- Quarter Highlighted by Year-Over-Year Growth in Revenue and Adjusted EBITDA and Sixth Consecutive Quarter of Positive Cash Flow from Operations -
TORONTO, Nov. 5, 2013 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), Canada's leading diversified healthcare services company, today announced financial results for the third quarter and nine-month period ended September 30, 2013.
Financial and Operating Highlights for the Third Quarter
- Revenue increased to $110.6 million from $107.4 million for the corresponding period in 2012, primarily the result of organic growth initiatives;
- Adjusted EBITDA1 increased to $10.4 million from $9.0 million for the corresponding period in 2012;
- Reported sixth consecutive quarter of positive cash flow from operations as a result of the Company's continued focus on cash management and improved operational income;
- Launched multiple initiatives to drive capacity utilization in the Surgical and Medical Centre segment:
- Established a five-year strategic alliance with Vancouver Imaging ("VI"), a premier sub-specialty Diagnostic and Interventional Radiology Group based in British Columbia, under which VI will provide imaging services at the Company's state-of-the-art False Creek Healthcare Centre and the two parties will jointly explore other imaging opportunities across Canada;
- Established two specialized Centres of Excellence (COEs) at False Creek Healthcare Centre for Sinus and Nasal and Women's Urology;
- Launched an Extended Patient Choice Network (EPCN), a Canadian solution that offers patients out-of-province surgical choices for early intervention and treatment through Centric Health's network of surgical centres across Canada; and
- Launched a Triage Assessment Program (TAP) at the Rouge Valley Health System in Toronto, Ontario, which offers patients on waiting lists a multi-disciplinary assessment and non-surgical treatment alternatives.
Financial and Operating Highlights Subsequent to the Third Quarter
- Renegotiated a $5 million related party convertible debt arrangement whereby the convertible debt now has a maturity date of April 30, 2018, preserving cash flow and providing additional financial flexibility.
"Our results for the third quarter - our best third quarter ever for both revenue and adjusted EBITDA - continue to demonstrate our ability to generate organic growth via our one-of-a-kind healthcare services platform," said David Cutler, President and Chief Executive Officer, Centric Health Corporation. "For the second consecutive quarter, we generated meaningful year-over-year increases in revenue and adjusted EBITDA as we begin to realize the contributions of the many growth initiatives across our business. We achieved these results despite the impact of regulatory and funding changes to seniors' physiotherapy services in Ontario that began in August and are encouraged by the initial success of our strategies to mitigate this impact. We are also encouraged by the initial success of the innovative programs we launched in the Surgical and Medical Centre segment last quarter. We are seeing the results of our operational initiatives and contribution of our new senior management team flow through to our financial results. We look forward to building on this momentum in the coming quarters."
Daniel Gagnon, Chief Financial Officer, Centric Health Corporation commented, "We continue to make steady, meaningful progress on the integration and optimization of the platform, management of our working capital and driving improved cash flow, which contributed to our sixth consecutive quarter of positive cash flow from operations. Continuing to strengthen our balance sheet remains a top priority and the recent renegotiation of $5 million in related party convertible debt, which extended the maturity date from this year to April 2018, is another step in that direction, both preserving cash flow and providing additional financial flexibility."
(All amounts below are in thousands except per share, shares outstanding, and percentage data)
Selected Financial Information
|Three months ended September 30,||Nine months ended September 30,|
|(Loss) income from operations||(288)||(2,854)||8,428||(2,538)||2,257||12,809|
| (Loss) income before interest
expense and income taxes
|Per share - basic ($)||0.08||0.08||$0.12||0.26||0.30||$0.20|
|Per share - diluted ($)||0.06||0.07||$0.09||0.18||0.26||$0.15|
|Net (loss) income||(39,256) 2||(6,273)||38,889||(47,244) 2||31,442||43,486|
|Per share ($) - basic||(0.30)||(0.05)||$0.47||(0.37)||0.28||$0.56|
|Per share ($) - diluted||(0.30)||(0.05)||$0.37||(0.37)||0.24||$0.45|
|Cash flow from operations||4,895||3,402||9,237||11,555||501||6,977|
| Weighted average shares
outstanding (basic) 3
|Shares outstanding Sept. 30 3||132,558||121,318||84,433||132,558||121,318||84,433|
1See "Non-IFRS Measures" below.
