News Column

Medical Facilities Corporation Reports 2014 Second Quarter Financial Results

August 14, 2014

TORONTO, Aug. 14, 2014 /CNW/ - Medical Facilities Corporation ("Medical Facilities" or the "Company") (TSX: DR), today reported its financial results for the three-month and six-month periods ended June 30, 2014.  All amounts are expressed in U.S. dollars unless indicated otherwise.

Second Quarter 2014 Summary

•Revenue of $74.4 million, up 0.9% as compared with $73.7 million in Q2 2013 •Income from operations1 of $20.3 million, down 2.5% as compared with $20.8 million in Q2 2013 •Cash available for distribution1 of Cdn$9.7 million, up 3.8% as compared with Cdn$9.4 million in Q2 2013 •Payout ratio1 of 90.6% as compared with 93.8% in Q2 2013

"The Company's second quarter 2014 revenue continued to be consistent with the results from one year ago. While our margins were impacted by higher operating costs, which were mostly due to the changes in case volumes and case mix at our Centers, and selected reimbursement reductions emanating from new contracts at two of our Centers, we continue to generate sustainable cash flows and distributions to our shareholders as evidenced by our cash available for distribution and payout ratio for the quarter," said Dr. Donald Schellpfeffer, CEO of Medical Facilities.

Financial Results

Three months ended June 30, 2014

The Company generated cash available for distribution ("CAFD") of Cdn$9.7 million, or Cdn$0.310 per common share, and declared dividends of Cdn$8.8 million, or Cdn$0.281 per common share, representing a payout ratio of 90.6% for the quarter compared to 93.8% for the same quarter last year. In U.S.-dollar terms, CAFD decreased by US$0.2 million compared to the same quarter in 2013 as higher foreign currency losses on foreign exchange forward contracts which matured in the respective periods were partially offset by lower provision for current income taxes.

Consolidated facility service revenue ("revenue") of $74.4 million increased by $0.7 million or 0.9% compared to the second quarter of 2013 as increases in surgical cases and pain management procedures, favourable case mix and increased revenue from urgent care operations were substantially offset by a less favourable payor mix attributable to an increase in cases reimbursed by payors with lower and fixed reimbursement rates.

Consolidated operating expenses, including salaries and benefits, drugs and supplies, and general and administrative costs, ("consolidated expenses") totalled $54.1 million, or 72.7% of revenue, compared with consolidated expenses of $52.9 million, or 71.7% of revenue, a year ago. The increase in consolidated expenses in absolute dollars and as a percentage of revenue was consistent with higher case volume and changes in case mix.

Consolidated income from operations was $20.3 million, or 27.3% of revenue, a $0.5 million or 2.5% decrease from consolidated income from operations of $20.8 million, or 28.3% of revenue, a year ago.

Total net income and comprehensive income was $23.1 million, or $0.503 per share (basic) and $0.243 per share (fully diluted), compared with a total net income and comprehensive income of $14.8 million, or $0.241 per share (basic) and $0.096 per share (fully diluted), for the same period last year. The increase of $8.4 million in total net income and comprehensive income was primarily attributable to the positive impact of the changes in values of exchangeable interest liability and convertible debentures, a decrease in interest expense and gain on foreign currency.

____________________

1 Cash available for distribution, income from operations and payout ratio are non-IFRS measures. While Medical Facilities believes that these measures are useful for the evaluation and assessment of its performance, they do not have any standard meaning prescribed by IFRS, are unlikely to be comparable to similar measures presented by other issuers, and should not be considered as alternatives to comparable measures determined in accordance with IFRS. For further information on these non-IFRS measures, including a reconciliation of each of these non-IFRS measures to the most directly comparable measure calculated in accordance with IFRS, please refer to Medical Facilities' most recently filed management's discussion and analysis, available on SEDAR at www.sedar.com.

Six months ended June 30, 2014

The Company generated CAFD of Cdn$18.7 million, or Cdn$0.596 per common share, and declared dividends of Cdn$17.6 million, or Cdn$0.562 per common share, representing a payout ratio of 94.3% compared to 93.0% a year earlier. In U.S.-dollar terms, CAFD decreased by US$0.7 million compared to 2013 as higher foreign currency losses on foreign exchange forward contracts which matured in the respective periods were partially offset by lower provision for current income taxes.

