CML HealthCare Income Fund Reports 2009 Third Quarter Financial Results
/NOT FOR DISTRIBUTION TO
MISSISSAUGA, ON,
Q3 2009 Summary
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- Revenue increased to $128.2 million from $117.9 million in Q3 2008
- EBITDA(1) totaled $35.3 million compared to $33.6 million in Q3 2008
- Net earnings decreased to $24.0 million from $26.4 million in Q3 2008
- Cash provided by operating activities totaled $28.9 million compared
to $28.5 million in Q3 2008
- The Fund generated distributable cash(2) of $28.6 million and
declared distributions totaling $24.0 million, representing a payout
ratio of 83.8%
"We continued to achieve growth in revenue, EBITDA(1) and cash flow from operations in the third quarter of 2009, while advancing our acquisition strategy and operating initiatives. Strong operating cash flow in Q3 2009 resulted in improved distributable cash and a lower payout ratio over last quarter," said
"With respect to the taxation changes impacting income trusts in 2011, we have assessed early conversion from an income trust to a corporate structure in terms of the best interests of our unitholders, but at this time, we see no compelling reason to convert prior to 2011," said
Financial Results
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Revenue for the Fund third quarter of 2009 ("Q3 2009") increased 8.8% to
Operating, general and administrative ("OG&A") expenses totaled
EBITDA(1) in Q3 2009 totaled
The Fund's net earnings for Q3 2009 totaled
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Financial Summary
(C$ millions, Three-months Three-months Nine-months Nine-months
except per unit ended ended ended ended
amounts) September 30, September 30, September 30, September 30,
(unaudited) 2009 2008 2009 2008
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Revenue 128.2 117.9 390.5 329.1
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Operating,
general
and
administrative 92.8 84.3 284.6 228.7
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EBITDA(1) 35.3 33.6 105.9 100.4
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Amortization 8.5 5.0 25.6 13.9
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Foreign Exchange
loss (gain) 0.5 - (0.2) -
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Loss/(gain) on
sale of
property and
equipment 0.1 (1.9) 0.2 (2.0)
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Transaction cost
on debt
financing - - - 3.5
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Other expense - 1.0 0.4 1.0
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Interest expense 3.1 3.7 10.4 10.6
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Recovery of
income
taxes (0.9) (0.6) (3.5) (1.2)
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Net earnings for
the period 24.0 26.4 73.0 74.6
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Basic earnings
per unit 0.27 0.29 0.81 0.84
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For the nine months ended
Distributable Cash(2)
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For Q3 2009, the Fund generated distributable cash(2) of
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Standardized
Distributable
Cash(3) & Three-months Three-months Nine-months Nine-months
Distributable ended ended ended ended
Cash(2) Table September 30, September 30, September 30, September 30,
(C$000s) 2009 2008 2009 2008
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Cash flow from
operating
activities 28,882 28,500 99,165 86,758
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Less:
Total capital
expenditures
as per
consolidated
statement of
cash flows (9,706) (7,904) (24,998) (16,536)
Acquisition of
licences &
intangible
assets (1,641) - (2,897) -
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Standardized
distributable
cash(3) 17,535 20,596 71,270 70,222
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Normalizing
adjustments to
non-cash
working
capital
items(4) 5,773 3,842 (3,837) 2,598
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Capital
Expenditures:
Add back:
One time
capital
expenditures 6,937 2,747 12,163 5,256
Non-recurring
capital
expenditure - - - 1,767
Changes in
capital
expenditure
notional
reserve 27 1,185 1,017 (779)
Capital lease
payments (19) (312) (57) (925)
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Sub-total 30,253 28,058 80,556 78,139
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Discretionary/
non-recurring
(recovery)
expenses(5) (626) 509 330 3,995
One-time
acquisition of
licences and
intangible
assets 63 - 1,319 -
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Cash available
for
distribution 29,690 28,567 82,205 82,134
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Non-recurring
revenue(6) (1,087) (93) (1,700) (819)
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Distributable
cash(2) 28,603 28,474 80,505 81,315
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Distributions to
unitholders 23,983 23,994 71,978 70,383
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Total payouts as
a percentage of
distributable
cash(2) 83.8% 84.3% 89.4% 86.6%
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Total payouts as
a percentage of
standardized
distributable
cash(3) 136.8% 116.5% 101.0% 100.2%
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Weighted average
number of Fund
units
outstanding in
the period 89,842,404 89,842,404 89,842,404 88,849,703
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(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
September 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 represents pre-implementation
costs related to certain business re-engineering projects; a one-time
tax adjustment; and non-recurring commodity tax recoveries.
(6) Non-recurring revenue represents retroactive payments for
professional and lab fees from MOH, retroactive payments in British
Columbia and retroactive MOH cap adjustment in the first quarter.
Segmented Analysis
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Canadian Operations
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(C$ millions,
except
percentages Three-months Three-months Nine-months Nine-months
and business ended ended ended ended
days) September 30, September 30, September 30, September 30,
(unaudited) 2009 2008 2009 2008
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Number of
business
days 63 63 189 188
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Revenue 90.1 82.2 270.1 247.9
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OG&A 59.9 52.9 180.1 157.9
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EBITDA(1) 30.3 29.4 90.0 90.0
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EBITDA(1)
margin 33.6% 35.7% 33.3% 36.3%
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Net earnings
for the
period 22.8 25.8 70.8 73.0
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The increase in revenue and OG&A in
U.S. Operations
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(US$ millions,
except
percentages Three-months Three-months Nine-months Nine-months
and business ended ended ended ended
days) September 30, September 30, September 30, September 30,
(unaudited) 2009 2008 2009 2008*
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Number of
business
days 64 64 191 149
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Revenue 34.7 34.2 102.9 79.5
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OG&A 30.0 30.2 89.3 69.3
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EBITDA(1) 4.7 4.1 13.6 10.2
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EBITDA(1)
margin 13.3% 11.9% 13.2% 12.8%
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Net earnings
for the
period 1.1 0.5 1.9 1.6
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* Represents ARS operations from March 1, 2008 onwards
For Q3 2009, revenue from U.S. operations of US$34.7 million was higher than Q3 2008 primarily as a result of increased reimbursements from the conversion to digital mammography. Higher EBITDA(1) margins of 13.3% in Q3 2009 compared to 11.9% in Q3 2008 are the result of higher revenue and effective cost containment. The increase in the net earnings to US$1.1 million in Q3 2009 as compared to
For YTD 2009, revenue and OG&A of US$102.9 million and US$89.3 million, respectively, were higher than the same period in 2008 due to the inclusion of ARS results for the nine-month period in 2009 compared to seven months in 2008. Improved EBITDA(1) margins of 13.2% YTD 2009 compared to 12.8% in the comparable period in 2008 are primarily due to increased reimbursements resulting from the conversion to digital mammography and effective cost containment.
Balance Sheet
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As at
As at
Tax Fairness Plan
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In June of 2007, the Government of
Notice of Conference Call
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Management of CML HealthCare Income Fund will host a conference call today,
(1) The Fund defines EBITDA as earnings before interest, taxes,
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 margins are calculated by dividing EBITDA by revenue. 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 Q3 2009 Financial statements and Notes, please click here: http://files.newswire.ca/476/FSandNOTESQ32009.pdf
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
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
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 initiatives.
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
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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: [email protected] or [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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