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EX-2.1 - EX-2.1 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex2d1.htm
EX-10.3 - EX-10.3 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex10d3.htm
EX-31.2 - EX-31.2 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex31d2.htm
EX-10.4 - EX-10.4 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex10d4.htm
EX-31.1 - EX-31.1 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex31d1.htm
EX-10.2 - EX-10.2 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex10d2.htm
EX-10.5 - EX-10.5 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex10d5.htm
EX-32.1 - EX-32.1 - SELECT MEDICAL HOLDINGS CORPa15-11948_1ex32d1.htm

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Quarterly Period Ended June 30, 2015

 

¨         Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Transition Period From           to           .

 

Commission File Number:  001 — 34465 and 001 — 31441

 

SELECT MEDICAL HOLDINGS CORPORATION

 

SELECT MEDICAL CORPORATION

(Exact name of Registrant as specified in its charter)

 

Delaware
Delaware
(State or other jurisdiction of
incorporation or organization)

 

20-1764048
23-2872718
(I.R.S. employer identification
number)

 

4714 Gettysburg Road, P.O. Box 2034, Mechanicsburg, Pennsylvania 17055

(Address of principal executive offices and zip code)

 

(717) 972-1100

(Registrants’ telephone number, including area code)

 

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as such Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  YES x  NO o

 

Indicate by check mark whether the Registrants have submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files).  YES x  NO o

 

Indicate by check mark whether the registrant, Select Medical Holdings Corporation, is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o
(Do not check if a smaller reporting company)

 

Smaller reporting company o

 

Indicate by check mark whether the registrant, Select Medical Corporation, is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x
(Do not check if a smaller reporting company)

 

Smaller reporting company o

 

Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

 

As of July 31, 2015, Select Medical Holdings Corporation had outstanding 131,381,185 shares of common stock.

 

This Form 10-Q is a combined quarterly report being filed separately by two Registrants: Select Medical Holdings Corporation and Select Medical Corporation.  Unless the context indicates otherwise, any reference in this report to “Holdings” refers to Select Medical Holdings Corporation and any reference to “Select” refers to Select Medical Corporation, the wholly-owned operating subsidiary of Holdings, and any of Select’s subsidiaries. Any reference to “Concentra” refers to Concentra Inc., the indirect operating subsidiary of Concentra Group Holdings, LLC (“Group Holdings”), and its subsidiaries. References to the “Company,” “we,” “us” and “our” refer collectively to Holdings, Select, and Group Holdings and its subsidiaries.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

3

 

 

 

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

Condensed consolidated balance sheets

3

 

 

 

 

Condensed consolidated statements of operations

4

 

 

 

 

Condensed consolidated statements of changes in equity and income

6

 

 

 

 

Condensed consolidated statements of cash flows

7

 

 

 

 

Notes to condensed consolidated financial statements

8

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

31

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

62

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

63

 

 

 

PART II

OTHER INFORMATION

64

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

64

 

 

 

ITEM 1A.

RISK FACTORS

65

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

74

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

74

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

74

 

 

 

ITEM 5.

OTHER INFORMATION

74

 

 

 

ITEM 6.

EXHIBITS

74

 

 

 

SIGNATURES

 

 

2



Table of Contents

 

PART I FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Select Medical Holdings Corporation

 

Select Medical Corporation

 

 

 

December 31,

 

June 30,

 

December 31,

 

June 30,

 

 

 

2014

 

2015

 

2014

 

2015

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,354

 

$

25,191

 

$

3,354

 

$

25,191

 

Accounts receivable, net of allowance for doubtful accounts of $46,425 and $50,675 at 2014 and 2015, respectively

 

444,269

 

633,621

 

444,269

 

633,621

 

Current deferred tax asset

 

15,991

 

17,355

 

15,991

 

17,355

 

Prepaid income taxes

 

17,888

 

 

17,888

 

 

Other current assets

 

46,142

 

78,153

 

46,142

 

78,153

 

Total Current Assets

 

527,644

 

754,320

 

527,644

 

754,320

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

542,310

 

771,410

 

542,310

 

771,410

 

Goodwill

 

1,642,083

 

2,353,975

 

1,642,083

 

2,353,975

 

Other identifiable intangibles

 

72,519

 

261,642

 

72,519

 

261,642

 

Other assets

 

140,253

 

199,988

 

140,253

 

199,988

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

2,924,809

 

$

4,341,335

 

$

2,924,809

 

$

4,341,335

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

Bank overdrafts

 

$

21,746

 

$

27,337

 

$

21,746

 

$

27,337

 

Current portion of long-term debt and notes payable

 

10,874

 

17,448

 

10,874

 

17,448

 

Accounts payable

 

108,532

 

105,369

 

108,532

 

105,369

 

Accrued payroll

 

97,090

 

122,707

 

97,090

 

122,707

 

Accrued vacation

 

63,132

 

76,262

 

63,132

 

76,262

 

Accrued interest

 

10,674

 

14,152

 

10,674

 

14,152

 

Accrued other

 

82,376

 

122,801

 

82,376

 

122,801

 

Income taxes payable

 

 

2,303

 

 

2,303

 

Total Current Liabilities

 

394,424

 

488,379

 

394,424

 

488,379

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

1,542,102

 

2,431,319

 

1,542,102

 

2,431,319

 

Non-current deferred tax liability

 

109,203

 

167,908

 

