You are here

The Ensign Group Reports Second Quarter Results

Conference Call and Webcast scheduled for tomorrow, August 3, 2018 at 10:00 am PT

MISSION VIEJO, Calif., Aug. 02, 2018 (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 and assisted living companies, today announced its operating results for the second quarter of 2018, reporting GAAP diluted earnings per share of $0.41 for the quarter with adjusted earnings per share of $0.44 for the quarter (1).

Highlights Include:

  • GAAP earnings for the quarter was up 78.3% over the prior year quarter to $0.41 per diluted share, and adjusted earnings per share was up 41.9% over the prior year quarter to $0.44 per diluted share(1)(2);
  • Consolidated GAAP Net Income for the quarter was $22.0 million, and consolidated adjusted Net Income was $23.7 million, an increase of 47.3% over the prior year quarter(1)(2);
  • Total Transitional and Skilled Services segment income was $43.2 million for the quarter, an increase of 36.3% over the prior year quarter;
  • Same-store skilled nursing revenue was $286.3 million, an increase of 4.2% over the prior year quarter and same-store skilled mix revenue was $143.8 million, an increase of 3.1% over the prior year quarter(3);  
  • Transitioning skilled occupancy was 73.4%, an increase of 274 basis points over the prior year quarter and transitioning skilled nursing revenue was $98.7 million, an increase of 6.3% over the prior year quarter(3);
  • Transitioning skilled managed care revenue and managed care days were up 7.1% and 8.8%, respectively, over the prior year quarter(3);  
  • Total Assisted Living Services segment revenue was up 12.6% to $37.2 million and Assisted Living Services segment income was up 35.8% to $5.0 million, both over the prior year quarter; and
  • Total Home Health and Hospice Services segment revenue was up 20.7% to $41.8 million and segment income was up 27.3% to $6.3 million, both over the prior year quarter(3).
  1. See "Reconciliation of GAAP to Non-GAAP Financial Information".
  2. Adjusted earnings per share and Consolidated Adjusted Net Income increased by 22.2% and 26.6%, respectively, over the prior year quarter if we applied a 25% tax rate to both periods.
  3. Excludes the impact of ASC 606.

Operating Results

Commenting on the quarter’s operating results, Ensign’s President and Chief Executive Officer Christopher Christensen said, “We are pleased to report that the improvements we experienced in the first quarter continued, resulting in a very strong second quarter, especially in our most mature operations.” Christensen added, “We are excited about the positive momentum in same-store skilled nursing revenue and same-store skilled mix revenue, which increased by 4.2% and 3.1%, respectively, over the prior year quarter.”  Noting that the Company expected to experience some typical second quarter seasonality, he highlighted the significant quarter over quarter improvement in adjusted earnings per share and consolidated adjusted net income, which increased by 41.9% and 47.3%, respectively, over the prior year quarter.

“We are reaffirming our 2018 annual earnings per share guidance to between $1.80 and $1.87 per diluted share.  Overall, the midpoint of this guidance represents a 31.1% increase over our annual earnings for 2017,” Christensen said.  He also remarked that even without the Company’s lower effective income tax rate, which was reduced from 35.5% in 2017 to an estimated 25.0% for 2018, the midpoint of management’s guidance represents a 15.7% increase over 2017 results. “We are very excited about the future and look forward to continuing to drive quality healthcare outcomes and corresponding financial results,” he said.

Christensen also stated that the Company’s operating subsidiaries in several states have renewed their focus on applying proven best-practices in every transition.  As a result of these efforts, during the quarter the Company’s 2017 and 2018 acquisitions collectively achieved an EBIT margin that is 760 basis points higher than its 2015 and 2016 acquisitions.  “These results not only show healthier transitions, but also demonstrate the enormous potential that remains in our overall portfolio.  We have great confidence that the combination of our locally-driven operating model, along with the backing of our world-class Service Center, will continue to create enormous organic growth in our newly acquired, transitioning and same-store buckets,” Christensen said.

“We are also pleased to report that Bridgestone Living LLC, Ensign’s assisted living and independent living portfolio company, which now consists of 51 stand-alone operations and 22 campuses in 12 states, grew its segment revenue and income by 12.6% and 35.8%, respectively, over the prior year quarter,” Christensen stated.  He also noted that Cornerstone Healthcare, Inc., Ensign’s home health and hospice portfolio subsidiary, grew its segment revenue and income by 20.7% and 27.3%, respectively, over the prior year quarter.  “Each segment’s leadership team has independently driven their respective businesses to achieve outstanding results. As they do so, we continue to evaluate ways in which we can enhance operational synergies while also ensuring that all of our affiliated operations will continue to create long-term shareholder value,” Christensen added.   

Chief Financial Officer Suzanne Snapper reported that, “Our liquidity remains strong with approximately $235 million of availability as of today on Ensign’s $450 million credit facility, which also has a built-in expansion option, and 48 unlevered real estate assets that add additional borrowing capacity.”  She also noted that the Company’s net-debt-to-EBITDAR ratio went down again this quarter to 4.0x in spite of additional borrowings incurred during the quarter to acquire certain real estate assets. She also indicated that cash generated from operations was $101.2 million in the six months ended June 30, 2018, which was primarily driven by an increase in operating results, stronger collections and lower taxes.

A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net earnings per share and adjusted net income, appear in the financial data portion of this release.  More complete information is contained in the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which is expected to be filed with the SEC today and can be viewed on the company’s website at http://www.ensigngroup.net

Quarter Highlights

During the quarter, Ensign paid a quarterly cash dividend of $0.045 per share of its common stock during the quarter. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 16 years.

