AP NEWS

The Ensign Group Reports Fourth Quarter and Fiscal Year 2018 Results

February 6, 2019

MISSION VIEJO, Calif., Feb. 06, 2019 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, home health, home care, hospice care and assisted living companies, today announced its operating results for the fourth quarter and full year 2018, reporting record GAAP diluted earnings per share of $0.48 for the quarter and $1.70 for the year and record adjusted earnings per share of $0.54 for the quarter and $1.88 for the year (1).

Highlights Include:

# GAAP earnings per share for the year was $1.70, an increase of 120.8% over the prior year, and adjusted earnings per share was $1.88, up 34.3% over the prior year(1)(2); # GAAP earnings per share for the fourth quarter was $0.48, an increase of 128.6% from the prior year quarter, and adjusted earnings per share was $0.54, an increase of 35.0% over the prior year quarter(1)(2); # Consolidated GAAP Net Income for the year was $92.4 million, an increase of 128.2% over the prior year, and consolidated adjusted Net Income for the year was $102.1 million, an increase of 38.3% over the prior year (1)(2); # Consolidated GAAP Net Income for the fourth quarter was $26.4 million, an increase of 135.2% from the prior year quarter, and adjusted Net Income was $29.4 million, an increase of 39.5% from the prior year quarter(1) (2); # Total Transitional and Skilled Services segment income was $190.9 million for the year, an increase of 36.1% over the prior year, and was $55.2 million for the quarter, an increase of 38.2% over the prior year quarter and 19% sequentially over the third quarter; # Same store skilled services occupancy was 78.8%, an increase of 63 basis points over the prior year, and transitioning skilled services occupancy was 75.0%, an increase of 296 basis points over the prior year; # Total Home Health and Hospice Services segment revenue for the year was up 20.0% over the prior year to $170.9 million and segment income for the year was up 32.5% over the prior year to $26.1 million(3); and # Total Assisted Living Services segment revenue for the year was up 11.1% over the prior year to $151.8 million and adjusted EBITDAR for the year was up 9.1% over the prior year to $52.8 million.

1. See “Reconciliation of GAAP to Non-GAAP Financial Information”. 2. Adjusted earnings per share and Consolidated Adjusted Net Income increased by 15.3% and 18.8%, respectively, over the prior year if we applied a 25% tax rate to both periods. Adjusted earnings per share and Consolidated Adjusted Net Income increased by 17.4% and 20.0%, respectively, over the prior year quarter if we applied a 25% tax rate to both periods. 3. Excludes the impact for the adoption of ASC 606.

Operating Results

“We are thrilled to report a record quarter as we achieved our highest adjusted earnings per share in our history,” said Ensign’s President and Chief Executive Officer Christopher Christensen. “The improvement we have been expecting in many of our operations, especially in Texas and Utah, is now materializing and making a meaningful contribution to our performance. However, we have many operations across all of our different buckets in all our geographies that still have tremendous organic upside, even in some of our most mature markets,” he added. He credited the local operational and clinical leadership teams and all of their field-based and Service Center partners for continuing their relentless focus on clinical and financial performance while they continued to integrate 148 transitioning and newly acquired operations into the organization.

“Our other lines of business continue to quietly create significant value,” Christensen stated. He noted that Cornerstone Healthcare, Inc., Ensign’s home health and hospice portfolio subsidiary, grew its segment revenue and income by 20.0% and 32.5%, respectively, over the prior year. Similarly, he said that Ensign’s assisted living and independent living portfolio company, which provides senior living services in 12 states, grew its segment revenue and adjusted EBITDAR by 11.1% and 9.1%, respectively, over the prior year. Collectively, these two business segments now represent 15.7% of Ensign’s consolidated revenue. “We are making progress in our evaluation of a long-term strategic opportunity involving our new venture businesses. Just as with our real estate transaction in 2014, our goal has been, and will be, to ensure that these businesses will benefit our shareholders over the long run,” he added.

Management also provided its 2019 annual guidance with earnings of between $2.17 and $2.26 per diluted share and annual revenue between $2.29 billion and $2.35 billion. Overall, the midpoint of this guidance represents a 19%, or $0.36 per share, increase from the midpoint of management’s annual earnings guidance for 2018. “We are very excited about the coming year and our guidance demonstrates our optimism for the future,” he said.

Chief Financial Officer Suzanne Snapper reported that, “Our liquidity remains strong with approximately $307.1 million of availability on Ensign’s $450 million credit facility, which also has a built-in expansion option, and 52 unlevered real estate assets that add additional liquidity.” She also reported that, even after some significant acquisition activity in the quarter, the Company’s lease-adjusted net-debt-to-adjusted EBITDAR ratio decreased again to 3.77x at year end, down from 4.2x at the end of the prior year. She attributed this trend to the fact that EBITDAR from transitioning and newly acquired operations has continued to grow. She also indicated that cash generated from operations was $210.3 million for the year, 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 Annual Report on Form 10-K for the year ended December 31, 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 $0.0475 per share of Ensign common stock. “We are pleased to announce our sixteenth consecutive annual dividend increase, which reflects our strong market position and continued commitment to return value to our shareholders,” Christensen commented.

In October, Ensign announced that its senior 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.

In November, Ensign announced that its affiliate acquired the real estate and operations of Rock Creek of Ottawa, a post-acute care retirement campus with 93 skilled nursing beds, 71 assisted living units and 24 independent living units located in Ottawa, Kansas. This acquisition represented the fourth transition from a non-profit seller in 2018, demonstrating Ensign’s continued success in working with non-profit operators that are looking to reposition their assets.

Also in November, Ensign acquired the real estate and operations of Creekside Transitional Care and Rehabilitation, a 139-bed skilled nursing and 21-unit assisted living facility located in Meridian, Idaho, and Bennett Hills Rehabilitation and Care Center, a 44-bed skilled nursing facility located in Gooding, Idaho. These acquisitions bring the number of skilled nursing operations in Idaho to 10, further demonstrating Ensign’s strategy of developing strong clusters in each local healthcare market.

