Medical Facilities Corporation Reports 2013 Second Quarter Financial Results

TORONTO, Aug. 14, 2013 /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, 2013.  All amounts are expressed in U.S. dollars unless indicated otherwise.

Second Quarter 2013 Highlights

• Revenue of $73.7 million, as compared with $54.3 million in Q2 2012
• Income from operations of $20.8 million, as compared with $17.5 million in Q2 2012
• Cash available for distribution¹ of Cdn$9.4 million, as compared with Cdn$9.2 million in Q2 2012
• Payout ratio of 93.8%, as compared with 85.1% in Q2 2012

"We are pleased to report a 35.7% growth in revenue in the second quarter of 2013, which was primarily due to the inclusion of the results of our recent acquisition, Arkansas Surgical Hospital, as well as revenue increases of 8% to 19% at our other surgical hospitals, including revenues from our urgent and primary care initiatives. However, our margins were impacted by higher operating costs, which were mostly due to the changes in case volumes and case mix at our Centers, as well as development-phase costs of our urgent and primary care initiatives. Our cash available for distribution remained consistent with the prior year and we are on track with our strategy of generating sustainable cash flows and distributions to our shareholders," stated Dr. Schellpfeffer, CEO of Medical Facilities. "We are also pleased to report that ConsumerReports.org recognized our commitment to exceptional quality of patient care and listed four of our hospitals as leaders in quality of care in their respective states," concluded Dr. Schellpfeffer.

Financial Results

Three months ended June 30, 2013
The Company generated cash available for distribution¹ ("CAFD") of Cdn$9.4 million, or Cdn$0.304 per common share, and declared dividends of Cdn$8.8 million, or Cdn$0.285 per common share, representing a payout ratio of 93.8% for the quarter compared to 85.1% for the same quarter last year. The Company's strong operating performance and lower corporate expenses, partially offset by higher debt repayments and maintenance capital expenditures, resulted in a $0.2 million increase in CAFD compared to the second quarter in 2012. However, the payout ratio was impacted by lower gains on foreign exchange forward contracts which matured in the current period compared to the same period in 2012 and the increase in dividends effective September 2012.

Consolidated facility service revenue ("revenue") was $73.7 million, an increase of 35.7% from $54.3 million in the second quarter of 2012. The increase was due to the inclusion of results of Arkansas Surgical Hospital, an increase in combined surgical cases, a favourable shift in case mix and additional revenue from primary and urgent care, which were partially offset by a decrease in payor reimbursements.

Consolidated operating expenses, including salaries and benefits, drugs and supplies, and general and administrative costs ("consolidated expenses") totalled $52.9 million, or 71.7% of revenue, compared with consolidated expenses of $36.8 million, or 67.8% of revenue, a year ago. The $16.0 million increase in consolidated expenses is primarily attributable to the acquisition of Arkansas Surgical Hospital, costs associated with the start-up phase of the primary and urgent care initiatives and costs consistent with the changes in case volumes and case mix.

Consolidated income from operations was $20.8 million, or 28.3% of revenue, a 3.3% increase from consolidated income from operations of $17.5 million, or 32.2% of revenue, a year ago.

Total net income and comprehensive income was $14.8 million, or $0.241 per share (basic) and $0.096 per share (fully diluted) compared with a total net income and comprehensive income of $8.4 million, or $0.066 per share (basic) and $0.062 per share (fully diluted), for the same period last year. The increase in total net income and comprehensive income was primarily attributable to the changes in values of exchangeable interest liability and convertible debentures.

Six months ended June 30, 2013
The Company generated CAFD of Cdn$18.0 million, or Cdn$0.610 per common share, and declared dividends of Cdn$16.8 million, or Cdn$0.567 per common share, representing a payout ratio of 93.0% compared to 82.0% a year earlier. Current year's CAFD and payout ratio were unfavourably impacted by higher debt repayments and maintenance capital expenditures, the decline in foreign currency gains and an increase in interest expense on convertible debentures.

Revenue was $146.6 million, an increase of 29.5% from $113.2 million a year earlier, which was attributable to the acquisition of Arkansas Surgical Hospital and a favourable case mix, partially offset by a less favourable payor mix.

Consolidated expenses totalled $105.4 million, or 71.9% of revenue, compared with consolidated expenses of $73.8 million, or 65.2% of revenue, a year ago. The $31.6 million increase in consolidated expenses is primarily attributable to the acquisition of Arkansas Surgical Hospital, costs associated with the start-up phase of the primary and urgent care initiatives and costs consistent with the changes in case mix.

Consolidated income from operations was $41.2 million, or 28.1% of revenue, a 1.8% increase from consolidated income from operations of $39.4 million, or 34.8% of revenue for the same period a year ago, as rising consolidated expenses partially offset growth in revenue.

Total net income and comprehensive income was $15.0 million, or $0.003 per share (basic and fully diluted) compared with a total net income and comprehensive income of $20.6 million, or $0.213 per share (basic and fully diluted), for the same period last year. The decline of $5.6 million in total net income and comprehensive income was attributable to an increase in amortization of other intangibles and a loss on foreign currency despite an increase in income from operations and the positive impact of the changes in values of exchangeable interest liability and convertible debentures.

As at June 30, 2013, the Company had consolidated net working capital of $61.0 million, including cash and cash equivalents and short-term investments of $40.9 million and accounts receivable of $45.2 million, compared with net working capital (excluding 7.5% convertible debentures classified as current liabilities) of $62.0 million, including cash and cash equivalents and short-term investments of $46.7 million and accounts receivable of $46.9 million, as at December 31, 2012. Long-term debt at the Centers' level, including the current portion, was $43.6 million as at June 30, 2013 compared with $41.6 million as at December 31, 2012.

As at June 30, 2013, the Company had 31,367,749 common shares outstanding.

Medical Facilities' complete 2013 second quarter financial statements and Management's Discussion and Analysis will be issued and filed on SEDAR on Wednesday, August 14, 2013 and will be available on the same day on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Normal Course Issuer Bid
Under its normal course issuer bid program ("NCIB"), the Company purchased 74,700 of its common shares during the second quarter of 2013 at an average price of Cdn$14.86, for a total consideration of Cdn$1.1 million. During the six months ended June 30, 2013, the Company purchased 82,300 of its common shares at an average price of Cdn$14.80, for a total consideration of Cdn$1.2 million.

All common shares purchased under the NCIB are cancelled. 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.

Notice of Conference Call
Management of Medical Facilities will host a conference call today, Wednesday, August 14, 2013 at 10:00 am (ET) to discuss its 2013 second quarter 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 until Wednesday, August 21, 2013 at midnight by calling 416-849-0833 or 1-855-859-2056, reference number 22902138.

To view Medical Facilities Q2 2013 financial statements and notes, please click here:
http://files.newswire.ca/940/MFC_FS_IFRS.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 primary and urgent 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.

PDF available at: http://stream1.newswire.ca/media/2013/08/14/20130814_C5648_DOC_EN_29803.pdf

SOURCE: Medical Facilities Corporation

Michael Salter
Chief Financial Officer
Medical Facilities Corporation
[phone] or 1-877-402-7162
[email protected]

Renée Lam
Investor Relations
TMX Equicom
[phone] or 1-800-385-5451 ext. 258
[email protected]