November 3, 2015

The Ensign Group Meets Consensus of $0.60 Per Share; Increases 2015 Guidance and Issues 2016 Guidance

Conference Call and Webcast Scheduled for Tomorrow, November 4, 2015 at 10:00 am PT

MISSION VIEJO, Calif., Nov. 03, 2015 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq:ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, home health, home care, hospice care, assisted living and urgent care companies, today reported operating results for the third quarter of 2015 with quarterly adjusted earnings of $0.60 per share.

Quarter Highlights Include:

  • Consolidated adjusted net income climbed 55.7% over the prior year quarter to $15.9 million, and adjusted earnings per share of $0.60 outpaced the prior year quarter of $0.44 per share by almost 37%;
  • Consolidated adjusted EBITDAR was $57.0 million for the quarter, an increase of 46.9%;
  • Same-store skilled revenue grew by 6.4% over the prior year quarter, with a skilled revenue mix of 52.8%, and managed care days increased by 12.45% over the prior year quarter;
  • Transitioning revenue grew by 18.2% over the prior year quarter, driving skilled revenue mix to 42.4%, and transitioning occupancy increased by 205 basis points over the prior year quarter;
  • Cornerstone Healthcare, Inc., our home health and hospice subsidiary, grew its revenue by $10.7 million, an increase of 73.1%; and
  • Consolidated revenues for the quarter were up $90.2 million or 34.6% over the prior year quarter to $351.1 million.

Operating Results

Ensign's President and Chief Executive Officer, Christopher Christensen, congratulated the organization's leaders and their teams for outstanding clinical and financial performance during the quarter. "In the midst of unprecedented growth, our team of expert operators and clinicians across the organization have been relentless at driving record improvements in our same-store operations while successfully transitioning dozens of new operations," he said. "It's important to emphasize that while our newly acquired facilities almost always create a short-term drag on earnings, we were able to offset that impact by achieving solid results in our same store and transitioning operations," he added.

"As our balance sheet and income statement demonstrate, we remain as disciplined as ever in our approach to growth, even as our ability to transition more and more operations grows with our organization," Mr. Christensen highlighted. He also pointed out that the quarter's results, "demonstrated again that our ability to transition new operations and to drive organic growth within our existing portfolio, even in the midst of significant growth, remains as strong as ever."  

He also reiterated that as of November 1, 2015, the company had 64 operations in the recently acquired bucket, which is the highest number of operations in that category in the organization's history. "Our recent growth puts us in a very strong position for continued organic improvement in 2016 and beyond as these recently acquired and transitioning operations continue to mature for years to come," Christensen said.

Chief Financial Officer Suzanne Snapper reported that Ensign's balance sheet remains strong in spite of our record acquisition activity, with its conservative adjusted net-debt-to-EBITDAR ratio of 3.27x at quarter end.  "It's remarkable that we transitioned so many acquisitions, protected our balance sheet and simultaneously achieved record-setting same store growth," she said.  She also added "as a result of our ever improving discipline, we continue to have flexibility under our revolving line of credit, with approximately $93.0 million of availability and a built-in expansion option that adds liquidity." She further noted that the company continues to generate strong cash flow, with cash on hand of $40.1 million on September 30, 2015.

Ms. Snapper also reported that consolidated revenues in the quarter were up 34.6% over the prior year quarter to a record $351.1 million and consolidated adjusted EBITDAR for the quarter grew by 46.9% to $57.0 million, with adjusted EBITDAR margins for the quarter of 16.5%.  Fully diluted adjusted earnings per share were $0.60 for the quarter and adjusted net income was $15.9 million.

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.

Quarter Highlights

During the quarter, Ensign paid a quarterly cash dividend of $0.075 per share of its common stock. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 13 years.

Also during the quarter and since, Ensign announced the acquisition of 12 skilled nursing operations, 20 assisted and independent living operations, one home health business, and one hospice agency, including:

  • In Arizona, seven skilled nursing operations with a total of 864 skilled nursing beds and three independent and assisted living operations with a total of 770 units, all under a new long-term master lease;
  • In Olympia, Washington, the operations and real estate of Olympia Transitional Care and Rehabilitation, a 135-bed skilled nursing operation;
  • In Westlake Village, California, Buena Vista Hospice, a Medicare and Medi-Cal certified hospice agency serving the Ventura County area;
  • In Wisconsin, fifteen assisted and independent living operations with a total of 761 units, all under a long-term master lease with an option to purchase the real estate;
  • In Orange and Whittier, California, two assisted living operations with a total of 188 units under a long-term lease;
  • In Arizona, a Medicare and Medi-Cal certified home health agency serving the Western Arizona and Eastern California areas;
  • In Kansas, The Healthcare Resortin Kansas City, Kansas, featuring a 70-bed licensed transitional care operation and 30 private assisted living suites under a long-term lease;
  • In Chandler and Scottsdale, Arizona, Chandler Post Acute and Rehabilitation, a 120-bed skilled nursing facility, and Shea Post Acute Rehabilitation Center, a 105-bed skilled nursing facility under a long-term lease;
  • In West Columbia, South Carolina, the operations and real estate of Millennium Post Acute Rehabilitation, a 125-bed skilled nursing facility; and
  • In El Cajon, California, the underlying real estate of Somerset Subacute and Rehabilitation, a 46-bed skilled nursing facility that has been operated under a lease arrangement since December 2014.

