MECHANICSBURG, Pa.,
April 30, 2020 /PRNewswire/ -- Select Medical Holdings
Corporation ("Select Medical," "we," "us," or "our") (NYSE: SEM)
today announced results for its first quarter ended March 31,
2020.
For the first quarter ended March 31, 2020, net operating
revenues increased 6.8% to $1,414.6
million, compared to $1,324.6
million for the same quarter, prior year. Income from
operations increased 15.2% to $128.7
million for the first quarter ended March 31, 2020,
compared to $111.7 million for the
same quarter, prior year. Net income increased 32.1% to
$70.4 million for the first quarter
ended March 31, 2020, compared to $53.3
million for the same quarter, prior year. For both the first
quarters ended March 31, 2020 and 2019, net income included
pre-tax gains on sales of businesses of $7.2
million and $6.5 million,
respectively. Adjusted EBITDA increased 10.1% to $187.3 million for the first quarter ended
March 31, 2020, compared to $170.1
million for the same quarter, prior year. Earnings per
common share increased to $0.40 on a
fully diluted basis for the first quarter ended March 31,
2020, compared to $0.30 for the same
quarter, prior year. Adjusted earnings per common share was
$0.37 on a fully diluted basis for
the first quarter ended March 31, 2020, compared to
$0.27 for the same quarter, prior
year. Adjusted earnings per common share excludes the gains on
sales of businesses and their related tax effects for both of the
quarters ended March 31, 2020 and 2019. The definition of
Adjusted EBITDA and a reconciliation of net income to Adjusted
EBITDA are presented in table VI of this release. A reconciliation
of earnings per common share to adjusted earnings per common share
is presented in table VII of this release.
Please refer to "Effects of the COVID-19 Pandemic on Select
Medical's Results of Operations" for further discussion
regarding the impact of the coronavirus disease 2019 ("COVID-19")
pandemic on Select Medical's operating results for the first
quarter ended March 31, 2020.
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 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 March 31, 2020,
Select Medical operated 101 critical illness recovery hospitals in
28 states, 29 rehabilitation hospitals in 12 states, and 1,753
outpatient rehabilitation clinics in 37 states and the District of Columbia. Select Medical's joint
venture subsidiary Concentra operated 523 occupational health
centers in 41 states. Concentra also provides contract services at
employer worksites and Department of Veterans Affairs
community-based outpatient clinics. At March 31, 2020, 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 first quarter ended March 31, 2020, net operating
revenues for the critical illness recovery hospital segment
increased 9.4% to $500.5 million,
compared to $457.5 million for the
same quarter, prior year. Adjusted EBITDA for the critical illness
recovery hospital segment increased 21.3% to $88.6 million for the first quarter ended
March 31, 2020, compared to $73.0
million for the same quarter, prior year. The Adjusted
EBITDA margin for the critical illness recovery hospital segment
was 17.7% for the first quarter ended March 31, 2020, compared
to 16.0% for the same quarter, prior year. Certain critical illness
recovery hospital key statistics are presented in table V of this
release for both the first quarters ended March 31, 2020 and
2019.
Rehabilitation Hospital Segment
For the first quarter ended March 31, 2020, net operating
revenues for the rehabilitation hospital segment increased 17.8% to
$182.0 million, compared to
$154.6 million for the same quarter,
prior year. Adjusted EBITDA for the rehabilitation hospital segment
increased 49.5% to $38.6 million for
the first quarter ended March 31, 2020, compared to
$25.8 million for the same quarter,
prior year. The Adjusted EBITDA margin for the rehabilitation
hospital segment was 21.2% for the first quarter ended
March 31, 2020, compared to 16.7% for the same quarter, prior
year. For the first quarter ended March 31, 2019, the Adjusted
EBITDA results for the rehabilitation hospital segment include
start-up losses of approximately $2.8
million. Certain rehabilitation hospital key statistics are
presented in table V of this release for both the first quarters
ended March 31, 2020 and 2019.
Outpatient Rehabilitation Segment
For the first quarter ended March 31, 2020, net operating
revenues for the outpatient rehabilitation segment increased 3.4%
to $255.2 million, compared to
$246.9 million for the same quarter,
prior year. Adjusted EBITDA for the outpatient rehabilitation
segment was $27.1 million for the
first quarter ended March 31, 2020, compared to $29.0 million for the same quarter, prior year.
The Adjusted EBITDA margin for the outpatient rehabilitation
segment was 10.6% for the first quarter ended March 31, 2020,
compared to 11.7% for the same quarter, prior year. Certain
outpatient rehabilitation key statistics are presented in table V
of this release for both the first quarters ended March 31,
2020 and 2019.
