2014

Select Medical Holdings Corporation Announces Results for First Quarter Ended March 31, 2012

MECHANICSBURG, Pa., May 3, 2012 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical") (NYSE: SEM) today announced results for its first quarter ended March 31, 2012.

For the first quarter ended March 31, 2012, net operating revenues increased 7.3% to $744.0 million compared to $693.2 million for the same quarter, prior year.  Income from operations increased 4.5% to $91.6 million compared to $87.6 million for the same quarter, prior year.  Net income attributable to Select Medical increased 23.4% to $41.5 million compared to $33.7 million for the same quarter, prior year.  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 first quarter increased 3.1% to $109.1 million compared to $105.7 million for the same quarter, prior year.  A reconciliation of net income to Adjusted EBITDA is presented in table V of this release.  Income per common share for the first quarter ended March 31, 2012 was $0.29 on a fully diluted basis compared to income per common share of $0.22 for the quarter ended March 31, 2011.

Specialty Hospitals

Certain specialty hospital key statistics are presented in table IV of this release.  For the first quarter of 2012, net operating revenues for the specialty hospital segment increased 6.4% to $553.0 million compared to $519.9 million for the same quarter, prior year.  Adjusted EBITDA for the specialty hospital segment decreased 0.4% to $100.0 million compared to $100.4 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 18.1% for the first quarter of 2012, compared to 19.3% for the same quarter, prior year.

Outpatient Rehabilitation

Certain outpatient rehabilitation key statistics are presented in table IV of this release.  For the first quarter of 2012, net operating revenues for the outpatient rehabilitation segment increased 10.2% to $190.9 million compared to $173.2 million for the same quarter, prior year.  Adjusted EBITDA for the segment for the first quarter increased 5.0% to $22.5 million compared to $21.4 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 11.8% for the first quarter of 2012, compared to 12.4% for the same quarter, prior year.

Stock Repurchase Program

On February 22, 2012, the board of directors of Select Medical authorized an increase of $100.0 million in the capacity of its common stock repurchase program from $150.0 million to $250.0 million.  The program will remain in effect until March 31, 2013, unless 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.  The timing of purchases of stock will be based upon market conditions and other factors.  Select Medical is funding this program with cash on hand or borrowings under its revolving credit facility.  Select Medical repurchased 3,203,692 shares at a cost of $25.7 million, which includes transaction costs, during the quarter ended March 31, 2012.  Since the inception of the program through March 31, 2012, Select Medical has repurchased 19,968,299 shares at a cost of $142.6 million, which includes transaction costs.

Business Outlook

Select Medical reaffirms the financial guidance provided in its January 6, 2012 press release.  Select Medical expects consolidated revenue for full year 2012 to be in the range of $2.85 billion to $2.95 billion.  Select Medical expects Adjusted EBITDA for full year 2012 to be in the range of $390 million to $410 million.  Select Medical expects fully diluted income per common share for full year 2012 to be in the range of $0.86 to $0.94.

Conference Call

Select Medical will host a conference call regarding its first quarter results and its business outlook on Friday, May, 4, 2012, at 9:00am EDT. The domestic dial-in number for the call is 1-866-578-5788. The international dial-in number is 1-617-213-8057. The passcode for the call is 68707993. The conference call will be webcast simultaneously and can be accessed at Select Medical Holdings Corporation's website, http://www.selectmedicalholdings.com.

For those unable to participate in the conference call, a replay will be available until 11:59pm EDT, May 11, 2012. The replay number is 1-888-286-8010 (domestic) or 1-617-801-6888 (international). The passcode for the replay will be 75172895. The replay can also be accessed at Select Medical Holdings Corporation's website, http://www.selectmedicalholdings.com.

Select Medical is a leading operator of specialty hospitals and outpatient rehabilitation clinics in the United States. As of March 31, 2012, Select Medical operated 111 long term acute care hospitals and 12 acute medical rehabilitation hospitals in 28 states and 950 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:

  • additional changes in government reimbursement for our services, including changes that will result from the expiration of the moratorium for long term acute care hospitals established by the Medicare, Medicaid, and SCHIP Extension Act of 2007, the American Recovery and Reinvestment Act, and the Patient Protection and Affordable Care Act may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability;
  • 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 under the heading "Risk Factors" in our annual report on Form 10-K.

Investor inquiries:
Joel T. Veit
Vice President and Treasurer
717-972-1100
ir@selectmedicalcorp.com

 

I.   Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2011 and 2012

(In thousands, except per share amounts, unaudited)

 










2011


2012


% Change








Net operating revenues


$   693,186


$   744,021


7.3%








Costs and expenses:







Cost of services


557,416


611,619


9.7%

General and administrative


16,566


14,224


(14.1)%

Bad debt expense


14,350


10,375


(27.7)%

Depreciation and amortization


17,222


16,199


(5.9)%








Income from operations


87,632


91,604


4.5%








Equity in earnings (losses) of unconsolidated subsidiaries


(73)


2,465


N/M

Interest income


56


-


N/M

Interest expense


(25,664)


(23,922)


(6.8)%








Income before income taxes


61,951


70,147


13.2%








Income tax expense


26,564


27,575


3.8%








Net income


35,387


42,572


20.3%








Less:  Net income attributable to non-

     controlling interests


1,715


1,030


(39.9)%








Net income attributable to Select Medical

      Holdings Corporation


$   33,672


$   41,542


23.4%








Income per common share:







     Basic


$0.22


$0.29



     Diluted


$0.22


$0.29










Weighted average shares outstanding:







