The Ensign Group (NASDAQ:ENSG) saw its adjusted net income climb 9.8% to $14.56 million in the second quarter ended June 30, 2012, despite last October’s 11.1% reduction in Medicare payment rates to skilled nursing facilities and a change in therapy regulations making it more expensive to deliver physical and other types of therapy to skilled nursing patients.
Ensign’s earnings per share of $0.67 exceeded analysts’ expectations of $0.59 per share. However, while consolidated revenues were up 9.7% to a record $204.3 million, they were under analysts’ $206.6 million estimate.
Ensign attributed the strong quarter to “continuous improvement” of its qualitative performance and “the ongoing sacrifices of our operational teams.”
“Skilled nursing, assisted living and even our relatively young home health businesses all gained strength as many operations achieved mitigation milestones early, and outpaced even our fairly aggressive projections,” said Christopher Christensen, Ensign’s president and CEO.
More than a third (36%) of Ensign’s 2012 revenue has come from Medicaid, while Medicare comprised 34.5% of revenues.
The company added a home health and hospice business, a skilled nursing and assisted living campus, and two skilled nursing facilities to its portfolio in the quarter, in three separate transactions. All of the businesses and facilities were purchased with cash and bring Ensign’s portfolio to 107 facilities, 83 of which are owned by the company, with Ensign affiliates holding purchase options on four of the company’s 24 leased facilities, along with four hospice companies and six home health businesses.
In the second quarter, Ensign reached a tentative settlement with class counsel in a staffing class-action claim filed in Los Angeles Superior Court. Costs and fees associated with the settlement were $5 million, of which $2.6 million was recorded in the quarter, with the balance expensed in prior periods. The settlement is not expected to have material ongoing adverse effect on the company’s business, financial conditions, or results of operations, says Ensign.
Looking forward, Ensign increased its previous 2012 annual earnings guidance, projecting net income expectations of $2.48 to $2.56 per diluted share on revenues of $830 million to $846 million.
View the second quarter earnings report here.
The Ensign Group, Inc. (NASDAQ:ENSG) announced on Wednesday the acquisition of two skilled nursing facilities, both located in Idaho, effective August 1, 2012.
Discovery Care Centre, a senior care facility with 45 skilled nursing beds and 24 assisted living units, is located in Salmon, Ida. Owyhee Health & Rehabilitation Center is a skilled nursing facility with 49 beds and is located in Homedale, Ida.
The two properties were acquired from an Idaho family that had operated them for several years.
Christopher Christensen, Ensign’s president and CEO, said he expects the operations in the two facilities, which had a combined occupancy rate of approximately 64% at time of acquisition, to be accretive to earnings on 2012.
Ensign also acquired the underlying real estate and other operating assets of Palomar Vista Healthcare Center, a skilled nursing facility with 74 beds located in Escondido, Calif., on Aug. 1. An Ensign subsidiary had already been operating the property since July 2003 under a lease with a purchase option.
There are now 107 facilities in Ensign’s portfolio, 83 of which are Ensign-owned. Ensign affiliates hold purchase options on four of its 24 leased facilities, and the company continues to actively seek additional opportunities to acquire both well-performing and struggling skilled nursing, assisted living, and other healthcare-related businesses across the United States.
Written by Alyssa Gerace