MECHANICSBURG, Pa.,
Feb. 20, 2020 /PRNewswire/ --
Select Medical Holdings Corporation ("Select Medical") (NYSE: SEM)
today announced results for its fourth quarter and year ended
December 31, 2019.
For the fourth quarter ended December 31, 2019, net
operating revenues increased 8.7% to $1,374.6 million, compared to $1,264.7 million for the same quarter, prior
year. Income from operations increased 27.3% to $112.4 million for the fourth quarter ended
December 31, 2019, compared to
$88.3 million for the same quarter,
prior year. Net income increased 46.9% to $43.7 million for the fourth quarter ended
December 31, 2019, compared to
$29.7 million for the same quarter,
prior year. For the fourth quarter ended December 31, 2019,
net income included pre-tax losses on early retirement of debt of
$19.4 million. For the fourth quarter
ended December 31, 2018, net income
included pre-tax losses on early retirement of debt of $3.9 million. Adjusted EBITDA increased 16.9% to
$171.9 million for the fourth quarter
ended December 31, 2019, compared to
$147.1 million for the same quarter,
prior year. Earnings per common share increased to
$0.24 on a fully diluted basis for
the fourth quarter ended December 31,
2019, compared to $0.18 for
the same quarter, prior year. Adjusted earnings per common share
was $0.31 on a fully diluted basis
for the fourth quarter ended December 31,
2019, compared to $0.20 for
the same quarter, prior year. Adjusted earnings per common
share excludes the losses on early retirement of debt and their
related tax effects for both the fourth quarters ended
December 31, 2019 and 2018. The definition of Adjusted EBITDA
and a reconciliation of net income to Adjusted EBITDA are presented
in table IX of this release. A reconciliation of earnings per
common share to adjusted earnings per common share is presented in
table X of this release.
For the year ended December 31, 2019, net operating
revenues increased 7.3% to $5,453.9
million, compared to $5,081.3
million for the prior year. Income from operations increased
13.1% to $471.9 million for the year
ended December 31, 2019, compared to $417.3 million for the prior year. Net income
increased 13.6% to $201.0 million for
the year ended December 31, 2019, compared to $176.9 million for the prior year. For the year
ended December 31, 2019, net income
included pre-tax losses on early retirement of debt of $38.1 million and a pre-tax gain on sale of
businesses of $6.5 million. For the
year ended December 31, 2018, net income included pre-tax
losses on early retirement of debt of $14.2
million, pre-tax gains on sales of businesses of
$9.0 million, and pre-tax U.S.
HealthWorks acquisition costs of $2.9
million. Adjusted EBITDA increased 10.2% to $710.9 million for the year ended
December 31, 2019, compared to $645.2
million for the prior year. Earnings per common share
increased to $1.10 on a fully diluted
basis for the year ended December 31, 2019, compared to
$1.02 for the prior year. Adjusted
earnings per common share was $1.24
on a fully diluted basis for the year ended December 31, 2019, compared to $1.03 for the prior year. Adjusted earnings per
common share excludes the losses on early retirement of debt and
related costs and gain on sale of businesses and their related tax
effects for the year ended December 31, 2019. Adjusted
earnings per common share excludes the losses on early retirement
of debt, gains on sales of businesses, U.S. HealthWorks acquisition
costs, and their related tax effects for the year ended
December 31, 2018. The definition of Adjusted EBITDA and a
reconciliation of net income to Adjusted EBITDA are presented in
table IX of this release. A reconciliation of earnings per common
share to adjusted earnings per common share is presented in table X
of this release.
Company Overview
Select Medical is one of the largest operators of critical
illness recovery hospitals, rehabilitation hospitals, outpatient
rehabilitation clinics, and occupational health centers in
the United States based on the
number of facilities. Select Medical's reportable segments include
the critical illness recovery hospital segment, the rehabilitation
hospital segment, the outpatient rehabilitation segment, and the
Concentra segment. As of December 31,
2019, Select Medical operated 101 critical illness recovery
hospitals in 28 states, 29 rehabilitation hospitals in 12 states,
and 1,740 outpatient rehabilitation clinics in 37 states and the
District of Columbia. Select
Medical's joint venture subsidiary Concentra operated 521
occupational health centers in 41 states. Concentra also provides
contract services at employer worksites and Department of Veterans
Affairs community-based outpatient clinics. At December 31, 2019, Select Medical had operations
in 47 states and the District of
Columbia. Information about Select Medical is available at
www.selectmedical.com.
Critical Illness Recovery Hospital Segment
For the fourth quarter ended December 31,
2019, net operating revenues for the critical illness
recovery hospital segment increased 6.7% to $454.9 million, compared to $426.3 million for the same quarter, prior year.
Adjusted EBITDA for the critical illness recovery hospital segment
increased 8.0% to $60.5 million for
the fourth quarter ended December 31,
2019, compared to $56.0
million for the same quarter, prior year. The Adjusted
EBITDA margin for the critical illness recovery hospital segment
was 13.3% for the fourth quarter ended December 31, 2019, compared to 13.1% for the same
quarter, prior year. Certain critical illness recovery hospital key
statistics are presented in table VII of this release for both the
fourth quarters ended December 31,
2019 and 2018.
For the year ended December 31,
2019, net operating revenues for the critical illness
recovery hospital segment increased 4.7% to $1,836.5 million, compared to $1,753.6 million for the prior year. Adjusted
EBITDA for the critical illness recovery hospital segment increased
4.9% to $254.9 million for the year
ended December 31, 2019, compared to
$243.0 million for the prior year.
The Adjusted EBITDA margin for the critical illness recovery
hospital segment was 13.9% for both the years ended December 31, 2019 and 2018. Certain critical
illness recovery hospital key statistics are presented in table
VIII of this release for both the years ended December 31, 2019 and 2018.
