8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

April 7, 2008

Date of report (Date of earliest event reported)

CRC HEALTH CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	333-135172	73-1650429
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

20400 Stevens Creek Boulevard, Suite 600, Cupertino, California	95014
(Address of Principal Executive Offices)	(Zip code)

(877) 272-8668

(Registrant’s Telephone Number, including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN REPORT

Item 2.02 Results of Operations and Financial Condition

On April 7, 2008, CRC Health Corporation (“the Company”) reported operating results for the fourth quarter and twelve months ended December 31, 2007. A copy of the Company’s press release is furnished herewith as Exhibit 99.1.

The information included in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Press Release dated April 7, 2008

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 7, 2008

CRC HEALTH CORPORATION
By:	/s/ KEVIN HOGGE
Name:	Kevin Hogge
Title:	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

EX-99.1

Exhibit 99.1

NEWS RELEASE

FOR IMMEDIATE RELEASE: April 7, 2008

CRC Health Reports Operating Results

for the Quarter & Year Ended December 31, 2007

CUPERTINO, CA, April 7, 2008 – CRC Health Corporation (“CRC” or the “Company”), a leading provider of substance abuse treatment and youth treatment services through its wholly owned consolidated subsidiaries, announced its results for the fourth quarter and year ended December 31, 2007, reflecting contributions from the acquisition of Aspen Education Group, Inc. (“Aspen”) and other acquisitions in 2006 and 2007, and continued organic growth. In the year ended December 31, 2007, CRC completed four acquisitions and paid total cash consideration of approximately $32.9 million, including acquisition related expenses. The acquisitions are intended to provide expansion of its recovery, youth, and healthy living services into new geographic regions in the United States.

Bain Capital Partners’ acquisition of CRC

On February 6, 2006, investment funds managed by Bain Capital Partners, LLC (“Bain”) completed the acquisition of CRC for approximately $723.0 million. As part of the acquisition, certain members of the CRC management team partnered with Bain by retaining an equity stake in CRC. The acquisition resulted in several large merger-related expenses during the year ended December 31, 2006. CRC’s pro forma results excluding these non-recurring items can be derived from the reconciliation of non-GAAP “EBITDA from continuing operations” to non-GAAP “Adjusted Pro Forma EBITDA,” presented below. CRC refers to the February 6, 2006 Bain acquisition and the related mergers and related financings as the “Transactions.”

The date of the Bain acquisition was February 6, 2006 but for accounting purposes and to coincide with its normal financial closing, CRC has utilized February 1, 2006 as the effective date of the Bain acquisition. As a result, CRC has reported operating results and financial position for all periods presented prior to February 1, 2006 as those of the Predecessor Company and for all periods from and subsequent to February 1, 2006 as those of the Successor Company due to the resulting change in the basis of accounting. CRC’s operating results for the year ended December 31, 2006 are presented as the mathematical addition of the Predecessor Company’s operating results for the one month ended

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January 31, 2006 to the Successor Company’s operating results for the eleven months ended December 31, 2006. This approach is not consistent with accounting principles generally accepted in the United States of America (“GAAP”) and may yield results that are not strictly comparable on a period-to-period basis primarily due to the impact of purchase accounting entries recorded as a result of the Transactions. However, CRC’s management believes that it is a meaningful way to present CRC’s results of operations for the year ended December 31, 2006.

Organization Change

Effective October 1, 2007, CRC realigned its operations and internal organization structure into three operating divisions: recovery division, youth division, and healthy living division. The recovery division provides substance abuse and behavioral disorder treatment services through residential treatment facilities and outpatient treatment clinics. The youth division provides educational programs for underachieving young people through residential schools and wilderness programs. The healthy living division provides adolescent and adult weight management programs and treatment services for eating disorders. For segment reporting purposes, we report in two segments: recovery and youth. The healthy living division is combined with corporate/other as it does not meet the quantitative threshold for separate segment reporting.

