Extendicare REIT Announces 2010 Second Quarter Results

EXTENDICARE REIT
Condensed Consolidated Earnings

(thousands of Canadian dollars Three months ended Six months ended
except per unit amounts) June 30 June 30
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2010 2009 2010 2009
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Revenue
Nursing and assisted living centers
United States 337,596 371,990 673,719 769,099
Canada 122,959 118,860 241,543 233,244
Home health - Canada 38,362 38,819 77,891 74,823
Health technology services
- United States 4,139 4,794 8,285 10,245
Outpatient therapy - United States 3,758 3,505 6,694 7,236
Other 7,557 8,631 15,073 17,593
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514,371 546,599 1,023,205 1,112,240
Operating expenses 424,567 452,589 853,863 931,659
Administrative costs 17,505 18,917 34,484 38,836
Lease costs 2,612 3,097 5,420 6,191
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EBITDA (1) 69,687 71,996 129,438 135,554
Depreciation and amortization 15,785 16,350 31,479 33,709
Accretion of asset retirement
obligations 393 416 793 853
Interest expense 22,800 24,479 45,994 50,316
Interest income (2,074) (709) (3,002) (1,851)
Loss (gain) on derivative financial
instruments and foreign exchange 4,505 (12,424) 1,285 (7,474)
Loss from asset impairment,
disposals and other items 2,580 594 2,580 337
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Earnings from continuing
operations before income taxes 25,698 43,290 50,309 59,664
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Income tax expense (recovery)
Current 11,244 14,958 22,650 25,911
Future 476 (1,206) (1,475) 397
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11,720 13,752 21,175 26,308
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Earnings from continuing
operations 13,978 29,538 29,134 33,356
Discontinued operations (974) 706 (564) 545
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Net earnings 13,004 30,244 28,570 33,901
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Basic and Diluted Earnings per Unit ($)
Earnings from continuing operations 0.17 0.40 0.36 0.45
Net earnings 0.16 0.41 0.36 0.46
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(1) Refer to discussion of non-GAAP measures.
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Certain 2009 figures have been revised for comparative purposes.

EXTENDICARE REIT
Condensed Consolidated Balance Sheets

(thousands of Canadian dollars, unless June 30 December 31
otherwise noted) 2010 2009
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Assets
Current assets
Cash and short-term investments 252,542 134,012
Restricted cash 19,322 22,361
Accounts receivable, less allowances 211,563 213,477
Income taxes recoverable 8,500 29,314
Future income tax assets 24,338 24,900
Other current assets 25,017 22,187
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541,282 446,251
Property and equipment, including construction-in
-progress of $50,880 and $41,956, respectively 865,132 863,430
Goodwill and other intangible assets 194,883 191,514
Other assets 152,536 166,870
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1,753,833 1,668,065
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Liabilities and Equity
Current liabilities
Accounts payable 37,708 38,372
Accrued liabilities 232,674 245,260
Accrual for self-insured liabilities 11,505 11,321
Current portion of long-term debt 99,013 28,538
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380,900 323,491
Accrual for self-insured liabilities 29,126 32,562
Long-term debt 1,157,975 1,205,494
Other long-term liabilities 68,173 67,555
Future income tax liabilities 75,799 79,866
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1,711,973 1,708,968
Unitholders' equity (deficiency) 41,860 (40,903)
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1,753,833 1,668,065
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Closing US/Cdn. dollar exchange rate 1.0646 1.0510
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EXTENDICARE REIT
Condensed Consolidated Cash Flows

