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The Ensign Group Meets Earnings Guidance of $1.27 Per Share for 2015; Reaffirms 2016 Projections
Globe Newswire
Conference Call and Webcast Scheduled for Tomorrow, February 11, 2016 at 10:00 am PT

MISSION VIEJO, Calif., Feb. 10, 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 reported operating results for the fourth quarter and full year 2015.

Quarter and Fiscal Year Highlights Include:

  • Adjusted earnings per share were $1.27 for the year, an increase of 16.4% over the prior year, and $0.35 for the quarter, an increase of 29.6% over the prior year quarter;
  • Consolidated adjusted net income climbed 31.6% over the prior year to $66.1 million, and 44.7% over the prior year quarter to $18.5 million;
  • Consolidated adjusted EBITDAR was $221.3 million for the year, an increase of 38.8%, and $63.1 million for the quarter, an increase of 43.5%;
  • Same-store revenue for all segments grew by 6.9% over the prior year, and by 7.9% over the prior year quarter, and same-store TSA revenue grew by 6.4% over the prior year, and by 7.5% over the prior year quarter;
  • Same store skilled revenue mix increased by 115 basis points over the prior year to 52.9%;
  • Cornerstone Healthcare, Inc., our home health and hospice subsidiary, grew its revenue by $35.8 million to $90.4 million for the year, an increase of 65.7% over the prior year; and
  • Consolidated revenues for the year were up $314.4 million or 30.6% over the prior year to $1.34 billion, and consolidated revenues for the quarter were up $96.3 million or 34.8% over the prior year quarter to $373.2 million.

Operating Results

“We are pleased to report that operating results met consensus and our annual earnings guidance, which was increased three times during 2015, with adjusted earnings per share of $1.27 for the year,” said Ensign’s President and Chief Executive Officer Christopher Christensen. He stated that “Although there were some temporary challenges in some operations, the overall strength inherent in Ensign’s local approach to healthcare continues to drive steady improvements in each distinct healthcare market.”  He credited the 2015 results to the local leaders and their teams, highlighting their ability to innovate in the midst of an ever-changing healthcare environment.

Mr. Christensen reiterated that as of December 31, 2015, the company had 68 operations in the recently acquired bucket, which is the highest number of operations in that category in the organization’s history. “While we are pleased with the contribution of a few of our newly acquired facilities to our 2015 results, most of our newly acquired operations have not yet contributed to our results in any meaningful way,” he said. He also noted that “our recent growth puts us in an unprecedented position for continued organic improvement in 2016 and beyond as these recently acquired operations begin to meet their potential, most of which we expect to occur towards the end of 2016.”

“We are also pleased to be reaffirming our annual guidance for 2016, projecting annual revenue of between $1.53 billion and $1.58 billion and annual earnings per share guidance between $1.43 and $1.50 per diluted share,” Christensen continued.  He also emphasized that, given the number of new operations acquired last year, management expects much of the increase in performance in 2016 to occur in the later part of the year, adding that it often takes several quarters for newly acquired facilities to perform. He also noted that, “As we often remind you, our results are not symmetrical from quarter to quarter, especially in periods of significant growth, but we have been able to project performance fairly accurately on an annual basis.” 

Chief Financial Officer Suzanne Snapper reported that Ensign’s balance sheet remains strong in spite of our record acquisition activity, with its conservative adjusted net-debt-to-EBITDAR ratio of 3.37x at year end.  Ms. Snapper added that “as a result of our ever improving discipline, we recently increased our revolving line of credit to $250 million, an increase of $100 million.” She further noted that as of December 31, 2015 the company had $41.6 million in cash on hand.

Ms. Snapper also reported that consolidated revenues in for the year were up 30.6% over the prior year to a record $1.34 billion and consolidated adjusted EBITDAR for the year grew by 38.8% to $221.3 million.  Fully diluted adjusted earnings per share were $0.35 for the quarter and adjusted net income was $18.5 million.  Fully diluted GAAP earnings per share were $1.06 for the year and $0.26 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-K, 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, Ensign paid a quarterly cash dividend of $0.04 per share of its common stock, an increase of 6.7% over the prior year. This is the thirteenth consecutive year Ensign has increased its dividend, signaling the board’s and management’s continued confidence in Ensign's operating model and its ability to return long-term value to shareholders. Ensign has been a dividend-paying company since 2002. 

In addition, the Company completed a 2 for 1 split of its outstanding stock, increasing the number of basic outstanding shares to approximately 51.4 million as of December 31, 2015. Mr. Christensen noted that the stock split made Ensign stock more affordable for a wider range of investors, increasing the liquidity and trading volumes.

On February 5, 2016, Ensign also increased its revolving credit facility by $100 million to an aggregate of $250 million, $111.8 million of which was drawn as of February 5, 2016.  The amendment reduced the LIBOR-based interest rate by 50 basis points and extended the termination date for the revolving commitment to February 5, 2021, among other things.

