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Item 1. Financial Statements

2023-04-26 compared with 2022-10-26 · 250 added, 475 removed, 790 unchanged (48% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands, except par values)

1 unchanged sentence

Cash and cash equivalents $ 326,969 $ 316,270

Accounts receivable—less allowance for doubtful accounts of $ 7,865 and $ 11,213 at September 30, 2022 and December 31, 2021, respectively

Accounts receivable—less allowance for doubtful accounts of $ 9,580 and $ 7,802 at March 31, 2023 and December 31, 2022, respectively

444,181 408,432

6 unchanged sentences

Insurance subsidiary deposits and investments 82,052 67,652

Escrow deposits 8,287 —

Deferred tax assets 39,596 39,643

7 unchanged sentences

Accounts payable $ 81,466 $ 77,087

Accrued wages and related liabilities (Note 3)

291,351 278,770

Accrued wages and related liabilities 261,323 289,810

Lease liabilities—current 77,419 65,796

14 unchanged sentences

100,000 shares authorized;

58,833 and 55,465 shares issued and outstanding at September 30, 2022, respectively, and 58,134 and 55,190 shares issued and outstanding at December 31, 2021, respectively

59,276 and 55,907 shares issued and outstanding at March 31, 2023, respectively, and 59,029 and 55,661 shares issued and outstanding at December 31, 2022, respectively

Additional paid-in capital 429,783 415,560

Retained earnings 1,002,976 946,339

Common stock in treasury, at cost, 3,368 and 2,944 shares at September 30, 2022 and December 31, 2021, respectively (Note 20)

Common stock in treasury, at cost, 3,369 and 3,368 shares at March 31, 2023 and December 31, 2022, respectively ( Note 20)

( 114,646 ) ( 114,626 )

7 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

(In thousands, except per share data)

8 unchanged sentences

Income from operations 74,875 69,110

Other (expense) income:

Other income (expense):

Interest expense ( 2,036 ) ( 2,068 )

Other income (expense) 5,543 ( 816 )

Other expense, net ( 1,832 ) ( 1,461 ) ( 9,991 ) ( 2,867 )

Other income (expense), net 3,507 ( 2,884 )

Income before provision for income taxes 78,382 66,226

22 unchanged sentences

Employee stock award compensation — — 6,573 — — — — 6,573

Repurchase of common stock (Note 20)

( 133 ) — — — 133 ( 9,882 ) — ( 9,882 )

Acquisition of noncontrolling interest shares — — ( 77 ) — — — — ( 77 )

Net loss attributable to noncontrolling interest — — — — — — ( 252 ) ( 252 )

Net income attributable to the Ensign Group, Inc.

— — — 50,340 — — — 50,340

BALANCE - MARCH 31, 2022 55,308 $ 58 $ 383,181 $ 781,290 3,077 $ ( 92,939 ) $ 423 $ 1,072,013

Issuance of common stock to employees and directors resulting from the exercise of stock options 223 — 3,303 — — — — 3,303

Issuance of restricted stock, net of forfeitures 38 — — — — — — —

Shares of common stock used to satisfy tax withholding obligations ( 20 ) — — — 20 ( 1,687 ) — ( 1,687 )

Dividends declared ($ 0.0550 per share)

— — — ( 3,040 ) — — — ( 3,040 )

Employee stock award compensation — — 5,616 — — — — 5,616

Repurchase of common stock (Note 19) ( 271 ) — — — 271 ( 20,000 ) — ( 20,000 )

Issuance of noncontrolling interests through subsidiary equity plan — — 6,693 — — — — 6,693

Net income attributable to noncontrolling interest — — — — — — 117 117

2 unchanged sentences

— — — 59,852 — — — 59,852

BALANCE - JUNE 30, 2022 55,278 $ 58 $ 398,793 $ 835,941 3,368 $ ( 114,626 ) $ 527 $ 1,120,693

Issuance of common stock to employees and directors resulting from the exercise of stock options 151 — 2,635 — — — — 2,635

Issuance of restricted stock, net of forfeitures 36 — — — — — — —

Dividends declared ($ 0.0550 per share)

— — — ( 3,051 ) — — — ( 3,051 )

Employee stock award compensation — — 5,898 — — — — 5,898

Acquisition of noncontrolling interest shares — — ( 1,774 ) — — — 1,105 ( 669 )

Net income attributable to noncontrolling interest — — — — — — 63 63

Distribution to noncontrolling interest holder and other changes — — 3 — — — ( 3 ) —

Net income attributable to the Ensign Group, Inc.

— — — 56,179 — — — 56,179

BALANCE - SEPTEMBER 30, 2022 55,465 $ 58 $ 405,555 $ 889,069 3,368 $ ( 114,626 ) $ 1,692 $ 1,181,748

BALANCE - MARCH 31, 2023 55,907 $ 60 $ 429,783 $ 1,002,976 3,369 $ ( 114,646 ) $ 1,581 $ 1,319,754

Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Non-Controlling Interest

7 unchanged sentences

Employee stock award compensation — — 5,167 — — — — 5,167

Net income attributable to noncontrolling interest — — — — — — 631 631

Distribution to noncontrolling interest holder — — — — — — ( 1,248 ) ( 1,248 )

Net income attributable to the Ensign Group, Inc.

— — — 49,206 — — — 49,206

BALANCE - MARCH 31, 2021 54,953 $ 58 $ 349,836 $ 597,375 2,791 $ ( 71,222 ) $ ( 467 ) $ 875,580

Issuance of common stock to employees and directors resulting from the exercise of stock options 148 — 2,982 — — — — 2,982

Issuance of restricted stock, net of forfeitures 49 — — — — — — —

Shares of common stock used to satisfy tax withholding obligations ( 20 ) — — — 20 ( 1,600 ) — ( 1,600 )

Dividends declared ($ 0.0525 per share)

— — — ( 2,894 ) — — — ( 2,894 )

Employee stock award compensation — — 4,633 — — — — 4,633

Net income attributable to noncontrolling interest — — — — — — 1,158 1,158

Distribution to noncontrolling interest holder — — — — — — ( 641 ) ( 641 )

Net income attributable to the Ensign Group, Inc.

— — — 49,425 — — — 49,425

BALANCE - JUNE 30, 2021 55,130 $ 58 $ 357,451 $ 643,906 2,811 $ ( 72,822 ) $ 50 $ 928,643

Issuance of common stock to employees and directors resulting from the exercise of stock options 69 — 1,246 — — — — 1,246

Issuance of restricted stock, net of forfeitures 49 — — — — — — —

Shares of common stock used to satisfy tax withholding obligations ( 1 ) — — — 1 ( 102 ) — ( 102 )

Dividends declared ($ 0.0525 per share)

Repurchase of common stock (Note 20)

( 133 ) — — — 133 ( 9,882 ) — ( 9,882 )

Employee stock award compensation — — 5,082 — — — — 5,082

Net income attributable to noncontrolling interest — — — — — — 1,063 1,063

Distribution to noncontrolling interest holder — — — — — — ( 1,019 ) ( 1,019 )

Acquisition of noncontrolling interest shares — — 245 — — — ( 271 ) ( 26 )

Net loss attributable to noncontrolling interest — — — — — — ( 252 ) ( 252 )

Net income attributable to the Ensign Group, Inc.

— — — 50,340 — — — 50,340

BALANCE - SEPTEMBER 30, 2021 55,247 $ 58 $ 363,779 $ 688,287 2,812 $ ( 72,924 ) $ 94 $ 979,294

BALANCE - MARCH 31, 2022 55,308 $ 58 $ 383,181 $ 781,290 3,077 $ ( 92,939 ) $ 423 $ 1,072,013

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2023 2022

5 unchanged sentences

Non-cash leasing arrangement 263 124

Write-off of deferred financing fees 566 —

Deferred income taxes 47 264

1 unchanged sentence

Stock-based compensation 6,573 5,167

Gain on sale of assets ( 3,467 ) ( 540 )

Loss on insurance claims, legal finding and asset disposals 62 4,054

11 unchanged sentences

Accrued self-insurance liabilities 9,369 4,740

Other long-term liabilities ( 34 ) ( 177 )

NET CASH PROVIDED BY OPERATING ACTIVITIES

3 unchanged sentences

Cash payments for business acquisitions (Note 8)

( 16,400 ) ( 6,000 )

Cash payments for asset acquisitions (Note 8)

( 65,699 ) ( 5,183 )

Escrow deposits — ( 400 )

Cash from insurance proceeds 1,143 6,705

Cash proceeds from the sale of assets 8,626 951

Cash proceeds from the sale of assets and insurance proceeds 13 431

Purchases of investments ( 9,767 ) ( 2,340 )

4 unchanged sentences

Cash flows from financing activities:

Proceeds from debt (Note 16)

Payments on debt (Note 15)

4 unchanged sentences

Dividends paid ( 3,201 ) ( 3,035 )

Proceeds from sale of subsidiary shares (Note 7)

Non-controlling interest distribution ( 4 ) —

1 unchanged sentence

Payments of deferred financing costs ( 19 ) ( 120 )

Proceeds from CARES Act Provider Relief Fund and Medicare Advance Payment Program (Note 3)

Repayments of CARES Act Provider Relief Fund and Medicare Advance Payment Program (Note 3)

— ( 113,660 )

NET CASH USED IN FINANCING ACTIVITIES

$ ( 1,674 ) $ ( 11,289 )

Net increase in cash and cash equivalents 46,663 68,058

Net increase (decrease) in cash and cash equivalents 10,699 ( 13,655 )

Cash and cash equivalents beginning of period 316,270 262,201

Cash and cash equivalents end of period $ 326,969 $ 248,546

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2023 2022

2 unchanged sentences

Interest $ 1,769 $ 2,107

Income taxes $ 57,880 $ 45,440

Lease liabilities $ 46,420 $ 35,972

10 unchanged sentences

(collectively, Ensign or the Company), is a holding company with no direct operating assets, employees or revenue.

The Company, through its operating subsidiaries, is a provider of health care services across the post-acute care continuum, engaged in the ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare-related properties and other ancillary businesses.

As of September 30, 2022, the Company operated 259 facilities and other ancillary operations located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin.

The Company's operating subsidiaries have a collective capacity of approximately 26,600 operational skilled nursing beds and 3,000 senior living units.

As of September 30, 2022, the Company operated 182 facilities under long-term lease arrangements, and had options to purchase 11 of those 182 facilities.

The Company's real estate portfolio includes 106 owned real estate properties, which included 77 facilities operated and managed by the Company, 29 senior living operations leased to and operated by The Pennant Group, Inc.

(Pennant) as part of the spin-off transaction that occurred in October 2019 (Spin-Off), and the Service Center location.

The Company's independent operating subsidiaries provide health care services across the post-acute care continuum and engage in the ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare-related properties and other ancillary businesses.

As of March 31, 2023, the Company's independent operating subsidiaries operated 290 facilities and other ancillary operations located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin.

The Company's independent operating subsidiaries have a collective capacity of approximately 29,900 operational skilled nursing beds and 3,000 senior living units.

As of March 31, 2023, the Company's independent operating subsidiaries operated 211 facilities under long-term lease arrangements, and had options to purchase 11 of those 211 facilities.

The Company's real estate portfolio includes 108 owned real estate properties, which included 79 facilities operated and managed by the Company's independent operating subsidiaries, 29 senior living operations leased to and operated by The Pennant Group, Inc.

(Pennant) as part of the spin-off transaction that occurred in October 2019, and the Service Center location.

