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8-K - 8-K - SELECT MEDICAL HOLDINGS CORPa13-18317_18k.htm

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

4714 Gettysburg Road

Mechanicsburg, PA 17055

 

NYSE Symbol: SEM

 

Select Medical Holdings Corporation Announces Results for

Second Quarter Ended June 30, 2013 and Quarterly Cash Dividend

 

MECHANICSBURG, PENNSYLVANIA — August 8, 2013 — Select Medical Holdings Corporation (“Select Medical”) (NYSE: SEM) today announced results for its second quarter ended June 30, 2013 and quarterly cash dividend.

 

For the second quarter ended June 30, 2013, net operating revenues increased 0.9% to $756.7 million compared to $750.2 million for the same quarter, prior year.  Income from operations decreased 5.6% to $88.3 million compared to $93.5 million for the same quarter, prior year.  Net income attributable to Select Medical decreased to $27.8 million compared to $43.2 million for the same quarter, prior year.  Net income attributable to Select Medical for the second quarter ended June 30, 2013 includes a loss on early retirement of debt, net of tax, of $10.5 million associated with the prepayment of a portion of its term loans due June 2018 under its senior secured credit facilities.  The second quarter results also reflect Medicare changes that became effective on April 1, 2013, including (i) a 2% reduction in Medicare payments that was implemented as part of the automatic reduction in federal spending mandated under the Budget Control Act of 2011 (the “Sequestration Reduction”), and (ii) an increase from 25% to 50% in the multiple procedure payment reduction for therapy services as mandated by the American Taxpayer Relief Act of 2012 (the “MPPR Reduction”).  For the second quarter ended June 30, 2013, these changes reduced net operating revenues and income from operations by approximately $9.5 million and $1.7 million, respectively.  Net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, equity in earnings (losses) of unconsolidated subsidiaries and other income (expense) (“Adjusted EBITDA”) for the second quarter decreased 3.9% to $106.0 million compared to $110.3 million for the same quarter, prior year.  A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release.  Income per common share for the second quarter ended June 30, 2013 was $0.20 on a fully diluted basis compared to income per common share of $0.31 for the same quarter, prior year.  Excluding the loss related to the early retirement of debt for the second quarter ended June 30, 2013 and its related tax effects, adjusted income per common share was $0.27 per diluted share for the second quarter ended June 30, 2013.  A reconciliation of income per common share to adjusted income per common share for the second quarter ended June 30, 2013 is presented in table IX of this release.

 

For the six months ended June 30, 2013, net operating revenues increased 0.8% to $1,506.6 million compared to $1,494.2 million for the same period, prior year.  Income from operations decreased 7.7% to $170.8 million compared to $185.1 million for the same period, prior year.  Net income attributable to Select Medical decreased to $62.2 million compared to $84.7 million for the same period, prior year.  Net income attributable to Select Medical for the six months ended June 30, 2013 includes a loss on early retirement of debt, net of tax, of $11.4 million associated with the refinancing activity in the first and second quarter of 2013.  Additionally, the Sequestration Reduction and MPPR Reduction reduced net operating revenues and income from operations by approximately $9.5 million and $1.7

 



 

million, respectively, for the six months ended June 30, 2013.  Adjusted EBITDA for the six months ended June 30, 2013 decreased 6.1% to $206.0 million compared to $219.3 million for the same period, prior year.  A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release.  Income per common share for the six months ended June 30, 2013 was $0.44 on a fully diluted basis compared to income per common share of $0.59 for the six months ended June 30, 2012.  Excluding the loss related to the early retirement of debt and its related tax effects, adjusted income per common share was $0.53 per diluted share for the six months ended June 30, 2013.  A reconciliation of net income per share to adjusted net income per share for the six months ended June 30, 2013 is presented in table X of this release.

 

Specialty Hospitals

 

For the second quarter of 2013, net operating revenues for the specialty hospital segment increased 0.4% to $559.4 million compared to $557.1 million for the same quarter, prior year.  The Sequestration Reduction reduced net operating revenues and income from operations for the segment by approximately $9.1 million for the second quarter of 2013.  Adjusted EBITDA for the specialty hospital segment decreased 5.7% to $96.4 million compared to $102.2 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 17.2% for the second quarter of 2013, compared to 18.3% for the same quarter, prior year.  Certain specialty hospital key statistics for the second quarter ended June 30, 2013 and 2012 are presented in table VI of this release.

