Attached files
| file | filename |
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| 8-K - FORM 8-K - UNITED SURGICAL PARTNERS INTERNATIONAL INC | d478272d8k.htm |
| EX-99.1 - PRESS RELEASE - UNITED SURGICAL PARTNERS INTERNATIONAL INC | d478272dex991.htm |
 Lenders’
Call
February 5, 2013
Exhibit 99.2 |
 2
DISCLAIMERS
SAFE HARBOR STATEMENT
This presentation contains forward-looking statements, including those
regarding United Surgical Partners International, Inc. and the services it
provides. Investors are cautioned not to place an undue reliance on
these forward-looking statements, which will speak only as of the date
of this presentation. United Surgical Partners International, Inc. undertakes no obligation
to publicly revise these forward-looking statements.
NON-GAAP MEASUREMENT
We
have
used
the
non-GAAP
financial
measurement
term
“EBITDA.”
EBITDA
is
calculated
as
operating income plus net gain (loss) on deconsolidations, disposals, impairments
and depreciation
and
amortization.
USPI
uses
EBITDA
and
EBITDA
less
noncontrolling
interests
as
analytical indicators for purposes of allocating resources and assessing
performance. EBITDA is commonly used as an analytical indicator within
the health care industry and also serves as a measure of leverage capacity
and debt service ability. EBITDA should not be considered as a measure of
financial performance under generally accepted accounting principles, and the items
excluded from EBITDA could be significant components in understanding and assessing
financial performance.
Because EBITDA is not a measurement determined in accordance with generally
accepted accounting principles and is thus susceptible to varying
calculation methods, EBITDA as presented by USPI may not be comparable to
similarly titled measures of other companies. |
 3
Presenters
United Surgical Partners International
Bill Wilcox, CEO
Jason Cagle, CFO
Mark Kopser, Former CFO
J.P. Morgan
Greg Maxon, Vice President |
 4
AGENDA
Greg Maxon, J.P. Morgan
I. Transaction summary
II. Company overview
III. Historical financials
IV. Transaction and credit facility overview
Jason Cagle, CFO USPI
Bill Wilcox, CEO USPI
V. Public Q&A
Greg Maxon, J.P. Morgan |
 I.
TRANSACTION SUMMARY |
 6
United
Surgical
Partners
International
(“USPI”
or
the
“Company”)
is
seeking
to
amend
its
existing
credit
facilities
USPI seeks to reprice the existing Revolver due 2017, Extended Term Loan due 2017
and the Add-on Term Loan due 2019
–
$125
million
Revolver
due
2017:
L+300-325
1
–
$310
million
Extended
Term
Loan
due
2017:
L+300-325
with
a
0.75%
LIBOR
floor
2
–
$522
million
Add-on
Term
Loan
due
2019:
L+325-350
with
a
1.00%
LIBOR
floor
3
USPI is also seeking to raise a new $150 million Incremental Term Loan due 2019 to
refinance the $144 million Non-extended Term Loan due 2014
–
The tranche will be fungible with the Add-on Term Loan due 2019
The terms of the tranches will remain substantially the same as existing with the
exception of the following: 101 soft call protection will be refreshed on
the Extended and Add-on Term Loans for 6 months The Company is
seeking to increase the maximum incremental debt amount to $200 million The
transaction will be done via an amendment and cashless roll will be accommodated
Lenders
in
the
non-extended
tranche
due
2014
that
do
not
elect
to
roll
into
the
new
$150
million
Incremental Term Loan will be repaid at closing
The transaction is expected to close on April 4, 2013 when the existing 101 soft
call protection expires Lenders
will
be
paid
a
ticking
fee
equal
to
50%
of
the
drawn
spread
on
the
repriced
tranches
and
the
new
$150 million Incremental Term Loan tranche between the allocation date and
closing TRANSACTION SUMMARY
Current pricing on Revolver is L+450
Current pricing on Extended term loan is L+450 with a 0.75% floor
Current pricing on Add-on term loan is L+475 with a 1.25% floor
1
2
3 |
 7
Uses
Amount ($mm)
Pay down non-extended term loan
$144.4
Fees & expenses
7.1
Total uses
$151.5
1
Based on 2012E Adjusted EBITDA less minority interest of $238mm
SOURCES AND USES &
PRO FORMA CAPITALIZATION
Sources
Amount ($mm)
New Incremental Term Loan
$150.0
Cash from balance sheet
1.5
Total sources
$151.5
Capitalization as of December 31, 2012E ($mm)
Sources and Uses ($mm)
Current
Pro forma
Total Leverage
1
Net leverage
1
Cash and cash equivalents
$51.2
$49.7
$125mm Revolver
due 2017
$ –
$ –
Non-extended Term Loan
due 2014
144.4
–
Extended Term Loan
due 2017
310.1
310.1
Add-on
Term Loan
B
due 2019
521.8
521.8
New Incremental Term Loan
due 2019
–
150.0
Total facility-level debt
63.2
63.2
Total senior secured debt
$1,039.5
$1,045.1
4.4x
4.2x
Senior Unsecured Notes
due 2020
440.0
440.0
Total debt
$1,479.5
$1,485.1
6.2x
6.0x |
 II.
