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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
current
report
Pursuant to Section 13
or 15(d) of the
Securities Exchange
Act of 1934
Date of Report (Date
of earliest event reported): February 20, 2025
SELECT
MEDICAL HOLDINGS CORPORATION
(Exact name of registrant
as specified in its charter)
| Delaware | |
001-34465 | |
20-1764048 |
(State or other jurisdiction of
Incorporation) | |
(Commission File
Number) | |
(I.R.S. Employer
Identification No.) |
4714 Gettysburg Road, P.O. Box 2034
Mechanicsburg, PA 17055
(Address of principal executive offices) (Zip Code)
(717) 972-1100
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section
12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
| Common Stock, par value $0.001 per share |
SEM |
New York Stock Exchange (NYSE) |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether either registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if either registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02 | Results of Operations and Financial Condition. |
On
February 20, 2025, Select Medical Holdings Corporation (the “Company”) issued a press release announcing its financial
results for its fourth quarter and fiscal year ended December 31, 2024 (the “Press Release”). A copy of the Press Release
and the attached financial schedules are attached as Exhibit 99.1 to this report and incorporated herein by reference.
The information in this report
(including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities
of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the
“Securities Act”), or the Exchange Act.
Dividend Declaration
On February 13, 2025, the
Company’s board of directors declared a cash dividend of $0.0625 per share. The dividend will be payable on or about March 13, 2025
to stockholders of record as of the close of business on March 3, 2025.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
| |
SELECT MEDICAL HOLDINGS CORPORATION |
| |
|
|
| Date: February 20, 2025 |
By: |
/s/ Michael E. Tarvin |
| |
|
Michael E. Tarvin |
| |
|
Senior Executive Vice President, General Counsel and Secretary |
Exhibit 99.1
| FOR IMMEDIATE RELEASE |
4714 Gettysburg Road
Mechanicsburg, PA 17055
NYSE Symbol: SEM |
Select Medical Holdings Corporation Announces
Results
For Its Fourth Quarter and Year Ended December 31,
2024, Its 2025 Business Outlook, and Cash Dividend
MECHANICSBURG, PENNSYLVANIA
— February 20, 2025 — Select Medical Holdings Corporation (“Select Medical,” “we,” “us,”
or “our”) (NYSE: SEM) today announced results for its fourth quarter and year ended December 31, 2024, its 2025 business
outlook, and the declaration of a cash dividend.
On November 25, 2024, we
completed a tax-free distribution of 104,093,503 shares of common stock of Concentra Group Holdings Parent, Inc. (“Concentra”)
to our stockholders. Holders of our common stock received 0.806971 shares of Concentra common stock for each outstanding share of our
common stock owned as of November 18, 2024. Following the completion of the distribution, we no longer own any shares of Concentra’s
common stock. The results of Concentra, and related transaction costs, have been reflected as discontinued operations in the consolidated
statements of operations, and prior periods have been recast to reflect this presentation.
For the fourth quarter ended
December 31, 2024, revenue increased 7.8% to $1,312.6 million, compared to $1,218.1 million for the same quarter, prior year. Income
from continuing operations before other income and expense was $21.1 million for the fourth quarter ended December 31, 2024, compared
to $64.9 million for the same quarter, prior year. Loss from continuing operations, net of tax, was $10.5 million for the fourth quarter
ended December 31, 2024, compared to income from continuing operations, net of tax, of $30.3 million for the same quarter, prior year.
In connection with the distribution of Concentra, there was a one-time acceleration of $45.9 million of stock compensation expense, which
reduced income (loss) from continuing operations for the quarter ended December 31, 2024. Additionally, during the quarter ended December
31, 2024, we recognized a loss on early retirement of debt of $17.9 million as a result of the debt refinancing transactions described
below. Adjusted EBITDA increased 3.8% to $116.0 million for the fourth quarter ended December 31, 2024, compared to $111.8 million for
the same quarter, prior year. Diluted loss per common share from continuing operations was $0.19 for the fourth quarter ended December
31, 2024, compared to earnings per common share from continuing operations of $0.12 for the same quarter, prior year. Adjusted earnings
per common share from continuing operations, net of tax, which excludes the one-time acceleration of stock compensation expense, the
loss on early retirement of debt, and certain reclassified transaction costs associated with the Concentra transaction, increased 50.0%
to $0.18 for the fourth quarter ended December 31, 2024, compared to $0.12 for the same quarter, prior year. The definition of Adjusted
EBITDA and a reconciliation of income from continuing operations, net of tax, to Adjusted EBITDA are presented in table IX of this release.
A reconciliation of earnings per common share from continuing operations, net of tax, to adjusted earnings per common share from continuing
operations, net of tax, is presented in table X of this release.
For the year ended December 31,
2024, revenue increased 7.5% to $5,187.1 million, compared to $4,826.0 million for the prior year. Income from continuing operations
before other income and expense increased 0.4% to $268.3 million for the year ended December 31, 2024, compared to $267.2 million
for the prior year. Income from continuing operations, net of tax, increased 17.7% to $130.0 million for the year ended December 31,
2024, compared to $110.5 million for the prior year. In connection with the distribution of Concentra, there was a one-time acceleration
of $45.9 million of stock compensation expense, which reduced income from continuing operations for the year ended December 31, 2024.
Additionally, during the year ended December 31, 2024, we recognized a loss on early retirement of debt of $28.8 million. Adjusted EBITDA
increased 14.4% to $510.4 million for the year ended December 31, 2024, compared to $446.1 million for the prior year. Earnings
per common share from continuing operations, net of tax, increased 10.9% to $0.51 for the year ended December 31, 2024, compared
to $0.46 for the prior year. Adjusted earnings per common share from continuing operations, net of tax, which excludes the one-time acceleration
of stock compensation expense and the loss on early retirement of debt, increased 74.1% to $0.94 for the year ended December 31,
2024, compared to $0.54 for the prior year. The definition of Adjusted EBITDA and a reconciliation of income from continuing operations,
net of tax, to Adjusted EBITDA are presented in table IX of this release. A reconciliation of earnings per common share from continuing
operations, net of tax, to adjusted earnings per common share from continuing operations, net of tax, is presented in table X of this
release.
Company Overview
Select Medical is one of
the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics 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, and the outpatient rehabilitation segment. As of December 31, 2024, Select Medical operated
104 critical illness recovery hospitals in 29 states, 35 rehabilitation hospitals in 14 states, and 1,914 outpatient rehabilitation clinics
in 39 states and the District of Columbia. At December 31, 2024, Select Medical had operations in 40 states and the District of Columbia.
Information about Select Medical is available at www.selectmedical.com.