Also during the quarter and since, affiliates of Ensign acquired 7 skilled nursing facilities and opened 3 healthcare resorts, including:

  • In Kansas, The Healthcare Resort of Kansas City, featuring a 70-bed licensed transitional care operation and 30 private assisted living suites under a long-term lease;
  • In Chandler and Scottsdale, Arizona, Chandler Post Acute and Rehabilitation, a 120-bed skilled nursing operation, and Shea Post Acute Rehabilitation Center, a 105-bed skilled nursing operation under a long-term lease;
  • In West Columbia, South Carolina, the operations and real estate of Millennium Post Acute Rehabilitation, a 125-bed skilled nursing operation;
  • In Kansas, The Healthcare Resort of Shawnee Mission, featuring a 101-bed licensed transitional care operation and 24 private assisted living suites under a long-term lease;
  • In El Cajon, California, the underlying real estate of Somerset Subacute and Rehabilitation, a 46-bed skilled nursing operation that has been operated under a lease arrangement since December 2014;
  • In South Carolina, the operations and real estate of Compass Post Acute Rehabilitation, a 95-bed skilled nursing operation in Conway, Las Colinas Post Acute Rehabilitation, a 99-bed skilled nursing operation in Rock Hill, and Opus Post Acute Rehabilitation, a 100-bed skilled nursing operation in West Columbia; and
  • In Kansas, The Healthcare Resort of Olathe, featuring a 70-bed licensed transitional care operation and 30 private assisted living suites under a long-term lease;

These additions bring Ensign's growing portfolio to 187 healthcare operations, thirty-two of which are owned, fourteen hospice agencies, fifteen home health agencies, three home care businesses and seventeen urgent care clinics across 14 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 Reaffirmed

Management also reaffirmed its 2016 guidance, projecting annual revenue of between $1.53 billion and $1.58 billion and earnings per share guidance to between $1.43 and $1.50 per diluted share for 2016.  Management’s guidance is based on diluted weighted average common shares outstanding of 53.3 million, which includes the impact of the 2 for 1 stock split completed in the fourth quarter of 2015.  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. 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 and costs incurred for facilities currently being constructed and other start-up operations.

Conference Call

A live webcast will be held Thursday, February 11, 2016 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s fourth quarter and fiscal year 2015 financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign’s website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific Time on Friday, March 25, 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 187 facilities, fourteen hospice agencies, fifteen home health agencies, three home care businesses and seventeen urgent care clinics in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas and South Carolina. More information about Ensign is available at http://www.ensigngroup.net.  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-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.

 

THE ENSIGN GROUP, INC.
GAAP and ADJUSTED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
            
 Three Months Ended
December 31, 2015
 Year Ended
December 31, 2015
 As Reported Non-GAAP Adj. As Adjusted As
Reported
 Non-GAAP Adj. As
Adjusted
Revenue$373,155  $  (8,059) (5)$365,096    1,341,826  $(28,066) (5)$1,313,760 
Expense:                
Cost of services (exclusive of rent, general and administrative and depreciation and amortization expense shown separately below) 297,401     (11,322)(1)(3)
(5)(8)
 286,079   1,067,694   (35,321)(1)(3)(5) (8) 1,032,373 
Rent—cost of services   26,245     (1,190) (6)(8)   25,055     88,776     (2,746) (6)(8)   86,030 
General and administrative expense   17,246     (1,360)(1)(2)(3)(4)(9)   15,886     64,163     (4,249)(1)(2)(3) (4)(9)   59,914 
Depreciation and amortization   7,926     (585) (7)   7,341     28,111     (2,279) (7)   25,832 
Total expenses 348,818   (14,457)  334,361   1,248,744   (44,595)  1,204,149 
Income from operations   24,337     6,398     30,735     93,082   16,529   109,611 
Other income (expense):                
Interest expense   (793)    46     (747)    (2,828)    184     (2,644)
Interest income   242     -      242     845     -      845 
Other expense, net   (551)    46     (505)    (1,983)    184     (1,799)
Income before provision for income taxes   23,786     6,444     30,230     91,099   16,713     107,812 
Tax Effect on Non-GAAP Adjustments       2,481         6,434   
Tax True-up for Effective Tax Rate       (191)        (109)  
Provision for income taxes   9,349     2,290   (10
)
   11,639     35,182     6,325  (10 )   41,507 
Net income   14,437     4,154       18,591     55,917   10,388       66,305 
Less: net (loss) income attributable to noncontrolling interests   836     (784)     52     485     (290)    195 
Net income attributable to The Ensign Group, Inc.$  13,601     4,938  $  18,539  $  55,432   10,678  $  66,110 
Net income per share:                       
Basic:$  0.27    $  0.36  $  1.10    $  1.31 
Diluted$  0.26    $  0.35  $  1.06    $  1.27 
Weighted average common shares outstanding:              
Basic   51,308       51,308     50,316       50,316 
Diluted   53,193       53,193     52,210       52,210 
________________________                   
(1)  Represents acquisition-related costs of $604 and $1,397 for the three months and year ended December 31, 2015, respectively. 
(2)  Represents costs of $131 and $267 for the three months and year ended December 31, 2015, respectively, incurred to recognize income tax credits and effect the stock-split in Q4 2015.
(3)  Represents stock-based compensation expense of $1,729 and $6,677 for the three months and year ended December 31, 2015, respectively. 
(4)  Represents costs of $567 and $2,550 for the three months and year ended December 31, 2015, respectively, incurred related to new systems implementation. 
(5)  Represents revenues and expenses incurred at 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 urgent care centers included in Note (5) and Note (8). 
(7)  Represents depreciation expense at urgent care centers, facilities currently being constructed and start-up operations and amortization costs related to patient base intangible assets at skilled nursing and assisted living facilities.
(8)  Represents costs incurred for facilities currently being constructed and start-up operations during the three months and year ended December 31, 2015. 
(9)  Represents breakup fee, net of costs, received in connection with a public auction in which we were the priority bidder. 
(10)  Represents the adjustment to provision for income tax to our historical year to date effective tax rate of 38.5% for the three months ended and year ended December 31, 2015.

