Centric Health 2010 revenue increases 70% to $62.5 million

Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), Canada's leading diversified healthcare services company, today announced financial results for the fourth quarter and year ended December 31, 2010.

"Centric Health made substantial progress in 2010 towards building the foundation for the future growth of the Company," said Dr. Jack Shevel, Chairman of Centric Health Corporation. "We believe the healthcare market is well positioned for continued consolidation to extract efficiencies with innovative solutions. We look forward to increasing our range of services to patients in partnership with healthcare professionals." 

Financial and Operating Highlights

During and subsequent to the year ended December 31, 2010:

• Revenue increased 70% to $62.5 million, as compared to $36.6 million in 2009.
• Net income increased 164% to $4.3 million for the year, as compared to $1.6 million in 2009.
• EBITDA increased by 136% or $4.7 million to $8.2 million, as compared to $3.5 million in 2009. 
• Successfully integrated the operations and businesses of Active Health, which contributed to an improved EBITDA margin of over 13% from 9.5% in the prior year.
• Established its homecare division through the acquisition of Community Advantage Rehabilitation Inc., a company providing services in occupational therapy, physiotherapy, social work and dietetics.
• On October 1, 2010, acquired two pharmacies located on the Southlake Regional Health Centre campus in Newmarket, Ontario.
• On December, 9, 2010, announced the appointment of Daniel Carriere to the position of President and CEO. Mr Carriere brings substantial expertise in healthcare leadership to the Company.
• Subsequent to December 31, 2010, acquired Surgical Spaces Inc., a company operating two ambulatory surgical facilities in Western Canada, including a full service diagnostic and emergency medicine clinic in BC.
• Subsequent to December 31, 2010, closed a private placement bought deal of 17,940,000 shares for proceeds of $21.5 million. 

Financial Results and Highlights (in thousands)

Revenue for the three months ended December 31, 2010 increased by $4,164, of which $1,806 was generated by Active Health, $68 was generated by Centric Disability Management, Inc. ("CDM"), $1,076 of the increase was generated by Community Advantage Rehabilitation, Inc. ("CAR"), acquired on September 1, 2010, and Centric Pharmacy ("Pharmacies"), acquired on October 1, 2010, generated revenue of $1,204.

Revenue for year ended December 31, 2010 increased by $25,859 to $62,482. Sales attributable to Active Health, acquired on May 29, 2009, for the comparable seven-month period increased to $22,267 from $17,899 in 2009, an increase of $4,368. This increase was due to higher numbers of long-term care homes serviced from 248 homes at the end of 2009 to 293 homes at the end of 2010, representing a net gain of 45 homes or an increase of 18% compared to the prior year.

Revenue for the CDM division increased by $3,097 for the year, driven primarily by a higher number of assessments obtained through increased referrals and additional business relationships with insurance providers. 

Revenue for the newly acquired divisions generated $1,446 from CAR for the period from September 1, 2010, and $1,204 from the Pharmacies division acquired on October 1, 2010. 

Direct costs include third-party consultant fees associated with the assessment and physiotherapy businesses, as well as salaries and wages of employees working directly in each business segment. In addition, in the fourth quarter of 2010, the cost of inventory sold by the Pharmacies was included in direct costs. 

Direct costs for the fourth quarter ended December 31, 2010 were $12,984, which was an increase of $3,066 over the comparable quarter last year. Direct costs expressed as a percentage of revenue were comparable at 76% for the same quarter in prior years. 

Direct costs for the year ended December 31, 2010 were $46,098, which was an increase of $19,910 compared to the prior year driven by the increase in revenues. Direct costs as a percentage of revenue for the year ended December 31, 2010 were higher than the prior year which reflects the higher cost structure for the Active Health business as a percentage of revenue which was owned for seven months in 2009, but is consistent with the percentage of revenue in the three-month period ended December 31, 2010.

General and administrative expenses for the quarter ended December 31, 2010 were $236 less than the comparable period in the prior year. The Company recorded a one-time restructuring charge of $600 relating to the re-organization of the Company's senior management and other restructuring costs as a result of the acquisition and integration of the Active Health business in the fourth quarter ended December 31, 2009.

General and administrative expenses for the year ended December 31, 2010 were $8,168 which was $1,214 higher than the prior year. This increase resulted primarily from higher salary and benefit costs of $581 associated with the Active Health business and an increase in the overhead costs for infrastructure to support the growth of the business. Included in the increased overhead are additional audit and consulting fees, administrative costs and increased contractual fees relating to the services performed by Global Healthcare Investments and Solutions, Inc. ("GHIS").

Stock-based compensation, a non-cash expense, increased by $354 in the year relating to the vesting of options granted at the end of 2009 and during 2010.

Interest expense for the year ended December 31, 2010 was $971 compared to $433 in the prior year. The increase was due to the increased debt levels with respect to the related party debt and the revolving credit facility. The interest expense includes $278 of amortization of loan arrangement costs ($71 for the year ended December 31, 2009) and interest incurred on its long-term loan and operating facility of $572 for the year ($362 for the year ended December 31, 2009). Interest incurred on the related party debt totaled $92 for the fourth quarter and year ended December 31, 2010 (Nil - 2009) and accretion totaled $71 for the same period. The total interest expense for the quarter ended December 31, 2010, net of interest income, was $391 compared to $183 in the same quarter last year. 

For the fourth quarter, cash increased by $8,885 compared to the third quarter of 2010. At December 31, 2010, the Company had total cash on hand of $9,210, an increase of $8,014 compared to December 31, 2009. The increase in cash in the fourth quarter is largely due to cash provided by operating activities, and the issuance of two promissory notes totaling $10 million. Cash on hand, in excess of working capital needs, was used for strategic acquisitions completed in January 2011, and business development.

During the year ended December 31, 2010, option holders exercised 975,000 options to purchase an equivalent number of shares at a weighted average exercise price per share of $0.21.

As at December 31, 2010, the total number of shares outstanding was 62,090,095. There were also 21,500,000 warrants outstanding entitling holders to acquire 21,500,000 common shares, and 6,100,000 options outstanding to purchase an equivalent number of common shares with various expiration dates though 2015.