Extendicare Announces 2014 First Quarter Results and Declares May
Dividend of $0.04 per Share
MARKHAM, ONTARIO--(Marketwired - May 7, 2014) - Extendicare Inc.
("Extendicare" or the "Company") (TSX:EXE) today reported results
for the first quarter ended March 31, 2014. Results are presented
in Canadian dollars unless otherwise noted.
HIGHLIGHTS (variances exclude effect of foreign exchange)
- Revenue of $528.2 million in Q1 2014 included a $2.7 million
increase in same-facility operations over Q1 2013.
- In the United States, our average daily Medicare Part A rate
decreased by 1.3% over Q1 2013, and increased by 0.3% over Q4 2013.
Average daily Managed Care rate increased by 1.6% over Q1 2013 and
by 0.3% over Q4 2013.
- In Canada, the average daily revenue rate for our senior care
centers increased by 1.8% to $194.47 from $191.12 in Q1 2013, and
home health care volumes improved by 7.5%.
- Adjusted EBITDA of $42.7 million in Q1 2014 increased by $1.2
million over Q1 2013, and by $9.4 million over Q4 2013.
- Adjusted EBITDA included a decrease in the provision for
self-insured liabilities of $2.7 million over Q1 2013 and a
decrease of $14.1 million over Q4 2013.
- Adjusted EBITDA margin of 8.1% in Q1 2014, up from 7.9% in Q1
2013 and from 6.2% in Q4 2013.
- AFFO was $21.5 million ($0.246 per basic share) in Q1 2014
compared to $18.2 million ($0.211 per basic share) in Q1 2013 and
$10.4 million ($0.119 per basic share) in Q4 2013.
- Dividends declared this quarter totalled $10.5 million,
representing approximately 49% of AFFO for the same period.
- Declares May dividend of $0.04 per share.
"We are pleased with the overall results of Extendicare in the
first quarter," said Tim Lukenda, President and CEO, "in light of
the challenging census and regulatory environment in the US and the
distraction of the unresolved government investigations and
strategic review process."
"We look forward to the resolution of these matters and the
refocusing on the opportunities to grow our business and capitalize
on strong market fundamentals," Lukenda added.
STRATEGIC REVIEW UPDATE
As previously disclosed in May 2013, the board of directors of
the Company (the "Board"), through its strategic committee (the
"Strategic Committee"), has been undertaking a review of strategic
alternatives relating to the separation of the Company's Canadian
and U.S. businesses that would be in the best interests of the
Company and would reasonably be expected to enhance shareholder
value (the "Strategic Review"). With the assistance of CitiGroup
Global Markets Inc., as a financial advisor, the Company has
studied various alternatives and analyzed relevant considerations,
including valuation, taxation, curtailment of future liability
costs, and strategic implications, of each alternative.
The outcome of the Strategic Review and the determination of the
Company's course of action have taken longer than expected. As
previously disclosed, the Company has had negotiations with one
party towards a transaction involving the U.S. business. The
Company's ability to separate the Canadian and U.S. businesses by
way of a sale of the U.S. business to a third party, the Company's
preferred technique for effecting the separation, is dependent in
part on the satisfactory resolution of the previously disclosed and
still unresolved investigations of the U.S. Department of Health
and Human Services, Office of the Inspector General ("OIG") into
the submission of claims by Extendicare Health Services, Inc.
(EHSI), which operates the U.S. business, relating to the quality
of care provided to its residents and patients and the provision of
rehabilitation services. As previously disclosed, the resolution of
the OIG's investigations will include the requirement that EHSI
enter into a corporate integrity agreement with the OIG, the
specific procedural, administrative, and other obligations and
requirements of which may pertain to a third party purchaser and
future operators of the U.S. business.
If the OIG investigations are resolved on a satisfactory basis
to EHSI and the third party in the near term, it is expected that
the separation of the Canadian and U.S. businesses will be effected
by way of a sale of the U.S. business. If the OIG investigations
are not so resolved, the Company intends to proceed to take steps
to separate the Canadian and U.S. businesses by utilizing one of
the other several alternatives and techniques being considered and
analyzed by the Strategic Committee. Material details relating to
the separation of the Company's Canadian and U.S. businesses will
be disclosed when appropriate.
PROVISION FOR SELF-INSURED LIABILITIES
Our 2014 first quarter provision for potential general and
professional liability claims was $7.4 million (US$6.7 million),
compared to $9.5 million (US$9.4 million) in the same 2013 period,
representing a decline of US$2.7 million. The 2013 first quarter
provision included approximately US$2.0 million in reserves for our
Kentucky based claims. Our last independent actuarial review was
completed in conjunction with the 2013 year end results, and the
next one will be completed in the 2014 second quarter.