 

 

THE ENSIGN GROUP, INC.
GAAP and ADJUSTED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
    
           
 Three Months Ended
December 31, 2014
 Year Ended
December 31, 2014
    
 As Reported Non-GAAP Adj. As Adjusted As
Reported
 Non-GAAP Adj. As
Adjusted
    
Revenue$  276,869     (4,409)(4)(5)$  272,460  $  1,027,406     (14,505)(4)(5)$ 1,012,901     
Expense:                            
Cost of services (exclusive of rent, general and administrative and depreciation and amortization expense shown separately below) 221,137   (5,060)(1)(4)(5) 216,077     822,669   (16,966)(1)(4)(5)   805,703     
Rent—cost of services   18,480   (402) (6)   18,078     48,488   (1,941) (6)   46,547     
General and administrative expense   12,525   (200)(2)(3)(4)   12,325     56,895   (9,234)(2)(3)(4)   47,661     
Depreciation and amortization   5,087   (371) (7)   4,716     26,430   (1,265) (7)   25,165     
Total expenses 257,229   (6,033)  251,196   954,482   (29,406)  925,076     
Income from operations   19,640   1,624     21,264     72,924   14,901     87,825     
Other income (expense):                            
Interest expense   (486)  46     (440)    (12,976)  6,517     (6,459)    
Interest income   159     -      159     594     -      594     
Other expense, net   (327)  46     (281)    (12,382)    6,517     (5,865)    
Income before provision for income taxes   19,313   1,670     20,983     60,542     21,418     81,960     
Tax Effect on Non-GAAP Adjustments     643           8,246         
Tax True-up for Effective Tax Rate     (1,082)          (3,492)        
Provision for income taxes   8,517   (439) (8)   8,078     26,801   4,754  (8)   31,555     
Net income   10,796     2,109     12,905     33,741     16,664     50,405     
Less: net (loss) income attributable to noncontrolling interests   (715)  807     92     (2,209)  2,370     161     
Net income attributable to The Ensign Group, Inc.$  11,511   1,302  $  12,813  $  35,950   14,294  $  50,244     
Net income per share               
Basic:$  0.26    $  0.28  $  0.80    $  1.12     
Diluted:$  0.25    $  0.27  $  0.78    $  1.09     
Weighted average common shares outstanding:                
Basic   45,038       45,038     44,682       44,682     
Diluted   46,756       46,756     46,190       46,190     
_____________________        
(1)  Represents acquisition-related costs of $453 and $672 for the three months and year ended ended December 31, 2014, respectively.     
(2)  Represents costs of $45 and $138 for the three months and year ended December 31, 2014, respectively, incurred to recognize income tax credits.     
(3)  Represents costs of $155 and $9,026 for the three months and year ended December 31, 2014, incurred related to the Company's spin-off of real estate assets to CareTrust REIT (CTRE) (the Spin-Off).  
(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 adjustment to provision for income tax to our historical year to date effective tax rate of 38.6% for the three months ended and year ended December 31, 2014.   
                

