MECHANICSBURG, Pa., Feb. 23,
2017 /PRNewswire/ -- Select Medical Holdings
Corporation ("Select Medical") (NYSE: SEM) today announced results
for its fourth quarter and year ended December 31, 2016.
For the fourth quarter ended December 31,
2016, net operating revenues increased to $1,046.3 million, compared to $1,039.2 million for the same quarter, prior
year. Income from operations decreased to $55.7 million for the fourth quarter ended
December 31, 2016, compared to
$62.3 million for the same quarter,
prior year. Net income was $20.5
million for the fourth quarter ended December 31, 2016, which includes a pre-tax
non-operating gain of $5.6 million.
Net income was $25.8 million for the
fourth quarter ended December 31,
2015. Earnings excluding interest, income taxes,
depreciation and amortization, gain (loss) on early retirement of
debt, stock compensation expense, Concentra acquisition costs,
Physiotherapy acquisition costs, non-operating gain (loss), and
equity in earnings (losses) of unconsolidated subsidiaries
("Adjusted EBITDA") for the fourth quarter ended December 31, 2016 was $97.7 million, compared to $100.8 million for the same quarter, prior year.
A reconciliation of net income to Adjusted EBITDA is presented in
table VIII of this release. Income per common share for the fourth
quarter ended December 31, 2016 was
$0.15 on a fully diluted basis,
compared to $0.22 for the same
quarter, prior year. Excluding the non-operating gain and related
tax effect, adjusted income per common share was $0.12 per diluted share for the fourth quarter
ended December 31, 2016. A
reconciliation of income per common share to adjusted income per
common share for both the fourth quarters ended December 31, 2016 and 2015 is presented in table
IX of this release.
For the year ended December 31,
2016, net operating revenues increased 14.5% to $4,286.0 million, compared to $3,742.7 million for the prior year. Income from
operations increased 9.1% to $299.8
million for the year ended December
31, 2016, compared to $274.8
million for the prior year. Net income was $125.3 million for the year ended December 31, 2016, which includes a pre-tax
non-operating gain of $42.7 million
and a pre-tax loss on early retirement on debt of $11.6 million. Net income was $136.0 million for the year ended December 31, 2015, which includes a pre-tax
non-operating gain of $29.6 million.
Adjusted EBITDA for the year ended December
31, 2016 increased 16.7% to $465.8
million, compared to $399.2
million for the prior year. A reconciliation of net income
to Adjusted EBITDA is presented in table VIII of this
release. Income per common share for the year ended
December 31, 2016 was $0.87 on a fully diluted basis, compared to
$0.99 for the prior year. Excluding
the non-operating gain, loss of early retirement of debt, and
related tax effects, adjusted income per common share was
$0.61 per diluted share for the year
ended December 31, 2016. Excluding
the non-operating gain and related tax effect, adjusted income per
common share was $0.85 per diluted
share for the year ended December 31,
2015. A reconciliation of income per common share to
adjusted income per common share for both the years ended
December 31, 2016 and 2015 is
presented in table IX of this release.
Specialty Hospitals Segment
For the fourth quarter ended December 31,
2016, net operating revenues for the specialty hospitals
segment decreased to $560.2 million,
compared to $593.3 million for the
same quarter, prior year. Adjusted EBITDA for the specialty
hospitals segment decreased to $63.8
million for the fourth quarter ended December 31, 2016, compared to $86.0 million for the same quarter, prior year.
The Adjusted EBITDA margin for the specialty hospitals segment was
11.4% for the fourth quarter ended December
31, 2016, compared to 14.5% for the same quarter, prior
year. The Adjusted EBITDA results for the specialty hospitals
segment include start-up losses of approximately $2.4 million for the fourth quarter ended
December 31, 2016, compared to
$4.9 million for the same quarter,
prior year. Certain specialty hospitals key statistics for
both the fourth quarters ended December 31,
2016 and 2015 are presented in table VI of this release.
For the year ended December 31,
2016, net operating revenues for the specialty hospitals
segment decreased to $2,289.5
million, compared to $2,346.8
million for the prior year. Adjusted EBITDA for the
specialty hospitals segment decreased to $281.5 million for the year ended December 31, 2016, compared to $327.6 million for the prior year. The Adjusted
EBITDA margin for the specialty hospitals segment was 12.3% for the
year ended December 31, 2016,
compared to 14.0% for the prior year. The Adjusted EBITDA results
for the specialty hospitals segment include start-up losses of
approximately $21.8 million for the
year ended December 31, 2016,
compared to $16.8 million for the
prior year. Certain specialty hospitals key statistics for both the
years ended December 31, 2016 and
2015 are presented in table VII of this release.
Outpatient Rehabilitation Segment
The financial results of the outpatient rehabilitation segment
include the contract therapy businesses through March 31, 2016 and Physiotherapy Associates
Holdings, Inc. ("Physiotherapy") beginning March 4, 2016.
For the fourth quarter ended December 31,
2016, net operating revenues for the outpatient
rehabilitation segment increased 21.1% to $249.7 million, compared to $206.2 million for the same quarter, prior year.
