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Select Medical Holdings Corporation Announces Results For Its First Quarter Ended March 31, 2020

Cision

MECHANICSBURG, Pa. , April 30, 2020 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical," "we," "us," or "our") (NYSE: SEM) today announced results for its first quarter ended March 31, 2020.

For the first quarter ended March 31, 2020, net operating revenues increased 6.8% to $1,414.6 million , compared to $1,324.6 million for the same quarter, prior year. Income from operations increased 15.2% to $128.7 million for the first quarter ended March 31, 2020, compared to $111.7 million for the same quarter, prior year. Net income increased 32.1% to $70.4 million for the first quarter ended March 31, 2020, compared to $53.3 million for the same quarter, prior year. For both the first quarters ended March 31, 2020 and 2019, net income included pre-tax gains on sales of businesses of $7.2 million and $6.5 million , respectively. Adjusted EBITDA increased 10.1% to $187.3 million for the first quarter ended March 31, 2020, compared to $170.1 million for the same quarter, prior year. Earnings per common share increased to $0.40 on a fully diluted basis for the first quarter ended March 31, 2020, compared to $0.30 for the same quarter, prior year. Adjusted earnings per common share was $0.37 on a fully diluted basis for the first quarter ended March 31, 2020, compared to $0.27 for the same quarter, prior year. Adjusted earnings per common share excludes the gains on sales of businesses and their related tax effects for both of the quarters ended March 31, 2020 and 2019. The definition of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA are presented in table VI of this release. A reconciliation of earnings per common share to adjusted earnings per common share is presented in table VII of this release.

Please refer to " Effects of the COVID-19 Pandemic on Select Medical's Results of Operation s" for further discussion regarding the impact of the coronavirus disease 2019 ("COVID-19") pandemic on Select Medical's operating results for the first quarter ended March 31, 2020.

Company Overview

Select Medical is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on number of facilities.   Select Medical's reportable segments include the critical illness recovery hospital segment, the rehabilitation hospital segment, the outpatient rehabilitation segment, and the Concentra segment. As of March 31, 2020, Select Medical operated 101 critical illness recovery hospitals in 28 states, 29 rehabilitation hospitals in 12 states, and 1,753 outpatient rehabilitation clinics in 37 states and the District of Columbia . Select Medical's joint venture subsidiary Concentra operated 523 occupational health centers in 41 states. Concentra also provides contract services at employer worksites and Department of Veterans Affairs community-based outpatient clinics. At March 31, 2020, Select Medical had operations in 47 states and the District of Columbia . Information about Select Medical is available at www.selectmedical.com .

Critical Illness Recovery Hospital Segment

For the first quarter ended March 31, 2020, net operating revenues for the critical illness recovery hospital segment increased 9.4% to $500.5 million , compared to $457.5 million for the same quarter, prior year. Adjusted EBITDA for the critical illness recovery hospital segment increased 21.3% to $88.6 million for the first quarter ended March 31, 2020, compared to $73.0 million for the same quarter, prior year. The Adjusted EBITDA margin for the critical illness recovery hospital segment was 17.7% for the first quarter ended March 31, 2020, compared to 16.0% for the same quarter, prior year. Certain critical illness recovery hospital key statistics are presented in table V of this release for both the first quarters ended March 31, 2020 and 2019.

Rehabilitation Hospital Segment

For the first quarter ended March 31, 2020, net operating revenues for the rehabilitation hospital segment increased 17.8% to $182.0 million , compared to $154.6 million for the same quarter, prior year. Adjusted EBITDA for the rehabilitation hospital segment increased 49.5% to $38.6 million for the first quarter ended March 31, 2020, compared to $25.8 million for the same quarter, prior year. The Adjusted EBITDA margin for the rehabilitation hospital segment was 21.2% for the first quarter ended March 31, 2020, compared to 16.7% for the same quarter, prior year. For the first quarter ended March 31, 2019, the Adjusted EBITDA results for the rehabilitation hospital segment include start-up losses of approximately $2.8 million . Certain rehabilitation hospital key statistics are presented in table V of this release for both the first quarters ended March 31, 2020 and 2019.

