Extendicare REIT
TSX : EXE.UN

Extendicare REIT

November 06, 2007 17:00 ET

Extendicare REIT Delivers Solid 2007 Third Quarter Results

MARKHAM, ONTARIO--(Marketwire - Nov. 6, 2007) - Extendicare Real Estate Investment Trust ("Extendicare REIT" or the "REIT") (TSX:EXE.UN) today reported earnings from continuing health care operations, prior to separately reported gains and losses as outlined in Table 1, of $14.4 million ($0.21 per diluted unit) in the third quarter of 2007 compared to $15.9 million ($0.23 per diluted share) in the third quarter of 2006. Excluding $3.1 million of future income tax credits recorded in the 2006 third quarter and a $0.4 million reduction in earnings due to the impact of the stronger Canadian dollar, earnings from health care operations, prior to gains and losses, increased $2.0 million in the 2007 third quarter compared to the prior year, reflecting operational improvements. Earnings before interest, income taxes, depreciation, amortization, and accretion (EBITDA) for the 2007 third quarter totalled $51.4 million compared with $48.0 million for the same period a year earlier. Excluding a $2.7 million negative impact of the stronger Canadian dollar, EBITDA improved $6.1 million or 12.7% from the 2006 third quarter.

Other financial highlights for the 2007 third quarter results and other developments include:



- Funds from operations (FFO) from continuing operations
of $24.6 million ($24.4 million in 2007 second quarter)
- Adjusted funds from operations (AFFO) from continuing
operations of $22.2 million ($21.9 million in 2007 second
quarter)
- Average Medicare Part A rate of US$392.42 (up 6.3% from
2006 third quarter, 0.9% from 2007 second quarter)
- U.S. nursing home same-facility average daily census
(ADC) of 12,406 (1.0% lower than 2006 third quarter)
- Tendercare acquisition completed October 31, 2007
- November distribution of $0.0925 per unit declared


Phil Small, President and CEO of Extendicare REIT, commented: "During the third quarter of 2007, we achieved good progress with our strategy to increase revenue rates by serving a greater proportion of high acuity residents with intense rehabilitative needs, particularly in the Medicare and private pay segments of our business. Higher revenue rates were largely offset by a reduction in our Medicare and total average daily census during the summer months when the volume of elective surgeries and other procedures decline. We also continue to advance our growth program, both through acquisitions and the construction of new facilities. Last week, we announced the completion of the Tendercare acquisition, through which we expect to gain US$22.0 million of annual EBITDA, based on its current operations, with the potential for more as we bring the Tendercare operations up to our standards of performance."

Tendercare Acquisition

Extendicare Health Services, Inc. (EHSI) completed the acquisition of Tendercare (Michigan) Inc. and affiliated entities (collectively "Tendercare") on October 31, 2007, for total consideration of US$232.3 million, excluding transaction costs. The acquisition has added 30 senior care facilities and two projects under development to EHSI's portfolio, and has established EHSI as a significant long-term care provider in the State of Michigan. During the first six months of 2007, Tendercare's overall nursing home occupancy was 82.5%, Medicare census as a percent of total ADC was 15.0% and the average Medicare Part A rate was US$377.14 per day. By comparison, over the first nine months of 2007, EHSI's occupancy rate from nursing facilities was 90.2%, Medicare census was 18.5% and the average Medicare Part A rate was US$389.69 per day.

Other Acquisitions

On August 1, 2007, EHSI acquired a Wisconsin assisted living facility (56 units) for US$5.4 million in cash. At the end of the third quarter, EHSI acquired a 99-bed nursing facility in Wisconsin for cash of US$7.4 million. An agreement entered into by EHSI to acquire a 60-bed skilled nursing facility and a 62-unit assisted living facility in Wausau, Wisconsin for cash of US$15.7 million is targeted for closing before the end of 2007.

Construction Projects

As of September 30, 2007, EHSI had construction projects in progress, representing 121 nursing home beds, of which 110 beds will be completed at the end of 2007, and the remainder by April 2008. The projects are comprised of a 100-bed nursing facility in Washington and a 21-bed nursing home addition in Ohio. The total estimated cost of these projects is US$14.1 million, of which US$8.3 million had been incurred through to September 30, 2007.

In Canada, Extendicare (Canada) Inc. (ECI) has entered into agreements to construct, own and operate a 280-bed continuing care centre in the city of Red Deer, Alberta. The Red Deer facility is anticipated to be completed by the end of 2009 at an estimated net cost of approximately $36.3 million, net of government grants.

