Centric Health Reports Strong Fourth Quarter and Year End 2011 Financial Results

- Acquisitions Contribute to Significant Growth in Revenue and Profitability; Provide Opportunities for Efficiencies, Synergies, Cross-Pollination -

TORONTO, April 2, 2012 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), Canada's leading diversified healthcare services company, today announced financial results for the fourth quarter and year ended December 31, 2011.

Financial and Operating Highlights for the Fourth Quarter

• Grew revenue by 353% to $77.3 million from $17.0 million in the prior year period as a result of the completion of seven acquisitions in 2011 and organic growth;
• Grew adjusted EBITDA¹ by 320% to $6.3 million ($0.07 per share diluted) from $1.5 million in the prior year period.
• Completed the acquisition of Classic Care Pharmacy Corporation ("Classic Care"), a provider of pharmaceutical dispensing, delivery and consulting services to long-term care homes and retirement residences; and,
• Completed the acquisition of 75% of Performance Medical Group, which offers state-of-the-art custom orthotics, custom bracing, laser and shockwave therapy.

Financial and Operating Highlights for 2011

• Grew revenue by 224% to $200.9 million from $62.5 million in the prior year, through key strategic acquisitions and organic growth;
• Grew adjusted EBITDA¹ by 168% to $21.4 million ($0.21 per share diluted) from $8.0 million ($0.11 per share diluted) for the prior year;
• Completed a total of seven acquisitions expanding services in the Physiotherapy, Surgical and Medical Centres, Pharmacy, Assessments segments as well as diversifying into the Retail and Home Medical Equipment market;
• All business units performed satisfactorily with the exception of the assessments division whose EBITDA declined by approximately $3.0 million due to legislative changes;
• Bolstered the corporate operations centre, including establishing a business development division responsible for integration, rationalization and support services to realize synergies through cross pollination opportunities arising from the Company's active mergers and acquisitions strategy;
• Raised $29.8 million through a bought deal (March) and the innovative offering to healthcare professionals and staff through a Directed Share Program ("DSP")(December).

Highlights Subsequent to Year End

• Completed the acquisition of Motion Specialties Inc., one of Canada's largest home healthcare providers, further expanding the Retail and Home Medical Equipment segment across Canada;
• Completed the second and final closing of the DSP which is part of a shelf prospectus for $265.5 million.

"During 2011 and into 2012, we made great strides in executing on our strategic rollout plan by developing a diversified portfolio of healthcare operations across Canada and in multiple business units," said Jack Shevel, Executive Chairman, Centric Health Corporation.  "Our eight acquisitions since the beginning of 2011 drove the scale of business to in excess of 3,400 staff and consultants delivering care at almost 1,000 locations across the country.  We have established a solid foundation for future growth in these sectors and will continue to accumulate assets with compelling growth prospects that provide synergy, rationalization and cross-pollination opportunities.  Centric is now well positioned for organic growth with its large national networks to offer innovative solutions in physiotherapy, assessments, specialty pharma, surgi-centres and home medical equipment.  As an independent sector we will continue to deliver quality care with measured outcomes to our patients in partnership with healthcare professionals.  I would like to compliment and thank the management and staff for their huge effort in integrating the various businesses and the changeover to IFRS."

"Our acquisitions, including the transformational LifeMark transaction, drove significant year-over-year growth in revenue and profitability in 2011," said Peter Walkey, Chief Financial Officer, Centric Health Corporation.  "We are making steady progress in achieving cost rationalizations and efficiencies across our business having consolidated our premises and centralized our support services and staff.  Our efforts in this regard will continue with further contributions from IT systems integrations, centralization of purchasing and standardization of various transaction streams expected in the coming quarters."

FINANCIAL RESULTS

(All amounts below are in thousands except per share and percentage data)

Centric Health's results for the three months ended December 31, 2011 include the contribution from Classic Care and Performance Medical Group from their dates of acquisition on November 17, 2011, and December 8, 2011, respectively.  The Company's financial results for year ended December 31, 2011 reflect the additions of Surgical Spaces Inc. ("SSI"), LifeMark Health Limited Partnership ("LifeMark"), Dedicated National Pharmacies Inc. ("DNP"), Blue Water Diagnostics Ltd., Windsor Endoscopy Centre Ltd., and 75% of the outstanding shares in the London Scoping Centre (collectively "BWC"), from the dates of their acquisitions on January 1, 2011, June 9, 2011, August 15, 2011, August 17, 2011, respectively.

