CML HealthCare Income Fund Reports 2009 First Quarter Financial Results


    Toronto Stock Exchange Symbol: CLC.UN

    MISSISSAUGA, ON, May 7 /CNW/ - CML HealthCare Income Fund (the "Fund" or
"CML HealthCare"), (TSX: CLC.UN) today reported its financial results for
three-month period ended March 31, 2009.

    Q1 2009 Highlights

    -   Revenue increased 38.6% to $128.3 million from $92.6 million in Q1
    -   EBITDA(1) rose to $34.1 million compared to $30.2 million in the same
        quarter last year
    -   Net earnings increased 5.4% to $23.0 million from $21.9 million in Q1
    -   Cash provided by operating activities of $38.7 million is 165.7%
        higher than $14.6 million in Q1 2008
    -   The Fund generated distributable cash(2) of $28.4 million and
        declared distributions totaling $24.0 million, representing a payout
        ratio of 84.6%

    "We are pleased to report continued growth in revenue, EBITDA(1), net
earnings, and cash flow from operations in the quarter. Our results reflect
the central importance of healthcare services, regardless of challenging
economic periods, and the stability in both our lab and imaging services,"
said Paul Bristow, President and CEO of CML HealthCare Income Fund. "We
continue to advance our new Radiology Information System ("RIS") and Picture
Archiving Communications System ("PACS") initiative for both our U.S. and
Canadian operations. We anticipate the digitization of our Canadian medical
imaging operations will take approximately 24 months, while upgrading our U.S.
operations to the new RIS / PACS is anticipated to take approximately 12
months. We expect the total cost of implementation to be in the range of $30
to $35 million, which will be funded by available cash and credit resources,
and future cash flow generated from operations. It will not impact the Fund's
distributable cash(2). We are also advancing our Canadian branding and clinic
refurbishment programs. Since our clinic refurbishment program commenced last
year, 25 clinics have been completed or are currently under construction."
    "Looking ahead, we will continue to advance our digital imaging and
clinic refurbishment initiatives, while also exploring acquisitions of medical
diagnostic assets in both Canada and in the U.S.," continued Mr. Bristow.
"With approximately $79 million in revolving credit facility available and
solid cash flow from operations, we have sufficient liquidity and capital
resources to finance growth opportunities and our capital commitments."

    Financial Results

    Revenue for the Fund in the first quarter of 2009 ("Q1 2009") increased
38.6% to $128.3 million from $92.6 million in the first quarter of 2008 ("Q1
2008"). The Fund's increased revenue in the quarter reflects: i) $29.0 million
in revenue from the inclusion of a three months of American Radiology
Services, Inc. ("ARS") results in Q1 2009 as compared to one month of results
in Q1 2008 (ARS was acquired on February 29, 2008); ii) $3.7 million in
revenue from acquisitions of new imaging clinics in Canada; iii) $1.7 million
increase in total cap revenue based on the Ontario Ministry of Health and
Long-Term Care("MOH") Funding agreement for laboratory services; and vi)
organic growth in non-cap revenues.
    Operating, general and administrative ("OG&A") expenses for the first
quarter of 2009 were $94.2 million compared to $62.4 million in Q1 2008.
Higher OG&A expenses in Q1 2009 compared to Q1 2008 reflect: i) higher
operating expenses (including salaries, rent and professional fees) associated
with acquisitions completed in 2008; ii) three months of operating expense
from ARS in Q1 2009 compared to one month in the same period in 2008; iii)
increased costs in line with revenue increases to support growth; and iv)
investments made in corporate infrastructure to support the Fund's growth
    EBITDA(1) in the first quarter of 2009 totaled $34.1 million, or 26.6% of
revenue, compared to $30.2 million, or 32.6% of revenue, in Q1 2008. Decreased
EBITDA(1) margins in Q1 2009 compared to the prior year result from a higher
proportion of consolidated revenue being derived from medical imaging services
as the Fund acquired medical imaging clinics in Canada and the U.S. (ARS
purchase) over the past two years.

    Comparative Quarterly
     Financial Summary
     ($ millions, except
     per unit amounts)               January 1, 2009 to   January 1, 2008 to
     (unaudited)                         March 31, 2009       March 31, 2008
    Revenue                                      $128.3                $92.6
    Operating, general
     and administrative                            94.2                 62.4
    EBITDA(1)                                      34.1                 30.2
    Amortization                                    8.7                  2.5
    Transaction cost on debt financing                -                  3.5
    Interest expense                                4.1                  3.2
    Recovery of income taxes                       (1.7)                (0.9)
    Net earnings for the period                    23.0                 21.9
    Basic earnings per unit                        0.26                 0.25

    The Fund's net earnings for the first quarter of 2009 increased 5.4% to
$23.0 million or $0.26 per Fund unit (basic), compared to $21.9 million or
$0.25 per Fund unit (basic) in Q1 2008.

