Centric Health Reports Third Quarter 2012 Financial Results
TORONTO, Nov. 13, 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 third quarter ended September 30, 2012.
Financial and Operating Highlights for the Third Quarter and Year to Date 2012
-- Revenue increased by 60% to $107.4 million for the third quarter and by 163% to $325.7 million for the year to date from the prior year periods, the result of acquisitions and organic growth; -- Adjusted EBITDA(1) increased to $33.2 million for the year to date from $15.0 million for the prior year period due to acquisitions, cost containment initiatives and organic growth; -- Adjusted EBITDA(1) decreased to $9.0 million for third quarter from $9.7 million for the prior year period due to the impact of regulatory changes in the assessments segment ($0.9 million), increased corporate overhead costs ($1.0 million) and lower utilization of operating room capacity in the surgical segment ($0.8 million); -- Generated $3.4 million in positive cash flow from operations for the third quarter as a result of the Company's continued focus on cash management; -- Completed bought deal offering of convertible unsecured subordinated notes generating net proceeds of $25.9 million, including the over-allotment option; -- Appointed David Cutler as President, Chief Executive Officer and a member of the Board of Directors of the Company; and, -- The Company continued its focus on cost containment with further integration, rationalization, renegotiation of supplier contracts and the closure and rationalization of certain assessment locations. The Company expects to realize annualized savings of $6.0 million to $7.5 million through these initiatives. Several top line initiatives have commenced to extract synergies and expand operations throughout the Company. "Centric Health has assembled an irreplaceable platform to deliver the highest quality of patient care and create value for all stakeholders," said David Cutler, President and Chief Executive Officer, Centric Health Corporation. "In my new position, one of my top priorities is to establish the systems, structure and processes, and appoint a permanent COO and CIO, to enable us to fully capitalize on the significant opportunities inherent in our business. At the same time, we are executing on strategies across our organization to drive long-term growth, with particular emphasis on our bundled services offering to seniors care homes and multiple initiatives to leverage the excess capacity at our Surgical and Medical Centres. We are making strong initial progress, having recently signed several new bundled services contracts and launched our first surgical Centres of Excellence, and expect to realize meaningful contributions next year." "Despite the softer quarter emphasized by seasonality, the Company expects to yield meaningful improvements in financial performance in future quarters through operational efficiencies, top line initiatives and rationalization and cost containments effected in 2012," said Peter Walkey, Chief Financial Officer, Centric Health Corporation. "Our continued focus on the integration of our acquired business has resulted in a meaningful decrease in corporate office expenses as a proportion of revenue so far in 2012. In addition, we generated positive cash flow from operations of $3.4 million, the result of our cash flow management efforts." ________________________________ (1)Defined and calculated in Reconciliation of Non-IFRS Measures FINANCIAL RESULTS (All amounts below are in thousands except per share, shares outstanding, and percentage data) Selected Financial Information Three months ended Nine months ended September 30, September 30, 2012 2011 2012 2011 $ $ $ $ Revenue 107,358 67,096 325,734 123,727 Income from operations 2,273 8,428 13,895 12,809 % of revenue 2.1% 12.6% 4.3% 10.4% EBITDA(1) 6,827 48,190 69,870 58,159 Adjusted EBITDA(1) 9,008 9,689 33,241 15,093 Adjusted EBITDA(1 )margin 8.4% 14.4% 10.2% 12.2% Net (loss) income (6,273) 38,889 31,442 43,486 Per share - basic ($) $ (0.05) $ 0.47 $ 0.28 $ 0.56 Per share - diluted ($) $ (0.05) $ 0.37 $ 0.24 $ 0.45 Weighted average shares outstanding 116,856 83,156 111,714 77,285 Shares outstanding Sept. 30 121,318 84,433 121,318 84,433 Consolidated Results Consolidated revenue for the third quarter of 2012 increased by 60% to $107.4 million from $67.1 million for the comparable period of 2011. The increase is primarily the result of several notable acquisitions, as well as organic growth. Adjusted EBITDA(1), which excludes transaction and restructuring costs and the non-cash change in the fair value of the contingent consideration liability, for the third quarter of 2012 was $9.0 million compared with $9.7 million for the comparable period of 2011. The change is primarily due to the impact of regulatory changes in the assessments segment ($0.9 million), increased corporate