Ensign’s senior living portfolio company also acquired the operations of four assisted living facilities in the Dallas-Fort Worth area of Texas, including: Canyon Creek Memory Care, a 52-unit memory care facility located in Temple, Texas; Bridgewater Memory Care, a 52-unit memory care facility located in Granbury, Texas; Lakeshore Assisted Living and Memory Care, a 46-unit assisted living and 30-unit memory care community located in Rockwall, Texas; and Windsor Court Senior Living, a retirement community with 36 independent living units, 16 memory care units, and seven assisted living units located in Weatherford, Texas.

Also during the quarter, Cornerstone Healthcare Inc., acquired the following: Alpha Nursing, a home health agency in Washington; Cornerstone Home Health and Hospice in Utah; and Sequoia Hospice in California. “Each of these acquisitions are small agencies that we purchased from small business owners that were looking to exit the space. We continue to see attractive growth opportunities like these and will opportunistically acquire when our leadership talent, geography and pricing align,” Christensen added.

Lastly, in January, the Company announced that it acquired the real estate and operations of Cedar Health and Rehabilitation, a skilled nursing facility with 120 skilled nursing beds located in Cedar City, Utah. “As is the case with all of our acquisition efforts, we pursued these operations because our local leaders see a pathway to meaningfully impact the quality of the healthcare services delivered to their residents and resulting occupancy improvements,” Christensen added.

These additions bring Ensign’s growing portfolio to 189 skilled nursing operations, 24 of which also include assisted living operations, 55 assisted and independent living operations, 23 hospice agencies, 24 home health agencies and seven home care businesses across sixteen states. Ensign owns the real estate at 72 of its 244 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.

2019 Guidance

Management provided guidance for 2019, with annual revenue guidance of $2.29 billion to $2.35 billion and annual earnings per share guidance of $2.17 to $2.26 per diluted share for 2019. This guidance represents a 19%, or $0.36 per share, increase from the midpoint of management’s previous annual earnings guidance for 2018. Management’s guidance is based on diluted weighted average common shares outstanding of approximately 56.7 million and a 25% tax rate. In addition, the guidance assumes, among other things, normalized health insurance costs, anticipated Medicare and Medicaid reimbursement rate increases, net of provider taxes and acquisitions closed in the first half of 2019. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, share-based compensation and start-up losses.

Conference Call

A live webcast will be held Thursday, February 7, 2019 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s fourth quarter and fiscal year 2018 financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign’s website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific Time on Friday, March 1, 2019.

About Ensign™

The Ensign Group, Inc.’s independent operating subsidiaries provide a broad spectrum of skilled nursing and assisted living services, physical, occupational and speech therapies, home health and hospice services and other rehabilitative and healthcare services at 244 healthcare facilities, 23 hospice agencies, 24 home health agencies and seven 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 and hospice businesses, the Service Center or the captive insurance subsidiary are operated by the same entity. More information about Ensign is available at http://www.ensigngroup.net.

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

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

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

Contact Information

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

SOURCE: The Ensign Group, Inc.

THE ENSIGN GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three Months Ended December 31, Year Ended December 31, ------------------------------------- ------------------------------------------- 2018 2018 adjusted to adjusted to 2018 reflect 2017 2018 reflect 2017 prior prior revenue revenue guidance guidance ----------- ----------- ----------- ------------- ------------- ------------- Revenue Service revenue $ 497,313 $ 504,387 $ 451,869 $ 1,888,862 $ 1,921,672 $ 1,712,670 Assisted and independent 40,462 40,462 35,836 151,797 151,797 136,647 living revenue - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Total revenue 537,775 544,849 487,705 2,040,659 2,073,469 1,849,317 Expense Cost of services 427,574 434,648 393,727 1,627,672 1,660,482 1,497,703 (Return of unclaimed class action settlement)/charges - - - (1,664 ) (1,664 ) 11,000 related to class action lawsuit (Gains) losses related to - - (410 ) - - 2,321 divestitures Rent—cost of services 35,339 35,339 33,652 138,512 138,512 131,919 General and administrative 28,216 28,216 22,833 100,307 100,307 80,617 expense Depreciation and 12,199 12,199 11,760 47,344 47,344 44,472 amortization - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Total expenses 503,328 510,402 461,562 1,912,171 1,944,981 1,768,032 Income from operations 34,447 34,447 26,143 128,488 128,488 81,285 Other income (expense): Interest expense (3,711 ) (3,711 ) (3,599 ) (15,182 ) (15,182 ) (13,616 ) Interest income 586 586 636 2,063 2,063 1,609 - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Other expense, net (3,125 ) (3,125 ) (2,963 ) (13,119 ) (13,119 ) (12,007 ) - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Income before provision for 31,322 31,322 23,180 115,369 115,369 69,278 income taxes Provision for income taxes 4,763 4,763 11,958 22,841 22,841 28,445 - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Net income 26,559 26,559 11,222 92,528 92,528 40,833 Less: net income attributable to 199 199 16 164 164 358 noncontrolling interests - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Net income attributable to $ 26,360 $ 26,360 $ 11,206 $ 92,364 $ 92,364 $ 40,475 The Ensign Group, Inc. Net income per share attributable to The Ensign Group, Inc.: Basic $ 0.50 $ 0.50 $ 0.22 $ 1.78 $ 1.78 $ 0.79 - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Diluted $ 0.48 $ 0.48 $ 0.21 $ 1.70 $ 1.70 $ 0.77 - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Weighted average common shares outstanding: Basic 52,449 52,449 51,250 52,016 52,016 50,932 - ------- - - ------- - - ------- - - --------- - - --------- - - --------- - Diluted 54,967 54,967 53,176 54,397 54,397 52,829 ----------- ----------- ----------- ------------- ------------- -------------

