8-K
Select Medical Holdings Corp (SEM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
current
report
Pursuant to Section 13or 15(d) of the
Securities ExchangeAct of 1934
Date of Report (Dateof earliest event reported): February 20, 2025
SELECT
MEDICAL HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-34465 | 20-1764048 |
|---|---|---|
| (State or other jurisdiction of <br> Incorporation) | (Commission File <br> Number) | (I.R.S. Employer <br>Identification No.) |
4714 Gettysburg Road, P.O. Box 2034
Mechanicsburg, PA 17055
(Address of principal executive offices) (Zip Code)
(717) 972-1100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | SEM | New York Stock Exchange (NYSE) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the<br>Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the<br>Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b)<br>under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c)<br>under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Indicate by check mark whether either registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if either registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On February 20, 2025, Select Medical Holdings Corporation (the “Company”) issued a press release announcing its financial results for its fourth quarter and fiscal year ended December 31, 2024 (the “Press Release”). A copy of the Press Release and the attached financial schedules are attached as Exhibit 99.1 to this report and incorporated herein by reference.
The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
| Item 8.01 | Other Events |
|---|
Dividend Declaration
On February 13, 2025, the Company’s board of directors declared a cash dividend of $0.0625 per share. The dividend will be payable on or about March 13, 2025 to stockholders of record as of the close of business on March 3, 2025.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release, dated February 20, 2025, announcing financial results for the fourth quarter and year ended December 31, 2024. |
| 104 | Cover Page Interactive Data File (embedded with the Inline XBRL) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SELECT MEDICAL HOLDINGS CORPORATION | ||
|---|---|---|
| Date: February 20, 2025 | By: | /s/ Michael E. Tarvin |
| Michael E. Tarvin | ||
| Senior Executive Vice President, General Counsel and Secretary |
Exhibit 99.1
| FOR IMMEDIATE RELEASE | 4714 Gettysburg Road<br><br> <br>Mechanicsburg, PA 17055<br><br> <br>****<br><br> <br>NYSE Symbol: SEM |
|---|
Select Medical Holdings Corporation AnnouncesResults
For Its Fourth Quarter and Year Ended December 31,2024, Its 2025 Business Outlook, and Cash Dividend
MECHANICSBURG, PENNSYLVANIA — February 20, 2025 — Select Medical Holdings Corporation (“Select Medical,” “we,” “us,” or “our”) (NYSE: SEM) today announced results for its fourth quarter and year ended December 31, 2024, its 2025 business outlook, and the declaration of a cash dividend.
On November 25, 2024, we completed a tax-free distribution of 104,093,503 shares of common stock of Concentra Group Holdings Parent, Inc. (“Concentra”) to our stockholders. Holders of our common stock received 0.806971 shares of Concentra common stock for each outstanding share of our common stock owned as of November 18, 2024. Following the completion of the distribution, we no longer own any shares of Concentra’s common stock. The results of Concentra, and related transaction costs, have been reflected as discontinued operations in the consolidated statements of operations, and prior periods have been recast to reflect this presentation.
For the fourth quarter ended December 31, 2024, revenue increased 7.8% to $1,312.6 million, compared to $1,218.1 million for the same quarter, prior year. Income from continuing operations before other income and expense was $21.1 million for the fourth quarter ended December 31, 2024, compared to $64.9 million for the same quarter, prior year. Loss from continuing operations, net of tax, was $10.5 million for the fourth quarter ended December 31, 2024, compared to income from continuing operations, net of tax, of $30.3 million for the same quarter, prior year. In connection with the distribution of Concentra, there was a one-time acceleration of $45.9 million of stock compensation expense, which reduced income (loss) from continuing operations for the quarter ended December 31, 2024. Additionally, during the quarter ended December 31, 2024, we recognized a loss on early retirement of debt of $17.9 million as a result of the debt refinancing transactions described below. Adjusted EBITDA increased 3.8% to $116.0 million for the fourth quarter ended December 31, 2024, compared to $111.8 million for the same quarter, prior year. Diluted loss per common share from continuing operations was $0.19 for the fourth quarter ended December 31, 2024, compared to earnings per common share from continuing operations of $0.12 for the same quarter, prior year. Adjusted earnings per common share from continuing operations, net of tax, which excludes the one-time acceleration of stock compensation expense, the loss on early retirement of debt, and certain reclassified transaction costs associated with the Concentra transaction, increased 50.0% to $0.18 for the fourth quarter ended December 31, 2024, compared to $0.12 for the same quarter, prior year. The definition of Adjusted EBITDA and a reconciliation of income from continuing operations, net of tax, to Adjusted EBITDA are presented in table IX of this release. A reconciliation of earnings per common share from continuing operations, net of tax, to adjusted earnings per common share from continuing operations, net of tax, is presented in table X of this release.
1
For the year ended December 31, 2024, revenue increased 7.5% to $5,187.1 million, compared to $4,826.0 million for the prior year. Income from continuing operations before other income and expense increased 0.4% to $268.3 million for the year ended December 31, 2024, compared to $267.2 million for the prior year. Income from continuing operations, net of tax, increased 17.7% to $130.0 million for the year ended December 31, 2024, compared to $110.5 million for the prior year. In connection with the distribution of Concentra, there was a one-time acceleration of $45.9 million of stock compensation expense, which reduced income from continuing operations for the year ended December 31, 2024. Additionally, during the year ended December 31, 2024, we recognized a loss on early retirement of debt of $28.8 million. Adjusted EBITDA increased 14.4% to $510.4 million for the year ended December 31, 2024, compared to $446.1 million for the prior year. Earnings per common share from continuing operations, net of tax, increased 10.9% to $0.51 for the year ended December 31, 2024, compared to $0.46 for the prior year. Adjusted earnings per common share from continuing operations, net of tax, which excludes the one-time acceleration of stock compensation expense and the loss on early retirement of debt, increased 74.1% to $0.94 for the year ended December 31, 2024, compared to $0.54 for the prior year. The definition of Adjusted EBITDA and a reconciliation of income from continuing operations, net of tax, to Adjusted EBITDA are presented in table IX of this release. A reconciliation of earnings per common share from continuing operations, net of tax, to adjusted earnings per common share from continuing operations, net of tax, is presented in table X of this release.
Company Overview
Select Medical is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics 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, and the outpatient rehabilitation segment. As of December 31, 2024, Select Medical operated 104 critical illness recovery hospitals in 29 states, 35 rehabilitation hospitals in 14 states, and 1,914 outpatient rehabilitation clinics in 39 states and the District of Columbia. At December 31, 2024, Select Medical had operations in 40 states and the District of Columbia. Information about Select Medical is available at www.selectmedical.com.
