Attached files
| file | filename |
|---|---|
| 8-K - 8-K - ENSIGN GROUP, INC | d737181d8k.htm |
| EX-3.1 - EX-3.1 - ENSIGN GROUP, INC | d737181dex31.htm |
| EX-10.2 - EX-10.2 - ENSIGN GROUP, INC | d737181dex102.htm |
| EX-10.3 - EX-10.3 - ENSIGN GROUP, INC | d737181dex103.htm |
| EX-10.4 - EX-10.4 - ENSIGN GROUP, INC | d737181dex104.htm |
| EX-10.1 - EX-10.1 - ENSIGN GROUP, INC | d737181dex101.htm |
| EX-2.1 - EX-2.1 - ENSIGN GROUP, INC | d737181dex21.htm |
| EX-99.1 - EX-99.1 - ENSIGN GROUP, INC | d737181dex991.htm |
| EX-10.8 - EX-10.8 - ENSIGN GROUP, INC | d737181dex108.htm |
| EX-10.6 - EX-10.6 - ENSIGN GROUP, INC | d737181dex106.htm |
| EX-10.5 - EX-10.5 - ENSIGN GROUP, INC | d737181dex105.htm |
| EX-10.7 - EX-10.7 - ENSIGN GROUP, INC | d737181dex107.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Effective from and after June 1, 2014, The Ensign Group, Inc. (“Ensign”) completed the separation of its healthcare business and its real estate business into two separate and independent publicly traded companies through the pro rata distribution of all of the outstanding shares of common stock of CareTrust REIT, Inc. (“CareTrust”) to Ensign stockholders (the “Spin-Off”).
The following unaudited pro forma consolidated financial statements present Ensign’s unaudited pro forma consolidated income statements for the year ended December 31, 2013 and the three months ended March 31, 2014, and Ensign’s unaudited pro forma consolidated balance sheet as of March 31, 2014, which have been derived from Ensign’s audited financial statements for the year ended December 31, 2013 and Ensign’s unaudited financial statements for the three months ended March 31, 2014.
The following unaudited pro forma consolidated financial statements give effect to the Spin-Off and the related transactions, including: (i) the transfer to CareTrust of Ensign’s assets and liabilities that are specifically identifiable or otherwise allocable to CareTrust; (ii) the elimination of Ensign’s equity interest in CareTrust; and (iii) the removal of certain non-recurring transaction expenses directly related to the Spin-Off. The unaudited pro forma consolidated income statements for the three months ended March 31, 2014 and the year ended December 31, 2013 assume the Spin-Off and the related transactions occurred on January 1, 2013. The unaudited pro forma consolidated balance sheet assumes the Spin-Off and the related transactions occurred on March 31, 2014.
The historical financial data has been adjusted to give pro forma effect to events that are directly attributable to the transactions described above, have an ongoing effect on Ensign’s statement of operations and are factually supportable. Ensign’s unaudited pro forma consolidated financial statements and explanatory notes present how Ensign’s financial statements may have appeared had its capital structure reflected the above transactions as of the dates noted above.
Ensign’s unaudited pro forma consolidated financial statements were prepared in accordance with Article 11 of Regulation S-X, using the assumptions set forth in the notes to the unaudited pro forma consolidated financial statements. The following unaudited pro forma consolidated financial statements are presented for illustrative purposes only and do not purport to reflect the results Ensign may achieve in future periods or the historical results that would have been obtained had the above transactions been completed on January 1, 2013 or as of March 31, 2014, as the case may be. Ensign’s unaudited pro forma consolidated financial statements also 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 transactions described above.
Ensign’s unaudited pro forma consolidated financial statements are derived from and should be read in conjunction with Ensign’s historical financial statements and accompanying notes that are included in Ensign’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014, filed with the Securities Exchange Commission.
As used herein, the term “Ensign Properties” refers to the carve-out business of the entities that own the skilled nursing, assisted living and independent living facilities that CareTrust owns following the Spin-Off, and the operations of the three independent living facilities that CareTrust operates following the Spin-Off. Ensign Properties is the predecessor of CareTrust. “CareTrust Properties” refers to the 97 skilled nursing, assisted living and independent living facilities transferred to CareTrust in connection with the Spin-Off.
