ensg-20210203
0001125376false00011253762021-02-032021-02-03


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 3, 2021
The Ensign Group, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware 001-33757 33-0861263
     
(State or other jurisdiction
of incorporation)
 (Commission File Number) (IRS Employer Identification No.)

29222 Rancho Viejo Road, Suite 127, 
San Juan Capistrano,CA92675
   
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 487-9500
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareENSGNasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark 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.




Item 2.02. Results of Operations and Financial Condition.
On February 3, 2021 The Ensign Group, Inc. (the Company) issued a press release reporting the financial results of the Company for its fourth quarter and full year ended December 31, 2020. A copy of the press release is attached to this Current Report as Exhibit 99.1.
The press release includes “non-GAAP financial measures.” Specifically, the press release refers to EBITDA, Adjusted EBITDA, Adjusted EBITDAR and Funds from Operations (FFO) for our real estate segment. EBITDA, Adjusted EBITDA, Adjusted EBITDAR and FFO are supplemental non-GAAP financial measures. Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) share-based compensation expense; (e) results of operations not at full capacity, excluding depreciation, interest and income taxes; (f) acquisition related costs; (g) impairment of goodwill and intangible assets; (h) spin-off transaction costs and (i) gain on sale of fixed assets, net of impairment charges; 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) share-based compensation expense; (f) results of operations not at full capacity, excluding rent, depreciation, interest and income taxes (g) acquisition related costs; (h) impairment of goodwill and intangible assets; (i) spin-off transaction costs; and (j) gain on sale of fixed assets, net of impairment charges. Funds from Operations (FFO) for our real estate segment consists of segment income, excluding gains (or losses) from sales of real estate and impairment of depreciable real estate assets and adding depreciation and amortization related to real estate to earnings. The company believes that the presentation of EBITDA, adjusted EBITDA, FFO, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. Adjusted EBITDAR is a financial valuation measure that is not specified in GAAP. This measure is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring operating expense. The company believes disclosure of adjusted net income, adjusted net income per share, FFO, EBITDA, adjusted EBITDA and adjusted EBITDAR has 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 measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, 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.








Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
   
Exhibit No. Description
   
 
Press Release of the Company dated February 3, 2021
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
     
Dated: February 3, 2021
THE ENSIGN GROUP, INC. 
 By:  /s/ Suzanne D. Snapper   
  Suzanne D. Snapper  
  Chief Financial Officer and Executive Vice President (principal financial officer and accounting officer and duly authorized officer) 
 


Document


https://cdn.kscope.io/e525e98885a13b53c3daea1436a9476b-ensigngrouplogoa02a01a341a.gif

The Ensign Group Reports Fourth Quarter and Fiscal Year 2020 Results

Conference Call and Webcast scheduled for tomorrow, February 4, 2021 at 10:00 am PT
SAN JUAN CAPISTRANO, California – February 3, 2021 – The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of companies, which invest in and provide skilled nursing services, senior living services, rehabilitative care services and other healthcare services, announced record operating results for the fourth quarter of 2020, reporting GAAP diluted earnings per share of $0.82 and $3.06 for the quarter and year ended December 31, 2020, respectively, and a record adjusted earnings per share(2) of $0.80 and $3.13 for the quarter and the year, respectively.

Highlights Include:

GAAP diluted earnings per share for the quarter was $0.82, representing an increase of 67.3% over the prior year quarter. Adjusted diluted earnings per share for the quarter was $0.80, an increase of 33.3%(1)(2) over the prior year quarter.

GAAP diluted earnings per share for the year was $3.06, representing an increase of 86.6%(1) over the prior year, and adjusted diluted earnings per share for the year was $3.13 (2), an increase of 75.8% over the prior year.

Consolidated GAAP and adjusted revenues for the year were $2.4 billion, an increase of over 18.0% (1)(2) over the prior year.

Total transitioning and skilled services revenue was $2.3 billion for the year, an increase of 18.3% over the prior year, and transitioning and skilled services revenue was $603 million for the quarter, an increase of 13.8% over the prior year quarter and 5.7% sequentially over the third quarter.

Same store skilled revenue improved by 14.7% with an increase in Medicare days of 22.1%, both over the prior year, and same store skilled revenue increased by 18.7% with an increase in Medicare days of 37.7%, both over the prior year quarter.

Transitioning skilled revenue improved by 24.4% over the prior year with an increase in transitioning managed care revenue of 21.1% and Medicare revenue of 25.8% both over the prior year.

Real estate segment income(3) was $31.3 million for the year, an increase of 79.2% from prior year, and $8.7 million for the quarter, an increase of 73.5% from the prior year quarter. FFO was $49.5 million for the year, an increase of 51.6% from prior year, and $13.3 million, an increase of 42.5% from the prior year quarter.

GAAP net income was $170.5 million for the year, an increase of 85.9%(1) over the prior year, and $46.3 million for the quarter, an increase of 69.1% over the prior year quarter.

Adjusted net income for the year was 174.6 million, an increase of 74.8%(1) over the prior year, and $44.9 million for the quarter, an increase of 33.9% (2) over the prior year quarter.


(1) Represents GAAP continued operations which excludes operating results for the October 1, 2019 spin-out of The Pennant Group, Inc. in accordance with discontinued operation guidance in GAAP.
(2) See "Reconciliation of GAAP to Non-GAAP Financial Information". All Non-GAAP financial results exclude operating results for the spun-out The Pennant Group, Inc. in accordance with discontinued operation guidance.
(3) Our Transitional and Skilled Services and Real Estate Segments are defined and outlined in Note 7 on Form 10-K.