    Distributable Cash(2)

    For the three months ended March 31, 2009, the Fund generated
distributable cash(2) of $28.4 million and declared distributions totaling
$24.0 million, representing a payout ratio of 84.6%. Please refer to
Standardized Distributable Cash(3) and Distributable Cash(2) table below.

    Standardized Distributable       January 1, 2009 to   January 1, 2008 to
     Cash(3) and Distributable           March 31, 2009       March 31, 2008
     Cash(2) Table ($000s)                   (unaudited)          (unaudited)
    Cash flow from operating
     activities                                 $38,669              $14,556
      Total capital expenditures
      as per consolidated statement
      of cash flows                             (11,629)              (2,649)
    Standardized distributable cash(3)           27,040               11,907
    Normalizing adjustments to
     non-cash working capital items(4)           (5,306)              11,088
    Capital Expenditures:
      Add back: One time
       capital expenditures                       3,838                  212
      Changes in capital expenditure
       notional reserve                           3,174                   34
      Capital lease payments                        (19)                (305)
        Sub-total                                28,727                  (59)
     expenses/(recovery)(5)                        (174)               3,384
    Cash available for distribution              28,553               26,320
    Non-recurring revenue(6)                       (171)                   -
    Distributable cash(2)                        28,382               26,320
    Distributions to unitholders                 24,011               22,665
    Total payouts as a percentage
     of distributable cash(2)                     84.6%                86.1%
    Total payouts as a percentage
     of standardized distributable cash(3)        88.8%               190.3%
    Weighted average number of Fund
     units outstanding in the period         89,842,404           86,853,393

    (3) On July 18, 2007, the Canadian Institute of Chartered Accountants
    issued its interpretive release "Standardized Distributable Cash in
    Income Trusts and Other Flow Through Entities: Guidance on Preparation
    and Disclosures". The Fund has reviewed the interpretive release and has
    adopted the guidance as applicable to the Fund. The above table
    represents a summarized presentation. Please refer to our March 31, 2009
    Management's Discussion and Analysis ("MD&A") for complete disclosure
    relating to Standardized Distributable Cash.
    (4) Comprised of adjustments related to known and measurable timing
    differences in respect of MOH cap revenue receivables; insurance
    adjustments; bonus adjustments; ARS tax refunds related to pre-
    acquisition periods; and non-recurring settlement of a pre-acquisition
    liability relating to ARS.
    (5) Discretionary/Non-recurring expenses/(recovery) represents one-time
    retail sales tax recovery.
    (6) Non-recurring revenue represents retroactive payments for
    professional and technical fees and retroactive MOH cap adjustment in the

    Segmented Analysis

    Canadian Operations

    For the three-month                                  Canadian Operations
    periods ended March 31                 (C$ million except percent amount)
                                                2009                    2008
    Revenue                                    $87.2                   $80.4
    OG&A                                       $57.4                   $51.6
    EBITDA(1)                                  $29.8                   $28.8
    EBITDA(1) margin                           34.2%                   35.8%
    Net earning for the period                 $23.3                   $21.5

    For the three month period ended March 31, 2009, revenue and OG&A of $87.2
million and $57.4 million respectively, were higher than the same period in
2008 as a result of the acquisitions of medical imaging clinics across Canada
completed post March 31, 2008, as well as organic growth. Lower EBITDA(1)
margins of 34.2% compared to 35.8% in Q1 2008 resulted from a higher
proportion of consolidated revenue derived from medical imaging services, as
the Fund has been active in acquiring medical imaging clinics across Canada.

    U.S. Operations

    For the three-month                      U.S. Operations
     period ended:                (U.S. $ million except percent amount)
                             Mar. 31, 2009    Mar. 31, 2008    Dec. 31, 2008
    Number of business
     days                               63               21               64
    Revenue                          $33.0            $12.2            $34.8
    OG&A                             $29.5            $10.7            $30.3
    EBITDA(1)                         $3.5             $1.5             $4.5
    EBITDA(1) margin                 10.6%            12.3%            12.9%
    Adjusted Revenue to
     account for an
     business day.                   $33.5                -                -
    Adjusted EBITDA(1) to
     account for an
     business day                     $4.0                -                -
    Adjusted EBITDA(1) to
     account for year-end
     accrual adjustments                 -                -             $4.1
    Adjusted EBITDA(1) margin        11.9%            12.3%            11.8%
    Net earnings (loss)
     for the period                  ($0.2)            $0.4            ($0.1)