Adjusted EBITDA for the outpatient rehabilitation segment increased
30.8% to $30.8 million for the fourth
quarter ended December 31, 2016,
compared to $23.6 million for the
same quarter, prior year. The Adjusted EBITDA margin for the
outpatient rehabilitation segment was 12.3% for the fourth quarter
ended December 31, 2016, compared to
11.4% for the same quarter, prior year. Certain outpatient
rehabilitation key statistics for both the fourth quarters ended
December 31, 2016 and 2015 are
presented in table VI of this release.
For the year ended December 31,
2016, net operating revenues for the outpatient
rehabilitation segment increased 22.9% to $995.4 million, compared to $810.0 million for the prior year. Adjusted
EBITDA for the outpatient rehabilitation segment increased 32.2% to
$129.8 million for the year ended
December 31, 2016, compared to
$98.2 million for the prior year. The
Adjusted EBITDA margin for the outpatient rehabilitation segment
was 13.0% for the year ended December 31,
2016, compared to 12.1% for the prior year. Certain
outpatient rehabilitation key statistics for both the years ended
December 31, 2016 and 2015 are
presented in table VII of this release.
Concentra Segment
The financial results of Concentra, which is operated through a
joint venture subsidiary, are consolidated with Select Medical's
commencing on the acquisition date of June
1, 2015.
For the fourth quarter ended December 31,
2016, net operating revenues for the Concentra segment
decreased to $236.4 million, compared
to $239.4 million for the same
quarter, prior year. Adjusted EBITDA for the Concentra
segment increased 116.4% to $24.9
million for the fourth quarter ended December 31, 2016, compared to $11.5 million for the same quarter, prior
year. The Adjusted EBITDA margin for the Concentra segment
was 10.5% for the fourth quarter ended December 31, 2016, compared to 4.8% for the same
quarter, prior year. Certain Concentra key statistics for both the
fourth quarters ended December 31,
2016 and 2015 are presented in table VI of this release.
For the year ended December 31,
2016, net operating revenues for the Concentra segment were
$1,000.6 million, compared to
$585.2 million for the prior year.
Adjusted EBITDA for the Concentra segment was $143.0 million for the year ended December 31, 2016, compared to $48.3 million for the prior year. The Adjusted
EBITDA margin for the Concentra segment was 14.3% for the year
ended December 31, 2016, compared to
8.3% for the prior year. Certain Concentra key statistics for
both the years ended December 31,
2016 and 2015 are presented in table VII of this
release.
Stock Repurchase Program
Select Medical did not repurchase shares during the year ended
December 31, 2016 under its
authorized $500.0 million stock
repurchase program. The program has been extended until
December 31, 2017, and will remain in
effect until then, unless further extended or earlier terminated by
the board of directors.
Proposed Refinancing
As announced on January 27, 2017,
Select Medical is in negotiations to refinance its senior secured
credit facility. Select Medical expects that its new senior
secured credit facility, which will replace the existing senior
secured credit facility, will consist of $1,150.0 million of term loans with an interest
rate of LIBOR plus 3.50% subject to a 1.00% LIBOR floor and a
$450.0 million revolving credit
facility with an interest rate of LIBOR plus 3.25%. The
proposed refinancing is subject to customary terms and conditions,
including negotiation and execution of definitive
documentation. Select Medical anticipates that the
refinancing, if completed, would close in March of 2017.
Business Outlook
Select Medical reaffirms its 2017 business outlook, provided
most recently in its January 6, 2017
press release, for net operating revenues, Adjusted EBITDA and
fully diluted income per common share. Select Medical continues to
expect consolidated net operating revenues for the full year 2017
to be in the range of $4.4 billion to $4.6
billion. Select Medical continues to expect Adjusted EBITDA
for the full year 2017 to be in the range of $540.0 million to $580.0 million. Select Medical
continues to expect fully diluted income per common share for the
full year 2017 to be in the range of $0.73
to $0.91. The above business outlook does not take into
consideration the effects of the proposed refinancing.
Conference Call
Select Medical will host a conference call regarding its fourth
quarter and full year ended December 31,
2016 results, as well as its business outlook, on
Friday, February 24, 2017, at
9:00am EST. The domestic dial in
number for the call is 1-877-430-7741. The international dial in
number is 1-615-247-0054. The passcode for the call is 59651514.
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 11:59pm EST,
March 3, 2017. The replay number is
1-855-859-2056 (domestic) or 1-404-537-3406 (international). The
passcode for the replay will be 59651514. The replay can also be
accessed at Select Medical Holdings Corporation's website,
www.selectmedicalholdings.com.
Select Medical began operations in 1997 and has grown to be one
of the largest operators of specialty hospitals, outpatient
rehabilitation clinics and occupational health centers in
the United States based on the
number of facilities. As of December 31,
2016, Select Medical operated 103 long term acute care
hospitals and 20 acute medical rehabilitation hospitals in 27
states and 1,611 outpatient rehabilitation clinics in 37 states and
the District of Columbia. Select
Medical's joint venture subsidiary Concentra operated 300 centers
in 38 states. Concentra also provides contract services at employer
worksites and Department of Veterans Affairs community-based
outpatient clinics. At December 31,
2016, Select Medical had operations in 46 states and the
District of Columbia. Information
about Select Medical is available at www.selectmedical.com.
