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The Ensign Group Reports Quarterly Adjusted Earnings of $0.44 per Share

MISSION VIEJO, Calif., Nov. 5, 2014 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq:ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, assisted and independent living, home health, hospice care and urgent care companies, today reported operating results for the third quarter of 2014.

Quarterly Financial Highlights

  • Consolidated revenues were up 13.8% over the prior year quarter to a record $260.8 million in the quarter;
  • Adjusted consolidated EBITDAR was $38.8 million, an increase of 10.4% over the prior year quarter;
  • Transitioning skilled revenue grew by 6.4% over the prior year quarter to $9.7 million in the quarter and transitioning occupancy was 71.3%, an increase of 103 basis points over the prior year quarter;
  • Same-store skilled revenue grew by 7.2% over the prior year quarter to $91.5 million in the quarter and same-store occupancy was 81.9%, an increase of 156 basis points over the prior year quarter; and
  • Cornerstone Healthcare, Inc., our home health and hospice subsidiary, grew its revenues by 45.6% over the prior year quarter to $14.1 million in the quarter.

Operating Results

Citing the marked improvements in the quarter in both same-store and transitioning skilled revenue and occupancy, Ensign's President and Chief Executive Officer Christopher Christensen said, "We are grateful that our operators have continued their relentless efforts to grow same store occupancy year over year, but our improvement in our transitioning facilities shows increasing strength in some of our transitions that were slower to turn." He added that "these results not only demonstrate the significant organic growth potential that exists in many of our operations but they also allow us to approach our anticipated acquisition growth from a position of greater strength."

Mr. Christensen also reported that operating results are running on schedule and that Management is reaffirming 2014 annual revenue guidance of $1.01 billion to $1.025 billion. "While third quarter results were solid, given our census-cyclical business and the timing of various reimbursement increases discussed last quarter, we expect many of the improvements to occur in the fourth quarter," he added.

Ensign's balance sheet further improved, with cash on hand of $39.2 million at the end of the third quarter and net cash from operations of $66.7 million through September 30, 2014. Adjusted EBITDAR grew by 10.4% over the prior year quarter to $38.8 million. Fully diluted GAAP earnings per share were $0.38 for the quarter and adjusted net income was $10.2 million or $0.44 per diluted share for the quarter.

A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share and 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 10-Q, which was filed with the SEC today and can be viewed on the Company's website at http://www.ensigngroup.net.

2014 and 2015 Guidance

Management affirmed 2014 revenue and earnings guidance, projecting revenue at $1.01 billion to $1.025 billion and net income of $50.1 million to $51.2 million and $2.16 to $2.21 per diluted share for the year. The guidance is based on the impact of the separation of Ensign's healthcare business and certain real estate assets that was completed on June 1, 2014, which resulted in an increase in rent and diluted weighted average common shares, and a reduction in depreciation and interest expenses. The guidance also assumes, among other things, acquisitions closed through the end of the year, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, and tax rates of 38.5%. It excludes acquisition-related costs and amortization costs related to intangible assets, acquired start-up losses at newly-created operations and transaction-related costs connected with the spin-off.

Management also updated its 2015 annual guidance, projecting revenues of $1.20 billion to $1.25 billion in revenues and net income of $58.1 million to $60.2 million and $2.44 to $2.53 per diluted share for 2015. Mr. Christensen noted that due to certain transactional delays in a few acquisitions, some of the acquisitions it anticipated to be closed by the end of 2014 are now expected to close early in 2015. The 2015 guidance is based on diluted weighted average common shares outstanding of 23.8 million and assumes, among other things, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, tax rates of 38.5% and acquisitions anticipated to be closed by the end of the first quarter in 2015. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired and start-up losses at newly-created operations.

Quarter Highlights

Dividend Declared

During the quarter, the company's Board of Directors declared a quarterly cash dividend of $0.07 per share of Ensign common stock. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year.

Acquisition Growth

During the quarter and since, the company acquired one skilled nursing operation, one assisted living and memory care operation, and one hospice agency and one home health agency. The following operations were added during the quarter:

  • In Washington, Beacon Hill Rehabilitation, a 67-bed skilled nursing operation in Longview;
  • In Colorado, Namaste Hospice located in Denver, adding to Ensign's subsidiary already operating a home health agency in that market;
  • In California, Angeles Home Health Care, a home health agency in Los Angeles, adding to Ensign's subsidiary already operating a hospice agency in that market; and
  • In Arizona, Sherwood Village Assisted Living and Memory Care, a 135-unit assisted living and operation in Tucson.
  • In the Seattle area, Ensign's urgent care subsidiary, Immediate Clinic Healthcare, Inc., also opened two new urgent care clinics.

