MARKHAM, ON--(Marketwired - May 07, 2015) - Extendicare Inc. ("Extendicare" or the "Company") (
FINANCIAL AND OPERATIONAL HIGHLIGHTS
- First quarter financial results (from continuing operations unless otherwise noted):
- Revenue of $202.2 million up $8.0 million, or 4.1%.
- Long-term care revenue of $143.5 million up $2.8 million or 2.0%, including average revenue rates for senior care centres up 2.0% to $198.31.
- Home health care revenue of $45.6 million up $2.7 million or 6.3%, including funding to support mandated wage increases and a 2.0% increase in service volumes.
- Net operating income of $25.8 million up $3.1 million or 13.7%, representing 12.8% and 11.7% of revenue, respectively.
- Adjusted EBITDA of $16.2 million up $2.3 million or 16.6%, representing 8.0% and 7.1% of revenue, respectively.
- AFFO from continuing operations was $7.1 million ($0.081 per basic share) in Q1 2015 compared to $6.4 million ($0.073 per basic share) in Q1 2014.
- AFFO, including discontinued operations, was $21.8 million ($0.248 per basic share) in Q1 2015 compared to $21.5 million ($0.246 per basic share) in Q1 2014.
- Dividends declared in Q1 2015 totalled $10.5 million, representing approximately 48% of AFFO for the same period.
- Acquired for cancellation, 978,489 common shares at a cost of $7.0 million.
- Declared May 2015 dividend of $0.04 per share.
- Completed sale of seven of 10 U.S. skilled nursing centres to date in 2015 for pre-tax cash proceeds of US$14.8 million.
- Completed home health care acquisition for cash of $83 million effective April 30, 2015.
- On target for completion of sale of U.S. operations before end of Q2/15.
- Ontario government released updated redevelopment program for older long-term care beds; includes increased construction funding subsidy base rate to $16.65 per bed from $13.30 per bed.
"We are off to a good start in 2015," stated Tim Lukenda, President and Chief Executive Officer of Extendicare. "The financial performance of our continuing business segments has been solid and we are making good progress towards executing on our previously announced strategic transactions. We have successfully closed on our home health care acquisition and remain on track for our Q2 exit from the U.S. business. We look forward to the future and the further opportunities to redeploy the sale proceeds into strategic growth opportunities," he added.
HOME HEALTH CARE ACQUISITION
As previously announced on May 1, 2015, the Company has completed the acquisition of the home health business from Revera Inc. for $83 million in cash, before working capital adjustments (the "Acquisition"). The Acquisition was financed with a bridge loan of $80 million (the "Bridge Loan") and cash on hand. The Company intends to repay the Bridge Loan from the proceeds of the previously announced sale of substantially all of our U.S. operations, which is expected to close in the second quarter of 2015. We estimate that this acquisition will add approximately $0.10 (annualized) to our AFFO per share in the first year, excluding any temporary financing costs.
U.S. SALE TRANSACTION
As previously announced, the Company has entered into a definitive share purchase agreement to sell substantially all of its U.S. business to a group of investors led by Formation Capital, LLC (the "Purchaser") for US$870 million ($1.1 billion using the closing U.S./Canadian dollar exchange rate of 1.2666 as at March 31, 2015), subject to specified adjustments, including a reduction on account of the outstanding amount of mortgage loans and other indebtedness relating to the U.S. business at closing, which as at March 31, 2015, was US$658.3 million. The Company estimates the net after-tax cash proceeds from the U.S. Sale Transaction to be in the range of US$230 million to US$250 million, and includes a deduction of pre-tax US$9 million for advisor fees and other transaction costs. The estimate of after-tax proceeds is subject to change at the time of closing, which is anticipated to occur in the 2015 second quarter. The Company's primary intended use of the proceeds from the U.S. Sale Transaction will be to repay the Bridge Loan in connection with the home health care acquisition described above and to further expand and grow its Canadian operations.
Not included in the U.S. Sale Transaction were 10 U.S. skilled nursing centres that the Company is disposing of separately. One of these centres was sold during the first quarter of 2015 for pre-tax cash proceeds of $5.4 million (US$4.3 million) that resulted in a pre-tax gain of $1.0 million (US$0.8 million). As at March 31, 2015, the net carrying value of the nine remaining U.S. skilled nursing centres was $20.2 million (US$16.0 million), which included net working capital to be retained of approximately US$4.9 million, and was net of debt to be assumed of US$9.6 million. Subsequent to March 31, 2015, six of these centres were sold for pre-tax cash proceeds of approximately US$10.5 million that had a net carrying value of US$11.4 million as at March 31, 2015, excluding working capital to be retained. The remaining three centres held for sale are anticipated to be sold in the second quarter of 2015.
