August 1, 2016

The Ensign Group Reports Second Quarter 2016 Results

Conference Call and Webcast Scheduled for tomorrow, August 2, 2016 at 10:00 am PT

MISSION VIEJO, Calif., Aug. 01, 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 second quarter of 2016, reporting GAAP diluted earnings per share for the quarter of $0.22 and adjusted earnings per share for the quarter of $0.33 (1).

Quarter Highlights Include:

  • Consolidated GAAP EBITDAR for the quarter was $60.3 million, an increase of 27.2% over the prior year quarter, and consolidated adjusted EBITDAR was $65.5 million, an increase of 30.3% over the prior year quarter(1);
  • Transitioning skilled revenue mix increased by 130 basis points over the prior year quarter to 55.9% and same-store skilled mix days increased by 35 basis points over the prior year quarter to 30.4%;
  • Same Store revenue for all segments grew by 6.9% over the prior year quarter, and same store TSA revenue grew by 6.3% over the prior year quarter;
  • Transitioning revenue for all segments grew by 6.3% over the prior year quarter, and transitioning TSA revenue grew by 5.8% over the prior year quarter;
  • Cornerstone Healthcare, Inc., our home health and hospice subsidiary, grew its segment income by 45.2% over the prior year quarter and revenue by $8.5 million to $28.5 million for the quarter, an increase of 42.9% over the prior year quarter; and
  • Consolidated GAAP revenues for the quarter were up $99.5 million or 32.0% over the prior year quarter to $410.5 million and consolidated adjusted revenues for the quarter were up $92.5 million or 30.4% over the prior year quarter to $396.6 million(1).

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

Operating Results

Commenting on the operating results, Ensign's President and Chief Executive Officer Christopher Christensen said, "While we are very pleased with the contribution of some of our recently acquired operations, the majority of our newer operations continue to have significant upside."  Noting that Ensign's adjusted earnings per share was $0.33 for the quarter, which met consensus estimates, Mr. Christensen reiterated that the organization completed the largest acquisition in its history during the quarter and has 72 recently acquired and 29 transitioning skilled nursing and assisted living operations, combining for 49% of Ensign's current portfolio as of July 1, 2016.  He added, "Compared to any other time in our organization's history, there is a substantial amount of organic growth potential inherent in our existing operations."

Mr. Christensen announced that after increasing its annual earnings guidance last quarter, management determined that some of the expected performance will take a few quarters longer to realize than initially anticipated. "As we continue to absorb a significant number of new operations across our organization, our focus has been to take the necessary steps to set these operations up for success over the long-term," Christensen said.  He added that "as a result of our deliberate efforts to ensure a proper transition for our new operations, some of the performance we expected to occur in the later part of 2016 will carry over into 2017.  Therefore, we are revising our 2016 adjusted earnings guidance to $1.35 to $1.42 per diluted share for 2016 and are reaffirming our 2016 revenue guidance of $1.625 billion to $1.660 billion."  

Chief Financial Officer Suzanne Snapper added "in order to provide our investors with more clarity regarding our organic growth expectations, we are also announcing 2017 guidance of $1.818 billion to $1.842 billion in revenues and $1.62 to $1.70 adjusted annual earnings per diluted share." Ms. Snapper also indicated that although the performance of the newer acquisitions has been slower than expected, many of the improvements management anticipated are beginning to take effect and she expects them to continue into the remainder of 2016 and into 2017. 

"Our operational leaders are fully engaged on all fronts to identify and overcome weakness wherever it occurs and, because of them, we remain confident that Ensign's future - both near- and long-term - is very bright," Christensen noted.  "As we've often reminded you, whenever we've seen an unusual surge in growth over a short period of time, we naturally expect a temporary impact to our short-term earnings, however, we have always taken the long view of our business, and we are excited about the enormous opportunity to unlock the value in our existing portfolio," he said. 

Ms. Snapper also added, "Our balance sheet remained strong, with approximately $263.0 million of availability on Ensign's new $450 million credit facility as of August 1, 2016, which also has a built-in expansion option, and 32 unlevered real estate assets that add additional liquidity." Ms. Snapper also reported that consolidated revenues for the quarter were up 32.0% over the prior year quarter to a record $410.5 million, GAAP EBITDAR for the quarter was $60.3 million and consolidated adjusted EBITDAR for the quarter was $65.5 million, an increase of 30.3 % over the prior year quarter. 

GAAP diluted earnings per share were $0.22 and fully diluted adjusted earnings per share were $0.33 for the quarter.  GAAP net income was $11.3 million and adjusted net income was $17.1 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 nineteen skilled nursing operations and one hospice business. The following skilled nursing operations are subject to long-term leases:

  • 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.

