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

Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Tables)

3 Months Ended

Mar. 31, 2015

Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

Schedule of Consolidating Balance Sheet

	Select Medical Corporation
	Condensed Consolidating Balance Sheet
	March 31, 2015
	(unaudited)
	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	3,071		$	3,011		$	506	$	—		$	6,588
Accounts receivable, net	—			415,657			77,752		—			493,409
Current deferred tax asset	10,519			2,252			3,190		—			15,961
Intercompany receivables	—			1,586,102			133,170		(1,719,272		)(a)	—
Other current assets	14,060			32,902			5,131		—			52,093
Total Current Assets	27,650			2,039,924			219,749		(1,719,272		)	568,051

Property and equipment, net	30,151			467,027			56,692		—			553,870
Investment in affiliates	3,774,640			84,150			—		(3,858,790		)(b)(c)	—
Goodwill	—			1,652,005			—		—			1,652,005
Non-current deferred tax asset	13,555			—			—		(13,555		)(d)	—
Other identifiable intangibles	—			72,640			—		—			72,640
Other assets	30,864			108,864			757		—			140,485

Total Assets	$	3,876,860		$	4,424,610		$	277,198	$	(5,591,617	)	$	2,987,051

Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	18,925		$	—		$	—	$	—		$	18,925
Current portion of long-term debt and notes payable	8,957			1,758			345		—			11,060
Accounts payable	10,150			77,693			13,170		—			101,013
Intercompany payables	1,852,442			(133,170		)	—		(1,719,272		)(a)	—
Accrued payroll	6,940			73,120			322		—			80,382
Accrued vacation	5,363			51,016			9,550		—			65,929
Accrued interest	21,684			121			—		—			21,805
Accrued other	38,855			39,593			8,625		—			87,073
Income taxes payable	6,776			—			—		—			6,776
Total Current Liabilities	1,970,092			110,131			32,012		(1,719,272		)	392,963

Long-term debt, net of current portion	1,087,579			389,575			92,473		—			1,569,627
Non-current deferred tax liability	—			112,305			7,952		(13,555		)(d)	106,702
Other non-current liabilities	53,467			39,961			4,817		—			98,245

Total Liabilities	3,111,138			651,972			137,254		(1,732,827		)	2,167,537

Redeemable non-controlling interests	—			—			11,275		—			11,275

Stockholder’s Equity:
Common stock	0			—			—		—			0
Capital in excess of par	889,989			—			—		—			889,989
Retained earnings (accumulated deficit)	(124,267		)	1,080,777			3,586		(1,084,363		)(c)	(124,267		)
Subsidiary investment	—			2,691,861			82,566		(2,774,427		)(b)	—
Total Select Medical Corporation Stockholder’s Equity	765,722			3,772,638			86,152		(3,858,790		)	765,722

Non-controlling interests	—			—			42,517		—			42,517
Total Equity	765,722			3,772,638			128,669		(3,858,790		)	808,239

Total Liabilities and Equity	$	3,876,860		$	4,424,610		$	277,198	$	(5,591,617	)	$	2,987,051

(a)

Elimination of intercompany.

(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, 2014
	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	70		$	2,454	$	830	$	—		$	3,354
Accounts receivable, net	—			376,780		67,489		—			444,269
Current deferred tax asset	10,186			2,458		3,347		—			15,991
Prepaid income taxes	17,888			—		—		—			17,888
Intercompany receivables	—			1,698,600		121,447		(1,820,047		)(a)	—
Other current assets	7,860			32,919		5,363		—			46,142
Total Current Assets	36,004			2,113,211		198,476		(1,820,047		)	527,644

Property and equipment, net	17,521			468,138		56,651		—			542,310
Investment in affiliates	3,725,915			82,514		—		(3,808,429		)(b) (c)	—
Goodwill	—			1,642,083		—		—			1,642,083
Non-current deferred tax asset	11,230			—		—		(11,230		)(d)	—
Other identifiable intangibles	—			72,519		—		—			72,519
Other assets	32,463			106,843		947		—			140,253

Total Assets	$	3,823,133		$	4,485,308	$	256,074	$	(5,639,706	)	$	2,924,809

Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	21,746		$	—	$	—	$	—		$	21,746
Current portion of long-term debt and notes payable	8,496			1,844		534		—			10,874
Accounts payable	9,885			84,304		14,343		—			108,532
Intercompany payables	1,820,047			—		—		(1,820,047		)(a)	—
Accrued payroll	17,410			79,435		245		—			97,090
Accrued vacation	5,070			49,315		8,747		—			63,132
Accrued interest	10,596			78		—		—			10,674
Accrued other	39,801			34,107		8,468		—			82,376
Total Current Liabilities	1,933,051			249,083		32,337		(1,820,047		)	394,424

Long-term debt, net of current portion	1,098,151			364,794		79,157		—			1,542,102
Non-current deferred tax liability	—			112,013		8,420		(11,230		)(d)	109,203
Other non-current liabilities	52,416			35,576		4,863		—			92,855

