Select Medical Holdings Corporation Announces Results For Its Third Quarter Ended September 30, 2020
MECHANICSBURG, Pa., Oct. 29, 2020 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical," "we," "us," or "our") (NYSE: SEM) today announced results for its third quarter ended September 30, 2020.
For the third quarter ended September 30, 2020, net operating revenues increased 2.2% to $1,423.9 million, compared to $1,393.3 million for the same quarter, prior year. Income from operations increased 27.0% to $156.1 million for the third quarter ended September 30, 2020, compared to $122.9 million for the same quarter, prior year. Income from operations included a net reduction of $1.2 million related to payments received under the Provider Relief Fund, as described below. Net income increased 137.2% to $104.5 million for the third quarter ended September 30, 2020, compared to $44.0 million for the same quarter, prior year. Net income included pre-tax gains on sales of businesses of $5.1 million for the third quarter ended September 30, 2020. Net income included pre-tax losses on early retirement of debt of $18.6 million for the third quarter ended September 30, 2019. Adjusted EBITDA increased 16.7% to $213.2 million for the third quarter ended September 30, 2020, compared to $182.7 million for the same quarter, prior year. Earnings per common share was $0.57 on a fully diluted basis for the third quarter ended September 30, 2020, compared to $0.23 for the same quarter, prior year. Adjusted earnings per common share was $0.56 on a fully diluted basis for the third quarter ended September 30, 2020, compared to $0.33 for the same quarter, prior year. Adjusted earnings per common share excludes the gains on sales of businesses and related tax effects for the third quarter ended September 30, 2020. Adjusted earnings per common share excludes the losses on early retirement of debt and related costs, and their related tax effects, for the third quarter ended September 30, 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.
For the nine months ended September 30, 2020, net operating revenues were $4,071.2 million, compared to $4,079.3 million for the same period, prior year. Income from operations increased 12.5% to $404.3 million for the nine months ended September 30, 2020, compared to $359.5 million for the same period, prior year. For the nine months ended September 30, 2020, income from operations included other operating income of $53.8 million related to the recognition of payments received under the Provider Relief Fund, as described below, for loss of revenue and health care related expenses attributable to coronavirus disease 2019 ("COVID-19"). Net income increased 54.0% to $242.4 million for the nine months ended September 30, 2020, compared to $157.4 million for the same period, prior year. Net income included pre-tax gains on sales of businesses of $12.7 million for the nine months ended September 30, 2020. Net income included pre-tax losses on early retirement of debt of $18.6 million and a pre-tax gain on sale of businesses of $6.5 million for the nine months ended September 30, 2019. Adjusted EBITDA increased 7.5% to $579.3 million for the nine months ended September 30, 2020, compared to $539.0 million for the same period, prior year. Earnings per common share was $1.35 on a fully diluted basis for the nine months ended September 30, 2020, compared to $0.86 for the same period, prior year. Adjusted earnings per common share was $1.31 on a fully diluted basis for the nine months ended September 30, 2020, compared to $0.93 for the same period, prior year. Adjusted earnings per common share excludes the gains on sales of businesses and related tax effects for the nine months ended September 30, 2020. Adjusted earnings per common share excludes the losses on early retirement of debt and related costs, gain on sale of businesses, and their related tax effects for the nine months ended September 30, 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 September 30, 2020, Select Medical operated 100 critical illness recovery hospitals in 28 states, 29 rehabilitation hospitals in 12 states, and 1,777 outpatient rehabilitation clinics in 37 states and the District of Columbia. Select Medical's joint venture subsidiary Concentra operated 523 occupational health centers in 41 states. At September 30, 2020, Select Medical had operations in 46 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 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 nine months ended September 30, 2020, Select Medical recognized payments received under the Provider Relief Fund for loss of revenue and health care related expenses attributable to COVID-19 as other operating income. For the three months ended September 30, 2020, other operating income of $0.4 million is included within the operating results of our Select Medical's Concentra segment, and a reduction to other operating income of $1.5 million is included within the operating results of its other activities. The reduction in other operating income resulted from changes in the terms and conditions associated with the acceptance of the Provider Relief Fund payments; these terms and conditions have changed from those which existed upon receipt of the payments. For the nine months ended September 30, 2020, $52.7 million and $1.1 million of other operating income is included within the operating results of Select Medical's other activities and its Concentra segment, respectively.
Critical Illness Recovery Hospital Segment
For the third quarter ended September 30, 2020, net operating revenues for the critical illness recovery hospital segment increased 12.2% to $519.5 million, compared to $462.9 million for the same quarter, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 55.2% to $88.8 million for the third quarter ended September 30, 2020, compared to $57.2 million for the same quarter, prior year. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 17.1% for the third quarter ended September 30, 2020, compared to 12.4% for the same quarter, prior year. Certain critical illness recovery hospital key statistics are presented in table VII of this release for both the third quarters ended September 30, 2020 and 2019.
