August 2019 Home Health, Hospice and Senior Living Spin-off - Investor Relations
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August 2019
Home Health, Hospice and Senior Living
Spin-off
ensigngroup.net 1
Disclaimers
Statements in this presentation concerning The Ensign Group’s (“Ensign” or the “Company”) future prospects are forward-looking statements
based on management’s current expectations, assumptions and beliefs about our business, financial performance, operating results, the industry
in which we operate and possible future events. These statements include, but are not limited to, statements regarding our growth prospects and
future operating and financial performance. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that
could cause our actual results to materially and adversely differ from those expressed in any forward-looking statement.
Readers should not place undue reliance on any forward-looking statements and are encouraged to review our periodic filings with the Securities
and Exchange Commission, including our recently filed Forms 10-K and 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. These documents are available on our website at
www.ensigngroup.net. This information is provided as of today’s date only, and except as required by federal securities law, Ensign does not
undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing
circumstances or for any other reason after the date of this presentation.
We supplement our GAAP reporting with EBITDA, adjusted EBITDA, adjusted EBITDAR, adjusted net income and adjusted EPS metrics, which
are supplemental non-GAAP financial measures. They reflect an additional way of looking at aspects of our operations that, when viewed with our
GAAP results, provide a more complete understanding of factors and trends affecting our business. They should not be relied upon to the
exclusion of GAAP financial measures. A more ample discussion of these GAAP financial measures is available on the “Investor Relations” tab of
our website and a reconciliation to GAAP is included as an appendix to this presentation.
We included unaudited pro forma financials in this presentation. The unaudited pro forma combined financial information were not prepared in
accordance with Article 11 of Regulation S-X. The following unaudited pro forma combined information are presented for illustrative purposes
only and do not purport to reflect the results we may achieve in future periods or the historical results that would have been obtained had the spin-
off been completed on January 1, 2018 or as of June 30, 2019 as the case may be. Also they do not give effect to the potential impact of current
financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the spin-off.
During this presentation we may reference operations in any or all of the 258 transitional, skilled and assisted living operations and other
businesses operated by our subsidiaries. Each such business is operated as a separate, wholly-owned independent operating subsidiary that has
its own management, employees and assets. References in the presentation to the consolidated “Company” and “its” assets and activities, as
well as the use of the terms “we,” “us,” “our,” and similar verbiage are not meant to imply that The Ensign Group, Inc. has direct operating assets,
employees or revenue, or that any of the Operations, the Service Center or the captive insurance subsidiary are operated by the same entity.
ensigngroup.net 2
Spin-off Overview
Operations Spin-off
Transitional & Skilled Services Home Health and Hospice (3)
Strategic Healthcare Campuses and Senior Senior Living (1)
Living Operations (1)
Ensign Pennant Care Continuum (EPCC)
Real Estate Ownership and Value Creation
New Ventures (4)
Ensign Pennant Care Continuum (EPCC)
New Ventures (2)
(1) Pennant includes 52 senior living operations, out of 57 senior living operations and 27 campuses; Ensign retains 9 senior living operations and 23 healthcare campuses, which are strategic to ENSG’s operations;
Data as of August 15, 2019.
(2)
(3)
Includes Capstone Transport (non-emergency medical transportation), Covalence Healthcare (specialized sub-acute services), Mobile Diagnostics, Beacon Purchasing (GPO) and outpatient rehab.
Includes home care.
ensigngroup.net 3
(4) Includes physician services.
Spin-off Overview
Pre-Spin / Ensign Today
Twelve Months Ending Six Months Ending
12/31/2018 06/30/2019
STATES 16 16
REVENUE $2,041mm $1,125mm
NET INCOME $92mm $56mm
ADJ. NET INCOME $102mm $61mm
ADJ. EBITDAR / MARGIN $319mm / 15.6% $186mm / 16.6%
ADJ. EBITDA / MARGIN $196mm / 9.6% $114mm / 10.1%
Post-Spin (1)
Twelve Months Six Months Twelve Months Six Months
Ending Ending Ending Ending
12/31/2018 06/30/2019 12/31/2018 06/30/2019
STATES 13 (2) 13 (2) STATES 13 (3) 13 (3)
REVENUE $1,766mm $970mm REVENUE $286mm $160mm
NET INCOME $67mm $46mm NET INCOME $16mm $5mm
ADJ. PRO FORMA NET INCOME $84mm $51mm ADJ. PRO FORMA NET INCOME $14mm $7mm
ADJ. PRO FORMA EBITDAR / MARGIN $268mm / 15.8% $158mm / 16.3% ADJ. PRO FORMA EBITDAR / MARGIN $58mm / 20.3% $30mm / 18.9%
ADJ. PRO FORMA EBITDA / MARGIN $168mm / 9.9% $98mm / 10.1% ADJ. PRO FORMA EBITDA / MARGIN $23mm / 8.1% $12mm / 7.3%
PRO FORMA TOTAL ASSETS NA $403mm
(1) See reconciliation of pro forma and agreement amounts in Appendix and Pennant Form 10.
(2)
(3)
Ensign will operate in AZ, CA, CO, IA, ID, KS, NE, NV, SC, TX, UT, WA and WI.
Pennant will operate in AZ, CA, CO, ID, IA, NV, OK, OR, TX, UT, WA, WI and WY.
ensigngroup.net 4
Post Spin-Off: Ensign's Commitment to Care Continuum
Denotes Ensign Business
Local leadership strategy focused on
Denotes Pennant Business
acquisitions in fragmented markets
Acute Care
for core business lines
Patient Service Intensity
Outpatient
Inpatient
LTAC High quality healthcare outcomes
Rehab
Rehab across the continuum driving local
Skilled reputation and partnerships
Nursing
Senior
Living Hospice Opportunistically drive new ventures
(1)
Home in ancillary businesses and markets
Health through its unique leadership model
Home
Care
Access to care continuum through
HOME Ensign Pennant Care Continuum
(described on a subsequent page)
Patient Illness Intensity
Ensign is Strategically Positioned to Deliver Long-term Value
(1) Pennant includes 52 senior living operations, out of 57 senior living operations and 27 campuses; Ensign retains 9 senior living operations and 23 healthcare campuses, which are strategic to ENSG’s operations;
ensigngroup.net 5
Data as of August 15, 2019.