 

For the six months ended June 30, 2013, net operating revenues for the specialty hospital segment increased 0.6% to $1,117.1 million compared to $1,110.2 million for the same period, prior year.  The Sequestration Reduction reduced net operating revenues and income from operations for the segment by approximately $9.1 million for the six months ended June 30, 2013.  Adjusted EBITDA for the specialty hospital segment for the six months ended June 30, 2013 decreased 6.1% to $189.7 million compared to $202.1 million for the same period, prior year.  The Adjusted EBITDA margin for the segment was 17.0% for the six months ended June 30, 2013, compared to 18.2% for the same period, prior year.  Certain specialty hospital key statistics for the six months ended June 30, 2013 and 2012 are presented in table VII of this release.

 

Outpatient Rehabilitation

 

For the second quarter of 2013, net operating revenues for the outpatient rehabilitation segment increased 2.1% to $197.1 million compared to $193.1 million for the same quarter, prior year.  The Sequestration Reduction and MPPR Reduction reduced net operating revenues and income from operations for the segment by approximately $0.4 million and $1.7 million, respectively, for the second quarter of 2013.  Adjusted EBITDA for the segment for the second quarter increased 0.8% to $26.1 million compared to $25.8 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 13.2% for the second quarter of 2013, compared to 13.4% for the same quarter, prior year.  Certain outpatient rehabilitation key statistics for the second quarter ended June 30, 2013 and 2012 are presented in table VI of this release.

 

For the six months ended June 30, 2013, net operating revenues for the outpatient rehabilitation segment increased 1.4% to $389.2 million compared to $383.9 million for the same period, prior year.  The Sequestration Reduction and MPPR Reduction reduced net operating revenues and income from operations for the segment by approximately $0.4 million and $1.7 million, respectively, for the six months ended June 30, 2013.  Adjusted EBITDA for the segment for the six months ended June 30, 2013 increased 1.2% to $48.9 million compared to $48.3 million for the same period, prior year.  The Adjusted EBITDA margin for the segment was 12.6% for both the six months ended June 30, 2013 and 2012. Certain outpatient rehabilitation key statistics for the six months ended June 30, 2013 and 2012 are presented in table VII of this release.

 



 

Stock Repurchase Program

 

Select Medical’s board of directors has authorized a $350.0 million stock repurchase program that will remain in effect until March 31, 2014, unless further extended by the board of directors.  Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Select Medical deems appropriate.  The timing of purchases of stock will be based upon market conditions and other factors.  Select Medical is funding this program with cash on hand or borrowings under its revolving credit facility.  Select Medical did not repurchase shares during the three months ended June 30, 2013.  During the six months ended June 30, 2013, Select Medical repurchased 1,115,691 shares at a cost of approximately $10.0 million, an average cost per share of $8.95, which includes transaction costs.  Since the inception of the program through June 30, 2013, Select Medical has repurchased 23,606,080 shares at a cost of approximately $173.6 million, an average cost per share of $7.36, which includes transaction costs.

 

Refinancing

 

On May 28, 2013 Select Medical Corporation completed its private placement of $600.0 million aggregate principal amount of its 6.375% senior notes due 2021.  Select Medical Corporation used the $587.0 million of net proceeds of the offering to prepay a portion of the term loans outstanding due 2018 under its senior secured credit facilities.

 

On June 3, 2013, Select Medical Corporation amended its existing senior secured credit facilities in order to extend the maturity date on $293.3 million of its $300.0 million revolving credit facility to March 1, 2018, lower the interest rate payable on its term loans due 2018 to Adjusted LIBO plus 3.00%, or Alternate Base Rate plus 2.00%, and amend the provision in such term loans from providing that Adjusted LIBO will at no time be less than 1.75% to providing that Adjusted LIBO will at no time be less than 1.00%.

 

Quarterly Dividend

 

On May 1, 2013, Select Medical’s board of directors declared a quarterly cash dividend of $0.10 per share, totaling $14.0 million.  The dividend was paid on May 30, 2013 to stockholders of record as of the close of business on May 20, 2013.

