CML HealthCare Income Fund Reports 2010 First Quarter Financial Results
Toronto Stock Exchange Symbol: CLC.UN
MISSISSAUGA, ON, May 6 /CNW/ - CML HealthCare Income Fund (the "Fund" or "CML HealthCare"), (TSX: CLC.UN) today reported its financial results for the three month period ended March 31, 2010 (all amounts are in Canadian dollars, unless noted otherwise).
Financial Highlights:
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(C$ millions except Three-months Three-months
percent amounts) ended ended
March 31, March 31,
2010 2009
("Q1 2010") ("Q1 2009") % Change
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Revenue 125.4 128.3 (2.3%)
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Operating, general, &
administration expenses 94.7 94.7 -
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EBITDA(1) 30.7 33.6 (8.6%)
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EBITDA(1) Margin 24.5% 26.2% (6.5%)
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Net Earnings 20.9 23.0 (9.1%)
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Cash provided by operating
activities 26.3 38.7 (32.0%)
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Distributable cash(2) 27.5 28.4 (3.2%)
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Distributions declared 24.0 24.0 -
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Payout ratio 87.3% 84.6% 3.2%
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Operating Highlights:
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- Record setting snow storms in Maryland and Delaware led to the
temporary closures of U.S. medical imaging centers and referring
physician offices, negatively impacting Q1/10 results;
- Revenue increased in Canadian operations through organic growth in
medical imaging services and increased cap revenue in laboratory
services based on the Ontario Ministry of Health funding agreement;
- Successful transition with U.S. senior management;
- New RIS/PACS system successfully piloted and is planned for
deployment in Maryland and Delaware in the second quarter;
- Northeast U.S. acquisitions made in 2009 experiencing growth as
expected;
- Progress made with positive results from Canadian center
refurbishment initiative.
"Our Canadian businesses performed well in the first quarter of 2010, reporting increased revenue through organic growth. In the U.S., we are pleased with the early results from our latest acquisition in Rhode Island which is tracking to plan," said Paul Bristow, President and CEO of CML HealthCare Income Fund. "The severe winter weather in February resulted in the closure of our centers in Maryland and Delaware for a number of days, and together with the extended closures of physicians' offices, our overall U.S. medical imaging business experienced lower patient visits in the quarter," continued Mr. Bristow. "Year over year comparisons of U.S. based revenues, expenses and earnings reflect the strengthened Canadian dollar against the U.S. dollar."
"With respect to our strategy for 2011, in light of taxes being applied to income trust distributions, I would like to confirm the Fund will be converting into a corporation on January 1, 2011," continued Mr. Bristow. "We are in the process of working with our professional advisors on all details including finalizing the post conversion dividend policy, which will be disseminated to the investment community by the end of the third quarter. For the balance of 2010, we anticipate the monthly distribution of $0.08927 per unit will remain unchanged."
Financial Results
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For the three months ended March 31, 2010 ("Q1 2010"), revenue for the Fund decreased 2.3% to $125.4 million from $128.3 million for the same period in 2009. Decreased revenue in Q1 2010 was largely attributable to:
- $6.8 million from changes in foreign exchange rates;
- Negative impact on patient flow due to inclement weather in the U.S.
and difficult market conditions; and
- $0.6 million in one-time imaging and laboratory services
reimbursements in Canada recorded in Q1 2009 not applicable in
Q1 2010;
The above declines in revenue were partially offset by:
- $3.9 million in new revenue from the addition of seven centers in the
U.S. Northeast in 2009;
- $2.1 million increase from organic growth in imaging services in
Canada; and
- $1.7 million increase in cap revenue based on the Ministry of Health
(MOH) Funding agreement for laboratory services
Operating, general and administrative ("OG&A") expenses totaled $94.7 million in Q1 2010. OG&A increased due to the addition of seven centers in the U.S. Northeast in 2009 and additional costs to support organic growth in Canada offset by a $6.1 decrease in OG&A for U.S. operations due to changes in foreign exchange rates.
Q1 2010 EBITDA (1) totaled $30.7 million compared to $33.6 million in Q1 2009. EBITDA(1) margin of 24.5% was lower than Q1 2009 of 26.2% largely as a result of a higher proportion of consolidated revenue being derived from medical imaging services acquired in the U.S. Northeast over the past two years and lower revenues in the U.S. business for reasons previously noted.