MEDICARE UPDATES
On May 1, 2014, the U.S. Centers for Medicare & Medicaid
Services (CMS) issued its proposed policy changes for the upcoming
fiscal year. CMS has proposed a net market basket increase in
Medicare Part A revenue rates of 2.0%, effective October 1, 2014,
consisting of a market basket increase of 2.4% minus a productivity
adjustment of 0.4%. We estimate that the impact of this funding
increase will provide us with additional Medicare Part A and
Managed Care revenue of approximately US$7.1 million per annum.
On April 1, 2014, the U.S. President signed into law the
Protecting Access to Medicare Act of 2014 (the "PAM Act").
The PAM Act is the latest postponement of the implementation of the
Medicare Sustainable Growth Rate (SGR) legislation, which if
implemented, would result in a 24% reduction to the Medicare Part B
fee screen rates. This postponement, commonly referred to as the
"Doc Fix", runs through April 1, 2015. The industry continues to
lobby for a more permanent solution. In addition to the SGR, the
PAM Act also postpones implementation of ICD-10 code sets that was
scheduled to begin on October 1, 2014, by at least one year, and
extends the therapy cap exception process to April 1, 2015. The PAM
Act also includes a "Value-Based Purchasing" initiative, whereby
providers can earn incentives for reducing hospital readmissions.
The incentives are to be funded via a 2% rate cut in fiscal year
2019, of which up to 70% will be transferred to an incentive pool.
Data used in setting the benchmarks and potential incentives will
be collected and made public on Medicare's "Nursing Home Compare"
website starting on October 1, 2017.
2014 CONVERTIBLE DEBENTURES
Extendicare's outstanding 5.7% convertible unsecured
subordinated debentures, in the aggregate principal amount of
$113.9 million (the "2014 Debentures"), mature on June 30, 2014.
EHSI is in the process of arranging a new credit facility for up to
US$100 million, which will be secured by mortgages on some of
EHSI's unencumbered centers. The interest rate under the new credit
facility is expected to be the one month LIBOR plus 475 basis
points. Management is confident that cash from operating activities
and draw downs under debt financings will be available and
sufficient to support Extendicare's ongoing business operations,
facility maintenance capital expenditures, debt repayment
obligations and to repay the principal and accrued and unpaid
interest owing under the 2014 Debentures on maturity.
2014 FIRST QUARTER FINANCIAL REVIEW
TABLE 1 |
Q1 |
Q1 |
Q4 |
(millions of dollars unless otherwise noted) |
2014 |
2013 |
2013 |
Revenue |
|
|
|
U.S. operations (US$) |
309.8 |
313.7 |
307.2 |
U.S. operations (C$) |
341.8 |
316.3 |
322.3 |
Canadian operations |
186.4 |
181.7 |
197.0 |
Total Revenue |
528.2 |
498.0 |
519.3 |
Adjusted EBITDA (1) |
|
|
|
U.S. operations (US$) |
25.2 |
23.5 |
12.0 |
U.S. operations (C$) |
27.8 |
23.7 |
12.7 |
Canadian operations |
14.9 |
15.4 |
19.4 |
Total Adjusted EBITDA |
42.7 |
39.1 |
32.1 |
Adjusted EBITDA margin |
8.1% |
7.9% |
6.2% |
Average U.S./Canadian dollar exchange rate |
1.1033 |
1.0083 |
1.0489 |
(1) Refer to discussion of non-GAAP measures. |
2014 First Quarter Comparison to 2013 First Quarter
Consolidated revenue improved by $0.8 million this quarter,
excluding a $29.4 million positive effect of a weaker Canadian
dollar. The impact of the following 2013 events: opening two new
nursing centers in northern Ontario; discontinuing home health care
operations in Alberta; classifying 11 U.S. skilled nursing centers
in various states as held for sale; and closing a rehabilitation
hospital in Michigan (collectively referred to as "non
same-facility operations"), resulted in lower revenue of $1.9
million between periods. Revenue from our remaining operations
(referred to as "same-facility operations") improved by $2.7
million, due to an improvement from our Canadian operations,
partially offset by lower revenue from our U.S. operations.
Revenue from U.S. operations declined by US$3.9 million to
US$309.8 million in the 2014 first quarter compared to US$313.7
million in the 2013 first quarter. Non same-facility operations
generated revenue of US$14.9 million this quarter compared to
US$16.1 million in the 2013 first quarter, for a net decline of
US$1.2 million. Revenue from same-facility operations declined by
US$2.7 million between periods, primarily due to the impact of
lower census levels of US$6.1 million and a decrease in prior
period revenue settlement adjustments and other revenue of US$0.5
million, partially offset by a net increase in average rates of
US$3.9 million.
