Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Investor Presentation (July 2015)
36 slides from Select Medical's investor presentation, Jul 24, 2015
Slide 1: Investor Presentation July 2015
INVESTOR PRESENTATION JULY 2015 Improving Quality of Life
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain forward-looking statements based managementexpectations.Numerousfactors,includingthose market conditions and those detailed from time-to-time in the on current relatedto Company’s filings with the Securities and Exchange Commission, may cause
Slide 3: Select Medical Overview
Select Medical Overview Founded in 1996 $3.1 Billion Net Revenue LTM Q1 2015 2015(1) $366 Million Adjusted EBITDA LTM 11.8% Adjusted EBITDA Margins Q1 SCALE AND EXPERTISE Leading provider of post-acute services with operations in 42 states and D.C. Headquartered in Mechanicsburg, Pennsylvania, Selec
Slide 4: Select Medical's National Footprint
Select 2 Medical’s National Footprint 12 1 4 1 2 24 4 13 1 9 148 2 131 3 44 4 1 11 7 9 2 2 11 11 1 45 16 57 51 1 1 3 152 23 1 5 1 1 17 3 1 21 2 2 1 33 15 3 19 17 21 2 3 42 4 15 2 3 66 2 33 3 2 15 1 16 3 14 12 2 5 5 2 1 2 1 20 1 2 6 2 1 10 6 24 2 5 As of 03/31/15 7 98 6 1 3 93 53 9 1 112 Long-Term Ac
Slide 5: Strategy
Strategy • Be the “preferred” provider of post acute care services in our markets • Structured relationships to align with patients •Partner with academic/major medical institutions •Hospital in hospital model in LTACH • Experts in our fields – LTACH, Inpatient Rehab and Occupational Medicine Rehab,
Slide 6: 2014 Financial Highlights
2014 Financial Highlights PRICING/ADMENDMENT TERM LOANS MARCH 2014 $110.0M SR. NOTE ADD-ON @ 101.5 MARCH 2014 10M shares @ $10.95/share on March 13, 2014 SHARE PURCHASES ~1.3M shares @$14.00/share on May 21, 2014 DIVIDEND PAYMENTS $.10/share on March 10, 2014 $.10/share on May 28, 2014 $.10/share on
Slide 7: 2014 Development Rehabilitation Joint Ventures: Highlights
2014 Development Rehabilitation Joint Ventures: Highlights Cincinnati, OH 60 bed IRF (opening 2016) Atlanta, GA 56 bed IRF 23 outpatient clinics Harrisburg, PA 55 bed IRF 21 outpatient clinics Cleveland, OH Two 60 bed IRFs (opening late 2015 & 2016) LTACHs: • • 6 Start Ups 1 New Joint Venture Atlant
Slide 8: Long-Term Acute Care Specialty Hospitals
Long-Term Acute Care Specialty Hospitals
Slide 9: Select Medical LTAC Hospitals
Select Medical LTAC Hospitals 1 1 3 11 9 2 2 1 1 16 5 1 3 2 3 2 3 3 2 5 2 1 6 2 10 5 As of 03/31/15 1 112 Long-Term Acute Care Hospitals (LTACH) (28 States) 9 9
Slide 10: LTACH Overview
LTACH Overview • Major provider of LTACH services in U.S. • 112 hospitals • • • 82 hospital-in-hospital (3,091 beds); average size 38 beds 29 freestanding (1,601 beds); average 1 managed hospital size 55 beds • Ownership of freestanding LTACHs • • 17 owned 12 leased 10
Slide 11: LTACH Legislation
LTACH Legislation LTACH Patient Criteria passed in late December 2013 as part of Budget bill and SGR - effective beginning Q4 2015 • LTACH Rates for patients with; •3 day prior short term acute hospital ICU/CCU stay or •Ventilation patients for > 96 hours in the LTACH Other patients receive “site ne
Slide 12: Patient Criteria Phase-In
