Acadia Healthcare Company Inc (ACHC) 2015 Q4 法說會逐字稿

As a reminder, this call is being recorded.

Good morning. I am Brent Turner, President of Acadia Healthcare, and I would like to welcome you to our fourth-quarter 2015 conference call.

To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated in accordance with GAAP on our website by viewing yesterday's news release under the investors link.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Acadia's expected quarterly and annual financial performance for 2016 and beyond. For this purpose, any statements made during the call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Acadia's filings with the Securities and Exchange Commission and in the Company's fourth-quarter news release, and consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements.

The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

At this time for opening remarks, I would like to turn the conference over to our Chairman and Chief Executive Officer, Joey Jacobs.

Good morning and welcome to our fourth-quarter conference call.

In addition to Brent, I am here today with our Chief Financial Officer, David Duckworth, and other members of our executive management team. David, Brent, and I will each have some brief remarks about the fourth quarter and our outlook for Acadia. Then we will open the line for your questions.

Acadia continued to produce strong operating results and substantial profitable growth for both the fourth quarter and the full year of 2015. Having started 2015 with approximately 5,800 beds in 78 facilities in 24 states, the United Kingdom, and Puerto Rico, we completed 2015 with more than 9,900 beds in 258 facilities, while adding 15 new states to our US geographic coverage.

This very significant expansion during a period of increasing demand was the key contributor to our 68% growth in revenues and adjusted EBITDA for the fourth quarter. It also drove the 28% growth in our adjusted EPS for the quarter, which includes the impact of new shares issued during the year, primarily related to acquisitions.

2015 is our fifth consecutive year of very strong, profitable growth, which we attribute to the outstanding execution of our acquisition and growth -- organic growth strategies. During 2015, we made 17 acquisitions for 69 inpatient facilities with approximately 3,450 beds and for 107 comprehensive treatment centers. Five of these transactions were completed in the fourth quarter with approximately 200 beds and 19 CTC centers.

We have already gotten off to a great start in 2016 by announcing the completion of the Priory acquisition in our news release yesterday afternoon. Priory is a high-quality, independent behavioral health provider in the UK with a great reputation for clinical expertise and excellent facilities.

It is also the UK's largest independent provider with 327 facilities and approximately 7,100 inpatient beds. Combining this network with our existing UK presence increases Acadia's footprint there to 381 inpatient facilities with approximately 9,300 beds. This acquisition also expands our Companywide operations to a total of 585 behavioral health facilities with approximately 17,100 inpatient beds.

The combination of Priory's annual revenue of over $850 million with our revenue running at an annualized -- during the fourth quarter of $2 billion represents a major step forward toward annual revenues of $3 billion. The growth in our fourth-quarter revenue further reflects the significant contribution of our organic growth strategy to our overall results.

A central element of this strategy is to meet rising demand in the US and the UK primarily by adding beds to existing facilities and by opening de novo facilities. For 2015, we added approximately 670 beds, a 16% increase in total beds for the year. During the fourth quarter alone, we added 149 beds to existing facilities, and we are on track to add more than 300 beds in the first quarter of 2016. For the full-year 2016, we expect to have more than 800 bed additions systemwide.

The addition of new beds to our same-facility base was the primary driver of an 8% increase in same-facility revenue for the fourth quarter, which reflects a nice improvement compared to the third quarter of 6.5% same-facility revenue growth.

Consolidated EBITDA increased 68.4% to $111.8 million for the quarter and the margin rose 10 basis points to 22.6%.

With a strong finish to 2015 and significant acquisition activity already accomplished for 2016, we expect our operating momentum to continue. Accordingly, today, we established our adjusted earnings guidance for 2016 in a range of $2.81 to $2.86 per diluted share, which implies an increase of 26% to 28% for the year compared with 2015. I now believe we can achieve a $6 billion revenue run rate by the fourth quarter of 2020.

Thank you for your interest in Acadia, and now I will turn it over to David Duckworth.

Thanks, Joey, and good morning.

Acadia's revenue for the fourth quarter of 2015 increased 68% to $495.3 million from $294.9 million for the fourth quarter of 2014. Adjusted income from continuing operations attributable to Acadia was $42.3 million, up 55.8% from $27.2 million. Adjusted EPS for the fourth quarter of 2015 was $0.59, up 28.3% from $0.46 for the fourth quarter of 2014.

