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Extendicare Announces Productive 2015 Third Quarter Results and Agreements to Acquire Three Additional Retirement Communities

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MARKHAM, ON --(Marketwired - November 11, 2015) - Extendicare Inc. ("Extendicare" or the "Company") (TSX: EXE) today reported results for the three and nine months ended September 30, 2015. Results are presented in Canadian dollars unless otherwise noted.

FINANCIAL AND OPERATIONAL HIGHLIGHTS



-- Third quarter financial results comparison over Q3 2014 (from continuing
operations unless otherwise noted):
-- Revenue of $263.3 million, up $55.4 million or 26.7%; same-store
revenue up 3.1%.
-- Long-term care revenue of $149.7 million, up $2.7 million or 1.9%.
-- Home health care revenue of $98.2 million, up $48.6 million or
98.1%, primarily from the acquisition.
-- Net operating income of $34.8 million, up $6.1 million or 21.1%,
representing 13.2% of revenue.
-- Adjusted EBITDA of $24.0 million, up $4.4 million or 22.5%,
representing 9.1% of revenue.
-- AFFO from continuing operations was $15.3 million ($0.174 per basic
share) in Q3 2015 compared to $9.0 million ($0.102 per basic share)
in Q3 2014.
-- Dividends declared of $31.6 million in first nine months, representing
approximately 77% of AFFO for the same period.
-- Subsequent to September 30, closed on purchase of one retirement
community and entered into agreements to acquire a further three
retirement communities.



"We are pleased to continue our progress in executing on our Canadian-focused strategy following our exit from the U.S. operations," commented Tim Lukenda, President and CEO. "The retirement communities that we are acquiring, and those under development, will be great additions to our property portfolio, and are consistent with our strategy to develop our business across the continuum of care. With these transactions, and the home health acquisition, we will have productively deployed approximately $210 million of capital from the U.S. sale proceeds in a value enhancing manner," Lukenda added.

"The integration of our home health care acquisition is progressing well, with those operations having contributed revenue of $82.5 million, NOI of $8.1 million, and AFFO of approximately $4.8 million, or $0.055 per basic share, to our year-to-date results for 2015," Lukenda said.

"We continue to focus on operational excellence across all of our business units to deliver high quality and cost-effective senior care and services to meet growing demand in Canada," Lukenda concluded.

U.S. SALE TRANSACTION

As previously announced, effective July 1, 2015, the Company completed the sale of its U.S. business (the "U.S. Sale Transaction") to a group of investors led by Formation Capital, LLC and an affiliate of Safanad (collectively the "Purchaser"), for US$870 million ($1.1 billion using the noon U.S./Canadian dollar exchange rate of 1.2474 on June 30, 2015), partially settled through the assumption by the Purchaser of mortgage loans and other third-party indebtedness relating to the U.S. business of approximately US$655 million, and working capital and other specified adjustments. The U.S. Sale Transaction resulted in gross proceeds of US$280.8 million representing US$193.4 million received on July 1, 2015, and a dividend of US$87.4 million received as part of a pre-closing reorganization on June 30, 2015 (the "Pre-closing Distribution"). In addition to final working capital adjustments, the Company has indemnified certain obligations of the U.S. operations related to tax and other items. The Company estimates these items to be a potential net liability of US$12.5 million, and has recorded provisions totalling US$23.3 million, partially offset by a potential receivable of approximately US$10.8 million. Total estimated taxes of the U.S. Sale Transaction are US$37.2 million, resulting in net after-tax proceeds of approximately US$231.1 million, including the Pre-closing Distribution. The U.S. Sale Transaction resulted in an after-tax gain of $204.7 million (US$146.7 million), before transactions costs, finalization of working capital adjustments and other specified items, and includes the realization of a foreign currency translation adjustment of $21.5 million, previously recognized in accumulated other comprehensive income.

Net after-tax proceeds from the U.S. Sale Transaction reported on the consolidated statements of cash flows of $185.6 million (US$148.8 million) for the 2015 third quarter, was net of income taxes paid on closing of US$19.1 million and an advance of US$6.0 million received from the Purchaser in 2014. In addition, it excluded the above noted intercompany Pre-closing Distribution of US$87.4 million, and non- cash items totalling US$19.5 million. The non-cash items relate to a note receivable from the Purchaser of US$13.3 million, due by the end of 2015, and a net US$6.2 million representing the net present value ascribed to an ongoing cash stream relating to certain U.S. skilled nursing centres that were leased prior to the closing (the "U.S. Sale Deferred Consideration"), offset in part by obligations assumed that were related to these leases. The estimated benefit of this cash stream, net of upfront costs, is anticipated to average US$5 million per annum (pre-tax) over 15 years. There are significant risks associated with the realization of this cash stream attributable to factors outside of our control that could materially negatively impact the amounts that are expected to be received by the Company.

EXPANSION INTO RETIREMENT SEGMENT

The following table summarizes our acquisition and future development activities into the private-pay retirement segment.



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Stabilized
Purchase
Price/
Development
Date Cost
Location Acquired/ Open Communities Suites (millions) (1)
----------------------------------------------------------------------------
Port Hope, ON Oct./15 1 64 $20.2
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Tillsonburg, ON Dec./15 1 100 $28.4
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Saskatoon/Regina, SK Dec./15 2 184 $50.2
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Fall 2016/
Simcoe/Bolton/Uxbridge Spring
, ON 2017 3 304 $81.0
----------------------------------------------------------------------------
(1) Non-GAAP: includes lease-up to stabilized NOI; and estimated development
costs also include imputed cost of capital.
----------------------------------------------------------------------------



Acquisition of Empire Crossing Retirement Community

As previously announced, we acquired Empire Crossing Retirement Community on October 1, 2015, a newly built 64-suite independent/enhanced living community in Port Hope, Ontario, for $20.2 million in cash, including $1.3 million of occupancy support. The building opened in May 2015, and its current occupancy of 39%, with deposits on hand for a further 20% of the suites, is well in accordance with our expectations. The vendor has provided Extendicare with occupancy support of up to $1.3 million over 24 months, which amount has been held back from the $20.2 million purchase price, and will be released to Extendicare during the lease-up period based on an agreed upon formula. The $20.2 million purchase price represents a per suite value of approximately $315,600, and represents a stabilized NOI yield of 6.88% based on an estimated stabilized NOI of $1.4 million per annum. The acquisition has been paid in cash, with an intention to finance up to 65% of the stabilized value within a year. As at September 30, 2015, we had made an escrow deposit of $19.2 million related to this transaction, which amount was excluded from cash and reflected in other current assets on our consolidated statements of financial position. As well, this property comes with excess land, providing us with the option to double the size of the retirement community in the future, contingent on market demand.