ECI has also been selected by the Government of Ontario to construct, own and operate three nursing homes (480 beds). Construction on the first of the projects, a 160-bed nursing home in Kingston, is anticipated to begin in May 2008 for completion by the end of 2009 at an estimated cost of $24.0 million. In addition, ECI expects to manage an additional 160-bed facility in Windsor that was awarded to a partner.

SIFT Tax

Beginning with its 2007 second quarter results, Extendicare REIT began recording provisions for income taxes related to Bill C-52, which received Royal Assent on June 22, 2007. Under the legislation, income trusts that are defined as specified investment flow-through trusts or partnerships (SIFTs) are subject to tax in respect of certain income that is distributed to its unitholders, at rates that are substantially equivalent to the general corporate tax rate applicable to Canadian corporations. Extendicare REIT qualifies as a SIFT under the legislation, and is subject to the new tax effective January 1, 2007. A provision of $1.2 million, or $0.02 per diluted unit, was recorded for SIFT tax in the third quarter of 2007 ($3.5 million, or $0.05 per diluted unit for the first nine months of the year).

The Board of Trustees had already considered the income tax proposals of Bill C-52 in its determination of distributions for 2007.

Operational Results

EHSI's average daily Medicare Part A rate increased 6.3% to US$392.42 in the 2007 third quarter from US$369.12 in the 2006 third quarter and 0.9% from US$388.93 in the 2007 second quarter. Compared to a year earlier, 3.2% of the increase was attributable to higher acuity levels of Medicare patients served, with the remaining 3.1% resulting from an annual inflationary increase effective October 1, 2006. The percentage of Medicare residents in the nine highest acuity Resource Utilization Group (RUG) classifications increased to 37.5% in the 2007 third quarter from 35.2% in the same quarter in 2006.

EHSI's Medicare ADC on a same-facility basis in the 2007 third quarter was 2,129 compared to 2,230 in the 2006 third quarter. Contributing to the reduction was a seasonal decline in elective surgeries and other hospital procedures, which in 2006 had been experienced more in the second quarter than the third quarter. For the first nine months of 2007, Medicare ADC on a same-facility basis of 2,284 was similar to the 2,300 level recorded for the first nine months of 2006.

EHSI's total U.S. nursing home ADC on a same-facility basis declined by 1.0% in the 2007 third quarter to 12,406 from 12,537 in the 2006 third quarter, and by 1.1% for the first nine months of 2007 to 12,458 from 12,598 for the first nine months of 2006. EHSI's average nursing home occupancy rate on a same-facility basis during the 2007 third quarter was 90.0% compared with 91.1% during the same period in 2006, and for the first nine months of 2007 compared to the same period in 2006 was 90.4% versus 91.7%, respectively.

Cash Flow and Capital Resources

Cash flow provided by operating activities was $87.7 million in the first nine months of 2007 compared to $85.2 million in the first nine months of 2006. Cash provided by operating activities includes discontinued operations, which in 2006 included ALC.

Cash provided by investing activities was $4.6 million in the first nine months of 2007 compared to a use of cash of $84.7 million in the first nine months of 2006. Investing activities in 2007 included proceeds from the disposal of Extendicare Inc.'s investment in Crown Life Insurance Company of $81.4 million. Capital additions to property and equipment, excluding acquisitions, were $53.1 million in the first nine months of 2007 compared to $55.8 million in the first nine months of 2006. The expenditures in 2006 included those of ALC. Refer to the table under "Supplemental Information" at the back of this release for the components of the property and equipment expenditures.

Growth expenditures of the REIT were $31.4 million in the first nine months of 2007 compared to $19.0 million in the first nine months of 2006, which related to the construction of new beds, building improvements or capital costs aimed at earnings growth. The capital costs to sustain and upgrade existing property and equipment were $21.7 million in the first nine months of 2007 compared to $22.3 million in the first nine months of 2006. These expenditures fluctuate on a quarterly basis with the timing of projects and seasonality. Management estimates that facility maintenance costs will be approximately $34.0 million for the year 2007 compared to $32.2 million in 2006, with the comparison to the prior year favourably impacted by $1.5 million due to the stronger Canadian dollar.

Extendicare REIT generated FFO of $76.1 million for the first nine months of 2007. Total Distributable Income (DI) was $81.5 million and AFFO was $70.2 million. The Board of Trustees of the REIT declared distributions of $58.5 million in the first nine months of 2007, representing $55.5 million in cash and $3.0 million by way of issued units under a distribution reinvestment plan, to holders of units of the REIT (REIT Units) and Class B limited partnership units of Extendicare Limited Partnership. Refer to the tables under "Supplemental Information" provided at the back of this release for a reconciliation of DI and AFFO as non-GAAP measures to the interim financial statements.