Concentra Segment
For the first quarter ended March 31, 2020, net operating
revenues for the Concentra segment increased 0.6% to $398.5 million, compared to $396.3 million for the same quarter, prior year.
Adjusted EBITDA for the Concentra segment was $61.5 million for the first quarter ended
March 31, 2020, compared to $66.3
million for the same quarter, prior year. The Adjusted
EBITDA margin for the Concentra segment was 15.4% for the first
quarter ended March 31, 2020, compared to 16.7% for the same
quarter, prior year. Certain Concentra key statistics are presented
in table V of this release for both the first quarters ended
March 31, 2020 and 2019.
Effects of the COVID-19 Pandemic on Select Medical's Results of
Operations
The broader implications of the COVID-19 pandemic on Select
Medical's results of operations and overall financial performance
remain uncertain. Select Medical is a healthcare service provider
that provides patient care services in both inpatient and
outpatient settings. Select Medical has provided certain additional
performance metrics to assist readers in understanding how the
COVID-19 pandemic impacted each of its segments during the one
month ended March 31, 2020, including
its (i) net operating revenues and Adjusted EBITDA for the two
months ended February 29, 2020 and
February 28, 2019, (ii) net operating
revenues and Adjusted EBITDA for the one month ended March 31, 2020 and 2019, (iii) net operating
revenues and Adjusted EBITDA for the quarters ended March 31, 2020 and 2019, and (iv) certain
operating statistics for each of the aforementioned periods.
Critical Illness Recovery Hospital Segment. Select
Medical's critical illness recovery hospitals are a key part of the
inpatient hospital continuum of care. Both the Centers for Medicare
& Medicaid Services ("CMS") and Congress acted to temporarily
suspend certain regulations concerning length of stay requirements,
which impact Select Medical's critical illness recovery hospitals,
in order to facilitate the transfer of patients from general acute
care hospitals. This was done in order to expand hospital bed
capacity to care for COVID-19 patients. As COVID-19 has spread in
the general acute care hospitals in many markets where it operates,
Select Medical has admitted patients with COVID-19 and has faced
the challenging task of treating them while attempting to protect
its patients and staff members who do not have COVID-19. The
hospitals have followed CDC guidelines, directives and
recommendations with regard to the use of personal protective
equipment and the isolation and treatment of patients with
COVID-19. The pandemic has caused, and will continue to cause,
disruptions in Select Medical's critical illness recovery
hospitals, which include, in some cases, the addition or reduction
of beds, the creation of isolated units and spaces, temporary
increases or restrictions on admissions, the incurrence of
additional costs, staff illnesses, and the increased use of
contract clinical labor.
Rehabilitation Hospital Segment. Select Medical's
rehabilitation hospitals receive most of their admissions from
general acute care hospitals. Both CMS and Congress acted to
temporarily suspend certain regulations that govern admissions into
rehabilitation hospitals to facilitate the transfer of patients
from general acute care hospitals and critical illness recovery
hospitals. This was done in order to expand hospital bed capacity
to care for COVID-19 patients. As COVID-19 has spread in the
general acute care hospitals in many markets where it operates,
Select Medical has admitted patients with COVID-19 and has faced
the challenging task of treating them while attempting to protect
its patients and staff members who do not have COVID-19. The
hospitals have followed CDC guidelines, directives and
recommendations with regard to the use of personal protective
equipment and the isolation and treatment of patients with
COVID-19. The pandemic has caused, and will continue to cause,
disruptions in Select Medical's rehabilitation hospitals, which
include, in some cases, the addition or reduction of beds, the
creation of isolated units and spaces, temporary restrictions on
admissions, the incurrence of additional costs, staff illnesses,
and the increased use of contract clinical labor. Additionally,
elective surgeries at hospitals and other facilities have been
suspended which is reducing the need for inpatient rehabilitation
services.
Outpatient Rehabilitation Segment. Beginning in
mid-March, hospitals and other facilities began to suspend elective
surgeries. Additionally, state governments in the areas
experiencing the most significant growth of COVID-19 infections
began implementing mandatory closures of non-essential or non-life
sustaining businesses, restrictions on individual activities
outside of the home, restrictions on travel, and closures of
schools. These actions continued to expand throughout March and by
the end of March, most states implemented significant restrictions
on businesses and individuals. The suspension of elective surgeries
at hospitals and other facilities and the reduction of physician
office visits combined with recommendations of social distancing
and the other items noted above have had significant effects on
patient visit volumes. As a result, Select Medical has temporarily
consolidated the operations of some of its clinics by transferring
staff and patients.
