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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from              to              
Commission file numbers: 001-34465
 
SELECT MEDICAL HOLDINGS CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware20-1764048
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
 
4714 Gettysburg Road, P.O. Box 2034
Mechanicsburg, PA 17055
(Address of Principal Executive Offices and Zip code)
(717972-1100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareSEMNew York Stock Exchange
(NYSE)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as such Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒  No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).   Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
 Emerging Growth Company
 If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No ☒
As of April 30, 2022, Select Medical Holdings Corporation had outstanding 130,627,340 shares of common stock.
Unless the context indicates otherwise, any reference in this report to “Holdings” refers to Select Medical Holdings Corporation and any reference to “Select” refers to Select Medical Corporation, the wholly owned operating subsidiary of Holdings, and any of Select’s subsidiaries. Any reference to “Concentra” refers to Concentra Group Holdings Parent, LLC (“Concentra Group Holdings Parent”) and its subsidiaries, including Concentra Inc. References to the “Company,” “we,” “us,” and “our” refer collectively to Holdings, Select, and Concentra.
1

TABLE OF CONTENTS
 
   
 
   
 
   
 
   
 
   
 
   
 
   
   
   
   
   
   
   
   
   
   
   
   
 
2

PART I: FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Select Medical Holdings Corporation
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share amounts)
December 31, 2021March 31, 2022
ASSETS  
Current Assets:  
Cash and cash equivalents$74,310 $130,881 
Accounts receivable889,303 941,434 
Prepaid income taxes55,620 40,761 
Other current assets120,206 137,775 
Total Current Assets1,139,439 1,250,851 
Operating lease right-of-use assets1,078,754 1,102,710 
Property and equipment, net961,467 952,926 
Goodwill3,448,912 3,465,456 
Identifiable intangible assets, net374,879 368,850 
Other assets356,720 395,151 
Total Assets$7,360,171 $7,535,944 
LIABILITIES AND EQUITY  
Current Liabilities:  
Overdrafts$42,353 $34,745 
Current operating lease liabilities229,334 234,420 
Current portion of long-term debt and notes payable17,572 24,513 
Accounts payable233,844 238,150 
Accrued payroll247,292 242,749 
Accrued vacation144,048 148,114 
Accrued interest29,002 9,932 
Accrued other244,312 232,297 
Government advances83,790 20,862 
Unearned government assistance93 194 
Income taxes payable1,437 3,175 
Total Current Liabilities1,273,077 1,189,151 
Non-current operating lease liabilities916,540 938,423 
Long-term debt, net of current portion3,556,385 3,738,299 
Non-current deferred tax liability142,792 156,407 
Other non-current liabilities106,442 105,098 
Total Liabilities5,995,236 6,127,378 
Commitments and contingencies (Note 14)
Redeemable non-controlling interests39,033 41,670 
Stockholders’ Equity:  
Common stock, $0.001 par value, 700,000,000 shares authorized, 133,884,817 and 131,769,303 shares issued and outstanding at 2021 and 2022, respectively
134 132 
Capital in excess of par504,314 489,794 
Retained earnings593,251 596,079 
Accumulated other comprehensive income12,282 52,135 
Total Stockholders’ Equity1,109,981 1,138,140 
Non-controlling interests215,921 228,756 
Total Equity1,325,902 1,366,896 
Total Liabilities and Equity$7,360,171 $7,535,944 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Select Medical Holdings Corporation
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share amounts)

 For the Three Months Ended March 31,
 20212022
Revenue$1,546,463 $1,599,547 
Costs and expenses:  
Cost of services, exclusive of depreciation and amortization1,293,449 1,407,010 
General and administrative35,403 37,513 
Depreciation and amortization49,620 51,039 
Total costs and expenses1,378,472 1,495,562 
Other operating income34,021  
Income from operations202,012 103,985 
Other income and expense:  
Equity in earnings of unconsolidated subsidiaries9,919 5,397 
Interest income4,749  
Interest expense(34,402)(35,514)
Income before income taxes182,278 73,868 
Income tax expense45,064 17,942 
Net income137,214 55,926 
Less: Net income attributable to non-controlling interests26,668 6,809 
Net income attributable to Select Medical Holdings Corporation$110,546 $49,117 
Earnings per common share (Note 13):  
Basic and diluted$0.82 $0.37 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Select Medical Holdings Corporation
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)

