Futuremed Healthcare Income Fund
TSX : FMD.UN

Futuremed Healthcare Income Fund

November 11, 2008 16:38 ET

Futuremed Announces Significant Increase in Third Quarter 2008 Distributable Cash

CONCORD, ONTARIO--(Marketwire - Nov. 11, 2008) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today strong financial and operating results for the three and nine months ended September 30, 2008.

HIGHLIGHTS:

- Third quarter sales almost double on Dismed contribution, and strong organic growth.

- Sales up in all geographic regions.

- Gross profit rises on higher sales and enhanced operating synergies.

- Third quarter distributable cash increases 54.8%, generating strong 84% payout ratio.

- Third quarter payout ratio, not including one-time acquisition costs, was 77%.

"As anticipated, the Dismed acquisition made a strong and accretive contribution to distributable cash in the third quarter. Our underlying businesses also generated significant organic growth, while our furniture and equipment sales experienced a solid increase," commented Raymond Stone, President and CEO. "Looking ahead, we are confident these trends will continue as we build market share, enter new geographic regions, and capture further operating synergies."

Sales in the third quarter of 2008 increased 90.1% to $47.2 million compared to $24.9 million for the same period in 2007. The increase is due primarily to the $17.5 million contribution in sales from Dismed, as well as solid increases across all of the Fund's revenue streams. The Fund acquired Dismed on June 30, 2008. Not including sales from Dismed, sales in the third quarter increased 19.8% to $29.8 million compared to $24.9 million for the same period last year. Sales of the Fund's consumable nursing supplies rose 80.0% to $40.8 million compared to $22.6 million last year, driven primarily by the contribution of $15.9 million in sales from Dismed, as well as strong increases in sales of incontinence products and other nursing supplies. Consumable nursing supplies represented approximately 86.3% of the Fund's total sales in the third quarter of 2008.

For the first nine months of 2008, sales increased 30.9% to $101.6 million compared to $77.7 million for the same period in 2007. Not including the contribution from Dismed, sales increased 8.4% to $84.2 million compared to $77.7 million for the same period last year. Sales of the Fund's consumable nursing supplies rose 30.0% to $87.6 million in the first nine months of 2008 compared to $67.4 million for the same period last year, driven primarily by a $6.2 million increase in sales of incontinence products. Of the $6.2 million increase in sales of incontinence products, $5.2 million is attributable to Dismed. Consumable nursing supplies represented approximately 86.2% of the Fund's total sales in the first nine months of 2008.

Sales of the Company's furniture and equipment increased $4.3 million to $6.5 million in the quarter compared to $2.2 million last year. The increase was due to the $1.7 million contribution in furniture and equipment sales from Dismed, an increase in replacement spending in a number of markets, as well as $1.4 million in infrastructure spending in the province of Saskatchewan. For the first nine months of 2008, sales of furniture and equipment increased $3.8 million to $14.0 million compared to $10.2 million for the same period last year.

On a geographic basis, sales in Ontario increased 15.1% in the third quarter of 2008 compared to the same period last year. Sales in British Columbia increased 8.5%, while sales in the other Western Canada provinces of Alberta, Saskatchewan and Manitoba increased by 52.0% in the third quarter of 2008 compared with the same prior year period. These increases in revenue do not include any contribution from Dismed, whose sales are primarily in the Province of Quebec. For the nine months ended September 30, 2008, sales in Ontario increased 6.2% compared to the same period last year, while sales in B.C. rose 5.1%. Sales in the other Western Canadian provinces increased 21.7% in the first nine months of 2008 compared to the same period in 2007. 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 third quarter of 2008, gross profit increased 54.8% compared to the prior year due to the margin contribution of $2.6 million from Dismed in the quarter. Not including the contribution from Dismed, gross profit increased 26.9% 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 the first nine months of 2008, gross profit increased by 15.4%, due primarily to the contribution from Dismed. Not including Dismed, gross profit increased 7.5% compared to the same period last year.