109,203

 

167,908

 

Other non-current liabilities

 

92,855

 

142,383

 

92,855

 

142,383

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

2,138,584

 

3,229,989

 

2,138,584

 

3,229,989

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable non-controlling interests

 

10,985

 

257,187

 

10,985

 

257,187

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

Common stock of Holdings, $0.001 par value, 700,000,000 shares authorized, 131,233,308 shares and 131,373,985 shares issued and outstanding at 2014 and 2015, respectively

 

131

 

131

 

 

 

Common stock of Select, $0.01 par value, 100 shares issued and outstanding

 

 

 

0

 

0

 

Capital in excess of par

 

413,706

 

422,524

 

885,407

 

894,225

 

Retained earnings (accumulated deficit)

 

325,678

 

383,278

 

(145,892

)

(88,292

)

Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders’ Equity

 

739,515

 

805,933

 

739,515

 

805,933

 

Non-controlling interest

 

35,725

 

48,226

 

35,725

 

48,226

 

Total Equity

 

775,240

 

854,159

 

775,240

 

854,159

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

2,924,809

 

$

4,341,335

 

$

2,924,809

 

$

4,341,335

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3



Table of Contents

 

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)

 

 

 

Select Medical Holdings Corporation

 

Select Medical Corporation

 

 

 

For the Three Months Ended June 30,

 

For the Three Months Ended June 30,

 

 

 

2014

 

2015

 

2014

 

2015

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

772,762

 

$

887,065

 

$

772,762

 

$

887,065

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of services

 

642,881

 

743,879

 

642,881

 

743,879

 

General and administrative

 

19,377

 

24,041

 

19,377

 

24,041

 

Bad debt expense

 

11,115

 

12,286

 

11,115

 

12,286

 

Depreciation and amortization

 

17,196

 

21,848

 

17,196

 

21,848

 

Total costs and expenses

 

690,569

 

802,054

 

690,569

 

802,054

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

82,193

 

85,011

 

82,193

 

85,011

 

 

 

 

 

 

 

 

 

 

 

Other income and expense:

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated subsidiaries

 

1,239

 

3,848

 

1,239

 

3,848

 

Interest expense

 

(21,663

)

(25,288

)

(21,663

)

(25,288

)

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

61,769

 

63,571

 

61,769

 

63,571

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

23,775

 

23,517

 

23,775

 

23,517

 

 

 

 

 

 

 

 

 

 

 

Net income

 

37,994

 

40,054

 

37,994

 

40,054

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to non-controlling interests

 

2,653

 

3,114

 

2,653

 

3,114

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation

 

$

35,341

 

$

36,940

 

$

35,341

 

$

36,940

 

 

 

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.27

 

$

0.28

 

 

 

 

 

Diluted

 

$

0.27

 

$

0.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per share

 

$

0.10

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

127,038

 

127,674

 

 

 

 

 

Diluted

 

127,541

 

128,009

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4



Table of Contents

 

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)

 

 

 

Select Medical Holdings Corporation

 

Select Medical Corporation

 

 

 

For the Six Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 

2014

 

2015

 

2014

 

2015

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

1,535,340

 

$

1,682,408

 

$

1,535,340

 

$

1,682,408

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of services

 

1,281,645

 

1,408,264

 

1,281,645

 

1,408,264

 

General and administrative

 

37,500

 

45,716

 

37,500

 

45,716

 

Bad debt expense

 

22,133

 

24,956

 

22,133

 

24,956

 

Depreciation and amortization

 

33,425

 

39,196

 

33,425

 

39,196

 

Total costs and expenses

 

1,374,703

 

1,518,132

 

1,374,703

 

1,518,132

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

160,637

 

164,276

 

160,637

 

164,276

 

 

 

 

 

 

 

 

 

 

 

Other income and expense:

 

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

(2,277

)

 

(2,277

)

 

Equity in earnings of unconsolidated subsidiaries

 

2,147

 

6,440

 

2,147

 

6,440

 

Interest expense

 

(42,279

)

(46,676

)

(42,279

)

(46,676

)

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

118,228

 

124,040

 

118,228

 

124,040

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

45,867

 

46,701

 

45,867

 

46,701

 

 

 

 

 

 

 

 

 

 

 

Net income

 

72,361

 

77,339

 

72,361

 

77,339

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to non-controlling interests

 

3,976

 

5,336

 

3,976

 

5,336

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation

 

$

68,385

 

$

72,003

 

$

68,385

 

$

72,003

 

 

 

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

$

0.55

 

 

 

 

 

Diluted

 

$

0.51

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per share

 

$

0.20

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

131,266

 

127,620

 

 

 

 

 

Diluted

 

131,766

 

127,944

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5



Table of Contents

 

Condensed Consolidated Statement of Changes in Equity and Income

(unaudited)

(in thousands)

 

 

 

 

 

 

 

Select Medical Holdings Corporation Stockholders

 

 

 

 

 

Comprehensive
Income

 

Total

 

Common
Stock Issued

 

Common
Stock Par
Value

 

Capital in
Excess of Par

 

Retained
Earnings

 

Non-
controlling
Interests

 

Balance at December 31, 2014

 

 

 

$

775,240

 

131,233

 

$

131

 

$

413,706

 

$

325,678

 

$

35,725

 

Net income

 

$

77,771

 

77,771

 

 

 

 

 

 

 

72,003

 

5,768

 