Acquisition of Harvest Retirement Community

Extendicare today is announcing that it has signed an agreement to purchase Harvest Retirement Community (Harvest) for $28.4 million from a partnership owned by Baybridge Seniors Housing and Nautical Lands Group. The acquisition is expected to close on December 1, 2015.

Harvest, located in Tillsonburg, ON, is a newly built 64-suite independent/enhanced living community that opened in September, 2012 with current occupancy of 94% and a newly constructed addition of a further 36 suites expected to be completed in December 2015.

The vendor has provided Extendicare with income support over 24 months of up to $1.0 million. This amount will be held back from the $28.4 million purchase price on closing and released back to Extendicare during the lease-up period based on an agreed-upon formula. The purchase price represents a per-suite value of approximately $284,500 and a stabilized NOI yield estimated at 6.74%.

Acquisition of Brightwater Senior Living Communities

Extendicare is also announcing today the execution of agreements to purchase a further two senior living homes in Saskatchewan from Brightwater Senior Living Group (Brightwater) for an aggregate purchase price of $50.2 million. These acquisitions are expected to close on December 1, 2015. Stonebridge Senior Living is located in Saskatoon, and is a newly built 116-suite independent/enhanced living community that opened in December 2012, with current occupancy of 90%. Riverbend Senior Living is located in Regina, and is a newly built 68-suite senior care facility specializing in memory care that opened in August 2013, with current occupancy of 72%.

On closing a further occupancy incentive payment of up to $750,000 will be paid based upon a specific formula contingent on occupancy exceeding 85% on the closing date. The gross purchase price of these two homes represents a per-suite value of approximately $277,350 and a stabilized NOI yield estimated at 7.08%.

In addition, we have entered into a non-binding letter of intent with Brightwater to acquire two additional properties that are currently under construction in Moose Jaw and Yorkton, Saskatchewan to Extendicare subject to conditions upon their completion. Brookfield Financial is advising the seller on the transaction.

The purchase price for each of Harvest, Stonebridge and Riverbend will initially be paid in cash with an intention to finance up to 65% once stabilized.

Retirement Development Projects

Extendicare is under way with the development of three private-pay retirement communities in Simcoe, Bolton, and Uxbridge, Ontario, with 304 suites in total. We broke ground on the Simcoe project in mid- October, and anticipate breaking ground on the other two next month. Completion of the Simcoe community is anticipated in the fall of 2016, while the Uxbridge and Bolton communities are expected to open in the first half of 2017.

The anticipated cost of these three development projects is approximately $81 million, or approximately $266,500 per suite, which amount includes an imputed cost of capital and lease up losses. The estimated average stabilized NOI yield for the three projects is 7.4%. We expect to be able to leverage up to 65% of the development costs, with the balance to be paid from cash on hand.

2015 THIRD QUARTER FINANCIAL REVIEW

Consolidated Revenue

Consolidated continuing operations - revenue grew by $55.4 million, or 26.7%, to $263.3 million in the 2015 third quarter, of which $49.0 million resulted from the home health acquisition completed in April 2015 (the "Home Health Acquisition"), with growth from same-store revenue of $6.4 million, or 3.1%.

Long-term care operations - revenue improved by $2.7 million, or 1.9%, to $149.7 million this quarter, primarily due to funding enhancements and was also impacted by the timing of recognition of revenue under the Ontario envelope system. Approximately $1.2 million of the revenue improvement related to our Ontario flow-through envelopes and was therefore directly offset by increased costs of resident care, and approximately $0.2 million of the increase was due to higher preferred accommodation revenue. Our average occupancy was unchanged at 98.2% this quarter compared to the same 2014 period. Our average daily revenue rate increased by 1.8% to $200.76 this quarter from $197.17 in the same 2014 period.

Home health care operations - revenue improved by $48.6 million to $98.2 million, of which $49.0 million was from the Home Health Acquisition. Same-store revenue declined by $0.4 million primarily due to a 1.4% decrease in daily hours of service provided to 13,967 this quarter from 14,172 in the 2014 third quarter.

Other operations - revenue from our Canadian management and group purchasing operations increased by $0.9 million to $4.1 million this quarter, primarily due to growth in the number of clients served. Revenue from our U.S. operations increased by $3.2 million to $11.3 million this quarter, and included a $1.2 million increase in income earned of from investments held by our captive insurance company (the "Captive"), and a $1.9 million positive effect of a weaker Canadian dollar.

Consolidated Operating Expenses

Consolidated continuing operations - operating expenses increased by $49.3 million, or 27.6%, to $228.5 million in the 2015 third quarter. The majority of our operating expenses are labour related, which increased by $44.4 million over 2014, and represented 85.3% and 83.9% of operating expenses in the third quarters of 2015 and 2014, respectively, and as a percentage of revenue were 74.0% and 72.4%, respectively. The Home Health Acquisition contributed $44.2 million to operating expenses, with same- store operating expenses increasing by $5.1 million, or 2.9%, of which $3.9 million was labour related.

Long-term care operations - operating expenses increased by $3.5 million to $131.7 million in the 2015 third quarter, of which $3.3 million was due to a 3.1% increase in labour costs.

Home health care operations - operating expenses increased by $44.0 million to $87.5 million, of which $44.2 million was from the Home Health Acquisition, with the decline in same-store operating expenses largely due to the decline in volumes.

Other operations - operating expenses from our Canadian management and group purchasing operations increased by $0.3 million to $1.8 million this quarter. Operating expenses from our U.S. operations related to our health technologies services provided through VCPI, increased by $1.5 million over the 2014 third quarter, of which $1.2 million was due to the negative effect of a weaker Canadian dollar, partially offset by reduced labour costs.