Concentra Segment. Beginning in mid-March, state
governments in the areas experiencing the most significant growth
of COVID-19 infections began implementing mandatory closures of
non-essential or non-life sustaining businesses. These actions have
continued to expand throughout March. By the end of March,
most states implemented significant restrictions on
businesses. These actions have had significant effects on
patient visit volumes as employers have furloughed workforces and
temporarily ceased operations or have significantly reduced their
operations. As a result, Select Medical has temporarily
consolidated the operations of some of its centers by transferring
staff and patients.
Select Medical provided below certain performance measures and
operating statistics used by management to help illustrate the
impact of the COVID-19 pandemic on its operating results. For the
quarter ended March 31, 2020, Select
Medical defined the pre-COVID-19 outbreak period as the two months
ended February 29, 2020, and the
post-COVID-19 outbreak period as the one month ended March 31, 2020. Select Medical provided prior
year comparative data for the pre-COVID-19 and post-COVID-19
outbreak periods presented. The following performance measures and
operating statistics should be considered in conjunction with
the operating results for the full quarter ended March 31, 2020. The performance measures and
operating statistics presented for the two months ended
February 29, 2020 and the one month
ended March 31, 2020 are, when
combined, equal to the performance measures and operating
statistics presented for the full quarter ended March 31, 2020. The same is true for the prior
year comparative data.
|
|
Two Months Ended
February
|
|
|
One Month Ended
March
|
|
|
Three Months Ended
March
|
|
|
2019
|
|
2020
|
|
%
Change
|
|
|
2019
|
|
2020
|
|
%
Change
|
|
|
2019
|
|
2020
|
Selected financial
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
|
$
|
295,385
|
|
|
$
|
328,613
|
|
|
11.2
|
%
|
|
|
$
|
162,149
|
|
|
$
|
171,908
|
|
|
6.0
|
%
|
|
|
$
|
457,534
|
|
|
$
|
500,521
|
|
Rehabilitation
hospital
|
|
98,695
|
|
|
122,363
|
|
|
24.0
|
|
|
|
55,863
|
|
|
59,656
|
|
|
6.8
|
|
|
|
154,558
|
|
|
182,019
|
|
Outpatient
rehabilitation
|
|
161,758
|
|
|
179,163
|
|
|
10.8
|
|
|
|
85,147
|
|
|
76,086
|
|
|
(10.6)
|
|
|
|
246,905
|
|
|
255,249
|
|
Concentra
|
|
259,816
|
|
|
274,926
|
|
|
5.8
|
|
|
|
136,505
|
|
|
123,609
|
|
|
(9.4)
|
|
|
|
396,321
|
|
|
398,535
|
|
Other(1)
|
|
38,532
|
|
|
54,283
|
|
|
40.9
|
|
|
|
30,781
|
|
|
24,025
|
|
|
(21.9)
|
|
|
|
69,313
|
|
|
78,308
|
|
Total
Company
|
|
$
|
854,186
|
|
|
$
|
959,348
|
|
|
12.3
|
%
|
|
|
$
|
470,445
|
|
|
$
|
455,284
|
|
|
(3.2)
|
%
|
|
|
$
|
1,324,631
|
|
|
$
|
1,414,632
|
|
Income (loss) from
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
|
$
|
36,355
|
|
|
$
|
48,395
|
|
|
33.1
|
%
|
|
|
$
|
25,192
|
|
|
$
|
27,839
|
|
|
10.5
|
%
|
|
|
$
|
61,547
|
|
|
$
|
76,234
|
|
Rehabilitation
hospital
|
|
11,605
|
|
|
22,855
|
|
|
96.9
|
|
|
|
7,790
|
|
|
8,827
|
|
|
13.3
|
|
|
|
19,395
|
|
|
31,682
|
|
Outpatient
rehabilitation
|
|
12,623
|
|
|
18,289
|
|
|
44.9
|
|
|
|
9,336
|
|
|
1,615
|
|
|
(82.7)
|
|
|
|
21,959
|
|
|
19,904
|
|
Concentra
|
|
23,373
|
|
|
29,624
|
|
|
26.7
|
|
|
|
17,214
|
|
|
8,188
|
|
|
(52.4)
|
|
|
|
40,587
|
|
|
37,812
|
|
Other(1)
|
