Extendicare REIT
TSX : EXE.UN

Extendicare REIT

February 21, 2008 17:01 ET

Extendicare REIT Delivers Solid 2007 Financial Results

MARKHAM, ONTARIO--(Marketwire - Feb. 21, 2008) - Extendicare Real Estate Investment Trust ("Extendicare REIT" or the "REIT") (TSX:EXE.UN) today reported earnings from continuing operations of $75.1 million ($1.06 per diluted unit) for the year ended December 31, 2007 compared to a loss of $43.4 million ($0.64 loss per diluted unit) for the same period in 2006. Excluding separately reported gains and losses as outlined in Table 1, earnings from continuing health care operations in 2007 were $59.2 million ($0.84 per diluted unit) compared to earnings in 2006 of $56.7 million ($0.81 per diluted unit). Earnings before interest, income taxes, depreciation, amortization, and accretion (EBITDA) for 2007 totalled $208.3 million, up from $188.7 million for 2006. Excluding an $8.5 million negative impact of the stronger Canadian dollar, EBITDA improved $28.1 million or 14.9% from the prior year level. EBITDA in the 2007 fourth quarter totalled $50.3 million compared with $50.5 million for the 2006 fourth quarter. Excluding a $5.7 million negative impact from a stronger Canadian dollar, EBITDA increased $5.5 million from the prior year fourth quarter level.



Other highlights for the fiscal year 2007 include:
- average Medicare Part A rate of US$395.56, up 6.2%
from 2006 (US$411.87 in 2007 fourth quarter - up 7.6%
from 2006 fourth quarter);
- growth in operating beds from acquisitions of 15%,
mainly due to the October 31, 2007 acquisition of
Tendercare; and
- total distributions declared of $78.1 million, for a payout
ratio of 90.3% (based on AFFO from continuing
operations of $86.5 million).


Phil Small, President and CEO of Extendicare REIT, commented: "In our first full year since converting to a REIT, we achieved significant progress with our business strategy, including raising revenue rates by serving a greater proportion of high-acuity residents with intense rehabilitative needs, particularly in the Medicare and HMO components of our business, undertaking value-creating acquisitions and development projects, and also continuing to reinvest in our owned facilities. In the fourth quarter of 2007, Medicare rates increased, average acuity levels rose, we saw some improvement in both Medicare and private-pay census, with further progress being achieved since year end, and we recorded the first financial contribution from the acquired operations of Tendercare."

Douglas J. Harris Appointed Senior Vice-President and Chief Financial Officer

The Board of Trustees of Extendicare REIT is pleased to announce that Douglas J. Harris has been appointed Senior Vice-President and Chief Financial Officer (CFO) of the REIT. Mr. Harris has served as interim CFO of Extendicare REIT for the past seven months following the passing of the late Richard Bertrand. Mr. Harris joined the Extendicare group in 1981 and over the past 26 years has served in a variety of roles in the U.S, Canada and the U.K. Prior to becoming interim CFO, Mr. Harris was Vice-President and Controller of Extendicare Health Services, Inc.

EHSI Revenue Rates

As shown in the table entitled, "Financial and Operating Statistics", Extendicare Health Services, Inc. (EHSI's) average daily Medicare Part A rate in 2007 was US$395.56, an increase of 6.2% from US$372.32 in 2006. Approximately half of this increase related to market basket inflationary increases, the most recent being a 3.3% increase effective October 1, 2007, with the remainder primarily related to higher average acuity levels among Medicare patients served. The percentage of Medicare residents in the nine highest Resource Utilization Groupings (RUGs) classifications increased to 37.6% in 2007 from 35.8% in 2006 (excluding Tendercare). As well, the percentage of therapy residents increased to 85.8% in 2007 from 84.0% in 2006.

The average revenue rate for Health Maintenance Organization (HMO) and commercial insurance clients, another important area of growth for EHSI that represents the highest rate component of private and other, was US$327.12 in 2007, up 6.3% from 2006.

For the fourth quarter of 2007, EHSI's average Medicare Part A rate was US$411.87 compared with US$382.78 in the 2006 fourth quarter and US$392.42 in the 2007 third quarter. Of the increase from both periods, approximately US$12.95 related to the October 1, 2007 market basket increase.

