Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Investor Presentation (September 2010)
40 slides from Select Medical's investor presentation, Sep 14, 2010
Slide 1: Select Medical Corporation
ak. Select | Medical Corporation September 15, 2010
Slide 2: Disclosure
Disclosure 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
Slide 3: Key Investment Highlights
Key Investment Highlights Complementary businesses in attractive market segmentsHigh quality operator with significant scale and breadth Strong track record of growth through acquisitions, de novos and JVsBalanced payor mix and well-positioned for healthcare reformExperienced management team with pr
Slide 4: Select Medical Today
Select Medical Today 112 LTAC Hospitals with 4,585 beds in 28 States 953 Outpatient Rehab Clinics in 36 States and the District of Columbia471 Contract Therapy locations in 28 states and the District of Columbia $2.3 Billion Net Revenue LTM Q2 '10$341.4 Million Adjusted PF EBITDA LTM Q2 '10126,200 E
Slide 5: Recent Events
Recent Events Acquisition of Regency Hospital Company - closed September 1, 201023 LTAC Hospitals in 9 statesBaylor Health System - Joint Venture for rehabilitation announced Subject to regulatory approval
Slide 6: Strong Track Record of Growth
1998 2000 2002 2004 2006 2008 2009 2010 149 806 1127 1602 1851 2153 2240 2451 (2003) (1999) Strong Track Record of Growth Company has Struck the Right Balance of Both Organic and Acquisitive Growth De Novo - 62 specialty hospitals and 276 outpatient clinics opened since inception - 2009 Acquisitions
Slide 7: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix Outpatient Payor Mix Overall Payor Mix (2005 - 2009) Commercial Payors and Other 89% Medicare/ Medicaid11% Commercial & Other Medicare East 36 64 West Medicare/Medicaid 64% Commercial Payors and Other 36% 2005 2006 2007 2008 2009 Medicare/Medicaid 0.585 0.55 0.
Slide 8: Business Strategy
Business Strategy
Slide 9: Operating and Growth Strategy
Operating and Growth Strategy Organic Joint Venture Acquisition LTAC - maturing new hospitalsOutpatient Rehab - margin improvementRegency - margin improvement Draw on reputation for JV developmentExpand into existing and contiguous marketsFocus on leading systems and university hospitals1 to 2 per y
Slide 10: Operating Segments
Operating Segments Specialty HospitalsLTACHsInpatient RehabilitationOutpatient RehabilitationOutpatient Rehab ClinicsContract Therapy
Slide 11: Specialty Hospitals LTACH
Specialty HospitalsLTACH
Slide 12: Largest provider of LTACH services in U.S.
Largest provider of LTACH services in U.S. (# of hospitals)112 hospitals81 are hospital-in-hospital (2,725 beds)31 are freestanding (1,860 beds)18 owned13 leasedSuperior host hospitals LTACHs Note: As of 30-Jun-10 pro forma for Regency acquisition
Slide 13: Maturing New Hospitals
Maturing New Hospitals New Hospitals Added 2008-09 ? 10 LTACs and 2 Rehab Adjusted EBITDA 2008 ($25.0)MAdjusted EBITDA 2009 ($ 1.6)MAdjusted EBITDA YTD Q2 '10 $ 5.4 M
Slide 14: Acquisition of Regency Hospital Company
Acquisition of Regency Hospital Company On September 1, Select Medical Holdings Corporation closed the acquisition of Regency Hospital Company, LLC for approximately $210MRegency operates a network of 23 long-term acute care hospitals located in 9 statesRevenue (1) $375MEBITDA (1) $ 28M (1) 2009 aud
Slide 15: Integration of Regency Hospital Company
Integration of Regency Hospital Company Synergies and margin enhancementCorporate CostsPre-Acquisition - $ ? 25MPost acquisition - $ ? 4-5MFacility level - Margins
Slide 16: LTAC Hospital Regulatory Environment Summary
LTAC Hospital Regulatory Environment Summary MMSEA 2007 - extended through December 2012Hospital in Hospital Rules - suspended at 50%Very Short Stay Outlier Rule - suspendedMoratorium on new LTAC hospital licensesFuture - post-2012Patient/Facility Criteria (Supported by Industry, AHA, FAH, etc.)Exte
Slide 17: Specialty Hospitals Inpatient Rehabilitation
Specialty HospitalsInpatient Rehabilitation
Slide 18: Rehabilitation Hospitals: Kessler Institute
Rehabilitation Hospitals Kessler InstituteFounded 1948Largest licensed rehab hospital in U.S. (three campuses)18 consecutive years U.S. News & World Report best hospitalOne of six rehab hospitals in U.S. to have model system designation for head injury and spinal cord injury
Slide 19: Kessler Institute for Rehabilitation Rank
Kessler Institute for Rehabilitation Rank Hospital #1 Rehabilitation Institute of Chicago, Chicago, IL #2 Kessler Institute for Rehabilitation, West Orange, NJ #3 University of Washington Medical Center, Seattle, WA #4 Spaulding Rehabilitation Hospital, Boston, MA #5 TIRR Memorial Hermann, Houston,