Certain statements contained herein that are not descriptions of
historical facts are "forward-looking" statements (as such term is
defined in the Private Securities Litigation Reform Act of
1995). Because such statements include risks and
uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements due to
factors including the following:
- changes in government reimbursement for our services due to the
implementation of healthcare reform legislation, deficit reduction
measures, and/or new payment policies (including, for example, the
expiration of the moratorium limiting the full application of the
25 Percent Rule that would reduce our Medicare payments for those
patients admitted to a long term acute care hospital from a
referring hospital in excess of an applicable percentage admissions
threshold) may result in a reduction in net operating revenues, an
increase in costs and a reduction in profitability;
- the impact of the Bipartisan Budget Act of 2013, which
established payment limits for Medicare patients who do not meet
specified criteria, may result in a reduction in net operating
revenues and profitability of our long term acute care
hospitals;
- 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;
- our plans and expectations related to the acquisitions of
Concentra Inc. and Physiotherapy Associates Holdings, Inc. 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; 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 our quarterly
reports on Form 10-Q and of the annual report on Form 10-K.
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, 2015 and 2016
(In thousands,
except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
2015
|
|
2016
|
|
%
Change
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
1,039,205
|
|
$
1,046,265
|
|
0.7%
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
services
|
|
902,328
|
|
909,893
|
|
0.8
|
General and
administrative
|
|
24,135
|
|
25,701
|
|
6.5
|
Bad debt
expense
|
|
16,129
|
|
17,502
|
|
8.5
|
Depreciation and
amortization
|
|
34,313
|
|
37,424
|
|
9.1
|
|
|
|
|
|
|
|
Income from
operations
|
|
62,300
|
|
55,745
|
|
(10.5)
|
|
|
|
|
|
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
4,023
|
|
5,477
|
|
36.1
|
Non-operating
gain
|
|
-
|
|
5,557
|
|
N/M
|
Interest
expense
|
|
(33,088)
|
|
(42,419)
|
|
28.2
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
33,235
|
|
24,360
|
|
(26.7)
|
|
|
|
|
|
|
|
Income tax
expense
|
|
7,388
|
|
3,879
|
|
(47.5)
|
|
|
|
|
|
|
|
Net income
|
|
25,847
|
|
20,481
|
|
(20.8)
|
|
|
|
|
|
|
|
Less: Net
income (loss) attributable to non-
controlling
interests
|
|
(3,480)
|
|
309
|
|
N/M
|
|
|
|
|
|
|
|
Net income
attributable to Select Medical
Holdings
Corporation
|
|
$
29,327
|
|
$
20,172
|
|
(31.2)%
|
|
|
|
|
|
|
|
Weighted average
shares outstanding(1):
|
|
|
|
|
|
|
Basic
|
|
127,292
|
|
128,274
|
|
|
Diluted
|
|
127,464
|
|
128,436
|
|
|
|
|
|
|
|
|
|
Income per common
share(1):
|
|
|
|
|
|
|
Basic
|
|
$0.22
|
|
$0.15
|
|
|
Diluted
|
|
$0.22
|
|
$0.15
|
|
|
|
(1) Under the two-class method for calculating income per
common share, unvested restricted stock is a separate,
participating class. Income per common share and weighted average
common shares outstanding exclude amounts attributed to the
unvested restricted class of stockholders. Net income allocated to
the unvested restricted stockholders was $0.6 million and $0.9
million for the three months ended December 31, 2016 and 2015,
respectively. Unvested restricted weighted average shares
were 4,261 thousand and 4,021 thousand for the three months ended
December 31, 2016 and 2015, respectively.
|
|
N/M = Not
Meaningful
|
II.
Condensed Consolidated Statements of Operations
|
For the Years
Ended December 31, 2015 and 2016
(In thousands,
except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
2015
|
|
2016
|
|
%
Change
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
3,742,736
|
|
$
4,286,021
|
|
14.5%
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
services
|
|
3,211,541
|
|
3,664,843
|
|
14.1
|
General and
administrative
|
|
92,052
|
|
106,927
|
|
16.2
|
Bad debt
expense
|
|
59,372
|
|
69,093
|
|
16.4
|
Depreciation and
amortization
|
|
104,981
|
|
145,311
|
|
38.4
|
|
|
|
|
|
|
|
Income from
operations
|
|
274,790
|
|
299,847
|
|
9.1
|
|
|
|
|
|
|
|
Loss on early
retirement of debt
|
|
-
|
|
(11,626)
|
|
N/M
|
Equity in earnings of
unconsolidated subsidiaries
|
|
16,811
|
|
19,943
|
|
18.6
|
Non-operating
gain
|
|
29,647
|
|
42,651
|
|
N/M
|
Interest
expense
|
|
(112,816)
|
|
(170,081)
|
|
50.8
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
208,432
|
|
180,734
|
|
(13.3)
|
|
|
|
|
|
|
|
Income tax
expense
|
|
72,436
|
|
55,464
|
|
(23.4)
|
|
|
|
|
|
|
|
Net income
|
|
135,996
|
|
125,270
|
|
(7.9)
|
|
|
|
|
|
|
|
Less: Net
income attributable to non-
controlling
interests
|
|
5,260
|
|
9,859
|
|
87.4
|
|
|
|
|
|
|
|
Net income
attributable to Select Medical
Holdings
Corporation
|
|
$
130,736
|
|
115,411
|
|
(11.7)%
|
|
|
|
|
|
|
|
Weighted average
shares outstanding(1):
|
|
|
|
|
|
|
Basic
|
|
127,478
|
|
127,813
|
|
|
Diluted
|
|
127,752
|
|
127,968
|
|
|
|
|
|
|
|
|
|
Income per common
share(1):
|
|
|
|
|
|
|
Basic
|
|
$1.00
|
|
$0.88
|
|
|
Diluted
|
|
$0.99
|
|
$0.87
|
|
|
|
|
|
|
|
|
|
Dividends paid per
share
|
|
$0.10
|
|
-
|
|
|
|
|
|
|
|
|
|
(1) Under
the two-class method for calculating income per common share,
unvested restricted stock is a separate, participating class.