Extendicare REIT's financial position continues to be strong, with long-term debt (at face value and including current portion) representing 41.9% of adjusted gross book value (AGBV) at September 30, 2007. Excluding the 2014 Debentures, debt to AGBV was 37.0% at September 30, 2007. On a pro forma basis, reflecting the October 31, 2007, acquisition of Tendercare, these ratios would increase to approximately 44.0% and 40.0%, respectively.

Quarters ended September 30, 2007 and 2006

The following table outlines the components of the REIT's earnings from continuing operations for the three months ended September 30, 2007 and 2006.



TABLE 1 Three months ended September 30
--------------------------------------------------------------------
2007 2006
--------------------------------------------------------------------
Components of Earnings Per Per
(Loss) from Continuing After diluted After diluted
Operations (1) -tax unit -tax share
--------------------------------------------------------------------
(thousands of Canadian dollars except per unit/share amounts)
Continuing Health Care Operations before Undernoted (1)
U.S. operations (US$) 9,357 10,329
--------------------------------------------------------------------
U.S. operations (C$) 9,696 11,195
Canadian operations 4,714 4,737
--------------------------------------------------------------------
14,410 $0.21 15,932 $0.23
Gain (loss) on derivative financial instruments
and foreign exchange 2,162 0.02 (9,893) (0.14)
Loss from restructuring charges, asset
disposals and other items (7,929) (0.12)
--------------------------------------------------------------------
16,572 $0.23 (1,890) $(0.03)
Share of equity accounted
earnings 1,239 0.02
--------------------------------------------------------------------
Earnings (loss) from continuing
operations 16,572 $0.23 (651) $(0.01)
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Refer to discussion of non-GAAP measures.


Earnings from continuing health care operations, prior to gains and losses related to derivative financial instruments, foreign exchange, restructuring charges, asset disposals and other items, as noted in Table 1 above, were $14.4 million ($0.21 per diluted unit) in the 2007 third quarter compared to $15.9 million ($0.23 per diluted share) in the 2006 third quarter. Including these gains and losses, earnings from continuing health care operations in the 2007 third quarter were $16.6 million ($0.23 per diluted unit) versus a loss of $1.9 million ($0.03 loss per diluted unit) for the same period in 2006.

Earnings from the U.S. operations in the 2007 third quarter, prior to the above gains and losses, declined $1.5 million compared to the 2006 third quarter. However, excluding future income tax credits recorded in last year's third quarter of $3.1 million and a $0.4 million unfavourable impact from the stronger Canadian dollar, earnings from U.S. operations increased $2.0 million, reflecting operational improvements compared to a year earlier. Earnings from Canadian operations of $4.7 million, prior to the above gains and losses, were unchanged from the 2006 third quarter. EBITDA in the 2007 third quarter was $51.4 million compared with $48.0 million in the same period a year earlier. Excluding the negative impact of the stronger Canadian dollar, EBITDA improved $6.1 million, of which $4.2 million was from the U.S. operations and $1.9 million was from the Canadian operations.

Reference should be made to the table under the heading "Financial and Operating Statistics" provided at the back of this release for the U.S. and Canadian segments of consolidated EBITDA.

EBITDA from U.S. operations improved US$3.7 million to US$34.6 million in the 2007 third quarter from the same period a year earlier. Of the increase, US$0.9 million was attributable to acquisitions and US$2.8 million to same-facility operations, where a US$10.3 million improvement in revenue more than offset a US$7.5 million increase in operating, administrative and lease costs. EBITDA from Canadian operations improved by $1.9 million, to $15.2 million, in the 2007 third quarter as growth of $4.8 million in revenue and a $1.1 million reduction in administrative costs, resulting from lower salaries and benefits primarily due to last fall's reorganization, were only partially offset by higher operating and lease costs of $4.0 million.

Interest expense, net of interest income, increased $1.9 million from the 2006 third quarter, to $16.5 million. Excluding a favourable impact of $0.8 million from the stronger Canadian dollar, net interest costs increased $2.7 million between periods due to higher debt levels associated with last fall's reorganization, acquisitions and construction, partially offset by higher interest income from cash and short-term investments.

The tax provision from continuing operations was $9.6 million in the 2007 third quarter compared to a tax recovery of $6.5 million in the 2006 third quarter. The effective tax rate for the 2007 third quarter was 36.7%.

Nine Months ended September 30, 2007 and 2006

The following table outlines the components of the REIT's earnings from continuing operations for the nine months ended September 30, 2007 and 2006.