THE ENSIGN GROUP, INC. CONSOLIDATED BALANCE SHEETS (In thousands) December 31, ---------------------------- 2018 2017 ------------- ------------- Assets Current assets: Cash and cash equivalents $ 31,083 $ 42,337 Accounts receivable—less allowance for doubtful accounts of $2,886 and $43,961 at 276,099 265,068 December 31, 2018 and 2017, respectively Investments—current 8,682 13,092 Prepaid income taxes 6,219 19,447 Prepaid expenses and other current assets 24,130 28,132 Assets held for sale - current 1,859 - - --------- - - --------- - Total current assets 348,072 368,076 Property and equipment, net 618,874 537,084 Insurance subsidiary deposits and investments 36,168 28,685 Escrow deposits 7,271 228 Deferred tax assets 11,650 12,745 Restricted and other assets 20,844 16,501 Intangible assets, net 31,000 32,803 Goodwill 80,477 81,062 Other indefinite-lived intangibles 27,602 25,249 - --------- - - --------- - Total assets $ 1,181,958 $ 1,102,433 - --------- - - --------- - Liabilities and equity Current liabilities: Accounts payable $ 44,236 $ 39,043 Accrued wages and related liabilities 119,656 90,508 Accrued self-insurance liabilities—current 25,446 22,516 Other accrued liabilities 69,784 63,815 Current maturities of long-term debt 10,105 9,939 - --------- - - --------- - Total current liabilities 269,227 225,821 Long-term debt—less current maturities 233,135 302,990 Accrued self-insurance liabilities—less current portion 54,605 50,220 Deferred rent and other long-term liabilities 11,234 11,268 Deferred gain related to sale-leaseback 11,417 12,075 Total equity 602,340 500,059 Total liabilities and equity $ 1,181,958 $ 1,102,433 - --------- - - --------- - THE ENSIGN GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) The following table presents selected data from our consolidated statements of cash flows for the periods presented: Year Ended December 31, ---------------------------- 2018 2017 ------------- ------------- Net cash provided by operating activities $ 210,302 $ 72,952 Net cash used in investing activities (151,211 ) (106,593 ) Net cash (used in)/provided by financing activities (70,345 ) 18,272 - --------- - - --------- - Net decrease in cash and cash equivalents (11,254 ) (15,369 ) Cash and cash equivalents beginning of period 42,337 57,706 - --------- - - --------- - Cash and cash equivalents end of period $ 31,083 $ 42,337 - --------- - - --------- -

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 December 31, Year Ended December 31, ---------------------------------------------------------- ---------------------------------------------------------------- 2018 2018 2018 (As Reported) adjusted to 2017 2018 (As Reported) adjusted to reflect 2017 reflect prior prior revenue guidance revenue guidance ------------------ ------------------ ------------------ -------------------- -------------------- -------------------- $ % $ % $ % $ % $ % $ % --------- ------- --------- ------- --------- ------- ----------- ------- ----------- ------- ----------- ------- (Dollars in thousands) (Dollars in thousands) Transitional and skilled $ 441,714 82.1 % $ 448,518 82.3 % $ 403,533 82.7 % $ 1,679,012 82.3 % $ 1,709,988 82.5 % $ 1,545,210 83.6 % services Assisted and independent 40,462 7.5 % 40,462 7.4 % 35,836 7.4 % 151,797 7.4 % 151,797 7.3 % 136,646 7.4 % living services Home health and hospice services: Home health 22,614 4.2 % 22,882 4.2 % 20,048 4.1 % 86,379 4.2 % 87,728 4.2 % 73,045 3.9 % Hospice 21,579 4.0 % 21,581 4.0 % 19,636 4.0 % 82,658 4.1 % 83,143 4.0 % 69,358 3.8 % - ------- ----- - - ------- ----- - - ------- ----- - - --------- ----- - - --------- ----- - - --------- ----- - Total home health and 44,193 8.2 % 44,463 8.2 % 39,684 8.1 % 169,037 8.3 % 170,871 8.2 % 142,403 7.7 % hospice services All other 11,406 2.2 % 11,406 2.1 % 8,652 1.8 % 40,813 2.0 % 40,813 2.0 % 25,058 1.3 % (1) - ------- ----- - - ------- ----- - - ------- ----- - - --------- ----- - - --------- ----- - - --------- ----- - Total $ 537,775 100.0 % $ 544,849 100.0 % $ 487,705 100.0 % $ 2,040,659 100.0 % $ 2,073,469 100.0 % $ 1,849,317 100.0 % revenue - ------- ----- - - ------- ----- - - ------- ----- - - --------- ----- - - --------- ----- - - --------- ----- - (1) Includes revenue from services generated in our other ancillary services.