Selected Financial Information

			Three months ended Dec. 31,								Year ended Dec. 31,
			2011 $				2010 $	% Change			2011 $			2010 $	% Change
Revenue				77,264			17,060	361%			200,992			62,482	222%
Income from operations				(5,997)			1,316	NM			6,812			7,442	(8%)
	% of revenue			(7.8%)			7.7%	NM			3.4%			11.9%	NM
EBITDA^1				82			430	(81%)			73,282			6,540	1,021%
Adjusted EBITDA^1				6,271			1,504	317%			21,385			7,993	168%
Adjusted EBITDA^1margin				8.1%			8.8%	NM			10.6%			12.8%	NM
	Per share - basic ($)		$	0.07		$	0.03	133%		$	0.27		$	0.13	108%
Per share - diluted ($)			$	0.06		$	0.02	200%		$	0.21		$	0.11	82%
Current income tax expense				1,801			209	NM			2,916			1,559	NM
Deferred income tax (recovery) expense				(5,340)			61	NM			(4,834)			369	NM
Net (loss) income				(67,484)			(592)	NM			(8,978)			2,138	NM
	Per share ($) - basic			($0.74)			($0.01)	NM			($0.11)			$0.03	NM
	Per share ($) - diluted			($0.74)			($0.01)	NM			($0.11)			$0.03	NM
Weighted average shares outstanding				90,691			60,958	NM			80,656			61,176	NM
Shares outstanding December 31				98,220			62,090	NM			98,220			62,090	NM
NM - Not meaningful

Reconciliation of Non-IFRS Measures

EBITDA¹ and Adjusted EBITDA¹

				Three months ended December 31,							Year ended December 31,
					2011 $			2010 $			2011 $			2010 $
Net income					(67,484)			(592)			(8,978)			2,262
		Amortization			12,268			188			14,573			551
		Interest expense			4,756			374			12,245			1,038
		Change in fair value of derivative financial instruments			(89)			-			1,396			-
		Stock-based compensation			1,369			190			3,163			761
		Impairments			52,801			-			52,801			-
		Income taxes			(3,539)			270			(1,918)			1,928
EBITDA^1					82			430			73,282			6,540
		Transaction and restructuring costs			3,627			808			8,181			1,141
		Change in fair value of contingent consideration liability			(2,562)			266			(60,078)			312
Adjusted EBITDA^1					6,271			1,504			21,385			7,993
Basic weighted average number of shares					90,691			60,958			80,656			61,176
Adjusted EBITDA^1 per share (basic)				$	0.069		$	0.025		$	0.27		$	0.13
Fully diluted weighted average number of shares					110,697			73,133			102,491			72,696
Adjusted EBITDA^1 per share (diluted)				$	0.057		$	0.021		$	0.21		$	0.11

Revenue

Consolidated revenue for the fourth quarter of 2011 increased by 353% to $77,264 from $17,025 for the comparable period of 2010.  Consolidated revenue for the year ended December 31, 2011 increased by 222% to $200,992 from $62,482 for the prior year.  The increases were primarily due to the seven acquisitions completed in 2011, which in aggregate contributed $61,496 or 54% of 2011 fourth quarter revenue. ($41,084 from LifeMark, $5,637 from SSI, $4,084 from DNP, $2,074 from BWC, $8,413 from Classic Care and $204 from Performance Medical Group).  Revenue from acquisition was $132,882 for the year ended December 31, 2011 ($93,875 from LifeMark, $20,264 from SSI, $7,013 from DNP, $3,113 from BWC, $8,413 from Classic Care and $204 from Performance Medical Group and $1,864 from partial year acquisitions in 2010). The balance of the increase for the year ended December 31, 2011 of $9,371 was due to organic growth, synergies resulting from acquisitions and growth strategies offset by a decline in revenue of $5,608 in the assessments division due to regulatory reform.

