Select Medical Holdings Corporation Announces Results for Fourth Quarter and Year Ended December 31, 2011

MECHANICSBURG, Pa., Feb. 23, 2012 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical") (NYSE: SEM) today announced results for its fourth quarter and year ended December 31, 2011.

For the fourth quarter ended December 31, 2011, net operating revenues increased 12.7% to $718.4 million compared to $637.4 million for the same quarter, prior year.  Income from operations increased 51.1% to $74.0 million compared to $49.0 million for the same quarter, prior year.  Net income attributable to Select Medical increased 76.0% to $36.9 million compared to $20.9 million for the same quarter, prior year.  Net income before interest, income taxes, depreciation and amortization, stock compensation expense, other income, loss on early retirement of debt and equity in earnings (losses) of unconsolidated subsidiaries ("Adjusted EBITDA") for the fourth quarter increased 39.6% to $93.8 million compared to $67.2 million for the same quarter, prior year.  A reconciliation of net income to Adjusted EBITDA is contained in table VII of this release.  Income per common share for the fourth quarter ended December 31, 2011 was $0.25 on a fully diluted basis compared to income per common share of $0.13 for the quarter ended December 31, 2010.

For the year ended December 31, 2011, net operating revenues increased 17.3% to $2,804.5 million compared to $2,390.3 million for the prior year.  Income from operations increased 31.6% to $310.7 million compared to $236.1 million for the prior year.  Net income attributable to Select Medical increased 38.9% to $107.8 million compared to $77.6 million for the prior year. Net income attributable to Select Medical for the year ended December 31, 2011 includes a loss on early retirement of debt, net of tax, of $19.6 million associated with the June 1, 2011 refinancing of a portion of its indebtedness. Additionally, Adjusted EBITDA for the year ended December 31, 2011 increased 25.7% to $386.0 million compared to $307.1 million for the prior year.  A reconciliation of net income to Adjusted EBITDA is contained in table VII of this release.  Income per common share for the year ended December 31, 2011 was $0.71 on a fully diluted basis compared to fully diluted income per common share of $0.48 for the year ended December 31, 2010.  Excluding the loss related to the early retirement of debt and its tax effect, net income available to common stockholders on an adjusted basis ("Adjusted Net Income Per Share") was $0.84 per diluted share for the year ended December 31, 2011.  A reconciliation of net income per share to Adjusted Net Income Per Share is contained in table VIII of this release.

Specialty Hospitals

Certain specialty hospital key statistics are contained on tables V and VI of this release.  For the fourth quarter of 2011, net operating revenues for the specialty hospital segment increased 14.3% to $534.2 million compared to $467.6 million for the same quarter, prior year.  The hospitals acquired in the Regency acquisition on September 1, 2010 contributed $84.5 million of net operating revenue, or $13.5 million of this increase.  Adjusted EBITDA for the specialty hospital segment increased 27.6% to $89.3 million compared to $70.0 million for the same quarter, prior year.  The hospitals acquired in the Regency acquisition contributed $10.0 million of this increase.  The Adjusted EBITDA margin for the segment was 16.7% for the fourth quarter of 2011, compared to 15.0% for the same quarter, prior year.  Excluding the effect of the Regency hospitals, the Adjusted EBITDA margin would have been 17.3% for the fourth quarter of 2011, compared to 17.3% for the same quarter, prior year.

For the year ended December 31, 2011, net operating revenues for the specialty hospital segment increased 23.1% to $2,095.5 million compared to $1,702.2 million for the prior year.  The hospitals acquired in the Regency acquisition contributed $339.6 million of net operating revenue, or $245.7 million of this increase.  Adjusted EBITDA for the segment for the year ended December 31, 2011 increased 27.3% to $362.3 million compared to $284.6 million for the prior year.  The hospitals acquired in the Regency acquisition contributed $45.9 million of this increase.  The Adjusted EBITDA margin for the segment for the year ended December 31, 2011 was 17.3%, compared to 16.7% for the prior year.  Excluding the effect of the Regency hospitals, the Adjusted EBITDA margin would have been 18.0% for the year ended December 31, 2011, compared to 17.7% for the prior year.

Outpatient Rehabilitation

Certain outpatient rehabilitation key statistics are contained in tables V and VI of this release.  For the fourth quarter of 2011, net operating revenues for the outpatient rehabilitation segment increased 8.5% to $184.2 million compared to $169.7 million for the same quarter, prior year.  Adjusted EBITDA for the segment for the fourth quarter increased 9.4% to $18.6 million compared to $17.0 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 10.1% for the fourth quarter of 2011, compared to 10.0% for the same quarter, prior year.

For the year ended December 31, 2011, net operating revenues for the outpatient rehabilitation segment increased 3.0% to $708.9 million compared to $688.0 million for the prior year. Adjusted EBITDA for the year ended December 31, 2011 increased to $83.9 million compared to $83.8 million for the prior year.  The Adjusted EBITDA margin for the year ended December 31, 2011 was 11.8% compared to 12.2% in the 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 5,209,160 shares at a cost of $41.1 million and 9,858,907 shares at a cost of $72.7 million, which includes transaction costs, during the quarter and year ended December 31, 2011, respectively.  Since the inception of the program through December 31, 2011, Select Medical has repurchased 16,764,607 shares at a cost of $116.9 million, which includes transaction costs.

Business Outlook

Select Medical reaffirms the guidance it 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 net income before interest, income taxes, depreciation and amortization, stock compensation expense, other income/(expense), and equity in income/(losses) of unconsolidated subsidiaries, or 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 fourth quarter and full year results and its business outlook on Friday, February 24, 2012, at 9:00am EST. The domestic dial in number for the call is 1-866-713-8310. The international dial in number is 1-617-597-5308. The passcode for the call is 27265578. The conference call will be webcast simultaneously and can be accessed at Select Medical Holdings Corporation's website http://www.selectmedicalholdings.com/investor-relations/.

For those unable to participate in the conference call, a replay will be available until 11:59pm EST, March 2, 2012. The replay number is 1-888-286-8010 (domestic) or 1-617-801-6888 (international). The passcode for the replay will be 68742251. The replay can also be accessed at Select Medical Holdings Corporation's website, http://www.selectmedicalholdings.com/investor-relations/.

Select Medical is a leading operator of specialty hospitals and outpatient rehabilitation clinics in the United States. As of December 31, 2011, Select Medical operated 110 long term acute care hospitals and nine acute medical rehabilitation hospitals in 28 states and 954 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
[email protected]

The following table reconciles net income to Adjusted EBITDA for Select Medical.  Adjusted EBITDA is used by Select Medical to report its segment of performance.  Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, stock compensation expense, other income, loss on early retirement of debt and equity in earnings (losses) of unconsolidated subsidiaries.  The Company believes that the presentation of Adjusted EBITDA is important to investors because 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 calculation, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

SOURCE Select Medical Holdings Corporation