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.
  • Riverbend Post Acute Rehabilitation, a 152-bed skilled nursing facility located in Kansas City, Kansas.

In addition, Ensign has opened six Healthcare ResortsThe Healthcare Resorts offer world-class rehabilitation and healthcare services in a resort-like setting as well as offering private extended-stay suites for patients requiring additional assistance before they return home.  The new Healthcare Resorts include:

  • The Healthcare Resort of Kansas City, with a 70-bed licensed transitional care operation and 30 private assisted living suites;
  • The Healthcare Resort of Shawnee Mission, with a 101-bed licensed transitional care operation and 29 private assisted living suites;
  • The Healthcare Resort of Olathe, with a 70-bed licensed transitional care operation and 30 private assisted living suites;
  • The Healthcare Resort of Plano, with a 70-bed licensed transitional care operation and 30 private assisted living suites;
  • The Healthcare Resort of Colorado Springs, with a 90-bed licensed transitional care operation and 35 private assisted living suites; and
  • The Healthcare Resort of Waco, with a 70-bed licensed transitional care operation and 30 private assisted living suites.

These additions bring Ensign's growing portfolio to 208 healthcare operations, thirty-five of which are owned, sixteen hospice agencies, sixteen home health agencies, three home care businesses and fourteen urgent care clinics across fourteen 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

Management reaffirmed its 2016 annual revenue guidance of $1.625 billion to $1.660 billion and adjusted its 2016 annual earnings per share guidance to $1.35 to $1.42 per diluted share.  Management's guidance is based on diluted weighted average common shares outstanding of 52.6 million, which includes the impact of 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 and insurance reserves in connection with a settlement of a general liability claim.

2017 Guidance

Management also provided guidance for 2017, with annual revenue guidance of $1.818 billion to $1.842 billion and annual earnings per share guidance of $1.62 to $1.70 per diluted share.  Management's guidance is based on diluted weighted average common shares outstanding of 54.2 million and a 36.0% tax rate, both of which reflect the anticipated impact of ASU 2016-09 that will become effective in 2017.  In addition, the guidance assumes, among other things, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, tax rates of 36.0% and acquisitions closed to date. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, stock based compensation, 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 Tuesday, August 2, 2016 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign's second 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, September 2, 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 208 operations, sixteen hospice agencies, sixteen home health agencies, three home care businesses and fourteen 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
       
 Three Months Ended
June 30, 
 Six Months Ended
June 30, 
  2016   2015   2016   2015 
Revenue$  410,517  $  311,056  $  793,750  $  617,585 
Expense:        
Cost of services   330,538     248,292     636,846     489,748 
Losses related to operational closure —   —     7,935   — 
Rent—cost of services   30,741     19,066     57,732     38,031 
General and administrative expense   19,657      15,335     37,045     29,751 
Depreciation and amortization   9,772     6,379     18,069     12,896 
Total expenses   390,708     289,072     757,627     570,426 
Income from operations   19,809     21,984     36,123     47,159 
Other income (expense):        
Interest expense   (1,446)    (567)    (2,816)    (1,233)
Interest income   278     195     513     361 
Other expense, net   (1,168)    (372)    (2,303)    (872)
Income before provision for income taxes   18,641     21,612     33,820     46,287 
Provision for income taxes   7,278     8,379     13,167     17,964 
Net income   11,363     13,233     20,653     28,323 
Less: net income (loss) attributable to noncontrolling interests   37     45     155     (37)
Net income attributable to The Ensign Group, Inc.$  11,326  $  13,188  $  20,498  $  28,360 
Net income per share:       
Basic:$  0.23  $  0.26  $  0.41  $  0.57 
Diluted$  0.22  $  0.25  $  0.39  $  0.55 
Weighted average common shares outstanding:         
Basic   50,274     50,949     50,476     49,391 
Diluted   51,931     52,866     52,134     51,272 
        
Dividends per share$  0.0400  $  0.0375  $  0.0800  $  0.0750  
       

 

THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 
 June 30, 2016December 31, 2015 
Assets   
Current assets:   
Cash and cash equivalents$33,519 $41,569  
Accounts receivable — less allowance for doubtful accounts of $33,654 and $30,308 at June 30, 2016 and December 31, 2015, respectively 226,623  209,026  
Investments — current 3,503  2,004  
Prepaid income taxes 7,873  8,141  
Prepaid expenses and other current assets 16,496  18,827  
Total current assets 288,014  279,567  
Property and equipment, net 347,203  299,633   
Insurance subsidiary deposits and investments 31,018  32,713  
Escrow deposits  6,704  400  
Deferred tax asset 20,823  20,852  
Restricted and other assets 12,507  9,631  
Intangible assets, net 44,910  45,431  
Goodwill   69,650    40,886  
Other indefinite-lived intangibles 19,246  18,646  
Total assets$840,075 $747,759  
    