Operating Results

“In spite of the continued challenges brought on as the result of the ongoing global pandemic, we are very happy to report another record quarter as we achieved our highest adjusted earnings per share in our history,” said Ensign’s Chief Executive Officer Barry Port. “Since the beginning of this unprecedented pandemic, our local teams have shown incredible strength and consistency while doing everything in their power to care for their patients, residents and the healthcare community they serve. Rather than hunkering down and waiting for the storm to pass, they have rolled up their sleeves and worked tirelessly to find ways to make clinical and operational adjustments that are tailored to meet the needs of their existing and potential patients in their local market. As they have done so, the medical community and the patient’s families have entrusted them to care for patients with increasingly complex clinical needs.”

Port noted that as evidence of the medical communities’ confidence in their local operations’ clinical capabilities, the Company saw a marked improvement in patient volumes, especially with high acuity and skilled patients with a 7.2% and 10.8% increase in Medicare census and a 6.2% and 5.7% in managed care census, sequentially from second quarter to third quarter and third quarter to the fourth quarter for same store and transitioning portfolio, respectively. "This improvement in our admissions trends not only gives us great confidence that we can continue to perform well as the pandemic stubbornly persists in many of our largest markets, but it also gives us confidence that we are in an excellent position to see occupancies normalize to pre-pandemic levels even while the pandemic continues to impact us and our patients. Because we have been working arm in arm with our hospital and managed care partners during this pandemic to care for both COVID-19 positive and negative patients with complex medical needs, our operations have solidified the critical role they play in the post-acute care continuum as an essential and cost-effective setting for highly complex patients,” he added.

Ensign also emphasized that the results for the quarter and the year do not include any benefit related to CARES Act Provider Relief Funds and reminded investors that the Company has returned all of the relief funds it received from the Government, which included approximately $109 million in provider grants in July, $33 million in the fourth quarter and $5 million in January. The Company also noted that the strong results in the quarter came from continued improvements in skilled mix across the portfolio, improved admissions trends, availability of more frequent and broader COVID testing, increased managed care revenues, cost saving initiatives, improved cash collections, sequestration suspension and improved Medicaid funding in certain states. Port added, “During this latest and most significant surge in COVID-19 positivity rates we’ve seen to date, especially in Texas, Arizona and California, we saw an increase in skilled mix. However, unlike in prior quarters where COVID surges were accompanied by occupancy declines, during the fourth quarter we saw occupancies remain flat. While we have ground to make up to get back to pre-COVID occupancies, the increase in our skilled mix has more than made up for the temporary decline in occupancy.”

Management also reaffirmed its guidance for 2021, with annual earnings per share guidance of $3.44 to $3.56 per diluted share and annual revenue guidance of $2.62 billion to $2.69 billion. The midpoint of this 2021 guidance represents an increase of approximately 14% over the midpoint of Ensign’s 2020 guidance, which it increased twice during 2020. “We remain confident that we can achieve this guidance as we begin to see the positive impact of the vaccination efforts and begin to realize the enormous upside in our newly acquired operations, coupled with the opportunistic acquisitions on the horizon. But more importantly, we believe, when this pandemic is behind us, that our operations are primed to rebuild occupancies and to continue to gain additional market share as a result of the deepened relationships with acute care providers and other healthcare partners,” Port said.

Chief Financial Officer, Suzanne Snapper, reported that the company’s liquidity remains strong with approximately $236.6 million of cash on hand and $340 million of available capacity under its line-of-credit facility, which also has a built-in expansion option, both as of December 31, 2020. She also indicated that the company received approximately $105.0 million of Medicare advance payments from the Centers for Medicare and Medicaid Services (CMS) and approximately $147.0 million of the Provider Relief Funds, including the amount received in January. To date, all of the Provider Relief Funds have been returned to the government. She also noted that the company also has 94 owned assets, 74 of which are unlevered and add additional liquidity. Ms. Snapper also indicated that the Company retained $102.0 million under the Medicare Accelerated and Advance Payment Program and the Company has elected to return these funds by the second quarter.

Management’s guidance is based on diluted weighted average common shares outstanding of approximately 57.8 million and a 25% tax rate. In addition, the guidance assumes, among other things, normalized health insurance costs, normal anticipated Medicare and Medicaid reimbursement rate increases, net of provider taxes, acquisitions closed in the first half of 2021 and recovery of the COVID-19 pandemic. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, share-based compensation and start-up losses.






A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR, adjusted EBITDA, FFO for our real estate segment as well as a reconciliation of GAAP earnings per share, net income to adjusted net income and adjusted net earnings per share appear in the financial data portion of this release. More complete information is contained in the company’s Annual Report on Form 10-K for the year ended December 31, 2020 which is expected to be filed with the SEC today and can be viewed on the company’s website at http://www.ensigngroup.net.

Growth and Real Estate Highlights

Chad Keetch, Ensign’s Chief Investment Officer, said, “We are pleased to announce that we are making progress in our effort to demonstrate, and ultimately unlock, the growing value in our owned real estate. As a first step, starting in the fourth quarter of 2020, we began reporting the results of our real estate portfolio as a new segment. This new real estate segment is comprised of properties owned by us and leased to affiliated skilled nursing and senior living operations and 31 senior living operations that are leased to The Pennant Group, Inc.” He noted that each of these properties are subject to triple-net, long-term leases and generated rental revenue of $61.3 million, of which $46.1 million was derived from Ensign affiliated operations. Also, for 2020 Ensign reported $49.5 million in FFO, which represents an increase of 51.6% over the prior year of $32.7 million. “Our goal in separating this real estate business from our operations is to demonstrate the enormous inherent value that these real estate assets have and will have over time. We hope that this extra disclosure will be helpful to our current and prospective investors as they evaluate this growing part of our business,” Keetch added.

During the quarter, the company paid a quarterly cash dividend of $0.0525 per share of Ensign common stock. “We are pleased to announce our eighteenth consecutive annual dividend increase, which reflects our strong balance sheet and continued commitment to return value to our shareholders,” Keetch said. He noted that the company’s liquidity remains strong and that there are no current plans to suspend future dividends.

