News Release Details

The Ensign Group, Inc. Reports Fourth Quarter 2007 Earnings

March 6, 2008 at 12:00 AM EST

MISSION VIEJO, Calif., March 6, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of skilled nursing, rehabilitative care services and assisted living companies, today reported results for the fourth quarter and the fiscal year ended 2007.

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    Highlights of the Fourth Quarter Include:

    --  Total revenue was $109.0 million, up 11.8% from the prior year
    --  Organic revenue grew 5.0%
    --  Sequential revenue grew 4.7% over Q3, an acceleration from Q3 2007
        growth of 3.8%
    --  Skilled revenue was 42.8%, an increase of 110 basis points
    --  EBITDAR was $16.8 million, up 11.7% vs. a year ago and up 20.9%
    --  Net income was $6.2 million, up 16.5% over Q4 2006 and up 39.5%

Operating Results

For the quarter ended December 31, 2007, total revenue was $109.0 million, up 11.8% compared to $97.5 million for the prior year quarter, and up 4.7% sequentially. On a same-facility basis, total revenue in the fourth quarter of 2007 increased 5.0% from the comparable quarter in the prior year. In addition, revenue generated by facilities acquired subsequent to October 1, 2006 increased by $6.7 million.

The company reported fourth quarter 2007 net income of $6.2 million or $0.32 per diluted share, compared to $5.4 million or $0.31 per diluted share for the fourth quarter of 2006.

Commenting on the results, Ensign President and Chief Executive Officer Christopher Christensen said, "We are pleased with our fourth quarter 2007 performance. We believe that these results represent a strong validation of Ensign's business model and demonstrate robust momentum heading into 2008."

For the year ended December 31, 2007, total net revenue was $411.3 million, up 14.7% compared to $358.6 million for the fiscal year 2006. On a same-facility basis, total revenue for the year ended 2007 increased 2.3% from the comparable period in 2006. In addition, revenue generated by facilities acquired in 2006 and 2007 increased $45.0 million.

The company reported net income for the year ended 2007 of $20.5 million or $1.17 per diluted share compared to $22.5 million or $1.34 per diluted share for the year ended 2006. EBITDAR for the year ended December 31, 2007 was $60.4 million as compared to EBITDAR of $59.5 million for the comparable period in 2006. EBITDAR is a non-GAAP financial measure. A discussion of the company's use of this non-GAAP financial measure is set forth below, and a reconciliation of net income to EBITDAR for the fourth quarter 2007 and 2006 and the year ended December 31, 2007 and 2006, respectively, appears in the financial data portion of this release.

More complete information is contained in the Company's 10-K, which was filed with the SEC today and can be viewed on the Company's website at

Recent Highlights

On February 21, 2008, Ensign operating subsidiaries expanded their credit facility with GE Healthcare Financial Services to $50.0 million and extended it for an additional five years. In addition to funding working capital, the credit facility also supports Ensign's growth strategy of acquiring underperforming facilities that cannot typically be financed with conventional acquisition loans. The new loan carries borrowing options that allow Ensign to draw short-term revolving credit borrowings, or one to six month LIBOR-based fixed-rate borrowings, at Ensign's option.

On February 1, 2008, Covey C. Christensen became the President of The Flagstone Group, Inc., the Ensign subsidiary responsible for supporting fifteen Southern California operating locations located throughout Los Angeles, Orange and San Diego Counties. He replaced Christopher Christensen, who had been doing double duty as both Ensign's CEO and Flagstone's interim President since May 2007. The Company's intention to install a permanent leader for Flagstone was previously disclosed in Ensign's recent Registration Statement on Form S-1 and Form 10-Q for the third quarter of 2007.

Ensign also recently announced that its Waverly Park skilled nursing facility in Tucson, Arizona has successfully graduated from the Special Focus Facility Program established by the Centers for Medicare and Medicaid Services (CMS). The 200-bed skilled nursing facility was in bankruptcy when Ensign acquired it, and was placed on Special Focus status by CMS in 2005 based on its long history of what CMS calls "yo-yo" compliance. The challenging clinical turnaround concluded when the facility passed its final Special Focus inspection in November 2007 with a nearly unheard-of one-deficiency survey report. Ensign now has two additional facilities that have been named to the Special Focus Facility list. CMS and state regulators selected the two based on their last three years of regulatory history, even though Ensign acquired them much more recently. One of the facilities, Mt. Ogden Rehab & Care Center in Ogden, Utah, has already had one successful survey by state regulators since Ensign took it over.

2008 Guidance

Ensign currently expects revenue of $450.0 million to $454.0 million and fully diluted earnings per share between $1.27 and $1.32 for fiscal year 2008. This guidance assumes, among other things, no additional acquisitions or dispositions, a continued stable Medicare reimbursement environment and no net changes in the Medicaid environment.

