This presentation contains forward-looking statements, based on our best judgements, which reflect risks and uncertainties.

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Carmella Atkinson
5 years ago
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EBITDA, Adjusted EBITDA, net operating income (NOI), funds from operations (FFO), and adjusted funds from operations (AFFO) are non- GAAP

1 2014 Third Quarter Conference Call & Webcast November 7, 2014 Forward-looking Statements This presentation contains forward-looking statements, based on our best judgements, which reflect risks and uncertainties. Actual results could vary from expectations. EBITDA, Adjusted EBITDA, net operating income (NOI), funds from operations (FFO), and adjusted funds from operations (AFFO) are non- GAAP measures and do not have standardized meanings prescribed by GAAP. Further information can be found in the disclosure documents filed by Extendicare. 2 1

2 Extendicare U.S. Transaction helping people live better 3 Sale Strategic Process Review Overview Timeline OUR OBJECTIVE: STRATEGIC FOCUS ON THE CANADIAN MARKET Initiated broad auction Multiple bids received Entered exclusive discussions with Formation Capital Final proposal from Formation Resolution of government investigation December 2012 Q May 2013 August

3 Overview of Transaction for Extendicare s U.S. Business US$870M sale of real estate and operations 8.8x EBITDA multiple (1) US$222M net cash proceeds (2) Additional upside Ongoing cash flow stream Expected gross proceeds from Estimated to be ~$6M per year potential: (3), for 15 future sale of 10 retained years, plus the potential for profit sharing facilities (1) LTM as of 9/30/2014, EBITDA normalized to exclude strengthening of prior period reserves for self-insured liabilities. (2) After accounting for tax, working capital and other closing adjustments (3) Average rent share, net of upfront costs Our Goal: Crystallize maximum value for shareholders with attractive valuation, cash proceeds and deal certainty 5 Key Transaction Terms (US $ in millions) Normalized EBITDA Multiple (LTM as of 9/30/2014) 1 8.8X Calculation of Cash Proceeds 2 Total Purchase Price $870 Plus: Cash distributed and other adjustments 102 Less: Indebtedness (665) Pre-Tax Proceeds $307 Less: Implied Tax Net of Make-whole (85) Net After-tax Proceeds $222 Other Sources of Value: Est. ongoing cash flow stream (per year for 15 years) $6 Expected gross proceeds of retained facilities $30-$40 Attractive valuation multiple Does not require shareholder vote $30M break fee in the event of financing failure (1) EBITDA normalized to exclude strengthening of prior period reserves for self-insured liabilities. (2) Final amounts may vary. Calculation shown assuming balance sheet as of September 30,

Back to Basics: Focus on Canada Leading Provider of Quality Senior Care Services in Canada

EBITDA 900 800 $776 $753 $729 $698 700 $643 $663 $606 600 500 400 300 200 100 0 $55 $65 $67

Occupancy Daily Rate 90 80 70 60 50 40 30 20 10 0 300 250 200 150 100 50 0 7 Our Opportunity

Grow our Long-Term Care Business 5 new centers since 2010 Average daily rate up 2.

4 Back to Basics: Focus on Canada Leading Provider of Quality Senior Care Services in Canada 104 centers* ~13,500 beds* 40+ years of operation Stable underlying demographics and industry fundamentals Strong brand and reputation for quality Achieved critical mass across most of Canada * Including owned/lease/managed Historical Financial Performance Revenue EBITDA $776 $753 $729 $ $643 $663 $ $55 $65 $67 $66 $72 $72 $ TTM Historical Operating Performance Occupancy Daily Rate Our Opportunity in Canada 1. Grow our Long-Term Care Business 5 new centers since 2010 Average daily rate up 2.2% (YTD) Added 23 centers to the managed portfolio since 2011 Extendicare Maple View, Sault Ste. Marie, ON Extendicare Timmins, Timmins, ON Continued Investment/Redevelopment of Existing Centers 8 4

0% (YTD) Well-positioned to benefit under Ontario government's new home health care funding model Contracts awarded on quality of care and value 9