Rehabilitation Hospital Segment
For the fourth quarter ended December 31,
2019, net operating revenues for the rehabilitation hospital
segment increased 20.9% to $182.7
million, compared to $151.1
million for the same quarter, prior year. Adjusted EBITDA
for the rehabilitation hospital segment increased 51.4% to
$43.3 million for the fourth quarter
ended December 31, 2019, compared to
$28.6 million for the same quarter,
prior year. The Adjusted EBITDA margin for the rehabilitation
hospital segment was 23.7% for the fourth quarter ended
December 31, 2019, compared to 18.9%
for the same quarter, prior year. For the fourth quarter ended
December 31, 2018, the Adjusted
EBITDA results for the rehabilitation hospital segment include
start-up losses of approximately $0.9
million. Certain rehabilitation hospital key statistics are
presented in table VII of this release for both the fourth quarters
ended December 31, 2019 and 2018.
For the year ended December 31,
2019, net operating revenues for the rehabilitation hospital
segment increased 14.9% to $671.0
million, compared to $583.7
million for the prior year. Adjusted EBITDA for the
rehabilitation hospital segment increased 24.7% to $135.9 million for the year ended December 31, 2019, compared to $108.9 million for the prior year. The Adjusted
EBITDA margin for the rehabilitation hospital segment was 20.2% for
the year ended December 31, 2019,
compared to 18.7% for the prior year. The Adjusted EBITDA results
for the rehabilitation hospital segment include start-up losses of
approximately $8.8 million for the
year ended December 31, 2019,
compared to approximately $4.7
million for the prior year. Certain rehabilitation hospital
key statistics are presented in table VIII of this release for both
the years ended December 31, 2019 and
2018.
Outpatient Rehabilitation Segment
For the fourth quarter ended December 31,
2019, net operating revenues for the outpatient
rehabilitation segment increased 7.7% to $271.9 million, compared to $252.4 million for the same quarter, prior year.
Adjusted EBITDA for the outpatient rehabilitation segment increased
14.9% to $40.2 million for the fourth
quarter ended December 31, 2019,
compared to $35.0 million for the
same quarter, prior year. The Adjusted EBITDA margin for the
outpatient rehabilitation segment was 14.8% for the fourth quarter
ended December 31, 2019, compared to
13.9% for the same quarter, prior year. Certain outpatient
rehabilitation key statistics are presented in table VII of this
release for both the fourth quarters ended December 31, 2019 and 2018.
For the year ended December 31,
2019, net operating revenues for the outpatient
rehabilitation segment increased 5.0% to $1,046.0 million, compared to $995.8 million for the prior year. Adjusted
EBITDA for the outpatient rehabilitation segment increased 6.9% to
$151.8 million for the year ended
December 31, 2019, compared to
$142.0 million for the prior year.
The Adjusted EBITDA margin for the outpatient rehabilitation
segment was 14.5% for the year ended December 31, 2019, compared to 14.3% for the
prior year. Certain outpatient rehabilitation key statistics are
presented in table VIII of this release for both the years ended
December 31, 2019 and 2018.
Concentra Segment
The financial results for the Concentra segment include U.S.
HealthWorks beginning February 1,
2018.
For the fourth quarter ended December 31,
2019, net operating revenues for the Concentra segment
increased 3.4% to $397.1 million,
compared to $384.3 million for the
same quarter, prior year. Adjusted EBITDA for the Concentra segment
increased 6.8% to $56.5 million for
the fourth quarter ended December 31,
2019, compared to $52.9
million for the same quarter, prior year. The Adjusted
EBITDA margin for the Concentra segment was 14.2% for the fourth
quarter ended December 31, 2019,
compared to 13.8% for the same quarter, prior year. Certain
Concentra key statistics are presented in table VII of this release
for both the fourth quarters ended December
31, 2019 and 2018.
For the year ended December 31,
2019, net operating revenues for the Concentra segment
increased 4.6% to $1,628.8 million,
compared to $1,557.7 million for the
prior year. Adjusted EBITDA for the Concentra segment
increased 9.7% to $276.5 million
for the year ended December 31, 2019,
compared to $252.0 million for the
prior year. The Adjusted EBITDA margin for the Concentra
segment was 17.0% for the year ended December 31, 2019, compared to 16.2% for the
prior year. Certain Concentra key statistics are presented in table
VIII of this release for both the years ended December 31, 2019 and 2018.
Stock Repurchase Program
The board of directors of Select Medical has authorized a common
stock repurchase program to repurchase up to $500.0 million worth of shares of its common
stock. The program has been extended until December 31, 2020, and will remain in effect
until then, unless further extended or earlier terminated 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. Select Medical funds this program with cash on
hand and borrowings under its revolving credit facility.
During the year ended December 31, 2019, Select Medical
repurchased 2,165,221 shares at a cost of approximately
$33.2 million, or $15.32 per share, which includes transaction
costs. Since the inception of the program through December 31,
2019, Select Medical has repurchased 38,089,349 shares at a cost of
approximately $347.9 million, or
$9.13 per share, which includes
transaction costs.
Financing Transactions
On December 10, 2019, Select
Medical issued and sold $675.0
million aggregate principal amount of 6.250% senior notes,
due August 15, 2026, as additional
notes under the indenture dated August 1,
2019, pursuant to which it previously issued $550.0 million of 6.250% senior notes due 2026.
The additional senior notes were issued at 106.00% of the aggregate
principal amount.
On December 10, 2019, Select
Medical entered into Amendment No. 4 to its senior secured credit
agreement. Among other things, Amendment No. 4 provided for an
additional $615.0 million in term
loans that, along with the existing term loans, have a maturity
date of March 6, 2025.
Select Medical used a portion of the net proceeds from the
incremental term loans, together with a portion of the net proceeds
of the 6.250% additional senior notes, to make a first lien term
loan in the aggregate principal amount of approximately
$1,240.3 million to Concentra Inc.,
pursuant to an intercompany loan agreement. Concentra Inc. used the
proceeds from the intercompany loan to repay in full the first lien
term loan outstanding under Concentra Inc.'s first lien credit
agreement. Concentra Inc. continues to have availability of up to
$100.0 million under its existing
revolving credit facility.
