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Press release from Marketwire

CML HealthCare Inc. Reports 2011 First Quarter Financial Results

Thursday, May 19, 2011

CML HealthCare Inc. Reports 2011 First Quarter Financial Results06:00 EDT Thursday, May 19, 2011MISSISSAUGA, ONTARIO--(Marketwire - May 19, 2011) - CML HealthCare Inc. (the "Company" or "CML") (TSX:CLC) today reported its financial results for the three month period ended March 31, 2011 ("Q1 2011") (all amounts are in Canadian dollars, unless noted otherwise). This is the first quarter the Company is reporting under International Financial Reporting Standards ("IFRS"). Under IFRS, unlike Canadian Generally Accepted Accounting Principles ("Canadian GAAP"), depreciation and amortization is included in cost of services ("COS") and general & administrative ("G&A") expenses. Consequently, COS and G&A expenses in Q1 2011 will be higher than the Company's reported Q4 2010 results, which were calculated under Canadian GAAP.Consolidated Financial Summary:(C$millions, except percent & per share amounts) For the three month period ended March 31:2011 12010% ChangeRevenue114.0124.4-8.3%COS and G&A90.1102.4-12.0%Add back: Depreciation and amortization7.68.3-8.7%EBITDA231.530.33.9%EBITDA2 Margin27.6%24.4%13.1%Depreciation & amortization7.68.3-8.7%Foreign exchange-0.5naOther expenses-1.8naInterest expense2.82.512.5%Earnings before income taxes21.117.222.2%Provision for income taxes6.6-3.1310.5%Net Earnings14.420.3-28.9%EPS0.160.23-30.4%Cash flow from operating activities27.925.97.5%Purchase of property & equipment-6.9-8.1-14.2%Acquisition of intangible assets-1.6-0.8103.7%Adjusted Funds from Operations ("AFFO"3)19.417.113.5%"Our first quarter results demonstrate the stability of our Canadian business and reflect the positive impact from our cost containment initiatives in all businesses," said Tom Weber, Executive Vice President and Chief Financial Officer. "The decrease in year-over-year reported revenues is the result of the accounting impact from the Management Service Agreement ("MSA") with radiologists in Maryland which became effective in Q2 2010, as well as the impact from foreign exchange movements," continued Mr. Weber. "With the conversion of CML from an income trust structure to a corporation, we have discontinued the reporting of distributable cash," said Mr. Weber. "In its place, we have introduced Adjusted Funds from Operations3 representing Funds from Operations less total capital expenditures." Financial Results For the three months ended March 31, 2011, revenue decreased 8.3% to $114.0 million from $124.4 million for the same period in 2010. Decreased revenue in Q1 2011 was largely attributable to:$8.9 million from a change in accounting associated with the MSA with radiologists in Maryland, effective Q2 2010; $1.8 million from changes in foreign exchange rates; and Reimbursement cuts by Medicare and other payors in the U.S. The above declines in revenue were partially offset by increases from the following:$0.9 million increase in cap revenue based on the Ministry of Health funding agreement for laboratory services; and Growth in non-cap revenue Q1 2011 COS and G&A expenses of $90.1 million were 12.0% lower than $102.4 million for the same period in 2010. The decrease reflects:$8.9 million from a change in accounting associated with the MSA with radiologists in Maryland, effective Q2 2010; $2.0 million from changes in foreign exchange rates; Cost reductions in the U.S.; and A decrease in depreciation and amortization resulting from intangible assets impairments recorded in Q4 2010 The above declines in COS and G&A expenses were partially offset by a $1.2 million increase from harmonized sales tax ("HST") in Ontario and British Columbia that took effect July 1, 2010.Q1 2011 EBITDA2 totaled $31.5 million compared to $30.3 million in Q1 2010. EBITDA2 margin of 27.6% was higher than Q1 2010 of 24.4% as a result of items previously noted.The Company's net earnings for Q1 2011 of $14.4 million or $0.16 per share were lower than $20.3 million or $0.23 per share in Q1 2010. The decline was largely attributable to a $6.6 million provision for income taxes in Q1 2011 compared to an income tax recovery of $3.1 million in Q1 2010 resulting from the conversion from an income fund to a corporation. This was partially offset by a $1.8 million decline in other expenses associated with severances in 2010.AFFO3 in Q1 2011 totaled $19.4 million compared to $17.1 million in Q1 2010. Increased AFFO3 in Q1 2011 reflect higher cash flow from operating activities in Q1 2011 of $2.0 million and a decrease of $0.4 million in purchase of property and equipment and intangible assets. Segmented Highlights Canadian Operations(in C$millions, except percent amounts)For the three month period ended March 3120112010% ChangeRevenue91.690.31.4%COS and G&A Expenses65.664.51.7%Add back depreciation & amortization4.23.812.3%EBITDA30.229.62.2%EBITDA Margin33.0%32.7%0.9%Net Earnings16.723.027.4%Revenue in Q1 2011 increased 1.4% to $91.6 million compared to $90.3 million in the corresponding period in 2010. The increase was due primarily to: i) $0.9 million increase in laboratory cap revenue based on the MOH funding agreement; and ii) growth in non-cap revenue. The higher COS and G&A expense in Q1 2011 reflect the impact of HST as previously noted. Net earnings for Q1 2011 of $16.7 million were lower than $23.0 in Q1 2010 reflecting the provision for income taxes resulting from the conversion