Extendicare Announces 2013 Fourth Quarter and Year-end Results
MARKHAM, ONTARIO--(Marketwired - Feb 26, 2014) - Extendicare
Inc. ("Extendicare" or the "Company") (TSX:EXE) today reported
results for the fourth quarter and year ended December 31, 2013.
Results are presented in Canadian dollars unless otherwise
noted.
HIGHLIGHTS (variances exclude effect of foreign exchange)
Q4 Financial Results
- Revenue of $519.3 million in Q4 2013 included a $6.7 million
increase in same-facility operations over Q4 2012.
- In the United States, our average daily Medicare Part A rate in
Q4 2013 decreased by 0.3% over Q4 2012, and by 0.5% over Q3 2013.
Average daily Managed Care rate in Q4 2013 increased by 1.3% over
Q4 2013 and declined by 0.8% over Q3 2013.
- In Canada, the average daily revenue rate for our senior care
centers increased by 5.6% to $201.82 from $191.15 in Q4 2012, and
home health care volumes improved by 8.1%.
- Adjusted EBITDA of $32.1 million in Q4 2013, declined by $21.8
million over Q4 2012, and by $11.2 million over Q3 2013.
- Adjusted EBITDA included an increase in the provision for
self-insured liabilities of $14.3 million over Q4 2012 and $6.3
million over Q3 2013.
- Adjusted EBITDA margin of 6.2% in Q4 2013, down from 10.7% in
Q4 2012 and from 8.5% in Q3 2013.
- AFFO was $10.4 million ($0.119 per basic share) in Q4 2013
compared to $26.8 million ($0.312 per basic share) in Q4 2012 and
$20.4 million ($0.235 per basic share) in Q3 2013.
2013 Financial Results
- Revenue of $2,024.4 million included a $19.6 million increase
in same-facility operations over 2012.
- In the United States, our average daily revenue rates for
Medicare Part A and Managed Care in 2013 increased by 1.9% and
2.5%, respectively, over 2012.
- In Canada, the average daily revenue rate for our senior care
centers increased by 3.8% to $194.33 from $187.24 in 2012, and home
health care volumes improved by 5.2%.
- Adjusted EBITDA of $155.7 million in 2013 declined by $30.0
million, due to an increase in provision for self-insured
liabilities and lower U.S. census levels.
- EBITDA margin of 7.7% in 2013 compared to 9.0% in 2012.
- AFFO was $71.1 million ($0.820 per basic share) in 2013
compared to $84.6 million ($0.994 per basic share) in 2012.
- Distributions in 2013 totalled $52.0 million, representing
approximately 73% of AFFO for the same period. Since May 2013, the
Company has been paying a monthly dividend of $0.04 per share, or
$0.48 per share per annum.
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 a 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. With
the assistance of CitiGroup Global Markets Inc., as a financial
advisor, the Company has studied various alternatives extensively
and analyzed relevant considerations, including valuation,
taxation, curtailment of future liability costs, and strategic
implications of each option.
Extendicare confirms that the Strategic Committee continues its
work on this initiative and that the Company is currently
negotiating with one party towards a transaction that may involve
the lease and/or sale of some or all of our U.S. assets or
business. There is no certainty that a transaction will be
completed in the near term, if at all. Material details will be
disclosed to the public when available.
PROVISION FOR SELF-INSURED LIABILITIES
The results of our independent actuarial review completed at
year end necessitated the continued strengthening of our reserves
this quarter. For 2013, we recorded a provision for self-insured
liabilities of US$52.9 million (US$9.4 million, US$9.2 million,
US$14.0 million and US$20.3 million in each quarter, respectively).
Approximately US$22.2 million of the US$52.9 million provision
recorded in 2013 related to our former Kentucky operations, as we
continue to process the settlement of those claims. Of the balance
of the provision of US$30.7 million, approximately US$5.7 million
related to the strengthening of prior years' reserves in other
states, and US$25.0 million related to potential claims for the
current 2013 period.
MEDICARE UPDATES
At the end of 2013, Medicare's SGR (sustainable growth rate) was
extended through March 31, 2014, to prevent schedule cuts to
physician reimbursement and out-patient therapy rates, known in the
industry as the "Doc Fix". The U.S. Congress is currently weighing
alternatives beyond March, and is expected to implement either a
nine-month fix or a more permanent solution to this annual
discussion.
On February 11, 2014, the U.S. Congress passed legislation
raising the debt ceiling limit allowing the U.S. government to
continue to pay its bills, with no further increases needed, until
March of 2015.
2013 FOURTH QUARTER FINANCIAL REVIEW
|
TABLE 1 |
Q4 |
|
Q4 |
|
Q3 |
|
|
(millions of dollars unless otherwise noted) |
2013 |
|
2012 |
|
2013 |
|
|
Revenue |
|
|
|
|
|
|
|
U.S. operations (US$) |
307.2 |
|
313.6 |
|
309.0 |
|
| U.S.
operations (C$) |
322.3 |
|
310.8 |
|
321.0 |
|
|
Canadian operations |
197.0 |
|
186.2 |
|
187.6 |
|
|
Total Revenue |
519.3 |
|
497.0 |
|
508.6 |
|
|
Adjusted EBITDA (1) |
|
|
|
|
|
|
|
U.S. operations (US$) |
12.0 |
|
33.9 |
|
22.6 |
|
| U.S.