TABLE 2 Nine months ended September 30
--------------------------------------------------------------------
2007 2006
--------------------------------------------------------------------
Per Per
Components of Earnings from After diluted After diluted
Continuing Operations (1) -tax unit -tax share
--------------------------------------------------------------------
(thousands of Canadian dollars except per unit/share amounts)
Continuing Health Care Operations before Undernoted (1)
U.S. operations (US$) 32,799 27,251
--------------------------------------------------------------------
U.S. operations (C$) 36,325 30,455
Canadian operations 9,986 10,009
--------------------------------------------------------------------
46,311 $0.66 40,464 $0.58
Gain (loss) on derivative financial instruments
and foreign exchange 14,580 0.20 (9,608) (0.14)
Gain (loss) from restructuring charges, asset
disposals and other items 1,428 0.02 (27,076) (0.40)
--------------------------------------------------------------------
62,319 $0.88 3,780 $0.04
Share of equity accounted
earnings 1,541 0.02 3,692 0.06
--------------------------------------------------------------------
Earnings from continuing
operations 63,860 $0.90 7,472 $0.10
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Refer to discussion of non-GAAP measures.


Earnings from continuing health care operations, prior to gains and losses, as noted in Table 2 above, were $46.3 million ($0.66 per diluted unit) in the first nine months of 2007 compared to $40.5 million ($0.58 per diluted share) in the first nine months of 2006, representing an improvement of $5.8 million. This improvement was from the U.S. operations primarily due to nursing home funding increases and newly acquired facilities, partially offset by future income tax credits recorded in 2006 and lower occupancy levels. Earnings from continuing Canadian operations were unchanged at $10.0 million, excluding gains and losses, as improved nursing home operations and lower general and administration costs were offset by higher operating expenses and an increase in net interest costs, the latter reflecting interest on intercompany borrowings from the U.S. operations.

EBITDA for the first nine months of 2007 totalled $158.1 million, up from $138.2 million for the same period a year earlier. Excluding a $2.9 million negative impact of the stronger Canadian dollar, EBITDA improved $22.8 million, of which $15.7 million was from the U.S. operations and $7.1 million was from the Canadian operations. The decline in consolidated administrative costs of $4.2 million was primarily due to non-recurring share-based compensation costs of $3.1 million and the stronger Canadian dollar of $0.8 million.

EBITDA from U.S. operations improved US$13.9 million to US$106.4 million in the first nine months of 2007 from US$92.5 million in the first nine months of 2006. Acquisitions contributed US$3.8 million to the improvement, while EBITDA from same-facility operations increased US$10.1 million, despite lower prior period settlement adjustments of US$1.8 million. Improvements in revenue from same-facility operations of US$35.2 million were partially offset by higher operating, administrative and lease costs of US$25.1 million.

EBITDA from Canadian operations was $40.5 million in the first nine months of 2007 compared to $33.4 million in the first nine months of 2006, representing an improvement of $7.1 million. Additional revenue of $16.2 million and lower administrative costs of $5.3 million were partially offset by higher operating and lease costs of $14.4 million, with labour-related costs representing $11.3 million of the increase.

Interest expense, net of interest income, increased $6.8 million to $50.5 million in the first nine months of 2007 from the first nine months of 2006. Excluding a favourable impact of $0.8 million from the stronger Canadian dollar, net interest costs increased $7.6 million between periods due to higher debt levels associated with last fall's reorganization, acquisitions and construction, partially offset by higher interest income from cash and short-term investments.

The tax provision from continuing operations was $30.1 million in the first nine months of 2007 compared to $19.1 million in the first nine months of 2006. The effective tax rate for the first nine months of 2007 was 32.6%, or 35.7% excluding the impact of a $1.4 million current income tax credit and the impact of gains and losses from derivative financial instruments, foreign exchange, restructuring charges, asset disposals and other items.

November Distribution

The Board of Trustees of the REIT today declared a cash distribution of $0.0925 per unit for the month of November 2007, payable to unitholders of record at the close of business on November 30, 2007, and will be paid on December 17, 2007.

Extendicare Limited Partnership also announced that it has declared a cash distribution of $0.0925 per Class B limited partnership unit for the month of November 2007, payable to unitholders of record at the close of business on November 30, 2007, and will be paid on December 17, 2007.

Management estimates that approximately 70% of Extendicare REIT's distributions in 2007 will be characterized as tax deferred returns of capital. To the extent a portion of the remaining 30% of distributions paid in 2007 are dividends, such dividends paid to Canadian residents will be eligible dividends as per the Canadian Income Tax Act.

