Document


 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2018
The Ensign Group, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
001-33757
 
33-0861263
 
 
 
 
 
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
27101 Puerta Real, Suite 450,
Mission Viejo, CA
 
 
92691
 
 
 
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code: (949) 487-9500
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
 
 
 
 






Item 2.02. Results of Operations and Financial Condition.
On May 2, 2018, The Ensign Group, Inc. (the Company) issued a press release reporting the financial results of the Company for its first quarter ended March 31, 2018. A copy of the press release is attached to this Current Report as Exhibit 99.1.
The press release includes “non-GAAP financial measures.” Specifically, the press release refers to EBITDA, Adjusted EBITDA and Adjusted EBITDAR. EBITDA, Adjusted EBITDA and Adjusted EBITDAR are supplemental non-GAAP financial measures. Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization and (d) rent-cost of services. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) costs incurred for operations currently being constructed and other start-up operations, excluding depreciation, interest and income taxes, (e) results of closed operations and facilities not at full operation, excluding depreciation, interest and income taxes, (f) share-based compensation expense, (g) return of unclaimed class action settlement and charges related to class action lawsuit, and (h) patient base and other transaction-related costs. Adjusted EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) costs incurred for facilities currently being constructed and other start-up operations, excluding rent, depreciation, interest and income taxes, (f) results of closed operation and facilities not at full operation, excluding rent, depreciation, interest and income taxes, (g) share-based compensation expense, (h) return of unclaimed class action settlement and charges related to class action lawsuit, and (i) patient base and other transaction-related costs. The company believes that the presentation of EBITDA, adjusted EBITDA, adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company's periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Ensign's website at http://www.ensigngroup.net.









Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
 
 
 
Exhibit No.
 
Description
 
 
 
 
Press Release of the Company dated May 2, 2018








SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
Dated: May 7, 2018
THE ENSIGN GROUP, INC.
 
 
By:  
/s/ Suzanne D. Snapper  
 
 
 
Suzanne D. Snapper 
 
 
 
Chief Financial Officer 
 
 







EXHIBIT INDEX
 
 
 
Exhibit No.
 
Description
 
 
 
 
Press Release of the Company dated May 2, 2018



Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12235410&doc=3

The Ensign Group Reports First Quarter Results

Conference Call and Webcast Scheduled for tomorrow, May 3, 2018 at 10:00 am PT

MISSION VIEJO, Calif., May 02, 2018 (GLOBE NEWSWIRE) --

The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, home health, home care, hospice care and assisted living companies, today announced its operating results for the first quarter of 2018, reporting GAAP diluted earnings per share of $0.43 for the quarter with adjusted earnings per share of $0.45 for the quarter(1).
Highlights Include:

GAAP earnings for the quarter was $0.43 per diluted share, and adjusted earnings per share was up 32.4% over the prior year quarter to a record $0.45 per diluted share(1)(2);

Consolidated GAAP Net Income for the quarter was $23.1 million, and consolidated adjusted Net Income was $24.1 million, an increase of 34.7% over the prior year quarter(1)(2);

Total Transitional and Skilled Services segment income was $46.2 million for the quarter, an increase of 45.3% over the prior year quarter and an increase of 15.7% sequentially over the fourth quarter;

Same-store occupancy was 79.2%, an increase of 82 basis points over the prior year quarter;

Transitioning skilled occupancy was 76.0%, an increase of 415 basis points over the prior year quarter;

Transitioning skilled managed care revenue was up 16.0% and same-store skilled managed care revenue was up 5.9%, both over the prior year quarter; and

Total Home Health and Hospice Services segment revenue was up 23.7% to $39.8 million and segment income was up 41.1% to $6.1 million, both over the prior year quarter.

(1) See "Reconciliation of GAAP to Non-GAAP Financial Information".
(2) Adjusted earnings per share and Consolidated Adjusted Net Income increased by 15.4% and 15.8%, respectively, over the prior year quarter if we applied a 25% tax rate to both periods.


