<<
www.cmlhealthcare.com
Toronto Stock Exchange Symbol: CLC.UN
>>
MISSISSAUGA, ON, Aug. 9 /CNW/ - CML Healthcare Income Fund (the "Fund"),
(TSX: CLC.UN) today reported its financial results for the three and six-month
periods ended June 30, 2006.
<<
Q2 2006 Highlights
- Revenue increased to $72.5 million from $69.5 million in Q2 2005
- EBITDA(xx) totaled $28.8 million compared to $27.8 in Q2 2005
- The Fund generated distributable cash(x) of $23.0 million and
declared distributions (including payments to non-controlling
interest and Part VI.1 tax paid) totaling $21.2 million,
representing a payout ratio of 92.4%
- The Ontario Association of Medical Laboratories ("OAML") entered
into a new three-year funding agreement for community-based
laboratory services with the Ontario Ministry of Health and Long-
Term Care ("MOH")
- The Fund increased annualized unitholder distributions from
$0.9468 per unit to $1.00 per unit, representing a 5.6% increase
>>
"Our increase to unitholder distributions in the quarter reflects our
continued strong performance and our commitment to building unitholder value.
Given our anticipated ongoing capital expenditure requirements, we are
comfortable with a payout ratio in the low-to-mid 90 percent range," said Paul
Bristow, President and newly appointed CEO of CML Healthcare Income Fund. "CML
Healthcare remains well positioned within the Canadian healthcare landscape.
This position is further supported by a new three-year MOH funding agreement
for community-based laboratory services, a growth strategy focused on both our
capped and non-capped revenues, and our ongoing commitment to maintaining
strong operating margins."
Financial Results
For the three months ended June 30, 2006, the Fund generated
distributable cash(x) of $23.0 million, and declared distributions (including
payments to non-controlling interest and Part VI.1 tax paid) totaling
$21.2 million, representing 92.4% of normalized cash available for
distributions. For the six months ended June 30, 2006, the Fund generated
distributable cash of $46.4 million, and declared distributions (including
payments to non-controlling interest and Part VI.1 tax paid) totaling $41.7
million, representing 90.0% of normalized cash available for distributions.
Revenue for the Fund in the second quarter of 2006 increased 4.3% to
$72.5 million compared to revenue of $69.5 million in the second quarter of
2005. The Fund's increase in revenue in the quarter resulted from: an increase
in cap revenues based on the new MOH funding agreement for laboratory services
resulting in a $1.7 million increase from the comparative period a year ago;
$0.4 million in additional funding as set-out in the new MOH agreement for the
period April 1 to June 30, 2006; organic growth of non-cap revenues; and a 2%
increase in certain professional fee codes listed in the Schedule of Benefits
for Physician Services.
<<
-------------------------------------------------------------------------
April 1, January 1,
Distributable cash(x) ($000s) 2006 to 2006 to
(unaudited) June 30, June 30,
2006 2006
-------------------------------------------------------------------------
Cash flow from operating activities 30,084 43,544
-------------------------------------------------------------------------
Less: non-recurring revenue - (3,550)
-------------------------------------------------------------------------
Add: normalizing items in working capital(1) (7,045) 6,151
-------------------------------------------------------------------------
Add: non-recurring expenses(2) 1,011 2,376
-------------------------------------------------------------------------
Part VI.1 tax adjustment(3) 568 1,116
-------------------------------------------------------------------------
Less:
Capital expenditures (1,217) (2,791)
Capital lease payments (278) (554)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Normalized cash from operations before reserves 23,123 46,292
-------------------------------------------------------------------------
Change in capital expenditure notional reserve (130) 95
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Normalized cash available for distributions 22,993 46,387
-------------------------------------------------------------------------
Distributions to unitholders 19,538 38,392
-------------------------------------------------------------------------
Payments to non-controlling interest 1,137 2,233
-------------------------------------------------------------------------
Part VI.1 tax paid 568 1,116
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total distributions/payments to non-controlling
interest and Part VI.1 tax paid 21,243 41,741
-------------------------------------------------------------------------
Total payouts as a percentage of cash available
for distribution 92.4% 90.0%
-------------------------------------------------------------------------
(1) Comprised primarily of non-recurring revenue from the MOH, timing
differences related to interest payments on long-term debt and MOH
holdbacks.
(2) Comprised primarily of expenses paid in respect of a potential
acquisition and professional expenses paid in respect of non-
recurring tax planning.
