October 28, 2010

The Ensign Group Reports Record Third Quarter

Conference Call and Webcast Scheduled for Friday, October 29, 2010 at 10:00 am PT

MISSION VIEJO, Calif., Oct 28, 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 third quarter of 2010.

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Financial Highlights Include:

  • Overall occupancy grew to 80.1% over the third quarter of 2009, and same-store occupancy increased by 216 basis points to a record 83.3%;
  • Total revenue was a record $164.7 million, up 23.9% on a consolidated basis;
  • Same-store skilled mix increased by 198 basis points to 52.4%;
  • Consolidated EBITDAR climbed 27.4% to $26.5 million, with consolidated EBITDAR margins of 16.1%;
  • Net income rose 28.6% to $9.9 million for the quarter; and
  • GAAP earnings were a record $0.47 per diluted share, up 27%.

Operating Results

Citing the marked improvements in both same-store and overall occupancy in the quarter, Ensign's President and Chief Executive Officer Christopher Christensen said, "We are especially gratified that our operators would not only grow occupancy year over year, but actually grow it sequentially over Q2, which is unprecedented for a third quarter in our census-cyclical business."

After adding 19 new facilities and a home health business since January 2009, Mr. Christensen noted that the third quarter was "time to take a short breather" from the aggressive acquisition pace, and focus on improving both the recently-acquired and existing operations. He added that "these results represent a strong validation of Ensign's business model, and demonstrate robust momentum heading into 2011."

Ensign's balance sheet further improved, with its industry-low adjusted net-debt-to-EBITDAR ratio of 1.9x, and net cash from operations of $34.5 million through September 30, 2010. Fully diluted GAAP earnings per share were $0.47 for the quarter, compared to $0.37 per share in the prior year. Excluding $0.1 million in acquisition expenses and amortization of recently-acquired patient bases, adjusted net income was $9.9 million or $0.47 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 Affirmed

Management affirmed its 2010 annual guidance, projecting revenues of $628 million to $638 million, and net income of $1.79 to $1.83 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.

With no new additions to Ensign's existing portfolio, the company nevertheless experienced significant growth in census, margins and earnings. Ensign's portfolio includes 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 Friday, October 29, 2010, at 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time) to discuss Ensign's third 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, November 5, 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
                             ------------------
                             September 30, 2010
                             ------------------
                                  As                    As
                              Reported     Non-     Adjusted
                              ---------    ----     ---------
                                           GAAP
                                           ----
                                           Adj.
                                           ----
    Revenue                    $164,653              $164,653
    Expense:
      Cost of services
       (exclusive of
       facility rent and
       depreciation and
       amortization shown                      (1)
       separately below)        131,460        (7)    131,453
      Facility rent-cost of
       services                   3,631                 3,631
      General and
       administrative
       expense                    6,713                 6,713
      Depreciation and                        (84)
       amortization               4,260        (2)      4,176
                                  -----   -------       -----
       Total expenses           146,064       (91)    145,973
    Income from operations       18,589        91      18,680
    Other income
     (expense):
      Interest expense           (2,283)               (2,283)
      Interest income                58                    58
                                    ---                   ---
       Other expense, net        (2,225)               (2,225)
    Income before
     provision for income
     taxes                       16,364        91      16,455
    Provision for income                       36
     taxes                        6,477        (3)      6,513
                                  -----     -----       -----
    Net income                   $9,887        55      $9,942
                                 ======       ===      ======
    Net income per share:
      Basic                       $0.48                 $0.48
                                  =====                 =====
      Diluted                     $0.47                 $0.47
                                  =====                 =====
    Weighted average
     common shares
     outstanding:
      Basic                      20,756                20,756
                                 ======                ======
      Diluted                    21,147                21,147
                                 ======                ======