Revenue by Segment

			Three months ended December 31,								Year ended December 31,
					2011 $			2010 $			2011 $			2010 $
Physiotherapy			$		41,196		$	10,641		$	112,307		$	37,995
Pharmacy					13,217			1,204			19,235			1,203
Surgical & Medical Centres					9,373			356			27,626			1,394
Assessments					10,553			4,824			35,654			21,890
Retail & Home Medical Equipment					2,706			0			6,170			-
Total			$		77,264		$	17,025		$	200,922		$	62,482

Physiotherapy

The Physiotherapy segment consists of the Company's rehabilitation, seniors' wellness, and homecare services.

Revenue for the fourth quarter of 2011 increased to $41,196 from $10,641 for the comparable period in 2010.  Revenue for the year ended December 31, 2011 increased 196% to $112,307 from $37,995 for the prior year.  The increases are primarily due to the acquisition of LifeMark, including its seniors' wellness division and the operations of over 100 clinics, which contributed $29,916 in the fourth quarter of 2011 and $58,601 in the 2011 year.  For the year ended December 31, 2011, the Company's homecare business grew by $1,446.  The remainder of the increase is due to organic growth in the seniors' wellness business through successful awards of new contracts with long-term care and retirement home providers. Seniors' wellness added 6,620 new beds in its existing business in 2011, while the LifeMark acquisition added 12,174 beds.  This success is testimony to Centric's existing infrastructure, partnerships and advanced rehabilitation programs that therapists deliver to seniors, with a key focus on the highest quality care while monitoring and providing outcomes to show improvements in falls, mobility, continence, wounds, restraints, and other important metrics that keep seniors independent.

EBITDA for the fourth quarter of 2011 increased to $6,983 from $1,949 for the comparable period in 2010.  EBITDA for the year ended December 31, 2011 increased to $13,459 from $6,847 for the prior year.

Pharmacy

The Pharmacy segment consists of 18 pharmacies servicing 34 treatment centres and pharmaceutical dispensing operations that service over 200 long-term care facilities with over 16,000 residents.

Revenue for the Pharmacy segment for the fourth quarter of 2011 increased to $13,217 from $1,204 for the comparable period in 2010.  Revenue for the year ended December 31, 2011 increased to $19,235 from $1,203 for the prior year. The increases are primarily due to the acquisitions of DNP, which contributed $4,084 in the fourth quarter of 2011 and $7,013 in the 2011 year, and Classic Care, which contributed $8,413 in the fourth quarter of 2011 and $8,413 in the 2011 year.  The Company's pharmacy operations continue to pursue revenue-generating and diversification strategies to improve its performance.  The number of prescriptions filled month-to-month has increased since the beginning of 2011.

EBITDA for the fourth quarter of 2011 increased to $1,056 from $51 for the comparable period in 2010.  EBITDA for the year ended December 31, 2011 increased to $1,622 from $37 for the prior year.

Surgical and Medical Centres

The Surgical and Medical Centre segment consists of seven centres across Canada, with 13 operating rooms and 86 beds.

Revenue for the Surgical and Medical Centres segment for the fourth quarter of 2011 increased to $9,373 from $356 for the comparable period in 2010. Revenue for the year ended December 31, 2011 increased to $27,626 from $1,394 for the prior year.  The increases are primarily due to the acquisitions of SSI, CSS (as part of the LifeMark transaction) and BWC, which contributed $5,637 $1,294 and $2,074, respectively, in the fourth quarter of 2011 and $20,264, $2,705 and $3,113 respectively in the 2011 year.

EBITDA for the fourth quarter of 2011 increased to $1,453 from $71 for the comparable period in 2010.  EBITDA for the year ended December 31, 2011 increased to $3,322 from $7 for the prior year.

Assessments

The Assessments segment is currently comprised of 8 medical assessment facilities, operating primarily through referrals from auto insurers.

