May 10, 2016

The Ensign Group Reports Quarterly Earnings; Meets Consensus of $0.34 per Share and Increases 2016 Projections

Conference Call and Webcast Scheduled for tomorrow, May 11, 2016 at 10:00 am PT

MISSION VIEJO, Calif., May 10, 2016 (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 announced its operating results for the first quarter of 2016, reporting GAAP diluted earnings per share for the quarter of $0.18 and adjusted earnings per share of $0.34 for the quarter (1).

Quarter Highlights Include:

  • Consolidated GAAP net income for the quarter was $9.2 million and consolidated adjusted net income was $17.8 million (1);

  • Consolidated GAAP EBITDAR for the quarter was $51.5 million, an increase of 1.5%, and consolidated adjusted EBITDAR was $62.6 million, an increase of 23.1% over the prior year quarter(1);

  • Transitioning skilled revenue mix increased by 300 basis points over the prior year quarter to 56.8% and same-store skilled revenue mix increased by 29 basis points over the prior year quarter to 53.6%;

  • Transitioning revenue for all segments grew by 9.7% over the prior year quarter, and transitioning TSA revenue grew by 8.0% over the prior year quarter;

  • Cornerstone Healthcare, Inc., our home health and hospice subsidiary, grew its segment income by 18.7% and revenue by $8.4 million to $26.7 million for the quarter, an increase of 45.6% over the prior year quarter; and

  • Consolidated revenues for the quarter were up $76.7 million or 25.0% over the prior year quarter to $383.2 million.

(1) See "Reconciliation of GAAP to Non-GAAP Financial Information".

Operating Results

"We are grateful to our experienced teams of local leaders across the organization for working tirelessly to transition all of our recently acquired operations, including eighteen new operations in Texas, while simultaneously driving improvements in our other operations," said Ensign's President and Chief Executive Officer Christopher Christensen.  Noting that Ensign's adjusted earnings per share was $0.34 for the quarter, which met consensus estimates,  Mr. Christensen reiterated that the company now has 69 recently acquired operations as of May 1, 2016, which is the largest number of operations in that bucket in the organization's history. 

"While we are pleased with the first quarter contribution of some of our recently acquired operations, the majority of our newer operations still have significant upside.  For example, after removing the boost that we received from the performing assets we recently acquired, 75% of our operations in the recently acquired bucket are traditional turnaround opportunities with an average occupancy of 65.0% and an average skilled revenue mix of 45.7%, which is substantially below the average occupancy of 80.1% and 53.6% skilled revenue mix, respectively, in our same store operations," Christensen said.    "Even with mild operational improvements, we expect most of our newly acquired operations to make a meaningful contribution to the bottom line in the latter half of 2016 and beyond," he added.   

Mr. Christensen announced that with the addition of the Legend Healthcare portfolio effective May 1, 2016, management is increasing its 2016 guidance. Revised projections for 2016 are $1.625 billion to $1.660 billion in revenues and $1.45 to $1.52 adjusted annual earnings per diluted share for 2016.  He also reiterated that, given the number of new operations acquired last year and so far in 2016, management expects most of the increase in performance in 2016 to occur in the later part of the year, adding that it often takes several quarters for newly acquired facilities to perform.

Chief Financial Officer Suzanne Snapper reported that "our balance sheet remained strong, with approximately $118 million of availability on our $250 million revolving line of credit as of March 31, 2016, which also has a built-in expansion option, and 32 unlevered real estate assets that add additional liquidity." Ms. Snapper added that as of March 31, 2016 the company had $51.4 million in cash on hand.

Ms. Snapper also reported that consolidated revenues for the quarter were up 25.0% over the prior year quarter to a record $383.2 million, GAAP EBITDAR for the quarter was $51.5 million and consolidated adjusted EBITDAR for the quarter was $62.6 million, an increase of 23.1 % over the prior year quarter. 