Historical Financial Results

Fourth Quarter and Year Ended December 31, 2007 Financial Results:

• Consolidated net revenue for the fourth quarter of 2007 increased by $28.8 million, or 33.9%, to $113.9 million as compared to $85.1 million for the fourth quarter of 2006. Of the $28.8 million increase, the youth division contributed $18.7 million due to the Aspen acquisition in November 2006 and the remaining net revenue growth was driven by net revenue increases of $6.6 million, or 9.7%, and $3.5 million, or 177.4%, in the recovery division and corporate/other , respectively. In addition, same-facility revenue growth in the recovery division and corporate/other of $4.5 million, or 6.5%, and $0.5 million, or 59.4%, respectively, contributed to the net revenue growth. Our same-facility recovery division growth of $4.5 million was driven in part by a 4.7% increase in patient census and a 1.8% increase in revenue per patient day. The remaining net revenue growth in the recovery division was driven by start-up facilities and acquisitions in the third quarter of 2007. Our same-facility corporate/other growth was driven in part by a 56.2% increase in patient census and a 2.1% increase in revenue per patient day.

• Consolidated net revenue for the year ended December 31, 2007 increased by $188.8 million, or 69.6%, to $460.0 million from $271.2 million for the same period in 2006. Of the $188.8 million increase, the youth division contributed $131.4 million and the remaining net revenue growth was driven by net revenue increases of $39.7 million, or 15.7%, and $17.8 million, or 364.2%, in recovery division and corporate/other, respectively. Of the $39.7 million and $17.8 million net revenue increases in the recovery division and corporate/other, respectively, $23.6 million and $16.5 million, respectively, was contributed by acquisitions and start-ups that were not fully included in both 2006 and 2007 results of operations. In addition, same-facility revenue growth in the recovery division and corporate/other of $16.0 million, or 6.4%, and $1.2 million, or 39.2%, respectively, contributed to the net revenue growth. Our same-facility recovery division growth was driven in part by a 5.4% increase in patient census and a 0.9% increase in revenue per patient day. Our same-facility corporate/other growth was driven in part by a 43.2% increase in patient census and a 2.8% decrease in revenue per patient day.

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• CRC’s consolidated operating margin was 8.7% for the fourth quarter of 2007, as compared to 15.0% for the fourth quarter of 2006. The decline in operating margin in 2007 was primarily attributable to lower operating margins associated with the Aspen acquisition and $2.2 million in non-recurring charges in the fourth quarter of 2007. On a same-facility basis, CRC’s consolidated operating margin decreased to 33.5% for the fourth quarter of 2007, as compared to 34.3% for the fourth quarter of 2006.

• CRC’s consolidated operating margin was 14.5% for the year ended December 31, 2007, as compared to 3.5% for the year ended December 31, 2006. Non-recurring expenses of $43.7 million related to the Transactions incurred in 2006 resulted in lower operating margin for 2006. The 2007 operating margin was not impacted by such non-recurring expenses but was partially impacted by lower operating margins associated with the Aspen acquisition. On a same-facility basis, consolidated operating margin decreased to 36.7% in 2007 as compared to 37.1% in 2006.

• Net income as a percentage of consolidated net revenue for the fourth quarter of 2007 was (5.3)% compared to 0.4% in the fourth quarter of 2006. The decrease in net income percentage in the fourth quarter of 2007 was primarily due to a decline in operating margin for the period as described above plus a non-recurring charge in the fourth quarter of 2007 related to the write-off of a potential acquisition of $1.3 million and non-cash charges for workers compensation based on an actuarial analysis and loss on fair value of our interest rate swap totaling $2.1 million. In addition, interest expense increase by $2.0 million in the fourth quarter of 2007 compared to the fourth quarter of 2006.

• Net income as a percentage of consolidated net revenue for the year ended December 31, 2007 was 0.3% compared to (13.1)% in the year ended December 31, 2006. Net income increased by $36.9 million in 2007 compared to 2006. The increase in net income in 2007 was primarily attributable to the increase in operating income of $10.9 million driven by the Aspen acquisition, an increase in operating income of $8.3 million in our recovery division and a decrease in loss from operations of $38.2 million in the corporate/other division. The decrease in loss from operations in the corporate/other division was primarily due to a decrease in transaction related costs compared to 2006. Other income decreased by $1.9 million in 2007 due primarily to a loss on an interest rate swap agreement of $1.8 million. Income tax expense increased by $12.5 million in 2007 resulting in an expense of $3.1 million in 2007 compared to a $9.4 million benefit in 2006.