Revenue for the fourth quarter of 2011 was $10,772 compared with $4,824 for the comparable period in 2010.  Revenue for the year ended December 31, 2011 increased to $35,654 from $21,890 for the prior year. The increases are due to the acquisition of LifeMark.  Excluding the contribution from the acquisition of LifeMark, revenue for the fourth quarter decreased compared to same period of 2010 and revenue for the year ended December 31, 2011 decreased by $5,608 compared to 2010.  This is a result of a decline in referrals from auto insurers due to regulatory reform enacted in September 2010, as well of consolidation within the industry that is leading to insurance companies using fewer vendors to perform assessment services.  To mitigate the negative impact of the regulatory reform, the Company has re-engineered the business and is aggressively pursuing revenue generating opportunities with auto insurers and workers compensation boards and has successfully obtained additional contracts with insurers in 2011 for future work.  The acquisition of LifeMark in 2011 provides critical mass in the national market, providing greater diversification within the auto insurance industry, adding disciplines to our current assessor roster and adding resources to allow the business to capitalize on opportunities within the disability, employer and government markets.  In addition, the Company has implemented cost saving initiatives to maintain profit margins.  The Company incurred certain redundant costs in 2011 as a result of the acquisition of LifeMark and is working to consolidate administrative and support staff to improve the efficiency of operations and rationalize costs.

EBITDA for the fourth quarter of 2011 increased to $1,739 from $397 for the comparable period in 2010.  EBITDA for the year ended December 31, 2011 increased to $6,306 from $4,682 for the prior year.

Retail and Home Medical Equipment

The Retail and Home Medical Equipment segment consists of MediChair and Performance Medical Group.  Subsequent to the end of 2011, the Company added Motion Specialties to this segment and now has more than 140 retail and home medical equipment locations across Canada. The Retail and Home Medical Equipment segment was a new segment for the Company in 2011.  As a result, there are no comparable results for 2010.

Revenue for the Retail and Home Medical Equipment segment for the fourth quarter of 2011 was $2,706.  Revenue for the year ended December 31, 2011, was $6,170.  Revenue for the periods consists of the contributions of MediChair (which was acquired as part of the LifeMark transaction) and Performance Medical Group from the date of their acquisitions in 2011.

EBITDA for the fourth quarter of 2011 was $137 and EBITDA for the year ended December 31, 2011 was $1,381.

Expenses

Cost of healthcare services and supplies for the fourth quarter of 2011 was $46,949, compared with $11,434 for the comparable period in 2010. Cost of healthcare services and supplies for the year ended December 31, 2011, was $112,836 compared to $39,229 for the prior year.  The increase is the result of the acquisitions completed in 2011 and is in line with the revenue contributions of the acquired businesses, as well as the build out of centralized support services for the underlying operations.

Employee costs for the fourth quarter of 2011 were $10,275 compared with $2,108 for the prior year.  Other operating expenses for the year ended December 31, 2011, was $23,147compared to $3,334 in the prior year.  Corporate expenses for the year ended December 31, 2011, were $11,284 compared to $4,354 in the prior year.  The support services provided through the corporate offices largely support the operations of the Company and certain of these costs have been allocated to the operating segments based on the extent of corporate management to the reportable segment during the period.

Loss from operations, expressed as revenue less cost of healthcare services and supplies, employee costs, other operating expenses, corporate office expenses and depreciation and amortization, for the fourth quarter of 2011 was $5,998, compared with income from operations of $1,281 for the comparable period in 2010.

Employee costs for the year ended December 31, 2011 were $32,340 compared with $7,572 for the prior year.  Other operating expenses for the year ended December 31, 2011, was $23,147 compared to $3,334 in the prior year.  Corporate expenses for the year ended December 31, 2011, were $11,284 compared to $4,354 in the prior year, due primarily to the acquisitions and growth in the business.

Profit from operations for the year ended December 31, 2011, was $6,812, compared to $7,442 for the prior year. The increase is primarily due to the contribution of the acquired businesses.

Costs for the fourth quarter and year ended December 31, 2011 are before cost savings rationalization strategies from acquisitions, including those expected from the integration of the LifeMark acquisition, have been fully implemented.  It is the expectation of management that various integration and rationalization efforts should results in significant savings through implementation of cost-savings initiatives at the operational and corporate levels.

