MECHANICSBURG, Pa., May 3, 2018 /PRNewswire/ -- Select Medical Holdings Corporation ("Select Medical") (NYSE: SEM) today announced results for its first quarter ended March 31, 2018.

For the first quarter ended March 31, 2018, net operating revenues increased 14.8% to $1,253.0 million, compared to $1,091.5 million for the same quarter, prior year. Income from operations increased 18.3% to $108.6 million for the first quarter ended March 31, 2018, compared to $91.8 million for the same quarter, prior year. Net income increased 87.5% to $44.0 million for the first quarter ended March 31, 2018, compared to $23.5 million for the same quarter, prior year. Net income for the first quarter ended March 31, 2018 included a pre-tax loss on early retirement of debt of $10.3 million. Net income for the first quarter ended March 31, 2017 included a pre-tax loss on early retirement of debt of $19.7 million. Adjusted EBITDA increased 17.5% to $163.2 million for the first quarter ended March 31, 2018, compared to $138.9 million for the same quarter, prior year. Income per common share increased to $0.25 on a fully diluted basis for the first quarter ended March 31, 2018, compared to $0.12 for the same quarter, prior year. Adjusted income per common share was $0.29 per diluted share for the first quarter ended March 31, 2018, compared to $0.21 for the same quarter, prior year. Adjusted income per common share excludes the loss on early retirement of debt and U.S. HealthWorks acquisition costs and their related tax effects for the first quarter ended March 31, 2018. Adjusted income per common share excludes the loss on early retirement of debt and its related tax effects for the first quarter ended March 31, 2017. The definition of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA are presented in table V of this release. A reconciliation of income per common share to adjusted income per common share is presented in table VI of this release. 

Company Overview

Select Medical began operations in 1997 and has grown to be one of the largest operators of long term acute care hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on the number of facilities.  As of March 31, 2018, Select Medical operated 99 long term acute care hospitals in 27 states, 24 rehabilitation hospitals in 10 states, and 1,617 outpatient rehabilitation clinics in 37 states and the District of Columbia. Select Medical's joint venture subsidiary Concentra operated 531 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, 2018, Select Medical had operations in 47 states and the District of Columbia. Information about Select Medical is available at www.selectmedical.com.

Long Term Acute Care Segment

For the first quarter ended March 31, 2018, net operating revenues for the long term acute care segment increased 4.4% to $464.7 million, compared to $445.1 million for the same quarter, prior year. Adjusted EBITDA for the long term acute care segment increased 0.9% to $73.0 million for the first quarter ended March 31, 2018, compared to $72.3 million for the same quarter, prior year. The Adjusted EBITDA margin for the long term acute care segment was 15.7% for the first quarter ended March 31, 2018, compared to 16.3% for the same quarter, prior year. The Adjusted EBITDA results for the long term acute care segment include start-up losses of approximately $0.4 million for the first quarter ended March 31, 2018. The long term acute care segment did not incur start-up losses for the first quarter ended March 31, 2017. Certain long term acute care key statistics for both the first quarters ended March 31, 2018 and 2017 are presented in table IV of this release.

Inpatient Rehabilitation Segment

For the first quarter ended March 31, 2018, net operating revenues for the inpatient rehabilitation segment increased 20.7% to $174.8 million, compared to $144.8 million for the same quarter, prior year. Adjusted EBITDA for the inpatient rehabilitation segment increased 64.0% to $26.8 million for the first quarter ended March 31, 2018, compared to $16.3 million for the same quarter, prior year. The Adjusted EBITDA margin for the inpatient rehabilitation segment was 15.3% for the first quarter ended March 31, 2018, compared to 11.3% for the same quarter, prior year. The Adjusted EBITDA results for the inpatient rehabilitation segment include start-up losses of approximately $0.8 million for the first quarter ended March 31, 2018, compared to approximately $2.0 million for the same quarter, prior year. Certain inpatient rehabilitation key statistics for both the first quarters ended March 31, 2018 and 2017 are presented in table IV of this release.

Outpatient Rehabilitation Segment

For the first quarter ended March 31, 2018, net operating revenues for the outpatient rehabilitation segment increased 2.8% to $257.4 million, compared to $250.4 million for the same quarter, prior year. Adjusted EBITDA for the outpatient rehabilitation segment was $30.5 million for the first quarter ended March 31, 2018, compared to $31.4 million for the same quarter, prior year. The Adjusted EBITDA margin for the outpatient rehabilitation segment was 11.9% for the first quarter ended March 31, 2018, compared to 12.5% for the same quarter, prior year. Certain outpatient rehabilitation key statistics for both the first quarters ended March 31, 2018 and 2017 are presented in table IV of this release.

Concentra Segment

For the first quarter ended March 31, 2018, net operating revenues for the Concentra segment increased 42.1% to $356.1 million, compared to $250.6 million for the same quarter, prior year.  Adjusted EBITDA for the Concentra segment increased 35.7% to $57.8 million for the first quarter ended March 31, 2018, compared to $42.6 million for the same quarter, prior year.  The Adjusted EBITDA margin for the Concentra segment was 16.2% for the first quarter ended March 31, 2018, compared to 17.0% for the same quarter, prior year. Certain Concentra key statistics for both the first quarters ended March 31, 2018 and 2017 are presented in table IV of this release.

On February 1, 2018, Concentra acquired all of the issued and outstanding shares of stock of U.S. HealthWorks, Inc. ("U.S. HealthWorks") an occupational medicine and urgent care service provider which operates approximately 240 centers and onsite clinics. The results for the quarter ended March 31, 2018 include the operations of U.S. HealthWorks effective February 1, 2018. For the period February 1, 2018 through March 31, 2018, U.S. HealthWorks contributed net operating revenues of $89.9 million.