Critical Illness Recovery Hospital Segment
For the fourth quarter ended
December 31, 2024, revenue for the critical illness recovery hospital segment increased 5.9% to $600.4 million, compared to $567.1 million
for the same quarter, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 10.0% to $63.1 million
for the fourth quarter ended December 31, 2024, compared to $57.4 million for the same quarter, prior year. The Adjusted EBITDA margin
for the critical illness recovery hospital segment was 10.5% for the fourth quarter ended December 31, 2024, compared to 10.1% for the
same quarter, prior year. Certain critical illness recovery hospital key statistics are presented in table VII of this release for the
fourth quarters ended December 31, 2024 and 2023.
For the year ended December
31, 2024, revenue for the critical illness recovery hospital segment increased 6.3% to $2,444.2 million, compared to $2,299.8 million
for the prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 22.6% to $301.6 million for the year
ended December 31, 2024, compared to $246.0 million for the prior year. The Adjusted EBITDA margin for the critical illness recovery
hospital segment was 12.3% for the year ended December 31, 2024, compared to 10.7% for the prior year. Certain critical illness recovery
hospital key statistics are presented in table VIII of this release for the years ended December 31, 2024 and 2023.
Rehabilitation Hospital Segment
For the fourth quarter ended
December 31, 2024, revenue for the rehabilitation hospital segment increased 13.1% to $294.4 million, compared to $260.2 million for
the same quarter, prior year. Adjusted EBITDA for the rehabilitation hospital segment was $62.3 million for the fourth quarter ended
December 31, 2024, compared to $66.3 million for the same quarter, prior year. The Adjusted EBITDA margin for the rehabilitation hospital
segment was 21.2% for the fourth quarter ended December 31, 2024, compared to 25.5% for the same quarter, prior year. Certain rehabilitation
hospital key statistics are presented in table VII of this release for both the fourth quarters ended December 31, 2024 and 2023.
For the year ended December
31, 2024, revenue for the rehabilitation hospital segment increased 13.4% to $1,110.6 million, compared to $979.6 million for the prior
year. Adjusted EBITDA for the rehabilitation hospital segment increased 10.8% to $245.7 million for the year ended December 31, 2024,
compared to $221.9 million for the prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 22.1% for the year
ended December 31, 2024, compared to 22.6% for the prior year. Certain rehabilitation hospital key statistics are presented in table
VIII of this release for the years ended December 31, 2024 and 2023.
Outpatient Rehabilitation Segment
For the fourth quarter ended
December 31, 2024, revenue for the outpatient rehabilitation segment increased 7.2% to $319.6 million, compared to $298.2 million for
the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment increased 18.2% to $26.6 million for the fourth
quarter ended December 31, 2024, compared to $22.5 million for the same quarter, prior year. The Adjusted EBITDA margin for the outpatient
rehabilitation segment was 8.3% for the fourth quarter ended December 31, 2024, compared to 7.5% for the same quarter, prior year. Certain
outpatient rehabilitation key statistics are presented in table VII of this release for the fourth quarters ended December 31, 2024 and
2023.
For the year ended December
31, 2024, revenue for the outpatient rehabilitation segment increased 5.2% to $1,250.3 million, compared to $1,188.9 million for the
prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $108.6 million for the year ended December 31, 2024, compared
to $111.9 million for the prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 8.7% for the year ended
December 31, 2024, compared to 9.4% for the prior year. Certain outpatient rehabilitation key statistics are presented in table VIII
of this release for the years ended December 31, 2024 and 2023.
Dividend
On February 13, 2025,
Select Medical’s board of directors declared a cash dividend of $0.0625 per share. The dividend will be payable on or about March 13,
2025 to stockholders of record as of the close of business on March 3, 2025.
There is no assurance that
future dividends will be declared. The declaration and payment of dividends in the future are at the discretion of Select Medical’s
board of directors after taking into account various factors, including, but not limited to, Select Medical’s financial condition,
operating results, available cash and current and anticipated cash needs, the terms of Select Medical’s indebtedness, and other
factors Select Medical’s board of directors may deem to be relevant.
Stock Repurchase Program
The board of directors of
Select Medical has authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock.
The common stock repurchase program will remain in effect until December 31, 2025, 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 under its authorized stock repurchase program during the year ended December 31, 2024. Since the inception of the common
stock repurchase program through December 31, 2024, Select Medical has repurchased 48,234,823 shares at a cost of approximately
$600.3 million, or $12.45 per share, which includes transaction costs.
Financing Transactions
On December 3, 2024, we entered
into Amendment No. 11 to our credit agreement. Amendment No. 11 established a new incremental term loan in the aggregate amount of $1,050.0
million. The maturity date of the term loan is December 3, 2031. In addition, Amendment No. 11 extended the maturity date of the revolving
credit facility to December 3, 2029 and increased the revolving credit facility commitments from $550.0 million to $600.0 million.
The interest rate on the term loan is equal to Term SOFR plus 2.00%, or the Alternative Base Rate (as defined in the credit agreement)
plus 1.00%. The interest rate on the revolving facility is equal to Adjusted Term SOFR plus a percentage ranging from 2.25% to 2.50%,
or the Alternative Base Rate (as defined in the credit agreement) plus a percentage ranging from 1.25% to 1.50%, in each case subject
to a specified leverage ratio.
On December 3, 2024, Select
issued and sold $550.0 million aggregate principal amount of 6.250% senior notes due December 1, 2032. Select used the net proceeds of
the 6.250% senior notes due 2032, together with the proceeds from the incremental term loan borrowings (as described above) and cash
on hand, to redeem in full the $1,225.0 million senior notes due 2026, repay the existing term loans, and pay related fees and expenses
associated with the financing. Interest on the 2032 senior notes accrues at the rate of 6.250% per annum and is payable semi-annually
in arrears on June 1 and December 1 of each year, beginning on June 1, 2025.
Business Outlook
Select Medical is issuing
its business outlook for 2025. Select Medical expects revenue to be in the range of $5.4 billion to $5.6 billion, Adjusted EBITDA to
be in the range of $520.0 million to $540.0 million, and fully diluted earnings per share to be in the range of $1.09 to $1.19. A reconciliation
of full year 2025 Adjusted EBITDA expectations to income from continuing operations, net of tax, is presented in table XI of this release.
Conference Call
Select Medical will host
a conference call regarding its results for the fourth quarter and full year ended December 31, 2024, and its business outlook on
Friday, February 21, 2025, at 9:00am ET. The conference call will be a live webcast and can be accessed at Select Medical Holdings Corporation’s
website at www.selectmedicalholdings.com. A replay of the webcast will be available shortly after the call through the same link.
For listeners wishing to
dial-in via telephone, or participate in the question and answer session, you may pre-register for the call at Select Medical Earnings
Call Registration to obtain your dial-in number and unique passcode.
