×

The Ensign Group Reports Second Quarter 2016 Results

MISSION VIEJO, Calif., Aug. 01, 2016 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq:ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, home health, home care, hospice care, assisted living and urgent care companies, today announced its operating results for the second quarter of 2016, reporting GAAP diluted earnings per share for the quarter of $0.22 and adjusted earnings per share for the quarter of $0.33 (1).

Quarter Highlights Include:

  • Consolidated GAAP EBITDAR for the quarter was $60.3 million, an increase of 27.2% over the prior year quarter, and consolidated adjusted EBITDAR was $65.5 million, an increase of 30.3% over the prior year quarter(1);
  • Transitioning skilled revenue mix increased by 130 basis points over the prior year quarter to 55.9% and same-store skilled mix days increased by 35 basis points over the prior year quarter to 30.4%;
  • Same Store revenue for all segments grew by 6.9% over the prior year quarter, and same store TSA revenue grew by 6.3% over the prior year quarter;
  • Transitioning revenue for all segments grew by 6.3% over the prior year quarter, and transitioning TSA revenue grew by 5.8% over the prior year quarter;
  • Cornerstone Healthcare, Inc., our home health and hospice subsidiary, grew its segment income by 45.2% over the prior year quarter and revenue by $8.5 million to $28.5 million for the quarter, an increase of 42.9% over the prior year quarter; and
  • Consolidated GAAP revenues for the quarter were up $99.5 million or 32.0% over the prior year quarter to $410.5 million and consolidated adjusted revenues for the quarter were up $92.5 million or 30.4% over the prior year quarter to $396.6 million(1).

(1) See "Reconciliation of GAAP to Non-GAAP Financial Information".

Operating Results

Commenting on the operating results, Ensign’s President and Chief Executive Officer Christopher Christensen said, “While we are very pleased with the contribution of some of our recently acquired operations, the majority of our newer operations continue to have significant upside.” Noting that Ensign’s adjusted earnings per share was $0.33 for the quarter, which met consensus estimates, Mr. Christensen reiterated that the organization completed the largest acquisition in its history during the quarter and has 72 recently acquired and 29 transitioning skilled nursing and assisted living operations, combining for 49% of Ensign’s current portfolio as of July 1, 2016. He added, “Compared to any other time in our organization’s history, there is a substantial amount of organic growth potential inherent in our existing operations.”

Mr. Christensen announced that after increasing its annual earnings guidance last quarter, management determined that some of the expected performance will take a few quarters longer to realize than initially anticipated. “As we continue to absorb a significant number of new operations across our organization, our focus has been to take the necessary steps to set these operations up for success over the long-term,” Christensen said. He added that “as a result of our deliberate efforts to ensure a proper transition for our new operations, some of the performance we expected to occur in the later part of 2016 will carry over into 2017. Therefore, we are revising our 2016 adjusted earnings guidance to $1.35 to $1.42 per diluted share for 2016 and are reaffirming our 2016 revenue guidance of $1.625 billion to $1.660 billion.”

Chief Financial Officer Suzanne Snapper added “in order to provide our investors with more clarity regarding our organic growth expectations, we are also announcing 2017 guidance of $1.818 billion to $1.842 billion in revenues and $1.62 to $1.70 adjusted annual earnings per diluted share.” Ms. Snapper also indicated that although the performance of the newer acquisitions has been slower than expected, many of the improvements management anticipated are beginning to take effect and she expects them to continue into the remainder of 2016 and into 2017.

“Our operational leaders are fully engaged on all fronts to identify and overcome weakness wherever it occurs and, because of them, we remain confident that Ensign’s future – both near- and long-term – is very bright,” Christensen noted. “As we’ve often reminded you, whenever we’ve seen an unusual surge in growth over a short period of time, we naturally expect a temporary impact to our short-term earnings, however, we have always taken the long view of our business, and we are excited about the enormous opportunity to unlock the value in our existing portfolio,” he said.

Ms. Snapper also added, “Our balance sheet remained strong, with approximately $263.0 million of availability on Ensign’s new $450 million credit facility as of August 1, 2016, which also has a built-in expansion option, and 32 unlevered real estate assets that add additional liquidity.” Ms. Snapper also reported that consolidated revenues for the quarter were up 32.0% over the prior year quarter to a record $410.5 million, GAAP EBITDAR for the quarter was $60.3 million and consolidated adjusted EBITDAR for the quarter was $65.5 million, an increase of 30.3 % over the prior year quarter.

GAAP diluted earnings per share were $0.22 and fully diluted adjusted earnings per share were $0.33 for the quarter. GAAP net income was $11.3 million and adjusted net income was $17.1 million. 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.

Quarter Highlights

During the quarter, the Company paid a quarterly cash dividend of $0.04 per share of Ensign common stock. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 14 years.

