EX-99.1 2 tm227531d1_ex99-1.htm EXHIBIT 99.1

 

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, 2021 and Cash Dividend

 

MECHANICSBURG, PENNSYLVANIA — February 24, 2022 — Select Medical Holdings Corporation (“Select Medical,” “we,” “us,” or “our”) (NYSE: SEM) today announced results for its fourth quarter and year ended December 31, 2021 and the declaration of a cash dividend.

 

For the fourth quarter ended December 31, 2021, revenue increased 6.8% to $1,559.8 million, compared to $1,460.5 million for the same quarter, prior year. Income from operations was $77.5 million for the fourth quarter ended December 31, 2021, compared to $163.3 million for the same quarter, prior year. Income from operations included $8.0 million and $36.2 million of other operating income related to the recognition of payments received under the Provider Relief Fund for the fourth quarters ended December 31, 2021 and 2020, respectively. Refer to “CARES Act Provider Relief Fund” for further discussion. Net income was $66.3 million for the fourth quarter ended December 31, 2021, compared to $102.2 million for the same quarter, prior year. For the fourth quarter ended December 31, 2021, net income included a pre-tax gain on sale of businesses of $2.2 million. For the fourth quarter ended December 31, 2020, net income included a pre-tax loss on sale of businesses of $0.3 million. Adjusted EBITDA was $138.4 million for the fourth quarter ended December 31, 2021, compared to $221.3 million for the same quarter, prior year. Earnings per common share was $0.37 for the fourth quarter ended December 31, 2021, compared to $0.57 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. A reconciliation of earnings per common share to adjusted earnings per common share is presented in table X of this release.

 

For the year ended December 31, 2021, revenue increased 12.2% to $6,204.5 million, compared to $5,531.7 million for the prior year. Income from operations increased 25.7% to $713.8 million for the year ended December 31, 2021, compared to $567.7 million for the prior year. Income from operations included $123.8 million and $90.0 million of other operating income related to the recognition of payments received under the Provider Relief Fund for the years ended December 31, 2021 and 2020, respectively. Refer to “CARES Act Provider Relief Fund” for further discussion. Net income increased 45.1% to $499.9 million for the year ended December 31, 2021, compared to $344.6 million for the prior year. For the years ended December 31, 2021 and 2020, net income included pre-tax gains on sales of businesses of $2.2 million and $12.4 million, respectively. Adjusted EBITDA increased 18.3% to $947.4 million for the year ended December 31, 2021, compared to $800.6 million for the prior year. Earnings per common share increased to $2.98 for the year ended December 31, 2021, compared to $1.93 for the prior year. Adjusted earnings per common share was $2.98 for the year ended December 31, 2021, compared to $1.89 for the prior year. Adjusted earnings per common share excluded the gains on sales of businesses and their related tax effects for both the years ended December 31, 2021 and 2020. 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.

 

Please refer to “Effects of the COVID-19 Pandemic on Select Medical’s Results of Operations” below for further discussion regarding the impact of the coronavirus disease 2019 (“COVID-19”) pandemic on Select Medical’s operating results.

 

 

 1 

 

 

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, 2021, Select Medical operated 104 critical illness recovery hospitals in 28 states, 30 rehabilitation hospitals in 12 states, and 1,881 outpatient rehabilitation clinics in 38 states and the District of Columbia. Concentra operated 518 occupational health centers in 41 states. At December 31, 2021, Select Medical had operations in 46 states and the District of Columbia. Information about Select Medical is available at www.selectmedical.com.

 

CARES Act Provider Relief Fund

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to COVID-19, and for reimbursing eligible health care providers for health care related expenses and lost revenues that are attributable to COVID-19.

 

For the three months and year ended December 31, 2021, Select Medical recognized $8.0 million and $123.8 million of payments received under the Provider Relief Fund as other operating income, respectively. For the three months and year ended December 31, 2020, Select Medical recognized $36.2 million and $90.0 million of payments received under the Provider Relief Fund as other operating income, respectively.

 

Critical Illness Recovery Hospital Segment

 

For the fourth quarter ended December 31, 2021, revenue for the critical illness recovery hospital segment increased 7.3% to $577.2 million, compared to $537.9 million for the same quarter, prior year. Adjusted EBITDA for the critical illness recovery hospital segment was $24.6 million for the fourth quarter ended December 31, 2021, compared to $75.3 million for the same quarter, prior year. For the fourth quarter ended December 31, 2021, Adjusted EBITDA included $2.0 million of other operating income related to the outcome of litigation with the Centers for Medicare & Medicaid Services. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 4.3% for the fourth quarter ended December 31, 2021, compared to 14.0% for the same quarter, prior year. Certain critical illness recovery hospital key statistics are presented in table VII of this release for both the fourth quarters ended December 31, 2021 and 2020.

 

For the year ended December 31, 2021, revenue for the critical illness recovery hospital segment increased 8.1% to $2,246.8 million, compared to $2,077.5 million for the prior year. Adjusted EBITDA for the critical illness recovery hospital segment was $268.0 million for the year ended December 31, 2021, compared to $342.4 million for the prior year. For the year ended December 31, 2021, Adjusted EBITDA included $19.9 million of other operating income related to the outcome of litigation with the Centers for Medicare & Medicaid Services. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 11.9% for the year ended December 31, 2021, compared to 16.5% for the prior year. Certain critical illness recovery hospital key statistics are presented in table VIII of this release for both the years ended December 31, 2021 and 2020.

 

 2 

 

 

Rehabilitation Hospital Segment

 

For the fourth quarter ended December 31, 2021, revenue for the rehabilitation hospital segment increased 10.5% to $216.4 million, compared to $195.9 million for the same quarter, prior year. Adjusted EBITDA for the rehabilitation hospital segment was $39.3 million for the fourth quarter ended December 31, 2021, compared to $42.4 million for the same quarter, prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 18.2% for the fourth quarter ended December 31, 2021, compared to 21.6% 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, 2021 and 2020.

