CRC Health 8-K CRC Health Corporation Reports Operating Results

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE: November 19, 2013

CRC Health Corporation Reports Operating Results

For the Three and Nine Months Ended September 30, 2013

CUPERTINO, CA, November 19, 2013—CRC Health Corporation, a leading provider of substance abuse treatment and adolescent youth services, announced its results for the three and nine months ended September 30, 2013.

“The Company’s performance in 2013 has been consistent – we’ve delivered revenue growth in our recovery business, driven by both our CTC’s and our residential recovery businesses, while our youth business struggles to achieve growth due to lack of demand in the marketplace and our weight management businesses continues to stabilize. The future is promising as we continue to invest in areas that position us well for the dramatic changes occurring given healthcare reform,” said R. Andrew Eckert, Chief Executive Officer.

Three Months Ended September 30, 2013 Operating Results:

For the three months ended September 30, 2013, net client service revenues increased $2.9 million, or 2.6%, to $116.4 million, operating income decreased $4.3 million, or 20.8%, and Adjusted EBITDA decreased $1.5 million, or 4.7%, compared to the same period in 2012.

The following table presents our net client service revenues, operating income (loss), Adjusted EBITDA and Adjusted EBITDA margin by division (in thousands, except for percentages):

	Three Months Ended September 30,
							2013 vs 2012
	2013			2012			$ Change			% Change
Net client service revenues:
Recovery	$	94,838		$	89,595		$	5,243			5.9	%
Youth		12,778			14,416			(1,638	)		(11.4	)%
Weight Management		8,780			9,434			(654	)		(6.9	)%
Corporate		7			14			(7	)		(50.0	)%
Total net client service revenues	$	116,403		$	113,459		$	2,944			2.6	%
Operating income (loss):
Recovery	$	28,272		$	30,103		$	(1,831	)		(6.1	)%
Youth		479			1,542			(1,063	)		(68.9	)%
Weight Management		2,223			(2,756	)		4,979			180.7	%
Corporate		(14,588	)		(8,204	)		(6,384	)		(77.8	)%
Total operating income	$	16,386		$	20,685		$	(4,299	)		(20.8	)%
Adjusted EBITDA:
Recovery	$	31,507		$	33,073		$	(1,566	)		(4.7	)%
Youth		1,146			2,208			(1,062	)		(48.1	)%
Weight Management		2,393			2,241			152			6.8	%
Corporate		(4,125	)		(5,068	)		943			(18.6	)%
Total Adjusted EBITDA	$	30,921		$	32,454		$	(1,533	)		(4.7	)%
Adjusted EBITDA margin:(1)
Recovery		33.2	%		36.9	%
Youth		9.0	%		15.3	%
Weight Management		27.3	%		23.8	%
Total Adjusted EBITDA margin		26.6	%		28.6	%

(1) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net client service revenues.

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

Recovery:

• Net client service revenues increased $5.2 million, or 5.9%, primarily due to a $2.7 million increase in our residential facilities and a $2.5 million increase in our CTC facilities. The increase in revenues at our residential facilities was driven in part by bed expansions at two residential facilities in Pennsylvania, contract rate increases at certain facilities, and increased patient days. The increase in revenues at our CTC facilities was primarily due to increased patient days which were driven by marketing programs and clinically appropriate retention efforts.

• Operating income decreased $1.8 million, or 6.1%. The decrease was primarily the result of an increase in operating expenses at our residential facilities due to increases in salaries, wages and benefits, outside services and other operating costs associated with increased patient days, and an increase in operating expenses at our CTC facilities due to increased marketing activities and salaries, wages and benefits associated with increased patient days.

• Adjusted EBITDA decreased $1.6 million to $31.5 million from the comparable prior period.

Youth:

• Net client service revenues decreased by $1.6 million, or 11.4%, due primarily to a decrease in patient days at our residential facilities.

• Operating income decreased $1.1 million. The decrease was primarily due to a decrease in net client service revenues noted above, offset by a decrease in other facility operating costs associated with the decline in patient days.

• Adjusted EBITDA decreased $1.1 million from the comparable prior period.

Weight Management:

• Net client service revenues decreased by $0.7 million, or 6.9%, primarily due to a decrease in patient days in our weight loss programs.