Also during the quarter and since, Ensign’s affiliates acquired the following skilled nursing operations:

The Medical Lodge of Amarillo, an 82-bed skilled nursing facility, located in Amarillo, TX;

Hays Nursing and Rehabilitation Center, a 116-bed skilled nursing facility, located in San Marcos, TX;

Golden Hill Post Acute, a 99-bed skilled nursing facility located in San Diego, CA;

St. Catherine Healthcare, a 99-bed skilled nursing facility located in Fullerton, CA;

Camino Healthcare, a 99-bed skilled nursing facility located in Hawthorne, CA; and

San Pedro Manor, a 150-bed skilled nursing facility located in San Antonio, TX.

“Our ability to continue to grow in the midst of a pandemic is a true testament to our local team of clinical and operational leadership and their experience, planning and preparation. We have full confidence in our team’s ability to successfully transition these operations,” Keetch said. “We are very excited about each of these hand-picked opportunities. Given the uniqueness of transitioning during a pandemic and the extra time that we’ve had to prepare for each of these, we feel an extra measure of confidence that these operations are poised to contribute to our overall results very soon,” he added. Keetch also noted that the pipeline for Ensign’s typical turnaround opportunities, in addition to some exciting strategic opportunities, remains strong. “We are still being very selective and are keeping plenty of dry powder on hand for what we believe will be an attractive buyer’s market on the horizon. We look forward to growing within our existing geographical footprint and will do so as we see significant advantages to adding strength in markets we know well, including some of our newer emerging markets as they continue to mature and prepare for growth,” he added.

These additions bring Ensign's growing portfolio to 232 healthcare operations, 24 of which also include senior living operations, across thirteen states. Ensign now owns 94 real estate assets, 64 of which it operates. Keetch reaffirmed that Ensign continues to actively seek transactions to acquire real estate and to lease both well-performing and struggling skilled nursing, senior living and other healthcare related businesses in new and existing markets.

Conference Call

A live webcast will be held Thursday, February 4, 2021 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, March 5, 2021.







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 and other rehabilitative and healthcare services at 232 healthcare facilities in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin. As part of its investment strategy, the Company also acquire, lease and own healthcare real estate to service the post-acute care continuum through acquisition and investment opportunities in healthcare properties. Ensign’s new business venture operating subsidiaries also offer several other post-acute-related services, including mobile x-ray, lab, non-emergency transportation services and other consulting services also across several states. 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 verbiage, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the facilities, 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. Additionally, many of these risks and uncertainties are currently amplified by and in the future may be amplified by, the COVID-19 outbreak. The developments with respect to the spread of COVID-19 and its impacts have been occurring so rapidly and because of the unprecedented nature of the pandemic, we are unable to predict the extent and duration of the adverse financial impact of COVID-19 on our business, financial condition and results of operations. While we are not able to estimate the full impact of the COVID-19 outbreak on our future results of operations, the pandemic could have an adverse effect on our reported results in the future. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. 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-K and 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.

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



THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME

Three Months Ended
December 31,
Year Ended
December 31,
(In thousands, except per share data)2020201920202019
Revenue:
Service revenue$625,068 $556,475 $2,387,439 $2,031,266 
Rental revenue3,961 3,716 15,157 5,258 
Total revenue $629,029 $560,191 $2,402,596 $2,036,524 
Expense:
Cost of services493,823 443,382 1,865,201 1,620,628 
Rent—cost of services 32,608 31,511 129,926 124,789 
General and administrative expense33,250 32,251 129,743 110,873 
Depreciation and amortization13,489 13,354 54,571 51,054 
Total expenses573,170 520,498 2,179,441 1,907,344 
Income from operations55,859 39,693 223,155 129,180 
Other income (expense):
Interest expense(1,664)(4,149)(9,362)(15,662)
Interest and other income1,183 792 3,813 2,649 
Other expense, net(481)(3,357)(5,549)(13,013)
Income before provision for income taxes55,378 36,336 217,606 116,167 
Provision for income taxes9,216 9,010 46,242 23,954 
Net income from continuing operations46,162 27,326 171,364 92,213 
Net income from discontinued operations, net of tax  —  19,473 
Net income 46,162 27,326 171,364 111,686 
Less:
Net income/(loss) attributable to noncontrolling interests in continuing operations(159)(68)886 523 
Net income attributable to noncontrolling interests in discontinued
operations
 —  629 
Net income/(loss) attributable to noncontrolling interests(159)(68)886 1,152 
Net income attributable to The Ensign Group, Inc.$46,321 $27,394 $170,478 $110,534 
Amounts attributable to The Ensign Group, Inc.:
Income from continuing operations attributable to The Ensign Group, Inc.$46,321 $27,394 $170,478 $91,690 
Income from discontinued operations, net of income tax  —  18,844 
Net income attributable to The Ensign Group, Inc. $46,321 $27,394 $170,478 $110,534 
Net income per share attributable to The Ensign Group, Inc.:
Basic:
Continuing operations$0.86 $0.51 $3.19 $1.72 
Discontinued operations —  0.35 
Basic income per share attributable to The Ensign Group, Inc.$0.86 $0.51 $3.19 $2.07 
Diluted:
Continuing operations$0.82 $0.49 $3.06 $1.64 
Discontinued operations —  0.33 
Diluted income per share attributable to The Ensign Group, Inc.$0.82 $0.49 $3.06 $1.97 
Weighted average common shares outstanding:
Basic53,835 53,397 53,434 53,452 
Diluted56,307 55,760 55,787 55,981 