operations (C$) |
12.7 |
|
33.7 |
|
23.6 |
|
|
Canadian operations |
19.4 |
|
19.2 |
|
19.4 |
|
|
Total Adjusted EBITDA |
32.1 |
|
52.9 |
|
43.0 |
|
|
Adjusted EBITDA margin |
6.2 |
% |
10.7 |
% |
8.5 |
% |
|
Average U.S./Canadian dollar exchange rate |
1.0489 |
|
0.9916 |
|
1.0385 |
|
| (1) Refer to discussion of non-GAAP measures. |
2013 Fourth Quarter Comparison to 2012 Fourth Quarter
Consolidated revenue from continuing operations improved by $4.6
million this quarter, excluding a $17.7 million positive effect of
a weaker Canadian dollar. The impact of: leasing out our Kentucky
centers in the latter half of 2012; 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 $2.1 million between
periods. Revenue from our remaining operations (referred to as
"same-facility operations") improved by $6.7 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$6.4 million to
US$307.2 million in the 2013 fourth quarter compared to US$313.6
million in the 2012 fourth quarter. Non same-facility operations
generated revenue of US$18.1 million this quarter compared to
US$19.8 million in the 2012 fourth quarter, for a net decline of
US$1.7 million. Revenue from same-facility operations declined by
US$4.7 million between periods, primarily due to the impact of
lower census levels of US$7.4 million and a decrease in prior
period revenue of US$3.0 million (a charge of US$0.7 million this
quarter compared to a receipt of US$2.3 million in the 2012 fourth
quarter), partially offset by a net increase in average rates of
US$5.6 million and higher other revenue of US$0.1 million.
Revenue from Canadian operations grew by $10.8 million to $197.0
million in the 2013 fourth quarter from $186.2 million in the 2012
fourth 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 $9.4 million this quarter compared to $10.1 million in the 2012
fourth quarter, for a net decrease of $0.7 million. Revenue from
same-facility operations improved by $11.5 million between periods,
primarily due to funding enhancements, the timing of recognition of
revenue under the Ontario envelope system, a favourable prior
period revenue settlement adjustment of $1.2 million, and higher
volumes from our Ontario home health care operations of 8.1%.
Consolidated Adjusted EBITDA from continuing operations was
$32.1 million this quarter compared to $52.9 million in the 2012
fourth quarter, representing 6.2% and 10.7% of revenue,
respectively. Excluding a $1.0 million positive effect of a weaker
Canadian dollar, Adjusted EBITDA declined by $21.8 million, of
which $21.7 million was from same-facility operations. The U.S.
operations contributed $22.2 million, or US$22.2 million, to this
decline and was partially offset by a $0.5 million improvement from
the Canadian operations.
Adjusted EBITDA from U.S. operations declined by US$21.9 million
to US$12.0 million this quarter from US$33.9 million in the 2012
fourth quarter, representing 3.9% and 10.8% of revenue,
respectively. Adjusted EBITDA from non same-facility operations
increased by US$0.2 million (US$2.7 million contribution this
quarter compared to US$2.5 million in the same 2012 period).
Adjusted EBITDA from same-facility operations decreased by US$22.1
million as a result of higher costs of US$17.4 million and lower
revenue of US$4.7 million. Operating, administrative and lease
costs from same-facility operations increased by US$17.4 million,
primarily due to a US$14.3 million increase in the provision for
self-insured liabilities, a US$4.8 million increase in labour costs
primarily due to a change in vacation policy that favourably
impacted the 2012 fourth quarter, and other cost increases of
US$0.3 million, partially offset by a refund of prior period
charges of US$2.0 million recorded in the 2013 fourth quarter.
Adjusted EBITDA from Canadian operations was $19.4 million this
quarter compared to $19.2 million in the 2012 fourth quarter,
representing 9.9% and 10.3% of revenue, respectively. Adjusted
EBITDA from non same-facility operations declined by $0.3 million
($0.8 million contribution this quarter compared to $1.1 million in
the same 2012 period). Adjusted EBITDA from same-facility
operations improved by $0.5 million as a result of revenue
improvements of $11.5 million, partially offset by cost increases
of $11.0 million.
2013 Fourth Quarter Comparison to 2013 Third Quarter
In comparison to the 2013 third quarter, consolidated revenue
from continuing operations this quarter improved by $7.5 million,
excluding a $3.2 million positive effect of a weaker Canadian
dollar. Revenue from the Canadian operations increased by $9.4
million due to timing of recognition under the Ontario nursing
center envelope system and increased home health care volumes.
Revenue from the U.S. operations declined primarily due to lower
prior period settlement adjustments.
Consolidated Adjusted EBITDA from continuing operations was
$32.1 million this quarter compared to $43.0 million in the 2013
third quarter, representing 6.2% and 8.5% of revenue, respectively.
Excluding a $0.3 million positive effect of a weaker Canadian
dollar, Adjusted EBITDA declined by $11.2 million between
periods.
Adjusted EBITDA from U.S. operations declined by US$10.6 million
to US$12.0 million this quarter from US$22.6 million in the 2013
third quarter, and represented 3.9% and 7.3% of revenue,
respectively. Same-facility operations contributed US$9.9 million
to the decline resulting from cost increases of US$9.4 million and
lower revenue of US$0.5 million between quarters. Revenue was
impacted by a decrease in prior period settlement adjustments of
US$3.1 million, partially offset by improvements in overall census
and average rates. Operating, administrative and lease costs
increased by US$9.4 million between quarters, which included a
higher provision for self-insured liabilities of US$6.3 million and
increased labour-related costs of US$3.8 million.