 

On August 7, 2013, Select Medical’s board of directors declared a quarterly cash dividend of $0.10 per share.  The dividend will be payable on or about August 30, 2013 to stockholders of record as of the close of business on August 20, 2013.

 

Business Outlook

 

Select Medical is reaffirming its prior business outlook provided in its May 2, 2013 earnings press release for net operating revenues, Adjusted EBITDA and adjusted income per common share. Select Medical continues to expect consolidated net operating revenues for the full year 2013 to be in the range of $2.925 billion to $3.025 billion, Adjusted EBITDA for the full year 2013 to be in the range of $375.0 million to $390.0 million and adjusted income per common share, which excludes the losses on early retirement of debt and their related tax effects in the first and second quarters, for the full year 2013 to be in the range of $0.87 to $0.94.  Select Medical now expects fully diluted income per common share for the full year 2013 to be in the range of $0.78 to $0.85.

 

The above business outlook includes the estimated financial impact from the automatic Medicare reductions mandated under the Budget Control Act of 2011. Select Medical estimates this negative impact to net operating revenues and Adjusted EBITDA for the combined third and fourth quarters of 2013 to be between $16 million and $17 million. The above business outlook also includes the expected financial impact to outpatient therapy payments related to the MPPR Reduction. Select Medical estimates this

 



 

negative impact to net operating revenues and Adjusted EBITDA for the combined third and fourth quarters of 2013 to be between $3 million and $4 million for its outpatient rehabilitation segment. Select Medical assumed a 40.0% effective tax rate for the remainder of 2013 when preparing the above business outlook for the full year 2013.

 

Conference Call

 

Select Medical will host a conference call regarding its second quarter results and its business outlook on Friday, August 9, 2013, at 9:00am EDT. The domestic dial-in number for the call is 1-866-515-2908. The international dial-in number is 1-617-399-5122. The passcode for the call is 56400230. The conference call will be webcast simultaneously and can be accessed at Select Medical’s website, www.selectmedicalholdings.com.

 

For those unable to participate in the conference call, a replay will be available until 11:59pm EDT, August 16, 2013. The replay number is 1-888-286-8010 (domestic) or 1-617-801-6888 (international). The passcode for the replay will be 85932415. The replay can also be accessed at Select Medical’s website, www.selectmedicalholdings.com.

 

*   *   *   *   *

 

Select Medical is a leading operator of specialty hospitals and outpatient rehabilitation clinics in the United States. As of June 30, 2013, Select Medical operated 109 long term acute care hospitals and 14 acute medical rehabilitation hospitals in 28 states and 988 outpatient rehabilitation clinics in 32 states and the District of Columbia. Select Medical also provides medical rehabilitation services on a contracted basis to nursing homes, hospitals, assisted living and senior care centers, schools and work sites. Information about Select Medical is available at www.selectmedical.com.

 

Certain statements contained herein that are not descriptions of historical facts are “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995).  Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements due to factors including the following:

 

·                     changes in government reimbursement for our services due to the implementation of healthcare reform legislation, deficit reduction measures, and/or new payment policies (including, for example, the expiration of the moratorium on the 25-percent payment adjustment threshold that would reduce our Medicare payments for those patients admitted to a long term acute care hospital from a referring hospital in excess of the percentage threshold) may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability;

 

·                     the impact of the Budget Control Act of 2011 which, as amended by the American Taxpayer Relief Act of 2012, has resulted in a 2% reduction to Medicare payments for services furnished on or after April 1, 2013 and will continue unless further legislation is enacted;

 

·                     the failure of our specialty hospitals to maintain their Medicare certifications may cause our net operating revenues and profitability to decline;

 

·                     the failure of our facilities operated as “hospitals within hospitals” to qualify as hospitals separate from their host hospitals may cause our net operating revenues and profitability to decline;

 

·                     a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs;

 

·                     acquisitions or joint ventures may prove difficult or unsuccessful, use significant resources or expose us to unforeseen liabilities;

 



 

·                     private third-party payors for our services may undertake future cost containment initiatives that limit our future net operating revenues and profitability;

 

