The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Marketwire

CML HealthCare Inc. Reports 2012 Year-End Financial Results and Declares Quarterly Dividend

Thursday, March 07, 2013

CML HealthCare Inc. Reports 2012 Year-End Financial Results and Declares Quarterly Dividend06:00 EST Thursday, March 07, 2013MISSISSAUGA, ONTARIO--(Marketwire - March 7, 2013) - CML HealthCare Inc. (the "Company" or "CML") (TSX:CLC) today reported results for the three and twelve month periods ended December 31, 2012. All financial results reflect the reclassification of CML's U.S. and Alberta imaging operations as discontinued operations which were sold in November 2011 and November 2012 respectively. CML will be hosting an investor call today, March 7, 2013 at 10:00 am (ET). Call-in number 416-340-8427 or 866-225-6564.Fiscal 2012 Highlights:Consolidated financial results reflect classification of U.S. and Alberta imaging operations as discontinued operations Revenue of $353.6 million compares to $354.8 million in 2011 EBITDA(1) of $107.5 million compares to $119.7 million in 2011 Net earnings of $39.9 million include a pretax charge for impairment of non-financial assets and, restructuring and other expenses totaling $25.2 million Including impairment charges and, restructuring and other expenses, EPS of $0.44 compares to $0.67 in 2011 Normalized AFFO(2) totaled $51.7 million For the full year 2012, consolidated revenue from continuing operations was $353.6 million compared to $354.8 million for the same period in 2011. The decline reflects a $3.1 million increase in laboratory revenue offset by a $4.3 million decrease in diagnostic imaging revenue. The increase in laboratory revenue reflects additional performance-based funding from the Ministry of Health and Long Term Care ("MOH") and higher non-cap revenues, partially offset by reimbursement rate cuts. The decline in revenue from imaging operations reflects the impact of the OHIP reimbursement cuts, retroactive imaging technical fee funding recognized as revenue in 2011, and closures of imaging locations in 2012.Cost of services for the full year 2012 increased 2.5% to $214.5 million compared to the same period in 2011, reflecting higher staffing costs, medical professional fees and variable costs associated with increased billings.General and administrative ("G&A") expenses totaled $46.3 million for the full year 2012 compared to $40.6 million in 2011. This increase reflects higher staffing costs, consulting fees related to laboratory process re-engineering, marketing costs associated with the launch of COLOGIC (CML's new screening test for colorectal cancer) and, a commodity tax recovery recorded in 2011 which was not applicable in 2012.Net earnings and EPS for the full year 2012 were $39.9 million and $0.44 compared to $59.9 million and $0.67 in the prior year respectively. Lower interest expense reflecting a decrease in interest rates and average debt balance, as well as lower income taxes in 2012, were offset by an asset impairment charge of $19.6 million and a charge of $5.7 million for restructuring and other expenses. The asset impairment charge reflects the write-down of the Company's diagnostic imaging assets to their estimated fair value, less costs to sell. The restructuring and other expenses include a $3.7 million charge in respect of severances associated with laboratory process re-engineering and closure of imaging locations, and a $2.0 million charge related to the early termination of a long-term supplier contract. "CML's 2012 results reflect the beginning of our transformation from a lab and imaging services provider to one that's focused on strengthening our core lab business. We invested in talent, process re-engineering and technology in 2012 to significantly strengthen our base business and to prepare for new opportunities," said Thomas Wellner, President and CEO of CML. "Late last year, we unveiled our new strategic plan to improve performance and build value for our stakeholders. We have moved decisively to execute on our strategic plan, starting with automation of our central laboratory. We're also streamlining other aspects of our operations to increase cost efficiencies and improve turnaround times," continued Mr. Wellner. "In 2012, we invested in our workforce to enhance our operating capabilities and add depth and capacity, while