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8-K - 8-K - SELECT MEDICAL HOLDINGS CORPa13-23262_18k.htm

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

 

 

4714 Gettysburg Road
Mechanicsburg, PA 17055

NYSE Symbol: SEM

 


 

Select Medical Holdings Corporation Announces Results for

Third Quarter Ended September 30, 2013 and Quarterly Cash Dividend

 

MECHANICSBURG, PENNSYLVANIA — October 31, 2013 — Select Medical Holdings Corporation (“Select Medical”) (NYSE: SEM) today announced results for its third quarter ended September 30, 2013 and the declaration of its quarterly cash dividend.

 

For the third quarter ended September 30, 2013, net operating revenues increased 1.3% to $722.8 million compared to $713.7 million for the same quarter, prior year.  The results for the third quarter ended September 30, 2013 reflect Medicare changes that became effective on April 1, 2013, including (i) a 2% reduction in Medicare payments that was implemented as part of the automatic reduction in federal spending mandated under the Budget Control Act of 2011 (the “Sequestration Reduction”), and (ii) an increase from 25% to 50% in the multiple procedure payment reduction for therapy services as mandated by the American Taxpayer Relief Act of 2012 (the “MPPR Reduction”).  For the third quarter ended September 30, 2013, these changes collectively reduced both net operating revenues and income from operations by approximately $7.2 million and $1.9 million, respectively.  Income from operations decreased to $62.4 million compared to $70.8 million for the same quarter, prior year.  Net income attributable to Select Medical decreased to $23.3 million compared to $24.1 million for the same quarter, prior year.  Net income attributable to Select Medical for the third quarter ended September 30, 2012 includes a loss on early retirement of debt, net of tax, of $3.7 million associated with the September 12, 2012 redemption of $275.0 million of Select Medical Corporation’s 7 5/8% senior subordinated notes.  Net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, equity in earnings (losses) of unconsolidated subsidiaries and other income (expense) (“Adjusted EBITDA”) for the third quarter decreased 8.3% to $80.4 million compared to $87.7 million for the same quarter, prior year.  A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release.  Income per common share for both the third quarter ended September 30, 2013 and 2012 was $0.17 on a fully diluted basis.  Excluding the loss related to the early retirement of debt for the third quarter ended September 30, 2012 and its related tax effects, adjusted income per common share was $0.20 per diluted share for the third quarter ended September 30, 2012.  A reconciliation of income per common share to adjusted income per common share for the third quarter ended September 30, 2013 and 2012 is presented in table IX of this release.

 

For the nine months ended September 30, 2013, net operating revenues increased 1.0% to $2,229.5 million compared to $2,207.9 million for the same period, prior year.  The results for the nine months ended September 30, 2013 include the Sequestration Reduction and MPPR Reduction which collectively reduced both net operating revenues and income from operations by approximately $16.6 million and $3.6 million, respectively.  Income from operations decreased to $233.2 million compared to $255.9 million for the same period, prior year.  Net income attributable to Select Medical decreased to $85.5 million compared to $108.8 million for the same period, prior year.  Net income attributable to Select Medical for the nine months ended September 30, 2013 and 2012 include losses on early

 



 

retirement of debt, net of tax, of $11.5 million and $3.7 million, respectively.  Net income attributable to Select Medical for the nine months ended September 30, 2012 includes a loss on early retirement of debt, net of tax, of $3.7 million associated with the September 12, 2012 redemption of $275.0 million of Select Medical Corporation’s 7 5/8% senior subordinated notes.  Adjusted EBITDA for the nine months ended September 30, 2013 decreased 6.7% to $286.5 million compared to $307.1 million for the same period, prior year.  A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release.  Income per common share for the nine months ended September 30, 2013 was $0.61 on a fully diluted basis compared to income per common share of $0.77 for the nine months ended September 30, 2012.  Excluding the loss related to the early retirement of debt in each period and their related tax effects, adjusted income per common share was $0.69 and $0.79 per diluted share for the nine months ended September 30, 2013 and 2012, respectively.  A reconciliation of net income per share to adjusted net income per share for the nine months ended September 30, 2013 and 2012 is presented in table X of this release.