COMPANY OVERVIEW |
 9
$2.2+bn of revenues under management 213 facilities that will perform over 900,000
cases by over 8,800 physician utilizers
High quality, low cost provider of surgical services
Leading operator
in an attractive
industry segment
Proven management
team
Attractive business
and payor mix
KEY HIGHLIGHTS
High margin, elective procedures with over half of revenue from orthopedic
specialties 78% private insurance; operating discipline yields bad debt
expense of ~2% of revenues Two-thirds of our facilities are owned in a
partnership with and partially owned by various not- for-profit
healthcare systems (hospital partners) Provides long-term strategic
stability in the market place with strong brand reputation and
stability
Working with existing partners (physicians and hospitals) to grow market share and
enhance strategic positioning
Adjusted EBITDA CAGR of 13% from 2006 to 2012E
Cumulative Free Cash Flow of $330 million from 2009 to 2012
Estimated 2012 adjusted EBITDA of $238mm
Majority of USPI’s senior management has been with the Company over 10
years Consistent financial
performance
Focused on key
strategic markets with
significant share
Unique JV
partnership
strategy
1
Consolidated Adjusted EBITDA less noncontrolling interest
2
Consolidated FCF calculated as adjusted EBITDA less capital expenditures, cash
interest, cash taxes and change in working capital (defined 3
Represents pro forma adjusted EBITDA-MI
1
2
3
as increases (decreases) in cash from changes in operating assets and liabilities,
net effects from purchases of new businesses) |
 10
FAVORABLE REVENUE AND PAYOR
MIX
High margin, elective procedures
56% of revenue mix from orthopedic
and pain management
Diversification of specialties insulates USPI
from negative utilization and specialty pricing
changes
78% private insurance
Insurance companies favor low cost
providers
Modest exposure to government
reimbursement fluctuations
Reliable payors and operating discipline
yields bad debt expense of ~2% of revenues
and receivable days outstanding is under 35
days
Low risk cash flows from high margin
specialties and reliable payors:
Orthopedic
Gynecology
ENT
GI
Cosmetic
Ophthalmology
Medical/Other
Pain Mgmt
12%
12%
44%
44%
3%
3%
5%
5%
7%
7%
9%
9%
8%
8%
3%
3%
9%
9%
2012 Revenue Mix
Private
Insurance
Self-pay
19%
19%
78%
78%
2%
2%
2012 Payor Mix
Government
General
1%
1%
Other |
 11
STRONG FINANCIAL AND OPERATING
PERFORMANCE POST LBO
86 acquisitions
25 de novo facility development
16 new Health System Partners
Facility revenue CAGR of 13% from 2006 to 2012E
Positive each of the past 5 years
Same facility revenue + 6.2% for 2011
Same facility revenue +5.7% for 2012E
Facility EBITDA CAGR of 13% from 2006 through 2012E
Facility EBITDA margins of 30.5% for 2012E
25% SWB as a % of revenue
3% G&A as a % of system-wide revenue
Installed decision support system
Improved quality management system
EHR Investment
40 facilities divested
75% of revenue from top 10 markets
Expansion
Facility revenue growth
Facility EBITDA
Cost management
System enhancements
Portfolio management
11 |
 12
POSITIONED FOR REFORM
OPPORTUNITIES
Post-reform, positioned to play an important role in managing increased need
for surgical services due to coverage of previously uninsured lives
Health System Partnerships
Physician
Partners
Professional Management
USPI is proven,
trusted partner
USPI involvement
can alleviate
historical distrust of
hospitals
USPI can help
provide targeted
solutions for
strategic
positioning
JV model in place
Commitment to highest level of quality service
Comfort regarding proper utilization of brand
Ability to assist with out-of-
hospital strategies
Proven ability to execute and operate low
cost, high quality facilities
Proven ability in managing professional
partnerships
Opportunities
for USPI to
assist with
enhancement
of strategic
network
capabilities
Access to
Capital
In a rapidly
changing
environment,
ability to enhance
speed to market
with new models
where there are
capital
constraints |
 13
HEALTHCARE SYSTEM PARTNERS
Benefits to Healthcare Systems
Leverage USPI’s operational expertise
and singular focus
Provides a strategy to promote
physician alignment and strategic
network capabilities
Provides defensive mechanism to
maintain short-stay surgical business
Provides capital and spreads risk
through USPI and physicians’
investment
Provides an opportunity to expand in
new markets at lower capital outlay
than a hospital
Benefits to USPI
Provides long-term strategic
stability in the marketplace
Provides brand, image,
reputation and credibility
Accelerates growth
Enhances relationships with
managed care payors
148 facilities are in a partnership with a healthcare system
