Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Tables)

12 Months Ended

Dec. 31, 2015

Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

Schedule of Consolidating Balance Sheet

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors		Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	4,070		$	3,706	$	625		$	6,034		$	—		$	14,435
Accounts receivable, net		—			419,382		68,504			115,672			—			603,558
Current deferred tax asset		11,556			6,708		4,786			5,638			—			28,688
Intercompany receivables		—			1,970,477		137,512			—			(2,107,989)	(a)		—
Prepaid income taxes		7,979			—		—			8,715			—			16,694
Other current assets		10,521			34,859		5,759			34,640			—			85,779
Total Current Assets		34,126			2,435,132		217,186			170,699			(2,107,989	)		749,154
Property and equipment, net		38,872			548,809		61,137			215,306			—			864,124
Investment in affiliates		4,107,930			75,027		—			—			(4,182,957)	(b)(c)		—
Goodwill		—			1,663,974		—			650,650			—			2,314,624
Non-current deferred tax asset		12,297			—		—			—			(12,297)	(d)		—
Other identifiable intangibles		—			72,776		—			245,899			—			318,675
Other assets		21,623			108,524		659			49,283			—			180,089
Total Assets	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	28,615		$	—	$	—		$	—		$	—		$	28,615
Current portion of long-term debt and notes payable		227,180			197		939			5,254			—			233,570
Accounts payable		10,445			101,156		16,997			8,811			—			137,409
Intercompany payables		1,970,477			137,512		—			—			(2,107,989)	(a)		—
Accrued payroll		22,970			66,892		3,932			27,195			—			120,989
Accrued vacation		6,406			50,194		9,423			7,954			—			73,977
Accrued interest		6,315			3		—			3,083			—			9,401
Accrued other		38,883			42,939		9,866			42,040			—			133,728
Total Current Liabilities		2,311,291			398,893		41,157			94,337			(2,107,989	)		737,689
Long-term debt, net of current portion		997,114			452,417		90,860			649,923			—			2,190,314
Non-current deferred tax liability		—			113,977		9,656			107,369			(12,297)	(d)		218,705
Other non-current liabilities		47,190			41,904		4,798			39,328			—			133,220
Total Liabilities		3,355,595			1,007,191		146,471			890,957			(2,120,286	)		3,279,928
Redeemable non-controlling interests		—			—		12,094			226,127			—			238,221
Stockholder's Equity:
Common stock		0			—		—			—			—			0
Capital in excess of par		904,375			—		—			—			—			904,375
Retained earnings (accumulated deficit)		(45,122	)		1,187,022		(1,006	)		(6,120	)		(1,179,896)	(c)		(45,122	)
Subsidiary investment		—			2,710,029		75,097			217,935			(3,003,061)	(b)		—
Total Select Medical Corporation Stockholder's Equity		859,253			3,897,051		74,091			211,815			(4,182,957	)		859,253
Non-controlling interests		—			—		46,326			2,938			—			49,264
Total Equity		859,253			3,897,051		120,417			214,753			(4,182,957	)		908,517
Total Liabilities and Equity	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666

