Medical Facilities Corporation Announces Fourth Quarter and Full Year 2022 Results

TORONTO, March 9, 2023 /CNW/ - Medical Facilities Corporation ("Medical Facilities," "MFC," or the "Corporation") (TSX: DR), reported its financial results today for the fourth quarter and year ended December 31, 2022. All amounts are expressed in U.S. dollars unless indicated otherwise.

Q4 2022 Highlights
(Compared to Q4 2021)

• Facility service revenue increased 7.9% to $119.4 million;
• Specialty surgical hospital surgical case volumes increased 5.7%;
• Income from operations was $5.7 million when excluding the $12.3 million reversal of Paycheck Protection Program ("PPP") income recognized in prior periods;
• Adjusted EBITDA¹ was $15.3 million, a decrease of 13.6% when also excluding the reversal of PPP income;
• Sold the remaining investment in Unity Medical and Surgical Hospital ("UMASH") and settled the loan receivable for gross proceeds of $2.0 million; and,
• Recorded a non-cash impairment charge of $16.5 million relating to the MFC Nueterra ambulatory surgery centers.

"While one-time items impacted our fourth quarter financial results, our core business remains strong, and we remain focused on delivering value to our stakeholders," said Jason Redman, President and CEO of Medical Facilities. "In the fourth quarter, surgical volumes increased at each of our four specialty surgical hospitals. We closed the book on UMASH, and we returned additional capital to our shareholders by repurchasing approximately 3.5 million common shares. We also aggressively pursued, and continue to pursue, opportunities to reduce expenses, which should help our fiscal 2023 results."

Financial Results

Financial Results	For the three months ended			For the year ended
	December 31			December 31
(thousands of U.S. dollars, except per share amounts and where otherwise noted)	2022	% change	2021	2022	% change	2021
Facility service revenue	119,434	7.9 %	110,677	424,551	6.5 %	398,633
Government stimulus income (costs)	(12,335)	(314.8 %)	5,742	(10,162)	(177.6 %)	13,099
Total revenue and other income	107,099	(8.0 %)	116,419	414,389	0.6 %	411,732
Consolidated operating expenses	113,726	25.1 %	90,917	379,450	13.5 %	334,374
Income (loss) from operations	(6,627)	(126.0 %)	25,502	34,939	(54.8 %)	77,358
Finance costs (net interest expense)	1,668	15.9 %	1,439	5,731	(5.5 %)	6,064
Finance costs (changes in values of derivative instruments and gain/loss on foreign currency)	(9,098)	(681.7 %)	1,564	(859)	(104.2 %)	20,280
Impairment loss (gain) on loan receivable	(1,394)	(100.0 %)	-	11,990	100.0 %	-
Share of equity loss (income) in associates	303	2,625.0 %	(12)	574	359.2 %	125
Income tax expense	5,231	225.3 %	1,608	5,208	18.5 %	4,396
Net income (loss)^2	(3,337)	(116.0 %)	20,903	12,295	(73.6 %)	46,493
Earnings (loss) per share
Basic	(0.08)	(124.2 %)	0.33	(0.15)	(130.0 %)	0.50
Diluted	(0.26)	(181.3 %)	0.32	(0.15)	(130.0 %)	0.50

Reconciliation of Net Income (Loss) to EBITDA^1 and Adjusted EBITDA	For the three months ended December 31			For the year ended December 31
(thousands of U.S. dollars, except where otherwise noted)	2022	% change	2021	2022	% change	2021
Net income (loss)	(3,337)	(116.0 %)	20,903	12,295	(73.6 %)	46,493
Income tax expense	5,231	225.3 %	1,608	5,208	18.5 %	4,396
Share of equity loss (income) in associates	303	2,625.0 %	(12)	574	359.2 %	125
Finance costs (income)	(8,824)	(393.8 %)	3,003	16,862	(36.0 %)	26,344
Depreciation and amortization	5,359	(16.9 %)	6,451	20,763	(22.4 %)	26,769
EBITDA	(1,268)	(104.0 %)	31,953	55,702	(46.5 %)	104,127
Impairment of goodwill, other intangibles and equipment	16,549	100.0 %	-	16,549	100.0 %	-
Adjusted EBITDA	15,281	(52.2 %)	31,953	72,251	(30.6 %)	104,127

