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The Ensign Group Reports Third Quarter 2018 Results

Conference Call and Webcast Scheduled for tomorrow, November 1, 2018 at 10:00 am PT

MISSION VIEJO, Calif., Oct. 31, 2018 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, assisted living, home health, home care and hospice care companies, today announced its operating results for the third quarter of 2018, reporting GAAP diluted earnings per share for the quarter of $0.38 and adjusted earnings per share for the quarter of $0.46 (1).

Quarter Highlights Include:

  • GAAP earnings per share for the quarter was up 40.7% over the prior year quarter to $0.38 per diluted share, and adjusted earnings per share was up 27.8% over the prior year quarter to a record $0.46 per diluted share(1)(2);
  • Consolidated GAAP Net Income for the quarter was $20.9 million, an increase of 46.8% over the prior year quarter, and consolidated adjusted Net Income was $25.0 million, an increase of 32.6% over the prior year quarter(1)(2);
  • Total Transitional and Skilled Services segment income was $46.4 million for the quarter, an increase of 25.7% over the prior year quarter and an increase of 7.3% sequentially over the second quarter;
  • Overall skilled services occupancy was 77.3%, an increase of 165 basis points over the prior year quarter and transitioning skilled services occupancy was 75.0%, an increase of 281 basis points over the prior year quarter;
  • Total Assisted Living Services segment revenue was up 7.3% to $38.1 million and Assisted Living Services segment income was up 9.0% to $4.7 million, both over the prior year quarter; and
  • Total Home Health and Hospice Services segment revenue was up 23.1% to $44.3 million and segment income was up 55.4% to $7.3 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 12.2% and 13.9%, 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

Ensign’s President and Chief Executive Officer Christopher Christensen said, “We are very pleased to report strong third-quarter results as the momentum we have experienced over the last several quarters continued into the third quarter.” He added, “We again saw significant improvement in GAAP earnings per share and consolidated GAAP net income, which increased by 40.7% and 46.8%, respectively, over the prior year quarter.”

While emphasizing the positive trends in the Transitional Skilled Services segment, Mr. Christensen noted an increase of 25.7% in segment income over the prior year quarter and an increase in occupancy of 281 basis points in the Company’s transitioning operations over the prior year quarter. “Even with our recent improvements, we believe that each of our carefully-selected acquisitions still have enormous unrealized potential as they continue the multi-year process of becoming like our most mature operations. Over the next several years, as demographics improve and quality providers are rewarded with higher volumes, we are positioned to capitalize on the significant organic growth potential inherent in our core skilled nursing business,” he said. 

Management also increased its 2018 annual earnings per share guidance to $1.83 to $1.88 per diluted share, which represents a 32.4% increase over the Company’s annual earnings for 2017. Christensen also indicated that even after the impact of our 2018 tax adjustment, the midpoint of management’s guidance represents a 16.8% increase over 2017 results. “Because we are ahead of schedule on our results this year and fourth quarter tends to be one of our strongest quarters, we determined a slight adjustment was necessary. We are very excited about the fourth quarter and the coming year and are confident that as our local leaders continue to push on the flywheel in both new and mature operations, and as we continue our disciplined growth strategy, Ensign’s near-term and long-term outlook is very bright,” he added.

“We continue to build significant value in our other lines of business, including home health and hospice care, assisted living, mobile diagnostics and other post-acute care services. Each of these profitable business lines, under the direction of key leaders and their dedicated Service Center resources, achieved consistent clinical and financial results, while simultaneously bolstering our core skilled nursing operations,” Christensen stated. “During the quarter, Cornerstone Healthcare, Inc., our home health and hospice portfolio subsidiary, grew its segment revenue and income by 23.1% and 55.4%, respectively, over the prior year quarter. As each segment’s leadership team continues to independently drive their respective businesses to achieve outstanding results, 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,” he said.

Pointing to the underlying value being created in Ensign’s owned real estate, Mr. Christensen noted that the Company continues to methodically add value to its real estate portfolio by improving the operating results in our owned operations and by acquiring additional real estate assets. “We now own 70 real estate assets, including the new Service Center location. We believe that our shareholders have received little to no credit in the past for the incredible amount of underlying value in our real estate and that its value is again being overlooked. We will always be an operationally-driven organization first, but we also believe it’s important to recognize the growing underlying value in our owned real estate and the flexibility that ownership gives us in the future,” he said.

Chief Financial Officer Suzanne Snapper reported that, “Our liquidity remains strong with approximately $295 million of availability as of today on Ensign’s $450 million credit facility, which also has a built-in expansion option, and 50 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 3.8x in spite of acquiring additional real estate assets during the quarter. She also indicated that cash generated from operations was $157.3 million in the nine months ended September 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 September 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, the Company paid a quarterly cash dividend of $0.045 per share of Ensign common stock. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 16 years.