Selling, general and administrative (SG&A) expenses for the three months ended September 30, 2008 increased due primarily to the addition of Dismed's costs, the hiring of additional staff required to support the anticipated higher level of sales, the opening of a new showroom in Kitchener/Waterloo to help further service the Ontario market, as well as increased delivery costs due to higher fuel prices and delivery surcharges levied by transportation suppliers. In addition, during the third quarter non-recurring expenses of approximately $0.4 million were incurred related to the Dismed acquisition that were not eligible for capitalization. Not including these one-time costs, SG&A as a percentage of revenues improved to 12.9% of revenues compared to 15.7% for the third quarter last year.

For the first nine months of 2008, SG&A expenses rose $3.6 million compared to the prior year period, due primarily to the aforementioned factors. Not including the one-time costs incurred in the third quarter, SG&A as a percentage of revenues improved to 14.1% of revenues for the first nine months of 2008 compared to 14.4% for the same period last year.

"While the Dismed acquisition was immediately accretive to our third quarter results, our underlying businesses also generated strong organic growth, resulting in enhanced profitability and increased distributable cash," Mr. Stone continued. "Going forward, we expect to realize further operating synergies resulting from the considerable increase in our size and scale."

For the three months ended September 30, 2008 the Fund generated distributable cash of $4.2 million or $0.28 per Unit compared to $2.7 million or $0.20 per Unit in the third 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. The computation of distributable cash in the third quarter of 2008 is inclusive of the $0.4 million non-recurring costs related to the Dismed acquisition. The increase in per Unit amounts is despite the 12.2% increase in the weighted average number of Unit's outstanding in the quarter resulting from the issuance of 1,865,000 Units related to the Dismed acquisition in the period. For the first nine months of 2008, the Fund generated $10.1 million or $0.72 per Unit in distributable cash compared to $9.9 million or $0.74 per Unit for the same period in 2007. For the nine months ended September 30, 2008 the weighted average number of Units outstanding increased 13.2%.

The payout ratios for the third quarter and first nine months of 2008 were 84% and 98% respectively compared to 114% and 94% 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, the payout ratio for the three and nine months ended September 30, 2008 would have been 77% and 93% respectively.

Long-term debt increased in the third quarter due primarily to the Dismed acquisition. Working capital rose to $18.6 million compared to $12.2 million at December 31, 2007. The Fund did not utilize its operating credit facility in the third quarter or first nine months of 2008.

"We were pleased to have been able to cost-effectively access the debt markets to complete the Dismed acquisition during the tight credit markets we are currently experiencing," Mr. Stone commented. "At quarter end, we were well within our debt covenants, despite the increased level of debt that was taken on. We are confident that we will continue to meet or exceed the accretion targets that were announced when we acquired Dismed, and that we will be able to finance our businesses through operational cash flows".



Financial Highlights
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(in $,000 except per Unit amounts) Three months ended Nine months ended
September 30, September 30
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2008 2007 2008 2007

Sales:
Nursing supplies $ 40,758 $ 22,641 $ 87,649 $ 67,425
Furniture & Equipment 6,482 2,209 13,984 10,240
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Total sales $ 47,240 $ 24,850 $ 101,633 $ 77,665
Gross profit 11,308 7,326 26,332 22,823
Selling, general & administrative
expenses 6,509 3,906 14,709 11,155

Net earnings 2,914 1,759 6,938 (259)

Distributable Cash 4,208 2,718 10,092 9,861
Distributable Cash per Unit $ 0.28 $ 0.20 $ 0.72 $ 0.74
Distributions/Declared per Unit $ 0.23 $ 0.23 $ 0.69 $ 0.69
Payout Ratio 84% 114% 98% 94%

Sales by Geography:
Ontario $ 21,132 $ 18,352 $ 61,157 $ 57,577
Quebec 17,472 - 17,472 -
British Columbia 3,098 2,856 9,155 8,708
Alberta, Saskatchewan, Manitoba 5,538 3,642 13,849 11,380
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$ 47,240 $ 24,850 $ 101,633 $ 77,665


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
    (905) 761-9929 (FAX)
    Website: www.futuremed.ca