Select Medical Holdings Corporation Announces Results for Second Quarter Ended June 30, 2014 and Cash Dividend - Beckley, Bluefield & Lewisburg News, Weather, Sports

Select Medical Holdings Corporation Announces Results for Second Quarter Ended June 30, 2014 and Cash Dividend

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SOURCE Select Medical Corporation

MECHANICSBURG, Pa., Aug. 7, 2014 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical") (NYSE: SEM) today announced results for its second quarter ended June 30, 2014 and the declaration of a cash dividend.

For the second quarter ended June 30, 2014, net operating revenues increased 2.1% to $772.8 million, compared to $756.7 million for the same quarter, prior year.  Income from operations was $82.2 million for the second quarter ended June 30, 2014, compared to $88.3 million for the same quarter, prior year.  Net income attributable to Select Medical was $35.3 million for the second quarter ended June 30, 2014, compared to $27.8 million for the same quarter, prior year.  Net income attributable to Select Medical for the second quarter ended June 30, 2013 includes a loss on early retirement of debt, net of tax, of $10.5 million.  Net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, equity in earnings (losses) of unconsolidated subsidiaries and other income (expense) ("Adjusted EBITDA") for the second quarter ended June 30, 2014 was $101.4 million, compared to $106.0 million for the same quarter, prior year.  A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release.  Income per common share for the second quarter ended June 30, 2014 was $0.27 on a fully diluted basis compared to income per common share of $0.20 for the same quarter, prior year.  Excluding the loss related to the early retirement of debt for the second quarter ended June 30, 2013 and its related tax affects, adjusted income per common share was $0.27 per diluted share for the second quarter ended June 30, 2013.  A reconciliation of net income per share to adjusted net income per share for the second quarter ended June 30, 2013 is presented in table IX of this release. The results for the quarters ended June 30, 2014 and 2013 both reflect Medicare changes that became effective on April 1, 2013, including (i) a 2% reduction in Medicare payments that was implemented as part of the automatic reduction in federal spending mandated under the Budget Control Act of 2011 (the "Sequestration Reduction"), and (ii) an increase from 25% to 50% in the multiple procedure payment reduction for therapy services as mandated by the American Taxpayer Relief Act of 2012 (the "MPPR Reduction").

For the six months ended June 30, 2014, net operating revenues increased 1.9% to $1,535.3 million compared to $1,506.6 million for the same period, prior year.  Income from operations was $160.6 million compared to $170.8 million for the same period, prior year.  The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations by $15.2 million for the Sequestration Reduction and $4.5 million for the MPPR Reduction for the six months ended June 30, 2014.  The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations by $9.5 million for the Sequestration Reduction and $1.7 million for the MPPR Reduction for the six months ended June 30, 2013.  Net income attributable to Select Medical was $68.4 million compared to $62.2 million for the same period, prior year.  Net income attributable to Select Medical for the six months ended June 30, 2014 and 2013 includes losses on early retirement of debt, net of tax, of $1.4 million and $11.4 million, respectively.  Adjusted EBITDA for the six months ended June 30, 2014 decreased 3.8% to $198.2 million compared to $206.0 million for the same period, prior year.  A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release.  Income per common share for the six months ended June 30, 2014 was $0.51 on a fully diluted basis compared to income per common share of $0.44 for the six months ended June 30, 2013.  Excluding the loss related to the early retirement of debt and its related tax effects in both periods, adjusted income per common share was $0.52 per diluted share for the six months ended June 30, 2014 compared to $0.53 per diluted share for the six months ended June 30, 2013.  A reconciliation of net income per share to adjusted net income per share for both the six months ended June 30, 2014 and 2013 is presented in table X of this release.

Specialty Hospitals

For the second quarter ended June 30, 2014, net operating revenues for the specialty hospital segment decreased 0.3% to $557.8 million, compared to $559.4 million for the same quarter, prior year.  Adjusted EBITDA for the specialty hospital segment was $88.7 million for the second quarter ended June 30, 2014, compared to $96.4 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 15.9% for the second quarter ended June 30, 2014, compared to 17.2% for the same quarter, prior year.  Certain specialty hospital key statistics for both the second quarter ended June 30, 2014 and 2013 are presented in table VI of this release.

