TORONTO, Aug. 11, 2011 /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, 2011.

"By any measure, the acquisition of LifeMark was a significant milestone for the Company and provides us with a critical mass to roll out the broader strategy," said Dr. Jack Shevel, Executive Chairman of Centric Health. "In addition to focusing on the successful integration of acquisitions, management has performed well in operating the core businesses while continuing to pursue opportunities."

"These results were positively impacted by the acquisitions of CAR, SSI, and Centric Pharmacy for the six-month period, as well as LifeMark for 22 days since closing on June 9, 2011," said Peter Walkey, Chief Financial Officer of Centric Health. "Excluding these acquisitions, the Company still grew organically due largely to solid growth within the Eldercare division which was offset by a decline in the Medical Assessments division following regulatory reforms in the industry."

"We have made progress in developing and initiating our integration plan with LifeMark with the expectation that the real benefits thereof will materialize over the next six to twelve months," said Dan Carriere, Chief Executive Officer. "One such initiative includes the identification of a new corporate office to combine both organizations that will yield rationalization and integration benefits."

Financial and Operating Highlights
During and subsequent to the second quarter of 2011:

• The Company completed its acquisition of LifeMark Health LP ("LifeMark") adding to its portfolio of physiotherapy, assessment and surgical clinics across Canada and simultaneously arranged senior debt credit facilities with a leading bank syndicate for future expansion.
• Revenue increased 111% to $33.6 million, as compared to $15.9 million in the comparable quarter of 2010.
• Gross profit increased by 137% to $14.9 million, as compared to $6.3 million in the comparable quarter of 2010.
• Adjusted EBITDA¹ increased 32% to $3.2 million, as compared to $2.4 million in the comparable quarter of 2010.
• Announced the acquisitions of Blue Water Surgical, Dedicated Pharmacies, and 75% of the interests in London Scoping Centre and Performance Orthotics during and subsequent to the reporting period.
• Entered into a new Consulting Agreement with Global Healthcare Investments & Solutions Inc. as well as concluded an agreement terminating the arrangement between the Company, GHIS Capital Inc. and Alegro Health Partners.

All amounts below are in thousands

Financial Results

Selected Financial Information

NM - Not meaningful

EBITDA and Adjusted EBITDA

¹Non-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 interest expense, income taxes, amortization and stock-based compensation expense.  Adjusted EBITDA is defined as EBITDA before transaction costs related to acquisitions and changes in fair value of the contingent consideration liability recognized on the statement of income and comprehensive income.  Management 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.

The Company's consolidated revenue for the three months ended June 30, 2011 increased by 111% or $17,669 to $33,596 over the comparable period in the prior year.  The increase was due to growth from acquisitions.  Revenue growth from the current year acquisitions of LifeMark was $10,975, and Surgical Spaces Inc. ("SSI") was $4,803, and the acquisitions of the prior year from Community Advantage Rehabilitation ("CAR") of $1,186 and Pharmacy of $1,057.  The balance of the change in revenue is a net decrease of $352 from existing businesses.

Revenue for the six months ended June 30, 2011 increased by 91% or $26,964 to $56,631.  This increase was primarily due to contribution from the LifeMark acquisition as stated above, revenue from SSI of $9,593, revenue from the acquisitions completed in 2010 of $2,437 and $2,135 from CAR and Centric Pharmacy, respectively, and $3,992 from the Active Eldercare division.  Revenue from the Centric Disability Management ("CDM") business decreased $2,278 from the prior year attributable to the higher referral volume and associated revenues in the prior year, due to the implementation of regulatory reforms enacted in September 2010.  In addition, revenue was lower in the period due to changes to the case-mix and effects of price caps imposed by such reforms.  Management has worked diligently to make cost-effective changes in the division to maintain profit margins.  The Company is aggressively pursuing revenue generating opportunities with auto insurers and workers compensation boards.

Revenue for Medical Assessments and Rehabilitation was $15,083, an increase of 82% over the same quarter in the prior year.  Revenue growth is due to the acquired businesses of LifeMark.  The existing business of CDM has had negative growth in the quarter compared to last year which is reflective of the impact of regulatory reform on this segment.  The post-regulatory reform case-mix has also hindered growth in this segment.  EBITDA compared to the first quarter of 2011 of $1,055 has improved due to the inclusion of the LifeMark assessment business which contributed $1,225 of EBITDA.  Management has worked diligently to make cost-effective changes in the division to maintain profit margin, which has improved to 49% compared to the same quarter last year of 46% and from the first quarter in 2011 of 42%, and is aggressively pursuing revenue-generating opportunities with auto insurers and workers compensation boards. For the six months ended June 30, 2011, revenue increased 48% to $21,968.  Performance in the six month period shows the negative growth, excluding acquisitions, in this segment with EBITDA decreasing from the same period in the prior year.