Consolidated Net Operating Income

Consolidated net operating income from continuing operations improved by $6.1 million to $34.8 million in the 2015 third quarter from $28.7 million in the same 2014 period, representing 13.2% and 13.8% of revenue, respectively. As discussed above, revenue increased by $55.4 million and was partially offset by higher operating expenses of $49.3 million. On a same-store basis, excluding the Home Health Acquisition, net operating income improved by $1.3 million to $30.0 million, reflecting an improvement from our U.S. operations of $1.7 million, partially offset by a decline of $0.4 million from our Canadian operations. Our same-store long-term care operations experienced a $0.8 million decline in net operating income primarily due to the timing of recognition of funding and costs under the Ontario envelope system and funding increases below inflation in our Western operations, while our same-store home health operations experienced a $0.2 million decline primarily due to lower volumes. These were offset by investment income earned in the Captive, growth in our management and group purchasing operations, and a $0.6 million positive effect of the weaker Canadian dollar.

Administrative and Lease Costs

Administrative and lease costs increased by $1.7 million to $10.8 million in the 2015 third quarter from $9.1 million in the same 2014 period, of which approximately $0.5 million was due to a weaker Canadian dollar. Our Canadian operations realized a $1.4 million increase, of which $0.5 million related to higher lease costs associated with the Home Health Acquisition, and the balance was largely due to an increase in professional fees. Administrative and lease costs from our U.S. operations increased by $0.3 million due to the impact of the weaker Canadian dollar, and were otherwise lower by $0.2 million.

Consolidated Adjusted EBITDA

Consolidated Adjusted EBITDA increased by $4.4 million to $24.0 million this quarter from $19.6 million in the 2014 third quarter, representing 9.1% and 9.4% of revenue, respectively. This increase in Adjusted EBITDA was realized from the growth in net operating income of $6.1 million, partially offset by the increase in administrative and lease costs of $1.7 million, previously discussed.

2015 NINE MONTH FINANCIAL REVIEW

Consolidated Revenue

Consolidated continuing operations - revenue grew by $105.5 million, or 17.5%, to $708.8 million in the first nine months of 2015. The Home Health Acquisition contributed $82.5 million of revenue, with growth from same-store revenue of $23.0 million, or 3.8%.

Long-term care operations - revenue improved by $8.4 million, or 1.9%, to $440.0 million in the first nine months of 2015, primarily due to funding enhancements and was also impacted by the timing of recognition of revenue under the Ontario envelope system. Approximately $4.0 million of the revenue improvement related to our Ontario flow-through envelopes and was therefore directly offset by increased costs of resident care, and approximately $0.6 million of the increase was due to improvements in preferred accommodation. Our average occupancy remained relatively unchanged at 97.9% in the first nine months of 2015 compared to 97.7% in the same 2014 period. Our average daily revenue rate for the first nine months of 2015 increased by 1.8% to $199.50 from $195.96 in the same 2014 period.

Home health care operations - revenue improved by $88.9 million to $226.9 million, of which $82.5 million was from the Home Health Acquisition. Same-store revenue grew by $6.4 million primarily due to enhanced funding to support an increase in government-funded wage increases for PSWs, estimated at approximately $5.8 million, and a 0.4% increase in daily hours of service provided to 13,969 in the first nine months of 2015 from 13,916 in the same 2014 period.

Other Canadian operations - revenue from our management and group purchasing operations increased by $2.5 million to $11.9 million in the first nine months of 2015, primarily due to growth in the number of clients served.

U.S. operations - revenue increased by $5.6 million to $29.9 million in the first nine months of 2015, and included a $3.9 million positive effect of a weaker Canadian dollar. The balance of the improvement of $1.7 million related primarily to an increase of $1.2 million in income earned by the Captive.

Consolidated Operating Expenses

Consolidated continuing operations - operating expenses increased by $90.2 million, or 17.2%, to $614.8 million in the first nine months of 2015 from $524.6 million in the same 2014 period. The majority of our operating expenses are labour related, which increased by $82.4 million over 2014, and represented 84.8% and 83.7% of operating expenses in the first nine months of 2015 and 2014, respectively, and as a percentage of revenue were 73.5% and 72.7%, respectively. The Home Health Acquisition contributed $74.4 million to operating expenses, with same-store operating expenses increasing by $15.8 million, or 3.0%, of which $15.0 million resulted from higher labour costs.

Long-term care operations - operating expenses increased by $6.3 million to $387.1 million in the first nine months of 2015, primarily due to higher labour costs of $7.3 million, or 2.3%, that were partially offset by a net decline in other costs that included lower staff training costs, utilities and repairs and maintenance.

Home health care operations - operating expenses increased by $80.5 million to $201.1 million, of which $74.4 million was from the Home Health Acquisition. Same-store operating expenses grew by $6.1 million, largely due to a $6.0 million, or 5.5%, increase in labour costs, of which approximately $5.8 million related to the government-funded wage increases.

Other Canadian operations - operating expenses from our management and group purchasing operations increased by $0.5 million to $5.5 million in the first nine months of 2015, primarily related to increased staffing to support the growth in clients served.

U.S. operations - operating expenses related to our health technologies services provided through VCPI, increased by $2.8 million in the first nine months of 2015 over the same 2014 period due to the negative effect of a weaker Canadian dollar.

Consolidated Net Operating Income

Consolidated net operating income from continuing operations improved by $15.3 million to $94.0 million in the first nine months of 2015 from $78.7 million in the same 2014 period, representing 13.3% and 13.0% of revenue, respectively. As discussed above, revenue increased by $105.5 million and was partially offset by higher operating expenses of $90.2 million. On a same-store basis, excluding the Home Health Acquisition, net operating income improved by $7.2 million to $85.9 million, representing 13.7% of revenue. Improvements in net operating income from same-store operations were largely realized in our long-term care operations primarily due to enhanced funding and the timing of recognition of funding and costs under the Ontario envelope system, and in our other Canadian operations due to increased volumes of business. The increase in net operating income from our U.S. operations of $2.8 million included a $1.1 million positive effect of the weaker Canadian dollar, with the balance primarily due to higher investment income.

Administrative and Lease Costs

Administrative and lease costs increased by $3.5 million to $30.6 million in the first nine months of 2015 from $27.1 million in the same 2014 period, of which approximately $1.2 million was due to a weaker Canadian dollar. Our Canadian operations realized a $2.2 million increase, of which $0.8 million related to higher lease costs associated with the Home Health Acquisition, and the balance was largely due to an increase in professional fees and labour costs. Administrative and lease costs from our U.S. operations increased by $1.3 million primarily due to the impact of the weaker Canadian dollar.

Consolidated Adjusted EBITDA

Consolidated Adjusted EBITDA increased by $11.8 million to $63.4 million in the first nine months of 2015 from $51.6 million in the same 2014 period, representing 8.9% and 8.6% of revenue, respectively. This improvement was realized from the growth in net operating income of $15.3 million, partially offset by the increase in administrative and lease costs of $3.5 million, previously discussed.

