SELECT MEDICAL HOLDINGS CORP - 10-Q filing on 2015-04-30

Segment Information

3 Months Ended

Mar. 31, 2015

6. Segment Information

The Company’s reportable segments consist of (i) specialty hospitals and (ii) outpatient rehabilitation. Other activities include the Company’s corporate services and certain other non-consolidating joint ventures and minority investments in other healthcare related businesses. The outpatient rehabilitation reportable segment has two operating segments: outpatient rehabilitation clinics and contract therapy. These operating segments are aggregated for reporting purposes as they have common economic characteristics and provide a similar service to a similar patient base. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance of the segments based on Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, equity in earnings (losses) of unconsolidated subsidiaries and other income (expense).

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, 2014
	Specialty Hospitals		Outpatient Rehabilitation		Other			Total
	(in thousands)

Net operating revenues	$	564,625	$	197,850	$	103		$	762,578
Adjusted EBITDA	92,150		20,989		(16,311		)	96,828
Total assets	2,290,655		525,040		100,031			2,915,726
Capital expenditures	21,498		3,630		2,171			27,299

	Three Months Ended March 31, 2015
	Specialty Hospitals		Outpatient Rehabilitation		Other			Total
	(in thousands)

Net operating revenues	$	598,781	$	196,443	$	119		$	795,343
Adjusted EBITDA	96,472		22,133		(19,665		)	98,940
Total assets	2,332,591		540,473		113,987			2,987,051
Capital expenditures	22,793		3,922		1,133			27,848

A reconciliation of Adjusted EBITDA to income before income taxes is as follows:

	Three Months Ended March 31, 2014
	Specialty Hospitals			Outpatient Rehabilitation			Other			Total
	(in thousands)
Adjusted EBITDA	$	92,150		$	20,989		$	(16,311	)
Depreciation and amortization	(12,095		)	(3,212		)	(922		)
Stock compensation expense	—			—			(2,155		)
Income (loss) from operations	$	80,055		$	17,777		$	(19,388	)	$	78,444
Loss on early retirement of debt										(2,277		)
Equity in earnings of unconsolidated subsidiaries										908
Interest expense										(20,616		)
Income before income taxes										$	56,459

	Three Months Ended March 31, 2015
	Specialty Hospitals			Outpatient Rehabilitation			Other			Total
	(in thousands)
Adjusted EBITDA	$	96,472		$	22,133		$	(19,665	)
Depreciation and amortization	(13,223		)	(3,140		)	(985		)
Stock compensation expense	—			—			(2,327		)
Income (loss) from operations	$	83,249		$	18,993		$	(22,977	)	$	79,265
Equity in earnings of unconsolidated subsidiaries										2,592
Interest expense										(21,388		)
Income before income taxes										$	60,469