Futuremed Healthcare Income Fund

Futuremed Healthcare Income Fund

November 13, 2006 17:00 ET

Futuremed Announces Strong Third Quarter 2006 Results

CONCORD, ONTARIO--(CCNMatthews - Nov. 13, 2006) - Futuremed Healthcare Income Fund (TSX:FMD.UN) ("Futuremed" or the "Fund") announced today its results for the three and nine months ended September 30, 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.

Third Quarter Highlights:

- Total sales up 19% on strong growth across all regions and product lines

- Nursing supplies sales up 14.4%

- Furniture and equipment sales increase

- Gross margin improves

- Continued successful penetration into new physician market

Total sales increased 19.0% for the three months ending September 30, 2006 to $23.5 million from $19.8 million for the same period last year. For the first nine months of 2006, sales were up 4.5% to $76.3 million compared to $73.0 million for the comparable period in 2005. For the Fund's reporting period from January 6, 2006 to September 30, 2006, sales were $75.1 million.

"We were pleased to have generated solid growth across all of our geographic markets and product lines during the third quarter," commented Raymond Stone, President and Chief Executive Officer of Futuremed.

Sales for nursing supplies increased 14.4% in the third quarter and 14.1% for the first nine months of 2006 compared to the same periods last year. The growth in nursing supplies sales was due 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 88.1% and 82.3% of total sales for the three and nine months ended September 30, 2006, respectively.

Sales of furniture and equipment rose to $2.8 million in the third quarter of 2006 from $1.7 million last year. For the first nine months of 2006 furniture and equipment sales were $16.4 million compared to $20.4 million in the prior year. Sales of the Fund's furniture and equipment are unpredictable and can vary significantly from quarter to quarter based on a number of factors, including the timing and size of provincial government-funded projects. The reduction in sales, in this revenue stream, for the nine months ended September 30, 2006, is solely the result of $7 million less infrastructure spending in Ontario during the current period, compared to the same period in 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. The Fund expects it will break-even in this market by year-end, and generate a positive and growing contribution to distributable cash in 2007 and going forward.

Gross profit in dollars increased 19.6% and 4.7% for the three and nine months ended September 30, 2006 respectively compared to the same periods last year. As a percentage of revenues, gross profit increased to 27.2% in the third quarter of 2006 from 27.0% last year, and remained stable at 28.2% for the nine months ended September 30, 2006 compared to the prior year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $2.9 million in the third quarter of 2006 compared to $3.5 million last year. For the first nine months of 2006, EBITDA was $11.5 million compared to $13.3 million for the same period last year. The change is primarily due to incremental costs associated with becoming a publicly traded income fund not incurred in the prior year, as well as increased overheads incurred in 2006 to manage the growth of the Fund's business. A further contributor to the increase in SG & A costs was higher delivery charges in the current year. This is the result of increased fuel prices, and a change in the sales mix from higher equipment and furniture sales (upon which delivery costs are recoverable), to nursing supplies (upon which industry terms are generally FOB customer's premises).

The Fund generated distributable cash of $2.3 million or $0.18 per Unit for the third quarter of 2006. For the nine months ended September 30, 2006, the Fund generated distributable cash of $9.7 million or $0.72 per Unit. Distributions declared for the third quarter were $3.1 million or $0.23 per Unit, and $9.2 million or $0.68 per Unit for the nine months ended September 30, 2006. The payout ratio for the three and nine months ended September 30, 2006 was 132% and 94% respectively. The higher payout ratio in the third quarter of 2006 was primarily due to investments made during the quarter, in staffing and other costs related to the funds entry into the new physicians market, and other growth initiatives.

"Our operating performance and financial results in the third quarter and first nine months of 2006 met our expectations as we expanded our presence in our current markets and successfully entered a new line of business," Mr. Stone concluded. "Looking ahead, we remain confident our growth will continue, and we expect that our payout ratio for the year ended December 31, 2006 will be under 100%."

Financial Highlights

(in $,000 except per Unit amounts) Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005

Nursing supplies $ 20,731 $ 18,124 $ 59,968 $ 52,583
Furniture & Equipment 2,797 1,650 16,366 20,376
Total sales 23,528 19,774 76,334 72,959
Gross profit 6,395 5,346 21,509 20,543
Gross profit % 27.2% 27.0% 28.2% 28.2%
Selling, general & administrative
expenses 3,567 2,934 10,181 8,566
EBITDA 2,858 3,527 11,485 13,293
Net earnings 1,333 2,315 6,627 8,557

Distributable Cash 2,347 - 9,672 -
Distributable Cash per Unit $0.18 - $0.72 -
Distributions/Declared 3,101 - 9,136 -
Distributions/Declared per Unit $0.23 - $0.68 -

Sales by Geography:
Ontario $ 17,300 $ 15,086 $ 58,523 $ 59,117
British Columbia 2,244 1,842 6,913 5,442
Alberta, Saskatchewan, Manitoba 3,984 2,846 10,898 8,460
Total Sales 23,528 19,774 76,334 72,959

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