ADJUSTED FUNDS FROM OPERATIONS (AFFO)

AFFO 2015 Third Quarter Financial Review

AFFO was $13.5 million ($0.155 per basic share) in the 2015 third quarter compared to $17.3 million ($0.196 per basic share) in the 2014 third quarter, representing a decline of $3.8 million, due to a reduction in AFFO from discontinued operations of $10.1 million, partially offset by an improvement of $6.3 million from continuing operations.

AFFO from continuing operations was $15.3 million ($0.174 per basic share) in the 2015 third quarter compared to $9.0 million in the 2014 third quarter ($0.102 per basic share). The improvement of $6.3 million included an increase in Adjusted EBITDA of $4.4 million and lower net finance costs of $2.8 million, partially offset by an increase in current income taxes of $0.4 million and higher maintenance capex of $0.8 million. Net finance costs were favourably impacted by $1.8 million (US$1.4 million) of interest income realized this quarter in connection with the U.S. Sale Deferred Consideration. Current income taxes for the 2015 third quarter were $2.4 million compared to $2.0 million in the same 2014 period, representing 14.2% and 20.0% of pre-tax FFO from continuing operations, respectively. The variance in the effective current tax rates was primarily due to timing differences that favourably impacted the 2015 third quarter results.

During the 2015 third quarter, the Company received audit adjustments proposed by the Canada Revenue Agency (CRA) for the 2012 and 2013 taxation years with regards to the deductibility of interest on intercompany debt between wholly owned subsidiaries of Extendicare, followed by the receipt in October 2015 of the notice of reassessment for the 2012 taxation year. The CRA is likely to issue similar reassessments for the 2013 and 2014 taxation years on the same or similar basis. The Company disagrees with the CRA's position and is in the process of filing a notice of objection to appeal. The Company has recorded a provision of $3.6 million for the full amount of the taxes in dispute for the 2012 to 2014 years, including interest. If the Company is successful in defending its position, in whole or in part, some or all of the provision will be reversed. Given the nature of this item, including the fact that it relates to prior periods, it has been excluded from the determination of AFFO and "earnings (loss) from continuing operations before separately reported items" for the three and nine months ended September 30, 2015.

AFFO Nine Month Financial Review

AFFO was $41.2 million ($0.470 per basic share) in the first nine months of 2015 compared to $54.3 million ($0.619 per basic share) in the same 2014 period, representing a decline of $13.1 million, due to a reduction in AFFO from discontinued operations of $24.2 million, partially offset by an improvement of $11.1 million from continuing operations.

AFFO from continuing operations was $34.9 million ($0.398 per basic share) in the first nine months of 2015 compared to $23.8 million in the same 2014 period ($0.271 per basic share). The improvement of $11.1 million included an increase in Adjusted EBITDA of $11.8 million and lower net finance costs of $5.3 million, partially offset by higher current taxes of $5.2 million and an increase in maintenance capex of $1.1 million. Net finance costs were favourably impacted by $1.8 million (US$1.4 million) of interest income realized in 2015 in connection with the U.S. Sale Deferred Consideration related to the ongoing cash stream, and lower interest expense due to the redemption of convertible debentures in 2014. Current income taxes for the first nine months of 2015 were $8.4 million compared to $3.2 million in the same 2014 period, representing 23.7% and 15.7% of pre-tax FFO from continuing operations, respectively. Current income taxes in the first nine months of 2014 were partially sheltered by non-capital loss carryforwards, which decreased current taxes by approximately $1.4 million, thereby reducing the effective current tax rate in the 2014 period to 15.7% from 22.4%.

As a result of the completion of the U.S. Sale Transaction on July 1, 2015, the contribution to AFFO from discontinued operations declined by $24.2 million reflecting a decrease in Adjusted EBITDA from discontinued operations of $44.6 million, partially offset by lower net finance costs of $3.3 million, lower current taxes of $13.7 million and lower maintenance capex of $3.4 million.

The determination of FFO includes a deduction for current income tax expense, and not deferred income tax expense. As a result, the effective tax rates on our FFO can be impacted by: adjustments to our estimates of annual deferred timing differences, particularly when dealing with cash-based tax items versus accounting accruals; changes in the proportion of earnings between taxable and non-taxable entities; book-to-file adjustments for prior year filings; cross-border dividends; and the ability to utilize loss carryforwards. The effective tax rate on FFO for the first nine months of 2015, at 23.7%, is within our anticipated range for the 2015 year of between 20% and 25%.

Maintenance capex from continuing operations was $4.2 million in the 2015 third quarter, compared to $3.4 million in the 2014 third quarter and to $2.4 million in the 2015 second quarter, representing 1.6%, 1.6% and 1.0% of revenue from continuing operations, respectively. For the first nine months of 2015, maintenance capex from continuing operations was $7.4 million compared to $6.4 million in the same 2014 period, representing 1.1% of revenue in both periods. For the 2014 year, maintenance capex from continuing operations was $12.8 million, representing 1.6% of revenue from continuing operations. These costs fluctuate on a quarterly basis with the timing of projects and seasonality. It is our intention to spend approximately 1.5% of revenue annually in maintenance capex, which is consistent with our objective to maintain and upgrade our centres. In 2015, our continuing operations are expecting to spend in the range of $13 million to $16 million in maintenance capex and approximately $15 million in growth capex.

Dividends declared for the first nine months of 2015 totalled $31.6 million, or $0.36 per share, representing approximately 77% of AFFO of $41.2 million, or $0.470 per basic share, compared to a payout ratio of approximately 58% in the same 2014 period.

SELF-INSURED LIABILITIES EXPENSE

Extendicare self-insured certain risks related to general and professional liability of its U.S. operations that were sold on July 1, 2015, through the Captive. With the classification of the U.S. senior care operations as discontinued operations, the expense for self-insured liabilities incurred by the Captive has also been reclassified to discontinued operations. However, the obligation to settle any claims incurred prior to the closing of the U.S. Sale Transaction, including claims incurred but yet to be reported, remains with Extendicare and the Captive. With this segment of our business now considered to be in a runoff state, we believe that the provisions recorded in the first half of 2015, prior to the sale, are sufficient to cover all remaining claim payments.

