Medical Facilities Corporation Reports 2015 Third Quarter Financial Results

TORONTO, Nov. 12, 2015 /CNW/ - Medical Facilities Corporation ("Medical Facilities" or the "Company") (TSX: DR), today reported its financial results for the three-month and nine-month periods ended September 30, 2015.  All amounts are expressed in U.S. dollars unless indicated otherwise.

Third Quarter 2015 Summary

  • Revenue from continuing operations of $73.1 million, down 1.5% as compared with $74.2 million in Q3 2014
  • Income from continuing operations of $14.7 million, down 11.1% as compared with $16.6 million in Q3 2014
  • Cash available for distribution1 of Cdn$9.8 million, down 8.2% as compared with Cdn$10.7 million in Q3 2014
  • Payout ratio1 of 89.8% as compared with 82.4% in Q3 2014

"After two successive quarters of strong operating results, we are pleased to see that the surgical and pain management case counts at our Centers continued to grow in the third quarter of 2015 by 2.0% and 8.0%, respectively. However, a reduction in the acuity and complexity of surgical cases in the quarter caused our revenue to decline compared to the same quarter last year. As we look forward to the traditionally strong fourth quarter, it is notable that for the nine months ended September 30, 2015, our revenue is already ahead by 1.9% and income from operations is up by 5.2% over 2014," said Dr. Donald Schellpfeffer, CEO of Medical Facilities.

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1 Cash available for distribution 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.

Financial Results
Three months ended September 30, 2015

The Company generated cash available for distribution ("CAFD") of Cdn$9.8 million, or Cdn$0.313 per common share, and declared dividends of Cdn$8.8 million, or Cdn$0.281 per common share, representing a payout ratio of 89.8% for the quarter compared to 82.4% for the same quarter last year. In U.S.-dollar terms, CAFD decreased by US$2.3 million compared to the same quarter in 2014, primarily due to weaker cash flows from the Centers in the quarter and higher foreign currency losses on foreign exchange forward contracts.

Consolidated facility service revenue ("revenue") from continuing operations of $73.1 million decreased by $1.1 million or 1.5% over the same period in 2014, reflecting unfavourable changes in case mix which were partially offset by positive contributions from higher case volumes, increased ancillary (primary, urgent, imaging, etc.) revenues, and favourable shifts in payor mix.

Consolidated operating expenses from continuing operations, including salaries and benefits, drugs and supplies, general and administrative costs, depreciation of property and equipment, and amortization of other intangibles, ("consolidated expenses") totalled $58.4 million, or 79.9% of revenue, compared with consolidated expenses of $57.6 million, or 77.7% of revenue, a year ago. The increase in consolidated expenses was primarily attributable to the growth in salaries and benefits and general and administrative expenses.

Consolidated income from operations from continuing operations ("income from operations") was $14.7 million, or 20.1% of revenue, a $1.8 million or 11.1% decrease from income from operations of $16.6 million, or 22.3% of revenue, a year ago, reflecting a decline in revenue and an increase in operating expenses.

Total income from continuing operations was $10.6 million, or $0.117 per share (basic) and $0.075 per share (fully diluted), compared with total income from continuing operations of $25.0 million, or $0.559 per share (basic) and $0.107 per share (fully diluted), for the same period last year. The decrease of $14.4 million in total income from continuing operations was primarily due to the impact of the changes in the value of exchangeable interest liability, partially offset by a decline in income tax expense.

Nine months ended September 30, 2015
The Company generated CAFD of Cdn$33.3 million, or Cdn$1.064 per common share, and declared dividends of Cdn$26.4 million, or Cdn$0.844 per common share, representing a payout ratio of 79.3% compared to 90.7% a year earlier. In U.S.-dollar terms, CAFD decreased by US$0.2 million compared to 2014 due to higher foreign currency losses on foreign exchange forward contracts, partially offset by a favourable variance in the provision for current income taxes and stronger cash flows from the Centers.

Revenue from continuing operations was $219.0 million, an increase of $4.1 million or 1.9% from $214.9 million a year earlier, which was attributable to the increases in case volumes and ancillary revenues, partially offset by unfavourable shifts in case and payor mix.

Consolidated expenses totalled $172.1 million, or 78.6% of revenue, compared with consolidated expenses of $170.4 million, or 79.3% of revenue, a year ago. The $1.8 million increase in consolidated expenses was primarily attributable to the growth in general and administrative expenses.