Operating Results

“We are pleased to report that we achieved a record quarter as the improvements we experienced in the fourth quarter continued into the first quarter,” said Ensign’s President and Chief Executive Officer Christopher Christensen. “We are excited about the progress we’ve made as the ramp in many of our transitioning operations is now materializing, including significant growth in occupancy in Utah and Texas,” he said. Mr. Christensen added that the Company has seen positive momentum in skilled revenue and managed care revenues in both same-store and transitioning facilities as each of these operations continue to gain the trust of the healthcare communities they serve. “These results are only possible because of outstanding local leaders that work tirelessly to customize their care and services to the needs of the unique healthcare markets they serve,” he emphasized. “We are encouraged by the progress we’re making in our more mature operations, but we are especially excited about the enormous potential we have in our 62 newer operations, most of which haven’t begun to contribute what we expect they will in the future,” he added.
Pointing to the underlying value being created in Ensign’s owned real estate, Mr. Christensen said, “As we announced again yesterday, we continue to methodically add value to our real estate portfolio by acquiring additional real estate assets and improving





their clinical outcomes. We will always be an operationally-driven organization first, but we also believe it’s important to recognize the growing underlying value in our owned real estate and the flexibility that ownership gives us in the future,” he said.
“We are also pleased to report that our home health and hospice and assisted living businesses continue to achieve outstanding results,” Christensen stated. He noted that Cornerstone Healthcare, Inc., Ensign’s home health and hospice portfolio subsidiary, grew its segment revenue and income by 23.7% and 41.1%, respectively, over the prior year quarter. Similarly, he noted that Bridgestone Living LLC, Ensign’s assisted living and independent living portfolio company, which now consists of 51 stand-alone operations and 22 campuses in 12 states, grew its segment revenue and income by 11.6% and 5.0%, respectively, over the prior year quarter. “While these two business segments and our skilled nursing operations both benefit from certain synergies that come from their affiliation with Ensign, each of the independent leadership teams drive their respective operations with little to no dependence on one another. As they do so, we continue to evaluate ways in which we can enhance those operational synergies while also ensuring that all of our affiliated operations are receiving credit for the value they have and continue to create,” Christensen added.
Mr. Christensen also commented on some recent announcements made by Centers for Medicare & Medicaid Services (CMS), indicating that he was very pleased with a proposed net market basket increase of 2.4% starting in October 2018 for our affiliated skilled nursing operations. He also mentioned that he was encouraged by CMS’s newest payment reform proposal called Patient-Driven Payment Model (PDPM), which could be implemented as soon as October 1, 2019. “While there is much to learn about this new proposed payment system, we are very pleased that CMS is working so closely with operators across the country to develop a predictable and sustainable reimbursement system,” he said. “But regardless of how the changes ultimately play out, we are confident that our relentless focus on quality and efficient outcomes will serve us well in any number of new reimbursement systems, including this latest iteration,” he concluded.
Chief Financial Officer Suzanne Snapper reported that, “Our liquidity remains strong with approximately $195 million of availability as of today on Ensign’s $450 million credit facility, which also has a built-in expansion option, and 47 unlevered real estate assets that add additional borrowing capacity.” She also noted that the Company’s net-debt-to-EBITDAR ratio went down to 4.1x as of quarter end as the EBITDAR from transitioning and newly acquired operations continues to grow, but indicated that this number could be impacted by future acquisitions. She also indicated that cash generated from operations was $40.4 million in the three months ended March 31, 2018, which was primarily driven by an increase in operating results and stronger collections.
A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net earnings per share and adjusted net income, appear in the financial data portion of this release. More complete information is contained in the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, which is expected to be filed with the SEC today and can be viewed on the company’s website at http://www.ensigngroup.net.
Quarter Highlights

During the quarter, Ensign announced that Bridgestone Living LLC, the Company’s assisted living portfolio subsidiary, acquired the real estate and operations of Cedar Hills Senior Living, a 37-unit assisted living facility in Cedar Hill, Texas, and Deer Creek Senior Living, a 37-unit assisted living facility in DeSoto, Texas.

Ensign also recently announced that Bandera Healthcare, Inc., the Company’s Arizona-based portfolio company, acquired the real estate and operations of Peoria Post Acute and Rehabilitation, a 128-bed skilled nursing facility located in Peoria, Arizona. The acquisition was effective April 1, 2018 and included an adjacent 50-bed long-term acute care hospital that is currently operated by a third party under a lease arrangement. “Our operational and clinical leaders in Arizona are singularly focused on becoming the best-in-class post-acute care provider in their respective markets,” said Christensen.  “This new operation is in good hands as it joins a group of Bandera-owned operations that are truly achieving remarkable clinical and financial results,” he added.