 

For the year ended December 31, 2021, revenue for the rehabilitation hospital segment increased 15.6% to $849.3 million, compared to $734.7 million for the prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 20.6% to $184.7 million for the year ended December 31, 2021, compared to $153.2 million for the prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 21.7% for the year ended December 31, 2021, compared to 20.9% for the prior year. Certain rehabilitation hospital key statistics are presented in table VIII of this release for both the years ended December 31, 2021 and 2020.

 

Outpatient Rehabilitation Segment

 

For the fourth quarter ended December 31, 2021, revenue for the outpatient rehabilitation segment increased 7.8% to $277.5 million, compared to $257.5 million for the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $27.6 million for the fourth quarter ended December 31, 2021, compared to $27.7 million for the same quarter, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 9.9% for the fourth quarter ended December 31, 2021, compared to 10.8% for the same quarter, prior year. Certain outpatient rehabilitation key statistics are presented in table VII of this release for both the fourth quarters ended December 31, 2021 and 2020.

 

For the year ended December 31, 2021, revenue for the outpatient rehabilitation segment increased 17.9% to $1,084.4 million, compared to $919.9 million for the prior year. Adjusted EBITDA for the outpatient rehabilitation segment increased 74.7% to $138.3 million for the year ended December 31, 2021, compared to $79.2 million for the prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 12.8% for the year ended December 31, 2021, compared to 8.6% for the prior year. Certain outpatient rehabilitation key statistics are presented in table VIII of this release for both the years ended December 31, 2021 and 2020.

 

Concentra Segment

 

For the fourth quarter ended December 31, 2021, revenue for the Concentra segment increased 3.0% to $410.6 million, compared to $398.7 million for the same quarter, prior year. Adjusted EBITDA for the Concentra segment increased 1.9% to $70.7 million for the fourth quarter ended December 31, 2021, compared to $69.4 million for the same quarter, prior year. Adjusted EBITDA included other operating income of $0.9 million related to the recognition of payments received under the Provider Relief Fund for the fourth quarter ended December 31, 2021. The Adjusted EBITDA margin for the Concentra segment was 17.2% for the fourth quarter ended December 31, 2021, compared to 17.4% for the same quarter, prior year. Certain Concentra key statistics are presented in table VII of this release for both the fourth quarters ended December 31, 2021 and 2020.

 

For the year ended December 31, 2021, revenue for the Concentra segment increased 15.4% to $1,732.0 million, compared to $1,501.4 million for the prior year. Adjusted EBITDA for the Concentra segment increased 54.1% to $389.6 million for the year ended December 31, 2021, compared to $252.9 million for the prior year. Adjusted EBITDA included other operating income of $34.7 million and $1.1 million related to the recognition of payments received under the Provider Relief Fund for the years ended December 31, 2021 and 2020, respectively. The Adjusted EBITDA margin for the Concentra segment was 22.5% for the year ended December 31, 2021, compared to 16.8% for the prior year. Certain Concentra key statistics are presented in table VIII of this release for both the years ended December 31, 2021 and 2020.

 

 3 

 

 

Effects of the COVID-19 Pandemic on Select Medical’s Results of Operations

 

Beginning in March 2020, state governments placed significant restrictions on businesses and mandated closures of non-essential or non-life sustaining businesses, causing many employers to furlough their workforce and temporarily cease or significantly reduce their operations. State governments also implemented restrictions on travel and individual activities outside of the home, closed schools, and mandated other social distancing measures. At the same time, hospitals and other facilities began suspending elective surgeries. In an effort to ensure hospitals and health systems had the capacity to absorb and effectively manage surges of COVID-19 patients, a number of waivers and modifications of certain requirements under the Medicare, Medicaid and Children’s Health Insurance Program (“CHIP”) programs were authorized in March 2020, including certain regulations under the Medicare program which govern admissions into Select Medical’s critical illness recovery hospitals and rehabilitation hospitals. Specifically, Select Medical’s critical illness recovery hospitals which are certified as long-term care hospitals (“LTCHs”) became exempt from the greater-than-25-day average length of stay requirement for all cost reporting periods that include the COVID-19 public health emergency period. Select Medical’s rehabilitation hospitals which are certified as inpatient rehabilitation facilities (“IRFs”) could exclude patients admitted solely to respond to the emergency from the calculation of the “60 percent rule” thresholds to receive payment as an IRF. The COVID-19 public health emergency period has been extended and is currently in effect through April 16, 2022.

 

The adverse effects of the COVID-19 pandemic, along with the actions of governmental authorities and those in the private sector to limit the spread of COVID-19, caused disruptions in each of Select Medical’s segments; these disruptions were most significant within the outpatient rehabilitation and Concentra segments. By mid-March 2020, Select Medical’s outpatient rehabilitation clinics began experiencing significantly less patient visit volume due to declines in patient referrals from physicians, a reduction in workers’ compensation injury visits resulting from the temporary closure of businesses, and the suspension of elective surgeries that normally increase the demand for outpatient rehabilitation services. Select Medical’s Concentra centers experienced similar declines in patient visit volume due to businesses furloughing their workforce and temporarily ceasing or significantly reducing their operations. Since March 2021, Select Medical’s outpatient rehabilitation clinics and Concentra centers have experienced patient visit volumes which approximate or exceed the levels experienced in the months prior to the widespread emergence of COVID-19 in the United States. Although it had experienced temporary disruptions in its core businesses as a result of the COVID-19 pandemic, Select Medical’s Concentra segment was able to expand its services to provide COVID-19 screening and testing.