For the six months ended June 30, 2014, net operating revenues for the specialty hospital segment increased 0.5% to $1,122.5 million compared to $1,117.1 million for the same period, prior year.  The Sequestration Reduction reduced net operating revenues and income from operations for the segment by approximately $14.4 million and $9.1 million for the six months ended June 30, 2014 and 2013, respectively.  Adjusted EBITDA for the specialty hospital segment for the six months ended June 30, 2014 decreased 4.7% to $180.8 million compared to $189.7 million for the same period, prior year.  The Adjusted EBITDA margin for the segment was 16.1% for the six months ended June 30, 2014, compared to 17.0% for the same period, prior year.  Certain specialty hospital key statistics for both the six months ended June 30, 2014 and 2013 are presented in table VII of this release.

Outpatient Rehabilitation

For the second quarter ended June 30, 2014, net operating revenues for the outpatient rehabilitation segment increased 9.0% to $214.8 million, compared to $197.1 million for the same quarter, prior year.  Adjusted EBITDA for the segment for the second quarter ended June 30, 2014 increased 16.8% to $30.4 million, compared to $26.1 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 14.2% for the second quarter ended June 30, 2014, compared to 13.2% for the same quarter, prior year.  Certain outpatient rehabilitation key statistics for both the second quarter ended June 30, 2014 and 2013 are presented in table VI of this release.

For the six months ended June 30, 2014, net operating revenues for the outpatient rehabilitation segment increased 6.0% to $412.6 million compared to $389.2 million for the same period, prior year.  The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations for the segment by approximately $0.9 million for the Sequestration Reduction and $4.5 million for the MPPR Reduction for the six months ended June 30, 2014.  The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations for the segment by approximately $0.4 million for the Sequestration Reduction and $1.7 million for the MPPR Reduction for the six months ended June 30, 2013.  Adjusted EBITDA for the segment for the six months ended June 30, 2014 increased 5.2% to $51.4 million compared to $48.9 million for the same period, prior year.  The Adjusted EBITDA margin for the segment was 12.5% for the six months ended June 30, 2014 compared to 12.6% for the same period, prior year.  Certain outpatient rehabilitation key statistics for both the six months ended June 30, 2014 and 2013 are presented in table VII of this release. 

Stock Repurchase Program

The board of directors of Select Medical has authorized a $500.0 million stock repurchase program that will remain in effect until December 31, 2016, unless further extended 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 is funding this program with cash on hand and borrowings under Select's revolving credit facility.  Select Medical repurchased a total of 1,285,714 shares at a total cost of $18.0 million, or $14.00 per share, during the quarter ended June 30, 2014.  Since the inception of the program through June 30, 2014, Select Medical has repurchased 34,891,794 shares at a cost of approximately $301.1 million, or $8.63 per share, which includes transaction costs.

Dividends

On August 6, 2014, Select Medical's board of directors declared a cash dividend of $0.10 per share.  The dividend will be payable on or about August 29, 2014 to stockholders of record as of the close of business on August 20, 2014.

There is no assurance that future dividends will be declared or the timing or amount of any future dividend. The declaration and payment of dividends in the future are at the sole discretion of our board of directors after taking into account various factors, including our financial condition, operating results, available cash and current and anticipated cash needs and applicable restrictions in our debt documents.

Business Outlook

Select Medical is reaffirming its prior business outlook provided most recently in its May 1, 2014 first quarter earnings press release.  Select Medical continues to expect consolidated net operating revenues for the full year 2014 to be in the range of $3.05 billion to $3.15 billion.  Select Medical continues to expect Adjusted EBITDA for the full year 2014 to be in the range of $365.0 million to $385.0 million.  Select Medical continues to expect adjusted income per common share, which excludes the loss on retirement of debt and its related tax effects, for the full year 2014 to be in the range $0.89 to $0.97.  Select Medical continues to expect fully diluted income per common share for the full year 2014 to be in the range of $0.88 to $0.96.

Conference Call

Select Medical will host a conference call regarding its second quarter results and its business outlook on Friday, August 8, 2014, at 9:00 am EDT. The domestic dial-in number for the call is 1-866-515-2907. The international dial-in number is 1-617-399-5121. The passcode for the call is 47783079. The conference call will be webcast simultaneously and can be accessed at Select Medical's website, www.selectmedicalholdings.com.

For those unable to participate in the conference call, a replay will be available until 11:59 pm EDT, August 15, 2014. The replay number is 1-888-286-8010 (domestic) or 1-617-801-6888 (international). The passcode for the replay will be 35238169. The replay can also be accessed at Select Medical's website, www.selectmedicalholdings.com.