Of those 29 senior living operations, one is located on the same real estate property as a skilled nursing facility that the Company owns and operates.

1 unchanged sentence

The Company also has a wholly-owned captive insurance subsidiary that provides some claims-made coverage to the Company’s operating subsidiaries for general and professional liabilities, as well as coverage for certain workers’ compensation insurance liabilities.

In January of 2022, the Company formed a captive real estate investment trust (REIT), which owns and manages its real estate business, called Standard Bearer Healthcare REIT, Inc.

In 2022, the Company formed a captive real estate investment trust (REIT), which owns and manages its real estate business, called Standard Bearer Healthcare REIT, Inc.

(Standard Bearer).

4 unchanged sentences

has direct operating assets, employees or revenue, or that any of the subsidiaries, are operated by The Ensign Group, Inc.

Other Information — The accompanying condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 (collectively, the Interim Financial Statements) are unaudited.

Certain information and note disclosures normally included in annual consolidated financial statements have been condensed or omitted, as permitted under applicable rules and regulations.

Other Information — The accompanying condensed consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 (collectively, the Interim Financial Statements) are unaudited.

Certain information and note disclosures normally included in the annual consolidated financial statements have been condensed or omitted, as permitted under applicable rules and regulations.

Readers of the Interim Financial Statements should refer to the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2022 which are included in the Company’s Annual Report on Form 10-K, File No.

8 unchanged sentences

and the noncontrolling interest in its condensed consolidated statements of income.

The Interim Financial Statements include the accounts of all entities controlled by the Company through its ownership of a majority voting interest.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Interim Financial Statements include the accounts of all entities controlled by the Company through its ownership of a majority voting interest.

Additionally, the accounts of any variable interest entities (VIEs) where the Company is subject to a majority of the risk of loss from the VIE's activities are entitled to receive a majority of the entity's residual returns, or both.

The Company assesses the requirements related to the consolidation of VIEs, including a qualitative assessment of power and economics that considers which entity has the power to direct the activities that "most significantly impacts" the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits that could be potentially significant to, the VIE.

On October 1, 2021, the Company deconsolidated its VIE, which was not material, as this entity no longer met the requirements for consolidation.

As of September 30, 2022 and December 31, 2021, the Company had no VIEs.

Reclassifications — Prior period results reflect reclassifications, for comparative purposes, related to the change in the Company's segment structure as a result of the formation of Standard Bearer.

Refer to Note 8, Business Segments , for additional information related to segments.

Estimates and Assumptions — The preparation of the Interim Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Interim Financial Statements and the reported amounts of revenue and expenses during the reporting periods.

1 unchanged sentence

Actual results could differ from those estimates.

Fair Value of Financial Instruments — The Company’s financial instruments consist principally of cash and cash equivalents, debt security investments, accounts receivable, insurance subsidiary deposits, accounts payable and borrowings.

The Company believes all of the financial instruments’ recorded values approximate fair values because of their nature or respective short durations.

Contracts insuring the lives of certain employees who are eligible to participate in non-qualified deferred compensation plans are held in a rabbi trust.

Cash surrender value of the contracts is based on funds that shadow the investment allocations specified by participants in the deferred compensation plan.

The fair value of the investment funds is derived using Level 2 inputs.

See Note 5, Fair Value Measurements.

3 unchanged sentences

See Note 3, Revenue and Accounts Receivable.

Accounts Receivable — Accounts receivable consist primarily of amounts due from Medicare and Medicaid programs, other government programs, managed care health plans and private payor sources, net of estimates for variable consideration.

Accounts Receivable and Allowance for Doubtful Accounts — Accounts receivable consist primarily of amounts due from Medicare and Medicaid programs, other government programs, managed care health plans and private payor sources, net of estimates for variable consideration.

Property and Equipment — Property and equipment are initially recorded at their historical cost.

4 unchanged sentences

The Company determines if an arrangement is a lease at the inception of each lease.

Leases commencing prior to the ASC 842 adoption date were classified as operating lease under historical guidance.

Leases commencing prior to the ASC 842 adoption date were classified as operating leases under historical guidance.

As the Company has elected the package of practical expedients allowing it to not reassess lease classification, these leases are classified as operating leases under ASC 842 as well.

For leases commencing subsequent to the ASC 842 adoption date, the Company performs an evaluation to determine whether the lease should be classified as an operating or finance lease at the inception of the lease.

As of September 30, 2022, the Company does not have any leases that are classified as finance leases.

Rights and obligations of operating leases are included as right-of-use assets, current lease liabilities and long-term lease liabilities on the Company's condensed consolidated balance sheets.

As of March 31, 2023, the Company has one financing lease which is not material to the condensed consolidated balance sheets.

Rights and obligations of these leases are included as right-of-use assets, current lease liabilities and long-term lease liabilities on the Company's condensed consolidated balance sheets.

As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of future lease payments.

The Company utilized a third-party valuation specialist to assist in estimating the incremental borrowing rate.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company records rent expense for operating leases on a straight-line basis over the term of the lease.

11 unchanged sentences

The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company does not have material subleases.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company subleases skilled nursing facilities to third-party operators and considers the subleases to be separate contracts under ASC 842 because the Company is not relieved of its primary obligation under its operating lease.

The rental income from third-parties related to these subleases is presented on a gross basis from the rent expense associated with the Company's lease obligations and is not material to the condensed consolidated statements of income.

Impairment of Long-Lived Assets — The Company reviews the carrying value of long-lived assets that are held and used in the Company’s operating subsidiaries for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

2 unchanged sentences

The Company estimates the fair value of assets based on the estimated future discounted cash flows of the asset.

Management has evaluated its long-lived assets and determined there was no impairment during the three and nine months ended September 30, 2022 and 2021.

Management has evaluated its long-lived assets and determined there was no impairment during the three months ended March 31, 2023 and 2022.

Intangible Assets and Goodwill — Definite-lived intangible assets consist primarily of patient base, facility trade names and customer relationships.

1 unchanged sentence

Trade names at affiliated facilities are amortized over 30 years and customer relationships are amortized over a period of up to 20 years.

The Company's indefinite-lived intangible assets consist of trade names, and Medicare and Medicaid licenses.

The Company's indefinite-lived intangible assets consist of trade names, Medicare and Medicaid licenses.

The Company tests indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

3 unchanged sentences

The Company performs its annual test for impairment during the fourth quarter of each year.

The Company did no t identify any goodwill or intangible asset impairment during the three and nine months ended September 30, 2022 and 2021.

Management has evaluated its long-lived assets and determined there was no impairment during the three months ended March 31, 2023 and 2022.

Self-Insurance — The Company is partially self-insured for general and professional liability claims up to a base amount per claim (the self-insured retention) with an aggregate, one-time deductible above this limit.

5 unchanged sentences

The captive insurance subsidiary is subject to certain statutory requirements as an insurance provider.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company’s policy is to accrue amounts equal to the actuarial estimated costs to settle open claims of insureds, as well as an estimate of the cost of insured claims that have been incurred but not reported.

1 unchanged sentence

The Company uses actuarial valuations to estimate the liability based on historical experience and industry information.

Accrued general liability and professional malpractice liabilities on an undiscounted basis, net of anticipated insurance recoveries, were $ 73,056 and $ 66,158 as of September 30, 2022 and December 31, 2021, respectively.

Accrued general liability and professional malpractice liabilities on an undiscounted basis, net of anticipated insurance recoveries, were $ 88,843 and $ 79,781 as of March 31, 2023 and December 31, 2022, respectively.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company’s operating subsidiaries are self-insured for workers’ compensation liabilities in California.

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The Company uses actuarial valuations to estimate the liability based on historical experience and industry information.

Accrued workers’ compensation liabilities are recorded on an undiscounted basis in the accompanying condensed consolidated balance sheets and were $ 28,290 and $ 27,335 as of September 30, 2022 and December 31, 2021, respectively.

In addition, the Company has recorded an asset and equal liability of $ 9,406 and $ 6,755 as of September 30, 2022 and December 31, 2021, respectively, in order to present the ultimate costs of malpractice and workers' compensation claims and the anticipated insurance recoveries on a gross basis.

Accrued workers’ compensation liabilities are recorded on an undiscounted basis in the accompanying condensed consolidated balance sheets and were $ 27,607 and $ 27,301 as of March 31, 2023 and December 31, 2022, respectively.

In addition, the Company has recorded an asset and equal liability of $ 13,765 and $ 10,512 as of March 31, 2023 and December 31, 2022, respectively, in order to present the ultimate costs of malpractice and workers' compensation claims and the anticipated insurance recoveries on a gross basis.

See Note 12, Restricted and Other Assets.

1 unchanged sentence

The Company is fully liable for all financial and legal aspects of these benefit plans.

To protect itself against loss exposure with this policy, the Company has purchased individual stop-loss insurance coverage that insures individual claims that exceed $ 525 for each covered person for fiscal year 2022.

The Company’s accrued liability under these plans recorded on an undiscounted basis in the accompanying condensed consolidated balance sheets was $ 14,005 and $ 9,891 as of September 30, 2022 and December 31, 2021, respectively.

As of March 31, 2023 and December 31, 2022, the Company’s accrued liability under these plans recorded on an undiscounted basis in the accompanying condensed consolidated balance sheets was $ 14,088 for both periods.

The Company believes that adequate provision has been made in the Interim Financial Statements for liabilities that may arise out of patient care, workers’ compensation, healthcare benefits and related services provided to date.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Standard Bearer intends to qualify and elect to be taxed as a REIT, for U.S.

federal income tax purposes, commencing with its taxable year ended December 31, 2022.

Standard Bearer believes it has been organized, has operated and intends to continue to operate in a manner to qualify for taxation as a REIT.

In order to qualify as a REIT, Standard Bearer must meet certain organizational and operational requirements, including a requirement to distribute to its shareholders, which in this case is the Company, at least 90% of its annual taxable income.

As a REIT, Standard Bearer generally will not be subject to federal income tax to the extent it distributes as qualifying dividends all of its REIT taxable income to its shareholders.

If Standard Bearer fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.

Noncontrolling Interest — The noncontrolling interest in a subsidiary is initially recognized at estimated fair value on the acquisition date and is presented within total equity in the Company's condensed consolidated balance sheets.

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The applicability of any standard is subject to the formal review of the Company's financial management and certain standards are under consideration.

Recent Accounting Standards Adopted by the Company — In November 2021, the FASB issued ASU 2021-10 “ Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance, ” which created FASB ASC Topic 832, Government Assistance (ASC 832) .

ASC 832 requires business entities to disclose information about certain government assistance they receive.

The Company adopted this standard on January 1, 2022 and determined there was no material impact on the Company's Interim Financial Statements.

Accounting Standards Recently Issued but Not Yet Adopted by the Company — In February 2020, the FASB issued ASU 2020-04 "Reference Rate Reform (Topic 848)," which provides temporary, optional practical expedients and exceptions to enable a smoother transition to reference rates which are expected to replace London Interbank Offered Rate (LIBOR) reference rates.

Adoption of the provisions of ASU 2020-04 is optional.

The amendments are effective for all entities from the beginning of the interim period that includes the issuance date of the ASU.

An entity may elect to apply the amendments prospectively through December 31, 2022.

During the nine months ended September 30, 2022, the Company and its subsidiaries including Standard Bearer, entered into the Second Amendment to Third Amended and Restated Credit Agreement (such agreement, the Amended Credit Agreement, and the revolving credit facility thereunder, the Revolving Credit Facility), which increased the Revolving Credit Facility by $ 250,000 to an aggregate principal amount of up to $ 600,000 .

