Medical Facilities Corporation Reports 2013 Annual and Fourth Quarter Financial Results

TORONTO, March 20, 2014 /CNW/ - Medical Facilities Corporation ("Medical Facilities" or the "Company") (TSX: DR), today reported its financial results for the three-month and twelve-month periods ended December 31, 2013.  All amounts are expressed in U.S. dollars unless indicated otherwise.

Full-year 2013 Highlights

  • Revenue of $309.2 million, up 29.2% as compared with $239.4 million in 2012
  • Income from operations1 of $91.1 million, up 15.7% as compared with $78.7 million in 2012
  • Cash available for distribution1 of Cdn$40.8 million, up 8.1% from Cdn$37.8 million in 2012
  • Payout ratio1 of 84.3% as compared with 83.3% in 2012

Fourth Quarter 2013 Highlights

  • Revenue of $89.6 million, up 24.7% as compared with $71.9 million in Q4 2012
  • Income from operations of $29.8 million, up 28.1% as compared with $23.2 million in Q4 2012
  • Cash available for distribution of Cdn$13.5 million, up 26.8% as compared with Cdn$10.7 million in Q4 2012
  • Payout ratio of 65.2% as compared with 74.7% in Q4 2012

"2013 marked another year of strong operating performance for Medical Facilities, with double digit growth in revenue and income from operations, as well as increased cash available for distribution," said Dr. Donald Schellpfeffer, CEO of Medical Facilities. "The acquisition of Arkansas Surgical Hospital in late 2012 was instrumental to our record-breaking results. Revenue growth for the year was also driven by our Centers in South Dakota and Oklahoma, largely as a result of increased patient volumes, higher revenue case mix and revenue from urgent and primary care initiatives. Throughout the year, we continued to strengthen our platform for growth within the parameters of healthcare reform. We have successfully integrated Arkansas Surgical Hospital into our operations and our Black Hills Surgical Hospital opened a second urgent care location."

"We are entering 2014 with a strong financial position while maintaining financial flexibility to execute on initiatives and opportunities that could be accretive. As we mark our ten-year anniversary as a public company on March 29, 2014, we remain committed to delivering and enhancing high-quality patient care and optimizing the performance of our Centers through a combination of strategic initiatives, including physician recruitment, enhanced case and payor mix, urgent and primary care and, where applicable, improved cost controls, in order to continue providing reliable income and long-term value to our shareholders. Since March 29, 2004, we have delivered 120 consecutive dividends to our shareholders," concluded Dr. Schellpfeffer.

Financial Results
Three months ended December 31, 2013
The Company generated cash available for distribution ("CAFD") of Cdn$13.5 million, or Cdn$0.431 per common share, and declared dividends of Cdn$8.8 million, or Cdn$0.281 per common share, representing a payout ratio of 65.2% for the quarter compared to 74.7% for the same quarter last year. In U.S.-dollar terms, CAFD increased by US$2.1 million compared to the same quarter in 2012 due to the Company's strong operating performance and lower corporate expenses and interest expense on convertible debentures, which were partially offset by a decline in foreign currency gains and higher provision for income taxes.

Consolidated facility service revenue ("revenue") was $89.6 million, an increase of 24.7% from $71.9 million in the fourth quarter of 2012 primarily due to the acquisition of Arkansas Surgical Hospital ("ASH") and an 8.5% revenue growth at the Company's Centers attributable to an overall increase in surgical cases and pain management procedures, an increase in cases that generate higher per case revenue, additional revenue from urgent and primary care and Medicare and Medicaid incentive payments received by some Centers for implementing electronic health records, 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 $59.9 million, or 66.8% of revenue, compared with consolidated expenses of $48.6 million, or 67.7% of revenue, a year ago. The $11.2 million increase in consolidated expenses is primarily attributable to the acquisition of ASH and costs consistent with the changes in case volumes and case mix.

Consolidated income from operations was $29.8 million, or 33.2% of revenue, a 28.1% increase from consolidated income from operations of $23.2 million, or 32.3% of revenue, a year ago.

