Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 30, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | SELECT MEDICAL HOLDINGS CORP | |
Entity Central Index Key | 1,320,414 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 132,759,535 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash and cash equivalents | $ 65,211 | $ 99,029 |
Accounts receivable, net of allowance for doubtful accounts of $63,787 and $67,792 at 2016 and 2017, respectively | 691,520 | 573,752 |
Prepaid income taxes | 2,402 | 12,423 |
Other current assets | 85,081 | 77,699 |
Total Current Assets | 844,214 | 762,903 |
Property and equipment, net | 897,146 | 892,217 |
Goodwill | 2,759,764 | 2,751,000 |
Identifiable intangible assets, net | 337,076 | 340,562 |
Other assets | 164,737 | 173,944 |
Total Assets | 5,002,937 | 4,920,626 |
Current Liabilities: | ||
Bank overdrafts | 22,299 | 39,362 |
Current portion of long-term debt and notes payable | 22,013 | 13,656 |
Accounts payable | 125,118 | 126,558 |
Accrued payroll | 110,196 | 146,397 |
Accrued vacation | 88,736 | 83,261 |
Accrued interest | 21,558 | 22,325 |
Accrued other | 143,180 | 140,076 |
Income taxes payable | 5,399 | |
Total Current Liabilities | 538,499 | 571,635 |
Long-term debt, net of current portion | 2,771,410 | 2,685,333 |
Non-current deferred tax liability | 195,729 | 199,078 |
Other non-current liabilities | 142,208 | 136,520 |
Total Liabilities | 3,647,846 | 3,592,566 |
Commitments and contingencies (Note 9) | ||
Redeemable non-controlling interests | 462,680 | 422,159 |
Stockholders' Equity: | ||
Common stock | 132 | 132 |
Capital in excess of par | 450,373 | 443,908 |
Retained earnings (accumulated deficit) | 351,224 | 371,685 |
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 801,729 | 815,725 |
Non-controlling interest | 90,682 | 90,176 |
Total Equity | 892,411 | 905,901 |
Total Liabilities and Equity | 5,002,937 | 4,920,626 |
Select | ||
Current Assets: | ||
Cash and cash equivalents | 65,211 | 99,029 |
Accounts receivable, net of allowance for doubtful accounts of $63,787 and $67,792 at 2016 and 2017, respectively | 691,520 | 573,752 |
Prepaid income taxes | 2,402 | 12,423 |
Other current assets | 85,081 | 77,699 |
Total Current Assets | 844,214 | 762,903 |
Property and equipment, net | 897,146 | 892,217 |
Goodwill | 2,759,764 | 2,751,000 |
Identifiable intangible assets, net | 337,076 | 340,562 |
Other assets | 164,737 | 173,944 |
Total Assets | 5,002,937 | 4,920,626 |
Current Liabilities: | ||
Bank overdrafts | 22,299 | 39,362 |
Current portion of long-term debt and notes payable | 22,013 | 13,656 |
Accounts payable | 125,118 | 126,558 |
Accrued payroll | 110,196 | 146,397 |
Accrued vacation | 88,736 | 83,261 |
Accrued interest | 21,558 | 22,325 |
Accrued other | 143,180 | 140,076 |
Income taxes payable | 5,399 | |
Total Current Liabilities | 538,499 | 571,635 |
Long-term debt, net of current portion | 2,771,410 | 2,685,333 |
Non-current deferred tax liability | 195,729 | 199,078 |
Other non-current liabilities | 142,208 | 136,520 |
Total Liabilities | 3,647,846 | 3,592,566 |
Commitments and contingencies (Note 9) | ||
Redeemable non-controlling interests | 462,680 | 422,159 |
Stockholders' Equity: | ||
Common stock | 0 | 0 |
Capital in excess of par | 931,661 | 925,111 |
Retained earnings (accumulated deficit) | (129,932) | (109,386) |
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 801,729 | 815,725 |
Non-controlling interest | 90,682 | 90,176 |
Total Equity | 892,411 | 905,901 |
Total Liabilities and Equity | $ 5,002,937 | $ 4,920,626 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 67,792 | $ 63,787 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 700,000,000 | 700,000,000 |
Common stock, shares issued | 132,753,444 | 132,596,758 |
Common stock, shares outstanding | 132,753,444 | 132,596,758 |
Select | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 67,792 | $ 63,787 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued | 100 | 100 |
Common stock, shares outstanding | 100 | 100 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Net operating revenues | $ 1,111,361 | $ 1,088,330 |
Costs and expenses: | ||
Cost of services | 928,357 | 922,262 |
General and administrative | 28,075 | 28,268 |
Bad debt expense | 20,625 | 16,397 |
Depreciation and amortization | 42,539 | 34,517 |
Total costs and expenses | 1,019,596 | 1,001,444 |
Income from operations | 91,765 | 86,886 |
Other income and expense: | ||
Loss on early retirement of debt | (19,719) | (773) |
Equity in earnings of unconsolidated subsidiaries | 5,521 | 4,652 |
Non-operating gain (loss) | (49) | 25,087 |
Interest expense | (40,853) | (38,848) |
Income before income taxes | 36,665 | 77,004 |
Income tax expense | 13,202 | 17,060 |
Net income | 23,463 | 59,944 |
Less: Net income attributable to non-controlling interests | 7,593 | 5,111 |
Net income attributable to Select Medical Holdings Corporation | $ 15,870 | $ 54,833 |
Basic (in dollars per share) | $ 0.12 | $ 0.42 |
Diluted (in dollars per share) | $ 0.12 | $ 0.42 |
Weighted average shares outstanding: | ||
Basic (in shares) | 128,464 | 127,500 |
Diluted (in shares) | 128,628 | 127,581 |
Select | ||
Net operating revenues | $ 1,111,361 | $ 1,088,330 |
Costs and expenses: | ||
Cost of services | 928,357 | 922,262 |
General and administrative | 28,075 | 28,268 |
Bad debt expense | 20,625 | 16,397 |
Depreciation and amortization | 42,539 | 34,517 |
Total costs and expenses | 1,019,596 | 1,001,444 |
Income from operations | 91,765 | 86,886 |
Other income and expense: | ||
Loss on early retirement of debt | (19,719) | (773) |
Equity in earnings of unconsolidated subsidiaries | 5,521 | 4,652 |
Non-operating gain (loss) | (49) | 25,087 |
Interest expense | (40,853) | (38,848) |
Income before income taxes | 36,665 | 77,004 |
Income tax expense | 13,202 | 17,060 |
Net income | 23,463 | 59,944 |
Less: Net income attributable to non-controlling interests | 7,593 | 5,111 |
Net income attributable to Select Medical Holdings Corporation | $ 15,870 | $ 54,833 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes in Equity and Income - 3 months ended Mar. 31, 2017 - USD ($) $ in Thousands | ParentSelect | Parent | Common StockSelect | Common Stock | Capital in Excess of ParSelect | Capital in Excess of Par | Retained EarningsSelect | Retained Earnings | Non-controlling InterestsSelect | Non-controlling Interests | Select | Total |
Balance at Dec. 31, 2016 | $ 815,725 | $ 815,725 | $ 0 | $ 132 | $ 925,111 | $ 443,908 | $ (109,386) | $ 371,685 | $ 90,176 | $ 90,176 | $ 905,901 | $ 905,901 |
Balance (in shares) at Dec. 31, 2016 | 0 | 132,597,000 | 100 | 132,596,758 | ||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Net income attributable to Select Medical Holdings Corporation | 15,870 | 15,870 | 15,870 | 15,870 | $ 15,870 | $ 15,870 | ||||||
Net income attributable to non-controlling interests | 1,503 | 1,503 | 1,503 | 1,503 | ||||||||
Issuance and vesting of restricted stock | 4,280 | $ 0 | 4,280 | 4,280 | ||||||||
Issuance and vesting of restricted stock (in shares) | 101,000 | |||||||||||
Additional investment by Holdings | 617 | 617 | 617 | |||||||||
Repurchase of common shares | (156) | $ 0 | (85) | (71) | (156) | |||||||
Repurchase of common shares (in shares) | (12,000) | |||||||||||
Dividends declared and paid to Holdings | (156) | (156) | (156) | |||||||||
Contribution related to restricted stock awards and stock option issuances by Holdings | 4,280 | 4,280 | 4,280 | |||||||||
Exercise of stock options | 617 | $ 0 | 617 | 617 | ||||||||
Exercise of stock options (in shares) | 67,000 | |||||||||||
Issuance of non-controlling interests | 1,653 | 1,653 | 1,653 | 1,653 | 441 | 441 | 2,094 | 2,094 | ||||
Purchase of non-controlling interests | 7 | 7 | 7 | 7 | 7 | 7 | ||||||
Distributions to non-controlling interests | (1,532) | (1,532) | (1,532) | (1,532) | ||||||||
Redemption adjustment on non-controlling interests | (36,292) | (36,292) | (36,292) | (36,292) | (36,292) | (36,292) | ||||||
Other | 25 | 25 | 25 | 25 | 94 | 94 | 119 | 119 | ||||
Balance at Mar. 31, 2017 | $ 801,729 | $ 801,729 | $ 0 | $ 132 | $ 931,661 | $ 450,373 | $ (129,932) | $ 351,224 | $ 90,682 | $ 90,682 | $ 892,411 | $ 892,411 |
Balance (in shares) at Mar. 31, 2017 | 0 | 132,753,000 | 100 | 132,753,444 | ||||||||
Balance - Redeemable Non-controlling Interests at Dec. 31, 2016 | $ 422,159 | $ 422,159 | ||||||||||
Redeemable Non-controlling interests | ||||||||||||
Net income attributable to redeemable non-controlling interests | 6,090 | 6,090 | ||||||||||
Purchase of non-controlling interests | (57) | (57) | ||||||||||
Distributions to non-controlling interests | (2,075) | (2,075) | ||||||||||
Redemption adjustment on non-controlling interests | 36,292 | 36,292 | ||||||||||
Other | 271 | 271 | ||||||||||
Balance - Redeemable Non-controlling Interests at Mar. 31, 2017 | $ 462,680 | $ 462,680 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net income | $ 23,463 | $ 59,944 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Distributions from unconsolidated subsidiaries | 4,911 | 8,305 |
Depreciation and amortization | 42,539 | 34,517 |
Provision for bad debts | 20,625 | 16,397 |
Equity in earnings of unconsolidated subsidiaries | (5,521) | (4,652) |
Losses on early retirement of debt | 6,527 | 773 |
Gain on sale of assets and businesses | (4,609) | (30,393) |
Impairment of equity investment | 5,339 | |
Stock compensation expense | 4,586 | 3,976 |
Amortization of debt discount, premium and issuance costs | 3,422 | 3,691 |
Deferred income taxes | (3,425) | (3,475) |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Accounts receivable | (138,113) | (39,164) |
Other current assets | (7,621) | 7,560 |
Other assets | (48) | (891) |
Accounts payable | 412 | (21,322) |
Accrued expenses | (18,429) | 51,193 |
Income taxes | 15,420 | 19,370 |
Net cash provided by (used in) operating activities | (55,861) | 111,168 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (9,566) | (412,883) |
Purchases of property and equipment | (50,653) | (46,768) |
Investment in businesses | (500) | (623) |
Proceeds from sale of assets and businesses | 19,512 | 62,600 |
Net cash used in investing activities | (41,207) | (397,674) |
Financing activities | ||
Borrowings on revolving facilities | 530,000 | 190,000 |
Payments on revolving facilities | (415,000) | (175,000) |
Proceeds from term loans | 1,139,822 | 600,127 |
Payments on term loans | (1,170,817) | (226,962) |
Revolving facility debt issuance costs | (3,887) | |
Borrowings of other debt | 6,571 | 6,727 |
Principal payments on other debt | (5,275) | (4,464) |
Repayments of bank overdrafts | (17,062) | (28,615) |
Repurchase of common stock | (156) | |
Proceeds from exercise of stock options | 617 | 21 |
Proceeds from issuance of non-controlling interests | 2,094 | |
Purchase of non-controlling interests | (50) | (1,294) |
Distributions to non-controlling interests | (3,607) | (3,061) |
Net cash provided by financing activities | 63,250 | 357,479 |
Net increase (decrease) in cash and cash equivalents | (33,818) | 70,973 |
Cash and cash equivalents at beginning of period | 99,029 | 14,435 |
Cash and cash equivalents at end of period | 65,211 | 85,408 |
Supplemental Information | ||
Cash paid for interest | 38,565 | 21,544 |
Cash paid for taxes | 1,207 | 1,209 |
Select | ||
Operating activities | ||
Net income | 23,463 | 59,944 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Distributions from unconsolidated subsidiaries | 4,911 | 8,305 |
Depreciation and amortization | 42,539 | 34,517 |
Provision for bad debts | 20,625 | 16,397 |
Equity in earnings of unconsolidated subsidiaries | (5,521) | (4,652) |
Losses on early retirement of debt | 6,527 | 773 |
Gain on sale of assets and businesses | (4,609) | (30,393) |
Impairment of equity investment | 5,339 | |
Stock compensation expense | 4,586 | 3,976 |
Amortization of debt discount, premium and issuance costs | 3,422 | 3,691 |
Deferred income taxes | (3,425) | (3,475) |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Accounts receivable | (138,113) | (39,164) |
Other current assets | (7,621) | 7,560 |
Other assets | (48) | (891) |
Accounts payable | 412 | (21,322) |
Accrued expenses | (18,429) | 51,193 |
Income taxes | 15,420 | 19,370 |
Net cash provided by (used in) operating activities | (55,861) | 111,168 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (9,566) | (412,883) |
Purchases of property and equipment | (50,653) | (46,768) |
Investment in businesses | (500) | (623) |
Proceeds from sale of assets and businesses | 19,512 | 62,600 |
Net cash used in investing activities | (41,207) | (397,674) |
Financing activities | ||
Borrowings on revolving facilities | 530,000 | 190,000 |
Payments on revolving facilities | (415,000) | (175,000) |
Proceeds from term loans | 1,139,822 | 600,127 |
Payments on term loans | (1,170,817) | (226,962) |
Revolving facility debt issuance costs | (3,887) | |
Borrowings of other debt | 6,571 | 6,727 |
Principal payments on other debt | (5,275) | (4,464) |
Repayments of bank overdrafts | (17,062) | (28,615) |
Dividends paid to Holdings | (156) | |
Equity investment by Holdings | 617 | 21 |
Proceeds from issuance of non-controlling interests | 2,094 | |
Purchase of non-controlling interests | (50) | (1,294) |
Distributions to non-controlling interests | (3,607) | (3,061) |
Net cash provided by financing activities | 63,250 | 357,479 |
Net increase (decrease) in cash and cash equivalents | (33,818) | 70,973 |
Cash and cash equivalents at beginning of period | 99,029 | 14,435 |
Cash and cash equivalents at end of period | 65,211 | 85,408 |
Supplemental Information | ||
Cash paid for interest | 38,565 | 21,544 |
Cash paid for taxes | $ 1,207 | $ 1,209 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The unaudited condensed consolidated financial statements of Select Medical Holdings Corporation (“Holdings”) and Select Medical Corporation (“Select”) as of March 31, 2017, and for the three month periods ended March 31, 2016 and 2017, have been prepared in accordance with generally accepted accounting principles (“GAAP”). In the opinion of management, such information contains all adjustments, which are normal and recurring in nature, necessary for a fair statement of the financial position, results of operations and cash flow for such periods. All significant intercompany transactions and balances have been eliminated. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2017. Holdings and Select and their subsidiaries are collectively referred to as the “Company.” The condensed consolidated financial statements of Holdings include the accounts of its wholly owned subsidiary, Select. Holdings conducts substantially all of its business through Select and its subsidiaries. Certain information and disclosures normally included in the notes to consolidated financial statements have been condensed or omitted consistent with the rules and regulations of the Securities and Exchange Commission (the “SEC”), although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2016 contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2017. |
Accounting Policies
Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies | |
Accounting Policies | 2. Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recent Accounting Pronouncements In February 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2017 - 05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) —Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Asset. The standard provides guidance for recognizing gains and losses from the transfer of nonfinancial assets and in-substance non-financial assets in contracts with non-customers, unless other specific guidance applies. The standard requires a company to derecognize nonfinancial assets once it transfers control. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a noncontrolling ownership interest, the company is required to measure any non-controlling interest it receives or retains at fair value. The standard will be effective for fiscal years beginning after December 15, 2017. The standard requires the selection of a retrospective or cumulative effect transition method. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business , which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ASU 2017-01 states that if substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction should be accounted for as an asset acquisition. In addition, the ASU clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. ASU 2017-01 is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The ASU requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The standard will be effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases . This ASU includes a lessee accounting model that recognizes two types of leases; finance and operating. This ASU requires that a lessee recognize on the balance sheet assets and liabilities for all leases with lease terms of more than twelve months. Lessees will need to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained the dual model, requiring leases to be classified as either operating or finance. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. For short-term leases of twelve months or less, lessees are permitted to make an accounting election by class of underlying asset not to recognize right-of-use assets or lease liabilities. If the alternative is elected, lease expense would be recognized generally on the straight-line basis over the respective lease term. The amendments in ASU 2016-02 will take effect for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted as of the beginning of an interim or annual reporting period. A modified retrospective approach is required for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Upon adoption, the Company will recognize significant assets and liabilities on the consolidated balance sheets as a result of the operating lease obligations of the Company. Operating lease expense will still be recognized as rent expense on a straight-line basis over the respective lease terms in the consolidated statements of operations. In May 2014, March 2016, April 2016, and December 2016, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations , ASU 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing , ASU 2016-12, Revenue from Contracts with Customers, Narrow Scope Improvements and Practical Expedients , and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customer (collectively “the standards”), respectively, which supersede most of the current revenue recognition requirements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The original standards were effective for fiscal years beginning after December 15, 2016; however, in July 2015, the FASB approved a one-year deferral of these standards, with a new effective date for fiscal years beginning after December 15, 2017. The standards require the selection of a retrospective or cumulative effect transition method. The Company will be prepared to implement the new standards beginning January 1, 2018, using the retrospective transition method. Adoption of the new standard will result in material changes to the presentation of net operating revenues and bad debt expense in the consolidated statements of operations, but the presentation of the amount of income from operations and net income will be unchanged upon adoption of the new standards. The principal change the Company will experience under the new standards is how the Company accounts for amounts estimated as being realizable from a customer on the date which services have been provided. Under the current standards, the Company’s estimate for unrealizable amounts based upon historical experience was recorded to bad debt expense. Under the new standards, the Company’s estimate for unrealizable amounts based upon historical experience will be recognized as a direct reduction to revenue. Accounts receivable will continue to be subject to estimates of collectability, and bad debt expense and related allowances for doubtful accounts will continue to be recognized if estimates of collectability change in future periods. If accounts receivable become uncollectible due to bankruptcy, financial hardship or other factors that may arise and impact the Company’s ability to realize amounts owed to us, the Company will write-off these uncollectible accounts through the allowance for doubtful accounts. The Company’s remaining implementation efforts will be focused principally on refining the accounting processes, disclosure processes, and internal controls. Recently Adopted Accounting Pronouncements In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes , which changed the presentation of deferred income taxes. The standard changed the presentation of deferred income taxes through the requirement that all deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company adopted the standard on January 1, 2017. The consolidated balance sheet at December 31, 2016 has been retrospectively adjusted. Adoption of the new standard impacted the Company’s previously reported results as follows: December 31, 2016 As Reported As Adjusted (in thousands) Current deferred tax asset $ $ — Total current assets Other assets Total assets Non-current deferred tax liability Total liabilities Total liabilities and equity Reclassifications Certain reclassifications have been made to prior year amounts in order to conform to current year presentation. As discussed above, the prior year balance sheet presentation has been changed in order to conform to the current year balance sheet presentation for the adoption of ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2017 | |
Acquisitions | |
Acquisitions | 3. Acquisitions Physiotherapy Acquisition On March 4, 2016, Select acquired 100% of the issued and outstanding equity securities of Physiotherapy Associates Holdings, Inc. (“Physiotherapy”) for $406.3 million, net of $12.3 million of cash acquired. For the Physiotherapy acquisition, the Company allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair value in accordance with the provisions of Accounting Standards Codification (“ASC”) 805, Business Combinations . During the three months ended March 31, 2017, the Company finalized the purchase price allocation. The following table reconciles the allocation of the consideration given for identifiable net assets and goodwill acquired to the net cash paid for the acquired business (in thousands): Cash and cash equivalents $ Identifiable tangible assets, excluding cash and cash equivalents Identifiable intangible assets Goodwill Total assets Total liabilities Acquired non-controlling interests Net assets acquired Less: Cash and cash equivalents acquired ) Net cash paid $ Goodwill of $343.2 million has been recognized in the business combination, representing the excess of the consideration given over the fair value of identifiable net assets acquired. The value of goodwill is derived from Physiotherapy’s future earnings potential and its assembled workforce. Goodwill has been assigned to the outpatient rehabilitation reporting unit and is not deductible for tax purposes. However, prior to its acquisition by the Company, Physiotherapy completed certain acquisitions that resulted in tax deductible goodwill with an estimated value of $8.8 million, which the Company will deduct through 2030. Due to the integration of Physiotherapy into our outpatient rehabilitation operations, it is not practicable to separately identify net revenue and earnings of Physiotherapy on a stand-alone basis. The following pro forma unaudited results of operations have been prepared assuming the acquisition of Physiotherapy occurred on January 1, 2015. These results are not necessarily indicative of results of future operations nor of the results that would have actually occurred had the acquisition been consummated on the aforementioned date. The Company’s results of operations for the three months ended March 31, 2017 include Physiotherapy for the entire period and there are no pro forma adjustments; therefore, no pro forma information is presented for the period. For the Three Months (in thousands, except per Net revenue $ Net income Income per common share: Basic $ Diluted $ The net income tax impact was calculated at a statutory rate, as if Physiotherapy had been a subsidiary of the Company as of January 1, 2015. Pro forma results for the three months ended March 31, 2016 were adjusted to exclude approximately $3.2 million of Physiotherapy acquisition costs. Other Acquisitions The Company completed acquisitions within our Concentra and outpatient rehabilitation segments during the three months ended March 31, 2017. Consideration given for these acquisitions consisted of $9.6 million of cash, net of cash received. The assets received in these acquisitions consisted principally of accounts receivable, property and equipment, identifiable intangible assets, and goodwill, of which $8.6 million and $0.3 million of goodwill was recognized in our Concentra and outpatient rehabilitation reporting units, respectively. |
Intangible Assets and Liabiliti
Intangible Assets and Liabilities | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets and Liabilities | |
Intangible Assets and Liabilities | 4. Intangible Assets and Liabilities The Company’s goodwill and identifiable intangible assets and liabilities consist of the following: December 31, March 31, 2016 2017 Gross Accumulated Net Gross Accumulated Net (in thousands) Goodwill $ $ — $ $ $ — $ Identifiable intangibles—Indefinite lived assets: Trademarks — — Certificates of need — — Accreditations — — Identifiable intangibles—Finite lived assets: Customer relationships ) ) Favorable leasehold interests ) ) Non-compete agreements ) ) Total identifiable intangible assets $ $ ) $ $ $ ) $ Identifiable intangibles—Finite lived liabilities: Unfavorable leasehold interests $ $ ) $ $ $ ) $ The Company’s customer relationships and non-compete agreements amortize over their estimated useful lives. Amortization expense was $3.8 million and $4.4 million for the three months ended March 31, 2016 and 2017, respectively. Estimated amortization expense of the Company’s customer relationships and non-compete agreements for each of the five succeeding years is $16.4 million annually. The Company’s favorable leasehold interest assets and unfavorable leasehold interest liabilities are amortized to rent expense over the remaining term of their respective leases to reflect a market rent per period based upon the market conditions present at the acquisition date. The Company’s unfavorable leasehold interests are presented as part of accrued other and other non-current liabilities on the condensed consolidated balance sheets. The Company’s accreditations and trademarks have renewal terms and the costs to renew these intangible assets are expensed as incurred. At March 31, 2017, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 2.6 years, respectively. The changes in goodwill for the three months ended March 31, 2017 are as follows: Specialty Outpatient Concentra Total (in thousands) Balance as of December 31, 2016 $ $ $ $ Acquired — Measurement period adjustment ) — ) Balance as of March 31, 2017 $ $ $ $ See Note 3 for details of the goodwill acquired during the period. |
Long-Term Debt and Notes Payabl
Long-Term Debt and Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
Long-Term Debt and Notes Payable | |
Long-Term Debt and Notes Payable | 5. Long-Term Debt and Notes Payable For purposes of this indebtedness footnote, references to Select exclude Concentra because the Concentra credit facilities are non-recourse to Holdings and Select. The Company’s long-term debt and notes payable consist of the following: December 31, March 31, (in thousands) Select 6.375% senior notes (1) $ $ Select credit facilities: Select revolving facility Select term loan (2) Other—Select Total Select debt Less: Select current maturities Select long-term debt maturities $ $ Concentra credit facilities: Concentra term loans (3) $ $ Other—Concentra Total Concentra debt Less: Concentra current maturities Concentra long-term debt maturities $ $ Total current maturities $ $ Total long-term debt maturities Total debt $ $ (1) Includes unamortized premium of $1.0 million and $0.9 million at December 31, 2016 and March 31, 2017, respectively. Includes unamortized debt issuance costs of $8.5 million and $8.0 million at December 31, 2016 and March 31, 2017, respectively. (2) Includes unamortized discounts of $12.0 million and $14.0 million at December 31, 2016 and March 31, 2017, respectively. Includes unamortized debt issuance costs of $13.6 million and $13.9 million at December 31, 2016 and March 31, 2017, respectively. (3) Includes unamortized discounts of $2.8 million and $2.6 million at December 31, 2016 and March 31, 2017, respectively. Includes unamortized debt issuance costs of $13.1 million and $12.5 million at December 31, 2016 and March 31, 2017, respectively. Maturities of Long-Term Debt and Notes Payable Maturities of the Company’s long-term debt and notes payable for the period April 1, 2017 through December 31, 2017 and for the years after 2017 are approximately as follows: Select Concentra Total (in thousands) April 1, 2017 — December 31, 2017 $ $ $ 2018 2019 2020 2021 2022 and beyond Total principal Unamortized discounts and premiums ) ) ) Unamortized debt issuance costs ) ) ) Total $ $ $ Select Credit Facilities On March 6, 2017, Select entered into a new senior secured credit agreement (the “Select credit agreement”) that provides for $1.6 billion in senior secured credit facilities comprising a $1.15 billion, seven-year term loan (the “Select term loan”) and a $450.0 million, five-year revolving credit facility (the “Select revolving facility” and together with the Select term loan, the “Select credit facilities”), including a $75.0 million sublimit for the issuance of standby letters of credit. Select used borrowings under the Select credit facilities to: (i) refinance in full the series E tranche B term loans due June 1, 2018, the series F tranche B term loans due March 31, 2021, and the revolving facility maturing March 1, 2018 under its then existing credit facilities; and (ii) pay fees and expenses in connection with the refinancing. Borrowings under the Select credit facilities bear interest at a rate equal to: (i) in the case of the Select term loan, Adjusted LIBO (as defined in the Select credit agreement) plus 3.50% (subject to an Adjusted LIBO floor of 1.00%), or Alternate Base Rate (as defined in the Select credit agreement) plus 2.50% (subject to an Alternate Base Rate floor of 2.00%); and (ii) in the case of the Select revolving facility, Adjusted LIBO plus a percentage ranging from 3.00% to 3.25% or Alternate Base Rate plus a percentage ranging from 2.00% to 2.25%, in each case based on Select’s leverage ratio. The Select term loan amortizes in equal quarterly installments in amounts equal to 0.25% of the aggregate original principal amount of the Select term loan commencing on June 30, 2017. The balance of the Select term loan will be payable on March 8, 2024; however, if the Select 6.375% senior notes, which are due June 1, 2021, are outstanding on March 1, 2021, the maturity date for the Select term loan will become March 1, 2021. The Select revolving facility will be payable on March 8, 2022; however, if the Select 6.375% senior notes are outstanding on February 1, 2021, the maturity date for the Select revolving facility will become February 1, 2021. Select will be required to prepay borrowings under the Select credit facilities with (i) 100% of the net cash proceeds received from non-ordinary course asset sales or other dispositions, or as a result of a casualty or condemnation, subject to reinvestment provisions and other customary carveouts and, to the extent required, the payment of certain indebtedness secured by liens having priority over the debt under the Select credit facilities or subject to a first lien intercreditor agreement, (ii) 100% of the net cash proceeds received from the issuance of debt obligations other than certain permitted debt obligations, and (ii) 50% of excess cash flow (as defined in the Select credit agreement) if Select’s leverage ratio is greater than 4.50 to 1.00 and 25% of excess cash flow if Select’s leverage ratio is less than or equal to 4.50 to 1.00 and greater than 4.00 to 1.00, in each case, reduced by the aggregate amount of term loans, revolving loans and certain other debt optionally prepaid during the applicable fiscal year. Select will not be required to prepay borrowings with excess cash flow if Select’s leverage ratio is less than or equal to 4.00 to 1.00. The Select revolving facility requires Select to maintain a leverage ratio (as defined in the Select credit agreement), which is tested quarterly, not to exceed 6.25 to 1.00. After March 31, 2019, the leverage ratio must not exceed 6.00 to 1.00. Failure to comply with this covenant would result in an event of default under the Select revolving facility and, absent a waiver or an amendment from the revolving lenders, preclude Select from making further borrowings under the Select revolving facility and permit the revolving lenders to accelerate all outstanding borrowings under the Select revolving facility. The termination of the Select revolving facility commitments and the acceleration of amounts outstanding thereunder would constitute an event of default with respect to the Select term loan. As of March 31, 2017, Select’s leverage ratio was 6.01 to 1.00. The Select credit facilities also contain a number of other affirmative and restrictive covenants, including limitations on mergers, consolidations and dissolutions; sales of assets; investments and acquisitions; indebtedness; liens; affiliate transactions; and dividends and restricted payments. The Select credit facilities contain events of default for non-payment of principal and interest when due (subject, as to interest, to a grace period), cross-default and cross-acceleration provisions and an event of default that would be triggered by a change of control. Borrowings under the Select credit facilities are guaranteed by Holdings and substantially all of Select’s current domestic subsidiaries and will be guaranteed by substantially all of Select’s future domestic subsidiaries and secured by substantially all of Select’s existing and future property and assets and by a pledge of Select’s capital stock, the capital stock of Select’s domestic subsidiaries and up to 65% of the capital stock of Select’s foreign subsidiaries held directly by Select or a domestic subsidiary. Loss on Early Retirement of Debt During the three months ended March 31, 2017, the Company refinanced its senior secured credit facilities, which consisted of the series E tranche B term loans due June 1, 2018, the series F tranche B term loans due March 31, 2021, and the revolving facility maturing March 1, 2018, which resulted in losses on early retirement of debt of $19.7 million. Excess Cash Flow Payment On March 1, 2017, Concentra made a principal prepayment of $23.1 million associated with the Concentra first lien term loans in accordance with the provision in the Concentra credit facilities that requires mandatory prepayments of term loans as a result of annual excess cash flow. |