In July, Ensign 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. 

In October, Ensign also announced that Bridgestone Living LLC, Ensign’s assisted living and independent living portfolio company, acquired the real estate and operations of Villa Court Assisted Living and Memory Care, a 53-unit assisted living and 20-unit memory care facility located in Las Vegas, Nevada. “We are thrilled to expand our senior housing footprint in Las Vegas. It’s a market in which we anticipate growing as we rely on the talented leaders there that each seek to become the community of choice in their area,” Christensen added.

Also during the quarter, Cornerstone Healthcare Inc., acquired two home health agencies, one hospice agency and one home care agency in Washington and Colorado, and a new footprint in Wyoming. “We continue to see attractive growth opportunities in home health and hospice and assisted living and will opportunistically acquire when our leadership availability, geography and pricing align,” Christensen added.

These additions bring Ensign's growing portfolio to 185 skilled nursing operations, 22 of which also include assisted living operations, 52 assisted and independent living operations, 21 hospice agencies, 22 home health agencies and six home care businesses across sixteen states. Ensign owns the real estate at 69 of its 237 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.

2018 EPS Guidance Increase

Management increased its annual earnings per share guidance to $1.83 to $1.88 per diluted share from $1.80 to $1.87 per diluted share. This guidance assumes, among other things, normalized health insurance costs, anticipated Medicare and Medicaid reimbursement rate increases net of provider taxes. It excludes transaction-related costs and amortization costs related to intangible assets acquired, share-based compensation and costs incurred to recognize income tax credits and costs incurred for start-up operations.

Conference Call

A live webcast will be held Thursday, November 1, 2018 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s third quarter financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors 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, November 30, 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 healthcare services at 237 healthcare facilities, 21 hospice agencies, 22 home health agencies and six home care businesses in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas, South Carolina, Oklahoma, and Wyoming. 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, hospice and assisted living 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
            
 Three Months Ended September 30, Nine Months Ended September 30,
  2018  2018
Pro forma (1)
  2017   2018  2018
Pro forma (1)
  2017 
Revenue           
Service revenue 476,306   484,160   436,139   1,391,549   1,417,285   1,260,802 
Assisted and independent living revenue 38,058   38,058   35,455   111,335   111,335   100,810 
Total revenue$514,364  $522,218  $471,594  $1,502,884  $1,528,620  $1,361,612 
Expense           
Cost of services 413,723   421,577   381,544   1,200,098   1,225,834   1,103,976 
(Return of unclaimed class action settlement)/charges related to class action lawsuit          (1,664)  (1,664)  11,000 
Losses related to divestitures                2,731 
Rent—cost of services 34,851   34,851   33,782   103,173   103,173   98,267 
General and administrative expense 24,601   24,601   19,261   72,091   72,091   57,784 
Depreciation and amortization 11,902   11,902   11,448   35,145   35,145   32,712 
Total expenses 485,077   492,931   446,035   1,408,843   1,434,579   1,306,470 
Income from operations 29,287   29,287   25,559   94,041   94,041   55,142 
Other income (expense):           
Interest expense (3,989)  (3,989)  (3,519)  (11,471)  (11,471)  (10,017)
Interest income 467   467   395   1,477   1,477   973 
Other expense, net (3,522)  (3,522)  (3,124)  (9,994)  (9,994)  (9,044)
Income before provision for income taxes 25,765   25,765   22,435   84,047   84,047   46,098 
Provision for income taxes 5,415   5,415   8,160   18,078   18,078   16,487 
Net income 20,350   20,350   14,275   65,969   65,969   29,611 
Less: net (loss)/income attributable to noncontrolling interests (511)  (511)  63   (35)  (35)  342 
Net income attributable to The Ensign Group, Inc.$20,861  $20,861  $14,212  $66,004  $66,004  $29,269 
            
Net income per share attributable to The Ensign Group, Inc.:           
Basic$0.40  $0.40  $0.28  $1.27  $1.27  $0.58 
Diluted$0.38  $0.38  $0.27  $1.22  $1.22  $0.56 
            
Weighted average common shares outstanding:           
Basic 52,139   52,139   50,911   51,870   51,870   50,795 
Diluted 54,632   54,632   52,828   54,176   54,176   52,674 
            
Dividends per share$0.0450  $0.0450  $0.0425  $0.1350  $0.1350  $0.1275 
            


(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 nine months ended September 30, 2018 by presenting the dollars as if the previous accounting guidance was still in effect.
   


THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
(Unaudited)
    
 September 30, 2018 December 31, 2017
Assets   
Current assets:   
Cash and cash equivalents$45,657  $42,337 
Accounts receivable—less allowance for doubtful accounts of $2,484 and $43,961 at September 30, 2018 and December 31, 2017, respectively 261,454   265,068 
Investments—current 9,688   13,092 
Prepaid income taxes 6,509   19,447 
Prepaid expenses and other current assets 25,105   28,132 
Total current assets 348,413   368,076 
Property and equipment, net 593,088   537,084 
Insurance subsidiary deposits and investments 32,487   28,685 
Escrow deposits 660   228 
Deferred tax assets 12,035   12,745 
Restricted and other assets 20,459   16,501 
Intangible assets, net 31,620   32,803 
Goodwill 78,612   81,062 
Other indefinite-lived intangibles 26,201   25,249 
Total assets$1,143,575  $1,102,433 
    
Liabilities and equity   
Current liabilities:   
Accounts payable$41,323  $39,043 
Accrued charge related to class action lawsuit     
Accrued wages and related liabilities 99,047   90,508 
Accrued self-insurance liabilities—current 23,113   22,516 
Other accrued liabilities 74,297   63,815 
Current maturities of long-term debt 10,080   9,939 
Total current liabilities 247,860   225,821 
Long-term debt—less current maturities 245,604   302,990 
Accrued self-insurance liabilities—less current portion 54,704   50,220 
Deferred rent and other long-term liabilities 11,450   11,268 
Deferred gain related to sale-leaseback 11,581   12,075 
Total equity 572,376   500,059 
Total liabilities and equity$1,143,575  $1,102,433 
 
    
THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented:
 Nine Months Ended September 30,
  2018   2017 
Net cash provided by operating activities 157,277   63,249 
Net cash used in investing activities (95,269)  (83,066)
Net cash (used in)/provided by financing activities (58,688)  2,166 
Net increase/ (decrease) in cash and cash equivalents 3,320   (17,651)
Cash and cash equivalents beginning of period 42,337   57,706 
Cash and cash equivalents end of period$45,657  $40,055 


 
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 September 30, Nine Months Ended September 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 $421,764 82.0% $429,188 82.2% $394,121 83.6% $1,237,298 82.3% $1,261,470 82.5% $1,141,677 83.8%
Assisted and independent living services  38,058 7.4%  38,058 7.3%  35,455 7.5%  111,335 7.4%  111,335 7.3%  100,810 7.4%
Home health and hospice services:                        
Home health  22,260 4.3%  22,549 4.3%  18,076 3.8%  63,765 4.2%  64,846 4.2%  52,997 3.9%
Hospice  21,577 4.2%  21,718 4.2%  17,889 3.8%  61,079 4.1%  61,562 4.0%  49,722 3.7%
Total home health and hospice services  43,837 8.5%  44,267 8.5%  35,965 7.6%  124,844 8.3%  126,408 8.2%  102,719 7.6%
All other (1)  10,705 2.1%  10,705 2.0%  6,053 1.3%  29,407 2.0%  29,407 2.0%  16,406 1.2%
Total revenue $514,364 100.0% $522,218 100.0% $471,594 100.0% $1,502,884 100.0% $1,528,620 100.0% $1,361,612 100.0%


(1) Includes revenue from services generated by our other ancillary services.
(2)

 The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three and nine months ended September 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 September 30,    
     2018     2017   Change % Change
              
   (Dollars in thousands)    
Total Facility Results:       
Transitional and skilled revenue (As Reported)$421,764  $394,121  $27,643  7.0%
Transitional and skilled revenue (Pro forma (4)) 429,188   394,121  $35,067  8.9%
Number of facilities at period end 163   159   4  2.5%
Number of campuses at period end* 22   21   1  4.8%
Actual patient days 1,367,142   1,292,787   74,355  5.8%
Occupancy percentage — Operational beds 77.3%  75.7%   1.6%
Skilled mix by nursing days 28.3%  29.4%   (1.1)%
Skilled mix by nursing revenue 47.9%  49.8%   (1.9)%
   Three Months Ended September 30,    
     2018     2017   Change % Change
              
   (Dollars in thousands)    
Same Facility Results(1):       
Transitional and skilled revenue (As Reported)$285,602  $279,167  $6,435  2.3%
Transitional and skilled revenue (Pro forma (4)) 290,630   279,167  $11,463  4.1%
Number of facilities at period end 108   108     %
Number of campuses at period end* 11   11     %
Actual patient days 882,069   876,255   5,814  0.7%
Occupancy percentage — Operational beds 78.6%  78.1%   0.5%
Skilled mix by nursing days 29.7%  30.2%   (0.5)%
Skilled mix by nursing revenue 49.8%  50.6%   (0.8)%
   Three Months Ended September 30,    
     2018     2017   Change % Change
              