ONTARIO REDEVELOPMENT PROGRAM
On February 27, 2015, the Ministry of Health and Long-Term Care (the "MOHLTC") released updates to its plan to redevelop approximately 31,000 older long-term care beds by the end of 2025. This included a new construction funding subsidy policy that includes an increase to the base rate from $13.30 to $16.65 per bed for large centres of 161 beds or more. The MOHLTC has indicated that the increased construction funding subsidy will apply retroactively to qualified operators who participated in phase one of the redevelopment program launched in 2009, following amendments to the existing development agreements. In addition, long-term care centres are no longer required to meet Leadership in Energy and Environmental Design, or LEED, construction standards; however, those that achieve LEED Silver status will continue to receive a per diem premium of $1.00 per bed. Extendicare constructed two centres (436 beds) under phase one of the program that currently receive a per diem construction subsidy of $14.30 per bed, and would be eligible to receive an increase in the per diem construction subsidy to $17.65 per bed, representing an additional $0.5 million per annum.
As a first step towards scheduling redevelopment projects, all operators are to complete a survey to assist the MOHLTC with gauging interest and readiness, following which projects will be prioritized and scheduled. It is anticipated that late in 2015, selected operators will receive approval to proceed with the next phase of redevelopments. Following their redevelopment, long-term care centres meeting the enhanced design standards will be eligible to receive a 30-year license. In addition, the government amended legislation to extend the maximum term of long-term care centre licenses for "New" and "A" beds by five years (to a maximum of 30 years), effective January 1, 2015.
2015 FIRST QUARTER FINANCIAL REVIEW
Consolidated Revenue
Consolidated continuing operations - revenue grew by $8.0 million to $202.2 million in the 2015 first quarter from $194.3 million in the same 2014 period.
Long-term care operations - revenue improved by $2.8 million to $143.5 million this quarter, primarily due to funding enhancements and was also impacted by the timing of recognition of revenue under the Ontario envelope system. Approximately $1.1 million of the revenue improvement related to our Ontario flow-through envelopes and were therefore directly offset by increased costs of resident care, and approximately $0.2 million of the increase was due to higher preferred accommodation revenue in Ontario.
Our average occupancy remained relatively unchanged at 97.4% this quarter compared to 97.3% in the same 2014 period. In comparison to the 2014 fourth quarter, average occupancy is down slightly from 98.2%, which is not unusual through the winter months. Our average daily revenue rate this quarter was $198.31, up 2.0% over $194.47 in the 2014 first quarter. In comparison to the 2014 fourth quarter, our average daily rate declined by 2.9% due to the timing of revenue recognition under the Ontario envelope system.
Home health care operations - revenue improved by $2.7 million to $45.6 million primarily due to enhanced funding to support an increase in government-mandated wage increases for personal support workers, estimated at approximately $2.0 million, and a 2.0% increase in daily hours of service provided to 13,758 this quarter from 13,485 in the 2014 first quarter. In comparison to the 2014 fourth quarter, our daily hours of service declined by 1.4%, which is not unusual as the community care access centres work to balance their budgets for their fiscal year end in March.
Other Canadian operations - revenue from our management and group purchasing operations increased by $0.7 million to $3.5 million this quarter, primarily due to the addition of 17 senior care centres (approximately 1,700 beds) under contract with our Extendicare Assist division since the 2014 first quarter.
U.S. operations - revenue increased by $1.8 million to $9.6 million this quarter, and included a $1.1 million positive effect of a weaker Canadian dollar. The balance of the improvement of $0.7 million related primarily to our health technology services, provided through Virtual Care Provider, Inc., or VCPI. VCPI generated revenue of US$7.6 million this quarter compared to US$7.0 million in the same 2014 period, which included internal services provided to Extendicare's U.S. operations of US$2.1 million and US$1.9 million, respectively. VCPI provided services to 2,074 non-Extendicare clients at the end of March 2015, compared to 2,039 at the end of the 2014 first quarter, and to 1,976 at the end of 2014.
Consolidated Net Operating Income
Consolidated continuing operations - net operating income improved by $3.1 million to $25.8 million in the 2015 first quarter from $22.7 million in the same 2014 period, representing 12.8% and 11.7% of revenue, respectively. This improvement reflected increased revenue of $8.0 million partially offset by higher operating costs of $4.9 million. The majority of our operating costs are labour related and represented 83.7% and 83.3% of our operating costs in the first quarters of 2015 and 2014, respectively, and as a percentage of revenue were 73.0% and 73.6%, respectively.
Long-term care operations - net operating income improved by $1.6 million, reflecting higher revenue of $2.8 million partially offset by increased operating costs of $1.2 million. Costs increases included higher labour costs of approximately $1.9 million, or 1.8%, that were partially offset by a net decline in other costs that included lower staff training costs of approximately $0.3 million and a reduction in repairs and maintenance costs of approximately $0.2 million. Labour costs of our long-term care operations represented 83.4% and 82.8% of operating expenses in the first quarters of 2015 and 2014, respectively.