In April, Ensign announced that Bandera Healthcare, Inc., the Company’s Arizona-based portfolio company, acquired the real estate and operations of Peoria Post Acute and Rehabilitation, a 128-bed skilled nursing facility located in Peoria, Arizona. The acquisition was effective April 1, 2018. The facility also included an adjacent 50-bed long-term acute care hospital that is currently operated by a third party under a lease arrangement.  “While we continue to evaluate many potential acquisition opportunities with extreme care and thought, this operation stood out as one that shows significant long-term potential while adding strength to our growing footprint in Arizona,” he added.

In May, Keystone Care LLC, the Company’s Texas-based portfolio company, acquired the real estate and operations of Grace Presbyterian Village, a 26-acre post-acute care and retirement campus located in Dallas, Texas. The acquisition was effective May 1, 2018. “This acquisition adds to our expanding footprint in the Dallas area and adds to our ability to accelerate the quality of care we can provide to our patients and their loved ones,” Mr. Christensen said.

In June, Bandera also acquired the operations of Sun West Choice Healthcare and Rehabilitation, a 140-bed skilled nursing facility in Sun City West, Arizona, and entered into a new long-term lease. The acquisition was effective June 1, 2018. “Sun West Choice is a perfect example of an off-market acquisition resulting from relationships built by our local operators over many years,” said Mr. Christensen.

In July, Ensign also announced that Pennant Healthcare, Inc., its Northwest-based portfolio subsidiary, acquired the real estate and operations of McCall Rehabilitation and Care Center, a 40-bed skilled nursing facility located in McCall, Idaho. “Our history and track record of successful acquisitions, together with the talented leaders and staff in Idaho that seek to be the provider of choice in their respective communities, give us the confidence to pursue opportunities in the state both big and small,” Christensen said. 

Ensign also recently announced during the quarter that a wholly-owned subsidiary acquired an office building located in San Juan Capistrano, California. “We are thrilled about our purchase of office space in nearby San Juan Capistrano to accommodate our growing Service Center team,” Christensen said. “With our existing lease in Mission Viejo set to expire in 2019, we diligently reviewed current market conditions as well as the Service Center’s short- and long-term real estate needs.  After considering dozens of possibilities over the last 18 months, we determined that owning the Service Center made the most sense financially and operationally,” he added.

Ensign reported that the commercial real estate property consists of approximately 115,517 square feet of usable office space, and that the building was 92% occupied by third-party tenants at the time of acquisition.  The Company closed with cash drawn from its revolver.

"We carefully selected this space based on the attractive and convenient location for our current and future team members, as well as our third-party tenants.  With this ownership, we not only expect to save millions of dollars in future rental increases for decades to come, but we are most excited about the ability this will give us to continue to attract and retain the best and brightest Service Center leaders,” he added. 

The Company expects Ensign Services to occupy a portion of the space upon termination of its existing office leases in 2019.  Ensign also expects to continue market-rate third-party leasing arrangements for any space not occupied by Ensign Services.

These additions bring Ensign's growing portfolio to 185 skilled nursing operations, 22 of which also include assisted living operations, 51 assisted and independent living operations, 22 hospice agencies, 21 home health agencies and five home care businesses across fifteen states.  Ensign owns the real estate at 68 of its 236 healthcare facilities.  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.

Conference Call

A live webcast will be held Friday, August 3, 2018 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s second quarter financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign’s website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific time on Friday, August 31, 2018.

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 and other rehabilitative and healthcare services at 236 healthcare facilities, 22 hospice agencies, 21 home health agencies and five home care businesses in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas, South Carolina, and Oklahoma. Each of these operations is operated by a separate, independent operating subsidiary that has its own management, employees and assets. References herein to the consolidated “company” and “its” assets and activities, as well as the use of the terms “we,” “us,” “its” and similar terms, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the operations, the home health and hospice businesses, the Service Center or the captive insurance subsidiary are operated by the same entity. More information about Ensign is available at http://www.ensigngroup.net.   

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

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

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

Contact Information

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

SOURCE: The Ensign Group, Inc.


 

THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
    
 Three Months Ended June 30, Six Months Ended June 30,
  2018  2018
Pro forma (1)
  2017   2018  2018
Pro forma (1)
  2017 
Revenue           
Service revenue  459,222    468,300    415,270    915,243    933,125    824,664 
Assisted and independent living revenue  37,164    37,164    33,009    73,277    73,277    65,355 
Total revenue$  496,386  $  505,464  $  448,279  $  988,520  $  1,006,402  $  890,019 
Expense           
Cost of services  396,132    405,210    366,946    786,375    804,257    722,433 
(Return of unclaimed class action settlement)/charges related to class action lawsuit  —    —    —    (1,664)   (1,664)   11,000 
(Gains)/losses related to divestitures   —    —    (1,286)   —    —    2,731 
Rent—cost of services   34,472    34,472    32,585    68,322    68,322    64,485 
General and administrative expense  22,386    22,386    17,253    47,490    47,490    38,523 
Depreciation and amortization  11,621    11,621    10,750    23,243    23,243    21,264 
Total expenses  464,611    473,689    426,248    923,766    941,648    860,436 
Income from operations  31,775    31,775    22,031    64,754    64,754    29,583 
Other income (expense):           
Interest expense  (3,869)   (3,869)   (3,053)   (7,482)   (7,482)   (6,498)
Interest income  562    562    288    1,010    1,010    578 
Other expense, net  (3,307)   (3,307)   (2,765)   (6,472)   (6,472)   (5,920)
Income before provision for income taxes  28,468    28,468    19,266    58,282    58,282    23,663 
Provision for income taxes  6,142    6,142    6,886    12,663    12,663    8,326 
Net income  22,326    22,326    12,380    45,619    45,619    15,337 
Less: net income attributable to noncontrolling interests  315    315    163    476    476    279 
Net income attributable to The Ensign Group, Inc.$  22,011  $  22,011  $  12,217  $  45,143  $  45,143  $  15,058 
            