These acquisitions brought Ensign's growing portfolio to 127 healthcare facilities, ten hospice companies, eleven home health agencies and fourteen urgent care clinics across 12 states.

During the quarter Ensign also announced that it has agreed to purchase nine skilled nursing and assisted living facilities, a home health agency and a private home care business from Shea Family Care, the largest provider of a complete continuum of post-acute healthcare services in the San Diego market. Ensign will purchase and retain the real estate in two of the nine operations and will assume long-term leases on the remaining facilities, one of which will include an option to purchase the real estate. The acquisition is expected to be effective in the fourth quarter of 2014 and remains subject to the completion of certain regulatory approvals and other closing conditions.

The closing of the Shea Family transaction will bring Ensign's growing portfolio to 136 healthcare facilities (eleven of which will be owned), ten hospice companies, twelve home health agencies, two home care businesses and fourteen urgent care clinics across 12 states. Management reaffirmed that Ensign is actively seeking additional opportunities to acquire real estate or to lease both well-performing and struggling skilled nursing, assisted living and other healthcare related businesses across the United States.

Conference Call

A live webcast will be held on Thursday, November 6, 2014 at 10:00 a.m. Pacific Time (1:00 p.m. Eastern) to discuss Ensign's third 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 section of the Ensign 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, November 28, 2014.

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, home health and hospice services, urgent care services and other rehabilitative and healthcare services at 127 facilities, ten hospice companies, eleven home health businesses and fourteen urgent care clinics in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon and Wisconsin. 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 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 the entry into final settlement documents. 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 facilities, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of facilities; 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 facilities; competition from other companies in the acquisition, development and operation of facilities; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its facilities 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, which was filed today, for a more complete discussion of the risks and other factors that could affect Ensign's business, prospects and any forward-looking statements. Except as required by the federal securities laws, Ensign does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.