(a)	Elimination of intercompany.
(b)	Elimination of investments in consolidated subsidiaries.
(c)	Elimination of investments in consolidated subsidiaries' earnings.
(d)	Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	70		$	2,454	$	830	$	—		$	3,354
Accounts receivable, net		—			376,780		67,489		—			444,269
Current deferred tax asset		10,186			2,458		3,347		—			15,991
Prepaid income taxes		17,888			—		—		—			17,888
Intercompany receivables		—			1,728,708		106,509		(1,835,217	)(a)		—
Other current assets		7,860			32,919		5,363		—			46,142
Total Current Assets		36,004			2,143,319		183,538		(1,835,217	)		527,644
Property and equipment, net		17,521			468,138		56,651		—			542,310
Investment in affiliates		3,741,085			67,575		—		(3,808,660)	(b)(c)		—
Goodwill		—			1,642,083		—		—			1,642,083
Non-current deferred tax asset		11,230			—		—		(11,230)	(d)		—
Other identifiable intangibles		—			72,519		—		—			72,519
Other assets		32,463			106,843		947		—			140,253
Total Assets	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	21,746		$	—	$	—	$	—		$	21,746
Current portion of long-term debt and notes payable		8,496			1,844		534		—			10,874
Accounts payable		9,885			84,304		14,343		—			108,532
Intercompany payables		1,835,217			—		—		(1,835,217	)(a)		—
Accrued payroll		17,410			76,670		3,010		—			97,090
Accrued vacation		5,070			49,315		8,747		—			63,132
Accrued interest		10,596			76		2		—			10,674
Accrued other		39,801			36,874		5,701		—			82,376
Total Current Liabilities		1,948,221			249,083		32,337		(1,835,217	)		394,424
Long-term debt, net of current portion		1,098,151			364,794		79,157		—			1,542,102
Non-current deferred tax liability		—			112,013		8,420		(11,230)	(d)		109,203
Other non-current liabilities		52,416			35,576		4,863		—			92,855
Total Liabilities		3,098,788			761,466		124,777		(1,846,447	)		2,138,584
Redeemable non-controlling interests		—			—		10,985		—			10,985
Stockholder's Equity:
Common stock		0			—		—		—			0
Capital in excess of par		885,407			—		—		—			885,407
Retained earnings (accumulated deficit)		(145,892	)		1,048,455		8,366		(1,056,821)	(c)		(145,892	)
Subsidiary investment		—			2,690,556		61,283		(2,751,839)	(b)		—
Total Select Medical Corporation Stockholder's Equity		739,515			3,739,011		69,649		(3,808,660	)		739,515
Non-controlling interests		—			—		35,725		—			35,725
Total Equity		739,515			3,739,011		105,374		(3,808,660	)		775,240
Total Liabilities and Equity	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809

(a)	Elimination of intercompany.
(b)	Elimination of investments in consolidated subsidiaries.
(c)	Elimination of investments in consolidated subsidiaries' earnings.
(d)	Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

Schedule of Consolidating Statement of Operations

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	724		$	2,673,987		$	482,803		$	585,222		$	—		$	3,742,736
Costs and expenses:
Cost of services		2,029			2,266,647			414,518			528,347			—			3,211,541
General and administrative		88,227			(890	)		—			4,715			—			92,052
Bad debt expense		—			40,541			9,240			9,591			—			59,372
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Total costs and expenses		94,548			2,362,745			434,356			576,297			—			3,467,946
Income (loss) from operations		(93,824	)		311,242			48,447			8,925			—			274,790
Other income and expense:
Intercompany interest and royalty fees		(1,417	)		1,387			30			—			—			—
Intercompany management fees		143,939			(119,388	)		(24,551	)		—			—			—
Gain on sale of equity investment		—			29,647			—			—			—			29,647
Equity in earnings of unconsolidated subsidiaries		—			16,719			92			—			—			16,811
Interest expense		(58,350	)		(24,250	)		(6,154	)		(24,062	)		—			(112,816	)
Income (loss) from operations before income taxes		(9,652	)		215,357			17,864			(15,137	)		—			208,432
Income tax expense (benefit)		(7,869	)		85,907			(470	)		(5,132	)		—			72,436
Equity in earnings of subsidiaries		132,520			9,117			—			—			(141,637)	(a)		—
Net income		130,737			138,567			18,334			(10,005	)		(141,637	)		135,996
Less: Net income attributable to non-controlling interests		—			—			9,144			(3,884	)		—			5,260
Net income (loss) attributable to Select Medical Corporation	$	130,737		$	138,567		$	9,190		$	(6,121	)	$	(141,637	)	$	130,736