THE ENSIGN GROUP, INC.
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
| March 31, 2014 | ||||||||||||||
| Historical | Pro Forma Adjustments |
Note | Pro Forma Consolidated |
|||||||||||
| (in thousands) | ||||||||||||||
| Assets: |
||||||||||||||
| Current assets: |
||||||||||||||
| Cash and cash equivalents |
$ | 57,469 | $ | (927 | ) | (1) | ||||||||
| 7,391 | (4) | $ | 63,933 | |||||||||||
| Accounts receivable |
120,569 | (13 | ) | (1) | 120,556 | |||||||||
| Investments – current |
4,521 | 4,521 | ||||||||||||
| Prepaid income taxes |
2,665 | 2,665 | ||||||||||||
| Prepaid expenses and other current assets |
9,023 | (1,069 | ) | (1) | 7,954 | |||||||||
| Deferred tax assets – current |
9,221 | (1,173 | ) | (1) | 8,048 | |||||||||
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|||||||||
| Total current assets |
203,468 | 4,209 | 207,677 | |||||||||||
| Property and equipment, net |
496,618 | (420,168 | ) | (1) | 76,450 | |||||||||
| Insurance subsidiary deposits and investment |
17,728 | 17,728 | ||||||||||||
| Escrow deposits |
3,252 | 3,252 | ||||||||||||
| Deferred tax asset |
4,380 | (10 | ) | (1) | 4,370 | |||||||||
| Restricted and other assets |
8,676 | (2,626 | ) | (1) | ||||||||||
| 825 | (5) | 6,875 | ||||||||||||
| Intangible assets, net |
5,650 | 5,650 | ||||||||||||
| Goodwill |
23,966 | 23,966 | ||||||||||||
| Other indefinite-lived intangibles |
7,740 | 7,740 | ||||||||||||
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| Total assets |
$ | 771,478 | $ | (417,770 | ) | $ | 353,708 | |||||||
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| Liabilities and Equity: |
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| Current liabilities |
||||||||||||||
| Accounts payable |
$ | 26,722 | $ | (2,004 | ) | (1) | $ | 24,718 | ||||||
| Accrued wages and related liabilities |
40,744 | (247 | ) | (1) | 40,497 | |||||||||
| Accrued self-insurance liabilities – current |
13,335 | 13,335 | ||||||||||||
| Other accrued liabilities |
23,584 | (2,036 | ) | (1) | 21,548 | |||||||||
| Current maturities of long-term debt |
7,469 | (7,469 | ) | (1) | — | |||||||||
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| Total current liabilities |
111,854 | (11,756 | ) | 100,098 | ||||||||||
| Long-term debt – less current maturities |
250,019 | (250,019 | ) | (1) | — | |||||||||
| Accrued self insurance liabilities – less current portion |
32,944 | 32,944 | ||||||||||||
| Fair value of interest rate swap |
1,631 | (1,631 | ) | (1) | — | |||||||||
| Deferred rent and other long-term liabilities |
3,222 | (1,174 | ) | (1) | 2,048 | |||||||||
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| Total liabilities |
399,670 | (264,580 | ) | 135,090 | ||||||||||
| Equity: |
||||||||||||||
| Common stock |
22 | 22 | ||||||||||||
| Additional paid-in capital |
104,229 | 104,229 | ||||||||||||
| Retained earnings |
269,459 | (154,183 | ) | (2) | 115,276 | |||||||||
| Treasury stock |
(1,585 | ) | (1,585 | ) | ||||||||||
| Accumulated other comprehensive loss |
(993 | ) | 993 | (3) | — | |||||||||
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| Total Ensign stockholders’ equity |
371,132 | (153,190 | ) | 217,942 | ||||||||||
| Noncontrolling interests |
676 | 676 | ||||||||||||
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| Total equity |
371,808 | (153,190 | ) | 218,618 | ||||||||||
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| Total liabilities and equity |
$ | 771,478 | $ | (417,770 | ) | $ | 353,708 | |||||||
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See accompanying notes to unaudited pro forma consolidated financial statements.