The Fund's net earnings for Q1 2010 of $20.9 million or $0.23 per Fund unit were 9.1% lower than $23.0 million or $0.26 per unit in Q1 2009. Net earnings include the impact of a one-time pre-tax restructuring charge of US$1.6 million associated with the departure of the President and CEO and the CFO of the U.S. imaging business in Q1 2010.
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Financial Summary Three-months Three-months
(C$ millions, except ended ended
percent amounts) March 31, March 31,
(unaudited) 2010 2009
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Net earnings for the period 20.9 23.0
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Less: recovery of income taxes (3.2) (1.7)
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Add: interest expense 3.0 4.1
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Add: other expense 1.5 -
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Less: Foreign exchange gain (0.1) (0.5)
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Add: Amortization 8.5 8.7
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EBITDA(1) 30.7 33.6
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Revenue 125.4 128.3
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EBITDA(1) margin as a percent of revenue 24.5 26.2
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Distributable Cash(2)
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For the three month period ended March 31, 2010, the Fund generated distributable cash(2) of $27.5 million and declared distributions totaling $24.0 million, representing a payout ratio of 87.3%. For the same period in 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(2) and Distributable Cash(2) table below.
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Standardized Distributable Three-months Three-months
Cash(3) & Distributable Cash(2) ended ended
Table March 31, March 31,
(C$000s) 2010 2009
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Cash flow from operating activities 26,278 38,669
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Less:
Total capital expenditures as per
consolidated statement of cash flows (7,992) (11,629)
Acquisition of licences and intangible assets (768) -
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Standardized distributable cash(3) 17,518 27,040
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Normalizing adjustments to non-cash working
capital items(4) 6,214 (5,306)
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Capital Expenditures:
Add back:
One time capital expenditures 7,163 3,838
Changes in capital expenditure notional reserve (2,691) 3,174
Capital lease payments (276) (19)
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Sub-total 27,928 28,727
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Discretionary/non-recurring expenses(5) 126 174
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Cash available for distribution 28,054 28,553
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Non-recurring revenue/expense recoveries(6) (542) (171)
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Distributable cash(2) 27,512 28,382
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Distributions to unitholders 24,017 24,011
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Total payouts as a percentage of distributable
cash(2) 87.3% 84.6%
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Total payouts as a percentage of standardized
distributable cash(2) 137.1% 88.8%
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Weighted average number of Fund units
outstanding in the period 89,842,404 89,842,404
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Segmented Highlights
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Canadian Operations
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Three-months Three-months
ended ended
(C$ millions, except percentages) March 31, March 31,
(unaudited) 2010 2009
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Revenue 90.3 87.2
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OG&A 60.6 57.9
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EBITDA(1) 29.7 29.2
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EBITDA(1) margin 32.9% 33.5%
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Net earnings for the period 23.4 23.3
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Revenue in Q1 2010 increased 3.6% compared to the corresponding period in 2009. The increase includes: i) $2.1 million in organic growth in imaging services and; ii) $1.7 million increase in cap revenue based on the MOH agreement. The increased revenue was partially offset by $0.6 million in one-time imaging and laboratory services reimbursements recorded in Q1 2009, not applicable in Q1 2010. The higher OG&A expense in Q1 2010 was largely in line with the revenue increases to support growth.
U.S. Operations
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Three-months Three-months
ended ended
(US$ millions, except percentages) March 31, March 31,
(unaudited) 2010 2009
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Revenue 33.8 33.0
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OG&A 32.9 29.5
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EBITDA(1) 0.9 3.5
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EBITDA(1) margin 2.7% 10.6%
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Net earnings/(loss) for the period (2.4) (0.2)
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The increase in revenue and OG&A expense in Q1 2010 compared to the same period in 2009 reflects the addition of seven centers in the U.S. Northeast in 2009. The increase in revenue was partially offset by the negative impact from the inclement weather in the mid-Atlantic region during Q1 2010, lower reimbursement rates from Medicare, as well as the continued challenging economic market place. The Q1 2010 EBITDA(1) margin of 2.7% was lower than 10.6% in Q1 2009 as a result of the previously noted factors.
