MECHANICSBURG, Pa.,
July 30, 2020 /PRNewswire/ -- Select Medical Holdings
Corporation ("Select Medical," "we," "us," or "our") (NYSE: SEM)
today announced results for its second quarter ended June 30,
2020.
For the second quarter ended June 30, 2020, net operating
revenues were $1,232.7 million,
compared to $1,361.4 million for the
same quarter, prior year. Income from operations was $119.5 million for the second quarter ended
June 30, 2020, compared to $124.9 million for the same quarter, prior
year. For the second quarter ended June 30, 2020, income from
operations included other operating income of $55.0 million related to the recognition of
payments received under the Public Health and Social Services
Emergency Fund, also referred to as the Provider Relief Fund, for
loss of revenue and health care related expenses attributable to
the coronavirus disease 2019 ("COVID-19"). Net income increased
12.5% to $67.5 million for the second
quarter ended June 30, 2020, compared to $60.0 million for the same quarter, prior year.
Net income included a pre-tax gain on sale of businesses of
$0.3 million for the second quarter
ended June 30, 2020. Adjusted EBITDA was $178.8 million for the second quarter ended
June 30, 2020, compared to $186.2
million for the same quarter, prior year. Earnings per
common share was $0.39 on a fully
diluted basis for the second quarter ended June 30, 2020,
compared to $0.33 for the same
quarter, prior year. Adjusted earnings per common share was
$0.38 on a fully diluted basis for
the second quarter ended June 30, 2020, compared to
$0.33 for the same quarter, prior
year. Adjusted earnings per common share excludes the gain on sale
of businesses and its related tax effects for the second quarter
ended June 30, 2020. The definition of Adjusted EBITDA and a
reconciliation of net income to Adjusted EBITDA are presented in
table IX of this release. A reconciliation of earnings per common
share to adjusted earnings per common share is presented in table X
of this release.
For the six months ended June 30, 2020, net operating
revenues were $2,647.4 million,
compared to $2,686.0 million for the
same period, prior year. Income from operations increased 4.9% to
$248.2 million for the six months
ended June 30, 2020, compared to $236.6
million for the same period, prior year. For the six months
ended June 30, 2020, income from operations included other
operating income of $55.0 million
related to the recognition of payments received under the Provider
Relief Fund for loss of revenue and health care related expenses
attributable to COVID-19. Net income increased 21.7% to
$137.9 million for the six months
ended June 30, 2020, compared to $113.3
million for the same period, prior year. Net income included
a pre-tax gain on sale of businesses of $7.5
million and $6.5 million for
the six months ended June 30, 2020 and 2019, respectively.
Adjusted EBITDA increased 2.7% to $366.1
million for the six months ended June 30, 2020,
compared to $356.4 million for the
same period, prior year. Earnings per common share was $0.78 on a fully diluted basis for the six months
ended June 30, 2020, compared to $0.63 for the same period, prior year. Adjusted
earnings per common share was $0.75
on a fully diluted basis for the six months ended June 30,
2020, compared to $0.60 for the same
period, prior year. Adjusted earnings per common share excludes the
gain on sale of businesses and related tax effects for both the six
months ended June 30, 2020 and 2019. The definition of
Adjusted EBITDA and a reconciliation of net income to Adjusted
EBITDA are presented in table IX of this release. A reconciliation
of earnings per common share to adjusted earnings per common share
is presented in table X of this release.
Please refer to "Effects of the COVID-19 Pandemic on Select
Medical's Results of Operations" below for further
discussion.
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 June 30, 2020,
Select Medical operated 101 critical illness recovery hospitals in
28 states, 29 rehabilitation hospitals in 12 states, and 1,757
outpatient rehabilitation clinics in 37 states and the District of Columbia. Select Medical's joint
venture subsidiary Concentra operated 522 occupational health
centers in 41 states. Concentra also provides contract services at
employer worksites and Department of Veterans Affairs
community-based outpatient clinics. At June 30, 2020, Select
Medical had operations in 47 states and the District of Columbia. Information about Select
Medical is available at www.selectmedical.com.
CARES Act Provider Relief Fund
On March 27, 2020, the Coronavirus
Aid, Relief, and Economic Security Act ("CARES Act") was enacted.
The CARES Act provided additional waivers, reimbursement, grants
and other funds to assist health care providers during the
coronavirus disease 2019 ("COVID-19") pandemic, including
$100.0 billion in appropriations for
the Public Health and Social Services Emergency Fund, also referred
to as the Provider Relief Fund, to be used for preventing,
preparing, and responding to the coronavirus, and for reimbursing
eligible health care providers for lost revenues and health care
related expenses that are attributable to COVID-19.
For the three and six months ended June 30, 2020, Select
Medical recognized approximately $55.0
million of other operating income related to payments
received under the Provider Relief Fund for loss of revenue and
health care related expenses attributable to COVID-19. $54.2 million of other operating income is
included within the operating results of Select Medical's other
activities; $0.8 million of
other operating income is included in the operating results of
Select Medical's Concentra segment.
Critical Illness Recovery Hospital Segment
For the second quarter ended June 30, 2020, net operating
revenues for the critical illness recovery hospital segment
increased 12.7% to $519.6 million,
compared to $461.1 million for the
same quarter, prior year. Adjusted EBITDA for the critical illness
recovery hospital segment increased 39.9% to $89.7 million for the second quarter ended
June 30, 2020, compared to $64.1
million for the same quarter, prior year. The Adjusted
EBITDA margin for the critical illness recovery hospital segment
was 17.3% for the second quarter ended June 30, 2020, compared
to 13.9% for the same quarter, prior year. Certain critical illness
recovery hospital key statistics are presented in table VII of this
release for both the second quarters ended June 30, 2020 and
2019.
For the six months ended June 30, 2020, net operating
revenues for the critical illness recovery hospital segment
increased 11.0% to $1,020.1 million,
compared to $918.7 million for the
same period, prior year. Adjusted EBITDA for the critical illness
recovery hospital segment increased 30.0% to $178.3 million for the six months ended
June 30, 2020, compared to $137.1
million for the same period, prior year. The Adjusted EBITDA
margin for the critical illness recovery hospital segment was 17.5%
for the six months ended June 30, 2020, compared to 14.9% for
the same period, prior year. Certain critical illness recovery
hospital key statistics are presented in table VIII of this release
for both the six months ended June 30, 2020 and 2019.