Income per common share and weighted average common shares
outstanding exclude amounts attributed to the unvested restricted
class of stockholders. Net income allocated to the unvested
restricted stockholders was $3.5 million and $3.8 million for the
years ended December 31, 2016 and 2015, respectively.
Unvested restricted weighted average shares were 4,022 thousand and
3,847 thousand for the years ended December 31, 2016 and 2015,
respectively.
N/M = Not
Meaningful
|
III.
Condensed Consolidated Balance Sheets
(In thousands,
unaudited)
|
|
|
December 31,
2015
|
|
December 31,
2016
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
14,435
|
|
$
99,029
|
|
|
|
|
|
Accounts receivable,
net
|
|
603,558
|
|
573,752
|
|
|
|
|
|
Current deferred tax
asset
|
|
28,688
|
|
45,165
|
|
|
|
|
|
Other current
assets
|
|
102,473
|
|
90,122
|
|
|
|
|
|
Total Current
Assets
|
|
749,154
|
|
808,068
|
|
|
|
|
|
Property and
equipment, net
|
|
864,124
|
|
892,217
|
|
|
|
|
|
Goodwill
|
|
2,314,624
|
|
2,751,000
|
|
|
|
|
|
Other identifiable
intangibles, net
|
|
318,675
|
|
340,562
|
|
|
|
|
|
Other
assets
|
|
142,101
|
|
152,548
|
|
|
|
|
|
Total
Assets
|
|
$
4,388,678
|
|
$
4,944,395
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
|
|
Payables and
accruals
|
|
$
504,119
|
|
$
557,979
|
|
|
|
|
|
Current portion of
long-term debt and notes payable
|
|
225,166
|
|
13,656
|
|
|
|
|
|
Total Current
Liabilities
|
|
729,285
|
|
571,635
|
|
|
|
|
|
Long-term debt, net of
current portion
|
|
2,160,730
|
|
2,685,333
|
|
|
|
|
|
Non-current deferred
tax liability
|
|
218,705
|
|
222,847
|
|
|
|
|
|
Other non-current
liabilities
|
|
133,220
|
|
136,520
|
|
|
|
|
|
Total
Liabilities
|
|
3,241,940
|
|
3,616,335
|
|
|
|
|
|
Redeemable
non-controlling interests
|
|
238,221
|
|
422,159
|
|
|
|
|
|
Total
equity
|
|
908,517
|
|
905,901
|
|
|
|
|
|
Total Liabilities
and Equity
|
|
$
4,388,678
|
|
$
4,944,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IV. Condensed
Consolidated Statements of Cash Flows
|
|
For the Three
Months Ended December 31, 2015 and 2016 (In thousands, unaudited)
|
|
|
|
2015
|
|
2016
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
25,847
|
|
$
20,481
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Distributions from
unconsolidated subsidiaries
|
|
2,155
|
|
4,331
|
Depreciation and
amortization
|
|
34,313
|
|
37,424
|
Provision for bad
debts
|
|
16,129
|
|
17,502
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(4,023)
|
|
(5,477)
|
Loss (gain) on sale of
assets and businesses
|
|
166
|
|
(4,578)
|
Gain on sale of equity
investment
|
|
-
|
|
(2,538)
|
Stock compensation
expense
|
|
5,741
|
|
4,489
|
Amortization of debt
discount, premium and issuance costs
|
|
2,797
|
|
3,811
|
Deferred income
taxes
|
|
4,867
|
|
497
|
Changes in operating
assets and liabilities, net of effects of business
combinations:
|
|
|
|
|
Accounts
receivable
|
|
(43,794)
|
|
1,456
|
Other current
assets
|
|
2,077
|
|
5,356
|
Other
assets
|
|
173
|
|
4,144
|
Accounts payable and
accrued expenses
|
|
(41,464)
|
|
(21,056)
|
Net cash provided by
operating activities
|
|
4,984
|
|
65,842
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisition of
businesses, net of cash acquired
|
|
(11,756)
|
|
(57,975)
|
Purchases of property
and equipment
|
|
(68,650)
|
|
(43,373)
|
Investment in
businesses
|
|
(644)
|
|
(1,583)
|