5 Our Opportunity in Canada 2. Grow our Home Health Care Business The Largest Home Health Care Operator in Ontario Demand for aging at home Volume up 8.0% (YTD) Well-positioned to benefit under Ontario government's new home health care funding model Contracts awarded on quality of care and value 9 Our Opportunity in Canada 3. Expand into Vertical Businesses HEALTH CARE CONTINUUM INDEPENDENT LIVING/ SENIORS APARTMENTS HOME HEALTH CARE RETIREMENT/ ASSISTED LIVING CENTERS LONG-TERM CARE CENTERS OUTPATIENT REHABILITATION CLINICS ACUTE CARE HOSPITALS LOWER INTENSITY OF SERVICES HIGHER 10 5

Expand into vertical businesses Grow our non-government funded revenue Extendicare Maple View, Sault

6 Extendicare Tomorrow Leading Provider of Senior Care Services in Canada Improved financial profile 1. Grow our owned and managed long-term care operations 2. Grow our home care operations 3. Expand into vertical businesses Grow our non-government funded revenue Extendicare Maple View, Sault Ste. Marie, ON 11 Third Quarter and Year-to-date Review of Canadian Operations helping people live better 12 6

7 Canadian Operations LTC average daily revenue rate 2.2% 3.8% $ $ $ Ontario Home Health Care Volumes (hours/day) 12, % 13,074 12, % 13,916 $ YTD 09/13 YTD 09/ YTD 09/13 YTD 09/14 Average occupancy unchanged at 98% Ontario wait list ~ 21, Canadian Operations 2014 LTC Funding Announcements Ontario 2% increase to nursing and program flow-through envelopes retroactive to April 1 st, ~ $3.7M per annum in revenue and costs of care 0.7% increase in accommodation funding effective July 1 st, ~ $0.8M per annum in revenue ($0.1M flow-through) Sept. 1 st preferred accommodation rates increasing $1.00 for semi-private and $1.75 for private (applicable only to new admissions for New and A beds) Alberta (as previously announced) April 1 st 0.9% in gov. funding, ~ $0.7M per annum July 1 st 3.0% in resident accommodation fees, ~ $0.7M per annum Resident accommodation fees to increase min. 3% in 2015 and

Ontario Redevelopment Ontario 2014 budget included: Recommitment for

homes by 5 years Update provided in October: Capital redevelopment

next few months in consultation with the industry 256 beds 180 beds 15

expand access to home care Funding PSW hourly wage $4.00 over 3 years $1.

funding for additional benefit costs ParaMed s estimated impact of $1.

8 Ontario Redevelopment Ontario 2014 budget included: Recommitment for capital redevelopment program Plans to extend licenses for New and A homes by 5 years Update provided in October: Capital redevelopment program to begin in fall of 2015 Details of program to be finalized over next few months in consultation with the industry 256 beds 180 beds 15 ParaMed Home Health Care 2014 Ontario Budget Government to continue to expand access to home care Funding PSW hourly wage $4.00 over 3 years $1.50 implemented in September, retroactive to April 1 st Shortfall in funding for additional benefit costs ParaMed s estimated impact of $1.50: funding ~ $7.2M, and labour costs ~ $7.6M ParaMed is well positioned for long-term growth 16 8

