Select Medical Holdings Corporation · NYSE:SEM
Select Medical — J.P. Morgan Global High Yield & Leveraged Finance Conference 2012
35 slides from Select Medical's conference presentation, Feb 27, 2012
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance Conference February 27, 2012
Slide 2: Forward-Looking Statements
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
Slide 3: Select Medical Today
Select Medical Today $2.8 Billion Net Revenue 2011 $386 Million Adjusted EBITDA 20111 28,800 Employees in the United States Specialty Hospitals Segment 110 LTAC Hospitals 109 owned with 4,627 beds and 1 managed. Hospitals in 28 states. 9 Inpatient Rehab Facilities (IRF) 6 owned with 508 beds, 3 mana
Slide 4: Significant Scale and Breadth
Significant Scale and Breadth LTACH 109 Hospitals 4,627 Total Beds 1 Managed Hospital 28 States Inpatient Rehab 6 Owned Hospitals 508 Total Beds 3 Managed Hospitals 4 Managed Units 5 States Outpatient Rehab 850 Owned Clinics 104 Managed Clinics 32 States and D.C. Contract Therapy 524 Locations 31 St
Slide 5: 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) ?Added Miami, FL IRF – Jan. 1, 2011 ?Completed Baylor Health System Rehab JV – April 1, 2011 ?Continued improvement on Regency integration ?Comple
Slide 6: Operating and Growth Strategy
Operating and Growth Strategy Organic ?LTAC – maturing hospitals/census growth?Regency – margin improvement ?Outpatient Rehab – margin improvement HealthSouth Clinics ?Draw on reputation for JV development ?Expand into existing and contiguous markets—Focus on leading systems and university hospitals
Slide 7: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix 35% Commercial Payors and Other Outpatient Payor Mix 10% Medicare/ Medicaid 65% Medicare/ Medicaid 90% Commercial Payors and Other Overall Payor Mix 41.5% 45.0% 49.7% 51.7% 51.0% 50.3% 48.5% 58.5% 55.0% 50.3% 48.3% 49.0% 49.7% 51.5% 2005 2006 2007 2008 2009 201
Slide 8: Specialty Hospitals: Long Term Acute Care
Specialty Hospitals Long Term Acute Care
Slide 9: LTACH Overview
LTACH Overview Overview of LTACHs ?Major provider of LTACH services in U.S?110 hospitals—77 are hospital-in-hospital (2,657 beds)—32 are freestanding (1,970 beds)—1 managed freestanding hospital Maturing New Hospitals New Hospitals Added 2008-09 ??10 LTACs and 2 Rehab ??Adjusted EBITDA 2008 ($25.0)M
Slide 10: Regency Acquisition
Regency Acquisition ?Closed September 1, 2010 – Purchase Price $210.0M ?23 long-term acute care hospitals ?Corporate services and back office functions fully integrated?Regency 2009 Audit 2011 Net Revenue $ 375M $ 340M Adjusted EBITDA $ 28M $ 46M Adjusted EBITDA Margin 7.5% 13.5% ?2011 specialty hos
Slide 11: LTACH Regulatory Environment
LTACH Regulatory Environment ?MMSEA 2007 – extended through December 2012—Hospital in Hospital Rules – suspended at 50%—Very Short Stay Outlier Rule – suspended—Moratorium on new LTAC hospital licenses ?Future – post-2012—Patient/Facility Criteria (Supported by Industry, AHA, FAH, etc.)—Extension of
Slide 12: Specialty Hospitals: Inpatient Rehabilitation
Specialty Hospitals Inpatient Rehabilitation
Slide 13: Inpatient Rehabilitation Strategy
Inpatient Rehabilitation Strategy ?Joint Ventures—Baylor Rehabilitation—SSM Rehabilitation—Penn State Hershey Rehabilitation—Denton, TX ?CON States—Kessler, NJ—Miami, FL
Slide 14: Rehabilitation Overview: Kessler Overview
Rehabilitation Overview Kessler Overview ??Founded in 1948 ??Largest licensed rehab hospital in U.S. (three campuses) ??19 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 U.S. News &
Slide 15: Rehab JV Overview
Rehab JV Overview—Two inpatient hospitals—One unit—32 outpatient locations—15 contract therapy locations—3 occupational health clinics—4 day institute clinics—Two inpatient rehab hospitals—Three managed inpatient rehab units—34 outpatient locations—54 bed rehab facility
Slide 16: Inpatient Rehab Regulatory Environment
Inpatient Rehab Regulatory Environment ?10/1/11 net 1.7% increase in Medicare rates ?Recent Obama proposal—Move 60% to 75%—Equalization payments between IRFs and SNFs ?Special committee sequestration
Slide 17: Outpatient Rehabilitation: Outpatient Rehab Clinics
Outpatient Rehabilitation Outpatient Rehab Clinics
Slide 18: Outpatient Rehab Clinics
Outpatient Rehab Clinics Outpatient Rehab Facilities Outpatient Margin Opportunity (Number of Facilities) ??Continue to expand former HealthSouth clinics’ EBITDA margins—2009 EBITDA margin differential – greater than 5%—2010 EBITDA margin differential – greater than 3%—2011 EBITDA margin differentia
Slide 19: Outpatient Rehab: Philadelphia/South Jersey locations
Outpatient Rehab—Philadelphia/South Jersey 118 locations
Slide 20: Outpatient Rehab: North Jersey locations
Outpatient Rehab—North Jersey 81 locations
Slide 21: Outpatient Rehab: St. Louis, MO locations
Outpatient Rehab—St. Louis, MO 39 locations
Slide 22: Outpatient Rehab: Dallas/Ft. Worth locations
Outpatient Rehab—Dallas/Ft. Worth 34 locations
Slide 23: Outpatient Rehabilitation: Contract Therapy
Outpatient Rehabilitation Contract Therapy
Slide 24: Contract Services
Contract Services ?524 contracts in 31 states and the District of Columbia ?2011 Revenue $164.3M ?Organic growth only
Slide 25: Outpatient Rehab Regulatory Environment
Outpatient Rehab Regulatory Environment ?Commercial -Stable ?Medicare—MPPR changes to therapy payments (effective Jan. 2011) • 25% reductions to practice expense component for 2nd and subsequent codes ?Contract Therapy rates
Slide 26: Financial Overview
lect MEDICAL Financial Overview
Slide 27: Net Revenue and Adjusted EBITDA Trends
Net Revenue and Adjusted EBITDA Trends Net Revenue Adjusted EBITDA 2008 2009 2010 2011 2008 2009 2010 2011 Specialty Outpatient Other Specialty Outpatient Note: In Millions
Slide 28: Key Financial Metrics
Key Financial Metrics Pricing and Volume Trends Specialty Hospital Outpatient Rehab Revenue per Patient Day1 / Admissions Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 140 1 Net revenue per patient day is calculated by dividing specialty hospital direct patient service
Slide 29: Annual Capital Expenditures
Annual Capital Expenditures ($ in millions) $57 $58 $52 $46 Maintenance Development 2008 2009 2010 2011
Slide 30: Free Cash Flow
Free Cash Flow Intense Focus on Free Cash Flow Generation Free Cash Flow1 $171 ($ in millions) $108 $93 $51 2008 2009 2010 2011 Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment 1 See slide 35 for non- GAAP reconciliation
Slide 31: Capitalization Details
Capitalization Details ($ in millions) As of 12/31/08 As of 12/31/09 As of 12/31/10 As of 12/31/11 Cash and Equivalents $ 64 $ 84 $ 4 $ 12 Revolving Credit Facility ($300mm) 150 0 25 40 Term Loan B 657 483 482 838 Other Debt 5 6 6 5 Total Senior Debt 811 489 513 883 Sr. Sub. Notes due 2015 658 612 6
Slide 32: 2012 Financial Guidance
2012 Financial Guidance Net Revenue $ 2,850M—$ 2,950M Adjusted EBITDA $ 390M—$ 410M EPS $ 0.86—$ 0.94
Slide 33: Questions
Questions MEDICAL
Slide 34: Appendix: Additional Materials
Appendix: Additional Materials
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in millions) 2008 2009 2010 2011 Net Income $ 25 $ 79 $ 82 $ 113 (+) Income tax 26 37 42 71 (+/-) Equity in losses/(earnings) of unconsolidated—- 1 (3) subsidiaries (+/-) Other expense / (income)—1 (1)—(+) Interest expense, net 146 132 112 99 (-/+) (Gain) / Loss on debt re
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