* * * * *
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), including statements related to Select Medical's 2025 long-term business outlook. 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 and/or new payment policies may result in a
reduction in revenue, an increase in costs, and a reduction in profitability; |
| · | adverse
economic conditions including an inflationary environment could cause us to continue to experience
increases in the prices of labor and other costs of doing business resulting in a negative
impact on our business, operating results, cash flows, and financial condition; |
| · | shortages
in qualified nurses, therapists, physicians, or other licensed providers, and/or the inability
to attract or retain qualified healthcare professionals could limit our ability to staff
our facilities; |
| · | shortages
in qualified health professionals could cause us to increase our dependence on contract labor,
increase our efforts to recruit and train new employees, and expand upon our initiatives
to retain existing staff, which could increase our operating costs significantly; |
| · | the
negative impact of public threats such as a global pandemic or widespread outbreak of an
infectious disease similar to the COVID-19 pandemic; |
| · | the
failure of our Medicare-certified long term care hospitals or inpatient rehabilitation facilities
to maintain their Medicare certifications may cause our revenue 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 revenue 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; |
| · | failure
to complete or achieve some or all the expected benefits of the potential separation of Concentra; |
| · | private
third-party payors for our services may adopt payment policies that could limit our future
revenue and profitability; |
| · | the
failure to maintain established relationships with the physicians in the areas we serve could
reduce our revenue and profitability; |
| · | competition
may limit our ability to grow and result in a decrease in our revenue 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 annual report on Form 10-K for the year ended December 31, 2024. |
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
SOURCE: Select Medical Holdings Corporation
I. Condensed Consolidated Statements of Operations
For the Three Months Ended December 31, 2023
and 2024
(In thousands, except per share amounts, unaudited)
| | |
2023 | | |
2024 | | |
% Change | |
| Revenue | |
$ | 1,218,116 | | |
$ | 1,312,564 | | |
| 7.8 | % |
| Costs and expenses: | |
| | | |
| | | |
| | |
| Cost of services, exclusive of depreciation and amortization | |
| 1,074,062 | | |
| 1,175,099 | | |
| 9.4 | |
| General and administrative | |
| 44,090 | | |
| 80,197 | | |
| 81.9 | |
| Depreciation and amortization | |
| 35,485 | | |
| 36,283 | | |
| 2.2 | |
| Total costs and expenses | |
| 1,153,637 | | |
| 1,291,579 | | |
| 12.0 | |
| Other operating income | |
| 458 | | |
| 106 | | |
| (76.9 | ) |
| Income from continuing operations before other income and expense | |
| 64,937 | | |
| 21,091 | | |
| (67.5 | ) |
| Other income and expense: | |
| | | |
| | | |
| | |
| Loss on early retirement of debt | |
| — | | |
| (17,906 | ) | |
| N/M | |
| Equity in earnings of unconsolidated subsidiaries | |
| 10,195 | | |
| 10,423 | | |
| 2.2 | |
| Interest expense | |
| (40,263 | ) | |
| (28,551 | ) | |
| (29.1 | ) |
| Income (loss) from continuing operations before income taxes | |
| 34,869 | | |
| (14,943 | ) | |
| N/M | |
| Income tax expense (benefit) from continuing operations | |
| 4,618 | | |
| (4,487 | ) | |
| N/M | |
| Income (loss) from continuing operations, net of tax | |
| 30,251 | | |
| (10,456 | ) | |
| N/M | |
| Discontinued operations: | |
| | | |
| | | |
| | |
| Income from discontinued business | |
| 38,779 | | |
| 24,669 | | |
| (36.4 | ) |
| Income tax expense from discontinued business | |
| 7,232 | | |
| 10,457 | | |
| 44.6 | |
| Income from discontinued operations, net of tax | |
| 31,547 | | |
| 14,212 | | |
| (54.9 | ) |
| Net income | |
| 61,798 | | |
| 3,756 | | |
| (93.9 | ) |
| Less: Net income attributable to non-controlling interests | |
| 15,529 | | |
| 19,806 | | |
| 27.5 | |
| Net income (loss) attributable to Select Medical | |
$ | 46,269 | | |
$ | (16,050 | ) | |
| N/M | |
| Net income (loss) attributable to Select Medical’s common
stockholders: | |
| | | |
| | | |
| | |
| Income (loss) from continuing operations, net of tax | |
$ | 15,743 | | |
$ | (23,664 | ) | |
| | |
| Income from discontinued operations, net
of tax | |
| 30,526 | | |
| 7,614 | | |
| | |
| Net income (loss) attributable to Select Medical’s common
stockholders | |
$ | 46,269 | | |
$ | (16,050 | ) | |
| | |
| Basic earnings (loss) per common share: | |
| | | |
| | | |
| | |
| Continuing operations | |
$ | 0.12 | | |
$ | (0.18 | ) | |
| | |
| Discontinued operations | |
| 0.24 | | |
| 0.06 | | |
| | |
| Total basic earnings (loss) per common share | |
$ | 0.36 | | |
$ | (0.12 | ) | |
| | |
| Diluted earnings (loss) per common share: | |
| | | |
| | | |
| | |
| Continuing operations | |
$ | 0.12 | | |
$ | (0.19 | ) | |
| | |
| Discontinued operations | |
| 0.24 | | |
| 0.06 | | |
| | |
| Total diluted earnings (loss) per common share | |
$ | 0.36 | | |
$ | (0.13 | ) | |
| | |
| (1) | Refer to table III for
calculation of earnings per common share. |
| | |
II. Condensed Consolidated Statements of Operations
For the Years Ended December 31, 2023 and 2024
(In thousands, except per share amounts, unaudited)
| | |
2023 | | |
2024 | | |
% Change | |
| Revenue | |
$ | 4,825,977 | | |
$ | 5,187,105 | | |
| 7.5 | % |
| Costs and expenses: | |
| | | |
| | | |
| | |
| Cost of services, exclusive of depreciation and amortization | |
| 4,254,369 | | |
| 4,553,461 | | |
| 7.0 | |
| General and administrative | |
| 170,193 | | |
| 225,869 | | |
| 32.7 | |
| Depreciation and amortization | |
| 135,691 | | |
| 142,866 | | |
| 5.3 | |
| Total costs and expenses | |
| 4,560,253 | | |
| 4,922,196 | | |
| 7.9 | |
