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Press release from Marketwire

CML HealthCare Inc. Reports Second Quarter 2012 Financial Results

Thursday, August 09, 2012

CML HealthCare Inc. Reports Second Quarter 2012 Financial Results20:32 EDT Thursday, August 09, 2012MISSISSAUGA, ONTARIO--(Marketwire - Aug. 9, 2012) - CML HealthCare Inc. (the "Company" or "CML") (TSX:CLC) today reported its financial results for the three and six months ended June 30, 2012 (all amounts are in Canadian dollars, unless noted otherwise). Consolidated Financial Summary: For three month period endedFor six month period ended(C$ million except percent & per share amounts)30-Jun- 1230-Jun- 11% Change30-Jun- 1230-Jun- 11% ChangeRevenue94.095.4(1.4%)190.3187.01.8%Cost of services58.758.7(0.0%)117.5114.62.4%General & administrative11.310.93.7%21.820.75.3%Add back: Depreciation & amortization4.14.4(6.7%)8.28.8(7.0%)EBITDA(1)28.130.1(6.9%)59.260.4(2.0%)EBITDA(1)Margin (%)29.9%31.6%na31.1%32.3%naDepreciation & amortization4.14.4(6.7%)8.28.8(7.0%)Foreign exchange loss--na-0.3naRestructuring & other expense-2.6na-2.6naInterest expense2.52.9(14.8%)5.25.6(7.1%)Interest and other (income) expense net(0.4)0.2na(0.5)-naEarnings from continuing operations Before Taxes(2)(EBT)21.920.09.4%46.443.17.6%Provision for income taxes:Current taxes6.14.6na12.34.6naDeferred taxes1.31.0na1.57.6naNet earnings from continuing operations14.514.40.8%32.630.95.5%Loss from discontinued operations, net of tax-(6.6)na-(8.7)naNet earnings14.57.886.3%32.622.346.5%EPS from continuing operations (basic and diluted)0.160.16na0.360.345.9%EPS (basic and diluted)0.160.0977.8%0.360.2544.0%Cash provided by operating activities from continuing operations23.827.5na26.855.1naPurchase of property & equipment(2.5)(3.8)na(4.5)(10.3)naProceeds from sale of property and equipment and licences1.1-na1.3-naAcquisition of intangible assets(0.4)(1.7)na(1.8)(3.3)naAdjusted Funds From Operations(3)(AFFO)22.122.0na21.841.5na"During the second quarter, the Ontario Ministry of Health and Long Term Care announced reimbursement cuts to certain lab and imaging procedures which impacted our revenue by $1.5 million. This impact was offset by lower interest expense and the absence of restructuring charges this quarter resulting in EBT of $21.9 million which was 9.4% higher than the comparable period in 2011," said Tom Weber, Executive Vice President and Chief Financial Officer."During the quarter, we have made solid progress on a number of key initiatives to strengthen our business and pave the way for growth," said Thomas Wellner, President and Chief Executive Officer. "We have finalized our plans to upgrade the hematology platform at our central laboratory and similar to the equipment upgrade to our biochemistry platform completed last year, we expect to realize improved quality, service, and efficiencies once the new, state-of-the-art hematology equipment is installed in early 2013.""We have also started work on our previously announced accelerated clinic refurbishment program to improve the patient experience, the completion of which is targeted for the end of 2012." continued Mr. Wellner. "We are committed to providing our patients and staff with the highest standard of quality at all of our locations." Financial Results for Three Months Ended June 30, 2012 Revenue decreased 1.4% to $94.0 million from $95.4 million in the same period in 2011. The decrease reflect primarily: i) $1.5 million decline due to reimbursement rate cuts to certain diagnostic imaging and laboratory procedures announced by the Ontario Ministry of Health and Long Term Care (MOH) in May 2012 effective April 1, 2012; ii) $0.4 million net decrease in one-time laboratory funding from the MOH, and iii) $0.4 million decrease in non-cap revenues. The decreases were partially offset by $0.9 million in laboratory performance-based funding not available in Q2 2011.Cost of Services of $58.7 million was unchanged compared to the same period in 2011. A $0.8 million increase from general inflation primarily impacting staffing costs in Q2 2012 was offset by decreases to medical professional fees related to reimbursement rate cuts and lower depreciation.General and administrative ("G&A") expenses of $11.3 million were 3.7% higher than $10.9 million in the same period in 2011. The increase was attributed to an increase in staffing costs as well as an increase in amortization.EBITDA(1) of $28.1 million was 6.9% lower than the same period in 2011 of $30.1 million. EBITDA(1) margin of 29.9% in Q2 2012 was lower than 31.6% in Q2 2011. Both were impacted by lower revenue and higher G&A expenses as previously noted.Net earnings from continuing operations of $14.5 million were effectively unchanged compared to $14.4 million in Q2 2011. Q2 2012 saw lower depreciation as well as lower interest expense compared to the same period in 2011, offset by an increase in income taxes. Interest expense declined due to lower average debt balances and lower interest rates.AFFO(3) from continuing operations in Q2 2012 totaled $22.1 million compared to dividends declared of $17.0 million in the quarter. This compares to AFFO(3) from continuing operations of $22.0 million in Q2 2011. The increase reflects lower cash flow from operating activities offset by a decrease in capital spending in Q2 2012 compared to the same quarter in 2011. Financial Results for Six-Months Ended June 30, 2012 For the six month period ended June 30, 2012, revenue increased 1.8% to $190.3 million compared to $187.0 million in the prior year. The increase was primarily attributable to: i) $3.3 million increase in laboratory performance-based funding not applicable in 2011; ii) $0.8 million in additional revenue associated with a new funding agreement related to data submissions into the Ontario Laboratory Information System; and iii) $1.4 million increase to non-cap revenue from lab and imaging due to organic growth. The increases were partially offset by a $0.7 million net decrease in one-time lab funding from the MOH, and a $1.5 million reduction due to reimbursement rate cuts announced by the MOH.EBITDA(1) was $59.2 million for the six months ended June 30, 2012 compared to $60.4 million for the same period in 2011. The decline is a result of increased revenue as previously noted, offset by: i) higher staffing costs as a result of general inflation and ii) higher medical professional fees associated with increased volumes.For the six month period ended June 30, net earnings from continuing operation of $32.6 million in 2012 was 5.5% higher than $30.9 million in 2011. The increase was largely attributed to $2.6 million in restructuring and other expenses in 2011 not applicable in 2012, and a decline in interest expense due to lower effective interest rate and lower outstanding debt, offset by increased income taxes. Balance Sheet As at June 30, 2012, the Company had cash balances of $13.4 million, compared to $50.6 million as at December 31, 2011 and $8.8 million as at March 31, 2012. The decline in cash balance compared to December 31, 2011 was due primarily to debt repayment of $23.4 million, and payment of 2011 income taxes totaling $16.3 million. Long-term debt of the Company, including the current portion, was $275.4 million as at June 30, 2012, essentially unchanged relative to the end of Q1 2012 of $275.8 million, but lower than $299.8 million as at December 31, 2011. As at June 30, 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 Friday, August 10, 2012 at 10:00 am (EST) to discuss the Company's 2012 second 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 Saturday, August 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 Canada's largest community-based, medical diagnostic services provider operating 115 laboratory collection centres in Ontario and 103 imaging centres in Ontario, British Columbia, and Alberta. 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.(1)The Company defines EBITDA as earnings from continuing operations before interest, taxes, depreciation, amortization, restructuring and other expenses, interest and other (income)/expenses, net, 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.(2)The 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.(3)Adjusted 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, proceeds from sale of property and equipment and licenses 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. Investors should be cautioned, however that adjusted funds from continuing operations should not be construed as an alternative to cash provided by operating activities of continuing operations determined in accordance with IFRS. The Company's method of calculating adjusted funds from continuing operations may differ from other companies and accordingly, adjusted funds from continuing operations may not be comparable to measures used by other companies.