Post Spin-Off: Ensign Remains Strategically Positioned to
Deliver Long-term Value
Best-in-Class Healthcare Services Company with a Proven Track Record
Experienced Management
Management team with combined
experience of ~70 years at Ensign
alone
Presence in Attractive Markets Multiple Business Lines
Presence in strategic markets Diversified operations including transitional
across 13 states with attractive and skilled services, strategic healthcare
reimbursement and growth profile campuses and senior living operations, real
estate ownership and new ventures
Several Growth Levers Strong Financial Profile
Leading consolidator in fragmented Above industry growth and
industry; new ventures; delivering profitability, stellar balance sheet
organic and strategic growth and strong cash flow conversion
Ensign’s Capabilities Create an Ecosystem that Enables Connectivity Among All Stakeholders and Drives a Virtuous Cycle of Success
ensigngroup.net 6
Ensign Investment Thesis
Superior
Results
Clinical Excellence
Strategic Continuum of Care
Growth Opportunities
Organic, Strategic, Real Estate and New Ventures
Culture of Local Leadership and Accountability
Ensign is Positioned to Deliver Superior Clinical Results that Will
Generate Strong Financial and Operating Results
ensigngroup.net 7
Leading Presence in Strategically Selected Attractive Markets
Industry Leader with Strong and Growing National Presence
9
12
2
6
1 7
20
19
15
48 7
29
1151305_1.wor (NY008V6E)
4
49
Skilled Nursing Facilities (SNF)
Senior Living Facilities (SLF)
Healthcare Campuses (SNF + SLF)
Count of Operations
1151305_1.wor (NY008V6E)
Data as of August 15, 2019.
ensigngroup.net 8Track Record of Attracting, Empowering and Retaining
Clinically-Focused Business Leaders Drives Results
Local
Leadership
Clusters
Superior
Clinical
Outcomes
Local Market
Operation of
Choice
ensigngroup.net 9Local Leaders Are Empowered by Our Cluster Model
Collaboration and connectivity between
operations (“ops”) that are geographically
What is a close together
Cluster?
Best practices, accountability and ownership
are shared among and between clusters
Each operation has full visibility into and Ops Ops
Ops Ops
accountability for individual and group
Incentive Cluster 1 Ops Cluster 2 Ops
results within the cluster
Driven
Compensation is linked to cluster’s clinical Ops Ops Ops
and financial success
Economic Sharing of resources across cluster partners
Benefits Economies of scale/purchasing power Ops
Ops
Ops Ops
Ops Cluster 4 Cluster 3
“Bundle" offering to payors by providing Ops Ops
Ops Ops
capabilities of cluster model
Payor Strengthens relationships with payor
Benefits partners
Coordinate to drive superior patient
outcomes
ensigngroup.net 10EPCC Enables Value-Based Care Continuum At the Local
Level
What is it?
Preferred provider network
Clinical Care Transitional Care
between Ensign and
Coordination Management
Pennant
Empowers local clinical
leaders to opt-in resulting in
smart and effective
solutions for patients
Home Health High Transparent Transitional Care
Hospice Quality Clinical Skilled Nursing
Home Care Outpatient Rehab
Care Data
Senior Living Healthcare Campuses
Senior Living
Optimal Care Setting
EPCC(1) Enabled Local Ecosystem is Well-Positioned to Existing Clinical Collaboration, Drive Best Quality
Care & Outcomes and Benefit From the Shift Toward Value-Based Reimbursement
(1) Subsidiaries of Ensign and Pennant may opt into a voluntary joint post-acute care preferred provider network called the Ensign Pennant Care Continuum (“the EPCC”).
ensigngroup.net 11Significant Real Estate Portfolio / Income
% of Total Facilites Proposed Ensign Triple Net Master
237 Facilites (1) Lease Pools with Pennant
Total Owned: 33.3%
5.1% Lease
Multiple “triple-net” master lease pools
Structure
21.5%
Lease agreements with initial terms between 14 and 16
Terms & years, with three 5-year extension options
Termination Consent required for Pennant to sublease, assign,
encumber or otherwise transfer or dispose any property
Rent Terms Fixed base rent with CPI-based escalators
11.8%
Pennant responsible for maintenance, capital expenditures,
61.6% Expenses property taxes, insurance and other expenses
Other Customary covenants and events of default
Leased (without a Purchase Option)
Leased (with a Purchase Option)
Owned + Operated
Owned + Leased to Pennant
(1) Total as of August 15, 2019 and Pro Forma for Pennant Spin-Off. ensigngroup.net 12Multifaceted Growth Opportunity Driven by Organic as well
as Strategic Opportunities
Skilled Mix
Disciplined
Occupancy
Acquisitions
Organic
CREATING
VALUE
Fundamentals Strategic Distressed
/ End Market Assets
New
Ventures
ensigngroup.net 13End Market Fundamentals Remain Favorable for Strong
Organic Growth
Key Drivers of Organic Growth
Estimated Population (75-87 Years) Based Aging Population over 65 projected to
on Average Birth Rate Data (1) 1 nearly double by 2050 (2)
4,500,000 Population
4,000,000
Shift to value-based care,
3,500,000
2 Shift to Value- will continue to benefit low
based Care cost, high quality settings
(e.g. SNF)
3,000,000
2,500,000
Over the last 10 years the
CMS reimbursement rates in
Reimbursement
3 the SNF industry have
2,000,000
Environment increased at a steady rate of
1.0-2.5%
Favorable Backdrop for Growth in the Transitional Skilled Services Industry
Source: US Census, CDC (NCHS), CMS and Population Reference Bureau.
(1)
(2)
Represents average number of births going back 75-87 years in any given year. For instance, 2000 data represents the average number of births from 1913-1925.
From 46MM in 2016 to 84MM in 2050.
ensigngroup.net 14Largest Beneficiary of Medicare Post-Acute Dollars with
Lowest Cost
Relative Costs of Treatment Across Post-Acute Destinations
Skilled Nursing IRF LTAC
$115
$67 $75
$45
$26 $31 $34 $26
$10 $9 $18 $11 $17
$6 $8
Tracheotomy with Vent Hip Fracture Joint Replacement Respiratory with Vent Stroke
Post-Acute Destinations - % of Medicare Dollars
44%
30%
13%
9%
5%
Skilled Nursing Home Health IRF LTAC Other
Skilled Nursing is the Most Utilized and Lowest Cost Setting for Post-Acute Care
Sources: Medpac and US HHS Department.
ensigngroup.net 15A Disciplined Approach to Acquisitions and Track Record of
Improving Operations to Drive Continued Growth
1 2 28.8% of Ensign’s skilled nursing
Market fragmentation creates
(1) operations have been operated less
significant consolidation opportunity
than three full years
HCR LCCA
2% 1% Sava
Genesis 1%
3%
Ensign
1%
20.2%
71.2%
8.6%
Other
92%
Same Facility Transitioning Recently Acquired
3 Proven track record of achieving significant 4 Significant impact from growth in
improvement in just 5 quarters (2) EBITDAR margins (3)
13.9%
EBITDAR
Margin 170
Skilled Mix bps
Revenue 170 bps
Occupancy
388 bps 12.2%
352 bps
(1) As of September 2018 per U.S. Nursing Home Market Summary by IQVIA.
