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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 22, 2024
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 22, 2024,
Select Medical Holdings Corporation (the “Company”) issued a press release announcing its financial results for its
fourth quarter and fiscal year ended December 31, 2023 (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, 2024,
the Board declared a cash dividend of $0.125 per share. The dividend will be payable on or about March 13, 2024 to stockholders of
record as of the close of business on March 1, 2024.
| Item 9.01 | Financial
Statements and Exhibits. |
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
| |
|
SELECT MEDICAL HOLDINGS CORPORATION |
| |
|
|
|
| |
|
|
|
| Date: February 22, 2024 |
|
By: |
/s/ Michael
E. Tarvin |
| |
|
|
Michael E. Tarvin |
| |
|
|
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,
2023 and Cash Dividend
MECHANICSBURG, PENNSYLVANIA
— February 22, 2024 — Select Medical Holdings Corporation (“Select Medical,” “we,” “us,”
or “our”) (NYSE: SEM) today announced results for its fourth quarter and year ended December 31, 2023 and the declaration
of a cash dividend.
For the fourth quarter ended
December 31, 2023, revenue increased 4.9% to $1,658.9 million, compared to $1,581.5 million for the same quarter, prior year. Income
from operations increased 31.5% to $114.3 million for the fourth quarter ended December 31, 2023, compared to $86.9 million for
the same quarter, prior year. Net income increased 63.9% to $61.8 million for the fourth quarter ended December 31, 2023, compared
to $37.7 million for the same quarter, prior year. Adjusted EBITDA increased 20.9% to $180.1 million for the fourth quarter ended December 31,
2023, compared to $148.9 million for the same quarter, prior year. Earnings per common share increased 63.6% to $0.36 for the fourth
quarter ended December 31, 2023, compared to $0.22 for the same quarter, prior year. The definition of Adjusted EBITDA and a reconciliation
of net income to Adjusted EBITDA are presented in table IX of this release.
For the year ended December 31,
2023, revenue increased 5.2% to $6,664.1 million, compared to $6,333.5 million for the prior year. Income from operations increased 37.6%
to $554.9 million for the year ended December 31, 2023, compared to $403.3 million for the prior year. For the year ended December 31,
2023, income from operations included $1.8 million of other operating income, compared to $28.8 million for the prior year.
The other operating income for the year ended December 31, 2022, was principally related to the recognition of payments received
under the Coronavirus Aid, Relief, and Economic Security Act Public Health and Social Services Emergency Fund, also referred to as the
Provider Relief Fund. Net income increased 51.4% to $299.7 million for the year ended December 31, 2023, compared to $198.0 million
for the prior year. Adjusted EBITDA increased 24.8% to $807.4 million for the year ended December 31, 2023, compared to $646.9 million
for the prior year. Earnings per common share increased 54.9% to $1.91 for the year ended December 31, 2023, compared to $1.23 for
the prior year. Adjusted earnings per common share increased 61.8% to $1.99 for the year ended December 31, 2023, compared to $1.23
for the prior year. Adjusted earnings per common share excludes the loss on early retirement of debt and related costs, and their related
tax effects for the year ended December 31, 2023. The definition of Adjusted EBITDA and a reconciliation of net income to Adjusted
EBITDA are presented in table IX of this release. A reconciliation of earnings per common share to adjusted earnings per common share
is presented in table X of this release.
Company Overview
Select Medical is one of
the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational
health centers in the United States based on number of facilities. Select Medical’s reportable segments include the critical illness
recovery hospital segment, the rehabilitation hospital segment, the outpatient rehabilitation segment, and the Concentra segment. As
of December 31, 2023, Select Medical operated 107 critical illness recovery hospitals in 28 states, 33 rehabilitation hospitals
in 13 states, 1,933 outpatient rehabilitation clinics in 39 states and the District of Columbia, and 544 occupational health centers
in 41 states. At December 31, 2023, Select Medical had operations in 46 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, 2023, revenue for the critical illness recovery hospital segment increased 0.9% to $567.1 million, compared to $561.9
million for the same quarter, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 29.4% to $57.4
million for the fourth quarter ended December 31, 2023, compared to $44.3 million for the same quarter, prior year. The Adjusted
EBITDA margin for the critical illness recovery hospital segment was 10.1% for the fourth quarter ended December 31, 2023, compared
to 7.9% 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, 2023 and 2022.
For the year ended December 31,
2023, revenue for the critical illness recovery hospital segment increased 2.9% to $2,299.8 million, compared to $2,234.1 million for
the prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 121.0% to $246.0 million for the year ended
December 31, 2023, compared to $111.3 million for the prior year. The Adjusted EBITDA margin for the critical illness recovery hospital
segment was 10.7% for the year ended December 31, 2023, compared to 5.0% 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, 2023 and 2022.
Rehabilitation Hospital Segment
For the fourth quarter ended
December 31, 2023, revenue for the rehabilitation hospital segment increased 9.4% to $260.2 million, compared to $237.9 million
for the same quarter, prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 18.4% to $66.3 million for the fourth
quarter ended December 31, 2023, compared to $56.0 million for the same quarter, prior year. The Adjusted EBITDA margin for the
rehabilitation hospital segment was 25.5% for the fourth quarter ended December 31, 2023, compared to 23.6% 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, 2023 and 2022.
