Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Barclays' 2012 High Yield Bond and Syndicated Loan Conference
23 slides from Encompass Health's conference presentation, Mar 26, 2012
Slide 1: Barclays' 2012 High Yield Bond and Syndicated Loan Conference
Barclays’ 2012 High Yield Bond and Syndicated Loan Conference Phoenix | March 26- 27, 2012 Doug Coltharp, EVP and Chief Financial Officer
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 outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, capit
Slide 3: Our Company Portfolio – As of Dec. 31, 2011
Our Company Portfolio – As of Dec. 31, 2011 Inpatient Rehabilitation Hospitals (―IRF‖) 99 • 29 operate as JV’s with Acute Care Hospitals Outpatient Rehabilitation Satellite 26 Clinics 25 Hospital-Based Home Health Agencies 27 + Puerto Rico Number of States Key Statistics ~ 22,000 Employees ~ $2.0 Bi
Slide 4: Our Historic Discharge Growth vs. Industry
Our Historic Discharge Growth vs. Industry HealthSouth’s volume growth has outpaced competitors’ Same Store HealthSouth vs. Industry Quarterly Discharge Growth Yearly 6.5% 120,000 UDS Industry Sites (1) 5.0% HLS Same Store (2) Q4 2.1% 3.3% 5.9% 4.7% 1.8% 1.9% 80,000 Q3 1.4% 5.1% 1.0% 2.7% 5.9% -1.4%
Slide 5: Our Quality
Our Quality • Inpatient rehabilitation hospitals evaluate all patients at admission and upon discharge to determine their functional status. − The Functional Independence Measurement (―FIM‖) patient assessment instrument is used for these evaluations. • The difference between the FIM scores at admis
Slide 6: Our Track Record
Our Track Record Total Debt Adjusted Free Cash Flow (1) (billions) (millions) $2.25 7 $229 $230 6.7x Leverage Ratio (1) Interest Expense $243 6 $2.00 $2.04 $180 5 $181 $155 $130 $1.75 $1.81 4 $119 $1.66 2.7x 3 $80 $1.50 $1.51 Swap Cash Payments 2 $11 $30 $1.25 $9 $1.25 1 2007 2008 2009 2010 2011 ($2
Slide 7: HealthSouth is now positioned with a lower-cost, flexible capital structure
HealthSouth is now positioned with a lower-cost, flexible capital structure… Capital Structure Enhancements: Credit S&P Moody’s Completed the retirement of the 10.75% notes due 2016 Rating Reduced total debt by $256.6 in 2011 Corporate B+ B1 Leverage ratio reduced to 2.7x (1) Positive Positive
Slide 8: Our Assets
Our Assets 99 (1) Inpatient Rehabilitation Hospitals; 6,461 Licensed Beds (2) 3,169 Licensed Beds in CON States 24 Own Hospital Building Only 40 Own Building and Land 35 Lease Building and Land 3,292 Licensed Beds A Certificate of Need (CON) is a legal document required in in Non-CON States many sta
Slide 9: Business Outlook: 2012 to 2014
Business Outlook: 2012 to 2014 Business Model • Adjusted EBITDA CAGR: 5-8% (1) (2) • Adjusted Free Cash Flow CAGR: 12-17% (1) (2) Strategy 2011 2012 2013 2014 Achieved < 3.0x Delevering (3) debt to EBITDA < 3.0x debt to EBITDA (subject to operating environment) Same-store growth (Includes bed expans
Slide 10: Priorities for Reinvesting HealthSouth's Free Cash Flows
Priorities for Reinvesting HealthSouth’s Free Cash Flows • Growth in core business Bed expansions Priorities De novo hospitals Growth Acquisitions − Free standing IRFs − Hospital unit IRFs Debt • Debt prepayment Opportunities Alternate Reduction • Purchase leased properties (limited opportunit
Slide 11: Medicare Spending on Post-Acute Services
Medicare Spending on Post-Acute Services 3.0% 2.1% 2.2% 2.1% 1.8% 1.9% Inpatient rehabilitation 1.5% 1.4% 1.3% 1.2% 1.2% spending (% of total 0.0% Medicare spending) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2010 Total Medicare Spending on Post-Acute Services $58.5 billion in 2010 Medicare P
