Select Medical (SEM) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE	4716 Old Gettysburg Road Mechanicsburg, PA 17055

Select Medical Corporation Announces Results for
Fourth Quarter and Year Ended December 31, 2006

     MECHANICSBURG, PENNSYLVANIA — March 28, 2007 — Select Medical Corporation (“Select”) today announced results for its fourth quarter and year ended December 31, 2006.

     On February 24, 2005, Select consummated a merger with a wholly-owned subsidiary of Select Medical Holdings Corporation (“Holdings”) pursuant to which Select became a wholly-owned subsidiary of Holdings. Holdings is owned by an investor group that includes Welsh, Carson, Anderson & Stowe IX, LP (“Welsh Carson”), Thoma Cressey Bravo (“Thoma Cressey”) and members of Select’s senior management. As a result of the merger, Select’s assets and liabilities have been adjusted to their fair value as of the closing. Select also experienced an increase in aggregate outstanding indebtedness as a result of financing transactions associated with the merger. Accordingly, amortization expense and interest expense are higher in periods following the merger. Additionally, certain costs associated with the merger are reflected in the 2005 income statement periods. As a result, the financial statements for the periods before and after the merger are not comparable in certain respects. For ease of comparison, the 2005 financial data presented represents the combination of the period before the Merger, January 1, 2005 through February 24, 2005 with the period subsequent to the Merger, February 25, 2005 through December 31, 2005.

     For the fourth quarter ended December 31, 2006, net operating revenues decreased 2.7% to $445.7 million compared to $458.0 million for the same quarter, prior year. Income from operations decreased 8.8% to $59.1 million compared to $64.8 million for the same quarter, prior year. Net income increased 29.7% to $32.8 million compared to $25.3 million for the same quarter, prior year. Additionally, net income before interest, income taxes, depreciation and amortization, income from discontinued operations, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, other income and minority interest (“Adjusted EBITDA”) for the fourth quarter decreased 7.3% to $71.8 million compared to $77.4 million for the same quarter, prior year. A reconciliation of net income to Adjusted EBITDA is attached to this release.

     For the year ended December 31, 2006, net operating revenues decreased 0.4% to $1,851.5 million compared to $1,858.4 million for the prior year. Income from operations increased 116.5% to $257.9 million compared to $119.1 million for the prior year. Net income was $118.2 million compared to a net loss of $14.7 million for the prior year. Additionally, Adjusted EBITDA for the year ended December 31, 2006 decreased 6.5% to $308.3 million compared to $329.9 million for the prior year.

     On March 1, 2006, a subsidiary of Select sold all the issued and outstanding shares of Canadian Back Institute Limited (“CBIL”) for approximately C$89.8 million in cash (US $79.0 million). CBIL comprised Select’s entire Canadian operations. As a result of the sale, the operating results of CBIL have been reclassified and reported as discontinued operations for all reported periods, and its assets and liabilities have been reclassified as held for sale on Select’s December 31, 2005 balance sheet.

Specialty Hospitals

     At December 31, 2006, Select operated 92 long-term acute care hospitals and four acute medical rehabilitation hospitals. This compares to 97 long-term acute care hospitals and four acute medical rehabilitation hospitals operated at December 31, 2005. For the fourth quarter of 2006, net operating revenues for all of Select’s hospitals decreased 3.6% to $328.8 million compared to $341.1 million for the same quarter, prior year. Total patient days for the fourth quarter 2006 were 235,520, admissions were 9,546 and net revenue per patient day was $1,366. This compares to 245,165 days, 9,907 admissions and net revenue per patient day of $1,367 for the same quarter, prior year. For the hospitals opened or acquired as of January 1, 2005 and operated by Select throughout both periods, patient days in the fourth quarter of 2006 were 233,852 and admissions were 9,487, compared to 238,068 days and 9,662 admissions in the same quarter, prior year. Adjusted EBITDA for the segment decreased 10.7% to $65.1 million compared to $72.8 million for the same quarter, prior year. The Adjusted EBITDA margin for the segment was 19.8% for the fourth quarter of 2006, compared to 21.4% for the same quarter, prior year. The Adjusted EBITDA margin for the hospitals opened or acquired as of January 1, 2005 and operated by Select throughout both periods was 21.0% for the fourth quarter of 2006, compared to 21.5% for the same quarter, prior year.

     For the year ended December 31, 2006, net operating revenues for all of Select’s hospitals increased 0.4% to $1,378.5 million compared to $1,372.5 million for the prior year. Total patient days for the year ended December 31, 2006 were 969,590, admissions were 39,668 and net revenue per patient day was $1,392. This compares to 985,025 days, 39,963 admissions and net revenue per patient day of $1,370 for the prior year. For the hospitals opened or acquired as of January 1, 2005 and operated by Select throughout both periods, patient days for the year ended December 31, 2006 were 951,872 and admissions were 39,026, compared to 948,916 days and 38,707 admissions in the prior year. Adjusted EBITDA for the segment for the year ended December 31, 2006 decreased 8.1% to $283.3 million compared to $308.1 million for the prior year. The Adjusted EBITDA margin for the segment for the year ended December 31, 2006 was 20.5%, compared to 22.5% for the prior year. The Adjusted EBITDA margin for the hospitals opened or acquired as of January 1, 2005 and operated by Select throughout both periods was 21.6% for the year ended December 31, 2006, compared to 22.9% for the prior year.

Outpatient Rehabilitation

     At December 31, 2006, Select operated 544 outpatient clinics. This compares to 608 outpatient clinics at December 31, 2005. For the fourth quarter of 2006, net operating revenues were $116.4 million compared to $116.3 million for the same quarter, prior year. Adjusted EBITDA for the fourth quarter increased 17.4% to $15.9 million compared to $13.5 million for the same quarter, prior year. The Adjusted EBITDA margin for the quarter was 13.7% compared to 11.6% in the same quarter, prior year. Patient visits for the quarter were 711,163 compared to 776,463 for the same quarter, prior year. Net revenue per visit was $98 for the fourth quarter of 2006 compared to $90 for the same quarter, prior year.

     For the year ended December 31, 2006, net operating revenues declined 2.2% to $470.3 million compared to $480.7 million for the prior year. Adjusted EBITDA for the year ended December 31, 2006 declined 1.7% to $64.8 million compared to $66.0 million for the prior year. The Adjusted EBITDA margin for the year ended December 31, 2006 was 13.8% compared to 13.7% in the prior year. Patient

visits for the year ended December 31, 2006 were 2,972,243 compared to 3,308,620 for the prior year. Net revenue per visit was $94 for the year ended December 31, 2006 compared $89 for the prior year.

Agreement to Purchase HealthSouth Corporation Outpatient Rehabilitation Division

     On January 27, 2007, Select and HealthSouth Corporation (“HealthSouth”) entered into a Stock Purchase Agreement, pursuant to which Select agreed to acquire the outpatient rehabilitation division of HealthSouth for approximately $245.0 million. The purchase price is subject to adjustment based on the division’s net working capital on the closing date.

     The HealthSouth transaction, which is expected to close in the second quarter of 2007, is subject to a number of closing conditions, including receipt of regulatory approvals.

Agreement to Purchase Nexus Health Systems, Inc.

     On March 26, 2007, Select entered into a Stock Purchase Agreement with Nexus Health Systems, Inc. (“Nexus”), Neurobehavioral Management Services L.L.C., Nexus Health Inc. and the stockholders of Nexus Health Systems, Inc. to acquire substantially all of the assets of Nexus for approximately $49.0 million in cash plus the assumption of a capital lease. The purchase price is subject to adjustment based on Nexus’s net working capital, cash and indebtedness on the closing date.

     The Nexus transaction, which is expected to close in the second quarter of 2007, is subject to a number of closing conditions, including receipt of regulatory approvals.

Conference Call

     Select will host a conference call regarding its fourth quarter and full year results on Thursday, March 29, 2007, at 11:00 am EDT. The domestic dial in number for the call is 1-866-793-1343. The international dial in number is 1-703-639-1314.

* * * * *

     Select Medical Corporation is a leading operator of specialty hospitals in the United States. Select operates 89 long-term acute care hospitals in 26 states. Select operates four acute medical rehabilitation hospitals in New Jersey. Select is also a leading operator of outpatient rehabilitation clinics in the United States, with approximately 544 locations. Select also provides medical rehabilitation services on a contract basis at nursing homes, hospitals, assisted living and senior care centers, schools and worksites. Information about Select is available athttp://www.selectmedicalcorp.com/

     Certain statements contained herein that are not descriptions of historical facts are “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to those discussed in filings made by Select with the Securities and Exchange Commission. Many of the factors that will determine Select’s future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. Select undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Investor inquiries:

Joel Veit, 717/972-1100

I. Condensed Consolidated Statements of Operations
(In thousands)
(unaudited)
For the Three Months Ended December 31, 2005 and 2006

							%
	2005			2006			Change
Net operating revenues	$	457,958		$	445,742			(2.7	)%
Costs and expenses:
Cost of services		368,795			364,865			(1.1	)%
General and administrative		10,534			10,003			(5.0	)%
Bad debt expense		3,969			44			(98.9	)%
Depreciation and amortization		9,812			11,713			19.4	%
Income from operations		64,848			59,117			(8.8	)%
Other income		2,360			448			(81.0	)%
Interest income		256			555			116.8	%
Interest expense		(23,631	)		(24,673	)		4.4	%
Income from continuing operations before minority interests and income taxes		43,833			35,447			(19.1	)%
Minority interests		426			319			(25.1	)%
Income from continuing operations before income taxes		43,407			35,128			(19.1	)%
Income tax expense		17,847			4,811			(73.0	)%
Income from continuing operations		25,560			30,317			18.6	%
Income (loss) from discontinued operations, net of tax		(295	)		2,460			N/M
Net income	$	25,265		$	32,777			29.7	%

II. Condensed Consolidated Statements of Operations
(In thousands)
(unaudited)
For the Years Ended December 31, 2005 and 2006

	Predecessor(1)			Successor(1)			Combined (2)			Successor (1)
	Period from			Period from
	January 1			February 25
	through			through			Year Ended			Year Ended
	February 24,			December			December 31,			December 31,
	2005			31, 2005			2005			2006			% Change
Net operating revenues	$	277,736		$	1,580,706		$	1,858,442		$	1,851,498			(0.4	)%
Costs and expenses:
Cost of services		244,321			1,244,361			1,488,682			1,484,632			(0.3	)%
General and administrative		122,509			59,494			182,003			43,514			(76.1	)%
Bad debt expense		6,588			18,213			24,801			18,810			(24.2	)%
Depreciation and amortization		5,933			37,922			43,855			46,668			6.4	%
Income (loss) from operations		(101,615	)		220,716			119,101			257,874			116.5	%
Loss on early retirement of debt		(42,736	)		—			(42,736	)		—			N/M
Merger related charges		(12,025	)		—			(12,025	)		—			N/M
Other income		267			3,018			3,285			1,366			(58.4	)%
Interest income		523			767			1,290			1,293			0.2	%
Interest expense		(4,651	)		(83,752	)		(88,403	)		(97,288	)		10.1	%
Income (loss) from continuing operations before minority interests and income taxes		(160,237	)		140,749			(19,488	)		163,245			N/M
Minority interests		330			1,776			2,106			1,414			(32.9	)%
Income (loss) from continuing operations before income taxes		(160,567	)		138,973			(21,594	)		161,831			N/M
Income tax expense (benefit)		(59,794	)		56,470			(3,324	)		56,089			N/M
Income (loss) from continuing operations		(100,773	)		82,503			(18,270	)		105,742			N/M
Income from discontinued operations, net of tax (includes pretax gain of $13,950 in 2006)		522			3,072			3,594			12,478			247.2	%
Net income (loss)	$	(100,251	)	$	85,575		$	(14,676	)	$	118,220			N/M

(1)

On February 24, 2005, Select Medical Corporation (“Select”) merged with a subsidiary of Select Medical Holdings Corporation (“Holdings”) and became a wholly owned subsidiary of Holdings. Select’s financial position and results of operations prior to the Merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the Merger are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the Merger, the pre-merger financial statements are not comparable with those after the Merger in certain respects.

(2)

Although the Predecessor and Successor results are not comparable by definition in certain respects due to the Merger and the resulting revaluation, for ease of comparison, the financial data for the period after the merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period), to arrive at the combined year ended December 31, 2005. As a result of the Merger, interest expense, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, depreciation and amortization have been impacted.

III. Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)

	December 31,		December 31,
	2005		2006
Assets
Cash	$	35,861	$	81,600
Restricted cash		6,345		4,335
Accounts receivable, net		256,798		199,927
Current deferred tax asset		59,135		42,613
Prepaid taxes		4,110		—
Current assets held for sale		13,876		—
Other current assets		19,725		16,762
Total Current Assets		395,850		345,237
Property and equipment, net		248,541		356,336
Goodwill		1,305,210		1,323,572
Other identifiable intangibles		86,789		79,230
Other assets held for sale		61,388		4,855
Other assets		65,591		68,412
Total Assets	$	2,163,369	$	2,177,642
Liabilities and Stockholder’s Equity
Payables and accruals	$	296,765	$	297,698
Income taxes payable		—		1,937
Current liabilities held for sale		4,215		—
Current portion of long term debt		6,516		6,209
Total Current Liabilities		307,496		305,844
Long term debt, net of current portion		1,315,764		1,224,509
Non-current deferred tax liability		25,771		30,721
Non-current liabilities held for sale		3,817		—
Minority interests		4,356		2,566
Stockholder’s equity		506,165		614,002
Total Liabilities and Stockholder’s Equity	$	2,163,369	$	2,177,642

IV. Key Statistics
(unaudited)
For the Three Months Ended December 31, 2005 and 2006

							%
	2005			2006			Change
Specialty Hospitals (a)
Number of hospitals — end of period		101			96			(5.0	)%
Net operating revenues (,000)	$	341,096		$	328,775			(3.6	)%
Number of patient days		245,165			235,520			(3.9	)%
Number of admissions		9,907			9,546			(3.6	)%
Net revenue per patient day (b)	$	1,367		$	1,366			(0.1	)%
Adjusted EBITDA (,000)	$	72,833		$	65,067			(10.7	)%
Adjusted EBITDA margin — all hospitals		21.4	%		19.8	%		(7.5	)%
Adjusted EBITDA margin — same store hospitals (c)		21.5	%		21.0	%		(2.3	)%
Outpatient Rehabilitation (d)
Number of clinics — end of period		608			544			(10.5	)%
Net operating revenues (,000)	$	116,348		$	116,365			0.0	%
Number of visits		776,463			711,163			(8.4	)%
Revenue per visit (e)	$	90		$	98			8.9	%
Adjusted EBITDA (,000)	$	13,543		$	15,903			17.4	%
Adjusted EBITDA margin		11.6	%		13.7	%		18.1	%

(a)	Specialty hospitals consist of long-term acute care hospitals and acute medical rehabilitation hospitals.
(b)	Net revenue per patient day is calculated by dividing specialty hospital patient service revenue by the total number of patient days.
(c)	Adjusted EBITDA margin — same store hospitals represents the Adjusted EBITDA margin for those hospitals opened or acquired on or before January 1, 2005 and operated throughout both periods.
(d)	Outpatient rehabilitation information for 2005 has been restated to remove the clinics operated by CBIL and sold on March 1, 2006, which is being reported as discontinued operations. Occupational health clinics have been reclassified as managed clinics.
(e)	Net revenue per visit is calculated by dividing outpatient rehabilitation clinic revenue by the total number of visits. For purposes of this computation, outpatient rehabilitation clinic revenue does not include managed clinics or contract services revenue.

V. Key Statistics
(unaudited)
For the Years Ended December 31, 2005 and 2006

							%
	2005			2006			Change
Specialty Hospitals (a)
Number of hospitals — end of period		101			96			(5.0	)%
Net operating revenues (,000)	$	1,372,483		$	1,378,543			0.4	%
Number of patient days		985,025			969,590			(1.6	)%
Number of admissions		39,963			39,668			(0.7	)%
Net revenue per patient day (b)	$	1,370		$	1,392			1.6	%
Adjusted EBITDA (,000)	$	308,144		$	283,270			(8.1	)%
Adjusted EBITDA margin — all hospitals		22.5	%		20.5	%		(8.9	)%
Adjusted EBITDA margin — same store hospitals (c)		22.9	%		21.6	%		(5.7	)%
Outpatient Rehabilitation (d)
Number of clinics — end of period		608			544			(10.5	)%
Net operating revenues (,000)	$	480,711		$	470,339			(2.2	)%
Number of visits		3,308,620			2,972,243			(10.2	)%
Revenue per visit (e)	$	89		$	94			5.6	%
Adjusted EBITDA (,000)	$	65,957		$	64,823			(1.7	)%
Adjusted EBITDA margin		13.7	%		13.8	%		0.7	%

(a)	Specialty hospitals consist of long-term acute care hospitals and acute medical rehabilitation hospitals.
(b)	Net revenue per patient day is calculated by dividing specialty hospital patient service revenue by the total number of patient days.
(c)	Adjusted EBITDA margin — same store hospitals represents the Adjusted EBITDA margin for those hospitals opened or acquired on or before January 1, 2005 and operated throughout both periods.
(d)	Outpatient rehabilitation information for 2005 has been restated to remove the clinics operated by CBIL and sold on March 1, 2006, which is being reported as discontinued operations. Occupational health clinics have been reclassified as managed clinics.
(e)	Net revenue per visit is calculated by dividing outpatient rehabilitation clinic revenue by the total number of visits. For purposes of this computation, outpatient rehabilitation clinic revenue does not include managed clinics or contract services revenue.

VI. Net Income to Adjusted EBITDA Reconciliation
(In thousands)
(unaudited)
For the Three Months and Years Ended December 31, 2005 and 2006

     The following table reconciles net income (loss) to Adjusted EBITDA for Select. Adjusted EBITDA is used by Select to report its segment performance in accordance with SFAS No. 131. Adjusted EBITDA is defined as net income (loss) before interest, income taxes, depreciation and amortization, income from discontinued operations, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, other income, and minority interest. We believe that the presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of our operating units.

     Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

							Predecessor (1)			Successor (1)			Combined (2)			Successor (1)
	Successor (1)						Period from			Period from
	Three Months Ended						January 1			February 25			For the			For the
	December 31,						through			through			Year Ended			Year Ended
	2005			2006			February 24, 2005			December 31, 2005			December 31, 2005			December 31, 2006
Net income (loss)	$	25,265		$	32,777		$	(100,251	)	$	85,575		$	(14,676	)	$	118,220
Income (loss) from discontinued operations, net of tax		295			(2,460	)		(522	)		(3,072	)		(3,594	)		(12,478	)
Income tax expense (benefit)		17,847			4,811			(59,794	)		56,470			(3,324	)		56,089
Minority interest		426			319			330			1,776			2,106			1,414
Interest expense, net		23,375			24,118			4,128			82,985			87,113			95,995
Other income		(2,360	)		(448	)		(267	)		(3,018	)		(3,285	)		(1,366	)
Loss on early retirement of debt		—			—			42,736			—			42,736			—
Merger related charges		—			—			12,025			—			12,025			—
Stock compensation expense
Included in general and administrative		2,696			888			115,025			10,134			125,159			3,551
Included in cost of services		49			57			27,188			178			27,366			231
Long-term incentive compensation (3)		—			—			—			14,453			14,453			—
Depreciation and amortization		9,812			11,713			5,933			37,922			43,855			46,668
Adjusted EBITDA	$	77,405		$	71,775		$	46,531		$	283,403		$	329,934		$	308,324
Specialty hospitals	$	72,833		$	65,067		$	44,384		$	263,760		$	308,144		$	283,270
Outpatient rehabilitation		13,543			15,903			9,848			56,109			65,957			64,823
Other (4)		(8,971	)		(9,195	)		(7,701	)		(36,466	)		(44,167	)		(39,769	)
Adjusted EBITDA	$	77,405		$	71,775		$	46,531		$	283,403		$	329,934		$	308,324

(1)	On February 24, 2005, Select Medical Corporation (“Select”) merged with a subsidiary of Select Medical Holdings Corporation (“Holdings”) and became a wholly owned subsidiary of Holdings. Select’s financial position and results of operations prior to the Merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the Merger are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the Merger, the pre-merger financial statements are not comparable with those after the Merger in certain respects.
(2)	Although the Predecessor and Successor results are not comparable by definition in certain respects due to the Merger and the resulting revaluation, for ease of comparison, the financial data for the period after the Merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period), to arrive at the combined year ended December 31, 2005. As a result of the Merger, interest expense, loss on early retirement of debt, merger related charges, stock compensation expense,long-term incentive compensation, and depreciation and amortization have been impacted.
(3)	For the period from February 25 through December 31, 2005, $14.5 million of long-term compensation expense was included in general administrative expense on Select’s consolidated statement of operations.
(4)	Other primarily includes Select’s general and administrative costs.

The following tables reconcile specialty hospital same store information.

	Three Months Ended
	December 31, 2005			December 31, 2006
Specialty hospitals net operating revenue	$	341,096		$	328,775
Less: Specialty hospitals in development, opened or closed after 1/1/05		9,982			1,817
Specialty hospitals same store net operating revenue	$	331,114		$	326,958
Specialty hospitals Adjusted EBITDA	$	72,833		$	65,067
Less: Specialty hospitals in development, opened or closed after 1/1/05		1,496			(3,673	)
Specialty hospitals same store Adjusted EBITDA	$	71,337		$	68,740
All specialty hospitals Adjusted EBITDA margin		21.4	%		19.8	%
Specialty hospitals same store Adjusted EBITDA margin		21.5	%		21.0	%

	Year Ended
	December 31, 2005			December 31, 2006
Specialty hospitals net operating revenue	$	1,372,483		$	1,378,543
Less: Specialty hospitals in development, opened or closed after 1/1/05		49,046			23,764
Specialty hospitals same store net operating revenue	$	1,323,437		$	1,354,779
Specialty hospitals Adjusted EBITDA	$	308,144		$	283,270
Less: Specialty hospitals in development, opened or closed after 1/1/05		5,404			(9,344	)
Specialty hospitals same store Adjusted EBITDA	$	302,740		$	292,614
All specialty hospitals Adjusted EBITDA margin		22.5	%		20.5	%
Specialty hospitals same store Adjusted EBITDA margin		22.9	%		21.6	%

VII. Discontinued Operations Income Statement
(In thousands)
(unaudited)
For the Three Months and Years Ended December 31, 2005 and 2006

The following table summarizes the income statement information relating to our discontinued operations of CBIL sold on March 1, 2006:

	Successor (1)						Predecessor (1)		Successor (1)			Combined (2)			Successor (1)
							Period from		Period from
							January 1		February 25
	For the Three Months						through		through
	Ended December 31,						February 24,		December 31 ,			For the Year Ended December 31,
	2005			2006			2005		2005			2005			2006
Net operating revenues	$	18,459		$	—		$	10,051	$	60,161		$	70,212		$	12,902
Costs and expenses:
Cost of services		15,098			—			8,295		48,397			56,692			10,733
Bad debt expense		205			—			73		386			459			87
Depreciation and amortization		350			—			244		1,138			1,382			176
Income from discontinued operations		2,806			—			1,439		10,240			11,679			1,906
						��
Other expense		434			—			267		1,092			1,359			—
Gain on sale		—			—			—		—			—			(13,950	)
Interest expense (income)		(452	)		—			83		(224	)		(141	)		(31	)
Income from discontinued operations before minority interests and income taxes		2,824			—			1,089		9,372			10,461			15,887
Minority interests		257			—			139		1,242			1,381			340
Income from discontinued operations before income taxes		2,567			—			950		8,130			9,080			15,547
Income tax expense (benefit)		2,862			(2,460	)		428		5,058			5,486			3,069
Income (loss) from discontinued operations, net of tax	$	(295	)	$	2,460		$	522	$	3,072		$	3,594		$	12,478

(1)

On February 24, 2005, Select Medical Corporation (Select) merged with a subsidiary of Select Medical Holdings Corporation (“Holdings”) and became a wholly owned subsidiary of Holdings. Select’s financial position and results of operations prior to the Merger are presented separately in the consolidated financial statements as “Predecessor” financial statements, while the financial position and results of operations following the Merger are presented as “Successor” financial statements. Due to the revaluation of assets as a result of purchase accounting associated with the Merger, the pre-merger financial statements are not comparable with those after the Merger in certain respects.

(2)

Although the Predecessor and Successor results are not comparable by definition in certain respects due to the Merger and the resulting revaluation, for ease of comparison, the financial data for the period after the Merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period), to arrive at the combined year ended December 31, 2005. As a result of the Merger, interest expense, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation and depreciation and amortization have been impacted.