Revenue from Canadian operations grew by $4.7 million to $186.4
million in the 2014 first quarter from $181.6 million in the 2013
first quarter. For purposes of discussing the variances in our
results, the operations of all six of our Sault Ste. Marie and
Timmins area nursing centers, consisting of two new nursing centers
that opened in 2013, three that were closed and one that was
downsized, are classified as "non same-facility". In addition, we
no longer provide home health care services in Alberta, and
therefore, these operations have also been classified as "non
same-facility". The non same-facility operations generated revenue
of $8.8 million this quarter compared to $9.6 million in the 2013
first quarter, for a net decrease of $0.8 million. Revenue from
same-facility operations improved by $5.5 million between periods,
primarily due to funding enhancements, the timing of recognition of
revenue under the Ontario envelope system and higher volumes from
our Ontario home health care operations of 7.5%, partially offset
by an unfavourable prior period revenue adjustment of $0.4
million.
Consolidated Adjusted EBITDA improved by $3.6 million this
quarter from $39.1 million in the 2013 first quarter, representing
8.1% and 7.9% of revenue, respectively. Excluding a $2.4 million
positive effect of a weaker Canadian dollar, Adjusted EBITDA
improved by $1.2 million, of which $1.3 million was from
same-facility operations. The U.S. operations contributed $1.4
million to the improvement from same-facility operations, and was
partially offset by a $0.1 million decline from the Canadian
operations.
Adjusted EBITDA from U.S. operations improved by US$1.7 million
to US$25.2 million this quarter from US$23.5 million in the 2013
first quarter, representing 8.1% and 7.5% of revenue, respectively.
Adjusted EBITDA from non same-facility operations improved by
US$0.3 million between quarters (a US$0.5 million loss this quarter
compared to a loss of US$0.8 million in the same 2013 period).
Adjusted EBITDA from same-facility operations increased by US$1.4
million as a result of lower costs of US$4.1 million, partially
offset by a decline in revenue of US$2.7 million. Operating,
administrative and lease costs from same-facility operations,
adjusted to exclude the impact of property taxes accounted for
under IFRIC 21, declined by US$4.1 million, primarily due to a
US$2.7 million decrease in the provision for self-insured
liabilities and a US$1.0 million decline in labour costs primarily
due to lower census levels partially offset by an average wage rate
increase.
Adjusted EBITDA from Canadian operations was $14.9 million this
quarter compared to $15.4 million in the 2013 first quarter,
representing 8.0% and 8.5% of revenue, respectively. Adjusted
EBITDA from non same-facility operations declined by $0.4 million
between periods (contribution of $0.5 million this quarter compared
to $0.9 million in the same 2013 period). Adjusted EBITDA from
same-facility operations declined by $0.1 million primarily due to
an unfavourable prior period revenue adjustment of $0.4 million
recorded this quarter.
2014 First Quarter Comparison to 2013 Fourth Quarter
In comparison to the 2013 fourth quarter, consolidated revenue
this quarter declined by $7.9 million, excluding a $16.8 million
positive effect of a weaker Canadian dollar. This decline was
primarily due to two fewer days this quarter and the timing of
recognition of funding in our Canadian operations, partially offset
by higher U.S. census levels.
Consolidated Adjusted EBITDA was $42.7 million this quarter
compared to $32.1 million in the 2013 fourth quarter, representing
8.1% and 6.2% of revenue, respectively. Excluding a $1.2 million
positive effect of a weaker Canadian dollar, Adjusted EBITDA
improved by $9.4 million between periods, of which $9.1 million was
from same-facility operations. This improvement was largely due to
a reduction in the provision for self-insured liabilities between
quarters of $14.1 million (US$13.6 million) and higher U.S. census
levels, partially offset by unfavourable settlement adjustments of
approximately $3.6 million, two fewer days and the timing of
recognition of funding and costs under the Ontario envelope
system.
Adjusted EBITDA from U.S. operations improved by US$13.2 million
to US$25.2 million this quarter from US$12.0 million in the 2013
fourth quarter, representing 8.1% and 3.9% of revenue,
respectively. Same-facility operations contributed US$12.7 million
to the improvement resulting from lower costs of US$10.6 million
and higher revenue of US$2.1 million between quarters. Revenue this
quarter was impacted by improvements in overall census and average
rates, partially offset by two fewer days in the quarter.
Operating, administrative and lease costs from same-facility
operations, adjusted to exclude the impact of property taxes
accounted for under IFRIC 21, declined by US$10.6 million between
quarters, primarily due to a US$13.6 million decrease in the
provision for self-insured liabilities and other cost decreases of
US$0.7 million, partially offset by a US$2.0 million refund of
prior period charges recorded in the 2013 fourth quarter and a
US$1.7 million increase in labour costs primarily due to the
seasonality of payroll taxes.