THE ENSIGN GROUP, INC. SELECT PERFORMANCE INDICATORS (Unaudited) 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 December 31, ---------------------------- 2018 2017 ------------- ------------- (Dollars in thousands) Change % Change ----------- ------ Total Facility Results: Transitional and skilled revenue (as reported) $ 441,714 $ 403,533 $ 38,181 9.5 % Transitional and skilled revenue (adjusted to reflect prior 448,518 403,533 44,985 11.1 % revenue guidance) Number of facilities at period end 164 160 4 2.5 % Number of campuses at period end* 24 21 3 14.3 % Actual patient days 1,393,783 1,315,247 78,536 6.0 % Occupancy percentage — Operational beds 77.9 % 76.2 % 1.7 % Skilled mix by nursing days 28.6 % 29.1 % -0.5 % Skilled mix by nursing revenue 48.1 % 49.3 % -1.2 % Three Months Ended December 31, ---------------------------- 2018 2017 ------------- ------------- (Dollars in thousands) Change % Change ----------- ------ Same Facility Results(1): Transitional and skilled revenue (as reported) $ 297,587 $ 281,245 $ 16,342 5.8 % Transitional and skilled revenue (adjusted to reflect prior 302,130 281,245 20,885 7.4 % revenue guidance) Number of facilities at period end 108 108 - - Number of campuses at period end* 11 11 - - Actual patient days 891,520 878,417 13,103 1.5 % Occupancy percentage — Operational beds 79.3 % 78.4 % 0.9 % Skilled mix by nursing days 30.4 % 30.0 % 0.4 % Skilled mix by nursing revenue 50.3 % 50.4 % -0.1 % Three Months Ended December 31, ---------------------------- 2018 2017 ------------- ------------- (Dollars in thousands) Change % Change ----------- ------ Transitioning Facility Results(2): Transitional and skilled revenue (as reported) $ 102,084 $ 98,565 $ 3,519 3.6 % Transitional and skilled revenue (adjusted to reflect prior 103,746 98,565 5,181 5.3 % revenue guidance) Number of facilities at period end 40 40 - - Number of campuses at period end* 9 9 - - Actual patient days 361,477 352,451 9,026 2.6 % Occupancy percentage — Operational beds 75.6 % 73.5 % 2.1 % Skilled mix by nursing days 27.0 % 29.1 % -2.1 % Skilled mix by nursing revenue 46.0 % 49.4 % -3.4 % Three Months Ended December 31, ---------------------------- 2018 2017 ------------- ------------- (Dollars in thousands) Change % Change ----------- ------ Recently Acquired Facility Results(3): Transitional and skilled revenue (as reported) $ 42,043 $ 23,723 $ 18,320 NM Transitional and skilled revenue (adjusted to reflect prior 42,642 23,723 18,919 NM revenue guidance) Number of facilities at period end 16 12 4 NM Number of campuses at period end* 4 1 3 NM Actual patient days 140,786 84,379 56,407 NM Occupancy percentage — Operational beds 75.0 % 67.4 % NM Skilled mix by nursing days 21.8 % 20.3 % NM Skilled mix by nursing revenue 37.0 % 36.1 % 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. Year Ended December 31, ---------------------------- 2018 2017 Change % Change ------------- ------------- ----------- ------ (Dollars in thousands) Total Facility Results: Transitional and skilled revenue (as reported) $ 1,679,012 $ 1,545,210 $ 133,802 8.7 % Transitional and skilled revenue (adjusted to reflect prior 1,709,988 1,545,210 164,778 10.7 % revenue guidance) Number of facilities at period end 164 160 4 2.5 % Number of campuses at period end* 24 21 3 14.3 % Actual patient days 5,405,952 5,050,140 355,812 7.0 % Occupancy percentage — Operational beds 77.4 % 75.4 % 2.0 % Skilled mix by nursing days 29.5 % 30.3 % -0.8 % Skilled mix by nursing revenue 49.6 % 51.1 % -1.5 % Year Ended December 31, ---------------------------- 2018 2017 Change % Change ------------- ------------- ----------- ------ (Dollars in thousands) Same Facility Results(1): Transitional and skilled revenue (as reported) $ 1,143,913 $ 1,108,822 $ 35,091 3.2 % Transitional and skilled revenue (adjusted to reflect prior 1,164,930 1,108,822 56,108 5.1 % revenue guidance) Number of facilities at period end 108 108 - - Number of campuses at period end* 11 11 - - Actual patient days 3,515,147 3,485,195 29,952 0.9 % Occupancy percentage — Operational beds 78.8 % 78.2 % 0.6 % Skilled mix by nursing days 30.9 % 30.8 % 0.1 % Skilled mix by nursing revenue 51.3 % 51.5 % -0.2 % Year Ended December 31, ---------------------------- 2018 2017 Change % Change ------------- ------------- ----------- ------ (Dollars in thousands) Transitioning Facility Results(2): Transitional and skilled revenue (as reported) $ 399,747 $ 382,805 $ 16,942 4.4 % Transitional and skilled revenue (adjusted to reflect prior 407,351 382,805 24,546 6.4 % revenue guidance) Number of facilities at period end 40 40 - - Number of campuses at period end* 9 9 - - Actual patient days 1,424,563 1,371,769 52,794 3.8 % Occupancy percentage — Operational beds 75.0 % 72.1 % 2.9 % Skilled mix by nursing days 28.8 % 30.1 % -1.3 % Skilled mix by nursing revenue 48.4 % 51.5 % -3.1 % Year Ended December 31, ---------------------------- 2018 2017 Change % Change ------------- ------------- ----------- ------ (Dollars in thousands) Recently Acquired Facility Results(3): Transitional and skilled revenue (as reported) $ 135,352 $ 51,715 $ 83,637 NM Transitional and skilled revenue (adjusted to reflect prior 137,707 51,715 85,992 NM revenue guidance) Number of facilities at period end 16 12 4 NM Number of campuses at period end* 4 1 3 NM Actual patient days 466,242 187,601 278,641 NM Occupancy percentage — Operational beds 74.3 % 58.1 % NM Skilled mix by nursing days 21.9 % 20.5 % NM Skilled mix by nursing revenue 38.0 % 37.3 % NM Year Ended December 31, ---------------------------- 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 0.0 % 34.3 % NM Skilled mix by nursing days 0.0 % 46.7 % NM Skilled mix by nursing revenue 0.0 % 71.5 % NM * Campus represents a facility that offers both skilled nursing, assisted and/or independent 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 represent all facilities purchased from January 1, 2015 to December 31, 2016. (3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2017. (4) Facility Closed results represent closed operations during the year ended December 31, 2017, which were excluded from Same Store and Transitioning results for the year ended December 31, 2017, for comparison purposes.

THE ENSIGN GROUP, INC. SKILLED NURSING AVERAGE DAILY REVENUE RATES AND PERCENT OF SKILLED NURSING REVENUE AND DAYS BY PAYOR The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate: -------- -------- -------- -------- -------- -------- -------- -------- Three Months Ended December 31, ------------------------------------------------------------------------------ Same Facility Transitioning Acquisitions Total ------------------ ------------------ ------------------ ------------------ 2018 2017 2018 2017 2018 2017 2018 2017 -------- -------- -------- -------- -------- -------- -------- -------- Skilled Nursing Average Daily Revenue Rates: Medicare $ 625.29 $ 612.89 $ 525.44 $ 514.34 $ 531.75 $ 517.26 $ 590.27 $ 576.93 Managed care 469.53 455.55 417.66 409.54 412.85 426.99 450.91 441.71 Other skilled 504.67 471.08 354.42 351.02 517.34 425.31 486.26 453.31 Total skilled revenue 539.91 520.39 461.99 455.88 481.67 478.03 516.35 501.22 Medicaid 234.66 221.23 201.70 191.97 231.08 215.32 225.68 213.31 Private and other payors 229.13 200.39 199.94 184.56 223.75 211.38 219.89 210.57 Total skilled nursing revenue $ 327.17 $ 307.86 $ 271.87 $ 267.20 $ 284.91 $ 267.93 $ 308.52 $ 297.12 -------- -------- -------- -------- -------- -------- -------- -------- YearEnded December 31, ------------------------------------------------------------------------------ Same Facility Transitioning Acquisitions Total ------------------ ------------------ ------------------ ------------------ 2018 2017 2018 2017 2018 2017 2018 2017 -------- -------- -------- -------- -------- -------- -------- -------- Skilled Nursing Average Daily Revenue Rates: Medicare $ 615.47 $ 603.28 $ 518.33 $ 508.15 $ 528.92 $ 506.12 $ 580.96 $ 569.77 Managed care 464.89 451.28 412.42 414.44 415.49 416.25 447.34 440.55 Other skilled 493.63 465.72 354.34 364.65 489.66 470.51 475.59 451.16 Total skilled revenue 530.95 516.26 457.59 457.93 483.67 479.63 509.10 499.51 Medicaid 226.64 217.47 196.47 184.24 221.42 206.32 218.30 208.24 Private and other payors 225.89 202.22 201.03 191.92 226.71 210.28 218.42 209.72 Total skilled nursing revenue $ 320.96 $ 307.35 $ 272.34 $ 267.71 $ 279.86 $ 262.90 $ 304.57 $ 296.84

