Select Medical Holdings Corporation · NYSE:SEM
Select Medical — J.P. Morgan Global High Yield & Leveraged Finance Conference 2010
29 slides from Select Medical's conference presentation, Mar 2, 2010
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance Conference March 3, 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: Select Medical At A Glance
Select Medical At A Glance 89 LTAC Hospitals with 3,770 beds in 25 States 6 Inpatient Rehab Facilities (IRF) with 463 beds in 4 States and 1 Managed Rehab Unit 961 Outpatient Rehab Clinics in 37 States and the District of Columbia 461 Contract Therapy locations in 22 states 22,500 Employees in the U
Slide 4: Key Investment Highlights
Key Investment Highlights Complementary businesses in attractive market segments High quality operator with significant scale and breadth Strong track record of growth through acquisitions, de novos and JVs Balanced payor mix and well-positioned for healthcare reform Experienced management team with
Slide 5: Complementary Business Segments Well-Positioned in the Post-Acute Continuum of Care
Complementary Business Segments Well-Positioned in the Post-Acute Continuum of Care
Slide 6: Attractive, Fragmented Market Segments
Attractive, Fragmented Market Segments Long-Term Acute Care Hospitals (LTAC)1 Inpatient Rehab Facilities (IRF)1 Outpatient Rehab 2008 Medicare Spending $4.5 billion $5.8 billion NA Competitive Environment ~ 400 hospitals ~ 200 hospitals and 1,000 hospital rehab units 5 largest providers represent <1
Slide 7: High Quality Care and Service
High Quality Care and Service Fully accredited 91 of our 95 hospitals (LTACs & IRFs) Four hospitals in process of obtaining full accreditation Kessler CARF accredited Only 43% of facilities are CARF Accredited1 1 Based on CARF accreditation of 517 IRFs and units of 1,202 IRFs and units nationwide So
Slide 8: Significant Scale and Breadth
Significant Scale and Breadth... Note: As of December 31, 2009 Leading Provider of Post-Acute Care in the United States LTAC 89 hospitals 25 states Inpatient Rehab 6 hospitals/1 unit 4 states Outpatient Rehab 961 clinics 37 states and District of Columbia Contract Therapy 461 locations 22 states
Slide 9: With Leading Industry Positions
....With Leading Industry Positions Source: Company public filings and websites Note: Specialty Hospitals includes LTAC Hospitals and Inpatient Rehabilitation facilities HealthSouth ATI USPH Physiotherapy Assoc Select East 40 56 367 600 961 Specialty Hospitals Outpatient Rehab Facilities LifeCare RH
Slide 10: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix Outpatient Payor Mix Overall Payor Mix (2005 - 2009) Commercial Payors and Other 90% Medicare/ Medicaid 10% Commercial & Other Medicare East 34 66 West Medicare/ Medicaid 66% Commercial Payors and Other 34% 2005 2006 2007 2008 2009 Medicare/Medicaid 0.585 0.55
Slide 11: Strong Track Record of Growth
1998 2000 2002 2004 2006 2008 2009 149 806 1127 1602 1851 2153 2240 (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 Acquisitions - 62 specialty h
Slide 12: Operating and Growth Strategy
Operating and Growth Strategy Leading Operator through Proven and Effective Strategies Centralization Margin Improvement Growth Through Development Reduce CBO locations 19 locations (Past) 4 locations (Present) Centralize functions Coding Collections HR, Accounting, and Legal Monitor staffing levels
Slide 13: Growth Strategy
Growth Strategy LTAC - maturing of new hospitals Inpatient Rehab - Joint Venture/Acquisition opportunities Outpatient Rehab - margin improvement
Slide 14: Maturing New Hospitals
Maturing New Hospitals New Hospitals Added 2008-09 ? 10 LTACs and 2 Rehab Adjusted EBITDA 2008 ($25.0) M Adjusted EBITDA 2009 ($ 1.6) M
