			3,067,243			3,105,420
Deferred tax liabilities – noncurrent		81,672			78,520
Deferred tax liabilities								104,351			71,860
Operating lease liabilities								477,355			502,252
Derivative instrument liabilities								39,859			68,915
Other liabilities		179,329			164,859			153,812			128,587

Total liabilities		3,836,353			3,839,248			4,443,959			4,340,610
Redeemable noncontrolling interests		18,648			17,754			54,547			33,151
Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized, no shares issued		—			—
Common stock, $0.01 par value; 180,000,000 shares authorized; 87,045,124 and 86,688,199 issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		870			867
Preferred stock, $0.01 par value; 10,000,000 shares authorized, 0 shares issued								—			—
Common stock, $0.01 par value; 180,000,000 shares authorized; 87,919,601 and 87,715,591 issued and outstanding at September 30, 2020 and December 31, 2019, respectively								879			877
Additionalpaid-in capital		2,512,951			2,496,288			2,572,587			2,557,642
Accumulated other comprehensive loss		(385,180	)		(549,570	)		(440,113	)		(414,884	)
Retained earnings		358,944			220,139			473,286			361,746

Total equity		2,487,585			2,167,724			2,606,639			2,505,381

Total liabilities and equity	$	6,342,586		$	6,024,726		$	7,105,145		$	6,879,142

See accompanying notes.

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of ~~Operations~~Income

(Unaudited)

													Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,						2020			2019			2020			2019
	2017			2016			2017			2016			(In thousands, except per share amounts)
	(In thousands, except per share amounts)
Revenue before provision for doubtful accounts	$	728,712		$	744,802		$	2,143,696		$	2,139,039
Provision for doubtful accounts		(11,998	)		(10,137	)		(31,892	)		(31,013	)

Revenue		716,714			734,665			2,111,804			2,108,026		$	833,304		$	777,251		$	2,366,425		$	2,327,230
Salaries, wages and benefits (including equity-based compensation expense of $4,175, $7,145, $19,007 and $20,989, respectively)		385,562			408,242			1,145,578			1,157,557
Salaries, wages and benefits (including equity-based compensation expense of $5,471, $4,039, $16,258 and $14,322, respectively)														450,459			428,601			1,318,378			1,288,399
Professional fees		53,042			47,687			142,772			137,970			61,359			62,152			183,273			177,588
Supplies		28,652			30,555			85,000			88,449			31,207			30,790			93,302			91,661
Rents and leases		19,049			19,740			57,455			55,013			21,182			20,134			62,833			60,860
Other operating expenses		82,328			79,748			249,161			230,950			97,093			92,975			288,222			281,517
Other income														18,070			—			—			—
Depreciation and amortization		36,442			36,418			105,256			101,145			42,912			40,620			126,037			122,277
Interest expense, net		44,515			48,843			130,777			135,315			37,553			46,644			119,064			143,384
Debt extinguishment costs		—			3,411			810			3,411			—			—			3,271			—
Loss on divestiture		—			174,739			—			174,739
Gain on foreign currency derivatives		—			(15	)		—			(523	)
Loss on impairment														20,239			—			20,239			—
Transaction-related expenses		5,665			1,111			18,836			33,483			8,503			5,775			17,293			15,308

Total expenses		655,255			850,479			1,935,645			2,117,509			788,577			727,691			2,231,912			2,180,994

Income (loss) before income taxes		61,459			(115,814	)		176,159			(9,483	)
Income before income taxes														44,727			49,560			134,513			146,236
Provision for income taxes		15,970			2,396			46,259			27,767			7,166			6,837			21,171			25,801

Net income (loss)		45,489			(118,210	)		129,900			(37,250	)
Net loss attributable to noncontrolling interests		129			402			306			1,575

Net income (loss) attributable to Acadia Healthcare Company, Inc.	$	45,618		$	(117,808	)	$	130,206		$	(35,675	)

Earnings attributable to Acadia Healthcare Company, Inc. stockholders:
Net income														37,561			42,723			113,342			120,435
Net income attributable to noncontrolling interests														(563	)		(157	)		(1,802	)		(258	)
Net income attributable to Acadia Healthcare Company, Inc.													$	36,998		$	42,566		$	111,540		$	120,177
Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders:
Basic	$	0.52		$	(1.36	)	$	1.50		$	(0.42	)	$	0.42		$	0.49		$	1.27		$	1.37

Diluted	$	0.52		$	(1.36	)	$	1.50		$	(0.42	)	$	0.42		$	0.48		$	1.26		$	1.37

Weighted-average shares outstanding:
Basic		87,017			86,618			86,912			85,376			87,911			87,649			87,849			87,591
Diluted		87,172			86,618			87,038			85,376			88,856			87,859			88,449			87,805

See accompanying notes.

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

													Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,						2020			2019			2020			2019
	2017			2016			2017			2016			(In thousands)
	(In thousands)
Net income (loss)	$	45,489		$	(118,210	)	$	129,900		$	(37,250	)
Net income													$	37,561		$	42,723		$	113,342		$	120,435
Other comprehensive income (loss):
Foreign currency translation gain (loss)		69,622			(89,645	)		188,744			(351,528	)		82,332			(59,975	)		(46,851	)		(66,112	)
(Loss) gain on derivative instruments, net of tax of $(6.7) million, $3.6 million, $(18.8) million and $20.2 million, respectively		(9,402	)		6,387			(24,354	)		30,306

(Loss) gain on derivative instruments, net of tax of $(8.0) million, $5.0 million, $8.0 million and $10.7 million, respectively														(21,566	)		11,598			21,622			20,495
Other comprehensive income (loss)		60,220			(83,258	)		164,390			(321,222	)		60,766			(48,377	)		(25,229	)		(45,617	)

Comprehensive income (loss)		105,709			(201,468	)		294,290			(358,472	)		98,327			(5,654	)		88,113			74,818

Comprehensive loss attributable to noncontrolling interests		129			402			306			1,575

Comprehensive income attributable to noncontrolling interests														(563	)		(157	)		(1,802	)		(258	)
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc.	$	105,838		$	(201,066	)	$	294,596		$	(356,897	)	$	97,764		$	(5,811	)	$	86,311		$	74,560

See accompanying notes.

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidated ~~Statement~~Statements of Equity

(Unaudited)

(In thousands)

   Common Stock    Additional
Paid-in
Capital Other
Comprehensive
Loss Retained
Earnings
(Accumulated
Deficit)    Total
   Shares    Amount
Balance at December 31, 2016
   86,688    $ 867    $ 2,496,288 $ (549,570 ) $ 220,139    $ 2,167,724
Common stock issued under stock incentive plans
   357    3    2,054 —   —      2,057
Common stock withheld for minimum statutory taxes
   —      —      (5,335 ) —   —      (5,335 )
Equity-based compensation expense
   —      —      19,007 —   —      19,007
Cumulative effect of change in accounting principle
   —      —      —   —   8,599    8,599
Other comprehensive income
   —      —      —   164,390 —      164,390
Other
   —      —      937 —   —      937
Net income attributable to Acadia Healthcare Company, Inc.
   —      —      —   —   130,206    130,206








Balance at September 30, 2017
   87,045    $ 870    $ 2,512,951 $ (385,180 ) $ 358,944    $ 2,487,585

	Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Retained
	Shares		Amount		Capital			Loss			Earnings			Total
Balance at December 31, 2018		87,444	$	874	$	2,541,987		$	(462,377	)	$	252,823		$	2,333,307
Common stock issued under stock incentive plans		149		2		291			—			—			293
Common stock withheld for minimum statutory taxes		—		—		(1,620	)		—			—			(1,620	)
Equity-based compensation expense		—		—		6,101			—			—			6,101
Other comprehensive income		—		—		—			35,791			—			35,791
Net income attributable to Acadia Healthcare Company, Inc.		—		—		—			—			29,471			29,471
Balance at March 31, 2019		87,593		876		2,546,759			(426,586	)		282,294			2,403,343
Common stock issued under stock incentive plans		52		—		68			—			—			68
Common stock withheld for minimum statutory taxes		—		—		(356	)		—			—			(356	)
Equity-based compensation expense		—		—		4,182			—			—			4,182
Other comprehensive loss		—		—		—			(33,031	)		—			(33,031	)
Net income attributable to Acadia Healthcare Company, Inc.		—		—		—			—			48,140			48,140
Balance at June 30, 2019		87,645		876		2,550,653			(459,617	)		330,434			2,422,346
Common stock issued under stock incentive plans		10		1		153			—			—			154
Common stock withheld for minimum statutory taxes		—		—		(37	)		—			—			(37	)
Equity-based compensation expense		—		—		4,039			—			—			4,039
Other comprehensive loss		—		—		—			(48,377	)		—			(48,377	)
Net income attributable to Acadia Healthcare Company, Inc.		—		—		—			—			42,566			42,566
Balance at September 30, 2019		87,655		877		2,554,808			(507,994	)		373,000			2,420,691
Common stock issued under stock incentive plans		60		—		54			—			—			54
Common stock withheld for minimum statutory taxes		—		—		(205	)		—			—			(205	)
Equity-based compensation expense		—		—		2,985			—			—			2,985
Other comprehensive income		—		—		—			93,110			—			93,110
Net loss attributable to Acadia Healthcare Company, Inc.		—		—		—			—			(11,254	)		(11,254	)
Balance at December 31, 2019		87,715		877		2,557,642			(414,884	)		361,746			2,505,381
Common stock issued under stock incentive plans		127		1		(1	)		—			—			—
Common stock withheld for minimum statutory taxes		—		—		(1,402	)		—			—			(1,402	)
Equity-based compensation expense		—		—		4,979			—			—			4,979
Other comprehensive loss		—		—		—			(78,254	)		—			(78,254	)
Net income attributable to Acadia Healthcare Company, Inc.		—		—		—			—			33,463			33,463
Balance at March 31, 2020		87,842		878		2,561,218			(493,138	)		395,209			2,464,167
Common stock issued under stock incentive plans		56		1		169			—			—			170
Common stock withheld for minimum statutory taxes		—		—		(145	)		—			—			(145	)
Equity-based compensation expense		—		—		5,808			—			—			5,808
Other comprehensive loss		—		—		—			(7,741	)		—			(7,741	)
Net income attributable to Acadia Healthcare Company, Inc.		—		—		—			—			41,079			41,079
Balance at June 30, 2020		87,898		879		2,567,050			(500,879	)		436,288			2,503,338
Common stock issued under stock incentive plans		22		—		180			—			—			180
Common stock withheld for minimum statutory taxes		—		—		(114	)		—			—			(114	)
Equity-based compensation expense		—		—		5,471			—			—			5,471
Other comprehensive income		—		—		—			60,766			—			60,766
Net income attributable to Acadia Healthcare Company, Inc.		—		—		—			—			36,998			36,998
Balance at September 30, 2020		87,920	$	879	$	2,572,587		$	(440,113	)	$	473,286		$	2,606,639

See accompanying notes.

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2020			2019
	(In thousands)						(In thousands)
Operating activities:
Net income (loss)	$	129,900		$	(37,250	)
Adjustments to reconcile net income (loss) to net cash provided by continuing operating activities:
Net income							$	113,342		$	120,435
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		105,256			101,145			126,037			122,277
Amortization of debt issuance costs		7,340			7,714			9,696			8,926
Equity-based compensation expense		19,007			20,989			16,258			14,322
Deferred income tax expense		29,416			25,857
Deferred income taxes								41,803			5,150
Debt extinguishment costs		810			3,411			3,271			—
Loss on divestiture		—			174,739
Gain on foreign currency derivatives		—			(523	)
Loss on impairment								20,239			—
Other		10,672			731			810			4,444
Change in operating assets and liabilities, net of effect of acquisitions:
Change in operating assets and liabilities:
Accounts receivable, net		(28,681	)		(12,579	)		5,392			(32,956	)
Other current assets		26,099			(12,973	)		(3,809	)		(3,912	)
Other assets		(566	)		(1,134	)		316			530
Accounts payable and other accrued liabilities		(26,381	)		2,067			90,752			(35,610	)
Accrued salaries and benefits		(7,937	)		(10,759	)		16,477			4,813
Other liabilities		7,677			3,746			31,656			5,110

Net cash provided by continuing operating activities		272,612			265,181
Net cash used in discontinued operating activities		(1,261	)		(5,524	)

Net cash provided by operating activities		271,351			259,657			472,240			213,529
Investing activities:
Cash paid for acquisitions, net of cash acquired		—			(683,285	)		—			(44,900	)
Cash paid for capital expenditures		(193,817	)		(249,961	)		(195,834	)		(202,722	)
Cash paid for real estate acquisitions		(33,297	)		(37,947	)		(5,595	)		(6,976	)
Proceeds from sale of property and equipment								2,509			13,470
Settlement of foreign currency derivatives		—			523			—			105,008
Other		(6,062	)		(1,135	)		(10,734	)		(1,072	)

Net cash used in investing activities		(233,176	)		(971,805	)		(209,654	)		(137,192	)
Financing activities:
Borrowings on long-term debt		—			1,480,000			450,000			—
Borrowings on revolving credit facility		—			179,000			100,000			76,573
Principal payments on revolving credit facility		—			(166,000	)		(100,000	)		(76,573	)
Principal payments on long-term debt		(25,913	)		(46,069	)		(31,863	)		(24,738	)
Repayment of assumed debt		—			(1,348,389	)
Repayment of long-term debt								(450,000	)		—
Payment of debt issuance costs		—			(35,748	)		(11,220	)		—
Issuance of common stock, net		—			685,097
Common stock withheld for minimum statutory taxes, net		(3,278	)		(7,917	)		(1,311	)		(1,498	)
Distributions to noncontrolling interests								(653	)		—
Other		1,649			(1,821	)		(3,517	)		(5,923	)

Net cash (used in) provided by financing activities		(27,542	)		738,153
Net cash used in financing activities								(48,564	)		(32,159	)
Effect of exchange rate changes on cash		7,965			(9,469	)		488			(1,788	)

Net increase in cash and cash equivalents		18,598			16,536			214,510			42,390
Cash and cash equivalents at beginning of the period		57,063			11,215			124,192			50,510

Cash and cash equivalents at end of the period	$	75,661		$	27,751		$	338,702		$	92,900

Effect of acquisitions:
Assets acquired, excluding cash	$	—		$	2,505,407		$	20,300		$	48,594
Liabilities assumed		—			(1,605,240	)		(53	)		(3,694	)
Issuance of common stock in connection with acquisition		—			(216,882	)

Redeemable noncontrolling interest resulting from an acquisition								(20,247	)		—
Cash paid for acquisitions, net of cash acquired	$	—		$	683,285		$	—		$	44,900

See accompanying notes.

Table of contents

Acadia Healthcare Company, Inc.

Notes to Condensed Consolidated Financial Statements

September 30, ~~2017~~2020

(Unaudited)

1.	Description of Business and Basis of Presentation

1. Description of Business ~~and Basis of Presentation~~

~~Description of Business~~

Acadia Healthcare Company, Inc. (the “Company”) develops and operates inpatient psychiatric facilities, residential treatment centers, group homes, substance abuse facilities and facilities providing outpatient behavioral healthcare services to serve the behavioral health and recovery needs of communities throughout the United States (“U.S.”), the United Kingdom (“U.K.”) and Puerto Rico. At September 30, ~~2017,~~2020, the Company operated ~~579~~582 behavioral healthcare facilities with approximately ~~17,400~~18,300 beds in 3940 states, the U.K. and Puerto Rico.

During 2019, the Company commenced a review of strategic alternatives including those related to its U.K. operations and a potential sale of such operations. In January 2020, the Company launched a formal process regarding the sale of its U.K. business. Consistent with market practice for U.K. transactions of this nature, and in conjunction with its advisors, the Company solicited and received initial, non-binding offers to acquire its U.K. business from multiple bidders. During the first quarter of 2020, the Company began the second phase of the sale process, during which interested bidders would receive proposed transaction documents and complete their confirmatory due diligence. However, given evolving market dynamics related to the novel coronavirus (“COVID-19”) pandemic, the Company suspended the sale process in mid-March 2020. In October 2020, the Company relaunched the formal sale process of its U.K. business.

Basis of Presentation

The business of the Company is conducted through limited liability companies, partnerships andC-corporations. The Company’s consolidated financial statements include the accounts of the Company and all subsidiaries controlled by the Company through ~~its’~~its direct or indirect ownership of majority interests and exclusive rights granted to the Company as the controlling member of an entity. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation of our financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The condensed consolidated balance sheet at December 31, ~~2016~~2019 has been derived from the audited financial statements as of that date. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended December 31, ~~2016~~2019 included in the Company’s Annual Report on Form10-K filed with the Securities and Exchange Commission (the “SEC”) on February ~~24, 2017.~~28, 2020. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

During March 2020, the global pandemic of COVID-19 began to affect the Company’s facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. At a limited number of facilities, employees and/or patients have tested positive for COVID-19. The Company is committed to protecting the health of our communities and has been responding to the evolving COVID-19 situation while taking steps to provide quality care and protect the health and safety of patients and employees. All of the Company’s facilities are closely following infectious disease protocols, as well as recommendations by the Centers for Disease Control and Prevention (“CDC”), the National Health Service (“NHS”) and local health officials. The Company has established an internal COVID-19 taskforce, taken steps to secure its supply chain, expanded telehealth capabilities and implemented emergency planning in directly impacted markets. Nevertheless, COVID-19 may adversely impact the Company’s business and have an impact on its financial results that the Company is not currently able to quantify. Disruptions to the Company’s business as a result of the COVID-19 pandemic could have a material adverse effect on its results of operations, financial condition, cash flows and ability to service its indebtedness and may affect the amounts reported in the consolidated financial statements including those related to collectability of accounts receivable as well as professional and general liability reserves, tax assets and liabilities and may result in a potential impairment of goodwill and long-lived assets.

Certain reclassifications have been made to prior years to conform to the current year presentation.

2. 6

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2.	Recently Issued Accounting Standards

In March 2020, the SEC adopted final rules that amend Rule 3-10 and Rule 3-16 of Regulation S-X to reduce and simplify the financial disclosure requirements applicable to guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a registrant’s securities. The new rules are effective January 4, 2021. Early adoption is permitted. The Company early adopted the new rules during the second quarter of 2020.

In ~~August 2017,~~March 2020, the Financial Accounting Standards Board ~~(the “FASB”~~(“FASB”) issued Accounting ~~Standards~~Standard Update (“ASU”)~~2017-12,~~~~“Derivatives~~ ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting and ~~Hedging (Topic 815): Targeted Improvements~~applies only to ~~Accounting for Hedging Activities”~~ (“contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU~~2017-12”).~~ 2020-04 is effective as of March 12, 2020 through December 31, 2022. Entities may adopt ASU~~2017-12~~ ~~amends~~ 2020-04 as of any date from the ~~hedge accounting model~~beginning of an interim period that includes or is subsequent to ~~enable entities~~March 12, 2020 or prospectively from a date within an interim period that includes or is subsequent to ~~better portray~~March 12, 2020, up to the ~~economics of their risk management activities in~~date that the financial statements are available to be issued. Management is evaluating the impact of ASU 2020-04 on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and ~~simplifies~~Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the ~~application of hedge accounting~~internal-use software guidance in ~~certain situations.~~ASC 350-402 to determine which implementation costs to capitalize as assets. ASU~~2017-12~~ 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, ~~2018.~~2019. Early adoption is permitted. ~~Management~~The Company adopted ASU 2018-15 on January 1, 2020. There is ~~evaluating the~~no significant impact ~~of ASU2017-12~~ on the Company’s consolidated financial statements.

In ~~January 2017, the FASB issued ASU2017-04,~~~~“Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”~~ ~~(“ASU2017-04”).~~ ~~ASU2017-04~~ simplifies the measurement of goodwill by eliminating the requirement to calculate the implied fair value of goodwill (step 2 of the current impairment test) to measure the goodwill impairment charge. Instead, entities will record impairment charges based on the excess of a reporting unit’s carrying amount over its fair value. ASU~~2017-04~~ ~~is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. Management is evaluating the impact of ASU2017-04~~ ~~on the Company’s consolidated financial statements.~~

~~In March~~June 2016, the FASB issued ASU~~2016-09,~~ 2016-13, “~~Improvements~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment methodology with a new methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to ~~Employee Share-Based Payment Accounting”~~ (“inform credit loss estimates. ASU~~2016-09”).~~ ~~ASU2016-09~~ ~~includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. ASU2016-09~~ 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, ~~2016.~~2019. Early adoption is permitted. The Company adopted ASU~~2016-09~~ ~~as of~~ 2016-13 on January 1, ~~2017 as described in Note 10 – Income Taxes.~~

~~In March 2016, the FASB issued ASU2016-02,~~~~“Leases”~~ ~~(“ASU2016-02”).~~ ~~ASU2016-02’s~~ ~~core principle~~2020. There is ~~to increase transparency and comparability among organizations by recognizing lease assets and liabilities~~no significant impact on the ~~balance sheet~~Company’s consolidated financial statements.

3.	The CARES Act

As part of the Coronavirus Aid, Relief and ~~disclosing key information. ASU2016-02~~Economic Security Act (the “CARES Act”), the U.S. government announced it would offer $100 billion of relief to eligible healthcare providers. On April 24, 2020, President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act (the “New PPP Act”). Among other things, the New PPP Act allocates $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion allocated under the New PPP Act is ~~effective~~in addition to the $100 billion allocated to healthcare providers for ~~fiscal~~the same purposes in the CARES Act and has been disbursed to providers under terms and conditions similar to the CARES Act funds. During the three months ended June 30, 2020, the Company participated in certain relief programs offered through the CARES Act, including receipt of approximately $19.7 million relating to the initial portions of the Public Health and Social Services Emergency Fund (“PHSSE Fund”), also known as the Provider Relief Fund, and approximately $45 million of payments from the Centers for Medicare and Medicaid Services’ (“CMS”) Accelerated and Advance Payment Program. In August 2020, the Company received approximately $12.8 million of additional funds from the PHSSE Fund. In addition, the Company received a 2% increase in facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020, to December 31, 2020.

The CARES Act also provides for certain federal income and other tax changes from which the Company has benefited, including an increase in the interest expense tax deduction limitation, the deferral of the employer portion of Social Security payroll taxes, refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds and bonus depreciation of qualified improvement property. The Company expects a cash benefit of approximately $39 million for 2020 relating to the delay of payment of the employer portion of Social Security payroll taxes. Within the CARES Act, the interest expense deduction threshold was increased to 50% of Adjusted Taxable Income for 2019 and 2020 tax years, making our interest expense fully deductible. As a result, the Company received a cash benefit in the form of refunds of $14 million and ~~interim periods within those~~expects lower tax payments of $2.7 million related to our 2019 interest expense and between $15 million and $20 million related to our 2020 interest expense. Furthermore, under the CARES Act, (i) for taxable years beginning ~~after December 15, 2018. Additionally, ASU2016-02~~ ~~would permit both public~~before 2021, net operating loss (“NOL”) carryforwards and ~~nonpublic organizations~~carrybacks may offset 100% of taxable income and (ii) NOLs arising in 2018, 2019 and 2020 taxable years may be carried back to ~~adopt~~each of the ~~new standard early. Management believes~~preceding five years to generate a refund.

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Results for the ~~primary effect~~three months ended September 30, 2020 include a reversal of ~~adopting~~$18.1 million of other income recorded during the ~~new standard will be to recordright-of-use~~ ~~assets and obligations for current operating leases.~~

~~In May 2014, the FASB and the International Accounting Standards Board issued ASU2014-09,~~~~“Revenue from Contracts with Customers (Topic 606)”~~ ~~(“ASU2014-09”).~~ ~~ASU2014-09’s~~ core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU~~2014-09~~ ~~requires companies to exercise more judgment and recognize revenue in accordance with the standard’s core principle by applying the following five steps:~~

~~Step 1: Identify the contract with a customer.~~

~~Step 2: Identify the performance obligations~~second quarter of 2020 in the ~~contract.~~

~~Step 3: Determine the transaction price.~~

~~Step 4: Allocate the transaction price~~condensed consolidated statements of income related to the ~~performance obligations~~$19.7 million of PHSSE funds received by the Company. The Company’s decision to reverse this income was based on additional guidance issued by the U.S. Department of Health and Human Services (“HHS”) in ~~the contract.~~

~~Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.~~

~~ASU2014-09~~ also includes a cohesive set of quantitative and qualitative disclosure requirements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

~~ASU2014-09~~ ~~is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Additionally, ASU2014-09~~ would permit both public and nonpublic organizations to adopt the new revenue standard early, but not before the original public organization effective date (that is, annual periods beginning after December 15, 2016). ASU~~2014-09~~ requires retrospective application using either a full retrospective adoption or a modified retrospective adoption approach. Full retrospective adoption requires entities to apply the standard as if it had been in effect since the inception of all its contracts with customers presented in the financial statements. Modified retrospective adoption requires entities to apply the standard retrospectivelySeptember 2020 related to the ~~most current period presented in the financial statements, requiring the cumulative effect of the retrospective application as an adjustment~~terms and conditions necessary to ~~the opening balance of retained earnings at the date of initial application.~~retain PHSSE funds. The Company continues to evaluate its compliance with the terms and ~~may adopt~~conditions to, and the ~~full retrospective method.~~financial impact of, funds received under the CARES Act and other government relief programs.

Revenue

Revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and residential treatment. The services provided by the Company have no fixed duration and can be terminated by the patient or the facility at any time, and therefore, each treatment is its own stand-alone contract.

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in Accounting Standards Codification (“ASC”) ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize the revenue. The Company ~~does not plan~~has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to ~~early adopt ASU2014-09.~~remain admitted in our facilities.

~~Additionally,~~The Company disaggregates revenue from contracts with customers by service type and by payor within each of the Company’s segments.

U.S. Facilities

The Company’s facilities in the United States (the “U.S. Facilities”) and services provided by the U.S. Facilities can generally be classified into the following categories: acute inpatient psychiatric facilities; specialty treatment facilities; residential treatment centers; and outpatient community-based facilities.

Acute inpatient psychiatric facilities. Acute inpatient psychiatric facilities provide a high level of care in order to stabilize patients that are either a threat to themselves or to others. The acute setting provides 24-hour observation, daily intervention and monitoring by psychiatrists.

Specialty treatment facilities. Specialty treatment facilities include residential recovery facilities, eating disorder facilities and comprehensive treatment centers. The Company provides a comprehensive continuum of care for adults with addictive disorders and co-occurring mental disorders. Inpatient, including detoxification and rehabilitation, partial hospitalization and outpatient treatment programs give patients access to the least restrictive level of care.

Residential treatment centers. Residential treatment centers treat patients with behavioral disorders in a non-hospital setting, including outdoor programs. The facilities balance therapy activities with social, academic and other activities.

Outpatient community-based facilities. Outpatient community-based programs are designed to provide therapeutic treatment to children and adolescents who have a clinically-defined emotional, psychiatric or chemical dependency disorder while enabling the youth to remain at home and within their community.