 

 4 

 

 

Select Medical’s critical illness recovery hospitals have played a critical role in caring for patients during the COVID-19 pandemic. The relaxation of certain admission restrictions contributed to volume increases in certain of its hospitals during the year ended December 31, 2020. The revenue of Select Medical’s critical illness recovery hospitals and rehabilitation hospitals has also benefited from the temporary suspension of the 2.0% cut to Medicare payments due to sequestration, which began May 1, 2020 following the enactment of the CARES Act, and was extended through March 31, 2022. From April 1, 2022 through June 30, 2022, the sequestration cut will be 1.0% and the full 2.0% sequestration cut will resume July 1, 2022. Certain of Select Medical’s rehabilitation hospitals did experience temporary declines in patient volume in areas more significantly impacted by the spread of COVID-19 and as a result of the suspension of elective surgeries at hospitals and other facilities, which consequently reduced the demand for inpatient rehabilitation services. Additionally, some of Select Medical’s rehabilitation hospitals temporarily restricted admissions as a result of the COVID-19 pandemic. The declines in volume occurred principally in April and May 2020. Beginning at the onset of the COVID-19 pandemic, both Select Medical’s critical illness recovery hospitals and rehabilitation hospitals modified certain of their protocols in order to follow the guidelines and recommendations for patient treatment and for the protection of their patients and staff members. This has resulted in increased labor costs as well as additional costs resulting from the purchase of personal protective equipment. Further, labor shortages have become more pronounced as a result of the COVID-19 pandemic. Select Medical has experienced an increase in labor costs in its hospitals as a result of constrained staffing due to a shortage of healthcare workers, an increased dependence on contract clinical workers, the loss of unvaccinated employees in jurisdictions requiring vaccination, and federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic. Increased turnover rates within Select Medical’s employee base have also lead to increased overtime to meet demand and increased wage rates to attract and retain employees.

 

The unpredictable effects of the COVID-19 pandemic, including the duration and extent of disruption on Select Medical’s operations, creates uncertainties about Select Medical’s future operating results and financial condition. Select Medical has provided revenue and certain operating statistics below for each of its segments for each of the periods presented. Please refer to the risk factors in Select Medical’s Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion.

 

 5 

 

 

   Critical Illness Recovery Hospital 
   Revenue   Patient Days   Occupancy Rate   Number of
Hospitals Owned(1)		 
   2019   2020   2021   2019   2020   2021   2019   2020   2021   2019   2020   2021 
                                                 
   (in thousands)                                     
January  $149,799   $163,238   $199,611    86,238    90,783    100,933    69%   69%   75%   96    100    99 
February   145,586    165,375    190,703    80,806    87,844    92,036    71%   72%   75%   96    100    99 
March   162,149    171,908    204,558    91,085    91,831    100,149    73%   70%   74%   96    100    99 
Three Months Ended March 31  $457,534   $500,521   $594,872    258,129    270,458    293,118    71%   70%   75%   96    100    99 
                                                             
April  $156,231   $171,445   $185,934    88,357    90,710    91,506    70%   71%   70%   99    100    99 
May   156,422    178,223    183,471    89,350    95,191    93,708    69%   72%   70%   99    100    99 
June   148,490    169,958    174,654    85,153    90,988    87,767    68%   71%   68%   99    100    99 
Three Months Ended June 30  $461,143   $519,626   $544,059    262,860    276,889    272,981    69%   72%   69%   99    100    99 
Six Months Ended June 30  $918,677   $1,020,147   $1,138,931    520,989    547,347    566,099    70%   71%   72%   99    100    99 
                                                             
July  $151,416   $175,253   $171,483    87,143    94,144    88,119    67%   71%   65%   99    99    100 
August   155,485    173,967    178,240    86,553    93,964    91,756    66%   71%   68%   99    99    100 
September   155,991    170,234    180,923    84,393    90,955    92,579    67%   71%   71%   99    99    100 
Three Months Ended September 30  $462,892   $519,454   $530,646    258,089    279,063    272,454    67%   71%   68%   99    99    100 
Nine Months Ended September 30  $1,381,569   $1,539,601   $1,669,577    779,078    826,410    838,553    69%   71%   70%   99    99    100 
                                                             
October  $152,791   $181,251   $195,444    87,188    95,616    99,935    66%   71%   71%   100    100    104 
November   150,399    174,133    191,134    84,540    92,651    96,102    67%   71%   71%   100    99    104 
December   151,759    182,514    190,617    87,555    97,079    98,449    67%   72%   70%   100    99    104 
Three Months Ended December 31  $454,949   $537,898   $577,195    259,283    285,346    294,486    67%   71%   71%   100    99    104 
Twelve Months Ended December 31  $1,836,518   $2,077,499   $2,246,772    1,038,361    1,111,756    1,133,039    68%   71%   71%   100    99    104 

 

   Rehabilitation Hospital 
   Revenue   Patient Days   Occupancy Rate   Number of
Hospitals Owned(1)		 
   2019   2020   2021   2019   2020   2021   2019   2020   2021   2019   2020   2021 
                                                 
   (in thousands)                                     
January  $50,615   $61,673   $68,297    27,434    32,111    34,404    74%   79%   82%   17    19    20 
February   48,080    60,690    64,202    25,442    31,813    32,178    76%   84%   84%   17    19    20 
March   55,863    59,656    75,305    29,940    30,644    35,857    78%   76%   85%   18    19    20 
Three Months Ended March 31  $154,558   $182,019   $207,804    82,816    94,568    102,439    76%   79%   84%   18    19    20 
                                                             
April  $51,991   $45,878   $70,295    28,266    23,553    34,861    76%   61%   85%   18    19    20 
May   56,019    57,815    71,190    29,730    29,787    35,604    75%   73%   84%   19    19    20 
June   52,364    64,974    71,181    28,529    30,741    34,483    73%   78%   84%   19    19    20 
Three Months Ended June 30  $160,374   $168,667   $212,666    86,525    84,081    104,948    75%   71%   85%   19    19    20 
Six Months Ended June 30  $314,932   $350,686   $420,470    169,341    178,649    207,387    76%   75%   84%   19    19    20 
                                                             