(2) Acquisition track record based on an average for all SNF acquisitions from 2001 to October 1, 2017 measuring 5 quarters of operating performance.
(3) 12.2% represents average EBITDAR margin for the 1st quarter after acquisition for acquisitions made from 2001 to October 1, 2017. ensigngroup.net 16Demonstrated Track Record of Significant Operational
Improvements of Acquired Assets – Q2 2019
Skilled Mix Revenue (1) Medicare Rates
Consolidated 48.7% Consolidated $595
$614 $535 $572 Medicaid
$224
50.9% 44.6%
35.2%
(2) (3) (4)
Same Store Transitioning Recently Acquired Same Store Transitioning Recently Acquired
Occupancy Skilled Mix Days
Consolidated 79.4% Consolidated 29.0%
31.0%
80.1% 78.0% 76.3% 25.4%
20.8%
Same Store Transitioning Recently Acquired Same Store Transitioning Recently Acquired
Source: Data as of Q2’19.
(1) At the end of Q2'19, there were 198 skilled nursing facilities in operation.
(2) Same Store represents all skilled nursing operations purchased prior to January 1, 2016 totaling 141 facilities.
(3) Transitioning represents all skilled nursing operations purchased from January 1, 2016 to December 31, 2017 totaling 40 facilities.
ensigngroup.net 17
(4) Recently Acquired represents all skilled nursing operations purchased on or subsequent to January 1, 2018 totaling 17 facilities.Organizational Focus on Clinical Quality Ultimately Leads to
Superior Financial Results
Clinical Quality Translates to Organic Growth
SNF Count by CMS Star Rating
1-Star 2-Star 3-Star 4-Star 5-Star
200
150
100
50
0
14 21 38 45 60 77 72 86 100 91
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Ensign 1-Star Facility % Trend Ensign Adjusted EBITDAR Trend
$ in millions
41%
$319
$87
12%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Note: Adjusted EBITDAR is a non-GAAP measure and represents net income before (a) interest expense, net, (b) provision for income taxes, (c) depreciation and (d) facility rent
expense. See Appendix for a reconciliation of GAAP to non-GAAP financial measures. ensigngroup.net 18Ensign Represents THE Growth Story in the Facility-Based
Healthcare Services & Post-Acute Sector
Revenue (1) Adjusted EBITDAR (1)
($mm) ($mm)
$2,041 $319
$1,849 $285
$1,655 $262
$1,342 $221
$1,027 $1,125 $186
$159
2014 2015 2016 2017 2018 1H2019 2014 2015 2016 2017 2018 1H19
2014 – 2018 Revenue CAGR 2014 – 2018 Adjusted EBITDAR CAGR
19% 19%
12% 13%
11%
10%
Facility-Based Post-acute (3) Facility-based Post-acute (3)
Healthcare Healthcare
Services (2) Services (2)
Note: Adjusted EBITDAR is a non-GAAP measure and represents net income before (a) interest expense, net, (b) provision for income taxes, (c) depreciation and (d) facility rent expense. See Appendix for a GAAP reconciliation.
(1) Revenue and adjusted EBITDAR not pro forma for spin.
(2) Represents average of peer growth from 2014-2018, except for peers that were not in existence for the entire time period, in which case the longest time period available was used. Peers grouped by subsector include:
Acute Care: HCA, CYH, THC, LPNT, QHC and UHS; Behavioral: ACHC, AAC and CIVI; ASC: SGRY and SCAI; Dialysis: FMS, DVA and ARA; Home Health and Hospice: AMED, LHCG, ADUS and CHE;
ensigngroup.net 19
Institutional: CSU, BKD, EHC and GEN; Rehab: SEM and USPH.
(3) Represents average of AMED, LHCG, ADUS, CHE, CSU, BKD, EHC and SEM.This Transaction Continues the Evolution of Ensign
Strong Expansion Since Its Founding in 1999
The Ensign Established Ensign Ensign entered Senior living In June 2014, Ensign Announces
Group was New Market completes an into the home portfolio Ensign completes 50 spin-off of home
founded with CEO program to IPO in health industry company was completed the acquisitions health &
the goal of provide existing November 2007 via acquisition formed in June spin-off of its across SNF, hospice as well
establishing a leaders at listing on and established 2011 to create a real estate home health & as senior living
new level of Ensign the NASDAQ with its home health platform of best business, hospice and segments,
quality care entrepreneurial the ticker, and hospice practices and CareTrust REIT senior living forming The
within the opportunity and ENSG, and portfolio resources in and begins to Pennant Group
skilled nursing challenge of raises ~$74mm company assisted living enter its next
industry entering a new before focusing phase of growth
market and on greater
starting a new expansion
business
1999 2006 2007 2010 2011 2014 2015 2018 2019
209
191 198
Healthcare Facilities Operated (1) 176
152
Cumulative Facility Growth
122
99 107
94
75 79
54 58 60
39 41 44
19 23
5 7
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
(1) Represents number of post-spin facilities including skilled nursing, standalone and healthcare campuses as of August 15, 2019.
ensigngroup.net 20Track Record of Successfully Incubating New Ventures
New Ventures
Announced May 2019 Completed in 2014 Completed in 2016
Real Estate
Spin Offs Divestitures Current
ensigngroup.net 21Total Shareholder Return as of Latest Completed Quarter
Total Shareholder Return Since Total Shareholder Return Since
1-Year Total Shareholder Return (1)
Ensign IPO (1) CareTrust Spin-off (1)
Combined Return: 459%
1,329%
355%
Combined Return: 109%
173% 104%
160%
70% 76%
60%
49%
10%
Facility-Based Facility-Based
-11%
S&P 500 Healthcare S&P 500 Healthcare S&P 500
Facility-Based
Services (2) Services (2)
Healthcare
Services (2)
Superior Total Shareholder Return for Ensign Across Time Periods (3)
(1) Compound total return, with dividends reinvested by default on the ex-date, FactSet as of 6/30/19. Return since IPO begins on 11/09/07, return since CareTrust Spin-off begins on 06/02/14 and 1-Year return begins
on 6/30/18.
