TORONTO, Aug. 14, 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 second quarter ended June 30, 2012.
Financial and Operating Highlights for the Second Quarter
- Revenue increased 240% to $114.1 million from $33.6 million in the prior year period as a result of acquisitions and organic growth;
- Adjusted EBITDA1 increased 291% to $12.5 million ($0.09 per share fully diluted) from $3.2 million ($0.03 per share fully diluted) in the prior year period;
- Adjusted EBITDA margin was 10.9% compared with 9.6% for the same period in the prior year;
- Generated $8.0 million in positive cash flow from operations during the quarter due to the Company's increased focus on working capital management;
- Renegotiated the existing lending agreement with the senior lender syndicate, which revised certain of the Company's financial performance covenants, providing the Company with greater financing flexibility;
- Completed a $15.0 million private placement of subordinated, unsecured convertible notes, the proceeds of which were used to pay down the Company's senior debt.
Highlights Subsequent to the Second Quarter
- Appointed David Cutler as President, Chief Executive Officer and a member of the Board of Directors of the Company, effective September 3, 2012;
- Settled the LifeMark earn out in terms of the formula in the purchase agreement with the release of 6,875,000 Centric shares that were held in escrow. The remaining 40,000,000 LifeMark escrowed shares will be cancelled. This cancellation results in a 22.0% reduction in outstanding and escrowed shares with enhanced adjusted EBITDA per share, including escrowed shares of 30.8%1 for the six month period ended June 30, 2012.
"The second quarter builds on our solid start to the year, highlighted by sequential revenue and EBITDA growth, as we continued to steadily progress on integration and rationalization initiatives to achieve cost savings and margin expansion," said Dr. Jack Shevel, Executive Chairman and Interim President and Chief Executive Officer, Centric Health Corporation. "We have created a tremendous platform for growth based on our strong national network and have commenced with several top line initiatives to deliver innovative solutions and quality care to patients. The addition of David Cutler, who will join us as President and CEO in September, significantly enhances our ability to capitalize on these opportunities."
"We have made solid progress on the integration of the acquired businesses and expect to achieve further cost containment over the next four quarters," said Peter Walkey, Chief Financial Officer, Centric Health Corporation. "Moreover, we are pleased the success of our focus on working capital management and its positive impact on cash flow from operations."
(All amounts below are in thousands except per share, shares outstanding, and percentage data)
Selected Financial Information
|Three months ended June 30,||Six months ended June 30,|
|Income from operations||6,159||2,632||134%||11,622||4,381||165%|
|% of revenue||5.4%||7.8%||NM||5.3%||7.7%||NM|
|Adjusted EBITDA1 margin||10.9%||9.6%||NM||11.1%||9.6%||NM|
|Per share - basic ($)||$ 0.38||$ 0.15||153%||$ 0.35||$ 0.08||338%|
|Per share - diluted ($)||$ 0.34||$ 0.11||209%||$ 0.29||$ 0.06||383%|
|Weighted average shares|
|Shares outstanding June 30||112,847||80,643||40%||112,847||80,643||40%|
NM - Not meaningful
Consolidated Revenue and Adjusted EBITDA
Consolidated revenue for the second quarter of 2012 increased by 240% to $114.1 million from $33.6 million for the comparable period of 2011. Consolidated revenue for the first six months of 2012 increased by 286% to $218.4 million from $56.6 million for the comparable period of 2011. This increase was due mainly to acquisitions and organic growth.
Adjusted EBITDA1, which excludes transaction and restructuring costs and the change in the fair value of the contingent consideration liability, for the second quarter of 2012 increased by 288% to $12.5 million from $3.2 million for the prior year period. Adjusted EBITDA1 margin for the second quarter of 2012 increased to 10.9% from 9.6% for the comparable period of 2011.
Adjusted EBITDA1 for the first six months of 2012 increased by 346% to $24.2 million from $5.4 million for the comparable period of 2011. Adjusted EBITDA1 margin increased to 11.1% from 9.6% for the comparable period of 2011.
Revenue and Adjusted EBITDA by Segment
|Three months ended June 30,|
|Surgical & Medical Centres||9,327||5,498||1,132||12.1||700||12.7|
|Retail & Home Medical Equipment||26,307||706||1,961||7.5||133||18.8|
|Total||$ 114,123||$ 33,596||$ 12,478||10.9%||$ 3,219||9.6%|
|Six months ended June 30,|
|Surgical & Medical Centres||17,873||10,638||2,268||12.7||1,371||12.9|
|Retail & Home Medical Equipment||43,467||706||3,878||8.9||133||18.8|
|Total||$ 218,376||$ 56,631||$ 24,174||11.1%||$ 5,416||9.6%|
Revenue and EBITDA for the Assessments segment continue to be adversely affected by legislative changes surrounding automobile insurance coverage. The Company continues to right-size the Assessments operations in response to regulatory reforms to improve its margins. In the first six months of 2012, the Company continued to consolidate its operations in Ontario into fewer assessment centres to reduce excess overhead costs. This resulted in an Adjusted EBITDA margin improvement of 2% to 17.0% in the second quarter of the year from 15.0% in the first quarter of 2012. Revenue for this segment is anticipated to be $12 million to $15 million lower on a pro forma basis in 2012 as compared to 2011.
The year-over-year decrease in Adjusted EBITDA margin for the Retail and Home Medical Equipment segment can be attributed to the acquisition during the first quarter of 2012 of Motion Specialties, which generates lower margins in comparison to the MEDIchair franchise royalty fees. With combined purchasing power, certain supplier contract volume rebates and renegotiated payment terms the Adjusted EBITDA margin has been positively impacted in the second quarter of 2012 and will continue to do so into the future.
