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.

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 ☒

At ~~May 3,~~July 31, 2018, there were ~~88,235,019~~88,274,373 shares of the registrant’s common stock outstanding.

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ACADIA HEALTHCARE COMPANY, INC.

QUARTERLY REPORT ON FORM10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements		1

	Condensed Consolidated Balance Sheets (Unaudited) at ~~March 31,~~June 30, 2018 and December 31, 2017		1

	Condensed Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended ~~March 31,~~June 30, 2018 and 2017		2

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended ~~March 31,~~June 30, 2018 and 2017		3

	Condensed Consolidated Statement of Equity (Unaudited) for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2018		4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2018 and 2017		5

	Notes to Condensed Consolidated Financial Statements (Unaudited)		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		37	42

Item 4.	Controls and Procedures		37
		42

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		39	44

Item 1A.	Risk Factors		39	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39	44

Item 6.	Exhibits		40
		45

SIGNATURES			41	46

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PART I – ~~FINANCIAL~~FINANCIAL INFORMATION

Item 1.

Financial Statements

Acadia Healthcare Company, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	March 31, 2018			December 31, 2017			June 30, 2018			December 31, 2017
	(In thousands, except share and per share amounts)						(In thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	57,808		$	67,290		$	79,463		$	67,290
Accounts receivable, net		325,148			296,925			329,256			296,925
Other current assets		120,937			107,335			80,503			107,335

Total current assets		503,893			471,550			489,222			471,550
Property and equipment, net		3,151,529			3,048,130			3,103,331			3,048,130
Goodwill		2,779,401			2,751,174			2,739,303			2,751,174
Intangible assets, net		91,036			87,348			91,566			87,348
Deferred tax assets		3,698			3,731			3,664			3,731
Derivative instrument assets		—			12,997			24,989			12,997
Other assets		55,172			49,572			51,072			49,572

Total assets	$	6,584,729		$	6,424,502		$	6,503,147		$	6,424,502

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	33,830		$	34,830		$	33,264		$	34,830
Accounts payable		122,430			102,299			130,228			102,299
Accrued salaries and benefits		104,908			99,047			102,840			99,047
Other accrued liabilities		128,473			141,213			127,786			141,213

Total current liabilities		389,641			377,389			394,118			377,389
Long-term debt		3,208,088			3,205,058			3,187,788			3,205,058
Deferred tax liabilities		76,930			80,333			78,340			80,333
Derivative instrument liabilities		15,160			—
Other liabilities		168,633			166,434			160,809			166,434

Total liabilities		3,858,452			3,829,214			3,821,055			3,829,214
Redeemable noncontrolling interests		24,658			22,417			28,791			22,417
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; 87,287,865 and 87,060,114 issued and outstanding at March 31, 2018 and December 31, 2017, respectively		873			871
Common stock, $0.01 par value; 180,000,000 shares authorized; 87,330,276 and 87,060,114 issued and outstanding at June 30, 2018 and December 31, 2017, respectively								873			871
Additionalpaid-in capital		2,522,745			2,517,545			2,530,083			2,517,545
Accumulated other comprehensive loss		(301,391	)		(374,118	)		(415,883	)		(374,118	)
Retained earnings		479,392			428,573			538,228			428,573

Total equity		2,701,619			2,572,871			2,653,301			2,572,871

Total liabilities and equity	$	6,584,729		$	6,424,502		$	6,503,147		$	6,424,502

See accompanying notes.

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Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Income

(Unaudited)


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2018			2017
	(In thousands, except per share amounts)						(In thousands, except per share amounts)
Revenue before provision for doubtful accounts	$	742,241		$	689,341		$	765,738		$	725,643		$	1,507,979		$	1,414,984
Provision for doubtful accounts		—			(10,147	)		—			(9,747	)		—			(19,894	)

Revenue		742,241			679,194			765,738			715,896			1,507,979			1,395,090
Salaries, wages and benefits (including equity-based compensation expense of $6,919 and $7,396, respectively)		411,528			376,421
Salaries, wages and benefits (including equity-based compensation expense of $7,129, $7,436, $14,048 and $14,832, respectively)								416,741			383,595			828,269			760,016
Professional fees		54,018			43,409			53,461			46,321			107,479			89,730
Supplies		29,364			27,709			30,133			28,639			59,497			56,348
Rents and leases		20,288			18,971			20,236			19,435			40,524			38,406
Other operating expenses		88,231			83,711			87,282			83,122			175,513			166,833
Depreciation and amortization		39,773			33,613			39,928			35,201			79,701			68,814
Interest expense, net		45,243			42,757			45,812			43,505			91,055			86,262
Debt extinguishment costs		940			—			—			810			940			810
Transaction-related expenses		4,768			4,119			2,887			9,052			7,655			13,171

Total expenses		694,153			630,710			696,480			649,680			1,390,633			1,280,390

Income before income taxes		48,088			48,484			69,258			66,216			117,346			114,700
(Benefit from) provision for income taxes		(2,786	)		13,711

Provision for income taxes								10,368			16,578			7,582			30,289
Net income		50,874			34,773			58,890			49,638			109,764			84,411
Net (income) loss attributable to noncontrolling interests		(55	)		185			(54	)		(8	)		(109	)		177

Net income attributable to Acadia Healthcare Company, Inc.	$	50,819		$	34,958		$	58,836		$	49,630		$	109,655		$	84,588

Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders:
Basic	$	0.58		$	0.40		$	0.67		$	0.57		$	1.26		$	0.97

Diluted	$	0.58		$	0.40		$	0.67		$	0.57		$	1.26		$	0.97

Weighted-average shares outstanding:
Basic		87,121			86,762			87,303			86,954			87,205			86,859
Diluted		87,294			86,908			87,467			87,080			87,351			86,997

See accompanying notes.

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Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

   Three Months Ended
March 31,
   2018 2017
   (In thousands)
Net income
   $ 50,874 $ 34,773
Other comprehensive income:

Foreign currency translation gain
   92,780 27,046
Loss on derivative instruments, net of tax of $(7.3) million and $(5.6) million, respectively
   (20,053 ) (5,868 )


Other comprehensive income
   72,727 21,178


Comprehensive income
   123,601 55,951


Comprehensive (gain) loss attributable to noncontrolling interests
   (55 ) 185


Comprehensive income attributable to Acadia Healthcare Company, Inc.
   $ 123,546 $ 56,136

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands)
Net income	$	58,890		$	49,638		$	109,764		$	84,411
Other comprehensive (loss) income:
Foreign currency translation (loss) gain		(143,599	)		92,076			(50,819	)		119,122
Gain (loss) on derivative instruments, net of tax of $10.5 million, $(6.5) million, $3.2 million and $(12.1) million, respectively		29,107			(9,084	)		9,054			(14,952	)
Other comprehensive (loss) income		(114,492	)		82,992			(41,765	)		104,170
Comprehensive (loss) income		(55,602	)		132,630			67,999			188,581
Comprehensive (gain) loss attributable to noncontrolling interests		(54	)		(8	)		(109	)		177
Comprehensive (loss) income attributable to Acadia Healthcare Company, Inc.	$	(55,656	)	$	132,622		$	67,890		$	188,758

See accompanying notes.

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Acadia Healthcare Company, Inc.

Condensed Consolidated Statement of Equity

(Unaudited)

(In thousands)


	Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Retained					Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Retained
	Shares		Amount		Capital			Loss			Earnings		Total			Shares		Amount		Capital			Loss			Earnings		Total
Balance at December 31, 2017		87,060	$	871	$	2,517,545		$	(374,118	)	$	428,573	$	2,572,871			87,060	$	871	$	2,517,545		$	(374,118	)	$	428,573	$	2,572,871
Common stock issued under stock incentive plans		228		2		94			—			—		96			270		2		222			—			—		224
Common stock withheld for minimum statutory taxes		—		—		(2,126	)		—			—		(2,126	)		—		—		(2,358	)		—			—		(2,358	)
Equity-based compensation expense		—		—		6,919			—			—		6,919			—		—		14,048			—			—		14,048
Other comprehensive income		—		—		—			72,727			—		72,727
Other comprehensive loss																	—		—		—			(41,765	)		—		(41,765	)
Other		—		—		313			—			—		313			—		—		626			—			—		626
Net income attributable to Acadia Healthcare Company, Inc.		—		—		—			—			50,819		50,819			—		—		—			—			109,655		109,655

Balance at March 31, 2018		87,288	$	873	$	2,522,745		$	(301,391	)	$	479,392	$	2,701,619

Balance at June 30, 2018																	87,330	$	873	$	2,530,083		$	(415,883	)	$	538,228	$	2,653,301

See accompanying notes.

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Acadia Healthcare Company, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands)						(In thousands)
Operating activities:
Net income	$	50,874		$	34,773		$	109,764		$	84,411
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Depreciation and amortization		39,773			33,613			79,701			68,814
Amortization of debt issuance costs		2,525			2,396			5,124			4,845
Equity-based compensation expense		6,919			7,396			14,048			14,832
Deferred income tax expense		1,897			2,007
Deferred income taxes								(3,978	)		17,096
Debt extinguishment costs		940			—			940			810
Other		1,043			3,825			1,040			6,558
Change in operating assets and liabilities:
Accounts receivable, net		(18,793	)		(12,459	)		(26,104	)		(22,404	)
Other current assets		(13,216	)		5,886			9,953			20,457
Other assets		(1,268	)		(1,710	)		2,761			1,809
Accounts payable and other accrued liabilities		(3,368	)		(16,993	)		21,066			(4,893	)
Accrued salaries and benefits		4,802			(3,437	)		4,364			(9,157	)
Other liabilities		509			2,142			(793	)		5,257

Net cash provided by continuing operating activities		72,637			57,439			217,886			188,435
Net cash used in discontinued operating activities		(287	)		(425	)		(572	)		(829	)

Net cash provided by operating activities		72,350			57,014			217,314			187,606
Investing activities:
Cash paid for capital expenditures		(70,327	)		(50,549	)		(161,555	)		(117,521	)
Cash paid for real estate acquisitions		(4,293	)		(2,495	)		(8,857	)		(22,850	)
Other		(4,066	)		(5,051	)		(3,337	)		(5,938	)

Net cash used in investing activities		(78,686	)		(58,095	)		(173,749	)		(146,309	)
Financing activities:
Principal payments on long-term debt		—			(8,638	)		(23,246	)		(17,275	)
Common stock withheld for minimum statutory taxes, net		(2,030	)		(4,234	)		(2,134	)		(3,678	)
Other		(2,704	)		(865	)		(5,172	)		(2,270	)

Net cash used in financing activities		(4,734	)		(13,737	)		(30,552	)		(23,223	)
Effect of exchange rate changes on cash		1,588			842			(840	)		4,297

Net decrease in cash and cash equivalents		(9,482	)		(13,976	)
Net increase in cash and cash equivalents								12,173			22,371
Cash and cash equivalents at beginning of the period		67,290			57,063			67,290			57,063

Cash and cash equivalents at end of the period	$	57,808		$	43,087		$	79,463		$	79,434

See accompanying notes.

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Acadia Healthcare Company, Inc.

Notes to Condensed Consolidated Financial Statements

~~March 31,~~June 30, 2018

(Unaudited)

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 ~~March 31,~~June 30, 2018, the Company operated ~~584~~585 behavioral healthcare facilities with approximately ~~17,800~~17,900 beds in 40 states, the U.K. and Puerto Rico.

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’ 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, 2017 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, 2017 included in the Company’s Annual Report on Form10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2018. 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.

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

2.	Recently Issued Accounting Standards

In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12, ~~2017-12,~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU2017-12”). ASU2017-12 amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in the financial statements and simplifies the application of hedge accounting in certain situations. ASU2017-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. Management is evaluating the impact of ASU2017-12 on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, ~~2017-04,~~“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. ASU2017-04 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has elected to early adopt ASU2017-04 on January 1, 2018, and ~~management does not anticipate a~~there was no significant impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, ~~2016-15,~~“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU2016-15”). ASU2016-15 addresses treatment of how certain cash receipts and cash payments are presented and classified in the statement of cash flows to reduce the diversity in practice. ASU2016-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted ASU2016-15 on January 1, 2018. There is no significant impact on the Company’s consolidated financial statements.

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In March 2016, the FASB issued ASU 2016-02, ~~2016-02,~~“Leases” (“ASU2016-02”). ASU2016-02’s core principle is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information. ASU2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Additionally, ASU2016-02 would permit both public and nonpublic organizations to adopt the new standard early. Management believes the primary effect of adopting the new standard will be to recordright-of-use assets and obligations for current operating leases. In March 2018, the FASB approved an alternative transition method to the modified retrospective approach. The alternative transition method eliminates the requirement to restate prior financial statements and requires the cumulative effect of the retrospective application to be recorded as an adjustment to the opening balance of retained earnings at the date of adoption. Management is currently evaluating ~~which transition method the Company will adopt on January 1, 2019 and~~ the impact ASU2016-02 will have on the Company’s consolidated financial statements, internal controls, policies and procedures.

In January 2016, the FASB issued ASU 2016-01, ~~2016-01,~~“Financial Instruments-Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU2016-01”). ASU2016-01 amends how entities recognize, measure, present and disclose certain financial assets and financial liabilities. It requires entities to measure equity investments (except for those accounted for under equity method) at fair value and recognize any changes in fair value in net income. ASU2016-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted ASU2016-01 on January 1, 2018. There iswas no significant impact on the Company’s consolidated financial statements.

In May 2014, the FASB and the International Accounting Standards Board issued ASU 2014-09, ~~2014-09,~~“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. ASU2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted ASU2014-09 on January 1, 2018 as described in Note 3 – Revenue.

Revenue

ASU2014-09 requires companies to exercise more judgment and recognize revenue using a five-step process. The Company adopted ASU2014-09 using the modified retrospective method for all contracts effective January 1, 2018 and is using a portfolio approach to group contracts with similar characteristics and analyze historical cash collections trends. Modified retrospective adoption requires entities to apply the standard retrospectively to the most current period presented in the financial statements, requiring the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings at the date of initial application. Prior periods have not been adjusted. No cumulative-effect adjustment in retained earnings was recorded as the adoption of ASU2014-09 did not significantly impact the Company’s reported historical revenue.

