Donald Schellpfeffer – Chief Executive Officer Michael Salter – Chief Financial Officer

Fred Garcia – RBC Capital Lennox Gibbs – TD Securities

Good morning ladies and gentlemen, and welcome to the Medical Facilities Corporation’s 2015 First 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 material factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter, 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 the 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, the Chief Financial Officer of Medical Facilities Corporation or MFC. Prior to market opened today, we released our 2015 first quarter financial results. Our news release, financial statements and MD&A may be accessed through our corporate website at www.medicalfacilitiescorp.ca and were also filed on SEDAR today. In the first quarter we reported revenue of $75.6 million up 2.7% from $72.9 million for the same period last year. On a consolidated basis, revenue growth was attributable to high case volumes, favorable shifts and payer mix and increased revenue from our ancillary services. Additionally, Arkansas Surgical Hospital received incentive payments under the electronic health records program from a payer specific program to providing cost effective care. Consolidated income from operations for the quarter was $17.2 million up 24.9% from $13.8 million recorded in the same period last year. Cash available for distribution increased 26% compared to the same period last year. The increase was due to the stronger cash flow generation from our centers, and lower corporate expenses and debts versus costs. Overall, in U.S. dollar terms, we saw an increase of nearly $20 million of cash available for distribution which was partially offset by higher foreign currency losses on the foreign exchange forward contracts which matured in the respected periods along with higher provisions for income taxes. As a result, our more favorable cash available for distribution ended the quarter with the payout ratio of 78.5%. As we have previously communicated to 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 and payer mix, cash mix, physician scheduling and case counts. Michael will now provide more detail and insight into our financial performance for the first quarter of 2015. 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. As usual, please note that our goal and amounts expressed in my comments on today’s call are in U.S. dollars unless otherwise noted. For the first quarter we recorded revenue of $75.6 million, an increase from $72.9 million in the same quarter last year. As Don mentioned earlier, the majority of our centers experience stronger performance which was driven by higher case volumes, favorable shifts in both payer mix and growth in ancillary revenue which contributed $0.7 million to our overall revenue. The facilities are well aligned with our company’s vision to grow our product and service offerings and to continue benefiting from our primary and urgent care service lines. Revenue of Black Hills unit increased due to a favorable change in case mix and an increase in urgent care revenue. Sioux Falls saw an increase in surgical cases and growth in revenue from a facility revenue which was offset by some unfavorable changes in payer and case mix. However, the facility we made in line compared to the same period a year earlier. Dakota Plains experienced a decrease in the revenue facility did experience a decline in surgical cases and then utility service procedures. However, this decline was partially offset by changes in case mix and annual price increases. Oklahoma experienced an increase in revenue due to a favorable change in payer mix and higher case volumes. While Arkansas unit recorded growth in case volumes and the receipt of electronic health records incentive payments and the payment from a payer specific program for providing cost detective care. Newport totals are AFC in California experienced unfavorable changes in payer mix, despite a positive shift in case mix and the growth in this case volumes. We have seen a continuing growth in case volumes of AFC with the results being impacted by the shift to an in-network payer or contracted basis with the payers in that market. On a consolidated basis we saw an overall increase of 4.9% in surgical cases and an increase of 7.2% and pain management procedures. As I mentioned earlier, we also saw added contributions from our ancillary services such as imaging, primary and urgent care. For the first quarter of 2015, income from operations on a consolidated basis increased by 24.9% to $17.2 million from $13.8 million compared to the same period one year ago. Income from operations reflected growth in revenue and the decline in operating expenses, and the very incremental nature of our business was reflected in the numbers on the income from operations. During the first quarter we recorded net income of $18.8 million compared with the net loss of $2.1 million for the same quarter last year. The increase was primarily attributable to the impact of the declining values of our exchangeable interest liability or convertible presenters and improved performance by the factors. Cash available for distribution or CAFD was CAD11.2 million, an increase from CAD8.9 million generated in the first quarter of last year. Our declared distributions were $8.8 million consistent with the same period last year, this resulted in a pay-out ratio for this quarter being a very favorable 78.5% as compared to the 98.9% we recorded in the first quarter of 2014. As at March 31, 2015, the company had outstanding foreign exchange forward contracts for future delivery of $28.2 million in exchange for CAD29.9 million. And as of March 31, 2015 our cash and cash equivalents and short term and long term investments stood at a healthy $49.1 million. Let me now call on Don for his closing comments.