Home health care operations - net operating income improved by $0.3 million, reflecting higher revenue of $2.7 million, partially offset by increased costs of $2.4 million. This improvement in net operating income was primarily due to a 2.0% increase in volumes. Labour costs of our home health care operations represented 89.7% and 89.3% of its operating expenses in the first quarters of 2015 and 2014, respectively.
Other Canadian operations - net operating income from our management and group purchasing operations improved by $0.4 million, reflecting higher revenue of $0.7 million, partially offset by increased operating costs of $0.3 million to support the increase in clients served.
U.S. operations - net operating income improved by $0.8 million, which included a $0.3 million positive effect of the weaker Canadian dollar. The balance of the improvement of $0.5 million related primarily to our health technology services, representing higher revenue of $0.7 million, partially offset by increased costs of $0.2 million.
Administrative and Lease Costs
Administrative and lease costs totalled $9.6 million in the 2015 first quarter, representing $6.2 million from our Canadian operations and $3.4 million (US$2.7 million) from our U.S. operations. In comparison, the administrative and lease costs in the 2014 first quarter of $8.8 million represented $6.0 million from our Canadian operations and $2.8 million (US$2.6 million) from our U.S. operations. Approximately half of the $0.8 million increase between quarters was due to the weaker Canadian dollar, with the balance primarily due to higher administrative wage costs.
Consolidated Adjusted EBITDA
Consolidated Adjusted EBITDA increased by $2.3 million to $16.2 million this quarter from $13.9 million in the 2014 first quarter, representing 8.0% and 7.1% of revenue, respectively. This improvement was realized from the growth in net operating income of $3.1 million, partially offset by the increase in administrative and lease costs of $0.8 million, previously discussed.
DISCONTINUED OPERATIONS
Earnings from discontinued operations, net of tax were $5.7 million this quarter compared to $0.7 million in the 2014 first quarter. On a pre-tax basis, results from discontinued operations improved by $7.9 million and were largely impacted by the elimination of any depreciation and amortization expense since the reclassification of these operations to assets held for sale, compared to $12.9 million recorded in the 2014 first quarter, partially offset by an increase in finance costs due to an increase in long-term debt, a decline in EBITDA, and transaction costs related to the pending sale.
ADJUSTED FUNDS FROM OPERATIONS (AFFO)
AFFO was $21.8 million ($0.248 per basic share) in the 2015 first quarter compared to $21.5 million ($0.246 per basic share) in the 2014 first quarter, representing an increase of $0.3 million, of which $0.7 million was from continuing operations, partially offset by a $0.4 million reduction in AFFO from discontinued operations.
The decline in AFFO from discontinued operations of $0.4 million was due to a decrease in Adjusted EBITDA from discontinued operations of $0.8 million and higher net finance costs of $2.6 million, partially offset by a decline in current taxes of $1.3 million and lower maintenance capex of $1.7 million.
AFFO from continuing operations was $7.1 million ($0.081 per basic share) in the 2015 first quarter compared to $6.4 million in the 2014 first quarter ($0.073 per basic share). The improvement of $0.7 million was due to an increase in Adjusted EBITDA of $2.3 million and lower net finance costs of $1.4 million, partially offset by higher current taxes of $2.7 million and an increase in maintenance capex of $0.3 million. Current income taxes for the 2015 first quarter were $3.1 million compared to $0.4 million in the same 2014 period, representing 47.5% and 13.2% of pre-tax FFO from continuing operations, respectively. The 2014 first quarter current taxes were predominately sheltered by non-capital loss carryforwards which decreased taxes by approximately $1.1 million, thereby reducing the effective rate from 48.9% to 13.2%.
The effective tax rates on our FFO can be impacted by: adjustments to our estimates of annual deferred timing differences, particularly when dealing with cash-based tax items versus accounting accruals; changes in the proportion of earnings between taxable and non-taxable entities; book-to-file adjustments for prior year filings; cross-border dividends; and the ability to utilize loss carryforwards. The 2015 first quarter effective tax rate on FFO, at 47.5%, was in excess of our anticipated rate for the 2015 year of between 20% and 25%, primarily due to timing differences.
Maintenance capex from continuing operations was $0.8 million in the 2015 first quarter, compared to $0.5 million in the 2014 first quarter and to $6.4 million in the 2014 fourth quarter, representing 0.4%, 0.3% and 3.0% of revenue from continuing operations, respectively. These costs fluctuate on a quarterly basis with the timing of projects and seasonality. It is our intention to spend between 1.5% and 2.0% of revenue annually, which is consistent with our objective to maintain and upgrade our centres. In 2015, we are expecting to spend in the range of $13 million to $16 million in maintenance capex.
Dividends declared for the three months ended March 31, 2015 totalled $10.5 million, or $0.12 per share, representing approximately 48% of AFFO of $21.8 million, or $0.248 per basic share, compared to a payout ratio of approximately 49% in the same 2014 period.