Adjusted EBITDA from Canadian operations was unchanged at $19.4
million this quarter compared to the 2013 third quarter,
representing 9.9% and 10.3% of revenue, respectively. Revenue
improvements of $9.4 million were offset by cost increases,
primarily due to the timing of spending under the Ontario nursing
center envelope system, a seasonal increase in utility costs, and
higher administrative costs between quarters.
2013 FINANCIAL REVIEW
|
TABLE 2 |
Year ended December 31 |
|
|
(millions of dollars unless otherwise noted) |
2013 |
|
2012 |
|
|
Revenue |
|
|
|
|
|
U.S. operations (US$) |
1,234.6 |
|
1,309.0 |
|
| U.S.
operations (C$) |
1,271.5 |
|
1,308.5 |
|
|
Canadian operations |
752.9 |
|
728.9 |
|
|
Total Revenue |
2,024.4 |
|
2,037.4 |
|
|
Adjusted EBITDA (1) |
|
|
|
|
|
U.S. operations (US$) |
81.4 |
|
111.1 |
|
| U.S.
operations (C$) |
83.8 |
|
111.0 |
|
|
Canadian operations |
71.9 |
|
72.2 |
|
|
Total Adjusted EBITDA |
155.7 |
|
183.2 |
|
|
Adjusted EBITDA margin |
7.7 |
% |
9.0 |
% |
|
Average U.S./Canadian dollar exchange rate |
1.0299 |
|
0.9996 |
|
| (1) Refer to discussion of non-GAAP measures. |
|
Consolidated revenue from continuing operations for the year
ended December 31, 2013, declined by $50.4 million, excluding a
$37.4 million positive effect of the weaker Canadian dollar. Non
same-facility operations contributed $70.0 million to the decline
in revenue between periods, largely due to the ceasing of
operations in Kentucky. Revenue from same-facility operations grew
by $19.6 million, with an improvement from the Canadian operations
of $25.1 million partially offset by lower revenue from the U.S.
operations primarily due to lower census levels.
Consolidated Adjusted EBITDA from continuing operations declined
by $30.0 million, excluding a $2.5 million positive effect of the
weaker Canadian dollar, and was 7.7% and 9.0% of revenue,
respectively. Non same-facility operations contributed $5.3 million
to the decline between periods. Adjusted EBITDA from same-facility
operations decreased by $24.7 million, as a result of a $26.1
million decline from the U.S. operations, partially offset by a
$1.4 million improvement from the Canadian operations, as discussed
below.
Adjusted EBITDA from U.S. operations declined by US$29.7 million
to US$81.4 million in 2013 from US$111.1 million in 2012,
representing 6.6% and 8.5% of revenue, respectively. Adjusted
EBITDA from non same-facility operations declined by US$3.7 million
between years (US$13.1 million in 2013 compared to US$16.8 million
in 2012). Adjusted EBITDA from same-facility operations declined by
US$26.0 million as a result of lower revenue of US$5.4 million and
higher costs of US$20.6 million. The decline in revenue was due to
lower census of US$29.5 million, a decrease in prior period revenue
settlement adjustments of US$3.0 million, one less day this year of
US$2.8 million, and other items of US$6.0 million, partially offset
by higher average funding rates of US$35.9 million. Costs from
same-facility operations increased by US$20.6 million, primarily
due to an increase in the provision for self-insured liabilities of
US$18.4 million, a premium refund of US$3.5 million received in the
2012 first quarter, and other net cost increases of US$1.8 million,
partially offset by a refund of prior period charges of US$2.0
million, and lower labour-related costs of US$1.1 million, which
included favourable workers' compensation adjustments of US$2.7
million.
Adjusted EBITDA from Canadian operations was $71.9 million in
2013 compared to $72.2 million in 2012, representing 9.6% and 9.9%
of revenue, respectively. Non same-facility operations contributed
Adjusted EBITDA of $2.7 million this period compared to $4.4
million in 2012, for a net decline of $1.7 million between years,
of which $0.9 million was from the discontinuance of home health
care in Alberta and the balance related to the new centers in
northern Ontario. Improvements from same-facility operations of
$1.4 million resulted from higher revenue of $25.1 million,
partially offset by higher costs of $23.7 million. Revenue
improvements resulted from enhanced funding and a 5.2% increase in
Ontario home health care volumes, while cost increases included
higher labour-related costs of $18.6 million.
ADJUSTED FUNDS FROM OPERATIONS (AFFO)
AFFO was $10.4 million ($0.119 per basic share) in the 2013
fourth quarter compared to $26.8 million ($0.312 per basic share)
in the 2012 fourth quarter, representing a decrease of $16.8
million, excluding a $0.4 million positive effect of a weaker
Canadian dollar. This decline was primarily due to a decrease in
Adjusted EBITDA of $21.8 million, partially offset by the timing of
facility maintenance capital expenditures, which were lower by $3.0
million, reduced net interest costs and lower current income taxes.
Net interest costs were lower by $1.0 million as a result of our
debt refinancing. Current income taxes for the 2013 fourth quarter
were a recovery of $3.3 million compared to a recovery of $2.4
million in the 2012 fourth quarter. The 2013 and 2012 fourth
quarters were favourably impacted by book-to-file tax adjustments
of approximately $3.6 million and $4.0 million, respectively,
primarily related to our U.S. operations. Excluding these
book-to-file adjustments, current income taxes represented 2.3% and
5.2% of pre-tax funds from operations (FFO), respectively.
