Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Debt Investor Presentation (December 2015)
27 slides from Select Medical's debt investor presentation, Dec 2, 2015
Slide 1: Transaction Overview
Transaction Overview • Select Medical Corporation (“Select” or the “Company”) is seeking to extend its existing Series D Term Loan and make other amendments to its existing credit facilities • Extend the maturity on the Series D Term Loan from December 2016 to June 2018, consistent with the Series E
Slide 2: Summary Amendment Terms
Summary Amendment Terms carryforward to next year 1 Secured leverage net of up to $75mm of cash 2 Total leverage net of up to $75mm of cash Proposed Pricing and Fees • Series D: – – Non extending: Unchanged; L+275, no LIBOR floor Extending: L+400 at current ratings; L+425 if corporate ratings fall b
Slide 3: Pro Forma Capitalization Details
Pro Forma Capitalization Details Select Standalone Select + Concentra Cash $450mm RCF due 2018 Series E Term Loan due 20183 Other Debt $9.9 225.0 750.1 14.4 $22.6 Net Sr Secured Debt $979.6 2.85x 6.375% Sr. Notes due 20214 711.3 Non-recourse Debt (Concentra)5 --649.9 1 Select standalone EBITDA was $
Slide 4: Transaction Timeline
Transaction Timeline S M T W T 3 10 17 24 31 F 4 S 5 12 19 26 6 13 20 27 7 14 21 28 15 22 29 16 23 30 18 Transaction Dates Bank Holidays December 2nd December 8th December 11th Lender call Commitments due at 5pm ET Closing 5 Week ofActivity 25 11 1 2 8 9 December 2015
Slide 5: Transaction Timeline
. . . ah Transaction Timeline Select |December2015 | sMTWTFS 1 345 67 9 10 Bz 13 14 15 16 17 18 19 won 2 2 24 Bas 27 629 3031 BBE esrcacion bates bank otays Week of Activity December 2n¢ tender call, December ‘Commitments due at Spm &T December 11% Closing Select Medical: Improving Q
Slide 6: The Select Medical Network
The Select Medical Network Diversified across multiple business lines Specialty hospital segment Outpatient rehabilitation segment 7 Contract therapy Employees: 3,000 Locations: 415 28 States and D.C. Occupational medicine Employees: 8,400 Locations: 476 43 States Physical therapy outpatient centers
Slide 7: 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, Outpatient Rehab and Occupati
Slide 8: LTACH Patient Criteria Phase In
Patient Q4 ’15* Criteria Phase In Q1 ‘16 Q3 ‘16 Q2 ‘16 HOSPITALS BEDS MOVING TO CRITERIA >>> *4Q15 does not include Covington (38 beds) which was closed post 9/30/15 10 HOSPITALS 2015 2016 16 HOSPITALS 724 19 HOSPITALS 823 BEDS 36 1,343 BEDS 37 HOSPITALS 1,567 BEDS
Slide 9: Impact on Select
Impact on Select Positives: • • • Degree of segment certainty with phase in Expect higher CMI with compliant patients Hospital in hospital strategy Neutral: • Moratorium – on new hospitals and beds (with exceptions) through September 30, 2017 Negatives: • Potential loss of volume 11
Slide 10: Inpatient Rehab Regulatory Environment
Inpatient Rehab Regulatory Environment • CMS Final Rule FY 2016 effective 10/1/15 Standard Payment Conversion Factor increase 1.8% - Removed several compliance list diagnosis codes from presumptive 12
Slide 11: JVs Under Construction
JVs Under Construction Cleveland, OH 60 bed IRF (opening late 2015) Currently managing 3 units with 97 total beds Los Angeles, CA 138 bed IRF (opening early 2016) New Orleans, LA 60 bed IRF (opening 2016) Currently managing 1unit with 29 total beds Cincinnati, OH 60 bed IRF (opening 2016) Currently
Slide 12: Growing Rehabilitation Network
Growing Rehabilitation Network Partner in joint ventures with premier acute care hospitals and systems to build post acute networks •select -J MEDICAL []Cleveland Clini Rehabilitation Hospital .,_ ....Sdect_ Rehabilitation Od hu-ioHealth INSTITUTE FOR REHABIUTATION Select Medical HelenM.Simpson habi
Slide 13: Specialty Hospitals Growth
