ENSG
$52.25
The Ensign Group IN
($.08)
(.15%)
Earnings Details
Quarter December 2019
Wednesday, February 05, 2020 4:18:00 PM
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Summary

Ensign Guides Above Estimates

The Ensign Group IN (ENSG) reported Quarter December 2019 earnings of $0.56 per share on revenue of $560.2 million. The consensus earnings estimate was $0.51 per share on revenue of $543.7 million. Revenue grew 4.2% on a year-over-year basis.

The company said it expects 2020 earnings of $2.50 to $2.58 per share on revenue of $2.42 billion to $2.45 billion. The current consensus earnings estimate is $2.27 per share on revenue of $2.28 billion for the year ending December 31, 2020.

Ensign Group Inc offers skilled nursing & rehabilitative care services through the operation of 136 facilities, 12 home health & 11 hospice operations, located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Oregon, Texas & Washington.

Results
Reported Earnings
$0.56
Earnings Whisper
-
Consensus Estimate
$0.51
Reported Revenue
$560.2 Mil
Revenue Estimate
$543.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

The Ensign Group Reports Fourth Quarter and Fiscal Year 2019 Results

SAN JUAN CAPISTRANO, Calif., Feb. 05, 2020 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of companies, which provide skilled nursing services, senior living services, rehabilitative care services and other healthcare services, announced its operating results for the fourth quarter and full year 2019, reporting record GAAP diluted earnings per share of $0.49 and $1.97 for the quarter and year ended December 31, 2019, respectively.   Ensign also reported a record adjusted earnings per share of $0.60 for the quarter and $2.24 for the year(2).

Highlights Include:

  • GAAP diluted earnings per share for the quarter was $0.49, representing a 48.5%(1) increase over the prior year quarter; and spin-adjusted diluted earnings per share for the fourth quarter was $0.60(2), an increase of 39.5%(3) from prior year quarter and an increase of 33.3%(3) sequentially over the third quarter.
  • GAAP diluted earnings per share for the year was $1.97 and adjusted diluted earnings per share for the year was $2.24(2), an increase of 29.5%(4) over the prior year.
  • Consolidated GAAP revenues for the year were $2.29 billion and consolidated adjusted revenues for the year were $2.28 billion(2), an increase of 19.9%(4) over the prior year.
  • Total skilled services revenue was $1.9 billion for the year, an increase of 15.2% over the prior year, and was $530.2 million for the quarter, an increase of 20.0% over the prior year quarter and 9.1% sequentially over the third quarter(5).
  • Same store occupancy was 80.3%, an increase of 216 basis points over the prior year; and same store skilled managed care and Medicare revenue was up 8.4% and 4.9%, respectively.
  • Transitioning occupancy was 78.1%, an increase of 279 basis points over the prior year; and transitioning skilled managed care revenue was up 15.7%.
  • Same store skilled days increased by 3.0% and transitioning skilled days increased by 4.9%, both for the year.
  • Same store skilled days increased by 8.8% and total same store skilled days increased by 3.1% basis points, both sequentially over the third quarter;
  • GAAP net income was $91.7 million(1), an increase of 54.1%(1) over the prior year, and spin-adjusted net income for the year was $109.0 million(3), an increase of 40.5%(3) over the prior year.

    1. Represents GAAP continued operations which excluding operating results for the recently spun-out The Pennant Group, Inc. in accordance with the discontinued operation guidance in GAAP
    2. See "Reconciliation of GAAP to Non-GAAP Financial Information".
    3. Unaudited pro forma Non-GAAP results include adjustments of rental income, savings of general and administrative expense and  interest as if the Spin-Off has occurred at the beginning of the period reported.
    4. Unaudited pro forma Non-GAAP results include results of continuing operations for four quarters and three quarters of discontinuing operations to be comparable to 2019 Non-GAAP results.
    5. Our Transitional and Skilled Services Segment is defined and outlined in Note 7 on Form 10-K. 

Operating Results

“We are thrilled to report a record quarter as we achieved our highest adjusted earnings per share in our history,” said Ensign’s Chief Executive Officer Barry Port.  He credited the local operational and clinical leadership teams and all of their field-based and Service Center partners for achieving these impressive clinical and financial results even in the midst of completing a transformative spin-off transaction and implementing a brand new reimbursement system.  “We are proud that our amazing operators were able to achieve these record results in the midst of potential distractions.  We also want to remind you that we can see tremendous organic growth potential in our 73 transitioning and newly acquired operations and in same store operations.  We are very excited about our continued operational momentum and expect it to continue into 2020,” he added. 

Port noted that much of the improvement came from strong quarter over quarter improvements in occupancy and both skilled mix days and revenue across same store, transitioning and newly acquired operations.  He added, “We are excited about the positive trends we continue to see in occupancy, as this is the fourth quarter in a row where we have experienced an increase of over 150 basis points in occupancy in both same store and transitioning operations, quarter over quarter.”

Mr. Port also commented on the organization’s experience in its first quarter of operations under CMS’s Patient Driven Payment Model (“PDPM”).  Complimenting CMS on the new system, he said, “We believe PDPM is an excellent long-term, patient-centered program that rewards operators that achieve high quality outcomes.”  Port noted, “After adjusting for the recent market basket increase, we experienced a range of rate growth from approximately 3% for our transitioning operations to approximately 6% for our same store operations, which generally serve a higher acuity patient as they mature into clinically complex operations. Our locally-driven model of improving our clinical capabilities has always been focused on increasing our acuity, which has resulted in consistent improvement in earnings, independent of the current rate environment.  While we experienced a modest rate improvement in our first quarter under the new system, the lion’s share of our performance during the quarter is totally unrelated to the PDPM impact.” 

Ensign also announced a 12.4% increase from its initial 2020 annual earnings guidance. “Given the strength of the quarter and our expectations for continued improvement over the next few quarters, we are raising our 2020 annual earnings guidance to $2.50 to $2.58 per diluted share and annual revenue guidance to $2.42 billion to $2.45 billion. We are very optimistic that with the continued upside that is inherent in our portfolio and the attractive acquisitions on the horizon, that we will be able to continue to meet or exceed our historic growth rates.  To underline this confidence, the midpoint of our 2020 guidance represents an increase of 30.3% over our 2019 spin adjusted results, which was $1.95(3) per diluted share when adjusting for the full-year impact of the Pennant spin-off.  In addition, this guidance represents an increase of 13.4% over our adjusted diluted 2019 results of $2.24(2), which includes Pennant results for the first nine months of 2019,” Port said.   

