Futuremed Healthcare Income Fund
TSX : FMD.UN

Futuremed Healthcare Income Fund

August 13, 2009 17:30 ET

Futuremed Announces Second Quarter 2009 Results

CONCORD, ONTARIO--(Marketwire - Aug. 13, 2009) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today its financial and operating results for the three and six months ended June 30, 2009.

Q2 HIGHLIGHTS:

- Sales rise 84.2% on Dismed contribution and strong 10.9% organic growth

- Strong growth in recurring, non-discretionary nursing supplies revenues

- Solid improvement in payout ratios

- Capital investments to enhance efficiency, reduce logistical costs

- Long-term debt extended on favourable terms

- Credit facility unutilized in quarter

Sales in the second quarter of 2009 increased to $49.6 million compared to $26.9 million for the same period in 2008. For the first half of 2009, sales increased to $96.4 million compared to $54.4 million in the prior year. The increases are due primarily to the $19.7 million and $38.2 million contribution in sales from Dismed during the second quarter and first six months of 2009 respectively, as well as solid increases across most of the Fund's revenue streams. The Fund acquired Dismed on June 30, 2008. Not including sales from Dismed, sales in the second quarter and first half of 2009 increased 10.9% and 7.1%, respectively, compared to the same periods last year.

Sales of the Fund's consumable nursing supplies increased 85.0% in the second quarter of 2009 and 82.2% for the six months ended June 30, 2009 compared to the same periods last year. The increases were driven primarily by the contribution in sales from Dismed, as well as strong increases in sales of incontinence products and other nursing supplies in the Fund's other markets. Consumable nursing supplies represented approximately 90.5% and 88.6% of the Fund's total sales in the second quarter and first half of 2009, respectively.

Sales of the Company's furniture and equipment increased by 77.2% in the second quarter of 2009 and 46.0% through the first six months of 2009 compared to the same periods last year. The increase was due primarily to the $2.0 million and $4.0 million contribution in furniture and equipment sales from Dismed during the second quarter and first six months of 2009, respectively, partially offset by a decrease in furniture and equipment sales in provinces other than Quebec due to a lack of replacement spending during the period.

"We are very pleased with the strong organic growth generated this year, the result of our leading market presence across the country and the successful introduction of our private label and other product lines to Dismed's customers in Quebec," commented Raymond Stone, President and CEO.

For the second quarter of 2009, gross profit increased 61.6% compared to the prior year period due primarily to the margin contribution from Dismed in the quarter. For the first six months of 2009, gross profit increased 48.9% over the same period in 2008. The impact on gross profit margins of increases in input costs as a result of the higher US dollar exchange rate, higher freight charges on incoming goods, and lower subsidies on goods manufactured in the Orient is mitigating, and management believes these inflationary pressures have stabilized, and in some instances, reversed due to current global economic influences.

Selling, general and administrative (SG&A) expenses for the three and six months ended June 30, 2009 increased 56.6% and 59.7%, respectively, due primarily to the addition of Dismed and increased infrastructure costs resulting from higher levels of business activity in the current year. Delivery costs have stabilized as a result of lower fuel prices and delivery surcharges, and represented a reduced 3.5% of total revenues in the second quarter of 2009 compared to 4.5% in the prior year. As a percentage of revenues, SG&A costs reduced to 13.2% in the second quarter of 2009 from 15.5% last year and 13.6% for the first six months of 2009 from 15.1% for the first half of 2008.

For the three months ended June 30, 2009 the Fund generated distributable cash of $3.9 million or $0.25 per Unit compared to $2.9 million or $0.21 per Unit in the second quarter of 2008. For the first half of 2009, the Fund generated $6.8 million or $0.44 per Unit of distributable cash compared to $5.9 million or $0.44 per Unit for the same six month period in the prior year. Capital expenditures amounted to approximately $324,000 in the second quarter and $759,000 for the first six months of 2009 compared to $146,000 and $217,000 respectively last year. The increases in 2009 relate to investments aimed at aligning and improving the Fund's supply chain infrastructure in all of its facilities across Canada. The project is expected to be completed within 2 years and involve approximately $1.5 million in excess of normal capital expenditures over this period. Excluding the impact of these specific short-term investments in supply chain improvements, distributable cash flow would have been $4.0 million in the second quarter, and $7.1 million for the first half of 2009.