|
(22,432)
|
|
|
(24,868)
|
|
|
(10.9)
|
|
|
|
(9,332)
|
|
|
(12,086)
|
|
|
(29.5)
|
|
|
|
(31,764)
|
|
|
(36,954)
|
|
Total
Company
|
|
$
|
61,524
|
|
|
$
|
94,295
|
|
|
53.3
|
%
|
|
|
$
|
50,200
|
|
|
$
|
34,383
|
|
|
(31.5)
|
%
|
|
|
$
|
111,724
|
|
|
$
|
128,678
|
|
Adjusted
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
|
$
|
44,035
|
|
|
$
|
56,648
|
|
|
28.6
|
%
|
|
|
$
|
28,963
|
|
|
$
|
31,922
|
|
|
10.2
|
%
|
|
|
$
|
72,998
|
|
|
$
|
88,570
|
|
Rehabilitation
hospital
|
|
15,908
|
|
|
27,448
|
|
|
72.5
|
|
|
|
9,889
|
|
|
11,121
|
|
|
12.5
|
|
|
|
25,797
|
|
|
38,569
|
|
Outpatient
rehabilitation
|
|
17,265
|
|
|
23,062
|
|
|
33.6
|
|
|
|
11,726
|
|
|
4,060
|
|
|
(65.4)
|
|
|
|
28,991
|
|
|
27,122
|
|
Concentra
|
|
40,785
|
|
|
45,537
|
|
|
11.7
|
|
|
|
25,473
|
|
|
15,929
|
|
|
(37.5)
|
|
|
|
66,258
|
|
|
61,466
|
|
Other(1)
|
|
(17,278)
|
|
|
(19,281)
|
|
|
(11.6)
|
|
|
|
(6,649)
|
|
|
(9,113)
|
|
|
(37.1)
|
|
|
|
(23,927)
|
|
|
(28,394)
|
|
Total
Company
|
|
$
|
100,715
|
|
|
$
|
133,414
|
|
|
32.5
|
%
|
|
|
$
|
69,402
|
|
|
$
|
53,919
|
|
|
(22.3)
|
%
|
|
|
$
|
170,117
|
|
|
$
|
187,333
|
|
Adjusted EBITDA
margins:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
|
14.9
|
%
|
|
17.2
|
%
|
|
|
|
|
17.9
|
%
|
|
18.6
|
%
|
|
|
|
|
16.0
|
%
|
|
17.7
|
%
|
Rehabilitation
hospital
|
|
16.1
|
|
|
22.4
|
|
|
|
|
|
17.7
|
|
|
18.6
|
|
|
|
|
|
16.7
|
|
|
21.2
|
|
Outpatient
rehabilitation
|
|
10.7
|
|
|
12.9
|
|
|
|
|
|
13.8
|
|
|
5.3
|
|
|
|
|
|
11.7
|
|
|
10.6
|
|
Concentra
|
|
15.7
|
|
|
16.6
|
|
|
|
|
|
18.7
|
|
|
12.9
|
|
|
|
|
|
16.7
|
|
|
15.4
|
|
Other(1)
|
|
N/M
|
|
|
N/M
|
|
|
|
|
|
N/M
|
|
|
N/M
|
|
|
|
|
|
N/M
|
|
|
N/M
|
|
Total
Company
|
|
11.8
|
%
|
|
13.9
|
%
|
|
|
|
|
14.8
|
%
|
|
11.8
|
%
|
|
|
|
|
12.8
|
%
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two Months Ended
February
|
|
|
One Month Ended
March
|
|
|
Three Months Ended
March
|
|
|
2019
|
|
2020
|
|
%
Change
|
|
|
2019
|
|
2020
|
|
%
Change
|
|
|
2019
|
|
2020
|
Operating
statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions
|
|
6,303
|
|
|
6,427
|
|
|
2.0
|
%
|
|
|
3,153
|
|
|
3,106
|
|
|
(1.5)
|
%
|
|
|
9,456
|
|
|
9,533
|
|
Patient
days
|
|
167,044
|
|
|
178,627
|
|
|
6.9
|
%
|
|
|
91,085
|
|
|
91,831
|
|
|
0.8
|
%
|
|
|
258,129
|
|
|
270,458
|
|
Occupancy
rate
|
|
70
|
%
|
|
70
|
%
|
|
|
|
|
73
|
%
|
|
70
|
%
|
|
|
|
|
71
|
%
|
|
70
|
%
|
Rehabilitation
hospital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions
|
|
3,758
|
|
|
4,412
|
|
|
17.4
|
%
|
|
|
2,078
|
|
|
1,921
|
|
|
(7.6)
|
%
|
|
|
5,836
|
|
|
6,333
|
|
Patient
days
|
|
52,876
|
|
|
63,924
|
|
|
20.9
|
%
|
|
|
29,940
|
|
|
30,644
|
|
|
2.4
|
%
|
|
|
82,816
|
|
|
94,568
|
|
Occupancy
rate
|
|
75
|
%
|
|
81
|
%
|
|
|
|
|
78
|
%
|
|
76
|
%
|
|
|
|
|
76
|
%
|
|
79
|
%
|
Outpatient
rehabilitation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
visits
|
|
1,345,617
|
|
|
1,496,232
|
|
|
11.2
|
%
|
|
|
708,866
|
|
|
626,433
|
|
|
(11.6)
|
%
|
|
|
2,054,483
|
|
|
2,122,665
|
|
Concentra:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
visits
|
|
1,904,663
|
|
|
1,997,810
|
|
|
4.9
|
%
|
|
|
1,006,944
|
|
|
879,585
|
|
|
(12.6)
|
%
|
|
|
2,911,607
|
|
|
2,877,395
|
|
|
|
(1)
|
Other includes
corporate administration and shared services, as well as employee
leasing services with non-consolidating subsidiaries.
