Futuremed Healthcare Income Fund

Futuremed Healthcare Income Fund

March 06, 2008 19:39 ET

Futuremed Announces Strong Fourth Quarter and Year-End 2007 Results

CONCORD, ONTARIO--(Marketwire - March 6, 2008) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today solid results for the three months and year ended December 31, 2007.

2007 Highlights:

- Strong organic growth generates solid revenue increase

- Enhanced market share across all geographic regions

- Recurring nursing supplies sales up 10.6%

- Increased sales of higher margin private label products

- Entry into physicians' market makes positive contribution

- Conservative 87% payout ratio

- Positive future outlook

Solid increases in sales of Futuremed's consumable and recurring nursing supplies generated strong organic growth in the fourth quarter and year ended December 31, 2007. For the year ended December 31, 2007, total sales were $107.6 million, up 2.4% from $105.1 million for 2006. Total sales in the fourth quarter of 2007 rose 4.3% to $30.0 million compared to $28.7 million in the same period last year.

For the year ended December 31, 2007, sales of the Company's nursing supplies rose 10.6% to $92.6 million compared to $83.7 million last year. Sales volumes of incontinence products in 2007 rose 9.0% compared to 2006, while sales of other nursing supplies increased 12.8%. Consumable nursing supplies represented approximately 86% of the Fund's total sales for the year ended December 31, 2007. For the fourth quarter of 2007, sales of nursing supplies increased 6.1% to $25.2 million, driven primarily by a 4.5% increase in sales volumes of incontinence products and an 8.6% rise in sales of other nursing supplies.

For the year ended December 31, 2007, sales of the Company's furniture and equipment lines were $15.0 million compared to $21.4 million last year. Sales of these products are dependent on government-funded infrastructure projects announced from time-to-time. 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 during of 2007. For the fourth quarter of 2007, furniture and equipment sales were $4.8 million compared to $5.0 million in the same period last year.

On a geographic basis, sales in Ontario increased 5.6% in 2007 compared to last year, excluding the impact of the above-mentioned DME project. Sales in British Columbia rose 17.4%, while sales in the other Western Canada provinces of Alberta, Saskatchewan and Manitoba were up 2.2% compared to 2006. The increases were due primarily to increased business from existing customers and further market penetration resulting in an increase in new customers.

"We are pleased with our financial and operating results in 2007 as we made solid gains across all of our geographic regions and most of our nursing supply product lines. Our recent entry into the physicians market also made a positive contribution to our performance during the year," commented Raymond Stone, President and Chief Executive Officer of Futuremed. "Importantly, our results clearly demonstrate that our growing nursing supplies business continues to support our distributions to Unitholders while at the same time maintaining conservative payout ratios."

For the year ended December 31, 2007, gross profit rose 3.8% over the prior year while gross profit on nursing supplies rose 11.7% compared to 2006. The increases were due primarily to the higher sales volumes in 2007, an improved product mix, and a $2.6 million, or 26.4% increase in sales of higher margin private label products in 2007. As a percentage of sales, gross margin improved to 29.2% in 2007 compared to 28.8% in 2006. Gross profit in the fourth quarter of 2007 was slightly reduced compared to the prior year due primarily to a proportionately larger increase in lower margin revenue from incontinence products combined with a proportionately smaller increase in higher margin revenue from other nursing supplies and furniture and equipment.

Selling, general and administrative (SG&A) expenses for the year ended December 31, 2007 increased 5.7% compared to last year, due primarily to the hiring of additional staff to support the anticipated continued growth in sales, increased logistics effort during the year, an increase in delivery costs due to higher fuel prices and delivery surcharges, and a restructuring charge of $0.1 million taken in the third quarter related to a reorganization of the Fund's sales force to focus on higher-growth markets. Excluding the restructuring charge, SG&A expenses as a percentage of revenues were 13.7% in 2007, stable with the prior year. Management believes SG&A expenses, as a percentage of revenues, will remain in this range going forward. SG&A expenses for the quarter ended December 31, 2007 decreased by 10.7% relative to the comparable prior year period due primarily to the timing of recognition of expenses during the period.

For the year ended December 31, 2007 the Fund generated distributable cash of $14.2 million or $1.06 per Unit compared to $13.9 million or $1.03 per Unit in 2006. The payout ratio for 2007 improved to 87% compared to 88% last year. For the three months ended December 31, 2007 distributable cash was $4.4 million or $0.33 per Unit compared to $4.2 million or $0.31 per Unit in the same period last year. The payout ratio for the fourth quarter of 2007 improved to 71% from 74% last year. Capital expenditures were only $4,000 in the fourth quarter and $127,000 for the year ended December 31, 2007.

"Looking ahead, we are confident our strong track record of organic growth will continue. The outlook for the Canadian long-term care sector remains strong, driven by powerful demographics and the ongoing addition of new long-term care facilities in all of our markets. Our extensive product offering, industry-leading service, and deep customer relationships with all of the major owners and operators of seniors housing facilities should continue to generate increases in market share going forward," Mr. Stone concluded.

Financial Highlights

(in $,000 except per Unit amounts) Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
Nursing supplies 25,180 23,725 92,605 83,693
Furniture &Equipment 4,774 5,000 15,014 21,365
Total sales 29,954 28,725 107,619 105,058
Gross profit 8,393 8,759 31,416 30,268
Selling, general &
administrative expenses 3,607 4,040 14,962 14,153
EBITDA 4,898 4,695 16,238 16,093

Net earnings 4,169 2,606 3,910 9,232
Distributable Cash 4,394 4,180 14,223 13,852(i)
Distributable Cash per Unit $ 0.33 $ 0.31 $ 1.06 $ 1.03(i)
Distributions/Declared per Unit $ 0.23 $ 0.23 $ 0.93 $ 0.91(i)
Payout Ratio 71% 74% 87% 88%(i)

Sales by Geography:
Ontario 22,851 21,409 80,428 79,932
British Columbia 2,967 3,029 11,675 9,942
Alberta, Saskatchewan, Manitoba 4,136 4,287 15,516 15,184
Total Sales 29,954 28,725 107,619 105,058
(i) Period January 6, 2006 to December 31, 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
    or Toll-free investor relations: 1-800-387-7025
    Website: www.futuremedfund.com