November 7, 2013

The Ensign Group Reports Quarterly Adjusted Earnings of $0.56 per Share; Adjusts 2013 Guidance

Conference Call and Webcast Scheduled for November 8, 2013 at 10:00 am PT

MISSION VIEJO, Calif., Nov. 7, 2013 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq:ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, assisted and independent living, home health, hospice care and urgent care companies, today reported operating results for the third quarter of 2013.

Quarter Highlights Include:

  • Consolidated revenues were up 10.9% to a record $229.3 million in the quarter;
     
  • Same-store skilled mix revenue was up 58 basis points;
     
  • Same-store managed care days were up 147 basis points, and same-store managed care revenue was up over 1000 basis points;
     
  • Ensign's Transitioning Facilities group showed significant strength, with an increase in skilled mix revenue of 270 basis points, to 41.3%, largely due to the performance of the most mature Transitioning Facilities;
     
  • Same-store occupancy was up sequentially by 65 basis points
     
  • Consolidated occupancy of 77.4% was significantly impacted by the group of 42 Transitioning and Newly-Acquired Facilities, averaging occupancy of 70.5% (64.5% average occupancy in the 17 Newly-Acquired facilities alone), representing the addition of substantial organic upside to the company's portfolio; and
     
  • Adjusted earnings per share were $0.56 per share for the quarter.

 Operating Results

Commenting on the operating results, Ensign's President and Chief Executive Officer Christopher Christensen said, "Although several challenges we experienced in the first half of the year dragged into the third-quarter, many of the improvements we anticipated began to take effect late in the third quarter and early this quarter, and we expect them to continue into next year."

He noted that some of the challenges included distractions associated with structuring the spin-off transaction announced today, efforts to push the recent DOJ settlement over the finish line along with preparations for the accompanying corporate integrity agreement, and especially the short-term earnings drag created by Ensign's significant growth earlier in the year. "As we've often reminded you, whenever we've seen an unusual surge in growth over a short period of time, we naturally expect a temporary hit to our short-term earnings, however, we have always taken the long view of our business, and we are confident that our recent challenges also create great opportunities for continued growth in the fourth quarter, and in 2014 and beyond," he added. 

Mr. Christensen also affirmed that even though it was necessary to slightly adjust management's annual guidance for 2013, "Our operational leaders are fully engaged on all fronts to identify and overcome weakness wherever it occurs and, because of them, we remain confident that Ensign's future — both near- and long-term — is very bright." 

Chief Financial Officer Suzanne Snapper reported that adjusted operating margins were impacted by a number of factors, including a spike in healthcare costs, challenges in Ensign's fast-growing home health and hospice services, and a 26 basis point decline in same store occupancy, which was somewhat offset by an increase in skilled mix. "However, we continue to see growth in our same store managed care days, with a 15.4% increase, as well as a 5.6% increase in sub-acute days," she said. She further noted that Ensign's business can vary from quarter to quarter, due largely to changes in reimbursement systems, delays and changes in state budgets, seasonality in occupancy and skilled mix, and the short-term impact of Ensign's acquisition activities, which were unusually aggressive in the first half of the year.

Ms. Snapper added, "The fourth quarter is when we historically have our best occupancy and mix, as well as the positive effects of our annual rate increases." She also noted that the company's adjusted guidance represents an average annual growth rate in earnings per share of almost 15% a year since 2009.

She reported that the company continues to generate strong cash flow, with cash on hand on September 30, 2013 of $46.0 million, net cash from operations in the quarter of $57.1 million, and free cash flow for the trailing twelve months ended September 30, 2013 of $53.6 million. She also noted that the company's credit relationships remain strong, with approximately $120.0 million in borrowing capacity available on its existing credit line.

Diluted GAAP earnings per share from continuing operations was $0.47 for the quarter, compared to earnings of $0.60 per share from continuing operations in the prior year quarter. Adjusted non-GAAP earnings for the quarter were $0.56 per diluted share, compared to $0.62 in the third quarter of 2012.

A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to adjusted EBITDAR and adjusted 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.