·                     the failure to maintain established relationships with the physicians in the areas we serve could reduce our net operating revenues and profitability;

 

·                     shortages in qualified nurses or therapists could increase our operating costs significantly;

 

·                     competition may limit our ability to grow and result in a decrease in our net operating revenues and profitability;

 

·                     the loss of key members of our management team could significantly disrupt our operations;

 

·                     the effect of claims asserted against us could subject us to substantial uninsured liabilities; and

 

·                     other factors discussed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including factors discussed under the heading “Risk Factors” for the year ended December 31, 2012 contained in our annual report on Form 10-K filed with the SEC on February 26, 2013 and our quarterly report on Form 10-Q for the three months ended March 31, 2013, filed with the SEC on May 2, 2013.

 

 

Investor inquiries:

 

 

 

Joel T. Veit

 

Senior Vice President and Treasurer

 

717-972-1100

 

ir@selectmedical.com

 

 

 

SOURCE: Select Medical Holdings Corporation

 

 



 

I.   Condensed Consolidated Statements of Operations

For the Three Months Ended June 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

2013

 

% Change

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

750,193

 

$

756,673

 

0.9

%

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of services

 

612,669

 

625,730

 

2.1

%

General and administrative

 

18,554

 

17,927

 

(3.4

)%

Bad debt expense

 

10,029

 

8,846

 

(11.8

)%

Depreciation and amortization

 

15,428

 

15,907

 

3.1

%

 

 

 

 

 

 

 

 

Income from operations

 

93,513

 

88,263

 

(5.6

)%

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

 

(17,280

)

N/M

 

Equity in earnings of unconsolidated subsidiaries

 

2,752

 

568

 

(79.4

)%

Interest expense

 

(23,798

)

(21,904

)

(8.0

)%

 

 

 

 

 

 

 

 

Income before income taxes

 

72,467

 

49,647

 

(31.5

)%

 

 

 

 

 

 

 

 

Income tax expense

 

27,651

 

19,769

 

(28.5

)%

 

 

 

 

 

 

 

 

Net income

 

44,816

 

29,878

 

(33.3

)%

 

 

 

 

 

 

 

 

Less: Net income attributable to non- controlling interests

 

1,644

 

2,098

 

27.6

%

 

 

 

 

 

 

 

 

Net income attributable to Select Medical Holdings Corporation

 

$

43,172

 

$

27,780

 

(35.7

)%

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

Basic

 

$

0.31

 

$

0.20

 

 

 

Diluted

 

$

0.31

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

138,456

 

136,609

 

 

 

Diluted

 

138,685

 

136,743

 

 

 

 

N/M = Not Meaningful

 



 

II.   Condensed Consolidated Statements of Operations

For the Six Months Ended June 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

2013

 

% Change

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

1,494,214

 

$

1,506,628

 

0.8

%

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of services

 

1,224,288

 

1,250,634

 

2.2

%

General and administrative

 

32,778

 

35,325

 

7.8

%

Bad debt expense

 

20,404

 

18,167

 

(11.0

)%

Depreciation and amortization

 

31,627

 

31,709

 

0.3

%

 

 

 

 

 

 

 

 

Income from operations

 

185,117

 

170,793

 

(7.7

)%

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

 

(18,747

)

N/M

 

Equity in earnings of unconsolidated subsidiaries

 

5,217

 

1,626

 

(68.8

)%

Interest expense

 

(47,720

)

(45,362

)

(4.9

)%

 

 

 

 

 

 

 

 

Income before income taxes

 

142,614

 

108,310

 

(24.1

)%

 

 

 

 

 

 

 

 

Income tax expense

 

55,226

 

41,630

 

(24.6

)%

 

 

 

 

 

 

 

 

Net income

 

87,388

 

66,680

 

(23.7

)%

 

 

 

 

 

 

 

 

Less: Net income attributable to non- controlling interests

 

2,674

 

4,482

 

67.6

%

 

 

 

 

 

 

 

 

Net income attributable to Select Medical Holdings Corporation

 

$

84,714

 

$

62,198

 

(26.6

)%

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

Basic

 

$

0.60

 

$

0.44

 

 

 

Diluted

 

$

0.59

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

139,941

 