For the nine months ended September 30, 2020, net operating revenues for the critical illness recovery hospital segment increased 11.4% to $1,539.6 million, compared to $1,381.6 million for the same period, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 37.4% to $267.1 million for the nine months ended September 30, 2020, compared to $194.4 million for the same period, prior year. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 17.4% for the nine months ended September 30, 2020, compared to 14.1% for the same period, prior year. Certain critical illness recovery hospital key statistics are presented in table VIII of this release for both the nine months ended September 30, 2020 and 2019.
Rehabilitation Hospital Segment
For the third quarter ended September 30, 2020, net operating revenues for the rehabilitation hospital segment increased 8.5% to $188.1 million, compared to $173.4 million for the same quarter, prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 21.4% to $44.6 million for the third quarter ended September 30, 2020, compared to $36.8 million for the same quarter, prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 23.7% for the third quarter ended September 30, 2020, compared to 21.2% for the same quarter, prior year. Certain rehabilitation hospital key statistics are presented in table VII of this release for both the third quarters ended September 30, 2020 and 2019.
For the nine months ended September 30, 2020, net operating revenues for the rehabilitation hospital segment increased 10.3% to $538.8 million, compared to $488.3 million for the same period, prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 19.7% to $110.8 million for the nine months ended September 30, 2020, compared to $92.5 million for the same period, prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 20.6% for the nine months ended September 30, 2020, compared to 19.0% for the same period, prior year. For the nine months ended September 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 nine months ended September 30, 2020 and 2019.
Outpatient Rehabilitation Segment
For the third quarter ended September 30, 2020, net operating revenues for the outpatient rehabilitation segment were $240.0 million, compared to $265.3 million for the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $30.6 million for the third quarter ended September 30, 2020, compared to Adjusted EBITDA of $40.0 million for the same quarter, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 12.8% for the third quarter ended September 30, 2020, compared to 15.1% for the same quarter, prior year. Certain outpatient rehabilitation key statistics are presented in table VII of this release for both the third quarters ended September 30, 2020 and 2019.
For the nine months ended September 30, 2020, net operating revenues for the outpatient rehabilitation segment were $662.4 million, compared to $774.1 million for the same period, prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $51.5 million for the nine months ended September 30, 2020, compared to $111.6 million for the same period, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 7.8% for the nine months ended September 30, 2020, compared to 14.4% for the same period, prior year. Certain outpatient rehabilitation key statistics are presented in table VIII of this release for both the nine months ended September 30, 2020 and 2019.
Concentra Segment
For the third quarter ended September 30, 2020, net operating revenues for the Concentra segment were $391.9 million, compared to $421.9 million for the same quarter, prior year. Adjusted EBITDA for the Concentra segment increased 3.7% to $80.5 million for the third quarter ended September 30, 2020, compared to $77.7 million for the same quarter, prior year. The Adjusted EBITDA margin for the Concentra segment was 20.6% for the third quarter ended September 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 third quarters ended September 30, 2020 and 2019.
For the nine months ended September 30, 2020, net operating revenues for the Concentra segment were $1,102.7 million, compared to $1,231.7 million for the same period, prior year. Adjusted EBITDA for the Concentra segment was $183.5 million for the nine months ended September 30, 2020, compared to $220.0 million for the same period, prior year. The Adjusted EBITDA margin for the Concentra segment was 16.6% for the nine months ended September 30, 2020, compared to 17.9% for the same period, prior year. Certain Concentra key statistics are presented in table VIII of this release for both the nine months ended September 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 nine months ended September 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 been 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 may 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, patient day volume, and occupancy rates for each of the periods presented, as well as the number of critical illness recovery hospitals Select Medical owned at the end of each period.
Net Operating Revenues
Patient Days Occupancy Rate Number of
Hospitals Owned(1)
2019 2020
% Change 2019 2020
% Change 2019 2020 2019 2020
(in thousands, except percentages)
January $
149,799 $
163,238 9.0% 86,238 90,783 5.3% 69% 69% 96 100
February 145,586 165,375 13.6% 80,806 87,844 8.7% 71% 72% 96 100
March 162,149 171,908 6.0% 91,085 91,831 0.8% 73% 70% 96 100
Three Months Ended March 31 $
457,534 $
500,521 9.4% 258,129 270,458 4.8% 71% 70% 96 100
April $
156,231 $
171,445 9.7% 88,357 90,710 2.7% 70% 71% 99 100
May 156,422 178,223 13.9% 89,350 95,191 6.5% 69% 72% 99 100
June 148,490 169,958 14.5% 85,153 90,988 6.9% 68% 71% 99 100
Three Months Ended June 30 $
461,143 $
519,626 12.7% 262,860 276,889 5.3% 69% 72% 99 100
Six Months Ended June 30 $
918,677 $
1,020,147 11.0% 520,989 547,347 5.1% 70% 71% 99 100
July $
151,416 $
175,253 15.7% 87,143 94,144 8.0% 67% 71% 99 99
August 155,485 173,967 11.9% 86,553 93,964 8.6% 66% 71% 99 99
September 155,991 170,234 9.1% 84,393 90,955 7.8% 67% 71% 99 99
Three Months Ended September 30 $
462,892 $
519,454 12.2% 258,089 279,063 8.1% 67% 71% 99 99
Nine Months Ended September 30 $
1,381,569 $
1,539,601 11.4% 779,078 826,410 6.1% 69% 71% 99 99
_______________________________________________________________________________
(1)
Represents the number of hospitals owned at the end of each period presented.
