Northstar Healthcare Reports 2010 Third Quarter Results

TORONTO, ON and HOUSTON, TX, Nov. 9 /CNW/ - Northstar Healthcare Inc. (TSX:NHC) today announced its financial results for the third quarter and nine months ended September 30, 2010. 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.

Detailed information relating to the third quarter and nine months ended September 30, 2010 is available in Management's Discussion and Analysis (MD&A) and Interim 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.

On September 30, Northstar completed a non-brokered private placement of 14,583,417 common shares to Canada Healthcare Acquisition Inc., a corporation indirectly controlled by Dr. Donald L. Kramer, M.D., for proceeds of Cdn.$5 million. The shareholders of the Company voted overwhelmingly in favour of the private placement. Following completion of the transaction, all five directors resigned and were replaced by nominees of Canada Healthcare Acquisition Inc. In addition, Healthcare Ventures, Ltd., a partnership indirectly controlled by Dr. Kramer, gave up its rights to all Class B Units and forgave the related deferred distributions in exchange for 4,195,029 further common shares of the Company, which resulted in a $2 million non-cash gain.

"The closing of the private placement injected needed capital into the Company and eliminated our Class B long-term obligations," said David Richardson, Chief Financial Officer of Northstar. "As a result, our balance sheet is stronger and the Company is better positioned to move forward with its initiatives. Additionally, with management's focus on implementing tighter cost controls and utilizing fewer consultants, we expect a significant reduction in the Company's cash requirements."

Subsequent to quarter-end, Dr. Kramer was appointed CEO of Northstar, with Ms. Donna Alexander also returning to the Company as COO. "Transformation in the U.S. healthcare delivery system has accelerated with the passage of the health reform act," said Dr. Kramer. "Consolidation is underway and Northstar is very well positioned as a potential merger partner for many physician-owned hospitals looking for alternatives to transactions with large hospitals. We will be aggressively exploring all opportunities."

Third Quarter Results
In the third quarter ended September 30, 2010, Northstar generated net patient service revenue of $2.6 million compared with $6.8 million in the corresponding period of 2009. Northstar noted that in the third quarter of 2009, there were $2.6 million in collections included in revenue that were attributable to prior periods. Excluding these amounts, the company generated revenue of $2.6 million in the third quarter of 2010 compared with $4.3 million in the prior year period.

The year-over-year decline in Q3 net patient service revenues was primarily due to a 37.7% decrease in case volume and a 3.4% decrease in the net patient service revenues per case.  The overall case volume decline was attributable to a 13.6% decrease at the Kirby Partnership and a 91.7% decrease at the Palladium Partnership. The decrease at the Palladium Partnership was due to a lack of cases by non-partner physicians, reflecting the difficulty on collections associated with those cases.

Northstar recorded a third quarter 2010 loss from operations of $0.5 million compared with a $3.2 million profit in the 2009 period. The net income in the 2010 period was $0.3 million, or $0.02 per share fully diluted, compared with a profit of $2.9 million, or $0.19 per share fully diluted. The 2010 net income figure included a $2 million gain on de-recognition of Class B Units, as referenced above, and the 2009 figure included a $2.7 million gain on foreign currency.

Cash flow used for operating activities in the third quarter of 2010 was $2.4 million, compared with cash flow provided by operating activities of $2.2 million in the corresponding period in 2009.

Nine Months Results
In the nine months ended September 30, 2010, Northstar generated net patient service revenue of $10.1 million compared with $19 million in the corresponding period of 2009. The 2010 figure included $1.2 million in revenue attributable to earlier periods, while the corresponding 2009 period included $4.1 million in such revenue. The year-over-year reduction in revenue was primarily attributable to a 35.0% decrease in case volume and a 7.7% reduction in revenue per case.

Northstar had income from operations for the nine months ended September 30, 2010 of $1.1 million compared to $7.3 million in the comparable 2009 period.

Northstar reported a net loss in the 2010 nine month period of $3.1 million, or $0.23 per share fully diluted, compared $2.9 million profit, or $0.20 per share fully diluted in the corresponding 2009 period. The 2010 net income figure included a $2 million gain on de-recognition of Class B Units and the 2009 figure included a $3.9 million gain on foreign currency.

Cash flow used for operating activities in the first nine months of 2010 was $3.8 million compared with cash flow provided by operating activities of $6.7 million in the corresponding prior year period.

At September 30, 2010, Northstar had consolidated working capital of $7.2 million, including cash of $4.7 million. This compares with $8.3 million and $6.2 million, respectively, at year-end 2009. Of the $4.7 million cash at September 30, 2010, $4.1 million is cash available at the Northstar corporate level related to the private placement, with the balance being cash held at the operating level by the Palladium and Kirby Partnerships.

Conference call
A conference call for the investment community will be held on Wednesday, November 10 at 10:00 a.m. (ET). The call-in numbers for participants are 647-427-7450 or 888-231-8191. A live audio feed of the call will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3299340

A replay of the call will be available from 1:00 pm ET on November 10, 2010 until 11:59 pm ET on November 17, 2010. To access the replay, call 416-849-0833 or 800-642-1687, enter pass code number 22896519, and then press the pound (#) key. The replay can also be accessed over the Internet at the above address.

On the conference call, in addition to reviewing the results of the third quarter, Northstar's new management team will begin to outline a new direction for the Company, which is designed to capitalize on the profound changes underway in the US healthcare delivery system.

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. At September 30, 2010, the Company held interests in two ambulatory surgery centres in Houston - a 72.5% partnership interest in The Palladium for Surgery - Houston and a 60% partnership interest in Medical Ambulatory Surgical Suites.

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: [phone] Ext. 235
E-mail: [email protected]