Net income per share attributable to The Ensign Group, Inc.:           
Basic$  0.42  $  0.42  $  0.24  $  0.87  $  0.87  $  0.30 
Diluted$  0.41  $  0.41  $  0.23  $  0.84  $  0.84  $  0.29 
            
Weighted average common shares outstanding:           
Basic  51,880    51,880    50,705    51,733    51,733    50,736 
Diluted  54,251    54,251    52,548    53,909    53,909    52,593 
            
Dividends per share$  0.0450  $  0.0450  $  0.0425  $  0.0900  $  0.0900  $  0.0850 
            
(1) The pro forma amounts in the table demonstrate the impact of adopting Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), for the three and six months ended June 30, 2018 by presenting the dollars as if the previous accounting guidance was still in effect. 
   


THE ENSIGN GROUP, INC.
CONSOLIDATED BALANCE SHEETS
 (In thousands)
(Unaudited)
 
     
 June 30, 2018 December 31, 2017 
Assets    
Current assets:    
Cash and cash equivalents$  27,184  $  42,337  
Accounts receivable—less allowance for doubtful accounts of $1,643 and $43,961 at June 30, 2018 and
December 31, 2017, respectively
  251,042    265,068  
Investments—current  12,952    13,092  
Prepaid income taxes  8,590    19,447  
Prepaid expenses and other current assets  27,801    28,132  
Total current assets  327,569    368,076  
Property and equipment, net  591,580    537,084  
Insurance subsidiary deposits and investments  31,396    28,685  
Escrow deposits  2,652    228  
Deferred tax assets  12,731    12,745  
Restricted and other assets  21,046    16,501  
Intangible assets, net  32,605    32,803  
Goodwill  81,019    81,062  
Other indefinite-lived intangibles  25,249    25,249  
Total assets$  1,125,847  $  1,102,433  
     
Liabilities and equity    
Current liabilities:    
Accounts payable$  39,018  $  39,043  
Accrued wages and related liabilities  89,462    90,508  
Accrued self-insurance liabilities—current  24,826    22,516  
Other accrued liabilities  66,972    63,815  
Current maturities of long-term debt  10,058    9,939  
Total current liabilities  230,336    225,821  
Long-term debt—less current maturities  268,066    302,990  
Accrued self-insurance liabilities—less current portion  53,775    50,220  
Deferred rent and other long-term liabilities  11,645    11,268  
Deferred gain related to sale-leaseback   11,746    12,075  
Total equity  550,279    500,059  
Total liabilities and equity  1,125,847    1,102,433  
 
     
THE ENSIGN GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
The following table presents selected data from our consolidated statements of cash flows for the periods presented: 
 Six Months Ended June 30, 
  2018   2017  
Net cash provided by operating activities  101,240    24,920  
Net cash used in investing activities  (81,244)   (48,626) 
Net cash used in financing activities  (35,149)   (524) 
Net decrease in cash and cash equivalents  (15,153)   (24,230) 
Cash and cash equivalents beginning of period  42,337    57,706  
Cash and cash equivalents end of period$  27,184  $  33,476  
 


THE ENSIGN GROUP, INC.
REVENUE BY SEGMENT
  
The following table sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated: 
 
  Three Months Ended June 30, Six Months Ended June 30,
 2018 (As Reported) 2018 (Pro Forma (2))  2017  2018 (As Reported) 2018 (Pro Forma (2))   2017  
 $ % $ % $ % $ % $ % $ %
  (Dollars in thousands) (Dollars in thousands)
Transitional and skilled services $  408,518 82.3% $  417,061 82.5% $  375,217 83.7% $  815,534 82.5% $  832,282 82.7% $  747,556 84.0%
Assisted and independent living services   37,164 7.5%   37,164 7.4%   33,009 7.4%   73,277 7.4%   73,277 7.3%   65,355 7.3%
Home health and hospice services:                        
Home health   21,321 4.3%   21,701 4.3%   17,871 4.0%   41,505 4.2%   42,297 4.2%   34,922 3.9%
Hospice   19,928 4.0%   20,083 4.0%   16,750 3.7%   39,502 4.0%   39,844 4.0%   31,832 3.6%
Total home health and hospice services   41,249 8.3%   41,784 8.3%   34,621 7.7%   81,007 8.2%   82,141 8.2%   66,754 7.5%
All other (1)   9,455 1.9%   9,455 1.8%   5,432 1.2%   18,702 1.9%   18,702 1.8%   10,354 1.2%
Total revenue $  496,386 100.0% $  505,464 100.0% $  448,279 100.0% $  988,520 100.0% $  1,006,402 100.0% $  890,019 100.0%
(1) Includes revenue from services generated by our other mobile diagnostic and ancillary services. 
(2) The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three and six months ended June 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect.
 


THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
  
The following tables summarize our selected performance indicators for our transitional and skilled services segment along with other statistics, for each of the dates or periods indicated:
 
 Three Months Ended June 30,    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Total Facility Results:       
Transitional and skilled revenue (As Reported)$  408,518  $  375,217  $  33,301  8.9%
Transitional and skilled revenue (Pro forma (5))  417,061    375,217  $  41,844  11.2%
Number of facilities at period end  162    155    7  4.5%
Number of campuses at period end*  22    21    1  4.8%
Actual patient days  1,330,057    1,232,842    97,215  7.9%
Occupancy percentage — Operational beds 76.6%  74.7%   1.9%
Skilled mix by nursing days 29.7%  30.7%   (1.0)%
Skilled mix by nursing revenue 50.2%  52.1%   (1.9)%
             
 Three Months Ended June 30,    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Same Facility Results(1):       
Transitional and skilled revenue (As Reported)$  280,477  $  274,680  $  5,797  2.1%
Transitional and skilled revenue (Pro forma (5))  286,330    274,680  $  11,650  4.2%
Number of facilities at period end  108    108    —  %
Number of campuses at period end*  11    11    —  %
Actual patient days  871,035    868,397    2,638  0.3%
Occupancy percentage — Operational beds 78.3%  78.0%   0.3%
Skilled mix by nursing days 31.3%  31.2%   0.1%
Skilled mix by nursing revenue 52.1%  52.3%   (0.2)%
             
 Three Months Ended June 30,    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Transitioning Facility Results(2):       
Transitional and skilled revenue (As Reported)$  96,690  $  92,875  $  3,815  4.1%
Transitional and skilled revenue (Pro forma (5))  98,693    92,875  $  5,818  6.3%
Number of facilities at period end  40    40    —  %
Number of campuses at period end*  9    9    —  %
Actual patient days  348,385    335,472    12,913  3.8%
Occupancy percentage — Operational beds 73.4%  70.7%   2.7%
Skilled mix by nursing days 28.5%  30.1%   (1.6)%
Skilled mix by nursing revenue 48.3%  52.0%   (3.7)%
             
 Three Months Ended June 30,    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Recently Acquired Facility Results(3):       
Transitional and skilled revenue (As Reported)$  31,351  $  7,489  $  23,862  NM
Transitional and skilled revenue (Pro forma (5))  32,038    7,489  $  24,549  NM
Number of facilities at period end  14    7    7  NM
Number of campuses at period end*  2    1    1  NM
Actual patient days  110,637    28,424    82,213  NM
Occupancy percentage — Operational beds 74.1%  45.9%   NM
Skilled mix by nursing days 21.6%  23.0%   NM
Skilled mix by nursing revenue 38.5%  44.0%   NM
            
 Three Months Ended June 30,    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Facility Closed Results(4):       
Skilled nursing revenue$  —  $  173  $  (173) NM
Actual patient days  —    549    (549) NM
Occupancy percentage — Operational beds %  50.0%   NM
Skilled mix by nursing days %  13.8%   NM
Skilled mix by nursing revenue %  35.5%   NM
        
*  Campus represents a facility that offers both skilled nursing and assisted and/or independently living services. Revenue and expenses related to skilled nursing, assisted and independent living services have been allocated and recorded in the respective reportable segment.
(1) Same Facility results represent all facilities purchased prior to January 1, 2015.  
(2) Transitioning Facility results represents all facilities purchased from January 1, 2015 to December 31, 2016.
(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2017.
(4) Facility Closed results represents closed operations during the three months ended June 30, 2017, which were excluded from Same Store and Transitioning results for three months ended June 30, 2017, for comparison purposes.
(5) The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three months ended June 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect. 
        
 Six Months Ended
June 30,
    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Total Facility Results:       
Transitional and skilled revenue (As Reported)$  815,534  $  747,556  $  67,978  9.1%
Transitional and skilled revenue (Pro forma (5))  832,282    747,556  $  84,726  11.3%
Number of facilities at period end  162    155    7  4.5%
Number of campuses at period end*  22    21    1  4.8%
Actual patient days  2,645,027    2,442,106    202,921  8.3%
Occupancy percentage — Operational beds 77.2%  74.8%   2.4%
Skilled mix by nursing days 30.7%  31.4%   (0.7)%
Skilled mix by nursing revenue 51.2%  52.7%   (1.5)%
             
 Six Months Ended
June 30,
    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Same Facility Results(1):       
Transitional and skilled revenue (As Reported)$  560,724  $  548,410  $  12,314  2.2%
Transitional and skilled revenue (Pro forma (5))  572,170    548,410  $  23,760  4.3%
Number of facilities at period end  108    108    —  %
Number of campuses at period end*  11    11    —  %
Actual patient days  1,741,558    1,730,523    11,035  0.6%
Occupancy percentage — Operational beds 78.8%  78.2%   0.6%
Skilled mix by nursing days 31.7%  31.5%   0.2%
Skilled mix by nursing revenue 52.6%  52.6%   %
             
 Six Months Ended
June 30,
    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Transitioning Facility Results(2):       
Transitional and skilled revenue (As Reported)$  198,537  $  188,605  $  9,932  5.3%
Transitional and skilled revenue (Pro forma (5))  202,656    188,605  $  14,051  7.4%
Number of facilities at period end  40    40    —  %
Number of campuses at period end*  9    9    —  %
Actual patient days  705,192    672,779    32,413  4.8%
Occupancy percentage — Operational beds 74.7%  71.3%   3.4%
Skilled mix by nursing days 30.4%  31.2%   (0.8)%
Skilled mix by nursing revenue 50.5%  53.2%   (2.7)%
             