at the same time maintaining our commitment to returning significant capital to shareholders in the form of dividends. These investments in people better position us to pursue new growth opportunities that will diversify our customer and payor base. In addition to COLOGIC, the exclusive, private pay screening test for colorectal cancer that we announced last fall, we have entered into exclusive Canadian distribution rights for MELISA, an immune response test to assess hypersensitivities to metals used by dentists and doctors worldwide to determine a patient's tolerance to materials commonly used in dental restorations or bodily implants. As well, we have repatriated allergy testing through a contract with Somagen which will reduce our costs and increase our revenue over time," said Mr. Wellner. "In January 2013, we announced our intent to divest our imaging operations and focus on growing our core laboratory business. The sale process is proceeding on plan and we have received a significant amount of interest for our imaging assets. There are a large number of non-binding offers from a broad range of parties interested in the entire diagnostic imaging portfolio through to provincial, regional, and individual clinics," added Mr. Wellner. "At this point, our expectation of value for all of the assets is in the range of $70 million to $110 million. We look forward to reporting on further progress and transactions over the next couple of quarters," said Mr. Wellner. For the year endedFor the three month period ended(C$ million except percent & per share amounts)31-Dec-1231-Dec-11% Change31-Dec-1231-Dec-11% ChangeRevenue353.6354.8(0.3%)88.290.6(2.7%)Cost of services214.5209.32.5%53.553.40.3%General and administrative46.340.614.3%12.910.325.3%Add back: Depreciation and amortization14.814.8(0.4%)4.03.610.1%EBITDA(1)107.5119.7(10.2%)25.730.5(15.8%)EBITDA(1)Margin30.4%33.8%29.1%33.7%Depreciation and amortization14.814.84.03.6Restructuring and other expenses5. of non-financial assets19.6-19.6-Interest expense10. and other income(1.0)(0.3)(0.5)(0.3)Provision for income taxes18.725.00.36.4Net earnings / (Loss) for the period from continuing operations39.765.4(5.7)17.5Earnings/(Loss) from discontinued operations, net of tax0.3(5.5)(0.8)7.8Net earnings/(Loss) for the period39.959.9(6.5)25.2Basic and diluted earnings per share - continuing operations0.440.73(0.06)0.19Basic and diluted earnings/(loss) per share - discontinued operations-(0.06)(0.01)0.09Basic and diluted earnings/(loss) per share0.440.67(0.07)0.28FY2012FY2011Q4 2012Q4 2011Q3 2012Normalized Adjusted Funds From Operations(2)(AFFO):Cash provided by operating activities of continuing operations61.2114.824.240.511.3Adjust for net change in non-cash working capital items(0.5)(5.4)(6.4)(10.6)5.9Average spending to maintain property and equipment(9.0)(9.0)(2.3)(2.2)(2.2)Normalized AFFO(2)51.7100.4*15.527.7*15.0*There were no material income taxes paid in 2011 Fourth Quarter Results For the fourth quarter ("Q4") ended December 31, 2012, revenues of $88.2 million were 2.7% lower than $90.6 million in 2011. The revenue decline reflects the previously announced reimbursement cuts to certain imaging and lab procedures by the MOH in 2012, and the continuing trend of lower x-ray volumes resulting from changes in industry referral patterns that began last summer. Compared to Q3 2012, Q4 2012 revenues increased $2.7 million reflecting a seasonally stronger quarter and increased laboratory performance-based funding recognized in Q4.Cost of services in Q4 2012 of $53.5 million were essentially unchanged from the same period in 2011 of $53.4 million. Compared to Q3 2012, cost of services were $1.0 million higher, in line with higher revenues.G&A expenses of $12.9 million in Q4 2012 compares with $10.3 million in Q4 2011. This increase reflects higher staffing costs, consulting fees related to laboratory process re-engineering, and marketing costs related to the launch of COLOGIC. Compared to Q3 2012, G&A expenses increased by $1.0 million, half of which represented consulting fees primarily associated with the laboratory process re-engineering.EBITDA(1) in Q4 2012 totaled $25.7 million compared to $30.5 million in the same quarter in 2011 and $24.7 million in Q3 2012. Net loss of $6.5 million (or $0.07 per share) in Q4 2012 compares to net earnings of $25.2 million (or $0.28 per share) in Q4 2011. The decline in net earnings in Q4 2012 reflects the previously noted asset impairment charge of $19.6 million and the charge of $5.7 million for restructuring and other expenses. Normalized AFFO(2) for Q4 2012 totaled $15.5 million compared to Q3 2012 of $15.0 million and Q4 2011 of $27.7 million. It should be noted that there were no material income taxes paid in 2011. Balance Sheet The Company had a cash balance of $3.0 million as at December 31, 2012 compared to $50.6 million as at December 31, 2011. The decline in cash balance was primarily due to debt repayment and payment of 2011 income taxes in the first quarter of 2012. Long-term debt, including the current portion, of $250.2 million as at December 31, 2012 compares to $299.8 million as at December 31, 2011. As at year-end 2012, the Company had approximately $150 million available under its revolving credit facility with a Debt/EBITDA ratio of approximately 2.3 times. Common shares issued and outstanding totaled 89,842,397 as at December 31, 2012. Change in Board of Directors Effective February 15, 2013, Steven Chepa retired as a Director of CML HealthCare Inc. "On behalf of CML and the Board of Directors, I would like to offer my sincere thanks and appreciation to Steven for his 16 years of distinguished service to the Company," said Patrice Merrin, Chairman of CML. Board of Directors Declare Quarterly Dividend For the first quarter ending March 31, 2013, the Board of Directors of CML HealthCare Inc. has declared a quarterly cash dividend of $0.1325 per common share payable on April 19, 2013 to shareholders of record as at the close of business on March 28, 2013.CML designates $0.00066 per share of the dividend as an "ineligible dividend", and the remainder $0.13184 per share to be an "eligible dividend" pursuant to subsection 89(14) of the Income Tax Act (Canada) and similar provincial and territorial legislation. Notice of Conference Call Thomas Wellner, President and CEO of CML will be hosting a conference call on Thursday, March 7, 2013 at 10:00 am (EST) to discuss the Company's 2012 year-end financial results. Investors and analysts are invited to join the call by dialing 416-340-8427 or 866-225-6564. 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 Please connect at least 15 minutes prior to the conference call to allow 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, March 21, 2012 by calling 905-694-9451 or 800-408-3053, reference number 3988268.About CML HealthCare Inc.Based in Mississauga, Ontario, CML HealthCare Inc. is a leading community-based, medical diagnostic services provider operating 137 patient service centres in Ontario, 84 imaging centres in Ontario, and British Columbia, and a reference laboratory in Ontario focused on specialized coagulation testing for customers worldwide. 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 and follow us on Twitter @cmlhealthcare. (1)The Company defines EBITDA as earnings from continuing operations before interest, taxes, depreciation, amortization, impairment of non-financial assets, restructuring and other expense and interest and other income. 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)NormalizedAdjusted funds from continuing operations ("AFFO") is not a recognized measure under IFRS. AFFO is defined as cash flows from operating activities of continuing operations adjusted for the net change in non-cash working capital items, and the average capital spending required to maintain property and equipment. 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; disposal of our diagnostic imaging business under acceptable terms and conditions to our Company; 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.Consolidated Balance Sheets (unaudited)December 31,December 31,20122011(in thousands of Canadian dollars)$$ASSETSCurrent assetsCash3,03950,640Trade and other receivables39,60144,627Current portion of notes receivable-1,373Other current assets3,6302,87446,27099,515Property and equipment49,23353,108Intangible assets12,71218,090Licenses223,468232,259Goodwill16,90030,582Notes receivable-6,916Investment and other assets362328Total Assets348,945440,797LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities35,72937,520Dividends payable5,6515,650Other current liabilities1,0302,671Income taxes payable3,64117,968Current