Liabilities and equity    
Current liabilities:   
Accounts payable 38,085  36,029  
Accrued wages and related liabilities 72,019  78,890  
Accrued self-insurance liabilities — current   20,829    18,122  
Other accrued liabilities   47,353    46,205  
Current maturities of long-term debt 634  620  
Total current liabilities 178,920  179,866  
Long-term debt — less current maturities  183,722  99,051  
Accrued self-insurance liabilities — less current portion 43,365  37,881  
Deferred rent and other long-term liabilities 9,975  3,976  
Total equity 424,093  426,985  
Total liabilities and equity$840,075 $747,759  
    
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 
The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented: 
    
 Six Months Ended
June 30, 
 
   2016  2015  
Net cash provided by operating activities$36,828 $6,808  
Net cash used in investing activities (99,857) (89,427) 
Net cash provided by financing activities 54,979  82,846  
Net increase in cash and cash equivalents (8,050) 227  
Cash and cash equivalents at beginning of period 41,569  50,408  
Cash and cash equivalents at end of period$33,519 $50,635  
    

  

 
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 June 30,  Six Months Ended June 30, 
  2016  2015  2016  2015 
  Revenue Dollars Revenue Percentage  Revenue Dollars Revenue Percentage   Revenue Dollars Revenue Percentage  Revenue Dollars Revenue Percentage 
  (Dollars in thousands) (Dollars in thousands)
TSA Services:                    
Skilled nursing facilities $340,417  82.9% $265,709  85.4% $655,631  82.6% $530,179  85.8%
Assisted and independent living facilities  30,708  7.5   15,927  5.1   60,877  7.7   30,230  4.9 
Total TSA services  371,125  90.4   281,636  90.5   716,508  90.3   560,409  90.7 
Home health and hospice services:                    
Home health  14,416  3.5   11,294  3.6   28,324  3.6   21,656  3.5 
Hospice  14,077  3.4   8,650  2.8   26,835  3.4   16,604  2.7 
Total home health and hospice services  28,493  6.9    19,944  6.4   55,159  7.0   38,260  6.2 
All other (1)  10,899  2.7   9,476  3.1   22,083  2.7    18,916  3.1 
Total revenue $410,517  100.0% $311,056  100.0% $793,750  100.0% $617,585  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
June 30,
        
  2016   2015         
 (Dollars in thousands) Change % Change   
Total Facility Results:            
Skilled nursing revenue$  340,417  $  265,709  $  74,708     28.1 %    
Assisted and independent living revenue   30,708     15,927     14,781     92.8 %    
Total TSA services revenue$  371,125  $  281,636  $  89,489     31.8 %   
Number of facilities at period end   206     150     56     37.3 %   
Actual patient days   1,465,625     1,121,158     344,467     30.7 %   
Occupancy percentage — Operational beds 76.3%  78.0%      (1.7)%   
Skilled mix by nursing days 31.3%  30.1%      1.2 %   
Skilled mix by nursing revenue 52.7%  53.4%      (0.7)%   
 Three Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change % Change   
Same Facility Results(1):           
Skilled nursing revenue$  225,787  $  211,994  $  13,793     6.5 %   
Assisted and independent living revenue   9,360     9,217     143     1.6 %   
Total TSA services revenue$  235,147  $  221,211  $  13,936     6.3 %   
Number of facilities at period end   106     106   —   — %   
Actual patient days   842,405     849,485     (7,080)    (0.8)%   
Occupancy percentage — Operational beds 78.8%  80.1%      (1.3)%   
Skilled mix by nursing days 30.4%  30.1%      0.3 %   
Skilled mix by nursing revenue 51.1%  53.6%      (2.5)%   
 Three Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change % Change   
Transitioning Facility Results(2):           
Skilled nursing revenue$  42,284  $  40,069  $  2,215     5.5 %   
Assisted and independent living revenue   4,754     4,389     365     8.3 %   
Total TSA services revenue$  47,038  $  44,458  $  2,580     5.8 %   
Number of facilities at period end   29     29   —   — %   
Actual patient days   186,096      182,708     3,388     1.9 %   
Occupancy percentage — Operational beds 73.3%  71.9%      1.4 %   
Skilled mix by nursing days 34.1%  31.8%      2.3 %   
Skilled mix by nursing revenue 55.9%  54.6%      1.3 %   
 Three Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change % Change   
Recently Acquired Facility Results(3):            
Skilled nursing revenue$72,346  $11,883  $60,463  NM    
Assisted and independent living revenue 16,594   2,321   14,273  NM    
Total TSA services revenue$88,940  $14,204  $74,736  NM    
Number of facilities at period end 71   14   57  NM    
Actual patient days 437,124   80,217   356,907  NM    
Occupancy percentage — Operational beds 73.1%  73.0%   NM    
Skilled mix by nursing days 32.1%  29.6%   NM    
Skilled mix by nursing revenue 55.6%  50.7%   NM    
 Three Months Ended
June 30,
        