For the year ended December 31,
2023, revenue for the rehabilitation hospital segment increased 6.9% to $979.6 million, compared to $916.8 million for the prior year.
Adjusted EBITDA for the rehabilitation hospital segment increased 12.0% to $221.9 million for the year ended December 31, 2023,
compared to $198.0 million for the prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 22.6% for the year
ended December 31, 2023, compared to 21.6% for the prior year. Certain rehabilitation hospital key statistics are presented in table
VIII of this release for the years ended December 31, 2023 and 2022.
Outpatient Rehabilitation Segment
For the fourth quarter ended
December 31, 2023, revenue for the outpatient rehabilitation segment increased 6.1% to $298.2 million, compared to $281.1 million
for the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment increased 40.9% to $22.5 million for the
fourth quarter ended December 31, 2023, compared to $15.9 million for the same quarter, prior year. The Adjusted EBITDA margin for
the outpatient rehabilitation segment was 7.5% for the fourth quarter ended December 31, 2023, compared to 5.7% 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, 2023 and 2022.
For the year ended December 31,
2023, revenue for the outpatient rehabilitation segment increased 5.7% to $1,188.9 million, compared to $1,125.3 million for the prior
year. Adjusted EBITDA for the outpatient rehabilitation segment increased 9.8% to $111.9 million for the year ended December 31,
2023, compared to $101.9 million for the prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 9.4% for
the year ended December 31, 2023, compared to 9.1% for the prior year. Certain outpatient rehabilitation key statistics are presented
in table VIII of this release for the years ended December 31, 2023 and 2022.
Concentra Segment
For the fourth quarter ended
December 31, 2023, revenue for the Concentra segment increased 6.2% to $440.7 million, compared to $415.0 million for the same quarter,
prior year. Adjusted EBITDA for the Concentra segment increased 9.7% to $68.3 million for the fourth quarter ended December 31,
2023, compared to $62.2 million for the same quarter, prior year. The Adjusted EBITDA margin for the Concentra segment was 15.5% for
the fourth quarter ended December 31, 2023, compared to 15.0% for the same quarter, prior year. Certain Concentra key statistics
are presented in table VII of this release for the fourth quarters ended December 31, 2023 and 2022.
For the year ended December 31,
2023, revenue for the Concentra segment increased 6.6% to $1,838.1 million, compared to $1,724.4 million for the prior year. Adjusted
EBITDA for the Concentra segment increased 8.1% to $361.3 million for the year ended December 31, 2023, compared to $334.3 million
for the prior year. The Adjusted EBITDA margin for the Concentra segment was 19.7% for the year ended December 31, 2023, compared
to 19.4% for the prior year. Certain Concentra key statistics are presented in table VIII of this release for the years ended December 31,
2023 and 2022.
Dividend
On February 13, 2024,
Select Medical’s board of directors declared a cash dividend of $0.125 per share. The dividend will be payable on or about March 13,
2024 to stockholders of record as of the close of business on March 1, 2024.
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, 2023. Since the inception of the common
stock repurchase program through December 31, 2023, 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.
Business Outlook
Select Medical is issuing
its business outlook for 2024. Select Medical expects revenue to be in the range of $6.9 billion to $7.1 billion, Adjusted EBITDA to
be in the range of $830 million to $880 million, and fully diluted earnings per share to be in the range of $1.88 to $2.18. A reconciliation
of full year 2024 Adjusted EBITDA expectations to net income 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, 2023, and its business outlook on
Friday, February 23, 2024, 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 2024 and 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; |
| · | public
threats such as a global pandemic, or widespread outbreak of an infectious disease, similar
to the COVID-19 pandemic, could negatively impact patient volumes and revenues, increase
