SEM Select Medical Holdings Corporation

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

current report

 

Pursuant to Section 13 or 15(d) of the

 

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 25, 2024

 

 

SELECT MEDICAL HOLDINGS CORPORATION

 

(Exact name of registrant as specified in its charter)

 

Delaware		001-34465		20-1764048
(State or other jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

 

4714 Gettysburg Road, P.O. Box 2034

Mechanicsburg, PA 17055

(Address of principal executive offices)  (Zip Code)

 

(717) 972-1100

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SEM	New York Stock Exchange (NYSE)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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. ¨

 

 

 

Item 2.01

Completion of Acquisition or Disposition of Assets.

 

On November 25, 2024, Select Medical Holdings Corporation (the “Company”) announced that it had completed the previously announced spin-off of Concentra Group Holdings Parent, Inc. (“Concentra”) by means of a special stock distribution of 104,093,503 shares of common stock of Concentra (the “Distribution”) that had been owned by Select Medical Corporation (“SMC”), a wholly owned subsidiary of the Company, to the Company’s stockholders as of the close of business on November 18, 2024 (the “Record Date”). Based on the number of shares of the Company’s common stock outstanding as of the Record Date, holders of the Company’s common stock received 0.806971 shares of Concentra common stock for each outstanding share of the Company’s common stock they owned as of the Record Date. No fractional shares of Concentra common stock were distributed. Instead, the Company’s stockholders will receive cash in lieu of any fraction of a share of Concentra common stock that they otherwise would have received.

 

Prior to the Distribution, the Company owned approximately 81.7% of the outstanding shares of Concentra common stock. Following the completion of the Distribution, the Company no longer owns any shares of Concentra common stock.

 

Based on the closing price of shares of Concentra common stock of $22.13 per share on November 25, 2024, the aggregate market value of the shares distributed by the Company to its stockholders was approximately $2,303.6 million.

 

A copy of the Company’s press release announcing the completion of the Distribution is attached as Exhibit 99.1 to this Current Report on Form 8-K, and incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits.

 

(b) Pro forma financial information.

 

Unaudited pro forma financial information of the Company to give effect to the Distribution is included in Exhibit 99.2 filed herewith and incorporated by reference into this Item 9.01.

 

(d) Exhibits.

 

Exhibit No.		Description of Exhibit
99.1		Press Release of Select Medical Holdings Corporation, dated November 25, 2024
99.2		Pro forma financial information of Select Medical Holdings Corporation (Unaudited)
104		Cover Page Interactive Data File (embedded with the Inline XBRL)

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	SELECT MEDICAL HOLDINGS CORPORATION
Date: November 26, 2024	By:	/s/ Michael E. Tarvin
		Michael E. Tarvin
		Senior Executive Vice President, General Counsel and Secretary

 

 

 

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

4714 Gettysburg Road Mechanicsburg, PA 17055   NYSE Symbol: SEM

 

Select Medical Holdings Corporation Completes

Spin-Off of Concentra

 

MECHANICSBURG, PENNSYLVANIA — November 25, 2024 — Select Medical Holdings Corporation (“Select Medical,” “we,” “us,” or “our”) (NYSE: SEM) today announced that we have completed our previously announced distribution (the “Distribution”) of 104,093,503 shares of common stock of Concentra Group Holdings Parent, Inc. (“Concentra”) (NYSE: CON) owned by Select Medical Corporation (“SMC”), a wholly owned subsidiary of Select Medical, representing approximately 81.7% of the outstanding shares of Concentra’s common stock. After the completion of the Distribution, Select Medical no longer owns any shares of Concentra’s common stock.

 

The Distribution was made today to Select Medical’s stockholders as of the close of business on the record date (the “Record Date”) for the Distribution, November 18, 2024. The Distribution took place in the form of a pro rata common stock distribution to each of Select Medical’s stockholder on the Record Date. Based on the shares of Select Medical’s common stock outstanding as of the Record Date, Select Medical’s stockholders received 0.806971 shares of Concentra’s common stock for every share of Select Medical’s common stock held as of the Record Date.

 

No fractional shares of Concentra’s common stock were distributed. Instead, Select Medical’s stockholders will receive cash in lieu of any fraction of a share of Concentra’s common stock that they otherwise would have received.