Specialty Hospitals Growth LTACH 2 new LTACHs 1 new LTACH Poised for Begin phase in of LTACH patient criteria 3 new LTACHs 1 new LTACH 1 new LTACH 2014 2015 2016 REHAB 15
Slide 14: Outpatient Rehab Clinics
Outpatient Rehab Clinics 16 5,146 4,971 VISITS 4,781 (000’s) 4,567 4,569 4,470 YEAR20102011201220132014LTM Q3 ‘15 REVENUE $101 $103 $103 $104 $103 $103 PER VISIT
Slide 15: 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 17
Slide 16: Concentra Post Acquisition Update
Concentra Post Acquisition Update • Concentra is the largest provider of occupational health and outpatient veterans services in the country with over 300 locations across 38 states Management transition Early results / earnings (6/1/15 – 9/30/15) • • • • • Revenue = $345.8mm Adjusted EBITDA = $36.8
Slide 17: Concentra Post-Acquisition Update
Concentra Post-Acquisition Update se... * Concentra is the largest provider of occupational health and outpatient veterans services in the country with over 300 locations across 38 states * Management transition * Early results / earnings (6/1/15 - 9/30/15) * Revenue = $345.8mm * Adjusted EBITDA =$3
Slide 18: Financial Policy
Financial Policy 20 USE OF CAPITAL (OPPORTUNISTIC) Stock buybacks will continue to be opportunistic STOCK BUYBACK Board decision but none for the foreseeable future DIVIDENDS To be funded with cash or stock MINORITY EQUITY IN CONCENTRA Execution of put / call to begin end of FY18 (max 33.3% per year
Slide 19: YTD Q3 Update
YTD Q3 Update • LTM Q3 2015 revenue of $3.5bn (YTD increase of 18% year over year) – – – 4.4% increase in Specialty Hospitals 1.7% decrease in Outpatient Rehab (primarily due to terminations in Contract Therapy) Concentra revenue contribution of $346mm since 6/1/15 • LTM Q3 2015 Adjusted EBITDA of $
Slide 20: Financial Metric Trends
Financial Metric Trends Net Revenue Adjusted EBITDA $406 $386 $377 $373 $364 $3,475 2013 1 2014 1 2010 2011 2012 2013 2014 LTM Q3 2015 2010 2011 2012 LTM Q3 2015 ($ in millions) Outpatient ($ in millions) Hospitals Outpatient Concentra Hospitals Concentra 1 Decline in FY13 and FY14 Adjusted EBITDA w
Slide 21: Annual Capex and Cash Flow
Annual Capex and Capital Expenditures Cash Flow Maintenance Development $300 $225 $150 $74 $68 $75 $0 2010 Cash Flow 2011 2012 2013 2014 Free Conversion % (FCF/EBITDA) $300 $225 $150 $75 $0 2010 2011 2012 2013 2014 23 ($ in millions) ($ in millions) 57% 44%$231 30%$171 32% $11921% $93 $75 $95 $52$46
Slide 22: Pro Forma Debt Maturities
Pro Forma Debt Maturities SEM Revolver (L + 3.75%) $1,000 $973 $800 $600 $400 $200 $0 2015 ($ in millions) 2016 2017 2018 2019 2020 2021 2022 2023 As of September 30, 2015, PF for amendment 24 SEM Term Loan E (L + 2.75% 1% floor) SEM Term Loan D (L + 2.75%) SEM Senior Notes 6.375% Concentra 1st Lien
Slide 23: Appendix: Additional Materials
Appendix: Additional Materials
Slide 24: Non GAAP Reconciliation
Non GAAP Reconciliation 1 LTM 9/30/15 EBITDA of $377mm includes ~$37mm of incremental EBITDA from Concentra (SEM standalone EBITDA is $340mm) 26 YTD YTD LTM ($ in millions) 2010 2011 2012 2013 2014 Q3 ’14 Q3 ’15 Q3 ’15 Net Income $82 $113 $154 $123 $128 $100 $110 $138 (+) Income tax 42 71 90 75 76 6
Slide 25: LTM Q3 '15 EBITDA Bridge
LTM Q3 ’15 EBITDA Bridge = SEM LTM Credit Agreement EBITDA = $343.9M = Concentra LTM Adjusted EBITDA = $98.4M + + + 1 2 2 6 4 4 + = Concentra Adjusted EBITDA (Credit Agreement) = $134.4M 5 5 6 $3.4 4 $36.0 1 2 $36.8 3 $61.6 $478.3 $377.3 $340.5 SEM Standalone EBITDA Concentra Contribution (June Sept
Slide 26: selectmedical.com/investor relations/for investors
selectmedical.com/investor relations/for investors
Slide 27: Select
r | 4 Select MEDICAL selectmedical.com/investor-relations/for-investors.
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