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."