Pursuant to the Amended Credit Agreement, the Company transitioned from LIBOR to the Secured Overnight Financing Rate (SOFR) as the applicable reference rate for borrowings under the Revolving Credit Facility and determined there was no resulting material impact on the Company's Interim Financial Statements.

COVID-19 UPDATE

The COVID-19 pandemic has continued to impact the Company's affiliated operations.

In prior years, as part of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the CARES Act), the Company received cash distributions of relief fund payments (Provider Relief Funds) and funds authorized by U.S.

Department of Health and Human Services (HHS) to be used to protect residents of nursing homes and long-term care (LTC) facilities from the impact of COVID-19 .

During the three and nine months ended September 30, 2022, the Company did not receive Provider Relief Funds.

During the three and nine months ended September 30, 2021, the Company received and returned $ 99 and $ 11,637 , respectively, in Provider Relief Funds.

The Company may continue to receive additional funding in future periods.

In fiscal year 2020, the Company applied for and received $ 105,255 through the Medicare Accelerated and Advance Payment Program under the CARES Act.

The purpose of the program is to assist in providing needed liquidity to care delivery providers.

The Company repaid $ 3,232 of the funds in 2020 and the remaining funds of $ 102,023 in March 2021.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Family First Coronavirus Response Act was signed into law in 2020 to provide a temporary 6.2% increase to the Federal Medical Assistance Percentage (FMAP) effective January 1, 2020.

The law permits states to retroactively change their state's Medicaid program rates effective as of January 1, 2020.

The law provides discretion to each state and specifies the funds are to be used to reimburse the recipient for healthcare related expenses that are attributable to COVID-19 and associated with providing patient care.

In addition, increases in Medicaid rates can come from other areas of the state's budget outside of FMAP funding.

Revenues from these additional payments are recognized in accordance with ASC 606, subject to variable consideration constraints.

In certain operations where the Company received additional payments that exceeded expenses incurred related to COVID-19, the Company characterized such payments as variable revenue that required additional consideration and accordingly, the amount of state relief revenue recognized is limited to the actual COVID-19 related expenses incurred.

As of September 30, 2022 and December 31, 2021, the Company had $ 3,248 and $ 1,781 in unapplied state relief funds, respectively.

During the three and nine months ended September 30, 2022, the Company received an additional $ 20,293 and $ 64,955 in state relief funding and recognized $ 21,400 and $ 63,488 , respectively, as revenue.

During the three and nine months ended September 30, 2021, the Company received an additional $ 17,829 and $ 50,250 in state relief funding and recognized $ 19,229 and $ 52,386 , respectively, as revenue.

The CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due by December 31, 2021 and the remaining 50% due by December 31, 2022.

The Company recorded $ 48,309 of deferred payments of social security taxes as a liability during 2020.

The Company paid $ 24,154 during the year ended December 31, 2021 and the remaining short-term balance of $ 24,155 is included in accrued wages and related liabilities within the condensed consolidated balance sheets as of September 30, 2022.

REVENUE AND ACCOUNTS RECEIVABLE

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If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such variances become known.

Revenue from the Medicare and Medicaid programs accounted for 73.7 % and 73.5 % of all service revenue for the three and nine months ended September 30, 2022, respectively and 73.6 % for both the three and nine months ended September 30, 2021, respectively.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Revenue from the Medicare and Medicaid programs accounted for 73.3 % and 73.4 % of all service revenue for the three months ended March 31, 2023 and 2022, respectively.

Settlements with Medicare and Medicaid payors for retroactive adjustments due to audits and reviews are considered variable consideration and are included in the determination of the estimated transaction price.

1 unchanged sentence

Consistent with healthcare industry practices, any changes to these revenue estimates are recorded in the period the change or adjustment becomes known based on the final settlement.

The Company recorded adjustments to revenue which were not material to the Company's revenue for the three and nine months ended September 30, 2022 and 2021.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company recorded adjustments to revenue which were not material to the Company's revenue for the three months ended March 31, 2023 and 2022.

Rental Revenue

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Otherwise, tenant reimbursements for taxes and insurance that are paid by the Company directly to a third party are classified as additional rental revenue and expense and recognized by the Company on a gross basis.

State relief funding

The Company receives state relief funding through Medicaid programs from various states, including healthcare relief funding under the American Rescue Plan Act (ARPA), increases in the Federal Medical Assistance Percentage (FMAP) under the Families First Coronavirus Response Act (FFCRA) and other state specific relief programs.

The funding generally incorporates specific use requirements primarily for direct patient care including labor related expenses that are attributable to the COVID-19 pandemic or are associated with providing patient care.

Revenues from these additional payments are recognized in accordance with ASC 606, subject to variable consideration constraints.

In certain operations where the Company received additional payments that exceeded expenses incurred related to the specific qualifiers, the Company characterized such payments as variable revenue that required additional consideration and accordingly, the amount of state relief revenue recognized is limited to the actual related expenses incurred.

As of March 31, 2023 and December 31, 2022, the Company had $ 1,907 and $ 1,001 in unapplied state relief funds, respectively.

During the three months ended March 31, 2023 and 2022, the Company received an additional $ 27,264 and $ 17,317 , respectively, in state relief funding and recognized $ 26,358 and $ 17,599 , respectively, as revenue.

Disaggregation of Revenue

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For patients under reimbursement arrangements with third-party payors, including Medicaid, Medicare and private insurers, revenue is recorded based on contractually agreed-upon amounts or rates, adjusted for estimates for variable consideration, on a per patient, daily basis or as services are performed.

Service revenue for the three and nine months ended September 30, 2022 and 2021 is summarized in the following tables:

Three Months Ended September 30,

Revenue % of Revenue Revenue % of Revenue

$ 302,615 39.5 % $ 267,008 40.2 %

Medicare 211,104 27.6 176,660 26.6

Medicaid — skilled 50,643 6.6 45,308 6.8

Total Medicaid and Medicare 564,362 73.7 488,976 73.6

Managed care 132,663 17.3 114,917 17.3

Private and other (2)

68,858 9.0 60,704 9.1

SERVICE REVENUE $ 765,883 100.0 % $ 664,597 100.0 %

(1) Medicaid payor includes revenue for senior living operations and revenue related to FMAP and other COVID-19 related state funding.

(2) Private and other payors also includes revenue from senior living operations and all payors generated in other ancillary services.

Nine Months Ended September 30,

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Service revenue for the three months ended March 31, 2023 and 2022 is summarized in the following tables:

Three Months Ended March 31,

Revenue % of Revenue Revenue % of Revenue

7 unchanged sentences

SERVICE REVENUE $ 881,918 100.0 % $ 709,156 100.0 %

(1) Medicaid payor includes revenue for senior living operations and revenue related to FMAP and other COVID-19 related state funding.

(1) Medicaid payor includes revenue for senior living operations and revenue related to state relief funding.

(2) Private and other payors also includes revenue from senior living operations and all payors generated in other ancillary services.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In addition to the service revenue above, the Company's rental revenue derived from triple-net lease arrangements with third parties was $ 4,122 and $ 12,550 , respectively, for the three and nine months ended September 30, 2022 and $ 3,933 and $ 11,837 , respectively, for the three and nine months ended September 30, 2021.

In addition to the service revenue above, the Company's rental revenue derived from triple-net lease arrangements with third parties was $ 4,923 and $ 4,289 , respectively, for the three months ended March 31, 2023 and 2022.

Balance Sheet Impact

Included in the Company’s condensed consolidated balance sheets are contract balances, comprised of billed accounts receivable and unbilled receivables, which are the result of the timing of revenue recognition, billings and cash collections, as well as, contract liabilities, which primarily represent payments the Company receives in advance of services provided.

The Company had no material contract liabilities and contract assets as of September 30, 2022 and December 31, 2021, or activity during the three and nine months ended September 30, 2022 and 2021.

Accounts receivable as of September 30, 2022 and December 31, 2021, is summarized in the following table:

September 30, 2022 December 31, 2021

The Company had no material contract liabilities and contract assets as of March 31, 2023 and December 31, 2022, or activity during the three months ended March 31, 2023 and 2022.

Accounts receivable as of March 31, 2023 and December 31, 2022, is summarized in the following table:

March 31, 2023 December 31, 2022

Medicaid $ 161,863 $ 157,878

5 unchanged sentences

ACCOUNTS RECEIVABLE, NET $ 444,181 $ 408,432

Practical Expedients and Exemptions

As the Company’s contracts with its patients have an original duration of one year or less, the Company uses the practical expedient applicable to its contracts and does not consider the time value of money.

Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue.

In addition, the Company has applied the practical expedient provided by ASC 340, Other Assets and Deferred Costs , and all incremental customer contract acquisition costs are expensed as they are incurred because the amortization period would have been one year or less.

COMPUTATION OF NET INCOME PER COMMON SHARE

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The computation of diluted net income per share is similar to the computation of basic net income per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A reconciliation of the numerator and denominator used in the calculation of basic net income per common share follows:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income $ 59,969 $ 50,088

5 unchanged sentences

$ 1.08 $ 0.92

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A reconciliation of the numerator and denominator used in the calculation of diluted net income per common share follows:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income $ 59,969 $ 50,088

4 unchanged sentences

incremental shares from assumed conversion (1)

1,879 2,344 2,010 2,524

Adjusted weighted average common shares outstanding 57,098 56,871

1 unchanged sentence

$ 1.05 $ 0.89

(1) Options outstanding which are anti-dilutive and therefore not factored into the weighted average common shares amount above were 918 and 734 for the three and nine months ended September 30, 2022, respectively, and 365 and 139 for the three and nine months ended September 30, 2021, respectively.

(1) Options outstanding which are anti-dilutive and therefore not factored into the weighted average common shares amount above were 1,178 and 647 for the three months ended March 31, 2023 and 2022, respectivel y.

FAIR VALUE MEASUREMENTS

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and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair value of cash and cash equivalents of $ 308,864 and $ 262,201 as of September 30, 2022 and December 31, 2021, respectively, is derived using Level 1 inputs.

The Company's other financial assets include contracts insuring the lives of certain employees who are eligible to participate in non-qualified deferred compensation plans which are held in a rabbi trust.

The Company's other financial assets include the captive insurance subsidiary's deposits and investments designated to support long-term insurance subsidiary liabilities and are carried at cost basis of $ 58,870 and $ 53,924 as of March 31, 2023 and December 31, 2022, respectively.

Also included are contracts insuring the lives of certain employees who are eligible to participate in non-qualified deferred compensation plans which are held in a rabbi trust.

The cash surrender value of these contracts is based on funds that shadow the investment allocations specified by participants in the deferred compensation plan.

As of September 30, 2022, and December 31, 2021, the fair value of the investment funds of $ 22,908 and $ 17,530 , respectively, is derived using Level 2 inputs.

The investment funds are included in restricted and other assets in the condensed consolidated balance sheets.

See Note 13, Restricted and Other Assets.

As of March 31, 2023, and December 31, 2022, the adjusted cost basis of the investment funds was $ 35,228 and $ 25,144 , respectively.

As of March 31, 2023 and December 31, 2022, the cost basis of the Company's financial assets included in the captive insurance subsidiary's investments, deferred compensation plan investment funds and other cost method investments are considered to approximate the fair value of these financial assets and are derived using Level 2 and 3 inputs.