136,997

 

 

 

Diluted

 

140,162

 

137,165

 

 

 

 

N/M = Not Meaningful

 



 

III.  Condensed Consolidated Balance Sheets

(In thousands, unaudited)

 

 

 

December
31, 2012

 

June 30,
2013

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

40,144

 

$

8,768

 

 

 

 

 

 

 

Accounts receivable, net

 

359,929

 

427,191

 

 

 

 

 

 

 

Current deferred tax asset

 

17,877

 

14,850

 

 

 

 

 

 

 

Prepaid income taxes

 

3,895

 

12,219

 

 

 

 

 

 

 

Other current assets

 

31,818

 

38,077

 

 

 

 

 

 

 

Total Current Assets

 

453,663

 

501,105

 

 

 

 

 

 

 

Property and equipment, net

 

501,552

 

498,808

 

 

 

 

 

 

 

Goodwill

 

1,640,534

 

1,641,796

 

 

 

 

 

 

 

Other identifiable intangibles

 

71,745

 

71,713

 

 

 

 

 

 

 

Other assets

 

93,867

 

131,633

 

 

 

 

 

 

 

Total Assets

 

$

2,761,361

 

$

2,845,055

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Payables and accruals

 

$

376,817

 

$

352,447

 

 

 

 

 

 

 

Current portion of long-term debt

 

11,646

 

13,230

 

 

 

 

 

 

 

Total Current Liabilities

 

388,463

 

365,677

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

1,458,597

 

1,517,728

 

 

 

 

 

 

 

Non-current deferred tax liability

 

89,510

 

89,676

 

 

 

 

 

 

 

Other non-current liabilities

 

68,502

 

70,647

 

 

 

 

 

 

 

Total Liabilities

 

2,005,072

 

2,043,728

 

 

 

 

 

 

 

Redeemable non-controlling interests

 

10,811

 

12,520

 

 

 

 

 

 

 

Total equity

 

745,478

 

788,807

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

2,761,361

 

$

2,845,055

 

 


 


 

IV.  Consolidated Statement of Cash Flows

For the Three Months Ended June 30, 2012 and 2013

(In thousands, unaudited)

 

 

 

2012

 

2013

 

Operating Activities

 

 

 

 

 

Net Income

 

$

44,816

 

$

29,878

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

15,428

 

15,907

 

Provision for bad debts

 

10,029

 

8,846

 

Equity in earnings of unconsolidated subsidiaries

 

(2,752

)

(568

)

Loss (gain) from disposal or sale of assets

 

(54

)

40

 

Loss on early retirement of debt

 

 

17,280

 

Non-cash stock compensation expense

 

1,338

 

1,788

 

Amortization of debt discount and issuance costs

 

1,754

 

2,284

 

Changes in operating assets and liabilities, net of effects from acquisition of businesses:

 

 

 

 

 

Accounts receivable

 

31,799

 

(5,869

)

Other current assets

 

2,807

 

513

 

Other assets

 

(1,372

)

796

 

Accounts payable

 

(3,926

)

(6,795

)

Due to third-party payors

 

1,253

 

3,320

 

Accrued expenses

 

27,008

 

(7,503

)

Income and deferred taxes

 

(17,503

)

(25,920

)

Net cash provided by operating activities

 

110,625

 

33,997

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property and equipment

 

(16,183

)

(13,963

)

Investment in businesses, net of distributions

 

(2,174

)

(18,739

)

Acquisition of businesses, net of cash acquired

 

(206

)

(171

)

Net cash used in investing activities

 

(18,563

)

(32,873

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Borrowings on revolving credit facility

 

110,000

 

265,000

 

Payments on revolving credit facility

 

(165,000

)

(250,000

)

Payments on credit facility term loans

 

(2,125

)

(589,052

)

Issuance of 6.375% senior notes

 

 

600,000

 

Borrowings of other debt

 

 

1,083

 

Principal payments on other debt

 

(2,757

)

(2,382

)

Proceeds from bank overdrafts

 

1,248

 

7,254

 

Debt issuance costs

 

 

(14,374

)

Dividends paid to common stockholders

 

 

(13,963

)

Repurchase of common stock

 

(21,051

)

 

