Northstar Healthcare Reports Second Quarter 2008 Financial Results



    
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    US $000 (except per share          Adjusted pro              Adjusted pro
     or where indicated)                   forma                     forma
                                          combined                  combined
                          Three months  three months   Six months  six months
                           ended June    ended June    ended June  ended June
                            30, 2008      30, 2007      30, 2008    30, 2007
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    Net patient service
     revenue                 $10,926       $13,004       $21,879     $24,124
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    Income from operations    $5,977        $8,976       $12,277     $16,390
    -------------------------------------------------------------------------
    Net income                $2,890        $3,422        $4,992      $6,968
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    Net income per share       $0.21         $0.26         $0.36       $0.53
    -------------------------------------------------------------------------
    Adjusted EBITDA(1)        $3,196        $5,543        $6,737     $10,064
    -------------------------------------------------------------------------
    Adjusted EBITDA(1)
     margin                    29.3%         42.6%         30.8%       41.7%
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    Cash available for
     dividends                $3,367        $5,299        $7,065      $9,990
    -------------------------------------------------------------------------
    Cash available for
     dividends $Cdn.          $3,699        $5,735        $7,733         n/a
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    Dividends declared
     $Cdn.                    $4,170        $4,170        $8,341         n/a
    -------------------------------------------------------------------------
    Payout ratio              112.8%         72.7%        107.9%         n/a
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        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.
    