GAAP diluted earnings per share were $0.18 and fully diluted adjusted earnings per share were $0.34 for the quarter.  GAAP net income was $9.2 million and adjusted net income was $17.8 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, the Company paid a quarterly cash dividend of $0.04 per share of Ensign common stock. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 14 years.

Also during the quarter and since, the company announced the acquisition of eighteen skilled nursing operations, one healthcare resort, two hospice agencies and one home health business. The following skilled nursing operations are subject to long-term leases:

  • The Healthcare Resort of Olathe, featuring a 70-bed licensed transitional care operation and 30 private assisted living suites under a long-term lease located in Olathe, Kansas;
  • Legend Oaks Healthcare and Rehabilitation - Greenville, a 126-bed skilled nursing facility located in Greenville, Texas;
  • Legend Oaks Healthcare and Rehabilitation - Euless, a 140-bed skilled nursing facility located in Euless, Texas;
  • Legend Oaks Healthcare and Rehabilitation Center - Gladewater, a 100-bed skilled nursing facility located in Gladewater, Texas;
  • Legend Oaks Healthcare and Rehabilitation - North Austin, a 124-bed skilled nursing facility located in Austin, Texas;
  • Legend Healthcare and Rehabilitation - Ennis, a 124-bed skilled nursing facility located in Ennis, Texas;
  • Granite Mesa Health Center, a 124-bed skilled nursing facility located in Marble Falls, Texas;
  • Legend Oaks Healthcare and Rehabilitation - Katy, a 125-bed skilled nursing facility located in Katy, Texas;
  • Legend Oaks Healthcare and Rehabilitation - Kyle, a 126-bed skilled nursing facility located in Kyle, Texas;
  • Legend Oaks Healthcare and Rehabilitation North Willowbrook, a 124-bed skilled nursing facility located in Houston, Texas;
  • Sonterra Health Center, a 124-bed skilled nursing facility located in San Antonio, Texas;
  • Legend Oaks Healthcare and Rehabilitation - San Antonio, a 126-bed skilled nursing facility located in San Antonio, Texas;
  • Legend Oaks Healthcare and Rehabilitation - West Houston, a 124-bed skilled nursing facility located in Houston, Texas;
  • Legend Oaks Healthcare and Rehabilitation - West San Antonio, a 124-bed skilled nursing facility located in San Antonio, Texas;
  • McAllen Transitional Care Center, a 70-bed skilled nursing facility located in McAllen, Texas;
  • Legend Oaks Healthcare and Rehabilitation Center - Northwest Houston, a 125-bed skilled nursing facility located in Houston, Texas; and
  • Legend Oaks Healthcare and Rehabilitation - New Braunfels, a 126-bed skilled nursing facility located in New Braunfels, Texas.

In addition, Ensign acquired the real estate and operations for the following skilled nursing operations:

  • Legend Healthcare and Rehabilitation - Paris, a 120-bed skilled nursing facility located in Paris, Texas; and
  • Legend Oaks Healthcare and Rehabilitation Center, a 125-bed skilled nursing facility located in Houston, Texas.

These additions bring Ensign's growing portfolio to 204 healthcare operations, thirty-four of which are owned, sixteen hospice agencies, sixteen 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.

2016 Guidance Information

Management's increased guidance is based on diluted weighted average common shares outstanding of 52.6 million, which includes the impact of the 2 for 1 stock split completed in the fourth quarter of 2015 and the stock repurchases in the first quarter of 2016.  In addition, the guidance assumes, among other things, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, tax rates of 38.5% and acquisitions closed to date. 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, results at one closed facility and costs incurred for facilities currently being constructed and other start-up operations.

Conference Call

A live webcast will be held Wednesday, May 11, 2016 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign's first quarter financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign's website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific Time on Friday, May 27, 2016.