 

THE ENSIGN GROUP, INC.
RECONCILIATION OF NET INCOME 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
December 31,
 Year Ended
December 31,
     
  2015   2014   2015   2014      
Consolidated Statements of Income Data:            
Net income   14,437     10,796     55,917     33,741      
Less: net income (loss) attributable to noncontrolling interests   836     (715)    485     (2,209)     
Interest expense, net   551     327     1,983     12,382      
Provision for income taxes   9,349     8,517     35,182     26,801      
Depreciation and amortization   7,926     5,087     28,111     26,430      
EBITDA   31,427     25,442     120,708     101,563      
Facility rent—cost of services   26,245     18,480     88,776     48,488      
EBITDAR   57,672     43,922     209,484     150,051      
             
EBITDA$  31,427  $  25,442  $  120,708  $  101,563      
Adjustments to EBITDA:            
Spin-Off charges including results at three independent living facilities transferred to CareTrust(a)   -      155     -      8,904      
Urgent care center losses (earnings)(b)   850     (609)    (1,132)    (389)     
Breakup fee, net of costs, received in connection with a public auction(c)   -      -      (1,019)    -       
Acquisition related costs(d)   604     453     1,397     672      
Stock-based compensation expense(e)   1,729     -      6,677     -       
Costs incurred for facilities currently being constructed and other start-up operations(f)   1,528     -      3,054     -       
Costs incurred related to new systems implementation(g)   567     -      2,550     -       
Professional service fees(h)   131     45     267     138      
Rent related to items(a), (b), and (f) above   1,190     402     2,746     1,941      
Adjusted EBITDA$  38,026  $  25,888  $  135,248  $  112,829      
Facility rent—cost of services   26,245     18,480     88,776     48,488      
Less: rent related to items(a), (b) and (f) above   (1,190)    (402)    (2,746)    (1,941)     
Adjusted EBITDAR$  63,081  $  43,966  $  221,278  $  159,376      
             
(a)  Spin-Off charges including results at three independent living facilities transferred to CareTrust in connection with the Spin-Off transaction.
     
(b)  Operating results at newly opened urgent care centers.  This amount excluded rent, depreciation, interest and income taxes. The results also excluded the net loss attributable to the variable interest entity associated with our urgent care business.
 
(c)  Breakup fee, net of costs, received in connection with a public auction.
     
(d)  Costs incurred to acquire an operation which are not capitalizable.
     
(e)  Stock-based compensation expense incurred during the three months and year ended December 31, 2015. Adjusted EBITDA and EBITDAR for the three months and year ended December 31, 2014 did not include non-GAAP adjustment related to stock-based compensation expense of $1.4 million and $5.2 million, respectively. If adjusted for stock-based compensation expense, Adjusted EBITDA for the three months and year ended December 31, 2014 would have been $27.3 million and $118.0 million, respectively, and Adjusted EBITDAR for the three months and year ended December 31, 2014 would have been $45.3 million and $164.6 million, respectively. EBITDA for the year ended December 31, 2014 reflects four month increase in rent expense as a result of the Spin-Off compared to twelve months increase in rent expense for the year ended December 31, 2015.
(f)  Costs incurred for facilities currently being constructed and other start-up operations.
     
(g)  Costs incurred related to new systems implementation.     
(h)  Professional service fees include costs incurred to recognize income tax credits which contributed to a decrease in effective tax rate and expenses incurred in connection with the stock-split effected in December 2015.      

 

THE ENSIGN GROUP, INC.
RECONCILIATION OF NET INCOME 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 each reportable segment for the periods presented:  
                  
  Three Months Ended December 31, Year Ended December 31, 
   2015   2014   2015   2014   2015   2014   2015   2014  
  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) $  39,615  $  30,445  $  3,846  $  2,909  $  148,207  $  126,011  $  13,584  $  9,701  
Depreciation and amortization    5,978     3,749     277     168     21,346     21,669     980     539  
EBITDA $  45,593  $  34,194  $  4,123  $  3,077  $  169,553  $  147,680  $  14,564  $  10,240  
Rent—cost of services  25,266   17,811   369   211   85,216   45,955   1,235   779  
EBITDAR $  70,859  $  52,005  $  4,492  $  3,288  $  254,769  $  193,635  $  15,799  $  11,019  
                  
EBITDA $  45,593  $  34,194  $  4,123  $  3,077  $  169,553  $  147,680  $  14,564  $  10,240  
Adjustments to EBITDA:                 
Stock-based compensation expense(b)    1,043     -      60     -      3,933     -      241     -   
Costs at facilities currently being constructed and other start-up operations(c)    1,060     -      11     -      3,043     -      11     -   
Earnings at three operations transferred to REIT (d)    -      -      -      -      -      (122)    -      -   
Acquisition related costs(e)    604     453     -      -      1,397     672     -      -   
Rent related to item(d) above(f)    644     -      5     -      644     406     5     -   
Adjusted EBITDA $  48,944  $  34,647  $  4,199  $  3,077  $  178,570  $  148,636  $  14,821  $  10,240  
Rent—cost of services    25,266     17,811     369     211     85,216     45,955     1,235     779  
Less: rent related to items(d) above(f)    (644)       (5)       (644)    (406)    (5)   -   
Adjusted EBITDAR $  73,566  $  52,458  $  4,563  $  3,288  $  263,142  $  194,185  $  16,051  $  11,019  
_________________________ 
(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.  
(b) Stock-based compensation expense incurred during the three months ended and year ended December 31, 2015.  
(c) Costs incurred for facilities currently being constructed and other start-up operations during the three months ended and year ended December 31, 2015.  
(d) 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.  
(e) Costs incurred to acquire operations which are not capitalizable.  
                  