(3) Adjustment to normalize the income tax expense which would not be
payable if the Exchangeable Shares were converted to Trust units.
Refer to the table for corresponding inclusion of Part VI.1 tax paid
in total distributions/payments to non-controlling interest.
>>
Operating, general and administrative expenses for the second quarter of
2006 were $43.8 million, or 60.4% of revenue, compared to operating, general
and administrative expenses of $41.7 million, or 60.0% of revenue, in the
second quarter a year ago. Increased operating, general and administrative
expenses for the three months ended June 30, 2006 primarily resulted from
increased operating expenses to support the increased billings.
Earnings Before Interest, Taxes, Depreciation, Amortization, Other
Expenses and Provisions (EBITDA)(xx) in the second quarter of 2006 totaled
$28.8 million, or 39.7% of revenue, compared to EBITDA of $27.8 million, or
40.0% of revenue, for the three months ended June 30, 2005.
The Fund's net earnings for the second quarter of 2006 increased by 20.1%
to $26.8 million or $0.34 per Fund unit (basic and diluted), compared to net
earnings of $22.3 million or $0.28 per Fund unit (basic and diluted) in the
second quarter of 2005.
For the six months ended June 30, 2006 revenue for the Fund totaled
$146.4 million, EBITDA totaled $61.2 million or 41.8% of revenue, and net
earnings totaled $48.6 million or $0.61 per Fund unit. Operating, general and
administrative expenses for the six months ended June 30, 2006 totaled
$85.3 million or 58.2% of revenue.
As at June 30, 2006, the Fund had working capital of $71.9 million
including cash and cash equivalents of $65.5 million, compared to working
capital of $68.6 million including cash and cash equivalents of $68.2 million
as at December 31, 2005. Long-term debt of the Fund, including the current
portion, was $192.9 million as at June 30, 2006, compared to $193.4 million as
at December 31, 2005.
In January 2005, the Emerging Issues Committee issued EIC 151,
Exchangeable Securities Issued by Subsidiaries of Income Trusts. The EIC was
further clarified during February 2005. EIC 151 requires that in certain
circumstances such as those pertaining to the Fund, exchangeable shares issued
by a subsidiary of an income trust be presented as non-controlling interest in
the subsidiary company and not as part of unitholders' equity. In accordance
with the transitional provisions of EIC 151, during the quarter ended June 30,
2005, the Fund retroactively restated the financial statements to reclassify
the exchangeable shares from unitholders' equity to non-controlling interest
and apply fair value accounting to the conversions of exchangeable shares to
units of the Fund. There is no cash impact on the Fund resulting from the
adoption of EIC 151 provisions.
Notice of Conference Call
Management of CML Healthcare Income Fund will host a conference call
today, August 9 at 10:00 am (EST) to discuss the Fund's 2006 second quarter
financial results. A live audio webcast of the call will be available at
www.cmlhealthcare.com. Webcast attendees are welcome to listen to the
conference in real-time or on-demand at your convenience. A taped replay of
the conference call will be available until August 16 at midnight at
1-877-289-8525 or 416-640-1917, reference number 21198150(followed by the
number sign).
((x)) Distributable Cash is not a recognized measure under Canadian
generally accepted accounting principles ("GAAP"); however, the Fund
believes that distributable cash is a useful measure as it provides
investors with an indication of cash available for distribution. The
Fund's method of calculating distributable cash may differ from that of
other issuers and, accordingly, distributable cash may not be comparable
to measures used by other issuers. Investors are cautioned that
distributable cash should not be construed as an alternative to the
statement of cash flows as a measure of liquidity and cash flows of the
Fund.
((xx)) EBITDA is not a recognized measure under Canadian generally
accepted accounting principles (GAAP). Management believes that in
addition to net income, EBITDA is a useful supplemental measure as it
provides investors with an indication of the Fund's performance.
Investors should be cautioned, however, that EBITDA should not be
construed as an alternative to net income. The Fund's method of
calculating EBITDA may differ from other companies' or income trusts'
and, accordingly, EBITDA may not be comparable to measures used by other
companies or income trusts.
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 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; and our success in anticipating and managing the
foregoing risks.
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
"Business Risks" 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. The Fund does not undertake to update any forward-looking statements;
such statements speak only as of the date made.