The table below presents total U.S. revenue attributed to each category (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Acute inpatient psychiatric facilities	$	259,353	$	233,141	$	723,611	$	678,866
Specialty treatment facilities		211,796		201,169		597,886		595,473
Residential treatment centers		71,153		69,681		210,432		216,989
Outpatient community-based facilities		5,659		5,392		16,724		15,828
Revenue	$	547,961	$	509,383	$	1,548,653	$	1,507,156

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The Company receives payments from the following sources for services rendered in our U.S. 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.

The Company determines 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. Most of our U.S. Facilities have contracts containing variable consideration. However, it is unlikely a significant reversal of revenue will occur when the uncertainty is resolved, and therefore, the Company ~~anticipates that,~~has included the variable consideration in the estimated transaction price. Subsequent changes resulting from a patient’s ability to pay are recorded as bad debt expense, which is included as a ~~result~~component of ~~certain changes required~~other operating expenses in the condensed consolidated statements of income. Bad debt expense for the three and nine months ended September 30, 2020 and 2019 was not significant.

The following table presents revenue by ~~ASU2014-09,~~payor type and as a percentage of revenue in our U.S. Facilities (in thousands):

	Three Months Ended September 30,										Nine Months Ended September 30,
	2020					2019					2020					2019
	Amount		%			Amount		%			Amount		%			Amount		%
Commercial	$	156,741		28.6	%	$	140,315		27.5	%	$	439,911		28.4	%	$	426,659		28.3	%
Medicare		96,536		17.6	%		76,906		15.1	%		244,721		15.9	%		223,027		14.8	%
Medicaid		261,341		47.7	%		256,370		50.3	%		767,075		49.4	%		750,631		49.8	%
Self-Pay		26,060		4.8	%		30,626		6.0	%		75,570		4.9	%		91,982		6.1	%
Other		7,283		1.3	%		5,166		1.1	%		21,376		1.4	%		14,857		1.0	%
Revenue	$	547,961		100.0	%	$	509,383		100.0	%	$	1,548,653		100.0	%	$	1,507,156		100.0	%

Contract liabilities in the ~~majority~~U.S. Facilities primarily consisted of ~~its provision~~unearned revenue from CMS’ Accelerated and Advance Payment Program. In April 2020, the Company received approximately $45 million from CMS’ Accelerated and Advance Payment Program for ~~doubtful accounts~~Medicare providers, which the Company expects to repay over the 12 month period beginning in April 2021. Once repayment begins, the amount will be ~~recorded~~recouped from the provider’s or supplier’s new Medicare claims. Approximately $24.9 million and $22.5 million of contract liabilities are included in other accrued liabilities and other liabilities, respectively, on the condensed consolidated balance sheets. A summary of the activity in unearned revenue in the U.S. Facilities is as follows (in thousands):

Balance at December 31, 2019	$	1,896
Payments received		50,087
Revenue recognized		(4,593	)
Balance at September 30, 2020	$	47,390

U.K. Facilities

The Company’s facilities located in the United Kingdom (the “U.K. Facilities”) and services provided by the U.K. Facilities can generally be classified into the following categories: healthcare facilities; education and children’s services; and adult care facilities.

Healthcare facilities. Healthcare facilities provide psychiatric treatment and nursing for sufferers of mental disorders, including for patients whose risk of harm to others and risk of escape from hospitals cannot be managed safely within other mental health settings. In order to manage the risks involved with treating patients, the facility is managed through the application of a range of security measures depending on the level of dependency and risk exhibited by the patient.

Education and children’s services. Education and children’s services provide specialist education for children and young people with special educational needs, including autism, Asperger’s Syndrome, social, emotional and mental health, and specific learning difficulties, such as dyslexia. The division also offers standalone children’s homes for children that require 52-week residential care to support complex and challenging behavior and fostering services.

Adult care facilities. Adult care focuses on care of individuals with a variety of learning difficulties, mental health illnesses and adult autism spectrum disorders. It also includes long-term, short-term and respite nursing care to high-dependency elderly individuals who are physically frail or suffering from dementia. Care is provided in a number of settings, including in residential care homes and through supported living.

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The table below presents total U.K. revenue attributed to each category (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Healthcare facilities	$	157,277	$	148,138	$	442,952	$	455,399
Education and Children’s Services		47,190		43,388		138,486		135,652
Adult Care facilities		80,876		76,342		236,334		229,023
Revenue	$	285,343	$	267,868	$	817,772	$	820,074

On an annual basis, the Company receives payments from approximately 500 public funded sources in the U.K. (including the NHS, Clinical Commissioning Groups (“CCGs”) and local authorities in England, Scotland and Wales) and individual patients and clients. The Company determines the transaction price based on established billing rates by payor reduced by implicit price concessions. Implicit price concessions are insignificant in the U.K. Facilities.

The following table presents revenue by payor type and as a ~~direct reduction~~percentage of revenue in our U.K. Facilities (in thousands):

	Three Months Ended September 30,										Nine Months Ended September 30,
	2020					2019					2020					2019
	Amount		%			Amount		%			Amount		%			Amount		%
U.K. public funded sources	$	258,508		90.6	%	$	242,747		90.6	%	$	740,329		90.5	%	$	740,492		90.3	%
Self-Pay		26,147		9.2	%		24,430		9.1	%		75,618		9.3	%		77,895		9.5	%
Other		688		0.2	%		691		0.3	%		1,825		0.2	%		1,687		0.2	%
Revenue	$	285,343		100.0	%	$	267,868		100.0	%	$	817,772		100.0	%	$	820,074		100.0	%

Contract liabilities in the U.K. Facilities primarily consist of unearned revenue due to ~~revenue instead~~the timing of ~~being presented as a separate line item. Management is continuing to evaluate the impact of ASU2014-09~~payments received mainly in our education and children’s services and healthcare facilities. Contract liabilities are included in other accrued liabilities on the ~~Company’s~~condensed consolidated ~~financial statements.~~balance sheets. A summary of the activity in unearned revenue in the U.K. Facilities is as follows (in thousands):

~~3. Earnings Per Share~~

Balance at December 31, 2019	$	36,579
Payments received		124,691
Revenue recognized		(129,790	)
Foreign currency translation loss		(850	)
Balance at September 30, 2020	$	30,630

~~Basic and diluted earnings per share are calculated in accordance with the FASB Standards Codification Topic 260, “~~~~Earnings Per Share~~~~,” based on the weighted-average number~~10

Table of ~~shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities have a dilutive effect on earnings per share.~~

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5.	Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 (in thousands, except per share amounts):


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016			2017		2016			2020		2019		2020		2019
Numerator:
Net income (loss) attributable to Acadia Healthcare Company, Inc.	$	45,618	$	(117,808	)	$	130,206	$	(35,675	)

Net income attributable to Acadia Healthcare Company, Inc.											$	36,998	$	42,566	$	111,540	$	120,177
Denominator:
Weighted average shares outstanding for basic earnings per share		87,017		86,618			86,912		85,376			87,911		87,649		87,849		87,591
Effect of dilutive instruments		155		—			126		—			945		210		600		214

Shares used in computing diluted earnings per common share		87,172		86,618			87,038		85,376			88,856		87,859		88,449		87,805

Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders:
Basic	$	0.52	$	(1.36	)	$	1.50	$	(0.42	)	$	0.42	$	0.49	$	1.27	$	1.37

Diluted	$	0.52	$	(1.36	)	$	1.50	$	(0.42	)	$	0.42	$	0.48	$	1.26	$	1.37

Approximately ~~1.0~~2.0 million and ~~0.2~~1.9 million shares of common stock issuable upon exercise of outstanding stock option awards were excluded from the calculation of diluted earnings per share for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, because their effect would have been anti-dilutive. Approximately ~~1.5~~2.1 million and ~~0.3~~2.4 million shares of common stock issuable upon exercise of outstanding stock option awards were excluded from the calculation of diluted earnings per share for both the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, because their effect would have been anti-dilutive.

~~4. Acquisitions~~

6.	Acquisitions

~~2016 U.S. Acquisitions~~The Company’s strategy is to acquire and develop behavioral healthcare facilities and improve operating results within its facilities and its other behavioral healthcare operations.

On ~~June~~April 1, ~~2016,~~2019, the Company completed the acquisition of ~~Pocono Mountain~~Bradford Recovery Center (“~~Pocono Mountain”~~Bradford”), a specialty treatment facility with 46 beds located in Millerton, Pennsylvania, for cash consideration of approximately $4.5 million.

On February 15, 2019, the Company completed the acquisition of Whittier Pavilion (“Whittier”), an inpatient psychiatric facility with ~~108~~71 beds located in ~~Henryville, Pennsylvania,~~Haverhill, Massachusetts, for cash consideration of approximately ~~$25.4~~$17.9 million.

~~On May 1, 2016,~~ Also on February 15, 2019, the Company completed the acquisition of ~~TrustPoint Hospital~~Mission Treatment (“~~TrustPoint”~~Mission Treatment”)~~, an inpatient psychiatric facility with 100 beds located in Murfreesboro, Tennessee,~~ for cash consideration of approximately ~~$62.7~~$22.5 million. Mission Treatment operates 9 comprehensive treatment centers in California, Nevada, Arizona and Oklahoma.

On April 1, 2016, the Company completed the acquisition of Serenity Knolls (“Serenity Knolls”), an inpatient psychiatric facility with 30 beds located in Forest Knolls, California, for cash consideration of approximately $10.0 million.Transaction-related expenses

~~Priory~~

On February 16, 2016, the Company completed the acquisition of Priory Group No. 1 Limited (“Priory”) for a total purchase price of approximately $2.2 billion, including cash consideration of approximately $1.9 billionTransaction-related expenses primarily relate to termination, restructuring, U.K. sale, strategic review, management transition and the issuance of 4,033,561 shares of its common stock to shareholders of Priory. Priory was the leading independent provider of behavioral healthcare services in the U.K. operating 324 facilities with approximately 7,100 beds at the acquisition date.

The Competition and Markets Authority (the “CMA”) in the U.K. reviewed the Company’s acquisition of Priory. On July 14, 2016, the CMA announced that the Company’s acquisition of Priory was referred for a phase 2 investigation unless the Company offered acceptable undertakings to address the CMA’s competition concerns relating to the provision of behavioral healthcare services in certain markets. On July 28, 2016, the CMA announced that the Company had offered undertakings to address the CMA’s concerns and that, in lieu of a phase 2 investigation, the CMA would consider the Company’s undertakings.

On October 18, 2016, the Company signed a definitive agreement with BC Partners (“BC Partners”) for the sale of 21 existing U.K. behavioral health facilities and one de novo behavioral health facility with an aggregate of approximately 1,000 beds (collectively, the “U.K. Disposal Group”). On November 10, 2016, the CMA accepted the Company’s undertakings to sell the U.K. Disposal Group to BC Partners and confirmed that the divestiture satisfied the CMA’s concerns about the impact of the Company’s acquisition of Priory on competition for the provision of behavioral healthcare services in certain markets in the U.K. As a result of the CMA’s acceptance of the undertakings, the Company’s acquisition of Priory was not referred for a phase 2 investigation. On November 30, 2016, the Company completed the sale of the U.K. Disposal Group to BC Partners for £320 million cash (the “U.K. Divestiture”).

~~In conjunction with the sale, the Company recorded a loss on divestiture of $174.7 million in the consolidated statements of operations~~other similar costs. Transaction-related expenses for the three and nine months ended September 30, ~~2016. The loss on divestiture consisted of an allocation of goodwill to the U.K. Disposal Group of $106.9 million, loss on the sale of properties of $42.2 million~~2020 and estimated transaction-related expenses of $25.6 million. The allocation of goodwill was based on the fair value of the U.K. Disposal Group relative to the total fair value of the Company’s U.K. Facilities segment.

~~Summary of Acquisitions~~

The Company selectively seeks opportunities to expand and diversify its base of operations by acquiring additional facilities. Approximately $31.5 million of the goodwill associated with domestic acquisitions completed in 2016 is deductible for federal income tax purposes. The fair values of assets acquired and liabilities assumed, at the corresponding acquisition dates, during the year ended December 31, 2016 in connection with the Priory, Serenity Knolls, TrustPoint and Pocono Mountain acquisitions (collectively the “2016 Acquisitions”)2019 were as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Termination, restructuring, sale and strategic review costs	$	6,891	$	5,329	$	9,151	$	10,941
Legal, accounting and other acquisition-related costs		1,612		235		8,142		1,451
Management transition costs		—		211		—		2,916
	$	8,503	$	5,775	$	17,293	$	15,308

   Priory    Other    Total
Cash
   $ 10,253    $ 2,488    $ 12,741
Accounts receivable
   57,832    4,264    62,096
Prepaid expenses and other current assets
   7,921    103    8,024
Property and equipment
   1,598,156    35,400    1,633,556
Goodwill
   679,265    96,052    775,317
Intangible assets
   23,200    338    23,538
Other assets
   8,862    47    8,909






Total assets acquired
   2,385,489    138,692    2,524,181
Accounts payable
   24,203    749    24,952
Accrued salaries and benefits
   39,588    918    40,506
Other accrued expenses
   48,305    391    48,696
Deferred tax liabilities – noncurrent
   56,462    269    56,731
Long-term debt
   1,348,389    —      1,348,389
Other liabilities
   61,311    30,243    91,554






Total liabilities assumed
   1,578,258    32,570    1,610,828






Net assets acquired
   $ 807,231    $ 106,122    $ 913,353

~~Other~~11

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7.	Property and Equipment

Property and equipment consisted of the following at September 30, 2020 and December 31, 2019 (in thousands):

	September 30, 2020			December 31, 2019
Land	$	448,342		$	448,716
Building and improvements		2,896,202			2,746,111
Equipment		534,665			516,769
Construction in progress		214,155			254,213
		4,093,364			3,965,809
Less: accumulated depreciation		(839,644	)		(741,775	)
Property and equipment, net	$	3,253,720		$	3,224,034

The ~~qualitative factors comprising~~Company has recorded assets held for sale within other assets on the ~~goodwill acquired in~~condensed consolidated balance sheets for closed properties being actively marketed of $28.3 million and $31.1 million at September 30, 2020 and December 31, 2019, respectively. For the 2016 Acquisitions 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 companies.

~~Transaction-related expenses comprised the following costs for the~~ three ~~and nine~~ months ended September 30, ~~2017~~2020, the Company recorded a non-cash asset impairment charge of $3.8 million relating to property and ~~2016 (in thousands):~~equipment as part of the decision to close certain U.K. elderly care facilities.

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Legal, accounting and other costs
   $ 3,845    $ 1,111    $ 7,286    $ 17,212
Severance and contract termination costs
   1,820    —      11,550    1,421
Advisory and financing commitment fees
   —      —      —      14,850








   $ 5,665    $ 1,111    $ 18,836    $ 33,483

8.	5. Other Intangible Assets

Other identifiable intangible assets and related accumulated amortization consisted of the following ~~as of~~at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 (in thousands):

	Gross Carrying Amount				Accumulated Amortization
	September 30, 2020		December 31, 2019		September 30, 2020			December 31, 2019
Intangible assets subject to amortization:
Contract intangible assets	$	2,100	$	2,100	$	(2,100	)	$	(2,100	)
Non-compete agreements		1,131		1,131		(1,131	)		(1,131	)
		3,231		3,231		(3,231	)		(3,231	)
Intangible assets not subject to amortization:
Licenses and accreditations		12,445		12,455		0			0
Trade names		60,329		60,831		0			0
Certificates of need		17,249		17,071		0			0
		90,023		90,357		0			0
Total	$	93,254	$	93,588	$	(3,231	)	$	(3,231	)

   Gross Carrying Amount    Accumulated Amortization
   September 30,
2017    December 31,
2016    September 30,
2017    December 31,
2016
Intangible assets subject to amortization:

Contract intangible assets
   $ 2,100    $ 2,100    $ (2,100 )    $ (2,100 )
Non-compete agreements
   1,147    1,147    (1,147 )    (1,147 )








   3,247    3,247    (3,247 )    (3,247 )
Intangible assets not subject to amortization:

Licenses and accreditations
   12,263    12,228    —      —
Trade names
   60,427    57,538    —      —
Certificates of need
   14,261    13,544    —      —








   86,951    83,310    —      —








Total
   $ 90,198    $ 86,557    $ (3,247 )    $ (3,247 )

~~Amortization expense related to~~All of the Company’s definite-lived intangible assets ~~was $0.1 million and $0.3 million for the three months and nine months ended September 30, 2016, respectively. As of December 31, 2016, all of the Company’s defined-lived intangible assets were~~are fully amortized. The Company’s licenses and accreditations, trade names and certificate of need intangible assets have indefinite lives and are, therefore, not subject to amortization.

~~6. Property~~

Leases

The Company’s lease portfolio primarily consists of finance and ~~Equipment~~

~~Property~~operating real estate leases integral for facility operations. The original terms of the leases typically range from five to 30 years with optional renewal periods. A minimal portion of the Company’s lease portfolio consists of non-real estate leases, including copiers and equipment, ~~consists~~which generally have lease terms of one to three years and have insignificant lease obligations.

The Company has elected the accounting policy practical expedients by class of underlying asset in ASC 842 “Leases” to: (i) combine associated lease and non-lease components into a single lease component; and (ii) exclude recording short-term leases as right-of-use assets and liabilities on the condensed consolidated balance sheets. Non-lease components, which are not significant overall, are combined with lease components.

Operating lease liabilities are recorded at the present value of remaining lease payments not yet paid for the lease term discounted using the incremental borrowing rate associated with each lease. Operating lease right-of-use assets represent operating lease liabilities adjusted for prepayments, accrued lease payments, lease incentives and initial direct costs. Certain of the Company’s leases include renewal or termination options. Calculation of operating lease right-of-use assets and liabilities include the initial lease term unless it is reasonably certain a renewal or termination option will be exercised. Variable components of lease payments

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fluctuating with a future index or rate, as well as those related to common area maintenance costs, are not included in determining lease payments and are expensed as incurred. Most of the Company’s leases do not contain implicit borrowing rates, and therefore, incremental borrowing rates are calculated based on information available at the lease commencement date. Incremental borrowing rates reflect the Company’s estimated interest rates for collateralized borrowings over similar lease terms. Additionally, the Company reviews service agreements for embedded lease and right-of-use assets and liabilities as necessary.

Lease Position

The Company recorded the following ~~as of~~at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 on the condensed consolidated balance sheets (in thousands):

Right-of-Use Assets	Balance Sheet Classification	September 30, 2020		December 31, 2019
Finance lease right-of-use assets	Property and equipment, net	$	43,663	$	44,370
Operating lease right-of-use assets	Operating lease right-of-use assets		464,596		501,837
Total		$	508,259	$	546,207

Lease Liabilities	Balance Sheet Classification	September 30, 2020		December 31, 2019
Current:
Finance lease liabilities	Other accrued liabilities	$	35,319	$	6,819
Operating lease liabilities	Current portion of operating lease liabilities		30,433		29,140
Noncurrent:
Finance lease liabilities	Other liabilities		14,704		43,662
Operating lease liabilities	Operating lease liabilities		477,355		502,252
Total		$	557,811	$	581,873

Weighted-average remaining lease terms and discount rates were as follows at September 30, 2020 and December 31, 2019:

	September 30, 2020			December 31, 2019
Weighted-average remaining lease term (in years):
Finance	6.3			6.9
Operating		18.7		19.4

Weighted-average discount rate:
Finance		6.4	%		6.4	%
Operating		6.3	%		6.3	%

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Lease Costs

The Company recorded the following lease costs for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Finance lease costs:
Depreciation of leased assets		1,151		1,036		3,336		3,295
Interest of lease liabilities		995		977		2,977		2,973
Total finance lease costs	$	2,146	$	2,013	$	6,313	$	6,268

Operating lease costs		16,616		15,873		49,436		48,639
Variable lease costs		1,311		1,229		4,181		3,159
Short term lease costs		1,407		1,378		3,725		4,308
Other lease costs		1,848		1,654		5,491		4,754
Total rents and leases	$	21,182	$	20,134	$	62,833	$	60,860

Total lease costs	$	23,328	$	22,147	$	69,146	$	67,128

For the three months ended September 30, 2020, the Company recorded a non-cash lease impairment charge of $16.4 million related to the decision to close certain U.K. elderly care facilities.

Other

Undiscounted cash flows for finance and operating leases recorded on the condensed consolidated balance sheets were as follows at September 30, 2020 (in thousands):

	Finance Leases		Operating Leases
For the three months ending December 31, 2020	$	1,963	$	15,765
2021		36,384		60,732
2022		3,481		55,565
2023		2,218		50,870
2024		1,340		48,471
Thereafter		25,090		670,965
Total minimum lease payments		70,476		902,368
Less: amount of lease payments representing interest		20,453		394,580
Present value of future minimum lease payments		50,023		507,788
Less: Current portion of lease liabilities		35,319		30,433
Noncurrent lease liabilities	$	14,704	$	477,355

Supplemental data for the three and nine months ended September 30, 2020 and 2019 was as follows (in thousands):

	Nine Months Ended September 30,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	47,697	$	45,576
Operating cash flows for finance leases	$	2,977	$	2,973
Financing cash flows for finance leases	$	3,151	$	2,701

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	21,560	$	15,623
Finance leases	$	2,896	$	2,457

   September 30, 2017    December 31, 2016
Land
   $ 445,598    $ 411,331
Building and improvements
   2,273,128    2,031,819
Equipment
   377,857    318,020
Construction in progress
   181,029    157,114




   3,277,612    2,918,284
Less accumulated depreciation
   (311,397 )    (214,589 )




Property and equipment, net
   $ 2,966,215    $ 2,703,695

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10.Long-Term Debt

Long-term debt consisted of the following (in thousands):


	September 30, 2017			December 31, 2016			September 30, 2020			December 31, 2019
Amended and Restated Senior Credit Facility:
Senior Secured Term A Loans	$	385,000		$	400,000
Senior Secured Term A Loan							$	325,375		$	346,750
Senior Secured Term B Loans		1,424,538			1,435,450			1,328,440			1,338,928
Senior Secured Revolving Line of Credit		—			—			—			—
6.125% Senior Notes due 2021		150,000			150,000			—			150,000
5.125% Senior Notes due 2022		300,000			300,000			—			300,000
5.625% Senior Notes due 2023		650,000			650,000			650,000			650,000
6.500% Senior Notes due 2024		390,000			390,000			390,000			390,000
9.0% and 9.5% Revenue Bonds		22,175			22,175
5.500% Senior Notes due 2028								450,000			—
Other long-term debt								3,932			4,821
Less: unamortized debt issuance costs, discount and premium		(52,762	)		(59,816	)		(29,646	)		(31,400	)
								3,118,101			3,149,099
		3,268,951			3,287,809
Less: current portion		(34,805	)		(34,805	)		(50,858	)		(43,679	)

Long-term debt	$	3,234,146		$	3,253,004		$	3,067,243		$	3,105,420

Amended and Restated Senior Credit Facility

The Company entered into a senior secured credit facility (the “Senior Secured Credit Facility”) on April 1, 2011. On December 31, 2012, the Company entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) which amended and restated the Senior Secured Credit Facility (the “Amended and Restated Senior Credit Facility”). The Company has amended the Amended and Restated Credit Agreement from time to time as described in the Company’s prior filings with the SEC.

On ~~January 25, 2016,~~February 6, 2019, the Company entered into the ~~Ninth~~Eleventh Amendment (the ~~“Ninth~~“Eleventh Amendment”) to the Amended and Restated Credit Agreement. The ~~Ninth~~Eleventh Amendment, ~~modified certain definitions~~among other things, amended the definition of “Consolidated EBITDA” to remove the cap on non-cash charges, losses and expenses related to the impairment of goodwill, which in turn provided increased flexibility to the Company in terms of ~~its~~the Company’s financial covenants. ~~The Company’s baskets for permitted investments were also increased to provide increased flexibility for it to invest innon-wholly~~ ~~owned subsidiaries, joint ventures and foreign subsidiaries. The Company may now invest innon-wholly~~ owned subsidiaries and joint ventures up to 10.0% of the Company and its subsidiaries’ total assets in any four consecutive fiscal quarter period, and up to 12.5% of the Company and its subsidiaries’ total assets during the term of the Amended and Restated Credit Agreement. The Company may also invest in foreign subsidiaries that are not loan parties up to 10% of the Company and its subsidiaries’ total assets in any consecutive four fiscal quarter period, and up to 15% of the Company and its subsidiaries’ total assets during the term of the Amended and Restated Credit Agreement. The foregoing permitted investments are subject to an aggregate cap of 25% of the Company and its subsidiaries’ total assets in any fiscal year.

On February ~~16, 2016,~~27, 2019, the Company entered into ~~a Second Incremental Facility~~the Twelfth Amendment (the ~~“Second Incremental~~“Twelfth Amendment”) to the Amended and Restated Credit Agreement. The ~~Second Incremental~~Twelfth Amendment, ~~activated a new $955.0 million incremental Term Loan B facility (the “New TLB Facility”)~~among other things, modified certain definitions, including “Consolidated EBITDA”, and ~~added $135.0 million~~increased our permitted Maximum Consolidated Leverage Ratio, thereby providing increased flexibility to the Term Loan A facility (the “TLA Facility”) to the Amended and Restated Senior Credit Facility, subject to limited conditionality provisions. Borrowings under the New TLB Facility were used to fund a portionCompany in terms of the purchase price for the acquisition of Priory and the fees and expenses for such acquisition and the related financing transactions. Borrowings under the TLA Facility were used to pay down the majority of our $300.0 million revolving credit facility.Company’s financial covenants.

On ~~May 26, 2016,~~April 21, 2020, the Company entered into ~~a TrancheB-1~~ ~~Repricing~~the Thirteenth Amendment (the ~~“TrancheB-1~~ ~~Repricing~~“Thirteenth Amendment”) to the Amended and Restated Credit Agreement. The ~~TrancheB-1~~ ~~Repricing~~Thirteenth Amendment ~~reduced~~amended the ~~Applicable Rate with respect to the $500.0 million incremental Term Loan B facility (the “Existing TLB Facility”) from 3.5% to 3.0%~~Consolidated Leverage Ratio in the ~~case of Eurodollar Rate loans and 2.5%~~existing covenant to ~~2.0% in~~increase the ~~case of Base Rate Loans.~~

~~On September 21, 2016, the Company entered into a TrancheB-2~~ ~~Repricing Amendment (the “TrancheB-2~~ ~~Repricing Amendment”) to the Amended and Restated Credit Agreement. The TrancheB-2~~ Repricing Amendment reduced the Applicable Rate with respect to the New TLB Facility from 3.75% to 3.0% in the case of Eurodollar Rate loans and 2.75% to 2.0% in the case of Base Rate Loans. In connection with the Tranche~~B-2~~ ~~Repricing Amendment, the Company recorded a debt extinguishment charge of $3.4 million, including the discount andwrite-off~~ ~~of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.~~

On November 22, 2016, the Company entered into a Tenth Amendment (the “Tenth Amendment”) to the Amended and Restated Credit Agreement. The Tenth Amendment, among other things, (i) amended the negative covenant regarding dispositions, (ii) modified the collateral package to release any real property with a fair market value of less than $5.0 million and (iii) changed certain investment, indebtedness and lien baskets.

