Robert Ortenzio - Executive Chairman & Co-Founder Martin Jackson - EVP & CFO.

Chris Rigg - Susquehanna Financial Group Frank Morgan - RBC Capital Markets A.J. Rice - UBS Gary Lieberman - Wells Fargo Dale Dutile - The Boston Company.

Good morning and thank you for joining us today for Select Medical Holdings Corporation's Earnings Conference Call to discuss the Fourth Quarter and Full-Year 2015 Results and the Company's Business Outlook.

Speaking today are the company's Executive Chairman and Co-Founder, Robert Ortenzio; and the company's Executive Vice President and Chief Financial Officer, Martin Jackson. Management will give you an overview of the quarter and then open the call for questions.

Before we get started, we'd like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including without limitation, statements regarding operating results, growth opportunities, and other statements that refer to Select Medical's plans, expectations, strategies, intentions, and beliefs.

These forward-looking statements are based on the information available to management of Select Medical today and the company assumes no obligation to update these statements as circumstances change. At this time, I'll turn the conference call over to Mr. Robert Ortenzio. Please proceed..

Thank you, Operator. Good morning everybody. Thanks for joining us for our fourth quarter and full-year earnings conference call for 2015.

As is our normal policy for prepared remarks I'll provide some overall highlights for the company and our operating divisions, and then ask our Chief Financial Officer, Marty Jackson, to provide some additional financial details and then we’ll open the call up for questions.

Net revenue for the fourth quarter increased 34.7% to $1.04 billion compared to $771.6 million in the same quarter last year. Net revenue for full-year grew by 22.1% to $3.74 billion compared to $3.07 billion last year.

During the year, we generated approximately 63% of our revenues from our specialty hospital segment which includes both our long-term acute care and inpatient rehab hospitals, 22% from our outpatient rehab segment which includes both our outpatient rehabilitation clinics and our contract therapy services, and 15% from our Concentra segment which is included in our results starting June 1, 2015.

Net revenue on our specialty hospital for the fourth quarter increased 4.8% to $593.3 million compared to $566.1 million in the same quarter last year.

Our net revenue per patient day increased to $1,588 per day in the fourth quarter compared to $1,546 per patient day in the same quarter last year and was primarily driven by an increase in our Medicare revenue per patient day. Patient days increased to over 339,000 days compared to 336,000 days in the same quarter last year.

Occupancy was 72% in the fourth quarter compared to 69% the same quarter last year. For the full-year net revenue on our specialty hospitals increased 4.5% to $2.35 billion compared to $2.24 billion last year. Our net revenue per patient day increased to $1,569 per day for the year compared to $1,546 per patient day last year.

The increase was driven by both our Medicare and non-Medicare revenue per patient day. Our overall patient days increased 2.5% for the year to 1.37 million days compared to last year and admissions increased 1.8% to over 56,000 admissions for the year. Occupancy was 72% for the year compared to 70% last year.

We generated approximately 81% of our specialty hospital revenues from our long-term acute care hospitals and 19% in our inpatient rehabilitation hospitals operations during the year. Net revenue on our outpatient rehabilitation segment for the fourth quarter increased slightly to $206.2 million compared to $205 million in the same quarter last year.

The increase is attributable to our clinic based business which is partially offset by a decline in our contract therapy business. Net revenue on our outpatient clinic based business increased 6.1% to $169 million compared to the same quarter last year.

For our owned clinics, patient visits increased 5.8% to over $1.3 million visits compared to the same quarter last year. Our net revenue per visit was $103 in both the fourth quarter of this year and last year.

Net revenue on our contract therapy business in the fourth quarter decreased to $37.2 million compared to $45.7 million in the same quarter last year and resulted primarily from contract terminations due to the sale of health facilities to a company that provides their own therapy services.

For the year, net revenue in our outpatient rehabilitation segment decreased 1.1% to $810 million compared to $819.4 million last year. The decrease was a result of a decline in our contract therapy business which was offset in part by an increase in our clinic based business.

Net revenue in our outpatient clinic business increased 5.3% to $656.1 million compared to last year. For our own clinic, patient business increased 5% to over 5.2 million visits compared to last year. Our net revenue per visit was 103 both this year and last year.

Net revenue on our contract therapy business for the year decreased to $153.9 million compared to $196.2 million last year and resulted from the contract terminations I previously mentioned. Net revenue in our Concentra segment for the fourth quarter was $239.4 million.

Net revenue generated in the Concentra centers was $204.8 million in the fourth quarter. Concentra also generated $34.6 million in net revenue from the onsite clinics and community based outpatient clinics in the quarter. For the centers, patient visits were over 1.78 million and net revenue per visit was $115 in the fourth quarter.

For the period from June 1 to December 31, net revenue on our Concentra segment was $585.2 million. Net revenue generated in the Concentra centers was $506.2 million and revenue generated from the onsite clinics and the community based outpatient clinics was $79 million.

For the center, patient visits were over 4.4 million and net revenue per visit was $114. Overall company adjusted EBITDA for the fourth quarter was $100.8 million compared to $78.9 million in the same quarter last year. With overall adjusted EBITDA margins at 9.7% for the fourth quarter compared to 10.2% margins for the same quarter last year.

Adjusted EBITDA for the full-year was $399.2 million compared to $363.9 million last year. With overall adjusted EBITDA margin at 10.7% this year compared to 11.9% last year. Specialty hospital adjusted EBITDA for the fourth quarter was $86 million compared to $80 million in the same quarter last year.

Adjusted EBITDA margin for the specialty hospital segment was 14.5% compared to 14.1% in the same quarter last year. Improvement in adjusted EBITDA margin was the result of a 30 basis point improvement in our cost of services as well as 10 basis point improvement in bad debt as a percentage of net revenue in the specialty hospital segment.

Our results in the quarter included $4.9 million in adjusted EBITDA start-up losses compared to $5.9 million start-up losses in the same quarter last year. Specialty hospital adjusted EBITDA for the full-year was $327.6 million compared to $341.8 million last year.

Adjusted EBITDA margin for the specialty hospital segment was 14% compared to 15.2% last year. The adjusted EBITDA decline primarily resulted from non-recurring increases in labor and training cost related to the adoption of patient criteria and incremental cost from higher staff turnover which primarily occurred in the third quarter of last year.

Results for the full-year includes $16.8 million of adjusted start-up losses compared to $14.5 million of start-up losses last year. Outpatient adjusted EBITDA for the fourth quarter was $23.6 million compared to $23.2 million in the same quarter last year.

Adjusted EBITDA margin for the outpatient segment was 11.4% in the fourth quarter compared to 11.3% in the same quarter last year. For the outpatient clinic portion of our business, adjusted EBITDA increased to $21.9 million in the fourth quarter compared to $19.3 million in the same quarter last year.

The increase was attributable to the volume growth and corresponding contribution from these services. For our contract services, adjusted EBITDA decreased to $1.7 million in the fourth quarter compared to $3.9 million in the same quarter last year primarily as a result of contract terminations.

Concentra adjusted EBITDA for the fourth quarter was $11.5 million and adjusted EBITDA margin was 4.8%. Concentra incurred over $4 million of one-time expenses associated with integration cost as well as $1.6 million of additional employee healthcare expenses for the quarter.

For the period from June 1 to December 31, Concentra adjusted EBITDA was $48.3 million and adjusted EBITDA margin was 8.3%. Our reported earnings per fully dilute share were $0.22 in the fourth quarter of this year compared to $0.20 in the same quarter last year.

Reported earnings per fully diluted share for the full-year were $0.99 compared to $0.91 last year. I would also like to provide you with an update post our third quarter earnings call in October.

On January 25, we announced the acquisition of Physiotherapy Associates, a leading provider of outpatient rehabilitation in the country second largest only to Select. Physio has over 550 locations throughout the country. The transaction will expand and enhance our geographic footprint of our outpatient business.

On February 18, we launched a $625 million term loan financing for the acquisition of Physio, as well as to refinance an existing term loan that matures in December of 2016. We also announced an agreement with Kindred Healthcare to swap certain LTAC hospitals.

Under the terms of the agreement Select will transfer five LTAC with a combined 233 bed to Kindred in exchange for four LTAC with a combined 287 beds plus $800,000 in cash. The hospital swap transaction is expected to close sometime in the second or third quarter.

On the development front, in December, we opened a new 60 bed in-patient rehab hospital in partnership with Cleveland Clinic. In addition our 138 bed in-patient rehab hospital in partnership with UCLA in Cedars-Sinai is scheduled to open in the second quarter.

Also in the second quarter, we expect to open a 60 bed in-patient rehab hospital in partnership with TriHealth in Cincinnati, Ohio.

Finally, during the quarter, we began management of a rehab unit of a joint venture partner Ochsner Healthcare in New Orleans and plans are underway with Ochsner to construct a new in-patient rehab hospital that should open sometime in 2017.

We are excited about adding these new facilities to our portfolio with our new partners and our pipeline from new deals remains strong. Finally, I want to provide an update on our LTAC hospitals transitioning to the new patient criteria. As we disclosed in a recent Lender Presentation 34 of our LTACs were subject to criteria through January.

Our reported compliance level for all patients at our LTACs throughout our system at the end of January was 86%. This is up from 82.7% we disclosed as of the end of the year.

The 34 hospital subject to criteria had an average daily census reduction of 2.6% or just over 27 average daily census which is less than one patient per hospital in the period post implementation of the criteria compared to the three-month period prior to entering criteria.

This compares to what we reported at the end of December where the then 16 LTACs subject to criteria had an ADC reduction of 3.4% or approximately 1.2 patients per hospital. Again I caution that we are in the early process of transitioning our LTACs.

But I'm so far pleased with the census numbers we are seeing in those hospitals that we have transitioned. At this point, I will turn it over to Marty Jackson, to cover some additional financial highlights for the quarter..

Thank you, Bob. For the fourth quarter, our operating expenses which include our cost of service, general and administrative expense, and bad debt expense were $942.6 million. This compares to $696.4 million in the same quarter last year. This number includes operating expenses in our Concentra segment which were $228.1 million in the fourth quarter.

As a percentage of our net revenue, operating expenses for the fourth quarter increased to 90.7%. This compares to 90.3% in the same quarter last year. The increase as a percent of our net revenue was due to a 170 basis point increase in cost of services which was partially offset by 130 basis point reduction in G&A.

Operating expenses as a percent of revenue excluding Concentra would have been 89.3% in the fourth quarter. For the year, our operating expenses were $3.36 billion. This compares to $2.71 billion last year. Operating expenses in our Concentra segment were $542.7 million.

As a percentage of our net revenue, operating expenses for the year increased to 89.9%, which compares to 88.5% for last year. The increase as a percent of net revenue is due to 160 basis point increase in cost of services, and a 10 basis point increase in bad debt, which was partially offset by 30 basis point reduction in G&A.

Operating expenses or percent of revenue excluding Concentra would have been 89.3% for the year. Cost of services increased to $902.3 million for the fourth quarter compared to $656.3 million in the same quarter last year.

As a percent of net revenue, cost of services increased 170 basis points to 86.8% in the fourth quarter compared to 85.1% in the same quarter last year. Cost of services in our Concentra segment was $223.9 million in the fourth quarter or 93.5% of revenue.

The higher relative cost of services in our Concentra segment was the primary reason for the increase in our cost of services as a percent of net revenue during the fourth quarter. Cost of services as a percent of revenue, excluding Concentra, would have been 84.8% in the fourth quarter. For the year, cost of services increased $3.21 billion.

This compares to $2.58 billion last year. As a percent of net revenue, cost of services increased 160 basis points to 85.8% for the year, which compares to 84.2% last year. Cost of services in our Concentra segment was $528.3 million for the year or 90.3% of revenue.

The primary derivers behind the increase in cost of services as a percent of net revenue was a higher relative cost of services in the Concentra segment, as well as increase in our cost of services as a percent of net revenue in our specialty hospital segment, which was due to incremental labor cost related to training and staff turnover during the third this year.

Cost of services as a percent of net revenue, excluding Concentra, would have been 85% for the full-year. G&A expense was $24.1 million in the fourth quarter, which as a percent of net revenue is 2.3%, which compares to $28 million or 3.6% of net revenue for the same quarter last year.

The reductions in G&A are the result of one-time cost in the same quarter last year. During the year G&A expense was $92.1 million, which as a percent of net revenue is 2.5% which compares to $85.2 million or 2.8% of net revenue last year. Primary reason for the increase in G&A expense were related to $4.7 million of Concentra acquisition cost.

G&A expense as a percent of net revenue, excluding Concentra acquisition cost, would have been 2.3% for the year. Bad debt as a percent of net revenue was 1.6% for both the fourth quarter of this year and last year. For the year, bad debt expense was 1.6% of net revenue and this compares to 1.5% last year.

Total adjusted EBITDA was $100.8 million and adjusted EBITDA margin was 9.7% for the fourth quarter. This compares to adjusted EBITDA of $78.9 million and adjusted EBITDA margin of 10.2% in the same quarter last year.

Concentra was a primary driver in the decline of the adjusted EBITDA margin during the fourth quarter of this year as it compares to last year. Concentra contributed $11.5 million of adjusted EBITDA during the quarter and their adjusted EBITDA margin was 4.8% and had the effect of decreasing our overall margin.

EBITDA margin for the quarter not including Concentra would have improved by 100 basis points to 11.2%. Total adjusted EBITDA for the year was $399.2 million and adjusted EBITDA margin was 10.7%. This compares to adjusted EBITDA of $363.9 million and adjusted EBITDA margins of 11.9% last year.

The increase in adjusted EBITDA was primarily due to the addition of the Concentra segment, which contributed $48.3 million of adjusted EBITDA. This was offset in part by a decline in specialty hospital adjusted EBITDA driven by increased operating expenses that Bob had mentioned earlier in his presentation.

Depreciation and amortization expense was $34.3 million in the fourth quarter, which compares to $17.3 million in the same quarter last year. The increase resulted primarily from an incremental $16.1 million of depreciation and amortization expense in our Concentra segment.

During the year, depreciation and amortization expense was $105 million, including $33.6 million from Concentra for the year, compared to $68.4 million last year. We generated $4 million in equity and earnings of unconsolidated subsidiaries during the fourth quarter compared to $2.9 million in the same quarter last year.

For the year, we had equity and earnings of unconsolidated subsidiaries of $16.8 million. This compares to $7 million last year. These increases are mainly the results of contributions from our specialty hospital joint venture partnerships, as well as improved results at the start-up companies that we have minority positions in.

During the year, we had a gain on the sale of equity investment of $29.6 million related to the NaviHealth sale. Interest expense was $33.1 million in the fourth quarter, which compares to $21.4 million in the same quarter last year. Interest expense for the year was $112.8 million compared to $85.4 million last year.

The increase in interest expense in both the fourth quarter and full-year is a result of additional borrowings related to the financing of the Concentra acquisition. The company recorded income tax expense of $7.4 million in the fourth quarter.

The effective tax rate for the quarter was 22.2% compared to an effective tax rate of 30% in the fourth quarter of last year. For the full-year, the company recorded income tax expense of $72.4 million with an effective tax rate of 34.8% which compares to 37.1% last year.

The decrease in the effective tax rate in both the fourth quarter and the full-year results from the resolution of uncertain tax positions. Net income attributable to Select Medical Holdings was $29.3 million in the fourth quarter and fully diluted earnings per share was $0.22.

This compares to fully diluted earnings per share of $0.20 in the same quarter last year. For the period, net income was a $130.7 million and fully diluted earnings per share were $0.99 which compares to fully diluted earnings per share of $0.91 last year.

At year-end, we had $2.42 billion of debt outstanding and $14.4 million of cash on the balance sheet. This includes $8.4 million of cash at Select and $6 million of cash at Concentra.

Our debt balances at the end of the year included $750.5 million in Select term loans, which includes the OIDs, $295 million in Select's revolving loans, $711.2 million in Select 6.38% senior notes, which includes issuance premium, $644.9 million in Concentra loans, which also includes OIDs, $5 million in Concentra revolving loans, with the balance of $17.3 million consisting of other miscellaneous debt.

Operating activities provided $5 million of cash flow in the fourth quarter and $208.4 million for the year. Our days outstanding were 53 days as of December 31, 2015. This compares to 52 days at the end of September 30, 2015, and 53 days as of December 30, 2014. Investing activities used $80.8 million of cash flow for the fourth quarter.

During the quarter, the use of cash was related to $68.7 million for the purchase of property and equipment, $12.4 million in investment and acquisition payments, which were offset by $300,000 from proceeds from the sale of assets. Investing activities used $1.2 billion of cash flow during the year.

For the year, $1.06 billion of the use of cash was related to investment and acquisition payments, primarily the acquisition of Concentra, and $182.6 million in PP&E purchases, which included approximately $94 million related to new development.

Additionally, we received $34.9 million in proceeds for the sale of NaviHealth and other assets during the year. Financing activities provided $67.6 million of cash during the quarter. This was primarily the result of $75 million in net borrowings on the Select revolver.

The revolving credit facility offset by $6.3 million and repurchases of distributions to non-controlling interest. Financing activities provided $1 billion of cash for the full-year.

This was primarily related to the debt and equity contributions for the acquisition of Concentra, which were offset in part by $15.8 million to repurchase stock, $13.1 million in dividend payments, and net other debt payments of $4.8 million.

Additionally, I'd like to reaffirm our financial guidance for calendar year 2016 that was provided in our earnings press release. This includes net revenue in the range of $4 billion to $4.2 billion, adjusted EBITDA in the range of $470 million to $510 million, and fully diluted earnings per share to be in the range of $0.72 to $0.91.

This guidance assumes a 40% effective tax rate for the year and does not take into consideration the pending acquisition of Physiotherapy. This concludes our prepared remarks. And at this time we'd like to turn it back over to the operator to open up the call for questions..

[Operator Instructions]. Your first question comes from the line of Chris Rigg of Susquehanna Financial Group. Please proceed..

Hi. Good morning guys. Just on -- when you had the Lender Presentation out a week or so ago, where you show the 34 hospitals, 21 are at or above the census, the pre-criteria census, the 13 - you have 13 that are below.

Can you just share some details, particularly on the 13, if there is something there that is notable or do you think you can actually get those 13 to -- get the census back up to flat?.

Yes. Chris, good morning. Chris, the key here is really the reduction in volume; it's really the reduction in volume. If you take a look at 12/31 data that we disclosed, it was 3.4% reduction. And in essence, what we're looking at and when we incorporated the January hospitals, the additional 18 hospitals that actually bumped down to 2.6%.

And in addition to that, if you take a look at the 12/31 data points 18.5% reduction in average daily census. And for the next 18 hospitals coming onboard the total amount for all 34 hospitals was 27.6. So in essence, you had nine additional or nine -- a reduction of nine ADC for the additional 18 hospitals coming onboard.

That, to us, is a very good indicator that the operators are doing a great job going through this process. Now, as Bob pointed out, this is really only the four set of hospitals that are going on. So we've got eight more sets of hospitals to go and two-thirds of the hospitals to go, so we're cautiously optimistic here..

Got you. That's great. And then just on the Concentra one-timers that you guys mentioned I didn't quite get all the details as to what's in that $4 million? Thanks..

Yes. A couple of things are in the $4 million, Chris. If you take a look at there is about a $1 million, little bit north of a $1 million hit associated with some true-ups we've done for purchase accounting on leases.

In addition to that, there is a -- when we synced up the benefits for Select employees and then Concentra employees there was about a $1 million hit associated with that, and that really occurred in that fourth quarter. In addition, there was about a $1.6 million hit with additional healthcare expenses.

And then, we had some adjustments associated with the accounts payable. One other things that we probably haven't talked about is that as of 1/1/16 Concentra, a good portion of Concentra's financial systems have been moved up to Mechanicsburg.

So if you take a look at the GL, accounts payable and payroll have all moved up to Mechanicsburg as we go through that process, we've accrued some dollars for accounts payable..

Your next question comes from the line of Frank Morgan of RBC Capital Markets. Please proceed..

Good morning. As you look at those hospitals that have converted is there anything that makes you think that they are any different or not representative of all the remaining 70 some odd hospitals that you got in terms of size or region or local market referral sources, they wouldn't be representative.

And I'm just curious that's really from a -- also looking at from a census perspective and a case mix perspective?.

Yes, thanks, Frank. I'll start with saying that every hospital and every market is different absolutely.

But I will tell you that if you look at the hospitals that have transitioned into criteria to-date there is really no discernible difference that you could draw that would bring a distinction between that group or cohort of hospitals relative to the remaining ones, either in terms generally of geographic area or mix in terms of size between hospital and hospital or freestanding or markets.

So the way the hospital is transitioned in, in terms of month and quarter throughout the end of last year, and this year, you really can consider completely random. So across a 107 hospitals, the further that you go in the more that the kind of distribution is exactly what you would expect.