Critical Illness Recovery Hospital Segment
For the fourth quarter ended December 31, 2024, revenue for the critical illness recovery hospital segment increased 5.9% to $600.4 million, compared to $567.1 million for the same quarter, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 10.0% to $63.1 million for the fourth quarter ended December 31, 2024, compared to $57.4 million for the same quarter, prior year. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 10.5% for the fourth quarter ended December 31, 2024, compared to 10.1% for the same quarter, prior year. Certain critical illness recovery hospital key statistics are presented in table VII of this release for the fourth quarters ended December 31, 2024 and 2023.
For the year ended December 31, 2024, revenue for the critical illness recovery hospital segment increased 6.3% to $2,444.2 million, compared to $2,299.8 million for the prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 22.6% to $301.6 million for the year ended December 31, 2024, compared to $246.0 million for the prior year. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 12.3% for the year ended December 31, 2024, compared to 10.7% for the prior year. Certain critical illness recovery hospital key statistics are presented in table VIII of this release for the years ended December 31, 2024 and 2023.
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Rehabilitation Hospital Segment
For the fourth quarter ended December 31, 2024, revenue for the rehabilitation hospital segment increased 13.1% to $294.4 million, compared to $260.2 million for the same quarter, prior year. Adjusted EBITDA for the rehabilitation hospital segment was $62.3 million for the fourth quarter ended December 31, 2024, compared to $66.3 million for the same quarter, prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 21.2% for the fourth quarter ended December 31, 2024, compared to 25.5% 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, 2024 and 2023.
For the year ended December 31, 2024, revenue for the rehabilitation hospital segment increased 13.4% to $1,110.6 million, compared to $979.6 million for the prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 10.8% to $245.7 million for the year ended December 31, 2024, compared to $221.9 million for the prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 22.1% for the year ended December 31, 2024, compared to 22.6% for the prior year. Certain rehabilitation hospital key statistics are presented in table VIII of this release for the years ended December 31, 2024 and 2023.
Outpatient Rehabilitation Segment
For the fourth quarter ended December 31, 2024, revenue for the outpatient rehabilitation segment increased 7.2% to $319.6 million, compared to $298.2 million for the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment increased 18.2% to $26.6 million for the fourth quarter ended December 31, 2024, compared to $22.5 million for the same quarter, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 8.3% for the fourth quarter ended December 31, 2024, compared to 7.5% for the same quarter, prior year. Certain outpatient rehabilitation key statistics are presented in table VII of this release for the fourth quarters ended December 31, 2024 and 2023.
For the year ended December 31, 2024, revenue for the outpatient rehabilitation segment increased 5.2% to $1,250.3 million, compared to $1,188.9 million for the prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $108.6 million for the year ended December 31, 2024, compared to $111.9 million for the prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 8.7% for the year ended December 31, 2024, compared to 9.4% for the prior year. Certain outpatient rehabilitation key statistics are presented in table VIII of this release for the years ended December 31, 2024 and 2023.
Dividend
On February 13, 2025, Select Medical’s board of directors declared a cash dividend of $0.0625 per share. The dividend will be payable on or about March 13, 2025 to stockholders of record as of the close of business on March 3, 2025.
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.
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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, 2025, 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.
Select Medical did not repurchase shares under its authorized stock repurchase program during the year ended December 31, 2024. Since the inception of the common stock repurchase program through December 31, 2024, Select Medical has repurchased 48,234,823 shares at a cost of approximately $600.3 million, or $12.45 per share, which includes transaction costs.
Financing Transactions
On December 3, 2024, we entered into Amendment No. 11 to our credit agreement. Amendment No. 11 established a new incremental term loan in the aggregate amount of $1,050.0 million. The maturity date of the term loan is December 3, 2031. In addition, Amendment No. 11 extended the maturity date of the revolving credit facility to December 3, 2029 and increased the revolving credit facility commitments from $550.0 million to $600.0 million. The interest rate on the term loan is equal to Term SOFR plus 2.00%, or the Alternative Base Rate (as defined in the credit agreement) plus 1.00%. The interest rate on the revolving facility is equal to Adjusted Term SOFR plus a percentage ranging from 2.25% to 2.50%, or the Alternative Base Rate (as defined in the credit agreement) plus a percentage ranging from 1.25% to 1.50%, in each case subject to a specified leverage ratio.
On December 3, 2024, Select issued and sold $550.0 million aggregate principal amount of 6.250% senior notes due December 1, 2032. Select used the net proceeds of the 6.250% senior notes due 2032, together with the proceeds from the incremental term loan borrowings (as described above) and cash on hand, to redeem in full the $1,225.0 million senior notes due 2026, repay the existing term loans, and pay related fees and expenses associated with the financing. Interest on the 2032 senior notes accrues at the rate of 6.250% per annum and is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2025.
Business Outlook
Select Medical is issuing its business outlook for 2025. Select Medical expects revenue to be in the range of $5.4 billion to $5.6 billion, Adjusted EBITDA to be in the range of $520.0 million to $540.0 million, and fully diluted earnings per share to be in the range of $1.09 to $1.19. A reconciliation of full year 2025 Adjusted EBITDA expectations to income from continuing operations, net of tax, is presented in table XI of this release.
Conference Call
Select Medical will host a conference call regarding its results for the fourth quarter and full year ended December 31, 2024, and its business outlook on Friday, February 21, 2025, at 9:00am ET. The conference call will be a live webcast and can be accessed at Select Medical Holdings Corporation’s website at www.selectmedicalholdings.com. A replay of the webcast will be available shortly after the call through the same link.
For listeners wishing to dial-in via telephone, or participate in the question and answer session, you may pre-register for the call at Select Medical Earnings Call Registration to obtain your dial-in number and unique passcode.