Yesterday, Ensign announced that Keystone Care LLC, its Texas-based portfolio subsidiary, acquired the real estate and operations of Grace Presbyterian Village, a 26-acre post-acute care and retirement campus located in Dallas, Texas. Grace Presbyterian Village, which will be known as The Villages of Dallas, is a full-service senior care campus with 125 skilled nursing beds, 81 independent living units, 36 assisted living units, and 26 memory care units. “This acquisition adds to our expanding footprint in the Dallas area and adds to our ability to accelerate the quality of care we can provide to our patients and their loved ones,” said Barry Port, President of Keystone Care LLC. He continued, “We are being very selective with each potential acquisition opportunity, and we have carefully chosen this campus because of the potential we see to enhance the outstanding foundation that has been established there.”






These additions bring Ensign's growing portfolio to 183 skilled nursing operations, 22 of which also include assisted living operations, 51 assisted and independent living operations, 22 hospice agencies, 20 home health agencies and four home care businesses across fifteen states.  Ensign owns the real estate at 67 of its 234 healthcare facilities.  Mr. Christensen reaffirmed that Ensign continues to actively seek transactions to acquire real estate and to lease both well-performing and struggling skilled nursing, assisted living and other healthcare related businesses in new and existing markets.

Ensign paid a quarterly cash dividend of $0.045 per share of its common stock during the quarter. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 16 years.

Conference Call

A live webcast will be held Thursday, May 3, 2018 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s first quarter financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign’s website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific Time on Friday, May 25, 2018.

About EnsignTM 

The Ensign Group, Inc.'s independent operating subsidiaries provide a broad spectrum of skilled nursing and assisted living services, physical, occupational and speech therapies, home health and hospice services and other rehabilitative and healthcare services at 234 healthcare facilities, 22 hospice agencies, 20 home health agencies and four home care businesses in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas, South Carolina, and Oklahoma. Each of these operations is operated by a separate, independent operating subsidiary that has its own management, employees and assets. References herein to the consolidated “company” and “its” assets and activities, as well as the use of the terms “we,” “us,” “its” and similar terms, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the operations, the home health and hospice businesses, the Service Center or the captive insurance subsidiary are operated by the same entity. More information about Ensign is available at http://www.ensigngroup.net.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management’s current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.
These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the Securities and Exchange Commission, including its Form 10-Q, for a more complete discussion of the risks and other factors that could affect Ensign’s business, prospects and any forward-looking statements. Except as required by the federal securities laws, Ensign does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.
Contact Information

Investor/Media Relations, The Ensign Group, Inc., (949) 487-9500, ir@ensigngroup.net.






SOURCE: The Ensign Group, Inc.

THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)


Three Months Ended March 31,

2018
 
2018
Pro forma (1)

2017
Revenue
 
 
 
 
 
Service revenue
$
456,021

 
$
464,825

 
$
409,393

Assisted and independent living revenue
36,113

 
36,113

 
32,346

Total revenue
492,134

 
500,938


441,739

Expense

 
 


Cost of services
390,243

 
399,047


355,486

(Return of unclaimed class action settlement)/charges related to class action lawsuit
(1,664
)
 
(1,664
)

11,000

Losses related to divestitures

 


4,017

Rent—cost of services
33,850

 
33,850


31,900

General and administrative expense
25,104

 
25,104


21,270

Depreciation and amortization
11,622

 
11,622


10,514

Total expenses
459,155

 
467,959


434,187

Income from operations
32,979

 
32,979


7,552

Other income (expense):

 
 


Interest expense
(3,613
)
 
(3,613
)

(3,445
)
Interest income
448

 
448


290

Other expense, net
(3,165
)
 
(3,165
)

(3,155
)
Income before provision for income taxes
29,814

 
29,814


4,397

Provision for income taxes
6,521

 
6,521


1,441

Net income
23,293

 
23,293


2,956

Less: net income attributable to noncontrolling interests
161

 
161


116

Net income attributable to The Ensign Group, Inc.
$
23,132

 
$
23,132


$
2,840



 
 


Net income per share attributable to The Ensign Group, Inc.:

 
 


Basic
$
0.45

 
$
0.45


$
0.06

Diluted
$
0.43

 
$
0.43


$
0.05

 

 
 


Weighted average common shares outstanding:

 
 


Basic
51,585

 
51,585


50,767

Diluted
53,518

 
53,518


52,633

 


 
 



Dividends per share
$
0.0450

 
$
0.0450


$
0.0425




 
 



(1) The proforma amounts in the table demonstrate the impact of adopting Accounting Standards Codification Topic 606, Revenue from Customers with Customers (ASC 606), for the three months ended March 31, 2018 by presenting the dollars as if the previous accounting guidance was still in effect.