• Operating income increased $5.0 million. The increase was primarily due to $4.8 million of goodwill impairment recorded in the third quarter of fiscal 2012 and our efforts to efficiently manage facility operating costs and related salaries, wages and benefits in the current period.

• Adjusted EBITDA increased $0.2 million from the comparable prior period.

Corporate:

• Operating income decreased $6.4 million, primarily due to a $6.75 million increase in legal expenses in the third quarter of fiscal 2013, offset by a $0.6 million reduction in corporate bonus.

• Adjusted EBITDA increased $0.9 million from the comparable prior period.

Nine Months Ended September 30, 2013 Operating Results:

For the nine months ended September 30, 2013, net client service revenues increased $13.1 million, or 4.1%, to $336.1 million, operating income decreased $5.3 million, or 9.4%, and Adjusted EBITDA increased $1.3 million, or 1.6%, compared to the same period in 2012.

The following table presents our net client service revenues, operating income (loss), Adjusted EBITDA and Adjusted EBITDA margin by division (in thousands, except for percentages):

	Nine Months Ended September 30,
							2013 vs 2012
	2013			2012			$ Change			% Change
Net client service revenues:
Recovery	$	280,582		$	265,204		$	15,378			5.8	%
Youth		36,214			38,489			(2,275	)		(5.9	)%
Weight Management		19,315			19,292			23			0.1	%
Corporate		28			56			(28	)		(50.0	)%
Total net client service revenues	$	336,139		$	323,041		$	13,098			4.1	%
Operating income (loss):
Recovery	$	83,779		$	83,180		$	599			0.7	%
Youth		(857	)		1,985			(2,842	)		(143.2	)%
Weight Management		3,314			(3,660	)		6,974			(190.6	)%
Corporate		(35,454	)		(25,469	)		(9,985	)		(39.2	)%
Total operating income	$	50,782		$	56,036		$	(5,254	)		(9.4	)%
Adjusted EBITDA:
Recovery	$	93,338		$	92,050		$	1,288			1.4	%
Youth		1,808			3,965			(2,157	)		(54.4	)%
Weight Management		3,876			1,964			1,912			97.4	%
Corporate		(15,914	)		(16,206	)		292			(1.8	)%
Total Adjusted EBITDA	$	83,108		$	81,773		$	1,335			1.6	%
Adjusted EBITDA margin:(1)
Recovery		33.3	%		34.7	%
Youth		5.0	%		10.3	%
Weight Management		20.1	%		10.2	%
Total Adjusted EBITDA margin		24.7	%		25.3	%

(1) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net client service revenues.

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012

Recovery:

• Net client service revenues increased $15.4 million, or 5.8%, primarily due to an $8.6 million increase in our residential facilities and a $6.8 million increase in our CTC facilities. The increase in revenues at our residential facilities was driven in part by the re-opening of New Life Lodge in April 2012, bed expansions at two residential facilities in Pennsylvania, contract rate increases at certain facilities and increased patient days. The increase in revenues at our CTC facilities was primarily due to increased patient days which were driven by marketing programs and clinically appropriate retention efforts.

• Operating income increased $0.6 million, or 0.7%. The increase was primarily the result of increases in net client service revenues noted above, offset by an increase in operating expenses at our residential facilities due to increases in salaries, wages and benefits, outside services and other operating costs associated with increased patient days, and an increase in operating expenses at our CTC facilities due to increased marketing activities and salaries, wages and benefits associated with increased patient days.

• Adjusted EBITDA increased $1.3 million to $93.3 million from the comparable prior period.

Youth:

• Net client service revenues decreased by $2.3 million, or 5.9%, due primarily to a decrease in patient days at our residential facilities.

• Operating income decreased $2.8 million to an operating loss, primarily due to the decrease in net client service revenues noted above and an increase in salaries, wages and benefits.

• Adjusted EBITDA decreased $2.2 million from the comparable prior period.

Weight Management:

• Net client service revenues were relatively flat.

• Operating income increased $7.0 million. The increase was primarily due to $4.8 million of goodwill impairment recorded in the third quarter of fiscal 2012 and our efforts to efficiently manage facility operating costs and related employee salaries, wages and benefits in the current period.

• Adjusted EBITDA increased $1.9 million from the comparable prior period.

Corporate:

• Operating income decreased $10.0 million, primarily due to a $9.25 million increase in legal expenses in the first nine months of fiscal 2013.

