Select Medical Holdings Corporation Announces Results for Second Quarter Ended June 30, 2016

The financial results of the outpatient rehabilitation segment include the contract therapy business through March 31, 2016 and Physiotherapy beginning March 4, 2016.

For the second quarter ended June 30, 2016, net operating revenues for the outpatient rehabilitation segment increased 23.6% to $256.9 million, compared to $207.8 million for the same quarter, prior year.  Income from operations for the outpatient rehabilitation segment increased 25.0% to $31.9 million for the second quarter ended June 30, 2016, compared to $25.5 million for the same quarter, prior year.  Adjusted EBITDA for the segment increased 32.8% to $38.1 million for the second quarter ended June 30, 2016, compared to $28.7 million for the same quarter, prior year.  The Adjusted EBITDA margin for the segment was 14.8% for the second quarter ended June 30, 2016, compared to 13.8% for the same quarter, prior year.  Certain outpatient rehabilitation key statistics for both the second quarters ended June 30, 2016 and 2015 are presented in table VI of this release.

For the six months ended June 30, 2016, net operating revenues for the outpatient rehabilitation segment increased 22.5% to $495.0 million, compared to $404.2 million for the same period, prior year.  Income from operations for the outpatient rehabilitation segment increased 27.5% to $56.8 million for the second quarter ended June 30, 2016, compared to $44.5 million for the same quarter, prior year.  Adjusted EBITDA for the outpatient rehabilitation segment for the six months ended June 30, 2016 increased 31.8% to $67.0 million, compared to $50.9 million for the same period, prior year.  The Adjusted EBITDA margin for the segment was 13.5% for the six months ended June 30, 2016, compared to 12.6% for the same period, prior year.  Certain outpatient rehabilitation key statistics for both the six months ended June 30, 2016 and 2015 are presented in table VII of this release. 

Concentra Segment

The financial results of Concentra, which is operated through a joint venture subsidiary, are consolidated with Select Medical's commencing on the acquisition date of June 1, 2015.

For the second quarter ended June 30, 2016, net operating revenues for the Concentra segment were $254.9 million, compared to $86.8 million for the same quarter, prior year. Income from operations for the Concentra segment was $27.9 million for the second quarter ended June 30, 2016, compared to $2.3 million for the same quarter, prior year. Adjusted EBITDA for the Concentra segment was $43.0 million for the second quarter ended June 30, 2016, compared to $11.2 million for the second quarter, prior year. The Adjusted EBITDA margin for the Concentra segment was 16.9% for the second quarter ended June 30, 2016, compared to 12.9% for the same quarter, prior year. Certain Concentra key statistics for both the second quarters ended June 30, 2016 and 2015 are presented in table VI of this release.

For the six months ended June 30, 2016, net operating revenues for the Concentra segment were $505.7 million, compared to $86.8 million for the same period, prior year. Income from operations for the Concentra segment was $46.5 million for the six months ended June 30, 2016, compared to $2.3 million for the same period, prior year. Adjusted EBITDA for the Concentra segment was $77.2 million for the six months ended June 30, 2016, compared to $11.2 million for the same period, prior year. The Adjusted EBITDA margin for the Concentra segment was 15.3% for the six months ended June 30, 2016, compared to 12.9% for the same period, prior year. Certain Concentra key statistics for the six months ended June 30, 2016 and 2015 are presented in table VII of this release.

Stock Repurchase Program

Select Medical did not repurchase shares during the six months ended June 30, 2016 under its authorized $500.0 million stock repurchase program. The program will remain in effect until December 31, 2016, unless extended or earlier terminated by the board of directors.

Business Outlook

Select Medical is updating its business outlook following reporting its second quarter 2016 financial performance. Select Medical now expects for the full year of 2016 consolidated net operating revenues to be in the range of $4.25 billion to $4.35 billion, Adjusted EBITDA for the full year of 2016 to be in the range of $500.0 million to $530.0 million, and fully diluted income per common share for the full year 2016 to be in the range of $0.87 to $1.00. Refer to table X for a reconciliation of net income to Adjusted EBITDA expectations for the full year of 2016.