“We are very excited about our performance this year and are confident that as our local leaders continue to stay true to our operating model, our operational strength will continue into 2020 and beyond,” he added. “In the fourth quarter, we more than replaced Pennant’s historical earnings, much sooner than anticipated, and we expect that trend to accelerate into 2020.  We have not even come close to reaching our full potential, and to do so it will take a relentless commitment to our culture and the repetitious adherence to sound fundamentals,” Port said. 

Chief Financial Officer, Suzanne Snapper reported that the company’s liquidity remains strong with approximately $135 million of availability on its new $350 million credit facility, which also has a built-in expansion option, and 72 unlevered real estate assets that add additional liquidity.  Snapper also indicated that the company maintained a lease-adjusted net-debt-to-adjusted EBITDAR ratio of 3.95x at quarter end a decrease from 4.14x(1) (when adjusting for the Spin-off), even after heavy acquisitions during the fourth quarter, which tend to temporarily raise the ratio while EBITDAR from new acquisitions catches up.

A discussion of the company's use of non-GAAP and proforma financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR, adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net income and adjusted net earnings per share, and proforma metrics 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, 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.

Quarterly Growth

During the quarter, the Company paid a quarterly cash dividend of $0.05 per share of Ensign common stock. “We are pleased to announce our seventeenth consecutive annual dividend increase, which reflects our strong market position and continued commitment to return value to our shareholders,” said Chad Keetch, Ensign’s Chief Investment Officer.

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

  • St. Joseph’s Villa Independent Living, a 58-unit independent living operation in Salt Lake City, Utah;
  • Treasure Hills Healthcare and Rehabilitation Centera skilled nursing facility with 110 skilled nursing beds, located in Harlingen, Texas; 
  • Keller Oaks Healthcare Center, a skilled nursing facility with 146 skilled nursing beds, located in Keller, Texas;
  • Kirkwood Manor, a skilled nursing facility with 162 skilled nursing beds, located in New Braunfels, Texas;
  • Hunters Pond Rehabilitation and Healthcare, a skilled nursing facility with 128 skilled nursing beds, located in San Antonio, Texas; 
  • Pecan Valley Rehabilitation and Healthcare, a skilled nursing facility with 124 skilled nursing beds, located in San Antonio, Texas;
  • Westover Hills Rehabilitation and Healthcare, a skilled nursing facility with 124 skilled nursing beds, located in San Antonio, Texas;
  • Crestwood Health and Rehabilitation Center, a skilled nursing facility with 112 skilled nursing beds and an assisted living center with 36 assisted living units, located in Willis Point, Texas;
  • Beacon Harbor Healthcare and Rehabilitation, a skilled nursing facility with 190 skilled nursing beds, located in Rockwall, Texas;
  • Rowlett Health and Rehabilitation Center, a skilled nursing facility with 150 skilled nursing beds, located in Rowlett, Texas;
  • Pleasant Manor Healthcare and Rehabilitation, a skilled nursing facility with 126 skilled nursing beds, located in Waxahachie, Texas;
  • Mission Palms Post Acute, a skilled nursing facility with 160 skilled nursing beds located in Mesa, Arizona; and
  • The Healthcare Center at Patriot Heights, a healthcare campus with 59 skilled nursing beds and 158 independent living units located in San Antonio, Texas.  

“As we saw last quarter, the pipeline for our typical turnaround opportunities and well-priced strategic deals remains strong.  We are still being very selective and are keeping plenty of dry powder on hand for what we believe will continue to be an attractive buyer’s market,” said Keetch.  “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.  We remain confident that there are and will be many, many opportunities to be had at the right prices,” he added.

These additions bring Ensign's growing portfolio to 225 skilled nursing operations, 23 of which also include senior living operations across fourteen states.  Ensign now owns 92 real estate assets, 62 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.  

Increased 2020 Guidance

Management raised guidance for 2020, with annual earnings per share guidance to $2.50 to 2.58 per diluted share and annual revenue guidance to $2.42 billion to $2.45 billion.  The midpoint of this 2020 guidance represents an increase of 30.3% over 2019 spin adjusted results, which was $1.95 per diluted share when adjusting for the full-year impact of the Pennant spin-off.  Management’s guidance is based on diluted weighted average common shares outstanding of approximately 57.6 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, and acquisitions closed in the first half of 2020. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, share-based compensation and start-up losses.

Conference Call

A live webcast will be held Thursday, February 6, 2020 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s fourth quarter and fiscal year 2019 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, February 28, 2020.

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 225 healthcare facilities in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin.   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. 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, 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 following tables have been adjusted to reflect the operations transferred to The Pennant Group, Inc. as part of the Spin-Off as discontinued operations. Accordingly, the results are displayed using continuing and discontinued operations format. Supplemental data that outlines the impact of continuing and discontinued operations has been provided.
           
THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
     
         
 Three Months Ended December 31, Years Ended December 31,      
  2019  2018   2019  2018      
Revenue from continuing operations$560,191 $462,439  $2,036,524 $1,754,601      
Expense from continuing operations          
Cost of services 443,382  372,066   1,620,628  1,418,249      
Return of unclaimed class action settlement -  -   -  (1,664)     
Rent—cost of services 31,511  29,898   124,789  117,676      
General and administrative expense 32,251  25,013   110,873  90,563      
Depreciation and amortization 13,354  11,544   51,054  44,864      
Total expenses 520,498  438,521   1,907,344  1,669,688      
Income from operations from continuing operations 39,693  23,918   129,180  84,913      
Other income (expense):          
Interest expense (4,149) (3,711)  (15,662) (15,182)     
Interest income 792  549   2,649  2,016      
Other expense, net (3,357) (3,162)  (13,013) (13,166)     
Income before provision for income taxes 36,336  20,756   116,167  71,747      
Provision for income taxes 9,010  2,653   23,954  12,685      
Net income from continuing operations, net of tax 27,326  18,103   92,213  59,062      
Net income from discontinued operations, net of tax -  8,456   19,473  33,466      
Net income 27,326  26,559   111,686  92,528      
Less:          
Net (loss)/income attributable to noncontrolling interests in continuing operations (68) 16   523  (431)     
Net income attributable to noncontrolling interests in discontinued operations -  183   629  595      
Net (loss)/ income attributable to noncontrolling interests (68) 199   1,152  164      
Net income attributable to The Ensign Group, Inc.$27,394 $26,360  $110,534 $92,364      
Amounts attributable to The Ensign Group, Inc.          
Income from continuing operations attributable to The Ensign Group, Inc. 27,394  18,087   91,690  59,493      
Income from discontinued operations, net of income tax -  8,273   18,844  32,871      
Net income attributable to The Ensign Group, Inc.$27,394 $26,360  $110,534 $92,364      
Net income per share attributable to The Ensign Group, Inc.:          
Basic:          
Continuing operations$0.51 $0.34  $1.72 $1.14      
Discontinued operations$- $0.16  $0.35 $0.64      
Basic income per share attributable to The Ensign Group, Inc.$0.51 $0.50  $2.07 $1.78      
Diluted:          
Continuing operations$0.49 $0.33  $1.64 $1.09      
Discontinued operations$- $0.15  $0.33 $0.61      
Diluted income per share attributable to The Ensign Group, Inc.$0.49 $0.48  $1.97 $1.70      
Weighted average common shares outstanding:          
Basic 53,397  52,449   53,452  52,016      
Diluted 55,760  54,967   55,981  54,397      
           
           



THE ENSIGN GROUP, INC.
GAAP, NON-GAAP AND PRO FORMA INFORMATION
(In thousands, except per share data)
(Unaudited)
            
The following table sets forth GAAP, Non-GAAP and pro forma results for our revenue, net income, diluted EPS, EBITDA and EBITDAR for the periods indicated: 
            
 Three Months Ended December 31, 2019 Three Months Ended December 31, 2018 Three Months Ended September 30, 2019
 GAAP Non-GAAP(1)Pro Forma
Non-GAAP
Adjustments(2)
 GAAP Non-GAAP(1)Pro Forma
Non-GAAP
Adjustments(2)
 GAAP Non-GAAP(1)Pro Forma
Non-GAAP
Adjustments(2)
 (In thousands, except per share data)
Net revenue - continuing operations$560,191$555,979$555,979 $462,439$445,455$448,293 $512,109$509,541$512,582
Net revenue - discontinued operations - -   75,336 75,291   88,398 88,325 
Net revenue$560,191$555,979  $537,775$520,746  $600,507$597,866 
            
Net income - continuing operations$27,394$33,529$33,529 $18,087$21,254$23,569 $22,148$22,447$25,487
Net income - discontinued operations - -   8,273 8,156   5,011 8,496 
Net income$27,394$33,529  $26,360$29,410  $27,159$30,943 
            
Fully diluted EPS - continuing operations$0.49$0.60$0.60 $0.33$0.39$0.43 $0.39$0.40$0.45
Fully diluted EPS - discontinued operations - -   0.15 0.15   0.09 0.15 
Fully diluted EPS$0.49$0.60  $0.48$0.54  $0.48$0.55 
            
EBITDA - continuing operations$53,115$60,430$60,430 $35,446$42,728$45,973 $43,814$46,160$50,286
EBITDA - discontinued operations - -   11,001 11,543   8,781 12,324 
EBITDA$53,115$60,430  $46,447$54,271  $52,595$58,484 
            
EBITDAR - continuing operations $91,498$91,498      $77,740$81,866
EBITDAR - discontinued operations  -        18,173 
EBITDAR $91,498       $95,913 
            
(1) Refer to our reconciliation of GAAP to Non-GAAP financial information.         
(2) Unaudited pro forma Non-GAAP results include adjustments of rental income and savings of general and administrative and interest expense as if the Spin-Off has occurred at the beginning of the period reported.
            



THE ENSIGN GROUP, INC.   
GAAP, NON-GAAP AND PRO FORMA INFORMATION   
(In thousands, except per share data)   
(Unaudited)   
            
The following table sets forth GAAP, Non-GAAP and pro forma results for our revenue, net income, diluted EPS, EBITDA and EBITDAR for the periods indicated:  
            
 Year Ended December 31, 2019 Year Ended December 31, 2018   
 GAAP Non-GAAP(1)Pro Forma
Non-GAAP
Adjustments(2)
 GAAP Non-GAAP(1)Pro Forma
Non-GAAP
Adjustments(2)
Pro Forma
Non-GAAP
Adjustments(3)
   
 (In thousands, except per share data) (In thousands, except per share data)   
Net revenue - continuing operations$2,036,524$2,027,915$2,037,010 $1,754,601$1,688,214$1,699,568$1,688,214   
Net revenue - discontinued operations 249,039 248,713   286,058 285,838  210,546   
Net revenue$2,285,563$2,276,628  $2,040,659$1,974,052 $1,898,760   
            
Net income - continuing operations$91,690$99,869$108,990 $59,493$68,319$77,584$68,319   
Net income - discontinued operations 18,844 25,688   32,871 33,812  25,654   
Net income$110,534$125,557  $92,364$102,131 $93,973   
            
Fully diluted EPS - continuing operations$1.64$1.78$1.95 $1.09$1.26$1.43$1.26   
Fully diluted EPS - discontinued operations 0.33 0.46   0.61 0.62  0.47   
Fully diluted EPS$1.97$2.24  $1.70$1.88 $1.73   
            
EBITDA - continuing operations$179,711$195,645$207,805 $130,208$147,988$160,968$147,988   
EBITDA - discontinued operations 26,883 36,801   45,460 47,627  36,083   
EBITDA$206,594$232,446  $175,668$195,615 $184,071   
            
EBITDAR - continuing operations $319,513$331,674        
EBITDAR - discontinued operations  54,084         
EBITDAR $373,597         
            
(1) Refer to our reconciliation of GAAP to Non-GAAP financial information.         
(2) Unaudited pro forma Non-GAAP results include adjustments of rental income, savings of general and administrative and interest expense as if the Spin-Off had occurred at the beginning of the period reported.
(3) Unaudited pro forma Non-GAAP results include results of continuing operations for four quarters and three quarters of discontinued operations to be comparable to 2019 Non-GAAP results. 
            



THE ENSIGN GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
     
 December 31, 
  2019   2018  
Assets    
Current assets:    
Cash and cash equivalents$59,175  $31,042  
Accounts receivable—less allowance for doubtful accounts of $2,472 and $2,270 at December 31, 2019 and 2018, respectively 308,985   251,915  
Investments—current 17,754   8,682  
Prepaid income taxes 739   6,219  
Prepaid expenses and other current assets 24,428   19,576  
Assets held for sale - current -   1,859  
Current assets of discontinued operations -   28,779  
Total current assets 411,081   348,072  
Property and equipment, net 767,565   608,416  
Right-of-use assets 1,046,901   -  
Insurance subsidiary deposits and investments 30,571   36,168  
Escrow deposits 14,050   7,271  
Deferred tax assets 4,615   11,749  
Restricted and other assets 26,207   18,459  
Intangible assets, net 3,382   30,922  
Goodwill 54,469   49,585  
Other indefinite-lived intangibles 3,068   2,466  
Long-term assets of discontinued operations -   68,850  
Total assets$2,361,909  $1,181,958  
     
Liabilities and equity    
Current liabilities:    
Accounts payable$44,973  $39,846  
Accrued wages and related liabilities 151,009   106,870  
Lease liabilities—current 44,964   -  
Accrued self-insurance liabilities—current 29,252   25,446  
Other accrued liabilities 70,273   56,711  
Current maturities of long-term debt 2,702   10,105  
Current liabilities of discontinued operations -   30,249  
Total current liabilities 343,173   269,227  
Long-term debt—less current maturities 325,217   233,135  
Long-term lease liabilities—less current portion 973,983   -  
Accrued self-insurance liabilities—less current portion 58,114   54,605  
Other long-term liabilities 5,278   7,918  
Deferred gain related to sale-leaseback -   11,417  
Long-term liabilities of discontinued operations -   3,316  
Total equity 656,144   602,340  
Total liabilities and equity$2,361,909  $1,181,958  
     
     
THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
The following table presents selected data from our consolidated statements of cash flows for the periods presented:   
 Year Ended December 31, 
  2019   2018  
Net cash provided by (used in):    
Continuing operating activities$168,927  $170,152  
Continuing investing activities (224,030)  (141,340) 
Continuing financing activities 83,278   (70,345) 
Net (decrease) increase in cash and cash equivalents from discontinued operations (83)  30,279  
Net increase (decrease) in cash and cash equivalents 28,092   (11,254) 
Cash and cash equivalents beginning of period, including cash of discontinued operations 31,083   42,337  
Cash and cash equivalents end of period, including cash of discontinued operations$59,175  $31,083  
Less cash of discontinued operations at end of period -   41  
Cash and cash equivalents at end of period 59,175   31,042  
     



               
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 December 31, Year Ended December 31,         
  2019  2018   2019  2018          
Net income from continuing operations$27,394 $18,087  $91,690 $59,493          
Net income from discontinued operations, net of tax -  8,273   18,844  32,871          
Net income attributable to The Ensign Group, Inc. 27,394  26,360   110,534  92,364          
               
Non-GAAP adjustments for continuing operations:              
Results related to operations in the start-up phase(a) -  449   -  3,682          
Return of unclaimed class action settlement -  -   -  (1,664)         
Share-based compensation expense(b) 3,107  2,211   11,322  8,367          
Results related to closed operations and operations not at full capacity(c) 1,311  222   3,505  933          
Acquisition related costs(d) 132  10   277  322          
Depreciation and amortization - patient base(e) 260  79   521  154          
General and administrative - Spin-Off transaction costs(f) 464  -   464  -          
COS - impairment charges to fixed assets(g) 1,732  4,632   329  4,632          
COS - business interruption gains(h) -  -   -  (675)         
COS - impairment of goodwill and intangibles(i) 941  -   941  3,177          
Interest expense - write off of deferred financing fee(j) 329  -   329  -          
Provision for income taxes on Non-GAAP adjustments(k) (2,141) (4,436)  (9,509) (10,102)         
Non-GAAP income from continuing operations 33,529  21,254   99,869  68,319          
Non-GAAP income from discontinued operations(l) -  8,156   25,688  33,812          
Non-GAAP Net Income$33,529 $29,410  $125,557 $102,131          
               
Average number of shares outstanding 55,760  54,967   55,981  54,397          
               
Diluted Earnings Per Share As Reported              
Continuing operations$0.49 $0.33  $1.64 $1.09          
Discontinued operations$- $0.15  $0.33 $0.61          
Diluted income per share attributable to The Ensign Group, Inc.$0.49 $0.48  $1.97 $1.70          
               
Adjusted Diluted Earnings Per Share              
Continuing operations$0.60 $0.39  $1.78 $1.26          
Discontinued operations$- $0.15  $0.46 $0.62          
Net Income$0.60 $0.54  $2.24 $1.88          
Footnotes:              
(a) Represents operating results for start-up operations.              
 Three Months Ended December 31, Year Ended December 31,         
  2019  2018   2019  2018          
Revenue$- $(16,984) $- $(66,386)         
Cost of services -  13,581   -  54,758          
Rent -  3,619   -  14,347          
Depreciation and amortization -  233   -  963          
Total Non-GAAP adjustment$- $449  $- $3,682          
               
(b) Represents share-based compensation expense incurred.              
 Three Months Ended December 31, Year Ended December 31,         
  2019  2018   2019  2018          
Cost of services$2,001 $1,379  $7,036 $5,183          
General and administrative 1,106  832   4,286  3,184          
Total Non-GAAP adjustment$3,107 $2,211  $11,322 $8,367          
             
(c) Represents results at closed operations and operations not at full capacity              
 Three Months Ended December 31, Year Ended December 31,         
  2019  2018   2019  2018          
Revenue$(4,212)$-  $(8,609)$-          
Cost of services 4,708  137   10,289  601          
Rent 443  76   921  301          
Depreciation and amortization 372  9   904  31          
Total Non-GAAP adjustment$1,311 $222  $3,505 $933          
               
(d) Represents costs incurred to acquire an operation which are not capitalizable.              
(e) Included in depreciation and amortization are 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 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. 
(g) Impairment charges to fixed assets includes impairment charges of $1.7 million at a leased skilled nursing operation 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 $2.9 million.
(h) Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017.            
(i) Impairment charges to goodwill and intangible assets at our other ancillary operations and a skilled nursing operation.             
(j) Represents the write off of deferred financing fees associated with the amendment of the credit facility.              
(k) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0% for the three months and years ended December 31, 2019 and 2018.         
(l) Represents results of the home health, hospice and senior living operations we transferred to the Pennant Group, Inc. as a result of the Spin-Off.            
 Three Months Ended December 31, Year Ended December 31,         
  2019  2018   2019  2018          
Revenue$- $75,291  $248,713 $285,838          
Cost of services -  (55,314)  (185,963) (208,585)         
General and administrative expenses -  (2,819)  (8,037) (8,225)         
Rent -  (5,432)  (17,283) (20,805)         
Depreciation and amortization -  (643)  (2,367) (2,392)         
Interest income, net -  36   26  47          
Provision for income taxes -  (2,780)  (8,772) (11,471)         
Non-controlling interest -  (183)  (629) (595)         
Non-GAAP net income from discontinued operations$- $8,156  $25,688 $33,812          
               



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 December 31, Year Ended December 31,   
  2019  2018   2019  2018    
Consolidated Statements of Income Data:        
Net income attributable to The Ensign Group, Inc.$27,326 $26,559  $111,686 $92,528    
Less: net (loss)/income attributable to noncontrolling interests in continuing operations (68) 16   523  (431)   
Less: net income from discontinued operations, net of tax -  8,456   19,473  33,466    
Add: Interest expense, net 3,357  3,162   13,013  13,166    
Provision for income taxes 9,010  2,653   23,954  12,685    
Depreciation and amortization 13,354  11,544   51,054  44,864    
EBITDA from continuing operations 53,115  35,446   179,711  130,208    
EBITDA from discontinued operations (g) -  11,001   26,883  45,460    
EBITDA$53,115 $46,447  $206,594 $175,668    
    
Adjustments to EBITDA:        
Earnings related to operations in the start-up phase (a) -  (3,403)  -  (11,628)   
Return of unclaimed class action settlement -  -   -  (1,664)   
Share-based compensation expense 3,107  2,211   11,322  8,367    
Results related to closed operations and operations not at full capacity(b) 496  137   1,680  601    
Acquisition related costs(c) 132  10   277  322    
Spin-Off transaction costs(d) 464  -   464  -    
Impairment charges to fixed assets, net of gain on sale(e) 1,732  4,632   329  4,632    
Business interruption recoveries related to Hurricane Harvey and California fires -  -   -  (675)   
Impairment of goodwill and intangible assets(f) 941  -   941  3,177    
Rent related to items above 443  3,695   921  14,648    
Adjusted EBITDA from continuing operations 60,430  42,728   195,645  147,988    
Adjusted EBITDA from discontinued operations(g) -  11,543   36,801  47,627    
Adjusted EBITDA$60,430 $54,271  $232,446 $195,615    
Rent—cost of services 31,511  29,898   124,789  117,676    
Less: rent related to items above (443) (3,695)  (921) (14,648)   
Adjusted rent—cost of services 31,068  26,203 - 123,868  103,028    
Adjusted rent included in discontinued operations -  5,432   17,283  20,805    
Adjusted EBITDAR from continuing operations$91,498   $319,513     
Adjusted EBITDAR$91,498  -$373,597     
         
         
(a) Represents results related to facilities currently in the start-up phase after construction was completed. This amount excludes rent, depreciation and interest expense.      
(b) Results at closed operations and operations not at full capacity during the periods presented.        
(c) Costs incurred to acquire operations which are not capitalizable.        
(d) Costs incurred in connection with the completed Spin-Off transaction of our home health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded company. Transaction costs incurred prior to Spin-Off date are included in discontinued operations as an adjustment.
(e) Impairment charges to fixed assets includes impairment charges of $1.7 million at a leased skilled nursing operation 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 $2.9 million.
(f) Impairment charges to goodwill and intangible assets at our other ancillary operations and a skilled nursing operation.        
(g) All adjustments included in the table below are presented within net income from discontinued operations, net of tax within the consolidated statements of income for the periods presented.    
 Three Months Ended December 31, Year Ended December 31,   
  2019  2018   2019  2018    
Consolidated Statements of Income Data:        
Net income from discontinued operations, net of tax$- $8,456  $19,473 $33,466    
Less: net income attributable to noncontrolling interests in discontinued operations -  183   629  595    
Add: Interest income, net$- $(37) $(26)$(47)   
Provision for income taxes -  2,110   5,663  10,156    
Depreciation and amortization -  655   2,402  2,480    
EBITDA from discontinued operations$- $11,001  $26,883 $45,460    
    
Adjustments to EBITDA from discontinued operations:        
Earnings related to operations in the start-up phase -  35   377  128    
Share-based compensation expense -  486   1,018  1,970    
Spin-Off transaction costs -  13   7,909  -    
Acquisition related costs -  -   603  39    
Rent related to items above -  8   11  30    
Adjusted EBITDA from discontinued operations$- $11,543  $36,801 $47,627    
         



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 December 31,   
  2019  2018 Change% Change
 (Dollars in thousands)  
Total Facility Results:    
Transitional and skilled revenue$530,171 $441,714 $88,457 20.0%
Number of facilities at period end 190  168  22 13.1%
Number of campuses at period end* 23  19  4 21.1%
Actual patient days 1,591,163  1,393,783  197,380 14.2%
Occupancy percentage — Operational beds 79.1% 77.9% 1.2%
Skilled mix by nursing days 28.7% 28.6% 0.1%
Skilled mix by nursing revenue 49.2% 48.1% 1.1%
 Three Months Ended December 31,   
  2019  2018 Change% Change
 (Dollars in thousands)  
Same Facility Results(1):    
Transitional and skilled revenue$372,507 $339,210 $33,297 9.8%
Number of facilities at period end 131  131  - -%
Number of campuses at period end* 9  9  - -%
Actual patient days 1,065,825  1,032,926  32,899 3.2%
Occupancy percentage — Operational beds 80.6% 78.7% 1.9%
Skilled mix by nursing days 31.2% 30.4% 0.8%
Skilled mix by nursing revenue 52.0% 49.9% 2.1%
 Three Months Ended December 31,   
  2019  2018 Change% Change
 (Dollars in thousands)  
Transitioning Facility Results(2):    
Transitional and skilled revenue$94,778 $86,516 $8,262 9.5%
Number of facilities at period end 33  33  - -%
Number of campuses at period end* 7  7  - -%
Actual patient days 313,281  307,367  5,914 1.9%
Occupancy percentage — Operational beds 77.7% 76.2% 1.5%
Skilled mix by nursing days 25.4% 24.4% 1.0%
Skilled mix by nursing revenue 45.5% 43.8% 1.7%
 Three Months Ended December 31,   
  2019  2018 Change% Change
 (Dollars in thousands)  
Recently Acquired Facility Results(3):    
Transitional and skilled revenue$62,010 $13,017 $48,993 NM
Number of facilities at period end 26  4  22 NM
Number of campuses at period end* 7  3  4 NM
Actual patient days 209,255  43,387  165,868 NM
Occupancy percentage — Operational beds 74.2% 72.4% NM
Skilled mix by nursing days 20.9% 19.8% NM
Skilled mix by nursing revenue 38.1% 32.2% NM
     
 Three Months Ended December 31,   
  2019  2018 Change% Change
 (Dollars in thousands)  
Facility Closed Results(4):    
Transitional and skilled revenue$876 $2,971 $(2,095)NM
Actual patient days 2,802  10,103  (7,301)NM
Occupancy percentage — Operational beds 60.7% 73.7% NM
Skilled mix by nursing days 13.7% 15.1% NM
Skilled mix by nursing revenue 27.8% 29.9% 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 represent 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. 
(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 2018 for comparison purposes.
 Year Ended December 31,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Total Facility Results:    
Transitional and skilled revenue$1,934,640 $1,679,012 $255,628 15.2%
Number of facilities at period end 190  168  22 13.1%
Number of campuses at period end* 23  19  4 21.1%
Actual patient days 5,987,027  5,405,952  581,075 10.7%
Occupancy percentage — Operational beds 79.2% 77.4% 1.8%
Skilled mix by nursing days 29.0% 29.5% (0.5)%
Skilled mix by nursing revenue 48.8% 49.6% (0.8)%
 Year Ended December 31,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Same Facility Results(1):    
Transitional and skilled revenue$1,410,718 $1,307,882 $102,836 7.9%
Number of facilities at period end 131  131  - -%
Number of campuses at period end* 9  9  - -%
Actual patient days 4,199,374  4,070,122  129,252 3.2%
Occupancy percentage — Operational beds 80.3% 78.2% 2.1%
Skilled mix by nursing days 31.1% 31.2% (0.1)%
Skilled mix by nursing revenue 51.2% 51.1% 0.1%
 Year Ended December 31,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Transitioning Facility Results(2):    
Transitional and skilled revenue$364,337 $330,795 $33,542 10.1%
Number of facilities at period end 33  33  - -%
Number of campuses at period end* 7  7  - -%
Actual patient days 1,247,573  1,201,138  46,435 3.9%
Occupancy percentage — Operational beds 78.1% 75.3% 2.8%
Skilled mix by nursing days 25.5% 25.2% 0.3%
Skilled mix by nursing revenue 44.9% 45.2% (0.3)%
 Year Ended December 31,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Recently Acquired Facility Results(3):    
Transitional and skilled revenue$149,995 $28,580 $121,415 NM
Number of facilities at period end 26  4  22 NM
Number of campuses at period end* 7  3  4 NM
Actual patient days 510,541  95,034  415,507 NM
Occupancy percentage — Operational beds 74.0% 73.9% NM
Skilled mix by nursing days 20.9% 20.5% NM
Skilled mix by nursing revenue 36.4% 33.4% NM
     
 Year Ended December 31,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Facility Closed Results(4):    
Transitional and skilled revenue$9,590 $11,755 $(2,165)NM
Actual patient days 29,539  39,658  (10,119)NM
Occupancy percentage — Operational beds 65.2% 72.9% NM
Skilled mix by nursing days 17.0% 16.1% NM
Skilled mix by nursing revenue 34.4% 33.4% 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 represent 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. 
(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 2018 for comparison purposes.
     



THE ENSIGN GROUP, INC.
SKILLED NURSING AVERAGE DAILY REVENUE RATES AND
PERCENT OF SKILLED NURSING REVENUE AND DAYS BY PAYOR
 
         
The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate: 
         
 Three Months Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
  2019 2018 2019 2018 2019 2018 2019 2018
Skilled Nursing Average Daily Revenue Rates:        
Medicare$669.99$611.29$566.96$529.04$615.07$520.12$642.11$590.27
Managed care 486.07 461.46 429.96 415.66 439.18 424.28 470.83 450.91
Other skilled 511.16 485.01 495.11 581.69 323.27 249.05 501.46 486.26
Total skilled revenue 563.23 526.39 502.37 480.00 518.43 458.20 548.33 516.35
Medicaid 237.78 232.72 208.42 200.45 224.69 240.55 230.12 225.68
Private and other payors 226.89 228.35 195.88 194.95 211.72 237.21 216.97 219.89
Total skilled nursing revenue$338.08$321.86$281.18$268.05$284.27$283.32$319.72$308.52
         
 Year Ended December 31,
 Same FacilityTransitioningAcquisitionsTotal
  2019 2018 2019 2018 2019 2018 2019 2018
Skilled Nursing Average Daily Revenue Rates:        
Medicare$628.20$600.65$542.67$520.85$594.74$528.11$607.24$580.96
Managed care 470.85 457.09 420.48 410.87 432.41 423.94 458.26 447.34
Other skilled 496.37 475.12 491.15 522.24 327.22 246.85 490.93 475.59
Total skilled revenue 537.00 517.86 484.13 473.60 501.13 460.52 525.41 509.10
Medicaid 232.41 225.48 203.99 193.18 231.46 235.70 226.43 218.30
Private and other payors 231.87 225.31 202.19 198.33 229.17 237.61 223.97 218.42
Total skilled nursing revenue$327.48$317.01$275.25$264.81$287.52$282.07$313.11$304.57
         



          
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, 2019 and 2018: 
          
 Three Months Ended December 31,  
 Same FacilityTransitioningAcquisitionsTotal 
 2019 2018 2019 2018 2019 2018 2019 2018  
Percentage of Skilled Nursing Revenue:         
Medicare24.2%23.2%26.0%25.2%22.8%17.4%24.3%23.4% 
Managed care17.9 17.0 17.4 17.0 13.2 13.6 17.3 16.9  
Other skilled9.9 9.7 2.1 1.6 2.1 1.2 7.6 7.8  
Skilled mix52.0 49.9 45.5 43.8 38.1 32.2 49.2 48.1  
Private and other payors7.4 7.5 11.1 11.0 9.8 13.1 8.4 8.4  
Medicaid40.6 42.6 43.4 45.2 52.1 54.7 42.4 43.5  
Total skilled nursing100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0% 
          