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 204 operations, sixteen hospice agencies, sixteen 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. More information about Ensign is available at http://www.ensigngroup.net. More information about Ensign is available at http://www.ensigngroup.net.  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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
     
 Three Months Ended
March 31, 
 
   2016   2015  
Revenue$  383,234  $  306,529  
Expense:     
Cost of services (exclusive of rent, general and administrative and depreciation and amortization expense shown separately below)     306,308     241,456  
Losses related to operational closure   7,935     -   
Rent—cost of services    26,991     18,966  
General and administrative expense   17,387     14,416  
Depreciation and amortization   8,298     6,517  
Total expenses   366,919     281,355  
Income from operations   16,315      25,174  
Other income (expense):     
Interest expense   (1,370)    (667) 
Interest income   234     166  
Other expense, net   (1,136)    (501) 
Income before provision for income taxes   15,179     24,673  
Provision for income taxes   5,889     9,585  
Net income   9,290     15,088  
Less: net (loss) income attributable to noncontrolling interests   118     (82) 
Net income attributable to The Ensign Group, Inc.$  9,172  $  15,170  
Net income per share:    
Basic:$  0.18  $  0.32  
Diluted$  0.18  $  0.31  
Weighted average common shares outstanding:     
Basic   50,679     47,815  
Diluted   52,334     49,652  
     
Dividends per share$  0.0400  $  0.0375  
      

 

  
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 
 March 31, 2016 December 31, 2015 
Assets    
Current assets:    
Cash and cash equivalents$  51,370  $  41,569  
Accounts receivable — less allowance for doubtful accounts of $32,098 and $30,308 at March 31, 2016 and December 31, 2015, respectively     217,171      209,026  
Investments — current   2,003     2,004  
Prepaid income taxes   3,254     8,141  
Prepaid expenses and other current assets   19,441     18,827   
Total current assets   293,239     279,567  
Property and equipment, net   311,479     299,633  
Insurance subsidiary deposits and investments   30,955     32,713  
Escrow deposits   1,646     400  
Deferred tax asset   20,823     20,852  
Restricted and other assets   11,165     9,631  
Intangible assets, net   44,444     45,431  
Goodwill   41,034     40,886  
Other indefinite-lived intangibles   18,896     18,646  
  Total assets$  773,681  $  747,759  
     
Liabilities and equity     
Current liabilities:    
Accounts payable   35,695     36,029  
Accrued wages and related liabilities   67,567     78,890  
Accrued self-insurance liabilities — current   18,204     18,122  
Other accrued liabilities   46,018     46,205  
Current maturities of long-term debt   627     620  
  Total current liabilities   168,111     179,866  
Long-term debt — less current maturities   145,642     99,051  
Accrued self-insurance liabilities — less current portion   39,872     37,881  
Deferred rent and other long-term liabilities   9,860     3,976  
Total equity   410,196     426,985  
  Total liabilities and equity$  773,681  $  747,759  
     
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: 
   
 Three Months Ended
March 31, 
 
  2016   2015  
Net cash provided by operating activities$  12,695  $  5,860  
Net cash used in investing activities (20,104)  (36,455) 
Net cash provided by financing activities 17,210   42,796  
Net increase in cash and cash equivalents 9,801   12,201  
Cash and cash equivalents at beginning of period   41,569     50,408  
Cash and cash equivalents at end of period$  51,370  $  62,609  
     

 

  
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 March 31,  
  2016  2015  
  Revenue
Dollars
 Revenue
Percentage
  Revenue
Dollars
 Revenue
Percentage
  
  (Dollars in thousands) 
TSA Services:           
Skilled nursing facilities $  315,212    82.3% $  264,471    86.3% 
Assisted and independent living facilities  30,171    7.9     14,303    4.6  
Total TSA services     345,383    90.2     278,774    90.9  
Home health and hospice services:            
Home health     13,908    3.6     10,363    3.4  
Hospice    12,758    3.3     7,952    2.6  
Total home health and hospice services    26,666    6.9     18,315    6.0  
All other (1)    11,185    2.9   9,440    3.1  
Total revenue $  383,234    100.0% $  306,529    100.0% 
  
(1) Includes revenue from services provided at our urgent care clinics and other ancillary operations.  
      

