- First Quarter Highlighted by Continued Solid Performance of Core Healthcare Services Businesses and Eighth Consecutive Quarter of Positive Cash Flow from Operations -

TORONTO, May 6, 2014 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH), Canada's leading diversified healthcare services company, today announced financial results for the first quarter ended March 31, 2014.

Financial and Operating Highlights for the First Quarter
(All comparative figures are for the corresponding period of the prior year)

• Revenue and Adjusted EBITDA¹ of $110.3 million and $6.7 million in 2014 compared with $113.3 million and $7.8 million in 2013 due to the funding changes for seniors physiotherapy services enacted in August 2013 and a perceived conflict of interest matter which is temporarily impacting referrals in the Retail and Home Medical Equipment segment;
• Adjusted EBITDA¹ of $6.7 million (margin of 6.1%) compared with $7.8 million (margin of 6.9%);
• Adjusted EBITDA¹ and Adjusted EBITDA¹ margin increased from the fourth quarter of 2013;
• Achieved eighth consecutive quarter of positive cash flow from operations and generated an increase in working capital of $8.3 million as a result of the Company's continued focus on cash management;
• Appointed Chris Dennis as permanent President of the Retail and Home Medical Equipment segment in March following his appointment on an interim basis in January; and,
• Entered into a definitive agreement to sell its Home Care operations to an arm's length third party purchaser and, subsequent to quarter end, signed a Letter of Intent to sell its Seniors Wellness operations, which when completed will fully resolve the perceived conflict of interest as determined by the Ontario Ministry of Health and Long Term Care (MOHLTC).

Highlights Subsequent to Quarter End

• Closed its under-performing surgical facility in Sarnia, Ontario.

"Our Pharmacy segment and the majority of our Rehabilitation and Wellness operations continued to perform well and we saw a tangible contribution from the Surgical Weight Loss Centres acquisition to our Surgical and Medical Centres segment," said David Cutler, President and Chief Executive Officer, Centric Health Corporation.  "Pharmacy continues to generate steady top line growth and margins have returned to historical levels following our technology investments last year.  Profitability at our Surgical and Medical Centres was up 65 percent on a 23 percent increase in revenue year-over-year and our decision to close the underperforming Sarnia facility will benefit the bottom line going forward."

"The solid performance in our core healthcare services businesses was offset by the impacts of the change in the Ontario seniors physiotherapy funding model effected last August and the perceived conflict of interest between our Seniors Wellness/Homecare and Retail operations. The pending sales of the Home Care and Seniors Wellness operations will fully resolve the conflict and, when resolved, we expect revenue in our Retail and Home Medical Equipment to progressively return to historical levels over the medium term."

"Going forward, we are focused on optimizing the platform for our best, long-term opportunities in our core healthcare services businesses that minimize working capital requirements, generate strong cash flows and limit legislative or funding risk."

"Our continuing focus on cash management enabled us to achieve our eighth consecutive quarter of positive cash flow from operations, complemented by an improvement in working capital of $8.3 million," said Daniel Gagnon, Chief Financial Officer, Centric Health Corporation.  "The recent amendments to certain financial performance covenants in our Revolving Credit Facility provide us with additional flexibility to execute our growth strategy, as we also focus on strengthening our balance sheet."

FINANCIAL RESULTS

(All amounts below are in thousands except per share, shares outstanding, and percentage data)

As a result of the strategic initiative to define the Company's long term operating model and the markets which the Company serves, the Company's Chief Operating Decision Maker ("CODM") has amended the manner in which the business is operated and, accordingly, how financial information is presented to the CODM.  As a result, the Company has amended its reportable operating segments and will now report four reportable operating segments rather than five reportable operating segments as it has previously.  Operating segments, as reported to the CODM are as follows:  Rehabilitation and Wellness, Pharmacy, Retail and Home Medical Equipment and Surgical and Medical Centres.  The Assessments operations, which were previously reported separately, are now reported as part of the Rehabilitation and Wellness segment (previously named the Physiotherapy segment).