On November 30, 2016, the Company entered into a Refinancing Facilities Amendment (the “Refinancing Amendment”) to the Amended and Restated Credit Agreement. The Refinancing Amendment increased the Company’s line of credit on its revolving credit facility to $500.0 million from $300.0 million and reduced its TLA Facility to $400.0 million from $600.6 million (together, the “Refinancing Facilities”). In addition, the Refinancing Amendment extended the maturity dateleverage ratio for the ~~Refinancing Facilities to November 30, 2021 from February 13, 2019, and lowered the Company’s effective interest rate on the line~~rest of credit on its revolving credit facility and TLA Facility by 50 basis points. In connection with the Refinancing Amendment, the Company recorded a debt extinguishment charge of $0.8 million, including the~~write-off~~ ~~of deferred financing costs, which was recorded in debt extinguishment in the condensed consolidated statements of operations.~~

On May 10, 2017, the Company entered into a Third Repricing Amendment (the “Third Repricing Amendment”) to the Amended and Restated Credit Agreement. The Third Repricing Amendment reduced the Applicable Rate with respect to the Existing TLB Facility and the New TLB Facility from 3.0% to 2.75% in the case of Eurodollar Rate loans and from 2.0% to 1.75% in the case of Base Rate Loans. In connection with the Third Repricing Amendment, the Company recorded a debt extinguishment charge of $0.8 million, including the discount and~~write-off~~ ~~of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.~~2020.

The Company had ~~$493.5~~$485.9 million of availability under the revolving line of credit and had standby letters of credit outstanding of ~~$6.5~~$14.1 million related to security for the payment of claims required by its workers’ compensation insurance program ~~as of~~at September 30, ~~2017.~~2020. In early April 2020, the Company borrowed $100.0 million on the revolving line of credit to enhance its cash position in response to the potential impact of COVID-19 on the Company’s future liquidity and subsequently repaid this amount in late May 2020. Borrowings under the revolving line of credit are subject to customary conditions precedent to borrowing.

The Amended and Restated Credit Agreement requires quarterly term loan principal repayments of our Term Loan A facility (“TLA ~~Facility~~Facility”) of ~~$5.0~~$7.1 million for ~~September 30, 2017 to December 31, 2019, $7.5 million for March 31, 2020 to~~ December 31, 2020, and ~~$10.0~~$9.5 million for March 31, 2021 to September 30, 2021, with the remaining principal balance of the TLA Facility due on the maturity date of November 30, 2021. The Company is required to repay the ~~Existing TLB Facility~~Term Loan B facility Tranche B-3 (the “Tranche B-3 Facility”) in equal quarterly installments of ~~$1.3~~$1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the ~~Existing TLB~~Tranche B-3 Facility of $447.3 million due on February 11, 2022. The Company is required to repay the ~~New TLB Facility~~Term Loan B facility Tranche B-4 (the “Tranche B-4

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Facility”) in equal quarterly installments of approximately ~~$2.4~~$2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the ~~TLB~~Tranche B-4 Facility of $854.4 million due on February 16, 2023.

Borrowings under the Amended and Restated Senior Credit Facility are guaranteed by each of the Company’s wholly-owned domestic subsidiaries (other than certain excluded subsidiaries) and are secured by a lien on substantially all of the assets of the Company and such subsidiaries. Borrowings with respect to the TLA Facility and the Company’s revolving credit facility (collectively, “Pro Rata Facilities”) under the Amended and Restated Credit Agreement bear interest at a rate tied to the Company’s Consolidated Leverage Ratio (defined as consolidated funded debt net of up to ~~$40.0~~$50.0 million of unrestricted and unencumbered cash to consolidated ~~EBITDA, in each case as defined in the Amended and Restated Credit Agreement)~~EBITDA). The Applicable Rate ~~(as defined in the Amended and Restated Credit Agreement)~~ for the Pro Rata Facilities was ~~2.75%~~2.50% for Eurodollar Rate Loans ~~(as defined in the Amended~~ and ~~Restated Credit Agreement) and 1.75%~~1.50% for Base Rate Loans ~~(as defined in the Amended and Restated Credit Agreement)~~ at September 30, ~~2017.~~2020. Eurodollar Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the Eurodollar Rate ~~(as defined in the Amended and Restated Credit Agreement)~~ (based upon the LIBOR Rate ~~(as defined in the Amended and Restated Credit Agreement)~~ prior to commencement of the interest rate period). Base Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus ~~1.0%~~1.00%. ~~As of~~At September 30, ~~2017,~~2020, the Pro Rata Facilities bore interest at a rate of LIBOR plus ~~2.75%~~2.50%. In addition, the Company is required to pay a commitment fee on undrawn amounts under the revolving line of credit.

Borrowings with respect to the Tranche B-3 Facility bear interest as follows: Eurodollar Rate loans bear interest at the Tranche B-3 Facility Applicable Rate (as defined below) plus the Eurodollar Rate (based upon the LIBOR Rate prior to commencement of the interest rate period). Base Rate Loans bear interest at the Tranche B-3 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Tranche B-3 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%. The Tranche B-4 Facility bears interest as follows: Eurodollar Rate Loans bear interest at the Tranche B-4 Facility Applicable Rate (as defined below) plus the Eurodollar Rate (based upon the LIBOR Rate prior to commencement of the interest rate period) and Base Rate Loans bear interest at the Tranche B-4 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term “Tranche B-4 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%. At September 30, 2020, the Tranche B-3 Facility and the Tranche B-4 Facility bore interest at a rate of LIBOR plus 2.50%.

The Amended and Restated Credit Agreement requires the Company and its subsidiaries to comply with customary affirmative, negative and financial covenants, including a fixed charge coverage ratio, consolidated leverage ratio and senior secured leverage ratio. The Company may be required to pay all of its indebtedness immediately if it defaults on any of the numerous financial or other restrictive covenants contained in any of its material debt agreements. ~~As of~~At September 30, ~~2017,~~2020, the Company was in compliance with such covenants.

Senior Notes

6.125% Senior Notes due 2021

On March 12, 2013, the Company issued $150.0 million of 6.125% Senior Notes due 2021 (the “6.125% Senior Notes”). The 6.125% Senior Notes mature on March 15, 2021 and bear interest at a rate of 6.125% per annum, payable semi-annually in arrears on March 15 and September 15 of each year.

5.125% Senior Notes due 2022

On July 1, 2014, the Company issued $300.0 million of 5.125% Senior Notes due 2022 (the “5.125% Senior Notes”). The 5.125% Senior Notes mature on July 1, 2022 and bear interest at a rate of 5.125% per annum, payable semi-annually in arrears on January 1 and July 1 of each year.

Redemption of 6.125% Senior Notes and 5.125% Senior Notes

On June 10, 2020, the Company issued conditional notices of full redemption providing for the redemption in full of the 6.125% Senior Notes and 5.125% Senior Notes on July 10, 2020 (the “Redemption Date”), in each case at a redemption price equal to 100.0% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including the Redemption Date (the “Redemption Price”). On June 24, 2020, the Company satisfied and discharged the indentures governing the 6.125% Senior Notes and the 5.125% Senior Notes by irrevocably depositing with a trustee sufficient funds equal to the Redemption Price for the 6.125% Senior Notes and the 5.125% Senior Notes and otherwise complying with the terms in the indentures relating to the satisfaction and discharge of the 6.125% Senior Notes and the 5.125% Senior Notes. In connection with the redemption of the 6.125% Senior Notes and the 5.125% Senior Notes, the Company recorded a debt extinguishment charge of $3.3 million, including the write-off of the deferred financing and other costs in the condensed consolidated statements of income.

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5.625% Senior Notes due 2023

On February 11, 2015, the Company issued $375.0 million of 5.625% Senior Notes due 2023 (the “5.625% Senior Notes”). On September 21, 2015, the Company issued $275.0 million of 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, the Company has outstanding an aggregate of $650.0 million of 5.625% Senior Notes. The 5.625% Senior Notes mature on February 15, 2023 and bear interest at a rate of 5.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year.

6.500% Senior Notes due 2024

On February 16, 2016, the Company issued $390.0 million of 6.500% Senior Notes due 2024 (the “6.500% Senior Notes”). The 6.500% Senior Notes mature on March 1, 2024 and bear interest at a rate of 6.500% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2016.

5.500% Senior Notes due 2028

On June 24, 2020, the Company issued $450.0 million of 5.500% Senior Notes due 2028 (the “5.500% Senior Notes”). The 5.500% Senior Notes mature on July 1, 2028 and bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021.

The indentures governing the ~~6.125% Senior Notes, 5.125% Senior Notes,~~ 5.625% Senior Notes, 6.500% Senior Notes and ~~6.500%~~5.500% Senior Notes (together, the “Senior Notes”) contain covenants that, among other things, limit the Company’s ability and the ability of its 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 the Company’s assets; and (vii) create liens on assets.

The Senior Notes issued by the Company are guaranteed by each of the Company’s subsidiaries that guarantee the Company’s obligations under the Amended and Restated Senior Credit Facility. The guarantees are full and unconditional and joint and several.

The Company may redeem the Senior Notes at its option, in whole or part, at the dates and amounts set forth in the indentures.

11.	Equity-Based Compensation

~~9.0% and 9.5% Revenue Bonds~~

On November 11, 2012, in connection with the acquisition of The Pavilion at HealthPark, LLC (“Park Royal”), the Company assumed debt of $23.0 million. The fair market value of the debt assumed was $25.6 million and resulted in a debt premium balance being recorded as of the acquisition date. The debt consisted of $7.5 million and $15.5 million of Lee County (Florida) Industrial Development Authority Healthcare Facilities Revenue Bonds, Series 2010 with stated interest rates of 9.0% and 9.5% (“9.0% and 9.5% Revenue Bonds”), respectively. The 9.0% bonds in the amount of $7.5 million have a maturity date of December 1, 2030 and require yearly principal payments beginning in 2013. The 9.5% bonds in the amount of $15.5 million have a maturity date of December 1, 2040 and require yearly principal payments beginning in 2031. The principal payments establish a bond sinking fund to be held with the trustee and shall be sufficient to redeem the principal amounts of the 9.0% and 9.5% Revenue Bonds on their respective maturity dates. As of September 30, 2017 and December 31, 2016, $2.3 million was recorded within other assets on the condensed consolidated balance sheets related to the debt service reserve fund requirements. The yearly principal payments, which establish a bond sinking fund, will increase the debt service reserve fund requirements. The bond premium amount of $2.6 million is amortized as a reduction of interest expense over the life of the revenue bonds using the effective interest method.

~~8. Equity Offerings~~

~~Common Stock~~

On March 3, 2016, the Company held a Special Meeting of Stockholders, where the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock from 90,000,000 to 180,000,000 (the “Amendment”). On March 3, 2016, the Company filed the Amendment with the Secretary of State of the State of Delaware.

~~Equity Offerings~~

On January 12, 2016, the Company completed the offering of 11,500,000 shares of common stock (including shares sold pursuant to the exercise of the over-allotment option that the Company granted to the underwriters as part of the offering) at a price of $61.00 per share. The net proceeds to the Company from the sale of the shares, after deducting the underwriting discount of $15.8 million and additional offering-related costs of $0.7 million, were $685.0 million. The Company used the net offering proceeds to fund a portion of the purchase price for the acquisition of Priory.

On February 16, 2016, the Company completed its acquisition of Priory for a total purchase price of approximately $2.2 billion, including total cash consideration of approximately $1.9 billion and the issuance of 4,033,561 shares of common stock.

~~9. Equity-Based Compensation~~

Equity Incentive Plans

The Company issues stock-based awards, including stock options, restricted stock and restricted stock units, to certain officers, employees andnon-employee directors under the Acadia Healthcare Company, Inc. Incentive Compensation Plan (the “Equity Incentive Plan”). ~~As of~~At September 30, ~~2017,~~2020, a maximum of 8,200,000 shares of the Company’s common stock were authorized for issuance as stock options, restricted stock and restricted stock units or other share-based compensation under the Equity Incentive Plan, of which ~~4,490,249~~1,067,730 were available for future grant. Stock options may be granted for terms of up to ten years. The Company recognizes expense on all share-based awards on a straight-line basis over the requisite service period of the entire award. Grants to employees generally vest in annual increments of 25% each year, commencing one year after the date of grant. The exercise prices of stock options are equal to the most recent closing price of the Company’s common stock on the most recent trading date prior to the date of grant.

The Company recognized ~~$4.2~~$5.5 million and ~~$7.1~~$4.0 million in equity-based compensation expense for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively and ~~$19.0~~$16.3 million and ~~$21.0~~$14.3 million for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively. ~~As of~~At September 30, ~~2017,~~2020, there was ~~$50.3~~$41.8 million of unrecognized compensation expense related to unvested options, restricted stock and restricted stock units, which is expected to be recognized over the remaining weighted average vesting period of ~~1.2~~1.3 years. ~~As of~~

At September 30, ~~2017,~~2020, there were no0 warrants ~~outstanding.~~outstanding and exercisable. The Company recognized a deferred income tax benefit of ~~$1.5~~$1.4 million and ~~$2.9~~$1.3 million for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, related to equity-based compensation expense. The Company recognized a deferred income tax benefit of ~~$7.3~~$4.3 million and ~~$8.3~~$4.1 million for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, related to equity-based compensation expense.

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Stock Options

Stock option activity during ~~2016~~2019 and ~~2017 was as follows (aggregate intrinsic value in thousands):~~

   Number
of
Options    Weighted
Average
Exercise Price    Weighted
Average
Remaining
Contractual
Term (in years)    Aggregate
Intrinsic
Value
Options outstanding at January 1, 2016
   694,743    $ 42.87    7.70    $ 20,717
Options granted
   503,850    57.98    9.28    297
Options exercised
   (57,397 )    31.92    N/A    1,530
Options cancelled
   (140,250 )    57.13    N/A    N/A








Options outstanding at December 31, 2016
   1,000,946    49.42    7.80    8,166
Options granted
   236,600    43.11    9.49    382
Options exercised
   (81,992 )    26.48    N/A    1,528
Options cancelled
   (173,988 )    54.73    N/A    N/A








Options outstanding at September 30, 2017
   981,566    $ 47.47    7.63    $ 4,648








Options exercisable at December 31, 2016
   288,959    $ 42.81    6.22    $ 6,111








Options exercisable at September 30, 2017
   407,571    $ 41.02    6.20    $ 4,172

~~Restricted stock activity during 2016 and 2017~~2020 was as follows:

   Number of
Shares    Weighted
Average
Grant-Date
Fair Value
Unvested at January 1, 2016
   944,562    $ 52.74
Granted
   387,347    55.38
Cancelled
   (122,178 )    57.02
Vested
   (365,312 )    47.18




Unvested at December 31, 2016
   844,419    $ 55.76
Granted
   371,924    43.22
Cancelled
   (124,743 )    55.42
Vested
   (275,294 )    53.78




Unvested at September 30, 2017
   816,306    $ 50.77

~~Restricted stock unit activity during 2016 and 2017 was as follows:~~

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Options outstanding at January 1, 2019		1,199,540		$	44.64		7.26	$	2,717
Options granted		605,200			28.50		9.21		1,343
Options exercised		(55,671	)		19.05	N/A			658
Options cancelled		(389,001	)		40.84	N/A		N/A
Options outstanding at December 31, 2019		1,360,068			39.40		7.57		1,650
Options granted		488,000			33.12		9.45		29
Options exercised		(12,400	)		28.25	N/A			34
Options cancelled		(228,537	)		40.46	N/A		N/A
Options outstanding at September 30, 2020		1,607,131		$	37.42		7.55	$	407
Options exercisable at December 31, 2019		513,290		$	48.08		5.88	$	512
Options exercisable at September 30, 2020		660,031		$	44.19		5.85	$	382

   Number of
Units    Weighted
Average
Grant-Date
Fair Value
Unvested at January 1, 2016
   218,084    $ 56.97
Granted
   230,750    56.95
Cancelled
   —      —
Vested
   (175,235 )    52.71




Unvested at December 31, 2016
   273,599    $ 59.68
Granted
   219,840    43.23
Cancelled
   —      —
Vested
   (132,530 )    58.67




Unvested at September 30, 2017
   360,909    $ 50.04

~~The grant-date fair value of the Company’s stock options is~~Fair values are estimated using the Black-Scholes option pricing model. The following table summarizes the grant-date fair value of options and the assumptions used to develop the fair value estimates for options granted during the nine months ended September 30, ~~2017~~2020 and year ended December 31, ~~2016:~~2019:

	September 30, 2020			December 31, 2019
Weighted average grant-date fair value of options	$	12.26		$	17.59
Risk-free interest rate		1.6	%		2.4	%
Expected volatility		40	%		38	%
Expected life (in years)		5.0			5.0

   September 30, 2017 December 31, 2016
Weighted average grant-date fair value of options
   $ 14.67 $ 18.96
Risk-free interest rate
   2.0 % 1.4 %
Expected volatility
   33 % 33 %
Expected life (in years)
   5.5 5.5

The Company’s estimate of expected volatility for stock options is based upon the volatility of ~~guideline companies given~~our stock price over the ~~lack of sufficient historical trading experience~~expected life of the ~~Company’s common stock.~~award. The risk-free interest rate is the approximate yield on ~~U. S.~~U.S. Treasury Strips having a life equal to the expected option life on the date of grant. The expected life is an estimate of the number of years an option will be held before it is exercised.

~~10. Income Taxes~~Other Stock-Based Awards

Restricted stock activity during 2019 and 2020 was as follows:

	Number of Shares			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2019		805,057		$	42.40
Granted		700,937			28.77
Cancelled		(389,684	)		33.50
Vested		(311,174	)		44.23
Unvested at December 31, 2019		805,136		$	34.14
Granted		601,519			25.40
Cancelled		(103,958	)		34.93
Vested		(235,437	)		37.02
Unvested at September 30, 2020		1,067,260		$	28.50

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Restricted stock unit activity during 2019 and 2020 was as follows:

	Number of Units			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2019		484,111		$	44.52
Granted		234,408			34.54
Cancelled		(271,162	)		45.17
Vested		—			—
Unvested at December 31, 2019		447,357		$	38.89
Granted		583,680			10.60
Cancelled		(10,123	)		42.09
Vested		(12,691	)		42.09
Unvested at September 30, 2020		1,008,223		$	22.44

Restricted stock awards are time-based vesting awards that vest over a period of three or four years and are subject to continuing service of the employee or non-employee director over the ratable vesting periods. The fair values of the restricted stock awards were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

Restricted stock units are granted to employees and are subject to Company performance compared to pre-established targets and Company performance compared to peers. In addition to Company performance, these performance-based restricted stock units are subject to the continuing service of the employee during the two- or three-year period covered by the awards. The performance condition for the restricted stock units is based on the Company’s achievement of annually established targets for diluted earnings per share. Additionally, the number of shares issuable pursuant to restricted stock units granted during 2020 and 2019 are subject to adjustment based on the Company’s three-year annualized total stockholder return relative to a peer group consisting of S&P 1500 companies within the Healthcare Providers & Services 6 digit GICS industry group and selected other companies deemed to be peers. The number of shares issuable at the end of the applicable vesting period of restricted stock units ranges from 0% to 200% of the targeted units based on the Company’s actual performance compared to the targets and, for 2020 and 2019 awards, performance compared to peers.

The ~~Company adopted ASU2016-09~~ asfair values of January 1, 2017, which changes how the Company accounts for share-based awards for tax purposes. Income tax effects of share-based awards are now recognized in the income statement, instead of through equity, when the awards vest.

~~Excess tax benefits/deficiencies are generated when the deduction for tax purposes is greater/less than the compensation cost for financial reporting purposes. Upon adoption of ASU2016-09,~~ ~~the Company no longer records excess tax benefits/deficiencies in additionalpaid-in~~ ~~capital as a component of equity. Instead, excess tax benefits/deficiencies are included in the provision for income taxes~~restricted stock units were determined based on the ~~condensed consolidated statements~~closing price of ~~operations. These changes are recorded prospectively as of January 1, 2017, which resulted in an increase in our income tax provision of $1.7 million, or an increase in~~ the effective tax rate of 1.0%, for the nine months ended September 30, 2017. Prior periods have not been adjusted. An adjustment for prior period excess tax benefits of $8.6 million is recorded as a cumulative-effect adjustment in retained earnings at September 30, 2017 as the Company adopted this amendment using the modified transition method. Excess tax benefits were previously required to be included in financing activitiesCompany’s common stock on the ~~condensed consolidated statement of cash flows and are now required to be included in operating activities. The changes~~trading date immediately prior to the ~~condensed consolidated statement of cash flows are recorded prospectively as of January 1, 2017. Additionally, the Company has elected not~~grant date for units subject to ~~adjust~~performance conditions, or at its ~~policy on accounting~~Monte-Carlo simulation value for ~~forfeitures and will continue~~units subject to ~~estimate forfeiture rates.~~market conditions.

12.	Income Taxes

The provision for income taxes for the three months ended September 30, ~~2017~~2020 and ~~2016~~2019 reflects effective tax rates of ~~26.0%~~16.0% and ~~(2.1)%~~13.8%, respectively. The increase in the effective tax rate for the three months ended September 30, 2020 was primarily attributable to the September 30, 2019 taxable gain on the foreign currency derivatives settlement in August 2019, which allowed the Company to deduct more interest and reduce a portion of a valuation allowance on deferred tax assets. The three months ended September 30, 2020 benefits from the CARES Act related to net operating loss carrybacks were partially offset by a statutory rate increase in the U.K.

The provision for income taxes for the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 reflects effective tax rates of ~~26.3%~~15.7% and ~~(292.8)%~~17.6%, respectively. The ~~increase~~decrease in the effective tax rate for the ~~three and nine months ended September 30, 2017 was~~current year is primarily attributable to ~~the disparity~~changes in the ~~accounting treatment and~~Company’s valuation allowance related to a decrease in the deferred tax ~~treatment of the U.K. Divestiture, the reduction in ongoing U.K. earnings~~asset on carried forward interest that is deductible as a result of the ~~U.K. Divestiture,~~CARES Act interest deductibility changes and technical corrections to tax depreciation methods for qualified improvement property that resulted in a net operating loss generated during 2019. This net operating loss, per the CARES Act, can be carried back at a 21% tax rate to recover taxes paid at a 35% tax rate.

As we continue to monitor tax implications of the CARES Act and other state, federal and foreign stimulus and tax legislation, we may make adjustments to our estimates and record additional amounts for tax assets and liabilities. Additionally, market disruption due to COVID-19 may affect the Company’s ability to realize our deferred tax assets. Any adjustments to our tax assets and liabilities could materially impact our provision for income taxes and our effective tax rate in the ~~foreign exchange rate between U.S. dollars (“USD”) and British pounds (“GBP”) and the adoption of ASU2016-09.~~periods in which they are made.

~~11. Derivative Instruments~~

13.	Derivatives

The Company ~~entered~~periodically enters into foreign currency forward contracts ~~during the nine months ended September 30, 2017 and the three and nine months ended 2016~~ in connection with ~~(i) acquisitions in the U.K. and (ii)~~certain transfers of cash between the U.S. and U.K. under the Company’s cash management and foreign currency risk management programs. Foreign currency forward

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contracts limit the economic risk of changes in the exchange rate between ~~USD~~U.S. Dollars (“USD”) and ~~GBP~~British Pounds (“GBP”) associated with cash transfers.

The foreign currency forward contracts entered into during the three and nine months ended September 30, 2016 resulted in gains of $15 thousand and $0.5 million, respectively, which have been recorded in the condensed consolidated statements of operations.

In May 2016, the Company entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency risk by effectively converting a portion of its fixed-rateUSD-denominated senior notes, including the semi-annual interest payments thereafter, to fixed-rate GBP-denominated debt of £449.3 million. In August 2019, the Company terminated its existing net investment cross currency swap derivatives of $105.0 million. Cash received from the termination of the cross currency swap derivatives was included in investing activities in the condensed consolidated statement of cash flows. The related gain from this termination was included in accumulated other comprehensive loss in accordance with ASC 815-30-40-1.

In August 2019, the Company also entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency risk by effectively converting a portion of its fixed-rate USD-denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rateGBP-denominated debt of ~~£449.3~~£538.1 million. The senior notes effectively converted include $150.0 million aggregate principal amount of 6.125% Senior Notes, $300.0 million aggregate principal amount of 5.125% Senior Notes and $200.0 million aggregate principal amount of 5.625% Senior Notes. During the term of the swap agreements, the Company will receive semi-annual interest payments in USD from the counterparties at fixed interest rates, and the Company will make semi-annual interest payments in GBP to the counterparties at fixed interest rates. The interest payments under the cross-currency swap agreements result in ~~£24.7~~£25.4 million of annual cash flows from the Company’s U.K. business being converted to $35.8 ~~million (at a 1.45 exchange rate). The interest rates applicable to the GBP interest payments are substantially the same as the interest rates in place for the existingUSD-denominated~~ ~~debt. At maturity, the Company will repay the principal amounts listed above in GBP and receive the principal amount in USD.~~million.

The Company has designated the cross currency swap agreements and ~~certain~~ forward contracts entered into during ~~2016~~2019 and the ~~three and~~ nine months ended September 30, ~~2017~~2020 as qualifying hedging instruments and is accounting for these derivatives as net investment hedges. The fair ~~value~~values of these derivatives at September 30, 2020 and December 31, 2019 of ~~$26.2~~$39.9 million isand $68.9 million, respectively, are recorded as derivative ~~instruments on~~instrument liabilities in the condensed consolidated balance sheets. ~~The gains~~During 2019, the Company elected the spot method for recording its net investment hedges. Gains and losses resulting from the settlement of the excluded components are recorded in interest expense on the condensed consolidated statements of income. Gains and losses resulting from fair value adjustments to ~~these derivatives~~the cross currency swap agreements are recorded in accumulated other comprehensive loss as the swaps are effective in hedging the designated risk. Cash flows related to ~~these~~the cross currency swap derivatives are included in operating activities in the condensed consolidated statements of cash flows.

14.	~~12.~~ Fair Value Measurements

The carrying amounts reported for cash and cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value because of the short-term maturity of these instruments.