For the full year of 2015, revenue increased 78.6% to $1.8 billion. Adjusted income from continuing operations attributable to Acadia rose 79% to $152.8 million and adjusted EPS increased 44.8% to $2.23.

For the fourth quarter of 2015, our adjusted EPS excludes debt extinguishment costs of $839,000 and transaction-related expenses of $5.2 million. For the fourth quarter of 2014, adjusted (multiple speakers) transaction-related expenses of $2.8 million.

Weighted average diluted shares outstanding increased 19.5% for the comparable quarters, primarily due to the equity issued in conjunction with the CRC acquisition in February 2015 and to our public equity offering in May 2015. Acadia's tax rate on an adjusted income from continuing operations before income taxes was 28.5% for the fourth quarter, compared with 27.9% for the fourth quarter of 2014.

Acadia's same-facility revenue increased 8% for the fourth quarter, compared with the fourth quarter of 2014, with 7.8% growth in patient days and a 0.1% increase in revenue per patient day. Same-facility EBITDA margin was 25.5% for the latest quarter versus 25.7% for the fourth quarter of the prior year.

Adjusted consolidated EBITDA grew 68.4% to $111.8 million, which was 22.6% of consolidated revenue from $66.4 million or 25% of consolidated revenue last year.

As announced in yesterday's news release, we established our 2016 guidance for adjusted earnings per diluted share in a range of $2.81 to $2.86, an increase of 26% to 28% over 2015. We also established first-quarter guidance for adjusted EPS in a range of $0.53 to $0.54, an increase of $0.23 to $0.26 over the first quarter of 2015.

Our first-quarter guidance includes the impact of the January 12 closing of an 11.5 million share public equity offering of our common stock related to the Priory acquisition and the 4 million shares issued to the Priory shareholders at the closing of the transaction yesterday. The first quarter also reflects only a partial quarter of the accretive impact of the transaction.

Other assumptions included in our financial guidance include an exchange rate of $1.45 per British pound sterling, non-cash stock compensation expense of approximately $26 million, and a consolidated tax rate of 23%. Our guidance excludes the impact from any future acquisitions and transaction-related expenses.

Now, here is Brent.

Thank you, David.

Before we turn the call over to the operator to queue up the questions, we had a number of questions around our guidance, and while David has outlined some of the components, I thought it would be very helpful and maybe alleviate a lot of redundant questions to outline somewhat of a bridge, a reconciliation to our 2016 guidance compared to more of the run rate that -- for a full year.

So when you look at our midpoint of approximately $2.84 for our 2016 adjusted EPS, there are several items that it is important to note and really adjust for. First, the early January 2016 equity offering of 11.5 million shares to finance a portion of the Priory transaction had a negative carry impact on the Company's earnings for 2016 of about $0.04, $0.04 impact from that 35-day carry of that offering.

Two, Priory closing in mid-February only affords us a partial-period effect in 2016 of approximately 10.5 months, and so when you adjust for that partial period, the impact is about another $0.04 per share.

Third, the strengthening dollar has had an effect on both our outlook for PiC and Priory earnings in 2016, due to the exchange rate from $1.52, roughly, where the exchange rate was in 2015, to our estimate and where the exchange rate is currently, in the neighborhood of $1.45 for 2016. That effect is another $0.10 on the earnings outlook.

And then, lastly, our assumed cost efficiencies are impacted again by the partial period for Priory in 2016, as well as a more conservative approach to the timing in realizing some of these efficiencies.

We expect to be on a run rate of $20 million in savings by the fourth quarter of 2016. This more conservative adjustment is about an $0.11 impact in 2016.

So these adjustments bring our pro forma adjusted EPS to approximately $3.14, and then if you take out and don't adjust for the FX, because that is out of the Company's control, it is still north of $3 when you adjust for the full-year effect of these other three items. So I did think that was helpful to just frame the absolute numbers embedded in our outlook.

And at this point, Operator, you can now begin the questions.

(Operator Instructions). Whit Mayo, Robert W. Baird.

