Select Medical Holdings Corporation Announces Results

The following excerpt is from the company's SEC filing.
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 mill ion 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.
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
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.
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.
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.
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.
Critical
Illness Recovery Hospital
Revenue
Patient
Days
Occupancy
Rate
Number
of

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

Hospitals Owned
50,615
61,673
68,297
27,434
32,111
34,404
48,080
60,690
64,202
25,442
31,813
32,178
55,863
59,656
75,305
29,940
30,644
35,857
154,558
182,019
207,804
82,816
94,568
102,439
51,991
45,878
70,295
28,266
23,553
34,861
56,019
57,815
71,190
29,730
29,787
35,604
52,364
64,974
71,181
28,529
30,741
34,483
160,374
168,667
212,666
86,525
84,081
104,948
314,932
350,686
420,470
169,341
178,649
207,387
57,077
62,312
70,467
30,054
31,986
34,894
58,072
63,673
71,682
30,228
32,518
34,835
58,220
62,090
70,285
29,172
31,176
33,224
173,369
188,075
212,434
89,454
95,680
102,953
488,301
538,761
632,904
258,795
274,329
310,340
61,975
66,591
72,509
31,767
33,378
35,908
60,353
64,610
71,865
31,022
31,581
34,491
60,342
64,711
72,062
31,447
31,545
33,962
182,670
195,912
216,436
94,236
96,504
104,361
670,971
734,673
849,340
353,031
370,833
414,701
Visits
Working Days
83,185
90,924
76,763
687,007
757,171
625,964
78,573
88,239
77,063
658,610
739,061
641,942
85,147
76,086
98,135
708,866
626,433
832,248
246,905
255,249
251,961
2,054,483
2,122,665
2,100,154
90,230
49,084
95,251
762,914
386,108
810,314
90,272
51,186
89,030
759,829
409,703
758,773
81,389
66,868
96,128
680,762
546,456
835,774
261,891
167,138
280,409
2,203,505
1,342,267
2,404,861
508,796
422,387
532,370
4,257,988
3,464,932
4,505,015
89,267
77,793
90,352
754,102
636,826
780,118
90,687
79,034
93,056
743,813
651,738
798,459
85,376
83,215
91,132
706,413
694,808
768,493
265,330
240,042
274,540
2,204,328
1,983,372
2,347,070
774,126
662,429
806,910
6,462,316
5,448,304
6,852,085
96,868
88,274
91,705
808,649
745,562
772,068
87,072
82,102
93,345
722,607
685,885
797,756
87,945
87,108
92,401
725,710
713,593
771,715
271,885
257,484
277,451
2,256,966
2,145,040
2,341,539
1,046,011
919,913
1,084,361
8,719,282
7,593,344
9,193,624
133,507
141,236
127,103
985,598
1,032,069
867,793
126,309
133,690
132,349
919,065
965,741
869,910
136,505
123,609
163,388
1,006,944
879,585
1,057,871
396,321
398,535
422,840
2,911,607
2,877,395
2,795,574
140,050
91,178
152,143
1,040,543
610,555
999,622
143,183
99,228
142,228
1,073,763
674,629
956,250
130,218
121,932
162,001
988,783
865,896
1,074,206
413,451
312,338
456,372
3,103,089
2,151,080
3,030,078
809,772
710,873
879,212
6,014,696
5,028,475
5,825,652
142,385
132,465
146,509
1,057,809
930,427
1,033,266
144,452
130,291
150,333
1,087,165
933,555
1,106,356
135,063
129,103
145,348
1,005,929
963,065
1,084,009
421,900
391,859
442,190
3,150,903
2,827,047
3,223,631
1,231,672
1,102,732
1,321,402
9,165,599
7,855,522
9,049,283
149,260
139,365
143,609
1,113,408
1,011,816
1,072,531
123,152
126,431
135,417
908,159
867,918
991,937
124,733
132,906
131,613
881,699
892,648
938,973
397,145
398,702
410,639
2,903,266
2,772,382
3,003,441
1,628,817
1,501,434
1,732,041
12,068,865
10,627,904
12,052,724
(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.
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.
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.
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,
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.
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, 2020 and 2021
(In thousands, except per share amounts, unaudited)
% Change
1,460,494
1,559,811
Costs and expenses:
Cost of services, exclusive of depreciation and amortization
1,246,594
1,402,570
General and administrative
35,229
37,950
Depreciation and amortization
51,526
51,943
Total costs and expenses
1,333,349
1,492,463
Other operating income
36,184
10,191
163,329
77,539
Other income and expense:
Equity in earnings of unconsolidated subsidiaries
11,248
Gain (loss) on sale of businesses
Interest income
Interest expense
(35,512
(33,870
Income before income taxes
137,277
57,673
Income tax expense (benefit)
35,062
(8,637
102,215
66,310
Less: Net income attributable to non-controlling interests
24,941
16,453
Net income attributable to Select Medical
77,274
49,857
Basic and diluted earnings per common share:
(1)            Refer
to table III for calculation of earnings per common share.
N/M        Not meaningful.
II. Condensed Consolidated Statements of Operations
For the Years Ended December 31, 2020 and 2021
5,531,713
6,204,515
4,710,372
5,285,149
138,037
146,975
205,659
202,645
5,054,068
5,634,769
90,012
144,028
567,657
713,774
29,440
44,428
Gain on sale of businesses
12,387
(153,011
(135,985
456,473
629,722
111,867
129,773
344,606
499,949
85,611
97,724
258,995
402,225
III. Earnings per Share
For the Three Months and Years Ended December 31, 2020 and
2021
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
Less: net income attributable to non-controlling interests
Less: net income attributable to participating securities
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:
Net Income Allocation
Shares
Common shares
130,269
129,679
Participating securities
129,780
130,249
Represents the weighted average share count outstanding during the period.
IV. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
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
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
V. Condensed Consolidated Statements of Cash Flows
Operating activities
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Distributions from unconsolidated subsidiaries
13,670
Provision for expected credit losses
(9,763
(11,248
Loss (gain) sale of assets and businesses
(2,322
Stock compensation expense
Amortization of debt discount, premium and issuance costs
Deferred income taxes
17,020
Changes in operating assets and liabilities, net of effects of business combinations:
(25,188
22,456
(4,072
Accounts payable and accrued expenses
44,722
(141,001
(75,715
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
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
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
Supplemental information:
Cash paid for interest
15,062
13,633
Cash paid for taxes
26,945
44,327
VI. Condensed Consolidated Statements of Cash Flows
Adjustments to reconcile net income to net cash provided by operating activities:
35,390
37,002
(29,440
(44,428
Gain on sale of assets and businesses
(22,563
(2,409
27,250
30,940
(14,715
(116,601
23,101
(18,775
(2,418
17,587
(7,196
196,164
(19,767
318,116
(241,185
(82,514
Net cash provided by operating activities
1,028,073
401,228
(20,808
(81,911
(146,440
(180,537
(31,425
(20,967
83,320
26,821
(115,353
(256,594
470,000
Payments on revolving facilities
(470,000
Payments on term loans
(39,843
40,108
33,013
(48,381
(39,668
(50,600
(16,034
(79,476
20,732
(38,589
(73,081
(576,366
(671,541
(647,385
Net increase (decrease) in cash and cash equivalents
241,179
(502,751
335,882
155,236
132,203
108,890
181,184
VII. Key Statistics