(2) Represents average total return of facility-based healthcare services peers, except for peers that were not in existence for the entire time period, in which case the longest time period available was used. Peers
grouped by subsector include: Acute Care: HCA, CYH, THC, LPNT, QHC and UHS; Behavioral: ACHC, AAC and CIVI; ASC: SGRY and SCAI; Dialysis: FMS, DVA and ARA; Home Health and Hospice: AMED,
ensigngroup.net 22
LHCG, ADUS and CHE; Institutional: CSU, BKD, EHC and GEN; Rehab: SEM and USPH.
(3) Past performance is not an indication of future performance and is not intended to predict actual results, and no assurance is given with respect there to.Ensign’s Management Team
Long Tenured and Successful Management Team with ~70 Years of Cumulative Experience at ENSG Alone
Christopher Christensen
Title Tenure at Ensign Prior Affiliations
Executive Chairman 20 years Former Ensign roles: CEO, President and Director
Prior to joining Ensign: Acting Chief Operating Officer of Covenant Care, Inc.
Barry Port
Title Tenure at Ensign Prior Affiliations
Chief Executive Officer and 15 years Former Ensign roles: COO, President of Keystone Care and CEO of Bella Vita Health
Director and Rehabilitation Center
Prior to joining Ensign: Leader of Strategic Sourcing Initiatives for Sprint Corporation
Suzanne Snapper
Title Tenure at Ensign Prior Affiliations
Chief Financial Officer and EVP 12 years Former Ensign roles: Vice President of Finance
Prior to joining Ensign: Senior Manager at KPMG LLP
Chad Keetch
Title Tenure at Ensign Prior Affiliations
Chief Investment Officer, EVP 9 years Former Ensign roles: Executive Vice President and Secretary, Vice President of
and Secretary Acquisitions and Business Legal Affairs and Assistant Secretary
Prior to joining Ensign: Attorney at Kirkland & Ellis LLP
Spencer Burton
Title Tenure at Ensign Prior Affiliations
President, Chief Operating Former Ensign roles: President of Pennant Healthcare, Administrator of Pacific Care
13 years
Officer and Rehabilitation (Ensign-affiliate)
ensigngroup.net 23Introduction to
Pennant
ensigngroup.net 24Introducing The Pennant Group
Highly Diversified by Payor, Service and Geography
Presence across 13(1) States with 63(1) Home Health and Hospice Agencies and 52(1) Senior Living Operations;
Revenue Generated from Multiple Sources
Clinical Excellence Driven by Quality Care and Outcomes
Average Rating of 4.0 vs. Industry Average of 3.5(2)
Strong Track Record of Growth
2011 - 2018 Revenue CAGR of ~37% Driven by Solid Organic Growth and Disciplined
Acquisition Strategy
Growing End Markets with Significant White Space
Less than 20% of Home, Health, Hospice and Senior Living Operations Owned by Large Operators – Significant
Consolidation Opportunity
Proven Leadership Team
Management Team Comprised of Ensign Leaders with ~60 Years of Cumulative Experience at Ensign and the
Industry that Drove Home Health, Hospice and Senior Living Expansion
(1)
(2)
As of August 15, 2019.
As of June 30, 2019.
ensigngroup.net 25Diversified Business and Payor Mix with Robust Financial
and Operating Track Record
A Home Health and Hospice B Senior Living A B Consolidated
(59% of 2018 Revenue) (41% of 2018 Revenue)
Medicaid Medicaid
Private and Other Medicaid
8% 21%
10% 13%
Private and Other
Payor Mix (1)
Managed Care
37%
14%
Medicare
Private and Other 41%
Medicare
79%
68% Managed Care
9%
Revenue ($mm) Revenue ($mm) Total Revenue ($mm)
Financials (1)
$286.1
$251.0
$217.2
$169.1
$142.4
$115.8 $108.6 $117.0
$101.4
2016 2017 2018 2016 2017 2018 2016 2017 2018
Average Medicare revenue per Unit Occupancy: 80.1%
Operating
Metrics (2)
completed 60-day episode
Average monthly revenue per unit:
(Home Health): $3,024
Average Daily Census (Hospice):
$3,109 A B
1,544
(1) As of December 31, 2018.
(2) As of June 30, 2019. ensigngroup.net 26Diversified Geographic Mix with Growing National Presence
1072869_1.wor (NY008RJ0)
Home Health and Hospice Operations
Senior Living Locations
1072869_1.wor (NY008RJ0)
Data as of August 15, 2019.
ensigngroup.net 27Pennant is Well-positioned for Long-term Value Creation
Strong Bedrock of Favorable Industry Trends… …Combined with Pennant's Competitive Advantages
Growing Innovative
Population over 65 will nearly double Local leadership
Senior Operating
by 2050(1) Superior clinical outcomes
Population Model
Demand for Comfort of one’s own home Disciplined
Track record of strong growth in net
Home-Based Lower savings levels today than in the Growth
revenue and adjusted EBITDAR
Setting past for the latest retiring population Strategy
Lower cost settings
Favorable Partner of Strong partnerships with key local
Shift toward value-based
Industry Choice healthcare communities
reimbursement across home health,
Dynamics
hospice and senior living
12,300 Medicare-certified Experienced
Industry Home-health agencies ~50 years combined experience within
Management
Fragmentation(2) 4,200 Hospice agencies Ensign alone
Team
17,000 Senior Living Providers
Shareholder Value Creation
Source: US Consensus, CDC, Kaufman Hall, ASHA, Population Reference Bureau and Industry Research.
(1)
(2)
Source: Population Reference Bureau, Dec 2015; from 46MM in 2016 to 84MM in 2050.