  2016   2015          
 (Dollars in thousands) Change % Change    
Facility Closed(4):           
Skilled nursing revenue$-  $1,763  $(1,763) NM    
Assisted and independent living revenue -   -   -  NM    
Total TSA services revenue$-  $1,763  $(1,763) NM    
Actual patient days -   8,748   (8,748) NM    
Occupancy percentage — Operational beds 0.0%  70.2%   NM    
Skilled mix by nursing days 0.0%  10.5%    NM    
Skilled mix by nursing revenue 0.0%  26.9%   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 first quarter of 2016. These results were excluded from Same Facility results for three months ended June 30, 2016 and 2015 for comparison purposes.
 
            
            
 Six Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change % Change   
Total Facility Results:           
Skilled nursing revenue$  655,631  $  530,179  $  125,452     23.7 %   
Assisted and independent living revenue   60,877     30,230     30,647     101.4 %   
Total TSA services revenue$  716,508  $  560,409  $  156,099     27.9 %   
Number of facilities at period end   206     150     56     37.3 %   
Actual patient days   2,842,504     2,198,396     644,108     29.3 %   
Occupancy percentage — Operational beds 76.7%  78.4%      (1.7)%   
Skilled mix by nursing days 31.9%  30.2%      1.7 %   
Skilled mix by nursing revenue 53.6%  53.2%      0.4 %   
 Six Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change  % Change   
Same Facility Results(1):           
Skilled nursing revenue$  449,545  $  427,549  $  21,996     5.1 %   
Assisted and independent living revenue   18,467     18,280     187     1.0 %   
Total TSA services revenue$  468,012  $  445,829  $  22,183     5.0 %   
Number of facilities at period end   106     106   —   — %   
Actual patient days   1,698,652      1,694,987     3,665     0.2 %   
Occupancy percentage — Operational beds 79.4%  80.3%      (0.9)%   
Skilled mix by nursing days 30.9%  30.3%      0.6 %   
Skilled mix by nursing revenue 52.3%  53.5%      (1.2)%   
 Six Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change  % Change   
Transitioning Facility Results(2):           
Skilled nursing revenue$  86,223  $  80,640  $  5,583     6.9 %   
Assisted and independent living revenue   9,341     8,755     586     6.7 %   
Total TSA services revenue$  95,564  $  89,395  $  6,169     6.9 %   
Number of facilities at period end   29     29   —   — %   
Actual patient days   374,345      364,555     9,790     2.7 %   
Occupancy percentage — Operational beds 73.7%  71.8%      1.9 %   
Skilled mix by nursing days 34.5%  31.4%      3.1 %   
Skilled mix by nursing revenue 56.4%  54.2%      2.2 %   
 Six Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change % Change   
Recently Acquired Facility Results(3):           
Skilled nursing revenue$  119,243  $  18,331  $  100,912   NM     
Assisted and independent living revenue   33,069     3,195     29,874   NM     
Total TSA services revenue$  152,312  $  21,526  $  130,786   NM     
Number of facilities at period end   71     14     57   NM     
Actual patient days   766,262     120,913     645,349   NM     
Occupancy percentage — Operational beds 72.5%  74.5%    NM     
Skilled mix by nursing days 33.9%  26.3%    NM     
Skilled mix by nursing revenue 56.5%  46.9%    NM     
  Six Months Ended
June 30,
        
  2016   2015         
 (Dollars in thousands) Change % Change   
Facility Closed(4):           
Skilled nursing revenue$  620  $  3,659  $  (3,039)  NM     
Assisted and independent living revenue   -      -      -    NM      
Total TSA services revenue$  620  $  3,659  $  (3,039)  NM     
Actual patient days   3,245     17,941     (14,696)  NM     
Occupancy percentage — Operational beds 70.7%  72.4%    NM     
Skilled mix by nursing days 9.6%  13.0%    NM     
Skilled mix by nursing revenue 14.0%  31.6%    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 and six  months ended June 30, 2016. These results were excluded from Same Facility results for six months ended June 30, 2016 and 2015 for comparison purposes. Included in the six months ended June 30, 2016 results is one month of operation as the facility was closed in February 2016; as such, the metrics are not comparable to the results during the six months ended June 30, 2015.
      