The Company believes its investments that were in an unrealized loss position as of March 31, 2023 and December 31, 2022 do not require an allowance for expected credit losses, nor has any event occurred through the filing date of this report that would indicate differently.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company's non-financial assets, which includes goodwill, intangible assets, property and equipment and right-of-use assets, are not required to be measured at fair value on a recurring basis.

1 unchanged sentence

When impairment has occurred, such long-lived assets are written down to fair value.

Debt Security Investments - Held to Maturity

As of September 30, 2022 and December 31, 2021, the Company had approximately $ 53,922 and $ 50,330 , respectively, in debt security investments which were classified as held to maturity and carried at amortized cost.

The carrying value of the majority of debt securities approximates fair value based on Level 1 inputs.

The Company has the intent and ability to hold these debt securities to maturity.

Further, as of September 30, 2022, the debt security investments were primarily held in AA, A and BBB r ated de bt securities.

The Company believes its debt security investments and investment funds that were in an unrealized loss position as of September 30, 2022 were not other-than-temporarily impaired, nor has any event occurred subsequent to that date that would indicate any other-than-temporary impairment.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

STANDARD BEARER

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Standard Bearer intends to qualify and elect to be taxed as a REIT, for U.S.

federal income tax purposes, commencing with its taxable year ending December 31, 2022.

During the nine months ended September 30, 2022, Standard Bearer acquired the real estate of eight skilled nursing facilities for a purchase price of $ 65,619 , three of which were previously operated and managed by Ensign's affiliated operations.

federal income tax purposes, commencing with its taxable year ended December 31, 2022.

During the three months ended March 31, 2022, Standard Bearer acquired the real estate of two skilled nursing facilities for a purchase price of $ 17,010 .

Standard Bearer did not have any real estate acquisitions during the three months ended March 31, 2023.

Refer to Note 8, Operation Expansions , for additional information.

Subsequent to September 30, 2022, Standard Bearer expanded its real estate portfolio with the addition of one skilled nursing property for a total purchase price of $ 8,000 .

As part of the formation of Standard Bearer, certain of the Company's operating subsidiaries, Standard Bearer and Standard Bearer's subsidiaries entered into several agreements that include leasing, management services and debt arrangements between the operations .

As these intercompany arrangements were entered into when Standard Bearer was formed in January 2022, the transactions related to these agreements are reflected in Standard Bearer's segment income during three and nine months ended September 30, 2022.

All intercompany transactions have been eliminated in consolidation.

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and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties.

The eight real estate properties acquired during nine months ended September 30, 2022 were added to the Standard Bearer Master Leases.

Rental revenue generated from Ensign affiliated operations was $ 15,024 and $ 42,343 , respectively, for the three and nine months ended September 30, 2022 and $ 11,010 and $ 32,385 , respectively, for the three and nine months ended September 30, 2021.

During the three months ended March 31, 2023, no acquisitions or amendments were made to the Standard Bearer Master Leases.

During the three months ended March 31, 2022, two real estate properties were acquired and added to the Standard Bearer Master Leases.

Rental revenue generated from Ensign affiliated operations for the three months ended March 31, 2023 and 2022 was $ 15,931 and $ 13,425 , respectively.

Intercompany management agreement

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The management agreement provides for a base management fee that is equal to 5 % of total rental revenue and an incentive management fee that is equal to 5 % of funds from operations (FFO) and is capped at 1 % of total rental revenue.

Management fee generated between Standard Bearer and the Service Center for the three and nine months ended September 30, 2022 was $ 1,124 and $ 3,202 , respectively, both of which represent 6 % of total Standard Bearer rental revenue.

No management fees were recorded in 2021, which was prior to the formation of Standard Bearer.

Management fee generated between Standard Bearer and the Service Center for the three months ended March 31, 2023 and 2022 was $ 1,182 and $ 1,022 , respectively, both representing 6 % of total Standard Bearer rental revenue.

Intercompany debt arrangements

2 unchanged sentences

The interest rate under the Amended Credit Agreement is a base rate plus a margin ranging from 0.25 % to 1.25 % per annum or SOFR plus a margin range from 1.25 % to 2.25 % per annum.

In addition, as the Department of Housing and Urban Development (HUD) mortgage loans and promissory notes are entered into by real estate subsidiaries of Standard Bearer, the interest expense incurred from these debts are included in Standard Bearer's segment income.

In addition, as the Department of Housing and Urban Development (HUD) mortgage loans and promissory note are entered into by real estate subsidiaries of Standard Bearer, the interest expense incurred from these debts are included in Standard Bearer's segment income.

Refer to Note 15, Debt , for additional information related to these debts.

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The Company can also call the awards, generally upon employee termination.

During the nine months ended September 30, 2022, Standard Bearer sold fully vested common shares from the Standard Bearer Equity Plan to shareholders for cash of $ 6,544 .

During the three and nine months ended September 30, 2022, the Company did not grant any stock options nor restricted shares under the Standard Bearer Equity Plan.

During the nine months ended September 30, 2022, Standard Bearer established shareholders of its preferred shares through contributions of cash of $ 149 .

In the second quarter of 2022, Standard Bearer sold fully vested common shares from the Standard Bearer Equity Plan to shareholders for cash of $ 6,544 .

During the three months ended March 31, 2023 and 2022, the Company did not grant any stock options nor restricted shares under the Standard Bearer Equity Plan.

Also in the second quarter of 2022, Standard Bearer established shareholders of its preferred shares through contributions of cash of $ 149 .

These preferred shares were fully vested at the time of the contributions by the shareholders.

The value of Standard Bearer common and preferred shares held by the Company are eliminated in consolidation and the value held by other shareholders are classified as noncontrolling interests on the Company's consolidated balance sheets.

BUSINESS SEGMENTS

In conjunction with the formation of Standard Bearer in January 2022, the Company's Chief Executive Officer, who is its chief operating decision maker, or CODM, began reviewing the results of Standard Bearer instead of all real estate properties.

Accordingly, the Company revised its former real estate segment to include only real estate properties that are part of Standard Bearer.

This change in organizational structure demonstrates that Standard Bearer's real estate is a core part of the Company's expansion of its real estate investment strategy.

As of the first quarter of 2022, the Company has two reportable segments:

The Company has two reportable segments:

(1) skilled services, which includes the operation of skilled nursing facilities and rehabilitation therapy services and (2) Standard Bearer, which is comprised of selected real estate properties owned by Standard Bearer and leased to skilled nursing and senior living operators.

Segment information for prior periods has been recast to reflect the change of the Company’s segment structure.

As of September 30, 2022, the skilled services segment includes 222 skilled nursing operations and 26 campus operations that provide both skilled nursing and rehabilitative care services and senior living services.

As of March 31, 2023, the skilled services segment includes 253 skilled nursing operations and 26 campus operations that provide both skilled nursing and rehabilitative care services and senior living services.

The Company's Standard Bearer segment consists of 103 owned real estate properties.

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The following tables set forth financial information for the segments:

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

Skilled Services Standard Bearer All Other (1)

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Segment income (loss) 113,345 7,219 ( 42,182 ) — 78,382

Gain on sale of assets, net 800

Income before provision for income taxes $ 72,455

Depreciation and amortization 9,064 5,966 2,082 — 17,112

4 unchanged sentences

Intercompany service revenue is eliminated in consolidation along with corresponding intercompany cost of service.

(3) All Other rental revenue includes rental revenue associated with the Company's subleases to third parties of $ 708 for the three months ended March 31, 2023.

Intercompany rental revenue represents rental income generated by both Standard Bearer and other real estate properties with the Company's affiliated wholly-owned healthcare facilities.

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The intercompany interest expense is eliminated in the "Intercompany Elimination" column.

Three Months Ended September 30, 2021

Skilled Services Standard Bearer All Other (1)

Intercompany Elimination Total

Service revenue (2)

$ 642,075 $ — $ 24,219 $ ( 1,697 ) $ 664,597

Rental revenue (3)

— 14,431 1,840 ( 12,338 ) 3,933

TOTAL REVENUE $ 642,075 $ 14,431 $ 26,059 $ ( 14,035 ) $ 668,530

Segment income (loss) 94,429 7,940 ( 37,512 ) — 64,857

Income before provision for income taxes $ 64,857

Depreciation and amortization 7,715 4,389 1,825 — 13,929

Interest expense $ — $ 1,705 $ 4 $ — $ 1,709

(1) All other primarily includes all ancillary operations, stand-alone senior living operations and the Service Center.

(2) Intercompany service revenue represents service revenue generated by ancillary operations provided to the Company's affiliated wholly-owned healthcare facilities.

Intercompany service revenue is eliminated in consolidation along with corresponding intercompany cost of service.

(3) Intercompany rental revenue represents rental income generated by both Standard Bearer and other real estate properties with the Company's affiliated wholly-owned healthcare facilities.

Intercompany rental revenue is eliminated in consolidation along with corresponding intercompany rent expense.

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2022

Skilled Services Standard Bearer All Other (1)

6 unchanged sentences

Segment income (loss) 98,256 6,900 ( 38,930 ) — 66,226

Gain on sale of assets, net 3,267

Income before provision for income taxes $ 211,638

Depreciation and amortization 7,901 5,021 1,754 — 14,676

8 unchanged sentences

The intercompany interest expense is eliminated in the "Intercompany Elimination" column.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Nine Months Ended September 30, 2021

Skilled Services Standard Bearer All Other (1)

Intercompany Elimination Total

Service revenue (2)

$ 1,855,993 $ — $ 71,566 $ ( 5,077 ) $ 1,922,482

Rental revenue (3)

— 42,714 5,467 ( 36,344 ) 11,837

TOTAL REVENUE $ 1,855,993 $ 42,714 $ 77,033 $ ( 41,421 ) $ 1,934,319

Segment income (loss) 273,370 23,559 ( 105,385 ) — 191,544

Gain on sale of assets 440

Income before provision for income taxes $ 191,984

Depreciation and amortization 22,893 12,792 5,698 — 41,383

Interest expense $ — $ 4,980 $ 4 $ — $ 4,984

(1) All other primarily includes all ancillary operations, stand-alone senior living operations and the Service Center.

(2) Intercompany service revenue represents service revenue generated by ancillary operations provided to the Company's affiliated wholly-owned healthcare facilities.

Intercompany service revenue is eliminated in consolidation along with corresponding intercompany cost of service.

(3) Intercompany rental revenue represents rental income generated by both Standard Bearer and other real estate properties with the Company's affiliated wholly-owned healthcare facilities.

Intercompany rental revenue is eliminated in consolidation along with corresponding intercompany rent expense.

Service revenue by major payor source were as follows:

Three Months Ended September 30, 2022

Skilled Services All Other (3)

Total Service Revenue Revenue %

$ 295,927 $ 6,688 $ 302,615 39.5 %

Medicare 211,104 — 211,104 27.6

Medicaid-skilled 50,643 — 50,643 6.6

Subtotal 557,674 6,688 564,362 73.7

Managed care 132,663 — 132,663 17.3

Private and other (2)

48,981 19,877 68,858 9.0

TOTAL SERVICE REVENUE $ 739,318 $ 26,565 $ 765,883 100.0 %

(1) Medicaid payor includes revenue generated from senior living operations and revenue related to FMAP and other COVID-19 related state funding.

(2) Private and other payors also includes revenue from senior living operations and all payors generated in other ancillary services.

(3) All other incorporates intercompany eliminations.