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* * * * *
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 2025 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:
| · | changes<br> in government reimbursement for our services and/or new payment policies may result in a<br> reduction in revenue, an increase in costs, and a reduction in profitability; |
|---|---|
| · | adverse<br> economic conditions including an inflationary environment could cause us to continue to experience<br> increases in the prices of labor and other costs of doing business resulting in a negative<br> impact on our business, operating results, cash flows, and financial condition; |
| --- | --- |
| · | shortages<br> in qualified nurses, therapists, physicians, or other licensed providers, and/or the inability<br> to attract or retain qualified healthcare professionals could limit our ability to staff<br> our facilities; |
| --- | --- |
| · | shortages<br> in qualified health professionals could cause us to increase our dependence on contract labor,<br> increase our efforts to recruit and train new employees, and expand upon our initiatives<br> to retain existing staff, which could increase our operating costs significantly; |
| --- | --- |
| · | the<br> negative impact of public threats such as a global pandemic or widespread outbreak of an<br> infectious disease similar to the COVID-19 pandemic; |
| --- | --- |
| · | the<br> failure of our Medicare-certified long term care hospitals or inpatient rehabilitation facilities<br> to maintain their Medicare certifications may cause our revenue and profitability to decline; |
| --- | --- |
| · | the<br> failure of our Medicare-certified long term care hospitals and inpatient rehabilitation facilities<br> operated as “hospitals within hospitals” to qualify as hospitals separate from<br> their host hospitals may cause our revenue and profitability to decline; |
| --- | --- |
| · | a<br> government investigation or assertion that we have violated applicable regulations may result<br> in sanctions or reputational harm and increased costs; |
| --- | --- |
| · | acquisitions<br> or joint ventures may prove difficult or unsuccessful, use significant resources, or expose<br> us to unforeseen liabilities; |
| --- | --- |
| · | our<br> plans and expectations related to our acquisitions and our ability to realize anticipated<br> synergies; |
| --- | --- |
| · | failure<br> to complete or achieve some or all the expected benefits of the potential separation of Concentra; |
| --- | --- |
| · | private<br> third-party payors for our services may adopt payment policies that could limit our future<br> revenue and profitability; |
| --- | --- |
| · | the<br> failure to maintain established relationships with the physicians in the areas we serve could<br> reduce our revenue and profitability; |
| --- | --- |
| · | competition<br> may limit our ability to grow and result in a decrease in our revenue and profitability; |
| --- | --- |
| · | the<br> loss of key members of our management team could significantly disrupt our operations; |
| --- | --- |
| · | the<br> effect of claims asserted against us could subject us to substantial uninsured liabilities; |
| --- | --- |
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| · | a<br> security breach of our or our third-party vendors’ information technology systems may<br> subject us to potential legal and reputational harm and may result in a violation of the<br> Health Insurance Portability and Accountability Act of 1996 or the Health Information Technology<br> for Economic and Clinical Health Act; and |
|---|---|
| · | other<br> factors discussed from time to time in our filings with the Securities and Exchange Commission<br> (the “SEC”), including factors discussed under the heading “Risk Factors”<br> of the annual report on Form 10-K for the year ended December 31, 2024. |
| --- | --- |
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
6
I. Condensed Consolidated Statements of Operations
For the Three Months Ended December 31, 2023and 2024
(In thousands, except per share amounts, unaudited)
| 2023 | 2024 | % Change | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenue | $ | 1,218,116 | $ | 1,312,564 | 7.8 | % | |||
| Costs and expenses: | |||||||||
| Cost of services, exclusive of depreciation and amortization | 1,074,062 | 1,175,099 | 9.4 | ||||||
| General and administrative | 44,090 | 80,197 | 81.9 | ||||||
| Depreciation and amortization | 35,485 | 36,283 | 2.2 | ||||||
| Total costs and expenses | 1,153,637 | 1,291,579 | 12.0 | ||||||
| Other operating income | 458 | 106 | (76.9 | ) | |||||
| Income from continuing operations before other income and expense | 64,937 | 21,091 | (67.5 | ) | |||||
| Other income and expense: | |||||||||
| Loss on early retirement of debt | — | (17,906 | ) | N/M | |||||
| Equity in earnings of unconsolidated subsidiaries | 10,195 | 10,423 | 2.2 | ||||||
| Interest expense | (40,263 | ) | (28,551 | ) | (29.1 | ) | |||
| Income (loss) from continuing operations before income taxes | 34,869 | (14,943 | ) | N/M | |||||
| Income tax expense (benefit) from continuing operations | 4,618 | (4,487 | ) | N/M | |||||
| Income (loss) from continuing operations, net of tax | 30,251 | (10,456 | ) | N/M | |||||
| Discontinued operations: | |||||||||
| Income from discontinued business | 38,779 | 24,669 | (36.4 | ) | |||||
| Income tax expense from discontinued business | 7,232 | 10,457 | 44.6 | ||||||
| Income from discontinued operations, net of tax | 31,547 | 14,212 | (54.9 | ) | |||||
| Net income | 61,798 | 3,756 | (93.9 | ) | |||||
| Less: Net income attributable to non-controlling interests | 15,529 | 19,806 | 27.5 | ||||||
| Net income (loss) attributable to Select Medical | $ | 46,269 | $ | (16,050 | ) | N/M | |||
| Net income (loss) attributable to Select Medical’s common<br> stockholders: | |||||||||
| Income (loss) from continuing operations, net of tax | $ | 15,743 | $ | (23,664 | ) | ||||
| Income from discontinued operations, net<br> of tax | 30,526 | 7,614 | |||||||
| Net income (loss) attributable to Select Medical’s common<br> stockholders | $ | 46,269 | $ | (16,050 | ) | ||||
| Basic earnings (loss) per common share: | |||||||||
| Continuing operations | $ | 0.12 | $ | (0.18 | ) | ||||