Proceeds from sale of
equity investment
|
|
-
|
|
2,538
|
Proceeds from sale of
assets and businesses
|
|
225
|
|
9,075
|
Net cash used in
investing activities
|
|
(80,825)
|
|
(91,318)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Borrowings on
revolving facilities
|
|
295,000
|
|
155,000
|
Payments on revolving
facilities
|
|
(220,000)
|
|
(110,000)
|
Payments on term
loans
|
|
(1,125)
|
|
(3,192)
|
Borrowings of other
debt
|
|
2,333
|
|
3,920
|
Principal payments on
other debt
|
|
(6,094)
|
|
(5,924)
|
Proceeds from bank
overdrafts
|
|
4,516
|
|
19,210
|
Repurchase of common
stock
|
|
(2,205)
|
|
(990)
|
Proceeds from exercise
of stock options
|
|
45
|
|
184
|
Tax benefit from stock
based awards
|
|
1,463
|
|
-
|
Purchase of
non-controlling interests
|
|
(1,095)
|
|
(569)
|
Distributions to
non-controlling interests
|
|
(5,197)
|
|
(1,357)
|
Net cash provided by
financing activities
|
|
67,641
|
|
56,282
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(8,200)
|
|
30,806
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
|
22,635
|
|
68,223
|
Cash and cash
equivalents at end of period
|
|
$
14,435
|
|
$
99,029
|
|
|
|
|
|
Supplemental
Information
|
|
|
|
|
Cash paid for
interest
|
|
$
43,229
|
|
$
49,712
|
Cash paid for
taxes
|
|
$
23,515
|
|
$
10,819
|
|
|
|
|
|
|
V. Condensed
Consolidated Statements of Cash Flows
|
|
For the Years Ended
December 31, 2015 and 2016 (In thousands, unaudited)
|
|
|
|
2015
|
|
2016
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
135,996
|
|
$
125,270
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Distributions from
unconsolidated subsidiaries
|
|
13,969
|
|
20,476
|
Depreciation and
amortization
|
|
104,981
|
|
145,311
|
Provision for bad
debts
|
|
59,372
|
|
69,093
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(16,811)
|
|
(19,943)
|
Loss on early
retirement of debt
|
|
-
|
|
11,626
|
Gain on sale of
assets and businesses
|
|
(1,098)
|
|
(46,488)
|
Gain on sale of
equity investment
|
|
(29,647)
|
|
(2,779)
|
Impairment of equity
investment
|
|
-
|
|
5,339
|
Stock compensation
expense
|
|
14,985
|
|
17,413
|
Amortization of debt
discount, premium, and issuance costs
|
|
9,543
|
|
15,656
|
Deferred income
taxes
|
|
(2,058)
|
|
(12,591)
|
Changes in operating
assets and liabilities, net of effects of business
combinations:
|
|
|
|
|
Accounts
receivable
|
|
(92,572)
|
|
(39,320)
|
Other current
assets
|
|
(2,503)
|
|
17,450
|
Other
assets
|
|
4,713
|
|
9,290
|
Accounts payable and
accrued expenses
|
|
9,545
|
|
30,800
|
Net cash provided by
operating activities
|
|
208,415
|
|
346,603
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisition of
businesses, net of cash acquired
|
|
(1,061,628)
|
|
(472,206)
|
Purchases of property
and equipment
|
|
(182,642)
|
|
(161,633)
|
Investment in
businesses
|
|
(2,347)
|
|
(4,723)
|
Proceeds from sale of
equity investment
|
|
33,096
|
|
3,779
|
Proceeds from sale of
assets and businesses
|
|
1,767
|
|
80,463
|
Net cash used in
investing activities
|
|
(1,211,754)
|
|
(554,320)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Borrowings on
revolving facilities
|
|
1,135,000
|
|
575,000
|
Payments on revolving
facilities
|
|
(895,000)
|
|
(655,000)
|
Net proceeds from term
loans
|
|
623,575
|
|
795,344
|
Payments on term
loans
|
|
(29,134)
|
|
(438,034)
|
Borrowings of other
debt
|
|
13,374
|
|
27,721
|
Principal payments on
