Select Medical Holdings Corp (SEM) 2011 Q1 法說會逐字稿

Good morning, and thank you for joining us today for Select Medical Holdings Corporation's earnings conference call to discuss the first quarter 2011 results and the Company's business outlook.

Speaking today are the Company's CEO, 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 annual highlights and then open the call for questions.

Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the Company, include, without limitation, statements regarding operating results, growth opportunities and other statements that refer to Select'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 will turn the conference call over to Robert Ortenzio. Please proceed.

Thank you, operator.

Good morning, everyone, and thank you for joining us for Select Medical Holdings' first quarter conference call for 2011.

For our prepared remarks I'll provide some overall highlights for the Company and our operating divisions and then ask Marty Jackson to go over some additional financial details before we open the call up for questions.

Earnings per fully diluted share increased 46.7% to $0.22 in the first quarter, compared to earnings per share in the first quarter last year of $0.15. Net revenue for the first quarter increased 18.5%, to $693.2 million, compared to the same quarter last year. We generated approximately 75% of our revenues from our specialty hospital segment, which includes both our long-term acute-care and inpatient rehab hospitals, and 25% from our outpatient rehabilitation segment, which includes both our outpatient clinics and contract services.

Specialty hospital net revenue for the first quarter increased 26.3%, to $519.9 million, compared to the same quarter last year. The primary driver behind the increase was the contribution from the hospitals acquired in the Regency transaction, which contributed $90.1 million of net revenue in the quarter. During the first quarter, approximately 88% of our specialty hospital revenue came from our long-term acute-care hospitals and 12% from our inpatient rehabilitation facilities.

We experienced a significant improvement in our specialty hospital volumes in the first quarter as patient days increased to 24.6% compared to the prior year, to 333,856 days in the quarter. The primary driver of this increase again was the contribution of the Regency hospitals. However, excluding the effects of Regency our hospital patient days would've increased 4.3% compared to the same quarter last year. In addition, sequentially our patient days increased 7.2% compared to the fourth quarter last year. Overall occupancy rates were 72% in the first quarter, compared to 70% in the same quarter last year and 66% in the fourth quarter last year. Net revenue per patient day increased to $1,514 in the first quarter, compared to $1,491 per day in the same quarter last year.

Net revenue in our outpatient rehabilitation segment for the first quarter increased slightly, to $173.2 million, compared to $173.1 million in the same quarter last year. During the first quarter approximately 67% of our outpatient revenue came from our own clinics and 33% from our contract services and managed clinics. Our overall clinic-based revenues increased 2.5% and our contract services revenues declined 7.3% compared to the same quarter last year. For our own clinics, patient visits increased 1.1% compared to the same quarter last year, and net revenue per visit increased 2%, to $103 per visit, compared to the same quarter last year. As we've mentioned in our last two earnings calls, the reduction of our contract services revenues is a result of a large contract that was terminated after the acquisition of a nursing home chain and the business going to a related company.

Overall adjusted EBITDA for the first quarter increased 16.4%, to $105.7 million, compared to $90.9 million in the same quarter last year. Overall adjusted EBITDA margins were 15.3% for the first quarter, compared to 15.5% for the same quarter last year.

Specialty hospital adjusted EBITDA for the first quarter increased 21.1%, to $104 million, compared to $82.9 million in the same quarter last year. The hospitals acquired in the Regency acquisition contributed $14.5 million of this increase. Adjusted EBITDA margins for the specialty hospital segment decreased 80 basis points, to 19.3%, compared to 20.1% in the same quarter last year. However, excluding the effects of the Regency hospitals, specialty hospital margins would have been 20% for the first quarter.

Outpatient rehabilitation adjusted EBITDA for the first quarter increased 4.3%, to $21.4 million, compared to $20.5 million in the same quarter last year. Adjusted EBITDA margins for the outpatient segment increased 50 basis points, to 12.4%, compared to 11.9% in the same quarter last year.

I want to make a couple of additional comments before turning the call over to Marty Jackson.