| Discontinued operations | 0.24 | 0.06 | |||||||
| Total basic earnings (loss) per common share | $ | 0.36 | $ | (0.12 | ) | ||||
| Diluted earnings (loss) per common share: | |||||||||
| Continuing operations | $ | 0.12 | $ | (0.19 | ) | ||||
| Discontinued operations | 0.24 | 0.06 | |||||||
| Total diluted earnings (loss) per common share | $ | 0.36 | $ | (0.13 | ) | ||||
| (1) | Refer to table III for<br> calculation of earnings per common share. | ||||||||
| --- | --- | ||||||||
| N/M | Not meaningful. | ||||||||
| --- | --- |
7
II. Condensed Consolidated Statements of Operations
For the Years Ended December 31, 2023 and 2024
(In thousands, except per share amounts, unaudited)
| 2023 | 2024 | % Change | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenue | $ | 4,825,977 | $ | 5,187,105 | 7.5 | % | |||
| Costs and expenses: | |||||||||
| Cost of services, exclusive of depreciation and amortization | 4,254,369 | 4,553,461 | 7.0 | ||||||
| General and administrative | 170,193 | 225,869 | 32.7 | ||||||
| Depreciation and amortization | 135,691 | 142,866 | 5.3 | ||||||
| Total costs and expenses | 4,560,253 | 4,922,196 | 7.9 | ||||||
| Other operating income | 1,518 | 3,406 | 124.4 | ||||||
| Income from continuing operations before other income and expense | 267,242 | 268,315 | 0.4 | ||||||
| Other income and expense: | |||||||||
| Loss on early retirement of debt | (14,692 | ) | (28,845 | ) | 96.3 | ||||
| Equity in earnings of unconsolidated subsidiaries | 41,339 | 63,904 | 54.6 | ||||||
| Interest expense | (154,165 | ) | (128,605 | ) | (16.6 | ) | |||
| Income from continuing operations before income taxes | 139,724 | 174,769 | 25.1 | ||||||
| Income tax expense from continuing operations | 29,253 | 44,782 | 53.1 | ||||||
| Income from continuing operations, net of tax | 110,471 | 129,987 | 17.7 | ||||||
| Discontinued operations: | |||||||||
| Income from discontinued business | 242,632 | 223,414 | (7.9 | ) | |||||
| Income tax expense from discontinued business | 53,372 | 56,697 | 6.2 | ||||||
| Income from discontinued operations, net of tax | 189,260 | 166,717 | (11.9 | ) | |||||
| Net income | 299,731 | 296,704 | (1.0 | ) | |||||
| Less: Net income attributable to non-controlling interests | 56,240 | 82,666 | 47.0 | ||||||
| Net income attributable to Select Medical | $ | 243,491 | $ | 214,038 | (12.1 | )% | |||
| Net income attributable to Select Medical’s common stockholders: | |||||||||
| Income from continuing operations, net of tax | $ | 59,027 | $ | 65,473 | |||||
| Income from discontinued operations, net of<br> tax | 184,464 | 148,565 | |||||||
| Net income attributable to Select Medical’s<br> common stockholders: | $ | 243,491 | $ | 214,038 | |||||
| Earnings per common share: | |||||||||
| Continuing operations - basic and diluted | $ | 0.46 | $ | 0.51 | |||||
| Discontinued operations - basic and diluted | 1.44 | 1.15 | |||||||
| Basic and<br> diluted earnings per common share:^(1)^ | $ | 1.91 | (2) | $ | 1.66 | ||||
| (1) | Refer to table III for<br> calculation of earnings per common share. | ||||||||
| --- | --- | ||||||||
| (2) | Does not total due to<br> rounding. | ||||||||
| --- | --- | ||||||||
| N/M | Not meaningful. | ||||||||
| --- | --- |
8
III. Earnings per Share
For the Three Months and Years Ended December 31, 2023 and2024
(In thousands, except per share amounts, unaudited)
Select Medical’s capital structure includes common stock and unvested restricted stock awards. To compute earnings per share (“EPS”), Select Medical applies the two-class method because its unvested restricted stock awards are participating securities which are entitled to participate equally with its common stock in undistributed earnings. Select Medical applies the treasury stock method when computing diluted EPS.
The following table sets forth the income from continuing operations, net of tax, attributable to Select Medical’s common stockholders, its common shares outstanding, and its participating securities outstanding for the three months and years ended December 31, 2023 and 2024:
| Basic EPS | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended<br><br> December 31, | Years Ended<br> <br>December 31, | ||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||
| Income (loss) from continuing operations, net of tax | $ | 30,251 | $ | (10,456 | ) | $ | 110,471 | $ | 129,987 |
| Less: Net income attributable to non-controlling interests | 14,508 | 13,208 | 51,444 | 64,514 | |||||
| Income (loss) from continuing operations, net of tax, attributable to Select Medical’s<br> common stockholders | 15,743 | (23,664 | ) | 59,027 | 65,473 | ||||
| Less: distributed and undistributed<br> net income (loss) attributable to participating securities^(1)^ | 556 | (597 | ) | 2,127 | 2,319 | ||||
| Income (loss) from continuing operations, net of tax, attributable<br> to common shares | $ | 15,187 | $ | (23,067 | ) | $ | 56,900 | $ | 63,154 |
The following tables set forth the computation of EPS for the three months and years ended December 31, 2023 and 2024:
| Three Months Ended<br> December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | ||||||||||||||||
| Income<br> from<br> Continuing<br> Operations, Net of<br> Tax, Allocation | Shares^(1)^ | Basic<br> and Diluted <br><br> EPS | ||||||||||||||
| (in thousands, except for per share amounts) | ||||||||||||||||
| Common shares | $ | 15,187 | 123,817 | $ | 0.12 | |||||||||||
| Participating securities | 556 | 4,530 | $ | 0.12 | ||||||||||||
| Total | $ | 15,743 | ||||||||||||||
| Three Months Ended<br> December 31, | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2024 | ||||||||||||||||
| Loss from<br><br> Continuing<br><br> Operations, <br><br> Net of Tax,<br><br> Allocation -<br><br> Basic | Basic Shares^(1)^ | Basic EPS | Loss from<br><br> Continuing<br><br> Operations, <br><br> Net of Tax,<br><br> Allocation -<br><br> Diluted | Diluted Shares^(1)^ | Diluted EPS | |||||||||||
| (in thousands, except for per share amounts) | ||||||||||||||||
| Common shares | $ | (23,067 | ) | 125,923 | $ | (0.18 | ) | $ | (23,664 | ) | 127,535 | $ | (0.19 | ) | ||
| Participating securities | (597 | ) | 3,261 | $ | (0.18 | ) | ||||||||||
| Total | $ | (23,664 | ) | **** |
9
| Year Ended December<br> 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2024 | |||||||||||
