MECHANICSBURG, Pa., Nov. 8 /PRNewswire/ -- Select Medical Corporation today announced results for the third quarter and nine months ended September 30, 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 its 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 has 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.
For the third quarter ended September 30, 2005, net operating revenues increased 17.2% to $477.7 million compared to $407.6 million for the same quarter, prior year. Income from operations increased 2.2% to $56.1 million compared to $55.0 million for the same quarter, prior year. Net income declined 36.0% to $17.8 million compared to $27.8 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 and minority interest (“Adjusted EBITDA”) for the third quarter increased 29.1% to $84.2 million compared to $65.2 million for the same quarter, prior year. A reconciliation of net income to Adjusted EBITDA is attached to this release.
For the combined nine months ended September 30, 2005, net operating revenues increased 17.0% to $1,452.2 million compared to $1,241.3 million for the same period, prior year. Income from operations decreased 63.6% to $63.1 million compared to $173.3 million for the same period, prior year. Select had a net loss of $39.9 million for the combined nine months ended September 30, 2005 compared to net income of $88.4 million for the same period, prior year. Additionally, Adjusted EBITDA for the combined nine months ended September 30, 2005 increased 29.4% to $262.4 million compared to $202.9 million for the same period, prior year.
Specialty Hospitals
At September 30, 2005, Select operated 97 long-term acute care hospitals and four acute medical rehabilitation hospitals. This compares to 83 long- term acute care hospitals and four acute medical rehabilitation hospitals operated at September 30, 2004. For the third quarter of 2005, net operating revenues for all Select’s hospitals increased 26.0% to $340.9 million compared to $270.6 million for the same quarter, prior year. Total patient days for the third quarter 2005 were 242,850, admissions were 9,725 and net revenue per patient day was $1,371. This compares to 198,052 days, 8,197 admissions and net revenue per patient day of $1,338 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 third quarter of 2005 were 206,046 and admissions in the third quarter were 8,375, compared to 192,205 days and 7,941 admissions in the same quarter, prior year. Adjusted EBITDA for the segment increased 31.7% to $77.6 million compared to $58.9 million for the same quarter, prior year. The Adjusted EBITDA margin for the segment was 22.8% for the third quarter of 2005, compared to 21.8% 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 23.7% for the third quarter of 2005, compared to 22.9% for the same quarter, prior year.
For the combined nine months ended September 30, 2005, net operating revenues for all Select’s hospitals increased 27.4% to $1,029.3 million compared to $807.9 million for the same period, prior year. Total patient days for the combined nine months ended September 30, 2005 were 739,860, admissions were 30,056 and net revenue per patient day was $1,358. This compares to 615,304 days, 25,241 admissions and net revenue per patient day of $1,287 for the same period, prior year. For the hospitals opened before January 1, 2004 and operated by Select throughout both periods, patient days for the combined nine months ended September 30, 2005 were 624,934 and admissions were 25,722, compared to 598,564 days and 24,597 admissions in the same period, prior year. Adjusted EBITDA for the segment for the combined nine months ended September 30, 2005 increased 34.4% to $235.2 million compared to $175.0 million for the same period, prior year. The Adjusted EBITDA margin for the segment for the combined nine months ended September 30, 2005 was 22.8%, compared to 21.7% for the same period, prior year. The Adjusted EBITDA margin for the hospitals opened before January 1, 2004 and operated by Select throughout both periods was 24.0% for the combined nine months ended September 30, 2005, compared to 22.4% for the same period, prior year.
Outpatient Rehabilitation
At September 30, 2005, Select operated 730 outpatient clinics. This compares to 750 outpatient clinics at September 30, 2004. For the third quarter of 2005, net operating revenues increased 1.3% to $135.3 million compared to $133.5 million for the same quarter, prior year. Adjusted EBITDA for the third quarter increased 3.9% to $18.0 million compared to $17.3 million for the same quarter, prior year. The Adjusted EBITDA margin for the quarter was 13.3% compared to 13.0% in the same quarter, prior year. U.S. based patient visits for the quarter were 858,974 compared to 935,763 for the same quarter, prior year. Net revenue per visit was $90 for the third quarter of 2005 compared to $88 for the same quarter, prior year.
For the combined nine months ended September 30, 2005, net operating revenues declined 1.7% to $416.1 million compared to $423.5 million for the same period, prior year. Adjusted EBITDA for the period declined 3.3% to $62.3 million compared to $64.4 million for the same period, prior year. The Adjusted EBITDA margin for the period was 15.0% compared to 15.2% in the same period, prior year. U.S. based patient visits for the period were 2,692,369 compared to 2,933,106 for the same period, prior year. Net revenue per visit was $90 for the period compared to $89 for the same period, prior year.
Conference Call
The Company will host a conference call regarding the third quarter results and its business outlook on Wednesday, November 9, 2005, at 11:00 am EST. The domestic dial-in number for the call is 1-866-261-3296. The international dial-in number is 1-703-639-1223.