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 been 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 governments and health departments began to ease these restrictions and hospitals began to perform elective surgeries again, which has since increased the need for the services provided by Select Medical's rehabilitation hospitals.
The following table shows the trend in net operating revenues, patient day volume, and occupancy rates for each of the periods presented, as well as the number of rehabilitation hospitals Select Medical owned at the end of each period.
Net Operating Revenues
Patient Days Occupancy Rate Number of
Hospitals Owned(1)
2019 2020 % Change 2019 2020 % Change 2019 2020 2019 2020
(in thousands, except percentages)
January $
50,615 $
61,673 21.8% 27,434 32,111 17.0% 74% 79% 17 19
February 48,080 60,690 26.2% 25,442 31,813 25.0% 76% 84% 17 19
March 55,863 59,656 6.8% 29,940 30,644 2.4% 78% 76% 18 19
Three Months Ended March 31 $
154,558 $
182,019 17.8% 82,816 94,568 14.2% 76% 79% 18 19
April $
51,991 $
45,878 (11.8)% 28,266 23,553 (16.7)% 76% 61% 18 19
May 56,019 57,815 3.2% 29,730 29,787 0.2% 75% 73% 19 19
June 52,364 64,974 24.1% 28,529 30,741 7.8% 73% 78% 19 19
Three Months Ended June 30 $
160,374 $
168,667 5.2% 86,525 84,081 (2.8)% 75% 71% 19 19
Six Months Ended June 30 $
314,932 $
350,686 11.4% 169,341 178,649 5.5% 76% 75% 19 19
July $
57,077 $
62,312 9.2% 30,054 31,986 6.4% 75% 81% 19 18
August 58,072 63,673 9.6% 30,228 32,518 7.6% 75% 83% 19 18
September 58,220 62,090 6.6% 29,172 31,176 6.9% 75% 82% 19 18
Three Months Ended September 30 $
173,369 $
188,075 8.5% 89,454 95,680 7.0% 75% 82% 19 18
Nine Months Ended September 30 $
488,301 $
538,761 10.3% 258,795 274,329 6.0% 75% 77% 19 18
_______________________________________________________________________________
(1)
Represents the number of hospitals owned at the end of each period presented.
Outpatient Rehabilitation Segment. Beginning in mid-March, state governments began implementing mandatory closures of non-essential or non-life sustaining businesses, restricting travel and individual activities outside of the home, closing schools, and mandating other social distancing measures. Additionally, hospitals and other facilities began to suspend elective surgeries. As a result, Select Medical's outpatient rehabilitation clinics experienced significantly less patient visit volume due to a decline in patient referrals from physicians, a reduction in workers' compensation injury visits resulting from the temporary closure of businesses, and the suspension of elective surgeries which would have required outpatient rehabilitation services. Beginning in May, state governments began to ease restrictions imposed on individuals and businesses. Further, most physician offices have reopened for routine office visits and hospitals and other facilities have begun to perform elective surgeries again, which has since increased the need for services provided by Select Medical's outpatient rehabilitation clinics.
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.
Net Operating Revenues
Visits Working Days(1)
2019 2020 % Change 2019 2020 % Change 2019 2020
(in thousands, except percentages)
January $
83,185 $
90,924 9.3% 687,007 757,171 10.2% 22 22
February 78,573 88,239 12.3% 658,610 739,061 12.2% 20 20
March 85,147 76,086 (10.6)% 708,866 626,433 (11.6)% 21 22
Three Months Ended March 31 $
246,905 $
255,249 3.4% 2,054,483 2,122,665 3.3% 63 64
April $
90,230 $
49,084 (45.6)% 762,914 386,108 (49.4)% 22 22
May 90,272 51,186 (43.3)% 759,829 409,703 (46.1)% 22 20
June 81,389 66,868 (17.8)% 680,762 546,456 (19.7)% 20 22
Three Months Ended June 30 $
261,891 $
167,138 (36.2)% 2,203,505 1,342,267 (39.1)% 64 64
Six Months Ended June 30 $
508,796 $
422,387 (17.0)% 4,257,988 3,464,932 (18.6)% 127 128
July $
89,267 $
77,793 (12.9)% 754,102 636,826 (15.6)% 22 22
August 90,687 79,034 (12.8)% 743,813 651,738 (12.4)% 22 21
September 85,376 83,215 (2.5)% 706,413 694,808 (1.6)% 20 21
Three Months Ended September 30 $
265,330 $
240,042 (9.5)% 2,204,328 1,983,372 (10.0)% 64 64
Nine Months Ended September 30 $
774,126 $
662,429 (14.4)% 6,462,316 5,448,304 (15.7)% 191 192
_______________________________________________________________________________
(1)
Represents the number of days in which normal business operations were conducted during the periods presented.