Select Medical is a leading operator of specialty hospitals and outpatient rehabilitation clinics in the United States. As of June 30, 2014, Select Medical operated 112 long term acute care hospitals and 15 acute medical rehabilitation hospitals in 28 states and 1,019 outpatient rehabilitation clinics in 32 states and the District of Columbia. Select Medical also provides medical rehabilitation services on a contracted basis to nursing homes, hospitals, assisted living and senior care centers, schools and work sites. Information about Select Medical is available at www.selectmedical.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:

  • changes in government reimbursement for our services due to the implementation of healthcare reform legislation, deficit reduction measures, and/or new payment policies (including, for example, the expiration of the moratorium limiting the full application of the 25 Percent Rule that would reduce our Medicare payments for those patients admitted to a long term acute care hospital from a referring hospital in excess of an applicable percentage admissions threshold) may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability;

  • the impact of the Bipartisan Budget Act of 2013, which establishes new payment limits for Medicare patients who do not meet specified criteria, may result in a reduction in net operating revenues and profitability of our long term acute care hospitals;

  • the failure of our specialty hospitals to maintain their Medicare certifications may cause our net operating revenues and profitability to decline;

  • the failure of our 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;

  • private third-party payors for our services may undertake future cost containment initiatives that 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 or therapists could increase our operating costs significantly;
  • 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; and

  • other factors discussed from time to time in our filings with the Securities and Exchange Commission, including factors discussed under the heading "Risk Factors" of the annual report on Form 10-K.

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, 2013 and 2014

(In thousands, except per share amounts, unaudited)

 










2013


2014


% Change








Net operating revenues


$   756,673


$   772,762


2.1%








Costs and expenses:







Cost of services


625,730


642,881


2.7%

General and administrative


17,927


19,377


8.1%

Bad debt expense


8,846


11,115


25.7%

Depreciation and amortization


15,907


17,196


8.1%








Income from operations


88,263


82,193


(6.9)%








Loss on early retirement of debt


(17,280)


-


N/M

Equity in earnings of unconsolidated subsidiaries


568


1,239


118.1%

Interest expense


(21,904)


(21,663)


(1.1)%








Income before income taxes


49,647


61,769


24.4%








Income tax expense


19,769


23,775


20.3%








Net income


29,878


37,994


27.2%








Less:  Net income attributable to non-

     controlling interests


2,098


2,653


26.5%








Net income attributable to Select Medical

      Holdings Corporation


$   27,780


$   35,341


27.2%








Income per common share:







     Basic


$0.20


$0.27



     Diluted


$0.20


$0.27










Weighted average shares outstanding:







     Basic


136,609


127,038



     Diluted


136,743


127,541










N/M = Not Meaningful

 







 

 


 

II.   Condensed Consolidated Statements of Operations

For the Six Months Ended June 30, 2013 and 2014

(In thousands, except per share amounts, unaudited)

 










2013


2014


% Change








Net operating revenues


$   1,506,628


$   1,535,340


1.9%








Costs and expenses:







Cost of services


1,250,634


1,281,645


2.5%

General and administrative


35,325


37,500


6.2%

Bad debt expense


18,167


22,133


21.8%

Depreciation and amortization


31,709


33,425


5.4%








Income from operations


170,793


160,637


(5.9)%








Loss on early retirement of debt


(18,747)


(2,277)


N/M

Equity in earnings of unconsolidated subsidiaries


1,626


2,147


32.0%

Interest expense


(45,362)


(42,279)


(6.8)%








Income before income taxes


108,310


118,228


9.2%








Income tax expense


41,630


45,867


10.2%








Net income


66,680


72,361


8.5%








Less:  Net income attributable to non-

     controlling interests


4,482


3,976


(11.3)%








Net income attributable to Select Medical

      Holdings Corporation


$   62,198


$   68,385


9.9%








Income per common share:







     Basic


$0.44


$0.51



     Diluted


$0.44


$0.51










Weighted average shares outstanding:







     Basic


136,997


131,266



     Diluted


137,165


131,766










N/M = Not Meaningful

 







 

 

 


 

III.  Condensed Consolidated Balance Sheets

(In thousands, unaudited)



