Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Corporate Update (December 2004)
48 slides from Encompass Health's corporate update, Dec 2, 2004
Slide 1: Business Update, December 2, 2004
Exhibit 99 Exhibit 99.1 Business December Update 2, 2004
Slide 2: Cautionary Statements Regarding Presentation
Cautionary This will As and There -HealthSouth 2 -the restatement be presentation can company differences beStatements undertakes no process. assurance currently contains between Regarding nois certain that duty such undertaking any to estimates estimates Presentation publicly estimates a reconstruc
Slide 3: Cautionary Statements Regarding Presentation
Cautionary You This No Restructuring Certain -There 3 -adjustments are presentation are items cautioned noStatements asset included Charges were was not impairment made prepared to are in Regarding place the presented forpresentation charges undue retrospective onPresentation a basis inreliance (e.g
Slide 4: Considerations Involving the Current Situation
Considerations Department The HealthSouth HealthSouth, violation Ernst No upon. -Our 4 -financial Securities Centers financial & Young of federal of for statements remains as statements and Justice LLP Involving Medicare well Exchange securities was as in(“DOJ”) certain currently default dismissed w
Slide 5: Forward-Looking Statements
Forward-Looking Certain Such Completion Resolution Our Changes, Regulatory Competitive General -You 5 - ability are information matters cautioned conditions delays of to changes, of pressures. successfully amend outstanding the discussed inis Statements not investigations or inbased including or the
Slide 6: Notes Regarding Presentation of Non-GAAP Financial Measures
Notes The planned As definition of Costs advisors, ordinary -Under 6restructuring -used financial which Regarding the business by course accounting allows Senior HealthSouth, HealthSouth data charges Presentation for activities. Subordinated contained the reconstruction, as incurred company “EBITDA”
Slide 7: Notes Regarding Presentation of Non-GAAP Financial Measures
Notes Financial consistent capacity EBITDA Because -calculated 7 - Regarding and HealthSouth may should information with in debt accordance beprior not Presentation useful service be years. is relating considered to currently with ability. stakeholders Actual GAAP of to 2004 Non-GAAP unable results
Slide 8: Agenda
I.8Operational Agenda II. III. IV. -Jay75% -SEC Liquidity Grinney, Rule FilingMike Impact and Update Update Bank SnowV. Facility Jay Financial Grinney Update Update John Workman VI. Legal Update John Workman VII. Management John Workman FocusGreg VIII.Doody Questions Jay Grinney and Answers
Slide 9: Operational Update: HealthSouth Positioned for Healthcare Trends
I.9Operational HealthSouth Inpatient Ambulatory Preventive O/P Imaging Wellness/Fitness Complementary/Holistic Post-Acute Cardiac G.I. Other Specialty SNF LTCH Rehab -Home - Surgery Procedures Health Cath. Acute Hospitals isUpdate well positioned to take advantage of healthcare trends.
Slide 10: Operational Update: Post-Acute Care Market
I.10 ACUTE Staffed AMBULATORY 11% 5% Diagnostic POST (Dollars 7% 1996 Inpatient Approximately -The Operational CAGR post-acute -CAGR 1997 ACUTE Inpatient in CARE Market 1998 Billions) Imaging Update market 1/3 1999 beds ofRevenues $17 hospital (cont’d) 2000 per is $16 anticipated highly 1,000 2001 $
Slide 11: Operational Update: 2004 Budget Overview
I.11 2004 (Dollars Overhead Net EBITDA** ($122) Facility Active Total Diagnostic Outpatient Surgery Inpatient 104 Top 1,380 101 828 176 CA FL TX * N/A ** -*** See Operational EBITDA ––Revenue –Markets Excludes -90 Budget 15 27 39 Disclaimers hospitals Facilities*** $650 Numbers TX in TX PA MDand Mil
Slide 12: Operational Update: 2004 Budget Seasonalized Allocation
* 12 I. Budget The 2004 This Using Seasonalized 1Q 2Q 3Q 4Q Full EBITDA -Percent 100% 24.2% 23.7% 24.7% 27.4% EBITDA Operational 2004 2004 Year -allocation Budget anAllocation ofaggregate (Dollars Budget Full is Basis presented Update Year bywas in quarter ofMillions) (cont’d) initially six after co
