Medical Facilities first quarter revenue increases to $51.7 million

May 13 2011

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 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.

Financial Results

For the three months ended March 31, 2011, Medical Facilities generated cash available for distribution ("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.