THE ENSIGN GROUP, INC.
GAAP and ADJUSTED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended
September 30, 2014
Nine Months Ended
September 30, 2014
As Reported Non-GAAP Adj. As Adjusted As Reported Non-GAAP Adj. As Adjusted
Revenue $ 260,841 $ (3,617) (4)(5) $ 257,224 $ 750,537 $ (10,094) (4)(5) $ 740,443
Expense:
Cost of services (exclusive of facility rent, general and administrative and depreciation and amortization expense shown separately below) 209,737 (4,256) (1)(4)(5) 205,481 601,532 (11,686) (1)(4)(5) 589,846
Facility rent—cost of services 18,176 (410) (6) 17,766 30,008 (1,539) (6) 28,469
General and administrative expense 12,956 (31) (2)(3)(4) 12,925 44,370 (9,035) (2)(3)(4) 35,335
Depreciation and amortization 4,677 (380) (7) 4,297 21,343 (895) (7) 20,448
Total expenses 245,546 (5,077) 240,469 697,253 (23,155) 674,098
Income from operations 15,295 1,460 16,755 53,284 13,061 66,345
Other income (expense):
Interest expense (407) 46 (361) (12,490) 6,471 (6,019)
Interest income 142 -- 142 435 -- 435
Other expense, net (265) 46 (219) (12,055) 6,471 (5,584)
Income before provision for income taxes 15,030 1,506 16,536 41,228 19,532 60,760
Tax Effect on Non-GAAP Adjustments 581 (8) 7,520 (8)
Tax True-up for Effective Tax Rate (872) (9) (2,410) (9)
Provision for income taxes 6,659 (291) 6,368 18,284 5,110 23,394
Net income 8,371 1,797 10,168 22,945 14,422 37,367
Less: net (loss) income attributable to noncontrolling interests (535) 523 (12) (1,494) 1,563 69
Net income attributable to The Ensign Group, Inc. $ 8,906 1,274 $ 10,180 $ 24,439 12,859 $ 37,298
Attributable to The Ensign Group, Inc.
Net income attributable to The Ensign Group, Inc. 8,906 1,274 10,180 24,439 12,859 37,298
Loss from discontinued operations, net of income tax benefit -- -- -- -- -- --
Income from continuing operations attributable to The Ensign Group, Inc. $ 8,906 $ 1,274 $ 10,180 $ 24,439 $ 12,859 $ 37,298
Net income per share:
Basic:
Net income attributable to The Ensign Group, Inc. $ 0.40 $ 0.45 $ 1.10 $ 1.67
Loss from discontinued operations, net of income tax benefit
Income from continuing operations attributable to The Ensign Group, Inc. $ 0.40 $ 0.45 $ 1.10 $ 1.67
Diluted:
Net income attributable to The Ensign Group, Inc. $ 0.38 $ 0.44 $ 1.06 $ 1.62
Loss from discontinued operations, net of income tax benefit
Income from continuing operations attributable to The Ensign Group, Inc. $ 0.38 $ 0.44 $ 1.06 $ 1.62
Weighted average common shares outstanding:
Basic 22,415 22,415 22,282 22,282
Diluted 23,186 23,186 23,014 23,014
(1) Represents acquisition-related costs of $85 and $219 for the three and nine months ended September 30, 2014, respectively.
(2) Represents costs of $31 and $93 for the three and nine months ended September 30, 2014, respectively, incurred to recognize income tax credits.
(3) Represents costs of $8,871 for the nine months ended September 30, 2014, incurred related to the Company's spin-off of real estate assets to CareTrust REIT (CTRE) (the Spin-Off). As the Spin-Off was completed in the second quarter of 2014, there was no costs associated with the Spin-Off for the three months ended September 30, 2014.
(4) Represents revenues and expenses incurred at the three independent living operations transferred to CTRE on June 1, 2014 in connection with the Spin-Off, excluding rent expense recognized in note (6) below.
(5) Represents revenues and expenses incurred at newly opened urgent care centers, excluding rent expense recognized in note (6) below and depreciation expense recognized in note (7) below.
(6) Represents straight-line rent amortization for newly opened urgent care centers and the three independent living operations transferred to CTRE included in Note (4).
(7) Represents depreciation expense at newly opened urgent care centers and amortization costs related to patient base intangible assets at skilled nursing and assisted living facilities.
(8) Represents the tax impact of non-GAAP adjustments noted in (1) – (7) at the Company's year to date effective tax rate of 38.5% for the three and nine months ended September 30, 2014.
(9) Represents an adjustment to the provision for income taxes to our current year to date effective rate to 38.5% for the three and nine months ended September 30, 2014.
THE ENSIGN GROUP, INC.
GAAP and ADJUSTED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Including Adjustments for Discontinued Operations
