Northstar Healthcare Reports Year-end Financial Results



    
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                                                    Pro forma        Pro
                                                  combined(2),(3)   forma(2)
                                      Period from    twelve         twelve
                         Three months   May 17,      months         months
    US $000 (except         ended       2007 to      ended          ended
     per share or        December 31,   December   December 31,  December 31,
     where indicated)       2007        31, 2007      2007           2006
    -------------------------------------------------------------------------
    Net patient
     service revenue      $ 13,593      $ 32,919      $ 50,224      $ 45,598
    -------------------------------------------------------------------------
    Income from
     operations           $  8,431      $ 21,323      $ 32,940      $ 31,887
    -------------------------------------------------------------------------
    Net income            $  1,470      $  3,160      $  8,761      $ 13,824
    -------------------------------------------------------------------------
    Net income per
     share                $   0.11      $   0.23      $   0.63      $   0.99
    -------------------------------------------------------------------------
    EBITDA(1)             $  4,770      $ 12,344      $ 19,651      $ 16,878
    -------------------------------------------------------------------------
    EBITDA(1) margin         35.1%         37.5%         39.1%         37.0%
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    Cash available
     for dividends        $  4,675      $ 12,119      $ 19,485      $ 17,361
    -------------------------------------------------------------------------
    Cash available
     for dividends $Cdn.  $  5,005      $ 12,934      $ 20,796      $ 19,047
    -------------------------------------------------------------------------
    Dividends declared
     $Cdn.                $  4,170      $ 10,398      $ 16,681      $ 16,681
    -------------------------------------------------------------------------
    Payout ratio             83.3%         80.4%         80.2%         87.6%
    -------------------------------------------------------------------------

    (1) EBITDA (Earnings Before Interest Depreciation and Amortization) is
        net of non-controlling interests, capital expenditures, and before
        unrealized gain on foreign currency exchange contracts and change in
        fair value of other liabilities, non-controlling interests
    (2) Pro forma net patient service revenues have been adjusted for changes
        in historical collection percentages, as indicated in the Q3 2007
        MD&A. As a result of the adjustments to net patient service revenues,
        income tax expense and non-controlling interest have also been
        adjusted. Pro forma results assume common shares outstanding at the
        same level as at December 31, 2007.
    (3) Pro forma combined results comprise the actual results from May 17,
        2007 - December 31 , 2007 with pro forma results from January 1, 2007
        - May 16, 2007
    

    TORONTO and HOUSTON, TX, March 17 /CNW/ - Northstar Healthcare Inc.
(TSX:NHC) today announced its financial results for the fourth quarter and
full period since inception of the Company, ended December 31, 2007. 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.
    During the fourth quarter, the Company continued to generate consistent
cash flow, supporting its Cdn.$0.10 per month common share dividend.
    Northstar completed its Initial Public Offering (IPO) and acquisitions of
its ASC operations on May 17, 2007, and as a result is reporting less than a
full year of operations. To assist investors in assessing the operating
performance of the Company and its predecessor businesses for the full year
ended December 31, 2007, Northstar also released pro forma combined financial
results for 2007, as well as pro forma 2006 consolidated financial results for
comparative purposes.
    In addition, Northstar also provided some key statistics relating to the
operations of its ambulatory surgical centers (ASCs). Specifically, Northstar
provided information relating to the number and mix of surgical procedures
performed in both the fourth quarter and twelve month periods ended
December 31, 2007, and for the corresponding periods in 2006. A detailed
breakdown of the ASC case and procedure data 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.

    Fourth quarter results
    ----------------------
    In the fourth quarter ended December 31, 2007, Northstar generated net
patient service revenue of $13.6 million. Income from operations was
$8.4 million, while net income was $1.5 million, or $0.11 per share.
    The Company reports EBITDA which, while non-GAAP, is a useful measure of
the performance of the Company. During the fourth quarter, EBITDA net of
non-controlling interests, capital expenditures, and before loss on foreign
exchange contracts and change in fair value of other liabilities and
non-controlling interest, was $4.8 million, providing an EBITDA margin of
35.1%.
    Cash flows provided by operating activities for the quarter were
$7.2 million.
    Northstar reported cash available for dividends in the fourth quarter of
2007 totaling $4.7 million, or Cdn$5.0 million, reflecting the positive impact
of the Company's foreign currency hedge. Dividends declared during the quarter
were Cdn. $4.2 million, resulting in a payout ratio of 83.3%. This ratio is
based on a calculation of cash available for dividends, which reduces EBITDA
above by the amount of current taxes payable in the period.
    Revenue increased 8.7% compared with the third quarter of 2007, or 2.6%
if the third quarter adjustment of $0.8 million (reflecting a change in
management's estimates related to previous periods) is eliminated. Positive
seasonal patterns were offset by lower insurer reimbursements at the Kirby
Center, primarily attributable to changes in the payor mix. Management has
undertaken a number of initiatives designed to increase revenues at Kirby. In
the fourth quarter, six new surgeons began utilizing the facility, taking the
total to ten since the second quarter. In addition, we are in discussions with
a major insurer on a new contract that is expected to drive more volume
through the facility.
    EBITDA was essentially flat compared with Q3, reflecting the
reimbursement change and increased overall G&A expenses. The higher G&A levels
reflected a number of year-end items related to our first year as a public
company, including legal, tax and accounting. In addition, the Company
incurred significant consulting expenses relating to healthcare recruiting, as
Northstar is building up its management resources with a view to significantly
increasing the scale of the Company.
    The Northstar ASCs performed 13,787 procedures during the fourth quarter,
an increase of 12.1% over the comparable 2006 level. Importantly, Northstar's
focus on improving revenue per procedure was enhanced by the year-over-year
change in procedure mix. Specifically, orthopaedics and ENT (ear, nose and
throat) procedures, which generate higher margins for the Company, increased
27.4% over the corresponding 2006 period.