    TORONTO and HOUSTON, Aug. 8 /CNW/ - Northstar Healthcare Inc. (TSX:NHC)
today announced its financial results for the second quarter and six months
ended June 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 2007 second quarter or six-months. 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
both the second quarter and six-months ended June 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 second quarter and six months ended
June 30, 2008 is available in the Management's Discussion and Analysis (MD&A),
which can be accessed on the Company's web site at
www.northstar-healthcare.com or at www.sedar.com. This information is not
intended to provide a comprehensive comparison of financial results.
    In the second quarter ended June 30, 2008, the total number of cases
performed by Northstar increased 4.8% from the comparable 2007 period, from
2,389 to 2,504. However, as a result of a negative shift in payor mix at the
Kirby Center, the Company experienced a year-over-year reduction in total net
patient service revenue to $10.9 million compared with $13.0 million on a pro
forma basis during the same period in 2007. The Company noted, however, that
in the third quarter of 2007, a $0.8 million reduction was made to net patient
service revenues for the forty-five day period ending June 30, 2007. After
adjusting reported 2007 pro forma second quarter results for this $0.8 million
reduction, net patient service revenues for the second quarter of 2008
declined 10.5% from the year-earlier period.
    The company noted that, based on historical trends, net patient service
revenues for the third and fourth calendar quarters typically exceed those of
the first and second calendar quarters in aggregate.
    Q2 income from operations decreased from $9.0 million on a pro forma
basis in 2007 or $8.2 million after the $0.8 million revenue adjustment - to
$6.0 million in the 2008 period. This decrease exceeded the percentage
decrease in revenue from the pro forma 2007 period, primarily as a result of
higher personnel and general and administrative expenses. General and
administrative costs included legal, accounting, insurance and directors and
officer's compensation associated with being a reporting issuer in Canada.
    Northstar reports Adjusted EBITDA as defined above which, while non-GAAP,
is a useful measure of the performance of the Company and is defined in the
Company's MD&A. During the second quarter, Adjusted EBITDA was $3.2 million,
representing an Adjusted EBITDA margin of 29.3%. This compares with
$5.5 million and 42.6%, respectively, on a pro forma basis in 2007. After
adjusting for the $0.8 million revenue reduction in the 2007 period, Adjusted
EBITDA for the pro forma 2007 period was $5.2 million, representing an
Adjusted EBITDA margin of 40.3%.
    Cash flows provided by operating activities for the second quarter of
2008 were $6.6 million compared with $3.0 million for the 45-day period ending
June 30, 2007. Net income for the second quarter of 2008 was $2.9 million or
$0.21 per share, compared with $3.4 million, or $0.26 per share for the
similar period, in 2007 respectively.
    Northstar reported cash available for dividends in the second quarter of
2008 totaling $3.4 million, or Cdn $3.7 million, reflecting the impact of the
Company's foreign currency hedge. Dividends declared during the quarter were
Cdn $4.2 million, resulting in a payout ratio of 112.8%. On a pro forma basis,
cash available for dividends last year would have been $5.3 million or Cdn
$5.7 million, representing a payout ratio of 72.7%. Adjusted for the
$0.8 million revenue reduction, cash available for dividends last year would
have been $5.0 million or Cdn $5.4 million, representing a payout ratio of
77.0%.
    In the six-month period ended June 30, 2008, the total number of cases
performed by Northstar increased 2.3% from the comparable 2007 period, from
4,686 to 4,795. As with the Q2 results noted above, however, the negative
shift in payor mix at the Kirby Center resulted in a year-over-year reduction
in revenue. The Company reported net patient service revenue of $21.9 million
compared with $24.1 million on a pro forma basis for the similar period in
2007 - and $23.4 million after the $0.8 million revenue adjustment. The shift
in payor mix at the Kirby Center was partially offset by an increase of 1.5%
in net patient service revenues at Palladium-Houston.
    Income from operations for the six-month period ended June 30, 2008
decreased from $16.4 million on a pro forma basis in 2007 - $15.6 million
after the $0.8 million revenue adjustment - to $12.3 million in the 2008
period. As in the three-month period June 30, 2008, the decline reflected the
lower revenues in addition to higher personnel and general and administrative
expenses associated with being a reporting issuer in Canada.
    Adjusted EBITDA in the first half of 2008, as defined above, was
$6.7 million, representing an Adjusted EBITDA margin of 30.8%. This compares
with $10.1 million and 41.7%, respectively, on a pro forma basis in 2007.
After adjusting for the $0.8 million revenue reduction in the 2007 period,
Adjusted EBITDA for the pro forma 2007 period was $9.8 million, representing a
margin of 40.5%.
    Cash flows provided by operating activities for the six-months ended
June 30, 2008 were $13.1 million. Net income for the first half of 2008 was
$5.0 million, or $0.36 per share, compared with $7.0 million and $0.53 per
share in 2007, respectively.
    Northstar reported cash available for dividends in the first half of 2008
totaling $7.1 million, or Cdn $7.7 million, reflecting the impact of the
Company's foreign currency hedge. Dividends declared during the six-months
ended June 30, 2008, were Cdn $8.3 million, resulting in a payout ratio of
107.9%.
    "As a result of the revenue decline at the Kirby Center, our financial
results in the first half of 2008 were unacceptable," said Dr. Donald Kramer,
Chief Executive Officer of Northstar Healthcare Inc. "While the payor mix
issue will remain a challenge in the near-term, we are moving aggressively to
counteract its effects by adding to our complement of surgeons. In fact, since
taking over the facility, we have added 14 surgeons representing 8% of revenue
with a good payor mix. We expect to continue to make more such additions to
our roster in coming periods."
    Total assets at June 30, 2008 were $175.0 million and Northstar had no
long-term debt. The Company had net working capital of $13.4 million,
including cash and cash equivalents of $4.2 million. Full financial statements
are available on the Company's web site at: www.northstar-healthcare.com and
at www.sedar.com.

    Conference call
    ---------------
    A conference call for analysts and interested listeners will be held
today, August 8, 2008 at 11:00 a.m. (ET). The call-in numbers for participants
are 416-695-9712 or 888-789-0089. A live audio feed of the call will also be
available on the Internet at: 
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2361480
    A replay of the call will be available from 1:00 p.m. (ET) on August 8,
2008 until 11:59 p.m. on August 22, 2008. To access the replay, call
416-695-5800 or 800-408-3053, enter pass code number 3267998, 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., its Chief
Executive Officer, 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:

For further information: Philip Koven, Tel: (416) 447-4740 Ext. 235,
E-mail: info@northstar-healthcare.com

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Northstar Healthcare Inc.

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