Medical Facilities Corporation Reports 2013 Third Quarter Financial Results

TORONTO, Nov. 14, 2013 /CNW/ - Medical Facilities Corporation ("Medical Facilities" or the "Company") (TSX: DR), today reported its financial results for the three-month and nine-month periods ended September 30, 2013.  All amounts are expressed in U.S. dollars unless indicated otherwise.

Third Quarter 2013 Highlights

• Revenue of $73.0 million, as compared with $54.3 million in Q3 2012
• Income from operations of $19.3 million, as compared with $16.1 million in Q3 2012
• Cash available for distribution¹ of Cdn$9.4 million, as compared with Cdn$8.1 million in Q3 2012
• Payout ratio of 94.3%, as compared with 97.6% in Q3 2012
• Black Hills Surgical Hospital opened a second urgent care location

"Our strong operating results and sustainable cash flows in the current quarter reflect positive contribution to our results by Arkansas Surgical Hospital which we acquired in late 2012, as well as growth in combined case volumes and in cases which generate higher revenues, despite the continued pressures on payor reimbursement rates and rising operating costs. In respect of the Patient Protection and Affordable Care Act which has dominated the news in recent weeks, we expect an increase in volumes of services provided from the continuing implementation of its provisions as states begin to implement healthcare insurance exchanges and more people in the United States become eligible for healthcare coverage. Finally, we are pleased to report that following a successful one-year operation of an urgent care clinic, in August 2013, our Black Hills Surgical Hospital opened a second urgent care location, which is expected to generate additional revenue growth for that Center," said Dr. Schellpfeffer, CEO of Medical Facilities.

Financial Results

Three months ended September 30, 2013
The Company generated cash available for distribution¹ ("CAFD") of Cdn$9.4 million, or Cdn$0.298 per common share, and declared dividends of Cdn$8.8 million, or Cdn$0.281 per common share, representing a payout ratio of 94.3% for the quarter compared to 97.6% for the same quarter last year. The Company's strong operating performance and lower interest expense on convertible debentures, partially offset by higher corporate expenses and a decline in foreign currency gains, resulted in a US$0.9 million increase in CAFD compared to the third quarter in 2012.

Consolidated facility service revenue ("revenue") was $73.0 million, an increase of 34.3% from $54.3 million in the third 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 $53.7 million, or 73.6% of revenue, compared with consolidated expenses of $38.3 million, or 70.4% of revenue, a year ago. The $15.4 million increase in consolidated expenses is primarily attributable to the acquisition of Arkansas Surgical Hospital, costs associated with the development phases of the primary and urgent care initiatives and costs consistent with the changes in case volumes and case mix.

Consolidated income from operations was $19.3 million, or 26.4% of revenue, a 20.0% increase from consolidated income from operations of $16.1 million, or 29.6% of revenue, a year ago.

Total net income and comprehensive income was $8.0 million, or $0.034 per share (basic and fully diluted) compared with a total net income and comprehensive income of $1.7 million, or a loss of $0.152 per share (basic and 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.

Nine months ended September 30, 2013
The Company generated CAFD of Cdn$27.4 million, or Cdn$0.908 per common share, and declared dividends of Cdn$25.6 million, or Cdn$0.848 per common share, representing a payout ratio of 93.4% compared to 86.7% 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 corporate expenses.

Revenue was $219.5 million, an increase of 31.1% from $167.5 million a year earlier, which was attributable to the acquisition of Arkansas Surgical Hospital, a favourable case mix and additional revenue from primary and urgent care, partially offset by a less favourable payor mix.

Consolidated expenses totalled $159.0 million, or 72.4% of revenue, compared with consolidated expenses of $112.1 million, or 66.9% of revenue, a year ago. The $47.0 million increase in consolidated expenses is primarily attributable to the acquisition of Arkansas Surgical Hospital, costs associated with the development phases of the primary and urgent care initiatives and costs consistent with the changes in case mix.

Consolidated income from operations was $60.5 million, or 27.6% of revenue, a 9.1% increase from consolidated income from operations of $55.5 million, or 33.1% 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 $23.0 million, or $0.039 per share (basic and fully diluted) compared with a total net income and comprehensive income of $22.3 million, or $0.061 per share (basic and fully diluted), for the same period last year. The increase of $0.7 million in total net income and comprehensive income was attributable to an increase in income from operations and the positive impact of the changes in values of exchangeable interest liability and convertible debentures despite an increase in amortization of other intangibles and a loss on foreign currency.

As at September 30, 2013, the Company had consolidated net working capital of $61.1 million, including cash and cash equivalents and short-term investments of $41.1 million and accounts receivable of $46.9 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 $44.5 million as at September 30, 2013 compared with $41.6 million as at December 31, 2012.

As at September 30, 2013, the Company had 31,366,749 common shares outstanding.

Medical Facilities' complete 2013 third quarter financial statements and Management's Discussion and Analysis will be issued and filed on SEDAR on Thursday, November 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 1,000 of its common shares during the third quarter of 2013 at an average price of Cdn$15.55, for a total consideration of Cdn$15,570. During the nine months ended September 30, 2013, the Company purchased 83,300 of its common shares at an average price of Cdn$14.83, 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, Thursday, November 14, 2013 at 10:00 am (ET) to discuss its 2013 third 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 November 21, 2013 at midnight by calling 416-849-0833 or 1-855-859-2056, reference number 92492295.

To view Medical Facilities Q3 2013 financial statements and notes, please click here: http://files.newswire.ca/940/MFC_FS_IFRS_Q3_2013_11-01-2013_FINAL.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.

_________________________
¹ Cash available for distribution is a non-International Financial Reporting Standards measure and is not intended to be representative of cash flows or results of operations determined in accordance with International Financial Reporting Standards. Accordingly, Medical Facilities provides a reconciliation of cash available for distribution to reported cash provided by operating activities in its Management's Discussion and Analysis. Investors are cautioned that cash available for distribution, as calculated by Medical Facilities, is unlikely to be comparable to similar measures used by other issuers.

PDF available at: http://stream1.newswire.ca/media/2013/11/14/20131114_C7232_DOC_EN_33343.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]