Northstar Healthcare Reports 2009 Second Quarter Results

TORONTO and HOUSTON, Aug. 14 /CNW/ - Northstar Healthcare Inc. (TSX:NHC) today announced its financial results for the second quarter and six months ended June 30, 2009. All dollar amounts are in United States currency; percentage calculations are based on the numbers in the financial statements and may not correspond to rounded figures presented in this release. Detailed information relating to the second quarter and six months ended June 30, 2009 is available in Management's Discussion and Analysis (MD&A) and Consolidated 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. Second Quarter Results ---------------------- In the second quarter ended June 30, 2009, Northstar generated net patient service revenue of $6.6 million compared with $10.9 million in the corresponding period of 2008. In June 2009, after comparing historical payment data to the estimated net patient service revenues primarily reported in 2008, management determined that actual collections as of June 30, 2009 had exceeded 2008 reported revenues. As a result, the Company recorded a $1.5 million increase to net patient service revenues during the three months ended June 30, 2009. The year-over-year reduction in revenue was attributable to a 30% decrease in case volume - to 1,754 cases in the second quarter of 2009 from 2,504 in the 2008 period - and a 14.3% decrease in the overall reimbursement rate. The reduction in the reimbursement rate is related to two issues. First is the significant decrease in highly reimbursed cases at Palladium-Houston, attributable to the previously disclosed collection difficulty with one of the center's major payors and the attendant reduction in use by physicians under 'Exclusive Use' contracts. The second is lower reimbursement levels at the Kirby Center, resulting from the in-network contract that took effect January 1, 2009. Northstar recorded Q2/2009 income from operations of $0.1 million compared with $6.0 million in the 2008 period. Net income in the 2009 period was $1.7 million, or $0.12 per share fully diluted, compared with $2.9 million, or $0.21 per share fully diluted. The net income figures included foreign currency gains of $2.6 million in the 2009 period and $1.6 million in the 2008 period. Cash flows provided by operating activities in the second quarter of 2009 were $1.6 million, compared with $6.6 million in the corresponding period in 2008. Northstar reports Adjusted EBITDA which, while non-GAAP, is a useful measure of the performance of the Company. During the second quarter of 2009, Adjusted EBITDA net of non-controlling interests, capital expenditures, and before an unrealized loss on foreign exchange contracts and non-controlling interest, was negative $0.5 million. This compares with positive Adjusted EBITDA of $3.2 million in the corresponding 2008 period. "Q2 results reflected the ongoing and previously disclosed difficulty in collections at Palladium-Houston from a major health insurance provider," said Steve Linehan, CEO of Northstar. "We are in the process of negotiating an in-network contract with this payor and are optimistic that this initiative will soon lead to a comprehensive solution of the dispute." Six Months Results ------------------ In the six months ended June 30, 2009, Northstar generated net patient service revenue of $12.2 million compared with $21.9 million in the corresponding period of 2008. As indicated above, the 2009 figure included $1.5 million in revenue attributable to 2008 operations, as the company's final 2008 collections exceeded the reported figures. The year-over-year reduction in revenue was primarily attributable to a 27.1% decrease in case volume - to 3,497 cases in the first six months of 2009 from 4,795 in the corresponding 2008 period - and a 24.2% reduction in the overall reimbursement rate. The reduction in the reimbursement rate is related to the same two issues identified above in the discussion of the second quarter results. Income from operations for the six months ended June 30, 2009 was negative $0.3 million. This compares with positive income from operations of $12.3 million in the comparable 2008 period. Net income in the 2009 six-month period was nominal, compared with $5.0 million, or $0.36 per share fully diluted, in the 2008 period. The net income figures included a foreign currency gain of $1.2 million in the 2009 period and a loss of $1.2 million in the 2008 period. Cash flows provided by operating activities in the first six months of 2009 were $4.5 million, compared with $13.1 million in the corresponding period in 2008. Adjusted EBITDA net of non-controlling interests, capital expenditures, and before an unrealized loss on foreign exchange contracts and non-controlling interest, was negative $0.7 million in the 2009 six month period. This compares with positive Adjusted EBITDA of $6.7 million in the corresponding 2008 period. "Management is intensely focused on four major initiatives at this time: a successful resolution of the major payor collection issue at Palladium-Houston, including the negotiation of an in-network contract; a re-syndication of the Palladium-Houston partnership designed to result in a broader base of revenue at the facility; a timely resolution to the previously disclosed claims filed against Dr. Kramer and associated entities; and disciplined management of operating costs. The resolution of these matters and the clarification of their inherent uncertainty should permit further timely progress on the Strategic Review Process initiated by the board in Q1, 2009," added Mr. Linehan. "We have already made tangible progress on all of these initiatives. Talks with the third party payor are at an advanced level; re-syndication meetings and initiatives are progressing; the company has filed a request for mediation of the Kramer-related claims with the American Arbitration Association; and cost reduction initiatives are continuing at both facilities," he said. The company noted, however, that progress on the re-syndication has been somewhat slowed, due predominantly to the claims the Company has made against Dr. Donald Kramer, related entities and certain former managers, who own approximately 19% of the Palladium Partnership under agreements relating to Northstar's acquisition of its interest in the Palladium Partnership. In March 2009, Northstar selected an independent third party valuator to conduct a formal valuation in connection with the announcement by Dr. Donald Kramer, Northstar's former chief executive officer, in February, 2009 that he intended to lead a group of physicians, through an acquisition company, to make an offer to acquire all the issued and outstanding common shares of Northstar for Cdn$0.95 per common share in cash. The valuation process requested by Dr. Kramer has not yet been initiated as Dr. Kramer has not yet advanced a retainer to cover the expenses for the valuator, which expenses are required to be paid by Dr. Kramer under applicable securities laws. Conference call --------------- A conference call for the investment community will be held today, August 14, 2009 at 10:00 a.m. (ET). The call-in numbers for participants are 416-644-3427 or 800-590-1817. A live audio feed of the call will also be available on the Internet at: [ http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2774420 ] A replay of the call will be available from 12:00 p.m. (ET) on August 14, 2009 until 11:59 p.m. on August 21, 2009. To access the replay, call 416-640-1917 or 877-289-8525, enter pass code number 21313008, 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. 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 news 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: Philip Koven, Tel: (416) 447-4740 Ext. 235, E-mail: [ info@northstar-healthcare.com ]

Contributing Sources

Market Wire

N@N

Northstar Healthcare Reports 2009 Second Quarter Results