So the short answer to your question is no, no discernible difference between those that have gone in, in terms of the profile and those that remain to transition..

Got it.

And then on the hospitals that are in the swap with Kindred, is there when are those cost reporting years, when would those go into under compliance? I know they are cost -- I think they're -- when you're out, but where would that stand?.

I think all Kindred hospitals are going on as of September 1, 2016. .

And as of the ones that we are swapping to Kindred a couple of those have already gone into criteria and others will happen across the next couple of quarters..

And what's the early read on those that have already gone into criteria?.

The one that we -- I don't want to -- I know that's really going to be more for the Kindred disclosures. I mean in terms of ones that we own that are moving to Kindred..

No, the ones that you're getting from Kindred, you said they had some that already going into [indiscernible] criteria, so you'll be assuming those?.

No, no, no, -- and Marty said all of the Kindred hospitals are back-end loaded..

Okay..

So we won't see those go until the latter part. But the - one of the comments that we've gotten and some questions we've gotten on this swap. This swap really wasn't driven by criteria. It's really driven by looking at different markets for both Kindred and Select are strong and where they want to concentrate..

Got it. And have you seen in your [ERG] [ph] business any slowdown in the payments or denials.

I know HealthSouth has talked about there as being an ongoing problem, but have you seen any of that in your ERG portfolio, from your [indiscernible]?.

Yes, Frank, we have not..

We have not. But that's not - HealthSouth has considerable larger portfolio of rehab hospitals than we do, so not to say that we won't but as of this time we have not..

Got you. And then I was going to ask a question about your cash flow commentary.

On the fourth quarter, I think Marty you touched on it somewhat but in terms of how that might normalize back up, I mean in the quarter seem like it was sort of weak, but you made some commentary surrounding Concentra, is there anything that says that would show that reversing back out over the next few quarters?.

No, Frank, I think what you have to do is take a look at the cash on context of a full-year basis. So while cash flow was about $5 million for the fourth quarter, it was $208 million for the entire year. And if you take a look at that in the context of the past couple of years that's actually been a very good cash flow from operations for us.

The other thing has to do with PIP timing, the timing of the periodic interim payments that we receive. So but all in all when you take a look at the entire year it was actually very good cash from operations year for us..

Your next question comes from the line of A.J. Rice of UBS. Please proceed..

Hi everybody.

First of all just I want to make sure as a big picture write on how you guys now are thinking about the impact of criteria in the fourth quarter and then your guidance for '16 on the bottom-line, is it, it almost sounds like are you thinking it's going to be sort of neutral at the end of the day or not a drag or is it baked in as a little bit of a drag still for this year?.

Yes, A.J. the thought process is we given we've talked about how transition we expect to be choppy, we're expecting a little bit of headwinds on the OpEx side..

I mean it's a very big change. The criteria is a very big change for this industry and so we do expect it to be a headwind..

Okay. I guess I know you had said that six months ago but the commentary seem to be more positive.

So I just didn't know if that had actually changed or not?.

What we're trying to give -- what we're trying to do at this point, A.J. is just to be a consistent on the data points that we're giving with respect to how we are going in.

So I mean people can derive from that what they will, we're continuing to say that this is a big change, it's a lot of effort, it takes a lot of execution in every single one of the hospitals that goes in. So we just are not in a position to be overly bullish about that. So it's certainly not a tailwind, it's so it is nothing but a headwind..

Yes, I mean the point there A.J. is while we are pleased, very pleased with what we see in the first third of our hospitals, we still have two-thirds to go. I think at the end of the first quarter we should have half of our hospitals through and if we're seeing the same types of results that point in time it will get a little less cautious..

Okay, okay. Just some other aspects to the 2016 outlook. So you had this more positive minority interest in the fourth quarter, it sounds like some of that at least is a recurring thing.

So is that sort of a run rate that's embedded in the guidance for this year or is it should we use something a little different and how much is start-up cost are those winding down now at this point or is there still assumption about start-up cost in the 2016 guidance?.

Yes, it's a good question A.J. Let's talk about start-up losses first. Start-up losses there will be some start-up losses in particular with some of the rehab JVs that we have coming on board. But in absence you will also see some pickups from those start-ups that we had over the past two years that are starting to generate some nice EBITDA.