2Includes non-cash charges for an impairment of goodwill of $26,000 related primarily to regulatory changes in Ontario for seniors' rehabilitative services, and for the Company's retail and home medical segment. In addition, an impairment of $15,007 related to OHIP billing privileges and trademarks, which were impacted by the regulatory changes in Ontario for seniors' physiotherapy services.
3Excludes contingent escrowed shares and restricted shares.
Consolidated revenue for the three-month period ended September 30, 2013 increased by 3.0% to $110.6 million from $107.4 million for the third quarter of 2012. This increase was primarily attributable to:
- Organic Growth - Same store revenue growth of $5.4 million in most segments except Physiotherapy.
- Working days - Increased revenue of $1.3 million as a result of one additional working day in the third quarter of 2013.
Offsetting these increases was a decrease of $3.5 million as a result of the funding changes for physiotherapy for seniors implemented by the government of Ontario in August 2013.
The Company's revenue for the nine-month period ended September 30, 2013, increased by 6.3% to $346.1 million from $325.7 million for the first nine months of 2012. This increase was primarily attributable to:
- Organic Growth - Same store revenue growth of $15.9 million in the Physiotherapy, Pharmacy and Retail and Home Medical Equipment segments; and
- Acquisitions - The acquisition of Motion Specialties in February 2012, Physiotherapy clinics in the first quarter of 2012 and Retail and Home Medical Equipment stores in the fourth quarter of 2012 and the first quarter of 2013, collectively, increased revenue by $13.9 million.
Offsetting these increases were:
- Pharmacy - A decrease in revenue of $4.1 million as a result of certain high volume drugs becoming generic;
- Physiotherapy - A decrease of $3.5 million as a result of the funding changes for rehabilitation services for seniors implemented by the government of Ontario in August 2013; and
- Surgical and Medical Centres - A decrease of $3.4 million due to management changes at the Sarnia location.
Adjusted EBITDA1, which excludes transaction and restructuring costs, the change in fair value of derivative financial instruments, non-cash impairments and the non-cash change in the fair value of the contingent consideration liability, for the third quarter of 2013 increased to $10.4 million from $9.0 million for the corresponding period in 2012. The increase was primarily the result of organic growth initiatives in all segments except for Physiotherapy, where the impact of regulatory changes imposed in August 2013 by the Ontario Ministry of Health on rehabilitative services was felt.
Adjusted EBITDA1 margin for the third quarter of 2013 increased to 9.4% from 8.4% for the corresponding period in 2012.
Adjusted EBITDA1 for the nine-month period ended September 30, 2013 was $33.3 million compared with $33.2 million for corresponding period in 2012. The Company's Adjusted EBITDA1 would have increased on a year-over-year basis if not for the impact of the regulatory changes in Ontario for seniors' physiotherapy services. Adjusted EBITDA1 margin for the nine-month period decreased to 9.6% from 10.2% for the corresponding period in 2012.
|Three months ended September 30,|
|Retail & Home Medical Equipment||26,830||26,176||1,097||4.1||1,646||6.3|
|Surgical & Medical Centres||7,253||7,831||434||6.0||340||4.3|
|Total||$ 110,614||$ 107,358||$ 10,377||9.4||$ 9,008||8.4|
|Nine months ended September 30,|
|Retail & Home Medical Equipment||85,405||69,643||4,190||4.9||5,525||7.9|
|Surgical & Medical Centres||22,813||25,704||1,343||5.9||2,608||10.1|
|Total||$ 346,079||$ 325,734||$ 33,333||9.6||$ 33,241||10.2|
As at September 30, 2013 and the date of this press release (November 5, 2013), the Company had total shares outstanding of 151,135,047 and 151,920,762 respectively. The outstanding shares include 18,557,470 shares which are restricted or held in escrow and will be released to certain vendors of acquired businesses based on the achievement of certain performance targets. Accordingly, for financial reporting purposes, the Company reported 132,577,577 common shares outstanding as at September 30, 2013 and 121,389,445 shares outstanding at December 31, 2012. The number of options outstanding is 8,204,500 at September 30, 2013 and 8,196,000 at November 5, 2013. The number of restricted share units outstanding is 1,601,046 at September 30, 2013 and November 5, 2013. The number of warrants outstanding is 33,078,390 at September 30, 2013 and 30,175,574 at November 5, 2013. Should all outstanding options and warrants that were exercisable at September 30, 2013 be exercised, the Company would receive proceeds of $26,241.