 Six Months Ended
June 30,
    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Recently Acquired Facility Results(3):       
Transitional and skilled revenue (As Reported)$  56,273  $  8,673  $  47,600  NM
Transitional and skilled revenue (Pro forma (5))  57,456    8,673  $  48,783  NM
Number of facilities at period end  14    7    7  NM
Number of campuses at period end*  2    1    1  NM
Actual patient days  198,277    33,229    165,048  NM
Occupancy percentage — Operational beds 73.0%  36.1%   NM
Skilled mix by nursing days 22.5%  23.2%   NM
Skilled mix by nursing revenue 39.7%  44.6%   NM
            
 Six Months Ended
June 30,
    
   2018     2017   Change % Change
            
 (Dollars in thousands)    
Facility Closed Results(4):       
Skilled nursing revenue$  —  $  1,868  $  (1,868) NM
Actual patient days  —    5,575    (5,575) NM
Occupancy percentage — Operational beds %  34.3%   NM
Skilled mix by nursing days %  46.7%   NM
Skilled mix by nursing revenue %  71.5%   NM
        
*  Campus represents a facility that offers both skilled nursing and assisted and/or independently living services. Revenue and expenses related to skilled nursing, assisted and independent living services have been allocated and recorded in the respective reportable segment.
(1) Same Facility results represent all facilities purchased prior to January 1, 2015.
(2) Transitioning Facility results represents all facilities purchased from January 1, 2015 to December 31, 2016. 
(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2017.
(4) Facility Closed results represents closed operations during the six months ended June 30, 2017, which were excluded from Same Store and Transitioning results for six months ended June 30, 2017, for comparison purposes.
(5) The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the six months ended June 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect. 
 


THE ENSIGN GROUP, INC.
SKILLED NURSING AVERAGE DAILY REVENUE RATES AND
PERCENT OF SKILLED NURSING REVENUE AND DAYS BY PAYOR
 
The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate: 
                
 Three Months Ended June 30,
 Same Facility Transitioning Acquisitions Total
   2018    2017    2018    2017    2018    2017    2018    2017
Skilled Nursing Average Daily Revenue Rates:               
Medicare$  615.55 $  599.86 $  516.78 $  504.49 $  534.46 $  499.43 $  582.05 $  567.65
Managed care  461.65   455.74   410.59   417.24   422.43   377.38   445.48   444.65
Other skilled  486.12   456.99   349.01   379.94   444.55   650.86   467.19   446.94
Total skilled revenue  528.70   516.37   455.64   459.54   484.99   481.16   507.68   500.59
Medicaid  221.75   213.21   194.38   179.62   212.69   179.72   213.86   203.49
Private and other payors  225.93   202.58   196.96   194.61   230.57   196.36   217.35   199.90
Total skilled nursing revenue$  318.56 $  305.91 $  269.45 $  266.13 $  274.57 $  251.58 $  302.01 $  293.84
 
 Six Months Ended June 30,
 Same Facility Transitioning Acquisitions Total
   2018    2017    2018    2017    2018    2017    2018    2017
Skilled Nursing Average Daily Revenue Rates:               
Medicare$  612.97 $  598.57 $  515.68 $  503.88 $  527.57 $  495.95 $  578.24 $  566.07
Managed care  460.62   449.01   409.68   418.85   421.00   374.41   444.31   440.45
Other skilled  484.37   458.35   357.20   373.36   460.15   650.86   467.16   446.23
Total skilled revenue  526.67   513.76   456.62   460.06   485.62   478.44   505.91   498.60
Medicaid  221.47   214.02   193.93   179.50   212.72   175.92   213.61   204.17
Private and other payors  225.56   204.56   202.76   198.19   229.50   193.64   218.67   202.29
Total skilled nursing revenue$  319.20 $  307.20 $  275.13 $  269.58 $  276.69 $  249.30 $  304.24 $  296.08
 


                
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three and six months ended June 30, 2018 and 2017: 
                