Rehabilitation Hospital Segment
For the second quarter ended June 30, 2020, net operating
revenues for the rehabilitation hospital segment increased 5.2% to
$168.7 million, compared to
$160.4 million for the same quarter,
prior year. Adjusted EBITDA for the rehabilitation hospital segment
was $27.6 million for the second
quarter ended June 30, 2020, compared to $30.0 million for the same quarter, prior year.
The Adjusted EBITDA margin for the rehabilitation hospital segment
was 16.4% for the second quarter ended June 30, 2020, compared
to 18.7% for the same quarter, prior year. For the second quarter
ended June 30, 2019, the Adjusted EBITDA results for the
rehabilitation hospital segment included start-up losses of
approximately $6.0 million. Certain
rehabilitation hospital key statistics are presented in table VII
of this release for both the second quarters ended June 30,
2020 and 2019.
For the six months ended June 30, 2020, net operating
revenues for the rehabilitation hospital segment increased 11.4% to
$350.7 million, compared to
$314.9 million for the same period,
prior year. Adjusted EBITDA for the rehabilitation hospital segment
increased 18.7% to $66.2 million for
the six months ended June 30, 2020, compared to $55.8 million for the same period, prior year.
The Adjusted EBITDA margin for the rehabilitation hospital segment
was 18.9% for the six months ended June 30, 2020, compared to
17.7% for the same period, prior year. For the six months ended
June 30, 2019, the Adjusted EBITDA results for the
rehabilitation hospital segment included start-up losses of
approximately $8.8 million. Certain
rehabilitation hospital key statistics are presented in table VIII
of this release for both the six months ended June 30, 2020
and 2019.
Outpatient Rehabilitation Segment
For the second quarter ended June 30, 2020, net operating
revenues for the outpatient rehabilitation segment were
$167.1 million, compared to
$261.9 million for the same quarter,
prior year. The outpatient rehabilitation segment incurred Adjusted
EBITDA losses of $6.3 million for the
second quarter ended June 30, 2020, compared to Adjusted
EBITDA of $42.6 million for the same
quarter, prior year. The Adjusted EBITDA margin for the outpatient
rehabilitation segment was (3.8)% for the second quarter ended
June 30, 2020, compared to 16.3% for the same quarter, prior
year. Certain outpatient rehabilitation key statistics are
presented in table VII of this release for both the second quarters
ended June 30, 2020 and 2019.
For the six months ended June 30, 2020, net operating
revenues for the outpatient rehabilitation segment were
$422.4 million, compared to
$508.8 million for the same period,
prior year. Adjusted EBITDA for the outpatient rehabilitation
segment was $20.8 million for the six
months ended June 30, 2020, compared to $71.6 million for the same period, prior year.
The Adjusted EBITDA margin for the outpatient rehabilitation
segment was 4.9% for the six months ended June 30, 2020,
compared to 14.1% for the same period, prior year. Certain
outpatient rehabilitation key statistics are presented in table
VIII of this release for both the six months ended June 30,
2020 and 2019.
Concentra Segment
For the second quarter ended June 30, 2020, net operating
revenues for the Concentra segment were $312.3 million, compared to $413.5 million for the same quarter, prior year.
Adjusted EBITDA for the Concentra segment was $41.5 million for the second quarter ended
June 30, 2020, compared to $76.1
million for the same quarter, prior year. The Adjusted
EBITDA margin for the Concentra segment was 13.3% for the second
quarter ended June 30, 2020, compared to 18.4% for the same
quarter, prior year. Certain Concentra key statistics are presented
in table VII of this release for both the second quarters ended
June 30, 2020 and 2019.
For the six months ended June 30, 2020, net operating
revenues for the Concentra segment were $710.9 million, compared to $809.8 million for the same period, prior year.
Adjusted EBITDA for the Concentra segment was $103.0 million for the six months ended
June 30, 2020, compared to $142.3
million for the same period, prior year. The Adjusted EBITDA
margin for the Concentra segment was 14.5% for the six months ended
June 30, 2020, compared to 17.6% for the same period, prior
year. Certain Concentra key statistics are presented in table VIII
of this release for both the six months ended June 30, 2020
and 2019.
Effects of the COVID-19 Pandemic on Select Medical's Results of
Operations
The continuing implications of the COVID-19 pandemic on Select
Medical's results of operations and overall financial performance
remain uncertain. Select Medical has provided net operating
revenues and certain operating statistics to assist readers in
understanding how the COVID-19 pandemic impacted each of its
segments during the three and six months ended June 30,
2020.
Critical Illness Recovery Hospital Segment. Select
Medical's critical illness recovery hospitals are a key component
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 apply to 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. COVID-19 has
become more prevalent in certain markets that Select Medical
serves; as a result, Select Medical's critical illness recovery
hospitals have admitted patients with COVID-19 and have faced the
challenging task of treating those patients while also taking
measures to protect their patients and staff members who do not
have 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.
The following table shows the trend in net operating revenues
and patient day volume for each of the periods presented, as well
as the number of critical illness recovery hospitals Select Medical
operated at the end of each period.
|
|
One Month
Ended
|
|
Three Months Ended
June 30
|
|
Six Months
Ended June 30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
163,238
|
|
|
$
|
165,375
|
|
|
$
|
171,908
|
|
|
$
|
171,445
|
|
|
$
|
178,223
|
|
|
$
|
169,958
|
|
|
$
|
519,626
|
|
|
$
|
1,020,147
|
|
Patient days
|
|
90,783
|
|
|
87,844
|
|
|
91,831
|
|
|
90,710
|
|
|
95,191
|
|
|
90,988
|
|
|
276,889
|
|
|
547,347
|
|
Occupancy
rate
|
|
69
|
%
|
|
72
|
%
|
|
70
|
%
|
|
71
|
%
|
|
72
|
%
|
|
71
|
%
|
|
72
|
%
|
|
71
|
%
|
Number of hospitals
owned
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
149,799
|
|
|
$
|
145,586
|
|
|
$
|
162,149
|
|
|
$
|
156,231
|
|
|
$
|
156,422
|
|
|
$
|
148,490
|
|
|
$
|
461,143
|
|
|
$
|
918,677
|
|
Patient days
|
|
86,238
|
|
|
80,806
|
|
|
91,085
|
|
|
88,357
|
|
|
89,350
|
|
|
85,153
|
|
|
262,860
|
|
|
520,989
|
|
Occupancy
rate
|
|
69
|
%
|
|
71
|
%
|
|
73
|
%
|
|
70
|
%
|
|
69
|
%
|
|
68
|
%
|
|
69
|
%
|
|
70
|
%
|
Number of hospitals
owned
|
|
96
|
|
|
96
|
|
|
96
|
|
|
99
|
|
|
99
|
|
|
99
|
|
|
99
|
|
|
99
|
|
The following table summarizes the changes in net operating
revenues and patient day volume for 2020, as compared to the same
period in 2019, for each of the periods presented.
