Medical Facilities Corporation Reports 2011 Third Quarter Financial Results

TORONTO, Nov. 11, 2011 /CNW/ - Medical Facilities Corporation ("Medical Facilities" or the "Corporation") (TSX: DR), today reported its financial results for the three-month and nine-month periods ended September 30, 2011. All amounts are expressed in U.S. dollars unless indicated otherwise.

Third Quarter 2011 Summary

  • Revenue of $51.9 million, compared to $51.0 million in Q3 2010
  • Operating income of $18.1 million, compared to $19.0 million in Q3 2010
  • Operating margin of 35.0%, compared to 37.2% in Q3 2010

"In the third quarter of 2011 our facility service revenue increased by 1.7%; however, we recorded a reduction in our quarterly operating income compared to the same quarter in 2010. Factors such as physician absences, continued pressures on payor reimbursement rates, and increases in the cost of drugs and supplies as a result of a higher acuity of cases performed unfavourably impacted our operating results for the quarter. To mitigate the impact of such factors, our Centers are actively pursuing revenue increasing and cost-reducing opportunities, including the provision of new services and new ways of delivering our existing services, and have intensified their physician recruitment efforts," said Dr. Donald Schellpfeffer, CEO of Medical Facilities. Dr. Schellpfeffer went on to note that, "on a year-to-date basis, operating margin increased by 4.9% to $57.8 million, representing 36.6% of facility service revenue."

Financial Results

Three months ended September 30, 2011
The Corporation generated cash available for distribution1 ("CAFD") of Cdn$8.0 million, or Cdn$0.282 per common share, and declared dividends of Cdn$7.866 million, or Cdn$0.275 per common share, representing a payout ratio of 97.5% for the quarter. The increase in payout ratio from 87.6% for the same quarter last year was largely attributable to a weaker performance of the Centers and a stronger Canadian dollar, which had a Cdn$0.5-million negative impact upon translation of CAFD into Canadian dollars.

Consolidated facility service revenue ("revenue") was $51.9 million, an increase of 1.7% from revenue of $51.0 million for the third quarter of 2010. The increase in revenue resulted from a combination of various factors, including, overall positive case mix and increases in pain management procedures, offset by a decline in surgical case numbers and unfavourable changes in payor mix.

Consolidated operating expenses, including salaries and benefits, drugs and supplies, and general and administrative costs ("consolidated expenses") totalled $33.7 million, or 65.0% of revenue, compared with consolidated expenses of $32.0 million, or 62.8% of revenue, a year ago. The $1.7-million increase in consolidated expenses is primarily attributable to an increase in the cost of drugs and supplies at two of the Centers, consistent with the changes in case mix, and an increase in general and administrative expenses.

Consolidated operating income was $18.1 million, or 35.0% of revenue, compared to consolidated operating income of $19.0 million, or 37.2% of revenue, a year ago.

Total comprehensive income was $21.1 million, or $0.538 per share (basic) and $0.098 per share (fully diluted) compared with a total comprehensive income of $0.8 million, or a loss of $0.190 per share (basic and fully diluted), for the same quarter last year. The increase in comprehensive income resulted from several factors, including the change in value of the exchangeable interest liability driven by the softening in the Corporation's common share price, the decrease in interest expense related to the extinguishment of subordinated notes payable, and changes in income taxes, offset by a change in the value of the early redemption option in the third quarter of 2010.

Nine months ended September 30, 2011
The Corporation generated CAFD of Cdn$24.2 million, or Cdn$0.853 per common share, and declared distributions of Cdn$23.4 million, or Cdn$0.825 per common share, representing a payout ratio of 96.7%. The increase in payout ratio from 88.7% for the same period last year was largely attributable to an increase in the provision for current taxes, a decrease in the realized gains on matured foreign exchange forward contracts and the impact of a stronger Canadian dollar.

Revenue was $157.9 million, an increase of 2.8% from $153.6 million a year earlier, which was attributable to the overall positive case mix, increases in pain management procedures, partially offset by a less favourable payor mix and a decline in surgical cases.

