Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Investor Presentation (November 2003)
45 slides from Select Medical's investor presentation, Nov 10, 2003
Slide 1: Select Medical Corporation Investor Presentation
sik "Select Medical Corporation Investor Presentation
Slide 2: Forward-looking statements
Select Medical Corporation 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
Slide 3: Presentation: Business Overview, Financial Performance
Presentation Business Overview Financial Performance 3
Slide 4: Business Overview
Business Overview Founded 1996 Two lines of business in health care services IPO - April 2001 NYSE - SEM 2002 - revenues $1.126 billion 4
Slide 5: Recent Highlights
Recent Highlights Completed the acquisition of Kessler Rehabilitation Corporation - September 2003 Implementation of PPS for Long Term Acute Care Hospitals 5
Slide 6: Select Medical Operations
Select Medical Operations Largest operator of long term acute care hospitals 77 hospitals operating in 24 states 73 operate as hospital within a hospital model Four acute medical rehabilitation hospitals in New Jersey Second largest operator of outpatient rehabilitation clinics 814 clinics operating
Slide 7: Revenue Growth
Revenue Other 1997 11.2 2 1998 149 3.269 1999 456 6.771 2000 805.9 10.212 2001 959 10.62 2002 1126.6 2003 1377 Revenue Growth Net Revenue ($ in millions) 1997 - 2002 2003 Estimate represents mid-point of guidance range. 7 CAGR: 151% (1) $1,377.0 Estimate
Slide 8: Adjusted EBITDA Growth
Adjusted EBITDA Growth Adjusted EBITDA (EBITDA $ in Million) EBITDA Outpatient Other (1) 1997 -2.546 0 0 1998 3.6 -12.152 1999 42.2 -16.382 2000 91.7 -18.3 2001 112 -19.743 2002 127.3 313.2 LTM 9/30/03 162.2 CAGR: 144% (1) 1998 - 2002 8 ($ in millions) $162.2
Slide 9: EPS Performance
Performance Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0.13 0.16 0.13 0.18 0.21 0.25 0.19 0.25 0.29 0.37 0.35 EPS 2001 2002 2003 9
Slide 10: Balanced Business and Payor Mix
Balanced Business and Payor Mix Inpatient 0.59 Outpatient 0.4 Other 0.01 Revenue By Business Medicare 0.45 Commercial/Other 0.54 Commercial/ Other Medicaid 0.01 Revenue By Payor Commercial/ Other 54% Note: For twelve months ended September 30, 2003 Medicaid 1% Diversified Mix of Business and Payor S
Slide 11: Select Specialty Hospitals
Select Specialty Hospitals
Slide 12: Select Specialty Hospitals
Select Specialty Hospitals 12 77 long term acute care hospitals in 24 states = 2,829 beds 73 operate as hospital-within-a-hospital model 37 acquired in 1998 (one closed in 1999 and one closed in 2003) 42 developed internally Four acute medical rehabilitation hospitals in New Jersey = 322 beds Note:
Slide 13: Diagnostic Categories - LTACH
Diagnostic Categories - LTACH Neuromuscular Respiratory Cardiac Wound Renal Cancer Other East 30 32 11 9 4 2 12 13 Note: For the six months ended June 30, 2003
Slide 14: Discharge Disposition - LTACH
Discharge Disposition - LTACH Home Expirations SNF Acute Rehab Other East 37 15 21 13 7 7 14 Note: For six months ended June 30, 2003
Slide 15: LTACH Industry
LTACH Industry Fragmented - Approximately 300 hospitals $2.5 billion revenues per year Select - 50% market share of hospital within hospital 15
Slide 16: Hospital Development