other debt
|
|
(18,136)
|
|
(21,401)
|
Proceeds from bank
overdrafts
|
|
6,869
|
|
10,746
|
Dividends paid to
common stockholders
|
|
(13,129)
|
|
-
|
Repurchase of common
stock
|
|
(15,827)
|
|
(2,929)
|
Proceeds from exercise
of stock options
|
|
1,649
|
|
1,672
|
Tax benefit from stock
based awards
|
|
1,846
|
|
-
|
Proceeds from issuance
of non-controlling interests
|
|
217,065
|
|
11,846
|
Purchase of
non-controlling interests
|
|
(1,095)
|
|
(2,099)
|
Distributions to
non-controlling interests
|
|
(12,637)
|
|
(10,555)
|
Net cash provided by
financing activities
|
|
1,014,420
|
|
292,311
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
|
11,081
|
|
84,594
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
|
3,354
|
|
14,435
|
Cash and cash
equivalents at end of period
|
|
$
14,435
|
|
$
99,029
|
|
|
|
|
|
Supplemental
Information
|
|
|
|
|
Cash paid for
interest
|
|
$
103,166
|
|
$
142,640
|
Cash paid for
taxes
|
|
$
79,420
|
|
$
70,756
|
VI. Key
Statistics
For the Three
Months Ended December 31, 2015 and 2016
|
(unaudited)
|
|
|
|
|
|
2015
|
|
2016
|
|
%
Change
|
Specialty
Hospitals
|
|
|
|
|
|
|
Number of hospitals –
end of period:
|
|
|
|
|
|
|
Long term acute care
hospitals (a)
|
|
109
|
|
103
|
|
|
Rehabilitation
hospitals (a)
|
|
18
|
|
20
|
|
|
Total specialty
hospitals
|
|
127
|
|
123
|
|
|
|
|
|
|
|
|
|
Net operating
revenues (,000)
|
|
$
593,336
|
|
$
560,221
|
|
(5.6)%
|
|
|
|
|
|
|
|
Number of patient
days (b)
|
|
339,614
|
|
306,776
|
|
(9.7)%
|
|
|
|
|
|
|
|
Number of admissions
(b)
|
|
14,218
|
|
12,840
|
|
(9.7)%
|
|
|
|
|
|
|
|
Net revenue per
patient day (b)(c)
|
|
$
1,588
|
|
$
1,651
|
|
4.0%
|
|
|
|
|
|
|
|
Adjusted EBITDA
(,000)
|
|
$
86,048
|
|
$
63,752
|
|
(25.9)%
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
|
14.5%
|
|
11.4%
|
|
|
|
|
|
|
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
Number of clinics –
end of period (d)
|
|
1,038
|
|
1,611
|
|
|
|
|
|
|
|
|
|
Net operating
revenues (,000)
|
|
$
206,178
|
|
$
249,654
|
|
21.1%
|
|
|
|
|
|
|
|
Number of visits
(e)
|
|
1,339,123
|
|
2,047,646
|
|
52.9%
|
|
|
|
|
|
|
|
Revenue per visit
(e)(f)
|
|
$
103
|
|
$
102
|
|
(1.0)%
|
|
|
|
|
|
|
|
Adjusted EBITDA
(,000)
|
|
$
23,558
|
|
$
30,824
|
|
30.8%
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
|
11.4%
|
|
12.3%
|
|
|
|
|
|
|
|
|
|
Concentra
|
|
|
|
|
|
|
Number of centers –
end of period (g)
|
|
300
|
|
300
|
|
|
|
|
|
|
|
|
|
Net operating
revenues (,000)
|
|
$
239,424
|
|
$
236,372
|
|
(1.3)%
|
|
|
|
|
|
|
|
Number of visits
(g)
|
|
1,782,647
|
|
1,731,446
|
|
(2.9)%
|
|
|
|
|
|
|
|
Revenue per visit
(g)(h)
|
|
$
115
|
|
$
119
|
|
3.5%
|
|
|
|
|
|
|
|
Adjusted EBITDA
(,000)
|
|
$
11,518
|
|
$
24,929
|
|
116.4%
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
|
4.8%
|
|
10.5%
|
|
|
|
|
|
|
|
|
|
(a) Includes managed
hospitals.
|
(b) Excludes managed
hospitals.
|
(c) Net revenue per patient
day is calculated by dividing specialty hospitals direct patient
service revenue by the total number of patient days.
|
(d) Includes managed
clinics.
|
(e) Excludes managed
clinics.
|
(f) 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 therapy revenue.
|
(g) Excludes onsite clinics
and community-based outpatient clinics.
|
(h) Net revenue per visit is
calculated by dividing center direct patient service revenue by the
total number of center visits.
