-------------------------------------------------------------------------
Adjusted
pro forma
combined
Three months Three months Nine months nine months
US $000 (except ended ended ended ended
per share or September 30, September 30, September 30, September 30,
where indicated) 2008 2007 2008 2007
-------------------------------------------------------------------------
Net patient service
revenue $9,364 $12,508 $31,243 $36,632
-------------------------------------------------------------------------
Income from operations $4,310 $8,120 $16,587 $24,510
-------------------------------------------------------------------------
Adjusted EBITDA(1) $2,949 $4,816 $9,686 $14,882
-------------------------------------------------------------------------
Adjusted EBITDA(1)
margin 31.5% 38.5% 31.0% 40.6%
-------------------------------------------------------------------------
Cash available for
dividends $2,248 $4,817 $9,313 $14,809
-------------------------------------------------------------------------
Cash available for
dividends $Cdn. $2,448 $5,245 $10,140 n/a
-------------------------------------------------------------------------
Dividends
declared $Cdn. $3,586 $4,170 $11,927 n/a
-------------------------------------------------------------------------
Payout ratio 146.5% 79.5% 117.6% n/a
-------------------------------------------------------------------------
Payout ratio
adjusted(2) 94.6% n/a n/a n/a
-------------------------------------------------------------------------
(1) Adjusted EBITDA (Earnings before interest, taxes, depreciation and
amortization) is net of non-controlling interests and capital
expenditures, and before gain on foreign currency exchange contracts
and change in fair value of other liabilities, non-controlling
interest.
(2) Dividend adjusted to current rate of Cdn. $0.058 per month for full
periodTORONTO and HOUSTON, Nov. 13 /CNW/ - November 13, 2008 - Northstar
Healthcare Inc. (TSX:NHC) today announced its financial results for the third
quarter and nine months ended September 30, 2008. All dollar amounts are in
United States currency unless otherwise stated. Percentage calculations are
based on the numbers in the financial statements and may not correspond to
rounded figures presented in this release.
Northstar completed its Initial Public Offering (IPO) and the
acquisitions of its ambulatory surgery center (ASC) operations on May 17,
2007. As a result, there are no directly comparative figures for the
corresponding nine months in 2007. Therefore, in order to assist investors in
assessing the operating performance of the Company, Northstar also announced
pro forma combined results for the predecessor businesses for the nine months
ended September 30, 2007. It should be noted, however, that these figures are
not directly comparable because they exclude expenses that were not incurred
in the pre-IPO period.
Detailed information relating to the third quarter and nine months ended
September 30, 2008 is available in the Management's Discussion and Analysis
(MD&A) and Financial Statements, which are available on the Company's web site
at: www.northstar-healthcare.com and at www.sedar.com. This information is not
intended to provide a comprehensive comparison of financial results.
In the third quarter ended September 30, 2008, Northstar's case volume
decreased 12.7% from the comparable 2007 period. The operations and
profitability of the Company's Houston-area ASCs were significantly affected
by Tropical Storm Edouard in August and Hurricane Ike in September. In all,
management estimates that disruptions caused by Edouard and Ike were
responsible for most of the decline in case volumes during Q3.
Hurricane Ike resulted in the evacuation of approximately 1.2 million
people in the metro Houston area. The hurricane knocked out electrical power
to approximately 2 million customers of the city's largest electrical
provider. Two weeks later - near the end of the financial quarter - more than
half of those customers were still without power, including some of company's
patients, staff and physicians' offices.
Both of Northstar's ASCs were closed for a day due to Edouard, while Ike
resulted in the Kirby Center closing for two days and Palladium-Houston
closing for three days. However, the Company continued to pay its staff during
these periods. Further, in the interests of patient safety, ASC staff
postponed surgeries for patients who would be returning to homes without
electricity. Not all of the affected surgeries have been re-scheduled or
completed to date.
Economic conditions in the United States are also affecting case volumes,
as elective surgery is being postponed due to some patients' concerns about
out-of-pocket payments and loss of income. With the current economic
uncertainty, this trend may continue.
Northstar's reimbursement rate per case declined 19.4%, due primarily to
the decline in the percentage of high payors at the Kirby Center. As a result,
revenue in the quarter declined 25.1% to $9.4 million, while income from
operations decreased 46.9% to $4.3 million.
Northstar reports Adjusted EBITDA as defined above which, while non-GAAP,
is a useful measure of the performance of the Company. During the third
quarter, Adjusted EBITDA was $2.9 million, representing an Adjusted EBITDA
margin of 31.5%. This compares with $4.8 million and 38.5%, respectively, in
the third quarter of 2007.
Northstar reported cash available for dividends in the third quarter of
2008 totaling $2.2 million, or Cdn $2.4 million, reflecting the impact of the
Company's foreign currency hedge. Dividends declared during the quarter were
Cdn $3.6 million, resulting in a payout ratio of 146.5%. Northstar noted that
the quarterly payout ratio was significantly increased by the impact of the
unusual weather, Hurricane Ike in particular. Despite this impact, however,
the Company indicated that, assuming Northstar's monthly dividend had been at
the current level of Cdn. $0.058 per share throughout the quarter, the payout
ratio in the third quarter would have been 94.6%. Cash available for dividends
in the corresponding 2007 period was $4.8 million or Cdn $5.2 million,
representing a payout ratio of 79.5%.