Hospital Development Leasehold Improvements = $550,000 Equipment = $350,000 Working Capital = $2,000,000 Start-up Losses = $600,000 $3.5 Million Investment { Return on Invested Capital > 35% 16
Slide 17: Hospital Development
Hospital Development 1998 1999 2000 2001 2002 SEP '03 YTD Existing 37 38 44 54 64 71 Developed 2 6 10 10 8 6 17 39 44 54 64 72 77
Slide 18: LTACH Payor Mix
LTACH Payor Mix Note: For twelve months ended September 30, 2003 18 Medicare 0.68 Medicaid 0.02 Commercial/Other 0.3 Commercial/ Other Medicare 68% Medicaid 2% Commercial/ Managed Care 30%
Slide 19: LTACH Reimbursement
LTACH Reimbursement October 1, 2002 - Prospective Payment System (PPS) DRG based system Budget neutral New system favors high acuity patient population, lower cost provider 19
Slide 20: Industry Comparison - LTACH
Industry Comparison - LTACH Select Industry Case Mix - Acuity 1.13 1.01 Total Cost Per Patient Day $811 $821 Note: Data from 2000 Cost Reports 20
Slide 21: PPS Phase-In - LTACHs
PPS Phase-In - LTACH's Q4 02 Q1 03 Q2 03 Q3 03 East 13 23 13 25 21 25
Slide 22: Select Hospital Same Store Adjusted EBITDA Margin
Select Hospital Same Store Adjusted EBITDA Margin Q1 Q2 Q3 Q4 Q1 Q2 Q3 East 0.132 0.135 0.131 0.14 0.153 0.174 0.176 22 2002 2003 For 2002, Same Store Hospitals are those open prior to 1/1/01 For 2003, Same Store Hospitals are those open prior to 1/1/02 15.3% 17.4% 17.6%
Slide 23: Kessler Rehabilitation Acquisition
Kessler Rehabilitation Acquisition
Slide 24: Kessler Rehabilitation Acquisition
Kessler Rehabilitation Acquisition Completed Effective September 1, 2003 Established 1948 in West Orange, New Jersey Ranked among Nation's Best Rehabilitation Hospitals by "U.S. News and World Report" for 11 Consecutive Years 2002 - #1 Northeast, #5 in United States Premier, Nationally Recognized Br
Slide 25: Kessler Rehabilitation
Kessler Rehabilitation Four Rehabilitation Hospitals in New Jersey - 322 licensed beds One joint venture rehabilitation hospital in Montgomery County, Maryland - 55 beds 92 outpatient rehabilitation clinics in ten states One SNF facility in New Jersey - 196 beds Contract therapy, DME, home infusion,
Slide 26: Kessler Rehabilitation purchase price and revenues
Kessler Rehabilitation 2002 Revenues - $228.8 million Select Purchase Price - $230.0 million 26
Slide 27: Select/Kessler Outpatient Rehabilitation
Select/Kessler Outpatient Rehabilitation
Slide 28: Outpatient Rehabilitation
Outpatient Rehabilitation Select Medical with Kessler 814 clinics in 31 states, D.C. and 7 Canadian provinces 684 owned U.S. clinics 101 owned Canadian clinics 29 managed clinics 29 Note: As of September 30, 2003
Slide 29: Kessler - An Excellent Fit for Select's Existing Business
Kessler - An Excellent Fit for Select's Existing Business Pennsylvania New Jersey Florida North Carolina Maryland Virginia Illinois Georgia Massachusetts Delaware Kessler 8 33 22 2 6 3 2 1 9 1 Select 96 75 40 40 22 22 20 11 8 1 Outpatient Clinics 30 Note: As of September 30, 2003
Slide 30: Industry
Industry $35.0 billion industry CAGR of 5% Predominantly commercial pay Recognized as cost effective 31
Slide 31: Outpatient Clinic Growth
1998 1999 2000 2001 2002 Q3 2003 East 115 658 679 717 737 814 Outpatient Clinic Growth 32 Select Outpatient Rehabilitation Clinics NovaCare Acquisition Represents total clinics owned and operated through management arrangements. Kessler Acquisition