Proceeds from issuance of common stock

 

452

 

 

Distributions to non-controlling interests

 

(583

)

(422

)

Net cash provided by (used in) financing activities

 

(79,816

)

3,144

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

12,246

 

4,268

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

9,274

 

4,500

 

Cash and cash equivalents at end of period

 

$

21,520

 

$

8,768

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Cash paid for interest

 

$

1,093

 

$

26,709

 

Cash paid for taxes

 

$

45,140

 

$

45,692

 

 



 

V.  Consolidated Statement of Cash Flows

For the Six Months Ended June 30, 2012 and 2013

(In thousands, unaudited)

 

 

 

2012

 

2013

 

Operating Activities

 

 

 

 

 

Net Income

 

$

87,388

 

$

66,680

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

31,627

 

31,709

 

Provision for bad debts

 

20,404

 

18,167

 

Equity in earnings of unconsolidated subsidiaries

 

(5,217

)

(1,626

)

Loss (gain) from disposal or sale of assets

 

(3,604

)

81

 

Loss on early retirement of debt

 

 

18,747

 

Non-cash stock compensation expense

 

2,599

 

3,537

 

Amortization of debt discount and issuance costs

 

3,511

 

4,588

 

Changes in operating assets and liabilities, net of effects from acquisition of businesses:

 

 

 

 

 

Accounts receivable

 

(30,520

)

(83,832

)

Other current assets

 

(1,612

)

(5,894

)

Other assets

 

1,675

 

144

 

Accounts payable

 

(5,486

)

(2,665

)

Due to third-party payors

 

1,738

 

5,217

 

Accrued expenses

 

6,423

 

(28,203

)

Income and deferred taxes

 

9,879

 

(4,627

)

Net cash provided by operating activities

 

118,805

 

22,023

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property and equipment

 

(27,934

)

(27,962

)

Proceeds from sale of assets

 

16,511

 

 

Investment in businesses, net of distributions

 

(10,014

)

(28,716

)

Acquisition of businesses, net of cash acquired

 

(206

)

(171

)

Net cash used in investing activities

 

(21,643

)

(56,849

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Borrowings on revolving credit facility

 

340,000

 

455,000

 

Payments on revolving credit facility

 

(380,000

)

(480,000

)

Borrowings on credit facility term loans, net of discount

 

 

298,500

 

Payments on credit facility term loans

 

(4,250

)

(592,615

)

Issuance of 6.375% senior notes

 

 

600,000

 

Repurchase of senior floating rate notes

 

 

(167,300

)

Repurchase of 7 5/8% senior subordinated notes

 

 

(70,000

)

Borrowings of other debt

 

5,835

 

6,909

 

Principal payments on other debt

 

(5,085

)

(4,673

)

Proceeds from bank overdrafts

 

3,739

 

1,625

 

Debt issuance costs

 

 

(18,583

)

Dividends paid to common stockholders

 

 

(13,963

)

Repurchase of common stock

 

(46,790

)

(9,983

)

Proceeds from issuance of common stock

 

547

 

 

Distributions to non-controlling interests

 

(1,681

)

(1,467

)

Net cash provided by (used in) financing activities

 

(87,685

)

3,450

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

9,477

 

(31,376

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

12,043

 

40,144

 

Cash and cash equivalents at end of period

 

$

21,520

 

$

8,768

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Cash paid for interest

 

$

32,378

 

$

53,914

 

Cash paid for taxes

 

$

45,344

 

$

46,832

 

 



 

VI.  Key Statistics

For the Three Months Ended June 30, 2012 and 2013

(unaudited)

 

 

 

2012

 

2013

 

% Change

 

Specialty Hospitals

 

 

 

 

 

 

 

Number of hospitals – end of period:

 

 

 

 

 

 

 

Long term acute care hospitals (a)

 

111

 

109

 

 

 

Rehabilitation hospitals (a)

 

12

 

14

 

 

 

Total specialty hospitals

 

123

 

123

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

557,130

 

$

559,386

 

0.4

%

 

 

 

 

 

 

 

 

Number of patient days (b)

 

336,016

 

341,655

 

1.7

%

 

 

 

 

 

 

 

 

Number of admissions (b)

 

13,872

 