Top ten home health operators account for 21% of market; top five hospice agencies account for 14% of market; top 5 senior living operators account for 10% of the market.
ensigngroup.net 28Disciplined Acquisition Strategy and Track Record
Growth in Revenue ($mm) and # of Home Health
& Hospice Agencies
$169.1
Focused on selectively acquiring strategic and
underperforming operations within our target markets
54
$14.8
Local leaders empowered to identify and pursue
acquisition opportunities 7
2011 2018
Growth in Revenue ($mm) and # of Senior Living
Units
Expertise in transitioning newly-acquired operations to
our innovative operating model and culture $117.0
Fragmented industry with significant opportunity for $17.1 3,820
consolidation
887
2011 2018
Proven ability to execute acquisitions in key markets, integrate into our existing markets and improve operations
ensigngroup.net 29Disciplined Organic and Strategic Growth
Strong Net Revenue and Adjusted EBITDAR Growth
Net Revenue ($ in millions) Adjusted EBITDAR ($ in millions)
$286.1 $57.5
$52.6
$251.0
$47.3
$217.2
$160.6
$30.0
2016 2017 2018 1H2019 2016 2017 2018 1H2019
Note: EBITDAR is a non-GAAP measure and represents net income before (a) interest expense, net, (b) provision for income taxes, (c) depreciation and (d) facility rent expense.
See Appendix for a reconciliation of GAAP to non-GAAP financial measures.
ensigngroup.net 30Transaction Process and Timing Overview
Independent executive management team dedicated to Pennant
Executive management will consist of current Ensign executives with ~50 years of combined experience within
Ensign
Chairman, Chief Executive Officer and President: Daniel Walker
Management Chief Financial Officer: Jennifer Freeman
Chief Operating Officer: John Gochnour
Chief Investment Officer, EVP and Secretary: Derek Bunker
Ensign to provide certain support functions on a transitional basis for up to two years
Ensign has announced its plan to spin-off its home health and hospice operators and substantially all of its senior
Transaction
living operations
Description
Spin-off distribution intended to qualify as tax-free for U.S. federal income tax purposes
Latest Form 10 Filed: August 19, 2019
Timing
Complete Spin-Off: October 1, 2019
Declaration by SEC that Pennant’s Registration Statement is effective
Filing and approval of Pennant listing application by NASDAQ
Conditions
Final approval and declaration of the distribution by Ensign’s Board of Directors
Precedent Execution of intercompany and third party agreements
Other customary conditions
ensigngroup.net 31Appendix
ensigngroup.net 32Non-GAAP and Unaudited Pro Forma Adjustments
The Company supplements its GAAP reporting with EBITDA, adjusted EBITDA, adjusted EBITDAR, adjusted net income and adjusted EPS
metrics, which are supplemental non-GAAP financial measures. They reflect an additional way of looking at aspects of the Company’s operations
that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business. They should not be
relied upon to the exclusion of GAAP financial measures. A more ample discussion of these GAAP financial measures is available on the “Investor
Relations” tab of the Company’s website and a reconciliation to GAAP is included as an appendix to this presentation.
The Pro-Formas do not purport to represent what the Company’s financial position and results of operations would have been had the proposed
spin-off occurred on the dates indicated or to project financial performance for any future period or as of a future date. In addition, the Pro-Formas
are based on currently available information and certain assumptions that the Company believes are reasonable, and are provided for illustrative
and informational purposes only. The Pro-Formas have been prepared to reflect adjustments to the Company’s historical annual consolidated
financial statements that are (1) directly attributable to the spin-off; (2) factually supportable; and (3) with respect to the unaudited pro forma
condensed consolidated statements of operations, expected to have a continuing impact on the Company’s results of operations. The Pro-Formas
include adjustments to reflect the following:
The elimination of the operating results of The Pennant Group Businesses;
The elimination of costs incurred in connection with the spin-off;
Revisions to the Company’s debt structure in connection with the spin-off; and
The impact of, and transactions contemplated by, the proposed Separation and Distribution Agreement, the Tax Matters Agreement, and
Employee Matters Agreement entered into between Ensign and Pennant in connection with the spin-off.
ensigngroup.net 33Reconciliation of GAAP to Non-GAAP Net Income - Pennant
$ in thousands Six Months Ended
June 30, 2019
Net income attributable to New Ventures $4,821
Non-GAAP adjustments
(a)
Costs at start-up operations 326
(b)
Share-based compensation expense 1,127
(c)
Depreciation and amortization - patient base 29
(d)
Acquisition-related costs 541
(e)
General and administrative – proposed spin-off transaction costs 4,648
(f)
Provision for income taxes on non-GAAP adjustments (2,984)
Non-GAAP Net Income $8,508
ensigngroup.net 34Reconciliation of GAAP to Non-GAAP Net Income - Pennant
(a) Represents results related to start-up operations.
(b) Represents share-based compensation expense incurred.
(c) Included in depreciation and amortization are amortization expenses related to patient base intangible assets at newly
acquired assisted living facilities.
(d) Costs incurred to acquire an operation which are not capitalizable.
(e) Included in general and administrative expense are costs incurred in connection with our proposed spin-off of our home
health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded
company.
(f) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0% for the
six months ended June 30, 2019.
ensigngroup.net 35Reconciliation of Adjusted Net Income to Pro Forma Adjusted Net
Income - Pennant
($ in thousands) Six Months Ended
June 30, 2019
Adjusted Net Income $8,508
Pro forma adjustments
Rent expense (1,796) (1)
Interest expense (1,039) (2)
Provision for income taxes 707 (3)
Non-controlling interest 350 (4)
Pro forma Adjusted Net Income $6,730
ensigngroup.net 36Reconciliation of Pro Forma Adjusted Net Income to Pro Forma
Non-GAAP EBITDA, Adjusted EBITDA And Adjusted EBITDAR -
Pennant
($ in thousands) Six Months Ended
June 30, 2019
Pro forma Adjusted Net Income $ 6,730
Interest expense, net 1,039
Provision for income taxes 2,244
Depreciation and amortization 1,743
Pro Forma Adjusted EBITDA $ 11,756
Rent—cost of services 18,617
Pro Forma Adjusted EBITDAR $ 30,373
ensigngroup.net 37Notes to Pro Forma Adjustments - Pennant
1. Reflects changes in rent resulting from the removal of intercompany rental charges and replacement of such in accordance with
the Ensign Leases, and new third-party master lease agreements based on preliminary negotiations with landlords that will
replace the existing lease agreements between Pennant’s subsidiaries and such landlords.
2. Represents the adjustments to interest expense related to approximately $30.0 million of debt that Pennant expects to incur.