As a result of certain changes required by ASU2014-09, the majority of the Company’s provision for doubtful accounts are recorded as a direct reduction to revenue instead of being presented as a separate line item on the condensed consolidated statements of income. The adoption of ASU2014-09 has no impact on the Company’s accounts receivable as it was historically recorded net of allowance for doubtful accounts and contractual adjustments, and the Company has eliminated the presentation of allowance for doubtful accounts on the condensed consolidated balance sheets. The adoption of ASU2014-09 did not have a significant impact on the Company’s condensed consolidated statements of income. The impact of adopting ASU2014-09 on ~~our~~the condensed consolidated statements of income for the three and six months ended ~~March 31,~~June 30, 2018 was as ~~follows:~~follows (in thousands):

						Three Months Ended June 30, 2018					Six Months Ended June 30, 2018
	As Reported		Prior to Adopting ASU2014-09			As Reported		Prior to Adopting ASU 2014-09			As Reported		Prior to Adopting ASU 2014-09
Revenue before provision for doubtful accounts	$	742,241	$	750,501		$	765,738	$	775,203		$	1,507,979	$	1,525,704
Provision for doubtful accounts		—		(8,260	)		—		(9,465	)		—		(17,725	)

Revenue	$	742,241	$	742,241		$	765,738	$	765,738		$	1,507,979	$	1,507,979

The Company evaluated the nature, amount, timing and uncertainty of revenue and cash flows using the five-step process provided within ASU2014-09.

Revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and adolescent 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.

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Services ordered by a healthcare provider in an episode of care are not separately identifiable and therefore have been combined into a single performance obligation for each contract. The Company recognizes revenue as its performance obligations are completed. The performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits of

the healthcare services provided. For inpatient services, the Company recognizes revenue equally over the patient stay on a daily basis. For outpatient services, the Company recognizes revenue equally over the number of treatments provided in a single episode of care. Typically, patients and third-party payors are billed within several days of the service being performed or the patient being discharged, and payments are due based on contract terms.

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in ASC606-10-50-14(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 has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to remain admitted in our facilities.

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 services.

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 provides24-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 andco-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 anon-hospital setting, including outdoor programs. The facilities balance therapy activities with social, academic and other activities.

Outpatient community-based services. 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 March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		2018		2017
Acute inpatient psychiatric facilities	$	195,891	$	184,687	$	203,535	$	193,989	$	399,426	$	378,676
Specialty treatment facilities		184,535		175,197		192,894		182,748		377,429		357,945
Residential treatment centers		71,557		69,287		74,133		73,180		145,690		142,467
Outpatient community-based services		10,422		11,052		10,908		11,497		21,330		22,549

Revenue	$	462,405	$	440,223	$	481,470	$	461,414	$	943,875	$	901,637

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 the Centers for Medicare and Medicaid Services (“CMS”); and (iv) individual patients and clients. As the period between the time of service and time of payment is typically one year or less, the Company elected the practical expedient under ASC606-10-32-18 and did not adjust for the effects of a significant financing component.

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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 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 component of other operating expenses in the condensed consolidating statements of income. Bad debt expense for the three and six months ended ~~March 31,~~June 30, 2018 was not significant.

The Company derives a significant portion of its revenue from Medicare, Medicaid and other payors that receive discounts from established billing rates. The Medicare and Medicaid regulations and various managed care contracts under which these discounts must be calculated are complex, subject to interpretation and adjustment, and may include multiple reimbursement mechanisms for different types of services provided in the Company’s inpatient facilities and cost settlement provisions. Management estimates the transaction price on a payor-specific basis given its interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to interpretation that could result in payments that differ from the Company’s estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management.

Settlements under cost reimbursement agreements with third-party payors are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. Final determination of amounts earned under the Medicare and Medicaid programs often occurs in subsequent years because of audits by such programs, rights of appeal and the application of numerous technical provisions. In the opinion of management, adequate provision has been made for any adjustments and final settlements. However, there can be no assurance that any such adjustments and final settlements will not have a material effect on the Company’s financial condition or results of operations. The Company’s cost report receivables were ~~$11.8~~$12.2 million and $9.0 million at ~~March 31,~~June 30, 2018 and December 31, 2017, respectively, and were included in other current assets in the condensed consolidated balance sheets. Management believes that these receivables are properly stated and are not likely to be settled for a significantly different amount. The net adjustments to estimated cost report settlements were not significant for the three and six months ended ~~March 31, 2018 and 2017.~~June 30, 2018.

Management believes that we comply in all material respects with applicable laws and regulations and is not aware of any material pending or threatened investigations involving allegations of wrongdoing. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties and exclusion from the Medicare and Medicaid programs.

The Company provides care without charge to patients who are financially unable to pay for the healthcare services they receive based on Company policies and federal and state poverty thresholds. Such amounts determined to qualify as charity care are not reported as revenue. The cost of providing charity care services were ~~$2.0~~$1.2 million and ~~$1.9~~$1.4 million for the three months ended ~~March 31,~~June 30, 2018 and 2017, respectively. The cost of providing charity care services were $2.8 million and $3.0 million for the six months ended June 30, 2018 and 2017, respectively. The estimated cost of charity care services was determined using a ratio of cost to gross charges determined from our most recently filed Medicare cost reports and applying that ratio to the gross charges associated with providing charity care for the period.

The following table presents revenue generated by each payor type (in thousands):


	Three Months Ended March 31,					Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017			2018		2017
Commercial	$	137,619	$	139,455		$	147,279	$	149,493		$	284,898	$	288,948
Medicare		67,271		67,840			69,508		71,559			136,779		139,399
Medicaid		213,279		190,834			225,567		197,279			438,846		388,113
Self-Pay		36,907		43,682			33,379		43,561			70,286		87,243
Other		7,329		8,553			5,737		9,269			13,066		17,822

Revenue before provision for doubtful accounts		462,405		450,364			481,470		471,161			943,875		921,525
Provision for doubtful accounts		—		(10,141	)		—		(9,747	)		—		(19,888	)

Revenue	$	462,405	$	440,223		$	481,470	$	461,414		$	943,875	$	901,637

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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, adult care facilities and elderly 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 require52-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.

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


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		2018		2017
Healthcare facilities	$	154,800	$	132,098	$	159,060	$	141,187	$	313,860	$	273,285
Education and Children’s Services		49,333		39,697		49,310		42,199		98,643		81,896
Adult Care facilities		75,703		67,176		75,898		71,096		151,601		138,272

Revenue	$	279,836	$	238,971	$	284,268	$	254,482	$	564,104	$	493,453

The Company receives payments from approximately 500 public funded sources in the U.K. (including the National Health Service (“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 and is reduced by implicit price concessions. Implicit price concessions are insignificant in our U.K. Facilities. There is no significant variable consideration in our U.K. Facilities’ contracts. As the period between the time of service and time of payment is typically one year or less, the Company elected the practical expedient under ASC606-10-32-18 and did not adjust for the effects of a significant financing component.

The following table presents revenue generated by each payor type (in thousands):


	Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017			2018		2017		2018		2017
U.K. public funded sources	$	253,294	$	215,465		$	256,881	$	226,380	$	510,175	$	441,845
Self-Pay		25,068		22,201			27,272		23,889		52,340		46,090
Other		1,474		1,311			115		4,213		1,589		5,524

Revenue before provision for doubtful accounts		279,836		238,977			284,268		254,482		564,104		493,459
Provision for doubtful accounts		—		(6	)		—		—		—		(6	)

Revenue	$	279,836	$	238,971		$	284,268	$	254,482	$	564,104	$	493,453

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The Company’s contract liabilities primarily consist of unearned revenue in our U.K. ~~Facilities.~~Facilities and are included in other accrued liabilities on the condensed consolidated balance sheets. A summary of the activity in unearned revenue in the U.K. Facilities is as follows (in thousands):


Balance at December 31, 2017	$	30,812		$	30,812
Payments received		45,349			84,541
Revenue recognized		(38,908	)		(82,580	)
Foreign currency translation gain		1,155

Balance at March 31, 2018	$	38,408

Foreign currency translation loss					(1,340	)
Balance at June 30, 2018				$	31,433

4.	Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended ~~March 31,~~June 30, 2018 and 2017 (in thousands, except per share amounts):


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		2018		2017
Numerator:
Net income attributable to Acadia Healthcare Company, Inc.	$	50,819	$	34,958	$	58,836	$	49,630	$	109,655	$	84,588

Denominator:
Weighted average shares outstanding for basic earnings per share		87,121		86,762		87,303		86,954		87,205		86,859
Effect of dilutive instruments		173		146		164		126		146		138

Shares used in computing diluted earnings per common share		87,294		86,908		87,467		87,080		87,351		86,997

Earnings per share attributable to Acadia Healthcare Company, Inc. stockholders:
Basic	$	0.58	$	0.40	$	0.67	$	0.57	$	1.26	$	0.97

Diluted	$	0.58	$	0.40	$	0.67	$	0.57	$	1.26	$	0.97

Approximately 1.6 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 three months ended June 30, 2018 and 2017, respectively, because their effect would have been anti-dilutive. Approximately 2.0 million and ~~1.2~~1.1 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~~six months ended ~~March 31,~~June 30, 2018 and 2017, respectively, because their effect would have been anti-dilutive.

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5.	Other Intangible Assets

Other identifiable intangible assets and related accumulated amortization consisted of the following at ~~March 31,~~June 30, 2018 and December 31, 2017 (in thousands):

	Gross Carrying Amount				Accumulated Amortization
	June 30, 2018		December 31, 2017		June 30, 2018			December 31, 2017
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		12,772		12,266		—			—
Trade names		61,960		60,586		—			—
Certificates of need		16,834		14,496		—			—
		91,566		87,348		—			—
Total	$	94,813	$	90,595	$	(3,247	)	$	(3,247	)

   Gross Carrying Amount    Accumulated Amortization
   March 31,
2018    December 31,
2017    March 31,
2018    December 31,
2017
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
   12,798    12,266    —      —
Trade names
   61,413    60,586    —      —
Certificates of need
   16,825    14,496    —      —








   91,036    87,348    —      —








Total
   $ 94,283    $ 90,595    $ (3,247 )    $ (3,247 )

All the Company’s defined-lived intangible assets 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 and Equipment

Property and equipment consists of the following at ~~March 31,~~June 30, 2018 and December 31, 2017 (in thousands):


	March 31, 2018			December 31, 2017			June 30, 2018			December 31, 2017
Land	$	466,913		$	450,342		$	451,264		$	450,342
Building and improvements		2,475,543			2,370,918			2,440,139			2,370,918
Equipment		440,189			400,596			438,033			400,596
Construction in progress		165,720			173,693			195,697			173,693
								3,525,133			3,395,549
		3,548,365			3,395,549
Less accumulated depreciation		(396,836	)		(347,419	)		(421,802	)		(347,419	)

Property and equipment, net	$	3,151,529		$	3,048,130		$	3,103,331		$	3,048,130

7.	Long-Term Debt

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


	March 31, 2018			December 31, 2017			June 30, 2018			December 31, 2017
Amended and Restated Senior Credit Facility:
Senior Secured Term A Loans	$	380,000		$	380,000		$	375,250		$	380,000
Senior Secured Term B Loans		1,398,400			1,398,400			1,379,904			1,398,400
Senior Secured Revolving Line of Credit		—			—			—			—
6.125% Senior Notes due 2021		150,000			150,000			150,000			150,000
5.125% Senior Notes due 2022		300,000			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		21,920			21,920			21,920			21,920
Less: unamortized debt issuance costs, discount and premium		(48,402	)		(50,432	)		(46,022	)		(50,432	)
								3,221,052			3,239,888
		3,241,918			3,239,888
Less: current portion		(33,830	)		(34,830	)		(33,264	)		(34,830	)

Long-term debt	$	3,208,088		$	3,205,058		$	3,187,788		$	3,205,058

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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 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 Term Loan B facility TrancheB-1 (the “TrancheB-1 Facility”) and the Term Loan B facility TrancheB-2 (the “TrancheB-2 Facility”) from 3.00% to 2.75% in the case of Eurodollar Rate loans and from 2.00% 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 andwrite-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of income.

On March 22, 2018, the Company entered into a Second Repricing Facilities Amendment (the “Second Repricing Facilities Amendment”) to the Amended and Restated Credit Agreement. The Second Repricing Facilities Amendment (i) replaced the TrancheB-1 Facility and the TrancheB-2 Facility with a new Term Loan B facility TrancheB-3 (the “TrancheB-3 Facility”) and a new Term Loan B facility TrancheB-4 (the “TrancheB-4 Facility”), respectively, and (ii) reduced the Applicable Rate from 2.75% to 2.50% in the case of Eurodollar Rate loans and reduced the Applicable Rate from 1.75% to 1.50% in the case of Base Rate Loans.

On March 29, 2018, the Company entered into a Third Repricing Facilities Amendment to the Amended and Restated Credit Agreement (the “Third Repricing Facilities Amendment”, and together with the Second Repricing Facilities Amendment, the “Repricing Facilities Amendments”). The Third Repricing Facilities Amendment replaced the existing revolving credit facility and Term Loan A facility (“TLA Facility”) with a new revolving credit facility and TLA Facility, respectively. The Company’s line of

credit on its revolving credit facility remains at $500.0 million and the Third Repricing Facility Amendment reduced the size of the TLA Facility from $400.0 million to $380.0 million to reflect the then current outstanding principal. The Third Repricing Facilities Amendment reduced the Applicable Rate by 25 basis points for the revolving credit facility and the TLA Facility by amending the definition of “Applicable Rate.”

In connection with the Repricing Facilities Amendments, the Company recorded a debt extinguishment charge of $0.9 million, including the discount andwrite-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of income.

The Company had ~~$495.8~~$495.0 million of availability under the revolving line of credit and had standby letters of credit outstanding of ~~$4.2~~$5.0 million related to security for the payment of claims required by its workers’ compensation insurance program at ~~March 31,~~June 30, 2018. 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 $4.8 million for ~~June~~September 30, 2018 to December 31, 2019, $7.1 million for March 31, 2020 to December 31, 2020, and $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 TrancheB-3 Facility in equal quarterly installments of $1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the TrancheB-3 Facility due on February 11, 2022. The Company is required to repay the TrancheB-4 Facility in equal quarterly installments of approximately $2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the TrancheB-4 Facility due on February 16, 2023. On December 29, 2017, the Company made an additional payment of $22.5 million, including $7.7 million on the TrancheB-1 Facility and $14.8 million on the TrancheB-2 Facility. On April 17, 2018, the Company made an additional payment of $15.0 million, including $5.1 million on the TrancheB-3 Facility and $9.9 million on the TrancheB-4 Facility.

