HispanicBusiness

The effective tax rates on our FFO can be impacted by: adjustments to our estimates of annual 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; and the ability to utilize loss carryforwards. The restructuring of our Canadian legal entities, along with elimination of the income trust structure in July 2012, has enhanced our ability to realize available non-capital loss carryforwards, which reduced our current Canadian income taxes to a nominal level for the last half of 2012. As a result of the continued utilization of these non-capital loss carryforwards, we anticipate that our annual effective tax rate on FFO for 2013 will be in the range of 18% to 22%.

Facility maintenance capital expenditures were $14.9 million in the 2012 fourth quarter, compared to $10.1 million in the 2011 fourth quarter and $8.7 million in the 2012 third quarter, representing 3.0%, 1.9% and 1.7% of revenue, respectively. For the year ended December 31, 2012, facility maintenance capital expenditures totalled $35.7 million, or 1.8% of revenue, compared to $31.0 million, or 1.5% of revenue, in 2011. These costs fluctuate on a quarterly basis with the timing of projects and seasonality. It is our intention to spend between 1.5% and 2.0% of revenue annually, which is consistent with our objective to maintain and upgrade our centers. In 2013, we are expecting to spend in the range of $38 million to $44 million in facility maintenance capital expenditures and $35 million to $40 million in growth capital expenditures.

Distributions declared in 2012 totalled $71.5 million, or $0.84 per share, representing approximately 85% of total AFFO of $84.6 million compared to approximately 100% in 2011. Excluding the impact of the increase in prior years' reserves for self-insured liabilities, distributions represented approximately 71% and 62% of total AFFO for the 2012 and 2011 years, respectively.

U.S. OPERATIONS KEY METRICS

Skilled Nursing Facility Revenue Rates

Our average daily Medicare Part A and Managed Care rates this quarter, excluding prior period settlement adjustments, were US$470.21 and US$439.41, respectively. Compared to the 2011 fourth quarter levels, these average rates increased by 1.4% and 3.2%, respectively, and increased over the 2012 third quarter levels by 0.9% and 1.2%, respectively. The 2012 fourth quarter improvement in Medicare Part A rates was due to the 1.8% net market basket increase effective October 1, 2012 and improvements in acuity mix, partially offset by a reduction in co-insurance reimbursement.

Our average daily Medicaid rate, excluding prior period settlement adjustments, increased this quarter by 5.0% to US$194.03 over US$184.83 in the 2011 fourth quarter, and by 1.9% from US$190.42 in the 2012 third quarter. However, revenue from Medicaid rate increases was partially offset by higher state provider taxes, resulting in a net increase of 4.3% this quarter in comparison to the 2011 fourth quarter. During the 2012 fourth quarter, we became eligible to receive Upper Payment Limit funding for all of our centers in Indiana. Exclusive of this additional funding of approximately US$1.3 million, the net increase in Medicaid rates in the 2012 fourth quarter was 3.3%.

Total and Skilled Census

We continue to be adversely affected by the weak U.S. economic conditions that have reduced disposable income of individuals and resulted in a general restraint by the public on health care spending. Lower hospital census has resulted in fewer admissions and the implementation of MDS 3.0 and RUG-IV as of October 2010 also resulted in a small reduction in our average length of stay for short-term admissions. In addition, certain state Medicaid programs are attempting to divert potential admissions to assisted living centers and home care programs to reduce the strain on state Medicaid budgets.