Revenue for physiotherapy services rendered through our Eldercare and Homecare divisions was $11,253 for the three month period ended June 30, 2011, a 54% increase of the same period in the prior year.  This growth is attributable to the inclusion of the homecare business, the addition of LifeMark's eldercare division contributed $825 in revenue for the period from June 9, 2011 through June 30, 2011, as well as organic growth in the eldercare division.  For the six months ended June 30, 2011, revenue increased 52% to $21,184. Eldercare added 4,287 new beds in its existing business in the six month period ended June 30, 2011, which has contributed growth of $1,853.  The eldercare division has also made efforts to streamline its cost structure which has helped improve its gross profit margin.  The beds added from the LifeMark acquisition are 12,174 beds serviced in 115 homes.

Revenue for Surgical and Medical services in the period was $5,498, a significant increase from the prior year resulting from the SSI acquisition effective January 1, 2011.  For the three months ended June 30, 2011, SSI contributed $4,803 and CSS contributed $298 to the increased surgical and medical revenue.  With the addition of SSI and CSS in 2011, the increase from the comparative period is primarily due to the addition of these businesses in the period.  For the six month period ending June 30, 2011, revenue increased by $9,958 to $10,638.

Pharmacy revenue was $1,057 in the three months ended June 30, 2011.  As the division was established in the fourth quarter of 2010, there is no comparative data from the prior year.  The Pharmacy division did not perform as expected due to the vacancies in the facility where one of the pharmacies operates and the loss of a supply contract for a high dollar ophthalmological drug. The Pharmacy continues to pursue revenue generating and diversification strategies to improve its performance.  The number of prescriptions filled month-to-month has improved since the beginning of 2011.

Included in the LifeMark acquisition is the business of MediChair.  MediChair is a franchise company with retail outlets across Canada.  MediChair specializes in the sales of various wheelchairs and accessibility equipment for the home.  The results of MediChair include corporate-owned stores as well as any royalties earned from franchised stores.  As LifeMark was acquired on June 9, 2011, the stated results are from the 22 days from June 9, 2011 to June 30, 2011.

Cost of services and supplies for the three months ended June 30, 2011 was $18,712, which was an increase of $9,078 compared to the prior period driven by the increase in revenues and acquired businesses.  For the three months ended June 30, 2011, gross profit, expressed as revenue less cost of services and supplies, was $14,884 or 44% of revenues.  Compared to the same period of the prior year, gross profit was $6,293 or 40% of revenues.  The increase in gross profit of $8,591 was driven by acquisitions, the increased revenues in the eldercare division and the performance from acquired businesses of LifeMark and SSI.  As a percentage of revenue, gross profit improved from the same period in the prior year and from the prior quarter in the current year.  This increase is due to the new acquisitions, the cost structures of SSI and LifeMark which have higher gross margins and the mix of revenues from the various segments which has impacted the overall results.

Cost of services and supplies for the six month period ended June 30, 2011 was $32,750, which was an increase of $14,644 over the same period in the prior year.  The increased costs are in line with the acquired businesses during the year.  Gross profit for the six months ended June 30, 2011 was $23,881 or 42% of revenues compared to $11,561 or 39% in the six months ended June 30, 2010.

Operating margin, expressed as gross profit less employee costs and other direct costs, for the three months ended June 30, 2011 increased by $1,501 to $5,142 compared to $3,641 in the prior year.  This increase was largely due to higher revenue, however, operating margin represented as a percentage of revenue dropped to 15% from 23% in the prior year.  This is largely due to the higher cost structure of the acquired businesses at the end of 2010 and SSI in the current year.  In addition, the integration of the LifeMark acquisition is in its early stages and cost savings and rationalization between operations have not been realized at this time.  It is the expectation of management that significant savings can be achieved through implementation of cost-savings initiatives at the operational and corporate levels.

Operating margin for the six months ended June 30, 2011 increased by $2,629 to $8,949 compared to $6,320 in the prior year.  This increase was primarily due to the acquired businesses in 2011; however, operating margin as a percentage of revenue dropped to 16% from 21% for the six month period in the prior year.  This is due to the added cost structures of the acquired businesses.  Management is working towards effective cost savings and rationalization strategies between the acquired businesses and the existing businesses.  These savings will be realized in the next several quarters.

Corporate administrative expenses for the three months ended June 30, 2011 were $1,923 which was $726 higher than the comparative period in the prior year.  This increase resulted primarily from higher compensation costs associated with the hiring of increased administrative staff and CEO of $380.  Included in the increased overhead are additional audit, legal and consulting fees of $106, and other administrative costs of $240 due primarily to the marked increase in corporate and acquisitions activities over the period.  Corporate administrative expenses as a percentage of revenue have dropped to 5.7% from 7.5% for the same period in the prior year.

