Donald Schellpfeffer – CEO Michael Salter – CFO

Fred Garcia – RBC Capital Markets

Good morning, ladies and gentlemen. Welcome to the Medical Facilities Corporation 2014 Second Quarter Results Conference Call. Before turning the call over to management, listeners are cautioned that today’s presentation and the responses to questions may contain forward-looking statements within the meaning of the Safe Harbor provisions of Canadian Provincial Securities Laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. 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. For additional information about factors that may cause actual results to differ materially from expectations and about medical factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter and the Risk Factors section of the Annual Information Form and Medical Facilities’ other filings with Canadian Securities Regulators. Medical Facilities does not undertake to update any forward-looking statements. Such statements speak only as of the date made. Listeners are also reminded that today’s call is being recorded for the benefit of individual shareholders. The media and other interested parties who may want to review this call at a later time. I would now like to turn the meeting over to Dr. Donald Schellpfeffer, Chief Executive Officer of Medical Facilities. Please go ahead, Dr. Schellpfeffer.

Thank you, operator, and good morning, ladies and gentlemen. Thank you for participating in today’s conference call. Joining me today is Michael Salter, Chief Financial Officer of Medical Facilities Corporation or MFC. Prior to market open today, we released our 2014 second quarter financial results. Our news release, financial statements, and MD&A may be accessed through our corporate website at www.medicalfacilitiescorp.ca and was also filed on SEDAR today. For the second quarter, we reported revenue of $74.4 million, which was up slightly from the same period last year. The increase in revenue reflects the growth at Black Hills, Arkansas Surgical and Newport Coast, which was offset by decline in revenue at Oklahoma Spine, Sioux Falls and Dakota Plains. Consolidated income from operations for the quarter was $20.3 million, in line with the $20.8 million recorded in the same period last year. An increase in cash available for distribution was attributable to positive operating performance and lower maintenance capital expenditures, which was partially offset by loss on foreign currency, forward contracts and higher provisions for income taxes. As a result, our favorable cash available for distribution of payout ratio excluding foreign exchange hedging decreased to 86.2%, including foreign exchange losses, our payout ratio was 90.6%. As we have previously informed the market, our year-over-year revenue and income from operations can fluctuate from quarter-to-quarter and center-by-center. This is a result of shifts in case mix, payor mix, physician scheduling and case counts. Michael will now provide more details and insight into our financial performance for the second quarter 2014. And I will conclude with our views on how the larger economic environment is impacting the healthcare market and our business. We will then open up the call to any questions you may have. With that, let me turn the call over to Michael to discuss our financial results. Michael?

Thanks, Don, and good morning, ladies and gentlemen. Before I begin, please note that all dollar amounts expressed in today’s call are in U.S. dollars unless noted otherwise. For the second quarter we recorded revenue of $74.4 which was an increase of $0.7 million from the $73.7 million recorded in the same quarter of last year. Black Hills and Arkansas, both experienced strong results due to a favorable shift in case mix and increase in case volumes. Black Hills also benefited from success of the surgeon care locations. Our ambulatory center at Newport Coast saw an increase in case volumes, but experienced a less favorable payor mix due to lower payor reimbursements resulting from its move to an in-network staffs with the majority of its payors. Oklahoma experienced marginal growth in case volumes, offset by a decline in average charges per case, and unfavorable payor mix and lower reimbursement rates, which resulted in the decline in revenue. Dakota Plains saw an overall decrease in the number of surgical cases, resulting in lower revenues. Revenue at Sioux Falls, if adjusted for the electronic health payment received in the second quarter of 2013, was 0.6% higher, when compared to last year, as a result of an increase in orthopedic cases. So on a consolidated basis, we saw an overall increase in surgical cases and pain management procedures, as well as increased revenue from our urgent care initiatives. However these increases were offset by higher volumes of cases, but lower per case revenues. Our consolidated income from operations in the second quarter of 2014 decreased slightly to $20.3 million from $20.8 million, compared to the same period one year ago. Income from operations experienced a decline as a result of marginal growth being offset by rise in salaries, benefits and as well as increases in certain general and administrative expenses. During the second quarter, we recorded net income of $23.1 million, compared with $14.8 million for the same quarter last year. The increase is being primarily attributable to the results from foreign currency hedging activities. Cash available for distribution or CAFD, was CAD$9.7 million, an increase from the CAD$9.4 million generated in the second quarter of last year. Our declared distributions were $8.8 million, pretty much the same as the period last year. The resulting payout ratio into this quarter was a comparable 90.6% compared to 93.8% for the same period a year earlier. As of June 30, 2014, MFC had outstanding foreign exchange forward contracts for future delivery of $56.4 million to be converted at a weighted average rate of CAD$1.045 per U.S. dollar through the end of December ‘15. Cash, cash equivalents and short-term and long-term bank deposits stood at $45.6 million at the end of the second quarter. Let me now call on Don for his closing comments.