SELF-INSURED LIABILITIES EXPENSE
Extendicare self-insures certain risks related to general and professional liability of its U.S. operations through its wholly owned captive insurance company (the "Captive"). With the classification of the U.S. senior care operations as held for sale and reported as discontinued operations, the expense for self-insured liabilities incurred by the Captive has also been reclassified to discontinued operations. However, the obligation to settle any claims incurred prior to the closing of the U.S. Sale Transaction, including claims incurred but yet to be reported, remains with Extendicare and the Captive.
The balance of our accrual for self-insured liabilities was $146.0 million (US$115.3 million) as at the end of March 2015, and was relatively unchanged from $133.4 million (US$115.0 million) at the beginning of the year, except for the impact of the weaker Canadian dollar. Our investments held for self-insured liabilities also remained relatively unchanged at $166.2 million (US$131.2 million) as at March 31, 2015, compared to $154.2 million (US$132.9 million) as at December 31, 2014.
Our expense for self-insured liabilities, which is included in discontinued operations, was $8.8 million (US$7.1 million) in the 2015 first quarter, and equaled the payments made for claims during the quarter. In comparison, our expense in the 2014 first quarter was $7.4 million (US$6.7 million) and payments made were $9.1 million (US$8.3 million). Our last independent actuarial review was completed in conjunction with the 2014 year end results, and the next one will be completed in the 2015 second quarter.
NORMAL COURSE ISSUER BID
As previously announced, we initiated a normal course issuer bid (the "Bid") on December 31, 2014, for up to 8,630,000 of our common shares (the "Common Shares") through the facilities of the TSX, and on alternative Canadian trading platforms. To date in 2015, we have acquired for cancellation 978,489 Common Shares at an average share price of $7.15, for a total cost of $7.0 million.
MAY 2015 DIVIDEND DECLARED
The Board of Directors of Extendicare today declared a cash dividend of $0.04 per share for the month of May 2015, which is payable on June 15, 2015, to shareholders of record at the close of business on May 29, 2015. This dividend is designated as an "eligible dividend" within the meaning of the Income Tax Act (Canada).
CONFERENCE CALL AND WEBCAST
On May 8, 2015, at 11:00 a.m. (ET), we will hold a conference call to discuss our 2015 first quarter results. The call will be webcast live and archived in the investors/presentations & webcasts section of our website at www.extendicare.com. Alternatively, the call-in number is 1-877-405-9213 or 416-695-7806, conference ID number 1015449#. A replay of the call will be available until midnight on May 22, 2015. To access the rebroadcast, dial 1-800-408-3053 or 905-694-9451, followed by the passcode 3966824#. Slides accompanying remarks during the call will be posted to our website as part of the live webcast. Also, a supplemental information package containing historical quarterly financial results and operating statistics can be found on the website under the investors/financial reports section.
ABOUT US
Extendicare is a leading provider of care and services for seniors throughout Canada. Through our network of 112 operated senior care centres (58 owned/54 managed), as well as our home health care operations, we are committed to delivering care throughout the health care continuum to meet the needs of a growing seniors' population in Canada. Our qualified and highly trained workforce of 22,400 individuals is dedicated to helping people live better through a commitment to quality service and a passion for what we do. As previously reported, our U.S. senior care operations have been classified as discontinued, with sale transactions expected to close in the 2015 second quarter.
RECAST OF COMPARATIVE INFORMATION
During the first quarter of 2015, certain costs and transactions previously classified as part of continuing operations were classified as discontinued operations. This included a note payable and transaction costs incurred in the 2014 fourth quarter associated with the sale of the U.S. operations.
A note payable of $7.6 million (US$6.0 million) was reclassified in 2015 from long-term debt to liabilities held for sale as this liability will be settled upon the completion of the U.S. Sale Transaction. The comparative amount of $7.0 million (US$6.0 million) as at December 31, 2014, has been reclassified on the consolidated statement of financial position. The Company has also recast the transaction costs incurred in the 2014 fourth quarter associated with the sale of the U.S. operations totalling $7.8 million (pre-tax), $6.7 million (after-tax), from continuing operations to discontinued operations, to conform with the current year's presentation.
Non-GAAP Measures
Extendicare assesses and measures operating results and financial position based on performance measures referred to as "net operating income", "Adjusted EBITDA", "earnings (loss) from continuing operations before separately reported items", "Funds from Operations", and "Adjusted Funds from Operations". These are not measures recognized under GAAP and do not have standardized meanings prescribed by GAAP. These non-GAAP measures are presented in this document because either: (i) management believes that they are a relevant measure of the ability of Extendicare to make cash distributions; or (ii) certain ongoing rights and obligations of Extendicare may be calculated using these measures. Such non-GAAP measures may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to similarly titled measures as reported by such issuers. They are not intended to replace earnings (loss) from continuing operations, net earnings (loss), cash flow, or other measures of financial performance and liquidity reported in accordance with GAAP. Reconciliations of these non-GAAP measures from net earnings (loss) and/or from net cash from operations, where applicable, are provided in this press release on the Non-GAAP Reconciliations page. Detailed descriptions of these terms can be found in the disclosure documents filed by Extendicare with the securities regulatory authorities, available at www.sedar.com and on Extendicare's website at www.extendicare.com.