Mr. Christensen noted, "We are thrilled about our recent entry into Kansas and South Carolina and we look forward to additional growth opportunities in both states."  He noted that Ensign takes a leadership-driven approach in all its acquisitions, particularly in new states, and added, "We look forward to working together with long-time Ensign leaders as we build a strong clinical and financial foundation from which we will continue to grow." 

These acquisitions bring Ensign's growing portfolio to 182 healthcare operations, twenty-nine of which are owned, fourteen hospice agencies, fifteen home health agencies, three home care businesses and seventeen urgent care clinics across 14 states.  Mr. Christensen reaffirmed that Ensign continues to actively seek transactions to acquire real estate and to lease both well-performing and struggling skilled nursing, assisted living and other healthcare related businesses in new and existing markets.

2015 Guidance

Management increased its 2015 annual revenue guidance to between $1.31 billion and $1.33 billion and its net income guidance to a range of $66.2 million to $67.6 million.  Management also raised its 2015 annual earnings per share guidance to between $2.53 and $2.58 per diluted share for 2015.  Management's guidance is based on diluted weighted average common shares outstanding of 26.2 million and assumes, among other things, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, tax rates of 38.5% and acquisitions closed. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, stock based compensation, implementation costs for system improvements, costs incurred to recognize income tax credits, a one-time break-up fee earned in an unsuccessful bankruptcy auction and costs incurred for facilities currently being constructed and other start-up operations.

2016 Guidance

Management also provided guidance for 2016, with annual revenue guidance of between $1.53 billion and $1.58 billion and its net income guidance to a range of $77.8 million to $82.0 million.  Management also provided 2016 annual earnings per share guidance to between $2.87 and $3.01 per diluted share for 2016.  Management's guidance is based on diluted weighted average common shares outstanding of 27.1 million and assumes, among other things, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, tax rates of 38.5% and acquisitions closed. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, stock based compensation, implementation costs for system improvements, costs incurred to recognize income tax credits and costs incurred for facilities currently being constructed and other start-up operations.

Conference Call

A live webcast will be held Wednesday, November 4, 2015 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign's third quarter 2015 financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign's website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific Time on Friday, November 27, 2015.

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, urgent care services and other rehabilitative and healthcare services at 182 skilled and assisted living operations, fourteen hospice agencies, fifteen home health agencies, three home care businesses and seventeen urgent care clinics in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas and South Carolina. Each of these operations is operated by a separate, independent operating subsidiary that has its own management, employees and assets. References herein to the consolidated "company" and "its" assets and activities, as well as the use of the terms "we," "us," "its" and similar terms, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the operations, the home health and hospice businesses, the Service Center or the captive insurance subsidiary are operated by the same entity. More information about Ensign is available at http://www.ensigngroup.net.  

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

This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management's current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.

These risks and uncertainties relate to the company's business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company's periodic filings with the Securities and Exchange Commission, including its Form 10-Q, for a more complete discussion of the risks and other factors that could affect Ensign's business, prospects and any forward-looking statements. Except as required by the federal securities laws, Ensign does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.


THE ENSIGN GROUP, INC.
GAAP and ADJUSTED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
 
     
 Three Months Ended
September 30, 2015
 Nine Months Ended
September 30, 2015
 
 As Reported Non-GAAP Adj. As Adjusted As Reported Non-GAAP Adj. As Adjusted 
Revenue$351,086  $(6,366) (5)$344,720   968,671  $(20,007)
 (5)$948,664  
Expense:             
Cost of services (exclusive of facility rent, general and administrative and depreciation and amortization expense shown separately below) 280,545   (8,481)(1)(3)(5) (8) 272,064   770,293   (23,998)(1)(3)(5) (8) 746,295  
Rent—cost of services 24,500   (540) (6) 23,960   62,531    (1,556) (6) 60,975  
General and administrative expense 17,165   (1,565)(2)(3)(4) (9) 15,600   46,917   (2,888)(2)(3)(4) (9) 44,029  
Depreciation and amortization 7,288   (521) (7) 6,767   20,185   (1,694) (7) 18,491  
Total expenses 329,498   (11,107)  318,391   899,926   (30,136)  869,790   
Income from operations 21,588   4,741   26,329   68,745   10,129   78,874  
Other income (expense):             
Interest expense (802)  46   (756)  (2,035)  138   (1,897) 
Interest income 242   -   242   603   -   603  
Other expense, net (560)  46   (514)  (1,432)  138   (1,294) 
Income before provision for income taxes 21,028   4,787   25,815   67,313   10,267   77,580  
Tax Effect on Non-GAAP Adjustments   1,844       3,953    
Tax True-up for Effective Tax Rate   226        82    
Provision for income taxes 7,869   2,070   9,939   25,833   4,035   29,868  
Net income 13,159   2,717  (10) 15,876   41,480   6,232  (10) 47,712  
Less: net (loss) income attributable to noncontrolling interests (313)  335   22   (351)  494   143  
Net income attributable to The Ensign Group, Inc.$13,472   2,382  $ 15,854  $41,831   5,738  $47,569  
Net income per share:            
Basic:$0.53    $0.62  $1.67    $1.90  
Diluted$0.51    $0.60  $1.61    $1.83  
Weighted average common shares outstanding:            
Basic 25,572     25,572   24,991     24,991  
Diluted 26,535     26,535   25,940     25,940  
        