Fair Value
Fair Value | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value | |
Fair Value | 6. Fair Value Financial instruments include cash and cash equivalents, notes payable, and long-term debt. The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments. The face values, carrying values, and fair values of the Company’s 6.375% senior notes and credit facilities are as follows: December 31, 2016 March 31, 2017 Face Carrying Fair Face Carrying Fair (in thousands) Select 6.375% senior notes (1) $ $ $ $ $ $ Select credit facilities (2) Concentra credit facilities (3) (1) The carrying value includes an unamortized premium of $1.0 million and $0.9 million at December 31, 2016 and March 31, 2017, respectively, and unamortized debt issuance costs of $8.5 million and $8.0 million at December 31, 2016 and March 31, 2017, respectively. (2) The carrying value includes unamortized discounts of $12.0 million and $14.0 million at December 31, 2016 and March 31, 2017, respectively, and unamortized debt issuance costs of $13.6 million and $13.9 million at December 31, 2016 and March 31, 2017, respectively. (3) The carrying value includes unamortized discounts of $2.8 million and $2.6 million at December 31, 2016 and March 31, 2017, respectively, and unamortized debt issuance costs of $13.1 million and $12.5 million at December 31, 2016 and March 31, 2017, respectively. The fair values of the Select credit facilities and the Concentra credit facilities were based on quoted market prices for this debt in the syndicated loan market. The fair value of Select’s 6.375% senior notes debt was based on quoted market prices. The Company considers the inputs in the valuation process to be Level 2 in the fair value hierarchy. Level 2 in the fair value hierarchy is defined as inputs that are observable for the asset or liability, either directly or indirectly, which includes quoted prices for identical assets or liabilities in markets that are not active. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Segment Information | 7. Segment Information The Company’s reportable segments consist of: specialty hospitals, outpatient rehabilitation, and Concentra. Other activities include the Company’s corporate shared services and certain other non-consolidating joint ventures and minority investments in other healthcare related businesses. The accounting policies of the segments are the same as those described in the Annual Report on Form 10-K for the year ended December 31, 2016. The Company evaluates performance of the segments based on Adjusted EBITDA. Adjusted EBITDA is defined as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, Physiotherapy acquisition costs, non-operating gain (loss), and equity in earnings (losses) of unconsolidated subsidiaries. The following tables summarize selected financial data for the Company’s reportable segments. The segment results of Holdings are identical to those of Select. Three Months Ended March 31, 2016 Specialty Outpatient (1) Concentra Other Total (in thousands) Net revenue $ $ $ $ $ Adjusted EBITDA ) Total assets (2) Capital expenditures Three Months Ended March 31, 2017 Specialty Outpatient Concentra Other Total (in thousands) Net revenue $ $ $ $ $ Adjusted EBITDA ) Total assets Capital expenditures A reconciliation of Adjusted EBITDA to income before income taxes is as follows: Three Months Ended March 31, 2016 Specialty Outpatient (1) Concentra Other Total (in thousands) Adjusted EBITDA $ $ $ $ ) Depreciation and amortization ) ) ) ) Stock compensation expense — — ) ) Physiotherapy acquisition costs — — — ) Income (loss) from operations $ $ $ $ ) $ Loss on early retirement of debt ) Equity in earnings of unconsolidated subsidiaries Non-operating gain Interest expense ) Income before income taxes $ Three Months Ended March 31, 2017 Specialty Outpatient Concentra Other Total (in thousands) Adjusted EBITDA $ $ $ $ ) Depreciation and amortization ) ) ) ) Stock compensation expense — — ) ) Income (loss) from operations $ $ $ $ ) $ Loss on early retirement of debt ) Equity in earnings of unconsolidated subsidiaries Non-operating loss ) Interest expense ) Income before income taxes $ (1) The outpatient rehabilitation segment includes the operating results of the Company’s contract therapy businesses through March 31, 2016 and Physiotherapy beginning March 4, 2016. Total assets presented under outpatient rehabilitation at March 31, 2016 reflect the disposition of assets sold as a result of the sale of our contract therapy businesses. (2) Reflects the retrospective adoption of ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. Total assets as of March 31, 2016 were retrospectively conformed to reflect the adoption of the standard, resulting in a reduction to total assets of $25.1 million. |
Income per Common Share
Income per Common Share | 3 Months Ended |
Mar. 31, 2017 | |
Income per Common Share | |
Income per Common Share | 8. Income per Common Share Holdings applies the two-class method for calculating and presenting income per common share. The two-class method is an earnings allocation formula that determines earnings per share for each class of stock participation rights in undistributed earnings. The following table sets forth the calculation of income per share in Holdings’ condensed consolidated statements of operations and the differences between basic weighted average shares outstanding and diluted weighted average shares outstanding used to compute basic and diluted earnings per share, respectively. Three Months Ended March 31, 2016 2017 (in thousands, except per share amounts) Numerator: Net income attributable to Select Medical Holdings Corporation $ $ Less: Earnings allocated to unvested restricted stockholders Net income available to common stockholders $ $ Denominator: Weighted average shares—basic Effect of dilutive securities: Stock options Weighted average shares—diluted Basic income per common share: $ $ Diluted income per common share: $ $ |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 9. Commitments and Contingencies Litigation The Company is a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of its business. The Company cannot predict the ultimate outcome of pending litigation, proceedings, and regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines, and other penalties. The Department of Justice, Centers for Medicare & Medicaid Services (“CMS”), or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company’s businesses in the future that may, either individually or in the aggregate, have a material adverse effect on the Company’s business, financial position, results of operations, and liquidity. To address claims arising out of the Company’s operations, the Company maintains professional malpractice liability insurance and general liability insurance, subject to self-insured retention of $2.0 million per medical incident for professional liability claims and $2.0 million per occurrence for general liability claims. The Company also maintains umbrella liability insurance covering claims which, due to their nature or amount, are not covered by or not fully covered by the Company’s other insurance policies. These insurance policies also do not generally cover punitive damages and are subject to various deductibles and policy limits. Significant legal actions, as well as the cost and possible lack of available insurance, could subject the Company to substantial uninsured liabilities. In the Company’s opinion, the outcome of these actions, individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations or cash flows. Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal (hence, usually unknown to the defendant) for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future. Evansville Litigation On October 19, 2015, the plaintiff-relators filed a Second Amended Complaint in United States of America, ex rel. Tracy Conroy, Pamela Schenk and Lisa Wilson v. Select Medical Corporation, Select Specialty Hospital—Evansville, LLC (“SSH-Evansville”), Select Employment Services, Inc., and Dr. Richard Sloan. The case is a civil action filed in the United States District Court for the Southern District of Indiana by private plaintiff-relators on behalf of the United States under the federal False Claims Act. The plaintiff-relators are the former CEO and two former case managers at SSH-Evansville, and the defendants currently include the Company, SSH-Evansville, a subsidiary of the Company serving as common paymaster for its employees, and a physician who practices at SSH-Evansville. The plaintiff-relators allege that SSH-Evansville discharged patients too early or held patients too long, improperly discharged patients to and readmitted them from short stay hospitals, up-coded diagnoses at admission, and admitted patients for whom long-term acute care was not medically necessary. They also allege that the defendants engaged in retaliation in violation of federal and state law. The Second Amended Complaint replaces a prior complaint that was filed under seal on September 28, 2012 and served on the Company on February 15, 2013, after a federal magistrate judge unsealed it on January 8, 2013. All deadlines in the case had been stayed after the seal was lifted in order to allow the government time to complete its investigation and to decide whether or not to intervene. On June 19, 2015, the United States Department of Justice notified the District Court of its decision not to intervene in the case. In December 2015, the defendants filed a Motion to Dismiss the Second Amended Complaint on multiple grounds, including that the action is disallowed by the False Claims Act’s public disclosure bar, which disqualifies qui tam actions that are based on fraud already publicly disclosed through enumerated sources, unless the relator is an original source, and that the plaintiff-relators did not plead their claims with sufficient particularity, as required by the Federal Rules of Civil Procedure. Thereafter, the United States filed a notice asserting a veto of the defendants’ use of the public disclosure bar for claims arising from conduct from and after March 23, 2010, which was based on certain statutory changes to the public disclosure bar language included in the Affordable Care Act. On September 30, 2016, the District Court partially granted and partially denied the defendants’ Motion to Dismiss. It ruled that the plaintiff-relators alleged substantially the same conduct as had been publicly disclosed and that the plaintiff relators are not original sources, so that the public disclosure bar requires dismissal of all non-retaliation claims arising from conduct before March 23, 2010. The District Court also ruled that the statutory changes to the public disclosure bar gave the United States the power to veto its applicability to claims arising from conduct on and after March 23, 2010, and therefore did not dismiss those claims based on the public disclosure bar. However, the District Court ruled that the plaintiff-relators did not plead certain of their claims relating to interrupted stay manipulation and premature discharging of patients with the requisite particularity, and dismissed those claims. The District Court declined to dismiss the plaintiff relators’ claims arising from conduct from and after March 23, 2010 relating to delayed discharging of patients and up-coding and the plaintiff relators’ retaliation claims. The plaintiff-relators then proposed a case management plan seeking nationwide discovery involving all of the Company’s LTCHs for the period from March 23, 2010 through the present, which the defendants have opposed. The Company intends to vigorously defend this action, but at this time the Company is unable to predict the timing and outcome of this matter. Knoxville Litigation On July 13, 2015, the United States District Court for the Eastern District of Tennessee unsealed a qui tam Complaint in Armes v. Garman, et al, No. 3:14-cv-00172-TAV-CCS, which named as defendants Select, Select Specialty Hospital—Knoxville, Inc. (“SSH-Knoxville”), Select Specialty Hospital—North Knoxville, Inc. and ten current or former employees of these facilities. The Complaint was unsealed after the United States and the State of Tennessee notified the court on July 13, 2015 that each had decided not to intervene in the case. The Complaint is a civil action that was filed under seal on April 29, 2014 by a respiratory therapist formerly employed at SSH-Knoxville. The Complaint alleges violations of the federal False Claims Act and the Tennessee Medicaid False Claims Act based on extending patient stays to increase reimbursement and to increase average length of stay; artificially prolonging the lives of patients to increase Medicare reimbursements and decrease inspections; admitting patients who do not require medically necessary care; performing unnecessary procedures and services; and delaying performance of procedures to increase billing. The Complaint was served on some of the defendants during October 2015. In November 2015, the defendants filed a Motion to Dismiss the Complaint on multiple grounds. The defendants first argued that False Claims Act’s first-to-file bar required dismissal of plaintiff-relator’s claims. Under the first-to-file bar, if a qui tam case is pending, no person may bring a related action based on the facts underlying the first action. The defendants asserted that the plaintiff-relator’s claims were based on the same underlying facts as were asserted in the Evansville litigation, discussed above. The defendants also argued that the plaintiff-relator’s claims must be dismissed under the public disclosure bar, and because the plaintiff-relator did not plead his claims with sufficient particularity. In June 2016, the District Court granted the defendants’ Motion to Dismiss and dismissed the plaintiff-relator’s lawsuit in its entirety. The District Court ruled that the first-to-file bar precludes all but one of the plaintiff-relator’s claims, and that the remaining claim must also be dismissed because the plaintiff-relator failed to plead it with sufficient particularity. In July 2016, the plaintiff-relator filed a Notice of Appeal to the United States Court of Appeals for the Sixth Circuit. Then, on October 11, 2016, the plaintiff-relator filed a Motion to Remand the case to the District Court for further proceedings, arguing that the September 30, 2016 decision in the Evansville litigation, discussed above, undermines the basis for the District Court’s dismissal. After the Court of Appeals denied the Motion to Remand, the plaintiff-relator then sought an indicative ruling from the District Court that it would vacate its prior dismissal ruling and allow plaintiff-relator to supplement his Complaint, which the defendants have opposed. The Company intends to vigorously defend this action, but at this time the Company is unable to predict the timing and outcome of this matter. Wilmington Litigation On January 19, 2017, the United States District Court for the District of Delaware unsealed a qui tam Complaint in United States of America and State of Delaware ex rel. Theresa Kelly v. Select Specialty Hospital—Wilmington, Inc. (“SSH-Wilmington”), Select Specialty Hospitals, Inc., Select Employment Services, Inc., Select Medical Corporation, and Crystal Cheek, No. 16-347-LPS. The Complaint was initially filed under seal on May 12, 2016 by a former chief nursing officer at SSH-Wilmington and was unsealed after the United States filed a Notice of Election to Decline Intervention on January 13, 2017. The corporate defendants were served on March 6, 2017. In the complaint, the plaintiff-relator alleges that the Select defendants and an individual defendant, who is a former health information manager at SSH-Wilmington, violated the False Claims Act and the Delaware False Claims and Reporting Act based on allegedly falsifying medical practitioner signatures on medical records and failing to properly examine the credentials of medical practitioners at SSH-Wilmington. The Company intends to vigorously defend this action if the plaintiff-relator pursues it, but at this time the Company is unable to predict the timing and outcome of this matter. Construction Commitments At March 31, 2017, the Company had outstanding commitments under construction contracts related to new construction, improvements, and renovations totaling approximately $69.9 million. |