The balance of our accrual for self-insured liabilities was $159.5 million (US$119.5 million) as at the end of September 2015, compared to $133.4 million (US$115.0 million) at the beginning of the year. Our investments held for self-insured liabilities were $181.0 million (US$135.6 million) as at September 30, 2015, compared to $154.2 million (US$132.9 million) as at December 31, 2014.

Our expense for self-insured liabilities is included in discontinued operations, and was nil this quarter, and $34.5 million (US$27.9 million) for the first nine months of September 2015, while claim payments to date in 2015, totalled $30.5 million (US$24.2 million). In comparison, our expense in the first nine months of 2014 was $34.5 million (US$31.5 million) and claim payments totalled $31.9 million (US$29.1 million). Our last independent actuarial review was completed in the 2015 third quarter, and the next one will be completed at year end.

NORMAL COURSE ISSUER BID

As previously announced, we initiated a normal course issuer bid (the "Bid") on December 31, 2014, for up to 8,630,000 of our common shares (the "Common Shares") through the facilities of the TSX, and on alternative Canadian trading platforms. To date in 2015, we have acquired for cancellation 1,111,789 Common Shares at an average share price of $7.20, for a total cost of $8.0 million, of which 64,900 Common Shares were acquired in the 2015 third quarter.

NOVEMBER 2015 DIVIDEND DECLARED

The Board of Directors of Extendicare today declared a cash dividend of $0.04 per share for the month of November 2015, which is payable on December 15, 2015, to shareholders of record at the close of business on November 30, 2015. This dividend is designated as an "eligible dividend" within the meaning of the Income Tax Act (Canada).

CONFERENCE CALL AND WEBCAST

On November 11, 2015, at 2:00 p.m. (ET), we will hold a conference call to discuss our 2015 third quarter results. The call will be webcast live and archived on our website at www.extendicare.com under the "Our Investors/Events & Presentations" section. Alternatively, the call-in number is 1-866-696-5910 or 416-340-2217, followed by the passcode 6001921#. A replay of the call will be available until midnight on November 27, 2015. To access the rebroadcast, dial 1-800-408-3053 or 905-694-9451, followed by the passcode 4399762#. Slides accompanying remarks during the call will be posted to our 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 the "Our Investors/Financial Reports" section.

ABOUT US

Extendicare is a leading provider of care and services for seniors throughout Canada. Through our network of 112 operated senior care centres (58 owned/54 managed) as at September 30, 2015, as well as our home health care operations, we are committed to delivering care throughout the health care continuum to meet the needs of a growing seniors' population in Canada. Our qualified and highly trained workforce of 22,800 individuals is dedicated to helping people live better through a commitment to quality service and a passion for what we do.

RECAST OF COMPARATIVE INFORMATION

During the first quarter of 2015, certain costs and transactions previously classified as part of continuing operations were classified as discontinued operations. This included a note payable and transaction costs incurred in the 2014 fourth quarter associated with the sale of the U.S. operations.

A note payable of $7.6 million (US$6.0 million) was reclassified in 2015 from long-term debt to liabilities held for sale as this liability will be settled upon the completion of the U.S. Sale Transaction. The comparative amount of $7.0 million (US$6.0 million) as at December 31, 2014, has been reclassified on the consolidated statement of financial position. The Company has also recast the transaction costs incurred in the 2014 fourth quarter associated with the sale of the U.S. operations totalling $7.8 million (pre-tax), $6.7 million (after-tax), from continuing operations to discontinued operations, to conform with the current year's presentation.

Non-GAAP Measures

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

Forward-looking Statements

Information provided by Extendicare 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 Extendicare and its subsidiaries, including, without limitation, statements regarding 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", "project", "plan" or "objective" or other similar expressions or the negative thereof. Forward-looking statements reflect management's beliefs and assumptions and are based on information currently available, and Extendicare assumes no obligation to update or revise any forward-looking statement, except as required by applicable securities laws. 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 Extendicare 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 Extendicare's forward-looking statements. Further information can be found in the disclosure documents filed by Extendicare with the securities regulatory authorities, available at www.sedar.com and on Extendicare's website at www.extendicare.com.



Extendicare Inc.
Consolidated Statements of Earnings (Loss)
----------------------------------------------------------------------------

Three months ended Nine months ended
(in thousands of Canadian dollars) September 30 September 30
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Revenue
Nursing and assisted living centres 149,723 146,957 440,010 431,612
Home health care 98,239 49,590 226,983 138,014
Health technology services 9,796 8,006 28,067 23,815
Management, consulting and other 5,594 3,365 13,696 9,842
----------------------------------------------------------------------------
Total revenue 263,352 207,918 708,756 603,283
Operating expenses 228,581 179,200 614,782 524,573
----------------------------------------------------------------------------
Net operating income (1) 34,771 28,718 93,974 78,710
Administrative costs 8,965 7,890 25,739 23,272
Lease costs 1,832 1,256 4,856 3,795
----------------------------------------------------------------------------
Adjusted EBITDA (1) 23,974 19,572 63,379 51,643
Depreciation and amortization 6,994 5,749 19,594 17,164
Loss from asset impairment,
disposals and other items 802 1,924 3,291 3,880
----------------------------------------------------------------------------
Earnings before net finance costs
and income taxes 16,178 11,899 40,494 30,599
Finance costs
Interest expense 6,745 7,626 23,161 25,393
Interest revenue (3,067) (1,009) (4,652) (2,929)
Accretion costs 628 542 1,837 1,619
Fair value adjustments - - - (296)
Gain on foreign exchange and
financial instruments (6,487) - (6,487) -
Net finance costs (income) (2,181) 7,159 13,859 23,787
----------------------------------------------------------------------------
Earnings from continuing operations
before income taxes 18,359 4,740 26,635 6,812
----------------------------------------------------------------------------
Income tax expense (recovery)
Current 5,815 2,010 11,616 3,229
Deferred 1,371 (352) (1,077) 487
----------------------------------------------------------------------------
Total income tax expense 7,186 1,658 10,539 3,716
----------------------------------------------------------------------------
Earnings from continuing operations 11,173 3,082 16,096 3,096
Gain on sale of U.S. operations, net
of income taxes 204,669 - 204,669 -
Earnings (loss) from discontinued
operations, net of income taxes 454 (9,093) 768 (31,057)
----------------------------------------------------------------------------
Net earnings (loss) 216,296 (6,011) 221,533 (27,961)
----------------------------------------------------------------------------
Average U.S./Cdn. dollar exchange
rate 1.3084 1.0891 1.2600 1.0942
----------------------------------------------------------------------------
(1) Refer to discussion of non-GAAP measures.
----------------------------------------------------------------------------