2013 Guidance Adjusted

Management adjusted its previously-announced 2013 annual guidance, projecting revenues of $900 million to $915 million, and adjusted net income of $2.56 to $2.72 per diluted share for the year. The guidance is based on diluted weighted average common shares outstanding of 22.5 million and assumes, among other things, no additional acquisitions or dispositions beyond those made to date, the October 1, 2013 Medicare rate increase, announced increases in Medicaid reimbursement rates net of expected provider tax increases, costs associated with the defense and settlement of the 2012 class action lawsuit, and a tax rate of 38.5%. It excludes acquisition-related costs and amortization costs related to intangible assets acquired and costs associated with the pending spin-off. It also excludes expenses related to the DOJ settlement, discontinued operations, and development and operational losses associated with newly-developed operations which have not achieved stabilization.

Quarter Highlights

Also during the quarter, the company's newly-developed Sloan's Lake Rehabilitation and Care Center, a 42-bed all-private/Medicare skilled nursing facility located just west of downtown Denver, Colorado, achieved an EBITDAR margin for the quarter of 21.8% in only the second full quarter since completing its Medicare certification, with 91.1% occupancy and 100% skilled mix revenue. Mr. Christensen noted that Ensign is pursuing a similar strategy in other key markets, creating an additional lever the company can pull in the near future.

During the quarter, the company's Board of Directors declared a quarterly cash dividend of $0.065 per share of Ensign common stock. Ensign has been a dividend-paying company since 2002 and has consistently increased its dividend annually. 

Ensign's growing portfolio consists of 119 facilities, nine home health and seven hospice companies, six urgent care clinics, and an ancillary service provider, all in 11 states. Of the 119 post-acute and seniors housing facilities, 96 are Ensign-owned, and 75 of those are owned free of mortgage debt, with Ensign affiliates holding purchase options on two of Ensign's 23 leased facilities. Management reaffirmed that Ensign is actively seeking additional opportunities to acquire both well-performing and struggling long-term care, assisted living, seniors housing, home health and hospice operations across the United States. Management also reports that they are seeing an increased number of acquisition opportunities at present, and that they expect to complete additional acquisitions before year-end.      

DOJ Investigation Finalized

On October 1, 2013, the company finalized its settlement with the Department of Justice and the OIG, fully and finally resolving the DOJ investigation which has been ongoing since 2006. In connection with the settlement, the company signed a five-year corporate integrity agreement. In anticipation of entering into the corporate integrity agreement, the company has been making significant enhancements to its internal compliance program, resulting in increased costs, including monitoring expenses, interest on the settlement amount and other associated start-up costs. The Company also paid the settlement amount of $48 million in the fourth quarter. Ensign has denied engaging in any illegal conduct, and agreed to the settlement without any admission of wrongdoing in order to resolve the matter and avoid the uncertainty and expense of protracted litigation. The company does not expect the settlement and remittance to have a material adverse effect on the company's long-term financial position, business plan or prospects; however, the resolution will have an impact on the company's GAAP results of operations and cash flows for the 2013 fiscal year. Investors are directed to the more complete discussions of the matter contained in the company's 10-Q for additional disclosures.

Conference Call

A live webcast will be held on Friday, November 8, 2013 at 10:00 a.m. Pacific Time (1:00 p.m. Eastern) to discuss Ensign's third 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 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 29, 2013.

