Medical Facilities Corporation Reports Second Quarter 2019 Financial Results

TORONTO, Aug. 8, 2019 /CNW/ - Medical Facilities Corporation ("Medical Facilities," "MFC," or the "Corporation") (TSX: DR), reported its financial results today for the second quarter ended June 30, 2019. All amounts are expressed in U.S. dollars unless indicated otherwise.

Q2 2019 Summary
(Compared to Q2 2018)

• Operating results for the quarter reflect a non-cash impairment charge of $29.5 million related to Unity Hospital based on continued volume and case mix challenges;
• Revenue decreased 5.2% to $101.0 million;
• Adjusted EBITDA¹ was $19.1 million compared to $23.9 million in Q2 2018;
• Cash available for distributions¹ was C$4.9 million versus C$11.7 million in Q2 2018;
• The payout ratio¹ was 179.0% for the quarter compared to 74.3% in Q2 2018;
• The payout ratio¹ was 91.9% for the trailing twelve months ending June 30, 2019.

"While we are disappointed with our second quarter results, we continue to work with our physician partners to improve same-facility performance, including adding access points and expanding our services," said Robert O. Horrar, President and CEO of Medical Facilities. "During the quarter, we recognized a goodwill and other intangibles impairment charge of $29.5 million related to the continued underperformance at Unity Hospital. This non-cash charge does not affect our cash balances, liquidity or operating cash flows. Notwithstanding this charge, we are confident that we have put in place strategies to deliver improved results."

"We remain focused on organic and inorganic growth initiatives. Our pipeline remains strong as we look to further diversify our revenue base through strategic acquisitions of physician-aligned operations."

Financial Results

Medical Facilities' 2019 financial results include the impact of IFRS 16, a substantial change to lease accounting standards, effective January 1, 2019. Medical Facilities adopted IFRS 16 using the modified retrospective approach and the Corporation's comparative information was not restated. As a result, the comparability of MFC's 2019 EBITDA to periods prior to January 1, 2019 is impacted.

Financial Results	For the three months ended			For the six months ended
	June 30			June 30
(thousands of U.S. dollars, except per share amounts and where otherwise noted)	2019	% change	2018	2019	% change	2018
Facility service revenue	100,988	(5.2%)	106,494	200,083	(2.0%)	204,112
Consolidated operating expenses	120,421	35.9%	88,633	209,317	21.6%	172,128
Income (loss) from operations	(19,433)	(208.8%)	17,861	(9,234)	(128.9%)	31,984
Finance costs (net interest expense)	4,746	31.5%	3,608	9,411	25.5%	7,497
Finance costs (changes in values of derivative instruments and gain/loss on foreign currency)	(20,949)	1,526.5%	(1,288)	(7,377)	105.4%	(3,592)
Income tax expense (recovery)	269	(89.2%)	2,491	(2,485)	(155.2%)	4,500
Net income (loss)	(3,499)	(126.8%)	13,050	(8,783)	(137.2%)	23,579
Attributable to:
Owners of the Corporation	(2,808)	(144.6%)	6,300	(13,094)	(224.4%)	10,528
Non-controlling interest	(691)	(110.2%)	6,750	4,311	(67.0%)	13,051
Financial Results	For the three months ended June 30			For the six months ended June 30
(U.S. dollars)	2019	% change	2018	2019	% change	2018
Earnings (loss) per share
Basic	(0.09)	(145.0%)	0.20	(0.42)	(223.5%)	0.34
Diluted	(0.46)	(355.6%)	0.18	(0.45)	(250.0%)	0.30

Net income attributable to owners of the Corporation fluctuates significantly between the periods, primarily due to variations in non-cash finance costs (changes in the values of convertible debentures and exchangeable interest liability), and income taxes; these charges are incurred at the corporate level rather than at the Facility level.

Reconciliation of Net Income to Adjusted EBITDA	For the three months ended			For the six months ended
	June 30			June 30
(thousands of U.S. dollars, except where otherwise noted)	2019	% change	2018	2019	% change	2018
Net income (loss)	(3,499)	(126.8%)	13,050	(8,783)	(137.2%)	23,579
Income tax expenses (recovery)	269	(89.2%)	2,491	(2,485)	(155.2%)	4,500
Finance costs	(16,203)	(798.4%)	2,320	2,034	(47.9%)	3,905
Depreciation and amortization	9,012	49.0%	6,049	18,161	51.4%	11,994
EBITDA	(10,421)	(143.6%)	23,910	8,927	(79.7%)	43,978
Goodwill and other intangibles impairment	29,500	100.0%	-	29,500	100.0%	-
Adjusted EBITDA	19,079	(20.2%)	23,910	38,427	(12.6%)	43,978
Distributable Cash Flow	For the three months ended			For the six months ended
	June 30			June 30
(thousands of U.S. dollars, except per share amounts and where otherwise noted)	2019	% change	2018	2019	% change	2018
Cash available for distribution (C$)	4,872	(58.4%)	11,719	10,127	(51.7%)	20,946
Distributions (C$)	8,739	0.3%	8,711	17,473	0.3%	17,416
Distributions per common share (C$)	0.281	-	0.281	0.562	-	0.562
Payout ratio	179.0%	140.9%	74.3%	172.4%	107.5%	83.1%

During the quarter, MFC paid monthly cash dividends of C$0.09375 per common share (or C$1.125 per share on an annualized basis), which represented an annualized yield of 9.12% on the June 28, 2019 closing price of $12.34 per common share.

As at June 30, 2019, MFC had consolidated net working capital of $14.7 million, compared to $33.2 million on December 31, 2018. The decrease was mainly due to the inclusion of current lease liability at June 30 of $13.1 million, a decrease in accounts receivable, offset by a decrease in accounts payable and accrued liabilities from timing differences.

Medical Facilities' 2019 second quarter financial statements and management's discussion and analysis will be issued and filed on SEDAR at www.sedar.com on Thursday, August 8, 2019 and will also be available on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Normal Course Issuer Bid ("NCIB")

During the quarter ended June 30, 2019, the Corporation did not purchase any of its common shares. As at June 30, 2019, the Corporation had 31,106,259 common shares outstanding.

Notice of Conference Call

Management of MFC will host a conference call today, August 8, 2019 at 8:30 am ET to discuss its second quarter financial results. You can join the call by dialing 647-427-7450 or 1-888-231-8191. A replay of the call will be available until Thursday, August 15, 2019 by calling 416-849-0833 or 1-855-859-2056, using reference number 9553019. A live audio webcast of the call will be available at http://bit.ly/MFC2019Q2. 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 Medical Facilities' website following the call date.

About Medical Facilities

Medical Facilities, in partnership with physicians, owns surgical facilities in the United States. Medical Facilities' portfolio includes controlling interest in five specialty surgical hospitals located in Arkansas, Indiana, Oklahoma, and South Dakota, and an ambulatory surgery center located in California. In addition, through a partnership with NueHealth LLC, Medical Facilities owns controlling interest in seven ambulatory surgery centers located in Arkansas, Michigan, Missouri, Nebraska, Ohio, Oregon, and Pennsylvania. 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 ambulatory surgery centers specialize 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 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.

 

SOURCE Medical Facilities Corporation

David Watson, Chief Financial Officer, Medical Facilities Corporation, 416.848.7380 or 1.877.402.7162, [email protected]; Trevor Heisler, Investor Relations, NATIONAL Capital Markets, 416.848.1434, [email protected]

Related Links

http://www.medicalfc.com