Net loss - attributable to redeemable non-controlling interests

 

(432

)

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

77,339

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to common stockholders

 

 

 

(13,129

)

 

 

 

 

 

 

(13,129

)

 

 

Issuance and vesting of restricted stock

 

 

 

5,765

 

202

 

0

 

5,765

 

 

 

 

 

Tax benefit from stock based awards

 

 

 

11

 

 

 

 

 

11

 

 

 

 

 

Stock option expense

 

 

 

29

 

 

 

 

 

29

 

 

 

 

 

Exercise of stock options

 

 

 

1,324

 

148

 

0

 

1,324

 

 

 

 

 

Acquisition of non-controlling interests

 

 

 

3,470

 

 

 

 

 

 

 

 

 

3,470

 

Distributions to non-controlling interests

 

 

 

(3,712

)

 

 

 

 

 

 

 

 

(3,712

)

Exchange of ownership interests with non-controlling interests

 

 

 

8,664

 

 

 

 

 

1,689

 

 

 

6,975

 

Other

 

 

 

(1,274

)

(209

)

(0

)

 

 

(1,274

)

 

 

Balance at June 30, 2015

 

 

 

$

854,159

 

131,374

 

$

131

 

$

422,524

 

$

383,278

 

$

48,226

 

 

 

 

 

 

 

 

Select Medical Corporation Stockholders

 

 

 

 

 

Comprehensive
Income

 

Total

 

Common
Stock Issued

 

Common
Stock Par
Value

 

Capital in
Excess of Par

 

Accumulated
Deficit

 

Non-
controlling
Interests

 

Balance at December 31, 2014

 

 

 

$

775,240

 

0

 

$

0

 

$

885,407

 

$

(145,892

)

$

35,725

 

Net income

 

$

77,771

 

77,771

 

 

 

 

 

 

 

72,003

 

5,768

 

Net loss - attributable to redeemable non-controlling interests

 

(432

)

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

77,339

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional investment by Holdings

 

 

 

1,324

 

 

 

 

 

1,324

 

 

 

 

 

Dividends declared and paid to Holdings

 

 

 

(13,129

)

 

 

 

 

 

 

(13,129

)

 

 

Contribution related to restricted stock awards and stock option issuances by Holdings

 

 

 

5,794

 

 

 

 

 

5,794

 

 

 

 

 

Tax benefit from stock based awards

 

 

 

11

 

 

 

 

 

11

 

 

 

 

 

Acquisition of non-controlling interests

 

 

 

3,470

 

 

 

 

 

 

 

 

 

3,470

 

Distributions to non-controlling interests

 

 

 

(3,712

)

 

 

 

 

 

 

 

 

(3,712

)

Exchange of ownership interests with non-controlling interests

 

 

 

8,664

 

 

 

 

 

1,689

 

 

 

6,975

 

Other

 

 

 

(1,274

)

 

 

 

 

 

 

(1,274

)

 

 

Balance at June 30, 2015

 

 

 

$

854,159

 

0

 

$

0

 

$

894,225

 

$

(88,292

)

$

48,226

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6



Table of Contents

 

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Select Medical Holdings Corporation

 

Select Medical Corporation

 

 

 

For the Six Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 

2014

 

2015

 

2014

 

2015

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

 

 

Net income

 

$

72,361

 

$

77,339

 

$

72,361

 

$

77,339

 

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

 

 

 

 

 

 

 

 

 

Distributions from unconsolidated subsidiaries

 

 

52

 

 

52

 

Depreciation and amortization

 

33,425

 

39,196

 

33,425

 

39,196

 

Provision for bad debts

 

22,133

 

24,956

 

22,133

 

24,956

 

Equity in earnings of unconsolidated subsidiaries

 

(2,147

)

(6,440

)

(2,147

)

(6,440

)

Loss on early retirement of debt

 

2,277

 

 

2,277

 

 

Loss from disposal of assets

 

143

 

251

 

143

 

251

 

Non-cash stock compensation expense

 

4,120

 

5,794

 

4,120

 

5,794

 

Amortization of debt discount, premium and issuance costs

 

3,849

 

4,027

 

3,849

 

4,027

 

Deferred income taxes

 

1,275

 

(4,428

)

1,275

 

(4,428

)

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

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(84,249

)

(89,265

)

(84,249

)

(89,265

)

Other current assets

 

(2,935

)

(8,038

)

(2,935

)

(8,038

)

Other assets

 

(3,462

)

3,568

 

(3,462

)

3,568

 

Accounts payable

 

10,343

 

8,925

 

10,343

 

8,925

 

Accrued expenses

 

(14,086

)

707

 

(14,086

)

707

 

Income taxes

 

(878

)

18,416

 

(878

)

18,416

 

Net cash provided by operating activities

 

42,169

 

75,060

 

42,169

 

75,060

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(50,493

)

(68,912

)

(50,493

)

(68,912

)

Investment in businesses

 

(175

)

(855

)

(175

)

(855

)

Acquisition of businesses, net of cash acquired

 

(454

)

(1,047,997

)

(454

)

(1,047,997

)

Net cash used in investing activities

 

(51,122

)

(1,117,764

)

(51,122

)

(1,117,764

)

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

Borrowings on revolving facilities

 

515,000

 

660,000

 

515,000

 

660,000

 

Payments on revolving facilities

 

(425,000

)

(400,000

)

(425,000

)

