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Press release from Marketwire

CML HealthCare Inc. Reports First Quarter 2012 Financial Results

Wednesday, May 09, 2012

CML HealthCare Inc. Reports First Quarter 2012 Financial Results16:01 EDT Wednesday, May 09, 2012MISSISSAUGA, ONTARIO--(Marketwire - May 9, 2012) - CML HealthCare Inc. (the "Company" or "CML") (TSX:CLC) today reported its financial results for the three months ended March 31, 2012 (all amounts are in Canadian dollars, unless noted otherwise).Q1 2012 Highlights:Revenue increased 5.1% to $96.3 millionEBITDA increased 2.8% to $31.1 millionEarnings Before Taxes (EBT3) increased 6.0% to $24.4 millionEarnings per Share (EPS) increased 25.0% to $0.20 Consolidated Financial Summary: (C$ million except percent & per share amounts)Three-monthsended Mar. 31, 2012 ("Q1 2012")Three-monthsended Mar. 31,2011 ("Q1 20111")% ChangeRevenue96.391.75.1%Cost of services58.856.05.0%General & administrative10.59.86.9%Add back: Depreciation & amortization4.14.4(7.4%)EBITDA231.130.32.8%EBITDA2Margin (%)32.3%33.0%naDepreciation & amortization4.14.4(7.4%)Foreign exchange loss-0.3naInterest expense2.72.7naInterest and other income(0.1)(0.2)naEarnings Before Taxes3(EBT)24.423.06.0%Provision for income taxes:Current taxes6.20.0naDeferred taxes0.26.6naNet earnings from continuing operations18.116.59.6%Loss from discontinued operations, net of tax0.0(2.0)naNet earnings18.114.425.0%EPS from continuing operations (basic and diluted)0.200.1811.1%EPS (basic and diluted)0.200.1625.0%Cash provided by operating activities from continuing operations3.127.6naPurchase of property & equipment(2.0)(6.6)naAcquisition of intangible assets(1.5)(1.6)naAdjusted Funds From Operations4(AFFO)(0.4)19.4na"CML reported solid results in the first quarter of 2012. Our 5.1% increase in revenue was driven by both organic growth in non-cap laboratory and imaging services, as well as additional funding received from the Ontario Ministry of Health and Long Term Care (MOH) for laboratory services. We also generated an 11.1% increase in earnings per share from continuing operations compared to the same period in 2011," said Thomas Wellner, President and Chief Executive Officer."Throughout the quarter, we continued to strengthen our foundation to deliver quality diagnostic health care services through: i) work-flow redesign and hematology equipment upgrade assessment at our central laboratory to improve efficiency; ii) renovations to our central laboratory office areas to improve the work environment and increase scalability; and iii) the decision to accelerate our clinic refurbishment program to enhance patient experience," continued Mr. Wellner. "We have also furthered our work on formulating CML's strategic direction for growth, and expect to communicate our strategy to stakeholders once our Board has reviewed and approved the strategy." Financial Results Q1 2012 revenue increased 5.1% to $96.3 million from $91.7 million primarily due to: i) $2.4 million in performance-based funding based on the laboratory funding agreement with the Ministry of Health and Long Term Care (MOH); ii) $0.6 million in funding from the MOH in respect of a new funding agreement associated with data submissions into the Ontario Laboratory Information System (OLIS); and iii) $1.7 million increase in non-cap laboratory and imaging revenue resulting from organic growth.Cost of Services increased 5.0% to $58.8 million from $56.0 million in Q1 20111 due primarily to: i) $1.3 million from general inflationary increases impacting staffing costs; and ii) $2.0 million increase in medical professional fees, supplies, and other variable costs associated with increased billings. The aforementioned were partially offset by lower depreciation resulting from certain assets becoming fully depreciated, offset by additional depreciation on purchase of property and equipment.General and administrative expenses of $10.5 million were 6.9% higher than $9.8 million in the same period in 2011. The increase was attributed to an increase in staffing costs and increased depreciation and amortization resulting from the purchase of additional property and equipment and intangible assets.Q1 2012 EBITDA of $31.1 million was 2.8% higher than the same period in 2011 of $30.3 million. EBITDA margin of 32.3% in Q1 2012 was lower than 33.0% in Q1 20111 due to increased cost of