labor and other operating costs, disrupt global financial markets, and/or further legislative
and regulatory actions which impact healthcare providers, including actions that may impact
the Medicare program; |
| · | 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, 2023. |
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,
2022 and 2023
(In thousands, except per share amounts, unaudited)
| | |
2022 | | |
2023 | | |
% Change | |
| Revenue | |
$ | 1,581,456 | | |
$ | 1,658,856 | | |
| 4.9 | % |
| Costs and expenses: | |
| | | |
| | | |
| | |
| Cost of services, exclusive of depreciation and amortization | |
| 1,408,784 | | |
| 1,447,086 | | |
| 2.7 | |
| General and administrative | |
| 38,763 | | |
| 44,090 | | |
| 13.7 | |
| Depreciation and amortization | |
| 52,246 | | |
| 53,984 | | |
| 3.3 | |
| Total costs and expenses | |
| 1,499,793 | | |
| 1,545,160 | | |
| 3.0 | |
| Other operating income | |
| 5,201 | | |
| 557 | | |
| N/M | |
| Income from operations | |
| 86,864 | | |
| 114,253 | | |
| 31.5 | |
| Other income and expense: | |
| | | |
| | | |
| | |
| Equity in earnings of unconsolidated subsidiaries | |
| 6,759 | | |
| 10,195 | | |
| 50.8 | |
| Interest expense | |
| (47,341 | ) | |
| (50,800 | ) | |
| 7.3 | |
| Income before income taxes | |
| 46,282 | | |
| 73,648 | | |
| 59.1 | |
| Income tax expense | |
| 8,570 | | |
| 11,850 | | |
| 38.3 | |
| Net income | |
| 37,712 | | |
| 61,798 | | |
| 63.9 | |
| Less: Net income attributable to non-controlling interests | |
| 10,208 | | |
| 15,529 | | |
| 52.1 | |
| Net income attributable to Select Medical | |
$ | 27,504 | | |
$ | 46,269 | | |
| 68.2 | % |
| Basic and diluted earnings per common share:(1) | |
$ | 0.22 | | |
$ | 0.36 | | |
| | |
| (1) | Refer to table III for calculation of earnings per
common share. |
II. Condensed Consolidated Statements of Operations
For the Years Ended December 31, 2022 and 2023
(In thousands, except per share amounts, unaudited)
| | |
2022 | | |
2023 | | |
% Change | |
| Revenue | |
$ | 6,333,538 | | |
$ | 6,664,058 | | |
| 5.2 | % |
| Costs and expenses: | |
| | | |
| | | |
| | |
| Cost of services, exclusive of depreciation and amortization | |
| 5,600,161 | | |
| 5,732,017 | | |
| 2.4 | |
| General and administrative | |
| 153,035 | | |
| 170,193 | | |
| 11.2 | |
| Depreciation and amortization | |
| 205,825 | | |
| 208,742 | | |
| 1.4 | |
| Total costs and expenses | |
| 5,959,021 | | |
| 6,110,952 | | |
| 2.5 | |
| Other operating income | |
| 28,766 | | |
| 1,768 | | |
| N/M | |
| Income from operations | |
| 403,283 | | |
| 554,874 | | |
| 37.6 | |
| Other income and expense: | |
| | | |
| | | |
| | |
| Loss on early retirement of debt | |
| — | | |
| (14,692 | ) | |
| N/M | |
| Equity in earnings of unconsolidated subsidiaries | |
| 26,407 | | |
| 40,813 | | |
| 54.6 | |
| Interest expense | |
| (169,111 | ) | |
| (198,639 | ) | |
| 17.5 | |
| Income before income taxes | |
| 260,579 | | |
| 382,356 | | |
| 46.7 | |
| Income tax expense | |
| 62,553 | | |
| 82,625 | | |
| 32.1 | |
| Net income | |
| 198,026 | | |
| 299,731 | | |
| 51.4 | |
| Less: Net income attributable to non-controlling interests | |
| 39,032 | | |
| 56,240 | | |
| 44.1 | |
| Net income attributable to Select Medical | |
$ | 158,994 | | |
$ | 243,491 | | |
| 53.1 | % |
| Basic and diluted earnings per common share:(1) | |
$ | 1.23 | | |
$ | 1.91 | | |
| | |
| (1) | Refer to table III for calculation of earnings per
common share. |
III. Earnings per Share
For the Three Months and Years Ended December 31, 2022 and
2023
(In thousands, except per share amounts, unaudited)
Select Medical’s capital
structure includes common stock and unvested restricted stock awards. To compute earnings per share (“EPS”), Select Medical
applies the two-class method because its unvested restricted stock awards are participating securities which are entitled to participate
equally with its common stock in undistributed earnings.
The following table sets
forth the net income attributable to Select Medical, its common shares outstanding, and its participating securities outstanding for
the three months and years ended December 31, 2022 and 2023:
| | |
Basic and Diluted
EPS | |
| | |
Three Months Ended
December 31, | | |
Years
Ended
December 31, | |
