Futuremed Healthcare Income Fund
TSX : FMD.UN

Futuremed Healthcare Income Fund

March 12, 2009 17:10 ET

Futuremed Announces Fourth Quarter and Fiscal 2008 Results

CONCORD, ONTARIO--(Marketwire - March 12, 2009) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today its financial and operating results for the three months and year ended December 31, 2008.



HIGHLIGHTS:
- Fourth quarter sales rise 67.8% on strong organic growth and Dismed
acquisition
- Dismed makes strong and highly accretive contribution through last half
of year
- Sales up in all geographic regions and across most product lines
- Fourth quarter distributable cash up 28.6%, generating strong 63% payout
ratio
- Full year pay-out ratio a conservative 84%
- Long-term debt extended three years on favourable terms


"We are very pleased with both the solid organic growth we generated in 2008, and the strong accretive contribution made by our Dismed acquisition through the last half of the year," commented Raymond Stone, President and CEO. "Looking ahead, we are confident our business will continue to grow despite the challenges being faced by the Canadian economy. Our target market, the Canadian long-term care sector, is government funded and generally not a discretionary service. Demand for long-term care continues to significantly outstrip supply, and with a fast growing seniors population, demographic forces would indicate that demand for our products and services will continue to grow for the foreseeable future."

Sales in the fourth quarter of 2008 increased to $50.3 million compared to $30.0 million for the same period in 2007. The increase is due primarily to the $18.6 million contribution in sales from Dismed 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 fourth quarter of 2008 increased 5.8% to $31.7 million. Sales of the Fund's consumable nursing supplies rose 75.8% to $44.3 million compared to $25.2 million last year, driven primarily by the contribution of $16.5 million in sales from Dismed, as well as strong increases in sales of incontinence products and other nursing supplies. Consumable nursing supplies represented approximately 88.0% of the Fund's total sales in the fourth quarter of 2008.

For the year ended December 31, 2008, sales increased 41.4% to $151.9 million compared to $107.6 million in 2007. The increase was due to the $36.0 million contribution in sales from Dismed, $1.4 million in infrastructure spending in the province of Saskatchewan, as well as organic growth in sales of consumable nursing supplies and specialized furniture and equipment. Not including the contributions from Dismed, sales increased 7.7% in 2008 to $115.9 million. Sales of the Fund's consumable nursing supplies rose 42.4% to $131.9 million in 2008 compared to $92.6 million in 2007, driven primarily by a $13.1 million increase in sales of incontinence products. Of the $13.1 million increase in sales of incontinence products, $10.5 million is attributable to Dismed. Consumable nursing supplies represented approximately 86.8% of the Fund's total sales in 2008.

Sales of the Company's furniture and equipment increased to $6.0 million in the fourth quarter of 2008 compared to $4.8 million for the same period last year. The increase was due primarily to the $2.1 million contribution in furniture and equipment sales from Dismed. For the year ended December 31, 2008, sales of furniture and equipment increased $5.0 million to $20.0 million compared to $15.0 million in 2007, and included $3.6 million in Dismed sales as well as $1.4 million in infrastructure spending in the province of Saskatchewan during the third quarter.

On a geographic basis, sales in Ontario increased 5.8% in the fourth quarter of 2008 compared to the same period last year. Sales in British Columbia increased 8.4%, while sales in the other Western Canada provinces of Alberta, Saskatchewan and Manitoba increased by 3.8% in the fourth quarter of 2008 compared with the same prior year period. These increases in market share do not include any contribution from Dismed, whose sales are primarily in the Province of Quebec. For the year ended December 31, 2008, sales in Ontario increased 6.1% compared to the prior year, while sales in B.C. rose 6.0% . Sales in the other Western Canadian provinces increased 16.9% in 2008 compared to the prior year. The increases were primarily the result of higher sales of consumable nursing supplies, an increase in new customers, replacement spending in Ontario and Western Canada, as well as infrastructure spending in Saskatchewan. There were no prior period comparable sales for Dismed.

