Medical Facilities Corporation Reports Year-Over-Year Improvement for Seasonably Strong Fourth Quarter

TORONTO, March 12, 2020 /CNW/ - Medical Facilities Corporation ("Medical Facilities," "MFC," or the "Corporation") (TSX: DR), reported its financial results today for the fourth quarter and year ended December 31, 2019. All amounts are expressed in U.S. dollars unless indicated otherwise.

Q4 2019 Summary
(For continuing operations² compared to Q4 2018)

• Revenue increased 1.8% to $114.0 million on higher inpatient volumes and increased higher acuity cases;
• Income from operations was up 8.8% to $25.9 million;
• EBITDA¹ increased 8.5% to $32.7 million; and
• Repaid in full the principal and interest of the 5.9% convertible unsecured subordinated debentures upon maturity on December 31, 2019.

Year 2019 Summary
(For continuing operations compared to 2018 year-end results)

• Revenue increased 1.9% to $398.1 million;
• Surgical cases increased 2.1%;
• Income from operations was down 38.7% to $44.5 million; and
• Adjusted EBITDA¹ increased 3.1% to $96.2 million.

"We saw an improvement in the fourth quarter, with revenue and income from continuing operations both substantially higher than the third quarter, and surpassing levels from the same seasonably strong fourth quarter a year ago," said Robert O. Horrar, President and CEO of Medical Facilities. "We benefited from stronger performance at our two South Dakota hospitals, both of which contributed higher revenue and EBITDA margins. On a consolidated basis, during the quarter we had increased higher acuity cases, which generate higher average revenue per case."

"In the final months of 2019 and early part of 2020, we've made steady progress towards improving our financial flexibility. We sold the majority of our interest in Unity Medical and Surgical Hospital to three physician groups, divested a smaller ambulatory surgery center, and retired our 5.9% debenture issue. While continuing to strengthen our balance sheet is a priority, we also remain focused on operational improvement and growing our business with our partners."

Financial Results

On February 26, 2020, subsequent to the year-end, the Corporation sold the majority of its interest in Unity Medical and Surgical Hospital ("UMASH") to members of three local physician groups. In connection to this transaction, the Corporation also announced the agreement for the sale of the real estate assets underlying UMASH, consisting of land and building. Negotiations to sell the assets began before December 31, 2019 and they are classified as assets held for sale on the consolidated balance sheet as at December 31, 2019. The Corporation no longer has a controlling interest in UMASH, with the Corporation's ownership interest decreasing to 31.7% from 87.6%. As a result, it no longer consolidates UMASH's financial and operating results in the Corporation's consolidated financial statements. Going forward, the Corporation will account for its interest in UMASH under the equity method of accounting.

Financial Results from Continuing Operations	For the three months ended December 31			For the year ended December 31
(thousands of U.S. dollars, except per share amounts and where otherwise noted)	2019	% change	2018	2019	% change	2018
Facility service revenue	113,954	1.8%	111,953	398,103	1.9%	390,845
Consolidated operating expenses	88,066	(0.1%)	88,148	353,647	11.1%	318,351
Income from operations	25,888	8.8%	23,805	44,456	(38.7%)	72,494
Finance costs (net interest
expense)	1,894	85.1%	1,023	7,903	126.6%	3,488
Finance costs (changes in values
of derivative instruments and
gain/loss on foreign currency)	(12,282)	(1489.4%)	884	(35,154)	(648.9%)	6,405
Income tax expense	5,496	145.8%	2,236	12,030	29.9%	9,263
Net income	30,780	56.5%	19,662	59,677	11.9%	53,338
Attributable to:
Owners of the Corporation	22,437	178.8%	8,048	37,647	70.5%	22,075
Non-controlling interest	8,343	(28.2%)	11,614	22,030	(29.5%)	31,263
Earnings per share
Basic	0.72	176.9%	0.26	1.21	70.4%	0.71
Diluted	0.36	71.4%	0.21	0.33	(46.8%)	0.62

Net income attributable to owners of the Corporation fluctuates significantly between the periods, primarily due to variations in non-cash finance costs (change in the value of 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 EBITDA and Adjusted EBITDA	For the three months ended December 31			For the year ended December 31
(thousands of U.S. dollars, except where otherwise noted)	2019	% change	2018	2019	% change	2018
Net income	30,780	56.5%	19,662	59,677	11.9%	53,338
Income tax expense	5,496	145.8%	2,236	12,030	29.9%	9,263
Finance costs	(10,388)	(644.7%)	1,907	(27,251)	(375.5%)	9,893
Depreciation and amortization	6,812	7.8%	6,321	29,792	42.7%	20,879
EBITDA	32,700	8.5%	30,126	74,248	(20.5%)	93,373
Goodwill impairment	-	-	-	22,000	100%	-
Adjusted EBITDA	32,700	8.5%	30,126	96,248	3.1%	93,373

Distributable Cash Flow	For the three months ended December 31			For the year ended December 31
(thousands of U.S. dollars, except per share amounts and where otherwise noted)	2019	% change	2018	2019	% change	2018
Cash available for distribution^1 (C$)	11,764	(37.8%)	18,904	27,533	(43.6%)	48,822
Distributions (C$)	4,368	(50.0%)	8,734	30,590	(12.3%)	34,864
Distributions per common share (C$)	0.140	(50.2%)	0.281	0.984	(12.5%)	1.125
Payout ratio^1	37.0%	(19.9%)	46.2%	111.1%	55.6%	71.4%

MFC paid monthly dividends of C$0.09375 per common share on both October 15, 2019 and November 15, 2019. These dividends were declared on September 23, 2019 and October 22, 2019 respectively. On November 7, 2019, the Corporation's dividend payment schedule was changed from monthly to quarterly, at an annual rate of C$0.28 per common share, representing an annualized yield of 5.83% on the December 31, 2019 closing price of C$4.80 per common share.

On December 31, 2019, the Corporation repaid in full the principal and interest in respect of its 5.9% convertible unsecured subordinated debentures upon maturity, and such debentures were delisted from the Toronto Stock Exchange in connection therewith. The Corporation used a combination of cash on hand and a draw of $16.0 million from the corporate credit facility for the repayment.

As at December 31, 2019, MFC had consolidated net working capital of $71.5 million, compared to $33.2 million a year earlier.

Medical Facilities' 2019 year-end financial statements and management's discussion and analysis will be issued and filed on SEDAR at www.sedar.com on Thursday, March 12, 2020 and will also be available on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Notice of Conference Call

Management of MFC will host a conference call today, March 12, 2020 at 8:30 am ET to discuss its fourth quarter and year-end 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, March 19, 2020 by calling 416-849-0833 or 1-855-859-2056, using reference number 3479904. A live audio webcast of the call will be available at http://bit.ly/MFCQ42019.

About Medical Facilities

Medical Facilities, in partnership with physicians, owns surgical facilities in the United States. MFC's portfolio includes controlling interest in four specialty surgical hospitals located in Arkansas, Oklahoma, and South Dakota, and an ambulatory surgery center located in California. MFC also has a non-controlling interest in a specialty surgical hospital in Indiana. In addition, through a partnership with NueHealth LLC, Medical Facilities owns controlling interest in six ambulatory surgery centers located in 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. 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.

² Continuing operations is defined as consolidated operations excluding UMASH and RRI Mishawaka Hospital, LP which are treated as discontinued operations in the financial results for the fourth quarter and year ended December 31, 2019.

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