| | |
2022 | | |
2023 | | |
2022 | | |
2023 | |
| Net income | |
$ | 37,712 | | |
$ | 61,798 | | |
$ | 198,026 | | |
$ | 299,731 | |
| Less: net income attributable to non-controlling interests | |
| 10,208 | | |
| 15,529 | | |
| 39,032 | | |
| 56,240 | |
| Net income attributable to Select Medical | |
| 27,504 | | |
| 46,269 | | |
| 158,994 | | |
| 243,491 | |
| Less: net income attributable to participating securities | |
| 1,002 | | |
| 1,633 | | |
| 5,609 | | |
| 8,773 | |
| Net income attributable to common shares | |
$ | 26,502 | | |
$ | 44,636 | | |
$ | 153,385 | | |
$ | 234,718 | |
The following tables set
forth the computation of EPS under the two-class method for the three months and years ended December 31, 2022 and 2023:
| | |
Three Months Ended
December 31, | |
| | |
2022 | | |
2023 | |
| | |
Net Income
Allocation | | |
Shares(1) | | |
Basic and
Diluted EPS | | |
Net Income
Allocation | | |
Shares(1) | | |
Basic and
Diluted EPS | |
| | |
(in thousands, except for per share amounts) | |
| Common shares | |
$ | 26,502 | | |
| 122,511 | | |
$ | 0.22 | | |
$ | 44,636 | | |
| 123,817 | | |
$ | 0.36 | |
| Participating securities | |
| 1,002 | | |
| 4,630 | | |
$ | 0.22 | | |
| 1,633 | | |
| 4,530 | | |
$ | 0.36 | |
| Total | |
$ | 27,504 | | |
| | | |
| | | |
$ | 46,269 | | |
| | | |
| | |
| | |
Years Ended December 31, | |
| | |
2022 | | |
2023 | |
| | |
Net Income
Allocation | | |
Shares(1) | | |
Basic and
Diluted EPS | | |
Net Income
Allocation | | |
Shares(1) | | |
Basic and
Diluted EPS | |
| | |
(in thousands, except for per share amounts) | |
| Common shares | |
$ | 153,385 | | |
| 124,628 | | |
$ | 1.23 | | |
$ | 234,718 | | |
| 123,105 | | |
$ | 1.91 | |
| Participating securities | |
| 5,609 | | |
| 4,557 | | |
$ | 1.23 | | |
| 8,773 | | |
| 4,601 | | |
$ | 1.91 | |
| Total | |
$ | 158,994 | | |
| | | |
| | | |
$ | 243,491 | | |
| | | |
| | |
| (1) | Represents the weighted average share count outstanding during the period. |
IV. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
| | |
December 31, | |
| | |
2022 | | |
2023 | |
| Assets | |
| | |
| |
| Current Assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 97,906 | | |
$ | 84,006 | |
| Accounts receivable | |
| 941,312 | | |
| 940,335 | |
| Other current assets | |
| 232,095 | | |
| 233,305 | |
| Total Current Assets | |
| 1,271,313 | | |
| 1,257,646 | |
| Operating lease right-of-use assets | |
| 1,169,740 | | |
| 1,188,616 | |
| Property and equipment, net | |
| 1,001,440 | | |
| 1,023,561 | |
| Goodwill | |
| 3,484,200 | | |
| 3,513,170 | |
| Identifiable intangible assets, net | |
| 351,662 | | |
| 329,916 | |
| Other assets | |
| 386,938 | | |
| 376,722 | |
| Total Assets | |
$ | 7,665,293 | | |
$ | 7,689,631 | |
| Liabilities and Equity | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Payables and accruals | |
$ | 874,016 | | |
$ | 932,736 | |
| Current operating lease liabilities | |
| 236,784 | | |
| 245,400 | |
| Current portion of long-term debt and notes
payable | |
| 44,351 | | |
| 70,329 | |
| Total Current Liabilities | |
| 1,155,151 | | |
| 1,248,465 | |
| Non-current operating lease liabilities | |
| 1,008,394 | | |
| 1,025,867 | |
| Long-term debt, net of current portion | |
| 3,835,211 | | |
| 3,587,675 | |
| Non-current deferred tax liability | |
| 169,793 | | |
| 143,306 | |
| Other non-current liabilities | |
| 106,137 | | |
| 110,303 | |
| Total Liabilities | |
| 6,274,686 | | |
| 6,115,616 | |
| Redeemable non-controlling interests | |
| 34,043 | | |
| 26,297 | |
| Total Equity | |
| 1,356,564 | | |
| 1,547,718 | |
| Total Liabilities and Equity | |
$ | 7,665,293 | | |
$ | 7,689,631 | |
V. Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 2022 and 2023
(In thousands, unaudited)
| | |
2022 | | |
2023 | |
| Operating activities | |
| | | |
| | |
| Net income | |
$ | 37,712 | | |
$ | 61,798 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Distributions from unconsolidated subsidiaries | |
| 5,019 | | |
| 13,521 | |
| Depreciation and amortization | |
| 52,246 | | |
| 53,984 | |
| Provision for expected credit losses | |
| 215 | | |
| (71 | ) |
| Equity in earnings of unconsolidated subsidiaries | |
| (6,759 | ) | |
| (10,195 | ) |
| Gain on sale of assets and businesses | |
| (1,121 | ) | |
| (50 | ) |