 

Specialty Hospitals

 

For the third quarter of 2013, net operating revenues for the specialty hospital segment increased 0.2% to $532.6 million compared to $531.4 million for the same quarter, prior year.  The Sequestration Reduction reduced net operating revenues and income from operations for the segment by approximately $6.8 million for the third quarter of 2013.  Adjusted EBITDA for the specialty hospital segment decreased 10.0% to $75.3 million compared to $83.7 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 14.1% for the third quarter of 2013, compared to 15.7% for the same quarter, prior year.  Certain specialty hospital key statistics for the third quarter ended September 30, 2013 and 2012 are presented in table VI of this release.

 

For the nine months ended September 30, 2013, net operating revenues for the specialty hospital segment increased 0.5% to $1,649.7 million compared to $1,641.6 million for the same period, prior year.  The Sequestration Reduction reduced both net operating revenues and income from operations for the segment by approximately $15.9 million for the nine months ended September 30, 2013.  Adjusted EBITDA for the specialty hospital segment for the nine months ended September 30, 2013 decreased 7.3% to $265.0 million compared to $285.8 million for the same period, prior year.  The Adjusted EBITDA margin for the segment was 16.1% for the nine months ended September 30, 2013, compared to 17.4% for the same period, prior year.  Certain specialty hospital key statistics for the nine months ended September 30, 2013 and 2012 are presented in table VII of this release.

 

Outpatient Rehabilitation

 

For the third quarter of 2013, net operating revenues for the outpatient rehabilitation segment increased 4.4% to $190.2 million compared to $182.2 million for the same quarter, prior year.  The Sequestration Reduction and MPPR Reduction collectively reduced both net operating revenues and income from operations for the segment by approximately $0.4 million and $1.9 million, respectively, for the third quarter of 2013.  Adjusted EBITDA for the segment for the third quarter increased 6.2% to $21.6 million compared to $20.4 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 11.4% for the third quarter of 2013, compared to 11.2% for the same quarter, prior year.  Certain outpatient rehabilitation key statistics for the third quarter ended September 30, 2013 and 2012 are presented in table VI of this release.

 

For the nine months ended September 30, 2013, net operating revenues for the outpatient rehabilitation segment increased 2.3% to $579.4 million compared to $566.2 million for the same period, prior year.  The Sequestration Reduction and MPPR Reduction collectively reduced both net operating revenues and income from operations for the segment by approximately $0.7 million and $3.6 million, respectively, for the nine months ended September 30, 2013.  Adjusted EBITDA for the segment for the nine months ended September 30, 2013 increased 2.7% to $70.5 million compared to $68.7 million for the same period, prior year.  The Adjusted EBITDA margin for the segment was 12.2% for the nine

 



 

months ended September 30, 2013, compared to 12.1% for the same period, prior year.  Certain outpatient rehabilitation key statistics for the nine months ended September 30, 2013 and 2012 are presented in table VII of this release.

 

Stock Repurchase Program

 

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

 

Quarterly Dividend

 

On August 7, 2013, Select Medical’s board of directors declared a quarterly cash dividend of $0.10 per share, totaling $14.0 million.  The dividend was paid on August 30, 2013 to stockholders of record as of the close of business on August 20, 2013.

 

On October 30, 2013, Select Medical’s board of directors declared a quarterly dividend of $0.10 per share.  The dividend will be payable on or about November 22, 2013 to stockholders of record as of the close of business on November 12, 2013.

 

Business Outlook

 

Select Medical is reaffirming its prior business outlook provided in its August 8, 2013 earnings press release for net operating revenues, Adjusted EBITDA and adjusted income per common share. Select Medical continues to expect consolidated net operating revenues for the full year 2013 to be in the range of $2.925 billion to $3.025 billion, Adjusted EBITDA for the full year 2013 to be in the range of $375.0 million to $390.0 million and adjusted income per common share, which excludes the losses on early retirement of debt and their related tax effects in the first and second quarters, for the full year 2013 to be in the range of $0.87 to $0.94. Select Medical continues to expect fully diluted income per common share for the full year 2013 to be in the range of $0.78 to $0.85.

