Centric Health Reports Continued Strong Growth and Record Adjusted EBITDA(1) from Continuing Operations for Second Quarter of 2016

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

– Expected Funds Flows From Recent Partnership and Previous Sale of Operations Provide Additional Flexibility and Financial Resources to Support Further Debt Reduction –

TORONTO, Aug. 9, 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 second quarter ended June 30, 2016.

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

  • Revenue from continuing operations increased 4.1% to $43.3 million from $41.5 million;
  • Adjusted EBITDA1 from continuing operations increased to a record $4.1 million from $2.8 million and Adjusted EBITDA1 margin from continuing operations was 9.4% compared with 6.6% (with Adjusted EBITDA1and Adjusted EBITDA1 margin for the second quarter of 2015 reflecting out-sized corporate costs to support since-discontinued operations);
  • The Company continued to advance its debt reduction strategy with the successful completion of a refinancing and reduction of its April 2016 Convertible Notes (the "Notes") under which noteholders of $9.1 million of the $15.0 million principal outstanding agreed to extend the notes to July 31, 2017 and the remaining $5.9 million principal outstanding was repaid at par plus accrued and unpaid interest; and,
  • The Company's debt reduction actions since the beginning of 2016 have reduced outstanding debt by an aggregate of nearly $209 million and will result in annual interest expense savings of nearly $19 million, strengthening the Company's ability to generate free cash flow and providing increased financial flexibility to invest in the growth of its businesses.

Highlights Subsequent to the Second Quarter

  • 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 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 programs and solutions, as well as the organic and acquisitive growth strategies of Centric Health.
  • The Company intends to repay its 6.0% Convertible Notes maturing December 2016 in cash with any of the remaining proceeds from the sale of their Physiotherapy, Rehabilitation, and Medical Assessments segment or the combination of remaining proceeds and the Revolving Facility;
  • Further to the Company's objective of further reducing its debt and simplifying its balance sheet, given the multiple debt instruments with various terms, the Company is currently in active discussions with lenders and intends to provide details on the next definitive steps in its plan before the end of the fourth quarter of 2016.

"The second quarter was highlighted by continuing strong growth for our Specialty Pharmacy segment in Western Canada, as well as our Surgical and Medical Centres segment, which contributed to our ninth consecutive quarter of year-over-year growth in revenue and adjusted EBITDA1  and a strong adjusted EBITDA margin1," said David Cutler, President and Chief Executive Officer, Centric Health Corporation.  "With our debt levels now substantially addressed and our corporate costs right-sized, we are focused on executing the growth strategies for each of our businesses to drive revenue and adjusted EBITDA1, with an emphasis on maximizing sustainable free cash flow.  Importantly, our national networks in each segment have significant operating leverage that will allow us to generate high margins on incremental volumes.

"Alongside our primary focus on growing our businesses, we continue to actively pursue further debt reduction and simplification of our balance sheet. We expect growth in Adjusted EBITDA1 to accelerate in the coming quarters and the investment of up to $17 million from our new business development and supply partner, along with the $4.4 million in cash and and cash remaining from the sale of the Physiotherapy, Rehabilitation and Medical Assessments operations last December, and the expected $8 million in contingent consideration and hold back from that sale to come over the next nine months, will provide additional near-term financial resources and flexibility in this regard."

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
June 30,

For the six month periods ended
June 30,


2016

2015

2014

2016

2015

2014

(thousands of Canadian Dollars)

$

$

$

$

$

$

Revenue

43,264

41,545

33,975

84,239

78,624

66,515








Loss from continuing operations

(2,778)

(2,585)

(2,603)

(3,977)

(6,608)

(5,493)








Income (loss) from continuing operations
before interest expense and income taxes

(6,981)

365

(4,972)

(8,421)

(5,092)

(7,389)








EBITDA1 from continuing operations

(3,987)

3,081

(2,588)

(2,447)

185

(2,611)

Adjusted EBITDA1 from continuing
operations

4,082

2,751

1,111

6,902

3,869

2,140


Per share - Basic and diluted

$0.03

$0.02

$0.01

$0.04

$0.02

$0.02

Adjusted EBITDA1 Margin from
continuing operations

9.4%

6.6%

3.3%

8.2%

4.9%

3.2%








Adjusted EBITDA1

4,082

9,622

8,237

6,902

16,966

14,954


Per share - Basic2 and diluted2

$0.03

$0.06

$0.05

$0.04

$0.11

$0.11

Adjusted EBITDA1 Margin

9.4%

10.6%

7.3%

8.2%

9.7%

6.7%








Net loss

(11,447)

(7,054)

(21,952)

(21,469)

(19,390)

(49,911)


Per share - Basic2 and diluted2

($0.07)

($0.04)

$(0.15)

($0.13)

($0.12)

$(0.37)








Cash flow from operations

(4,906)

12,697

8,610

(12,114)

14,706

12,442















Weighted Average Shares Outstanding
(Basic)3

162,741

159,937

140,458

162,357

157,535

137,010








Shares Outstanding, June 303

162,752

160,350

153,074

162,752

160,350

153,074








1 See "Non-IFRS Measures" below.

2 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 periods ended June 30, 2016 increased 4.1% to $43.3 million from $41.5 million for the three month periods ended June 30, 2015. The increase was primarily due to organic growth of $2.8 million, driven by the performance in the Specialty Pharmacy segment in western Canada and the Surgical and Medical Centres.

