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…

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…

[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.