Forward-looking Statements
Information provided by Extendicare from time to time, including this release, contains or may contain forward-looking statements concerning anticipated financial events, results, circumstances, economic performance or expectations with respect to Extendicare and its subsidiaries, including, without limitation, statements regarding its business operations, business strategy, and financial condition. Forward-looking statements can be identified because they generally contain the words "expect", "intend", "anticipate", "believe", "estimate", "project", "plan" or "objective" or other similar expressions or the negative thereof. Forward-looking statements reflect management's beliefs and assumptions and are based on information currently available, and Extendicare assumes no obligation to update or revise any forward-looking statement, except as required by applicable securities laws. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Extendicare to differ materially from those expressed or implied in the statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on Extendicare's forward-looking statements. Further information can be found in the disclosure documents filed by Extendicare with the securities regulatory authorities, available at www.sedar.com and on Extendicare's website at www.extendicare.com.
| Extendicare Inc. | |||||||
| Consolidated Statements of Earnings (Loss) | |||||||
| (in thousands of Canadian dollars) | Three months ended March 31 |
||||||
| 2015 | 2014 | ||||||
| Revenue | |||||||
| Nursing and assisted living centres | 143,479 | 140,669 | |||||
| Home health care | 45,627 | 42,937 | |||||
| Health technology services | 9,444 | 7,770 | |||||
| Management, consulting and other | 3,669 | 2,878 | |||||
| Total revenue | 202,219 | 194,254 | |||||
| Operating expenses | 176,404 | 171,552 | |||||
| Net operating income(1) | 25,815 | 22,702 | |||||
| Administrative costs | 8,300 | 7,542 | |||||
| Lease costs | 1,328 | 1,273 | |||||
| Adjusted EBITDA(1) | 16,187 | 13,887 | |||||
| Depreciation and amortization | 5,870 | 5,705 | |||||
| Loss from asset impairment, disposals and other items | 899 | 560 | |||||
| Earnings before net finance costs and income taxes | 9,418 | 7,622 | |||||
| Finance costs | |||||||
| Interest expense | 7,370 | 9,157 | |||||
| Interest income | (848 | ) | (1,182 | ) | |||
| Accretion costs | 604 | 540 | |||||
| Fair value adjustments | - | 558 | |||||
| Net finance costs | 7,126 | 9,073 | |||||
| Earnings (loss) from continuing operations before income taxes | 2,292 | (1,451 | ) | ||||
| Income tax expense (recovery) | |||||||
| Current | 3,155 | 405 | |||||
| Deferred | (1,923 | ) | (66 | ) | |||
| 1,232 | 339 | ||||||
| Earnings (loss) from continuing operations | 1,060 | (1,790 | ) | ||||
| Earnings from discontinued operations | 5,695 | 732 | |||||
| Net earnings (loss) | 6,755 | (1,058 | ) | ||||
| Average U.S./Cdn. dollar exchange rate | 1.2412 | 1.1033 | |||||
| (1) Refer to discussion of non-GAAP measures. | |||||||
| Extendicare Inc. | ||||||
| Consolidated Statements of Financial Position | ||||||
| March 31 | December 31 | |||||
| (in thousands of Canadian dollars, unless otherwise noted) | 2015 | 2014 | ||||
| Assets | ||||||
| Current assets | ||||||
| Cash and short-term investments | 40,162 | 35,495 | ||||
| Restricted cash | 1,207 | 1,085 | ||||
| Accounts receivable, less allowance | 34,317 | 41,036 | ||||
| Income taxes recoverable | 70 | 65 | ||||
| Assets held for sale | 1,341,759 | 1,254,535 | ||||
| Other current assets | 18,176 | 10,409 | ||||
| Total current assets | 1,435,691 | 1,342,625 | ||||
| Non-current assets | ||||||
| Property and equipment, net of accumulated depreciation of $186,261 and $182,180, respectively | 327,388 | 331,134 | ||||
| Goodwill and other intangible assets | 16,013 | 16,227 | ||||
| Investments held for self-insured liabilities | 166,187 | 154,178 | ||||
| Other assets | 62,062 | 63,187 | ||||
| Deferred tax assets | 8,418 | 7,935 | ||||
| Total non-current assets | 580,068 | 572,661 | ||||
| Total Assets | 2,015,759 | 1,915,286 | ||||
| Liabilities and Equity (Deficiency) | ||||||
