Extendicare Inc. (EXE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the audio webcast for Extendicare Inc.'s 2021 Annual and Special Meeting of Shareholders. I would now like to turn the meeting over to Mr. Alan Torrie, Chairman of the Board. Please go ahead, sir.

Thank you, and good morning. As Chairman of Extendicare's Board of Directors, I welcome everyone participating in this 2021 Annual and Special Meeting of Shareholders of Extendicare. Joining me today are Michael Guerriere, Extendicare's President and Chief Executive Officer; David Bacon, Senior Vice President and Chief Financial Officer; and John Toffoletto, Senior Vice President, Chief Legal Officer and Corporate Secretary. These are certainly extraordinary times, and I hope that you and yours are safe and keeping well. Normally, we would be meeting today face to face. However, for the second year in a row, we are meeting virtually to ensure the safety of all. Given the progress that is being made in reducing the threat of the pandemic, we all look forward to like returning to normal next year. This has easily been the most difficult year in recent memory for everyone and also in Extendicare's history. And it continues to be important for everyone to remember that we are not alone in this battle. This virus has been a particular challenge for seniors and long-term care operators worldwide. While the pandemic has exacted a terrible tool, our efforts to control its spread in Canada have seen results that are substantially better than average for other OECD countries. Even so, there's no question that the pandemic has been an immense challenge, and I am very proud of our staff who were steadfast in the face of significant personal risk and doing everything possible to protect our residents and home care clients. But despite our best efforts, the virus took a heavy toll on our residents, their families and our staff. It's hard to fathom the magnitude of the loss, not only for those who lost loved ones but also the residents cut off from their families, the caregivers who lived in hotels to protect their families and those who work through major upgrades and are still trying to put traumatic memories and experiences behind them. The Board and I are grateful for the work of our caregivers across the country as well as the support we have received from governments, hospitals and public health units. Fortunately, vaccines have given cause for hope that we will get past the pandemic. We are looking to learn everything we can from this experience to build a better future for our seniors in this country. Today, we will share our progress in this regard and outline the investments we are making to build a better future. The pandemic shun the light on long-standing issues in the long-term care sector and galvanized societal support for systemic change in a collaborative fashion. This will make for a better future for our seniors care, and Extendicare is looking forward to play a leadership role and change for the better. So with that, we're about to commence the formal business portion of this meeting. But as a reminder, only registered shareholders and duly appointed proxy holders are able to vote and only they and shareholders who have logged in using their 16-digit control number may ask questions. Questions can be submitted using the Ask a Question text box in the lower left-hand side of the screen. If your question relates to a specific motion, please start your question by identifying the motion so that we may address your question at the appropriate time of the meeting. We will save any questions that are not in respect to a particular motion for the general question-and-answer session following the formal business of the meeting. If a question is personal in nature, we will follow up with you individually after the meeting. And the shareholders or duly elected proxy holders have questions, we encourage you to submit them now. Any voting during the meeting today will be conducted by virtual or online ballot. If you previously sent in your proxies or voted via telephone or Internet and are not changing your vote, you do not need to vote again. Your prior votes will be counted. However, if you are a registered shareholder or duly appointed proxy holder eligible to vote at today's meeting but have not yet done so or if you wish to change your vote, please vote online so that your vote will be counted in the final voting results. The Vote Here button is located on the lower right-hand side of your screen, and voting will be open throughout the formal portion of the meeting. Finally, we would like to remind you that our remarks today, including answers to your questions, may contain forward-looking information. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties discussed more fully in our public disclosure filings. I will now call the meeting to order. I will act as chair of today's meeting, and I'll ask that John Toffoletto act as secretary of the meeting. For the purposes of today's meeting, I appoint Broadridge Investor Communications Corporation to act as scrutineer through its representatives, Rosemary Colakic and Leanne Branston. We are constituted this morning at the Annual and Special Meeting of the Shareholders of Extendicare Inc. Under the articles of the company, the common shares have attached to them a single vote per share. In order to facilitate the proceedings for today's meeting, I will present and move the proposals related to the items of business identified in the notice of meeting. As previously noted, during the formal portion of the meeting, we will pause to address questions and comments submitted that are specific to the motions being presented during the meeting. Any general questions will be dealt with during the general question-and-answer session following the formal business of the meeting. If you are a shareholder or duly appointed proxy holder with a question that you'd like to address during the meeting, I ask that you submit your question now. We will now proceed with the formal business of the meeting. The secretary has provided me with a declaration affirming that the notice of this meeting was properly given to all shareholders entitled to receive notice and was accompanied by the management information circular and form of proxy or voting instruction form. Accordingly, with the consent of the meeting, the reading of the notice of the meeting will be dispensed with. The preliminary scrutineers' report on common share representation at the meeting has been received, and it shows that there are more than 25% of all outstanding voting shares present, and therefore, a quorum is present. A final report will be prepared following the meeting. I declare the meeting regularly called and properly constituted for the transaction of business. I direct the secretary to attach the declaration of mailing and the scrutineer's final report to the minutes of this meeting. According to the preliminary scrutineers' report, a clear majority of votes has been cast in respect of the matters to be voted on today. The final voting results, which will include the results of online voting, will be filed on SEDAR and disclosed by press release within 24 hours of this meeting. We will now proceed with the first item of business, which is the presentation of the consolidated financial statements of Extendicare for the year ended December 31, 2020, and the report of the auditors thereon. A copy of the 2020 annual report containing the financial statements and auditor's report was mailed to each shareholder that requested a copy. As well, a link to the 2020 annual report appears in the lower right-hand box of your screen. Apart from presenting the financial statements, no further actions required to be taken by the shareholders on these financial statements. So John, can you please advise if any questions concerning the financial statements were submitted?