     Basic


152,838


141,426



     Diluted


153,056


141,640










N/M = Not Meaningful

 








 

II.  Condensed Consolidated Balance Sheets

(In thousands, unaudited)

 



December 31,
2011


March 31,
2012

Assets










Cash


$         12,043


$         9,274






Accounts receivable, net


413,743


465,687






Current deferred tax asset


18,305


19,894






Prepaid income taxes


9,497


-






Other current assets


29,822


34,178






Total Current Assets


483,410


529,033






Property and equipment, net


510,028


491,773






Goodwill


1,631,716


1,631,383






Other identifiable intangibles


72,123


71,868






Assets held for sale


2,742


2,742






Other assets


72,128


79,779






Total Assets


$  2,772,147


$  2,806,578






Liabilities and equity










Payables and accruals


$     373,090


$     366,518






Current portion of long-term debt


10,848


14,451






Total Current Liabilities


383,938


380,969






Long-term debt, net of current portion


1,385,950


1,399,039






Non-current deferred tax liability


82,028


85,029






Other non-current liabilities


64,905


69,459






Total equity


855,326


872,082






Total Liabilities and Equity


$  2,772,147


$  2,806,578
















 

III.  Condensed Consolidated Statement of Cash Flows


For the Three Months Ended March 31, 2011 and 2012

(In thousands, unaudited)










2011


2012

Operating Activities





Net Income


$        35,387


$        42,572

Adjustments to reconcile net income to net cash provided by (used in)
operating activities:





     Depreciation and amortization


17,222


16,199

     Provision for bad debts


14,350


10,375

     Loss (gain) from disposal or sale of assets


188


(3,550)

     Non-cash stock compensation expense


880


1,261

     Amortization of debt discount


507


311

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





          Accounts receivable


(100,135)


(62,319)

          Other current assets


(3,076)


(4,419)

          Other assets


2,052


2,028

          Accounts payable


11,777


(1,560)

          Due to third-party payors


(474)


485

          Accrued expenses


(9,948)


(20,585)

          Income and deferred taxes


26,238


27,382

Net cash provided by (used in) operating activities


(5,032)


8,180






Investing activities





Purchases of property and equipment


(12,920)


(11,751)

Proceeds from sale of assets


250


16,511

Investment in business


-


(7,840)

Acquisition of businesses, net of cash acquired


(2,000)


-

Net cash used in investing activities


(14,670)


(3,080)






Financing activities





Borrowings on revolving credit facilities


205,000


230,000

Payments on revolving credit facilities


(105,000)


(215,000)

Payments on 2011 credit facility term loans


-


(2,125)

Payments on 2005 credit facility term loans


(59,563)


-

Borrowings of other debt


5,496


5,835

Principal payments on other debt


(2,494)


(2,328)

Repurchase of common stock


(2,026)


(25,739)

Proceeds from issuance of common stock


81


95

Proceeds from (repayment of) bank overdrafts


(9,418)


2,491

Distribution to non-controlling interests


(1,671)


(1,098)

Net cash provided by (used in) financing activities


30,405


(7,869)






Net increase (decrease) in cash and cash equivalents


10,703


(2,769)






Cash and cash equivalents at beginning of period


4,365


12,043

Cash and cash equivalents at end of period


$         15,068


$         9,274






Supplemental Cash Flow Information





     Cash paid for interest


$        41,365


$        31,285

     Cash paid for taxes


$             103


$             204











 

IV.  Key Statistics

For the Three Months Ended March 31, 2011 and 2012

 (unaudited)




2011


2012


% Change

Specialty Hospitals






Number of hospitals – end of period:






Long term acute care hospitals (a)        

110


111



Rehabilitation hospitals (a)

8


12



Total specialty hospitals

118


123









Net operating revenues (,000)

$519,924


$553,038


6.4%







Number of patient days (b)

333,856


343,021


2.7%







Number of admissions (b)

13,810


14,055


1.8%







Net revenue per patient day (b)(c)

$      1,514


$    1,525


0.7%







Adjusted EBITDA (,000)

$  100,353


$  99,954


(0.4)%







Adjusted EBITDA margin

19.3%


18.1%









Outpatient Rehabilitation






Number of clinics – end of period

945


950









Net operating revenues (,000)

$173,191


$190,899


10.2%







Number of visits (d)

1,138,700


1,152,209


1.2%







Revenue per visit (e)

$103


$103


0.0%







Adjusted EBITDA (,000)

$  21,406


$  22,478


5.0%







Adjusted EBITDA margin

12.4%


11.8%











(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 revenue by the total number of visits.  For purposes of this computation, 
              outpatient rehabilitation clinic revenue does not include managed clinics or contract services revenue.



 

V. Net Income to Adjusted EBITDA Reconciliation
For the Three Months Ended March 31, 2011 and 2012
(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
March 31,



2011


2012

Net income


$  35,387


$  42,572

Income tax expense


26,564


27,575

Interest expense, net of interest income


25,608


23,922

Equity in (earnings) losses of unconsolidated subsidiaries


73


(2,465)

Stock compensation expense:





   Included in general and administrative


470


772

 Included in cost of services


410


489

Depreciation and amortization


17,222


16,199

Adjusted EBITDA


$  105,734


$  109,064






Specialty hospitals


$  100,353


$    99,954

Outpatient rehabilitation


21,406


22,478

Other (1)


(16,025)


(13,368)

Adjusted EBITDA


$  105,734


$  109,064











(1)  Other consists primarily of general and administrative costs.

 

SOURCE Select Medical Holdings Corporation



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