Outpatient Rehabilitation Segment

For the first quarter ended March 31, 2020, net operating revenues for the outpatient rehabilitation segment increased 3.4% to $255.2 million , compared to $246.9 million for the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $27.1 million for the first quarter ended March 31, 2020, compared to $29.0 million for the same quarter, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 10.6% for the first quarter ended March 31, 2020, compared to 11.7% for the same quarter, prior year. Certain outpatient rehabilitation key statistics are presented in table V of this release for both the first quarters ended March 31, 2020 and 2019.

Concentra Segment

For the first quarter ended March 31, 2020, net operating revenues for the Concentra segment increased 0.6% to $398.5 million , compared to $396.3 million for the same quarter, prior year. Adjusted EBITDA for the Concentra segment was $61.5 million for the first quarter ended March 31, 2020, compared to $66.3 million for the same quarter, prior year. The Adjusted EBITDA margin for the Concentra segment was 15.4% for the first quarter ended March 31, 2020, compared to 16.7% for the same quarter, prior year. Certain Concentra key statistics are presented in table V of this release for both the first quarters ended March 31, 2020 and 2019.

Effects of the COVID-19 Pandemic on Select Medical's Results of Operations

The broader implications of the COVID-19 pandemic on Select Medical's results of operations and overall financial performance remain uncertain. Select Medical is a healthcare service provider that provides patient care services in both inpatient and outpatient settings. Select Medical has provided certain additional performance metrics to assist readers in understanding how the COVID-19 pandemic impacted each of its segments during the one month ended March 31, 2020 , including its (i) net operating revenues and Adjusted EBITDA for the two months ended February 29, 2020 and February 28, 2019 , (ii) net operating revenues and Adjusted EBITDA for the one month ended March 31, 2020 and 2019, (iii) net operating revenues and Adjusted EBITDA for the quarters ended March 31, 2020 and 2019, and (iv) certain operating statistics for each of the aforementioned periods.

Critical Illness Recovery Hospital Segment.   Select Medical's critical illness recovery hospitals are a key part of the inpatient hospital continuum of care. Both the Centers for Medicare & Medicaid Services ("CMS") and Congress acted to temporarily suspend certain regulations concerning length of stay requirements, which impact Select Medical's critical illness recovery hospitals, in order to facilitate the transfer of patients from general acute care hospitals. This was done in order to expand hospital bed capacity to care for COVID-19 patients. As COVID-19 has spread in the general acute care hospitals in many markets where it operates, Select Medical has admitted patients with COVID-19 and has faced the challenging task of treating them while attempting to protect its patients and staff members who do not have COVID-19. The hospitals have followed CDC guidelines, directives and recommendations with regard to the use of personal protective equipment and the isolation and treatment of patients with COVID-19. The pandemic has caused, and will continue to cause, disruptions in Select Medical's critical illness recovery hospitals, which include, in some cases, the addition or reduction of beds, the creation of isolated units and spaces, temporary increases or restrictions on admissions, the incurrence of additional costs, staff illnesses, and the increased use of contract clinical labor.

Rehabilitation Hospital Segment.   Select Medical's rehabilitation hospitals receive most of their admissions from general acute care hospitals. Both CMS and Congress acted to temporarily suspend certain regulations that govern admissions into rehabilitation hospitals to facilitate the transfer of patients from general acute care hospitals and critical illness recovery hospitals. This was done in order to expand hospital bed capacity to care for COVID-19 patients. As COVID-19 has spread in the general acute care hospitals in many markets where it operates, Select Medical has admitted patients with COVID-19 and has faced the challenging task of treating them while attempting to protect its patients and staff members who do not have COVID-19. The hospitals have followed CDC guidelines, directives and recommendations with regard to the use of personal protective equipment and the isolation and treatment of patients with COVID-19. The pandemic has caused, and will continue to cause, disruptions in Select Medical's rehabilitation hospitals, which include, in some cases, the addition or reduction of beds, the creation of isolated units and spaces, temporary restrictions on admissions, the incurrence of additional costs, staff illnesses, and the increased use of contract clinical labor. Additionally, elective surgeries at hospitals and other facilities have been suspended which is reducing the need for inpatient rehabilitation services.