Mr. Chair, no questions specific to this item have been submitted.

Thank you. I will now proceed with the next item of business, which is the appointment of Extendicare's auditors. As indicated in the management information circular, KPMG LLP are the present auditors of the company, and the Board, on the advice of the Audit Committee, recommends their reappointment. Therefore, I move that KPMG LLP be appointed as auditors for Extendicare at such remuneration as shall be fixed by the Board until the next Annual Meeting of the company. John, can you please advise if any questions specific to this motion were submitted?

Mr. Chair, no questions specific to this motion have been submitted.

Great. Thank you. Moving on now. I would like to proceed with the next item of business, which is the election of directors for the year. All 9 directors are standing for reelection, and the number of directors to be elected today has been fixed at 9 by the Board. The nominees for election as directors, in addition to myself, are Norma Beauchamp, Michael Guerriere, Sandra Hanington, Alan Hibben, Brent Houlden, Donna Kingelin, Samir Manji and Al Mawani. There having been no further nominations received in advance of today's meeting in accordance with Extendicare's advanced notice bylaw, I declare nominations to be closed. I move that each of the individuals so nominated be elected as directors of Extendicare to hold office until the next Annual Meeting of the company or until their respective successors are elected or appointed. John, can you please advise if any questions specific to the motion were submitted?

Mr. Chair, no questions specific to this motion have been submitted.

Thank you, John. I will now proceed with the next item of business, which is to consider and, if deemed advisable, pass an ordinary resolution to continue the amended and restated shareholder rights plan agreement dated May 24, 2018. In order to remain effective, the terms of the shareholder rights plan require that it be reconfirmed by the shareholders at the Annual Meeting of the company held in 2021 and at every third Annual Meeting of the company thereafter. A summary of the history and objectives of the shareholder rights plan is set out in the management information circular beginning on Page 13. The terms of the shareholder rights plan are consistent with the current takeover bid regime and institutional investor guidelines. Neither the original shareholder rights plan of the company nor the amended and restated rights plan is intended to prevent a takeover bid being made for the company. But it is designed to make it impractical for any person to make a takeover bid for the company that has not been approved by the Board, except in accordance with the plan's permitted bid and competing bid provisions. The shareholder rights plan is similar to the rights plans adopted by many other Canadian companies. The Board of Directors has determined that it is advisable and in the best interest of the company to continue to have a rights plan in place. Passage of the ordinary resolution by the shareholders is not being recommended by the directors in response to or in anticipation of any pending or threatened takeover bid or proposed acquisition of the company that is known to senior management or the Board. If the shareholder rights plan resolution is passed by the shareholders, the amended and restated shareholder rights plan agreement shall continue to remain in effect. At this time, I would invite you to ask questions relating to the continuation of the shareholder rights plan. John, can you please advise if any questions specific to this item have been submitted?

Mr. Chair, no questions specific to this motion have been submitted.