December 31,
2013


June 30,
2014

Assets










Cash


$         4,319


$         3,140






Accounts receivable, net


391,319


453,184






Current deferred tax asset


17,624


16,042






Other current assets


41,140


44,759






Total Current Assets


454,402


517,125






Property and equipment, net


509,102


526,349






Goodwill


1,642,633


1,642,869






Other identifiable intangibles


71,907


72,023






Other assets


139,578


145,405






Total Assets


$  2,817,622


$  2,903,771






Liabilities and Equity










Payables and accruals


$     353,959


$     341,083






Current portion of long-term debt


17,565


14,778






Total Current Liabilities


371,524


355,861






Long-term debt, net of current portion


1,427,710


1,598,754






Non-current deferred tax liability


96,287


95,981






Other non-current liabilities


91,875


96,335






Total Liabilities


1,987,396


2,146,931






Redeemable non-controlling interests


11,584


11,238






Total equity


818,642


745,602






Total Liabilities and Equity


$  2,817,622


$  2,903,771
















 


 

IV.  Consolidated Statement of Cash Flows


For the Three Months Ended June 30, 2013 and 2014

(In thousands, unaudited)




2013


2014

Operating Activities





Net Income


$      29,878


$      37,994

Adjustments to reconcile net income to net cash provided by operating
activities:





     Depreciation and amortization


15,907


17,196

     Provision for bad debts


8,846


11,115

Equity in earnings of unconsolidated subsidiaries


(568)


(1,239)

     Loss from disposal or sale of assets


40


22

Loss on early retirement of debt


17,280


-

     Non-cash stock compensation expense


1,788


1,965

     Amortization of debt discount, premium and issuance costs


2,284


1,798

     Deferred income taxes


3,190


1,218

     Changes in operating assets and liabilities, net of effects from
     acquisition of businesses:





Accounts receivable


(5,869)


3,188

Other current assets


513


209

Other assets


796


476

Accounts payable


(6,795)


5,611

Due to third-party payors


3,320


790

Accrued expenses


(7,503)


(2,073)

Income taxes


(29,110)


(20,101)

Net cash provided by operating activities


33,997


58,169






Investing activities





Purchases of property and equipment


(13,963)


(23,194)

Investment in businesses, net of distributions


(18,739)


(51)

Acquistion of businesses, net of cash acquired


(171)


(79)

Net cash used in investing activities


(32,873)


(23,324)






Financing activities





Borrowings on revolving credit facility


265,000


230,000

Payments on revolving credit facility


(250,000)


(225,000)

Payments on credit facility term loans


(589,052)


-

Issuance of 6.375% senior notes


600,000


-

Borrowings of other debt


1,083


-

Principal payments on other debt


(2,382)


(3,982)

Proceeds from (repayment of) bank overdrafts


7,254


(9,284)

Debt issuance costs


(14,374)


-

Dividends paid to common stockholders


(13,963)


(13,097)

Repurchase of common stock


-


(18,000)

Proceeds from issuance of common stock


-


3,354

Distributions to non-controlling interests


(422)


(388)

Net cash provided by (used in) financing activities


3,144


(36,397)






Net increase (decrease) in cash and cash equivalents


4,268


(1,552)






Cash and cash equivalents at beginning of period


4,500


4,692

Cash and cash equivalents at end of period


$       8,768


$       3,140






Supplemental Cash Flow Information





     Cash paid for interest


$     26,709


$     24,700

     Cash paid for taxes


$     45,692


$     42,659







 

 


 


V.  Consolidated Statement of Cash Flows


For the Six Months Ended June 30, 2013 and 2014

(In thousands, unaudited)




2013


2014

Operating Activities





Net Income


$      66,680


$      72,361

Adjustments to reconcile net income to net cash provided by operating
activities:





     Depreciation and amortization


31,709


33,425

     Provision for bad debts


18,167


22,133

Equity in earnings of unconsolidated subsidiaries


(1,626)


(2,147)

     Loss from disposal or sale of assets


81


143

     Loss on early retirement of debt


18,747


2,277

     Non-cash stock compensation expense


3,537


4,120

     Amortization of debt discount, premium, and issuance costs


4,588


3,849

     Deferred income taxes


3,192


1,275

     Changes in operating assets and liabilities, net of effects from
     acquisition of businesses:





Accounts receivable


(83,832)


(84,249)

Other current assets


(5,894)


(2,935)

Other assets


144


(3,462)

Accounts payable


(2,665)


10,343

Due to third-party payors


5,217


1,944

Accrued expenses


(28,203)


(16,030)

Income taxes


(7,819)


(878)

Net cash provided by operating activities


22,023


42,169






Investing activities





Purchases of property and equipment


(27,962)


(50,493)

Investment in businesses, net of distributions


(28,716)


(175)

Acquisition of businesses, net of cash acquired


(171)


(454)

Net cash used in investing activities


(56,849)