For the Three Months Ended March 31,
20212022
Net income$137,214 $55,926 
Other comprehensive income, net of tax:
Gain on interest rate cap cash flow hedge8,151 39,814 
Reclassification adjustment for losses (gains) included in net income 39 
Net change, net of tax benefit (expense) of $(2,834) and $(13,284)
8,151 39,853 
Comprehensive income145,365 95,779 
Less: Comprehensive income attributable to non-controlling interests26,668 6,809 
Comprehensive income attributable to Select Medical Holdings Corporation$118,697 $88,970 

The accompanying notes are an integral part of these condensed consolidated financial statements.


5

Select Medical Holdings Corporation
Condensed Consolidated Statements of Changes in Equity and Income
(unaudited)
(in thousands)

For the Three Months Ended March 31, 2022
 Total Stockholders’ Equity  
 Common
Stock
Issued
Common
Stock
Par Value
Capital in
Excess
of Par
Retained
Earnings
Accumulated Other Comprehensive IncomeTotal Stockholders’ EquityNon-controlling
Interests
Total
Equity
Balance at December 31, 2021133,884 $134 $504,314 $593,251 $12,282 $1,109,981 $215,921 $1,325,902 
Net income attributable to Select Medical Holdings Corporation49,117 49,117 49,117 
Net income attributable to non-controlling interests 4,891 4,891 
Cash dividends declared for common stockholders ($0.125 per share)
(16,691)(16,691)(16,691)
Issuance of restricted stock13 0 0   
Vesting of restricted stock8,288 8,288 8,288 
Repurchase of common shares(2,128)(2)(23,459)(28,215)(51,676)(51,676)
Issuance of non-controlling interests651 651 4,578 5,229 
Non-controlling interests acquired in business combination, measurement period adjustment 12,463 12,463 
Distributions to and purchases of non-controlling interests (9,097)(9,097)
Redemption value adjustment on non-controlling interests(1,381)(1,381)(1,381)
Other comprehensive income39,853 39,853 39,853 
Other(2)(2)(2)
Balance at March 31, 2022131,769 $132 $489,794 $596,079 $52,135 $1,138,140 $228,756 $1,366,896 