In the third quarter of 2008, Northstar recorded $78.9 million in
non-cash charges related to goodwill and intangible asset impairment. These
charges, which do not affect the Company's cash position, result from a number
of factors including lower-than-forecast net patient service revenues,
deterioration in the payor mix at the Kirby Center and a higher discount rate
on future cash flow, which reflects uncertainty in financial and business
markets.
In the nine-month period ended September 30, 2008, the total number of
cases performed by Northstar decreased 2.9% from the comparable 2007 period.
As with the Q3 results noted above, the decline was attributable primarily to
the negative shift in payor mix at the Kirby Center, as well as to the impact
of weather. Revenue declined 14.7% to $31.2 million and income from operations
decreased 32.3% to $16.6 million.
Adjusted EBITDA in the nine months, as defined above, was $9.7 million,
representing an Adjusted EBITDA margin of 31.0%. This compares with
$14.9 million and 40.6%, respectively, on a pro forma basis in 2007. Cash
available for dividends in the nine months of 2008 totaled $9.3 million, or
Cdn $10.1 million, reflecting the impact of the Company's foreign currency
hedge. Dividends declared during the nine months ended September 30, 2008,
were Cdn $11.9 million, resulting in a payout ratio of 117.6%.
"Our financial results in the third quarter reflected the affects of
Hurricane Ike on the business, the write-down related to the Kirby Center and
the payor mix trends evident throughout 2008," said Syl Ghirardi, Interim
Chief Executive Officer of Northstar Healthcare Inc. "The results underline
the importance of the dividend reduction announced September 22, which is
designed to ensure that our payout ratio is below 100% and that our balance
sheet continues to be strong."
Northstar's balance sheet at September 30, 2008 reflected total assets of
$114.9 million and no long-term debt. The Company had net working capital of
$12.0 million, including cash and cash equivalents of $3.7 million.
"In addition to attracting new surgeons to our centers and introducing
additional, well-reimbursed procedures, our operational focus continues to
address strategic planning and the continuing refinement of Northstar's
business processes," Ghirardi added. "This is an ongoing effort to better
position the company for anticipated growth."
"While ASC industry growth has slowed - due to both the overall economy
and the industry's increasing maturity - it remains very attractive in the
long-term, and we are continuing to seek out and develop opportunities to
extend Northstar's geographic footprint and thereby diversify our business
base," Ghirardi said.Conference call
---------------A conference call for analysts and interested listeners will be held
today, November 13, 2008 at 10:00 a.m. (ET). The call-in numbers for
participants are 416-915-5785 or 800-588-4490. A live audio feed of the call
will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2469060
A replay of the call will be available from 1:00 p.m. (ET) on
November 13, 2008 until 11:59 p.m. on November 20, 2008. To access the replay,
call 416-640-1917 or 877-289-8525, enter pass code number 21289094, and then
press the pound key. The replay can also be accessed over the Internet at the
above address.About Northstar Healthcare Inc.
-------------------------------Northstar owns and/or manages ambulatory surgery centres in the United
States, focusing initially on Houston and other metropolitan areas in Texas.
The Company currently holds interests in two ambulatory surgery centres in
Houston - a 70% partnership interest in The Palladium for Surgery - Houston
and a 60% partnership interest in Medical Ambulatory Surgical Suites. In
addition, Northstar manages an ambulatory surgery centre in Dallas and three
pain management clinics in Houston.
Northstar was founded and sponsored by Donald Kramer, M.D. and Stewart A.
Feldman. Mr. Feldman also served as the co-principal and Chairman and Chief
Executive Officer of Healthcare Ventures, Ltd., which sponsored Northstar,
with Dr. Kramer serving as its President.Forward-looking statements
--------------------------This press release may contain forward-looking statements (within the
meaning of applicable securities laws) relating to business of Northstar
Healthcare Inc. (the "Company") and the environment in which it operates.
Forward-looking statements are identified by words such as "believe",
"anticipate", "expect", "intend", "plan", "will", "may" and other similar
expressions. These statements are based on the Company's expectations,
estimates, forecasts and projections. They are not guarantees of future
performance and involve risks and uncertainties that are difficult to control
or predict. These risks and uncertainties are discussed in the Company's
regulatory filings available on the Company's web site at
www.Northstar-Healthcare.com or at www.sedar.com. There can be no assurance
that forward-looking statements will prove to be accurate as actual outcomes
and results may differ materially from those expressed in these
forward-looking statements. Readers, therefore, should not place undue
reliance on any such forward-looking statements. Further, a forward-looking
statement speaks only as of the date on which such statement is made. The
Company undertakes no obligation to publicly update any such statement or to
reflect new information or the occurrence of future events or circumstances.
%SEDAR: 00025141E
For further information: Allan Austin, Tel: (416) 447-4740 Ext. 240,
E-mail: info@northstar-healthcare.com