Adjusted EBITDA from Canadian operations was declined by $4.5
million to $14.9 million this quarter from $19.4 million in the
2013 fourth quarter, representing 8.0% and 9.9% of revenue,
respectively. Same-facility operations contributed $4.2 million to
the decline resulting from lower revenue of $10.0 million,
partially offset by a reduction in costs of $5.8 million. This was
primarily due to a decline in home health care volumes, two fewer
days this quarter, timing of spending under the flow-through
envelopes, and an unfavourable prior period revenue settlement
adjustments of $1.6 million between periods (a $0.4 million charge
this quarter versus a $1.2 million pick up in the 2013 fourth
quarter).
ADJUSTED FUNDS FROM OPERATIONS (AFFO)
AFFO was $21.5 million ($0.246 per basic share) in the 2014
first quarter compared to $18.2 million ($0.211 per basic share) in
the 2013 first quarter, representing an improvement of $2.1
million, excluding a $1.2 million positive effect of a weaker
Canadian dollar. This improvement was primarily due to an increase
in Adjusted EBITDA of $1.2 million, lower facility maintenance
capital expenditures of $0.3 million, a $0.3 million increase in
government capital funding payments and lower current income taxes.
Current income taxes for the 2014 first quarter were $3.2 million
compared to $3.4 million in the 2013 first quarter, representing
15.4% and 18.6% of pre-tax funds from operations (FFO),
respectively.
In comparison to AFFO in the 2013 fourth quarter of $10.4
million ($0.119 per basic share), AFFO this quarter improved by
$10.4 million, excluding a $0.7 million positive effect of a weaker
Canadian dollar. This improvement was primarily due to an increase
in Adjusted EBITDA of $9.4 million, the timing of facility
maintenance capital expenditures, which were lower by $7.7 million,
partially offset by higher current income taxes. Current income
taxes for the 2014 first quarter were a provision of $3.2 million,
representing 15.4% of pre-tax FFO. Current income taxes for the
2013 fourth quarter were a recovery of $3.3 million, and were
favourably impacted by book-to-file tax adjustments of
approximately $3.6 million, primarily related to our U.S.
operations. Excluding these book-to-file adjustments, current
income taxes for the 2013 fourth quarter represented 2.3% of
pre-tax FFO.
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; and the ability to utilize loss carryforwards.
The restructuring of our Canadian legal entities in mid-2012
enhanced our ability to utilize available non-capital loss
carryforwards. Our Canadian non-capital loss carryforwards were
substantially utilized by the end of the 2014 first quarter. As a
result, we anticipate that our annual effective tax rate on FFO
will increase in 2014 to between 23% and 26%.
Facility maintenance capital expenditures were $4.7 million in
the 2014 first quarter, compared to $4.7 million in the 2013 first
quarter and $12.2 million in the 2013 fourth quarter, representing
0.9%, 0.9% and 2.4% of revenue, 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 centers. In 2014, we are expecting to spend in the
range of $38 million to $43 million in facility maintenance capital
expenditures and $15 million to $20 million in growth capital
expenditures.
Dividends declared in the first three months of 2014 totalled
$10.5 million, or $0.120 per share, representing approximately 49%
of AFFO of $21.5 million, or $0.246 per basic share, compared to a
payout ratio of approximately 100% in the same 2013 period when the
dividends declared totalled $0.210 per share.
U.S. OPERATIONS KEY METRICS
Skilled Nursing Facility Revenue Rates
The CMS Medicare net market basket increases for October 1, 2012
and 2013, were 1.8% and 1.3%, respectively. However, our Medicare
Part A and Managed Care rates were adversely impacted by the
sequestration funding reduction of 2.0% effective April 1, 2013,
and our Medicare Part A funding has been impacted by a reduction in
co-insurance reimbursement for bad debts, which declined from 100%
to 88% on January 1, 2013, and to 76% on January 1, 2014.
For the 2014 first quarter, our average daily Medicare Part A
rate, excluding prior period settlement adjustments, was US$470.01,
representing a decrease of 1.3% from US$476.08 in the 2013 first
quarter, primarily due to the impact of sequestration that took
effect April 1, 2013, reduction in reimbursement for bad debts and
changes in acuity mix, partially offset by the market basket
increase. In comparison to our average daily Medicare Part A rate
of US$468.78 in the 2013 fourth quarter, our rate this quarter
increased by 0.3%, primarily due to the market basket increase,
partially offset by changes in acuity mix.
For the 2014 first quarter, our average daily Managed Care rate,
excluding prior period settlement adjustments, was US$446.35,
representing an increase of 1.6% from US$439.44 in the 2013 first
quarter and an increase of 0.3% from US$445.03 in the 2013 fourth
quarter, primarily due to changes in acuity mix.