Thanks Mike. MFC’s outlook can be affected by many interrelated factors which includes the economy, healthcare reforms and management strategies. The U.S. economy has experienced a modest improvement, with unemployed lower, but still elevated. The housing sector has remains tepid with minor improvements in household spending and business fixed investments. The Federal Reserve has limited its forecast for economic growth this year to a range of 2.1% to 2.3%, down from an earlier estimate of 2.9%. The S&P 500 demonstrated economic signs of improve with its sixth consecutive quarter of gains as it rose 4.7% which is its best run in quarterly gains since 1998. The Toronto Stock Exchange recorded its fourth consecutive quarter of gains at 5.7% and reached its highest ever close during the last day of trading. With financial markets still resilience, we will continue to monitor potential impacts from recently implemented tax increases, spending cuts and the continued withdrawal of stimulus measures. We continue to believe that we will benefit from the fact that over 97% of our revenues are generated in South Dakota, Oklahoma and Arkansas. These states consistently demonstrate unemployment rates that are below the national average, as well as economic growth. We believe that as the economic recovery and unemployment rate declines, further we will see non-Medicare and non-Medicaid patient volumes grow, which in turn, will have a positive impact on the results of the company’s operations. With the continued implementation of the Patient Protection and Affordability Care Act, it remains difficult to assess its impacts, given the level of uncertainty for healthcare providers. We believe the implementation of the PPACA will cause healthcare industry to experience a number of challenges and opportunities. We anticipate that the increase in the number of patients will result in an increased number of surgical cases and reduction in uncompensated care. Also, healthcare incentives maybe offered reimbursement incentives rewarding those who meet quality of care and operational criteria. However, the ongoing pressure on reimbursement rates will remain a challenge for most healthcare providers. The combination of the increasing average age and life expectancy of the U.S. population, overall population growth and increased proportion of the population with access to health insurance and advances in science and technology will continue to drive increased demand for services we provide in all of our centers. We will continue to access and identify accretive acquisition opportunities where our remaining focus and driving operating performance is across all our centers over the long-term. Management intends to continue capitalizing on our unique business model. One of our approach is to positively impact our performance going forward, will be supporting physician recruitment efforts at our centers in order to drive increased utilization of our expanded facilities at our hospitals. We believe that increases in a number of physicians holding medical staff privileges and/or ownership interests in our centers is one of the best methods that positively impacting results. The integration and development of revenue generating initiatives, such as our primary and urgent care operations at two of our hospitals will also expand our capabilities and service offerings. It is management’s focus to continue optimizing opportunities for revenue generation, while apply best practices and cost reduction strategies to achieve the company’s business objectives. The management team remains confident in the company’s operations being able to continue to generate cash available for distribution that is more than adequate to satisfy our current annual dividends of CAD$1.25 per common share. We would now like to open the lineup for any questions that you may have. Operator?

