EX-99.1 2 q22019pressrelease.htm EXHIBIT 99.1 Wdesk | Exhibit


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The Ensign Group Reports Second Quarter Results

Conference Call and Webcast scheduled for tomorrow, August 2, 2019 at 10:00 am PT
MISSION VIEJO, California - August 1, 2019 - 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 and senior living companies, today announced its operating results for the second quarter of 2019, reporting a GAAP diluted earnings per share of $0.51 for the quarter with adjusted earnings per share of $0.54 for the quarter (1).
Highlights Include:

▪
GAAP earnings per share for the quarter was a record $0.51, an increase of 24.4% over the prior year quarter, and adjusted earnings per share was $0.54, up 22.7% over the prior year quarter (1);

▪
Consolidated GAAP Net Income for the quarter was $28.6 million, an increase of 30.0% over the prior year quarter, and adjusted Net Income was $30.3 million, an increase of 27.8% over the prior year quarter(1);

▪
Same store skilled services occupancy was 80.1%, an increase of 272 basis points over the prior year quarter, and skilled managed care revenue was up 8.5%;

▪
Transitioning skilled services occupancy was 78.0%, an increase of 375 basis points over the prior year quarter; and skilled managed care revenue was up 24.3%;

▪
Total Transitional and Skilled Services segment revenue was $469.2 million, an increase of 14.9%, and segment income was $56.7 million for the quarter, an increase of 31.1% over the prior year quarter(2);

▪
Total Home Health and Hospice Services segment revenue for the quarter was up 21.7% over the prior year quarter to $50.2 million; segment income was up 16.6% over the prior year quarter to $7.3 million and 6.4% sequentially over the first quarter of 2019(2).

(1) See "Reconciliation of GAAP to Non-GAAP Financial Information".
(2) Segment income is defined and outlined in Note 7 on Form 10-Q. Segment income excludes general and administrative expenses and interest expense, as well as the elimination of intercompany transactions.

Operating Results

“We are very happy to report that our local operators continue to drive impressive results. We are honored to be affiliated with so many outstanding caregivers and healthcare leaders and their collective efforts have led to another strong quarter, with GAAP earnings per share of $0.51, an increase of 24.4% over the prior year quarter, and adjusted earnings per share of $0.54, up 22.7% over the prior year quarter,” said Ensign’s Chief Executive Officer, Barry Port. He continued, “Our organic growth this quarter has again come from the steady improvement in the organization’s most mature operations, as well as an increasingly positive contribution from our transitioning and newly acquired operations. While we are pleased with our progress, we have only begun to approach our potential in about half of the states in which we operate, not to mention the tremendous opportunities from our disciplined acquisition strategy. Our local leaders in our newer states are working diligently to implement proven practices that have consistently led to stronger clinical and financial results and we are confident that, as they do so, these newer markets will soon become enormously positive contributors to our collective results.”




Mr. Port pointed to high quality healthcare outcomes, stronger occupancy, strong regulatory results and consistent collection efforts as the primary drivers of the quarter’s strong results. He also noted that the strength of the relationships between our local clusters and managed care companies in their markets continue to be an advantage. He added, “We hope that these results will continue to show that even in a period where occupancies across the industry are down, we are able to consistently drive results across all payor types, including Medicaid, Medicare, managed care and private pay. Thanks to our distinctive local leadership model and our disciplined real estate investments and acquisitions, we are confident that this performance is sustainable over the long-term.”
He also highlighted Ensign’s unique entrepreneurial culture and its history of incubating other post-acute and healthcare businesses, noting that Cornerstone Healthcare, Inc., Ensign’s home health and hospice venture, grew its segment revenue and income by 21.7% and 16.6%, respectively, over the prior year quarter. “We are pleased with the results being achieved by our partners in home health and hospice and look forward to the enormous potential in our other new ventures as they, like Cornerstone, apply proven Ensign leadership and operational principles to their respective businesses,” Mr. Port said.
Ensign also reaffirmed its 2019 annual earnings per share guidance of between $2.22 and $2.30 per diluted share and annual revenue of between $2.34 billion and $2.40 billion. Overall, the midpoint of this guidance represents a 20.2%, or $0.38 per share, increase over Ensign’s 2018 annual earnings. “We are very happy with our performance for the first half of the year and remain confident that as our local leaders continue to focus on meeting the needs of their unique markets, we will carry this momentum into the second half of the year” Mr. Port added.
Chief Financial Officer, Suzanne Snapper reported that the Company’s liquidity remains strong with approximately $235 million of availability on its $450 million credit facility, which also has a built-in expansion option, and 59 unlevered real estate assets that add additional liquidity. Ms. Snapper also indicated that even after some significant acquisition activity, the Company maintained a lease-adjusted net-debt-to-adjusted EBITDAR ratio of 3.77x at quarter end. She pointed out that the Company expects the ratio to be impacted during periods of heavier acquisitions as the cash outlay precedes the growth in EBITDAR from newly acquired operations. She also indicated that cash generated from operations was $72.3 million for the first half of the year, which was primarily driven by an increase in operating results.
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 and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, 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 Quarterly Report on Form 10-Q for the three and six months ended June 30, 2019, which is expected to be filed with the SEC today and can be viewed on the company’s website at http://www.ensigngroup.net.
Quarter Highlights
During the quarter, Ensign paid a quarterly cash dividend of $0.0475 per share of its common stock. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 16 years.
Also during the quarter and since, Ensign’s affiliates acquired the following skilled nursing and healthcare campus operations:
▪
Phoenix Mountain Post Acute, a skilled nursing facility with 130 skilled nursing beds located in Phoenix, Arizona;
▪
The Hills Post Acute, a 172-bed skilled nursing operation located in Santa Ana, California;
▪
St. Elizabeth Healthcare and Rehabilitation, a 59-bed skilled nursing operation located in Fullerton, California;
▪
Villa Maria Post Acute, a 78-bed skilled nursing operation located in Santa Maria, California;
▪
Mainplace Post Acute, a 163-bed skilled nursing operation located in Orange, California;
▪
Vista Post Acute and Rehabilitation & Olive Ridge Senior Living, a 150-bed skilled nursing operation and a 67-unit senior living facility, both in Peoria, Arizona;
▪
Alta Mesa Health and Rehabilitation & The Groves Assisted Living and Independent Senior Living Community, a 58-bed skilled nursing operation and a senior living center with 18 assisted living and 88 independent living units, both in Mesa, Arizona;
▪
Golden Palms Rehabilitation and Retirement, a 60-bed skilled nursing operation and a senior living center with 38 assisted living beds and 92 independent living units in Harlingen, Texas;
▪
Valley of the Moon Post Acute, a 27-bed hospital-based skilled nursing operation that is being operated under a management arrangement with Sonoma Valley Hospital in Sonoma, California; and
▪
The Terrace at Mount Ogden, a 114-bed skilled nursing operation in Ogden, Utah.

Also during the quarter, Ensign’s affiliates acquired the following home health, hospice and senior living operations:
▪
Stonebridge Home Care North, a home care agency based in Salt Lake City, Utah, and Stonebridge Home Care South, a home care agency based in Provo, Utah;
▪
Resolutions Hospice, which operates hospice agencies in Austin and Houston, Texas;




▪
Preceptor Health Care, which provides home health, hospice, and therapy services in eastern Wisconsin;
▪
Agape Hospice, a hospice agency providing services in Tucson, Arizona;
▪
Rockbrook Memory Care, a 52-unit memory care community in Lewisville, Texas; and
▪
Mainplace Senior Living, a 91-unit senior living center, located in Orange, California.
“We are very excited about these carefully selected operations and are pleased with the progress our local operators have already made in many of them,” said Chad Keetch, Ensign’s Chief Investment Officer. “Even though we’ve had a solid year on the acquisition front so far, the deals we have completed to date are not representative of the number of attractive opportunities that are available to us. Our pipeline is as full as ever, but we have intentionally kept plenty of dry powder on hand for what we believe will be an increasingly more attractive buyer’s market,” Mr. Keetch said. He added, “We are very excited to grow within our existing geographical footprint and will continue to do so as we see significant advantages to adding strength in markets we know well. We are in the process of evaluating dozens of opportunities and expect to announce more deals in the third and fourth quarters.”
These additions bring Ensign's growing portfolio to 200 skilled nursing operations, 27 of which also include senior living operations, 57 stand-alone senior living operations, 28 hospice agencies, 26 home health agencies and nine home care businesses across sixteen states.  Ensign owns the real estate at 78 of its 257 healthcare facilities.  Mr. 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.
Spin-off Update
On May 6, 2019, the Company announced that it plans to separate its home health and hospice agencies and substantially all of its senior living businesses into a separate publicly-traded company. Upon consummation of the spin-off, the two companies will be comprised of:
▪
The Ensign Group, Inc., which will include transitional and skilled services, rehabilitative care services, healthcare campuses, mobile diagnostic and clinical laboratory operations, other post-acute-related new business ventures and real estate investments; and
▪
The Pennant Group, Inc., which will include Ensign’s home health and hospice operations and substantially all of its senior living operations.
Ensign’s current management team will continue in place. Daniel Walker, President of Ensign’s home health and hospice holding company, Cornerstone Healthcare, Inc., will become the Chairman, Chief Executive Officer and President of Pennant. Ensign’s current Executive Chairman, Christopher Christensen, will also serve as a director for both companies for the foreseeable future.
Pennant has filed a registration statement on Form 10 relating to the spin-off with the Securities and Exchange Commission. The spin-off is subject to customary conditions, including receipt of a tax opinion from counsel, effectiveness of the registration statement filed with the Securities and Exchange Commission, certain lease amendments, execution of intercompany agreements and final approval by Ensign’s board of directors. Ensign anticipates that the spin-off will be completed on October 1, 2019, but there can be no assurances regarding the final terms and structure of the spin-off or that it will be completed at all.
Discussing the prospects for the two companies, Mr. Port said, “As we have emphasized repeatedly over the last several quarters, our home health, hospice and senior living leaders have created significant value as they have embraced and applied Ensign’s innovative leadership and operating model. We believe that this spin-off will shine light on value that has yet to be fully realized under Ensign and will present two very attractive investments that provide our partners and shareholders the opportunity to share in that value, now and over time.”
Mr. Walker added, “We believe that separating these two businesses will accelerate the ability of both organizations, as two smaller but strong organizations, to quickly adapt to the ever changing needs of our patients, payors and other providers within the continuum of care. We are pleased with the progress we have made and are confident that we are on schedule to complete the spin-off on October 1, 2019. As our collective results in the first and second quarters show, our local operators have shown that the spin-off transaction has not been a distraction, as they have maintained their focus on clinical outcomes and operational discipline.”
Mr. Keetch also emphasized that Ensign will continue to be the leading consolidator in its highly fragmented core skilled nursing business, noting that Ensign will retain all existing owned real estate assets and will continue to pursue the purchase of additional real estate assets. “We now own 79 real estate assets, including the new Service Center location and the 28 senior living assets that will be leased by Pennant following the spin-off, which is approaching the 94 assets that we spun out to CareTrust in 2014. As we look to our past and what we have been able to accomplish with our real estate, we are very excited about the opportunities




we have to unlock the value in our owned real estate. We are constantly evaluating our options and looking forward to creating a structure that will ensure both cultural and operational alignment,” he said.
Mr. Walker also reported that Pennant will continue to pursue the acquisition of home health and hospice agencies and senior living operations. In addition, Ensign management affirmed that Ensign does not intend to “stand still” or otherwise abate its acquisition program during the pendency of the transaction, and references to the property counts, capitalization or financial condition of either Ensign or Pennant and similar statements may change as a result of acquisitions, expenditures or other changes made prior to the effective date of the spin-off.
2019 Guidance Affirmed
Management affirmed its 2019 annual earnings per share guidance of between $2.22 and $2.30 per diluted share and annual revenue guidance of between $2.34 billion and $2.40 billion. Ms. Snapper reminded investors that the business is subject to seasonality, which historically impacts second and third quarter results. This guidance excludes the potential spin-off transaction costs, share-based compensation and costs incurred for start-up operations. The guidance includes, among other things, self-insurance healthcare costs, anticipated Medicare and Medicaid reimbursement rates and acquisitions completed to date.
Conference Call
A live webcast will be held Friday, August 2, 2019 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, August 30, 2019.
About Ensign™
The Ensign Group, Inc.'s independent operating subsidiaries provide a broad spectrum of skilled nursing and senior living services, physical, occupational and speech therapies, home health and hospice services and other rehabilitative and healthcare services at 257 healthcare facilities, 28 hospice agencies, 26 home health agencies and nine home care businesses in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas, South Carolina, Oklahoma and Wyoming. 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.
Contact Information
Investor/Media Relations, The Ensign Group, Inc., (949) 487-9500, ir@ensigngroup.net.
SOURCE: The Ensign Group, Inc.
















THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)


Three Months Ended June 30,
 
Six Months Ended June 30,

2019
 
2018
 
2019
 
2018
Revenue
$
575,651

 
$
496,386

 
$
1,124,865

 
$
988,520

Expense
 
 
 
 

 
 
Cost of services
457,000

 
396,132

 
887,002

 
786,375

Return of unclaimed class action settlement
—

 
—

 
—

 
(1,664
)
Rent—cost of services
37,060

 
34,472

 
72,846

 
68,322

General and administrative expense
30,561

 
22,386

 
63,585

 
47,490

Depreciation and amortization
13,184

 
11,621

 
25,782

 
23,243

Total expenses
537,805

 
464,611

 
1,049,215

 
923,766

Income from operations
37,846

 
31,775

 
75,650

 
64,754

Other income (expense):
 
 
 
 

 
 
Interest expense
(3,941
)
 
(3,869
)
 
(7,613
)
 
(7,482
)
Interest income
572

 
562

 
1,147

 
1,010

Other expense, net
(3,369
)
 
(3,307
)
 
(6,466
)
 
(6,472
)
Income before provision for income taxes
34,477

 
28,468

 
69,184

 
58,282

Provision for income taxes
5,552

 
6,142

 
12,652

 
12,663

Net income
28,925

 
22,326

 
56,532

 
45,619

Less: net income attributable to noncontrolling interests
316

 
315

 
551

 
476

Net income attributable to The Ensign Group, Inc.
$
28,609

 
$
22,011

 
$
55,981

 
$
45,143

Net income per share attributable to The Ensign Group, Inc.:
 
 
 
 

 
 
Basic
$
0.54

 
$
0.42

 
$
1.05

 
$
0.87

Diluted
$
0.51

 
$
0.41

 
$
1.00

 
$
0.84

Weighted average common shares outstanding:
 
 
 
 

 
 
Basic
53,408

 
51,880

 
53,246

 
51,733

Diluted
56,078

 
54,251

 
55,896

 
53,909






THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)


June 30, 2019

December 31, 2018
Assets
 

 
Current assets:
 

 
Cash and cash equivalents
$
39,042


$
31,083

Accounts receivable—less allowance for doubtful accounts of $3,726 and $2,886 at June 30, 2019 and December 31, 2018, respectively
296,935


276,099

Investments—current
8,003


8,682

Prepaid income taxes
5,934


6,219

Prepaid expenses and other current assets
25,632


24,130

Assets held for sale - current
—

 
1,859

Total current assets
375,546


348,072

Property and equipment, net
674,892


618,874

Right-of-use assets
1,074,449

 
—

Insurance subsidiary deposits and investments
38,929


36,168

Escrow deposits
—


7,271

Deferred tax assets
8,603


11,650

Restricted and other assets
16,943


20,844

Intangible assets, net
3,829


31,000

Goodwill
97,408


80,477

Other indefinite-lived intangibles
30,922


27,602

Total assets
$
2,321,521


$
1,181,958

 



Liabilities and equity
 

 
Current liabilities:
 

 
Accounts payable
$
44,694


$
44,236

Accrued wages and related liabilities
116,018


119,656

Lease liabilities—current
59,686

 
—

Accrued self-insurance liabilities—current
26,981


25,446

Other accrued liabilities
69,816


69,784

Current maturities of long-term debt
10,153


10,105

Total current liabilities
327,348


269,227

Long-term debt—less current maturities
268,179


233,135

Long-term lease liabilities—less current portion
988,145

 
—

Accrued self-insurance liabilities—less current portion
57,565


54,605

Other long-term liabilities
2,977


11,234

Deferred gain related to sale-leaseback
—


11,417

Total equity
677,307


602,340

Total liabilities and equity
$
2,321,521


$
1,181,958














THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

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

Six Months Ended June 30,

2019

2018
Net cash provided by operating activities
$
72,278


$
101,240

Net cash used in investing activities
(98,256
)

(81,244
)
Net cash provided by/(used in) financing activities
33,937


(35,149
)
Net increase/(decrease) in cash and cash equivalents
7,959


(15,153
)
Cash and cash equivalents beginning of period
31,083


42,337

Cash and cash equivalents end of period
$
39,042


$
27,184


 
THE ENSIGN GROUP, INC.
 
 
REVENUE BY SEGMENT
 
 
(Unaudited)
 

The following tables sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated:


Three Months Ended June 30,


2019
 
2018


$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 


(Dollars in thousands)
Transitional and skilled services

$
469,238


81.5
%
 
$
408,518


82.3
%
Senior living services

42,046


7.3

 
37,164


7.5

Home health and hospice services:



 
 



Home health

24,988


4.3

 
21,321


4.3

Hospice

25,220


4.4

 
19,928


4.0

Total home health and hospice services

50,208


8.7

 
41,249


8.3

All other (1)

14,159


2.5

 
9,455


1.9

Total revenue

$
575,651


100.0
%
 
$
496,386


100.0
%
(1) Includes revenue from services generated in our other ancillary services.
 
 
Six Months Ended June 30,
 
 
2019
 
2018
 
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
Transitional and skilled services
 
$
918,496

 
81.7
%
 
$
815,534

 
82.5
%
Senior living services
 
82,740

 
7.4

 
73,277

 
7.4

Home health and hospice services:
 
 
 
 
 
 
 
 
Home health
 
48,647

 
4.3

 
41,505

 
4.2

Hospice
 
47,678

 
4.2

 
39,502

 
4.0

Total home health and hospice services
 
96,325

 
8.5

 
81,007

 
8.2

All other (1)
 
27,304

 
2.4

 
18,702

 
1.9

Total revenue
 
$
1,124,865

 
100.0
%
 
$
988,520

 
100.0
%
(1) Includes revenue from services generated in our other ancillary services.





 
THE ENSIGN GROUP, INC.
 
 
SELECT PERFORMANCE INDICATORS
 
 
(Unaudited)
 

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 June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Total Facility Results:
 

 

 

 
Transitional and skilled revenue
$
469,238

 
$
408,518

 
$
60,720

 
14.9
 %
Number of facilities at period end
171

 
162

 
9

 
5.6
 %
Number of campuses at period end*
27

 
22

 
5

 
22.7
 %
Actual patient days
1,472,798

 
1,330,057

 
142,741

 
10.7
 %
Occupancy percentage — Operational beds
79.4
%
 
76.6
%
 
 
 
2.8
 %
Skilled mix by nursing days
29.0
%
 
29.7
%
 
 
 
(0.7
)%
Skilled mix by nursing revenue
48.7
%
 
50.2
%
 
 
 
(1.5
)%
 
Three Months Ended June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Same Facility Results(1):
 

 

 

 
Transitional and skilled revenue
$
348,623


$
322,922


$
25,701

 
8.0
 %
Number of facilities at period end
127


127


—

 
—
 %
Number of campuses at period end*
14


14


—

 
—
 %
Actual patient days
1,054,389


1,015,579


38,810

 
3.8
 %
Occupancy percentage — Operational beds
80.1
%

77.4
%

 
 
2.7
 %
Skilled mix by nursing days
31.0
%

31.4
%

 
 
(0.4
)%
Skilled mix by nursing revenue
50.9
%

51.7
%

 
 
(0.8
)%
 
Three Months Ended June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Transitioning Facility Results(2):
 

 

 

 
Transitional and skilled revenue
$
89,359


$
79,801


$
9,558


12.0
%
Number of facilities at period end
33


33


—

 
—

Number of campuses at period end*
7


7


—

 
—

Actual patient days
310,474


295,103


15,371


5.2
%
Occupancy percentage — Operational beds
78.0
%
 
74.3
%

 

3.7
%
Skilled mix by nursing days
25.4
%
 
24.6
%

 

0.8
%
Skilled mix by nursing revenue
44.6
%
 
44.6
%

 

—
%




 
Three Months Ended June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Recently Acquired Facility Results(3):


 

 

 
Transitional and skilled revenue
$
31,256


$
5,795


$
25,461


NM
Number of facilities at period end
11


2


9


NM
Number of campuses at period end*
6


1


5


NM
Actual patient days
107,935


19,375


88,560


NM
Occupancy percentage — Operational beds
76.3
%
 
75.7
%




NM
Skilled mix by nursing days
20.8
%
 
23.4
%

 


NM
Skilled mix by nursing revenue
35.2
%
 
38.8
%

 


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 reportable segment.
(1)
Same Facility results represent all facilities purchased prior to January 1, 2016.
(2)
Transitioning Facility results represents all facilities purchased from January 1, 2016 to December 31, 2017.
(3)
Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2018.
 
Six Months Ended June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Total Facility Results:
 
 
 
 
 
 
 
Transitional and skilled revenue
$
918,496

 
$
815,534

 
$
102,962

 
12.6
 %
Number of facilities at period end
171

 
162

 
9

 
5.6
 %
Number of campuses at period end*
27

 
22

 
5

 
22.7
 %
Actual patient days
2,879,167

 
2,645,027

 
234,140

 
8.9
 %
Occupancy percentage — Operational beds
79.4
%
 
77.2
%
 
 
 
2.2
 %
Skilled mix by nursing days
29.5
%
 
30.7
%
 
 
 
(1.2
)%
Skilled mix by nursing revenue
49.2
%
 
51.2
%
 
 
 
(2.0
)%
 
Six Months Ended June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Same Facility Results(1):
 
 
 
 
 
 
 
Transitional and skilled revenue
$
693,180

 
$
647,995

 
$
45,185

 
7.0
 %
Number of facilities at period end
127

 
127

 
—

 
—
 %
Number of campuses at period end*
14

 
14

 
—

 
—
 %
Actual patient days
2,093,819

 
2,034,749

 
59,070

 
2.9
 %
Occupancy percentage — Operational beds
80.1
%
 
77.9
%
 
 
 
2.2
 %
Skilled mix by nursing days
31.3
%
 
32.0
%
 
 
 
(0.7
)%
Skilled mix by nursing revenue
51.3
%
 
52.4
%
 
 
 
(1.1
)%




 
Six Months Ended June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Transitioning Facility Results(2):
 
 
 
 
 
 
 
