Centric Health Reports Continued Strong Financial Results for Third Quarter of 2016

– Company Delivers Tenth Consecutive Quarter of Year-Over-Year Growth in Revenue and Adjusted EBITDA1

TORONTO, Nov. 8, 2016 /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 third quarter ended September 30, 2016.

Highlights for the Third Quarter
(All comparative figures are for the third quarter and year to date of the prior year)

  • Revenue from continuing operations increased 1.3% to $42.4 million from $41.9 million;
  • Adjusted EBITDA1 from continuing operations increased to $4.2 million from $2.8 million and Adjusted EBITDA1 margin from continuing operations was 9.9% compared with 6.6% (with Adjusted EBITDA1 and Adjusted EBITDA1 margin for the third quarter of 2015 reflecting out-sized corporate costs to support since-discontinued operations);
  • Generated positive cash flow from operations of $10.7 million ($0.8 million excluding cash from the Guardian and IDA Pharmacy Agreements), compared with $7.3 million;
  • Entered into 10-year Business Development, Technology and Supply Agreements with Guardian and IDA Pharmacies under which the Company has agreed to an exclusive supply arrangement over the term of the agreement and the two companies have committed to explore partnerships that can result in the creation or extension of the patient support initiatives that deliver better quality and more efficient patient care by leveraging technology.  Under the terms of the Agreements, Guardian and IDA Pharmacies have committed to invest up to $17 million to support innovative program and solutions, as well as the organic and acquisitive growth strategies of Centric Health;
  • Opened Specialty Pharmacy fulfillment centres in Kelowna, BC and Lethbridge, AB; and
  • Won a multi-province Specialty Pharmacy services contract with The Good Samaritan Society (GSS) for more than 2,400 long-term care and assisted living beds at all of GSS's 28 facilities and several specialized programs in BC and Alberta.

Highlights Subsequent to the Third Quarter

  • Established a significant presence in British Columbia in its Specialty Pharmacy business through the acquisition of CareRx Enterprises Ltd. ("CareRx"), a leading provider of pharmacy services to seniors communities in British Columbia, servicing approximately 1,500 beds at 26 long-term care and assisted living communities through its three fulfillment centers located in Vancouver, Victoria and Nanaimo.  The acquisition provides a platform for significant growth in the local markets, provides access to the majority of the BC seniors population and further strengthens the Company's ability to serve national customers; and,
  • Continued to advance its debt reduction and balance sheet simplification strategy with the redemption of the entire outstanding principal amount of $10.8 million of its 6% Unsecured Subordinated Notes scheduled to mature on December 22, 2016.

"Having effectively completed our deleveraging, we are now firmly focused on the executing our growth strategy focused on maximizing utilization of our national networks and strategically expanding our networks and our addressable market," said David Cutler, President and Chief Executive Officer, Centric Health Corporation.  "We are making strong, steady progress, especially in our Specialty Pharmacy business, winning new contracts, completing accretive tuck-in acquisitions and opening new fulfillment centres.  In particular, the recent acquisition of CareRx established a meaningful presence in British Columbia, supporting the award of the Good Samaritan Society contract and providing an excellent foundation for significant growth in that province."

Mr. Cutler added, "Our financial results for the year to date, and momentum in the business, position us well to finish the year with strong growth in both revenue and Adjusted EBITDA1 over 2015.  Looking further ahead, the recent expansion of our Specialty Pharmacy network and new contract awards, combined with a significantly reduced interest expense and ongoing cost management, position us for even stronger growth next year, with additional upside potential as we continue to pursue accretive tuck-in acquisitions."

"We continue to pursue further debt reduction and balance sheet simplification, supported by expected growth in Adjusted EBITDA1, the $17 million investment from Guardian and IDA Pharmacies and the $8 million still to flow from the sale of our Physiotherapy, Rehabilitation and Medical Assessments operations last December."

