Ensign Group Inc
NASDAQ:ENSG
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Ensign Group Inc
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Good afternoon, ladies and gentlemen, and welcome to the Ensign Group, Inc. First Quarter Fiscal Year 2019 Earnings Conference Call. [Operator Instructions]
As a reminder, this conference is being recorded. I will now like to turn the call -- conference over to your host Mr. Keetch, Executive Vice President.
Thank you, Rashae. Welcome, everyone, and thank you for joining us today. Here with me today, I have: Christopher Christensen, our President and CEO; Suzanne Snapper, our CFO; Barry Port, our COO; and Danny Walker, the CEO of The Pennant Group, which we'll be discussing in more detail later in the call, and all will be available to answer your questions.
As always, before I begin, I have just a few housekeeping matters. We filed our earnings press release and 10-Q yesterday. This announcement is available on the Investor Relations section of our website at www.ensigngroup.net. A replay of this call will also be available on our website until 5:00 p.m. Pacific on Friday, May 31, 2019.
We want to remind any listeners that may be listening to a replay of this call that all the statements made are as of today, May 7, 2019, and these statements have not been nor will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its affiliates, do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason.
In addition, The Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our wholly owned independent subsidiaries, collectively referred to as the Service Center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to our other operating subsidiaries through contractual relationships with such subsidiaries. In addition, our wholly owned captive insurance company, which we refer to as the captive, provides certain claims made coverage to our operating subsidiaries for general and professional liability as well as for workers compensation insurance liabilities.
The words Ensign, company, we, our and us refer to the Ensign Group, Inc. and its consolidated subsidiaries. All of our operating subsidiaries, the Service Center and the captive are operated by separate wholly owned independent companies that have their own management, employees and assets. References herein to the consolidated company and its assets and activities as well as the use of terms, we, us, our and similar terms used today are not meant to imply, nor should it be construed as meaning that the Ensign Group, Inc. has direct operating assets, employees or revenue or that any of the subsidiaries are operated by the Ensign Group.
As we supplement our GAAP -- also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available on our 10-Q.
And with that, I will turn the call over to a Christopher Christensen, our President and CEO. Christopher?
Thanks, Chad. Good morning. As we celebrate our 20-year anniversary, we're pleased to announce another record quarter with GAAP earnings per share for the quarter of $0.49, an increase of 14% over the prior year quarter and adjusted earnings per share of $0.55, up 22% over the prior year quarter. We're reminded again how fortunate we are to have the guiding principles that we embrace in this organization and the uniquely spectacular leaders that surround us.
This quarter's record results are due to dozens of victories, large and small, across a vast number of communities and operations. We celebrate the transformative impact of -- our local leaders have on their teams and communities that had been often neglected or even long forgotten prior to the infusion of this culture that we love. Much of the improvement came from the continued organic growth in transitioning and newly acquired operations, but we also saw steady improvement in some of our most mature same-store operations.
During the quarter, we experienced a dramatic improvement in our Transitional and Skilled Services segment income up 27% over the prior year quarter and 7% sequentially over the fourth quarter of last year, which was also a record quarter. We also saw positive trends in occupancy with an increase in same-store skilled services occupancy of 163 basis points to 80% and transitioning skilled services occupancy of 349 basis points to 79%. These results are due to the collective impact of the improvements made by dozens of operations, including the continued achievement of quality health care outcomes, strong regulatory results, enhanced efforts in collections and strengthened relationships with managed care providers.
For example, leaders like CEO, Karl Cooper; and COO, [ Marjorie Cruz, ] continue to set quantitative and qualitative standards at Montecito Post Acute Care & Rehab in Mesa, Arizona. Their operation won the coveted Ensign flag award for nearly perfect performance in almost every operational category over the course of an entire year. They improved the EBIT by 37% and skilled mix revenues by 17% compared to the same quarter last year.