(In thousands, except per share data)
Three Months Ended
September 30, 2013
Nine Months Ended
September 30, 2013
As Reported Non-GAAP Adj. As Adjusted As Reported Non-GAAP Adj. As Adjusted
Revenue $ 229,261 (1,265) (8) $ 227,996 $ 667,548 (4,164) (8)(9) $ 663,384
Expense:
Cost of services (exclusive of facility rent, general and administrative and depreciation and amortization expense shown separately below) 186,172 (2,341) (1)(2)(3)(9) 183,831 538,146 (8,757) (1)(2)(3)(9)(10) 529,389
Charges related to U.S. Government inquiries -- -- (4) -- 33,000 (33,000) (4) --
Facility rent—cost of services 3,404 (180) (6) 3,224 10,056 (688) (5)(6) 9,368
General and administrative expense 10,601 (1,746) (7)(8) 8,855 28,321 (2,968) (7)(8) 25,353
Depreciation and amortization 8,795 (364) (11) 8,431 25,198 (1,176) (11)(12) 24,022
Total expenses 208,972 (4,631) 204,341 634,721 (46,589) 588,132
Income from operations 20,289 3,366 23,655 32,827 42,425 75,252
Other income (expense):
Interest expense (3,181) (3,181) (9,441) (9,441)
Interest income 141 141 363 363
Other expense, net (3,040) (3,040) (9,078) (9,078)
Income before provision for income taxes 17,249 3,366 20,615 23,749 42,425 66,174
Tax Effect on Non-GAAP Adjustments 1,296 (13) 16,334 (13)
Tax True-up for Effective Tax Rate 34 (14) (2,297) (14)
Provision for income taxes 6,607 1,330 7,937 11,440 14,037 25,477
Income from continuing operations 10,642 2,036 12,678 12,309 28,388 40,697
Loss from discontinued operations, net of income tax benefit (30) (30) (1,804) (1,804)
Net income (loss) 10,612 2,036 12,648 10,505 28,388 38,893
Less: net income (loss) attributable to noncontrolling interests 148 148 (179) (179)
Net income attributable to The Ensign Group, Inc. $ 10,464 2,036 $ 12,500 $ 10,684 28,388 $ 39,072
Attributable to The Ensign Group, Inc.
Net income attributable to The Ensign Group, Inc. 10,464 2,036 12,500 10,684 28,388 39,072
Loss from discontinued operations, net of income tax benefit (30) (30) (1,804) (1,804)
Income from continuing operations attributable to The Ensign Group, Inc. $ 10,494 2,036 $ 12,530 $ 12,488 28,388 $ 40,876
Net (loss) income per share
Basic:
Net income attributable to The Ensign Group, Inc. 0.48 0.57 0.49 1.79
Loss from discontinued operations, net of income tax benefit -- -- (0.08) (0.08)
Income from continuing operations attributable to The Ensign Group, Inc. $ 0.48 $ 0.57 $ 0.57 $ 1.87
Diluted:
Net income attributable to The Ensign Group, Inc. 0.47 0.56 0.48 1.75
Loss from discontinued operations, net of income tax benefit -- -- (0.08) (0.08)
Income from continuing operations attributable to The Ensign Group, Inc. $ 0.47 $ 0.56 $ 0.56 $ 1.83
Weighted average common shares outstanding:
Basic 21,941 21,941 21,857 21,857
Diluted 22,409 22,409 22,316 22,316
(1) Represents acquisition-related costs of $38 and $264 for the three and nine months ended September 30, 2013.
(2) Represents costs of $19 and $103 for the three and nine months ended September 30, 2013, incurred to recognize income tax credits.
(3) Represents additional costs incurred related to a class action lawsuit settlement of $915 and $1,524 for the three and nine months ended September 30, 2013.
(4) Represents the Company's estimated U.S. Department of Justice (DOJ) inquiry settlement reserve recorded in the first quarter of 2013.
(5) Represents straight-line rent amortization for the first nine months of 2013 for one newly constructed facility which began operations during the first quarter of 2013. This facility began operating at full capacity during the third quarter and therefore, third quarter results were not included in the three or nine month periods above.
(6) Represents straight-line rent amortization for newly opened urgent care centers.
(7) Represents legal costs incurred in connection with the ongoing investigation into the billing and reimbursement processes of some of our subsidiaries being conducted by the DOJ.
(8) Represents expenses incurred in connection with the Company's proposed spin-off of its real estate assets to a newly formed publicly traded real estate investment trust (REIT).
(9) Represents revenues and expenses incurred at newly opened urgent care centers, less rent expense recognized in note (6) above and depreciation expense recognized in note (11) below