THE ENSIGN GROUP, INC.
UNAUDITED PRO FORMA
CONSOLIDATED INCOME STATEMENT
| Three Months Ended March 31, 2014 | ||||||||||||||
| Historical | Pro Forma Adjustments |
Note | Pro Forma Consolidated |
|||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| Revenue |
$ | 239,653 | $ | (587 | ) | (11) | $ | 239,066 | ||||||
| Expense: |
||||||||||||||
| Cost of services |
189,738 | (543 | ) | (11) | 189,195 | |||||||||
| Facility rent – cost of services |
3,549 | 14,000 | (6) | 17,549 | ||||||||||
| General and administrative expense |
13,157 | (1,590 | ) | (7) | 11,567 | |||||||||
| Depreciation and amortization |
8,862 | (5,247 | ) | (8) | 3,615 | |||||||||
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| Total Expenses |
215,306 | 6,620 | 221,926 | |||||||||||
| Income from operations |
24,347 | (7,207 | ) | 17,140 | ||||||||||
| Other income (expense): |
||||||||||||||
| Interest expense |
(3,363 | ) | 3,098 | (9) | (265 | ) | ||||||||
| Interest income |
159 | 159 | ||||||||||||
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| Other expense, net |
(3,204 | ) | 3,098 | (106 | ) | |||||||||
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| Income from operations before provision for income taxes |
21,143 | (4,109 | ) | 17,034 | ||||||||||
| Provision (benefit) for income taxes |
8,102 | (1,635 | ) | (10) | 6,467 | |||||||||
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| Net income from continuing operations |
13,041 | (2,474 | ) | 10,567 | ||||||||||
| Less: net income (loss) attributable to noncontrolling interests |
(485 | ) | (485 | ) | ||||||||||
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| Net income from continuing operations attributable to Ensign |
$ | 13,526 | $ | (2,474 | ) | $ | 11,052 | |||||||
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| Basic earnings from continuing operations attributable to Ensign per share: |
$ | 0.61 | $ | 0.50 | ||||||||||
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| Diluted earnings from continuing operations attributable to Ensign per share: |
$ | 0.60 | $ | 0.49 | ||||||||||
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| Weighted average number of shares outstanding: |
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| Basic |
22,168 | 22,168 | ||||||||||||
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| Diluted |
22,582 | 22,582 | ||||||||||||
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See accompanying notes to unaudited pro forma consolidated financial statements.
THE ENSIGN GROUP, INC.
UNAUDITED PRO FORMA
CONSOLIDATED INCOME STATEMENT
| Year Ended December 31, 2013 | ||||||||||||||
| Historical | Pro Forma Adjustments |
Note | Pro Forma Consolidated |
|||||||||||
| (in thousands, except per share amounts) | ||||||||||||||
| Revenue |
$ | 904,556 | $ | (2,386 | ) | (11) | $ | 902,170 | ||||||
| Expense: |
||||||||||||||
| Cost of services |
725,989 | (2,138 | ) | (11) | 723,851 | |||||||||
| U.S. Government inquiry settlement |
33,000 | 33,000 | ||||||||||||
| Facility rent – cost of services |
13,613 | 53,701 | (6) | 67,314 | ||||||||||
| General and administrative expense |
40,103 | (4,049 | ) | (7) | 36,054 | |||||||||
| Depreciation and amortization |
33,909 | (19,467 | ) | (8) | 14,442 | |||||||||
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| Total Expenses |
846,614 | 28,047 | 874,661 | |||||||||||
| Income from operations |
57,942 | (30,433 | ) | 27,509 | ||||||||||
| Other income (expense): |
||||||||||||||
| Interest expense |
(12,787 | ) | 11,732 | (9) | (1,055 | ) | ||||||||
| Interest income |
506 | 506 | ||||||||||||
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| Other expense, net |
(12,281 | ) | 11,732 | (549 | ) | |||||||||
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| Income from operations before provision for income taxes |
45,661 | (18,701 | ) | 26,960 | ||||||||||
| Provision (benefit) for income taxes |
20,003 | (7,443 | ) | (10) | 12,560 | |||||||||
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| Net income from continuing operations |
25,658 | (11,258 | ) | 14,400 | ||||||||||
| Less: net income (loss) attributable to noncontrolling interests |
(186 | ) | (186 | ) | ||||||||||
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| Net income from continuing operations attributable to Ensign |
$ | 25,844 | $ | (11,258 | ) | $ | 14,586 | |||||||
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| Basic earnings from continuing operations attributable to Ensign per share: |
$ | 1.18 | $ | 0.67 | ||||||||||
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| Diluted earnings from continuing operations attributable to Ensign per share: |
$ | 1.16 | $ | 0.65 | ||||||||||
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| Weighted average number of shares outstanding: |
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| Basic |
21,900 | 21,900 | ||||||||||||
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| Diluted |
22,364 | 22,364 | ||||||||||||
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See accompanying notes to unaudited pro forma consolidated financial statements.