EHSI's Average Daily Census (ADC)

EHSI's Medicare ADC on a same-facility basis in 2007 was 2,256, down 1.9% from the comparable 2006 level. This decrease was more than offset by an increase of 120 in HMO and commercial insurance ADC, to 633 in 2007 from 513 in 2006. The increase in HMO residents is due to EHSI's focus on these higher acuity residents and the number of Medicare beneficiaries opting out of traditional Medicare Part A benefits and selecting coverage through a Medicare HMO product.

For the fourth quarter of 2007, EHSI's Medicare ADC was 2,174 compared with 2,296 in the 2006 fourth quarter, a decline of 122. However HMO and commercial insurance ADC increased by 190 to 679 from 489 in the 2006 fourth quarter. In comparison to the 2007 third quarter, Medicare ADC increased by 45 and HMO and commercial insurance ADC increased by 53, with Medicare ADC showing strong further improvement so far in the first quarter of 2008.

Acquisitions and Development Projects

During 2007 EHSI acquired 36 senior care facilities with 3,880 beds for a total cost of $261.7 million (US$272.8 million), including cash acquired of $14.7 million. Consideration paid consisted of net cash of $142.3 million and debt assumed or issued of $104.7 million. The cash to fund these acquisitions came primarily from proceeds from the issuance of $115.0 million of convertible debentures by the REIT in June 2007 and the sale of Extendicare's investment in Crown Life Insurance Company (Crown Life) for $82.5 million in July 2007.

The most significant acquisition made in 2007 was the purchase of Tendercare (Michigan) Inc. and affiliated entities (collectively "Tendercare"), which added 30 senior care facilities (3,301 operational beds), with two additional facilities (177 beds) under development. For the two months of 2007 following the completion of the transaction, Tendercare's operations contributed $38.6 million (US$35.9 million) of revenue and $3.4 million (US$3.2 million) of EBITDA. However, Tendercare's EBITDA for these two months was adversely affected by post-closing integration costs of approximately US$0.3 million. The operations of Tendercare, as if EHSI had owned them for the 12 months beginning on January 1, 2007, generated US$219.2 million of revenue and US$22.1 million of EBITDA. Based on these annual results, management estimates that these operations will contribute approximately $0.06 per diluted unit of AFFO to the REIT.

Adjusted Funds from Operations

As shown in the table entitled, "Supplemental Information - FFO and AFFO", Extendicare REIT generated FFO from continuing operations of $99.6 million in 2007, an increase of $14.9 million or 17.6% from $84.7 million in 2006, largely reflecting higher EBITDA and lower current taxes, partially offset by higher interest costs. AFFO from continuing operations was $86.5 million in 2007, up $15.1 million or 21.1% from 2006. The increase resulted from higher FFO and the impact of increased deferred financing costs, offset by a $2.7 million increase in facility maintenance costs (exclusive of furniture, fixtures, equipment and computers).

For the fourth quarter of 2007, AFFO from continuing operations was $16.0 million compared with $17.4 million in the 2006 fourth quarter and $22.2 million in the 2007 third quarter. During the 2007 fourth quarter, the REIT recorded $4.5 million more than its average level of facility maintenance costs for the year and incurred $3.2 million more of these costs than during the 2006 fourth quarter and $5.3 million more than during the 2007 third quarter. Facility maintenance costs for full-year 2007 were approximately 2% of revenue, consistent with the REIT's objective to maintain and upgrade its facilities. In addition, the 2007 fourth quarter current tax expense was favourably impacted by approximately $2.3 million for year-end tax adjustments, while a stronger Canadian dollar reduced AFFO in the 2007 fourth quarter by $2.3 million and $0.9 million, respectively, compared to the prior year fourth quarter and the third quarter of 2007.