Let me start by saying that we are pleased with the progress made in our specialty hospital segment this past quarter. We experienced sequential improvement from the fourth quarter for both our rate and volumes in our specialty hospitals. Net revenue per patient day increased 3.9% and our patient days increased 7.2% compared to the fourth quarter, both of which contributed to a solid quarter and significant progress for that segment of our business. We are optimistic that we have turned the corner with the Regency hospitals, and that is evident in their contribution both in terms of revenue and EBITDA this past quarter.

I also wanted to mention that we did close our previously announced rehabilitation services joint venture with Baylor Health System on April 1, 2011. The joint venture includes two inpatient rehab hospitals with 136 total beds, three managed rehab units with 57 beds, and 30 outpatient locations. We are excited about the partnership with Baylor and enhancing the rehab services in the Dallas-Fort Worth area.

And, finally, as you're probably aware, last month CMS released the proposed rules for fiscal year 2012 for both the LTACs on April 19 and inpatient rehab facilities on April 22. I emphasize these rules are still only proposed and subject to a comment period and change. We've performed an initial analysis and continue looking at the specifics of the respective proposed rules. Our analysis indicates based on our historical patient population that each of the LTAC and rehab proposals would provide an overall increase of approximately 30 basis points, which is considerably less than the 1.9% and 1.8% increases suggested by CMS in their respective releases of the proposed rules. We will continue to analyze the effects of the rule changes and provide comments to CMS within the specified time frames.

With that I'll turn it over to Marty Jackson, our CFO, to cover some additional financial highlights for the quarter.

Thanks, Bob.

As Bob indicated in his comments, we are pleased with the performance of our business segments this past quarter. Our operating expenses, which include our cost of service, general and administrative costs and bad debt expense in the first quarter, increased 19%, to $588.3 million, compared to the same quarter last year. As a percentage of net revenue, operating expenses for the quarter were 84.9%, compared to 84.6% in the same quarter last year.

Cost of services increased 18%, to $557.4 million, for the first quarter. The principal reason for the increase is additional cost associated with the Regency hospitals. We realized a 40-basis-point improvement in our cost of services for the quarter. As a percent of net revenue, cost of services was 80.4% for the first quarter, compared to 80.8% in the same quarter last year. The primary driver of this reduction was improved labor expense. Both segments of our business realized improved labor performance during the first quarter compared to the same quarter last year.

G&A was $16.6 million in the first quarter, which as a percentage of net revenue was 2.4%, compared to 2.2% for the same quarter last year. This increase is primarily related to the additional corporate cost to support the Regency acquisition as well as higher legal expenses and executive compensation cost compared to the same quarter last year.

Bad debt as a percentage of net revenue was 2.1% for the first quarter, which represents a 50-basis-point increase for the same quarter last year. While we experienced a small growth of bad debt in our outpatient business, the primary driver of this increase is associated with the Regency transition. We expect bad debt expense to return to historical levels under 2% over the remainder of the year.

On a related note, our net accounts receivable balance increased $85.9 million in the first quarter compared to year-end 2010. Overall we experienced 6-day increase in days sales outstanding, or DSO, to 57 days, compared to 51 days at December 31, 2010. The increase in DSO in the quarter was primarily the result of timing of our periodic interim payments from Medicare for our specialty hospitals. The seasonal timing impact we typically experience in the first quarter was exacerbated by a mandated fiscal intermediary change during the quarter. Our new primary fiscal intermediary's scheduled PIP payment dates were five days later than our former intermediary would have paid, which resulted in receiving one less PIP payment in the quarter. Each biweekly payment is approximately $35 million. Our 57-day DSO at the end of the first quarter is consistent with our experience in prior years, with DSO of 56 days at the end of the first quarter last year.

Turning back to the income statement, as Bob mentioned, total adjusted EBITDA was $105.7 million for the first quarter, and adjusted EBITDA margins were 15.3%, compared to adjusted EBITDA of $90.9 million and 15.5% adjusted EBITDA margins in the same quarter last year.

Depreciation and amortization expense was $17.2 million in the first quarter, compared to $17.7 million for the same quarter last year. The decline in D&A was primarily the result of a decline in amortization expense as we fully amortized items related to contract therapy evaluations and noncompete agreements in 2010.

Net interest expense was $25.6 million in the first quarter, down from $30 million in the same quarter last year. The reduction in interest expense is primarily related to the expiration of the interest rate swaps during 2010 that carried higher fixed interest rates.