(Operator Instructions) We’ll pause for just a moment to compile the Q&A roster. (Operator Instructions) And your first question comes from the line of Fred Garcia from RBC. Your line is open. Fred Garcia – RBC Capital Markets: Good morning, and thanks for taking the questions.

Good morning, Fred. Fred Garcia – RBC Capital Markets: Just a question on the impact of new medical exchanges, things like that. How is that affecting the business, you’re talking about the volumes increasing on a consolidated basis, and I’m just curious how some of that might have been flowing through?

Yes sir, obviously the exchanges now are into their first year of operations. First thing I’d note on it is we have indicated in the past to the market and on all these calls that we operate in areas where the rates of uninsured people were at the lower end of the ranges within the United States. It’s obviously a very geographical thing. And it’s really difficult to track certainly in the markets we are in, if there has been specifically any cases we feel there likely has been. Don can speak to the actual number that came under the exchange systems in State of South Dakota, but all of that business does come in as private insurance, as I am sure you’re aware this is for private insurers in the funds. The other thing is the uptick in Medicaid. And I think I’d say overall that we’ve seen some slight increases in Medicaid, because obviously the part of the Obama Care reforms when people – the states expanded the Medicare. The programs to pick-up additional people. In that little different, I think we’re in a bit different position. You’ve heard some of our peers, certainly the big hospitals, I’m going to say peers, but the other players in the private hospital industry such as the likes of Tenet and Columbia/HCA come to mind that have reported significant upticks in the number of patients that they are saying and the cases that are being generated. Again I would say that we have not seen that same type of uptick, but I refer it back to our continuing commentary that, we’re in areas where it has been a lot lower uninsured rate prior to the exchanges. Don, maybe if you’d like to talk to experiences we’ve had in South Dakota?

Yes, Fred, as far as South Dakota is concerned, the people that are even eligible for that are – it’s not a large number even though they’re at low population state, the fact that effect on our centers, three centers we’re going to break whole basically for that. Medicaid is increased slightly, but as far as Affordable Care Act is very minimal. Fred Garcia – RBC Capital Markets: Okay. Very helpful. And as you alluded to in your release in the past, the pressure on reimbursement is continuing. It should be something that you’re obviously having to plan for in the future. I’m just curious, if you have any visibility on contracts for 2015, and what your thoughts are. I’m assuming more pressure on plans to offset some of these in the future work that you’re considering?

That will be an ongoing event, Fred. Moving forward, we’re building pressure on from all those centers and all the hospital across the country as far as lower reimbursement, and of course that has to be offset by several things. You have to get more efficient, whether it’s with staffing, materials and/or obviously increasing volumes and/or having patients that don’t necessarily have insurance that are cosmetic in nature as the number of those are going are increasing slightly, but it could be an downward pressures going forward reimbursement across the country in every site in every contract moving forward. So it’s an ongoing thing. It’s been ongoing for the past 10 years for all of our centers. Fred Garcia – RBC Capital Markets: Okay. Last question has to deal with your primary care initiative. And sort of, you’re seeing the Walmart and CVS jumping into this space. I’m just curious if that’s having any impact on your strategy or I’m not exactly sure those two conglomerate have opened any in your regions, but just curious about your thoughts on those initiatives from those two players?

In our regions they haven’t opened any of them yet currently and I assume that they will, but they probably will in the future, but their model is slightly different than ours. They’re more like a doc-in-a-box conversion basically, where they have primary, middle levels and may not even a have doctor there to take care of these patients. And obviously well they’re driving new capturing part of primary care is care marketing is getting obviously pharmacy sector it seems that’s where they are located. Fred Garcia – RBC Capital Markets: Okay. Thank you very much.

We have no further questions at this time. I’ll turn the call back over to you, Dr. Schellpfeffer.

Thank you for participating on today’s call and for your continued interest in MFC. We look forward to reporting on our progress in the next quarter. Thank you very much and have a great day.

This concludes today’s conference call. You may now disconnect.