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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good morning, ladies and gentlemen. Welcome to the CML Healthcare Income Fund's acquisition announcement conference call. Before turning the call over to management, listeners are cautioned that today's discussion and responses to questions may contain forward-looking statements within the meaning of the Safe Harbor provisions of Canadian financial provincial security laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements.
Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For 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, please consult the risk factors section of CML's annual information form and other filings within Canadian securities regulators. CNL does not undertake to update any forward-looking statements. Such statements speak only as of the date made.
Listeners are also reminded that today's call is being recorded and broadcast live via the Internet for the benefit of individual unitholders, the media and other interested parties.
I would now like to turn the meeting over to Paul Bristow, President and CEO of CML Healthcare.
PAUL BRISTOW, PRESIDENT & CEO, CML HEALTHCARE INCOME FUND: Thanks, Luke. Good morning, ladies and gentlemen. Thank you for participating in today's conference call. With me today is Cameron Duff, Executive Vice President Corporate Development, and Tom Weber, Chief Financial Officer.
We issued the news release prior to market open today, announcing that we have entered into a definitive agreement to acquire American Radiology Services, Inc. or ARS, a leading provider of diagnostic medical imaging services based in Baltimore, Maryland, for total cash consideration of approximately $151 million. The consideration is for 100% ownership inclusive of debt, but exclusive of acquisition costs and other post-closing adjustments such as retained minority interest in ARS. The transaction is expected to close in the first quarter of 2008, subject to customary closing conditions. The acquisition will be immediately accretive to the funds distributable to cash.
On today's call we will provide you with an overview of ARS, the transaction details, as well as the financial, strategic and operational benefits we believe this transaction provides. We will then open the call to any questions.
I would now like to turn the call over to Cameron Duff. Cameron?
CAMERON DUFF, VP CORPORATE DEVELOPMENT, CML HEALTHCARE INCOME FUND: Thanks, Paul, and good morning. ARS is one of the largest medical imaging practices in the Maryland market. ARS was formed in February 1997 through the merger of four Maryland radiology practices, including one owned by The Johns Hopkins University based in Baltimore, Maryland, with Johns Hopkins participating as a shareholder and strategic partner.
ARS through its affiliation with Johns Hopkins is one of the largest providers of fully-integrated medical imaging services in the U.S. by volume, performing approximately 2.2 million medical imaging scans per year. ARS is regionally concentrated with 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 by its teleradiology network to 25 hospitals across seven states in the U.S. ARS is expected to generate an estimated $142 million in revenue in fiscal 2007.
Over the years, ARS has invested substantially in its diagnostic imaging equipment and digital infrastructure, information systems and physical facilities, with a view to significantly enhancing the scalability of its operations for future expansion. Through ARS and its affiliation with Johns Hopkins, CML will gain unique insight into a highly scalable and advanced digital imaging and teleradiology network, and accompanying expertise that will support, enhance and accelerate our digitization initiatives throughout our imaging clinic network across Canada.
We also expect to benefit from other ARS resources and competitive strengths. For example, 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. Through an exclusive long-term services contract with American Radiology Associates, or ARA, ARS has access to 68 radiologists, and through its affiliation with Johns Hopkins, access to a significant additional pool of Johns Hopkins radiologists.
Access to Johns Hopkins faculty and subspecialists, cooperative studies and potential expansion opportunities are also made possible through this affiliation. 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. 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.
Other ARS resources and strengths we can benefit from include innovative sales and marketing programs that will support CML's national branding program, contemporary ARS clinic designs to support our national clinic refurbishment program now underway, and opportunities to jointly evaluate new and complementary healthcare services both in Canada and the U.S., which we have also referred to as focused diversification.
Through our discussions with ARS, we have learned that we both have identified similar opportunities. And while we cannot discuss these in detail at this point for competitive reasons, I can say that any new service offering added would meet shared core value creation criteria, including the ability to leverage our core assets, grow non-capped revenue, and increase capacity utilization.
As noted earlier, ARS has significant geographic concentration of imaging clinics in an attractive regional market that offers abundant consolidation opportunities in Maryland and in several other mid-Atlantic states. ARS management believes there are opportunities to acquire a large number of imaging practices located within Maryland and in adjacent mid-Atlantic states that could potentially add significant annual revenues.
There are also significant organic growth opportunities to augment acquisition growth in these mid-Atlantic states. These include digital mammography in women's health, orthopedic and specialist imaging, teleradiology, and hospital joint ventures.
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