Extendicare Inc.
Consolidated Statements of Financial Position
----------------------------------------------------------------------------


(in thousands of Canadian dollars, unless September 30 December 31
otherwise noted) 2015 2014
----------------------------------------------------------------------------
Assets
Current assets
Cash and short-term investments 190,822 35,495
Restricted cash 1,454 1,085
Accounts receivable, less allowance 59,105 36,775
Income taxes recoverable 74 65
Assets held for sale - 1,254,535
Other current assets 90,333 14,670
----------------------------------------------------------------------------
Total current assets 341,788 1,342,625
----------------------------------------------------------------------------
Non-current assets
Property and equipment, net of accumulated
depreciation
of $192,834 and $182,180, respectively 321,656 331,134
Goodwill and other intangible assets 97,478 16,227
Investments held for self-insured
liabilities 181,008 154,178
Other assets 106,028 63,187
Deferred tax assets 6,789 7,935
----------------------------------------------------------------------------
Total non-current assets 712,959 572,661
----------------------------------------------------------------------------
Total Assets 1,054,747 1,915,286
----------------------------------------------------------------------------
Liabilities and Equity (Deficiency)
Current liabilities
Accounts payable 6,043 4,998
Accrued liabilities 128,499 103,907
Liabilities held for sale - 1,137,774
Provisions 5,965 -
Accrual for self-insured liabilities 38,701 25,984
Current portion of long-term debt 19,302 18,828
Income taxes payable 33,735 4,043
----------------------------------------------------------------------------
Total current liabilities 232,245 1,295,534
----------------------------------------------------------------------------
Non-current liabilities
Provisions 30,610 7,535
Accrual for self-insured liabilities 120,820 107,460
Long-term debt 439,284 453,200
Other long-term liabilities 48,519 38,014
Deferred tax liabilities 11,473 16,047
----------------------------------------------------------------------------
Total non-current liabilities 650,706 622,256
----------------------------------------------------------------------------
Total liabilities 882,951 1,917,790
Shareholders' equity (deficiency) 171,796 (2,504)
----------------------------------------------------------------------------
Total Liabilities and Equity (Deficiency) 1,054,747 1,915,286
----------------------------------------------------------------------------
Closing U.S./Cdn. dollar exchange rate 1.3345 1.1601
----------------------------------------------------------------------------





Extendicare Inc.
Consolidated Statements of Cash Flows
----------------------------------------------------------------------------


(in thousands of Canadian Three months ended Nine months ended
dollars) September 30 September 30
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Operating Activities
Net earnings (loss) 216,296 (6,011) 221,533 (27,961)
Adjustments for:
Depreciation and
amortization 6,994 18,451 19,594 55,542
Expense for U.S. self-
insured liabilities - 15,368 34,495 34,491
Payments for U.S. self-
insured liabilities (8,800) (14,791) (30,505) (31,853)
Deferred taxes (2,096) (3,952) (10,832) (11,328)
Current taxes 52,388 7,865 62,465 5,796
Gain from sale of U.S.
operations (251,064) - (251,064) -
Loss from asset impairment,
disposals and other items
Continuing operations 802 1,924 3,291 3,880
Discontinued operations 2,547 11,023 13,659 12,187
Loss (gain) from derivative
financial instruments and
foreign exchange
Continuing operations (6,487) - (6,487) (296)
Discontinued operations (212) - 323 -
Net finance costs 4,306 15,898 40,531 48,276
Other 63 - 49 -
----------------------------------------------------------------------------
14,737 45,775 97,052 88,734
Net change in operating assets
and liabilities
Accounts receivable (22,093) (7,540) (2,757) 14,914
Other current assets 1,868 2,138 (3,285) (2,046)
Provision for U.S.
government investigations - - - 42,240
Accounts payable and accrued
liabilities (33,200) (12,576) (37,892) (23,579)
Income taxes - - - -
----------------------------------------------------------------------------
(38,688) 27,797 53,118 120,263
Interest paid (8,278) (17,458) (40,158) (47,884)
Interest received 3,067 1,024 4,761 3,158
Income taxes paid 1,060 (128) (12,543) (6,823)
----------------------------------------------------------------------------
Net cash from operating
activities (42,839) 11,235 5,178 68,714
----------------------------------------------------------------------------
Investing Activities
Purchase of property, equipment
and software - growth (5,426) (684) (6,316) (2,516)
Purchase of property, equipment
and software - maintenance (4,186) (6,865) (15,185) (17,542)
Purchase of home health business (697) - (84,335) -
Net proceeds from sale of U.S.
operations 185,579 - 185,579 -
Net proceeds from dispositions - 1,912 21,066 1,912
Decrease (increase) in
investments held for self-
insured liabilities 7,320 5,437 (5,133) (5,338)
Other assets (36,310) 721 (36,909) 5,355
----------------------------------------------------------------------------
Net cash from investing
activities 146,280 521 58,767 (18,129)
----------------------------------------------------------------------------
Financing Activities
Issue of long-term debt,
excluding line of credit - 32,894 163,341 142,574
Repayment of long-term debt,
excluding line of credit (81,633) (8,455) (103,331) (138,495)
Repayment on line of credit - - - (2,303)
Decrease (increase) in
restricted cash 3,047 3,834 (899) 7,083
Purchase of securities for
cancellation (487) - (7,999) -
Dividends paid (8,926) (8,913) (26,788) (26,651)
Financing costs - (1,529) (2,947) (4,701)
Other 2,324 - 2,324 -
----------------------------------------------------------------------------
Net cash from financing
activities (85,675) 17,831 23,701 (22,493)
----------------------------------------------------------------------------
Increase in cash and cash
equivalents 17,766 29,587 87,646 28,092
Cash and cash equivalents at
beginning of period 173,212 94,289 98,799 95,999
Foreign exchange gain on cash
held in foreign currency (156) 3,583 4,377 3,368
----------------------------------------------------------------------------
Cash and cash equivalents at end
of period 190,822 127,459 190,822 127,459
Less: cash from discontinued
operations - - - -
----------------------------------------------------------------------------
Cash and cash equivalents at end
of period, continuing
operations 190,822 127,459 190,822 127,459
----------------------------------------------------------------------------





Extendicare Inc.
Canadian Operations - Operating Statistics
----------------------------------------------------------------------------


