Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Baird's 2012 Health Care Conference
32 slides from Select Medical's conference presentation, Sep 5, 2012
Slide 1: Baird's 2012 Health Care Conference
Baird’s 2012 Health Care Conference September 5, 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 - 4,660 beds 1 managed Hospitals in 28 states 956 Outpatient Rehab Clinics in 32 states and the District of Columbia $2.9 Billion Net Revenue LTM Q2 ‘121 $400 Million Adjusted EBITDA LTM Q2 ’121 29,620 Employees in the United States 12 Inpatient Rehab Facilities (IRF) 7
Slide 4: 2011 Accomplishments
2011 Accomplishments Financial Performance Grew YoY Revenue by 17.3% Grew YoY EBITDA by 25.7% Reduced leverage thru Holdco by 1 full turn (4.6x to 3.6x) Free Cash Flow of $171.0 million Added Miami, FL rehab hospital – January 1, 2011 Completed Baylor Health System Rehab JV – April 1, 2011 Completed
Slide 5: YTD 2012 Strong 1H results
YTD 2012 Strong 1H results Revenue growth of 7.3% Adjusted EPS growth of 40.5% (excludes loss on debt and tax effect in 2011) Acquired two rehab hospitals in the Baylor joint venture
Slide 6: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix Outpatient Payor Mix Overall Payor Mix 90% Commercial Payors and Other 10% Medicare/Medicaid 65% Medicare/Medicaid 35% Commercial Payors and Other Note: LTM June 30, 2012 58.5% 55.0% 50.3% 48.3% 49.0% 49.7% 51.5% 41.5% 45.0% 49.7% 51.7% 51.0% 50.3% 48.5% 2005 2
Slide 7: 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 8: 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 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. 111 hospitals 78 are hospital-in-hospital (2,690 beds) 32 are freestanding (1,970 beds) 1 managed freestanding hospital Ownership of freestanding LTACHs 18 owned 14 leased
Slide 11: Regency Acquisition (23 LTACHs)
Closed September 1, 2010 – Purchase Price $210.0M Regency 2009 Audit 2011 1H 2011 1H 2012 Net Revenue $ 375M $ 340M $ 171M $ 178M Adjusted EBITDA $ 28M $ 46M $ 23M $ 34M Adjusted EBITDA Margin 7.5% 13.5% 13.6% 19.4% Purchase multiple EBITDA 7.5x 4.6x Regency Acquisition (23 LTACHs)
Slide 12: LTACH Regulatory Environment
MMSEA 2007 – expires December 2012 Hospital in Hospital Rules – suspended at 50% Very Short Stay Outlier Rule – suspended Moratorium on new LTAC hospital licenses Budget Sequestration cuts LTACH Regulatory Environment
Slide 13: CMS Final Rule – August 2012
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 CMS Final Rule – August 2012
Slide 14: Specialty Hospitals Inpatient Rehabilitation
Specialty Hospitals Inpatient Rehabilitation
Slide 15: Rehabilitation Business Cornerstone
Rehabilitation Business Cornerstone Founded in 1948 Largest licensed rehab hospital in U.S. (three campuses) 20 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 #1 Rehabilitation Instit
Slide 16: Rehab JV Overview
Rehab JV Overview 2 inpatient hospitals 1 managed inpatient rehab unit 32 outpatient locations 16 contract therapy locations 3 occupational health clinics 3 day institute clinics 4 inpatient hospitals 3 managed inpatient rehab units 35 outpatient locations 1 contract therapy location 54 bed rehab ho
Slide 17: Inpatient Rehab Regulatory Environment
Inpatient Rehab Regulatory Environment Net Market basket increase 1.9% effective October 2012
Slide 18: Outpatient Rehab Clinics
Outpatient Rehab Clinics Outpatient Rehab Facilities (Number of Facilities) 956 Source: Company public filings and websites as of June 30, 2012. 26 164 419 700
Slide 19: Outpatient Rehabilitation Contract Therapy
Outpatient Rehabilitation Contract Therapy
Slide 20: Contract Services
Contract Services 523 contracts in 31 states and the District of Columbia 2011 Revenue $164.3M Organic growth only
Slide 21: 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 22: Financial Overview
FY Select MEDICAL Financial Overview Select Medical: Imprc
Slide 23: Net Revenue and Adjusted EBITDA Trends
$2,390 $2,240 $2,153 Note: In Millions CAGR 9.2% CAGR 12.7% $307 $330 $270 Net Revenue Adjusted EBITDA $2,805 $386 Net Revenue and Adjusted EBITDA Trends $1,392 $1,494 $206 $219 2008 2009 2010 2011 1H '11 1H'12 Specialty Outpatient Other 2008 2009 2010 2011 1H '11 1H '12 Specialty Outpatient
Slide 24: Key Financial Metrics Pricing and Volume Trends
Key Financial Metrics Pricing and Volume Trends Specialty Hospital Revenue per Patient Day1 / Admissions Outpatient Rehab Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 1 Net revenue per patient day is calculated by dividing specialty hospital direct patient service reve
Slide 25: Annual Capital Expenditures
Annual Capital Expenditures ($ in millions) 2008 2009 2010 2011 Maintenance Development $52 $ 46 $57 $58
Slide 26: Free Cash Flow
Free Cash Flow Free Cash Flow1 ($ 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 32 for non-GAAP reconciliation $51 $108 $93 $171 $202 2008 2009 2010 2011 LTM Q2
Slide 27: Capitalization Details
As of 12/31/08 As of 12/31/09 As of 12/31/10 As of 12/31/11 As of 6/30/12 Proforma 6/30/12 Cash and Equivalents $ 64 $ 84 $ 4 $ 12 $ 22 $ 5 Revolving Credit Facility ($300mm) 150 0 25 40 0 0 Term Loan B 657 483 482 838 834 1,101 Other Debt 5 6 6 5 7 7 Total Senior Debt 811 489 513 883 841 1,108 Sr.
Slide 28: 2012 Financial Guidance
2012 Financial Guidance Net Revenue $ 2,900M - $ 2,975M Adjusted EBITDA $ 400M - $ 410M EPS $ 1.01 - $ 1.06
Slide 29: Questions
F | Y Select IMEDICAL Questions
Slide 30: Appendix: Additional Materials
Appendix: Additional Materials
Slide 31: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2008 2009 2010 2011 1H ’11 1H ’12 LTM Q2 ‘12 Net Income $ 25 $ 79 $ 82 $ 113 $ 49 $ 87 $ 151 (+) Income tax 26 37 42 71 38 55 89 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries - - 1 (3) 0 (5) (8) (+/-) Other expense / (income) - 1 (1) - - - - (+) Interest ex
Slide 32: Sclect
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