While we celebrate our growth and our financial health and our transformative impact in the marketplace and the hundreds of operations that have been improved, we still have dozens more that need to be transformed. We're excited about the progress some of our struggling operations continue to make but want to make sure everyone understands that tremendous potential remains within our existing portfolio, including within our same-store operations, not to mention the enormous opportunities for future disciplined acquisitions.
The same principles that have led the consistent results in the Transitional and Skilled Services segment have also driven continued success of the company's new venture businesses. Cornerstone Healthcare, our home health and hospice portfolio subsidiary grew its segment revenue and income by 16% and 13% respectively over the prior year quarter. Our senior living portfolio company grew its segment revenue and segment income by 13% and 8%, respectively over the prior year quarter. Collectively, these 2 business segments now represent 16% of Ensign's consolidated revenue.
In one senior living example of this continued momentum, leaders Carolyn Lynch, Executive Director; and [ Trista Spark, ] Wellness Director at Rose Court Assisted Living & Memory Care in Phoenix, Arizona continued to post incredible results on all fronts. Last year, they had a 0 deficiency annual compliance survey. In addition, Rose Court also improved EBIT by an impressive 40% and occupancy by 12%, both compared to the same quarter last year. We expect to see more examples of growth like this in each of these segments as we acquire underperforming operations and drive organic growth.
As we'll discuss in more details in a few minutes, we believe the proposed transaction we announced yesterday will both accelerate the growth of these businesses while also allowing our shareholders direct access to inherent value in these lines of businesses.
Because we are ahead of schedule on our results this year and our guidance tends to favor the second half of the year, we increased our 2019 annual earnings guidance to between $2.22 and $2.30 per diluted share and annual revenue to between $2.34 billion and $2.4 billion. Overall, the midpoint of this guidance represents a 20% or $0.38 per share increase over our 2018 annual earnings. We're very excited about our first quarter performance and the coming year. We're confident that as each leader continues to adjust to local market conditions, we'll carry this momentum forward. We aren't close to what we must become, but we have come a long, long way. I genuinely believe though that we have only just begun and to achieve our full potential, it will take a relentless commitment to our culture and the repetitious adherence to sound fundamentals. If we do those things, we're confident that the results we announced today can continue for years to come.
And with that, I'll ask Chad to give an update on our recent investment and acquisition activity. Chad?
Thank you, Christopher. During the quarter, we paid a quarterly cash dividend of $0.0475 per share. We've been a dividend-paying company since 2002 and have increased our dividend every year for 16 years.
Also during the quarter and since, we announced 12 different acquisitions, including: 1 skilled nursing operation in Utah; 5 skilled nursing operations in California; 1 skilled nursing operation in Arizona; 2 healthcare campuses, both of which include skilled nursing and senior living operations in Arizona; 1 senior living operation in Texas; and 2 hospice agencies in Texas.
We are very excited to add strength to some of our most mature clusters in California, Arizona and Utah and also look forward to great things from our new home health and hospice operations in Texas.
We continue to be very selective with each potential acquisition opportunity, and we have carefully chosen each of these operations amongst the many available opportunities we elected not to pursue because of the potential we see to enhance the clinical and financial outcomes. With these additions, our growing portfolio is now comprised of 197 skilled nursing operations, 26 of which are health care campuses that also include senior living operations; 56 stand-alone senior living operations; 26 hospice agencies; 25 home health agencies; and 9 home care businesses across 16 states.
We continue to methodically add value to our real estate portfolio by improving the operating results in our owned operations and by acquiring additional real estate assets. Since we spun out 94 of our real estate assets through CareTrust in 2014, we have added 187 operations and acquired 77 real estate assets. As we look to our past and what we have been able to accomplish with our real estate, we are very excited about the opportunities we have again to unlock the value in our owned real estate. We are constantly evaluating our options and looking forward to creating a structure that will better ensure both cultural and operational alignment. The pipeline for our typical turnaround opportunities and well-priced strategic deals remain strong, and we expect the supply of potential opportunities to continue to grow. We are in the process of evaluating dozens of opportunities and expect a handful more to close in the second and third quarters of this year.
