Centric Health Reports Continued Strong Financial Results for First Quarter of 2017

– Company Delivers Twelfth Consecutive Quarter of Year-Over-Year Growth in Revenue and Adjusted EBITDA1 and Fifth Consecutive Quarter of Sequential Growth in Adjusted EBITDA1 as it Continues to Execute on Stated Strategic Objectives –

TORONTO, May 9, 2017 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), Canada's leading diversified healthcare services company, today reported its financial results for the first quarter ended March 31, 2017.

Highlights for the First Quarter of 2017
(All comparative figures are for the first quarter 2016)

  • Adjusted EBITDA1 from continuing operations increased to $4.5 million from $2.9 million, and Adjusted EBITDA1 margin from continuing operations was 10% compared with 7% for the first quarter of 2016;
  • Adjusted EBITDA1 growth from continuing operations was 55%, primarily as a result of accretive acquisitions made in 2016 and organic growth in the Specialty Pharmacy business, partially offset by a slight decrease in the Surgical and Medical Centres business primarily due to a reduction in higher margin diagnostic procedures;
  • Revenue from continuing operations increased 7.1% to $43.6 million from $40.7 million, with first quarter 2017 revenue reflecting $1.5 million that was reclassified to cost of sales. Revenue growth from continuing operations, normalizing for the reclassification of revenue to cost of sales, was 11%;
  • Maintained positive cash flow from operations at $1.1 million; and
  • Continued to advance debt reduction and balance sheet simplification strategy through the completion of early conversion of the July 2017 CDs and Jamon promissory note with outstanding principal balances of $9.1 million and $5.0 million, respectively, reducing the Company's outstanding debt by a total of $14.1 million.

Completion of Debt Refinancing Plan Subsequent to Quarter

  • On May 3, 2017, the Company signed definitive agreements with a syndicate of lenders comprised of three major Canadian banks providing for new credit facilities in an aggregate amount of up to $113.5 million consisting of $100 million in senior secured facilities (the "Senior Facilities") and $13.5 million in secured subordinated term credit facilities (the "Subordinated Facilities") (collectively, the "New Credit Facilities"), subject to closing conditions being satisfied on or about June 2, 2017;
  • The Senior Facilities are structured as follows: (i) a revolving credit facility in the amount of up to $20 million, including a swingline of up to $3 million, (ii) a non-revolving term loan facility in the amount of up to $60 million, and (iii) a limited revolving acquisition and capital expenditure term loan facility in the amount of up to $20 million to be available in multiple draws;
  • The Subordinated Facilities consist of a term loan to be fully drawn in one advance for a total of $13.5 million;
  • The credit facilities will be used to refinance the Company's existing debt instruments and to provide capacity for potential acquisitions, capital expenditures, organic growth initiatives and general working capital and corporate purposes;
  • Simultaneously with the signing of the definitive agreements, the Company has delivered redemption notices to the holders of the senior Notes and the October 2017 CDs in accordance with the terms of their respective indentures; and,
  • The New Credit Facilities are expected to result in a significant reduction in annual finance charges, with the Company's weighted average interest rate decreasing from the current rate of 6.7% per annum to approximately 5.25% on closing.

"The first quarter of 2017 demonstrates the significant progress we have made in right-sizing the company by reducing debt and strengthening the balance sheet," said David Cutler, President and Chief Executive Officer of Centric Health. "This success, along with the accretive acquisitions made in 2016, have resulted in a solid platform for growth that generated a 7% increase in revenue and a 55% increase in Adjusted EBITDA in the quarter."

"Subsequent to quarter end, we further strengthened our position with the signing of a new credit facility which simplifies our debt structure, extends the maturity and lowers our interest rate," Mr. Cutler added. "This further enables our operational focus and provides an advantage in acting on organic growth opportunities in both sectors of our business, which we have continued to demonstrate with a recent addition of 1,200 long-term care beds to our Specialty Pharmacy division through a successful RFP bid subsequent to the quarter."

FINANCIAL RESULTS

Discontinued Operations

The Company's discontinued operations consist of the businesses divested as part of the sale of its Physiotherapy, Rehabilitation and Medical Assessments segment in 2015 and London Scoping Centre in 2016.