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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 and Canada, with approximately 730 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.
Investor inquiries: Joel Veit, 717/972-1100 ir@selectmedicalcorp.com I. Condensed Consolidated Statements of Operations (In thousands) (unaudited) For the Three Months Ended September 30, 2005 and 2004 Predecessor Successor (1) (1) % 2004 2005 Change Net operating revenues $407,570 $477,698 17.2% Costs and expenses: Cost of services 318,541 377,711 18.6% Stock compensation expense - 1,424 N/M Long-term incentive compensation - 14,453 N/M Bad debt expense 12,857 4,401 (65.8)% General and administrative 10,945 11,402 4.2% Depreciation and amortization 10,264 12,161 18.5% Income from operations 54,963 56,146 2.2% Interest income (634) (287) (54.7)% Interest expense 8,632 25,604 196.6% Income from continuing operations before minority interests and income taxes 46,965 30,829 (34.4)% Minority interests 620 843 36.0% Income from continuing operations before income taxes 46,345 29,986 (35.3)% Income tax expense 18,674 12,170 (34.8)% Income from continuing operations 27,671 17,816 (35.6)% Income from discontinued operations, net of tax 146 - N/M Net income $27,817 $17,816 (36.0)% (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 Nine Months Ended September 30, 2005 and 2004 Successor Combined Predecessor (1) (1) (2) For the Period Period Nine from from Nine Months Jan. 1 Feb. 25 Months Ended through through Ended Sept. 30, Feb. 24, Sept. 30, Sept. 30, 2004 2005 2005 2005 % Change Net operating revenues $1,241,276 $287,787 $1,164,450 $1,452,237 17.0% Costs and expenses: Cost of services 965,848 225,428 908,736 1,134,164 17.4% Stock compensation expense - 142,213 7,567 149,780 N/M Long-term incentive compensation - - 14,453 14,453 N/M Bad debt expense 36,056 6,661 14,425 21,086 (41.5)% General and administrative 36,490 7,484 27,069 34,553 (5.3)% Depreciation and amortization 29,533 6,177 28,898 35,075 18.8% Income (loss) from operations 173,349 (100,176) 163,302 63,126 (63.6)% Loss on early retirement of debt - 42,736 - 42,736 N/M Merger related charges - 12,025 - 12,025 N/M Interest income (1,485) (523) (568) (1,091) (26.5)% Interest expense 25,385 4,734 60,406 65,140 156.6% Income (loss) from continuing operations before minority interests, and income taxes 149,449 (159,148) 103,464 (55,684) (137.3)% Minority interests 2,772 469 2,335 2,804 1.2% Income (loss) from continuing operations before income taxes 146,677 (159,617) 101,129 (58,488) (139.9)% Income tax expense (benefit) 59,121 (59,366) 40,819 (18,547) (131.4)% Income (loss) from continuing operations 87,556 (100,251) 60,310 (39,941) (145.6)% Income from discontinued operations, net of tax 802 - - - N/M Net income (loss) $88,358 $(100,251) $60,310 $(39,941) (145.2)% (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 September 30, 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 nine months ended September 30, 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, September 30, 2004 2005 Assets Cash $247,476 $9,364 Restricted cash 7,031 6,706 Accounts receivable, net 216,852 290,836 Current deferred tax asset 59,239 70,718 Other current assets 18,737 23,220 Total current assets 549,335 400,844 Property and equipment, net 165,336 224,790 Goodwill 302,069 1,362,757 Other identifiable intangibles 78,304 87,278 Non-current deferred tax asset - 172 Other assets 18,677 63,551 Total assets $1,113,721 $2,139,392 Liabilities and Stockholders’ Equity Payables and accruals $232,063 $271,246 Current portion of long term debt 3,557 7,949 Total current liabilities 235,620 279,195 Long term debt, net of current portion 351,033 1,372,091 Non-current deferred tax liability 4,458 - Minority interests 6,667 7,458 Stockholders’ equity 515,943 480,648 Total liabilities and stockholders’ equity $1,113,721 $2,139,392 (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 September 30, 2005 and 2004 % 2004 2005 Change Specialty Hospitals (a) Number of hospitals - end of period 87 101 16.1% Net operating revenues (,000) $270,647 $340,898 26.0% Number of patient days 198,052 242,850 22.6% Number of admissions 8,197 9,725 18.6% Net revenue per patient day (b) $1,338 $1,371 2.5% Adjusted EBITDA (,000) $58,945 $77,642 31.7% Adjusted EBITDA margin - all hospitals 21.8% 22.8% 4.6% Adjusted EBITDA margin - same store hospitals (c) 22.9% 23.7% 3.5% Outpatient Rehabilitation Number of clinics - end of period 750 730 (2.7)% Net operating revenues (,000) $133,522 $135,302 1.3% Number of visits (US) 935,763 858,974 (8.2)% Revenue