Select Medical Holdings Corporation · NYSE:SEM
Select Medical — J.P. Morgan Global High Yield & Leveraged Finance Conference 2013
38 slides from Select Medical's conference presentation, Feb 25, 2013
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance Conference February 25, 2013
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
110 LTAC Hospitals 109 owned - 4,593 beds 1 managed Hospitals in 28 states 979 Outpatient Rehab Clinics in 32 states and the District of Columbia $2.9 Billion Net Revenue 2012 $406 Million Adjusted EBITDA 20121 29,900 Employees in the United States 12 Inpatient Rehab Facilities (IRF) 7 Consolidated
Slide 4: 2012 Accomplishments
2012 Accomplishments Strong operating results Revenue growth of 5.2% Adjusted EPS growth of 27.4% (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
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)
Slide 7: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix Outpatient Payor Mix Overall Payor Mix 90% Commercial Payors and Other 10% Medicare/ Medicaid 64% Medicare/ Medicaid 36% Commercial Payors and Other Note: 2012 58.5% 55.0% 50.3% 48.3% 49.0% 49.7% 51.5% 50.4% 41.5% 45.0% 49.7% 51.7% 51.0% 50.3% 48.5% 49.6% 2005
Slide 8: Significant Scale and Breadth
DC 3 1 2 1 1 5 84 2 3 9 5 1 5 5 15 2 11 5 3 1 4 3 1 1 9 3 2 1 1 3 3 22 9 67 45 4 3 71 14 2 1 1 17 8 3 6 2 23 2 159 4 42 23 3 2 59 13 141 40 1 5 13 14 2 101 38 20 9 59 1 22 25 4 7 6 17 10 34 25 21 14 1 9 1 11 14 2 1 2 2 1 2 3 2 8 1 112 Significant Scale and Breadth LTACH 109 Owned Hospitals 1 Managed
Slide 9: Specialty Hospitals Long Term Acute Care
Specialty Hospitals Long Term Acute Care
Slide 10: LTACH Overview
LTACH Overview Major provider of LTACH services in U.S. 110 hospitals 77 are hospital-in-hospital (2,678 beds) 32 are freestanding (1,915 beds) 1 managed freestanding hospital Ownership of freestanding LTACHs 19 owned 13 leased
Slide 11: Regency Acquisition (23 LTACHs)
Closed September 1, 2010 – Purchase Price $210.0M Regency 2009 Audit 2011 2012 Net Revenue $ 375M $ 340M $ 349M Adjusted EBITDA $ 28M $ 46M $ 65M Adjusted EBITDA Margin 7.5% 13.5% 18.6% Purchase multiple EBITDA 7.5x 4.6x 3.2x Regency Acquisition (23 LTACHs)
Slide 12: LTACH Regulatory Environment
MMSEA 2007 – expired 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 13: Specialty Hospitals Inpatient Rehabilitation
Specialty Hospitals Inpatient Rehabilitation
Slide 14: Rehabilitation Hospitals
Wholly Owned Hospitals Kessler Institute (3 hospitals) – New Jersey West Gables Rehabilitation – Miami, FL Consolidated Joint Ventures Penn State Hershey Rehabilitation – Hershey, PA SSM Rehabilitation (2 hospitals and 1 managed unit) – St. Louis, MO Non-Consolidating Joint Ventures Baylor Institute
Slide 15: Kessler Overview
Rehabilitation Overview Founded in 1948 Largest licensed rehab hospital in U.S. (three campuses) 20 consecutive years U.S. News & World Report best hospital One of eight rehabilitation centers in U.S. to have Model System designation for both traumatic brain injury and spinal cord injury #1 Rehabili
Slide 16: Rehab JV Overview
Rehab JV Overview 2 inpatient hospitals 1 managed inpatient rehab unit 34 outpatient locations 14 contract therapy locations 3 occupational health clinics 3 day institute clinics 4 inpatient hospitals 3 managed inpatient rehab units 43 outpatient locations 1 contract therapy location 54 bed rehab ho
Slide 17: Inpatient Rehab Regulatory Environment
Inpatient Rehab Regulatory Environment CMS Final Rule FY 2013 Net Market basket increase of 1.9% Budget Sequestration cuts?