   (Dollars in thousands)    
Transitioning Facility Results(2):       
Transitional and skilled revenue (As Reported)$99,126  $95,635  $3,491  3.7%
Transitional and skilled revenue (Pro forma (4)) 100,949   95,635  $5,314  5.6%
Number of facilities at period end 40   40     %
Number of campuses at period end* 9   9     %
Actual patient days 357,894   346,539   11,355  3.3%
Occupancy percentage — Operational beds 75.0%  72.2%   2.8%
Skilled mix by nursing days 27.4%  29.2%   (1.8)%
Skilled mix by nursing revenue 46.7%  50.2%   (3.5)%
   Three Months Ended September 30,    
     2018     2017   Change % Change
              
   (Dollars in thousands)    
Recently Acquired Facility Results(3):       
Transitional and skilled revenue (As Reported)$37,036  $19,319  $17,717  NM 
Transitional and skilled revenue (Pro forma (4)) 37,609   19,319  $18,290  NM 
Number of facilities at period end 15   11   4  NM 
Number of campuses at period end* 2   1   1  NM 
Actual patient days 127,179   69,993   57,186  NM 
Occupancy percentage — Operational beds 75.6%  66.0%   NM 
Skilled mix by nursing days 21.1%  19.4%   NM 
Skilled mix by nursing revenue 36.7%  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)

 The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three months ended September 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect.
   Nine Months Ended
September 30,
    
     2018     2017   Change % Change
              
   (Dollars in thousands)    
Total Facility Results:       
Transitional and skilled revenue (As Reported)$1,237,298  $1,141,677  $95,621  8.4%
Transitional and skilled revenue (Pro forma (5)) 1,261,470   1,141,677  $119,793  10.5%
Number of facilities at period end 163   159   4  2.5%
Number of campuses at period end* 22   21   1  4.8%
Actual patient days 4,012,169   3,734,893   277,276  7.4%
Occupancy percentage — Operational beds 77.2%  75.1%   2.1%
Skilled mix by nursing days 29.9%  30.7%   (0.8)%
Skilled mix by nursing revenue 50.1%  51.7%   (1.6)%
   Nine Months Ended
September 30,
    
     2018     2017   Change % Change
              
   (Dollars in thousands)    

Same Facility Results(1):
       
Transitional and skilled revenue (As Reported)$846,326  $827,577  $18,749  2.3%
Transitional and skilled revenue (Pro forma (5)) 862,800   827,577  $35,223  4.3%
Number of facilities at period end 108   108     %
Number of campuses at period end* 11   11     %
Actual patient days 2,623,627   2,606,778   16,849  0.6%
Occupancy percentage — Operational beds 78.7%  78.2%   0.5%
Skilled mix by nursing days 31.1%  31.1%   %
Skilled mix by nursing revenue 51.7%  51.9%   (0.2)%
   Nine Months Ended
September 30,
    
     2018     2017   Change % Change
              
   (Dollars in thousands)    
Transitioning Facility Results(2):       
Transitional and skilled revenue (As Reported)$297,663  $284,240  $13,423  4.7%
Transitional and skilled revenue (Pro forma (5)) 303,605   284,240  $19,365  6.8%
Number of facilities at period end 40   40     %
Number of campuses at period end* 9   9     %
Actual patient days 1,063,086   1,019,318   43,768  4.3%
Occupancy percentage — Operational beds 74.8%  71.6%   3.2%
Skilled mix by nursing days 29.4%  30.5%   (1.1)%
Skilled mix by nursing revenue 49.2%  52.2%   (3.0)%
   Nine Months Ended
September 30,
    
     2018     2017   Change % Change
              
   (Dollars in thousands)    
Recently Acquired Facility Results(3):       
Transitional and skilled revenue (As Reported)$93,309  $27,992  $65,317  NM 
Transitional and skilled revenue (Pro forma (5)) 95,065   27,992  $67,073  NM 
Number of facilities at period end 15   11   4  NM 
Number of campuses at period end* 2   1   1  NM 
Actual patient days 325,456   103,222   222,234  NM 
Occupancy percentage — Operational beds 74.0%  52.1%     NM 
Skilled mix by nursing days 21.9%  20.6%     NM 
Skilled mix by nursing revenue 38.5%  38.3%     NM 
   Nine Months Ended
September 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 %  71.6%     NM 
               