About Ensign

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, healthcare and diagnostic services for both long-term residents and short-stay rehabilitation patients at 119 post-acute, assisted living and seniors housing facilities, nine home health companies, seven hospice companies, five urgent care locations and a mobile diagnostic business, all spread across California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska and Oregon. 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 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 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 the entry into final settlement documents. 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, 2013
Nine Months Ended
September 30, 2013
  As Reported Non-GAAP Adj.   As Adjusted As Reported Non-GAAP Adj.   As Adjusted
Revenue  $ 229,261  (1,265) (8)  $ 227,996  $ 667,548  (4,164) (8) (9)  $ 663,384
Expense:                 
Cost of services (exclusive of facility rent, general and administrative and depreciation and amortization expense shown separately below)  186,172 (2,341) (1) (2) (3) (9)  183,831  538,146 (8,757) (1) (2) (3) (9) (10)  529,389
U.S. Government inquiry settlement  --   --     --   33,000 (33,000) (4)  -- 
Facility rent—cost of services  3,404 (180) (6)  3,224  10,056 (688) (5)(6)  9,368
General and administrative expense  10,601 (1,746) (7) (8)  8,855  28,321 (2,968) (7) (8)  25,353
Depreciation and amortization  8,795 (364) (11)  8,431  25,198 (1,176) (11) (12)  24,022
Total expenses  208,972 (4,631)    204,341  634,721 (46,589)    588,132
Income from operations  20,289 3,366    23,655  32,827 42,425    75,252
Other income (expense):                 
Interest expense  (3,181)      (3,181)  (9,441)      (9,441)
Interest income  141      141  363      363
Other expense, net  (3,040)      (3,040)  (9,078)      (9,078)
Income before provision for income taxes  17,249 3,366    20,615  23,749 42,425    66,174
Tax Effect on Non-GAAP Adjustments   1,296 (13)     16,334 (13)  
Tax True-up for Effective Tax Rate   34 (14)     (2,297) (14)  
Provision for income taxes  6,607 1,330    7,937  11,440 14,037    25,477
Income from continuing operations  10,642 2,036    12,678  12,309 28,388    40,697
Loss from discontinued operations, net of income tax benefit  (30)      (30)  (1,804)      (1,804)
Net income (loss)  10,612 2,036    12,648  10,505 28,388    38,893
Less: net loss attributable to noncontrolling interests  148      148  (179)      (179)
Net income attributable to The Ensign Group, Inc.  $ 10,464 2,036    $ 12,500  $ 10,684 28,388    $ 39,072
Attributable to The Ensign Group, Inc.                
Net income attributable to The Ensign Group, Inc.  10,464 2,036    12,500  10,684 28,388    39,072
Loss from discontinued operations, net of income tax benefit  (30)      (30)  (1,804)      (1,804)
Income from continuing operations attributable to The Ensign Group, Inc.  $ 10,494 2,036    $ 12,530  $ 12,488 28,388    $ 40,876
Net income (loss) per share:                
Basic:                
Net income attributable to The Ensign Group, Inc.  $ 0.48      $ 0.57  $ 0.49      $ 1.79
Loss from discontinued operations, net of income tax benefit      (0.08)      (0.08)
Income from continuing operations attributable to The Ensign Group, Inc.  $ 0.48      $ 0.57  $ 0.57      $ 1.87
Diluted:                
Net income attributable to The Ensign Group, Inc.  $ 0.47      $ 0.56  $ 0.48      $ 1.75
Loss from discontinued operations, net of income tax benefit      (0.08)      (0.08)
Income from continuing operations attributable to The Ensign Group, Inc.  $ 0.47      $ 0.56  $ 0.56      $ 1.83
Weighted average common shares outstanding:                 
Basic  21,941      21,941  21,857      21,857
Diluted  22,409      22,409  22,316      22,316
                 
(1) Represents acquisition-related costs of $38 and $264 for the three and nine months ended September 30, 2013.
(2) Represents costs of $19 and $103 for the three and nine months ended September 30, 2013, incurred to recognize income tax credits.
(3) Represents additional costs incurred related to a class action lawsuit settlement of $915 and $1,524 for the three and nine months ended September 30, 2013.
(4) Represents the Company's U.S. Department of Justice (DOJ) inquiry settlement reserve recorded in the first quarter of 2013.
(5) Represents straight-line rent amortization for the first six months of 2013 for one newly constructed facility which began operations during the first quarter of 2013. This facility began operating at full capacity during the third quarter and therefore, third quarter results were not included in the three or nine month periods above.
(6) Represents straight-line rent amortization for newly opened urgent care centers.
(7) Represents legal costs incurred in connection with the ongoing investigation into the billing and reimbursement processes of some of our subsidiaries being conducted by the DOJ.
(8) Represents expenses incurred in connection with the Company's proposed spin-off of its real estate assets to a newly formed publicly traded real estate investment trust (REIT).
(9) Represents revenues and expenses incurred at newly opened urgent care centers, less rent expense recognized in note (6) above and depreciation expense recognized in note (11) below
(10) Represents revenues and expenses for the first six months of 2013 incurred at one newly constructed facility which began operations during the first quarter of 2013, less rent expense recognized in note (5) above and depreciation expense recognized in Note (12) below. This facility began operating at full capacity during the third quarter and therefore, third quarter results were not included in the three or nine month periods above.
(11) Represents depreciation expense at newly opened urgent care centers and amortization costs related to patient base intangible assets at skilled nursing and assisted living facilities 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.
(12) Represents depreciation expense for the first six months of 2013 at one newly constructed facility which began operations during the first quarter of 2013. This facility began operating at full capacity during the third quarter and therefore, third quarter results were not included in the three or nine month periods above.
(13) Represents the tax impact of non-GAAP adjustments noted in (1) — (12) at the Company's year to date effective tax rate of 38.5% for the three and nine months ended September 30, 2013.
(14) Represents an adjustment to the provision for income taxes to our current year to date effective rate to 38.5% for the three and nine months ended September 30, 2013.
 