services and general and administrative expenses as previously noted.Net earnings from continuing operations increased 9.6% to $18.1 million ($0.20 per share) in Q1 2012 from $16.5 million ($0.18 per share) in Q1 20111. Cash flow from continuing operations of $3.1 million in Q1 2012 was lower than $27.6 million in Q1 20111. The decline was due primarily to: i) the payment of 2011 income taxes of $16.3 million; ii) the payment of 2012 income tax installments of $4.1 million; and iii) timing differences impacting certain non-cash working capital items.AFFO4 from continuing operations in Q1 2012 was a deficit of $0.4 million compared to a surplus of $19.4 million in the same quarter last year. The decline reflects primarily lower cash flow from operations as discussed above. Balance Sheet As at March 31, 2012, the Company had cash balances of $8.8 million, compared to $50.6 million as at December 31, 2011. The decline in cash balance was due primarily to debt repayment of $23.2 million, and payment of 2011 income taxes totaling $16.3 million. Long-term debt of the Company, including the current portion, was $275.8 million as at March 31, 2012, compared to $299.8 million as at December 31, 2011, reflecting the repayment of $23.2 million from cash as previously noted. As at March 31, 2012, the Company had approximately $125 million available under the revolving credit facility and 89,842,397 common shares issued and outstanding. Notice of Conference Call Thomas Wellner, President and CEO of CML will be hosting a conference call on Thursday, May 10, 2012 at 10:00 am (EST) to discuss the Company's 2012 first quarter financial results. Investors and analysts are invited to join the call by dialing 416-340-9531 / 877-440-9795. 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 Friday, May 25, 2012 by calling 905-694-9451 or 800-408-3053, reference number 1573557.About CML HealthCare Inc.Based in Mississauga, Ontario, CML HealthCare Inc. is a leading provider of laboratory testing services in Ontario operating 115 laboratory collection centres and the largest provider of medical imaging services in Canada with 105 imaging centres. CML is publicly-traded on the Toronto Stock Exchange under the symbol "CLC" and has approximately 89.8 million common shares outstanding. For more information, please visit www.cmlhealthcare.com.1Q1 2011 results reflect the reclassification of the U.S. operations as discontinued operations.2The Company defines EBITDA as earnings from continuing operations before interest, taxes, depreciation, amortization, restructuring and other expenses, interest and other income, 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.3The Company defines EBT as earnings from continuing operations before income taxes. EBT is not a recognized measure under IFRS. Management believes that, in addition to net earnings, EBT is a useful supplemental measure, as it provides investors with an indication of the Company's performance. EBT is used by the Company to analyze operating performance. Investors should be cautioned, however, that EBT should not be construed as an alternative to net earnings determined in accordance with IFRS. The Company's method of calculating EBT may differ from other companies and, accordingly, EBT may not be comparable to measures used by other companies.4Adjusted funds from continuing operations ("AFFO") is not a recognized measure under IFRS. AFFO is defined as cash flows from operating activities of continuing operations less purchases of property and equipment and acquisition of intangible assets. 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.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; operational and infrastructure risks including possible equipment failure and performance of information technology systems; 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; 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; structural subordination of common shares; 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; and future sales of common shares.