Our average daily Medicaid rate, excluding prior period
settlement adjustments, increased this quarter by 2.8% to US$200.88
from US$195.39 in the 2013 first quarter, and was relatively
unchanged from US$200.80 in the 2013 fourth quarter. During the
2012 fourth quarter, we became eligible to receive Upper Payment
Limit funding for all of our centers in Indiana. Exclusive of this
additional funding, the net increase in Medicaid rates this quarter
over the 2013 first quarter was 1.9%.
Total and Skilled Census
Our same-facility ADC of 11,364 in the 2014 first quarter was
177 below the 2013 first quarter level of 11,541 due to lower
Skilled Mix ADC of 109, and lower Medicaid ADC of 79, partially
offset by higher private/other ADC of 11. In comparison to the 2013
fourth quarter, our same-facility ADC improved by 172 due to higher
Skilled Mix ADC of 199 and higher Medicaid ADC of 32, partially
offset by lower private/other ADC of 59. Our average same-facility
occupancy was 84.9% this quarter compared to 85.5% in the 2013
first quarter, and 83.4% in the 2013 fourth quarter.
Our same-facility Skilled Mix ADC of 23.1% of our residents in
the 2014 first quarter declined from 23.7% in the 2013 first
quarter, and improved from 21.7% in the 2013 fourth quarter.
MAY 2014 DIVIDEND DECLARED
The Board of Directors of Extendicare today declared a cash
dividend of $0.04 per share for the month of May 2014, which is
payable on June 16, 2014 to shareholders of record at the close of
business on May 30, 2014. This dividend is designated as an
"eligible dividend" within the meaning of the Income Tax Act
(Canada).
CONFERENCE CALL AND WEBCAST
On May 8, 2014, at 10:00 a.m. (ET), we will hold a conference
call to discuss our 2014 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 1-866-696-5910 or
416-340-2217, conference ID number 1556484#. A replay of the call
will be available until midnight on May 23, 2014. To access the
rebroadcast, dial 1-800-408-3053 or 905-694-9451, followed by the
passcode 5906792#. 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 North American provider of post-acute
and long-term senior care services. Through our network of owned
and operated health care centers, our qualified and experienced
workforce of 35,500 individuals is dedicated to helping people live
better through a commitment to quality service that includes
skilled nursing care, rehabilitative therapies and home health care
services. Our 251 senior care centers in North America have
capacity to care for approximately 27,800 residents.
Retrospective Adoption of IFRIC 21, Levies
Upon the adoption of IFRIC 21, Levies, effective January 1,
2014, the Company has reassessed the timing of when to accrue
property taxes imposed by specific legislation in the jurisdictions
where it owns property. The Company previously accrued for Canadian
and U.S. property taxes evenly throughout the year. In accordance
with IFRIC 21, the Company has determined that the liability to pay
the U.S. property taxes should be recognized in full at a single
point in time when the obligating event occurs. The obligating
event for the U.S. properties has been determined to be January 1,
as stated in the legislation. The Company's recognition of property
taxes for its Canadian properties remains unchanged. The Company
has retrospectively applied this change in accounting policy to
January 1, 2013, and has restated its comparative interim periods
for 2013 to reflect the recognition of the full amount of the
annual U.S. property tax expense in the first quarter.
Non-GAAP Measures
Extendicare assesses
and measures operating results and financial position based on
performance measures referred to as "Adjusted EBITDA", "earnings
(loss) 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 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 |
|
|
2014 |
|
2013 |
|
Revenue |
|
|
|
|
Nursing and assisted living centers |
|
|
|
|
|
United States |
328,331 |
|
302,764 |
