TORONTO, Aug. 13 /CNW/ - Medical Facilities Corporation ("Medical Facilities" or "the Corporation") (TSX: DR.UN) today reported its financial results for the three- and six-month periods ended June 30, 2010. All amounts are expressed in U.S. dollars unless indicated otherwise.
"After a disappointing first quarter, in which we saw our consolidated operating margin drop to a low of 32.7%, we are encouraged by the rebound in this key measurement of our operations to 37.3%, which is up slightly over the 37.1% reported in Q2 2009," said Dr. Donald Schellpfeffer, CEO of Medical Facilities. "Similarly, our payout ratio of 83.8% is 12.4 percentage points lower than the 96.2% payout ratio recorded in the first quarter of this year and is comparable with the 83.1% payout ratio in Q2 2009."
Q2 2010 Summary
- Operating margin was 37.3% (37.1% in Q2 2009)
- Payout ratio was 83.8% (83.1% in Q2 2009)
- Facility service revenue was $51.2 million ($52.2 million in Q2 2009)
- Operating income was $19.1 million ($19.4 million in Q2 2009)
- Cash available for distribution(1) was Cdn$9.3 million
(Cdn$9.4 million in Q2 2009)
Dr. Schellpfeffer added, "The improvements in results for the second quarter were recorded despite a 1.9% decline in consolidated revenue, largely accounted for by the decline in revenue in our California ambulatory surgery centers. While we saw positive changes in overall case mix and higher pain management revenues, lower overall case volume and a higher proportion of cases covered by payors with lower reimbursement rates offset these revenue increases. With decreased operating expenses, our operating income declined by only 1.4% year over year, or $0.3 million, and improved by 13.6%, or $2.3 million, versus the previous quarter."
"Our expansion at Black Hills should be completed in the third quarter, and along with our recent expansions at Sioux Falls, Dakota Plains, and Oklahoma Spine, should help position Medical Facilities to capitalize on future increases in inpatient cases, as we continue to deliver best-in-class medical treatments. Operations of Barranca Surgery Center have continued to be negatively impacted by the departure of several physician owners. We are now in negotiations to divest our interest in the Center. This divestiture will positively impact our operating results and efforts on cost containment and physician recruitment."
Three months ended June 30, 2010
For the three months ended June 30, 2010, Medical Facilities generated cash available for distribution ("CAFD") of Cdn$9.3 million or Cdn$0.328 per 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 83.8% for the quarter.
Consolidated facility service revenue ("revenue") for the second quarter of 2010 decreased by 1.9% to $51.2 million compared with $52.2 million in the second quarter of 2009. Approximately $0.7 million of the $1.0 million decline in revenue was attributable to lower surgical case volume and lower average revenue per surgical case at Medical Facilities' California ambulatory surgery centers (ASCs), reflecting the departure of three physicians from Barranca and continued local economic weakness. At the Corporation's specialty surgical hospitals (SSHs), Black Hills Surgical Hospital ("BHSH") experienced a 2.6% revenue growth attributable to an increase in more complex cases that generate higher revenue per case. Revenue at both Sioux Falls Surgical Hospital ("SFSH") and Oklahoma Spine Hospital ("OSH") were essentially flat. At SFSH, the positive impact of a favourable case mix was offset by a 6.2% decline in surgical case volume. At Dakota Plains Surgical Center ("DPSC"), revenue declined by 17.5%, due to negative changes in specialty and payor mix. Revenue at all SSHs was negatively impacted by a higher proportion of cases covered by payors with lower reimbursement rates, such as Medicare, Medicaid, Workers' Compensation, and private insurers with fixed reimbursement schedules.
Consolidated operating expenses, including salaries and benefits, drugs and supplies, and general and administrative costs ("consolidated expenses") for the second quarter of 2010 totalled $32.1 million, or 62.7% of revenue, compared with consolidated expenses of $32.8 million, or 62.9% of revenue, in the second quarter a year ago. The decline in consolidated expenses was attributable to a $0.5-million decrease in drugs and supplies expenses due to lower case volume and lower proportion of complex cases that required higher-cost drugs and supplies, a $0.3-million decrease in general, administrative and other operating expenses largely due to a reduction in bad debt expense at two Centers and a decrease in non-recurring expenses at the corporate level, offset by a marginal increase in salaries and benefits mainly due to additional full-time staffing required by the facility expansions at SFSH and OSH.