Selected Financial Information

	For the three month periods ended March 31,
	2014 $	2013 3 $	2012 $
Revenue	110,326	113,281	104,253
(Loss) income from operations	(3,534)	(3,030)	1,944
(Loss) income before interest expense and income taxes	(19,618)	7,801	694
EBITDA1	(11,174)	16,394	7,010
Adjusted EBITDA1	6,716	7,828	11,779
Per share - basic ($)	$0.05	$0.06	$0.11
Per share - diluted ($)	$0.04	$0.04	$0.09
Adjusted EBITDA1margin	6.1%	6.9%	11.3%
Net (loss) income	(27,958)	2,965	(4,651)
Per share ($) - basic	$(0.21)	$0.02	$(0.04)
Per share ($) - diluted	$(0.21)	$0.02	$(0.04)
Cash flow from operations	3,832	200	(10,903)
Weighted average shares outstanding (basic) 2	133,563	123,990	105,839
Shares outstanding March 31 2	133,563	125,934	112,447

1See "Non-IFRS Measures" below.

2Excludes contingent escrowed shares and restricted shares.

3As part of the year end financial statement close process for the year ended December 31, 2013, the Company's Motion Specialties operations performed an inventory count and valuation. Upon the completion of the inventory count and inventory valuation, an adjustment of $1,915 ($1,408 net of income taxes) was recorded for the three month period ended March 31, 2013 which reduced inventory and increased cost of healthcare services and supplies.

Consolidated Results

Consolidated revenue for the three month period ended March 31, 2014 was $110.3 million compared with $113.3 million for the three month period ended March 31, 2013. This decrease was primarily attributable to:

• Rehabilitation and Wellness - a decrease of $8.2 million in the Seniors Wellness operations as a result of the funding changes for physiotherapy services for seniors implemented by the Ontario Ministry of Health and Long Term Care in August 2013; and,
• Retail and Home Medical Equipment - a decrease of $3.9 million due to the impact on Assisted Device Program (ADP) referrals of the perceived conflict on interest between its Seniors Wellness/Home Care operations and its Retail and Home Medical Equipment operations as determined by the Ontario MOHLTC and decreased order fulfillment at one of its larger retail stores during an IT conversion.

Partially offsetting these decreases were:

• Organic Growth - the Rehabilitation and Wellness, Pharmacy and Surgical and Medical Centre segments contributed incremental revenue of $6.3 million;
• Acquisitions - the purchase of Surgical Weight Loss Centres (SWLC) in the fourth quarter of 2013 and other start-up initiatives contributed incremental revenue of $2.0; and,
• Business Days - one additional business day in the first quarter of 2014 contributed incremental revenue of $1.1 million.

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 three month period ended March 31, 2014 was $6.7 million compared with $7.8 million for the three month period ended March 31, 2013.  Organic growth in the Rehabilitation and Wellness and Pharmacy segments and accretive growth from the SWLC acquisition were more than offset by decreases in the Seniors Wellness operations of the business and the Retail and Home Medical Equipment segments, consistent with revenue for these segments.

Adjusted EBITDA¹ margin for the three month period ended March 31, 2014 decreased to 6.1% from 6.9% for the corresponding period in 2012.

Segment Results

(in 000s of dollars)		For the three month periods ended March 31,
		Revenue		Adjusted EBITDA1
		2014	2013	2014		2013
		$	$	$	%	$	%
Rehabilitation and Wellness		48,367	52,925	6,314	13.1	7,824	14.8
Pharmacy		27,611	24,278	3,501	12.7	2,474	10.2
Retail & Home Medical Equipment		25,217	28,679	(845)	(3.4)	(160)	(0.6)
Surgical & Medical Centres		9,131	7,399	645	7.1	391	5.3
Corporate		—	—	(2,899)	—	(2,701)	—
Total		110,326	113,281	6,716	6.1	7,828	6.9

SHARES OUTSTANDING

As at March 31, 2014 and the date of this press release (May 6, 2014), the Company had total shares outstanding of 152,995,764.  The outstanding shares include 19,432,470 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 133,563,294 common shares outstanding as at March 31, 2014 and 133,363,294 shares outstanding at December 31, 2013. The number of options outstanding is 8,266,000 at March 31, 2014 and May 6, 2014. The number of restricted share units outstanding is 1,550,269 at March 31, 2014 and May 6, 2014. The number of warrants outstanding is 33,177,310 at March 31, 2014 and at May 6, 2014.  Should all outstanding options and warrants that were exercisable at March 31, 2014 be exercised, the Company would receive proceeds of $26.0 million.

