CML HealthCare reports 2.3% decrease in first-quarter 2010 revenue

CML HealthCare Income Fund (the "Fund" or "CML HealthCare"), (TSX: CLC.UN) today reported its financial results for the three month period ended March 31, 2010 (all amounts are in Canadian dollars, unless noted otherwise).

Financial Highlights: --------------------- ------------------------------------------------------------------------- (C$ millions except Three-months Three-months percent amounts) ended ended March 31, March 31, 2010 2009 ("Q1 2010") ("Q1 2009") % Change ------------------------------------------------------------------------- Revenue 125.4 128.3 (2.3%) ------------------------------------------------------------------------- Operating, general, & administration expenses 94.7 94.7 - ------------------------------------------------------------------------- EBITDA(1) 30.7 33.6 (8.6%) ------------------------------------------------------------------------- EBITDA(1) Margin 24.5% 26.2% (6.5%) ------------------------------------------------------------------------- Net Earnings 20.9 23.0 (9.1%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by operating activities 26.3 38.7 (32.0%) ------------------------------------------------------------------------- Distributable cash(2) 27.5 28.4 (3.2%) ------------------------------------------------------------------------- Distributions declared 24.0 24.0 - ------------------------------------------------------------------------- Payout ratio 87.3% 84.6% 3.2% ------------------------------------------------------------------------- Operating Highlights: --------------------- - Record setting snow storms in Maryland and Delaware led to the temporary closures of U.S. medical imaging centers and referring physician offices, negatively impacting Q1/10 results; - Revenue increased in Canadian operations through organic growth in medical imaging services and increased cap revenue in laboratory services based on the Ontario Ministry of Health funding agreement; - Successful transition with U.S. senior management; - New RIS/PACS system successfully piloted and is planned for deployment in Maryland and Delaware in the second quarter; - Northeast U.S. acquisitions made in 2009 experiencing growth as expected; - Progress made with positive results from Canadian center refurbishment initiative.

"Our Canadian businesses performed well in the first quarter of 2010, reporting increased revenue through organic growth. In the U.S., we are pleased with the early results from our latest acquisition in Rhode Island which is tracking to plan," said Paul Bristow, President and CEO of CML HealthCare Income Fund. "The severe winter weather in February resulted in the closure of our centers in Maryland and Delaware for a number of days, and together with the extended closures of physicians' offices, our overall U.S. medical imaging business experienced lower patient visits in the quarter," continued Mr. Bristow. "Year over year comparisons of U.S. based revenues, expenses and earnings reflect the strengthened Canadian dollar against the U.S. dollar."

"With respect to our strategy for 2011, in light of taxes being applied to income trust distributions, I would like to confirm the Fund will be converting into a corporation on January 1, 2011," continued Mr. Bristow. "We are in the process of working with our professional advisors on all details including finalizing the post conversion dividend policy, which will be disseminated to the investment community by the end of the third quarter. For the balance of 2010, we anticipate the monthly distribution of $0.08927 per unit will remain unchanged."

Financial Results -----------------

For the three months ended March 31, 2010 ("Q1 2010"), revenue for the Fund decreased 2.3% to $125.4 million from $128.3 million for the same period in 2009. Decreased revenue in Q1 2010 was largely attributable to:

- $6.8 million from changes in foreign exchange rates; - Negative impact on patient flow due to inclement weather in the U.S. and difficult market conditions; and - $0.6 million in one-time imaging and laboratory services reimbursements in Canada recorded in Q1 2009 not applicable in Q1 2010;

The above declines in revenue were partially offset by:

- $3.9 million in new revenue from the addition of seven centers in the U.S. Northeast in 2009; - $2.1 million increase from organic growth in imaging services in Canada; and - $1.7 million increase in cap revenue based on the Ministry of Health (MOH) Funding agreement for laboratory services

Operating, general and administrative ("OG&A") expenses totaled $94.7 million in Q1 2010. OG&A increased due to the addition of seven centers in the U.S. Northeast in 2009 and additional costs to support organic growth in Canada offset by a $6.1 decrease in OG&A for U.S. operations due to changes in foreign exchange rates.

Q1 2010 EBITDA (1) totaled $30.7 million compared to $33.6 million in Q1 2009. EBITDA(1) margin of 24.5% was lower than Q1 2009 of 26.2% largely as a result of a higher proportion of consolidated revenue being derived from medical imaging services acquired in the U.S. Northeast over the past two years and lower revenues in the U.S. business for reasons previously noted.

The Fund's net earnings for Q1 2010 of $20.9 million or $0.23 per Fund unit were 9.1% lower than $23.0 million or $0.26 per unit in Q1 2009. Net earnings include the impact of a one-time pre-tax restructuring charge of US$1.6 million associated with the departure of the President and CEO and the CFO of the U.S. imaging business in Q1 2010.