Concentra Segment. Beginning in mid-March, state governments began placing significant restrictions on businesses and mandating closures of non-essential or non-life sustaining businesses, causing many employers to furlough their workforce and temporarily cease or significantly reduce their operations. These actions have had significant effects on Select Medical's patient visit volumes. Beginning in May, state governments began to ease restrictions imposed on businesses and employers began to increase their workforce, which has since 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.
Net Operating Revenues
Visits Working Days(1)
2019 2020 % Change 2019 2020 % Change 2019 2020
(in thousands, except percentages)
January $
133,507 $
141,236 5.8% 985,598 1,032,069 4.7% 22 22
February 126,309 133,690 5.8% 919,065 965,741 5.1% 20 20
March 136,505 123,609 (9.4)% 1,006,944 879,585 (12.6)% 21 22
Three Months Ended March 31 $
396,321 $
398,535 0.6% 2,911,607 2,877,395 (1.2)% 63 64
April $
140,050 $
91,178 (34.9)% 1,040,543 610,555 (41.3)% 22 22
May 143,183 99,228 (30.7)% 1,073,763 674,629 (37.2)% 22 20
June 130,218 121,932 (6.4)% 988,783 865,896 (12.4)% 20 22
Three Months Ended June 30 $
413,451 $
312,338 (24.5)% 3,103,089 2,151,080 (30.7)% 64 64
Six Months Ended June 30 $
809,772 $
710,873 (12.2)% 6,014,696 5,028,475 (16.4)% 127 128
July $
142,385 $
132,465 (7.0)% 1,057,809 930,427 (12.0)% 22 22
August 144,452 130,291 (9.8)% 1,087,165 933,555 (14.1)% 22 21
September 135,063 129,103 (4.4)% 1,005,929 963,065 (4.3)% 20 21
Three Months Ended September 30 $
421,900 $
391,859 (7.1)% 3,150,903 2,827,047 (10.3)% 64 64
Nine Months Ended September 30 $
1,231,672 $
1,102,732 (10.5)% 9,165,599 7,855,522 (14.3)% 191 192
_______________________________________________________________________________
(1)
Represents the number of days in which normal business operations were conducted during the periods presented.
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, 2021, 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 September 30, 2020. Since the inception of the program through September 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.
Business Outlook
Select Medical is issuing an updated business outlook following the reporting of its third quarter 2020 results. Select Medical now expects for the full year of 2020 consolidated net operating revenues to be in the range of $5.44 billion to $5.50 billion and Adjusted EBITDA for the full year of 2020 to be in the range of $745.0 million to $765.0 million. Select Medical now expects fully diluted earnings per common share for the full year 2020 to be in the range of $1.65 to $1.75 and adjusted earnings per common share for the full year 2020 to be in the range of $1.61 to $1.71. Adjusted earnings per common share excludes the gains on sales of businesses and their related tax effects. Reconciliations of net income to Adjusted EBITDA and diluted earnings per common share to adjusted earnings per common share for the full year of 2020 are presented in table XI of this release.
Conference Call
Select Medical will host a conference call regarding its third quarter results, as well as its business outlook and the impact of the COVID-19 pandemic on each of its reporting segments, on Friday, October 30, 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 6297066. The conference call will be webcast simultaneously and can be accessed at Select Medical Holdings Corporation's website www.selectmedicalholdings.com.