14,106

 

1.7

%

 

 

 

 

 

 

 

 

Net revenue per patient day (b)(c)

 

$

1,554

 

$

1,532

 

(1.4

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

102,166

 

$

96,393

 

(5.7

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

18.3

%

17.2

%

 

 

 

 

 

 

 

 

 

 

Outpatient Rehabilitation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of clinics – end of period

 

956

 

988

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

193,050

 

$

197,080

 

2.1

%

 

 

 

 

 

 

 

 

Number of visits (d)

 

1,166,550

 

1,217,598

 

4.4

%

 

 

 

 

 

 

 

 

Revenue per visit (d)(e)

 

$

102

 

$

103

 

1.0

%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

25,837

 

$

26,054

 

0.8

%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

13.4

%

13.2

%

 

 

 


(a)         Includes managed hospitals.

(b)         Excludes managed hospitals.

(c)          Net revenue per patient day is calculated by dividing specialty hospital direct patient service revenue by the total number of patient days.

(d)         Excludes managed clinics.

(e)          Net revenue per visit is calculated by dividing outpatient rehabilitation clinic direct patient service revenue by the total number of visits.  For purposes of this computation, outpatient rehabilitation clinic direct patient service revenue does not include managed clinics or contract services revenue.

 



 

VII.  Key Statistics

For the Six Months Ended June 30, 2012 and 2013

(unaudited)

 

 

 

2012

 

2013

 

% Change

 

Specialty Hospitals

 

 

 

 

 

 

 

Number of hospitals – end of period:

 

 

 

 

 

 

 

Long term acute care hospitals (a)

 

111

 

109

 

 

 

Rehabilitation hospitals (a)

 

12

 

14

 

 

 

Total specialty hospitals

 

123

 

123

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

1,110,168

 

$

1,117,137

 

0.6

%

 

 

 

 

 

 

 

 

Number of patient days (b)

 

679,037

 

681,037

 

0.3

%

 

 

 

 

 

 

 

 

Number of admissions (b)

 

27,927

 

27,962

 

0.1

%

 

 

 

 

 

 

 

 

Net revenue per patient day (b)(c)

 

$

1,539

 

$

1,538

 

(0.1

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

202,120

 

$

189,740

 

(6.1

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

18.2

%

17.0

%

 

 

 

 

 

 

 

 

 

 

Outpatient Rehabilitation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of clinics – end of period

 

956

 

988

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

383,949

 

$

389,181

 

1.4

%

 

 

 

 

 

 

 

 

Number of visits (d)

 

2,318,759

 

2,380,221

 

2.7

%

 

 

 

 

 

 

 

 

Revenue per visit (d)(e)

 

$

103

 

$

104

 

1.0

%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

48,315

 

$

48,887

 

1.2

%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

12.6

%

12.6

%

 

 

 


(a)         Includes managed hospitals.

(b)         Excludes managed hospitals.

(c)          Net revenue per patient day is calculated by dividing specialty hospital direct patient service revenue by the total number of patient days.

(d)         Excludes managed clinics.

(e)          Net revenue per visit is calculated by dividing outpatient rehabilitation clinic direct patient service revenue by the total number of visits.  For purposes of this computation, outpatient rehabilitation clinic direct patient service revenue does not include managed clinics or contract services revenue.

 



 

VIII. Net Income to Adjusted EBITDA Reconciliation

For the Three and Six Months Ended June 30, 2012 and 2013

(In thousands, unaudited)

 

The following table reconciles net income to Adjusted EBITDA for Select Medical.  Adjusted EBITDA is used by Select Medical to report its segment performance.  Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, equity in earnings (losses) of unconsolidated subsidiaries and other income (expense).  The Company believes that the presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry.  Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of its operating units.

