Futuremed Healthcare Income Fund
TSX : FMD.UN

Futuremed Healthcare Income Fund

November 08, 2007 17:30 ET

Futuremed Announces Strong Third Quarter 2007 Results

CONCORD, ONTARIO--(Marketwire - Nov. 8, 2007) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today solid results for the three and nine months ended September 30, 2007.

Highlights:

- Strong organic growth generates 5.6% third quarter sales increase

- Quarterly gross profit up 14.6% on higher margin sales mix

- Market share continues to increase in all geographic regions

- Three and nine-month payout ratios enhanced

Solid increases in sales of Futuremed's consumable and recurring nursing supplies generated strong organic growth in the third quarter and nine months ended September 30, 2007. Total sales in the quarter rose 5.6% to $24.9 million compared to $23.5 million in the same quarter last year. For the nine months ended September 30, 2007, total sales were $77.7 million, up 1.7% from the same period last year.

For the three months ended September 30, 2007 sales of the Company's nursing supplies rose 9.2% to $22.6 million, driven primarily by an 8.6% increase in sales volume of incontinence products and a 10.1% rise in sales of other nursing supplies. For the first nine months of 2007, revenues from nursing supplies increased 12.4% to $67.4 million compared to $60.0 million for the same period last year. Consumable nursing supplies represented approximately 91% of the Fund's total sales in the third quarter and 87% for the first nine months of 2007.

Sales of the Company's furniture and equipment business decreased marginally in the third quarter of 2007 to $2.2 million from $2.8 million in the same period last year, due primarily to a reduction in replacement spending in the Fund's western Canadian markets. For the nine months ended September 30, 2007 sales of furniture and equipment were $10.2 million compared to $16.4 million last year. Sales of these products are dependent on government-funded infrastructure projects announced from time-to-time. The first nine months of 2006 included revenue of approximately $3.9 million related to a large Durable Medical Equipment ("DME") project managed by the Ontario Government. There were no such infrastructure projects announced through the first nine months of 2007.

"We continue to build our market share as the leading supplier of consumable nursing supplies to the Canadian long-term care sector," commented Raymond Stone, President and Chief Executive Officer of Futuremed. "Our recurring nursing supplies business continues to grow as we increase sales to current customers and add new clients in all of our targeted geographic markets."

On a geographic basis, sales in Ontario increased 6.1% in the third quarter of 2007 compared to the prior year. For the nine months ended September 30, 2007, sales in Ontario decreased 1.6% compared to the same period in 2006, due primarily to the impact of the DME project in 2006. Not including sales of furniture and equipment, sales in Ontario increased 5.4% in the first nine months of 2007 compared to the same period last year.

In British Columbia sales rose 27.3% for the third quarter of 2007 compared to the same period last year, while sales in the other Western Canadian provinces of Alberta, Saskatchewan and Manitoba declined 8.6% due to the reduction in sales of furniture and equipment in these markets. Not including furniture and equipment, sales in these markets were up 5.7% in the quarter. For the first nine months of 2007, sales in B.C. rose 26.0% while sales in other Western Canada provinces were up 4.4% over the same period last year.

Gross profit in the third quarter of 2007 increased by 14.6% compared to last year's third quarter. For the nine months ended September 30, 2007, gross profit rose 6.0% over the same period last year. Gross profit on nursing supplies rose 8.5% and 13.2% respectively, for the three and nine months ended September 30, 2007, compared to the same periods last year. The increases were due primarily to the higher sales volumes this year and a change in product mix towards higher margin private label products.

Selling, general and administrative (SG&A) expenses were higher in the third quarter of 2007 due primarily to the hiring of additional staff required to support the anticipated higher level of sales, and increased delivery costs related to higher fuel prices and changes in sales mix. In addition, a restructuring charge of $0.1 million was taken in the quarter related to a reorganization of the Fund's sales force to focus on higher-growth markets. Not including this restructuring charge, SG&A expenses as percentage of revenue in the third quarter of 2007 were 15.0% compared to 15.2% for the same quarter in 2006. Excluding the restructuring charge, SG&A expenses for the first nine months of 2007 were 14.2% of total revenue compared to 13.3% for the same period last year.

The Fund generated distributable cash of $2.7 million or $0.20 per Unit in the third quarter of 2007 compared to $2.3 million or $0.18 per Unit last year. Distributions declared for the third quarters of both 2007 and 2006 were $3.1 million or $0.23 per Unit. The payout ratio for the third quarter of 2007 improved to 114% from 132% last year. For the nine months ended September 30, 2007 the Fund generated distributable cash of $9.9 million or $0.74 per Unit compared to $9.7 million or $0.72 per Unit for the same period last year. The payout ratio for the first nine months of 2007 was 94%, in-line with last year. Capital expenditures were only $2,000 in the quarter and $123,000 through the first nine months of 2007.

"Looking ahead, we are confident our solid and growing consumable nursing supplies business will continue to support the stability and sustainability of our cash distributions to Unitholders. In addition, our recent entry into the physicians market is making a growing contribution to our cash flows," Mr. Stone concluded.



Financial Highlights

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(in $,000 except Three months ended Nine months ended
per Unit amounts) September 30, September 30,
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2007 2006 2007 2006
Sales:
Nursing supplies 22,641 20,730 67,425 59,968
Furniture & Equipment 2,209 2,797 10,240 16,365
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Total sales 24,850 23,527 77,665 76,333
Gross profit 7,326 6,395 22,823 21,509
Selling, general &
administrative expenses 3,906 3,567 11,155 10,201
EBITDA 3,261 2,858 11,340 11,310
Net earnings 1,759 1,333 (259) 6,627

Cash flow from operations 2,153 1,616 7,303 10,632
Distributable Cash per Unit $ 0.20 $ 0.18 $ 0.74 $ 0.72(i)
Distributions/Declared
per Unit $ 0.23 $ 0.23 $ 0.69 $ 0.68(i)
Payout Ratio 114% 132% 94% 94%(i)

Sales by Geography:
Ontario 18,352 17,300 57,577 58,523
British Columbia 2,856 2,243 8,708 6,913
Alberta, Saskatchewan,
Manitoba 3,642 3,984 11,380 10,897
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Total Sales 24,850 23,527 77,665 76,333
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(i) Period January 6, 2006 to September 30, 2006


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.futuremedfund.com 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.futuremedfund.com.

Readers are cautioned that EBITDA, 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
    (905) 761-9929 (FAX)
    Website: www.futuremedfund.com