MECHANICSBURG, Pa., March 17 /PRNewswire/ -- Select Medical Corporation today announced results for its fourth quarter and year ended December 31, 2005.
On February 24, 2005, Select Medical Corporation (“Select”) consummated a merger with a wholly-owned subsidiary of Select Medical Holdings Corporation (“Holdings”) pursuant to which Select became a wholly-owned subsidiary of Holdings. Holdings is owned by an investor group that includes Welsh, Carson, Anderson & Stowe IX, LP (“Welsh Carson”), Thoma Cressey Equity Partners, Inc. (“Thoma Cressey”) and members of Select’s senior management. As a result of the merger, Select’s assets and liabilities have been adjusted to their fair value as of the closing. Select also experienced an increase in aggregate outstanding indebtedness as a result of financing transactions associated with the merger. Accordingly, amortization expense and interest expense are higher in periods following the merger. Additionally, certain costs associated with the merger are reflected in the 2005 income statement periods. As a result, the financial statements for the periods before and after the merger are not comparable in certain respects.
On March 1, 2006, a subsidiary of Select sold all the issued and outstanding shares of Canadian Back Institute Limited (“CBIL”) for approximately C$89.8 million in cash (US$79.0 million). CBIL comprised Select’s entire Canadian operations. As a result of the sale, the operating results of CBIL have been reclassified and reported as discontinued operations for all reported periods, and its assets and liabilities have been reclassified as held for sale on our December 31, 2005 balance sheet.
For the fourth quarter ended December 31, 2005, net operating revenues increased 13.4% to $458.0 million compared to $403.7 million for the same quarter, prior year. Income from operations increased 16.0% to $64.8 million compared to $55.9 million for the same quarter, prior year. Net income declined 15.3% to $25.3 million compared to $29.8 million for the same quarter, prior year. Additionally, net income before interest, income taxes, depreciation and amortization, income from discontinued operations, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, other income and minority interest (“Adjusted EBITDA”) for the fourth quarter increased 17.1% to $77.4 million compared to $66.1 million for the same quarter, prior year. A reconciliation of net income to Adjusted EBITDA is attached to this release.
For the combined twelve months ended December 31, 2005, net operating revenues increased 16.0% to $1,858.4 million compared to $1,601.5 million for the prior year. Income from operations decreased 46.5% to $119.1 million compared to $222.5 million for the prior year. Select had a net loss of $14.7 million for the combined twelve months ended December 31, 2005 compared to net income of $118.2 million for the prior year. Additionally, Adjusted EBITDA for the combined twelve months ended December 31, 2005 increased 26.2% to $329.9 million compared to $261.5 million for the prior year.
Specialty Hospitals
At December 31, 2005, Select operated 97 long-term acute care hospitals and four acute medical rehabilitation hospitals. This compares to 82 long- term acute care hospitals and four acute medical rehabilitation hospitals operated at December 31, 2004. For the fourth quarter of 2005, net operating revenues for all of Select’s hospitals increased 21.1% to $341.0 million compared to $281.6 million for the same quarter, prior year. Total patient days for the fourth quarter 2005 were 245,165, admissions were 9,907 and net revenue per patient day was $1,354. This compares to 201,594 days, 8,282 admissions and net revenue per patient day of $1,364 for the same quarter, prior year. For the hospitals opened before January 1, 2004 and operated by Select throughout both periods, patient days in the fourth quarter of 2005 were 208,836 and admissions were 8,575, compared to 195,187 days and 8,036 admissions in the same quarter, prior year. Adjusted EBITDA for the segment increased 17.9% to $72.1 million compared to $61.2 million for the same quarter, prior year. The Adjusted EBITDA margin for the segment was 21.2% for the fourth quarter of 2005, compared to 21.7% for the same quarter, prior year. The Adjusted EBITDA margin for the hospitals opened before January 1, 2004 and operated by Select throughout both periods was 22.4% for the fourth quarter of 2005, compared to 23.2% for the same quarter, prior year.