THE ENSIGN GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)


March 31, 2018

December 31, 2017
Assets
 

 
Current assets:
 

 
Cash and cash equivalents
$
35,057


$
42,337

Accounts receivable—less allowance for doubtful accounts of $1,762 and $43,961 at March 31, 2018 and December 31, 2017, respectively
258,509


265,068

Investments—current
13,631


13,092

Prepaid income taxes
12,794


19,447

Prepaid expenses and other current assets
24,735


28,132

Total current assets
344,726


368,076

Property and equipment, net
541,019


537,084

Insurance subsidiary deposits and investments
28,065


28,685

Escrow deposits
10,025


228

Deferred tax assets
12,731


12,745

Restricted and other assets
17,695


16,501

Intangible assets, net
32,236


32,803

Goodwill
80,963


81,062

Other indefinite-lived intangibles
25,249


25,249

Total assets
$
1,092,709


$
1,102,433

 



Liabilities and equity
 

 
Current liabilities:
 

 
Accounts payable
$
31,977


$
39,043

Accrued wages and related liabilities
84,018


90,508

Accrued self-insurance liabilities—current
22,163


22,516

Other accrued liabilities
63,088


63,815

Current maturities of long-term debt
10,035


9,939

Total current liabilities
211,281


225,821

Long-term debt—less current maturities
280,449


302,990

Accrued self-insurance liabilities—less current portion
51,518


50,220

Deferred rent and other long-term liabilities
11,608


11,268

Deferred gain related to sale-leaseback
11,910


12,075

Total equity
525,943


500,059

Total liabilities and equity
$
1,092,709


$
1,102,433



















THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

The following table presents selected data from our consolidated statements of cash flows for the periods presented:

Three Months Ended March 31,

2018

2017
Net cash provided by operating activities
40,395


19,586

Net cash used in investing activities
(25,463
)

(21,397
)
Net cash used in financing activities
(22,212
)

(24,388
)
Net decrease in cash and cash equivalents
(7,280
)

(26,199
)
Cash and cash equivalents beginning of period
42,337


57,706

Cash and cash equivalents end of period
$
35,057


$
31,507



 
THE ENSIGN GROUP, INC.
 
REVENUE BY SEGMENT
 





 
 
 
 




 
The following table sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated:
 





 
 
 
 




 


Three Months Ended March 31,
 


2018 (As Reported)
 
2018 (Pro Forma (2))

2017
 


$

%
 
$

%

$

%
 


(Dollars in thousands)
 
Transitional and skilled services

$
407,016


82.7
%
 
$
415,221


82.9
%

$
372,339


84.3
%
 
Assisted and independent living services

36,113


7.3

 
36,113


7.2


32,346


7.3

 
Home health and hospice services:




 







 
Home health

20,184


4.1

 
20,596


4.1


17,050


3.9

 
Hospice

19,574


4.0

 
19,761


3.9


15,083


3.4

 
Total home health and hospice services

39,758


8.1

 
40,357


8.0


32,133


7.3

 
All other (1)

9,247


1.9

 
9,247


1.9


4,921


1.1

 
Total revenue

$
492,134


100.0
%
 
$
500,938


100.0
%

$
441,739


100.0
%
 
(1) Includes revenue from services generated in our other ancillary services.
 
(2) The proforma amounts in the table demonstrate the impact of adopting ASC 606 for the three months ended March 31, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect.
 
 
 
 
 
 
 
 
 
 
 
 
 
 






 
THE ENSIGN GROUP, INC.
 
 
SELECT PERFORMANCE INDICATORS
 
 
(Unaudited)
 

The following tables summarize our selected performance indicators for our transitional and skilled services segment along with other statistics, for each of the dates or periods indicated:

Three Months Ended March 31,




 
2018

2017

 

 
 
(Dollars in thousands)

Change

% Change
Total Facility Results:
 

 

 

 
Transitional and skilled revenue (As Reported)
$
407,016


$
372,339


$
34,677


9.3
 %
Transitional and skilled revenue (Pro forma (5))
415,221

 
372,339

 
42,882

 
11.5
 %
Number of facilities at period end
160


150


10


6.7
 %
Number of campuses at period end*
21


21




 %
Actual patient days
1,314,970


1,209,264


105,706


8.7
 %
Occupancy percentage — Operational beds
77.8
%

74.9
%

 

2.9
 %
Skilled mix by nursing days
31.6
%

32.0
%

 

(0.4
)%
Skilled mix by nursing revenue
52.2
%

53.3
%

 

(1.1
)%

Three Months Ended March 31,




 
2018

2017

 

 
 
(Dollars in thousands)

Change

% Change
Same Facility Results(1):
 

 

 

 
Transitional and skilled revenue (As Reported)
$
280,247


$
273,730


$
6,517


2.4
%
Transitional and skilled revenue (Pro forma (5))
285,840

 
273,730

 
12,110

 
4.4
%
Number of facilities at period end
108


108




%
Number of campuses at period end*
11


11




%
Actual patient days
870,523


862,126


8,397


1.0
%
Occupancy percentage — Operational beds
79.2
%

78.4
%

 

0.8
%
Skilled mix by nursing days
32.2
%

31.9
%

 

0.3
%
Skilled mix by nursing revenue
53.1
%

52.9
%

 

0.2
%

Three Months Ended March 31,




 
2018

2017

 

 
 
(Dollars in thousands)

Change

% Change
Transitioning Facility Results(2):
 

 

 

 
Transitional and skilled revenue (As Reported)
$
101,847


$
95,730


$
6,117


6.4
 %
Transitional and skilled revenue (Pro forma (5))
103,963

 
95,730

 
8,233

 
8.6
 %
Number of facilities at period end
40


40




 %
Number of campuses at period end*
9


9




 %
Actual patient days
356,807


337,307


19,500


5.8
 %
Occupancy percentage — Operational beds
76.0
%

71.9
%

 

4.1
 %
Skilled mix by nursing days
32.2
%

32.2
%

 

 %
Skilled mix by nursing revenue
52.6
%

54.3
%

 

(1.7
)%






Three Months Ended March 31,




 
2018

2017

 

 
 
(Dollars in thousands)

Change

% Change
Recently Acquired Facility Results(3):


 

 

 
Transitional and skilled revenue (As Reported)
$
24,922


$
1,184


$
23,738


NM
Transitional and skilled revenue (Pro forma (5))
25,418

 
1,184

 
24,234

 
NM
Number of facilities at period end
12


2


10


NM
Number of campuses at period end*
1


1




NM
Actual patient days
87,640


4,805


82,835


NM
Occupancy percentage — Operational beds
71.6
%

16.0
%




NM
Skilled mix by nursing days
23.5
%

24.6
%

 


NM
Skilled mix by nursing revenue
41.2
%

48.3
%

 


NM

Three Months Ended March 31,




 
2018

2017

 

 
 
(Dollars in thousands)

Change

% Change
Facility Closed Results(4):


 

 

 
Skilled nursing revenue
$


$
1,695


$
(1,695
)

NM
Actual patient days


5,026


(5,026
)

NM
Occupancy percentage — Operational beds
%

33.2
%



NM
Skilled mix by nursing days
%

50.3
%

 

NM
Skilled mix by nursing revenue
%

74.6
%

 

NM
                                
* Campus represents a facility that offers both skilled nursing, assisted and/or independent living services. Revenue and expenses related to skilled nursing, assisted and independent living services have been allocated and recorded in the respective reportable segment.
(1)
Same Facility results represent all facilities purchased prior to January 1, 2015.
(2)
Transitioning Facility results represents all facilities purchased from January 1, 2015 to December 31, 2016.
(3)
Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2017.
(4)
Facility Closed results represents closed operations during the three months ended March 31, 2017, which were excluded from Same Store and Transitioning results for the three months ended March 31, 2017, for comparison purposes.
(5)
The proforma amounts in the table demonstrate the impact of adopting ASC 606 for the three months ended March 31, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect.

THE ENSIGN GROUP, INC.
SKILLED NURSING AVERAGE DAILY REVENUE RATES AND
PERCENT OF SKILLED NURSING REVENUE AND DAYS BY PAYOR

The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate, and revenue associated with these metrics are generated based on contractually agreed-upon amounts or rate, excluding the estimates of variable consideration under ASC 606:






 
Three Months Ended March 31,
 
Same Facility

Transitioning

Acquisitions

Total
 
2018

2017

2018

2017

2018

2017

2018

2017
Skilled Nursing Average Daily Revenue Rates:
 
 
 
 
 
 
 
 
 
 
 

 

 
Medicare
$
610.47


$
597.31


$
514.77


$
503.32


$
520.54


$
479.03


$
574.68


$
564.55

Managed care
459.66


442.56


408.92


420.38


419.10


347.98


443.24


436.41

Other skilled
482.53


459.83


365.45


366.97


484.95




467.14


445.46

Total skilled revenue
524.69


511.20


457.49


460.55


486.36


463.38


504.22


496.65

Medicaid
221.18


214.83


193.47


179.37


212.76


144.36


213.36


204.87

Private and other payors
225.18


206.66


208.69


202.04


227.94


185.77


220.06


204.88

Total skilled nursing revenue
$
319.84


$
308.50


$
280.68


$
273.02


$
279.37


$
235.79


$
306.49


$
298.38


The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months March 31, 2018 and 2017:

 
Three Months Ended March 31,
 
Same Facility

Transitioning

Acquisitions

Total
 
2018

2017

2018

2017

2018

2017

2018

2017
Percentage of Skilled Nursing Revenue:
 

 

 

 

 

 

 

 
Medicare
24.9
%

26.3
%

28.9
%

31.7
%

26.9
%

44.0
%

26.0
%

27.9
%
Managed care
19.1


18.8


20.7


19.4


10.9


4.3


19.0


18.8

Other skilled
9.1


7.8


3.0


3.2


3.4




7.2


6.6

Skilled mix
53.1


52.9


52.6


54.3


41.2


48.3


52.2


53.3

Private and other payors
7.4


7.6


10.1


10.1


10.1


24.8


8.3


8.3

Quality mix
60.5


60.5


62.7


64.4


51.3


73.1


60.5


61.6

Medicaid
39.5


39.5


37.3


35.6


48.7


26.9


39.5


38.4

Total skilled nursing
100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%
 
Three Months Ended March 31,
 
Same Facility

Transitioning

Acquisitions

Total
 
2018

2017

2018

2017

2018

2017

2018

2017
Percentage of Skilled Nursing Days:
 

 

 

 

 

 

 

 
Medicare
13.0
%

13.6
%

15.7
%

17.2
%

14.4
%

21.6
%

13.8
%

14.8
%
Managed care
13.2


13.1


14.2


12.6


7.3


3.0


13.1


12.9

Other skilled
6.0


5.2


2.3


2.4


1.8




4.7


4.3

Skilled mix
32.2


31.9


32.2


32.2


23.5


24.6


31.6


32.0

Private and other payors
10.9


11.4


13.8


13.6


12.9


31.4


11.8


12.1

Quality mix
43.1


43.3


46.0


45.8


36.4


56.0


43.4


44.1

Medicaid
56.9


56.7


54.0


54.2


63.6


44.0


56.6


55.9

Total skilled nursing
100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%






 
THE ENSIGN GROUP, INC.
 
 
SELECT PERFORMANCE INDICATORS
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
The following tables summarize our selected performance indicators for our assisted and independent living segment along with other statistics, for each of the periods indicated:
 
 
 
 
 
 
 
 
 
 
 
 


Three Months Ended March 31,




 
2018

2017

Change

% Change

(Dollars in thousands)




Resident fee revenue
$
36,113


$
32,346


$
3,767


11.6
 %
Number of facilities at period end
51


41


10


24.4
 %
Number of campuses at period end
21


21




 %
Occupancy percentage (units)
75.5
%

76.8
%

 

(1.3
)%
Average monthly revenue per unit
$
2,858


$
2,838


$
20


0.7
 %

 
THE ENSIGN GROUP, INC.
 
 
SELECT PERFORMANCE INDICATORS
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
The following tables summarize our selected performance indicators for our home health and hospice segment along with other statistics, for each of the periods indicated:
 
 
 
 
 
 
 
 
 
 
 
 


Three Months Ended March 31,




 
2018
 
2017

Change

% Change

(Dollars in thousands)

 
 
 
Home health and hospice revenue
 
 
 
 
 
 
 
Home health services
$
20,184

 
$
17,050


$
3,134


18.4
 %
Hospice services
19,574

 
15,083


4,491


29.8

Total home health and hospice revenue
$
39,758

 
$
32,133


$
7,625


23.7
 %
Pro-forma(1)
 
 
 
 
 
 
 
Home health and hospice revenue
 
 
 
 
 
 
 
Home health services
$
20,596

 
$
17,050

 
$
3,546

 
20.8
 %
Hospice services
19,761

 
15,083

 
4,678

 
31.0

Total home health and hospice revenue
$
40,357

 
$
32,133

 
$
8,224

 
25.6
 %
 
 
 
 
 
 
 
 
Home health services:

 





Average Medicare Revenue per Completed Episode
$
2,848

 
$
2,976


$
(128
)

(4.3
)%
Hospice services:
 
 
 
 
 
 
 
Average Daily Census
1,260

 
1,001


259


25.9
 %
(1) The proforma amounts in the table demonstrate the impact of adopting ASC 606 for the three months ended March 31, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect.