For those unable to participate in the conference call, a replay will be available until 11:00am ET, November 6, 2020. The replay number is 1-855-859-2056 (domestic) or 1-404-537-3406 (international). The conference ID for the replay will be 6297066. 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 September 30, 2019 and 2020
(In thousands, except per share amounts, unaudited)
2019 2020 % Change
---
Net operating revenues $
1,393,343 $
1,423,869 2.2
%
Costs and expenses:
Cost of services, exclusive of depreciation and amortization 1,183,111 1,180,951 (0.2)
General and administrative 34,385 35,516 3.3
Depreciation and amortization 52,941 50,110 (5.3)
Total costs and expenses 1,270,437 1,266,577 (0.3)
Other operating income - (1,160) N/M
Income from operations 122,906 156,132 27.0
Other income and expense:
Loss on early retirement of debt (18,643) N/M
Equity in earnings of unconsolidated subsidiaries 6,950 8,765 26.1
Gain on sale of businesses - 5,143 N/M
Interest expense (54,336) (34,026) (37.4)
Income before income taxes 56,877 136,014 139.1
Income tax expense 12,847 31,557 145.6
Net income 44,030 104,457 137.2
Less: Net income attributable to non-controlling interests 13,298 27,511 106.9
Net income attributable to Select Medical $
30,732 $
76,946 150.4
%
Diluted earnings per common share:(1) $
0.23 $
0.57
_______________________________________________________________________________
(1)
Refer to table III for calculation of earnings per common share.
N/M
Not Meaningful
II. Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 2019 and 2020
(In thousands, except per share amounts, unaudited)
2019 2020 % Change
---
Net operating revenues $
4,079,338 $
4,071,219 (0.2)
%
Costs and expenses:
Cost of services, exclusive of depreciation and amortization 3,465,353 3,463,778 0.0
General and administrative 94,401 102,808 8.9
Depreciation and amortization 160,072 154,133 (3.7)
Total costs and expenses 3,719,826 3,720,719 0.0
Other operating income - 53,828 N/M
Income from operations 359,512 404,328 12.5
Other income and expense:
Loss on early retirement of debt (18,643) N/M
Equity in earnings of unconsolidated subsidiaries 18,710 19,677 5.2
Gain on sale of businesses 6,532 12,690 N/M
Interest expense (156,611) (117,499) (25.0)
Income before income taxes 209,500 319,196 52.4
Income tax expense 52,140 76,805 47.3
Net income 157,360 242,391 54.0
Less: Net income attributable to non-controlling interests 40,978 60,670 48.1
Net income attributable to Select Medical $
116,382 $
181,721 56.1
%
Diluted earnings per common share:(1) $
0.86 $
1.35
_______________________________________________________________________________
(1)
Refer to table III for calculation of earnings per common share.
N/M
Not meaningful
III. Earnings per Share
For the Three and Nine Months Ended
September 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 nine months ended September 30,
2019 and 2020:
Diluted EPS
Three Months Ended Nine Months Ended
September 30,
September 30,
2019 2020 2019 2020
Net income $
44,030 $
104,457 $
157,360 $
242,391
Less: net income attributable to non-controlling interests 13,298 27,511 40,978 60,670
Net income attributable to Select Medical 30,732 76,946 116,382 181,721
Less: net income attributable to participating securities 1,052 2,666 3,888 6,254
Net income attributable to common shares $
29,680 $
74,280 $
112,494 $
175,467
The following tables set forth the
computation of EPS under the two-
class method for the three and nine
months ended September 30, 2019 and
2020:
Three Months Ended September 30,
2019 2020
Net Income Shares(1) Diluted EPS Net Income Shares(1) Diluted EPS
Allocation Allocation
Common shares $
29,680 130,007 $
0.23 $
74,280 129,882 $
0.57
Participating securities 1,052 4,607 $
0.23 2,666 4,662 $
0.57
Total $
30,732 $
76,946
Nine Months Ended September 30,
2019 2020
Net Income Shares(1) Diluted EPS Net Income Shares(1) Diluted EPS
Allocation Allocation
Common shares $
112,494 130,474 $
0.86 $
175,467 129,616 $
1.35
Participating securities 3,888 4,509 $
0.86 6,254 4,620 $
1.35
Total $
116,382 $
181,721
_______________________________________________________________________________
(1)
Represents the weighted average share count outstanding during the period.