Income from operations was $46.9 million, or 21.4% of revenue, a $2.3 million or 5.2% increase over income from operations of $44.6 million, or 20.7% of revenue for the same period a year ago, reflecting growth in revenue partially offset by increased consolidated expenses.

Total income from continuing operations was $44.9 million, or $0.756 per share (basic) and $0.316 per share (fully diluted) compared with total income from continuing operations of $44.4 million, or $0.759 per share (basic) and $0.385 per share (fully diluted), for the same period last year. The increase of $0.5 million in total income from continuing operations was due to the improved operating performance of the Centers and the impact of the declines in the values of convertible debentures and exchangeable interest liability, which were partially offset by increases in income tax expense and foreign currency losses.

As at September 30, 2015, the Company had consolidated net working capital of $77.3 million, including cash and cash equivalents and short-term investments of $68.3 million and accounts receivable of $39.8 million, compared with net working capital of $61.9 million, including cash and cash equivalents and short-term investments of $50.6 million, and accounts receivable of $47.0 million, as at December 31, 2014.

Long-term debt at the Centers' level, including the current portion, was $35.8 million as at September 30, 2015 compared with $40.2 million as at December 31, 2014.

Medical Facilities' complete third quarter 2015 financial statements and management's discussion and analysis will be issued and filed on SEDAR at www.sedar.com on Thursday, November 12, 2015 and will be available on the same day on Medical Facilities' website at www.medicalfacilitiescorp.ca.

Appointment of Director and Executive Transitions
Medical Facilities is pleased to announce the appointment of Jeffrey C. Lozon to its Board of Directors, effective November 11, 2015. Mr. Lozon brings with him valuable experience as a highly respected and accomplished executive in the healthcare and seniors' housing industries. Prior to his retirement in April 2014, he held the position of President and Chief Executive Officer of Revera Inc., a leading provider of seniors' accommodation, care and service. Prior to joining Revera, he was President and Chief Executive Officer of St. Michael's Hospital in Toronto for 18 years. Mr. Lozon currently serves on the boards of Sunrise Senior Living, Voalte Inc., Ontario Brain Institute and CD Howe Institute. He holds a Masters of Health Services Administration from the University of Alberta and is a recipient of the Order of Canada.

The Company also announced that, effective January 1, 2016, Marilynne Day-Linton, a Director since January 2013 and Chairperson of the Audit Committee, will assume the role of Lead Independent Director.

Seymour Temkin, who has served as Chairman of Medical Facilities Corporation's Board of Directors since inception, will assume the role of interim Chief Executive Officer. The assumption of this role by Mr. Temkin, who has been central to every initiative undertaken by the Company and has overseen its growth and continued success, will be seamless. Mr. Temkin will manage the business and affairs of Medical Facilities as it moves to completion of its comprehensive search for a new Chief Executive Officer.

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 the three-month period ended September 30, 2015, the Corporation purchased 156,900 of its common shares at an average price of Cdn$14.98 for a total consideration of Cdn$2.4 million. During the nine-month period ended September 30, 2015, the Corporation purchased 175,700 of its common shares at an average price of Cdn$15.13 for a total consideration of Cdn$2.7 million.

As at September 30, 2015, the Company had 31,238,345 common shares outstanding.

Notice of Conference Call
Management of Medical Facilities will host a conference call today, Thursday, November 12, 2015 at 10:00 am ET to discuss its third quarter 2015 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 Thursday, November 19, 2015 by calling 416.849.0833 or 1.855.859.2056, reference number 61367573.

To view Medical Facilities Q3 2015 financial statements and notes, please click here: http://files.newswire.ca/940/MFC-Q3-2015.pdf

About Medical Facilities
Medical Facilities owns controlling interests in four specialty surgical hospitals located in Arkansas, Oklahoma and South Dakota, 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.

SOURCE Medical Facilities Corporation

PDF available at: http://stream1.newswire.ca/media/2015/11/12/20151112_C7385_PDF_EN_543223.pdf

For further information: please contact: Michael Salter, Chief Financial Officer, Medical Facilities Corporation, 416.848.7380 or 1.877.402.7162, investors@medicalfc.com; Renée Lam, Investor Relations, NATIONAL Equicom, 416.848.1405 or 1.800.385.5451, rlam@national.ca


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