Ensign Group Q3 Profit Declines, Cuts 2013 Outlook; Plans REIT Spin-off

(RTTNews) - Ensign Group Inc. (ENSG) reported third-quarter net income attributable to the company of $10.46 million or $0.47 per share, down from $13.29 million or $0.60 per share in the year-ago period. Adjusted earnings for the quarter were $0.56 per share, compared to $0.62 per share in the prior-year quarter. However, consolidated revenues rose 11 percent to $229.26 million from $206.69 million in the same period last year.

On average, analysts polled by Thomson Reuters expected the company to report earnings of $0.68 per share for the quarter on revenues of $233.21 million. Analysts' estimates typically exclude special items.

Looking ahead to fiscal 2013, Ensign lowered its full-year guidance, now projecting adjusted net income of $2.56 to $2.72 per share on revenues of $900 million to $915 million. Earlier, the company forecast adjusted net income of $2.72 to $2.81 per share on revenues of $915 million to $931 million. Street expects the company to earn $2.69 per share for the year on revenues of $911.16 million.

Ensign is the parent company of the Ensign group of skilled nursing, rehabilitative care services, home health care, hospice care, assisted living and urgent care companies.

Separately, Ensign said it plans to separate its healthcare business and real estate business into two separate and independent publicly-traded companies.

Under the plan, Ensign will continue to provide healthcare services through its existing operations, while CareTrust REIT, Inc. will own, acquire and lease real estate serving the healthcare industry. Ensign plans to effect the strategic separation through a spin-off by distributing all of the outstanding shares of CareTrust common stock to Ensign's shareholders on a pro rata basis.

At the time of the spin-off, CareTrust, which is currently a wholly-owned subsidiary of Ensign, will hold substantially all of the real property owned by Ensign and will operate three independent living facilities.

After the spin-off, these properties - other than the three independent living facilities - will be leased to Ensign on a triple-net basis. CareTrust intends to qualify and elect to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with its taxable year ending December 31, 2014.

Ensign expects the spin-off to be tax-free to its shareholders, except for any cash paid in lieu of fractional shares. CareTrust has applied to list its shares on the Nasdaq stock market under the ticker symbol "CTRE".

Gregory Stapley, Ensign's executive vice president and secretary, will become the president and chief executive officer of CareTrust. Ensign noted that other than Stapley, its current management team will continue in place.

In connection with the proposed spin-off, Ensign's board of directors has adopted a stockholder rights plan to facilitate CareTrust's REIT qualification. Under the stockholder rights plan, Ensign's shareholders of record at the close of business on November 18, 2013 will receive a dividend of one right for each share of Ensign common stock held by them.