The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three months ended and year ended December 31, 2018 and 2017: Three Months Ended December 31, ---------------------------------------------------------------------- Same Facility Transitioning Acquisitions Total ---------------- ---------------- ---------------- ---------------- 2018 2017 2018 2017 2018 2017 2018 2017 ------- ------- ------- ------- ------- ------- ------- ------- Percentage of Skilled Nursing Revenue: Medicare 23.6 % 23.3 % 24.2 % 27.2 % 20.3 % 22.2 % 23.4 % 24.2 % Managed care 16.8 % 18.1 % 18.6 % 19.0 % 13.0 % 10.4 % 16.9 % 17.8 % Other skilled 9.9 % 9.0 % 3.2 % 3.2 % 3.7 % 3.5 % 7.8 % 7.3 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Skilled mix 50.3 % 50.4 % 46.0 % 49.4 % 37.0 % 36.1 % 48.1 % 49.3 % Private and other payors 7.6 % 7.8 % 9.8 % 10.9 % 10.7 % 12.3 % 8.4 % 8.9 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Quality mix 57.9 % 58.2 % 55.8 % 60.3 % 47.7 % 48.4 % 56.5 % 58.2 % Medicaid 42.1 % 41.8 % 44.2 % 39.7 % 52.3 % 51.6 % 43.5 % 41.8 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Total skilled nursing 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Three Months Ended December 31, ---------------------------------------------------------------------- Same Facility Transitioning Acquisitions Total ---------------- ---------------- ---------------- ---------------- 2018 2017 2018 2017 2018 2017 2018 2017 ------- ------- ------- ------- ------- ------- ------- ------- Percentage of Skilled Nursing Days: Medicare 12.3 % 11.8 % 12.5 % 14.2 % 10.8 % 11.5 % 12.2 % 12.4 % Managed care 11.6 % 12.3 % 12.1 % 12.4 % 8.9 % 6.5 % 11.5 % 11.9 % Other skilled 6.5 % 5.9 % 2.4 % 2.5 % 2.1 % 2.3 % 4.9 % 4.8 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Skilled mix 30.4 % 30.0 % 27.0 % 29.1 % 21.8 % 20.3 % 28.6 % 29.1 % Private and other payors 11.2 % 11.6 % 13.5 % 15.4 % 14.0 % 15.5 % 12.2 % 12.9 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Quality mix 41.6 % 41.6 % 40.5 % 44.5 % 35.8 % 35.8 % 40.8 % 42.0 % Medicaid 58.4 % 58.4 % 59.5 % 55.5 % 64.2 % 64.2 % 59.2 % 58.0 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Total skilled nursing 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Year Ended December 31, ---------------------------------------------------------------------- Same Facility Transitioning Acquisitions Total ---------------- ---------------- ---------------- ---------------- 2018 2017 2018 2017 2018 2017 2018 2017 ------- ------- ------- ------- ------- ------- ------- ------- Percentage of Skilled Nursing Revenue: Medicare 23.8 % 24.7 % 25.9 % 29.0 % 22.3 % 25.8 % 24.2 % 25.8 % Managed care 17.8 % 18.2 % 19.4 % 19.1 % 11.9 % 8.5 % 17.7 % 18.1 % Other skilled 9.7 % 8.6 % 3.1 % 3.4 % 3.8 % 3.0 % 7.7 % 7.2 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Skilled mix 51.3 % 51.5 % 48.4 % 51.5 % 38.0 % 37.3 % 49.6 % 51.1 % Private and other payors 7.7 % 7.9 % 10.1 % 10.5 % 11.3 % 13.2 % 8.5 % 8.6 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Quality mix 59.0 % 59.4 % 58.5 % 62.0 % 49.3 % 50.5 % 58.1 % 59.7 % Medicaid 41.0 % 40.6 % 41.5 % 38.0 % 50.7 % 49.5 % 41.9 % 40.3 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Total skilled nursing 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Year Ended December 31, ---------------------------------------------------------------------- Same Facility Transitioning Acquisitions Total ---------------- ---------------- ---------------- ---------------- 2018 2017 2018 2017 2018 2017 2018 2017 ------- ------- ------- ------- ------- ------- ------- ------- Percentage of Skilled Nursing Days: Medicare 12.3 % 12.6 % 13.6 % 15.3 % 11.7 % 13.4 % 12.6 % 13.4 % Managed care 12.2 % 12.5 % 12.8 % 12.3 % 8.0 % 5.4 % 12.0 % 12.2 % Other skilled 6.4 % 5.7 % 2.4 % 2.5 % 2.2 % 1.7 % 4.9 % 4.7 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Skilled mix 30.9 % 30.8 % 28.8 % 30.1 % 21.9 % 20.5 % 29.5 % 30.3 % Private and other payors 11.2 % 11.6 % 13.8 % 14.6 % 14.3 % 16.4 % 12.2 % 12.5 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Quality mix 42.1 % 42.4 % 42.6 % 44.7 % 36.2 % 36.9 % 41.7 % 42.8 % Medicaid 57.9 % 57.6 % 57.4 % 55.3 % 63.8 % 63.1 % 58.3 % 57.2 % ----- - ----- - ----- - ----- - ----- - ----- - ----- - ----- - Total skilled nursing 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