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. CML is a leading provider of laboratory testing services in
Ontario and the largest private provider of medical imaging services in
Canada. CML Healthcare Income Fund is publicly traded on the Toronto Stock
Exchange under the symbol "CLC.UN" and has approximately 86.6 million units
outstanding (assuming the exchange for units of all of the outstanding
exchangeable shares of CML Healthcare Inc., excluding those held by the Fund
or its affiliates). To reach CML Healthcare Income Fund via the worldwide web
log on to www.cmlhealthcare.com.
<<
CML Healthcare Income Fund
Unaudited Consolidated Balance Sheets
-------------------------------------------------------------------------
(in thousands of dollars)
June 30, December 31,
2006 2005
$ $
ASSETS
Current assets
Cash and cash equivalents 65,502 68,178
Accounts receivable 32,976 27,590
Income taxes receivable 787 2,487
Other current assets 2,483 1,778
Future income taxes 1,547 1,113
Due from related parties (note 9) 311 56
------------------------
103,606 101,202
Property and equipment 20,655 19,375
Licences 431,000 430,538
Goodwill 153,759 153,678
Investments and other assets 1,156 1,261
Restricted cash 912 912
------------------------
711,088 706,966
------------------------
------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 23,955 25,231
Distributions payable (note 7) 6,627 6,284
Current portion of long-term debt 1,151 1,122
------------------------
31,733 32,637
Long-term debt 191,735 192,318
Future income taxes 56,252 60,994
------------------------
279,720 285,949
------------------------
Non-controlling interest (note 4) 11,609 9,622
UNITHOLDERS' EQUITY
Trust units (note 5) 405,852 407,654
Retained earnings 13,907 3,741
------------------------
419,759 411,395
------------------------
------------------------
711,088 706,966
------------------------
------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
CML Healthcare Income Fund
Unaudited Consolidated Statements of Earnings
-------------------------------------------------------------------------
(in thousands of dollars, except for per unit amounts)
For the For the
For the For the three three
six months six months months months
ended ended ended ended
June 30 June 30 June 30 June 30
2006 2005 2006 2005
$ $ $ $
Revenue (note 10) 146,445 136,597 72,482 69,518
------------------------ ------------------------
Expenses
Operating, general and
administrative 85,282 80,887 43,751 41,690
Amortization of
property and equipment 1,511 1,433 770 713
Other expenses (note 11) 2,092 - 201 -
------------------------ ------------------------
88,885 82,320 44,722 42,403
------------------------ ------------------------
Income before the
undernoted 57,560 54,277 27,760 27,115
Interest expense
Long-term 5,653 5,685 2,825 2,842
------------------------ ------------------------
Earnings from
continuing operations
before income taxes 51,907 48,592 24,935 24,273
------------------------ ------------------------
Provision for
(recovery of) income
taxes (note 8)
Current taxes 4,312 1,171 1,244 947
Future taxes (5,192) 1,201 (5,456) (943)
------------------------ ------------------------
(880) 2,372 (4,212) 4
Earnings before the
following 52,787 46,220 29,147 24,269
Non-controlling
interest (note 4) 4,229 3,712 2,338 1,951
------------------------ ------------------------
Net earnings for the
period 48,558 42,508 26,809 22,318
------------------------ ------------------------
------------------------ ------------------------
Basic and diluted
earnings per unit
(note 6) 0.61 0.53 0.34 0.28
The accompanying notes are an integral part of these consolidated
financial statements.