For the Three Months Ended March 31, 2021
 Total Stockholders’ Equity  
 Common
Stock
Issued
Common
Stock
Par Value
Capital in
Excess
of Par
Retained
Earnings
Accumulated Other Comprehensive Income (Loss)Total Stockholders’ EquityNon-controlling
Interests
Total
Equity
Balance at December 31, 2020134,850 $135 $509,128 $553,244 $(2,027)$1,060,480 $192,493 $1,252,973 
Net income attributable to Select Medical Holdings Corporation110,546 110,546 110,546 
Net income attributable to non-controlling interests 17,042 17,042 
Issuance of restricted stock2 0 0   
Forfeitures of unvested restricted stock(14)0 0   
Vesting of restricted stock6,173 6,173 6,173 
Non-controlling interests acquired in business combination 8,193 8,193 
Distributions to and purchases of non-controlling interests(787)(787)(13,458)(14,245)
Redemption value adjustment on non-controlling interests(38,405)(38,405)(38,405)
Other comprehensive income8,151 8,151 8,151 
Other(178)(4)(182)371 189 
Balance at March 31, 2021134,838 $135 $514,336 $625,381 $6,124 $1,145,976 $204,641 $1,350,617 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Select Medical Holdings Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 For the Three Months Ended March 31,
 20212022
Operating activities  
Net income$137,214 $55,926 
Adjustments to reconcile net income to net cash provided by operating activities:  
Distributions from unconsolidated subsidiaries11,633 7,486 
Depreciation and amortization49,620 51,039 
Provision for expected credit losses67 94 
Equity in earnings of unconsolidated subsidiaries(9,919)(5,397)
Loss (gain) on sale or disposal of assets72 (23)
Stock compensation expense6,709 8,823 
Amortization of debt discount, premium and issuance costs543 558 
Deferred income taxes(897)420 
Changes in operating assets and liabilities, net of effects of business combinations:  
Accounts receivable(60,142)(52,225)
Other current assets(4,425)(1,819)
Other assets961 2,686 
Accounts payable23,460 16,074 
Accrued expenses21,167 (31,076)
Government advances (62,928)
Unearned government assistance19,207 101 
Income taxes44,618 16,598 
Net cash provided by operating activities239,888 6,337 
Investing activities  
Business combinations, net of cash acquired(6,314)(5,186)
Purchases of property and equipment(39,719)(46,845)
Investment in businesses(6,571)(3,337)
Proceeds from sale of assets19 37 
Net cash used in investing activities(52,585)(55,331)
Financing activities  
Borrowings on revolving facilities 280,000 
Payments on revolving facilities (100,000)
Borrowings of other debt8,915 15,794 
Principal payments on other debt(9,342)(9,188)
Dividends paid to common stockholders (16,691)
Repurchase of common stock (51,676)
Decrease in overdrafts (7,608)
Proceeds from issuance of non-controlling interests 5,229 
Distributions to and purchases of non-controlling interests(13,663)(10,295)
Net cash provided by (used in) financing activities(14,090)105,565 
Net increase in cash and cash equivalents173,213 56,571 
Cash and cash equivalents at beginning of period577,061 74,310 
Cash and cash equivalents at end of period$750,274 $130,881 
Supplemental Information  
Cash paid for interest$52,470 $53,517 
Cash paid for taxes1,343 923 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7

SELECT MEDICAL HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.                  Basis of Presentation
The unaudited condensed consolidated financial statements of Select Medical Holdings Corporation (“Holdings”) include the accounts of its wholly owned subsidiary, Select Medical Corporation (“Select”). Holdings conducts substantially all of its business through Select and its subsidiaries. Holdings, Select, and Select’s subsidiaries are collectively referred to as the “Company.” The unaudited condensed consolidated financial statements of the Company as of March 31, 2022, and for the three month periods ended March 31, 2021 and 2022, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting and the accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, certain information and disclosures required by GAAP, which are normally included in the notes to the consolidated financial statements, have been condensed or omitted pursuant to those rules and regulations, although the Company believes the disclosure is adequate to make the information presented not misleading. In the opinion of management, such information contains all adjustments, which are normal and recurring in nature, necessary for a fair statement of the financial position, results of operations and cash flow for such periods. All significant intercompany transactions and balances have been eliminated.
The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2022. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2021, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2022.
2.    Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates.
3.     Credit Risk Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash balances and accounts receivable. The Company’s excess cash is held with large financial institutions. The Company grants unsecured credit to its patients, most of whom reside in the service area of the Company’s facilities and are insured under third-party payor agreements.
Because of the diversity in the Company’s non-governmental third-party payor base, as well as their geographic dispersion, accounts receivable due from the Medicare program represent the Company’s only significant concentration of credit risk. Approximately 15% of the Company’s accounts receivable is due from Medicare at both December 31, 2021 and March 31, 2022.
4.     Redeemable Non-Controlling Interests
The ownership interests held by outside parties in subsidiaries, which include limited liability companies and limited partnerships, controlled by the Company are classified as non-controlling interests. Some of the Company’s non-controlling ownership interests consist of outside parties that have certain redemption rights that, if exercised, require the Company to purchase the parties’ ownership interests. These interests are classified and reported as redeemable non-controlling interests and have been adjusted to their approximate redemption values, after the attribution of net income or loss.







8

The changes in redeemable non-controlling interests are as follows:
Three Months Ended March 31,
20212022
(in thousands)
Balance as of January 1$398,171 $39,033 
Net income attributable to redeemable non-controlling interests9,626 1,918 
Distributions to and purchases of redeemable non-controlling interests(614)(1,198)
Redemption value adjustment on redeemable non-controlling interests38,405 1,381 
Other343 536 
Balance as of March 31$445,931 $41,670 
5.     Variable Interest Entities
Certain states prohibit the “corporate practice of medicine,” which restricts the Company from owning medical practices which directly employ physicians and from exercising control over medical decisions by physicians. In these states, the Company enters into long-term management agreements with medical practices that are owned by licensed physicians, which, in turn, employ or contract with physicians who provide professional medical services. The management agreements provide for the Company to direct the transfer of ownership of the medical practices to new licensed physicians at any time. Based on the provisions of the management agreements, the medical practices are variable interest entities for which the Company is the primary beneficiary.
As of December 31, 2021 and March 31, 2022, the total assets of the Company’s variable interest entities were $225.1 million and $242.0 million, respectively, and are principally comprised of accounts receivable. As of December 31, 2021 and March 31, 2022, the total liabilities of the Company’s variable interest entities were $74.8 million and $79.1 million, respectively, and are principally comprised of accounts payable and accrued expenses. These variable interest entities have obligations payable for services received under their management agreements with the Company of $150.3 million and $163.4 million as of December 31, 2021 and March 31, 2022, respectively. These intercompany balances are eliminated in consolidation.
6.     Leases
The Company has operating and finance leases for its facilities. The Company leases its corporate office space from related parties.
The Company’s total lease cost is as follows:

Three Months Ended March 31, 2021Three Months Ended March 31, 2022
Unrelated PartiesRelated PartiesTotalUnrelated PartiesRelated PartiesTotal
(in thousands)
Operating lease cost
$70,114 $1,799 $71,913 $73,962 $1,809 $75,771 
Finance lease cost:
Amortization of right-of-use assets
35  35 347  347 
Interest on lease liabilities
251  251 340  340 
Short-term lease cost   35  35 
Variable lease cost13,009 3 13,012 13,655 39 13,694 
Sublease income(2,234) (2,234)(1,966) (1,966)
Total lease cost$81,175 $1,802 $82,977 $86,373 $1,848 $88,221 




9

Supplemental cash flow information related to leases is as follows:
Three Months Ended March 31,
20212022
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$72,437 $77,689 
Operating cash flows for finance leases
251 340 
Financing cash flows for finance leases
58 344 
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases$79,987 $88,636 
Finance leases138  

Supplemental balance sheet information related to leases is as follows:

December 31, 2021March 31, 2022
Unrelated PartiesRelated PartiesTotalUnrelated PartiesRelated PartiesTotal
(in thousands)
Operating Leases
Operating lease right-of-use assets$1,052,603 $26,151 $1,078,754 $1,077,980 $24,730 $1,102,710 
Current operating lease liabilities$222,865 $6,469 $229,334 $228,598 $5,822 $234,420 
Non-current operating lease liabilities894,104 22,436 916,540 916,887 21,536 938,423 
Total operating lease liabilities$1,116,969 $28,905 $1,145,874 $1,145,485 $27,358 $1,172,843 

December 31, 2021March 31, 2022
Unrelated PartiesRelated PartiesTotalUnrelated PartiesRelated PartiesTotal
(in thousands)
Finance Leases
Property and equipment, net$8,505 $ $8,505 $8,158 $ $8,158 
Current portion of long-term debt and notes payable$1,404 $ $1,404 $1,436 $ $1,436 
Long-term debt, net of current portion16,679  16,679 16,303  16,303 
Total finance lease liabilities$18,083 $ $18,083 $17,739 $ $17,739 
The weighted average remaining lease terms and discount rates are as follows:
December 31, 2021March 31, 2022
Weighted average remaining lease term (in years):
Operating leases
7.87.6
Finance leases
24.724.8
Weighted average discount rate:
Operating leases
5.6 %5.6 %
Finance leases
7.4 %7.4 %






10

As of March 31, 2022, maturities of lease liabilities are approximately as follows:
Operating LeasesFinance Leases
(in thousands)
2022 (remainder of year)$222,152 $2,040 
2023259,672 2,747 
2024219,375 2,384 
2025175,699 2,101 
2026145,837 2,126 
Thereafter495,998 28,181 
Total undiscounted cash flows1,518,733 39,579 
Less: Imputed interest345,890 21,840 
Total discounted lease liabilities$1,172,843 $17,739 
7.     Intangible Assets
Goodwill
The following table shows changes in the carrying amounts of goodwill by reporting unit for the three months ended March 31, 2022:
 Critical Illness Recovery HospitalRehabilitation HospitalOutpatient
Rehabilitation
ConcentraTotal
 (in thousands)
Balance as of December 31, 2021$1,131,440 $442,155 $654,125 $1,221,192 $3,448,912 
Acquisition of businesses  409 2,884 3,293 
Measurement period adjustment13,251    13,251 
Balance as of March 31, 2022$1,144,691 $442,155 $654,534 $1,224,076 $3,465,456 
Identifiable Intangible Assets
The following table provides the gross carrying amounts, accumulated amortization, and net carrying amounts for the Company’s identifiable intangible assets:
 December 31, 2021March 31, 2022
 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 need21,478 — 21,478 21,625 — 21,625 
Accreditations1,874 — 1,874 1,874 — 1,874 
Finite-lived intangible assets:      
Trademarks5,000 (5,000) 5,000 (5,000) 
Customer relationships304,289 (141,111)163,178 305,839 (148,283)157,556 
Non-compete agreements36,746 (15,095)21,651 37,087 (15,990)21,097 
Total identifiable intangible assets$536,085 $(161,206)$374,879 $538,123 $(169,273)$368,850 
The Company’s accreditations and trademarks have renewal terms and the costs to renew these intangible assets are expensed as incurred. At March 31, 2022, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 7.5 years, respectively.
The Company’s finite-lived intangible assets amortize over their estimated useful lives. Amortization expense was $7.1 million and $7.6 million for the three months ended March 31, 2021 and 2022, respectively.
11

8.     Long-Term Debt and Notes Payable
As of March 31, 2022, the Company’s long-term debt and notes payable were as follows:
 Principal
Outstanding
Unamortized Premium (Discount)Unamortized
Issuance Costs
Carrying ValueFair Value
(in thousands)
6.250% senior notes
$1,225,000 $26,131 $(13,212)$1,237,919 $1,262,118 
Credit facilities:     
Revolving facility340,000   340,000 338,725
Term loan2,103,437 (5,890)(6,421)2,091,126 2,079,773 
Other debt, including finance leases93,961  (194)93,767 93,767 
Total debt$3,762,398 $20,241 $(19,827)$3,762,812 $3,774,383 
Principal maturities of the Company’s long-term debt and notes payable were approximately as follows:
 20222023202420252026ThereafterTotal
(in thousands)
6.250% senior notes
$ $ $ $ $1,225,000 $ $1,225,000 
Credit facilities:       
Revolving facility  340,000    340,000 
Term loan 4,757 11,150 2,087,530   2,103,437 
Other debt, including finance leases22,143 31,064 26,081 1,824 1,286 11,563 93,961 
Total debt$22,143 $35,821 $377,231 $2,089,354 $1,226,286 $11,563 $3,762,398 
As of December 31, 2021, the Company’s long-term debt and notes payable were as follows:
 Principal
Outstanding
Unamortized Premium (Discount)Unamortized
Issuance Costs
Carrying ValueFair Value
(in thousands)
6.250% senior notes
$1,225,000 $27,635 $(13,951)$1,238,684 $1,297,104 
Credit facilities:     
Revolving facility160,000