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Pro Forma Financial Results

Adjusted pro forma EBITDA was $19.8 million for the three months ended December 31, 2007, compared to $22.4 million for the three months ended December 31, 2006, a decrease of $2.6 million, or 11.6%. The decrease of $2.6 million in adjusted pro forma EBITDA was due primarily to a 14.5% decline in census within the youth division residential business and in part to higher expenses relating to compliance with Sarbanes-Oxley 404 requirements and other professional fees. Adjusted pro forma EBITDA was $104.5 million for the year ended December 31, 2007, compared to $100.8 million for the year ended December 31, 2006, an increase of $3.7 million, or 3.7%.

In order to supplement its condensed consolidated financial statements presented in accordance with GAAP, CRC is providing a summary to show the computation of earnings before interest, taxes, depreciation and amortization (“EBITDA”), as well as adjusted pro forma EBITDA. Adjusted pro forma EBITDA takes into account certain adjustments which are excluded from EBITDA for purposes of various covenants in the indenture governing CRC’s 10 ³/4% senior subordinated notes due 2016 and its senior secured credit facility, as amended to date. CRC believes that the adjusted pro forma EBITDA information presented provides useful information to both management and investors concerning its ability to meet its future debt obligations and to comply with certain covenants in its borrowing arrangements that are tied to these measures. CRC also believes that including the effect of these items allows management and investors to better compare CRC’s financial performance from period-to-period, and to better compare CRC’s financial performance with that of its competitors. The presentation of this additional information is not meant to be considered in isolation of, or as a substitute for, results prepared in accordance with GAAP.

The unaudited adjusted pro forma EBITDA for the periods presented gives effect to all acquisitions in 2006 and 2007 as if they had occurred on January 1, 2006. The pro forma adjustments are based upon available information and certain assumptions that CRC believes are reasonable. The pro forma adjusted EBITDA is for informational purposes only and does not purport to represent what CRC’s results of operations or financial position would have been if the acquisitions in 2006 and 2007 occurred at any date, nor does such information purport to project the results of operations for any future period.

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CRC HEALTH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007 AND DECEMBER 31, 2006

(In thousands, except share amounts)

	December 31, 2007		December 31, 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	5,118	$	4,206
Accounts receivable, net of allowance for doubtful accounts of $6,901 in 2007 and $8,235 in 2006		31,910		33,805
Prepaid expenses		7,544		7,675
Other current assets		2,120		2,261
Income taxes receivable		193		6,496
Deferred income taxes		6,599		7,052
Total current assets		53,484		61,495
PROPERTY AND EQUIPMENT—Net		122,937		94,976
GOODWILL		730,684		702,425
INTANGIBLE ASSETS—Net		390,388		400,714
OTHER ASSETS		24,798		29,178
TOTAL ASSETS	$	1,322,291	$	1,288,788
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	7,014	$	6,714
Accrued liabilities		37,582		34,827
Current portion of long-term debt		35,603		10,743
Other current liabilities		29,824		27,941
Total current liabilities		110,023		80,225
LONG-TERM DEBT—Less current portion		612,764		615,785
OTHER LONG-TERM LIABILITIES		7,514		5,526
DEFERRED INCOME TAXES		145,867		149,827
Total liabilities		876,168		851,363
MINORITY INTEREST		374		251
STOCKHOLDER’S EQUITY:
Common stock, $0.001 par value—1,000 shares authorized; 1,000 shares issued and outstanding at December 31, 2007 and December 31, 2006
Additional paid-in capital		438,608		433,652
Retained earnings		7,141		3,522
Total stockholder’s equity		445,749		437,174
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	1,322,291	$	1,288,788

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CRC HEALTH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