About Us

Extendicare REIT, through its wholly owned subsidiaries, is a major provider of long-term care and related services in North America. Through its subsidiaries, Extendicare REIT operates 267 nursing and assisted living facilities in North America, with capacity for approximately 30,200 residents. As well, Extendicare REIT's subsidiaries offer medical specialty services such as subacute care and rehabilitative therapy services in the United States, and home health care services in Canada, and employ approximately 37,800 people in North America.

On November 7, 2007, at 10:00 a.m. (ET), Extendicare REIT will hold a conference call to discuss its results for the third quarter ended September 30, 2007. The call will be webcast live, and archived, in the investor information section of Extendicare REIT's website at www.extendicare.com. Alternatively, the call-in number is 1-866-898-9626 or 416-340-2216. A taped rebroadcast of the call will be available until midnight on November 23, 2007. To access the rebroadcast, dial 1-800-408-3053 or 416-695-5800, conference ID number 3238489. Slides accompanying remarks during the call will be posted to Extendicare's 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 Investor Information/Investor Documents/Supplemental Information.

Certain 2006 figures have been revised to conform to the presentation in 2007, mainly for discontinued operations.

Non-GAAP Measures

Extendicare REIT assesses and measures operating results and financial position based on performance measures referred to as "EBITDA", "continuing health care operations before undernoted", "Distributable Income", "Funds from Operations", "Adjusted Funds from Operations" and "Adjusted Gross Book Value". 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 the REIT to make cash distributions; or (ii) certain ongoing rights and obligations of the REIT 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 operations, net earnings (loss) for the period, cash flow, or other measures of financial performance and liquidity reported in accordance with Canadian GAAP. Reconciliations of these non-GAAP measures from net earnings and/or from cash provided by operations, where applicable, are provided in this press release. Detailed descriptions of these terms can be found in the disclosure documents filed by Extendicare REIT with the securities regulatory authorities, available at www.sedar.com and on the REIT's website at www.extendicare.com.

Forward-looking Statements

Information provided by Extendicare REIT 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 the REIT and its subsidiaries, including 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", "plan" or "objective" or other similar expressions. Forward-looking statements reflect management's beliefs and assumptions and are based on information currently available, and the REIT assumes no obligation to update any forward-looking statement. 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 the REIT 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 the REIT's forward-looking statements. Further information can be found in the disclosure documents filed by Extendicare REIT with the securities regulatory authorities, available at www.sedar.com and on the REIT's website at www.extendicare.com.



EXTENDICARE REIT
Condensed Consolidated Earnings
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
(thousands of Canadian dollars except per unit/share amounts)
(revised) (revised)
Revenue
Nursing and assisted living centres
United States 279,653 284,675 874,829 840,432
Canada 105,155 101,313 308,829 295,686
Outpatient therapy -
United States 2,986 2,525 9,481 9,025
Home health - Canada 35,200 34,474 105,603 103,476
Other 11,028 11,017 36,030 32,038
---------------------------------------------------------------------------
434,022 434,004 1,334,772 1,280,657
Operating expenses 363,876 366,222 1,118,743 1,079,387
Administrative costs 15,650 16,459 48,617 52,833
Lease costs 3,093 3,338 9,342 10,273
---------------------------------------------------------------------------
EBITDA(1) 51,403 47,985 158,070 138,164
Depreciation and
amortization 11,805 11,973 36,825 35,932
Accretion expense 317 314 989 949
Interest expense 19,704 16,094 56,812 47,715
Interest income (3,163) (1,416) (6,297) (3,968)
Loss (gain) on derivative financial instruments
and foreign exchange (3,425) 16,627 (20,479) 16,165
Loss (gain) from restructuring charges, asset disposals
and other items 12,755 (2,192) 18,483
---------------------------------------------------------------------------
Earnings (loss) from continuing health care operations
before income taxes 26,165 (8,362) 92,412 22,888
---------------------------------------------------------------------------
Income tax expense (recovery)
Current 6,688 469 21,317 14,469
Future 2,905 (6,941) 8,776 (10,931)
Tax associated with reorganization 15,570
---------------------------------------------------------------------------
9,593 (6,472) 30,093 19,108
---------------------------------------------------------------------------
Earnings (loss) from continuing health
care operations 16,572 (1,890) 62,319 3,780
Share of equity accounted
earnings 1,239 1,541 3,692
---------------------------------------------------------------------------
Earnings (loss) from continuing
operations 16,572 (651) 63,860 7,472
Discontinued operations (344) 2,307 (3,957) 5,544
---------------------------------------------------------------------------
Net earnings 16,228 1,656 59,903 13,016
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Basic and Diluted Earnings (Loss) per Unit/Subordinate
Voting Share ($)
Earnings (loss) from continuing
operations 0.23 (0.01) 0.90 0.11
Net earnings 0.23 0.02 0.85 0.19
---------------------------------------------------------------------------
Basic and Diluted Earnings (Loss) per Multiple Voting Share ($)
Earnings (loss) from continuing
operations (0.03) 0.04
Net earnings 0.12
---------------------------------------------------------------------------
(1) Refer to discussion of non-GAAP measures.