Maybe just a follow-up on your last comment, Brent, around the synergies. Just trying to figure out, was there a new development that occurred to reshape your thinking around the pace and timing of the synergies? Just trying to understand a little bit more where this new conservative stance comes from, and has your view on the overall accretion really changed? I understand a lot of this is just timing-related issues.

Whit, this is Joey. It is all timing related. We are still absolutely certain that the cost efficiencies will be able to get to $20 million and we were just somewhat conservative in our 2016 guidance, but you can be rest assured that that is a top priority for our operations team and myself, so we will get those -- as Brent mentioned, we will be -- we will get those cost efficiencies as soon as possible and deliver those earnings to the market.

Okay, I guess I'm just trying to understand. Did you feel like initially that was a synergy number that you could realize for all of 2016 and something occurred to make you change that (multiple speakers)

No. Nothing occurred, no. It was just probably too much conservatism on my part.

Okay, no, that's fair.

And second question just maybe around the recently issued proposed rule for TRICARE, and I know that you have got a number of dedicated military TRICARE facilities today. Just curious if you have any thoughts, if you think this is helpful to the facilities where you aren't a TRICARE provider or potentially a headwind for some of your existing dedicated military programs. Thanks.

Actually, we think it is a tailwind. What we don't talk a lot about is we do have a national marketing referral department that TRICARE is a large part of that, so actually the opportunity and the additional coverage, we see that as a positive for us. And once again, it is further confirmation that they want to recognize that addiction and mental health issues, that the coverage is there for those individuals.

Great, thanks.

Kevin Fischbeck, Bank of America.

Just to clarify, the synergy number or the accretion number that you expect from Priory, that hasn't changed at all? Assuming stable exchange rates, I guess that might be the only thing that would have (multiple speakers)

That's right, Kevin. The only thing really is the FX. Everything else is absolutely what we said, absolutely.

Now what -- I am very -- I am absolutely excited about is that we were able to make this acquisition during the toughest -- one of the toughest times in the market and we're able to access all pieces of the balance sheet to make that acquisition happen, and absolutely the accretion, the assumptions we have for that, other than the foreign currency exchange, everything else is -- we are very, very optimistic and welcome those 13,000 employees to the Acadia family and very, very excited about getting this deal done on February 16.

Okay, and as far as the new bed additions that you've been doing, I think last quarter, I guess Q3, you said the organic growth rate was pulled back a little bit just because you couldn't open beds fast enough. I think in Q4 you were looking to do more beds than you actually opened. I think you were looking for 700-plus. In 2015, you did 670.

Is there anything around the ability to open beds (inaudible) for a really big year this year, but anything going on there around bed approvals or timing or anything that we should be thinking about?

There is nothing at all, and quite frankly, our folks were out in Las Vegas this past week opening up a brand-new 40-bed unit to that facility, and as we've mentioned, we're going to do more than 300 beds.

Now, obviously, the third quarter, you got a lot of concern about the third quarter, the same-store revenue numbers. But as we talked about it on the call, it was just the delay of the beds. Beds came online and we started filling those up, so you saw us go up 150 basis points on the same-facility revenue from 6.5% to 8%, so up 150 basis points in that one quarter. Ron Fincher and the operations team did an outstanding job. So, once again, we are looking for strong single-digit same-store revenue growth for 2016.

And then, just one clarification on that organic growth rate. Your $6 billion of revenue run rate, is that assuming a high single-digit growth rate until (multiple speakers) for deals?

Building the model, I would use 8%.

Okay, perfect. Thank you.

Paula Torch, Avondale Partners.

Good morning. I have a couple of questions on the UK. I am wondering the growth rate for Priory. Is it consistent with Partnerships in Care and is it relatively in line with your consolidated organic growth rate, and maybe how we should think about that going forward, ex any kind of ForEx impact?

We expect them to have strong single-digit patient day growth. They have -- the last time I talked to Tom Riall, the CEO of Priory, they have 300 beds that they need to get to work on, so they have got the same demand needs as Partnerships in Care does. So we expect another good year out of the UK, both for Priory and for PiC.

Okay, and just in terms of maybe getting a little bit more color on your overall M&A pipeline, I think over 40% or so now of your revenue is coming from the UK. In the past, you stated that your core US mental health business would really make up the bulk. So, is that changing how we should think about the breakdown over the next couple of years and wondering how the pipeline looks in the US for core mental health?