Total Liabilities	3,083,618			761,466		124,777		(1,831,277		)	2,138,584

Redeemable non-controlling interests	—			—		10,985		—			10,985

Stockholder’s Equity:
Common stock	0			—		—		—			0
Capital in excess of par	885,407			—		—		—			885,407
Retained earnings (accumulated deficit)	(145,892		)	1,048,455		8,366		(1,056,821		)(c)	(145,892		)
Subsidiary investment	—			2,675,387		76,221		(2,751,608		)(b)	—
Total Select Medical Corporation Stockholder’s Equity	739,515			3,723,842		84,587		(3,808,429		)	739,515

Non-controlling interests	—			—		35,725		—			35,725
Total Equity	739,515			3,723,842		120,312		(3,808,429		)	775,240

Total Liabilities and Equity	$	3,823,133		$	4,485,308	$	256,074	$	(5,639,706	)	$	2,924,809

(a)

Elimination of intercompany.

(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 Consolidating Statement of Operations

	Select Medical Corporation
	Condensed Consolidating Statement of Operations
	For the Three Months Ended March 31, 2015
	(unaudited)
	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)

Net operating revenues	$	119		$	673,749		$	121,475		$	—		$	795,343

Costs and expenses:
Cost of services	436			561,093			102,856			—			664,385
General and administrative	21,751			(76		)	—			—			21,675
Bad debt expense	—			9,473			3,197			—			12,670
Depreciation and amortization	985			13,772			2,591			—			17,348
Total costs and expenses	23,172			584,262			108,644			—			716,078

Income (loss) from operations	(23,053		)	89,487			12,831			—			79,265

Other income and expense:
Intercompany interest and royalty fees	(286		)	280			6			—			—
Intercompany management fees	41,454			(35,247		)	(6,207		)	—			—
Equity in earnings of unconsolidated subsidiaries	—			2,571			21			—			2,592
Interest expense	(13,901		)	(6,003		)	(1,484		)	—			(21,388		)

Income from operations before income taxes	4,214			51,088			5,167			—			60,469

Income tax expense (benefit)	1,402			22,046			(264		)	—			23,184
Equity in earnings of subsidiaries	32,251			3,280			—			(35,531		)(a)	—

Net income	35,063			32,322			5,431			(35,531		)	37,285

Less: Net income attributable to non-controlling interests	—			—			2,222			—			2,222

Net income attributable to Select Medical Corporation	$	35,063		$	32,322		$	3,209		$	(35,531	)	$	35,063

(a)

Elimination of equity in earnings of subsidiaries.

	Select Medical Corporation
	Condensed Consolidating Statement of Operations
	For the Three Months Ended March 31, 2014
	(unaudited)
	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)

Net operating revenues	$	103		$	660,317		$	102,158		$	—		$	762,578

Costs and expenses:
Cost of services	445			550,224			88,095			—			638,764
General and administrative	19,312			(1,189		)	—			—			18,123
Bad debt expense	—			9,317			1,701			—			11,018
Depreciation and amortization	923			13,048			2,258			—			16,229
Total costs and expenses	20,680			571,400			92,054			—			684,134

Income (loss) from operations	(20,577		)	88,917			10,104			—			78,444

Other income and expense:
Intercompany interest and royalty fees	(282		)	285			(3		)	—			—
Intercompany management fees	38,868			(33,941		)	(4,927		)	—			—
Equity in earnings of unconsolidated subsidiaries	—			887			21			—			908
Loss on early retirement of debt	(2,277		)	—			—			—			(2,277		)
Interest expense	(13,796		)	(5,832		)	(988		)	—			(20,616		)

Income from operations before income taxes	1,936			50,316			4,207			—			56,459

Income tax expense	925			20,962			205			—			22,092
Equity in earnings of subsidiaries	32,033			2,337			—			(34,370		)(a)	—

Net income	33,044			31,691			4,002			(34,370		)	34,367

Less: Net income attributable to non-controlling interests	—			53			1,270			—			1,323

Net income attributable to Select Medical Corporation	$	33,044		$	31,638		$	2,732		$	(34,370	)	$	33,044

(a)

Elimination of equity in earnings of subsidiaries.

Schedule of Consolidating Statement of Cash Flows


	Select Medical Corporation
	Condensed Consolidating Statement of Cash Flows
	For the Three Months Ended March 31, 2015
	(unaudited)
	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)

Operating activities
Net income	$	35,063		$	32,322		$	5,431		$	(35,531	)(a)	$	37,285
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Distributions from unconsolidated subsidiaries	—			—			28			—			28
Depreciation and amortization	985			13,772			2,591			—			17,348
Provision for bad debts	—			9,473			3,197			—			12,670
Equity in earnings of unconsolidated subsidiaires	—			(2,571		)	(21		)	—			(2,592		)
Loss from disposal of assets	—			5			—			—			5
Non-cash stock compensation expense	2,399			—			—			—			2,399
Amortization of debt discount and issuance costs	1,929			—			—			—			1,929
Deferred income taxes	(2,471		)	—			—			—			(2,471		)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries	(32,251		)	(3,280		)	—			35,531		(a)	—
Accounts receivable	—			(48,350		)	(13,460		)	—			(61,810		)
Other current assets	(6,200		)	42			234			—			(5,924		)
Other assets	1,599			(140		)	204			—			1,663
Accounts payable	47			6,037			(752		)	—			5,332
Accrued expenses	1,016			5,048			693			—			6,757
Income taxes	24,916			—			—			—			24,916
Net cash provided by (used in) operating activities	27,032			12,358			(1,855		)	—			37,535

Investing activities
Purchases of property and equipment	(1,452		)	(25,067		)	(1,329		)	—			(27,848		)
Investment in businesses	—			(1,000		)	—			—			(1,000		)
Acquisition of businesses, net of cash acquired	—			—			(2,686		)	—			(2,686		)
Net cash used in investing activities	(1,452		)	(26,067		)	(4,015		)	—			(31,534		)

Financing activities
Borrowings on revolving credit facility	215,000			—			—			—			215,000
Payments on revolving credit facility	(175,000		)	—			—			—			(175,000		)
Payments on credit facility term loans	(26,884		)	—			—			—			(26,884		)
Borrowings of other debt	6,486			—			96			—			6,582
Principal payments on other debt	(4,201		)	(103		)	(280		)	—			(4,584		)
Repayments of bank overdrafts	(2,821		)	—			—			—			(2,821		)
Equity investment by Holdings	489			—			—			—			489
Dividends paid to Holdings	(13,129		)	—			—			—			(13,129		)
Intercompany	(22,524		)	14,369			8,155			—			—
Tax benefit from stock based awards	5			—			—			—			5
Distributions to non-controlling interests	—			—			(2,425		)	—			(2,425		)
Net cash provided by (used in) financing activities	(22,579		)	14,266			5,546			—			(2,767		)

Net increase (decrease) in cash and cash equivalents	3,001			557			(324		)	—			3,234

Cash and cash equivalents at beginning of period	70			2,454			830			—			3,354
Cash and cash equivalents at end of period	$	3,071		$	3,011		$	506		$	—		$	6,588

(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, 2014
	(unaudited)
	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)

Operating activities
Net income	$	33,044		$	31,691		$	4,002		$	(34,370	)(a)	$	34,367
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	923			13,048			2,258			—			16,229
Provision for bad debts	—			9,317			1,701			—			11,018
Equity in earnings of unconsolidated subsidiaires	—			(887		)	(21		)	—			(908		)
Loss on early retirement of debt	2,277			—			—			—			2,277
Loss from disposal or sale of assets	—			6			115			—			121
Non-cash stock compensation expense	2,155			—			—			—			2,155
Amortization of debt discount, premium and issuance costs	2,051			—			—			—			2,051
Deferred income taxes	57			—			—			—			57
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries	(32,033		)	(2,337		)	—			34,370		(a)	—
Accounts receivable	—			(80,083		)	(7,354		)	—			(87,437		)
Other current assets	(2,043		)	(1,959		)	858			—			(3,144		)
Other assets	(3,324		)	(597		)	(17		)	—			(3,938		)
Accounts payable	1,274			4,122			(664		)	—			4,732
Accrued expenses	(12,117		)	1,802			(2,488		)	—			(12,803		)
Income and deferred taxes	19,223			—			—			—			19,223
Net cash provided by (used in) operating activities	11,487			(25,877		)	(1,610		)	—			(16,000		)

Investing activities
Purchases of property and equipment	(2,171		)	(23,636		)	(1,492		)	—			(27,299		)
Investment in businesses, net of distributions	—			(124		)	—			—			(124		)
Acquisition of businesses, net of cash acquired	—			(375		)	—			—			(375		)
Net cash used in investing activities	(2,171		)	(24,135		)	(1,492		)	—			(27,798		)

Financing activities
Borrowings on revolving credit facility	285,000			—			—			—			285,000
Payments on revolving credit facility	(200,000		)	—			—			—			(200,000		)
Payments on credit facility term loans	(33,994		)	—			—			—			(33,994		)
Issuance of 6.375% senior notes, includes premium	111,650			—			—			—			111,650
Borrowings of other debt	6,111			—			—			—			6,111
Principal payments on other debt	(2,567		)	(80		)	(420		)	—			(3,067		)
Debt issuance costs	(4,434		)	—			—			—			(4,434		)
Proceeds from bank overdrafts	5,970			—			—			—			5,970
Equity investment by Holdings	1,943			—			—			—			1,943
Dividends paid to Holdings	(123,556		)	—			—			—			(123,556		)
Intercompany	(55,440		)	50,154			5,286			—			—
Distributions to non-controlling interests	—			—			(1,452		)	—			(1,452		)
Net cash provided by (used in) financing activities	(9,317		)	50,074			3,414			—			44,171

Net increase (decrease) in cash and cash equivalents	(1		)	62			312			—			373

Cash and cash equivalents at beginning of period	71			3,098			1,150			—			4,319
Cash and cash equivalents at end of period	$	70		$	3,160		$	1,462		$	—		$	4,692

(a)

Elimination of equity in earnings of consolidated subsidiaries.