 

  
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 June 30,  
 Same Facility Transitioning Acquisitions Total  
  2016   2015   2016   2015   2016   2015   2016   2015   
Skilled Nursing Average Daily Revenue Rates:                 
Medicare$581.48  $562.69  $557.12  $555.42  $494.81  $452.97  $555.11  $554.72   
Managed care 424.79   421.17   461.67   458.59   409.62   428.20   427.43   428.94   
Other skilled 468.47   468.38   351.42   324.76   384.43   666.11   440.25   448.95   
Total skilled revenue 505.99   499.85   478.37   477.00   453.45   459.54   489.49   494.31   
Medicaid 215.90   185.58   190.70   182.54   168.98   185.95   202.11   184.80   
Private and other payors 207.64   189.48   213.58   192.98   181.61   193.58   201.41   189.87   
Total skilled nursing revenue$303.93  $280.60  $291.18  $277.29  $262.10  $268.65  $292.40  $278.71   
                  
 Six Months Ended June 30,  
 Same Facility Transitioning Acquisitions Total   
  2016   2015   2016   2015   2016   2015   2016   2015   
Skilled Nursing Average Daily Revenue Rates:                 
Medicare$580.14  $564.51  $557.08  $556.26  $492.44  $451.51  $556.51  $558.20   
Managed care 423.08   416.35   463.87   461.45   410.07   412.68   427.65   425.87   
Other skilled 467.33   473.75   350.59   324.95   389.41   669.14   439.46   456.13   
Total skilled revenue 503.07   500.66    478.42   480.87   451.99   461.00   488.82   496.10   
Medicaid 206.35    189.91   189.43   183.02   175.67   184.53   198.28   188.20   
Private and other payors 203.57   189.94   223.90   202.20   190.29   190.81   203.59   191.62   
Total skilled nursing revenue$297.95  $284.22  $292.81  $278.95  $271.05  $258.71  $291.81  $281.59   

 

                         
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months ended June 30, 2016 and 2015:  
                          
 Three Months Ended June 30, 
 Same Facility Transitioning Acquisitions Total  
 2016  2015  2016  2015   2016  2015  2016  2015  
Percentage of Skilled Nursing Revenue:                       
Medicare27.8% 30.7% 23.1% 24.4% 32.5% 35.0% 28.2% 29.9% 
Managed care15.6  15.7  26.5  25.0  19.6  11.3  17.8  16.9  
Other skilled7.7  7.2  6.3  5.2  3.5  4.4  6.7   6.6  
Skilled mix51.1  53.6  55.9  54.6   55.6  50.7  52.7  53.4  
Private and other payors7.9  8.2  8.1  8.1  9.2  15.6  8.1  8.6  
Quality mix59.0  61.8  64.0  62.7  64.8  66.3  60.8  62.0  
Medicaid41.0  38.2  36.0  37.3  35.2  33.7  39.2  38.0  
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 
                         
                         
 Three Months Ended June 30, 
 Same Facility Transitioning Acquisitions Total 
 2016  2015  2016  2015  2016  2015  2016  2015  
Percentage of Skilled Nursing Days:                        
Medicare14.4% 15.3% 12.1% 12.2% 17.2% 20.8% 14.8% 15.0% 
Managed care11.1  10.5  16.7  15.1  12.5  7.1  12.1  11.0  
Other skilled4.9  4.3  5.3  4.5  2.4  1.7  4.4  4.1  
Skilled mix30.4  30.1  34.1  31.8  32.1  29.6  31.3  30.1  
Private and other payors12.3  12.1  10.9   11.5  13.3  21.8  12.3  12.6  
Quality mix42.7  42.2  45.0  43.3  45.4  51.4  43.6  42.7  
Medicaid57.3  57.8  55.0  56.7  54.6  48.6  56.4  57.3  
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0 % 
                         
                         
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the six months ended June 30, 2016 and 2015:  
                         