(amounts in Canadian dollars, Three months ended Nine months ended
unless otherwise noted) September 30 September 30
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Canadian Senior Care Centres
Number of Centres Operated at
Period End
Owned/leased 58 58 58 58
Managed 54 46 54 46
--------------------------------------------------------------------------
112 104 112 104
----------------------------------------------------------------------------
Operational Resident Capacity
at Period End
Owned/leased 8,116 8,116 8,116 8,116
Managed 6,303 5,395 6,303 5,395
--------------------------------------------------------------------------
14,419 13,511 14,419 13,511
----------------------------------------------------------------------------
Average Daily Revenue Rate
(owned/leased centres)
Total Canadian operations $200.76 $197.17 $199.50 $195.96
----------------------------------------------------------------------------
Average Occupancy
(owned/leased centres)
Total Canadian operations 98.2% 98.2% 97.9% 97.7%
Ontario LTC total average
occupancy 98.5 98.4 98.1 97.8
Ontario LTC preferred
accommodation (1)
"New" centres −
private (2) 94.8 89.7 93.2 87.8
"C" centres − private 98.7 98.2 97.9 97.4
"C" centres - semi-private 62.5 60.4 61.2 59.8
----------------------------------------------------------------------------
Home Health Care − hours
of service
Total operations
Hours of service (000's) 2,692.9 1,303.8 6,183.5 3,799.1
Hours per day 29,270.5 14,171.7 29,458.8 13,916.0
----------------------------------------------------------------------------
Same-store basis
Hours of service (000's) 1,285.0 1,303.8 3,813.5 3,799.1
Hours per day 13,967.4 14,171.7 13,968.8 13,916.0
----------------------------------------------------------------------------





1. Average occupancy reported for the available private and semi-private
rooms reflects the percentage of residents occupying those beds and
paying the respective premiums.
2. The occupancy percentages for 2014 have been restated from what was
previously reported at the end of 2014 to conform with the methodology
described in note 1 above.



Extendicare Inc.
Supplemental Information - FFO and AFFO

The following table provides a reconciliation of Adjusted EBITDA to Funds from Operations (FFO) and Adjusted
Funds from Operations (AFFO) for the periods ended September 30, 2015 and 2014.(1)



----------------------------------------------------------------------------

(in thousands of Canadian dollars Three months ended Nine months ended
unless otherwise noted) September 30 September 30
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Adjusted EBITDA 23,974 19,572 63,379 51,643
Depreciation for FFEC (maintenance
capex) (2) (2,550) (2,332) (7,464) (6,928)
Accretion costs (628) (542) (1,837) (1,619)
Interest expense (6,745) (7,626) (23,161) (25,393)
Interest income 3,067 1,009 4,652 2,929
----------------------------------------------------------------------------
17,118 10,081 35,569 20,632
Current income tax recovery
(expense) (3) (2,438) (2,020) (8,427) (3,239)
----------------------------------------------------------------------------
FFO (continuing operations) 14,680 8,061 27,142 17,393
Amortization of financing costs 358 473 2,532 1,195
Accretion costs 628 542 1,837 1,619
Principal portion of government
capital funding 1,065 1,008 3,193 3,027
Amounts offset through investments
held for self-insured liabilities
(4) 195 - 195 -
Additional maintenance capex (2) (1,636) (1,082) 12 519
----------------------------------------------------------------------------
AFFO (continuing operations) 15,290 9,002 34,911 23,753
AFFO (discontinued operations) (1,750) 8,270 6,306 30,522
----------------------------------------------------------------------------
AFFO 13,540 17,272 41,217 54,275
----------------------------------------------------------------------------
Per Basic Share ($)
FFO (continuing operations) 0.167 0.091 0.309 0.198
FFO (total operations) 0.147 0.181 0.448 0.535
AFFO (continuing operations) 0.174 0.102 0.398 0.271
AFFO (total operations) 0.155 0.196 0.470 0.619
----------------------------------------------------------------------------
Per Diluted Share ($)
FFO (continuing operations) 0.167 0.091 0.309 0.198
FFO (total operations) 0.147 0.181 0.448 0.535
AFFO (continuing operations) 0.169 0.102 0.393 0.271
AFFO (total operations) 0.150 0.191 0.457 0.614
----------------------------------------------------------------------------
Dividends declared 10,522 10,547 31,578 31,558
Dividends declared per share ($) 0.120 0.120 0.360 0.360
----------------------------------------------------------------------------
Basic weighted average number of
shares (thousands) 87,663 87,854 87,740 87,624
Diluted weighted average number of
shares (thousands) 98,907 99,099 98,984 98,869
----------------------------------------------------------------------------





1. "Adjusted EBITDA", "funds from operations" 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. These two line items combined represent the total of our maintenance
capex incurred in the period. An amount equivalent to our depreciation
for FFEC, or furniture, fixtures, equipment and computers, is deducted
in determining FFO, and the difference in total maintenance capex
incurred is adjusted for in determining AFFO.
3. Excludes current income tax with respect to the loss (gain) from
derivative financial instruments, foreign exchange, asset impairment,
disposals, provisions for prior period tax reassessments, and other
items that are excluded from the computation of AFFO.
4. Represents AFFO of the Captive that decreases/(increases) the Captive's
investments held for self-insured liabilities not impacting the
Company's reported cash and short-term investments.





Extendicare Inc.
Segmented Information
----------------------------------------------------------------------------