(51,122)






Financing activities





Borrowings on revolving credit facility


455,000


515,000

Payments on revolving credit facility


(480,000)


(425,000)

Borrowings on credit facility term loans, net of discount


298,500


-

Payments on credit facility term loans


(592,615)


(33,994)

Issuance of 6.375% senior notes, includes premium


600,000


111,650

Repurchase of senior floating rate notes


(167,300)


-

Repurchase of 7 5/8% senior subordinated notes


(70,000)


-

Borrowings of other debt


6,909


6,111

Principal payments on other debt


(4,673)


(7,049)

Proceeds from (repayments of) bank overdrafts


1,625


(3,314)

Debt issuance costs


(18,583)


(4,434)

Dividends paid to common stockholders


(13,963)


(27,153)

Repurchase of common stock


(9,983)


(127,500)

Proceeds from issuance of common stock


-


5,297

Distributions to non-controlling interests


(1,467)


(1,840)

Net cash provided by financing activities


3,450


7,774






Net decrease in cash and cash equivalents


(31,376)


(1,179)






Cash and cash equivalents at beginning of period


40,144


4,319

Cash and cash equivalents at end of period


$       8,768


$        3,140






Supplemental Cash Flow Information





     Cash paid for interest


$     53,914


$     39,107

     Cash paid for taxes


$     46,832


$     45,471







 

VI.  Key Statistics

For the Three Months Ended June 30, 2013 and 2014




 (unaudited)






2013


2014


% Change

Specialty Hospitals







Number of hospitals – end of period:







Long term acute care hospitals (a)


109


112



Rehabilitation hospitals (a)


14


15



Total specialty hospitals


123


127










Net operating revenues (,000)


$  559,386


$  557,833


(0.3)%








Number of patient days (b)


341,655


330,378


(3.3)%








Number of admissions (b)


14,106


13,796


(2.2)%








Net revenue per patient day (b)(c)


$      1,532


$      1,562


2.0%








Adjusted EBITDA (,000)


$    96,393


$    88,688


(8.0)%








Adjusted EBITDA margin


17.2%


15.9%










Outpatient Rehabilitation







Number of clinics – end of period


988


1,019










Net operating revenues (,000)


$  197,080


$  214,798


9.0%








Number of visits (d)


1,217,598


1,289,782


5.9%








Revenue per visit (d)(e)


$         103


$         103


0.0%








Adjusted EBITDA (,000)


$    26,054


$    30,432


16.8%








Adjusted EBITDA margin


13.2%


14.2%











(a)     Includes managed hospitals.

(b)     Excludes managed hospitals.

(c)     Net revenue per patient day is calculated by dividing specialty hospital direct patient service revenue by the
          total number of patient days.

(d)     Excludes managed clinics.

(e)     Net revenue per visit is calculated by dividing outpatient rehabilitation clinic direct patient service revenue by
          the total number of visits.  For purposes of this computation, outpatient rehabilitation clinic direct patient 
          service revenue does not include managed clinics or contract services revenue.









 


 


VII.  Key Statistics

For the Six Months Ended June 30, 2013 and 2014




 (unaudited)






2013


2014


% Change

Specialty Hospitals







Number of hospitals – end of period:







Long term acute care hospitals (a)


109


112



Rehabilitation hospitals (a)


14


15



Total specialty hospitals


123


127










Net operating revenues (,000)


$ 1,117,137


$  1,122,458


0.5%








Number of patient days (b)


681,037


671,929


(1.3)%








Number of admissions (b)


27,962


27,737


(0.8)%








Net revenue per patient day (b)(c)


$        1,538


$        1,550


0.8%








Adjusted EBITDA (,000)


$    189,740


$    180,838


(4.7)%








Adjusted EBITDA margin


17.0%


16.1%










Outpatient Rehabilitation







Number of clinics – end of period


988


1,019










Net operating revenues (,000)


$    389,181


$   412,648


6.0%








Number of visits (d)


2,380,221


2,464,572


3.5%








Revenue per visit (d)(e)


$           104


$          104


0.0%








Adjusted EBITDA (,000)


$      48,887


$     51,421


5.2%








Adjusted EBITDA margin


12.6%


12.5%











(a)     Includes managed hospitals.

(b)     Excludes managed hospitals.

(c)     Net revenue per patient day is calculated by dividing specialty hospital direct patient service revenue by the
          total number of patient days.

(d)     Excludes managed clinics.