Revenue was $147.2 million, an increase of $0.7 million or 0.5% from $146.6 million a year earlier, which was attributable to the increase in case volume and a favourable case mix, partially offset by a less favourable payor mix.

Consolidated expenses totalled $108.9 million, or 74.0% of revenue, compared with consolidated expenses of $105.4 million, or 71.9% of revenue, a year ago. The $3.5 million increase in consolidated expenses is primarily attributable to the costs consistent with the changes in case volume and case mix.

Consolidated income from operations was $38.3 million, or 26.0% of revenue, a $2.9 million or 7.0% decrease from consolidated income from operations of $41.2 million, or 28.1% of revenue for the same period a year ago, as rising consolidated expenses partially offset marginal growth in revenue.

Total net income and comprehensive income was $21.2 million, or $0.230 per share (basic and fully diluted) compared with a total net income and comprehensive income of $15.0 million, or $0.003 per share (basic and fully diluted), for the same period last year. The increase of $6.2 million in total net income and comprehensive income was attributable to a decrease in interest expense, decrease in losses on foreign currency and the positive impact of the changes in values of exchangeable interest liability and convertible debentures.

As at June 30, 2014, the Company had consolidated net working capital of $42.6 million, including cash and cash equivalents and short-term and long-term investments of $45.6 million and accounts receivable of $39.4 million, compared with net working capital of $48.4 million, including cash and cash equivalents and short-term and long-term investments of $48.7 million and accounts receivable of $50.3 million, as at December 31, 2013. Long-term debt at the Centers' level, including the current portion, was $40.0 million as at June 30, 2014 compared with $42.4 million as at December 31, 2013.

Medical Facilities' complete second quarter 2014 financial statements and management's discussion and analysis will be issued and filed on SEDAR at wwww.sedar.com on Thursday, August 14, 2014 and will be available on the same day on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Normal Course Issuer Bid ("NCIB")

The Company repurchases its common shares in the open market. By repurchasing and cancelling its common shares, Medical Facilities reduces the total amount of dividends payable, resulting in cash savings for the Company. The remaining shareholders also benefit from the NCIB as the distributable cash per share increases. During the three-month and six-month periods ended June 30, 2014, the Company purchased 16,500 of its common shares at an average price of Cdn$19.01, for a total consideration of Cdn$0.3 million.

As at June 30, 2014, the Company had 31,350,982 common shares outstanding.

Notice of Conference Call

Management of Medical Facilities will host a conference call today, Thursday, August 14, 2014 at 10:00 am ET to discuss its second quarter 2014 financial results. You can join the call by dialing 647.427.7450 or 1.888.231.8191. A taped replay of the conference call will be available from August 14, 2014 at 12:00 pm ET until August 21, 2014 at 11:59 pm ET by calling 416.849.0833 or 1.855.859.2056, reference number 74202228.

To view Medical Facilities Q2 2014 financial statements and notes, please click here: http://files.newswire.ca/940/MFC08-14.pdf

About Medical Facilities

Medical Facilities owns controlling interests in five specialty surgical hospitals located in South Dakota, Arkansas and Oklahoma, as well as an ambulatory surgery center in California. The specialty hospitals perform scheduled surgical, imaging, diagnostic and other procedures, including urgent and primary care, and derive their revenue from the fees charged for the use of their facilities. The ambulatory surgery center specializes in outpatient surgical procedures, with patient stays of less than 24 hours. Medical Facilities is structured so that a majority of its free cash flow from operations is distributed to the holders of its common shares in the form of dividends. For more information, please visit www.medicalfacilitiescorp.ca.

Caution concerning forward-looking statements

Statements made in this news release, other than those concerning historical financial information, may be forward-looking and therefore subject to various risks and uncertainties.  Some forward-looking statements may be identified by words like "may", "will", "anticipate", "estimate", "expect", "intend", or "continue" or the negative thereof or similar variations. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements.  Factors that could cause results to vary include those identified in Medical Facilities' filings with Canadian securities regulatory authorities such as legislative or regulatory developments, intensifying competition, technological change and general economic conditions.  All forward-looking statements presented herein should be considered in conjunction with such filings.  Medical Facilities does not undertake to update any forward-looking statements; such statements speak only as of the date made.

SOURCE Medical Facilities Corporation


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