| Other operating income | |
| 1,518 | | |
| 3,406 | | |
| 124.4 | |
| Income from continuing operations before other income and expense | |
| 267,242 | | |
| 268,315 | | |
| 0.4 | |
| Other income and expense: | |
| | | |
| | | |
| | |
| Loss on early retirement of debt | |
| (14,692 | ) | |
| (28,845 | ) | |
| 96.3 | |
| Equity in earnings of unconsolidated subsidiaries | |
| 41,339 | | |
| 63,904 | | |
| 54.6 | |
| Interest expense | |
| (154,165 | ) | |
| (128,605 | ) | |
| (16.6 | ) |
| Income from continuing operations before income taxes | |
| 139,724 | | |
| 174,769 | | |
| 25.1 | |
| Income tax expense from continuing operations | |
| 29,253 | | |
| 44,782 | | |
| 53.1 | |
| Income from continuing operations, net of tax | |
| 110,471 | | |
| 129,987 | | |
| 17.7 | |
| Discontinued operations: | |
| | | |
| | | |
| | |
| Income from discontinued business | |
| 242,632 | | |
| 223,414 | | |
| (7.9 | ) |
| Income tax expense from discontinued business | |
| 53,372 | | |
| 56,697 | | |
| 6.2 | |
| Income from discontinued operations, net of tax | |
| 189,260 | | |
| 166,717 | | |
| (11.9 | ) |
| Net income | |
| 299,731 | | |
| 296,704 | | |
| (1.0 | ) |
| Less: Net income attributable to non-controlling interests | |
| 56,240 | | |
| 82,666 | | |
| 47.0 | |
| Net income attributable to Select Medical | |
$ | 243,491 | | |
$ | 214,038 | | |
| (12.1 | )% |
| Net income attributable to Select Medical’s common stockholders: | |
| | | |
| | | |
| | |
| Income from continuing operations, net of tax | |
$ | 59,027 | | |
$ | 65,473 | | |
| | |
| Income from discontinued operations, net of
tax | |
| 184,464 | | |
| 148,565 | | |
| | |
| Net income attributable to Select Medical’s
common stockholders: | |
$ | 243,491 | | |
$ | 214,038 | | |
| | |
| Earnings per common share: | |
| | | |
| | | |
| | |
| Continuing operations - basic and diluted | |
$ | 0.46 | | |
$ | 0.51 | | |
| | |
| Discontinued operations - basic and diluted | |
| 1.44 | | |
| 1.15 | | |
| | |
| Basic and
diluted earnings per common share:(1) | |
$ | 1.91 | (2) | |
$ | 1.66 | | |
| | |
| (1) | Refer to table III for
calculation of earnings per common share. |
| | |
| (2) | Does not total due to
rounding. |
III. Earnings per Share
For the Three Months and Years Ended December 31, 2023 and
2024
(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. Select Medical applies the treasury stock method when computing diluted EPS.
The following table sets
forth the income from continuing operations, net of tax, attributable to Select Medical’s common stockholders, its common shares
outstanding, and its participating securities outstanding for the three months and years ended December 31, 2023 and 2024:
| | |
Basic EPS | |
| | |
Three Months Ended
December 31, | | |
Years
Ended December
31, | |
| | |
2023 | | |
2024 | | |
2023 | | |
2024 | |
| Income (loss) from continuing operations, net of tax | |
$ | 30,251 | | |
$ | (10,456 | ) | |
$ | 110,471 | | |
$ | 129,987 | |
| Less: Net income attributable to non-controlling interests | |
| 14,508 | | |
| 13,208 | | |
| 51,444 | | |
| 64,514 | |
| Income (loss) from continuing operations, net of tax, attributable to Select Medical’s
common stockholders | |
| 15,743 | | |
| (23,664 | ) | |
| 59,027 | | |
| 65,473 | |
| Less: distributed and undistributed
net income (loss) attributable to participating securities(1) | |
| 556 | | |
| (597 | ) | |
| 2,127 | | |
| 2,319 | |
| Income (loss) from continuing operations, net of tax, attributable
to common shares | |
$ | 15,187 | | |
$ | (23,067 | ) | |
$ | 56,900 | | |
$ | 63,154 | |
The following tables set
forth the computation of EPS for the three months and years ended December 31, 2023 and 2024:
| | |
Three Months Ended
December 31, | |
| | |
2023 | |
| | |
Income
from
Continuing
Operations, Net of
Tax, Allocation | | |
Shares(1) | | |
Basic
and Diluted
EPS | |
| | |
| | |
| | |
| |
| | |
(in thousands, except for per share amounts) | |
| Common shares | |
$ | 15,187 | | |
| 123,817 | | |
$ | 0.12 | |
| Participating securities | |
| 556 | | |
| 4,530 | | |
$ | 0.12 | |
| Total | |
$ | 15,743 | | |
| | | |
| | |
| | |
Three Months Ended
December 31, | |
| | |
2024 | |
| | |
Loss from
Continuing
Operations,
Net of Tax,
Allocation -
Basic | | |
Basic
Shares(1) | | |
Basic EPS | | |
Loss from
Continuing
Operations,
Net of Tax,
Allocation -
Diluted | | |
Diluted
Shares(1) | | |
Diluted EPS | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
(in thousands, except for per share amounts) | |
| Common shares | |
$ | (23,067 | ) | |
| 125,923 | | |
$ | (0.18 | ) | |
$ | (23,664 | ) | |
| 127,535 | | |
$ | (0.19 | ) |
| Participating securities | |
| (597 | ) | |
| 3,261 | | |
$ | (0.18 | ) | |
| | | |
| | | |
| | |
| Total | |
$ | (23,664 | ) | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
Year Ended December
31, | |
| | |
2023 | | |
2024 | |
| | |
Income from
Continuing
Operations,
Net of Tax,
Allocation | | |
Shares(1) | | |
Basic and Diluted
EPS | | |
Income from
Continuing
Operations,
Net of Tax,
Allocation | | |
Shares(1) | | |
Basic and
Diluted
EPS | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
(in thousands, except for per share amounts) | |
| Common shares | |
$ | 56,900 | | |
| 123,105 | | |
$ | 0.46 | | |
$ | 63,154 | | |
| 124,614 | | |
$ | 0.51 | |
| Participating securities | |
| 2,127 | | |
| 4,601 | | |
$ | 0.46 | | |
| 2,319 | | |
| 4,576 | | |
$ | 0.51 | |
| Total | |
$ | 59,027 | | |
| | | |
| | | |
$ | 65,473 | | |
| | | |
| | |
| (1) | Represents the weighted average share count
outstanding during the period. |
IV. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
| | |
December 31, | |
| | |
2023 | | |
2024 | |
| Assets | |
| | |
| |
| Current Assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 52,632 | | |
$ | 59,694 | |
| Accounts receivable | |
| 724,141 | | |
| 821,385 | |
| Current assets of discontinued operations | |
| 291,064 | | |
| — | |
| Other current assets | |
| 189,809 | | |
| 138,698 | |
| Total Current Assets | |