CML Healthcare Income Fund
Unaudited Consolidated Statements of Retained Earnings (Deficit)
-------------------------------------------------------------------------
(in thousands of dollars)
For the For the
For the For the three three
six months six months months months
ended ended ended ended
June 30 June 30 June 30 June 30
2006 2005 2006 2005
$ $ $ $
Retained earnings -
Beginning of period
as previously
reported 3,741 1,321 6,636 3,315
Change in accounting
policy (note 2) - (1,775) - (2,435)
------------------------ ------------------------
Retained earnings
(deficit) - Beginning
of period as restated 3,741 (454) 6,636 880
Distributions declared
during the period to
unitholders (note 7) (38,392) (37,717) (19,538) (18,861)
Net earnings for the
period 48,558 42,508 26,809 22,318
------------------------ ------------------------
Retained earnings -
End of period 13,907 4,337 13,907 4,337
------------------------ ------------------------
------------------------ ------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
CML Healthcare Income Fund
Unaudited Consolidated Statements of Cash Flows
-------------------------------------------------------------------------
(in thousands of dollars)
For the For the
For the For the three three
six months six months months months
ended ended ended ended
June 30 June 30 June 30 June 30
2006 2005 2006 2005
$ $ $ $
Cash provided by
(used in)
Operating activities
Net earnings for
the period 48,558 42,508 26,809 22,318
Items not affecting
cash
Amortization of
property and
equipment 1,511 1,433 770 713
Long-term incentive
plan expense 630 440 315 220
Non-cash interest
expense 105 105 52 52
Future income taxes (5,192) 1,200 (5,456) (942)
Non-controlling
interest 4,229 3,712 2,338 1,951
------------------------ ------------------------
49,841 49,398 24,828 24,312
Net change in
non-cash working
capital items (6,297) (515) 5,256 9,043
------------------------ ------------------------
43,544 48,883 30,084 33,355
------------------------ ------------------------
Investing activities
Purchase of property
and equipment (2,791) (1,148) (1,217) (654)
Acquisition of
licences (376) - (50) -
Decrease in
investments and
other assets - 63 - (23)
------------------------ ------------------------
(3,167) (1,085) (1,267) (677)
------------------------ ------------------------
Financing activities
Principal repayment
of long-term debt (554) (606) (278) (301)
Distributions paid (38,049) (37,713) (19,196) (18,861)
Payments to non-
controlling interest
(note 7) (2,233) (2,202) (1,137) (1,098)
Treasury units
acquired (1,962) - (1,962) -
Decrease (increase)
in due from related
parties - net (255) 437 (45) (29)
------------------------ ------------------------
(43,053) (40,084) (22,618) (20,289)
------------------------ ------------------------
Increase in cash and
cash equivalents (2,676) 7,714 6,199 12,389
Cash and cash
equivalents,
beginning of period 68,178 51,198 59,303 46,523
------------------------ ------------------------
Cash and cash
equivalents,
end of period 65,502 58,912 65,502 58,912
------------------------ ------------------------
------------------------ ------------------------
Supplementary
information
Interest paid 5,548 5,580 39 56
Taxes paid 2,623 1,564 1,338 121
The accompanying notes are an integral part of these consolidated
financial statements.
CML Healthcare Income Fund
Notes to Unaudited Consolidated Financial Statements
1 Organization and nature of operations
The CML Healthcare Income Fund (the "Fund") is a trust established
under the laws of the Province of Ontario pursuant to a declaration
of trust dated January 16, 2004. The Fund was created to invest in
common shares and $630,446,000 of 12% unsecured subordinated notes of
CML Healthcare Inc. ("CML"). Through its wholly-owned subsidiaries,
the Fund provides medical laboratory services in Ontario and medical
imaging services in the Provinces of Ontario, Quebec, Manitoba,
Alberta and British Columbia.
2 Change in accounting policy
In January 2005, the Emerging Issues Committee issued EIC 151,
Exchangeable Securities Issued by Subsidiaries of Income Trusts. The
EIC was further clarified during February 2005. EIC 151 requires
that, in certain circumstances such as those pertaining to the Fund,
exchangeable shares issued by a subsidiary of an income trust be
presented as non-controlling interest in the subsidiary and not as
part of unitholders' equity. In accordance with the transitional
provisions of EIC 151, during the quarter ended June 30, 2005, the
Fund retroactively restated the consolidated financial statements to
reclassify the exchangeable shares of CML Healthcare Inc. from
unitholders' equity to non-controlling interest and to apply fair
value accounting to the conversions of exchangeable shares into units
of the Fund.
The effect of this change in accounting policy on the consolidated
statement of retained earnings as at June 30, 2005 was as follows:
Balance as
previously Balance as
reported Adjustment restated
(in thousands of dollars) $ $ $
Opening retained earnings (deficit) 1,321 (1,775) (454)
3 Basis of presentation
The accompanying interim consolidated financial statements of the
Fund have been prepared in accordance with accounting principles
generally accepted in Canada for interim reporting. Accordingly,
these financial statements do not include all of the disclosures
required by generally accepted accounting principles for annual
financial statements and should be read in conjunction with the 2005
annual financial statements of the Fund. In the opinion of
management, all adjustments considered necessary for fair
presentation have been included. All such adjustments are of a normal
recurring nature. Operating results for the six-months ended June 30,
2006 are not necessarily indicative of the results that may be
expected for the 12 month period ending December 31, 2006.
There have been no changes to the accounting policies as described in
Note 1 to the consolidated financial statements for the year ended
December 31, 2005.
4 Acquisition of non-controlling interest
During the period ended June 30, 2006, 11,000 exchangeable shares of
CML Healthcare Inc. were converted to 11,000 units of the Fund. The
conversion of the exchangeable shares has been accounted for as a
step acquisition and has resulted in a reduction of the non-
controlling interest. The 11,000 units of the Fund were valued at
$160,000. This amount along with the excess of the purchase price
over the carrying value of the non-controlling interest of $9,000 was
allocated as follows:
6-month
period ended
June 30, 2006
(in thousands of dollars) $
Licences 86
Goodwill 81
Future tax liability (16)
-----
151
-----
-----
As at June 30, 2006, 6,938,588 exchangeable shares of CML Healthcare
Inc. are issued and outstanding (excluding those held by the Fund and
its affiliates).
5 Unitholders' equity
The authorized capital of the Fund consists of an unlimited amount of
trust units. Under the Arrangement, shareholders of CML transferred
their common shares, directly or indirectly, to the Fund and received
either four units of the Fund, or four exchangeable shares of CML
AcquisitionCo, a wholly-owned subsidiary of the Fund. Exchangeable
shares can be converted at the option of the holder on a one-to-one
basis for units of the Fund. Any exchangeable shares still held as of
February 23, 2007 will be exchanged into one unit of the Fund on that
date. In addition, if on any date, the aggregate number of issued and
outstanding exchangeable shares is less than 7,409,000, then on that
date or any date thereafter, the Fund has the option to convert these
exchangeable shares into a corresponding number of units of the Fund.
The following is a summary of changes in unitholders' equity from
December 31, 2005 to June 30, 2006:
Trea-
Trust sury Net
Units Units Units
(in thousands) Number $ Number $ Number $
December 31,
2005 79,693 408,278 44 624 79,649 407,654
Treasury units
acquired - - 135 1,962 (135) (1,962)
Exchangeable
shares
exchanged for
trust units
(note 4) 11 160 - - 11 160
------------------------------------------------------
June 30, 2006 79,704 408,438 179 2,586 79,525 405,852
------------------------------------------------------
------------------------------------------------------
During the six month period ended June 30, 2006, 11,000 exchangeable
shares of CML were exchanged for 11,000 trust units.
During the six month period ended June 30, 2006, the Fund funded
$1,962,000 to a trust in respect of exceeding certain 2005 defined
distributable cash thresholds contained in the Fund's long-term
incentive plan ("LTIP"). The trust subsequently acquired 135,000
units of the Fund on the open market. The Fund units will be
distributed to the employees in accordance with the terms of the
LTIP.
6 Earnings per unit
Earnings per unit is calculated using the weighted average number of
units outstanding, including the treasury units. The weighted average
number of units outstanding for the 6-month period ended June 30,
2006, was 79,697,391 (June 30, 2005 - 79,664,518) and the 3-month
period ended June 30, 2006, was 79,700,036 (June 30, 2005 -
79,677,541).
Diluted earnings per unit reflects the effect of the conversion of
the exchangeable shares of CML Healthcare Inc. for units of the Fund.