|
|
Canada |
140,669 |
|
137,407 |
|
Home health − Canada |
42,937 |
|
42,063 |
|
Health technology services − United States |
5,686 |
|
5,508 |
|
Outpatient therapy − United States |
3,013 |
|
3,384 |
|
Rent, management, consulting and other services |
7,563 |
|
6,831 |
|
Total revenue |
528,199 |
|
497,957 |
|
Operating expenses |
474,048 |
|
447,205 |
|
Administrative costs |
16,785 |
|
16,187 |
|
Lease costs |
2,843 |
|
2,784 |
|
Total expenses |
493,676 |
|
466,176 |
|
Earnings before depreciation, amortization, loss from
asset impairment, disposals and other items |
34,523 |
|
31,781 |
|
Depreciation and amortization |
18,631 |
|
19,046 |
|
Loss from asset impairment, disposals and other
items |
510 |
|
11 |
|
Earnings before net finance costs and income taxes |
15,382 |
|
12,724 |
|
Finance costs |
|
|
|
|
|
Interest expense |
16,456 |
|
15,689 |
|
|
Interest income |
(1,330 |
) |
(1,182 |
) |
|
Accretion costs |
962 |
|
828 |
|
|
Fair value adjustments |
558 |
|
(1,610 |
) |
|
Loss on foreign exchange and financial instruments |
- |
|
518 |
|
Net finance costs |
16,646 |
|
14,243 |
|
Loss before income taxes |
(1,264 |
) |
(1,519 |
) |
Income tax expense (recovery) |
|
|
|
|
Current |
27 |
|
482 |
|
Deferred |
(233 |
) |
(1,397 |
) |
|
(206 |
) |
(915 |
) |
|
|
|
|
|
Net loss |
(1,058 |
) |
(604 |
) |
|
|
|
|
|
Certain items have been restated for the adoption
of the new standard, IFRIC 21 "Levies". |
|
|
|
Extendicare Inc. |
Consolidated Statements of Financial Position |
|
|
|
|
March 31 |
December 31 |
(in thousands of Canadian dollars, unless otherwise
noted) |
2014 |
2013 |
Assets |
|
|
Current assets |
|
|
|
Cash and short-term investments |
112,607 |
95,999 |
|
Restricted cash |
11,698 |
18,668 |
|
Accounts receivable, less allowance |
198,071 |
210,795 |
|
Income taxes recoverable |
6,100 |
9,395 |
|
Other current assets |
67,042 |
61,893 |
|
Total current assets |
395,518 |
396,750 |
Non-current assets |
|
|
|
Property and equipment, including construction-in-progress of
$5,503 and $6,514, respectively |
1,172,406 |
1,152,007 |
|
Goodwill and other intangible assets |
81,127 |
79,229 |
|
Other assets |
223,786 |
213,571 |
|
Deferred tax assets |
7,107 |
7,531 |
|
Total non-current assets |
1,484,426 |
1,452,338 |
Total Assets |
1,879,944 |
1,849,088 |
Liabilities and Equity |
|
|
Current liabilities |
|
|
|
Accounts payable |
35,770 |
31,031 |
|
Accrued liabilities |
217,096 |
215,521 |
|
Accrual for self-insured liabilities |
31,230 |
28,052 |
|
Current portion of long-term debt |
143,070 |
148,051 |
|
Income taxes payable |
6,617 |
10,111 |
|
Total current liabilities |
433,783 |
432,766 |
Non-current liabilities |
|
|
|
Provisions |
29,886 |
28,801 |
|
Accrual for self-insured liabilities |
87,179 |
87,257 |
|
Long-term debt |
1,037,102 |
1,016,785 |
|
Other long-term liabilities |
47,036 |
46,147 |
|
Deferred tax liabilities |
206,227 |
199,953 |
|
Total non-current liabilities |
1,407,430 |
1,378,943 |
Total liabilities |
1,841,213 |
1,811,709 |
Shareholders' equity |
38,731 |
37,379 |
Total Liabilities and Equity |
1,879,944 |
1,849,088 |
|
|
|
Closing U.S./Cdn. dollar exchange rate |
1.1055 |
1.0636 |
Certain items have been restated for the adoption
of the new standard, IFRIC 21 "Levies". |
|
|
|
|
Extendicare Inc. |
|
Consolidated Statements of Cash Flows |
|
|
|
|
|
|
(in thousands of Canadian dollars) |
Three months ended March 31 |
|
|
2014 |
|
2013 |
|
Operating Activities |
|
|
|
|
Net loss |
(1,058 |
) |
(604 |
) |
Adjustments for: |
|
|
|
|
|
Depreciation and amortization |
18,631 |
|
19,046 |
|
|
Provision for self-insured liabilities |
7,390 |
|
9,520 |
|
|
Payments for self-insured liabilities |
(9,106 |
) |
(7,822 |
) |
|
Deferred taxes |
(233 |
) |
(1,397 |
) |
|
Current taxes |
27 |
|
482 |
|
|
Loss from asset impairment, disposals and other items |
510 |
|
11 |
|
|
Net finance costs |
16,646 |
|
14,243 |
|
|
Interest capitalized |
- |
|
(580 |
) |
|
Other |
- |
|
(328 |
) |
|
32,807 |
|
32,571 |
|
Net change in operating assets and liabilities |
|
|
|
|
|
Accounts receivable |
20,692 |
|
68 |
|
|
Other current assets |
(1,836 |
) |
(1,109 |
) |
|
Accounts payable and accrued liabilities |
(851 |
) |
10,587 |
|
|
50,812 |
|
42,117 |
|
Interest paid |
(15,835 |
) |
(14,752 |
) |
Interest received |
1,314 |
|
1,190 |
|
Income taxes paid |
(254 |
) |
(4,554 |
) |
Net cash from operating activities |
36,037 |
|
24,001 |
|
Investing Activities |
|
|
|
|
Purchase of property, equipment and software |
(6,155 |
) |
(16,208 |
) |
Other assets |
3,136 |
|
(591 |
) |
Net cash from investing activities |
(3,019 |
) |
(16,799 |
) |
Financing Activities |
|
|
|
|
Issue of long-term debt, excluding line of credit |
- |
|
9,256 |
|
Repayment of long-term debt, excluding line of
credit |
(8,291 |
) |
(8,657 |
) |
Decrease in restricted cash |
6,970 |
|
6,242 |
|
Increase in investments held for self-insured
liabilities |
(7,692 |
) |
(486 |
) |
Dividends paid |
(8,841 |
) |
(14,701 |
) |
Financing costs |
(184 |
) |
(372 |
) |
Other |
- |
|
34 |
|
Net cash from financing activities |
(18,038 |
) |
(8,684 |
) |
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
14,980 |
|
(1,482 |
) |
Cash and cash equivalents at beginning of period |
95,999 |
|
71,398 |
|
Foreign exchange gain on cash held in foreign
currency |
1,628 |
|
705 |
|
Cash and cash equivalents at end of period |
112,607 |
|
70,621 |
|
Certain items have been restated for the adoption
of the new standard, IFRIC 21 "Levies". |
|
|
|
|
|
Extendicare Inc. |
|
Financial and Operating Statistics |
|
|
|
|
|
|
|
Three months ended |
|
(amounts in Canadian dollars, unless otherwise
noted) |
March 31 |
|
|
2014 |
|
2013 |
|
U.S. Skilled Nursing Center Statistics |
|
|
|
|
Percent of Revenue by Payor
Source (same-facility basis, excluding prior period settlement
adjustments) |
|
|
|
|
|
Medicare (Parts A and B) |
30.1 |
% |
32.2 |
% |
|
Managed Care |
11.8 |
|
10.9 |
|
|
Skilled mix |
41.9 |
|
43.1 |
|
|
Private/other |
9.0 |
|
8.9 |
|
|
Quality mix |
50.9 |
|
52.0 |
|
|
Medicaid |
49.1 |
|
48.0 |
|
|
|
100.0 |
|
100.0 |
|
|
Average Daily Census by Payor Source (same-facility basis) |
|
|
|
|
|
Medicare |
1,807 |
|
1,961 |
|
|
Managed Care |
823 |
|
778 |
|
|
Skilled mix |
2,630 |
|
2,739 |
|
|
Private/other |
1,159 |
|
1,148 |
|
|
Quality mix |
3,789 |
|
3,887 |
|
|
Medicaid |
7,575 |
|
7,654 |
|
|
|
11,364 |
|
11,541 |
|
|
Average Revenue per Resident Day by Payor Source (excluding prior
period settlement adjustments) (US$) |
|
|
|
|
|
Medicare Part A only |
$470.01 |
|
$476.08 |
|
|
Medicare (Parts A and B) |
520.48 |
|
516.86 |
|
|
Managed Care |
446.35 |
|
439.44 |
|
|
Private/other |
243.61 |
|
245.04 |
|
|
Medicaid |
200.88 |
|
195.39 |
|
|
Weighted average |
272.63 |
|
270.55 |
|
Average Occupancy (excluding managed centers)
(same-facility basis) |
|
|
|
|
U.S. skilled nursing centers |
84.9 |
% |
85.5 |
% |
U.S. assisted living centers |
75.1 |
|
79.0 |
|
Canadian centers |
97.5 |
|
97.5 |
|
|
|
|
|
|
Average U.S./Cdn. dollar exchange rate |
1.1033 |
|
1.0083 |
|
|
|
|
|
Extendicare Inc. |
|
Supplemental Information - FFO and AFFO |
|
|
|
|
|
|
The following table provides a reconciliation of
Adjusted EBITDA to Funds from Operations (FFO) and Adjusted Funds
from Operations (AFFO) for the periods ended March 31, 2014 and
2013.(1) |
|
|
|
|
|
|
|
Three months ended |
|
(in thousands of Canadian dollars unless otherwise
noted) |
March 31 |
|
|
2014 |
|
2013 |
|
Adjusted EBITDA from continuing operations |
42,734 |
|
39,143 |
|
Depreciation for furniture, fixtures, equipment and computers |
(5,558 |
) |
(5,597 |
) |
Accretion costs |
(962 |
) |
(828 |
) |
Interest expense, net |
(15,126 |
) |
(14,507 |
) |
|
21,088 |
|
18,211 |
|
Current income tax expense (recovery) (2) |
(3,255 |
) |
(3,394 |
) |
FFO |
17,833 |
|
14,817 |
|
Amortization of financing costs |
1,822 |
|
1,798 |
|
Principal portion of government capital funding payments |