9 Q3/14 Results and Variance from Q3/13 Variance from Q3/13 favourable (unfavourable) ($ millions) Q3/14 Q3/13 ($) (%) Revenue $ $ $ % Adjusted EBITDA $ 20.2 $ 19.4 $ % Adjusted EBITDA margin 10.1% 10.3% (20) bps AFFO $ 10.2 $ 11.4 $ (1.2) (10.5)% Interest (excluding deferred financing costs) $ 6.0 $ 7.6 $ % Current taxes (affecting AFFO) $ 2.1 $ 0.2 $ (1.9) (950.0)% FFO effective tax rate 17.5% 2.6% CAPEX $ 2.9 $ 1.1 $ (1.8) (63.6)% Adjusted EBITDA refers to EBITDA adjusted to exclude for the line item on the face of our statement of earnings referred to as loss from asset impairment, disposals and other items. 17 YTD/14 Results and Variance from YTD/13 Nine Months September Nine Months September Variance from 2013 favourable (unfavourable) ($ millions) ($) (%) Revenue $ $ $ % Adjusted EBITDA $ 53.8 $ 52.5 $ % Adjusted EBITDA margin 9.3% 9.4% (10) bps AFFO $ 27.6 $ 29.9 $ (2.3) (7.7)% Interest (excluding deferred financing costs) $ 21.2 $ 21.4 $ % Current taxes (affecting AFFO) $ 3.4 $ 1.4 $ (2.0) (142.9)% FFO effective tax rate 13.0% 5.8% CAPEX $ 4.6 $ 2.3 $ (2.3) (100)% Adjusted EBITDA refers to EBITDA adjusted to exclude for the line item on the face of our statement of earnings referred to as loss from asset impairment, disposals and other items. 18 9

10 YTD/14 AFFO and Payout Ratio AFFO ($ per basic share) Cash distributions ($/share) YTD 09/14 Payout ratio: 19 Cash and Long-term Debt ($ in millions) Year of Maturity Balance Sep/14 Cash and cash equivalents (EHSI - US$86M; Cda - $31.6M) C$ 127 Restricted cash (EHSI - US$9M; Cda - $1M) C$ 12 Long-term debt PrivateBank (variable; WAM 5 yrs) 2019 US$ 130 HUD mortgages (WAR 4.3%; WAM 29 yrs) Other U.S Total U.S. Debt (WAR 4.4%; WAM 25 yrs) US$ 675 C$ 756 CMHC & other Cdn mortgs (WAR 5.2%; WAM 12 yrs) Conv t debt (face value, WAR 6.0%; WAM 5 yrs) Sept/ Total long-term debt (1) (WAR 4.8%; WAM 19 yrs) C$ 1,246 (1) LTD includes current portion and long-term debt held for sale, excludes financing costs, and reflects convertible debentures at face value. Interest coverage ratio 2.7 times (TTM Sep/14 Adjusted EBITDA/net interest) 20 10

11 2014 Third Quarter Conference Call & Webcast November 7, Glossary of terms Acuity A measure of levels of care and services required. Residents with complex medical needs who require rehabilitation services and treatment of multiple illnesses have high levels of acuity. Average Daily Census (ADC) The number of residents occupying beds over a period of time, divided by the number of days in that period. Census The number of residents occupying beds (or units in the case of an assisted living facility). Medicare A U.S. federally funded health-insurance program providing coverage for persons aged 65 or over, disabled persons who have been disabled for at least two consecutive years, and persons who have end-stage renal disease. Medicaid A state-administered program financed by state funds and matching federal funds, providing health insurance for certain persons in financial need, regardless of age, and which may supplement Medicare benefits for financially needy persons aged 65 and older. In most states, Medicaid is the most unattractive payor source as rates are lower than those from Medicare or private pay sources. Managed Care Collectively health maintenance organization (HMO) and commercial insurance (CI), but does not include HMOs serving Medicaid residents, which are included in the Medicaid category Occupancy The percentage of census relative to the total available resident beds. Private pay Revenue from individuals, private insurance companies, HMOs, preferred provider organizations (PPOs), other charge-based payment sources, HMO Medicare risk plans, Blue Cross and the Department of Veteran Affairs. Quality Mix The level of census from non-medicaid sources. Resource Utilization Groupings (RUGs) Classifications implemented by the Centers for Medicare & Medicaid Services (CMS) aimed at categorizing residents based on the nature of their condition and the level of care and services required. Skilled Mix The level of census from Medicare and Managed Care payor sources

2016 Year End Results Conference Call. March 1, 2017

2016 Year End Results Conference Call March 1, 2017 1 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements, based on our best judgements, which reflect risks and uncertainties.