So from our perspective on a net-net basis you should probably net each other out..

Okay..

And then we should see some real nice increase in EBITDA come 2017..

Okay.

And then may be just a last question on the Physiotherapy may be to comment a little more about what that opportunity looks like to you and how you see that meshing with the rehab businesses you currently have?.

Well we think the Physio is a great opportunity and we have great overlap as for people who follow the company know that our management team and the outpatient has been really rock solid, you look over the course of last five years in terms of the revenue per day, their volume growth it's been strong. So we see Physio as really a great opportunity.

Marty has put some information out there on the expected synergies and we feel highly confident that we will be able to accomplish those. So we like the outpatient business very much, it's been great for us in the whole 20 year history of the company.

So the opportunity for us is the largest company to buy that second largest provider and expand our footprint from little over 1,000 to almost 1,600. We just don't think an opportunity like that comes along very often and we are happy we are able to take advantage of it..

Your next question comes from the line of Gary Lieberman of Wells Fargo. Please proceed..

Thanks for taking my question.

Could you give us a little bit of guidance or just direction in terms of how to think about the EBITDA for 2016 for Concentra?.

Yes, Gary. The number that we think with regards to EBITDA for Concentra and we kind of put this out is we anticipate it will be in the $136 million range, $136 million with EBITDA and that's kind of what discussion has been in particular around of synergies and some of the growth we're seeing there..

Okay.

And then any sense or indication of what Physiotherapy could do to EPS when you included in guidance once you close it?.

Yes. I think probably for '16 it will either be neutral or a little bit positive, may be a penny or two positive. And it really depends on the timing of the synergies that we're able to get out of it..

Okay. And then may be finally just on the LTAC conversion.

Can you give us a sense of what -- what's in the guidance at the high-end? Does it assume that you sort of continue on this path of being able to confer relatively quickly or kind of what were -- what was your thinking when you put the guidance together?.

No. The guidance is much more conservative than what you're seeing, the results that we've reported. So from that perspective we anticipate some better performance based on that..

Your next question comes from the line of Simon. Please proceed..

Could you disclose any revenue EBITDA metrics or synergy amounts for the Physiotherapy Associates that on a LCM basis or just any color there would be great?.

Yes, yes we have. There is some Lender Presentations that we put out on 8-K. It indicates Physiotherapy revenue was in that $315 million, $320 million range. EBITDA is $32.7 million and expected synergies in the little bit north of $20 million..

Great.

And similarly what was Concentra's revenue and EBITDA of the full-year '15? I know you guys will disclose on June 1 onwards for your financials, but just to get an order of magnitude for that business?.

Yes. Given the fact that we've owned it since June 1, those are the revenues that we feel comfortable disclosing. And we're not going to disclose anything on the January 1 through May 31..

And we did none..

Fair enough. You guys mentioned that in 2016 EBITDA guidance for Concentra that you guys were thinking about $136 million, if I got you correctly that includes some impacts of the synergies.

Is there revenue number that would be in your revenue guidance then for Concentra well if you could break that out?.

The revenue should be in the $1 billion range, little bit north of a $1 billion..

Great. Thank you very much.

And then the term loan that you guys are raising to finance the Physio acquisition, is that just going to be Perry [ph] and CMS the existing some loans you have structurally?.

Yes..

Okay..

Yes. It will be a term loan F, yes..

Your next question comes from the line of Dale Dutile of The Boston Company. Please proceed..

Just trying to understand Concentra a little better.

So the $4 million one-time charge, that -- that's in the EBITDA number?.

Yes, it is..

Okay. And so -- and then when I look at net income attributable to non-controlling interest that was a loss for the quarter.

Is that primarily related to Concentra as well?.

Yes..

So can you just help -- when I look at the P&L on a consolidated basis, how does the EBITDA with interest in D&A, how does that get to at loss, just walk me through those numbers?.

Sure. I've got EBITDA of $11.5 million. I've got interest expense a little bit north of $10 million. I've got depreciation just a little bit shy of $15 million..

Okay.

And the $10 million was what you borrowed about $650 million related to Concentra?.

Borrowed exactly $650 million..

At this time there are no additional questions in the audio queue. And I would like to turn the call back over to management for closing remarks. Please proceed..

No further comments. Thank you everybody for joining us. And look forward updating you in next quarter..

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day..