(1)  Represents acquisition-related costs of $203 and $793 for the three and nine months ended September 30, 2015, respectively.       
(2)  Represents costs of $84 and $136 for the three and nine months ended September 30, 2015, respectively, incurred to recognize income tax credits.     
(3)  Represents stock-based compensation expense of $1,722 and $4,948 for the three and nine months ended September 30, 2015, respectively.     
(4)  Represents costs of $836 and $1,983 for the three and nine months ended September 30, 2015, respectively, incurred related to new systems implementation.   
(5)  Represents revenues and expenses incurred at urgent care centers, excluding rent expense recognized in note (6) below and depreciation expense recognized in note (7) below. 
(6)  Represents straight-line rent amortization for urgent care centers included in Note (5).           
(7)  Represents depreciation expense at urgent care centers and amortization costs related to patient base intangible assets at skilled nursing and assisted living facilities.   
(8)  Represents costs incurred for facilities currently being constructed and newly-built operations during the three and nine months ended September 30, 2015.   
(9)  Represents breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder.       
(10)  Represents the adjustment to provision for income tax to our historical year to date effective tax rate of 38.5% for the three and nine months ended September 30, 2015.  
             

 

THE ENSIGN GROUP, INC.
GAAP and ADJUSTED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
    
           
 Three Months Ended
September 30, 2014
 Nine Months Ended
September 30, 2014
    
 As Reported Non-GAAP Adj. As Adjusted As Reported Non-GAAP Adj. As Adjusted    
Revenue$260,841   (3,617)(4)(5)$257,224  $750,537   (10,094)(4)(5)$ 740,443     
Expense:               
Cost of services (exclusive of facility rent, general and administrative and depreciation and amortization expense shown separately below)  209,737   (4,256)(1)(4)(5) 205,481   601,532   (11,686)(1)(4)(5) 589,846     
Rent—cost of services 18,176   (410) (6) 17,766   30,008   (1,539)   (6)  28,469     
General and administrative expense 12,956   (31)(2)(3)(4) 12,925   44,370   (9,035)(2)(3)(4) 35,335     
Depreciation and amortization 4,677   (380) (7) 4,297   21,343   (895)  (7 ) 20,448     
Total expenses 245,546   (5,077)  240,469    697,253   (23,155)  674,098     
Income from operations 15,295   1,460   16,755   53,284   13,061   66,345     
Other income (expense):               
Interest expense (407)  46   (361)  (12,490)  6,471   (6,019)    
Interest income 142   -   142   435   -   435     
Other expense, net (265)  46   (219)  (12,055)  6,471   (5,584)    
Income before provision for income taxes 15,030   1,506   16,536   41,229   19,532    60,761     
Tax Effect on Non-GAAP Adjustments   581       7,520       
Tax True-up for Effective Tax Rate   (872)      (2,410)      
Provision for income taxes 6,659   (291)  6,368    18,284   5,110   23,394     
Net income 8,371   1,797  (8) 10,168   22,945   14,422   (8 ) 37,367     
Less: net (loss) income attributable to noncontrolling interests (535)  523   (12)  (1,494)  1,563   69     
Net income attributable to The Ensign Group, Inc.$8,906   1,274  $10,180  $24,439   12,859  $37,298     
Net income per share               
Basic: 0.40     0.45   1.10     1.67     
Diluted: 0.38     0.44   1.06     1.62      
Weighted average common shares outstanding:               
Basic 22,415     22,415   22,282     22,282     
Diluted 23,186     23,186   23,014     23,014     
                
(1)  Represents acquisition-related costs of $85 and $219 for the three and nine months ended September 30, 2014, respectively.        
(2)  Represents costs of $31 and $93 for the three and nine months ended September 30, 2014, respectively, incurred to recognize income tax credits.      
(3)  Represents costs of $8,871 for the nine months ended September 30, 2014, incurred related to the Company's spin-off of real estate assets to CareTrust REIT (CTRE) (the Spin-Off). As the Spin-Off was completed in the second quarter of 2014, there was no costs associated with the Spin-Off for the three months ended September 30, 2014.
(4)  Represents revenues and expenses incurred at the three independent living operations transferred to CTRE on June 1, 2014 in connection with the Spin Off, excluding rent expense recognized in note (6) below.  
(5)  Represents revenues and expenses incurred at newly opened urgent care centers, excluding rent expense recognized in note (6) below and depreciation expense recognized in note (7) below.   
(6)  Represents straight-line rent amortization for newly opened urgent care centers and the three independent living operations transferred to CTRE included in Note (4).    
(7)  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.   
(8)  Represents the adjustment to provision for income tax to our historical year to date effective tax rate of 38.5% for the three and nine months ended September 30, 2014.    
                