In comparison to AFFO in the 2013 third quarter of $20.4 million
($0.235 per basic share), AFFO this quarter decreased by $10.2
million, excluding a $0.2 million positive effect of a weaker
Canadian dollar. This decline was primarily due to a decrease in
Adjusted EBITDA of $11.2 million and increased facility maintenance
capital spending of $6.7 million, partially offset by lower current
income taxes due to the favourable book-to-file adjustments in the
2013 fourth quarter.
For the year ended December 31, 2013, AFFO was $71.1 million
($0.820 per basic share), compared to $84.6 million ($0.994 per
basic share) in 2012, representing a decrease of $14.5 million,
excluding a $1.0 million positive effect of a weaker Canadian
dollar. This decline was primarily due to a $30.0 million decrease
in Adjusted EBITDA, partially offset by the timing of facility
maintenance capital expenditures, which were lower by $8.1 million,
lower net interest costs of $4.5 million due to our debt
refinancing, and lower current income taxes. Current income taxes
were $4.7 million in 2013 compared to $7.0 million in 2012,
representing 6.6% and 7.3% of pre-tax FFO, respectively. Both years
were favourably impacted by book-to-file tax adjustments of
approximately $4.0 million in 2013 and $5.2 million in 2012. In
addition, the 2012 first quarter results included a non-taxable
premium refund of $3.5 million. Excluding these items, current
income taxes represented 12.3% of pre-tax FFO in 2013 compared to
10.8% in 2012.
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, along with the
elimination of the income trust structure in July 2012, enhanced
our ability to utilize available non-capital loss carryforwards,
which reduced our Canadian current income taxes in the last half of
2012 and during 2013. Our Canadian non-capital loss carryforwards
were substantially utilized by the end of 2013. 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 $12.2 million in
the 2013 fourth quarter, compared to $14.9 million in the 2012
fourth quarter and $5.5 million in the 2013 third quarter,
representing 2.4%, 3.0% and 1.1% of revenue, respectively. Facility
maintenance capital expenditures totalled $28.2 million in 2013
compared to $35.7 million in 2012, representing 1.4% and 1.8% 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.
Distributions declared in 2013 totalled $52.0 million, or $0.60
per share, representing approximately 73% of AFFO of $71.1 million,
or $0.820 per basic share, compared to approximately 85% in 2012.
Since May 2013, the Company has been paying a monthly dividend of
$0.04 per share, or $0.48 per share per annum.
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
2013 fourth quarter, our average daily Medicare Part A rate,
excluding prior period settlement adjustments, was US$468.78,
representing a decrease of 0.3% from US$470.21 in the 2012 fourth
quarter, primarily due to the impact of sequestration partially
offset by the market basket increase. In comparison to our average
daily Medicare Part A rate of US$471.20 in the 2013 third quarter,
our rate this quarter declined by 0.5%, primarily due to the
reduction in reimbursement for bad debts and a change in acuity
mix, partially offset by the net market basket increase. For 2013
compared to 2012, our average daily Medicare Part A rate increased
by 1.9% to US$470.21, primarily due to changes in acuity mix, with
the impact of the market basket increases being substantially
offset by sequestration and reductions in reimbursement for bad
debts.
For the 2013 fourth quarter, our average daily Managed Care
rate, excluding prior period settlement adjustments, was US$445.03,
representing an increase of 1.3% from US$439.41 in the 2012 fourth
quarter and a 0.8% decline from US$448.82 in the 2013 third
quarter, primarily due to changes in acuity mix. For 2013, our
average daily Managed Care rate increased by 2.5% to US$443.27.
Our average daily Medicaid rate, excluding prior period
settlement adjustments, increased this quarter by 3.5% to US$200.80
from US$194.03 in the 2012 fourth quarter, and by 0.5% from
US$199.76 in the 2013 third quarter. For 2013 compared to 2012, our
average daily Medicaid rate increased by 5.4% to US$199.07.
However, revenue from Medicaid rate increases was partially offset
by higher state provider taxes, resulting in a net increase of 5.0%
this year over 2012. In addition, 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 year over 2012 was
3.2%.
Total and Skilled Census
Our same-facility ADC of 11,192 in the 2013 fourth quarter was
324 below the 2012 fourth quarter level of 11,516 due to lower
Medicaid ADC of 255, lower Skilled Mix ADC of 52, and lower
private/other ADC of 17. In comparison to the 2013 third quarter,
our same-facility ADC improved by 28 due to higher Skilled Mix ADC
of 23 and higher private/other ADC of 22, partially offset by lower
Medicaid ADC of 17. For 2013, our same-facility skilled nursing
center ADC declined by 2.7%, or 317 ADC to 11,288 from 11,605 in
2012 due to lower Skilled Mix ADC of 72 and lower Medicaid ADC of
248, partially offset by higher private/other ADC of three. Our
average same-facility occupancy was 83.4% this quarter compared to
85.1% in the 2012 fourth quarter, and 82.8% in the 2013 third
quarter. For 2013, our average occupancy from same-facility skilled
nursing center operations was 83.8% compared to 85.5% in 2012.
Our same-facility Skilled Mix ADC of 21.7% of our residents in
the 2013 fourth quarter improved over 21.6% in each of the 2012
fourth and 2013 third quarters.