• Adjusted EBITDA increased $0.3 million from the comparable prior period.

Non-GAAP Financial Measures:

Under the terms of our borrowing arrangements, we are required to comply with various covenants, including the maintenance of certain financial ratios, the calculations of which are based on Adjusted EBITDA, as defined in our credit agreements. As of September 30, 2013, we were in compliance with all such covenants. A breach of these could result in a default under our credit facilities and in our being unable to borrow additional amounts under our revolving credit facility. If an event of default occurs, the lenders could elect to declare all amounts borrowed under our credit facilities to be immediately due and payable and the lenders under our term loans and revolving credit facility could proceed against the collateral securing the indebtedness.

The computation of Adjusted EBITDA is presented below to provide an understanding of the impact that Adjusted EBITDA has on our ability to comply with certain covenants in our borrowing arrangements that are tied to these measures and to borrow under the credit facility. Adjusted EBITDA should not be considered as an alternative to net income (loss) or cash flows from operating activities (which are determined in accordance with GAAP) and is not being presented as an indicator of operating performance or a measure of liquidity. Other companies may define Adjusted EBITDA differently and as a result, such measures may not be comparable to our Adjusted EBITDA.

The following table reconciles our net income (loss) to our Adjusted EBITDA (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net Income (Loss) Attributable to CRC Health Corporation:	$	(6,496	)	$	2,267		$	(9,151	)	$	7,308
Depreciation and amortization(1)		5,061			5,099			15,248			15,106
Income tax expense (benefit) (1)		(3,724	)		5,115			(3,982	)		9,019
Interest expense		11,727			12,480			35,369			36,818
EBITDA		6,568			24,961			37,484			68,251
Adjustments to EBITDA:
Lease termination and other restructuring activities(1)		13,555			184			13,941			1,114
Non-recurring legal costs		7,146			323			10,620			1,135
Discontinued operations		1,296			923			4,063			2,256
Stock-based compensation expense		683			711			2,015			1,727
Management fees		600			593			1,800			1,727
Proforma cost savings from restructuring activities		221			—			1,083			—
Loss on disposal of property and equipment(1)		230			179			420			597
Debt costs		83			116			250			293
Goodwill and asset impairments(1)		64			4,840			10,923			4,840
Foreign exchange translation		(15	)		(18	)		19			(46	)
Other non-cash charges and non-recurring costs		490			(358	)		490			(121	)
Total adjustments to EBITDA		24,353			7,493			45,624			13,522
Adjusted EBITDA	$	30,921		$	32,454		$	83,108		$	81,773

(1) Includes amounts related to both continuing operations and discontinued operations.

Key Operating Statistics:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Recovery
Residential and outpatient facilities
Net client service revenues (in thousands)	$	58,356	$	55,601	$	174,101	$	165,475
Patient days		152,586		142,602		445,567		423,505
Net client service revenues per patient day	$	382.45	$	389.90	$	390.74	$	390.73
CTCs
Net client service revenues (in thousands)	$	36,482	$	33,994	$	106,481	$	99,729
Patient days		2,771,233		2,619,759		8,121,130		7,689,586
Net client service revenues per patient day	$	13.16	$	12.98	$	13.11	$	12.97
Youth
Residential facilities
Net client service revenues (in thousands)	$	6,310	$	7,471	$	19,498	$	22,000
Patient days		17,342		20,445		54,928		63,749
Net client service revenues per patient day	$	363.86	$	365.42	$	354.97	$	345.10
Outdoor programs
Net client service revenues (in thousands)	$	6,468	$	6,945	$	16,716	$	16,489
Patient days		15,817		15,960		38,013		36,044
Net client service revenues per patient day	$	408.93	$	435.15	$	439.74	$	457.47
Weight Management
Net client service revenues (in thousands)	$	8,780	$	9,434	$	19,315	$	19,292
Patient days		29,117		34,760		53,144		59,156
Net client service revenues per patient day	$	301.54	$	271.40	$	363.45	$	326.12

Other Data (in thousands except ratios):