 

Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles.  Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance.  Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.  Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2012

 

2013

 

2012

 

2013

 

Net income

 

$

44,816

 

$

29,878

 

$

87,388

 

$

66,680

 

Income tax expense

 

27,651

 

19,769

 

55,226

 

41,630

 

Loss on early retirement of debt

 

 

17,280

 

 

18,747

 

Interest expense

 

23,798

 

21,904

 

47,720

 

45,362

 

Equity in earnings of unconsolidated subsidiaries

 

(2,752

)

(568

)

(5,217

)

(1,626

)

Stock compensation expense:

 

 

 

 

 

 

 

 

 

Included in general and administrative

 

817

 

1,231

 

1,589

 

2,427

 

Included in cost of services

 

521

 

557

 

1,010

 

1,110

 

Depreciation and amortization

 

15,428

 

15,907

 

31,627

 

31,709

 

Adjusted EBITDA

 

$

110,279

 

$

105,958

 

$

219,343

 

$

206,039

 

 

 

 

 

 

 

 

 

 

 

Specialty hospitals

 

$

102,166

 

$

96,393

 

$

202,120

 

$

189,740

 

Outpatient rehabilitation

 

25,837

 

26,054

 

48,315

 

48,887

 

Other (a)

 

(17,724

)

(16,489

)

(31,092

)

(32,588

)

Adjusted EBITDA

 

$

110,279

 

$

105,958

 

$

219,343

 

$

206,039

 

 


(a)         Other primarily includes general and administrative costs.

 



 

IX.   Reconciliation of Income Per Common Share to Adjusted Income Per Common Share

For the Three Months Ended June 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

Per Share (a)

 

2013

 

Per Share (a)

 

Net income attributable to Select Medical Holdings Corporation

 

$

43,172

 

$

0.31

 

$

27,780

 

$

0.20

 

Earnings allocated to unvested restricted stockholders

 

(707

)

(0.00

)

(593

)

(0.00

)

Net income available to common stockholders

 

42,465

 

0.31

 

27,187

 

0.20

 

 

 

 

 

 

 

 

 

 

 

Adjustment for early retirement of debt:

 

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

 

 

17,280

 

0.12

 

Estimated income tax benefit (b)

 

 

 

(6,762

)

(0.05

)

Earnings allocated to unvested restricted stockholders

 

 

 

(225

)

(0.00

)

 

 

 

 

 

 

 

 

 

 

Adjusted net income available to common stockholders

 

$

42,465

 

$

0.31

 

$

37,480

 

$

0.27

 

Adjustment for dilution

 

 

 

(0.00

)

 

 

(0.00

)

Adjusted income per common share - diluted shares

 

 

 

$

0.31

 

 

 

$

0.27

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

 

138,456

 

 

 

136,609

 

Diluted

 

 

 

138,685

 

 

 

136,743

 

 


(a)         Per share amounts for each period presented are basic weighted average common shares outstanding for all amounts except adjusted  income per common share - diluted shares, which is based on diluted shares outstanding.

(b)         Represents the estimated tax benefit on the adjustments to net income.

 



 

X.   Reconciliation of Income Per Common Share to Adjusted Income Per Common Share

For the Six Months Ended June 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

Per Share (a)

 

2013

 

Per Share (a)

 

Net income attributable to Select Medical Holdings Corporation

 

$

84,714

 

$

0.61

 

$

62,198

 

$

0.45

 

Earnings allocated to unvested restricted stockholders

 

(1,338

)

(0.01

)

(1,304

)

(0.01

)

Net income available to common stockholders

 

83,376

 

0.60

 

60,894

 

0.44

 

 

 

 

 

 

 

 

 

 

 

Adjustment for early retirement of debt:

 

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

 

 

18,747

 

0.14

 

Estimated income tax benefit (b)

 

 

 

(7,341

)

(0.05

)

Earnings allocated to unvested restricted stockholders

 

 

 

(239

)

(0.00

)

 

 

 

 

 

 

 

 

 

 

Adjusted net income available to common stockholders

 

$

83,376

 

$

0.60

 

$

72,061

 

$

0.53

 

Adjustment for dilution

 

 

 

(0.01

)

 

 

(0.00

)

Adjusted income per common share - diluted shares

 

 

 

$

0.59

 

 

 

$

0.53

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

 

139,941

 

 

 

136,997

 

Diluted

 

 

 

140,162

 

 

 

137,165

 

 


(a)         Per share amounts for each period presented are basic weighted average common shares outstanding for all amounts except adjusted  income per common share - diluted shares, which is based on diluted shares outstanding.

(b)         Represents the estimated tax benefit on the adjustments to net income.