	Three Months Ended Dec 31, 2007			Three Months Ended Dec 31, 2006			Twelve Months Ended Dec 31, 2007			Twelve Months Ended Dec 31, 2006			Eleven Months Ended Dec 31, 2006			One Month Ended Jan 31, 2006
	(Successor)			(Successor)			(Successor)			(Combined)			(Successor)			(Predecessor)
NET REVENUE:
Net client service revenue	$	112,130		$	83,809		$	453,619		$	266,240		$	246,880		$	19,360
Other revenue		1,784			1,285			6,387			4,938			4,448			490
Net revenue		113,914			85,094			460,006			271,178			251,328			19,850
OPERATING EXPENSES:
Salaries and benefits		59,435			41,692			226,566			128,219			118,954			9,265
Supplies, facilities and other operating costs		37,059			24,918			137,736			73,892			69,331			4,561
Provision for doubtful accounts		1,793			1,811			6,857			5,391			5,106			285
Depreciation and amortization		5,705			3,947			22,015			10,554			10,193			361
Acquisition related costs		—			—			—			43,710			—			43,710
Total operating expenses		103,992			72,368			393,174			261,766			203,584			58,182
INCOME (LOSS) FROM OPERATIONS		9,922			12,726			66,832			9,412			47,744			(38,332	)
INTEREST EXPENSE, NET		(15,291	)		(13,240	)		(60,262	)		(43,843	)		(41,338	)		(2,505	)
OTHER FINANCING COSTS		—			—			—			(10,655	)		—			(10,655	)
OTHER INCOME (EXPENSE )		(974	)		124			(1,774	)		144			89			55
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(6,343	)		(390	)		4,796			(44,942	)		6,495			(51,437	)
INCOME TAX EXPENSE (BENEFIT)		(232	)		(683	)		3,143			(9,433	)		3,011			(12,444	)
MINORITY INTEREST IN INCOME (LOSS) OF A SUBSIDIARY		(86	)		(38	)		189			(38	)		(38	)		—
NET INCOME (LOSS)	$	(6,025	)	$	331		$	1,464		$	(35,471	)	$	3,522		$	(38,993	)

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CRC HEALTH CORPORATION

Reconciliation of GAAP “Cash Flows (Used In) Provided By Operating Activities” to non-GAAP “EBITDA” from

continuing operations and Reconciliation of non-GAAP “EBITDA” from continuing operations to GAAP “Net Income”

(In thousands) (unaudited)

	Three Months Ended Dec 31, 2007			Three Months Ended Dec 31, 2006			Twelve Months Ended Dec 31, 2007			Twelve Months Ended Dec 31, 2006			Eleven Months Ended Dec 31, 2006			One Month Ended Jan 31, 2006
	(Successor)			(Successor)			(Successor)			(Combined)			(Successor)			(Predecessor)
Cash flows (used in) provided by operating activities	$	32,653		$	1,897		$	56,420		$	(3,285	)	$	(4,486	)	$	1,201
Write-off of debt discount and capitalized financing costs		—			—			—			(10,655	)		—			(10,655	)
Amortization of debt discount and other financing costs		(1,116	)		(924	)		(4,476	)		(3,068	)		(2,906	)		(162	)
Stock-based compensation		(706	)		(883	)		(3,909	)		(21,135	)		(3,469	)		(17,666	)
Deferred income taxes		(1,584	)		(306	)		(1,306	)		85			85			—
Net effect of changes in non-current net assets		345			230			(6,873	)		(1,060	)		271			(1,331	)
Net effect of working capital changes		(29,912	)		4,264			(16,377	)		14,201			24,220			(10,019	)
Interest expense and other financing costs		15,291			13,240			60,262			54,498			41,338			13,160
Income tax expense (benefit)		(232	)		(683	)		3,143			(9,433	)		3,011			(12,444	)
EBITDA from continuing operations		14,739			16,835			86,884			20,148			58,064			(37,916	)
Interest expense and other financing costs		(15,291	)		(13,240	)		(60,262	)		(54,498	)		(41,338	)		(13,160	)
Income tax expense (benefit)		232			683			(3,143	)		9,433			(3,011	)		12,444
Depreciation and amortization		(5,705	)		(3,947	)		(22,015	)		(10,554	)		(10,193	)		(361	)
Net income (loss)	$	(6,025	)	$	331		$	1,464		$	(35,471	)	$	3,522		$	(38,993	)

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CRC HEALTH CORPORATION

Reconciliation of non-GAAP “EBITDA from continuing operations” to non-GAAP “Adjusted pro forma EBITDA”

(In thousands) (unaudited)