Amortization for the fourth quarter of 2011 was $12,268 compared with $188 for the comparable period in 2010. Amortization for the year ended December 31, 2011 was $14,573, compared with $551 for the prior year.  These increases are primarily the result of the amortization of intangible assets recognized in the allocation of identifiable assets from the Company's acquisitions in 2011.

Stock-based compensation, a non-cash expense, was $1,369 for the fourth quarter of 2011, compared with $190 for the comparable period in 2010.  Stock-based compensation for the year ended December 31, 2011 was $3,163, compared with $761 for the prior year.  The increases are due to restricted shares and stock options being expensed over their vesting periods, a change in amortization policy to graded vesting due to the implementation of IFRS, and an increase in the fair value of stock-based compensation due to an increase in the value of the common shares of the Company.

Total interest and interest-related expenses for the fourth quarter were $4,756, compared with $374 for the comparable period in 2010. The change in fair value for the interest rate swaps that were designated as an effective hedge was $73, compared with $nil for the prior year.  Total interest and interest-related expenses for the year ended December 31, 2011 was $12,245 compared with $1,038 for the prior year.  The change in fair value of derivative financial instruments not designated as an effective hedge was $1,396, compared with $nil for the prior year.  The increases in interest and interest-related expenses for both periods is primarily due to the term loan and revolving facility arranged in June 2011, the distribution on preferred partnership units recognized as debt, the revolving operating facility arranged in October, 2010, the related party loans obtained in November, 2010, the capital leases assumed in the acquisition of SSI and BWC and the amortization of an interest rate swaps, which do not qualify for hedge accounting treatment.

During the fourth quarter of 2011, option holders exercised 50,000 options to purchase an equivalent number of shares at a weighted average exercise price per share of $0.72.  During the year ended December 31, 2011, option holders exercised 712,500 to purchase an equivalent number of shares at a weighted average exercise price per share of $0.39.

As at December 31, 2011, the Company had total shares outstanding of 170,162,147 of which 71,341,896 are currently restricted or held in escrow pending acquired businesses achieving performance targets or vesting milestones.  As at December 31, 2010, there were 62,090,095 shares outstanding.

As at the date of this news release, April 2, 2012, the number of shares outstanding, including restricted and escrowed shares, is 182,152,586; the number of options outstanding is 11,318,000; and, the number of warrants outstanding is 23,744,363. Included in the shares outstanding are 69,220,854 shares held in escrow, or in trust, and are not freely tradable.

International Financial Reporting Standards ("IFRS") Impact

The most significant impacts of the adoption of IFRS for the fourth quarter relate to the non-cash loss of $2,562 related to the decrease in fair value of contingent consideration liabilities pursuant to its business combination activities and the transaction costs incurred relating thereto.  The significant impacts from the adoption of IFRS for the Company for the year ended December 31, 2011 included recognizing a liability on its statement of financial position related to contingent consideration of $68,849 of which $65,639 is non-cash contingent consideration.  In addition, the Company recognized a non-cash gain of $60,078 million which represents the decrease in fair value of its share-based business acquisition contingent purchase consideration.  In the fourth quarter, the Company reduced the probability of LifeMark achieving its target EBITDA to 50% to 70%.  Every $1 million change in actual EBITDA for LifeMark results in a change of approximately 6 million common shares that could be earned and issued from escrow.  A maximum of 48,750,000 common shares can be issued to the vendors of LifeMark from the earn-out terms in the acquisition agreement.

LIQUIDITY AND CAPITAL RESOURCES

The Company did not meet certain financial performance covenants at December 31, 2011 and obtained a waiver from its lenders subsequent to year end with regards to this matter.  The Company continuously assesses its capital requirements for the existing business and future expansion and has registered a base shelf prospectus for $265.5 million in October 2011.  The Company intends on meeting with its lenders in 2012 to revisit its lending agreement and financial performance covenants.