EXTENDICARE REIT
Condensed Consolidated Cash Flows
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
(thousands of Canadian dollars)
(revised) (revised)
Operating Activities
Net earnings 16,228 1,656 59,903 13,016
Adjustments for:
Depreciation and
amortization 11,803 16,829 36,926 50,573
Provision for self-insured
liabilities 2,786 2,453 8,840 8,820
Payments for self-insured
liabilities (2,683) (2,680) (14,982) (12,573)
Future income taxes 3,017 (10,245) 6,516 1,995
Loss (gain) on derivative financial instruments
and foreign exchange (3,425) 16,627 (20,479) 16,165
Loss (gain) from restructuring charges,
asset disposals and other items 12,755 (2,192) 18,483
Loss from restructuring charges, asset
impairment, disposals and other items
from discontinued operations 5,650 5,675 10,079
Undistributed share of earnings
from equity investments (1,239) (1,541) (3,692)
Other 1,777 533 4,206 925
---------------------------------------------------------------------------
29,503 42,339 82,872 103,791
Net change in operating assets and liabilities
Accounts receivable (1,968) (18,382) 2,726 (40,560)
Inventories, supplies and
prepaid expenses 2,016 624 (3,511) (3,969)
Accounts payable and
accrued liabilities (1,170) 13,378 (16,357) 36,299
Income taxes 5,661 (8,077) 21,993 (10,366)
---------------------------------------------------------------------------
34,042 29,882 87,723 85,195
---------------------------------------------------------------------------
Investing Activities
Capital additions (18,034) (23,490) (53,123) (55,804)
Acquisitions, net of
cash acquired (13,159) (11,769) (24,648) (39,842)
Net proceeds from dispositions 2,228 1,944
Sale/return of equity
accounted investment 39,808 81,445
Other assets 1,347 480 (1,319) 8,987
---------------------------------------------------------------------------
9,962 (34,779) 4,583 (84,715)
---------------------------------------------------------------------------
Financing Activities
Issue of long-term debt 246,695
Issue on line of credit 8,291 52,005 8,291 71,354
Repayment of long-term debt (5,740) (2,490) (11,161) (7,444)
Decrease (increase) in investments held
for self-insured liabilities 1,824 (1,711) 11,832 3,228
Purchase of shares for cancellation (30) (376)
Distributions/dividends paid (19,000) (3,281) (62,050) (9,870)
Transaction costs of reorganization (13,267) (20,906)
Financial costs (45) (21,205) (9,995) (21,205)
Income taxes paid re: the
distribution of ALC (120,220)
Other (2,029) 4,280 294 4,648
---------------------------------------------------------------------------
(16,699) 14,301 63,686 19,429
---------------------------------------------------------------------------
Foreign exchange loss on cash
held in foreign currency (1,392) (47) (6,237) (241)
---------------------------------------------------------------------------
Increase in cash and
cash equivalents 25,913 9,357 149,755 19,668
Cash and cash equivalents at
beginning of period 151,899 32,920 28,057 22,609
---------------------------------------------------------------------------
Cash and cash equivalents
at end of period 177,812 42,277 177,812 42,277
---------------------------------------------------------------------------
---------------------------------------------------------------------------



EXTENDICARE REIT
Condensed Consolidated Balance Sheets
September 30 December 31
2007 2006
---------------------------------------------------------------------------
(thousands of Canadian dollars)
Assets (revised)
Current assets
Cash and short-term investments 177,812 28,057
Invested assets 3,220
Accounts receivable, less allowances 171,688 204,741
Future income tax assets 21,191 25,183
Inventories, supplies and prepaid expenses 23,016 20,048
---------------------------------------------------------------------------
396,927 278,029
Property and equipment 685,903 729,274
Goodwill and other intangible assets 71,104 80,648
Other assets 123,559 147,840
---------------------------------------------------------------------------
1,277,493 1,235,791
Equity accounted investments 79,391
---------------------------------------------------------------------------
1,277,493 1,315,182
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Liabilities and Unitholders' Deficiency
Current liabilities
Accounts payable 24,124 52,583
Accrued liabilities 183,843 207,836
Accrual for self-insured liabilities 17,409 20,395
Current portion of long-term debt 9,930 13,423
Income taxes payable 153 95,558
---------------------------------------------------------------------------
235,459 389,795
Accrual for self-insured liabilities 28,093 39,386
Long-term debt 951,932 837,757
Other long-term liabilities 61,277 59,312
Future income tax liabilities 16,698 12,586
---------------------------------------------------------------------------
1,293,459 1,338,836
Unitholders' deficiency (15,966) (23,654)
---------------------------------------------------------------------------
1,277,493 1,315,182
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Closing US/Cdn. dollar exchange rate 0.9948 1.1654