| Current liabilities | ||||||
| Accounts payable | 3,815 | 4,998 | ||||
| Accrued liabilities | 106,213 | 103,907 | ||||
| Liabilities held for sale | 1,226,965 | 1,137,774 | ||||
| Accrual for self-insured liabilities | 28,407 | 25,984 | ||||
| Current portion of long-term debt | 19,029 | 18,828 | ||||
| Income taxes payable | 2,737 | 4,043 | ||||
| Total current liabilities | 1,387,166 | 1,295,534 | ||||
| Non-current liabilities | ||||||
| Provisions | 7,618 | 7,535 | ||||
| Accrual for self-insured liabilities | 117,604 | 107,460 | ||||
| Long-term debt | 447,890 | 453,200 | ||||
| Other long-term liabilities | 40,153 | 38,014 | ||||
| Deferred tax liabilities | 13,846 | 16,047 | ||||
| Total non-current liabilities | 627,111 | 622,256 | ||||
| Total liabilities | 2,014,277 | 1,917,790 | ||||
| Shareholders' equity (deficiency) | 1,482 | (2,504 | ) | |||
| Total Liabilities and Equity (Deficiency) | 2,015,759 | 1,915,286 | ||||
| Closing U.S./Cdn. dollar exchange rate | 1.2666 | 1.1601 | ||||
| Extendicare Inc. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (in thousands of Canadian dollars) | Three months ended March 31 |
|||||||
| 2015 | 2014 | |||||||
| Operating Activities | ||||||||
| Net earnings (loss) | 6,755 | (1,058 | ) | |||||
| Adjustments for: | ||||||||
| Depreciation and amortization | 5,870 | 18,631 | ||||||
| Provision for self-insured liabilities | 8,846 | 7,390 | ||||||
| Payments for self-insured liabilities | (8,850 | ) | (9,106 | ) | ||||
| Deferred taxes | 1,430 | (233 | ) | |||||
| Current taxes | 2,189 | 27 | ||||||
| Loss from asset impairment, disposals and other items | ||||||||
| Continuing operations | 899 | 560 | ||||||
| Discontinued operations | 942 | (50 | ) | |||||
| Loss from derivative financial instruments and foreign exchange | ||||||||
| Continuing operations | - | 558 | ||||||
| Discontinued operations | 639 | - | ||||||
| Net finance costs | 17,213 | 16,088 | ||||||
| 35,933 | 32,807 | |||||||
| Net change in operating assets and liabilities | ||||||||
| Accounts receivable | 30,105 | 20,692 | ||||||
| Other current assets | (8,319 | ) | (1,836 | ) | ||||
| Accounts payable and accrued liabilities | (14,183 | ) | (851 | ) | ||||
| 43,536 | 50,812 | |||||||
| Interest paid | (18,046 | ) | (15,835 | ) | ||||
| Interest received | 921 | 1,314 | ||||||
| Income taxes paid | (5,340 | ) | (254 | ) | ||||
| Net cash from operating activities | 21,071 | 36,037 | ||||||
| Investing Activities | ||||||||
| Purchase of property, equipment and software - growth | (75 | ) | (1,405 | ) | ||||
| Purchase of property, equipment and software - maintenance | (3,359 | ) | (4,750 | ) | ||||
| Net proceeds from dispositions | 5,368 | - | ||||||
| Decrease (increase) in investments held for self-insured liabilities | 3,204 | (7,692 | ) | |||||
| Other assets | (2,000 | ) | 3,136 | |||||
| Net cash from investing activities | 3,138 | (10,711 | ) | |||||
| Financing Activities | ||||||||
| Repayment of long-term debt, excluding line of credit | (9,302 | ) | (8,291 | ) | ||||
| Decrease (increase) in restricted cash | (819 | ) | 6,970 | |||||
| Purchase of securities for cancellation | (7,000 | ) | - | |||||
| Dividends paid | (8,976 | ) | (8,841 | ) | ||||
| Financing costs | (621 | ) | (184 | ) | ||||
| Net cash from financing activities | (26,718 | ) | (10,346 | ) | ||||
| Increase (decrease) in cash and cash equivalents | (2,509 | ) | 14,980 | |||||
| Cash and cash equivalents at beginning of period | 98,799 | 95,999 | ||||||
| Foreign exchange gain on cash held in foreign currency | 5,745 | 1,628 | ||||||
| Cash and cash equivalents at end of period | 102,035 | 112,607 | ||||||
| Less: cash from discontinued operations | (61,873 | ) | - | |||||
| Cash and cash equivalents at end of period, continuing operations | 40,162 | 112,607 | ||||||
| Extendicare Inc. | ||||||||
| Canadian Operations - Operating Statistics | ||||||||
| Three months ended | ||||||||
| (amounts in Canadian dollars, unless otherwise noted) | March 31 | |||||||
| 2015 | 2014 | |||||||
| Canadian Senior Care Centres | ||||||||
| Number of Centres Operated at Period End | ||||||||