THE ENSIGN GROUP, INC.
CONSOLIDATED BALANCE SHEETS


December 31, 2020December 31, 2019
(In thousands)
Assets
Current assets:
Cash and cash equivalents$236,562 $59,175 
Accounts receivable—less allowance for doubtful accounts of $8,718 and $2,472 at December 31, 2020 and 2019, respectively305,062 308,985 
Investments—current13,449 17,754 
Prepaid income taxes1,224 739 
Prepaid expenses and other current assets26,659 24,428 
Total current assets582,956 411,081 
Property and equipment, net778,244 767,565 
Right-of-use assets 1,025,510 1,046,901 
Insurance subsidiary deposits and investments32,105 30,571 
Escrow deposits100 14,050 
Deferred tax assets32,424 4,615 
Restricted and other assets 33,155 26,207 
Intangible assets, net 2,899 3,382 
Goodwill 54,469 54,469 
Other indefinite-lived intangibles 3,716 3,068 
Total assets$2,545,578 $2,361,909 
Liabilities and equity
Current liabilities:
Accounts payable$50,901 $44,973 
Accrued wages and related liabilities236,614 151,009 
Lease liabilities—current 48,187 44,964 
Accrued self-insurance liabilities—current34,396 29,252 
Advance payment liabilities 102,023 — 
Other accrued liabilities 87,318 70,273 
Current maturities of long-term debt2,960 2,702 
Total current liabilities562,399 343,173 
Long-term debt—less current maturities112,544 325,217 
Long-term lease liabilities—less current portion 950,320 973,983 
Accrued self-insurance liabilities—less current portion62,402 58,114 
Other long-term liabilities39,686 5,278 
Total equity818,227 656,144 
Total liabilities and equity$2,545,578 $2,361,909 



THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


The following table presents selected data from our consolidated statements of cash flows for the periods presented:

Year Ended December 31,
20202019
(In thousands)
Net cash provided by/(used in):
Continuing operating activities$373,351 $168,927 
Continuing investing activities(58,666)(224,030)
Continuing financing activities(137,298)83,278 
Net decrease in cash and cash equivalents from discontinued operations (83)
Net increase in cash and cash equivalents177,387 28,092 
Cash and cash equivalents beginning of period59,175 31,083 
Cash and cash equivalents at end of period$236,562 $59,175 




THE ENSIGN GROUP, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

The following table reconciles net income to Non-GAAP net income for the periods presented:

Three Months Ended December 31,Year Ended December 31,
2020201920202019
Net income from continuing operations $46,321 $27,394 $170,478 $91,690 
Net income from discontinued operations, net of tax  —  18,844 
Net income attributable to The Ensign Group, Inc.$46,321 $27,394 $170,478 $110,534 
Non-GAAP adjustments
Stock-based compensation expense(a)3,588 3,107 14,524 11,322 
Results related to operations not at full capacity(b)647 1,311 1,499 3,505 
Acquisition related costs(c) 132 104 277 
Depreciation and amortization - patient base(d)19 260 259 521 
General and administrative - Spin-Off transaction costs(e) 464  464 
COS - gain on sale of fixed assets, net of impairment charges(f) 1,732  329 
COS - impairment of goodwill and intangibles(g) 941  941 
Interest expense - write off of deferred financing fees(h) 329  329 
Provision for income taxes on Non-GAAP adjustments(i)(5,693)(2,141)(12,256)(9,509)
Non-GAAP income from continuing operations $44,882 $33,529 $174,608 $99,869 
Non-GAAP income from discontinued operations(j) —  25,688 
Non-GAAP net income$44,882 $33,529 $174,608 $125,557 
Average number of diluted shares outstanding56,307 55,760 55,787 55,981 
Diluted Earnings Per Share As Reported
Continuing operations$0.82 $0.49 $3.06 $1.64 
Discontinued operations —  0.33 
Diluted income per share attributable to The Ensign Group, Inc.$0.82 $0.49 $3.06 $1.97 
Adjusted Diluted Earnings Per Share
Continuing operations$0.80 $0.60 $3.13 $1.78 
Discontinued operations —  0.46 
Diluted income per share attributable to The Ensign Group, Inc.$0.80 $0.60 $3.13 $2.24 
Footnotes:
(a) Represents stock-based compensation expense incurred.
Three Months Ended December 31,Year Ended December 31,
2020201920202019
Cost of services$2,277 $2,001 $9,686 $7,036 
General and administrative1,311 1,106 4,838 4,286 
Total Non-GAAP adjustment$3,588 $3,107 $14,524 $11,322 



(b) Represents results to operations not at full capacity
Three Months Ended December 31,Year Ended December 31,
2020201920202019
Revenue$(1,020)$(4,212)$(3,161)$(8,609)
Cost of services1,583 4,708 4,344 10,289 
Rent28 443 100 921 
Depreciation and amortization56 372 216 904 
Total Non-GAAP adjustment$647 $1,311 $1,499 $3,505 
(c) Represents costs incurred to acquire an operation which are not capitalizable.
(d) Included in depreciation and amortization are expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities.
(e) Included in general and administrative expense are costs incurred in connection with the Completed Spin-Off of our home health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded company subsequent to the Spin-off date. Expenses incurred prior to Spin-Off date are included in discontinued operations as an adjustment.
(f) Impairment charges to fixed assets includes impairment charges of $1.7 million at one of our skilled nursing operations during the three months ended December 31, 2019. Additionally, included in the year ended December 31, 2019, impairment charges of $1.5 million at two of our senior living operations and at the skilled nursing operation mentioned, offset by the gain recognized for the sale of real estate of $2.9 million.
(g) Impairment charges to goodwill and intangible assets at our other ancillary operations and a skilled nursing operation.
(h) Represents the write off of deferred financing fees associated with the amendment of the credit facility.
(i) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0% for the three months and years ended December 31, 2020 and 2019.
(j) Represents results of the home health, hospice and senior living operations we transferred to the Pennant Group, Inc. as a result of the Spin-Off.
Year Ended December 31,
2019
Revenue$248,713 
Cost of services(185,963)
General and administrative expenses(8,037)
Rent(17,283)
Depreciation and amortization(2,367)
Interest income, net 26 
Provision for income taxes(8,772)
Non-controlling interest (629)
Non-GAAP net income from discontinued operations$25,688 