The Company recorded income tax expense of $26.6 million in the first quarter, which represents an effective tax rate of 42.9%, compared to the effective tax rate in the same quarter last year of 40%. The increase in our effective tax rate has resulted from a difference between the tax accounting basis and the financial accounting basis associated with the hospital transaction we did with Rehab Care on January 1 of this year, which we discussed on our earnings call last quarter.

Net income attributable to Select Medical Holdings was $33.7 million in the first quarter, and, as Bob mentioned, fully diluted earnings per share was $0.22.

We ended the quarter with $1.47 billion of debt outstanding and $15.1 million of cash on the balance sheet. Our debt balances at the end of the first quarter included $167.3 million of holdco senior floating rate notes, $139.7 million of holdco senior sub notes, $611.5 million of 7-5/8 senior sub notes and $422.3 million of term loans outstanding and $125 million in revolving loans outstanding, with a balance of $8.9 million consisting of other miscellaneous debt.

As you are probably aware, we have begun efforts to refinance a significant portion of our debt structure. On April 25, 2011 we commenced a conditional cash tender offer and consent solicitation for any and all of the 7-5/8 senior sub notes due 2015. The tender offer is scheduled to expire on May 20, 2011. We are seeking to enter into a new senior credit facility with proceeds which will refinance our existing credit facility, the tendered 7-5/8 senior sub notes and the 10% senior sub notes of the holding company. We hope to have the refinancing completed in the second quarter.

Operating activities used $5 million of cash flow for the first quarter compared to cash flow usage of $15.8 million in the same quarter last year. The cash usage in both periods resulted principally from increases in accounts receivable I previously mentioned. Investing activities used $14.7 million of cash for the first quarter. $12.9 million was for the purchase of property and equipment, and $2 million in acquisition-related payments, offset in part by $250,000 in proceeds from the sale of the business.

Financing activities provided $30.4 million of cash for the first quarter. This resulted from $100 million in borrowing under our revolving credit facility, net borrowing of $3 million in other debt and proceeds from stock sales of $100,000, offset by $59.6 million in term loan payments, $9.4 million in repayment of bank overdrafts, $2 million for repurchase of common stock and $1.7 million in distributions to noncontrolled interests.

I also want to reaffirm the financial guidance for the full year of 2011 we provided in our January 20 press release, which includes net revenue of $2.65 billion to $2.75 billion, adjusted EBITDA of $365 million to $385 million, and income per share of $0.67 to $0.72.

This concludes our prepared remarks, and we'd like to ask the operator to open up the call for questions.

Thank you.

(Operator instructions.)

Our first question comes from the line of Frank Morgan, with RBC Capital Markets. Please proceed.

Good morning. A couple of questions here, maybe one for Bob and one for Marty, starting with Bob. Just any kind of legislative updates you can give us on what you're seeing out there with regard to facility or patient criteria, any updates there on that legislation? And then for Marty, could you talk a little bit more about, obviously, the Regency acquisition you're starting to see some nice improvement in margins there, but when you think about kind of getting from where you are today up to company-wide averages, what do you think is the real biggest drivers there? Is it more just continued volume? Is it mix shift? Or what gets you there? And then also what gets you there on the -- getting the legacy Select hospitals back up to their record level margins?

Thanks, Frank. This is Bob. I'll address your first question, which is a legislative update. As probably most of the people on the call know there has been an initiative that has been led by the American Hospital Association to help develop more enhanced patient facility criteria for LTAC hospitals. I think that I would characterize that effort as continuing and ongoing. But the American Hospital Association is in the lead, and they were really instrumental in the development of the ideas and the proposals, although we had some input. So, the Company is supporting, in a supportive role, and is supporting that initiative.

As you know, the kind of legislative environment is a little cloudy right now. I don't know that there is -- people think that there's a lot of opportunity for healthcare legislation to move in the near term, but I think that there is a continued effort to get support for the ideas that the American Hospital Association has put forth, and we continue to be supportive.

Okay. And then on just the margin opportunity from here, Marty?