CONFERENCE CALL AND WEBCAST
On February 27, 2014, at 10:00 a.m. (ET), we will hold a
conference call to discuss our 2013 fourth quarter and year-end
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 7894126#. A
replay of the call will be available until midnight on March 14,
2014. To access the rebroadcast, dial 1-800-408-3053 or
905-694-9451, followed by the passcode 1390940#. 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 35,300 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 249 senior care centers in North America have
capacity to care for approximately 27,700 residents.
Non-GAAP Measures
Extendicare assesses
and measures operating results and financial position based on
performance measures referred to as "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 and/or from net cash from operations, where
applicable, are provided in this press release on the face of the
Consolidated Statements of Earnings and on the Supplemental
Information 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.
Visit Extendicare's Website at www.extendicare.com
| Extendicare Inc. |
|
| Consolidated Statements of Earnings |
|
|
|
|
|
|
|
|
|
|
| (in thousands of Canadian dollars) |
Three months ended December 31 |
|
Twelve months ended December 31 |
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
| Revenue |
|
|
|
|
|
|
|
|
| Nursing and assisted living centers |
|
|
|
|
|
|
|
|
|
United States |
307,922 |
|
296,208 |
|
1,216,569 |
|
1,259,858 |
|
|
Canada |
149,677 |
|
140,681 |
|
568,870 |
|
550,302 |
|
| Home health − Canada |
44,717 |
|
43,692 |
|
174,087 |
|
170,343 |
|
| Health technology services − United States |
5,494 |
|
7,041 |
|
22,348 |
|
25,453 |
|
| Outpatient therapy − United States |
3,290 |
|
2,775 |
|
13,360 |
|
13,229 |
|
| Rent, management, consulting and other services |
8,274 |
|
6,637 |
|
29,231 |
|
18,228 |
|
| Total revenue |
519,374 |
|
497,034 |
|
2,024,465 |
|
2,037,413 |
|
| Operating expenses |
468,855 |
|
426,921 |
|
1,793,368 |
|
1,780,019 |
|
| Administrative costs |
15,443 |
|
14,465 |
|
64,258 |
|
63,155 |
|
| Lease costs |
2,923 |
|
2,710 |
|
11,096 |
|
10,986 |
|
| Total expenses |
487,221 |
|
444,096 |
|
1,868,722 |
|
1,854,160 |
|
| Adjusted EBITDA(1) |
32,153 |
|
52,938 |
|
155,743 |
|
183,253 |
|
| Depreciation and amortization |
19,949 |
|
18,990 |
|
77,929 |
|
76,805 |
|
| Loss (gain) from asset impairment, disposals and other
items |
8,335 |
|
(367 |
) |
9,641 |
|
7,930 |
|
| Earnings before net finance costs and income taxes |
3,869 |
|
34,315 |
|
68,173 |
|
98,518 |
|
| Finance costs |
|
|
|
|
|
|
|
|
|
Interest expense |
15,954 |
|
16,538 |
|
63,416 |
|
65,306 |
|
|
Interest income |
(1,369 |
) |
(1,221 |
) |
(4,638 |
) |
(3,565 |
) |
|
Accretion costs |
863 |
|
695 |
|
3,380 |
|
2,302 |
|
|
Fair value adjustments |
(103 |
) |
2,313 |
|
(3,099 |
) |
(4,823 |
) |
|
Loss on foreign exchange and financial instruments |
1 |
|
- |
|
519 |
|
1,103 |
|
| Net finance costs |
15,346 |
|
18,325 |
|
59,578 |
|
60,323 |
|
| Earnings (loss) before income taxes |
(11,477 |
) |
15,990 |
|
8,595 |
|
38,195 |
|
| Income tax expense (recovery) |
|
|
|
|
|
|
|
|
| Current |
(3,330 |
) |
(2,400 |
) |
4,547 |
|
5,178 |
|
| Deferred |
(349 |
) |
3,836 |
|
(1,204 |
) |
5,394 |
|
|
(3,679 |
) |
1,436 |
|
3,343 |
|
10,572 |
|
| Earnings (loss) from continuing operations |
(7,798 |
) |
14,554 |
|
5,252 |
|
27,623 |
|
| Discontinued operations |
- |
|
72 |
|
- |
|
35,033 |
|
| Net earnings (loss) |
(7,798 |
) |
14,626 |
|
5,252 |
|
62,656 |
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) from continuing operations |
(7,798 |
) |
14,554 |
|
5,252 |
|
27,623 |
|
| Add (deduct): |
|
|
|
|
|
|
|
|
| Fair value adjustment on convertible debentures, net of
tax |
(103 |
) |
2,313 |
|
(3,099 |
) |
(4,823 |
) |
| Loss on foreign exchange and financial instruments, net
of tax |
1 |
|
- |
|
519 |
|
1,103 |
|
| Loss (gain) from asset impairment, disposals and other
items, net of tax |
6,007 |
|
(367 |
) |
7,662 |
|
5,629 |
|
| Earnings (loss) from continuing operations before