(a) Elimination of equity in earnings of subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	721		$	2,634,480		$	429,816		$	—		$	3,065,017
Costs and expenses:
Cost of services		2,015			2,209,724			370,601			—			2,582,340
General and administrative		86,311			(1,064	)		—			—			85,247
Bad debt expense		—			38,052			6,548			—			44,600
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Total costs and expenses		92,049			2,301,588			386,904			—			2,780,541
Income (loss) from operations		(91,328	)		332,892			42,912			—			284,476
Other income and expense:
Intercompany interest and royalty fees		(1,142	)		1,131			11			—			—
Intercompany management fees		142,273			(120,528	)		(21,745	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			6,958			86			—			7,044
Loss on early retirement of debt		(2,277	)		—			—			—			(2,277	)
Interest expense		(57,651	)		(23,367	)		(4,428	)		—			(85,446	)
Income (loss) from operations before income taxes		(10,125	)		197,086			16,836			—			203,797
Income tax expense (benefit)		(4,333	)		78,748			1,207			—			75,622
Equity in earnings of subsidiaries		126,419			8,995			—			(135,414	)(a)		—
Net income		120,627			127,333			15,629			(135,414	)		128,175
Less: Net income attributable to non-controlling interests		—			623			6,925			—			7,548
Net income attributable to Select Medical Corporation	$	120,627		$	126,710		$	8,704		$	(135,414	)	$	120,627

(a) Elimination of equity in earnings of subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net operating revenues	$	350		$	2,576,906		$	398,392		$	—		$	2,975,648
Costs and expenses:
Cost of services		1,757			2,155,370			338,349			—			2,495,476
General and administrative		76,709			212			—			—			76,921
Bad debt expense		—			31,173			6,250			—			37,423
Depreciation and amortization		3,746			51,825			8,821			—			64,392
Total costs and expenses		82,212			2,238,580			353,420			—			2,674,212
Income (loss) from operations		(81,862	)		338,326			44,972			—			301,436
Other income and expense:
Intercompany interest and royalty fees		(1,326	)		836			490			—			—
Intercompany management fees		144,447			(125,357	)		(19,090	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			2,384			92			—			2,476
Loss on early retirement of debt		(17,788	)		—			—			—			(17,788	)
Interest expense		(58,100	)		(22,916	)		(3,938	)		—			(84,954	)
Income (loss) from operations before income taxes		(14,629	)		193,273			22,526			—			201,170
Income tax expense (benefit)		(1,238	)		76,837			372			—			75,971
Equity in earnings of subsidiaries		129,971			14,561			—			(144,532)	(a)		—
Net income		116,580			130,997			22,154			(144,532	)		125,199
Less: Net income attributable to non-controlling interests		—			995			7,624			—			8,619
Net income attributable to Select Medical Corporation	$	116,580		$	130,002		$	14,530		$	(144,532	)	$	116,580

(a)           Elimination of equity in earnings of subsidiaries.

Schedule of Consolidating Statement of Cash Flows

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Non- Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	130,737		$	138,567		$	18,334		$	(10,005	)	$	(141,637)	(a)	$	135,996
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			13,870			99			—			—			13,969
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Provision for bad debts		—			40,541			9,240			9,591			—			59,372
Equity in earnings of unconsolidated subsidiaries		—			(16,719	)		(92	)		—			—			(16,811	)
Loss (gain) on sale of assets and businesses		—			(1,128	)		16			14			—			(1,098	)
Gain on sale of equity investment		—			(29,647	)		—			—			—			(29,647	)
Stock compensation expense		13,969			—			—			1,016			—			14,985
Amortization of debt discount and issuance costs		7,404			—			—			2,139			—			9,543
Deferred income taxes		(3,484	)		—			—			1,426			—			(2,058	)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(132,520	)		(9,117	)		—			—			141,637	(a)		—
Accounts receivable		—			(83,142	)		(10,255	)		825			—			(92,572	)
Other current assets		(2,661	)		(2,236	)		(396	)		2,790			—			(2,503	)
Other assets		10,840			(6,415	)		288			—			—			4,713
Accounts payable		560			8,569			2,654			(9,438	)		—			2,345
Accrued expenses		(1,508	)		9,569			5,696			(6,557	)		—			7,200
Net cash provided by operating activities		27,629			119,159			36,182			25,445			—			208,415
Investing activities
Purchases of property and equipment		(10,890	)		(134,002	)		(10,979	)		(26,771	)		—			(182,642	)
Proceeds from sale of assets		—			1,742			24			1			—			1,767
Investment in businesses		—			(2,347	)		—			—			—			(2,347	)
Proceeds from sale of equity method investment		—			33,096			—			—			—			33,096
Acquisition of businesses, net of cash acquired		—			—			(8,832	)		(1,052,796	)		—			(1,061,628	)
Net cash used in investing activities		(10,890	)		(101,511	)		(19,787	)		(1,079,566	)		—			(1,211,754	)
Financing activities
Borrowings on revolving facilities		1,115,000			—			—			20,000			—			1,135,000
Payments on revolving facilities		(880,000	)		—			—			(15,000	)		—			(895,000	)
Proceeds from term loans, net of discounts		—			—			—			646,875			—			646,875
Payments on term loans		(26,884	)		—			—			(2,250	)		—			(29,134	)
Borrowings of other debt		8,684			—			1,681			3,009			—			13,374
Principal payments on other debt		(11,923	)		(2,736	)		(1,513	)		(1,964	)		—			(18,136	)
Debt issuance costs		—			—			—			(23,300	)		—			(23,300	)
Proceeds from bank overdrafts		6,869			—			—			—			—			6,869
Equity investment by Holdings		1,649			—			—			—			—			1,649
Dividends paid to Holdings		(28,956	)		—			—			—			—			(28,956	)
Intercompany		(199,024	)		(13,660	)		(5,251	)		217,935			—			—
Purchase of non-controlling interests		—			—			(1,095	)		—			—			(1,095	)
Proceeds from issuance of non-controlling interests		—			—			—			217,065			—			217,065
Tax benefit from stock based awards		1,846			—			—			—			—			1,846
Distributions to non-controlling interests		—			—			(10,422	)		(2,215	)		—			(12,637	)
Net cash provided by (used in) financing activities		(12,739	)		(16,396	)		(16,600	)		1,060,155			—			1,014,420
Net increase (decrease) in cash and cash equivalents		4,000			1,252			(205	)		6,034			—			11,081
Cash and cash equivalents at beginning of period		70			2,454			830			—			—			3,354
Cash and cash equivalents at end of period	$	4,070		$	3,706		$	625		$	6,034		$	—		$	14,435