|
|
|
|
|
|
|
|
|
|
VII. Key
Statistics
For the Years
Ended December 31, 2015 and 2016
|
(unaudited)
|
|
|
|
|
|
2015
|
|
2016
|
|
%
Change
|
Specialty
Hospitals
|
|
|
|
|
|
|
Number of hospitals –
end of period:
|
|
|
|
|
|
|
Long term acute care
hospitals (a)
|
|
109
|
|
103
|
|
|
Rehabilitation
hospitals (a)
|
|
18
|
|
20
|
|
|
Total specialty
hospitals
|
|
127
|
|
123
|
|
|
|
|
|
|
|
|
|
Net operating
revenues (,000)
|
|
$
2,346,781
|
|
$
2,289,482
|
|
(2.4)%
|
|
|
|
|
|
|
|
Number of patient
days (b)
|
|
1,373,780
|
|
1,258,068
|
|
(8.4)%
|
|
|
|
|
|
|
|
Number of admissions
(b)
|
|
56,570
|
|
52,381
|
|
(7.4)%
|
|
|
|
|
|
|
|
Net revenue per
patient day (b)(c)
|
|
$
1,569
|
|
$
1,651
|
|
5.2%
|
|
|
|
|
|
|
|
Adjusted EBITDA
(,000)
|
|
$
327,623
|
|
$
281,511
|
|
(14.1)%
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
|
14.0%
|
|
12.3%
|
|
|
|
|
|
|
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
Number of clinics –
end of period: (d)
|
|
1,038
|
|
1,611
|
|
|
|
|
|
|
|
|
|
Net operating
revenues (,000)
|
|
$
810,009
|
|
$
995,374
|
|
22.9%
|
|
|
|
|
|
|
|
Number of visits
(e)
|
|
5,218,532
|
|
7,799,208
|
|
49.5%
|
|
|
|
|
|
|
|
Revenue per visit
(e)(f)
|
|
$
103
|
|
$
102
|
|
(1.0)%
|
|
|
|
|
|
|
|
Adjusted EBITDA
(,000)
|
|
$
98,220
|
|
$
129,830
|
|
32.2%
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
|
12.1%
|
|
13.0%
|
|
|
|
|
|
|
|
|
|
Concentra
|
|
|
|
|
|
|
Number of centers –
end of period (g)
|
|
300
|
|
300
|
|
|
|
|
|
|
|
|
|
Net operating
revenues (,000)
|
|
$
585,222
|
|
$
1,000,624
|
|
N/M
|
|
|
|
|
|
|
|
Number of visits
(g)
|
|
4,436,977
|
|
7,373,751
|
|
N/M
|
|
|
|
|
|
|
|
Revenue per visit
(g)(h)
|
|
$
114
|
|
$
118
|
|
3.5%
|
|
|
|
|
|
|
|
Adjusted EBITDA
(,000)
|
|
$
48,301
|
|
$
143,009
|
|
N/M
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
|
8.3%
|
|
14.3%
|
|
|
|
|
|
|
|
|
|
(a) Includes managed
hospitals.
|
(b) Excludes managed
hospitals.
|
(c) Net revenue per patient
day is calculated by dividing specialty hospitals direct patient
service revenue by the total number of patient days.
|
(d) Includes managed
clinics.
|
(e) Excludes managed
clinics.
|
(f) 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 therapy revenue.
|
(g) Excludes onsite clinics
and community-based outpatient clinics.
|
(h) Net revenue per visit is
calculated by dividing center direct patient service revenue by the
total number of center visits.
|
N/M = Not
Meaningful
|
|
|
|
|
|
|
|
|
VIII. Net Income
to Adjusted EBITDA Reconciliation
|
For the Three
Months and Years Ended December 31, 2015 and 2016
|
(In thousands,
unaudited)
|
|
The presentation of
Adjusted EBITDA income (loss) 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 units.
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 calculations, 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, Concentra
acquisition costs, Physiotherapy acquisition costs, non-operating
gain (loss), and equity in earnings (losses) of unconsolidated
subsidiaries.
|
Non-GAAP Measure
Reconciliation
|
|
Three Months
Ended
December
31,
|
|
Year
Ended
December
31,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Net income
|
|
$
25,847
|
|
$
20,481
|
|
$
135,996
|
|
$
125,270
|
Income tax
expense
|
|
7,388
|
|
3,879
|
|
72,436
|
|
55,464
|
Interest
expense
|
|
33,088
|
|
42,419
|
|
112,816
|
|
170,081
|
Non-operating
gain
|
|
-
|
|
(5,557)
|
|
(29,647)
|
|
(42,651)
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(4,023)
|
|
(5,477)
|
|
(16,811)
|
|
(19,943)
|
Loss on early
retirement of debt
|
|
-
|
|
-
|
|
-
|
|
11,626
|
Income from
operations
|
|
62,300
|
|
55,745
|
|
274,790
|
|
299,847
|
Stock compensation
expense:
|
|
|
|
|
|
|
|
|
Included
in general and administrative
|
|
3,560
|
|
3,836
|
|
11,633
|
|
14,607
|
Included
in cost of services
|
|
644
|
|
653
|
|
3,046
|
|
2,806
|
Depreciation and
amortization
|
|
34,313
|
|
37,424
|
|
104,981
|
|
145,311
|
Physiotherapy
acquisition costs
|
|
-
|
|
-
|
|
-
|
|
3,236
|
Concentra acquisition
costs
|
|
-
|
|
-
|
|
4,715
|
|
-
|
Adjusted
EBITDA
|
|
$
100,817
|
|
$
97,658
|
|
$
399,165
|
|
$
465,807
|
|
|
|
|
|
|
|
|
|
Specialty
hospitals
|
|
$
86,048
|
|
$
63,752
|
|
$
327,623
|
|
$
281,511
|
Outpatient
rehabilitation
|
|
23,558
|
|
30,824
|
|
98,220
|
|
129,830
|
Concentra
|
|
11,518
|
|
24,929
|
|
48,301
|
|
143,009
|
Other (a)
|
|
(20,307)
|
|
(21,847)
|
|
(74,979)
|
|
(88,543)
|
Adjusted
EBITDA
|
|
$
100,817
|
|
$
97,658
|
|
$
399,165
|
|
$
465,807
|
|
|
|
|
|
|
|
|
|
(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 and Years Ended December 31, 2015 and 2016
|
(In thousands,
except per share amounts, unaudited)
|
|
Adjusted net income
available to common stockholders and adjusted income per common
share – diluted shares are not measures of financial performance
under GAAP. Items excluded from adjusted net income available
to common stockholders and adjusted income per common share –
diluted shares are significant components in understanding and
assessing financial performance. The Company believes that the
presentation of adjusted net income available to common
stockholders and adjusted income per common share – diluted shares
is important to investors because it is reflective of the financial
performance of our ongoing operations and provides better
comparability of our results of operations between periods.