 
THE ENSIGN GROUP, INC.
GAAP and ADJUSTED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Including Adjustments for Discontinued Operations
(In thousands, except per share data)
                 
  Three Months Ended
September 30, 2012
Nine Months Ended
September 30, 2012
  As Reported Incl. Disc. Ops. Non-GAAP Adj.   As Adjusted As Reported Incl. Disc. Ops. Non-GAAP Adj.   As Adjusted
Revenue  $ 206,691      $ 206,691  $ 612,650      $ 612,650
Expense:                 
Cost of services (exclusive of facility rent, general and administrative and depreciation and amortization expense shown separately below)  164,579 (553) (1)(2)(7)  164,026  487,291 (3,565) (1)(2)(3)(7)  483,726
Facility rent—cost of services  3,359 (236) (4)(7)  3,123  10,034 (588) (4)(7)  9,446
General and administrative expense  8,099 (593) (5)  7,506  23,933 (1,441) (5)  22,492
Depreciation and amortization  7,147 (144) (6)(7)  7,003  21,071 (450) (6)(7)  20,621
Total expenses  183,184 (1,526)    181,658  542,329 (6,044)    536,285
Income from operations  23,507 1,526    25,033  70,321 6,044    76,365
Other income (expense):                 
Interest expense  (3,092)      (3,092)  (9,131)      (9,131)
Interest income  69      69  172      172
Other expense, net  (3,023)      (3,023)  (8,959)      (8,959)
Income before provision for income taxes  20,484 1,526    22,010  61,362 6,044    67,406
Tax impact of non-GAAP adjustments   595 (8)     2,357 (8)  
Adjustments to reflect 38.9% tax rate   461 (9)     817 (9)  
Provision for income taxes  7,528 1,056    8,584  23,114 3,174    26,288
Income from continuing operations  12,956 470    13,426  38,248 2,870    41,118
Income (loss) from discontinued operations, net of income tax benefit  80      80  (105)      (105)
Net income  13,036 470    13,506  38,143 2,870    41,013
Less: net loss attributable to noncontrolling interests  (258) 94    (164)  (511) 128    (383)
Net income attributable to The Ensign Group, Inc.  $ 13,294 376    $ 13,670  $ 38,654 2,742    $ 41,396
Attributable to The Ensign Group, Inc.                
Net income attributable to The Ensign Group, Inc.  13,294 376    13,670  38,654 2,742    41,396
Loss from discontinued operations, net of income tax benefit  80      80  (105)      (105)
Income from continuing operations attributable to The Ensign Group, Inc.  $ 13,214 376    $ 13,590  $ 38,759 2,742    $ 41,501
Net income per share                
Basic:                
Net income attributable to The Ensign Group, Inc.  0.62      0.64  1.81      1.94
Income from discontinued operations, net of income tax benefit  0.01      0.01  --       -- 
Income from continuing operations attributable to The Ensign Group, Inc.  $ 0.61      $ 0.63  $ 1.81      $ 1.94
Diluted:                
Net income attributable to The Ensign Group, Inc.  0.60      0.62  1.77      1.89
Loss from discontinued operations, net of income tax benefit  --       --   --       (0.01)
Income from continuing operations attributable to The Ensign Group, Inc.  $ 0.60      $ 0.62  $ 1.77      $ 1.90
Weighted average common shares outstanding:                 
Basic  21,488      21,488  21,369      21,369
Diluted  22,010      22,010  21,899      21,899
                 
(1) Represents acquisition-related costs of $110 and $230 for the three and nine months ended September 30, 2012.
(2) Represents costs of$197 and $439 for the three and nine months ended September 30, 2012, respectively, to recognize income tax credits which contributed to the decrease in the Company's effective tax rate.
(3) Represents costs incurred related to a class action lawsuit settlement of $2,596 during the three months ended June 30, 2012.
(4) Represents straight-line rent amortization for a facility which the Company had begun construction activities, but had not commenced operations of a skilled nursing facility as of September 30, 2012.
(5) Represents legal costs incurred in connection with the investigation into the billing and reimbursement processes of some of our subsidiaries conducted by the Department of Justice (DOJ).
(6) 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.
(7) Represents costs incurred at urgent care centers which had not begun operations as of September 30, 2012.
(8) Represents the tax impact of non-GAAP adjustments noted in (1) - (7) at a normalized tax rate of 39.0%.
(9) In 2011 and 2010, the Company's effective tax rate was 38.3% and 39.3%, respectively. Therefore, this represents an adjustment to the provision for income taxes to normalize the effective tax rate to 39.0%.
 