The carrying amounts and fair values of the Company’s Amended and Restated Senior Credit Facility, 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes, 6.500% Senior Notes, ~~9.0%~~5.500% Senior Notes, other long-term debt and ~~9.5% Revenue Bonds,~~ derivative instruments ~~and contingent consideration liabilities as of~~at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 were as follows (in thousands):


	Carrying Amount				Fair Value				Carrying Amount				Fair Value
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Amended and Restated Senior Credit Facility	$	1,778,798	$	1,799,993	$	1,778,798	$	1,799,993	$	1,640,521	$	1,668,062	$	1,640,521	$	1,668,062
6.125% Senior Notes due 2021	$	147,964	$	147,574	$	152,359	$	152,186	$	—	$	149,254	$	—	$	149,441
5.125% Senior Notes due 2022	$	295,988	$	295,442	$	306,466	$	293,595	$	—	$	297,761	$	—	$	299,994
5.625% Senior Notes due 2023	$	641,554	$	640,574	$	673,632	$	640,574	$	645,942	$	644,771	$	650,011	$	655,249
6.500% Senior Notes due 2024	$	381,998	$	381,268	$	410,170	$	389,847	$	385,326	$	384,430	$	395,460	$	398,366
9.0% and 9.5% Revenue Bonds	$	22,648	$	22,959	$	22,648	$	22,959
Derivative instruments	$	26,176	$	73,509	$	26,176	$	73,509
Contingent consideration liabilities	$	—	$	107	$	—	$	107
5.500% Senior Notes due 2028									$	442,380	$	—	$	454,988	$	—
Other long-term debt									$	3,932	$	4,821	$	3,932	$	4,821
Derivative instrument liabilities									$	39,859	$	68,915	$	39,859	$	68,915

The Company’s Amended and Restated Senior Credit Facility, 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes, 6.500% Senior Notes, 5.500% Senior Notes and ~~9.0% and 9.5% Revenue Bonds~~other long-term debt were categorized as Level 2 in the GAAP fair value hierarchy. Fair values were based on trading activity among the Company’s lenders and the average bid and ask price as determined using published rates.

The fair values of the derivative instruments were categorized as Level 2 in the GAAP fair value hierarchy and were based on observable market inputs including applicable exchange rates and interest rates.

~~The fair value~~

Table of the contingent consideration liabilities were categorized as Level 3 in the GAAP fair value hierarchy. The contingent consideration liabilities were valued using a probability-weighted discounted cash flow method. This analysis reflected the contractual terms of the purchase agreements and utilized assumptions with regard to future earnings, probabilities of achieving such future earnings and a discount rate.contents

~~13. Commitments and Contingencies~~

15.	Commitments and Contingencies

Professional and General Liability

A portion of the Company’s professional liability risks isare insured through a wholly-owned insurance subsidiary. The ~~Company’s wholly-owned insurance subsidiary insures the~~ Company is self-insured for professional liability ~~losses~~claims up to ~~$78.0~~$3.0 million per claim and has obtained reinsurance coverage from a third party to cover claims in excess of the retention limit. The reinsurance policy has a coverage limit of $75.0 million in the aggregate. The Company’s reinsurance receivables are recognized consistent with the related liabilities and include known claims and any incurred but not reported claims that are covered by current insurance ~~subsidiary has obtained reinsurance with unrelated commercial insurers for professional liability risks of $75.0 million~~policies in ~~excess of a retention level of $3.0 million.~~place.

Legal Proceedings

The Company is, from time to time, subject to various claims, lawsuits, governmental investigations and regulatory actions, ~~that arise in the ordinary course of the Company’s business,~~ including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employment related claims. In these actions, plaintiffs request a variety of damages, including, in some instances, punitive and other types of damages that may not be covered by insurance. In addition, healthcare companies are subject to numerous investigations by various governmental agencies. Certain of the ~~opinion~~Company’s individual facilities have received, and from time to time, other facilities may receive, subpoenas, civil investigative demands, audit requests and other inquiries from, and may be subject to investigation by, federal and state agencies. These investigations can result in repayment obligations, and violations of ~~management,~~the False Claims Act can result in substantial monetary penalties and fines, the imposition of a corporate integrity agreement and exclusion from participation in governmental health programs. In addition, the federal False Claims Act permits private parties to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions.

On April 1, 2019, a consolidated complaint was filed against the Company ~~is not currently a party to any proceeding that would individually or~~and certain former and current officers in the ~~aggregate~~lawsuit styled St. Clair County Employees’ Retirement System v. Acadia Healthcare Company, Inc., et al., Case No. 3:19-cv-00988, which is pending in the United States District Court for the Middle District of Tennessee. The complaint purports to be brought on behalf of a class consisting of all persons (other than defendants) who purchased securities of the Company between April 30, 2014 and November 15, 2018, and alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. At this time, we are not able to quantify any potential liability in connection with this litigation because the case is in its early stages.

On February 21, 2019, a purported stockholder filed a related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Davydov v. Joey A. Jacobs, et al., Case No. 3:19-cv-00167, which is pending in the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Section 10(b) and 14(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. On May 23, 2019, a purported stockholder filed a second related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Beard v. Jacobs, et al., Case No. 3:19-cv-0441, which is pending the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Sections 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duty, waste of corporate assets, unjust enrichment, and insider selling. On June 11, 2019, the Davydov and Beard actions were consolidated and ordered stayed pending a ruling on the motion to dismiss that was filed in the St. Clair County v. Acadia Healthcare case described above. On October 23, 2020, a purported stockholder filed a third related derivation action on behalf of the Company against former and current officers and directors in the lawsuit styled Pfenning v. Jacobs, et al., which is pending in the Court of Chancery of the State of Delaware. The complaint alleges claims for breach of fiduciary duty. At this time, we are not able to quantify any potential liability in connection with this litigation because the cases are in their early stages.

On April 25, 2018, plaintiff filed Pence v. Sober Living By the Sea, Inc. - 30-2018-00988742-CU-OE-CXC, Orange County Superior Court (Pence I). On July 13, 2018, plaintiff next filed Pence v. Sober Living by the Sea, Inc.; Acadia Healthcare Company, Inc. - 30-2018-01005317-CU-OE-CJC, Orange County Superior Court (Pence II). These cases have now been consolidated before the same judge in the Complex Litigation Department of the Orange County Superior Court. The complaints allege various wage and hour violations under California law on behalf of a ~~material adverse effect~~putative class of all non-exempt California employees of Acadia and various subsidiaries, going back to April 25, 2014, and on behalf of purportedly aggrieved non-exempt employees under California’s Private Attorney General Act (“PAGA”). The claims include (1) failure to provide overtime wages; (2); failure to provide minimum wages; (3) failure to provide meal periods; (4) failure to provide rest periods; (5); failure to pay wages due at termination; (6) failure to provide accurate wage statements; (7) violations of California Business and Professions Code section 17200; and (8) civil penalties under California Labor Code section 2699 (PAGA). During the second quarter of 2020, the Company recorded approximately $4.0 million to transaction-related expenses in the consolidated statements of income based on the Company’s ~~business, financial condition or results~~expected settlement and legal fees.

In the fall of ~~operations.~~

2017, the Office of Inspector General issued subpoenas to three of the Company’s facilities requesting certain documents from January 2013 to the date of the subpoenas. The U.S. Attorney’s Office for the Middle District of Florida issued a civil

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investigative demand to one of the Company’s facilities in December 2017 requesting certain documents from November 2012 to the date of the demand. In April 2019, the Office of Inspector General issued subpoenas relating to six additional facilities requesting certain documents and information from January 2013 to the date of the subpoenas. The government’s investigation of each of these facilities is focused on claims not eligible for payment because of alleged violations of certain regulatory requirements relating to, among other things, medical necessity, admission eligibility, discharge decisions, length of stay and patient care issues. The Company is cooperating with the government’s investigation but is not able to quantify any potential liability in connection with these investigations.

16.	Noncontrolling Interests

Noncontrolling interests in the consolidated financial statements represents the portion of equity held by noncontrolling partners in the Company’s non-wholly owned ~~subsidiaries the Company controls.~~subsidiaries. At September 30, ~~2017, certain of these~~2020, the Company operated 6 facilities through non-wholly owned ~~subsidiaries operated two facilities.~~subsidiaries. The Company owns between 60% and ~~75%~~86% of the equity interests ~~in the entity that owns each facility,~~of these entities and noncontrolling partners own the remaining equity interests. The initial value of the noncontrolling interests is based on the fair value of contributions, and the Company consolidates the operations of each facility based on its equity ownership and its control of the entity. The noncontrolling interests are reflected as redeemable noncontrolling interests on the accompanying condensed consolidated balance sheets based on put rights that could require the Company to purchase the noncontrolling interests upon the occurrence of a change in control.

~~15. Other Current Assets~~The components of redeemable noncontrolling interests are as follows (in thousands):

Balance at December 31, 2019	$	33,151
Contribution of redeemable noncontrolling interests		20,247
Net income attributable to noncontrolling interests		1,802
Dividend payments to noncontrolling interests		(653	)
Balance at September 30, 2020	$	54,547

17.	Other Current Assets

Other current assets consisted of the following (in thousands):

					September 30, 2020		December 31, 2019
	September 30, 2017		December 31, 2016
Prepaid expenses					$	29,785	$	23,708
Other receivables	$	30,910	$	44,975		14,020		16,097
Prepaid expenses		28,874		27,455
Income taxes receivable						12,686		5,579
Workers’ compensation deposits – current portion		10,000		10,000		10,000		10,000
Income taxes receivable		9,472		11,714
Insurance receivable-current portion		6,472		6,472
Cost report receivable						9,292		13,723
Inventory		4,698		4,633		5,092		4,759
Insurance receivable – current portion						1,831		3,030
Other		1,981		2,288		1,771		1,348

Other current assets	$	92,407	$	107,537	$	84,477	$	78,244

~~16. Other Accrued Liabilities~~

Table of contents

18.	Other Accrued Liabilities

Other accrued liabilities consisted of the following (in thousands):


	September 30, 2017		December 31, 2016		September 30, 2020		December 31, 2019
Accrued expenses	$	39,610	$	37,323	$	83,195	$	50,614
Unearned income		25,062		28,805
Unearned revenue						55,520		38,475
Finance lease liabilities						35,319		6,819
Government relief funds						32,492		—
Accrued interest		15,058		33,616		14,004		33,323
Accrued property taxes						7,656		4,755
Income taxes payable						7,338		—
Insurance liability – current portion		11,672		11,672		4,731		4,731
Income taxes payable		7,384		527
Accrued property taxes		5,257		2,732
Other		7,360		8,283		10,922		2,443

Other accrued liabilities	$	111,403	$	122,958	$	251,177	$	141,160

~~17.~~

19.	Segment Information

The Company operates in one line of business, which is operating acute inpatient psychiatric facilities, specialty treatment facilities, residential treatment centers and facilities providing outpatient behavioral healthcare services. As management reviews the operating results of its ~~facilities in the~~ U.S. ~~(the “U.S. Facilities”)~~Facilities and its ~~facilities in the~~ U.K. ~~(the “U.K. Facilities”)~~Facilities separately to assess performance and make decisions, the Company’s operating segments include ~~its~~our U.S. Facilities and U.K. Facilities. At September 30, ~~2017,~~2020, the U.S. Facilities segment included ~~208~~229 behavioral healthcare facilities with approximately ~~8,700~~9,800 beds in 3940 states and Puerto Rico, and the U.K. Facilities segment included ~~371~~353 behavioral healthcare facilities with approximately ~~8,700~~8,500 beds in the U.K.

The following tables set forth the financial information by operating segment, including a reconciliation of Segment EBITDA to income before income taxes (in thousands):

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Revenue:

U.S. Facilities
   $ 453,678    $ 431,521    $ 1,355,315    $ 1,269,994
U.K. Facilities
   263,036    303,146    756,489    836,004
Corporate and Other
   —      (2 )    —      2,028








   $ 716,714    $ 734,665    $ 2,111,804    $ 2,108,026








Segment EBITDA (1):

U.S. Facilities
   $ 118,744    $ 108,810    $ 359,250    $ 334,230
U.K. Facilities
   50,665    67,795    146,941    185,664
Corporate and Other
   (17,153 )    (20,767 )    (55,346 )    (60,818 )








   $ 152,256    $ 155,838    $ 450,845    $ 459,076








   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
Segment EBITDA (1)
   $ 152,256    $ 155,838    $ 450,845    $ 459,076
Plus (less):

Equity-based compensation expense
   (4,175 )    (7,145 )    (19,007 )    (20,989 )
Debt extinguishment costs
   —      (3,411 )    (810 )    (3,411 )
Loss on divestiture
   —      (174,739 )    —      (174,739 )
Gain on foreign currency derivatives
   —      15    —      523
Transaction-related expenses
   (5,665 )    (1,111 )    (18,836 )    (33,483 )
Interest expense, net
   (44,515 )    (48,843 )    (130,777 )    (135,315 )
Depreciation and amortization
   (36,442 )    (36,418 )    (105,256 )    (101,145 )








Income before income taxes
   $ 61,459    $ (115,814 )    $ 176,159    $ (9,483 )








   U.S. Facilities    U.K. Facilities    Corporate
and Other    Consolidated
Goodwill:

Balance at January 1, 2017
   $ 2,041,795    $ 639,393    $ —      $ 2,681,188
Foreign currency translation
   —      55,260    —      55,260
Purchase price allocation and other
   797    (6,883 )    —      (6,086 )








Balance at September 30, 2017
   $ 2,042,592    $ 687,770    $ —      $ 2,730,362

					Three Months Ended September 30,						Nine Months Ended September 30,
	September 30, 2017		December 31, 2016		2020			2019			2020			2019
Assets (2):
Revenue:
U.S. Facilities	$	3,521,080	$	3,382,167	$	547,961		$	509,383		$	1,548,653		$	1,507,156
U.K. Facilities		2,615,828		2,441,018		285,343			267,868			817,772			820,074
Corporate and Other		205,678		201,541		—			—			—			—
					$	833,304		$	777,251		$	2,366,425		$	2,327,230
Segment EBITDA (1):
U.S. Facilities					$	138,401		$	127,087		$	393,356		$	381,491
U.K. Facilities						43,388			40,726			111,195			126,617
Corporate and Other						(22,384	)		(21,175	)		(67,876	)		(66,581	)
	$	6,342,586	$	6,024,726	$	159,405		$	146,638		$	436,675		$	441,527

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Segment EBITDA (1)	$	159,405		$	146,638		$	436,675		$	441,527
Less:
Equity-based compensation expense		(5,471	)		(4,039	)		(16,258	)		(14,322	)
Transaction-related expenses		(8,503	)		(5,775	)		(17,293	)		(15,308	)
Loss on impairment		(20,239	)		—			(20,239	)		—
Debt extinguishment costs		—			—			(3,271	)		—
Interest expense, net		(37,553	)		(46,644	)		(119,064	)		(143,384	)
Depreciation and amortization		(42,912	)		(40,620	)		(126,037	)		(122,277	)
Income before income taxes	$	44,727		$	49,560		$	134,513		$	146,236

Table of contents

	U.S. Facilities			U.K. Facilities			Corporate and Other		Consolidated
Goodwill:
Balance at January 1, 2020
Goodwill	$	2,085,104		$	689,902		$	—	$	2,775,006
Accumulated impairment loss		—			(325,875	)		—		(325,875	)
Net goodwill at January 1, 2020		2,085,104			364,027			—		2,449,131
Increase from contribution of redeemable noncontrolling interests		20,300			—			—		20,300
Prior period purchase price adjustments		(40	)		—			—		(40	)
Foreign currency translation loss		—			(8,669	)		—		(8,669	)
Balance at September 30, 2020
Goodwill		2,105,364			681,233			—		2,786,597
Accumulated impairment loss		—			(325,875	)		—		(325,875	)
Net goodwill at September 30, 2020	$	2,105,364		$	355,358		$	—	$	2,460,722

	September 30, 2020		December 31, 2019
Assets (2):
U.S. Facilities	$	4,166,001	$	4,037,968
U.K. Facilities		2,521,294		2,610,357
Corporate and Other		417,850		230,817
	$	7,105,145	$	6,879,142

(1)

Segment EBITDA is defined as income before provision for income taxes, equity-based compensation expense, loss on impairment, debt extinguishment costs, ~~loss on divestiture, gain on foreign currency derivatives,~~ transaction-related expenses, interest expense and depreciation and amortization. The Company uses Segment EBITDA as an analytical indicator to measure the performance of the Company’s segments and to develop strategic objectives and operating plans for those segments. Segment 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. Segment EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from Segment EBITDA are significant components in understanding and assessing financial performance. Because Segment EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

(2)

Assets include property and equipment for the U.S. Facilities of ~~$1.1 billion, U.K. Facilities of $1.8 billion and corporate and other of $36.7 million at September 30, 2017. Assets include property and equipment for the U.S. Facilities of $1.0~~$1.5 billion, U.K. Facilities of $1.7 billion and corporate and other of ~~$27.1~~$51.3 million at September 30, 2020. Assets include property and equipment for the U.S. Facilities of $1.4 billion, U.K. Facilities of $1.7 billion and corporate and other of $50.9 million at December 31, ~~2016.~~2019.

~~18. Accumulated Other Comprehensive Loss~~

20.	Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows (in thousands):

   Foreign Currency
Translation
Adjustments    Change in Fair
Value of
Derivative
Instruments    Pension Plan    Total
Balance at December 31, 2016
   $ (584,081 )    $ 40,598    $ (6,087 )    $ (549,570 )
Foreign currency translation gain
   189,265    —      (521 )    188,744
Loss on derivative instruments, net of tax of $(18.8) million
   —      (24,354 )    —      (24,354 )








Balance at September 30, 2017
   $ (394,816 )    $ 16,244    $ (6,608 )    $ (385,180 )

	Foreign Currency Translation Adjustments			Change in Fair Value of Derivative Instruments		Pension Plan			Total
Balance at December 31, 2019	$	(434,633	)	$	24,958	$	(5,209	)	$	(414,884	)
Foreign currency translation (loss) gain		(46,975	)		—		124			(46,851	)
Gain on derivative instruments, net of tax of $8.0 million		—			21,622		—			21,622
Balance at September 30, 2020	$	(481,608	)	$	46,580	$	(5,085	)	$	(440,113	)

~~19.~~ Table of contents

21.	Financial Information for the Company and Its Subsidiaries

The Company conducts substantially all of its business through its subsidiaries. The 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes, 6.500% Senior Notes and ~~6.500%~~5.500% Senior Notes are jointly and severally guaranteed on an unsecured senior basis by all of the Company’s subsidiaries that guarantee the Company’s obligations under the Amended and Restated Senior Credit Facility. Summarized financial information is presented below is consistent with the condensed consolidated financial statements of the Company, except transactions between combining entities have been eliminated. Financial information for the combined non-guarantor entities has been excluded. Presented below is condensed ~~consolidating~~ financial information for Acadia Healthcare Company, Inc. and the ~~Company and its subsidiaries as of~~combined wholly-owned subsidiary guarantors at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, and for the ~~three and~~ nine months ended September 30, ~~2017 and 2016. The~~2020.

Summarized balance sheet information ~~segregates the parent company (Acadia Healthcare Company, Inc.), the combined wholly-owned subsidiary guarantors, the combinednon-guarantor~~ ~~subsidiaries and eliminations.~~(in thousands):

	September 30, 2020		December 31, 2019
Current assets	$	591,762	$	427,315
Property and equipment, net		1,398,897		1,313,830
Goodwill		1,992,305		1,992,344
Total noncurrent assets		3,608,625		3,516,967

Current liabilities		400,256		294,289
Long-term debt		2,847,191		2,877,602
Total noncurrent liabilities		3,159,529		3,162,782
Redeemable noncontrolling interests		—		—
Total equity		640,602		487,211

~~Acadia Healthcare Company, Inc.~~Summarized operating results information (in thousands):

	Nine Months Ended September 30, 2020
Revenue	$	1,443,685
Income before income taxes		104,217
Net income		84,162
Net income attributable to Acadia Healthcare Company, Inc.		84,162

~~Condensed Consolidating Balance Sheets~~

~~September 30, 2017~~

~~(In thousands)~~

   Parent    Combined
Subsidiary
Guarantors    Combined
Non-
Guarantors    Consolidating
Adjustments Total
Consolidated
Amounts
Current assets:

Cash and cash equivalents
   $ —      $ 43,714    $ 31,947    $ —   $ 75,661
Accounts receivable, net
   —      230,283    65,473    —   295,756
Other current assets
   —      68,978    23,429    —   92,407








Total current assets
   —      342,975    120,849    —   463,824
Property and equipment, net
   —      1,042,800    1,923,415    —   2,966,215
Goodwill
   —      1,936,057    794,305    —   2,730,362
Intangible assets, net
   —      57,392    29,559    —   86,951
Deferred tax assets – noncurrent
   3,378    —      4,399    (4,088 ) 3,689
Derivative instruments
   26,176    —      —      —   26,176
Investment in subsidiaries
   5,228,165    —      —      (5,228,165 ) —
Other assets
   490,535    53,903    8,375    (487,444 ) 65,369








Total assets
   $ 5,748,254    $ 3,433,127    $ 2,880,902    $ (5,719,697 ) $ 6,342,586








Current liabilities:

Current portion of long-term debt
   $ 34,550    $ —      $ 255    $ —   $ 34,805
Accounts payable
   —      62,655    32,450    —   95,105
Accrued salaries and benefits
   —      68,271    31,622    —   99,893
Other accrued liabilities
   14,365    12,392    84,646    —   111,403








Total current liabilities
   48,915    143,318    148,973    —   341,206
Long-term debt
   3,211,754    —      509,836    (487,444 ) 3,234,146
Deferred tax liabilities – noncurrent
   —      36,341    49,419    (4,088 ) 81,672
Other liabilities
   —      112,094    67,235    —   179,329








Total liabilities
   3,260,669    291,753    775,463    (491,532 ) 3,836,353








Redeemable noncontrolling interests
   —      —      18,648    —   18,648








Total equity
   2,487,585    3,141,374    2,086,791    (5,228,165 ) 2,487,585








Total liabilities and equity
   $ 5,748,254    $ 3,433,127    $ 2,880,902    $ (5,719,697 ) $ 6,342,586

22.	Subsequent Events

~~Acadia Healthcare~~On October 14, 2020, the Company ~~Inc.~~

~~Condensed Consolidating Balance Sheets~~

~~December 31, 2016~~

~~(In thousands)~~issued $475.0 million of the 5.000% Senior Notes due 2029 (the “5.000% Senior Notes”). The 5.000% Senior Notes mature April 15, 2029 and bear interest at a rate of 5.000% per annum, payable semi-annually in arrears on April 15 and October 15, commencing on April 15, 2021. The Company used the net proceeds of the 5.000% Senior Note to prepay approximately $453.3 million of the outstanding borrowings on the Tranche B-3 Facility and intends to use the remaining net proceeds for general corporate purposes, which may include additional debt repayment, and to pay related fees and expenses in connection with the offering.

   Parent    Combined
Subsidiary
Guarantors    Combined
Non-
Guarantors    Consolidating
Adjustments Total
Consolidated
Amounts
Current assets:

Cash and cash equivalents
   $ —      $ 15,681    $ 41,382    $ —   $ 57,063
Accounts receivable, net
   —      209,124    54,203    —   263,327
Other current assets
   —      61,724    45,813    —   107,537








Total current assets
   —      286,529    141,398    —   427,927
Property and equipment, net
   —      940,880    1,762,815    —   2,703,695
Goodwill
   —      1,935,260    745,928    —   2,681,188
Intangible assets, net
   —      56,676    26,634    —   83,310
Deferred tax assets – noncurrent
   13,522    —      4,606    (14,348 ) 3,780
Derivative instruments
   73,509    —      —      —   73,509
Investment in subsidiaries
   4,885,865    —      —      (4,885,865 ) —
Other assets
   493,294    40,480    7,189    (489,646 ) 51,317








Total assets
   $ 5,466,190    $ 3,259,825    $ 2,688,570    $ (5,389,859 ) $ 6,024,726








Current liabilities:

Current portion of long-term debt
   $ 34,550    $ —      $ 255    $ —   $ 34,805
Accounts payable
   —      49,205    30,829    —   80,034
Accrued salaries and benefits
   —      72,835    32,233    —   105,068
Other accrued liabilities
   33,616    24,375    64,967    —   122,958








Total current liabilities
   68,166    146,415    128,284    —   342,865
Long-term debt
   3,230,300    —      512,350    (489,646 ) 3,253,004
Deferred tax liabilities – noncurrent
   —      40,574    52,294    (14,348 ) 78,520
Other liabilities
   —      101,938    62,921    —   164,859








Total liabilities
   3,298,466    288,927    755,849    (503,994 ) 3,839,248








Redeemable noncontrolling interests
   —      —      17,754    —   17,754








Total equity
   2,167,724    2,970,898    1,914,967    (4,885,865 ) 2,167,724








Total liabilities and equity
   $ 5,466,190    $ 3,259,825    $ 2,688,570    $ (5,389,859 ) $ 6,024,726

~~Acadia Healthcare Company, Inc.~~

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~Three Months Ended September 30, 2017~~

~~(In thousands)~~

   Parent Combined
Subsidiary
Guarantors Combined
Non-
Guarantors Consolidating
Adjustments Total
Consolidated
Amounts
Revenue before provision for doubtful accounts
   $ —   $ 440,423 $ 288,289 $ —   $ 728,712
Provision for doubtful accounts
   —   (10,310 ) (1,688 ) —   (11,998 )


Revenue
   —   430,113 286,601 —   716,714
Salaries, wages and benefits
   4,175 225,001 156,386 —   385,562
Professional fees
   —   24,385 28,657 —   53,042
Supplies
   —   18,843 9,809 —   28,652
Rents and leases
   —   8,127 10,922 —   19,049
Other operating expenses
   —   55,077 27,251 —   82,328
Depreciation and amortization
   —   16,963 19,479 —   36,442
Interest expense, net
   15,933 19,304 9,278 —   44,515
Transaction-related expenses
   —   2,211 3,454 —   5,665


Total expenses
   20,108 369,911 265,236 —   655,255
(Loss) income before income taxes
   (20,108 ) 60,202 21,365 —   61,459
Equity in earnings of subsidiaries
   55,925 —   —   (55,925 ) —
(Benefit from) provision for income taxes
   (9,672 ) 21,202 4,440 —   15,970


Net income (loss)
   45,489 39,000 16,925 (55,925 ) 45,489
Net loss attributable to noncontrolling interests
   —   —   129 —   129


Net income (loss) attributable to Acadia Healthcare Company, Inc.
   $ 45,489 $ 39,000 $ 17,054 $ (55,925 ) $ 45,618


Other comprehensive income (loss):

Foreign currency translation gain
   —   —   69,622 —   69,622
Loss on derivative instruments
   (9,402 ) —   —   —   (9,402 )


Other comprehensive (loss) income
   (9,402 ) —   69,622 —   60,220


Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc.
   $ 36,087 $ 39,000 $ 86,676 $ (55,925 ) $ 105,838

~~Acadia Healthcare Company, Inc.~~

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~Three Months Ended September 30, 2016~~

~~(In thousands)~~

   Parent Combined
Subsidiary
Guarantors Combined
Non-
Guarantors Consolidating
Adjustments    Total
Consolidated
Amounts
Revenue before provision for doubtful accounts
   $ —   $ 420,061 $ 324,741 $ —      $ 744,802
Provision for doubtful accounts
   —   (9,383 ) (754 ) —      (10,137 )




