TORONTO, May 13 /CNW/ - Medical Facilities Corporation ("Medical Facilities" or "the Corporation") (TSX: DR.UN), today reported its financial results for the three-month period ended March 31, 2011. All amounts are expressed in U.S. dollars unless indicated otherwise.
First Quarter 2011 Highlights
- Operating income of $18.2 million, up from $17.0 million in Q1 2010
- Operating margin of 35.1%, up from 33.1% in Q1 2010
- Revenue of $51.7 million, up from $51.4 million in Q1 2010
- Cash available for distribution(1) of $8.0 million, up from $7.9
million in Q1 2010
"We are pleased to see the improved results in the second half of 2010 continue into the first quarter of this year. Operating income increased by 7.0% on slightly higher revenue, reflecting a two-percentage point improvement in our consolidated operating margin. Cash available for distribution in U.S.-dollar terms increased by 2.4% year-over-year although the significant appreciation of the Canadian dollar resulted in a 3.0% decline in Canadian-dollar terms. We are confident this positive momentum, together with the benefits of the proposed conversion to a common share structure initiated in March, will further our growth and performance," said Dr. Donald Schellpfeffer, CEO of Medical Facilities.
As of January 1, 2011, the Corporation adopted International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and Interpretations of the International Financial Reporting Interpretations Committee. The first quarter of 2011 was the Corporation's first period reporting under IFRS. The most significant impact of the conversion to IFRS on the financial results of the Corporation was the change in treatment of the change in value of exchangeable interest liability. Under IFRS, the changes in value of exchangeable interest liability (an expense of $18.6 million for the three months ended March 31, 2011 and an expense of $13.7 million for the three months ended March 31, 2010) are included in the comprehensive loss. Under the previous accounting framework, Canadian GAAP, the changes in value of exchangeable interest liability were included in the statement of financial position as a change in goodwill. For a more detailed explanation of this and other changes related to the conversion to IFRS, please refer to the Corporation's interim condensed consolidated financial statements for the three months ended March 31, 2011.
For the three months ended March 31, 2011, Medical Facilities generated cash available for distribution(1) ("CAFD") of Cdn$7.9 million or Cdn$0.280 per income participating security ("IPS") unit, and declared distributions (comprised of interest on subordinated notes and dividends on common shares) of Cdn$7.8 million or Cdn$0.275 per IPS unit, representing a payout ratio of 98.2% for the quarter. The increase in payout ratio from 95.5% for the same quarter last year was largely attributable to the stronger Canadian dollar, which resulted in a lower translation of cash available for distribution this quarter. The CAFD in U.S. dollar terms was 2.4% higher than prior year's amount.
Consolidated facility service revenue ("revenue") for the first quarter of 2011 was $51.7 million compared to revenue of $51.4 million for the first quarter of 2010 as the positive impact of an increase in neurosurgery and orthopaedic cases was offset by higher contractual allowances attributable to the higher proportion of cases funded by payors with lower reimbursement rates.
Consolidated operating expenses, including salaries and benefits, drugs and supplies, and general and administrative costs ("consolidated expenses") for the first quarter totalled $33.5 million, or 64.9% of revenue, compared with consolidated expenses of $34.4 million, or 66.9% of revenue, a year ago. The $0.9-million decrease in consolidated expenses is primarily attributable to a decrease in the cost of drugs and supplies, reflecting changes in case mix with lower proportion of cases requiring the use of implants.
Consolidated operating income, before depreciation and amortization, interest expense, loss on foreign currency translation and non-controlling interest ("consolidated operating income") for the first quarter was $18.2 million, or 35.1% of revenue, an increase of 7.0% from consolidated operating income of $17.0 million, or 33.1% of revenue, a year ago.
Total comprehensive loss for the first quarter was $9.0 million (of which a loss of $15.1 million was attributable to the owners of the Corporation and an income of $6.1 million was attributable to the non-controlling interest), or a loss of $0.534 per share (basic and fully diluted), compared with a net loss of $5.1 million (of which a loss of $10.7 million was attributable to the owners of the Corporation and an income of $5.6 million was attributable to the non-controlling interest), or a loss of $0.379 per IPS unit (basic and fully diluted), in the comparable period last year. The increase in comprehensive loss attributable to the owners of the Corporation was due to a number of factors, including appreciation of the Canadian dollar against the U.S. dollar and the change in value of the exchangeable interest liability driven by the rise in the Corporation's IPS unit price, offset by stronger operating performance of the Centers.
As at March 31, 2011, the Corporation had consolidated net working capital of $58.7 million, including cash and cash equivalents of $31.6 million and patient accounts receivable of $33.8 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 $48.8 million as at March 31, 2011 compared with $50.4 million as at December 31, 2010.
As at March 31, 2011, the Corporation had 28,316,749 IPS units or unit equivalents outstanding.
Normal Course Issuer Bid
On May 2, 2011, the Corporation announced that it received regulatory approval for a normal course issuer bid ("NCIB") to purchase up to 851,437 of its outstanding IPS units at prevailing market prices during the period from May 4, 2011 to May 3, 2012. All IPS units purchased under the NCIB will be cancelled. By repurchasing and cancelling its units, Medical Facilities reduces the total amount of distributions payable, resulting in cash savings for the Corporation. The remaining unitholders also benefit from the NCIB as the distributable cash per unit increases. If the proposed conversion from IPS to a traditional common share structure is successfully completed, the NCIB would become a bid for the common shares.
Medical Facilities' complete 2011 first quarter financial statements and Management Discussion & Analysis will be issued and filed on SEDAR on Friday, May 13, 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, May 13, 2011 at 9:00 am (ET) to discuss its 2011 first 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, May 20, 2011 at midnight by calling 416-849-0833 or 1-800-642-1687, reference number 62967639.
To view Medical Facilities Q1 2011 financial statements and notes, please click here: http://files.newswire.ca/940/MedFacilities-2011Q1.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 holders of its IPS units, of which a portion is interest on subordinated debt and a portion is dividend. 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) 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.
SOURCE Medical Facilities Corporation
For further information: Michael Salter, Chief Financial Officer, Medical Facilities Corporation, (416) 848-7380 or 1-877-402-7162, firstname.lastname@example.org; Salvador Diaz, Investor Relations, The Equicom Group Inc., (416) 815-0700 or 1-800-385-5451 ext. 242, email@example.com