 

The above business outlook includes the estimated financial impact from the automatic Medicare reductions mandated under the Budget Control Act of 2011. Select Medical estimates this negative impact to both net operating revenues and Adjusted EBITDA for the fourth quarter of 2013 to be between $8.0 million and $9.0 million. The above business outlook also includes the expected financial impact to outpatient therapy payments related to the MPPR Reduction. Select Medical estimates this negative impact to both net operating revenues and Adjusted EBITDA for the fourth quarter of 2013 to be between $1.5 million and $2.0 million for its outpatient rehabilitation segment. Select Medical assumed a 40.0% effective tax rate for the remainder of 2013 when preparing the above business outlook for the full year 2013.

 

Conference Call

 

Select Medical will host a conference call regarding its third quarter results and its business outlook on Friday, November 1, 2013, at 9:00am EDT. The domestic dial-in number for the call is 1-866-700-6067. The international dial-in number is 1-617-213-8834. The passcode for the call is 69642856.

 



 

The conference call will be webcast simultaneously and can be accessed at Select Medical’s website, www.selectmedicalholdings.com.

 

For those unable to participate in the conference call, a replay will be available until 11:59pm EST, November 8, 2013. The replay number is 1-888-286-8010 (domestic) or 1-617-801-6888 (international). The passcode for the replay will be 77254976. The replay can also be accessed at Select Medical’s website, www.selectmedicalholdings.com.

 

*   *   *   *   *

 

Select Medical is a leading operator of specialty hospitals and outpatient rehabilitation clinics in the United States. As of September 30, 2013, Select Medical operated 108 long term acute care hospitals and 15 acute medical rehabilitation hospitals in 28 states and 997 outpatient rehabilitation clinics in 32 states and the District of Columbia. Select Medical also provides medical rehabilitation services on a contracted basis to nursing homes, hospitals, assisted living and senior care centers, schools and work sites. Information about Select Medical is available at www.selectmedical.com.

 

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

 

·                     changes in government reimbursement for our services due to the implementation of healthcare reform legislation, deficit reduction measures, and/or new payment policies may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 



 

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

 

Investor inquiries:

 

Joel T. Veit

Senior Vice President and Treasurer

717-972-1100

ir@selectmedical.com

 

SOURCE: Select Medical Holdings Corporation

 



 

I.   Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

2013

 

% Change

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

713,669

 

$

722,845

 

1.3

%

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of services

 

598,984

 

617,281

 

3.1

%

General and administrative

 

17,130

 

17,740

 

3.6

%

Bad debt expense

 

11,199

 

9,262

 

(17.3

)%

Depreciation and amortization

 

15,537

 

16,163

 

4.0

%

 

 

 

 

 

 

 

 

Income from operations

 

70,819

 

62,399

 

(11.9

)%

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

(6,064

)

 

N/M

 

Equity in earnings (losses) of unconsolidated subsidiaries

 

1,167

 

(179

)

N/M

 

Interest expense

 

(24,575

)

(21,252

)

(13.5

)%

 

 

 

 

 

 

 

 

Income before income taxes

 

41,347

 

40,968

 

(0.9

)%

 

 

 

 

 

 

 

 

Income tax expense

 

16,189

 

15,761

 

(2.6

)%

 

 

 

 

 

 

 

 

Net income

 

25,158

 

25,207

 

0.2

%

 

 

 

 

 

 

 

 

Less: Net income attributable to non- controlling interests

 

1,048

 

1,935

 

84.6

%

 

 

 

 

 

 

 

 

Net income attributable to Select Medical Holdings Corporation

 

$

24,110

 

$

23,272

 

(3.5

)%

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

Basic

 

$

0.17

 

$

0.17

 

 

 

Diluted

 

$

0.17

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

137,551

 

136,646

 

 

 

Diluted

 

137,888

 

136,793

 

 

 

 

N/M = Not Meaningful

 



 

II.   Condensed Consolidated Statements of Operations

For the Nine Months Ended September 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

2013

 

% Change

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

2,207,883

 

$

2,229,473

 

1.0

%

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of services

 

1,823,272

 

1,867,915

 

2.4

%

General and administrative

 

49,908

 

53,065

 

6.3

%

Bad debt expense

 

31,603

 

27,429

 

(13.2

)%

Depreciation and amortization

 

47,164

 

47,872

 

1.5

%

 