Financial Information for Subsi
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes | 3 Months Ended |
Mar. 31, 2017 | |
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes | |
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes | 10. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select’s 6.375% Senior Notes Select’s 6.375% senior notes are fully and unconditionally guaranteed, except for customary limitations, on a senior basis by all of Select’s wholly owned subsidiaries (the “Subsidiary Guarantors”) which is defined as a subsidiary where Select or a subsidiary of Select holds all of the outstanding ownership interests. Certain of Select’s subsidiaries did not guarantee the 6.375% senior notes (the “Non-Guarantor Subsidiaries” and Concentra Group Holdings and its subsidiaries, the “Non-Guarantor Concentra”). Select conducts a significant portion of its business through its subsidiaries. Presented below is condensed consolidating financial information for Select, the Subsidiary Guarantors, the Non-Guarantor Subsidiaries, and Non-Guarantor Concentra at December 31, 2016 and March 31, 2017 and for the three months ended March 31, 2016 and March 31, 2017. The equity method has been used by Select with respect to investments in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in Non-Guarantor Subsidiaries. Separate financial statements for Subsidiary Guarantors are not presented. Certain reclassifications have been made to prior reported amounts in order to conform to the current year guarantor structure. Select Medical Corporation Condensed Consolidating Balance Sheet March 31, 2017 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Assets Current Assets: Cash and cash equivalents $ $ $ $ $ — $ Accounts receivable, net — — Intercompany receivables — — ) (a) — Prepaid income taxes — — — — Other current assets — Total Current Assets ) Property and equipment, net — Investment in affiliates — — ) (b) (c) — Goodwill — — — Identifiable intangible assets, net — — — Other assets ) (d) Total Assets $ $ $ $ $ ) $ Liabilities and Equity Current Liabilities: Bank overdrafts $ $ — $ — $ — $ — $ Current portion of long-term debt and notes payable Accounts payable — Intercompany payables — — ) (a) — Accrued payroll — Accrued vacation — Accrued interest — — Accrued other — Income taxes payable — — — — Total Current Liabilities ) Long-term debt, net of current portion — Non-current deferred tax liability — ) (d) Other non-current liabilities — Total Liabilities ) Redeemable non-controlling interests — — — Stockholder’s Equity: Common stock — — — — Capital in excess of par — — — — Retained earnings (accumulated deficit) ) ) ) (c) ) Subsidiary investment — ) (b) — Total Select Medical Corporation Stockholder’s Equity ) Non-controlling interests — — — Total Equity ) Total Liabilities and Equity $ $ $ $ $ ) $ (a) Elimination of intercompany balances. (b) Elimination of investments in consolidated subsidiaries. (c) Elimination of investments in consolidated subsidiaries’ earnings. (d) Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation. Select Medical Corporation Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2017 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Net operating revenues $ $ $ $ $ — $ Costs and expenses: Cost of services — General and administrative — — — Bad debt expense — — Depreciation and amortization — Total costs and expenses — Income (loss) from operations ) — Other income and expense: Intercompany interest and royalty fees ) ) — — — Intercompany management fees ) ) — — — Loss on early retirement of debt ) — — — — ) Equity in earnings of unconsolidated subsidiaries — — — Non-operating loss — ) — — — ) Interest expense ) ) ) ) — ) Income (loss) before income taxes ) — Income tax expense — Equity in earnings of subsidiaries — — )(a) — Net income ) Less: Net income attributable to non-controlling interests — — — Net income attributable to Select Medical Corporation $ $ $ $ $ ) $ (a) Elimination of equity in earnings of subsidiaries. Select Medical Corporation Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2017 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Operating activities Net income $ $ $ $ $ )(a) $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Distributions from unconsolidated subsidiaries — — — Depreciation and amortization — Provision for bad debts — — Equity in earnings of unconsolidated subsidiaries — ) ) — — ) Equity in earnings of consolidated subsidiaries ) ) — — (a) — Loss on early retirement of debt — — — — Loss (gain) on sale of assets and businesses — ) — — ) Stock compensation expense — — — Amortization of debt discount, premium and issuance costs — — — Deferred income taxes — — ) — ) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable — ) ) ) — ) Other current assets ) ) ) — ) Other assets ) ) — ) Accounts payable ) — Accrued expenses ) ) ) — ) Income taxes — — — Net cash provided by (used in) operating activities ) ) ) — ) Investing activities Acquisition of businesses, net of cash acquired — ) — ) — ) Purchases of property and equipment ) ) ) ) — ) Investment in businesses — ) — — — ) Proceeds from sale of assets and businesses — — — Net cash provided by (used in) investing activities ) ) ) — ) Financing activities Borrowings on revolving facilities — — — — Payments on revolving facilities ) — — — — ) Proceeds from term loans — — — — Payments on term loans ) — — ) — ) Revolving facility debt issuance costs ) — — — — ) Borrowings of other debt — — — — Principal payments on other debt ) ) ) ) — ) Repayments of bank overdrafts ) — — — — ) Dividends paid to Holdings ) — — — — ) Equity investment by Holdings — — — — Intercompany ) ) — — — Proceeds from issuance of non-controlling interests — — — — Purchase of non-controlling interests — ) — — — ) Distributions to non-controlling interests — — ) ) — ) Net cash provided by (used in) financing activities ) ) — Net increase (decrease) in cash and cash equivalents ) ) ) — ) Cash and cash equivalents at beginning of period — Cash and cash equivalents at end of period $ $ $ $ $ — $ (a) Elimination of equity in earnings of consolidated subsidiaries. Select Medical Corporation Condensed Consolidating Balance Sheet December 31, 2016 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Assets Current Assets: Cash and cash equivalents $ $ $ $ $ — $ Accounts receivable, net — — Intercompany receivables — — ) (a) — Prepaid income taxes — — — Other current assets — Total Current Assets ) Property and equipment, net — Investment in affiliates — — ) (b) (c) — Goodwill — — — Identifiable intangible assets, net — — — Other assets ) (d) Total Assets $ $ $ $ $ ) $ Liabilities and Equity Current Liabilities: Bank overdrafts $ $ — $ — $ — $ — $ Current portion of long-term debt and notes payable — Accounts payable — Intercompany payables — — ) (a) — Accrued payroll — Accrued vacation — Accrued interest — — — Accrued other — Total Current Liabilities ) Long-term debt, net of current portion — Non-current deferred tax liability — ) (d) Other non-current liabilities — Total Liabilities ) Redeemable non-controlling interests — — — Stockholder’s Equity: Common stock — — — — Capital in excess of par — — — — Retained earnings (accumulated deficit) ) ) ) (c) ) Subsidiary investment — ) (b) — Total Select Medical Corporation Stockholder’s Equity ) Non-controlling interests — — — Total Equity ) Total Liabilities and Equity $ $ $ $ $ ) $ (a) Elimination of intercompany balances. (b) Elimination of investments in consolidated subsidiaries. (c) Elimination of investments in consolidated subsidiaries’ earnings. (d) Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation. Select Medical Corporation Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2016 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Net operating revenues $ $ $ $ $ — $ Costs and expenses: Cost of services — General and administrative ) — — — Bad debt expense — — Depreciation and amortization — Total costs and expenses — Income (loss) from operations ) — Other income and expense: Intercompany interest and royalty fees ) ) — — — Intercompany management fees ) ) — — — Loss on early retirement of debt ) — — — — ) Equity in earnings of unconsolidated subsidiaries — — — Non-operating gain (loss) ) — — — Interest expense ) ) ) ) — ) Income before income taxes — Income tax expense (benefit) ) — Equity in earnings of subsidiaries — — ) (a) — Net income ) Less: Net income attributable to non-controlling interests — — — Net income attributable to Select Medical Corporation $ $ $ $ $ ) $ (a) Elimination of equity in earnings of subsidiaries. Select Medical Corporation Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2016 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Operating activities Net income $ $ $ $ $ )(a) $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Distributions from unconsolidated subsidiaries — — — Depreciation and amortization — Provision for bad debts — — Equity in earnings of unconsolidated subsidiaries — ) ) — — ) Equity in earnings of consolidated subsidiaries ) ) — — (a) — Loss on early retirement of debt — — — — Loss (gain) on sale of assets and business ) — — ) Impairment of equity investment — — — — Stock compensation expense — — — Amortization of debt discount, premium and issuance costs — — — Deferred income taxes ) — — ) — ) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable — ) ) ) — ) Other current assets ) ) — Other assets ) ) — ) Accounts payable ) ) ) — ) Accrued expenses ) — Income taxes — — — Net cash provided by (used in) operating activities ) — Investing activities Acquisition of businesses, net of cash acquired ) ) — ) — ) Purchases of property and equipment ) ) ) ) — ) Investment in businesses — ) — — — ) Proceeds from sale of assets and business — — — Net cash used in investing activities ) ) ) ) — ) Financing activities Borrowings on revolving facilities — — — — Payments on revolving facilities ) — — ) — ) Proceeds from term loans — — — — Payments on term loans ) — — ) — ) Borrowings of other debt — — — — Principal payments on other debt ) ) ) ) — ) Repayments of bank overdrafts ) — — — — ) Equity investment by Holdings — — — — Intercompany ) — — — Purchase of non-controlling interests — ) — — — ) Distributions to non-controlling interests ) — — ) — ) Net cash provided by (used in) financing activities ) ) — Net increase in cash and cash equivalents — Cash and cash equivalents at beginning of period — Cash and cash equivalents at end of period $ $ $ $ $ — $ (a) Elimination of equity in earnings of consolidated subsidiaries. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2017 - 05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) —Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Asset. The standard provides guidance for recognizing gains and losses from the transfer of nonfinancial assets and in-substance non-financial assets in contracts with non-customers, unless other specific guidance applies. The standard requires a company to derecognize nonfinancial assets once it transfers control. Additionally, when a company transfers its controlling interest in a nonfinancial asset, but retains a noncontrolling ownership interest, the company is required to measure any non-controlling interest it receives or retains at fair value. The standard will be effective for fiscal years beginning after December 15, 2017. The standard requires the selection of a retrospective or cumulative effect transition method. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business , which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ASU 2017-01 states that if substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction should be accounted for as an asset acquisition. In addition, the ASU clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. ASU 2017-01 is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The ASU requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The standard will be effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases . This ASU includes a lessee accounting model that recognizes two types of leases; finance and operating. This ASU requires that a lessee recognize on the balance sheet assets and liabilities for all leases with lease terms of more than twelve months. Lessees will need to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained the dual model, requiring leases to be classified as either operating or finance. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. For short-term leases of twelve months or less, lessees are permitted to make an accounting election by class of underlying asset not to recognize right-of-use assets or lease liabilities. If the alternative is elected, lease expense would be recognized generally on the straight-line basis over the respective lease term. The amendments in ASU 2016-02 will take effect for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted as of the beginning of an interim or annual reporting period. A modified retrospective approach is required for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Upon adoption, the Company will recognize significant assets and liabilities on the consolidated balance sheets as a result of the operating lease obligations of the Company. Operating lease expense will still be recognized as rent expense on a straight-line basis over the respective lease terms in the consolidated statements of operations. In May 2014, March 2016, April 2016, and December 2016, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations , ASU 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing , ASU 2016-12, Revenue from Contracts with Customers, Narrow Scope Improvements and Practical Expedients , and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customer (collectively “the standards”), respectively, which supersede most of the current revenue recognition requirements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The original standards were effective for fiscal years beginning after December 15, 2016; however, in July 2015, the FASB approved a one-year deferral of these standards, with a new effective date for fiscal years beginning after December 15, 2017. The standards require the selection of a retrospective or cumulative effect transition method. The Company will be prepared to implement the new standards beginning January 1, 2018, using the retrospective transition method. Adoption of the new standard will result in material changes to the presentation of net operating revenues and bad debt expense in the consolidated statements of operations, but the presentation of the amount of income from operations and net income will be unchanged upon adoption of the new standards. The principal change the Company will experience under the new standards is how the Company accounts for amounts estimated as being realizable from a customer on the date which services have been provided. Under the current standards, the Company’s estimate for unrealizable amounts based upon historical experience was recorded to bad debt expense. Under the new standards, the Company’s estimate for unrealizable amounts based upon historical experience will be recognized as a direct reduction to revenue. Accounts receivable will continue to be subject to estimates of collectability, and bad debt expense and related allowances for doubtful accounts will continue to be recognized if estimates of collectability change in future periods. If accounts receivable become uncollectible due to bankruptcy, financial hardship or other factors that may arise and impact the Company’s ability to realize amounts owed to us, the Company will write-off these uncollectible accounts through the allowance for doubtful accounts. The Company’s remaining implementation efforts will be focused principally on refining the accounting processes, disclosure processes, and internal controls. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes , which changed the presentation of deferred income taxes. The standard changed the presentation of deferred income taxes through the requirement that all deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company adopted the standard on January 1, 2017. The consolidated balance sheet at December 31, 2016 has been retrospectively adjusted. Adoption of the new standard impacted the Company’s previously reported results as follows: December 31, 2016 As Reported As Adjusted (in thousands) Current deferred tax asset $ $ — Total current assets Other assets Total assets Non-current deferred tax liability Total liabilities Total liabilities and equity |