|
|
|
N/M
|
Not
meaningful
|
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 quarter ended March 31, 2020, Select Medical
repurchased 491,559 shares at a cost of approximately $8.7 million, an average cost per share of
$17.68, which includes transaction
costs. Since the inception of the program through March 31,
2020, Select Medical has repurchased 38,580,908 shares at a cost of
approximately $356.6 million, or
$9.24 per share, which includes
transaction costs.
Conference Call
Select Medical will host a conference call regarding its first
quarter results, as well as its business outlook and the impact of
the COVID-19 pandemic on each of its reportable segments, on
Friday, May 1, 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 2296334. 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,
May 8, 2020. The replay number is
1-855-859-2056 (domestic) or 1-404-537-3406 (international). The
conference ID for the replay will be 2296334. 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:
- developments related to the COVID-19 pandemic including, but
not limited to, the duration and severity of the pandemic,
additional measures taken by government authorities and the private
sector to limit the spread of COVID-19, and further legislative and
regulatory actions which impact healthcare providers, including
actions that may impact the Medicare program;
- 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, or the inability to attract or retain
healthcare professionals due to the heightened risk of infection
related to the COVID-19 pandemic, 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 quarterly
reports on Form 10-Q and 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
I. Condensed Consolidated Statements of
Operations
For the Three Months Ended March 31,
2019 and 2020
(In thousands, except per share amounts,
unaudited)
|
|
|
|
|
2019
|
|
2020
|
|
%
Change
|
Net operating
revenues
|
|
$
|
1,324,631
|
|
|
$
|
1,414,632
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
services
|
|
1,132,092
|
|
|
1,200,371
|
|
|
6.0
|
|
General and
administrative
|
|
28,677
|
|
|
33,831
|
|
|
18.0
|
|
Depreciation and
amortization
|
|
52,138
|
|
|
51,752
|
|
|
(0.7)
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
111,724
|
|
|
128,678
|
|
|
15.2
|
|
|
|
|
|
|
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
4,366
|
|
|
2,588
|
|
|
(40.7)
|
|
Gain on sale of
businesses
|
|
6,532
|
|
|
7,201
|
|
|
N/M
|
|
Interest
expense
|
|
(50,811)
|
|
|
(46,107)
|
|
|
(9.3)
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
71,811
|
|
|
92,360
|
|
|
28.6
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
18,467
|
|
|
21,912
|
|
|
18.7
|
|
|
|
|
|
|
|
|
Net income
|
|
53,344
|
|
|
70,448
|
|
|
32.1
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to non-controlling interests
|
|
12,510
|
|
|
17,323
|
|
|
38.5
|
|
|
|
|
|
|
|
|
Net income
attributable to Select Medical
|
|
$
|
40,834
|
|
|
$
|
53,125
|
|
|
30.1
|
%
|
|
|
|
|
|
|
|
Diluted earnings per
common share:(1)
|
|
$
|
0.30
|
|
|
$
|
0.40
|
|
|
|
|
|
(1)
|
Refer to table II for
calculation of earnings per common share.