THE ENSIGN GROUP, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)

The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:

Three Months Ended December 31,Year Ended December 31,
2020201920202019
Consolidated Statements of Income Data:
Net income attributable to The Ensign Group, Inc.$46,162 $27,326 $171,364 $111,686 
Less: net income attributable to noncontrolling interests in continuing operations(159)(68)886 523 
Less: net income from discontinued operations —  19,473 
Add: Interest expense, net481 3,357 5,549 13,013 
Provision for income taxes9,216 9,010 46,242 23,954 
Depreciation and amortization13,489 13,354 54,571 51,054 
EBITDA from continuing operations 69,507 53,115 276,840 179,711 
EBITDA from discontinued operations(e) —  26,883 
EBITDA$69,507 $53,115 $276,840 $206,594 
Adjustments to EBITDA:
Stock-based compensation expense3,588 3,107 14,524 11,322 
Results related to operations not at full capacity(a)563 496 1,183 1,680 
Acquisition related costs(b) 132 104 277 
Impairment of goodwill and intangible assets 941  941 
Spin-Off transaction costs(c) 464  464 
Impairment charges to fixed assets, net of gain on sale(d) 1,732  329 
Rent related to items above28 443 100 921 
Adjusted EBITDA from continuing operations73,686 60,430 292,751 195,645 
Adjusted EBITDA from discontinued operations(e) —  36,801 
Adjusted EBITDA$73,686 $60,430 $292,751 $232,446 
Rent—cost of services32,608 31,511 129,926 124,789 
Less: rent related to items above(28)(443)(100)(921)
Adjusted rent from continuing operations32,580 31,068 129,826 123,868 
Adjusted rent included in discontinued operations —  17,283 
Adjusted EBITDAR from continuing operations$106,266 $422,577 
(a)    Represents results at closed operations and operations not at full capacity.
(b)    Costs incurred to acquire operations which are not capitalizable.
(c)    Costs incurred in connection with the completed Spin-Off transaction of The Pennant Group, Inc. Transaction costs incurred prior to Spin-Off date are included in discontinued operations as an adjustment.
(d)    Impairment charges to fixed assets includes impairment charges of $1.7 million at one of our skilled nursing operations during the three months ended December 31, 2019. Additionally, included in the year ended December 31, 2019, impairment charges of $1.5 million at two of our senior living operations and at the skilled nursing operation mentioned, offset by the gain recognized for the sale of real estate of $2.9 million.




(e)    All adjustments included in the table below are presented within net income from discontinued operations, net of tax within the consolidated statements of income for the periods presented.
Year Ended December 31, 2019
Consolidated Statements of Income Data:
Net income from discontinued operations, net of tax$19,473 
Less: net income attributable to noncontrolling interests in discontinued operations629 
Add: Interest and other income, net(26)
Provision for income taxes5,663 
Depreciation and amortization2,402 
EBITDA from discontinued operations $26,883 
Results related to closed operations
Losses related to operations in the start-up phase377 
Stock-based compensation expense1,018 
Spin-Off transaction costs7,909 
Acquisition related costs603 
Rent related to items above11 
Adjusted EBITDA from discontinued operations$36,801 


THE ENSIGN GROUP, INC.
UNAUDITED SELECT PERFORMANCE INDICATORS

The following tables summarize our selected performance indicators for our transitional and skilled services segment along with other statistics, for each of the dates or periods indicated:
Three Months Ended
December 31,
 20202019Change% Change
Total Facility Results:(Dollars in thousands)  
Transitional and skilled revenue$602,919 $529,901 $73,018 13.8 %
Number of facilities at period end195 190 2.6 %
Number of campuses at period end*24 23 4.3 %
Actual patient days1,502,237 1,591,163 (88,926)(5.6)%
Occupancy percentage — Operational beds70.7 %79.1 %(8.4)%
Skilled mix by nursing days35.2 %28.7 %6.5 %
Skilled mix by nursing revenue56.8 %49.2 %7.6 %

Three Months Ended
December 31,
 20202019Change% Change
Same Facility Results(1):(Dollars in thousands)  
Transitional and skilled revenue$467,823 $433,801 $34,022 7.8 %
Number of facilities at period end152 152 — — %
Number of campuses at period end*15 15 — — %
Actual patient days1,141,809 1,274,588 (132,779)(10.4)%
Occupancy percentage — Operational beds71.5 %79.9 %(8.4)%
Skilled mix by nursing days37.2 %30.3 %6.9 %
Skilled mix by nursing revenue59.0 %51.4 %7.6 %





Three Months Ended
December 31,
20202019Change% Change
Transitioning Facility Results(2):(Dollars in thousands)  
Transitional and skilled revenue$54,056 $49,740 $4,316 8.7 %
Number of facilities at period end16 16 — — %
Number of campuses at period end*4 — — %
Actual patient days145,358 158,458 (13,100)(8.3)%
Occupancy percentage — Operational beds73.2 %80.8 %(7.6)%
Skilled mix by nursing days29.2 %23.3 %5.9 %
Skilled mix by nursing revenue47.2 %39.4 %7.8 %

Three Months Ended
December 31,
20202019Change% Change
Recently Acquired Facility Results(3):(Dollars in thousands)  
Transitional and skilled revenue$81,040 $45,484 $35,556 NM
Number of facilities at period end27 22 NM
Number of campuses at period end*5 NM
Actual patient days215,070 155,315 59,755 NM
Occupancy percentage — Operational beds65.7 %72.4 %NM
Skilled mix by nursing days28.7 %20.7 %NM
Skilled mix by nursing revenue50.8 %39.3 %NM