Thanks, Mike. MFC’s outlook can be affected at many inter-related factors which include the economy, healthcare reform and management strategies. The U.S. economic activity has continued to grow at a moderate pace. The labor market demonstrated solid job gains with improvements in the unemployment rate. The housing sector continued to remain slow but improvements we’re seeing in both household spending and business fixed investments. The S&P 500 recorded its ninth straight quarterly event and has the longest winning streak since 1998. Both the S&P 500 and the TSX ended the first quarter of 2015 with gains of up 0.4% to 1.9% respectively. The U.S. dollar added to insurance gains during the quarter and the Federal Reserve move closer to hiking rates for the first time since 2006. However, with downgraded outlook for the economic growth and installation and add signals that is no particular rush to push foreign cost to more than normal levels. As macro conditions continue to evolve, we at Medical Facilities will continue to mount through the general state of the U.S. economy and in particular, our disposable income of healthcare consumers will impact the demand for elective medical procedures. We remain confident that we’ll continue to benefit from the fact that most of our revenues are generated in South Dakota, Oklahoma and Arkansas, states that continue to exhibit favorable economic trends. As I mentioned last quarter, the mid-term elections have handed the republicans control of both houses of Congress which continues to produce somewhat uncertainty as to the future of the Patient Protection and Affordability Care Act. It remains difficult to assess its impact given the level of uncertainty for healthcare providers. We believe the implementation of the Patient Protection and Affordability Care Act will cause the healthcare industry to experience a number of challenges and opportunities. We anticipate that the increase in number of patients will result in an increased number of surgical cases and with the reduction in uncompensated care. Healthcare entities may also be offer reimbursement incentives rewarding those with 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 U.S. population, overall population growth and increasing proportion of the population with access to health insurance and advances in science and technology will continue to drive an increased demand for the services that we provided our centers. We continue to assess and identify accretive acquisition opportunities while remained focused on driving operating performance across all of our centers over the long term. Management intends to continue capitalizing on our unique business model. We also continue to support our centers with their physician recruitment efforts has increased in a number of physicians for the medical staff privileges and/or ownership interest in our centers are key drivers positively impacting our results. Management continues to focus on accretive opportunities for revenue generation while applying best practices and cost reduction strategies to achieve the company’s business and strategic objectives. We remain confident that company will be able to continue to generate cash available for distribution that is more adequate to satisfy our current annual dividends of CAD1.12 per common share. We would now like to open the line up for any questions that you may have. Operator?

[Operator Instructions] Your first question comes from the line of Fred Garcia. Your line is open.

Good morning, and thanks for taking my questions.

Hi Fred.

Hi, Fred.

Just quickly, just as you assess the urgent and primary care initiatives, how are you thinking about additional initiatives you can make that could continue to improve demand that your facilities – I mean are there some other facilities you’re considering?

I think the way to look at it, the Black Hills and Sioux Falls of course where we put those two operations and one being primary care with the other being urgent care, and those were similarities between them on our health. I think all our facilities where we do get together to discuss things that I can’t tell you that they are all evaluating what might be right in their specific market places. And I would point that out, I don’t think you can just take a broad-brush and say what might work well in that city where Black Hills is located may not work well, and Sioux Falls may not work well on Oklahoma etcetera. So, our approach is very much decent based on that in terms of looking at what can be done at each one of these areas centered, but I think you’ll – overtime you will see us – you will see our centers making some additions or changes or tweaks to what they offer in order to obtain the benefits. And be very clear, one of our goals in both of the centers where we have established the urgent care, primary care as being to sustain and grow our major business which is the provision of the surgical facilities.

And what in 2015 would you anticipate, any new initiatives I think in the other facilities based on the performance at Black Hills and Sioux Falls?

At this point I would say there is nothing that’s announceable to the public.