THE ENSIGN GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Basis of Presentation
Immediately following the Spin-Off, Ensign will continue to provide healthcare services through its existing operations. The unaudited pro forma consolidated financial statements give effect to the Spin-Off and related transactions as discussed above.
Pro Forma Adjustments
| (1) | Removal of assets and liabilities attributable to the entities that own the Ensign Properties and the entities that operate three independent living facilities. These adjustments include: |
| Assets: |
||||
| Property and equipment balances, net of certain land, equipment, furniture and fixtures that will not be transferred to CareTrust |
$ | 420,168 | ||
| Cash |
927 | |||
| Accounts receivable |
13 | |||
| Prepaid expenses and other current assets |
1,069 | |||
| Deferred tax assets – current |
1,173 | |||
| Deferred tax assets |
10 | |||
| Restricted and other assets |
2,626 | |||
| Liabilities: |
||||
| Accounts payable |
2,004 | |||
| Accrued wages and related liabilities |
247 | |||
| Other accrued liabilities |
2,036 | |||
| Current maturities of long-term, debt |
7,469 | |||
| Debt, net of debt discount |
250,019 | |||
| Interest rate swap liability |
1,631 | |||
| Deferred rent and other long-term liabilities |
1,174 | |||
| (2) | Elimination of Ensign’s net equity interest in Ensign Properties resulting from the Spin-Off of assets and liabilities and related transactions. |
| (3) | To remove the accumulated other comprehensive loss related to the interest rate swap that has been attributed to Ensign Properties debt. |
| (4) | Reflects cash transferred from CareTrust to Ensign. |
| (5) | Reflects the issuance cost associated with the new $150,000 revolving credit facility. |
| (6) | Reflects changes in rent charges resulting from the removal of intercompany rental charges and replacement of such in accordance with the Master Leases. |
| (7) | Removal of Spin-Off transactional related expenses of $1,590 incurred for the three months ended March 31, 2014 and $4,049 incurred through December 31, 2013, attributable to the entities that own the CareTrust Properties as these amounts have been included in the historical combined income statement of CareTrust. |
| (8) | To adjust depreciation expense for the property and equipment transferred from Ensign to Ensign Properties, net of certain equipment, furniture and fixtures that will not be transferred. |
THE ENSIGN GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
| (9) | Represents the adjustments to interest expense due to the following: |
| Three Months Ended March 31, 2014 |
Year Ended December 31, 2013 |
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| Indebtedness attributed to the Ensign Properties |
$ | (3,327 | ) | $ | (12,647 | ) | ||
| New revolving credit facility |
229 | 915 | ||||||
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| Net decrease to interest expense |
$ | (3,098 | ) | $ | (11,732 | ) | ||
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| (10) | The pro forma adjustments were tax effected using the statutory tax rate of 39.8%. |
| (11) | Removal of operations attributed and contributed to Ensign Properties consisting of the operations of the three independent living facilities that Ensign Properties will own and operate following the Spin-Off. |