Medical Facilities Corporation Reports 2014 Third Quarter Financial Results

TORONTO, Nov. 13, 2014 /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, 2014.  All amounts are expressed in U.S. dollars unless indicated otherwise.

Third Quarter 2014 Summary

• Consolidated facility service revenue of $77.0 million, up 5.5% as compared with $73.0 million in Q3 2013
• Consolidated income from operations of $21.3 million, up 6.2% as compared with $20.1 million in Q3 2013
• Cash available for distribution¹ of Cdn$10.8 million, up 15.2% as compared with Cdn$9.4 million in Q3 2013
• Payout ratio¹ of 81.7% as compared with 94.3% in Q3 2013

"We are pleased to report that in the third quarter of 2014 our Centers performed higher levels of surgical cases and pain management procedures which along with increased ancillary revenues drove consolidated revenue up 5.5% over last year. While unfavorable changes in payor mix impacted average revenue per surgical case, income from operations still increased by 6.2% compared to 2013. These positive results contributed to a very favourable payout ratio of 81.7% versus 94.3% a year ago, demonstrating the sustainability of our dividend policy," said Dr. Donald Schellpfeffer, CEO of Medical Facilities.

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¹ Cash available for distribution 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.

Financial Results

Three months ended September 30, 2014
The Company generated cash available for distribution ("CAFD") of Cdn$10.8 million, or Cdn$0.344 per common share, and declared dividends of Cdn$8.8 million, or Cdn$0.281 per common share, representing a payout ratio of 81.7% for the quarter compared to 94.3% for the same quarter last year. In U.S.-dollar terms, CAFD increased by US$0.9 million compared to the same quarter in 2013 due to stronger performance of the Centers and a decline in corporate expenses, which were partially offset by higher foreign currency losses and higher provision for current income taxes.

Consolidated facility service revenue ("revenue") of $77.0 million increased by $4.0 million or 5.5% compared to the third quarter of 2013 due to increases in surgical cases, pain management procedures and ancillary revenues (imaging, urgent and primary care, etc.). These increases were partially offset by the decline in the average revenue per surgical case reflecting changes in payor mix.

Consolidated operating expenses, including salaries and benefits, drugs and supplies, and general and administrative costs, ("consolidated expenses") totalled $55.6 million, or 72.3% of revenue, compared with consolidated expenses of $52.9 million, or 72.5% of revenue, a year ago. The increase in consolidated expenses in absolute dollars was consistent with higher case volume and changes in case mix.

Consolidated income from operations was $21.3 million, or 27.7% of revenue, a $1.3 million or 6.2% increase from consolidated income from operations of $20.1 million, or 27.5% of revenue, a year ago.

Consolidated net income and comprehensive income was $25.7 million, or $0.572 per share (basic) and $0.117 per share (fully diluted), compared with a consolidated net income and comprehensive income of $9.1 million, or $0.034 per share (basic and fully dilute), for the same period last year. The increase of $16.6 million in consolidated net income and comprehensive income was primarily attributable to the positive impact of the changes in values of exchangeable interest liability and convertible debentures and stronger operating performance, partially offset by losses on foreign currency and an increase in income tax expense.

Nine months ended September 30, 2014
The Company generated CAFD of Cdn$29.5 million, or Cdn$0.941 per common share, and declared dividends of Cdn$26.5 million, or Cdn$0.844 per common share, representing a payout ratio of 89.7% compared to 93.4% a year earlier. In U.S.-dollar terms, CAFD increased by US$0.2 million primarily due to higher cash flows from the Centers, lower interest expense on convertible debentures and lower provision for current income taxes, which were partially offset by foreign currency losses on foreign exchange forward contracts which matured in the respective periods.

Revenue was $224.2 million, an increase of $4.7 million or 2.1% from $219.5 million a year earlier, which was primarily attributable to the growth achieved in the third quarter of 2014 and resulted from increased revenues from surgical cases, pain management procedures and ancillary services.

Consolidated expenses totalled $164.5 million, or 73.4% of revenue, compared with consolidated expenses of $158.2 million, or 72.1% of revenue, a year ago. The increase in consolidated expenses as a percentage of facility service revenue was due to payor mix induced decrease in average revenue per surgical case and lower margins on urgent and primary care.

Consolidated income from operations was $59.7 million, or 26.6% of revenue, a $1.6 million or 2.6% decrease from consolidated income from operations of $61.3 million, or 27.9% of revenue for the same period a year ago, as an increase in consolidated expenses offset growth in revenue.

Consolidated net income and comprehensive income was $46.8 million, or $0.802 per share (basic) and $0.419 per share (fully diluted) compared with a consolidated net income and comprehensive income of $24.1 million, or $0.039 per share (basic and fully diluted), for the same period last year. The increase of $22.8 million in consolidated net income and comprehensive income was attributable to the positive impact of the changes in values of exchangeable interest liability and convertible debentures and a decrease in interest expense, partially offset by an increase in income tax expense.

As at September 30, 2014, the Company had consolidated net working capital of $43.9 million, including cash and cash equivalents and short-term and long-term investments of $47.2 million and accounts receivable of $39.9 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 $39.1 million as at September 30, 2014 compared with $42.4 million as at December 31, 2013.

Medical Facilities' complete third quarter 2014 financial statements and management's discussion and analysis will be issued and filed on SEDAR at www.sedar.com on Thursday, November 13, 2014 and will be available on the same day on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Appointment of New Director
The Company is pleased to announce Ms. Dale Lawr has been appointed to the Board of Directors of Medical Facilities on November 12, 2014. Ms. Lawr is Chief Risk Officer at Infrastructure Ontario, which she joined in 2011. Prior to joining Infrastructure Ontario, she held the role of Chief Financial Officer at Altus Group from 2005 to 2010 before transitioning to EVP Finance, Strategic Initiatives where she was responsible for Altus Group's restructuring to a traditional corporate structure from an income trust. Ms. Lawr is a Chartered Professional Accountant – Chartered Accountant, and a Certified Professional Accountant (Illinois). She holds an MBA from Rotman School of Management, University of Toronto and recently earned the ICD.D designation with the Institute of Corporate Directors.

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 period ended September 30, 2014, the Company purchased 37,600 of its common shares at an average price of Cdn$16.40 per share, for a total consideration of Cdn$0.6 million. During the nine-month period ended September 30, 2014, the Company purchased 54,100 of its common shares at an average price of Cdn$17.19 per share, for a total consideration of Cdn$0.9 million.

As at September 30, 2014, the Company had 31,313,382 common shares outstanding.

Notice of Conference Call
Management of Medical Facilities will host a conference call today, Thursday, November 13, 2014 at 10:00 am ET to discuss its third 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 November 13, 2014 at 12:00 pm ET until November 20, 2014 at 11:59 pm ET by calling 416.849.0833 or 1.855.859.2056, reference number 21901958.

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

Michael Salter, Chief Financial Officer, Medical Facilities Corporation, 416.848.7380 or 1.877.402.7162, [email protected]; Renée Lam, Investor Relations, TMX Equicom, 416.815.0700 or 1.800.385.5451 ext. 258, [email protected]