Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — JPMorgan Healthcare Conference 2008
17 slides from Encompass Health's conference presentation, Jan 7, 2008
Slide 1: JPMorgan Healthcare Conference
1 Exhibit 99 JPMorgan Healthcare Conference January 7, 2008
Slide 2: Forward-Looking Statements
2 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 inf
Slide 3: The "New" HealthSouth
3 The “New” HealthSouth With our turnaround complete and the regulatory uncertainty resolved, 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 ex
Slide 4: Current Portfolio and Services
4 Current Portfolio and Services Current Portfolio: 94 inpatient rehabilitation hospitals (“IRH”) Also have: 6 LTCH Hospitals 25 Licensed Home Health Agencies Major IRH Services Offered: Specialized nursing care (24/7) Three-hours intensive therapy per day Key Investment Considerations: (minimum) Re
Slide 5: Regulatory Uncertainty Resolved
5 Regulatory Uncertainty Resolved 75% “60% Rule” Implications at 60% vs Full Implementation at 75% Permanent regulatory relief (S.2499): ’08 ’09 ’10 Threshold permanently “frozen” at 60% Positive Positive Positive Co-morbidities permanently included N/A Positive Positive Pricing “rolled back” to 3Q’
Slide 6: Attractive Industry
6 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
Slide 7: Attractive Industry
7 Attractive Industry Fragmented Provider Base = Opportunities 1 2 Inpatient rehabilitation is HLS’ core business -vs- one of many, secondary services provided by acute-care hospitals HLS not challenged by Bad Debt, CAPEX issues facing acute-care hospitals HLS can attract patients from multiple refe
Slide 8: Leadership Franchise
8 Leadership Franchise Value Proposition = Quality of Care FIM Gains LOS Efficiency Source: UDSmr Database –On Demand *Benchmark = Risk Adjusted Expectancy Reports - Q2 2007
Slide 9: Leadership Franchise
9 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 Not required c
Slide 10: Earnings Growth
10 Earnings Growth “Roadmap” to EPS Growth 2008 2009 2010+ 1. Pay down debt 2. Invest in existing IRH platform – Sales & Marketing Non-Clinical Support Costs Human Capital Clinical Service Re-furbish existing hospitals Add capacity (as warranted)
Slide 11: Earnings Growth
11 Earnings Growth “Roadmap” to EPS Growth (cont’d) 2008 2009 2010+ 3. Develop “de-novo hospitals” in new and existing markets Goal: Launch 5/yr CAPEX per 40-bed IRH: HLS-financed = $15-20M Off-Balance Sheet = $3-5M Approx 18 mos. to permit/ build + 6 mos. to “ramp-up” 4. Seek to consolidate existin
Slide 12: Earnings Growth
12 Earnings Growth “Roadmap” to EPS Growth (cont’d) Key Assumptions: Comments: SS Discharges: 2+%/yr Primary operational focus (TeamWorks) Pricing: 2-3%/yr Beginning in Q409 (S.2499 “rolls-back” pricing from Q208 thru Q309) SW&B: 3-4%/yr Higher in 2008 due to investment (“catch-up”) to make Benefits
Slide 13: Solid Financials
13 Solid Financials Strong Cash Flow Significant turnaround from 2006 Free Cash Flow FCF = ($208M) Nine Months ended 9/30/07 Normalized Gen & Admin Expense All Settlement Payments completed at 5.6% (a) at 5.2% (b) by 12/31/07 (in millions) of Rev. of Rev. FCF will be used for: Adj. Consol. EBITDA $
Slide 14: Solid Financials
14 Solid Financials Ongoing Debt Reduction Debt Balance 10.75% Senior Notes (in millions) Debt Balance December 31, 2006 $3,402.3 Purchased ~$51M of Debt Balance September 30, 2007 $2,400.7 Notes during Sept/ Oct timeframe at an average Post Sept 30, 2007: price of 103.80 Additional Proceeds from Ou
Slide 15: Investment Considerations
15 Investment Considerations Focused management: proven track record of achieving results Attractive industry: demand for post-acute services expected to grow (favorable demographics) Leadership Franchise: largest specialty provider of inpatient rehabilitative care in the U.S. Differentiation throug
Slide 16: Appendix
16 Appendix Three Months Ended Nine Months Ended September30, September30, 2007 2006 2007 2006 (In Millions) Net income (loss) $ 287.6 $ (76.1) $ 699.2 $ (553.7) (Income) loss from discontinued operations (37.6) 18.0 (475.7) 35.4 Provision for income tax (benefit) expense (281.1) 2.1 (288.2) 21.0 Lo
Slide 17: Appendix (cont'd)
17 Appendix (cont'd) Our Credit Agreement allows certain items to be added to arrive at Adjusted Consolidated EBITDA that are viewed as not being ongoing costs once the Company has completed its restructuring. After consummation of the divestitures of our surgery centers, outpatient, and diagnostic