During the nine month period ended September 30, 2013, the Company repaid $188,253 for its Term Loan and original Revolving Facility from the net proceeds of $194,059 which were received from the issuance of second lien senior secured notes in April 2013. For the nine month period ended September 30, 2013, the Company borrowed an additional $16,500 from its restated and amended Revolving Facility. The Company utilized $30,000 of proceeds from the second lien senior secured notes and the restated and amended Revolving Facility to redeem preferred partnership units whose interest rate was higher than the Company's senior debt facilities. The Company paid $1,733 and $11,313 in cash interest on its borrowings for the third quarter and nine-month period ended September 30, 2013.
Subsequent to the end of the third quarter, the Company renegotiated its $5 million convertible debt arrangement with Jamon Investments LLC ("Jamon"), a related party, whereby this convertible debt will now have a maturity date of November 9, 2018. This renegotiation preserves $5 million in cash flow which otherwise would have been payable to Jamon in the fourth quarter of 2013.
Centric Health remains well positioned to capitalize on its unparalleled Canadian national healthcare platform. Under the leadership of its President and Chief Executive Officer, David Cutler, appointed September 2012, and supported by the appointments of Daniel Gagnon as Chief Financial Officer, Chris Dennis as Chief Operating Officer and Jim Black as Chief Information Officer in the first half of 2013, the Company continues to steadily progress in the optimization and integration of the platform and the generation of organic growth, as evidenced by two consecutive quarters of meaningful year-over-year growth in revenue and adjusted EBITDA1, including record results for the second quarter of 2013, followed by the Company's best ever third quarter results.
The Company's principal focus in 2013 continues to be on organic growth initiatives and commenced many such initiatives in 2013. Many of these initiatives have long sales cycles and, as such, the Company does not expect to begin to realize the benefits until 2014 and beyond. In the third quarter of 2013, the Company launched several programs intended to increase capacity utilization in its Surgical and Medical Centre segment, including entering into a strategic alliance with Vancouver Imaging, launching an Extended Patient Choice Network and establishing surgical Centres of Excellence in nasal and sinus and women's urology. Also during the quarter, the Company launched its first Triage Assessment Program at the Rouge Valley hospital in Toronto.
Cross-selling initiatives are another component of organic growth. These include Bundled Service contracts, which leverage the Company's platform to offer bundled Physiotherapy, Pharmacy and Home Medical Equipment services to Long-Term Care and Retirement Homes. The Company signed new bundled services contracts in 2013 and the Company and is continuing its focus in this area. Other cross-selling initiatives include expanding orthotic sales in Physiotherapy clinics and Motion Specialties and MEDIchair stores and promoting rehabilitative services to surgical patients to expedite recovery. The Company also continues to assess potential strategic acquisitions that will bolster its existing national platform, however any such acquisitions must provide an appropriate return relative to any debt which the Company incurs to complete the acquisition and the return, including cross platform pollination benefits, is expected to be in excess of the Company's risk adjusted weighted average cost of capital.
The Company has a particular focus on driving enhanced margins from its Retail and Home Medical Equipment segment. Motion Specialties reduced head count in the second quarter of 2013 through attrition and restructuring to better align resources and has invested in revenue generating personnel for key growth initiatives, the benefits of which are expected to be realized beginning in 2014. Motion Specialties is undertaking a continuous improvement project in the fourth quarter of 2013 and into 2014 in order to standardize and streamline business processes, which is expected to drive operational improvements.