THE ENSIGN GROUP, INC. SELECT PERFORMANCE INDICATORS (Unaudited) The following tables summarize our selected performance indicators for our assisted and independent living segment along with other statistics, for each of the periods indicated: Three Months Ended December 31, ------------------------ 2018 2017 Change % Change ----------- ----------- -------- ------ (Dollars in thousands) Revenue $ 40,462 $ 35,836 $ 4,626 12.9 % Number of facilities at period end 56 49 7 14.3 % Number of campuses at period end 24 21 3 14.3 % Occupancy percentage (units) 75.9 % 75.8 % 0.1 % Average monthly revenue per unit $ 2,866 $ 2,792 $ 74 2.7 % Year Ended December 31, ------------------------ 2018 2017 Change % Change ----------- ----------- -------- ------ (Dollars in thousands) Resident fee revenue $ 151,797 $ 136,646 $ 15,151 11.1 % Number of facilities at period end 56 49 7 14.3 % Number of campuses at period end 24 21 3 14.3 % Occupancy percentage (units) 75.7 % 76.4 % -0.7 % Average monthly revenue per unit $ 2,861 $ 2,800 $ 61 2.2 %

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 periods indicated: Three Months Ended December 31, -------------------- 2018 2017 Change % Change --------- --------- ---------- ------ (Dollars in thousands) Home health and hospice revenue: Home health services $ 22,614 $ 20,048 $ 2,566 12.8 % Hospice services 21,579 19,636 1,943 9.9 % - ------- - ------- - ------ - ---- - Total home health and hospice revenue $ 44,193 $ 39,684 $ 4,509 11.4 % Adjusted to reflect prior revenue guidance Home health and hospice revenue Home health services $ 22,882 $ 20,048 $ 2,834 14.1 % Hospice services 21,581 19,636 1,945 9.9 % - ------- - ------- - ------ - ---- - Total home health and hospice revenue $ 44,463 $ 39,684 $ 4,779 12.0 % - ------- - ------- - ------ - ---- - Home health services: Average medicare revenue per completed episode $ 3,027 $ 2,985 $ 42 1.4 % Hospice services: Average daily census 1,386 1,229 157 12.8 % Home health and hospice agencies 54 46 8 17.4 % Year Ended December 31, -------------------- 2018 2017 Change % Change --------- --------- ---------- ------ (Dollars in thousands) Home health and hospice revenue Home health services $ 86,379 $ 73,045 $ 13,334 18.3 % Hospice services 82,658 69,358 13,300 19.2 % - ------- - ------- - ------ - ---- - Total home health and hospice revenue $ 169,037 $ 142,403 $ 26,634 18.7 % Adjusted to reflect prior revenue guidance Home health and hospice revenue Home health services $ 87,728 $ 73,045 $ 14,683 20.1 % Hospice services 83,143 69,358 13,785 19.9 % - ------- - ------- - ------ - ---- - Total home health and hospice revenue $ 170,871 $ 142,403 $ 28,468 20.0 % - ------- - ------- - ------ - ---- - Home health services: Average medicare revenue per completed episode $ 2,982 $ 3,028 $ (46 ) -1.5 % Hospice services: Average daily census 1,329 1,102 227 20.6 % Home health and hospice agencies 54 46 8 17.4 %

THE ENSIGN GROUP, INC. REVENUE BY PAYOR SOURCE The following table sets forth our total revenue by payor source and as a percentage of total revenue for the periods indicated: Three Months Ended December 31, Year Ended December 31, ---------------------------------------------------------- ---------------------------------------------------------------- 2018 adjusted to 2018 adjusted to 2018 As Reported reflect 2017 2018 As Reported reflect 2017 prior revenue prior revenue guidance guidance ------------------ ------------------ ------------------ -------------------- -------------------- -------------------- $ % $ % $ % $ % $ % $ % --------- ------- --------- ------- --------- ------- ----------- ------- ----------- ------- ----------- ------- (Dollars in thousands) (Dollars in thousands) ---------------------------------------------------------- ---------------------------------------------------------------- Revenue: Medicaid $ 198,030 36.8 % $ 200,289 36.8 % $ 174,795 35.8 % $ 727,310 35.6 % $ 738,179 35.6 % $ 644,803 34.9 % Medicare 142,896 26.6 % 143,081 26.3 % 130,465 26.8 % 552,577 27.1 % 556,159 26.8 % 515,884 27.9 % Medicaid-skilled 31,662 5.9 % 32,073 5.8 % 27,208 5.6 % 117,686 5.8 % 119,667 5.8 % 102,875 5.6 % - ------- ----- - - ------- ----- - - ------- ----- - - --------- ----- - - --------- ----- - - --------- ----- - Total 372,588 69.3 % 375,443 68.9 % 332,468 68.2 % 1,397,573 68.5 % 1,414,005 68.2 % 1,263,562 68.4 % Managed Care 82,263 15.3 % 83,485 15.3 % 78,176 16.0 % 326,325 16.0 % 333,197 16.1 % 303,386 16.4 % Private and 82,924 15.4 % 85,921 15.8 % 77,061 15.8 % 316,761 15.5 % 326,267 15.7 % 282,369 15.2 % Other(1) - ------- ----- - - ------- ----- - - ------- ----- - - --------- ----- - - --------- ----- - - --------- ----- - Total revenue $ 537,775 100.0 % $ 544,849 100.0 % $ 487,705 100.0 % $ 2,040,659 100.0 % $ 2,073,469 100.0 % $ 1,849,317 100.0 % - ------- ----- - - ------- ----- - - ------- ----- - - --------- ----- - - --------- ----- - - --------- ----- - (1) Private and other payors also includes revenue from all payors generated in our other ancillary services for the three months ended and year ended December 31, 2018 and 2017.