Thank you, John. Before proceeding, I would ask if you have not already done so to please cast your vote as the polls will be closing following this last item. If there are no more questions, I move that the ordinary resolution approving the continuation of the amended and restated shareholder rights plan agreement, the text of which is set out in the management information circular delivered in advance of this meeting of shareholders, be approved. The last item of business is an advisory resolution on the Board of Directors' approach to executive compensation, commonly known as say-on-pay. This is an advisory vote, the results of which are nonbinding. However, it gives shareholders an opportunity to provide important input on the company's executive compensation practices. The Board and in particular the Human Resources Committee will consider the outcome of the advisory vote as part of its ongoing review of executive compensation and when considering future compensation policies, procedures and decisions. I move on an advisory basis, and not to diminish the role and responsibility of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the company's management information circular delivered in advance of this Meeting of Shareholders. John, can you please advise if any questions specific to this motion were submitted?

Mr. Chair, once again, no questions specific to the motion have been submitted.

Okay. Thank you, John. Well, thank you again to all the shareholders who have voted in advance or during today's meeting. The polls are now closed, and we will proceed with announcing the voting results of the meeting. As I indicated earlier, I have been advised by the scrutineer that the ballots and proxies deposited for the meeting have been voted in favor of the resolutions. As such, I declare each of the resolutions considered at today's meeting in respect of those matters as carried. The exact number of votes cast in respect of each matter will be filed on SEDAR and disseminated via press release, which will also be made available on our website. So having completed all of the business for which this Annual and Special Meeting of Shareholders was called, I move and declare the meeting to be terminated. On behalf of the management and the Board, I would like to thank you all for your strong show of support, interest and continued loyalty by attending today's meeting. It is now my privilege to ask Michael Guerriere to deliver his remarks and conduct the general question-and-answer session. As a reminder to all shareholders who would like to ask a question, please use the Ask a Question text box on your screen. So Michael, over to you.