separately reported items |
(1,893 |
) |
16,500 |
|
10,334 |
|
29,532 |
|
| (1)Refer to discussion of non-GAAP
measures. |
|
|
|
|
|
| Extendicare Inc. |
| Consolidated Statements of Financial Position |
|
|
|
| (in thousands of Canadian dollars, unless otherwise
noted) |
December 31 2013 |
December 31 2012 |
| Assets |
|
|
| Current assets |
|
|
|
Cash
and short-term investments |
95,999 |
71,398 |
|
Restricted cash |
18,668 |
28,680 |
|
Accounts receivable, less allowance |
210,795 |
209,518 |
|
Income taxes recoverable |
9,395 |
4,149 |
|
Other current assets |
61,893 |
31,408 |
| Total current assets |
396,750 |
345,153 |
| Non-current assets |
|
|
|
Property and equipment, including construction-in-progress
of $6,514 and $62,688, respectively |
1,152,007 |
1,181,596 |
|
Goodwill and other intangible assets |
79,229 |
82,793 |
|
Other
assets |
213,571 |
176,457 |
|
Deferred tax assets |
7,531 |
21,917 |
|
Total non-current assets |
1,452,338 |
1,462,763 |
| Total Assets |
1,849,088 |
1,807,916 |
| Liabilities and Equity |
|
|
| Current liabilities |
|
|
|
Accounts payable |
31,030 |
35,508 |
|
Accrued liabilities |
214,715 |
202,913 |
|
Accrual for self-insured liabilities |
28,052 |
21,888 |
|
Current portion of long-term debt |
148,051 |
93,448 |
|
Income taxes payable |
10,430 |
9,377 |
|
Total current liabilities |
432,278 |
363,134 |
| Non-current liabilities |
|
|
|
Provisions |
28,801 |
26,851 |
|
Accrual for self-insured liabilities |
87,257 |
74,042 |
|
Long-term debt |
1,016,785 |
1,038,787 |
|
Other
long-term liabilities |
46,147 |
48,025 |
|
Deferred tax liabilities |
199,954 |
202,417 |
|
Total non-current liabilities |
1,378,944 |
1,390,122 |
| Total liabilities |
1,811,222 |
1,753,256 |
| Shareholders' equity |
37,866 |
54,660 |
| Total Liabilities and Equity |
1,849,088 |
1,807,916 |
|
|
|
| Closing U.S./Cdn. dollar exchange rate |
1.0636 |
0.9949 |
|
|
| Extendicare Inc. |
|
| Consolidated Statements of Cash Flows |
|
|
|
|
|
|
|
|
|
|
| (in thousands of Canadian dollars) |
Three months ended December 31 |
|
Twelve months ended December 31 |
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
| Operating Activities |
|
|
|
|
|
|
|
|
| Net earnings (loss) |
(7,798 |
) |
14,626 |
|
5,252 |
|
62,656 |
|
| Adjustments for: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
19,949 |
|
18,991 |
|
77,929 |
|
76,805 |
|
|
Provision for self-insured liabilities |
21,130 |
|
5,960 |
|
54,482 |
|
40,807 |
|
|
Payments for self-insured liabilities |
(5,607 |
) |
(6,770 |
) |
(42,720 |
) |
(23,933 |
) |
|
Deferred taxes |
(349 |
) |
3,660 |
|
(1,204 |
) |
5,263 |
|
|
Current taxes |
(3,330 |
) |
(2,296 |
) |
4,547 |
|
26,729 |
|
|
Loss (gain) from asset impairment, disposals and other items |
8,335 |
|
(367 |
) |
9,641 |
|
7,930 |
|
|
Gain from asset disposals from discontinued operations |
- |
|
- |
|
- |
|
(56,453 |
) |
|
Net finance costs |
15,346 |
|
18,325 |
|
59,578 |
|
60,323 |
|
|
Interest capitalized |
(59 |
) |
(526 |
) |
(1,232 |
) |
(873 |
) |
|
Other |
(2 |
) |
(610 |
) |
(335 |
) |
(406 |
) |
|
47,615 |
|
50,993 |
|
165,938 |
|
198,848 |
|
| Net change in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Accounts receivable |
(21,932 |
) |
3,665 |
|
6,246 |
|
21,111 |
|
|
Other current assets |
2,905 |
|
379 |
|
4,541 |
|
759 |
|
|
Accounts payable and accrued liabilities |
8,465 |
|
3,451 |
|
(15,882 |
) |
(31,701 |
) |
|
37,053 |
|
58,488 |
|
160,843 |
|
189,017 |
|
| Interest paid |
(14,831 |
) |
(16,999 |
) |
(59,585 |
) |
(60,276 |
) |
| Interest received |
1,387 |
|
1,209 |
|
4,657 |
|
3,509 |
|
| Income taxes paid |
815 |
|
(1,374 |
) |
(7,999 |
) |
(23,463 |
) |
| Net cash from operating activities |
24,424 |
|
41,324 |
|
97,916 |
|
108,787 |
|
| Investing Activities |
|
|
|
|
|
|
|
|
| Purchase of property, equipment and software |
(12,793 |
) |
(33,723 |
) |
(55,753 |
) |
(84,103 |
) |
| Net proceeds from dispositions |
2,507 |
|
- |
|
3,671 |
|
56,323 |
|
| Other assets |
1,787 |
|
446 |
|
1,646 |
|
(5,363 |
) |
