MECHANICSBURG, Pa., Aug. 7, 2014 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical") (NYSE: SEM) today announced results for its second quarter ended June 30, 2014 and the declaration of a cash dividend.
For the second quarter ended June 30, 2014, net operating revenues increased 2.1% to $772.8 million, compared to $756.7 million for the same quarter, prior year. Income from operations was $82.2 million for the second quarter ended June 30, 2014, compared to $88.3 million for the same quarter, prior year. Net income attributable to Select Medical was $35.3 million for the second quarter ended June 30, 2014, compared to $27.8 million for the same quarter, prior year. Net income attributable to Select Medical for the second quarter ended June 30, 2013 includes a loss on early retirement of debt, net of tax, of $10.5 million. Net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, equity in earnings (losses) of unconsolidated subsidiaries and other income (expense) ("Adjusted EBITDA") for the second quarter ended June 30, 2014 was $101.4 million, compared to $106.0 million for the same quarter, prior year. A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release. Income per common share for the second quarter ended June 30, 2014 was $0.27 on a fully diluted basis compared to income per common share of $0.20 for the same quarter, prior year. Excluding the loss related to the early retirement of debt for the second quarter ended June 30, 2013 and its related tax affects, adjusted income per common share was $0.27 per diluted share for the second quarter ended June 30, 2013. A reconciliation of net income per share to adjusted net income per share for the second quarter ended June 30, 2013 is presented in table IX of this release. The results for the quarters ended June 30, 2014 and 2013 both reflect Medicare changes that became effective on April 1, 2013, including (i) a 2% reduction in Medicare payments that was implemented as part of the automatic reduction in federal spending mandated under the Budget Control Act of 2011 (the "Sequestration Reduction"), and (ii) an increase from 25% to 50% in the multiple procedure payment reduction for therapy services as mandated by the American Taxpayer Relief Act of 2012 (the "MPPR Reduction").
For the six months ended June 30, 2014, net operating revenues increased 1.9% to $1,535.3 million compared to $1,506.6 million for the same period, prior year. Income from operations was $160.6 million compared to $170.8 million for the same period, prior year. The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations by $15.2 million for the Sequestration Reduction and $4.5 million for the MPPR Reduction for the six months ended June 30, 2014. The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations by $9.5 million for the Sequestration Reduction and $1.7 million for the MPPR Reduction for the six months ended June 30, 2013. Net income attributable to Select Medical was $68.4 million compared to $62.2 million for the same period, prior year. Net income attributable to Select Medical for the six months ended June 30, 2014 and 2013 includes losses on early retirement of debt, net of tax, of $1.4 million and $11.4 million, respectively. Adjusted EBITDA for the six months ended June 30, 2014 decreased 3.8% to $198.2 million compared to $206.0 million for the same period, prior year. A reconciliation of net income to Adjusted EBITDA is presented in table VIII of this release. Income per common share for the six months ended June 30, 2014 was $0.51 on a fully diluted basis compared to income per common share of $0.44 for the six months ended June 30, 2013. Excluding the loss related to the early retirement of debt and its related tax effects in both periods, adjusted income per common share was $0.52 per diluted share for the six months ended June 30, 2014 compared to $0.53 per diluted share for the six months ended June 30, 2013. A reconciliation of net income per share to adjusted net income per share for both the six months ended June 30, 2014 and 2013 is presented in table X of this release.
Specialty Hospitals
For the second quarter ended June 30, 2014, net operating revenues for the specialty hospital segment decreased 0.3% to $557.8 million, compared to $559.4 million for the same quarter, prior year. Adjusted EBITDA for the specialty hospital segment was $88.7 million for the second quarter ended June 30, 2014, compared to $96.4 million for the same quarter, prior year. The Adjusted EBITDA margin for the segment was 15.9% for the second quarter ended June 30, 2014, compared to 17.2% for the same quarter, prior year. Certain specialty hospital key statistics for both the second quarter ended June 30, 2014 and 2013 are presented in table VI of this release.
For the six months ended June 30, 2014, net operating revenues for the specialty hospital segment increased 0.5% to $1,122.5 million compared to $1,117.1 million for the same period, prior year. The Sequestration Reduction reduced net operating revenues and income from operations for the segment by approximately $14.4 million and $9.1 million for the six months ended June 30, 2014 and 2013, respectively. Adjusted EBITDA for the specialty hospital segment for the six months ended June 30, 2014 decreased 4.7% to $180.8 million compared to $189.7 million for the same period, prior year. The Adjusted EBITDA margin for the segment was 16.1% for the six months ended June 30, 2014, compared to 17.0% for the same period, prior year. Certain specialty hospital key statistics for both the six months ended June 30, 2014 and 2013 are presented in table VII of this release.
Outpatient Rehabilitation
For the second quarter ended June 30, 2014, net operating revenues for the outpatient rehabilitation segment increased 9.0% to $214.8 million, compared to $197.1 million for the same quarter, prior year. Adjusted EBITDA for the segment for the second quarter ended June 30, 2014 increased 16.8% to $30.4 million, compared to $26.1 million for the same quarter, prior year. The Adjusted EBITDA margin for the segment was 14.2% for the second quarter ended June 30, 2014, compared to 13.2% for the same quarter, prior year. Certain outpatient rehabilitation key statistics for both the second quarter ended June 30, 2014 and 2013 are presented in table VI of this release.