|
|
|
N/M
|
Not
meaningful
|
II. Earnings per Share
For the Three Months
Ended March 31, 2019 and 2020
(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 ended
March 31, 2019 and 2020:
|
|
Diluted
EPS
|
|
|
Three Months
Ended
March 31,
|
|
|
2019
|
|
2020
|
Net income
|
|
$
|
53,344
|
|
|
$
|
70,448
|
|
Less: net income
attributable to non-controlling interests
|
|
12,510
|
|
|
17,323
|
|
Net income
attributable to Select Medical
|
|
40,834
|
|
|
53,125
|
|
Less: net income
attributable to participating securities
|
|
1,343
|
|
|
1,818
|
|
Net income
attributable to common shares
|
|
$
|
39,491
|
|
|
$
|
51,307
|
|
The following tables set forth the computation of EPS under the
two-class method for the three months ended March 31, 2019 and
2020:
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
|
2020
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
Common
shares
|
|
$
|
39,491
|
|
|
130,861
|
|
|
$
|
0.30
|
|
|
|
$
|
51,307
|
|
|
129,638
|
|
|
$
|
0.40
|
|
Participating
securities
|
|
1,343
|
|
|
4,449
|
|
|
$
|
0.30
|
|
|
|
1,818
|
|
|
4,594
|
|
|
$
|
0.40
|
|
Total
|
|
$
|
40,834
|
|
|
|
|
|
|
|
$
|
53,125
|
|
|
|
|
|
|
|
(1)
|
Represents the
weighted average share count outstanding during the
period.
|
III. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
|
|
December 31,
2019
|
|
March 31,
2020
|
Assets
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
335,882
|
|
|
$
|
73,163
|
|
Accounts
receivable
|
|
762,677
|
|
|
816,405
|
|
Other current
assets
|
|
114,433
|
|
|
108,462
|
|
Total Current
Assets
|
|
1,212,992
|
|
|
998,030
|
|
Operating lease
right-of-use assets
|
|
1,003,986
|
|
|
1,014,969
|
|
Property and
equipment, net
|
|
998,406
|
|
|
978,547
|
|
Goodwill
|
|
3,391,955
|
|
|
3,391,078
|
|
Identifiable
intangible assets, net
|
|
409,068
|
|
|
405,374
|
|
Other
assets
|
|
323,881
|
|
|
327,569
|
|
Total
Assets
|
|
$
|
7,340,288
|
|
|
$
|
7,115,567
|
|
Liabilities and
Equity
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Payables and
accruals
|
|
$
|
681,163
|
|
|
$
|
613,909
|
|
Current operating
lease liabilities
|
|
207,950
|
|
|
212,884
|
|
Current portion of
long-term debt and notes payable
|
|
25,167
|
|
|
17,161
|
|
Total Current
Liabilities
|
|
914,280
|
|
|
843,954
|
|
Non-current operating
lease liabilities
|
|
852,897
|
|
|
860,796
|
|
Long-term debt, net of
current portion
|
|
3,419,943
|
|
|
3,553,056
|
|
Non-current deferred
tax liability
|
|
148,258
|
|
|
158,782
|
|
Other non-current
liabilities
|
|
101,334
|
|
|
103,783
|
|
Total
Liabilities
|
|
5,436,712
|
|
|
5,520,371
|
|
Redeemable
non-controlling interests
|
|
974,541
|
|
|
620,377
|
|
Total
equity
|
|
929,035
|
|
|
974,819
|
|
Total Liabilities
and Equity
|
|
$
|
7,340,288
|
|
|
$
|
7,115,567
|
|
IV. Condensed Consolidated Statements of Cash
Flows
For the Three Months Ended March 31, 2019 and
2020
(In thousands, unaudited)
|
|
2019
|
|
2020
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
53,344
|
|
|
$
|
70,448
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Distributions from
unconsolidated subsidiaries
|
|
7,872
|
|
|
8,479
|
|
Depreciation and
amortization
|
|
52,138
|
|
|
51,752
|
|
Provision for bad
debts
|
|
1,567
|
|
|
199
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(4,366)
|
|
|
(2,588)
|
|
Gain on sale of
assets and businesses
|
|
(6,233)
|
|
|
(7,339)
|
|
Stock compensation
expense
|
|
6,255
|
|
|
6,903
|
|
Amortization of debt
discount, premium and issuance costs
|
|
3,231
|
|
|
553
|
|
Deferred income
taxes
|
|
(81)
|
|
|
9,364
|
|
Changes in operating
assets and liabilities, net of effects of business
combinations:
|
|
|
|
|
Accounts
receivable
|
|
(74,752)
|
|
|
(53,928)
|
|
Other current
assets
|
|
(7,523)
|
|
|
27
|
|
Other
assets
|
|
57,319
|
|
|
2,248
|
|
Accounts payable and
accrued expenses
|
|
(64,839)