For the Three Months Ended December 31, 2020 and 2021
(unaudited)
Number of hospitals – end of period
Revenue (,000)
Number of patient days
(b)(c)
Number of admissions
(b)(d)
Revenue per patient day
(b)(e)
Adjusted EBITDA (,000)
75,284
24,572
42,392
39,326
Number of clinics – end of period
Number of visits
(b)(f)
Revenue per visit
(b)(g)
27,701
27,551
Number of centers – end of period
69,382
70,709
Includes managed locations.
Excludes managed locations. For purposes of the Concentra segment, onsite clinics and community-based
outpatient clinics are excluded.
Each patient day represents one patient occupying one bed for one day during the periods presented.
Represents the number of patients admitted to Select Medical’s hospitals during the periods presented.
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.
Represents the number of visits in which patients were treated at Select Medical’s outpatient rehabilitation
clinics and Concentra centers during the periods presented.
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.
VIII. Key Statistics

For the Years Ended December 31, 2020 and 2021
37,456
37,921
342,427
267,993
25,081
28,868
153,203
184,704
79,164
138,275
252,892
389,616
IX. Net Income to Adjusted EBITDA Reconciliation
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.
(5,350
Loss (gain) on sale of businesses
(2,155
(12,387
Stock compensation expense:
Included in general and administrative
22,053
24,598
Included in cost of services
221,277
138,420
800,566
947,359
Critical illness recovery hospital
Rehabilitation hospital
Outpatient rehabilitation
(c)(d)
(23,738
(27,120
(33,229
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.
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.
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.
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
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.
Per Share
Adjustments:
Adjusted net income attributable to common shares
74,837
47,422
(4,888
245,211
388,015
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.
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.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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