(10) Represents revenues and expenses for the first six months of 2013 incurred at one newly constructed facility which began operations during the first quarter of 2013, less rent expense recognized in note (5) above and depreciation expense recognized in Note (12) below. This facility began operating at full capacity during the third quarter and therefore, third quarter results were not included in the three or nine month periods above.
(11) Represents depreciation expense at newly opened urgent care centers and amortization costs related to patient base intangible assets at skilled nursing and assisted living facilities acquired. Patient base intangible assets are amortized over a period of four to eight months, depending on the classification of the patients and the level of occupancy in a new acquisition on the acquisition date.
(12) Represents depreciation expense for the first six months of 2013 at one newly constructed facility which began operations during the first quarter of 2013. This facility began operating at full capacity during the third quarter and therefore, third quarter results were not included in the three or nine month periods above.
(13) Represents the tax impact of non-GAAP adjustments noted in (1) – (12) at the Company's year to date effective tax rate of 38.5% for the three and nine months ended September 30, 2013.
(14) Represents an adjustment to the provision for income taxes to our current year to date effective rate to 38.5% for the three and nine months ended September 30, 2013.
THE ENSIGN GROUP, INC.
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR
(in thousands)
(Unaudited)
The table below reconciles net income to EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2014 2013 2014 2013
Consolidated Statements of Income Data:
Net income $ 8,371 $ 10,612 $ 22,945 $ 10,505
Less: net (loss) income attributable to noncontrolling interests (535) 148 (1,494) (179)
Loss from discontinued operations 30 1,804
Interest expense, net 265 3,040 12,055 9,078
Provision for income taxes 6,659 6,607 18,284 11,440
Depreciation and amortization 4,677 8,795 21,343 25,198
EBITDA $ 20,507 $ 28,936 $ 76,121 $ 58,204
Facility rent—cost of services 18,176 3,404 30,008 10,056
EBITDAR $ 38,683 $ 32,340 $ 106,129 $ 68,260
EBITDA $ 20,507 $ 28,936 $ 76,121 $ 58,204
Adjustments to EBITDA:
Charge related to the U.S. Government inquiry(a) 33,000
Expenses related to the Spin-Off(b) 1,648 8,871 1,857
Legal costs(c) 98 1,111
Settlement of class action lawsuit(d) 915 1,524
Urgent care center (earnings) losses(e) 31 105 3 1,447
Earnings at three operations transferred to REIT(f) (122)
Loss at skilled nursing facility not at full operation(g) 1,256
Acquisition related costs(h) 85 38 219 264
Costs incurred to recognize income tax credits(i) 31 19 93 103
Rent related to items (e), (f) and (g) above (j) 410 180 1,539 687
Adjusted EBITDA $ 21,064 $ 31,939 $ 86,724 $ 99,453
Facility rent—cost of services 18,176 3,404 30,008 10,056
Less: rent related to items (e), (f) and (g) above (j) (410) (180) (1,539) (687)
Adjusted EBITDAR $ 38,830 $ 35,163 $ 115,193 $ 108,822
(a) Charges related to our resolution of any claims connected to the DOJ settlement.
(b) Expenses incurred in connection with the Company's spin-off of its real estate assets to a newly formed publicly traded real estate investment trust (REIT).
(c) Legal costs incurred in connection with the settlement of the investigation into the billing and reimbursement processes of some of our subsidiaries conducted by the DOJ.
(d) Settlement of a class action lawsuit regarding minimum staffing requirements in the State of California.
(e) Results at newly opened urgent care centers, excluding rent, depreciation, interest and income taxes.
(f) Results at three independent living facilities which were transferred to CareTrust REIT as part of the Spin-Off transaction, excluding rent, depreciation, interest and income taxes.
(g) Losses incurred through the second quarter of 2013 at one newly constructed skilled nursing facility which began operations during the first quarter of 2013, excluding rent, depreciation, interest and income taxes.
(h) Costs incurred to acquire an operation which are not capitalizable.
(i) Costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate.