Consolidated operating income, before depreciation and amortization, interest expense, loss on foreign currency translation and minority interest ("consolidated operating income") in the second quarter of 2010 was $19.1 million, or 37.3% of revenue, compared with consolidated operating income of $19.4 million, or 37.1% of revenue, in the second quarter a year ago.
Consolidated net income for the second quarter of 2010 was $2.5 million, or $0.085 per IPS unit (basic and fully diluted), compared with a net loss of $4.5 million, or $0.149 per IPS unit (basic and fully diluted), in the second quarter of 2009.
Six months ended June 30, 2010
For the six months ended June 30, 2010, Medical Facilities generated CAFD of Cdn$17.4 million or Cdn$0.614 per IPS unit, and declared distributions (consisting of interest on subordinated notes and dividends on common shares) of Cdn$15.6 million or Cdn$0.550 per IPS unit, representing a payout ratio of 89.6% for the six months ended June 30, 2009.
Revenue for the six-month period ended June 30, 2010 grew by 2.1% to $102.5 million from $100.4 million in the same period a year ago. The overall increase in revenue for the period is primarily attributable to an improved case mix with increase in orthopaedic and neurosurgery procedures at all SSHs (except DPSC) and price increases, offset by a higher proportion of cases covered by payors with lower reimbursement rates.
Consolidated expenses for the six months ended June 30, 2010 totalled $66.6 million, or 65.0% of revenue, compared to consolidated expenses of $62.4 million, or 62.1% of revenue, in the six months ended June 30, 2009. The increase in consolidated expenses as a percentage of revenues resulted primarily from higher drugs and supplies expenses due to changes in case mix at some of the Centers, annual salary and wage increases at all Centers, and additional staffing as a result of the facility expansions at SFSH and OSH.
Consolidated operating income for the six months ended June 30, 2010 was $35.9 million, or 35.0% of revenue, compared with operating income of $38.1 million, or 37.9% of revenue, for the prior-year period.
Consolidated net income for the six-month period ended June 30, 2010 totalled $0.8 million, or $0.031 per IPS unit (basic and fully diluted), compared with consolidated net loss of $2.9 million, or a loss of $0.096 per IPS unit (basic and fully diluted), in the same period in 2009.
As at June 30, 2010, the Corporation had consolidated net working capital of $47.8 million, including cash and cash equivalents of $27.0 million and patient accounts receivable of $30.6 million, compared with net working capital of $46.4 million, including cash and cash equivalents of $29.0 million and patient accounts receivable of $36.6 million, as at December 31, 2009. Long-term debt at the centers' level, including the current portion, was $48.5 million as at June 30, 2010 compared with $43.8 million as at December 31, 2009.
Normal Course Issuer Bid
On April 22, 2010, the Corporation announced that it received regulatory approval for a normal course issuer bid ("NCIB") to purchase up to 1,417,975 of its IPS units at prevailing market prices during the period from April 26, 2010 to April 25, 2011. 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.
Under this NCIB, 22,900 IPS units of Medical Facilities were repurchased and cancelled during the second quarter at an average cost of Cdn$9.81 per unit, for a total consideration of Cdn$0.2 million.
As at June 30, 2010, the Corporation had 28,406,149 IPS units outstanding.
Medical Facilities' complete 2010 second quarter financial statements and Management Discussion & Analysis will be issued and filed on SEDAR on Friday, August 13, 2010 and will be available on the same day via Medical Facilities' website at www.medicalfacilitiescorp.ca.
Notice of Conference Call
Management of Medical Facilities will host a conference call today, Friday, August 13, 2010 at 10:00 am (ET) to discuss its 2010 second 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, August 20, 2010 at midnight by calling 1-800-642-1687 or 416-849-0833, reference number 88626820.
To view Medical Facilities Q2 2010 financial statements and notes, please click here: http://files.newswire.ca/476/DR.UN_Q2_2010_FS¬es.pdf
About Medical Facilities
Medical Facilities owns controlling interests in four specialty surgical hospitals, located in South Dakota and Oklahoma, as well as two ambulatory surgery centers 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 centers specialize 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-GAAP measure and is not
intended to be representative of cash flow or results of operations
determined in accordance with GAAP. 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: For further information: Michael Salter, Chief Financial Officer, Medical Facilities Corp., (416) 848-7380 or 1-877-402-7162; Salvador Diaz, Investor Relations, The Equicom Group Inc., (416) 815-0700 or 1-800-385-5451 ext. 242, firstname.lastname@example.org