FINANCING

During the first quarter of 2014, the Company finalized a suite of amendments to the covenants for its $50 million Revolving Credit Facility for 2014 and beyond.  The amendments resulted from the funding reductions in Ontario from the MOHLTC for seniors physiotherapy services and a perceived conflict of interest matter which impacts the profitability of Motion Specialties and the Seniors Wellness operations.  Based on its 2014 operating budget and cash flow management initiatives, the Company believes it will be in compliance with the new financial performance covenants for the Revolving Facility at each quarterly measurement date through to the end of 2014.  The Company was in compliance with its financial performance covenants at March 31, 2014.  The Company paid $1.7 million in cash interest on its borrowings for the first quarter of 2014.

OUTLOOK

Centric Health remains well positioned to capitalize on its unparalleled national healthcare platform. The Company's senior leadership team, under the direction of CEO David Cutler, has completed a review which analyzed and evaluated the Company's businesses individually and as a group. They have evaluated the businesses in the context of the key factors relevant to the success of a Canadian healthcare services company, its core competencies and best opportunities, as well as the evolving nature of the regulatory environments within which it operates. Senior leadership will continue to focus on optimization of the platform to minimize working capital requirements, generate strong cash flows, limit regulatory risk and maximize long-term potential, with the objective of generating long-term value for shareholders.

Centric Health's growth strategy is focused in three major areas:  Expanding the footprint of its physiotherapy clinic network; expanding its Pharmacy operations to Western Canada; and growing its offering of specialized surgical solutions.  The Company plans on only launching an acquisition or growth initiative once a comprehensive and complete analysis has been completed to ensure they are accretive within a reasonable period.  Organic growth initiatives will be focused on those with a low cost capital investment that utilize the Company's existing resources and capacity.  Acquisitions should provide an appropriate return relative to any requisite investment and the return is expected to be in excess of the Company's risk adjusted weighted average cost of capital.

Rehabilitation and Wellness

The Company continued to focus on growth in the Rehabilitation and Wellness segment from the Company's rehabilitation clinics and assessment centres through organic expansion initiatives such as expanding its preferred provider relationships with employers and other organizations.  The Company is also seeking to increase its local marketing initiatives in order to increase the volume of patient visits and brand awareness.  The Company may expand its rehabilitation clinic footprint through strategic acquisitions.  However, growth through acquisition will only occur if the acquisition will be accretive to income and complementary to the Company's national network.  Growth at the Company's assessment centres will be achieved by increasing market share through successful RFPs.

Following the MOHLTC's determination that a perceived conflict existed between its Seniors Wellness and Home Care operations and its Retail operations, management acted definitively and expeditiously in the best interests of all the affected physiotherapists, customers' residents and patients, as well as the health of these businesses overall, making the decision to sell its Seniors Wellness and Home Care operations. The pending sales of the Seniors Wellness and Home Care operations will fully resolve the perceived conflict.  Year-over-year comparisons for the Rehabilitation and Wellness segment for the remainder of 2014 will reflect the divestiture of these operations.

Pharmacy

Revenues for the Company's Pharmacy segment are expected to continue to increase in the balance of 2014 due to organic growth resulting from successful contract tenders, retail initiatives, bundled service offerings, and maximizing the utilization of existing infrastructure.  Adjusted EBITDA margins have returned to historical levels following non-recurring costs to implement Electronic Medical Administrative Records ("EMAR") for existing long-term care home contracts and are expected to be maintained in upcoming quarters. The Company is exploring expansion of its Pharmacy operations, which currently reside wholly in Ontario, into Western Canada.

Surgical and Medical Centres

Following a decline in the second half of 2012 and first half of 2013, the financial results of the Surgical and Medical Centres segment showed signs of stability in the second half of 2013 and improved on a year-over-year basis in the first quarter of 2014, primarily due to the acquisition of SWLC, in the fourth quarter of 2013.  SWLC will expand the Company's bariatric footprint across its surgical locations.  The acquisition of SWLC contributed to a 23% year-over-year increase in revenue and 65% increase in Adjusted EBITDA in the first quarter of 2014.

Following significant effort to rebuild operations at its Sarnia facility that were not realized and due ongoing losses and projected losses into the future, the Company closed the Sarnia facility on April 30, 2014.

The Company is continuing its efforts to expand the roster of physicians to utilize excess operating room capacity at all centres. In addition, in the second half of 2013, the Company launched multiple initiatives to drive capacity utilization in the Surgical and Medical Centre segment, including a five-year strategic alliance with Vancouver Imaging, two specialized Centres of Excellence for Sinus and Nasal and Women's Urology, Extended Patient Choice Network, and the first Triage Assessment Program (TAP) at the Rouge Valley Health System.