Selected Financial Information

(All amounts in the chart below are in thousands except per share, shares outstanding, and percentage data)


For the three month periods ended March 31,


2017

2016

2015

(thousands of Canadian Dollars)

$

$

$

Revenue

43,563

40,694

36,637





Gain (Loss) from continuing operations

668

(1,100)

(4,010)





Gain (Loss) from continuing operations before interest
expense and income taxes

1,477

(1,341)

(5,401)





EBITDA1 from continuing operations

3,260

1,598

(2,870)

Adjusted EBITDA1 from continuing operations

4,456

2,878

1,102


Per share - Basic and diluted

$0.02

$0.02

$0.01

Adjusted EBITDA1 Margin from continuing operations

10.2%

7.1%

3.0%





Adjusted EBITDA1

4,456

2,821

7,342


Per share - Basic2 and diluted2

$0.02

$0.02

$0.05

Adjusted EBITDA1 Margin

10.2%

6.9%

8.8%





Net loss

(3,329)

(10,022)

(12,336)


Per share - Basic2 and diluted2                 

($0.02)

($0.06)

$(0.08)





Cash provided by (used in) operations

1,114

(7,208)

2,009









Weighted Average Shares Outstanding (Basic and diluted)3

179,693

161,974

155,303

Shares Outstanding, March 313

198,576

162,258

159,388

1

See "Non-IFRS Measures" below.

Basic and diluted earnings per share is based on the profit or loss attributable to shareholders of Centric Health Corporation.

3

Excludes contingent escrowed shares and restricted shares.

 

Consolidated Results

Consolidated Revenue from continuing operations for the three month period ended March 31, 2017 increased 7.1% to $43.6 million from $40.7 million for the three month period ended March 31, 2016. Consolidated Revenue growth, normalized for the $1.5 million that was reclassified to cost of sales, was 11%. The growth was primarily due to organic growth driven by the performance of the Specialty Pharmacy segment in Western Canada, combined with contributions from the acquisitions made in 2016. 

Adjusted EBITDA1 from continuing operations for the three month period ended March 31, 2017 increased to $4.5 million from $2.9 million for the three month period ended March 31, 2016. The increase was primarily the result of the organic growth in the Specialty Pharmacy segment as well as accretive tuck-in acquisitions, partially offset by a slight decrease in the Surgical and Medical Centres primarily due to a reduction in higher margin diagnostic procedures.

The Adjusted EBITDA1 margin for the three month period ended March 31, 2017 was 10.2% as compared to 7.1% over the same period in the prior year.

Segment Results

(All amounts in the charts below are in thousands except per share, shares outstanding, and percentage data)

For the three month periods ended
March 31,

Revenue

Adjusted EBITDA1 from continuing
operations


2017

2016

2017


2016


(in $000)

$

$

$

%

$

%

Specialty Pharmacy

32,907

30,303

4,924

15.0

3,284

10.8

Surgical and Medical Centres

10,656

10,391

1,177

11.0

1,235

11.9

Corporate

(1,645)

(1,641)

Total

43,563

40,694

4,456

10.2

2,878

7.1

 

SHARES OUTSTANDING

As at March 31, 2017, the Company had total shares outstanding of 204,097,247. The outstanding shares at March 31, 2017 include 5,521,025 shares which are restricted or held in escrow and will be released to certain vendors of previously acquired businesses based on the achievement of certain stated performance targets and certain customers. Accordingly, for financial reporting purposes, the Company reported 198,576,222 common shares outstanding as at March 31, 2017 and 169,982,529 shares outstanding at December 31, 2016. The number of options outstanding is 2,945,000 at March 31, 2017. The number of restricted share units outstanding is 4,585,652 at March 31, 2017. The number of warrants outstanding is 2,938,400 at March 31, 2017. Should all outstanding options and warrants that were exercisable at March 31, 2017 be exercised, the Company would receive proceeds of $2.9 million.

As at the date of this press release, May 9, 2017, the Company had total shares outstanding of 204,230,577 which include 5,521,025 shares which are restricted or held in escrow. The number of options outstanding is 2,625,000; the number of warrants outstanding is 2,938,400; and the number of restricted share units outstanding is 4,452,319.

1NON-IFRS MEASURES

This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin 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 non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.