Slide 15: Inpatient Rehab Facility JV Strategy
Inpatient Rehab Facility JV Strategy Potential IRF JV Partner Profile Leading health care systems and/or university hospitals Services Provided: Rehab Annual Revenue: > $1 billion Beds: > 400 Patient Volume: High Geography: > 750,000 population
Slide 16: SSM Rehab Joint Venture
SSM Rehab Joint Venture The Partners SSM Health Care St. Louis network with seven acute care hospitals, 12,000 employees, 2,500 staff physicians Select Medical 51% owner of joint venture with management responsibility The Services 80 inpatient rehab beds 33 outpatient locations (18 SSM, 15 Select) 6
Slide 17: Outpatient Strategy
Outpatient Strategy Continue to expand former HealthSouth clinics' EBITDA margins 2008 EBITDA margin differential - greater than 7% 2009 EBITDA margin differential - greater than 5% Former HealthSouth clinics' revenue - ^ $200M Contract renewals Lease renewals
Slide 18: Regulatory Environment
Regulatory Environment Long Term Care Hospitals - stable through 2010 Inpatient Rehab - stable Outpatient Rehab - modest risk/"doc fix"
Slide 19: LTAC Hospital Regulatory Environment
LTAC Hospital Regulatory Environment MMSEA 2007 - expiration December 2010 Hospital in Hospital Rules - suspended at 50% Very Short Stay Outlier Rule - suspended Moratorium on new LTAC hospital licenses Proposed Extension through 2011 or 2012
Slide 20: Financial Overview
Financial Overview
Slide 21: Historical Net Revenue
Revenue Specialty Outpatient Other 2007 1386.4 603.4 1.8 2008 1488.4 664.8 0.2 2009 1557.8 681.9 0.2 ($ in millions) $2,240 $2,153 $1,992 Historical Net Revenue Note: In Millions CAGR 6.0%
Slide 22: Historical Adjusted EBITDA
EBITDA Specialty Outpatient Other 2007 189 66 2008 204 66 2009 253 77 ($ in millions) Note: In Millions Historical Adjusted EBITDA $330 $270 $255 CAGR 13.8%
Slide 23: EBITDA Growth and Margin Stability
EBITDA Growth and Margin Stability Specialty Hospitals Adj. EBITDA / Adj. EBITDA Margin Outpatient Rehabilitation Adj. EBITDA / Adj. EBITDA Margin Admissions 40,008 41,177 42,674 Visits 4,032,197 4,533,727 4,502,049 Growth in Admissions/Visits Supports Adj. EBITDA Growth and Margin Stability Note: D
Slide 24: Key Financial Metrics
Key Financial Metrics Favorable Pricing and Volume Trends Specialty Hospital Revenue per Patient Day1 / Admissions Outpatient Rehab Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 1 Net revenue per patient day is calculated by dividing specialty hospital patient service r
Slide 25: Free Cash Flow
Free Cash Flow Revenue Free Cash Flow 2007 -80.1 2008 50.9 2009 108 2010P 120 Free Cash Flow1 Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment 1 See slide 28 for non-GAAP reconciliation Intense Focus on Free Cash Flow Generation ($
Slide 26: Capitalization Details
Capitalization Details IPO Proceeds were used to Repay Existing Indebtedness ($ in millions) 1 See slide 28 for non-GAAP reconciliation
Slide 27: 5-Year Strategic Goals
5-Year Strategic Goals Adjusted EBITDA growth of 8 - 10% per year Adjusted EBITDA margin improvement of 6% per year over this period Capital spending of $50 - $60 million per year Free cash flow per year of $120 million Bring leverage levels down to < 2.0x by 2014
Slide 28: Non-GAAP Reconciliation
2006 2007 2008 2009 Net Income $ 118 $ 55 $ 22 $ 75 (-) Discontinued ops, net of tax (13) - - - (+) Non-controlling interest 1 2 3 4 (+) Income tax 56 29 26 37 (+/-) Other expense / (income) (1) 5 - 1 (+) Interest expense, net 96 103 146 132 (-) Gain on debt retirement - - (1) (13) (+) Depreciation
Slide 29: Select Medical Corporation
ak. Select Medical Corporation
Select Medical Holdings — J.P. Morgan Global High Yield & Leveraged Finance Conference 2010 on 6ix