(400,000

)

Payments on Select term loans

 

(33,994

)

(26,884

)

(33,994

)

(26,884

)

Issuance of 6.375% senior notes, includes premium

 

111,650

 

 

111,650

 

 

Proceeds from Concentra term loans, net of discounts

 

 

646,875

 

 

646,875

 

Borrowings of other debt

 

6,111

 

9,590

 

6,111

 

9,590

 

Principal payments on other debt

 

(7,049

)

(8,320

)

(7,049

)

(8,320

)

Debt issuance costs

 

(4,434

)

(23,300

)

(4,434

)

(23,300

)

Dividends paid to common stockholders

 

(27,153

)

(13,129

)

 

 

Dividends paid to Holdings

 

 

 

(154,653

)

(13,129

)

Repurchase of common stock

 

(127,500

)

 

 

 

Proceeds from issuance of common stock

 

5,297

 

1,325

 

 

 

Proceeds from issuance of non-controlling interest

 

 

217,065

 

 

217,065

 

Equity investment by Holdings

 

 

 

5,297

 

1,325

 

Proceeds from (repayments of) bank overdrafts

 

(3,314

)

5,590

 

(3,314

)

5,590

 

Tax benefit from stock based awards

 

 

11

 

 

11

 

Distributions to non-controlling interests

 

(1,840

)

(4,282

)

(1,840

)

(4,282

)

Net cash provided by financing activities

 

7,774

 

1,064,541

 

7,774

 

1,064,541

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(1,179

)

21,837

 

(1,179

)

21,837

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

4,319

 

3,354

 

4,319

 

3,354

 

Cash and cash equivalents at end of period

 

$

3,140

 

$

25,191

 

$

3,140

 

$

25,191

 

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

39,107

 

$

39,932

 

$

39,107

 

$

39,932

 

Cash paid for taxes

 

$

45,471

 

$

32,702

 

$

45,471

 

$

32,702

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

 

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

1.              Basis of Presentation

 

The unaudited condensed consolidated financial statements of Select Medical Holdings Corporation (“Holdings”) and Select Medical Corporation (“Select”) as of June 30, 2015, and for the three and six month periods ended June 30, 2014 and 2015, have been prepared in accordance with generally accepted accounting principles (“GAAP”).  In the opinion of management, such information contains all adjustments, which are normal and recurring in nature, necessary for a fair statement of the financial position, results of operations, and cash flow for such periods.  All significant intercompany transactions and balances have been eliminated.  The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2015.  Holdings and Select, and their subsidiaries, are collectively referred to as the “Company.” The condensed consolidated financial statements of Holdings include the accounts of its wholly-owned subsidiary Select. Holdings conducts substantially all of its business through Select and its subsidiaries.

 

Certain information and disclosures normally included in the notes to consolidated financial statements have been condensed or omitted consistent with the rules and regulations of the Securities and Exchange Commission (the “SEC”), although the Company believes the disclosure is adequate to make the information presented not misleading.  The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2015.

 

2.              Accounting Policies

 

Use of Estimates

 

The preparation of 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 financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

 

Redeemable Non-Controlling Interests

 

The interests held by other parties in subsidiaries, limited liability companies, and limited partnerships owned and controlled by the Company are generally reported as a component of stockholders’ equity. Some of those non-controlling interests consist of outside owners that have certain “put rights,” that are currently exercisable, and that, if exercised, require the Company to purchase the member’s non-controlling interest. These redeemable non-controlling interests that are currently redeemable, or considered probable of becoming redeemable, have been adjusted to their approximate redemption values, and are reported outside of the stockholders’ equity section. As of June 30, 2015 and December 31, 2014, the Company believes the redemption values of the non-controlling ownership interests approximates the fair value of those interests classified as redeemable non-controlling interests. The changes in the redeemable non-controlling interests amounts for the six months ended June 30, 2015 are as follows (in thousands):

 

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Table of Contents

 

Balance at December 31, 2014 — redeemable non-controlling interests

 

$

10,985

 

Issuance of non-controlling interests in Concentra Group Holdings

 

217,065

 

Acquisition of Concentra Inc. non-controlling interests

 

28,865

 

Changes in the redemption amounts of non-controlling interests

 

1,274

 

Net loss attributable to non-controlling interests

 

(432

)

Distributions to non-controlling interests

 

(570

)

Balance at June 30, 2015 — redeemable non-controlling interests

 

$

257,187

 

 

3.              Concentra Acquisition

 

On June 1, 2015, MJ Acquisition Corporation, a joint venture that Select created with Welsh, Carson, Anderson & Stowe XII, L.P. (“WCAS”), consummated the acquisition of Concentra Inc. (“Concentra”), the indirect operating subsidiary of Concentra Group Holdings, LLC (“Group Holdings”), and its subsidiaries.  Pursuant to the terms of the stock purchase agreement (the “Purchase Agreement”), dated as of March 22, 2015, by and among MJ Acquisition Corporation, Concentra and Humana Inc. (“Humana”), MJ Acquisition Corporation acquired 100% of the issued and outstanding equity securities of Concentra, from Humana for $1,045.3 million, net of $3.7 million of cash acquired.