 

   
THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
  
          
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
March 31,
      
  2016   2015       
 (Dollars in thousands) Change % Change 
Total Facility Results:         
Skilled nursing revenue$  315,212  $  264,471  $  50,741     19.2% 
Assisted and independent living revenue   30,171     14,303     15,868     110.9% 
Total TSA services revenue $  345,383  $  278,774  $  66,609     23.9% 
Number of facilities at period end   186     143     43     30.1% 
Actual patient days   1,376,879     1,077,238     299,641     27.8% 
Occupancy percentage — Operational beds 77.1%  78.8%      (1.7)% 
Skilled mix by nursing days 32.5%  30.3%      2.2% 
Skilled mix by nursing revenue 54.6%  52.9%      1.7% 
               
 Three Months Ended
March 31,
      
  2016   2015       
 (Dollars in thousands) Change % Change 
Same Facility Results(1):         
Skilled nursing revenue$  223,757  $  215,556  $  8,201     3.8% 
Assisted and independent living revenue   9,107     9,063     44     0.5% 
Total TSA services revenue$  232,864  $  224,619  $  8,245     3.7% 
Number of facilities at period end   106     106      — % 
Actual patient days   856,247     845,502     10,745     1.3% 
Occupancy percentage — Operational beds 80.1%  80.5%      (0.4)% 
Skilled mix by nursing days 31.3%  30.6%      0.7% 
Skilled mix by nursing revenue 53.6%  53.3%      0.3% 
               
 Three Months Ended
March 31,
      
  2016   2015       
 (Dollars in thousands) Change  % Change 
Transitioning Facility Results(2):         
Skilled nursing revenue$  43,938  $  40,571  $  3,367     8.3% 
Assisted and independent living revenue   4,588     4,367     221     5.1% 
Total TSA services revenue$  48,526  $  44,938  $  3,588     8.0% 
Number of facilities at period end   29     29      — % 
Actual patient days   188,249     181,847     6,402     3.5% 
Occupancy percentage — Operational beds 74.1%  71.8%      2.3% 
Skilled mix by nursing days 34.9 %  31.1%      3.8% 
Skilled mix by nursing revenue 56.8%  53.8%      3.0% 
               
 Three Months Ended
March 31,
      
  2016   2015       
 (Dollars in thousands) Change % Change 
Recently Acquired Facility Results(3):         
Skilled nursing revenue$  46,897  $  6,447  $  40,450   NM   
Assisted and independent living revenue   16,476     873     15,603   NM   
Total TSA services revenue$  63,373  $  7,320  $  56,053   NM   
Number of facilities at period end   51     7     44   NM   
Actual patient days   329,138     40,696     288,442   NM   
Occupancy percentage — Operational beds 71.8%  77.6%    NM   
Skilled mix by nursing days 36.7%  20.8%    NM   
Skilled mix by nursing revenue 57.8%  39.8%    NM   
               
 Three Months Ended
March 31,
      
  2016   2015       
  (Dollars in thousands) Change % Change 
Facility Closed(4):          
Skilled nursing revenue$  620  $  1,897  $  (1,277)  NM   
Assisted and independent living revenue   -      -      -    NM   
Total TSA services revenue$  620  $  1,897  $  (1,277)  NM   
Actual patient days   3,245     9,193     (5,948)  NM   
Occupancy percentage — Operational beds 70.7%  74.6%    NM   
Skilled mix by nursing days 9.6%  15.4%    NM   
Skilled mix by nursing revenue 14.0%  36.0%    NM   
_______________________         
(1)  Same Facility results represent all facilities purchased prior to January 1, 2013 
(2)  Transitioning Facility results represents all facilities purchased from January 1, 2013 to December 31, 2014 
(3)  Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2015 
(4)  Facility Closed represent the result of one facility closed during the three months ended March 31, 2016. These results were excluded from Same Facility results for three months ended March 31, 2016 and 2015 for comparison purposes.
 