|
 USPI’s
strategy
of
partnering
with
not-for-profit
healthcare
systems
aligns the Company’s facilities with strong networks of physicians
and hospitals that are prominent in their communities and known
for providing high quality care
HEALTHCARE SYSTEM PARTNERS
14
BON SECOURS HEALTH SYSTEM, INC. |
 15
GROWTH STRATEGY
Work with existing partners (physicians and hospitals) to grow market
share and enhance strategic positioning
Poised
to
react
to
current
economic
conditions
and
legislative
changes
Acquisition of troubled facilities
Selective acquisition of strong facilities
Selective de novo development
Selective acquisition of multi-facility companies
Selectively enter new markets with existing or new partners
Attractive demographics and/or payor characteristics
Prominent health system that embraces physician
alignment
strategy
Prominent physicians who are influential in the market
|
 III. HISTORICAL FINANCIALS |
 17
Operating performance
Cases increased 2.5% from prior year
Consolidated net revenues increased 8% to $540.2 million compared with
$499.2 million in the prior year period
Systemwide revenue increased 12% and consolidated revenue increased 8%
Net revenue per case increased 3.2%
EBITDA less minority interests was $204.0 million, a $20.7 million, or 11.3%,
increase as compared to 2011
Development activity
Acquired 14 facilities and opened 2 de novo facilities
Summary of 2012E results |
  18
2012E FINANCIAL UPDATE
Estimated GAAP Financials ($mm)
Year Ended December 31,
Variance
($mm)
2011
2012E
$
%
Revenues
$499.2
$540.2
$41.1
8.2%
% change
5.3%
8.2%
Operating expenses
$289.5
$326.0
$36.6
12.6%
% of sales
58.0%
60.3%
General and administrative expenses
38.0
41.4
3.4
9.0%
Total operating costs
$327.5
$367.4
$40.0
12.2%
Equity in earnings of unconsolidated affiliates
83.1
96.4
13.3
15.9%
Depreciation and amortization
21.2
24.0
2.8
13.1%
Operating income
$233.7
$245.2
$11.6
5.0%
% margin
46.8%
45.4%
EBITDA less noncontrolling interests
$183.4
$204.1
$20.7
11.3%
% margin
36.7%
37.8%
% growth
16.9%
11.3% |
 19
SUSTAINED REVENUE GROWTH
Facilities
operated
at year end
165
185
200
213
12%
13%
7%
9%
6%
6%
5%
8%
0%
3%
6%
9%
12%
15%
2009
2010
2012E
2011
Same facility revenue growth
Systemwide revenue growth
Systemwide revenue growth and same facility revenue growth ($mm)
|
 20
2012E ADJUSTED EBITDA
1
BRIDGE
1
Adjusted EBITDA less noncontrolling interest
2
USPI is in discussions to sell a portion of its ownership in several facilities to
a health system partner. If completed, this will reduce our EBITDA by $10-13mm, final
terms have not been determined
1
($mm)
20
-
$204.0
$238.0
2
$0.5
$2.2
$2.0
$1.7
$27.6
EBITDA -
MI
De novo hospital
losses
Transaction Costs
Management Fees Equity compensation
WCAS
Acquisitions
completed by
12/31/12
MI as of 12/31/12
Proforma EBITDA |
 IV.
TRANSACTION AND CREDIT FACILITY OVERVIEW |
 22
SUMMARY TERMS AND CONDITIONS
1
Current pricing on Revolver is L+450
2
Current pricing on Extended term loan is L+450 with a 0.75% floor
3
Current pricing on Add-on term loan is L+475 with a 1.25% floor
Borrower
United Surgical Partners International, Inc. (the “Borrower”)
Facility
Facility
Amt ($mm)
Maturity
Spread
Floor
Revolver
1
$125
4/3/17
L+300-325
-
Extended term loan
2
$310
4/19/17
L+300-325
0.75%
Add-on term loan
3
$522
4/3/19
L+325-350
1.00%
Incremental term loan
$150
4/3/19
L+325-350
1.00%
Expected corporate credit
ratings
B2 / B
Purpose
Reprice
existing
$125mm
revolver, $310mm
extended
term
loan
and
$522mm
add-on
term
loan;
refinance
$144mm
non-extended
term
loan
and
pay
related
fees
and
expenses
Lead Arranger
J.P. Morgan Securities LLC
JPMorgan Chase Bank, N.A.
Security
Same as existing
Guarantors
Same as existing
Financial covenants
Same as existing
Negative covenants
Same as existing
Mandatory prepayments
Same as existing
Incremental facility
The Company is seeking to increase the maximum incremental debt amount to $200
million Soft call protection
101 soft call protection will be refreshed for 6 months with respect to the
extended term loan Administrative Agent
Ticking fee
Lenders will be paid a ticking fee equal to 50% of the drawn spread on the
repriced tranches and the new $150 million Incremental
Term Loan tranche between the allocation date and closing
Delayed closing
Transaction is expected to close on 4/4/2013
tranche
maturing
in
2017
and
the
add-on
term
loan
tranche
maturing
in
2019 |
 23
TRANSACTION TIMETABLE
2/12/13
Commitments and
signature pages due at 12:00pm
4/4/13
Expected closing
date February 2013
March 2013
April 2013
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Bank Holiday
Key transaction date
Date
Event |
 V.
PUBLIC Q&A |