| Income from<br> Continuing<br><br> Operations, <br> Net of Tax,<br> Allocation | Shares^(1)^ | Basic and Diluted<br> EPS | Income from<br> Continuing<br><br> Operations, <br> Net of Tax,<br> Allocation | Shares^(1)^ | Basic and<br> Diluted<br> EPS | |||||||
| (in thousands, except for per share amounts) | ||||||||||||
| Common shares | $ | 56,900 | 123,105 | $ | 0.46 | $ | 63,154 | 124,614 | $ | 0.51 | ||
| Participating securities | 2,127 | 4,601 | $ | 0.46 | 2,319 | 4,576 | $ | 0.51 | ||||
| Total | $ | 59,027 | $ | 65,473 | ||||||||
| (1) | Represents the weighted average share count<br> outstanding during the period. | |||||||||||
| --- | --- |
10
IV. Condensed Consolidated Balance Sheets
(In thousands, unaudited)
| December 31, | ||||
|---|---|---|---|---|
| 2023 | 2024 | |||
| Assets | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 52,632 | $ | 59,694 |
| Accounts receivable | 724,141 | 821,385 | ||
| Current assets of discontinued operations | 291,064 | — | ||
| Other current assets | 189,809 | 138,698 | ||
| Total Current Assets | 1,257,646 | 1,019,777 | ||
| Operating lease right-of-use assets | 790,764 | 908,095 | ||
| Property and equipment, net | 845,191 | 872,185 | ||
| Goodwill | 2,283,425 | 2,331,898 | ||
| Identifiable intangible assets, net | 105,147 | 103,183 | ||
| Non-current assets of discontinued operations | 2,039,142 | — | ||
| Other assets | 368,316 | 372,813 | ||
| Total Assets | $ | 7,689,631 | $ | 5,607,951 |
| Liabilities and Equity | ||||
| Current Liabilities: | ||||
| Payables and accruals | $ | 735,857 | $ | 777,781 |
| Current operating lease liabilities | 172,454 | 179,601 | ||
| Current portion of long-term debt and notes payable | 68,874 | 20,269 | ||
| Current liabilities of discontinued operations | 271,280 | — | ||
| Total Current Liabilities | 1,248,465 | 977,651 | ||
| Non-current operating lease liabilities | 668,557 | 787,124 | ||
| Long-term debt, net of current portion | 3,584,384 | 1,691,546 | ||
| Non-current deferred tax liability | 119,942 | 81,497 | ||
| Non-current liabilities of discontinued operations | 411,487 | — | ||
| Other non-current liabilities | 82,781 | 73,038 | ||
| Total Liabilities | 6,115,616 | 3,610,856 | ||
| Redeemable non-controlling interests | 26,297 | 10,167 | ||
| Total Equity | 1,547,718 | 1,986,928 | ||
| Total Liabilities and Equity | $ | 7,689,631 | $ | 5,607,951 |
11
V. Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 2023 and 2024
(In thousands, unaudited)
| 2023 | 2024 | |||||
|---|---|---|---|---|---|---|
| Operating activities | ||||||
| Net income | $ | 61,798 | $ | 3,756 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Distributions from unconsolidated subsidiaries | 13,521 | 8,742 | ||||
| Depreciation and amortization | 53,984 | 45,743 | ||||
| Provision for expected credit losses | (71 | ) | 2,620 | |||
| Equity in earnings of unconsolidated subsidiaries | (10,195 | ) | (10,423 | ) | ||
| Loss on extinguishment of debt | — | 8,099 | ||||
| (Gain) loss on sale of assets and businesses | (50 | ) | 48 | |||
| Stock compensation expense | 11,818 | 61,271 | ||||
| Amortization of debt discount, premium and issuance costs | 748 | 684 | ||||
| Deferred income taxes | 930 | 2,507 | ||||
| Changes in operating assets and liabilities, net of effects<br> of business combinations: | ||||||
| Accounts receivable | 4,170 | 20,916 | ||||
| Other current assets | (12,098 | ) | 10,216 | |||
| Other assets | 3,003 | (1,009 | ) | |||
| Accounts payable and accrued expenses | 51,884 | (27,738 | ) | |||
| Net cash provided by operating activities | 179,442 | 125,432 | ||||
| Investing activities | ||||||
| Business combinations, net of cash acquired | (9,085 | ) | (10,786 | ) | ||
| Purchases of property and equipment | (60,603 | ) | (63,429 | ) | ||
| Proceeds from sale of assets and businesses | 104 | 22 | ||||
| Net cash used in investing activities | (69,584 | ) | (74,193 | ) | ||
| Financing activities | ||||||
| Borrowings on revolving facilities | 270,000 | 290,000 | ||||
| Payments on revolving facilities | (330,000 | ) | (195,000 | ) | ||
| Proceeds from term loans, net of issuance costs | — | 1,043,355 | ||||
| Payments on term loans | (5,258 | ) | (372,982 | ) | ||
| Payment on senior notes, including call premium | — | (1,237,764 | ) | |||
| Proceeds from senior notes, net of issuance costs | — | 539,261 | ||||
| Borrowings of other debt | 550 | 4,086 | ||||
| Principal payments on other debt | (8,648 | ) | (29,498 | ) | ||
| Dividends paid to common stockholders | (16,048 | ) | (16,124 | ) | ||
| Repurchase of common stock | (1,709 | ) | (19,981 | ) | ||
| Increase in overdrafts | 280 | 11,630 | ||||
| Proceeds from issuance of non-controlling interests | 2,472 | 6,300 | ||||
| Distributions to and purchases of non-controlling interests | (14,931 | ) | (24,201 | ) | ||
| Cash transferred to Concentra at separation | — | (182,095 | ) | |||
| Net cash used in financing activities | (103,292 | ) | (183,013 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 6,566 | (131,774 | ) | |||
| Cash and cash equivalents at beginning of period | 77,440 | 191,468 | ||||
| Cash and cash equivalents at end<br> of period^(1)^ | $ | 84,006 | $ | 59,694 | ||
| Supplemental information: | ||||||
| Cash paid for interest, excluding amounts received of $22,465 under the interest rate<br> cap contract in 2023 | $ | 50,564 | $ | 39,472 | ||
| Cash paid for taxes | 10,008 | 30,491 | ||||
| (1) | Discontinued operations at December 31, 2023, includes $31.4 million<br>of cash and cash equivalents. | |||||
| --- | --- |
12
VI. Condensed Consolidated Statements of Cash Flows
For the Years Ended December 31, 2023 and 2024
(In thousands, unaudited)
| 2023 | 2024 | |||||
|---|---|---|---|---|---|---|
| Operating activities | ||||||
| Net income | $ | 299,731 | $ | 296,704 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Distributions from unconsolidated subsidiaries | 23,417 | 39,178 | ||||
| Depreciation and amortization | 208,742 | 203,894 | ||||
| Provision for expected credit losses | 1,030 | 4,279 | ||||
| Equity in earnings of unconsolidated subsidiaries | (40,813 | ) | (60,228 | ) | ||
| Loss on extinguishment of debt | 175 | 19,038 | ||||
| Gain on sale of assets and businesses | (57 | ) | (1,063 | ) | ||