Select Medical's business outlook has been updated to include the effects of the revised inpatient rehabilitation joint venture hospital openings,  long term acute care hospital closures, and the effective tax rate that occurred in the most recent quarter.

Conference Call

Select Medical will host a conference call regarding its second quarter results, as well as its business outlook, on Friday, August 5, 2016, at 9:00am EDT. The domestic dial in number for the call is 1-877-430-7741. The international dial in number is 1-615-247-0054. The conference ID for the call is 41469974. The conference call will be webcast simultaneously and can be accessed at Select Medical Holdings Corporation's website www.selectmedicalholdings.com.

For those unable to participate in the conference call, a replay will be available until 11:59pm EDT, August 12, 2016. The replay number is 1-855-859-2056 (domestic) or 1-404-537-3406 (international). The conference ID for the replay will be 41469974. The replay can also be accessed at Select Medical Holdings Corporation's website, www.selectmedicalholdings.com.

*   *   *   *   *

Select Medical began operations in 1997 and has grown to be one of the largest operators of specialty hospitals, outpatient rehabilitation clinics and occupational health centers in the United States based on the number of facilities. As of June 30, 2016, Select Medical operated 106 long term acute care hospitals and 18 acute medical rehabilitation hospitals in 26 states and 1,600 outpatient rehabilitation clinics in 37 states and the District of Columbia.  Select Medical's joint venture subsidiary Concentra operated 301 centers in 38 states. Concentra also provides contract services at employer worksites and Department of Veterans Affairs community-based outpatient clinics. At June 30, 2016, Select Medical had operations in 46 states and the District of Columbia. Information about Select Medical is available at www.selectmedical.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 due to factors including the following:

• changes in government reimbursement for our services due to the implementation of healthcare reform legislation, deficit reduction measures, and/or new payment policies (including, for example, the expiration of the moratorium limiting the full application of the 25 Percent Rule that would reduce our Medicare payments for those patients admitted to a long term acute care hospital from a referring hospital in excess of an applicable percentage admissions threshold) may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability;
• the impact of the Bipartisan Budget Act of 2013, which establishes new payment limits for Medicare patients who do not meet specified criteria, may result in a reduction in net operating revenues and profitability of our long term acute care hospitals;
• the failure of our specialty hospitals to maintain their Medicare certifications may cause our net operating revenues and profitability to decline;
• the failure of our 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 the Concentra and Physiotherapy acquisitions and our inability to realize anticipated synergies;
• private third-party payors for our services may undertake future cost containment initiatives 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 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; and
• other factors discussed from time to time in our filings with the Securities and Exchange Commission ("SEC"), including factors discussed under the section entitled, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 as such risk factors may be updated from time to time in our periodic filings with the SEC.

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance.

Investor inquiries:
Joel T. Veit
Senior Vice President and Treasurer
717-972-1100
ir@selectmedical.com

I.  Condensed Consolidated Statements of Operations
For the Three Months Ended June 30, 2015 and 2016 (In thousands, except per share amounts, unaudited)
		2015		2016		% Change
Net operating revenues		$   887,065		$  1,097,631		23.7%
Costs and expenses:
Cost of services		743,879		916,985		23.3%
General and administrative		24,041		25,870		7.6%
Bad debt expense		12,286		17,517		42.6%
Depreciation and amortization		21,848		36,205		65.7%
Income from operations		85,011		101,054		18.9%
Equity in earnings of unconsolidated subsidiaries		3,848		4,546		18.1%
Non-operating gain		-		13,035		N/M
Interest expense		(25,288)		(44,332)		75.3%
Income before income taxes		63,571		74,303		16.9%
Income tax expense		23,517		33,450		42.2%
Net income		40,054		40,853		2.0%
Less:  Net income attributable to non-      controlling interests		3,114		6,918		N/M
Net income attributable to Select Medical       Holdings Corporation		$   36,940		$    33,935		(8.1%)
Weighted average shares outstanding(1):
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