Frank, the thought right now, I mean, if you take a look at when we acquired Regency they were doing about 7.5% EBITDA margins. Our expectation was after the elimination of the -- or the reduction in the corporate expense we'd be in the 13% to 13.5% range. And obviously the first quarter we were at that 16% range. So we're very pleased with that.

We anticipated that we would achieve that later on this year. We thought that post acquisition, over the next 12 to 18 months you would see an improvement in labor cost, and we started to see that a little bit earlier than we thought. But I anticipate it's still going to take 12 to 18 months to really hit the legacy Select LTAC margins.

Okay. And then on the -- just with your legacy Select hospitals, what do you see as the opportunity there? Is it just predicated purely on volume?

It really is. I mean, we were very, very focused on the volumes. So, I mean, volumes were very good for us. You saw on the legacy Select LTACs a 20% margin, which is exactly where we were last year.

Okay. And then one more just on the proposed rule. I know that I think the guys at Kindred made a comparable comment describing the disparity between what CMS has said as kind of the net number on the rate versus what the company-specific rates are. And they, too, saw a very big difference. Is there anything unique? I would think between the two of you all that you all would be pretty representative of the industry, but can you point to anything specifically that drives that? I mean, is it geography? Is it -- I mean, why would there be such a disparity between what they're saying and what's the company-specific rate? Thank you.

Yes, this is Bob, I don't know, Frank. I mean, sometimes the stuff that -- they do the calculations inside CMS it's, I mean, from my standpoint as a CEO it's a little bit like a black box. So we know what we can see based on our patients, and, as you pointed out, I believe that I heard that Kindred kind of reported the same thing. So it is difficult at this point to know exactly, although I suspect that's what the comment period is for. So we'll do our work and submit things as a comment and then see what comes out in the final. But, yes, as you point out, there is a pretty big delta between what the two largest providers in the industry are seeing and in terms of what the increase would be and what the headline was coming out of the proposed rule. Marty, I don't know if you have any comment on that.

It really is -- it should be a mathematical equation, and, unfortunately, going through our patient population, we're at 30 basis points.

Wow. And then one final one and I'll hop back in the queue. Given the fact you had a nice beat here, the reason for not raising guidance, is it just being conservative, or is there anything out there that you're seeing that gives you pause? And I'll hop off. Thanks.

Frank, the former rather than the latter.

Our next question comes from the line of Kevin Fischbeck, with Bank of America. Please proceed.

Okay, thanks. Yes, I guess a couple of questions. The -- any impact to your business on the outpatient rehab side from the nursing home proposal? I know some of the rate cuts may be impacting rates you might get from customers or the changes in the group therapy.

Kevin, you're talking about the proposed reg?

Yes.

Yes, certainly there won't be any impact to us if it's a 1.5% increase, but the -- whether it's an 11.3% decrease, it would have a negative impact to us, but it's not material. It would really impact our contract therapy business, which is relatively small.

Okay. And any impact on the group therapy changes? Is it the same thing, it's a smaller part?

That's all in the contract therapy business, which is, again, which is not material.

Okay. And then I wanted to go back to the cash flow commentary. It wasn't clear to me. It sounded like the fiscal intermediary change -- well, I guess part of the increase in DSOs was normal seasonality of timing, but then part of it was this fiscal intermediary change, and the fiscal intermediary paying -- taking a lot of time to pay claims, is that something that will reverse over time and you'll get that cash back, or is that just a permanent change and although cash flow will normalize going forward you won't catch back up to that missed payment?

Ultimately we will catch up, Kevin.

Okay. Do you think you'll get that back in 2011?

Probably over a year period of time.

Okay. And the cost control in the quarter seemed to be kind of be the big story. You mentioned that (inaudible). Do you have kind of a basis point change year over year, and how should we think about that improvement? Is that anything one time going on there, or is that kind of a sustainable improvement that you (inaudible) going forward?

Kevin, I think the costs were terrific. Our operators did a great job. But what really helped here was the increase in volume. As you know, with nursing it's a step function, and to the extent that you increase your volume you're going to see improvements in the cost side.

Okay.

So, the increase that we saw sequentially was just significant for us, and I think that had a very positive impact on our cost structure.

Okay. That makes sense. And then last question today, you closed the Baylor joint venture. Can you give us an update on what the pipeline is for additional deals?