3. Reflects the tax effects of adjustments.
4. Represents an adjustment to reflect the pro forma recapitalization of Pennant equity. As part of the recapitalization, non-
controlling shareholders net investment in subsidiaries of Pennant will be eliminated.
ensigngroup.net 38Reconciliation of GAAP to Non-GAAP Financial Measures -
Pennant
$ in thousands Six Months Ended
June 30,
2019 2018
Net Income $5,171 $ 7,912
Less: Net income attributable to noncontrolling interest 350 370
Add: Provision for income taxes (32) 2,200
Depreciation and amortization 1,772 1,435
EBITDA $6,561 $ 11,177
Adjustments to EBITDA:
Add: Costs at Start-up operations(a) 317 36
Share-based compensation expense(b) 1,127 1,177
Acquisition related costs(c) 541 —
Spin-off related transaction related costs(d) 4,648 —
Rent related to item (a) above 9 13
Adjusted EBITDA $13,203 $ 12,403
Add: Rent—cost of services 16,830 15,289
Less: Rent related to items(a) above (9) (13)
Adjusted Rent—cost of services 16,821 15,276
Adjusted EBITDAR $30,024
ensigngroup.net 39Reconciliation of GAAP to Non-GAAP Financial Measures -
Pennant
Notes to the Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR
(a) Represents results related to start-up operations. This amount excludes rent, depreciation and amortization expense.
(b) Share-based compensation expense incurred.
(c) Acquisition related costs are included in general and administrative expense.
(d) Costs incurred related to the spin-off are included in general and administrative expense.
ensigngroup.net 40Reconciliation by Segment - Pennant
$ in thousands Six Months Ended June 30,
Home Health and Hospice Senior Living Services
2019 2018 2019 2018
Segment income before provision for income taxes(a) $ 12,888 $ 11,087 $ 7,434 $ 8,016
Less: net income attributable to noncontrolling interests 350 370 — —
Add: Depreciation and amortization 580 526 1,142 909
EBITDA $ 13,118 $ 11,243 $ 8,576 $ 8,925
Adjustments to EBITDA:
Add: Costs at start-up operations(b) 317 36 — —
Share-based compensation expense(c) 87 95 137 150
Acquisition-related compensation expense(d) 438 — — —
Rent related to item (b) above 9 13 — —
Adjusted EBITDA $ 13,969 $11,387 $ 8,713 $ 9,075
Rent—cost of services $ 1,414 $ 1,089 $15,416 $ 14,200
Less: Rent related to item (b) above (9) (13) — —
Adjusted Rent—cost of services $ 1,405 $ 1,076 $15,416 $ 14,200
ensigngroup.net 41Reconciliation by Segment - Pennant
Notes to the Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or
loss.
(b) Costs incurred for start-up operations. This amount excludes rent, depreciation and amortization expense.
(c) Share-based compensation expense incurred and included in cost of services.
(d) Acquisition related costs that are not capitalizable.
ensigngroup.net 42Reconciliation of GAAP to Non-GAAP Net Income - Pennant
$ in thousands Year Ended
December 31, 2018
Net income attributable to New Ventures $15,684
Non-GAAP adjustments
(a)
Costs at start up operations 159
(b)
Share-based compensation expense 2,382
(c)
Amortization of patient base 87
(d)
Spin-off related transaction costs 756
(e)
Provision for income taxes on non-GAAP adjustments (1,652)
Adjusted Net Income $17,416
ensigngroup.net 43Reconciliation of GAAP to Non-GAAP Net Income - Pennant
(a) Represents results related to start-up operations.
(b) Represents share-based compensation expense incurred.
(c) Represents depreciation and amortization expenses related to patient base intangible assets at newly acquired assisted
living communities.
(d) Represents general and administrative expense costs incurred in connection with the proposed spin-off of our home
health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded
company.
(e) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0% for the
year ended December 31, 2018.
ensigngroup.net 44Reconciliation of Adjusted Net Income to Pro Forma Adjusted Net
Income - Pennant
($ in thousands) Year Ended
Dec. 31, 2018
Adjusted Net Income $17,416
Pro forma adjustments
Rent expense (3,700) (1)
Interest expense (1,944) (2)
Provision for income taxes 1,409 (3)
Non-controlling interest 595 (4)
Pro forma Adjusted Net Income $13,776
ensigngroup.net 45Reconciliation of Pro Forma Adjusted Net Income to Pro Forma
Non-GAAP EBITDA, Adjusted EBITDA And Adjusted EBITDAR -
Pennant
($ in thousands) Year Ended
Dec. 31, 2018
Pro forma Adjusted Net Income $ 13,776
Interest expense, net 1,944
Provision for income taxes 4,594
Depreciation and amortization 2,877
Pro Forma Adjusted EBITDA $ 23,191
Rent—cost of services 34,870
Pro Forma Adjusted EBITDAR $ 58,061
ensigngroup.net 46Notes to Pro Forma Adjustments - Pennant
1. Reflects changes in rent resulting from the removal of intercompany rental charges and replacement of such in accordance with
the Ensign Leases, and new third-party master lease agreements based on preliminary negotiations with landlords that will
replace the existing lease agreements between Pennant’s subsidiaries and such landlords.
2. Represents the adjustments to interest expense related to approximately $30.0 million of debt that Pennant expects to incur.
3. Reflects the tax effects of adjustments.
4. Represents an adjustment to reflect the pro forma recapitalization of Pennant equity. As part of the recapitalization, non-
controlling shareholders net investment in subsidiaries of Pennant will be eliminated.
ensigngroup.net 47Reconciliation of GAAP to Non-GAAP Financial Measures -
Pennant
$ in thousands Year Ended December 31,
2018 2017 2016
Net Income $ 16,279 $ 10,027 $ 7,917
Less: Net income attributable to noncontrolling interest 595 160 26
Add: Provision for income taxes 4,352 5,375 5,065
Depreciation and amortization 2,964 2,544 2,855
EBITDA $23,000 $ 17,786 $ 15,811
Adjustments to EBITDA:
Add: Costs at Start-up operations(a) 129 478 157
Results related to closed operations(b) — 728 —
Share-based compensation expense(c) 2,382 2,298 2,341
Spin-off related transaction related costs(d) 756 — —
Rent related to items (a) and (b) above 30 190 36
Adjusted EBITDA $ 26,297 $ 21,480 $ 18,345
Add: Rent—cost of services 31,199 31,304 28,953
Less: Rent related to items(a) and (b) above (30) (190) (36)
Adjusted Rent—cost of services 31,169 31,114 28,917
Adjusted EBITDAR $ 57,466
ensigngroup.net 48Reconciliation of GAAP to Non-GAAP Financial Measures -
Pennant
Notes to Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR
(a) Represents results related to start-up operations. This amount excludes rent, depreciation and amortization expense.
(b) Represents results at closed operations. This amount excludes rent, depreciation and amortization expense.
(c) Share-based compensation expense incurred.