THE ENSIGN GROUP, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION (In thousands, except per share data) (Unaudited) RECONCILIATION OF GAAP TO NON-GAAP NET INCOME Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2018 2017 2018 2017 ----------- ----------- ----------- ----------- Net income attributable to The Ensign Group, Inc. $ 26,360 $ 11,206 $ 92,364 $ 40,475 Non-GAAP adjustments Results related to facilities currently being constructed 492 2,374 3,840 13,378 and other start-up operations(a) Charges related to the settlement/(return of unclaimed - 14 (1,664 ) 11,177 class action settlement) of the class action lawsuit Share-based compensation expense(b) 2,697 2,941 10,337 9,695 Results related to closed operations and operations not at full capacity, including continued obligations and closing 222 4 933 5,602 expense(c) Bonus accrual as a result of the Tax Act(d) - 3,100 - 3,100 Losses/(business interruption gains) related to Hurricane - 741 (675 ) 1,299 Harvey and California fires(e) Depreciation and amortization - patient base(f) 91 180 242 733 General and administrative - transaction-related costs(g) 23 100 361 717 COS - business interruption gains(h) - - - COS - Goodwill and long-lived assets impairment(h) 4,632 - 7,809 - Professional service fees(i) - 80 - 80 Provision for income taxes on non-GAAP adjustments(j) (5,107 ) 344 (11,416 ) (12,399 ) - ------- - - ------- - - ------- - - ------- - Non-GAAP net income $ 29,410 $ 21,084 $ 102,131 $ 73,857 - ------- - - ------- - - ------- - - ------- - Diluted Earnings Per Share As Reported Net income $ 0.48 $ 0.21 $ 1.70 $ 0.77 - ------- - - ------- - - ------- - - ------- - Average number of shares outstanding 54,967 53,176 54,397 52,829 - ------- - - ------- - - ------- - - ------- - Adjusted Diluted Earnings Per Share Net income 0.54 0.40 1.88 1.40 - ------- - - ------- - - ------- - - ------- - Average number of shares outstanding 54,967 53,176 54,397 52,829 - ------- - - ------- - - ------- - - ------- - Footnotes: ---------------------------------------------------------- (a) Represents operating results for facilities currently being constructed and other start-up operations. Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2018 2017 2018 2017 ----------- ----------- ----------- ----------- Revenue $ (17,029 ) $ (17,480 ) $ (66,606 ) $ (62,686 ) Cost of services 13,661 15,726 55,106 59,424 Rent 3,627 3,865 14,377 15,559 Depreciation and amortization 233 263 963 1,081 - ------- - - ------- - - ------- - - ------- - Total Non-GAAP adjustment $ 492 $ 2,374 $ 3,840 $ 13,378 - ------- - - ------- - - ------- - - ------- - (b) Represents share-based compensation expense incurred. Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2018 2017 2018 2017 ----------- ----------- ----------- ----------- Cost of services $ 1,494 $ 1,219 $ 5,665 $ 4,988 General and administrative 1,203 1722 4,672 4,707 - ------- - - ------- - - ------- - - ------- - Total Non-GAAP adjustment $ 2,697 $ 2,941 $ 10,337 $ 9,695 - ------- - - ------- - - ------- - - ------- - (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 year ended December 31, 2017. Included in the three months and year ended December 31, 2017 results is the loss recovery of $1.3 million of certain losses related to a closed facility in the prior year. Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2018 2017 2018 2017 ----------- ----------- ----------- ----------- Revenue $ - $ - $ - $ (2,805 ) (Gains)/Losses related to operational closures - (410 ) - 2,321 Cost of services 137 321 601 5,115 Rent 76 93 301 885 Depreciation and amortization 9 - 31 86 - ------- - - ------- - - ------- - - ------- - Total Non-GAAP adjustment $ 222 $ 4 $ 933 $ 5,602 - ------- - - ------- - - ------- - - ------- - (d) Represent bonus accrual as a result of the Tax Act. Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2018 2017 2018 2017 ----------- ----------- ----------- ----------- Cost of services - 600 - 600 General and administrative - 2,500 - 2,500 - ------- - - ------- - - ------- - - ------- - Total Non-GAAP adjustment $ - $ 3,100 $ - $ 3,100 - ------- - - ------- - - ------- - - ------- - (e) Losses and business interruption recoveries related to Hurricane Harvey and California fires. Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2018 2017 2018 2017 ----------- ----------- ----------- ----------- Revenue $ - $ 870 $ - $ 638 Cost of services - (129 ) (675 ) 604 Rent - - - 50 Depreciation and amortization - - - 7 - ------- - - ------- - - ------- - - ------- - Total Non-GAAP adjustment $ - $ 741 $ (675 ) $ 1,299 - ------- - - ------- - - ------- - - ------- - (f) Included in depreciation and amortization are amortization expenses related to patient base intangible assets at newly acquired skilled nursing and assisted living facilities. (g) Included in general and administrative expense are costs incurred to acquire an operation which are not capitalizable. (h) Impairment charges to goodwill and long-lived assets at one of our other ancillary operations and two assisted living facilities. Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2018 2017 2018 2017 ----------- ----------- ----------- ----------- Cost of services 4,632 - 8,285 - Non-controlling interest - - (476 ) - - ------- - - ------- - - ------- - - ------- - Total Non-GAAP adjustment $ 4,632 $ - $ 7,809 $ - - ------- - - ------- - - ------- - - ------- - (i) Included in general and administrative expense are professional fees associated with income tax rate credits, tax reform impacts and adoption of the new revenue recognition standard. (j) 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 months and year ended December 31, 2018 and 35.5% for the three months and year ended December 31, 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 Year Ended December 31, December 31, ---------------------- ------------------------ 2018 2017 2018 2017 ---------- ---------- ----------- ----------- Consolidated Statements of Income Data: Net income $ 26,559 $ 11,222 $ 92,528 $ 40,833 Less: net income attributable to noncontrolling interests 199 16 164 358 Interest expense, net 3,125 2,963 13,119 12,007 Provision for income taxes 4,763 11,958 22,841 28,445 Depreciation and amortization 12,199 11,760 47,344 44,472 - ------ - - ------ - - ------- - - ------- - EBITDA $ 46,447 $ 37,887 $ 175,668 $ 125,399 - ------ - - ------ - - ------- - - ------- - Adjustments to EBITDA: Earnings related to operations in the start-up phase (3,368 ) (1,753 ) (11,500 ) (3,261 ) Charges related to the settlement/(return of unclaimed class action settlement) of the class action lawsuit and insurance - 14 (1,664 ) 11,177 claims Share-based compensation expense 2,697 2,941 10,337 9,695 Results related to closed operations and operations not at 137 (88 ) 601 4,632 full capacity(a) Bonus accrual as a result of the Tax Act - 3,100 - 3,100 Losses/(business insurance recoveries) related to Hurricane - 741 (675 ) 1,242 Harvey and California fires Transaction-related costs(b) 23 100 361 717 Professional service fee(c) - 80 - 80 Impairment of long-lived assets and goodwill(d) 4,632 - 7,809 - Rent related to items above 3,703 3,959 14,678 16,495 - ------ - - ------ - - ------- - - ------- - Adjusted EBITDA $ 54,271 $ 46,981 $ 195,615 $ 169,276 - ------ - - ------ - - ------- - - ------- - Rent—cost of services 35,339 33,652 138,512 131,919 Less: rent related to items above (3,703 ) (3,959 ) (14,678 ) (16,495 ) - ------ - - ------ - - ------- - - ------- - Adjusted EBITDAR $ 85,907 $ 76,674 $ 319,449 $ 284,700 ---------- ---------- ----------- ----------- (a) Represents results at closed operations and operations not at full capacity during the years ended December 31, 2018 and 2017; including the fair value of continued obligation under the lease agreement and related closing expenses of $4.0 million for the year ended December 31, 2017. Included in the year ended December 31, 2017 results is the loss recovery of $1.3 million of certain losses related to a closed facility in 2016. (b) Costs incurred to acquire operations which are not capitalizable. (c) Professional fees associated with income tax credits, tax reform impacts and adoption of the new revenue recognition standard. (d) Impairment charges of long-lived assets and goodwill during year ended December 31, 2018, excluding the impact of non-controlling interest of $0.5 million. Including the impact of noncontrolling interest, the impairment charge is $8.3 million.