Well, we do have a pipeline, and there are a number of, I think, great provider systems that we're working with around the country. It is just very difficult with these deals to really be able to predict when you can get them to the finish line. So I would characterize our pipeline as active and good discussions, but I'm really hesitant to try to give any estimate of when we would actually sign it and announce another deal, but we are working actively with a number of strong systems.

Okay, great. Thanks.

Our next question comes from the line of A.J. Rice, with Susquehanna Financial Group. Please proceed.

Thanks. Maybe just stepping back from that last question, if you think about your cash flow priorities and capital deployment from here, obviously you've got the debt refinancing you're working on. What -- maybe give us a sense of how you view the priorities, acquisitions, JVs, stock buyback, debt buyback. I know you didn't get a lot of stock in in the first quarter. What's your thoughts about that going forward?

A.J., the overall focus of the Company is to make sure that we're creating value for the shareholders. So when you take a look at acquisitions, it has to meet our acquisition criteria, which, as you know, is we always take a look at three years out. We take a look at LTM, EBITDA, and we've got to be in the range of four times or less. So, unless we see transactions out there that meet those criteria, I don't think we'll be doing much in the acquisition front. The focus right now that we see is really paying down debt with the free cash flow.

Okay. You got good, nice improvement in the margin on the outpatient rehab clinic business, 50 basis points. Do you want to speak to that and the sustainability of that improvement, what was driving that?

The majority of that improvement on the margin really came from, as we had mentioned before, the former HealthSouth clinics, where we've seen a very nice expansion on the margins. And a lot of that has to do with the increase in volume that we've seen.

Okay. All right. And then, maybe more broadly just a question on a lot of discussion about broadening the post-acute offering, needing to have different pieces in place. You guys have been pretty focused on a couple of areas that are your historic strengths. What's your thought about that and over time whether there's a need to add additional lines of service? Maybe give us some perspective on that.

Well, A.J., what I would say to you on that is that we have what we consider a historic competency in a couple of areas, in the LTAC, the inpatient rehab, outpatient rehab, contract business with nursing homes. You'll note that the joint venture strategy really is an integrated post-acute strategy, and if you look at our SSM joint venture and others we really are developing an integrated post-acute strategy.

I guess we don't feel as though we need to own all the pieces of the post-acute in a market where we're strong. We feel that we should own those pieces that we bring a lot of value add in terms of operations and can be the most efficient, both in terms of cost and quality, and those where we can't do that or where others, primarily general acute-care hospitals, have preferred providers or may own their own pieces of the post-acute, that we want to be in a situation to network with them. So the initial place for that is in our joint ventures on the rehab side, but every place where we have a joint venture rehab -- you would note that would be Penn State Hershey, SSM and Dallas -- while they're not in the joint ventures, we also happen to have LTACs in each of those markets.

I'd also point out that because 80 of our LTACs are hospitals within hospitals, we already feel that we have somewhat of a leg up to be part of any post-acute. So I don't think that we feel as though in every market that we are going to control, absolutely control or own all aspects of the post-acute network, but we feel that we need to be part of it, and where we have joint ventures snap on these pieces that make sense and that we can bring additional value.

Okay. Thanks a lot.

Thanks, A.J.

Our next question comes from the line of Doug Simpson, with Morgan Stanley. Please proceed.

Hi. Good morning, everyone. Could you just give us a little bit more color? You guys did a nice job. When you look at the volume differential from sort of Q4 to Q1 this year in both LTAC and outpatient, obviously the sequential improvement much better, several hundred basis points better than what you saw sort of Q4 '09 to Q1 of 2010. Obviously the portfolio, there are some obvious changes there. But just any more color you can give us on what you did operationally to drive that? And presumably you also had a little bit of a heavy lift with respect to weather, particularly in the outpatient side. So just any more detail around the volume drivers would be great.

I can't give you any more color on the volume other than it was a focus on volume, and you kind of see that. I mean, volume is, even as Marty pointed out in a prior question, I mean, volume, increased volume will help your cost structure. And we were able to see the volume and it's just really an outstanding job that our operators did staying focused in the local markets on our market share and what our teams in those local markets were doing to drive volume. So that became a continued focus from the third quarter of last year, when we really saw the business start to fall off. You saw some improvement in the fourth quarter. And you really see a greater, almost full impact of that here in the first quarter. So it's really been a -- in my mind it's really been a volume story, and that's really blocking and tackling in the local markets.