Three Months Ended September 30, 2021

Skilled Services All Other (3)

Total Service Revenue Revenue %

Three Months Ended March 31, 2023

Skilled Services All Other Total Service Revenue Revenue %

$ 333,445 $ 6,819 $ 340,264 38.6 %

6 unchanged sentences

TOTAL SERVICE REVENUE $ 850,923 $ 30,995 $ 881,918 100.0 %

(1) Medicaid payor includes revenue generated from senior living operations and revenue related to FMAP and other COVID-19 related state funding.

(1) Medicaid payor includes revenue generated from senior living operations and revenue related to state relief funding.

(2) Private and other payors also includes revenue from senior living operations and all payors generated in other ancillary services.

(3) All other incorporates intercompany eliminations.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Nine Months Ended September 30, 2022

Skilled Services Other Service Revenue Total Service Revenue Revenue %

$ 845,341 $ 17,750 $ 863,091 39.2 %

Medicare 610,009 — 610,009 27.7

Medicaid-skilled 146,355 — 146,355 6.6

Subtotal 1,601,705 17,750 1,619,455 73.5

Managed care 389,036 — 389,036 17.7

Private and other (2)

137,826 57,069 194,895 8.8

TOTAL SERVICE REVENUE $ 2,128,567 $ 74,819 $ 2,203,386 100.0 %

(1) Medicaid payor includes revenue generated from senior living operations and revenue related to FMAP and other COVID-19 related state funding.

(2) Private and other payors also includes revenue from senior living operations and all payors generated in other ancillary services.

Nine Months Ended September 30, 2021

Skilled Services Other Service Revenue Total Service Revenue Revenue %

Three Months Ended March 31, 2022

Skilled Services All Other Total Service Revenue Revenue %

$ 261,587 $ 4,761 $ 266,348 37.6 %

6 unchanged sentences

TOTAL SERVICE REVENUE $ 686,771 $ 22,385 $ 709,156 100.0 %

(1) Medicaid payor includes revenue generated from senior living operations and revenue related to FMAP and other COVID-19 related state funding.

(1) Medicaid payor includes revenue generated from senior living operations and revenue related to state relief funding.

(2) Private and other payors also includes revenue from senior living operations and all payors generated in other ancillary services.

In addition to the service revenue above, the Company's rental revenue derived from triple-net lease arrangements with third parties is $ 4,122 and $ 12,550 , respectively, for the three and nine months ended September 30, 2022 and $ 3,933 and $ 11,837 , respectively, for the three and nine months ended September 30, 2021.

This revenue is included in both Standard Bearer and the all other category.

5 unchanged sentences

As a result, from time to time, a real estate affiliated subsidiary will acquire the property of facilities that have previously been operated under third-party leases.

FASB ASC Topic 805, Clarifying the Definition of a Business (ASC 805) defined the definition of a business to assist entities with evaluating when a set of transferred assets and activities is deemed to be a business.

Determining whether a transferred set constitutes a business is important because the accounting for a business combination differs from that of an asset acquisition.

The definition of a business also affects the accounting for dispositions.

When substantially all of the fair value of assets acquired is concentrated in a single asset, or a group of similar assets, the assets acquired would not represent a business and business combination accounting would not be required.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2023 Expansions

During the nine months ended September 30, 2022, the Company expanded its operations through a combination of long-term leases and real estate purchases, with the addition of 11 stand-alone skilled nursing operations and one campus operation.

Of these additions, Standard Bearer acquired the real estate of five of the stand-alone skilled nursing operations, which were leased back to Ensign affiliated entities.

In addition, the Company purchased the real estate at three skilled nursing properties that the Company was already operating, further expanding the Company's real estate portfolio.

Refer to Note 7, Standard Bearer, for additional information on the purchase of real estate properties.

In addition, the Company added five senior living operations that were transferred from Pennant, three of which are part of campuses operated by the Company's affiliated operating subsidiaries.

These new operations added a total of 1,553 operational skilled nursing beds and 674 operational senior living units to be operated by the Company's affiliated operating subsidiaries.

The Company also invested in new ancillary services that are complementary to its existing businesses.

The aggregate purchase price for these expansions during the nine months ended September 30, 2022 was $ 82,099 .

In connection with the new operations made through long-term leases, the Company did not acquire any material assets or assume any liabilities other than the tenant's post-assumption rights and obligations under the long-term lease.

During the three months ended March 31, 2023, the Company expanded its operations through long-term leases, with the addition of 19 stand-alone skilled nursing operations.

These new operations added a total of 1,764 operational skilled nursing beds to be operated by the Company's affiliated operating subsidiaries.

In connection with the new operations obtained through long-term leases, the Company did not acquire any material assets or assume any liabilities other than the tenant's post-assumption rights and obligations under the long-term lease.

The Company entered into a separate operations transfer agreement with the prior operator as part of each transaction.

The aggregate purchase price for the transactions that were classified as asset acquisitions during the nine months ended September 30, 2022 was $ 65,699 , consisting of real estate properties and indefinite-lived intangible assets.

The remaining aggregate purchase price for transactions during the nine months ended September 30, 2022 was concentrated in goodwill of $ 16,400 and accordingly, the transactions were classified as business combinations.

Subsequent to September 30, 2022, the Company expanded its operations through a combination of long-term leases and real estate purchases, with the addition of nine stand-alone skilled nursing operations.

Of these additions, Standard Bearer acquired the real estate of one of these operations, which was leased back to an Ensign affiliated entity.

These new operations added 1,115 operational skilled nursing beds.

The aggregate purchase price for these expansions was $ 8,000 .

2022 Expansions

During the nine months ended September 30, 2021, the Company expanded its operations through a combination of long-term leases and a real estate purchase, with the addition of 14 stand-alone skilled nursing operations.

Of these additions, one is related to the purchase of real estate property, further expanding the Company's real estate portfolio.

These new operations added a total of 1,504 operational skilled nursing beds operated by the Company's affiliated operating subsidiaries.

The aggregate purchase price for these acquisitions during the nine months ended September 30, 2021 was $ 11,183 .

During the three months ended March 31, 2022 , the Company expanded its operations and real estate portfolio through a combination of long-term leases and real estate purchases , with the addition of four stand-alone skilled nursing operations.

Of these additions, two are related to purchases of real estate properties.

In addition, the Company added two senior living operations that were transferred from Pennant, one of which is part of a campus operated by the Company's affiliated operating subsidiaries.

These new operations added a total of 453 operational skilled nursing beds and 403 operational senior living units to be operated by the Company's affiliated operating subsidiaries.

The aggregate purchase price for these expansions during the three months ended March 31, 2022 was $ 33,410 .

The Company entered into a separate operations transfer agreement with the prior operator as part of each transaction.

The fair value of assets for ten of the acquisitions was concentrated in property and equipment and as such, these transactions were classified as asset acquisitions.

The aggregate purchase price for the asset acquisitions during the nine months ended September 30, 2021 was $ 5,183 .

The fair value of assets for the remaining four additions was concentrated in goodwill of $ 6,000 and as such, the transaction was classified as a business combination.

The aggregate purchase price for the two real estate properties acquired during the three months ended March 31, 2022 was $ 17,010 and was classified as asset acquisitions.

The remaining aggregate purchase price during the three months ended March 31, 2022 of $ 16,400 is concentrated in goodwill and accordingly, the transactions were classified as business combinations.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company’s acquisition strategy has been focused on identifying both opportunistic and strategic acquisitions within its target markets that offer strong opportunities for return.

2 unchanged sentences

Consequently, the Company believes that prior operating results are not a meaningful representation of the Company’s current operating results or indicative of the integration potential of its newly acquired operating subsidiaries.

The assets added during the nine months ended September 30, 2022 were not material operations to the Company individually or in the aggregate.

The assets added during the three months ended March 31, 2023 were not material operations to the Company individually or in the aggregate.

Accordingly, pro forma financial information is not presented.

These additions have been included in the September 30, 2022 condensed consolidated balance sheets of the Company, and the operating results have been included in the condensed consolidated statements of operations of the Company since the date the Company gained effective control.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

These additions have been included in the March 31, 2023 condensed consolidated balance sheets of the Company, and the operating results have been included in the condensed consolidated statements of operations of the Company since the date the Company gained effective control.

PROPERTY AND EQUIPMENT - NET

Property and equipment, net consists of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Land $ 134,864 $ 134,864

7 unchanged sentences

PROPERTY AND EQUIPMENT, NET $ 1,002,052 $ 992,010

The Company completed the sale of assets for a sale price of $ 8,607 and recorded a gain of $ 3,467 within the Company's condensed consolidated statement of income as cost of services during the nine months ended September 30, 2022.

See also Note 7, Standard Bearer and Note 9, Operation Expansions for information on acquisitions during the nine months ended September 30, 2022.

See also Note 6, Standard Bearer and Note 8, Operation Expansions for information on acquisitions during the three months ended March 31, 2023.

INTANGIBLE ASSETS - NET

September 30, 2022 December 31, 2021

Weighted Average Life (Years)

Weighted Average Life (Years) March 31, 2023 December 31, 2022

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

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TOTAL $ 5,750 $ ( 3,391 ) $ 2,359 $ 5,750 $ ( 3,285 ) $ 2,465

During the three and nine months ended September 30, 2022, amortization expense was $ 432 and $ 1,254 , respectively, of which $ 289 and $ 866 was related to the amortization of right-of-use assets, respectively.

Amortization expense was $ 363 and $ 1,087 , respectively, of which $ 289 and $ 869 was related to the amortization of right-of-use assets for the three and nine months ended September 30, 2021, respectively.

During the three months ended March 31, 2023 and 2022, amortization expense was $ 404 in both periods, of which $ 298 and $ 289 was related to the amortization of right-of-use assets, respectively.

Estimated amortization expense for each of the years ending December 31 is as follows:

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An impairment loss is measured by the difference between the carrying value of the reporting unit and its fair value.

The Company anticipates that the majority of total goodwill recognized will be fully deductible for tax purposes as of September 30, 2022.

The Company anticipates that the majority of goodwill recognized will be fully deductible for tax purposes as of March 31, 2023.

There were no activities in goodwill during the three months ended March 31, 2023.

Provided that goodwill corresponds to the acquisition of a business and not merely the acquisition of real estate property, the Company's Standard Bearer segment appropriately does not carry a goodwill balance.

The following table represents activity in goodwill by skilled service segment and "all other" category as of and for the nine months ended September 30, 2022:

The following table represents activity in goodwill by skilled service segment and "all other" category as of March 31, 2023 and December 31, 2022:

Skilled Services All Other Total

January 1, 2022 $ 51,486 $ 8,983 $ 60,469

Additions 16,400 — 16,400

September 30, 2022 $ 67,886 $ 8,983 $ 76,869

Goodwill $ 67,886 $ 8,983 $ 76,869

Other indefinite-lived intangible assets consist of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Trade name $ 889 $ 889

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Restricted and other assets consist of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Debt issuance costs, net $ 3,548 $ 3,753

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Capital improvement reserves with landlords and lenders 6,441 6,446

Deferred compensation plan investments 22,908 17,530

Deposits with landlords 2,538 2,527

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RESTRICTED AND OTHER ASSETS $ 34,343 $ 37,291

Included in restricted and other assets as of September 30, 2022 and December 31, 2021 are anticipated insurance recoveries related to the Company's workers' compensation liabilities and general and professional liability reserves that are recorded on a gross rather than net basis in accordance with GAAP.