 Six Months Ended June 30, 
 Same Facility Transitioning Acquisitions  Total  
 2016  2015   2016  2015  2016  2015  2016  2015  
Percentage of Skilled Nursing Revenue:                        
Medicare28.0% 31.1% 22.9% 23.8% 32.7% 31.4% 28.2% 29.9% 
Managed care16.5  15.4  27.0  26.0  19.5  9.7  18.4  16.8  
Other skilled7.8  7.0  6.5  4.4  4.3   5.8  7.0  6.5  
Skilled mix52.3  53.5  56.4  54.2  56.5  46.9  53.6  53.2  
Private and other payors7.9  8.0  8.1  8.6  8.5  17.0   8.1  8.5  
Quality mix60.2  61.5  64.5  62.8  65.0  63.9  61.7  61.7  
Medicaid39.8  38.5  35.5  37.2  35.0  36.1  38.3  38.3  
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 
                         
                         
 Six Months Ended June 30, 
 Same Facility Transitioning Acquisitions Total 
 2016  2015   2016  2015  2016  2015  2016  2015  
Percentage of Skilled Nursing Days:                        
Medicare14.3% 15.6% 12.0% 11.9% 18.0% 18.0% 14.7% 15.1% 
Managed care11.6  10.5  17.0  15.7  12.9  6.1  12.5  11.1  
Other skilled5.0  4.2  5.5  3.8  3.0  2.2  4.7   4.0  
Skilled mix30.9  30.3  34.5  31.4   33.9  26.3  31.9  30.2  
Private and other payors11.9  12.1  10.7  11.9  12.2  23.0  11.8  12.5  
Quality mix42.8  42.4  45.2  43.3  46.1  49.3  43.7  42.7  
Medicaid57.2  57.6  54.8  56.7  53.9  50.7  56.3  57.3  
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  June 30,       
  2016    2015  Change % Change        
 (Dollars in thousands)       
Results:               
Home health and hospice revenue               
Home health services:$  14,416  $  11,294  $  3,122     27.6 %       
Hospice services:   14,077     8,650     5,427     62.7         
Total home health and hospice revenue$  28,493  $  19,944  $  8,549     42.9 %       
Home health services:                
Medicare Episodic Admissions 2,037   1,672   365      21.8 %       
Average Medicare Revenue per Completed Episode $  2,950  $  2,954  $  (4)    (0.1)%       
Hospice services:               
Average Daily Census 898   562   336     59.8 %       
                 
 Six Months Ended  June 30,       
  2016   2015  Change % Change        
 (Dollars in thousands)       
Results:               
Home health and hospice revenue                 
Home health services:$  28,324  $  21,656  $  6,668     30.8 %        
Hospice services:   26,835     16,604     10,231     61.6         
Total home health and hospice revenue$  55,159  $  38,260  $  16,899     44.2 %       
Home health services:               
Medicare Episodic Admissions 4,194   3,415   779     22.8 %       
Average Medicare Revenue per Completed Episode $  2,937  $  2,984  $  (47)    (1.6)%       
Hospice services:               
Average Daily Census 871   552   319     57.8 %        

 

  
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 June 30, Six Months Ended June 30,
 2016  2015  2016  2015 
 $ %  $ %  $ %  $ % 
Revenue:(Dollars in thousands) (Dollars in thousands)
Medicaid$  132,763    32.3% $  100,873    32.4% $  250,338    31.6% $  202,502    32.8%
Medicare 119,443    29.1   95,396    30.7   229,721    28.9   189,752    30.7 
Medicaid—skilled 20,661    5.0   16,745    5.4   42,327    5.3   32,282    5.3 
Total 272,867    66.4   213,014    68.5   522,386    65.8   424,536    68.8 
Managed care 65,178    15.9   47,633    15.3   129,721    16.4   93,963    15.2 
Private and other(1) 72,472    17.7   50,409    16.2   141,643    17.8   99,086    16.0 
Total revenue$  410,517    100.0% $  311,056    100.0% $  793,750    100.0% $  617,585    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
June 30, 
 Six Months Ended
June 30, 
  
  2016   2015   2016   2015    
Net income attributable to The Ensign Group, Inc.$  11,326  $  13,188  $  20,498  $  28,360    
            
Non-GAAP adjustments          
Results at urgent care centers, including noncontrolling interests(a) 47   191   (148)  22    
Costs incurred for facilities currently being constructed and other start-up operations(b) 2,794   472   5,592   618    
Results at a closed facility, including continued obligations and closing expenses(c) 219    8,403     
Stock-based compensation expense(d) 2,780   1,733   4,665   3,226    
Cost of services - Insurance reserve in connection with the settlement of a general liability claim(e) 1,586    1,586     
General and administrative - Acquisition related costs(f) 748   438   893   590    
General and administrative - Costs incurred related to new systems implementation and professional service fees(g) 269   881   947   1,168    
General and administrative - Break up fee, net of costs, received in connection with a public auction(h)    (1,019)   
Depreciation and amortization - Patient base(i) 713   308   991   592    
Interest expense - Write off of deferred financing fees and amortization of deferred financing fees related to spin-off debt(j)  46   225   92    
Provision for income taxes on Non-GAAP adjustments(k) (3,422)  (1,510)  (8,758)  (1,966)   
Non-GAAP Net Income$17,060  $15,747  $34,894  $31,683    
           