Reclassifications | Reclassifications Certain reclassifications have been made to prior year amounts in order to conform to current year presentation. As discussed above, the prior year balance sheet presentation has been changed in order to conform to the current year balance sheet presentation for the adoption of ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. |
Accounting Policies (Tables)
Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies | |
Schedule of adoption of the new standard impacted our previously reported results | December 31, 2016 As Reported As Adjusted (in thousands) Current deferred tax asset $ $ — Total current assets Other assets Total assets Non-current deferred tax liability Total liabilities Total liabilities and equity |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Acquisitions | |
Schedule of pro forma unaudited results of operations | For the Three Months (in thousands, except per Net revenue $ Net income Income per common share: Basic $ Diluted $ |
Physiotherapy | |
Acquisitions | |
Schedule of reconciliation of the allocation of the consideration given for identifiable net assets and goodwill acquired to the net cash paid for the acquired business | The following table reconciles the allocation of the consideration given for identifiable net assets and goodwill acquired to the net cash paid for the acquired business (in thousands): Cash and cash equivalents $ Identifiable tangible assets, excluding cash and cash equivalents Identifiable intangible assets Goodwill Total assets Total liabilities Acquired non-controlling interests Net assets acquired Less: Cash and cash equivalents acquired ) Net cash paid $ |
Intangible Assets and Liabili20
Intangible Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets and Liabilities | |
Schedule of the Company's goodwill and identifiable intangible assets and liabilities | December 31, March 31, 2016 2017 Gross Accumulated Net Gross Accumulated Net (in thousands) Goodwill $ $ — $ $ $ — $ Identifiable intangibles—Indefinite lived assets: Trademarks — — Certificates of need — — Accreditations — — Identifiable intangibles—Finite lived assets: Customer relationships ) ) Favorable leasehold interests ) ) Non-compete agreements ) ) Total identifiable intangible assets $ $ ) $ $ $ ) $ Identifiable intangibles—Finite lived liabilities: Unfavorable leasehold interests $ $ ) $ $ $ ) $ |
Schedule of changes in goodwill | Specialty Outpatient Concentra Total (in thousands) Balance as of December 31, 2016 $ $ $ $ Acquired — Measurement period adjustment ) — ) Balance as of March 31, 2017 $ $ $ $ |
Long-Term Debt and Notes Paya21
Long-Term Debt and Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Long-Term Debt and Notes Payable | |
Schedule of Company's long-term debt and notes payable | December 31, March 31, (in thousands) Select 6.375% senior notes (1) $ $ Select credit facilities: Select revolving facility Select term loan (2) Other—Select Total Select debt Less: Select current maturities Select long-term debt maturities $ $ Concentra credit facilities: Concentra term loans (3) $ $ Other—Concentra Total Concentra debt Less: Concentra current maturities Concentra long-term debt maturities $ $ Total current maturities $ $ Total long-term debt maturities Total debt $ $ (1) Includes unamortized premium of $1.0 million and $0.9 million at December 31, 2016 and March 31, 2017, respectively. Includes unamortized debt issuance costs of $8.5 million and $8.0 million at December 31, 2016 and March 31, 2017, respectively. (2) Includes unamortized discounts of $12.0 million and $14.0 million at December 31, 2016 and March 31, 2017, respectively. Includes unamortized debt issuance costs of $13.6 million and $13.9 million at December 31, 2016 and March 31, 2017, respectively. (3) Includes unamortized discounts of $2.8 million and $2.6 million at December 31, 2016 and March 31, 2017, respectively. Includes unamortized debt issuance costs of $13.1 million and $12.5 million at December 31, 2016 and March 31, 2017, respectively. |
Schedule of maturities of the Company's long-term debt and notes payable | Select Concentra Total (in thousands) April 1, 2017 — December 31, 2017 $ $ $ 2018 2019 2020 2021 2022 and beyond Total principal Unamortized discounts and premiums ) ) ) Unamortized debt issuance costs ) ) ) Total $ $ $ |
Fair Value (Tables)
Fair Value (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value | |
Schedule of face values, carrying values and fair values of financial instruments | December 31, 2016 March 31, 2017 Face Carrying Fair Face Carrying Fair (in thousands) Select 6.375% senior notes (1) $ $ $ $ $ $ Select credit facilities (2) Concentra credit facilities (3) (1) The carrying value includes an unamortized premium of $1.0 million and $0.9 million at December 31, 2016 and March 31, 2017, respectively, and unamortized debt issuance costs of $8.5 million and $8.0 million at December 31, 2016 and March 31, 2017, respectively. (2) The carrying value includes unamortized discounts of $12.0 million and $14.0 million at December 31, 2016 and March 31, 2017, respectively, and unamortized debt issuance costs of $13.6 million and $13.9 million at December 31, 2016 and March 31, 2017, respectively. (3) The carrying value includes unamortized discounts of $2.8 million and $2.6 million at December 31, 2016 and March 31, 2017, respectively, and unamortized debt issuance costs of $13.1 million and $12.5 million at December 31, 2016 and March 31, 2017, respectively. |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Schedule of selected financial data for the Company's reportable segments | Three Months Ended March 31, 2016 Specialty Outpatient (1) Concentra Other Total (in thousands) Net revenue $ $ $ $ $ Adjusted EBITDA ) Total assets (2) Capital expenditures Three Months Ended March 31, 2017 Specialty Outpatient Concentra Other Total (in thousands) Net revenue $ $ $ $ $ Adjusted EBITDA ) Total assets Capital expenditures |
Schedule of reconciliation of Adjusted EBITDA to income before income taxes | Three Months Ended March 31, 2016 Specialty Outpatient (1) Concentra Other Total (in thousands) Adjusted EBITDA $ $ $ $ ) Depreciation and amortization ) ) ) ) Stock compensation expense — — ) ) Physiotherapy acquisition costs — — — ) Income (loss) from operations $ $ $ $ ) $ Loss on early retirement of debt ) Equity in earnings of unconsolidated subsidiaries Non-operating gain Interest expense ) Income before income taxes $ Three Months Ended March 31, 2017 Specialty Outpatient Concentra Other Total (in thousands) Adjusted EBITDA $ $ $ $ ) Depreciation and amortization ) ) ) ) Stock compensation expense — — ) ) Income (loss) from operations $ $ $ $ ) $ Loss on early retirement of debt ) Equity in earnings of unconsolidated subsidiaries Non-operating loss ) Interest expense ) Income before income taxes $ (1) The outpatient rehabilitation segment includes the operating results of the Company’s contract therapy businesses through March 31, 2016 and Physiotherapy beginning March 4, 2016. Total assets presented under outpatient rehabilitation at March 31, 2016 reflect the disposition of assets sold as a result of the sale of our contract therapy businesses. (2) Reflects the retrospective adoption of ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. Total assets as of March 31, 2016 were retrospectively conformed to reflect the adoption of the standard, resulting in a reduction to total assets of $25.1 million. |
Income per Common Share (Tables
Income per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Income per Common Share | |
Schedule of computation of basic and diluted earnings per share | Three Months Ended March 31, 2016 2017 (in thousands, except per share amounts) Numerator: Net income attributable to Select Medical Holdings Corporation $ $ Less: Earnings allocated to unvested restricted stockholders Net income available to common stockholders $ $ Denominator: Weighted average shares—basic Effect of dilutive securities: Stock options Weighted average shares—diluted Basic income per common share: $ $ Diluted income per common share: $ $ |
Financial Information for Sub25
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Tables) - Select | 3 Months Ended |
Mar. 31, 2017 | |
Schedule of Condensed Consolidating Balance Sheet | Select Medical Corporation Condensed Consolidating Balance Sheet March 31, 2017 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Assets Current Assets: Cash and cash equivalents $ $ $ $ $ — $ Accounts receivable, net — — Intercompany receivables — — ) (a) — Prepaid income taxes — — — — Other current assets — Total Current Assets ) Property and equipment, net — Investment in affiliates — — ) (b) (c) — Goodwill — — — Identifiable intangible assets, net — — — Other assets ) (d) Total Assets $ $ $ $ $ ) $ Liabilities and Equity Current Liabilities: Bank overdrafts $ $ — $ — $ — $ — $ Current portion of long-term debt and notes payable Accounts payable — Intercompany payables — — ) (a) — Accrued payroll — Accrued vacation — Accrued interest — — Accrued other — Income taxes payable — — — — Total Current Liabilities ) Long-term debt, net of current portion — Non-current deferred tax liability — ) (d) Other non-current liabilities — Total Liabilities ) Redeemable non-controlling interests — — — Stockholder’s Equity: Common stock — — — — Capital in excess of par — — — — Retained earnings (accumulated deficit) ) ) ) (c) ) Subsidiary investment — ) (b) — Total Select Medical Corporation Stockholder’s Equity ) Non-controlling interests — — — Total Equity ) Total Liabilities and Equity $ $ $ $ $ ) $ (a) Elimination of intercompany balances. (b) Elimination of investments in consolidated subsidiaries. (c) Elimination of investments in consolidated subsidiaries’ earnings. (d) Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation. Select Medical Corporation Condensed Consolidating Balance Sheet December 31, 2016 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Assets Current Assets: Cash and cash equivalents $ $ $ $ $ — $ Accounts receivable, net — — Intercompany receivables — — ) (a) — Prepaid income taxes — — — Other current assets — Total Current Assets ) Property and equipment, net — Investment in affiliates — — ) (b) (c) — Goodwill — — — Identifiable intangible assets, net — — — Other assets ) (d) Total Assets $ $ $ $ $ ) $ Liabilities and Equity Current Liabilities: Bank overdrafts $ $ — $ — $ — $ — $ Current portion of long-term debt and notes payable — Accounts payable — Intercompany payables — — ) (a) — Accrued payroll — Accrued vacation — Accrued interest — — — Accrued other — Total Current Liabilities ) Long-term debt, net of current portion — Non-current deferred tax liability — ) (d) Other non-current liabilities — Total Liabilities ) Redeemable non-controlling interests — — — Stockholder’s Equity: Common stock — — — — Capital in excess of par — — — — Retained earnings (accumulated deficit) ) ) ) (c) ) Subsidiary investment — ) (b) — Total Select Medical Corporation Stockholder’s Equity ) Non-controlling interests — — — Total Equity ) Total Liabilities and Equity $ $ $ $ $ ) $ (a) Elimination of intercompany balances. (b) Elimination of investments in consolidated subsidiaries. (c) Elimination of investments in consolidated subsidiaries’ earnings. (d) Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation. |
Schedule of Condensed Consolidating Statement of Operations | Select Medical Corporation Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2017 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Net operating revenues $ $ $ $ $ — $ Costs and expenses: Cost of services — General and administrative — — — Bad debt expense — — Depreciation and amortization — Total costs and expenses — Income (loss) from operations ) — Other income and expense: Intercompany interest and royalty fees ) ) — — — Intercompany management fees ) ) — — — Loss on early retirement of debt ) — — — — ) Equity in earnings of unconsolidated subsidiaries — — — Non-operating loss — ) — — — ) Interest expense ) ) ) ) — ) Income (loss) before income taxes ) — Income tax expense — Equity in earnings of subsidiaries — — )(a) — Net income ) Less: Net income attributable to non-controlling interests — — — Net income attributable to Select Medical Corporation $ $ $ $ $ ) $ (a) Elimination of equity in earnings of subsidiaries. Select Medical Corporation Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2016 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Net operating revenues $ $ $ $ $ — $ Costs and expenses: Cost of services — General and administrative ) — — — Bad debt expense — — Depreciation and amortization — Total costs and expenses — Income (loss) from operations ) — Other income and expense: Intercompany interest and royalty fees ) ) — — — Intercompany management fees ) ) — — — Loss on early retirement of debt ) — — — — ) Equity in earnings of unconsolidated subsidiaries — — — Non-operating gain (loss) ) — — — Interest expense ) ) ) ) — ) Income before income taxes — Income tax expense (benefit) ) — Equity in earnings of subsidiaries — — ) (a) — Net income ) Less: Net income attributable to non-controlling interests — — — Net income attributable to Select Medical Corporation $ $ $ $ $ ) $ (a) Elimination of equity in earnings of subsidiaries. |
Schedule of Condensed Consolidating Statement of Cash Flows | Select Medical Corporation Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2017 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Operating activities Net income $ $ $ $ $ )(a) $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Distributions from unconsolidated subsidiaries — — — Depreciation and amortization — Provision for bad debts — — Equity in earnings of unconsolidated subsidiaries — ) ) — — ) Equity in earnings of consolidated subsidiaries ) ) — — (a) — Loss on early retirement of debt — — — — Loss (gain) on sale of assets and businesses — ) — — ) Stock compensation expense — — — Amortization of debt discount, premium and issuance costs — — — Deferred income taxes — — ) — ) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable — ) ) ) — ) Other current assets ) ) ) — ) Other assets ) ) — ) Accounts payable ) — Accrued expenses ) ) ) — ) Income taxes — — — Net cash provided by (used in) operating activities ) ) ) — ) Investing activities Acquisition of businesses, net of cash acquired — ) — ) — ) Purchases of property and equipment ) ) ) ) — ) Investment in businesses — ) — — — ) Proceeds from sale of assets and businesses — — — Net cash provided by (used in) investing activities ) ) ) — ) Financing activities Borrowings on revolving facilities — — — — Payments on revolving facilities ) — — — — ) Proceeds from term loans — — — — Payments on term loans ) — — ) — ) Revolving facility debt issuance costs ) — — — — ) Borrowings of other debt — — — — Principal payments on other debt ) ) ) ) — ) Repayments of bank overdrafts ) — — — — ) Dividends paid to Holdings ) — — — — ) Equity investment by Holdings — — — — Intercompany ) ) — — — Proceeds from issuance of non-controlling interests — — — — Purchase of non-controlling interests — ) — — — ) Distributions to non-controlling interests — — ) ) — ) Net cash provided by (used in) financing activities ) ) — Net increase (decrease) in cash and cash equivalents ) ) ) — ) Cash and cash equivalents at beginning of period — Cash and cash equivalents at end of period $ $ $ $ $ — $ (a) Elimination of equity in earnings of consolidated subsidiaries. Select Medical Corporation Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2016 (unaudited) Select (Parent Subsidiary Non-Guarantor Non-Guarantor Eliminations Consolidated (in thousands) Operating activities Net income $ $ $ $ $ )(a) $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Distributions from unconsolidated subsidiaries — — — Depreciation and amortization — Provision for bad debts — — Equity in earnings of unconsolidated subsidiaries — ) ) — — ) Equity in earnings of consolidated subsidiaries ) ) — — (a) — Loss on early retirement of debt — — — — Loss (gain) on sale of assets and business ) — — ) Impairment of equity investment — — — — Stock compensation expense — — — Amortization of debt discount, premium and issuance costs — — — Deferred income taxes ) — — ) — ) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable — ) ) ) — ) Other current assets ) ) — Other assets ) ) — ) Accounts payable ) ) ) — ) Accrued expenses ) — Income taxes — — — Net cash provided by (used in) operating activities ) — Investing activities Acquisition of businesses, net of cash acquired ) ) — ) — ) Purchases of property and equipment ) ) ) ) — ) Investment in businesses — ) — — — ) Proceeds from sale of assets and business — — — Net cash used in investing activities ) ) ) ) — ) Financing activities Borrowings on revolving facilities — — — — Payments on revolving facilities ) — — ) — ) Proceeds from term loans — — — — Payments on term loans ) — — ) — ) Borrowings of other debt — — — — Principal payments on other debt ) ) ) ) — ) Repayments of bank overdrafts ) — — — — ) Equity investment by Holdings — — — — Intercompany ) — — — Purchase of non-controlling interests — ) — — — ) Distributions to non-controlling interests ) — — ) — ) Net cash provided by (used in) financing activities ) ) — Net increase in cash and cash equivalents — Cash and cash equivalents at beginning of period — Cash and cash equivalents at end of period $ $ $ $ $ — $ (a) Elimination of equity in earnings of consolidated subsidiaries. |