Balance Sheet
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As at March 31, 2010, the Fund had working capital of $24.0 million, including cash and cash equivalents of $15.7 million, compared to working capital of $25.2 million, including cash and cash equivalents of $21.8 million as at December 31, 2009. Long-term debt of the Fund, including the current portion, was $320.3 million as at March 31, 2010, compared to $320.5 million as at December 31, 2009. As at March 31, 2010, the Fund had approximately $66.4 million available under the revolving credit facility. As at March 31, 2010, there were 89,842,404 Fund units issued and outstanding.
Notice of Conference Call
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Management of CML HealthCare Income Fund will host a conference call today, Thursday, May 6, 2010 at 10:00 am (EST) to discuss the Fund's 2010 first quarter financial results. A live audio webcast of the call will be available at www.cmlhealthcare.com. 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 13th, 2010 by calling 1-800-642-1687 or 416-849-0833, reference number 70102201 followed by the number sign.
(1) The Fund defines EBITDA as earnings before interest, taxes,
amortization, other expenses, goodwill impairment, gain/loss on
disposals of property and equipment, foreign exchange gain and
transaction costs on debt financing. EBITDA margins are calculated by
dividing EBITDA by revenue. EBITDA is not a recognized measure under
Canadian generally accepted accounting principles ("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 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.
(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, 2010 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; and a one-time settlement of
non-operating receivables relating to prior years.
(5) Discretionary/Non-recurring expenses represent one-time legal costs
incurred in the quarter
(6) Non-recurring revenue/(expense recoveries) represents one-time sales
tax recoveries in the quarter.
To view the Fund's Q1 2010 Financial Statements and Notes, please click here: http://files.newswire.ca/736/CML_Q1_2010_FS.pdf
About CML HealthCare Income Fund
CML HealthCare Income Fund is an unincorporated open-ended trust that owns CML HealthCare Inc., one of North America's largest healthcare services businesses. Based in Mississauga, Ontario, CML HealthCare Inc. is a leading provider of laboratory testing services in Ontario, the largest provider of medical imaging services in Canada and is a leading provider of medical imaging services in the U.S. Northeast. 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 www.cmlhealthcare.com.
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 in Canada; pending and proposed legislative or regulatory developments in Canada 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; our ability to complete strategic acquisitions and to integrate our acquisitions successfully; insurance coverage of sufficient scope to satisfy any liability claims; operational and infrastructure risks including possible equipment failure and performance of information technology systems; fluctuations in total patient referrals; technological change and obsolescence; loss of services of key senior management personnel; privacy laws; dependence on our operating subsidiary to pay its interest obligations to us; unpredictability and volatility of the unit price; nature of the Units; fluctuations in cash distributions and capital investment; structural subordination of the units; leverage and restrictive covenants; timing and amount of capital expenditures; restrictions on potential growth; tax-related risks; redemption right; dilution; future sales of units; distribution of CML Shares and Notes on termination of the Fund; and limited unitholder liability. Additional factors related to the business operations in the U.S. imaging market include, but are not limited to: potential termination of arrangements with contracted radiology practices; fluctuations in total patient referrals; changes in third-party reimbursement rates or methodology; increased pressure to control healthcare costs; increased competition; technological change; exposure to professional malpractice liability; potential termination of relationship with Johns Hopkins; currency fluctuations; ability to grow business in the United States; U.S. income tax matters; different regulatory environment characterized by extensive regulation; penalties arising from failure to comply with all regulations; federal and state fraud and abuse laws; reversal of Board of Physician's decisions or legislative change; loss of licensing, certification or accreditation; Certificate of Need regulations; privacy legislation; legislative change affecting prices that physicians or suppliers can charge; avoidance of fee-splitting; environmental health and safety laws; and the uncertainty of the U.S. regulatory environment.
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 and Uncertainties" section and elsewhere in our Management's Discussion and Analysis of Operating Results and Financial Position for the year ended December 31, 2009 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.
For further information: Alice Dunning, Investor Relations, The Equicom Group Inc., (416) 815-0700 ext 255, (416) 815-0080 fax, Email: [email protected]; Tom Weber, Chief Financial Officer, CML HealthCare Income Fund, (905) 565-0043, (905) 565-1776 fax, Internet: www.cmlhealthcare.com
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