| Net cash from investing activities |
(8,499 |
) |
(33,277 |
) |
(50,436 |
) |
(33,143 |
) |
| Financing Activities |
|
|
|
|
|
|
|
|
| Issue of long-term debt, excluding line of credit |
8,229 |
|
36,812 |
|
95,703 |
|
329,720 |
|
| Repayment of long-term debt, excluding line of
credit |
(11,697 |
) |
(114,749 |
) |
(84,101 |
) |
(254,468 |
) |
| Issue on line of credit |
- |
|
4,839 |
|
- |
|
63,964 |
|
| Repayment on line of credit |
(1,061 |
) |
(3,014 |
) |
(6,179 |
) |
(108,846 |
) |
| Decrease (increase) in restricted cash |
(7,064 |
) |
(4,584 |
) |
9,799 |
|
(11,832 |
) |
| Decrease (increase) in investments held for
self-insured liabilities |
(4,599 |
) |
(12,279 |
) |
6,908 |
|
(31,603 |
) |
| Dividends/distributions paid |
(8,881 |
) |
(14,425 |
) |
(45,534 |
) |
(56,980 |
) |
| Financing costs |
(116 |
) |
(1,204 |
) |
(2,065 |
) |
(13,101 |
) |
| Other |
(35 |
) |
2 |
|
5 |
|
(4 |
) |
| Net cash from financing activities |
(25,224 |
) |
(108,602 |
) |
(25,464 |
) |
(83,150 |
) |
|
|
|
|
|
|
|
|
|
| Increase (decrease) in cash and cash equivalents |
(9,299 |
) |
(100,555 |
) |
22,016 |
|
(7,506 |
) |
| Cash and cash equivalents at beginning of period |
104,132 |
|
171,439 |
|
71,398 |
|
80,018 |
|
| Foreign exchange gain (loss) on cash held in foreign
currency |
1,166 |
|
514 |
|
2,585 |
|
(1,114 |
) |
| Cash and cash equivalents at end of period |
95,999 |
|
71,398 |
|
95,999 |
|
71,398 |
|
|
|
| Extendicare Inc. |
|
| Financial and Operating Statistics |
|
|
|
|
|
|
|
|
|
|
| (amounts in Canadian dollars, unless otherwise
noted) |
Three months ended December 31 |
|
Twelve months ended December 31 |
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
| 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) |
|
28.6 |
% |
|
29.9 |
% |
|
29.9 |
% |
|
31.3 |
% |
|
Managed Care |
|
10.9 |
|
|
10.3 |
|
|
10.8 |
|
|
10.5 |
|
|
Skilled mix |
|
39.5 |
|
|
40.2 |
|
|
40.7 |
|
|
41.8 |
|
|
Private/other |
|
10.0 |
|
|
9.6 |
|
|
9.5 |
|
|
9.2 |
|
|
Quality mix |
|
49.5 |
|
|
49.8 |
|
|
50.2 |
|
|
51.0 |
|
|
Medicaid |
|
50.5 |
|
|
50.2 |
|
|
49.8 |
|
|
49.0 |
|
|
|
100.0 |
|
|
100.0 |
|
|
100.0 |
|
|
100.0 |
|
|
Average Daily Census by Payor Source (same-facility basis) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
1,696 |
|
|
1,778 |
|
|
1,785 |
|
|
1,867 |
|
|
Managed Care |
|
735 |
|
|
705 |
|
|
743 |
|
|
733 |
|
|
Skilled mix |
|
2,431 |
|
|
2,483 |
|
|
2,528 |
|
|
2,600 |
|
|
Private/other |
|
1,218 |
|
|
1,235 |
|
|
1,189 |
|
|
1,186 |
|
|
Quality mix |
|
3,649 |
|
|
3,718 |
|
|
3,717 |
|
|
3,786 |
|
|
Medicaid |
|
7,543 |
|
|
7,798 |
|
|
7,571 |
|
|
7,819 |
|
|
|
11,192 |
|
|
11,516 |
|
|
11,288 |
|
|
11,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Revenue per Resident Day by Payor Source (excluding prior
period settlement adjustments) (US$) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Part A only |
$ |
468.78 |
|
$ |
470.21 |
|
$ |
470.21 |
|
$ |
461.45 |
|
|
Medicare (Parts A and B) |
|
508.95 |
|
|
510.68 |
|
|
511.84 |
|
|
508.92 |
|
|
Managed Care |
|
445.03 |
|
|
439.41 |
|
|
443.27 |
|
|
432.38 |
|
|
Private/other |
|
247.79 |
|
|
235.69 |
|
|
244.60 |
|
|
235.39 |
|
|
Medicaid |
|
200.80 |
|
|
194.03 |
|
|
199.07 |
|
|
188.87 |
|
|
Weighted average |
|
267.51 |
|
|
261.78 |
|
|
268.44 |
|
|
258.66 |
|
| Average Occupancy (excluding managed centers)
(same-facility basis) |
|
|
|
|
|
|
|
|
|
|
|
|
| U.S. skilled nursing centers |
|
83.4 |
% |
|
85.1 |
% |
|
83.8 |
% |
|
85.5 |
% |
| U.S. assisted living centers |
|
76.3 |
|
|
76.1 |
|
|
78.1 |
|
|
69.9 |
|
| Canadian centers |
|
98.2 |
|
|
98.7 |
|
|
97.8 |
|
|
97.9 |
|
| Purchase of Property, Equipment and Software
(thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| Growth expenditures |
$ |
598 |
|
$ |
19,332 |
|
$ |
28,747 |
|
$ |
49,253 |
|
| Facility maintenance |
|
12,254 |
|
|
14,917 |
|
|
28,238 |
|
|
35,723 |
|
| Deduct: capitalized interest |
|
(59 |
) |
|
(526 |
) |
|
(1,232 |
) |
|
(873 |
) |
|
$ |
12,793 |
|
$ |
33,723 |
|
$ |
55,753 |
|
$ |
84,103 |
|
| Segmented Adjusted Funds from
