Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Bank of America Merrill Lynch Leveraged Finance Conference 2012
28 slides from Select Medical's conference presentation, Dec 4, 2012
Slide 1: Bank of America Merrill Lynch Leveraged Finance Conference
Bank of America Merrill Lynch Leveraged Finance Conference December 4, 2012
Slide 2: Forward-Looking Statements
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 differ mat
Slide 3: Select Medical Today
111 LTAC Hospitals 110 owned - 4,629 beds 1 managed Hospitals in 28 states 965 Outpatient Rehab Clinics in 32 states and the District of Columbia $2.9 Billion Net Revenue LTM Q3 ‘12 $401 Million Adjusted EBITDA LTM Q3 ‘121 29,750 Employees in the United States 12 Inpatient Rehab Facilities (IRF) 7 C
Slide 4: 2012 Accomplishments
2012 Accomplishments Strong results YTD September Revenue growth of 5.8% Adjusted EPS growth of 33.9% (excludes loss on debt and tax effect in 2011 and 2012) Acquired two rehab hospitals in the Baylor joint venture Completed $275M debt refinancing in Q3 Special Cash Dividend of $1.50/share payable D
Slide 5: IRFs and LTACHs in Post Acute Setting
IRFs and LTACHs in Post Acute Setting Readmission Rates1 2010 Medicare Margin2 2012 Projected Medicare Margin2 % 2010 Total Medicare Spending2 Skilled Nursing Facilities 22.0% 18.5% >14.0% 5.1% Home Health Agencies 18.1% 19.4% 13.7% 3.8% Hospice 4.5% 7.1% 5.1% 3.0% Inpatient Rehabilitation 9.4% 8.8%
Slide 6: IRFs and LTACHs in Post Acute Setting
IRFs and LTACHs in Post Acute Setting Source: Medicare Payment Advisory Commission, A Data Book: Health Care Spending and the Medicare Program (June 2011) (in billions) $30 $20 $10 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 7: Specialty Hospitals Long Term Acute Care
Specialty Hospitals Long Term Acute Care
Slide 8: LTACH Overview
LTACH Overview Major provider of LTACH services in U.S. 111 hospitals 79 are hospital-in-hospital (2,759 beds) 31 are freestanding (1,870 beds) 1 managed freestanding hospital Ownership of freestanding LTACHs 18 owned 13 leased
Slide 9: Regency Acquisition (23 LTACHs)
Regency Acquisition (23 LTACHs) Closed September 1, 2010 – Purchase Price $210.0M Regency 2009 Audit 2011 LTM Q3 ’12 Net Revenue $ 375M $ 340M $ 345M Adjusted EBITDA $ 28M $ 46M $ 58M Adjusted EBITDA Margin 7.5% 13.5% 16.9% Purchase multiple EBITDA 7.5x 4.6x 3.6x
Slide 10: LTACH Regulatory Environment
MMSEA 2007 – expires December 2012 CMS Final Rule FY 2013 Net Market Basket update of 1.7% Three Year Phase-In of BNA (1.266% per year) One year extension of 25% Rule at current levels Expiration of moratorium on new LTACHs at 12/29/12 Budget Sequestration cuts? LTACH Regulatory Environment
Slide 11: Specialty Hospitals Inpatient Rehabilitation
Specialty Hospitals Inpatient Rehabilitation
Slide 12: Inpatient Rehabilitation Hospitals
Wholly Owned Hospitals Kessler Institute (3 hospitals) West Gables Rehabilitation Consolidated Joint Ventures Penn State Hershey Rehabilitation SSM Rehabilitation (2 hospitals and 1 managed unit) Non-Consolidating Joint Ventures Baylor Institute of Rehabilitation (4 hospitals and 3 managed units) Se
Slide 13: Rehab JV Overview
Rehab JV Overview 2 inpatient hospitals 1 managed inpatient rehab unit 33 outpatient locations 15 contract therapy locations 3 occupational health clinics 3 day institute clinics 4 inpatient hospitals 3 managed inpatient rehab units 37 outpatient locations 1 contract therapy location 54 bed rehab ho
Slide 14: Outpatient Rehabilitation Clinics & Contract Therapy
Outpatient Rehabilitation Clinics & Contract Therapy
Slide 15: Outpatient Rehab Clinics
Outpatient Rehab Clinics Outpatient Rehab Facilities (Number of Facilities) 965 700 423 183 26 Source: Company public filings and websites as of September 30, 2012. 16
Slide 16: Contract Services
Contract Services 513 contracts in 30 states and the District of Columbia LTM Q3 ‘12 Net Revenue of $192.9M Organic growth only
Slide 17: Outpatient Rehab Regulatory Environment
Outpatient Rehab Regulatory Environment Commercial - Stable Medicare MPPR changes to therapy payments (effective January 2011) 25% reductions to practice expense component for 2nd and subsequent codes Contract Therapy rates
Slide 18: Financial Overview
Financial Overview Fallin “Hae
Slide 19: Net Revenue and Adjusted EBITDA Trends
Net Revenue and Adjusted EBITDA Trends Net Revenue Adjusted EBITDA $401 $386 $2,926 $2,805 $330 $270 $307 $2,390 $2,153 $2,240 2008 2009 2010 2011 LTM Q3 '12 2008 2009 2010 2011 LTM Q3 '12 Specialty Outpatient Other Specialty Outpatient Note: In Millions 20
Slide 20: Key Financial Metrics
Key Financial Metrics Pricing and Volume Trends Specialty Hospital Outpatient Rehab Revenue per Patient Day1/ Admissions Revenue per Visit2/ Visits (Admissions in Thousands) (Visits in Thousands) 140 $1,495 $1,474 $1,497 $1,522 $1,444 55 55 46 41 43 2008 2009 2010 2011 LTM Q3 '12 $102 $102 $101 $103
Slide 21: Annual Capital Expenditures
Annual Capital Expenditures ($ in millions) $58 $59 $57 $52 $46 2008 2009 2010 2011 LTM Q3 '12 Maintenance Development 22
Slide 22: Free Cash Flow
Free Cash Flow Intense Focus on Free Cash Flow Generation Free Cash Flow1 ($ in millions) $208 $171 $108 $93 $51 2008 2009 2010 2011 LTM Q3 '12 Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment 1 See slide 28 for non-GAAP reconcilia
Slide 23: Capitalization Details
As of 12/31/08 As of 12/31/09 As of 12/31/10 As of 12/31/11 As of 9/30/12 Cash and Equivalents $ 64 $ 84 $ 4 $ 12 $ 50 Revolving Credit Facility ($300mm) 150 0 25 40 0 Term Loan B 657 483 482 838 1,099 Other Debt 5 6 6 5 6 Total Senior Debt 811 489 513 883 1,105 Sr. Sub. Notes due 2015 658 612 612 3
Slide 24: 2012 Financial Guidance
2012 Financial Guidance Net Revenue $ 2,900M - $ 2,975M Adjusted EBITDA $ 400M - $ 410M EPS, Adjusted $ 1.01 - $ 1.06
Slide 25: Questions
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Slide 26: Appendix: Additional Materials
Appendix: Additional Materials
Slide 27: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2008 2009 2010 2011 YTD ’11 YTD ’12 LTM Q3 ‘12 Net Income $ 25 $ 79 $ 82 $ 113 $ 75 $ 112 $ 150 (+) Income tax 26 37 42 71 57 72 86 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries - - 1 (3) (1) (6) (8) (+/-) Other expense / (income) - 1 (1) - - - - (+) Intere
Slide 28: Select Medical
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