| Stock compensation expense | 43,809 | 100,670 | ||||
| Amortization of debt discount, premium and issuance costs | 2,647 | 2,963 | ||||
| Deferred income taxes | (16,119 | ) | (32,434 | ) | ||
| Changes in operating assets and liabilities, net of effects<br> of business combinations: | ||||||
| Accounts receivable | 1,156 | (95,845 | ) | |||
| Other current assets | (29,374 | ) | 18,072 | |||
| Other assets | 10,031 | 12,933 | ||||
| Accounts payable and accrued expenses | 77,683 | 9,703 | ||||
| Net cash provided by operating activities | 582,058 | 517,864 | ||||
| Investing activities | ||||||
| Business combinations, net of cash acquired | (29,567 | ) | (13,097 | ) | ||
| Purchases of property, equipment, and other assets | (229,200 | ) | (222,177 | ) | ||
| Investment in businesses | (9,873 | ) | — | |||
| Proceeds from sale of assets and businesses | 163 | 4,263 | ||||
| Net cash used in investing activities | (268,477 | ) | (231,011 | ) | ||
| Financing activities | ||||||
| Borrowings on revolving facilities | 905,000 | 1,240,000 | ||||
| Payments on revolving facilities | (1,070,000 | ) | (1,415,000 | ) | ||
| Proceeds from term loans, net of issuance costs | 2,092,232 | 1,880,052 | ||||
| Payments on term loans | (2,113,952 | ) | (2,092,485 | ) | ||
| Payment on senior notes | — | (1,237,764 | ) | |||
| Proceeds from senior notes, net of issuance costs | — | 1,176,598 | ||||
| Borrowings of other debt | 31,399 | 24,892 | ||||
| Principal payments on other debt | (46,946 | ) | (65,280 | ) | ||
| Dividends paid to common stockholders | (63,904 | ) | (64,617 | ) | ||
| Repurchase of common stock | (12,759 | ) | (37,905 | ) | ||
| Decrease in overdrafts | (1,687 | ) | (4,471 | ) | ||
| Proceeds from issuance of non-controlling interests | 22,935 | 15,713 | ||||
| Distributions to and purchases of non-controlling interests | (63,531 | ) | (60,001 | ) | ||
| Purchase of membership interests of Concentra Group Holdings Parent | (6,268 | ) | — | |||
| Proceeds from Concentra initial public offering | — | 511,198 | ||||
| Cash transferred to Concentra at separation | — | (182,095 | ) | |||
| Net cash used in financing activities | (327,481 | ) | (311,165 | ) | ||
| Net decrease in cash and cash equivalents | (13,900 | ) | (24,312 | ) | ||
| Cash and cash equivalents at beginning of period | 97,906 | 84,006 | ||||
| Cash and cash equivalents at end<br> of period^(1)^ | $ | 84,006 | $ | 59,694 | ||
| Supplemental information: | ||||||
| Cash paid for interest, excluding amounts received of $82,818 and $68,069 under the<br> interest rate cap contract in 2023 and 2024, respectively | $ | 272,261 | $ | 256,229 | ||
| Cash paid for taxes | 88,510 | 133,187 | ||||
| (1) | Discontinued operations at December 31, 2023, includes $31.4 million<br>of cash and cash equivalents. | |||||
| --- | --- |
13
VII. Key StatisticsFor the Three Months Ended December 31, 2023 and 2024
(unaudited)
| 2023 | 2024 | % Change | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Critical Illness Recovery Hospital | |||||||||
| Number of hospitals operated – end<br> of period^(a)^ | 107 | 104 | |||||||
| Revenue (,000) | $ | 567,128 | $ | 600,445 | 5.9 | % | |||
| Number of patient days^(b)(c)^ | 277,470 | 274,134 | (1.2 | )% | |||||
| Number of admissions^(b)(d)^ | 9,126 | 8,691 | (4.8 | )% | |||||
| Revenue per patient day^(b)(e)^ | $ | 2,037 | $ | 2,183 | 7.2 | % | |||
| Occupancy rate^(b)(f)^ | 66 | % | 67 | % | 1.5 | % | |||
| Adjusted EBITDA (,000) | $ | 57,384 | $ | 63,098 | 10.0 | % | |||
| Adjusted EBITDA margin | 10.1 | % | 10.5 | % | |||||
| Rehabilitation Hospital | |||||||||
| Number of hospitals operated – end of period^(a)^ | 33 | 35 | |||||||
| Revenue (,000) | $ | 260,166 | $ | 294,352 | 13.1 | % | |||
| Number of patient days^(b)(c)^ | 116,003 | 119,870 | 3.3 | % | |||||
| Number of admissions^(b)(d)^ | 8,264 | 8,626 | 4.4 | % | |||||
| Revenue per patient day^(b)(e)^ | $ | 2,063 | $ | 2,177 | 5.5 | % | |||
| Occupancy rate^(b)(f)^ | 85 | % | 81 | % | (4.7 | )% | |||
| Adjusted EBITDA (,000) | $ | 66,344 | $ | 62,277 | (6.1 | )% | |||
| Adjusted EBITDA margin | 25.5 | % | 21.2 | % | |||||
| Outpatient Rehabilitation | |||||||||
| Number of clinics operated – end of period^(a)^ | 1,933 | 1,914 | |||||||
| Working days^(g)^ | 63 | 64 | |||||||
| Revenue (,000) | $ | 298,235 | $ | 319,598 | 7.2 | % | |||
| Number of visits^(b)(h)^ | 2,672,936 | 2,811,704 | 5.2 | % | |||||
| Revenue per visit^(b)(i)^ | $ | 100 | $ | 102 | 2.0 | % | |||
| Adjusted EBITDA (,000) | $ | 22,473 | $ | 26,561 | 18.2 | % | |||
| Adjusted EBITDA margin | 7.5 | % | 8.3 | % | |||||
| (a) | Includes managed locations. | ||||||||
| --- | --- | ||||||||
| (b) | Excludes managed locations. | ||||||||
| --- | --- | ||||||||
| (c) | Each patient day represents one patient occupying<br> one bed for one day during the periods presented. | ||||||||
| --- | --- | ||||||||
| (d) | Represents the number of patients admitted<br> to Select Medical’s hospitals during the periods presented. | ||||||||
| --- | --- | ||||||||
| (e) | Represents the average amount of revenue recognized<br> for each patient day. Revenue per patient day is calculated by dividing patient service revenues,<br> excluding revenues from certain other ancillary and outpatient services provided at Select<br> Medical’s hospitals, by the total number of patient days. | ||||||||
| --- | --- | ||||||||
| (f) | Represents the portion of our hospitals being<br> utilized for patient care during the periods presented. Occupancy rate is calculated using<br> the number of patient days, as presented above, divided by the total number of bed days available<br> during the period. Bed days available is derived by adding the daily number of available<br> licensed beds for each of the periods presented. | ||||||||
| --- | --- | ||||||||
| (g) | Represents the number of days in which normal<br> business operations were conducted during the periods presented. | ||||||||
| --- | --- | ||||||||
| (h) | Represents the number of visits in which patients<br> were treated at Select Medical’s outpatient rehabilitation clinics during the periods<br> presented. | ||||||||
| --- | --- | ||||||||
