Genesis Healthcare, Inc. · OTC:GENNQ
Genesis Healthcare — Merrill Lynch (November 2004)
23 slides from Genesis Healthcare's conference presentation, Nov 30, 2004
Slide 1: Genesis HealthCare Corporation
Genesis HealthCare Corporation Merrill Lynch November 30, 2004
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements made in this presentation which are not historical facts may be “forward-looking” statements (as defined in the private securities litigation reform act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-lo
Slide 3: Today's Agenda
Today’s Agenda Company Overview Strategic Initiatives Industry Issues Financial Overview 22
Slide 4: Genesis HealthCare Corporation
Genesis HealthCare Corporation GHC is a leading provider of healthcare and support services to the post- acute elderly population in its core markets GHC operates 217 facilities, primarily SNFs Operate over 26,000 beds of which 89% are SNFs Facilities are operated along the east coast Inpatien
Slide 5: Company Highlights
Company Highlights Valuable portfolio of high quality assets Strong regional concentration Significant facility ownership Stable reimbursement outlook Medicare: 2.8% market basket adjustment effective October 1, 2004 Medicaid: Concentration in states with above average rate increases Substan
Slide 6: Strategic Plan – Industry Environment
Strategic Plan – Industry Environment Limited investment in SNF asset development Increasing acuity in the SNF setting Changes in IRF, LTAC regulations Penetration of managed care Break down of regulatory barriers (i.e. 3 day hospital stay) 55
Slide 7: Strategic Priorities
Strategic Priorities Operational Excellence Achieve superior customer satisfaction Meet market demand for clinical services Secure top-quality staff in key operating positions Improve operating efficiency Expand Clinical Capabilities Modernize Facilities 66
Slide 8: Investment Priorities
Investment Priorities Expand clinical capabilities Dialysis Ventilator Care Alzheimer’s Facility modernization Information systems 77
Slide 9: Information System Priorities
Information System Priorities Technology is the principal driver of operational excellence Integrated operational, clinical and financial operating system Integrated labor management system Online purchasing system 88
Slide 10: Value Creation
Value Creation Process Improvement Initiatives Clinical quality Labor management Operating efficiency Improve Financial Profile Maximize Free Cash Flow Debt reduction Reduce cost of capital Selective Investments Information systems & infrastructure Existing facilities Fill-in
Slide 11: Industry Issues
Industry Issues
Slide 12: Payor Continuum
Payor Continuum Eldercare Line Private Hospital Medicare Pay & Medicaid External Care Other Coordinators • $354 Per • $203 Per • $163 Per Approx. 90% Diem Diem Diem of our patients • 15.7% of • 19.7% of • 64.6% of come from patients patients patients hospitals • ALOS • ALOS • ALOS 34 days 194 days 5
Slide 13: Reimbursement Outlook
Reimbursement Outlook Stable Reimbursement Environment 2.8% market basket adjustment effective October 1, 2004 RUGs Refinement Consultant recommendation to CMS in January 2005 Potential for “Super Skilled” category Implication to providers Provider Taxes Recognized NH benefit in FY04
Slide 14: Medicaid Rate Environment
Medicaid Rate Environment Medicaid revenues approximate 52% of inpatient revenues Top 5 states represent 82% of Medicaid revenues Est. Annualized Contribution Date of Rate State to Medicaid Revenue Increase ’04 vs. ’03 PA $175.5 million 7/1 4.3% NJ $146.0 million 7/1; 4/1 5.3% MD $88.4 million 7
Slide 15: Liability Insurance Program
Liability Insurance Program Program Structure June ’04 – ‘05 • Fully insured, per occurrence & aggregate XL Insurance: $50 million per occurrence aggregate in excess of $50 million • Fully funded through captive insurance subsidiary • Limited exposure to high risk states • No prospective cash versus
Slide 16: Financial Review
Financial Review
Slide 17: Financial Highlights
Financial Highlights Fiscal Year Ended 9/30/04 Substantial Cash Flow $148.4 million of operating cash flow for the year $126.1 million of cash at end of quarter Strong Fiscal Year Performance 10.3% net revenue growth over prior fiscal year Operating margins grew from prior year Strong
Slide 18: Strong Cash Flow
Strong Cash Flow • Q4 2004 operating cash flow of $48.2 million • $11 million reduction in accounts receivable • Fiscal 2004 operating cash flow of $148.4 million • Cash flow impacted by NOLs of approximately $100 million and tax deductible goodwill of approx. $96 million • Voluntarily repaid $77.7
Slide 19: Financial Results
Financial Results ($ in millions) Twelve Months Twelve Months Ended 9/30/04 Ended 9/30/03 Inpatient Services (1) Revenue $1,365.5 $1,216.6 EBITDA $172.6 120.6 EBITDA Margin 12.6% 9.9% Rehabilitation Services (1) (2) Revenue $197.1 $202.5 EBITDA $14.2 $31.0 EBITDA Margin 7.2% 15.3% Consolidated Reven
Slide 20: Strong Working Capital Management
Strong Working Capital Management Days Sales Outstanding vs. Receivables 185 48 180 46 $ in Millions 175 170 44 Days 165 42 160 40 155 150 38 145 36 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Receivables Quarter DSO 19 19
Slide 21: Capitalization – As of 9/30/04
Capitalization – As of 9/30/04 ($ in millions) % of Cap Cash and Cash Equivalents (1) $126.1 - Senior Debt: Revolver (2) - 0.0% Term Loan B 134.1 13.8% Mortgages and Other Debt 44.0 4.5% Total Senior Debt 178.1 18.3% Senior Sub Notes due 2013 225.0 23.2% Total Debt 403.1 41.5% Book Equity 568.8 58.5
Slide 22: Credit Statistics – As of 9/30/04
Credit Statistics – As of 9/30/04 ($ in millions) (1) Net Debt / EBITDA 2.2x Debt/EBITDA 3.2x Total Debt/Book Capitalization 41.5% EBITDA/ Pro Forma Interest (2) 4.4x (EBITDA-Capex)/Interest(3) 3.3x Note: Fiscal year ended September 30, 2004 EBITDA from continuing operations only. Since GHC fully fu
Slide 23: Company Highlights
Company Highlights Valuable portfolio of high quality assets Strong regional concentration Significant facility ownership Stable reimbursement outlook Medicare: 2.8% market basket adjustment effective October 1, 2004 Medicaid: Concentration in states with above average rate increases Substan