May 5, 2010

The Ensign Group Reports Record Quarter; First Quarter 2010 Adjusted Earnings of $0.45 per Share

Conference Call and Webcast Scheduled for May 6, 2010 at 10:30 am PT

MISSION VIEJO, Calif., May 5, 2010 /PRNewswire via COMTEX News Network/ -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of skilled nursing, rehabilitative care services, home health, hospice care and assisted living companies, today reported record results for the first quarter of 2010.

(Logo: http://www.newscom.com/cgi-bin/prnh/20071213/LATH168LOGO)

Financial Highlights Include:

  • Adjusted earnings were a record $0.45 per diluted share, up 15.4% over the first quarter of 2009;
  • Total revenue was a record $154.2 million, up 18.3% on a consolidated basis;
  • Same-store skilled mix increased by 363 basis points to 54.0%;
  • The company's same-store skilled revenue increased by 12.4%, notwithstanding the negative impact of Medicare's 1.1% net market basket decrease, which took effect on October 1, 2009;
  • Consolidated EBITDAR climbed 19.4% to $25.2 million, with consolidated EBITDAR margins of 16.4%; and
  • Net income rose 18.0% to $9.3 million for the quarter.

Operating Results

Ensign's President and Chief Executive Officer Christopher Christensen congratulated Ensign's facility leaders and their teams on the record performance. "We acknowledge that it took everyone pulling together to deliver record results in the face of the significant reimbursement headwinds affecting the industry," he said.

He also explained that during the quarter significant attention had been given to preparing for Ensign's expansion into the home health and hospice business, which occurred on May 1 with the acquisition of the profitable and well-regarded Horizon Home Health and Hospice in Meridian, Idaho. "We expect Ensign's growing expertise in this new operating arena to function as a springboard, allowing us to eventually acquire or start up new home health and hospice businesses in other strategic markets, creating additional value for shareholders."

Mr. Christensen also referenced Ensign's balance sheet and its industry-low debt ratio, noting that the company's adjusted net-debt-to-EBITDAR ratio is less than 2.1x. He further noted that the company continues to generate strong cash flow, with net cash from operations of $10.3 million for the quarter. "These assets, together with our accumulated operating and turnaround expertise, position us well to continue our pattern of disciplined growth," he added.

Fully diluted GAAP earnings per share were $0.44 for the quarter, compared to $0.38 per share in the prior year. Excluding $0.2 million in acquisition expenses and amortization of recently-acquired patient bases, adjusted net income was $9.5 million or $0.45 per diluted share for the quarter.

A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDAR and EBITDA, as well as a reconciliation of GAAP earnings per share and 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 10-Q, which was filed with the SEC today and can be viewed on the Company's website at http://www.ensigngroup.net.

2010 Guidance Reaffirmed

Management reaffirmed its 2010 annual guidance, projecting revenues of $605 million to $615 million, and net income of $1.75 to $1.79 per diluted share for the year. The guidance is based on diluted weighted average common shares outstanding of 21.4 million and assumes, among other things, no additional acquisitions or dispositions beyond those made to date, and an aggregate 1.0% projected decline in overall reimbursement rates. It also assumes that tax rates do not materially increase, and no negative impact associated with the implementation of RUGs IV and MDS 3.0.

Quarter Highlights

During the quarter, the company's Board of Directors declared a quarterly cash dividend of $0.05 per share of Ensign common stock. Ensign has been a dividend-paying company since 2002.

The company also announced the acquisition of four long-term care facilities and a home health and hospice business in three separate transactions between January 1, 2010 and May 1, 2010. The real estate and operations were purchased with cash, and include:

  • In Idaho, Emmett Care & Rehabilitation Center, a 72-bed skilled nursing facility in Emmett, and Parke View Rehabilitation & Care Center, an 86-bed skilled nursing facility in Burley, on January 1, 2010;
  • In Texas, Heritage Gardens Healthcare Center, a 140-bed skilled nursing facility in Carrollton, Texas, and Silver Springs Healthcare Center, a 144-bed skilled nursing facility in Houston, Texas, on May 1, 2010.
  • And in Idaho, Horizon Home Health and Hospice, a well-regarded home health and hospice agency based in Meridian, Idaho, also on May 1, 2010.

The four facility acquisitions brought Ensign's growing portfolio to 81 facilities, 51 of which are Ensign-owned, with Ensign affiliates holding purchase options on eight of Ensign's 30 leased facilities. Ensign also owns one home health and two hospice businesses. Management reaffirmed that Ensign is actively seeking additional opportunities to acquire both well-performing and struggling long-term care operations across the Western United States.

