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Select Medical Holdings Corporation Announces Results for First Quarter Ended March 31, 2011

Friday, May 6, 2011 General News J E 4
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V. Net Income to Adjusted EBITDA Reconciliation

For the Three Months Ended March 31, 2010 and 2011

(In thousands, unaudited)

The following table reconciles net income to Adjusted EBITDA for Select.  Adjusted EBITDA is used by Select to report its segment performance.  Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, stock compensation expense, other income and equity in losses of unconsolidated subsidiaries.  The Company believes that the presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of its operating units.

Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles.  Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance.  Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.  Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculation, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

Three Months Ended

March 31,

2010

2011

Net income

$   25,632

$   35,387

Income tax expense

17,109

26,564

Other income

(134)

-

Interest expense, net of interest income

30,042

25,608

Equity in losses of unconsolidated subsidiaries

-

73

Stock compensation expense:

  Included in general and administrative

180

470

  Included in cost of services

328

410

Depreciation and amortization

17,711

17,222

Adjusted EBITDA

$   90,868

$  105,734

Specialty hospitals

$   82,897

$  100,353

Outpatient rehabilitation

20,518

21,406

Other (1)

(12,547)

(16,025)

Adjusted EBITDA

$   90,868

$  105,734

(1)  Other primarily includes general and administrative costs.

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