 

 
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 March 31, 
 Same Facility Transitioning  Acquisitions Total 
  2016   2015   2016   2015   2016   2015   2016   2015  
Skilled Nursing Average Daily Revenue Rates:                 
Medicare$578.81  $566.27  $557.05  $557.14  $488.89  $447.71  $558.04  $561.71  
Managed care   421.54     411.53     465.94     464.09     410.77     370.04     427.87     422.79  
Other skilled   466.22     479.49     349.83     325.21     394.25     672.04     438.70     464.13  
Total skilled revenue   500.30     501.46     478.46     484.83     449.86     464.48     488.13     497.92  
Medicaid    196.98     194.31     188.19     183.51     187.25     182.39     194.12     191.69  
Private and other payors   199.63     190.40     234.49     210.98     208.45     186.80     206.05     193.42  
Total skilled nursing revenue$292.15  $287.85  $294.41  $280.61  $285.97  $242.06  $291.17  $284.54  
                  

 

                         
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months ended March 31, 2016 and 2015: 
                         
 Three Months Ended March 31, 
 Same Facility Transitioning Acquisitions Total   
 2016  2015  2016  2015  2016  2015  2016  2015  
Percentage of Skilled Nursing Revenue:                        
Medicare28.3% 31.5% 22.7% 23.1% 32.9% 24.8% 28.2% 30.0% 
Managed care  17.4    15.1    27.4    27.0    19.3    6.6    19.1    16.6  
Other skilled  7.9     6.7    6.7    3.7    5.6    8.4    7.3    6.3  
Skilled mix  53.6    53.3    56.8    53.8    57.8    39.8    54.6    52.9  
Private and other payors  7.9    8.0    8.3    9.1    7.7    19.5     8.0    8.5  
Quality mix  61.5    61.3    65.1    62.9    65.5    59.3    62.6    61.4  
Medicaid  38.5    38.7    34.9     37.1    34.5    40.7    37.4    38.6  
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 
                         
                         
 Three Months Ended March 31, 
 Same Facility Transitioning  Acquisitions Total 
 2016  2015  2016  2015  2016  2015  2016  2015  
Percentage of Skilled Nursing Days:                        
Medicare14.2% 16.0% 12.0% 11.6% 19.2% 13.4% 14.7% 15.2% 
Managed care  12.0    10.5    17.3    16.3    13.5    4.3    13.0    11.2  
Other skilled  5.1    4.1    5.6    3.2    4.0    3.1    4.8    3.9  
Skilled mix  31.3    30.6    34.9    31.1     36.7    20.8    32.5    30.3  
Private and other payors  11.6    12.1    10.4    12.2    10.6     25.1    11.4    12.5  
Quality mix  42.9    42.7    45.3    43.3    47.3    45.9    43.9    42.8  
Medicaid  57.1    57.3    54.7    56.7    52.7    54.1    56.1    57.2  
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  March 31, 
   2016   2015   Change % Change  
 (Dollars in thousands)      
Results:         
Home health and hospice revenue          
Home health services:$  13,908   $  10,363  $  3,545    34.2% 
Hospice services:   12,758     7,952     4,806    60.4  
Total home health and hospice revenue$  26,666  $  18,315  $  8,351    45.6% 
Home health services:         
Medicare Episodic Admissions 2,157   1,384   773    55.9% 
Average Medicare Revenue per Completed Episode $  2,923  $  2,861  $  62    2.2% 
Hospice services:         
Average Daily Census 843   536   307    57.3% 
          

 

THE ENSIGN GROUP, INC.
REVENUE BY PAYOR SOURCE
 
            
The following table sets forth our total revenue by payor source and as a percentage of total revenue for the periods indicated:
           
 Three Months Ended March 31, 
 2016  2015  
 $ %  $  %  
Revenue:(Dollars in thousands) 
Medicaid$  117,575    30.7% $  101,628    33.2% 
Medicare 110,278    28.8   94,356    30.8  
Medicaid—skilled 21,665    5.7   15,537    5.1  
Total 249,518    65.2   211,521    69.1  
Managed care 64,543    16.8   46,330    15.1  
Private and other(1) 69,173    18.0   48,678    15.8  
Total revenue$  383,234    100.0% $  306,529     100.0% 
 
(1)  Private and other payors also includes revenue from urgent care centers and other ancillary operations.
           