IV. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
December 31, 2019 September 30, 2020
Assets
Current Assets:
Cash and cash equivalents $
335,882 $
639,800
Accounts receivable 762,677 842,615
Other current assets 114,433 141,719
Total Current Assets 1,212,992 1,624,134
Operating lease right-of-use assets 1,003,986 1,005,689
Property and equipment, net 998,406 927,975
Goodwill 3,391,955 3,369,009
Identifiable intangible assets, net 409,068 392,506
Other assets 323,881 340,564
Total Assets $
7,340,288 $
7,659,877
Liabilities and Equity
Current Liabilities:
Payables and accruals $
681,163 $
734,166
Government advances 318,116
Unearned government assistance 66,938
Current operating lease liabilities 207,950 215,235
Current portion of long-term debt and notes payable 25,167 11,031
Total Current Liabilities 914,280 1,345,486
Non-current operating lease liabilities 852,897 852,555
Long-term debt, net of current portion 3,419,943 3,390,945
Non-current deferred tax liability 148,258 131,423
Other non-current liabilities 101,334 178,967
Total Liabilities 5,436,712 5,899,376
Redeemable non-controlling interests 974,541 541,856
Total equity 929,035 1,218,645
Total Liabilities and Equity $
7,340,288 $
7,659,877
V. Condensed Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2019 and 2020
(In thousands, unaudited)
2019 2020
Operating activities
Net income $
44,030 $
104,457
Adjustments to reconcile net income to net cash provided by operating
activities:
Distributions from unconsolidated subsidiaries 2,461 10,497
Depreciation and amortization 52,941 50,110
Provision for expected credit losses 386 28
Equity in earnings of unconsolidated subsidiaries (6,950) (8,765)
Loss on extinguishment of debt 10,160
Loss (gain) on sale of assets and businesses 5 (16,842)
Stock compensation expense 6,818 6,962
Amortization of debt discount, premium and issuance costs 3,143 542
Deferred income taxes (957) (11,140)
Changes in operating assets and liabilities, net of effects of business
combinations:
Accounts receivable (7,552) (104,592)
Other current assets 3,220 (23,528)
Other assets 2,198 4,831
Accounts payable and accrued expenses 39,251 133,748
Government advances 1,124
Unearned government assistance 21,433
Income taxes (15,428) (34,328)
Net cash provided by operating activities 133,726 134,537
Investing activities
Business combinations, net of cash acquired (207) (7,115)
Purchases of property and equipment (34,671) (34,319)
Investment in businesses (8,411) (11,108)
Proceeds from sale of assets and businesses 58 70,919
Net cash provided by (used in) investing activities (43,231) 18,377
Financing activities
Borrowings on revolving facilities 65,000
Payments on revolving facilities (260,000)
Proceeds from term loans 593,683
Payments on term loans (242,399)
Proceeds from 6.250% senior notes 539,176
Payment on 6.375% senior notes (710,000)
Revolving facility debt issuance costs (310)
Borrowings of other debt 5,052 3,599
Principal payments on other debt (9,948) (7,087)
Repurchase of common stock (23,689) (4,827)
Proceeds from exercise of stock options 413
Decrease in overdrafts (27,259)
Distributions to and purchases of non-controlling interests (8,287) (14,536)
Net cash used in financing activities (78,568) (22,851)
Net increase in cash and cash equivalents 11,927 130,063
Cash and cash equivalents at beginning of period 124,036 509,737
Cash and cash equivalents at end of period $
135,963 $
639,800
Supplemental information
Cash paid for interest $
51,181 $
54,050
Cash paid for taxes 29,231 77,025
VI. Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2019 and 2020
(In thousands, unaudited)
2019 2020
Operating activities
Net income $
157,360 $
242,391
Adjustments to reconcile net income to net cash provided by operating
activities:
Distributions from unconsolidated subsidiaries 13,609 21,720
Depreciation and amortization 160,072 154,133
Provision for expected credit losses 2,344 281
Equity in earnings of unconsolidated subsidiaries (18,710) (19,677)
Loss on extinguishment of debt 10,160
Gain on sale of assets and businesses (6,349) (24,723)
Stock compensation expense 19,431 20,828
Amortization of debt discount, premium and issuance costs 9,469 1,635
Deferred income taxes (7,247) (14,556)
Changes in operating assets and liabilities, net of effects of business
combinations:
Accounts receivable (93,425) (91,413)
Other current assets (6,016) (22,815)
Other assets 1,259 16,335
Accounts payable and accrued expenses 23,765 142,027
Government advances 318,116
Unearned government assistance 66,938
Income taxes 918 9,415
Net cash provided by operating activities 266,640 820,635
Investing activities
Business combinations, net of cash acquired (86,269) (14,076)
Purchases of property and equipment (123,956) (105,572)
Investment in businesses (60,668) (25,857)
Proceeds from sale of assets and businesses 183 83,320
Net cash used in investing activities (270,710) (62,185)
Financing activities
Borrowings on revolving facilities 700,000 470,000
Payments on revolving facilities (720,000) (470,000)
Proceeds from term loans 593,683
Payments on term loans (375,084) (39,843)
Proceeds from 6.250% senior notes 539,176
Payment on 6.375% senior notes (710,000)
Revolving facility debt issuance costs (310)
Borrowings of other debt 19,282 35,086
Principal payments on other debt (22,628) (42,820)