For the six months ended June 30, 2014, net operating revenues for the outpatient rehabilitation segment increased 6.0% to $412.6 million compared to $389.2 million for the same period, prior year. The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations for the segment by approximately $0.9 million for the Sequestration Reduction and $4.5 million for the MPPR Reduction for the six months ended June 30, 2014. The Sequestration Reduction and MPPR Reduction reduced both net operating revenues and income from operations for the segment by approximately $0.4 million for the Sequestration Reduction and $1.7 million for the MPPR Reduction for the six months ended June 30, 2013. Adjusted EBITDA for the segment for the six months ended June 30, 2014 increased 5.2% to $51.4 million compared to $48.9 million for the same period, prior year. The Adjusted EBITDA margin for the segment was 12.5% for the six months ended June 30, 2014 compared to 12.6% for the same period, prior year. Certain outpatient rehabilitation key statistics for both the six months ended June 30, 2014 and 2013 are presented in table VII of this release.
Stock Repurchase Program
The board of directors of Select Medical has authorized a $500.0 million stock repurchase program that will remain in effect until December 31, 2016, unless further extended 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 is funding this program with cash on hand and borrowings under Select's revolving credit facility. Select Medical repurchased a total of 1,285,714 shares at a total cost of $18.0 million, or $14.00 per share, during the quarter ended June 30, 2014. Since the inception of the program through June 30, 2014, Select Medical has repurchased 34,891,794 shares at a cost of approximately $301.1 million, or $8.63 per share, which includes transaction costs.
Dividends
On August 6, 2014, Select Medical's board of directors declared a cash dividend of $0.10 per share. The dividend will be payable on or about August 29, 2014 to stockholders of record as of the close of business on August 20, 2014.
There is no assurance that future dividends will be declared or the timing or amount of any future dividend. The declaration and payment of dividends in the future are at the sole discretion of our board of directors after taking into account various factors, including our financial condition, operating results, available cash and current and anticipated cash needs and applicable restrictions in our debt documents.
Business Outlook
Select Medical is reaffirming its prior business outlook provided most recently in its May 1, 2014 first quarter earnings press release. Select Medical continues to expect consolidated net operating revenues for the full year 2014 to be in the range of $3.05 billion to $3.15 billion. Select Medical continues to expect Adjusted EBITDA for the full year 2014 to be in the range of $365.0 million to $385.0 million. Select Medical continues to expect adjusted income per common share, which excludes the loss on retirement of debt and its related tax effects, for the full year 2014 to be in the range $0.89 to $0.97. Select Medical continues to expect fully diluted income per common share for the full year 2014 to be in the range of $0.88 to $0.96.
Conference Call
Select Medical will host a conference call regarding its second quarter results and its business outlook on Friday, August 8, 2014, at 9:00 am EDT. The domestic dial-in number for the call is 1-866-515-2907. The international dial-in number is 1-617-399-5121. The passcode for the call is 47783079. The conference call will be webcast simultaneously and can be accessed at Select Medical's website, www.selectmedicalholdings.com.
For those unable to participate in the conference call, a replay will be available until 11:59 pm EDT, August 15, 2014. The replay number is 1-888-286-8010 (domestic) or 1-617-801-6888 (international). The passcode for the replay will be 35238169. The replay can also be accessed at Select Medical's website, www.selectmedicalholdings.com.
Select Medical is a leading operator of specialty hospitals and outpatient rehabilitation clinics in the United States. As of June 30, 2014, Select Medical operated 112 long term acute care hospitals and 15 acute medical rehabilitation hospitals in 28 states and 1,019 outpatient rehabilitation clinics in 32 states and the District of Columbia. Select Medical also provides medical rehabilitation services on a contracted basis to nursing homes, hospitals, assisted living and senior care centers, schools and work sites. Information about Select Medical is available at www.selectmedical.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 due to factors including the following:
- changes in government reimbursement for our services due to the implementation of healthcare reform legislation, deficit reduction measures, and/or new payment policies (including, for example, the expiration of the moratorium limiting the full application of the 25 Percent Rule that would reduce our Medicare payments for those patients admitted to a long term acute care hospital from a referring hospital in excess of an applicable percentage admissions threshold) may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability;
- the impact of the Bipartisan Budget Act of 2013, which establishes new payment limits for Medicare patients who do not meet specified criteria, may result in a reduction in net operating revenues and profitability of our long term acute care hospitals;
- the failure of our specialty hospitals to maintain their Medicare certifications may cause our net operating revenues and profitability to decline;
- the failure of our facilities operated as "hospitals within hospitals" to qualify as hospitals separate from their host hospitals may cause our net operating revenues 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;
- private third-party payors for our services may undertake future cost containment initiatives that limit our future net operating revenues and profitability;
- the failure to maintain established relationships with the physicians in the areas we serve could reduce our net operating revenues and profitability;
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