EXTENDICARE REIT
Financial and Operating Statistics
(dollar amounts in Canadian dollars, unless otherwise noted)
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
Revenue (millions)
United States (US$) $278.4 $264.2 $826.7 $773.4
---------------------------------------------------------------------------
United States $291.6 $296.4 $913.9 $876.0
Canada 142.4 137.6 420.9 404.7
---------------------------------------------------------------------------
$434.0 $434.0 $1,334.8 $1,280.7
---------------------------------------------------------------------------
---------------------------------------------------------------------------
EBITDA (millions)
United States (US$) $34.6 $30.9 $106.4 $92.5
---------------------------------------------------------------------------
United States $36.2 $34.7 $117.6 $104.8
Canada 15.2 13.3 40.5 33.4
---------------------------------------------------------------------------
$51.4 $48.0 $158.1 $138.2
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Health Care Earnings (Loss) from Continuing Operations (millions)
United States (US$) $11.7 $0.0 $42.6 $3.5
---------------------------------------------------------------------------
United States $12.1 $(0.3) $47.1 $3.6
Canada 4.5 (1.6) 15.2 0.2
---------------------------------------------------------------------------
$16.6 $(1.9) $62.3 $3.8
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Health Care Net Earnings (millions)
United States (US$) $11.4 $2.0 $39.2 $8.3
---------------------------------------------------------------------------
United States $11.7 $2.0 $43.1 $9.1
Canada 4.5 (1.6) 15.2 0.2
---------------------------------------------------------------------------
$16.2 $0.4 $58.4(1) $9.3
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Components of Diluted Earnings (Loss) per Unit/Share (prior to
Subordinate Voting Share preferential dividend)
Health care operations
before undernoted $0.21 $0.23 $0.66 $0.58
Gain (loss) on derivative financial instruments
and foreign exchange 0.02 (0.14) 0.20 (0.14)
Gain (loss) from restructuring charges,
asset disposals and other items (0.12) 0.02 (0.17)
Taxes associated with reorganization (0.23)
Share of equity accounted
earnings 0.02 0.02 0.06
---------------------------------------------------------------------------
Earnings (loss) from continuing
operations $0.23 (0.01) 0.90 0.10
Discontinued operations 0.03 (0.05) 0.08
---------------------------------------------------------------------------
Net earnings $0.23 $0.02 $0.85 $0.18
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Diluted Earnings (Loss) per Unit/Share from Continuing Operations
Unit/Subordinate Voting
Share $0.23 $(0.01) $0.90 $0.11
Multiple Voting Share (0.03) 0.04
---------------------------------------------------------------------------
U.S. Nursing Centre Statistics
Percent of Revenue by Payor Source (same-facility basis)
Medicare 33.9% 34.5% 35.7% 35.4%
Private/other 17.4 16.4 17.0 16.3
Medicaid 48.7 49.1 47.3 48.3
Average Daily Census by Payor Source (same-facility basis)
Medicare 2,129 2,230 2,284 2,300
Private/other 1,988 1,957 1,957 1,966
Medicaid 8,289 8,350 8,217 8,332
---------------------------------------------------------------------------
12,406 12,537 12,458 12,598
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Revenue per Resident Day by Payor Source
(excluding prior period settlement adjustments)(US$)
Medicare (Part A and B) $434.21 $406.04 $427.10 $402.92
Private/other 239.64 221.35 239.38 219.25
Medicaid 162.70 156.43 159.63 152.82
Medicare Part A only 392.42 369.12 389.69 368.74
---------------------------------------------------------------------------
U.S. Average Occupancy (excluding managed facilities)
(same-facility basis)
Nursing facilities 90.0% 91.1% 90.4% 91.7%
Assisted living facilities 89.6 74.5 86.7 77.6
Combined U.S. nursing and assisted
living facilities 90.0 90.8 90.3 91.5
Canadian facilities average occupancy
(same-facility basis) 98.6 98.4 98.2 98.1
Extendicare total average occupancy
(same-facility basis) 93.0 93.4 93.0 93.8
---------------------------------------------------------------------------
Average US/Cdn. dollar
exchange rate 1.0477 1.1216 1.1055 1.1326
---------------------------------------------------------------------------
(1) Does not add due to rounding.