2007 Earnings Review



TABLE 1 Twelve months ended December 31
--------------------------------------------------------------------
2007 2006
--------------------------------------------------------------------
Components of Earnings Per Per
(Loss) from Continuing After diluted After diluted
Operations (1) -tax unit -tax unit
--------------------------------------------------------------------
(thousands of Canadian dollars except per unit amounts)
Continuing Health Care Operations before Undernoted (1)
U.S. operations (US$) 43,955 41,241
--------------------------------------------------------------------
U.S. operations (C$) 47,344 46,443
Canadian operations 11,811 10,304
--------------------------------------------------------------------
59,155 $0.84 56,747 $0.81
Gain (loss) on derivative financial instruments
and foreign exchange 12,944 0.18 (56,023) (0.81)
Gain (loss) from restructuring charges, asset
disposals and other items 1,428 0.02 (49,370) (0.72)
--------------------------------------------------------------------
73,527 $1.04 (48,646) $(0.72)
Share of equity accounted
earnings 1,541 0.02 5,220 0.08
--------------------------------------------------------------------
Earnings (loss) from continuing
operations 75,068 $1.06 (43,426) $(0.64)
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Refer to discussion of non-GAAP measures.


EBITDA in 2007 increased $19.6 million or 10.4% from the previous year. Excluding the impact of a stronger Canadian dollar, EBITDA increased $28.1 million or 14.9%. EBITDA from U.S. operations improved US$17.8 million, and as a percent of revenue improved to 12.5% from 12.1%, respectively. Acquisitions contributed US$8.3 million of the increase, while EBITDA from same-facility U.S. operations rose US$9.5 million to US$131.9 million in 2007 from US$122.4 million in 2006. Higher revenue more than offset a US$34.7 million increase in operating, administrative and lease costs, of which US$25.8 million was labour related, in accounting for the improvement from same-facility U.S. operations. EBITDA from Canadian operations increased $7.9 million as higher revenue and lower administrative expenses, resulting from reduced salaries and benefits primarily due to the REIT's 2006 reorganization, more than offset higher operating and lease costs.

Earnings from continuing health care operations prior to separately reported items, as indicated in Table 1 above, were $59.2 million in 2007 compared to $56.7 million in 2006, representing an improvement of $2.5 million. Earnings from continuing U.S. operations, excluding separately reported gains, improved by US$2.7 million in 2007 primarily as a result of nursing home funding increases, higher acuity levels and newly acquired facilities, partially offset by lower occupancy levels and a higher effective income tax rate. The higher effective tax rate was primarily due to non-recurring future income tax credits of US$5.5 million recorded in 2006, partially offset by US$3.0 million of book-to-file adjustments and higher income in non-taxable entities in 2007. Earnings from continuing Canadian operations, excluding separately reported items, increased $1.5 million reflecting funding improvements and lower administrative costs partially offset by higher operating and financing costs, and a higher tax provision because of a future income tax credit recorded in 2006 of $0.8 million.

Separately reported items related to gains and losses on the valuation of derivative financial instruments and foreign exchange, mainly foreign currency forward contracts, the disposal of non-core assets and, in 2006, an after-tax loss of $49.4 million resulting primarily from the REIT's 2006 reorganization. The REIT's share of equity accounted earnings declined to $1.5 million in 2007 from $5.2 million in 2006, due to the sale of its investment in Crown Life in July 2007. Earnings from continuing operations, including separately reported items and equity accounted earnings, were $75.1 million compared to a loss of $43.4 million in 2006.

Fourth Quarter 2007 Financial Review



TABLE 2 Three months ended December 31
--------------------------------------------------------------------
2007 2006
--------------------------------------------------------------------
Per Per
Components of Earnings (Loss) After diluted After diluted
from Continuing Operations (1) -tax unit -tax unit
--------------------------------------------------------------------
(thousands of Canadian dollars except per unit amounts)
Continuing Health Care Operations before Undernoted (1)
U.S. operations (US$) 11,156 13,990
--------------------------------------------------------------------
U.S. operations (C$) 11,019 15,988
Canadian operations 1,825 295
--------------------------------------------------------------------
12,844 $0.18 16,283 $0.23
Loss on derivative financial instruments
and foreign exchange (1,636) (0.02)(46,415) (0.67)
Loss from restructuring charges, asset
disposals and other items (22,294) (0.32)
--------------------------------------------------------------------
11,208 $0.16 (52,426) $(0.76)
Share of equity accounted
earnings 1,528 0.02
--------------------------------------------------------------------
Earnings (loss) from
continuing operations 11,208 $0.16 (50,898) $(0.74)
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Refer to discussion of non-GAAP measures.


