☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-1764048
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification Number)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.001 per share
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SEM
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New York Stock Exchange
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(NYSE)
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging Growth Company
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☐
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December 31, 2019
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March 31, 2020
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$
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335,882
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$
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73,163
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Accounts receivable
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762,677
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816,405
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Prepaid income taxes
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18,585
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12,634
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Other current assets
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95,848
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95,828
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Total Current Assets
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1,212,992
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998,030
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Operating lease right-of-use assets
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1,003,986
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1,014,969
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Property and equipment, net
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998,406
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978,547
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Goodwill
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3,391,955
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3,391,078
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Identifiable intangible assets, net
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409,068
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405,374
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Other assets
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323,881
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327,569
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Total Assets
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$
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7,340,288
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$
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7,115,567
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LIABILITIES AND EQUITY
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Current Liabilities:
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Current operating lease liabilities
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$
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207,950
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$
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212,884
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Current portion of long-term debt and notes payable
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25,167
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17,161
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Accounts payable
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145,731
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131,601
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Accrued payroll
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183,754
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140,009
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Accrued vacation
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124,111
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128,705
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Accrued interest
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33,853
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11,339
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Accrued other
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191,076
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194,165
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Income taxes payable
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2,638
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8,090
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Total Current Liabilities
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914,280
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843,954
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Non-current operating lease liabilities
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852,897
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860,796
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Long-term debt, net of current portion
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3,419,943
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3,553,056
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Non-current deferred tax liability
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148,258
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158,782
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Other non-current liabilities
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101,334
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103,783
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Total Liabilities
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5,436,712
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5,520,371
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Commitments and contingencies (Note 11)
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Redeemable non-controlling interests
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974,541
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620,377
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Stockholders’ Equity:
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Common stock, $0.001 par value, 700,000,000 shares authorized, 134,328,112 and 133,823,713 shares issued and outstanding at 2019 and 2020, respectively
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134
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134
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Capital in excess of par
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491,038
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491,824
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Retained earnings
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279,800
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316,680
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Total Stockholders’ Equity
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770,972
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808,638
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Non-controlling interests
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158,063
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166,181
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Total Equity
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929,035
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974,819
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Total Liabilities and Equity
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$
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7,340,288
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$
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7,115,567
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For the Three Months Ended March 31,
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2019
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2020
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Net operating revenues
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$
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1,324,631