 

  
THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)
 
     
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME    
 Three Months Ended
March 31, 
 
  2016   2015  
Net income attributable to The Ensign Group, Inc.$  9,172  $  15,170  
     
Non-GAAP adjustments    
Results at urgent care centers, including noncontrolling interests(a)   (195)    (169) 
Costs incurred for facilities currently being constructed and other start-up operations(b)   2,798     146  
Results at closed facility, including continued obligations and closing expenses(c)   8,184     -   
Acquisition related costs(d)   145     152  
Patient base amortization(e)   276     284  
Stock-based compensation expense(f)   1,885     1,493  
Professional service fees(g)   -      26  
Write off of deferred financing fee(h)   197     -   
Amortization of deferred financing fee related to Spin-Off debt(i)   28     46  
Costs incurred related to new systems implementation(j)   678     287  
Break up fee, net of costs, received in connection with a public auction(k)   -      (1,019) 
Tax effect on Non-GAAP adjustments(l)   (5,337)    (454) 
Non-GAAP Net Income$  17,831  $  15,962  
     
Diluted Earnings Per Share As Reported    
Net Income$  0.18  $  0.31  
Average number of shares outstanding   52,334     49,652  
     
Adjusted Diluted Earnings Per Share     
Net Income$  0.34  $  0.32  
Average number of shares outstanding   52,334     49,652  
     
________________________________________________________    
(a) Represent operating results at newly opened urgent care centers, including noncontrolling interest 
(b) Represent costs incurred for facilities currently being constructed and other start-up operations.  
(c) Represent results at closed facility during three months ended March 31, 2016, including fair value of continued obligation under lease agreement and related closing expenses $7.9 million and operating loss of $0.3 million.
(d) Represent costs incurred to acquire an operation which are not capitalizable.  
(e) Represent amortization costs related to patient base intangible assets at skilled nursing and assisted living facilities. 
(f)  Represent stock-based compensation expense incurred.  
(g) Represent professional service fees include costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate.
(h) Represent write off of deferred financing fee associated with the amendment of credit revolver.  
(i) Represent amortization of deferred financing fee related to the former revolver debt costs as part of the spin-off transaction.
(j) Represent costs incurred related to new systems implementation.  
(k) Represent breakup fee, net of costs, received in connection with a public auction.  
(l) Represent adjustment to provision for income tax to our historical year to date effective tax rate of 38.5% 
  

 

     
THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
 
    
The table below reconciles net income to EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:   
 Three Months Ended
March 31,
 
  2016   2015  
Consolidated Statements of Income Data:    
Net income   9,290     15,088  
Less: net income (loss) attributable to noncontrolling interests   118     (82) 
Interest expense, net   1,136     501  
Provision for income taxes   5,889     9,585  
Depreciation and amortization   8,298     6,517  
  EBITDA   24,495     31,773  
Facility rent—cost of services   26,991     18,966  
  EBITDAR   51,486     50,739  
     