 

 

 

 

 

 

 

Income from operations

 

255,936

 

233,192

 

(8.9

)%

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

(6,064

)

(18,747

)

N/M

 

Equity in earnings of unconsolidated subsidiaries

 

6,384

 

1,447

 

(77.3

)%

Interest expense

 

(72,295

)

(66,614

)

(7.9

)%

 

 

 

 

 

 

 

 

Income before income taxes

 

183,961

 

149,278

 

(18.9

)%

 

 

 

 

 

 

 

 

Income tax expense

 

71,415

 

57,391

 

(19.6

)%

 

 

 

 

 

 

 

 

Net income

 

112,546

 

91,887

 

(18.4

)%

 

 

 

 

 

 

 

 

Less: Net income attributable to non- controlling interests

 

3,722

 

6,417

 

72.4

%

 

 

 

 

 

 

 

 

Net income attributable to Select Medical Holdings Corporation

 

$

108,824

 

$

85,470

 

(21.5

)%

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

Basic

 

$

0.77

 

$

0.61

 

 

 

Diluted

 

$

0.77

 

$

0.61

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

139,138

 

136,879

 

 

 

Diluted

 

139,404

 

137,040

 

 

 

 

N/M = Not Meaningful

 



 

III.  Condensed Consolidated Balance Sheets

(In thousands, unaudited)

 

 

 

December 31,
2012

 

September 30,
2013

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

40,144

 

$

9,293

 

 

 

 

 

 

 

Accounts receivable, net

 

359,929

 

423,334

 

 

 

 

 

 

 

Current deferred tax asset

 

17,877

 

15,372

 

 

 

 

 

 

 

Prepaid income taxes

 

3,895

 

4,044

 

 

 

 

 

 

 

Other current assets

 

31,818

 

39,968

 

 

 

 

 

 

 

Total Current Assets

 

453,663

 

492,011

 

 

 

 

 

 

 

Property and equipment, net

 

501,552

 

499,531

 

 

 

 

 

 

 

Goodwill

 

1,640,534

 

1,641,836

 

 

 

 

 

 

 

Other identifiable intangibles

 

71,745

 

71,831

 

 

 

 

 

 

 

Other assets

 

93,867

 

137,215

 

 

 

 

 

 

 

Total Assets

 

$

2,761,361

 

$

2,842,424

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

Payables and accruals

 

$

376,817

 

$

371,324

 

 

 

 

 

 

 

Current portion of long-term debt

 

11,646

 

13,966

 

 

 

 

 

 

 

Total Current Liabilities

 

388,463

 

385,290

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

1,458,597

 

1,474,915

 

 

 

 

 

 

 

Non-current deferred tax liability

 

89,510

 

90,859

 

 

 

 

 

 

 

Other non-current liabilities

 

68,502

 

80,077

 

 

 

 

 

 

 

Total Liabilities

 

2,005,072

 

2,031,141

 

 

 

 

 

 

 

Redeemable non-controlling interests

 

10,811

 

11,623

 

 

 

 

 

 

 

Total equity

 

745,478

 

799,660

 

 

 

 

 

 

 

Total Liabilities and Equity

 

$

2,761,361

 

$

2,842,424

 

 



 

IV.  Consolidated Statement of Cash Flows

For the Three Months Ended September 30, 2012 and 2013

(In thousands, unaudited)

 

 

 

2012

 

2013

 

Operating Activities

 

 

 

 

 

Net Income

 

$

25,158

 

$

25,207

 

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

 

 

 

 

 

Depreciation and amortization

 

15,537

 

16,163

 

Provision for bad debts

 

11,199

 

9,262

 

Equity in losses (earnings) of unconsolidated subsidiaries

 

(1,167

)

179

 

Loss (gain) from disposal or sale of assets

 

120

 

(174

)

Loss on early retirement of debt

 

6,064

 

 

Non-cash stock compensation expense

 

1,391

 

1,866

 

Amortization of debt discount and issuance costs

 

1,983

 

1,919

 

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

 

 

 

 

 

Accounts receivable

 

20,013

 

(5,405

)

Other current assets

 

(237

)

(1,748

)

Other assets

 

(405

)

(3,355

)

Accounts payable

 