Distributable Cash Flow	For the three months ended			For the year ended
	December 31			December 31
(thousands of dollars, except per share amounts and where otherwise noted)	2022	% change	2021	2022	% change	2021
Cash available for distribution^1 (C$)	9,900	(32.4 %)	14,650	27,536	(26.5 %)	37,448
Distributions (C$)	2,086	(15.9 %)	2,479	9,302	3.2 %	9,011
Distributions per common share (C$)	0.077	(3.8 %)	0.080	0.317	9.3 %	0.290
Payout ratio^1	21.2 %	25.4 %	16.9 %	33.8 %	40.2 %	24.1 %

On December 29, 2022, the Corporation sold its remaining 31.7% non-controlling ownership interest in UMASH for proceeds of $0.6 million, recording a pre-tax gain of $0.3 million in general and administrative expenses. Along with the sale of its equity interests, the Corporation also completed the full and final settlement of the loan receivable from UMASH for proceeds of $1.4 million, and, in connection with this transaction, recorded an impairment gain of the same amount on the loan receivable during the three months ended December 31, 2022, resulting in a net impairment loss of $12.0 million on the loan receivable for the year ended December 31, 2022.

Due to the denial and additional review of certain PPP loan forgiveness applications by the U.S. Small Business Administration ("SBA") in 2022, the Corporation no longer has reasonable assurance of meeting the forgiveness requirements for loans totaling $12.3 million. As a result, this amount has been reversed from government stimulus income for year ended December 31, 2022, and recorded as a liability under payor advances and government stimulus funds repayable as at December 31, 2022. There remains uncertainty over the final outcome as forgiveness applications for these PPP loans have not yet been definitively resolved. Management plans to vigorously pursue all reasonably available channels for reversing any denials. Any loans subsequently forgiven will result in a recognition of income and a reversal of the corresponding liability.

During the quarter, the Corporation purchased and cancelled 3,053,097 of its common shares at an aggregate purchase price of $25.5 million under a substantial issuer bid, and 433,300 of its common shares at an aggregate purchase price of $2.5 million under its normal course issuer bid programs.

During the quarter, MFC paid a quarterly cash dividend of C$0.0805 per common share (or C$0.322 per share on an annualized basis), which represented an annualized yield of 4.00% on the December 31, 2022, closing price of C$8.04 per common share.

On December 31, 2022, MFC had consolidated net working capital of $32.5 million, compared to $60.9 million on December 31, 2021.

MFC's financial statements and management's discussion and analysis, for the three-month and twelve-month periods ended December 31, 2022, will be filed on SEDAR at www.sedar.com on Thursday, March 9, 2023, and will also be available on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Notice of Conference Call

Management of MFC will host a conference call today, March 9, 2023, at 8:30 am ET to discuss its fourth quarter financial results. All interested parties may join the conference call by dialing 416-764-8650 or 1-888-664-6383 approximately 15 minutes prior to the call to secure a line. To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/40SO72D to receive an instant automated call back.

A live audio webcast of the call will be available at https://bit.ly/MFC2022Q4. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived on MFC's website following the call date.

About Medical Facilities

Medical Facilities, in partnership with physicians, owns a diverse portfolio of highly rated, high-quality surgical facilities in the United States. MFC's ownership includes controlling interest in four specialty surgical hospitals located in Arkansas, Oklahoma, and South Dakota, and an ambulatory surgery center ("ASC") located in California. In addition, through a partnership with NueHealth LLC, Medical Facilities owns a controlling interest in five ambulatory surgery centers located in Michigan, Missouri, Nebraska, Ohio, and Pennsylvania. MFC also owns a non-controlling interest in an ASC in Missouri. The specialty surgical hospitals perform scheduled surgical, imaging, diagnostic and other procedures, including primary and urgent care, and derive their revenue from the fees charged for the use of their facilities. The ASCs specialize in outpatient surgical procedures, with patient stays of less than 24 hours. 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.

¹ EBITDA, adjusted EBITDA, cash available for distribution and payout ratio are non-IFRS financial 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 financial measures, including a reconciliation of each of these non-IFRS financial 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.

² Net Income (Loss) is attributable to the owners of the Corporation and the non-controlling interest holders.

SOURCE Medical Facilities Corporation

David Watson, Chief Financial Officer, Medical Facilities Corporation, 1.877.402.7162, [email protected]; Trevor Heisler, Investor Relations, MBC Capital Markets Advisors, [phone], [email protected]