| 1,257,646 | | |
| 1,019,777 | |
| Operating lease right-of-use assets | |
| 790,764 | | |
| 908,095 | |
| Property and equipment, net | |
| 845,191 | | |
| 872,185 | |
| Goodwill | |
| 2,283,425 | | |
| 2,331,898 | |
| Identifiable intangible assets, net | |
| 105,147 | | |
| 103,183 | |
| Non-current assets of discontinued operations | |
| 2,039,142 | | |
| — | |
| Other assets | |
| 368,316 | | |
| 372,813 | |
| Total Assets | |
$ | 7,689,631 | | |
$ | 5,607,951 | |
| Liabilities and Equity | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Payables and accruals | |
$ | 735,857 | | |
$ | 777,781 | |
| Current operating lease liabilities | |
| 172,454 | | |
| 179,601 | |
| Current portion of long-term debt and notes payable | |
| 68,874 | | |
| 20,269 | |
| Current liabilities of discontinued operations | |
| 271,280 | | |
| — | |
| Total Current Liabilities | |
| 1,248,465 | | |
| 977,651 | |
| Non-current operating lease liabilities | |
| 668,557 | | |
| 787,124 | |
| Long-term debt, net of current portion | |
| 3,584,384 | | |
| 1,691,546 | |
| Non-current deferred tax liability | |
| 119,942 | | |
| 81,497 | |
| Non-current liabilities of discontinued operations | |
| 411,487 | | |
| — | |
| Other non-current liabilities | |
| 82,781 | | |
| 73,038 | |
| Total Liabilities | |
| 6,115,616 | | |
| 3,610,856 | |
| Redeemable non-controlling interests | |
| 26,297 | | |
| 10,167 | |
| Total Equity | |
| 1,547,718 | | |
| 1,986,928 | |
| Total Liabilities and Equity | |
$ | 7,689,631 | | |
$ | 5,607,951 | |
V. Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 2023 and 2024
(In thousands, unaudited)
| | |
2023 | | |
2024 | |
| Operating activities | |
| | | |
| | |
| Net income | |
$ | 61,798 | | |
$ | 3,756 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Distributions from unconsolidated subsidiaries | |
| 13,521 | | |
| 8,742 | |
| Depreciation and amortization | |
| 53,984 | | |
| 45,743 | |
| Provision for expected credit losses | |
| (71 | ) | |
| 2,620 | |
| Equity in earnings of unconsolidated subsidiaries | |
| (10,195 | ) | |
| (10,423 | ) |
| Loss on extinguishment of debt | |
| — | | |
| 8,099 | |
| (Gain) loss on sale of assets and businesses | |
| (50 | ) | |
| 48 | |
| Stock compensation expense | |
| 11,818 | | |
| 61,271 | |
| Amortization of debt discount, premium and issuance costs | |
| 748 | | |
| 684 | |
| Deferred income taxes | |
| 930 | | |
| 2,507 | |
| Changes in operating assets and liabilities, net of effects
of business combinations: | |
| | | |
| | |
| Accounts receivable | |
| 4,170 | | |
| 20,916 | |
| Other current assets | |
| (12,098 | ) | |
| 10,216 | |
| Other assets | |
| 3,003 | | |
| (1,009 | ) |
| Accounts payable and accrued expenses | |
| 51,884 | | |
| (27,738 | ) |
| Net cash provided by operating activities | |
| 179,442 | | |
| 125,432 | |
| Investing activities | |
| | | |
| | |
| Business combinations, net of cash acquired | |
| (9,085 | ) | |
| (10,786 | ) |
| Purchases of property and equipment | |
| (60,603 | ) | |
| (63,429 | ) |
| Proceeds from sale of assets and businesses | |
| 104 | | |
| 22 | |
| Net cash used in investing activities | |
| (69,584 | ) | |
| (74,193 | ) |
| Financing activities | |
| | | |
| | |
| Borrowings on revolving facilities | |
| 270,000 | | |
| 290,000 | |
| Payments on revolving facilities | |
| (330,000 | ) | |
| (195,000 | ) |
| Proceeds from term loans, net of issuance costs | |
| — | | |
| 1,043,355 | |
| Payments on term loans | |
| (5,258 | ) | |
| (372,982 | ) |
| Payment on senior notes, including call premium | |
| — | | |
| (1,237,764 | ) |
| Proceeds from senior notes, net of issuance costs | |
| — | | |
| 539,261 | |
| Borrowings of other debt | |
| 550 | | |
| 4,086 | |
| Principal payments on other debt | |
| (8,648 | ) | |
| (29,498 | ) |
| Dividends paid to common stockholders | |
| (16,048 | ) | |
| (16,124 | ) |
| Repurchase of common stock | |
| (1,709 | ) | |
| (19,981 | ) |
| Increase in overdrafts | |
| 280 | | |
| 11,630 | |
| Proceeds from issuance of non-controlling interests | |
| 2,472 | | |
| 6,300 | |
| Distributions to and purchases of non-controlling interests | |
| (14,931 | ) | |
| (24,201 | ) |
| Cash transferred to Concentra at separation | |
| — | | |
| (182,095 | ) |
| Net cash used in financing activities | |
| (103,292 | ) | |
| (183,013 | ) |
| Net increase (decrease) in cash and cash equivalents | |
| 6,566 | | |
| (131,774 | ) |
| Cash and cash equivalents at beginning of period | |
| 77,440 | | |
| 191,468 | |
| Cash and cash equivalents at end
of period(1) | |
$ | 84,006 | | |
$ | 59,694 | |
| Supplemental information: | |
| | | |
| | |
| Cash paid for interest, excluding amounts received of $22,465 under the interest rate
cap contract in 2023 | |
$ | 50,564 | | |
$ | 39,472 | |
| Cash paid for taxes | |
| 10,008 | | |
| 30,491 | |
| (1) | Discontinued operations at December 31, 2023, includes $31.4 million
of cash and cash equivalents. |
VI. Condensed Consolidated Statements of Cash Flows
For the Years Ended December 31, 2023 and 2024
(In thousands, unaudited)
| | |
2023 | | |
2024 | |
| Operating activities | |
| | | |
| | |
| Net income | |
$ | 299,731 | | |
$ | 296,704 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Distributions from unconsolidated subsidiaries | |
| 23,417 | | |
| 39,178 | |
| Depreciation and amortization | |
| 208,742 | | |
| 203,894 | |
| Provision for expected credit losses | |
| 1,030 | | |
| 4,279 | |
| Equity in earnings of unconsolidated subsidiaries | |
| (40,813 | ) | |
| (60,228 | ) |
| Loss on extinguishment of debt | |
| 175 | | |
| 19,038 | |
| Gain on sale of assets and businesses | |
| (57 | ) | |
| (1,063 | ) |
| Stock compensation expense | |
| 43,809 | | |
| 100,670 | |
| Amortization of debt discount, premium and issuance costs | |
| 2,647 | | |
| 2,963 | |
| Deferred income taxes | |
| (16,119 | ) | |
| (32,434 | ) |
| Changes in operating assets and liabilities, net of effects
of business combinations: | |
| | | |