Revenue
   —   410,678 323,987 —      734,665
Salaries, wages and benefits
   7,145 224,692 176,405 —      408,242
Professional fees
   —   21,140 26,547 —      47,687
Supplies
   —   19,467 11,088 —      30,555
Rents and leases
   —   8,759 10,981 —      19,740
Other operating expenses
   —   51,536 28,212 —      79,748
Depreciation and amortization
   —   15,105 21,313 —      36,418
Interest expense, net
   13,388 19,258 16,197 —      48,843
Debt extinguishment costs
   3,411 —   —   —      3,411
Loss on divestiture
   —   —   174,739 —      174,739
Gain on foreign currency derivatives
   (15 ) —   —   —      (15 )
Transaction-related expenses
   —   —   1,111 —      1,111




Total expenses
   23,929 359,957 466,593 —      850,479
(Loss) income before income taxes
   (23,929 ) 50,721 (142,606 ) —      (115,814 )
Equity in earnings of subsidiaries
   (99,875 ) —   —   99,875    —
(Benefit from) provision for income taxes
   (5,594 ) 38,654 (30,664 ) —      2,396




Net (loss) income
   (118,210 ) 12,067 (111,942 ) 99,875    (118,210 )
Net loss attributable to noncontrolling interests
   —   —   402 —      402




Net (loss) income attributable to Acadia Healthcare Company, Inc.
   $ (118,210 ) $ 12,067 $ (111,540 ) $ 99,875    $ (117,808 )




Other comprehensive loss:

Foreign currency translation loss
   —   —   (89,645 ) —      (89,645 )
Gain on derivative instruments
   6,387 —   —   —      6,387




Other comprehensive income (loss)
   6,387 —   (89,645 ) —      (83,258 )




Comprehensive (loss) income attributable to Acadia Healthcare Company, Inc.
   $ (111,823 ) $ 12,067 $ (201,185 ) $ 99,875    $ (201,066 )

~~Acadia Healthcare Company, Inc.~~

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~Nine Months Ended September 30, 2017~~

~~(In thousands)~~

   Parent Combined
Subsidiary
Guarantors Combined
Non-
Guarantors Consolidating
Adjustments Total
Consolidated
Amounts
Revenue before provision for doubtful accounts
   $ —   $ 1,311,937 $ 831,759 $ —   $ 2,143,696
Provision for doubtful accounts
   —   (28,007 ) (3,885 ) —   (31,892 )


Revenue
   —   1,283,930 827,874 —   2,111,804
Salaries, wages and benefits
   19,007 675,206 451,365 —   1,145,578
Professional fees
   —   69,796 72,976 —   142,772
Supplies
   —   56,502 28,498 —   85,000
Rents and leases
   —   25,139 32,316 —   57,455
Other operating expenses
   —   164,596 84,565 —   249,161
Depreciation and amortization
   —   48,918 56,338 —   105,256
Interest expense, net
   46,392 57,054 27,331 —   130,777
Debt extinguishment costs
   810 —   —   —   810
Transaction-related expenses
   —   6,219 12,617 —   18,836


Total expenses
   66,209 1,103,430 766,006 —   1,935,645
(Loss) income before income taxes
   (66,209 ) 180,500 61,868 —   176,159
Equity in earnings of subsidiaries
   163,931 —   —   (163,931 ) —
(Benefit from) provision for income taxes
   (32,178 ) 66,124 12,313 —   46,259


Net income (loss)
   129,900 114,376 49,555 (163,931 ) 129,900
Net loss attributable to noncontrolling interests
   —   —   306 —   306


Net income (loss) attributable to Acadia Healthcare Company, Inc.
   $ 129,900 $ 114,376 $ 49,861 $ (163,931 ) $ 130,206


Other comprehensive income (loss):

Foreign currency translation gain
   —   —   188,744 —   188,744
Loss on derivative instruments
   (24,354 ) —   —   —   (24,354 )


Other comprehensive (loss) income
   (24,354 ) —   188,744 —   164,390


Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc.
   $ 105,546 $ 114,376 $ 238,605 $ (163,931 ) $ 294,596

Table of contents

~~Acadia Healthcare Company, Inc.~~

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~Nine Months Ended September 30, 2016~~

~~(In thousands)~~

   Parent Combined
Subsidiary
Guarantors Combined
Non-
Guarantors Consolidating
Adjustments Total
Consolidated
Amounts
Revenue before provision for doubtful accounts
   $ —   $ 1,245,227 $ 893,812 $ —   $ 2,139,039
Provision for doubtful accounts
   —   (28,318 ) (2,695 ) —   (31,013 )


Revenue
   —   1,216,909 891,117 —   2,108,026
Salaries, wages and benefits
   20,989 648,669 487,899 —   1,157,557
Professional fees
   —   66,967 71,003 —   137,970
Supplies
   —   57,456 30,993 —   88,449
Rents and leases
   —   25,857 29,156 —   55,013
Other operating expenses
   —   151,485 79,465 —   230,950
Depreciation and amortization
   —   42,072 59,073 —   101,145
Interest expense, net
   37,452 57,394 40,469 —   135,315
Debt extinguishment costs
   3,411 —   —   —   3,411
Loss on divestiture
   —   —   174,739 —   174,739
Gain on foreign currency derivatives
   (523 ) —   —   —   (523 )
Transaction-related expenses
   —   25,624 7,859 —   33,483


Total expenses
   61,329 1,075,524 980,656 —   2,117,509
(Loss) income before income taxes
   (61,329 ) 141,385 (89,539 ) —   (9,483 )
Equity in earnings of subsidiaries
   8,937 —   —   (8,937 ) —
(Benefit from) provision for income taxes
   (15,142 ) 62,247 (19,338 ) —   27,767


Net (loss) income
   (37,250 ) 79,138 (70,201 ) (8,937 ) (37,250 )
Net loss attributable to noncontrolling interests
   —   —   1,575 —   1,575


Net (loss) income attributable to Acadia Healthcare Company, Inc.
   $ (37,250 ) $ 79,138 $ (68,626 ) $ (8,937 ) $ (35,675 )


Other comprehensive loss:

Foreign currency translation loss
   —   —   (351,528 ) —   (351,528 )
Gain on derivative instruments
   30,306 —   —   —   30,306


Other comprehensive income (loss)
   30,306 —   (351,528 ) —   (321,222 )


Comprehensive (loss) income attributable to Acadia Healthcare Company, Inc.
   $ (6,944 ) $ 79,138 $ (420,154 ) $ (8,937 ) $ (356,897 )

~~Acadia Healthcare Company, Inc.~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Nine Months Ended September 30, 2017~~

~~(In thousands)~~

   Parent Combined
Subsidiary
Guarantors Combined
Non-
Guarantors Consolidating
Adjustments Total
Consolidated
Amounts
Operating activities:

Net income (loss)
   $ 129,900 $ 114,376 $ 49,555 $ (163,931 ) $ 129,900
Adjustments to reconcile net income (loss) to net cash (used in) provided by continuing operating activities:

Equity in earnings of subsidiaries
   (163,931 ) —   —   163,931 —
Depreciation and amortization
   —   48,918 56,338 —   105,256
Amortization of debt issuance costs
   7,652 —   (312 ) —   7,340
Equity-based compensation expense
   19,007 —   —   —   19,007
Deferred income tax expense
   156 22,401 6,859 —   29,416
Debt extinguishment costs
   810 —   —   —   810
Other
   4,216 1,727 4,729 —   10,672
Change in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable, net
   —   (21,183 ) (7,498 ) —   (28,681 )
Other current assets
   —   1,126 24,973 —   26,099
Other assets
   3,479 (705 ) 139 (3,479 ) (566 )
Accounts payable and other accrued liabilities
   —   (22,372 ) (4,009 ) —   (26,381 )
Accrued salaries and benefits
   —   (4,759 ) (3,178 ) —   (7,937 )
Other liabilities
   —   4,084 3,593 —   7,677


Net cash provided by (used in) continuing operating activities
   1,289 143,613 131,189 (3,479 ) 272,612
Net cash used in discontinued operating activities
   —   (1,261 ) —   —   (1,261 )


Net cash provided by (used in) operating activities
   1,289 142,352 131,189 (3,479 ) 271,351
Investing activities:

Cash paid for capital expenditures
   —   (114,130 ) (79,687 ) —   (193,817 )
Cash paid for real estate acquisitions
   —   (33,297 ) —   —   (33,297 )
Other
   —   (7,984 ) 1,922 —   (6,062 )


Net cash used in investing activities
   —   (155,411 ) (77,765 ) —   (233,176 )
Financing activities:

Principal payments on long-term debt
   (25,913 ) —   (3,479 ) 3,479 (25,913 )
Common stock withheld for minimum statutory taxes, net
   (3,278 ) —   —   —   (3,278 )
Other
   —   1,649 —   —   1,649
Cash provided by (used in) intercompany activity
   27,902 39,443 (67,345 ) —   —


Net cash (used in) provided by financing activities
   (1,289 ) 41,092 (70,824 ) 3,479 (27,542 )


Effect of exchange rate changes on cash
   —   —   7,965 —   7,965


Net increase in cash and cash equivalents
   —   28,033 (9,435 ) —   18,598
Cash and cash equivalents at beginning of the period
   —   15,681 41,382 —   57,063


Cash and cash equivalents at end of the period
   $ —   $ 43,714 $ 31,947 $ —   $ 75,661

~~Acadia Healthcare Company, Inc.~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Nine Months Ended September 30, 2016~~

~~(In thousands)~~

   Parent Combined
Subsidiary
Guarantors Combined
Non-
Guarantors Consolidating
Adjustments Total
Consolidated
Amounts
Operating activities:

Net (loss) income
   $ (37,250 ) $ 79,138 $ (70,201 ) $ (8,937 ) $ (37,250 )
Adjustments to reconcile net income (loss) to net cash (used in) provided by continuing operating activities:

Equity in earnings of subsidiaries
   (8,937 ) —   —   8,937 —
Depreciation and amortization
   —   42,072 59,073 —   101,145
Amortization of debt issuance costs
   8,035 —   (321 ) —   7,714
Equity-based compensation expense
   20,989 —   —   —   20,989
Deferred income tax (benefit) expense
   —   26,381 (524 ) —   25,857
Debt extinguishment costs
   3,411 —   —   —   3,411
Loss on divestiture
   —   —   174,739 —   174,739
Gain on foreign currency derivatives
   (523 ) —   —   —   (523 )
Other
   —   826 (95 ) —   731
Change in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable, net
   —   (26,055 ) 13,476 —   (12,579 )
Other current assets
   —   (4,901 ) (8,072 ) —   (12,973 )
Other assets
   (2,780 ) (818 ) (316 ) 2,780 (1,134 )
Accounts payable and other accrued liabilities
   —   31,633 (29,566 ) —   2,067
Accrued salaries and benefits
   —   3,527 (14,286 ) —   (10,759 )
Other liabilities
   —   5,975 (2,229 ) —   3,746


Net cash (used in) provided by continuing operating activities
   (17,055 ) 157,778 121,678 2,780 265,181
Net cash used in discontinued operating activities
   —   (5,524 ) —   —   (5,524 )


Net cash (used in) provided by operating activities
   (17,055 ) 152,254 121,678 2,780 259,657
Investing activities:

Cash paid for acquisitions, net of cash acquired
   —   (103,189 ) (580,096 ) —   (683,285 )
Cash paid for capital expenditures
   —   (142,626 ) (107,335 ) —   (249,961 )
Cash paid for real estate acquisitions
   —   (26,146 ) (11,801 ) —   (37,947 )
Settlement of foreign currency derivatives
   —   523 —   —   523
Other
   —   (1,135 ) —   —   (1,135 )


Net cash used in investing activities
   —   (272,573 ) (699,232 ) —   (971,805 )
Financing activities:

Borrowings on long-term debt
   1,480,000 —   —   —   1,480,000
Borrowings on revolving credit facility
   179,000 —   —   —   179,000
Principal payments on revolving credit facility
   (166,000 ) —   —   —   (166,000 )
Principal payments on long-term debt
   (46,069 ) —   (2,780 ) 2,780 (46,069 )
Repayment of assumed debt
   (1,348,389 ) —   —   —   (1,348,389 )
Payment of debt issuance costs
   (35,748 ) —   —   —   (35,748 )
Issuance of common stock
   685,097 —   —   —   685,097
Common stock withheld for minimum statutory taxes, net
   (7,917 ) —   —   — �� (7,917 )
Other
   —   (1,821 ) —   —   (1,821 )
Cash (used in) provided by intercompany activity
   (722,919 ) 125,313 603,166 (5,560 ) —


Net cash provided by (used in) financing activities
   17,055 123,492 600,386 (2,780 ) 738,153


Effect of exchange rate changes on cash
   —   —   (9,469 ) —   (9,469 )


Net increase in cash and cash equivalents
   —   3,173 13,363 —   16,536
Cash and cash equivalents at beginning of the period
   —   1,987 9,228 —   11,215


Cash and cash equivalents at end of the period
   $ —   $ 5,160 $ 22,591 $ —   $ 27,751

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form10-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 ~~contained~~ 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 outbreak of the COVID-19 pandemic on our inpatient and outpatient volumes, or disruptions caused by other pandemics, epidemics and highly contagious infectious diseases;

•

increases in the amount and risk of collectability of patient accounts receivable, particularly as the unemployment rate and number of underinsured and uninsured patients have increased as a result of the COVID-19 pandemic;

•

costs of providing care to our patients, including increased staffing, equipment and supply expenses resulting from the COVID-19 pandemic;

•

our significant indebtedness, our ability to meet our debt obligations, and our ability to incur substantially more debt;

•

our ability to implement our business strategies, especially in light of the COVID-19 pandemic and our pursuit of a strategic transaction for our U.K. business;

•

potential difficulties operating our business in light of political and economic instability in the U.K. and globally relating to the U.K.’s departure from the European Union;

•

the impact of fluctuations in foreign exchange rates, including the devaluations of the GBP relative to the USD;

•

our ability to enter into and successfully complete a strategic transaction related to our U.K. operations on terms that are favorable to us or at all;

•

the impact of payments received from the government and third-party payors on our revenue and results of operations including the significant dependence of our U.K. Facilities on payments received from the NHS;

•

difficulties in successfully integrating the operations of acquired 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 staffing on our labor costs and profitability;

•

the impact of increases to our labor costs;

•

the occurrence of patient incidents, 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 restrictive covenants, which may restrict our business and financing activities;

•

our ability to make payments on our financing arrangements;

•

the impact of the economic and employment conditions on our business and future results of operations;

•

the impact of adverse weather conditions, including the effects of hurricanes;

•

compliance with laws and government regulations;

•

the impact of claims brought against us or our facilities including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employee related claims;

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~~our significant indebtedness, our ability to meet our debt obligations, and our ability to incur substantially more debt;~~

•

the impact of governmental investigations, regulatory actions and whistleblower lawsuits;

difficulties in successfully integrating the operations of acquired facilities, including those acquired in the Priory acquisition, or realizing the potential benefits and synergies of our acquisitions and joint ventures;

•

any failure to comply with the terms of our corporate integrity agreement;

~~our ability to implement our business strategies in the U.S. and the U.K. and adapt to the regulatory and business environment in the U.K.;~~

•

the impact of healthcare reform in the U.S. and abroad, including the potential repeal, replacement or modification of the Patient Protection and Affordable Care Act;

potential difficulties operating our business in light of political and economic instability in the U.K. and globally following the referendum in the U.K. on June 23, 2016, in which voters approved an exit from the European Union, or Brexit;

•

the impact of our highly competitive industry on patient volumes;

~~the impact of fluctuations in foreign exchange rates, including the devaluations of the GBP relative to the USD following the Brexit vote;~~

•

our dependence on key management personnel, key executives and local facility management personnel;

the impact of payments received from the government and third-party payors on our revenue and results of operations including the significant dependence of our U.K. facilities on payments received from the National Health Service (the “NHS”);

•

our acquisition, joint venture and de novo 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 operations;

~~our future cash flow and earnings;~~

•

our potential inability to extend leases at expiration;

~~our restrictive covenants, which may restrict our business and financing activities;~~

•

the impact of controls designed to reduce inpatient services on our revenue;

~~our ability to make payments on our financing arrangements;~~

•

the impact of different interpretations of accounting principles on our results of operations or financial condition;

•

the impact ~~of the economic and employment conditions in the U.S. and the U.K. on our business and future results~~ of environmental, health and safety laws and regulations, especially in locations where we have concentrated operations;

~~compliance with laws and government regulations;~~

•

the risk of a cyber-security incident and any resulting violation of laws and regulations regarding information privacy or other negative impact;

~~the impact of claims brought against us or our facilities;~~

•

the impact of laws and regulations relating to privacy and security of patient health information and standards for electronic transactions;

~~the impact of governmental investigations, regulatory actions and whistleblower lawsuits;~~

•

our ability to cultivate and maintain relationships with referral sources;

~~the impact of healthcare reform in the U.S. and abroad, including the potential repeal of the Patient Protection and Affordable Care Act;~~

•

the impact of a change in the mix of our U.S. and U.K. earnings, adverse changes in our effective tax rate and adverse developments in tax laws generally;

~~the impact of our highly competitive industry on patient volumes;~~

•

changes in interpretations, assumptions and expectations regarding recent legislation, including provisions of the CARES Act, and additional guidance that may be issued by federal and state authorities;

~~our ability to recruit and retain quality psychiatrists and other physicians;~~

•

failure to maintain effective internal control over financial reporting;

~~the impact of competition for staffing on our labor costs and profitability;~~

•

the impact of fluctuations in our operating results, quarter to quarter earnings and other factors on the price of our securities;

~~the impact of increases to our labor costs;~~

•

the impact of the trend for insurance companies and managed care organizations to enter into sole source contracts on our ability to obtain patients;

~~our dependence on key management personnel, key executives and local facility management personnel;~~

•

the impact of value-based purchasing programs on our revenue; and

~~our acquisition, joint venture and de novo 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 operations;~~

~~our potential inability to extend leases at expiration;~~

~~the impact of controls designed to reduce inpatient services on our revenue;~~

~~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, especially in locations where we have concentrated operations;~~

~~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;~~

~~the risk of a cyber-security incident and any resulting violation of laws and regulations regarding information privacy or other negative impact;~~

~~the impact of laws and regulations relating to privacy 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 mix of our U.S. and U.K. earnings, adverse changes in our effective tax rate and adverse developments in tax laws generally;~~

~~failure to maintain effective internal control over financial reporting;~~

~~the impact of fluctuations in our operating results, 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~~

•

those risks and uncertainties described from time to time in our filings with the SEC.

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 Form10-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.

Overview

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 September 30, ~~2017,~~2020, we operated ~~579~~582 behavioral healthcare facilities with approximately ~~17,400~~18,300 beds in 3940 states, the U.K. and Puerto Rico. During the nine months ended September 30, ~~2017,~~2020, we added 352 beds, including 208 added to existing ~~facilities.~~facilities and 144 added through the

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opening of a de novo facility. For the year ending December 31, ~~2017,~~2020, we expect to add approximately ~~800~~500 total beds exclusive of acquisitions.

We are the leading publicly traded pure-play provider of behavioral healthcare services, with operations in the U.S. and the U.K. 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 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 ofout-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~~U.S. through acquisitions, de novo facilities, joint ventures and bed additions in existing facilities.

During 2019, we commenced a review of strategic alternatives including those related to our U.K. operations and a potential sale of such operations. In January 2020, we launched a formal process regarding the sale of our U.K. business. Consistent with market practice for U.K. transactions of this nature, and in conjunction with our advisors, we solicited and received initial, non-binding offers to acquire our U.K. business from multiple bidders. During the first quarter of 2020, we began the second phase of the sale process, during which interested bidders would receive proposed transaction documents and complete their confirmatory due diligence. However, given evolving market dynamics related to the COVID-19 pandemic, we suspended the sale process in mid-March 2020. In October 2020, we relaunched the formal sale process of our U.K. business.

COVID-19

During 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 a limited number 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 patients and employees. All of our facilities are closely following infectious disease protocols, as well as recommendations by the CDC, NHS and local health officials. We have established an internal COVID-19 taskforce, developed additional supply chain management processes, expanded telehealth capabilities and implemented emergency planning in directly impacted markets.

We have taken steps to help minimize the impact of the virus. For example, we:

•

have instituted social distancing practices and protective measures throughout our facilities, which includes restricting or suspending visitor access, limiting group therapy, and screening patients and staff who enter our facilities based on criteria established by the CDC, NHS and local health officials;

•

have limited all non-essential business travel; and

•

have implemented work-from-home policies for certain employees, to the extent practicable, and suspended in-person trainings and conferences.

COVID-19 is adversely impacting our business and likely will have an impact on our financial results that we are not currently able to quantify. For example, due in part to local, state and federal guidelines as well as recommendations from medical officials regarding stay-at-home orders, social distancing practices and self-quarantine in response to the COVID-19 pandemic, we have seen a decline in referrals, particularly from emergency rooms and medical professionals. In addition, restrictive measures adopted or encouraged by federal, state and local governments, such as travel bans and stay-at-home orders, have reduced patient volume at our facilities more generally. As a result, many of our facilities experienced significantly lower patient days primarily during late March and April 2020. The impact on our facilities varies based on the market in which the facility operates and the type of facility. During the second quarter of 2020 we saw improvements in patient days which continued into the third quarter. The improved volume trends were driven by a shift in marketing strategy and efforts and the easing of stay-at-home orders and other restrictions. It is difficult to predict the impact of COVID-19 on our patient volume in future periods given the evolving nature of the pandemic.

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. However, we are also experiencing supply chain disruptions and could experience 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.

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At September 30, 2020, we had approximately $338.7 million of cash and cash equivalents and $485.9 million of available borrowing capacity under our revolving line of credit. In response to the estimated financial impact of the COVID-19 pandemic, we continue to pursue various actions intended to enhance our financial flexibility including, among other things, the benefits described in the “CARES Act and other Regulatory Developments” herein.In addition,we are evaluating and undertaking certain additional steps to mitigate the financial impact, including:

•

reducing maintenance and expansion capital expenditures;

•

managing corporate and facility-level staffing costs by aligning staffing to patient volumes and implementing a temporary hiring freeze for non-clinical staff;

•

limiting all non-essential business travel;

•

reducing discretionary expenditures and temporarily reducing marketing spending;

•

negotiating with our vendors and lessors for discounts and/or revised payment terms; and

•

closely managing our working capital as our facilities continue to bill and collect for services rendered and extend payments on traditional accounts payables.

Although we are reviewing potential liquidity and intend to seek any available benefits under the CARES Act, including those described herein, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you we will be able to access such benefits. In addition, procuring these benefits and otherwise responding to the global pandemic is likely to require us to dedicate additional management resources.

For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources”.

CARES Act and Other Regulatory Developments

On March 27, 2020, the CARES Act was signed into law. The CARES Act is intended to provide over $2 trillion in 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 billion for 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 appropriation of $100 billion to the PHSSE Fund for a new program to reimburse, through grants or other 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;

•

the temporary suspension of Medicare sequestration from May 1, 2020, to December 31, 2020; and

•

waivers or temporary suspension of certain regulatory requirements.

As noted above, the U.S. government initially announced it would offer $100 billion of relief to eligible healthcare providers through the PHSSE Fund. On April 24, 2020, President Trump signed into law the New PPP Act. Among other things, the New PPP Act allocates $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion allocated under the New PPP Act is in addition to the $100 billion allocated 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 million of the initial PHSSE funds distributed in April 2020. We received approximately $12.8 million of additional PHSSE funds in August 2020.

Results for the three months ended September 30, 2020 include a reversal of $18.1 million of other income recorded during the second quarter of 2020 in the condensed consolidated statements of income related to the $19.7 million of PHSSE funds received by the Company. The Company’s decision to reverse this income was based on additional guidance issued by HHS in September 2020 related to the terms and conditions necessary to retain PHSSE funds.

Using existing authority and certain expanded authority under the CARES Act, HHS has 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.

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Under the program, 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, Congress amended 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 will be 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 million in April 2020 from this program, which we expect to repay over the 12 month period beginning April 2021.

Also under the CARES Act, we received a 2% increase in our facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020 to December 31, 2020.

The CARES Act also provides for certain federal income and other tax changes, including an increase in the interest expense tax deduction limitation, the deferral of the employer portion of Social Security payroll taxes, refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds and bonus depreciation of qualified improvement property. We expect a cash benefit of approximately $39 million for 2020 relating to the delay of payment of the employer portion of Social Security payroll taxes. Within the CARES Act, the interest expense deduction threshold was increased to 50% of Adjusted Taxable Income for 2019 and 2020 tax years, making our interest expense fully deductible. As a result, we received a cash benefit in the form of refunds of $14 million and expect lower tax payments of $2.7 million related to our 2019 interest expense and between $15 million and $20 million related to our 2020 interest expense.

Furthermore, under the CARES Act, (i) for taxable years beginning before 2021, net operating loss (“NOL”) carryforwards and carrybacks may offset 100% of taxable income and (ii) NOLs arising in 2018, 2019 and 2020 taxable years may be carried back to each of the preceding five years to generate a refund. As a result, we expect to receive a refund related to our 2019 NOL carryback to 2014 in the amount of $18 million and expect lower future payments of $9 million.

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 are continuing to evaluate the terms and conditions and financial impact of funds received under the CARES Act and other government relief programs.

Acquisitions

~~2016 U.S. Acquisitions~~

On ~~June~~April 1, ~~2016, we~~2019, the Company completed the acquisition of ~~Pocono Mountain, an inpatient psychiatric~~Bradford, a specialty treatment facility with ~~108~~46 beds located in ~~Henryville,~~Millerton, Pennsylvania, for cash consideration of approximately ~~$25.4~~$4.5 million.

On ~~May 1, 2016, we~~February 15, 2019, the Company completed the acquisition of ~~TrustPoint,~~Whittier, an inpatient psychiatric facility with ~~100~~71 beds located in ~~Murfreesboro, Tennessee,~~Haverhill, Massachusetts, for cash consideration of approximately ~~$62.7~~$17.9 million.

~~On April 1, 2016, we~~ Also on February 15, 2019, the Company completed the acquisition of ~~Serenity Knolls, an inpatient psychiatric facility with 30 beds located in Forest Knolls, California,~~Mission Treatment for cash consideration of approximately ~~$10.0~~$22.5 million. Mission Treatment operates nine comprehensive treatment centers in California, Nevada, Arizona and Oklahoma.

~~Priory~~

~~On February 16, 2016, we completed~~30

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Results of Operations

The following table illustrates our consolidated results of operations for the ~~acquisition of Priory for a total purchase price of approximately $2.2 billion, including cash consideration of approximately $1.9 billion and~~respective periods shown (dollars in thousands):

	Three Months Ended September 30,												Nine Months Ended September 30,
	2020						2019						2020						2019
	Amount			%			Amount			%			Amount			%			Amount			%
Revenue	$	833,304			100.0	%	$	777,251			100.0	%	$	2,366,425			100.0	%	$	2,327,230			100.0	%
Salaries, wages and benefits		450,459			54.1	%		428,601			55.1	%		1,318,378			55.7	%		1,288,399			55.4	%
Professional fees		61,359			7.4	%		62,152			8.0	%		183,273			7.7	%		177,588			7.6	%
Supplies		31,207			3.7	%		30,790			4.0	%		93,302			3.9	%		91,661			3.9	%
Rents and leases		21,182			2.5	%		20,134			2.6	%		62,833			2.7	%		60,860			2.6	%
Other operating expenses		97,093			11.7	%		92,975			12.0	%		288,222			12.2	%		281,517			12.1	%
Other income		18,070			2.2	%		-			0.0	%		-			0.0	%		-			0.0	%
Depreciation and amortization		42,912			5.1	%		40,620			5.2	%		126,037			5.3	%		122,277			5.3	%
Interest expense		37,553			4.5	%		46,644			6.0	%		119,064			5.0	%		143,384			6.2	%
Debt extinguishment costs		-			0.0	%		-			0.0	%		3,271			0.1	%		-			0.0	%
Loss on impairment		20,239			2.4	%		-			0.0	%		20,239			0.9	%		-			0.0	%
Transaction-related expenses		8,503			1.0	%		5,775			0.7	%		17,293			0.7	%		15,308			0.7	%
Total expenses		788,577			94.6	%		727,691			93.6	%		2,231,912			94.2	%		2,180,994			93.8	%
Income before income taxes		44,727			5.4	%		49,560			6.4	%		134,513			5.8	%		146,236			6.2	%
Provision for income taxes		7,166			0.9	%		6,837			0.9	%		21,171			0.9	%		25,801			1.1	%
Net income		37,561			4.5	%		42,723			5.5	%		113,342			5.0	%		120,435			5.1	%
Net income attributable to noncontrolling interests		(563	)		-0.1	%		(157	)		0.0	%		(1,802	)		-0.1	%		(258	)		0.0	%
Net income attributable to Acadia Healthcare Company, Inc.	$	36,998			4.4	%	$	42,566			5.5	%	$	111,540			4.9	%	$	120,177			5.1	%

Segments

At September 30, 2020, the ~~issuance of 4,033,561 shares of our common stock to shareholders of Priory. Priory was the leading independent provider of~~U.S. Facilities segment included 229 behavioral healthcare ~~services in the U.K. operating 324~~ facilities with approximately ~~7,100~~9,800 beds atin 40 states and Puerto Rico, and the ~~acquisition date.~~

~~The CMA~~U.K. Facilities segment included 353 behavioral healthcare facilities with approximately 8,500 beds in the U.K. ~~reviewed~~

The following table sets forth percent changes in same facility operating data for our acquisition of Priory. On July 14, 2016, the CMA announced that our acquisition of Priory was referred for a phase 2 investigation unless we offered acceptable undertakings to address the CMA’s competition concerns relating to the provision of behavioral healthcare services in certain markets. On July 28, 2016, the CMA announced that we had offered undertakings to address the CMA’s concerns and that, in lieu of a phase 2 investigation, the CMA would consider our undertakings.

On October 18, 2016, we signed a definitive agreement with BC Partners for the sale of 21 existing U.K. behavioral health facilities and one de novo behavioral health facility with an aggregate of approximately 1,000 beds. On November 10, 2016, the CMA accepted our undertakings to sell the U.K. Disposal Group to BC Partners and confirmed that the divestiture satisfied the CMA’s concerns about the impact of our acquisition of Priory on competition for the provision of behavioral healthcare services in certain markets in the U.K. As a result of the CMA’s acceptance of our undertakings, our acquisition of Priory was not referred for a phase 2 investigation. On November 30, 2016, we completed the sale of the U.K. Disposal Group to BC Partners for £320 million cash.

~~In conjunction with the sale, the Company recorded a loss on divestiture of $174.7 million in the consolidated statements of operations~~U.S. Facilities for the three and nine months ended September 30, ~~2016. The~~2020 compared to the same periods in 2019:

	Three Months Ended	Nine Months Ended
U.S. Same Facility Results (a)
Revenue growth	7.5%	2.7%
Patient days growth	4.2%	2.2%
Admissions growth	0.5%	-1.1%
Average length of stay change (b)	3.8%	3.3%
Revenue per patient day growth	3.1%	0.6%
EBITDA margin change (c)	50 bps	10 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) Segment EBITDA is defined as income before provision for income taxes, equity-based compensation expense, debt extinguishment costs, loss on ~~divestiture consisted~~impairment, transaction-related expenses, interest expense and depreciation and amortization. Management uses Segment EBITDA as an analytical indicator to measure the performance of our segments and to develop strategic objectives and operating plans for those segments. Segment EBITDA is commonly used as an ~~allocation~~analytical indicator within the health care industry, and also serves as a measure of ~~goodwill~~leverage capacity and debt service ability. Segment EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from Segment EBITDA are significant components in

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understanding and assessing financial performance. Because Segment EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

Results in our U.S. Facilities for the nine months ended September 30, 2020 were affected by COVID-19. Volumes declined in late March 2020 as a result of the impact of the pandemic on traditional referral sources, such as emergency rooms and medical professionals; the stay-at-home orders implemented by many states; and the effects of the travel restrictions on certain facilities with national referral networks. As the country has started to reopen and lift restrictions, patient volumes have shown recent improvement. During the three months ended September 30, 2020, we demonstrated measurable improvement in our EBITDA margin in part due to our continued focus on cost management and operating efficiencies.

The following table sets forth percent changes in same facility operating data for our U.K. Facilities for the three and nine months ended September 30, 2020 compared to the same periods in 2019:

	Three Months Ended	Nine Months Ended
U.K. Same Facility Results (a,c)
Revenue growth	2.7%	0.3%
Patient days growth	-0.1%	-1.9%
Admissions growth	5.1%	-7.9%
Average length of stay change (b)	-5.0%	6.6%
Revenue per patient day growth	2.8%	2.2%
EBITDA margin change (d)	50 bps	-140 bps

(a)

Results for the periods presented include facilities we have operated more than one year and exclude the elderly care division. While the elderly care division is complementary to our continuum of behavioral healthcare services, it has never been part of our overall growth strategy nor had a meaningful impact on our operations or results.

(b)

Average length of stay is defined as patient days divided by admissions.

(c)

Revenue and revenue per patient day for the three and nine months ended September 30, 2019 is adjusted to reflect the foreign currency exchange rate for the comparable periods of 2020 in order to eliminate the effect of changes in the exchange rate.

(d)

See definition of Segment EBITDA in U.S. Same Facility Results table above.

Results in our U.K. ~~Disposal Group of $106.9 million, loss~~Facilities for the nine months ended September 30, 2020 were affected by COVID-19. Beginning in late March 2020, our U.K. operations faced temporary disruptions from the stay-at-home orders implemented in the U.K. on the ~~sale~~referral and commissioning process. As the country has started to reopen and lift restrictions, patient volumes and labor costs have shown recent improvement.

Three months ended September 30, 2020 compared to the three months ended September 30, 2019

Revenue. Revenue increased $56.1 million, or 7.2%, to $833.3 million for the three months ended September 30, 2020 from $777.3 million for the three months ended September 30, 2019 resulting from same facility revenue growth of ~~properties~~5.9% and a $12.7 million increase in the exchange rate between USD and GBP. During the three months ended September 30, 2020, we generated $548.0 million of ~~$42.2~~revenue, or 65.8% of our total revenue, from our U.S. Facilities and $285.3 million of revenue, or 34.2% of our total revenue, from our U.K. Facilities. During the three months ended September 30, 2019, we generated $509.4 million of revenue, or 65.5% of our total revenue, from our U.S. Facilities and $267.9 million of revenue, or 34.5% of our total revenue, from our U.K. Facilities.

U.S. same facility revenue increased by $38.2 million, or 7.5%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, resulting from same facility growth in patient days of 4.2% and an increase in same facility revenue per day of 3.1%. U.K. same facility revenue increased by $6.9 million, or 2.7%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, resulting from a decline in same facility patient days of 0.1% offset by an increase in same facility revenue per day of 2.8%.

Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $450.5 million for the three months ended September 30, 2020 compared to $428.6 million for the three months ended September 30, 2019, an increase of $21.9 million. SWB expense included $5.5 million and ~~estimated transaction-related~~$4.0 million of equity-based compensation expense for the three months ended September 30, 2020 and 2019, respectively. Excluding equity-based compensation expense, SWB expense was $445.0 million, or 53.4% of revenue, for the three months ended September 30, 2020, compared to $424.6 million, or 54.6% of revenue, for the three months ended

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September 30, 2019. Same facility SWB expense was $409.9 million for the three months ended September 30, 2020, or 50.7% of revenue, compared to $399.9 million for the three months ended September 30, 2019, or 52.4% of revenue.

Professional fees. Professional fees were $61.4 million for the three months ended September 30, 2020, or 7.4% of revenue, compared to $62.2 million for the three months ended September 30, 2019, or 8.0% of revenue. Same facility professional fees were $55.6 million for the three months ended September 30, 2020, or 6.9% of revenue, compared to $56.8 million, for the three months ended September 30, 2019, or 7.5% of revenue.

Supplies. Supplies expense was $31.2 million for the three months ended September 30, 2020, or 3.7% of revenue, compared to $30.8 million for the three months ended September 30, 2019, or 4.0% of revenue. Same facility supplies expense was $29.8 million for the three months ended September 30, 2020, or 3.7% of revenue, compared to $29.7 million for the three months ended September 30, 2019, or 3.9% of revenue.

Rents and leases. Rents and leases were $21.2 million for the three months ended September 30, 2020, or 2.5% of revenue compared to $20.1 million for the three months ended September 30, 2019, or 2.6% of revenue. Same facility rents and leases were $17.2 million for the three months ended September 30, 2020, or 2.1% of revenue, compared to $16.9 million for the three months ended September 30, 2019, or 2.2% of revenue.

Other operating expenses. Other operating expenses consisted primarily of ~~$25.6 million. The allocation~~purchased services, utilities, insurance, travel and repairs and maintenance expenses. Other operating expenses were $97.1 million for the three months ended September 30, 2020, or 11.7% of ~~goodwill was based~~revenue, compared to $93.0 million for the three months ended September 30, 2019, or 12.0% of revenue. Same facility other operating expenses were $92.6 million for the three months ended September 30, 2020, or 11.4% of revenue, compared to $89.7��million for the three months ended September 30, 2019, or 11.8% of revenue.

Other income. Based on the ~~fair value~~additional guidance from HHS issued in September 2020 regarding the terms and conditions necessary to retain the PHSSE funds received by the Company, the three months ended September 30, 2020 reflects a reversal of the ~~U.K. Disposal Group relative~~$18.1 million of other income recorded during the second quarter of 2020.

Depreciation and amortization. Depreciation and amortization expense was $42.9 million for the three months ended September 30, 2020, or 5.1% of revenue, compared to $40.6 million for the three months ended September 30, 2019, or 5.2% of revenue.

Interest expense. Interest expense was $37.6 million for the three months ended September 30, 2020 compared to $46.6 million for the three months ended September 30, 2019. The decrease in interest expense was primarily a result of lower interest rates applicable to our variable rate debt.

Loss on impairment. Loss on impairment was $20.2 million for the three months ended September 30, 2020 and represents a non-cash lease impairment charge of $16.4 million and a non-cash long-lived asset impairment charge of $3.8 million related to the ~~total fair value~~decision to close certain U.K. elderly care facilities.

Transaction-related expenses. Transaction-related expenses were $8.5 million for the three months ended September 30, 2020 compared to $5.8 million the three months ended September 30, 2019. Transaction-related expenses primarily relate to termination, restructuring, U.K. sale, strategic review, management transition and other similar costs incurred in the respective periods, as summarized below (in thousands):

	Three Months Ended September 30,
	2020		2019
Termination, restructuring, sale and strategic review costs	$	6,891	$	5,329
Legal, accounting and other acquisition-related costs		1,612		235
Management transition costs		—		211
	$	8,503	$	5,775

Provision for income taxes. For the three months ended September 30, 2020, the provision for income taxes was $7.2 million, reflecting an effective tax rate of 16.0%, compared to $6.8 million, reflecting an effective tax rate of 13.8%, for the three months ended September 30, 2019. The increase in the effective tax rate for the three months ended September 30, 2020 was primarily attributable to the September 20, 2019 taxable gain on the foreign currency derivatives settlement in August 2019, which

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allowed us to deduct more interest and reduce a portion of a valuation allowance on deferred tax assets. The three months ended September 30, 2020 benefits from the CARES Act related to net operating loss carrybacks were partially offset by a statutory rate increase in the U.K.

Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019

Revenue. Revenue increased $39.2 million, or 1.7%, to $2.4 billion for the nine months ended September 30, 2020 from $2.3 billion for the nine months ended September 30, 2019 resulting from same facility revenue growth of 1.9% and offset by $1.6 million decrease in the exchange rate between USD and GBP. During the nine months ended September 30, 2020, we generated $1.5 billion of revenue, or 65.4% of our total revenue, from our U.S. Facilities and $817.7 million of revenue, or 34.6% of our total revenue, from our U.K. Facilities. During the nine months ended September 30, 2019, we generated $1.5 billion of revenue, or 64.8% of our total revenue, from our U.S. Facilities ~~segment.~~and $820.1 million of revenue, or 35.2% of our total revenue, from our U.K. Facilities.

U.S. same facility revenue increased by $40.7 million, or 2.7%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, resulting from same facility growth in patient days of 2.2% and an increase in same facility revenue per day of 0.6%. U.K. same facility revenue increased by $2.3 million, or 0.3%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, resulting from a decline in same facility patient days of 1.9% offset by an increase in same facility revenue per day of 2.2%.

Salaries, wages and benefits. SWB expense was $1.3 billion for both the nine months ended September 30, 2020 and 2019, an increase of $30.0 million. SWB expense included $16.3 million and $14.3 million of equity-based compensation expense for the nine months ended September 30, 2020 and 2019, respectively. Excluding equity-based compensation expense, SWB expense was $1.3 billion, or 55.0% of revenue, for the nine months ended September 30, 2020, compared to $ 1.3 billion, or 54.7% of revenue, for the nine months ended September 30, 2019. Same facility SWB expense was $1.2 billion for both the nine months ended September 30, 2020 and 2019, or 52.2% of revenue.

Professional fees. Professional fees were $183.3 million for the nine months ended September 30, 2020, or 7.7% of revenue, compared to $177.6 million for the nine months ended September 30, 2019, or 7.6% of revenue. Same facility professional fees were $163.8 million for the nine months ended September 30, 2020, or 7.2% of revenue, compared to $158.0 million, for the nine months ended September 30, 2019, or 7.0% of revenue.

Supplies. Supplies expense was $93.3 million for the nine months ended September 30, 2020, or 3.9% of revenue, compared to $91.7 million for the nine months ended September 30, 2019, or 3.9% of revenue. Same facility supplies expense was $88.6 million for the nine months ended September 30, 2020, or 3.9% of revenue, compared to $87.1 million for the nine months ended September 30, 2019, or 3.9% of revenue.

Rents and leases. Rents and leases were $62.8 million for the nine months ended September 30, 2020, or 2.7% of revenue compared to $60.9 million for the nine months ended September 30, 2019, or 2.6% of revenue. Same facility rents and leases were $51.3 million for the nine months ended September 30, 2020, or 2.2% of revenue, compared to $49.5 million for the nine months ended September 30, 2019, or 2.2% 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 $288.2 million for the nine months ended September 30, 2020, or 12.2% of revenue, compared to $281.5 million for the nine months ended September 30, 2019, or 12.1% of revenue. Same facility other operating expenses were $275.4 million for the nine months ended September 30, 2020, or 12.0% of revenue, compared to $267.6 million for the nine months ended September 30, 2019, or 11.8% of revenue.

Depreciation and amortization. Depreciation and amortization expense was $126.0 million for the nine months ended September 30, 2020, or 5.3% of revenue, compared to $122.3 million for the nine months ended September 30, 2019, or 5.3% of revenue.

Interest expense. Interest expense was $119.1 million for the nine months ended September 30, 2020 compared to $143.4 million for the nine months ended September 30, 2019. The decrease in interest expense was primarily a result of lower interest rates applicable to our variable rate debt.

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Debt extinguishment costs. Debt extinguishment costs were $3.3 million for the nine months ended September 30, 2020 and represented $1.0 million of cash charges and $2.3 million of non-cash charges recorded in connection with the redemption of the 6.125% Senior Notes and the 5.125% Senior Notes.

Loss on impairment. Loss on impairment was $20.2 million for the nine months ended September 30, 2020 and represents a non-cash lease impairment charge of $16.4 million and a non-cash long-lived asset impairment charge of $3.8 million related to the decision to close certain U.K. elderly care facilities.

Transaction-related expenses. Transaction-related expenses were $17.3 million for the nine months ended September 30, 2020 compared to $15.3 million for the nine months ended September 30, 2019. Transaction-related expenses primarily relate to termination, restructuring, U.K. sale, strategic review, management transition and other similar costs incurred in the respective periods, as summarized below (in thousands):

	Nine Months Ended September 30,
	2020		2019
Termination, restructuring, sale and strategic review costs	$	9,151	$	10,941
Legal, accounting and other acquisition-related costs		8,142		1,451
Management transition costs		—		2,916
	$	17,293	$	15,308

Provision for income taxes. For the nine months ended September 30, 2020, the provision for income taxes was $21.2 million, reflecting an effective tax rate of 15.7%, compared to $25.8 million, reflecting an effective tax rate of 17.6%, for the nine months ended September 30, 2019. The decrease in the effective tax rate for the current year is primarily attributable to changes in the Company’s valuation allowance related to a decrease in the deferred tax asset on carried forward interest that is deductible as a result of the CARES Act interest deductibility changes and technical corrections to tax depreciation methods for qualified improvement property that resulted in a net operating loss generated during 2019. This net operating loss, per the CARES Act, can be carried back at a 21% tax rate to recover taxes paid at a 35% tax rate.

Revenue

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; (iv) publicly funded sources in the U.K. (including the NHS, ~~Clinical Commissioning Groups~~CCGs and local authorities in England, Scotland and Wales) and (v) individual patients and clients. ~~Revenue is recorded in~~We determine the ~~period in which services are provided at~~transaction price based on established billing rates ~~less~~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 ~~amounts reimbursable by Medicare or Medicaid under provisions of cost or prospective reimbursement formulas or amounts due from other third-party payors at contractually determined rates.~~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 ~~before provision for doubtful accounts~~in our U.S. Facilities for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 (dollars in thousands):


	Three Months Ended September 30,												Nine Months Ended September 30,												Three Months Ended September 30,										Nine Months Ended September 30,
	2017						2016						2017						2016						2020					2019					2020					2019
	Amount			%			Amount			%			Amount			%			Amount			%			Amount		%			Amount		%			Amount		%			Amount		%
Commercial	$	142,870			19.6	%	$	136,014			18.3	%	$	431,818			20.2	%	$	398,011			18.6	%	$	156,741		28.6	%	$	140,315		27.5	%	$	439,911		28.4	%	$	426,659		28.3	%
Medicare		73,593			10.1	%		70,563			9.5	%		212,992			9.9	%		198,183			9.3	%		96,536		17.6	%		76,906		15.1	%		244,721		15.9	%		223,027		14.8	%
Medicaid		199,592			27.4	%		182,432			24.5	%		587,705			27.4	%		542,594			25.4	%		261,341		47.7	%		256,370		50.3	%		767,075		49.4	%		750,631		49.8	%
NHS		236,778			32.5	%		278,524			37.4	%		694,059			32.4	%		771,496			36.1	%
Self-Pay		68,257			9.4	%		68,608			9.2	%		186,154			8.7	%		200,451			9.4	%		26,060		4.8	%		30,626		6.0	%		75,570		4.9	%		91,982		6.1	%
Other		7,622			1.0	%		8,661			1.1	%		30,968			1.4	%		28,304			1.2	%		7,283		1.3	%		5,166		1.1	%		21,376		1.4	%		14,857		1.0	%

Revenue before provision for doubtful accounts		728,712			100.0	%		744,802			100.0	%		2,143,696			100.0	%		2,139,039			100.0	%
Provision for doubtful accounts		(11,998	)					(10,137	)					(31,892	)					(31,013	)

Revenue	$	716,714					$	734,665					$	2,111,804					$	2,108,026					$	547,961		100.0	%	$	509,383		100.0	%	$	1,548,653		100.0	%	$	1,507,156		100.0	%

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The following table presents revenue by payor type and as a percentage of revenue in our U.K. Facilities for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands):

	Three Months Ended September 30,										Nine Months Ended September 30,
	2020					2019					2020					2019
	Amount		%			Amount		%			Amount		%			Amount		%
U.K. public funded sources	$	258,508		90.6	%	$	242,747		90.6	%	$	740,329		90.5	%	$	740,492		90.3	%
Self-Pay		26,147		9.2	%		24,430		9.1	%		75,618		9.3	%		77,895		9.5	%
Other		688		0.2	%		691		0.3	%		1,825		0.2	%		1,687		0.2	%
Revenue	$	285,343		100.0	%	$	267,868		100.0	%	$	817,772		100.0	%	$	820,074		100.0	%

The following tables present a summary of our aging of accounts receivable ~~as of~~at September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:

September 30, ~~2017~~2020

	Current			30-90			90-150			>150			Total
Commercial		17.8	%		4.7	%		1.9	%		5.6	%		30.0	%
Medicare		10.6	%		1.2	%		0.6	%		1.2	%		13.6	%
Medicaid		24.7	%		3.1	%		2.1	%		8.5	%		38.4	%
U.K. public funded sources		8.1	%		0.9	%		0.2	%		0.3	%		9.5	%
Self-Pay		1.7	%		1.5	%		1.2	%		2.3	%		6.7	%
Other		0.9	%		0.3	%		0.2	%		0.4	%		1.8	%
Total		63.8	%		11.7	%		6.2	%		18.3	%		100.0	%

December 31, 2019

	Current			30-90			90-150			>150			Total
Commercial		15.2	%		6.2	%		3.9	%		6.3	%		31.6	%
Medicare		10.3	%		1.4	%		0.4	%		0.9	%		13.0	%
Medicaid		23.3	%		5.9	%		3.4	%		6.8	%		39.4	%
U.K. public funded sources		6.3	%		1.6	%		0.0	%		0.0	%		7.9	%
Self-Pay		1.8	%		1.4	%		1.4	%		2.5	%		7.1	%
Other		0.6	%		0.2	%		0.1	%		0.1	%		1.0	%
Total		57.5	%		16.7	%		9.2	%		16.6	%		100.0	%

   Current 30-90 90-150 >150 Total
Commercial
   17.3 % 7.6 % 3.5 % 6.1 % 34.5 %
Medicare
   9.9 % 1.8 % 0.7 % 1.3 % 13.7 %
Medicaid
   20.5 % 5.2 % 2.2 % 5.4 % 33.3 %
NHS
   8.0 % 1.3 % 0.2 % —   % 9.5 %
Self-Pay
   1.2 % 1.3 % 1.3 % 3.0 % 6.8 %
Other
   0.9 % 0.4 % 0.2 % 0.7 % 2.2 %


Total
   57.8 % 17.6 % 8.1 % 16.5 % 100.0 %
December 31, 2016
   Current 30-90 90-150 >150 Total
Commercial
   15.8 % 8.5 % 3.0 % 5.3 % 32.6 %
Medicare
   12.0 % 1.6 % 0.8 % 1.2 % 15.6 %
Medicaid
   18.7 % 6.5 % 2.9 % 5.5 % 33.6 %
NHS
   5.1 % 3.4 % 0.6 % 0.4 % 9.5 %
Self-Pay
   1.8 % 1.5 % 1.5 % 3.3 % 8.1 %
Other
   0.1 % 0.1 % 0.1 % 0.3 % 0.6 %


Total
   53.5 % 21.6 % 8.9 % 16.0 % 100.0 %

~~Results of Operations~~

~~The following table illustrates our consolidated results of operations for the respective periods shown (dollars in thousands):~~

   Three Months Ended September 30, Nine Months Ended September 30,
   2017 2016 2017 2016
   Amount % Amount % Amount % Amount %
Revenue before provision for doubtful accounts
   $ 728,712 $ 744,802 $ 2,143,696 $ 2,139,039
Provision for doubtful accounts
   (11,998 ) (10,137 ) (31,892 ) (31,013 )


Revenue
   716,714 100.0 % 734,665 100.0 % 2,111,804 100. % 2,108,026 100.0 %
Salaries, wages and benefits
   385,562 53.8 % 408,242 55.6 % 1,145,578 54.2 % 1,157,557 54.9 %
Professional fees
   53,042 7.4 % 47,687 6.5 % 142,772 6.8 % 137,970 6.5 %
Supplies
   28,652 4.0 % 30,555 4.2 % 85,000 4.0 % 88,449 4.2 %
Rents and leases
   19,049 2.6 % 19,740 2.7 % 57,455 2.7 % 55,013 2.6 %
Other operating expenses
   82,328 11.5 % 79,748 10.9 % 249,161 11.8 % 230,950 11.0 %
Depreciation and amortization
   36,442 5.1 % 36,418 5.0 % 105,256 5.0 % 101,145 4.8 %
Interest expense
   44,515 6.2 % 48,843 6.6 % 130,777 6.2 % 135,315 6.4 %
Debt extinguishment costs
   —   0.0 % 3,411 0.5 % 810 0.1 % 3,411 0.2 %
Loss on divestiture
   —   0.0 % 174,739 23.8 % —   0.0 % 174,739 8.3 %
Gain on foreign currency derivatives
   —   0.0 % (15 ) (0.1 )% —   0.0 % (523 ) (0.1 )%
Transaction-related expenses
   5,665 0.8 % 1,111 0.1 % 18,836 0.9 % 33,483 1.6 %


Total expenses
   655,255 91.4 % 850,479 115.8 % 1,935,645 91.7 % 2,117,509 100.4 %


Income (loss) before income taxes
   61,459 8.6 % (115,814 ) (15.8 )% 176,159 8.3 % (9,483 ) (0.4 )%
Provision for income taxes
   15,970 2.2 % 2,396 0.3 % 46,259 2.1 % 27,767 1.3 %


Net income (loss)
   $ 45,489 6.4 % $ (118,210 ) (16.1 )% $ 129,900 6.2 % $ (37,250 ) (1.7 )%

~~Three months ended September 30, 2017 compared to the three months ended September 30, 2016~~

~~Revenue before provision for doubtful accounts.~~ Revenue before provision for doubtful accounts decreased $16.1 million, or 2.2%, to $728.7 million for the three months ended September 30, 2017 from $744.8 million for the three months ended September 30, 2016. The decrease related primarily to the reduction in revenue before provision for doubtful accounts related to the U.K. Divestiture of $45.4 million offset by same facility patient day growth. Same-facility revenue before provision for doubtful accounts increased by $37.8 million, or 5.7%, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016, resulting from same-facility growth in patient days of 3.5% and an increase in same-facility revenue per day of 1.9%. Consistent with the same-facility patient day growth in 2016, the growth in same-facility patient days for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

~~Provision for doubtful accounts.~~ The provision for doubtful accounts was $12.0 million for the three months ended September 30, 2017, or 1.6% of revenue before provision for doubtful accounts, compared to $10.1 million for the three months ended September 30, 2016, or 1.4% of revenue before provision for doubtful accounts.

~~Salaries, wages and benefits.~~ Salaries, wages and benefits (“SWB”) expense was $385.6 million for the three months ended September 30, 2017 compared to $408.2 million for the three months ended September 30, 2016, a decrease of $22.6 million. SWB expense included $4.2 million and $7.1 million of equity-based compensation expense for the three months ended September 30, 2017 and 2016, respectively. Excluding equity-based compensation expense, SWB expense was $381.4 million, or 53.2% of revenue, for the three months ended September 30, 2017, compared to $401.1 million, or 54.6% of revenue, for the three months ended September 30, 2016. The $19.7 million decrease in SWB expense, excluding equity-based compensation expense, was primarily attributable to the reduction in expense related to the U.K. Divestiture. Same-facility SWB expense was $351.3 million for the three months ended September 30, 2017, or 51.1% of revenue, compared to $338.1 million for the three months ended September 30, 2016, or 51.9% of revenue.

~~Professional fees.~~ Professional fees were $53.0 million for the three months ended September 30, 2017, or 7.4% of revenue, compared to $47.7 million for the three months ended September 30, 2016, or 6.5% of revenue. The $5.3 million increase was primarily attributable to higher contract labor costs in our U.K. Facilities offset by the reduction in expense related to the U.K. Divestiture. Same-facility professional fees were $45.1 million for the three months ended September 30, 2017, or 6.6% of revenue, compared to $37.6 million, for the three months ended September 30, 2016, or 5.7% of revenue.

~~Supplies.~~Supplies expense was $28.7 million for the three months ended September 30, 2017, or 4.0% of revenue, compared to $30.6 million for the three months ended September 30, 2016, or 4.2% of revenue. The $1.9 million decrease was primarily attributable to the reduction in expense related to the U.K. Divestiture. Same-facility supplies expense was $26.8 million for the three months ended September 30, 2017, or 3.9% of revenue, compared to $26.4 million for the three months ended September 30, 2016, or 4.0% of revenue.

~~Rents and leases.~~ Rents and leases were $19.1 million for the three months ended September 30, 2017, or 2.7% of revenue, compared to $19.7 million for the three months ended September 30, 2016, or 2.7% of revenue. Same-facility rents and leases were $15.4 million for the three months ended September 30, 2017, or 2.2% of revenue, compared to $16.0 million for the three months ended September 30, 2016, or 2.5% of revenue.

~~Depreciation and amortization.~~ Depreciation and amortization expense was $36.4 million for the three months ended September 30, 2017, or 5.1% of revenue, compared to $36.4 million for the three months ended September 30, 2016, or 5.0% of revenue. The slight change in depreciation and amortization was attributable to reduction in expense related to the U.K. Divestiture offset by depreciation associated with capital expenditures during 2016 and 2017.

~~Interest expense.~~ Interest expense was $44.5 million for the three months ended September 30, 2017 compared to $48.8 million for the three months ended September 30, 2016. The decrease in interest expense was primarily a result of the debt paydown on November 30, 2016 using proceeds from the U.K. Divestiture. Interest expense was also impacted by lower interest rates in connection with amendments to the Amended and Restated Senior Credit Facility offset by higher interest rates applicable to our variable rate debt.

~~Debt extinguishment costs.~~ ~~The debt extinguishment costs for the three months ended September 30, 2016 represent $3.4 million of charges recorded in connection with the TrancheB-2~~ ~~Repricing Amendment.~~

~~Loss on divestiture.~~ As part of our divestiture in the U.K., we recorded $174.7 million of loss on divestiture for the three months ended September 30, 2016, which included an allocation of goodwill to the U.K. Disposal Group of approximately $106.9 million, estimated transaction-related expenses of approximately $25.6 million and a loss on the sale of property of $42.2 million.

~~Gain on foreign currency derivatives.~~ We entered into foreign currency forward contracts during the three months ended September 30, 2016 in connection with (i) acquisitions in the U.K. and (ii) transfers of cash between the U.S. and U.K. under our cash management and foreign currency risk management programs. Exchange rate changes between the contract date and the settlement date resulted in a gain on foreign currency derivatives of $15,000 for the three months ended September 30, 2016.

~~Transaction-related expenses.~~ Transaction-related expenses were $5.7 million for the three months ended September 30, 2017 compared to $1.1 million for the three months ended September 30, 2016. Transaction-related expenses represent costs incurred in the respective periods, primarily related to the 2016 Acquisitions, the U.K. Divestiture and related integration efforts, as summarized below (in thousands):

   Three Months Ended September 30,
   2017    2016
Legal, accounting and other costs
   $ 3,845    $ 1,111
Severance and contract termination costs
   1,820    —




   $ 5,665    $ 1,111

~~Provision for income taxes.~~ For the three months ended September 30, 2017, the provision for income taxes was $16.0 million, reflecting an effective tax rate of 26.0%, compared to $2.4 million, reflecting an effective tax rate of (2.1)%, for the three months ended September 30, 2016. The increase in the effective tax rate for the three and nine months ended September 30, 2017 was primarily attributable to the disparity in the accounting treatment and the tax treatment of the U.K. Divestiture, the reduction in ongoing U.K. earnings as a result of the U.K. Divestiture, changes in the foreign exchange rate between USD and GBP and the adoption of ASU~~2016-09.~~

~~Nine months ended September 30, 2017 compared to the nine months ended September 30, 2016~~

~~Revenue before provision for doubtful accounts.~~ Revenue before provision for doubtful accounts increased $4.7 million, or 0.2%, to $2.1 billion for the nine months ended September 30, 2017 from $2.1 billion for the nine months ended September 30, 2016. The increase related primarily to revenue generated during the nine months ended September 30, 2017 from the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, offset by the reduction in revenue before provision for doubtful accounts related to the U.K. Divestiture of $129.1 million and the decline in the exchange rate between USD and GBP of $64.5 million. Same-facility revenue before provision for doubtful accounts increased $103.7 million, or 5.7%, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, resulting from same-facility growth in patient days of 4.1% and an increase in same-facility revenue per day of 1.5%. Consistent with the same-facility patient day growth in 2016, the growth in same-facility patient days for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

~~Provision for doubtful accounts.~~ The provision for doubtful accounts was $31.9 million for the nine months ended September 30, 2017, or 1.5% of revenue before provision for doubtful accounts, compared to $31.0 million for the nine months ended September 30, 2016, or 1.4% of revenue before provision for doubtful accounts.

~~Salaries, wages and benefits.~~ SWB expense was $1.2 billion for both the nine months ended September 30, 2017 and 2016. SWB expense included $19.0 million and $21.0 million of equity-based compensation expense for the nine months ended September 30, 2017 and 2016, respectively. Excluding equity-based compensation expense, SWB expense was $1.1 billion, or 53.3% of revenue, for the nine months ended September 30, 2017, compared to $1.1 billion, or 53.9% of revenue, for the nine months ended September 30, 2016. The slight decrease in SWB expense, excluding equity-based compensation expense, was primarily attributable to the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP offset by SWB expense incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory. Same-facility SWB expense was $967.2 million for the nine months ended September 30, 2017, or 50.7% of revenue, compared to $920.4 million for the nine months ended September 30, 2016, or 50.9% of revenue.

~~Professional fees.~~ Professional fees were $142.8 million for the nine months ended September 30, 2017, or 6.8% of revenue, compared to $138.0 million for the nine months ended September 30, 2016, or 6.5% of revenue. The $4.8 million increase was primarily attributable to professional fees incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, and higher contract labor costs in the U.K. Facilities offset by the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP. Same-facility professional fees were $114.6 million for the nine months ended September 30, 2017, or 6.0% of revenue, compared to $104.9 million, for the nine months ended September 30, 2016, or 5.8% of revenue.

~~Supplies.~~Supplies expense was $85.0 million for the nine months ended September 30, 2017, or 4.0% of revenue, compared to $88.4 million for the nine months ended September 30, 2016, or 4.2% of revenue. The $3.4 million decrease was primarily attributable to the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP slightly offset by supplies expense incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory. Same-facility supplies expense was $76.0 million for the nine months ended September 30, 2017, or 4.0% of revenue, compared to $73.9 million for the nine months ended September 30, 2016, or 4.1% of revenue.

~~Rents and leases.~~ Rents and leases were $57.5 million for the nine months ended September 30, 2017, or 2.7% of revenue, compared to $55.0 million for the nine months ended September 30, 2016, or 2.6% of revenue. The $2.4 million increase was primarily attributable to rents and leases incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, slightly offset by the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP. Same-facility rents and leases were $42.3 million for the nine months ended September 30, 2017, or 2.2% of revenue, compared to $42.3 million for the nine months ended September 30, 2016, or 2.3% 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 $249.2 million for the nine months ended September 30, 2017, or 11.8% of revenue, compared to $231.0 million for the nine months ended September 30, 2016, or 11.0% of revenue. The $18.2 million increase was primarily attributable to other operating expenses incurred by the facilities acquired in our 2016 Acquisitions, particularly the acquisition of Priory, slightly offset by the reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP. Same-facility other operating expenses were $220.0 million for the nine months ended September 30, 2017, or 11.4% of revenue, compared to $198.5 million for the nine months ended September 30, 2016, or 10.9% of revenue.

~~Depreciation and amortization.~~ Depreciation and amortization expense was $105.3 million for the nine months ended September 30, 2017, or 5.0% of revenue, compared to $101.1 million for the nine months ended September 30, 2016, or 4.8% of revenue. The increase in depreciation and amortization was attributable to depreciation associated with capital expenditures during 2016 and 2017 and real estate acquired as part of the 2016 Acquisitions, particularly the acquisition of Priory, offset by reduction in expense related to the U.K. Divestiture and the decline in the exchange rate between USD and GBP.

~~Interest expense.~~ Interest expense was $130.8 million for the nine months ended September 30, 2017 compared to $135.3 million for the nine months ended September 30, 2016. The decrease in interest expense was primarily a result of the lower interest rates in connection with amendments to the Amended and Restated Senior Credit Facility and the debt paydown on November 30, 2016 using proceeds from the U.K. Divestiture. Interest expense was also impacted by higher interest rates applicable to our variable rate debt, borrowings under the Amended and Restated Senior Credit Facility and the issuance of the 6.500% Senior Notes on February 16, 2016.

~~Debt extinguishment costs.~~ ~~Debt extinguishment costs for the nine months ended September 30, 2017 represent $0.5 million of charges and $0.3 ofnon-cash~~ charges recorded in connection with the Third Repricing Amendment to the Amended and Restated Senior Credit Facility. The debt extinguishment costs for the nine months ended September 30, 2016 represent $3.4 million of charges recorded in connection with the Tranche~~B-2~~ ~~Repricing Amendment.~~

~~Loss on divestiture.~~ As part of our divestiture in the U.K., we recorded $174.7 million of loss on divestiture for the nine months ended September 30, 2016, which included an allocation of goodwill to the U.K. Disposal Group of approximately $106.9 million, estimated transaction-related expenses of approximately $25.6 million and a loss on the sale of property of $42.2 million.

~~Gain on foreign currency derivatives.~~ We entered into foreign currency forward contracts during the nine months ended September 30, 2016 in connection with (i) acquisitions in the U.K. and (ii) transfers of cash between the U.S. and the U.K. under our cash management and foreign currency risk management programs. Exchange rate changes between the contract date and the settlement date resulted in a gain on foreign currency derivatives of $0.5 million for the nine months ended September 30, 2016.

~~Transaction-related expenses.~~ Transaction-related expenses were $18.8 million for the nine months ended September 30, 2017 compared to $33.5 million for the nine months ended September 30, 2016. Transaction-related expenses represent costs incurred in the respective periods, primarily related to the 2016 Acquisitions, the U.K. Divestiture and related integration efforts, as summarized below (in thousands):

   Nine Months Ended September 30,
   2017    2016
Legal, accounting and other costs
   $ 7,286    $ 17,212
Severance and contract termination costs
   11,550    1,421
Advisory and financing commitment fees
   —      14,850




   $ 18,836    $ 33,483

~~Provision for income taxes.~~ For the nine months ended September 30, 2017, the provision for income taxes was $46.3 million, reflecting an effective tax rate of 26.3%, compared to $27.8 million, reflecting an effective tax rate of (292.8)%, for the nine months ended September 30, 2016. The increase in the effective tax rate for the three and nine months ended September 30, 2017 was primarily attributable to the disparity in the accounting treatment and the tax treatment of the U.K. Divestiture, the reduction in ongoing U.K. earnings as a result of the U.K. Divestiture, changes in the foreign exchange rate between USD and GBP and the adoption of ASU~~2016-09.~~

Liquidity and Capital Resources

Cash provided by ~~continuing~~ operating activities for the nine months ended September 30, ~~2017~~2020 was ~~$272.6~~$472.2 million compared to ~~$265.2~~$213.5 million for the nine months ended September 30, ~~2016.~~2019. The increase in operating cash ~~provided by continuing operating activities was~~flows primarily ~~attributable~~relates to ~~cash provided by operating activities from our 2016 Acquisitions offset by~~positive working capital trends and benefits related to the ~~U.K. Divestiture and the decline in the exchange rate between USD and GBP.~~CARES Act. Days sales outstanding were ~~38 as of~~37 days for September 30, ~~2017~~2020 compared to ~~34 as of~~40 days at December 31, ~~2016. As of September 30, 2017 and December 31, 2016, we had working capital of $122.6 million and $85.1 million, respectively.~~2019.

Cash used in investing activities for the nine months ended September 30, ~~2017~~2020 was ~~$233.2~~$209.7 million compared to ~~$971.8~~$137.2 million for the nine months ended September 30, ~~2016.~~2019. Cash used in investing activities for the nine months ended September 30, ~~2017~~2020 primarily consisted of ~~$193.8~~$195.8 million of cash paid for capital expenditures, ~~and $33.3~~$5.6 million of cash paid for real ~~estate.~~estate and other of $10.7 million, offset by proceeds from sale of property and equipment of $2.5 million. Cash paid for capital expenditures for the nine months ended September 30, ~~2017~~2020 consisted of ~~$52.1~~$59.2 million of routine capital expenditures and ~~$141.7~~$136.6 million of 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 2.5% of revenue for the nine months ended September 30, ~~2017.~~2020. Cash used in investing activities for the nine months ended September 30, ~~2016~~2019 primarily consisted ~~of $683.3 million~~ of cash paid for acquisitions ~~$250.0~~of $44.9 million, $202.7 million of cash paid for capital expenditures, ~~and $37.9~~$7.0 million of cash paid for real estate ~~acquisitions.~~and other of $1.1 million offset by proceeds from sale of property and equipment of $13.5 million and $105.0 million for settlement of foreign currency derivatives. Cash paid for capital expenditures for the nine months ended September 30, 2019 consisted of $61.6 million of cash paid for routine capital expenditures and $141.1 million of expansion capital expenditures.

Table of contents

Cash used in financing activities for the nine months ended September 30, ~~2017~~2020 was ~~$27.5~~$48.6 million compared ~~to cash provided by financing activities of $738.2~~$32.2 million for the nine months ended September 30, ~~2016.~~2019. Cash used in financing activities for the nine months ended September 30, ~~2017 primarily~~2020 consisted of repayment of long-term debt of $450.0 million, principal payments of long-term debt of $31.9 million, principal payments on ~~long-term~~revolving credit facility of $100.0 million, payment of debt issuance costs of ~~$25.9~~$11.2 million, ~~and~~ common stock withheld for minimum statutory taxes of ~~$3.3~~$1.3 million, distributions to noncontrolling interests of $0.7 million and other of $3.5 million offset by borrowings of long-term debt of $450.0 million and borrowings on revolving credit facility of $100.0 million. Cash ~~provided by~~used in financing activities for the nine months ended September 30, ~~2016~~2019 primarily consisted of ~~borrowings on~~principal payments of long-term debt of ~~$1.5 billion, borrowings on our revolving credit facility of $179.0~~$24.7 million, ~~issuance of common stock of $685.1 million, partially offset by repayment of assumed Priory debt of $1.3 billion, payment~~principal payments on revolving credit facility of ~~$166.0~~$76.6 million, ~~payment of debt issuance costs of $35.8 million, principal payments on long-term debt of $46.1 million and~~ common stock withheld for minimum statutory taxes of ~~$7.9~~$1.5 million and other of $5.9 million offset by borrowings on revolving credit facility of $76.6 million.

We had total available cash and cash equivalents of ~~$75.7~~$338.7 million and ~~$57.1~~$124.2 million ~~as of~~at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively, of which approximately ~~$31.9~~$66.7 million and ~~$41.4~~$23.2 million was 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., and it is our current intention to permanently reinvest our foreign cash and cash equivalents outside of the U.S. If

In the second quarter of 2020, we ~~were to repatriate foreign cash~~participated in certain relief programs offered through the CARES Act, including receipt of approximately $19.7 million relating to the ~~U.S.,~~initial portions of the PHSSE funds and approximately $45 million of payments from the CMS’ Accelerated and Advance Payment Program. In addition, we ~~may be required to accrue and pay U.S. taxes~~received a 2% increase in ~~accordance with applicable U.S. tax rules and regulations~~our facilities’ Medicare reimbursement rate as a result of the ~~repatriation.~~temporary suspension of Medicare sequestration provided for in the CARES Act. In August 2020, we received an additional $12.8 million in PHSSE funds.

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.

Amended and Restated Senior Credit Facility

We entered into the Senior Secured Credit Facility on April 1, 2011. On December 31, 2012, we entered into the Amended and Restated Credit Agreement which amended and restated the Senior Secured Credit Facility. We have amended the Amended and Restated Credit Agreement from time to time as described in our prior filings with the SEC.

On ~~January 25, 2016,~~February 6, 2019, we entered into the ~~Ninth~~Eleventh Amendment to ~~our~~the Amended and Restated Credit Agreement. The ~~Ninth~~Eleventh Amendment, ~~modified certain definitions~~among other things, amended the definition of “Consolidated EBITDA” to remove the cap on non-cash charges, losses and ~~provides~~expenses related to the impairment of goodwill, which in turn provided increased flexibility to us in terms of our financial covenants. ~~Our baskets for permitted investments were also increased to provide increased flexibility for us to invest innon-wholly~~ ~~owned subsidiaries, joint ventures and foreign subsidiaries. As a result of the Ninth Amendment, we may invest innon-wholly~~ owned subsidiaries and joint ventures up to 10.0% of our and our subsidiaries’ total assets in any consecutive four fiscal quarter period, and up to 12.5% of our and our subsidiaries’ total assets during the term of the Amended and Restated Credit Agreement. We may also invest in foreign subsidiaries that are not loan parties up to 10% of our and our subsidiaries’ total assets in any consecutive four fiscal quarter period, and up to 15% of our and our subsidiaries’ total assets during the term of the Amended and Restated Credit Agreement. The foregoing permitted investments are subject to an aggregate cap of 25% of our and our subsidiaries’ total assets in any fiscal year.

On February ~~16, 2016,~~27, 2019, we entered into the Second Incremental Facility Amendment to our Amended and Restated Credit Agreement. The Second Incremental Amendment activated a new $955.0 million incremental Term Loan B facility and added $135.0 million to the Term Loan A facility to our Amended and Restated Senior Secured Credit Facility, subject to limited conditionality provisions. Borrowings under the New TLB Facility were used to fund a portion of the purchase price for the acquisition of Priory and the fees and expenses for such acquisition and the related financing transactions. Borrowings under the TLA Facility were used to pay down the majority of our $300.0 million revolving credit facility.

~~On May 26, 2016, we entered into the TrancheB-1~~ ~~Repricing~~Twelfth Amendment to the Amended and Restated Credit Agreement. The ~~TrancheB-1~~ ~~Repricing~~Twelfth Amendment, ~~reduced the Applicable Rate with respect~~among other things, modified certain definitions, including “Consolidated EBITDA”, and increased our permitted Maximum Consolidated Leverage Ratio, thereby providing increased flexibility to ~~the Existing TLB Facility from 3.5% to 3.0%~~us in ~~the case~~terms of ~~Eurodollar Rate loans and 2.5% to 2.0% in the case of Base Rate Loans.~~our financial covenants.

On ~~September~~April 21, ~~2016,~~2020, we entered into the ~~TrancheB-2~~ ~~Repricing~~Thirteenth Amendment to the Amended and Restated Credit Agreement. The ~~TrancheB-2~~ ~~Repricing~~Thirteenth Amendment ~~reduced~~amended the ~~Applicable Rate with respect to the New TLB Facility from 3.75% to 3.00%~~Consolidated Leverage Ratio in the ~~case of Eurodollar Rate loans and 2.75%~~existing covenant to ~~2.00% in~~increase the ~~case of Base Rate Loans. In connection with the TrancheB-2~~ ~~Repricing Amendment, we recorded a debt extinguishment charge of $3.4 million, including the discount andwrite-off~~ ~~of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.~~

On November 22, 2016, we entered into the Tenth Amendment to the Amended and Restated Credit Agreement. The Tenth Amendment, among other things, (i) amended the negative covenant regarding dispositions, (ii) modified the collateral package to release any real property with a fair market value of less than $5.0 million and (iii) changed certain investment, indebtedness and lien baskets.

On November 30, 2016, we entered into the Refinancing Facilities Amendment to the Amended and Restated Credit Agreement. The Refinancing Amendment increased our line of credit on our revolving credit facility to $500.0 million from $300.0 million and reduced our TLA Facility to $400.0 million from $600.6 million. In addition, the Refinancing Amendment extended the maturity dateleverage ratio for the ~~Refinancing Facilities to November 30, 2021 from February 13, 2019, and lowered our effective interest rate on our line~~rest of ~~credit on our revolving credit facility and TLA Facility by 50 basis points. In connection with the Refinancing Amendment, we recorded a debt extinguishment charge of $0.8 million, including thewrite-off~~ ~~of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.~~

On May 10, 2017, we entered into the Third Repricing Amendment to the Amended and Restated Credit Agreement. The Third Repricing Amendment reduced the Applicable Rate with respect to the Existing TLB Facility and the New TLB Facility from 3.0% to 2.75% in the case of Eurodollar Rate loans and 2.0% to 1.75% in the case of Base Rate Loans. In connection with the Third Repricing Amendment, we recorded a debt extinguishment charge of $0.8 million, including the discount and~~write-off~~ ~~of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of operations.~~2020.

We had ~~$493.5~~$485.9 million of availability under the revolving line of credit and had standby letters of credit outstanding of ~~$6.5~~$14.1 million related to security for the payment of claims required by our workers’ compensation insurance program ~~as of~~at September 30, ~~2017.~~2020. In early April 2020, we borrowed $100.0 million on the revolving line of credit to enhance our cash position in response to the potential impact of COVID-19 on our future liquidity and subsequently repaid this amount in late May 2020. Borrowings under the revolving line of credit are subject to customary conditions precedent to borrowing.

The Amended and Restated Credit Agreement requires quarterly term loan principal repayments of our TLA Facility of ~~$5.0~~$7.1 million for ~~September 30, 2017 to December 31, 2019, $7.5 million for March 31, 2020 to~~ December 31, 2020, and ~~$10.0~~$9.5 million for March 31, 2021 to September 30, 2021, with the remaining principal balance of the TLA Facility due on the maturity date of November 30, 2021. We are required to repay the ~~Existing TLB~~Tranche B-3 Facility in equal quarterly installments of ~~$1.3~~$1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the ~~Existing TLB~~Tranche B-3 Facility of $447.3 million due on February 11, 2022. We are required to repay the ~~New TLB~~Tranche B-4 Facility in equal quarterly installments of approximately ~~$2.4~~$2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the ~~New TLB~~Tranche B-4 Facility of $854.4 million due on February 16, 2023.

Borrowings under the Amended and Restated Credit Agreement are guaranteed by each of our wholly-owned domestic subsidiaries (other than certain excluded subsidiaries) and are secured by a lien on substantially all of ~~our~~the assets of the Company and

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such ~~subsidiaries’ assets.~~subsidiaries. Borrowings with respect to the TLA Facility and our revolving credit facility (collectively, “Pro Rata Facilities”) under the Amended and Restated Credit Agreement bear interest at a rate tied to our Consolidated Leverage Ratio (defined as consolidated funded debt net of up to ~~$40.0~~$50.0 million of unrestricted and unencumbered cash to consolidated ~~EBITDA, in each case as defined in the Amended and Restated Credit Agreement)~~EBITDA). The Applicable Rate ~~(as defined in the Amended and Restated Credit Agreement)~~ for the Pro Rata Facilities was ~~2.75%~~2.50% for Eurodollar Rate Loans ~~(as defined in the Amended~~ and ~~Restated Credit Agreement) and 1.75%~~1.50% for Base Rate Loans ~~(as defined in the Amended and Restated Credit Agreement)~~ at September 30, ~~2017.~~2020. Eurodollar Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the Eurodollar Rate ~~(as defined in the Amended and Restated Credit Agreement)~~ (based upon the LIBOR Rate ~~(as defined in the Amended and Restated Credit Agreement)~~ prior to commencement of the interest rate period). Base Rate Loans with respect to the Pro Rata Facilities bear interest at the Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. ~~As of~~At September 30, ~~2017,~~2020, the Pro Rata Facilities bore interest at a rate of LIBOR plus ~~2.75%~~2.50%. In addition, we are required to pay a commitment fee on undrawn amounts under our revolving credit facility.

