Toronto Stock Exchange Symbol: CLC.UN
MISSISSAUGA, ON, Dec. 21 /CNW/ - CML HealthCare Income Fund (the "Fund" or "CML HealthCare") (TSX:CLC.UN), today announced that it has entered into a definitive agreement to acquire American Radiology Services, Inc. ("ARS"), a leading provider of fully-integrated diagnostic medical imaging services based in Baltimore, Maryland. ARS, in conjunction with The Johns Hopkins University and The Johns Hopkins Health System Corporation (collectively "Johns Hopkins"), is one of the largest providers of medical imaging services in the U.S. by volume, performing approximately 2.2 million medical imaging scans per year. ARS operates 15 fixed-site multi-modality and two single-modality outpatient centers in Maryland and Delaware and provides radiologist coverage to 11 hospitals in Maryland. Through its operating division, American Radiology Solutions, ARS also provides primary or secondary reading services via its teleradiology network to 25 hospitals across seven states in the U.S. The acquisition is expected to be immediately accretive to the Fund's distributable cash(1). The transaction is expected to close in the first quarter of 2008, subject to customary closing conditions.
The anticipated annualized revenue contribution resulting from the acquisition of ARS, as well as the cash consideration paid, are included in the following summary:
Number of Clinics: 17 in Maryland and Delaware
Hospital Contracts: 11 in Maryland
Teleradiology Contracts: 25 across seven states
Modalities: Magnetic Resonance Imaging ("MRI"), Computed
Tomography ("CT"), Positron Emission
Tomography ("PET"), PET/CT, Nuclear Medicine,
Bone Densitometry ("DEXA"), Mammography,
Ultrasound, X-ray, Fluoroscopy
Revenues: US$142 million(x)
(Fiscal 2007 estimate)
Consideration: US$151 million(xx)
(approx. cash)
(x) In accordance with U.S. GAAP. Please refer to cautionary language
concerning forward-looking statements on page 3 of this news
release.
(xx) For 100% ownership, inclusive of debt, but exclusive of
acquisition costs and other post-closing adjustments which may be
material.
CML HealthCare is inviting ARS senior management, Johns Hopkins and radiologists associated with American Radiology Associates, P.A. (described below), who are current shareholders of ARS, to retain minority equity interests in ARS. To the extent such interests are retained, the purchase price and CML HealthCare's ownership of ARS will be reduced.
CML HealthCare also announced that it has secured a fully underwritten commitment for a C$450 million credit facility from The Toronto-Dominion Bank. The credit facility will provide: up to C$350 million to fund the acquisition of ARS and repay certain indebtedness of CML HealthCare (if required); and a C$100 million revolving credit facility for general corporate purposes, including future acquisitions. Although CML HealthCare has arranged a committed credit facility for 100% of the purchase price of ARS, CML HealthCare intends to continue to manage its capital structure and financial flexibility in a conservative manner over the long term consistent with its past practice.
"We believe ARS is an excellent operational and strategic fit for CML HealthCare. We share a common vision with ARS for the delivery of exceptional patient care and for the future of medical imaging. ARS augments CML HealthCare's competitive strengths and provides a tremendous platform for continued growth that supports the execution of our overall strategy," said Paul Bristow, President and CEO of CML HealthCare. "ARS has significant geographic concentration of imaging clinics in an attractive regional market that offers abundant consolidation opportunities in Maryland and several other Mid-Atlantic states. ARS has a strong management team, state-of-the-art imaging equipment and teleradiology network, robust information systems, an exceptional pool of radiologists and technicians, more than 11,000 referring physicians, and established relationships with a diverse base of payors. Accordingly, ARS is well positioned to exploit growth opportunities, while continuing to deliver best-in-class patient care. Furthermore, ARS currently has an affiliation with Johns Hopkins that offers a number of compelling strategic benefits, including, access to faculty and training resources, sub-specialty radiologist expertise and radiologist recruitment, interaction and staffing."
ARS is focused on the regional delivery of best-in-class imaging services through its state-of-the-art, multi-modality imaging centers. Since 2001, ARS has made substantial investments in its diagnostic imaging equipment, information technology and facilities improvements. ARS recently began the rollout of digital mammography within its growing women's health franchise. ARS, through an exclusive management services contract with American Radiology Associates, P.A. ("ARA"), has access to 68 radiologists and through its affiliation with Johns Hopkins, access to a significant additional pool of Johns Hopkins radiologists. The radiologists at ARA are board certified and co-trained through specialized programs with Johns Hopkins, one of the leading healthcare institutions in the U.S. The Johns Hopkins healthcare network consists of Johns Hopkins Hospital, Johns Hopkins School of Medicine and Johns Hopkins University. Johns Hopkins Hospital has been ranked as the "Best of the Best" in U.S. News & World Report's Honor Roll of "America's Best Hospitals" for 17 consecutive years. The Johns Hopkins University Russell H. Morgan Department of Radiology and Radiological Science was recently ranked the top U.S. radiology department by Medical Imaging Magazine. ARS is uniquely positioned with Johns Hopkins, a relationship that supports the continual recruitment of high-quality radiologists and marketing of services to more than 11,000 referring physicians. Access to Johns Hopkins faculty and sub-specialists, cooperative studies and potential expansion opportunities are also made possible through this affiliation.
"We believe ARS will support CML HealthCare's initiatives to enhance patient care in Canada and help to further elevate our profile in the healthcare services community. Through ARS and their affiliation with Johns Hopkins, we will gain unique insight into a highly scalable and advanced digital imaging network and accompanying expertise that will support, enhance and accelerate our own digitization initiatives throughout our imaging clinic network across Canada," said Mr. Bristow. "We also expect to benefit from other ARS resources, including: access to exceptional radiologists and training programs; being able to offer our own referring physicians access to advanced imaging modalities, such as PET/CT scanning; innovative sales and marketing programs; and opportunities to jointly evaluate new and complementary healthcare services both in Canada and the U.S."
"Senior management of CML HealthCare and ARS share many of the same strategic goals and objectives concerning the provision of exceptional patient care and delivering value to our respective payors. CML HealthCare's strong track record of operational and financial discipline and stable business model provides a strong foundation for growth," said Bob Carfagno, President of ARS. "As part of CML HealthCare, we look forward to moving ahead with our strategic focus on becoming the leading radiology group in the Mid-Atlantic region, through our commitment of resources to develop an organization that achieves both medical and operational excellence, and major market share in the counties where we operate, as we expand our geographic coverage."
TD Securities acted as financial advisor to CML HealthCare and UBS Investment Bank acted as financial advisor to ARS on the transaction.
(1) 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.
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 "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. The Fund does not undertake to update any forward-looking statements; such statements speak only as of the date made.
Notice of Conference Call
Management of CML HealthCare Income Fund will host a conference call today, December 21, at 10:00 am (EDT) to discuss the Fund's acquisition of American Radiology Services, Inc. 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 December 28 midnight at 1-877-289-8525 or 416-640-1917, reference number 21257965 followed by the number sign.
About American Radiology Services, Inc.
American Radiology Services, Inc. is a Baltimore-based leading provider of fully-integrated diagnostic imaging services in the U.S. ARS was created in February 1997 through the consolidation of four Maryland radiology practices, including one owned by Johns Hopkins, with Johns Hopkins participating as a shareholder and strategic partner. ARS operates 17 fixed-site outpatient centers in Maryland and Delaware and provides radiologist coverage in 11 Maryland hospitals. Through its operating division, American Radiology Solutions, ARS also provides teleradiology services to 25 hospitals throughout the U.S. For more information, please visit www.americanradiology.com.
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. To reach CML HealthCare Income Fund via the worldwide web, log on to www.cmlhealthcare.com.
%SEDAR: 00020333E