Three months ended Six months ended
(thousands of Canadian dollars) June 30 June 30
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2010 2009 2010 2009
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Operating Activities
Net earnings 13,004 30,244 28,570 33,901
Adjustments for:
Depreciation and amortization 15,785 16,782 31,479 34,665
Provision for self-insured
liabilities 3,942 4,988 9,433 10,313
Payments for self-insured
liabilities (8,536) (4,443) (11,659) (7,563)
Future income taxes (999) (1,204) (2,950) 391
Loss (gain) on derivative financial instruments
and foreign exchange 4,505 (12,424) 1,285 (7,474)
Loss from asset impairment,
disposals and other items 2,580 594 2,580 337
Loss (gain) from asset disposals,
impairment and other items from
discontinued operations 2,751 - 2,751 (1,426)
Other 2,596 2,866 5,229 6,205
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35,628 37,403 66,718 69,349
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Net change in operating assets and liabilities
Accounts receivable 10,475 9,320 2,148 24,903
Other current assets 513 608 (2,650) (6,002)
Accounts payable and
accrued liabilities (15,394) (4,555) (16,930) (12,064)
Income taxes 11,133 (8,345) 19,633 (4,843)
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6,727 (2,972) 2,201 1,994
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42,355 34,431 68,919 71,343
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Investing Activities
Growth capital expenditures (6,901) (12,518) (18,517) (25,789)
Maintenance capital expenditures (5,173) (7,917) (9,759) (15,241)
Net proceeds from dispositions 5,482 - 5,482 9,995
Other assets (490) 384 (1,185) (1,710)
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(7,082) (20,051) (23,979) (32,745)
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Financing Activities
Issue of long-term debt 9,427 6,337 30,138 12,049
Repayment of long-term debt (6,957) (3,895) (20,365) (14,135)
Decrease (increase) in
restricted cash 3,039 (29,482) 3,039 (29,482)
Decrease in investments held
for self-insured liabilities 7,950 6,536 8,278 7,091
Purchase of securities for
cancellation - - - (6,189)
Distributions paid (15,968) (14,584) (31,086) (30,866)
Issue of units - - 82,212 -
Financing costs (476) (2,795) (740) (2,832)
Other (95) (330) (95) (1,860)
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(3,080) (38,213) 71,381 (66,224)
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Foreign exchange gain (loss) on cash
held in foreign currency 4,457 (1,704) 2,209 (851)
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Increase (decrease) in cash
and cash equivalents 36,650 (25,537) 118,530 (28,477)
Cash and cash equivalents at
beginning of period 215,892 120,144 134,012 123,084
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Cash and cash equivalents at
end of period 252,542 94,607 252,542 94,607
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EXTENDICARE REIT
Financial and Operating Statistics

Three months ended Six months ended
June 30 June 30
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(amounts in Canadian dollars, unless
otherwise noted) 2010 2009 2010 2009
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Earnings from Continuing Operations (millions)
United States (US$) $11.8 $20.7 $22.9 $25.8
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United States $12.1 $24.8 $23.6 $31.1
Canada 1.9 4.7 5.5 2.2
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$14.0 $29.5 $29.1 $33.3
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Net Earnings (millions)
United States (US$) $10.8 $21.4 $22.3 $26.3
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United States $11.2 $25.5 $23.1 $31.7
Canada 1.9 4.7 5.5 2.2
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$13.1 $30.2 $28.6 $33.9
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U.S. Skilled Nursing Center Statistics
Percent of Revenue by Payor Source (same-facility basis, excluding prior
period settlement adjustments)
Medicare (Parts A and B) 33.3% 34.1% 33.1% 34.4%
Managed Care 9.5 9.6 9.5 9.5
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Skilled mix 42.8 43.7 42.6 43.9
Private/other 9.0 9.4 9.1 9.3
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Quality mix 51.8 53.1 51.7 53.2
Medicaid 48.2 46.9 48.3 46.8
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100.0 100.0 100.0 100.0
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Average Daily Census by Payor Source (same-facility basis)
Medicare 2,342 2,385 2,334 2,441
Managed Care 802 797 808 802
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Skilled mix 3,144 3,182 3,142 3,243
Private/other 1,425 1,518 1,427 1,516
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Quality mix 4,569 4,700 4,569 4,759
Medicaid 9,440 9,490 9,498 9,513
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14,009 14,190 14,067 14,272
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Average Revenue per Resident Day by Payor Source (excluding prior period
settlement adjustments) (US$)
Medicare Part A only $ 457.74 $ 454.38 $ 457.40 $ 451.03
Medicare (Parts A and B) 499.77 497.31 499.87 492.07
Managed Care 415.60 417.72 412.75 415.12
Private/other 223.73 215.17 224.59 213.52
Medicaid 179.79 172.06 179.60 172.10
Weighted average 252.63 245.14 252.02 244.88
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Average Occupancy (excluding managed centers) (same-facility basis)
U.S. skilled nursing centers 86.9% 88.3% 87.2% 88.8%
U.S. assisted living centers 78.3 82.6 78.3 82.6
Canadian centers 98.3 97.9 98.1 97.8
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Average US/Cdn. dollar exchange rate 1.0277 1.1672 1.0338 1.2062
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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 periods ended June 30, 2010 and 2009.(1)