Okay, for the remainder of the year, I see very little acquisition activity in the UK, but I do see acquisition activity, one-off transactions, here in the US, which would be in our core spot. We are in the beginning stages of discussions with larger transactions that probably would occur into 2017, so we are pivoting back and the opportunity on the acquisition front for the next 18 months will be here in the US, so the US's revenue and earnings as a percent of the total will grow.

Okay, great, and just one last follow-up on Priory, if I may. I think if my numbers are correct, it has about 200 basis points or so less margin than PiC, so just curious what is driving that difference, and is there any opportunity to pick up margins there as well or is it just maybe inherent in some of the service lines that Priory may have that PiC doesn't?

Once you achieve the cost efficiencies, their margins are going to be very similar to PiC. And then I think during the period of 2012 to 2014, they did some infrastructure work, expense, on some quality initiatives that they wanted to do for their company, which they have those completed. So that spend would lessen going forward.

So between the cost efficiencies and that spend slowing down, the margins should be similar to what we have with PiC.

Okay, thank you so much.

Gary Lieberman, Wells Fargo.

Thanks for taking the question. Can you maybe talk about the balance sheet and how you're thinking about acquisitions and financing and leverage ratios?

Our high watermark was on February 16 at 5.4. We expect that to come down during the year. We have $300 million roughly available under the revolver, so for the one-off transactions, we have adequate capacity there.

So Gary, we will be able to continue to make acquisitions here in the US using the revolver and at the same time growing our earnings and lowering our leverage. Hopefully -- I have a personal goal of getting close to 5 times by the end of the year.

Okay. And then, so you feel good about whatever is in the pipeline, the larger stuff for 2017, that there shouldn't be any obstacles to financing any of that?

No.

Okay. Okay, all right. Thanks very much.

Ana Gupte, Leerink Partners.

I appreciate you taking the question. Back to the same-store growth, one of your peers talked about staffing shortages in that -- could have helped -- did not help volumes, if you will. So beyond the buildout and the timing of your capacity in the beds, have you had any issues around that, and if not, what makes it different for you?

In the US, we have not seen that be a significant issue at all about us being able to build our beds, open our beds, and staff our beds. So maybe it is just the markets that we are in, but we have been able to find the staff necessary to grow, as you saw with the fourth quarter, put up great same-store growth numbers. So, we see that continuing and hopefully we don't have any of those issues happen with us.

Okay, great. And then on the UK, again on the same-store side, but for pricing, there was a little bit of pressure. You said that would ease up. Now that you have PiC and Priory, and they're really a significant player, to what degree are you able to influence the reimbursement environment with NHS and be expected to be flattish still, or might it get better than that?

Since we just bought on February 16 and negotiations with NHS are about to be completed, we think both companies will -- should be able to get more than a 1% increase in their rate, and those negotiations will be completed by April 1. So, both of them were already working separate tracks and there is no reason to -- we will let them continue and finish those negotiations and it is going to be a positive rate increase.

And what would be the timing of the increase with the April (multiple speakers)

April 1.

Okay, terrific. Thank you.

A.J. Rice, UBS.

Maybe first on Priory. Obviously beyond just traditional acute psychiatric care, they have a number of business lines. Can you just comment a little bit more about where you see opportunities in maybe some of those other business lines that might be interesting long term for you even more broadly across the Acadia portfolio? And then, is there anything in that portfolio that is probably a candidate for divestiture?

The book of business that Priory has fits us nicely and we like it all.

The one piece of their business is the nursing home piece that we would not have done, but they did it several years ago. A.J., somewhere down the road that's a possibility of divesting that, but right now -- and right now, when I say that, I say for the next 24 months, we will just continue to operate it. We like the pieces of the business and just try to be as efficient in the delivery of high-quality service over there, knowing that this one subsidiary really doesn't fit what we do.

And I think they have some stuff in -- with the developmentally disabled, autistic, and those kind of things. Are those niche businesses that they are in or are those things that you might see the potential to expand more broadly across the Acadia portfolio?

We do that business now here in the US and it is a possibility for growth for us, but it would be more complementary to our existing businesses.