 

On November 19, 2024, Select Medical made available an information statement to its stockholders on the Record Date, which included details on the Distribution. The information statement is posted under the Investor Relations tab on Select Medical’s website at www.selectmedical.com/investor-relations/.

 

J.P. Morgan and Goldman Sachs acted as financial advisors to Select Medical in connection with the Distribution. Dechert LLP acted as legal advisor to Select Medical in connection with the Distribution.

 

About Select Medical

 

Select Medical is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on number of facilities. Select Medical’s reportable segments include the critical illness recovery hospital segment, the rehabilitation hospital segment, the outpatient rehabilitation segment, and the Concentra segment. As of September 30, 2024, Select Medical operated 106 critical illness recovery hospitals in 29 states, 34 rehabilitation hospitals in 13 states, 1,925 outpatient rehabilitation clinics in 39 states and the District of Columbia, and 549 occupational health centers in 41 states. At September 30, 2024, Select Medical had operations in 46 states and the District of Columbia. Information about Select Medical is available at www.selectmedical.com.

 

*****

 

 

This press release may contain forward-looking statements based on current management expectations. Numerous factors, including those related to market conditions and those detailed from time-to-time in Select Medical’s filings with the Securities and Exchange Commission, may cause results to differ materially from those anticipated in the forward-looking statements. Many of the factors that will determine Select Medical’s future results are beyond the ability of Select Medical to control or predict. These statements are subject to risks and uncertainties and, therefore, actual results may differ materially. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. Select Medical undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

 

Investor inquiries:

 

Joel T. Veit

Senior Vice President and Treasurer

717-972-1100

ir@selectmedical.com

 

SOURCE: Select Medical Holdings Corporation

 

 

 

Exhibit 99.2

 

Select Medical Holdings Corporation Unaudited Pro Forma Consolidated Financial Information

 

On January 3, 2024, Select Medical Holdings Corporation (“Select,” “we,” or “our”) (NYSE: SEM) announced our intention to separate Concentra Group Holdings Parent, Inc. (“Concentra”) from our business. On July 11, 2024, Concentra Escrow Issuer Corporation (the “Escrow Issuer”) completed a private offering (the “Concentra Notes Offering”) of $650.0 million aggregate principal amount of 6.875% senior notes due 2032 (the “Concentra Notes”) and related guarantees. On July 26, 2024, the Escrow Issuer merged with and into Concentra Health Services, Inc. (“CHSI”), and assumed all of the Escrow Issuer’s obligations under the Concentra Notes and the related indenture.

 

On July 26, 2024, Concentra completed an initial public offering of 22,500,000 shares of its common stock, par value $0.01 per share, at an initial public offering price of $23.50 per share for net proceeds of $499.7 million after deducting underwriting discounts and commission of $29.1 million, and subsequently, the underwriters exercised the option to purchase an additional 750,000 shares of the Concentra’s common stock for net proceeds of $16.7 million after deducting discounts and commission of $1.0 million (collectively, the “Concentra IPO”).

 

Also on July 26, 2024, CHSI entered into a senior secured credit agreement (the “Concentra Credit Agreement” and, together with the Concentra Notes Offering and the Concentra IPO, the “Concentra Financing Transactions”) providing for an $850.0 million term loan and a $400.0 million, five-year revolving credit facility. Substantially all of the net proceeds of the Concentra Financing Transactions were (a) used to repay an intercompany note owed by Concentra to us (the “Intercompany Repayment”) or (b) paid to us as a dividend (the “Concentra Dividend”), the proceeds from each of which we used to repay certain of our outstanding indebtedness.

 

On November 6, 2024, we announced that our board of directors approved a special stock distribution (the “Distribution”) to our stockholders of 104,093,503 shares of common stock of Concentra, representing approximately 81.7% of the outstanding shares of Concentra’s common stock. The Distribution by Select occurred on November 25, 2024 to all of our stockholders as of the record date of November 18, 2024.