 Campus represents a facility that offers both skilled nursing 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 represent results closed operations during the nine months ended September 30, 2017, which were excluded from Same Store and Transitioning results for nine months ended September 30, 2017, for comparison purposes.
(5) The proforma amounts in the table demonstrate the impact of adopting ASC 606 for the nine months ended September 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 September 30,
 Same Facility Transitioning Acquisitions Total
   2018    2017    2018    2017    2018    2017    2018    2017
Skilled Nursing Average Daily Revenue Rates:               
Medicare$610.37 $604.15 $517.25 $511.43 $528.30 $501.20 $577.09 $570.52
Managed care 469.41  451.68  413.09  410.85  410.57  416.01  450.07  439.53
Other skilled 500.03  473.68  348.94  361.87  506.07  513.29  480.62  457.72
Total skilled revenue 530.74  517.32  455.33  455.60  482.70  482.32  508.31  499.62
Medicaid 228.53  220.38  195.87  185.44  224.14  208.78  219.54  210.58
Private and other payors 223.36  199.64  198.57  188.23  225.74  217.33  216.49  197.46
Total skilled nursing revenue$318.15 $307.13 $267.32 $264.58 $279.19 $263.28 $301.19 $293.38
 
 Nine Months Ended September 30,
 Same Facility Transitioning Acquisitions Total
   2018    2017    2018    2017    2018    2017    2018    2017
Skilled Nursing Average Daily Revenue Rates:               
Medicare$612.16 $600.33 $516.16 $506.22 $527.83 $499.13 $577.88 $567.50
Managed care 463.42  449.87  410.76  416.15  416.84  403.24  446.17  440.15
Other skilled 489.76  463.83  354.31  369.18  478.90  537.77  471.84  450.38
Total skilled revenue 527.98  514.92  456.22  458.61  484.53  480.92  506.68  498.94
Medicaid 223.88  216.18  194.61  181.56  217.20  198.73  215.68  206.43
Private and other payors 224.79  202.85  201.39  194.72  227.96  209.46  217.91  200.55
Total skilled nursing revenue$318.84 $307.17 $272.50 $267.88 $277.67 $258.78 $303.20 $295.15


                
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three and nine months ended September 30, 2018 and 2017:  
 
 Three Months Ended September 30,
 Same Facility Transitioning Acquisitions Total
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Revenue:               
Medicare22.2% 23.8% 24.5% 27.6% 20.9% 25.5% 22.6% 24.8%
Managed care17.5% 17.7% 19.0% 18.9% 11.4% 7.1% 17.3% 17.5%
Other skilled10.1% 9.1% 3.2% 3.7% 4.4% 2.9% 8.0% 7.5%
Skilled mix49.8% 50.6% 46.7% 50.2% 36.7% 35.5% 47.9% 49.8%
Private and other payors7.9% 8.0% 9.9% 10.4% 11.9% 14.0% 8.8% 8.8%
Quality mix57.7% 58.6% 56.6% 60.6% 48.6% 49.5% 56.7% 58.6%
Medicaid42.3% 41.4% 43.4% 39.4% 51.4% 50.5% 43.3% 41.4%
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
 
 Three Months Ended September 30,
 Same Facility Transitioning Acquisitions Total
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Days:               
Medicare11.5% 12.2% 12.6% 14.3% 11.0% 13.4% 11.8% 12.8%
Managed care11.8% 12.1% 12.3% 12.2% 7.7% 4.5% 11.5% 11.7%
Other skilled6.4% 5.9% 2.5% 2.7% 2.4% 1.5% 5.0% 4.9%
Skilled mix29.7% 30.2% 27.4% 29.2% 21.1% 19.4% 28.3% 29.4%
Private and other payors11.7% 11.7% 13.4% 14.6% 15.2% 16.9% 12.5% 12.7%
Quality mix41.4% 41.9% 40.8% 43.8% 36.3% 36.3% 40.8% 42.1%
Medicaid58.6% 58.1% 59.2% 56.2% 63.7% 63.7% 59.2% 57.9%
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
 
 
 Nine Months Ended September 30,
 Same Facility Transitioning Acquisitions Total
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Revenue:               
Medicare23.9% 25.2% 26.5% 29.6% 23.2% 28.9% 24.4% 26.4%
Managed care18.2% 18.3% 19.7% 19.1% 11.4% 6.9% 18.0% 18.2%
Other skilled9.6% 8.4% 3.0% 3.5% 3.9% 2.5% 7.7% 7.1%
Skilled mix51.7% 51.9% 49.2% 52.2% 38.5% 38.3% 50.1% 51.7%
Private and other payors7.6% 7.9% 10.2% 10.4% 11.5% 13.9% 8.5% 8.6%
Quality mix59.3% 59.8% 59.4% 62.6% 50.0% 52.2% 58.6% 60.3%
Medicaid40.7% 40.2% 40.6% 37.4% 50.0% 47.8% 41.4% 39.7%
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
 