Conference Call

A live webcast will be held on Thursday, May 6, 2010, at 10:30 a.m. Pacific Time (1:30 p.m. Eastern Time) to discuss Ensign's first quarter results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors section of the Ensign 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 14, 2010.

About Ensign(TM)

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 for both long-term residents and short-stay rehabilitation patients at 81 facilities, two hospice companies and a home health business in California, Arizona, Texas, Washington, Utah, Idaho and Colorado. Each of these facilities is operated by a separate, wholly-owned 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 verbiage are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the facilities, the hospice business, 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. 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 facilities, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of facilities; 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 facilities; competition from other companies in the acquisition, development and operation of facilities; 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 facilities 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, which was filed today, 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.


                        THE ENSIGN GROUP, INC.
    GAAP AND ADJUSTED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                (In thousands, except per share data)


                              Three Months Ended
                              ------------------
                                March 31, 2010
                                --------------
                                   As                   As
                               Reported    Non-     Adjusted
                               ---------   ----     ---------
                                           GAAP
                                           Adj.
                                          -----
    Revenue                     $154,174             $154,174
    Expense:
       Cost of services
        (exclusive of
        facility rent and
        depreciation and
        amortization shown                     (1)
        separately below)        123,183      (52)    123,131
       Facility rent-cost of
        services                   3,575                3,575
       General and
        administrative
        expense                    5,774                5,774
       Depreciation and                      (255)
        amortization               3,955       (2)      3,700
                                   -----   ------       -----
        Total expenses           136,487     (307)    136,180
    Income from operations        17,687      307      17,994
    Other income
     (expense):
       Interest expense           (2,280)              (2,280)
       Interest income                67                   67
                                     ---                  ---
        Other expense, net        (2,213)              (2,213)
    Income before
     provision for income
     taxes                        15,474      307      15,781
    Provision for income
     taxes                         6,126   122 (3)      6,248
                                   -----   ------       -----
    Net income                    $9,348      185      $9,533
                                  ======      ===      ======
    Net income per share:
      Basic                        $0.45                $0.46
                                   =====                =====
      Diluted                      $0.44                $0.45
                                   =====                =====
    Weighted average
     common shares
     outstanding:
      Basic                       20,686               20,686
                                  ======               ======
      Diluted                     21,074               21,074
                                  ======               ======



                              Three Months Ended
                              ------------------
                                March 31, 2009
                                --------------
                                   As                   As
                               Reported    Non-     Adjusted
                               ---------   ----     ---------
                                           GAAP
                                           Adj.
                                          -----
    Revenue                     $130,285             $130,285
    Expense:
       Cost of services
        (exclusive of
        facility rent and
        depreciation and
        amortization shown                     (1)
        separately below)        104,199     (114)    104,085
       Facility rent-cost of
        services                   3,701                3,701
       General and
        administrative
        expense                    4,961                4,961
       Depreciation and                      (223)
        amortization               2,965       (2)      2,742
                                   -----   ------       -----
        Total expenses           115,826     (337)    115,489
    Income from operations        14,459      337      14,796
    Other income
     (expense):
       Interest expense           (1,328)              (1,328)
       Interest income                70                   70
                                     ---                  ---
        Other expense, net        (1,258)              (1,258)
    Income before
     provision for income
     taxes                        13,201      337      13,538
    Provision for income
     taxes                         5,278   135 (3)      5,413
                                   -----   ------       -----
    Net income                    $7,923      202      $8,125
                                  ======      ===      ======
    Net income per share:
      Basic                        $0.39                $0.39
                                   =====                =====
      Diluted                      $0.38                $0.39
                                   =====                =====
    Weighted average
     common shares
     outstanding:
      Basic                       20,572               20,572
                                  ======               ======
      Diluted                     20,892               20,892
                                  ======               ======


    (1)  Represents acquisition-related costs expenses.
    (2)  Represents amortization costs related to patient base intangible
    assets acquired.  Patient base intangible assets are amortized over
    a period of four to eight months, depending on the classification of
    the patients and the level of occupancy in a new acquisition on the
    acquisition date.
    (3)  Represents the tax impact of acquisition costs and patient base
    non-GAAP adjustments represented in entries (1) and (2).