For the combined twelve months ended December 31, 2005, net operating revenues for all of Select’s hospitals increased 25.8% to $1,370.3 million compared to $1,089.5 million for the prior year. Total patient days for the combined twelve months ended December 31, 2005 were 985,025, admissions were 39,963 and net revenue per patient day was $1,357. This compares to 816,898 days, 33,523 admissions and net revenue per patient day of $1,306 for the prior year. For the hospitals opened before January 1, 2004 and operated by Select throughout both periods, patient days for the combined twelve months ended December 31, 2005 were 833,770 and admissions were 34,297, compared to 793,751 days and 32,633 admissions in the prior year. Adjusted EBITDA for the segment for the combined twelve months ended December 31, 2005 increased 30.1% to $307.3 million compared to $236.2 million for the prior year. The Adjusted EBITDA margin for the segment for the combined twelve months ended December 31, 2005 was 22.4%, compared to 21.7% for the prior year. The Adjusted EBITDA margin for the hospitals opened before January 1, 2004 and operated by Select throughout both periods was 23.7% for the combined twelve months ended December 31, 2005, compared to 22.7% for the prior year.
Outpatient Rehabilitation
At December 31, 2005, Select operated 608 outpatient clinics. This compares to 640 outpatient clinics at December 31, 2004. For the fourth quarter of 2005, net operating revenues declined 2.1% to $116.3 million compared to $118.8 million for the same quarter, prior year. Adjusted EBITDA for the fourth quarter declined 7.6% to $13.5 million compared to $14.7 million for the same quarter, prior year. The Adjusted EBITDA margin for the quarter was 11.6% compared to 12.3% in the same quarter, prior year. Patient visits for the quarter were 826,371 compared to 877,178 for the same quarter, prior year. Net revenue per visit was $91 for the fourth quarter of 2005 compared to $92 for the same quarter, prior year. Number of clinics, net operating revenues and Adjusted EBITDA excludes CBIL. CBIL is being reported as a discontinued operation.
For the combined twelve months ended December 31, 2005, net operating revenues declined 3.6% to $480.7 million compared to $498.8 million for the prior year. Adjusted EBITDA for the combined twelve months ended December 31, 2005 declined 7.8% to $66.0 million compared to $71.6 million for the prior year. The Adjusted EBITDA margin for the combined twelve months ended December 31, 2005 was 13.7% compared to 14.3% in the prior year. Patient visits for the twelve months ended December 31, 2005 were 3,518,740 compared to 3,810,284 for the prior year. Net revenue per visit was $90 for both years. Number of clinics, net operating revenues and Adjusted EBITDA excludes CBIL. CBIL is being reported as a discontinued operation.
Conference Call
Select will host a conference call regarding its fourth quarter and full year results on Tuesday, March 21, 2006, at 11:00 am EST. The domestic dial-in number for the call is 1-866-219-5268. The international dial-in number is 1-703-639-1120.
Select Medical Corporation is a leading operator of specialty hospitals in the United States. Select operates 97 long-term acute care hospitals in 26 states. Select operates four acute medical rehabilitation hospitals in New Jersey. Select is also a leading operator of outpatient rehabilitation clinics in the United States, with approximately 608 locations. Select also provides medical rehabilitation services on a contract basis at nursing homes, hospitals, assisted living and senior care centers, schools and worksites. Information about Select is available at http://www.selectmedicalcorp.com/.
