CML HealthCare Income Fund Reports 2009 Second Quarter Financial Results


    Toronto Stock Exchange Symbol: CLC.UN

    MISSISSAUGA, ON, Aug. 12 /CNW/ - CML HealthCare Income Fund (the "Fund"
or "CML HealthCare"), (TSX: CLC.UN) today reported its financial results for
the three and six-month periods ended June 30, 2009.

    Q2 2009 Summary

    -   Revenue increased 12.9% to $133.9 million from $118.6 million in
        Q2 2008
    -   EBITDA(1) totaled $36.8 million compared to $36.6 million in the same
        quarter last year
    -   Net earnings decreased 1.5% to $25.9 million from $26.3 million in
        Q2 2008
    -   Cash provided by operating activities of $32.5 million decreased
        $11.2 million compared to Q2 2008 due to timing of working capital
    -   The Fund generated distributable cash(2) of $24.3 million and
        declared distributions totaling $24.0 million, representing a payout
        ratio of 98.6%, reflecting timing of working capital changes

    "Our growth in revenue and EBITDA in the second quarter demonstrate the
resilience of our business during challenging economic periods," said Paul
Bristow, President and CEO of CML HealthCare Income Fund. "Our second quarter
results also substantiate the progress we have made in enhancing margins in
our U.S. imaging business. The completion of our digital mammography rollout
in the U.S. in the fourth quarter last year played a significant role in this
operational improvement, along with cost controls. As we move ahead with the
digitization of our medical imaging operations in Canada and adopt a common
Radiology Information System and Picture Archiving Communication System in
both Canada and the U.S., we believe there will be further opportunities to
enhance our performance, while delivering improved patient care."

    Financial Results

    Revenue for the Fund second quarter of 2009 ("Q2 2009") increased 12.9%
to $133.9 million from $118.6 million in the second quarter of 2008 ("Q2
2008"). The Fund's increased revenue in the quarter is primarily attributable
to: i) $7.7 million in additional revenue from American Radiology Services,
Inc. ("ARS") primarily resulting from $5.3 million in foreign exchange, ARS's
transition to digital mammography from analog, and a shift in procedures mix
to high end modalities; ii) $3.1 million in revenue from acquisitions of new
imaging clinics in Canada; iii) a $1.9 million increase in total cap revenue
based on the MOH Funding agreement for laboratory services; iv) $0.8 million
one-time technical fee payment from MOH for CML's share of available funding
per the Ontario Medical Association agreement; v) $0.6 million in retroactive
payments for imaging test fee increases in British Columbia related to 2008;
and vi) organic growth in non-cap revenue.
    Operating, general and administrative ("OG&A") expenses totaled $97.1
million in Q2 2009 compared to $82.0 million in Q2 2008. Higher OG&A expenses
in Q2 2009 compared to the prior year reflect: i) additional operating
expenses (including salaries, rent and professional fees) from acquisitions,
including an increase of $3.7 million from ARS (of which $3.5 million is
related to changes in foreign exchange rates) and $2.1 million from imaging
acquisitions in Canada; ii) increased costs in line with revenue increases to
support growth; iii)additional laboratory service costs to support utilization
increases in excess of MOH cap funding; and iv) investments made in corporate
infrastructure to support the Fund's growth plans.
    EBITDA(1) in the second quarter of 2009 totaled $36.8 million, or 27.5%
of revenue, compared to $36.6 million, or 30.9% of revenue, in Q2 2008.
Decreased EBITDA(1) margin as a percentage of revenue in Q2 2009 compared to
the prior year result primarily from a higher proportion of consolidated
revenue being derived from medical imaging services as the Fund acquired
medical imaging clinics in Canada over the past year.
    The Fund's net earnings for the second quarter of 2009 totaled $25.9
million or $0.29 per Fund unit (basic), compared to $26.3 million or $0.29 per
Fund unit (basic) in Q2 2008.

    Financial Summary    Three-months Three-months   Six-months   Six-months
    (C$ millions, except        ended        ended        ended        ended
    per unit amounts)         June 30,     June 30,     June 30,     June 30,
    (unaudited)                  2009         2008         2009         2008
    Revenue                     133.9        118.6        262.2        211.2
    Operating, general and
     administrative              97.1         82.0        191.8        144.3
    EBITDA(1)                    36.8         36.6         70.4         66.8
    Amortization                  8.4          6.3         17.1          8.8
    Foreign Exchange gain        (0.2)           -         (0.7)           -
    Transaction cost on debt
     financing                      -            -            -          3.5
    Other expense                 0.4            -          0.4            -
    Interest expense              3.2          3.7          7.3          6.9
    (Recovery of) provision for
     income taxes                (0.9)         0.3         (2.6)        (0.6)
    Net earnings for the period  25.9         26.3         49.0         48.2
    Basic earnings per unit      0.29         0.29         0.55         0.55

    For the six months ended June 30, 2009, revenue for the Fund totaled
$262.2 million, EBITDA(1) totaled $70.4 million, or 26.9% of revenue, and net
earnings totaled $49.0 million or $0.55 per Fund unit, compared to revenue of
$211.2 million, EBITDA(1) of $66.8 million, or 31.6% of revenue, and net
earnings of $48.2 million or $0.55 per Fund unit in the first six months of
2008. For the six months ended June 30, 2008, OG&A expenses totaled $191.8
million or 73.1% of revenue, compared to OG&A expenses of $144.3 million, or
68.4% of revenue, in the first half of 2008.

    Distributable Cash(2)

    For the three months ended June 30, 2009, the Fund generated
distributable cash(2) of $24.3 million and declared distributions totaling
$24.0 million, representing a payout ratio of 98.6%. The high payout ratio in
the quarter is primarily the result of timing of working capital changes.
Please refer to Standardized Distributable Cash(3) and Distributable Cash(2)
table below.

                                                        April 1,   January 1,
                                                           2009         2009
                                                     to June 30,  to June 30,
    Standardized Distributable Cash(3) and                 2009         2009
     Distributable Cash(2) Table ($000s)             (unaudited)  (unaudited)
    Cash flow from operating activities                  32,505       70,283
      Total capital expenditures as per consolidated
       statement of cash flows                           (4,555)     (15,292)
      Acquisition of licences and intangible assets      (1,256)      (1,256)
    Standardized distributable cash(3)                   26,694       53,735
    Normalizing adjustments to non-cash working
     capital items(4)                                    (4,304)      (9,610)
    Capital Expenditures:
      Add back: One time capital expenditures             2,280        5,226
      Changes in capital expenditure notional reserve    (2,184)         990
      Capital lease payments                                (19)         (38)
        Sub-total                                            77        6,178
    Discretionary/non-recurring expenses(5)               1,130          956
    One-time acquisition of licences and intangible
     assets                                               1,256        1,256
    Cash available for distribution                      24,853       52,515
    Non-recurring revenue(6)                               (535)        (646)
    Distributable cash(2)                                24,318       51,869
    Distributions to unitholders                         23,984       47,995
    Total payouts as a percentage of distributable
     cash(2)                                              98.6%        92.5%
    Total payouts as a percentage of standardized
     distributable cash(3)                                89.8%        89.3%
    Weighted average number of Fund units
     outstanding in the period                       89,842,404   89,842,404

    (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 June 30, 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 represent pre-implementation
    costs related to certain system implementation projects and a one-time
    tax adjustment.
    (6) Non-recurring revenue represents retroactive payments for
    professional and technical fees and retroactive MOH cap adjustment in the
    first quarter.

    Segmented Analysis

    Canadian Operations

                         Three-months Three-months   Six-months   Six-months
    (C$ millions,               ended        ended        ended        ended
     except percentages)      June 30,     June 30,     June 30,     June 30,
     (unaudited)                 2009         2008         2009         2008
    Number of business days        63           64          125          126
    Revenue                      92.8         85.2        180.0        165.6
    OG&A                         62.3         53.4        120.3        105.0
    EBITDA(1)                    30.5         31.8         59.7         60.6
    EBITDA(1) margin            32.9%        37.3%        33.2%        36.6%
    Net earnings for the period  24.7         25.6         48.0         47.1

    The increase in revenue and OG&A in Canada in Q2 2009 and YTD 2009, as
compared to the comparable prior year periods, is mainly due to CML
HealthCare's acquisitions of medical imaging clinics across Canada in the last
year, increased cap revenue, and organic growth in non-cap revenue. EBITDA(1)
margins were lower in Q2 2009 and year-to-date primarily due to: a higher
proportion of consolidated revenue derived from medical imaging services;
additional laboratory service costs to support utilization increases in excess
of MOH cap funding; and investments made in corporate infrastructure to
support the Fund's growth plans.

    U.S. Operations

                         Three-months Three-months   Six-months   Six-months
    (US$ millions,              ended        ended        ended        ended
     except percentages)      June 30,     June 30,     June 30,     June 30,
     (unaudited)                 2009         2008         2009       2008(*)
    Number of business days        64           64          127           85
    Revenue                      35.2         33.0         68.2         45.2
    OG&A                         29.8         28.3         59.3         39.0
    EBITDA(1)                     5.4          4.7          8.9          6.2
    EBITDA(1) margin            15.3%        14.2%        13.0%        13.7%
    Net earnings for the period   1.1          0.7          0.9          1.1

    (*) Represents ARS operations from March 1, 2008 onwards

    For Q2 2009, revenue from U.S. operations of US$35.2 million was higher
than Q2 2008 primarily as a result of increased reimbursements due to the
conversion from analog to digital mammography and a shift in procedure mix to
high end modalities. Higher EBITDA(1) margins of 15.3% in Q2 2009 as compared
to 14.2% in Q2 2008 are the result of higher revenues and effective cost
containment. The increase in the net earnings in Q2 2009 as compared to Q2
2008 is mainly due to an increase in EBITDA(1), partially offset by a decrease
in the income tax recovery in the U.S. as a result of an increase in income,
and other expenses of US$0.4 million relating to professional fees in respect
of a potential acquisition written-off in the current quarter.
    For the first six months of 2009, revenue and OG&A of US$68.2 million and
US$59.3 million, respectively, were higher than first half of fiscal 2008 and
reflect the inclusion of ARS results for six-month period in 2009 compared to
four months in 2008. Lower EBITDA(1) margins of 13.0% in the first six months
of 2009 as compared to 13.7% in the comparable period in 2008 are due
primarily to average revenues per business day in January and February
typically being lower than those of March through June. Accordingly, since the
ARS acquisition closed on February 29, 2008, the first half of fiscal 2008's
four month results reflect higher average revenue per day than the first six
months results in 2009.

    Balance Sheet

    As at June 30, 2009, the Fund had working capital of $29.1 million,
including cash and cash equivalents of $23.6 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 $315.2 million as at June 30, 2009, compared to $320.2 million as
at December 31, 2008. As at June 30, 2009, the Fund has approximately $79.0
million available under the revolving credit facility.
    As at June 30, 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, Wednesday, August 12, 2009 at 10:00 am (EST) to discuss the Fund's 2009
second 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 Wednesday, August 19, 2009 by calling 1-877-289-8525 or
416-640-1917, reference number 21310902 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 the Fund's Q2 2009 Financial statements and Notes, please click

    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 Ministry of Health and Long Term Care 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 Medicare and Medicaid reimbursements levels and
including those that may arise from potential U.S. Healthcare reform
    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, 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

    %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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