 

Select entered into a Subscription Agreement (the “Subscription Agreement”), by and among Select, WCAS, Group Holdings and the other members of Group Holdings.  Pursuant to the Subscription Agreement, Select purchased Class A equity interests of Group Holdings for an aggregate purchase price of $217.9 million, representing a majority (50.1%) of the voting equity interests in Group Holdings. WCAS and the other members purchased Class A interests of Group Holdings for an aggregate purchase price of $217.1 million, representing a 49.9% share of the voting equity interests of Group Holdings.

 

MJ Acquisition Corporation entered into the Concentra credit facilities (See Footnote 6) to fund a portion of the purchase price for all of the issued and outstanding stock of Concentra. Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower under the Concentra credit facilities.

 

Group Holdings contributed cash of $435.0 million, to MJ Acquisition Corporation. MJ Acquisition Corporation used the cash, together with $650.0 million in borrowings under the Concentra credit facilities, to pay the purchase price. Select owns 50.1% of the voting interests of Group Holdings, the indirect parent of Concentra. Concentra’s financial results are consolidated with Select’s as of June 1, 2015. Group Holdings issued a non-controlling interest valued at $217.1 million.

 

Concentra, formed in 1979, is one of the largest providers of occupational health, consumer health, physical therapy and veteran’s healthcare services in the United States based on the number of facilities.  As of June 30, 2015, Concentra operated 300 freestanding medical centers in 38 states, 150 medical facilities located at the workplaces of Concentra’s employer customers and 30 Department of Veterans Affairs community-based outpatient clinics.

 

The Concentra acquisition is being accounted for under the provisions of Accounting Standards Codification (“ASC”) 805, Business Combinations. The Company will allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The Company is in the process of completing its assessment of fair values for identifiable tangible and intangible assets, and liabilities assumed; therefore, the values set forth below are subject to adjustment during the measurement period for such activities as estimating useful lives of long-lived assets and finite lived intangibles and completing assessment of fair values by obtaining appraisals. The amount of these potential adjustments could be significant. The Company expects to complete its purchase price allocation activities by December 31, 2015.

 

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Table of Contents

 

The following table summarizes the preliminary allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed, in accordance with the acquisition method of accounting (in thousands):

 

Cash and cash equivalents

 

$

3,772

 

Identifiable tangible assets, excluding cash and cash equivalents

 

389,782

 

Identifiable intangible assets

 

190,000

 

Goodwill

 

702,023

 

Total assets

 

1,285,577

 

 

 

 

 

Total current liabilities

 

91,557

 

Total non-current liabilities

 

112,601

 

Non-controlling interests

 

32,336

 

Total liabilities

 

236,494

 

 

 

 

 

Net assets acquired

 

1,049,083

 

Cash and cash equivalents acquired

 

(3,772

)

Net cash paid

 

$

1,045,311

 

 

Goodwill of $702.0 million has been preliminarily recognized in the transaction, representing the excess of the purchase price over the value of the tangible and intangible assets acquired and liabilities assumed. The goodwill has been pushed down to Concentra and is not deductible for tax purposes. However, prior to its acquisition by MJ Acquisition Corporation, Concentra completed certain acquisitions that resulted in goodwill with an estimated value of $21.1 million that is deductible for tax purposes, which the Company will deduct through 2025.

 

For the period of June 1, 2015 through June 30, 2015, Concentra contributed net revenue of $86.8 million and a net loss of approximately $0.4 million reflected in the Company’s Consolidated Statement of Operations. We incurred $4.7 million of acquisition costs for the period ended June 30, 2015. Acquisition costs consist of legal, advisory, and due diligence fees and expenses.

 

The following pro forma unaudited results of operations have been prepared assuming the acquisition of Concentra occurred January 1, 2014. These results are not necessarily indicative of results of future operations nor of the results that would have actually occurred had the acquisition been consummated January 1, 2014.

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2014

 

2015

 

2014

 

2015

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

1,026,748

 

$

1,087,953

 

$

2,033,445

 

$

2,094,650

 

Net income

 

35,421

 

40,532

 

63,832

 

68,943

 

Income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.27

 

$

0.31

 

$

0.47

 

$

0.53

 

Diluted

 

$

0.27

 

$

0.31

 

$

0.47

 

$

0.52

 

 

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Table of Contents

 

The pro forma financial information is based on the preliminary allocation of the purchase price and therefore subject to adjustment upon finalizing the purchase price allocation during the measurement period. The net income tax impact was calculated at a statutory rate, as if Concentra had been a subsidiary of the company as of January 1, 2014.

 

Pro forma results for the three months ended June 30, 2015 were adjusted to include approximately $8.6 million of interest expense, an income tax benefit of approximately $1.8 million, approximately $0.3 million of rent expense, and approximately $0.1 million in net loss attributable to non-controlling interest. Results for the same period were also adjusted to exclude Concentra acquisition costs of $4.7 million and amortization expense of approximately $0.7 million.

 

Pro forma results for the three months ended June 30, 2014 were adjusted to include approximately $12.0 million of interest expense, approximately $1.4 million in net income attributable to non-controlling interest, an income tax benefit of approximately $1.3 million, and approximately $0.5 million of rent expense.  Results for the same period were also adjusted to exclude amortization expense of approximately $1.0 million.

 

Pro forma results for the six months ended June 30, 2015 were adjusted to include approximately $20.5 million of interest expense, an income tax benefit of approximately $6.5 million, approximately $0.9 million of rent expense, and $0.8 million in net loss attributable to non-controlling interest. Results for the same period were also adjusted to exclude Concentra acquisition costs of $4.7 million and amortization expense of approximately $1.8 million.