 
THE ENSIGN GROUP, INC.
RECONCILIATION OF NET INCOME TO EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR
(in thousands)
(Unaudited)
 
The table below reconciles net income to EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:
 
  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2013 2012 2013 2012
Consolidated Statements of Income Data:        
Net income  $ 10,612  $ 13,036  $ 10,505  $ 38,143
Net (income) loss attributable to noncontrolling interests  (148) 258 179 511
Loss (income) from discontinued operations  30  (80)  1,804  105
Interest expense, net 3,040 3,023 9,078 8,959
Provision for income taxes  6,607 7,528  11,440 23,114
Depreciation and amortization 8,795 7,147 25,198 21,071
EBITDA  $ 28,936  $ 30,912  $ 58,204  $ 91,903
Facility rent—cost of services 3,404 3,359 10,056 10,034
EBITDAR  $ 32,340  $ 34,271  $ 68,260  $ 101,937
         
EBITDA  $ 28,936  $ 30,912  $ 58,204  $ 91,903
Adjustments to EBITDA:        
Charge related to the U.S. Government inquiry(a)  33,000
Expenses related to the Spin-Off(b)  1,648  1,857
Legal costs(c)  98  593  1,111  1,441
Settlement of class action lawsuit(d)  915  1,524  2,596
Urgent care center losses(e)  105  152  1,447  172
Losses at skilled nursing facility not at full operation(f)  1,256
Acquisition related costs(g)  38  110  264  230
Costs incurred to recognize income tax credits(h)  19 197  103  439
Rent related to non-core business items above(i)  180  236  687  588
Adjusted EBITDA  $ 31,939  $ 32,200  $ 99,453  $ 97,369
Facility rent—cost of services  3,404  3,359  10,056  10,034
Less: rent related to non-core business items above(i)  (180)  (236)  (687)  (588)
Adjusted EBITDAR  $ 35,163  $ 35,323  $ 108,822  $ 106,815
         
(a) Liability related to our efforts to achieve a global, company-wide, resolution of any claims connected to the U.S. Department of Justice (DOJ) investigation.
(b) Expenses incurred in connection with the Company's proposed spin-off of its real estate assets to a newly formed publicly traded real estate investment trust (REIT)
(c) Legal costs incurred in connection with the ongoing investigation into the billing and reimbursement processes of some our our subsidiaries being conducted by the DOJ.
(d) Settlement of a class action lawsuit regarding minimum staffing requirements in the state of California.
(e) Losses incurred at newly opened urgent care centers, excluding rent, depreciation, interest and income taxes.
(f) Losses incurred through the second quarter at one newly constructed skilled nursing facility which began operations during the first quarter of 2013, excluding rent, depreciation, interest and income taxes. This facility began running at full capacity during the third quarter of 2013, and therefore, results for the third quarter were not included in the three or nine month results above.
(g) Costs incurred to acquire an operation which are not capitalizable.
(h) Costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate.
(i) Rent related to newly opened urgent care centers and one newly constructed skilled nursing facility, which began operations during the first quarter of 2013, not included in items (e) and (f) above.
 
 
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
     
  September 30, December 31,
  2013 2012
Assets    
Current assets:    
Cash and cash equivalents  $ 45,997  $ 40,685
Accounts receivable — less allowance for doubtful accounts of $15,568 and $13,811 at September 30, 2013 and December 31, 2012, respectively  102,428  94,187
Investments — current  3,783  5,195
Prepaid income taxes  11,435  3,787
Prepaid expenses and other current assets  7,700  8,606
Deferred tax asset — current  13,966  14,871
Assets held for sale — current  —   268
Total current assets  185,309  167,599
Property and equipment, net  479,837  447,855
Insurance subsidiary deposits and investments  18,712  17,315
Escrow deposits  250  4,635
Deferred tax asset  3,576  2,234
Restricted and other assets  12,086  8,640
Intangible assets, net  5,976  6,115
Long-term assets held for sale  —   11,324
Goodwill  24,754  21,557
Other indefinite-lived intangibles  7,740  3,588
Total assets  $ 738,240  $ 690,862
     