Adjusted EBITDA1 from continuing operations for the three month period ended June 30, 2016 increased to $4.1 million from $2.8 million from the three month period ended June 30, 2015. (Adjusted EBITDA1 for the second quarter of 2015 reflects out-sized corporate costs of 6.4% of revenue to support since-discontinued operations.)

Adjusted EBITDA1 margin from continuing operations for the three month periods ended June 30, 2016 was 9.4% compared with 6.6% for the three month periods ended June 30, 2015. Adjusted EBITDA margin was 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.

Consolidated revenue from continuing operations for the six month period ended June 30, 2016 increased by 7.1%, or $5.6 million, to $84.2 million from $78.6 million for the same period in the prior year.

Adjusted EBITDA from continuing operations for the six month period ended June 30, 2016 increased to $6.9 million compared to $3.9 million over the same period in the prior year.

The increase in Revenue and Adjusted EBITDA for the six month period ended June 30, 2016 were primarily due to the acquisition of Pharmacare in March 2015 and organic growth, partially offset by the impact of the ODB changes.

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
June 30,

Revenue

Adjusted EBITDA1 from continuing
operations


2016

2015

2016


2015


(in $000)

$

$

$

%

$

%

Specialty Pharmacy

31,813

31,215

4,287

13.5

4,540

14.5

Surgical and Medical Centres

11,451

10,330

1,500

13.1

873

8.5

Corporate

(1,705)

(2,662)

Total

43,264

41,545

4,082

9.4

2,751

6.6

 

For the six month periods ended
June 30,

Revenue

Adjusted EBITDA1 from continuing
operations


2016

2015

2016


2015


(in $000)

$

$

$

%

$

%

Specialty Pharmacy

62,115

58,223

7,569

12.2

8,058

13.8

Surgical and Medical Centres

22,124

20,401

2,680

12.1

1,653

8.1

Corporate

(3,347)

(5,842)

Total

84,239

78,624

6,902

8.2

3,869

4.9

 

SHARES OUTSTANDING

As at June 30, 2016, the Company had total shares outstanding of 162,952,967. The outstanding shares at June 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 162,751,942 common shares outstanding as at June 30, 2016  and 160,882,600 shares outstanding at December 31, 2015. The number of options outstanding is 4,895,500 at June 30, 2016. The number of restricted share units outstanding is 2,982,488 at June 30, 2016. The number of warrants outstanding is 3,641,507 at June 30, 2016. Should all outstanding options and warrants that were exercisable at June 30, 2016 be exercised, the Company would receive proceeds of $7.6 million.

As at the date of this press release, August 9, 2016, the Company had total shares outstanding of 163,521,959, which 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. The number of options outstanding is 4,895,500; the number of warrants outstanding is 3,641,507; and the number of restricted share units outstanding is 1,352,319.

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 June 30,

For the six month
periods ended June 30,


2016

2015

2016

2015

(thousands of Canadian Dollars)

$

$

$

$

Net loss from continuing operations

(7,311)

(7,887)

(16,296)

(21,479)

Depreciation and amortization

3,099

2,732

6,138

5,342

Interest expense

3,157

8,953

11,368

17,309

Amortization of lease incentives

(105)

(16)

(164)

(65)

Income tax recovery

(701)

(666)

(922)

EBITDA from continuing operations

(1,160)

3,081

380

185

Transaction and restructuring costs

872

2,350

1,651

4,488

Change in fair value of contingent consideration liability

4,223

(374)

4,510

51

Share-based compensation expense

167

270

428

712

Change in fair value of derivative financial instruments

(20)

(2,576)

(66)

(1,567)

(Gain) loss on disposal of property and equipment

(1)

Adjusted EBITDA from continuing operations

4,082

2,751

6,902

3,869

Adjusted EBITDA from discontinued operations

6,871

13,097

Adjusted EBITDA

4,082

9,622

6,902

16,966






Weighted average number of shares - basic and diluted

162,741

159,937

162,357

157,535

Adjusted EBITDA per share from continuing operations- basic
and diluted

$0.03

$0.02

$0.04

$0.02

Adjusted EBITDA per share - basic and diluted

$0.03

$0.06

$0.04

$0.11

 

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 second quarter financial results on August 10, 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, August 17, 2016 at midnight.  To access the archived conference call, dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 50139893.

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 25,000 residents in over 300 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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