 

                                                                     
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,
                                                                
  2015   2014   2015   2014                                                              
Consolidated Statements of Income Data:                                                                        
Net income$13,159  $8,371  $41,480  $22,945                                                              
Less: net loss attributable to noncontrolling interests (313)  (535 )  (351)  (1,494)                                                             
Interest expense, net 560   265   1,432   12,055                                                              
Provision for income taxes 7,869   6,659   25,833   18,284                                                              
Depreciation and amortization 7,288   4,677   20,185   21,343                                                              
EBITDA$29,189  $20,507  $89,281  $76,121                                                              
Rent—cost of services 24,500   18,176   62,531   30,008                                                              
EBITDAR$53,689  $38,683  $151,812  $106,129                                                              
                                                                         
EBITDA$29,189  $20,507  $89,281  $76,121                                                              
Adjustments to EBITDA:                                                                    
Expenses related to the Spin-Off(a)    8,871                                                              
Stock-based compensation expense(b) 1,722    4,948                                                               
Costs incurred related to new systems implementation(c) 836    1,983                                                               
Urgent care center (earnings) loss(d) (418)  31   (1,982)  3                                                              
Costs at facilities currently being constructed and start-up operations(e) 918     1,526                                                               
Earnings at three operations transferred to REIT (f)    (122)                                                             
Acquisition related costs(g) 203   85   793   219                                                                  
Breakup fee, net of costs, received in connection with a public auction(h)   (1,019)                                                              
Costs incurred to recognize income tax credits(i) 84   31   136   93                                                                 
Rent related to item(d) and (f) above 540   410   1,556   1,539                                                                 
Adjusted EBITDA $33,074  $21,064  $97,222  $86,724                                                                  
Rent—cost of services 24,500   18,176   62,531   30,008                                                                  
Less: rent related to items (d) and (f) above (540)  (410)  (1,556)  (1,539)                                                             
Adjusted EBITDAR$57,034  $38,830  $158,197  $115,193                                                                 
                                                                     
(a)  Expenses incurred in connection with the Spin-Off.                                                                    
(b)  Stock-based compensation expense incurred during the three and nine months ended September 30, 2015.  Adjusted EBITDA and EBITDAR for the three and nine months ended September 30, 2014 did not include non-GAAP adjustment related to stock-based compensation expense of $1.4 million and $3.8 million, respectively.  If adjusted for stock-based compensation expense, Adjusted EBITDA for the three and nine months ended September 30, 2014 would have been $22.4 million and $90.5 million, respectively, and Adjusted EBITDAR for the three and nine months ended September 30, 2014 would have been $40.2 million and $119.0 million, respectively.  EBITDA for the nine months ended September 30, 2014 reflects four month increase in rent expense as a result of the Spin-Off compared to nine months increase in rent expense for the nine months ended September 30, 2015.
(c)  Costs incurred related to new systems implementation.                                                                    
(d)  Operating results at urgent care centers.  This amount for the three and nine months ended September 30, 2015 excluded rent of $0.5 million and $1.6 million, respectively, and depreciation expense of $0.3 million and 0.9 million, respectively. This amount for the three and nine months ended September 30, 2014 excluded rent of $0.4 million and $1.1 million, respectively, and depreciation expense of $0.2 million and $0.5 million, respectively. The results also excluded the net loss attributable to the variable interest entity associated with our urgent care business of approximately $0.3 million and  $0.5 million for the three and nine months ended September 30, 2015, respectively, and $0.5 million and $1.6 million for the three and nine months ended September 30, 2014, respectively. Operating loss excluding the net loss attributable to the variable interest entity associated with our urgent care business for the three and nine months ended September 30, 2015 were $0.4 million for both periods.
(e)  Costs incurred for facilities currently being constructed and start-up operations during the three and nine months ended September 30, 2015.
(f)  Results at three independent living facilities which were transferred to CareTrust as part of the Spin-Off transaction, excluding rent, depreciation, interest and income taxes.
(g)  Costs incurred to acquire operations which are not capitalizable.                                                                    
(h)  Breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder.
(i) Costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate.
                                                                 

 

                  
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 each reportable segment for the periods presented: 
                  
  Three Months Ended
September 30,
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 Nine Months Ended
September 30,
 
   2015   2014   2015   2014   2015   2014   2015   2014  
  TSA Services Home Health and Hospice TSA Services Home Health and Hospice 
Statements of Income Data:                  
Income from operations, excluding general and administrative expense(a) $36,226  $27,262  $4,067  $2,707  $108,592  $95,566  $9,738  $6,792  
Depreciation and amortization  5,542   3,459   258   124   15,368   17,920   703   371  
EBITDA $41,768  $30,721  $4,325  $2,831  $123,960  $113,486  $10,441  $7,163  
Rent—cost of services  23,574   17,507   332    203   59,950   28,144   866    568  
EBITDAR $65,342  $48,228  $4,657  $3,034  $183,910  $141,630  $11,307  $7,731  
                  
EBITDA $41,768  $30,721   $4,325  $2,831  $123,960  $113,486  $10,441  $7,163  
Adjustments to EBITDA:                 
Stock-based compensation expense(b)  997    59    2,890    181   
Costs at facilities currently being constructed and start-up operations(c)  836      1,983     
Earnings at three operations transferred to REIT (d)       (122)   
Acquisition related costs(e)  203   85     793   219    
Rent related to item(d) above(f)       406    
Adjusted EBITDA $43,804  $30,806  $4,384  $2,831  $ 129,626  $113,989  $10,622  $7,163  
Rent—cost of services  23,574   17,507   332    203   59,950   28,144   866   568  
Less: rent related to items(d) above(f)       (406)   
Adjusted EBITDAR $67,378  $48,313  $4,716  $3,034  $189,576  $141,727  $11,488  $7,731  
                  