1,388

 

9,463

 

Due to third-party payors

 

(1,378

)

(2,327

)

Accrued expenses

 

(6,075

)

32,991

 

Income and deferred taxes

 

1,680

 

9,041

 

Net cash provided by operating activities

 

75,271

 

93,082

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property and equipment

 

(17,254

)

(17,369

)

Proceeds from sale of assets

 

 

518

 

Investment in businesses, net of distributions

 

115

 

(3,714

)

Acquisition of businesses, net of cash acquired

 

(1,341

)

(677

)

Net cash used in investing activities

 

(18,480

)

(21,242

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Borrowings on revolving credit facility

 

25,000

 

125,000

 

Payments on revolving credit facility

 

(25,000

)

(165,000

)

Borrowings on credit facility term loans, net of discount

 

266,750

 

 

Payments on credit facility term loans

 

(2,813

)

(2,053

)

Repurchase of 7 5/8% senior subordinated notes, net of premium

 

(278,495

)

 

Borrowings of other debt

 

 

2,329

 

Principal payments on other debt

 

(2,332

)

(2,794

)

Repayment of bank overdrafts

 

(6,750

)

(12,026

)

Debt issuance costs

 

(4,236

)

(237

)

Dividends paid to common stockholders

 

 

(13,966

)

Repurchase of common stock

 

 

(963

)

Proceeds from issuance of common stock

 

557

 

 

Distributions to non-controlling interests

 

(1,316

)

(1,605

)

Net cash used in financing activities

 

(28,635

)

(71,315

)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

28,156

 

525

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

21,520

 

8,768

 

Cash and cash equivalents at end of period

 

$

49,676

 

$

9,293

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Cash paid for interest

 

$

35,744

 

$

6,525

 

Cash paid for taxes

 

$

14,506

 

$

6,145

 

 



 

V.  Consolidated Statement of Cash Flows

For the Nine Months Ended September 30, 2012 and 2013

(In thousands, unaudited)

 

 

 

2012

 

2013

 

Operating Activities

 

 

 

 

 

Net Income

 

$

112,546

 

$

91,887

 

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

 

 

 

 

 

Depreciation and amortization

 

47,164

 

47,872

 

Provision for bad debts

 

31,603

 

27,429

 

Equity in earnings of unconsolidated subsidiaries

 

(6,384

)

(1,447

)

Gain from disposal or sale of assets

 

(3,484

)

(93

)

Loss on early retirement of debt

 

6,064

 

18,747

 

Non-cash stock compensation expense

 

3,990

 

5,403

 

Amortization of debt discount and issuance costs

 

5,494

 

6,507

 

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

 

 

 

 

 

Accounts receivable

 

(10,507

)

(89,237

)

Other current assets

 

(1,849

)

(7,642

)

Other assets

 

1,270

 

(3,211

)

Accounts payable

 

(4,098

)

6,798

 

Due to third-party payors

 

360

 

2,890

 

Accrued expenses

 

348

 

4,788

 

Income and deferred taxes

 

11,559

 

4,414

 

Net cash provided by operating activities

 

194,076

 

115,105

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property and equipment

 

(45,188

)

(45,331

)

Proceeds from sale of assets

 

16,511

 

518

 

Investment in businesses, net of distributions

 

(9,899

)

(32,430

)

Acquisition of businesses, net of cash acquired

 

(1,547

)

(848

)

Net cash used in investing activities

 

(40,123

)

(78,091

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Borrowings on revolving credit facility

 

365,000

 

580,000

 

Payments on revolving credit facility

 

(405,000

)

(645,000

)

Borrowings on credit facility term loans, net of discount

 

266,750

 

298,500

 

Payments on credit facility term loans

 

(7,063

)

(594,668

)

Issuance of 6.375% senior notes

 

 

600,000

 

Repurchase of senior floating rate notes

 

 

(167,300

)

Repurchase of 7 5/8% senior subordinated notes

 

(278,495

)

(70,000

)

Borrowings of other debt

 

5,835

 

9,238

 

Principal payments on other debt

 

(7,417

)

(7,467

)

Repayment of bank overdrafts

 

(3,011

)

(10,401

)

Debt issuance costs

 

(4,236

)