EBITDA for the 2007 fourth quarter was $50.3 million compared to $50.5 million for the 2006 fourth quarter and $51.4 million in the 2007 third quarter. Excluding the impact of a stronger Canadian dollar, EBITDA increased $5.5 million from the 2006 fourth quarter and $1.1 million from the third quarter of 2007.

Compared to the 2006 fourth quarter, EBITDA from U.S. operations in U.S. dollars rose US$4.0 million reflecting the impact of acquisitions, mainly Tendercare. U.S. same-facility EBITDA declined US$0.6 million as higher rates and acuity levels were offset by lower census and an increase in operating costs, which included approximately US$2.5 million of unfavourable adjustments for prior period costs, primarily workers' compensation accruals. EBITDA from Canadian operations rose $0.9 million reflecting operational improvements.

Compared to the 2007 third quarter, EBITDA from U.S. operations rose US$3.0 million due to a US$3.4 million increase from acquisitions, while same-facility EBITDA was US$0.4 million lower. Revenue from same-facility operations grew US$5.2 million or 2.0% from the third quarter of 2007, which compared to a US$5.6 million or 2.4% increase in operating, administrative and lease costs quarter over quarter. Included in higher fourth quarter operating expenses were US$2.5 million of non-recurring costs and US$1.4 million of seasonal labour and utility costs, which were partially offset by the favourable impact of US$1.5 million of corporate costs being reallocated to Canadian operations. This reallocation of corporate costs was the primary factor leading to a $2.1 million reduction in EBITDA from Canadian operations compared to the prior quarter.

Earnings from continuing health care operations prior to separately reported items, as outlined in Table 2 above, were $12.8 million in the 2007 fourth quarter compared to $16.3 million in the 2006 fourth quarter and $14.4 million in the 2007 third quarter. Contributing to the change from both prior periods were operational improvements offset by higher financing costs and a negative impact from the stronger Canadian dollar. In addition, the 2007 fourth quarter effective income tax rate was lower than both prior periods, with the reduction from the 2006 fourth quarter reflecting higher non-taxable income and the change from the previous quarter due to approximately $0.8 million of favourable tax adjustments.

As outlined in Table 2, earnings from continuing operations, including separately reported items and equity accounted earnings, were $11.2 million ($0.16 per diluted unit) in the 2007 fourth quarter compared to a loss of $50.9 million ($0.74 loss per diluted unit) in the 2006 fourth quarter.

Liquidity and Capital Resources

At December 31, 2007, the REIT had cash and cash equivalents of $44.2 million compared with $28.1 million at December 31, 2006. Cash provided by operating activities was $115.6 million in 2007 compared to $128.8 million in 2006. Cash provided by operating activities includes discontinued operations, which in 2006 included ALC.

Capital additions to property and equipment, excluding acquisitions, were $75.0 million in 2007 compared to $76.6 million in 2006. Growth expenditures totalled $40.1 million in 2007 versus $29.5 million in 2006. Facility maintenance costs were $34.9 million in 2007 compared to $32.2 million in 2006. These costs fluctuate on a quarterly basis with the timing of projects and seasonality.

Long-term debt, including current portion, was $1,071.7 million at December 31, 2007, and was net of $20.6 million of deferred financing costs. The current portion of long-term debt at December 31, 2007 of $80.4 million included mortgage loans of $59.6 million maturing in 2008. Management is currently in the process of, and is confident in, refinancing Tendercare's mortgage loans of US$49.5 million, which are due to LaSalle Bank on April 30, 2008, and $10.6 million of Canadian mortgages that were extended beyond their maturity date of February 1, 2008. At December 31, 2007, long-term debt (at face value and including current portion) represented 43.8% of adjusted gross book value (39.2% excluding the convertible debentures).

At December 31, 2007, U.S. operations had US$64.3 million available under its credit facility and cash on hand of US$12.1 million. The Canadian operations had cash on hand of $32.2 million and available bank lines of $6.1 million.