THE ENSIGN GROUP, INC.
REVENUE BY PAYOR SOURCE

The following table sets forth our total revenue by payor source and as a percentage of total revenue for the periods indicated:





 
 
Three Months Ended March 31,
 
 
2018 As Reported
 
2018 Pro forma (2)

2017
 
 
$

%
 
$

%

$

%
 
 
(Dollars in thousands)
Revenue:
 
 

 
 
 
 
 

 

 
Medicaid
 
$
167,625


34.1
%
 
$
170,309


34.0
%

$
148,271


33.6
%
Medicare
 
139,314


28.3

 
140,381


28.0


129,920


29.4

Medicaid-skilled
 
27,042


5.5

 
27,538


5.5


23,017


5.2

Total
 
333,981


67.9

 
338,228


67.5


301,208


68.2

Managed Care
 
83,716


17.0

 
85,845


17.1


75,562


17.1

Private and Other(1)
 
74,437


15.1

 
76,865


15.4


64,969


14.7

Total revenue
 
$
492,134


100.0
%
 
$
500,938


100.0
%

$
441,739


100.0
%
(1) Private and other payors also includes revenue from all payors generated in our other ancillary services for the three months ended March 31, 2018 and 2017.
(2) The 2018 pro forma results reflect balances assuming previous accounting guidance was still in effect.







THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

Three Months Ended March 31,

2018

2017
Net income attributable to The Ensign Group, Inc.
$
23,132

 
$
2,840


 
 
 
Non-GAAP adjustments
 
 
 
Costs incurred for facilities currently being constructed and other start-up operations(a)
1,575

 
4,542

(Return of unclaimed class action settlement)/charges related to the settlement of the class action lawsuit(b)
(1,664
)
 
11,000

Share-based compensation expense(c)
2,309

 
2,224

Results related to closed operations and operations not at full capacity, including continued obligations and closing expense(d)
198

 
5,587

Depreciation and amortization - Patient base(e)
39

 
36

General and administrative - Transaction-related costs(f)
28

 
88

Provision for income taxes on Non-GAAP adjustments(g)
(1,553
)
 
(8,454
)
Non-GAAP Net Income
$
24,064

 
$
17,863


 
 
 
Diluted Earnings Per Share As Reported
 
 
 
Net Income
$
0.43

 
$
0.05

Average number of shares outstanding
53,518

 
52,633


 
 

Adjusted Diluted Earnings Per Share
 
 

Net Income
$
0.45

 
$
0.34

Average number of shares outstanding
53,518

 
52,633





Footnotes:



(a) Represents operating results for facilities currently being constructed and other start-up operations.

Three Months Ended March 31,

2018

2017
Revenue
$
(16,224
)
 
$
(12,967
)
Cost of services
13,972

 
13,598

Rent
3,583

 
3,662

Depreciation and amortization
244

 
249

Total Non-GAAP adjustment
$
1,575

 
$
4,542







(b) (Return of unclaimed class action settlement funds)/charges incurred in connection with the settlement of the class action lawsuit.
(c) Represents share-based compensation expense incurred.

Three Months Ended March 31,

2018

2017
Cost of services
$
1,257

 
$
1,235

General and administrative
1,052

 
989

Total Non-GAAP adjustment
$
2,309

 
$
2,224












(d) Represents results at closed operations and operations not at full capacity, including the fair value of continued obligation under the lease agreement and related closing expenses of $4.0 million for the three months ended March 31, 2017.

Three Months Ended March 31,

2018

2017
Revenue
$

 
$
(2,372
)
(Gains)/Losses related to operational closures

 
4,017

Cost of services
116

 
3,274

Rent
74

 
611

Depreciation and amortization
8

 
57

Total Non-GAAP adjustment
$
198

 
$
5,587

 
 
 
 
(e) Included in depreciation and amortization are amortization expenses related to patient base intangible assets at newly acquired skilled nursing and assisted living facilities.
(f) Included in general and administrative expense are costs incurred to acquire an operation which are not capitalizable.
(g) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0%, resulting from adoption of Tax Cuts and Jobs Act, for the three months ended March 31, 2018 and 35.5% for the three months ended March 31, 2017.


THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)

The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:

Three Months Ended March 31,

2018

2017
Consolidated Statements of Income Data:



Net income
$
23,293


$
2,956

Less: net income attributable to noncontrolling interests
161


116

Interest expense, net
3,165


3,155

Provision for income taxes
6,521


1,441

Depreciation and amortization
11,622


10,514

EBITDA
$
44,440


$
17,950


Adjustments to EBITDA:
 
 
 
(Earnings)/losses related to facilities currently being constructed and other start-up operations(a)
(2,252
)
 
631

(Return of unclaimed class action settlement)/charges related to the settlement of the class action lawsuit(b)
(1,664
)
 
11,000

Share-based compensation expense(c)
2,309

 
2,224

Results related to closed operations and operations not at full capacity, including continued obligations and closing expenses(d)
116

 
4,919

Transaction-related costs(e)
28

 
88

Rent related to items(a) and (d) above
3,657

 
4,273

Adjusted EBITDA
$
46,634

 
$
41,085

Rent—cost of services
33,850

 
31,900

Less: rent related to items(a) and (d) above
(3,657
)
 
(4,273
)
Adjusted EBITDAR
$
76,827

 
$
68,712







(a)
Represents results related to facilities currently in the start up phase after construction was completed. This amount excludes rent, depreciation and interest expense.
(b) Return of unclaimed class action settlement funds/charges incurred in connection with the settlement of the class action lawsuit.
(c)
Share-based compensation expense incurred.





(d)
Represents results at closed operations and operations not at full capacity during the three months ended March 31, 2018 and 2017, including the fair value of continued obligation under the lease agreement and related closing expenses of $4.0 million for the three months ended March 31, 2017.
(e)
Costs incurred to acquire operations which are not capitalizable.


THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The table below reconciles net income from operations to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for each reportable segment for the periods presented:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Three Months Ended March 31,



Transitional and Skilled Services

Assisted and Independent Services

Home Health and
Hospice



2018

2017

2018

2017

2018

2017















Statements of Income Data:

 
 
 
 
 
 
 
 
 
 
 

Income from operations, excluding general and administrative expense(a)

$
46,195

 
$
31,790

 
$
4,662

 
$
4,439

 
$
6,058

 
$
4,294


Less: net income attributable to noncontrolling interests


 

 

 

 
89

 
8


Depreciation and amortization

7,802

 
6,953

 
1,597

 
1,623

 
245

 
235


EBITDA

$
53,997

 
$
38,743

 
$
6,259

 
$
6,062

 
$
6,214

 
$
4,521




 
 
 
 
 
 
 
 
 
 
 

Adjustments to EBITDA:

 
 
 
 
 
 
 
 
 
 
 

Costs at facilities currently being constructed and other start-up operations(b)

(2,383
)
 
190


122

 
346


9

 
95


Results related to closed operations and operations not at full capacity, including continued obligations and closing expenses(c)

116

 
4,404



 
2



 
513


Share-based compensation expense(d)

987

 
1,028


158

 
90


91

 
85


Rent related to item(b),(c) and (d) above

$
2,767

 
3,180


$
883

 
$
934


$
7

 
$
159


Adjusted EBITDA

55,484

 
47,545


7,422

 
7,434


6,321

 
5,373


Rent—cost of services

26,777

 
25,946


6,380

 
5,308


537

 
551


Less: rent related to items(b),(c) and(d) above

(2,767
)
 
(3,180
)

(883
)
 
(934
)

(7
)
 
(159
)

Adjusted EBITDAR
 
$
79,494


$
70,311


$
12,919


$
11,808


$
6,851


$
5,765

 
                                
(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) (Earnings)/costs incurred for facilities currently being constructed and other start-up operations. This amount excludes rent, depreciation and interest expense.
(c) Represents results at closed operations and operations not at full capacity during the three months ended March 31, 2018 and 2017, including the fair value of continued obligation under the lease agreement and related closing expenses of $4.0 million for the three months ended March 31, 2017.
(d) Share-based compensation expense incurred.






Discussion of Non-GAAP Financial Measures

EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization and (d) rent-cost of services. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) costs incurred for operations currently being constructed and other start-up operations, excluding depreciation, interest and income taxes, (e) results of closed operations and facilities not at full operation, excluding depreciation, interest and income taxes, (f) share-based compensation expense, (g) return of unclaimed class action settlement and charges related to class action lawsuit, and (h) patient base and other transaction-related costs. Adjusted EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) costs incurred for facilities currently being constructed and other start-up operations, excluding rent, depreciation, interest and income taxes, (f) results of closed operation and facilities not at full operation, excluding rent, depreciation, interest and income taxes, (g) share-based compensation expense, (h) return of unclaimed class action settlement and charges related to class action lawsuit, and (i) patient base and other transaction-related costs. The company believes that the presentation of EBITDA, adjusted EBITDA, adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company's periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Ensign's website at http://www.ensigngroup.net.