Transitional and skilled revenue
$
177,783

 
$
161,744

 
$
16,039

 
9.9
 %
Number of facilities at period end
33

 
33

 
—

 
—

Number of campuses at period end*
7

 
7

 
—

 
—

Actual patient days
620,434

 
590,903

 
29,531

 
5.0
 %
Occupancy percentage — Operational beds
78.4
%
 
74.8
%
 
 
 
3.6
 %
Skilled mix by nursing days
25.7
%
 
26.2
%
 
 
 
(0.5
)%
Skilled mix by nursing revenue
45.0
%
 
46.7
%
 
 
 
(1.7
)%
 
Six Months Ended June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Recently Acquired Facility Results(3):
 
 
 
 
 
 
 
Transitional and skilled revenue
$
47,533

 
$
5,795

 
$
41,738

 
NM
Number of facilities at period end
11

 
2

 
9

 
NM
Number of campuses at period end*
6

 
1

 
5

 
NM
Actual patient days
164,914

 
19,375

 
145,539

 
NM
Occupancy percentage — Operational beds
74.2
%
 
75.7
%
 
 
 
NM
Skilled mix by nursing days
20.3
%
 
23.4
%
 
 

 
NM
Skilled mix by nursing revenue
33.9
%
 
38.8
%
 
 

 
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 reportable segment.
(1)
Same Facility results represent all facilities purchased prior to January 1, 2016.
(2)
Transitioning Facility results represents all facilities purchased from January 1, 2016 to December 31, 2017.
(3)
Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2018.

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

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:
 
Three Months Ended June 30,
 
Same Facility

Transitioning

Acquisitions

Total
 
2019

2018

2019

2018

2019

2018

2019

2018
Skilled Nursing Average Daily Revenue Rates:
 
 
 
 
 
 
 
 
 
 
 

 

 
Medicare
$
614.76


$
602.08


$
534.84


$
520.22


$
572.34


$
526.05


$
594.59


$
582.05

Managed care
466.48


454.13


419.73


410.79


421.67


427.64


454.37


445.48

Other skilled
493.47


468.18


462.28


467.78


330.42


250.64


488.04


467.19

Total skilled revenue
529.62


516.38


478.10


472.27


483.79


462.85


517.71


507.68

Medicaid
229.48


220.74


202.91


190.39


234.49


219.92


224.27


213.86

Private and other payors
236.16


226.10


204.60


196.25


233.55


236.72


227.22


217.35

Total skilled nursing revenue
$
323.49


$
314.46


$
273.32


$
260.74


$
286.20


$
279.56


$
310.16


$
302.01






 
Six Months Ended June 30,
 
Same Facility
 
Transitioning
 
Acquisitions
 
Total
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Skilled Nursing Average Daily Revenue Rates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare
$
613.55

 
$
598.45

 
$
533.06

 
$
517.82

 
$
553.27

 
$
526.05

 
$
592.89

 
$
578.24

Managed care
464.81

 
452.75

 
417.42

 
410.42

 
424.10

 
427.64

 
453.16

 
444.31

Other skilled
492.54

 
467.50

 
489.70

 
472.81

 
322.78

 
250.64

 
489.47

 
467.16

Total skilled revenue
529.09

 
514.35

 
477.56

 
471.69

 
475.36

 
462.85

 
517.29

 
505.91

Medicaid
229.65

 
220.76

 
200.49

 
189.13

 
238.30

 
219.92

 
223.83

 
213.61

Private and other payors
235.03

 
225.95

 
207.84

 
201.42

 
234.47

 
236.72

 
227.54

 
218.67

Total skilled nursing revenue
$
324.28

 
$
315.80

 
$
272.86

 
$
265.35

 
$
286.07

 
$
279.56

 
$
311.00

 
$
304.24


The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Same Facility
 
Transitioning
 
Acquisitions
 
Total
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Percentage of Skilled Nursing Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare
23.0
%
 
24.2
%
 
24.7
%
 
26.8
%
 
19.2
%
 
20.9
%
 
23.1
%
 
24.7
%
Managed care
18.5

 
18.2

 
18.5

 
16.4

 
14.0

 
16.5

 
18.2

 
17.8

Other skilled
9.4

 
9.3

 
1.4

 
1.4

 
2.0

 
1.4

 
7.4

 
7.7

Skilled mix
50.9

 
51.7

 
44.6

 
44.6

 
35.2

 
38.8

 
48.7

 
50.2

Private and other payors
7.6

 
7.7

 
11.4

 
12.2

 
11.5

 
13.6

 
8.5

 
8.6

Quality mix
58.5

 
59.4

 
56.0

 
56.8

 
46.7

 
52.4

 
57.2

 
58.8

Medicaid
41.5

 
40.6

 
44.0

 
43.2

 
53.3

 
47.6

 
42.8

 
41.2

Total skilled nursing
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
Three Months Ended June 30,
 
Same Facility
 
Transitioning
 
Acquisitions
 
Total
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Percentage of Skilled Nursing Days:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare
12.1
%
 
12.6
%
 
12.6
%
 
13.4
%
 
9.6
%
 
11.1
%
 
12.0
%
 
12.8
%
Managed care
12.8

 
12.5

 
12.0

 
10.4

 
9.5

 
10.8

 
12.4

 
12.0

Other skilled
6.1

 
6.3

 
0.8

 
0.8

 
1.7

 
1.5

 
4.6

 
4.9

Skilled mix
31.0

 
31.4

 
25.4

 
24.6

 
20.8

 
23.4

 
29.0

 
29.7

Private and other payors
10.7

 
11.1

 
15.5

 
16.4

 
14.3

 
16.1

 
12.0

 
12.4

Quality mix
41.7

 
42.5

 
40.9

 
41.0

 
35.1

 
39.5

 
41.0

 
42.1

Medicaid
58.3

 
57.5

 
59.1

 
59.0

 
64.9

 
60.5

 
59.0

 
57.9

Total skilled nursing
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%





 
Six Months Ended June 30,
 
Same Facility
 
Transitioning
 
Acquisitions
 
Total
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Percentage of Skilled Nursing Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare
23.5
%
 