|
|
|
(53,447)
|
|
Income
taxes
|
|
17,830
|
|
|
11,413
|
|
Net cash provided by
operating activities
|
|
41,762
|
|
|
44,084
|
|
Investing
activities
|
|
|
|
|
Business
combinations, net of cash acquired
|
|
(6,120)
|
|
|
(6,833)
|
|
Purchases of property
and equipment
|
|
(49,073)
|
|
|
(39,208)
|
|
Investment in
businesses
|
|
(27,608)
|
|
|
(9,848)
|
|
Proceeds from sale of
assets and businesses
|
|
2
|
|
|
11,230
|
|
Net cash used in
investing activities
|
|
(82,799)
|
|
|
(44,659)
|
|
Financing
activities
|
|
|
|
|
Borrowings on
revolving facilities
|
|
360,000
|
|
|
460,000
|
|
Payments on revolving
facilities
|
|
(220,000)
|
|
|
(295,000)
|
|
Payments on term
loans
|
|
(132,685)
|
|
|
(39,843)
|
|
Borrowings of other
debt
|
|
8,290
|
|
|
6,487
|
|
Principal payments on
other debt
|
|
(6,155)
|
|
|
(8,099)
|
|
Repurchase of common
stock
|
|
—
|
|
|
(8,691)
|
|
Increase in
overdrafts
|
|
6,050
|
|
|
—
|
|
Proceeds from
issuance of non-controlling interests
|
|
3,425
|
|
|
1,679
|
|
Distributions to and
purchases of non-controlling interests
|
|
(5,251)
|
|
|
(12,474)
|
|
Purchase of
membership interests of Concentra Group Holdings Parent
|
|
—
|
|
|
(366,203)
|
|
Net cash provided by
(used in) financing activities
|
|
13,674
|
|
|
(262,144)
|
|
Net decrease in cash
and cash equivalents
|
|
(27,363)
|
|
|
(262,719)
|
|
Cash and cash
equivalents at beginning of period
|
|
175,178
|
|
|
335,882
|
|
Cash and cash
equivalents at end of period
|
|
$
|
147,815
|
|
|
$
|
73,163
|
|
Supplemental
information
|
|
|
|
|
Cash paid for
interest
|
|
$
|
37,199
|
|
|
$
|
67,885
|
|
Cash paid for
taxes
|
|
718
|
|
|
1,135
|
|
V. Key Statistics
For the Three Months Ended
March 31, 2019 and 2020
(unaudited)
|
|
2019(g)
|
|
2020
|
|
%
Change
|
Critical Illness
Recovery Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
97
|
|
|
101
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
457,534
|
|
|
$
|
500,521
|
|
|
9.4
|
%
|
Number of patient
days(b)(c)
|
|
258,129
|
|
|
270,458
|
|
|
4.8
|
%
|
Number of
admissions(b)(d)
|
|
9,456
|
|
|
9,533
|
|
|
0.8
|
%
|
Net revenue per
patient day(b)(e)
|
|
$
|
1,759
|
|
|
$
|
1,839
|
|
|
4.5
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
72,998
|
|
|
$
|
88,570
|
|
|
21.3
|
%
|
Adjusted EBITDA
margin
|
|
16.0
|
%
|
|
17.7
|
%
|
|
|
Rehabilitation
Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
27
|
|
|
29
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
154,558
|
|
|
$
|
182,019
|
|
|
17.8
|
%
|
Number of patient
days(b)(c)
|
|
82,816
|
|
|
94,568
|
|
|
14.2
|
%
|
Number of
admissions(b)(d)
|
|
5,836
|
|
|
6,333
|
|
|
8.5
|
%
|
Net revenue per
patient day(b)(e)
|
|
$
|
1,633
|
|
|
$
|
1,732
|
|
|
6.1
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
25,797
|
|
|
$
|
38,569
|
|
|
49.5
|
%
|
Adjusted EBITDA
margin
|
|
16.7
|
%
|
|
21.2
|
%
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
Number of clinics –
end of period(a)
|
|
1,684
|
|
|
1,753
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
246,905
|
|
|
$
|
255,249
|
|
|
3.4
|
%
|
Number of
visits(b)
|
|
2,054,483
|
|
|
2,122,665
|
|
|
3.3
|
%
|
Revenue per
visit(b)(f)
|
|
$
|
103
|
|
|
$
|
104
|
|
|
1.0
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
28,991
|
|
|
$
|
27,122
|
|
|
(6.4)
|
%
|
Adjusted EBITDA
margin
|
|
11.7
|
%
|
|
10.6
|
%
|
|
|
Concentra
|
|
|
|
|
|
|
Number of centers –
end of period(b)
|
|
525
|
|
|
523
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
396,321
|
|
|
$
|
398,535
|
|
|
0.6
|
%
|
Number of
visits(b)
|
|
2,911,607
|
|
|
2,877,395
|
|
|
(1.2)
|
%
|
Revenue per
visit(b)(f)
|
|
$
|
124
|
|
|
$
|
123
|
|
|
(0.8)
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
66,258
|
|
|
$
|
61,466
|
|
|
(7.2)
|
%
|
Adjusted EBITDA
margin
|
|
16.7
|
%
|
|
15.4
|
%
|
|
|
|
|
(a)
|
Includes managed
locations.