| Stock compensation expense | |
| 9,799 | | |
| 11,818 | |
| Amortization of debt discount, premium and issuance costs | |
| 576 | | |
| 748 | |
| Deferred income taxes | |
| 14,601 | | |
| 930 | |
| Changes in operating assets and liabilities, net of effects
of business combinations: | |
| | | |
| | |
| Accounts receivable | |
| (32,497 | ) | |
| 4,170 | |
| Other current assets | |
| (7,789 | ) | |
| (12,098 | ) |
| Other assets | |
| 6,841 | | |
| 3,003 | |
| Accounts payable and accrued expenses | |
| (65,357 | ) | |
| 51,884 | |
| Government advances | |
| (942 | ) | |
| — | |
| Net cash provided by operating activities | |
| 12,544 | | |
| 179,442 | |
| Investing activities | |
| | | |
| | |
| Business combinations, net of cash acquired | |
| (4,960 | ) | |
| (9,085 | ) |
| Purchases of property and equipment | |
| (55,253 | ) | |
| (60,603 | ) |
| Proceeds from sale of assets and businesses | |
| 2,979 | | |
| 104 | |
| Net cash used in investing activities | |
| (57,234 | ) | |
| (69,584 | ) |
| Financing activities | |
| | | |
| | |
| Borrowings on revolving facilities | |
| 275,000 | | |
| 270,000 | |
| Payments on revolving facilities | |
| (210,000 | ) | |
| (330,000 | ) |
| Payments on term loans | |
| — | | |
| (5,258 | ) |
| Borrowings of other debt | |
| 4,800 | | |
| 550 | |
| Principal payments on other debt | |
| (10,429 | ) | |
| (8,648 | ) |
| Dividends paid to common stockholders | |
| (15,897 | ) | |
| (16,048 | ) |
| Repurchase of common stock | |
| (1,914 | ) | |
| (1,709 | ) |
| Increase (decrease) in overdrafts | |
| (1,301 | ) | |
| 280 | |
| Proceeds from issuance of non-controlling interests | |
| 2,434 | | |
| 2,472 | |
| Distributions to and purchases of non-controlling interests | |
| (8,320 | ) | |
| (14,931 | ) |
| Net cash provided by (used in) financing activities | |
| 34,373 | | |
| (103,292 | ) |
| Net increase (decrease) in cash and cash equivalents | |
| (10,317 | ) | |
| 6,566 | |
| Cash and cash equivalents at beginning of period | |
| 108,223 | | |
| 77,440 | |
| Cash and cash equivalents at end of period | |
$ | 97,906 | | |
$ | 84,006 | |
| Supplemental information: | |
| | | |
| | |
| Cash paid for interest, excluding amounts received of $13,352 and $22,465 under the
interest rate cap contract | |
$ | 39,998 | | |
$ | 50,564 | |
| Cash paid for taxes | |
| 7,446 | | |
| 10,008 | |
VI. Condensed Consolidated Statements of Cash Flows
For the Years Ended December 31, 2022 and 2023
(In thousands, unaudited)
| | |
2022 | | |
2023 | |
| Operating activities | |
| | | |
| | |
| Net income | |
$ | 198,026 | | |
$ | 299,731 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Distributions from unconsolidated subsidiaries | |
| 21,911 | | |
| 23,417 | |
| Depreciation and amortization | |
| 205,825 | | |
| 208,742 | |
| Provision for expected credit losses | |
| 174 | | |
| 1,030 | |
| Equity in earnings of unconsolidated subsidiaries | |
| (26,407 | ) | |
| (40,813 | ) |
| Loss on extinguishment of debt | |
| — | | |
| 175 | |
| Gain on sale of assets and businesses | |
| (2,714 | ) | |
| (57 | ) |
| Stock compensation expense | |
| 37,755 | | |
| 43,809 | |
| Amortization of debt discount, premium and issuance costs | |
| 2,272 | | |
| 2,647 | |
| Deferred income taxes | |
| 7,521 | | |
| (16,119 | ) |
| Changes in operating assets and liabilities, net of effects
of business combinations: | |
| | | |
| | |
| Accounts receivable | |
| (52,183 | ) | |
| 1,156 | |
| Other current assets | |
| (4,866 | ) | |
| (29,374 | ) |
| Other assets | |
| 16,491 | | |
| 10,031 | |
| Accounts payable and accrued expenses | |
| (35,190 | ) | |
| 77,683 | |
| Government advances | |
| (83,790 | ) | |
| — | |
| Net cash provided by operating activities | |
| 284,825 | | |
| 582,058 | |
| Investing activities | |
| | | |
| | |
| Business combinations, net of cash acquired | |
| (26,987 | ) | |
| (29,567 | ) |
| Purchases of property, equipment, and other assets | |
| (190,372 | ) | |
| (229,200 | ) |
| Investment in businesses | |
| (17,323 | ) | |
| (9,873 | ) |
| Proceeds from sale of assets and businesses | |
| 8,343 | | |
| 163 | |
| Net cash used in investing activities | |
| (226,339 | ) | |
| (268,477 | ) |
| Financing activities | |
| | | |
| | |
| Borrowings on revolving facilities | |
| 1,120,000 | | |