The payout ratio for the second quarter of 2009 improved to 91% compared to 113% last year. For the first half of 2009 the payout ratio was 105% compared to 108% in the prior year. Not including the short-term investments in supply chain improvements in the second quarter and first six months of 2009, the payout ratio would have been 89% and 99%, respectively.

Working capital was $18.9 million at June 30, 2009 compared to $19.6 million at June 30, 2008. The Fund continued to have no need to utilize its operating credit facility through the second quarter of 2009. During the quarter the Fund reached an agreement with its existing lender to extend its credit facilities to March 31, 2012 on similar terms and conditions. As at June 30, 2009 the Fund was in compliance with all financial and non-financial covenants on its credit facilities.

"Looking ahead, we believe our organic sales growth will continue as we benefit from our strong market presence across the country, our initiatives to expand Dismed's sales, and positive fundamentals in the government-funded Canadian long-term care sector. Since inception, the Fund has paid out approximately $3.24 per unit in accumulated cash distributions to its Unitholders, and we remain confident we will maintain our current distribution level for the foreseeable future," Mr. Stone concluded.



Financial Highlights
----------------------------------------------------------------------------
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(in $,000 except per Unit amounts) Three months ended Six months ended
June 30, June 30,
----------------------------------------------------------------------------
2009 2008 2009 2008
Sales:
Nursing supplies $ 27,039 $ 24,217 $ 51,713 $ 46,890
Furniture &Equipment 2,799 2,683 6,520 7,503
Dismed 19,715 - 38,154 -
------------------------------------------
Total sales $ 49,553 $ 26,900 $ 96,387 $ 54,393
Gross profit 12,096 7,484 22,375 15,024
Selling, general &
administrative expenses 6,538 4,175 13,109 8,200
Net earnings 2,269 1,791 4,147 4,024

Distributable Cash:
Cash flow from operating
activities 1,906 2,744 5,456 3,777
(Less) capital expenditures (324) (52) (759) (217)
(Less) payments under capital
lease (8) - (16) -
Add/(Less) changes in working
capital and unrealized loss
on swap contract 2,298 189 2,074 2,493
------------------------------------------
Distributable Cash 3,872 2,881 6,755 5,884

Distributable Cash per Unit $ 0.25 $ 0.21 $ 0.44 $ 0.44
Distributions/Declared per Unit $ 0.23 $ 0.23 $ 0.46 $ 0.46
Payout Ratio 91% 113% 105% 108%
Normalized(i) Payout Ratio 89% 113% 99% 108%

(i) Excluding infrastructure capital expenditures that are outside the
definition of maintenance capital expenditures.


Copies of the Fund's financial statements and Management's Discussion and Analysis for the period can be obtained on the Fund's web site at www.futuremed.ca or www.sedar.com.

About Futuremed Healthcare Income Fund

Futuremed Healthcare Income Fund, through its operating entities, is Canada's leading value-added distributor of consumable nursing home supplies and specialized furniture and equipment to the growing long-term care facilities sector. Futuremed's Trust Units trade on the Toronto Stock Exchange under the symbol FMD.UN. More information can be found at www.futuremed.ca.

Readers are cautioned that Payout Ratio distributable cash and distributable cash per unit are not Generally Accepted Accounting Principles ("GAAP") measures and should not be construed as an alternative to net earnings and earnings per share determined in accordance with GAAP as an indicator of the Fund's performance. The Fund's methods of calculating these measures may differ from other issuers' methods and accordingly, they may not be comparable to measures used by other issuers.

This document may contain forward-looking statements relating to Futuremed's operations or to the environment in which it operates, which are based on the Fund's operations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, and/or are beyond the Fund's control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include those set forth in other public filings. In addition, these forward-looking statements relate to the date on which they are made. The Fund disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. More information about these risks and uncertainties can be found in regulatory filings available at www.sedar.com.

Contact Information

  • Futuremed Healthcare Income Fund
    Daniel Sacks
    Chief Financial Officer
    (905) 761-0068, ext. 2222
    Toll-free investor relations: 1-800-387-7025
    www.futuremed.ca