| (i) | Represents the average amount of revenue recognized<br> for each patient visit. Revenue per visit is calculated by dividing patient service revenue,<br> excluding revenues from certain other ancillary services, by the total number of visits. | ||||||||
| --- | --- |
14
VIII. Key StatisticsFor the Years Ended December 31, 2023 and 2024
(unaudited)
| 2023 | 2024 | % Change | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Critical Illness Recovery Hospital | |||||||||
| Number of hospitals operated – end<br> of period^(a)^ | 107 | 104 | |||||||
| Revenue (,000) | $ | 2,299,773 | $ | 2,444,196 | 6.3 | % | |||
| Number of patient days^(b)(c)^ | 1,108,492 | 1,118,757 | 0.9 | % | |||||
| Number of admissions^(b)(d)^ | 36,225 | 35,784 | (1.2 | )% | |||||
| Revenue per patient day^(b)(e)^ | $ | 2,067 | $ | 2,177 | 5.3 | % | |||
| Occupancy rate^(b)(f)^ | 68 | % | 68 | % | 0.0 | % | |||
| Adjusted EBITDA (,000) | $ | 246,015 | $ | 301,634 | 22.6 | % | |||
| Adjusted EBITDA margin | 10.7 | % | 12.3 | % | |||||
| Rehabilitation Hospital | |||||||||
| Number of hospitals operated – end of period^(a)^ | 33 | 35 | |||||||
| Revenue (,000) | $ | 979,585 | $ | 1,110,592 | 13.4 | % | |||
| Number of patient days^(b)(c)^ | 446,145 | 470,594 | 5.5 | % | |||||
| Number of admissions^(b)(d)^ | 31,627 | 33,665 | 6.4 | % | |||||
| Revenue per patient day^(b)(e)^ | $ | 2,017 | $ | 2,134 | 5.8 | % | |||
| Occupancy rate^(b)(f)^ | 85 | % | 84 | % | (1.2 | )% | |||
| Adjusted EBITDA (,000) | $ | 221,875 | $ | 245,748 | 10.8 | % | |||
| Adjusted EBITDA margin | 22.6 | % | 22.1 | % | |||||
| Outpatient Rehabilitation | |||||||||
| Number of clinics operated – end of period^(a)^ | 1,933 | 1,914 | |||||||
| Working days^(g)^ | 254 | 256 | |||||||
| Revenue (,000) | $ | 1,188,914 | $ | 1,250,294 | 5.2 | % | |||
| Number of visits^(b)(h)^ | 10,657,558 | 11,147,920 | 4.6 | % | |||||
| Revenue per visit^(b)(i)^ | $ | 100 | $ | 101 | 1.0 | % | |||
| Adjusted EBITDA (,000) | $ | 111,868 | $ | 108,577 | (2.9 | )% | |||
| Adjusted EBITDA margin | 9.4 | % | 8.7 | % | |||||
| (a) | Includes managed locations. | ||||||||
| --- | --- | ||||||||
| (b) | Excludes managed locations. | ||||||||
| --- | --- | ||||||||
| (c) | Each patient day represents one patient occupying<br> one bed for one day during the periods presented. | ||||||||
| --- | --- | ||||||||
| (d) | Represents the number of patients admitted<br> to Select Medical’s hospitals during the periods presented. | ||||||||
| --- | --- | ||||||||
| (e) | Represents the average amount of revenue recognized<br> for each patient day. Revenue per patient day is calculated by dividing patient service revenues,<br> excluding revenues from certain other ancillary and outpatient services provided at Select<br> Medical’s hospitals, by the total number of patient days. | ||||||||
| --- | --- | ||||||||
| (f) | Represents the portion of our hospitals being<br> utilized for patient care during the periods presented. Occupancy rate is calculated using<br> the number of patient days, as presented above, divided by the total number of bed days available<br> during the period. Bed days available is derived by adding the daily number of available<br> licensed beds for each of the periods presented. | ||||||||
| --- | --- | ||||||||
| (g) | Represents the number of days in which normal<br> business operations were conducted during the periods presented. | ||||||||
| --- | --- | ||||||||
| (h) | Represents the number of visits in which patients<br> were treated at Select Medical’s outpatient rehabilitation clinics during the periods<br> presented. | ||||||||
| --- | --- | ||||||||
| (i) | Represents the average amount of revenue recognized<br> for each patient visit. Revenue per visit is calculated by dividing patient service revenue,<br> excluding revenues from certain other ancillary services, by the total number of visits. | ||||||||
| --- | --- |
15
IX. Income from Continuing Operations, Net of Tax, to AdjustedEBITDA Reconciliation
For the Three Months and Years Ended December 31, 2023 and2024
(In thousands, unaudited)
The presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of Select Medical’s segments. Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America (“GAAP”). Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, income from continuing operations, income from continuing operations before other income and expense, 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 income from continuing operations, net of tax, to Adjusted EBITDA for Select Medical. Adjusted EBITDA is used by Select Medical to report its segment performance. Adjusted EBITDA is defined as earnings from continuing operations excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, transaction costs associated with the Concentra separation, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
| Three Months Ended<br> <br>December 31, | Years Ended<br> <br>December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2024 | 2023 | 2024 | |||||||||
| Income (loss) from continuing operations, net of tax | $ | 30,251 | $ | (10,456 | ) | $ | 110,471 | $ | 129,987 | |||
| Income tax expense (benefit) | 4,618 | (4,487 | ) | 29,253 | 44,782 | |||||||
| Interest expense | 40,263 | 28,551 | 154,165 | 128,605 | ||||||||
| Equity in earnings of unconsolidated subsidiaries | (10,195 | ) | (10,423 | ) | (41,339 | ) | (63,904 | ) | ||||
| Loss on early retirement of debt | — | 17,906 | 14,692 | 28,845 | ||||||||
| Income from continuing operations before other income and expense | $ | 64,937 | $ | 21,091 | $ | 267,242 | $ | 268,315 | ||||
| Stock compensation expense: | ||||||||||||
| Included in general and administrative | 9,658 | 47,414 | 36,041 | 79,931 | ||||||||
| Included in cost of services | 1,688 | 12,902 | 7,117 | 19,283 | ||||||||
| Depreciation and amortization | 35,485 | 36,283 | 135,691 | 142,866 | ||||||||
| Concentra separation transaction<br> costs^(b)^ | — | (1,698 | ) | — | — | |||||||
| Adjusted EBITDA | $ | 111,768 | $ | 115,992 | $ | 446,091 | $ | 510,395 | ||||
| Critical illness recovery hospital | $ | 57,384 | $ | 63,098 | $ | 246,015 | $ | 301,634 | ||||
| Rehabilitation hospital | 66,344 | 62,277 | 221,875 | 245,748 | ||||||||
| Outpatient rehabilitation | 22,473 | 26,561 | 111,868 | 108,577 | ||||||||
| Other^(a)^ | (34,433 | ) | (35,944 | ) | (133,667 | ) | (145,564 | ) | ||||
| Adjusted EBITDA | $ | 111,768 | $ | 115,992 | $ | 446,091 | $ | 510,395 | ||||
| (a) | Other primarily includes general and administrative<br> costs and other operating income, as discussed further above. | |||||||||||
| --- | --- | |||||||||||
| (b) | During the three months ended December 31,<br> 2024, transaction costs of $1.7 million recognized in previous periods were reclassified<br> from income from continuing operations to income from discontinued operations. Total Concentra<br> separation transaction costs of $16.3 million were recognized during the year ended December<br> 31, 2024 and included in income from discontinued business. | |||||||||||
| --- | --- |
16
X. Reconciliation of Earnings per Common Sharefrom Continuing Operations, Net of Tax, to Adjusted Earnings per Common Share from Continuing Operations, Net of Tax
For the Years Ended December 31, 2023 and 2024
(In thousands, except per share amounts, unaudited)
Adjusted income from continuing operations, net of tax, attributable to common shares and adjusted earnings per common share from continuing operations are not measures of financial performance under GAAP. Items excluded from adjusted income from continuing operations, net of tax, attributable to common shares and adjusted earnings per common share from continuing operations are significant components in understanding and assessing financial performance. Select Medical believes that the presentation of adjusted income from continuing operations, net of tax, attributable to common shares and adjusted earnings per common share from continuing operations 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 income from continuing operations, net of tax, attributable to common shares and adjusted earnings per common share from continuing operations should not be considered in isolation or as alternatives to, or substitutes for, income from continuing operations, net of tax, 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 income from continuing operations, net of tax, 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 income from continuing operations, net of tax, attributable to common shares and adjusted earnings per common share from continuing operations as presented may not be comparable to other similarly titled measures of other companies.
The following tables reconcile income from continuing operations, net of tax, attributable to common shares and earnings per common share from continuing operations on a fully diluted basis to adjusted income from continuing operations, net of tax, attributable to common shares and adjusted earnings per common share from continuing operations on a fully diluted basis.
| Three Months Ended<br> December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | Per Share^(a)^ | 2024 | Per Share^(a)^ | |||||||
| Income from continuing operations, net of<br> tax, attributable to common shares^(a)^ | $ | 15,187 | $ | 0.12 | $ | (23,664 | ) | (0.19 | ) | |
| Adjustments:^(b)^ | ||||||||||
| Loss on early retirement of debt, net of tax | — | — | 12,885 | 0.10 | ||||||
| Concentra separation transaction costs, net of tax | — | — | (1,241 | ) | (0.01 | ) | ||||
| Stock compensation expense due to accelerated<br> vesting, net of tax | — | — | 34,645 | 0.28 | ||||||
| Adjusted income from continuing operations, net of tax, attributable<br> to common shares | $ | 15,187 | $ | 0.12 | $ | 22,625 | $ | 0.18 | ||
| Years Ended December 31, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| 2023 | Per Share^(a)^ | 2024 | Per Share^(a)^ | |||||||
| Income from continuing operations, net of<br> tax, attributable to common shares^(a)^ | $ | 56,900 | $ | 0.46 | $ | 63,154 | $ | 0.51 | ||
| Adjustments:^(b)^ | ||||||||||
| Loss on early retirement of debt, net of tax | 10,019 | 0.08 | 20,311 | 0.16 | ||||||
| Stock compensation expense due to accelerated<br> vesting, net of tax | — | — | 33,846 | 0.27 | ||||||
| Adjusted income from continuing operations, net of tax, attributable<br> to common shares | $ | 66,919 | $ | 0.54 | $ | 117,311 | $ | 0.94 | ||
| (a) | Income from continuing operations, net of<br> tax, attributable to common shares and earnings per common share from continuing operations<br> are calculated based on the diluted weighted average common shares outstanding, as presented<br> in table III. | |||||||||
| --- | --- | |||||||||
| (b) | Adjustments to income from continuing operations,<br> net of tax, attributable to common shares include estimated income tax and non-controlling<br> interest impacts and are calculated based on the diluted weighted average common shares outstanding.<br> The estimated income tax impact, which is determined using tax rates based on the nature<br> of the adjustment and the jurisdiction in which the adjustment occurred, includes both current<br> and deferred income tax expense or benefit. | |||||||||
| --- | --- |
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XI. Incomefrom Continuing Operations, Net of Tax, to Adjusted EBITDA Reconciliation
Business Outlook for the Year Ending December 31, 2025
(In millions, unaudited)
The following is a reconciliation of full year 2025 Adjusted EBITDA expectations as computed at the low and high points of the range to the closest comparable GAAP financial measure. Refer to table IX for the definition of Adjusted EBITDA and a discussion of Select Medical’s use of Adjusted EBITDA in evaluating financial performance. Each item presented in the below table is an estimation of full year 2025 expectations.
| Range | ||||||
|---|---|---|---|---|---|---|
| Non-GAAP Measure Reconciliation | Low | High | ||||
| Income from continuing operations, net of tax, attributable to Select<br> Medical | $ | 142 | $ | 155 | ||
| Net income attributable to non-controlling interests | 75 | 78 | ||||
| Income from continuing operations, net of tax | 217 | 233 | ||||
| Income tax expense | 79 | 84 | ||||
| Interest expense | 107 | 107 | ||||
| Equity in earnings of unconsolidated subsidiaries | (47 | ) | (48 | ) | ||
| Income from continuing operations before other income and expense | 356 | 376 | ||||
| Stock compensation expense | 18 | 18 | ||||
| Depreciation and amortization | 146 | 146 | ||||
| Adjusted EBITDA | $ | 520 | $ | 540 |
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