July  $57,077   $62,312   $70,467    30,054    31,986    34,894    75%   81%   83%   19    18    20 
August   58,072    63,673    71,682    30,228    32,518    34,835    75%   83%   83%   19    18    20 
September   58,220    62,090    70,285    29,172    31,176    33,224    75%   82%   81%   19    18    20 
Three Months Ended September 30  $173,369   $188,075   $212,434    89,454    95,680    102,953    75%   82%   82%   19    18    20 
Nine Months Ended September 30  $488,301   $538,761   $632,904    258,795    274,329    310,340    75%   77%   84%   19    18    20 
                                                             
October  $61,975   $66,591   $72,509    31,767    33,378    35,908    78%   82%   85%   19    19    20 
November   60,353    64,610    71,865    31,022    31,581    34,491    79%   80%   84%   19    19    20 
December   60,342    64,711    72,062    31,447    31,545    33,962    78%   78%   80%   19    19    20 
Three Months Ended December 31  $182,670   $195,912   $216,436    94,236    96,504    104,361    78%   80%   83%   19    19    20 
Twelve Months Ended December 31  $670,971   $734,673   $849,340    353,031    370,833    414,701    76%   78%   83%   19    19    20 

 

 6 

 

 

   Outpatient Rehabilitation 
   Revenue   Visits   Working Days(2) 
   2019   2020   2021   2019   2020   2021   2019   2020   2021 
                                     
   (in thousands)                         
January  $83,185   $90,924   $76,763    687,007    757,171    625,964    22    22    20 
February   78,573    88,239    77,063    658,610    739,061    641,942    20    20    20 
March   85,147    76,086    98,135    708,866    626,433    832,248    21    22    23 
Three Months Ended March 31  $246,905   $255,249   $251,961    2,054,483    2,122,665    2,100,154    63    64    63 
                                              
April  $90,230   $49,084   $95,251    762,914    386,108    810,314    22    22    22 
May   90,272    51,186    89,030    759,829    409,703    758,773    22    20    20 
June   81,389    66,868    96,128    680,762    546,456    835,774    20    22    22 
Three Months Ended June 30  $261,891   $167,138   $280,409    2,203,505    1,342,267    2,404,861    64    64    64 
Six Months Ended June 30  $508,796   $422,387   $532,370    4,257,988    3,464,932    4,505,015    127    128    127 
                                              
July  $89,267   $77,793   $90,352    754,102    636,826    780,118    22    22    21 
August   90,687    79,034    93,056    743,813    651,738    798,459    22    21    22 
September   85,376    83,215    91,132    706,413    694,808    768,493    20    21    21 
Three Months Ended September 30  $265,330   $240,042   $274,540    2,204,328    1,983,372    2,347,070    64    64    64 
Nine Months Ended September 30  $774,126   $662,429   $806,910    6,462,316    5,448,304    6,852,085    191    192    191 
                                              
October  $96,868   $88,274   $91,705    808,649    745,562    772,068    23    22    21 
November   87,072    82,102    93,345    722,607    685,885    797,756    20    20    21 
December   87,945    87,108    92,401    725,710    713,593    771,715    21    22    21 
Three Months Ended December 31  $271,885   $257,484   $277,451    2,256,966    2,145,040    2,341,539    64    64    63 
Twelve Months Ended December 31  $1,046,011   $919,913   $1,084,361    8,719,282    7,593,344    9,193,624    255    256    254 

 

   Concentra 
   Revenue   Visits   Working Days(2) 
   2019   2020   2021   2019   2020   2021   2019   2020   2021 
                                     
   (in thousands)                         
January  $133,507   $141,236   $127,103    985,598    1,032,069    867,793    22    22    20 
February   126,309    133,690    132,349    919,065    965,741    869,910    20    20    20 
March   136,505    123,609    163,388    1,006,944    879,585    1,057,871    21    22    23 
Three Months Ended March 31  $396,321   $398,535   $422,840    2,911,607    2,877,395    2,795,574    63    64    63 
                                              
April  $140,050   $91,178   $152,143    1,040,543    610,555    999,622    22    22    22 
May   143,183    99,228    142,228    1,073,763    674,629    956,250    22    20    20 
June   130,218    121,932    162,001    988,783    865,896    1,074,206    20    22    22 
Three Months Ended June 30  $413,451   $312,338   $456,372    3,103,089    2,151,080    3,030,078    64    64    64 
Six Months Ended June 30  $809,772   $710,873   $879,212    6,014,696    5,028,475    5,825,652    127    128    127 
                                              
July  $142,385   $132,465   $146,509    1,057,809    930,427    1,033,266    22    22    21 
August   144,452    130,291    150,333    1,087,165    933,555    1,106,356    22    21    22 
September   135,063    129,103    145,348    1,005,929    963,065    1,084,009    20    21    21 
Three Months Ended September 30  $421,900   $391,859   $442,190    3,150,903    2,827,047    3,223,631    64    64    64 
Nine Months Ended September 30  $1,231,672   $1,102,732   $1,321,402    9,165,599    7,855,522    9,049,283    191    192    191 
                                              
October  $149,260   $139,365   $143,609    1,113,408    1,011,816    1,072,531    23    22    21 
November   123,152    126,431    135,417    908,159    867,918    991,937    19    19    21 
December   124,733    132,906    131,613    881,699    892,648    938,973    21    22    21 
Three Months Ended December 31  $397,145   $398,702   $410,639    2,903,266    2,772,382    3,003,441    63    63    63 
Twelve Months Ended December 31  $1,628,817   $1,501,434   $1,732,041    12,068,865    10,627,904    12,052,724    254    255    254 

 

 

(1)            Represents the number of hospitals owned at the end of each period presented.