Consolidated expenses of $100.2 million were $1.7 million higher than for the same period last year, largely due to increases in salaries and benefits as well as drugs and supplies expenses. However, consolidated expenses declined as a percentage of revenue to 63.4% from 64.1%.

Consolidated operating income was $57.8 million, or 36.6% of revenue, a 4.9% increase from consolidated operating income of $55.1 million, or 35.9% of revenue for the same period a year ago.

Total comprehensive income was $2.1 million, or a loss of $0.594 per share (basic and fully diluted) compared with total comprehensive income of $15.5 million, or a loss of $0.090 per share (basic and fully diluted), for the same period last year. The decrease in comprehensive income was primarily due to the change in the value of subordinated notes payable early redemption option and increases in income tax expense, foreign currency loss, and the loss on deemed extinguishment of convertible secured debentures, which were offset by a stronger performance of the Centers and lower interest expense.

As at September 30, 2011, the Corporation had consolidated net working capital of $59.9 million, including cash and cash equivalents of $31.6 million and patient accounts receivable of $34.2 million, compared with net working capital of $62.8 million, including cash and cash equivalents of $31.6 million and patient accounts receivable of $40.8 million, as at December 31, 2010. Long-term debt at the Centers' level, including the current portion, was $45.6 million as at September 30, 2011 compared with $50.4 million as at December 31, 2010.

As at September 30, 2011, the Corporation had 28,332,042 common shares outstanding.

Normal Course Issuer Bid
Under the normal course issuer bid ("NCIB") that commenced on May 2, 2011, the Corporation purchased 114,300 of its new common shares during the third quarter at an average cost of Cdn$10.81, for a total consideration of Cdn$1.2 million. Subsequent to September 30, 2011 and up to and including October 19, 2011, the Corporation purchased 22,000 of its new common shares at an average cost of Cdn$9.69.

All securities purchased under the NCIB are cancelled. By repurchasing and cancelling its securities, Medical Facilities reduces the total amount of dividends payable, resulting in cash savings for the Corporation. The remaining securityholders also benefit from the NCIB as the distributable cash per share increases.

Medical Facilities' complete 2011 third quarter financial statements and Management's Discussion & Analysis will be issued and filed on SEDAR on Friday, November 11, 2011 and will be available on the same day on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Notice of Conference Call
Management of Medical Facilities will host a conference call today, Friday, November 11, 2011 at 10:00 am (ET) to discuss its 2011 third quarter 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 Friday, November 18, 2011 at midnight by calling 416-849-0833 or 1-855-859-2056, reference number 19544063.

To view Medical Facilities Q3 2011 financial statements and notes, please click here:
http://files.newswire.ca/940/MFCFSIFRSQ32011Final.pdf

About Medical Facilities
Medical Facilities owns controlling interests in four specialty surgical hospitals, located in South Dakota and Oklahoma, as well as an ambulatory surgery center in California. The specialty hospitals perform scheduled surgical, imaging and diagnostic procedures, 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.



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1 Cash available for distribution is a non-IFRS measure and is not intended to be representative of cash flow or results of operations determined in accordance with IFRS. Accordingly, Medical Facilities provides a reconciliation of cash available for distributions to reported cash flow from operations in the Corporation's MD&A. Investors are cautioned that cash available for distribution, as calculated by Medical Facilities, is unlikely to be comparable to similar measures used by other issuers.



 

 

 

PDF with caption: "Medical Facilities Q3 2011 financial statements and notes". PDF available at: http://stream1.newswire.ca/media/2011/11/11/20111111_C4912_DOC_EN_6521.pdf

SOURCE Medical Facilities Corporation

For further information:

Michael Salter
Chief Financial Officer
Medical Facilities Corporation
(416) 848-7380 or 1-877-402-7162
investors@medicalfc.com
                            Salvador Diaz
Investor Relations
TMX Equicom
(416) 815-0700 or 1-800-385-5451 ext. 242
sdiaz@equicomgroup.com

 


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