And with that, I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance. Suzanne?
Thank you, Chad, and good morning, everyone. [ Consolidated ] financials for the quarter are contained in our 10-Q and press release filed yesterday.
Some additional highlights for the quarter include the following. Consolidated GAAP net income for the quarter was $27.4 million, an increase of 18% from the prior year quarter, and adjusted net income was $30.8 million, an increase of 28% from the prior year quarter.
We also wanted to point out that we have made very few adjustments between our GAAP and non-GAAP numbers and 90% of those adjustments relate to just 2 adjustments, potential spin-off transaction cost and share-based compensation. Other key metrics, as of and for the quarter ended March 31 includes, cash and cash equivalents of $38 million, cash generated from operations of $24.8 million and $250 million of availability on our revolving line of credit.
As we expected, our lease-adjusted net debt-to-EBITDAR ratio decreased again this quarter to 3.73x. And as a reminder, that is after we have invested $570 million in 187 acquisitions since we spun off the REIT.
We continue to make preparations for the implementation of CMS' payment reform model called Patient-Driven Payment Model, or PDPM. As we make preparations to implement this payment model, we are confident that our relentless focus on quality and efficient outcomes will serve us well under PDPM, which is expected to go into effect on October 1, 2019.
As Christopher mentioned, we increased our guidance for 2019. We are projecting earnings of between $2.22 and $2.30 per diluted share, and annual revenues between $2.34 billion and $2.4 billion. The 2019 guidance is based on diluted weighted average shares outstanding of approximately 56.7 million, a tax rate of approximately 25% with the primary exclusions coming from proposed spin-off transaction costs and stock-based compensation and the inclusion of acquisitions closed and anticipated to be closed in the first half of 2019. Additionally, other factors contributing to our asymmetrical quarters include, variations in reimbursement systems, delays and changes in state budget, seasonality in occupancy and skilled mix, the influence of the general economy on our census and staffing, the short-term impact of our acquisition activities, variation in insurance accruals and other factors. Accordingly, we would expect to be more heavily weighted towards the second half of the year.
And with that, I'll turn the call back over to Chad to provide more details about the proposed spin-off we announced yesterday. Chad?
Thanks, Suzanne. Yesterday, we announced our plans to separate our home health and hospice agencies and substantially all of our senior living businesses into a separate publicly traded company. Upon the consummation of the spin-off, the 2 companies will include: The Ensign Group, which will continue to include Transitional and Skilled Services, rehabilitative care services, health care campuses, post-acute-related new business ventures and real estate investments; and The Pennant Group, which will include Ensign's home health and hospice operations, substantially all of Ensign's senior living operations and Ensign's mobile diagnostic and clinical laboratory operations.
This strategic separation will be accomplished through a spin-off in which Ensign will distribute shares of Pennant's common stock to our shareholders on a pro rata basis. We anticipate that the Board of Directors will declare a dividend of 1 share of Pennant common stock for every 2 shares of the company's common stock held by stockholders as of the record date.
The spin-off is subject to customary conditions, including the receipt of a tax opinion from counsel, effectiveness of the registration statement filed with the SEC, execution of third-party agreements and final approval by the Ensign Board of Directors. Pennant has filed a registration statement on Form 10 relating to the spin-off with the SEC, and that document can be found at the Investor Relations section of our website. We have also prepared a more detailed summary of the spin-off, including some summary pro forma financial information in a presentation entitled Home Health, Hospice and Senior Living Spin-off, which is also available on the Investor Relations section of our website.
We anticipate that the proposed spin-off will be completed in or before the fourth quarter of 2019, but there can be no assurances regarding the final terms and structure of the spin-off or that it will be completed at all. In addition, we do not intend to stand still or otherwise slow our acquisition program. And references to the property counts, capitalization or financial condition of either Ensign or Pennant and similar statements may change as we continue to acquire.