EBITDA$  24,495  $  31,773  
Adjustments to EBITDA:    
Urgent care center earnings(a)   (1,057)    (940) 
Breakup fee, net of costs, received in connection with a public auction(b)   -      (1,019) 
Acquisition related costs(c)   145     152  
Stock-based compensation expense(d)   1,885     1,493  
Costs incurred for facilities currently being constructed and other start-up operations(e)   1,363     146  
Costs incurred related to new systems implementation(f)   678     287  
Professional service fees(g)   -      26  
Results at closed facility, including continued obligations and closing expenses (h)   8,125     -   
Rent related to items(a), (e), and (h) above   1,940     489  
Adjusted EBITDA$  37,574  $  32,407  
Facility rent—cost of services   26,991     18,966  
Less: rent related to items(a), (e) and (h) above   (1,940)    (489) 
Adjusted EBITDAR$  62,625  $  50,884  
________________________________________________________    
(a)  Operating results at urgent care centers.  This amount excluded rent, depreciation, and interest of $0.8 million for the three months ended March 31, 2016 and 2015. The results also excluded the net loss attributable to the variable interest entity associated with our urgent care business.
(b)  Breakup fee, net of costs, received in connection with a public auction.
 
(c)  Costs incurred to acquire an operation which are not capitalizable.
 
(d)  Stock-based compensation expense incurred during the three months ended March 31, 2016 and 2015.
 
(e)  Costs incurred for facilities currently being constructed and other start-up operations. This amount excluded rent, depreciation and interest of $1.4 million for the three months ended March 31, 2016.
(f)  Costs incurred related to new systems implementation.  
(g)  Professional service fees include costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate. 
(h) Results at closed facility during three months ended March 31, 2016, including fair value of continued obligation under lease agreement and related closing expenses $7.9 million and operating loss of $0.2 million.  This amount excluded rent, depreciation and interest of $0.1 million.
     

 

          
THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(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 March 31, 
   2016   2015   2016   2015  
  TSA Services Home Health and Hospice 
Statements of Income Data:         
Income from operations, excluding general and administrative expense(a) $  30,856  $  37,298  $  3,176  $  2,675  
Depreciation and amortization    6,302     4,949     268     221  
  EBITDA $  37,158  $  42,247  $  3,444  $  2,896  
Rent—cost of services  25,987   18,163   378   258  
  EBITDAR $  63,145  $  60,410  $  3,822  $  3,154  
          
EBITDA $  37,158   $  42,247  $  3,444  $  2,896  
Adjustments to EBITDA:         
Stock-based compensation expense(b)    1,121     880     66      61  
Costs at facilities currently being constructed and other start-up operations(c)    1,332     146     31     -   
Acquisition related costs(d)    145     152     -      -   
Results at closed facility, including continued obligations and closing expenses (e)    8,125     -      -      -   
Rent related to item(c) and (e)above    1,369     -      9     -   
Adjusted EBITDA $  49,250  $  43,425  $  3,550  $  2,957  
Rent—cost of services     25,987     18,163     378     258  
Less: rent related to items(c) and (e)above    (1,369)    -      (9)    -   
Adjusted EBITDAR $  73,868  $  61,588  $  3,919  $  3,215  
________________________________________________________         
(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 months ended March 31, 2016 and 2015.  
(c) Costs incurred for facilities currently being constructed and other start-up operations. This amount excluded rent, depreciation and interest of $1.4 million for the three months ended March 31, 2016.
(d) Costs incurred to acquire operations which are not capitalizable.  
(e) Results at closed facility during three months ended March 31, 2016, including fair value of continued obligation under lease agreement and related closing expenses of $7.9 million and operating loss of $0.2 million.  This amount excluded rent, depreciation and interest of $0.1 million.
 

Discussion of Non-GAAP Financial Measures

EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization and (d) rent-cost of services. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) costs incurred for operations currently being constructed and other start-up operations, excluding rent, depreciation, interest and income taxes, (e) results of a single closed operation, (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) professional service fees include 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, and (k) operating results at urgent care centers,  excluding 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, excluding rent, depreciation, interest and income taxes, (f) results of a single closed operation, (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) professional service fees include 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 and (l) operating results at urgent care centers,  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 Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company's periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Ensign's website at http://www.ensigngroup.net

Contact Information



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

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