Futuremed Healthcare Income Fund

Futuremed Healthcare Income Fund

March 08, 2007 17:00 ET

Futuremed Announces Strong Fourth Quarter and Year-End 2006 Results

CONCORD, ONTARIO--(CCNMatthews - March 8, 2007) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today its results for the three months and year ended December 31, 2006. As the Fund commenced operations with the completion of its initial public offering on January 6, 2006, comparative information includes selected unaudited figures of the Fund's predecessor companies for the prior year.

2006 Highlights:

- Fourth quarter sales up 23% on strong organic growth

- Sales increase across all geographic markets and most product categories

- Gross margin improves in quarter and for year

- Fourth quarter EBITDA rises 29%

- Break-even performance in new physicians market

- Payout ratio improves to 74% in fourth quarter

Total sales increased 23.3% in the fourth quarter of 2006 to $28.7 million from $23.3 million for the same period last year. For the year ended December 31, 2006, sales were up 9.2% to $105.1 million compared to $96.3 million for the comparable period in 2005. For the Fund's reporting period from January 6, 2006 to December 31, 2006, sales were $103.8 million.

"We were very pleased with the strong organic growth generated in the fourth quarter, the result of significant increases in sales of our recurring nursing home supplies," commented Raymond Stone, President and Chief Executive Officer of Futuremed. "We were also pleased to have generated solid growth in all of our geographic markets during the year."

On a geographic basis, sales in Ontario were up 20.7% and 4.0% for the fourth quarter and year ended December 31, 2006 respectively. Not including sales of furniture and equipment in Ontario, sales were up 15.3% in 2006 compared to 2005. In British Columbia sales rose 50.3% and 33.3% respectively compared to the same periods last year, while sales in other Western Canadian provinces (Alberta, Saskatchewan and Manitoba) rose 21.2% and 27.2% respectively.

Sales of nursing supplies increased 14.4% in the fourth quarter to $23.7 million and 14.1% to $83.7 million for the year ended December 31, 2006 compared to the same periods in 2005. The growth in nursing supplies sales was due primarily to sales to new customers and increased utilization of the Fund's consumable products for the care and treatment of residents in long-term care facilities. Sales of nursing supplies accounted for approximately 82.5% and 79.7% of total sales for the three months and year ended December 31, 2006, respectively.

Sales of furniture and equipment rose to $5.0 million in the fourth quarter of 2006 from $2.6 million last year. For 2006, furniture and equipment sales were $21.4 million compared to $22.9 million in the prior year. Sales of the Fund's furniture and equipment are unpredictable and can vary significantly on a year-over-year comparison due to a number of factors, including the timing and size of provincial government-funded projects and repair and refurbishment cycles initiated by individual long-term care facilities. The increased furniture and equipment sales in the fourth quarter of 2006 related to increased spending on repair and refurbishment by various facilities in the Fund's markets during the period. The reduction in sales of furniture and equipment for the year ended December 31, 2006 compared to the prior year is primarily due to $7.0 million less infrastructure spending in Ontario during 2006 compared to 2005.

Effective July 1, 2006 the Fund implemented a new program to enter the physician market with the hiring of dedicated management and sales staff. Physicians utilize many of the same products the Fund sells to its long-term care customers, and the Fund believes it will be successful in increasing distributable cash over the long term through its entrance into this new business. As expected, the Fund broke-even in this market for 2006 and expects to generate a positive and growing contribution to distributable cash in 2007 and going forward.

Gross profit, as a percentage of revenues, increased to 30.4% in the fourth quarter of 2006 from 29.2% last year, and increased to 28.8% for the year ended December 31, 2006 compared to 28.4% in the prior year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $4.7 million in the fourth quarter of 2006 compared to $3.6 million last year. For 2006, EBITDA was $16.1 million compared to $15.6 million last year. During 2006 the Fund incurred incremental costs associated with becoming a publicly traded income fund not incurred in the prior year, as well as increased overheads to manage the growth of the Fund's business. Selling, general and administrative (SG&A) expenses were higher in 2006 due primarily to higher delivery charges resulting from increased fuel prices and a change in the sales mix from higher equipment and furniture sales in 2005 (upon which delivery costs are recoverable) to increased nursing supplies sales in 2006 (upon which industry terms are generally FOB customer's premises).

The Fund generated distributable cash of $4.2 million or $0.31 per Unit for the fourth quarter of 2006. For the year ended December 31, 2006, the Fund generated distributable cash of $13.9 million or $1.03 per Unit. Distributions declared for the fourth quarter were $3.1 million or $0.23 per Unit, and $12.2 million or $0.91 per Unit for the year ended December 31, 2006. The payout ratio improved significantly in the fourth quarter to 74%. For the year ended December 31, 2006 the payout ratio was 88%. Capital expenditures were only $128,000 for the period from January 6, 2006 to December 31, 2006.

"Our strong payout ratio in the fourth quarter was despite the considerable overhead investments made during the year related to our entry into the new physicians market and other growth initiatives," Mr. Stone continued.

"Looking ahead, we are confident our growth will continue as we leverage our strong market presence, attract new customers, and benefit from strong demographic trends in our markets. We will also continue to explore new markets and industries that could utilize our products and logistics infrastructure," Mr. Stone concluded.

Financial Highlights

(in $,000 except
per Unit amounts) Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
Nursing supplies $ 23,725 $ 20,740 $ 83,693 $ 73,323
Furniture &Equipment 5,000 2,551 21,365 22,927
Total sales 28,725 23,291 105,058 96,250
Gross profit 8,759 6,807 30,268 27,350
Gross profit % 30.4% 29.2% 28.8% 28.4%
Selling, general &
expenses 4,040 3,158 14,153 11,724
EBITDA 4,695 3,649 16,093 15,626
Net earnings 2,934 1,455 9,560 9,008

Distributable Cash 4,180 - 13,852(1) -
Distributable Cash per Unit $ 0.31 - $ 1.03(1) -
Distributions/Declared 3,100 - 12,236(1) -
Distributions/Declared per
Unit $ 0.23 - $ 0.91(1) -
Payout Ratio 74% - 88% -

Sales by Geography:
Ontario $ 21,409 $ 17,738 $ 79,931 $ 76,856
British Columbia 3,029 2,016 9,942 7,458
Alberta, Saskatchewan,
Manitoba 4,287 3,537 15,185 11,936
Total Sales 28,725 23,291 105,058 96,250
(1) Period from January 6, 2006 to December 31, 2005

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
    Vice President, Finance
    (905) 761-0068, ext. 2222
    Toll-free investor relations: 1-800-387-7025
    Website: www.futuremedfund.com