Okay. And I don’t know if we have had a real update on toward the impact of Measure 17 if that had any meaningful uptick in volumes based on that, can you comment on that?

Yes, we’ve had some comments. One of the things that have to have after the Initiated Measure 17 path was of course with all of our facilities have to get context hammered out with the particular careers who with customers affected by IM-17. To a large extent that has now happened. I think some of our evidence on it is still a little bit anecdotal on what was in contact with our accessories on that issue and of course, we’re very keenly interested. It’s not the easiest thing in the world to necessarily track but what I can say is I think it’s encouraging that we are seeing the whole of some patients that we would not have seen otherwise. We take some satisfaction in that.

Great. And last question, maybe you can speak a bit about your appetite for M&A how that’s maybe changed over the last 12 months, is that the environment that is?

We still see from time-to-time opportunities offer and we will look at opportunities if we feel that they will fit our model. As you well know, it’s our stated goal, accretion is very important to us, the cycle volume very sound operations which goes I think without saying, but accretion to us is a very important factor. We believe there are opportunities existing in the physician and hospital space like specialty surgical hospitals, [indiscernible] such new facilities being built but there is still quite a number of these types of facilities out that are not partnering up with other chains like some of our peers or ourselves is a good pull of those but again I think as we’ve always said it is – it could be sporadic that’s just because of the number that are available, and the appetite for the owners or the current owners of those facilities would meet our criteria wanting to join forces with the likes of an NRC.

Okay, thank you very much.

Next question comes from the line of Lennox Gibbs from TD Securities. Please go ahead.

Hi, good morning.

Good morning.

Good morning.

Okay, morning, morning. So I’m just going to return to the urgent care, primary care just for a bit. So you’re about three years into the urgent care, primary care strategy at Sioux Falls and Black Hills. What evidence do you have that those initiatives are materially growing volumes that those are respective surgical centers?

We can measure going forward basically the number of patients that were definitely seeing plus spin off that we did from the – either surgical portion of it, the imaging portion of lateral paying procedures and we’re confident going forward in all of these sites they see that – and one, it increases our referral sources overall and number two, it broadens our base for patient selection in both the Black Hills area and the Sioux Falls area where we have sites located.

Just to add to that Lennox, I think like imaging that results from the centers is a little easier for us to nail down say definitely what that business we wouldn’t have seen otherwise.

Right.

But that’s supposed to be driving out. On the surgical cases M&A and from those visits, that can be a little bit harder and it gives you – it’s really hard to be able to look at a specific case, I mean we can identify the cases but by the fact that [indiscernible] being seen with the urgent care or primary care facility. The issue is whether we would have got that case otherwise, we may have got it regardless and that makes a little bit more difficult down on the surgical side, but we definitely as I indicated I think in more response to press, we definitely are encouraged by what we have seen.

Right. So, I guess the absence of being able to quantify the impact on the surgical side, how would you rate the success of the initiative overall? Maybe I don’t know if you want to use a scale of 1 to 10 or how you want to do it but just in the absence of quantitative information.

It’s hard to put a scale on it. I think it’s favorable, I think we both feel that it has been great favorable.

Favorable, yes.

Okay, fair enough. Just on the competitive dynamic, what is your competitive position in I think is Aberdeen [indiscernible] just relative to the Stanford facility that entered that market a couple of years back.

It’s hard. The competition that you’re providing is the Stanford facility versus our facility?

Right, how do you – what’s your competitive position in that area in Aberdeen relative to the [indiscernible] facility?

I don’t think it’s really changed much at all, because with the initiation including the IM-17 doctors can take any of those patients from either facility and still do on that Dakota Plains surgical side, that hasn’t really changed – it doesn’t had a very large impact because it had not been successful until this point in time but they’ve been…

Stanford is not been successful?

They’ve not been successful and approaching in that market doing a significant extent.

Excellent, thanks very much.

We have no further questions. I’ll turn the call back over to the presenters.

Thank you for participating in today’s call and for your continued interest in MFC. We look forward to reporting on our progress at next quarter. And if you have any questions you give Mike Salter or myself a call. Thank you and have a great day ladies and gentlemen.

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