Accounting Policies (Details)
Accounting Policies (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 |
Recently Adopted Accounting Pronouncements | |||
Total current assets | $ 844,214 | $ 762,903 | |
Other assets | 164,737 | 173,944 | |
Total assets | 5,002,937 | 4,920,626 | $ 4,822,864 |
Non-current deferred tax liability | 195,729 | 199,078 | |
Total liabilities | 3,647,846 | 3,592,566 | |
Total liabilities and equity | $ 5,002,937 | 4,920,626 | |
ASU 2015-17 | |||
Recently Adopted Accounting Pronouncements | |||
Total current assets | 762,903 | ||
Other assets | 173,944 | ||
Total assets | 4,920,626 | ||
Non-current deferred tax liability | 199,078 | ||
Total liabilities | 3,592,566 | ||
Total liabilities and equity | 4,920,626 | ||
As Reported | ASU 2015-17 | |||
Recently Adopted Accounting Pronouncements | |||
Current deferred tax asset | 45,165 | ||
Total current assets | 808,068 | ||
Other assets | 152,548 | ||
Total assets | 4,944,395 | ||
Non-current deferred tax liability | 222,847 | ||
Total liabilities | 3,616,335 | ||
Total liabilities and equity | $ 4,944,395 | ||
Restatement Adjustment | ASU 2015-17 | |||
Recently Adopted Accounting Pronouncements | |||
Total assets | $ 25,100 |
Acquisitions - Physiotherapy Ac
Acquisitions - Physiotherapy Acquisition (Details) - USD ($) $ in Thousands | Mar. 04, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Mar. 03, 2016 |
Consideration given for identifiable net assets and goodwill acquired to the net cash paid | |||||
Goodwill | $ 2,759,764 | $ 2,751,000 | |||
Net cash paid | 9,566 | $ 412,883 | |||
Physiotherapy | |||||
Acquisitions | |||||
Voting equity interests acquired | 100.00% | ||||
Consideration given for identifiable net assets and goodwill acquired to the net cash paid | |||||
Cash and cash equivalents | $ 12,300 | 12,340 | |||
Identifiable tangible assets, excluding cash and cash equivalents | 87,832 | ||||
Identifiable intangible assets | 32,484 | ||||
Goodwill | 343,187 | ||||
Total assets | 475,843 | ||||
Total liabilities | 54,685 | ||||
Acquired non-controlling interests | 2,514 | ||||
Net assets acquired | 418,644 | ||||
Net cash paid | $ 406,300 | $ 406,304 | |||
Estimated value of goodwill, deductible for tax purposes | $ 8,800 |
Acquisitions - Proforma Results
Acquisitions - Proforma Results and Other Acquisitions (Details) - USD ($) $ / shares in Units, $ in Thousands | Mar. 04, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
Acquisitions | ||||
Net cash paid | $ 9,566 | $ 412,883 | ||
Goodwill | 2,759,764 | $ 2,751,000 | ||
Pro Forma | ||||
Pro forma results of operations | ||||
Net revenue | 1,141,860 | |||
Net income | $ 53,014 | |||
Income per common share: | ||||
Basic (in dollars per share) | $ 0.40 | |||
Diluted (in dollars per share) | $ 0.40 | |||
Concentra | ||||
Acquisitions | ||||
Goodwill | $ 668,664 | 660,037 | ||
Outpatient Rehabilitation | ||||
Acquisitions | ||||
Goodwill | 644,036 | $ 643,557 | ||
Physiotherapy | ||||
Acquisitions | ||||
Net cash paid | $ 406,300 | 406,304 | ||
Goodwill | 343,187 | |||
Physiotherapy | Pro Forma | ||||
Proforma acquisition costs | ||||
Acquisition costs excluded from proforma results | 3,200 | |||
Other Acquisitions | ||||
Acquisitions | ||||
Net cash paid | 9,600 | |||
Other Acquisitions | Concentra | ||||
Acquisitions | ||||
Goodwill | 8,600 | |||
Other Acquisitions | Outpatient Rehabilitation | ||||
Acquisitions | ||||
Goodwill | $ 300 |
Intangible Assets and Liabili29
Intangible Assets and Liabilities - Carrying Value and Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Intangible Assets and Liabilities | |||
Goodwill | $ 2,759,764 | $ 2,751,000 | |
Identifiable intangibles-Finite lived assets: | |||
Accumulated Amortization | (32,041) | (27,339) | |
Total identifiable intangible assets, Gross Carrying Amount | 369,117 | 367,901 | |
Total identifiable intangible assets, Net (Excluding Goodwill), Total | 337,076 | 340,562 | |
Identifiable intangibles-Finite lived liabilities: | |||
Unfavorable leasehold interests, Gross Carrying Amount | 5,343 | 5,139 | |
Unfavorable leasehold interests, Accumulated Amortization | (1,690) | (1,410) | |
Unfavorable leasehold interests, Net Carrying Amount | 3,653 | 3,729 | |
Customer relationships | |||
Identifiable intangibles-Finite lived assets: | |||
Identifiable intangibles - Finite lived assets, Gross Carrying Amount | 142,890 | 142,198 | |
Accumulated Amortization | (26,908) | (23,185) | |
Identifiable intangibles - Finite lived assets, Net Carrying Amount | 115,982 | 119,013 | |
Leasehold interests | |||
Identifiable intangibles-Finite lived assets: | |||
Identifiable intangibles - Finite lived assets, Gross Carrying Amount | 13,177 | 13,089 | |
Accumulated Amortization | (2,796) | (2,317) | |
Identifiable intangibles - Finite lived assets, Net Carrying Amount | 10,381 | 10,772 | |
Non-compete agreements | |||
Identifiable intangibles-Finite lived assets: | |||
Identifiable intangibles - Finite lived assets, Gross Carrying Amount | 27,057 | 26,655 | |
Accumulated Amortization | (2,337) | (1,837) | |
Identifiable intangibles - Finite lived assets, Net Carrying Amount | 24,720 | 24,818 | |
Customer relationships and non-compete agreements | |||
Identifiable intangibles-Finite lived assets: | |||
Amortization expense | 4,400 | $ 3,800 | |
Estimated amortization expense, rolling maturity | |||
12 months ending March 31, 2018 | 16,400 | ||
12 months ending March 31, 2019 | 16,400 | ||
12 months ending March 31, 2020 | 16,400 | ||
12 months ending March 31, 2021 | 16,400 | ||
12 months ending March 31, 2022 | $ 16,400 | ||
Trademarks | |||
Intangible Assets and Liabilities | |||
Weighted average time until next renewal | 2 years 7 months 6 days | ||
Identifiable intangibles-Indefinite lived assets | |||
Identifiable intangibles - Indefinite lived assets | $ 166,698 | 166,698 | |
Certificates of need | |||
Identifiable intangibles-Indefinite lived assets | |||
Identifiable intangibles - Indefinite lived assets | $ 17,152 | 17,026 | |
Accreditations | |||
Intangible Assets and Liabilities | |||
Weighted average time until next renewal | 1 year 6 months | ||
Identifiable intangibles-Indefinite lived assets | |||
Identifiable intangibles - Indefinite lived assets | $ 2,143 | $ 2,235 |
Intangible Assets - Changes in
Intangible Assets - Changes in the Carrying Amount of Goodwill (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Goodwill | |
Balance at the beginning of the year | $ 2,751,000 |
Acquired | 8,938 |
Measurement period adjustment | (174) |
Balance at the end of the year | 2,759,764 |
Specialty Hospitals | |
Goodwill | |
Balance at the beginning of the year | 1,447,406 |
Measurement period adjustment | (342) |
Balance at the end of the year | 1,447,064 |
Outpatient Rehabilitation | |
Goodwill | |
Balance at the beginning of the year | 643,557 |
Acquired | 311 |
Measurement period adjustment | 168 |
Balance at the end of the year | 644,036 |
Concentra | |
Goodwill | |
Balance at the beginning of the year | 660,037 |
Acquired | 8,627 |
Balance at the end of the year | $ 668,664 |
Long-Term Debt and Notes Paya31
Long-Term Debt and Notes Payable - Components of Long-Term Debt And Notes Payable (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Long-term debt and notes payable | ||
Total debt | $ 2,793,423 | $ 2,698,989 |
Current portion of long-term debt and notes payable | 22,013 | 13,656 |
Long-term debt, net of current portion | 2,771,410 | 2,685,333 |
Select Excluding Concentra | ||
Long-term debt and notes payable | ||
Total debt | 2,184,860 | 2,067,436 |
Current portion of long-term debt and notes payable | 21,641 | 8,996 |
Long-term debt, net of current portion | 2,163,219 | $ 2,058,440 |
Unamortized debt issuance costs | $ 21,931 | |
Select Excluding Concentra | 6.375% senior notes | ||
Long-term debt and notes payable | ||
Interest rate of debt (as a percent) | 6.375% | 6.375% |
Total debt | $ 702,966 | $ 702,545 |
Unamortized premiums | 900 | 1,000 |
Unamortized debt issuance costs | 8,000 | 8,500 |
Select Excluding Concentra | Revolving credit facility | ||
Long-term debt and notes payable | ||
Total debt | 335,000 | 220,000 |
Select Excluding Concentra | Term loans | ||
Long-term debt and notes payable | ||
Total debt | 1,122,052 | 1,122,203 |
Unamortized discounts | 14,000 | 12,000 |
Unamortized debt issuance costs | 13,900 | 13,600 |
Select Excluding Concentra | Other | ||
Long-term debt and notes payable | ||
Total debt | 24,842 | 22,688 |
Concentra Inc | ||
Long-term debt and notes payable | ||
Total debt | 608,563 | 631,553 |
Current portion of long-term debt and notes payable | 372 | 4,660 |
Long-term debt, net of current portion | 608,191 | 626,893 |
Unamortized debt issuance costs | 12,466 | |
Concentra Inc | Term loans | ||
Long-term debt and notes payable | ||
Total debt | 604,068 | 626,375 |
Unamortized discounts | 2,600 | 2,800 |
Unamortized debt issuance costs | 12,500 | 13,100 |
Concentra Inc | Other | ||
Long-term debt and notes payable | ||
Total debt | $ 4,495 | $ 5,178 |
Long-Term Debt and Notes Paya32
Long-Term Debt and Notes Payable - Maturities Of Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Long-term debt and notes payable | ||
Total debt | $ 2,793,423 | $ 2,698,989 |
Select Excluding Concentra | ||
Long-term debt and notes payable | ||
April 1, 2017 - December 31, 2017 | 18,072 | |
2,018 | 14,976 | |
2,019 | 23,327 | |
2,020 | 11,568 | |
2,021 | 721,514 | |
2022 and beyond | 1,430,385 | |
Total principal | 2,219,842 | |
Unamortized discounts and premiums | (13,051) | |
Unamortized debt issuance costs | (21,931) | |
Total debt | 2,184,860 | 2,067,436 |
Concentra Inc | ||
Long-term debt and notes payable | ||
April 1, 2017 - December 31, 2017 | 343 | |
2,018 | 128 | |
2,019 | 144 | |
2,020 | 3,177 | |
2,021 | 6,680 | |
2022 and beyond | 613,198 | |
Total principal | 623,670 | |
Unamortized discounts and premiums | (2,641) | |
Unamortized debt issuance costs | (12,466) | |
Total debt | 608,563 | $ 631,553 |
Select | ||
Long-term debt and notes payable | ||
April 1, 2017 - December 31, 2017 | 18,415 | |
2,018 | 15,104 | |
2,019 | 23,471 | |
2,020 | 14,745 | |
2,021 | 728,194 | |
2022 and beyond | 2,043,583 | |
Total principal | 2,843,512 | |
Unamortized discounts and premiums | (15,692) | |
Unamortized debt issuance costs | (34,397) | |
Total debt | $ 2,793,423 |
Long-Term Debt and Notes Paya33
Long-Term Debt and Notes Payable - Select Credit Facilities (Details) - Select - USD ($) $ in Millions | Apr. 01, 2019 | Mar. 31, 2017 | Mar. 06, 2017 |
Long-term debt and notes payable | |||
Capital stock of foreign subsidiaries pledged (as a percent) | 65.00% | ||
Credit agreement | |||
Long-term debt and notes payable | |||
Current borrowing capacity | $ 1,600 | ||
Percentage of net cash proceeds received from non-ordinary course asset sales or other dispositions, or as a result of a casualty or condemnation to be used for prepayment of debt | 100.00% | ||
Percentage of net proceeds received from the issuance of debt obligations other than certain permitted debt obligations to be used for prepayment of debt | 100.00% | ||
Leverage ratio of financial maintenance covenant | 6.01% | ||
Credit agreement | Leverage ratio greater than 4.50 to 1.00 | |||
Long-term debt and notes payable | |||
Percentage of excess cash flow to be used for prepayment of debt | 50.00% | ||
Leverage ratio of financial maintenance covenant | 4.50% | ||
Credit agreement | Leverage ratio less than or equal to 4.50 to 1.00 and greater than 4.00 to 1.00 | |||
Long-term debt and notes payable | |||
Percentage of excess cash flow to be used for prepayment of debt | 25.00% | ||
Leverage ratio of financial maintenance covenant | 4.00% | ||
Credit agreement | Leverage ratio less than 6.25 to 1.00 | |||
Long-term debt and notes payable | |||
Leverage ratio of financial maintenance covenant | 6.25% | ||
Credit agreement | Future leverage ratio less than 6.00 to 1.00 | |||
Long-term debt and notes payable | |||
Leverage ratio of financial maintenance covenant | 6.00% | ||
Credit agreement | Term loans | |||
Long-term debt and notes payable | |||
Aggregate principal amount | $ 1,150 | ||
Debt instrument term (in years) | 7 years | ||
Percentage of amortization of term loan | 0.25% | ||
Credit agreement | Term loans | Adjusted LIBO | |||
Long-term debt and notes payable | |||
Variable rate basis | Adjusted LIBO | ||
Interest rate margin (as a percent) | 3.50% | ||
Credit agreement | Term loans | Alternate Base Rate | |||
Long-term debt and notes payable | |||
Variable rate basis | Alternate Base Rate | ||
Interest rate margin (as a percent) | 2.50% | ||
Credit agreement | Term loans | Alternate Base Rate floor | |||
Long-term debt and notes payable | |||
Variable rate basis | Alternate Base Rate floor | ||
Interest rate margin (as a percent) | 2.00% | ||
Credit agreement | Term loans | Adjusted LIBO Rate floor | |||
Long-term debt and notes payable | |||
Variable rate basis | Adjusted LIBO floor | ||
Interest rate margin (as a percent) | 1.00% | ||
Credit agreement | Revolving credit facility | |||
Long-term debt and notes payable | |||
Current borrowing capacity | $ 450 | ||
Debt instrument term (in years) | 5 years | ||
Credit agreement | Revolving credit facility | Adjusted LIBO | |||
Long-term debt and notes payable | |||
Variable rate basis | Adjusted LIBO | ||
Credit agreement | Revolving credit facility | Adjusted LIBO | Minimum | |||
Long-term debt and notes payable | |||
Interest rate margin (as a percent) | 3.00% | ||
Credit agreement | Revolving credit facility | Adjusted LIBO | Maximum | |||
Long-term debt and notes payable | |||
Interest rate margin (as a percent) | 3.25% | ||
Credit agreement | Revolving credit facility | Alternate Base Rate | |||
Long-term debt and notes payable | |||
Variable rate basis | Alternate Base Rate | ||
Credit agreement | Revolving credit facility | Alternate Base Rate | Minimum | |||
Long-term debt and notes payable | |||
Interest rate margin (as a percent) | 2.00% | ||
Credit agreement | Revolving credit facility | Alternate Base Rate | Maximum | |||
Long-term debt and notes payable | |||
Interest rate margin (as a percent) | 2.25% | ||
Credit agreement | Standby letter of credit | |||
Long-term debt and notes payable | |||
Current borrowing capacity | $ 75 |
Long-Term Debt and Notes Paya34
Long-Term Debt and Notes Payable - Loss on Early Retirement of Debt and Excess Cash Flow Payment (Details) - USD ($) $ in Thousands | Mar. 01, 2017 | Mar. 31, 2017 | Mar. 31, 2016 |
Long-term debt and notes payable | |||
Losses on early retirement of debt | $ 19,719 | $ 773 | |
Select | |||
Long-term debt and notes payable | |||
Losses on early retirement of debt | 19,719 | $ 773 | |
Select | Credit agreement | |||
Long-term debt and notes payable | |||
Losses on early retirement of debt | $ 19,700 | ||
Select | First Lien Credit Agreement - Term Loan | |||
Long-term debt and notes payable | |||
Principal prepayments from excess cash flow | $ 23,100 |
Fair Value (Details)
Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Select Excluding Concentra | ||
Fair Value | ||
Unamortized debt issuance costs | $ 21,931 | |
Concentra Inc | ||
Fair Value | ||