Slide 20: Inpatient Rehab Facility JV Strategy
Inpatient Rehab Facility JV Strategy
Slide 21: SSM Rehab Joint Venture
SSM Rehab Joint Venture The PartnersSSM Health Care St. Louis network with seven acute care hospitals, 12,000 employees, 2,500 staff physiciansSelect Medical 51% owner of joint venture with management responsibilityThe Services80 inpatient rehab beds33 outpatient locations (18 SSM, 15 Select)6 contr
Slide 22: Baylor Joint Venture - pending regulatory approval
Baylor Joint Venture - pending regulatory approval The PartnersBaylor Select Medical The ServicesTwo inpatient rehab hospitals with 136 bedsThree managed rehab units with 57 beds30 outpatient locations (Select 18 & Baylor 12)The FutureExpect immediate growth in the Outpatient business
Slide 23: Inpatient Rehabilitation Regulatory Environment
Inpatient Rehabilitation Regulatory Environment Stable75% Rule issue resolved in 2007 part of MMSEA frozen at 60%Market basket 2.5% minus PPACA reduction of 0.25%, and 0.09% reduction in outlier payments
Slide 24: Outpatient Rehabilitation Segment: Outpatient Rehab Clinics
Outpatient Rehabilitation SegmentOutpatient Rehab Clinics
Slide 25: Outpatient Rehabilitation Clinics
Outpatient Rehabilitation Clinics Outpatient Rehab Facilities (Number of Facilities) ^ 953 Source: Company public filings and websites
Slide 26: Outpatient Clinic Platform
Outpatient Clinic Platform Outpatient Rehab 953 clinics 36 states and District of Columbia WA OR CA MT ID NV AZ WY UT CO NM TX ND SD NE KS OK MN LA AR IA WI MI MS IN FL GA SC NC TN KY OH PA VT ME NH NJ AL IL VA WV DE NH MA CT RI NY MO 102 96 14 130 27 MD DC 2 23 3 33 59 15 5 AK 18 30 66 22 41 14 4 6
Slide 27: Outpatient Rehabilitation - North Jersey
Outpatient Rehabilitation - North Jersey Approximately 77 locations
Slide 28: Outpatient Rehabilitation - St. Louis, MO
Outpatient Rehabilitation - St. Louis, MO Approximately 36 locations
Slide 29: Outpatient Margin Opportunity
Outpatient Margin Opportunity Continue to expand former HealthSouth clinics' EBITDA margins2008 EBITDA margin differential - greater than 7%2009 EBITDA margin differential - greater than 5%Former HealthSouth clinics' revenue - ^ $200MJoint Venture outpatient opportunities (see JVs)
Slide 30: Outpatient Rehabilitation Regulatory Environment
Outpatient Rehabilitation Regulatory Environment Commercial - StableMedicarePhysician fee scheduleCapsMPPR proposed changes to therapy paymentsContract Therapy rates
Slide 31: Outpatient Rehabilitation Segment: Contract Therapy
Outpatient Rehabilitation SegmentContract Therapy
Slide 32: Contract Services
Contract Services 471 contracts in 28 states and the District of ColumbiaLTM Revenue $161.1M as of 6/30/10Only significant provider with 100% "unaffiliated" contractsStrong ROI with organic growth only
Slide 33: Financial Overview
Financial Overview
Slide 34: Historical Net Revenue and Adjusted EBITDA
Revenue Specialty Outpatient Other 2007 1386.4 603.4 1.8 2008 1488.4 664.8 0.2 2009 1557.8 681.9 0.2 LTM 6/30/10 1593 691 0.1 EBITDA Specialty Outpatient Other 2007 217 75 2008 236 77 2009 290 89 LTM 6/30/10 299 89 $2,240 $2,153 $1,992 Historical Net Revenue and Adjusted EBITDA Note: In Millions CAG
Slide 35: Key Financial Metrics
Key Financial Metrics Favorable Pricing and Volume Trends Specialty Hospital Revenue per Patient Day1 / Admissions Outpatient Rehab Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 1 Net revenue per patient day is calculated by dividing specialty hospital direct patient se
Slide 36: Free Cash Flow
Free Cash Flow Revenue Free Cash Flow 2007 -80.1 2008 50.9 2009 108 LTM 6/30/10 104 Free Cash Flow1 Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment 1 See slide 41 for non-GAAP reconciliation Intense Focus on Free Cash Flow Generat
Slide 37: Capitalization Details
Capitalization Details IPO Proceeds were used to Repay Existing Indebtedness ($ in millions) 1 See slide 41 for non-GAAP reconciliation
Slide 38: Appendix: Additional Materials
Appendix: Additional Materials
Slide 39: Non-GAAP Reconciliation
2007 2008 2009 LTM 6/30/10 Net Income $ 55 $ 22 $ 75 $ 79 (+) Non-controlling interest 2 3 4 5 (+) Income tax 29 26 37 38 (+/-) Other expense / (income) 5 - 1 0 (+) Interest expense, net 103 146 132 123 (-/+) (Gain) / Loss on debt retirement - (1) (13) 2 (+) Depreciation and Amortization 57 72 71 70
Slide 40: Select Medical Corporation
ak. Select Medical Corporation
Select Medical Holdings — Investor Presentation (September 2010) on 6ix