Included in restricted and other assets as of March 31, 2023 and December 31, 2022 are anticipated insurance recoveries related to the Company's workers' compensation and general and professional liability claims that are recorded on a gross, rather than net, basis.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company implemented a non-qualified deferred compensation plan (DCP) that was effective in 2019.

The DCP allows for the employee deferrals to be deposited into a rabbi trust and these funds are generally invested in individual variable life insurance contracts owned by the Company that are specifically designed to fund the deferrals.

The cash surrender value of the insurance contracts is based on funds that shadow the investment allocations specified by participants in the DCP.

For the three and nine months ended September 30, 2022, the Company recorded a loss on these investments of $ 1,135 and $ 5,650 , respectively, which is included in other income (expense), net.

During the same periods, the Company recorded an offsetting reduction in expense of $ 1,055 and $ 5,566 , respectively, allocated between cost of services and general and administrative expenses.

For the three months ended September 30, 2021, the Company recorded loss on the investment acquired in connection with our DCP that was not material.

For the nine months ended September 30, 2021, the Company recorded income on the investment acquired in connection with our DCP of $ 940 , which is included in other income (expense), net, and an offsetting expense of $ 1,046 between cost of services and general and administrative expenses.

OTHER ACCRUED LIABILITIES

Other accrued liabilities consists of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Quality assurance fee $ 8,486 $ 7,701

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Property taxes 8,075 10,926

Income tax payable 13,850 —

Legal finding accrued 4,620 4,553

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The cash balance related to this liability is included in other current assets in the condensed consolidated balance sheets.

The Company recorded income tax expense of $ 47,505 and $ 43,220 during the nine months ended September 30, 2022 and 2021, respectively, or 22.4 % of earnings before income taxes for the nine months ended September 30, 2022, compared to 22.5 % for the nine months ended September 30, 2021.

The Company recorded income tax expense of $ 18,413 and $ 16,138 during the three months ended March 31, 2023 and 2022, respectively, or 23.5 % of earnings before income taxes for the three months ended March 31, 2023, compared to 24.4 % for the three months ended March 31, 2022.

The effective tax rate for both periods is driven by the impact of excess tax benefits from stock-based compensation, offset by non-deductible expenses including non-deductible compensation.

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The Company does not believe the Federal or state statute lapses or any other event will significantly impact the balance of unrecognized tax benefits in the next twelve months.

The net balance of unrecognized tax benefits was not material to the Interim Financial Statements for the nine months ended September 30, 2022 and 2021.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The net balance of unrecognized tax benefits was not material to the Interim Financial Statements for the three months ended March 31, 2023 and 2022.

Debt consists of the following:

September 30, 2022 December 31, 2021

Mortgage loans and promissory notes $ 157,269 $ 159,967

March 31, 2023 December 31, 2022

Mortgage loans and promissory note $ 155,264 $ 156,271

current maturities ( 3,851 ) ( 3,883 )

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LONG-TERM DEBT LESS CURRENT MATURITIES $ 148,339 $ 149,269

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Credit Facility with a Lending Consortium Arranged by Truist

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Except as set forth in the Amended Credit Facility, all other terms and conditions of the Credit Facility remained in full force and effect as described below.

As part of the entry into the Amended Credit Agreement, deferred financing costs of $ 566 were written off and additional deferred financing costs of $ 3,197 were capitalized during the nine months ended September 30, 2022.

Borrowings made under the Revolving Credit Facility are guaranteed, jointly and severally, by certain of the Company’s wholly-owned subsidiaries, and are secured by a pledge of stock of the Company's material operating subsidiaries as well as a first lien on substantially all of their personal property.

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provided that if the aggregate consideration for approved acquisitions in a six month period is greater than $ 50,000 , then the ratio can be increased at the election of the Company with notice to the administrative agent to 3.50 :1.00 for the first fiscal quarter and the immediately following three fiscal quarters), and (ii) a minimum interest/rent coverage ratio (which cannot be less than 1.50 :1.00).

As of September 30, 2022, and October 24, 2022, there was no outstanding debt under the Revolving Credit Facility.

The Company was in compliance with all loan covenants as of September 30, 2022.

Mortgage Loans and Promissory Notes

As of September 30, 2022, the Company's operating subsidiaries had $ 157,269 outstanding under the mortgage loans and notes, of which $ 3,914 is classified as short-term and the remaining $ 153,355 is classified as long-term.

The Company was in compliance with all loan covenants as of September 30, 2022.

As of September 30, 2022, 23 of the Company's subsidiaries have mortgage loans insured with HUD in the aggregate amount of $ 154,284 , which subjects these subsidiaries to HUD oversight and periodic inspections.

As of March 31, 2023, there was no outstanding debt under the Revolving Credit Facility.

The Company was in compliance with all loan covenants as of March 31, 2023.

Mortgage Loans and Promissory Note

As of March 31, 2023, the Company's operating subsidiaries had $ 155,264 outstanding under the mortgage loans and notes, of which $ 3,851 is classified as short-term and the remaining $ 151,413 is classified as long-term.

The Company was in compliance with all loan covenants as of March 31, 2023.

As of March 31, 2023, 23 of the Company's subsidiaries have mortgage loans insured with HUD in the aggregate amount of $ 152,686 , which subjects these subsidiaries to HUD oversight and periodic inspections.

The mortgage loans bear effective interest rates in a range of 3.1 % to 4.2 %, including fixed interest rates in a range of 2.4 % to 3.3 % per annum.

In addition to the interest rate, we incur other fees for HUD placement, including but not limited to audit fees.

In addition to the interest rate, the Company incurs other fees for HUD placement, including but not limited to audit fees.

Amounts borrowed under the mortgage loans may be prepaid, subject to prepayment fees based on the principal balance on the date of prepayment.

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The terms for all the mortgage loans are 25 to 35 years.

In addition to the HUD mortgage loans above, the Company has a promissory note that bears a fixed interest rate of 5.3 % per annum and has a term of 12 years.

The note, which was used for an acquisition, is secured by the real property comprising the facility and the rent, issues and profits thereof, as well as all personal property used in the operation of the facility.

Based on Level 2 inputs, the carrying value of the Company's long-term debt is considered to approximate the fair value of such debt for all periods presented based upon the interest rates that the Company believes it can currently obtain for similar debt.

Off-Balance Sheet Arrangements

As of March 31, 2023, the Company had approximately $ 6,710 of borrowing capacity under the Revolving Credit Facility pledged as collateral to secure outstanding letters of credit.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In addition to the HUD mortgage loans above, the Company has two promissory notes.

The notes bear fixed interest rates of 6.3 % and 5.3 % per annum and the term of the notes are 10 months and 12 years, respectively.

The 12 year note which was used for an acquisition is secured by the real property comprising the facility and the rent, issues and profits thereof, as well as all personal property used in the operation of the facility.

Based on Level 2, the carrying value of the Company's long-term debt is considered to approximate the fair value of such debt for all periods presented based upon the interest rates that the Company believes it can currently obtain for similar debt.

Off-Balance Sheet Arrangements

As of September 30, 2022, the Company had approximately $ 6,710 of borrowing capacity under the Revolving Credit Facility pledged as collateral to secure outstanding letters of credit.

OPTIONS AND AWARDS

Stock-based compensation expense consists of stock-based payment awards made to employees and directors, including employee stock options and restricted stock awards, based on estimated fair values.

As stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the three and nine months ended September 30, 2022 and 2021 was based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

As stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the three months ended March 31, 2023 and 2022 was based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

The Company estimates forfeitures at the time of grant and, if necessary, revises the estimate in subsequent periods if actual forfeitures differ.

The Company has an option plan, the 2022 Omnibus Incentive Plan (the 2022 Plan), which was approved by the Company's stockholders on May 26, 2022, and replaced the Company's prior option plan, the 2017 Omnibus Incentive Plan (the 2017 Plan).

The total number of shares available for issuance under the 2022 Plan was 3,047 as of September 30, 2022.

2022 Omnibus Incentive Plan - During the second quarter of 2022, the Company's shareholders approved the 2022 Plan.

2022 Omnibus Incentive Plan (2022 Plan) — The Company has one active stock incentive plan, the 2022 Omnibus Incentive Plan (the 2022 Plan).

Including the shares rolled over from the 2017 Plan, the 2022 Plan provides for the issuance of 3,452 shares of common stock.

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Options expire ten years from the date of grant.

At March 31, 2023, the total number of shares available for issuance under the 2022 Plan was 2,429 .

The Company uses the Black-Scholes option-pricing model to recognize the value of stock-based compensation expense for stock option awards.

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Stock Options

The Company granted 145 and 463 stock options from the available plans during the three and nine months ended September 30, 2022, respectively.

The Company used the following assumptions for stock options granted during the three months ended September 30, 2022 and 2021:

Grant Year Options Granted Weighted Average Risk-Free Rate Expected Life Weighted Average Volatility Weighted Average Dividend Yield

2022 145 3.1 % 6.3 years 41.8 % 0.2 %

2021 151 1.0 % 6.1 years 42.5 % 0.3 %

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company used the following assumptions for stock options granted during the nine months ended September 30, 2022 and 2021:

The Company granted 222 stock options during the three months ended March 31, 2023.

The Company used the following assumptions for stock options granted during the three months ended March 31, 2023 and 2022:

Grant Year Options Granted Weighted Average Risk-Free Rate Expected Life Weighted Average Volatility Weighted Average Dividend Yield

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2022 164 1.8 % 6.1 years 42.3 % 0.3 %

For the nine months ended September 30, 2022 and 2021, the following represents the exercise price and fair value displayed at grant date for stock option grants:

For the three months ended March 31, 2023 and 2022, the following represents the exercise price and fair value displayed at grant date for stock option grants:

Grant Year Granted Weighted Average Exercise Price Weighted Average Fair Value of Options

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2022 164 $ 79.79 $ 33.56

The weighted average exercise price equaled the weighted average fair value of common stock on the grant date for all options granted during the periods ended September 30, 2022 and 2021 and therefore, the intrinsic value was $ 0 at the date of grant.

The following table represents the employee stock option activity during the nine months ended September 30, 2022:

The weighted average exercise price equaled the weighted average fair value of common stock on the grant date for all options granted during the three months ended March 31, 2023 and 2022 and therefore, the intrinsic value was $ 0 at the date of grant.

The following table represents the employee stock option activity during the three months ended March 31, 2023:

Number of Options Outstanding Weighted Average

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Exercised ( 145 ) 18.26 — —

September 30, 2022 3,897 $ 44.37 2,127 $ 27.59

The following summary information reflects stock options outstanding, vested and related details as of September 30, 2022:

March 31, 2023 3,891 $ 50.17 2,058 $ 31.41

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following summary information reflects stock options outstanding, vested and related details as of March 31, 2023:

Stock Options Outstanding Stock Options Vested

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TOTAL 3,891 $ 79,310 2,058

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The aggregate intrinsic value of options outstanding, vested and expected to vest as of September 30, 2022 and December 31, 2021 is as follows:

Options September 30, 2022 December 31, 2021

The aggregate intrinsic value of options outstanding, vested and expected to vest as of March 31, 2023 and December 31, 2022 is as follows:

Options March 31, 2023 December 31, 2022

Outstanding $ 176,518 $ 183,593

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The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the options .

The aggregate intrinsic value of options that vested during the nine months ended September 30, 2022 and 2021 was $ 15,810 and $ 18,500 , respectively.

The total intrinsic value of options exercised during the nine months ended September 30, 2022 and 2021 was $ 36,151 and $ 31,167 , respectively.

