Select Medical Holdings Corporation · NYSE:SEM
Select Medical — J.P. Morgan Global High Yield & Leveraged Finance Conference 2011
42 slides from Select Medical's conference presentation, Feb 28, 2011
Slide 1: J.P. Morgan Global High Yield & Leveraged Finance Conference
J.P. Morgan Global High Yield & Leveraged Finance ConferenceFebruary 28, 2011
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 JVsExperienced management team with proven track record of successfully operating in challenging e
Slide 4: Select Medical Today
Select Medical Today 110 LTAC Hospitals with 4,601 beds in 28 States 944 Outpatient Rehab Clinics in 36 States and the District of Columbia483 Contract Therapy locations in 30 states and the District of Columbia $2.3 Billion Net Revenue LTM Q3 '10$327.8 Million Adjusted EBITDA LTM Q3 '10125,900 Empl
Slide 5: Significant Scale and Breadth
Contract Therapy 483 locations 30 states and District of Columbia Note: As of January 1, 2011 Outpatient Rehab 944 clinics 36 states and District of Columbia LTAC 110 hospitals 28 states Inpatient Rehab 8 hospitals/1 unit 5 states Significant Scale and Breadth WA OR CA MT ID NV AZ WY UT CO NM TX ND
Slide 6: Recent Events
Recent Events Acquisition of Regency Hospital Company - closed September 1, 201023 LTAC Hospitals in 9 statesBaylor Health System - Received regulatory approval Deal should close by April 1, 2011 $100.0 million Share Buyback Program Miami Rehab addition - January 1, 2011
Slide 7: Strong Track Record of Growth
1998 2000 2002 2004 2006 2008 2009 LTM Q3 2010 149 806 1127 1602 1851 2153 2240 2326 (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 293 outpatient clinics opened since inception - Sept. 2010
Slide 8: Business Strategy
Business Strategy
Slide 9: Operating and Growth Strategy
Operating and Growth Strategy Organic Joint Venture Acquisition LTAC - maturing new hospitalsRegency- margin improvementOutpatient Rehab - margin improvement Draw on reputation for JV developmentExpand into existing and contiguous marketsFocus on leading systems and university hospitals1 to 2 per ye
Slide 10: Operating Segments
Operating Segments Specialty HospitalsLTACHsInpatient RehabilitationOutpatient RehabilitationOutpatient Rehab ClinicsContract Therapy
Slide 11: Specialty Hospitals LTACH
Specialty HospitalsLTACH
Slide 12: Major provider of LTACH services
Major provider of LTACH services in U.S. 110 hospitals80 are hospital-in-hospital (2,754 beds)29 are freestanding (1,847 beds)1 managed freestanding hospital LTACHs Note: As of Jan. 1, 2011
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 Q3 '10 $ 6.1 M
Slide 14: Acquisition of Regency Hospital Company
Acquisition of Regency Hospital Company On September 1, 2010, Select closed the acquisition of Regency Hospitals for $210M less assumed liabilities23 long-term acute care hospitals with 898 licensed beds in 9 statesCorporate services and back office functions fully integrated (1) 2009 audited financ
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
Rehabilitation Hospitals Eight hospitals - 550 beds, one managed unitKessler Institute (3)Penn State Hershey Rehabilitation (1)SSM Rehabilitation (1)Dallas, TX area (2)Miami, FL (1)Baylor Joint Venture expected to close by April 1, 20112 I/P rehab hospitals and 3 I/P rehab units30 outpatient clinics
Slide 19: 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 20: 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 21: Inpatient Rehab Facility JV Strategy
Inpatient Rehab Facility JV Strategy
Slide 22: 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 23: Baylor Joint Venture
Baylor Joint Venture The PartnersBaylor Select Medical The ServicesTwo inpatient rehab hospitals with 136 bedsThree managed inpatient rehab units with 57 beds30 outpatient locations (Select 18 & Baylor 12)The FutureExpect immediate growth in the Outpatient business
Slide 24: Inpatient Rehabilitation Regulatory Environment
Inpatient Rehabilitation Regulatory Environment Stable75% Rule issue resolved in 2007 part of MMSEA frozen at 60%10/1/10 net 1.7% increase in Medicare rates
Slide 25: Outpatient Rehabilitation Segment: Outpatient Rehab Clinics
Outpatient Rehabilitation SegmentOutpatient Rehab Clinics
Slide 26: Outpatient Rehabilitation Clinics
Outpatient Rehabilitation Clinics Outpatient Rehab Facilities (Number of Facilities) ^ 944 Source: Company public filings and websites as of Dec. 31, 2010.
Slide 27: Outpatient Rehabilitation - Philadelphia/South Jersey locations
Outpatient Rehabilitation - Philadelphia/South Jersey 115 locations
Slide 28: Outpatient Rehabilitation - North Jersey locations
Outpatient Rehabilitation - North Jersey 78 locations
Slide 29: Outpatient Rehabilitation - St. Louis, MO locations
Outpatient Rehabilitation - St. Louis, MO 39 locations
Slide 30: 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
Slide 31: Outpatient Rehabilitation Regulatory Environment
Outpatient Rehabilitation Regulatory Environment Commercial - StableMedicareMPPR changes to therapy payments (effective Jan. 2011)25% reductions to practice expense component for 2nd and subsequent codesContract Therapy rates
Slide 32: Outpatient Rehabilitation Segment: Contract Therapy
Outpatient Rehabilitation SegmentContract Therapy
Slide 33: Contract Services
Contract Services 483 contracts in 30 states and the District of ColumbiaLTM Revenue $159.3M as of 9/30/10Strong ROI with organic growth only
Slide 34: Financial Overview
Financial Overview
Slide 35: Historical Net Revenue and Adjusted EBITDA
(CHART) EBITDA Specialty Outpatient 2007 217 75 2008 236 77 2009 290 89 LTM 9/30/10 285 87 $2,240 $2,153 $1,992 Historical Net Revenue and Adjusted EBITDA Note: In Millions CAGR 5.3% CAGR 8.7% $330 $270 $255 $328 $2,326 Net Revenue Adjusted EBITDA
Slide 36: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix Outpatient Payor Mix Overall Payor Mix Commercial Payors and Other 89% Medicare/ Medicaid11% Commercial & Other Medicare East 36 64 West Medicare/Medicaid 65% Commercial Payors and Other 35% 2005 2006 2007 2008 2009 2010 LTMQ3 Medicare/Medicaid 0.585 0.55 0.503
Slide 37: Annual Capital Expenditures
(CHART) Annual Capital Expenditures $57
Slide 38: Free Cash Flow
Free Cash Flow (CHART) Free Cash Flow1 Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment 1 See slide 41 for non-GAAP reconciliation Intense Focus on Free Cash Flow Generation ($ in millions)
Slide 39: Capitalization Details
Capitalization Details ($ in millions) 1 See slide 41for non-GAAP reconciliation
Slide 40: Appendix: Additional Materials
Appendix: Additional Materials
Slide 41: Non-GAAP Reconciliation
2008 2009 LTM 9/30/10 Net Income $ 25 $ 79 $ 92 (+) Income tax 26 37 44 (+) Equity in losses of unconsolidated subsidiaries - - 0 (+/-) Other expense / (income) - 1 0 (+) Interest expense, net 146 132 118 (-/+) (Gain) / Loss on debt retirement (1) (13) 3 (+) Depreciation and Amortization 72 71 69 (+
Slide 42: Select Medical Corporation
ak. Select Medical Corporation
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