Also during the quarter and since, the company announced the acquisition of nineteen skilled nursing operations and one hospice business. The following skilled nursing operations are subject to long-term leases:

  • Legend Oaks Healthcare and Rehabilitation – Greenville, a 126-bed skilled nursing facility located in Greenville, Texas;
  • Legend Oaks Healthcare and Rehabilitation – Euless, a 140-bed skilled nursing facility located in Euless, Texas;
  • Legend Oaks Healthcare and Rehabilitation Center – Gladewater, a 100-bed skilled nursing facility located in Gladewater, Texas;
  • Legend Oaks Healthcare and Rehabilitation – North Austin, a 124-bed skilled nursing facility located in Austin, Texas;
  • Legend Healthcare and Rehabilitation – Ennis, a 124-bed skilled nursing facility located in Ennis, Texas;
  • Granite Mesa Health Center, a 124-bed skilled nursing facility located in Marble Falls, Texas;
  • Legend Oaks Healthcare and Rehabilitation – Katy, a 125-bed skilled nursing facility located in Katy, Texas;
  • Legend Oaks Healthcare and Rehabilitation – Kyle, a 126-bed skilled nursing facility located in Kyle, Texas;
  • Legend Oaks Healthcare and Rehabilitation North Willowbrook, a 124-bed skilled nursing facility located in Houston, Texas;
  • Sonterra Health Center, a 124-bed skilled nursing facility located in San Antonio, Texas;
  • Legend Oaks Healthcare and Rehabilitation – San Antonio, a 126-bed skilled nursing facility located in San Antonio, Texas;
  • Legend Oaks Healthcare and Rehabilitation – West Houston, a 124-bed skilled nursing facility located in Houston, Texas;
  • Legend Oaks Healthcare and Rehabilitation – West San Antonio, a 124-bed skilled nursing facility located in San Antonio, Texas;
  • McAllen Transitional Care Center, a 70-bed skilled nursing facility located in McAllen, Texas;
  • Legend Oaks Healthcare and Rehabilitation Center – Northwest Houston, a 125-bed skilled nursing facility located in Houston, Texas; and
  • Legend Oaks Healthcare and Rehabilitation – New Braunfels, a 126-bed skilled nursing facility located in New Braunfels, Texas.

Ensign acquired the real estate and operations for the following skilled nursing operations:

  • Legend Healthcare and Rehabilitation – Paris, a 120-bed skilled nursing facility located in Paris, Texas; and
  • Legend Oaks Healthcare and Rehabilitation Center, a 125-bed skilled nursing facility located in Houston, Texas.
  • Riverbend Post Acute Rehabilitation, a 152-bed skilled nursing facility located in Kansas City, Kansas.

In addition, Ensign has opened six Healthcare Resorts. The Healthcare Resorts offer world-class rehabilitation and healthcare services in a resort-like setting as well as offering private extended-stay suites for patients requiring additional assistance before they return home. The new Healthcare Resorts include:

  • The Healthcare Resort of Kansas City, with a 70-bed licensed transitional care operation and 30 private assisted living suites;
  • The Healthcare Resort of Shawnee Mission, with a 101-bed licensed transitional care operation and 29 private assisted living suites;
  • The Healthcare Resort of Olathe, with a 70-bed licensed transitional care operation and 30 private assisted living suites;
  • The Healthcare Resort of Plano, with a 70-bed licensed transitional care operation and 30 private assisted living suites;
  • The Healthcare Resort of Colorado Springs, with a 90-bed licensed transitional care operation and 35 private assisted living suites; and
  • The Healthcare Resort of Waco, with a 70-bed licensed transitional care operation and 30 private assisted living suites.

These additions bring Ensign's growing portfolio to 208 healthcare operations, thirty-five of which are owned, sixteen hospice agencies, sixteen home health agencies, three home care businesses and fourteen urgent care clinics across fourteen states. Mr. Christensen reaffirmed that Ensign continues to actively seek transactions to acquire real estate and to lease both well-performing and struggling skilled nursing, assisted living and other healthcare related businesses in new and existing markets.

2016 Guidance

Management reaffirmed its 2016 annual revenue guidance of $1.625 billion to $1.660 billion and adjusted its 2016 annual earnings per share guidance to $1.35 to $1.42 per diluted share. Management’s guidance is based on diluted weighted average common shares outstanding of 52.6 million, which includes the impact of the stock repurchases in the first quarter of 2016. In addition, the guidance assumes, among other things, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, tax rates of 38.5% and acquisitions closed to date. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, stock based compensation, implementation costs for system improvements, costs incurred to recognize income tax credits, results at one closed facility and costs incurred for facilities currently being constructed and other start-up operations and insurance reserves in connection with a settlement of a general liability claim.

2017 Guidance

Management also provided guidance for 2017, with annual revenue guidance of $1.818 billion to $1.842 billion and annual earnings per share guidance of $1.62 to $1.70 per diluted share. Management’s guidance is based on diluted weighted average common shares outstanding of 54.2 million and a 36.0% tax rate, both of which reflect the anticipated impact of ASU 2016-09 that will become effective in 2017. In addition, the guidance assumes, among other things, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes, tax rates of 36.0% and acquisitions closed to date. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, stock based compensation, costs incurred to recognize income tax credits and costs incurred for facilities currently being constructed and other start-up operations.