 

On or about December 3, 2024, we intend to issue $550.0 million aggregate principal amount of the 6.250% senior notes due 2032 (the “Select Notes”). Concurrently with the closing of the Select Notes offering, we intend to enter into an amendment to our existing senior secured credit agreement to (i) establish a new incremental term loan in the aggregate principal amount of $1,050.0 million (the “Refinancing Term Loans” and together with the Select Notes, the “Refinancing Transactions”), (ii) extend the tenor of our revolving credit facility to five years from the closing of this offering, (iii) provide for an incremental revolving commitment in an aggregate principal amount of $50.0 million, and (iv) make certain other changes to the credit agreement. We expect to use the net proceeds of the Select Notes Offering, together with the proceeds from the Refinancing Term Loans and cash on hand, to repay in full the term loans currently outstanding under our existing credit agreement, to redeem all of our outstanding 6.250% Senior Notes due 2026, and to pay fees and expenses related to the foregoing.

 

We refer to the Concentra Financing Transactions, the Intercompany Repayment and Concentra Dividend and our use of the proceeds therefrom, and the Distribution collectively herein as the “Separation.” Following the Distribution, Select’s consolidated financial statements will be updated to reflect Concentra’s financial position and results of operations as discontinued operations.

 

 

The following unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2024, and for the years ended December 31, 2023, 2022 and 2021, are presented as if the Separation and the Refinancing Transactions occurred as of January 1, 2023. The adjustments in the “Transaction Accounting Adjustments” column in the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, give effect to the Separation as if it occurred as of January 1, 2023. The adjustments in the “Refinancing Transaction Adjustments” column in the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, give effect to the Refinancing Transactions as if the Refinancing Transactions occurred as of January 1, 2023. The following unaudited pro forma consolidated balance sheet as of September 30, 2024 is presented as if Separation and the Refinancing Transactions occurred on September 30, 2024. The following unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2022 and 2021 reflect the effects of reclassifying Concentra as discontinued operations.

 

The following unaudited pro forma consolidated financial information have been derived from our historical consolidated financial statements as of and for the three years ended December 31, 2023 and the interim unaudited period ended September 30, 2024. The unaudited pro forma consolidated financial information and the accompanying notes should be read in conjunction with (i) the audited consolidated financial statements, the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023, and (ii) the unaudited consolidated financial statements, the accompanying notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

 

The following unaudited pro forma consolidated financial information gives effect to the Separation and the Refinancing Transactions in accordance with Article 11 of the SEC’s Regulation S-X, as amended. The pro forma adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, and best reflect the Separation and the Refinancing Transactions on the Company’s financial condition and results of operations. They are intended for informational purposes only, and do not purport to represent what our financial position and results of operations actually would have been had the Separation occurred on the dates indicated, or to project our financial position or results of operations for any future date or period. The Company’s current estimates on a discontinued operations basis could change as the Company finalizes discontinued operations accounting to be reported in our 2024 Annual Report on Form 10-K for the year ended December 31, 2024.

 

 

Select Medical Holdings Corporation

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of September 30, 2024

(in thousands)

 

		Select Medical Holdings Corporation Historical (As Reported)				Concentra Discontinued Operations (Note a)				Refinancing Transaction Adjustments					Pro Forma Select Medical Holdings Corporation
ASSETS
Current Assets:
Cash and cash equivalents		$	191,468			$	(136,822	)		$	(34,809	)	(d)		$	19,837
Accounts receivable			1,060,007				(232,202	)			—					827,805
Prepaid income taxes			8,669				(1,505	)			—					7,164
Other current assets			144,053				(23,041	)			—					121,012
Total Current Assets			1,404,197				(393,570	)			(34,809	)				975,818
Operating lease right-of-use assets			1,321,045				(430,133	)			—					890,912
Property and equipment, net			1,040,383				(191,099	)			—					849,284
Goodwill			3,555,022				(1,234,707	)			—					2,320,315
Identifiable intangible assets, net			312,565				(209,171	)			—					103,394
Other assets			369,449				(5,975	)			—					363,474
Total Assets		$	8,002,661			$	(2,464,655	)		$	(34,809	)			$	5,503,197
LIABILITIES AND EQUITY
Current Liabilities:
Overdrafts		$	14,173			$	—			$	—				$	14,173
Current operating lease liabilities			249,832				(74,411	)			—					175,421
Current portion of long-term debt and notes payable			42,785				(9,737	)			10,500		(d)			43,548
Accounts payable			170,711				(21,030	)			—					149,681
Accrued and other liabilities			768,203				(147,956	)			(2,404	)	(e)			617,843
Total Current Liabilities			1,245,704				(253,134	)			8,096					1,000,666
Non-current operating lease liabilities			1,163,406				(391,037	)			—					772,369
Long-term debt, net of current portion			3,098,957				(1,472,610	)			(35,762	)	(d)			1,590,585
Non-current deferred tax liability			95,557				(22,454	)			—					73,103
Other non-current liabilities			98,593				(24,188	)			—					74,405
Total Liabilities			5,702,217				(2,163,423	)			(27,666	)				3,511,128
Redeemable non-controlling interests			30,455				(18,122	)			—					12,333
Stockholders’ Equity:
Common stock			130				—				—					130
Capital in excess of par			858,741				—				—					858,741
Retained earnings			1,056,320				(227,064	)			(7,143	)	(d)(e)			822,113
Total Stockholders’ Equity			1,915,191				(227,064	)			(7,143	)				1,680,984
Non-controlling interests			354,798				(56,046	)			—					298,752
Total Equity			2,269,989				(283,110	)			(7,143	)				1,979,736
Total Liabilities and Equity		$	8,002,661			$	(2,464,655	)		$	(34,809	)			$	5,503,197