Unamortized debt issuance costs | 12,466 | |
Credit facility | Select Excluding Concentra | ||
Fair Value | ||
Face Value | 1,485,000 | $ 1,367,751 |
Carrying Value | 1,457,052 | 1,342,203 |
Fair Value | 1,474,013 | 1,370,460 |
Unamortized discounts | 14,000 | 12,000 |
Unamortized debt issuance costs | 13,900 | 13,600 |
Credit facility | Concentra Inc | ||
Fair Value | ||
Face Value | 619,175 | 642,239 |
Carrying Value | 604,068 | 626,375 |
Fair Value | 622,271 | 644,648 |
Unamortized discounts | 2,600 | 2,800 |
Unamortized debt issuance costs | $ 12,500 | $ 13,100 |
6.375% senior notes | Select Excluding Concentra | ||
Fair Value | ||
Interest rate of debt (as a percent) | 6.375% | 6.375% |
Face Value | $ 710,000 | $ 710,000 |
Carrying Value | 702,966 | 702,545 |
Fair Value | 715,325 | 710,000 |
Unamortized premium | 900 | 1,000 |
Unamortized debt issuance costs | $ 8,000 | $ 8,500 |
Segment Information - Selected
Segment Information - Selected Financial Data (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Segment information | |||
Net revenue | $ 1,111,361 | $ 1,088,330 | |
Adjusted EBITDA | 138,890 | 128,615 | |
Total assets | 5,002,937 | 4,822,864 | $ 4,920,626 |
Capital expenditures | 50,653 | 46,768 | |
Operating Segments | Specialty Hospitals | |||
Segment information | |||
Net revenue | 598,787 | 598,954 | |
Adjusted EBITDA | 88,665 | 86,756 | |
Total assets | 2,622,220 | 2,434,405 | |
Capital expenditures | 32,357 | 33,675 | |
Operating Segments | Outpatient Rehabilitation | |||
Segment information | |||
Net revenue | 255,817 | 238,082 | |
Adjusted EBITDA | 31,351 | 28,879 | |
Total assets | 980,261 | 974,264 | |
Capital expenditures | 6,673 | 4,974 | |
Operating Segments | Concentra | |||
Segment information | |||
Net revenue | 256,149 | 250,877 | |
Adjusted EBITDA | 42,592 | 34,153 | |
Total assets | 1,297,672 | 1,310,317 | |
Capital expenditures | 8,686 | 3,210 | |
Other | |||
Segment information | |||
Net revenue | 608 | 417 | |
Adjusted EBITDA | (23,718) | (21,173) | |
Total assets | 102,784 | 103,878 | |
Capital expenditures | $ 2,937 | $ 4,909 |
Segment Information - Reconcili
Segment Information - Reconciliation of Adjusted EBITDA to Income Before Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Segment information | |||
Adjusted EBITDA | $ 138,890 | $ 128,615 | |
Depreciation and amortization | (42,539) | (34,517) | |
Income from operations | 91,765 | 86,886 | |
Loss on early retirement of debt | (19,719) | (773) | |
Equity in earnings of unconsolidated subsidiaries | 5,521 | 4,652 | |
Non-operating gain (loss) | (49) | 25,087 | |
Interest expense | (40,853) | (38,848) | |
Income before income taxes | 36,665 | 77,004 | |
Total assets | 5,002,937 | 4,822,864 | $ 4,920,626 |
ASU 2015-17 | |||
Segment information | |||
Total assets | 4,920,626 | ||
ASU 2015-17 | Restatement Adjustment | |||
Segment information | |||
Total assets | 25,100 | ||
Operating Segments | Specialty Hospitals | |||
Segment information | |||
Adjusted EBITDA | 88,665 | 86,756 | |
Depreciation and amortization | (18,500) | (13,893) | |
Income from operations | 70,165 | 72,863 | |
Total assets | 2,622,220 | 2,434,405 | |
Operating Segments | Outpatient Rehabilitation | |||
Segment information | |||
Adjusted EBITDA | 31,351 | 28,879 | |
Depreciation and amortization | (6,340) | (4,036) | |
Income from operations | 25,011 | 24,843 | |
Total assets | 980,261 | 974,264 | |
Operating Segments | Concentra | |||
Segment information | |||
Adjusted EBITDA | 42,592 | 34,153 | |
Depreciation and amortization | (16,123) | (15,376) | |
Stock compensation expense | (306) | (192) | |
Income from operations | 26,163 | 18,585 | |
Total assets | 1,297,672 | 1,310,317 | |
Other | |||
Segment information | |||
Adjusted EBITDA | (23,718) | (21,173) | |
Depreciation and amortization | (1,576) | (1,212) | |
Stock compensation expense | (4,280) | (3,784) | |
Income from operations | (29,574) | (29,405) | |
Total assets | 102,784 | 103,878 | |
Other | Physiotherapy | |||
Segment information | |||
Acquisition costs | (3,236) | ||
Select | |||
Segment information | |||
Depreciation and amortization | (42,539) | (34,517) | |
Income from operations | 91,765 | 86,886 | |
Loss on early retirement of debt | (19,719) | (773) | |
Equity in earnings of unconsolidated subsidiaries | 5,521 | 4,652 | |
Non-operating gain (loss) | (49) | 25,087 | |
Interest expense | (40,853) | (38,848) | |
Income before income taxes | 36,665 | $ 77,004 | |
Total assets | $ 5,002,937 | $ 4,920,626 |
Income per Common Share (Detail
Income per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Numerator: | ||
Net income attributable to Select Medical Holdings Corporation | $ 15,870 | $ 54,833 |
Less: Earnings allocated to unvested restricted stockholders | 507 | 1,582 |
Net income available to common stockholders | $ 15,363 | $ 53,251 |
Denominator: | ||
Basic (in shares) | 128,464 | 127,500 |
Effect of dilutive securities: Stock options (in shares) | 164 | 81 |
Weighted average shares - diluted | 128,628 | 127,581 |
Income per common share | ||
Basic income per common share: (in dollars per share) | $ 0.12 | $ 0.42 |
Diluted income per common share: (in dollars per share) | $ 0.12 | $ 0.42 |
Commitments and Contingencies -
Commitments and Contingencies - Litigation (Details) $ in Millions | Oct. 19, 2015item | Jul. 13, 2015item | Mar. 31, 2017USD ($) |
Select, SSH-Knoxville, and SSH-North Knoxville | |||
Commitments and Contingencies | |||
Number of current or former employees named as defendants | item | 10 | ||
Professional liability claims | |||
Commitments and Contingencies | |||
Self insurance retention per occurrence | $ | $ 2 | ||
General liability claims | |||
Commitments and Contingencies | |||
Self insurance retention per occurrence | $ | $ 2 | ||
Amended complaint | SSH-Evansville | |||
Commitments and Contingencies | |||
Number of case managers identified as plaintiff | item | 2 |
Commitments and Contingencies40
Commitments and Contingencies - Construction Commitments (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Construction Commitments | |
Construction Commitments | |
Construction contract commitments | $ 69.9 |
Financial Information for Sub41
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Details) | Mar. 31, 2017 |
6.375% senior notes | Select | |
Financial information for subsidiary guarantors and non-guarantor subsidiaries under select's 6.375% senior notes | |
Interest rate of debt (as a percent) | 6.375% |
Financial Information for Sub42
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Current Assets: | ||||
Cash and cash equivalents | $ 65,211 | $ 99,029 | $ 85,408 | $ 14,435 |
Accounts receivable, net | 691,520 | 573,752 | ||
Prepaid income taxes | 2,402 | 12,423 | ||
Other current assets | 85,081 | 77,699 | ||
Total Current Assets | 844,214 | 762,903 | ||
Property and equipment, net | 897,146 | 892,217 | ||
Goodwill | 2,759,764 | 2,751,000 | ||
Identifiable intangible assets, net | 337,076 | 340,562 | ||
Other assets | 164,737 | 173,944 | ||
Total Assets | 5,002,937 | 4,920,626 | 4,822,864 | |
Current Liabilities: | ||||
Bank overdrafts | 22,299 | 39,362 | ||
Current portion of long-term debt and notes payable | 22,013 | 13,656 | ||
Accounts payable | 125,118 | 126,558 | ||
Accrued payroll | 110,196 | 146,397 | ||
Accrued vacation | 88,736 | 83,261 | ||
Accrued interest | 21,558 | 22,325 | ||
Accrued other | 143,180 | 140,076 | ||
Income taxes payable | 5,399 | |||
Total Current Liabilities | 538,499 | 571,635 | ||
Long-term debt, net of current portion | 2,771,410 | 2,685,333 | ||
Non-current deferred tax liability | 195,729 | 199,078 | ||
Other non-current liabilities | 142,208 | 136,520 | ||
Total Liabilities | 3,647,846 | 3,592,566 | ||
Redeemable non-controlling interests | 462,680 | 422,159 | ||
Stockholder's Equity: | ||||
Common stock | 132 | 132 | ||
Capital in excess of par | 450,373 | 443,908 | ||
Retained earnings (accumulated deficit) | 351,224 | 371,685 | ||
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 801,729 | 815,725 | ||
Non-controlling interests | 90,682 | 90,176 | ||
Total Equity | 892,411 | 905,901 | ||
Total Liabilities and Equity | 5,002,937 | 4,920,626 | ||
Select | ||||
Current Assets: | ||||
Cash and cash equivalents | 65,211 | 99,029 | 85,408 | 14,435 |
Accounts receivable, net | 691,520 | 573,752 | ||
Prepaid income taxes | 2,402 | 12,423 | ||
Other current assets | 85,081 | 77,699 | ||
Total Current Assets | 844,214 | 762,903 | ||
Property and equipment, net | 897,146 | 892,217 | ||
Goodwill | 2,759,764 | 2,751,000 | ||
Identifiable intangible assets, net | 337,076 | 340,562 | ||
Other assets | 164,737 | 173,944 | ||
Total Assets | 5,002,937 | 4,920,626 | ||
Current Liabilities: | ||||
Bank overdrafts | 22,299 | 39,362 | ||
Current portion of long-term debt and notes payable | 22,013 | 13,656 | ||
Accounts payable | 125,118 | 126,558 | ||
Accrued payroll | 110,196 | 146,397 | ||
Accrued vacation | 88,736 | 83,261 | ||
Accrued interest | 21,558 | 22,325 | ||
Accrued other | 143,180 | 140,076 | ||
Income taxes payable | 5,399 | |||
Total Current Liabilities | 538,499 | 571,635 | ||
Long-term debt, net of current portion | 2,771,410 | 2,685,333 | ||
Non-current deferred tax liability | 195,729 | 199,078 | ||
Other non-current liabilities | 142,208 | 136,520 | ||
Total Liabilities | 3,647,846 | 3,592,566 | ||
Redeemable non-controlling interests | 462,680 | 422,159 | ||
Stockholder's Equity: | ||||
Common stock | 0 | 0 | ||
Capital in excess of par | 931,661 | 925,111 | ||
Retained earnings (accumulated deficit) | (129,932) | (109,386) | ||
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 801,729 | 815,725 | ||
Non-controlling interests | 90,682 | 90,176 | ||
Total Equity | 892,411 | 905,901 | ||
Total Liabilities and Equity | 5,002,937 | 4,920,626 | ||
Select | Reportable legal entities | Select (Parent Company Only) | ||||
Current Assets: | ||||
Cash and cash equivalents | 72 | 11,071 | 46,768 | 4,070 |
Prepaid income taxes | 2,402 | 6,658 | ||
Other current assets | 17,714 | 11,953 | ||
Total Current Assets | 20,188 | 29,682 | ||
Property and equipment, net | 49,309 | 48,697 | ||
Investment in affiliates | 4,513,416 | 4,515,998 | ||
Other assets | 50,355 | 45,636 | ||
Total Assets | 4,633,268 | 4,640,013 | ||
Current Liabilities: | ||||
Bank overdrafts | 22,299 | 39,362 | ||
Current portion of long-term debt and notes payable | 20,506 | 7,227 | ||
Accounts payable | 13,349 | 10,775 | ||
Intercompany payables | 2,183,527 | 2,237,362 | ||
Accrued payroll | 4,268 | 16,963 | ||
Accrued vacation | 3,740 | 3,440 | ||
Accrued interest | 19,390 | 20,114 | ||
Accrued other | 38,937 | 39,155 | ||
Total Current Liabilities | 2,306,016 | 2,374,398 | ||
Long-term debt, net of current portion | 1,482,768 | 1,407,066 | ||
Other non-current liabilities | 42,755 | 42,824 | ||
Total Liabilities | 3,831,539 | 3,824,288 | ||
Stockholder's Equity: | ||||
Common stock | 0 | 0 | ||
Capital in excess of par | 931,661 | 925,111 | ||
Retained earnings (accumulated deficit) | (129,932) | (109,386) | ||
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 801,729 | 815,725 | ||
Total Equity | 801,729 | 815,725 | ||
Total Liabilities and Equity | 4,633,268 | 4,640,013 | ||
Select | Reportable legal entities | Subsidiary Guarantors | ||||
Current Assets: | ||||
Cash and cash equivalents | 6,836 | 6,467 | 9,692 | 3,706 |
Accounts receivable, net | 442,132 | 361,327 | ||
Intercompany receivables | 2,183,527 | 2,237,362 | ||
Other current assets | 34,693 | 33,860 | ||
Total Current Assets | 2,667,188 | 2,639,016 | ||
Property and equipment, net | 609,822 | 601,426 | ||
Investment in affiliates | 100,095 | 92,389 | ||
Goodwill | 2,091,100 | 2,090,963 | ||
Identifiable intangible assets, net | 108,545 | 109,132 | ||
Other assets | 86,384 | 84,803 | ||
Total Assets | 5,663,134 | 5,617,729 | ||
Current Liabilities: | ||||
Current portion of long-term debt and notes payable | 502 | 445 | ||
Accounts payable | 78,195 | 78,166 | ||
Intercompany payables | 169,816 | 157,324 | ||
Accrued payroll | 76,290 | 92,187 | ||
Accrued vacation | 57,763 | 55,297 | ||
Accrued other | 62,607 | 60,871 | ||
Total Current Liabilities | 445,173 | 444,290 | ||
Long-term debt, net of current portion | 525,263 | 513,938 | ||
Non-current deferred tax liability | 135,640 | 133,852 | ||
Other non-current liabilities | 56,617 | 53,399 | ||
Total Liabilities | 1,162,693 | 1,145,479 | ||
Stockholder's Equity: | ||||
Retained earnings (accumulated deficit) | 1,318,340 | 1,295,603 | ||
Subsidiary investment | 3,182,101 | 3,176,647 | ||
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 4,500,441 | 4,472,250 | ||
Total Equity | 4,500,441 | 4,472,250 | ||
Total Liabilities and Equity | 5,663,134 | 5,617,729 | ||
Select | Reportable legal entities | Non-Guarantor Subsidiaries | ||||
Current Assets: | ||||
Cash and cash equivalents | 3,405 | 5,056 | 5,013 | 625 |
Accounts receivable, net | 125,079 | 99,913 | ||
Intercompany receivables | 169,816 | 157,324 | ||
Other current assets | 11,878 | 10,367 | ||
Total Current Assets | 310,178 | 272,660 | ||
Property and equipment, net | 54,118 | 52,851 | ||
Other assets | 38,882 | 53,954 | ||
Total Assets | 403,178 | 379,465 | ||
Current Liabilities: | ||||
Current portion of long-term debt and notes payable | 633 | 1,324 | ||
Accounts payable | 17,429 | 22,839 | ||
Accrued payroll | 2,488 | 4,275 | ||
Accrued vacation | 11,968 | 10,857 | ||
Accrued interest | 4 | |||
Accrued other | 9,780 | 6,152 | ||
Total Current Liabilities | 42,302 | 45,447 | ||
Long-term debt, net of current portion | 155,188 | 137,436 | ||
Non-current deferred tax liability | 667 | 596 | ||
Other non-current liabilities | 6,849 | 5,865 | ||
Total Liabilities | 205,006 | 189,344 | ||
Redeemable non-controlling interests | 9,899 | 10,169 | ||
Stockholder's Equity: | ||||
Retained earnings (accumulated deficit) | (40,858) | (39,546) | ||
Subsidiary investment | 142,123 | 132,890 | ||
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 101,265 | 93,344 | ||
Non-controlling interests | 87,008 | 86,608 | ||
Total Equity | 188,273 | 179,952 | ||
Total Liabilities and Equity | 403,178 | 379,465 | ||
Select | Reportable legal entities | Non-Guarantor Concentra | ||||
Current Assets: | ||||
Cash and cash equivalents | 54,898 | 76,435 | $ 23,935 | $ 6,034 |
Accounts receivable, net | 124,309 | 112,512 | ||
Prepaid income taxes | 5,765 | |||
Other current assets | 20,796 | 21,519 | ||
Total Current Assets | 200,003 | 216,231 | ||
Property and equipment, net | 183,897 | 189,243 | ||
Goodwill | 668,664 | 660,037 | ||
Identifiable intangible assets, net | 228,531 | 231,430 | ||
Other assets | 16,577 | 16,235 | ||
Total Assets | 1,297,672 | 1,313,176 | ||
Current Liabilities: | ||||
Current portion of long-term debt and notes payable | 372 | 4,660 | ||
Accounts payable | 16,145 | 14,778 | ||
Accrued payroll | 27,150 | 32,972 | ||
Accrued vacation | 15,265 | 13,667 | ||
Accrued interest | 2,164 | 2,211 | ||
Accrued other | 31,856 | 33,898 | ||
Income taxes payable | 5,399 | |||
Total Current Liabilities | 98,351 | 102,186 | ||
Long-term debt, net of current portion | 608,191 | 626,893 | ||
Non-current deferred tax liability | 86,883 | 91,314 | ||
Other non-current liabilities | 35,987 | 34,432 | ||
Total Liabilities | 829,412 | 854,825 | ||
Redeemable non-controlling interests | 452,781 | 411,990 | ||
Stockholder's Equity: | ||||
Retained earnings (accumulated deficit) | 6,668 | 1,364 | ||
Subsidiary investment | 5,137 | 41,429 | ||
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | 11,805 | 42,793 | ||
Non-controlling interests | 3,674 | 3,568 | ||
Total Equity | 15,479 | 46,361 | ||
Total Liabilities and Equity | 1,297,672 | 1,313,176 | ||
Select | Eliminations | ||||
Current Assets: | ||||
Intercompany receivables | (2,353,343) | (2,394,686) | ||
Total Current Assets | (2,353,343) | (2,394,686) | ||
Investment in affiliates | (4,613,511) | (4,608,387) | ||
Other assets | (27,461) | (26,684) | ||
Total Assets | (6,994,315) | (7,029,757) | ||
Current Liabilities: | ||||
Intercompany payables | (2,353,343) | (2,394,686) | ||
Total Current Liabilities | (2,353,343) | (2,394,686) | ||
Non-current deferred tax liability | (27,461) | (26,684) | ||
Total Liabilities | (2,380,804) | (2,421,370) | ||
Stockholder's Equity: | ||||
Retained earnings (accumulated deficit) | (1,284,150) | (1,257,421) | ||
Subsidiary investment | (3,329,361) | (3,350,966) | ||
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity | (4,613,511) | (4,608,387) | ||
Total Equity | (4,613,511) | (4,608,387) | ||
Total Liabilities and Equity | $ (6,994,315) | $ (7,029,757) |
Financial Information for Sub43
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes - Condensed Consolidating Statement of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Consolidating Statement of Operations | ||