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 December 31, Year Ended December 31, -------------------------------------------------------------------- ------------------------------------------------------------------------ Transitional and Assisted and Home Health and Transitional and Skilled Assisted and Home Health and Skilled Services Independent Services Hospice Services Independent Services Hospice ---------------------- ---------------------- -------------------- ------------------------ ---------------------- ---------------------- 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 ---------- ---------- ---------- ---------- --------- --------- ----------- ----------- ---------- ---------- ---------- ---------- Statements of Income Data: Income from operations, excluding $ 55,169 $ 39,910 $ 1,065 $ 4,298 $ 6,494 $ 5,805 $ 190,924 $ 140,272 $ 15,426 $ 16,736 $ 26,117 $ 19,717 general and administrative expense(a) Less: net income attributable - - - - 183 27 - - - - 595 160 to noncontrolling interests Depreciation and 8,360 7,890 1,920 1,647 256 245 31,931 29,928 7,282 6,334 1,045 945 amortization - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - ------- - - ------- - - ------ - - ------ - - ------ - - ------ - EBITDA $ 63,529 $ 47,800 $ 2,985 $ 5,945 $ 6,567 $ 6,023 $ 222,855 $ 170,200 $ 22,708 $ 23,070 $ 26,567 $ 20,502 - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - ------- - - ------- - - ------ - - ------ - - ------ - - ------ - Adjustments to EBITDA: Results related to operations in (3,455 ) (2,046 ) 52 117 35 175 (11,924 ) (4,431 ) 295 693 129 478 the start-up phase Results related to closed operations and 137 (87 ) - (2 ) - - 601 3,801 - - - 728 operations not at full capacity Losses/ (business interruption recoveries) related to - 741 - - - - (675 ) 1,242 - - - - Hurricane Harvey and California fires Share-based compensation 1,256 948 74 159 132 87 4,516 3,909 595 627 446 345 expense Long-lived assets - - 4,632 - - - - - 4,632 - - - impairment(b) Bonus related - 575 - 25 - - - 575 - 25 - - to the Tax Act Rent related 2,916 3,078 778 872 9 9 11,220 12,765 3,428 3,540 30 190 to item above - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - ------- - - ------- - - ------ - - ------ - - ------ - - ------ - Adjusted 64,383 51,009 8,521 7,116 6,743 6,294 226,593 188,061 31,658 27,955 27,172 22,243 EBITDA - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - ------- - - ------- - - ------ - - ------ - - ------ - - ------ - Rent—cost of 28,301 26,624 6,230 6,354 609 528 110,999 105,520 24,553 23,950 2281 1977 services Less: rent related to (2,916 ) (3,078 ) (778 ) (872 ) (9 ) (9 ) (11,220 ) (12,765 ) (3,428 ) (3,540 ) (30 ) (190 ) items above - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - ------- - - ------- - - ------ - - ------ - - ------ - - ------ - Adjusted $ 89,768 $ 74,555 $ 13,973 $ 12,598 $ 7,343 $ 6,813 $ 326,372 $ 280,816 $ 52,783 $ 48,365 $ 29,423 $ 24,030 EBITDAR - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - ------- - - ------- - - ------ - - ------ - - ------ - - ------ - (a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss. (b) Impairment charges to long-lived assets for two of our assisted living facilities.

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) losses and business interruption recoveries related to Hurricane Harvey and the California fires on impacted operations, (i) impairment of goodwill and long-lived assets, (j) bonus accrual as a result of the Tax Act, (k) professional fees associated with income tax credits, tax reform impacts and adoption of the new revenue recognition standard and (l) 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) losses and business interruption recoveries related to Hurricane Harvey and the California fires on impacted operations, (j) impairment of goodwill and long-lived assets, (k) bonus accrual as a result off the Tax Act, (l) professional fees associated with income tax credits, tax reform impacts and adoption of the new revenue recognition standard and (m) 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.

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