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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 10-Q
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2020.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                      to                     .
Commission file number: 001-33757
_____________________________
https://cdn.kscope.io/5b1b127ea9114e404ba91c17e9d57422-ensg-20200930_g1.jpg
THE ENSIGN GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)
Delaware33-0861263
(State or Other Jurisdiction of(I.R.S. Employer
Incorporation or Organization)Identification No.)

29222 Rancho Viejo Road, Suite 127
San Juan Capistrano, CA 92675
(Address of Principal Executive Offices and Zip Code)
(949487-9500
(Registrant’s Telephone Number, Including Area Code)
_____________________________

Securities registered pursuant to Section 12(g) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareENSGNASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark:
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.þYesNo
whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).þYesNo
whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filerþAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.YesNo
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesþNo
As of October 26, 2020, 54,241,788 shares of the registrant’s common stock, $0.001 par value, were outstanding.

Table of Contents
THE ENSIGN GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
TABLE OF CONTENTS


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Table of Contents
PART I.

Item 1.        FINANCIAL STATEMENTS

THE ENSIGN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2020December 31, 2019
(In thousands, except par values)
Assets   
Current assets:   
Cash and cash equivalents$175,380 $59,175 
Accounts receivable—less allowance for doubtful accounts of $6,053 and $2,472 at September 30, 2020 and December 31, 2019, respectively
294,151 308,985 
Investments—current17,577 17,754 
Prepaid income taxes13,550 739 
Prepaid expenses and other current assets25,969 24,428 
Total current assets526,627 411,081 
Property and equipment, net783,187 767,565 
Right-of-use assets 1,027,434 1,046,901 
Insurance subsidiary deposits and investments31,768 30,571 
Escrow deposits35 14,050 
Deferred tax assets3,435 4,615 
Restricted and other assets 31,777 26,207 
Intangible assets, net 2,959 3,382 
Goodwill 54,469 54,469 
Other indefinite-lived intangibles 3,299 3,068 
Total assets$2,464,990 $2,361,909 
Liabilities and equity  
Current liabilities:  
Accounts payable$50,971 $44,973 
Accrued wages and related liabilities177,115 151,009 
Lease liabilities—current 47,342 44,964 
Accrued self-insurance liabilities—current33,022 29,252 
CARES Act Provider Relief Fund and advance payment liabilities (Note 3)123,988  
Other accrued liabilities89,625 70,273 
Current maturities of long-term debt3,139 2,702 
Total current liabilities525,202 343,173 
Long-term debt—less current maturities113,222 325,217 
Long-term lease liabilities—less current portion 952,866 973,983 
Accrued self-insurance liabilities—less current portion62,016 58,114 
Other long-term liabilities (Note 3)46,140 5,278 
Total liabilities1,699,446 1,705,765 
Commitments and contingencies (Notes 16, 18 and 19)
Equity  
Ensign Group, Inc. stockholders' equity:
Common stock: $0.001 par value; 100,000 shares authorized; 56,926 and 54,135 shares issued and outstanding at September 30, 2020, respectively, and 56,176 and 53,487 shares issued and outstanding at December 31, 2019, respectively (Note 20)
57 56 
Additional paid-in capital328,347 307,914 
Retained earnings507,554 391,523 
Common stock in treasury, at cost, 2,791 and 2,079 shares at September 30, 2020 and December 31, 2019, respectively (Note 20)
(71,203)(45,296)
Total Ensign Group, Inc. stockholders' equity764,755 654,197 
Non-controlling interest789 1,947 
Total equity
765,544 656,144 
Total liabilities and equity$2,464,990 $2,361,909 
See accompanying notes to condensed consolidated financial statements.
1