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$
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1,414,632
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Costs and expenses:
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Cost of services, exclusive of depreciation and amortization
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1,132,092
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1,200,371
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General and administrative
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28,677
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33,831
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Depreciation and amortization
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52,138
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51,752
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Total costs and expenses
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1,212,907
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1,285,954
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Income from operations
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111,724
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128,678
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Other income and expense:
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Equity in earnings of unconsolidated subsidiaries
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4,366
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2,588
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Gain on sale of businesses
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6,532
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7,201
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Interest expense
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(50,811
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)
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(46,107
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)
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Income before income taxes
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71,811
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92,360
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Income tax expense
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18,467
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21,912
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Net income
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53,344
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70,448
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Less: Net income attributable to non-controlling interests
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12,510
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17,323
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Net income attributable to Select Medical Holdings Corporation
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$
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40,834
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$
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53,125
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Earnings per common share (Note 10):
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Basic
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$
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0.30
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$
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0.40
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Diluted
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$
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0.30
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$
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0.40
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For the Three Months Ended March 31, 2020
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|||||||||||||||||||||||||
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Total Stockholders’ Equity
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Common
Stock
Issued
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Common
Stock
Par Value
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Capital in
Excess
of Par
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Retained
Earnings
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Total Stockholders’ Equity
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Non-controlling
Interests
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Total
Equity
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|||||||||||||
Balance at December 31, 2019
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134,328
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$
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134
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$
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491,038
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$
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279,800
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$
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770,972
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$
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158,063
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$
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929,035
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Net income attributable to Select Medical Holdings Corporation
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53,125
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53,125
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53,125
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Net income attributable to non-controlling interests
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—
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10,067
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10,067
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Issuance of restricted stock
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2
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0
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0
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—
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—
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Forfeitures of unvested restricted stock
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(15
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)
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0
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0
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—
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—
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Vesting of restricted stock
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6,136
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6,136
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6,136
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Repurchase of common shares
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(492
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)
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0
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(5,350
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)
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(3,341
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)
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(8,691
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)
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(8,691
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)
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Issuance of non-controlling interests
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—
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1,679
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1,679
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Distributions to and purchases of non-controlling interests
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(2,726
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)
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(2,726
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)
