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.

 

Cision View original content:http://www.prnewswire.com/news-releases/select-medical-holdings-corporation-announces-results-for-its-second-quarter-ended-june-30-2020-301103479.html

SOURCE Select Medical Holdings Corporation

Copyright 2020 PR Newswire

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