With favorable market conditions, the infrastructure in place and a prepared organization and leadership, the time was right to spin off Ensign’s home health and hospice agencies, along with most of it senior living businesses, into a new company, Daniel H. “Danny” Walker said Tuesday during Ensign’s first-quarter earnings call.
Walker will be chairman, CEO and president of the new company, The Pennant Group, which also will include Ensign’s mobile diagnostic and clinical laboratory operations. He has been with Mission Viejo, CA-based Ensign for 12 years and currently is president of Cornerstone Healthcare, Ensign’s home health and hospice holding company.
“It just felt like the right time for them to spin off and become their own entity,” Ensign President and CEO Christopher Christensen said. Additional reasons for the move, he said, included alignment of shareholder and lender interests and providing a pathway for the advancement of current and future leaders.
“We feel like there is a lot more crossover between these two particular professions than any other in our portfolio,” Christensen said. The portfolio also includes the transitional and skilled services, rehabilitative care services, healthcare campuses, post-acute-related new business ventures and real estate investments that will remain part of The Ensign Group.
“We think it’s the right time, and we think it’s the right combination of organizations,” Christensen added.
Talks about the spinoff have been taking place for “many, many” months, Chief Operating Officer Barry Port said, adding that board and third-party approvals, as well as lender agreements, still need to be finalized.
“We would not have announced this today if we didn’t feel comfortable that the likelihood that this is going to occur is very, very high,” however, he added.
The proposed spin-off is expected to be completed in or before the fourth quarter, Ensign Executive Vice President and Secretary Chad A. Keetch said. “We anticipate that the Board of Directors will declare a dividend of one share of Pennant common stock for every two shares of the company’s common stock held by stockholders as of the record date,” he said.
Pennant has applied to list its shares on the NASDAQ stock market under the ticker symbol PNTG. The Pennant name, chosen by “several key leaders,” pays tribute to Ensign, which means a flag or standard, Walker said.
“Although Pennant will have a new ownership structure, we are very excited to announce that we expect to remain linked to Ensign in meaningful and mutually beneficial ways,” Walker said. “To this end, Ensign and Pennant have created a preferred provider network called the Ensign-Pennant Care Continuum, which will memorialize the operational partnership we have always enjoyed under Ensign’s ownership. As preferred providers within the care continuum, each Ensign and Pennant operation that elects to opt into the network will work together to appropriately share data and create care pathways designed by our clinicians to achieve the highest possible outcomes in transitions between care settings.”
First-quarter results
Ensign had earnings per share of $0.49 for the quarter, an increase of 14% over the prior year quarter, and had adjusted earnings per share of $0.55, up 22% over the prior year quarter, Christensen said.
“Our senior living portfolio company grew its segment revenue and segment income by 13% and 8% respectively over the prior year quarter,” he said.
Acquisitions in the quarter, Keetch said, were two healthcare campuses in Arizona, both of which includes skilled nursing and senior living operations; one senior living community in Texas; one skilled nursing facility in Utah, five skilled nursing facilities in California; one skilled nursing facility in Arizona; and two hospice agencies in Texas.
With these additions, he said, the Ensign portfolio now includes 197 skilled nursing facilities, 26 of which are healthcare campuses that also includes senior living operations; 56 stand-alone senior living communities; 26 hospice agencies; 25 home health agencies; and nine home care businesses across 16 states.