Slide 12: HealthSouth has successfully managed through Medicare payment cuts and an economic recession
HealthSouth has successfully managed through Medicare payment cuts and an economic recession… Adjusted EBITDA ($million) Discharges 30,500 $120 RECESSION 30,000 $110 29,500 29,000 $100 28,500 $90 28,000 27,500 $80 27,000 $70 26,500 26,000 $60 25,500 $50 25,000 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409
Slide 13: Strong and Sustainable Business Fundamentals
Strong and Sustainable Business Fundamentals • Favorable demographic trends Attractive Healthcare Sector • Non-discretionary nature of many conditions treated in IRFs • Highly fragmented industry • #1 market share: above industry same-store growth and margins Industry Leading Position • Consistent a
Slide 14: Appendix
Appendix HEALTHSOUTH,
Slide 15: Debt Schedule
Debt Schedule Credit Rating Change S&P Moody Dec. 31, Dec. 31, in Debt (Millions) Corporate B+ B1 2011 2010 vs. YE 2010 Advances under $500 million revolving credit facility, May 2016 - 3 Month LIBOR +225bps BB Ba1 $ 110.0 $ 78.0 $ 32.0 Term loan facility, May 2016 - 3 Month LIBOR +225bps BB Ba1 97.
Slide 16: Adjusted Free Cash Flow
Adjusted Free Cash Flow Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow Q4 Full Year (Millions) 2011 2010 2011 2010 2009 2008 2007 Net cash provided by operating activities $ 129.6 $ 67.1 $ 342.7 $ 331.0 $ 406.1 $ 227.2 $ 230.6 Impact of discontinued operations
Slide 17: Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA Q4 Full Year (Millions) 2011 2010 2011 2010 2009 2008 2007 Net cash provided by operating activities $ 129.6 $ 67.1 $ 342.7 $ 331.0 $ 406.1 $ 227.2 $230.6 Prov ision for doubtful accounts (6.1) (1.6) (21.0) (16.4) (30.7)
Slide 18: Reconciliation of Net Income to Adjusted EBITDA 2011
(1)(3) Reconciliation of Net Income to Adjusted EBITDA 2011 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income $ 91.5 $ 32.3 $ 68.3 $ 62.5 $ 254.6 (Income) loss from disc ops, net of tax, attributable
Slide 19: Reconciliation of Net Income to Adjusted EBITDA 2010
(1)(3) Reconciliation of Net Income to Adjusted EBITDA 2010 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income $ 50.5 $ 57.5 $ 41.9 $ 789.9 $ 939.8 Income from disc ops, net of tax, attributable to Hea
Slide 20: Reconciliation of Net Income to Adjusted EBITDA 2009
(1) (3) Reconciliation of Net Income to Adjusted EBITDA 2009 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income $ 53.5 $ 3.6 $ 24.8 $ 46.9 $ 128.8 (Income) loss from disc ops, net of tax, attributable
Slide 21: Reconciliation of Net Income to Adjusted EBITDA 2008
(1) (3) Reconciliation of Net Income to Adjusted EBITDA 2008 Q1 Q2 Q3 Q4 Full Year (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income $ 26.4 $ 52.4 $ 12.8 $ 190.2 $ 281.8 Income from disc ops, net of tax, attributable to He
Slide 22: Reconciliation of Net Income to Adjusted EBITDA 2007
(1) (3) Reconciliation of Net Income to Adjusted EBITDA 2007 (in millions, except per share data) Total Per Share Net income $ 718.7 Income from disc ops, net of tax, attributable to HealthSouth (462.4) Net income attributable to noncontrolling interests (65.3) Income from continuing operations attr
Slide 23: Reconciliation Notes for Slides 18-22
Reconciliation Notes for Slides 18-22 1. Adjusted EBITDA is a non-GAAP financial measure. The Company’s leverage ratio (total consolidated debt to Adjusted EBITDA for the trailing four quarters) is, likewise, a non- GAAP financial measure. Management and some members of the investment community util
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