Purchase of Concentra Interest
On January 1, 2020, Select
Medical, Welsh, Carson, Anderson & Stowe XII, L.P. ("WCAS"),
and Dignity Health Holding Corporation ("DHHC") entered into an
agreement pursuant to which Select Medical acquired approximately
17.2% of the outstanding membership interests of Concentra Group
Holdings Parent, LLC ("Concentra Parent") on a fully diluted basis
from WCAS, DHHC, and other equity holders of Concentra Parent for
approximately $338.4 million. On
February 1, 2020, Select Medical,
WCAS and DHHC entered into an agreement pursuant to which Select
Medical acquired an additional 1.4% of the outstanding membership
interests of Concentra Parent on a fully diluted basis from WCAS,
DHHC, and other equity holders of Concentra Parent for
approximately $27.8 million.
These purchases were in lieu of, and considered to be, the
exercise of the first put right provided to certain equity holders
under the terms of the Amended and Restated Limited Liability
Company Agreement of Concentra Parent, dated as of February 1, 2018. Following these purchases,
Select Medical owns approximately 66.6% of the outstanding
membership interests of Concentra Parent on a fully diluted basis
and approximately 68.8% of the outstanding voting membership
interests of Concentra Parent.
Business Outlook
Select Medical reaffirms its 2020 business outlook, provided
most recently in its January 27, 2020
press release, for net operating revenues, Adjusted EBITDA and
fully diluted earnings per common share. Select Medical continues
to expect consolidated net operating revenues for the full year
2020 to be in the range of $5.575
billion to $5.675 billion.
Select Medical continues to expect Adjusted EBITDA for the full
year 2020 to be in the range of $725.0
million to $760.0 million.
Select Medical continues to expect fully diluted earnings per
common share for the full year 2020 to be in the range of
$1.27 to $1.46.
Conference Call
Select Medical will host a conference call regarding its results
for the fourth quarter and full year ended December 31, 2019,
as well as its business outlook, on Friday,
February 21, 2020, at 9:00am
ET. The domestic dial in number for the call is
1-866-440-2669. The international dial in number is 1-409-220-9844.
The conference ID for the call is 8644656. The conference call will
be webcast simultaneously and can be accessed at Select Medical
Holdings Corporation's website www.selectmedicalholdings.com.
For those unable to participate in the conference call, a
replay will be available until 12:00pm
ET, February 28, 2020. The
replay number is 1-855-859-2056 (domestic) or 1-404-537-3406
(international). The conference ID for the replay will be 8644656.
The replay can also be accessed at Select Medical Holdings
Corporation's website, www.selectmedicalholdings.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 and/or new
payment policies may result in a reduction in net operating
revenues, an increase in costs, and a reduction in
profitability;
- the failure of our Medicare-certified long term care hospitals
or inpatient rehabilitation facilities to maintain their Medicare
certifications may cause our net operating revenues and
profitability to decline;
- the failure of our Medicare-certified long term care hospitals
and inpatient rehabilitation 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;
- our plans and expectations related to our acquisitions and our
ability to realize anticipated synergies;
- private third-party payors for our services may adopt payment
policies that could 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, therapists, physicians, or other
licensed providers could increase our operating costs significantly
or limit our ability to staff our facilities;
- 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;
- a security breach of our or our third-party vendors'
information technology systems may subject us to potential legal
and reputational harm and may result in a violation of the Health
Insurance Portability and Accountability Act of 1996 or the Health
Information Technology for Economic and Clinical Health Act;
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" of the annual
report on Form 10-K for the year ended December 31, 2019.
Except as required by applicable law, including the securities
laws of the United States and the
rules and regulations of the SEC, we are under no obligation to
publicly update or revise any forward-looking statements, whether
as a result of any new information, future events, or otherwise.
You should not place undue reliance on our forward-looking
statements. Although we believe that the expectations reflected in
forward-looking statements are reasonable, we cannot guarantee
future results or performance.
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 December 31, 2018 and 2019
(In
thousands, except per share amounts, unaudited)
|
|
2018
|
|
2019
|
|
%
Change
|
Net operating
revenues
|
|
$
|
1,264,683
|
|
|
$
|
1,374,584
|
|
|
8.7
|
%
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
services
|
|
1,093,450
|
|
|
1,175,649
|
|
|
7.5
|
|
General and
administrative
|
|
30,317
|
|
|
34,062
|
|
|
12.4
|
|
Depreciation and
amortization
|
|
52,633
|
|
|
52,504
|
|
|
(0.2)
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
88,283
|
|
|
112,369
|
|
|
27.3
|
|
|
|
|
|
|
|
|
Loss on early
retirement of debt
|
|
(3,900)
|
|
|
(19,440)
|
|
|
N/M
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
6,991
|
|
|
6,279
|
|
|
(10.2)
|
|
Interest
expense
|
|
(50,502)
|
|
|
(43,959)
|
|
|
(13.0)
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
40,872
|
|
|
55,249
|
|
|
35.2
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
11,150
|
|
|
11,578
|
|
|
3.8
|
|
|
|
|
|
|
|
|
Net income
|
|
29,722
|
|
|
43,671
|
|
|
46.9
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to non-controlling interests
|
|
5,049
|
|
|
11,604
|
|
|
129.8
|
|
|
|
|
|
|
|
|
Net income
attributable to Select Medical
|
|
$
|
24,673
|
|
|
$
|
32,067
|
|
|
30.0
|
%
|
|
|
|
|
|
|
|
Diluted earnings per
common share:(1)
|
|
$
|
0.18
|
|
|
$
|
0.24
|
|
|
|
_______________________________________________________________________________
(1)
|
Refer to table III
for calculation of earnings per common share.