Liabilities and equity     
Current liabilities:    
Accounts payable  $ 22,212  $ 26,069
Accrued charge related to U.S. Government inquiry  48,000  15,000
Accrued wages and related liabilities  35,628  35,847
Accrued self-insurance liabilities — current  16,154  16,034
Liabilities held for sale — current  —   339
Other accrued liabilities  21,525  20,871
Current maturities of long-term debt  7,354  7,187
Total current liabilities  150,873  121,347
Long-term debt — less current maturities  205,046  200,505
Accrued self-insurance liabilities — less current portion  35,393  34,849
Fair value of interest rate swap  2,003  2,866
Long-term liabilities held for sale  —   130
Deferred rent and other long-term liabilities  3,155  3,281
Total equity  341,770  327,884
Total liabilities and equity  $ 738,240  $ 690,862
     
 
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
The following table presents selected data from our consolidated statements of cash flows for the periods presented:
     
  Nine Months Ended
September 30, 
  2013 2012
Net cash provided by operating activities  $ 57,110  $ 51,593
Net cash used in investing activities (57,046)  (61,841)
Net cash provided by financing activities 5,248  12,692
Net increase (decrease) in cash and cash equivalents 5,312  2,444
Cash and cash equivalents beginning of period 40,685  29,584
Cash and cash equivalents end of period  $ 45,997  $ 32,028
 
 
THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Quarterly Information Unaudited)
         
The following tables summarize our selected performance indicators, along with other statistics, for each of the dates or periods indicated:
         
  Three Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Total Facility Results:        
Revenue  $ 229,261  $ 206,691  $ 22,570  10.9%
Number of facilities at period end  119  107  12  11.2%
Actual patient days  940,054  872,701  67,353  7.7%
Occupancy percentage — Operational beds 77.4% 78.7%    (1.3)%
Skilled mix by nursing days 26.0% 25.2%    0.8%
Skilled mix by nursing revenue 49.7% 49.3%    0.4%
       
  Three Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Same Facility Results(1):        
Revenue  $ 168,484  $ 167,165  $ 1,319  0.8%
Number of facilities at period end  77  77  —%
Actual patient days  659,373  661,001  (1,628)  (0.2)%
Occupancy percentage — Operational beds 80.7% 81.0%    (0.3)%
Skilled mix by nursing days 27.9% 26.9%    1.0%
Skilled mix by nursing revenue 52.0% 51.4%    0.6%
         
  Three Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Transitioning Facility Results(2):        
Revenue  $ 35,696  $ 33,729  $ 1,967  5.8%
Number of facilities at period end  25  25  —   —%
Actual patient days  183,381  185,325  (1,944)  (1.0)%
Occupancy percentage — Operational beds 74.2% 74.9%    (0.7)%
Skilled mix by nursing days 19.8% 17.8%    2.0%
Skilled mix by nursing revenue 41.3% 38.6%    2.7%
         
  Three Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):        
Revenue  $ 25,081  $ 5,797  $ 19,284 NM
Number of facilities at period end  17  5  12 NM
Actual patient days  97,300  26,375  70,925 NM
Occupancy percentage — Operational beds 64.5% 58.1%   NM
Skilled mix by nursing days 18.6% 10.6%   NM
Skilled mix by nursing revenue 38.5% 22.1%   NM
         
         
(1)  Same Facility results represent all facilities purchased prior to January 1, 2010.
(2)  Transitioning Facility results represents all facilities purchased from January 1, 2010 to December 31, 2011.
(3)  Recently Acquired Facility (or "Acquisitions") results represent all facilities purchased on or subsequent to January 1, 2012.
 
 
THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Quarterly Information Unaudited)
         
The following tables summarize our selected performance indicators, along with other statistics, for each of the dates or periods indicated:
         
  Nine Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Total Facility Results:        
Revenue  $ 667,548  $ 612,650  $ 54,898  9.0%
Number of facilities at period end  119  107  12  11.2%
Actual patient days  2,701,513  2,580,026  121,487  4.7%
Occupancy percentage — Operational beds 77.3% 79.2%    (1.9)%
Skilled mix by nursing days 26.6% 25.8%    0.8%
Skilled mix by nursing revenue 50.4% 50.1%    0.3%
         