| 905,000 | |
| Payments on revolving facilities | |
| (835,000 | ) | |
| (1,070,000 | ) |
| Proceeds from term loans | |
| — | | |
| 2,092,232 | |
| Payments on term loans | |
| — | | |
| (2,113,952 | ) |
| Borrowings of other debt | |
| 25,666 | | |
| 31,399 | |
| Principal payments on other debt | |
| (35,594 | ) | |
| (46,946 | ) |
| Dividends paid to common stockholders | |
| (64,589 | ) | |
| (63,904 | ) |
| Repurchase of common stock | |
| (195,528 | ) | |
| (12,759 | ) |
| Decrease in overdrafts | |
| (10,392 | ) | |
| (1,687 | ) |
| Proceeds from issuance of non-controlling interests | |
| 9,530 | | |
| 22,935 | |
| Distributions to and purchases of non-controlling interests | |
| (43,107 | ) | |
| (63,531 | ) |
| Purchase of membership interests of Concentra Group Holdings Parent | |
| (5,876 | ) | |
| (6,268 | ) |
| Net cash used in financing activities | |
| (34,890 | ) | |
| (327,481 | ) |
| Net increase (decrease) in cash and cash equivalents | |
| 23,596 | | |
| (13,900 | ) |
| Cash and cash equivalents at beginning of period | |
| 74,310 | | |
| 97,906 | |
| Cash and cash equivalents at end of period | |
$ | 97,906 | | |
$ | 84,006 | |
| Supplemental information: | |
| | | |
| | |
| Cash paid for interest, excluding amounts received of $19,584 and $82,818 under the
interest rate cap contract | |
$ | 183,453 | | |
$ | 272,261 | |
| Cash paid for taxes | |
| 32,290 | | |
| 88,510 | |
VII. Key Statistics
For the Three Months Ended December 31, 2022 and 2023
(unaudited)
| | |
2022 | | |
2023 | | |
% Change | |
| Critical Illness Recovery Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end of period(a) | |
| 103 | | |
| 107 | | |
| | |
| Revenue (,000) | |
$ | 561,885 | | |
$ | 567,128 | | |
| 0.9 | % |
| Number of patient days(b)(c) | |
| 287,424 | | |
| 277,470 | | |
| (3.5 | )% |
| Number of admissions(b)(d) | |
| 9,275 | | |
| 9,126 | | |
| (1.6 | )% |
| Revenue per patient day(b)(e) | |
$ | 1,947 | | |
$ | 2,037 | | |
| 4.6 | % |
| Occupancy rate(b)(f) | |
| 70 | % | |
| 66 | % | |
| (5.7 | )% |
| Adjusted EBITDA (,000) | |
$ | 44,345 | | |
$ | 57,384 | | |
| 29.4 | % |
| Adjusted EBITDA margin | |
| 7.9 | % | |
| 10.1 | % | |
| | |
| Rehabilitation Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end of period(a) | |
| 31 | | |
| 33 | | |
| | |
| Revenue (,000) | |
$ | 237,855 | | |
$ | 260,166 | | |
| 9.4 | % |
| Number of patient days(b)(c) | |
| 108,857 | | |
| 116,003 | | |
| 6.6 | % |
| Number of admissions(b)(d) | |
| 7,587 | | |
| 8,264 | | |
| 8.9 | % |
| Revenue per patient day(b)(e) | |
$ | 2,011 | | |
$ | 2,063 | | |
| 2.6 | % |
| Occupancy rate(b)(f) | |
| 85 | % | |
| 85 | % | |
| 0.0 | % |
| Adjusted EBITDA (,000) | |
$ | 56,038 | | |
$ | 66,344 | | |
| 18.4 | % |
| Adjusted EBITDA margin | |
| 23.6 | % | |
| 25.5 | % | |
| | |
| Outpatient Rehabilitation | |
| | | |
| | | |
| | |
| Number of clinics operated – end of period(a) | |
| 1,928 | | |
| 1,933 | | |
| | |
| Working days(g) | |
| 63 | | |
| 63 | | |
| | |
| Revenue (,000) | |
$ | 281,091 | | |
$ | 298,235 | | |
| 6.1 | % |
| Number of visits(b)(h) | |
| 2,408,114 | | |
| 2,672,936 | | |
| 11.0 | % |
| Revenue per visit(b)(i) | |
$ | 102 | | |
$ | 100 | | |
| (2.0 | )% |
| Adjusted EBITDA (,000) | |
$ | 15,948 | | |
$ | 22,473 | | |
| 40.9 | % |
| Adjusted EBITDA margin | |
| 5.7 | % | |
| 7.5 | % | |
| | |
| Concentra | |
| | | |
| | | |
| | |
| Number of centers operated – end of period(b) | |
| 540 | | |
| 544 | | |
| | |
| Working days(g) | |
| 63 | | |
| 63 | | |
| | |
| Revenue (,000) | |
$ | 415,003 | | |
$ | 440,740 | | |
| 6.2 | % |
| Number of visits(b)(h) | |
| 2,975,027 | | |
| 3,010,751 | | |
| 1.2 | % |
| Revenue per visit(b)(i) | |
$ | 130 | | |
$ | 137 | | |
| 5.4 | % |
| Adjusted EBITDA (,000) | |
$ | 62,236 | | |
$ | 68,288 | | |
| 9.7 | % |
| Adjusted EBITDA margin | |
| 15.0 | % | |
| 15.5 | % | |
| | |
| (a) | Includes managed locations. |
| (b) | Excludes managed locations. For purposes of the Concentra segment, onsite
clinics are excluded. |
| (c) | Each patient day represents one patient occupying one bed for one day
during the periods presented. |
| (d) | Represents the number of patients admitted to 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 and Concentra centers during the periods presented.