|
|
|
N/M
|
Not
meaningful
|
II. Condensed Consolidated Statements of
Operations
For the Years Ended December 31, 2018
and 2019
(In thousands, except per share amounts,
unaudited)
|
|
2018
|
|
2019
|
|
%
Change
|
Net operating
revenues
|
|
$
|
5,081,258
|
|
|
$
|
5,453,922
|
|
|
7.3
|
%
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
services
|
|
4,341,056
|
|
|
4,641,002
|
|
|
6.9
|
|
General and
administrative
|
|
121,268
|
|
|
128,463
|
|
|
5.9
|
|
Depreciation and
amortization
|
|
201,655
|
|
|
212,576
|
|
|
5.4
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
417,279
|
|
|
471,881
|
|
|
13.1
|
|
|
|
|
|
|
|
|
Loss on early
retirement of debt
|
|
(14,155)
|
|
|
(38,083)
|
|
|
N/M
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
21,905
|
|
|
24,989
|
|
|
14.1
|
|
Gain on sale of
businesses
|
|
9,016
|
|
|
6,532
|
|
|
N/M
|
|
Interest
expense
|
|
(198,493)
|
|
|
(200,570)
|
|
|
1.0
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
235,552
|
|
|
264,749
|
|
|
12.4
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
58,610
|
|
|
63,718
|
|
|
8.7
|
|
|
|
|
|
|
|
|
Net income
|
|
176,942
|
|
|
201,031
|
|
|
13.6
|
|
|
|
|
|
|
|
|
Less: Net
income attributable to non-controlling interests
|
|
39,102
|
|
|
52,582
|
|
|
34.5
|
|
|
|
|
|
|
|
|
Net income
attributable to Select Medical
|
|
$
|
137,840
|
|
|
$
|
148,449
|
|
|
7.7
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share:(1)
|
|
$
|
1.02
|
|
|
$
|
1.10
|
|
|
|
_______________________________________________________________________________
(1)
|
Refer to table III
for calculation of earnings per common share.
|
|
|
N/M
|
Not
meaningful
|
III. Earnings per Share
For the Three Months
and Years Ended December 31, 2018 and 2019
(In
thousands, except per share amounts, unaudited)
Select Medical's capital structure includes common stock and
unvested restricted stock awards. To compute earnings per share
("EPS"), Select Medical applies the two-class method because its
unvested restricted stock awards are participating securities which
are entitled to participate equally with its common stock in
undistributed earnings.
The following table sets forth the net income attributable to
Select Medical, its common shares outstanding, and its
participating securities outstanding for the three months and years
ended December 31, 2018 and 2019:
|
|
Diluted
EPS
|
|
|
|
Three Months
Ended
December 31,
|
|
Years
Ended December
31,
|
|
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
Net income
|
|
$
|
29,722
|
|
|
$
|
43,671
|
|
|
$
|
176,942
|
|
|
$
|
201,031
|
|
|
Less: net income
attributable to non-controlling interests
|
|
5,049
|
|
|
11,604
|
|
|
39,102
|
|
|
52,582
|
|
|
Net income
attributable to Select Medical
|
|
24,673
|
|
|
32,067
|
|
|
137,840
|
|
|
148,449
|
|
|
Less: net income
attributable to participating securities
|
|
817
|
|
|
1,101
|
|
|
4,548
|
|
|
4,994
|
|
|
Net income
attributable to common shares
|
|
$
|
23,856
|
|
|
$
|
30,966
|
|
|
$
|
133,292
|
|
|
$
|
143,455
|
|
|
The following tables set forth the computation of EPS under the
two-class method for the three months and years ended December 31, 2018 and 2019:
|
|
Three Months Ended
December 31,
|
|
|
2018
|
|
|
2019
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
Common
shares
|
|
$
|
23,856
|
|
|
130,820
|
|
|
$
|
0.18
|
|
|
|
$
|
30,966
|
|
|
129,676
|
|
|
$
|
0.24
|
|
Participating
securities
|
|
817
|
|
|
4,480
|
|
|
$
|
0.18
|
|
|
|
1,101
|
|
|
4,610
|
|
|
$
|
0.24
|
|
Total
|
|
$
|
24,673
|
|
|
|
|
|
|
|
$
|
32,067
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
2018
|
|
|
2019
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
Common
shares
|
|
$
|
133,292
|
|
|
130,256
|
|
|
$
|
1.02
|
|
|
|
$
|
143,455
|
|
|
130,276
|
|
|
$
|
1.10
|
|
Participating
securities
|
|
4,548
|
|
|
4,444
|
|
|
$
|
1.02
|
|
|
|
4,994
|
|
|
4,535
|
|
|
$
|
1.10
|
|
Total
|
|
$
|
137,840
|
|
|
|
|
|
|
|
$
|
148,449
|
|
|
|
|
|
_______________________________________________________________________________
(1)
|
Represents the
weighted average share count outstanding during the
period.
|
IV. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
|
|
December
31,
|
|
|
2018
|
|
2019
|
Assets
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash
|
|
$
|
175,178
|
|
|
$
|
335,882
|
|
Accounts
receivable
|
|
706,676
|
|
|
762,677
|
|
Other current
assets
|
|
110,670
|
|
|
114,433
|
|
Total Current
Assets
|
|
992,524
|
|
|
1,212,992
|
|
Operating lease
right-of-use assets
|
|
—
|
|
|
1,003,986
|
|
Property and
equipment, net
|
|
979,810
|
|
|
998,406
|
|
Goodwill
|
|
3,320,726
|
|
|
3,391,955
|
|
Identifiable
intangible assets, net
|
|
437,693
|
|
|
409,068
|
|
Other
assets
|
|
233,512
|
|
|
323,881
|
|
Total
Assets
|
|
$
|
5,964,265
|
|
|
$
|
7,340,288
|
|
Liabilities and
Equity
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Payables and
accruals
|
|
$
|
661,321
|
|
|
$
|
681,163
|
|
Current operating
lease liabilities
|
|
—
|