Slide 13: Operational Update: Quarterly EBITDA Performance
* 13 I. Quarterly (Dollars Seasonalized Actual EBITDA* 1Q Variance% Variance 2Q (2.5)% 0.7% 3Q (3.4)% The -(1.8)% EBITDA Operational YTD 2004 original - in $173.6 $161.7 $148.6 2004 Performance Millions) is2004 Basis presented Update $483.9 $178.1 $160.6 $154.0 Budget (cont’d) $492.7 after $(4.5) $1
Slide 14: Operational Update: YTD EBITDA Bridge
* 14 (a) I. (Dollars 3Q EBITDA* Hurricane 75% (6.0) Operational (1.3) All (7.5) (2.5) Actual 6.0 -4.4 EBITDA Operational Seasonalized YTD 2004/YTD 2004 Other -Rule EBITDA* in 2004 Impact Budget(a) Millions) isShortfall presented Update Bridge as$148.6 per$154.0 (cont’d) industry after $483.9 $492.7
Slide 15: Operational Update: Inpatient Division
* 15 I. Inpatient (Dollars Division 3Q Net Discharges 2004 Actual EBITDA* (1%) 94,463 93,630 Variance% 0% 75% Issues (2%) Capacity Corrective New Target Growth -LTCH EBITDA Operational 2004 $378.8 Revenue -Rule leadership $1,542.9 Budget development marketing Opportunities in YTD President: Division
Slide 16: Operational Update: Ambulatory Surgery Division
Several I. Ambulatory (Dollars Division 3Q Net Procedures 591,334 Actual EBITDA* 2004 596,804 Re-syndications Issues 3% (1%) Variance% assets Corrective Expect Sell ($4.6) ($1.0) ($2.0) ($7.7) Annualized Recruiting * ** -Growth 16 EBITDA Operational These 2004 Revenue 7- Budget facilities Physician
Slide 17: Operational Update: Diagnostic Division
* 17 ** I. Diagnostic (Dollars Division 3Q Net Scans 600,268 Actual EBITDA* 2004 668,533 Performance Issues (18%) (15%) (10%) Variance% Lack Corrective Accelerated Close Implemented Growth Market -Responsive EBITDA Operational These 2004 Revenue - of Budget 7 concentration facilities/annualized Oppo
Slide 18: Operational Update: Outpatient Division
* 18 ** I. Outpatient (Dollars Division 3Q Net Visits 3,971,776 Actual EBITDA* 2004 4,479,856 Resurgence Issues (8%) (9%) (11%) Variance% Corrective Accelerated Close Reduction Growth -Workers EBITDA Operational These 2004 Revenue - Budget 27Opportunities in compensation/employer YTD President: faci
Slide 19: Agenda
I.19 Agenda II. III. -Jay Operational 75% Liquidity Grinney, - Rule Mike Impact and Update Bank SnowFacility Jay Grinney UpdateJohn IV. SEC Workman FilingJohn Update Workman V. Financial John Workman Update VI. Greg Legal Doody Update JayVII. Grinney Management Focus VIII. Questions and Answers
Slide 20: 75% Rule Impact: CMS Timeline
CMS 2002 2003 November: May: 2004 July: October: -II. 2075% -Transmittal CMS Final suspended Rule Transmittal Rule Appropriations announces Impact enforcement issued 221 347 provides only but provides Bill without 13% ofICD-9 includes 75% ofadditional inpatient specific Rule codes report pending dia
Slide 21: 75% Rule Impact: Qualifying Conditions
HealthSouth: II. Fewer Old 2. 3. 4. 5. 6. 7. 8. 9. New 1. 10. 11. Age Bilateral Body 1 + 13. -After 2. 21Amputation Stroke Brain Spinal Fracture Neurological Multiple Congenital Burns – 75% Joint Osteoarthritis Rheumatoid Systemic “HCFA-10” 9. -³CMS-13 less Mass 85 Qualifying Same Rule Injury 10. Re
Slide 22: 75% Rule Impact: Development
Cahaba II. Development Fiscal Non-qualifying Qualifying -Expect 2275% - Intermediary variation is Rule the perImpact of FICMS per Local for among CMS reviews 77% (cont’d) 13Coverage (75%) Fiscal of 13 HealthSouth’s all (25%) Intermediaries patients Determinations against IRF’s. (“FI”) unique (LCD’s)
Slide 23: 75% Rule Impact: Projected Financial Impact Assumptions
II.2375% Projected Analysis Based Comorbid Polyneuropathy Engaged Facilities -2004 - Projected onRule external performed operating discharges Financial conditions Impact EBITDA diagnoses consulting at Impact—Assumptions on during (cont’d) included. capacity a facility-specific Impact: included. the
Slide 24: 75% Rule Impact: Projected FY 2005 EBITDA Impact
The II. IRF (Dollars Offsets Capacity Market Net New Home SNF Total -FY ~($22) ~$6 ~$25 ~($53) ~($95) ~$2 ~$4 EBITDA ~$32 ~$10 2475% 2005 Variable Revenue 75% company Discharges -Services EBITDA—New Health to Share/Coding Rule in Projected EBITDA Factor Rule Net Millions) Expense Impact Loss will Re