	Three Months Ended December 31, 2007			Three Months Ended December 31, 2006			Twelve Months Ended December 31, 2007		Twelve Months Ended December 31, 2006
	(Successor)			(Successor)			(Successor)		(Combined)
EBITDA from continuing operations	$	14,739		$	16,835		$	86,884	$	20,148
Pre-acquisition Adjusted EBITDA from Aspen acquisition					2,102			—		21,076
Pre-acquisition Adjusted EBITDA from other acquisitions in 2006		—			—			—		3,387
Pre-acquisition Adjusted EBITDA from other acquisitions in 2007					274			3,175		3,817
Expenses incurred related to the Transactions								4		43,710
Unrecognized profit on deferred revenue		53			1,901			2,748		3,456
Stock-based compensation expense		706			883			3,909		3,469
Loss (gain) on interest rate swap		1,027			(124	)		1,771		(164	)
(Gain) loss on fixed asset disposal		228			(5	)		218		(42	)
Management fees to Bain		668			508			2,201		1,834
Profit in minority interest (no dividends paid)		(86	)		(38	)		189		(38	)
Transaction expense		58			(17	)		781		12
Write-off of cancelled acquisitions		1,267						1,298		22
Franchise taxes		74			101			176		163
Write-off of miscellaneous accounts (non-cash)		102						125
Non cash charge for workers compensation actuarial analysis		975			—			975		—
Adjusted Pro forma EBITDA	$	19,811		$	22,420		$	104,454	$	100,850

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CRC HEALTH CORPORATION

Selected Statistics

	Three Months Ended December 31, 2007			Three Months Ended December 31, 2006			Twelve Months Ended December 31, 2007			Twelve Months Ended December 31, 2006
	(Successor)			(Successor)			(Successor)			(Combined)
Recovery Division:
Number of inpatient facilities - end of period		28			25			28			25
Number of outpatient facilities - end of period		15			14			15			14
Number of comprehensive treatment clinics (CTC) - end of period		62			59			62			59
Available beds - end of period		1,857			1,696			1,857			1,696
Patient Days - Inpatient		133,681			128,214			528,093			466,560
Occupancy rate		78.2	%		82.2	%		82.1	%		86.1	%
Net revenue per patient day - inpatient	$	364.99		$	343.46		$	356.64		$	345.69
Patient Days - CTC		2,359,588			2,221,835			9,223,803			8,295,023
Net revenue per patient day - CTC	$	11.26		$	11.14		$	11.20		$	11.12
Youth Division:
Number of facilities - end of period		29			26			29			26
Patient days		116,437			88,560			524,124			88,560
Net revenue per patient day	$	284.88		$	183.51		$	283.29		$	183.51
Healthy Living Division:
Number of facilities - end of period		13			10			13			10
Patient days		17,077			6,637			80,896			9,464
Net revenue per patient day	$	313.46		$	272.97		$	274.39		$	456.69

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Conference Call

CRC will host a conference call, open to all interested parties, on Wednesday, April 9, 2008 beginning at 10:00 AM Pacific Daylight Time (1:00 PM Eastern Daylight Time). The number to call within the United States is (888) 278-8466. Participants outside the United States should call (913)-312-1480. The conference ID is 4531381. A replay of the conference call will be available starting at 4:00 PM Pacific Daylight Time on Wednesday, April 9, 2008 until 10:00 PM Pacific Daylight Time on Wednesday, April 16, 2008. 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 4531381.

Forward-Looking Statements

This press release includes or may include “forward-looking statements.” All statements included herein, other than statements of historical fact, may constitute forward-looking statements. Although CRC believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among others, the following factors: changes in government reimbursement for CRC’s services; our substantial indebtedness; changes in applicable regulations or a government investigation or assertion that CRC has violated applicable regulations; attempts by local residents to force our closure or relocation; the potentially difficult, unsuccessful or costly integration of recently acquired operations and future acquisitions; the potentially difficult, unsuccessful or costly opening and operating of new treatment facilities; the possibility that commercial payors for CRC’s services may undertake future cost containment initiatives; the limited number of national suppliers of methadone used in CRC’s outpatient treatment clinics; the failure to maintain established relationships or cultivate new relationships with patient referral sources; shortages in qualified healthcare workers; natural disasters such as hurricanes, earthquakes and floods; competition that limits CRC’s ability to grow; the potentially costly implementation of new information systems to comply with federal and state initiatives relating to patient privacy, security of medical information and electronic transactions; the potentially costly implementation of accounting and other management systems and resources in response to financial reporting and other requirements; the loss of key members of CRC’s management; claims asserted against CRC or lack of adequate available insurance; and certain restrictive covenants in CRC’s debt documents.

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