(a) Elimination of equity in earnings of consolidated subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	120,627		$	127,333		$	15,629		$	(135,414	)(a)	$	128,175
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			11,889			65						11,954
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Provision for bad debts		—			38,052			6,548			—			44,600
Equity in earnings of unconsolidated subsidiaries		—			(6,958	)		(86	)		—			(7,044	)
Loss on early retirement of debt		2,277			—			—			—			2,277
Gain on disposal or sale of assets		—			(1,168	)		120			—			(1,048	)
Stock compensation expense		11,186			—			—			—			11,186
Amortization of debt discount and issuance costs		7,553			—			—			—			7,553
Deferred income taxes		14,311			—			—			—			14,311
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(126,419	)		(8,995	)		—			135,414	(a)		—
Accounts receivable		—			(80,394	)		(17,408	)		—			(97,802	)
Other current assets		1,885			(4,004	)		390			—			(1,729	)
Other assets		2,811			(2,566	)		(348	)		—			(103	)
Accounts payable		3,136			2,440			421			—			5,997
Accrued expenses		(6,353	)		(9,407	)		(279	)		—			(16,039	)
Net cash provided by operating activities		34,737			121,098			14,807			—			170,642
Investing activities
Purchases of property and equipment		(4,674	)		(79,600	)		(10,972	)		—			(95,246	)
Investment in businesses		—			(4,634	)		—			—			(4,634	)
Acquisition of businesses, net of cash acquired		—			(397	)		(814	)		—			(1,211	)
Net cash used in investing activities		(4,674	)		(84,631	)		(11,786	)		—			(101,091	)
Financing activities
Borrowings on revolving facilities		910,000			—			—			—			910,000
Payments on revolving facilities		(870,000	)		—			—			—			(870,000	)
Payments on term loans		(33,994	)		—			—			—			(33,994	)
Issuance of 6.375% senior notes		111,650			—			—			—			111,650
Borrowings of other debt		8,151			—			925			—			9,076
Principal payments on other debt		(9,213	)		(2,058	)		(3,402	)		—			(14,673	)
Debt issuance costs		(4,434	)		—			—			—			(4,434	)
Proceeds from bank overdrafts		9,240			—			—			—			9,240
Purchase of non-controlling interests		—			(9,961	)		—			—			(9,961	)
Equity investment by Holdings		7,355			—			—			—			7,355
Dividends paid to Holdings		(184,100	)		—			—			—			(184,100	)
Intercompany		22,162			(25,092	)		2,930			—			—
Proceeds from issuance of non-controlling interests		—			—			185			—			185
Tax benefit from stock based awards		3,119			—			—			—			3,119
Distributions to non-controlling interests		—			—			(3,979	)		—			(3,979	)
Net cash used in financing activities		(30,064	)		(37,111	)		(3,341	)		—			(70,516	)
Net decrease in cash and cash equivalents		(1	)		(644	)		(320	)		—			(965	)
Cash and cash equivalents at beginning of period		71			3,098			1,150			—			4,319
Cash and cash equivalents at end of period	$	70		$	2,454		$	830		$	—		$	3,354