| Owned/leased | 58 | 58 | ||||||
| Managed | 54 | 37 | ||||||
| 112 | 95 | |||||||
| Operational Resident Capacity at Period End | ||||||||
| Owned/leased | 8,116 | 8,119 | ||||||
| Managed | 6,195 | 4,484 | ||||||
| 14,311 | 12,603 | |||||||
| Average Daily Revenue Rate (owned/leased centres) | ||||||||
| Total Canadian operations | $198.31 | $194.47 | ||||||
| Average Occupancy (owned/leased centres) | ||||||||
| Total Canadian operations | 97.4 | % | 97.3 | % | ||||
| Ontario LTC total average occupancy | 97.4 | 97.2 | ||||||
| Ontario LTC preferred accommodation (1) | ||||||||
| "New" centres - private (2) | 91.3 | 85.3 | ||||||
| "C" centres - private | 97.4 | 96.8 | ||||||
| "C" centres - semi-private | 60.6 | 59.5 | ||||||
| Home Health Care - hours of service | ||||||||
| Total operations | ||||||||
| Hours of service (000's) | 1,238.2 | 1,213.7 | ||||||
| Hours per day | 13,757.5 | 13,485.3 | ||||||
| (1) Average occupancy reported for the available private and semi-private rooms reflects the percentage of residents occupying those beds and paying the respective premiums. | ||||||||
| (2) The occupancy percentages for 2014 have been restated from what was previously reported at the end of 2014 to conform with the methodology described in note 1 above. | ||||||||
| Extendicare Inc. | ||||||
| Supplemental Information - FFO and AFFO | ||||||
| The following table provides a reconciliation of Adjusted EBITDA to Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) for the periods ended March 31, 2015 and 2014.(1) | ||||||
| Three months ended | ||||||
| (in thousands of Canadian dollars unless otherwise noted) | March 31 | |||||
| 2015 | 2014 | |||||
| Adjusted EBITDA | 16,187 | 13,887 | ||||
| Depreciation for FFEC (maintenance capex) (2) | (2,416 | ) | (2,294 | ) | ||
| Accretion costs | (604 | ) | (540 | ) | ||
| Interest expense | (7,370 | ) | (9,157 | ) | ||
| Interest income | 848 | 1,182 | ||||
| 6,645 | 3,078 | |||||
| Current income tax recovery (expense) (3) | (3,155 | ) | (405 | ) | ||
| FFO (continuing operations) | 3,490 | 2,673 | ||||
| Amortization of financing costs | 356 | 361 | ||||
| Accretion costs | 604 | 540 | ||||
| Principal portion of government capital funding payments | 1,064 | 1,008 | ||||
| Additional maintenance capex (2) | 1,577 | 1,798 | ||||
| AFFO (continuing operations) | 7,091 | 6,380 | ||||
| AFFO (discontinued operations) | 14,752 | 15,091 | ||||
| AFFO | 21,843 | 21,471 | ||||
| Per Basic Share ($) | ||||||
| FFO (continuing operations) | 0.040 | 0.031 | ||||
| FFO (total operations) | 0.225 | 0.204 | ||||
| AFFO (continuing operations) | 0.081 | 0.073 | ||||
| AFFO (total operations) | 0.248 | 0.246 | ||||
| Per Diluted Share ($) | ||||||
| FFO (continuing operations) | 0.040 | 0.031 | ||||
| FFO (total operations) | 0.217 | 0.199 | ||||
| AFFO (continuing operations) | 0.081 | 0.073 | ||||
| AFFO (total operations) | 0.234 | 0.232 | ||||
| Dividends declared | 10,546 | 10,491 | ||||
| Dividends declared per share ($) | 0.120 | 0.120 | ||||
| Basic weighted average number of shares (thousands) | 88,003 | 87,386 | ||||
| Diluted weighted average number of shares (thousands) | 99,247 | 104,355 | ||||
| (1) "Adjusted EBITDA", "funds from operations" and "adjusted funds from operations" are not recognized measures under GAAP and do not have a standardized meaning prescribed by GAAP. Refer to the discussion of non-GAAP measures. | ||||||
| (2) These two line items combined represent the total of our maintenance capex incurred in the period. An amount equivalent to our depreciation for FFEC, or furniture, fixtures, equipment and computers, is deducted in determining FFO, and the difference in total maintenance capex incurred is adjusted for in determining AFFO. | ||||||
| (3) Excludes current tax with respect to the loss (gain) from derivative financial instruments, foreign exchange, asset impairment, disposals and other items that are excluded from the computation of AFFO. | ||||||
| Extendicare Inc. | ||||||||||||||||||
| Segmented Information | ||||||||||||||||||
| (in thousands of Canadian dollars) | Long-term Care |