                              Nine Months Ended
                              -----------------
                             September 30, 2010
                             ------------------
                                  As                    As
                              Reported     Non-     Adjusted
                              ---------    ----     ---------
                                           GAAP
                                           ----
                                           Adj.
                                           ----
    Revenue                    $476,775              $476,775
    Expense:
      Cost of services
       (exclusive of
       facility rent and
       depreciation and
       amortization shown                      (1)
       separately below)        380,451       (96)    380,355
      Facility rent-cost of
       services                  10,822                10,822
      General and
       administrative
       expense                   18,894                18,894
      Depreciation and                       (453)
       amortization              12,238        (2)     11,785
                                 ------   -------      ------
       Total expenses           422,405      (549)    421,856
    Income from operations       54,370       549      54,919
    Other income
     (expense):
      Interest expense           (6,871)               (6,871)
      Interest income               188                   188
                                    ---                   ---
       Other expense, net        (6,683)               (6,683)
    Income before
     provision for income
     taxes                       47,687       549      48,236
    Provision for income                      217
     taxes                       18,833        (3)     19,050
                                 ------    ------      ------
    Net income                  $28,854       332     $29,186
                                =======       ===     =======
    Net income per share:
      Basic                       $1.39                 $1.41
                                  =====                 =====
      Diluted                     $1.37                 $1.38
                                  =====                 =====
    Weighted average
     common shares
     outstanding:
      Basic                      20,728                20,728
                                 ======                ======
      Diluted                    21,123                21,123
                                 ======                ======



    (1)  Represents acquisition-related costs expenses.
          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
    (2)   acquisition on the acquisition date.
          Represents the tax impact of acquisition costs and
          patient base non-GAAP adjustments represented in
    (3)   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
                                                    September 30,
                                                    -------------
                                                 2010               2009
                                                 ----               ----
    Consolidated Statement of Income
     Data:
    Net income                                 $9,887             $7,686
    Interest expense, net                       2,225              1,168
    Provision for income taxes                  6,477              4,977
    Depreciation and amortization               4,260              3,239
                                                -----              -----
    EBITDA(1)                                 $22,849            $17,070
                                              =======            =======
    Facility rent-cost of services              3,631              3,707
                                                -----              -----
    EBITDAR(1)                                $26,480            $20,777
                                              =======            =======




                                                  Nine Months Ended
                                                    September 30,
                                                    -------------
                                                 2010               2009
                                                 ----               ----
    Consolidated Statement of Income
     Data:
    Net income                                $28,854            $23,793
    Interest expense, net                       6,683              3,498
    Provision for income taxes                 18,833             15,537
    Depreciation and amortization              12,238              9,413
                                               ------              -----
    EBITDA(1)                                 $66,608            $52,241
                                              =======            =======
    Facility rent-cost of services             10,822             11,132
                                               ------             ------
    EBITDAR(1)                                $77,430            $63,373
                                              =======            =======



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

                                                    September   December
                                                       30,      31,
                                                         2010     2009
                                                         ----     ----
    Assets
    Current assets:
      Cash and cash equivalents                       $36,926  $38,855
      Accounts receivable-less allowance
       for doubtful accounts of $9,254 and
       $7,575 at September 30, 2010 and
       December 31, 2009, respectively                 72,083   62,606
      Prepaid income taxes                                397    1,242
      Prepaid expenses and other current
       assets                                           6,953    6,498
      Deferred tax asset-current                       10,707    8,126
                                                       ------    -----
          Total current assets                        127,066  117,327
    Property and equipment, net                       254,192  230,774
    Insurance subsidiary deposits and
     investments                                       15,845   13,810
    Escrow deposits                                       250    7,595
    Deferred tax asset                                  6,392    4,262
    Restricted and other assets                         6,067    5,650
    Intangible assets, net                              4,131    4,498
    Goodwill                                           10,524    7,432
    Other indefinite-lived intangibles                    672        -
                                                          ---      ---
          Total assets                               $425,139 $391,348
                                                     ======== ========