And with that, I want to turn the call back over to Christopher.
Thanks, Chad. I need to correct something. I said [ Marjorie Cruz ] who is valuable COO in California, and I meant sent [ Marjorie Barsona ] in Mesa, Arizona, who is an incredible COO as well. So sorry, Marjorie.
We've emphasized repeatedly over the last several quarters, our home health, hospice and senior living leaders have created significant value as they've embraced and applied Ensign's innovative operating model. As a result of consistently achieving outstanding clinical results, Pennant has become the partner of choice in the markets they serve, and it shows in their financial and clinical results. We believe that this proposed spin-off, much like the very successful spin-off of CareTrust REIT in 2014, will shine light on value that is yet to be fully realized under Ensign. We've been very pleased with the combined growth that Ensign and CareTrust have experienced and the return that it has generated for our shareholders, which as of March 31, has collectively produced a 408% return since the spin-off date.
We also believe that the spin-off will present 2 very attractive investments that provide our partners and shareholders the opportunity to share in that value now and over time. Our guiding principle in pursuing this undertaking, just as it was when we spun off CareTrust, has been to ensure 2 healthy operations, both of which are poised to grow. While there are obvious differences in the Pennant spin-off, we are applying the lessons learned from our prior spin-off, some of which were positive and some negative, to create a structure for both companies that leaves each very healthy, financially and operationally, while also ensuring both organizations stay true to the operationally driven cultures upon which they were founded. Because of that, we're confident that both Ensign and Pennant will have a solid cultural and financial foundation to drive both near-term and long-term growth.
As Chad mentioned earlier in the call, we now own 77 real estate assets, including the new service center location and the 28 senior living assets that will be leased by Pennant following the spin-off, which is approaching the 94 assets that we spun out to CareTrust in 2014. We'll always be an operationally driven organization first, but we are also evaluating the growing underlying value in our owned real estate and other new business ventures and the additional potential opportunities that each of those businesses gives us in the future. We've always sought to be a leadership company above all else. Developing outstanding entrepreneurial leaders is our most important priority. As we do so, creating a pathway for each of these leader to experience what so many at Ensign has experienced is a key strategy to help us attract and retain the best and the brightest.
Our new venture program, which has been the incubator for these Pennant businesses has been and will continue to be a driver for much of our success as an organization. The spin-off and the resulting new ownership structure allows us to better align the interest of our shareholders with the leaders that are driving the growth of these businesses. It also provides a pathway for current and future leaders to follow as we work to recreate the Ensign experience over and over again for all of our stakeholders.
Most importantly, we are confident that our operational focus is stronger than ever in spite of the transactional efforts and as our quarterly results for the quarter indicate, the spin-off has not been a distraction to our local leaders and operators.
Next, I want to introduce Danny Walker, who, as we announced yesterday, has been named as the Chairman, CEO and President of the Pennant Group. Danny has been with us for over 12 years. Danny?
Thanks, Christopher. On behalf of all that are associated with The Pennant Group, thank you. Words can't describe how grateful we all feel to have been part of the Ensign experience.
As those that have been following the Ensign's story know well, the name Ensign is synonymous with a flag or a standard and refers to Ensign's goal of setting the standard by which all others in its industry are measured. To pay tribute to our Ensign partners and to show our dedication to that same mission, several key leaders carefully selected the name Pennant to draw on similar imagery and themes to represent our mission of becoming the ensign to the home health, hospice and senior living industries.
We are grateful to our Ensign partners for trusting us enough to carry on the legacy that they started. And on behalf of all of my Pennant Group partners, we collectively convey our commitment to honor our cultural heritage of developing and rewarding local leaders so that we can become the standard in home health, hospice, senior living, and other -- and our other new ventures.