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(4,048
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)
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(6,774
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)
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Redemption adjustment on non-controlling interests
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(10,123
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)
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(10,123
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)
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(10,123
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)
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||||||
Other
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|
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|
|
|
|
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(55
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)
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(55
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)
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420
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|
|
365
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||||||
Balance at March 31, 2020
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133,823
|
|
|
$
|
134
|
|
|
$
|
491,824
|
|
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$
|
316,680
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|
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$
|
808,638
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|
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$
|
166,181
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|
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$
|
974,819
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|
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For the Three Months Ended March 31, 2019
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|||||||||||||||||||||||||
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|
|||||||||||||||||||||
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Total Stockholders’ Equity
|
|
|
|
|
|||||||||||||||||||
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Common
Stock
Issued
|
|
Common
Stock
Par Value
|
|
Capital in
Excess
of Par
|
|
Retained
Earnings
|
|
Total Stockholders’ Equity
|
|
Non-controlling
Interests
|
|
Total
Equity
|
|||||||||||||
Balance at December 31, 2018
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135,266
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|
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$
|
135
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|
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$
|
482,556
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|
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$
|
320,351
|
|
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$
|
803,042
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$
|
113,198
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$
|
916,240
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Net income attributable to Select Medical Holdings Corporation
|
|
|
|
|
|
|
40,834
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|
40,834
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|
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40,834
|
|
||||||||||
Net income attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
—
|
|
|
4,810
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|
|
4,810
|
|
||||||||||
Issuance of restricted stock
|
21
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|
|
0
|
|
|
0
|
|
|
|
|
—
|
|
|
|
|
—
|
|
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Forfeitures of unvested restricted stock
|
(24
|
)
|
|
0
|
|
|
0
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Vesting of restricted stock
|
|
|
|
|
5,488
|
|
|
|
|
5,488
|
|
|
|
|
5,488
|
|
||||||||||
Issuance of non-controlling interests
|
|
|
|
|
|
|
|
|
—
|
|
|
6,837
|
|
|
6,837
|
|
||||||||||
Distributions to and purchases of non-controlling interests
|
|
|
|
|
259
|
|
|
|
|
259
|
|
|
(2,739
|
)
|
|
(2,480
|
)
|
|||||||||
Redemption adjustment on non-controlling interests
|
|
|
|
|
|
|
(47,470
|
)
|
|
(47,470
|
)
|
|
|
|
(47,470
|
)
|
||||||||||
Other
|
|
|
|
|
|
|
(122
|
)
|
|
(122
|
)
|
|
413
|
|
|
291
|
|
|||||||||
Balance at March 31, 2019
|
135,263
|
|
|
$
|
135
|
|
|
$
|
488,303
|
|
|
$
|
313,593
|
|
|
$
|
802,031
|
|
|
$
|
122,519
|
|
|
$
|
924,550
|
|
|
For the Three Months Ended March 31,
|
|
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2019
|
|
2020
|
|
||||
Operating activities
|
|
|
|
|
|
|
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Net income
|
$
|
53,344
|
|
|
$
|
70,448
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Distributions from unconsolidated subsidiaries
|
7,872
|
|
|
8,479
|
|
|
||
Depreciation and amortization
|
52,138
|
|
|
51,752
|
|
|
||
Provision for expected credit losses
|
1,567
|
|
|
199
|
|
|
||
Equity in earnings of unconsolidated subsidiaries
|
(4,366
|
)
|
|
(2,588
|
)
|
|
||
Gain on sale of assets and businesses
|
(6,233
|
)
|
|
(7,339
|
)
|
|
||
Stock compensation expense
|
6,255
|
|
|
6,903
|
|
|
||
Amortization of debt discount, premium and issuance costs
|
3,231
|
|
|
553
|
|
|
||
Deferred income taxes
|
(81
|
)
|
|
9,364
|
|
|
||
Changes in operating assets and liabilities, net of effects of business combinations:
|
|
|
|
|
|
|
||
Accounts receivable
|
(74,752
|
)
|
|
(53,928
|
)
|
|
||
Other current assets
|
(7,523
|
)
|
|
27
|
|
|
||
Other assets
|
57,319
|
|
|
2,248
|
|
|
||
Accounts payable
|
4,324
|
|
|
(8,992
|
)
|
|
||
Accrued expenses
|
(69,163
|
)
|
|
(44,455
|
)
|
|
||
Income taxes
|
17,830
|
|
|
11,413
|
|
|
||
Net cash provided by operating activities
|
41,762
|
|
|
44,084
|
|
|
||
Investing activities
|
|
|
|
|
|
|
||
Business combinations, net of cash acquired
|
(6,120
|
)
|
|
(6,833
|
)
|
|
||
Purchases of property and equipment
|
(49,073
|
)
|
|
(39,208
|
)
|
|
||
Investment in businesses
|
(27,608
|
)
|
|
(9,848
|
)
|
|
||
Proceeds from sale of assets and businesses
|
2
|
|
|
11,230
|
|
|
||
Net cash used in investing activities
|
(82,799
|
)
|
|
(44,659
|
)
|
|
||
Financing activities
|
|
|
|
|
|
|
||
Borrowings on revolving facilities
|
360,000
|
|
|
460,000
|
|
|
||
Payments on revolving facilities
|
(220,000
|
)
|
|
(295,000
|
)
|
|
||
Payments on term loans
|
(132,685
|
)
|
|
(39,843
|
)
|
|
||
Borrowings of other debt
|
8,290
|
|
|
6,487
|
|
|
||
Principal payments on other debt
|
(6,155
|
)
|
|
(8,099
|
)
|
|
||
Repurchase of common stock
|
—
|
|
|
(8,691
|
)
|
|
||
Increase in overdrafts
|
6,050
|
|
|
—
|
|
|
||
Proceeds from issuance of non-controlling interests
|
3,425
|
|
|
1,679
|
|
|
||
Distributions to and purchases of non-controlling interests
|
(5,251
|
)
|
|
(12,474
|
)
|
|
||
Purchase of membership interests of Concentra Group Holdings Parent (Note 4)
|
—
|
|
|
(366,203
|
)
|
|
||
Net cash provided by (used in) financing activities
|
13,674
|
|
|
(262,144
|
)
|
|
||
Net decrease in cash and cash equivalents
|
(27,363
|
)
|
|
(262,719
|
)
|
|
||
Cash and cash equivalents at beginning of period
|
175,178
|
|
|
335,882
|
|
|
||
Cash and cash equivalents at end of period
|
$
|
147,815
|
|
|
$
|
73,163
|
|
|
Supplemental Information
|
|
|
|
|
|
|
||
Cash paid for interest
|
$
|
37,199
|
|
|
$
|
67,885
|
|
|
Cash paid for taxes
|
718
|
|
|
1,135
|
|
|
||
Operating lease right-of-use assets obtained in exchange for lease liabilities, excluding adoption impact of ASC Topic 842 at January 1, 2019
|
24,176
|
|
|
67,894
|
|
|
1.
|
Basis of Presentation
|
2.
|
Accounting Policies
|
3.
|
Credit Risk Concentrations
|
4.
|
Redeemable Non-Controlling Interests
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2020
|
||||
Balance as of January 1
|
$
|
780,488
|
|
|
$
|
974,541
|
|
Net income attributable to redeemable non-controlling interests
|
7,700
|
|
|
7,256
|
|
||
Distributions to and purchases of redeemable non-controlling interests
|
(2,771
|
)
|
|
(5,687
|
)
|
||
Purchase of membership interests of Concentra Group Holdings Parent
|
—
|
|
|
(366,203
|
)
|
||
Redemption adjustment on redeemable non-controlling interests
|
47,470
|
|
|
10,123
|
|
||
Other
|
354
|
|
|
347
|
|
||
Balance as of March 31
|
$
|
833,241
|
|
|
$
|
620,377
|
|
5.
|
Variable Interest Entities
|
6.
|
Intangible Assets
|
|
Critical Illness Recovery Hospital
|
|
Rehabilitation Hospital
|
|
Outpatient
Rehabilitation
|
|
Concentra
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Balance as of December 31, 2019
|
$
|
1,078,804
|
|
|
$
|
430,900
|
|
|
$
|
649,763
|
|
|
$
|
1,232,488
|
|
|
$
|
3,391,955
|
|
Acquired
|
—
|
|
|
—
|
|
|
610
|
|
|
4,567
|
|
|
5,177
|
|
|||||
Sold
|
—
|
|
|
—
|
|
|
(6,034
|
)
|
|
—
|
|
|
(6,034
|
)
|
|||||
Measurement period adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
(20
|
)
|
|||||
Balance as of March 31, 2020
|
$
|
1,078,804
|
|
|
$
|
430,900
|
|
|
$
|
644,339
|
|
|
$
|
1,237,035
|
|
|
$
|
3,391,078
|
|
|
|
December 31, 2019
|
|
March 31, 2020
|
||||||||||||||||||||
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trademarks
|
|
$
|
166,698
|
|
|
$
|
—
|
|
|
$
|
166,698
|
|
|
$
|
166,698
|
|
|
$
|
—
|
|
|
$
|
166,698
|
|
Certificates of need
|
|
17,157
|
|
|
—
|
|
|
17,157
|
|
|
18,348
|
|
|
—
|
|
|
18,348
|
|
||||||
Accreditations
|
|
1,874
|
|
|
—
|
|
|
1,874
|
|
|
1,874
|
|
|
—
|
|
|
1,874
|
|
||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trademarks
|
|
5,000
|
|
|
(5,000
|
)
|
|
—
|
|
|
5,000
|
|
|
(5,000
|
)
|
|
—
|
|
||||||
Customer relationships
|
|
287,373
|
|
|
(87,346
|
)
|
|
200,027
|
|
|
288,963
|
|
|
(93,814
|
)
|
|
195,149
|
|
||||||
Non-compete agreements
|
|
32,114
|
|
|
(8,802
|
)
|
|
23,312
|
|
|
32,845
|
|
|
(9,540
|
)
|
|
23,305
|
|
||||||
Total identifiable intangible assets
|
|
$
|
510,216
|
|
|
$
|
(101,148
|
)
|
|
$
|
409,068
|
|
|
$
|
513,728
|
|
|
$
|
(108,354
|
)
|
|
$
|
405,374
|
|
7.
|
Long-Term Debt and Notes Payable
|
|
Principal
Outstanding
|
|
Unamortized
Premium
(Discount)
|
|
Unamortized
Issuance
Costs
|
|
Carrying
Value
|
|
|
Fair
Value
|
||||||||||
Select 6.250% senior notes
|
$
|
1,225,000
|
|
|
$
|
38,437
|
|
|
$
|
(19,200
|
)
|
|
$
|
1,244,237
|
|
|
|
$
|
1,222,673
|
|
Select credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Select revolving facility
|
165,000
|
|
|
—
|
|
|
—
|
|
|
165,000
|
|
|
|
164,381
|
|
|||||
Select term loan
|
2,103,437
|
|
|
(9,905
|
)
|
|
(10,796
|
)
|
|
2,082,736
|
|
|
|
1,987,748
|
|
|||||
Other debt, including finance leases
|
78,617
|
|
|
—
|
|
|
(373
|
)
|
|
78,244
|
|
|
|
78,244
|
|
|||||
Total debt
|
$
|
3,572,054
|
|
|
$
|
28,532
|
|
|
$
|
(30,369
|
)
|
|
$
|
3,570,217
|
|
|
|
$
|
3,453,046
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
||||||||||||||
Select 6.250% senior notes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,225,000
|
|
|
$
|
1,225,000
|
|
Select credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Select revolving facility
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
165,000
|
|
|
—
|
|
|
165,000
|
|
|||||||
Select term loan
|
—
|
|
|
—
|
|
|
—
|
|
|
4,757
|
|
|
11,150
|
|
|
2,087,530
|
|
|
2,103,437
|
|
|||||||
Other debt, including finance leases
|
14,318
|
|
|
8,130
|
|
|
17,215
|
|
|
3,364
|
|
|
23,550
|
|
|
12,040
|
|
|
78,617
|
|
|||||||
Total debt
|
$
|
14,318
|
|
|
$
|
8,130
|
|
|
$
|
17,215
|
|
|
$
|
8,121
|
|
|
$
|
199,700
|
|
|
$
|
3,324,570
|
|
|
$
|
3,572,054
|
|
|
Principal
Outstanding
|
|
Unamortized
Premium
(Discount)
|
|
Unamortized
Issuance
Costs
|
|
Carrying
Value
|
|
|
Fair
Value
|
||||||||||
Select 6.250% senior notes
|
$
|
1,225,000
|
|
|
$
|
39,988
|
|
|
$
|
(19,944
|
)
|
|
$
|
1,245,044
|
|
|
|
$
|
1,322,020
|
|
Select credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Select revolving facility
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|||||
Select term loan
|
2,143,280
|
|
|
(10,411
|
)
|
|
(11,348
|
)
|
|
2,121,521
|
|
|
|
2,145,959
|
|
|||||
Other debt, including finance leases
|
78,941
|
|
|
—
|
|
|
(396
|
)
|
|
78,545
|
|
|
|
78,545
|
|
|||||
Total debt
|
$
|
3,447,221
|
|
|
$
|
29,577
|
|
|
$
|
(31,688
|
)
|
|
$
|
3,445,110
|
|
|
|
$
|
3,546,524
|
|
8.
|
Segment Information
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2019
|
|
2020
|
||||
|
(in thousands)
|
|||||||
Net operating revenues:(1)
|
|
|
|
|
|
|
||
Critical illness recovery hospital
|
|
$
|
457,534
|
|
|
$
|
500,521
|
|
Rehabilitation hospital
|
|
154,558
|
|
|
182,019
|
|
||
Outpatient rehabilitation
|
|
246,905
|
|
|
255,249
|
|
||
Concentra
|
|
396,321
|
|
|
398,535
|
|
||
Other
|
|
69,313
|
|
|
78,308
|
|
||
Total Company
|
|
$
|
1,324,631
|
|
|
$
|
1,414,632
|
|
Adjusted EBITDA:
|
|
|
|
|
|
|
||
Critical illness recovery hospital
|
|
$
|
72,998
|
|
|
$
|
88,570
|
|
Rehabilitation hospital
|
|
25,797
|
|
|
38,569
|
|
||
Outpatient rehabilitation
|
|
28,991
|
|
|
27,122
|
|
||
Concentra
|
|
66,258
|
|
|
61,466
|
|
||
Other
|
|
(23,927
|
)
|
|
(28,394
|
)
|
||
Total Company
|
|
$
|
170,117
|
|
|
$
|
187,333
|
|
Total assets:
|
|
|
|
|
|
|
||
Critical illness recovery hospital
|
|
$
|
2,062,659
|
|
|
$
|
2,148,779
|
|
Rehabilitation hospital
|
|
1,089,391
|
|
|
1,127,267
|
|
||
Outpatient rehabilitation
|
|
1,250,015
|
|
|
1,285,449
|
|
||
Concentra
|
|
2,464,317
|
|
|
2,354,169
|
|
||
Other
|
|
155,110
|
|
|
199,903
|
|
||
Total Company
|
|
$
|
7,021,492
|
|
|
$
|
7,115,567
|
|
Purchases of property and equipment:
|
|
|
|
|
|
|
||
Critical illness recovery hospital
|
|
$
|
10,160
|
|
|
$
|
8,965
|
|
Rehabilitation hospital
|
|
13,183
|
|
|
3,325
|
|
||
Outpatient rehabilitation
|
|
9,040
|
|
|
8,384
|
|
||
Concentra
|
|
15,698
|
|
|
15,586
|
|
||
Other
|
|
992
|
|
|
2,948
|
|
||
Total Company
|
|
$
|
49,073
|
|
|
$
|
39,208
|
|
(1)
|
Prior to the quarter ended June 30, 2019, the financial results of employee leasing services provided to non-consolidating subsidiaries were included with the Company’s reportable segments. These results are now reported as part of the Company’s other activities. Net operating revenues have been conformed to the current presentation for the three months ended March 31, 2019.