 

(2)            Represents the number of days in which normal business operations were conducted during the periods presented.

 

 7 

 

 

Purchase of Concentra Interest

 

On December 24, 2021, Select Medical, Welsh, Carson, Anderson & Stowe XII, L.P. (“WCAS”), and Dignity Health Holding Corporation (“DHHC”) entered into an agreement pursuant to which Select Medical acquired substantially all of the outstanding membership interests of Concentra Group Holdings Parent that it did not already own from WCAS, DHHC, and the other equity holders of Concentra Group Holdings Parent for approximately $660.7 million.

 

This purchase was in lieu of, and deemed to be, the exercise of the third put right provided to certain equity holders under the terms of the Amended and Restated Limited Liability Company Agreement of Concentra Group Holdings Parent, LLC, dated as of February 1, 2018. Following this purchase, Select Medical owns approximately 99.3% of the outstanding membership interests of Concentra Group Holdings Parent, LLC on a fully diluted basis and 100.0% of the outstanding voting membership interests of Concentra Group Holdings Parent, LLC.

 

Dividend

 

On February 17, 2022, Select Medical’s board of directors declared a cash dividend of $0.125 per share. The dividend will be payable on or about March 16, 2022 to stockholders of record as of the close of business on March 4, 2022.

 

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, 2023, 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.

 

During the fourth quarter ended December 31, 2021, Select Medical repurchased 387,212 shares at a cost of approximately $11.1 million, or $28.65 per share, which includes transaction costs. During the year ended December 31, 2021, Select Medical repurchased 1,770,720 shares at a cost of approximately $58.6 million, or $33.09 per share, which includes transaction costs. Since the inception of the program through December 31, 2021, Select Medical has repurchased 40,351,628 shares at a cost of approximately $415.2 million, or $10.29 per share, which includes transaction costs.

 

Business Outlook for Revenue

 

Given the uncertainties due to significantly increased labor costs resulting from higher than expected use of agency clinical staff, Select Medical is issuing its business outlook at this time for revenue only for 2022. Select Medical expects revenue to be in the range of $6.25 billion to $6.40 billion for the full year of 2022. Select Medical is also reaffirming its previously issued three-year compound annual growth rate target for revenue only, which is expected to be in the range of 4% to 6% for 2021 through 2023. Select Medical intends to readdress its business outlook and target compound annual growth rates for Adjusted EBITDA and earnings per common share when the labor climate stabilizes.

 

 8 

 

 

Conference Call

 

Select Medical will host a conference call regarding its results for the fourth quarter and full year ended December 31, 2021, as well as its business outlook and the impact of the COVID-19 pandemic on each of its reporting segments, on Friday, February 25, 2022, at 9:00am ET. The domestic dial in number for the call is 1-866-440-2669. The international dial in number is 1-409-220-9844. The conference ID for the call is 7334656. The conference call will be webcast simultaneously and can be accessed at Select Medical Holdings Corporation’s website www.selectmedicalholdings.com.

 

For those unable to participate in the conference call, a replay will be available until 12:00pm ET, March 4, 2022. The replay number is 1-855-859-2056 (domestic) or 1-404-537-3406 (international). The conference ID for the replay will be 7334656. The replay can also be accessed at Select Medical Holdings Corporation’s website, www.selectmedicalholdings.com.

 

 9 

 

 

* * * * *

 

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 2022 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:

 

•developments related to the COVID-19 pandemic including, but not limited to, the duration and severity of the pandemic, additional measures taken by government authorities and the private sector to limit the spread of COVID-19, and further legislative and regulatory actions which impact healthcare providers, including actions that may impact the Medicare program;

 

•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;

 

•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;

 

•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;

 

•shortages in qualified nurses, therapists, physicians, or other licensed providers, or the inability to attract or retain healthcare professionals due to the heightened risk of infection related to the COVID-19 pandemic, could increase our operating costs significantly or limit our ability to staff our facilities;

 

•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, 2021.

 

 10 

 

 

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

 11 

 

 

I. Condensed Consolidated Statements of Operations

For the Three Months Ended December 31, 2020 and 2021

(In thousands, except per share amounts, unaudited)

 

   2020   2021   % Change 
Revenue  $1,460,494   $1,559,811    6.8%
Costs and expenses:               
Cost of services, exclusive of depreciation and amortization   1,246,594    1,402,570    12.5 
General and administrative   35,229    37,950    7.7 
Depreciation and amortization   51,526    51,943    0.8 
Total costs and expenses   1,333,349    1,492,463    11.9 
Other operating income   36,184    10,191    N/M 
Income from operations   163,329    77,539    (52.5)
Other income and expense:               
Equity in earnings of unconsolidated subsidiaries   9,763    11,248    15.2 
Gain (loss) on sale of businesses   (303)   2,155    N/M 
Interest income   —    601    N/M 
Interest expense   (35,512)   (33,870)   (4.6)
Income before income taxes   137,277    57,673    (58.0)
Income tax expense (benefit)   35,062    (8,637)   N/M 
Net income   102,215    66,310    (35.1)
Less: Net income attributable to non-controlling interests   24,941    16,453    (34.0)
Net income attributable to Select Medical  $77,274   $49,857    (35.5)%
Basic and diluted earnings per common share:(1)  $0.57   $0.37      

 

 

(1)            Refer to table III for calculation of earnings per common share.

 

N/M        Not meaningful.