Although Pennant will have new ownership structure, we are very excited to announce that we expect to remain linked to Ensign in meaningful and mutually beneficial ways. To this end, Ensign and Pennant have created a preferred provider network, called the Ensign Pennant Care Continuum, which will memorialize the operational partnership we have always enjoyed under Ensign's ownership. As preferred providers within the care continuum, each Ensign and Pennant operation that elects to opt into the network will work together to appropriately share data and create care pathways designed by our clinicians to achieve the highest possible outcomes in transitions between care settings.
We are excited to further enhance our service offerings to our acute care partners, payers and other channel partners and look forward to continuing to earn the trust of patients, residents and their families. Post-acute care is becoming more and more complex. We recognized early in our new business venture experience that it was very important to invest in the right people and systems to give each of these unique operations the resources they require to be the best of the best. To that end, each of the Pennant businesses have successfully developed their own leadership and field-based resources that operate independent of their skilled nursing counterparts. While those efforts have been working very well, we believe that taking this additional step will accelerate both organizations' ability as 2 smaller but strong organization to quickly adapt to the ever-changing needs of our patients, payers and other providers within the Care Continuum.
Pennant will continue to pursue the acquisition of home health and hospice agencies and senior living operations as well as growing its mobile x-ray and lab businesses. Creating and growing these new businesses within Ensign has been an amazing accelerator of our success and has forged a pathway for thousands to benefit from the application of Ensign's core values.
With this anticipated spin-off, we're recreating the opportunities that many of the early Ensign founders experienced for a new generation of leaders. So in short, as we move forward, we're very excited to retain the benefits from our affiliation with Ensign, while simultaneously gaining the benefits of creating a separate platform to drive growth. We look forward to maintaining the trust of our new capital partners, our landlords and our shareholders, as we seek to become the premier home health, hospice and senior care provider.
With that, I'll hand the call back to Christopher.
Thanks, Danny. Before I turn the call over to the Q&A section, I do want to just make a quick point I guess. Ensign is very, very unique in that all of the leaders that lead Ensign have been here for a very long period of time, and I just want to remind everybody how unusual that is. Barry Port, who'll be the CEO at the end of this month, has been with us for more than 15 years; General Counsel, Beverly Wittekind has been with us for more than 17 years; Chad Keetch, who is Executive Vice President and Chief Investment Officer, has been with us for more than 9 years; Suzanne Snapper, Executive Vice President and CFO, has been with us for more than 12 years; Danny Walker, who'll be the new CEO and President of The Pennant Group, has been with us for more than 12 years; Spencer Burton; who'll be President and COO, has been with us for almost 13 years. To have a combined almost 80 years amongst this small leadership team with the organization -- not just the industry, but with the organization is pretty unusual, and I'm confident that the organization is going to do significantly better in the future than it's done in the past. I also wanted to add, I know that this was made clear in the announcement, I hope, but I'm going to remain fully engaged in Ensign. I -- while I will serve on the Board of The Pennant Group, this is one of the loves of my life, and it's something that I'd have a hard time leaving even if I wanted to. And I'm excited to remain engaged and tackle some of the projects I haven't had a chance to tackle in my current role.
We want to again thank you for joining us. And I guess I'll open this up to [ Rashae ] for Q&A.
[Operator Instructions] Your first question, from line of Chad Vanacore with Stifel.
So your proposed spin-off the ancillary business, you guys have contemplated this for a couple of years now. Why is the right time to spin these businesses off [ right ] now? And then what kind of valuation differences do you think you can garner with Pennant as stand-alone company compared to your core SNF business?
