Select Medical Holdings Expected to Price IPO Next Week

Select Medical Holdings (SEM) is a leading operator of specialty hospitals and outpatient rehabilitation clinics which expects to price their IPO next week.

Business Overview (from prospectus)

We believe that we are one of the largest operators of both specialty hospitals and outpatient rehabilitation clinics in the United States based on number of facilities. As of March 31, 2009, we operated 87 long term acute care hospitals and five inpatient rehabilitation facilities in 25 states, and 948 outpatient rehabilitation clinics in 37 states and the District of Columbia. We also provide medical rehabilitation services on a contract basis at nursing homes, hospitals, assisted living and senior care centers, schools and worksites. We began operations in 1997 under the leadership of our current management team, including our co-founders, Rocco A. Ortenzio and Robert A. Ortenzio, who have a combined 68 years of experience in the healthcare industry. Under this leadership, we have grown our business from its founding to a business that generated net operating revenue of $2,153.4 million for the year ended December 31, 2008.

Offering: 33.3 million shares at $11- $13 per share. Net proceeds of approximately $372.7 million will be used to repay debt and to make payments under the Long Term Cash Incentive Plan in the amount of approximately $18.0 million.

Lead Underwriters: Goldman Sachs (GS), Morgan Stanley (MS), BofA Merrill Lynch (BAC)

Financial Highlights:

Our net operating revenues increased by 3.1% to $1,120.7 million for the six months ended June 30, 2009 compared to $1,087.1 million for the six months ended June 30, 2008... Our operating expenses remained generally constant and were $952.0 million for the six months ended June 30, 2009 compared to $949.0 million for the six months ended June 30, 2008. Our operating expenses include our cost of services, general and administrative expense and bad debt expense. As a percentage of our net operating revenues, our operating expenses were 85.0% for the six months ended June 30, 2009 compared to 87.2% for the six months ended June 30, 2008. Our cost of services were $904.4 million for the six months ended June 30, 2009 compared to $901.6 million for the six months ended June 30, 2008...For the six months ended June 30, 2009 we experienced income from operations of $133.0 million compared to $102.8 million for the six months ended June 30, 2008.

Competitors:

We compete on the basis of pricing, the quality of the patient services we provide and the results that we achieve for our patients. The primary competitive factors in the long term acute care and inpatient rehabilitation businesses include quality of services, charges for services and responsiveness to the needs of patients, families, payors and physicians. Other companies operate long term acute care hospitals and inpatient rehabilitation facilities that compete with our hospitals, including large operators of similar facilities, such as Kindred Healthcare Inc. (KND) and HealthSouth Corporation (HLS).

The competitive position of any hospital is also affected by the ability of its management to negotiate contracts with purchasers of group healthcare services, including private employers, managed care companies, preferred provider organizations and health maintenance organizations. Such organizations attempt to obtain discounts from established hospital charges. The importance of obtaining contracts with preferred provider organizations, health maintenance organizations and other organizations which finance healthcare, and its effect on a hospital’s competitive position, vary from area to area, depending on the number and strength of such organizations.

Additional Resources:

• Company website
• Online road show
• Renaissance Capital IPO Home page

Comments

[meridian575:]

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Oct 02 12:15 PM