(e)     Net revenue per visit is calculated by dividing outpatient rehabilitation clinic direct patient service revenue by
          the total number of visits.  For purposes of this computation, outpatient rehabilitation clinic direct patient
          service revenue does not include managed clinics or contract services revenue.









 

VIII.  Net Income to Adjusted EBITDA Reconciliation
For the Three and Six Months Ended June 30, 2013 and 2014
(In thousands, unaudited)

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 net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, equity in earnings (losses) of unconsolidated subsidiaries and other income (expense).  The Company believes that 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 by management to evaluate financial performance and determine resource allocation for each of its operating units.

Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles.  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, 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 generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. 

 




Three Months Ended June 30,


Six Months Ended June 30,



2013


2014


2013


2014

Net income


$      29,878


$     37,994


$     66,680


$     72,361

Income tax expense


19,769


23,775


41,630


45,867

Loss on early retirement of debt


17,280


-


18,747


2,277

Interest expense


21,904


21,663


45,362


42,279

Equity in earnings of unconsolidated 
   subsidiaries


(568)


(1,239)


(1,626)


(2,147)

Stock compensation expense:









   Included in general and administrative


1,231


1,480


2,427


3,190

   Included in cost of services


557


485


1,110


930

Depreciation and amortization


15,907


17,196


31,709


33,425

Adjusted EBITDA


$    105,958


$   101,354


$   206,039


$   198,182










Specialty hospitals


$      96,393


$     88,688


$   189,740


$   180,838

Outpatient rehabilitation


26,054


30,432


48,887


51,421

Other (a)


(16,489)


(17,766)


(32,588)


(34,077)

Adjusted EBITDA


$     105,958


$   101,354


$   206,039


$   198,182










(a)     Other primarily includes general and administrative costs.


 

 

 

IX.   Reconciliation of Income Per Common Share to Adjusted Income Per Common Share

For the Three Months Ended June 30, 2013 and 2014



(In thousands, except per share amounts, unaudited)
















2013

Per Share (a)


2014

Per Share (a)

Net income attributable to Select Medical Holdings Corporation

$   27,780

$     0.20


$   35,341

$     0.28

Earnings allocated to unvested restricted stockholders

(593)

(0.00)


(919)

(0.01)

Net income available to common stockholders

27,187

0.20


34,422

0.27







Adjustment for early retirement of debt:






Loss on early retirement of debt

17,280

0.12


-

-

Estimated income tax benefit (b)

(6,762)

(0.05)


-

-

Earnings allocated to unvested restricted stockholders

(225)

(0.00)


-

-







Adjusted net income available to common stockholders

$   37,480

$     0.27


$   34,422

$     0.27

Adjustment for dilution


(0.00)



(0.00)

Adjusted income per common share - diluted shares


$     0.27



$     0.27







Weighted average common shares outstanding:






Basic


136,609



127,038

Diluted


136,743



127,541







(a) Per share amounts for each period presented are basic weighted average common shares outstanding for all amounts except adjusted 
      income per common share - diluted shares, which is based on diluted shares outstanding.

(b) Represents the estimated tax benefit on the adjustments to net income.

 


 

X.   Reconciliation of Income Per Common Share to Adjusted Income Per Common Share

For the Six Months Ended June 30, 2013 and 2014



(In thousands, except per share amounts, unaudited)
















2013

Per Share (a)


2014

Per Share (a)

Net income attributable to Select Medical Holdings Corporation

$   62,198

$     0.45


$   68,385

$     0.52

Earnings allocated to unvested restricted stockholders

(1,304)

(0.01)


(1,683)

(0.01)

Net income available to common stockholders

60,894

0.44


66,702

0.51







Adjustment for early retirement of debt:






Loss on early retirement of debt

18,747

0.14


2,277

0.02

Estimated income tax benefit (b)

(7,341)

(0.05)


(922)

(0.01)

Earnings allocated to unvested restricted stockholders

(239)

(0.00)


(33)

(0.00)







Adjusted net income available to common stockholders

$   72,061

$     0.53


$   68,024

$     0.52

Adjustment for dilution


(0.00)



(0.00)

Adjusted income per common share - diluted shares


$     0.53



$     0.52







Weighted average common shares outstanding:






Basic


136,997



131,266

Diluted


137,165



131,766







(a) Per share amounts for each period presented are basic weighted average common shares outstanding for all amounts except adjusted 
      income per common share - diluted shares, which is based on diluted shares outstanding.

(b) Represents the estimated tax benefit on the adjustments to net income.

 

 

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