Adjusted net income available to common stockholders and adjusted
income per common share – diluted shares 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 net income
available to common stockholders and adjusted income per common
share – diluted shares is not a measurement determined in
accordance with GAAP and is thus susceptible to varying
calculations, adjusted net income available to common stockholders
and adjusted income per common share – diluted shares as presented
may not be comparable to other similarly titled measures of other
companies.
|
|
The following table
reconciles net income available to common stockholders and income
per common share – diluted shares to adjusted net income available
to common stockholders and adjusted income per common share –
diluted shares for Select Medical. Adjusted net income
available to common stockholders is defined as net income available
to common shareholders before non-operating gain (loss) and gain
(loss) on early retirement of debt.
|
|
Three Months Ended
December 31,
|
|
2015
|
Per share
(a)
|
|
2016
|
Per share
(a)
|
Net income
attributable to Select Medical Holdings Corporation
|
$
29,327
|
|
|
$
20,172
|
|
Earnings allocated to
unvested restricted stockholders
|
898
|
|
|
649
|
|
Net income available
to common stockholders
|
28,429
|
$
0.22
|
|
19,523
|
$
0.15
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Non-operating gains
|
-
|
|
|
(5,557)
|
|
Estimated income tax
expense (b)
|
-
|
|
|
941
|
|
Earnings allocated to
unvested restricted stockholders
|
-
|
|
|
148
|
|
Adjusted net income
available to common stockholders
|
$
28,429
|
$
0.22
|
|
$
15,055
|
$
0.12
|
Adjustment for
dilution
|
|
(0.00)
|
|
|
(0.00)
|
Adjusted income per
common share – diluted shares
|
|
$
0.22
|
|
|
$
0.12
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
|
127,292
|
|
|
128,274
|
Diluted
|
|
127,464
|
|
|
128,436
|
|
|
|
|
|
|
(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 expense on the
adjustments to net income.
|
Refer to
Reconciliation of Income per Common Share to Adjusted Income per
Common Share for the years ended December 31, 2015 and
2016 on the next page.
|
|
Year Ended
December 31,
|
|
2015
|
Per share
(a)
|
|
2016
|
Per share
(a)
|
Net income
attributable to Select Medical Holdings Corporation
|
$
130,736
|
|
|
$
115,411
|
|
Earnings allocated to
unvested restricted stockholders
|
3,830
|
|
|
3,521
|
|
Net income available
to common stockholders
|
126,906
|
$
1.00
|
|
111,890
|
$
0.88
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Non-operating gain:
|
|
|
|
|
|
Gain on sale of contract therapy
|
-
|
|
|
(33,933)
|
|
Other non-operating gains
|
(29,647)
|
|
|
(8,705)
|
|
Loss on
early retirement of debt (b)
|
-
|
|
|
6,211
|
|
Estimated income tax
expense (c)
|
11,419
|
|
|
1,273
|
|
Earnings allocated to
unvested restricted stockholders
|
534
|
|
|
1,072
|
|
Adjusted net income
available to common stockholders
|
$
109,212
|
$
0.86
|
|
$
77,808
|
$
0.61
|
Adjustment for
dilution
|
|
(0.01)
|
|
|
(0.00)
|
Adjusted income per
common share – diluted shares
|
|
$
0.85
|
|
|
$
0.61
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
Basic
|
|
127,478
|
|
|
127,813
|
Diluted
|
|
127,752
|
|
|
127,968
|
|
(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) Includes the loss on early
retirement of Concentra's debt, net of non-controlling
interest.
|
(c)
Represents the estimated tax expense on the
adjustments to net income.
|
X. Net
Income to Adjusted EBITDA Reconciliation
|
Business Outlook
for the Year Ending December 31, 2017
|
(In millions,
unaudited)
|
|
The following is a
reconciliation of full year 2017 Adjusted EBITDA expectations as
computed at the low and high points of the range to the closest
comparable GAAP financial measure. Refer to table VIII for the
definition of Adjusted EBITDA and a discussion of the Company's use
of Adjusted EBITDA in evaluating financial performance and
determining resource allocation. Each item of expense presented in
the table is an estimation of full year 2017
expectations.
|
|
|
Range
|
Non-GAAP Measure
Reconciliation
|
|
Low
|
|
High
|
Net income
|
|
$
135
|
|
$
159
|
Income tax
expense
|
|
90
|
|
106
|
Interest
expense
|
|
173
|
|
173
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(23)
|
|
(23)
|
Income from
operations
|
|
$
375
|
|
$
415
|
Stock compensation
expense
|
|
15
|
|
15
|
Depreciation and
amortization
|
|
150
|
|
150
|
Adjusted
EBITDA
|
|
$
540
|
|
$
580
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/select-medical-holdings-corporation-announces-results-for-fourth-quarter-and-year-ended-december-31-2016-300412892.html
SOURCE Select Medical Holdings Corporation