    Liabilities and stockholders' equity
    Current liabilities:
        Accounts payable                              $17,616  $15,498
        Accrued wages and related liabilities          30,835   28,756
        Accrued self-insurance
         liabilities-current                           10,672   10,074
        Other accrued liabilities                      13,247   15,375
        Current maturities of long-term debt            2,165    2,065
                                                        -----    -----
            Total current liabilities                  74,535   71,768
    Long-term debt-less current
     maturities                                       105,847  107,401
    Accrued self-insurance
     liabilities-less current portion                  25,393   22,096
    Deferred rent and other long-term
     liabilities                                        2,951    2,524
    Stockholders' equity                              216,413  187,559
                Total liabilities and stockholders'
                 equity                              $425,139 $391,348
                                                     ======== ========




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

                                              Nine Months Ended
                                                September 30,
                                                -------------
                                             2010                  2009
                                             ----                  ----
                                               (In thousands)
    Net cash provided by operating
     activities                           $34,460               $28,683
    Net cash used in investing
     activities                           (32,758)             (45,441)
    Net cash used in financing
     activities                            (3,631)               (3,203)
                                           ------                ------
    Net decrease in cash and cash
     equivalents                           (1,929)             (19,961)
    Cash and cash equivalents at
     beginning of period                   38,855                41,326
                                           ------                ------
    Cash and cash equivalents at
     end of period                        $36,926               $21,365
                                          =======               =======



                                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
                                                September 30,
                                                -------------
                                              2010                2009
                                              ----                ----
                                                 (Dollars in
                                                  thousands)
    Total Facility Results :
      Revenue                             $164,653            $132,924
      Number of facilities at
       period end                               81                  70
      Actual patient days                  688,617             581,041
      Occupancy percentage -
       Operational beds                       80.1%               79.5%
      Skilled mix by nursing days             24.5%               24.5%
      Skilled mix by nursing
       revenue                                47.9%               48.1%

                                           Three Months Ended
                                              September 30,
                                              -------------
                                              2010                2009
                                              ----                ----
                                               (Dollars in
                                                thousands)
    Same Facility Results(1) :
      Revenue                             $124,274            $115,748
      Number of facilities at
       period end                               56                  56
      Actual patient days                  498,610             495,532
      Occupancy percentage -
       Operational beds                       83.3%               81.1%
      Skilled mix by nursing days             28.1%               26.2%
      Skilled mix by nursing
       revenue                                52.4%               50.4%

                                           Three Months Ended
                                              September 30,
                                              -------------
                                              2010                2009
                                              ----                ----
                                               (Dollars in
                                                thousands)
    Transitioning Facility
     Results(2) :
      Revenue                               $9,129              $8,519
      Number of facilities at
       period end                                6                   6
      Actual patient days                   42,942              42,317
      Occupancy percentage -
       Operational beds                       73.3%               72.2%
      Skilled mix by nursing days             19.4%               17.3%
      Skilled mix by nursing
       revenue                                41.6%               39.5%

                                           Three Months Ended
                                              September 30,
                                              -------------
                                              2010                2009
                                              ----                ----
                                               (Dollars in
                                                thousands)
    Recently Acquired Facility
     Results(3) :
      Revenue                              $31,250              $8,657
      Number of facilities at
       period end                               19                   7
      Actual patient days                  147,065              43,192
      Occupancy percentage -
       Operational beds                       72.7%               70.1%
      Skilled mix by nursing days             13.8%               11.6%
      Skilled mix by nursing
       revenue                                30.5%               25.8%





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

    Total Facility Results :
      Revenue                                $31,729               23.9%
      Number of facilities at
       period end                                 11               15.7%
      Actual patient days                    107,576               18.5%
      Occupancy percentage -
       Operational beds                                             0.6%
      Skilled mix by nursing days                                     -  %
      Skilled mix by nursing
       revenue                                                    (0.2)%



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

    Same Facility Results(1) :
      Revenue                                 $8,526                7.4%
      Number of facilities at
       period end                                  -                  -  %
      Actual patient days                      3,078                0.6%
      Occupancy percentage -
       Operational beds                                             2.2%
      Skilled mix by nursing days                                   1.9%
      Skilled mix by nursing
       revenue                                                      2.0%