So is it -- I mean, as we think about this, is it [technical difficulty] -- hello?

Yes, we're here.

As we think about that, is that sort of -- how sticky is that, those improvements? Is this sort of a change in practices? Is it a renewed focus? I mean, are you doing something different that should sort of persist over the foreseeable future? I'm just trying to gauge how to think about the nature of those improvements.

Well, we do believe that it'll be sustainable in the future, and it is just an increased focus. When you have a company of our size with as many hospitals in as many markets as you have, I mean, it's what you focus on. And we started to see some deterioration. We made some changes operationally, put an increased focus, but there's nothing systemic that changed in our business other than putting a renewed focus on driving volume at the local area, and our President and Chief Operating Officer and our Division Presidents put a renewed focus on that, and you saw the fruits of it over the last six months.

Okay. And then the direct care costs came in at a level that I think was the lowest, frankly, that we have in our model. As we think about that going forward, and Marty, you talked about the expense leverage, can you just help us think about the seasonality of that line over the balance of this year?

Yes, Doug, I would anticipate that Q2 you should see something in the same range.

Okay.

And then you should see it gravitate upwards a little bit in Q3 and Q4 as the volume goes down.

Okay, and I guess same question for G&A.

G&A I think was a little bit high for us. I anticipate G&A to be between $15 million -- somewhere between $15 million to $16 million. It was a little bit higher than we anticipated, but moving forward I anticipate probably $15.5 million a quarter.

All right. Great. Thank you.

Sure.

Our next question comes from the line of Gary Lieberman, with Wells Fargo. Please proceed.

Thanks. Any data you can share around case mix? Was acuity higher in the quarter? Did that help you guys at all?

Acuity did help us, Gary. We were at 1.21 for this quarter.

Just remind me how that compares to year over year and prior quarter.

Prior quarter it would -- I think it was 1.15, so, yes, we saw a nice increase in acuity. And with regards to Q1, I'll have to get that for you.

Okay. And was that a focus of -- did that just sort of happen, or, again, was that sort of some kind of process change that you guys put in place to try to go after the higher acuity patients?

I actually think Doug's comment of a renewed focus is appropriate here, so really focusing on those patients that we do a good job on, and those are the higher acuity patients.

Okay. And then can you just update us, were you able to recoup the Regency charge capture, I guess the $6 million that you reported last quarter? Were you able to recoup that? I think you expected to this quarter.

Well, what we said we were going to do is we were going to increase the chargemaster and over the next 18 months that would be recouped.

Okay.

So that was not recouped this quarter. I anticipate, as I said, over the next 18 months we'll be in a position to do that.

Okay. But you did everything that you sort of expected to do to put in place to recoup that?

Yes, we have done that.

All right. Thanks a lot.

Thanks, Gary.

Our next question comes from the line of Whit Mayo, with Robert Baird. Please proceed

Thanks. Good morning. Marty, any details you can provide on the (inaudible)? I know it's a little sensitive considering the tender is ongoing right now, but just anything in terms of size of the facility, revolver, the term, the (inaudible), just anything to help us sort of understand that?

Are you talking about the new -- just the refinancing?

Yes, your refinancing, I'm sorry.

Yes, I mean, the refinancing, it's $1.5 billion, refinancing with $1.2 billion in term and the $300 million revolver.

Okay. Is there a way to think about the cash or the EPS impact at this point? I know you haven't set the terms, but --

Yes, we haven't set them. I think we can probably give you an idea as to what our expectation is is very similar to the marketplace where you've got LIBOR plus 3.75%, a LIBOR floor of 1.5% and an OID of 99.

Okay. Great. Do you plan on swapping any of that?

For the first year or two I don't think so. We think that the LIBOR floor actually provides us substantial cushion there. I mean, with a LIBOR floor of 150 bps and LIBOR trading at 27, 28 basis points, there's a lot of room there.

Okay. And you bought back a ton of stock, and do you have the ending share count for the quarter, not the 153 average but the ending?