EXTENDICARE REIT
Supplemental Information
Reconciliation of Net Earnings (Loss) to Funds from Operations,
Distributable Income and Adjusted Funds from Operations(1)
---------------------------------------------------------------------------
Three months ended
September 30, 2007 YTD 2007
---------------------------------------------------------------------------
(thousands of Canadian
dollars unless Contin'g Discont'd
otherwise noted) Operations Operations Total Total
---------------------------------------------------------------------------
Net earnings (loss) 16,572 (344) 16,228 59,903
Adjustments:
Depreciation and amortization
expense 11,805 (2) 11,803 36,926
Deduct depreciation for FFEC (3,360) (3,360) (10,400)
Accretion expense 317 15 332 1,041
Gain on derivative financial instruments
and foreign exchange (3,425) (3,425) (20,479)
Loss from asset impairment, disposals and
other items 3,483
Current tax expense (recovery) on loss (gain)
from derivatives, asset impairment,
disposals and other items (195) (195) 696
Future income taxes 2,905 112 3,017 6,516
Share of undistributed equity accounted
earnings (1,541)
---------------------------------------------------------------------------
Funds from operations, before working
capital changes 24,619 (219) 24,400 76,145
Amortization of deferred
financing costs 1,572 1,572 3,810
Principal portion of government capital
funding payments 510 510 1,534
---------------------------------------------------------------------------
Distributable income 26,701 (219) 26,482 81,489
Additional maintenance
capital expenditures(2) (4,547) (4,547) (11,285)
---------------------------------------------------------------------------
Adjusted funds from
operations 22,154 (219) 21,935 70,204
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Per Unit ($)
Funds from operations
- basic 0.350 (0.003) 0.347 1.083
Funds from operations
- diluted 0.340 (0.004) 0.336 1.070
---------------------------------------------------------------------------
Distributable income
- basic 0.380 (0.004) 0.376 1.159
Distributable income
- diluted 0.361 (0.004) 0.357 1.137
---------------------------------------------------------------------------
Adjusted funds from operations
- basic 0.315 (0.004) 0.311 0.998
Adjusted funds from operations
- diluted 0.300 (0.002) 0.298 0.982
---------------------------------------------------------------------------
Distributions declared 19,530 58,542
Distributions declared per unit ($) 0.2775 0.8325
---------------------------------------------------------------------------
Basic weighted average number of units (thousands) 70,372 70,311
Diluted weighted average number of
units (thousands) 76,151 72,449
---------------------------------------------------------------------------

1. "Funds from operations", "distributable income" 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. Represents total facility maintenance capital expenditures less
depreciation for furniture, fixtures, equipment and computers
(FFEC) already deducted in determining Distributable Income.



EXTENDICARE REIT
Supplemental Information
Reconciliation of Cash Provided by Operating Activities to
Distributable Income and Adjusted Funds from Operations(1)
(thousands of Canadian dollars) Q3 2007 YTD 2007
---------------------------------------------------------------------------
Cash provided by operating activities 34,042 87,723
Add (deduct):
Net change in operating assets and liabilities (4,539) (4,851)
Current tax expense (recovery) on loss (gain) from derivatives,
asset impairment, disposals and other items (195) 696
Net provisions and payments for
self-insured liabilities (103) 6,142
Depreciation on FFEC (3,360) (10,400)
Other 127 645
Principal portion of government capital
funding payments 510 1,534
---------------------------------------------------------------------------
Distributable income 26,482 81,489
Additional maintenance capital expenditures(2) (4,547) (11,285)
---------------------------------------------------------------------------
Adjusted funds from operations 21,935 70,204
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Capital Additions to Three months ended Nine months ended
Property and Equipment September 30 September 30
---------------------------------------------------------------------------
(thousands of
Canadian dollars) 2007 2006 2007 2006
---------------------------------------------------------------------------
Components of REIT operations
Growth expenditures 10,127 8,706 31,438 18,993
Sprinkler project 266 1,063
Facility maintenance 7,907 6,227 21,685 22,295
---------------------------------------------------------------------------
18,034 15,199 53,123 42,351
ALC operations distributed 8,291 13,453
---------------------------------------------------------------------------
Consolidated reported 18,034 23,490 53,123 55,804
---------------------------------------------------------------------------
---------------------------------------------------------------------------
1. "Funds from operations", "distributable income" 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. Represents total facility maintenance capital expenditures less
depreciation for furniture, fixtures, equipment and computers
(FFEC) already deducted in determining Distributable Income.

Contact Information