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

    Transitioning Facility
     Results(2) :
      Revenue                                   $610                7.2%
      Number of facilities at
       period end                                  -                  -  %
      Actual patient days                        625                1.5%
      Occupancy percentage -
       Operational beds                                             1.1%
      Skilled mix by nursing days                                   2.1%
      Skilled mix by nursing
       revenue                                                      2.1%



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

    Recently Acquired Facility
     Results(3) :
      Revenue                                $22,593                NM  %
      Number of facilities at
       period end                                 12                NM  %
      Actual patient days                    103,873                NM  %
      Occupancy percentage -
       Operational beds                                             2.6%
      Skilled mix by nursing days                                   2.2%
      Skilled mix by nursing
       revenue                                                      4.7%





           Same Facility results represent all facilities purchased prior
           to January 1, 2007. Same Facility results for 2009 include the
           results of operations through September 30, 2009 of our
           assisted living facility in Arizona where we decided not to
           exercise our renewal option on the lease which expired on
           September 30, 2009. The non-renewal of this lease reduced the
           number of actual patient days by 7,461 during the three months
    (1)    ended September 30, 2010.

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

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



                                    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:

                                                Nine Months Ended
                                                  September 30,
                                                  -------------
                                               2010                   2009
                                               ----                   ----
                                             (Dollars in thousands)
    Total Facility Results :
      Revenue                              $476,775               $395,387
      Number of facilities at
       period end                                81                     70
      Actual patient days                 2,005,559              1,724,398
      Occupancy percentage -
       Operational beds                        79.6%                  79.6%
      Skilled mix by nursing days              25.1%                  24.7%
      Skilled mix by nursing
       revenue                                 48.6%                  48.2%






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

    Total Facility Results :
      Revenue                             $81,388               20.6%
      Number of facilities at
       period end                              11               15.7%
      Actual patient days                 281,161               16.3%
      Occupancy percentage -
       Operational beds                                            -  %
      Skilled mix by nursing days                                0.4%
      Skilled mix by nursing
       revenue                                                   0.4%




                                               Nine Months Ended
                                  September 30,
                                  -------------
                                                      2010                2009
                                                      ----                ----
                                            (Dollars in thousands)
    Same Facility Results(1) :
      Revenue                                     $366,323          $348,348
      Number of facilities at
       period end                                       56                56
      Actual patient days                        1,472,619         1,488,370
      Occupancy percentage -
       Operational beds                               82.9%             81.7%
      Skilled mix by nursing days                     28.7%             26.3%
      Skilled mix by nursing
       revenue                                        53.1%             50.3%






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

    Same Facility Results(1) :
      Revenue                               $17,975                5.2%
      Number of facilities at
       period end                                 -                  -  %
      Actual patient days                   (15,751)             (1.1)%
      Occupancy percentage -
       Operational beds                                            1.2%
      Skilled mix by nursing days                                  2.4%
      Skilled mix by nursing
       revenue                                                     2.8%




                                           Nine Months
                                              Ended
                                            September
                                                 30,
                                            ----------
                                       2010                             2009
                                       ----                             ----
                                           (Dollars in
                                           thousands)
    Transitioning Facility
     Results(2) :
      Revenue                                 $26,046                $24,683
      Number of facilities at
       period end                                   6                      6
      Actual patient days                     123,820                120,358
      Occupancy percentage -
       Operational beds                          71.2%                  69.2%
      Skilled mix by nursing days                19.0%                  18.2%
      Skilled mix by nursing
       revenue                                   40.5%                  41.9%






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

    Transitioning Facility
     Results(2) :
      Revenue                                  $1,363               5.5%
      Number of facilities at
       period end                                   -                 -  %
      Actual patient days                       3,462               2.9%
      Occupancy percentage -
       Operational beds                                             2.0%
      Skilled mix by nursing days                                   0.8%
      Skilled mix by nursing
       revenue                                                    (1.4)%




