Medical Facilities Corporation Reports 2015 Second Quarter Financial Results

TORONTO, Aug. 13, 2015 /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, 2015.  All amounts are expressed in U.S. dollars unless indicated otherwise.

Second Quarter 2015 Summary

• Revenue from continuing operations of $73.6 million, up 3.4% as compared with $71.2 million in Q2 2014
• Income from operations from continuing operations of $16.0 million, up 5.1% as compared with $15.2 million in Q2 2014
• Cash available for distribution¹ of Cdn$12.1 million, up 25.8% as compared with Cdn$9.6 million in Q2 2014
• Payout ratio¹ of 72.8% as compared with 91.5% in Q2 2014
• On June 30, 2015, Dakota Plains Surgical Center, LLP sold its operating assets for net proceeds of $33.8 million

"The second quarter of 2015 saw our consolidated revenues (on a continuing operations basis) increase 3.4% over a year earlier reflecting higher case volumes, favourable shifts in payor mix and increased ancillary revenues from our urgent and primary care initiatives which were moderated by the unfavourable shifts in case mix. Our South Dakota Centers also showed favorable impacts from Initiated Measure 17 (Patient Choice legislation) which was passed by South Dakota voters in November 2014," said Dr. Donald Schellpfeffer, CEO of Medical Facilities.

Financial Results
Three months ended June 30, 2015
The Company generated cash available for distribution ("CAFD") of Cdn$12.1 million, or Cdn$0.386 per common share, and declared dividends of Cdn$8.8 million, or Cdn$0.281 per common share, representing a payout ratio of 72.8% for the quarter compared to 91.5% for the same quarter last year. In U.S.-dollar terms, CAFD increased by US$1.0 million compared to the same quarter in 2014 primarily due to higher recovery of current income taxes which was partially offset by higher foreign currency losses on matured foreign exchange forward contracts.

Consolidated facility service revenue ("revenue") from continuing operations of $73.6 million increased by $2.4 million or 3.4% over the same period in 2014, reflecting positive contribution from higher case volumes, favourable shifts in payor mix, as well as increased ancillary (primary, urgent, imaging, etc.) revenues, which were partially offset by unfavourable shifts in case mix.

Consolidated operating expenses from continuing operations, including salaries and benefits, drugs and supplies, general and administrative costs, depreciation of property and equipment, and amortization of other intangibles, ("consolidated expenses") totalled $57.7 million, or 78.3% of revenue, compared with consolidated expenses of $56.0 million, or 78.6% of revenue, a year ago. The increase in consolidated expenses was primarily attributable to growth in drugs and supplies and general and administrative expenses.

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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.

Consolidated income from operations from continuing operations ("income from operations") was $16.0 million, or 21.7% of revenue, a $0.8 million or 5.1% increase from income from operations of $15.2 million, or 21.4% of revenue, a year ago reflecting growth in revenue partially offset by the increased consolidated expenses.

Total income from continuing operations was $16.4 million, or $0.296 per share (basic) and $0.201 per share (fully diluted), compared with total income from continuing operations of $22.4 million, or $0.492 per share (basic) and $0.233 per share (fully diluted), for the same period last year. The decrease of $6.0 million in total income from continuing operations was primarily due to the impact of the change in value of exchangeable interest liability and lower gains on foreign currency.

Six months ended June 30, 2015
The Company generated CAFD of Cdn$23.4 million, or Cdn$0.748 per common share, and declared dividends of Cdn$17.6 million, or Cdn$0.562 per common share, representing a payout ratio of 75.1% compared to 95.3% a year earlier. In U.S.-dollar terms, CAFD increased by US$2.1 million compared to 2014 due to stronger cash flows from the Centers, lower corporate expenses and debt service costs and higher recovery of current income taxes, which were partially offset by higher foreign currency losses on foreign exchange forward contracts which matured in the respective periods.

Revenue from continuing operations was $145.9 million, an increase of $5.2 million or 3.7% from $140.7 million a year earlier, which was attributable to the increases in case volumes and ancillary revenues, and receipt of electronic health records incentive payment, partially offset by unfavorable shifts and case and payor mix.

Consolidated expenses totalled $113.7 million, or 78.0% of revenue, compared with consolidated expenses of $112.7 million, or 80.1% of revenue, a year ago. The $1.0 million increase in consolidated expenses was primarily attributable to the growth in general and administrative expenses partially offset by decreases in depreciation of property and equipment and amortization of other intangibles.

Income from operations was $32.2 million, or 22.0% of revenue, a $4.2 million or 14.9% increase from income from operations of $28.0 million, or 19.9% of revenue for the same period a year ago, reflecting growth in revenue partially offset by the increased consolidated expenses.

Total income from continuing operations was $34.3 million, or $0.639 per share (basic) and $0.240 per share (fully diluted) compared with total income from continuing operations of $19.4 million, or $0.201 per share (basic and fully diluted), for the same period last year. The increase of $14.8 million in total income from continuing operations was due to the impact of the decline in the value of exchangeable interest liability and improved operating performance, which were partially offset by increases in income tax expense and foreign currency losses.

As at June 30, 2015, the Company had consolidated net working capital of $88.1 million, including cash and cash equivalents and short-term investments of $84.7 million and accounts receivable of $39.2 million, compared with net working capital of $61.9 million, including cash and cash equivalents and short-term investments of $50.6 million, and accounts receivable of $47.0 million, as at December 31, 2014. Subsequent to the quarter end, Dakota Plains Surgical Center, LLP distributed $33.3 million of proceeds from disposal of the assets to the partners, including $21.5 million to the Corporation and $11.8 million to the holders of non-controlling interest in the Center.

Long-term debt at the Centers' level, including the current portion, was $36.2 million as at June 30, 2015 compared with $40.2 million as at December 31, 2014.

Medical Facilities' complete second quarter 2015 financial statements and management's discussion and analysis will be issued and filed on SEDAR at www.sedar.com on Thursday, August 13, 2015 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 period ended June 30, 2015, the Corporation purchased 6,700 of its common shares at an average price of Cdn$15.97 for a total consideration of Cdn$0.1 million. During the six-month period ended June 30, 2015, the Corporation purchased 18,800 of its common shares at an average price of Cdn$16.59 for a total consideration of Cdn$0.3 million.

As at June 30, 2015, the Company had 31,395,245 common shares outstanding.

Notice of Conference Call
Management of Medical Facilities will host a conference call today, Thursday, August 13, 2015 at 10:00 am ET to discuss its second quarter 2015 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 Thursday, August 20, 2015 by calling 416.849.0833 or 1.855.859.2056, reference number 85678271.

To view Medical Facilities Q2 2015 financial statements and notes, please click here: http://files.newswire.ca/940/MFC_Q2_2015.pdf

About Medical Facilities
Medical Facilities owns controlling interests in four specialty surgical hospitals located in Arkansas, Oklahoma and South Dakota, 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

PDF available at: http://stream1.newswire.ca/media/2015/08/13/20150813_C2318_PDF_EN_476820.pdf

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