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)June 30, 2012December 31, 2011$$ASSETSCurrent assetsCash13,39750,640Trade and other receivables37,97344,627Current portion of note receivable1,4451,373Other current assets3,3542,87456,16999,514Property and equipment52,13153,108Licences231,815232,259Intangible assets17,14618,090Goodwill30,67230,582Note receivable6,1836,916Other assets-328Total Assets394,116440,797LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities29,94437,520Dividends payable5,6505,650Other current liabilities2,0152,671Income taxes payable4,51117,968Current portion of long-term debt919897Provisions1,4992,13644,53866,842Long-term debt274,486298,935Other long-term liabilities1,1601,360Interest rate swap7,5667,172Deferred tax liabilities25,80624,489Total Liabilities353,556398,798SHAREHOLDERS' EQUITYCommon shares55,13455,134Contributed surplus13951Accumulated other comprehensive loss(5,577)(5,347)Deficit(9,136)(7,839)40,56041,999Total Liabilities and Shareholders' Equity394,116440,797CML HealthCare Inc.Unaudited Consolidated Statements of Earnings and Comprehensive Income(in thousands of Canadian dollars, except share and per share amounts)Six month period endedThree month period endedJune 30June 30June 30June 302012201120122011$$$$Revenue190,321187,01893,98995,368Cost of services117,472114,66358,65558,666Gross margin72,84972,35535,33436,702ExpensesGeneral and administrative21,83420,74511,34310,936Foreign exchange loss (gain)-278-(7)Restructuring and other expenses-2,607-2,60721,83423,63011,34313,536Operating earnings from continuing operations51,01548,72523,99123,166Interest expense5,2005,5982,4502,877Interest and other (income) expense, net(536)39(389)237Earnings from continuing operations before income taxes46,35143,08821,93020,052Provision for income taxesCurrent taxes12,2944,6196,1044,619Deferred taxes1,4527,5581,27799513,74612,1777,3815,614Net earnings for the period from continuing operations32,60530,91114,54914,438Loss from discontinued operations, net of tax-(8,662)-(6,629)Net earnings for the period32,60522,24914,5497,809Other comprehensive income (loss) net of income taxesGain (loss) on interest rate swap(394)1,507(2,492)37(Provision for) recovery of income taxes164(383)721(9)Net(230)1,124(1,771)28Foreign currency translation adjustment-(1,203)-(1,233)(Recovery of) provision for income taxes-(37)-142Net-(1,240)-(1,091)Total other comprehensive loss(230)(116)(1,771)(1,063)Comprehensive income for the period32,37522,13312,7786,746Continuing operations - basic and diluted earnings per share0.360.340.160.16Discontinued operations - basic and diluted earnings per share-(0.10)-(0.07)Net earnings - basic and diluted earnings per share0.360.250.160.09Weighted average number of common shares outstanding - basic89,842,39789,842,39789,842,39789,842,397Weighted average number of common shares outstanding - diluted89,854,90189,842,39789,851,16589,842,397CML HealthCare Inc.Unaudited Consolidated Statements of Cash Flows(in thousands of Canadian dollars)Six month period endedThree month period endedJune 30June 30June 30June 302012201120122011$$$$Cash provided by (used in)Operating activitiesNet earnings for the period from continuing operations32,60530,91114,54914,438Items not affecting cashDepreciation of property and equipment6,2637,1443,0973,536Amortization of intangible assets1,9251,663974827Unrealized foreign exchange loss (gain)7(5)(153)250Interest expense5,2005,5982,4502,877Other non-cash items(700)189(75)414Gain on sale of property and equipment and licences(580)-(580)-Restructuring and other expenses-2,607-2,607Income tax expense12,2944,6196,1044,619Deferred income taxes1,4527,5581,277995Net change in non-cash working capital items(151)1,3064,540391Interest paid(5,719)(6,398)(3,052)(3,354)Income taxes paid(25,751)(117)(5,344)(118)Cash provided by operating activities of continuing operations26,84555,07523,78727,482Cash provided by operating activities of discontinued operations-358-177Cash provided by operating activities26,84555,43323,78727,659Investing activitiesPurchase of property and equipment(4,470)(10,343)(2,454)(3,761)Proceeds from sale of property and equipment and licences1,262-1,105-Receipts from notes receivable1,039-519-Acquisition of intangible assets(1,835)(3,264)(351)(1,700)Cash used in investing activities of continuing operations(4,004)(13,607)(1,181)(5,461)Transaction costs paid(1,248)-(825)-Cash used in investing activities of discontinued operations-(609)-(1,266)Cash used in investing activities(5,252)(14,216)(2,006)(6,727)Financing activitiesPrincipal repayment of long-term debt and obligations under finance leases(23,431)(14,003)(222)(5,702)Dividends paid(33,902)(28,229)(16,951)(16,934)Transaction costs incurred on debt refinancing(1,503)---Common shares acquired-(392)--Cash used in financing activities of continuing operations(58,836)(42,624)(17,173)(22,636)Cash used in financing activities of discontinued operations-(947)-(478)Cash used in financing activities(58,836)(43,571)(17,173)(23,114)(Decrease) increase in cash(37,243)(2,354)4,608(2,182)Cash, beginning of period50,6409,5068,7899,334Cash, end of period13,3977,15213,3977,152FOR 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