                                                Nine Months Ended
                                                  September 30,
                                                  -------------
                                              2010                   2009
                                              ----                   ----
                                              (Dollars in thousands)
    Recently Acquired Facility
     Results(3) :
      Revenue                              $84,406                $22,356
      Number of facilities at
       period end                               19                      7
      Actual patient days                  409,120                115,670
      Occupancy percentage -
       Operational beds                       72.1%                  67.4%
      Skilled mix by nursing days             14.1%                  10.3%
      Skilled mix by nursing
       revenue                                30.6%                  22.8%





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

    Recently Acquired Facility
     Results(3) :
      Revenue                             $62,050                  NM  %
      Number of facilities at
       period end                              12                  NM  %
      Actual patient days                 293,450                  NM  %
      Occupancy percentage -
       Operational beds                                         4.7%
      Skilled mix by nursing days                               3.8%
      Skilled mix by nursing
       revenue                                                  7.8%




          Same Facility results represent all facilities purchased prior
          to January 1, 2007. Same Facility results for 2009 include
          the results of operations through September 30, 2009 of our
          assisted living facility in Arizona where we decided not to
          exercise our renewal option on the lease which expired on
          September 30, 2009. The non-renewal of this lease reduced
          the number of actual patient days by 21,984 during the nine
    (1)   months ended September 30, 2010.

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

          Recently Acquired Facility (or "Acquisitions") results
          represent all facilities purchased on or subsequent to
    (3)   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
                                      ------------------
                                        September 30,
                                        -------------
                                        Same Facility
                                        -------------
                                                             %
                               2010                     2009          Change
                                 ----              ----      -------
    Skilled Nursing Average
     Daily Revenue Rates:
    Medicare                 $557.22          $545.11            2.2%
    Managed care              347.68           338.97            2.6%
    Other skilled             556.12           588.55          (5.5)%
      Total skilled revenue   475.75           463.99            2.5%
    Medicaid                  166.12           159.67            4.0%
    Private and other payors  189.16           179.75            5.2%
      Total skilled nursing
       revenue               $255.49          $241.73            5.7%



                                      Nine Months Ended
                                      -----------------
                                        September 30,
                                        -------------
                                        Same Facility
                                        -------------
                                                             %
                               2010                     2009           Change
                                 ----              ----      -------
    Skilled Nursing Average
     Daily Revenue Rates:
    Medicare                 $554.61          $544.12             1.9%
    Managed care              343.65           335.98             2.3%
    Other skilled             550.11           612.91          (10.2)%
      Total skilled revenue   471.73           463.61             1.8%
    Medicaid                  164.63           160.52             2.6%
    Private and other payors  188.14           182.47             3.1%
      Total skilled nursing
       revenue               $255.16          $242.67             5.1%


    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 September 30,
                          --------------------------------
                                       2010                          2009
                                       ----                          ----
                       $            %                      $     %
                     ---           ---                   ---    ---
    Revenue:
    Medicaid      $66,993              40.7%            $53,589      40.3%
    Medicare       52,905              32.1              42,027      31.6
    Medicaid-
     skilled        4,420               2.7               3,640       2.7
                    -----               ---               -----       ---
      Total       124,318              75.5              99,256      74.6
    Managed Care   20,373              12.4              17,996      13.6
    Private and
     Other(1)      19,962              12.1              15,672      11.8
                   ------              ----              ------      ----
      Total
       revenue   $164,653             100.0%           $132,924     100.0%
                 ========             =====            ========     =====




                          Nine Months Ended September 30,
                          -------------------------------
                                      2010                          2009
                                      ----                          ----
                       $           %                      $     %
                     ---          ---                   ---    ---
    Revenue:
    Medicaid     $192,648             40.4%           $159,428      40.3%
    Medicare      154,616             32.4             128,389      32.5
    Medicaid-
     skilled       13,462              2.8               8,627       2.2
                   ------              ---               -----       ---
      Total       360,726             75.6             296,444      75.0
    Managed Care   61,164             12.9              52,675      13.3
    Private and
     Other(1)      54,885             11.5              46,268      11.7
                   ------             ----              ------      ----
      Total
       revenue   $476,775            100.0%           $395,387     100.0%
                 ========            =====            ========     =====



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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