Slide 18: Outpatient Rehabilitation Outpatient Rehab Clinics
Outpatient Rehabilitation Outpatient Rehab Clinics
Slide 19: Outpatient Rehab Clinics
Outpatient Rehab Clinics Outpatient Rehab Facilities (Number of Facilities) 979 Source: Company public filings and websites as of December 31, 2012. 26 193 431 ~700
Slide 20: Outpatient Rehab—Philadelphia/South Jersey locations
Outpatient Rehab—Philadelphia/South Jersey 124 locations
Slide 21: Outpatient Rehab—North Jersey locations
Outpatient Rehab—North Jersey 82 locations
Slide 22: Outpatient Rehab—St. Louis, MO locations
Outpatient Rehab—St. Louis, MO 40 locations
Slide 23: Outpatient Rehab—Dallas/Ft. Worth locations
Outpatient Rehab—Dallas/Ft. Worth 43 locations
Slide 24: Outpatient Rehabilitation Contract Therapy
Outpatient Rehabilitation Contract Therapy
Slide 25: Contract Services
Contract Services 504 contracts in 30 states and the District of Columbia 2012 Net Revenue of $190M Organic growth only
Slide 26: Outpatient Rehab Regulatory Environment
Outpatient Rehab Regulatory Environment Commercial - Stable Medicare MPPR changes to therapy payments (effective April 2013) 25% reductions increased to 50% reductions to practice expense component for 2nd and subsequent codes Contract Therapy rates
Slide 27: Minority Investments
Minority Investments Haven Health Inpatient Psychiatric hospital company Allevant Rural Hospital Management Services (Mayo Clinic JV) Amplion Alarm alert technology company naviHealth Post acute managed care company U.S. Physiatry Physician practice management company
Slide 28: Financial Overview
ali by he Financial Overview Select Medical: Imp
Slide 29: Net Revenue and Adjusted EBITDA Trends
$2,390 $2,240 $2,153 Note: In Millions CAGR 8.2% CAGR 10.7% $307 $330 $270 Net Revenue Adjusted EBITDA $2,805 $386 Net Revenue and Adjusted EBITDA Trends $2,949 $406 2008 2009 2010 2011 2012 Specialty Outpatient Other 2008 2009 2010 2011 2012 Specialty Outpatient
Slide 30: Key Financial Metrics
Key Financial Metrics Pricing and Volume Trends Specialty Hospital Revenue per Patient Day1 / Admissions Outpatient Rehab Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 1 Net revenue per patient day is calculated by dividing specialty hospital direct patient service reve
Slide 31: Annual Capital Expenditures
Annual Capital Expenditures ($ in millions) 2008 2009 2010 2011 2012 Maintenance Development $52 $ 46 $57 $58 $ 68
Slide 32: Free Cash Flow
Free Cash Flow Free Cash Flow1 ($ in millions) Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment Intense Focus on Free Cash Flow Generation 1 See slide 37 for non-GAAP reconciliation $51 $108 $93 $171 $231 2008 2009 2010 2011 2012
Slide 33: Capitalization Details
As of 12/31/08 As of 12/31/09 As of 12/31/10 As of 12/31/11 As of 12/31/12 Cash and Equivalents $ 64 $ 84 $ 4 $ 12 $ 40 Revolving Credit Facility ($300mm) 150 0 25 40 130 Term Loan B 657 483 482 838 1,097 Other Debt 5 6 6 5 6 Total Senior Debt 811 489 513 883 1,233 Sr. Sub. Notes due 2015 658 612 61
Slide 34: 2013 Financial Guidance
2013 Financial Guidance Net Revenue $ 2,950M - $ 3,050M Adjusted EBITDA $ 400M - $ 415M EPS, Adjusted $ 0.98 - $ 1.04
Slide 35: Questions
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Slide 36: Appendix: Additional Materials
Appendix: Additional Materials
Slide 37: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2008 2009 2010 2011 2012 Net Income $ 25 $ 79 $ 82 $ 113 $ 154 (+) Income tax 26 37 42 71 90 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries - - 1 (3) (8) (+/-) Other expense / (income) - 1 (1) - - (+) Interest expense, net 146 132 112 99 95 (-/+) (Gain) / Lo
Slide 38: Sclect
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