 

Pro forma results for the six months ended June 30, 2014 were adjusted to include approximately $24.0 million of interest expense, $4.7 million of Concentra acquisition costs, an income tax benefit of approximately $5.0 million, approximately $2.0 million of net loss attributable to non-controlling interest, and approximately $0.9 million of rent expense.  Results for the same period were also adjusted to exclude amortization expense of approximately $2.1 million.

 

4.              Property and Equipment

 

Property and equipment consists of the following:

 

 

 

December 31,
2014

 

June 30,
2015

 

 

 

(in thousands)

 

Land

 

$

71,635

 

$

74,510

 

Leasehold improvements

 

155,648

 

274,606

 

Buildings and improvements

 

396,228

 

404,936

 

Furniture and equipment

 

272,919

 

360,632

 

Construction-in-progress

 

41,230

 

72,915

 

 

 

937,660

 

1,187,599

 

Accumulated depreciation and amortization

 

(395,350

)

(416,189

)

Total property and equipment

 

$

542,310

 

$

771,410

 

 

Depreciation expense was $20.7 million and $17.1 million for the three months ended June 30, 2015 and 2014, respectively.  Depreciation expense was $37.8 million and $33.2 million for the six months ended June 30, 2015 and 2014, respectively.

 

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Table of Contents

 

5.              Intangible Assets

 

The net carrying value of the Company’s goodwill and identifiable intangible assets consist of the following:

 

 

 

December 31,
2014

 

June 30,
2015

 

 

 

(in thousands)

 

Goodwill

 

$

1,642,083

 

$

2,353,975

 

 

 

 

 

 

 

Identifiable intangibles:

 

 

 

 

 

Trademarks

 

$

57,709

 

$

140,709

 

Certificates of need

 

12,727

 

12,884

 

Accreditations

 

2,083

 

2,083

 

Customer relationships

 

 

105,966

 

Total identifiable intangibles

 

$

72,519

 

$

261,642

 

 

The Company’s accreditations and trademarks have renewal terms. The costs to renew these intangibles are expensed as incurred. At June 30, 2015, the accreditations and trademarks have a weighted average time until next renewal of approximately 1.5 years and 4.5 years, respectively.

 

The changes in the carrying amount of goodwill for the Company’s reportable segments for the six months ended June 30, 2015 are as follows:

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra

 

Total

 

 

 

(in thousands)

 

Balance as of December 31, 2014

 

$

1,335,460

 

$

306,623

 

$

 

$

1,642,083

 

Goodwill acquired

 

9,922

 

 

702,023

 

711,945

 

Measurement period adjustment

 

(53

)

 

 

 

(53

)

Balance as of June 30, 2015

 

$

1,345,329

 

$

306,623

 

$

702,023

 

$

2,353,975

 

 

Refer to Footnote 3 — Concentra Acquisition for details of the goodwill acquired during the period.

 

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Table of Contents

 

6.              Indebtedness

 

For purposes of this indebtedness footnote, references to Select exclude Concentra, because the Concentra credit facilities are non-recourse to Holdings and Select.

 

The components of long-term debt and notes payable are as follows:

 

 

 

December 31,
2014

 

June 30,
2015

 

 

 

(in thousands)

 

Select 6.375% senior notes(1)

 

$

711,465

 

$

711,350

 

Select credit facilities:

 

 

 

 

 

Select revolving facility

 

60,000

 

320,000

 

Select term loans(2) 

 

775,996

 

749,823

 

Other - Select

 

5,515

 

15,554

 

Total Select debt

 

1,552,976

 

1,796,727

 

Less: Select current maturities

 

10,874

 

10,311

 

Select long-term debt maturities

 

$

1,542,102

 

$

1,786,416

 

 

 

 

 

 

 

Concentra credit facilities:

 

 

 

 

 

Concentra revolving facility

 

 

 

$

 

Concentra term loans(3)

 

 

 

646,908

 

Other - Concentra

 

 

 

5,132

 

Total Concentra debt

 

 

 

652,040

 

Less: Concentra current maturities

 

 

 

7,137

 

Concentra long-term debt maturities

 

 

 

$

644,903

 

 

 

 

 

 

 

Total current maturities

 

$

10,874

 

$

17,448

 

Total long-term debt maturities

 

1,542,102

 

2,431,319

 

Total debt

 

$

1,552,976

 

$

2,448,767

 

 


(1)         Includes unamortized premium of $1.5 million and $1.4 million at December 31, 2014 and June 30, 2015, respectively.

(2)         Includes unamortized discounts of $4.2 million and $3.5 million at December 31, 2014 and June 30, 2015, respectively.

(3)         Includes unamortized discounts of $3.1 million at June 30, 2015.

 

Excess Cash Flow Payment

 

On March 4, 2015, Select made a principal prepayment of $26.9 million associated with the Select series D term loan and Select series E term loan (collectively, the “Select term loans”) in accordance with the provision in the Select credit facilities (as defined below) that requires mandatory prepayments of term loans as a result of annual excess cash flow as defined in the Select credit facilities.

 

Select revolving facility

 

On May 20, 2015 Select entered into an additional credit extension amendment of its revolving credit facility (the “Select revolving facility” and together with the Select term loans, the “Select credit facilities”) to obtain $100.0 million of incremental revolving commitments.  The revolving commitments mature on March 1, 2018.