| | |
| Accounts receivable | |
| 1,156 | | |
| (95,845 | ) |
| Other current assets | |
| (29,374 | ) | |
| 18,072 | |
| Other assets | |
| 10,031 | | |
| 12,933 | |
| Accounts payable and accrued expenses | |
| 77,683 | | |
| 9,703 | |
| Net cash provided by operating activities | |
| 582,058 | | |
| 517,864 | |
| Investing activities | |
| | | |
| | |
| Business combinations, net of cash acquired | |
| (29,567 | ) | |
| (13,097 | ) |
| Purchases of property, equipment, and other assets | |
| (229,200 | ) | |
| (222,177 | ) |
| Investment in businesses | |
| (9,873 | ) | |
| — | |
| Proceeds from sale of assets and businesses | |
| 163 | | |
| 4,263 | |
| Net cash used in investing activities | |
| (268,477 | ) | |
| (231,011 | ) |
| Financing activities | |
| | | |
| | |
| Borrowings on revolving facilities | |
| 905,000 | | |
| 1,240,000 | |
| Payments on revolving facilities | |
| (1,070,000 | ) | |
| (1,415,000 | ) |
| Proceeds from term loans, net of issuance costs | |
| 2,092,232 | | |
| 1,880,052 | |
| Payments on term loans | |
| (2,113,952 | ) | |
| (2,092,485 | ) |
| Payment on senior notes | |
| — | | |
| (1,237,764 | ) |
| Proceeds from senior notes, net of issuance costs | |
| — | | |
| 1,176,598 | |
| Borrowings of other debt | |
| 31,399 | | |
| 24,892 | |
| Principal payments on other debt | |
| (46,946 | ) | |
| (65,280 | ) |
| Dividends paid to common stockholders | |
| (63,904 | ) | |
| (64,617 | ) |
| Repurchase of common stock | |
| (12,759 | ) | |
| (37,905 | ) |
| Decrease in overdrafts | |
| (1,687 | ) | |
| (4,471 | ) |
| Proceeds from issuance of non-controlling interests | |
| 22,935 | | |
| 15,713 | |
| Distributions to and purchases of non-controlling interests | |
| (63,531 | ) | |
| (60,001 | ) |
| Purchase of membership interests of Concentra Group Holdings Parent | |
| (6,268 | ) | |
| — | |
| Proceeds from Concentra initial public offering | |
| — | | |
| 511,198 | |
| Cash transferred to Concentra at separation | |
| — | | |
| (182,095 | ) |
| Net cash used in financing activities | |
| (327,481 | ) | |
| (311,165 | ) |
| Net decrease in cash and cash equivalents | |
| (13,900 | ) | |
| (24,312 | ) |
| Cash and cash equivalents at beginning of period | |
| 97,906 | | |
| 84,006 | |
| Cash and cash equivalents at end
of period(1) | |
$ | 84,006 | | |
$ | 59,694 | |
| Supplemental information: | |
| | | |
| | |
| Cash paid for interest, excluding amounts received of $82,818 and $68,069 under the
interest rate cap contract in 2023 and 2024, respectively | |
$ | 272,261 | | |
$ | 256,229 | |
| Cash paid for taxes | |
| 88,510 | | |
| 133,187 | |
| (1) | Discontinued operations at December 31, 2023, includes $31.4 million
of cash and cash equivalents. |
VII. Key Statistics
For the Three Months Ended December 31, 2023 and 2024
(unaudited)
| | |
2023 | | |
2024 | | |
% Change | |
| Critical Illness Recovery Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end
of period(a) | |
| 107 | | |
| 104 | | |
| | |
| Revenue (,000) | |
$ | 567,128 | | |
$ | 600,445 | | |
| 5.9 | % |
| Number of patient days(b)(c) | |
| 277,470 | | |
| 274,134 | | |
| (1.2 | )% |
| Number of admissions(b)(d) | |
| 9,126 | | |
| 8,691 | | |
| (4.8 | )% |
| Revenue per patient day(b)(e) | |
$ | 2,037 | | |
$ | 2,183 | | |
| 7.2 | % |
| Occupancy rate(b)(f) | |
| 66 | % | |
| 67 | % | |
| 1.5 | % |
| Adjusted EBITDA (,000) | |
$ | 57,384 | | |
$ | 63,098 | | |
| 10.0 | % |
| Adjusted EBITDA margin | |
| 10.1 | % | |
| 10.5 | % | |
| | |
| Rehabilitation Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end of period(a) | |
| 33 | | |
| 35 | | |
| | |
| Revenue (,000) | |
$ | 260,166 | | |
$ | 294,352 | | |
| 13.1 | % |
| Number of patient days(b)(c) | |
| 116,003 | | |
| 119,870 | | |
| 3.3 | % |
| Number of admissions(b)(d) | |
| 8,264 | | |
| 8,626 | | |
| 4.4 | % |
| Revenue per patient day(b)(e) | |
$ | 2,063 | | |
$ | 2,177 | | |
| 5.5 | % |
| Occupancy rate(b)(f) | |
| 85 | % | |
| 81 | % | |
| (4.7 | )% |
| Adjusted EBITDA (,000) | |
$ | 66,344 | | |
$ | 62,277 | | |
| (6.1 | )% |
| Adjusted EBITDA margin | |
| 25.5 | % | |
| 21.2 | % | |
| | |
| Outpatient Rehabilitation | |
| | | |
| | | |
| | |
| Number of clinics operated – end of period(a) | |
| 1,933 | | |
| 1,914 | | |
| | |
| Working days(g) | |
| 63 | | |
| 64 | | |
| | |
| Revenue (,000) | |
$ | 298,235 | | |
$ | 319,598 | | |
| 7.2 | % |
| Number of visits(b)(h) | |
| 2,672,936 | | |
| 2,811,704 | | |
| 5.2 | % |
| Revenue per visit(b)(i) | |
$ | 100 | | |
$ | 102 | | |
| 2.0 | % |
| Adjusted EBITDA (,000) | |
$ | 22,473 | | |
$ | 26,561 | | |
| 18.2 | % |
| Adjusted EBITDA margin | |
| 7.5 | % | |
| 8.3 | % | |
| | |
| (a) | Includes managed locations. |
| (b) | Excludes managed locations. |
| (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 Select Medical’s hospitals during the periods presented. |
| (e) | Represents the average amount of revenue recognized
for each patient day. Revenue per patient day is calculated by dividing patient service revenues,
excluding revenues from certain other ancillary and outpatient services provided at Select
Medical’s hospitals, by the total number of patient days. |
| (f) | Represents the portion of our hospitals being
utilized for patient care during the periods presented. Occupancy rate is calculated using
the number of patient days, as presented above, divided by the total number of bed days available
during the period. Bed days available is derived by adding the daily number of available
licensed beds for each of the periods presented. |
| (g) | Represents the number of days in which normal
business operations were conducted during the periods presented. |
| (h) | Represents the number of visits in which patients
were treated at Select Medical’s outpatient rehabilitation clinics during the periods
presented. |
| (i) | Represents the average amount of revenue recognized
for each patient visit. 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 Years Ended December 31, 2023 and 2024
(unaudited)
| | |
2023 | | |
2024 | | |
% Change | |
| Critical Illness Recovery Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end
of period(a) | |
| 107 | | |
| 104 | | |
| | |
| Revenue (,000) | |
$ | 2,299,773 | | |
$ | 2,444,196 | | |
| 6.3 | % |
| Number of patient days(b)(c) | |
| 1,108,492 | | |
| 1,118,757 | | |
| 0.9 | % |
| Number of admissions(b)(d) | |
| 36,225 | | |
| 35,784 | | |
| (1.2 | )% |
| Revenue per patient day(b)(e) | |
$ | 2,067 | | |
$ | 2,177 | | |
| 5.3 | % |
| Occupancy rate(b)(f) | |
| 68 | % | |
| 68 | % | |
| 0.0 | % |
| Adjusted EBITDA (,000) | |
$ | 246,015 | | |
$ | 301,634 | | |
| 22.6 | % |
| Adjusted EBITDA margin | |
| 10.7 | % | |
| 12.3 | % | |
| | |
| Rehabilitation Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end of period(a) | |
| 33 | | |
| 35 | | |
| | |
| Revenue (,000) | |
$ | 979,585 | | |
$ | 1,110,592 | | |
| 13.4 | % |
| Number of patient days(b)(c) | |
| 446,145 | | |
| 470,594 | | |
| 5.5 | % |
| Number of admissions(b)(d) | |
| 31,627 | | |
| 33,665 | | |
| 6.4 | % |
| Revenue per patient day(b)(e) | |
$ | 2,017 | | |
$ | 2,134 | | |
| 5.8 | % |
| Occupancy rate(b)(f) | |
| 85 | % | |
| 84 | % | |
| (1.2 | )% |
| Adjusted EBITDA (,000) | |
$ | 221,875 | | |
$ | 245,748 | | |
| 10.8 | % |
| Adjusted EBITDA margin | |
| 22.6 | % | |
| 22.1 | % | |
| | |
| Outpatient Rehabilitation | |
| | | |
| | | |
| | |
| Number of clinics operated – end of period(a) | |
| 1,933 | | |
| 1,914 | | |
| | |
| Working days(g) | |
| 254 | | |
| 256 | | |
| | |
| Revenue (,000) | |
$ | 1,188,914 | | |
$ | 1,250,294 | | |
| 5.2 | % |
| Number of visits(b)(h) | |
| 10,657,558 | | |
| 11,147,920 | | |
| 4.6 | % |
| Revenue per visit(b)(i) | |
$ | 100 | | |
$ | 101 | | |
| 1.0 | % |
| Adjusted EBITDA (,000) | |
$ | 111,868 | | |
$ | 108,577 | | |
| (2.9 | )% |
| Adjusted EBITDA margin | |
| 9.4 | % | |
| 8.7 | % | |
| | |
| (a) | Includes managed locations. |
| (b) | Excludes managed locations. |
| (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 Select Medical’s hospitals during the periods presented. |
| (e) | Represents the average amount of revenue recognized
for each patient day. Revenue per patient day is calculated by dividing patient service revenues,
excluding revenues from certain other ancillary and outpatient services provided at Select
Medical’s hospitals, by the total number of patient days. |
| (f) | Represents the portion of our hospitals being
utilized for patient care during the periods presented. Occupancy rate is calculated using
the number of patient days, as presented above, divided by the total number of bed days available
during the period. Bed days available is derived by adding the daily number of available
licensed beds for each of the periods presented. |
| (g) | Represents the number of days in which normal
business operations were conducted during the periods presented. |
| (h) | Represents the number of visits in which patients
were treated at Select Medical’s outpatient rehabilitation clinics during the periods
presented. |
| (i) | Represents the average amount of revenue recognized
for each patient visit. Revenue per visit is calculated by dividing patient service revenue,
excluding revenues from certain other ancillary services, by the total number of visits. |
IX. Income from Continuing Operations, Net of Tax, to Adjusted
EBITDA Reconciliation
For the Three Months and Years Ended December 31, 2023 and
2024
(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 by management to evaluate financial performance and determine resource allocation for
each of Select Medical’s segments. Adjusted EBITDA is not a measure of financial performance under accounting principles generally
accepted in the United States of America (“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,
income from continuing operations, income from continuing operations before other income and expense, 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
income from continuing operations, net of tax, to Adjusted EBITDA for Select Medical. Adjusted EBITDA is used by Select Medical to report
its segment performance. Adjusted EBITDA is defined as earnings from continuing operations excluding interest, income taxes, depreciation
and amortization, gain (loss) on early retirement of debt, stock compensation expense, transaction costs associated with the Concentra
separation, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
| | |
Three
Months Ended December
31, | | |
Years
Ended December
31, | |
| | |
2023 | | |
2024 | | |
2023 | | |
2024 | |
| Income (loss) from continuing operations, net of tax | |
$ | 30,251 | | |
$ | (10,456 | ) | |
$ | 110,471 | | |
$ | 129,987 | |
| Income tax expense (benefit) | |
| 4,618 | | |
| (4,487 | ) | |
| 29,253 | | |
| 44,782 | |
| Interest expense | |
| 40,263 | | |
| 28,551 | | |
| 154,165 | | |
| 128,605 | |
| Equity in earnings of unconsolidated subsidiaries | |
| (10,195 | ) | |
| (10,423 | ) | |
| (41,339 | ) | |
| (63,904 | ) |
| Loss on early retirement of debt | |
| — | | |
| 17,906 | | |
| 14,692 | | |
| 28,845 | |
| Income from continuing operations before other income and expense | |
$ | 64,937 | | |
$ | 21,091 | | |
$ | 267,242 | | |
$ | 268,315 | |
| Stock compensation expense: | |
| | | |
| | | |
| | | |
| | |
| Included in general and administrative | |
| 9,658 | | |
| 47,414 | | |
| 36,041 | | |
| 79,931 | |
| Included in cost of services | |
| 1,688 | | |
| 12,902 | | |
| 7,117 | | |
| 19,283 | |
| Depreciation and amortization | |
| 35,485 | | |
| 36,283 | | |
| 135,691 | | |
| 142,866 | |
| Concentra separation transaction
costs(b) | |
| — | | |
| (1,698 | ) | |
| — | | |
| — | |
| Adjusted EBITDA | |
$ | 111,768 | | |
$ | 115,992 | | |
$ | 446,091 | | |
$ | 510,395 | |
| | |
| | | |
| | | |
| | | |
| | |
| Critical illness recovery hospital | |
$ | 57,384 | | |
$ | 63,098 | | |
$ | 246,015 | | |
$ | 301,634 | |
| Rehabilitation hospital | |
| 66,344 | | |
| 62,277 | | |
| 221,875 | | |
| 245,748 | |
| Outpatient rehabilitation | |