Operations(thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| United States (US$) |
$ |
2,689 |
|
$ |
20,764 |
|
$ |
32,787 |
|
$ |
51,400 |
|
| United States (C$) |
|
2,961 |
|
|
20,674 |
|
|
33,767 |
|
|
51,382 |
|
| Canada |
|
7,450 |
|
|
6,088 |
|
|
37,347 |
|
|
33,187 |
|
|
$ |
10,411 |
|
$ |
26,762 |
|
$ |
71,114 |
|
$ |
84,569 |
|
| Average U.S./Cdn. dollar exchange rate |
|
1.0489 |
|
|
0.9916 |
|
|
1.0299 |
|
|
0.9996 |
|
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 December 31, 2013 and 2012.(1)
|
(in thousands of Canadian dollars unless otherwise
noted) |
Three months ended December 31 |
|
Twelve months ended December 31 |
|
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
|
Adjusted EBITDA from continuing operations |
32,153 |
|
52,938 |
|
155,743 |
|
183,253 |
|
|
Depreciation for furniture, fixtures, equipment and computers |
(5,407 |
) |
(5,748 |
) |
(22,018 |
) |
(23,580 |
) |
|
Accretion costs |
(863 |
) |
(695 |
) |
(3,380 |
) |
(2,302 |
) |
|
Interest expense, net |
(14,585 |
) |
(15,317 |
) |
(58,778 |
) |
(61,741 |
) |
|
|
11,298 |
|
31,178 |
|
71,567 |
|
95,630 |
|
|
Current income tax expense (recovery) (2) |
3,307 |
|
2,400 |
|
(4,741 |
) |
(6,948 |
) |
|
FFO (continuing operations) |
14,605 |
|
33,578 |
|
66,826 |
|
88,682 |
|
|
Amortization of financing costs |
1,713 |
|
1,666 |
|
7,119 |
|
5,274 |
|
|
Principal portion of government capital funding payments |
940 |
|
687 |
|
3,389 |
|
2,756 |
|
|
Additional maintenance capital expenditures (3) |
(6,847 |
) |
(9,169 |
) |
(6,220 |
) |
(12,143 |
) |
|
AFFO (continuing operations) |
10,411 |
|
26,762 |
|
71,114 |
|
84,569 |
|
|
AFFO (discontinued operations) |
- |
|
- |
|
- |
|
- |
|
|
AFFO |
10,411 |
|
26,762 |
|
71,114 |
|
84,569 |
|
|
Per Basic Share/Unit ($) |
|
|
|
|
|
|
|
|
|
FFO (continuing operations) |
0.167 |
|
0.393 |
|
0.770 |
|
1.043 |
|
|
AFFO (continuing operations) |
0.119 |
|
0.312 |
|
0.820 |
|
0.994 |
|
|
AFFO |
0.119 |
|
0.312 |
|
0.820 |
|
0.994 |
|
|
Per Diluted Share/Unit ($) |
|
|
|
|
|
|
|
|
|
FFO (continuing operations) |
0.168 |
|
0.362 |
|
0.756 |
|
0.988 |
|
|
AFFO (continuing operations) |
0.124 |
|
0.292 |
|
0.784 |
|
0.945 |
|
|
AFFO |
0.124 |
|
0.292 |
|
0.784 |
|
0.945 |
|
|
Distributions declared |
10,462 |
|
18,021 |
|
52,023 |
|
71,497 |
|
|
Distributions declared per share/unit ($) |
0.1200 |
|
0.2100 |
|
0.6000 |
|
0.8400 |
|
|
Basic weighted average number of shares/units
(thousands) |
87,140 |
|
85,736 |
|
86,738 |
|
85,039 |
|
|
Diluted weighted average number of shares/units
(thousands) |
104,109 |
|
105,254 |
|
103,708 |
|
100,420 |
|
| (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. |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash Provided by Operating Activities to
AFFO |
Three months ended December 31 |
|
Twelve months ended December 31 |
|
|
(in thousands of Canadian dollars) |
2013 |
|
2012 |
|
2013 |
|
2012 |
|
|
Net cash from operating activities |
24,424 |
|
41,324 |
|
97,916 |
|
108,787 |
|
|
Add (Deduct): |
|
|
|
|
|
|
|
|
|
Net change in operating assets and liabilities, including interest
and taxes |
12,845 |
|
(1,856 |
) |
9,668 |
|
5,436 |
|
|
Current tax on fair value adjustments, gain/loss on foreign
exchange, financial instruments, asset impairment, disposals and
other items |
(23 |
) |
104 |
|
(194 |
) |
19,781 |
|
|
Net provisions and payments for self-insured liabilities |
(15,523 |
) |
810 |
|
(11,762 |
) |
(16,874 |
) |
|
Depreciation for furniture, fixtures, equipment and computers |
(5,407 |
) |
(5,748 |
) |
(22,018 |
) |
(23,580 |
) |
|
Principal portion of government capital funding payments |
940 |
|
687 |
|
3,389 |
|
2,756 |
|
|
Other |
2 |
|
610 |
|
335 |
|
406 |
|
|
Additional maintenance capital expenditures |
(6,847 |
) |
(9,169 |
) |
(6,220 |
) |
(12,143 |
) |
|
AFFO |
10,411 |
|
26,762 |
|
71,114 |
|
84,569 |
|
Extendicare Inc.Dylan MannSenior Vice President and Chief
Financial Officer(414) 908-8623(905)
470-4003dmann@extendicare.comwww.extendicare.com
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