For 2008, management believes that cash from operating activities, together with available bank credit facilities, and debt refinancings in process, will be sufficient to fund the current requirements of the REIT's ongoing operations, including an expected $40.0 million of maintenance capital expenditures, as well as to meet debt obligations and pay declared distributions to unitholders. The REIT raises funds through debt financings and the capital markets to fund strategic acquisitions and growth capital expenditures, the latter of which are expected to total $90.0 million in 2008.

Normal Course Issuer Bid

On December 21, 2007, the REIT received approval from the TSX to make a normal course issuer bid (the "Bid") for up to 5,500,000 of its trust units (the "REIT Units") on the TSX, representing approximately 9.7% of the public float of the REIT Units outstanding at December 14, 2007. The Bid provides the REIT's Board of Trustees with flexibility to repurchase units over a period of approximately one year, until December 24, 2008. To date there have been no purchases under the Bid.

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 269 nursing and assisted living facilities in North America, with capacity for approximately 30,300 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 37,700 people in North America.

On February 22, 2008, at 10:00 a.m. (ET), Extendicare REIT will hold a conference call to discuss its results for the fourth quarter and year ended December 31, 2007. The call will be webcast live, and archived, in the Investors/Presentation & Webcast section of Extendicare REIT's website at www.extendicare.com. Alternatively, the call-in number is 1-877-323-2090 or 416-641-6140. A taped rebroadcast of the call will be available until midnight on March 7, 2008. To access the rebroadcast, dial 1-800-408-3053 or 416-695-5800, conference ID number 3249342. 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 Investors/Financial Results/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 (Loss)
Three months ended Twelve months ended
December 31 December 31
-------------------------------------------------------------------
2007 2006 2007 2006
-------------------------------------------------------------------
(thousands of Canadian dollars except per unit amounts)
(revised) (revised)
Revenue
Nursing and assisted living centres
United States 309,871 297,297 1,184,700 1,137,729
Canada 109,829 103,536 418,658 399,222
Home health - Canada 36,194 37,628 141,797 141,104
Outpatient therapy -
United States 2,778 3,359 12,259 12,384
Other 11,005 11,131 47,035 43,169
-------------------------------------------------------------------
469,677 452,951 1,804,449 1,733,608
Operating expenses 400,584 381,371 1,519,327 1,460,758
Administrative costs 15,801 17,622 64,418 70,455
Lease costs 3,040 3,469 12,382 13,742
-------------------------------------------------------------------
EBITDA (1) 50,252 50,489 208,322 188,653
Depreciation and
amortization 13,148 12,412 49,973 48,344
Accretion expense 340 314 1,329 1,263
Interest expense 20,212 16,714 77,024 64,429
Interest income (2,067) (2,996) (8,364) (6,964)
Loss (gain) on derivative financial instruments
and foreign exchange 2,461 50,585 (18,018) 66,750
Loss (gain) from restructuring charges, asset disposals
and other items 36,698 (2,192) 55,181
-------------------------------------------------------------------
Earnings (loss) from continuing health care operations
before income taxes 16,158 (63,238) 108,570 (40,350)
-------------------------------------------------------------------
Income tax expense (recovery)
Current 3,361 (11,609) 24,678 2,860
Future 1,589 797 10,365 (10,134)
Tax associated with reorganization 15,570
-------------------------------------------------------------------
4,950 (10,812) 35,043 8,296
-------------------------------------------------------------------
Earnings (loss) from continuing health
care operations 11,208 (52,426) 73,527 (48,646)
Share of equity accounted
earnings 1,528 1,541 5,220
-------------------------------------------------------------------
Earnings (loss) from continuing
operations 11,208 (50,898) 75,068 (43,426)
Discontinued operations (730) 2,154 (4,687) 7,698
-------------------------------------------------------------------
Net earnings (loss) 10,478 (48,744) 70,381 (35,728)
-------------------------------------------------------------------
-------------------------------------------------------------------
Basic and Diluted Earnings (Loss) per Unit($)
Earnings (loss) from continuing
operations 0.16 (0.74) 1.06 (0.64)
Net earnings (loss) 0.15 (0.71) 1.00 (0.53)
-------------------------------------------------------------------
(1) Refer to discussion of non-GAAP measures.