Certain statements contained herein that are not descriptions of historical facts are “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to those discussed in filings made by Select with the Securities and Exchange Commission. Many of the factors that will determine Select’s future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. Select undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
I. Condensed Consolidated Statements of Operations (In thousands) (unaudited) For the Three Months Ended December 31, 2004 and 2005 Predecessor Successor (1) (1) % 2004 2005 Change Net operating revenues $403,724 $457,958 13.4% Costs and expenses: Cost of services 315,985 368,746 16.7% Stock compensation expense - 2,745 N/M General and administrative 9,366 7,838 (16.3)% Bad debt expense 12,284 3,969 (67.7)% Depreciation and amortization 10,187 9,812 (3.7)% Income from operations 55,902 64,848 16.0% Other income (286) (2,360) 725.2% Interest income (1,098) (256) (76.7)% Interest expense 8,158 23,631 189.7% Income from continuing operations before minority interests and income taxes 49,128 43,833 (10.8)% Minority interests 537 426 (20.7)% Income from continuing operations before income taxes 48,591 43,407 (10.7)% Income tax expense 19,734 17,847 (9.6)% Income from continuing operations 28,857 25,560 (11.4)% Income (loss) from discontinued operations, net of tax 969 (295) (130.4)% Net income $29,826 $25,265 (15.3)% (1) On February 24, 2005, Select Medical Corporation (the “Company”) merged with a subsidiary of Select Medical Holdings Corporation (“Holdings”) and became a wholly-owned subsidiary of Holdings. The Company’s financial position and results of operations prior to the merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the merger are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the merger, the pre-merger financial statements are not comparable with those after the merger in certain respects. II. Condensed Consolidated Statements of Operations (in thousands) (unaudited) For the Twelve Months Ended December 31, 2004 and 2005 Predecessor Successor Combined (1) (1) (2) For the Period Period For the Twelve from from Twelve Months January 1 February 25 Months Ended through through Ended December February December December 31, 2004 24, 2005 31, 2005 31, 2005 % Change Net operating revenues $1,601,524 $277,736 $1,580,706 $1,858,442 16.0% Costs and expenses: Cost of services 1,246,249 217,133 1,244,183 1,461,316 17.3% Stock compensation expense - 142,213 10,312 152,525 N/M Long-term incentive compensation - - 14,453 14,453 N/M General and administrative 45,856 7,484 34,907 42,391 (7.6)% Bad debt expense 47,963 6,588 18,213 24,801 (48.3)% Depreciation and amortization 38,951 5,933 37,922 43,855 12.6% Income (loss) from operations 222,505 (101,615) 220,716 119,101 (46.5)% Loss on early retirement of debt - 42,736 - 42,736 N/M Merger related charges - 12,025 - 12,025 N/M Other income (1,096) (267) (3,018) (3,285) 199.7% Interest income (2,583) (523) (767) (1,290) (50.1)% Interest expense 33,299 4,651 83,752 88,403 165.5% Income (loss) from continuing operations before minority interests and income taxes 192,885 (160,237) 140,749 (19,488) (110.1)% Minority interests 2,608 330 1,776 2,106 (19.2)% Income (loss) from continuing operations before income taxes 190,277 (160,567) 138,973 (21,594) (111.3)% Income tax expense (benefit) 76,551 (59,794) 56,470 (3,324) (104.3)% Income (loss) from continuing operations 113,726 (100,773) 82,503 (18,270) (116.1)% Income from discontinued operations, net of tax 4,458 522 3,072 3,594 (19.4)% Net income (loss) $118,184 $(100,251) $85,575 $(14,676) (112.4)% (1) On February 24, 2005, Select Medical Corporation (the “Company”) merged with a subsidiary of Select Medical Holdings Corporation (“Holdings”) and became a wholly-owned subsidiary of Holdings. The Company’s financial position and results of operations prior to the merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the merger are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the merger, the pre-merger financial statements are not comparable with those after the merger in certain respects. (2) Although the Predecessor and Successor results are not comparable by definition in certain respects due to the merger and the resulting revaluation, for ease of comparison, the financial data for the period after the merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period), to arrive at the combined twelve months ended December 31, 2005. As