 Three Months Ended June 30,
 Same Facility Transitioning Acquisitions Total
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Revenue:               
Medicare24.5% 25.4% 25.9% 29.6% 22.7% 35.3% 24.7% 26.7%
Managed care18.0% 18.4% 19.4% 19.0% 11.8% 6.6% 17.8% 18.3%
Other skilled9.6% 8.5% 3.0% 3.4% 4.0% 2.1% 7.7% 7.1%
Skilled mix52.1% 52.3% 48.3% 52.0% 38.5% 44.0% 50.2% 52.1%
Private and other payors7.7% 7.9% 10.5% 10.8% 12.1% 11.9% 8.6% 8.7%
Quality mix59.8% 60.2% 58.8% 62.8% 50.6% 55.9% 58.8% 60.8%
Medicaid40.2% 39.8% 41.2% 37.2% 49.4% 44.1% 41.2% 39.2%
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
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Days:               
Medicare12.6% 13.1% 13.5% 15.6% 11.6% 17.8% 12.8% 13.9%
Managed care12.3% 12.4% 12.7% 12.1% 7.6% 4.4% 12.0% 12.2%
Other skilled6.4% 5.7% 2.3% 2.4% 2.4% 0.8% 4.9% 4.6%
Skilled mix31.3% 31.2% 28.5% 30.1% 21.6% 23.0% 29.7% 30.7%
Private and other payors11.1% 11.5% 14.5% 14.7% 15.0% 15.3% 12.4% 12.5%
Quality mix42.4% 42.7% 43.0% 44.8% 36.6% 38.3% 42.1% 43.2%
Medicaid57.6% 57.3% 57.0% 55.2% 63.4% 61.7% 57.9% 56.8%
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
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Revenue:               
Medicare24.7% 25.9% 27.4% 30.7% 24.6% 36.5% 25.3% 27.3%
Managed care18.5% 18.6% 20.0% 19.2% 11.4% 6.3% 18.4% 18.6%
Other skilled9.4% 8.1% 3.1% 3.3% 3.7% 1.8% 7.5% 6.8%
Skilled mix52.6% 52.6% 50.5% 53.2% 39.7% 44.6% 51.2% 52.7%
Private and other payors7.5% 7.8% 10.3% 10.4% 11.2% 13.7% 8.5% 8.5%
Quality mix60.1% 60.4% 60.8% 63.6% 50.9% 58.3% 59.7% 61.2%
Medicaid39.9% 39.6% 39.2% 36.4% 49.1% 41.7% 40.3% 38.8%
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
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Days:               
Medicare12.8% 13.3% 14.6% 16.4% 12.8% 18.3% 13.3% 14.3%
Managed care12.8% 12.8% 13.4% 12.3% 7.5% 4.2% 12.6% 12.5%
Other skilled6.1% 5.4% 2.4% 2.5% 2.2% 0.7% 4.8% 4.6%
Skilled mix31.7% 31.5% 30.4% 31.2% 22.5% 23.2% 30.7% 31.4%
Private and other payors11.1% 11.5% 14.1% 14.1% 14.0% 17.7% 12.1% 12.2%
Quality mix42.8% 43.0% 44.5% 45.3% 36.5% 40.9% 42.8% 43.6%
Medicaid57.2% 57.0% 55.5% 54.7% 63.5% 59.1% 57.2% 56.4%
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 assisted and independent living segment along with other statistics, for each of the dates or periods indicated:
 
 Three Months Ended June 30,     
  2018   2017  Change % Change 
             
 (Dollars in thousands)     
Resident fee revenue$  37,164  $  33,009  $  4,155 12.6% 
Number of facilities at period end  51    46    5 10.9% 
Number of campuses at period end  22    21    1 4.8% 
Occupancy percentage (units) 75.2%  77.4%   (2.2)% 
Average monthly revenue per unit$  2,863  $  2,799   $  64 2.3% 
 
 Six Months Ended June 30,     
  2018   2017  Change % Change 
             
 (Dollars in thousands)     
Resident fee revenue$  73,277  $  65,355  $  7,922 12.1% 
Number of facilities at period end  51    46    5 10.9% 
Number of campuses at period end  22    21    1 4.8% 
Occupancy percentage (units) 75.4%  77.1%   (1.7)% 
Average monthly revenue per unit$  2,860  $  2,818   $  42 1.5% 
 


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,    
  2018  2017 Change % Change
            
 (Dollars in thousands)  
Home health and hospice revenue       
Home health services$  21,321 $  17,871 $  3,450  19.3%
Hospice services  19,928   16,750   3,178  19.0%
Total home health and hospice revenue$  41,249 $  34,621 $  6,628  19.1%
Pro-forma(1)       
Home health and hospice revenue       
Home health services$  21,701 $  17,871 $  3,830  21.4%
Hospice services  20,083   16,750   3,333  19.9%
Total home health and hospice revenue$  41,784 $  34,621 $  7,163  20.7%
        
Home health services:       
Average Medicare Revenue per Completed Episode$  3,064 $  3,140 $  (76) (2.4)%
Hospice services:       
Average Daily Census  1,290   1,020   270  26.5%
(1) The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three months ended June 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect. 
        
 Six Months Ended June 30,    
  2018  2017 Change % Change
            
 (Dollars in thousands)  
Home health and hospice revenue       
Home health services$  41,505 $  34,922 $  6,583  18.9%
Hospice services  39,502   31,832   7,670  24.1%
Total home health and hospice revenue$  81,007 $  66,754 $  14,253  21.4%
Pro-forma(1)       
Home health and hospice revenue       
Home health services$  42,297 $  34,922 $  7,375  21.1%
Hospice services  39,844   31,832   8,012  25.2%
Total home health and hospice revenue$  82,141 $  66,754 $  15,387  23.1%
        
Home health services:       
Average Medicare Revenue per Completed Episode$  2,951 $  3,058 $  (107) (3.5)%
Hospice services:       
Average Daily Census  1,275   1,011   264  26.1%
(1) The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the six months ended June 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect. 
 


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,
  2018 As Reported 2018 Pro forma (2)   2017   2018 As Reported 2018 Pro forma (2)   2017  
  $ % $ % $ % $ % $ % $ %
                                     
  (Dollars in thousands) (Dollars in thousands)
Revenue:                        
Medicaid $  173,169 34.9% $  176,689 35.0% $  152,637 34.0% $  340,794 34.5% $  346,998 34.5% $  300,908 33.8%
Medicare   136,813 27.6%   138,027 27.3%   128,151 28.6%   276,127 27.9%   278,408 27.7%   258,072 29.0%
Medicaid-skilled   28,298 5.7%   28,935 5.7%   24,913 5.6%   55,340 5.6%   56,473 5.6%   47,930 5.4%
Total   338,280 68.2%   343,651 68.0%   305,701 68.2%   672,261 68.0%   681,879 67.8%   606,910 68.2%
Managed Care   80,150 16.1%   81,786 16.2%   74,925 16.7%   163,866 16.6%   167,631 16.7%   150,486 16.9%
Private and Other(1)   77,956 15.7%   80,027 15.8%   67,653 15.1%   152,393 15.4%   156,892 15.5%   132,623 14.9%
Total revenue $  496,386 100.0% $  505,464 100.0% $  448,279 100.0% $  988,520 100.0% $  1,006,402 100.0% $  890,019 100.0%
(1) Private and other payors also includes revenue from all payors generated by our other ancillary services for the three and six months ended June 30, 2018 and 2017. 
(2) The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three and six months ended June 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect.
                         