Repurchase of common stock (37,309) (14,242)
Proceeds from exercise of stock options 872
Decrease in overdrafts (25,083)
Proceeds from issuance of non-controlling interests 18,288 1,686
Distributions to and purchases of non-controlling interests (16,032) (28,196)
Purchase of membership interests of Concentra Group Holdings Parent (366,203)
Net cash used in financing activities (35,145) (454,532)
Net increase (decrease) in cash and cash equivalents (39,215) 303,918
Cash and cash equivalents at beginning of period 175,178 335,882
Cash and cash equivalents at end of period $
135,963 $
639,800
Supplemental information
Cash paid for interest $
149,090 $
140,174
Cash paid for taxes 58,472 81,945
VII. Key Statistics
For the Three Months Ended September 30, 2019 and 2020
(unaudited)
2019 2020 % Change
Critical Illness Recovery Hospital
Number of hospitals - end of period(a) 100 100
Net operating revenues (,000) $
462,892 $
519,454 12.2
%
Number of patient days(b)(c) 258,089 279,063 8.1
%
Number of admissions(b)(d) 9,051 9,380 3.6
%
Net revenue per patient day(b)(e) $
1,773 $
1,845 4.1
%
Adjusted EBITDA (,000) $
57,247 $
88,830 55.2
%
Adjusted EBITDA margin 12.4
% 17.1
%
Rehabilitation Hospital
Number of hospitals - end of period(a) 29 29
Net operating revenues (,000) $
173,369 $
188,075 8.5
%
Number of patient days(b)(c) 89,454 95,680 7.0
%
Number of admissions(b)(d) 6,400 6,443 0.7
%
Net revenue per patient day(b)(e) $
1,724 $
1,775 3.0
%
Adjusted EBITDA (,000) $
36,780 $
44,637 21.4
%
Adjusted EBITDA margin 21.2
% 23.7
%
Outpatient Rehabilitation
Number of clinics - end of period(a) 1,707 1,777
Net operating revenues (,000) $
265,330 $
240,042 (9.5)
%
Number of visits(b) 2,204,328 1,983,372 (10.0)
%
Revenue per visit(b)(f) $
103 $
104 1.0
%
Adjusted EBITDA (,000) $
40,040 $
30,623 (23.5)
%
Adjusted EBITDA margin 15.1
% 12.8
%
Concentra
Number of centers - end of period(b) 523 523
Net operating revenues (,000) $
421,900 $
391,859 (7.1)
%
Number of visits(b) 3,150,903 2,827,047 (10.3)
%
Revenue per visit(b)(f) $
120 $
121 0.8
%
Adjusted EBITDA (,000) $
77,679 $
80,547 3.7
%
Adjusted EBITDA margin 18.4
% 20.6
%
_______________________________________________________________________________
(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 Nine Months Ended September 30, 2019 and 2020
(unaudited)
2019 2020 % Change
Critical Illness Recovery Hospital
Number of hospitals - end of period(a) 100 100
Net operating revenues (,000) $
1,381,569 $
1,539,601 11.4
%
Number of patient days(b)(c) 779,078 826,410 6.1
%
Number of admissions(b)(d) 27,679 28,080 1.4
%
Net revenue per patient day(b)(e) $
1,757 $
1,850 5.3
%
Adjusted EBITDA (,000) $
194,383 $
267,143 37.4
%
Adjusted EBITDA margin 14.1
% 17.4
%
Rehabilitation Hospital
Number of hospitals - end of period(a) 29 29
Net operating revenues (,000) $
488,301 $
538,761 10.3
%
Number of patient days(b)(c) 258,795 274,329 6.0
%
Number of admissions(b)(d) 18,253 18,489 1.3
%
Net revenue per patient day(b)(e) $
1,665 $
1,777 6.7
%
Adjusted EBITDA (,000) $
92,545 $
110,811 19.7
%
Adjusted EBITDA margin 19.0
% 20.6
%
Outpatient Rehabilitation
Number of clinics - end of period(a) 1,707 1,777
Net operating revenues (,000) $
774,126 $
662,429 (14.4)
%
Number of visits(b) 6,462,316 5,448,304 (15.7)
%
Revenue per visit(b)(f) $
103 $
105 1.9
%
Adjusted EBITDA (,000) $
111,615 $
51,463 (53.9)
%
Adjusted EBITDA margin 14.4
% 7.8
%
Concentra
Number of centers - end of period(b) 523 523
Net operating revenues (,000) $
1,231,672 $
1,102,732 (10.5)
%
Number of visits(b) 9,165,599 7,855,522 (14.3)
%
Revenue per visit(b)(f) $
122 $
123 0.8
%
Adjusted EBITDA (,000) $
220,024 $
183,510 (16.6)
%
Adjusted EBITDA margin 17.9
% 16.6
%
_______________________________________________________________________________
(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 Nine Months Ended
September 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 Nine Months Ended
September 30,
September 30,
2019 2020 2019 2020
Net income $
44,030 $
104,457 $
157,360 $
242,391
Income tax expense 12,847 31,557 52,140 76,805
Interest expense 54,336 34,026 156,611 117,499
Gain on sale of businesses (5,143) (6,532) (12,690)
Equity in earnings of unconsolidated subsidiaries (6,950) (8,765) (18,710) (19,677)
Loss on early retirement of debt 18,643 18,643
Income from operations 122,906 156,132 359,512 404,328
Stock compensation expense:
Included in general and administrative 5,305 5,600 14,849 16,488
Included in cost of services 1,513 1,362 4,582 4,340
Depreciation and amortization 52,941 50,110 160,072 154,133
Adjusted EBITDA $
182,665 $
213,204 $
539,015 $
579,289
Critical illness recovery hospital $
57,247 $
88,830 $
194,383 $
267,143
Rehabilitation hospital 36,780 44,637 92,545 110,811
Outpatient rehabilitation 40,040 30,623 111,615 51,463
Concentra(a) 77,679 80,547 220,024 183,510
Other(a)(b) (29,081) (31,433) (79,552) (33,638)
Adjusted EBITDA $
182,665 $
213,204 $
539,015 $
579,289
_______________________________________________________________________________
(a) For the three and nine months ended September 30, 2020, Select Medical recognized payments received under the Provider Relief Fund for loss of revenue and health care related expenses
attributable to COVID-19 as other operating income. Refer to "CARES Act Provider Relief Fund" for further discussion.
(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 Nine Months Ended
September 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 September 30,
2019 Per Share(a) 2020 Per Share(a)
---
Net income attributable to common shares(a) $
29,680 $
0.23 $
74,280 $
0.57
Adjustments:(b)
Loss on early retirement of debt and related costs(c) 12,777 0.10
Gain on sale of businesses - (1,189) (0.01)
Adjusted net income attributable to common shares $
42,457 $
0.33 $
73,091 $
0.56
Nine Months Ended September 30,
2019 Per Share(a) 2020 Per Share(a)
---
Net income attributable to common shares(a) $
112,494 $
0.86 $
175,467 $
1.35
Adjustments:(b)
Loss on early retirement of debt and related costs(c) 12,777 0.10
Gain on sale of businesses (4,543) (0.03) (5,089) (0.04)
Adjusted net income attributable to common shares $
120,728 $
0.93 $
170,378 $
1.31
______________________________________________________________________________
(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 September 30, 2019, the adjustments to net income attributable to common shares include an estimated income tax benefit of approximately $5.9 million. For the
three months ended September 30, 2020, the adjustments to net income attributable to common shares include an estimated income tax benefit of approximately $0.2 million.
For the nine months ended September 30, 2019, the adjustments to net income attributable to common shares include an estimated income tax benefit of approximately $4.0 million. For the nine
months ended September 30, 2020, the adjustments to net income attributable to common shares include estimated income tax expense of approximately $3.3 million.
(c) For the three and nine months ended September 30, 2019, the loss on early retirement of debt and related costs adjustment includes expenses related to the amendment to the Select credit
agreement, the amendment to the Concentra-JPM first lien credit agreement, the repayment of term loans outstanding under the Concentra-JPM second lien credit agreement, and the redemption
of the 6.375% senior notes.
The redemption of the 6.375% senior notes occurred on August 30, 2019, while the issuance of the $550.0 million 6.250% senior notes occurred on August 1, 2019. As a result, Select Medical
recognized interest expense on both the 6.250% senior notes and the 6.375% senior notes during August 2019. The adjustment to net income attributable to common shares for the loss on early
retirement of debt and related costs includes the interest expense recognized on the 6.375% senior notes during August 2019 and its related tax effects.
XI. Net Income to Adjusted EBITDA and
Earnings per Common Share to Adjusted
Earnings per Common Share
Reconciliations
Business Outlook for the Year Ending
December 31, 2020
(In millions, unaudited)
The following are reconciliations of
full year 2020 Adjusted EBITDA and
adjusted earnings per common share
expectations as computed at the low and
high points of the range to the closest
comparable GAAP financial measure.
Refer to table IX and table X for a
discussion of Select Medical's use of
Adjusted EBITDA and adjusted earnings
per common share in evaluating
financial performance. Refer to table
IX for the definition of Adjusted
EBITDA. Each item presented in the
below tables are estimations of full
year 2020 expectations.
Range
Non-GAAP Measure
Reconciliation Low High
---
Net income
attributable to
Select Medical $
221 $
235
Net income
attributable to
non-controlling
interests 75 75
Net income 296 310
Income tax expense 98 104
Interest expense 154 154
Gain on sale of
businesses (13) (13)
Equity in earnings
of unconsolidated
subsidiaries (27) (27)
Income from
operations 508 528
Stock compensation
expense 29 29
Depreciation and
amortization 208 208
Adjusted EBITDA $
745 $
765
Range
Non-GAAP Measure
Reconciliation Low High
---
Diluted earnings
per common share $
1.65 $
1.75
Adjustments:
Gain on sale of
businesses (0.04) (0.04)
Adjusted earnings
per common share $
1.61 $
1.71
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SOURCE Select Medical Holdings Corporation