 Nine Months Ended September 30,
 Same Facility Transitioning Acquisitions Total
  2018    2017    2018    2017    2018    2017    2018    2017  
Percentage of Skilled Nursing Days:               
Medicare12.4% 12.9% 13.9% 15.7% 12.1% 15.0% 12.8% 13.8%
Managed care12.4% 12.5% 13.0% 12.3% 7.6% 4.4% 12.2% 12.2%
Other skilled6.3% 5.7% 2.5% 2.5% 2.2% 1.2% 4.9% 4.7%
Skilled mix31.1% 31.1% 29.4% 30.5% 21.9% 20.6% 29.9% 30.7%
Private and other payors11.2% 11.5% 13.9% 14.3% 14.5% 17.2% 12.2% 12.4%
Quality mix42.3% 42.6% 43.3% 44.8% 36.4% 37.8% 42.1% 43.1%
Medicaid57.7% 57.4% 56.7% 55.2% 63.6% 62.2% 57.9% 56.9%
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 date or periods indicated:
 
 Three Months Ended September 30,    
  2018   2017  Change % Change
            
 (Dollars in thousands)    
Resident fee revenue$38,058  $35,455  $2,603 7.3%
Number of facilities at period end 51   49   2 4.1%
Number of campuses at period end 22   21   1 4.8%
Occupancy percentage (units) 76.0%  75.7%   0.3%
Average monthly revenue per unit$2,855  $2,774  $81 2.9%
 
 Nine Months Ended
September 30,
    
  2018   2017  Change % Change
            
 (Dollars in thousands)    
Resident fee revenue$111,335  $100,810  $10,525 10.4%
Number of facilities at period end 51   49   2 4.1%
Number of campuses at period end 22   21   1 4.8%
Occupancy percentage (units) 75.6%  76.6%   (1.0)%
Average monthly revenue per unit$2,858  $2,803  $55 2.0%


               
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 date or periods indicated:
 
   Three Months Ended September 30,    
    2018  2017 Change % Change
            
   (Dollars in thousands)    
Home health and hospice revenue       
Home health services$22,260 $18,076 $4,184  23.1%
Hospice services 21,577  17,889  3,688  20.6%
Total home health and hospice revenue$43,837 $35,965 $7,872  21.9%
Pro-forma(1)       
Home health and hospice revenue       
Home health services$22,549 $18,076 $4,473  24.7%
Hospice services 21,718  17,889  3,829  21.4%
Total home health and hospice revenue$44,267 $35,965 $8,302  23.1%
          
Home health services:       
Average Medicare Revenue per Completed Episode$3,001 $3,011 $(10) (0.3)%
Hospice services:       
Average Daily Census 1,379  1,158  221  19.1%
(1)

 The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three months ended September 30, 2018 by presenting the dollars and percentages as if the previous accounting guidance was still in effect.
   Nine Months Ended
September 30,
    
    2018  2017 Change % Change
            
   (Dollars in thousands)    
Home health and hospice revenue       
Home health services$63,765 $52,997 $10,768  20.3%
Hospice services 61,079  49,722  11,357  22.8%
Total home health and hospice revenue$124,844 $102,719 $22,125  21.5%
Pro forma(1)       
Home health and hospice revenue       
Home health services$64,846 $52,997 $11,849  22.4%
Hospice services 61,562  49,722  11,840  23.8%
Total home health and hospice revenue$126,408 $102,719 $23,689  23.1%
          
Home health services:       
Average Medicare Revenue per Completed Episode$2,968 $3,043 $(75) (2.5)%
Hospice services:       
Average Daily Census 1,310  1,060  250  23.6%
(1)

 The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the nine months ended September 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 September 30, Nine Months Ended September 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 $188,486 36.6% $190,892 36.6% $169,100 35.9% $529,280 35.2% $537,890 35.2% $470,008 34.5%
Medicare  133,554 26.0%  134,670 25.8%  127,348 27.0%  409,681 27.3%  413,078 27.0%  385,419 28.3%
Medicaid-skilled  30,684 6.0%  31,121 6.0%  27,737 5.9%  86,024 5.7%  87,594 5.7%  75,667 5.6%
Total  352,724 68.6%  356,683 68.4%  324,185 68.8%  1,024,985 68.2%  1,038,562 67.9%  931,094 68.4%
Managed Care  80,196 15.6%  82,081 15.6%  74,723 15.8%  244,062 16.2%  249,712 16.3%  225,210 16.5%
Private and Other(1)  81,444 15.8%  83,454 16.0%  72,686 15.4%  233,837 15.6%  240,346 15.8%  205,308 15.1%
Total revenue $514,364 100.0% $522,218 100.0% $471,594 100.0% $1,502,884 100.0% $1,528,620 100.0% $1,361,612 100.0%