(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss. 
(b) Stock-based compensation expense incurred during the three and nine months ended September 30, 2015.
(c) Costs incurred for facilities currently being constructed and start-up operations during the three and nine months ended September 30, 2015.
(d) Results at three independent living facilities which were transferred to CareTrust REIT as part of the Spin-Off transaction, excluding rent, depreciation, interest and income taxes.
(e) Costs incurred to acquire operations which are not capitalizable.
 
                   

 

THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 
 September 30,
2015
 December 31,
2014
 
Assets    
Current assets:    
Cash and cash equivalents$40,069  $50,408  
Restricted cash — current  5,082  
Accounts receivable — less allowance for doubtful accounts of $27,595 and $20,438 at September 30, 2015 and December 31, 2014, respectively 192,016   130,051  
Investments — current 4,500    6,060  
Prepaid income taxes 6,792   2,992  
Prepaid expenses and other current assets 15,417   8,434  
Deferred tax asset — current 10,736   10,615  
Total current assets 269,530   213,642  
Property and equipment, net 257,164   149,708  
Insurance subsidiary deposits and investments 30,050   17,873  
Escrow deposits 2,310   16,153  
Deferred tax asset 10,597   11,509  
Restricted and other assets 8,177   6,833  
Intangible assets, net 47,223   35,568  
Goodwill 39,736   30,269  
Other indefinite-lived intangibles 17,716   12,361  
Total assets$682,503  $493,916  
     
Liabilities and equity     
Current liabilities:    
Accounts payable 34,699   33,186  
Accrued wages and related liabilities 65,475   56,712  
Accrued self-insurance liabilities — current 17,069   15,794  
Other accrued liabilities 43,492   24,630  
Current maturities of long-term debt 613   111  
Total current liabilities 161,348   130,433  
Long-term debt — less current maturities 69,209   68,279   
Accrued self-insurance liabilities — less current portion 36,938   34,166  
Deferred rent and other long-term liabilities 3,811   3,235  
Total equity 411,197   257,803  
Total liabilities and equity$ 682,503  $493,916  
     
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, 
  2015   2014  
Net cash provided by operating activities$13,300  $66,688  
Net cash used in investing activities (120,576)  (99,408) 
Net cash provided by financing activities 96,937   6,171  
Net decrease in cash and cash equivalents (10,339)  (26,549) 
Cash and cash equivalents at beginning of period 50,408   65,755  
Cash and cash equivalents at end of period$40,069  $ 39,206  
     

 

THE ENSIGN GROUP, INC.
REVENUE BY SEGMENTS
    
The following table sets forth our total revenue by segments and as a percentage of total revenue for the periods indicated:        
              
              
  Three Months Ended September 30,  Nine Months Ended September 30, 
  2015  2014  2015  2014 
  Revenue Dollars Revenue Percentage  Revenue Dollars Revenue Percentage  Revenue Dollars Revenue Percentage  Revenue Dollars Revenue Percentage 
  (Dollars in thousands)
TSA Services:                    
Skilled nursing facilities  $289,475  82.5% $228,134  87.5% $819,655  84.6% $660,816  88.1%
Assisted and independent living facilities  27,686  7.9    12,259  4.7   57,916  6.0   35,714  4.8 
Total TSA services  317,161  90.4   240,393  92.2   877,571  90.6   696,530  92.9 
Home health and hospice services:                    
Home health  12,794  3.6   7,655  2.9   34,452  3.6   20,938   2.8 
Hospice  12,456  3.5   6,930  2.7   29,057  3.0   17,497  2.3 
Total home health and hospice services  25,250  7.1   14,585  5.6   63,509  6.6   38,435  5.1 
All other (1)  8,675  2.5   5,863  2.2   27,591  2.8   15,572  2.0 
Total revenue $351,086  100.0% $260,841  100.0% $968,671  100.0% $750,537  100.0%
(1) Includes revenue from services provided at our urgent care clinics and a mobile x-ray and diagnostic operation.    
               

 

THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
           
         
The following tables summarize our selected performance indicators for our TSA services segment along with other statistics, for each of the dates or periods indicated: 
          