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,
  2018   2017   2018   2017 
Net income attributable to The Ensign Group, Inc.$  22,011  $  12,217  $  45,143  $  15,058 
        
Non-GAAP adjustments       
(Earnings)/losses related to facilities currently being constructed and other start-up operations(a)  1,272    3,365    2,847    7,907 
(Return of unclaimed class action settlement)/charges related to the settlement of the class action lawsuit(b)  —    163    (1,664)   11,163 
Share-based compensation expense(c)  2,520    2,376    4,829    4,600 
Results related to closed operations and operations not at full capacity, including continued obligations and closing expense(d)  291    (457)   489    5,130 
Depreciation and amortization - Patient base(e)  62    115    101    151 
General and administrative - Transaction-related costs(f)  83    360    111    448 
Business interruption recoveries(g)  (675)   —    (675)   — 
Provision for income taxes on Non-GAAP adjustments(h)  (1,863)   (2,054)   (3,416)   (10,508)
Non-GAAP Net Income$  23,701  $  16,085  $  47,765  $  33,949 
        
Diluted Earnings Per Share As Reported       
Net Income$  0.41  $  0.23  $  0.84  $  0.29 
Average number of shares outstanding  54,251    52,548    53,909    52,593 
        
Adjusted Diluted Earnings Per Share        
Net Income  0.44    0.31    0.89    0.65 
Average number of shares outstanding  54,251    52,548    53,909    52,593 
        
Footnotes:       
(a) Represents operating results for facilities currently being constructed and other start-up operations. 
 Three Months Ended June 30, Six Months Ended June 30,
  2018   2017   2018   2017 
Revenue$  (16,343) $  (15,912) $  (32,566) $  (28,879)
Cost of services  13,800    15,055    27,772    28,653 
Rent  3,571    3,934    7,154    7,596 
Depreciation and amortization  244    288    487    537 
Total Non-GAAP adjustment$  1,272  $  3,365  $  2,847  $  7,907 
        
(b) (Return of unclaimed class action settlement funds) or charges incurred in connection with the settlement of the class action lawsuit.  
(c)  Represents share-based compensation expense incurred. 
 Three Months Ended June 30, Six Months Ended June 30,
  2018   2017   2018   2017 
Cost of services$  1,381  $  1,338  $  2,638  $  2,573 
General and administrative  1,139    1,038    2,191    2,027 
Total Non-GAAP adjustment$  2,520  $  2,376  $  4,829  $  4,600 
    
(d) Represents results at closed operations and operations not at full capacity, including the fair value of continued obligation under the lease agreement and related closing expenses of $4.0 million for the six months ended June 30, 2017. Included in the three and six months ended June 30, 2017 results is the loss recovery of $1.3 million of certain losses related to a closed facility in prior year.
 Three Months Ended June 30, Six Months Ended June 30,
  2018   2017   2018   2017 
Revenue$  —  $  (172) $  —  $  (2,544)
(Gains)/Losses related to operational closures  —    (1,286)   —    2,731 
Cost of services  209    903    325    4,177 
Rent  75    85    149    696 
Depreciation and amortization  8    13    15    70 
Total Non-GAAP adjustment$  292  $  (457) $  489  $  5,130 
        
(e) Included in depreciation and amortization are amortization expenses related to patient base intangible assets at newly acquired skilled nursing and assisted living facilities.
(f) Included in general and administrative expense are costs incurred to acquire an operation which are not capitalizable. 
(g) Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017. 
(h) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0%, resulting from adoption of Tax Cuts and Jobs Act, for the three and six months ended June 30, 2018 and 35.5% for the three and six months ended June 30, 2017.
        


THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
 
The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented: 
 
  Three Months Ended June 30, Six Months Ended June 30,
   2018   2017   2018   2017 
Consolidated Statements of Income Data:        
Net income $  22,326  $  12,380  $  45,619  $  15,337 
Less: net income attributable to noncontrolling interests   315    163    476    279 
Plus: Interest expense, net   3,307    2,765    6,472    5,920 
Provision for income taxes   6,142    6,886    12,663    8,326 
Depreciation and amortization   11,621    10,750    23,243    21,264 
EBITDA $  43,081  $  32,618  $  87,521  $  50,568 
     
Adjustments to EBITDA:        
(Earnings)/losses related to facilities currently being constructed and other start-up operations(a)   (2,543)   (857)   (4,794)   (226)
(Return of unclaimed class action settlement)/charges related to the settlement of the class action lawsuit(b)   —    163    (1,664)   11,163 
Share-based compensation expense(c)   2,520    2,376    4,829    4,600 
Results related to closed operations and operations not at full capacity, including continued obligations and closing expenses(d)   209    (555)   325    4,364 
Transaction-related costs(e)   83    360    111    448 
Business interruption recoveries(f)   (675)   —    (675)   — 
Rent related to items(a) and (d) above   3,646    4,019    7,303    8,292 
Adjusted EBITDA $  46,321  $  38,124  $  92,956  $  79,209 
Rent—cost of services   34,472    32,585    68,322    64,485 
Less: rent related to items(a) and (d) above   (3,646)   (4,019)   (7,303)   (8,292)
Adjusted EBITDAR $  77,147  $  66,690  $  153,975  $  135,402 
         
 
(a)  Represents results related to facilities currently in the start up phase after construction was completed. This amount excludes rent, depreciation and interest expense.
 