Three months ended Six months ended
June 30 June 30
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(thousands of Canadian dollars
unless otherwise noted) 2010 2009 2010 2009
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EBITDA from continuing
operations 69,687 71,996 129,438 135,554
Depreciation for furniture, fixtures,
equipment and computers (5,580) (5,983) (11,033) (12,049)
Interest expense, net (20,726) (23,770) (42,992) (48,465)
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43,381 42,243 75,413 75,040
Current income tax expense (2) (11,244) (15,448) (22,650) (26,911)
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FFO (continuing operations) 32,137 26,795 52,763 48,129
Amortization of financing costs 2,184 2,841 4,353 5,365
Principal portion of government
capital funding payments 615 574 1,226 1,150
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DI (continuing operations) 34,936 30,210 58,342 54,644
Additional maintenance capital
expenditures (3) 407 (1,934) 1,274 (3,192)
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AFFO (continuing operations) 35,343 28,276 59,616 51,452
AFFO (discontinued operations)(4) 302 1,161 731 2,362
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AFFO 35,645 29,437 60,347 53,814
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Per Basic Unit ($)
FFO (continuing operations) 0.393 0.367 0.658 0.660
AFFO (continuing operations) 0.431 0.388 0.743 0.706
AFFO 0.435 0.404 0.752 0.738
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Per Diluted Unit ($)
FFO (continuing operations) 0.365 0.340 0.620 0.618
AFFO (continuing operations) 0.390 0.349 0.676 0.639
AFFO 0.393 0.362 0.684 0.666
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Distributions declared 17,346 15,317 34,019 30,602
Distributions declared per unit ($) 0.2100 0.2100 0.4200 0.4200
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Basic weighted average number of
units (thousands) 82,576 72,914 80,221 72,913
Diluted weighted average number
of units (thousands) 96,389 86,727 94,034 86,733
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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, asset impairment, disposals and
other items that are excluded from the computation of AFFO.
3. Represents total facility maintenance capital expenditures less
depreciation for furniture, fixtures, equipment and computers already
deducted in determining DI.
4. The impact of discontinued operations reduces FFO, DI and AFFO by the
same amount.
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Reconciliation of Cash Provided by Three months ended Six months ended
Operating Activities to DI & AFFO June 30 June 30
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(thousands of Canadian dollars) 2010 2009 2010 2009
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Cash provided by operating
activities 42,355 34,431 68,919 71,343
Add (Deduct):
Net change in operating assets
and liabilities (6,727) 2,972 (2,201) (1,994)
Current tax expense on gain or loss
from derivative financial instruments,
foreign exchange, asset impairment,
disposals and other items (12) (490) (12) 1,250
Net provisions and payments for
self-insured liabilities 4,594 (545) 2,226 (2,750)
Depreciation for furniture, fixtures,
equipment and computers (5,580) (5,983) (11,033) (12,049)
Principal portion of government
capital funding payments 615 574 1,226 1,150
Other (7) 412 (52) 56
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DI 35,238 31,371 59,073 57,006
Additional maintenance capital
expenditures 407 (1,934) 1,274 (3,192)
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AFFO 35,645 29,437 60,347 53,814
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