Table of Contents
THE ENSIGN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(In thousands, except per share data)
Revenue $599,255 $512,109 $1,773,567 $1,476,333 
Expense:
Cost of services465,108 410,516 1,371,378 1,177,246 
Rent—cost of services 32,504 31,875 97,318 93,278 
General and administrative expense32,817 25,514 96,493 78,622 
Depreciation and amortization13,757 13,405 41,082 37,700 
Total expenses544,186 481,310 1,606,271 1,386,846 
Income from operations55,069 30,799 167,296 89,487 
Other income (expense):
Interest expense(1,740)(3,900)(7,698)(11,513)
Interest and other income850 732 2,630 1,857 
Other expense, net(890)(3,168)(5,068)(9,656)
Income before provision for income taxes54,179 27,631 162,228 79,831 
Provision for income taxes10,866 5,093 37,026 14,944 
Net income from continuing operations43,313 22,538 125,202 64,887 
Net income from discontinued operations, net of tax (Note 4) 5,290  19,473 
Net income 43,313 27,828 125,202 84,360 
Less:
Net income attributable to noncontrolling interests in continuing operations253 390 1,045 591 
Net income attributable to noncontrolling interests in discontinued operations (Note 4) 279  629 
Net income attributable to noncontrolling interests253 669 1,045 1,220 
Net income attributable to The Ensign Group, Inc.$43,060 $27,159 $124,157 $83,140 
Amounts attributable to The Ensign Group, Inc.:
Income from continuing operations attributable to The Ensign Group, Inc.$43,060 $22,148 $124,157 $64,296 
Income from discontinued operations, net of income tax (Note 4) 5,011  18,844 
Net income attributable to The Ensign Group, Inc. $43,060 $27,159 $124,157 $83,140 
Net income per share attributable to The Ensign Group, Inc.:
Basic:
Continuing operations$0.81 $0.41 $2.33 $1.20 
Discontinued operations 0.09  0.35 
Basic income per share attributable to The Ensign Group, Inc.$0.81 $0.50 $2.33 $1.55 
Diluted:
Continuing operations$0.77 $0.39 $2.23 $1.15 
Discontinued operations 0.09  0.33 
Diluted income per share attributable to The Ensign Group, Inc.$0.77 $0.48 $2.23 $1.48 
Weighted average common shares outstanding:
Basic53,328 53,941 53,299 53,470 
Diluted55,713 56,364 55,585 56,054 
See accompanying notes to condensed consolidated financial statements.
2

Table of Contents
THE ENSIGN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 Common Stock Additional Paid-In Capital Retained Earnings Treasury StockNon-Controlling Interest
(In thousands)Shares Amount   Shares AmountTotal
Balance - January 1, 202053,487 $56 $307,914 $391,523 2,079 $(45,296)$1,947 $656,144 
Issuance of common stock to employees and directors resulting from the exercise of stock options148  1,552     1,552 
Issuance of restricted stock723 1 3,085     3,086 
Dividends declared ($0.0500 per share)
   (2,683)   (2,683)
Employee stock award compensation  3,235     3,235 
Repurchase of common stock (Note 20)(692)   692 (25,000) (25,000)
Net income attributable to noncontrolling interest      352 352 
Distribution to noncontrolling interest holder      (720)(720)
Net income attributable to the Ensign Group, Inc.   40,849    40,849 
Balance - March 31, 202053,666 $57 $315,786 $429,689 2,771 $(70,296)$1,579 $676,815 
Issuance of common stock to employees and directors resulting from the exercise of stock options31  456     456 
Issuance of restricted stock75        
Shares of common stock used to satisfy tax withholding obligations (17)   17 (753) (753)
Dividends declared ($0.0500 per share)
   (2,718)   (2,718)
Employee stock award compensation  3,528     3,528 
Net income attributable to noncontrolling interest      440 440 
Distribution to noncontrolling interest holder      (240)(240)
Net income attributable to the Ensign Group, Inc.   40,248    40,248 
Balance - June 30, 202053,755 $57 $319,770 $467,219 2,788 $(71,049)$1,779 $717,776 
Issuance of common stock to employees and directors resulting from the exercise of stock options340  4,404     4,404 
Issuance of restricted stock43        
Shares of common stock used to satisfy tax withholding obligations(3)   3 (154) (154)
Dividends declared ($0.0500 per share)
   (2,725)   (2,725)
Employee stock award compensation  4,173     4,173 
Net income attributable to noncontrolling interest      253 253 
Distribution to noncontrolling interest holder      (1,243)(1,243)
Net income attributable to the Ensign Group, Inc.   43,060    43,060 
Balance - September 30, 202054,135 $57 $328,347 $507,554 2,791 $(71,203)$789 $765,544 

3

Table of Contents

 Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Non-Controlling Interest
(In thousands)Shares Amount   Shares Amount Total
Balance - January 1, 201952,584 $55 $284,384 $344,901 1,932 $(38,405)$11,405 $602,340 
Issuance of common stock to employees and directors resulting from the exercise of stock options and grant of stock awards371 — 5,616 — — — — 5,616 
Dividends declared ($0.0475 per share)
— — — (2,543)— — — (2,543)
Employee stock award compensation— — 2,612 — — — — 2,612 
Noncontrolling interest attributable to subsidiary equity plan (Note 17)— — — (317)— — 658 341 
Cumulative effect of accounting change, net of tax— — — 9,030 — — — 9,030 
Net income attributable to noncontrolling interest— — — — — — 235 235 
Net income attributable to the Ensign Group, Inc.— — — 27,372 — — — 27,372 
Balance - March 31, 201952,955 $55 $292,612 $378,443 1,932 $(38,405)$12,298 $645,003 
Issuance of common stock to employees and directors resulting from the exercise of stock options and grant of stock awards326 — 3,213 — — — — 3,213 
Shares of common stock used to satisfy tax withholding obligations(9)— — — 9 (485)— (485)
Dividends declared ($0.0475 per share)
— — — (2,559)— — — (2,559)
Employee stock award compensation— — 3,066 — — — — 3,066 
Noncontrolling interest attributable to subsidiary equity plan (Note 17)— — — (2,497)— — 2,733 236 
Distribution to noncontrolling interest holder— — — — — — (92)(92)
Net income attributable to noncontrolling interest— — — — — — 316 316 
Net income attributable to the Ensign Group, Inc.— — — 28,609 — — — 28,609 
Balance - June 30, 201953,272 $55 $298,891 $401,996 1,941 $(38,890)$15,255 $677,307 
Issuance of common stock to employees and directors resulting from the exercise of stock options and grant of stock awards200 $— $1,828 $— — $— $— $1,828 
Repurchase of common stock (105)— — — 105 (5,000)— (5,000)
Dividends declared ($0.0475 per share)
— — — (2,564)— — — (2,564)
Employee stock award compensation— — 2,961 — — — — 2,961 
Repurchase of common stock attributable to subsidiary equity plan (Note 17)— — — — — — (394)(394)
Noncontrolling interest attributable to subsidiary equity plan (Note 17)— — — (177)— — 194 17 
Distribution to noncontrolling interest holder— — — — — — (177)(177)
Net income attributable to noncontrolling interest— — — — — — 669 669 
Net income attributable to the Ensign Group, Inc.— — — 27,159 — — — 27,159 
Balance - September 30, 201953,367 $55 $303,680 $426,414 2,046 $(43,890)$15,547 $701,806 

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents
THE ENSIGN GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
(In thousands)20202019
Cash flows from operating activities:  
Net income $125,202 $84,360 
Net income from discontinued operations, net of tax (19,473)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization41,082 37,700 
Impairment of long-lived assets2,681 1,471 
Amortization of deferred financing fees630 876 
Non-cash leasing arrangement (Note 18)337 134 
Deferred income taxes 1,179  
Provision for doubtful accounts 4,193 824 
Stock-based compensation10,936 8,215 
Cash received from insurance proceeds related to replacement properties and business interruptions282 803 
Gain on insurance claims and disposal of assets (3,026)
Change in operating assets and liabilities 
Accounts receivable 11,441 (27,847)
Prepaid income taxes(12,811)3,677 
Prepaid expenses and other assets(7,468)2,755 
Operating lease obligations(542)(7,427)
Accounts payable7,197 (4,623)
Accrued wages and related liabilities29,194 14,493 
Other accrued liabilities19,333 8,487 
Accrued self-insurance liabilities8,433 4,686 
Other long-term liabilities40,862 2,992 
Net cash provided by continuing operating activities282,161 109,077 
Net cash provided by discontinued operating activities (Note 4) 23,296 
Net cash provided by operating activities282,161 132,373 
Cash flows from investing activities:  
Purchase of property and equipment(37,824)(49,857)
Cash payments for business acquisitions (Note 9) (6,455)
Cash payments for asset acquisitions (Note 9)(23,077)(75,305)
Escrow deposits(35)(50)
Escrow deposits used to fund acquisitions14,050 7,271 
Cash proceeds from the sale of assets and insurance proceeds 359 7,835 
Purchases of investments(14,648)(11,042)
Maturities of investments13,626 8,306 
Other restricted assets(936)(1,886)
Net cash used in continuing investing activities(48,485)(121,183)
Net cash used in discontinued investing activities (Note 4) (22,985)
Net cash used in investing activities(48,485)(144,168)
Cash flows from financing activities:  
Proceeds from revolving credit facility and other debt (Note 16)380,600 895,000 
Payments on revolving credit facility and other debt (Note 16)(592,255)(863,494)
Issuance of common stock upon exercise of options6,412 7,376 
Repurchase of shares of common stock to satisfy tax withholding obligations(907)(485)
Repurchase of shares of common stock and subsidiary shares (Note 17)