Now if we came across a freestanding facility that we really liked in this area, we would give it a hard look because that is a need that needs to be met and we do have this experience in the UK about running those types of businesses. So, that could be an opportunity for us here, A.J., in the US.

Okay, and maybe just one other pivot. Any update in your thinking about where we stand with respect to the IND exclusion or other legislative initiatives that are percolating in Washington?

Sure, A.J., this is Brent. We are -- continue to be optimistic. The House has taken up the Tim Murphy bill in the Energy and Commerce Committee. It is expected to go to the full committee in, I believe, early April.

Similarly, the Senator Chris Murphy bill on the Senate side has begun making its way through the Health committee, so we are very optimistic that there is movement on both -- in both houses for this bill. There is, obviously, some reconciliations of the respective bills to come together, but we are continuing to push very hard and we believe there's a lot of support to take away this inequality, which limits the Medicaid adults from being able to get treated in freestanding psychiatric hospitals in our country.

Okay, thanks a lot.

Frank Morgan, RBC Capital Markets.

I think at some point in your prepared remarks, you mentioned some investments that were being made in the UK, and it made me think about you in a larger scale. With all the acquisitions, including Priory, do you feel like you have got sufficient corporate infrastructure, if you will, to manage all of the growth? How do you feel on that front at the corporate level?

Yes, we have a lot of corporate talent over there that is more than adequate to run our UK operations, and we have total -- ultimate -- we have great confidence in their abilities, so that's not -- I don't see that being an issue.

And what about here in the US as well? How do you feel you are positioned there?

We have a great team here, here in the US. I will say this. We're just anniversarying the CRC transaction and it exceeded all expectations during the past year, and the key reason for that is how Ron organized that into two subsidiaries, two divisions, and both John Peloquin and Joe Procopio have done an outstanding job, and so Ron Fincher has, both here and the UK, great talent positioned to continue to get the results that we need.

Got you. And I guess one nitpick. On the margins, same-store margins here in the US, a little bit minor 20 basis-point compression there. Is that just more a function of maybe the rate environment or is it anything you are seeing on the cost side? And I will hop off. Thanks.

It was just slightly down, Frank. There was nothing -- I saw nothing unusual in that. It was just -- it is basic on top of each other, 20 basis points. And year to date, it is up, so we were very pleased.

We're extremely pleased with the same-store revenue coming back. That had concerned some people and we said just be patient. We were late in getting some of those beds open, and the beds opened up, and so there is probably a little ramp-up costs maybe in some of those same-store beds that maybe have impacted that margin slightly.

Okay, thank you very much. Oh, one other. Going forward, will you all be reporting -- having a constant-currency reporting mechanism inside of your operating results now that you got such a big presence over there? And I will hop off. Thanks.

This is Brent. We do that within the same facility results for the UK, so in terms of measuring how the assets are doing in the UK, it is only fair to hold the currency constant, and pointing to that on our -- on page 7 of the release, you see the UK same-facility result, revenue was up 9.2% in the third quarter. So the PiC asset performing very well both in the third and fourth quarter on a year-over-year basis anniversary.

Thanks.

Brian Tanquilut, Jefferies.

Brent or Joey, we just saw that the British Prime Minister just announced a $1 billion per year commitment -- or GBP1 billion per year commitment to mental health. So how do the assets that you have in there, how are they positioned to take advantage of increasing spend from NHS in terms of whether it is new capabilities or new buildouts? How should we be thinking about that?

Brian, that's great news, and I think the most obvious thing is that Priory is by far the most recognized -- recognizable provider of mental health in the UK. I think the stats say 63%-plus of folks in the UK recognize that, so if there's more dollars, more access, we would think that our portfolio is well positioned to meet that need in the country, similar to some of the tailwinds we are enjoying in the US from legislation and regulatory adjustments to provide more access.

Brent, to follow up on that, do you need to ratchet up CapEx as they spend more money outside of the core NHS facilities?

We don't see any necessarily significant increase in CapEx, but to the extent that opportunity presents itself, that is just a return on capital assessment to say does it make sense. But right now, similar to the US, we have got capacity in the system there to absorb some further increases in utilization before we would have to step up incrementally the CapEx spend beyond what we have budgeted for for 2016.