(j) Rent related to newly opened urgent care centers, one newly constructed skilled nursing facility which began operations during the first quarter of 2013, and the three independent living facilities which were transferred to CareTrust REIT as part of the Spin-Off transaction, not included in items (e), (f) and (g) above.
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2014 2013
Assets
Current assets:
Cash and cash equivalents $ 39,206 $ 65,755
Restricted cash — current 6,652
Accounts receivable — less allowance for doubtful accounts of $19,452 and $16,540 at June 30, 2014 and December 31, 2013, respectively 120,647 111,370
Investments — current 5,883 5,511
Prepaid income taxes 5,078 9,915
Prepaid expenses and other current assets 8,432 9,213
Deferred tax asset — current 8,033 9,232
Total current assets 193,931 210,996
Property and equipment, net 127,448 479,770
Insurance subsidiary deposits and investments 18,170 16,888
Escrow deposits 600 1,000
Deferred tax asset 11,493 4,464
Restricted and other assets 8,449 9,804
Intangible assets, net 6,560 5,718
Goodwill 25,719 23,935
Other indefinite-lived intangibles 10,509 7,740
Total assets $ 402,879 $ 760,315
Liabilities and equity
Current liabilities:
Accounts payable 27,783 23,793
Accrued wages and related liabilities 48,159 40,093
Accrued self-insurance liabilities — current 15,642 15,461
Other accrued liabilities 26,751 25,698
Current maturities of long-term debt 110 7,411
Total current liabilities 118,445 112,456
Long-term debt — less current maturities 3,307 251,895
Accrued self-insurance liabilities — less current portion 33,658 33,642
Fair value of interest rate swap 1,828
Deferred rent and other long-term liabilities 3,151 3,237
Total equity 244,318 357,257
Total liabilities and equity $ 402,879 $ 760,315
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
The following table presents selected data from our consolidated statements of cash flows for the periods presented:
Nine Months Ended
September 30,
2014 2013
Net cash provided by operating activities $ 66,687 $ 57,110
Net cash used in investing activities (99,407) (57,046)
Net cash provided by financing activities 6,171 5,248
Net (decrease) increase in cash and cash equivalents (26,549) 5,312
Cash and cash equivalents at beginning of period 65,755 40,685
Cash and cash equivalents at end of period $ 39,206 $ 45,997
THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
The following tables summarize our selected performance indicators, along with other statistics, for each of the dates or periods indicated:
Three Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Total Facility Results:
Revenue $ 260,841 $ 229,261 $ 31,580 13.8%
Number of facilities at period end 127 119 8 6.7%
Actual patient days 994,995 940,054 54,941 5.8%
Occupancy percentage — Operational beds 77.7% 77.4% 0.3%
Skilled mix by nursing days 27.1% 26.0% 1.1%
Skilled mix by nursing revenue 50.2% 49.7% 0.5%
Three Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Same Facility Results(1):
Revenue $ 189,230 $ 178,797 $ 10,433 5.8%
Number of facilities at period end 82 82 —%
Actual patient days 713,682 701,049 12,633 1.8%
Occupancy percentage — Operational beds 81.9% 80.3% 1.6%
Skilled mix by nursing days 28.7% 27.4% 1.3%
Skilled mix by nursing revenue 51.8% 51.3% 0.5%
Three Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Transitioning Facility Results(2):
Revenue $ 36,333 $ 33,141 $ 3,192 9.6%
Number of facilities at period end 25 25 —%
Actual patient days 160,025 157,705 2,320 1.5%
Occupancy percentage — Operational beds 71.3% 70.3% 1.0%
Skilled mix by nursing days 19.6% 19.2% 0.4%
Skilled mix by nursing revenue 41.4% 39.8% 1.6%
Three Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):
Revenue $ 35,278 $ 16,504 $ 18,774 NM
Number of facilities at period end 20 11 9 NM
Actual patient days 121,288 63,072 58,216 NM
Occupancy percentage — Operational beds 65.9% 67.5% NM
Skilled mix by nursing days 24.1% 20.8% NM
Skilled mix by nursing revenue 45.9% 45.8% NM
Three Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Transferred to CareTrust(4):
Revenue $ -- $ 819 $ (819) NM
Actual patient days -- 18,228 (18,228) NM
Occupancy percentage — Operational beds -- 75.0% NM
_______________________
(1) Same Facility results represent all facilities purchased prior to January 1, 2011.
(2) Transitioning Facility results represents all facilities purchased from January 1, 2011 to December 31, 2012.
