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, 2010. All amounts are expressed in U.S. dollars unless indicated otherwise.
Q1 2010 Summary
- Facility service revenue increased to $51.4 million from
$48.2 million in Q1 2009
- Operating income was $16.8 million compared with $18.7 million in Q1
- Payout ratio of 96.2% (84.1% in Q1 2009) after realized gains or
losses on foreign currency hedges
- Payout ratio of 100.7% (78.1% in Q1 2009) based on cash available for
distribution(1) from operations before realized gains or losses on
foreign currency hedges
- Completed the conversion of existing space at Oklahoma Spine Hospital
into five additional overnight stay rooms and three additional pain
management bays, and expanded the materials handling area
"During the first quarter, we saw consolidated revenues grow by 6.5% to $51.4 million, driven by higher case volume and higher revenue per case. Our specialty hospitals, in aggregate, experienced a 5% increase in surgical cases and a 5.1% improvement in average revenue per case," said Dr. Donald Schellpfeffer, CEO of Medical Facilities. "However, our operating income was negatively impacted by a combination of higher proportion of cases covered by payors with lower reimbursement rates, an increase in the number of cases which, while generating higher revenue per case, also attract a higher level of drugs and supplies costs, and an increase in inpatient cases at our larger hospitals, which attract a higher level of patient care. Our performance continues to be negatively impacted by weakness in case volume and facility service revenues at our ambulatory surgery centers in California, which continue to reflect local economic conditions."
"We are starting to see the impact of the expansions at Sioux Falls, Dakota Plains and Oklahoma Spine in the form of higher numbers of inpatient cases and expect this trend to continue over the course of the year. We expect to finish our expansion at Black Hills in the third quarter of 2010. We remain focused on delivering best-in-class medical treatments and are committed to optimizing the performance of our centers. Our centers are focused on physician recruitment and cost containment, so that we can continue to provide reliable income and long-term value growth to our unitholders."
Three months ended March 31, 2010
For the three months ended March 31, 2010, Medical Facilities generated cash available for distribution(1) ("CAFD") of Cdn$8.1 million or Cdn$0.286 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 96.2% for the quarter.
Consolidated facility service revenue ("revenue") for the first quarter of 2010 increased by 6.5% to $51.4 million compared with $48.2 million in the first quarter of 2009. Increased revenue in the quarter resulted primarily from growth at Oklahoma Spine Hospital ("OSH"), Sioux Falls Surgical Hospital ("SFSH"), and Black Hills Surgical Hospital ("BHSH"), which experienced year-over-year revenue growth rates of 12.4%, 10.8%, and 5.8%, respectively. Such growth was offset by revenue declines at Dakota Plains Surgical Center ("DPSC"), Barranca Surgery Center ("Barranca") and The Surgery Center of Newport Coast ("Newport Coast") due to a shift in case mix at these Centers and lower case volumes at Barranca and Newport Coast. In addition, there was an increase in lower-revenue-generating Medicare, Medicaid and other lower reimbursement payors' cases at most of the Centers.
Consolidated operating expenses, including salaries and benefits, drugs and supplies, and general and administrative costs ("consolidated expenses") for the first quarter of 2010 totalled $34.5 million, or 67.3% of revenue, compared to consolidated expenses of $29.6 million, or 61.3% of revenue, in the first quarter a year ago. The increase in consolidated expenses and the growth as a percentage of revenues were largely attributable to:
(i) higher drugs and supplies expenses, due to higher case volumes,
shifts in case mix (with an increase in inpatient cases and cases
that consumed more supplies and implants), and a higher proportion
of Medicare, Medicaid, and other payors' cases with lower
(ii) higher staff hours due to the increase in number and type of cases
at SFSH, DPSC, and OSH;
(iii) annual salary and wage adjustments; and
(iv) non-recurring reorganizational costs at Barranca.
Consolidated operating income, before depreciation and amortization, interest expense, loss on foreign currency translation and minority interest ("consolidated operating income") in the first quarter of 2010 was $16.8 million, or 32.7% of revenue, compared with consolidated operating income of $18.7 million, or 38.7% of revenue, in the first quarter a year ago.
Consolidated net loss for the first quarter of 2010 was $1.7 million, or a loss of $0.054 per IPS unit (basic and fully diluted), compared with net income of $1.6 million, or $0.053 per IPS unit (basic) and $0.050 per IPS unit (fully diluted), in the first quarter of 2009.
As at March 31, 2010, the Corporation had consolidated net working capital of $42.0 million, including cash and cash equivalents of $30.5 million and patient accounts receivable were $32.5 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 $48.1 million as at March 31, 2010 compared with $43.8 million as at December 31, 2009. There have been no changes in the amounts of convertible secured debentures and subordinated notes payable outstanding since December 31, 2009. The changes in the reported amounts of these instruments are attributable to the fluctuations in the exchange rate between Canadian and U.S. dollars in the first quarter of 2010.
Normal Course Issuer Bid
Subsequent to the end of the quarter, on April 22, 2010, the Corporation announced that it has 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.
As at March 31, 2010, the Corporation had 28,359,506 IPS units outstanding.
Medical Facilities' complete 2010 first quarter financial statements and Management Discussion & Analysis will be issued and filed on SEDAR on Thursday, May 13, 2010 and will be available the same day via Medical Facilities' website at www.medicalfacilitiescorp.ca.
Notice of Conference Call and Webcast
Management of Medical Facilities will host a conference call today, Thursday, May 13, 2010 at 9:00 am (ET) to discuss its 2010 first quarter financial results. You can join the call by dialling 1-888-231-8191 or 647-427-7450. A live audio webcast of the call will also be available at www.medicalfacilitiescorp.ca. Webcast attendees are welcome to listen to the conference in real-time or on-demand at their convenience. A taped replay of the conference call will be available until Thursday, May 20, 2010 at midnight by calling 1-800-642-1687 or 416-849-0833, reference number 69493691 followed by the number sign.
To view Medical Facilities Q1 2010 financial statements and notes, please click here: http://files.newswire.ca/476/MFC_FS_Q1_2010--05-12-10.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