 

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

 

Select Medical Holdings Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Nine Months Ended September 30, 2024

(in thousands, except per share data)

 

		Select Medical Holdings Corporation Historical (As Reported)				Concentra Discontinued Operations (Note a)				Continuing Operations				Transaction Accounting Adjustments					Refinancing Transactions Impact				Pro Forma Select Medical Holdings Corporation
Revenue		$	5,309,692			$	(1,435,151	)		$	3,874,541			$	—				$	—			$	3,874,541
Costs and expenses:
Cost of services, exclusive of depreciation and amortization			4,516,553				(1,136,622	)			3,379,931				—					—				3,379,931
General and administrative			145,672				(1,569	)			144,103				—					—				144,103
Depreciation and amortization			158,151				(51,568	)			106,583				—					—				106,583
Total costs and expenses			4,820,376				(1,189,759	)			3,630,617				—					—				3,630,617
Other operating income			3,584				(284	)			3,300				—					—				3,300
Income from operations			492,900				(245,676	)			247,224				—					—				247,224
Other income and expense:
Loss on early retirement of debt			(10,939	)			—				(10,939	)			10,939		(b)			—				—
Equity in earnings of unconsolidated subsidiaries			49,805				3,676				53,481				—					—				53,481
Interest expense			(143,309	)			43,255				(100,054	)			35,965		(b)			158		(d)		(63,931	)
Income from continuing operations before income taxes			388,457				(198,745	)			189,712				46,904					158				236,774
Income tax expense			95,509				(46,241	)			49,268				12,444		(c)			42		(e)		61,754
Income from continuing operations			292,948				(152,504	)			140,444				34,460					116				175,020
Less: Net income attributable to non-controlling interests			62,860				(11,554	)			51,306				—					—				51,306
Net income attributable to Select Medical Holdings Corporation		$	230,088			$	(140,950	)		$	89,138			$	34,460				$	116			$	123,714
Earnings per common share:
Basic and diluted		$	1.78																				$	0.96
Weighted average shares outstanding
Basic and diluted			129,192																					129,192

 

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

 

Select Medical Holdings Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2023

(in thousands, except per share data)

 

		Select Medical Holdings Corporation Historical (As Reported)				Concentra Discontinued Operations (Note a)				Continuing Operations				Transaction Accounting Adjustments					Refinancing Transactions Impact					Pro Forma Select Medical Holdings Corporation
Revenue		$	6,664,058			$	(1,838,081	)		$	4,825,977			$	—				$	—				$	4,825,977
Costs and expenses:
Cost of services, exclusive of depreciation and amortization			5,732,017				(1,477,648	)			4,254,369				—					—					4,254,369
General and administrative			170,193				—				170,193				—					—					170,193
Depreciation and amortization			208,742				(73,051	)			135,691				—					—					135,691
Total costs and expenses			6,110,952				(1,550,699	)			4,560,253				—					—					4,560,253
Other operating income			1,768				(250	)			1,518														1,518
Income from operations			554,874				(287,632	)			267,242				—					—					267,242
Other income and expense:
Loss on early retirement of debt			(14,692	)			—				(14,692	)			(10,939	)	(b)			(9,722	)	(d)			(35,353	)
Equity in earnings of unconsolidated subsidiaries			40,813				526				41,339				—					—					41,339
Interest (expense) income			(198,639	)			44,474				(154,165	)			169,668		(b)			2,074		(d)			17,577
Income from continuing operations before income taxes			382,356				(242,632	)			139,724				158,729					(7,648	)				290,805
Income tax expense			82,625				(53,372	)			29,253				42,111		(c)			(2,029	)	(e)			69,335
Income from continuing operations			299,731				(189,260	)			110,471				116,618					(5,619	)				221,470
Less: Net income attributable to non-controlling interests			56,240				(4,796	)			51,444				—					—					51,444
Net income attributable to Select Medical Holdings Corporation		$	243,491			$	(184,464	)		$	59,027			$	116,618				$	(5,619	)			$	170,026
Earnings per share:
Basic and diluted		$	1.91																					$	1.33
Weighted average shares outstanding
Basic and diluted			127,706																						127,706