(3) Recently Acquired Facility (or "Acquisitions") results represent all facilities purchased on or subsequent to January 1, 2013.
(4) Transferred to CareTrust results represent the results at three independent living facilities which were transferred to CareTrust REIT as part of the Spin-Off transaction on June 1, 2014. These results were excluded from Same Facility and Transitioning Facility for the three months ended September 30, 2013 for comparison purposes.
Nine Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Total Facility Results:
Revenue $ 750,537 $ 667,548 $ 82,989 12.4%
Number of facilities at period end 127 119 8 6.7%
Actual patient days 2,895,265 2,701,513 193,752 7.2%
Occupancy percentage — Operational beds 77.9% 77.3% 0.6%
Skilled mix by nursing days 27.6% 26.6% 1.0%
Skilled mix by nursing revenue 50.9% 50.4% 0.5%
Nine Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Same Facility Results(1):
Revenue $ 563,303 $ 535,278 $ 28,025 5.2%
Number of facilities at period end 82 82 —%
Actual patient days 2,115,181 2,078,207 36,974 1.8%
Occupancy percentage — Operational beds 81.8% 80.2% 1.6%
Skilled mix by nursing days 29.3% 28.0% 1.3%
Skilled mix by nursing revenue 52.5% 51.8% 0.7%
Nine Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Transitioning Facility Results(2):
Revenue $ 104,933 $ 96,249 $ 8,684 9.0%
Number of facilities at period end 25 25 —%
Actual patient days 473,841 460,949 12,892 2.8%
Occupancy percentage — Operational beds 71.2% 69.3% 1.9%
Skilled mix by nursing days 19.9% 19.8% 0.1%
Skilled mix by nursing revenue 41.4% 40.7% 0.7%
Nine Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):
Revenue $ 81,053 $ 33,390 $ 47,663 NM
Number of facilities at period end 20 11 9 NM
Actual patient days 278,227 107,210 171,017 NM
Occupancy percentage — Operational beds 65.6% 64.4% NM
Skilled mix by nursing days 23.2% 19.9% NM
Skilled mix by nursing revenue 46.2% 46.4% NM
Nine Months Ended
September 30,
2014 2013
(Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):
Revenue $ 1,248 $ 2,631 $ (1,383) NM
Actual patient days 28,016 55,147 (27,131) NM
Occupancy percentage — Operational beds 70.3% 76.5% NM
_______________________
(1) Same Facility results represent all facilities purchased prior to January 1, 2011.
(2) Transitioning Facility results represents all facilities purchased from January 1, 2011 to December 31, 2012.
(3) Recently Acquired Facility (or "Acquisitions") results represent all facilities purchased on or subsequent to January 1, 2013.
(4) Transferred to CareTrust results represent the results at three independent living facilities which were transferred to CareTrust REIT as part of the Spin-Off transaction on June 1, 2014. The five months results of the three independent living facilities were excluded from Same Facility and Transitioning Facility for the nine months ended September 30, 2014 for comparison purposes. The nine months results of the three independent living facilities were excluded from Same Facility and Transitioning Facility for the nine months ended September 30 2013 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 the skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate:
Three Months Ended September 30,
Same Facility Transitioning Acquisitions Total %
2014 2013 2014 2013 2014 2013 2014 2013 Change
Skilled Nursing Average Daily Revenue Rates:
Medicare $560.92 $550.66 $484.03 $467.35 $512.84 $475.17 $546.67 $535.03 2.2%
Managed care 412.44 403.44 417.71 383.64 465.20 468.39 418.22 406.35 2.9%
Other skilled 446.54 467.02 834.01 690.75 316.85 436.48 471.27 (7.4)%
Total skilled revenue 489.91 487.50 478.48 458.82 459.08 472.20 485.93 484.01 0.4%
Medicaid 181.89 173.47 162.31 164.02 168.06 145.78 178.30 170.81 4.4%
Private and other payors 191.81 187.04 170.35 167.05 187.45 150.75 185.52 178.62 3.9%
Total skilled nursing revenue $271.41 $261.26 $226.54 $221.60 $241.15 $214.51 $262.64 $253.35 3.7%
Nine Months Ended September 30,
Same Facility Transitioning Acquisitions Total %
2014 2013 2014 2013 2014 2013 2014 2013 Change
Skilled Nursing Average Daily Revenue Rates:
Medicare $561.42 $557.23 $476.04 $467.66 $504.91 $490.67 $546.34 $541.89 0.8%
Managed care 411.33 396.02 411.71 390.30 462.66 465.71 415.80 397.77 4.5%
Other skilled 439.24 465.01 806.09 686.13 311.85 437.26 468.85 (6.7)%
Total skilled revenue 490.55 489.22 472.14 460.87 463.57 481.76 486.96 486.20 0.2%