EXTENDICARE REIT
Condensed Consolidated Cash Flows
Three months Twelve months
ended December 31 ended December 31
-------------------------------------------------------------------
2007 2006 2007 2006
-------------------------------------------------------------------
(thousands of Canadian dollars)
(revised) (revised)
Operating Activities
Net earnings (loss) 10,478 (48,744) 70,381 (35,728)
Adjustments for:
Depreciation and
amortization 13,146 14,841 50,072 65,414
Provision for self-insured
liabilities 2,906 1,441 11,746 10,261
Payments for self-insured
liabilities (5,864) (5,020) (20,846) (17,593)
Future income taxes 2,985 (13,195) 9,501 (11,200)
Loss (gain) on derivative financial instruments
and foreign exchange 2,461 50,585 (18,018) 66,750
Loss (gain) from restructuring charges,
asset disposals and other items 36,698 (2,192) 55,181
Loss from restructuring charges, asset
impairment, disposals and other items
from discontinued operations 36 733 5,711 10,812
Undistributed share of earnings from
equity investments (1,528) (1,541) (5,220)
Other 1,812 1,066 6,018 1,991
-------------------------------------------------------------------
27,960 36,877 110,832 140,668
Net change in operating assets and liabilities
Accounts receivable (22,798) 97 (20,072) (40,463)
Supplies and prepaid expenses 7,606 (111) 4,095 (4,080)
Accounts payable and
accrued liabilities 17,243 1,741 886 38,040
Income taxes (2,147) 4,985 19,846 (5,381)
-------------------------------------------------------------------
27,864 43,589 115,587 128,784
-------------------------------------------------------------------
Investing Activities
Capital additions (21,839) (20,797) (74,962) (76,601)
Acquisitions, net of
cash acquired (117,615) (10,371) (142,263) (50,213)
Net proceeds from dispositions 9,726 907 11,954 2,851
Sale/return of equity
accounted investment 1,089 82,534
Other assets 6,969 882 5,650 9,869
-------------------------------------------------------------------
(121,670) (29,379) (117,087) (114,094)
-------------------------------------------------------------------
Financing Activities
Issue of long-term debt 1,117 568,600 247,812 568,600
Issue on line of credit 2,457 (71,354) 10,748
Repayment of long-term debt (2,626)(412,416) (13,787) (419,860)
Decrease (increase) in investments held
for self-insured liabilities (8,863) (5,675) 2,969 (2,447)
Purchase of shares
for cancellation (30) (20,015) (30) (20,391)
Distributions/dividends paid (18,863) (3,326) (80,913) (13,196)
Cash distributed with ALC (40,687) (40,687)
Transaction costs of reorganization (4,655) (25,561)
Financial costs (70) (41,748) (10,065) (62,953)
Income taxes paid re: the
distribution of ALC (7,007) (120,220) (7,007)
Other (17,511) 9,420 (17,217) 14,068
-------------------------------------------------------------------
(44,389) (28,863) 19,297 (9,434)
-------------------------------------------------------------------
Foreign exchange gain (loss) on cash
held in foreign currency 4,617 433 (1,620) 192
-------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (133,578) (14,220) 16,177 5,448
Cash and cash equivalents at
beginning of period 177,812 42,277 28,057 22,609
-------------------------------------------------------------------
Cash and cash equivalents
at end of period 44,234 28,057 44,234 28,057
-------------------------------------------------------------------
-------------------------------------------------------------------