 

12

 

II. Condensed Consolidated Statements of Operations

For the Years Ended December 31, 2020 and 2021

(In thousands, except per share amounts, unaudited)

 

   2020   2021   % Change 
Revenue  $5,531,713   $6,204,515    12.2%
Costs and expenses:               
Cost of services, exclusive of depreciation and amortization   4,710,372    5,285,149    12.2 
General and administrative   138,037    146,975    6.5 
Depreciation and amortization   205,659    202,645    (1.5)
Total costs and expenses   5,054,068    5,634,769    11.5 
Other operating income   90,012    144,028    N/M 
Income from operations   567,657    713,774    25.7 
Other income and expense:               
Equity in earnings of unconsolidated subsidiaries   29,440    44,428    50.9 
Gain on sale of businesses   12,387    2,155    N/M 
Interest income   —    5,350    N/M 
Interest expense   (153,011)   (135,985)   (11.1)
Income before income taxes   456,473    629,722    38.0 
Income tax expense   111,867    129,773    16.0 
Net income   344,606    499,949    45.1 
Less: Net income attributable to non-controlling interests   85,611    97,724    14.1 
Net income attributable to Select Medical  $258,995   $402,225    55.3%
Basic and diluted earnings per common share:(1)  $1.93   $2.98      

 

 

(1)            Refer to table III for calculation of earnings per common share.

 

N/M        Not meaningful.

 

13

 

III. Earnings per Share

For the Three Months and Years Ended December 31, 2020 and 2021

(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, 2020 and 2021:

 

   Basic and Diluted EPS 
   Three Months Ended
December 31,		  

Years Ended

December 31,

 
   2020   2021   2020   2021 
Net income  $102,215   $66,310   $344,606   $499,949 
Less: net income attributable to non-controlling interests   24,941    16,453    85,611    97,724 
Net income attributable to Select Medical   77,274    49,857    258,995    402,225 
Less: net income attributable to participating securities   2,638    1,660    8,896    13,435 
Net income attributable to common shares  $74,636   $48,197   $250,099   $388,790 

 

The following tables set forth the computation of EPS under the two-class method for the three months and years ended December 31, 2020 and 2021:

 

   Three Months Ended December 31, 
   2020   2021 
   Net Income Allocation   Shares(1)   Basic and Diluted EPS   Net Income Allocation   Shares(1)   Basic and Diluted EPS 
Common shares  $74,636    130,269   $0.57   $48,197    129,679   $0.37 
Participating securities   2,638    4,605   $0.57    1,660    4,466   $0.37 
Total  $77,274             $49,857           

 

   Years Ended December 31, 
   2020   2021 
   Net Income Allocation   Shares(1)   Basic and Diluted EPS   Net Income Allocation   Shares(1)   Basic and Diluted EPS 
Common shares  $250,099    129,780   $1.93   $388,790    130,249   $2.98 
Participating securities   8,896    4,616   $1.93    13,435    4,501   $2.98 
Total  $258,995             $402,225           

 

 

 

(1)Represents the weighted average share count outstanding during the period.

 

14

 

IV. Condensed Consolidated Balance Sheets

(In thousands, unaudited)

 

   December 31, 
   2020   2021 
Assets        
Current Assets:          
Cash and cash equivalents  $577,061   $74,310 
Accounts receivable   896,763    889,303 
Other current assets   120,176    175,826 
Total Current Assets   1,594,000    1,139,439 
Operating lease right-of-use assets   1,032,217    1,078,754 
Property and equipment, net   943,420    961,467 
Goodwill   3,379,014    3,448,912 
Identifiable intangible assets, net   387,541    374,879 
Other assets   319,207    356,720 
Total Assets  $7,655,399   $7,360,171 
Liabilities and Equity          
Current Liabilities:          
Payables and accruals  $800,918   $942,288 
Government advances   321,807    83,790 
Unearned government assistance   82,607    93 
Current operating lease liabilities   220,413    229,334 
Current portion of long-term debt and notes payable   12,621    17,572 
Total Current Liabilities   1,438,366    1,273,077 
Non-current operating lease liabilities   875,367    916,540 
Long-term debt, net of current portion   3,389,398    3,556,385 
Non-current deferred tax liability   132,421    142,792 
Other non-current liabilities   168,703    106,442 
Total Liabilities   6,004,255    5,995,236 
Redeemable non-controlling interests   398,171    39,033 
Total equity   1,252,973    1,325,902 
Total Liabilities and Equity  $7,655,399   $7,360,171 

 

15

 

V. Condensed Consolidated Statements of Cash Flows

For the Three Months Ended December 31, 2020 and 2021

(In thousands, unaudited)

 

   2020   2021 
Operating activities          
Net income  $102,215   $66,310 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Distributions from unconsolidated subsidiaries   13,670    9,230 
Depreciation and amortization   51,526    51,943 
Provision for expected credit losses   323    64 
Equity in earnings of unconsolidated subsidiaries   (9,763)   (11,248)
Loss (gain) sale of assets and businesses   2,160    (2,322)
Stock compensation expense   6,422    8,938 
Amortization of debt discount, premium and issuance costs   549    562 
Deferred income taxes   (159)   17,020 
Changes in operating assets and liabilities, net of effects of business combinations:          
Accounts receivable   (25,188)   22,456 
Other current assets   4,040    (596)
Other assets   1,252    (4,072)
Accounts payable and accrued expenses   44,722    (141,001)
Government advances   —    (75,715)
Unearned government assistance   15,669    (2,321)
Net cash provided by (used in) operating activities   207,438    (60,752)
Investing activities          
Business combinations, net of cash acquired   (6,732)   (55,081)
Purchases of property and equipment   (40,868)   (55,151)
Investment in businesses   (5,568)   (4,600)
Proceeds from sale of assets and businesses   —    15,564 
Net cash used in investing activities   (53,168)   (99,268)
Financing activities          
Borrowings on revolving facilities   —    160,000 
Borrowings of other debt   5,022    13,498 
Principal payments on other debt   (5,561)   (16,758)
Dividends paid to common stockholders   —    (16,784)
Repurchase of common stock   (1,792)   (13,426)
Increase in overdrafts   —    42,353 
Proceeds from issuance of non-controlling interests   5,878    806 
Distributions to and purchases of non-controlling interests   (10,393)   (22,684)
Purchase of membership interests of Concentra Group Holdings Parent   (210,163)   (660,658)
Net cash used in financing activities   (217,009)   (513,653)
Net decrease in cash and cash equivalents   (62,739)   (673,673)
Cash and cash equivalents at beginning of period   639,800    747,983 
Cash and cash equivalents at end of period  $577,061   $74,310 
Supplemental information:          
Cash paid for interest  $15,062   $13,633 
Cash paid for taxes  $26,945   $44,327 

