Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Bank of America Merrill Lynch Leveraged Finance Conference 2013
34 slides from Select Medical's conference presentation, Dec 3, 2013
Slide 1: Bank of America Merrill Lynch Leveraged Finance Conference
Bank of America Merrill Lynch Leveraged Finance Conference December 3, 2013
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: Company Overview
Fa “Het Company Overview Select Medical: Imp
Slide 4: Select Medical Today
108 LTAC Hospitals 107 owned - 4,585 beds 1 managed Hospitals in 28 states 997 Outpatient Rehab Clinics in 32 states and the District of Columbia $3.0 Billion Net Revenue LTM Q3 ‘13 $385 Million Adjusted EBITDA LTM Q3 ‘131 31,300 Employees in the United States 15 Inpatient Rehab Facilities (IRF) 8 C
Slide 5: Recent Events Update
Recent Events Update Operating Results Q3 ‘13 Revenue $722.8M (vs. $713.7M Q3‘12) Adjusted EBITDA $80.4M (vs. $87.7M Q3 ‘12) Adjusted EPS $0.17 (vs. $0.20 Q3 ‘12) Refinancing activity Q2 ‘13 $600M Senior Unsecured Note offering May 2013 Net proceeds repaid Senior Secured Debt Repriced $520M Senior S
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 64% Medicare/ Medicaid 36% Commercial Payors and Other Note: 2012 58.5% 55.0% 50.3% 48.3% 49.0% 49.7% 51.5% 50.4% 41.5% 45.0% 49.7% 51.7% 51.0% 50.3% 48.5% 49.6% 2005
Slide 7: IRFs and LTACHs in Post Acute Setting
IRFs and LTACHs in Post Acute Setting Readmission Rates1 2010 Medicare Margin2 2011 Medicare Margin2 2013 Projected Medicare Margin2, 3 % 2010 Total Medicare Spending2 Skilled Nursing Facilities 22.0% 18.5% 22-24% 12-14% 5.1% Home Health Agencies 18.1% 19.1% 14.8% 11.8% 3.8% Inpatient Rehabilitation
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. 108 hospitals 78 are hospital-in-hospital (2,885 beds) 29 are freestanding (1,700 beds) 1 managed freestanding hospital Ownership of freestanding LTACHs 18 owned 11 leased
Slide 11: Regency Acquisition (23 LTACHs)
Closed September 1, 2010 – Purchase Price $210.0M Regency 2009 Audit 2011 2012 Net Revenue $ 375M $ 340M $ 349M Adjusted EBITDA $ 28M $ 46M $ 65M Adjusted EBITDA Margin 7.5% 13.5% 18.6% Purchase multiple EBITDA 7.5x 4.6x 3.2x Regency Acquisition (23 LTACHs)
Slide 12: LTACH Regulatory Environment
MMSEA 2007 – expired December 2012 Expiration of moratorium on new LTACHs at 12/29/12 Budget Sequestration cuts started April 1, 2013 CMS Final Rule FY 2014, effective 10/1/13 Net Market Basket update of 0.5% (Includes 2nd year of 3 year phase-in of BNA (1.266% per year)) LTACH Regulatory Environmen
Slide 13: Specialty Hospitals Inpatient Rehabilitation
Specialty Hospitals Inpatient Rehabilitation
Slide 14: Rehabilitation Hospitals
Wholly Owned Hospitals (4) Kessler Institute (3 hospitals) – New Jersey West Gables Rehabilitation – Miami, FL Consolidated Joint Ventures (4) Penn State Hershey Rehabilitation – Hershey, PA SSM Rehabilitation Network (2 hospitals and 1 managed unit) – St. Louis, MO Select Rehabilitation – San Anton
Slide 15: Kessler Overview and U.S. News Rankings
Rehabilitation Overview Founded in 1948 Largest licensed rehab hospital in U.S. (three campuses) 21 consecutive years U.S. News & World Report best hospital One of eight rehabilitation centers in U.S. to have Model System designation for both traumatic brain injury and spinal cord injury #1 Rehabili
Slide 16: Rehab JV Overview
Rehab JV Overview 2 inpatient hospitals 1 managed inpatient rehab unit 36 outpatient locations 15 contract therapy locations 3 occupational health clinics 4 day institute clinics 4 inpatient hospitals 3 managed inpatient rehab units 48 outpatient locations 1 contract therapy location 1 54-bed rehab
Slide 17: Inpatient Rehab Regulatory Environment