a result of the merger, interest expense, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, depreciation and amortization have been impacted. III. Condensed Consolidated Balance Sheets (In thousands) (unaudited) Predecessor (1) Successor (1) December 31, December 31, 2004 2005 Assets Cash $247,476 $35,861 Restricted cash 7,031 6,345 Accounts receivable, net 216,852 256,798 Current deferred tax asset 59,239 59,135 Prepaid taxes - 4,110 Current assets held for sale - 13,876 Other current assets 18,737 19,725 Total current assets 549,335 395,850 Property and equipment, net 165,336 248,541 Goodwill 302,069 1,305,210 Other identifiable intangibles 78,304 86,789 Other assets held for sale - 61,388 Other assets 18,677 65,591 Total assets $1,113,721 $2,163,369 Liabilities and Stockholders’ Equity Payables and accruals $232,063 $296,765 Current liabilities held for sale - 4,215 Current portion of long-term debt 3,557 6,516 Total current liabilities 235,620 307,496 Long-term debt, net of current portion 351,033 1,315,764 Non-current deferred tax liability 4,458 25,771 Non-current liabilities held for sale - 3,817 Minority interests 6,667 4,356 Stockholders’ equity 515,943 506,165 Total liabilities and stockholders’ equity $1,113,721 $2,163,369 (1) On February 24, 2005, Select Medical Corporation (the “Company”) merged with a subsidiary of Select Medical Holdings Corporation (“Holdings”) and became a wholly-owned subsidiary of Holdings. The Company’s financial position and results of operations prior to the merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the merger are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the merger, the pre-merger financial statements are not comparable with those after the merger in certain respects. IV. Key Statistics (unaudited) For the Three Months Ended December 31, 2005 and 2004 % 2004 2005 Change Specialty Hospitals (a) Number of hospitals - end of period 86 101 17.4% Net operating revenues (,000) $281,594 $341,037 21.1% Number of patient days 201,594 245,165 21.6% Number of admissions 8,282 9,907 19.6% Net revenue per patient day (b) $1,364 $1,354 (0.7)% Adjusted EBITDA (,000) $61,215 $72,149 17.9% Adjusted EBITDA margin - all hospitals 21.7% 21.2% (2.3)% Adjusted EBITDA margin - same store hospitals (c) 23.2% 22.4% (3.4)% Outpatient Rehabilitation (e) Number of clinics - end of period 640 608 (5.0)% Net operating revenues (,000) $118,841 $116,348 (2.1)% Number of visits (US) 877,178 826,371 (5.8)% Revenue per visit (US) (d) $92 $91 (1.1)% Adjusted EBITDA (,000) $14,650 $13,541 (7.6)% Adjusted EBITDA margin 12.3% 11.6% (5.7)% (a) Specialty hospitals consist of long-term acute care hospitals and acute medical rehabilitation hospitals. (b) Net revenue per patient day is calculated by dividing specialty hospital patient service revenue by the total number of patient days. (c) Adjusted EBITDA margin - same store hospitals represents the Adjusted EBITDA margin for those hospitals opened before January 1, 2004 and operated throughout both periods. (d) Net revenue per visit is calculated by dividing outpatient rehabilitation clinic revenue by the total number of visits. For purposes of this computation, outpatient rehabilitation clinic revenue does not include contract services revenue. (e) Outpatient rehabilitation information has been restated to remove the clinics operated by CBIL, which is being reported as discontinued operations. V. Key Statistics (unaudited) For the Twelve Months Ended December 31, 2005 and 2004 % 2004 2005 Change Specialty Hospitals (a) Number of hospitals - end of period 86 101 17.4% Net operating revenues (,000) $1,089,538 $1,370,320 25.8% Number of patient days 816,898 985,025 20.6% Number of admissions 33,523 39,963 19.2% Net revenue per patient day (b) $1,306 $1,357 3.9% Adjusted EBITDA (,000) $236,181 $307,339 30.1% Adjusted EBITDA margin - all hospitals 21.7% 22.4% 3.2% Adjusted EBITDA margin - same store hospitals (c) 22.7% 23.7% 4.4% Outpatient Rehabilitation (e) Number of clinics - end of period 640 608 (5.0)% Net operating revenues (,000) $498,830 $480,711 (3.6)% Number of visits (US) 3,810,284 3,518,740 (7.7)% Revenue per visit (US) (d) $90 $90 0.0% Adjusted EBITDA (,000) $71,562 $65,957 (7.8)% Adjusted EBITDA margin 14.3% 13.7% (4.2)% (a) Specialty hospitals consist of long-term acute care hospitals and acute medical rehabilitation hospitals. (b) Net revenue per patient day is calculated by dividing specialty hospital patient service revenue by the total number of