The Company defines EBITDA as earnings before depreciation and amortization, interest expense, amortization of lease incentives, and income tax expense (recovery).  Adjusted EBITDA is defined as EBITDA before transaction and restructuring costs, changes in the fair value of the contingent consideration liability, impairments, stock based compensation expense, change in fair value of derivative financial instruments and gain on disposal of property and equipment recognized in the statement of income. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA per share is defined as Adjusted EBITDA divided by the weighted outstanding shares on both a basic and diluted basis. The Company believes that Adjusted EBITDA1 is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service interest and principal debt repayments and fund future growth initiatives.  The Company's agreements with senior lenders are structured with certain financial performance covenants which includes Adjusted EBITDA1 as a key component of the covenant calculations. EBITDA and Adjusted EBITDA1 are not recognized measures under IFRS.

Reconciliation of Non-IFRS Measures







For the three month periods ended
March 31,



2017

2016

(in $000)


$

$

Loss from continuing operations


(3,329)

(8,876)

Depreciation and amortization


1,848

2,997

Interest expense


3,821

8,211

Amortization of lease incentives


(65)

(58)

Income tax expense (recovery)


985

(676)

EBITDA from continuing operations


3,260

1,598

Transaction and restructuring costs


1,656

779

Change in fair value of contingent consideration liability


(958)

287

Stock-based compensation expense


324

261

Change in fair value of derivative financial  instruments


149

(46)

Gain (loss) on disposal of property and equipment


25

(1)

Adjusted EBITDA from continuing operations


4,456

2,878

Adjusted EBITDA from discontinued operations


(57)

Adjusted EBITDA


4,456

2,821





Basic and diluted weighted average number of shares


179,693

161,974

Adjusted EBITDA per share from continuing operations
(basic and diluted)


$0.02

$0.02

Adjusted EBITDA per share (basic and diluted)


$0.02

$0.02

 

PRESENTATION OF FINANCIAL RESULTS

The Company presents two reportable operating segments as follows: Specialty Pharmacy and Surgical and Medical Centres. The financial results of the Company's Performance Medical Group, are included as part of the Surgical and Medical Centres segment.

CONFERENCE CALL

Centric Health will host a conference call, including a slide presentation, to discuss its first quarter financial results on Wednesday, May 10, 2017 at 8:30 a.m. (ET).

Telephone Dial-In Access Information

To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191.  Please connect approximately 10 minutes prior to the beginning of the call to ensure participation.  Those participating in the conference call by telephone can view the slide presentation by accessing the online webcast (see instructions below) and choosing the Non-Streaming Audio option.

Webcast Access Information

A live webcast of the conference call, including the slide presentation, will be available on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/events-and-presentations.html).  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. To view the webcast presentation with slides, please choose either the Real Streaming Audio or Windows Streaming Audio option.

Archive Access Information

The conference call will be archived for replay by telephone until Wednesday, May 17, 2017 at midnight.  To access the archived conference call, dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 8564256.

The webcast with slide presentation will be archived for 90 days on the Events and Presentations page of the Investors section of the Company's web site (http://www.centrichealth.ca/investors/events-and-presentations.html).

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

About Centric Health

Centric Health's vision is to be Canada's most respected and recognized provider in the independent healthcare sectors in which it operates, world renowned for delivering the highest levels of quality care and outcomes, innovative solutions and value to patients, clients and stakeholders. To this end, Centric Health primarily focuses on two core healthcare businesses:

  • The Specialty Pharmacy division is a "Patient First" model composed of a growing national network of fulfilment centres that deliver high-volume solutions for the cost effective supply of chronic medication and other specialty clinical care services, serving more than 29,000 residents in over 425 seniors communities (long term care facilities, retirement homes and assisted living facilities) nationally. The Specialty Pharmacy division also provides pharmaceutical dispensing services for employees insured by corporate health plans.

  • The Surgical & Medical Centres division is Canada's largest independent surgical provider operating five facilities across four provinces. It serves a diversified customer base with private paid non-insured surgeries and diagnostics, government outsourcing of insured surgeries and diagnostics and other procedures funded by third-party payors (including Workers Compensation) and is the proud owner of Canada's first Centre of Excellence in Metabolic and Bariatric Surgery.

With national networks of facilities in each of its businesses, deep knowledge and experience of healthcare delivery and extensive, trusted relationships with payers, physicians, and government agencies, the Company is uniquely positioned to address current and future healthcare needs in growing markets as the Canadian healthcare industry goes through a major transformation over the medium to long term.

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.

SOURCE Centric Health Corporation

For further information: David Cutler, Chief Executive Officer, Centric Health Corporate, 416-619-9401, david.cutler@centrichealth.ca; Leslie Cho, Chief Financial Officer, Centric Health Corporate, 416-619-9488, leslie.cho@centrichealth.ca


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