Inpatient Rehab Regulatory Environment CMS Final Rule FY 2014 effective 10/1/13 Standard Payment Conversion Factor increase 3.5% Net Market basket increase of 1.8% Other Budget Neutrality adjustments increasing standard payment rate 1.7% Budget Sequestration cuts effective April 1, 2013
Slide 18: Outpatient Rehabilitation Outpatient Rehab Clinics
Outpatient Rehabilitation Outpatient Rehab Clinics
Slide 19: Outpatient Rehab Clinics
Outpatient Rehab Clinics Outpatient Rehab Facilities (Number of Facilities) Source: Company public filings and websites as of September 30, 2013 997 21 250 466 600
Slide 20: Outpatient Rehab Clinics
997 clinics in 32 states and D.C. 876 clinics owned 121 clinics managed LTM Q3 ‘13 Net Revenue of $ 583.0M Outpatient Rehab Clinics
Slide 21: Outpatient Rehabilitation Contract Therapy
Outpatient Rehabilitation Contract Therapy
Slide 22: Contract Services
Contract Services 507 contracts in 30 states and the District of Columbia LTM Q3 ‘13 Net Revenue of $181.5M Organic growth only
Slide 23: Outpatient Rehab Regulatory Environment
Outpatient Rehab Regulatory Environment Commercial - Stable Medicare MPPR changes to therapy payments (effective April 2013) 25% reductions increased to 50% reductions to practice expense component for 2nd and subsequent codes Contract Therapy rates
Slide 24: Minority Investments
Minority Investments Allevant Rural Hospital Management Services (Mayo Clinic JV) Amplion Alarm alert technology company Haven Health Inpatient Psychiatric hospital company naviHealth Post acute managed care company U.S. Physiatry Physician practice management company
Slide 25: Financial Overview
ali Reet Financial Overview
Slide 26: Net Revenue and Adjusted EBITDA Trends
$2,390 $2,240 $2,153 Note: In Millions CAGR 7.0% CAGR 7.8% $307 $330 $270 Net Revenue Adjusted EBITDA $2,805 $386 Net Revenue and Adjusted EBITDA Trends $2,949 $406 $2,971 $385 2008 2009 2010 2011 2012 LTM Q3'13 Specialty Outpatient Other 2008 2009 2010 2011 2012 LTM Q3'13 Specialty Outpatient
Slide 27: Key Financial Metrics: Pricing and Volume Trends
Key Financial Metrics Pricing and Volume Trends Specialty Hospital Revenue per Patient Day1 / Admissions Outpatient Rehab Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 1 Net revenue per patient day is calculated by dividing specialty hospital direct patient service reve
Slide 28: Annual Capital Expenditures
Annual Capital Expenditures ($ in millions) 2008 2009 2010 2011 2012 LTM Q3'13 Maintenance Development $52 $ 46 $57 $58 $ 68 $ 68
Slide 29: 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 1 See Slide 34 for non-GAAP reconciliation Intense Focus on Free Cash Flow Generation $51 $108 $93 $171 $231 $152 2008 2009 2010 2011 2
Slide 30: Leverage Analysis
As of 12/31/08 As of 12/31/09 As of 12/31/10 As of 12/31/11 As of 12/31/12 As of 9/30/13 Cash and Equivalents $ 64 $ 84 $ 4 $ 12 $ 40 $ 9 Revolving Credit Facility ($300mm) 150 0 25 40 130 65 Term Loan B 657 483 482 838 1,097 809 Sr. Notes due 2021 600 Other Debt 5 6 6 5 6 15 Total Senior Debt 811 4
Slide 31: Most Recent 2013 Financial Guidance
Most Recent 2013 Financial Guidance Net Revenue $ 2,925M - $ 3,025M Adjusted EBITDA $ 375M - $ 390M Adjusted EPS $ 0.87 - $ 0.94
Slide 32: Appendix: Additional Materials
Appendix: Additional Materials
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2008 2009 2010 2011 2012 Q3’ 12 YTD Q3’ 13 YTD Q3’ 13 LTM Net Income $ 25 $ 79 $ 82 $ 113 $ 154 $ 113 $ 92 $ 133 (+) Income tax 26 37 42 71 90 71 57 76 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries - - 1 (3) (8) (6) (1) (3) (+/-) Other expense / (income) -
Slide 34: Select Medical
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