Conference Call

A live webcast will be held on Friday, March 7, 2008, at 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time) to discuss Ensign's fourth quarter and fiscal year 2007 financial results. To listen to the webcast, or to view any financial or other statistical information required by SEC Regulation G, please visit the Investors section of the Ensign website at The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. (Pacific Time) on Monday, March 17, 2008.

About Ensign(TM)

The Ensign Group, Inc.'s operating subsidiaries provide a broad spectrum of skilled nursing and assisted living services, physical, occupational and speech therapies, and other rehabilitative and healthcare services for both long-term residents and short-stay rehabilitation patients, at 61 facilities located in California, Arizona, Texas, Washington, Utah and Idaho. Each of these facilities is operated by a separate, wholly-owned independent operating subsidiary that has its own management, employees and assets. The use of "we," "us," "our" and similar words in this release is not meant to imply that these facilities are operated by the same entity. More information about Ensign is available at

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 our business, financial performance, operating results, the industry in which we operate 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 our growth prospects, future operating and financial performance, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to materially and adversely differ from those expressed in any forward-looking statement.

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

                        Consolidated Statements of Income
                      (in thousands, except per share data)

                               Three Months Ended           Year Ended
                                  December 31,             December 31,
                               2007          2006        2007         2006

    Revenue                  $108,979       $97,509    $411,318     $358,574

      Cost of services
      (exclusive of facility
       rent and depreciation
       and amortization shown
       separately below)       87,837        78,705     335,014      284,847

      Facility rent-cost of
       services                 4,164         4,144      16,675       16,404

      General and
       administrative expense   4,307         3,739      15,945       14,210

      Depreciation and
       amortization             1,962         1,360       6,966        4,221
        Total expenses         98,270        87,948     374,600      319,682

    Income from operations     10,709         9,561      36,718       38,892

    Other income (expense):
      Interest expense         (1,206)         (919)     (4,844)      (2,990)

      Interest income             584           272       1,558          772
        Other expense, net       (622)         (647)     (3,286)      (2,218)

    Income before provision
     for income taxes          10,087         8,914      33,432       36,674

    Provision for income
     taxes                      3,858         3,564      12,905       14,125
    Net income                 $6,229        $5,350     $20,527      $22,549

    Net income per share:

      Basic                     $0.35         $0.39       $1.39        $1.66
      Diluted                   $0.32         $0.31       $1.17        $1.34
    Weighted average common
     shares outstanding:

      Basic                    17,566        13,393      14,497       13,366
      Diluted                  19,204        16,984      17,470       16,823

                           Consolidated Balance Sheets
                                 (in thousands)

                                                            December 31,
                                                         2007           2006

      Cash and cash equivalents                         $51,732        $25,491

      Other current assets                               68,631         58,314

        Total current assets                            120,363         83,805

    Property and equipment, net                         124,861         87,133

    Other assets                                         22,165         19,593

        Total assets                                   $267,389       $190,531

    Liabilities and stockholders' equity

    Current liabilities:

      Current liabilities, excluding current
       maturities of long-term debt                     $54,401        $54,583

      Current maturities of long-term debt                2,993            941

        Total current liabilities                        57,394         55,524

    Long-term debt-less current maturities               60,577         63,587

    Other long-term liabilities                          19,741         17,548

    Series A redeemable convertible preferred stock          --          2,725

    Total Stockholders' equity                          129,677         51,147

        Total liabilities and stockholders' equity     $267,389       $190,531

                     Reconciliation of Net Income to EBITDAR
                                 (in thousands)

                                  Three Months Ended
                                      December 31,     Year Ended December 31,
                                    2007       2006        2007         2006

    Net income                    $6,229     $5,350     $20,527      $22,549

    Interest expense, net            622        647       3,286        2,218

    Provision for income taxes
                                   3,858      3,564      12,905       14,125
    Depreciation and amortization  1,962      1,360       6,966        4,221

    Facility rent -- cost of
     services                      4,164      4,144      16,675       16,404

    EBITDAR                      $16,835    $15,065     $60,359      $59,517

Discussion of Non-GAAP Financial Measures

EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, and (d) facility rent-cost of services. The Company believes that the presentation of EBITDAR provides important supplemental information to management and investors to evaluate the Company's operating performance. This non-GAAP financial measure should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the Company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the Company's Report on Form 10-K filed today with the SEC. The Form 10-K is available on the SEC's website at or under the "Financial Information" link of the Investor Relations section of Ensign's website.

SOURCE The Ensign Group, Inc.

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