Home Health Care |
Other Canadian Operations |
Corporate Canada |
Total Canada |
Total U.S. |
Total | |||||||||||
| Q1 2015 | ||||||||||||||||||
| Revenue | 143,479 | 45,627 | 3,545 | 7 | 192,658 | 9,561 | 202,219 | |||||||||||
| Operating expenses | 127,534 | 40,317 | 1,559 | - | 169,410 | 6,994 | 176,404 | |||||||||||
| Net operating income | 15,945 | 5,310 | 1,986 | 7 | 23,248 | 2,567 | 25,815 | |||||||||||
| Net operating income margin (% of revenue) | 11.1% | 11.6% | 56.0% | 100.0% | 12.1% | 26.8% | 12.8% | |||||||||||
| Q1 2014 | ||||||||||||||||||
| Revenue | 140,669 | 42,937 | 2,831 | 11 | 186,448 | 7,806 | 194,254 | |||||||||||
| Operating expenses | 126,288 | 37,916 | 1,307 | - | 165,511 | 6,041 | 171,552 | |||||||||||
| Net operating income | 14,381 | 5,021 | 1,524 | 11 | 20,937 | 1,765 | 22,702 | |||||||||||
| Net operating income margin (% of revenue) | 10.2% | 11.7% | 53.8% | 100.0% | 11.2% | 22.6% | 11.7% | |||||||||||
| Q1 2015 over Q1 2014 Change | ||||||||||||||||||
| Revenue | 2,810 | 2,690 | 714 | (4 | ) | 6,210 | 1,755 | 7,965 | ||||||||||
| Operating expenses | 1,246 | 2,401 | 252 | - | 3,899 | 953 | 4,852 | |||||||||||
| Net operating income | 1,564 | 289 | 462 | (4 | ) | 2,311 | 802 | 3,113 | ||||||||||
| Q1 2015 | Q1 2014 | Total | ||||||||||||||||
| (in thousands of Canadian dollars) | Canada | U.S. | Total | Canada | U.S. | Total | Change | |||||||||||
| AFFO (continuing operations) | 7,872 | (781 | ) | 7,091 | 7,537 | (1,157 | ) | 6,380 | 711 | |||||||||
| Discontinued operations | - | 14,752 | 14,752 | - | 15,091 | 15,091 | (339 | ) | ||||||||||
| AFFO | 7,872 | 13,971 | 21,843 | 7,537 | 13,934 | 21,471 | 372 | |||||||||||
| Maintenance capex (continuing operations) | 815 | 24 | 839 | 361 | 135 | 496 | 343 | |||||||||||
| Discontinued operations | - | 2,520 | 2,520 | - | 4,254 | 4,254 | (1,734 | ) | ||||||||||
| Maintenance capex | 815 | 2,544 | 3,359 | 361 | 4,389 | 4,750 | (1,391 | ) | ||||||||||
| Extendicare Inc. | |||||||
| Non-GAAP Reconciliations | |||||||
| Three months ended | |||||||
| (in thousands of Canadian dollars unless otherwise noted) | March 31 | ||||||
| 2015 | 2014 | ||||||
| Reconciliation of Cash Provided by Operating Activities to AFFO: | |||||||
| Net cash from operating activities | 21,071 | 36,037 | |||||
| Add (Deduct): | |||||||
| Net change in operating assets and liabilities, including interest and taxes | (2,652 | ) | (17,523 | ) | |||
| Current income taxes on items excluded from AFFO (1) | (2,563 | ) | (3,228 | ) | |||
| Net provisions and payments for self-insured liabilities | 4 | 1,716 | |||||
| Depreciation for FFEC (maintenance capex) (2) | (2,416 | ) | (5,558 | ) | |||
| Principal portion of government capital funding payments | 1,064 | 1,008 | |||||
| Additional maintenance capex | (943 | ) | 808 | ||||
| Property taxes accounted for under IFRIC 21 | 8,278 | 8,211 | |||||
| AFFO(2) | 21,843 | 21,471 | |||||
| Reconciliation of Earnings before Income Taxes to Adjusted EBITDA and Net Operating Income: | |||||||
| Earnings (loss) from continuing operations before income taxes | 2,292 | (1,451 | ) | ||||
| Add (Deduct): | |||||||
| Depreciation and amortization | 5,870 | 5,705 | |||||
| Net finance costs | 7,126 | 9,073 | |||||
| Loss from asset impairment, disposals and other items | 899 | 560 | |||||
| Adjusted EBITDA(2) | 16,187 | 13,887 | |||||
| Add (Deduct): | |||||||
| Administrative costs | 8,300 | 7,542 | |||||
| Lease costs | 1,328 | 1,273 | |||||
| Net operating income(2) | 25,815 | 22,702 | |||||
| (1) Represents current income tax with respect to the property taxes accounted for under IFRIC 21, provision for U.S. government investigations, gains or losses from derivative financial instruments, foreign exchange, asset impairment, disposals and other items that are excluded from the computation of AFFO. | |||||||
| (2) Refer to discussion of non-GAAP measures. | |||||||
Contact Information:
For further information, contact:
Dylan Mann
Senior Vice President and Chief Financial Officer
Phone: (414) 908-8623
Fax: (905) 470-4003
Email: dmann@extendicare.com
Visit Extendicare's Website at www.extendicare.com