                                 THE ENSIGN GROUP, INC.
                   RECONCILIATION OF NET INCOME TO EBITDA AND EBITDAR
                                     (in thousands)

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



                                               Three Months Ended
                                                   March 31,
                                                   ---------
                                              2010               2009
                                              ----               ----

    Consolidated Statement of Income Data:
    Net income                              $9,348             $7,923
    Interest expense, net                    2,213              1,258
    Provision for income taxes               6,126              5,278
    Depreciation and amortization            3,955              2,965
                                             -----              -----
    EBITDA                                 $21,642            $17,424
                                           =======            =======
    Facility rent-cost of services           3,575              3,701
                                             -----              -----
    EBITDAR                                $25,217            $21,125
                                           =======            =======



                                THE ENSIGN GROUP, INC.
          CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                                    (In thousands)



                                                                December
                                                    March 31,            31,
                                                          2010     2009
                                                          ----     ----
    Assets
    Current assets:
      Cash and cash equivalents                        $41,452  $38,855
      Accounts receivable                               69,372   62,606
      Prepaid income taxes                                   -    1,242
      Prepaid expenses and other current assets          5,866    6,498
      Deferred tax asset-current                         7,615    8,126
                                                         -----    -----
         Total current assets                          124,305  117,327
    Property and equipment, net                        241,034  230,774
    Insurance subsidiary deposits and investments       13,985   13,810
    Escrow deposits                                        500    7,595
    Deferred tax asset                                   5,488    4,262
    Restricted and other assets                          5,895    5,650
    Intangible assets, net                               4,269    4,498
    Goodwill                                             7,432    7,432
                                                         -----    -----
         Total assets                                 $402,908 $391,348
                                                      ======== ========

    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable                                 $15,079  $15,498
      Accrued wages and related liabilities             27,368   28,756
      Accrued self-insurance liabilities-current        10,079   10,074
      Other accrued liabilities                         11,850   15,375
      Income taxes payable                               5,350        -
      Current maturities of long-term debt               2,087    2,065
                                                         -----    -----
         Total current liabilities                      71,813   71,768
    Long-term debt-less current maturities             106,868  107,401
    Accrued self-insurance liabilities-less current
     portion                                            23,572   22,096
    Deferred rent and other long-term liabilities        3,415    2,524
    Stockholders' equity                               197,240  187,559
                                                       -------  -------
         Total liabilities and stockholders' equity   $402,908 $391,348
                                                      ======== ========



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


                                                 Three months ended
                                                      March 31,
                                                      ---------
                                                 2010                  2009
                                                 ----                  ----
                                                   (In thousands)
    Net cash provided by operating activities $10,325               $10,406
    Net cash used in investing activities      (6,878)             (17,593)
    Net cash used in financing activities        (850)               (1,079)
                                                 ----                ------
    Net increase (decrease) in cash and cash
     equivalents                                2,597                (8,266)
    Cash and cash equivalents at beginning of
     period                                    38,855                41,326
                                               ------                ------
    Cash and cash equivalents at end of
     period                                   $41,452               $33,060
                                              =======               =======



                                   THE ENSIGN GROUP, INC.
                                SELECT PERFORMANCE INDICATORS
                                   (Dollars in thousands)

    The following table summarizes our selected performance indicators,
    along with other statistics, for each of the dates or periods
    indicated:



                                               Three Months Ended
                                                   March 31,
                                                   ---------
                                     2010                     2009
                                     ----                     ----
                                             (Dollars in thousands)
    Total Facility Results :
       Revenue                                $154,174              $130,285
       Number of facilities at
        period end                                  79                    70
       Operational beds                          9,076                 7,994
       Actual patient days                     649,084               566,619
       Available patient days                  816,840               710,000
       Occupancy percentage -
        Operational beds                          79.5%                 79.8%
       Skilled mix by nursing
        revenue                                   49.8%                 48.6%







                                                            %
                                    Change                        Change
                                    ------               ------

    Total Facility Results :
       Revenue                      $23,889              18.3%
       Number of facilities at
        period end                        9              12.9%
       Operational beds               1,082              13.5%
       Actual patient days           82,465              14.6%
       Available patient days       106,840              15.1%
       Occupancy percentage -
        Operational beds                                (0.3)%
       Skilled mix by nursing
        revenue                                           1.2%




                                               Three Months Ended
                                                   March 31,
                                                   ---------
                                              2010                   2009
                                              ----                   ----
                                             (Dollars in thousands)
    Same Facility Results(1) :
       Revenue                            $121,150               $116,304
       Number of facilities at
        period end                              56                     56
       Actual patient days                 485,501                496,857
       Available patient days              586,440                603,731
       Occupancy percentage -
        Operational beds                      82.8%                  82.3%
       Skilled mix by nursing
        revenue                               54.0%                  50.4%






                                                            %
                                    Change                          Change
                                    ------               ------

    Same Facility Results(1) :
       Revenue                         $4,846               4.2%
       Number of facilities at
        period end                          -                 -  %
       Actual patient days            (11,356)            (2.3)%
       Available patient days         (17,291)            (2.9)%
       Occupancy percentage -
        Operational beds                                    0.5%
       Skilled mix by nursing
        revenue                                             3.6%