For the fourth quarter of 2008, gross profit increased 51.7% compared to the prior year period due to the margin contribution of $2.7 million from Dismed in the quarter. Not including the contribution from Dismed, gross profit increased $1.7 million or 20.1% due to increases in sales volumes and changes in sales mix. A proportionately smaller increase in lower margin revenue from incontinence products was offset by a proportionately larger increase in higher margin revenue from other nursing supplies as well as increased discounts and rebates from suppliers as a result of higher product volumes. For 2008, gross profit increased by $7.6 million or 24.4% for the same reasons discussed above. Not including Dismed, gross profit increased 7.3% compared to the same period last year.

Selling, general and administrative (SG&A) expenses for the three months ended December 31, 2008 increased due primarily to the addition of Dismed's SG&A, which accounted for 56.5% of this increase. The remainder resulted from the hiring of additional staff required to support the anticipated higher level of future sales, the opening of a new showroom in Kitchener/Waterloo to help further service the Ontario market, increased delivery costs due to 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 year ended December 31, 2008, SG&A expenses rose 44.8% to $39.1 million compared to the prior year. Of this increase, 79% was due to the addition of Dismed's SG&A, the remainder resulted from the same factors that impacted the fourth quarter of this year. For 2008, SG&A as a percentage of revenues increased slightly to 14.3% compared to 13.9% last year.

For the three months ended December 31, 2008 the Fund generated distributable cash of $5.7 million or $0.36 per Unit compared to $4.4 million or $0.33 per Unit in the fourth quarter of 2007. The increase is due primarily to the contribution from Dismed, as well as improved operating results for the Fund's underlying businesses. Impacting distributable cash in the fourth quarter was $0.4 million in capital expenditures related to warehouse improvements made at the end of the period which are expected to be complete by the end of the first quarter of 2009. For the year ended December 31, 2008, the Fund generated $15.9 million or $1.11 per Unit in distributable cash compared to $14.2 million or $1.06 per Unit in 2007.

The payout ratios for the fourth quarter and year ended December 31, 2008 were 64% and 84% respectively compared to 71% and 87% respectively for the same periods in 2007. Not including the $0.4 million in one-time costs incurred in the third quarter related to the Dismed acquisition and $0.4 million related to warehouse improvements, the payout ratio for the three months and year ended December 31, 2008 would have been 60% and 80% respectively.

"As at December 31, 2008, the cumulative distributions paid since the inception of the fund in January, 2006 amount to $2.77 per unit," observed Mr. Stone.

Long-term debt increased as at December 31, 2008 due primarily to the Dismed acquisition. Working capital was $19.6 million compared to $12.2 million at December 31, 2007. The Fund did not utilize its operating credit facility in 2008.

Subsequent to year-end, the Fund reached an agreement with its existing lender to extend the credit facilities that mature on January 10, 2010 to March 2012 on similar terms and conditions. Management expects that the revised credit agreement will be finalized during the first quarter of 2009.

"We are pleased to be extending our term loan for three years on favourable terms in these challenging credit markets, a testament to the strength of our balance sheet and the positive outlook for our business," Mr. Stone concluded.



Financial Highlights
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(In $,000 except per Unit Three months ended Year ended
amounts) December 31, December 31,
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2008 2007 2008 2007
Sales:
Nursing supplies $ 44,254 $ 25,851 $ 131,902 $ 92,605
Furniture & Equipment 6,012 4,774 19,997 15,014
-------------------------------------------
Total sales $ 50,266 $ 29,954 $ 151,899 $ 107,619
Gross profit 12,735 8,393 39,067 31,416
Selling, general &
administrative expenses 6,956 3,607 21,665 14,962

Net earnings 4,520 4,169 11,458 3,910

Distributable Cash 5,509 4,394 15,884 14,223
Distributable Cash per Unit $ 0.36 $ 0.33 $ 1.11 $ 1.06
Distributions/Declared per Unit $ 0.23 $ 0.23 $ 0.93 $ 0.93
Payout Ratio 64% 71% 84% 87%

Sales by Geography:
Ontario $ 24,181 $ 22,851 $ 85,338 $ 80,428
Quebec 18,575 N/A 36,047 N/A
British Columbia 3,217 2,967 12,372 11,675
Alberta, Saskatchewan,
Manitoba 4,293 4,136 18,142 15,516
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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
    (905) 761-9929 (FAX)
    Toll-free investor relations: 1-800-387-7025
    Website: www.futuremed.ca