 

16

 

VI. Condensed Consolidated Statements of Cash Flows

For the Years Ended December 31, 2020 and 2021

(In thousands, unaudited)

 

   2020   2021 
Operating activities          
Net income  $344,606   $499,949 
Adjustments to reconcile net income to net cash provided by operating activities:          
Distributions from unconsolidated subsidiaries   35,390    37,002 
Depreciation and amortization   205,659    202,645 
Provision for expected credit losses   604    236 
Equity in earnings of unconsolidated subsidiaries   (29,440)   (44,428)
Gain on sale of assets and businesses   (22,563)   (2,409)
Stock compensation expense   27,250    30,940 
Amortization of debt discount, premium and issuance costs   2,184    2,217 
Deferred income taxes   (14,715)   5,055 
Changes in operating assets and liabilities, net of effects of business combinations:          
Accounts receivable   (116,601)   23,101 
Other current assets   (18,775)   (2,418)
Other assets   17,587    (7,196)
Accounts payable and accrued expenses   196,164    (19,767)
Government advances   318,116    (241,185)
Unearned government assistance   82,607    (82,514)
Net cash provided by operating activities   1,028,073    401,228 
Investing activities          
Business combinations, net of cash acquired   (20,808)   (81,911)
Purchases of property and equipment   (146,440)   (180,537)
Investment in businesses   (31,425)   (20,967)
Proceeds from sale of assets and businesses   83,320    26,821 
Net cash used in investing activities   (115,353)   (256,594)
Financing activities          
Borrowings on revolving facilities   470,000    160,000 
Payments on revolving facilities   (470,000)   — 
Payments on term loans   (39,843)   — 
Borrowings of other debt   40,108    33,013 
Principal payments on other debt   (48,381)   (39,668)
Dividends paid to common stockholders   —    (50,600)
Repurchase of common stock   (16,034)   (79,476)
Increase in overdrafts   —    42,353 
Proceeds from issuance of non-controlling interests   7,564    20,732 
Distributions to and purchases of non-controlling interests   (38,589)   (73,081)
Purchase of membership interests of Concentra Group Holdings Parent   (576,366)   (660,658)
Net cash used in financing activities   (671,541)   (647,385)
Net increase (decrease) in cash and cash equivalents   241,179    (502,751)
Cash and cash equivalents at beginning of period   335,882    577,061 
Cash and cash equivalents at end of period  $577,061   $74,310 
Supplemental information:          
Cash paid for interest  $155,236   $132,203 
Cash paid for taxes  $108,890   $181,184 

 

17

 

VII. Key Statistics
For the Three Months Ended December 31, 2020 and 2021

(unaudited)

 

   2020   2021   % Change 
Critical Illness Recovery Hospital               
Number of hospitals – end of period(a)   99    104      
Revenue (,000)  $537,898   $577,195    7.3%
Number of patient days(b)(c)   285,346    294,486    3.2%
Number of admissions(b)(d)   9,376    9,786    4.4%
Revenue per patient day(b)(e)  $1,881   $1,946    3.5%
Adjusted EBITDA (,000)  $75,284   $24,572    (67.4)%
Adjusted EBITDA margin   14.0%   4.3%     
Rehabilitation Hospital               
Number of hospitals – end of period(a)   30    30      
Revenue (,000)  $195,912   $216,436    10.5%
Number of patient days(b)(c)   96,504    104,361    8.1%
Number of admissions(b)(d)   6,592    7,134    8.2%
Revenue per patient day(b)(e)  $1,839   $1,888    2.7%
Adjusted EBITDA (,000)  $42,392   $39,326    (7.2)%
Adjusted EBITDA margin   21.6%   18.2%     
Outpatient Rehabilitation               
Number of clinics – end of period(a)   1,788    1,881      
Revenue (,000)  $257,484   $277,451    7.8%
Number of visits(b)(f)   2,145,040    2,341,539    9.2%
Revenue per visit(b)(g)  $103   $102    (1.0)%
Adjusted EBITDA (,000)  $27,701   $27,551    (0.5)%
Adjusted EBITDA margin   10.8%   9.9%     
Concentra               
Number of centers – end of period(b)   517    518      
Revenue (,000)  $398,702   $410,639    3.0%
Number of visits(b)(f)   2,772,382    3,003,441    8.3%
Revenue per visit(b)(g)  $122   $125    2.5%
Adjusted EBITDA (,000)  $69,382   $70,709    1.9%
Adjusted EBITDA margin   17.4%   17.2%     

 

 

 

(a)Includes managed locations.

 

(b)Excludes managed locations. For purposes of the Concentra segment, onsite clinics and community-based outpatient 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 number of visits in which patients were treated at Select Medical’s outpatient rehabilitation clinics and Concentra centers during the periods presented.

 

(g)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 and community-based outpatient clinics.