EXTENDICARE REIT
Condensed Consolidated Balance Sheets
December 31 December 31
2007 2006
-------------------------------------------------------------------
(thousands of Canadian dollars, unless otherwise noted)
Assets (revised)
Current assets
Cash and short-term investments 44,234 28,057
Invested assets 2,439
Accounts receivable, less allowances 214,305 204,741
Income taxes recoverable 2,640
Future income tax assets 27,504 25,183
Supplies and prepaid expenses 25,467 20,048
-------------------------------------------------------------------
316,589 278,029
Property and equipment 842,648 729,274
Goodwill and other intangible assets 161,538 80,648
Other assets 119,388 147,840
-------------------------------------------------------------------
1,440,163 1,235,791
Equity accounted investments 79,391
-------------------------------------------------------------------
1,440,163 1,315,182
-------------------------------------------------------------------
-------------------------------------------------------------------
Liabilities and Unitholders' Deficiency
Current liabilities
Accounts payable 35,963 52,583
Accrued liabilities 203,084 207,836
Accrual for self-insured liabilities 12,392 20,395
Current portion of long-term debt 80,378 13,423
Income taxes payable 95,558
-------------------------------------------------------------------
331,817 389,795
Accrual for self-insured liabilities 30,018 39,386
Long-term debt 991,333 837,757
Other long-term liabilities 63,978 59,312
Future income tax liabilities 46,595 12,586
-------------------------------------------------------------------
1,463,741 1,338,836
Unitholders' deficiency (23,578) (23,654)
-------------------------------------------------------------------
1,440,163 1,315,182
-------------------------------------------------------------------
-------------------------------------------------------------------
Closing US/Cdn. dollar exchange rate 0.9913 1.1654

EXTENDICARE REIT
Financial and Operating Statistics
(dollar amounts in Canadian dollars, unless otherwise noted)
Q4/07 Q4/06 2007 2006
--------------------------------------------------------------------
Revenue (millions)
United States (US$) $322.1 $272.0 $1,148.8 $1,045.4
--------------------------------------------------------------------
United States $320.8 $309.7 $1,234.7 $1,185.6
Canada 148.9 143.3 569.7 548.0
--------------------------------------------------------------------
$469.7 $453.0 $1,804.4 $1,733.6
--------------------------------------------------------------------
--------------------------------------------------------------------
EBITDA (millions)
United States (US$) $37.6 $33.6 $143.9 $126.1
--------------------------------------------------------------------
United States $37.1 $38.2 $154.7 $143.0
Canada 13.1 12.3 53.6 45.7
--------------------------------------------------------------------
$50.3(1) $50.5 $208.3 $188.7
--------------------------------------------------------------------
--------------------------------------------------------------------
Health Care Earnings (Loss) from Continuing Operations (millions)
United States (US$) $8.5 $(8.9) $51.1 $(5.4)
--------------------------------------------------------------------
United States $8.5 $(9.9) $55.6 $(6.3)
Canada 2.7 (42.5) 17.9 (42.3)
--------------------------------------------------------------------
$11.2 $(52.4) $73.5 $(48.6)
--------------------------------------------------------------------
--------------------------------------------------------------------
Health Care Net Earnings (Loss) (millions)
United States (US$) $7.8 $(7.0) $47.0 $1.3
--------------------------------------------------------------------
United States $7.8 $(7.8) $50.9 $1.4
Canada 2.7 (42.5) 17.9 (42.3)
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$10.5 $(50.3) $68.8 $(40.9)
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U.S. Nursing Centre Statistics
Percent of Revenue by Payor Source (same-facility basis)
Medicare 35.3% 35.8% 35.6% 35.5%
HMO and insurance 8.1 6.0 7.5 6.0
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Skilled mix 43.4 41.8 43.1 41.5
Private/other 9.2 10.3 9.6 10.3
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Quality mix 52.6 52.1 52.7 51.8
Medicaid 47.4 47.9 47.3 48.2
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Average Daily Census by Payor Source (same-facility basis)
Medicare 2,174 2,296 2,256 2,299
HMO and insurance 679 489 633 513
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Skilled mix 2,853 2,785 2,889 2,812
Private/other 1,327 1,453 1,337 1,447
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Quality mix 4,180 4,238 4,226 4,259
Medicaid 8,166 8,319 8,204 8,329
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12,346 12,557 12,430 12,588
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Average Revenue per Resident Day by Payor Source
(excluding prior period settlement adjustments)(US$)
Medicare Part A only $411.87 $382.78 $395.56 $372.32
HMO and insurance 334.10 330.83 327.12 307.61
Private/other 196.52 192.04 198.90 190.39
Medicaid 164.18 157.30 160.90 153.96
Medicare (Part A and B) 450.28 421.58 433.23 407.67
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Average Occupancy (excluding managed facilities)
(same-facility basis)
U.S.nursing facilities 89.8% 91.1% 90.2% 91.6%
U.S.assisted living facilities 88.3 81.4 87.1 78.4
Canadian facilities average
occupancy 98.1 98.1 98.2 98.1
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Average US/Cdn. dollar
exchange rate 0.9837 1.1386 1.0748 1.1341
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Capital Additions to Property and Equipment (thousands)
Growth expenditures 8,669 9,405 40,107 28,398
Sprinkler project 62 1,125
Facility maintenance 13,170 9,954 34,855 32,249
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21,839 19,421 74,962 61,772
ALC operations distributed 1,376 14,829
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Consolidated reported 21,839 20,797 74,962 76,601
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(1) Does not add due to rounding.