|
|
207,950
|
|
Current portion of
long-term debt and notes payable
|
|
43,865
|
|
|
25,167
|
|
Total Current
Liabilities
|
|
705,186
|
|
|
914,280
|
|
Non-current operating
lease liabilities
|
|
—
|
|
|
852,897
|
|
Long-term debt, net of
current portion
|
|
3,249,516
|
|
|
3,419,943
|
|
Non-current deferred
tax liability
|
|
153,895
|
|
|
148,258
|
|
Other non-current
liabilities
|
|
158,940
|
|
|
101,334
|
|
Total
Liabilities
|
|
4,267,537
|
|
|
5,436,712
|
|
Redeemable
non-controlling interests
|
|
780,488
|
|
|
974,541
|
|
Total
equity
|
|
916,240
|
|
|
929,035
|
|
Total Liabilities
and Equity
|
|
$
|
5,964,265
|
|
|
$
|
7,340,288
|
|
V. Condensed Consolidated Statements of Cash
Flows
For the Three Months Ended December 31, 2018
and 2019
(In thousands, unaudited)
|
|
2018
|
|
2019
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
29,722
|
|
|
$
|
43,671
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Distributions from
unconsolidated subsidiaries
|
|
4,987
|
|
|
6,613
|
|
Depreciation and
amortization
|
|
52,633
|
|
|
52,504
|
|
Provision for bad
debts
|
|
270
|
|
|
694
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(6,991)
|
|
|
(6,279)
|
|
Loss on extinguishment
of debt
|
|
2,515
|
|
|
11,970
|
|
Gain on sale of
assets and businesses
|
|
(39)
|
|
|
28
|
|
Stock compensation
expense
|
|
6,151
|
|
|
7,020
|
|
Amortization of debt
discount, premium and issuance costs
|
|
3,267
|
|
|
2,097
|
|
Deferred income
taxes
|
|
9,309
|
|
|
(188)
|
|
Changes in operating
assets and liabilities, net of effects of business
combinations:
|
|
|
|
|
Accounts
receivable
|
|
31,080
|
|
|
35,434
|
|
Other current
assets
|
|
6,122
|
|
|
1,757
|
|
Other
assets
|
|
3,029
|
|
|
4,863
|
|
Accounts payable and
accrued expenses
|
|
(28,838)
|
|
|
18,358
|
|
Net cash provided by
operating activities
|
|
113,217
|
|
|
178,542
|
|
Investing
activities
|
|
|
|
|
Business combinations,
net of cash acquired
|
|
(3,876)
|
|
|
(7,436)
|
|
Purchases of property
and equipment
|
|
(46,242)
|
|
|
(33,170)
|
|
Investment in
businesses
|
|
(546)
|
|
|
(5,422)
|
|
Proceeds from sale of
assets and businesses
|
|
69
|
|
|
9
|
|
Net cash used in
investing activities
|
|
(50,595)
|
|
|
(46,019)
|
|
Financing
activities
|
|
|
|
|
Borrowings on
revolving facilities
|
|
175,000
|
|
|
—
|
|
Payments on revolving
facilities
|
|
(220,000)
|
|
|
—
|
|
Proceeds from term
loans
|
|
—
|
|
|
614,423
|
|
Payments on term
loans
|
|
(2,875)
|
|
|
(1,243,086)
|
|
Proceeds from 6.250%
senior notes
|
|
—
|
|
|
705,811
|
|
Revolving facility
debt issuance costs
|
|
(387)
|
|
|
—
|
|
Borrowings of other
debt
|
|
12,084
|
|
|
4,943
|
|
Principal payments on
other debt
|
|
(7,271)
|
|
|
(7,976)
|
|
Repurchase of common
stock
|
|
(1,197)
|
|
|
(1,222)
|
|
Proceeds from exercise
of stock options
|
|
89
|
|
|
92
|
|
Increase in
overdrafts
|
|
1,792
|
|
|
—
|
|
Proceeds from issuance
of non-controlling interests
|
|
—
|
|
|
159
|
|
Distributions to and
purchases of non-controlling interests
|
|
(5,092)
|
|
|
(5,748)
|
|
Net cash provided by
(used in) financing activities
|
|
(47,857)
|
|
|
67,396
|
|
Net increase in cash
and cash equivalents
|
|
14,765
|
|
|
199,919
|
|
Cash and cash
equivalents at beginning of period
|
|
160,413
|
|
|
135,963
|
|
Cash and cash
equivalents at end of period
|
|
$
|
175,178
|
|
|
$
|
335,882
|
|
Supplemental
information
|
|
|
|
|
Cash paid for
interest
|
|
$
|
59,028
|
|
|
$
|
33,902
|
|
Cash paid for
taxes
|
|
$
|
7,693
|
|
|
$
|
12,120
|
|
VI. Condensed Consolidated Statements of Cash
Flows
For the Years Ended December 31, 2018 and
2019
(In thousands, unaudited)
|
|
2018
|
|
2019
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
176,942
|
|
|
$
|
201,031
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Distributions from
unconsolidated subsidiaries
|
|
15,721
|
|
|
20,222
|
|
Depreciation and
amortization
|
|
201,655
|
|
|
212,576
|
|
Provision for bad
debts
|
|
(103)
|
|
|
3,038
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(21,905)
|
|
|
(24,989)
|
|
Loss on extinguishment
of debt
|
|
2,999
|
|
|
22,130
|
|
Gain on sale of assets
and businesses
|
|
(9,168)
|
|
|
(6,321)
|
|
Stock compensation
expense
|
|
23,326
|
|
|
26,451
|
|
Amortization of debt
discount, premium and issuance costs
|
|
13,112
|
|
|
11,566
|
|
Deferred income
taxes
|
|
7,217
|
|
|
(7,435)
|
|
Changes in operating
assets and liabilities, net of effects of business
combinations:
|
|
|
|
|
Accounts
receivable
|
|
54,575
|
|
|
(57,991)
|
|
Other current
assets
|
|
(4,152)
|
|
|
(4,259)
|
|
Other
assets
|
|
7,857
|
|
|
6,122
|
|
Accounts payable and
accrued expenses
|
|
26,118
|
|
|
43,041
|
|
Net cash provided by
operating activities
|
|
494,194
|
|
|
445,182
|
|
Investing
activities
|
|
|
|
|
Business combinations,
net of cash acquired
|
|
(523,134)
|
|
|
(93,705)
|
|
Purchases of property
and equipment
|
|
(167,281)
|
|
|
(157,126)
|
|
Investment in
businesses
|
|
(13,482)
|
|
|
(66,090)
|
|
Proceeds from sale of
