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CML HealthCare Income Fund Reports 2010 Second Quarter Financial Results

^{Published on 2010-08-12 03:20:55 - Market Wire}
 

 ------------------------------------------------------------------------- Three-months Three-months ended ended June 30, June 30, (C$ millions except percent 2010 2009 and per unit amounts) ("Q2 2010") ("Q2 2009") % Change ------------------------------------------------------------------------- Revenue $119.7 $133.9 (10.6%) ------------------------------------------------------------------------- Operating, general, & administration expenses $87.0 $97.1 (10.4%) ------------------------------------------------------------------------- EBITDA(1) $32.7 $36.8 (11.2%) ------------------------------------------------------------------------- EBITDA(1) Margin 27.3% 27.5% (0.1%) ------------------------------------------------------------------------- Net Earnings $22.9 $25.9 (11.9%) ------------------------------------------------------------------------- Net Earnings per unit $0.25 $0.29 (13.8%) ------------------------------------------------------------------------- Cash provided by operating activities $27.1 $32.5 (16.8%) ------------------------------------------------------------------------- Distributable cash(2) $23.1 $24.3 (5.0%) ------------------------------------------------------------------------- Distributions declared $24.0 $24.0 0.0% ------------------------------------------------------------------------- Payout ratio 103.9% 98.6% 5.4% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Six-months Six-months ended ended June 30, June 30, (C$ millions except percent 2010 2009 and per unit amounts) ("H1 2010") ("H1 2009") % Change ------------------------------------------------------------------------- Revenue $245.1 $262.2 (6.5%) ------------------------------------------------------------------------- Operating, general, & administration expenses $181.7 $191.8 (5.3%) ------------------------------------------------------------------------- EBITDA(1) $63.4 $70.4 (10.0%) ------------------------------------------------------------------------- EBITDA(1) Margin 25.9% 26.9% (3.7%) ------------------------------------------------------------------------- Net Earnings $43.8 $49.0 (10.6%) ------------------------------------------------------------------------- Net Earnings per unit $0.49 $0.55 (10.9%) ------------------------------------------------------------------------- Cash provided by operating activities $53.3 $70.3 (24.1%) ------------------------------------------------------------------------- Distributable cash(2) $51.3 $51.9 (1.0%) ------------------------------------------------------------------------- Distributions declared $48.0 $48.0 0.0% ------------------------------------------------------------------------- Payout ratio 93.5% 92.5% 1.1% ------------------------------------------------------------------------- Operating Highlights: --------------------- - Implemented a new, management service agreement ("MSA") with American Radiology Associates, P.A. ("ARA") representing the radiologists at CML's U.S. medical imaging subsidiary, American Radiology Services ("ARS") in which fees vary with revenues. This resulted in an accounting impact of decreasing both consolidated revenue and expenses YTD and in Q2 2010 compared to similar periods in 2009. However, it does not impact EBITDA or Net Earnings; - Increased revenue 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; - Implemented the new RIS/PACS in all centres in Maryland and Delaware; - Improved quarter-over-quarter U.S. EBITDA(1) margins from 2.7% in Q1 2010 to 11.1% in Q2 2010 (under the previous ARA MSA, although EBITDA(1) in Q2 2010 would be no different, EBITDA(1) Margin would have been 8.3%) 

 New Management Service Agreement (MSA) with American Radiology -------------------------------------------------------------- Associates (ARA) ---------------- 

 Financial Results ----------------- 

 - $5.1 million from changes in foreign exchange rates; - $9.3 million as a result of accounting for the new MSA with ARA; - $1.8 million in one-time imaging and laboratory services reimbursements in Canada recorded in Q2 2009 not applicable in Q2 2010; - Decreased reimbursements from Medicare on high-end modalities resulting from U.S. healthcare reform; and - Lower volumes resulting from difficult market conditions in the U.S. including declines in office visits at our referring physicians. 

 - $4.0 million in revenue generated from the seven centres in the U.S. acquired in the second half of 2009; - $1.1 million increase from organic growth in imaging services in Canada; and - $1.0 million increase in cap revenue based on the Ministry of Health (MOH) Funding agreement for laboratory services 

 - $4.3 million from changes in foreign exchange rates; - $9.3 million as a result of accounting for the new MSA with ARA; and - Additional decreases in operating expenses due to effective cost containment 

 - $3.3 million in additional costs related to the seven centres in the U.S acquired. in the second half of 2009; and - $0.9 million in additional costs to support organic growth including costs related to the HRIS and RIS/PACS projects. 