|
|
One Month
Ended
|
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
Critical illness
recovery hospital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
9.0
|
%
|
|
13.6
|
%
|
|
6.0
|
%
|
|
9.7
|
%
|
|
13.9
|
%
|
|
14.5
|
%
|
|
12.7
|
%
|
|
11.0
|
%
|
Patient days
|
|
5.3
|
%
|
|
8.7
|
%
|
|
0.8
|
%
|
|
2.7
|
%
|
|
6.5
|
%
|
|
6.9
|
%
|
|
5.3
|
%
|
|
5.1
|
%
|
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 in order 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. COVID-19 has become more
prevalent in certain markets that Select Medical serves; as a
result, Select Medical's rehabilitation hospitals have admitted
patients with COVID-19 and have faced the challenging task of
treating those patients while also taking measures to protect their
patients and staff members who do not have 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. At the beginning of the pandemic, elective
surgeries at hospitals and other facilities were suspended, which
reduced the need for inpatient rehabilitation services. Beginning
in May, state governors and health departments began to ease the
restrictions imposed at the beginning of the pandemic and hospitals
began to perform elective surgeries again, which has increased the
need for the services provided by Select Medical's rehabilitation
hospitals.
The following table shows the trend in net operating revenues
and patient day volume for each of the periods presented, as well
as the number of rehabilitation hospitals Select Medical operated
at the end of each period.
|
|
One Month
Ended
|
|
Three
Months
Ended June
30
|
|
Six Months
Ended June 30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rehabilitation
hospital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
61,673
|
|
|
$
|
60,690
|
|
|
$
|
59,656
|
|
|
$
|
45,878
|
|
|
$
|
57,815
|
|
|
$
|
64,974
|
|
|
$
|
168,667
|
|
|
$
|
350,686
|
|
Patient days
|
|
32,111
|
|
|
31,813
|
|
|
30,644
|
|
|
23,553
|
|
|
29,787
|
|
|
30,741
|
|
|
84,081
|
|
|
178,649
|
|
Occupancy
rate
|
|
79
|
%
|
|
84
|
%
|
|
76
|
%
|
|
61
|
%
|
|
73
|
%
|
|
78
|
%
|
|
71
|
%
|
|
75
|
%
|
Number of hospitals
owned
|
|
19
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|
19
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rehabilitation
hospital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
50,615
|
|
|
$
|
48,080
|
|
|
$
|
55,863
|
|
|
$
|
51,991
|
|
|
$
|
56,019
|
|
|
$
|
52,364
|
|
|
$
|
160,374
|
|
|
$
|
314,932
|
|
Patient days
|
|
27,434
|
|
|
25,442
|
|
|
29,940
|
|
|
28,266
|
|
|
29,730
|
|
|
28,529
|
|
|
86,525
|
|
|
169,341
|
|
Occupancy
rate
|
|
74
|
%
|
|
76
|
%
|
|
78
|
%
|
|
76
|
%
|
|
75
|
%
|
|
73
|
%
|
|
75
|
%
|
|
76
|
%
|
Number of hospitals
owned
|
|
17
|
|
|
17
|
|
|
18
|
|
|
18
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|
19
|
|
The following table summarizes the changes in net operating
revenues and patient day volume for 2020, as compared to the same
period in 2019, for each of the periods presented.
|
|
One Month
Ended
|
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
Rehabilitation
hospital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
21.8
|
%
|
|
26.2
|
%
|
|
6.8
|
%
|
|
(11.8)
|
%
|
|
3.2
|
%
|
|
24.1
|
%
|
|
5.2
|
%
|
|
11.4
|
%
|
Patient days
|
|
17.0
|
%
|
|
25.0
|
%
|
|
2.4
|
%
|
|
(16.7)
|
%
|
|
0.2
|
%
|
|
7.8
|
%
|
|
(2.8)
|
%
|
|
5.5
|
%
|
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. By the end of March, most states had 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.
Beginning in May, state governors and health departments began to
ease the restrictions imposed at the beginning of the pandemic and
hospitals began to perform elective surgeries again, which has
increased the need for the services provided by Select Medical's
outpatient rehabilitation clinics. Additionally, most physician
offices have reopened for routine office visits. While some volume
has recovered, Select Medical's outpatient rehabilitation segment
continues to experience reduced volume of patients seeking
rehabilitation services for employment injuries and sports
activities.
The following table shows the trend in net operating revenues
and patient visit volume for each of the periods presented, as well
as the number of working days for each period.
|
|
One Month
Ended
|
|
Three Months
Ended June 30
|
|
Six
Months
Ended June
30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
90,924
|
|
|
$
|
88,239
|
|
|
$
|
76,086
|
|
|
$
|
49,084
|
|
|
$
|
51,186
|
|
|
$
|
66,868
|
|
|
$
|
167,138
|
|
|
$
|
422,387
|
|
Visits
|
|
757,171
|
|
|
739,061
|
|
|
626,433
|
|
|
386,108
|
|
|
409,703
|
|
|
546,456
|
|
|
1,342,267
|
|
|
3,464,932
|
|
Working
days(1)
|
|
22
|
|
|
20
|
|
|
22
|
|
|
22
|
|
|
20
|
|
|
22
|
|
|
|
64
|
|
|
|
128
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
83,185
|
|
|
$
|
78,573
|
|
|
$
|
85,147
|
|
|
$
|
90,230
|
|
|
$
|
90,272
|
|
|
$
|
81,389
|
|
|
$
|
261,891
|
|
|
$
|
508,796
|
|
Visits
|
|
687,007
|
|
|
658,610
|
|
|
708,866
|
|
|
762,914
|
|
|
759,829
|
|
|
680,762
|
|
|
2,203,505
|
|
|
4,257,988
|
|
Working
days(1)
|
|
22
|
|
|
20
|
|
|
21
|
|
|
22
|
|
|
22
|
|
|
20
|
|
|
|
64
|
|
|
|
127
|
|
|
|
(1)
|
Represents the number
of days in which normal business operations were conducted during
the periods presented.
|
The following table summarizes the changes in net operating
revenues and patient visit volume for 2020, as compared to the same
period in 2019, for each of the periods presented below.
|
|
One Month
Ended
|
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
9.3
|
%
|
|
12.3
|
%
|
|
(10.6)
|
%
|
|
(45.6)
|
%
|
|
(43.3)
|
%
|
|
(17.8)
|
%
|
|
(36.2)
|
%
|
|
(17.0)
|
%
|
Visits
|
|
10.2
|
%
|
|
12.2
|
%
|
|
(11.6)
|
%
|
|
(49.4)
|
%
|
|
(46.1)
|
%
|
|
(19.7)
|
%
|
|
(39.1)
|
%
|
|
(18.6)
|
%
|
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. By the end of
March, most states implemented significant restrictions on
businesses, causing many employers to furlough their workforce and
temporarily cease or significantly reduce their operations. These
actions have had significant effects on patient visit volumes.
Beginning in May, state governors and health departments began to
ease the restrictions imposed at the beginning of the pandemic and
employers began to increase their workforce, which has resulted in
an increased need for occupational health services.
The following table shows the trend in net operating revenues
and patient visit volume for each of the periods presented, as well
as the number of working days for each period.
|
|
One Month
Ended
|
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentra
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
141,236
|
|
|
$
|
133,690
|
|
|
$
|
123,609
|
|
|
$
|
91,178
|
|
|
$
|
99,228
|
|
|
$
|
121,932
|
|
|
$
|
312,338
|
|
|
$
|
710,873
|
|
Visits
|
|
1,032,069
|
|
|
965,741
|
|
|
879,585
|
|
|
610,555
|
|
|
674,629
|
|
|
865,896
|
|
|
2,151,080
|
|
|
5,028,475
|
|
Working
days(1)
|
|
22
|
|
|
20
|
|
|
22
|
|
|
22
|
|
|
20
|
|
|
22
|
|
|
|
64
|
|
|
|
128
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentra
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
$
|
133,507
|
|
|
$
|
126,309
|
|
|
$
|
136,505
|
|
|
$
|
140,050
|
|
|
$
|
143,183
|
|
|
$
|
130,218
|
|
|
$
|
413,451
|
|
|
$
|
809,772
|
|
Visits
|
|
985,598
|
|
|
919,065
|
|
|
1,006,944
|
|
|
1,040,543
|
|
|
1,073,763
|
|
|
988,783
|
|
|
3,103,089
|
|
|
6,014,696
|
|
Working
days(1)
|
|
22
|
|
|
20
|
|
|
21
|
|
|
22
|
|
|
22
|
|
|
20
|
|
|
|
64
|
|
|
|
127
|
|
|
|
(1)
|
Represents the number
of days in which normal business operations were conducted during
the periods presented.
|
The following table summarizes the changes in net operating
revenues and patient visit volume for 2020, as compared to the same
period in 2019, for each of the periods presented below.
|
|
One Month
Ended
|
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
|
|
January
31
|
|
February
28
|
|
March
31
|
|
April
30
|
|
May
31
|
|
June
30
|
|
|
Concentra
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenues
|
|
5.8
|
%
|
|
5.8
|
%
|
|
(9.4)
|
%
|
|
(34.9)
|
%
|
|
(30.7)
|
%
|
|
(6.4)
|
%
|
|
(24.5)
|
%
|
|
(12.2)
|
%
|
Visits
|
|
4.7
|
%
|
|
5.1
|
%
|
|
(12.6)
|
%
|
|
(41.3)
|
%
|
|
(37.2)
|
%
|
|
(12.4)
|
%
|
|
(30.7)
|
%
|
|
(16.4)
|
%
|
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.
Select Medical did not repurchase shares during the quarter
ended June 30, 2020. Since the inception of the program
through June 30, 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 second
quarter results, as well as its business outlook and the impact of
the COVID-19 pandemic on each of its reportable segments, on
Friday, July 31, 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
8496384. 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,
August 7, 2020. The replay number is
1-855-859-2056 (domestic) or 1-404-537-3406 (international). The
conference ID for the replay will be 8496384. 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 June 30, 2019
and 2020
(In thousands, except per share amounts,
unaudited)
|
|
2019
|
|
2020
|
|
%
Change
|
Net operating
revenues
|
$
|
1,361,364
|
|
|
$
|
1,232,718
|
|
|
(9.4)
|
%
|
Costs and
expenses:
|
|
|
|
|
|
Cost of services,
exclusive of depreciation and amortization
|
1,150,150
|
|
|
1,082,456
|
|
|
(5.9)
|
|
General and
administrative
|
31,339
|
|
|
33,461
|
|
|
6.8
|
|
Depreciation and
amortization
|
54,993
|
|
|
52,271
|
|
|
(4.9)
|
|
Total costs and
expenses
|
1,236,482
|
|
|
1,168,188
|
|
|
(5.5)
|
|
Other operating
income
|
—
|
|
|
54,988
|
|
|
N/M
|
Income from
operations
|
124,882
|
|
|
119,518
|
|
|
(4.3)
|
|
Other income and
expense:
|
|
|
|
|
|
Equity in earnings of
unconsolidated subsidiaries
|
7,394
|
|
|
8,324
|
|
|
12.6
|
|
Gain on sale of
businesses
|
—
|
|
|
346
|
|
|
N/M
|
Interest
expense
|
(51,464)
|
|
|
(37,366)
|
|
|
(27.4)
|
|
Income before income
taxes
|
80,812
|
|
|
90,822
|
|
|
12.4
|
|
Income tax
expense
|
20,826
|
|
|
23,336
|
|
|
12.1
|
|
Net income
|
59,986
|
|
|
67,486
|
|
|
12.5
|
|
Less: Net income
attributable to non-controlling interests
|
15,170
|
|
|
15,836
|
|
|
4.4
|
|
Net income
attributable to Select Medical
|
$
|
44,816
|
|
|
$
|
51,650
|
|
|
15.2
|
%
|
Diluted earnings per
common share:(1)
|
$
|
0.33
|
|
|
$
|
0.39
|
|
|
|
|
|
(1)
|
Refer to table III
for calculation of earnings per common share.
|
|
|
N/M
|
Not
Meaningful
|
II. Condensed Consolidated Statements of
Operations
For the Six Months Ended June 30, 2019
and 2020
(In thousands, except per share amounts,
unaudited)
|
|
2019
|
|
2020
|
|
%
Change
|
Net operating
revenues
|
$
|
2,685,995
|
|
|
$
|
2,647,350
|
|
|
(1.4)
|
%
|
Costs and
expenses:
|
|
|
|
|
|
Cost of services,
exclusive of depreciation and amortization
|
2,282,242
|
|
|
2,282,827
|
|
|
0.0
|
|
General and
administrative
|
60,016
|
|
|
67,292
|
|
|
12.1
|
|
Depreciation and
amortization
|
107,131
|
|
|
104,023
|
|
|
(2.9)
|
|
Total costs and
expenses
|
2,449,389
|
|
|
2,454,142
|
|
|
0.2
|
|
Other operating
income
|
—
|
|
|
54,988
|
|
|
N/M
|
Income from
operations
|
236,606
|
|
|
248,196
|
|
|
4.9
|
|
Other income and
expense:
|
|
|
|
|
|
Equity in earnings of
unconsolidated subsidiaries
|
11,760
|
|
|
10,912
|
|
|
(7.2)
|
|
Gain on sale of
businesses
|
6,532
|
|
|
7,547
|
|
|
N/M
|
Interest
expense
|
(102,275)
|
|
|
(83,473)
|
|
|
(18.4)
|
|
Income before income
taxes
|
152,623
|
|
|
183,182
|
|
|
20.0
|
|
Income tax
expense
|
39,293
|
|
|
45,248
|
|
|
15.2
|
|
Net income
|
113,330
|
|
|
137,934
|
|
|
21.7
|
|
Less: Net income
attributable to non-controlling interests
|
27,680
|
|
|
33,159
|
|
|
19.8
|
|
Net income
attributable to Select Medical
|
$
|
85,650
|
|
|
$
|
104,775
|
|
|
22.3
|
%
|
Diluted earnings per
common share:(1)
|
$
|
0.63
|
|
|
$
|
0.78
|
|
|
|
|
|
(1)
|
Refer to table III
for calculation of earnings per common share.
|
|
|
N/M
|
Not
meaningful
|
III. Earnings per Share
For the Three and Six
Months Ended June 30, 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 and six months
ended June 30, 2019 and 2020:
|
|
Diluted
EPS
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
Net income
|
|
$
|
59,986
|
|
|
$
|
67,486
|
|
|
$
|
113,330
|
|
|
$
|
137,934
|
|
Less: net income
attributable to non-controlling interests
|
|
15,170
|
|
|
15,836
|
|
|
27,680
|
|
|
33,159
|
|
Net income
attributable to Select Medical
|
|
44,816
|
|
|
51,650
|
|
|
85,650
|
|
|
104,775
|
|
Less: net income
attributable to participating securities
|
|
1,484
|
|
|
1,778
|
|
|
2,826
|
|
|
3,596
|
|
Net income
attributable to common shares
|
|
$
|
43,332
|
|
|
$
|
49,872
|
|
|
$
|
82,824
|
|
|
$
|
101,179
|
|
The following tables set forth the computation of EPS under the
two-class method for the three and six months ended June 30,
2019 and 2020:
|
|
Three Months Ended
June 30,
|
|
|
2019
|
|
|
2020
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
Common
shares
|
|
$
|
43,332
|
|
|
130,562
|
|
|
$
|
0.33
|
|
|
|
$
|
49,872
|
|
|
129,319
|
|
|
$
|
0.39
|
|
Participating
securities
|
|
1,484
|
|
|
4,471
|
|
|
$
|
0.33
|
|
|
|
1,778
|
|
|
4,610
|
|
|
$
|
0.39
|
|
Total
|
|
$
|
44,816
|
|
|
|
|
|
|
|
$
|
51,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
|
2020
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
|
|
Net Income
Allocation
|
|
Shares(1)
|
|
Diluted
EPS
|
Common
shares
|
|
$
|
82,824
|
|
|
130,711
|
|
|
$
|
0.63
|
|
|
|
$
|
101,179
|
|
|
129,479
|
|
|
$
|
0.78
|
|
Participating
securities
|
|
2,826
|
|
|
4,460
|
|
|
$
|
0.63
|
|
|
|
3,596
|
|
|
4,602
|
|
|
$
|
0.78
|
|
Total
|
|
$
|
85,650
|
|
|
|
|
|
|
|
$
|
104,775
|
|
|
|
|
|
|
|
(1)
|
Represents the
weighted average share count outstanding during the
period.
|
IV. Condensed Consolidated Balance Sheets
(In
thousands, unaudited)
|
|
December 31,
2019
|
|
June 30,
2020
|
Assets
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
335,882
|
|
|
$
|
509,737
|
|
Accounts
receivable
|
|
762,677
|
|
|
749,245
|
|
Other current
assets
|
|
114,433
|
|
|
104,347
|
|
Total Current
Assets
|
|
1,212,992
|
|
|
1,363,329
|
|
Operating lease
right-of-use assets
|
|
1,003,986
|
|
|
1,022,721
|
|
Property and
equipment, net
|
|
998,406
|
|
|
959,086
|
|
Goodwill
|
|
3,391,955
|
|
|
3,391,196
|
|
Identifiable
intangible assets, net
|
|
409,068
|
|
|
398,266
|
|
Other
assets
|
|
323,881
|
|
|
333,860
|
|
Total
Assets
|
|
$
|
7,340,288
|
|
|
$
|
7,468,458
|
|
Liabilities and
Equity
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Payables and
accruals
|
|
$
|
681,163
|
|
|
$
|
663,348
|
|
Government
advances
|
|
—
|
|
|
316,992
|
|
Unearned government
assistance
|
|
—
|
|
|
45,505
|
|
Current operating
lease liabilities
|
|
207,950
|
|
|
216,689
|
|
Current portion of
long-term debt and notes payable
|
|
25,167
|
|
|
13,435
|
|
Total Current
Liabilities
|
|
914,280
|
|
|
1,255,969
|
|
Non-current operating
lease liabilities
|
|
852,897
|
|
|
866,097
|
|
Long-term debt, net of
current portion
|
|
3,419,943
|
|
|
3,390,417
|
|
Non-current deferred
tax liability
|
|
148,258
|
|
|
144,697
|
|
Other non-current
liabilities
|
|
101,334
|
|
|
142,861
|
|
Total
Liabilities
|
|
5,436,712
|
|
|
5,800,041
|
|
Redeemable
non-controlling interests
|
|
974,541
|
|
|
495,987
|
|
Total
equity
|
|
929,035
|
|
|
1,172,430
|
|
Total Liabilities
and Equity
|
|
$
|
7,340,288
|
|
|
$
|
7,468,458
|
|
V. Condensed Consolidated Statements of Cash
Flows
For the Three Months Ended June 30, 2019 and
2020
(In thousands, unaudited)
|
|
2019
|
|
2020
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
59,986
|
|
|
$
|
67,486
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Distributions from
unconsolidated subsidiaries
|
|
3,276
|
|
|
2,744
|
|
Depreciation and
amortization
|
|
54,993
|
|
|
52,271
|
|
Provision for expected
credit losses
|
|
391
|
|
|
54
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(7,394)
|
|
|
(8,324)
|
|
Gain on sale of assets
and businesses
|
|
(121)
|
|
|
(542)
|
|
Stock compensation
expense
|
|
6,358
|
|
|
6,963
|
|
Amortization of debt
discount, premium and issuance costs
|
|
3,095
|
|
|
540
|
|
Deferred income
taxes
|
|
(6,209)
|
|
|
(12,780)
|
|
Changes in operating
assets and liabilities, net of effects of business
combinations:
|
|
|
|
|
Accounts
receivable
|
|
(11,121)
|
|
|
67,107
|
|
Other current
assets
|
|
(1,713)
|
|
|
686
|
|
Other
assets
|
|
(756)
|
|
|
9,256
|
|
Accounts payable and
accrued expenses
|
|
(8,149)
|
|
|
61,726
|
|
Government
advances
|
|
—
|
|
|
316,992
|
|
Unearned government
assistance
|
|
—
|
|
|
45,505
|
|
Income
taxes
|
|
(1,484)
|
|
|
32,330
|
|
Net cash provided by
operating activities
|
|
91,152
|
|
|
642,014
|
|
Investing
activities
|
|
|
|
|
Business
combinations, net of cash acquired
|
|
(79,942)
|
|
|
(128)
|
|
Purchases of property
and equipment
|
|
(40,212)
|
|
|
(32,045)
|
|
Investment in
businesses
|
|
(24,649)
|
|
|
(4,901)
|
|
Proceeds from sale of
assets and businesses
|
|
123
|
|
|
1,171
|
|
Net cash used in
investing activities
|
|
(144,680)
|
|
|
(35,903)
|
|
Financing
activities
|
|
|
|
|
Borrowings on
revolving facilities
|
|
275,000
|
|
|
10,000
|
|
Payments on revolving
facilities
|
|
(240,000)
|
|
|
(175,000)
|
|
Borrowings of other
debt
|
|
5,940
|
|
|
25,000
|
|
Principal payments on
other debt
|
|
(6,525)
|
|
|
(27,634)
|
|
Repurchase of common
stock
|
|
(13,620)
|
|
|
(724)
|
|
Proceeds from
exercise of stock options
|
|
459
|
|
|
—
|
|
Decrease in
overdrafts
|
|
(3,874)
|
|
|
—
|
|
Proceeds from
issuance of non-controlling interests
|
|
14,863
|
|
|
7
|
|
Distributions to and
purchases of non-controlling interests
|
|
(2,494)
|
|
|
(1,186)
|
|
Net cash provided by
(used in) financing activities
|
|
29,749
|
|
|
(169,537)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(23,779)
|
|
|
436,574
|
|
Cash and cash
equivalents at beginning of period
|
|
147,815
|
|
|
73,163
|
|
Cash and cash
equivalents at end of period
|
|
$
|
124,036
|
|
|
$
|
509,737
|
|
Supplemental
information
|
|
|
|
|
Cash paid for
interest
|
|
$
|
60,710
|
|
|
$
|
18,239
|
|
Cash paid for
taxes
|
|
28,523
|
|
|
3,785
|
|
VI. Condensed Consolidated Statements of Cash
Flows
For the Six Months Ended June 30, 2019 and
2020
(In thousands, unaudited)
|
|
2019
|
|
2020
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
113,330
|
|
|
$
|
137,934
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Distributions from
unconsolidated subsidiaries
|
|
11,148
|
|
|
11,223
|
|
Depreciation and
amortization
|
|
107,131
|
|
|
104,023
|
|
Provision for expected
credit losses
|
|
1,958
|
|
|
253
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
(11,760)
|
|
|
(10,912)
|
|
Gain on sale of assets
and businesses
|
|
(6,354)
|
|
|
(7,881)
|
|
Stock compensation
expense
|
|
12,613
|
|
|
13,866
|
|
Amortization of debt
discount, premium and issuance costs
|
|
6,326
|
|
|
1,093
|
|
Deferred income
taxes
|
|
(6,290)
|
|
|
(3,416)
|
|
Changes in operating
assets and liabilities, net of effects of business
combinations:
|
|
|
|
|
Accounts
receivable
|
|
(85,873)
|
|
|
13,179
|
|
Other current
assets
|
|
(9,236)
|
|
|
713
|
|
Other
assets
|
|
(939)
|
|
|
11,504
|
|
Accounts payable and
accrued expenses
|
|
(15,486)
|
|
|
8,279
|
|
Government
advances
|
|
—
|
|
|
316,992
|
|
Unearned government
assistance
|
|
—
|
|
|
45,505
|
|
Income
taxes
|
|
16,346
|
|
|
43,743
|
|
Net cash provided by
operating activities
|
|
132,914
|
|
|
686,098
|
|
Investing
activities
|
|
|
|
|
Business
combinations, net of cash acquired
|
|
(86,062)
|
|
|
(6,961)
|
|
Purchases of property
and equipment
|
|
(89,285)
|
|
|
(71,253)
|
|
Investment in
businesses
|
|
(52,257)
|
|
|
(14,749)
|
|
Proceeds from sale of
assets and businesses
|
|
125
|
|
|
12,401
|
|
Net cash used in
investing activities
|
|
(227,479)
|
|
|
(80,562)
|
|
Financing
activities
|
|
|
|
|
Borrowings on
revolving facilities
|
|
635,000
|
|
|
470,000
|
|
Payments on revolving
facilities
|
|
(460,000)
|
|
|
(470,000)
|
|
Payments on term
loans
|
|
(132,685)
|
|
|
(39,843)
|
|
Borrowings of other
debt
|
|
14,230
|
|
|
31,487
|
|
Principal payments on
other debt
|
|
(12,680)
|
|
|
(35,733)
|
|
Repurchase of common
stock
|
|
(13,620)
|
|
|
(9,415)
|
|
Proceeds from
exercise of stock options
|
|
459
|
|
|
—
|
|
Increase in
overdrafts
|
|
2,176
|
|
|
—
|
|
Proceeds from
issuance of non-controlling interests
|
|
18,288
|
|
|
1,686
|
|
Distributions to and
purchases of non-controlling interests
|
|
(7,745)
|
|
|
(13,660)
|
|
Purchase of
membership interests of Concentra Group Holdings Parent
|
|
—
|
|
|
(366,203)
|
|
Net cash provided by
(used in) financing activities
|
|
43,423
|
|
|
(431,681)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(51,142)
|
|
|
173,855
|
|
Cash and cash
equivalents at beginning of period
|
|
175,178
|
|
|
335,882
|
|
Cash and cash
equivalents at end of period
|
|
$
|
124,036
|
|
|
$
|
509,737
|
|
Supplemental
information
|
|
|
|
|
Cash paid for
interest
|
|
$
|
97,909
|
|
|
$
|
86,124
|
|
Cash paid for
taxes
|
|
29,241
|
|
|
4,920
|
|
VII. Key Statistics
For the Three Months
Ended June 30, 2019 and 2020
(unaudited)
|
|
2019
|
|
2020
|
|
%
Change
|
Critical Illness
Recovery Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
100
|
|
|
101
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
461,143
|
|
|
$
|
519,626
|
|
|
12.7
|
%
|
Number of patient
days(b)(c)
|
|
262,860
|
|
|
276,889
|
|
|
5.3
|
%
|
Number of
admissions(b)(d)
|
|
9,172
|
|
|
9,167
|
|
|
(0.1)
|
%
|
Net revenue per
patient day(b)(e)
|
|
$
|
1,739
|
|
|
$
|
1,867
|
|
|
7.4
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
64,138
|
|
|
$
|
89,743
|
|
|
39.9
|
%
|
Adjusted EBITDA
margin
|
|
13.9
|
%
|
|
17.3
|
%
|
|
|
Rehabilitation
Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
28
|
|
|
29
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
160,374
|
|
|
$
|
168,667
|
|
|
5.2
|
%
|
Number of patient
days(b)(c)
|
|
86,525
|
|
|
84,081
|
|
|
(2.8)
|
%
|
Number of
admissions(b)(d)
|
|
6,017
|
|
|
5,713
|
|
|
(5.1)
|
%
|
Net revenue per
patient day(b)(e)
|
|
$
|
1,635
|
|
|
$
|
1,831
|
|
|
12.0
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
29,968
|
|
|
$
|
27,605
|
|
|
(7.9)
|
%
|
Adjusted EBITDA
margin
|
|
18.7
|
%
|
|
16.4
|
%
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
Number of clinics –
end of period(a)
|
|
1,695
|
|
|
1,757
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
261,891
|
|
|
$
|
167,138
|
|
|
(36.2)
|
%
|
Number of
visits(b)
|
|
2,203,505
|
|
|
1,342,267
|
|
|
(39.1)
|
%
|
Revenue per
visit(b)(f)
|
|
$
|
102
|
|
|
$
|
106
|
|
|
3.9
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
42,584
|
|
|
$
|
(6,282)
|
|
|
(114.8)
|
%
|
Adjusted EBITDA
margin
|
|
16.3
|
%
|
|
(3.8)
|
%
|
|
|
Concentra
|
|
|
|
|
|
|
Number of centers –
end of period(b)
|
|
526
|
|
|
522
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
413,451
|
|
|
$
|
312,338
|
|
|
(24.5)
|
%
|
Number of
visits(b)
|
|
3,103,089
|
|
|
2,151,080
|
|
|
(30.7)
|
%
|
Revenue per
visit(b)(f)
|
|
$
|
121
|
|
|
$
|
124
|
|
|
2.5
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
76,087
|
|
|
$
|
41,497
|
|
|
(45.5)
|
%
|
Adjusted EBITDA
margin
|
|
18.4
|
%
|
|
13.3
|
%
|
|
|
|
|
(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.
|
VIII. Key Statistics
For the Six Months
Ended June 30, 2019 and 2020
(unaudited)
|
|
2019
|
|
2020
|
|
%
Change
|
Critical Illness
Recovery Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
100
|
|
|
101
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
918,677
|
|
|
$
|
1,020,147
|
|
|
11.0
|
%
|
Number of patient
days(b)(c)
|
|
520,989
|
|
|
547,347
|
|
|
5.1
|
%
|
Number of
admissions(b)(d)
|
|
18,628
|
|
|
18,700
|
|
|
0.4
|
%
|
Net revenue per
patient day(b)(e)
|
|
$
|
1,749
|
|
|
$
|
1,853
|
|
|
5.9
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
137,136
|
|
|
$
|
178,313
|
|
|
30.0
|
%
|
Adjusted EBITDA
margin
|
|
14.9
|
%
|
|
17.5
|
%
|
|
|
Rehabilitation
Hospital
|
|
|
|
|
|
|
Number of hospitals –
end of period(a)
|
|
28
|
|
|
29
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
314,932
|
|
|
$
|
350,686
|
|
|
11.4
|
%
|
Number of patient
days(b)(c)
|
|
169,341
|
|
|
178,649
|
|
|
5.5
|
%
|
Number of
admissions(b)(d)
|
|
11,853
|
|
|
12,046
|
|
|
1.6
|
%
|
Net revenue per
patient day(b)(e)
|
|
$
|
1,634
|
|
|
$
|
1,778
|
|
|
8.8
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
55,765
|
|
|
$
|
66,174
|
|
|
18.7
|
%
|
Adjusted EBITDA
margin
|
|
17.7
|
%
|
|
18.9
|
%
|
|
|
Outpatient
Rehabilitation
|
|
|
|
|
|
|
Number of clinics –
end of period(a)
|
|
1,695
|
|
|
1,757
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
508,796
|
|
|
$
|
422,387
|
|
|
(17.0)
|
%
|
Number of
visits(b)
|
|
4,257,988
|
|
|
3,464,932
|
|
|
(18.6)
|
%
|
Revenue per
visit(b)(f)
|
|
$
|
103
|
|
|
$
|
105
|
|
|
1.9
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
71,575
|
|
|
$
|
20,840
|
|
|
(70.9)
|
%
|
Adjusted EBITDA
margin
|
|
14.1
|
%
|
|
4.9
|
%
|
|
|
Concentra
|
|
|
|
|
|
|
Number of centers –
end of period(b)
|
|
526
|
|
|
522
|
|
|
|
Net operating
revenues (,000)
|
|
$
|
809,772
|
|
|
$
|
710,873
|
|
|
(12.2)
|
%
|
Number of
visits(b)
|
|
6,014,696
|
|
|
5,028,475
|
|
|
(16.4)
|
%
|
Revenue per
visit(b)(f)
|
|
$
|
122
|
|
|
$
|
124
|
|
|
1.6
|
%
|
Adjusted EBITDA
(,000)
|
|
$
|
142,345
|
|
|
$
|
102,963
|
|
|
(27.7)
|
%
|
Adjusted EBITDA
margin
|
|
17.6
|
%
|
|
14.5
|
%
|
|
|
|
(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.
|
IX. Net Income to Adjusted EBITDA
Reconciliation
For the Three and Six Months Ended
June 30, 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
June 30,
|
|
Six Months
Ended
June 30,
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
Net income
|
$
|
59,986
|
|
|
$
|
67,486
|
|
|
$
|
113,330
|
|
|
$
|
137,934
|
|
Income tax
expense
|
20,826
|
|
|
23,336
|
|
|
39,293
|
|
|
45,248
|
|
Interest
expense
|
51,464
|
|
|
37,366
|
|
|
102,275
|
|
|
83,473
|
|
Gain on sale of
businesses
|
—
|
|
|
(346)
|
|
|
(6,532)
|
|
|
(7,547)
|
|
Equity in earnings of
unconsolidated subsidiaries
|
(7,394)
|
|
|
(8,324)
|
|
|
(11,760)
|
|
|
(10,912)
|
|
Income from
operations
|
124,882
|
|
|
119,518
|
|
|
236,606
|
|
|
248,196
|
|
Stock compensation
expense:
|
|
|
|
|
|
|
|
Included in general
and administrative
|
4,796
|
|
|
5,451
|
|
|
9,544
|
|
|
10,888
|
|
Included in cost of
services
|
1,562
|
|
|
1,512
|
|
|
3,069
|
|
|
2,978
|
|
Depreciation and
amortization
|
54,993
|
|
|
52,271
|
|
|
107,131
|
|
|
104,023
|
|
Adjusted
EBITDA
|
$
|
186,233
|
|
|
$
|
178,752
|
|
|
$
|
356,350
|
|
|
$
|
366,085
|
|
|
|
|
|
|
|
|
|
Critical illness
recovery hospital
|
$
|
64,138
|
|
|
$
|
89,743
|
|
|
$
|
137,136
|
|
|
$
|
178,313
|
|
Rehabilitation
hospital
|
29,968
|
|
|
27,605
|
|
|
55,765
|
|
|
66,174
|
|
Outpatient
rehabilitation
|
42,584
|
|
|
(6,282)
|
|
|
71,575
|
|
|
20,840
|
|
Concentra(a)
|
76,087
|
|
|
41,497
|
|
|
142,345
|
|
|
102,963
|
|
Other(a)(b)
|
(26,544)
|
|
|
26,189
|
|
|
(50,471)
|
|
|
(2,205)
|
|
Adjusted
EBITDA
|
$
|
186,233
|
|
|
$
|
178,752
|
|
|
$
|
356,350
|
|
|
$
|
366,085
|
|
|
|
(a)
|
For the three and six
months ended June 30, 2020, Select Medical recognized
approximately $55.0 million of other operating income related to
payments received under the Provider Relief Fund for loss of
revenue and health care related expenses attributable to COVID-19.
$54.2 million of other operating income is included within the
operating results of Select Medical's other activities;
$0.8 million of other operating income is included in the
operating results of Select Medical's Concentra segment.
|
|
|
(b)
|
Other primarily
includes general and administrative costs.
|
X. Reconciliation of Earnings per Common Share to Adjusted
Earnings per Common Share
For the Three and Six Months
Ended June 30, 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
June 30,
|
|
2019
|
|
Per
Share(a)
|
|
2020
|
|
Per
Share(a)
|
Net income
attributable to common shares(a)
|
$
|
43,332
|
|
|
$
|
0.33
|
|
|
$
|
49,872
|
|
|
$
|
0.39
|
|
Adjustments:(b)
|
|
|
|
|
|
|
|
Gain on sale of
businesses
|
—
|
|
|
—
|
|
|
(249)
|
|
|
(0.01)
|
|
Adjusted net income
attributable to common shares
|
$
|
43,332
|
|
|
$
|
0.33
|
|
|
$
|
49,623
|
|
|
$
|
0.38
|
|
|
|
|
Six Months Ended
June 30,
|
|
2019
|
|
Per
Share(a)
|
|
2020
|
|
Per
Share(a)
|
Net income
attributable to common shares(a)
|
$
|
82,824
|
|
|
$
|
0.63
|
|
|
$
|
101,179
|
|
|
$
|
0.78
|
|
Adjustments:(b)
|
|
|
|
|
|
|
|
Gain on sale of
businesses
|
(4,545)
|
|
|
(0.03)
|
|
|
(3,900)
|
|
|
(0.03)
|
|
Adjusted net income
attributable to common shares
|
$
|
78,279
|
|
|
$
|
0.60
|
|
|
$
|
97,279
|
|
|
$
|
0.75
|
|
|
(a)
|
Net income
attributable to common shares and earnings per common share are
calculated based on the diluted weighted average common shares
outstanding, as presented in table III.
|
|
|
(b)
|
Adjustments to net
income attributable to common shares include estimated income tax
and non-controlling interest impacts and are calculated based on
the diluted weighted average common shares outstanding.
|
|
|
|
The estimated income
tax impact, which is determined using tax rates based on the nature
of the adjustment and the jurisdiction in which the adjustment
occurred, includes both current and deferred income tax expense or
benefit.
|
|
|
|
For the three months
ended June 30, 2020, the adjustment to net income attributable to
common shares includes estimated income tax expense of
approximately $0.1 million.
|
|
|
|
For the six months
ended June 30, 2019 and 2020, the adjustments to net income
attributable to common shares include estimated income tax expense
of approximately $1.8 million and $3.5 million,
respectively.
|
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SOURCE Select Medical Holdings Corporation