Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Debt Investor Presentation (April 2011)
34 slides from Select Medical's debt investor presentation, Apr 27, 2011
Slide 1: Presentation to Lenders April 2011
Presentation to Lenders April 2011
Slide 2: Disclosure
Disclosure This presentation 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 the Company's filings with the Securities and Exchange Commission, may cause results to
Slide 3: Agenda
Agenda Business Overview Financial Overview Transaction Overview Questions & Answers
Slide 4: Presenters
Presenters Robert Ortenzio Chief Executive Officer Martin Jackson Executive Vice President and Chief Financial Officer
Slide 5: Business Overview
Business Overview
Slide 6: Select Medical Today
Select Medical Today 110 LTAC Hospitals with 4,601 beds in 28 States 944 Outpatient Rehab Clinics in 36 States and the District of Columbia $2.4 Billion Net Revenue FY 2010 $331 Million FY 2010 Pro Forma Adjusted EBITDA 25,900 Employees in the United States 8 Inpatient Rehab Facilities (IRF) with 55
Slide 7: Significant Scale and Breadth
Contract Therapy 483 locations 29 states and District of Columbia Note: As of January 1, 2011 Outpatient Rehab 944 clinics 36 states and District of Columbia LTAC 110 hospitals 28 states Inpatient Rehab 8 hospitals/1 unit 5 states Significant Scale and Breadth WA OR CA MT ID NV AZ WY UT CO NM TX ND
Slide 8: Recent Events
Recent Events Acquisition of Regency Hospital Company - closed September 1, 2010 23 LTAC Hospitals in 9 states Baylor Health System Joint Venture - Closed April 1, 2011 Q1 2011 earnings guidance announcement on April 26, 2011 $100.0 million Share Buyback Program Miami Rehab addition - January 1, 201
Slide 9: Operating and Growth Strategy
Operating and Growth Strategy Organic Joint Venture Acquisition LTAC - maturing new hospitals Regency- margin improvement Outpatient Rehab - margin improvement Draw on reputation for JV development Expand into existing and contiguous markets Focus on leading systems and university hospitals 1 to 2 p
Slide 10: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix Outpatient Payor Mix Overall Payor Mix Commercial Payors and Other 89% Medicare/ Medicaid 11% Commercial & Other Medicare East 36 64 West Medicare/ Medicaid 65% Commercial Payors and Other 35% 2005 2006 2007 2008 2009 2010 Medicare/Medicaid 0.585 0.55 0.503 0.4
Slide 11: Segment Overview
2007 2008 2009 2010 999 956 961 944 2007 2008 2009 2010 87 93 95 118 2007 2008 2009 2010 Revenue 1386 1488 1558 1702 EBITDA 217 236 290 301 2007 2008 2009 2010 Revenue 603 665 682 688 EBITDA 75 77 89 84 Segment Overview Specialty Hospitals Revenue / Adjusted EBITDA Outpatient Rehab Facilities Revenu
Slide 12: Experienced Leadership Team
Experienced Leadership Team Name Title Years of Experience Rocco A. Ortenzio Executive Chairman 42 Robert A. Ortenzio Chief Executive Officer 28 Patricia A. Rice President & Chief Operating Officer 33 David S. Chernow President & Chief Development and Strategy Officer 19 Martin F. Jackson Executive
Slide 13: Key Credit Considerations
Key Credit Considerations Complementary businesses in attractive market segments High quality operator with significant scale and breadth Strong track record of growth through acquisitions, de novos and JVs Experienced management team with proven track record of successfully operating in challenging
Slide 14: Segment Overview
Segment Overview
Slide 15: LTACHs Overview
Major provider of LTACH services in U.S. 110 hospitals 80 are hospital-in-hospital (2,754 beds) 29 are freestanding (1,847 beds) 1 managed freestanding hospital LTACHs Overview Note: As of Jan. 1, 2011 Overview of LTACHs Maturing New Hospitals New Hospitals Added 2008-09 ? 10 LTACs and 2 Rehab Adjus
Slide 16: Regency Acquisition
Regency Acquisition On September 1, 2010, Select closed the acquisition of Regency Hospitals for $210M less assumed liabilities 23 long-term acute care hospitals with 898 licensed beds in 9 states Corporate services and back office functions fully integrated Synergies and margin enhancement Corporat
Slide 17: LTAC Hospital Regulatory Environment Summary
LTAC Hospital Regulatory Environment Summary MMSEA 2007 - extended through December 2012 Hospital in Hospital Rules - suspended at 50% Very Short Stay Outlier Rule - suspended Moratorium on new LTAC hospital licenses Future - post-2012 Patient/Facility Criteria (Supported by Industry, AHA, FAH, etc.