Three Months Ended
December 31,
20202019Change% Change
Facility Closed Results(4):(Dollars in thousands)  
Skilled nursing revenue$ $876 $(876)NM
Actual patient days 2,802 (2,802)NM
Occupancy percentage — Operational beds %60.7 %NM
Skilled mix by nursing days %13.7 %NM
Skilled mix by nursing revenue %27.8 %NM
* Campus represents a facility that offers both skilled nursing and senior living services. Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective operating segment.
(1)Same Facility results represent all facilities purchased prior to January 1, 2017.
(2)Transitioning Facility results represent all facilities purchased from January 1, 2017 to December 31, 2018.
(3)Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2019.
(4)Facility Closed results represents closed operations during the three months ended December 31, 2019, which were excluded from Same Facilities results for the three months ended December 31, 2019 and 2020 for comparison purposes.





Year Ended
December 31,
 20202019Change% Change
Total Facility Results:(Dollars in thousands)  
Transitional and skilled revenue$2,288,182 $1,934,243 $353,939 18.3 %
Number of facilities at period end195 190 2.6 %
Number of campuses at period end*24 23 4.3 %
Actual patient days6,171,198 5,987,027 184,171 3.1 %
Occupancy percentage — Operational beds73.5 %79.2 %(5.7)%
Skilled mix by nursing days31.7 %29.0 %2.7 %
Skilled mix by nursing revenue53.1 %48.8 %4.3 %

Year Ended
December 31,
 20202019Change% Change
Same Facility Results(1):(Dollars in thousands)  
Transitional and skilled revenue$1,787,138 $1,650,515 $136,623 8.3 %
Number of facilities at period end152 152 — — %
Number of campuses at period end*15 15 — — %
Actual patient days4,711,983 5,036,697 (324,714)(6.4)%
Occupancy percentage — Operational beds74.1 %79.7 %(5.6)%
Skilled mix by nursing days33.6 %30.4 %3.2 %
Skilled mix by nursing revenue55.4 %50.7 %4.7 %

Year Ended
December 31,
20202019Change% Change
Transitioning Facility Results(2):(Dollars in thousands)  
Transitional and skilled revenue$208,657 $185,895 $22,762 12.2 %
Number of facilities at period end16 16 — — %
Number of campuses at period end*4 — — %
Actual patient days602,072 617,091 (15,019)(2.4)%
Occupancy percentage — Operational beds76.8 %79.5 %(2.7)%
Skilled mix by nursing days25.9 %22.2 %3.7 %
Skilled mix by nursing revenue43.1 %37.6 %5.5 %

Year Ended
December 31,
20202019Change% Change
Recently Acquired Facility Results(3):(Dollars in thousands)  
Transitional and skilled revenue$292,387 $88,818 $203,569 NM
Number of facilities at period end27 22 NM
Number of campuses at period end*5 NM
Actual patient days857,143 303,700 553,443 NM
Occupancy percentage — Operational beds68.5 %72.0 %NM
Skilled mix by nursing days25.0 %21.4 %NM
Skilled mix by nursing revenue46.3 %39.3 %NM




Year Ended
December 31,
20202019Change% Change
Facility Closed Results(4):(Dollars in thousands)  
Skilled nursing revenue$ $9,015 $(9,015)NM
Actual patient days 29,539 (29,539)NM
Occupancy percentage — Operational beds %65.2 %NM
Skilled mix by nursing days %17.0 %NM
Skilled mix by nursing revenue %36.6 %NM
* Campus represents a facility that offers both skilled nursing and senior living services. Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective operating segment.
(1)Same Facility results represent all facilities purchased prior to January 1, 2017.
(2)Transitioning Facility results represent all facilities purchased from January 1, 2017 to December 31, 2018.
(3)Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2019.
(4)Facility Closed results represents closed operations during the year ended December 31, 2019, which were excluded from Same Facilities results for the year ended December 31, 2019 and 2020 for comparison purposes.


THE ENSIGN GROUP, INC.
UNAUDITED SKILLED NURSING AVERAGE DAILY REVENUE RATES AND
PERCENT OF SKILLED NURSING REVENUE AND DAYS BY PAYOR

The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate(1):
Three Months Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
 20202019202020192020201920202019
Skilled Nursing Average Daily
Revenue Rates:
Medicare$673.77 $651.37 $601.49 $574.20 $664.79 $628.97 $666.72 $642.11 
Managed care514.34 476.47 485.38 434.64 499.86 438.81 510.11 470.83 
Other skilled532.73 510.21 496.68 473.14 357.39 329.13 522.60 501.46 
Total skilled revenue598.47 553.46 547.28 507.60 595.71 532.74 594.04 548.33 
Medicaid249.12 230.76 256.61 239.14 235.05 216.82 247.65 230.12 
Private and other payors230.99 217.07 231.68 225.61 220.54 204.02 229.51 216.97 
Total skilled nursing revenue$377.25 $327.02 $338.07 $299.64 $337.19 $280.74 $367.72 $319.72 
(1) These rates exclude state relief revenue we recognized and include sequestration reversal of 2%.

Year Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
 20202019202020192020201920202019
Skilled Nursing Average Daily
Revenue Rates:
Medicare$669.76 $612.60 $594.20 $543.30 $649.45 $631.27 $660.78 $607.24 
Managed care495.41 461.77 470.38 427.88 478.66 433.97 491.53 458.26 
Other skilled534.00 495.83 505.73 468.21 346.56 339.08 525.51 490.93 
Total skilled revenue584.60 528.36 536.37 489.17 578.94 523.86 580.14 525.41 
Medicaid240.05 225.57 248.99 234.52 224.75 222.20 238.62 226.43 
Private and other payors232.70 225.67 236.41 222.00 215.02 208.68 230.52 223.97 
Total skilled nursing revenue$355.20 $317.87 $321.53 $289.10 $312.08 $285.23 $345.92 $313.11 
(1) These rates exclude state relief revenue we recognized and include sequestration reversal of 2%.