24.6
%
 
25.1
%
 
28.5
%
 
17.8
%
 
20.9
%
 
23.5
%
 
25.3
%
Managed care
18.4

 
18.8

 
18.4

 
17.0

 
14.5

 
16.5

 
18.2

 
18.4

Other skilled
9.4

 
9.0

 
1.5

 
1.2

 
1.6

 
1.4

 
7.5

 
7.5

Skilled mix
51.3

 
52.4

 
45.0

 
46.7

 
33.9

 
38.8

 
49.2

 
51.2

Private and other payors
7.5

 
7.5

 
11.2

 
12.0

 
12.6

 
13.6

 
8.4

 
8.5

Quality mix
58.8

 
59.9

 
56.2

 
58.7

 
46.5

 
52.4

 
57.6

 
59.7

Medicaid
41.2

 
40.1

 
43.8

 
41.3

 
53.5

 
47.6

 
42.4

 
40.3

Total skilled nursing
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
Six Months Ended June 30,
 
Same Facility
 
Transitioning
 
Acquisitions
 
Total
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Percentage of Skilled Nursing Days:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medicare
12.4
%
 
12.9
%
 
12.8
%
 
14.6
%
 
9.2
%
 
11.1
%
 
12.3
%
 
13.3
%
Managed care
12.8

 
13.0

 
12.0

 
11.0

 
9.7

 
10.8

 
12.5

 
12.6

Other skilled
6.1

 
6.1

 
0.9

 
0.6

 
1.4

 
1.5

 
4.7

 
4.8

Skilled mix
31.3

 
32.0

 
25.7

 
26.2

 
20.3

 
23.4

 
29.5

 
30.7

Private and other payors
10.7

 
10.9

 
14.9

 
16.0

 
15.7

 
16.1

 
11.8

 
12.1

Quality mix
42.0

 
42.9

 
40.6

 
42.2

 
36.0

 
39.5

 
41.3

 
42.8

Medicaid
58.0

 
57.1

 
59.4

 
57.8

 
64.0

 
60.5

 
58.7

 
57.2

Total skilled nursing
100.0
%
 
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 senior living segment along with other statistics, for each of the dates or periods indicated:
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Resident fee revenue
$
42,046

 
$
37,164

 
$
4,882

 
13.1
%
Number of facilities at period end
56

 
51

 
5

 
9.8
%
Number of campuses at period end
27

 
22

 
5

 
22.7
%
Occupancy percentage (units)
75.5
%
 
75.2
%
 
 
 
0.3
%
Average monthly revenue per unit
$
2,900

 
$
2,863

 
$
37

 
1.3
%





 
Six Months Ended
June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Resident fee revenue
$
82,740

 
$
73,277

 
9,463

 
12.9
 %
Number of facilities at period end
56

 
51

 
5

 
9.8
 %
Number of campuses at period end
27

 
22

 
5

 
22.7
 %
Occupancy percentage (units)
75.3
%
 
75.4
%
 
 
 
(0.1
)%
Average monthly revenue per unit
$
2,923

 
$
2,860

 
63

 
2.2
 %

 
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,




 
2019

2018

Change

% Change
 
 
 
 
 
 
 
 

(Dollars in thousands)




Home health and hospice revenue







Home health services
$
24,988

 
$
21,321

 
$
3,667

 
17.2
%
Hospice services
25,220

 
19,928

 
5,292

 
26.6

Total home health and hospice revenue
$
50,208

 
$
41,249

 
$
8,959

 
21.7
%
 
 
 
 
 
 
 
 
Home health and hospice agencies
62

 
46

 
16

 
34.8
%
Home health services:
 
 
 
 
 
 
 
Average Medicare revenue per completed episode
$
3,077

 
$
3,064

 
$
13

 
0.4
%
Hospice services:
 
 
 
 
 
 
 
Average daily census
1,673

 
1,290

 
383

 
29.7
%
 
Six Months Ended
June 30,
 
 
 
 
 
2019
 
2018
 
Change
 
% Change
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
Home health and hospice revenue
 
 
 
 
 
 
 
Home health services
$
48,647

 
$
41,505

 
$
7,142

 
17.2
%
Hospice services
47,678

 
39,502

 
8,176

 
20.7

Total home health and hospice revenue
$
96,325

 
$
81,007

 
$
15,318

 
18.9
%
 
 
 
 
 
 
 
 
Home health and hospice agencies
62

 
46

 
16

 
34.8
%
Home health services:
 
 
 
 
 
 
 
Average Medicare revenue per completed episode
$
3,024

 
$
2,951

 
$
73

 
2.5
%
Hospice services:
 
 
 
 
 
 
 
Average daily census
1,544

 
1,275

 
$
269

 
21.1
%





THE ENSIGN GROUP, INC.
REVENUE BY PAYOR SOURCE
(Unaudited)

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,
 
 
2019

2018
 
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
Revenue:
 
 

 

 

 
Medicaid
 
$
206,811

 
35.9
%
 
$
173,169

 
34.9
%
Medicare
 
153,187

 
26.6

 
136,813

 
27.6

Medicaid-skilled
 
31,792

 
5.5

 
28,298

 
5.7

Total
 
391,790

 
68.0

 
338,280

 
68.2

Managed Care
 
93,690

 
16.3

 
80,150

 
16.1

Private and Other(1)
 
90,171

 
15.7

 
77,956

 
15.7

Total revenue
 
$
575,651

 
100.0
%
 
$
496,386

 
100.0
%
(1) Private and other payors also includes revenue from all payors generated in our other ancillary services for the three months ended June 30, 2019 and 2018.
 