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 Acadia’s Consolidated Leverage Ratio (defined as consolidated funded debt net of up to $40.0 million of unrestricted and unencumbered cash to consolidated EBITDA, in each case as defined in the Amended and Restated Credit Agreement). The Applicable Rate (as defined in the Amended and Restated Credit Agreement) for the Pro Rata Facilities was 2.50% for Eurodollar Rate Loans (as defined in the Amended and Restated Credit Agreement) and 1.50% for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) at ~~March 31,~~June 30, 2018. 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

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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 1.00%. At ~~March 31,~~June 30, 2018, the Pro Rata Facilities bore interest at a rate of LIBOR plus 2.50%. In addition, the Company is required to pay a commitment fee on undrawn amounts under the revolving line of credit.

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. At ~~March 31,~~June 30, 2018, 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.

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.

The indentures governing the 6.125% Senior Notes, 5.125% Senior Notes, 5.625% Senior Notes and 6.500% 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.

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

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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. At ~~March 31,~~June 30, 2018 and December 31, 2017, $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. 8	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”). At ~~March 31,~~June 30, 2018, 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 ~~3,236,556~~3,221,669 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 date of grant.

The Company recognized ~~$6.9~~$7.1 million and $7.4 million in equity-based compensation expense for the three months ended ~~March 31,~~June 30, 2018 and 2017, ~~respectively.~~respectively, and $14.0 million and $14.8 million for the six months ended June 30, 2018 and 2017. At ~~March 31,~~June 30, 2018, there was ~~$62.5~~$56.5 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 ~~1.4~~1.3 years.

At ~~March 31,~~June 30, 2018, there were no warrants outstanding. The Company recognized a deferred income tax benefit of $1.9 million and ~~$2.9~~$2.8 million for the three months ended ~~March 31,~~June 30, 2018 and 2017, respectively, related to equity-based compensation expense. The Company recognized a deferred income tax benefit of $3.8 million and $5.7 million for the six months ended June 30, 2018 and 2017, respectively, related to equity-based compensation expense.

Stock Options

Stock option activity during 2017 and 2018 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		Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Options outstanding at January 1, 2017		1,000,946		$	49.42		7.80	$	8,166		1,000,946		$	49.42		7.80	$	8,166
Options granted		259,300			42.25		9.30		205		259,300			42.25		9.30		205
Options exercised		(87,367	)		25.92		N/A		1,636		(87,367	)		25.92	N/A			1,636
Options cancelled		(198,313	)		54.71		N/A		N/A		(198,313	)		54.71	N/A		N/A

Options outstanding at December 31, 2017		974,566			47.89		7.46		3,802		974,566			47.89		7.46		3,802
Options granted		323,500			37.46		7.86		112		353,800			37.36		7.85		137
Options exercised		(4,689	)		20.60		N/A		97		(8,689	)		25.87	N/A			134
Options cancelled		(36,475	)		51.41		N/A		N/A		(86,112	)		51.97	N/A		N/A

Options outstanding at March 31, 2018		1,256,902		$	45.17		7.60	$	2,730

Options outstanding at June 30, 2018											1,233,565		$	44.70		7.42	$	2,764
Options exercisable at December 31, 2017		405,634		$	41.20		6.05	$	3,549		405,634		$	41.20		6.05	$	3,549

Options exercisable at March 31, 2018		538,884		$	44.41		6.27	$	2,485

Options exercisable at June 30, 2018											541,589		$	44.53		6.11	$	2,494

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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 ~~three~~six months ended ~~March 31,~~June 30, 2018 and year ended December 31, 2017:


	March 31, 2018			December 31, 2017			June 30, 2018			December 31, 2017
Weighted average grant-date fair value of options	$	13.66		$	14.39		$	13.61		$	14.39
Risk-free interest rate		2.2	%		2.0	%		2.2	%		2.0	%
Expected volatility		37	%		33	%		38	%		33	%
Expected life (in years)		5.1			5.5			5.0			5.5

The Company’s estimate of expected volatility for stock options is based upon the volatility of our stock price over the expected life of the award. The risk-free interest rate is the approximate yield on 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.

Other Stock-Based Awards

Restricted stock activity during 2017 and 2018 was as follows:


	Number of Shares			Weighted Average Grant-Date Fair Value		Number of Shares			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2017		844,419		$	55.76		844,419		$	55.76
Granted		404,224			42.38		404,224			42.38
Cancelled		(145,981	)		55.03		(145,981	)		55.03
Vested		(292,794	)		53.07		(292,794	)		53.07

Unvested at December 31, 2017		809,868		$	50.19		809,868		$	50.19
Granted		370,162			36.67		441,837			36.51
Cancelled		(30,177	)		50.52		(58,217	)		49.25
Vested		(197,992	)		53.66		(245,814	)		53.44

Unvested at March 31, 2018		951,861		$	44.20

Unvested at June 30, 2018							947,674		$	43.03

Restricted stock unit activity during 2017 and 2018 was as follows:


	Number of Units			Weighted Average Grant-Date Fair Value		Number of Units			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2017		273,599		$	59.68		273,599		$	59.68
Granted		219,840			43.23		219,840			43.23
Cancelled		—			—		—			—
Vested		(132,530	)		58.67		(132,530	)		58.67

Unvested at December 31, 2017		360,909		$	50.04		360,909		$	50.04
Granted		285,358			42.26		285,358			42.26
Cancelled		(89,713	)		55.44		(89,173	)		55.44
Vested		(72,983	)		49.64		(72,983	)		49.64

Unvested at March 31, 2018		484,111		$	44.52

Unvested at June 30, 2018							484,111		$	44.52

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 ornon-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 topre-established targets and, in the case of the 2018 awards, 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 thetwo- or three-year period

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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 2018 is 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 2018 awards, performance compared to peers.

The fair values of restricted stock units were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date for units subject to performance conditions, or at its Monte-Carlo simulation value for units subject to market conditions.

9.	Income Taxes

The ~~(benefit from)~~ provision for income taxes for the three months ended ~~March 31,~~June 30, 2018 and 2017 reflects effective tax rates of ~~(5.8)%~~15.0% and ~~28.3%~~25.0%, respectively. The provision for income taxes for the six months ended June 30, 2018 and 2017 reflects effective tax rates of 6.5% and 26.4%, respectively. The decrease in the effective tax rate for the three and six months ended ~~March 31,~~June 30, 2018 and 2017 was primarily attributable to the application of Public Law 115-97, informally referred to as the Tax Cuts and Jobs Act (the “Tax Act”) and a discrete benefit of $10.5 million recorded in the ~~three~~six months ended ~~March 31,~~June 30, 2018 related to a change in the Company’s provisional amount recorded at December 31, 2017.

The Company adopted ASU 2016-09, ~~2016-09,~~“Improvements to Employee Share-Based Payment Accounting” on January 1, 2017, which changed how the Company accounts for share-based awards for tax purposes. Income tax effects of share-based awards are recognized in the income statement, instead of through equity, when the awards vest. These changes resulted in an increase in our income tax provision of ~~$1.5~~$1.6 million and $1.7 million, or an increase in the effective tax rate of ~~3.1%~~1.4% and ~~3.6%,~~1.5% for the ~~three~~six months ended ~~March 31,~~June 30, 2018 and 2017, respectively.

U.S. Tax Reform

On December 22, 2017, the Tax Act was enacted into law. The Tax Act provides for significant changes to the U.S. tax code that impact businesses. Effective January 1, 2018, the Tax Act reduces the U.S. federal tax rate for corporations from 35% to 21%, for U.S. taxable income. The Tax Act requires aone-time remeasurement of deferred taxes to reflect their value at a lower tax rate of 21%. The Tax Act includes other changes, including, but not limited to, requiring aone-time transition tax on certain repatriated earnings of foreign subsidiaries that is payable over eight years, a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, a new provision designed to tax global intangiblelow-taxed income, a limitation of the deduction for net operating losses, elimination of net operating loss carrybacks, immediate deductions for depreciation expense for certain qualified property, additional limitations on the deductibility of executive compensation and limitations on the deductibility of interest.

Accounting Standards Codification (“ASC”) 740“Income Taxes” (“ASC 740”) requires the Company to recognize the effect of tax law changes in the period of enactment. However, the SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) which will allow the Company to record provisional amounts during a measurement period similarly to the measurement period used when accounting for business combinations. The Company will continue to assess the impact of the Tax Act on its business and consolidated financial statements.

At ~~March 31,~~June 30, 2018, the Company had not completed its accounting for the tax effects of enactment of the Tax Act; however, in certain cases, as described below, the Company has made a reasonable estimate of the effects on ~~our~~its existing deferred tax balances. In other cases, the Company has not been able to make a reasonable estimate and continues to account for those items based on its existing accounting under ASC 740 and the provisions of the tax laws that were in effect immediately prior to enactment of the Tax Act. The Company has recognized a cumulative provisional amount of $19.3 million at ~~March 31,~~June 30, 2018 related to the remeasurement of ~~our~~its deferred tax balance. In addition, the Company has recorded aone-time transition tax lability in relation to its foreign subsidiaries of $0.0 million at ~~March 31,~~June 30, 2018. The amount may change when the calculation of post-1986 foreign earnings and profits previously deferred from U.S. federal taxation is finalized.

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Provisional Amounts

Deferred Tax Assets and Liabilities

The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. As a result of the reduction in the corporate income tax rate, the Company is required to revalue its net deferred tax assets and liabilities to account for the future impact of lower corporate tax rates on this deferred amount and record any change in the value of such asset or liability as a~~one-timenon-cash~~ one-time non-cash charge or benefit on its income statement. However, the Company is still analyzing certain aspects of the Tax Act, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The Company has recognized a cumulative provisional amount of $19.3 million at ~~March 31,~~June 30, 2018 related to the remeasurement of ~~our~~its deferred tax balance.

U.S. Tax on Foreign Earnings

Theone-time transition tax is based on total post-1986 earnings and profits that the Company previously deferred from U.S. income taxes. The Company has made sufficient progress on the earnings and profits analysis for its foreign subsidiaries to reasonably estimate the effects of theone-time transition tax and has recorded a provisional amount of $0.0 million at ~~March 31,~~June 30, 2018. This amount may change when the Company finalizes the calculation of ~~post -1986~~post-1986 foreign earnings and profit. As part of ~~our~~the analysis of the Tax Act, the Company made an adjustment regarding the treatment of foreign dividends of $10.9 million during the ~~three~~six months ended ~~March 31,~~June 30, 2018. The change in the provisional estimate recorded at December 31, 2017 was recognized under the law that existed prior to December 22, 2017.

The Company has estimated the impacts for Global IntangibleLow-Taxed Income, Foreign-Derived Intangible Income, the Base Erosion and Anti-Abuse Tax and any remaining impacts of the foreign income provisions of the Tax Act. The Company has made sufficient progress to reasonably estimate the effects of the aforementioned items and has recorded a provisional amount of $0.0 million at ~~March 31,~~June 30, 2018.

10.	Derivatives

The Company entered into foreign currency forward contracts during the three and six months ended ~~March 31,~~June 30, 2018 and 2017 in connection with 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 contracts limit the economic risk of changes in the exchange rate between U.S. Dollars (“USD”) and British Pounds (“GBP”) associated with cash transfers.

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 thereunder, to fixed-rateGBP-denominated debt of £449.3 million. 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 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 Company has designated the cross currency swap agreements and forward contracts entered into during 2017 and the ~~three~~six months ended ~~March 31,~~June 30, 2018 as qualifying hedging instruments and is accounting for these as net investment hedges. The fair value of these derivatives of ~~$15.2~~$25.0 million is recorded as derivative ~~instruments liabilities~~instrument assets on the condensed consolidated balance sheets. The gains and losses resulting from fair value adjustments to 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 the cross currency swap derivatives are included in operating activities in the condensed consolidated statements of cash flows.

11.	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.

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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% and 9.5% Revenue Bonds and derivative instruments at ~~March 31,~~June 30, 2018 and December 31, 2017 were as follows (in thousands):


	Carrying Amount					Fair Value					Carrying Amount				Fair Value
	March 31, 2018			December 31, 2017		March 31, 2018			December 31, 2017		June 30, 2018		December 31, 2017		June 30, 2018		December 31, 2017
Amended and Restated Senior Credit Facility	$	1,750,391		$	1,749,185	$	1,750,391		$	1,749,185	$	1,728,688	$	1,749,185	$	1,728,688	$	1,749,185
6.125% Senior Notes due 2021	$	148,234		$	148,098	$	149,716		$	150,134	$	148,373	$	148,098	$	149,857	$	150,134
5.125% Senior Notes due 2022	$	296,364		$	296,174	$	296,364		$	296,914	$	296,555	$	296,174	$	295,814	$	296,914
5.625% Senior Notes due 2023	$	642,233		$	641,891	$	650,261		$	651,519	$	642,580	$	641,891	$	647,399	$	651,519
6.500% Senior Notes due 2024	$	382,507		$	382,251	$	397,807		$	397,541	$	382,769	$	382,251	$	392,338	$	397,541
9.0% and 9.5% Revenue Bonds	$	22,188		$	22,289	$	22,188		$	22,289	$	22,087	$	22,289	$	22,087	$	22,289
Derivative instrument (liabilities) assets	$	(15,160	)	$	12,997	$	(15,160	)	$	12,997
Derivative instrument assets											$	24,989	$	12,997	$	24,989	$	12,997

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 and 9.0% and 9.5% Revenue Bonds 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.

12.	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, governmental investigations and regulatory actions, 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. Under the federal False Claims Act, private parties have the right to bringqui 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. Certain of our individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. In the opinion of management, the Company is not currently a party to any proceeding that would individually or in the aggregate have a material adverse effect on the Company’s business, financial condition or results of operations.

13.	Noncontrolling Interests

Noncontrolling interests in the consolidated financial statements represents the portion of equity held by noncontrolling partners innon-wholly owned subsidiaries the Company controls. At ~~March 31,~~June 30, 2018, certain of thesenon-wholly owned subsidiaries operated ~~three~~four facilities. The Company owns between 60% and ~~75%~~80% of the equity interests in the entity that owns each facility, 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.