Slide 18: Rehabilitation Hospitals
Rehabilitation Hospitals Eight hospitals1 - 552 beds, one managed unit Kessler Institute (3) Penn State Hershey Rehabilitation (1) SSM Rehabilitation (1) Dallas, TX area (2) Miami, FL (1) Baylor Joint Venture closed April 1, 2011 2 I/P rehab hospitals and 3 I/P rehab units 30 outpatient clinics LTAC
Slide 19: Rehab Overview - Kessler Institute
Rehab Overview - Kessler Institute Founded in 1948 Largest licensed rehab hospital in U.S. (three campuses) 18 consecutive years U.S. News & World Report best hospital One of six rehab hospitals in U.S. to have model system designation for head injury and spinal cord injury LTACH Inpatient Rehab Con
Slide 20: Rehab JV Overview
Rehab JV Overview SEM 51% JV 80 inpatient rehab beds 33 outpatient locations (18 SSM, 15 Select) 6 contract therapy locations/4 onsite rehab locations 3 occupational health clinics 3 day institute clinics Construction of new 60 bed facility on SSM DePaul Campus ; expands bed capacity to 95 upon comp
Slide 21: Inpatient Rehabilitation Regulatory Environment
Inpatient Rehabilitation Regulatory Environment Stable 75% Rule issue resolved in 2007 part of MMSEA frozen at 60% 10/1/10 net 1.7% increase in Medicare rates LTACH Inpatient Rehab Contract Therapy Outpatient Rehab
Slide 22: Outpatient Rehabilitation Clinics
Outpatient Rehabilitation Clinics Outpatient Rehab Facilities (Number of Facilities) ^ 944 Source: Company public filings and websites as of Dec. 31, 2010. Outpatient Margin Opportunity Continue to expand former HealthSouth clinics' EBITDA margins 2009 EBITDA margin differential - greater than 5% 20
Slide 23: Outpatient Rehabilitation locations
Outpatient Rehabilitation 115 locations Philadelphia/South Jersey 78 locations North Jersey LTACH Outpatient Rehab Inpatient Rehab Contract Therapy
Slide 24: Outpatient Rehabilitation Regulatory Environment
Outpatient Rehabilitation Regulatory Environment Commercial - Stable Medicare MPPR changes to therapy payments (effective Jan. 2011) 25% reductions to practice expense component for 2nd and subsequent codes Contract Therapy rates LTACH Outpatient Rehab Inpatient Rehab Contract Therapy
Slide 25: Contract Services
Contract Services 483 contracts in 29 states and the District of Columbia 2010 Revenue $155.9M Strong ROI with organic growth only LTACH Inpatient Rehab Outpatient Rehab Contract Therapy
Slide 26: Financial Overview
Financial Overview
Slide 27: Q1 Guidance
Q1 Guidance On April 26, 2011, Select released public guidance for Q1 2011 as follows: Revenue: $685 - $695 million Adjusted EBITDA: $104 - $106 million EPS: $0.21 - $0.22
Slide 28: Historical Net Revenue and Adjusted EBITDA
$2,240 $2,153 $1,992 Historical Net Revenue and Adjusted EBITDA Note: In Millions CAGR 6.3% CAGR 9.1% $330 $270 $255 $331* $2,390 Net Revenue Adjusted EBITDA * Pro Forma Adjusted EBITDA per the current Credit Agreement ; please see page 34 for EBITDA reconciliation
Slide 29: EBITDA Growth and Margin Stability
2007 2008 2009 2010 Revenue 217 236 290 301 EBITDA 0.157 0.159 0.186 0.167 EBITDA Growth and Margin Stability Specialty Hospitals Adj. EBITDA / Adj. EBITDA Margin Outpatient Rehabilitation Adj. EBITDA / Adj. EBITDA Margin 40,008 41,177 42,674 45,990 Growth in Admissions/Visits Supports Adj. EBITDA G
Slide 30: Key Financial Metrics
Key Financial Metrics Pricing and Volume Trends Specialty Hospital Revenue per Patient Day1 / Admissions Outpatient Rehab Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 1 Net revenue per patient day is calculated by dividing specialty hospital direct patient service reve
Slide 31: Annual Capital Expenditures
Annual Capital Expenditures $57
Slide 32: Free Cash Flow
Free Cash Flow Free Cash Flow1 1Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment Intense Focus on Free Cash Flow Generation ($ in millions)
Slide 33: Select has successfully deleveraged over time
Select has successfully deleveraged over time 12/31/2008 3/31/2009 6/30/2009 9/30/2009 12/31/2009 3/31/2010 6/30/2010 9/30/2010 12/31/2010 Total Net Debt / EBITDA 6.4 6.2 5.6 4.4 4 3.9 3.6 4.1 4.3 OpCo Net Debt / Adj EBITDA 5.2 5.1 4.6 3.4 3.1 3 2.8 3.2 3.4 Note: Pro Forma Adjusted EBITDA per the cu
Slide 34: EBITDA Reconciliation
FY 2010 Net Income 78 (+) Non-controlling interest 5 (+) Income tax 42 (+/-) Other expense / (income) (1) (+) Interest expense, net 112 (+) Depreciation and Amortization 69 (+) Stock Based Compensation 2 Adjusted EBITDA $307 (-) Cash Non-Controlling Interest 4 (+) Pro Forma Regency (1/1/2010 - 8/31/
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