The following table reconciles the basic and diluted weighted average
number of Fund units outstanding and basic and diluted earnings per
unit:
Adjustments
for convers- Diluted
Basic ions of earnings
(in thousands of dollars, earnings exchangeable per Fund
except per unit amounts) per Fund unit shares unit
Six months ended June 30, 2006
Net earnings for the period $ 48,558 $ 4,229 $ 52,787
Earnings per Fund unit $ 0.61 $ 0.61
Weighted average number of
Fund units outstanding 79,697,368 6,938,588 86,635,956
Six months ended June 30, 2005
Net earnings for the period $ 42,508 $ 3,712 $ 46,220
Earnings per Fund unit $ 0.53 $ 0.53
Weighted average number of
Fund units outstanding 79,664,518 6,964,388 86,628,906
Three months ended June 30, 2006
Net earnings for the period $ 26,809 $ 2,338 $ 29,147
Earnings per Fund unit $ 0.34 $ 0.34
Weighted average number of
Fund units outstanding 79,699,992 6,938,588 86,638,580
Three months ended June 30, 2005
Net earnings for the period $ 22,318 $ 1,951 $ 24,269
Earnings per Fund unit $ 0.28 $ 0.28
Weighted average number of
Fund units outstanding 79,677,541 6,964,388 86,641,929
7 Distributions declared and dividends declared to non-controlling
interest
During the 6-month period ended June 30, 2006, the Fund declared
total distributions to unitholders of $38,392,000 and total dividends
to non-controlling interest of $2,233,000. The amounts and record
dates of distributions and payments were as follows:
(in thousands of dollars, except per unit and per share amounts)
Non-controlling
Trust Units interest
Amount Amount
Record Date $ per Unit $ per Share
---------------------------------------------------------------------
January 31, 2006 6,284 0.0789 366 0.0526
February 28, 2006 6,285 0.0789 365 0.0526
March 31, 2006 6,285 0.0789 365 0.0526
April 30, 2006 6,285 0.0789 365 0.0526
May 31, 2006 6,626 0.0833 386 0.0556
June 30, 2006 6,627 0.0833 386 0.0556
---------------------------------------------------------------------
38,392 0.4822 2,233 0.3216
---------------------------------------------------------------------
---------------------------------------------------------------------
During the 6-month period ended June 30, 2005, the Fund declared
total distributions to unitholders of $37,717,000 and total dividends
to non-controlling interest of $2,199,000. The amounts and record
dates of distributions and payments were as follows:
(in thousands of dollars, except per unit and per share amounts)
Non-controlling
Trust Units interest
Amount Amount
Record Date $ per Unit $ per Share
---------------------------------------------------------------------
January 31, 2005 6,283 0.0789 369 0.0526
February 28, 2005 6,286 0.0789 366 0.0526
March 31, 2005 6,287 0.0789 366 0.0526
April 30, 2005 6,287 0.0789 366 0.0526
May 31, 2005 6,287 0.0789 366 0.0526
June 30, 2005 6,287 0.0789 366 0.0526
---------------------------------------------------------------------
37,717 0.4734 2,199 0.3156
---------------------------------------------------------------------
---------------------------------------------------------------------
8 Income taxes
The effective income tax rate on consolidated earnings is influenced
by items such as non-taxable income and non-deductible expenses:
6-month 6-month
period period
ended ended
June 30, June 30,
2006 2005
(in thousands of dollars) $ $
Combined Canadian federal and
provincial income tax at
statutory rate of 36.12% 18,749 17,551
Increase (decrease) in statutory
income tax resulting from the
following:
Fund income not taxable (13,475) (13,477)
Reduction in future income taxes
resulting from decreases in
enacted income tax rate (6,271) -
Non-deductible expenses and other 117 (1,702)
---------------------
Provision for income taxes (880) 2,372
---------------------
---------------------
9 Due from related parties
Due from related parties consists of amounts due from Cipher
Pharmaceuticals Inc. ("Cipher") and its wholly-owned subsidiaries, in
respect of the provision of management services by the Fund and
certain other reimbursements to the Fund. During the 6-month period
ended June 30, 2006, the Fund charged Cipher $62,000 (6-month period
ended June 30, 2005 - $200,000) in accordance with the administration
agreement between the Fund and Cipher.
10 Industry cap agreement
On March 29, 2006, a new industry cap agreement was signed with the
Ministry of Health and Long-Term Care ("MOH") which provides for an
increase in the Fund's share of the funding of approximately
$2,500,000 for the period of April 1, 2005 to December 31, 2005. This
revenue has been recognized in the 3-month period ended March 31,
2006. In addition, the agreement provides additional funding if the
industry meets certain conditions. At March 31, 2006, management
believes that the industry had met these conditions for the MOH
fiscal year ended March 31, 2006 and accordingly the Fund has
recorded additional revenue of $1,400,000.
In the second quarter of 2006, the Fund recognized revenue of $0.4
million in respect of the $15.9 million additional funding available
for the MOH year ended March 31, 2007. Certain additional revenue
included in the agreement with the MOH is recognized based on
management's best estimates of its share of the additional funding
earned in the period based on information currently available. A
further $3.3 million of the $15.9 million additional funding may be
recognized in fiscal 2006, based on services performed and growth in
the private lab industry.
11 Other expenses
During the 6-month period ended June 30, 2006, the Fund incurred and
expensed professional fees of $2,092,000 in respect
of a potential acquisition.
>>
%SEDAR: 00020333E