Slide 25: 75% Rule Impact: Industry Coalition
II.2575% Industry Coalition AHA, Message: Omnibus Delays Continuing Meetings -HealthSouth - FAH, re-desingnation Rule Response Appropriations and established. Delay involvement AMRPA, will Impact correspondence implementation continue (cont’d) American ofwith Rider. hospitals to participate the to A
Slide 26: Agenda
Jay I. Agenda II. -III. 26 Operational 75% Liquidity Grinney, - Rule Mike Impact and Update Bank SnowFacility Jay Grinney UpdateJohn IV. SEC Workman FilingJohn Update Workman V. Financial John Workman Update VI. Greg Legal Doody Update JayVII. Grinney Management Focus VIII. Questions and Answers
Slide 27: Liquidity and Bank Facility Update: Liquidity Highlights
(a) III. (Dollars Liquidity March June Sept Available Restricted Consolidated Interest Highlights -An 27Restricted amended Liquidity -3031 payments 2004 inCash 2004 Cash(a) Millions) and and Cash cash $471.1 restated Bank are includes $200.0 $27 $407.6 Facility credit million, $184.2 non-consolidate
Slide 28: Liquidity and Bank Facility Update: Available Cash Reconciliation
$320.5 III. (Dollars Available -Cash 28Liquidity - Restructuring Reconciliation 483.9 inCash Millions) and (158.3) (beginning Bank Expenditures (161.5) Facility of (80.2) year) Update Interest YTD (94.5) (cont’d) EBITDA Payments 79.2 16.9Bond $406.0 Consent Fees Capital Expenditures Asset Sales and
Slide 29: Liquidity and Bank Facility Update: Capital Structure
(1) III. Capital (Dollars Annual Bank 6 7% 8 7 10 Greenery $ Senior Total -Net 29 7/8% 1/2% 3/8% 5/8% 2,275 3373/4% Holders Liquidity due Debt - Cash Debt Facility 10.602% Notes Sub due Structure 7.702% 2008 in due $2015 2011 $Millions) 2,700 Term Notes 2005 2006 2008 2011 2012 have 3,340 640 2008 a
Slide 30: Liquidity and Bank Facility Update: Debt Maturity Schedule
* 30 III. Maturity (Dollars -2004 Bank Liquidity - 2005 facility in Schedule 2006 Millions) and of2007 Bank $373 (Assuming $0.0 2008 Facility million $245.0 2009 All matures Update 2010 $180.3 Noteholders 2011 (cont’d) June $373.3* $624.0* 2012 2007. Exercise $912.0Option) $662.3 $0.0 $0.0$0.0 $1,25
Slide 31: Liquidity and Bank Facility Update: Credit Facility Plan
III. Credit We Commitment Anticipate Plan -To 31be Liquidity remain -tosecured Agreement syndicate the in and letter default by new stock in Bank facility expected early with in Facility 2005. first our will byexisting tier provide Update endsubsidiaries of the senior (cont’d) $315 year million bank
Slide 32: Agenda
I.32 Agenda II. III. -Jay Operational 75% Liquidity Grinney, - Rule Mike Impact and Update Bank SnowFacility Jay Grinney UpdateJohn IV. SEC Workman FilingJohn Update Workman V. Financial John Workman Update VI. Greg Legal Doody Update JayVII. Grinney Management Focus VIII. Questions and Answers
Slide 33: SEC Filing Update: Target Project Filing Dates
IV. Target Project Comprehensive -Expect 33SEC - Plan to Target Filing befor a Date current Update Filing Form of 10-K filer Audited by for1Q 2000-2003 Financial 2006 which Filed Statements would 1Q 2005 allowForm access 10-K to capital for 2004 markets. Filed 3Q 2005 Form 10-K for 2005 Filed 1Q 200
Slide 34: Agenda
I.34 Agenda II. III. -Jay Operational 75% Liquidity Grinney, - Rule Mike Impact and Update Bank SnowFacility Jay Grinney UpdateJohn IV. SEC Workman FilingJohn Update Workman V. Financial John Workman Update VI. Greg Legal Doody Update JayVII. Grinney Management Focus VIII. Questions and Answers
Slide 35: Financial Update: YTD EBITDA and Restructuring Charges
V.35Financial (Dollars YTD Restructuring EBITDA -Capital - (3Q Expenditures inAfter Before 2004) Millions) Update Charges Restructuring Actual –Restructuring Total $94.5 ($169.8) 2004 Company $129.7 Budget Charges Charges ($69.8) $35.2 Variance $314.1 $483.9 ($100.0) $422.9 $492.7($108.8) ( $8.8)
Slide 36: Financial Update: Restructuring Charges
