Toronto Stock Exchange Symbol: CLC.UN
MISSISSAUGA, ON, Dec. 17 /CNW/ - CML HealthCare Income Fund (the "Fund" or "CML HealthCare") (TSX: CLC.UN) today announced that the Ontario Association of Medical Laboratories ("OAML") has entered into a new three-year funding agreement (the "Agreement") with the Ontario Ministry of Health and Long-Term Care ("MOH"). Under terms of the Agreement, which is retroactive to April 1, 2008, the MOH has increased the provincial payment cap for laboratory services to OAML members to $628.4 million for the MOH year ending March 31, 2009 ("Year One"), representing an increase of $18.3 million or 3% compared to the $610.1 million in funding for the MOH year ended March 31, 2008. For the MOH year ending March 31, 2010 ("Year Two"), the MOH will increase the base provincial payment cap to $640.9 million, representing an increase of $12.6 million or 2% compared to Year One. For the MOH year ending March 31, 2011 ("Year Three") the MOH will increase the base provincial payment cap to $649.3 million, representing an increase of $8.3 million or 1.3% compared to Year Two.
Similar to the previous funding agreement, the Agreement also includes additional funding in Year Two and Year Three, provided industry billings exceed certain thresholds. Additional funding in Year Two amounts to a maximum of $4.9 million and a maximum of $5.9 million in Year Three. Additional funding earned in Year Three will be added to the provincial payment cap at the end of the three-year term.
"While the increases to the funding agreement may appear modest, CML and the OAML appreciate the current challenging economic environment faced by the province of Ontario. As always, CML will cooperate and support the ongoing shared responsibility between the MOH and OAML to ensure a continued high level of laboratory testing patient services and with respect for the long-term prosperity in Ontario," said Paul Bristow, President and CEO of CML HealthCare Income Fund. "The new agreement further supports our laboratory services business, providing continued stable cash flow going forward."
The following table provides a summary of the industry funding in accordance with the Agreement. CML HealthCare, which currently holds approximately 30.6% of the provincial payment cap, will receive its proportionate share of the total funding.
------------------------------------------------------------------------- (in millions, MOH Year Ending MOH Year Ending MOH Year Ending except % figures) March 31, 2009 March 31, 2010 March 31, 2011 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Opening Base Cap $610.1 $628.4 $640.9 ------------------------------------------------------------------------- Base Cap Adjustment $18.3 $12.6 $8.3 ------------------------------------------------------------------------- Closing Base Cap $628.4 $640.9 $649.3 ------------------------------------------------------------------------- Additional Funding - $4.9 $5.9 ------------------------------------------------------------------------- Total Available Funding/ % Increase over Opening Base Cap $628.4/3.0% $645.8/2.8% $655.2/2.2% -------------------------------------------------------------------------
While this is a three-year agreement, the OAML and MOH have agreed to meet in the first quarter of 2010 to negotiate whether the base cap adjustment for Year Three should be further increased after considering such factors as growth in utilization and prevailing economic conditions.
Due to the retroactive nature of the Agreement, CML Healthcare will recognize approximately $4.2 million in additional cap revenue in its fourth quarter 2008, representing the 3% cap increase from April 1, 2008 to December 31, 2008. Of this amount, $2.8 million relates to the second and third quarters of 2008.
With respect to the proforma cash flow impact resulting from the increased funding, the Fund's proforma distributable cash(xx) in the third quarter of 2008 increases by $1.4 million from $28.5 million to $29.9 million. This results in a lower proforma payout ratio of 80.3% for the quarter, compared to the payout ratio 84.3% previously disclosed. The impact to the Fund's proforma distributable cash(xx) for the nine months ended September 30, 2008 is an increase of $2.8 million from $81.3 million to $84.1 million. This results in a lower proforma payout ratio of 83.7% for the nine months ended September 30, 2008, compared to the payout ratio of 86.6% previously disclosed. The following Standardized Distributable Cash(1) and Distributable Cash(xx) table from the Fund's 2008 Third Quarter news release (dated November 5, 2008) has been modified to reflect the Fund's proforma distributable cash(xx), resulting from retroactive payments under the new funding agreement.
-------------------------------------------------------------------------
Standardized Distributable Cash(1) July 1, 2008 January 1, 2008
and Distributable Cash(xx) Table to September 30, to September 30,
($000s) 2008 (unaudited) 2008 (unaudited)
-------------------------------------------------------------------------
Cash flow from operating
activities 28,500 86,758
-------------------------------------------------------------------------
Less:
Total capital expenditures
as per consolidated statement
of cash flows (7,904) (16,536)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Standardized distributable cash(1) 20,596 70,222
-------------------------------------------------------------------------
Normalizing adjustments to non-cash
working capital items(2) 3,842 2,598
-------------------------------------------------------------------------
Capital Expenditures:
Add back: One time capital
expenditures 2,747 5,256
Non-recurring capital
expenditure(3) - 1,767
Changes in capital expenditure
notional reserve 1,185 (779)
Capital lease payments (312) (925)
-------------------------------------------------------------------------
Sub-total 28,058 78,139
-------------------------------------------------------------------------
Discretionary/non-recurring
expenses(4) 509 3,995
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash available for distribution 28,567 82,134
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Non-recurring revenue(5) (93) (819)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributable cash 28,474 81,315
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Proforma cash flow from new
MOH agreement 1,400 2,800
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Proforma Distributable Cash 29,874 84,115
-------------------------------------------------------------------------
Distributions to unitholders 23,994 70,383
-------------------------------------------------------------------------
Total payouts as a percentage of
distributable cash(xx) 84.3% 86.6%
-------------------------------------------------------------------------
Total payouts as a percentage of
proforma distributable cash(xx) 80.3% 83.7%
-------------------------------------------------------------------------
----------------------------------
(1) 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
September 30, 2008 Management's Discussion and Analysis ("MD&A") for
complete disclosure relating to Standardized Distributable Cash.