 

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

 

Select Medical Holdings Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2022

(in thousands, except per share data)

 

		Select Medical Holdings Corporation Historical (As Reported)				Concentra Discontinued Operations (Note a)				Pro Forma Select Medical Holdings Corporation
Revenue		$	6,333,538			$	(1,724,359	)		$	4,609,179
Costs and expenses:
Cost of services, exclusive of depreciation and amortization			5,600,161				(1,392,475	)			4,207,686
General and administrative			153,035				—				153,035
Depreciation and amortization			205,825				(73,667	)			132,158
Total costs and expenses			5,959,021				(1,466,142	)			4,492,879
Other operating income			28,766				(312	)			28,454
Income from operations			403,283				(258,529	)			144,754
Other income and expense:
Equity in earnings of unconsolidated subsidiaries			26,407				1,577				27,984
Interest expense			(169,111	)			31,641				(137,470	)
Income from continuing operations before income taxes			260,579				(225,311	)			35,268
Income tax expense			62,553				(45,830	)			16,723
Income from continuing operations			198,026				(179,481	)			18,545
Less: Net income attributable to non-controlling interests			39,032				(5,516	)			33,516
Net income (loss) attributable to Select Medical Holdings Corporation		$	158,994			$	(173,965	)		$	(14,971	)
Earnings (loss) per share:
Basic and diluted		$	1.23							$	(0.12	)
Weighted average shares outstanding
Basic and diluted			129,185								126,309

 

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

 

Select Medical Holdings Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2021

(in thousands, except per share data)

 

		Select Medical Holdings Corporation Historical (As Reported)				Concentra Discontinued Operations (Note a)				Pro Forma Select Medical Holdings Corporation
Revenue		$	6,204,515			$	(1,732,041	)		$	4,472,474
Costs and expenses:
Cost of services, exclusive of depreciation and amortization			5,285,149				(1,379,566	)			3,905,583
General and administrative			146,975				—				146,975
Depreciation and amortization			202,645				(82,210	)			120,435
Total costs and expenses			5,634,769				(1,461,776	)			4,172,993
Other operating income			144,028				(34,999	)			109,029
Income from operations			713,774				(305,264	)			408,510
Other income and expense:
Equity in earnings of unconsolidated subsidiaries			44,428				—				44,428
Gain on sale of businesses			2,155				(2,155	)			—
Interest income			5,350				—				5,350
Interest expense			(135,985	)			31,856				(104,129	)
Income before income taxes			629,722				(275,563	)			354,159
Income tax expense			129,773				(55,236	)			74,537
Net income			499,949				(220,327	)			279,622
Less: Net income attributable to non-controlling interests			97,724				(50,527	)			47,197
Net income attributable to Select Medical Holdings Corporation		$	402,225			$	(169,800	)		$	232,425
Earnings per share:
Basic and diluted		$	2.98							$	1.72
Weighted average shares outstanding
Basic and diluted			134,750								134,750

 

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

Concentra Discontinued Operations:

 

(a)

Reflects the discontinued operations of Concentra, including associated assets, liabilities, and equity and results of operations in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations as currently estimated.

 

Transaction Accounting Adjustments:

 

(b)

Reflects the estimated reduced interest expense of $82.0 million for the nine months ended September 30, 2024 and $123.7 million for the year ended December 31, 2023, respectively, as a result of the payments made with the cash proceeds received in connection with the Separation to reduce long-term debt obligations. Additionally, the estimated reduced interest expense for the year-ended December 31, 2023 reflects a reclassification of a $46.0 million gain on the interest rate cap cash flow hedge from accumulated other comprehensive income into interest expense for forecasted transactions that were probable not to occur as of that date, which was reported in the historical results for the nine months ended September 30, 2024.