 
Six Months Ended June 30,
 
 
2019
 
2018
 
 
$
 
%
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
Revenue:
 
 
 
 
 
 
 
 
Medicaid
 
$
401,814

 
35.7
%
 
$
340,794

 
34.5
%
Medicare
 
300,907

 
26.8

 
276,127

 
27.9

Medicaid-skilled
 
62,243

 
5.5

 
55,340

 
5.6

Total
 
764,964

 
68.0

 
672,261

 
68.0

Managed Care
 
183,538

 
16.3

 
163,866

 
16.6

Private and Other(1)
 
176,363

 
15.7

 
152,393

 
15.4

Total revenue
 
$
1,124,865

 
100.0
%
 
$
988,520

 
100.0
%
(1) Private and other payors also includes revenue from all payors generated in our other ancillary services for the six months ended June 30, 2019 and 2018.





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,
 
2019
 
2018
 
2019
 
2018
Net income attributable to The Ensign Group, Inc.
$
28,609

 
$
22,011


$
55,981


$
45,143

 







Non-GAAP adjustments







Results related to facilities currently being constructed and other start-up operations(a)
84

 
1,272

 
326

 
2,847

Return of unclaimed class action settlement
—


—

 
—

 
(1,664
)
Share-based compensation expense(b)
3,302


2,520


6,255


4,829

Results related to closed operations and operations not at full capacity(c)
626

 
291

 
975


489

Transaction-related costs(d)
546

 
83

 
608

 
111

Depreciation and amortization - patient base(e)
105

 
62

 
186


101

General and administrative - proposed spin-off transaction costs(f)
1,658


—


4,648


—

COS - business interruption gains(g)
—


(675
)

—

 
(675
)
Provision for income taxes on Non-GAAP adjustments(h)
(4,648
)
 
(1,863
)
 
(7,893
)
 
(3,416
)
Non-GAAP net income
$
30,282


$
23,701


$
61,086


$
47,765

 
 
 
 

 
 
 
Diluted Earnings Per Share As Reported
 
 
 

 
 
 
Net income
$
0.51

 
$
0.41


$
1.00


$
0.84

Average number of shares outstanding
56,078

 
54,251


55,896


53,909

 
 
 
 
 
 
 
 
Adjusted Diluted Earnings Per Share
 
 
 
 
 
 
 
Net income
$
0.54

 
$
0.44


$
1.09


$
0.89

Average number of shares outstanding
56,078

 
54,251


55,896


53,909

Footnotes:







(a) Represents operating results for facilities currently being constructed and other start-up operations.
 
Three Months Ended June 30,

Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
(75
)
 
$
(16,343
)
 
$
(252
)
 
$
(32,566
)
Cost of services
157

 
13,800

 
569

 
27,772

Rent
2

 
3,571

 
9

 
7,154

Depreciation and amortization
—

 
244

 
—

 
487

Total Non-GAAP adjustment
$
84

 
$
1,272


$
326


$
2,847

 
 
 
 
 
 
 
 
(b) Represents share-based compensation expense incurred.
 
Three Months Ended June 30,

Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Cost of services
$
1,879

 
$
1,381

 
$
3,519

 
$
2,638

General and administrative
1,423

 
1,139

 
2,736

 
2,191

Total Non-GAAP adjustment
$
3,302

 
$
2,520


$
6,255


$
4,829













(c) Represents results at closed operations and operations not at full capacity




 
Three Months Ended June 30,

Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
(1,830
)
 
$
—

 
$
(1,859
)
 
$
—

Cost of services
2,195

 
209

 
2,488

 
325

Rent
107

 
75

 
183

 
149

Depreciation and amortization
154

 
7

 
163

 
15

Total Non-GAAP adjustment
$
626

 
$
291


$
975


$
489

 
 
 
 
 
 
 
 
(d) Represents costs incurred to acquire an operation which are not capitalizable
 
Three Months Ended June 30,

Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Cost of services
$
468

 
$
—

 
$
468

 
$
—

Rent
78

 
83

 
140

 
111

Total Non-GAAP adjustment
$
546

 
$
83


$
608


$
111

(e) Included in depreciation and amortization expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities.
(f) Included in general and administrative expense are costs incurred in connection with our proposed spin-off of our home health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded company.
(g) Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017.
(h) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0% for the three and six months ended June 30, 2019 and 2018. This rate excludes the tax benefit of shared-based payment awards.





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

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

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,

 
2019
 
2018
 
2019
 
2018
Consolidated Statements of Income Data:
 
 
 
 
 
 
 
 
Net income
 
$
28,925

 
$
22,326

 
$
56,532


$
45,619

Less: net income attributable to noncontrolling interests
 
316

 
315

 
551


476

Add: Interest expense, net
 
3,369

 
3,307

 
6,466


6,472

Provision for income taxes
 
5,552

 
6,142

 
12,652


12,663

Depreciation and amortization
 
13,184

 
11,621

 
25,782


23,243

EBITDA
 
$
50,714

 
$
43,081

 
$
100,881


$
87,521


 
 
 
 
Adjustments to EBITDA:
 
 
 
 
 
 
 
 
Results related to closed operations and operations not at full capacity(a)
 
365

 
209

 
629

 
325

Losses/(earnings) related to operations in the start-up phase(b)
 
82

 
(2,543
)
 
317


(4,794
)
Return of unclaimed class action settlement
 
—

 
—

 
—


(1,664
)
Share-based compensation expense
 
3,302

 
2,520

 
6,255


4,829

Proposed spin-off transaction costs(c)
 
1,658

 
—

 
4,648

 
—

Acquisition related costs(d)
 
546

 
83

 
608


111

Business interruption recoveries(e)
 
—

 
(675
)
 
—

 
(675
)
Rent related to items above
 
109

 
3,646

 
192


7,303

Adjusted EBITDA
 
$
56,776

 
$
46,321

 
$
113,530


$
92,956

Rent—cost of services
 
37,060

 
34,472

 
72,846


68,322

Less: rent related to items above
 
(109
)
 
(3,646
)
 
(192
)

(7,303
)
Adjusted EBITDAR
 
$
93,727

 
$
77,147

 
$
186,184


$
153,975


 
 
 
 
 
 
 
 
(a) Results at closed operations and operations not at full capacity during the three and six months ended June 30, 2019 and 2018.
(b) Represents results related to facilities currently in the start up phase after construction was completed. This amount excludes rent, depreciation and interest expense.
(c) Costs incurred in connection with our proposed spin-off of our home health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded company.
(d) Costs incurred to acquire operations which are not capitalizable.
(e) Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017.





THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
The table below reconciles net income from operations to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for each reportable segment for the periods presented:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
 
Transitional and Skilled Services
 
Senior Living Services
 
Home Health and
Hospice
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Statements of Income Data:
 
 
 
 
 
 
 
 
 
 
 
 
Income from operations, excluding general and administrative expense(a)
 
$
56,652

 
$
43,210

 
$
4,821

 
$
4,966

 
$
7,306

 
$
6,268

Less: net income attributable to noncontrolling interests
 
—

 
—

 
—

 
—

 
200

 
281

Depreciation and amortization
 
8,938

 
7,708

 
2,019

 
1,863

 
320

 
281

EBITDA
 
$
65,590

 
$
50,918

 
$
6,840

 
$
6,829

 
$
7,426

 
$
6,268

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to EBITDA:
 
 
 
 
 
 
 
 
 
 
 
 
Results related to operations in the start-up phase(b)
 
—

 
(2,626
)
 


 
56

 
82

 
27

Results related to closed operations and operations not at full capacity(c)
 
25

 
209

 
—

 
—

 
—

 
—

Share-based compensation expense
 
1,573

 
1,076

 
96

 
180

 
162

 
99

Transaction-related costs(d)
 
—

 
—

 
—

 
—

 
438

 
—

Business interruption recoveries(e)
 
—

 
(675
)
 
—

 
—

 
—

 
—

Rent related to items above
 
77

 
2,759

 


 
880

 
2

 
7

Adjusted EBITDA
 
$
67,265

 
$
51,661

 
$
6,936

 
$
7,945

 
$
8,110

 
$
6,401

Rent—cost of services
 
29,656

 
27,832

 
6,422

 
5,928

 
776

 
552

Less: rent related to items above
 
(77
)
 
(2,759
)
 
—

 
(880
)
 
(2
)
 
(7
)
Adjusted EBITDAR
 
$
96,844

 
$
76,734

 
$
13,358

 
$
12,993

 
$
8,884

 
$
6,946

(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) Represents results related to facilities currently in the start up phase after construction was completed. This amount excludes rent, depreciation and interest expense.
(c) Results at closed operations and operations not at full capacity during the three months ended June 30, 2019 and 2018.
(d) Costs incurred to acquire operations which are not capitalizable.
(e) Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017.







 
 
Six Months Ended June 30,
 
 
Transitional and Skilled Services
 
Senior Living Services
 
Home Health and
Hospice
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Statements of Income Data:
 
 
 
 
 
 
 
 
 
 
 
 
Income from operations, excluding general and administrative expense(a)
 
$
115,416


$
89,405

 
$
9,859


$
9,629

 
$
14,174


$
12,326

Less: net income attributable to noncontrolling interests
 
—

 
—

 
—

 
—

 
350

 
370

Depreciation and amortization
 
17,552


15,510

 
3,919


3,460

 
580


526

EBITDA
 
$
132,968


$
104,915


$
13,778


$
13,089


$
14,404


$
12,482

 
 











Adjustments to EBITDA:
 











Results related to operations in the start-up phase(b)
 
—

 
(5,008
)
 
—

 
178

 
317

 
36

Results related to closed operations and operations not at full capacity(c)
 
289

 
325

 
—

 
—

 
—

 
—

Share-based compensation expense
 
2,958

 
2,063

 
175

 
338

 
299

 
190

Transaction-related costs(d)
 
—

 
—

 
—

 
—

 
438

 
—

Business interruption recoveries(e)
 
—

 
(675
)
 
—

 
—

 
—

 
—

Rent related to items above
 
153

 
5,526

 
—

 
1,764

 
9

 
13

Adjusted EBITDA
 
$
136,368


$
107,146


$
13,953


$
15,369


$
15,467


$
12,721

Rent—cost of services
 
58,219


54,609


12,808


12,309


1,412


1,089

Less: rent related to items above
 
(153
)

(5,526
)

—


(1,764
)

(9
)

(13
)
Adjusted EBITDAR
 
$
194,434


$
156,229


$
26,761


$
25,914


$
16,870


$
13,797

(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) Represents results related to facilities currently in the start up phase after construction was completed. This amount excludes rent, depreciation and interest expense.
(c) Results at closed operations and operations not at full capacity during the six months ended June 30, 2019 and 2018.
(d) Costs incurred to acquire operations which are not capitalizable.
(e) Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017.









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) costs incurred for operations currently in start-up phase, excluding depreciation, interest and income taxes, (e) results of operations not at full capacity, excluding depreciation, interest and income taxes, (f) share-based compensation expense, (g) return of unclaimed class action settlement, (h) patient base and other acquisition-related costs and (i) proposed spin-off transaction costs. 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 in start-up phase, excluding rent, depreciation, interest and income taxes, (f) results operations not at full capacity, excluding rent, depreciation, interest and income taxes, (g) share-based compensation expense, (h) return of unclaimed class action settlement, (i) patient base and other acquisition-related costs and (j) proposed spin-off transaction costs. The company believes that the presentation of EBITDA, 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, adjusted net income per share, EBITDA, 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.