Diluted Earnings Per Share As Reported          
Net Income$0.22  $0.25  $0.39  $0.55    
Average number of shares outstanding 51,931   52,866   52,134   51,272    
           
Adjusted Diluted Earnings Per Share           
Net Income$0.33  $0.30  $0.67  $0.62    
Average number of shares outstanding 51,931   52,866   52,134   51,272    
           
           
(a) Represent operating results at newly opened urgent care centers, including noncontrolling interest.          
 Three Months Ended
June 30, 
 Six Months Ended
June 30, 
  
  2016   2015   2016   2015    
Revenue$(7,042) $(6,974) $(14,642) $(13,641)   
Cost of services 6,226   6,351   12,751   12,235    
Rent 554   520   1,116   1,009    
Depreciation and amortization 304   296   603   577    
Non-controlling interest 5   (2)  24   (158)   
Total Non-GAAP adjustment$47  $191  $(148) $22     
           
(b) Represent operating results for facilities currently being constructed and other start-up operations.          
 Three Months Ended
June 30, 
  Six Months Ended
June 30, 
  
  2016   2015   2016   2015    
Revenue$(6,894) $-  $(10,653) $ -    
Cost of services 7,343   462   12,464   608    
Rent 2,165   7   3,488   7    
Depreciation and amortization 180    10   293   10    
Total Non-GAAP adjustment$2,794  $479  $5,592  $625    
           
(c) Represent results at closed facility during the three and six months ended June 30, 2016, including fair value of continued obligation under lease agreement and related closing expenses $7.9 million and operating loss of $0.3 million.
 Three Months Ended
June 30, 
  Six Months Ended
June 30, 
  
  2016   2015   2016   2015    
Revenue$-  $-  $(105) $-    
Cost of services 207   -   8,436   -    
Rent 2   -   58   -    
Depreciation and amortization 10   -   14   -    
Total Non-GAAP adjustment$219  $-  $8,403  $ -    
           
(d)  Represent stock-based compensation expense incurred.          
 Three Months Ended
June 30, 
 Six Months Ended
June 30, 
  
  2016   2015   2016   2015    
Cost of services$1,316  $1,119  $2,529  $2,081    
General and administrative 1,464   614   2,136   1,145    
Total Non-GAAP adjustment$2,780  $1,733  $4,665  $3,226    
(e) Included in cost of services are insurance reserves in connection with the settlement of a general liability claim.     
(f) Included in general and administrative expense are costs incurred to acquire an operation which are not capitalizable.    
(g) Included in general and administrative expense are costs incurred related to new systems implementation and income tax credits which contributed to a decrease in effective tax rate.   
(h) Included in general and administrative expense is breakup fee, net of costs, received in connection with a public auction.    
(i) Included in depreciation and amortization are amortization costs related to patient base intangible assets at newly acquired skilled nursing and assisted living facilities.    
(j) Included in interest expense are write-offs of deferred financing fees associated with the amendment of credit facility and amortization of deferred financing fees related to the former revolving credit facility as part of the spin-off transaction.   
(k) 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
June 30,
 Six Months Ended
June 30,
    
  2016   2015   2016   2015     
Consolidated Statements of Income Data:           
Net income   11,363     13,233     20,653     28,323     
Less: net income (loss) attributable to noncontrolling interests    37     45     155     (37)    
Interest expense, net 1,168   372   2,303   872     
Provision for income taxes 7,278   8,379   13,167   17,964     
Depreciation and amortization 9,772   6,379   18,069   12,896     
EBITDA 29,544   28,318   54,037   60,092     
Facility rent—cost of services 30,741   19,066   57,732   38,031     
EBITDAR 60,285   47,384   111,769   98,123     
            