In the Physiotherapy segment, regulatory and funding changes to seniors' physiotherapy services implemented by the Ontario government in August 2013 will have an estimated Adjusted EBITDA1 impact of $3.0 to $4.0 million in fiscal 2013. The Company has taken proactive steps through existing and new revenue streams to mitigate the impact to its business resulting from changes to the funding model. The vast majority of the Company's existing long-term care homes have verbally committed or contractually agreed to continue outsourcing their physiotherapy services with Centric Health under the new funding model. In addition, the Company is pursuing opportunities through private homecare, private pay services of rehabilitation and other ancillary services to retirement homes, and publicly funded physiotherapy services through Community Care Access Centres. It is expected that the average number of annual treatments per resident will be significantly reduced but reimbursed at a higher tariff. Other re-imbursement alternatives are being explored. The Company has implemented a cost containment program to support adjusted EBITDA1 margins.
Strengthening the Company's balance sheet remains a strategic priority. In the first nine months of the year, the Company completed a $200 million second lien senior secured notes offering, renegotiated its Revolving Credit Facility to more favourable terms and repaid $30 million of its $65.5 million in preferred partnership units, which, in aggregate, is expected to generate more than $10 million in free cash flow on an annualized basis. Subsequent to the end of the third quarter, the Company renegotiated $5 million in related-party debt, extending the maturity date to April 2018. The renegotiation not only preserves cash flow in the short term but also provides additional financial flexibility as the Company has no debt principal repayment obligations until June 2015, when its Revolving Credit Facility with a balance of $16,500 as at September 30, 2013, is due. Moreover, with the exception of the recently renegotiated related party debt, all of the Company's convertible debt offerings can be settled in common shares at the discretion of the Company. The Company anticipates that, based on meeting its 2013 and 2014 operating budget, it will generate sufficient cash flow from operations in the remainder of 2013 and in 2014 to meet its obligations as they come due.
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 depreciation and amortization, interest expense, amortization of lease incentives, and income tax 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) loss on disposal of property and equipment 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 both a basic and diluted basis. The Company believes that Adjusted EBITDA is a meaningful financial metric as it assists in the ability to measure cash generated from operations. EBITDA and Adjusted EBITDA are not recognized measures under IFRS.
Reconciliation of Non-IFRS Measures
| Three months ended
| Nine months ended
|Net (loss) income||(39,256)||(6,273)||(47,244)||31,442|
|Depreciation and amortization||8,673||6,563||26,112||19,115|
|Amortization of lease incentives||217||172||354||231|
|Income tax recovery||(5,804)||(1,774)||(9,101)||(1,284)|
|Transaction and restructuring costs||1,051||3,861||3,464||8,642|
|Change in fair value of contingent consideration liability||(2,982)||(1,680)||(9,974)||(45,271)|
|Stock-based compensation expense||724||1,266||5,946||2,952|
|Change in fair value of derivative financial instruments||(1,656)||(261)||(5,115)||(418)|
|(Gain) loss on disposal of property and equipment||-||-||(5)||44|
|Basic weighted average number of shares||132,246||116,856||127,668||111,714|
|Adjusted EBITDA per share (basic)||$0.08||$0.08||$0.26||$0.30|
|Fully diluted weighted average number of shares||184,955||130,414||181,783||129,635|
|Adjusted EBITDA per share (diluted)||$0.06||$0.07||$0.18||$0.26|
Centric Health will host a conference call, including a slide presentation, to discuss its third quarter 2013 financial results tomorrow, Wednesday, November 6, 2013, 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, November 13, 2013 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 89081731.
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 is Canada's leading diversified healthcare company and dedicated to building on the strengths of Canada's healthcare system through innovative solutions. Through a series of strategic acquisitions, the Company has amassed a national platform for delivery of a broad range of services through more than 3,600 staff and consultants at almost 1,000 locations and has preferred provider contracts with over 50 corporations, government agencies and employers, and over 600 contracts with Long Term Care and Retirement Homes. This platform provides compelling growth prospects through synergies, rationalization and cross-pollination opportunities to create meaningful value for all stakeholders. Above all, Centric Health has an unwavering commitment to employ the highest service and ethical standards and deliver a superior quality of care with the best possible clinical outcomes. For more information, visit www.centrichealth.ca.
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:
Chief Financial Officer
416-815-0700 ext. 257