Yes. I'll answer the first one. Chad, this is Christopher. It -- these 2 companies have essentially run side by side for a long time and shared best practices along with the lab and x-ray company. They have been interacting with each other on a daily, weekly, monthly basis, correcting one another's course when there were challenges, challenging each other on acquisitions and transitions and helping one another. And as they got to the point where they were healthy enough with their own Service Center, their own resources, their in -- really their own balance sheet, if you will, it just felt like the right time for them to spin off and become that -- their own entity. It's -- frankly, it's hard when you are -- when you represent less than 1% or 5% or 7% of an entity, it's hard to feel like that the organization is about your business. And now they'll be a significant part of this new business, and we're confident that they'll perform well as they have been acting as separate companies for a lengthy period of time as well. If Danny wants to answer anything, you can add anything you want to.
No. I mean, the market conditions are obviously favorable in these industries as well. And so the combination of being prepared organizationally and having the infrastructure in place, so that we can take this step is part of it, having the mature leadership group that's prepared to meet the obligations of a new public company all factored into our decision.
All right. And Danny, it's a little bit early, but are there any opportunities that you think you can explore that maybe you wouldn't be able to explore as part of the Ensign Group?
Yes. Sure. I mean it's -- part of the opportunities that exist there is to continue to work with other providers in this -- in the whole post-acute continuum that, in some cases, are hesitant to do business because of the channel conflict issues that exist. And so we'll continue to explore those. We've worked towards that end already. And one thing that's important to note is that the results that are reflected in the Pennant Group financials are a product of operating the way we're going to continue to operate with Ensign. So we retain those benefits, and there will be other opportunities that will present themselves as we have that stand-alone status.
Chad, I think there's another advantage that you should appreciate especially, and that is there are people that don't really like our profession, that don't like our industry, and they like our model and they like the results that we achieve, and this gives them a chance to invest in Ensign and what we believe in and how we operate and the fundamentals in the way we acquire, the contrarian way that -- the contrarian acquisition model we tend to follow gives them a chance to do that without necessarily coming into an industry that they're uncomfortable with.
All right, Christopher. And one more. It looks like you took a fairly large step forward in terms of occupancy this quarter. What were some of the main drivers? And then maybe contrast any differences you're seeing in the core portfolio, what's driving that versus the transitioning portfolio?
Chad, this is Barry. I think what you're just seeing is a continuation of what we saw through the year last year, which is -- in particularly in our same store that continues to gradually strengthen. But also I think you saw transitioning portfolio is one that has been gaining momentum. Obviously, we talked a lot about maybe some sputters we have with some of larger transactions. And as we've seen those mature and our leaders embrace those, you're seeing some good momentum coming from that segment as well. But again, I'd have to point also to our strengthening relationships with our managed care partners as another reason. But then also, just our leader looking at every opportunity they can to strengthen occupancy, even in the nonskilled segments, which we'll remind you that we don't just focus on skilled where we have opportunities to strengthen occupancy, whether it's long-term care patients or skilled patients, we'll continue to go after that. So just kind of a culmination of all of those things.
All right. One more quick one because you mentioned PDPM transitions later this year. Have you incurred any cost to prepare for the new payment model yet? And how do you expect that to flow through the year?
No. I wouldn't say we've incurred any additional cost. I mean our internal team has banded together, along with the Service Center folks, partnered with field leaders that have -- we've dived right in and read through as many of the pages of the regulations as we possibly can and are developing models for our operators to utilize, to better understand the nuts and bolts of the system and operationalize it. But that's been an organic process with internal resources. We haven't really had to add or change headcount to adjust, and we feel pretty confident about our preparations in the direction we're going.
All right. Barry, do you expect to ramp up in the second and third quarter? Or is this about the right run rate?
Yes. We'll look. I mean we -- I think what you're probably used to seeing something that will probably always happen, which is second and third quarters aren't quite what first and fourth are. But we -- we've -- it's hard to predict exactly, but we typically dip off a little bit in the second quarter and third quarter is usually an improvement after that. Fourth quarter is usually our strongest.
And your next question, the line of Eric Fleming with SunTrust.