Patient Criteria Phase-In Q3 ‘16 Q2 ‘16 Q4 ‘15 Q1 ‘16 HOSPITALS BEDS OVING TO CRITERIA >>> 12 HOSPITALS M 2015 2016 18 HOSPITALS 790 19 HOSPITALS 823 BEDS 36 1,343 BEDS 37 HOSPITALS 1,567 BEDS
Slide 13: Select Impact
Select Impact Positives: • • Degree of segment certainty with phase-in 25% Rule extension – through cost reporting periods on or after October 1, 2016 Select high CMI HiH Strategy • • Neutral: • Moratorium – on new hospitals and beds (with exceptions) through September 30, 2017 Negatives: • • Potent
Slide 14: Inpatient Rehabilitation Hospitals
Inpatient Rehabilitation Inpatient Rehabilitation Hospitals Right Choice. Right Setting. RiSghpt Oeutccoimael. ty Hospitals
Slide 15: Inpatient Rehabilitation Hospitals
Inpatient Rehabilitation Hospitals • • Acquired Kessler Institute in September 2003 The Kessler Rehabilitation network: - Three freestanding inpatient rehab hospitals (336 total beds) - 88 outpatient rehab clinics Largest licensed rehab hospital in U.S. U.S. News & World Report has recognized Kessle
Slide 16: Operational Joint Ventures
Operational Joint Ventures Consolidated Joint Ventures: Hershey, PA 76 bed IRF 22 bed TCU St. Louis, MO 2 IRFs (95 beds) 1 managed unit 47 outpatient clinics Additional services San Antonio, TX 42 bed IRF Harrisburg, PA 55 bed IRF 21 outpatient clinics Non-Consolidating Joint Ventures: Dallas, TX 4
Slide 17: JVs Under Construction
JVs Under Construction Cleveland, OH Two 60 bed IRFs (opening late 2015 & 2016) Currently managing 3 units with 97 total beds Los Angeles, CA 138 bed IRF (opening late 2015) Cincinnati, OH 60 bed IRF (opening 2016) Currently managing 2 units with 46 total beds 17
Slide 18: Growing Rehabilitation Network
Growing Rehabilitation Network Partner in joint ventures with premier acute care hospitals and systems to build post acute networks .... O·1h11-ioHealth PENNSTATE IICRSIICY Rehabilitation . oopilai INSTITUTE FOR REHABLIITATION .-HdenMSimpson REHABIUWIO:-J HOSPITAl. CaUfornia abilitation Rehabilitati
Slide 19: Specialty Hospitals Poised for Growth
Specialty Hospitals Poised for Growth LTACH 2 new LTACHs 1 new LTACH Begin phase-in of LTACH patient criteria 3 new LTACHs 1 new LTACH 1 new LTACH 2014 2015 2016 REHAB 19 6 New IRFs 8 New LTACHs
Slide 20: Outpatient Rehab Clinics
Outpatient Rehab Clinics Outpatient Rehabilitation
Slide 21: Outpatient Rehabilitation - Industry
Outpatient Rehabilitation - Industry 12 24 13 9 44 7 131 11 45 152 1 21 2 57 17 17 21 42 Source: Company public filings and websites as of March 31, 2015 15 66 33 14 12 2 1 15 20 24 98 6 3 93 1,028 Outpatient Rehabilitation Clinics (31 States and D.C.) 21 ATI (420) USPH (494) PhysioTherapy Associate
Slide 22: Outpatient Rehab Clinics
Outpatient Rehab Clinics Managed/ Other 23% Medicare/ Medicaid 13% Payor Mix 22% 42% Commercial/ Managed Care Workers’ Comp LTM Q1 ‘15 YEAR 2010 2011 2012 2013 2014 REVENUE PER VISIT 22 $101 $103 $103 $104 $103 $103 5,032 4,971 VISITS 4,781 (000’s) 4,567 4,569 4,470
Slide 23: 2015 Outpatient Initiatives
2015 Outpatient Initiatives • Continued growth in workers’ comp business by illustrating historical ROI benefits of working with Select • Payors/Employers • Expand hand therapy services to more clinics • Expand concussion management program • Continued development of start-up clinics 23
