Assisted living offers promise for future, Ensign Group CEO says
Ensign Group President and CEO Christopher Christensen
Assisted living, along with home health, hospice, nonemergency medical transportation and other post-acute services are areas that offer encouragement for the future of The Ensign Group and its operating affiliates, President and CEO Christopher Christensen told participants in a Friday call about second-quarter earnings.
“The income growth each of these business ventures has achieved is further evidence of the organization's agility and ability to apply its operating principles in several healthcare services,” he said.
Assisted living accounted for 7.3% of Ensign's revenue as of the first quarter, according to supplemental materials from the company. Assisted living and independent living revenue growth went from almost $41 million in 2013 to almost $126 million for the 12 trailing months as of May.
Chief Financial Officer Suzanne Snapper told those on the call that Bridgestone Living, the company's assisted and independent living subsidiary, grew its segment income by 12.1% to $3.7 million over the prior-year quarter.
The company's earnings per share of $0.31 for the quarter missed analysts' expectations by $0.05, and although Christensen said he was not pleased with the overall results for the quarter, he remained confident in Ensign's annual guidance for 2017. “We're reaffirming our projected revenues of $1.76 billion to $1.8 billion and annual earnings per share guidance of $1.46 to $1.53 per diluted share,” he said.
Revenue of $448.28 million for the quarter, up 9.2% year over year, beat analysts' expectations by $4.85 million.
Christensen cited Ensign's Harbor View Assisted Living in Manitowoc, WI, as an example of improvements in assisted living operations seen by the company.
“Under the leadership of Executive Director Tammy Wagner and Wellness Director Lindsay Holdorf, this operation has improved in almost every metric,” he said. “Together, Tammy and Lindsay have immersed themselves into the community to overcome a challenging reputation we inherited at the time of acquisition to gain the trust of the healthcare community and the families in Manitowoc. By systematically improving culture, this operation has improved occupancy by 33.6%, resulting in an increase in earnings before interest and taxes of 253.5% over last year's quarter.”
As of May 11, the company had 4,523 units of independent and assisted living, 60.1% leased without a purchase option, 35.8% which are owned, and 4.1% which are leased with a purchase option.
Christensen said the company had 111 recently acquired and transitioning operations as of Aug. 1, representing almost 50% of its total assisted living and skilled nursing operations.
“We can see the incredible opportunity we have within our organization, and we can see the progress in that opportunity,” he said. “It's because of that potential that we are so optimistic about our future, even after a quarter that doesn't meet our own expectations. As our same-store operations have been strengthening, we expect our newly acquired and transitioning operations to follow the standards that our mature operations continue to set.”
Senior living-related acquisitions in the second quarter, said Chad Keetch, executive vice president and secretary, included five facilities acquired June 16 from affiliates of Brookdale Senior Living:
- Meadowcreek Senior Living, a 37-unit assisted living community in Lancaster, TX;
- Paris Chalet Senior Living, a 37-unit community in Paris, TX;
- Maple Meadows Assisted Living, a 19-unit community in Fond du Lac, WI;
- North Point Senior Living, a 19-unit assisted living facility in Kenosha, WI; and
- Lakepoint Villa Assisted Living, a 19-unit assisted living facility in Oshkosh, WI.
The communities had a combined occupancy rate of 80%, Ensign said June 27 when the acquisitions were announced.
The company also completed the sale-leaseback of an assisted living community with Mainstreet Health Investments in May, Keetch said.
Senior living-related acquisitions made after the end of the second quarter, he said, were:
- The Villas at Sunny Acres, a Thornton, CO, retirement community with 109 independent living units, 35 assisted living units and 134 skilled nursing beds, acquired July 1 from CHI Living Communities;
- Medallion Villas, a 44-unit assisted living community and 64-unit independent living operation, and Medallion Post Acute Rehabilitation, a 60-bed skilled nursing operation, both set on a single healthcare campus in Colorado Springs, CO, also acquired July 1 from CHI Living Communities; and
- The Parkside Senior Living, a 20-unit assisted living community in Neenah, WI, acquired Aug. 1.
Keetch also said Ensign expects Housing and Urban Development financing on 17 of its 61 owned assets to be completed during the third quarter.
“This will also allow us to pay down most of our revolving line of credit and to establish long-term fixed financing at very favorable rates,” he said. “As we do so, we add to our liquidity and our ability to acquire well-performing and struggling skilled nursing operations, assisted living operations and startup or early-stage hospice and home health agencies as well as other post-acute care businesses.”