    Results since inception of operations
    -------------------------------------
    Northstar also reported financial results for the period from inception
of operations on May 17, 2007 to December 31, 2007. Net patient service
revenues for the period were $32.9 million. Income from operations was
$21.3 million and net income was $3.2 million or $0.23 per common share.
    A $10.2 million non-cash increase in the fair value of other liabilities,
non-controlling interest, reduced net income in the year. This represents the
change in fair value of the retained interest held by Healthcare Ventures.
    This reduction in net income was partly offset by a $6.0 million gain
relating to foreign currency exchange contracts. The gain relates to the
change in fair value of the remaining 5.0 years of foreign currency exchange
contracts entered into by the Company to hedge exposure to fluctuations
between the U.S. dollar and the Canadian dollar for future common share
dividends, and reflects the strengthening of the Canadian dollar during the
period.
    EBITDA net of non-controlling interests, capital expenditures, and before
unrealized gain on foreign exchange contracts and change in fair value of
other liabilities and non-controlling interest, was $12.3 million, providing
an EBITDA margin for the period of 37.5%.
    Cash flows provided by operating activities since inception were
$18.3 million.
    The Company generated cash available for dividends, net of current tax
payable, of $12.1 million or Cdn. $12.9 million in the period since inception.
Dividends declared were Cdn. $10.4 million, resulting in a payout ratio for
the period of 80.4%.

    Pro forma 12 month results
    --------------------------
    Northstar also released pro forma combined financial results for 2007,
comprised of the actual results for the full period following completion of
the IPO combined with pro forma results for the period prior to the IPO. For
comparison purposes, 2006 pro forma consolidated financial results are also
provided.
    On this basis, net patient service revenue for 2007 was $50.2 million
compared with $45.6 million in 2006. Income from operations was $32.9 million
in 2007 compared with $31.9 million, while net income was $8.8 million in 2007
compared with $13.8 million a year earlier.
    EBITDA net of non-controlling interests, capital expenditures, and before
unrealized gain on foreign exchange contracts and change in fair value of
other liabilities and non-controlling interest, would have been $19.7 million
in 2007 compared with $16.9 million in 2006. This would have resulted in pro
forma EBITDA margins of 39.1% and 37.0% respectively.
    Assuming that the dividends declared would have been at the $0.10 per
share per month level introduced at the time of the IPO and that the currency
hedge price was the same, the pro forma payout ratios would have been 80.2% in
2007, compared with 87.6% in 2006.
    For the year as a whole, Northstar ASCs performed 47,745 procedures,
compared with 49,194 in 2006. These figures include higher procedure numbers
than were previously reported for all periods prior to the fourth quarter of
2007, reflecting a revision in management's previous reporting practice. This
revision, as described more fully in the MD&A, had no affect on historical
revenues or expenses. In 2007, 8.0% of the Company's procedures were higher
margin ENT procedures, compared with 3.3% in 2006. This reflects Northstar's
focus on more complex, higher margin procedures, and contributed to the
increase in EBITDA margins in the year.
    "We are excited about 2008, our first full year as a public company,"
said Dr. Donald Kramer, Chief Executive Officer of Northstar Healthcare Inc.
"We intend to continue to focus our efforts on generating organic growth in
our ASCs, increasing the number of cases and procedures, optimizing our
procedure mix and generating improvements in billing and operations."
    Total assets at December 31, 2007 were $179.6 million and Northstar had
no long-term debt. The Company had net working capital of $14.7 million,
including cash and cash equivalents of $5.0 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, March 17, 2008 at 10:00 a.m. (ET). The call-in numbers for participants
are 416-644-3415 or 800-732-9307. A live audio feed of the call will also be
available on the Internet at: 
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2198680
    A replay of the call will be available from 12:00 p.m. (ET) on March 17,
2008 until 11:59 p.m. on March 24, 2008. To access the replay, call
416-640-1917 or 877-289-8525, enter pass code number 21266006, and then press
the pound (No.) 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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