 

THE ENSIGN GROUP, INC.
CONSOLIDATED BALANCE SHEETS
 (In thousands)
 
 Year Ended December 31, 
  2015   2014  
Assets    
Current assets:    
Cash and cash equivalents$  41,569  $  50,408  
Restricted cash — current  —     5,082  
Accounts receivable — less allowance for doubtful accounts of $30,308 and $20,438 at December 31, 2015 and 2014, respectively   209,026     130,051  
Investments — current   2,004     6,060  
Prepaid income taxes   8,141     2,992  
Prepaid expenses and other current assets   18,827     8,434  
Deferred tax asset — current   15,403     10,615  
Total current assets   294,970     213,642  
Property and equipment, net   299,633     149,708  
Insurance subsidiary deposits and investments   32,713     17,873  
Escrow deposits   400     16,153  
Deferred tax asset   5,449     11,509  
Restricted and other assets   9,631     6,833  
Intangible assets, net   45,431     35,568  
Goodwill   40,886     30,269  
Other indefinite-lived intangibles   18,646     12,361  
Total assets$  747,759  $  493,916  
     
Liabilities and equity     
Current liabilities:    
Accounts payable   36,029     33,186  
Accrued wages and related liabilities   78,890     56,712  
Accrued self-insurance liabilities — current   18,122     15,794  
Other accrued liabilities   46,205     24,630  
Current maturities of long-term debt   620     111  
Total current liabilities   179,866     130,433  
Long-term debt — less current maturities   99,051     68,279  
Accrued self-insurance liabilities — less current portion   37,881     34,166  
Deferred rent and other long-term liabilities   3,976     3,235  
Total equity   426,985     257,803  
Total liabilities and equity$  747,759  $  493,916  
     
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,
  2015   2014  
Net cash provided by operating activities$  33,369  $  84,880  
Net cash used in investing activities (168,538)    (172,851) 
Net cash provided by financing activities 126,330     72,624  
Net decrease in cash and cash equivalents (8,839)  (15,347) 
Cash and cash equivalents at beginning of period   50,408     65,755  
Cash and cash equivalents at end of period$  41,569  $  50,408  

 

 

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 December 31,  Year Ended Ended December 31, 
  2015  2014  2015  2014 
  Revenue
Dollars
 Revenue
Percentage
  Revenue
Dollars
 Revenue
Percentage
  Revenue
Dollars
 Revenue
Percentage
  Revenue
Dollars
 Revenue
Percentage
 
  (Dollars in thousands)
TSA Services:                    
Skilled nursing facilities $  306,733  82.2% $  240,654  86.9% $  1,126,388    83.9% $  901,470    87.7%
Assisted and independent living facilities  30,213  8.1     13,134  4.8   88,129    6.6     48,848    4.8 
Total TSA services     336,946  90.3     253,788  91.7     1,214,517    90.5     950,318    92.5 
Home health and hospice services:                    
Home health     13,503  3.6     8,639  3.1     47,955    3.6     29,577    2.9 
Hospice    13,344  3.6     7,442  2.7     42,401    3.2     24,939    2.4 
Total home health and hospice services    26,847  7.2     16,081  5.8     90,356    6.8     54,516    5.3 
All other (1)    9,362  2.5   7,000  2.5     36,953    2.7   22,572    2.2 
Total revenue $  373,155  100.0% $  276,869  100.0% $  1,341,826    100.0% $  1,027,406    100.0%
(1) Includes revenue from services provided at our urgent care clinics and mobile ancillary operations. 

 

THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
        
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
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Total Facility Results:       
Skilled nursing revenue$  306,733  $  240,654  $  66,079     27.5%
Assisted and independent living revenue   30,213     13,134     17,079     130.0%
Total TSA services revenue$  336,946  $  253,788  $  83,158     32.8%
Number of facilities at period end   186     136     50     36.8%
Actual patient days   1,357,023     1,026,493     330,530     32.2%
Occupancy percentage — Operational beds 77.2%  78.2%      (1.0)%
Skilled mix by nursing days 30.9%  27.8%      3.1%
Skilled mix by nursing revenue 51.8%  50.4%      1.4%
 Three Months Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Same Facility Results(1):       
Skilled nursing revenue$  222,592  $  206,596  $  15,996     7.7%
Assisted and independent living revenue   7,957     7,885     72     0.9%
Total TSA services revenue$  230,549  $  214,481  $  16,068     7.5%
Number of facilities at period end   101     101       —%
Actual patient days   836,313     840,922     (4,609)    (0.5)%
Occupancy percentage — Operational beds 80.5%  81.0%      (0.5)%
Skilled mix by nursing days 30.3%  28.4%      1.9%
Skilled mix by nursing revenue 51.1%  51.2%      (0.1)%
 Three Months Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Transitioning Facility Results(2):       
Skilled nursing revenue$  17,387  $  16,157  $  1,230     7.6%
Assisted and independent living revenue   3,227     3,126     101     3.2%
Total TSA services revenue$  20,614  $  19,283  $  1,331     6.9%
Number of facilities at period end   17     17      %
Actual patient days   102,317     102,723     (406)    (0.4)%
Occupancy percentage — Operational beds 68.7%  68.1%      0.6%
Skilled mix by nursing days 21.2%  20.0%      1.2%
Skilled mix by nursing revenue 42.5%  39.9%      2.6%
 Three Months Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):       
Skilled nursing revenue$  66,754  $  17,901  $  48,853   NM 
Assisted and independent living revenue   19,029     2,123     16,906   NM 
Total TSA services revenue$  85,783  $  20,024  $  65,759   NM 
Number of facilities at period end   68     18     50   NM 
Actual patient days   418,393     82,848     335,545   NM 
Occupancy percentage — Operational beds 73.3%  67.0%    NM 
Skilled mix by nursing days 35.6%  30.6%    NM 
Skilled mix by nursing revenue 56.0%  51.3%    NM 
_______________________       
(1)  Same Facility results represent all facilities purchased prior to January 1, 2012. 
(2)  Transitioning Facility results represents all facilities purchased from January 1, 2012 to December 31, 2013. 
(3)  Recently Acquired Facility (or “Acquisitions”) results represent all facilities purchased on or subsequent to January 1, 2014. 
 
 Year Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Total Facility Results:       
Skilled nursing revenue$  1,126,388  $  901,470  $  224,918     25.0%
Assisted and independent living revenue   88,129     48,848     39,281     80.4%
Total TSA services revenue$  1,214,517  $  950,318  $  264,199     27.8%
Number of facilities at period end   186     136     50     36.8%
Actual patient days   4,872,742     3,921,758     950,984     24.2%
Occupancy percentage — Operational beds 77.9%  78.0%      (0.1)%
Skilled mix by nursing days 30.4%  27.6%      2.8%
Skilled mix by nursing revenue 52.6%  50.8%      1.8%
 Year Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Same Facility Results(1):       
Skilled nursing revenue$  856,276  $  803,173  $  53,103     6.6%
Assisted and independent living revenue   31,783     31,495     288     0.9%
Total TSA services revenue$  888,059  $  834,668  $  53,391     6.4%
Number of facilities at period end   101     101      %
Actual patient days   3,316,461     3,324,948     (8,487)    (0.3)%
Occupancy percentage — Operational beds 80.9%  80.7%      0.2%
Skilled mix by nursing days 30.3%  28.4%      1.9%
Skilled mix by nursing revenue 52.9%  51.7%      1.2%
 Year Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Transitioning Facility Results(2):       
Skilled nursing revenue$  66,823  $  61,955  $  4,868     7.9%
Assisted and independent living revenue   12,795     11,759     1,036     8.8%
Total TSA services revenue$  79,618  $  73,714  $  5,904     8.0%
Number of facilities at period end   17     17      %
Actual patient days   406,476     397,461     9,015     2.3%
Occupancy percentage — Operational beds 68.8%  66.4%      2.4%
Skilled mix by nursing days 20.9%  19.1%      1.8%
Skilled mix by nursing revenue 42.5%  40.2%      2.3%
 Year Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Recently Acquired Facility Results(3):       
Skilled nursing revenue$  203,289  $  36,342  $  166,947  NM
Assisted and independent living revenue   43,551     4,347     39,204  NM
Total TSA services revenue$  246,840  $  40,689  $  206,151  NM
Number of facilities at period end   68     18     50  NM
Actual patient days   1,149,805     171,333     978,472  NM
Occupancy percentage — Operational beds 73.6%  63.3%   NM
Skilled mix by nursing days 34.2%  28.7%   NM
Skilled mix by nursing revenue 54.9%  48.5%   NM
 Year Ended
December 31,
    