V.36Financial Restructuring (Dollars 2004 Forensic, Sarbanes-Oxley Legal Financial Lease All TOTAL Note: reconstruction, charges -(a) Approximately Other - Budget “Restructuring $34 Buyouts/Gain incurred $93 inAdvisors Restatement, $14 $21 Millions) Update $195 Current Charges $19 $13 audit $0 after
Slide 37: Financial Update: Restructuring Charges Forward Estimate
V.37Financial (Dollars Restructuring Forensic, Audit Sarbanes-Oxley Legal Financial Lease All TOTAL Note: reconstruction, charges -(b) Approximately Other - “Restructuring $34 and Buyouts/Gain incurred $93 inAdvisors Restatement, $14 Tax $21 Millions) Update $195 Charges $19 $8 audit $0 after $3 $42
Slide 38: Financial Update: Trended 4Q 2004 Results
V.38Financial 2004 (Dollars YTD Trended Original 4Q Note: (a) -(b) Other Includes 2004 - Expectations (3Q This in 4Q EBITDA Trended includes 2004) is Millions) 2004 operational Update notResults aAmount Budget some forecast (cont’d) shortfalls carryover $483.9 4Q $146.5 of 2004 results $146.5 in imp
Slide 39: Financial Update: FY 2004 Cash Flow Generation
V.39Financial (Dollars FY Trended Interest Bond Asset Capital Cash -(a) ProForma 2004 - Flow Restructuring Consent Sales Expenditures Payments in EBITDA ProForma(a) Millions) Generation before and Update excludes Fees Other Resolution ($267.0) $630.4 Costs ($80.2) (cont’d) ($125.0) $80.0 Restructuri
Slide 40: Agenda
I.40 Agenda II. III. -Jay Operational 75% Liquidity Grinney, - Rule Mike Impact and Update Bank SnowFacility Jay Grinney UpdateJohn IV. SEC Workman FilingJohn Update Workman V. Financial John Workman Update VI. Greg Legal Doody Update JayVII. Grinney Management Focus VIII. Questions and Answers
Slide 41: Legal Update: Accomplishments to Date
VI. Accomplishments Improved Created Completed -debt 41Legal -Reorganized new Update corporate board corporate transition surgery toculture Date governance center plan and syndication platform largely completed process senior management transition plan Implemented new corporate compliance and intern
Slide 42: Legal Update: Remaining Legal Matters
VI. Remaining CMS/DOJ Substantial Remain DOJ Cooperation Negotiations SEC Class Dialogue -Amendment 42Legal -Criminal action hopeful initiated Update Civil “Rocks progress and /recognized continue restatement in other (cont’d) reaching inhas the litigation by been Road” ofUnited definitive senior ma
Slide 43: Agenda
I.43 Agenda II. III. -Jay Operational 75% Liquidity Grinney, - Rule Mike Impact and Update Bank SnowFacility Jay Grinney UpdateJohn IV. SEC Workman FilingJohn Update Workman V. Financial John Workman Update VI. Greg Legal Doody Update JayVII. Grinney Management Focus VIII. Questions and Answers
Slide 44: Management Focus
VII. 1. New expense Standardized -2005 44 Operations -Management management Budget Appropriate being monthly Focus team: finalized CAPEX reporting/analysis COO,Digital investment CFO,Hospital Division Standardized Enhance disposition President management projections Understand Operational reporting
Slide 45: Management Focus (cont'd)
VII. 75% REVENUE Centralized SEC INFRASTRUCTURE Internal Financial Financial/operating Compliance HR PEOPLE COST Productivity Benchmarking Streamline Establish QUALITY Standardized -AutoAmbulator 45 strategic -Management Rule filing controls ainfrastructure mitigation milestones supply robust manage
Slide 46: Management Focus (cont'd)
VII. 2. Resolve 3. Organization Quality, -Will 46 Litigation Strategy -Management continue Compliance, DOJ structure class Civil/CMS action providing Focus litigation Shareholder assessment periodic (cont’d) by year in aupdates end Value Industry timely Resolve (3-4) manner assessment SEC in 2005. i
Slide 47: Management Focus (cont'd)
VII. ACUTE Staffed AMBULATORY 11% 5% Diagnostic POST (Dollars 7% 1996 Inpatient Approximately -The 47CAGR post-acute -Management CAGR 1997 ACUTE Inpatient in CARE Market 1998 Billions) Imaging market 1/3 1999 beds Focus ofRevenues $17 hospital 2000 per is (cont’d) $16 anticipated highly 1,000 2001 $
Slide 48: Questions and Answers
VIII. -Questions 48 - Questions and Answers and Answers