COVID-19 screening and testing services provided by our Concentra segment are not included in these
figures. |
| (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. For purposes of this computation for
the Concentra segment, patient service revenue does not include onsite clinics or revenues generated
from COVID-19 screening and testing services. |
VIII. Key Statistics
For the Years Ended December 31, 2022 and 2023
(unaudited)
| | |
2022 | | |
2023 | | |
% Change | |
| Critical Illness Recovery Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end of period(a) | |
| 103 | | |
| 107 | | |
| | |
| Revenue (,000) | |
$ | 2,234,132 | | |
$ | 2,299,773 | | |
| 2.9 | % |
| Number of patient days(b)(c) | |
| 1,127,911 | | |
| 1,108,492 | | |
| (1.7 | )% |
| Number of admissions(b)(d) | |
| 36,594 | | |
| 36,225 | | |
| (1.0 | )% |
| Revenue per patient day(b)(e) | |
$ | 1,973 | | |
$ | 2,067 | | |
| 4.8 | % |
| Occupancy rate(b)(f) | |
| 69 | % | |
| 68 | % | |
| (1.4 | )% |
| Adjusted EBITDA (,000) | |
$ | 111,344 | | |
$ | 246,015 | | |
| 121.0 | % |
| Adjusted EBITDA margin | |
| 5.0 | % | |
| 10.7 | % | |
| | |
| Rehabilitation Hospital | |
| | | |
| | | |
| | |
| Number of hospitals operated – end of period(a) | |
| 31 | | |
| 33 | | |
| | |
| Revenue (,000) | |
$ | 916,763 | | |
$ | 979,585 | | |
| 6.9 | % |
| Number of patient days(b)(c) | |
| 430,547 | | |
| 446,145 | | |
| 3.6 | % |
| Number of admissions(b)(d) | |
| 29,736 | | |
| 31,627 | | |
| 6.4 | % |
| Revenue per patient day(b)(e) | |
$ | 1,953 | | |
$ | 2,017 | | |
| 3.3 | % |
| Occupancy rate(b)(f) | |
| 85 | % | |
| 85 | % | |
| 0.0 | % |
| Adjusted EBITDA (,000) | |
$ | 198,034 | | |
$ | 221,875 | | |
| 12.0 | % |
| Adjusted EBITDA margin | |
| 21.6 | % | |
| 22.6 | % | |
| | |
| Outpatient Rehabilitation | |
| | | |
| | | |
| | |
| Number of clinics operated – end of period(a) | |
| 1,928 | | |
| 1,933 | | |
| | |
| Working days(g) | |
| 255 | | |
| 254 | | |
| | |
| Revenue (,000) | |
$ | 1,125,282 | | |
$ | 1,188,914 | | |
| 5.7 | % |
| Number of visits(b)(h) | |
| 9,573,980 | | |
| 10,657,558 | | |
| 11.3 | % |
| Revenue per visit(b)(i) | |
$ | 103 | | |
$ | 100 | | |
| (2.9 | )% |
| Adjusted EBITDA (,000) | |
$ | 101,860 | | |
$ | 111,868 | | |
| 9.8 | % |
| Adjusted EBITDA margin | |
| 9.1 | % | |
| 9.4 | % | |
| | |
| Concentra | |
| | | |
| | | |
| | |
| Number of centers operated – end of period(b) | |
| 540 | | |
| 544 | | |
| | |
| Working days(g) | |
| 255 | | |
| 254 | | |
| | |
| Revenue (,000) | |
$ | 1,724,359 | | |
$ | 1,838,081 | | |
| 6.6 | % |
| Number of visits(b)(h) | |
| 12,579,468 | | |
| 12,777,632 | | |
| 1.6 | % |
| Revenue per visit(b)(i) | |
$ | 127 | | |
$ | 135 | | |
| 6.3 | % |
| Adjusted EBITDA (,000) | |
$ | 334,337 | | |
$ | 361,334 | | |
| 8.1 | % |
| Adjusted EBITDA margin | |
| 19.4 | % | |
| 19.7 | % | |
| | |
| (a) | Includes managed locations. |
| (b) | Excludes managed locations. For purposes of the Concentra segment, onsite
clinics are excluded. |
| (c) | Each patient day represents one patient occupying one bed for one day
during the periods presented. |
| (d) | Represents the number of patients admitted to 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 and Concentra centers during the periods presented.
COVID-19 screening and testing services provided by our Concentra segment are not included in these
figures. |
| (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. For purposes of this computation for
the Concentra segment, patient service revenue does not include onsite clinics or revenues generated
from COVID-19 screening and testing services. |
IX. Net Income to Adjusted EBITDA Reconciliation
For the Three Months and Years Ended December 31, 2022 and
2023
(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,
net income, income from operations, cash flows generated by operations, investing or financing activities, or other financial statement
data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA
is not a measurement determined in accordance with GAAP and is thus susceptible to varying definitions, Adjusted EBITDA as presented
may not be comparable to other similarly titled measures of other companies.