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||||||
|
Critical Illness Recovery Hospital
|
|
Rehabilitation Hospital
|
|
Outpatient
Rehabilitation
|
|
Concentra
|
|
Other
|
|
Total
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Adjusted EBITDA
|
$
|
72,998
|
|
|
$
|
25,797
|
|
|
$
|
28,991
|
|
|
$
|
66,258
|
|
|
$
|
(23,927
|
)
|
|
|
|
|
Depreciation and amortization
|
(11,451
|
)
|
|
(6,402
|
)
|
|
(7,032
|
)
|
|
(24,904
|
)
|
|
(2,349
|
)
|
|
|
|
||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(767
|
)
|
|
(5,488
|
)
|
|
|
|
||||||
Income (loss) from operations
|
$
|
61,547
|
|
|
$
|
19,395
|
|
|
$
|
21,959
|
|
|
$
|
40,587
|
|
|
$
|
(31,764
|
)
|
|
$
|
111,724
|
|
Equity in earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,366
|
|
|||||||
Gain on sale of businesses
|
|
|
|
|
|
|
|
|
|
|
6,532
|
|
|||||||||||
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50,811
|
)
|
|||||||
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
71,811
|
|
|
Three Months Ended March 31, 2020
|
||||||||||||||||||||||
|
Critical Illness Recovery Hospital
|
|
Rehabilitation Hospital
|
|
Outpatient
Rehabilitation
|
|
Concentra
|
|
Other
|
|
Total
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Adjusted EBITDA
|
$
|
88,570
|
|
|
$
|
38,569
|
|
|
$
|
27,122
|
|
|
$
|
61,466
|
|
|
$
|
(28,394
|
)
|
|
|
|
|
Depreciation and amortization
|
(12,336
|
)
|
|
(6,887
|
)
|
|
(7,218
|
)
|
|
(22,887
|
)
|
|
(2,424
|
)
|
|
|
|
||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(767
|
)
|
|
(6,136
|
)
|
|
|
|
||||||
Income (loss) from operations
|
$
|
76,234
|
|
|
$
|
31,682
|
|
|
$
|
19,904
|
|
|
$
|
37,812
|
|
|
$
|
(36,954
|
)
|
|
$
|
128,678
|
|
Equity in earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,588
|
|
|||||||
Gain on sale of businesses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,201
|
|
|||||||
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,107
|
)
|
|||||||
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
92,360
|
|
9.
|
Revenue from Contracts with Customers
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||||||
|
Critical Illness Recovery Hospital
|
|
Rehabilitation Hospital
|
|
Outpatient
Rehabilitation
|
|
Concentra
|
|
Other
|
|
Total
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Patient service revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Medicare
|
$
|
238,169
|
|
|
$
|
74,579
|
|
|
$
|
40,278
|
|
|
$
|
555
|
|
|
$
|
—
|
|
|
$
|
353,581
|
|
Non-Medicare
|
216,959
|
|
|
70,642
|
|
|
187,914
|
|
|
393,236
|
|
|
—
|
|
|
868,751
|
|
||||||
Total patient services revenues
|
455,128
|
|
|
145,221
|
|
|
228,192
|
|
|
393,791
|
|
|
—
|
|
|
1,222,332
|
|
||||||
Other revenues(1)
|
2,406
|
|
|
9,337
|
|
|
18,713
|
|
|
2,530
|
|
|
69,313
|
|
|
102,299
|
|
||||||
Total net operating revenues
|
$
|
457,534
|
|
|
$
|
154,558
|
|
|
$
|
246,905
|
|
|
$
|
396,321
|
|
|
$
|
69,313
|
|
|
$
|
1,324,631
|
|
|
Three Months Ended March 31, 2020
|
||||||||||||||||||||||
|
Critical Illness Recovery Hospital
|
|
Rehabilitation Hospital
|
|
Outpatient
Rehabilitation
|
|
Concentra
|
|
Other
|
|
Total
|
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
Patient service revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Medicare
|
$
|
241,509
|
|
|
$
|
90,752
|
|
|
$
|
40,832
|
|
|
$
|
472
|
|
|
$
|
—
|
|
|
$
|
373,565
|
|
Non-Medicare
|
255,947
|
|
|
81,436
|
|
|
196,890
|
|
|
395,033
|
|
|
—
|
|
|
929,306
|
|
||||||
Total patient services revenues
|
497,456
|
|
|
172,188
|
|
|
237,722
|
|
|
395,505
|
|
|
—
|
|
|
1,302,871
|
|
||||||
Other revenues
|
3,065
|
|
|
9,831
|
|
|
17,527
|
|
|
3,030
|
|
|
78,308
|
|
|
111,761
|
|
||||||
Total net operating revenues
|
$
|
500,521
|
|
|
$
|
182,019
|
|
|
$
|
255,249
|
|
|
$
|
398,535
|
|
|
$
|
78,308
|
|
|
$
|
1,414,632
|
|
(1)
|
Prior to the quarter ended June 30, 2019, the financial results of employee leasing services provided to non-consolidating subsidiaries were included with the Company’s reportable segments. These results are now reported as part of the Company’s other activities. Net operating revenues have been conformed to the current presentation for the three months ended March 31, 2019.
|
10.