As at June 30, 2012, the Company had total shares outstanding of 181,952,586 of which 69,106,081 are held in escrow pending acquired businesses achieving performance targets or vesting milestones. As at June 30, 2011, there were 112,846,505 shares outstanding excluding restricted shares and shares held in escrow.
As at the date of this news release, August 14, 2012, and after the cancellation of 40,000,000 LifeMark escrowed shares, the number of shares outstanding, including escrowed shares, is 142,077,586; this includes 29,106,081 shares held in escrow, or in trust, that are not freely tradable.
The number of options outstanding is 12,220,000 and the number of warrants outstanding is 27,794,363. Should all outstanding options and warrants that were exercisable at June 30, 2012 be exercised, the Company would receive proceeds of $14,413.
As discussed in the news release of August 14, 2012, the Company finalized the number of escrow shares to be released to the former LifeMark vendors. Subsequent to June 30, 2012, the Company agreed to release 6,875,000 of the LifeMark escrowed shares to the LifeMark vendors as LifeMark achieved certain performance metrics as specified in the purchase agreement for this transaction. The remaining 40,000,000 LifeMark escrowed shares will be cancelled.
The main factors resulting in this outcome were the underachievement of performance targets by LifeMark's assessments operations, which represents less than 30% of the acquired LifeMark operations, as a result of regulatory reform in the industry and higher than expected debt and other obligations that were incurred by the Company from the LifeMark acquisition. The remaining LifeMark business performed in-line with expectations. The structure of the earnout model was designed to maintain an acquisition price that represented approximately 8.5 times of EBITDA. As previously disclosed, the LifeMark earn-out formula is highly sensitive, as every $1 million change in actual EBITDA for LifeMark resulted in a change of approximately 6.6 million common shares that could be earned and issued from escrow.
LIQUIDITY AND CAPITAL RESOURCES
The Company was in compliance with its financial performance covenants at June 30, 2012. The Company anticipates that, based on meeting its approved 2012 operating budget, working capital management initiatives and other financing opportunities it will generate sufficient cash flows to meets its obligations as they come due. The Company expects to be in compliance with its financial performance covenants for the balance of 2012 and subsequent periods.
Over the past 18 months the Company has achieved its strategic objectives of establishing an integrated national healthcare company with critical mass and mitigated its risk via different business units operating in 7 provinces. Revenue growth has been achieved through acquisitive and organic growth in the first half of 2012 and this revenue expansion is expected to continue in the coming quarters. The Company now has a national network and platform to focus on driving synergies across its various operations. The Company's focus for the balance of 2012 will be to continue developing leverage and cross-selling opportunities in order to drive revenue and income growth. Although the Company had an improved EBITDA in the second quarter of 2012 as compared to the first quarter of 2012, the Company believes that further EBITDA growth can be achieved within its core operations over the next four quarters and beyond through targeted revenue and income growth projects and operational efficiencies.
This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Adjusted EBITDA per share, Adjusted EBITDA % and Adjusted EBITDA per share with consideration to escrowed shares. 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 depreciation and amortization, interest expense, change in fair value of derivative financial instruments, loss on disposal of property and equipment, stock based compensation and income taxes. Adjusted EBITDA is defined as EBITDA before transaction and restructuring costs related to acquisitions and changes in the fair value of the contingent consideration liability recognized in the statement of income. Adjusted EBITDA % is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA per share is defined as Adjusted EBITDA divided by the weighted outstanding shares on either a basic or diluted basis. The Company 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.
In giving consideration to the agreement to cancel 40,000,000 LifeMark escrowed shares, on page 17 of the Company's MD&A, the Company has calculated Adjusted EBITDA per share including escrowed shares. The Company believes that this is a useful financial metric as it assists stakeholders to assess the impact on their value per share with consideration to the shares that will be cancelled subsequent to June 30, 2012.
Reconciliation of Non-IFRS Measures
EBITDA1 and Adjusted EBITDA1
|Three months ended June 30,||Six months ended June 30,|
|Depreciation and amortization||6,319||587||12,552||1,035|
|Change in fair value of derivative financial instruments||(5)||-||(157)||-|
|Loss on disposal of property and equipment||-||-||44||-|
|Transaction and restructuring costs||2,454||2,734||4,781||3,681|
|Change in fair value of contingent consideration liability||(44,993)||(14,751)||(43,591)||(8,246)|
|Basic weighted average number of shares||112,370||80,525||109,123||74,298|
|Adjusted EBITDA1 per share (basic)||$ 0.11||$ 0.04||$ 0.22||$ 0.07|
|Fully diluted weighted average number of shares||126,288||102,746||131,505||95,388|
|Adjusted EBITDA1 per share (diluted)||$ 0.09||$ 0.03||$ 0.18||$ 0.06|
The effect of the cancellation of the LifeMark escrowed shares on Adjusted EBITDA per share including escrowed shares would be as follows:
|Caption|| Common shares
| Common shares after
cancellation of LifeMark
|Total outstanding and escrowed shares (in 000s)||181,953||181,953|
|Cancellation of LifeMark escrowed shares (in 000s)||-||(40,000)|
|Adjusted outstanding and escrowed shares (in 000s) 1||181,953||141,953||22.0%|
|Year to Date Adjusted EBITDA||24,174||24,174|
|Adjusted EBITDA per share including escrowed shares1||$0.13||$0.17||30.8%|
Centric Health will host a conference call, including a slide presentation, to discuss its second quarter 2012 financial results and provide a corporate update tomorrow, Wednesday, August 15, 2012, 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/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. 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 22, 2012 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 10979353.
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/events-presentations.php).
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 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.ca and 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.
SOURCE: Centric Health Corporation
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