Total net income and comprehensive income was $21.0 million, or $0.321 per share (basic and fully diluted) compared with a total net income and comprehensive income of $39.9 million, or $1.097 per share (basic) and $0.794 per share (fully diluted), for the same period last year. The decrease of $18.9 million in total net income and comprehensive income was primarily attributable to the changes in values of exchangeable interest liability and convertible debentures.

Twelve months ended December 31, 2013
The Company generated CAFD of Cdn$40.8 million, or Cdn$1.340 per common share, and declared dividends of Cdn$34.4 million, or Cdn$1.129 per common share, representing a payout ratio of 84.3%, which was consistent with the payout ratio of 83.3% achieved a year earlier. Compared to 2012, CAFD in U.S.-dollar terms increased by US$1.9 million as stronger operating performance of the Centers was partially offset by declines in foreign currency gains.

Revenue was $309.2 million, an increase of 29.2% from $239.4 million a year earlier, which was attributable to the acquisition of ASH and a 6.6% revenue growth at the Company's Centers primarily due to a favourable shift in case mix and additional revenue from urgent and primary care, which were partially offset by a decrease in payor reimbursements.

Consolidated expenses totalled $218.1 million, or 70.5% of revenue, compared with consolidated expenses of $160.7 million, or 67.1% of revenue, a year ago. The $57.4 million increase in consolidated expenses is primarily attributable to the acquisition of ASH, costs associated with the development phases of the urgent and primary care initiatives and costs consistent with the changes in case and payor mix.

Consolidated income from operations was $91.1 million, or 29.5% of revenue, a 15.7% increase from consolidated income from operations of $78.7 million, or 32.9% 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 $45.1 million, or $0.369 per share (basic and fully diluted) compared with a total net income and comprehensive income of $62.2 million, or $1.158 per share (basic and fully diluted), for the same period last year. The decrease of $17.1 million in total net income and comprehensive income was primarily attributable to an increase in amortization of other intangibles, a loss on foreign currency and the changes in value of exchangeable interest liability and convertible debentures.

As at December 31, 2013, the Company had consolidated 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, 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 $42.4 million as at December 31, 2013 compared with $41.6 million as at December 31, 2012.

Medical Facilities' complete fourth quarter and year-end 2013 financial statements and Management's Discussion and Analysis will be issued and filed on SEDAR at wwww.sedar.com on Thursday, March 20, 2014 and will be available on the same day on Medical Facilities' website at www.medicalfacilitiescorp.ca.

On March 31, 2014, the Company will launch its 2013 Annual Report online which will be available at http://www.medicalfacilitiescorp.ca/ar/.

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 2013, 83,300 common shares of Medical Facilities have been repurchased and cancelled at an average price of Cdn$14.83, for a total consideration of Cdn$1.2 million. The cancellation of these common shares resulted in a total savings of Cdn$0.9 million.

As at December 31, 2013, the Company had 31,366,750 common shares outstanding.

Notice of Conference Call
Management of Medical Facilities will host a conference call today, Thursday, March 20, 2014 at 10:00 am ET to discuss its fourth quarter and year-end 2013 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 March 20, 2014 at 1:00 pm ET until March 27, 2014 at 11:59 pm ET by calling 416.849.0833 or 1.855.859.2056, reference number 3524210.

To view Medical Facilities Q4 2013 financial statements and notes, please click here: http://files.newswire.ca/940/MFC_FS_IFRS.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 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.

1Cash available for distribution, income from operations 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.

SOURCE Medical Facilities Corporation

PDF available at: http://stream1.newswire.ca/media/2014/03/20/20140320_C6138_DOC_EN_38155.pdf

For further information:

Michael Salter
Chief Financial Officer
Medical Facilities Corporation
416.848.7380 or 1.877.402.7162
investors@medicalfc.com

Renée Lam
Investor Relations
TMX Equicom
416.815.0700 or 1.800.385.5451 ext. 258
rlam@tmxequicom.com