(in thousands Long- Home Other
of Canadian term Health Canadian Corporate Total Total
dollars) Care Care Operations Canada Canada U.S. Total
----------------------------------------------------------------------------
Q3 2015
Revenue 149,723 98,239 4,090 4 252,056 11,296 263,352
Operating
expenses 131,771 87,531 1,798 - 221,100 7,481 228,581
----------------------------------------------------------------------------
Net operating
income 17,952 10,708 2,292 4 30,956 3,815 34,771
----------------------------------------------------------------------------
Net operating
income
margin (% of
revenue) 12.0% 10.9% 56.0% 100.0% 12.3% 33.8% 13.2%
Q3 2014
Revenue 146,957 49,590 3,237 4 199,788 8,130 207,918
Operating
expenses 128,169 43,439 1,555 - 173,163 6,037 179,200
----------------------------------------------------------------------------
Net operating
income 18,788 6,151 1,682 4 26,625 2,093 28,718
----------------------------------------------------------------------------
Net operating
income
margin (% of
revenue) 12.8% 12.4% 52.0% 100.0% 13.3% 25.7% 13.8%
Change - Q3
2015 over
2014
Revenue 2,766 48,649 853 - 52,268 3,166 55,434
Operating
expenses 3,602 44,092 243 - 47,937 1,444 49,381
----------------------------------------------------------------------------
Net operating
income (836) 4,557 610 - 4,331 1,722 6,053
----------------------------------------------------------------------------
Nine months
ended
September
30, 2015
Revenue 440,010 226,983 11,818 34 678,845 29,911 708,756
Operating
expenses 387,121 201,166 5,442 - 593,729 21,053 614,782
----------------------------------------------------------------------------
Net operating
income 52,889 25,817 6,376 34 85,116 8,858 93,974
----------------------------------------------------------------------------
Net operating
income
margin (% of
revenue) 12.0% 11.4% 54.0% 100.0% 12.5% 29.6% 13.3%
Nine months
ended
September
30, 2014
Revenue 431,612 138,014 9,321 38 578,985 24,298 603,283
Operating
expenses 380,765 120,640 4,947 - 506,352 18,221 524,573
----------------------------------------------------------------------------
Net operating
income 50,847 17,374 4,374 38 72,633 6,077 78,710
----------------------------------------------------------------------------
Net operating
income
margin (% of
revenue) 11.8% 12.6% 46.9% 100.0% 12.5% 25.0% 13.0%
Change - Nine
Months 2015
over 2014
Revenue 8,398 88,969 2,497 (4) 99,860 5,613 105,473
Operating
expenses 6,356 80,526 495 - 87,377 2,832 90,209
----------------------------------------------------------------------------
Net operating
income 2,042 8,443 2,002 (4) 12,483 2,781 15,264
----------------------------------------------------------------------------








----------------------------------------------------------------------------
Total
Q3 2015 Q3 2014 Change
-----------------------------------------------------
(in thousands
of Canadian
dollars) Canada U.S. Total Canada U.S. Total
----------------------------------------------------------------------------
AFFO
(continuing
operations) 13,750 1,540 15,290 10,151 (1,149) 9,002 6,288
Discontinued
operations - (1,750) (1,750) - 8,270 8,270 (10,020)
----------------------------------------------------------------------------
AFFO 13,750 (210) 13,540 10,151 7,121 17,272 (3,732)
----------------------------------------------------------------------------
Maintenance
capex
(continuing
operations) 3,423 763 4,186 2,842 572 3,414 772
Discontinued
operations - - - - 3,451 3,451 (3,451)
----------------------------------------------------------------------------
Maintenance
capex 3,423 763 4,186 2,842 4,023 6,865 (2,679)
----------------------------------------------------------------------------

Total
Nine Months 2015 Nine Months 2014 Change
-----------------------------------------------------
(in thousands
of Canadian
dollars) Canada U.S. Total Canada U.S. Total
----------------------------------------------------------------------------
AFFO
(continuing
operations) 34,914 (3) 34,911 27,566 (3,813) 23,753 11,158
Discontinued
operations - 6,306 6,306 - 30,522 30,522 (24,216)
----------------------------------------------------------------------------
AFFO 34,914 6,303 41,217 27,566 26,709 54,275 (13,058)
----------------------------------------------------------------------------
Maintenance
capex
(continuing
operations) 6,533 919 7,452 4,632 1,777 6,409 1,043
Discontinued
operations - 7,733 7,733 - 11,133 11,133 (3,400)
----------------------------------------------------------------------------
Maintenance
capex 6,533 8,652 15,185 4,632 12,910 17,542 (2,357)
----------------------------------------------------------------------------





Extendicare Inc.
Non-GAAP Reconciliations
----------------------------------------------------------------------------

(in thousands of Canadian Three months ended Nine months ended
dollars unless otherwise noted) September 30 September 30
----------------------------------------------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
Reconciliation of Cash Provided
by Operating Activities to
AFFO:
Net cash from operating
activities (42,839) 11,235 5,178 68,714
Add (Deduct):
Net change in operating assets
and liabilities, including
interest and taxes 1,868 12,522 (4,913) (28,664)
Current income taxes on items
excluded from AFFO (1) 48,700 2,695 51,579 (13,596)
Net provisions and payments
for self-insured liabilities 8,800 (577) (3,990) (2,638)
Depreciation for FFEC
(maintenance capex) (2) (2,550) (5,467) (7,464) (16,525)
Principal portion of
government capital funding 1,065 1,008 3,193 3,027
Amounts offset through
investments held for self-
insured liabilities 195 - 195 -
Additional maintenance capex (1,636) (1,398) (7,721) (1,017)
Provision for U.S. government
investigations - - - 42,240
Property taxes accounted for
under IFRIC 21 - (2,746) 5,209 2,734
Other (63) - (49) -
----------------------------------------------------------------------------
AFFO (2) 13,540 17,272 41,217 54,275
----------------------------------------------------------------------------

Reconciliation of Earnings before Income Taxes to
Adjusted EBITDA and Net Operating Income:
Earnings (loss) from
continuing operations before
income taxes 18,359 4,740 26,635 6,812
Add (Deduct):
Depreciation and amortization 6,994 5,749 19,594 17,164
Net finance costs (2,181) 7,159 13,859 23,787
Loss from asset impairment,
disposals and other items 802 1,924 3,291 3,880
----------------------------------------------------------------------------
Adjusted EBITDA (2) 23,974 19,572 63,379 51,643
Add (Deduct):
Administrative costs 8,965 7,890 25,739 23,272
Lease costs 1,832 1,256 4,856 3,795
----------------------------------------------------------------------------
Net operating income (2) 34,771 28,718 93,974 78,710
----------------------------------------------------------------------------





1. Represents current income tax with respect to the property taxes
accounted for under IFRIC 21, the gain on sale of the U.S. operations,
provision for U.S. government investigations, gains or losses from
derivative financial instruments, foreign exchange, asset impairment,
disposals, provisions for prior period tax reassessments, and other
items that are excluded from the computation of AFFO.
2. Refer to discussion of non-GAAP measures.




FOR FURTHER INFORMATION PLEASE CONTACT:

For further information, contact:
Elaine E. Everson
Vice President and Chief Financial Officer
Phone: (905) 470-4000
Fax: (905) 470-4003
Email: eeverson@extendicare.com
Visit Extendicare's Website at www.extendicare.com

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