Net client service revenues:

Recovery

Youth

Weight Management

Corporate

Total net client service revenues

Operating income (loss):

Recovery

Youth

Weight Management

Corporate

Total operating income

Adjusted EBITDA:

Recovery

Youth

Weight Management

Corporate

Total Adjusted EBITDA

Adjusted EBITDA margin: (1)

Recovery

Youth

Weight Management

Total Adjusted EBITDA margin

Net client service revenues increased $3.1 million, or 4%, primarily due to a $3.0 million increase from our CTC facilities. The increase in revenues at CTC facilities was due to a combination of increased patient days at the facilities driven by marketing programs and clinically appropriate retention efforts, increased patient days resulting from new CTC facilities that were acquired and opened during the fourth quarter of 2011, as well as certain rate increases across the facilities.

Operating income increased by $4.1 million, or 16%. This increase was primarily the result of the increase in revenues described above, the decrease in operating expenses at a residential facility in Tennessee, as well as a decrease in the provision for doubtful accounts due to better collection efforts across residential facilities. These effects were partially offset by increases in investments in sales, marketing and clinical quality management, and increases due to new CTC facilities that were acquired and opened during the fourth quarter of 2011.

Adjusted EBITDA increased $4.2 million, or 15%, to $33.1 million from the comparable prior-year period.

Net client service revenues increased by $0.5 million, or 2%, due to an increase of $0.6 million, or 6%, in residential facilities, offset by a decrease of $0.2 million, or 2%, in outdoor programs. Residential program revenues increased due to increased rates, partially offset by a 4% decrease in patient days. Outdoor program revenues decreased due to a 7% decrease in patient days partially offset by increased rates.

Operating income decreased by $0.9 million, primarily due to increases in investments in sales, marketing and clinical quality management, partially offset by increases in revenues described above.

Adjusted EBITDA decreased $0.6 million to $1.7 million from the comparable prior-year period.

Net client service revenues decreased by $1.8 million, or 15%, primarily due to an 18% decrease in patient days at weight loss programs resulting from a decline in enrollment, partially offset by an increase in rates.

Operating income decreased by $6.1 million, primarily due to the decrease in net client service revenues noted above, and a non-cash goodwill impairment charge, partially offset by a decrease in operating expenses resulting from measures taken in reaction to the decline in enrollment. As enrollment and revenues continued to decline during the third quarter, the Company lowered its forecasted cash flows and tested for possible impairment resulting in a charge of $4.8 million.

Adjusted EBITDA decreased $1.4 million to $1.9 million from the comparable prior-year period.

Operating loss increased by $1.0 million, or 13%. The increase is primarily due to an increase in salaries and benefits, as well as an increase in professional fees.

Net client service revenues:

Recovery

Youth

Weight Management

Corporate

Total net client service revenues

Operating income (loss):

Recovery

Youth

Weight Management

Corporate

Total operating income

Adjusted EBITDA:

Recovery

Youth

Weight Management

Corporate

Total Adjusted EBITDA

Adjusted EBITDA margin: (1)

Recovery

Youth

Weight Management

Total Adjusted EBITDA margin

Net client service revenues increased $4.1 million, or 2%, primarily due to an $8.1 million increase from CTCs, offset by a $4.0 million decrease from residential facilities. The increase in revenues at our CTC facilities was due to a combination of increased census at our facilities driven by marketing programs and clinically appropriate retention efforts, as well as certain rate increases across our facilities. The decrease in revenues at our residential facilities was primarily driven by a decrease in patient days at our residential facility in Tennessee that was closed for part of the period. The decrease in revenues was partially offset by an increase in patient days at our other residential facilities.

Operating income decreased by $2.1 million, or 2%. This decrease was primarily the result of increases in investments in sales, marketing and clinical quality management expenses, increases at certain residential facilities to support the increase in patient days, increases in salaries and benefits for additional executive and finance personnel and increases at our CTC facilities to support the increase in patient days and the new CTC facilities that were acquired and opened during the fourth quarter of 2011. These increases were partially offset by a decrease in operating expenses at our residential facility in Tennessee that was closed for part of the period, as well as increases in revenues described above.

Adjusted EBITDA decreased $1.3 million, or 1%, to $92.0 million from the comparable prior-year period.

Net client service revenues increased by $3.5 million, or 7%, due to increases of $3.0 million, or 9%, and $0.5 million, or 3%, in our residential facilities and outdoor programs, respectively. Residential program revenues increased due to a 4% increase in patient days and increased rates. Outdoor program revenues increased due to increased rates, partially offset by a 1% decrease in patient days.

Operating income increased by $4.1 million. This increase was primarily due to a non-cash intangible asset impairment charge of $1.9 million recorded in the first quarter of 2011 as well as decreases in salaries and benefits, the effects of which were partially offset by increases in investments in sales, marketing and clinical quality management.

Adjusted EBITDA increased $1.5 million to $3.4 million from the comparable prior-year period.

Net client service revenues decreased by $3.3 million, or 13%, primarily due to a 15% decrease in patient days resulting from a decline in enrollment at our weight loss programs, partially offset by an increase in rates.

Operating income decreased by $6.9 million. This decrease was due primarily to the decrease in revenue described above and the non-cash goodwill impairment charge of $4.8 million recorded in the third quarter of 2012 described above, the effects of which were partially offset by a decrease in certain non-recurring expenses from the prior period and a decrease in operating costs at our weight loss programs in reaction to the decline in enrollment.

Adjusted EBITDA decreased $3.9 million to $1.7 million from the comparable prior-year period.

Operating loss increased by $1.4 million. The increase is primarily due to an increase in professional fees, partially offset by a decrease in debt costs as well as a reduction in other operating expenses.

Net Income

Depreciation and amortization (1)

Income tax expense (1)

Interest expense (1)

EBITDA

Adjustments to EBITDA:

Discontinued operations

Goodwill and asset impairment (1)

Non-impairment restructuring activities (1)

Stock-based compensation expense

Foreign exchange translation

Loss (gain) 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)

Available beds - end of period

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 of allowance for doubtful accounts of $5,171 in 2012 and $6,476 in 2011)

Prepaid expenses

Other current assets

Income taxes receivable

Deferred income taxes

Current assets of discontinued operations

Total current assets

Property and equipment (net of accumulated depreciation of $74,563 in 2012 and $64,456 in 2011)

Goodwill

Other intangible assets, net

Other assets, net

Total assets

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

Accrued liabilities

Income taxes payable

Current portion of long-term debt

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 (Note 6)

Stockholders’ equity

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

Additional paid-in capital

Accumulated deficit

Total stockholders’ 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

Goodwill and asset impairment

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

Net income (loss) attributable to noncontrolling interest

Net income attributable to CRC Health Corporation

Amounts attributable to CRC Health Corporation:

Income from continuing operations, net of tax

Discontinued operations, net of tax

Net income attributable to CRC Health Corporation

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

Goodwill and asset impairment

Loss (gain) on disposal of property and equipment

Provision for doubtful accounts

Stock-based compensation

Deferred income taxes

Other operating activities

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 non-controlling interest

Other investing activities

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

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents — beginning of period

Cash and cash equivalents — end of period

Purchases of property and equipment included in accounts payable

Payable related to acquisition

Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for income taxes, net of refunds

Our substantial indebtedness;

The timing or amount of any potential future impairment charges;

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

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;

Changes in reimbursement rates for services provided;

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

Claims and legal actions by patients, students, employees 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;

The material weakness in our controls over financial reporting.