Centric Health Finalizes LifeMark Earn Out and Adjusts Shares to be Issued to Vendors
TORONTO, Aug. 14, 2012 /CNW/ - Further to previous press releases relating to the acquisition of LifeMark Health in June 2011, Centric Health Corporation ("Centric Health) (TSX: CHH), Canada's leading diversified healthcare company, today announced that it has finalized the determination of the number of escrowed shares to be released to the former LifeMark vendors based on an agreed upon formula related to the performance of the LifeMark base business and other acquisitions completed during the 12-month period ended June 30, 2012 ("the Warranty Period").
The LifeMark group included one of Canada's largest medical assessment businesses. In determining the final number of escrowed shares to be released to the former LifeMark vendors, the outcome was negatively impacted by the underperformance of LifeMark's assessment division, which represents less than 30% of the acquired LifeMark operations, whose earnings during the Warranty Period were lower by approximately $5.2 million due to a significant decline in referrals from auto insurers resulting from regulatory reform which included changes to minor injury guidelines, price caps, changes in case-mix of referrals and consolidation within the industry. The remaining LifeMark business performed in-line with expectations. In addition, Centric Health assumed higher debt and working capital adjustments from LifeMark and its acquisitions.
As the major portion of the purchase price was settled in cash and assumed debt, the earn-out formula resulted in a reduction of 6.6 million Centric shares for every $1 million shortfall in EBITDA.
In addition to the $18.2 million already received in cash on closing, the former LifeMark vendors will receive 6.875 million shares from escrow and the remaining 40.0 million common shares held in escrow will be cancelled. This cancellation represents a reduction of approximately 22% of Centric Health's current issued and outstanding common shares, As a result, Centric Health now has 142,077,586 common shares issued and outstanding of which 22,231,081 common shares are held in escrow relating to other Centric Health acquisitions. The adjusted EBITDA earnings per share including escrowed shares for the six month period ending June 30, 2012 following this adjustment is enhanced by 30.8%.
"While the regulatory reform has resulted in a challenging period for the Assessments business, we are confident in the strength of the underlying business and that the work we have done to re-engineer this business positions it well for the future," said Dr. Jack Shevel, Chairman of Centric Health.
Dr. Shevel added, "The finalization of the LifeMark transaction and completion of the Warranty Period now enables the Company to more fully consolidate and rationalize the business units with additional benefits. Together with LifeMark, we have a national platform with a great team from which to extend our services and products."
"With the base business being financially sound, the cancellation of shares should enhance future earnings per share and importantly removes any uncertainty from the market arising from the complexity of this transaction," said Peter Walkey, Chief Financial Officer of Centric Health.
"Although the outcome fell short of our original expectations as a result mainly of the regulatory impact on the assessment business, we believe strongly in the exciting vision and growth of Centric Health," said Craig Gattinger, CEO of LifeMark.
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, wellness and prevention and home medical equipment. 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 through 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 ("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