(18,820

)

Dividends paid to common stockholders

 

 

(27,929

)

Repurchase of common stock

 

(46,790

)

(10,946

)

Proceeds from issuance of common stock

 

1,104

 

 

Distributions to non-controlling interests

 

(2,997

)

(3,072

)

Net cash used in financing activities

 

(116,320

)

(67,865

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

37,633

 

(30,851

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

12,043

 

40,144

 

Cash and cash equivalents at end of period

 

$

49,676

 

$

9,293

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Cash paid for interest

 

$

68,122

 

$

60,439

 

Cash paid for taxes

 

$

59,850

 

$

52,977

 

 



 

VI.  Key Statistics

For the Three Months Ended September 30, 2012 and 2013

(unaudited)

 

 

 

2012

 

2013

 

% Change

 

Specialty Hospitals

 

 

 

 

 

 

 

Number of hospitals — end of period:

 

 

 

 

 

 

 

Long term acute care hospitals (a)

 

111

 

108

 

 

 

Rehabilitation hospitals (a)

 

12

 

15

 

 

 

Total specialty hospitals

 

123

 

123

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

531,409

 

$

532,610

 

0.2

%

 

 

 

 

 

 

 

 

Number of patient days (b)

 

328,871

 

336,120

 

2.2

%

 

 

 

 

 

 

 

 

Number of admissions (b)

 

13,477

 

13,778

 

2.2

%

 

 

 

 

 

 

 

 

Net revenue per patient day (b)(c)

 

$

1,517

 

$

1,471

 

(3.0

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

83,659

 

$

75,280

 

(10.0

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

15.7

%

14.1

%

 

 

 

 

 

 

 

 

 

 

Outpatient Rehabilitation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of clinics — end of period

 

965

 

997

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

182,246

 

$

190,223

 

4.4

%

 

 

 

 

 

 

 

 

Number of visits (d)

 

1,129,015

 

1,196,893

 

6.0

%

 

 

 

 

 

 

 

 

Revenue per visit (d)(e)

 

$

103

 

$

103

 

0.0

%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

20,354

 

$

21,619

 

6.2

%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

11.2

%

11.4

%

 

 

 


(a)         Includes managed hospitals.

(b)         Excludes managed hospitals.

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

(d)         Excludes managed clinics.

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

 



 

VII.  Key Statistics

For the Nine Months Ended September 30, 2012 and 2013

(unaudited)

 

 

 

2012

 

2013

 

% Change

 

Specialty Hospitals

 

 

 

 

 

 

 

Number of hospitals — end of period:

 

 

 

 

 

 

 

Long term acute care hospitals (a)

 

111

 

108

 

 

 

Rehabilitation hospitals (a)

 

12

 

15

 

 

 

Total specialty hospitals

 

123

 

123

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

1,641,577

 

$

1,649,747

 

0.5

%

 

 

 

 

 

 

 

 

Number of patient days (b)

 

1,007,908

 

1,017,157

 

0.9

%

 

 

 

 

 

 

 

 

Number of admissions (b)

 

41,404

 

41,740

 

0.8

%

 

 

 

 

 

 

 

 

Net revenue per patient day (b)(c)

 

$

1,532

 

$

1,516

 

(1.0

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

285,779

 

$

265,020

 

(7.3

)%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

17.4

%

16.1

%

 

 

 

 

 

 

 

 

 

 

Outpatient Rehabilitation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of clinics — end of period

 

965

 

997

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues (,000)

 

$

566,195

 

$

579,404

 

2.3

%

 

 

 

 

 

 

 

 

Number of visits (d)

 

3,447,774

 

3,577,114

 

3.8

%

 

 

 

 

 

 

 

 

Revenue per visit (d)(e)

 

$

103

 

$

104

 

1.0

%

 

 

 

 

 

 

 

 

Adjusted EBITDA (,000)

 

$

68,669

 

$

70,506

 

2.7

%

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

12.1

%

12.2

%

 

 

 


(a)         Includes managed hospitals.

(b)         Excludes managed hospitals.

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

(d)         Excludes managed clinics.