 

(Thousands)		For the Nine Months Ended September 30, 2024				For the Year Ended December 31, 2023
Reduced interest expense in connection with the Separation		$	81,964			$	123,669
Reclassification of gain on interest rate cap cash flow hedge		$	(45,999	)		$	45,999
Total decrease in Interest Expense		$	35,965			$	169,668

 

As a result of the repayments, a loss on extinguishment of debt related to the write-off of unamortized deferred financing fees of $10.9 million for the year ended. December 31, 2023 is also reflected, which was reported in the historical results for the nine months ended September 30, 2024.

 

(c)

Reflects the tax effects of the Transaction Accounting Adjustments to pre-tax book income at the applicable statutory income tax rates.

 

Refinancing Transaction Adjustments:

 

(d)

Reflects the impacts of the Refinancing Transactions, which includes the estimated reduced interest expense of $0.2 million for the nine months ended September 30, 2024 and $2.1 million for the year ended December 31, 2023, respectively, as a result of lower interest rates on the refinanced debt. With respect to the Refinancing Transactions, the pro forma financial information includes the following assumptions:

 

·

Refinancing Term Loans in an aggregate principal amount of $1,050.0 million, of which 1% has been classified as current, bearing interest at a rate equal to SOFR + 200% and an original issue discount of $1.3 million;

 

·

$550.0 million of Senior Notes due 2032 bearing interest at a rate equal to 6.25%; and

 

·

Estimated debt issuance costs of $22.8 million

 

 

The net proceeds of the Refinancing Transactions and $34.8 million of cash on hand, will be used to repay in full the Existing Select Term Loan of $373.0 million, to redeem all of the $1,225.0 million 2026 Notes (including an estimated call premium of $12.8 million) and to pay fees and expenses related to the foregoing.

 

(Thousands)		As of September 30, 2024
Retirement of Existing Select Term Loan		$	(372,982	)
Redemption of 2026 Senior Notes			(1,225,000	)
2026 Senior Notes call premium			(12,765	)
Refinancing Term Loan			1,050,000
Refinancing Term Loan original issue discount			(1,312	)
2032 Senior Notes			550,000
Debt issuance costs for Refinancing Transactions			(22,750	)
Total change in Cash and Cash Equivalents		$	(34,809	)

 

(Thousands)		As of September 30, 2024
Retirement of Existing Select Term Loan		$	(372,982	)
Redemption of 2026 Senior Notes			(1,225,000	)
Write-off of 2026 Senior Notes premium, net of Existing Select Term Loan original issue discount and debt issuance costs			(3,218	)
Refinancing Term Loan			1,050,000
Refinancing Term Loan original issue discount			(1,312	)
2032 Senior Notes			550,000
Debt issuance costs for Refinancing Transactions			(22,750	)
Total change in Debt			(25,262	)
Increase in Current Portion of Long-Term Debt			10,500
Total change in Long-Term Debt		$	(35,762	)

 

The Refinancing Transactions are assumed to qualify for debt extinguishment accounting resulting in a $9.7 million loss on early retirement of debt ($7.1 million net of taxes), inclusive of the $12.8 million call premium noted above, and the capitalization of new debt issuance costs.

 

A variance of 1/8% of the weighted average interest rate estimate would result in a $2.0 million change in annual cash interest expense associated with the $1,600.0 million of indebtedness expected to be incurred.

 

(e)

Reflects the tax effects of the Refinancing Transaction Adjustments to pre-tax book income at the applicable statutory income tax rates.

 

 

v3.24.3

Cover	Nov. 25, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 25, 2024
Entity File Number	001-34465
Entity Registrant Name	SELECT MEDICAL HOLDINGS CORPORATION
Entity Central Index Key	0001320414
Entity Tax Identification Number	20-1764048
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	4714 Gettysburg Road
Entity Address, Address Line Two	P.O. Box 2034
Entity Address, City or Town	Mechanicsburg
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	17055
City Area Code	717
Local Phone Number	972-1100
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	SEM
Security Exchange Name	NYSE
Entity Emerging Growth Company	false

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