Conference Call

A live webcast will be held Tuesday, August 2, 2016 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s second quarter financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign’s website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific Time on Friday, September 2, 2016.

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 208 operations, sixteen hospice agencies, sixteen home health agencies, three home care businesses and fourteen urgent care clinics in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas and South Carolina. Each of these operations is operated by a separate, independent operating subsidiary that has its own management, employees and assets. References herein to the consolidated “company” and “its” assets and activities, as well as the use of the terms “we,” “us,” “its” and similar terms, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the operations, the home health and hospice businesses, the Service Center or the captive insurance subsidiary are operated by the same entity. More information about Ensign is available at http://www.ensigngroup.net.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management’s current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.

These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the Securities and Exchange Commission, including its Form 10-Q, for a more complete discussion of the risks and other factors that could affect Ensign’s business, prospects and any forward-looking statements. Except as required by the federal securities laws, Ensign does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.


THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Revenue$ 410,517 $ 311,056 $ 793,750 $ 617,585
Expense:
Cost of services 330,538 248,292 636,846 489,748
Losses related to operational closure 7,935
Rent—cost of services 30,741 19,066 57,732 38,031
General and administrative expense 19,657 15,335 37,045 29,751
Depreciation and amortization 9,772 6,379 18,069 12,896
Total expenses 390,708 289,072 757,627 570,426
Income from operations 19,809 21,984 36,123 47,159
Other income (expense):
Interest expense (1,446) (567) (2,816) (1,233)
Interest income 278 195 513 361
Other expense, net (1,168) (372) (2,303) (872)
Income before provision for income taxes 18,641 21,612 33,820 46,287
Provision for income taxes 7,278 8,379 13,167 17,964
Net income 11,363 13,233 20,653 28,323
Less: net income (loss) attributable to noncontrolling interests 37 45 155 (37)
Net income attributable to The Ensign Group, Inc.$ 11,326 $ 13,188 $ 20,498 $ 28,360
Net income per share:
Basic:$ 0.23 $ 0.26 $ 0.41 $ 0.57
Diluted$ 0.22 $ 0.25 $ 0.39 $ 0.55
Weighted average common shares outstanding:
Basic 50,274 50,949 50,476 49,391
Diluted 51,931 52,866 52,134 51,272
Dividends per share$ 0.0400 $ 0.0375 $ 0.0800 $ 0.0750

THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, 2016December 31, 2015
Assets
Current assets:
Cash and cash equivalents$33,519 $41,569
Accounts receivable — less allowance for doubtful accounts of $33,654 and $30,308 at June 30, 2016 and December 31, 2015, respectively 226,623 209,026
Investments — current 3,503 2,004
Prepaid income taxes 7,873 8,141
Prepaid expenses and other current assets 16,496 18,827
Total current assets 288,014 279,567
Property and equipment, net 347,203 299,633
Insurance subsidiary deposits and investments 31,018 32,713
Escrow deposits 6,704 400
Deferred tax asset 20,823 20,852
Restricted and other assets 12,507 9,631
Intangible assets, net 44,910 45,431
Goodwill 69,650 40,886
Other indefinite-lived intangibles 19,246 18,646
Total assets$840,075 $747,759
Liabilities and equity
Current liabilities:
Accounts payable 38,085 36,029
Accrued wages and related liabilities 72,019 78,890
Accrued self-insurance liabilities — current 20,829 18,122
Other accrued liabilities 47,353 46,205
Current maturities of long-term debt 634 620
Total current liabilities 178,920 179,866
Long-term debt — less current maturities 183,722 99,051
Accrued self-insurance liabilities — less current portion 43,365 37,881
Deferred rent and other long-term liabilities 9,975 3,976
Total equity 424,093 426,985
Total liabilities and equity$840,075 $747,759
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented:
Six Months Ended
June 30,
2016 2015
Net cash provided by operating activities$36,828 $6,808
Net cash used in investing activities (99,857) (89,427)
Net cash provided by financing activities 54,979 82,846
Net increase in cash and cash equivalents (8,050) 227
Cash and cash equivalents at beginning of period 41,569 50,408
Cash and cash equivalents at end of period$33,519 $50,635

THE ENSIGN GROUP, INC.
REVENUE BY SEGMENTS
The following table sets forth our total revenue by segments and as a percentage of total revenue for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
(Dollars in thousands) (Dollars in thousands)
TSA Services:
Skilled nursing facilities $340,417 82.9% $265,709 85.4% $655,631 82.6% $530,179 85.8%
Assisted and independent living facilities 30,708 7.5 15,927 5.1 60,877 7.7 30,230 4.9
Total TSA services 371,125 90.4 281,636 90.5 716,508 90.3 560,409 90.7
Home health and hospice services:
Home health 14,416 3.5 11,294 3.6 28,324 3.6 21,656 3.5
Hospice 14,077 3.4 8,650 2.8 26,835 3.4 16,604 2.7
Total home health and hospice services 28,493 6.9 19,944 6.4 55,159 7.0 38,260 6.2
All other (1) 10,899 2.7 9,476 3.1 22,083 2.7 18,916 3.1
Total revenue $410,517 100.0% $311,056 100.0% $793,750 100.0% $617,585 100.0%
(1) Includes revenue from services provided at our urgent care clinics and other ancillary operations.

THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
The following tables summarize our selected performance indicators for our TSA services segment along with other statistics, for each of the dates or periods indicated:
Three Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Total Facility Results:
Skilled nursing revenue$ 340,417 $ 265,709 $ 74,708 28.1 %
Assisted and independent living revenue 30,708 15,927 14,781 92.8 %
Total TSA services revenue$ 371,125 $ 281,636 $ 89,489 31.8 %
Number of facilities at period end 206 150 56 37.3 %
Actual patient days 1,465,625 1,121,158 344,467 30.7 %
Occupancy percentage — Operational beds 76.3% 78.0% (1.7)%
Skilled mix by nursing days 31.3% 30.1% 1.2 %
Skilled mix by nursing revenue 52.7% 53.4% (0.7)%
Three Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Same Facility Results(1):
Skilled nursing revenue$ 225,787 $ 211,994 $ 13,793 6.5 %
Assisted and independent living revenue 9,360 9,217 143 1.6 %
Total TSA services revenue$ 235,147 $ 221,211 $ 13,936 6.3 %
Number of facilities at period end 106 106 %
Actual patient days 842,405 849,485 (7,080) (0.8)%
Occupancy percentage — Operational beds 78.8% 80.1% (1.3)%
Skilled mix by nursing days 30.4% 30.1% 0.3 %
Skilled mix by nursing revenue 51.1% 53.6% (2.5)%
Three Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Transitioning Facility Results(2):
Skilled nursing revenue$ 42,284 $ 40,069 $ 2,215 5.5 %
Assisted and independent living revenue 4,754 4,389 365 8.3 %
Total TSA services revenue$ 47,038 $ 44,458 $ 2,580 5.8 %
Number of facilities at period end 29 29 %
Actual patient days 186,096 182,708 3,388 1.9 %
Occupancy percentage — Operational beds 73.3% 71.9% 1.4 %
Skilled mix by nursing days 34.1% 31.8% 2.3 %
Skilled mix by nursing revenue 55.9% 54.6% 1.3 %
Three Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):
Skilled nursing revenue$72,346 $11,883 $60,463 NM
Assisted and independent living revenue 16,594 2,321 14,273 NM
Total TSA services revenue$88,940 $14,204 $74,736 NM
Number of facilities at period end 71 14 57 NM
Actual patient days 437,124 80,217 356,907 NM
Occupancy percentage — Operational beds 73.1% 73.0% NM
Skilled mix by nursing days 32.1% 29.6% NM
Skilled mix by nursing revenue 55.6% 50.7% NM
Three Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Facility Closed(4):
Skilled nursing revenue$- $1,763 $(1,763) NM ��
Assisted and independent living revenue - - - NM
Total TSA services revenue$- $1,763 $(1,763) NM
Actual patient days - 8,748 (8,748) NM
Occupancy percentage — Operational beds 0.0% 70.2% NM
Skilled mix by nursing days 0.0% 10.5% NM
Skilled mix by nursing revenue 0.0% 26.9% NM
_______________________
(1) Same Facility results represent all facilities purchased prior to January 1, 2013.
(2) Transitioning Facility results represents all facilities purchased from January 1, 2013 to December 31, 2014.
(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2015.
(4) Facility Closed represent the result of one facility closed during the first quarter of 2016. These results were excluded from Same Facility results for three months ended June 30, 2016 and 2015 for comparison purposes.
Six Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Total Facility Results:
Skilled nursing revenue$ 655,631 $ 530,179 $ 125,452 23.7 %
Assisted and independent living revenue 60,877 30,230 30,647 101.4 %
Total TSA services revenue$ 716,508 $ 560,409 $ 156,099 27.9 %
Number of facilities at period end 206 150 56 37.3 %
Actual patient days 2,842,504 2,198,396 644,108 29.3 %
Occupancy percentage — Operational beds 76.7% 78.4% (1.7)%
Skilled mix by nursing days 31.9% 30.2% 1.7 %
Skilled mix by nursing revenue 53.6% 53.2% 0.4 %
Six Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Same Facility Results(1):
Skilled nursing revenue$ 449,545 $ 427,549 $ 21,996 5.1 %
Assisted and independent living revenue 18,467 18,280 187 1.0 %
Total TSA services revenue$ 468,012 $ 445,829 $ 22,183 5.0 %
Number of facilities at period end 106 106 %
Actual patient days 1,698,652 1,694,987 3,665 0.2 %
Occupancy percentage — Operational beds 79.4% 80.3% (0.9)%
Skilled mix by nursing days 30.9% 30.3% 0.6 %
Skilled mix by nursing revenue 52.3% 53.5% (1.2)%
Six Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Transitioning Facility Results(2):
Skilled nursing revenue$ 86,223 $ 80,640 $ 5,583 6.9 %
Assisted and independent living revenue 9,341 8,755 586 6.7 %
Total TSA services revenue$ 95,564 $ 89,395 $ 6,169 6.9 %
Number of facilities at period end 29 29 %
Actual patient days 374,345 364,555 9,790 2.7 %
Occupancy percentage — Operational beds 73.7% 71.8% 1.9 %
Skilled mix by nursing days 34.5% 31.4% 3.1 %
Skilled mix by nursing revenue 56.4% 54.2% 2.2 %
Six Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):
Skilled nursing revenue$ 119,243 $ 18,331 $ 100,912 NM
Assisted and independent living revenue 33,069 3,195 29,874 NM
Total TSA services revenue$ 152,312 $ 21,526 $ 130,786 NM
Number of facilities at period end 71 14 57 NM
Actual patient days 766,262 120,913 645,349 NM
Occupancy percentage — Operational beds 72.5% 74.5% NM
Skilled mix by nursing days 33.9% 26.3% NM
Skilled mix by nursing revenue 56.5% 46.9% NM
Six Months Ended
June 30,
2016 2015
(Dollars in thousands) Change % Change
Facility Closed(4):
Skilled nursing revenue$ 620 $ 3,659 $ (3,039) NM
Assisted and independent living revenue - - - NM
Total TSA services revenue$ 620 $ 3,659 $ (3,039) NM
Actual patient days 3,245 17,941 (14,696) NM
Occupancy percentage — Operational beds 70.7% 72.4% NM
Skilled mix by nursing days 9.6% 13.0% NM
Skilled mix by nursing revenue 14.0% 31.6% NM
_______________________
(1) Same Facility results represent all facilities purchased prior to January 1, 2013.
(2) Transitioning Facility results represents all facilities purchased from January 1, 2013 to December 31, 2014.
(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2015.
(4) Facility Closed represent the result of one facility closed during the three and six months ended June 30, 2016. These results were excluded from Same Facility results for six months ended June 30, 2016 and 2015 for comparison purposes. Included in the six months ended June 30, 2016 results is one month of operation as the facility was closed in February 2016; as such, the metrics are not comparable to the results during the six months ended June 30, 2015.