Got it. And then my follow-up question, just on the M&A, Joey, here in the US, the M&A outlook and the environment, are we seeing valuations come down yet? And then, what is the competitive landscape like for deals at this point?

Valuations are coming down and there still is -- there is still quite a bit of activity about one-off facilities, these boutique thinkers getting in the process, but that's not an issue. If we don't like it, we're not buying it, and if we can't buy it at the right price, we're not buying it. So multiples are coming down and so that's how we see the US market today.

Got it. Thanks, guys.

Chris Rigg, Susquehanna Financial Group.

Thanks for taking my questions. Just wanted to know with regard to development capital spending, do you think the Company has the scale or will soon have the scale where, at least from the organic development side, not excluding external acquisitions, that you will be able to generate enough operating cash flow to cover those expenditures?

Yes, Chris, I think as you work through your models for 2016 and going forward, we have now (multiple speakers) to the size that we can internally finance all of the -- all of, obviously, the maintenance CapEx, but also the incremental growth CapEx that is outlined in our bed builds just from internally generated cash.

Okay. And then, I know this is a way out, but Joey, you mentioned it, when we think about getting to $6 billion by the end of 2020, when you guys think about things internally, does that include other countries besides the US and the UK? Thanks.

No, it does not. This is -- all be UK, US. The $6 billion of revenue would be coming from those two markets.

Okay, thanks a lot.

Gary Taylor, JPMorgan.

I just wanted to clarify one thing on the same-store margins. I believe Companywide same-store margin is around 20, but the US same-store margins were down 50 basis points. But again, that wouldn't change your answer, Joey. That would still just be start-up costs and nothing worth calling out?

No, that's correct.

And is there any hedging program in place or are the consolidated -- is the consolidated guidance at risk of further strengthening of the dollar? Are you doing anything setting up in terms of hedging?

Gary, this is David. There is a formal hedging program that is in place. We will continue to see the earnings volatility, and when we talk about the decline in the exchange rate, that will be a continuing topic in future periods. But in terms of just the cash flows generated by the business and us using those cash flows, we have a hedging program focused on our ability to use the cash flows generated by the business to cover debt payments and other expansion spending.

So the full impact of any change in dollar flows through the reported EPS, but you are saying the hedging program is not protecting the EPS you will report? I just want to (multiple speakers)

That's correct, Gary.

And then, finally, Joey, you talked about your total bed count goal for 1Q, 300, and then over 800 for the year. Just wanted to try to get the cadence for the rest of the year, if possible, that incremental 500 beds over 2Q through 4Q. At this point, should we just model that ratably or do you see that more back-end loaded, front-end loaded?

I would do it ratably.

Okay. Thank you. That's all I had.

Charles Haff, Craig-Hallum.

Thanks for taking my questions. I had a question about other geographies besides the US and the UK. We have seen other providers, like Ramsay, doing things in France, and just wondered are there other developed countries that you think your model would lend itself to?

Charles, this is Joey. We have not spent any time looking at other countries. We have plenty to take care of in the UK and the US, so we have not spent any time. In our model, getting to the $6 billion run rate doesn't include any new countries, so there is probably some other countries out there, but we are just not -- we are focused just on the UK and the US.

Okay. And then for same-store length of stay in the US, it was down slightly, about 5% in the fourth quarter. Was there anything that you want to call out there? How should we be thinking about length of stay in 2016 in the US?

I'm just looking at the numbers. It was down 3/10 of a day from the fourth quarter of 2014 to our acute census. It was down 3/10 of a day, so -- and our RPC census was 169 versus 168, so that was just a minor movement. So, no, there is nothing unusual there.

Okay. And my last question, on your hurdle rate that you use for de novos or expansions, can you just remind us, David or Brent, what type of hurdle rate do you usually use there?

Charles, usually we are looking at a 15% to 20% hurdle rate. We have a lot of different projects and opportunities and all of them are unique, but that's our general target.

Okay, great. Thanks, David. Thanks for taking my questions.

John Ransom, Raymond James.

Hard to be clever at the end after all these good questions. One thing I wanted to follow up on --

(multiple speakers). You could congratulate us on the acquisition.

Yes, I could say nice quarter, guys, but I don't do that.

You could.