FINANCIAL RESULTS

Discontinued Operations

On December 31, 2015, the Company completed the sale of its Physiotherapy, Rehabilitation and Assessments operations ("PR&A operations"), which are composed of its physiotherapy network, Community Advantage Rehabilitation ("CAR") (the Company's Home Care operations) and Active Health Services Ltd. ("AHS") (the Company's Seniors Wellness operations) and the Company's Assessments (Independent Medical Examinations) operations.  Consequently, those businesses have been classified as discontinued operations for both the current and comparative periods and the Company now organizes its operations into two reportable operating segments based on the various products and services that it offers. The consolidated operations of the Company are composed of: (i) Specialty Pharmacy; and (ii) Surgical and Medical Centres. 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's involvement in the reportable segment during the period. The sale of the PR&A operations does not include Performance Medical Group, which was previously part of the Company's Physiotherapy, Rehabilitation and Assessments segment, is now included in the Company's Surgical and Medical Centres segment.

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 September 30,

For the nine month periods
ended September 30,


2016

2015

2014

2016

2015

2014

(thousands of Canadian Dollars)

$

$

$

$

$

$

Revenue

42,420

41,891

33,870

126,659

120,515

100,385








Loss from continuing operations

(218)

(1,420)

(6,019)

(4,195)

(8,028)

(18,188)








Loss from continuing operations before
interest expense and income taxes

(1,141)

(1,670)

(5,597)

(9,562)

(6,762)

(19,714)








EBITDA1 from continuing operations

1,916

1,032

670

(529)

1,217

(1,616)

Adjusted EBITDA1 from continuing operations

4,198

2,763

1,811

11,102

6,632

3,951


Per share - Basic and diluted

$0.03

$0.02

$0.01

$0.07

$0.04

$0.03

Adjusted EBITDA1 Margin from continuing operations

9.9%

6.6%

5.3%

8.8%

5.5%

3.9%








Adjusted EBITDA1

4,198

8,210

7,213

11,102

25,177

22,167


Per share - Basic2 and diluted2

$0.03

$0.05

$0.05

$0.07

$0.16

$0.16

Adjusted EBITDA1 Margin

9.9%

9.4%

7.3%

8.8%

9.6%

6.9%








Net income (loss)

3,409

(4,961)

743

(18,060)

(24,352)

(49,168)


Per share - Basic2 and diluted2

$0.02

($0.03)

$0.00

($0.11)

($0.15)

$0.34








Cash flow from operations

10,658

7,330

1,753

(1,282)

22,036

14,195















Weighted Average Shares Outstanding
(Basic and diluted)3

163,806

160,684

153,176

162,860

158,468

142,478

Shares Outstanding, September 303

166,813

160,678

153,389

166,813

160,678

153,389

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 September 30, 2016 increased 1.3% to $42.4 million from $41.9 million for the three month period ended September 30, 2015. The increase was primarily due to organic growth, driven by the performance of the Specialty Pharmacy segment in western Canada and the Surgical and Medical Centres.

Adjusted EBITDA1 from continuing operations for the three month period ended September 30, 2016 increased to $4.2 million from $2.8 million from the three month period ended September 30, 2015. (Adjusted EBITDA1 for the third quarter of 2015 reflects out-sized corporate costs of 6.6% of revenue to support since-discontinued operations.)

Adjusted EBITDA1 margin from continuing operations for the three month period ended September 30, 2016 was 9.9% compared with 6.6% for the three month period ended September 30, 2015.

Revenue, Adjusted EBITDA1 and Adjusted EBITDA1 margin were impacted by the reduction in the Ontario Drug Benefit ("ODB") dispensing fee that became effective as of October 1, 2015, which was partially offset by cost containment measures.  The net impact of the reduction in the dispensing fee on Revenue and Adjusted EBITDA1 was approximately $1.4 million and $1.0 million, respectively.

Consolidated revenue from continuing operations for the nine month period ended September 30, 2016 increased by 5.1%, or $6.1 million, to $126.7 million from $120.5 million for the same period in the prior year.

Adjusted EBITDA1 from continuing operations for the nine month period ended September 30, 2016 increased to $11.1 million compared to $6.6 million over the same period in the prior year.

The increase in Revenue and Adjusted EBITDA1 for the nine month period ended September 30, 2016 were primarily due to the acquisition of Pharmacare in March 2015 and organic growth, partially offset by the impact of the reduction of the ODB dispensing fee. The net impact of the reduction in the dispensing fee on Revenue and Adjusted EBITDA1 was approximately $3.8 million and $3.0 million, respectively.