EXTENDICARE REIT
Supplemental Information-FFO and AFFO
The following table provides a reconciliation of EBITDA to Funds
from Operations(FFO), Distributable Income (DI) and Adjusted Funds
from Operations (AFFO) for the years ended December 31, 2007
and 2006. (1)
--------------------------------------------------------------------
(thousands of Canadian
dollars unless
otherwise noted) Q4/07 Q4/06 2007 2006
--------------------------------------------------------------------
EBITDA from continuing
health care operations 50,252 50,489 208,322 188,653
--------------------------------------------------------------------
Depreciation for furniture, fixtures,
equipment and computers 3,951 3,557 14,351 14,426
Interest expense, net 18,145 13,718 68,660 57,465
Current income tax
expense (2) 4,933 10,693 25,681 32,043
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27,029 27,968 108,692 103,934
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FFO (continuing operations) 23,223 22,521 99,630 84,719
Amortization of deferred
financing costs 1,526 839 5,336 2,628
Principal portion of government
capital funding payments 513 481 2,047 1,929
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DI (continuing operations) 25,262 23,841 107,103 89,276
Additional maintenance
capital expenditures (3) (9,219) (6,397) (20,504) (17,823)
--------------------------------------------------------------------
AFFO (continuing operations) 16,043 17,444 86,509 71,453
AFFO (discontinued
operations) (4) (737) 3,374 (999) (2,333)
--------------------------------------------------------------------
AFFO 15,306 20,818 85,510 69,120
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Per Basic Unit ($)
AFFO (continuing operations) 0.228 0.250 1.230 1.045
AFFO 0.218 0.299 1.216 1.011
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Per Diluted Unit ($)
AFFO (continuing operations) 0.220 0.250 1.205 1.036
AFFO 0.209 0.299 1.191 1.002
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Distributions declared 19,542 12,988 78,084 12,988
Distributions declared
per unit ($) 0.2775 0.1850 1.1100 0.1850
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Basic weighted average number
of units (thousands) 70,413 69,603 70,336 68,355
Diluted weighted average number of
units (thousands) 76,192 69,603 73,392 68,955
--------------------------------------------------------------------

1. "EBITDA", "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. Excludes current tax with respect to the loss (gain) from
derivative financial instruments, foreign exchange,
restructuring charges, asset 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 DI.
4. The impact of discontinued operations reduces FFO, DI, and AFFO
by the same amount. Therefore, FFO, including discontinued
operations, was $98,631 in 2007 and $82,386 in 2006, while DI
was $106,014 in 2007 and $86,943 in 2006.
--------------------------------------------------------------------
Reconciliation of Cash Provided by Operating Activities to DI
and AFFO
--------------------------------------------------------------------
(thousands of Canadian dollars) Q4/07 2007 2006
--------------------------------------------------------------------
Cash provided by operating activities 27,864 115,587 128,784
Add (Deduct):
Net change in operating assets
and liabilities 96 (4,755) 11,884
Earnings of ALC, after adjustments for non-cash
items, net of taxes (34,220)
Current tax recovery on loss (gain) from derivative
financial instruments, foreign exchange,
asset impairment, disposals
and other items (3,020) (2,324) (14,574)
Net provisions and payments for
self-insured liabilities 2,958 9,100 7,332
Depreciation for furniture, fixtures,
equipment and computers (3,951) (14,351) (14,426)
Other 65 710 234
Principal portion of government capital
funding payments 513 2,047 1,929
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DI 24,525 106,014 86,943
Additional maintenance
capital expenditures (9,219) (20,504) (17,823)
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AFFO 15,306 85,510 69,120
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