------------------------------------------------------------------------- Financial Summary Three-months Three-months (C$ millions, except ended ended percent amounts) March 31, March 31, (unaudited) 2010 2009 ------------------------------------------------------------------------- Net earnings for the period 20.9 23.0 ------------------------------------------------------------------------- Less: recovery of income taxes (3.2) (1.7) ------------------------------------------------------------------------- Add: interest expense 3.0 4.1 ------------------------------------------------------------------------- Add: other expense 1.5 - ------------------------------------------------------------------------- Less: Foreign exchange gain (0.1) (0.5) ------------------------------------------------------------------------- Add: Amortization 8.5 8.7 ------------------------------------------------------------------------- EBITDA(1) 30.7 33.6 ------------------------------------------------------------------------- Revenue 125.4 128.3 ------------------------------------------------------------------------- EBITDA(1) margin as a percent of revenue 24.5 26.2 ------------------------------------------------------------------------- Distributable Cash(2) ---------------------

For the three month period ended March 31, 2010, the Fund generated distributable cash(2) of $27.5 million and declared distributions totaling $24.0 million, representing a payout ratio of 87.3%. For the same period in 2009, the Fund generated distributable cash(2) of $28.4 million and declared distributions totaling $24.0 million, representing a payout ratio of 84.6%. Please refer to Standardized Distributable Cash(2) and Distributable Cash(2) table below.

------------------------------------------------------------------------- Standardized Distributable Three-months Three-months Cash(3) & Distributable Cash(2) ended ended Table March 31, March 31, (C$000s) 2010 2009 ------------------------------------------------------------------------- Cash flow from operating activities 26,278 38,669 ------------------------------------------------------------------------- Less: Total capital expenditures as per consolidated statement of cash flows (7,992) (11,629) Acquisition of licences and intangible assets (768) - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Standardized distributable cash(3) 17,518 27,040 ------------------------------------------------------------------------- Normalizing adjustments to non-cash working capital items(4) 6,214 (5,306) ------------------------------------------------------------------------- Capital Expenditures: Add back: One time capital expenditures 7,163 3,838 Changes in capital expenditure notional reserve (2,691) 3,174 Capital lease payments (276) (19) ------------------------------------------------------------------------- Sub-total 27,928 28,727 ------------------------------------------------------------------------- Discretionary/non-recurring expenses(5) 126 174 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash available for distribution 28,054 28,553 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Non-recurring revenue/expense recoveries(6) (542) (171) ------------------------------------------------------------------------- Distributable cash(2) 27,512 28,382 ------------------------------------------------------------------------- Distributions to unitholders 24,017 24,011 ------------------------------------------------------------------------- Total payouts as a percentage of distributable cash(2) 87.3% 84.6% ------------------------------------------------------------------------- Total payouts as a percentage of standardized distributable cash(2) 137.1% 88.8% ------------------------------------------------------------------------- Weighted average number of Fund units outstanding in the period 89,842,404 89,842,404 ------------------------------------------------------------------------- Segmented Highlights -------------------- Canadian Operations ------------------------------------------------------------------------- Three-months Three-months ended ended (C$ millions, except percentages) March 31, March 31, (unaudited) 2010 2009 ------------------------------------------------------------------------- Revenue 90.3 87.2 ------------------------------------------------------------------------- OG&A 60.6 57.9 ------------------------------------------------------------------------- EBITDA(1) 29.7 29.2 ------------------------------------------------------------------------- EBITDA(1) margin 32.9% 33.5% ------------------------------------------------------------------------- Net earnings for the period 23.4 23.3 -------------------------------------------------------------------------

Revenue in Q1 2010 increased 3.6% compared to the corresponding period in 2009. The increase includes: i) $2.1 million in organic growth in imaging services and; ii) $1.7 million increase in cap revenue based on the MOH agreement. The increased revenue was partially offset by $0.6 million in one-time imaging and laboratory services reimbursements recorded in Q1 2009, not applicable in Q1 2010. The higher OG&A expense in Q1 2010 was largely in line with the revenue increases to support growth.

U.S. Operations ------------------------------------------------------------------------- Three-months Three-months ended ended (US$ millions, except percentages) March 31, March 31, (unaudited) 2010 2009 ------------------------------------------------------------------------- Revenue 33.8 33.0 ------------------------------------------------------------------------- OG&A 32.9 29.5 ------------------------------------------------------------------------- EBITDA(1) 0.9 3.5 ------------------------------------------------------------------------- EBITDA(1) margin 2.7% 10.6% ------------------------------------------------------------------------- Net earnings/(loss) for the period (2.4) (0.2) -------------------------------------------------------------------------

The increase in revenue and OG&A expense in Q1 2010 compared to the same period in 2009 reflects the addition of seven centers in the U.S. Northeast in 2009. The increase in revenue was partially offset by the negative impact from the inclement weather in the mid-Atlantic region during Q1 2010, lower reimbursement rates from Medicare, as well as the continued challenging economic market place. The Q1 2010 EBITDA(1) margin of 2.7% was lower than 10.6% in Q1 2009 as a result of the previously noted factors.

Balance Sheet -------------

As at March 31, 2010, the Fund had working capital of $24.0 million, including cash and cash equivalents of $15.7 million, compared to working capital of $25.2 million, including cash and cash equivalents of $21.8 million as at December 31, 2009. Long-term debt of the Fund, including the current portion, was $320.3 million as at March 31, 2010, compared to $320.5 million as at December 31, 2009. As at March 31, 2010, the Fund had approximately $66.4 million available under the revolving credit facility. As at March 31, 2010, there were 89,842,404 Fund units issued and outstanding.