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Press release from CNW Group

Medical Facilities Corporation Reports 2012 Third Quarter Financial Results

Wednesday, November 14, 2012

Medical Facilities Corporation Reports 2012 Third Quarter Financial Results07:00 EST Wednesday, November 14, 2012TORONTO, Nov. 14, 2012 /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, 2012. All amounts are expressed in U.S. dollars unless indicated otherwise.Third Quarter 2012 HighlightsRevenue of $55.5 million, as compared with $51.9 million in Q3 2011Income from operations of $16.1 million, as compared with $16.4 million in Q3 2011Cash available for distribution1 of Cdn$8.1 million, up from Cdn$8.0 million in Q3 2011Payout ratio of 97.6%, as compared with 97.5% in Q3 2011Increased dividends to an annualized rate of C$1.125, payable monthly"As we get closer to the end of 2012, we are pleased to report an 86.7% year-to-date payout ratio, a significant improvement over our 96.7% payout ratio for the same period last year," stated Dr. Donald Schellpfeffer, CEO of Medical Facilities.  "We recorded an 8.0% year-over-year growth in revenues and a 5.5% growth in income from operations so far for the year, reflecting strong performance across all four of our specialty surgical hospitals and driving the 12.0% growth in cash available for distribution.  We announced an increase in dividends in August that demonstrates the Board's continued confidence in our operations.  For the third quarter, we recorded a 7.1% increase in revenue but income from operations declined slightly, partly due to expenses related to our new initiatives in primary care and urgent care, weakness at Newport Coast, and higher expenses at the corporate level. To date, capital investment in our brand-building primary and urgent care initiatives totaled US$3.9 million with further capital expenditure of US$1.2 million expected through the end of 2013. Approximately 46% of the investment is being funded by the physician-owners of Black Hills and Sioux Falls."Financial ResultsThree months ended September 30, 2012The Company generated cash available for distribution1 ("CAFD") of Cdn$8.1 million, or Cdn$0.286 per common share, and declared dividends of Cdn$7.9 million, or Cdn$0.279 per common share, representing a payout ratio of 97.6% for the quarter, in line with 97.5% for the same quarter last year. During the quarter, the Company incurred substantially higher maintenance capital expenditures and increased expenses at the corporate level, offset by higher foreign exchange contract gains.Consolidated facility service revenue ("revenue") was $55.5 million, an increase of 7.1% from revenue of $51.9 million for the third quarter of 2011. The increase was driven by an 18.2% growth in revenue at Black Hills resulting from an increase in number of surgical cases and additional revenue from urgent care, and a 13.2% growth at Oklahoma Spine attributable to favourable payor and case mix and an increase in pain management procedures offset by fewer surgical cases. These increases were offset by lower revenue from Dakota Plains and Newport Coast, both of which experienced a decrease in the number of surgical cases and pain management procedures.Income from operations declined by 2.2% to $16.1 million, or 28.9% of revenue, from $16.4 million, or 31.7% of revenue, a year ago. The decline was a result of a combination of factors, including higher operating expenses at Sioux Falls resulting from primary care operations, a reduction in case counts and payor reimbursement rates at Newport Coast, and higher expenses at the corporate level.  These factors were partially offset by 21.2% and 26.5% increases in income from operations at Black Hills and Oklahoma Spine, respectively.Net income was $1.7 million, or a loss of $0.152 per share (basic and fully diluted) attributable to shareholders of the Company compared with a net income of $21.7 million, or earnings of $0.560 per share (basic) and $0.137 per share (fully diluted), for the same quarter last year. The decline was attributable to the changes in value of the exchangeable interest liability and convertible secured debentures, which increased in value by $14.8 million in aggregate during the quarter (resulting in a decrease in reported net income), compared with a decline in value by $18.1 million in aggregate during the same quarter last year (resulting in an increase in reported net income), and offset by gains on foreign currency.Nine months ended September 30, 2012The Company generated CAFD of Cdn$27.1 million, or Cdn$0.956 per common share, and declared distributions of Cdn$23.5 million, or Cdn$0.829 per common share, representing a payout ratio of 86.7%. The improvement in payout ratio from 96.7% for the same period last year was largely attributable to improved year-to-date operating performance, higher cash flows from the Centers, and foreign currency gains, partially offset by higher maintenance capital expenditures and a higher provision for current income taxes.Revenue was $170.6 million, an increase of 8.0% from $157.9 million a year earlier, which was attributable to a strong year-over-year growth across all but one Center. Black Hills recorded a 10.2% growth in revenue largely due to increases in the number of surgical cases and pain management procedures and additional revenue from the urgent care business.  Revenue at Sioux Falls grew by 8.9% due to a higher number of neurosurgery and orthopedic cases. Oklahoma Spine's revenue grew by 8.8% as a result of favourable case and payor mix and an increase in pain management procedures.Income from operations was $55.5 million, or 32.5% of revenue, a 5.5% increase from consolidated income from operations of $52.6 million, or 33.3% of revenue, for the same period a year ago. The increase was due to the strong operating performance of all but one Center year to date, offset by increases in operating expenses related to the combined increase in surgical cases, shifts in case mix, the operation of primary care at Sioux Falls and start-up of urgent care at Black Hills, and higher expenses at the corporate level.Net income was $22.3 million, or $0.061 per share (basic and fully diluted) attributable to shareholders of the Company, compared with net income of $2.6 million, or a net loss of $0.575 per share (basic and fully diluted), for the same period last year. The $19.6-million increase in net income was primarily due to strong operating performance of the Centers, lower interest expense, foreign currency gains, and income tax recovery, partially offset by an aggregate increase in value of exchangeable interest liability and convertible secured debentures (versus an aggregate decrease in value last year).As at September 30, 2012, the Corporation had consolidated net working capital (excluding convertible secured debentures classified as current liabilities) of $51.2 million, including cash and cash equivalents of $35.7 million and patient accounts receivable of $40.6 million, compared with net working capital of $50.2 million, including cash and cash equivalents and short-term and long-term bank deposits of $29.5 million and patient accounts receivable of $41.5 million, as at December 31, 2011. Long-term debt at the Centers' level, including the current portion, was $44.3 million as at September 30, 2012 compared with $44.0 million as at December 31, 2011.As at September 30, 2012, the Corporation had 28,341,173 common shares outstanding.Medical Facilities' complete 2012 third quarter financial statements and Management's Discussion and Analysis will be issued and filed on SEDAR on Wednesday, November 14, 2012 and will be available on the same day on Medical Facilities' website at www.medicalfacilitiescorp.ca.Normal Course Issuer BidUnder the normal course issuer bid ("NCIB") that commenced on May 15, 2012, the Company purchased 14,500 of its common shares during the third quarter at an average cost of Cdn$13.79.  Subsequent to September 30, 2012 and up to and including November 12, 2012, the Company purchased another 20,500 of its common shares at an average cost of Cdn$13.77.All securities purchased under the NCIB are cancelled. 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.Notice of Conference CallManagement of Medical Facilities will host a conference call today, Wednesday, November 14, 2012 at 10:00 am (ET) to discuss its 2012 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 Wednesday, November 21, 2012 at midnight by calling 416-849-0833 or 1-855-859-2056, reference number 54710855.To view Medical Facilities Q3 2012 financial statements and notes, please click here: http://files.newswire.ca/940/MFCQ32012.pdfAbout Medical FacilitiesMedical 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, diagnostic and other procedures, including primary and urgent 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 statementsStatements 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 distribution 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 available at: http://stream1.newswire.ca/media/2012/11/14/20121114_C7864_DOC_EN_20592.pdfSOURCE: Medical Facilities CorporationFor 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