  2015   2014     
 (Dollars in thousands) Change % Change
Transferred to CareTrust(4):       
Skilled nursing revenue$  -   $  -   $  -   NM
Assisted and independent living revenue   -      1,247     (1,247) NM
Total TSA services revenue$  -   $  1,247  $  (1,247) NM
Actual patient days   -      28,016    NM
Occupancy percentage — Operational beds   -    70.3%   NM
_______________________       
(1)  Same Facility results represent all facilities purchased prior to January 1, 2012. 
(2)  Transitioning Facility results represents all facilities purchased from January 1, 2012 to December 31, 2013. 
(3)  Recently Acquired Facility (or “Acquisitions”) results represent all facilities purchased on or subsequent to January 1, 2014. 
(4)  Transferred to CareTrust results represent the results at three independent living facilities which were transferred to CareTrust as part of the Spin-Off on June 1, 2014.  These results were excluded from Same Facility for the nine months ended September 30, 2014 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 December 31, 
 Same Facility Transitioning Acquisitions Total  
  2015   2014   2015   2014   2015   2014   2015   2014   
Skilled Nursing Average Daily Revenue Rates:                 
Medicare$574.76  $564.79  $487.80  $461.91  $517.23  $561.52  $556.02  $556.58     
Managed care   423.69     414.37     472.40     420.03     438.12     458.20     429.72     419.19     
Other skilled   434.17     449.96     355.05     -      357.56     335.63     414.07     436.62     
Total skilled revenue   494.90     493.66     481.99     447.91     456.37     465.21     484.53     488.76     
Medicaid   209.78     185.42     183.69     174.56     195.45     191.46     204.84     184.92     
Private and other payors   194.63     191.44     143.84     141.26     215.35     214.46     193.66     187.98     
Total skilled nursing revenue$295.27  $273.56  $240.73  $223.79  $290.21  $278.00  $290.52  $269.91     
                  
 Year Ended December 31, 
 Same Facility Transitioning Acquisitions Total  
  2015   2014   2015   2014   2015   2014   2015   2014   
Skilled Nursing Average Daily Revenue Rates:                 
Medicare$568.08  $556.11  $485.63  $462.51  $524.90  $542.66  $555.50  $549.12   
Managed care   419.39     412.26     462.72     456.88     443.60     448.43     427.16     416.74   
Other skilled   456.62     447.26     331.93     253.00     361.20     321.73     436.41     437.08   
Total skilled revenue   497.93     491.22     476.58     460.42     463.92     446.07     490.07     487.55   
Medicaid   194.26     180.40     176.59     166.35     195.14     187.52     193.04     179.45   
Private and other payors   193.90     189.28     145.30     149.56     209.51     209.85     192.04     185.79   
Total skilled nursing revenue$286.65  $269.72  $234.36  $219.98  $288.53  $264.21  $283.31  $265.41   

 

The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months and year ended December 31, 2015 and 2014:
                          
 Three Months Ended December 31,  
 Same Facility Transitioning Acquisitions Total  
 2015 2014 2015 2014 2015 2014 2015 2014  
Percentage of Skilled Nursing Revenue:                         
Medicare27.4% 28.8% 28.7% 27.4% 25.5% 19.5% 27.1% 28.0%  
Managed care  16.1    15.5    13.6    12.5    23.2    24.0    17.5    15.9   
Other skilled  7.6    6.9    0.2    -     7.3    7.8    7.2    6.5   
Skilled mix  51.1    51.2    42.5    39.9    56.0    51.3    51.8    50.4   
Private and other payors  8.0    8.9    9.4    10.2    6.8    9.0    7.7    9.0   
Quality mix  59.1    60.1    51.9    50.1    62.8    60.3    59.5    59.4   
Medicaid  40.9    39.9    48.1    49.9    37.2    39.7    40.5    40.6   
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%  
                          
                          
 Three Months Ended December 31,  
 Same Facility Transitioning Acquisitions Total  
 2015 2014 2015 2014 2015 2014 2015 2014  
Percentage of Skilled Nursing Days:                         
Medicare  13.9%   14.0%   14.2%   13.3%   14.3%   9.7%   14.0%   13.6%  
Managed care  11.2    10.2    6.9    6.7    15.4    14.5    11.8    10.2   
Other skilled  5.2    4.2    0.1    -     5.9    6.4    5.1    4.0   
Skilled mix  30.3    28.4    21.2    20.0    35.6    30.6    30.9    27.8   
Private and other payors  12.2    12.7    15.7    16.1    9.2    11.8    11.7    13.0   
Quality mix  42.5    41.1    36.9    36.1    44.8    42.4    42.6    40.8   
Medicaid  57.5    58.9    63.1    63.9    55.2    57.6    57.4    59.2   
Total skilled nursing  100.0%   100.0%   100.0%   100.0%   100.0%   100.0%   100.0%   100.0%  
                          