EBITDA$29,544  $28,318  $54,037  $60,092     
Adjustments to EBITDA:           
Urgent care center earnings(a) (811)  (625)  (1,867)  (1,565)    
Costs incurred for facilities currently being constructed and other start-up operations(b) 449   462   1,812   608      
Results at closed facility, including continued obligations and closing expenses (c) 206    8,331      
Stock-based compensation expense(d)   2,780     1,733     4,665     3,226     
Insurance reserve in connection with the settlement of a general liability claim(e)
   1,586   —     1,586   —     
Acquisition related costs(f)   748     438     893     590     
Costs incurred related to new systems implementation and professional service fees(g)   269     885     947     1,198     
Breakup fee, net of costs, received in connection with a public auction(h) —   —   —     (1,019)    
Rent related to items(a), (b), and (c) above   2,721     527     4,662     1,016     
Adjusted EBITDA$  37,492  $  31,738  $  75,066  $  64,146     
Rent—cost of services 30,741   19,066   57,732   38,031     
Less: rent related to items(a), (b) and (c) above (2,721)  (527)  (4,662)  (1,016)    
Adjusted EBITDAR$65,512  $50,277  $128,136  $101,161     
            
(a)  Operating results at urgent care centers.  This amount excludes rent, depreciation and interest of $0.8 million and $1.7 million for the three and six months ended June 30, 2016, respectively, and $0.8 million and $1.6 million for the three and six months ended June 30, 2015, respectively. The results also excluded the net loss attributable to the variable interest entity associated with our urgent care business.
    
(b)  Costs incurred for facilities currently being constructed and other start-up operations.  This amount excludes rent, depreciation and interest of $2.3 million and $3.8 million for the three and six months ended June 30, 2016, respectively.  Rent, depreciation and interest expenses were not material for the three and six months ended June 30, 2015.
    
(c)  Results at a closed facility during three and six months ended June 30, 2016, including fair value of continued obligation under the lease agreement and related closing expenses of $7.9 million and operating loss of $0.2 million for both the three and six months ended June 30, 2016.  This amount excludes rent and depreciation of $0.1 million for the six months ended June 30, 2016.
    
(d)  Stock-based compensation expense incurred during the three and six months ended June 30, 2016 and 2015.
    
(e)  Insurance reserves in connection with the settlement of a general liability claim.
    
(f)  Costs incurred to acquire an operation which are not capitalizable.
    
(g)  Costs incurred related to new systems implementation and income tax credits which contributed to a decrease in effective tax rate.
    
(h)  Breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder.
    
            

 

                     
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 June 30, Six Months Ended June 30,    
   2016   2015   2016   2015   2016   2015   2016   2015     
  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) $36,098  $35,067  $4,349  $2,996  $66,954  $72,366  $7,525  $5,671     
Depreciation and amortization  7,775   4,877    229   224   14,077   9,826    496   445     
EBITDA $43,873  $39,944  $4,578  $3,220  $81,031  $82,192  $8,021  $6,116     
Rent—cost of services  29,747   18,214   369   276   55,733   36,376   747   535     
EBITDAR $73,620  $58,158  $4,947  $3,496  $136,764  $118,568  $8,768  $6,651     
                     
EBITDA $43,873  $39,944  $4,578  $3,220  $81,031  $82,192  $8,021  $6,116     
Adjustments to EBITDA:                    
Costs at facilities currently being constructed and other start-up operations(b)  441   462   8    1,773   608   39      
Results at closed facility, including continued obligations and closing expenses (c)  206      8,331        
Stock-based compensation expense(d)  1,216   1,033   72   61   2,337   1,913   138   122     
Insurance reserve in connection with the settlement of a general liability claim(e)
  1586      1586        
Rent related to item(c) and (e)above  2,156    9    3,470    18      
Adjusted EBITDA $49,478   $41,439  $4,667  $3,281  $98,528  $84,713  $8,216  $6,238     
Rent—cost of services  29,747   18,214   369   276   55,733   36,376   747   535     
Less: rent related to items(c) and (e)above  (2,156)   (9)   (3,470)   (18)     
Adjusted EBITDAR $77,069  $59,653  $5,027  $3,557  $150,791  $121,089  $8,945  $6,773     
                      
(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.    
(b)  Costs incurred for facilities currently being constructed and other start-up operations.  This amount excluded rent, depreciation and interest of $2.3 million and $3.8 million for the three and six months ended June 30, 2016, respectively.  Rent, depreciation and interest expenses were not material for the three and six months ended June 30, 2015.
    
(c)  Results at closed facility during three and six months ended June 30, 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 for both the three and six months ended June 30, 2016.  This amount excluded rent and depreciation of $0.1 million for the six months ended June 30, 2016.
     
(d) Stock-based compensation expense incurred during the three and six months ended June 30, 2016 and 2015.    
(e)  Insurance reserves in connection with the settlement of a general liability claim.
    
(f) Costs incurred to acquire operations which are not capitalizable.    
                     

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 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, (k) insurance reserves in connection with the settlement related to a general liability claim and (l) 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) break-up 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, (l) insurance reserves in connection with the settlement related to a general liability claim and (m) 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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Source: The Ensign Group, Inc.

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