Medicaid 181.62 174.96 161.40 163.32 159.70 136.42 177.50 172.24 3.1%
Private and other payors 192.36 186.92 172.08 167.62 178.34 147.77 185.33 179.35 3.3%
Total skilled nursing revenue $273.09 $264.16 $226.12 $223.28 $233.19 $207.52 $263.80 $256.68 2.8%
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months ended September 30, 2014 and 2013:
Three Months Ended September 30,
Same Facility Transitioning Acquisitions Total
2014 2013 2014 2013 2014 2013 2014 2013
Percentage of Skilled Nursing Revenue:
Medicare 28.9% 30.2% 31.9% 33.5% 22.5% 25.9% 28.6% 30.4%
Managed care 15.8 15.5 7.7 5.1 17.6 19.9 15.1 14.5
Other skilled 7.1 5.6 1.8 1.2 5.8 6.5 4.8
Skilled mix 51.8 51.3 41.4 39.8 45.9 45.8 50.2 49.7
Private and other payors 7.4 7.9 21.5 22.2 11.8 13.2 9.3 9.8
Quality mix 59.2 59.2 62.9 62.0 57.7 59.0 59.5 59.5
Medicaid 40.8 40.8 37.1 38.0 42.3 41.0 40.5 40.5
Total skilled nursing 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Three Months Ended September 30,
Same Facility Transitioning Acquisitions Total
2014 2013 2014 2013 2014 2013 2014 2013
Percentage of Skilled Nursing Days:
Medicare 14.0% 14.3% 14.9% 15.9% 10.6% 11.7% 13.7% 14.4%
Managed care 10.4 10.0 4.2 3.0 9.2 9.1 9.5 9.0
Other skilled 4.3 3.1 0.5 0.3 4.3 3.9 2.6
Skilled mix 28.7 27.4 19.6 19.2 24.1 20.8 27.1 26.0
Private and other payors 10.4 11.1 28.7 29.6 15.2 18.7 13.2 13.9
Quality mix 39.1 38.5 48.3 48.8 39.3 39.5 40.3 39.9
Medicaid 60.9 61.5 51.7 51.2 60.7 60.5 59.7 60.1
Total skilled nursing 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the nine months ended September 30, 2014 and 2013:
Nine Months Ended September 30,
Same Facility Transitioning Acquisitions Total
2014 2013 2014 2013 2014 2013 2014 2013
Percentage of Skilled Nursing Revenue:
Medicare 30.2% 31.3% 32.7% 35.0% 22.9% 30.3% 29.9% 31.7%
Managed care 15.7 15.1 6.9 4.7 19.5 16.1 15.1 13.9
Other skilled 6.6 5.4 1.8 1.0 3.8 5.9 4.8
Skilled mix 52.5 51.8 41.4 40.7 46.2 46.4 50.9 50.4
Private and other payors 7.3 7.6 22.0 21.9 11.8 13.9 9.2 9.4
Quality mix 59.8 59.4 63.4 62.6 58.0 60.3 60.1 59.8
Medicaid 40.2 40.6 36.6 37.4 42.0 39.7 39.9 40.2
Total skilled nursing 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Nine Months Ended September 30,
Same Facility Transitioning Acquisitions Total
2014 2013 2014 2013 2014 2013 2014 2013
Percentage of Skilled Nursing Days:
Medicare 14.7% 14.9% 15.6% 16.7% 10.6% 12.8% 14.4% 15.0%
Managed care 10.5 10.0 3.8 2.7 9.8 7.1 9.6 9.0
Other skilled 4.1 3.1 0.5 0.4 2.8 3.6 2.6
Skilled mix 29.3 28.0 19.9 19.8 23.2 19.9 27.6 26.6
Private and other payors 10.3 10.8 28.8 29.1 15.5 19.8 13.0 13.5
Quality mix 39.6 38.8 48.7 48.9 38.7 39.7 40.6 40.1
Medicaid 60.4 61.2 51.3 51.1 61.3 60.3 59.4 59.9
Total skilled nursing 100.0% 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
September 30,
Nine Months Ended
September 30,
2014 2013 2014 2013
$ % $ % $ % $ %
Revenue: (Dollars in thousands) (Dollars in thousands)
Medicaid $ 91,707 35.2% $ 81,802 35.7% $ 260,986 34.8% $ 237,301 35.5%
Medicare 78,056 29.9% 72,138 31.5% 231,860 30.9% 218,214 32.7%
Medicaid—skilled 13,614 5.2% 9,204 4.0% 36,575 4.9% 26,616 4.0%
Total 183,377 70.3% 163,144 71.2% 529,421 70.6% 482,131 72.2%
Managed Care 36,562 14.0% 30,886 13.5% 105,316 14.0% 87,446 13.1%
Private and Other(1) 40,902 15.7% 35,231 15.3% 115,800 15.4% 97,971 14.7%
Total revenue $ 260,841 100.0% $ 229,261 100.0% $ 750,537 100.0% $ 667,548 100.0%
(1) Private and other payors includes revenue from urgent care centers and other ancillary services.

Discussion of Non-GAAP Financial Measures

EBITDA consists of net income (loss) from continuing operations, adjusted for net losses attributable to noncontrolling interests, before (a) interest expense, net, (b) provisions for income taxes, and (c) depreciation and amortization. EBITDAR consists of EBITDA adjusted to exclude facility rent-cost of services. Adjusted EBITDA and EBITDAR are EBITDA and EBITDAR adjusted for non-core business items. The Company believes that the presentation of EBITDA, EBITDAR, 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 per share, EBITDA, EBITDAR, 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 Report on Form 10-Q filed today with the SEC. The Form 10-Q is 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.

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

Source:The Ensign Group, Inc.