                                               Three Months Ended
                                                   March 31,
                                                   ---------
                                                2010                2009
                                                ----                ----
                                             (Dollars in thousands)
    Transitioning Facility
     Results(2) :
       Revenue                                $8,164              $8,239
       Number of facilities at
        period end                                 6                   6
       Actual patient days                    39,977              38,792
       Available patient days                 57,330              57,330
       Occupancy percentage -
        Operational beds                        69.7%               67.7%
       Skilled mix by nursing
        revenue                                 40.3%               44.6%






                                                           %
                                    Change                       Change
                                    ------               ------

    Transitioning Facility
     Results(2) :
       Revenue                        $(75)              (0.9)%
       Number of facilities at
        period end                       -                   -  %
       Actual patient days           1,185                 3.1%
       Available patient days            -                   -  %
       Occupancy percentage -
        Operational beds                                   2.0%
       Skilled mix by nursing
        revenue                                          (4.3)%




                                               Three Months Ended
                                                    March 31,
                                                    ---------
                                                2010                 2009
                                                ----                 ----
                                             (Dollars in thousands)
    Recently Acquired Facility
     Results(3) :
       Revenue                               $24,860               $5,742
       Number of facilities at
        period end                                17                    7
       Actual patient days                   123,606               30,970
       Available patient days                173,070               48,939
       Occupancy percentage -
        Operational beds                        71.4%                63.3%
       Skilled mix by nursing
        revenue                                 31.8%                17.4%





                                                            %
                                    Change                        Change
                                    ------               ------

    Recently Acquired Facility
     Results(3) :
       Revenue                      $19,118                  NM  %
       Number of facilities at
        period end                       10                  NM  %
       Actual patient days           92,636               NM  %
       Available patient days       124,131               NM  %
       Occupancy percentage -
        Operational beds                                  8.1%
       Skilled mix by nursing
        revenue                                          14.4%


    (1) Same Facility results represent all facilities purchased prior to
    January 1, 2007. Same Facility results for 2009 include the results
    of operations through March 31, 2009 of our assisted living facility
    in Arizona. We decided not to exercise our renewal option on the
    lease which expired on September 30, 2009.  The reduction in the
    number of actual and available patient days primarily relates to the
    non-renewal of this lease.

    (2)Transitioning Facility results represents all facilities purchased
    from January 1, 2007 to December 31, 2008.

    (3)Recently Acquired Facility (or "Acquisitions") results represent
    all facilities purchased on or subsequent to January 1, 2009.


                                  THE ENSIGN GROUP, INC.
             SKILLED NURSING AVERAGE DAILY REVENUE RATES AND REVENUE BY PAYOR
    The following table reflects the change in the skilled nursing
    average daily revenue rates by payor source, excluding therapy and
    other ancillary services that are not covered by the daily rate:


                              Three Months Ended
                                  March 31,
                                  ---------
                                Same Facility
                                -------------
                                                             %
                               2010                        2009       Change
                                 ----                 ----   -------
    Skilled Nursing Average
     Daily Revenue Rates:
    Medicare                 $555.01             $535.66         3.6%
    Managed care              339.90              329.06         3.3%
    Other skilled             551.01              646.84      (14.8)%
       Total skilled revenue  470.04              456.31         3.0%
    Medicaid                  164.28              161.47         1.7%
    Private and other
     payors                   185.41              182.49         1.6%
       Total skilled nursing
        revenue              $256.47             $242.87         5.6%



    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,
                                 ----------------------------
                                        2010                          2009
                                        ----                          ----
                               $           %                        $      %
                             ---          ---                     ---     ---
    Revenue:
    Medicaid           $61,653          40.0%             $52,236     40.1%
    Medicare            51,122          33.2               43,207     33.2
    Medicaid-skilled     4,418           2.8                2,282      1.7
                         -----           ---                -----      ---
       Total           117,193          76.0               97,725     75.0
    Managed Care        20,569          13.4               17,497     13.4
    Private and Other   16,412          10.6               15,063     11.6
                        ------          ----               ------     ----
       Total revenue  $154,174           100%            $130,285      100%
                      ========                           ========



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) facility rent-cost of services. The Company believes that the presentation of EBITDA and EBITDAR provides important supplemental information to management and investors to evaluate the Company's operating performance. The Company believes disclosure of adjusted non-GAAP net income and non-GAAP diluted earnings per share has economic substance because the excluded expenses are infrequent in nature and are variable in nature, or do not represent current 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 Report on Form 10-Q filed today with the SEC. The Form 10-Q is 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.

SOURCE The Ensign Group, Inc.

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