The interest rates and the unused line fee on unused commitments related to the Pro Rata Facilities are based upon the following pricing tiers:


Pricing Tier	Consolidated Leverage Ratio	Eurodollar Rate Loans			Base Rate Loans			Commitment Fee			Consolidated Leverage Ratio	Eurodollar Rate Loans			Base Rate Loans			Commitment Fee
1	< 3.50:1.0		1.75	%		0.75	%		0.20	%	< 3.50:1.0		1.50	%		0.50	%		0.20	%
2	>3.50:1.0 but < 4.00:1.0		2.00	%		1.00	%		0.25	%	>3.50:1.0 but < 4.00:1.0		1.75	%		0.75	%		0.25	%
3	>4.00:1.0 but < 4.50:1.0		2.25	%		1.25	%		0.30	%	>4.00:1.0 but < 4.50:1.0		2.00	%		1.00	%		0.30	%
4	>4.50:1.0 but < 5.25:1.0		2.50	%		1.50	%		0.35	%	>4.50:1.0 but < 5.25:1.0		2.25	%		1.25	%		0.35	%
5	>5.25:1.0		2.75	%		1.75	%		0.40	%	>5.25:1.0		2.50	%		1.50	%		0.40	%

~~Eurodollar Rate Loans~~

Borrowings with respect to the ~~Existing TLB~~Tranche B-3 Facility bear interest as follows: Eurodollar Rate loans bear interest at the ~~Existing TLB~~Tranche B-3 Facility Applicable Rate (as defined below) plus the Eurodollar Rate ~~(subject to a floor of 0.75% and based~~(based upon the LIBOR Rate prior to commencement of the interest rate period). Base Rate Loans bear interest at the ~~Existing TLB~~Tranche B-3 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term ~~“Existing TLB~~“Tranche B-3 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, ~~3.0%~~2.50%, and with respect to Base Rate Loans, ~~2.0%~~1.50%. The ~~New TLB~~Tranche B-4 Facility bears interest as follows: Eurodollar Rate Loans bear interest at the Tranche B-4 Facility Applicable Rate (as defined ~~in the Amended and Restated Credit Agreement)~~below) plus the Eurodollar Rate ~~(subject to a floor of 0.75% and based~~(based upon the LIBOR Rate prior to commencement of the interest rate period) and Base Rate Loans bear interest at the Tranche B-4 Facility Applicable Rate plus the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the Eurodollar Rate plus 1.0%. As used herein, the term ~~“Applicable~~“Tranche B-4 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, ~~3.0%~~2.50%, and with respect to Base Rate Loans, ~~2.0%~~1.50%. At September 30, 2020, the Tranche B-3 Facility and the Tranche B-4 Facility bore interest at a rate of LIBOR plus 2.50%.

The lenders who provided the ~~Existing TLB~~Tranche B-3 Facility and ~~New TLB~~Tranche B-4 Facility are not entitled to benefit from our maintenance of ~~its~~the financial covenants under the Amended and Restated Credit Agreement. Accordingly, if we fail to maintain ~~its~~the financial covenants, such failure shall not constitute an event of default under the Amended and Restated Credit Agreement with respect to the ~~Existing TLB~~Tranche B-3 Facility or ~~the New TLB~~Tranche B-4 Facility until and unless the Amended and Restated Senior Credit Facility is accelerated or the commitment of the lenders to make further loans is terminated.

The Amended and Restated Credit Agreement requires us and our subsidiaries to comply with customary affirmative, negative and financial covenants, including a fixed charge coverage ratio, consolidated leverage ratio and consolidated senior secured leverage ratio. We may be required to pay all of our indebtedness immediately if we default on any of the numerous financial or other restrictive covenants contained in any of our material debt agreements. Set forth below is a brief description of such covenants, all of which are subject to customary exceptions, materiality thresholds and qualifications:

the affirmative covenants include the following: (i) delivery of financial statements and other customary financial information; (ii) notices of events of default and other material events; (iii) maintenance of existence, ability to conduct business, properties, insurance and books and records; (iv) payment of taxes; (v) lender inspection rights; (vi) compliance with laws; (vii) use of proceeds; (viii) further assurances; and (ix) additional collateral and guarantor requirements.

the negative covenants include limitations on the following: (i) liens; (ii) debt (including guaranties); (iii) investments; (iv) fundamental changes (including mergers, consolidations and liquidations); (v) dispositions; (vi) sale leasebacks; (vii) affiliate transactions; (viii) burdensome agreements; (ix) restricted payments; (x) use of proceeds; (xi) ownership of subsidiaries; (xii) changes to line of business; (xiii) changes to organizational documents, legal name, state of formation, form of entity and fiscal year; (xiv) prepayment or redemption of certain senior unsecured debt; and (xv) amendments to certain material agreements. We are generally not permitted to issue dividends or distributions other than with respect to the following: (w) certain tax distributions; (x) the repurchase of equity held by employees, officers or directors upon the occurrence of death, disability or termination subject to cap of $500,000 in any fiscal year and compliance with certain other conditions; (y) in the form of capital stock; and (z) scheduled payments of deferred purchase price, working capital adjustments and similar payments pursuant to the merger agreement or any permitted acquisition.

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The financial covenants include maintenance of the following:

•

the fixed charge coverage ratio may not be less than 1.25:1.00 as of the end of any fiscal quarter;

~~the total~~

•

the consolidated leverage ratio may not be greater than the following levels as of the end of ~~each fiscal quarter listed below:~~

   March 31    June 30    September 30    December 31
2017    6.75 x    6.75 x    6.50 x    6.50 x
2018    6.50 x    6.25 x    6.00 x    6.00 x
2019    5.75 x    5.75 x    5.50 x    5.50 x
2020    5.25 x    5.25 x    5.25 x    5.00 x

~~the secured leverage ratio may not be greater than the following levels as of the end of each fiscal quarter listed below:~~


~~September 30, 2017- June 30, 2018~~	~~3.75~~	x
~~September 30, 2018 and~~ each fiscal quarter ~~thereafter~~listed below:

	March 31	~~3.50~~	x June 30	September 30	December 31
2020	5.75x		6.50x	6.50x	6.25x
2021	5.25x		5.25x	5.00x	5.00x

•

the consolidated senior secured leverage ratio may not be greater than 3.50x as of the end of each fiscal quarter.

At September 30, ~~2017,~~2020, we were in compliance with all of the above covenants.

Senior Notes

6.125% Senior Notes Due 2021

On March 12, 2013, we issued $150.0 million of 6.125% Senior Notes due 2021. The 6.125% Senior Notes mature on March 15, 2021 and bear interest at a rate of 6.125% per annum, payable semi-annually in arrears on March 15 and September 15 of each year.

5.125% Senior Notes due 2022

On July 1, 2014, we issued $300.0 million of 5.125% Senior Notes due 2022. The 5.125% Senior Notes mature on July 1, 2022 and bear interest at a rate of 5.125% per annum, payable semi-annually in arrears on January 1 and July 1 of each year.

Redemption of 6.125% Senior Notes and 5.125% Senior Notes

On June 10, 2020, we issued conditional notices of full redemption providing for the redemption in full of the 6.125% Senior Notes and 5.125% Senior Notes on Redemption Date, in each case at the Redemption Price. On June 24, 2020, we satisfied and discharged the indentures governing the 6.125% Senior Notes and the 5.125% Senior Notes by irrevocably depositing with a trustee sufficient funds equal to the Redemption Price for the 6.125% Senior Notes and the 5.125% Senior Notes and otherwise complying with the terms in the indentures relating to the satisfaction and discharge of the 6.125% Senior Notes and the 5.125% Senior Notes. In connection with the redemption of the 6.125% Senior Notes and the 5.125% Senior Notes, we recorded a debt extinguishment charge of $3.3 million, including the write-off of the deferred financing and other costs in the condensed consolidated statements of income.

5.625% Senior Notes due 2023

On February 11, 2015, we issued $375.0 million of 5.625% Senior Notes due 2023. On September 21, 2015, we issued $275.0 million of 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 have outstanding an aggregate of $650.0 million of 5.625% Senior Notes. The 5.625% Senior Notes mature on February 15, 2023 and bear interest at a rate of 5.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year.

6.500% Senior Notes due 2024

On February 16, 2016, we issued $390.0 million of 6.500% Senior Notes due 2024. The 6.500% Senior Notes mature on March 1, 2024 and bear interest at a rate of 6.500% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2016.

5.500% Senior Notes due 2028

On June 24, 2020, we issued $450.0 million of 5.500% Senior Notes due 2028. The 5.500% Senior Notes mature on July 1, 2028 and bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021.

The indentures governing the Senior Notes contain covenants that, among other things, limit our ability and the ability of ~~its~~our restricted subsidiaries to: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue

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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 guarantee our obligations under the Amended and Restated Senior Credit Facility. The guarantees are full and unconditional and joint and several.

We may redeem the Senior Notes at ~~its~~our option, in whole or part, at the dates and amounts set forth in the indentures.

~~9.0% and 9.5% Revenue Bonds~~

On November 11, 2012, in connection with the acquisition of Park Royal, we assumed debt of $23.0 million. The fair market value of the debt assumed was $25.6 million and resulted in a debt premium balance being recorded as of the acquisition date. The debt consisted of $7.5 million and $15.5 million of Lee County (Florida) Industrial Development Authority Healthcare Facilities Revenue Bonds, Series 2010 with stated interest rates of 9.0% and 9.5%, respectively. The 9.0% bonds in the amount of $7.5 million have a maturity date of December 1, 2030 and require yearly principal payments beginning in 2013. The 9.5% bonds in the amount of $15.5 million have a maturity date of December 1, 2040 and require yearly principal payments beginning in 2031. The principal payments establish a bond-sinking fund to be held with the trustee and shall be sufficient to redeem the principal amounts of the 9.0% and 9.5% Revenue Bonds on their respective maturity dates. As of September 30, 2017 and December 31, 2016, $2.3 million was recorded within other assets on the condensed consolidated balance sheets related to the debt service reserve fund requirements. The yearly principal payments, which establish a bond sinking fund, will increase the debt service reserve fund requirements. The bond premium amount of $2.6 million is amortized as a reduction of interest expense over the life of the 9.0% and 9.5% Revenue Bonds using the effective interest method.

Contractual Obligations

The following table presents a summary of contractual obligations ~~as of~~at September 30, ~~2017~~2020 (dollars in thousands):


	Payments Due by Period										Payments Due by Period
	Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
Long-term debt (a)	$	196,142	$	395,699	$	1,534,207	$	2,048,740	$	4,174,788	$	182,462	$	2,454,481	$	439,801	$	530,438	$	3,607,182
Operating leases		67,856		122,996		105,816		836,723		1,133,391
Purchase and other obligations (b)		4,365		7,357		34,603		27,332		73,657

Operating lease liabilities (b)												61,898		108,685		95,746		636,039		902,368
Finance lease liabilities												37,310		6,265		2,629		24,272		70,476
Total obligations and commitments	$	268,363	$	526,052	$	1,674,626	$	2,912,795	$	5,381,836	$	281,670	$	2,569,431	$	538,176	$	1,190,749	$	4,580,026

(a)	Amounts include required principal and interest payments. The projected interest payments reflect the interest rates in place on our variable-rate debt ~~as of~~at September 30, ~~2017.~~2020.

(b)	Amounts ~~relate to purchase obligations, including capital~~exclude variable components of lease payments.

Off-Balance Sheet Arrangements

~~As of~~At September 30, ~~2017,~~2020, we had standby letters of credit outstanding of ~~$6.5~~$14.1 million related to security for the payment of claims as required by our workers’ compensation insurance program.

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. We have two operating segments for segment reporting purposes, U.S. Facilities and U.K. Facilities, each of which represents a reporting unit for purposes of the Company’s goodwill impairment test. Our annual goodwill impairment and other indefinite-lived intangible assets test performed as of October 1, 2019 resulted in no impairment charges. As of our most recent impairment test on October 1, 2019, the fair value of our U.S Facilities reporting unit substantially exceeded its carrying value, and the fair value of our U.K Facilities exceeded its carrying value by approximately 7%.

During late March 2020, results in our U.S. Facilities and U.K. Facilities were affected by COVID-19. Based on recent financial performance and current forecasts, we believe it is more likely than not that the fair values of each of our reporting units exceeds the carrying values of each reporting unit. Therefore, a quantitative impairment test was not required. We will continue to monitor our business, financial performance and forecasts for indicators of impairment. Continued disruptions to our business as a result of the COVID-19 pandemic could have a material adverse effect on our results of operations, financial condition, cash flows and ability to service our indebtedness and may affect the amounts reported in the consolidated financial statements including those related to the potential impairment of goodwill and long-lived assets.

There have been no material changes in our critical accounting policies at September 30, 2020 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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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 September 30, ~~2017~~2020 was composed of $1.5 billion of fixed-rate debt and ~~$1.8~~$1.6 billion of variable-rate debt with interest based on LIBOR plus an applicable margin. A hypothetical 10% increase in interest rates (which would equate to a ~~0.39%~~0.26% higher rate on our variable rate debt) would decrease our net income and cash flows by ~~$4.5~~$3.6 million on an annual basis based upon our borrowing level at September 30, ~~2017.~~2020.

LIBOR and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences. The U.K.’s Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR rates after 2021, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve. If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future debt obligations may be adversely affected. Management continues to evaluate new and existing contracts for the potential impact of the discontinuation of LIBOR.

Foreign Currency Risk

The functional currency for our U.K. facilities is the British pound or GBP. Our revenue and earnings are sensitive to changes in the GBP to USD exchange rate from the translation of our earnings into USD at exchange rates that may fluctuate. Based upon the level of our U.K. operations relative to the Company as a whole, a hypothetical 10% change in the exchange rate (which would equate to an increase or decrease in the exchange rate of 0.13) would cause a change in our net income of ~~$10.3~~$6.1 million on an annual basis.

In May 2016, we entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency exchange risk by effectively converting a portion of our fixed-rate USD denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rate,GBP-denominated debt of £449.3 million. In August 2019, we terminated our existing net investment cross currency swap derivatives of $105.0 million. Cash received from the termination of the cross currency swap derivatives is included in investing activities in the condensed consolidated statement of cash flows. The related gain from this termination is included in accumulated other comprehensive loss in accordance with ASC 815-30-40-1.

In August 2019, we also entered into multiple cross currency swap agreements with an aggregate notional amount of $650.0 million to manage foreign currency risk by effectively converting a portion of our fixed-rate USD-denominated senior notes, including the semi-annual interest payments thereunder, to fixed-rate GBP-denominated debt of £538.1 million. During the term of the swap agreements, we will receive semi-annual interest payments in USD from the counterparties at fixed interest rates, and we will make semi-annual interest payments in GBP to the counterparties at fixed interest rates. The interest payments under the cross-currency swap agreements result in £25.4 million of annual cash flows from our U.K. business being converted to $35.8 million. The cross currency swap agreements limit the impact of changes in the exchange rate on our cash flows and leverage. Following the Brexit vote, the GBP dropped to its lowest level against the USD in more than 30 years. If the exchange rate remains low, our results of operations will be negatively impacted in future periods.

Item 4.

Controls and Procedures

Evaluation 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 inRules 13a-15(e) and15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934 (the “Exchange Act”))~~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’s rules 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 September 30, ~~2017~~2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

We are, from time to time, subject to various claims, lawsuits, governmental investigations and ~~legal~~regulatory actions, ~~that arise in the ordinary course of our business,~~ including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employment related claims. In these actions, plaintiffs request a variety of damages, including, in some instances, punitive and other types of damages that may not be covered by insurance. In addition, healthcare companies are subject to numerous investigations by various governmental agencies. Certain of our individual facilities have received, and from time to time, other facilities may receive, subpoenas, civil investigative demands, audit requests and other inquiries from, and may be subject to investigation by, federal and state agencies. These investigations can result in repayment obligations, and violations of the ~~opinion~~False Claims Act can result in substantial monetary penalties and fines, the imposition of ~~management,~~a corporate integrity agreement and exclusion from participation in governmental health programs. In addition, the federal False Claims Act permits private parties to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions.

On April 1, 2019, a consolidated complaint was filed against the Company and certain former and current officers in the lawsuit styled St. Clair County Employees’ Retirement System v. Acadia Healthcare Company, Inc., et al., Case No. 3:19-cv-00988, which is pending in the United States District Court for the Middle District of Tennessee. The complaint purports to be brought on behalf of a class consisting of all persons (other than defendants) who purchased securities of the Company between April 30, 2014 and November 15, 2018, and alleges that defendants violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. At this time, we are not ~~currently~~able to quantify any potential liability in connection with this litigation because the case is in its early stages.

On February 21, 2019, a ~~party~~purported stockholder filed a related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Davydov v. Joey A. Jacobs, et al., Case No. 3:19-cv-00167, which is pending in the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Section 10(b) and 14(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. On May 23, 2019, a purported stockholder filed a second related derivative action on behalf of the Company against certain former and current officers and directors in the lawsuit styled Beard v. Jacobs, et al., Case No. 3:19-cv-0441, which is pending the United States District Court for the Middle District of Tennessee. The complaint alleges claims for violations of Sections 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duty, waste of corporate assets, unjust enrichment, and insider selling. On June 11, 2019, the Davydov and Beard actions were consolidated and ordered stayed pending a ruling on the motion to dismiss that was filed in the St. Clair County v. Acadia Healthcare case described above. On October 23, 2020, a purported stockholder filed a third related derivation action on behalf of the Company against former and current officers and directors in the lawsuit styled Pfenning v. Jacobs, et al., which is pending in the Court of Chancery of the State of Delaware. The complaint alleges claims for breach of fiduciary duty. At this time, we are not able to quantify any ~~proceeding that would~~potential liability in connection with this litigation because the cases are in their early stages.

On April 25, 2018, plaintiff filed Pence v. Sober Living By the Sea, Inc. - 30-2018-00988742-CU-OE-CXC, Orange County Superior Court (Pence I). On July 13, 2018, plaintiff next filed Pence v. Sober Living by the Sea, Inc.; Acadia Healthcare Company, Inc. - 30-2018-01005317-CU-OE-CJC, Orange County Superior Court (Pence II). These cases have now been consolidated before the same judge in the Complex Litigation Department of the Orange County Superior Court. The complaints allege various wage and hour violations under California law on behalf of a ~~material adverse effect~~putative class of all non-exempt California employees of Acadia and various subsidiaries, going back to April 25, 2014, and on behalf of purportedly aggrieved non-exempt employees under California’s Private Attorney General Act (“PAGA”). The claims include (1) failure to provide overtime wages; (2); failure to provide minimum wages; (3) failure to provide meal periods; (4) failure to provide rest periods; (5); failure to pay wages due at termination; (6) failure to provide accurate wage statements; (7) violations of California Business and Professions Code section 17200; and (8) civil penalties under California Labor Code section 2699 (PAGA). During the second quarter of 2020, we recorded approximately $4.0 million to transaction-related expenses in the consolidated statements of income based on our ~~business, financial condition or results~~expected settlement and legal fees.

In the fall of ~~operations.~~2017, Office of Inspector General issued subpoenas to three of our facilities requesting certain documents from January 2013 to the date of the subpoenas. The U.S. Attorney’s Office for the Middle District of Florida issued a civil investigative demand to one of our facilities in December 2017 requesting certain documents from November 2012 to the date of the demand. In April 2019, the Office of Inspector General issued subpoenas relating to six additional facilities requesting certain documents and information from January 2013 to the date of the subpoenas. The government’s investigation of each of these facilities is focused on claims not eligible for payment because of alleged violations of certain regulatory requirements relating to, among other things, medical necessity, admission eligibility, discharge decisions, length of stay and patient care issues. We are cooperating with the government’s investigation but are not able to quantify any potential liability in connection with these investigations.

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Item 1A.

Risk Factors

In addition to the other information set forth in this report, an investor should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form10-K for the year ended December 31, ~~2016.~~2019. The Company has updated and supplemented certain risk factors previously disclosed in its periodic reports filed with the Securities and Exchange Commission as set forth below. The risks as described herein and those in the Company’s Annual Report on Form10-K for the year ended December 31, ~~2016,~~2019, are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems immaterial also may materially, adversely affect the Company’s business, financial condition, operating results or cash flows.

The COVID-19 global pandemic is affecting our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the U.S. and U.K. economies remain unstable for a significant amount of time or if patient volumes decline at our facilities.

The global pandemic of COVID-19 is affecting our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. During the second and third quarters of 2020, COVID-19 resulted in fewer referrals to our facilities and lower voluntary admissions as individuals are less inclined to leave their homes and seek treatment. When employees and/or patients at a facility are infected with COVID-19, there is a risk that the virus will spread to others at the facility and impact the operations of such facility. COVID-19 is continuing to evolve and its full impact remains unknown and difficult to predict; however, it has adversely affected our business operations in the second and third quarters of 2020 and could negatively impact our financial performance for the remainder of 2020 or longer.

We are also experiencing supply chain disruptions and could experience 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. We have experienced higher staffing costs in our U.K. Facilities as a result of COVID-19, especially during surges in positive COVID-19 cases in the U.K.

We may need to take additional steps to mitigate the financial impact of COVID-19, which actions could adversely affect our financial condition and results of operations, including:

•

postponing or eliminating maintenance capital expenditures and growth capital expenditures, including acquisitions, de novo and joint venture development and facility expansions;

•

managing corporate and facility-level staffing costs by aligning staffing to patient volumes and implementing a temporary hiring freeze for non-clinical staff; and

•

reducing marketing expenditures and other corporate expenses.

Even after taking into account the actions described above intended to strengthen our financial condition and increase our financial flexibility, we could experience material decreases in Adjusted EBITDA during the fourth quarter of 2020 and for subsequent quarters.

Broad economic factors resulting from COVID-19, including high unemployment rates and reduced consumer spending, could also negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables. Business closings and layoffs in the areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services as rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital. If general economic conditions continue to deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be adversely affected.

In addition, our results and financial condition may be further adversely affected by future federal or state laws, regulations, orders, or other governmental or regulatory actions addressing the current COVID-19 pandemic or the U.S. or U.K. healthcare systems, which, if adopted, could result in direct or indirect restrictions to our business. We may also be subject to negative press and/or lawsuits from patients, employees and others exposed to COVID-19 at our facilities. Such actions may involve large demands, as well as substantial costs to resolve. Our professional and general liability insurance may not cover all claims against us.

Furthermore, the COVID-19 pandemic has caused disruption in the financial markets and the businesses of financial institutions. These factors have caused a slowdown in the decision-making of these institutions, which may affect the timing on which we may obtain any additional funding. As a result, there can be no assurance that we will be able to access additional funds on terms acceptable to us, if at all.

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As previously disclosed, after suspending our pursuit of a strategic transaction for the sale of our U.K. business because of the negative impact COVID-19 is having on the capital markets, we relaunched the sales process in October 2020. There can be no assurance, however, as to the timing, terms or viability of a potential sale of our U.K. business. In addition, we may not be able to pursue organic growth initiatives and/or acquisition and joint venture opportunities previously planned or expected for our business.

The foregoing and other continued disruptions to our business as a result of the COVID-19 pandemic have had and are likely to continue to have a material adverse effect on our business and could have a material adverse effect on our results of operations, financial condition, cash flows and our ability to service our indebtedness. Additionally, the COVID-19 pandemic (including governmental responses, broad economic impacts and market disruptions) has heightened the materiality of certain other risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019.

There is a high degree of uncertainty regarding the implementation and impact of the CARES Act and other existing or future stimulus legislation, if any. There can be no assurance as to the total amount of financial assistance or types of assistance we will receive or that we will be able to comply with the applicable terms and conditions to retain such assistance.

The CARES Act is a $2 trillion economic stimulus package signed into law on March 27, 2020, in response to the COVID-19 pandemic. As part of the CARES Act, the U.S. government announced it would offer $100 billion of relief to eligible healthcare providers. On April 24, 2020, President Trump signed into law the New PPP Act. Among other things, the New PPP Act allocates $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses. The $75 billion allocated under the New PPP Act is in addition to the $100 billion allocated 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 million of the initial PHSSE funds distributed in April 2020. We received approximately $12.8 million of additional PHSSE funds in August 2020.

The CARES Act also makes other forms of financial assistance available to health care providers, including Medicare and Medicaid payments adjustments and an expansion of the CMS Accelerated and Advance Payment Program, which makes available advance payments of Medicare funds in order to increase cash flow to providers. Using existing authority and certain expanded authority under the CARES Act, HHS has 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, our facilities were eligible to request up to 100% of their Medicare payment amount for a three-month period.

Due to the recent enactment of the CARES Act, the New PPP Act and other enacted legislation, there is still a high degree of uncertainty surrounding their implementation, and the COVID-19 pandemic continues to evolve. Some of the measures allowing for flexibility in delivery of care and various financial supports for health care providers are available only for the duration of the public health emergency (“PHE”), and it is unclear whether or for how long the PHE declaration will be extended. The current PHE determination expires January 21, 2021. The HHS Secretary may choose to renew the PHE declaration for successive 90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the PHE no longer exists. The federal government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will be enacted or their impact. There can be no assurance as to the total amount of financial and other types of assistance we will receive under the CARES Act, New PPP Act or future legislation, if any, or whether we shall retain, return or repay any such assistance, and it is difficult to predict the impact of such legislation on our operations. Further, there can be no assurance that the terms and conditions of provider relief funding or other relief programs will not change or be interpreted in ways that affect our ability to comply with such terms and conditions in the future (which could affect our ability or willingness to retain assistance), the amount of total stimulus funding we will receive or our eligibility to participate in such stimulus funding. We are continuing to evaluate the terms and conditions and financial impact of funds received under the CARES Act and other government relief programs.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, ~~2017,~~2020, the Company withheld shares of Company common stock to satisfy employee minimum statutory tax withholding obligations payable upon the vesting of restricted stock, as follows:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs		Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 – July 31		4,400	$	50.08		—		—		2,812	$	30.92		—		—
August 1 – August 31		3,016		50.29		—		—		739		29.96		—		—
September 1 – September 30		198		47.28		—		—		175		29.90		—		—

Total		7,614								3,726

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Item 6.

Exhibits

Exhibit No.	Exhibit Description
~~Exhibit~~ ~~No.~~		~~Exhibit Description~~
3.1
~~3.1~~	Amended and Restated Certificate of Incorporation, as ~~filed on October~~ ~~28, 2011 with the Secretary of State of the State of Delaware, as amended by the Certificate of Amendment filed on May~~ ~~25, 2017.~~amended. (1)

3.2	Amended and Restated Bylaws of the Company, as ~~amended May~~ ~~25, 2017.~~amended. (1)
4.1	Indenture, dated October 14, 2020, by and among the Company, the guarantors party thereto and U.S. Bank National Association, as Trustee. (2)
31.1*
4.2	Form of 5.000% Senior Note due 2029 (included as Exhibit A1 in Exhibit 4.1).

22*	List of Subsidiary Guarantors and Issuers of Guaranteed Securities.

31.1*	Certification of the Chief Executive Officer of the Company pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

31.2*	Certification of the Chief Financial Officer of the Company pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

32*	Certification of Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

101.INS**	Inline XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.

101.SCH**	Inline XBRL Taxonomy Extension Schema Document.

101.CAL**	Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF**	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB**	Inline XBRL Taxonomy ~~Labels~~Label Linkbase Document.

101.PRE**	Inline XBRL Taxonomy Presentation Linkbase Document.

104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, has been formatted in Inline XBRL.

(1)	Incorporated by reference to exhibits filed with the Company’s Current Report on Form8-K filed May 25, 2017 (FileNo. 001-35331).

(2)

~~Filed herewith.~~

~~The XBRL related information in Exhibit 101 to this quarterly report on Form10-Q~~ ~~shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated~~

Incorporated by reference ~~into any filing or other document pursuant~~ to exhibits filed with the ~~Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.~~Company’s Current Report on Form 8-K filed October 14, 2020 (File No. 001-35331).

*	Filed herewith.

** The XBRL related information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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SIGNATURES

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


Acadia Healthcare Company, Inc.

By:		/s/ David M. Duckworth
		David M. Duckworth
		Chief Financial Officer

Dated: October ~~25, 2017~~

30, 2020

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