	September 30,		December 31,
	2013		2012
Total Adjusted Debt (1)	$	557,064	$	570,996
Cash Interest Expense (2)	$	41,847	$	42,144
Adjusted EBITDA (2)	$	106,094	$	102,279
Debt Covenant Ratios
Leverage Ratio (3)		5.25		5.58
Maximum Required Leverage Ratio per Credit Facility		6.75		6.75
		Compliant		Compliant
Interest Coverage Ratio(4)		2.54		2.43
Minimum Required Interest Coverage Ratio per Credit Facility		2.00		2.00
		Compliant		Compliant

Notes:

1. Consolidated Total Debt is defined as the aggregate principal amount of indebtedness outstanding on such date, determined on a consolidated basis, consisting of borrowed money, capitalized leases, promissory notes or similar instrumentsminuscash and cash equivalents in excess of $0.5 million (cash reserve). The Total Adjusted Debt includes debt of discontinued operations of $0.2 million as of December 31, 2012.

2. Calculated over the four trailing quarters.

3. Leverage ratio is defined as Consolidated Total Debt divided by the Adjusted EBITDA for the respective four trailing quarters.

4. Interest coverage ratio is defined as our Adjusted EBITDA for the respective four trailing quarters divided by the cash interest expense over the same period.

CRC HEALTH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share amounts)

	September 30, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	12,920		$	19,058
Restricted cash		111			364
Accounts receivable, net		40,748			36,737
Prepaid expenses		5,749			4,781
Other current assets		2,575			2,591
Income taxes receivable		—			1,109
Deferred income taxes		6,352			6,352
Current assets of discontinued operations		13,413			2,759
Total current assets		81,868			73,751
Property and equipment, net		133,587			130,381
Goodwill		519,093			518,953
Other intangible assets, net		279,855			294,085
Other assets, net		17,446			20,396
Total assets	$	1,031,849		$	1,037,566
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,446		$	6,801
Accrued payroll and related expenses		20,665			18,333
Accrued interest		4,773			9,412
Accrued expenses		20,273			8,721
Income taxes payable		4,324			—
Current portion of long-term debt		—			4,840
Deferred revenue		8,474			9,494
Other current liabilities		1,114			1,592
Current liabilities of discontinued operations		5,494			2,372
Total current liabilities		71,563			61,565
Long-term debt		567,485			584,535
Other long-term liabilities		8,468			8,740
Long-term liabilities of discontinued operations		15,905			6,275
Deferred income taxes		107,290			107,289
Total liabilities		770,711			768,404
Commitments and contingencies
Stockholders’ equity
Common stock, $0.001 par value - 1,000 shares authorized, issued and outstanding		—			—
Additional paid-in capital		466,062			464,932
Accumulated deficit		(204,851	)		(195,699	)
Accumulated other comprehensive loss		(73	)		(71	)
Total stockholders’ equity		261,138			269,162
Total liabilities and stockholders’ equity	$	1,031,849		$	1,037,566

CRC HEALTH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net client service revenues	$	116,403		$	113,459		$	336,139		$	323,041
Operating expenses:
Salaries and benefits		51,445			49,026			156,664			148,722
Facilities and other operating costs		41,826			32,202			108,033			93,400
Provision for doubtful accounts		1,791			1,870			5,729			5,649
Depreciation and amortization		4,955			4,836			14,931			14,394
Goodwill impairment		—			4,840			—			4,840
Total operating expenses		100,017			92,774			285,357			267,005
Operating income		16,386			20,685			50,782			56,036
Interest expense		(11,727	)		(12,480	)		(35,369	)		(36,818	)
Other income (loss)		247			269			750			763
Income from continuing operations before income taxes		4,906			8,474			16,163			19,981
Income tax expense		6,743			6,024			6,367			10,787
Income from continuing operations, net of tax		(1,837	)		2,450			9,796			9,194
Loss from discontinued operations, net of tax		(4,659	)		(617	)		(18,947	)		(2,320	)
Net income (loss)		(6,496	)		1,833			(9,151	)		6,874
Net income attributable to noncontrolling interest		—			434			—			434
Net income (loss) attributable to CRC Health Corporation	$	(6,496	)	$	2,267		$	(9,151	)	$	7,308
Amounts attributable to CRC Health Corporation:
Income (loss) from continuing operations, net of tax	$	(1,837	)	$	2,884		$	9,796		$	9,628
Loss from discontinued operations, net of tax		(4,659	)		(617	)		(18,947	)		(2,320	)
Net income (loss) attributable to CRC Health Corporation	$	(6,496	)	$	2,267		$	(9,151	)	$	7,308