Slide 32: Select Outpatient Adjusted EBITDA Margin
Select Outpatient Adjusted EBITDA Margin 33 2000 2001 2002 9 Mo. '03 Select 0.157 0.173 0.167 0.155
Slide 33: U.S. Outpatient Net Revenue per Visit
Outpatient Rate Legend Text Inpatient Outpatient 1Q 79 2Q 78 3Q 79 4Q 78 1Q 81 2Q 81 3Q 82 4Q 84 1Q 86 2Q 86 3Q 87 4Q 87 1Q 88 2Q 88 3Q 87 34 2000 2001 2002 U.S. Outpatient Net Revenue per Visit 2003
Slide 34: Outpatient Rehabilitation Payor Mix
Outpatient Rehabilitation Payor Mix Note: For twelve months ended September 30, 2003 35 Commercial/Managed Care 69 Capitation 3 Medicare 9 Commercial/ Other Workers Comp. 19 Commercial/ Managed Care 69% Workers Comp. 19% Medicare 9% Capitation 3%
Slide 35: Financial Overview
Financial Overview
Slide 36: Specialty Hospital Performance
Specialty Hospital Performance 2001 2002 503 625.2 Net Revenue Adjusted EBITDA 24% 23% 31% 91% $503.0 $625.2 $456.5 $597.2 $57.6 $70.9 $49.5 $94.7 37 ($ in millions) Margins 11.4% 11.3% 10.8% 15.9% SS* Margins 12.8% 13.4% 11.7% 16.8% 2001 2002 9 Mo. '02 9 Mo. '03 2001 2002 9 Mo. '02 9 Mo. '03 *Same
Slide 37: Outpatient Rehabilitation Performance
Outpatient Rehabilitation Performance 9 Mo. '02 9 Mo. '03 363.5 386.7 2001 2002 76.1 81.1 9 Mo. '02 9 Mo. '03 63.1 59.8 2001 2002 440.8 485.1 Net Revenue Adjusted EBITDA 10% 7% 6% (5%) $440.8 $485.1 $363.5 $386.7 $76.1 $81.1 $63.1 $59.8 38 ($ in millions) Margins 17.3% 16.7% 17.4% 15.5% 2001 2002 20
Slide 38: Strong ROIC - Development
Strong ROIC - Development (000's) (1) Average annual Adjusted EBITDA over 3 year period. (2) Includes start-up period prior to generation of Adjusted EBITDA: Hospitals - 6 months O/P Rehab - 3 months 39
Slide 39: Improved Receivables Management
Improved Receivables Management Legend Text Inpatient Outpatient 1Q 111 2Q 106 3Q 121 4Q 119 1Q 89 2Q 81 3Q 86 4Q 85 1Q 81 2Q 80 3Q 79 4Q 77 1Q 74 2Q 76 3Q 76 4Q 73 1Q 64 2Q 56 3Q 54 One Day Improvement in DSO Equals $3.8 million 40 Days Sales Outstanding 1999 2000 2001 2002 2003
Slide 40: Free Cash Flow
Free Cash Flow : (Sin mitiions) 2000 2001 2002 9 Mo. ‘03 Operating Cash Flow $ 22.5 $ 95.8 $1208 $164.2 Capital Expenditures (22.4) (24.0) (43.2)—( 23.7) Preferred Dividends - (19.2) - - Free Cash Flow $ 041 $ 52.6 $ 77.6 $140.5 ah:
Slide 41: Rapid Deleveraging
Rapid Deleveraging ($ in millions) Net Debt Net Debt / Adj. EBITDA 1999 336.8 4.7 2000 299.65 3.3 2001 277.7 2.5 2002 204.16 1.6 LTM 9/30/03 288.5 1.5 Pro forma for full year ownership of NovaCare Pro forma for full year ownership of Kessler Rehabilitation, including the add-back of $11.5 million in
Slide 42: First Nine Months 2003 Actual vs. Guidance
First 9 Mo. 2003 Actual vs. Guidance 43
Slide 43: 2003 Financial Objectives
2003 Financial Objectives 44
Slide 44: 2004 Financial Objectives
2004 Financial Objectives 45
Slide 45: Key Selling Points
Key Selling Points Proven management team Balanced business and payor mix Demonstrated development expertise Impressive financial performance with significant upside potential 46 Attractive long- term industry dynamics Two strong and growing business lines
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