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 ("MD&A") for the year ended December 31, 2011 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.CML HealthCare Inc.Unaudited Consolidated Balance Sheets(in thousands of Canadian dollars)March 31,2012$December 31, 2011 $ASSETSCurrent assetsCash8,78950,640Trade and other receivables44,00544,627Current portion of notes receivable1,3811,373Other current assets3,7822,874Assets held for sale675-58,63299,514Property and equipment52,29753,108Licences231,815232,259Intangible assets17,72218,090Goodwill30,67230,582Notes receivable6,4256,916Investments and other assets-328Total Assets397,563440,797LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities32,00037,520Dividends payable5,6505,650Other current liabilities2,1842,671Income taxes payable3,75017,968Current portion of long-term debt910897Provisions1,8842,13646,37866,842Long-term debt274,934298,935Other long-term liabilities1,2511,360Interest rate swap5,0747,172Deferred tax liabilities25,24924,489Total Liabilities352,886398,798SHAREHOLDERS' EQUITYCommon shares55,13455,134Contributed surplus8351Accumulated other comprehensive loss(3,806)(5,347)Deficit(6,734)(7,839)44,67741,999Total Liabilities and Shareholders' Equity397,563440,797CML HealthCare Inc.Unaudited Consolidated Statements of Earnings and Comprehensive Income(in thousands of Canadian dollars, except share and per share amounts)For the three month period endedMarch 31,March 31,20122011$$Revenue96,33291,650Cost of services58,81755,997Gross margin37,51535,653ExpensesGeneral and administrative10,4919,809Foreign exchange loss-28510,49110,094Operating earnings from continuing operations27,02425,559Interest expense2,7502,721Interest and other income(147)(198)Earnings from continuing operations before income taxes24,42123,036Provision for income taxesCurrent taxes6,190-Deferred taxes1756,5636,3656,563Net earnings for the period from continuing operations18,05616,473Loss from discontinued operations, net of tax-(2,033)Net earnings for the period18,05614,440Other comprehensive income, net of income taxesGain on interest rate swap2,0981,470Provision for income taxes(557)(374)Net1,5411,096Foreign currency translation adjustment-30Provision for income taxes-(179)Net-(149)Total other comprehensive income1,541947Comprehensive income for the period19,59715,387Continuing operations - basic and diluted earnings per share0.200.18Discontinued operations - basic and diluted earnings per share-(0.02)Net earnings - basic and diluted earnings per share0.200.16Weighted average number of common shares outstanding - basic89,842,39789,842,397Weighted average number of common shares outstanding - diluted89,858,55389,842,397CML HealthCare Inc.Unaudited Consolidated Statements of Cash Flows(in thousands of Canadian dollars)For the three month period endedMarch 31,March 31,20122011$$Cash provided by (used in)Operating activitiesNet earnings for the period from continuing operations18,05616,473Items not affecting cashDepreciation of property and equipment3,1663,608Amortization of intangible assets951836Unrealized foreign exchange (gain) loss160(255)Interest expense2,7502,721Other non-cash items(625)(225)Income tax expense6,190-Deferred income taxes1756,563Net change in non-cash working capital items(4,691)915Interest paid(2,667)(3,044)Income taxes (paid) recovered(20,407)1Cash provided by operating activities of continuing operations3,05827,593Cash provided by operating activities of discontinued operations-181Cash provided by operating activities3,05827,774Investing activitiesPurchase of property and equipment(2,016)(6,582)Receipts from note receivable520-Other investing activities157-Acquisition of intangible assets(1,484)(1,564)Cash used in investing activities of continuing operations(2,823)(8,146)Transaction costs paid(423)-Cash provided by investing activities of discontinued operations-657Cash used in investing activities(3,246)(7,489)Financing activitiesPrincipal repayment of long-term debt and obligations under finance lease(23,209)(8,301)Dividends paid(16,951)(11,295)Transaction costs incurred on debt refinancing(1,503)-Shares acquired-(392)Cash used in financing activities of continuing operations(41,663)(19,988)Cash used in financing activities of discontinued operations-(469)Cash used in financing activities(41,663)(20,457)Decrease in cash(41,851)(172)Cash, beginning of period50,6409,506Cash, end of period8,7899,334FOR FURTHER INFORMATION PLEASE CONTACT: Alice DunningCML HealthCare Inc.Director, Corporate Communications(905) 565-0043 ext. 3472(905) 565-2844 (FAX)dunninga@cml.caORTom WeberCML HealthCare Inc.Executive Vice President, Chief Financial Officer(905) 565-0043 ext. 3204(905) 565-2844 (FAX)www.cmlhealthcare.com