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 June 30,
Same Facility Transitioning Acquisitions Total
2016 2015 2016 2015 2016 2015 2016 2015
Skilled Nursing Average Daily Revenue Rates:
Medicare$581.48 $562.69 $557.12 $555.42 $494.81 $452.97 $555.11 $554.72
Managed care 424.79 421.17 461.67 458.59 409.62 428.20 427.43 428.94
Other skilled 468.47 468.38 351.42 324.76 384.43 666.11 440.25 448.95
Total skilled revenue 505.99 499.85 478.37 477.00 453.45 459.54 489.49 494.31
Medicaid 215.90 185.58 190.70 182.54 168.98 185.95 202.11 184.80
Private and other payors 207.64 189.48 213.58 192.98 181.61 193.58 201.41 189.87
Total skilled nursing revenue$303.93 $280.60 $291.18 $277.29 $262.10 $268.65 $292.40 $278.71
Six Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2016 2015 2016 2015 2016 2015 2016 2015
Skilled Nursing Average Daily Revenue Rates:
Medicare$580.14 $564.51 $557.08 $556.26 $492.44 $451.51 $556.51 $558.20
Managed care 423.08 416.35 463.87 461.45 410.07 412.68 427.65 425.87
Other skilled 467.33 473.75 350.59 324.95 389.41 669.14 439.46 456.13
Total skilled revenue 503.07 500.66 478.42 480.87 451.99 461.00 488.82 496.10
Medicaid 206.35 189.91 189.43 183.02 175.67 184.53 198.28 188.20
Private and other payors 203.57 189.94 223.90 202.20 190.29 190.81 203.59 191.62
Total skilled nursing revenue$297.95 $284.22 $292.81 $278.95 $271.05 $258.71 $291.81 $281.59