The aggregate intrinsic value of options that vested during the three months ended March 31, 2023 and 2022 was $ 5,337 and $ 6,351 , respectively.

The total intrinsic value of options exercised during the three months ended March 31, 2023 and 2022 was $ 10,950 and $ 9,502 , respectively.

Restricted Stock Awards

The Company granted 41 and 199 restricted stock awards from the available plans during the three and nine months ended September 30, 2022, respectively.

The Company granted 51 and 195 restricted stock awards during the three and nine months ended September 30, 2021, respectively.

The Company granted 105 and 112 restricted stock awards during the three months ended March 31, 2023 and 2022 , respectively.

All awards were granted at an issue price of $ 0 and generally vest over five years .

The fair value per share of restricted awards granted during the nine months ended September 30, 2022 and 2021 ranged from $ 73.17 to $ 90.50 and $ 82.20 to $ 93.31 , respectively.

The fair value per share of restricted awards granted during the three months ended March 31, 2023 and 2022 ranged from $ 89.83 to $ 94.63 and $ 73.17 to $ 79.79 , respectively.

The fair value per share includes quarterly stock awards to non-employee directors.

A summary of the status of the Company's non-vested restricted stock awards as of September 30, 2022 and changes during the nine months ended September 30, 2022 is presented below:

A summary of the status of the Company's non-vested restricted stock awards as of March 31, 2023 and changes during the three months ended March 31, 2023 is presented below:

Non-Vested Restricted Awards Weighted Average Grant Date Fair Value

Non-vested at January 1, 2022 549 $ 52.16

Nonvested at January 1, 2023 487 $ 64.92

Granted 105 90.08

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Forfeited ( 3 ) 62.92

Non-vested at September 30, 2022 486 $ 62.07

During the three and nine months ended September 30, 2022, respectively, the Company granted 4 and 13 automatic quarterly stock awards to non-employee directors for their service on the Company's board of directors from the 2017 and 2022 Plan.

The fair value per share of these stock awards ranged from $ 75.33 to $ 83.93 based on the market price on the grant date.

Nonvested at March 31, 2023 494 $ 67.68

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

During the three months ended March 31, 2023, the Company granted 4 automatic quarterly stock awards to non-employee directors for their service on the Company's board of directors.

The fair value per share of these stock awards was $ 94.63 based on the market price on the grant date.

Long-Term Incentive Plan

On August 27, 2019, the Board approved the Long-Term Incentive Plan (the 2019 LTI Plan).

The 2019 LTI Plan provides that certain employees of the Company who assisted in the consummation of the Spin-Off transaction are granted shares of restricted stock upon the successful completion of the Spin-Off.

The 2019 LTI Plan provides that certain employees of the Company who assisted in the consummation of the spin-off transaction in 2019 were granted shares of restricted stock upon successful completion of the spin-off transaction.

The 2019 LTI Plan provides for the issuance of 500 shares of Pennant restricted stock.

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If a recipient is terminated or voluntarily leaves the Company, all shares subject to restriction or not yet vested shall be entirely forfeited.

The total stock-based compensation related to the 2019 LTI Plan was approximately $ 248 and $ 638 for the three and nine months ended September 30, 2022, respectively, compared to $ 248 and $ 651 for the three and nine months ended September 30, 2021, respectively.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Stock-based compensation expense recognized for the Company's equity incentive plans and long-term incentive plan for the three and nine months ended September 30, 2022 and 2021 was as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

The total stock-based compensation related to the 2019 LTI Plan was approximately $ 191 and $ 195 for the three months ended March 31, 2023 and 2022, respectively.

Stock-based compensation expense recognized for the Company's equity incentive plans and long-term incentive plan for the three months ended March 31, 2023 and 2022 was as follows:

Three Months Ended March 31,

Stock-based compensation expense related to stock options $ 3,425 $ 2,520

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TOTAL $ 6,573 $ 5,167

In future periods, the Company expects to recognize approximately $ 41,668 and $ 29,166 in stock-based compensation expense for unvested options and unvested restricted stock awards, respectively, that were outstanding as of September 30, 2022.

In future periods, the Company expects to recognize approximately $ 48,755 and $ 30,109 in stock-based compensation expense for unvested options and unvested restricted stock awards, respectively, that were outstanding as of March 31, 2023.

Future stock-based compensation expense will be recognized over 3.7 and 3.4 weighted average years for unvested options and restricted stock awards, respectively.

There were 1,770 unvested and outstanding options as of September 30, 2022, of which 1,671 shares are expected to vest.

The weighted average contractual life for options outstanding, vested and expected to vest as of September 30, 2022 was 6.0 years.

There were 1,833 unvested and outstanding options as of March 31, 2023, of which 1,729 shares are expected to vest.

The weighted average contractual life for options outstanding, vested and expected to vest as of March 31, 2023 was 6.1 years.

The Company leases from CareTrust REIT, Inc.

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and (2) the tenants providing timely notice of their intent to renew.

The term of the Master Leases is subject to termination prior to the expiration of the then current term upon default by the tenants in their obligations, if not cured within any applicable cure periods set forth in the Master Leases.

The term of the Master Leases is subject to termination prior to the expiration of the current term upon default by the tenants in their obligations, if not cured within any applicable cure periods set forth in the Master Leases.

If the Company elects to renew the term of a Master Lease, the renewal will be effective to all, but not less than all, of the leased property then subject to the Master Lease.

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If a Master Lease is terminated prior to its expiration other than with CareTrust’s consent, the Company may be liable for damages and incur charges such as continued payment of rent through the end of the lease term as well as maintenance and repair costs for the leased property.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The rent structure under the Master Leases includes a fixed component, subject to annual escalation equal to the lesser of (1) the percentage change in the Consumer Price Index (but not less than zero ) or (2) 2.5 %.

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The terms and conditions of the one stand-alone lease are substantially the same as those for the master leases described above.

Total rent expense under the Master Leases was approximately $ 16,259 and $ 47,911 for the three and nine months ended September 30, 2022, respectively, and $ 15,445 and $ 43,944 for the three and nine months ended September 30, 2021, respectively.

Total rent expense under the Master Leases was approximately $ 16,283 and $ 15,645 for the three months ended March 31, 2023 and 2022, respectively.

Among other things, under the Master Leases, the Company must maintain compliance with specified financial covenants measured on a quarterly basis, including a portfolio coverage ratio and a minimum rent coverage ratio.

The Master Leases also include certain reporting, legal and authorization requirements.

The Company is in compliance with requirements of the Master Leases as of September 30, 2022.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In connection with the Spin-Off, the Company guaranteed certain leases of Pennant based on the underlying terms of the leases.

The Company is in compliance with requirements of the Master Leases as of March 31, 2023.

In connection with the spin-off transaction that occurred in 2019, the Company guaranteed certain leases of Pennant based on the underlying terms of the leases.

The Company does not consider these guarantees to be probable and the likelihood of Pennant defaulting is remote, and therefore no liabilities have been accrued.

The Company has entered into multiple lease agreements with various landlords to operate newly constructed state-of-the-art, full-service healthcare resorts.

The term of each lease is 15 years with two five-year renewal options and is subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.

The Company also leases certain affiliated operations and certain administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five to 20 years.

The Company leases certain affiliated operations and certain administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five to 20 years.

In addition, the Company leases certain of its equipment under non-cancelable operating leases with initial terms ranging from three to five years .

Most of these leases contain renewal options, certain of which involve rent increases.

Total rent expense for continuing operations inclusive of straight-line rent adjustments and rent associated with the Master Leases noted above, was $ 38,940 and $ 111,976 for the three and nine months ended September 30, 2022, respectively, and $ 35,646 and $ 103,598 for the three and nine months ended September 30, 2021, respectively.

Forty-eight of the Company’s affiliated facilities, excluding the facilities that are operated under the Master Leases with CareTrust, are operated under eight separate master lease arrangements.

In the first quarter of 2022, the Company added an operation and extended the term for one of the separate master leases to 14 remaining years.

As a result, the lease liabilities and right-of-use assets increased by $ 120,349 to reflect the new lease obligations.

In the third quarter of 2022, the Company added four new operations to one of the separate master leases.

As a result, the lease liabilities and right-of-use assets increased by $ 32,853 to reflect the new lease obligations.

Total rent expense, inclusive of straight-line rent adjustments and rent associated with the Master Leases noted above, was $ 46,761 and $ 35,785 for the three months ended March 31, 2023 and 2022, respectively.

Seventy-eight of the Company’s affiliated facilities, excluding the facilities that are operated under the Master Leases with CareTrust, are operated under 12 separate master lease arrangements.

During the three months ended March 31, 2023, the Company expanded its operations through two separate master lease arrangements for 20 stand-alone skilled nursing operations, of which 17 are operated by the Company's affiliated operating subsidiaries and the remaining three are subleased to a third-party operator.

These two master leases increased the lease liabilities and right-of-use assets by $ 325,369 to reflect the new lease obligations and have initial lease terms of 18 and 20 years.

Under these master leases, a breach at a single facility could subject one or more of the other facilities covered by the same master lease to the same default risk.

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With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord.

During the three months ended September 30, 2022, Standard Bearer acquired the real estate of three skilled nursing operations, which were previously under separate long-term lease arrangements.

The aggregate reduction in the carrying value of the Company's lease liabilities and right-of-use assets related to this acquisition is $ 10,080 .

The components of operating lease expense are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Rent - cost of services (1)

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Depreciation and amortization (2)

289 289 866 869

Variable lease costs (3)

$ 51,891 $ 41,437

$ 43,350 $ 39,517 $ 126,098 $ 115,186

(1) Rent- cost of services includes deferred rent expense adju stments of $ 111 and $ 351 for the three and nine months ended September 30, 2022, respectively and $ 125 and $ 346 for the three and nine months ended September 30, 2021, respectively.

Additionally, rent- cost of services includes other variable lease costs such as CPI increases and short-term leases of $ 1,758 and $ 3,997 for the three and nine months ended September 30, 2022, respectively, and $ 1,127 and $ 2,543 for the three and nine months ended September 30, 2021, respectively.

(1) Rent- cost of services includes deferred rent expense adjustments of $ 263 and $ 124 for the three months ended March 31, 2023 and 2022, respectively.

Additionally, rent - cost of services includes other variable lease costs such as CPI increases and short-term leases of $ 2,060 and $ 937 for the three months ended March 31, 2023 and 2022, respectively.

(2) Depreciation and amortization is related to the amortization of favorable and direct lease costs.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Future minimum lease payments for all leases as of September 30, 2022 are as follows:

Future minimum lease payments for all leases as of March 31, 2023 are as follows:

2023 (remainder) $ 141,572

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In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date.

As of September 30, 2022, the weighted average remaining lease term is 15.1 years and the weighted average discount rate used to determine the operating lease liabilities is 6.8 %.

Subsequent to September 30, 2022, the Company expanded its operations through long-term lease arrangements with the addition of eight stand-alone skilled nursing operations, adding a total of 1,051 operational skilled nursing beds operated by the Company's affiliated operating subsidiaries.

Of the eight , six are part of two new separate master lease agreements and the remaining are part of a separate existing amended master lease agreement.

The aggregate impact to the fair value of lease liabilities and right-of-use assets related to both the new long-term lease arrangement and the separate amended master lease agreement is estimated to be approximately $ 78,505 .

As of March 31, 2023, the weighted average remaining lease term is 15.5 years and the weighted average discount rate used to determine the operating lease liabilities is 6.5 %.

Lessor Activities

In connection with the Spin-Off, Ensign affiliates retained ownership of the real estate at 29 senior living operations that were contributed to Pennant.

Between October 2019 and September 30, 2022, the Company transferred three additional senior living operations to Pennant.

In the second quarter of 2022, the Company completed the sale of real estate associated with two of the senior living operations operated by Pennant and also transferred one senior living operation operated by Pennant back to Ensign affiliates.

As of September 30, 2022, Ensign affiliates retained ownership of the real estate for these 29 senior living communities.

In 2019, Ensign affiliates retained ownership of the real estate at 29 senior living operations that were contributed to Pennant in the spin-off transaction.

As of March 31, 2023, Ensign affiliates retained ownership of the real estate for these 29 senior living communities.

All of these properties are leased to Pennant on a triple-net basis, whereas the respective Pennant affiliates are responsible for all costs at the properties including:

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The initial terms range between 14 to 16 years.

Total rental income from all third-party sources for the three and nine months ended September 30, 2022 and 2021 is as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

During the three months ended March 31, 2023, the Company entered into a sublease agreement for three stand-alone skilled nursing operations with a third-party operator with an initial lease term of 18 years.

Total rental income from all third-party sources for the three months ended March 31, 2023 and 2022 is as follows:

Three Months Ended March 31,

$ 3,742 $ 3,815

Other third-party 1,181 474

$ 4,122 $ 3,933 $ 12,550 $ 11,837

(1) Pennant rental income includes variable rent such as property taxes of $ 331 and $ 988 during the three and nine months ended September 30, 2022 and $ 301 and $ 881 for the three and nine months ended September 30, 2021.

TOTAL $ 4,923 $ 4,289

(1) Pennant rental income includes variable rent such as property taxes of $ 325 and $ 330 during the three months ended March 31, 2023 and 2022, respectively.

In addition, the number of senior living operations leased to and operated by Pennant during the three months ended March 31, 2023 and 2022 was 29 and 32 , respectively.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Future annual rental income for all leases as of September 30, 2022 were as follows:

Future annual rental income for all leases as of March 31, 2023 were as follows:

Year Amount (1)

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TOTAL $ 229,091

(1) Annual rental income includes base rents and variable rental income pursuant to existing leases as of September 30, 2022 .

(1) Annual rental income includes base rents and variable rental income pursuant to existing leases as of March 31, 2023 .

DEFINED CONTRIBUTION PLANS

The Company has a 401(k) defined contribution plan (the 401(k) Plan), whereby eligible employees may contribute up to 90 % of their annual basic earnings, subject to applicable annual Internal Revenue Code limits.

Additionally, the 401(k) Plan provides for discretionary matching contributions (as defined in the 401(k) Plan) by the Company.

The Company has a non-qualified deferred compensation plan (the DCP), whereby certain highly compensated employees who are otherwise ineligible to participate in the Company's 401(k) plan, may defer the receipt of a portion of their base compensation and, for certain employees, up to 100 % of their eligible bonuses.

Additionally, the DCP allows for the employee deferrals to be deposited into a rabbi trust and the funds are generally invested in individual variable life insurance contracts owned by the Company that are specifically designed to fund savings plans of this nature.

The Company paid for related administrative costs, which were not significant during three months ended March 31, 2023 and 2022.

As of the three months ended March 31, 2023 and 2022, the Company accrued $ 37,613 and $ 27,980 , respectively, as long term deferred compensation in other long term liabilities on the consolidated balance sheet.

Cash surrender value of the contracts is based on investment funds that shadow the investment allocations specified by participants in the deferred compensation plan.

Refer to Note 5, Fair Value Measurements for more information on the funds.

For the three months ended March 31, 2023, the Company recorded a gain on the investment acquired in connection with its deferred compensation plan of $ 1,239 , which is included in other income (expense), net.

During the same period, the Company recorded an offsetting expense of $ 1,280 , which is allocated between cost of services and general and administrative expenses.

For the three months ended March 31, 2022, the Company recorded a loss on the investment acquired in connection with its DCP of $ 1,202 , which is included in other income (expense), net.

During the same periods, the Company recorded an offsetting reduction in expense of $ 1,211 , which is allocated between cost of services and general and administrative expenses.

COMMITMENTS AND CONTINGENCIES

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Cost-Containment Measures — Both government and private pay sources have instituted cost-containment measures designed to limit payments made to providers of healthcare services, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect the Company.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Indemnities — From time to time, the Company enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims.

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Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on the Company’s condensed consolidated balance sheets for any of the periods presented.

In connection with the Spin-Off, certain landlords required, in exchange for their consent to the transaction, that the Company's lease guarantees remain in place for a certain period of time following the Spin-Off.

In connection with the spin-off transaction in 2019, certain landlords required, in exchange for their consent to the transaction, that the Company's lease guarantees remain in place for a certain period of time following the transaction.

These guarantees could result in significant additional liabilities and obligations for the Company if Pennant were to default on their obligations under their leases with respect to these properties.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Department of Justice Civil Investigative Demand — On May 31, 2018, the Company received a Civil Investigative Demand (CID) from the U.S.

Department of Justice stating that it was investigating whether there had been a violation of the False Claims Act and/or the Anti-Kickback Statute with respect to relationships between certain of the Company’s independently operated skilled nursing facilities and persons who serve or have served as medical directors, advisory board participants or other potential referral sources.

The CID covered the period from October 3, 2013 through 2018, and was limited in scope to ten of the Company’s Southern California independent operating entities.

In October 2018, the Department of Justice made an additional request for information covering the period of January 1, 2011 through 2018, relating to the same topic.

As a general matter, the Company’s independent operating entities have established and maintain policies and procedures to promote compliance with the False Claims Act, the Anti-Kickback Statute, and other applicable regulatory requirements.

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The Company has cooperated in responding to this inquiry.

In July 2022, the Company received a follow up request for additional documents and information.

The Company responded to this request, and continues to cooperate with the House Select Subcommittee in connection with its investigation.

However, it is not possible to predict the ultimate outcome of any such investigation or whether and what other investigations or regulatory responses may result from the process, which could have a material adverse effect on our reputation, business, financial condition, and results of operations.

In July 2022 and thereafter, the Company received follow up requests for additional documents and information.

The Company has responded to these requests, and continued to cooperate with the House Select Subcommittee in connection with its investigation.

On December 9, 2022, the House Select Subcommittee issued its final report summarizing its investigation and related recommendations designed "to strengthen the nation's ability to prevent and respond to public health and economic emergencies." According to the information provided by the House Select Subcommittee, the issuance of this report was the House Select Subcommittee's final official act.

Litigation — The skilled nursing business involves a significant risk of liability given the age and health of the patients and residents served by the Company's independent operating subsidiaries.

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The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In addition to the potential lawsuits and claims described above, the Company and its independent operating subsidiaries are also subject to potential lawsuits under the Federal False Claims Act and comparable state laws alleging submission of fraudulent claims for services to any healthcare program (such as Medicare or Medicaid) or other payor.

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As such, the Company and its independent operating subsidiaries could face increased scrutiny, potential liability and legal expenses and costs based on claims under state false claims acts in markets in which its independent operating subsidiaries do business.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In May 2009, Congress passed the Fraud Enforcement and Recovery Act (FERA) which made significant changes to the Federal False Claims Act and expanded the types of activities subject to prosecution and whistleblower liability.

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In addition, these claims could impact the Company's ability to procure insurance to cover its exposure related to the various services provided by its independent operating subsidiaries to their residents, customers and patients.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company and its independent subsidiaries are also subject to requests for information and investigations by other State and Federal governmental entities (e.g., offices of the attorney general and offices of the inspector general).

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The Company anticipates that these Reviews could increase in frequency in the future.

As of September 30, 2022 and since, 27 of the Company's independent operating subsidiaries had Reviews scheduled, on appeal, or in a dispute resolution process.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of March 31, 2023 and through the filing date of this report, 17 of the Company's independent operating subsidiaries had Reviews scheduled, on appeal, or in a dispute resolution process.

Concentrations

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The Company believes that an appropriate allowance has been recorded for the possibility of these receivables proving uncollectible, and continually monitors and adjusts these allowances as necessary.

The Company’s receivables from Medicare and Medicaid payor programs accounted for 53.5 % and 54.0 % of its total accounts receivable as of September 30, 2022 and December 31, 2021, respectively.

Revenue from reimbursement under the Medicare and Medicaid programs accounted for 73.7 % and 73.5 % of the Company's revenue for the three and nine months ended September 30, 2022, respectively, and 73.6 % for both the three and nine months ended September 30, 2021.

The Company’s receivables from Medicare and Medicaid payor programs accounted for 54.7 % and 56.3 % of its total accounts receivable as of March 31, 2023 and December 31, 2022, respectively.

Revenue from reimbursement under the Medicare and Medicaid programs accounted for 73.3 % and 73.4 % of the Company's revenue for the three months ended March 31, 2023 and 2022, respectively.

Cash in Excess of FDIC Limits — The Company currently has bank deposits with financial institutions in the U.S.

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In addition, the Company has uninsured bank deposits with a financial institution outside the U.S.

As of October 24, 2022, the Company had approximately $ 701 in uninsured cash deposits.

As of March 31, 2023, the Company's uninsured cash deposits are not material.

All uninsured bank deposits are held at high quality credit institutions.

COMMON STOCK REPURCHASE PROGRAM

On July 28, 2022, the Board of Directors approved the Company to enter into a stock repurchase program pursuant to which the Company may repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from August 2, 2022.

On July 28, 2022, the Board of Directors approved a stock repurchase program pursuant to which the Company may repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from August 2, 2022.

Under this program, the Company is authorized to repurchase its issued and outstanding common shares from time to time in open-market and privately negotiated transactions and block trades in accordance with federal securities laws.

The Company did not purchase any shares pursuant to this stock repurchase program.

On February 9, 2022, the Board of Directors approved the Company to enter into a stock repurchase program pursuant to which the Company could repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from February 10, 2022.

The share repurchase program does not obligate the Company to acquire any specific number of shares.

The Company did not purchase any shares pursuant to this stock repurchase program in the three months ended March 31, 2023.

On February 9, 2022, the Board of Directors approved a stock repurchase program pursuant to which the Company could repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months from February 10, 2022.

Under this program, the Company was authorized to repurchase its issued and outstanding common shares from time to time in open-market and privately negotiated transactions and block trades in accordance with federal securities laws.

During the three months ended June 30, 2022, the Company repurchased 271 shares of its common stock for $ 20,000 .

This repurchase program expired upon the repurchase of the fully authorized amount under the plan.

As approved by the Board of Directors on October 21, 2021, the Company entered into a stock repurchase program pursuant to which the Company could repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months that started on October 29, 2021.

The Company did not purchase any shares pursuant to this stock repurchase program in the three months ended March 31, 2022.

In 2022, this repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

THE ENSIGN GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On October 21, 2021, the Board of Directors approved a stock repurchase program pursuant to which the Company could repurchase up to $ 20,000 of its common stock under the program for a period of approximately 12 months that started on October 29, 2021.

During the three months ended March 31, 2022, the Company repurchased 133 shares of its common stock for $ 9,882 .

During the fourth quarter of 2021, the Company repurchased 132 shares of its common stock for $ 10,118 .

This repurchase program expired upon the repurchase of the fully authorized amount under the plan.

The Company repurchased 133 shares of its common stock for $ 9,882 pursuant to this stock repurchase program during the three months ended March 31, 2022.

In 2022, this repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements