Select Medical Holdings Corporation Announces Results For Its Second Quarter Ended June 30, 2020
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 Six Months
Ended June 30 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 Six Months
Ended June 30
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 Six Months
Ended June 30 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 Six Months
Ended June 30
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 Six Months
Ended June 30 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 Six Months
Ended June 30 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 Six Months
Ended June 30 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 $
44,816 $
51,650 15.2
Select Medical %
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 $
85,650 $
104,775 22.3
Select Medical %
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 Six Months Ended
June 30, 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 Shares(1) Diluted EPS Net Income
Allocation 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 Shares(1) Diluted EPS Net Income
Allocation 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 $
461,143 $
519,626 12.7
(,000) %
Number of patient 262,860 276,889 5.3
days(b)(c) %
Number of 9,172 9,167 (0.1)
admissions(b)(d) %
Net revenue per patient $
1,739 $
1,867 7.4
day(b)(e) %
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 $
160,374 $
168,667 5.2
(,000) %
Number of patient 86,525 84,081 (2.8)
days(b)(c) %
Number of 6,017 5,713 (5.1)
admissions(b)(d) %
Net revenue per patient $
1,635 $
1,831 12.0
day(b)(e) %
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 $
261,891 $
167,138 (36.2)
(,000) %
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 $
413,451 $
312,338 (24.5)
(,000) %
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 $
918,677 $
1,020,147 11.0
(,000) %
Number of patient 520,989 547,347 5.1
days(b)(c) %
Number of 18,628 18,700 0.4
admissions(b)(d) %
Net revenue per patient $
1,749 $
1,853 5.9
day(b)(e) %
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 $
314,932 $
350,686 11.4
(,000) %
Number of patient 169,341 178,649 5.5
days(b)(c) %
Number of 11,853 12,046 1.6
admissions(b)(d) %
Net revenue per patient $
1,634 $
1,778 8.8
day(b)(e) %
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 $
508,796 $
422,387 (17.0)
(,000) %
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 $
809,772 $
710,873 (12.2)
(,000) %
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 Six Months Ended
June 30, 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.
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