(1) Private and other payors also includes revenue from all payors generated by our other ancillary services for the three and nine months ended September 30, 2018 and 2017.
(2)

 The pro forma amounts in the table demonstrate the impact of adopting ASC 606 for the three and nine months ended September 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 September 30, Nine Months Ended September 30,
    2018   2017   2018   2017 
Net income attributable to The Ensign Group, Inc.$20,861  $14,212  $66,004  $29,269 
          
Non-GAAP adjustments       
Results related to facilities currently being constructed and other start-up operations(a) 500   3,097   3,347   11,004 
(Return of unclaimed class action settlement)/charges related to the settlement of the class action lawsuit       (1,664)  11,163 
Share-based compensation expense(b) 2,811   2,156   7,639   6,755 
Results related to closed operations and operations not at full capacity, including continued obligations and closing expense(c) 224   468   712   5,598 
Losses related to Hurricane Harvey on impacted operations(d)    558      558 
Depreciation and amortization - patient base(e) 48   402   150   553 
General and administrative - transaction-related costs(f) 228   169   338   617 
COS - business interruption gains(g)       (675)   
COS - Goodwill and intangible assets impairment(h) 3,177      3,177    
Provision for income taxes on Non-GAAP adjustments(i) (2,890)  (2,236)  (6,309)  (12,744)

Non-GAAP Net Income
$24,959  $18,826  $72,719  $52,773 
          

Diluted Earnings Per Share As Reported
       
Net Income$0.38  $0.27  $1.22  $0.56 
Average number of shares outstanding 54,632   52,828   54,176   52,674 
          

Adjusted Diluted Earnings Per Share 
       
Net Income 0.46   0.36   1.34   1.00 
Average number of shares outstanding 54,632   52,828   54,176   52,674 
          
Footnotes:       
(a) Represents operating results for facilities currently being constructed and other start-up operations. 
   Three Months Ended September 30, Nine Months Ended September 30,
    2018   2017   2018   2017 
Revenue$(17,011) $(16,327) $(49,577) $(45,206)
Cost of services 13,672   15,045   41,444   43,698 
Rent 3,596   4,098   10,750   11,694 
Depreciation and amortization 243   281   730   818 
Total Non-GAAP adjustment$500  $3,097  $3,347  $11,004 
          
(b) Represents share-based compensation expense incurred. 
   Three Months Ended September 30, Nine Months Ended September 30,
    2018   2017   2018   2017 
Cost of services$1,533  $1,197  $4,170  $3,769 
General and administrative 1,278   959   3,469   2,986 
Total Non-GAAP adjustment$2,811  $2,156  $7,639  $6,755 
          
(c)

 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 nine months ended September 30, 2017. Included in the three and nine months ended September 30, 2017 results is the loss recovery of $1.3 million of certain losses related to a closed facility in prior year.
   Three Months Ended September 30, Nine Months Ended September 30,
    2018   2017   2018   2017 
Revenue$  $(261) $  $(2,805)
(Gains)/Losses related to operational closures          2,731 
Cost of services 139   617   464   4,794 
Rent 76   96   225   792 
Depreciation and amortization 9   16   23   86 
Total Non-GAAP adjustment$224  $468  $712  $5,598 
          
(d) Losses related to Hurricane Harvey on impacted operations. 
   Three Months Ended September 30, Nine Months Ended September 30,
    2018   2017   2018   2017 
Revenue$  $(232) $  $(232)
Cost of services    733      733 
Rent    50      50 
Depreciation and amortization    7      7 
Total Non-GAAP adjustment$  $558  $  $558 
(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 received in Q2 2018 related to insurance claims of the California fires that occurred in the fourth quarter of 2017.
(h) Impairment charges to goodwill and intangible assets for one of our other ancillary operations
   Three Months Ended September 30, Nine Months Ended September 30,
    2018   2017   2018   2017 
Cost of services 3,653      3,653    
Non-controlling interest (476)     (476)   
Total Non-GAAP adjustment$3,177  $  $3,177  $ 
(i)

 Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0%, resulting from the adoption of the Tax Cuts and Jobs Act, for the three and nine months ended September 30, 2018 and 35.5% for the three and nine months ended September 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
September 30,
 Nine Months Ended
September 30,
   2018   2017   2018   2017 
Consolidated Statements of Income Data:        
Net income $20,350  $14,275  $65,969  $29,611 
Less: net (loss)/income attributable to noncontrolling interests  (511)  63   (35)  342 
Interest expense, net  3,522   3,124   9,994   9,044 
Provision for income taxes  5,415   8,160   18,078   16,487 
Depreciation and amortization  11,902   11,448   35,145   32,712 
EBITDA $41,700  $36,944  $129,221  $87,512 
     