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
September 30,

Revenue

Adjusted EBITDA1 from continuing
operations


2016

2015

2016


2015


(in $000)

$

$

$

%

$

%

Specialty Pharmacy

31,582

31,982

4,690

14.9

4,820

15.1

Surgical and Medical Centres

10,838

9,909

1,068

9.9

709

7.2

Corporate

(1,560)

(2,766)

Total

42,420

41,891

4,198

9.9

2,763

6.6

 

For the nine month periods ended
September 30,

Revenue

Adjusted EBITDA1 from continuing
operations


2016

2015

2016


2015


(in $000)

$

$

$

%

$

%

Specialty Pharmacy

93,696

90,205

12,256

13.1

12,879

14.3

Surgical and Medical Centres

32,963

30,310

3,752

11.4

2,361

7.8

Corporate

(4,906)

(8,608)

Total

126,659

120,515

11,102

8.8

6,632

5.5

 

SHARES OUTSTANDING

As at September 30, 2016, the Company had total shares outstanding of 167,013,552. The outstanding shares at September 30, 2016 include 201,025 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. Accordingly, for financial reporting purposes, the Company reported 166,812,527 common shares outstanding as at September 30, 2016 and 160,882,600 shares outstanding at December 31, 2015. The number of options outstanding is 3,125,000 at September 30, 2016. The number of restricted share units outstanding is 1,548,986 at September 30, 2016. The number of warrants outstanding is 2,859,280 at September 30, 2016. Should all outstanding options and warrants that were exercisable at September 30, 2016 be exercised, the Company would receive proceeds of $3.4 million.

As at the date of this press release, November 8, 2016, the Company had total shares outstanding of 171,513,552 which include  2,701,025 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. The number of options outstanding is 4,125,000; the number of warrants outstanding is 2,859,280; and the number of restricted share units outstanding is 1,548,986.

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 EBITDA 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 EBITDA as a key component of the covenant calculations. EBITDA and Adjusted EBITDA are not recognized measures under IFRS.

Reconciliation of Non-IFRS Measures


For the three month periods
ended September 30,

For the nine month periods
ended September 30,


2016

2015

2016

2015

(in $000)

$

$

$

$

Net income (loss) from continuing operations

3,409

(9,491)

(17,023)

(30,971)

Depreciation and amortization

3,109

2,776

9,247

8,118

Interest expense

3,328

8,519

15,191

25,828

Amortization of lease incentives

(52)

(74)

(214)

(139)

Income tax recovery

(7,878)

(698)

(7,730)

(1,619)

EBITDA from continuing operations

1,916

1,032

(529)

1,217

Transaction and restructuring costs

1,231

1,050

5,709

5,538

Change in fair value of contingent consideration liability

897

182

5,407

233

Stock-based compensation expense

128

312

556

1,024

Change in fair value of derivative financial  instruments

26

68

(40)

(1,499)

Gain (loss) on disposal of property and equipment

119

(1)

119

Adjusted EBITDA1 from continuing operations

4,198

2,763

11,102

6,632

Adjusted EBITDA1 from discontinued operations

5,447

18,545

Adjusted EBITDA1

4,198

8,210

11,102

25,177






Basic and diluted weighted average number of shares

163,806

160,684

162,860

158,468

Adjusted EBITDA1 per share from continuing operations
(basic and diluted)

$0.03

$0.02

$0.07

$0.04

Adjusted EBITDA1 per share (basic and diluted)

$0.03

$0.05

$0.07

$0.16

 

PRESENTATION OF FINANCIAL RESULTS

As a result of the Company completing the Sale Transaction on December 31, 2015, the Company has amended its reportable operating segments. The Company will now present two reportable operating segments rather than three reportable operating segments as was previously presented. Operating segments are as follows: Specialty Pharmacy and Surgical and Medical Centres. The financial results of the Company's Performance Medical Group, which were included in the past as part of the Physiotherapy, Rehabilitation and Assessments segment, is now 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 third quarter financial results today, Wednesday November 9, 2016 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, November 17, 2016 at midnight.  To access the archived conference call, dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 2982103.

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 provider and brand 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 composed of a growing national network of fulfilment centres that offer high-volume solutions for the cost effective supply of chronic medication and other specialty clinical services, serving more than 27,500 residents in over 375 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 six 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 continues to evolve 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; Lawrence Chamberlain, Investor Relations, NATIONAL Equicom, 416-848-1457, lchamberlain@national.ca


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