1,008 |
|
730 |
|
Additional maintenance capital expenditures (3) |
808 |
|
878 |
|
AFFO |
21,471 |
|
18,223 |
|
Per Basic Share ($) |
|
|
|
|
FFO |
0.204 |
|
0.172 |
|
AFFO |
0.246 |
|
0.211 |
|
Per Diluted Share ($) |
|
|
|
|
FFO |
0.199 |
|
0.172 |
|
AFFO |
0.232 |
|
0.203 |
|
Distributions declared |
10,491 |
|
18,122 |
|
Distributions declared per share ($) |
0.1200 |
|
0.2100 |
|
Basic weighted average number of shares (thousands) |
87,386 |
|
86,221 |
|
Diluted weighted average number of shares (thousands) |
104,355 |
|
103,192 |
|
(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) 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. |
|
(3) Represents total facility maintenance capital
expenditures less depreciation for furniture, fixtures, equipment
and computers already deducted in determining FFO. |
|
|
|
|
|
|
|
Three months ended |
|
(in thousands of Canadian dollars unless otherwise
noted) |
March 31 |
|
|
2014 |
|
2013 |
|
Purchase of Property, Equipment and Software |
|
|
|
|
Growth expenditures |
$1,405 |
|
$12,069 |
|
Facility maintenance |
4,750 |
|
4,719 |
|
Deduct: capitalized interest |
- |
|
(580 |
) |
|
$6,155 |
|
$16,208 |
|
|
|
|
|
|
Segmented Adjusted Funds from Operations |
|
|
|
|
United States (US$) |
$12,628 |
|
$9,788 |
|
United States (C$) |
13,934 |
|
9,868 |
|
Canada |
7,537 |
|
8,355 |
|
|
$21,471 |
|
$18,223 |
|
|
|
|
|
Extendicare Inc. |
|
Non-GAAP Reconciliations |
|
|
|
|
|
|
|
Three months ended |
|
(in thousands of Canadian dollars unless otherwise
noted) |
March 31 |
|
|
2014 |
|
2013 |
|
|
|
|
|
|
Reconciliation of Cash Provided by Operating Activities
to AFFO: |
|
|
|
|
|
Net cash from operating activities |
36,037 |
|
24,001 |
|
|
Add (Deduct): |
|
|
|
|
|
Net change in operating assets and liabilities, including interest
and taxes |
(17,523 |
) |
(4,869 |
) |
|
Current income taxes on items excluded from AFFO(1) |
(3,228 |
) |
(2,912 |
) |
|
Net provisions and payments for self-insured liabilities |
1,716 |
|
(1,698 |
) |
|
Depreciation for furniture, fixtures, equipment and computers |
(5,558 |
) |
(5,597 |
) |
|
Principal portion of government capital funding payments |
1,008 |
|
730 |
|
|
Additional maintenance capital expenditures |
808 |
|
878 |
|
|
Property taxes accounted for under IFRIC 21 |
8,211 |
|
7,362 |
|
|
Other |
- |
|
328 |
|
|
AFFO(2) |
21,471 |
|
18,223 |
|
|
|
|
|
|
Reconciliation of Earnings (Loss) before Income Taxes
to Adjusted EBITDA: |
|
|
|
|
|
Loss before income taxes |
(1,264 |
) |
(1,519 |
) |
|
Add (Deduct): |
|
|
|
|
|
Property taxes accounted for under IFRIC 21 |
8,211 |
|
7,362 |
|
|
Depreciation and amortization |
18,631 |
|
19,046 |
|
|
Net finance costs |
16,646 |
|
14,243 |
|
|
Loss from asset impairment, disposals and other items |
510 |
|
11 |
|
|
Adjusted EBITDA(2) |
42,734 |
|
39,143 |
|
|
|
|
|
|
Reconciliation of Net Loss to Loss before Separately
Reported Items: |
|
|
|
|
|
Net loss |
(1,058 |
) |
(604 |
) |
|
Add (deduct): |
|
|
|
|
|
Fair value adjustment on convertible debentures, net of tax |
558 |
|
(1,610 |
) |
|
Loss on foreign exchange and financial instruments, net of tax |
- |
|
518 |
|
|
Loss from asset impairment, disposals and other items, net of
tax |
419 |
|
8 |
|
|
Loss before separately reported items(2) |
(81 |
) |
(1,688 |
) |
(1)Represents current income tax with respect
to the property taxes accounted for under IFRIC 21, gains or losses
from derivative financial instruments, foreign exchange, asset
impairment, disposal and other items that are excluded from the
computation of AFFO. |
|
(2)Refer to discussion of non-GAAP
measures. |
|
Extendicare Inc.Dylan MannSenior Vice President and Chief
Financial Officer(414) 908-8623(905)
470-4003dmann@extendicare.comVisit Extendicare's Website at
www.extendicare.com
Extendicare (TSX:EXE)
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Extendicare (TSX:EXE)
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