Extendicare Announces 2019 Third Quarter Results

MARKHAM, Ontario, Nov. 07, 2019 (GLOBE NEWSWIRE) — Extendicare Inc. (“Extendicare” or the “Company”) (TSX: EXE) today reported results for the three and nine months ended September 30, 2019. Results are presented in Canadian dollars unless otherwise noted.
“We are pleased with our progress and continue to make important improvements on several fronts,” said Chief Executive Officer, Dr. Michael Guerriere. “We increased our retirement living capacity with the recent opening of a new 124-suite retirement community, welcomed a significant new SGP client serving 4,000 residents in British Columbia, and continued to make progress on our ParaMed transformation, with 76% of the targeted volumes now supported by the new platform. We believe the ParaMed enhancements resulted in a less pronounced seasonal reduction in home health care volumes than what we typically experience in the summer months. These efforts will optimize our operations to meet the increasing demand for high quality seniors care while driving long-term growth for our shareholders.”Financial Highlights from Third Quarter 2019 (all comparisons with Q3 2018)Revenue of $282.7 million, up 0.9% or $2.4 million from $280.3 million; driven by long-term care (LTC) funding enhancements and growth in retirement living.Net operating income (NOI) of $34.9 million, down 1.8% or $0.6 million from $35.5 million; reflecting growth in the LTC and retirement living segments, offset by lower home health care volumes and increased back office operating costs.Adjusted EBITDA of $23.6 million, down $0.8 million from $24.4 million; impacted by higher administrative costs, primarily due to increased compensation costs and professional fees.Earnings from continuing operations of $5.2 million, down $2.4 million from $7.6 million; impacted by a change in foreign exchange and fair value adjustments related to the Captive’s investments and interest rate swaps.AFFO of $13.7 million ($0.153 per basic share), up $0.3 million; impacted by lower earnings as noted above, offset by lower maintenance capex. Financial Highlights from Nine Months 2019 (all comparisons with Nine Months 2018)Revenue of $841.1 million, up 1.2% or $9.9 million from $831.2 million; driven by LTC funding enhancements, growth in retirement living and incremental home health care funding of $2.2 million for 2018 related to Bill 148 recognized in the second quarter of 2019.NOI of $100.6 million, down $0.5 million from $101.1 million; driven by growth in LTC and retirement living, offset by lower home health care volumes and higher back office operating costs.Adjusted EBITDA of $68.1 million, down $3.6 million from $71.7 million; impacted by higher administrative costs, primarily due to increased compensation costs and professional fees.Earnings from continuing operations of $12.1 million, down $5.0 million from $17.1 million; impacted by a change in foreign exchange and fair value adjustments, and higher depreciation and amortization.  AFFO of $41.2 million ($0.463 per basic share) down $3.9 million; impacted by lower earnings as noted above and higher current income taxes, partially offset by lower maintenance capex. Dividends declared of $32.0 million in first nine months of 2019, representing approximately 78% of AFFO.Business UpdatesParaMed ProgressThe transformation of ParaMed is key to driving profitable growth for the Company. Progress continues on new training processes, standardized operating procedures and the implementation of a new cloud-based system across the operations. ParaMed has focused the transformation efforts in its larger markets first, with 76% of the targeted volumes now converted, and expects to be mostly complete in these areas by the end of 2019, with implementation in smaller markets targeted for early 2020. The Company’s cost estimate of over $12 million to transform the ParaMed business is unchanged, with approximately $2.6 million remaining to be incurred. Though the transformation and its associated costs have lowered ParaMed’s profitability in the short term, we believe that once completed these enhancements will drive long-term growth. We expect to recognize the benefits from the transformation, including increasing volumes, enhanced staff retention and improved efficiencies, in 2020.  In addition, ParaMed continues to make progress with its previously announced exit from the low margin B.C. home health care market. Final dates for the transfer of the operations to the B.C. Health Authorities have not been finalized; however, the Company expects it to occur no later than the first quarter of 2020.Retirement Living OperationsRetirement living continues to deliver strong financial results and expand its footprint with the addition of 112 suites at Bolton Mills earlier in 2019 and the 124-suite retirement living community in Barrie, Ontario that opened in October 2019. Pre-lease activity at The Barrieview has been strong, and we anticipate occupancy to trend ahead of plan. As well, expansion plans are under way for a 59-suite expansion of the Company’s 63-suite Empire Crossing Retirement Community in Port Hope, Ontario.The Company’s retirement living operations contributed $0.2 million and $1.7 million in additional NOI for the three and nine months ended September 30, 2019, respectively, as compared to the same periods in 2018. Average occupancy of the stabilized retirement living communities grew to 94.6% for the nine months ended September 30, 2019, up from 90.5% for the same prior year period. In the third quarter, lease-up communities average occupancy grew sequentially to 74.6%, up from 67.4% in the three months ended June 30, 2019.SGP Purchasing Partner Network (SGP)SGP continues to expand its market presence. In the third quarter of 2019, SGP welcomed West Coast Seniors Housing Management, which provides services to over 4,000 residents in British Columbia, to its growing number of highly respected clients. Together with our partners, SGP now provides for third parties cost effective products and services for more than 64,000 senior residents across Canada.Financial Activities Subsequent to September 30, 2019Repatriated US$10.0 million from its captive insurance company (the “Captive”).Secured permanent Canadian Mortgage and Housing Corporation insured financing of $9.3 million on Cedar Crossing Retirement Community, constructed in 2016.November Dividend DeclaredThe Board of Directors of Extendicare today declared a cash dividend of $0.04 per share for the month of November 2019, which is payable on December 16, 2019, to shareholders of record at the close of business on November 29, 2019. This dividend is designated as an “eligible dividend” within the meaning of the Income Tax Act (Canada).Select Financial InformationThe following is a summary of select financial information for the three and nine months ended September 30, 2019 and 2018.Summary of Factors Impacting Comparability of Results for 2019
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