Futuremed Healthcare Income Fund

Futuremed Healthcare Income Fund

May 07, 2008 17:30 ET

Futuremed Announces First Quarter 2008 Results

CONCORD, ONTARIO--(Marketwire - May 7, 2008) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today its financial and operating results for the three months ended March 31, 2008.

Sales in the first quarter of 2008 were $27.5 million compared to $27.6 million for the same period in 2007. Sales of the Fund's consumable nursing supplies rose 0.7% to $22.7 million compared to $22.5 million last year, driven primarily by a 1.8% increase in sales of incontinence products. Consumable nursing supplies represented approximately 82.5% of the Fund's total sales in the first quarter of 2008.

Sales of the Company's furniture and equipment were $4.8 million in the quarter compared to $5.1 million last year. The Fund experienced reduced replacement spending in its Ontario and Western Canadian markets during the first quarter of 2008 compared to the prior year, and no infrastructure projects were announced.

On a geographic basis, sales in Ontario decreased 1.3% in the first quarter of 2008 compared to the same period last year. Sales in British Columbia rose 12.9%, while sales in the other Western Canada provinces of Alberta, Saskatchewan and Manitoba declined by 4.1% . The changes in the first quarter of 2008 compared to the same period in 2007 were primarily due to changes in revenue of the Fund's furniture and equipment. Sales of consumable nursing supplies were up in British Columbia and the other Western Canadian provinces in the first quarter of 2008, while a slight decline was experienced in Ontario.

"Contrary to prior years, during the fourth quarter of 2007 year-end spending by our long-term care customers was concentrated on our consumable nursing supplies rather than our furniture and equipment. As a result, we experienced reduced demand in the first quarter of 2008," commented Raymond Stone, President and Chief Executive Officer of Futuremed. "Looking ahead, we are confident we will see a return to our track record of solid organic growth for the full 2008 year."

For the first quarter of 2008, gross profit declined 5.0% compared to the prior year due to changes in sales mix and developments in the Fund's supply chain in China. During the quarter the Fund had a proportionately larger increase in lower margin revenue from incontinence products combined with a decrease in higher margin revenue from other nursing supplies and furniture and equipment. In addition, in mid-2007 the Government of China initiated a program to reduce manufacturing subsidies, the impact of which affected the cost of the Fund's private label products produced in that region during the quarter. In addition, the strengthening of the Chinese currency against the US dollar has resulted in further cost increases for the Fund's products. The Fund had experienced little or no increase in its cost of goods manufactured in China over the last six years. As a 277 Basaltic Road, Concord, Ontario L4K 5V3 Tel: 905-761-0068 Fax: 905-761-9929 result, gross margin as a percentage of sales was 27.4% in the first quarter of 2008 compared to 29.6% for the same period last year.

"We expect that the cost inflation experienced in the first quarter will mitigate somewhat through the balance of the year as we gradually pass on these increased input costs and continue to investigate other markets where we can have our private label product produced," Mr. Stone continued.

Selling, general and administrative (SG&A) expenses for the three months ended March 31, 2008 increased 8.1% compared to last year, due primarily to increased delivery costs resulting from higher fuel prices and delivery surcharges levied by transportation suppliers, as well as a reduction in the number of large project orders for which delivery costs are typically recoverable by the Fund.

For the three months ended March 31, 2008 the Fund generated distributable cash of $3.2 million or $0.24 per Unit compared to $3.9 million or $0.29 per Unit in the first quarter of 2007. The payout ratio for the first quarter of 2008 was 95%. Capital expenditures were only $71,000 in the first quarter of 2008.

"While our results were impacted by the unusual factors experienced in the first quarter, we expect our payout ratio for the full 2008 year will once again be well below 100%. We have continued to meet all our financial obligations without utilizing our operating credit facility, and remain confident the ongoing strength and stability of our consumable nursing supplies business will continue to support our current level of annual cash distributions to Unitholders over the long term," Mr. Stone concluded.

Financial Highlights
(in $,000 except per Unit amounts) Three months ended
March 31,
2008 2007
Nursing supplies 22,674 22,509
Furniture &Equipment 4,819 5,063
Total sales 27,493 27,572
Gross profit 7,540 8,171
Selling, general & administrative expenses 4,025 3,722
EBITDA 3,779 4,489
Net earnings 2,233 2,615

Distributable Cash 3,226 3,919
Distributable Cash per Unit $0.24 $0.29
Distributions/Declared per Unit $0.23 $0.23
Payout Ratio 95% 79%

Sales by Geography:
Ontario 20,374 20,651
British Columbia 3,193 2,828
Alberta, Saskatchewan, Manitoba 3,926 4,093
27,493 27,572

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
    (905) 761-9929 (FAX)
    Toll-free investor relations: 1-800-387-7025
    Website: www.futuremedfund.com