per visit (US) (d) $88 $90 2.3% Adjusted EBITDA (,000) $17,349 $18,032 3.9% Adjusted EBITDA margin 13.0% 13.3% 2.3% (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 Select’s Canadian subsidiary or contract services revenue. V. Key Statistics (unaudited) For the Nine Months Ended September 30, 2005 and 2004 % 2004 2005 Change Specialty Hospitals (a) Number of hospitals - end of period 87 101 16.1% Net operating revenues (,000) $807,944 $1,029,283 27.4% Number of patient days 615,304 739,860 20.2% Number of admissions 25,241 30,056 19.1% Net revenue per patient day (b) $1,287 $1,358 5.5% Adjusted EBITDA (,000) $174,966 $235,190 34.4% Adjusted EBITDA margin - all hospitals 21.7% 22.8% 5.1% Adjusted EBITDA margin - same store hospitals (c) 22.4% 24.0% 7.1% Outpatient Rehabilitation Number of clinics - end of period 750 730 (2.7)% Net operating revenues (,000) $423,465 $416,116 (1.7)% Number of visits (US) 2,933,106 2,692,369 (8.2)% Revenue per visit (US) (d) $89 $90 1.1% Adjusted EBITDA (,000) $64,427 $62,321 (3.3)% Adjusted EBITDA margin 15.2% 15.0% (1.3)% (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 Select’s Canadian subsidiary or contract services revenue. VI. Net Income to Adjusted EBITDA Reconciliation (In thousands) (unaudited) For the Three and Nine Months Ended September 30, 2005 and 2004
The following table reconciles net income 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 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, 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) Three Months Ended September 30, 2004 2005 Net income (loss) $27,817 $17,816 Income from discontinued operations, net of tax (146) - Income tax expense (benefit) 18,674 12,170 Minority interest 620 843 Interest expense, net 7,998 25,317 Loss on early retirement of debt - - Merger related charges - - Stock compensation expense - 1,424 Long-term incentive compensation - 14,453 Depreciation and amortization 10,264 12,161 Adjusted EBITDA $65,227 $84,184 Specialty hospitals $58,945 $77,642 Outpatient rehabilitation 17,349 18,032 Other (3) (11,067) (11,490) Adjusted EBITDA $65,227 $84,184 Successor Combined Predecessor (1) (1) (2) Period Period For the from from For the Nine Months Jan. 1 Feb. 25 Nine Months Ended through through Ended Sept. 30, Feb. 24, Sept. 30, Sept. 30, 2004 2005 2005 2005 Net income (loss) $88,358 $(100,251) $60,310 $(39,941) Income from discontinued operations, net of tax (802) - - - Income tax expense (benefit) 59,121 (59,366) 40,819 (18,547) Minority interest 2,772 469 2,335 2,804 Interest expense, net 23,900 4,211 59,838 64,049 Loss on early retirement of debt - 42,736 - 42,736 Merger related charges - 12,025 - 12,025 Stock compensation expense - 142,213 7,567 149,780 Long-term incentive compensation - - 14,453 14,453 Depreciation and amortization 29,533 6,177 28,898 35,075 Adjusted EBITDA $202,882 $48,214 $214,220 $262,434 Specialty hospitals $174,966 $44,343 $190,847 $235,190 Outpatient rehabilitation 64,427 11,531 50,790 62,321 Other (3) (36,511) (7,660) (27,417) (35,077) Adjusted EBITDA $202,882 $48,214 $214,220 $262,434 (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 September 30, 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 nine months ended September 30, 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 September 30, 2004 September 30, 2005 Specialty hospitals net operating revenue $270,647 $340,898 Less: Specialty hospitals opened, acquired or closed after 1/1/04 3,599 52,589 Specialty hospitals same store net operating revenue $267,048 $288,309 Specialty hospitals Adjusted EBITDA $58,945 $77,642 Less: Specialty hospitals opened, acquired or closed after 1/1/04 (2,083) 9,224 Specialty hospitals same store Adjusted EBITDA $61,028 $68,418 All specialty hospitals Adjusted EBITDA margin 21.8% 22.8% Specialty hospitals same store Adjusted EBITDA margin 22.9% 23.7% Nine Months Ended September 30, 2004 September 30, 2005 Specialty hospitals net operating revenue $807,944 $1,029,283 Less: Specialty hospitals opened, acquired or closed after 1/1/04 7,574 154,006 Specialty hospitals same store net operating revenue $800,370 $875,277 Specialty hospitals Adjusted EBITDA $174,966 $235,190 Less: Specialty hospitals opened, acquired or closed after 1/1/04 (3,921) 24,770 Specialty hospitals same store Adjusted EBITDA $178,887 $210,420 All specialty hospitals Adjusted EBITDA margin 21.7% 22.8% Specialty hospitals same store Adjusted EBITDA margin 22.4% 24.0%
Select Medical Corporation
CONTACT: Joel Veit, Select Medical Corporation, +1-717-972-1100,ir@selectmedicalcorp.com
Web site: http://www.selectmedicalcorp.com/