(b)  Return of unclaimed class action settlement funds or charges incurred in connection with the settlement of the class action lawsuit. 
(c)  Share-based compensation expense incurred. 
(d)  Represent results at closed operations and operations not at full capacity during the three and six months ended June 30, 2018 and 2017, including the fair value of continued obligation under the lease agreement and related closing expenses of $4.0 million for the six months ended June 30, 2017. Included in the three and six months ended June 30, 2017 results is the loss recovery of $1.3 million of certain losses related to a closed facility in 2016.
(e)  Costs incurred to acquire operations which are not capitalizable. 
(f)  Business interruption recoveries related to insurance claims with respect to the California fires that occurred in the fourth quarter of 2017. 
 


THE ENSIGN GROUP, INC.       
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION 
(In thousands) 
(Unaudited) 
  
The table below reconciles net income from operations to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for each reportable segment for the periods presented: 
 
  Three Months Ended June 30, Six Months Ended June 30, 
 Transitional
and Skilled
Services
 Assisted and Independent
Services
 Home Health
and 
Hospice
 Transitional
and Skilled
Services
 Assisted and Independent
Services
 Home Health
and
 Hospice
 
    2018     2017     2018     2017     2018     2017     2018     2017     2018     2017     2018     2017   
                          
Statements of Income Data:                         
Income from operations, excluding general and administrative expense(a) $  43,210  $  31,704  $  4,966  $  3,657  $  6,268  $  4,923  $  89,405  $  63,494  $  9,629  $  8,096  $  12,326  $  9,217   
Less: net income attributable to noncontrolling interests   —    —    —    —    281    86    —    —    —    —    370    94   
Depreciation and amortization   7,708    7,204    1,863    1,492    281    230    15,510    14,157    3,460    3,115    526    466  
EBITDA $  50,918  $  38,908  $  6,829  $  5,149  $  6,268  $  5,067  $  104,915  $  77,651  $  13,089  $  11,211  $  12,482  $  9,589  
                          
Adjustments to EBITDA:                         
(Earnings)/losses related to facilities currently being constructed and other start-up operations(b)   (2,626)   (1,256)   56    271    27    128    (5,008)   (1,066)   178    616    36    224  
Results related to closed operations and operations not at full capacity, including continued obligations and closing expenses(c)   209    (657)   —    —    —    —    325    3,749    —    —    —    513  
Share-based compensation expense(d)   1,076    992    180    233    99    86    2,063    2,020    338    323    190    174  
Business interruption recoveries(e)   (675)   —    —    —    —    —    (675)   —    —    —    —    —  
Rent related to item(b) and (c) above $  2,759    3,720  $  880  $  289  $  7  $  10  $  5,526    6,900  $  1,764  $  1,223  $  13  $  168  
Adjusted EBITDA   51,661    41,707    7,945    5,942    6,401    5,291    107,146    89,254    15,369    13,373    12,721    10,668  
Rent—cost of services   27,832    26,733    5,928    5,323    552    426    54,609    52,679    12,309    10,631    1,089    978  
Less: rent related to items(b) and (c) above   (2,759)   (3,720)   (880)   (289)   (7)   (10)   (5,526)   (6,900)   (1,764)   (1,223)   (13)   (168) 
Adjusted EBITDAR $  76,734  $  64,720  $  12,993  $  10,976  $  6,946  $  5,707  $  156,229  $  135,033  $  25,914  $  22,781  $  13,797  $  11,478  
 
(a)  General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss. 
(b)  (Earnings)/costs incurred for facilities currently being constructed and other start-up operations. This amount excludes rent, depreciation and interest expense. 
(c)  Represent results at closed operations and operations not at full capacity during the three and six months ended June 30, 2018 and 2017, including the fair value of continued obligation under the lease agreement and related closing expenses of $4.0 million for the six months ended June 30, 2017. Included in the three and six months ended June 30, 2017 results is the loss recovery of $1.3 million of certain losses related to a closed facility in 2016.
(d)  Share-based compensation expense incurred. 
(e)  Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017.
 

Discussion of Non-GAAP Financial Measures

EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. 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) (earnings)/losses related to operations currently being constructed and other start-up operations, excluding depreciation, interest and income taxes, (e) results of closed operations and facilities not at full operation, excluding depreciation, interest and income taxes, (f) share-based compensation expense, (g) return of unclaimed class action settlement and charges related to class action lawsuit, (h) business interruption recoveries, and (i) patient base and other transaction-related costs.  Adjusted EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) (earnings)/losses related to facilities currently being constructed and other start-up operations, excluding rent, depreciation, interest and income taxes, (f) results of closed operation and facilities not at full operation, excluding rent, depreciation, interest and income taxes, (g) share-based compensation expense, (h) return of unclaimed class action settlement and charges related to class action lawsuit, (i) business interruption recoveries and (j) patient base and other transaction-related costs. The company believes that the presentation of EBITDA, adjusted EBITDA, adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company’s periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Ensign’s website at http://www.ensigngroup.net.

Thursday, August 2, 2018 - 16:20