from an income fund to a corporation. U.S. Operations (in US$millions, except percent amounts)For the three month period ended March 3120112010% ChangeRevenue22.732.8-30.6%COS and G&A Expenses24.936.5-31.8%Add back depreciation & amortization3.44.4-22.0%EBITDA1.30.779.6%EBITDA Margin5.5%2.1%161.9%Net Earnings-2.3-2.610.7%Revenue in Q1 2011 totaled US$22.7 million compared to US$32.8 million in Q1 2010. The decrease in revenue in Q1 2011 compared to the same period in 2010 reflects: i) US$9.0 million from the accounting change associated with the MSA, effective Q2 2010; and ii) reimbursement cuts by Medicare and other payors effective January 1, 2011. Q1 2011 COS and G&A expenses were lower than the same period in 2010 due primarily to the accounting change associated with the MSA and cost reduction initiatives implemented in 2010. Balance Sheet As at March 31, 2011, the Company had cash balances of $9.3 million, compared to $9.5 million as at December 31, 2010. Long-term debt of the Company, including the current portion, was $320.5 million as at March 31, 2011, compared to $330.2 million as at December 31, 2010. As at March 31, 2011, the Company had approximately $57.5 million available under the revolving credit facility with 89,842,404 common shares issued and outstanding. Notice of Conference Call Patrice Merrin, Interim CEO and Chairman of the Board will be hosting a conference call today, Thursday, May 19, 2011 at 10:00 am (EST) to discuss the Company's 2011 first quarter financial results. Investors and analysts are invited to join the call by dialing 416-340-8527 or 877-240-9772. Please dial in 15 minutes prior to the call to secure a line. You will be put on hold until the conference call begins.A live audio webcast of the conference call will be available through 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, June 2, 2011 by calling 905-694-9451 or 800-408-3053, reference number 4524240.1 Revenue & operating expenses in Q1 2011 were lower than Q1 2010 by $8.9 million to reflect accounting changes resulting from the Management Services Agreement (MSA) with radiologists in Maryland which became effective in Q2 2010. Note that there was no impact to EBITDA or Net earnings as a result of the MSA.2 The Company defines EBITDA as earnings before interest, taxes, depreciation, amortization, other expenses-net, goodwill impairment, impairment of non-financial assets, loss on disposal of property and equipment, and foreign exchange gains/losses. EBITDA margins are calculated by dividing EBITDA by revenue. EBITDA is not a recognized measure under IFRS. Management believes that, in addition to net earnings, EBITDA is a useful supplemental measure, as it provides investors with an indication of the Company's performance. EBITDA is used by the Company 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 IFRS. The Company's method of calculating EBITDA may differ from other companies and, accordingly, EBITDA may not be comparable to measures used by other companies.3 Adjusted funds from operations ("AFFO") is not a recognized measure under IFRS. The Company uses this as a measure of financial performance, as an indicator of its cash flow strength, its ability to meet future operational and capital expenditure requirements and ability to pay dividends on the Company's common shares.To view the Fund's Q2 2010 Financial Statements, please click here: http://media3.marketwire.com/docs/cml_fs_0519.pdfAbout CML HealthCare Inc.CML HealthCare Inc. is one of North America's largest community-based healthcare services providers. 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 large provider of medical imaging services in the U.S. Northeast. CML HealthCare Inc. is publicly-traded on the Toronto Stock Exchange under the symbol "CLC" and has approximately 89.8 million common shares outstanding. To reach CML HealthCare Inc. via the worldwide web, log on to www.cmlhealthcare.com.Caution concerning forward-looking statementsThis 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: dependence on government-based revenues in Canada; general economic conditions; pending and proposed legislative or regulatory developments in Canada including the impact of changes in laws, regulations and the enforcement thereof; reliance on funding models in Canada; 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; ability to pay dividends in the future; leverage and restrictive covenants; fluctuations in cash timing and amount of capital expenditures; tax-related risks; unpredictability and volatility of the price of common shares; dilution; future sales of common shares. Additional factors related to business operations in the U.S. imaging market include, but are not limited to: potential termination of the 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; 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, and changes in, the U.S. healthcare 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 Factors" section of our Annual Information Form, under "Business Risks" and elsewhere in our Management's Discussion and Analysis of Operating Results and Financial Position for the year ended December 31, 2010 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 PLEASE CONTACT: Alice DunningCML HealthCare Inc.Director, Corporate Communications(905) 565-0043 ext.3472(905) 565-2844 (FAX)www.cmlhealthcare.comORTom WeberCML HealthCare Inc.Executive Vice President & Chief Financial Officer(905) 565-0043 ext.3204(905) 565-2844 (FAX)www.cmlhealthcare.com