OUTLOOK

The Company anticipates that its financial performance in 2012 and beyond will improve over that of the fourth quarter of 2011.  A key strategic objective for the Company is effective integration of acquisitions and driving synergies across its various operations while effectively utilizing debt and equity financing in furthering the Company's growth plans. The Company is focused on developing leverage and cross-selling opportunities in order to drive revenue and income growth.  The Company continues to be focused on cost savings through integration of acquisitions, reducing redundancies, and centralizing operational support services.  The Company anticipates that these activities will result in up to $5,500 in savings.  The Company expects to realize the financial impact of these efforts in 2012. Notably seasonality factors can affect quarterly performance given the nature of the underlying businesses.

The Company is focused on growth in the physiotherapy segment through the acquisition of clinics that will be accretive to income and continued efficiencies through the integration of LifeMark's eldercare operations with the Company's legacy operations.

While revenues in the medical assessments segment continue to be adversely affected by legislative changes surrounding automobile insurance coverage, substantial efforts were made in the fourth quarter of 2011 to reduce fixed costs and "right size" the business.  Revenue for this segment is anticipated to be $12 million to $15 million lower on a pro forma basis.  However due to cost rationalization measures management is focusing on margin improvement practices to re-engineer the business and ensure future success so that the Company can continue to serve insurers and clients on a national basis with quality care and quality outcomes.

Revenues and EBITDA¹ for the Company's pharmacy, surgical and medical, and retail and home medical equipment segments are expected to increase in the 2012 as compared to 2011.  Each of these segments will have the benefit of full year results from businesses that were acquired in 2011.  In addition, the retail and home medical segment's revenues and income will increase as a result of the acquisition of Motion Specialties.

In addition, the Company is exploring various equity alternatives including through private placements or through a public offering from the base shelf prospectus completed in October 2011.

Conference Call

Centric Health will host a conference call today, Monday, April 2, 2012, at 8:30 a.m. ET to discuss its year end and fourth quarter 2011 financial results.  To access the conference call by telephone, dial [phone] or [phone].  Please connect approximately 10 minutes prior to the start of the call to ensure access.

A recording of the conference call will be archived for replay by telephone until April 9, 2012 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 60446462.

A live audio webcast of the conference call will be available at http://www.centrichealth.ca/events-presentations.php. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

For further information please refer to the Company's complete filings at www.sedar.com.

¹Non-IFRS Measures

This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, and Adjusted EBITDA per share.  These non-IFRS measures are not recognized under IFRS and, accordingly, shareholders are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS.  The Company defines EBITDA as earnings before interest expense, income taxes, amortization and stock-based compensation expense.  Adjusted EBITDA is defined as EBITDA before transaction costs related to acquisitions and changes in fair value of contingent consideration recognized on the statement of income and comprehensive income.  Management believes that Adjusted EBITDA is a useful financial metric as it assists in the ability to measure cash generated from operations.  Adjusted EBITDA per share for any period represents the cash generated on a per share basis for the weighted average number of shares outstanding at the end of the period.  The method of calculating EBITDA may differ from other companies and accordingly, EBITDA may not be comparable to measures used by other companies.

About Centric Health Centric Health's vision is to be Canada's premier healthcare company, providing innovative solutions centered on patients and healthcare professionals. As a diversified healthcare company with investments in several niche service areas, Centric Health currently has operations in medical assessments, disability and rehabilitation management, physiotherapy and surgical centres, homecare, specialty pharmacy and wellness and prevention. With knowledge and experience of healthcare delivery in international markets and extensive and trusted relationships with payers, physicians, and government agencies, Centric Health is pursuing expansion opportunities into other healthcare sectors to create value for all stakeholders with an unwavering commitment to the highest quality of care. Centric Health is listed on the TSX under the symbol CHH.  For further information, please visit www.centrichealth.caand www.lifemark.ca.  Centric Health's strategic advisor is Global Healthcare Investments & Solutions, Inc. ("GHIS") (www.ghis.us).  GHIS and entities controlled by shareholders of GHIS are currently the largest shareholders of Centric Health.

This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation.  These forward-looking statements include, among others, statements regarding business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Centric Health and described in the forward-looking statements contained in this press release. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits Centric Health will derive there-from.

 

Peter Walkey
Chief Financial Officer
Centric Health
416-619-9417
[email protected]

Lawrence Chamberlain
Investor Relations
The Equicom Group
416-815-0700 ext. 257
[email protected]