overhead costs associated with the sizable Classic Care and Motion acquisitions ($1.0 million) and lower utilization of operating room capacity in the surgical segment ($0.8 million). Adjusted EBITDA(1 )margin for the third quarter of 2012 was 8.4% compared with 14.4% for the comparable period of 2011. Consolidated revenue and Adjusted EBITDA(1) for the third quarter of 2012 decreased from $114.1 million and $12.5 million, respectively, in the second quarter of 2012, primarily due to seasonality at certain of the Company's operations, including fewer physiotherapy treatments as patients take more personal vacation over the summer months and certain surgical centres being either closed or having fewer procedures due to surgeon vacations. Consolidated revenue for the first nine months of 2012 increased by 163% to $325.7 million from $123.7 million for the comparable period of 2011. Adjusted EBITDA(1) for the first nine months of 2012 increased by 120% to $33.2 million from $15.1 million for the comparable period of 2011. Adjusted EBITDA(1) margin for the first nine months of 2012 was 10.2% compared with 12.2% for the comparable period of 2011. The lower margins are a result of the acquisitions of Motion Specialties and Classic Care, which generate lower margins as compared to the Company's legacy operations. Segment Results Three months ended September 30, Revenue Adjusted EBITDA (1) 2012 2011 2012 2011 $ $ $ % $ % Physiotherapy 42,210 40,479 5,497 13.0 5,660 14.0 Pharmacy 22,429 3,883 2,357 10.5 1,074 27.7 Retail &Home 26,176 2,553 1,646 6.3 771 30.2 Medical Equipment Assessments 8,712 12,606 1,624 18.6 2,495 19.8 Surgical & 7,831 7,575 340 4.3 1,125 14.9 Medical Centres Corporate - - (2,456) - (1,436) - Total $ 107,358 $ 67,096 $ 9,008 8.4% $ 9,689 14.4% Nine months ended September 30, Revenue Adjusted EBITDA (1) 2012 2011 2012 2011 $ $ $ % $ % Physiotherapy 132,898 71,737 19,756 14.9 9,452 13.2 Pharmacy* 69,109 6,018 7,312 10.6 1,108 18.4 Retail &Home 69,643 3,259 5,525 7.9 1,081 33.2 Medical Equipment* Assessments 28,380 24,500 4,976 17.5 5,320 21.7 Surgical & 25,704 18,213 2,608 10.1 2,544 14.0 Medical Centres* Corporate - - (6,936) - (4,412) - Total $ 325,724 $ 123,727 $ 10.2 $ 15,093 12.2 33,241 * - Adjusted EBITDA margins reflect acquisitions since the third quarter of 2011 which generate lower margins than legacy operations. The year-over-year decrease in Adjusted EBITDA(1) for the Physiotherapy segment for the third quarter of 2012 is primarily the result of a higher than anticipated decline in the number of physiotherapy patients treated over the summer months. The third quarter is typically a softer quarter for the Company's physiotherapy clinics as patients tend to have fewer treatments due to their personal vacation schedules. The year-over-year decrease in Adjusted EBITDA(1) margin for the Retail and Home Medical Equipment segment for the third quarter of 2012 is attributable to the acquisition during the first quarter of 2012 of Motion Specialties, which generates lower margins than the MEDIchair franchise royalty fees. With combined purchasing power benefits and certain rationalization initiatives, Adjusted EBITDA(1) margin is expected to improve in the future. Revenue and Adjusted EBITDA(1) for the Assessments segment for the third quarter of 2012 continued to be adversely affected by legislative changes surrounding automobile insurance coverage. The Company continues to right-size the Assessments operations to improve its margins and during the third quarter consolidated its Ontario operations into fewer assessments centres. The Assessments segment continues to generate positive income and cash flows. The Company has been successful in continuing to win RFPs for the provision of assessment services, and is well positioned competitively to increase its market share based on its size and national presence. The year-over-year decrease in Adjusted EBITDA(1) for the Surgical and Medical Centres segment for the third quarter of 2012 is mainly due to low utilization of operating room capacity as a result of renovations, closures, and surgeon vacations. The Company is pursuing innovative strategies including the launch of the Company's first surgical Centre of Excellence in October 2012 in orthopedic surgery. The Company expects to launch further specialized surgical Centres of Excellence over the coming year which will partner the Company with some of Canada's leading surgeons. The Company also has long-term initiatives to launch triage assessment programs, new treatment technologies, an extended patient choice network and transitional care maternity beds. SHARES OUTSTANDING As at both September 30, 2012 and the date of this news release, the Company has total shares outstanding of 144,549,097, of which 23,231,081 are held in escrow pending acquired businesses achieving performance targets or vesting