The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months and years ended December 31, 2020 and 2019(1):

 Three Months Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
 20202019202020192020201920202019
Percentage of Skilled
Nursing Revenue:
Medicare33.8 %24.5 %27.1 %21.9 %35.8 %25.3 %33.4 %24.3 %
Managed care16.5 18.3 15.5 13.4 13.3 11.8 16.0 17.3 
Other skilled8.7 8.6 4.6 4.1 1.7 2.2 7.4 7.6 
Skilled mix59.0 51.4 47.2 39.4 50.8 39.3 56.8 49.2 
Private and other payors5.7 8.0 9.1 11.0 6.9 9.1 6.3 8.4 
Medicaid35.3 40.6 43.7 49.6 42.3 51.6 36.9 42.4 
Total skilled nursing100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %
(1) The revenue mix excludes state relief revenue we recognized.
 Three Months Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
 20202019202020192020201920202019
Percentage of Skilled
Nursing Days:
Medicare18.9 %12.3 %15.2 %11.4 %18.1 %11.3 %18.4 %12.1 %
Managed care12.1 12.5 10.8 9.2 8.9 7.6 11.5 11.7 
Other skilled6.2 5.5 3.2 2.7 1.7 1.8 5.3 4.9 
Skilled mix37.2 30.3 29.2 23.3 28.7 20.7 35.2 28.7 
Private and other payors9.4 12.1 13.3 14.6 10.5 12.4 10.0 12.3 
Medicaid53.4 57.6 57.5 62.1 60.8 66.9 54.8 59.0 
Total skilled nursing100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %

 Year Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
 20202019202020192020201920202019
Percentage of Skilled
Nursing Revenue:
Medicare30.1 %23.6 %24.1 %20.7 %32.6 %23.9 %29.8 %23.4 %
Managed care16.7 18.8 14.9 13.3 12.3 12.9 16.0 17.9 
Other skilled8.6 8.3 4.1 3.6 1.4 2.5 7.3 7.5 
Skilled mix55.4 50.7 43.1 37.6 46.3 39.3 53.1 48.8 
Private and other payors6.7 8.0 10.5 11.8 8.1 8.5 7.3 8.5 
Medicaid37.9 41.3 46.4 50.6 45.6 52.2 39.6 42.7 
Total skilled nursing100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %
(1) The revenue mix excludes state relief revenue we recognized.



 Year Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
 20202019202020192020201920202019
Percentage of Skilled
Nursing Days:
Medicare15.9 %12.2 %13.0 %11.0 %15.7 %10.8 %15.6 %12.0 %
Managed care12.0 12.9 10.2 9.0 8.0 8.5 11.2 12.2 
Other skilled5.7 5.3 2.7 2.2 1.3 2.1 4.9 4.8 
Skilled mix33.6 30.4 25.9 22.2 25.0 21.4 31.7 29.0 
Private and other payors10.4 11.7 14.1 15.3 11.7 11.6 10.9 12.1 
Medicaid56.0 57.9 60.0 62.5 63.3 67.0 57.4 58.9 
Total skilled nursing100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %

THE ENSIGN GROUP, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION BY SEGMENT
(In thousands)

In the fourth quarter of 2020, the Company began reporting the results of its real estate portfolio as a new segment. The Company now has two reportable segments: (1) transitional and skilled services, which includes the operation of skilled nursing facilities and rehabilitation therapy services and (2) real estate, which is comprised of properties owned by the Company and leased to skilled nursing and assisted living operations where the properties are subject to triple-net long-term leases, including operations that are owned and operated by the Company. Prior to this new segment structure, the Company had one reportable segment, transitional and skilled services.

Transitional and Skilled Services

The table below reconciles net income to EBITDA and Adjusted EBITDA for the transitional and skilled services reportable segment for the periods presented:

Year Ended December 31,
20202019
Statements of Income Data:
Segment income(a)$327,812 $225,910 
Depreciation and amortization28,585 27,837 
EBITDA356,397 253,747 
Adjustments to EBITDA:
Stock-based compensation expense9,239 6,419 
Results related to operations not at full capacity(b) 109 
Rent related to items above 809 
Adjusted EBITDA$365,636 $261,084 
(a)    Segment income reflects profits or loss from operations before provision for income taxes, excluding gain or loss from sale of real estate and impairment charges from operations. General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b)    Represents results at closed operations and operations not at full capacity.




The tables below reconcile net income to EBITDA and Adjusted EBITDA for the transitional and skilled services reportable segment for the periods presented:
Three Months Ended
3/31/20206/30/20209/30/202012/31/2020
Statements of Income Data:
Segment income(a)$80,591 $78,302 $84,747 $84,172 
Depreciation and amortization7,148 7,005 7,094 7,338 
EBITDA87,739 85,307 91,841 91,510 
Adjustments to EBITDA:
Stock-based compensation expense2,000 2,215 2,829 2,195 
Adjusted EBITDA$89,739 $87,522 $94,670 $93,705 
(a)    Segment income reflects profits or loss from operations before provision for income taxes, excluding gain or loss from sale of real estate and impairment charges from operations. General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b)    Represents results at closed operations and operations not at full capacity.