Thank you, Alan. I'll start my remarks by spending a few minutes reflecting on the past year. Then I'll look to the future, describing our investment agenda and how we are positioning Extendicare for success. Needless to say, 2020 was all about managing the pandemic. Now thanks to vaccines, we are witnessing a turning point in our battle with the virus. We have seen a dramatic decline in the infection rates experienced by our long-term care homes and environment communities, and new outbreaks are now a rarity. However, with the emergence of new more virulent virus variants and continued community transmission in the third wave, we must remain ever vigilant in our fight against COVID-19. We are focused on keeping our people safe all the while remembering those we have lost, all of the much-loved friends, colleagues or family members. We recognize the tremendous toll that the past year has taken on our residents, our team members and their families. We are hopeful that with increased vaccine supply and accelerating distribution, we are in the final phase of this pandemic. As always, our devoted caregivers continue to work tirelessly to support our residents and clients. And I thank each one of them for their selfless commitment and ongoing effort. As the third wave brought significantly higher case numbers, we have continued to invest in infection prevention and control programs. Currently, approximately 90% of our long-term care residents and 86% of our retirement residents have been fully vaccinated with 2 doses. We conduct regular rapid testing for all long-term care staff and visitors across Canada and have increased testing frequency, particularly in areas where there are high levels of community transmission. We are now administering more than 25,000 rapid tests each week through our program. We have mounted an extensive vaccine education and awareness campaign for staff, and we provide paid time-off and reimbursement of travel expenses for vaccination. As of last week, 78% of our long-term care staff and 69% of our retirement staff have received at least 1 dose of the vaccine. Each week, hundreds more of our staff are joining the ranks of those vaccinated coming together in a community effort to stifle the virus once and for all. We are very encouraged by the impact vaccinations and increased testing have had on our communities. As of today, there are no active resident cases of COVID-19 across our 69 long-term care homes and retirement communities. Governments continue to do their utmost to support our COVID-19 prevention efforts, and we appreciate both the financial support we have received and the policy commitments they have made to address long-standing challenges in the long-term care sector. Despite the significant changes we faced during the past 18 months, the future of seniors care is bright. The tragedy of the pandemic has shown a light on the sector, resulting in major progress on the policy front, heralding a new era of higher staffing levels and modern facilities. Demographic trends will double the population that needs our services over the next 15 years. Access to capital, economies of scale and innovative delivery models will be required to meet demand growth, all our capabilities that private sector operators are particularly well suited to contribute. The ability of private operators to tap into capital markets for the resources needed to build new homes is essential if we are to maintain access to long-term care for everyone that needs it. Those that advocate for an exclusively public sector ownership model fail to account for the significantly higher levels of government debt that would result from such a policy shift. The scale we bring to the sector is important to manage input prices and to enable adoption of cutting-edge technology at reasonable cost. Extendicare provides others with access to our national scale through our SGP and Assist offerings, helping the entire sector, for-profit, not-for-profit and municipal alike, to reduce costs and manage operations more efficiently. On the innovation front, Extendicare is working collaboratively with other health providers to achieve optimal outcomes for our residents and clients. For example, we launched the transitional care unit in partnership with the Ottawa Hospital earlier this month. This unit situated on the top floor of our West End Villa home is staffed by the hospital to provide a higher level of care, enabling people who otherwise would not be able to leave the hospital to transition into the community. Every resident in that home benefits from the care of the academic family practice team at the Ottawa Hospital. This is the type of win-win scenario we can achieve when private and public operators work together for the betterment of the health system. And yet, there are those still who argue that for-profit operators have no place in the delivery of health services. They fail to appreciate or to acknowledge the major contributions for-profit operators bring to the sector. Our homes are carrying vibrant communities that help Canadians and their families manage health needs often at the end of life. We care deeply about ensuring an atmosphere that is comforting and dependable, and our ability to do this is in large part due to our devoted 23,000 team members across Canada who have found their life's work in caring for those that need our help. We have advocated for decades to improve quality of care for our residents and clients through more support for our team members and replacement of aging facilities. We welcome the increased focus and policy attention on our sector. It is long overdue. We are taking action in our own right to create change guided by engagement with our residents, their families and our teams with transparency, accountability and measurable results against our goals. As we turn our sights to the future, Extendicare is making major investments in our people, facilities and technology to grow and enhance our industry-leading services. During the last year, Extendicare added more than 1,000 new frontline caregivers to our long-term care homes. We did this to support enhanced infection control protocols and to fortify our homes against COVID-19 outbreaks. As we look to the post-pandemic future, the expanded care team positions us well to implement the long-term care staffing plan announced in December by the government of Ontario. This policy will increase funding to support 4 hours of care per resident day by 2024, a 30% increase in care staff from pre-pandemic levels. This represents the biggest enhancement in the quality of long-term care we have seen in a generation. We are also making investments to add to our ParaMed team. The in-house training programs we launched last year have graduated approximately 400 new caregivers. including over 100 who graduated in the first quarter of this year. We expect to add approximately 600 new caregivers from these programs in 2021. In parallel with our investments in people, we continue to advance our plan to replace aging infrastructure with new modern homes that are designed to provide improved functionality safely and comfort for our residents. Of the 22 long-term care redevelopment projects we have proposed to the Ontario government, requisite beds have been granted for 9 so far. After so many years of advocating for replacement of aging facilities, it is gratifying to see this move forward. These first 9 projects represent a $500 million investment by Extendicare in the future of long-term care in the province. We are targeting to have 6 projects under construction by the end of 2022 with the other 3 planned to start the following year. Construction of the first 2 homes in Sudbury and Kingston is already underway. These will soon be joined by a third project in Ottawa, a 256-bed home that is advancing through the approval process, and we plan to begin construction later this year. We also have aging homes in Saskatchewan, Manitoba and Alberta. We continue to encourage those provinces to put programs in place to enable redevelopment. Older homes were built as standards that proved less equipped to achieve robust infection control during the pandemic. It is essential that these homes be replaced at the earliest possible opportunity. The third area we are investing in is technology. It offers us unlimited opportunity to improve quality, communication, customer service and efficient delivery of care. For example, we are seeing the benefits of our completed cloud-based scheduling and clinical management system for ParaMed, particularly with improved efficiency in our back office operations and growing volumes of virtual care services. We expect that as the impact of the pandemic abates and volumes further recover, the scalability of the new system will drive stronger margins as we grow. Taken together, these investments in people, facilities and technology will drive more efficient operations, enable scalability and enhance quality across all of our service offerings. Although we are emerging from a very traumatic year in our history, we look to the future with a renewed sense of optimism of what we will be able to achieve for seniors in Canada. While we are extremely encouraged by the impact of vaccinations and the lower COVID-19 infection rates in our homes, we remain vigilant in our efforts to protect residents, clients and team members. We know that we cannot let our guard down until this virus is no longer a threat to the people we care for. At the same time, we are actively working to create a better future. We are investing in our people, in new homes and in technology to provide state-of-the-art services to meet the needs of our residents and clients. Our scope of services in long-term care, home care and retirement living gives us a unique platform for leadership and innovation. We look forward to playing our part to build a better future for seniors across Canada. That concludes my remarks for today. We would now be pleased to respond to questions from our shareholders or duly appointed proxy holders. John, can you please advise if any questions were submitted?

Michael, no questions have been submitted.

Okay. Well, with that, Thank you all for taking time to attend today's meeting. Have a good afternoon.