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The components of redeemable noncontrolling interests are as follows (in thousands):


Balance at December 31, 2017	$	22,417	$	22,417
Acquisition of redeemable noncontrolling interests		2,186
Contribution of redeemable noncontrolling interests				6,265
Net income attributable to noncontrolling interests		55		109

Balance at March 31, 2018	$	24,658

Balance at June 30, 2018			$	28,791

14.	Other Current Assets

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

					June 30, 2018		December 31, 2017
	March 31, 2018		December 31, 2017
Prepaid expenses					$	28,379	$	27,320
Other receivables	$	32,867	$	30,455		29,791		30,455
Prepaid expenses		28,930		27,320
Insurance receivable-current portion		17,588		17,588
Income taxes receivable		24,405		15,056
Workers’ compensation deposits – current portion		10,000		10,000		10,000		10,000
Inventory		4,772		4,787		4,733		4,787
Income taxes receivable						3,885		15,056
Insurance receivable-current portion						1,688		17,588
Other		2,375		2,129		2,027		2,129

Other current assets	$	120,937	$	107,335	$	80,503	$	107,335

15.	Other Accrued Liabilities

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

					June 30, 2018		December 31, 2017
	March 31, 2018		December 31, 2017
Accrued interest					$	33,156	$	36,370
Unearned income	$	38,956	$	31,342		32,362		31,342
Accrued expenses		35,955		37,268		32,113		37,268
Income taxes payable						8,966		1,012
Insurance liability – current portion		22,788		22,788		6,888		22,788
Accrued interest		12,257		36,370
Income taxes payable		4,439		1,012
Accrued property taxes		3,666		3,945		4,530		3,945
Other		10,412		8,488		9,771		8,488

Other accrued liabilities	$	128,473	$	141,213	$	127,786	$	141,213

16.	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. and its facilities in the U.K. separately to assess performance and make decisions, the Company’s operating segments include our U.S. Facilities and U.K. Facilities. At ~~March 31,~~June 30, 2018, the U.S. Facilities segment included ~~212~~213 behavioral healthcare facilities with approximately ~~9,000~~9,100 beds in 40 states and Puerto Rico, and the U.K. Facilities segment included 372 behavioral healthcare facilities with approximately 8,800 beds in the U.K.

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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 March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2018			2017
Revenue:
U.S. Facilities	$	462,405		$	440,223		$	481,470		$	461,414		$	943,875		$	901,637
U.K. Facilities		279,836			238,971			284,268			254,482			564,104			493,453
Corporate and Other		—			—			—			—			—			—
							$	765,738		$	715,896		$	1,507,979		$	1,395,090
	$	742,241		$	679,194

Segment EBITDA (1):
U.S. Facilities	$	117,124		$	112,145		$	130,002		$	128,361		$	247,126		$	240,506
U.K. Facilities		51,152			44,186			54,194			52,090			105,346			96,276
Corporate and Other		(22,545	)		(19,962	)		(19,182	)		(18,231	)		(41,727	)		(38,193	)
							$	165,014		$	162,220		$	310,745		$	298,589
	$	145,731		$	136,369

   Three Months Ended March 31,
   2018    2017
Segment EBITDA (1)
   $ 145,731    $ 136,369
Plus (less):

Equity-based compensation expense
   (6,919 )    (7,396 )
Transaction-related expenses
   (4,768 )    (4,119 )
Debt extinguishment costs
   (940 )    —
Interest expense, net
   (45,243 )    (42,757 )
Depreciation and amortization
   (39,773 )    (33,613 )




Income before income taxes
   $ 48,088    $ 48,484

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

Balance at January 1, 2018
   $ 2,042,592    $ 708,582    $ —      $ 2,751,174
Foreign currency translation gain
   —      27,465    —      27,465
Prior year purchase price adjustments
   —      762    —      762








Balance at March 31, 2018
   $ 2,042,592    $ 736,809    $ —      $ 2,779,401

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Segment EBITDA (1)	$	165,014		$	162,220		$	310,745		$	298,589
Plus (less):
Equity-based compensation expense		(7,129	)		(7,436	)		(14,048	)		(14,832	)
Transaction-related expenses		(2,887	)		(9,052	)		(7,655	)		(13,171	)
Debt extinguishment costs		—			(810	)		(940	)		(810	)
Interest expense, net		(45,812	)		(43,505	)		(91,055	)		(86,262	)
Depreciation and amortization		(39,928	)		(35,201	)		(79,701	)		(68,814	)
Income before income taxes	$	69,258		$	66,216		$	117,346		$	114,700

   March 31, 2018    December 31, 2017
Assets (2):

U.S. Facilities
   $ 3,635,834    $ 3,567,126
U.K. Facilities
   2,765,246    2,647,150
Corporate and Other
   183,649    210,226




   $ 6,584,729    $ 6,424,502

	U.S. Facilities		U.K. Facilities			Corporate and Other		Consolidated
Goodwill:
Balance at January 1, 2018	$	2,042,592	$	708,582		$	—	$	2,751,174
Increase from contribution of redeemable noncontrolling interests		2,244		—			—		2,244
Foreign currency translation loss		—		(14,877	)		—		(14,877	)
Prior year purchase price adjustments		—		762			—		762
Balance at June 30, 2018	$	2,044,836	$	694,467		$	—	$	2,739,303

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	June 30, 2018		December 31, 2017
Assets (2):
U.S. Facilities	$	3,694,600	$	3,567,126
U.K. Facilities		2,599,911		2,647,150
Corporate and Other		208,636		210,226
	$	6,503,147	$	6,424,502

(1)

Segment EBITDA is defined as income before provision for income taxes, equity-based compensation expense, transaction-related expenses, debt extinguishment costs, 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 ~~$1.2~~$1.3 billion, U.K. Facilities of ~~$1.9~~$1.8 billion and corporate and other of ~~$49.1~~$50.4 million at ~~March 31,~~June 30, 2018. Assets include property and equipment for the U.S. Facilities of $1.2 billion, U.K. Facilities of $1.8 billion and corporate and other of $49.2 million at December 31, 2017.

17.	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, 2017
   $ (376,740 )    $ 7,167    $ (4,545 )    $ (374,118 )
Foreign currency translation gain
   92,954    —      (174 )    92,780
Loss on derivative instruments, net of tax of $(7.3) million
   —      (20,053 )    —      (20,053 )








Balance at March 31, 2018
   $ (283,786 )    $ (12,886 )    $ (4,719 )    $ (301,391 )

	Foreign Currency Translation Adjustments			Change in Fair Value of Derivative Instruments		Pension Plan			Total
Balance at December 31, 2017	$	(376,740	)	$	7,167	$	(4,545	)	$	(374,118	)
Foreign currency translation (loss) gain		(50,916	)		—		97			(50,819	)
Gain on derivative instruments, net of tax of $3.2 million		—			9,054		—			9,054
Balance at June 30, 2018	$	(427,656	)	$	16,221	$	(4,448	)	$	(415,883	)

18.	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 and 6.500% 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. Presented below is condensed consolidating financial information for the Company and its subsidiaries at ~~March 31,~~June 30, 2018 and December 31, 2017, and for the three and six months ended ~~March 31,~~June 30, 2018 and 2017. The information segregates the parent company (Acadia Healthcare Company, Inc.), the combined wholly-owned subsidiary guarantors, the combinednon-guarantor subsidiaries and eliminations.

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidating Balance Sheets

~~March 31,~~June 30, 2018

(In thousands)


	Parent		Combined Subsidiary Guarantors		Combined Non- Guarantors		Consolidating Adjustments			Total Consolidated Amounts		Parent		Combined Subsidiary Guarantors		Combined Non- Guarantors		Consolidating Adjustments			Total Consolidated Amounts
Current assets:
Cash and cash equivalents	$	—	$	25,212	$	32,596	$	—		$	57,808	$	—	$	59,979	$	19,484	$	—		$	79,463
Accounts receivable, net		—		251,938		73,210		—			325,148		—		253,954		75,302		—			329,256
Other current assets		—		93,378		27,559		—			120,937		—		56,961		23,542		—			80,503

Total current assets		—		370,528		133,365		—			503,893		—		370,894		118,328		—			489,222
Property and equipment, net		—		1,113,401		2,038,128		—			3,151,529		—		1,161,630		1,941,701		—			3,103,331
Goodwill		—		1,936,057		843,344		—			2,779,401		—		1,936,056		803,247		—			2,739,303
Intangible assets, net		—		58,285		32,751		—			91,036		—		58,295		33,271		—			91,566
Deferred tax assets		1,427		—		3,698		(1,427	)		3,698		931		—		3,664		(931	)		3,664
Derivative instruments assets													24,989		—		—		—			24,989
Investment in subsidiaries		5,590,670		—		—		(5,590,670	)		—		5,515,341		—		—		(5,515,341	)		—
Other assets		355,984		44,507		7,453		(352,772	)		55,172		343,990		41,952		6,127		(340,997	)		51,072

Total assets	$	5,948,081	$	3,522,778	$	3,058,739	$	(5,944,869	)	$	6,584,729	$	5,885,251	$	3,568,827	$	2,906,338	$	(5,857,269	)	$	6,503,147

Current liabilities:
Current portion of long-term debt	$	33,550	$	—	$	280	$	—		$	33,830	$	32,984	$	—	$	280	$	—		$	33,264
Accounts payable		—		78,622		43,808		—			122,430		—		86,317		43,911		—			130,228
Accrued salaries and benefits		—		74,265		30,643		—			104,908		—		73,543		29,297		—			102,840
Other accrued liabilities		11,572		29,302		87,599		—			128,473		32,985		31,526		63,275		—			127,786

Total current liabilities		45,122		182,189		162,330		—			389,641		65,969		191,386		136,763		—			394,118
Long-term debt		3,186,180		—		374,680		(352,772	)		3,208,088		3,165,981		—		362,804		(340,997	)		3,187,788
Deferred tax liabilities		—		21,772		56,585		(1,427	)		76,930		—		25,311		53,960		(931	)		78,340
Derivative instrument liabilities		15,160		—		—		—			15,160
Other liabilities		—		103,280		65,353		—			168,633		—		104,283		56,526		—			160,809

Total liabilities		3,246,462		307,241		658,948		(354,199	)		3,858,452		3,231,950		320,980		610,053		(341,928	)		3,821,055

Redeemable noncontrolling interests		—		—		24,658		—			24,658		—		—		28,791		—			28,791

Total equity		2,701,619		3,215,537		2,375,133		(5,590,670	)		2,701,619		2,653,301		3,247,847		2,267,494		(5,515,341	)		2,653,301

Total liabilities and equity	$	5,948,081	$	3,522,778	$	3,058,739	$	(5,944,869	)	$	6,584,729	$	5,885,251	$	3,568,827	$	2,906,338	$	(5,857,269	)	$	6,503,147

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Acadia Healthcare Company, Inc.

Condensed Consolidating Balance Sheets

December 31, 2017

(In thousands)

	Parent		Combined Subsidiary Guarantors		Combined Non- Guarantors		Consolidating Adjustments			Total Consolidated Amounts
Current assets:
Cash and cash equivalents	$	—	$	46,860	$	20,430	$	—		$	67,290
Accounts receivable, net		—		230,890		66,035		—			296,925
Other current assets		—		85,746		21,589		—			107,335
Total current assets		—		363,496		108,054		—			471,550
Property and equipment, net		—		1,086,802		1,961,328		—			3,048,130
Goodwill		—		1,936,057		815,117		—			2,751,174
Intangible assets, net		—		57,628		29,720		—			87,348
Deferred tax assets		2,370		—		3,731		(2,370	)		3,731
Derivative instruments assets		12,997		—		—		—			12,997
Investment in subsidiaries		5,429,386		—		—		(5,429,386	)		—
Other assets		381,913		38,860		7,807		(379,008	)		49,572
Total assets	$	5,826,666	$	3,482,843	$	2,925,757	$	(5,810,764	)	$	6,424,502

Current liabilities:
Current portion of long-term debt	$	34,550	$	—	$	280	$	—		$	34,830
Accounts payable		—		70,767		31,532		—			102,299
Accrued salaries and benefits		—		69,057		29,990		—			99,047
Other accrued liabilities		36,196		27,676		77,341		—			141,213
Total current liabilities		70,746		167,500		139,143		—			377,389
Long-term debt		3,183,049		—		401,017		(379,008	)		3,205,058
Deferred tax liabilities		—		27,975		54,728		(2,370	)		80,333
Other liabilities		—		103,112		63,322		—			166,434
Total liabilities		3,253,795		298,587		658,210		(381,378	)		3,829,214
Redeemable noncontrolling interests		—		—		22,417		—			22,417
Total equity		2,572,871		3,184,256		2,245,130		(5,429,386	)		2,572,871
Total liabilities and equity	$	5,826,666	$	3,482,843	$	2,925,757	$	(5,810,764	)	$	6,424,502

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Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended ~~March 31,~~June 30, 2018

(In thousands)


	Parent			Combined Subsidiary Guarantors			Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts			Parent			Combined Subsidiary Guarantors		Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Revenue	$	—		$	435,625		$	306,616		$	—		$	742,241		$	—		$	453,782	$	311,956		$	—		$	765,738

Salaries, wages and benefits		6,919			239,052			165,557			—			411,528			7,129			239,999		169,613			—			416,741
Professional fees		—			24,271			29,747			—			54,018			—			24,677		28,784			—			53,461
Supplies		—			18,712			10,652			—			29,364			—			19,292		10,841			—			30,133
Rents and leases		—			8,239			12,049			—			20,288			—			8,311		11,925			—			20,236
Other operating expenses		—			56,170			32,061			—			88,231			—			55,258		32,024			—			87,282
Depreciation and amortization		—			18,172			21,601			—			39,773			—			18,611		21,317			—			39,928
Interest expense, net		14,617			23,584			7,042			—			45,243			15,465			23,602		6,745			—			45,812
Debt extinguishment costs		940			—			—			—			940
Transaction-related expenses		—			4,009			759			—			4,768			—			2,671		216			—			2,887

Total expenses		22,476			392,209			279,468			—			694,153			22,594			392,421		281,465			—			696,480
(Loss) income before income taxes		(22,476	)		43,416			27,148			—			48,088			(22,594	)		61,361		30,491			—			69,258
Equity in earnings of subsidiaries		67,598			—			—			(67,598	)		—			75,752			—		—			(75,752	)		—
(Benefit from) provision for income taxes		(5,752	)		(123	)		3,089			—			(2,786	)		(5,732	)		11,442		4,658			—			10,368

Net income (loss)		50,874			43,539			24,059			(67,598	)		50,874			58,890			49,919		25,833			(75,752	)		58,890
Net gain attributable to noncontrolling interests		—			—			(55	)		—			(55	)		—			—		(54	)		—			(54	)

Net income (loss) attributable to Acadia Healthcare Company, Inc.	$	50,874		$	43,539		$	24,004		$	(67,598	)	$	50,819		$	58,890		$	49,919	$	25,779		$	(75,752	)	$	58,836

Other comprehensive (loss) income:
Foreign currency translation gain		—			—			92,780			—��			92,780
Loss on derivative instruments		(20,053	)		—			—			—			(20,053	)

Foreign currency translation loss																	—			—		(143,599	)		—			(143,599	)
Gain on derivative instruments																	29,107			—		—			—			29,107
Other comprehensive (loss) income		(20,053	)		—			92,780			—			72,727			29,107			—		(143,599	)		—			(114,492	)

Comprehensive income (loss)	$	30,821		$	43,539		$	116,784		$	(67,598	)	$	123,546

Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc.																$	87,997		$	49,919	$	(117,820	)	$	(75,752	)	$	(55,656	)

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Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Three Months Ended June 30, 2017

(In thousands)

	Parent			Combined Subsidiary Guarantors			Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Revenue before provision for doubtful accounts	$	—		$	444,718		$	280,925		$	—		$	725,643
Provision for doubtful accounts		—			(8,483	)		(1,264	)		—			(9,747	)
Revenue		—			436,235			279,661			—			715,896
Salaries, wages and benefits		7,436			225,775			150,384			—			383,595
Professional fees		—			23,337			22,984			—			46,321
Supplies		—			19,050			9,589			—			28,639
Rents and leases		—			8,501			10,934			—			19,435
Other operating expenses		—			54,488			28,634			—			83,122
Depreciation and amortization		—			16,404			18,797			—			35,201
Interest expense, net		15,091			19,265			9,149			—			43,505
Debt extinguishment costs		810			—			—			—			810
Transaction-related expenses		—			2,570			6,482			—			9,052
Total expenses		23,337			369,390			256,953			—			649,680
(Loss) income before income taxes		(23,337	)		66,845			22,708			—			66,216
Equity in earnings of subsidiaries		61,453			—			—			(61,453	)		—
(Benefit from) provision for income taxes		(11,522	)		23,852			4,248			—			16,578
Net income (loss)		49,638			42,993			18,460			(61,453	)		49,638
Net loss attributable to noncontrolling interests		—			—			(8	)		—			(8	)
Net income (loss) attributable to Acadia Healthcare Company, Inc.	$	49,638		$	42,993		$	18,452		$	(61,453	)	$	49,630
Other comprehensive (loss) income:
Foreign currency translation gain		—			—			92,076			—			92,076
Loss on derivative instruments		(9,084	)		—			—			—			(9,084	)
Other comprehensive (loss) income		(9,084	)		—			92,076			—			82,992
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc.	$	40,554		$	42,993		$	110,528		$	(61,453	)	$	132,622

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

~~Three~~Six Months Ended ~~March 31,~~June 30, 2018

(In thousands)

	Parent			Combined Subsidiary Guarantors		Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Revenue	$	—		$	889,407	$	618,572		$	—		$	1,507,979
Salaries, wages and benefits		14,048			479,051		335,170			—			828,269
Professional fees		—			48,948		58,531			—			107,479
Supplies		—			38,004		21,493			—			59,497
Rents and leases		—			16,550		23,974			—			40,524
Other operating expenses		—			111,428		64,085			—			175,513
Depreciation and amortization		—			36,783		42,918			—			79,701
Interest expense, net		30,082			47,186		13,787			—			91,055
Debt extinguishment costs		940			—		—			—			940
Transaction-related expenses		—			6,680		975			—			7,655
Total expenses		45,070			784,630		560,933			—			1,390,633
(Loss) income before income taxes		(45,070	)		104,777		57,639			—			117,346
Equity in earnings of subsidiaries		143,350			—		—			(143,350	)		—
(Benefit from) provision for income taxes		(11,484	)		11,319		7,747			—			7,582
Net income (loss)		109,764			93,458		49,892			(143,350	)		109,764
Net gain attributable to noncontrolling interests		—			—		(109	)		—			(109	)
Net income (loss) attributable to Acadia Healthcare Company, Inc.	$	109,764		$	93,458	$	49,783		$	(143,350	)	$	109,655
Other comprehensive (loss) income:
Foreign currency translation loss		—			—		(50,819	)		—			(50,819	)
Gain on derivative instruments		9,054			—		—			—			9,054
Other comprehensive (loss) income		9,054			—		(50,819	)		—			(41,765	)
Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc.	$	118,818		$	93,458	$	(1,036	)	$	(143,350	)	$	67,890

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Comprehensive Income (Loss)

Six Months Ended June 30, 2017

(In thousands)


	Parent			Combined Subsidiary Guarantors			Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts			Parent			Combined Subsidiary Guarantors			Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Revenue before provision for doubtful accounts	$	—		$	426,796		$	262,545		$	—		$	689,341		$	—		$	871,514		$	543,470		$	—		$	1,414,984
Provision for doubtful accounts		—			(9,214	)		(933	)		—			(10,147	)		—			(17,697	)		(2,197	)		—			(19,894	)

Revenue		—			417,582			261,612			—			679,194			—			853,817			541,273			—			1,395,090
Salaries, wages and benefits		7,396			224,430			144,595			—			376,421			14,832			450,205			294,979			—			760,016
Professional fees		—			22,074			21,335			—			43,409			—			45,411			44,319			—			89,730
Supplies		—			18,609			9,100			—			27,709			—			37,659			18,689			—			56,348
Rents and leases		—			8,511			10,460			—			18,971			—			17,012			21,394			—			38,406
Other operating expenses		—			55,031			28,680			—			83,711			—			109,519			57,314			—			166,833
Depreciation and amortization		—			15,551			18,062			—			33,613			—			31,955			36,859			—			68,814
Interest expense, net		15,368			18,485			8,904			—			42,757			30,459			37,750			18,053			—			86,262
Debt extinguishment costs																	810			—			—			—			810
Transaction-related expenses		—			1,438			2,681			—			4,119			—			4,008			9,163			—			13,171

Total expenses		22,764			364,129			243,817			—			630,710			46,101			733,519			500,770			—			1,280,390
(Loss) income before income taxes		(22,764	)		53,453			17,795			—			48,484			(46,101	)		120,298			40,503			—			114,700
Equity in earnings of subsidiaries		46,553			—			—			(46,553	)		—			108,006			—			—			(108,006	)		—
(Benefit from) provision for income taxes		(10,984	)		21,070			3,625			—			13,711			(22,506	)		44,922			7,873			—			30,289

Net income (loss)		34,773			32,383			14,170			(46,553	)		34,773			84,411			75,376			32,630			(108,006	)		84,411
Net loss attributable to noncontrolling interests		—			—			185			—			185			—			—			177			—			177

Net income (loss) attributable to Acadia Healthcare Company, Inc.	$	34,773		$	32,383		$	14,355		$	(46,553	)	$	34,958		$	84,411		$	75,376		$	32,807		$	(108,006	)	$	84,588

Other comprehensive (loss) income:
Foreign currency translation gain		—			—			27,046			—			27,046			—			—			119,122			—			119,122
Loss on derivative instruments		(5,868	)		—			—			—			(5,868	)		(14,952	)		—			—			—			(14,952	)

Other comprehensive (loss) income		(5,868	)		—			27,046			—			21,178			(14,952	)		—			119,122			—			104,170

Comprehensive income (loss)	$	28,905		$	32,383		$	41,401		$	(46,553	)	$	56,136

Comprehensive income (loss) attributable to Acadia Healthcare Company, Inc.																$	69,459		$	75,376		$	151,929		$	(108,006	)	$	188,758

Table of contents

Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2018

(In thousands)

	Parent			Combined Subsidiary Guarantors			Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Operating activities:
Net income (loss)	$	109,764		$	93,458		$	49,892		$	(143,350	)	$	109,764
Adjustments to reconcile net income (loss) to net cash (used in) provided by continuing operating activities:
Equity in earnings of subsidiaries		(143,350	)		—			—			143,350			—
Depreciation and amortization		—			36,783			42,918			—			79,701
Amortization of debt issuance costs		5,326			—			(202	)		—			5,124
Equity-based compensation expense		14,048			—			—			—			14,048
Deferred income taxes		1,438			(5,843	)		427			—			(3,978	)
Debt extinguishment costs		940			—			—			—			940
Other		240			1,149			(349	)		—			1,040
Change in operating assets and liabilities:
Accounts receivable, net		—			(23,064	)		(3,040	)		—			(26,104	)
Other current assets		—			12,197			(2,244	)		—			9,953
Other assets		4,514			2,689			72			(4,514	)		2,761
Accounts payable and other accrued liabilities		—			27,859			(6,793	)		—			21,066
Accrued salaries and benefits		—			4,487			(123	)		—			4,364
Other liabilities		—			3,002			(3,795	)		—			(793	)
Net cash (used in) provided by continuing operating activities		(7,080	)		152,717			76,763			(4,514	)		217,886
Net cash used in discontinued operating activities		—			(572	)		—			—			(572	)
Net cash (used in) provided by operating activities		(7,080	)		152,145			76,763			(4,514	)		217,314
Investing activities:
Cash paid for capital expenditures		—			(97,186	)		(64,369	)		—			(161,555	)
Cash paid for real estate acquisitions		—			(8,857	)		—			—			(8,857	)
Other		—			(5,759	)		2,422			—			(3,337	)
Net cash used in investing activities		—			(111,802	)		(61,947	)		—			(173,749	)
Financing activities:
Principal payments on long-term debt		(23,246	)		(169	)		(4,345	)		4,514			(23,246	)
Common stock withheld for minimum statutory taxes, net		(2,134	)		—			—			—			(2,134	)
Other		(1,742	)		(1,924	)		(1,506	)		—			(5,172	)
Cash provided by (used in) intercompany activity		34,202			(25,131	)		(9,071	)		—			—
Net provided by (used in) in financing activities		7,080			(27,224	)		(14,922	)		4,514			(30,552	)
Effect of exchange rate changes on cash		—			—			(840	)		—			(840	)
Net increase (decrease) in cash and cash equivalents		—			13,119			(946	)		—			12,173
Cash and cash equivalents at beginning of the period		—			46,860			20,430			—			67,290
Cash and cash equivalents at end of the period	$	—		$	59,979		$	19,484		$	—		$	79,463

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Acadia Healthcare Company, Inc.

Condensed Consolidating Statement of Cash Flows

~~Three~~Six Months Ended ~~March 31, 2018~~

~~(In thousands)~~

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

Net income (loss)
   $ 50,874 $ 43,539 $ 24,059 $ (67,598 ) $ 50,874
Adjustments to reconcile net income (loss) to net cash (used in) provided by continuing operating activities:

Equity in earnings of subsidiaries
   (67,598 ) —   —   67,598 —
Depreciation and amortization
   —   18,172 21,601 —   39,773
Amortization of debt issuance costs
   2,626 —   (101 ) —   2,525
Equity-based compensation expense
   6,919 —   —   —   6,919
Deferred income tax (benefit) expense
   942 1,104 (149 ) —   1,897
Debt extinguishment costs
   940 —   —   —   940
Other
   794 315 (66 ) —   1,043
Change in operating assets and liabilities:

Accounts receivable, net
   —   (21,049 ) 2,256 —   (18,793 )
Other current assets
   —   (7,980 ) (5,236 ) —   (13,216 )
Other assets
   4,432 (1,305 ) 37 (4,432 ) (1,268 )
Accounts payable and other accrued liabilities
   —   (11,417 ) 8,049 —   (3,368 )
Accrued salaries and benefits
   —   5,208 (406 ) —   4,802
Other liabilities
   —   1,204 (695 ) —   509


Net cash (used in) provided by continuing operating activities
   (71 ) 27,791 49,349 (4,432 ) 72,637
Net cash used in discontinued operating activities
   —   (287 ) —   —   (287 )


Net cash (used in) provided by operating activities
   (71 ) 27,504 49,349 (4,432 ) 72,350
Investing activities:

Cash paid for capital expenditures
   —   (40,879 ) (29,448 ) —   (70,327 )
Cash paid for real estate acquisitions
   —   (4,293 ) —   —   (4,293 )
Other
   —   (4,799 ) 733 —   (4,066 )


Net cash used in investing activities
   —   (49,971 ) (28,715 ) —   (78,686 )
Financing activities:

Principal payments on long-term debt
   —   (169 ) (4,263 ) 4,432 —
Common stock withheld for minimum statutory taxes, net
   (2,030 ) —   —   —   (2,030 )
Other
   (1,742 ) (962 ) —   —   (2,704 )
Cash provided by (used in) intercompany activity
   3,843 1,950 (5,793 ) —   —


Net provided by (used in) in financing activities
   71 819 (10,056 ) 4,432 (4,734 )


Effect of exchange rate changes on cash
   —   —   1,588 —   1,588


Net (decrease) increase in cash and cash equivalents
   —   (21,648 ) 12,166 —   (9,482 )
Cash and cash equivalents at beginning of the period
   —   46,860 20,430 —   67,290


Cash and cash equivalents at end of the period
   $ —   $ 25,212 $ 32,596 $ —   $ 57,808

~~Acadia Healthcare Company, Inc.~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Three Months Ended March 31,~~June 30, 2017

(In thousands)


	Parent			Combined Subsidiary Guarantors			Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts			Parent			Combined Subsidiary Guarantors			Combined Non- Guarantors			Consolidating Adjustments			Total Consolidated Amounts
Operating activities:
Net income (loss)	$	34,773		$	32,383		$	14,170		$	(46,553	)	$	34,773		$	84,411		$	75,376		$	32,630		$	(108,006	)	$	84,411
Adjustments to reconcile net income (loss) to net cash provided by (used in) continuing operating activities:
Equity in earnings of subsidiaries		(46,553	)		—			—			46,553			—			(108,006	)		—			—			108,006			—
Depreciation and amortization		—			15,551			18,062			—			33,613			—			31,955			36,859			—			68,814
Amortization of debt issuance costs		2,500			—			(104	)		—			2,396			5,053			—			(208	)		—			4,845
Equity-based compensation expense		7,396			—			—			—			7,396			14,832			—			—			—			14,832
Deferred income tax (benefit) expense		(171	)		2,754			(576	)		—			2,007
Deferred income taxes																	1,610			12,268			3,218			—			17,096
Debt extinguishment costs																	810			—			—			—			810
Other		2,732			506			587			—			3,825			2,692			1,181			2,685			—			6,558
Change in operating assets and liabilities:
Accounts receivable, net		—			(10,412	)		(2,047	)		—			(12,459	)		—			(13,423	)		(8,981	)		—			(22,404	)
Other current assets		—			5,097			789			—			5,886			—			(3,564	)		24,021			—			20,457
Other assets		2,927			(1,778	)		68			(2,927	)		(1,710	)		3,397			1,705			104			(3,397	)		1,809
Accounts payable and other accrued liabilities		—			(9,224	)		(7,769	)		—			(16,993	)		—			3,747			(8,640	)		—			(4,893	)
Accrued salaries and benefits		—			(1,961	)		(1,476	)		—			(3,437	)		—			(6,591	)		(2,566	)		—			(9,157	)
Other liabilities		—			(304	)		2,446			—			2,142			—			1,625			3,632			—			5,257

Net cash provided by (used in) continuing operating activities		3,604			32,612			24,150			(2,927	)		57,439			4,799			104,279			82,754			(3,397	)		188,435
Net cash used in discontinued operating activities		—			(425	)		—			—			(425	)		—			(829	)		—			—			(829	)

Net cash provided by (used in) operating activities		3,604			32,187			24,150			(2,927	)		57,014			4,799			103,450			82,754			(3,397	)		187,606
Investing activities:
Cash paid for capital expenditures		—			(30,018	)		(20,531	)		—			(50,549	)		—			(71,274	)		(46,247	)		—			(117,521	)
Cash paid for real estate acquisitions		—			(2,495	)		—			—			(2,495	)		—			(22,850	)		—			—			(22,850	)
Other		—			(6,531	)		1,480			—			(5,051	)		—			(7,543	)		1,605			—			(5,938	)

Net cash used in investing activities		—			(39,044	)		(19,051	)		—			(58,095	)		—			(101,667	)		(44,642	)		—			(146,309	)
Financing activities:
Principal payments on long-term debt		(8,638	)		—			(2,927	)		2,927			(8,638	)		(17,275	)		—			(3,397	)		3,397			(17,275	)
Common stock withheld for minimum statutory taxes, net		(4,234	)		—			—			—			(4,234	)		(3,678	)		—			—			—			(3,678	)
Other		—			(865	)		—			—			(865	)		—			(2,270	)		—			—			(2,270	)
Cash provided by (used in) intercompany activity		9,268			(5,030	)		(4,238	)		—			—			16,154			32,629			(48,783	)		—			—

Net (used in) provided by in financing activities		(3,604	)		(5,895	)		(7,165	)		2,927			(13,737	)		(4,799	)		30,359			(52,180	)		3,397			(23,223	)

Effect of exchange rate changes on cash		—			—			842			—			842			—			—			4,297			—			4,297

Net decrease in cash and cash equivalents		—			(12,752	)		(1,224	)		—			(13,976	)		—			32,142			(9,771	)		—			22,371
Cash and cash equivalents at beginning of the period		—			15,681			41,382			—			57,063			—			15,681			41,382			—			57,063

Cash and cash equivalents at end of the period	$	—		$	2,929		$	40,158		$	—		$	43,087		$	—		$	47,823		$	31,611		$	—		$	79,434

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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:

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

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

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

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

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;

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

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

the impact of increases to our labor costs in the U.S. and the U.K.;

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 in the U.S. and the U.K. on our business and future results of operations;

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;

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

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;

the impact of our highly competitive industry on patient volumes;

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

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;~~

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•

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;

changes in interpretations, assumptions and expectations regarding the Tax Act, including additional guidance that may be issued by federal and state taxing authorities;

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 ~~March 31,~~June 30, 2018, we operated ~~584~~585 behavioral healthcare facilities with approximately ~~17,800~~17,900 beds in 40 states, the U.K. and Puerto Rico. During the ~~three~~six months ended ~~March 31,~~June 30, 2018, we added ~~121~~276 beds, including 57124 added to existing facilities and 64152 added through the opening of ~~one~~two de novo ~~facility.~~facilities. For the year ~~ended~~ending December 31, 2018, we expect to add more than 800 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 and U.K. though acquisitions, joint ventures and bed additions in existing facilities.

~~Acquisitions~~Table of contents

~~On November 13,~~

Results of Operations

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

	Three Months Ended June 30,											Six Months Ended June 30,
	2018					2017						2018					2017
	Amount		%			Amount			%			Amount		%			Amount			%
Revenue before provision for doubtful accounts	$	765,738				$	725,643					$	1,507,979				$	1,414,984
Provision for doubtful accounts		—					(9,747	)					—					(19,894	)
Revenue		765,738		100.0	%		715,896			100.0	%		1,507,979		100.0	%		1,395,090			100.0	%
Salaries, wages and benefits		416,741		54.4	%		383,595			53.6	%		828,269		54.9	%		760,016			54.5	%
Professional fees		53,461		7.0	%		46,321			6.5	%		107,479		7.1	%		89,730			6.4	%
Supplies		30,133		3.9	%		28,639			4.0	%		59,497		3.9	%		56,348			4.0	%
Rents and leases		20,236		2.6	%		19,435			2.7	%		40,524		2.7	%		38,406			2.8	%
Other operating expenses		87,282		11.4	%		83,122			11.6	%		175,513		11.6	%		166,833			12.0	%
Depreciation and amortization		39,928		5.2	%		35,201			4.9	%		79,701		5.3	%		68,814			4.9	%
Interest expense		45,812		6.0	%		43,505			6.1	%		91,055		6.0	%		86,262			6.2	%
Debt extinguishment costs		—		0.0	%		810			0.1	%		940		0.1	%		810			0.1	%
Transaction-related expenses		2,887		0.4	%		9,052			1.3	%		7,655		0.5	%		13,171			0.9	%
Total expenses		696,480		90.9	%		649,680			90.8	%		1,390,633		92.1	%		1,280,390			91.8	%
Income before income taxes		69,258		9.1	%		66,216			9.2	%		117,346		7.9	%		114,700			8.2	%
Provision for income taxes		10,368		1.4	%		16,578			2.3	%		7,582		0.5	%		30,289			2.2	%
Net income	$	58,890		7.7	%	$	49,638			6.9	%	$	109,764		7.4	%	$	84,411			6.0	%

Segments

At June 30, 2018, the U.S. Facilities segment included 213 behavioral healthcare facilities with approximately 9,100 beds in 40 states and Puerto Rico, and the U.K. Facilities segment included 372 behavioral healthcare facilities with approximately 8,800 beds in the U.K.

The following table sets forth percent changes in same facility operating data for our U.S. Facilities for the three and six months ended June 30, 2018 compared to the same periods in 2017:

	Three Months Ended June 30, 2018	Six Months Ended June 30, 2018
U.S. Same Facility Results (a)
Revenue growth	5.0%	5.5%
Patient days growth	1.9%	1.9%
Admissions growth	4.1%	2.9%
Average length of stay change (b)	-2.2%	-0.9%
Revenue per patient day growth	3.1%	3.5%
EBITDA margin change (c)	-30 bps	0 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, transaction-related expenses, debt extinguishment costs, 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 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.

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The following table sets forth percent changes in same facility operating data for our U.K. Facilities for the three and six months ended June 30, 2018 compared to the same periods in 2017:

	Three Months Ended June 30, 2018	Six Months Ended June 30, 2018
U.K. Same Facility Results (a,c)
Revenue growth	5.6%	5.1%
Patient days growth	1.6%	1.8%
Admissions growth	3.5%	3.4%
Average length of stay change (b)	-1.8%	-1.6%
Revenue per patient day growth	3.9%	3.3%
EBITDA margin change (d)	-110 bps	-40 bps

(a)

Results for the periods presented include facilities we have operated more than one year and exclude the elderly care division and certain closed services.

(b)

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

(c)

Revenue and revenue per patient day for the three and six months ended June 30, 2017 is adjusted to reflect the foreign currency exchange rate for the comparable periods of 2018 in order to eliminate the effect of changes in the exchange rate. The exchange rate used in the adjusted revenue and revenue per patient day amounts for the three and six months ended June 30, 2017 is 1.36 and 1.38, respectively.

(d)

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

Three months ended June 30, 2018 compared to the three months ended June 30, 2017

Revenue. Revenue increased $49.8 million, or 7.0%, to $765.7 million for the three months ended June 30, 2018 from $715.9 million for the three months ended June 30, 2017 resulting from same facility revenue growth of 5.2% and the increase in the exchange rate between USD and GBP of $16.2 million. During the three months ended June 30, 2018, we generated $481.5 million of revenue, or 62.9% of our total revenue, from our U.S. Facilities and $284.3 million of revenue, or 37.1% of our total revenue, from our U.K. Facilities. During the three months ended June 30, 2017, we ~~completed~~generated $461.4 million of revenue, or 64.5% of our total revenue, from our U.S. Facilities and $254.5 million of revenue, or 35.5% of our total revenue, from our U.K. Facilities.

U.S. same facility revenue increased by $22.5 million, or 5.0%, for the ~~acquisition~~three months ended June 30, 2018 compared to the three months ended June 30, 2017, resulting from same facility growth in patient days of ~~Aspire,~~1.9% and an ~~education~~increase in same facility revenue per day of 3.1%. U.K. same facility revenue increased by $13.5 million, or 5.6%, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017, resulting from same facility growth in patient days of 1.6% and an increase in same facility revenue per day of 3.9%. Consistent with 36the same facility patient day growth in 2017, the growth in same facility patient days for the three months ended June 30, 2018 compared to the three months ended June 30, 2017, resulted from the addition of beds ~~located~~to our existing facilities and ongoing demand for our services.

Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $416.7 million for the three months ended June 30, 2018 compared to $383.6 million for the three months ended June 30, 2017, an increase of $33.1 million. SWB expense included $7.1 million and $7.4 million of equity-based compensation expense for the three months ended June 30, 2018 and 2017, respectively. Excluding equity-based compensation expense, SWB expense was $409.6 million, or 53.5% of revenue, for the three months ended June 30, 2018, compared to $376.2 million, or 52.5% of revenue, for the three months ended June 30, 2017. Same facility SWB expense was $371.7 million for the three months ended June 30, 2018, or 50.9% of revenue, compared to $348.8 million for the three months ended June 30, 2017, or 50.2% of revenue.

Professional fees. Professional fees were $53.5 million for the three months ended June 30, 2018, or 7.0% of revenue, compared to $46.3 million for the three months ended June 30, 2017, or 6.5% of revenue. The $7.1 million increase was primarily attributable to higher contract labor costs in ~~Scotland,~~our U.K. Facilities. Same facility professional fees were $46.1 million for the three months ended June 30, 2018, or 6.3% of revenue, compared to $40.9 million, for the three months ended June 30, 2017, or 5.9% of revenue.

Supplies. Supplies expense was $30.1 million for the three months ended June 30, 2018, or 3.9% of revenue, compared to $28.6 million for the three months ended June 30, 2017, or 4.0% of revenue. Same facility supplies expense was $28.0 million for the three months ended June 30, 2018, or 3.8% of revenue, compared to $27.1 million for the three months ended June 30, 2017, or 3.9% of revenue.

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Rents and leases. Rents and leases were $20.2 million for the three months ended June 30, 2018, or 2.6% of revenue, compared to $19.4 million for the three months ended June 30, 2017, or 2.7% of revenue. Same facility rents and leases were $16.2 million for the three months ended June 30, 2018, or 2.2% of revenue, compared to $16.1 million for the three months ended June 30, 2017, 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 $87.3 million for the three months ended June 30, 2018, or 11.4% of revenue, compared to $83.1 million for the three months ended June 30, 2017, or 11.6% of revenue. Same facility other operating expenses were $80.8 million for the three months ended June 30, 2018, or 11.2% of revenue, compared to $79.1 million for the three months ended June 30, 2017, or 11.4% of revenue.

Depreciation and amortization. Depreciation and amortization expense was $39.9 million for the three months ended June 30, 2018, or 5.2% of revenue, compared to $35.2 million for the three months ended June 30, 2017, or 4.9% of revenue. The increase in depreciation and amortization was attributable to depreciation associated with capital expenditures and real estate acquisitions during 2017 and 2018.

Interest expense. Interest expense was $45.8 million for the three months ended June 30, 2018 compared to $43.5 million for the three months ended June 30, 2017. The increase in interest expense was primarily a result of higher interest rates applicable to our variable rate debt slightly offset by the lower interest rates in connection with amendments to the Repricing Facilities to the Amended and Restated Credit Agreement.

Debt extinguishment costs. Debt extinguishment costs for the three months ended June 30, 2017 represent $0.5 million of cash ~~consideration~~charges and $0.3 million of ~~approximately $21.3~~non-cash charges recorded in connection with the Third Repricing Amendment to the Amended and Restated Senior Credit Facility.

Transaction-related expenses. Transaction-related expenses were $2.9 million for the three months ended June 30, 2018 compared to $9.1 million for the three months ended June 30, 2017. Transaction-related expenses represent costs incurred in the respective periods primarily related to our acquisitions and related integrated efforts, as summarized below (in thousands):

	Three Months Ended June 30,
	2018		2017
Legal, accounting and other costs	$	2,060	$	2,114
Severance and contract termination costs		827		6,938
	$	2,887	$	9,052

Provision for income taxes. For the three months ended June 30, 2018, the provision for income taxes was $10.4 million, reflecting an effective tax rate of 15.0%, compared to $16.6 million, reflecting an effective tax rate of 25.0%, for the three months ended June 30, 2017. The decrease in the effective tax rate for the three months ended June 30, 2018 was primarily attributable to the application of the Tax Act.

Six months ended June 30, 2018 compared to the six months ended June 30, 2017

Revenue. Revenue increased $112.9 million, or 8.1%, to $1.5 billion for the six months ended June 30, 2018 from $1.4 billion for the six months ended June 30, 2017 resulting from same facility revenue growth of 5.4% and the increase in the exchange rate between USD and GBP of $45.8 million. During the six months ended June 30, 2018, we generated $943.9 million of revenue, or 62.6% of our total revenue, from our U.S. Facilities and $564.1 million of revenue, or 37.4% of our total revenue, from our U.K. Facilities. During the six months ended June 30, 2017, we generated $901.6 million of revenue, or 64.6% of our total revenue, from our U.S. Facilities and $493.5 million of revenue, or 35.4% of our total revenue, from our U.K. Facilities.