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

 



 

VIII. Net Income to Adjusted EBITDA Reconciliation

For the Three and Nine Months Ended September 30, 2012 and 2013

(In thousands, unaudited)

 

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

 

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

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2012

 

2013

 

2012

 

2013

 

Net income

 

$

25,158

 

$

25,207

 

$

112,546

 

$

91,887

 

Income tax expense

 

16,189

 

15,761

 

71,415

 

57,391

 

Loss on early retirement of debt

 

6,064

 

 

6,064

 

18,747

 

Interest expense

 

24,575

 

21,252

 

72,295

 

66,614

 

Equity in losses (earnings) of unconsolidated subsidiaries

 

(1,167

)

179

 

(6,384

)

(1,447

)

Stock compensation expense:

 

 

 

 

 

 

 

 

 

Included in general and administrative

 

847

 

1,258

 

2,436

 

3,685

 

Included in cost of services

 

544

 

608

 

1,554

 

1,718

 

Depreciation and amortization

 

15,537

 

16,163

 

47,164

 

47,872

 

Adjusted EBITDA

 

$

87,747

 

$

80,428

 

$

307,090

 

$

286,467

 

 

 

 

 

 

 

 

 

 

 

Specialty hospitals

 

$

83,659

 

$

75,280

 

$

285,779

 

$

265,020

 

Outpatient rehabilitation

 

20,354

 

21,619

 

68,669

 

70,506

 

Other (a)

 

(16,266

)

(16,471

)

(47,358

)

(49,059

)

Adjusted EBITDA

 

$

87,747

 

$

80,428

 

$

307,090

 

$

286,467

 

 


(a)   Other primarily includes general and administrative costs.

 



 

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

For the Three Months Ended September 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

Per Share (a)

 

2013

 

Per Share (a)

 

Net income attributable to Select Medical Holdings Corporation

 

$

24,110

 

$

0.18

 

$

23,272

 

$

0.17

 

Earnings allocated to unvested restricted stockholders

 

(407

)

(0.01

)

(497

)

(0.00

)

Net income available to common stockholders

 

23,703

 

0.17

 

22,775

 

0.17

 

 

 

 

 

 

 

 

 

 

 

Adjustment for early retirement of debt:

 

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

6,064

 

0.05

 

 

 

Estimated income tax benefit (b)

 

(2,363

)

(0.02

)

 

 

Earnings allocated to unvested restricted stockholders

 

(63

)

(0.00

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income available to common stockholders

 

$

27,341

 

$

0.20

 

$

22,775

 

$

0.17

 

Adjustment for dilution

 

 

 

(0.00

)

 

 

(0.00

)

Adjusted income per common share - diluted shares

 

 

 

$

0.20

 

 

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

 

137,551

 

 

 

136,646

 

Diluted

 

 

 

137,888

 

 

 

136,793

 

 


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

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

 



 

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

For the Nine Months Ended September 30, 2012 and 2013

(In thousands, except per share amounts, unaudited)

 

 

 

2012

 

Per Share (a)

 

2013

 

Per Share (a)

 

Net income attributable to Select Medical Holdings Corporation

 

$

108,824

 

$

0.78

 

$

85,470

 

$

0.62

 

Earnings allocated to unvested restricted stockholders

 

(1,759

)

(0.01

)

(1,802

)

(0.01

)

Net income available to common stockholders

 

107,065

 

0.77

 

83,668

 

0.61

 

 

 

 

 

 

 

 

 

 

 

Adjustment for early retirement of debt:

 

 

 

 

 

 

 

 

 

Loss on early retirement of debt

 

6,064

 

0.05

 

18,747

 

0.13

 

Estimated income tax benefit (b)

 

(2,352

)

(0.02

)

(7,248

)

(0.05

)

Earnings allocated to unvested restricted stockholders

 

(60

)

(0.00

)

(243

)

(0.00

)

 

 

 

 

 

 

 

 

 

 

Adjusted net income available to common stockholders

 

$

110,717

 

$

0.80

 

$

94,924

 

$

0.69

 

Adjustment for dilution

 

 

 

(0.01

)

 

 

(0.00

)

Adjusted income per common share - diluted shares

 

 

 

$

0.79

 

 

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

 

139,138

 

 

 

136,879

 

Diluted

 

 

 

139,404

 

 

 

137,040

 

 


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

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