 Three Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Total Facility Results:         
Skilled nursing revenue$289,475  $228,134  $61,341   26.9 %          
Assisted and independent living revenue 27,686   12,259   15,427   125.8 %    
Total transitional, skilled and assisted living revenue$317,161  $240,393  $76,768   31.9 %    
Number of facilities at period end 178   127   51   40.2 %   
Actual patient days 1,317,323   994,995   322,328   32.4 %   
Occupancy percentage — Operational beds 77.9%  77.7%    0.2 %   
Skilled mix by nursing days 30.2%  27.1%    3.1 %  
Skilled mix by nursing revenue 52.5%  50.2%    2.3 %   
 Three Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Same Facility Results(1):         
Skilled nursing revenue$213,329  $200,376  $12,953   6.5 % 
Assisted and independent living revenue  7,972   7,903   69   0.9 % 
Total transitional, skilled and assisted living revenue$221,301  $208,279  $13,022   6.3 %   
Number of facilities at period end 101   101   %   
Actual patient days 840,094   838,198   1,896   0.2 %  
Occupancy percentage — Operational beds 81.1%  80.7%    0.4 % 
Skilled mix by nursing days  30.1%  27.9%    2.2 % 
Skilled mix by nursing revenue 52.8%  51.2%    1.6 % 
 Three Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Transitioning Facility Results(2):         
Skilled nursing revenue$16,806  $15,622  $1,184   7.6 % 
Assisted and independent living revenue 3,155   2,987   168   5.6 % 
Total transitional, skilled and assisted living revenue$19,961  $18,609  $1,352   7.3 %   
Number of facilities at period end 17   17   %   
Actual patient days 101,868   100,089   1,779   1.8 %  
Occupancy percentage — Operational beds 68.4%  66.3%    2.1 % 
Skilled mix by nursing days 20.8%  18.4%    2.4 % 
Skilled mix by nursing revenue 42.4%  39.5%    2.9 % 
 Three Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Recently Acquired Facility Results(3):         
Skilled nursing revenue$59,340  $12,136  $47,204  NM (4) 
Assisted and independent living revenue 16,559   1,369   15,190  NM  
Total transitional, skilled and assisted living revenue$75,899  $13,505  $62,394  NM  
Number of facilities at period end 60   9   51  NM  
Actual patient days 375,361   56,708    318,653  NM 
Occupancy percentage — Operational beds 74.2%  62.6%   NM  
Skilled mix by nursing days  33.7%  27.3%   NM 
Skilled mix by nursing revenue 54.4%  46.3%   NM  
_______________________        
(1)  Same Facility results represent all facilities purchased prior to January 1, 2012.        
(2)  Transitioning Facility results represents all facilities purchased from January 1, 2012 to December 31, 2013.     
(3)  Recently Acquired Facility (or "Acquisitions") results represent all facilities purchased on or subsequent to January 1, 2014.    
(4) Not meaningful.         
 
 Nine Months Ended
September 30,
     
  2015   2014       
 (Dollars in thousands) Change % Change 
Total Facility Results:         
Skilled nursing revenue$819,655  $660,816  $158,839   24.0 % 
Assisted and independent living revenue 57,916   35,714   22,202   62.2 % 
Total transitional, skilled and assisted living revenue$877,571  $696,530  $181,041   26.0 % 
Number of facilities at period end 178   127   51   40.2 % 
Actual patient days 3,515,719   2,895,265   620,454   21.4 % 
Occupancy percentage — Operational beds 78.2%  77.9%    0.3 % 
Skilled mix by nursing days 30.2%   27.6%    2.6 % 
Skilled mix by nursing revenue 52.9%  50.9%    2.0 % 
 Nine Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Same Facility Results(1):         
Skilled nursing revenue$633,684  $596,576  $37,108   6.2 % 
Assisted and independent living revenue 23,826   23,609   217   0.9 % 
Total transitional, skilled and assisted living revenue$657,510  $620,185  $37,325   6.0 % 
Number of facilities at period end 101   101   % 
Actual patient days 2,480,148   2,484,026   (3,878)  (0.2)% 
Occupancy percentage — Operational beds 81.0%  80.6%    0.4 % 
Skilled mix by nursing days  30.4%  28.4%    2.0 % 
Skilled mix by nursing revenue 53.4%  51.8%    1.6 % 
 Nine Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Transitioning Facility Results(2):          
Skilled nursing revenue$49,436  $45,798  $3,638   7.9 % 
Assisted and independent living revenue 9,568   8,633   935   10.8 % 
Total transitional, skilled and assisted living revenue$59,004  $54,431  $4,573   8.4 % 
Number of facilities at period end 17   17   % 
Actual patient days 304,159   294,738   9,421   3.2 % 
Occupancy percentage — Operational beds 68.8%  65.8%    3.0 % 
Skilled mix by nursing days 20.8%   18.9%    1.9 % 
Skilled mix by nursing revenue 42.5%  40.2%    2.3 % 
 Nine Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Recently Acquired Facility Results(3):         
Skilled nursing revenue$136,535   $18,442  $118,093  NM (5) 
Assisted and independent living revenue 24,522   2,224   22,298  NM  
Total transitional, skilled and assisted living revenue$161,057  $20,666  $140,391  NM  
Number of facilities at period end 60   9   51   NM  
Actual patient days 731,412   88,485   642,927  NM 
Occupancy percentage — Operational beds 73.7%  60.1%   NM  
Skilled mix by nursing days 33.5%  27.0%   NM 
Skilled mix by nursing revenue 54.4%  45.8%   NM  
 Nine Months Ended
September 30,
     
  2015   2014      
 (Dollars in thousands) Change % Change 
Transferred to CareTrust(4):         
Skilled nursing revenue$-  $-  $-  NM 
Assisted and independent living revenue -   1,248   (1,248) NM  
Total transitional, skilled and assisted living revenue$-  $1,248  $(1,248) NM 
Actual patient days -   28,016    NM  
Occupancy percentage — Operational beds -   70.3%   NM 
_______________________        
(1)  Same Facility results represent all facilities purchased prior to January 1, 2012.         
(2)  Transitioning Facility results represents all facilities purchased from January 1, 2012 to December 31, 2013.     
(3)  Recently Acquired Facility (or "Acquisitions") results represent all facilities purchased on or subsequent to January 1, 2014.    
(4)  Transferred to CareTrust results represent the results at three independent living facilities which were transferred to CareTrust as part of the Spin-Off on June 1, 2014.  These results were excluded from Same Facility for the nine months ended September 30, 2014 for comparison purposes.
(5) Not meaningful.                  