|
|
|
(b)
|
Excludes managed
locations. For purposes of the Concentra segment, onsite clinics
and community-based outpatient clinics are excluded.
|
|
|
(c)
|
Each patient day
represents one patient occupying one bed for one day during the
periods presented.
|
|
|
(d)
|
Represents the number
of patients admitted to our hospitals during the periods
presented.
|
|
|
(e)
|
Represents the
average amount of revenue recognized for each patient day. Net
revenue per patient day is calculated by dividing patient service
revenues, excluding revenues from certain other ancillary and
outpatient services provided at our hospitals, by the total number
of patient days.
|
|
|
(f)
|
Represents the
average amount of revenue recognized for each patient visit. Net
revenue per visit is calculated by dividing patient service
revenue, excluding revenues from certain other ancillary services,
by the total number of visits.
|
|
|
(g)
|
For the three months
ended March 31, 2019, the financial results of Select
Medical's reportable segments have been changed to remove the net
operating revenues and expenses associated with employee leasing
services provided to its non-consolidating subsidiaries. These
results are now reported as part of Select Medical's other
activities. Select Medical leases employees at cost to these
non-consolidating subsidiaries.
|
VI. Net Income to Adjusted EBITDA Reconciliation
For the Three Months Ended March 31,
2019 and 2020
(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, gain (loss) on sale of businesses, and equity in earnings
(losses) of unconsolidated subsidiaries.
|
Three Months
Ended
March 31,
|
|
|
2019
|
|
2020
|
|
Net income
|
$
|
53,344
|
|
|
$
|
70,448
|
|
|
Income tax
expense
|
18,467
|
|
|
21,912
|
|
|
Interest
expense
|
50,811
|
|
|
46,107
|
|
|
Gain on sale of
businesses
|
(6,532)
|
|
|
(7,201)
|
|
|
Equity in earnings of
unconsolidated subsidiaries
|
(4,366)
|
|
|
(2,588)
|
|
|
Income from
operations
|
111,724
|
|
|
128,678
|
|
|
Stock compensation
expense:
|
|
|
|
|
Included in general
and administrative
|
4,748
|
|
|
5,437
|
|
|
Included in cost of
services
|
1,507
|
|
|
1,466
|
|
|
Depreciation and
amortization
|
52,138
|
|
|
51,752
|
|
|
Adjusted
EBITDA
|
$
|
170,117
|
|
|
$
|
187,333
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
$
|
72,998
|
|
|
$
|
88,570
|
|
|
Rehabilitation
hospital
|
25,797
|
|
|
38,569
|
|
|
Outpatient
rehabilitation
|
28,991
|
|
|
27,122
|
|
|
Concentra
|
66,258
|
|
|
61,466
|
|
|
Other(a)
|
(23,927)
|
|
|
(28,394)
|
|
|
Adjusted
EBITDA
|
$
|
170,117
|
|
|
$
|
187,333
|
|
|
|
|
(a)
|
Other primarily
includes general and administrative costs.
|
VII. Reconciliation of Earnings per Common Share to Adjusted
Earnings per Common Share
For the Three Months Ended March 31,
2019 and 2020
(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 Select
Medical's ongoing operations and provide better comparability of
its 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
March 31,
|
|
2019
|
|
Per
Share(a)
|
|
2020
|
|
Per
Share(a)
|
Net income
attributable to common shares(a)
|
$
|
39,491
|
|
|
$
|
0.30
|
|
|
$
|
51,307
|
|
|
$
|
0.40
|
|
Adjustments:(b)
|
|
|
|
|
|
|
|
Gain on sale of
businesses
|
(4,545)
|
|
|
(0.03)
|
|
|
(3,652)
|
|
|
(0.03)
|
|
Adjusted net income
attributable to common shares
|
$
|
34,946
|
|
|
$
|
0.27
|
|
|
$
|
47,655
|
|
|
$
|
0.37
|
|
|
|
(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 II.
|
(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
benefit. For the three months ended March 31, 2019 and 2020, the
adjustments to net income attributable to common shares include
estimated income tax expense of approximately $1.8 million and $3.4
million, respectively.
|
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SOURCE Select Medical Holdings Corporation