                          
 Year Ended December 31,  
 Same Facility Transitioning Acquisitions Total  
 2015 2014 2015 2014 2015 2014 2015 2014  
Percentage of Skilled Nursing Revenue:                         
Medicare29.6% 30.2% 27.5% 25.8% 25.1% 18.7% 28.6% 29.4%  
Managed care  15.9    15.1    14.8    14.4    23.3    20.9    17.2    15.3   
Other skilled  7.4    6.4    0.2    -     6.5    8.9    6.8    6.1   
Skilled mix  52.9    51.7    42.5    40.2    54.9    48.5    52.6    50.8   
Private and other payors  8.1    9.0    9.7    11.4    8.0    8.6    8.2    9.1   
Quality mix  61.0    60.7    52.2    51.6    62.9    57.1    60.8    59.9   
Medicaid  39.0    39.3    47.8    48.4    37.1    42.9    39.2    40.1   
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%  
                          
                          
 Year Ended December 31,  
 Same Facility Transitioning Acquisitions Total  
 2015 2014 2015 2014 2015 2014 2015 2014  
Percentage of Skilled Nursing Days:                         
Medicare  14.9%   14.6%   13.3%   12.2%   13.8%   9.1%   14.6%   14.2%  
Managed care  10.8    9.9    7.5    6.9    15.2    12.3    11.4    9.7   
Other skilled  4.6    3.9    0.1    -     5.2    7.3    4.4    3.7   
Skilled mix  30.3    28.4    20.9    19.1    34.2    28.7    30.4    27.6   
Private and other payors  12.1    12.8    15.6    16.8    11.0    10.9    12.1    13.1   
Quality mix  42.4    41.2    36.5    35.9    45.2    39.6    42.5    40.7   
Medicaid  57.6    58.8    63.5    64.1    54.8    60.4    57.5    59.3   
Total skilled nursing  100.0%   100.0%   100.0%   100.0%   100.0%   100.0%   100.0%   100.0%  

 

THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
        
The following tables summarize our selected performance indicators for our home health and hospice segment along with other statistics, for each of the dates or periods indicated:
        
 Three Months Ended  December 31,
  2015   2014  Change % Change
 (Dollars in thousands)    
Results:       
Home health and hospice revenue       
Home health services:$  13,503  $  8,639  $  4,864     56.3%
Hospice services:   13,344     7,442     5,902     79.3 
Total home health and hospice revenue$  26,847  $  16,081  $  10,766     66.9%
Home health services:       
Medicare Episodic Admissions 2,191   1,768   423     23.9 %
Average Medicare Revenue per Completed Episode$  2,856  $  2,945  $  (89)    (3.0)%
Hospice services:       
Average Daily Census 842   493   349     70.8%
        
 Year Ended December 31,
  2015   2014  Change % Change
 (Dollars in thousands)    
Results:       
Home health and hospice revenue       
Home health services:$  47,955  $  29,577  $  18,378     62.1%
Hospice services:   42,401     24,939     17,462     70.0 
Total home health and hospice revenue$  90,356  $  54,516  $  35,840     65.7%
Home health services:       
Medicare Episodic Admissions 7,534   5,221   2,313     44.3%
Average Medicare Revenue per Completed Episode $  2,929  $  2,840  $  89     3.1%
Hospice services:       
Average Daily Census 679   420   259     61.7%

 

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,
 
 2015  2014  2015  2014
 $ %  $ %  $ %  $ % 
Revenue:(Dollars in thousands)  (Dollars in thousands) 
Medicaid$  123,388    33.1% $  97,133    35.1% $  439,996    32.8% $  358,119    34.9%
Medicare 104,542    28.0   81,182    29.3   395,503    29.5   313,144    30.5 
Medicaid—skilled 20,698    5.5   14,583    5.3   71,905    5.4   51,157    5.0 
Total 248,628    66.6   192,898    69.7   907,404    67.7   722,420    70.4 
Managed care 58,395    15.6   40,480    14.6   206,770    15.4   145,796    14.2 
Private and other(1) 66,132    17.8   43,491    15.7   227,652    16.9   159,190    15.4 
Total revenue$  373,155    100.0% $  276,869    100.0% $  1,341,826    100.0% $  1,027,406    100.0%
(1)  Private and other payors also includes revenue from urgent care centers and mobile ancillary operations.
 

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 rent, depreciation, interest and income taxes, (e) Spin-Off charges including results at three independent living facilities transferred to CareTrust in connection with the Spin-Off transaction, excluding rent, depreciation, interest and income taxes, (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 and expenses incurred in connection with the stock-split effected in December 2015, (j) costs incurred to acquire operations which are not capitalized, and (k) 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) Spin-Off charges including results at three independent living facilities transferred to CareTrust in connection with the Spin-Off transaction, excluding rent, depreciation, interest and income taxes, (g) stock-based compensation expense, (h) costs incurred related to new systems implementation, (i) breakup 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 and expenses incurred in connection with the stock-split effected in December 2015, (k) costs incurred to acquire operations which are not capitalized and (l) 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

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