Outpatient Rehabilitation Segment .  Beginning in mid-March, hospitals and other facilities began to suspend elective surgeries. Additionally, state governments in the areas experiencing the most significant growth of COVID-19 infections began implementing mandatory closures of non-essential or non-life sustaining businesses, restrictions on individual activities outside of the home, restrictions on travel, and closures of schools. These actions continued to expand throughout March and by the end of March, most states implemented significant restrictions on businesses and individuals. The suspension of elective surgeries at hospitals and other facilities and the reduction of physician office visits combined with recommendations of social distancing and the other items noted above have had significant effects on patient visit volumes. As a result, Select Medical has temporarily consolidated the operations of some of its clinics by transferring staff and patients.

Concentra Segment.   Beginning in mid-March, state governments in the areas experiencing the most significant growth of COVID-19 infections began implementing mandatory closures of non-essential or non-life sustaining businesses. These actions have continued to expand throughout March.  By the end of March, most states implemented significant restrictions on businesses.  These actions have had significant effects on patient visit volumes as employers have furloughed workforces and temporarily ceased operations or have significantly reduced their operations. As a result, Select Medical has temporarily consolidated the operations of some of its centers by transferring staff and patients.

Select Medical provided below certain performance measures and operating statistics used by management to help illustrate the impact of the COVID-19 pandemic on its operating results. For the quarter ended March 31, 2020 , Select Medical defined the pre-COVID-19 outbreak period as the two months ended February 29, 2020 , and the post-COVID-19 outbreak period as the one month ended March 31, 2020 . Select Medical provided prior year comparative data for the pre-COVID-19 and post-COVID-19 outbreak periods presented. The following performance measures and operating statistics should be considered in conjunction with the operating results for the full quarter ended March 31, 2020 . The performance measures and operating statistics presented for the two months ended February 29, 2020 and the one month ended March 31, 2020 are, when combined, equal to the performance measures and operating statistics presented for the full quarter ended March 31, 2020 . The same is true for the prior year comparative data.

...


Two Months Ended February



One Month Ended March



Three Months Ended March



2019


2020


%

 Change



2019


2020


%

 Change



2019


2020

Selected financial data:



















Net operating revenues:



















Critical illness recovery hospital


$

295,385



$

328,613



11.2

%



$

162,149



$

171,908



6.0

%



$

457,534



$

500,521


Rehabilitation hospital


98,695



122,363



24.0




55,863



59,656



6.8




154,558



182,019


Outpatient rehabilitation


161,758



179,163



10.8




85,147



76,086



(10.6)




246,905



255,249


Concentra


259,816



274,926



5.8




136,505



123,609



(9.4)




396,321



398,535


Other (1)


38,532



54,283



40.9




30,781



24,025



(21.9)




69,313



78,308


Total Company


$

854,186



$

959,348



12.3

%



$

470,445



$

455,284



(3.2)

%



$

1,324,631



$

1,414,632


Income (loss) from operations:



















Critical illness recovery hospital


$

36,355



$

48,395



33.1

%



$

25,192



$

27,839



10.5

%



$

61,547



$

76,234


Rehabilitation hospital


11,605



22,855



96.9




7,790



8,827



13.3




19,395



31,682


Outpatient rehabilitation


12,623



18,289



44.9




9,336



1,615



(82.7)




21,959



19,904


Concentra


23,373



29,624



26.7




17,214



8,188



(52.4)




40,587



37,812


Other (1)


(22,432)



(24,868)



(10.9)




(9,332)



(12,086)



(29.5)




(31,764)



(36,954)


Total Company


$

61,524



$

94,295



53.3

%



$

50,200



$

34,383



(31.5)

%



$

111,724



$

128,678


Adjusted EBITDA:



















Critical illness recovery hospital


$

44,035



$

56,648



28.6

%



$

28,963



$

31,922



10.2

%



$

72,998



$

88,570


Rehabilitation hospital


15,908



27,448



72.5




9,889



11,121



12.5




25,797



38,569


Outpatient rehabilitation


17,265



23,062



33.6




11,726



4,060



(65.4)




28,991



27,122


Concentra


40,785



45,537



11.7




25,473



15,929



(37.5)




66,258



61,466


Other (1)


(17,278)



(19,281)



(11.6)




(6,649)



(9,113)



(37.1)




(23,927)



(28,394)


Total Company


$

100,715



$

133,414



32.5

%



$

69,402



$

53,919



(22.3)

%



$

170,117



$

187,333


Adjusted EBITDA margins: