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Select Medical Corporation Announces Results for Second Quarter Ended June 30, 2009

Friday, September 18, 2009 General News J E 4
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MECHANICSBURG, Pa., Aug. 13 Select Medical Corporation ("Select") today announced results for its second quarter ended June 30, 2009.

For the second quarter ended June 30, 2009, net operating revenues increased 3.8% to $559.5 million compared to $538.8 million for the same quarter, prior year. Income from operations increased 35.0% to $65.4 million compared to $48.4 million for the same quarter, prior year. Net income attributable to Select Medical Corporation increased to $25.5 million compared to $12.6 million for the same quarter, prior year. Additionally, net income before interest, income taxes, depreciation and amortization, gain on early retirement of debt, stock compensation expense, other income(expense) and non-controlling interest ("Adjusted EBITDA") for the second quarter increased 25.2% to $83.6 million compared to $66.8 million for the same quarter, prior year. A reconciliation of net income to Adjusted EBITDA is attached to this release.

For the six months ended June 30, 2009, net operating revenues increased 3.1% to $1,120.7 million compared to $1,087.1 million for the same period, prior year. Income from operations increased 29.4% to $133.0 million compared to $102.8 million for the same period, prior year. Net income attributable to Select Medical Corporation increased to $57.2 million compared to $24.2 million for the same period, prior year. Additionally, Adjusted EBITDA for the six months ended June 30, 2009 increased 21.5% to $169.3 million compared to $139.3 million for the same period, prior year.

Specialty Hospitals

At June 30, 2009, Select operated 87 long term acute care hospitals and five acute medical rehabilitation hospitals. This compares to 88 long term acute care hospitals and four acute medical rehabilitation hospitals operated at June 30, 2008. For the second quarter of 2009, net operating revenues for all of Select's hospitals increased 5.2% to $386.3 million compared to $367.3 million for the same quarter, prior year. Total patient days for the second quarter of 2009 were 252,710, admissions were 10,504 and net revenue per patient day was $1,502. This compares to 252,727 days, 10,178 admissions and net revenue per patient day of $1,425 for the same quarter, prior year. For the hospitals opened or acquired as of January 1, 2008 and operated by Select throughout both periods, patient days in the second quarter of 2009 were 235,648 and admissions were 9,811, compared to 243,334 days and 9,789 admissions in the same quarter, prior year. Adjusted EBITDA for the segment increased 28.5% to $71.0 million compared to $55.2 million for the same quarter, prior year. The Adjusted EBITDA margin for the segment was 18.4% for the second quarter of 2009, compared to 15.0% for the same quarter, prior year. The Adjusted EBITDA margin for the hospitals opened or acquired as of January 1, 2008 and operated by Select throughout both periods was 20.1% for the second quarter of 2009, compared to 16.9% for the same quarter, prior year.

For the six months ended June 30, 2009, net operating revenues for all of Select's hospitals increased 4.5% to $779.6 million compared to $745.9 million for the same period, prior year. Total patient days for the six months ended June 30, 2009 were 508,983, admissions were 21,309 and net revenue per patient day was $1,505. This compares to 512,286 days, 20,914 admissions and net revenue per patient day of $1,428 for the same period, prior year. For the hospitals opened or acquired as of January 1, 2008 and operated by Select throughout both periods, patient days for the six months ended June 30, 2009 were 474,183, and admissions were 19,860, compared to 494,621 days and 20,180 admissions in the same period, prior year. Adjusted EBITDA for the segment for the six months ended June 30, 2009 increased 24.7% to $147.7 million compared to $118.5 million for the same period, prior year. The Adjusted EBITDA margin for the segment for the six months ended June 30, 2009 was 19.0%, compared to 15.9% for the same period, prior year. The Adjusted EBITDA margin for the hospitals opened or acquired as of January 1, 2008 and operated by Select throughout both periods was 20.6% for the six months ended June 30, 2009, compared to 18.0% for the same period, prior year.

Outpatient Rehabilitation

At June 30, 2009, Select operated 948 outpatient clinics. This compares to 970 outpatient clinics at June 30, 2008. For the second quarter of 2009, net operating revenues for the segment increased 1.0% to $173.2 million compared to $171.5 million for the same quarter, prior year. Adjusted EBITDA for the segment for the second quarter increased 6.5% to $25.3 million compared to $23.7 million for the same quarter, prior year. The Adjusted EBITDA margin for the segment for the quarter was 14.6% compared to 13.8% in the same quarter, prior year. Patient visits for the quarter were 1,163,341 compared to 1,167,702 for the same quarter, prior year. Net revenue per visit was $101 for the quarter ended June 30, 2009 compared to $102 for the same quarter, prior year.

For the six months ended June 30, 2009, net operating revenues were $341.0 million compared to $341.1 million for the same period, prior year. Adjusted EBITDA for the six months ended June 30, 2009 increased 6.2% to $46.6 million compared to $43.8 million for the same period, prior year. The Adjusted EBITDA margin for the six months ended June 30, 2009 was 13.7% compared to 12.9% in the same period, prior year. Patient visits for the six months ended June 30, 2009 were 2,259,637 compared to 2,323,609 for the same period, prior year. Net revenue per visit was $102 for the six months ended June 30, 2009 compared to $103 for the same period, prior year.

Credit Facility Amendment

Select and Select's parent corporation, Select Medical Holdings Corporation ("Holdings"), effective August 5, 2009 entered into Amendment No. 3 (the "Amendment") to Select's senior secured credit facility, dated as of February 24, 2005 (as amended to date, the "Credit Facility"), with a group of holders of Tranche B term loans and JPMorgan Chase Bank, N.A., as administrative agent. The Amendment extended the maturity of $384.5 million principal amount of Tranche B term loans from February 24, 2012 to August 22, 2014, and made related technical changes to the Credit Facility. The applicable rate for the Tranche B-1 term loans under the Credit Facility has increased to 3.75% for adjusted LIBOR loans and 2.75% for alternate base rate loans.

Conference Call

Select Medical Holdings Corporation ("Holdings"), the Parent of Select, has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission ("SEC") in connection with the proposed initial public offering of its common stock. Based on advice of counsel, Select's regular quarterly earnings conference calls will be suspended while Holdings' registration statement is under review by the SEC.

Select Medical Corporation is a leading operator of specialty hospitals in the United States. Select operates 87 long term acute care hospitals and five acute medical rehabilitation hospitals in 25 states. Select is also a leading operator of outpatient rehabilitation clinics in the United States, with approximately 948 locations in 37 states and the District of Columbia. Select also provides medical rehabilitation services on a contract basis at nursing homes, hospitals, assisted living and senior care centers, schools and worksites. Information about Select is available at http://www.selectmedicalcorp.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:

-- additional changes in government reimbursement for our services may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability; -- the failure of our long term acute care hospitals, or LTCHs, to maintain their status as such may cause our net operating revenues and profitability to decline; -- the failure of our facilities operated as "hospitals within hospitals," or HIHs, to qualify as hospitals separate from their host hospitals may cause our net operating revenues and profitability to decline; -- implementation of modifications to the admissions policies for our inpatient rehabilitation facilities, as required to achieve compliance with Medicare guidelines, may result in a loss of patient volume at these hospitals and, as a result, may reduce our future net operating revenues and profitability; -- a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs; -- future acquisitions may prove difficult or unsuccessful, use significant resources or expose us to unforeseen liabilities; -- private third-party payors for our services may undertake future cost containment initiatives that limit our future net operating revenues and profitability; -- the failure to maintain established relationships with the physicians in our markets could reduce our net operating revenues and profitability; -- shortages in qualified nurses or therapists could increase our operating costs significantly; -- 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 or lack of adequate available insurance could subject us to substantial uninsured liabilities; -- the ability to obtain any necessary or desired waiver or amendment from our existing lenders may be difficult due to the current uncertainty in the credit markets; and -- the inability to draw funds under our senior secured credit facility because of lender defaults.

SOURCE Select Medical Corporation
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