Net client service revenues:

Recovery

Youth

Weight management

Corporate

Total net client service revenues

Operating expenses:

Recovery

Youth

Weight management

Corporate

Total operating expenses

Operating income (loss):

Recovery

Youth

Weight management

Corporate

Operating income

Interest expense

Other income

Income from continuing operations before income taxes

Income tax expense

Income from continuing operations, net of tax

Loss from discontinued operations, net of tax

Net income

Adjusted EBITDA margin: ⁽¹⁾

Recovery

Youth

Weight Management

Total Adjusted EBITDA margin

Net client service revenues increased $3.6 million, or 4%, primarily due to a $2.1 million increase from our CTC facilities and $1.4 million increase in our residential facilities. The increase in revenues at our CTC facilities was due to a combination of increased patient days at our facilities driven by marketing programs and clinically appropriate retention efforts, as well as certain rate increases across our facilities. The increase in revenues at our residential facilities was primarily driven by one of our Recovery residential facilities, New Life Lodge, where admissions had been suspended during the first quarter of 2012. This facility re-opened in April 2012.

Operating expenses increased $2.7 million, or 4%, primarily due to a $1.6 million increase related to our residential facilities and a $1.1 million increase related to our CTC facilities. The increased operating expenses at our residential facilities was primarily driven by the reopening of our New Life Lodge facility in April 2012 and the related increases in salaries, wages and benefits, outside services and other operating costs. The increased operating expenses at our CTC facilities was primarily due to increased marketing activities and employee salaries, wages and benefits.

Adjusted EBITDA increased $1.0 million, or 4%, from the comparable prior period.

Net client service revenues decreased by $1.4 million, or 8%, due primarily to a decrease in patient days at our residential facilities.

Operating expenses decreased $0.2 million, or 1%, due to a decrease in marketing activities and other facility operating costs associated with the decline in patient days. This decrease in operating expenses was slightly offset by an increase in employee benefit costs.

Adjusted EBITDA decreased $1.2 million from the comparable prior period.

Net client service revenues increased by $0.2 million, or 3%, primarily due to an increase in patient days.

Operating expenses decreased $0.3 million, or 6%, primarily due to our efforts to manage facility operating costs and related salaries, wages and benefits.

Adjusted EBITDA increased $0.5 million from the comparable prior period.

Net Income Attributable to CRC Health Corporation:

Depreciation and amortization ⁽¹⁾

Income tax expense ⁽¹⁾

Interest expense

EBITDA

Adjustments to EBITDA:

Discontinued operations

Non-impairment restructuring activities ⁽¹⁾

Stock-based compensation expense

Foreign exchange translation

Loss on disposal of property and equipment ⁽¹⁾

Management fees

Non-recurring legal costs

Debt costs

Other non-cash charges and non-recurring costs

Total adjustments to EBITDA

Adjusted EBITDA

Recovery

Residential and outpatient facilities

Net client service revenues (in thousands)

Patient days

Net client service revenues per patient day

CTCs

Net client service revenues (in thousands)

Patient days

Net client service revenues per patient day

Youth

Residential facilities

Net client service revenues (in thousands)

Patient days

Net client service revenues per patient day

Outdoor programs

Net client service revenues (in thousands)

Patient days

Net client service revenues per patient day

Weight Management

Net client service revenues (in thousands)

Patient days

Net client service revenues per patient day

Total Adjusted Debt ⁽¹⁾

Cash Interest Expense ⁽²⁾

Adjusted EBITDA ⁽²⁾

Debt Covenant Ratios

Leverage Ratio ⁽³⁾

Maximum Required Leverage Ratio per Credit Facility

Interest Coverage Ratio (4)

Minimum Required Interest Coverage Ratio per Credit Facility

Assets

Current assets:

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Prepaid expenses

Other current assets

Income taxes receivable

Deferred income taxes

Current assets of discontinued operations

Total current assets

Property and equipment, net

Goodwill

Other intangible assets, net

Other assets, net

Total assets

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

Accrued payroll and related expenses

Accrued interest

Accrued expenses

Income taxes payable

Current portion of long-term debt

Deferred revenue

Other current liabilities

Current liabilities of discontinued operations

Total current liabilities

Long-term debt

Other long-term liabilities

Long-term liabilities of discontinued operations

Deferred income taxes

Total liabilities

Commitments and contingencies

Stockholders’ equity

Common stock, $0.001 par value - 1,000 shares authorized, issued and outstanding

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

Total equity

Total liabilities and stockholders’ equity

Net client service revenues

Operating expenses:

Salaries and benefits

Supplies, facilities and other operating costs

Provision for doubtful accounts

Depreciation and amortization

Total operating expenses

Operating income

Interest expense

Other income

Income from continuing operations before income taxes

Income tax expense

Income from continuing operations, net of tax

Loss from discontinued operations, net of tax

Net income

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of debt discount and capitalized financing costs

Loss on disposal of property and equipment

Provision for doubtful accounts

Stock-based compensation

Deferred income taxes

Changes in assets and liabilities:

Restricted cash

Accounts receivable

Prepaid expenses

Income taxes receivable and payable

Other current assets

Accounts payable

Accrued liabilities

Other current liabilities

Other long-term assets

Other long-term liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Additions of property and equipment

Proceeds from sale of property and equipment

Acquisition of business, net of cash acquired

Other

Net cash used in investing activities

Cash flows from financing activities:

Borrowings of long-term debt

Repayment of long-term debt

Borrowings on revolving line of credit

Repayments on revolving line of credit

Capital distributed to Parent

Capitalized financing costs

Other

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents — beginning of period

Cash and cash equivalents — end of period

Our substantial indebtedness;

Unfavorable economic conditions that have and could continue to negatively impact our revenues;

Changes in reimbursement rates for services provided;

Failure to comply with extensive laws and governmental regulations given the highly regulated industry in which we operate and the ever changing nature of these laws and regulations;

Significant economic contribution that certain regions and programs have to our operating results;

Claims and legal actions by patients, students, employees, third-party payors, such as Medicare, and others;

Failure to cultivate new, or maintain existing relationships with patient referral sources;

Competition;

Shortage in qualified healthcare workers;

Our employees election of union representation;

Difficult, costly or unsuccessful integrations of acquisitions;

Accidents or other incidents at our programs;

Defaults by borrowers in our loan program;

Limited history of profitability;

Potential conflicts with our financial sponsors;

Natural disasters;

Adverse media;

Deficiencies in our internal controls; and

Regulatory risks.