Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Investor Presentation (May 2008)
23 slides from Encompass Health's investor presentation, May 21, 2008
Slide 1: Investor Presentation May 2008
Investor Presentation May 2008 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect our current views with respect to future events and financial performance. These estimates, projections and other forward-looking infor
Slide 3: Investment Considerations
Investment Considerations Turnaround Complete: 2008 represents the first year current management can focus 100% on operations Volume Growth: #1 priority going forward; TeamWorks initiative will help us meet or exceed our targets Expense Control: focused on managing expenses in a disciplined manner,
Slide 4: HealthSouth
HealthSouth Largest Provider of Inpatient Rehabilitative Healthcare Services in the U.S. (1) ~8% of IRHs ~17% of inpatient beds $1.8 billion 100 hospitals ~22,000 employees net operating revenues 26 states + 60 outpatient satellites & 25 hospital- based home health agencies (1) Source: Report to Con
Slide 5: HealthSouth's Value Proposition
HealthSouth's Value Proposition Attractive industry Aging demographics Industry leader Demonstrated ability to grow market share Strong operating platform Industry-leading margins Commitment to quality Negligible bad debts Excellent growth opportunities: Modest CAPEX requirements 1. Organic 2. Devel
Slide 6: A New Company...
A New Company... “Old” HealthSouth “New” HealthSouth Post-acute provider with emphasis Complex company with four New, independent board on inpatient rehabilitation operating divisions and no New management synergies -- some actual dis- synergies Resolved bond holder Debt reduced to $2.0 billion as o
Slide 7: ... With a Focused Strategy
... With a Focused Strategy With our turnaround complete our focus is now on executing our strategic plan and growing EPS Our Goal: To be the preeminent specialty provider of inpatient rehabilitative care in the U.S. through: clinical, service and operational excellence; growing market share in exis
Slide 8: Attractive Industry
Attractive Industry Aging Demographics = Increased Demand Projected percentage of US population Projected Medicare Compliant Case Growth (2) 65 years or older through 2050 (1) + 22% “Compliant Cases” are expected to grow Demand for post-acute services will increase ~2% per year for the foreseeable f
Slide 9: Attractive Industry
Attractive Industry Fragmented Provider Base = Opportunities 1 (1) Total Number of IRFs 1,224 2 (2) Free-Standing Hospitals In-Hospital Units 217 (18%) 1,007 (82%) HLS All Others For-Profit NFP & Gov’t 94 123 179 828 Inpatient rehabilitation is HLS’ core business -vs- one of many, secondary services
Slide 10: Leadership Franchise
Leadership Franchise Value Proposition = Quality of Care FIM Gains LOS Efficiency Source: UDSmr Database –On Demand *Benchmark = Risk Adjusted Expectancy Reports - YTD 2007 10
Slide 11: Leadership Franchise
Leadership Franchise Differentiation = Better Outcomes at Comparable Costs IRHs provide a Higher Level of Service… Service Inpatient Rehabilitation Hospital Nursing Home Attending physician visits 4+ times per week Once every 30 days (min.) Multi-disciplinary team approach; Required; 3 hour (min.) t
Slide 12: Financial Overview, Debt Reduction & Growth Strategies
Financial Overview, Debt Reduction & Growth Strategies 12
Slide 13: 2008 Q1 Financial Recap
2008 Q1 Financial Recap Year-Over-Year ($ In Millions) Three Months Ended Mar. 31, 2008 2007 First Quarter Highlights Net operating revenues $ 469.0 $ 443.1 Q1 2008 net operating revenues Adjusted Consolidated EBITDA $ 89.0 $ 68.9 from inpatient rehabilitation hospitals increased by 7.7% Operating E
Slide 14: Strong Cash Flow
Strong Cash Flow All Settlement Payments completed by 12/31/07 Tax losses available for future Pro-Forma Based on years ~ $2.5 billion (In Millions) Q1 2008 2008 Guidance Range No federal income taxes for Adjusted Consolidated EBITDA $ 89.0 $ 320.0 $ 335.0 foreseeable future Less: Est. capital expen
Slide 15: Debt Reduction
Debt Reduction Significant debt reduction since 2004 No near-term refinancing requirements Priority: reduce high cost debt Purchased $5M of 10.75% Senior Notes in Jan/Feb 2008 Will repay $30M of 10.75% Senior Sub Note in Q4 2008 Future debt reduction from: Sale of Corporate Campus Additional income
Slide 16: Growth: Acquisitions and Consolidations
Growth: Acquisitions and Consolidations Acquisitions Opportunistic "tuck-in" IRHs Active in marketplace as we believe we're the natural consolidator in IRH space We will continue to be very disciplined in our approach -- carefully evaluating these opportunities against our deleveraging priority Cons
Slide 17: Growth: De-novo
Growth: De-novo De-novo - Pro forma (40 Bed) New and existing markets (In Thousands) (1) (1) Revenue EBITDA % Real estate lease option available Year 1 $8,500 $1,275 15% at $3 - $5 million cash up-front cost Year 2 $10,500 $2,500 24% Goal: Launch 5 /yr Run Rate $11,500 $2,900 25% Pre-construction ~
Slide 18: Investment Considerations
Investment Considerations Turnaround Complete: 2008 represents the first year current management can focus 100% on operations Volume Growth: #1 priority going forward; TeamWorks initiative will help us meet or exceed our targets Expense Control: focused on managing expenses in a disciplined manner,
Slide 19: Appendix
Appendix 19
Slide 20: 2008 Guidance
2008 Guidance Inpatient discharges are expected to grow 2% to 4% year over year Consolidated net operating revenues to be in the range of $1.80 billion to $1.85 billion Adjusted consolidated EBITDA is expected to be in the range of $320 million to $335 million Diluted loss per share available to com
Slide 21: Review of Key Assumptions to EPS Growth
Review of Key Assumptions to EPS Growth Key Assumptions: Comments: SS Discharges: 2+%/yr Primary operational focus (TeamWorks) (2% - 4% guidance for 2008) Pricing: 2-3%/yr Beginning in Q409 (P.L. 110-173 “rolls-back” pricing from Q208 thru Q309) SW&B: 3-4%/yr Higher in 2008 due to investment (“catch
Slide 22: Supplemental Non-GAAP Disclosures
Supplemental Non-GAAP Disclosures Adjusted Consolidated EBITDA Three Months Ended March 31, 2008 2007 (In Millions) Net income (loss) $ 19.8 $ (56.6) (Income) loss from discontinued operations (15.9) 27.8 Provision for income tax expense 0.1 3.3 Loss on interest rate swap 36.6 4.3 Interest expense a
Slide 23: Supplemental Non-GAAP Disclosures (cont'd)
Supplemental Non-GAAP Disclosures (cont'd) Adjusted Consolidated EBITDA After consummation of the divestitures of our surgery centers, outp atient, and diagnostic divisions, and in accordance with our Credit Agreement, Adjusted Consolidated EBITDA is calculated to give effect to each divestiture, in