 

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Table of Contents

 

Concentra credit facilities

 

Concentra first lien credit agreement

 

On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into a first lien credit agreement (the “Concentra first lien credit agreement”). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower. The Concentra first lien credit agreement provides for $500.0 million in first lien loans comprised of a $450.0 million, seven-year term loan (“Concentra first lien term loan”) and a $50.0 million, five-year revolving credit facility (“Concentra revolving facility”). The borrowings under the Concentra first lien credit agreement are guaranteed, on a first lien basis, by Concentra Holdings, Inc., the direct parent of Concentra. Select and Holdings are not parties to the Concentra first lien credit agreement and are not obligors with respect to Concentra’s debt under such agreement.

 

Borrowings under the Concentra first lien credit agreement will bear interest at a rate equal to:

 

·                  in the case of the Concentra first lien term loan, Adjusted LIBO (as defined in the Concentra first lien credit agreement) plus 3.00% (subject to an Adjusted LIBO floor of 1.00%), or Alternate Base Rate (as defined in the Concentra first lien credit agreement) plus 2.00% (subject to an Alternate Base Rate floor of 2.00%); and

 

·                  in the case of the Concentra revolving facility, Adjusted LIBO plus a percentage ranging from 2.75% to 3.00%, or Alternate Base Rate plus a percentage ranging from 1.75% to 2.00%, in each case based on Concentra’s leverage ratio.

 

The Concentra first lien term loan will amortize in equal quarterly installments, in aggregate annual amounts equal to 0.25% of the original principal amount of the first lien term loan commencing on September 30, 2015. The balance of the Concentra first lien term loan will be payable on June 1, 2022. The Concentra revolving facility matures on June 1, 2020.

 

Concentra second lien credit agreement

 

On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into a second lien credit agreement (the “Concentra second lien credit agreement” and, together with the Concentra first lien credit agreement, the “Concentra credit facilities”). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower.  The Concentra second lien credit agreement provides for a $200.0 million eight-year second lien term loan (“Concentra second lien term loan” and, together with the Concentra first lien term loans, the “Concentra term loans”). The borrowings under the Concentra second lien credit agreement are guaranteed, on a second lien basis, by Concentra Holdings, Inc., the direct parent of Concentra. Select and Holdings are not parties to the Concentra second lien credit agreement and are not obligors with respect to Concentra’s debt under such agreement.

 

Borrowings under the Concentra second lien term loan will bear interest at a rate equal to Adjusted LIBO Rate (as defined in the Concentra second lien credit agreement) plus 8.00% (subject to an Adjusted LIBO floor of 1.00%), or Alternate Base Rate (as defined in the Concentra second lien credit agreement) plus 7.00% (subject to an Alternate Base Rate floor of 2.00%).

 

In the event that, on or prior to June 1, 2016, Concentra prepays any of the Concentra second lien term loan to refinance such term loan, Concentra shall pay a premium of 2.00% of the aggregate principal amount of the Concentra second lien term loan prepaid and if Concentra prepays any of the Concentra second lien term loan to refinance such term loan on or prior to June 1, 2017, Concentra shall pay a premium of 1.00% of the

 

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Table of Contents

 

aggregate principal amount of the Concentra second lien term loan prepaid.  The Concentra second lien term loan will be payable on June 1, 2023.

 

Maturities of Long-Term Debt and Notes Payable

 

Maturities of the Company’s long-term debt for the period from July 1, 2015 through December 31, 2015 and the years after 2015 are approximately as follows and are presented including the discounts on Select term loans and premium on Select’s senior notes, and including the discounts on Concentra credit facilities:

 

 

 

Select

 

Concentra

 

Total

 

 

 

(in thousands)

 

July 1, 2015 — December 31, 2015

 

$

4,757

 

$

3,698

 

$

8,455

 

2016

 

282,135

 

5,504

 

287,639

 

2017

 

6,402

 

4,139

 

10,541

 

2018

 

790,645

 

4,151

 

794,796

 

2019

 

2,465

 

4,165

 

6,630

 

2020 and beyond

 

710,323

 

630,383

 

1,340,706

 

Total

 

$

1,796,727

 

$

652,040

 

$

2,448,767

 

 

Loss on Early Retirement of Debt

 

On March 4, 2014, Select amended the Select term loans under the Select credit facilities.  During the six months ended June 30, 2014, the Company recognized a loss of $2.3 million for unamortized debt issuance costs, unamortized original issue discount and certain fees incurred related to the Select term loans modifications.

 

7.              Fair Value

 

Financial instruments include cash and cash equivalents, notes payable, and long-term debt.  The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

 

The carrying value of the Select credit facilities was $836.0 million and $1,069.8 million at December 31, 2014 and June 30, 2015, respectively.  The fair value of the Select credit facilities was $816.6 million and $1,049.7 million at December 31, 2014 and June 30, 2015, respectively.  The fair value of the Select credit facilities was based on quoted market prices for this debt in the syndicated loan market.

 

The carrying value of Select’s 6.375% senior notes was $711.5 million and $711.4 million at December 31, 2014 and June 30, 2015, respectively.  The fair value of Select’s 6.375% senior notes was $722.4 million and $711.8 million at December 31, 2014 and June 30, 2015, respectively.  The fair value of this debt was based on quoted market prices.