patient days. (c) Adjusted EBITDA margin - same store hospitals represents the Adjusted EBITDA margin for those hospitals opened before January 1, 2004 and operated throughout both periods. (d) Net revenue per visit is calculated by dividing outpatient rehabilitation clinic revenue by the total number of visits. For purposes of this computation, outpatient rehabilitation clinic revenue does not include contract services revenue. (e) Outpatient rehabilitation information has been restated to remove the clinics operated by CBIL, which is being reported as discontinued operations. VI. Net Income (Loss) to Adjusted EBITDA Reconciliation (In thousands) (unaudited) For the Three and Twelve Months Ended December 31, 2005 and 2004 The following table reconciles net income (loss) to Adjusted EBITDA for the Company. Adjusted EBITDA is used by the Company to report its segment performance in accordance with SFAS No. 131. Adjusted EBITDA is defined as net income (loss) before interest, income taxes, depreciation and amortization, income (loss) from discontinued operations, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, other income and minority interest. We believe that the presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of our operating units. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. Predecessor (1) Successor (1) For the Three Months Ended December 31, 2004 2005 Net income (loss) $29,826 $25,265 Loss (income) from discontinued operations, net of tax (969) 295 Income tax expense (benefit) 19,734 17,847 Minority interest 537 426 Interest expense, net 7,060 23,375 Other income (286) (2,360) Loss on early retirement of debt - - Merger related charges - - Stock compensation expense - 2,745 Long-term incentive compensation - - Depreciation and amortization 10,187 9,812 Adjusted EBITDA $66,089 $77,405 Specialty hospitals $61,215 $72,149 Outpatient rehabilitation 14,650 13,541 Other (3) (9,776) (8,285) Adjusted EBITDA $66,089 $77,405 Predecessor Successor Combined (1) (1) (2) For the For the Twelve Period from Period from Twelve Months January 1 February 25 Months Ended through through Ended December February December December 31, 2004 24, 2005 31, 2005 31, 2005 Net income (loss) $118,184 $(100,251) $85,575 $(14,676) Loss (income) from discontinued operations, net of tax (4,458) (522) (3,072) (3,594) Income tax expense (benefit) 76,551 (59,794) 56,470 (3,324) Minority interest 2,608 330 1,776 2,106 Interest expense, net 30,716 4,128 82,985 87,113 Other income (1,096) (267) (3,018) (3,285) Loss on early retirement of debt - 42,736 - 42,736 Merger related charges - 12,025 - 12,025 Stock compensation expense - 142,213 10,312 152,525 Long-term incentive compensation - - 14,453 14,453 Depreciation and amortization 38,951 5,933 37,922 43,855 Adjusted EBITDA $261,456 $46,531 $283,403 $329,934 Specialty hospitals $236,181 $44,343 $262,996 $307,339 Outpatient rehabilitation 71,562 9,848 56,109 65,957 Other (3) (46,287) (7,660) (35,702) (43,362) Adjusted EBITDA $261,456 $46,531 $283,403 $329,934 (1) On February 24, 2005, Select Medical Corporation (the “Company”) merged with a subsidiary of Select Medical Holdings Corporation (“Holdings”) and became a wholly-owned subsidiary of Holdings. The Company’s financial position and results of operations prior to the merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the merger are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the merger, the pre-merger financial statements are not comparable with those after the merger in certain respects. (2) Although the Predecessor and Successor results are not comparable by definition in certain respects due to the merger and the resulting revaluation, for ease of comparison, the financial data for the period after the merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period), to arrive at the combined twelve months ended December 31, 2005. As a result of the merger, interest expense, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, depreciation and amortization have been impacted. (3) Other primarily includes the Company’s general and administrative costs. The following tables reconcile specialty hospital same store information. Three Months Ended December 31, 2004 December 31, 2005 Specialty hospitals net operating revenue $281,594 $341,037 Less: Specialty hospitals opened, acquired or closed after 1/1/04 8,658 53,920 Specialty hospitals same store net operating revenue $272,936 $287,117 Specialty hospitals Adjusted EBITDA $61,215