Slide 24: Concentra Acquisition
Concentra Acquisition • Concentra is the leading provider of occupational health with 488 locations across 40 states –For the 12 months ended March 31, 2015, Concentra generated $1.0 billion of revenues and $96.0 million of Adjusted EBITDA • Three primary service lines: – Centers: 300 locations focu
Slide 25: Concentra Transaction Overview
Concentra Transaction Overview • On March 23, 2015, Select Medical and Welsh Carson Anderson & Stowe (“WCAS”) announced the purchase of Concentra for $1,055 million. The transaction will be structured as a joint venture partnership –Debt financing will be non-recourse to both Select and WCAS The tra
Slide 26: Concentra Investment Rationale
Concentra Investment Rationale • • • Business well known by both WCAS and Select Complementary to Select’s outpatient rehabilitation business Significant geographic overlap of Concentra centers and Select outpatient clinics Select’s track record of successful acquisitions combined with • WCAS’s hist
Slide 27: Financial Overview
Financial Overview
Slide 28: Financial Metric Trends
Financial Metric Trends Net Revenue Adjusted EBITDA Adjusted EPS $3,065 $3,098 $2,805 $2,949 $2,976 $406 $386 $1.07 2010 2011 2012 2013 2014 LTM Q1 2015 2010 2011 2012 2013 2014 LTM Q1 2015 2010 2011 2012 2013 2014 LTM Q1 2015 ($ in millions) ($ in millions) Hospitals Outpatient Hospitals Outpatient
Slide 29: Annual Capital Expenditures
Annual Capital Expenditures Accelerated development spending expected 2014-2015 $96 $100 $95 $75 $50 $25 $0 2010 2011 2012 2013 2014 LTM Q1 '15 Maintenance Development 29 ($ in millions) $74 $68 $52 $46
Slide 30: Free Cash Flow
Free Cash Flow Focus on Free Cash Flow Generation $231 $119 2010 ($ in millions) 2011 2012 2013 2014 LTM Q1 '15 Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment See Slide 35 for non-GAAP reconciliation 30 $171 $128 $93 $75
Slide 31: Debt Maturities
Debt Maturities Revolver (L + 3.75%) $800 $600 $400 $200 $0 2015 ($ in millions) 2016 2017 2018 2019 2020 2021 31 Term Loan E (L + 2.75% - 1% floor)$710 Term Loan D (L + 2.75%) Senior Notes 6.375%$568 $280 $5
Slide 32: Use of Capital - Opportunistic
Use of Capital - Opportunistic Acquisition payments $176M since 2010 ACQUISITIONS Investments in businesses $73M since 2011 Special dividend $1.50/share @ 12/2012 DIVIDENDS Dividend payments totaling $.30/share in 2013 Dividend payments totaling $.40/share in 2014 STOCK BUYBACK - $129.5M in 2011-13
Slide 33: 2015 Financial Guidance
2015 Financial Guidance Net Revenue $3,100M - $3,200M Adjusted EBITDA $370M - $385M Adjusted EPS $0.84 - $0.90 33
Slide 34: Appendix: Additional Materials
Appendix: Additional Materials
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2010 2011 2012 2013 2014 Q1 ‘14 Q1 ‘15 LTM Q1 ’15 Net Income $82 $113 $154 $123 $128 $35 $38 $131 (+) Income tax 42 71 90 75 76 22 23 77 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries 1 (3) (8) (2) (7) (1) (3) (9) (+/-) Other expense / (income) (1) - - - - -
Slide 36: selectmedical.com/investor-relations/for-investors
selectmedical.com/investor-relations/for-investors
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