 

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VIII. Key Statistics
For the Years Ended December 31, 2020 and 2021

(unaudited)

 

   2020   2021   % Change 
Critical Illness Recovery Hospital               
Number of hospitals – end of period(a)   99    104      
Revenue (,000)  $2,077,499   $2,246,772    8.1%
Number of patient days(b)(c)   1,111,756    1,133,039    1.9%
Number of admissions(b)(d)   37,456    37,921    1.2%
Revenue per patient day(b)(e)  $1,858   $1,972    6.1%
Adjusted EBITDA (,000)  $342,427   $267,993    (21.7)%
Adjusted EBITDA margin   16.5%   11.9%     
Rehabilitation Hospital               
Number of hospitals – end of period(a)   30    30      
Revenue (,000)  $734,673   $849,340    15.6%
Number of patient days(b)(c)   370,833    414,701    11.8%
Number of admissions(b)(d)   25,081    28,868    15.1%
Revenue per patient day(b)(e)  $1,793   $1,868    4.2%
Adjusted EBITDA (,000)  $153,203   $184,704    20.6%
Adjusted EBITDA margin   20.9%   21.7%     
Outpatient Rehabilitation               
Number of clinics – end of period(a)   1,788    1,881      
Revenue (,000)  $919,913   $1,084,361    17.9%
Number of visits(b)(f)   7,593,344    9,193,624    21.1%
Revenue per visit(b)(g)  $104   $102    (1.9)%
Adjusted EBITDA (,000)  $79,164   $138,275    74.7%
Adjusted EBITDA margin   8.6%   12.8%     
Concentra               
Number of centers – end of period(b)   517    518      
Revenue (,000)  $1,501,434   $1,732,041    15.4%
Number of visits(b)(f)   10,627,904    12,052,724    13.4%
Revenue per visit(b)(g)  $123   $125    1.6%
Adjusted EBITDA (,000)  $252,892   $389,616    54.1%
Adjusted EBITDA margin   16.8%   22.5%     

 

 

 

(a)Includes managed locations.

 

(b)Excludes managed locations. For purposes of the Concentra segment, onsite clinics and community-based outpatient 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 number of visits in which patients were treated at Select Medical’s outpatient rehabilitation clinics and Concentra centers during the periods presented.

 

(g)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 and community-based outpatient clinics.

 

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IX. Net Income to Adjusted EBITDA Reconciliation

For the Three Months and Years Ended December 31, 2020 and 2021

(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,

 
   2020   2021   2020   2021 
Net income  $102,215   $66,310   $344,606   $499,949 
Income tax expense (benefit)   35,062    (8,637)   111,867    129,773 
Interest expense   35,512    33,870    153,011    135,985 
Interest income   —    (601)   —    (5,350)
Loss (gain) on sale of businesses   303    (2,155)   (12,387)   (2,155)
Equity in earnings of unconsolidated subsidiaries   (9,763)   (11,248)   (29,440)   (44,428)
Income from operations  $163,329   $77,539   $567,657   $713,774 
Stock compensation expense:                    
Included in general and administrative   5,565    7,061    22,053    24,598 
Included in cost of services   857    1,877    5,197    6,342 
Depreciation and amortization   51,526    51,943    205,659    202,645 
Adjusted EBITDA  $221,277   $138,420   $800,566   $947,359 
                     
Critical illness recovery hospital(a)  $75,284   $24,572   $342,427   $267,993 
Rehabilitation hospital   42,392    39,326    153,203    184,704 
Outpatient rehabilitation   27,701    27,551    79,164    138,275 
Concentra(b)   69,382    70,709    252,892    389,616 
Other(c)(d)   6,518    (23,738)   (27,120)   (33,229)
Adjusted EBITDA  $221,277   $138,420   $800,566   $947,359 

 

 

 

(a)For the three months and year ended December 31, 2021, Adjusted EBITDA included other operating income of $2.0 million and $19.9 million, respectively. The other operating income related to the outcome of litigation with the Centers for Medicare & Medicaid Services.

 

(b)For the three months and year ended December 31, 2021, Adjusted EBITDA included other operating income of $1.0 million and $35.0 million, respectively. For the year ended December 31, 2020, Adjusted EBITDA included other operating income of $1.1 million. The other operating income is primarily related to the recognition of payments received under the Provider Relief Fund.

 

(c)For the three months and year ended December 31, 2021, Adjusted EBITDA included other operating income of $7.1 million and $89.1 million, respectively. For the three months and year ended December 31, 2020, Adjusted EBITDA included other operating income of $36.2 million and $88.9 million, respectively. The other operating income is related to the recognition of payments received under the Provider Relief Fund.

 

(d)Other primarily includes general and administrative costs and other operating income, as discussed further above.

 

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X. Reconciliation of Earnings per Common Share to Adjusted Earnings per Common Share

For the Three Months and Years Ended December 31, 2020 and 2021

(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.

 

   Three Months Ended December 31, 
   2020   Per Share(a)   2021   Per Share(a) 
Net income attributable to common shares(a)  $74,636   $0.57   $48,197   $0.37 
Adjustments:(b)                    
Loss (gain) on sale of businesses   201    0.00    (775)   0.00 
Adjusted net income attributable to common shares  $74,837   $0.57   $47,422   $0.37 

 

   Years Ended December 31, 
   2020   Per Share(a)   2021   Per Share(a) 
Net income attributable to common shares(a)  $250,099   $1.93   $388,790   $2.98 
Adjustments:(b)                    
Gain on sale of businesses   (4,888)   (0.04)   (775)   0.00 
Adjusted net income attributable to common shares  $245,211   $1.89   $388,015   $2.98 

 

 

 

(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.

 

For the three months ended December 31, 2020, the estimated income tax effect on the adjustment made to net income attributable to common shares was immaterial. For the three months ended December 31, 2021, the adjustments to net income attributable to common shares include estimated income tax expense of approximately $1.1 million

 

For the year ended December 31, 2020, the adjustments to net income attributable to common shares include estimated income tax expense of approximately $3.3 million. For the year ended December 31, 2021, the adjustments to net income attributable to common shares include estimated income tax expense of approximately $1.1 million.

 

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