Yes. Just had a question on the Pennant spin. You outlined the senior leadership positions. What's -- what do you think the impact is going to be on the local leadership? And will there be any change in the comp structure at the local leadership. You guys have always highlighted that local leadership is really driving your growth, anything you can add on the local side?
Great question, Eric. I'm glad that's your focus. If anything, this will augment our entire model and focus on local leadership because we have -- we've had, for years, put in place efforts to make sure that subsidiary equity pieces go to those local leaders and allowed those leaders to have a greater influence on the overall company that they are a part of. And so if anything, this spin-off will just add fuel to that fire. As far as compensation structures, the whole cultural system that exists, the cluster model, all of those types of structures are -- have been in place independent of the skilled nursing counterparts from the beginning. And to Christopher's point earlier, the reason these 3 businesses function well together is because we've acted as a company of cluster partners to begin with, as we've built these businesses over the last 9 years.
And your next question comes from the line of Dana Hambly of Stephens.
Do you think you'll be in a position before the spin to give any kind of financial guidelines for Pennant? I just -- with the growth in the business, I'm hopeful that the revenue and EBITDA is going to look a lot different than the pro forma number you gave for 2018?
Yes. Definitely, Dana, we'll be able to continue to give you additional information. Obviously, we were able to give you what we had as of 12/31 in the deck that's attached. But as you saw from our Q1 announcement, we definitely had some acquisitions that are going to go into the Pennant Group. And so we'll continue to have enhanced financial disclosures as we move through this process.
We will be filing an updated Form 10 as part of that as well that will have additional disclosure.
Okay. When would be the general timing of that? Generally speaking, I'm not holding you to anything.
I mean obviously, the numbers go stale at some point, and say you drop in 3/31, so I think we -- in the next couple of month or so, few months, we'll have the 3/31 numbers. And then depending upon as we make progress, you would see additional numbers thereafter.
Okay. All right. Fair enough. And then Christopher, you mentioned investor sentiment fairly negative on the skilled nursing, and I think a lot of people would argue sentiment is not dissimilar on the senior housing. So just curious about the inclusion of the senior housing assets in the Pennant spin-off?
We don't make these decisions necessarily based on what the investor sentiment is at the time, but these 2 entities have grown up together, if you will. They have interacted so closely one with another, they've shared a lot of resources one with another. They have -- I said this earlier, but they've corrected the course of one another on several occasions, and I think that we feel like there's a lot more crossover between these 2 particular professions than any other in our portfolio. But we think it's the right time, we think it's the right combination of organizations, and I don't want to leave the lab and x-ray out either. But I mean I think we talked about this before, Dana, but home health happens a lot more in an [ AL ] setting than it does in a skilled nursing setting. And so there are a lot of -- there is a lot more overlap between these 2 entities, between these 2 particular industries than even -- than our industry with these. It's -- it is pretty natural, even outside of our organization, but because of the way these 2 organizations have functioned for the last almost 10 years, the last 9 years, it's a perfect fit.
Okay. All right. That make sense. And then I guess the deal's not over the finish line yet, and you mentioned that it may not happen and just as in advocate for the devil, I was just curious as to kind of what could possibly derail this? Do third-party landlords have any say in this?
Yes. So I mean -- Obviously, we include the list of kind of conditions that need to fulfilled for the spin to happen probably more from a legal perspective. I mean, the Board of Directors needs to approve it. There are some third-party approvals that we are putting in place. We're actually in the process of obtaining 2 creditor agreements with the 2 entities, so working on arrangements with our lenders. So there's a lot of those things, Dana, that are happening. But we feel very comfortable that we're very far along in that process and we've -- this has been happening behind the scenes for many, many months. And we would not have announced this today if we didn't feel comfortable that the likelihood that this was going to occur is very, very high.
And I am sure no further questions at this time. I will like to turn the conference back to Chris Christensen.
Thank you. We appreciate your time, we appreciate your help and thanks everyone for joining us today.
Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.