 

The carrying value of the Concentra term loans, was $646.9 million at June 30, 2015.  The fair value of the Concentra term loans, was $645.7 million at June 30, 2015.  The fair value of Concentra term loans was based on quoted market prices for this debt in the syndicated loan market.

 

The Company considers the inputs in the valuation process to be Level 2 in the fair value hierarchy.  Level 2 in the fair value hierarchy is defined as inputs that are observable for the asset or liability, either directly or indirectly which includes quoted prices for identical assets or liabilities in markets that are not active.

 

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8.              Segment Information

 

The Company’s reportable segments consist of: (i) specialty hospitals, (ii) outpatient rehabilitation, and (iii) Concentra. Other activities include the Company’s corporate services and certain other non-consolidating joint ventures and minority investments in other healthcare related businesses. The outpatient rehabilitation reportable segment has two operating segments: outpatient rehabilitation clinics and contract therapy. These operating segments are aggregated for reporting purposes as they have common economic characteristics and provide a similar service to a similar patient base. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance of the segments based on Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, Concentra acquisition costs, equity in earnings (losses) of unconsolidated subsidiaries, and other income (expense).

 

The following tables summarize selected financial data for the Company’s reportable segments. The segment results of Holdings are identical to those of Select.

 

 

 

Three Months Ended June 30, 2014

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra(1)

 

Other

 

Total

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

557,833

 

$

214,798

 

 

 

$

131

 

$

772,762

 

Adjusted EBITDA

 

88,688

 

30,432

 

 

 

(17,766

)

101,354

 

Total assets

 

2,271,256

 

532,529

 

 

 

99,986

 

2,903,771

 

Capital expenditures

 

19,800

 

2,546

 

 

 

848

 

23,194

 

 

 

 

Three Months Ended June 30, 2015

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra(1)

 

Other

 

Total

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

592,336

 

$

207,795

 

$

86,829

 

$

105

 

$

887,065

 

Adjusted EBITDA

 

91,447

 

28,722

 

11,199

 

(16,471

)

114,897

 

Total assets

 

2,372,723

 

538,586

 

1,320,941

 

109,085

 

4,341,335

 

Capital expenditures

 

31,042

 

3,103

 

3,854

 

3,065

 

41,064

 

 

 

 

Six Months Ended June 30, 2014

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra(1)

 

Other

 

Total

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

1,122,458

 

$

412,648

 

 

 

$

234

 

$

1,535,340

 

Adjusted EBITDA

 

180,838

 

51,421

 

 

 

(34,077

)

198,182

 

Total assets

 

2,271,256

 

532,529

 

 

 

99,986

 

2,903,771

 

Capital expenditures

 

41,298

 

6,176

 

 

 

3,019

 

50,493

 

 

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Table of Contents

 

 

 

Six Months Ended June 30, 2015

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra(1)

 

Other

 

Total

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

1,191,117

 

$

404,238

 

$

86,829

 

$

224

 

$

1,682,408

 

Adjusted EBITDA

 

187,919

 

50,855

 

11,199

 

(36,136

)

213,837

 

Total assets

 

2,372,723

 

538,586

 

1,320,941

 

109,085

 

4,341,335

 

Capital expenditures

 

53,835

 

7,025

 

3,854

 

4,198

 

68,912

 

 

A reconciliation of Adjusted EBITDA to income before income taxes is as follows:

 

 

 

Three Months Ended June 30, 2014

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra(1)

 

Other

 

Total

 

 

 

(in thousands)

 

Adjusted EBITDA

 

$

88,688

 

$

30,432

 

 

 

$

(17,766

)

 

 

Depreciation and amortization

 

(13,067

)

(3,225

)

 

 

(904

)

 

 

Stock compensation expense

 

 

 

 

 

(1,965

)

 

 

Income (loss) from operations

 

$

75,621

 

$

27,207

 

 

 

$

(20,635

)

$

82,193

 

Equity in earnings of unconsolidated subsidiaries

 

 

 

 

 

 

 

 

 

1,239

 

Interest expense

 

 

 

 

 

 

 

 

 

(21,663

)

Income before income taxes

 

 

 

 

 

 

 

 

 

$

61,769

 

 

 

 

Three Months Ended June 30, 2015

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra(1)

 

Other

 

Total

 

 

 

(in thousands)

 

Adjusted EBITDA

 

$

91,447

 

$

28,722

 

$

11,199

 

$

(16,471

)

 

 

Depreciation and amortization

 

(13,404

)

(3,177

)

(4,194

)

(1,073

)

 

 

Stock compensation expense

 

 

 

 

(3,323

)

 

 

Concentra acquisition costs

 

 

 

(4,715

)

 

 

 

Income (loss) from operations

 

$

78,043

 

$

25,545

 

$

2,290

 

$

(20,867

)

$

85,011

 

Equity in earnings of unconsolidated subsidiaries

 

 

 

 

 

 

 

 

 

3,848

 

Interest expense

 

 

 

 

 

 

 

 

 

(25,288

)

Income before income taxes

 

 

 

 

 

 

 

 

 

$

63,571

 

 

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Table of Contents

 

 

 

Six Months Ended June 30, 2014

 

 

 

Specialty
Hospitals

 

Outpatient
Rehabilitation

 

Concentra(1)

 

Other

 

Total

 

 

 

(in thousands)

 

Adjusted EBITDA

 

$

180,838

 

$

51,421

 

 

 

$

(34,077

)

 

 

Depreciation and amortization