(d) Costs incurred related to the spin-off are included in general and administrative expense.
ensigngroup.net 49Reconciliation by Segment - Pennant
$ in thousands Year Ended December 31,
Home Health and Hospice Senior Living Services
2018 2017 2016 2018 2017 2016
Segment income before provision for
$ 23,375 $ 16,832 $ 13,676 $ 16,099 $ 13,033 $ 11,754
income taxes(a)
Less: net income attributable to
595 160 26 — — —
noncontrolling interests
Add: Depreciation and amortization 1,045 945 924 1,919 1,599 1,931
EBITDA $ 23,825 $ 17,617 $ 14,574 $ 18,018 $ 14,632 $ 13,685
Adjustments to EBITDA:
Costs at start-up operations(b) 129 478 157 — — —
Results related to closed
— 728 — — — —
operations(c)
Share-based compensation
192 207 253 294 271 204
expense(d)
Rent related to items (b) and (c)
30 190 36 — — —
above
Adjusted EBITDA $ 24,176 $ 19,220 $ 15,020 $ 18,312 $ 14,903 $ 13,889
Rent—cost of services $ 2,281 $ 1,977 $ 1,564 $ 28,918 $ 29,327 $ 27,389
Less: rent related to items (b) and
(30) (190) (36) — — —
(c) above
Adjusted Rent—cost of services $ 2,251 $ 1,787 $ 1,528 $ 28,918 $ 29,327 $ 27,389
ensigngroup.net 50Reconciliation by Segment - Pennant
Notes to the Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or
loss.
(b) Costs incurred for start-up operations. This amount excludes rent, depreciation and amortization expense.
(c) Represent results at closed operations. This amount excludes rent, depreciation and amortization expense.
(d) Share-based compensation expense incurred and included in cost of services.
ensigngroup.net 51Reconciliation of GAAP to Non-GAAP Net Income - Ensign
$ and shares in thousands, except per share Six Months Ended
June 30, 2019
Net income attributable to The Ensign Group, Inc. $55,981
Non-GAAP adjustments
(a)
Results related to facilities currently being constructed and other start-up operations 326
(b)
Share-based compensation expense 6,255
(c)
Results related to closed operations and operations not at full capacity 975
(d)
Depreciation and amortization - patient base 186
(e)
Acquisition-related costs 608
(f)
General and administrative – proposed spin-off transaction costs 4,648
(g)
Provision for income taxes on non-GAAP adjustments (7,893)
Non-GAAP net income $61,086
Diluted Earnings Per Share As Reported
Net income $1.00
Average number of shares outstanding 55,896
Adjusted Diluted Earnings Per Share
Net income $1.09
Average number of shares outstanding 55,896
ensigngroup.net 52Reconciliation of GAAP to Non-GAAP Net Income
Notes to the Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR
(a) Represents operating results for facilities currently being constructed and other start-up operations.
(b) Represents share-based compensation expense incurred.
(c) Represents results at closed operations and operations not at full capacity.
(d) Included in depreciation and amortization are amortization expenses related to patient base intangible assets at newly
acquired skilled nursing and assisted living facilities.
(e) Costs incurred to acquire an operation which are not capitalizable.
(f) Included in general and administrative expense are costs incurred in connection with our proposed spin-off of our home
health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded
company.
(g) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0% for the
six months ended June 30, 2019.
ensigngroup.net 53Reconciliation of Adjusted Net Income to Pro Forma Adjusted
Net Income - Ensign
(in thousands) Six Months Ended
June 30, 2019
Adjusted Net Income $61,086
Pro forma adjustments
Pennant results (19,954) (6)
Rental income from Pennant 5,964 (1)
Certain general and administrative expenses 5,622 (2)
Rent expense (4,168) (1)
Interest expense 427 (4)
Provision for income taxes 3,392 (5)
Other (1,017) (7)
Pro forma Adjusted Net Income $51,352
ensigngroup.net 54Reconciliation of Pro Forma Adjusted Net Income to Pro
Forma Non-GAAP EBITDA, Adjusted EBITDA And Adjusted
EBITDAR - Ensign
(in thousands) Six Months Ended
June 30, 2019
Pro forma Adjusted Net Income $51,352
Interest expense, net 6,039
Provision for income taxes 17,185
Depreciation and amortization 23,691
Pro Forma Adjusted EBITDA 98,267
Rent—cost of services 60,001
Pro Forma Adjusted EBITDAR $158,268
ensigngroup.net 55Reconciliation of Net Income to Pro Forma Net Income for the
Six Months Ended June 30, 2019 - Ensign
(in thousands) Six Months Ended June 30, 2019
Pennant Pro Forma
As Reported Pro Forma
Separation(6) Adjustments
Revenue
Service revenue $1,124,865 $(160,641) $ - $964,224
(1)
Rental income - - 5,964 5,964
Revenue 1,124,865 (160,641) 5,964 970,188
Expense
Cost of services 887,002 (121,767) - 765,235
(1)
Rent—cost of services 72,846 (16,830) 4,168 60,184
(3)
General and administrative expense 63,585 - (4,648) 58,937
Depreciation and amortization 25,782 (1,772) - 24,010
Total expenses 1,049,215 (140,369) (480) 908,366
Income from operations 75,650 (20,272) 6,444 61,822
Other income (expense):
(4)
Interest expense (7,613) - 427 (7,186)
Interest income 1,147 - - 1,147
Other expense, net (6,466) - 427 (6,039)
Income before provision for income taxes 69,184 (20,272) 6,871 55,783
(5)
Provision for income taxes 12,652 32 (3,423) 9,261
Net income 56,532 (20,304) 10,294 46,522
Less: net income attributable to noncontrolling interests 551 (350) - 201
Net income attributable to The Ensign Group, Inc. 55,981 (19,954) 10,294 46,321
ensigngroup.net 56Footnotes to Pro Forma Adjustments - Ensign
Notes to Pro Forma Adjustments
1. Reflects changes in rent expenses and rental income resulting from the Pennant, Ensign and third-parties leases.
2. General and Administrative (G&A) expense for Pennant was not removed from the consolidated Ensign pro forma results.
Accordingly, as part of the adjusted pro forma net income, we excluded 3.5% of Pennant revenue as a representation of G&A
expense for Pennant. We believe at the time of separation a portion of the historical G&A will be transferred to Pennant.
3. Reflects the removal of non-recurring transaction and pre-separation costs incurred in the historical periods that are directly
related to the separation of Pennant from Ensign.