|
Earnings per Share
|
(i)
|
Net income attributable to the Company is reduced by the amount of dividends declared and by the contractual amount of dividends that must be paid for the current period for each class of stock. There were no dividends declared or contractual dividends paid for the three months ended March 31, 2019 and 2020.
|
(ii)
|
The remaining undistributed net income of the Company is then equally allocated to its common stock and unvested restricted stock awards, as if all of the earnings for the period had been distributed. The total net income allocated to each security is determined by adding both distributed and undistributed net income for the period.
|
(iii)
|
The net income allocated to each security is then divided by the weighted average number of outstanding shares for the period to determine the EPS for each security considered in the two-class method.
|
|
|
Basic EPS
|
|
Diluted EPS
|
|
||||||||||||
|
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
|
||||||||||||
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
||||||||
|
|
(in thousands)
|
|
||||||||||||||
Net income
|
|
$
|
53,344
|
|
|
$
|
70,448
|
|
|
$
|
53,344
|
|
|
$
|
70,448
|
|
|
Less: net income attributable to non-controlling interests
|
|
12,510
|
|
|
17,323
|
|
|
12,510
|
|
|
17,323
|
|
|
||||
Net income attributable to the Company
|
|
40,834
|
|
|
53,125
|
|
|
40,834
|
|
|
53,125
|
|
|
||||
Less: net income attributable to participating securities
|
|
1,343
|
|
|
1,818
|
|
|
1,343
|
|
|
1,818
|
|
|
||||
Net income attributable to common shares
|
|
$
|
39,491
|
|
|
$
|
51,307
|
|
|
$
|
39,491
|
|
|
$
|
51,307
|
|
|
|
|
Three Months Ended March 31, 2019
|
|||||||||||||||||||||
|
|
Net Income Allocation
|
|
Shares(1)
|
|
Basic EPS
|
|
|
Net Income Allocation
|
|
Shares(1)
|
|
Diluted EPS
|
||||||||||
|
|
(in thousands, except for per share amounts)
|
|||||||||||||||||||||
Common shares
|
|
$
|
39,491
|
|
|
130,821
|
|
|
$
|
0.30
|
|
|
|
$
|
39,491
|
|
|
130,861
|
|
|
$
|
0.30
|
|
Participating securities
|
|
1,343
|
|
|
4,449
|
|
|
$
|
0.30
|
|
|
|
1,343
|
|
|
4,449
|
|
|
$
|
0.30
|
|
||
Total Company
|
|
$
|
40,834
|
|
|
|
|
|
|
|
$
|
40,834
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|||||||||||||||||||||
|
|
Net Income Allocation
|
|
Shares(1)
|
|
Basic EPS
|
|
|
Net Income Allocation
|
|
Shares(1)
|
|
Diluted EPS
|
||||||||||
|
|
(in thousands, except for per share amounts)
|
|||||||||||||||||||||
Common shares
|
|
$
|
51,307
|
|
|
129,638
|
|
|
$
|
0.40
|
|
|
|
$
|
51,307
|
|
|
129,638
|
|
|
$
|
0.40
|
|
Participating securities
|
|
1,818
|
|
|
4,594
|
|
|
$
|
0.40
|
|
|
|
1,818
|
|
|
4,594
|
|
|
$
|
0.40
|
|
||
Total Company
|
|
$
|
53,125
|
|
|
|
|
|
|
|
$
|
53,125
|
|
|
|
|
|
11.
|
Commitments and Contingencies
|
12.
|
Income Taxes
|
13.
|
Subsequent Events
|
•
|
developments related to the COVID-19 pandemic including, but not limited to, the duration and severity of the pandemic, additional measures taken by government authorities and the private sector to limit the spread of COVID-19, and further legislative and regulatory actions which impact healthcare providers, including actions that may impact the Medicare program;
|
•
|
changes in government reimbursement for our services and/or new payment policies may result in a reduction in net operating revenues, an increase in costs, and a reduction in profitability;
|
•
|
the failure of our Medicare-certified long term care hospitals or inpatient rehabilitation facilities to maintain their Medicare certifications may cause our net operating revenues and profitability to decline;
|
•
|
the failure of our Medicare-certified long term care hospitals and inpatient rehabilitation facilities operated as “hospitals within hospitals” to qualify as hospitals separate from their host hospitals may cause our net operating revenues and profitability to decline;
|
•
|
a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs;
|
•
|
acquisitions or joint ventures may prove difficult or unsuccessful, use significant resources, or expose us to unforeseen liabilities;
|
•
|
our plans and expectations related to our acquisitions and our ability to realize anticipated synergies;
|
•
|
private third-party payors for our services may adopt payment policies that could limit our future net operating revenues and profitability;
|
•
|
the failure to maintain established relationships with the physicians in the areas we serve could reduce our net operating revenues and profitability;
|
•
|
shortages in qualified nurses, therapists, physicians, or other licensed providers, or the inability to attract or retain healthcare professionals due to the heightened risk of infection related to the COVID-19 pandemic, could increase our operating costs significantly or limit our ability to staff our facilities;
|
•
|
competition may limit our ability to grow and result in a decrease in our net operating revenues and profitability;
|
•
|
the loss of key members of our management team could significantly disrupt our operations;
|
•
|
the effect of claims asserted against us could subject us to substantial uninsured liabilities;
|
•
|
a security breach of our or our third-party vendors’ information technology systems may subject us to potential legal and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 or the Health Information Technology for Economic and Clinical Health Act; and
|
•
|
other factors discussed from time to time in our filings with the SEC, including factors discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, as such risk factors may be updated from time to time in our periodic filings with the SEC, including the risk factors discussed in Item 1A. Risk Factors on this Form 10-Q.
|
|
|
Three Months Ended March 31,
|
|
||||||
|
|
2019
|
|
2020
|
|
||||
|
|
(in thousands)
|
|||||||
Net income
|
|
$
|
53,344
|
|
|
$
|
70,448
|
|
|
Income tax expense
|
|
18,467
|
|
|
21,912
|
|
|
||
Interest expense
|
|
50,811
|
|
|
46,107
|
|
|
||
Gain on sale of businesses
|
|
(6,532
|
)
|
|
(7,201
|
)
|
|
||
Equity in earnings of unconsolidated subsidiaries
|
|
(4,366
|
)
|
|
(2,588
|
)
|
|
||
Income from operations
|
|
111,724
|
|
|
128,678
|
|
|
||
Stock compensation expense:
|
|
|
|
|
|
|
|
||
Included in general and administrative
|
|
4,748
|
|
|
5,437
|
|
|
||
Included in cost of services
|
|
1,507
|
|
|
1,466
|
|
|
||
Depreciation and amortization
|
|
52,138
|
|
|
51,752
|
|
|
||
Adjusted EBITDA
|
|
$
|
170,117
|
|
|
$
|
187,333
|
|
|
|
|
Two Months Ended February
|
|
|
One Month Ended March
|
|
|
Three Months Ended March
|
||||||||||||||||||||||||
|
|
2019
|
|
2020
|
|
%
Change
|
|
|
2019
|
|
2020
|
|
%
Change
|
|
|
2019
|
|
2020
|
||||||||||||||
Selected financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Critical illness recovery hospital
|
|
$
|
295,385
|
|
|
$
|
328,613
|
|
|
11.2
|
%
|
|
|
$
|
162,149
|
|
|
$
|
171,908
|
|
|
6.0
|
%
|
|
|
$
|
457,534
|
|
|
$
|
500,521
|
|
Rehabilitation hospital
|
|
98,695
|
|
|
122,363
|
|
|
24.0
|
|
|
|
55,863
|
|
|
59,656
|
|
|
6.8
|
|
|
|
154,558
|
|
|
182,019
|
|
||||||
Outpatient rehabilitation
|
|
161,758
|
|
|
179,163
|
|
|
10.8
|
|
|
|
85,147
|
|
|
76,086
|
|
|
(10.6
|
)
|
|
|
246,905
|
|
|
255,249
|
|
||||||
Concentra
|
|
259,816
|
|
|
274,926
|
|
|
5.8
|
|
|
|
136,505
|
|
|
123,609
|
|
|
(9.4
|
)
|
|
|
396,321
|
|
|
398,535
|
|
||||||
Other(1)
|
|
38,532
|
|
|
54,283
|
|
|
40.9
|
|
|
|
30,781
|
|
|
24,025
|
|
|
(21.9
|
)
|
|
|
69,313
|
|
|
78,308
|
|
||||||
Total Company
|
|
$
|
854,186
|
|
|
$
|
959,348
|
|
|
12.3
|
%
|
|
|
$
|
470,445
|
|
|
$
|
455,284
|
|
|
(3.2
|
)%
|
|
|
$
|
1,324,631
|
|
|
$
|
1,414,632
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|