  Nine Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Same Facility Results(1):        
Revenue  $ 504,697  $ 501,533  $ 3,164  0.6%
Number of facilities at period end  77  77  —%
Actual patient days  1,954,443  1,976,834  (22,391)  (1.1)%
Occupancy percentage — Operational beds 80.6% 81.3%    (0.7)%
Skilled mix by nursing days 28.4% 27.5%    0.9%
Skilled mix by nursing revenue 52.5% 51.9%    0.6%
         
  Nine Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Transitioning Facility Results(2):        
Revenue  $ 104,804  $ 100,769  $ 4,035  4.0%
Number of facilities at period end  25  25  —   —%
Actual patient days  540,321  554,257  (13,936)  (2.5)%
Occupancy percentage — Operational beds 73.6% 75.3%    (1.7)%
Skilled mix by nursing days 20.4% 18.0%    2.4%
Skilled mix by nursing revenue 42.0% 39.4%    2.6%
         
  Nine Months Ended
September 30,
   
  2013 2012    
  (Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):        
Revenue  $ 58,047  $ 10,348  $ 47,699 NM
Number of facilities at period end  17  5  12 NM
Actual patient days  206,749  48,935  157,814 NM
Occupancy percentage — Operational beds 61.3% 54.7%   NM
Skilled mix by nursing days 17.6% 9.0%   NM
Skilled mix by nursing revenue 36.8% 18.5%   NM
         
         
(1)  Same Facility results represent all facilities purchased prior to January 1, 2010.
(2)  Transitioning Facility results represents all facilities purchased from January 1, 2010 to December 31, 2011.
(3)  Recently Acquired Facility (or "Acquisitions") results represent all facilities purchased on or subsequent to January 1, 2012.
 
 
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 the skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate:
                   
  Three Months Ended September 30,
  Same Facility Transitioning Acquisitions Total %
  2013 2012 2013 2012 2013 2012 2013 2012 Change
Skilled Nursing Average Daily Revenue Rates:                  
Medicare $554.78 $554.00 $473.35 $465.28 $450.37 $415.79 $535.03 $539.13  (0.8)%
Managed care  404.51  396.32  366.67  394.36  463.79  363.10  406.35  396.17  2.6%
Other skilled  467.02  458.30  690.75  567.72  —   471.27  459.89  2.5%
Total skilled revenue  489.36  491.74  458.25  454.50  455.23  413.86  484.01  487.11  (0.6)%
Medicaid  172.77  168.83  158.44  150.99  169.73  175.01  170.81  166.74  2.4%
Private and other payors  188.48  187.80  165.59  167.87  156.71  165.17  178.62  180.75  (1.2)%
Total skilled nursing revenue $262.87 $257.77 $219.83 $209.98 $220.74 $198.88 $253.35 $249.38  1.6%
                   
                   
  Nine Months Ended September 30,
  Same Facility Transitioning Acquisitions Total %
  2013 2012 2013 2012 2013 2012 2013 2012 Change
Skilled Nursing Average Daily Revenue Rates:                  
Medicare $561.87 $552.39 $469.94 $470.09 $459.22 $411.47 $541.89 $539.61  0.4%
Managed care  397.00  387.96  372.47  397.20  456.62  405.72  397.77  388.47  2.4%
Other skilled  464.60  459.68  700.59  566.14  —   468.85  461.24  1.6%
Total skilled revenue  491.17  489.40  457.78  459.81  458.53  411.24  486.20  485.99  —%
Medicaid  174.42  168.33  158.24  150.47  170.84  181.75  172.24  166.22  3.6%
Private and other payors  187.78  190.96  168.23  165.55  154.36  167.25  179.35  182.19  (1.6)%
Total skilled nursing revenue $265.84 $258.87 $222.19 $210.70 $218.56 $200.12 $256.68 $250.98  2.3%
 
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months ended September 30, 2013 and 2012:
                 
  Three Months Ended September 30,
  Same Facility Transitioning Acquisitions Total
  2013 2012 2013 2012 2013 2012 2013 2012
Percentage of Skilled Nursing Revenue:                
Medicare 30.4% 32.5% 34.3% 32.2% 24.3% 21.4% 30.4% 32.3%
Managed care  15.8  13.6  5.9  5.7  14.2  0.7  14.5  12.4
Other skilled  5.8  5.3  1.1  0.7  —   —   4.8  4.6
Skilled mix  52.0  51.4  41.3  38.6  38.5  22.1  49.7  49.3
Private and other payors  7.8  7.5  21.3  23.2  12.6  12.7  9.8  9.5
Quality mix  59.8  58.9  62.6  61.8  51.1  34.8  59.5  58.8
Medicaid  40.2  41.1  37.4  38.2  48.9  65.2  40.5  41.2
Total skilled nursing 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
                 