4. Based on term sheet from bank, we anticipate that our overall interest rate will decline by 25 basis points. As these amounts are
not finalized this amount may adjustment on placement of debt.
5. Reflects the tax effects of the pro forma and Non-GAAP adjustments at income tax rates of 25%.
6. Represents Pennant statement of income as filed on the Form 10, excluding general and administrative expenses allocated to
Pennant discussed in note (2).
7. Represents Pennant closed operations that we adjusted as part of our consolidated Non-GAAP adjustments. As the Pennant
operations have been removed from Ensign’s pro forma adjusted net income, we need to eliminate these Non-GAAP adjustments
that were part our original Non-GAAP adjustments.
ensigngroup.net 57Reconciliation of GAAP to Non-GAAP Net Income - Ensign
$ and shares in thousands, except per share Year Ended
Dec 31, 2018
Net income attributable to The Ensign Group, Inc. $92,364
Non-GAAP adjustments
(a)
Results related to facilities currently being constructed and other start-up operations 3,840
Charges related to the settlement/(return of unclaimed class action settlement) of the class action
(1,664)
lawsuit
(b)
Share-based compensation expense 10,337
Results related to closed operations and operations not at full capacity, including continued obligations
933
and closing expense
(c)
Business interruption recoveries related to California fires (675)
(d)
Depreciation and amortization - patient base 242
(e)
Transaction-related costs 361
(f)
COS - Goodwill and long-lived assets impairment 7,809
(g)
Provision for income taxes on non-GAAP adjustments (11,416)
Non-GAAP net income $102,131
Diluted Earnings Per Share As Reported
Net income $1.70
Average number of shares outstanding 54,397
Adjusted Diluted Earnings Per Share
Net income 1.88
Average number of shares outstanding 54,397
ensigngroup.net 58Reconciliation of GAAP to Non-GAAP Net Income
Notes to Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR
(a) Represents operating results for facilities currently being constructed and other start-up operations.
(b) Represents share-based compensation expense incurred.
(c) Business interruption recoveries related to California fires.
(d) Included in depreciation and amortization are amortization expenses related to patient base intangible assets at newly
acquired skilled nursing and assisted living facilities.
(e) Costs incurred to acquire an operation which are not capitalizable.
(f) Impairment charges to goodwill and long-lived assets at one of our other ancillary operations and two assisted living
facilities.
(g) 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 year ended December 31, 2018.
ensigngroup.net 59Reconciliation of Adjusted Net Income to Pro Forma Adjusted
Net Income - Ensign
(in thousands) Year Ended
Dec. 31, 2018
Adjusted Net Income $ 102,131
Pro forma adjustments
Pennant results (34,527) (6)
Rental adjustments 11,398 (1)
Certain general and administrative expenses 10,012 (2)
Rent expense (7,698) (1)
Interest expense 931 (4)
Spin-off related costs 756 (3)
Provision for income taxes 1,849 (5)
Other (728) (7)
Pro forma Adjusted Net Income $ 84,124
ensigngroup.net 60Reconciliation of Pro Forma Adjusted Net Income to Pro
Forma Non-GAAP EBITDA, Adjusted EBITDA And Adjusted
EBITDAR - Ensign
(in thousands) Year Ended
Dec. 31, 2018
Pro forma Adjusted Net Income $ 84,124
Interest expense, net 12,188
Provision for income taxes 28,056
Depreciation and amortization 43,231
Pro Forma Adjusted EBITDA $ 167,599
Rent—cost of services 100,360
Pro Forma Adjusted EBITDAR $ 267,959
ensigngroup.net 61Reconciliation of Net Income to Pro Forma Net Income for the
Year Ended December 31, 2018 - Ensign
(in thousands) Year Ended December 31, 2018
Pennant Pro Forma
As Reported Pro Forma
Separation(6) Adjustments
Revenue
Service revenue 1,888,862 (169,037) - 1,719,825
Senior living revenue 151,797 (117,021) - 34,776
(1)
Rental income - - 11,398 11,398
Revenue $ 2,040,659 $ (286,058) $ 11,398 $ 1,765,999
Expense
Cost of services 1,627,672 (212,421) - 1,415,251
Return of unclaimed class action settlement (1,664) - - (1,664)
(1)
Rent—cost of services 138,512 (31,199) 7,698 115,011
(2) (3)
General and administrative expense 100,307 - (756) 99,551
Depreciation and amortization 47,344 (2,964) - 44,380
Total expenses 1,912,171 (246,584) 6,942 1,672,529
Income from operations $ 128,488 $ (39,474) $ 4,456 $ 93,470
Other income (expense):
(4)
Interest expense (15,182) - 931 (14,251)
Interest income 2,063 - - 2,063
Other expense, net (13,119) - 931 (12,188)
Income before provision for income taxes 115,369 (39,474) 5,387 81,282
(5)
Provision for income taxes 22,841 (4,352) (4,272) 14,217
Net income $ 92,528 $ (35,122) $ 9,659 $ 67,065
Less: net income attributable to noncontrolling interests 164 (595) - (431)
Net income attributable to The Ensign Group, Inc. $ 92,364 $ (34,527) $ 9,659 $ 67,496
ensigngroup.net 62Footnotes to Pro Forma Adjustments - Ensign
Notes to Pro Forma Adjustments
1. Reflects changes in rent expenses and rental income resulting from the Pennant, Ensign and third-parties leases.
2. General and Administrative (G&A) expense for Pennant was not removed from the consolidated Ensign pro forma results.
Accordingly, as part of the adjusted pro forma net income, we excluded 3.5% of Pennant revenue as a representation of G&A
expense for Pennant. We believe at the time of separation a portion of the historical G&A will be transferred to Pennant.
3. Reflects the removal of non-recurring transaction and pre-separation costs incurred in the historical periods that are directly
related to the separation of Pennant from Ensign.
4. Based on term sheet from bank, we anticipate that our overall interest rate will decline by 25 basis points. As these amounts are
not finalized this amount may adjustment on placement of debt.
5. Reflects the tax effects of the pro forma and Non-GAAP adjustments at income tax rates of 25%.
6. Represents Pennant statement of income as filed on the Form 10, excluding general and administrative expenses allocated to
Pennant discussed in note (2).
7. Represents Pennant closed operations that we adjusted as part of our consolidated Non-GAAP adjustments. As the Pennant
operations have been removed from Ensign’s pro forma adjusted net income, we need to eliminate these Non-GAAP adjustments
that were part our original Non-GAAP adjustments.
ensigngroup.net 63You can also read