The following table reconciles
net income to Adjusted EBITDA for Select Medical. Adjusted EBITDA is used by Select Medical to report its segment performance. Adjusted
EBITDA is defined as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt,
stock compensation expense, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
| | |
Three
Months Ended
December 31, | | |
Years
Ended
December 31, | |
| | |
2022 | | |
2023 | | |
2022 | | |
2023 | |
| Net income | |
$ | 37,712 | | |
$ | 61,798 | | |
$ | 198,026 | | |
$ | 299,731 | |
| Income tax expense | |
| 8,570 | | |
| 11,850 | | |
| 62,553 | | |
| 82,625 | |
| Interest expense | |
| 47,341 | | |
| 50,800 | | |
| 169,111 | | |
| 198,639 | |
| Equity in earnings of unconsolidated subsidiaries | |
| (6,759 | ) | |
| (10,195 | ) | |
| (26,407 | ) | |
| (40,813 | ) |
| Loss on early retirement of debt | |
| — | | |
| — | | |
| — | | |
| 14,692 | |
| Income from operations | |
$ | 86,864 | | |
$ | 114,253 | | |
$ | 403,283 | | |
$ | 554,874 | |
| Stock compensation expense: | |
| | | |
| | | |
| | | |
| | |
| Included in general and administrative | |
| 8,560 | | |
| 9,658 | | |
| 30,555 | | |
| 36,041 | |
| Included in cost of services | |
| 1,239 | | |
| 2,161 | | |
| 7,200 | | |
| 7,768 | |
| Depreciation and amortization | |
| 52,246 | | |
| 53,984 | | |
| 205,825 | | |
| 208,742 | |
| Adjusted EBITDA | |
$ | 148,909 | | |
$ | 180,056 | | |
$ | 646,863 | | |
$ | 807,425 | |
| | |
| | | |
| | | |
| | | |
| | |
| Critical illness recovery hospital | |
$ | 44,345 | | |
$ | 57,384 | | |
$ | 111,344 | | |
$ | 246,015 | |
| Rehabilitation hospital | |
| 56,038 | | |
| 66,344 | | |
| 198,034 | | |
| 221,875 | |
| Outpatient rehabilitation | |
| 15,948 | | |
| 22,473 | | |
| 101,860 | | |
| 111,868 | |
| Concentra | |
| 62,236 | | |
| 68,288 | | |
| 334,337 | | |
| 361,334 | |
| Other(a) | |
| (29,658 | ) | |
| (34,433 | ) | |
| (98,712 | ) | |
| (133,667 | ) |
| Adjusted EBITDA | |
$ | 148,909 | | |
$ | 180,056 | | |
$ | 646,863 | | |
$ | 807,425 | |
| (a) | Other primarily includes general and administrative costs and other
operating income, as discussed further above. |
X. Reconciliation of Earnings per Common Share
to Adjusted Earnings per Common Share
For the Years Ended December 31, 2022 and 2023
(In thousands, except per share amounts, unaudited)
Adjusted net income attributable
to common shares and adjusted earnings per common share are not measures of financial performance under GAAP. Items excluded from adjusted
net income attributable to common shares and adjusted earnings per common share are significant components in understanding and assessing
financial performance. Select Medical believes that the presentation of adjusted net income attributable to common shares and adjusted
earnings per common share are important to investors because they are reflective of the financial performance of Select Medical’s
ongoing operations and provide better comparability of its results of operations between periods. Adjusted net income attributable to
common shares and adjusted earnings per common share should not be considered in isolation or as alternatives to, or substitutes for,
net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the
consolidated financial statements as indicators of financial performance or liquidity. Because adjusted net income attributable to common
shares and adjusted earnings per common share are not measurements determined in accordance with GAAP and are thus susceptible to varying
calculations, adjusted net income attributable to common shares and adjusted earnings per common share as presented may not be comparable
to other similarly titled measures of other companies.
The following tables reconcile
net income attributable to common shares and earnings per common share on a fully diluted basis to adjusted net income attributable to
common shares and adjusted earnings per common share on a fully diluted basis. There were no adjustments to earnings per common share
for the three months ended December 31, 2022 and 2023.
| | |
Years Ended December 31, | |
| | |
2022 | | |
Per Share(a) | | |
2023 | | |
Per Share(a) | |
| Net income attributable to common shares(a) | |
$ | 153,385 | | |
$ | 1.23 | | |
$ | 234,718 | | |
$ | 1.91 | |
| Adjustments:(b) | |
| | | |
| | | |
| | | |
| | |
| Loss on early retirement of debt, net of
tax | |
| — | | |
| — | | |
| 10,019 | | |
| 0.08 | |
| Adjusted net income attributable to common shares | |
$ | 153,385 | | |
$ | 1.23 | | |
$ | 244,737 | | |
$ | 1.99 | |
| (a) | Net income attributable to common shares and earnings per common share
are calculated based on the diluted weighted average common shares outstanding, as presented in table
III. |
| (b) | Adjustments to net income attributable to common shares include estimated
income tax and non-controlling interest impacts and are calculated based on the diluted weighted average
common shares outstanding. The estimated income tax impact, which is determined using tax rates based
on the nature of the adjustment and the jurisdiction in which the adjustment occurred, includes both
current and deferred income tax expense or benefit. |
XI. Net Income
to Adjusted EBITDA Reconciliation
Business Outlook for the Year Ending December 31, 2024
(In millions, unaudited)
The following is a reconciliation
of full year 2024 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 2024 expectations
| | |
Range | |
| Non-GAAP Measure Reconciliation | |
Low | | |
High | |
| Net income attributable to Select Medical | |
$ | 243 | | |
$ | 282 | |
| Net income attributable to non-controlling interests | |
| 59 | | |
| 61 | |
| Net income | |
| 302 | | |
| 343 | |
| Income tax expense | |
| 95 | | |
| 108 | |
| Interest expense | |
| 217 | | |
| 217 | |
| Equity in earnings of unconsolidated subsidiaries | |
| (43 | ) | |
| (47 | ) |
| Income from operations | |
| 571 | | |
| 621 | |
| Stock compensation expense | |
| 48 | | |
| 48 | |
| Depreciation and amortization | |
| 211 | | |
| 211 | |
| Adjusted EBITDA | |
$ | 830 | | |
$ | 880 | |
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