Three Months Ended
3/31/20196/30/20199/30/201912/31/2019
Statements of Income Data:
Segment income(a)$54,413 $51,951 $51,459 $68,087 
Depreciation and amortization6,593 6,882 6,995 7,367 
EBITDA61,006 58,833 58,454 75,454 
Adjustments to EBITDA:
Stock-based compensation expense1,385 1,573 1,566 1,895 
Results related to operations not at full capacity(b)264 25 190 (370)
Rent related to items above76 77 245 411 
Adjusted EBITDA$62,731 $60,508 $60,455 $77,390 
(a)    Segment income reflects profits or loss from operations before provision for income taxes, excluding gain or loss from sale of real estate and impairment charges from operations. General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b)    Represents results at closed operations and operations not at full capacity.

Real Estate
The following table sets forth details of operating results for our revenue and earnings, and their respective components, by our real estate segment the periods indicated:
Year Ended December 31,
20202019
Rental revenue generated from third-party tenants$15,157 $5,258 
Rental revenue generated from Ensign affiliated operations46,118 44,610 
Total rental revenue61,275 49,868 
Segment income(a)31,323 17,479 
Depreciation and amortization18,218 15,196 
FFO(b)$49,541 $32,675 
(a) Segment income reflects profits or loss from operations before provision for income taxes, excluding gain or loss from sale of real estate and impairment charges from operations. General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) FFO, in accordance with the definition used by the National Association of Real Estate Investment Trusts, means net income attributable to common stockholders, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable real estate assets and adding depreciation and amortization related to real estate to earnings.





 Three Months Ended
3/31/20206/30/20209/30/202012/31/2020
Rental revenue generated from third-party tenants$3,662 $3,620 $3,914 $3,961 
Rental revenue generated from Ensign affiliated operations11,282 11,389 11,622 11,825 
Total rental revenue14,944 15,009 15,536 15,786 
Segment income(a)6,325 7,794 8,474 8,730 
Depreciation and amortization4,515 4,587 4,522 4,594 
FFO(b)$10,840 $12,381 $12,996 $13,324 
(a) Segment income reflects profits or loss from operations before provision for income taxes, excluding gain or loss from sale of real estate and impairment charges from operations. General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) FFO, in accordance with the definition used by the National Association of Real Estate Investment Trusts, means net income attributable to common stockholders, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable real estate assets and adding depreciation and amortization related to real estate to earnings.
 
Three Months Ended (c)
3/31/20196/30/20199/30/201912/31/2019
Rental revenue generated from third-party tenants(c)$576 $487 $479 $3,716 
Rental revenue generated from Ensign affiliated operations(c)10,587 11,407 12,345 10,271 
Total rental revenue11,163 11,894 12,824 13,987 
Segment income(a)3,716 4,161 4,569 5,033 
Depreciation and amortization3,422 3,545 3,912 4,317 
FFO(b)$7,138 $7,706 $8,481 $9,350 
(a) Segment income reflects profits or loss from operations before provision for income taxes, excluding gain or loss from sale of real estate and impairment charges from operations. General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) FFO, in accordance with the definition used by the National Association of Real Estate Investment Trusts, means net income attributable to common stockholders, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable real estate assets and adding depreciation and amortization related to real estate to earnings.
(c) For all periods presented prior to October 1, 2019, Pennant rental revenue has been included within Ensign affiliated operations. Effective upon the Spin-Off , Pennant rental revenue has been included within third-party tenant rental revenue.
THE ENSIGN GROUP, INC.
UNAUDITED REVENUE BY PAYOR SOURCE

The following table sets forth our service revenue by payor source and as a percentage of total service revenue for the periods indicated:

 Three Months Ended December 31,
20202019
Revenue% of RevenueRevenue% of Revenue
Medicaid$227,744 36.4 %$216,729 38.9 %
Medicare207,509 33.2 144,213 25.9 
Medicaid — skilled39,220 6.3 36,567 6.6 
Total Medicaid and Medicare474,473 75.9 397,509 71.4 
Managed care95,102 15.2 92,849 16.7 
Private and other(1)
55,493 8.9 66,117 11.9 
Service revenue$625,068 100.0 %$556,475 100.0 %
(1) Private and other payors also includes revenue from all payors generated in our other ancillary operations for the three months ended December 31, 2020 and 2019.





 Year Ended December 31,
20202019
Revenue% of RevenueRevenue% of Revenue
Medicaid$900,249 37.7 %$802,952 39.5 %
Medicare727,374 30.5 499,353 24.6 
Medicaid — skilled149,846 6.3 132,889 6.5 
Total Medicaid and Medicare1,777,469 74.5 1,435,194 70.6 
Managed care367,095 15.4 351,054 17.3 
Private and other(1)
242,875 10.1 245,018 12.1 
Service revenue$2,387,439 100.0 %$2,031,266 100.0 %
(1) Private and other payors also includes revenue from all payors generated in our other ancillary operations for the years ended December 31, 2020 and 2019.


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. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) share-based compensation expense; (e) results of operations not at full capacity, excluding depreciation, interest and income taxes; (f) acquisition related costs; (g) impairment of goodwill and intangible assets; (h) spin-off transaction costs and (i) gain on sale of fixed assets, net of impairment charges; 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) share-based compensation expense; (f) results of operations not at full capacity, excluding rent, depreciation, interest and income taxes (g) acquisition related costs; (h) impairment of goodwill and intangible assets; (i) spin-off transaction costs; and (j) gain on sale of fixed assets, net of impairment charges. Funds from Operations (FFO) for our real estate segment consists of segment income, excluding gains (or losses) from sales of real estate and impairment of depreciable real estate assets and adding depreciation and amortization related to real estate to earnings. The company believes that the presentation of EBITDA, adjusted EBITDA, FFO, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. Adjusted EBITDAR is a financial valuation measure that is not specified in GAAP. This measure is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring operating expense. The company believes disclosure of adjusted net income, adjusted net income per share, FFO, EBITDA, adjusted EBITDA and adjusted EBITDAR has 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 measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, 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.