| 22,473 | | |
| 26,561 | | |
| 111,868 | | |
| 108,577 | |
| Other(a) | |
| (34,433 | ) | |
| (35,944 | ) | |
| (133,667 | ) | |
| (145,564 | ) |
| Adjusted EBITDA | |
$ | 111,768 | | |
$ | 115,992 | | |
$ | 446,091 | | |
$ | 510,395 | |
| (a) | Other primarily includes general and administrative
costs and other operating income, as discussed further above. |
| (b) | During the three months ended December 31,
2024, transaction costs of $1.7 million recognized in previous periods were reclassified
from income from continuing operations to income from discontinued operations. Total Concentra
separation transaction costs of $16.3 million were recognized during the year ended December
31, 2024 and included in income from discontinued business. |
X. Reconciliation of Earnings per Common Share
from Continuing Operations, Net of Tax, to Adjusted Earnings per Common Share from Continuing Operations, Net of Tax
For the Years Ended December 31, 2023 and 2024
(In thousands, except per share amounts, unaudited)
Adjusted income from continuing
operations, net of tax, attributable to common shares and adjusted earnings per common share from continuing operations are not measures
of financial performance under GAAP. Items excluded from adjusted income from continuing operations, net of tax, attributable to common
shares and adjusted earnings per common share from continuing operations are significant components in understanding and assessing financial
performance. Select Medical believes that the presentation of adjusted income from continuing operations, net of tax, attributable to
common shares and adjusted earnings per common share from continuing operations 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 income from continuing operations, net of tax, attributable to common shares and adjusted earnings per common
share from continuing operations should not be considered in isolation or as alternatives to, or substitutes for, income from continuing
operations, net of tax, 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 income from continuing
operations, net of tax, 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 income from continuing operations, net of tax, attributable to common
shares and adjusted earnings per common share from continuing operations as presented may not be comparable to other similarly titled
measures of other companies.
The following tables reconcile
income from continuing operations, net of tax, attributable to common shares and earnings per common share from continuing operations
on a fully diluted basis to adjusted income from continuing operations, net of tax, attributable to common shares and adjusted earnings
per common share from continuing operations on a fully diluted basis.
| | |
Three Months Ended
December 31, | |
| | |
2023 | | |
Per
Share(a) | | |
2024 | | |
Per
Share(a) | |
| Income from continuing operations, net of
tax, attributable to common shares(a) | |
$ | 15,187 | | |
$ | 0.12 | | |
$ | (23,664 | ) | |
| (0.19 | ) |
| Adjustments:(b) | |
| | | |
| | | |
| | | |
| | |
| Loss on early retirement of debt, net of tax | |
| — | | |
| — | | |
| 12,885 | | |
| 0.10 | |
| Concentra separation transaction costs, net of tax | |
| — | | |
| — | | |
| (1,241 | ) | |
| (0.01 | ) |
| Stock compensation expense due to accelerated
vesting, net of tax | |
| — | | |
| — | | |
| 34,645 | | |
| 0.28 | |
| Adjusted income from continuing operations, net of tax, attributable
to common shares | |
$ | 15,187 | | |
$ | 0.12 | | |
$ | 22,625 | | |
$ | 0.18 | |
| | |
Years Ended December 31, | |
| | |
2023 | | |
Per
Share(a) | | |
2024 | | |
Per
Share(a) | |
| Income from continuing operations, net of
tax, attributable to common shares(a) | |
$ | 56,900 | | |
$ | 0.46 | | |
$ | 63,154 | | |
$ | 0.51 | |
| Adjustments:(b) | |
| | | |
| | | |
| | | |
| | |
| Loss on early retirement of debt, net of tax | |
| 10,019 | | |
| 0.08 | | |
| 20,311 | | |
| 0.16 | |
| Stock compensation expense due to accelerated
vesting, net of tax | |
| — | | |
| — | | |
| 33,846 | | |
| 0.27 | |
| Adjusted income from continuing operations, net of tax, attributable
to common shares | |
$ | 66,919 | | |
$ | 0.54 | | |
$ | 117,311 | | |
$ | 0.94 | |
| (a) | Income from continuing operations, net of
tax, attributable to common shares and earnings per common share from continuing operations
are calculated based on the diluted weighted average common shares outstanding, as presented
in table III. |
| | |
| (b) | Adjustments to income from continuing operations,
net of tax, 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. |
XI. Income
from Continuing Operations, Net of Tax, to Adjusted EBITDA Reconciliation
Business Outlook for the Year Ending December 31, 2025
(In millions, unaudited)
The following is a reconciliation
of full year 2025 Adjusted EBITDA expectations as computed at the low and high points of the range to the closest comparable GAAP financial
measure. Refer to table IX for the definition of Adjusted EBITDA and a discussion of Select Medical’s use of Adjusted EBITDA in
evaluating financial performance. Each item presented in the below table is an estimation of full year 2025 expectations.
| | |
Range | |
| Non-GAAP Measure Reconciliation | |
Low | | |
High | |
| Income from continuing operations, net of tax, attributable to Select
Medical | |
$ | 142 | | |
$ | 155 | |
| Net income attributable to non-controlling interests | |
| 75 | | |
| 78 | |
| Income from continuing operations, net of tax | |
| 217 | | |
| 233 | |
| Income tax expense | |
| 79 | | |
| 84 | |
| Interest expense | |
| 107 | | |
| 107 | |
| Equity in earnings of unconsolidated subsidiaries | |
| (47 | ) | |
| (48 | ) |
| Income from continuing operations before other income and expense | |
| 356 | | |
| 376 | |
| Stock compensation expense | |
| 18 | | |
| 18 | |
| Depreciation and amortization | |
| 146 | | |
| 146 | |
| Adjusted EBITDA | |
$ | 520 | | |
$ | 540 | |
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