(2) Comprised of adjustments related to known and measurable timing
differences in respect of: MOH cap revenue receivables; interest
payments on long-term debt; insurance; bonus payments, lease
cancellation fee payment; tax installments; and work fee paid for
acquisitions that were not completed.
(3) Non-recurring capital expenditure relates to certain property and
equipment purchased by ARS prior to the date of acquisition but paid
for subsequent to the acquisition date.
(4) Discretionary/Non-recurring expenses represents costs paid in
establishing the new credit facility and professional fees expensed
in respect of a potential acquisition that was not completed.
(5) Non-recurring revenue in the third quarter represents retroactive
payments from Alberta Health; and for the nine months ended Sept. 30,
2008 also includes the adjustment for retroactive additional funding
as set out in the MOH agreement.
(xx) Distributable Cash of the Fund is not a Canadian generally accepted
accounting principle ("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.
About CML HealthCare Income Fund
CML HealthCare Income Fund is an unincorporated open-ended trust that owns CML HealthCare Inc., one of Canada's largest healthcare services businesses. Based in Mississauga, Ontario, CML HealthCare Inc. is a leading provider of laboratory testing services in Ontario and the largest private provider of medical imaging services in Canada. The Fund also owns American Radiology Services, Inc., a leading provider of fully-integrated diagnostic medical imaging services based in Baltimore, Maryland. CML HealthCare Income Fund is publicly traded on the Toronto Stock Exchange under the symbol "CLC.UN" and has approximately 89.8 million units outstanding. To reach CML HealthCare Income Fund via the worldwide web log on to www.cmlhealthcare.com.
Caution concerning forward-looking statements
Statements made in this news release, other than those concerning historical financial information, may be forward-looking and therefore subject to various risks and uncertainties. Some forward-looking statements may be identified by words like "may", "will", "anticipate", "estimate", "expect", "intend", or "continue" or the negative thereof or similar variations. Readers are cautioned not to place undue reliance on such statements, as actual results may differ materially from those expressed or implied in such statements. Factors that could cause results to vary include, but are not limited to: dependence on government-based revenues; pending and proposed legislative or regulatory developments including the impact of changes in laws, regulations and the enforcement thereof; intensifying competition from established competitors and new entrants in the businesses in which we operate; technological change; interest rate fluctuations and general economic conditions; insurance coverage of sufficient scope to satisfy any liability claims; fluctuations in operating results; dependence on our ability to renegotiate the MOH contract on favourable terms; dependence on our operating subsidiary to pay its interest obligations; fluctuations in cash distributions and capital investment; management of credit, market, liquidity and funding and operational risks; judicial judgments and legal proceedings; our ability to complete strategic acquisitions and to integrate our acquisitions successfully; changes in accounting policies and methods we use to report our financial condition, including uncertainties associated with critical accounting assumptions and estimates; operational and infrastructure risks including possible equipment failure and performance of information technology systems; fluctuations in total patient referrals; loss of services of key senior management personnel; other factors that may affect future growth and results including, timely development and introduction of new products and services; changes in our estimates relating to reserves and allowances; future sales of units; changes in tax laws; technological changes and obsolescence, natural disasters, the possible impact on our businesses from public health emergencies, international conflicts and other developments including those relating to terrorism; the effect of anyone or more of such events and risks on our stability ratings and any changes thereto; and our success in anticipating and managing the foregoing risks. Additional factors related to the recent acquisition of American Radiology Services, Inc. ("ARS") include, but are not limited to, the Fund's ability to successfully integrate the operations of ARS, additional liabilities or costs attributable to the acquisition of ARS, unknown liabilities of ARS, the ability to retain senior management of ARS, the ability to complete accretive acquisitions in the U.S., the continuation and nature of the relationship with The Johns Hopkins University and The Johns Hopkins Health System Corporation (collectively "Johns Hopkins") and changes in U.S. federal and state healthcare laws and regulations, including with respect to Medicare and Medicaid reimbursements levels.
We caution that the foregoing list of factors is not exhaustive and that when reviewing our forward-looking statements, investors and others should refer to the "Risk Factors" section of the Fund's Annual Information Form, the "Risks and Uncertainties" and other sections of our Management's Discussion and Analysis of Operating Results and Financial Position and our other periodic filings with Canadian securities regulatory authorities. All forward-looking statements presented herein should be considered in conjunction with such filings. 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.
%SEDAR: 00020333E