portion of long-term debt922897Provisions4,2672,13651,24066,842Long-term debt249,279298,935Provisions and other long-term liabilities2,4331,360Derivative liabilities6,2587,172Deferred tax liabilities24,33324,489Total Liabilities333,542398,798SHAREHOLDERS' EQUITYCommon shares55,21055,134Contributed surplus21851Deficit(35,711)(7,839)Accumulated other comprehensive loss(4,315)(5,347)15,40241,999Total Liabilities and Shareholders' Equity348,945440,797CML HealthCare Inc.Consolidated Statements of Earnings and Comprehensive Income (unaudited)For the year ended December 3120122011(in thousands of Canadian dollars, except share and per share amounts)$$Revenue353,599354,753Cost of services214,500209,289Gross margin139,099145,464ExpensesGeneral and administrative46,33740,553Impairment of non-financial assets19,570-Restructuring and other expenses5,6732,76471,58043,317Earnings from continuing operations before interest & income taxes67,519102,147Interest expense10,15712,036Interest and other income(975)(301)Earnings from continuing operations before income taxes58,33790,412Provision for (recovery of) income taxesCurrent taxes19,03515,578Deferred taxes(365)9,43118,67025,009Net earnings for the year from continuing operations39,66765,403Earnings (loss) from discontinued operations, net of tax267(5,466)Net earnings for the year39,93459,937Other comprehensive income, net of income taxesGain on interest rate swap1,3142,798Provision for income taxes(282)(711)Net1,0322,087Foreign currency translation adjustment-1,418Reclassified to net earnings-(5,367)(Recovery of) provision for income taxes-(37)Net-(3,986)Total other comprehensive income (loss)1,032(1,899)Comprehensive income for the year40,96658,038Continuing operations - basic and diluted earnings per share0.440.73Discontinued operations - basic and diluted earnings/(loss) per share0.01(0.06)Net earnings - basic and diluted earnings per share0.440.67Weighted average number of common shares outstanding - basic89,842,39789,842,397Weighted average number of common shares outstanding - diluted89,843,53389,842,451CML HealthCare Inc.Consolidated Statements of Cash Flows (unaudited)For the year ended December 3120122011(in thousands of Canadian dollars)$$Cash provided by (used in)Operating activitiesNet earnings for the year from continuing operations39,66765,403Items not affecting cashDepreciation of property and equipment11,34311,840Amortization of intangible assets3,4422,998Unrealized foreign exchange-(84)Interest expense10,15712,036Other non-cash items(1,569)(15)Gain on settlement of notes receivable(305)-Impairment of non-financial assets19,570-Gain on sale of property and equipment and licenses(580)-Restructuring and other expenses5,6732,764Current taxes19,03515,578Deferred taxes(365)9,431Net change in non-cash working capital items4815,396Deferred revenue-2,194Interest paid(10,556)(12,594)Income taxes paid(34,840)(110)Cash provided by operating activities of continuing operations61,153114,837Cash provided by operating activities of discontinued operations3,01011,692Cash provided by operating activities64,163126,529Investing activitiesPurchase of property and equipment(14,304)(16,297)Proceeds from sale of property and equipment and licenses1,262-Receipts from notes receivable9,056223Other investing activities(362)-Business acquisitions(923)(328)Acquisition of intangible assets(3,875)(1,926)Cash used in investing activities of continuing operations(9,146)(18,328)Transaction costs paid(1,248)-Cash used in investing activities of discontinued operations(41)(7,169)Proceeds from sale of discontinued operations17,03631,176Cash from investing activities6,6015,679Financing activitiesPrincipal repayment of long-term debt and obligations under finance leases(49,057)(27,188)Dividends paid(67,805)(62,126)Transaction costs incurred on debt refinancing(1,503)-Common shares acquired-(392)Cash used in financing activities of continuing operations(118,365)(89,706)Cash used in financing activities of discontinued operations-(1,368)Cash used in financing activities(118,365)(91,074)(Decrease) increase in cash(47,601)41,134Cash, beginning of year50,6409,506Cash, end of year3,03950,640FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: CML HealthCare Inc.Alice Dunning, MBA, CFADirector, Corporate Communications(905) 565-0043 ext.3472(905) 565-2844 (FAX) or Twitter: @cmlhealthcare