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 is expected to be in excess of the Company's risk adjusted weighted average cost of capital including cross platform pollination benefits.

Retail and Home Medical Equipment

The Company's Retail and Home Medical Equipment segment achieved revenue growth in the first three quarters of 2013, however, growth has been stalled in the last two quarters due to the perceived conflict of interest matter, which resulted in lower ADP referrals during these periods. The matter will be resolved through the sales of the Seniors Wellness and Home Care operations subsequent to the end of the first quarter of 2014 and the segment's revenue growth is expected to progressively improve to historical levels and beyond over the medium term.  Adjusted EBITDA for this segment has not reflected its revenue growth as the Company has invested in revenue generating personnel for initiatives with a longer sales cycle. The benefits of these investments are not expected to be fully realized until the fourth quarter of 2014. Motion Specialties reduced head count both in the second quarter of 2013 and in the first quarter of 2014 through attrition and restructuring in order to better align its resourcing needs.

In the first quarter of 2014, the Company upgraded leadership of the segment, replacing several members of the management team, including the appointment of Chris Dennis (previously Centric Health's Chief Operating Officer) as President.  Under the direction of Mr. Dennis, decisive action has been taken including a strategic review of the in-process IT integration, staffing changes, organizational structure changes, cost rationalization initiatives and a continuous improvement project designed to standardize and streamline business processes. A major system integration of Motion Specialties is in progress with pilot launches in September 2013 and February 2014. However, the process re-engineering of day-to-day activities and the automation of inventory is taking longer than management had expected. In order to effectively implement new processes in conjunction with the new system, the Company has revised its estimated completion date to the end of 2015, with approximately half of this segment's inventory balance migrated to a perpetual inventory system by the end of 2014. It is expected that this project will drive operational improvements and improve Adjusted EBITDA margins once it is completed. The Company has brought on personnel with experience in process re-engineering and supply chain management in order to assist Mr. Dennis with his strategic plans for this segment. Cost management is also an area of focus which includes reducing discretionary spending, bulk-purchasing initiatives and spending caps.

Financial

The activities senior management has undertaken to improve its balance sheet since the beginning of 2013, including amendment of certain financial performance covenants for its $50 million Revolving Credit Facility during the first quarter of 2014, have provided the Company with additional financial flexibility to execute its strategy.  Management's focus on cash management has resulting in eight consecutive quarters and significantly improved working capital in the first quarter of 2014.

The Company's debt profile has improved such that it has no debt principal repayment obligations until June 2015 and, with the exception of the Jamon 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 will continue to focus on strengthening its balance sheet through strategic repayments of the Company's most expensive debt arrangements based on the generation of free cash flow from operations and from other opportunities as they arise.

¹Non-IFRS Measures

This press release includes certain measures which have not been prepared in accordance with IFRS such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin 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 non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.

The Company defines EBITDA as earnings before depreciation and amortization, interest expense, amortization of lease incentives, and income tax expense (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 on disposal of property and equipment recognized in the statement of income.  Adjusted EBITDA margin 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.  The Company's agreements with senior lenders are structured with certain financial performance covenants which includes Adjusted EBITDA as a key component of the covenant calculations. EBITDA and Adjusted EBITDA are not recognized measures under IFRS.

Reconciliation of Non-IFRS Measures

			For the three month periods ended March 31,
			2014 $	2013 3 $
Net (loss) income			(27,958)	2,965
		Depreciation and amortization	8,359	8,561
		Interest expense	8,271	6,918
		Amortization of lease incentives	85	32
		Income tax expense (recovery)	69	(2,082)
EBITDA1			(11,174)	16,394
		Transaction and restructuring costs	1,383	523
		Change in fair value of contingent consideration liability	(17)	(6,945)
		Impairments	16,494	—
		Stock-based compensation expense	423	1,747
		Change in fair value of derivative financial instruments	(393)	(3,886)
		Gain on disposal of property and equipment	—	(5)
Adjusted EBITDA1			6,716	7,828
Basic weighted average number of shares			133,563	123,990
Adjusted EBITDA per share (basic)			$0.05	$0.06
Fully diluted weighted average number of shares			189,837	179,423
Adjusted EBITDA per share (diluted)			$0.04	$0.04

CONFERENCE CALL

Centric Health will host a conference call, including a slide presentation, to discuss its first quarter 2014 financial results tomorrow, Wednesday, May 7, 2014, 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, May 14, 2014 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 30885558.

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