    For the three-month period ended March 31, 2009, revenue and OG&A of
US$33.0 million and US$29.5 million respectively were higher than the same
period in 2008 and reflect the inclusion of ARS results for three-month period
in the current quarter compared to one month in the prior year. Lower
EBITDA(1) margins of 10.6% compared to 12.3% in Q1 2008 are due primarily to
average revenues per business day in March being typically higher than in
January and February. Accordingly, since the ARS acquisition closed on
February 29, 2008, Q1 2008's one month results reflect higher average revenue
per day than the three months results in Q1 2009.
    Q1 2009 EBITDA(1) margin of 10.6% is lower than Q4 2008 EBITDA(1) margin
of 12.9% primarily due to one less business day in Q1 2009. Furthermore, there
were three days of inclement weather in Q1 2009. Q1 2009 revenues were
adversely affected by the number of business days compared to Q4 2008 while
OG&A consists mainly of fixed costs. Adjusting revenue by US$0.5 million to
account for the lost business day in Q1 2009 would result in an adjusted
EBITDA(1) margin of 11.9%. Q4 2008 EBITDA(1) was adjusted by US$0.4 million
due to a reduction in the provision of U.S. medical malpractice insurance
established in a prior period, which results in an adjusted EBITDA(1) margin
of 11.8%.

    Balance Sheet

    As at March 31, 2009, the Fund had working capital of $30.7 million,
including cash and cash equivalents of $21.9 million, compared to working
capital of $37.5 million, including cash and cash equivalents of $21.5 million
as at December 31, 2008. Long-term debt of the Fund, including the current
portion, was $323.1 million as at March 31, 2009, compared to: $320.2 million
as at December 31, 2008. The increase in debt is due to foreign exchange
fluctuation on the Fund's U.S. dollar denominated debt. As at March 31, 2009,
the Fund has approximately $79.0 million available under the revolving credit
    As at March 31, 2009, there were 89,842,404 Fund units issued and

    Tax Fairness Plan

    In June of 2007, the Government of Canada enacted legislation previously
proposed on October 31, 2006 that will apply a tax at the income trust level
on unitholder distributions commencing January 1, 2011. While CML HealthCare
will continue to evaluate its options for the post-2010 tax regime, at this
time the Fund does not see any compelling reasons to make changes to its
structure prior to 2011.

    Notice of Conference Call

    Management of CML HealthCare Income Fund will host a conference call
today, Thursday, May 7, 2009 at 10:00 am (EST) to discuss the Fund's 2009
first quarter financial results. A live audio webcast of the call will be
available at Please connect at least 15 minutes prior
to the conference call to ensure adequate time for any software download that
may be needed to hear the webcast. An archived replay of the webcast will be
available for 90 days. A taped replay of the conference call will also be
available until Thursday, May 14, 2009 by calling 1-877-289-8525 or
416-640-1917, reference number 21304396 followed by the number sign.

    (1) The Fund defines EBITDA as earnings before interest, taxes,       
depreciation, amortization, other expenses, non-controlling interest,
gain/loss on disposals of property and equipment, foreign exchange gain and
transaction costs on debt financing. Adjusted EBITDA is defined as EBITDA less
certain adjustments for revenue and operating expenses. EBITDA and adjusted
EBITDA margins are calculated by dividing EBITDA by revenue and adjusted
EBITDA by adjusted revenue respectively. EBITDA is not a recognized measure
under Canadian GAAP. Management believes that, in addition to net earnings,
EBITDA is a useful supplemental measure, as it provides investors with an
indication of the Fund's performance. EBITDA is used by the Fund to analyze
performance and compare profitability between periods. Investors should be
cautioned, however, that EBITDA should not be construed as an alternative to
net earnings determined in accordance with GAAP. The Fund's method of
calculating EBITDA may differ from other companies or income trusts and,
accordingly, EBITDA may not be comparable to measures used by other companies
or income trusts.

    (2) Distributable Cash of the Fund is not a Canadian generally accepted
accounting principle ("GAAP") measure, and though it is generally used by
Canadian open-ended trusts as an indicator of financial performance, it should
not be seen as a measure of liquidity or a substitute for comparable metrics
prepared in accordance with GAAP. One characteristic of certain non-GAAP
measures such as Distributable Cash is the inclusion of management's
adjustments for entity-specific issues not contemplated in a standard
measurement, such as Standardized Distributable Cash that focuses on
comparability across entities and consistency over time. Therefore, the Fund's
Distributable Cash may differ from similar calculations as reported by other
similar entities and, accordingly, may not be comparable to Distributable Cash
as reported by such entities. The Fund's objective for disclosing the
Distributable Cash calculation is to outline the net cash flow generated by
the Fund that was available for distribution during the period and anticipated
to be sustainable into the next period. The Fund uses Distributable Cash to
evaluate, on a consistent basis, sustainable cash generated from its
operations, and to evaluate cash available for distributions.

    To view CML HealthCare's 2009 first quarter financial statements and
notes to financials, please click here:

    About CML HealthCare Income Fund

    CML HealthCare Income Fund is an unincorporated open-ended trust that
owns CML HealthCare Inc., one of Canada's largest healthcare services
businesses. Based in Mississauga, Ontario, CML HealthCare Inc. is a leading
provider of laboratory testing services in Ontario and the largest private
provider of medical imaging services in Canada. The Fund also owns American
Radiology Services, Inc., a leading provider of fully-integrated diagnostic
medical imaging services based in Baltimore, Maryland. CML HealthCare Income
Fund is publicly traded on the Toronto Stock Exchange under the symbol
"CLC.UN" and has approximately 89.8 million units outstanding. To reach CML
HealthCare Income Fund via the worldwide web log on to

    Caution concerning forward-looking statements

    This document includes forward-looking statements within the meaning of
certain securities laws, including the "safe harbour" provisions of the
Securities Act (Ontario) and other provincial securities law in Canada. These
forward-looking statements include, among others, statements with respect to
our objectives, goals and strategies to achieve those objectives and goals, as
well as statements with respect to our beliefs, plans, objectives,
expectations, anticipations, estimates and intentions. The words "may",
"will", "could", "should", "would", "suspect", "outlook", "believe", "plan",
"anticipate", "estimate", "expect", "intend", "forecast", "objective" and
"continue" (or the negative thereof), and words and expressions of similar
import, are intended to identify forward-looking statements.
    By their very nature, forward-looking statements involve inherent risks
and uncertainties, both general and specific, which give rise to the
possibility that predictions, forecasts, projections and other forward-looking
statements will not be achieved. Certain material factors or assumptions are
applied in making forward-looking statements and actual results may differ
materially from those expressed or implied in such statements. We caution
readers not to place undue reliance on these statements, as a number of
important factors, many of which are beyond our control, could cause our
actual results to differ materially from the beliefs, plans, objectives,
expectations, anticipations, estimates and intentions expressed in such
forward-looking statements. These factors include, but are not limited to,
general economic conditions; dependence on government-based revenues; the
ability to renew the MOH contract on favourable terms; pending and proposed
legislative or regulatory developments including the impact of changes in
laws, regulations and the enforcement thereof; intensifying competition,
resulting from established competitors and new entrants in the businesses in
which we operate; technological change; interest rate fluctuations; insurance
coverage of sufficient scope to satisfy any liability claims; fluctuations in
operating results; dependence on our operating subsidiary to pay its interest
obligations to us; fluctuations in cash distributions and capital investment;
management of credit, market, liquidity and funding and operational risks;
judicial judgments and legal proceedings; privacy laws; our ability to
complete strategic acquisitions and to integrate our acquisitions
successfully; changes in accounting policies and methods we use to report our
financial condition, including uncertainties associated with critical
accounting assumptions and estimates; operational and infrastructure risks
including possible equipment failure and performance of information technology
systems; fluctuations in total patient referrals; loss of services of key
senior management personnel; other factors that may affect future growth and
results including timely development and introduction of new products and
services, changes in our estimates relating to reserves and allowances, future
sales of units, changes in tax laws, technological changes and obsolescence,
natural disasters, the possible impact on our businesses from public health
emergencies, international conflicts and other developments including those
relating to terrorism; the effect of any one or more of such events and risks
on our stability ratings and any changes thereto; and our success in
anticipating and managing the foregoing risks. Additional factors related to
the Acquisition include, but are not limited to, our ability to successfully
integrate the operations of ARS; additional liabilities or costs attributable
to the Acquisition; unknown liabilities of ARS; the ability to retain senior
management of ARS; the ability to complete accretive acquisitions in the U.S.;
the continuation and nature of the relationship with Johns Hopkins; and
changes in U.S. federal and state healthcare laws and regulations, including
with respect to Medicare and Medicaid reimbursements levels.
    We caution that the foregoing list of important factors that may affect
future results is not exhaustive. When reviewing our forward-looking
statements, investors and others should carefully consider the foregoing
factors and other uncertainties and potential events. Additional information
about factors that may cause actual results to differ materially from
expectations, and about material factors or assumptions applied in making
forward-looking statements, may be found in the "Risk Factors" section hereof,
under "Business Risks" and elsewhere in our Management's Discussion and
Analysis of Operating Results and Financial Position for the year ended
December 31, 2008 and elsewhere in our filings with Canadian securities
regulators. Except as required by Canadian securities law, we do not undertake
to update any forward-looking statements, whether written or oral, that may be
made from time to time by us or on our behalf; such statements speak only as
of the date made.

    %SEDAR: 00020333E

For further information:

For further information: Bruce Wigle or Alice Dunning, Investor
Relations, The Equicom Group Inc., (416) 815-0700 ext 228 or ext 255, (416)
815-0080 fax, Email: or; Tom
Weber, Chief Financial Officer, CML HealthCare Income Fund, (905) 565-0043,
(905) 565-1776 fax, Internet:

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