Adjustments to EBITDA:        
Earnings related to facilities currently being constructed and other start-up operations(a)  (3,339)  (1,282)  (8,133)  (1,508)
(Return of unclaimed class action settlement)/charges related to the settlement of the class action lawsuit        (1,664)  11,163 
Share-based compensation expense  2,811   2,156   7,639   6,755 
Results related to closed operations and operations not at full capacity, including continued obligations and closing expenses(b)  139   356   464   4,720 
Losses related to Hurricane Harvey on impacted operations(c)     501      501 
Transaction-related costs(d)  228   169   338   617 
Impairment of goodwill and intangibles assets(e)  3,177      3,177    
Business interruption recoveries(f)        (675)   
Rent related to items(a), (b) and (c) above  3,672   4,244   10,975   12,536 
Adjusted EBITDA $48,388  $43,088  $141,342  $122,296 
Rent—cost of services  34,851   33,782   103,173   98,267 
Less: rent related to items(a), (b) and (c) above  (3,672)  (4,244)  (10,975)  (12,536)
Adjusted EBITDAR $79,567  $72,626  $233,540  $208,027 
         
         


(a) Represents results related to facilities currently being constructed and other start-up operations. This amount excludes rent, depreciation and interest expense.
(b)


 Represents results at closed operations and operations not at full capacity during the three and nine months ended September 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 nine months ended September 30, 2017. Included in the nine months ended September 30, 2017, results is the loss recovery of $1.3 million of certain losses related to a closed facility in 2016.
(c) Losses related to Hurricane Harvey on impacted operations.
(d) Costs incurred to acquire operations which are not capitalizable.
(e) Impairment charges to goodwill and intangible assets for our other ancillary operations during the three and nine months ended September 30, 2018, excluding impact of non-controlling interest.
(f) Business interruption recoveries received in Q2 2018 related to insurance claims of 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 September 30, Nine Months Ended September 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) $46,350  $36,868  $4,733  $4,342  $7,297  $4,695  $135,755  $100,362  $14,361  $12,438  $19,623  $13,912 
Less: net income attributable to noncontrolling interests              42   39               413   133 
Depreciation and amortization  8,061   7,881   1,902   1,572   263   235   23,571   22,038   5,362   4,687   789   700 
EBITDA $54,411  $44,749  $6,635  $5,914  $7,518  $4,891  $159,326  $122,400  $19,723  $17,125  $19,999  $14,479 
                         
Adjustments to EBITDA:                        
Results related to facilities currently being constructed and other start-up operations(b)  (3,461)  (1,320)  64   (42)  58   80   (8,469)  (2,385)  243   576   93   303 
Results related to closed operations and operations not at full capacity, including continued obligations and closing expenses(c)  139   141            215   464   3,888      2      728 
Impact of Hurricane Harvey to operations (d)     501                  501             
Share-based compensation expense  1,197   941   182   146   124   87   3,259   2,961   521   468   314   258 
Business interruption recoveries(e)                    (675)               
Rent related to item(b),(c) and (d) above  2,777   2,787   886   1,445   9   12   8,303   9,687   2,649   2,668   23   181 
Adjusted EBITDA $55,063  $47,799  $7,767  $7,463  $7,709  $5,285  $162,208  $137,052  $23,136  $20,839  $20,429  $15,949 
Rent—cost of services  28,088   26,217   6,015   6,964   583   472   82,698   78,896   18,324   17,596   1,671   1,449 
Less: rent related to items(b),(c) and(d) above  (2,777)  (2,787)  (886)  (1,445)  (9)  (12)  (8,303)  (9,687)  (2,649)  (2,668)  (23)  (181)
Adjusted EBITDAR $80,374  $71,229  $12,896  $12,982  $8,283  $5,745  $236,603  $206,261  $38,811  $35,767  $22,077  $17,217 
   


(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.
(b) Costs incurred for facilities currently being constructed and other start-up operations. This amount excludes rent, depreciation and interest expense.
(c)

 Represent results at closed operations and operations not at full capacity during the three and nine months ended September 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 nine months ended September 30, 2017. Included in the nine months ended September 30, 2017, results is the loss recovery of $1.3 million of certain losses related to a closed facility in 2016.
(d) Losses related to Hurricane Harvey on impacted operations.
(e) Business interruption recoveries received in Q2 2018 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 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, (i) impairment of goodwill and intangible assets, (j) losses related to Hurricane Harvey on impacted operations and (k) 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 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, (j) impairment of goodwill and intangible assets, (k) losses related to Hurricane Harvey on impacted operations and (l) 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.

Wednesday, October 31, 2018 - 16:15