The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months ended June 30, 2016 and 2015:
Three Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2016 2015 2016 2015 2016 2015 2016 2015
Percentage of Skilled Nursing Revenue:
Medicare27.8% 30.7% 23.1% 24.4% 32.5% 35.0% 28.2% 29.9%
Managed care15.6 15.7 26.5 25.0 19.6 11.3 17.8 16.9
Other skilled7.7 7.2 6.3 5.2 3.5 4.4 6.7 6.6
Skilled mix51.1 53.6 55.9 54.6 55.6 50.7 52.7 53.4
Private and other payors7.9 8.2 8.1 8.1 9.2 15.6 8.1 8.6
Quality mix59.0 61.8 64.0 62.7 64.8 66.3 60.8 62.0
Medicaid41.0 38.2 36.0 37.3 35.2 33.7 39.2 38.0
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Three Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2016 2015 2016 2015 2016 2015 2016 2015
Percentage of Skilled Nursing Days:
Medicare14.4% 15.3% 12.1% 12.2% 17.2% 20.8% 14.8% 15.0%
Managed care11.1 10.5 16.7 15.1 12.5 7.1 12.1 11.0
Other skilled4.9 4.3 5.3 4.5 2.4 1.7 4.4 4.1
Skilled mix30.4 30.1 34.1 31.8 32.1 29.6 31.3 30.1
Private and other payors12.3 12.1 10.9 11.5 13.3 21.8 12.3 12.6
Quality mix42.7 42.2 45.0 43.3 45.4 51.4 43.6 42.7
Medicaid57.3 57.8 55.0 56.7 54.6 48.6 56.4 57.3
Total skilled nursing100.0% 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 six months ended June 30, 2016 and 2015:
Six Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2016 2015 2016 2015 2016 2015 2016 2015
Percentage of Skilled Nursing Revenue:
Medicare28.0% 31.1% 22.9% 23.8% 32.7% 31.4% 28.2% 29.9%
Managed care16.5 15.4 27.0 26.0 19.5 9.7 18.4 16.8
Other skilled7.8 7.0 6.5 4.4 4.3 5.8 7.0 6.5
Skilled mix52.3 53.5 56.4 54.2 56.5 46.9 53.6 53.2
Private and other payors7.9 8.0 8.1 8.6 8.5 17.0 8.1 8.5
Quality mix60.2 61.5 64.5 62.8 65.0 63.9 61.7 61.7
Medicaid39.8 38.5 35.5 37.2 35.0 36.1 38.3 38.3
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Six Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2016 2015 2016 2015 2016 2015 2016 2015
Percentage of Skilled Nursing Days:
Medicare14.3% 15.6% 12.0% 11.9% 18.0% 18.0% 14.7% 15.1%
Managed care11.6 10.5 17.0 15.7 12.9 6.1 12.5 11.1
Other skilled5.0 4.2 5.5 3.8 3.0 2.2 4.7 4.0
Skilled mix30.9 30.3 34.5 31.4 33.9 26.3 31.9 30.2
Private and other payors11.9 12.1 10.7 11.9 12.2 23.0 11.8 12.5
Quality mix42.8 42.4 45.2 43.3 46.1 49.3 43.7 42.7
Medicaid57.2 57.6 54.8 56.7 53.9 50.7 56.3 57.3
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
The following tables summarize our selected performance indicators for our home health and hospice segment along with other statistics, for each of the dates or periods indicated:
Three Months Ended June 30,
2016 2015 Change % Change
(Dollars in thousands)
Results:
Home health and hospice revenue
Home health services:$ 14,416 $ 11,294 $ 3,122 27.6 %
Hospice services: 14,077 8,650 5,427 62.7
Total home health and hospice revenue$ 28,493 $ 19,944 $ 8,549 42.9 %
Home health services:
Medicare Episodic Admissions 2,037 1,672 365 21.8 %
Average Medicare Revenue per Completed Episode $ 2,950 $ 2,954 $ (4) (0.1)%
Hospice services:
Average Daily Census 898 562 336 59.8 %
Six Months Ended June 30,
2016 2015 Change % Change
(Dollars in thousands)
Results:
Home health and hospice revenue
Home health services:$ 28,324 $ 21,656 $ 6,668 30.8 %
Hospice services: 26,835 16,604 10,231 61.6
Total home health and hospice revenue$ 55,159 $ 38,260 $ 16,899 44.2 %
Home health services:
Medicare Episodic Admissions 4,194 3,415 779 22.8 %
Average Medicare Revenue per Completed Episode $ 2,937 $ 2,984 $ (47) (1.6)%
Hospice services:
Average Daily Census 871 552 319 57.8 %

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 June 30, Six Months Ended June 30,
2016 2015 2016 2015
$ % $ % $ % $ %
Revenue:(Dollars in thousands) (Dollars in thousands)
Medicaid$ 132,763 32.3% $ 100,873 32.4% $ 250,338 31.6% $ 202,502 32.8%
Medicare 119,443 29.1 95,396 30.7 229,721 28.9 189,752 30.7
Medicaid—skilled 20,661 5.0 16,745 5.4 42,327 5.3 32,282 5.3
Total 272,867 66.4 213,014 68.5 522,386 65.8 424,536 68.8
Managed care 65,178 15.9 47,633 15.3 129,721 16.4 93,963 15.2
Private and other(1) 72,472 17.7 50,409 16.2 141,643 17.8 99,086 16.0
Total revenue$ 410,517 100.0% $ 311,056 100.0% $ 793,750 100.0% $ 617,585 100.0%
(1) Private and other payors also includes revenue from urgent care centers and other ancillary operations.

THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Net income attributable to The Ensign Group, Inc.$ 11,326 $ 13,188 $ 20,498 $ 28,360
Non-GAAP adjustments
Results at urgent care centers, including noncontrolling interests(a) 47 191 (148) 22
Costs incurred for facilities currently being constructed and other start-up operations(b) 2,794 472 5,592 618
Results at a closed facility, including continued obligations and closing expenses(c) 219 8,403
Stock-based compensation expense(d) 2,780 1,733 4,665 3,226
Cost of services - Insurance reserve in connection with the settlement of a general liability claim(e) 1,586 1,586
General and administrative - Acquisition related costs(f) 748 438 893 590
General and administrative - Costs incurred related to new systems implementation and professional service fees(g) 269 881 947 1,168
General and administrative - Break up fee, net of costs, received in connection with a public auction(h) (1,019)
Depreciation and amortization - Patient base(i) 713 308 991 592
Interest expense - Write off of deferred financing fees and amortization of deferred financing fees related to spin-off debt(j) 46 225 92
Provision for income taxes on Non-GAAP adjustments(k) (3,422) (1,510) (8,758) (1,966)
Non-GAAP Net Income$17,060 $15,747 $34,894 $31,683
Diluted Earnings Per Share As Reported
Net Income$0.22 $0.25 $0.39 $0.55
Average number of shares outstanding 51,931 52,866 52,134 51,272
Adjusted Diluted Earnings Per Share
Net Income$0.33 $0.30 $0.67 $0.62
Average number of shares outstanding 51,931 52,866 52,134 51,272
(a) Represent operating results at newly opened urgent care centers, including noncontrolling interest.
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Revenue$(7,042) $(6,974) $(14,642) $(13,641)
Cost of services 6,226 6,351 12,751 12,235
Rent 554 520 1,116 1,009
Depreciation and amortization 304 296 603 577
Non-controlling interest 5 (2) 24 (158)
Total Non-GAAP adjustment$47 $191 $(148) $22
(b) Represent operating results for facilities currently being constructed and other start-up operations.
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Revenue$(6,894) $- $(10,653) $-
Cost of services 7,343 462 12,464 608
Rent 2,165 7 3,488 7
Depreciation and amortization 180 10 293 10
Total Non-GAAP adjustment$2,794 $479 $5,592 $625
(c) Represent results at closed facility during the three and six months ended June 30, 2016, including fair value of continued obligation under lease agreement and related closing expenses $7.9 million and operating loss of $0.3 million.
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Revenue$- $- $(105) $-
Cost of services 207 - 8,436 -
Rent 2 - 58 -
Depreciation and amortization 10 - 14 -
Total Non-GAAP adjustment$219 $- $8,403 $-
(d) Represent stock-based compensation expense incurred.
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Cost of services$1,316 $1,119 $2,529 $2,081
General and administrative 1,464 614 2,136 1,145
Total Non-GAAP adjustment$2,780 $1,733 $4,665 $3,226
(e) Included in cost of services are insurance reserves in connection with the settlement of a general liability claim.
(f) Included in general and administrative expense are costs incurred to acquire an operation which are not capitalizable.
(g) Included in general and administrative expense are costs incurred related to new systems implementation and income tax credits which contributed to a decrease in effective tax rate.
(h) Included in general and administrative expense is breakup fee, net of costs, received in connection with a public auction.
(i) Included in depreciation and amortization are amortization costs related to patient base intangible assets at newly acquired skilled nursing and assisted living facilities.
(j) Included in interest expense are write-offs of deferred financing fees associated with the amendment of credit facility and amortization of deferred financing fees related to the former revolving credit facility as part of the spin-off transaction.
(k) Represent adjustment to provision for income tax to our historical year to date effective tax rate of 38.5%

THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
The table below reconciles net income to EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Consolidated Statements of Income Data:
Net income 11,363 13,233 20,653 28,323
Less: net income (loss) attributable to noncontrolling interests 37 45 155 (37)
Interest expense, net 1,168 372 2,303 872
Provision for income taxes 7,278 8,379 13,167 17,964
Depreciation and amortization 9,772 6,379 18,069 12,896
EBITDA 29,544 28,318 54,037 60,092
Facility rent—cost of services 30,741 19,066 57,732 38,031
EBITDAR 60,285 47,384 111,769 98,123
EBITDA$29,544 $28,318 $54,037 $60,092
Adjustments to EBITDA:
Urgent care center earnings(a) (811) (625) (1,867) (1,565)
Costs incurred for facilities currently being constructed and other start-up operations(b) 449 462 1,812 608
Results at closed facility, including continued obligations and closing expenses (c) 206 8,331
Stock-based compensation expense(d) 2,780 1,733 4,665 3,226
Insurance reserve in connection with the settlement of a general liability claim(e)
1,586 1,586
Acquisition related costs(f) 748 438 893 590
Costs incurred related to new systems implementation and professional service fees(g) 269 885 947 1,198
Breakup fee, net of costs, received in connection with a public auction(h) (1,019)
Rent related to items(a), (b), and (c) above 2,721 527 4,662 1,016
Adjusted EBITDA$ 37,492 $ 31,738 $ 75,066 $ 64,146
Rent—cost of services 30,741 19,066 57,732 38,031
Less: rent related to items(a), (b) and (c) above (2,721) (527) (4,662) (1,016)
Adjusted EBITDAR$65,512 $50,277 $128,136 $101,161
(a) Operating results at urgent care centers. This amount excludes rent, depreciation and interest of $0.8 million and $1.7 million for the three and six months ended June 30, 2016, respectively, and $0.8 million and $1.6 million for the three and six months ended June 30, 2015, respectively. The results also excluded the net loss attributable to the variable interest entity associated with our urgent care business.
(b) Costs incurred for facilities currently being constructed and other start-up operations. This amount excludes rent, depreciation and interest of $2.3 million and $3.8 million for the three and six months ended June 30, 2016, respectively. Rent, depreciation and interest expenses were not material for the three and six months ended June 30, 2015.
(c) Results at a closed facility during three and six months ended June 30, 2016, including fair value of continued obligation under the lease agreement and related closing expenses of $7.9 million and operating loss of $0.2 million for both the three and six months ended June 30, 2016. This amount excludes rent and depreciation of $0.1 million for the six months ended June 30, 2016.
(d) Stock-based compensation expense incurred during the three and six months ended June 30, 2016 and 2015.
(e) Insurance reserves in connection with the settlement of a general liability claim.
(f) Costs incurred to acquire an operation which are not capitalizable.
(g) Costs incurred related to new systems implementation and income tax credits which contributed to a decrease in effective tax rate.
(h) Breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder.

THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
The table below reconciles net income to EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR for each reportable segment for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015 2016 2015 2016 2015
TSA Services Home Health and Hospice TSA Services Home Health and Hospice
Statements of Income Data:
Income from operations, excluding general and administrative expense(a) $36,098 $35,067 $4,349 $2,996 $66,954 $72,366 $7,525 $5,671
Depreciation and amortization 7,775 4,877 229 224 14,077 9,826 496 445
EBITDA $43,873 $39,944 $4,578 $3,220 $81,031 $82,192 $8,021 $6,116
Rent—cost of services 29,747 18,214 369 276 55,733 36,376 747 535
EBITDAR $73,620 $58,158 $4,947 $3,496 $136,764 $118,568 $8,768 $6,651
EBITDA $43,873 $39,944 $4,578 $3,220 $81,031 $82,192 $8,021 $6,116
Adjustments to EBITDA:
Costs at facilities currently being constructed and other start-up operations(b) 441 462 8 1,773 608 39
Results at closed facility, including continued obligations and closing expenses (c) 206 8,331
Stock-based compensation expense(d) 1,216 1,033 72 61 2,337 1,913 138 122
Insurance reserve in connection with the settlement of a general liability claim(e)
1586 1586
Rent related to item(c) and (e)above 2,156 9 3,470 18
Adjusted EBITDA $49,478 $41,439 $4,667 $3,281 $98,528 $84,713 $8,216 $6,238
Rent—cost of services 29,747 18,214 369 276 55,733 36,376 747 535
Less: rent related to items(c) and (e)above (2,156) (9) (3,470) (18)
Adjusted EBITDAR $77,069 $59,653 $5,027 $3,557 $150,791 $121,089 $8,945 $6,773
(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) Costs incurred for facilities currently being constructed and other start-up operations. This amount excluded rent, depreciation and interest of $2.3 million and $3.8 million for the three and six months ended June 30, 2016, respectively. Rent, depreciation and interest expenses were not material for the three and six months ended June 30, 2015.
(c) Results at closed facility during three and six months ended June 30, 2016, including fair value of continued obligation under lease agreement and related closing expenses of $7.9 million and operating loss of $0.2 million for both the three and six months ended June 30, 2016. This amount excluded rent and depreciation of $0.1 million for the six months ended June 30, 2016.
(d) Stock-based compensation expense incurred during the three and six months ended June 30, 2016 and 2015.
(e) Insurance reserves in connection with the settlement of a general liability claim.
(f) Costs incurred to acquire operations which are not capitalizable.

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. EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization and (d) rent-cost of services. 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 being constructed and other start-up operations, excluding depreciation, interest and income taxes, (e) results of a single closed operation, (f) stock-based compensation expense, (g) costs incurred related to new systems implementation, (h) breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder, (i) professional service fees include costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate, (j) costs incurred to acquire operations which are not capitalized, (k) insurance reserves in connection with the settlement related to a general liability claim and (l) operating results at urgent care centers, excluding depreciation, interest and income taxes. 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 being constructed and other start-up operations, excluding rent, depreciation, interest and income taxes, (f) results of a single closed operation, (g) stock-based compensation expense, (h) costs incurred related to new systems implementation, (i) break-up fee, net of costs, received in connection with a public auction in which we were the priority bidder , (j) professional service fees include costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate, (k) costs incurred to acquire operations which are not capitalized, (l) insurance reserves in connection with the settlement related to a general liability claim and (m) operating results at urgent care centers, excluding rent, depreciation, interest and income taxes. 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 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.

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

Source:The Ensign Group, Inc.