 

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  
  2015   2014   2015   2014   2015   2014   2015   2014   
Skilled Nursing Average Daily Revenue Rates:                 
Medicare$562.35  $552.96  $488.67  $472.72  $521.96  $532.44  $549.74  $546.65     
Managed care 421.17   412.94   457.91   475.05   436.13   445.64   426.75   418.22     
Other skilled 451.25   453.22   316.70   253.00   357.12   317.07   430.03   436.48     
Total skilled revenue 493.20   489.94   476.00   473.31   460.00   433.51   484.90   485.92     
Medicaid 189.65   179.00   177.61   167.13   195.11   184.92   189.82   178.30     
Private and other payors 194.95   188.31   139.45   151.65   202.54   211.53   191.20   185.52     
Total skilled nursing revenue$281.65  $266.96  $233.66  $220.82  $285.08  $255.97  $279.09  $262.64     
                   
 Nine Months Ended September 30, 
 Same Facility  Transitioning Acquisitions Total  
  2015   2014   2015   2014   2015   2014   2015   2014   
Skilled Nursing Average Daily Revenue Rates:                  
Medicare$566.01  $553.02  $484.84  $462.74  $528.84  $523.84  $555.32  $546.34   
Managed care 417.87   411.51   459.78   468.86   446.32   436.29   426.19   415.80   
Other skilled 465.47   446.24   322.97   253.00   363.39   311.99   446.08   437.26   
Total skilled revenue 498.96   490.22   474.72   464.93   467.83   426.88   492.12   486.96   
Medicaid 189.03   178.69   174.22   163.54   194.98   184.32   188.78   177.50   
Private and other payors  193.65   188.92   145.79   152.25   207.32   205.11   191.48   185.33   
Total skilled nursing revenue$283.74  $268.42  $232.21  $218.67  $287.72  $252.00  $280.70  $263.80   

 

                          
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three and nine months ended September 30, 2015 and 2014:
                          
 Three Months Ended September 30,  
 Same Facility Transitioning Acquisitions Total  
 2015 2014 2015 2014 2015  2014 2015 2014  
Percentage of Skilled Nursing Revenue:                         
Medicare28.6% 29.4% 26.8% 25.3% 25.6% 18.8% 27.9% 28.6%  
Managed care16.4  15.1  15.4  14.2  22.5  16.8  17.6  15.1   
Other skilled7.8  6.7  0.2  -  6.3   10.7  7.0  6.5   
Skilled mix52.8  51.2  42.4  39.5  54.4  46.3  52.5  50.2   
Private and other payors8.1  9.1  9.6  11.9  7.4   9.6  8.0  9.3   
Quality mix60.9  60.3  52.0  51.4  61.8  55.9  60.5  59.5   
Medicaid39.1  39.7  48.0  48.6  38.2  44.1  39.5  40.5   
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0 % 100.0%  
                          
                          
 Three Months Ended September 30,  
 Same Facility Transitioning Acquisitions Total  
 2015 2014 2015 2014  2015 2014 2015 2014  
Percentage of Skilled Nursing Days:                         
Medicare14.3% 14.2% 12.8% 11.8% 14.0% 9.0% 14.2% 13.7%  
Managed care10.9  9.8  7.9  6.6  14.7  9.6  11.5  9.5   
Other skilled4.9  3.9  0.1  -  5.0  8.7  4.5  3.9   
Skilled mix30.1  27.9  20.8  18.4  33.7  27.3  30.2  27.1   
Private and other payors11.8  12.9  16.0  17.4  10.4  11.6  11.8  13.2   
Quality mix41.9  40.8  36.8  35.8  44.1  38.9  42.0  40.3   
Medicaid58.1  59.2   63.2  64.2  55.9  61.1  58.0  59.7   
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0%  100.0% 100.0%  
                           
                          
 Nine Months Ended September 30,  
 Same Facility Transitioning Acquisitions Total  
  2015 2014 2015 2014 2015 2014 2015 2014  
Percentage of Skilled Nursing Revenue:                         
Medicare30.3% 30.6% 27.1% 25.2% 24.9% 17.8% 29.2% 29.9%  
Managed care15.8  15.0  15.2  15.0  23.4  17.9  17.0  15.1   
Other skilled7.3  6.2  0.2  -   6.1  10.1  6.7  5.9   
Skilled mix53.4  51.8  42.5  40.2  54.4  45.8  52.9  50.9   
Private and other payors 8.2  9.1  9.8  11.9  8.6  8.2  8.4  9.2   
Quality mix61.6   60.9  52.3  52.1  63.0  54.0  61.3  60.1   
Medicaid38.4  39.1  47.7  47.9  37.0  46.0  38.7  39.9   
Total skilled nursing100.0%  100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%  
                           
                           
 Nine Months Ended September 30,  
 Same Facility Transitioning Acquisitions Total  
 2015 2014 2015 2014 2015 2014 2015 2014  
Percentage of Skilled Nursing Days:                         
Medicare15.2% 14.9% 13.0% 11.9% 13.6% 8.6% 14.8% 14.4%  
Managed care10.7  9.8  7.7  7.0  15.1  10.4  11.2  9.6   
Other skilled4.5  3.7  0.1  -  4.8  8.0  4.2  3.6   
Skilled mix30.4  28.4  20.8  18.9   33.5  27.0  30.2  27.6   
Private and other payors12.0  12.8  15.6  17.0  11.9  10.1  12.3  13.0   
Quality mix42.4  41.2  36.4  35.9  45.4  37.1  42.5  40.6   
Medicaid57.6  58.8  63.6  64.1  54.6  62.9  57.5  59.4   
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0%  100.0% 100.0% 100.0%  
                          

 

THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
       
               
The following tables summarize our selected performance indicators for our home health and hospice segment along with other statistics, for each of the dates or periods indicated: 
               
 Three Months Ended  September 30,       
  2015   2014  Change % Change       
 (Dollars in thousands)           
Results:              
Home health and hospice revenue              
Home health services:$12,794  $7,655  $5,139   67.1 %     
Hospice services: 12,456   6,930   5,526   79.7        
Total home health and hospice revenue 25,250   14,585   10,665   73.1 %     
Home health services:              
Medicare Episodic Admissions 1,856   1,328   528   39.8 %     
Average Medicare Revenue per Completed Episode$2,920  $2,984  $(64)  (2.1)%     
Hospice services:              
Average Daily Census 764   451   313   69.4 %     
                
 Nine Months Ended  September 30,       
  2015   2014  Change % Change       
 (Dollars in thousands)           
Results:               
Home health and hospice revenue               
Home health services:$34,452  $20,938  $13,514   64.5 %     
Hospice services: 29,057   17,497   11,560   66.1        
Total home health and hospice revenue$63,509  $38,435  $25,074   65.2 %     
Home health services:              
Medicare Episodic Admissions 5,343   3,845   1,498   39.0 %     
Average Medicare Revenue per Completed Episode$2,960  $2,936  $24   0.8 %     
Hospice services:              
Average Daily Census 622   408   214   52.5 %     

 

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,
 
 2015  2014  2015  2014
 $ %  $ %  $ %  $ % 
Revenue:(Dollars in thousands)  (Dollars in thousands) 
Medicaid$114,106  32.5%  $91,707  35.2% $316,608  32.7% $260,986  34.8%
Medicare 101,212  28.8   78,056  29.9    290,964  30.0   231,860  30.9 
Medicaid—skilled 18,924  5.4   13,614  5.2   51,206  5.3   36,575  4.9 
Total 234,242  66.7   183,377  70.3   658,778  68.0   529,421  70.6 
Managed care 54,411  15.5   36,562  14.0   148,374  15.3   105,316  14.0 
Private and other(1) 62,433  17.8   40,902  15.7   161,519  16.7   115,800  15.4 
Total revenue$351,086  100.0% $260,841  100.0% $968,671  100.0% $750,537  100.0%
(1)  Private and other payors in our "All Other" category includes revenue from urgent care centers, mobile x-ray and diagnostic operations and other ancillary businesses.
                     

Discussion of Non-GAAP Financial Measures

EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization and (d) rent-cost of services. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) costs incurred for operations currently being constructed and other start-up operations, (e) expenses incurred in connection with the Spin-Off, (f) stock-based compensation expense, (g) costs incurred related to new systems implementation, (h) breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder, (i) costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate, (j) costs incurred to acquire operations which are not capitalized, (k) operating results at urgent care centers,  excluding depreciation, interest and income taxes and (l) results at three independent living operations which were transferred to Care Trust REIT as part of the Spin-Off transaction, excluding rent, depreciation, interest and income taxes.  Adjusted EBITDAR consists of net income before (a) interest expense, net, (b)provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) costs incurred for facilities currently being constructed and other start-up operations, (f) expenses incurred in connection with the Spin-Off, (g) stock-based compensation expense, (h) costs incurred related to new systems implementation, (i) breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder , (j) costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate, (k) costs incurred to acquire operations which are not capitalized, (l) operating results at urgent care centers,  excluding rent, depreciation, interest and income taxes and (m) results at three independent living operations which were transferred to Care Trust REIT as part of the Spin-Off transaction, excluding rent, depreciation, interest and income taxes. The company believes that the presentation of EBITDA, EBITDAR, adjusted EBITDA, adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company's operating performance. The company believes disclosure of adjusted net income per share, EBITDA, EBITDAR, adjusted EBITDA and adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q. The company's periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Ensign's website at http://www.ensigngroup.net.

Investor/Media Relations,

The Ensign Group, Inc.,

(949) 487-9500,

ir@ensigngroup.net.  

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Source: The Ensign Group, Inc.

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