Corporate administrative expenses for the six months ended June 30, 2011 were $3,533 which was $1,504 higher than the comparative period in the prior year.  Of this amount, $717 relates to additional salary and benefits of additional administrative staff and CEO for the business, higher professional fees of $336 related to audit, legal and consulting fees and an additional $203 related to the GHIS fees earned in the period.  As a percentage of revenue, corporate administrative expenses have remained steady at 6.2% from the prior period.

Stock-based compensation, a non-cash expense, increased by $378, to $562, in the three months ended June 30, 2011.  This expense is largely related to the vesting of options granted from time to time and the amortization of the expense related to the restricted shares issued to the CEO at the end of 2010.  Stock-based compensation for the six months ended June 30, 2011 was $977, an increase of $589 from the same period in the prior year.  The increase is due to restricted shares and stock options being expensed over their vesting periods, the change in amortization policy due to IFRS to graded vesting, and the increased fair value of the stock-based compensation due to the increase in value of the common shares of the Company.

Amortization was higher during the quarter ended June 30, 2011 due to the amortization of the capital assets acquired in the SSI and LifeMark acquisitions.  Amortization for the second quarter was $457 higher than in the same period in the prior year.  Amortization for the six months ended June 30, 2011 was $811 higher than in the same period in the prior year.

At June 30, 2011, the Company was in an overdraft position that is within the swing line limits arranged with its lender.  The decrease in cash is largely due to investing activities related to the acquisition of LifeMark.

During the three month period ended June 30, 2011, option holders exercised 200,000 options to purchase an equivalent number of shares at a weighted average exercise price per share of $0.38.  During the six month period ended June 30, 2011, 612,500 options were exercised to purchase an equivalent number of shares at a weighted average exercise price per share of $0.36.

As at June 30, 2011, the Company had total shares outstanding of 140,445,551 of which 1,100,000 are restricted shares held by the CEO which vest over time as discussed in Note 12 to the Company's 2010 audited consolidated financial statements, 46,875,000 shares are held in escrow pending LifeMark achieving performance targets, and 11,827,956 shares are held in escrow pending SSI achieving performance targets as disclosed in Note 7 to the June 30, 2011 unaudited interim consolidated financial statements.  Accordingly, for financial reporting purposes, the Company reported 80,642,595 common shares outstanding as at June 30, 2011.  As at June 30, 2010, there were 61,140,095 shares outstanding.

As at the date of this report, August 10, 2011, the number of shares outstanding, including restricted and escrowed shares, is 143,970,551; the number of options outstanding is 7,278,000; and, the number of warrants outstanding is 21,998,200.  Included in the shares outstanding are 63,302,956 shares held in escrow, or in trust, and are not freely tradeable.

International Financial Reporting Standards ("IFRS") Impact
The three months ended June 30, 2011, was the Company's second reporting period under IFRS.  As anticipated and disclosed in the fourth quarter of 2010 and the first quarter of 2011, the adoption of IFRS had an impact on the presentation of the Company's 2011 second quarter financial results.  As a result in the second quarter of 2011, from a net income standpoint, the most significant impacts of the transition to IFRS relate to the non-cash gain related to the decrease in fair value of contingent consideration liability and the transaction costs incurred related to business acquisitions.

As expected for a company in its growth stage, transaction costs incurred are directly related to the size of acquisition targets, and have increased year over year leading to a charge of $2,734 in the second quarter of 2011 compared to a charge of $145 in the same period last year. In addition, the Company is required to value the contingent consideration liabilities pursuant to its business combination activities.  As part of the Company's acquisition strategy, such consideration for acquired businesses is often subject to profit performance paid in shares and or warrants of the Company.  Management's valuation method to determine the value of the contingent consideration is largely based on the value of its common shares and the probability of the acquired business achieving targeted performance milestones.  The valuation of contingent consideration on the date the acquisition closes is included in the purchase price of the acquisition.  Subsequently, the contingent consideration is revalued on each reporting date with changes in fair value included in the determination of net income and comprehensive income.  For the three months ended June 30, 2011, the Company recorded a non-cash gain of $15,984 to earnings, reflective of the change in fair value of the contingent consideration related to the purchases of Community Advantage Rehabilitation ("CAR"), Surgical Spaces Inc. ("SSI"), and LifeMark.  This non-cash gain in fair value was largely the result of the decrease in the Company's share price from the date of closing of the LifeMark acquisition on June 9, 2011, to June 30, 2011.

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, surgical and medical centres, homecare, home medical equipment, 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 / www.lifemark.ca / www.medichair.com. 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.