Net operating revenues | $ 1,111,361 | $ 1,088,330 |
Costs and expenses: | ||
Cost of services | 928,357 | 922,262 |
General and administrative | 28,075 | 28,268 |
Bad debt expense | 20,625 | 16,397 |
Depreciation and amortization | 42,539 | 34,517 |
Total costs and expenses | 1,019,596 | 1,001,444 |
Income from operations | 91,765 | 86,886 |
Other income and expense: | ||
Loss on early retirement of debt | (19,719) | (773) |
Equity in earnings of unconsolidated subsidiaries | 5,521 | 4,652 |
Non-operating gain (loss) | (49) | 25,087 |
Interest expense | (40,853) | (38,848) |
Income before income taxes | 36,665 | 77,004 |
Income tax expense | 13,202 | 17,060 |
Net income | 23,463 | 59,944 |
Less: Net income attributable to non-controlling interests | 7,593 | 5,111 |
Net income attributable to Select Medical Holdings Corporation | 15,870 | 54,833 |
Select | ||
Condensed Consolidating Statement of Operations | ||
Net operating revenues | 1,111,361 | 1,088,330 |
Costs and expenses: | ||
Cost of services | 928,357 | 922,262 |
General and administrative | 28,075 | 28,268 |
Bad debt expense | 20,625 | 16,397 |
Depreciation and amortization | 42,539 | 34,517 |
Total costs and expenses | 1,019,596 | 1,001,444 |
Income from operations | 91,765 | 86,886 |
Other income and expense: | ||
Loss on early retirement of debt | (19,719) | (773) |
Equity in earnings of unconsolidated subsidiaries | 5,521 | 4,652 |
Non-operating gain (loss) | (49) | 25,087 |
Interest expense | (40,853) | (38,848) |
Income before income taxes | 36,665 | 77,004 |
Income tax expense | 13,202 | 17,060 |
Net income | 23,463 | 59,944 |
Less: Net income attributable to non-controlling interests | 7,593 | 5,111 |
Net income attributable to Select Medical Holdings Corporation | 15,870 | 54,833 |
Select | Reportable legal entities | Select (Parent Company Only) | ||
Condensed Consolidating Statement of Operations | ||
Net operating revenues | 608 | 417 |
Costs and expenses: | ||
Cost of services | 532 | 344 |
General and administrative | 28,036 | 28,387 |
Depreciation and amortization | 1,575 | 1,211 |
Total costs and expenses | 30,143 | 29,942 |
Income from operations | (29,535) | (29,525) |
Other income and expense: | ||
Intercompany interest and royalty fees | (1,896) | (1,058) |
Intercompany management fees | 61,698 | 55,357 |
Loss on early retirement of debt | (19,719) | (773) |
Non-operating gain (loss) | 30,432 | |
Interest expense | (22,808) | (20,346) |
Income before income taxes | (12,260) | 34,087 |
Income tax expense | 126 | 8,612 |
Equity in earnings of subsidiaries | 28,256 | 29,358 |
Net income | 15,870 | 54,833 |
Net income attributable to Select Medical Holdings Corporation | 15,870 | 54,833 |
Select | Reportable legal entities | Subsidiary Guarantors | ||
Condensed Consolidating Statement of Operations | ||
Net operating revenues | 684,902 | 711,868 |
Costs and expenses: | ||
Cost of services | 577,885 | 602,521 |
General and administrative | 39 | (119) |
Bad debt expense | 11,699 | 10,698 |
Depreciation and amortization | 21,221 | 15,211 |
Total costs and expenses | 610,844 | 628,311 |
Income from operations | 74,058 | 83,557 |
Other income and expense: | ||
Intercompany interest and royalty fees | 3,415 | 2,854 |
Intercompany management fees | (52,421) | (49,525) |
Equity in earnings of unconsolidated subsidiaries | 5,493 | 4,627 |
Non-operating gain (loss) | (49) | (5,345) |
Interest expense | (8,070) | (6,634) |
Income before income taxes | 22,426 | 29,534 |
Income tax expense | 5,936 | 5,615 |
Equity in earnings of subsidiaries | 6,247 | 3,117 |
Net income | 22,737 | 27,036 |
Net income attributable to Select Medical Holdings Corporation | 22,737 | 27,036 |
Select | Reportable legal entities | Non-Guarantor Subsidiaries | ||
Condensed Consolidating Statement of Operations | ||
Net operating revenues | 169,702 | 125,168 |
Costs and expenses: | ||
Cost of services | 141,648 | 106,195 |
Bad debt expense | 3,355 | 1,985 |
Depreciation and amortization | 3,620 | 2,719 |
Total costs and expenses | 148,623 | 110,899 |
Income from operations | 21,079 | 14,269 |
Other income and expense: | ||
Intercompany interest and royalty fees | (1,519) | (1,796) |
Intercompany management fees | (9,277) | (5,832) |
Equity in earnings of unconsolidated subsidiaries | 28 | 25 |
Interest expense | (2,476) | (1,639) |
Income before income taxes | 7,835 | 5,027 |
Income tax expense | 304 | (65) |
Net income | 7,531 | 5,092 |
Less: Net income attributable to non-controlling interests | 1,069 | 1,886 |
Net income attributable to Select Medical Holdings Corporation | 6,462 | 3,206 |
Select | Reportable legal entities | Non-Guarantor Concentra | ||
Condensed Consolidating Statement of Operations | ||
Net operating revenues | 256,149 | 250,877 |
Costs and expenses: | ||
Cost of services | 208,292 | 213,202 |
Bad debt expense | 5,571 | 3,714 |
Depreciation and amortization | 16,123 | 15,376 |
Total costs and expenses | 229,986 | 232,292 |
Income from operations | 26,163 | 18,585 |
Other income and expense: | ||
Interest expense | (7,499) | (10,229) |
Income before income taxes | 18,664 | 8,356 |
Income tax expense | 6,836 | 2,898 |
Net income | 11,828 | 5,458 |
Less: Net income attributable to non-controlling interests | 6,524 | 3,225 |
Net income attributable to Select Medical Holdings Corporation | 5,304 | 2,233 |
Select | Eliminations | ||
Other income and expense: | ||
Equity in earnings of subsidiaries | (34,503) | (32,475) |
Net income | (34,503) | (32,475) |
Net income attributable to Select Medical Holdings Corporation | $ (34,503) | $ (32,475) |
Financial Information for Sub44
Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net income | $ 23,463 | $ 59,944 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Distributions from unconsolidated subsidiaries | 4,911 | 8,305 |
Depreciation and amortization | 42,539 | 34,517 |
Provision for bad debts | 20,625 | 16,397 |
Equity in earnings of unconsolidated subsidiaries | (5,521) | (4,652) |
Losses on early retirement of debt | 6,527 | 773 |
Loss (gain) on sale of assets and businesses | (4,609) | (30,393) |
Impairment of equity investment | 5,339 | |
Stock compensation expense | 4,586 | 3,976 |
Amortization of debt discount, premium and issuance costs | 3,422 | 3,691 |
Deferred income taxes | (3,425) | (3,475) |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Accounts receivable | (138,113) | (39,164) |
Other current assets | (7,621) | 7,560 |
Other assets | (48) | (891) |
Accounts payable | 412 | (21,322) |
Accrued expenses | (18,429) | 51,193 |
Income taxes | 15,420 | 19,370 |
Net cash provided by (used in) operating activities | (55,861) | 111,168 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (9,566) | (412,883) |
Purchases of property and equipment | (50,653) | (46,768) |
Investment in businesses | (500) | (623) |
Proceeds from sale of assets and businesses | 19,512 | 62,600 |
Net cash used in investing activities | (41,207) | (397,674) |
Financing activities | ||
Borrowings on revolving facilities | 530,000 | 190,000 |
Payments on revolving facilities | (415,000) | (175,000) |
Proceeds from term loans | 1,139,822 | 600,127 |
Payments on term loans | (1,170,817) | (226,962) |
Revolving facility debt issuance costs | (3,887) | |
Borrowings of other debt | 6,571 | 6,727 |
Principal payments on other debt | (5,275) | (4,464) |
Repayments of bank overdrafts | (17,062) | (28,615) |
Proceeds from issuance of non-controlling interests | 2,094 | |
Purchase of non-controlling interests | (50) | (1,294) |
Distributions to non-controlling interests | (3,607) | (3,061) |
Net cash provided by financing activities | 63,250 | 357,479 |
Net increase (decrease) in cash and cash equivalents | (33,818) | 70,973 |
Cash and cash equivalents at beginning of period | 99,029 | 14,435 |
Cash and cash equivalents at end of period | 65,211 | 85,408 |
Select | ||
Operating activities | ||
Net income | 23,463 | 59,944 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Distributions from unconsolidated subsidiaries | 4,911 | 8,305 |
Depreciation and amortization | 42,539 | 34,517 |
Provision for bad debts | 20,625 | 16,397 |
Equity in earnings of unconsolidated subsidiaries | (5,521) | (4,652) |
Losses on early retirement of debt | 6,527 | 773 |
Loss (gain) on sale of assets and businesses | (4,609) | (30,393) |
Impairment of equity investment | 5,339 | |
Stock compensation expense | 4,586 | 3,976 |
Amortization of debt discount, premium and issuance costs | 3,422 | 3,691 |
Deferred income taxes | (3,425) | (3,475) |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Accounts receivable | (138,113) | (39,164) |
Other current assets | (7,621) | 7,560 |
Other assets | (48) | (891) |
Accounts payable | 412 | (21,322) |
Accrued expenses | (18,429) | 51,193 |
Income taxes | 15,420 | 19,370 |
Net cash provided by (used in) operating activities | (55,861) | 111,168 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (9,566) | (412,883) |
Purchases of property and equipment | (50,653) | (46,768) |
Investment in businesses | (500) | (623) |
Proceeds from sale of assets and businesses | 19,512 | 62,600 |
Net cash used in investing activities | (41,207) | (397,674) |
Financing activities | ||
Borrowings on revolving facilities | 530,000 | 190,000 |
Payments on revolving facilities | (415,000) | (175,000) |
Proceeds from term loans | 1,139,822 | 600,127 |
Payments on term loans | (1,170,817) | (226,962) |
Revolving facility debt issuance costs | (3,887) | |
Borrowings of other debt | 6,571 | 6,727 |
Principal payments on other debt | (5,275) | (4,464) |
Repayments of bank overdrafts | (17,062) | (28,615) |
Dividends paid to Holdings | (156) | |
Equity investment by Holdings | 617 | 21 |
Proceeds from issuance of non-controlling interests | 2,094 | |
Purchase of non-controlling interests | (50) | (1,294) |
Distributions to non-controlling interests | (3,607) | (3,061) |
Net cash provided by financing activities | 63,250 | 357,479 |
Net increase (decrease) in cash and cash equivalents | (33,818) | 70,973 |
Cash and cash equivalents at beginning of period | 99,029 | 14,435 |
Cash and cash equivalents at end of period | 65,211 | 85,408 |
Select | Reportable legal entities | Select (Parent Company Only) | ||
Operating activities | ||
Net income | 15,870 | 54,833 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 1,575 | 1,211 |
Equity in earnings of consolidated subsidiaries | (28,256) | (29,358) |
Losses on early retirement of debt | 6,527 | 773 |
Loss (gain) on sale of assets and businesses | (30,432) | |
Stock compensation expense | 4,280 | 3,784 |
Amortization of debt discount, premium and issuance costs | 2,590 | 2,838 |
Deferred income taxes | 1,005 | (3,294) |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Other current assets | (5,761) | (5,472) |
Other assets | (3,753) | 155 |
Accounts payable | 2,574 | (12) |
Accrued expenses | (13,406) | (2,149) |
Income taxes | 4,256 | 16,483 |
Net cash provided by (used in) operating activities | (12,499) | 9,360 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (408,654) | |
Purchases of property and equipment | (2,937) | (4,909) |
Proceeds from sale of assets and businesses | 62,597 | |
Net cash used in investing activities | (2,937) | (350,966) |
Financing activities | ||
Borrowings on revolving facilities | 530,000 | 190,000 |
Payments on revolving facilities | (415,000) | (170,000) |
Proceeds from term loans | 1,139,822 | 600,127 |
Payments on term loans | (1,147,752) | (225,837) |
Revolving facility debt issuance costs | (3,887) | |
Borrowings of other debt | 6,571 | 6,727 |
Principal payments on other debt | (3,704) | (3,028) |
Repayments of bank overdrafts | (17,062) | (28,615) |
Dividends paid to Holdings | (156) | |
Equity investment by Holdings | 617 | 21 |
Intercompany | (85,012) | 17,341 |
Distributions to non-controlling interests | (2,432) | |
Net cash provided by financing activities | 4,437 | 384,304 |
Net increase (decrease) in cash and cash equivalents | (10,999) | 42,698 |
Cash and cash equivalents at beginning of period | 11,071 | 4,070 |
Cash and cash equivalents at end of period | 72 | 46,768 |
Select | Reportable legal entities | Subsidiary Guarantors | ||
Operating activities | ||
Net income | 22,737 | 27,036 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Distributions from unconsolidated subsidiaries | 4,893 | 8,283 |
Depreciation and amortization | 21,221 | 15,211 |
Provision for bad debts | 11,699 | 10,698 |
Equity in earnings of unconsolidated subsidiaries | (5,493) | (4,627) |
Equity in earnings of consolidated subsidiaries | (6,247) | (3,117) |
Loss (gain) on sale of assets and businesses | 62 | 23 |
Impairment of equity investment | 5,339 | |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Accounts receivable | (92,404) | (18,362) |
Other current assets | (1,129) | 4,411 |
Other assets | (11,531) | (70) |
Accounts payable | 694 | (18,456) |
Accrued expenses | (3,673) | 50,917 |
Net cash provided by (used in) operating activities | (59,171) | 77,286 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (445) | (605) |
Purchases of property and equipment | (29,268) | (32,571) |
Investment in businesses | (500) | (623) |
Proceeds from sale of assets and businesses | 7 | |
Net cash used in investing activities | (30,206) | (33,799) |
Financing activities | ||
Principal payments on other debt | (80) | (37) |
Intercompany | 89,876 | (36,170) |
Purchase of non-controlling interests | (50) | (1,294) |
Net cash provided by financing activities | 89,746 | (37,501) |
Net increase (decrease) in cash and cash equivalents | 369 | 5,986 |
Cash and cash equivalents at beginning of period | 6,467 | 3,706 |
Cash and cash equivalents at end of period | 6,836 | 9,692 |
Select | Reportable legal entities | Non-Guarantor Subsidiaries | ||
Operating activities | ||
Net income | 7,531 | 5,092 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Distributions from unconsolidated subsidiaries | 18 | 22 |
Depreciation and amortization | 3,620 | 2,719 |
Provision for bad debts | 3,355 | 1,985 |
Equity in earnings of unconsolidated subsidiaries | (28) | (25) |
Loss (gain) on sale of assets and businesses | (4,671) | 16 |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Accounts receivable | (28,521) | (13,913) |
Other current assets | (1,511) | (522) |
Other assets | 15,072 | 19 |
Accounts payable | (5,410) | (4,242) |
Accrued expenses | 3,940 | 1,040 |
Net cash provided by (used in) operating activities | (6,605) | (7,809) |
Investing activities | ||
Purchases of property and equipment | (9,762) | (6,078) |
Proceeds from sale of assets and businesses | 19,505 | 3 |
Net cash used in investing activities | 9,743 | (6,075) |
Financing activities | ||
Principal payments on other debt | (695) | (557) |
Intercompany | (4,864) | 18,829 |
Proceeds from issuance of non-controlling interests | 2,094 | |
Distributions to non-controlling interests | (1,324) | |
Net cash provided by financing activities | (4,789) | 18,272 |
Net increase (decrease) in cash and cash equivalents | (1,651) | 4,388 |
Cash and cash equivalents at beginning of period | 5,056 | 625 |
Cash and cash equivalents at end of period | 3,405 | 5,013 |
Select | Reportable legal entities | Non-Guarantor Concentra | ||
Operating activities | ||
Net income | 11,828 | 5,458 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 16,123 | 15,376 |
Provision for bad debts | 5,571 | 3,714 |
Stock compensation expense | 306 | 192 |
Amortization of debt discount, premium and issuance costs | 832 | 853 |
Deferred income taxes | (4,430) | (181) |
Changes in operating assets and liabilities, net of effects of business combinations: | ||
Accounts receivable | (17,188) | (6,889) |
Other current assets | 780 | 9,143 |
Other assets | 164 | (995) |
Accounts payable | 2,554 | 1,388 |
Accrued expenses | (5,290) | 1,385 |
Income taxes | 11,164 | 2,887 |
Net cash provided by (used in) operating activities | 22,414 | 32,331 |
Investing activities | ||
Acquisition of businesses, net of cash acquired | (9,121) | (3,624) |
Purchases of property and equipment | (8,686) | (3,210) |
Net cash used in investing activities | (17,807) | (6,834) |
Financing activities | ||
Payments on revolving facilities | (5,000) | |
Payments on term loans | (23,065) | (1,125) |
Principal payments on other debt | (796) | (842) |
Distributions to non-controlling interests | (2,283) | (629) |
Net cash provided by financing activities | (26,144) | (7,596) |
Net increase (decrease) in cash and cash equivalents | (21,537) | 17,901 |
Cash and cash equivalents at beginning of period | 76,435 | 6,034 |
Cash and cash equivalents at end of period | 54,898 | 23,935 |
Select | Eliminations | ||
Operating activities | ||
Net income | (34,503) | (32,475) |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Equity in earnings of consolidated subsidiaries | $ 34,503 | $ 32,475 |