U.S. same facility revenue increased by $48.9 million, or 5.5%, for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, resulting from same facility growth in patient days of 1.9% and an increase in same facility revenue per day of 3.5%. U.K. same facility revenue increased by $24.5 million, or 5.1%, for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, resulting from same facility growth in patient days of 1.8% and an increase in same facility revenue per day of 3.3%. Consistent with the same facility patient day growth in 2017, the growth in same facility patient days for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

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Salaries, wages and benefits. Salaries, wages and benefits (“SWB”) expense was $828.3 million for the six months ended June 30, 2018 compared to $760.0 million for the six months ended June 30, 2017, an increase of $68.3 million. SWB expense included $14.0 million and $14.8 million of equity-based compensation expense for the six months ended June 30, 2018 and 2017, respectively. Excluding equity-based compensation expense, SWB expense was $814.2 million, or 54.0% of revenue, for the six months ended June 30, 2018, compared to $745.2 million, or 53.4% of revenue, for the six months ended June 30, 2017. Same facility SWB expense was $737.8 million for the six months ended June 30, 2018, or 51.2% of revenue, compared to $697.2 million for the six months ended June 30, 2017, or 51.0% of revenue.

Professional fees. Professional fees were $107.5 million for the six months ended June 30, 2018, or 7.1% of revenue, compared to $89.7 million for the six months ended June 30, 2017, or 6.4% of revenue. The $17.8 million increase was primarily attributable to higher contract labor costs in our U.K. Facilities. Same facility professional fees were $92.1 million for the six months ended June 30, 2018, or 6.4% of revenue, compared to $79.7 million, for the six months ended June 30, 2017, or 5.8% of revenue.

Supplies. Supplies expense was $59.5 million for the six months ended June 30, 2018, or 3.9% of revenue, compared to $56.3 million for the six months ended June 30, 2017, or 4.0% of revenue. Same facility supplies expense was $55.3 million for the six months ended June 30, 2018, or 3.8% of revenue, compared to $53.8 million for the six months ended June 30, 2017, or 3.9% of revenue.

Rents and leases. Rents and leases were $40.5 million for the six months ended June 30, 2018, or 2.7% of revenue, compared to $38.4 million for the six months ended June 30, 2017, or 2.8% of revenue. Same facility rents and leases were $32.5 million for the six months ended June 30, 2018, or 2.3% of revenue, compared to $32.4 million for the six months ended June 30, 2017, or 2.4% 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 $175.5 million for the six months ended June 30, 2018, or 11.6% of revenue, compared to $166.8 million for the six months ended June 30, 2017, or 12.0% of revenue. Same facility other operating expenses were $163.0 million for the six months ended June 30, 2018, or 11.2% of revenue, compared to $160.6 million for the six months ended June 30, 2017, or 11.7% of revenue.

Depreciation and amortization. Depreciation and amortization expense was $79.7 million for the six months ended June 30, 2018, or 5.3% of revenue, compared to $68.8 million for the six months ended June 30, 2017, or 4.9% of revenue. The increase in depreciation and amortization was attributable to depreciation associated with capital expenditures and real estate acquisitions during 2017 and 2018.

Interest expense. Interest expense was $91.1 million for the six months ended June 30, 2018 compared to $86.3 million for the six months ended June 30, 2017. The increase in interest expense was primarily a result of higher interest rates applicable to our variable rate debt slightly offset by the lower interest rates in connection with amendments to the Repricing Facilities Amendments to the Amended and Restated Credit Agreement.

Debt extinguishment costs. Debt extinguishment costs for the six months ended June 30, 2018 represent $0.6 million of cash charges and $0.3 million of non-cash charges recorded in connection with the Repricing Facilities Amendments to the Amended and Restated Credit Agreement. Debt extinguishment costs for the six months ended June 30, 2017 represent $0.5 million of cash charges and $0.3 million of non-cash charges recorded in connection with the Third Repricing Amendment to the Amended and Restated Credit Facility.

Transaction-related expenses. Transaction-related expenses were $7.7 million for the six months ended June 30, 2018 compared to $13.2 million for the six months ended June 30, 2017. Transaction-related expenses represent costs incurred in the respective periods primarily related to our acquisitions and related integrated efforts, as summarized below (in thousands):

	Six Months Ended June 30,
	2018		2017
Severance and contract termination costs	$	4,181	$	9,570
Legal, accounting and other costs		3,474		3,601
	$	7,655	$	13,171

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Provision for income taxes. For the six months ended June 30, 2018, the provision for income taxes was $7.6 million, reflecting an effective tax rate of 6.5%, compared to $30.3 million, reflecting an effective tax rate of 26.4%, for the six months ended June 30, 2017. The decrease in the effective tax rate for the six months ended June 30, 2018 was primarily attributable to the application of the Tax Act and a discrete benefit of $10.5 million recorded in the six months ended June 30, 2018 related to a change in the provisional amount recorded at December 31, 2017.

Revenue

In May 2014, the FASB and the International Accounting Standards Board issued 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 we expect to be entitled in exchange for those goods or services. We adopted ASU2014-09 using the modified retrospective method effective January 1, 2018. As a result of certain changes required by ASU2014-09, the majority of our provision for doubtful accounts are recorded as a direct reduction to revenue instead of being presented as a separate line item on the condensed consolidated statements of income. The adoption of ASU2014-09 did not have a significant impact on our consolidated financial statements.

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, CCGs and local authorities in England, Scotland and Wales) and (v) individual patients and clients. We determine the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. Implicit price concessions are based on historical collection experience.

The following table presents revenue by payor type and as a percentage of revenue in our U.S. Facilities for the three and six months ended ~~March 31,~~June 30, 2018 and 2017 (dollars in thousands):


	Three Months Ended March 31,											Three Months Ended June 30,												Six Months Ended June 30,
	2018					2017						2018						2017						2018					2017
	Amount		%			Amount			%			Amount			%			Amount			%			Amount		%			Amount			%
Commercial	$	137,619		29.8	%	$	139,455			31.0	%	$	147,279			30.6	%	$	149,493			31.7	%	$	284,898		30.2	%	$	288,948			31.4	%
Medicare		67,271		14.5	%		67,840			15.0	%		69,508			14.4	%		71,559			15.2	%		136,779		14.5	%		139,399			15.1	%
Medicaid		213,279		46.1	%		190,834			42.4	%		225,567			46.9	%		197,279			41.9	%		438,846		46.5	%		388,113			42.1	%
Self-Pay		36,907		8.0	%		43,682			9.7	%		33,379			6.9	%		43,561			9.2	%		70,286		7.4	%		87,243			9.5	%
Other		7,329		1.6	%		8,553			1.9	%		5,737	��		1.2	%		9,269			2.0	%		13,066		1.4	%		17,822			1.9	%

Revenue before provision for doubtful accounts		462,405		100.0	%		450,364			100.0	%		481,470			100.0	%		471,161			100.0	%		943,875		100.0	%		921,525			100.0	%
Provision for doubtful accounts		—					(10,141	)					—						(9,747	)					—					(19,888	)

Revenue	$	462,405				$	440,223					$	481,470					$	461,414					$	943,875				$	901,637

The following table presents revenue by payor type and as a percentage of revenue in our U.K. Facilities for the three and six months ended ~~March 31,~~June 30, 2018 and 2017 (dollars in thousands):


	Three Months Ended March 31,											Three Months Ended June 30,										Six Months Ended June 30,
	2018					2017						2018					2017					2018					2017
	Amount		%			Amount			%			Amount		%			Amount		%			Amount		%			Amount			%
U.K. public funded sources	$	253,294		90.5	%	$	215,465			90.2	%	$	256,881		90.4	%	$	226,380		88.9	%	$	510,175		90.4	%	$	441,845			89.6	%
Self-Pay		25,068		9.0	%		22,201			9.3	%		27,272		9.6	%		23,889		9.4	%		52,340		9.3	%		46,090			9.3	%
Other		1,474		0.5	%		1,311			0.5	%		115		0.0	%		4,213		1.7	%		1,589		0.3	%		5,524			1.1	%

Revenue before provision for doubtful accounts		279,836		100.0	%		238,977			100.0	%		284,268		100.0	%		254,482		100.0	%		564,104		100.0	%		493,459			100.0	%
Provision for doubtful accounts		—					(6	)					—					—					—					(6	)

Revenue	$	279,836				$	238,971					$	284,268				$	254,482				$	564,104				$	493,453

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The following tables present a summary of our aging of accounts receivable at ~~March 31,~~June 30, 2018 and December 31, 2017:

~~March 31,~~June 30, 2018


	Current			30-90			90-150			>150			Total			Current			30-90			90-150			>150			Total
Commercial		17.4	%		7.1	%		2.7	%		6.0	%		33.2	%		16.8	%		6.3	%		2.6	%		4.9	%		30.6	%
Medicare		9.8	%		1.4	%		0.4	%		1.0	%		12.6	%		10.2	%		1.5	%		0.4	%		0.9	%		13.0	%
Medicaid		21.6	%		6.0	%		3.1	%		5.8	%		36.5	%		23.3	%		4.6	%		3.1	%		6.1	%		37.1	%
U.K. public funded sources		3.1	%		6.1	%		0.2	%		0.0	%		9.4	%		8.0	%		1.9	%		0.0	%		0.0	%		9.9	%
Self-Pay		1.6	%		1.8	%		1.2	%		2.9	%		7.5	%		1.8	%		1.6	%		1.6	%		3.4	%		8.4	%
Other		0.3	%		0.3	%		0.1	%		0.1	%		0.8	%		0.6	%		0.2	%		0.1	%		0.1	%		1.0	%

Total		53.8	%		22.7	%		7.7	%		15.8	%		100.0	%		60.7	%		16.1	%		7.8	%		15.4	%		100.0	%

December 31, 2017

	Current			30-90			90-150			>150			Total
Commercial		15.3	%		8.7	%		3.2	%		6.9	%		34.1	%
Medicare		9.4	%		1.6	%		0.5	%		1.1	%		12.6	%
Medicaid		19.8	%		6.4	%		2.5	%		5.2	%		33.9	%
U.K. public funded sources		7.0	%		3.4	%		0.2	%		0.0	%		10.6	%
Self-Pay		1.8	%		1.4	%		1.4	%		3.2	%		7.8	%
Other		0.3	%		0.3	%		0.2	%		0.2	%		1.0	%
Total		53.6	%		21.8	%		8.0	%		16.6	%		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 March 31,
   2018 2017
   Amount    % Amount    %
Revenue before provision for doubtful accounts
   $ 742,241    $ 689,341
Provision for doubtful accounts
   —      (10,147 )





Revenue
   742,241    100.0 % 679,194    100.0 %
Salaries, wages and benefits
   411,528    55.4 % 376,421    55.4 %
Professional fees
   54,018    7.3 % 43,409    6.4 %
Supplies
   29,364    4.0 % 27,709    4.1 %
Rents and leases
   20,288    2.7 % 18,971    2.8 %
Other operating expenses
   88,231    11.9 % 83,711    12.3 %
Depreciation and amortization
   39,773    5.4 % 33,613    4.9 %
Interest expense
   45,243    6.1 % 42,757    6.3 %
Debt extinguishment costs
   940    0.1 % —      —   %
Transaction-related expenses
   4,768    0.6 % 4,119    0.6 %





Total expenses
   694,153    93.5 % 630,710    92.8 %





Income before income taxes
   48,088    6.5 % 48,484    7.2 %
(Benefit from) provision for income taxes
   (2,786 )    (0.4 )% 13,711    2.0 %





Net income
   $ 50,874    6.9 % $ 34,773    5.2 %

~~Three months ended March 31, 2018 compared to the three months ended March 31, 2017~~

~~Revenue.~~ Revenue increased $63.0 million, or 9.3%, to $742.2 million for the three months ended March 31, 2018 from $679.2 million for the three months ended March 31, 2017 resulting from total facility revenue growth of 4.8% and the increase in the exchange rate between USD and GBP of $29.5 million. Same-facility revenue increased by $37.5 million, or 5.6%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017, resulting from same-facility growth in patient days of 2.0% and an increase in same-facility revenue per day of 3.5%. Consistent with the same-facility patient day growth in 2017, the growth in same-facility patient days for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 resulted from the addition of beds to our existing facilities and ongoing demand for our services.

~~Salaries, wages and benefits.~~ Salaries, wages and benefits (“SWB”) expense was $411.5 million for the three months ended March 31, 2018 compared to $376.4 million for the three months ended March 31, 2017, an increase of $35.1 million. SWB expense included $6.9 million and $7.4 million of equity-based compensation expense for the three months ended March 31, 2018 and 2017, respectively. Excluding equity-based compensation expense, SWB expense was $404.6 million, or 54.5% of revenue, for the three months ended March 31, 2018, compared to $369.0 million, or 54.3% of revenue, for the three months ended March 31, 2017. Same-facility SWB expense was $366.1 million for the three months ended March 31, 2018, or 51.6% of revenue, compared to $348.4 million for the three months ended March 31, 2017, or 51.8% of revenue.

~~Professional fees.~~ Professional fees were $54.0 million for the three months ended March 31, 2018, or 7.3% of revenue, compared to $43.4 million for the three months ended March 31, 2017, or 6.4% of revenue. The $10.6 million increase was primarily attributable to higher contract labor costs in our U.K. Facilities. Same-facility professional fees were $46.0 million for the three months ended March 31, 2018, or 6.4% of revenue, compared to $38.9 million, for the three months ended March 31, 2017, or 5.8% of revenue.

~~Supplies.~~Supplies expense was $29.4 million for the three months ended March 31, 2018, or 4.0% of revenue, compared to $27.7 million for the three months ended March 31, 2017, or 4.1% of revenue. Same-facility supplies expense was $27.3 million for the three months ended March 31, 2018, or 3.9% of revenue, compared to $26.7 million for the three months ended March 31, 2017, or 4.0% of revenue.

~~Rents and leases.~~ Rents and leases were $20.3 million for the three months ended March 31, 2018, or 2.7% of revenue, compared to $19.0 million for the three months ended March 31, 2017, or 2.8% of revenue. Same-facility rents and leases were $16.2 million for the three months ended March 31, 2018, or 2.3% of revenue, compared to $16.2 million for the three months ended March 31, 2017, or 2.4% 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 $88.2 million for the three months ended March 31, 2018, or 11.9% of revenue, compared to $83.7 million for the three months ended March 31, 2017, or 12.3% of revenue. Same-facility other operating expenses were $82.2 million for the three months ended March 31, 2018, or 11.6% of revenue, compared to $81.5 million for the three months ended March 31, 2017, or 12.1% of revenue.

~~Depreciation and amortization.~~ Depreciation and amortization expense was $39.8 million for the three months ended March 31, 2018, or 5.4% of revenue, compared to $33.6 million for the three months ended March 31, 2017, or 4.9% of revenue. The increase in depreciation and amortization was attributable to depreciation associated with capital expenditures and real estate acquisitions during 2017 and 2018.

~~Interest expense.~~ Interest expense was $45.2 million for the three months ended March 31, 2018 compared to $42.8 million for the three months ended March 31, 2017. The increase in interest expense was primarily a result of higher interest rates applicable to our variable rate debt slightly offset by the lower interest rates in connection with amendments to the Amended and Restated Credit Agreement.

~~Debt extinguishment costs.~~ ~~Debt extinguishment costs for the three months ended March 31, 2018 represent $0.6 million of cash charges and $0.3 million ofnon-cash~~ ~~charges recorded in connection with the Repricing Facilities Amendments to the Amended and Restated Credit Agreement.~~

~~Transaction-related expenses.~~ Transaction-related expenses were $4.8 million for the three months ended March 31, 2018 compared to $4.1 million for the three months ended March 31, 2017. Transaction-related expenses represent costs incurred in the respective periods primarily related to our acquisitions and related integrated efforts, as summarized below (in thousands):

   Three Months Ended March 31,
   2018    2017
Legal, accounting and other costs
   $ 1,414    $ 1,486
Severance and contract termination costs
   3,354    2,633




   $ 4,768    $ 4,119

~~(Benefit from) provision for income taxes.~~ For the three months ended March 31, 2018, the (benefit from) provision for income taxes was $(2.8) million, reflecting an effective tax rate of (5.8)%, compared to $13.7 million, reflecting an effective tax rate of 28.3%, for the three months ended March 31, 2017. The decrease in the effective tax rate for the three months ended March 31, 2018 was primarily attributable to the application of the Tax Act and a discrete benefit of $10.5 million recorded in the three months ended March 31, 2018 related to a change in the provisional amount recorded at December 31, 2017.

Liquidity and Capital Resources

Cash provided by continuing operating activities for the ~~three~~six months ended ~~March 31,~~June 30, 2018 was ~~$72.6~~$217.9 million compared to ~~$57.4~~$188.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2017. The increase in cash provided by continuing operating activities was primarily attributable to the growth in ~~same-facility~~same facility operations. Days sales outstanding were 40 days at ~~March 31,~~June 30, 2018 compared to 38 days at December 31, 2017. At ~~March 31,~~June 30, 2018 and December 31, 2017, we had working capital of ~~$114.3~~$95.1 million and $94.2 million, respectively.

Cash used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2018 was ~~$78.7~~$173.7 million compared to ~~$58.1~~$146.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2017. Cash used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2018 primarily consisted of ~~$70.3~~$161.6 million of cash paid for capital expenditures and ~~$4.3~~$8.9 million of cash paid for real estate. Cash paid for capital expenditures for the ~~three~~six months ended ~~March 31,~~June 30, 2018 consisted of ~~$18.1~~$32.8 million of routine capital expenditures and ~~$52.2~~$128.8 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 ~~2.4%~~2.2% of revenue for the ~~three~~six months ended ~~March 31,~~June 30, 2018. Cash used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2017 primarily consisted of ~~$50.5~~$32.1 million of cash paid for routine capital expenditures, $85.4 million of cash paid for expansion capital expenditures and ~~$2.5~~$22.9 million of cash paid for real ~~estate acquisitions.~~estate.

Cash used in financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2018 was ~~$4.7~~$30.5 million compared to cash used in financing activities of ~~$13.7~~$23.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2017. Cash used in financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2018 consisted of principal payments of long-term debt of $23.2 million, common stock withheld for minimum statutory taxes of ~~$2.0~~$2.1 million and other of ~~$2.7~~$5.2 million. Cash used in financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2017 primarily consisted of principal payments on long-term debt of ~~$8.6~~$17.3 million and common stock withheld for minimum statutory taxes of ~~$4.2~~$3.7 million.

We had total available cash and cash equivalents of ~~$57.8~~$79.5 million and $67.3 million at ~~March 31,~~June 30, 2018 and December 31, 2017, respectively, of which approximately ~~$32.6~~$19.4 million and $20.4 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. While we are still evaluating the full impact of the Tax Act on the Company, we expect the substantial reduction of the federal corporate tax rate to benefit our financial results and cash flow in future periods. We believe the change will not result in a U.S. tax liability on those foreign earnings which have not previously been repatriated to the U.S., with future foreign earnings potentially not subject to U.S. income taxes when repatriated.

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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 May 10, 2017, we entered into a Third Repricing Amendment to the Amended and Restated Credit Agreement. The Third Repricing Amendment reduced the Applicable Rate with respect to the TrancheB-1 Facility and the TrancheB-2 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, we recorded a debt extinguishment charge of $0.8 million, including the discount andwrite-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of income.

On March 22, 2018, we entered into a Second Repricing Facilities Amendment to the Amended and Restated Credit Agreement. The Second Repricing Facilities Amendment (i) replaced the TrancheB-1 Facility and the TrancheB-2 Facility with a new TrancheB-3 Facility and a new TrancheB-4 Facility, respectively, and (ii) reduced the Applicable Rate from 2.75% to 2.50% in the case of Eurodollar Rate loans and reduced the Applicable Rate from 1.75% to 1.50% in the case of Base Rate Loans.

On March 29, 2018, we entered into a Third Repricing Facilities Amendment to the Amended and Restated Credit Agreement. The Third Repricing Facilities Amendment replaced the existing revolving credit facility and TLA Facility with a new revolving credit facility and TLA Facility, respectively. Our line of credit on the revolving credit facility remains at $500.0 million and the Third Repricing Facility Amendment reduced the size of the TLA Facility from $400.0 million to $380.0 million to reflect the then current outstanding principal. The Third Repricing Facilities Amendment reduced the Applicable Rate for the revolving credit facility and the TLA Facility by amending the definition of “Applicable Rate” and replacing the rate table therein with the table set forth below.

In connection with the Repricing Facilities Amendments, we recorded a debt extinguishment charge of $0.9 million, including the discount andwrite-off of deferred financing costs, which was recorded in debt extinguishment costs in the condensed consolidated statements of income.

We had ~~$495.8~~$495.0 million of availability under the revolving line of credit and had standby letters of credit outstanding of ~~$4.2~~$5.0 million related to security for the payment of claims required by our workers’ compensation insurance program at ~~March 31,~~June 30, 2018. 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 $4.8 million for ~~June~~September 30, 2018 to December 31, 2019, $7.1 million for March 31, 2020 to December 31, 2020, and $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 TrancheB-3 Facility in equal quarterly installments of $1.2 million on the last business day of each March, June, September and December, with the outstanding principal balance of the TrancheB-3 Facility due on February 11, 2022. We are required to repay the TrancheB-4 Facility in equal quarterly installments of approximately $2.3 million on the last business day of each March, June, September and December, with the outstanding principal balance of the TrancheB-4 Facility due on February 16, 2023. On December 29, 2017, we made an additional payment of $22.5 million, including $7.7 million on the TrancheB-1 Facility and $14.8 million on the TrancheB-2 Facility. On April 17, 2018, we made an additional payment of $15.0 million, including $5.1 million on the TrancheB-3 Facility and $9.9 million on the TrancheB-4 Facility.

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 the Company and such subsidiaries’ assets. 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 million of unrestricted and unencumbered cash to consolidated EBITDA, in each case as defined in the Amended and Restated Credit Agreement). The Applicable Rate (as defined in the Amended and Restated Credit Agreement) for the Pro Rata Facilities was 2.50% for Eurodollar Rate Loans (as defined in the Amended and Restated Credit Agreement) and 1.50% for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) at ~~March 31,~~June 30, 2018. 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%. At ~~March 31,~~June 30, 2018, the Pro Rata Facilities bore interest at a rate of LIBOR plus 2.50%. In addition, we are required to pay a commitment fee on undrawn amounts under our revolving credit facility.

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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		1.50	%		0.50	%		0.20	%	< 3.50:1.0		1.50	%		0.50	%		0.20	%
2	>3.50:1.0 but < 4.00:1.0		1.75	%		0.75	%		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		2.00	%		1.00	%		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		2.25	%		1.25	%		0.35	%	>4.50:1.0 but < 5.25:1.0		2.25	%		1.25	%		0.35	%
5	>5.25:1.0		2.50	%		1.50	%		0.40	%	>5.25:1.0		2.50	%		1.50	%		0.40	%

Eurodollar Rate Loans with respect to the TrancheB-3 Facility bear interest at the TrancheB-3 Facility Applicable Rate (as defined below) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period). Base Rate Loans bear interest at the TrancheB-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 “TrancheB-3 Facility Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%. The TrancheB-4 Facility bears interest as follows: Eurodollar Rate Loans bear interest at the Applicable Rate (as defined in the Amended and Restated Credit Agreement) plus the Eurodollar Rate (subject to a floor of 0.75% and based upon the LIBOR Rate prior to commencement of the interest rate period) and Base Rate Loans 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 used herein, the term “Applicable Rate” means, with respect to Eurodollar Rate Loans, 2.50%, and with respect to Base Rate Loans, 1.50%.

The lenders who provided the TrancheB-3 Facility and TrancheB-4 Facility are not entitled to benefit from our maintenance of its financial covenants under the Amended and Restated Credit Agreement. Accordingly, if we fail to maintain its financial covenants, such failure shall not constitute an event of default under the Amended and Restated Credit Agreement with respect to the TrancheB-3 Facility or TrancheB-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.

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 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

2018

~~March 31~~

6.50x

6.25x

~~June 30~~

6.00x

~~September 30~~

~~December 31~~

6.00x

~~2018~~

2019

5.75x

~~6.50x~~

5.75x

5.50x

~~6.25x~~

~~6.00x~~

5.50x

~~2019~~

2020

5.25x

~~5.75x~~

5.25x

~~5.75x~~

~~5.50x~~

~~2020~~

~~5.25x~~

5.00x

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

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•

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

June 30, 2018			3.75x
September 30, 2018 and each fiscal quarter thereafter			3.50x

At ~~March 31,~~June 30, 2018, 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.

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.

The indentures governing the Senior Notes contain covenants that, among other things, limit our 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 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 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. At ~~March 31,~~June 30, 2018 and December 31, 2017, $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

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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 at ~~March 31,~~June 30, 2018 (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)	$	201,631	$	562,840	$	2,870,032	$	458,597	$	4,093,100	$	201,487	$	564,834	$	2,812,898	$	451,785	$	4,031,004
Operating leases		71,750		128,627		109,042		846,095		1,155,514		70,721		126,152		105,310		837,607		1,139,790
Purchase and other obligations (b)		4,177		7,453		33,195		26,837		71,662		4,189		38,012		1,980		26,590		70,771

Total obligations and commitments	$	277,558	$	698,920	$	3,012,269	$	1,331,529	$	5,320,276	$	276,397	$	728,998	$	2,920,188	$	1,315,982	$	5,241,565

(a)	Amounts include required principal and interest payments. The projected interest payments reflect the interest rates in place on our variable-rate debt at ~~March 31,~~June 30, 2018.

(b)	Amounts relate to purchase obligations, including capital lease payments.

Off-Balance Sheet Arrangements

At ~~March 31,~~June 30, 2018, we had standby letters of credit outstanding of ~~$4.2~~$5.0 million related to security for the payment of claims as required by our workers’ compensation insurance program.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at ~~March 31,~~June 30, 2018 was composed of $1.5 billion of fixed-rate debt and $1.7 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 ~~0.44%~~0.45% higher rate on our variable rate debt) would decrease our net income and cash flows by $6.1 million on an annual basis based upon our borrowing level at ~~March 31,~~June 30, 2018.

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 $10.4 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. 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 in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’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.

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Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended ~~March 31,~~June 30, 2018 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II – ~~OTHER~~OTHER INFORMATION

Item 1.

Legal Proceedings

We are, from time to time, subject to various claims, governmental investigations and regulatory actions, 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. Under the federal False Claims Act, private parties have the right to bringqui 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. Certain of our individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. In the opinion of management, we are not currently a party to any proceeding that would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations.

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, 2017. The risks, as described in the Company’s Annual Report on Form10-K for the year ended December 31, 2017, 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.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended ~~March 31,~~June 30, 2018, 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
January 1 – January 31
   —      $ —      —      —
February 1 – February 28
   32,598    37.58    —      —
March 1 – March 31
   15,315    41.61    —      —



Total
   47,913

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
April 1 – April 30		—	$	—		—		—
May 1 – May 31		4,583		42.12		—		—
June 1 – June 30		4,827		40.71		—		—
Total		9,410

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Item 6.

Exhibits


Exhibit No.		Exhibit Description

3.1		Amended and Restated Certificate of Incorporation, as amended. (1)

3.2		Amended and Restated Bylaws of the Company, as amended. (1)

~~10.1~~ 31.1*		~~Second Refinancing FacilitiesAmendment, dated March~~ ~~22, 2018, to the Amended and Restated Credit Agreement, dated December~~ 31, 2012 (as amended, restated or otherwise modified to date), by and among Bank of America, NA (Administrative Agent, Swing Line Lender and L/C Issuer) and the Company, the guarantors listed on the signature pages thereto, and the lenders listed on the signature pages thereto. (2)

~~10.2~~		~~Third Refinancing FacilitiesAmendment, dated March~~ ~~29, 2018, to the Amended and Restated Credit Agreement, dated December~~ 31, 2012 (as amended, restated or otherwise modified to date), by and among Bank of America, NA (Administrative Agent, Swing Line Lender and L/C Issuer) and the Company, the guarantors listed on the signature pages thereto, and the lenders listed on the signature pages thereto. (3)

10.3*		~~Form of Restricted Stock Agreement pursuant to the Incentive Compensation Plan.~~

10.4*		~~Form of Restricted Stock Unit Agreement pursuant to the Incentive Compensation Plan.~~

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.

31.2*		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* 32*		~~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.~~

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.

101.INS**		XBRL Instance Document.

101.SCH**		XBRL Taxonomy Extension Schema Document.

101.CAL**		XBRL Taxonomy Calculation Linkbase Document.

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

101.LAB**		XBRL Taxonomy Labels Linkbase Document.

101.PRE**		XBRL Taxonomy Presentation Linkbase Document.

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

~~(2)~~

~~Incorporated by reference to exhibits filed with the Company’s Current Report on Form8-K~~ ~~filed March 27, 2018 (FileNo. 001-35331).~~

Filed herewith.

~~(3)~~

~~Incorporated by reference to exhibits filed with the Company’s Current Report on Form8-K~~ ~~filed April 2, 2018 (FileNo. 001-35331).~~

*	~~Filed herewith.~~

~~The XBRL related information in Exhibit 101 to this quarterly report on Form~~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~~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: ~~May 3,~~July 31, 2018

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