Yes. Let me get that for you.

And I guess maybe while you're looking for that, just a corollary to that question is just maybe back to cash priorities, I just presume that buybacks are more a distant priority right now.

Let me give you the outstanding shares and then we'll talk about the buyback. As of April 30, it's 154,273,150 shares.

Okay.

Okay, and can you repeat the question on the buyback?

I just was curious in terms of thinking about priorities. I mean, you didn't mention buybacks as an immediate priority right now. I just wanted to understand how you were thinking about that.

Yes, I mean, as far as that's concerned we still think it's -- our share price is a very good price right now, and I anticipate when the window opens for us we'll be buying some stock.

Great. And this may be a silly question, but there will be a new equity earnings line for Baylor, correct?

Baylor will appear on the nonconsolidating line.

Okay. And one other question, or maybe two quick questions, just, Marty, can you comment on mix in the quarter, how maybe that trended?

Mix has been pretty consistent, Whit.

Okay. And the last question, Bob, was last year you were a little surprised with the large management contract that you lost. Just can you maybe frame up and help us understand the renewal schedule some, how much revenue is up this year and just the risk around this business, just anything to help us understand how that should shape up this year?

Well, I'll tell you that our operators I think have done a good job replacing that business. It does take a while once you sign contracts to integrate the staff. There's usually a little bit higher cost in the upfront and then it builds. These contracts tend to be more profitable the longer you have them. As a company, since our contract therapy group, unlike many others that are out there, do not provide any services to our own facilities, it's all independent third parties, we tend to have smaller contracts or midsize chains, small to midsize chains, then when they get acquired we run the risk that they go to what I would call inhouse providers. So I think our revenue is starting to increase in that area back up, it's just that we just haven't been able to build the margin back up.

Okay.

I anticipate that will come.

Yes, okay. Thanks a lot, guys.

Our next question comes from the line of Todd Corsair, with UBS. Please proceed. Mr. Corsair, your line is open.

Sorry about that. On a same facility basis, was specialty hospital revenue up about 3% or 4%? Is that about right?

Yes, and, Todd, the way to take a look at our revenue is really the reported total less the -- less Regency. So, yes, I think it was north of 4%.

Okay. And as far as in the outpatient rehab segment, so the revenue per visit there has moved up a bit over the last couple of quarters. Is that -- do you expect that that's something that's sustainable?

I think the $103 we were a little bit surprised by the nice increase we saw there.

Yes.

Whether it stays at $103 or goes back and forth between $101 and $103, I think that's what our expectation is.

Okay, so we shouldn't expect necessarily that that's going to continue to move up?

No.

And, lastly, you indicated that the pending capital markets transaction or refinance, revolver, the term loans, the opco subs and the holdco 10% subs, can you say for certain at this point that you're going to keep the L+5.75% FRNs outstanding at the holdco, or is that still potentially in flux depending on where demand ends up for the term loan and whether you potentially upsize that?

Todd, we never say anything is for certain.

Good answer.

What we will say is that there's a high degree of probability that we will retain the floater at the holdco level.

Okay. Okay. Great. Thank you.

Thanks.

Our next question comes from the line of Walter Branson, with Regiment Capital. Please proceed.

Thanks. Hey, guys. Just a quick question on the refinancing. I think you had been looking at repaying $1.268 billion of debt and adding $24 million in cash to the balance sheet. In light of the increase in debt in the first quarter, which I guess will take a while to reverse on the accounts receivable, are those still the right numbers?

Those, as far as -- you're looking at the source and use of the funds?

Yes.

Okay. We anticipate you'll see a nice reduction in the debt over the next two quarters.

Okay. I just meant at closing would you now need to take out more debt than that number, or is that still a good number?

I think it's a good number. It really depends on timing, Walter.

Okay.

But for all intents and purposes I think the numbers are pretty good.

Okay, great. Thank you.

Sure.

Ladies and gentlemen, this concludes the Q&A portion of the call. I'd now like to turn things back over to Mr. Robert Ortenzio.

No more comments, so thank you all for joining us for the call, and we'll look forward to updating you again at the conclusion of the second quarter. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for you participation. You may now disconnect. Have a wonderful day.