Stock Repurchase Program

Select Medical did not repurchase shares during the first quarter ended March 31, 2018 under its authorized $500.0 million stock repurchase program. The program has been extended until December 31, 2018, and will remain in effect until then, unless further extended or earlier terminated by the board of directors. Since the inception of the program through March 31, 2018, Select Medical has repurchased 35,924,128 shares at a cost of approximately $314.7 million, or $8.76 per share, which includes transaction costs.

Amendment to Senior Secured Credit Facilities

On March 22, 2018, Select Medical entered into an amendment to the senior secured credit agreement dated March 6, 2017. The amendment (i) decreases the applicable interest rate on the term loans from the Adjusted LIBO Rate (as defined in the credit agreement and subject to an Adjusted LIBO floor of 1.00%) plus 3.50% to the Adjusted LIBO Rate plus a percentage ranging from 2.50% to 2.75%, or from the Alternative Base Rate (as defined in the credit agreement and subject to an Alternate Base Rate floor of 2.00%) plus 2.50% to the Alternative Base Rate plus a percentage ranging from 1.50% to 1.75%, in each case based on Select Medical's total net leverage ratio (as defined in the credit agreement); (ii) decreases the applicable interest rate on the loans outstanding under the revolving facility from the Adjusted LIBO Rate plus a percentage ranging from 3.00% to 3.25% to the Adjusted LIBO Rate plus a percentage ranging from 2.50% to 2.75%, or from the Alternative Base Rate plus a percentage ranging from 2.00% to 2.25% to the Alternative Base Rate plus a percentage ranging from 1.50% to 1.75%, in each case based on Select Medical's total net leverage ratio; (iii) extends the maturity date for the term loans from March 6, 2024 to March 6, 2025; and (iv) makes certain other technical amendments to the credit agreement as set forth therein.

Business Outlook

Select Medical reaffirms its 2018 business outlook, provided in its January 8, 2018 press release, for net operating revenues and Adjusted EBITDA. Select Medical continues to expect consolidated net operating revenues for the full year 2018 to be in the range of $5.0 billion to $5.2 billion. Select Medical continues to expect Adjusted EBITDA for the full year 2018 to be in the range of $630.0 million to $660.0 million. Select Medical is adjusting its 2018 business outlook for fully diluted income per common share to include the first quarter 2018 loss on early retirement of debt and U.S. HealthWorks acquisition costs and their related tax effects. Select Medical now expects fully diluted income per common share for the full year 2018 to be in the range of $0.93 to $1.08. Select Medical expects adjusted income per common share to be in the range of $0.97 to $1.12. Adjusted income per common share excludes the loss on early retirement of debt and U.S. HealthWorks acquisition costs and their related tax effects.

Conference Call

Select Medical will host a conference call regarding its first quarter results, as well as its business outlook, on Friday, May 4, 2018, at 9:00am ET. The domestic dial in number for the call is 1-866-440-2669. The international dial in number is 1-409-220-9844. The conference ID for the call is 2793449. The conference call will be webcast simultaneously and can be accessed at Select Medical Holdings Corporation's website www.selectmedicalholdings.com.

For those unable to participate in the conference call, a replay will be available until 11:59pm ET, March 11, 2018. The replay number is 1-855-859-2056 (domestic) or 1-404-537-3406 (international). The passcode for the replay will be 2793449. The replay can also be accessed at Select Medical Holdings Corporation's website, www.selectmedicalholdings.com.

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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).  Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements due to factors including the following:

• changes in government reimbursement for our services and/or new payment policies (including, for example, the expiration of the moratorium limiting the full application of the 25 Percent Rule that would reduce our Medicare payments for those patients admitted to a long term acute care hospital from a referring hospital in excess of an applicable percentage admissions threshold) may result in a reduction in net operating revenues, an increase in costs, and a reduction in profitability;
• the failure of our long term acute care hospitals or inpatient rehabilitation facilities to maintain their Medicare certifications may cause our net operating revenues and profitability to decline;
• the failure of our long term acute care hospitals and inpatient rehabilitation facilities operated as "hospitals within hospitals" to qualify as hospitals separate from their host hospitals may cause our net operating revenues and profitability to decline;
• a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs;
• acquisitions or joint ventures may prove difficult or unsuccessful, use significant resources or expose us to unforeseen liabilities;
• our plans and expectations related to the acquisition of U.S. HealthWorks by Concentra and our ability to realize anticipated synergies;
• private third-party payors for our services may adopt payment policies that could limit our future net operating revenues and profitability;
• the failure to maintain established relationships with the physicians in the areas we serve could reduce our net operating revenues and profitability;
• shortages in qualified nurses, therapists, physicians, or other licensed providers could increase our operating costs significantly or limit our ability to staff our facilities;
• competition may limit our ability to grow and result in a decrease in our net operating revenues and profitability;
• the loss of key members of our management team could significantly disrupt our operations;
• the effect of claims asserted against us could subject us to substantial uninsured liabilities;
• a security breach of our or our third-party vendors' information technology systems may subject us to potential legal and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 or the Health Information Technology for Economic and Clinical Health Act; and
• other factors discussed from time to time in our filings with the Securities and Exchange Commission (the "SEC"), including factors discussed under the heading "Risk Factors" of the quarterly reports on Form 10-Q and of the annual report on Form 10-K for the year ended December 31, 2017.

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
[email protected]

SOURCE: Select Medical Holdings Corporation

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