assets and businesses
|
|
6,760
|
|
|
192
|
|
Net cash used in
investing activities
|
|
(697,137)
|
|
|
(316,729)
|
|
Financing
activities
|
|
|
|
|
Borrowings on
revolving facilities
|
|
595,000
|
|
|
700,000
|
|
Payments on revolving
facilities
|
|
(805,000)
|
|
|
(720,000)
|
|
Proceeds from term
loans
|
|
779,823
|
|
|
1,208,106
|
|
Payments on term
loans
|
|
(11,500)
|
|
|
(1,618,170)
|
|
Proceeds from 6.250%
senior notes
|
|
—
|
|
|
1,244,987
|
|
Payment on 6.375%
senior notes
|
|
—
|
|
|
(710,000)
|
|
Revolving facility
debt issuance costs
|
|
(1,639)
|
|
|
(310)
|
|
Borrowings of other
debt
|
|
42,218
|
|
|
24,225
|
|
Principal payments on
other debt
|
|
(25,242)
|
|
|
(30,604)
|
|
Repurchase of common
stock
|
|
(6,837)
|
|
|
(38,531)
|
|
Proceeds from exercise
of stock options
|
|
1,722
|
|
|
964
|
|
Decrease in
overdrafts
|
|
(4,380)
|
|
|
(25,083)
|
|
Proceeds from issuance
of non-controlling interests
|
|
2,926
|
|
|
18,447
|
|
Distributions to and
purchases of non-controlling interests
|
|
(311,519)
|
|
|
(21,780)
|
|
Net cash provided by
financing activities
|
|
255,572
|
|
|
32,251
|
|
Net increase in cash
and cash equivalents
|
|
52,629
|
|
|
160,704
|
|
Cash and cash
equivalents at beginning of period
|
|
122,549
|
|
|
175,178
|
|
Cash and cash
equivalents at end of period
|
|
$
|
175,178
|
|
|
$
|
335,882
|
|
Supplemental
information
|
|
|
|
|
Cash paid for
interest
|
|
$
|
193,406
|
|
|
$
|
182,992
|
|
Cash paid for
taxes
|
|
$
|
48,153
|
|
|
$
|
70,592
|
|
Non-cash equity
exchange for acquisition of U.S. HealthWorks
|
|
$
|
238,000
|
|
|
$
|
—
|
|
VII. Key Statistics
For the Three Months Ended December 31, 2018 and 2019
(unaudited)
|
|
2018(e)
|
|
2019
|
|
%
Change
|
Critical Illness
Recovery Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
96
|
|
|
101
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
426,348
|
|
|
$
|
454,949
|
|
|
6.7
|
%
|
Number of patient
days(b)
|
|
246,505
|
|
|
259,283
|
|
|
5.2
|
%
|
Number of
admissions(b)
|
|
8,869
|
|
|
9,095
|
|
|
2.5
|
%
|
Net revenue per
patient day(b)(c)
|
|
$
|
1,717
|
|
|
$
|
1,742
|
|
|
1.5
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
56,026
|
|
|
$
|
60,485
|
|
|
8.0
|
%
|
Adjusted EBITDA
margin
|
|
13.1
|
%
|
|
13.3
|
%
|
|
|
Rehabilitation
Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
26
|
|
|
29
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
151,070
|
|
|
$
|
182,670
|
|
|
20.9
|
%
|
Number of patient
days(b)
|
|
81,931
|
|
|
94,236
|
|
|
15.0
|
%
|
Number of
admissions(b)
|
|
5,594
|
|
|
6,636
|
|
|
18.6
|
%
|
Net revenue per
patient day(b)(c)
|
|
$
|
1,610
|
|
|
$
|
1,739
|
|
|
8.0
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
28,613
|
|
|
$
|
43,312
|
|
|
51.4
|
%
|
Adjusted EBITDA
margin
|
|
18.9
|
%
|
|
23.7
|
%
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
Number of clinics –
end of period(a)
|
|
1,662
|
|
|
1,740
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
252,415
|
|
|
$
|
271,885
|
|
|
7.7
|
%
|
Number of
visits(b)
|
|
2,104,436
|
|
|
2,256,966
|
|
|
7.2
|
%
|
Revenue per
visit(b)(d)
|
|
$
|
103
|
|
|
$
|
104
|
|
|
1.0
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
35,002
|
|
|
$
|
40,216
|
|
|
14.9
|
%
|
Adjusted EBITDA
margin
|
|
13.9
|
%
|
|
14.8
|
%
|
|
|
Concentra
|
|
|
|
|
|
|
Number of centers –
end of period(b)
|
|
524
|
|
|
521
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
384,253
|
|
|
$
|
397,145
|
|
|
3.4
|
%
|
Number of
visits(b)
|
|
2,821,928
|
|
|
2,903,266
|
|
|
2.9
|
%
|
Revenue per
visit(b)(d)
|
|
$
|
124
|
|
|
$
|
122
|
|
|
(1.6)
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
52,858
|
|
|
$
|
56,458
|
|
|
6.8
|
%
|
Adjusted EBITDA
margin
|
|
13.8
|
%
|
|
14.2
|
%
|
|
|
_______________________________________________________________________________
(a)
|
Includes managed
locations.
|
|
|
(b)
|
Excludes managed
locations. For purposes of our Concentra segment, onsite clinics
and community-based outpatient clinics are excluded.
|
|
|
(c)
|
Net revenue per
patient day is calculated by dividing direct patient service
revenues by the total number of patient days.
|
|
|
(d)
|
Net revenue per visit
is calculated by dividing direct patient service revenue by the
total number of visits. For purposes of this computation for
our outpatient rehabilitation segment, direct patient service
revenue does not include managed clinics. For purposes of this
computation for our Concentra segment, direct patient service
revenue does not include onsite clinics and community-based
outpatient clinics.
|
|
|
(e)
|
For the three months
ended December 31, 2018, the financial results of our reportable
segments have been changed to remove the net operating revenues and
expenses associated with employee leasing services provided to our
non-consolidating subsidiaries. These results are now reported as
part of our other activities. Select Medical leases employees at
cost to these non-consolidating subsidiaries.
|
VIII. Key Statistics
For the Years Ended December 31, 2018 and 2019
(unaudited)
|
|
2018(e)
|
|
2019
|
|
%
Change
|
Critical Illness
Recovery Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
96
|
|
|
101
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
1,753,584
|
|
|
$
|
1,836,518
|
|
|
4.7
|
%
|
Number of patient
days(b)
|
|
1,012,368
|
|
|
1,038,361
|
|
|
2.6
|
%
|
Number of
admissions(b)
|
|
36,474
|
|
|
36,774
|
|
|
0.8
|
%
|
Net revenue per
patient day(b)(c)
|
|
$
|
1,716
|
|
|
$
|
1,753
|
|
|
2.2
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
243,015
|
|
|
$
|
254,868
|
|
|
4.9
|
%
|
Adjusted EBITDA
margin
|
|
13.9
|
%
|
|
13.9
|
%
|
|
|
Rehabilitation
Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
26
|
|
|
29
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
583,745
|
|
|
$
|
670,971
|
|
|
14.9
|
%
|
Number of patient
days(b)
|
|
315,468
|
|
|
353,031
|
|
|
11.9
|
%
|
Number of
admissions(b)
|
|
21,813
|
|
|
24,889
|
|
|
14.1
|
%
|
Net revenue per
patient day(b)(c)
|
|
$
|
1,606
|
|
|
$
|
1,685
|
|
|
4.9
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
108,927
|
|
|
$
|
135,857
|
|
|
24.7
|
%
|
Adjusted EBITDA
margin
|
|
18.7
|
%
|
|
20.2
|
%
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
Number of clinics –
end of period(a)
|
|
1,662
|
|
|
1,740
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
995,794
|
|
|
$
|
1,046,011
|
|
|
5.0
|
%
|
Number of
visits(b)
|
|
8,356,018
|
|
|
8,719,282
|
|
|
4.3
|
%
|
Revenue per
visit(b)(d)
|
|
$
|
103
|
|
|
$
|
103
|
|
|
0.0
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
142,005
|
|
|
$
|
151,831
|
|
|
6.9
|
%
|
Adjusted EBITDA
margin
|
|
14.3
|
%
|
|
14.5
|
%
|
|
|
Concentra
|
|
|
|
|
|
|
Number of centers –
end of period(b)
|
|
524
|
|
|
521
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
1,557,673
|
|
|
$
|
1,628,817
|
|
|
4.6
|
%
|
Number of
visits(b)
|
|
11,426,940
|
|
|
12,068,865
|
|
|
5.6
|
%
|
Revenue per
visit(b)(d)
|
|
$
|
124
|
|
|
$
|
122
|
|
|
(1.6)
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
251,977
|
|
|
$
|
276,482
|
|
|
9.7
|
%
|
Adjusted EBITDA
margin
|
|
16.2
|
%
|
|
17.0
|
%
|
|
|
_______________________________________________________________________________
(a)
|
Includes managed
locations.
|
|
|
(b)
|
Excludes managed
locations. For purposes of our Concentra segment, onsite clinics
and community-based outpatient clinics are excluded.
|
|
|
(c)
|
Net revenue per
patient day is calculated by dividing direct patient service
revenues by the total number of patient days.
|
|
|
(d)
|
Net revenue per visit
is calculated by dividing direct patient service revenue by the
total number of visits. For purposes of this computation for
our outpatient rehabilitation segment, direct patient service
revenue does not include managed clinics. For purposes of this
computation for our Concentra segment, direct patient service
revenue does not include onsite clinics and community-based
outpatient clinics.
|
|
|
(e)
|
For the year ended
December 31, 2018, the financial results of our reportable segments
have been changed to remove the net operating revenues and expenses
associated with employee leasing services provided to our
non-consolidating subsidiaries. These results are now reported as
part of our other activities. Select Medical leases employees at
cost to these non-consolidating subsidiaries.
|
IX. Net Income to Adjusted EBITDA
Reconciliation
For the
Three Months and Years Ended December 31, 2018 and
2019
(In thousands, unaudited)
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 to evaluate financial performance and
determine resource allocation for each of Select Medical's
operating segments. Adjusted EBITDA is not a measure of financial
performance under generally accepted accounting principles
("GAAP"). 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, income from
operations, 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 GAAP and is thus
susceptible to varying definitions, Adjusted EBITDA as presented
may not be comparable to other similarly titled measures of other
companies.
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 earnings
excluding interest, income taxes, depreciation and amortization,
gain (loss) on early retirement of debt, stock compensation
expense, acquisition costs associated with U.S. HealthWorks, gain
(loss) on sale of businesses, and equity in earnings (losses) of
unconsolidated subsidiaries.
|
Three Months
Ended
December 31,
|
|
Years
Ended
December 31,
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
Net income
|
$
|
29,722
|
|
|
$
|
43,671
|
|
|
$
|
176,942
|
|
|
$
|
201,031
|
|
Income tax
expense
|
11,150
|
|
|
11,578
|
|
|
58,610
|
|
|
63,718
|
|
Interest
expense
|
50,502
|
|
|
43,959
|
|
|
198,493
|
|
|
200,570
|
|
Gain on sale of
businesses
|
—
|
|
|
—
|
|
|
(9,016)
|
|
|
(6,532)
|
|
Equity in earnings of
unconsolidated subsidiaries
|
(6,991)
|
|
|
(6,279)
|
|
|
(21,905)
|
|
|
(24,989)
|
|
Loss on early
retirement of debt
|
3,900
|
|
|
19,440
|
|
|
14,155
|
|
|
38,083
|
|
Income from
operations
|
88,283
|
|
|
112,369
|
|
|
417,279
|
|
|
471,881
|
|
Stock compensation
expense:
|
|
|
|
|
|
|
|
Included in general
and administrative
|
4,884
|
|
|
5,485
|
|
|
17,604
|
|
|
20,334
|
|
Included in cost of
services
|
1,267
|
|
|
1,535
|
|
|
5,722
|
|
|
6,117
|
|
Depreciation and
amortization
|
52,633
|
|
|
52,504
|
|
|
201,655
|
|
|
212,576
|
|
U.S. HealthWorks
acquisition costs
|
—
|
|
|
—
|
|
|
2,895
|
|
|
—
|
|
Adjusted
EBITDA
|
$
|
147,067
|
|
|
$
|
171,893
|
|
|
$
|
645,155
|
|
|
$
|
710,908
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
$
|
56,026
|
|
|
$
|
60,485
|
|
|
$
|
243,015
|
|
|
$
|
254,868
|
|
Rehabilitation
hospital
|
28,613
|
|
|
43,312
|
|
|
108,927
|
|
|
135,857
|
|
Outpatient
rehabilitation
|
35,002
|
|
|
40,216
|
|
|
142,005
|
|
|
151,831
|
|
Concentra
|
52,858
|
|
|
56,458
|
|
|
251,977
|
|
|
276,482
|
|
Other(a)
|
(25,432)
|
|
|
(28,578)
|
|
|
(100,769)
|
|
|
(108,130)
|
|
Adjusted
EBITDA
|
$
|
147,067
|
|
|
$
|
171,893
|
|
|
$
|
645,155
|
|
|
$
|
710,908
|
|
_______________________________________________________________________________
(a)
|
Other primarily
includes general and administrative costs.
|
X. Reconciliation of Earnings per Common Share to
Adjusted Earnings per Common Share
For the Three Months
and Years Ended December 31, 2018 and 2019
(In
thousands, except per share amounts, unaudited)
Adjusted net income attributable to common shares and adjusted
earnings per common share are not measures of financial performance
under GAAP. Items excluded from adjusted net income
attributable to common shares and adjusted earnings per common
share are significant components in understanding and assessing
financial performance. Select Medical believes that the
presentation of adjusted net income attributable to common shares
and adjusted earnings per common share are important to investors
because they are reflective of the financial performance of our
ongoing operations and provide better comparability of our results
of operations between periods. Adjusted net income attributable to
common shares and adjusted earnings per common share should not be
considered in isolation or as alternatives to, or substitutes 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 net income attributable
to common shares and adjusted earnings per common share are not
measurements determined in accordance with GAAP and are thus
susceptible to varying calculations, adjusted net income
attributable to common shares and adjusted earnings per common
share as presented may not be comparable to other similarly titled
measures of other companies.
The following tables reconcile net income attributable to common
shares and earnings per common share on a fully diluted basis to
adjusted net income attributable to common shares and adjusted
earnings per common share on a fully diluted basis.
|
Three Months Ended
December 31,
|
|
2018
|
|
Per
Share(a)
|
|
2019
|
|
Per
Share(a)
|
Net income
attributable to common shares(a)
|
$
|
23,856
|
|
|
$
|
0.18
|
|
|
$
|
30,966
|
|
|
$
|
0.24
|
|
Adjustments:(b)
|
|
|
|
|
|
|
|
Loss on early
retirement of debt
|
2,284
|
|
|
0.02
|
|
|
9,505
|
|
|
0.07
|
|
Adjusted net income
attributable to common shares
|
$
|
26,140
|
|
|
$
|
0.20
|
|
|
$
|
40,471
|
|
|
$
|
0.31
|
|
|
|
|
Years Ended
December 31,
|
|
2018
|
|
Per
Share(a)
|
|
2019
|
|
Per
Share(a)
|
Net income
attributable to common shares(a)
|
$
|
133,292
|
|
|
$
|
1.02
|
|
|
$
|
143,455
|
|
|
$
|
1.10
|
|
Adjustments:(b)
|
|
|
|
|
|
|
|
Loss on early
retirement of debt and related costs(c)
|
6,674
|
|
|
0.05
|
|
|
22,286
|
|
|
0.17
|
|
Gain on sale of
businesses
|
(6,432)
|
|
|
(0.05)
|
|
|
(4,543)
|
|
|
(0.03)
|
|
U.S. HealthWorks
acquisition costs
|
1,002
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
Adjusted net income
attributable to common shares
|
$
|
134,536
|
|
|
$
|
1.03
|
|
|
$
|
161,198
|
|
|
$
|
1.24
|
|
_______________________________________________________________________________
(a)
|
Net income
attributable to common shares and earnings per common share are
calculated based on the diluted weighted average common shares
outstanding, as presented in table III.
|
|
|
(b)
|
Adjustments to net
income attributable to common shares include estimated income tax
and non-controlling interest impacts and are calculated based on
the diluted weighted average common shares outstanding.
|
|
The estimated income
tax impact, which is determined using tax rates based on the nature
of the adjustment and the jurisdiction in which the adjustment
occurred, includes both current and deferred income tax expense or
benefits. For the three months ended December 31, 2018 and 2019,
the adjustments to net income attributable to common shares include
estimated income tax benefits of approximately $1.0 million and
$5.2 million, respectively. For the years ended December 31, 2018
and 2019, the adjustments to net income attributable to common
shares include estimated net income tax benefits of approximately
$2.1 million and $9.2 million, respectively.
|
|
|
(c)
|
Select Medical
redeemed its $710.0 million 6.375% senior notes on August 30, 2019
and issued and sold $550.0 million 6.250% senior notes on August 1,
2019. As a result, Select Medical recognized interest expense on
both the 6.250% senior notes and the 6.375% senior notes during
August 2019. The adjustment to net income attributable to common
shares for the loss on early retirement of debt and related costs
includes the interest expense recognized on the 6.375% senior notes
during August 2019 and its related tax effects.
|
XI. Net Income to Adjusted EBITDA
Reconciliation
Business Outlook for the Year Ending
December 31, 2020
(In
millions, unaudited)
The following is a reconciliation of full year 2020 Adjusted
EBITDA expectations as computed at the low and high points of the
range to the closest comparable GAAP financial measure. Refer to
table IX for the definition of Adjusted EBITDA and a discussion of
Select Medical's use of Adjusted EBITDA in evaluating financial
performance. Each item presented in the below table is an
estimation of full year 2020 expectations.
|
Range
|
Non-GAAP Measure
Reconciliation
|
Low
|
|
High
|
Net income
attributable to Select Medical
|
$
|
171
|
|
|
$
|
197
|
|
Net income
attributable to non-controlling interests
|
72
|
|
|
72
|
|
Net income
|
243
|
|
|
269
|
|
Income tax
expense
|
81
|
|
|
90
|
|
Interest
expense
|
188
|
|
|
188
|
|
Equity in earnings of
unconsolidated subsidiaries
|
(29)
|
|
|
(29)
|
|
Income from
operations
|
483
|
|
|
518
|
|
Stock compensation
expense
|
30
|
|
|
30
|
|
Depreciation and
amortization
|
212
|
|
|
212
|
|
Adjusted
EBITDA
|
$
|
725
|
|
|
$
|
760
|
|
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SOURCE Select Medical Holdings Corporation