(a) Elimination of equity in earnings of consolidated subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors				Non- Guarantor Subsidiaries				Eliminations					Consolidated
	(in thousands)
Operating activities
Net income	$	116,580		$	130,997			$	22,154			$	(144,532)			(a)	$	125,199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,746			51,825				8,821				—					64,392
Provision for bad debts		—			31,173				6,250				—					37,423
Equity in earnings of unconsolidated subsidiaires		—			(2,384		)		(92		)		—					(2,476	)
Loss on early retirement of debt		17,788			—				—				—					17,788
Gain on disposal or sale of assets		—			(463		)		(118		)		—					(581	)
Stock compensation expense		7,033			—				—				—					7,033
Amortization of debt discount and issuance costs		8,344			—				—				—					8,344
Deferred income taxes		7,032			—				—				—					7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(129,971	)		(14,561		)		—				144,532			(a)		—
Accounts receivable		—			(60,460		)		(6,685		)		—					(67,145	)
Other current assets		(4,145	)		(5,849		)		1,827				—					(8,167	)
Other assets		(6,594	)		3,026				84				—					(3,484	)
Accounts payable		2,075			(3,746		)		388				—					(1,283	)
Due to third-party payors		—			3,067				(4,108		)		—					(1,041	)
Accrued expenses		(4,929	)		20,843				(846		)		—					15,068
Net cash provided by operating activities		16,959			153,468				27,675				—					198,102
Investing activities
Purchases of property and equipment		(3,024	)		(60,532		)		(10,104		)		—					(73,660	)
Investment in businesses, net of distributions		—			(34,893		)		—				—					(34,893	)
Acquisition of businesses, net of cash acquired		—			(1,665		)		—				—					(1,665	)
Proceeds from sale of assets		—			2,456				456				—					2,912
Net cash used in investing activities		(3,024	)		(94,634		)		(9,648		)		—					(107,306	)
Financing activities
Borrowings on revolving facilities			690,000				—				—				—			690,000
Payments on revolving facilities			(800,000		)		—				—				—			(800,000	)
Borrowings on term loans, net of discount			298,500				—				—				—			298,500
Payments on term loans			(596,720		)		—				—				—			(596,720	)
Issuance of 6.375% senior notes			600,000				—				—				—			600,000
Repurchase of 75/8% senior subordinated notes, net of premiums			(70,000		)		—				—				—			(70,000	)
Borrowings of other debt			8,923				5,303				1,084				—			15,310
Principal payments on other debt			(7,752		)		(873		)		(2,209		)		—			(10,834	)
Debt issuance costs			(18,914		)		—				—				—			(18,914	)
Repayments of bank overdrafts			(5,330		)		—				—				—			(5,330	)
Equity investment by Holdings			1,525				—				—				—			1,525
Dividends paid to Holdings			(226,621		)		—				—				—			(226,621	)
Intercompany			77,455				(63,900		)		(13,555		)		—			—
Distributions to non-controlling interests			—				—				(3,537		)		—			(3,537	)
Net cash used in financing activities			(48,934		)		(59,470		)		(18,217		)		—			(126,621	)
Net decrease in cash and cash equivalents			(34,999		)		(636		)		(190		)		—			(35,825	)
Cash and cash equivalents at beginning of period			35,070				3,734				1,340				—			40,144
Cash and cash equivalents at end of period		$	71			$	3,098			$	1,150			$	—		$	4,319

(a)           Elimination of equity in earnings of consolidated subsidiaries.