                 
  Three Months Ended September 30,
  Same Facility Transitioning Acquisitions Total
  2013 2012 2013 2012 2013 2012 2013 2012
Percentage of Skilled Nursing Days:                
Medicare  14.4%  15.1%  15.9%  14.5%  11.8%  10.2%  14.4%  14.9%
Managed care  10.2  8.8  3.5  3.1  6.8  0.4  9.0  7.8
Other skilled  3.3  3.0  0.4  0.2  —   —   2.6  2.5
Skilled mix  27.9  26.9  19.8  17.8  18.6  10.6  26.0  25.2
Private and other payors  11.0  10.4  28.3  29.0  17.9  15.3  13.9  13.2
Quality mix  38.9  37.3  48.1  46.8  36.5  25.9  39.9  38.4
Medicaid  61.1  62.7  51.9  53.2  63.5  74.1  60.1  61.6
Total skilled nursing  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
 
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the nine months ended September 30, 2013 and 2012:
                 
  Nine Months Ended September 30,
  Same Facility Transitioning Acquisitions Total
  2013 2012 2013 2012 2013 2012 2013 2012
Percentage of Skilled Nursing Revenue:                
Medicare 31.5% 33.4% 35.4% 33.3% 27.1% 17.8% 31.7% 33.3%
Managed care  15.4  13.3  5.6  5.4  9.7  0.7  13.9  12.2
Other skilled  5.6  5.2  1.0  0.7  —   —   4.8  4.6
Skilled mix  52.5  51.9  42.0  39.4  36.8  18.5  50.4  50.1
Private and other payors  7.5  7.6  21.6  23.0  12.0  13.7  9.4  9.5
Quality mix  60.0  59.5  63.6  62.4  48.8  32.2  59.8  59.6
Medicaid  40.0  40.5  36.4  37.6  51.2  67.8  40.2  40.4
Total skilled nursing 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
                 
                 
  Nine Months Ended September 30,
  Same Facility Transitioning Acquisitions Total
  2013 2012 2013 2012 2013 2012 2013 2012
Percentage of Skilled Nursing Days:                
Medicare  14.9%  15.7%  16.8%  14.9%  12.9%  8.7%  15.0%  15.4%
Managed care  10.3  8.9  3.3  2.9  4.7  0.3  9.0  7.9
Other skilled  3.2  2.9  0.3  0.2  —   —   2.6  2.5
Skilled mix  28.4  27.5  20.4  18.0  17.6  9.0  26.6  25.8
Private and other payors  10.7  10.3  28.5  29.4  16.8  16.3  13.5  13.2
Quality mix  39.1  37.8  48.9  47.4  34.4  25.3  40.1  39.0
Medicaid  60.9  62.2  51.1  52.6  65.6  74.7  59.9  61.0
Total skilled nursing  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
         
         
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
September 30,
Nine Months Ended
September 30,
  2013 2012 2013 2012
  $ % $ % $ % $ %
Revenue: (Dollars in thousands)
Medicaid  $ 81,802 35.7%  $ 76,709 37.1%  $ 237,301 35.5%  $ 223,934 36.6%
Medicare 72,138 31.5% 69,526 33.6% 218,214 32.7% 209,715 34.2%
Medicaid—skilled 9,204 4.0% 6,316 3.1% 26,616 4.0% 18,590 3.0%
Total 163,144 71.2% 152,551 73.8% 482,131 72.2% 452,239 73.8%
Managed Care 30,886 13.5% 26,316 12.7% 87,446 13.1% 77,738 12.7%
Private and Other(1) 35,231 15.3% 27,824 13.5% 97,971 14.7% 82,673 13.5%
Total revenue  $ 229,261 100.0%  $ 206,691 100.0%  $ 667,548 100.0%  $ 612,650 100.0%
 
(1) Private and other payors includes revenue from urgent care centers and other ancillary businesses.
                 
Discussion of Non-GAAP Financial Measures            
EBITDA consists of net income, adjusted for net losses attributable to noncontrolling interest, 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, EBITDAR, Adjusted EBITDA and Adjusted 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 Annual Report on Form 10-K filed today with the SEC. The Form 10-K 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.
CONTACT: Investor/Media Relations

         The Ensign Group, Inc.

         (949) 487-9500, ir@ensigngroup.net

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