I could. Going back to CRC, I recall something 600 or 700 empty beds. I am just curious how many of those, one year on, since you referenced it, what the occupancy rate looks like now one year on?

I don't have that number here, but I can give you one little tidbit of information.

Perfect.

The year two [sun] is at its highest census it has been at in years.

You want to put a number on that or -- do you want to put a number on that one or no?

It is well over 100 patients a day.

Okay, great. (Multiple speakers). And then my second thing to follow up on, that pro forma for Priory, can you give us just a rough breakout of both EBITDA and EPS that we should think about with the GBP?

Roughly, there is about $300 million EBITDA and the balance is in the UK, but we can -- that may be a quick answer. We can give you that detail later (multiple speakers)

But the earnings would be higher because of the tax rate, right? So the earnings exposure is actually higher, though, because of the lower tax rate?

Absolutely. The EBITDA that comes from the UK is enhanced by the 20% tax rate over there. That's right.

Okay. Do you have the rough earnings -- when you think about this year, do you have the rough earnings breakout of GBP versus US or is that a follow-up?

We just need to follow up. We want to give you the right number and I don't have it right in front of us right now, nor does David.

Okay. And then, thirdly, when you guys look in the US, are you more tempted -- I know you're just coming off a big deal, so maybe you will take a breather, but are you more tempted to buy addiction deals or buy US psych deals? And what is the relative opportunity set look like in both those subcategories?

Right now, acute is hotter as far as M&A activity, but there are some addiction facilities that are also out there, but right now I would say acute is hotter. And then, also, there is some activity in the CTC area, but right now is the acute.

Okay. And are you seeing any impetus from payers in the US to start tracking outcomes or to go to any kind of different payment models at all?

No.

On the US psych side?

No. Not at all.

And so, you guys don't feel the need to integrate on the back end with any kind of outpatient or extended stay? It is still relatively an acute model for the foreseeable future?

It is an acute model. We leave those decisions to the local markets. If the CEO in the local market thinks an outpatient program will benefit him or benefit that facility, then we will look at it and probably do it, but it is market by market.

Okay. That's all I got. Thank you.

Dana Hambly, Stephens Financial.

Can you just remind me the CRC synergy that you had expected when that deal was announced and where we are in that process?

We are right on top of it. We thought at this time we would have $10 million of the $15 million and we are right there, and we see a clear way to get to the $15 million, so we feel real good about the CRC synergies.

Okay, so you feel -- you talked about the conservatism with Priory. You feel that's tracking the same way and it is pretty identifiable, the $20 million that you --

Yes.

Okay. Just on the UK drivers, for modeling, how should we think about Priory as it relates to length of stay or revenue per patient day?

We have those numbers by service (multiple speakers), but we don't give them to anybody.

Got you.

Or haven't given them to anybody.

And Dana, this is David, I think what we would see is the length of stay would be similar, and with some of the mix in their services and some of the other business lines that they have, we may see a slightly lower revenue per day compared to the PiC business, but similar other than just the impact of the mix.

Okay, that's helpful. And then on the leverage, getting that down this year, is that mostly just EBITDA increasing or are there some scheduled debt payments this year?

It is a combination, Dana. This is Brent. It is the increasing EBITDA of the Company combined with the scheduled debt amortization. With our term loan, we do have a small required amortization, and so just as that debt pays off, it is going to naturally move us in combination with the increasing EBITDA to the 5.0 times leverage level.

5.0, okay. And that leverage includes the synergy -- benefit from the synergies, correct?

That's right.

Okay, and then just lastly on the CapEx for bed add, is that still running about $100,000 per unit?

Probably a little higher. It is the blended effect of the UK additions. For modeling purposes, probably $150,000 per bed.

Okay, thanks very much.

Overall.

It appears there are no further questions at this time. Mr. Jacobs, I would like to turn the conference back to you for any additional or closing remarks.

Okay, thank you very much. We had a great quarter. We're off to a good start here in 2016. We are extremely excited about being able to get the Priory transaction closed on February 16, and a lot of work ahead for us, but I know the team is up for it, and we will be talking to you sometime at the end of April about the first quarter. So thank you for your interest in the Company and we got to get back to work.

That concludes today's conference. We appreciate your participation.