 Three Months Ended December 31,  
 Same FacilityTransitioningAcquisitionsTotal 
 2019 2018 2019 2018 2019 2018 2019 2018  
Percentage of Skilled Nursing Days:         
Medicare12.2%12.2%12.9%12.8%10.6%9.5%12.1%12.2% 
Managed care12.5 11.8 11.4 10.9 8.6 9.0 11.7 11.5  
Other skilled6.5 6.4 1.1 0.7 1.7 1.3 4.9 4.9  
Skilled mix31.2 30.4 25.4 24.4 20.9 19.8 28.7 28.6  
Private and other payors11.1 11.0 16.1 15.2 13.2 16.0 12.3 12.2  
Medicaid57.7 58.6 58.5 60.4 65.9 64.2 59.0 59.2  
Total skilled nursing100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0% 
          
          
 Year Ended December 31,  
 Same FacilityTransitioningAcquisitionsTotal 
 2019 2018 2019 2018 2019 2018 2019 2018  
Percentage of Skilled Nursing Revenue:         
Medicare23.2%23.6%25.1%26.8%20.6%17.9%23.4%24.2% 
Managed care18.4 18.1 18.1 16.9 13.8 14.4 17.9 17.7  
Other skilled9.6 9.4 1.7 1.5 2.0 1.1 7.5 7.7  
Skilled mix51.2 51.1 44.9 45.2 36.4 33.4 48.8 49.6  
Private and other payors7.5 7.6 11.3 11.5 11.0 14.1 8.5 8.5  
Medicaid41.3 41.3 43.8 43.3 52.6 52.5 42.7 41.9  
Total skilled nursing100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0% 
          
 Year Ended December 31,  
 Same FacilityTransitioningAcquisitionsTotal 
 2019 2018 2019 2018 2019 2018 2019 2018  
Percentage of Skilled Nursing Days:         
Medicare12.1%12.4%12.7%13.6%10.0%9.5%12.0%12.6% 
Managed care12.7 12.5 11.8 10.8 9.2 9.6 12.2 12.0  
Other skilled6.3 6.3 1.0 0.8 1.7 1.4 4.8 4.9  
Skilled mix31.1 31.2 25.5 25.2 20.9 20.5 29.0 29.5  
Private and other payors10.8 11.0 15.6 15.6 13.9 16.8 12.1 12.2  
Medicaid58.1 57.8 58.9 59.2 65.2 62.7 58.9 58.3  
Total skilled nursing100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0% 
          
          



THE ENSIGN GROUP, INC.  
REVENUE BY PAYOR SOURCE  
   
            
The following table sets forth our total revenue by payor source and as a percentage of total revenue for the periods indicated:     
            
 Three Months Ended December 31, Year Ended December 31,  
  2019  2018   2019  2018   
 $%$% $%$%  
 (Dollars in thousands) (Dollars in thousands)  
Revenue:           
Medicaid$216,72938.7%$188,05840.7% $802,95239.4%$691,27639.4%  
Medicare 144,21325.7  112,88424.4   499,35324.5  436,58024.9   
Medicaid-skilled 36,5676.5  31,6626.9   132,8896.5  117,6866.7   
Total Medicaid and Medicare 397,50970.9  332,60472.0   1,435,19470.4  1,245,54271.0   
Managed Care 92,84916.6  76,00216.4   351,05417.2  301,86617.2   
Private and Other(1) 69,83312.5  53,83311.6   250,27612.4  207,19311.8   
Revenue$560,191100.0%$462,439100.0% $2,036,524100.0%$1,754,601100.0%  
(1) Private and other payors also includes revenue from all payors generated in our other ancillary services for the three months and years ended December 31, 2019 and 2018. During the fiscal year 2019, private and other payors includes $5,812 of rental income.
            



                
THE ENSIGN GROUP, INC.         
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION BY QUARTER        
(In thousands, except per share data)        
(Unaudited)        
                
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME               
                
 Three Months Ended         
 3/31/19 6/30/19 9/30/19 12/31/19        
Net income from continuing operations$21,480  $20,668  $22,148  $27,394         
Net income from discontinued operations, net of tax 5,892   7,941   5,011   -         
Net income attributable to The Ensign Group, Inc. 27,372   28,609   27,159   27,394         
                
Non-GAAP adjustments for continuing operations:               
Share-based compensation expense(a) 2,456   2,930   2,829   3,107         
Results related to closed operations and operations not at full capacity(b) 349   626   1,219   1,311         
Acquisition related costs(c) 26   49   69   132         
Depreciation and amortization - patient base(d) 70   87   104   260         
General and administrative - Spin-Off transaction costs(e) -   -   -   464         
COS - (gain on sale)/impairment charges to fixed assets(f) -   -   (1,402)  1,732         
COS - impairment of goodwill and intangibles(g) -   -   -   941         
Interest expense - write off of deferred financing fee(h) -   -   -   329         
Provision for income taxes on Non-GAAP adjustments(i) (2,161)  (2,687)  (2,520)  (2,141)        
Non-GAAP income from continuing operations 22,220   21,673   22,447   33,529         
Non-GAAP income from discontinued operations(j) 8,583   8,609   8,496   -         
Non-GAAP Net Income$30,803  $30,282  $30,943  $33,529         
                
Average number of shares outstanding 55,698   56,078   56,364   55,760         
                
Diluted Earnings Per Share As Reported               
Continuing operations$0.39  $0.37  $0.39  $0.49         
Discontinued operations$0.10  $0.14  $0.09  $-         
Diluted income per share attributable to The Ensign Group, Inc.$0.49  $0.51  $0.48  $0.49         
                
Adjusted Diluted Earnings Per Share               
Continuing operations$0.40  $0.39  $0.40  $0.60         
Discontinued operations$0.15  $0.15  $0.15  $-         
Net Income$0.55  $0.54  $0.55  $0.60         
Footnotes:               
(a) Represents share-based compensation expense incurred.               
 Three Months Ended         
 3/31/19 6/30/19 9/30/19 12/31/19        
Cost of services$1,516  $1,779  $1,740  $2,001         
General and administrative 940   1,151   1,089   1,106         
Total Non-GAAP adjustment$2,456  $2,930  $2,829  $3,107         
                
(b) Represents results at closed operations and operations not at full capacity               
 Three Months Ended         
 3/31/19 6/30/19 9/30/19 12/31/19        
Revenue$-  $(1,830) $(2,567) $(4,212)        
Cost of services 264   2,195   3,122   4,708         
Rent 76   107   295   443         
Depreciation and amortization 9   154   369   372         
Total Non-GAAP adjustment$349  $626  $1,219  $1,311         
                
(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.     
(f) Impairment charges to fixed assets includes impairment charges of $1.7 million at a leased skilled nursing operations during the three months ended December 31, 2019. Included in the three months ended September 30, 2019, impairment charges of $1.5 million at two of our senior living operations, 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 periods presented.            
(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.          
 Three Months Ended         
 3/31/19 6/30/19 9/30/19 12/31/19        
Revenue$77,730  $82,658  $88,325  $-         
Cost of services (57,448)  (61,534)  (66,981)  -         
General and administrative expenses (2,393)  (2,752)  (2,892)  -         
Rent (5,598)  (5,836)  (5,849)  -         
Depreciation and amortization (658)  (800)  (909)  -         
Interest income, net 11   9   6   -         
Provision for income taxes (2,911)  (2,936)  (2,925)  -         
Non-controlling interest (150)  (200)  (279)  -         
Non-GAAP net income from discontinued operations$8,583  $8,609  $8,496  $-         
                



THE ENSIGN GROUP, INC. 
SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION BY QUARTER 
(In thousands) 
(Unaudited) 
          
The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:         
          
  Three Months Ended  
  3/31/19 6/30/19 9/30/19 12/31/19 
Consolidated Statements of Income Data:         
Net income attributable to The Ensign Group, Inc. $27,607  $28,925  $27,828  $27,326  
Less: net income/(loss) attributable to noncontrolling interests in continuing operations  85   116   390   (68) 
Less: net income from discontinued operations, net of tax  6,042   8,141   5,290   -  
Add: Interest expense, net  3,109   3,379   3,168   3,357  
Provision for income taxes  5,275   4,576   5,093   9,010  
Depreciation and amortization  11,929   12,366   13,405   13,354  
EBITDA from continuing operations  41,793   40,989   43,814   53,115  
EBITDA from discontinued operations(f)  8,374   9,725   8,781   -  
EBITDA $50,167  $50,714  $52,595  $53,115  
  
Adjustments to EBITDA:         
Share-based compensation expense  2,456   2,930   2,829   3,107  
Results related to closed operations and operations not at full capacity(a)  264   365   555   496  
Acquisition related costs(b)  26   49   69   132  
Spin-Off transaction costs(c)  -   -   -   464  
(Gain on sale)/impairment charges to fixed assets(d)  -   -   (1,402)  1,732  
Impairment of goodwill and intangible assets(e)  -   -   -   941  
Rent related to items above  76   107   295   443  
Adjusted EBITDA from continuing operations  44,615   44,440   46,160   60,430  
Adjusted EBITDA from discontinued operations(f)  12,141   12,336   12,324   -  
Adjusted EBITDA $56,756  $56,776  $58,484  $60,430  
Rent—cost of services  30,181   31,222   31,875   31,511  
Less: rent related to items above  (76)  (107)  (295)  (443) 
Adjusted rent—cost of services  30,105   31,115   31,580   31,068  
Adjusted rent included in discontinued operations  5,598   5,836   5,849   -  
Adjusted EBITDAR from continuing operations  74,720   75,555   77,740   91,498  
Adjusted EBITDAR $92,459  $93,727  $95,913  $91,498  
          
          
(a) Results at closed operations and operations not at full capacity during the periods presented.         
(b) Costs incurred to acquire operations which are not capitalizable.         
(c) Costs incurred in connection with the completed Spin-Off transaction of our home health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded company. 
(d) Impairment charges to fixed assets includes impairment charges of $1.7 million at a leased skilled nursing operations during the three months ended December 31, 2019. Included in the three months ended September 30, 2019, we recorded an impairment charges of $1.5 million at two of our senior living operations, offset by the gain recognized for the sale of real estate of $2.9 million.
(e) Impairment charges to goodwill and intangible assets at our other ancillary operations and a skilled nursing operation.         
(f) 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.   
  Three Months Ended  
  3/31/19 6/30/19 9/30/19 12/31/19 
Consolidated Statements of Income Data:         
Net income from discontinued operations, net of tax $6,042  $8,141  $5,290  $-  
Less: net income attributable to noncontrolling interests in discontinued operations  150   200   279   -  
Add: Interest income, net  (12)  (10)  (4)  -  
Provision for income taxes  1,825   976   2,860   -  
Depreciation and amortization  669   818   914   -  
EBITDA from discontinued operations $8,374  $9,725  $8,781  $-  
Adjustments to EBITDA from discontinued operations:         
Earnings related to operations in the start-up phase  236   82   59   -  
Share-based compensation expense  497   372   149   -  
Spin-Off transaction costs  2,990   1,658   3,261   -  
Acquisition related costs  36   497   70   -  
Rent related to items above  8   2   4   -  
Adjusted EBITDA from discontinued operations $12,141  $12,336  $12,324  $-  
          

 

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) return of unclaimed class action settlement; (f) share-based compensation expense; (g) results of operations not at full capacity, excluding depreciation, interest and income taxes, (h) acquisition related costs; (i) spin-off transaction costs, (j) impairment charges to fixed assets, net of gain on sale of assets; (k) business interruption recoveries; and (l) impairment of intangible assets and goodwill. 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) return of unclaimed class action settlement; (g) share-based compensation expense; (h) results of operations not at full capacity, excluding rent, depreciation, interest and income taxes, (i) return of unclaimed class action settlement; (j) spin-off transaction costs, (k) impairment charges to fixed assets, net of gain on sale of assets; (l) business interruption recoveries; and (m) impairment of intangible assets and goodwill. The company believes that the presentation of EBITDA, adjusted EBITDA, 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, 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.

We have included unaudited pro forma financials. The unaudited pro forma consolidated financial information were not prepared in accordance with Article 11 of Regulation S-X.  The historical financial data has also been adjusted to give pro forma effect to events that are directly attributable to the Spin-Off transaction and have an ongoing effect on Ensign’s statement of operations. The unaudited pro forma consolidated financial statements include:  (1) rental income generated from a master lease with Pennant; (2) reduction in estimated historical general and administrative expenses related to Pennant; (3) amendment of the credit facility in connection with the spin-off; and (4) the discontinued operation effect of the spin-off.  For further information regarding why the company believes that this non-GAAP and pro forma 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.

 

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Source: The Ensign Group, Inc.