CRC HEALTH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Nine Months Ended September 30,
	2013			2012
Cash flows from operating activities:
Net income (loss)	$	(9,151	)	$	6,874
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,248			15,106
Amortization of debt discount and capitalized financing costs		3,184			4,369
Goodwill and asset impairments		10,923			4,840
Loss on disposal of property and equipment		420			597
Provision for doubtful accounts		5,791			5,917
Stock-based compensation		2,015			1,727
Deferred income taxes		—			(1,861	)
Changes in assets and liabilities:
Restricted cash		253			13
Accounts receivable		(9,858	)		(7,014	)
Prepaid expenses		(1,142	)		2,410
Income taxes receivable and payable		(4,914	)		8,865
Other current assets		13			729
Accounts payable		628			160
Accrued liabilities		12,499			1,069
Other current liabilities		(1,503	)		422
Other long-term assets		914			(1,186	)
Other long-term liabilities		9,362			51
Net cash provided by operating activities		34,682			43,088
Cash flows from investing activities:
Additions of property and equipment		(16,595	)		(11,328	)
Proceeds from sale of property and equipment		36			691
Acquisition of business, net of cash acquired		(140	)		—
Acquisition of non-controlling interest		—			(500	)
Other investing activities		—			(101	)
Net cash used in investing activities		(16,699	)		(11,238	)
Cash flows from financing activities:
Borrowings of long-term debt		—			84,096
Repayment of long-term debt		(5,019	)		(88,118	)
Borrowings on revolving line of credit		15,000			18,000
Repayments on revolving line of credit		(33,000	)		(27,500	)
Capital distributed to Parent		(885	)		(9,554	)
Capitalized financing costs		(217	)		(2,786	)
Net cash used in financing activities		(24,121	)		(25,862	)
Net increase (decrease) in cash and cash equivalents		(6,138	)		5,988
Cash and cash equivalents — beginning of period		19,058			10,183
Cash and cash equivalents — end of period	$	12,920		$	16,171

Conference Call

CRC Health Corporation will host a conference call, open to all interested parties, on Monday, November 25, 2013 beginning at 4:00 PM Eastern Time (1:00 PM Pacific Time). The number to call within the United States is (888) 430-8691. Participants outside the United States should call (719) 325-2472. The conference ID is 7939610.

A replay of the conference call will be available starting at 7:00 PM Eastern Time on Monday, November 25, 2013 until 7:00 PM Eastern Time Monday, December 2, 2013. The replay number for callers within the United States is (888) 203-1112 or (719) 457-0820 from outside the United States and the conference ID for all callers is 7939610.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements related to trends and events that may affect our future financial position and operating results. Any statement contained in this release that is not statements of historical fact may be deemed forward-looking statements. For example, words such as “may”, “will”, “should”, “likely”, “expect”, “anticipate”, “estimate”, “believe”, “intend”, “potential” or “plan”, or comparable terminology, are intended to identify forward-looking statements. Such statements are based upon current expectations, estimates and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to us that could cause or contribute to material differences include, but are not limited to, the following:

• 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.

A more detailed discussion of many of these factors, as well as other factors that could affect our results, is contained in our periodic reports filed with the SEC. You should carefully consider each of these factors and all of the other information in this release. We believe that all forward-looking statements are based upon reasonable assumptions when made. However, we caution that it is impossible to predict actual results or outcomes and that

accordingly you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to revise or update these statements in light of subsequent events or developments. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in forward-looking statements. You are advised however, to consult any future disclosures we make on related subjects in future reports to the Securities and Exchange Commission (SEC).

About CRC Health Group

CRC Health Group is the most comprehensive network of addiction treatment and related behavioral health services in the nation. CRC offers the largest array of personalized treatment options, allowing individuals, families and professionals to choose the most appropriate treatment setting for their behavioral, addiction, weight management or therapeutic education needs. CRC is committed to making our services widely and easily available, while maintaining a passion for delivering advanced treatment. Since 1995, CRC has been helping individuals and families reclaim and enrich their lives. For more information, visitwww.crchealth.com or call (877) 637-6237.

Contact:

CRC Health Corporation

LeAnne M. Stewart, 408-645-3160

Chief Financial Officer