milestones. Consequently, there are 121,318,016 shares outstanding excluding restricted shares and shares held in escrow as contingent consideration for the vendors of acquired businesses. The number of options outstanding is 11,690,500, the number of warrants outstanding is 28,576,590, and the number of restricted share units outstanding is 615,000. Should all outstanding options and warrants that were exercisable at September 30, 2012 be exercised, the Company would receive proceeds of $16,942. LIQUIDITY AND CAPITAL RESOURCES The Company was in compliance with its financial performance covenants at September 30, 2012. The Company anticipates that based on its expected fourth quarter operating results, its 2013 operating budget and working capital initiatives, it will generate sufficient cash flows to meet its financial performance covenants and other obligations as they come due. OUTLOOK In addition to its acquisition strategy, the Company is focused on organic growth initiatives, including cross-selling activities and new service introductions across its business segments. Many of these organic growth initiatives are in their infancy stages and the benefits are not expected to be realized until 2013 due to long sales cycles. One of the largest and most advanced opportunities is bundled service contracts to long term care and retirement homes. The Company has recently signed several such contracts and further contracts are expected to be signed in the coming quarters. In addition, utilization within the Surgical and Medical Centres remains low and presents a high-margin growth opportunity as operations already are above the break-even point and the Company will leverage off its already fixed asset cost base. The Company has multiple initiatives to capitalize on this excess capacity and recently launched the first of many planned surgical Centres of Excellence (COEs) and plans to launch additional COEs in 2013 and beyond. Other initiatives include increasing retail sales, rolling out orthotics and expanding massage therapy within the Physiotherapy network. With the completion of over 15 acquisitions over the past two years, the Company is also focused on integration and rationalization to bring these businesses together under a common strategy. Near-term priorities in this regard include the appointment of a permanent Chief Operating Officer and Chief Information Officer. In addition, the Company continues to focus on operational efficiency to improve margins and has undertaken several special projects to achieve economies of scale and rationalization benefits, which it expects to continue to realize in the fourth quarter of 2012 and into 2013. (1)Non-IFRS Measures 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, change in fair value of derivative financial instruments, loss on disposal of property and equipment, stock based compensation, amortization of lease incentives, and income tax (recovery) expense. Adjusted EBITDA is defined as EBITDA before transaction and restructuring costs 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 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 September 30, September 30, 2012 2011 2012 2011 $ $ $ $ Net (loss) income (6,273) 38,889 31,442 43,486 Depreciation 6,563 1,270 19,115 2,305 and amortization Interest 7,134 5,018 17,788 7,489 expense Change in (261) 1,580 (418) 1,485 fair value of derivative financial instruments Loss on - - 44 - disposal of property and equipment Stock-based 1,266 817 2,952 1,794 compensation expense Amortization 172 (9) 231 (21) of lease incentives Income tax (1,774) 625 (1,284) 1,621 (recovery) expense EBITDA(1) 6,827 48,190 68,870 58,159 Transaction 3,861 873 8,642 4,554 and restructuring costs Change in (1,680) (39,374) (45,271) (47,620) fair value of contingent consideration liability Adjusted EBITDA 9,008 9,689 33,241 15,093 (1) Basic weighted 116,856 83,156 111,714 77,285 average number of shares Adjusted EBITDA $0.08 $0.12 $ 0.30 $ 0.20 (1) per share (basic) Fully diluted 130,414 105,053 129,635 97,531 weighted average number of shares Adjusted EBITDA $0.07 $0.09 $ 0.26 $ 0.15 (1) per share (diluted) CONFERENCE CALL Centric Health will host a conference call, including a slide presentation, to discuss its third quarter 2012 financial results today, Tuesday, November 13, 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 Tuesday, November 20, 2012 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 68298951. 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. Peter Walkey Chief Financial Officer Centric Health 416-619-9417 firstname.lastname@example.org Lawrence Chamberlain Investor Relations The Equicom Group 416-815-0700 ext. 257 email@example.com SOURCE: Centric Health Corporation To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/November2012/13/c7307.html CO: Centric Health Corporation ST: Ontario NI: HEA ERN CONF -0- Nov/13/2012 12:00 GMT