 Financial Summary ------------------------------------------------------------------------- (C$ millions, Three-months Three-months Six-months Six-months except percent ended ended ended ended amounts) June 30, June 30, June 30, June 30, (unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Net earnings for the period 22.9 25.9 43.8 49.0 Less: recovery of income taxes (1.6) (0.9) (4.7) (2.6) Add: interest expense 3.1 3.2 6.1 7.3 Add: other expense - 0.4 1.5 0.4 Less: Foreign exchange gain (0.1) (0.2) (0.2) (0.7) Add: Amortization 8.5 8.4 17.0 17.1 ------------------------------------------------------------------------- EBITDA(1) 32.7 36.8 63.4 70.4 Revenue 119.7 133.9 245.1 262.2 ------------------------------------------------------------------------- EBITDA(1) margin as a percent of revenue 27.3 27.5 25.9 26.9 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Distributable Cash(2) --------------------- 

 ------------------------------------------------------------------------- Standardized Distributable Cash(3) & Three-months Three-months Six-months Six-months Distributable ended ended ended ended Cash(2) Table June 30, June 30, June 30, June 30, (C$000s) 2010 2009 2010 2009 ------------------------------------------------------------------------- Cash flow from operating activities 27,060 32,505 53,337 70,283 Less: Total capital expenditures as per consolidated statement of cash flows (4,432) (4,555) (12,424) (15,292) Expenditure relating to the acquisition of licenses and intangible assets (2,502) (1,256) (3,270) (1,256) ------------------------------------------------------------------------- Standardized distributable cash(3) 20,126 26,694 37,643 53,735 ------------------------------------------------------------------------- Normalizing adjustments to non-cash working capital items(4) 737 (4,304) 6,952 (9,610) Capital Expenditures: Add back: Intangible asset acquired 1,654 1,256 1,654 - One time capital expenditures 3,206 2,280 10,368 5,226 Changes in capital expenditure notional reserve (2,102) (2,184) (4,794) 990 Capital lease payments (358) (19) (634) (38) ------------------------------------------------------------------------- Sub-total 23,263 23,723 51,189 51,559 ------------------------------------------------------------------------- Discretionary/ non-recurring expenses(5) 1,192 1,130 1,317 956 ------------------------------------------------------------------------- Cash available for distribution 24,455 24,853 52,506 52,515 ------------------------------------------------------------------------- Non-recurring revenue/ expense recoveries/ supplier incentive(6) (1,340) (535) (1,161) (646) Distributable cash(2) 23,115 24,318 51,345 51,869 ------------------------------------------------------------------------- Distributions to unitholders 24,009 23,984 48,026 47,995 Total payouts as a percentage of distributable cash(2) 103.9% 98.6% 93.5% 92.5% Total payouts as a percentage of standardized distributable cash(2) 119.3% 89.8% 127.6% 89.3% ------------------------------------------------------------------------- Weighted average number of Fund units outstanding in the period 89,842,404 89,842,404 89,842,404 89,842,404 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Segmented Highlights -------------------- Canadian Operations ------------------------------------------------------------------------- (C$ millions, Three-months Three-months Six-months Six-months except ended ended ended ended percentages) June 30, June 30, June 30, June 30, (unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenue 93.0 92.8 183.3 180.0 ------------------------------------------------------------------------- OG&A 63.3 62.3 123.9 120.3 ------------------------------------------------------------------------- EBITDA(1) 29.7 30.5 59.5 59.8 ------------------------------------------------------------------------- EBITDA(1) margin 32.0% 32.9% 32.4% 33.2% ------------------------------------------------------------------------- Net earnings for the period 23.0 24.3 46.4 47.6 ------------------------------------------------------------------------- 

 U.S. Operations ------------------------------------------------------------------------- US$ millions, Three-months Three-months Six-months Six-months except ended ended ended ended percentages June 30, June 30, June 30, June 30, (unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenue 25.9 35.2 59.7 68.2 ------------------------------------------------------------------------- OG&A 23.0 29.8 56.0 59.3 ------------------------------------------------------------------------- EBITDA(1) 2.9 5.4 3.8 8.9 ------------------------------------------------------------------------- EBITDA(1) margin 11.1% 15.3% 6.3% 13.0% ------------------------------------------------------------------------- Net earnings/(loss) for the period (0.1) 1.4 (2.6) 1.2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 U.S. Operations - Adjusting for the new MSA ------------------------------------------------------------------------- US$ millions, Three-months Three-months Six-months Six-months except ended ended ended ended percentages June 30, June 30, June 30, June 30, (unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenue 25.9 35.2 59.7 68.2 ------------------------------------------------------------------------- Add back: Impact of new MSA on Revenue 9.0 - 9.0 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjusted Revenue 34.9 35.2 68.7 68.2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- OG&A 23.0 29.8 56.0 59.3 ------------------------------------------------------------------------- Add back: Impact of new MSA on OG&A 9.0 - 9.0 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjusted OG&A 32.0 29.8 65.0 59.3 ------------------------------------------------------------------------- ------------------------------------------------------------------------- EBITDA(1) 2.9 5.4 3.8 8.9 ------------------------------------------------------------------------- Adjusted EBITDA(1) margin 8.3% 15.3% 5.5% 13.0% ------------------------------------------------------------------------- Net earnings/(loss) for the period (0.1) 1.4 (2.6) 1.2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Balance Sheet ------------- 

 Notice of Conference Call ------------------------- 

 (1) The Fund defines EBITDA as earnings before interest, taxes, amortization, other expenses, goodwill impairment, gain/loss on disposals of property and equipment, and foreign exchange gain. 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 June 30, 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; one-time payments made related to the transition to the new MSA;, amounts payable on deposits and acquisition costs relating to a potential future acquisition 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; additional cost under the new MSA relating to RIS/PACS; and non-recurring sales tax payment (6) Non-recurring revenue/expense recoveries/supplier incentive represents one-time gain on sale of an investment; recoveries of certain sales taxes paid; and supplier incentive received net of the price reductions expected on future purchase of supplies.