Encompass Health Corporation · NYSE:EHC
Encompass Health — Q2 2009 Earnings Presentation
33 slides from Encompass Health's earnings presentation, Aug 5, 2009
Slide 1: Second Quarter 2009 Earnings Call Supplemental Slides
Second Quarter 2009 Earnings Call Supplemental Slides 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 info
Slide 3: Table of Contents
Table of Contents Highlights .......................................................................................................................................... 4 Revenues..........................................................................................................................
Slide 4: Highlights (Q2 2009)
Highlights (Q2 2009) 9 Achieved 5.6% quarter-over-quarter discharge growth. – Same store discharge growth was 4.7%. 9 Revenue growth of 5.9%. – Driven by higher discharge volume which more than offset lower outpatient revenue. 9 High-quality, cost-effective, patient care. – Driven by effective manag
Slide 5: Revenues (Q2 2009 vs. Q2 2008)
Revenues (Q2 2009 vs. Q2 2008) Favorable (Unfavorable) (Millions) 2nd Qtr. 2009 2nd Qtr. 2008 Change Inpatient $ 439.0 $ 410.4 7.0% Outpatient and other 44.7 46.2 (3.2%) Consolidated net operating $ 483.7 $ 456.6 5.9% (Actual Amounts) Discharges 28,494 26,990 5.6% Net patient revenue / discharge $ 1
Slide 6: Expenses (Q2 2009 vs. Q2 2008)
Expenses (Q2 2009 vs. Q2 2008) (Millions) 2nd Qtr. 2009 2nd Qtr. 2008 Change Salaries and benefits $ 239.1 $ 234.1 (2.1%) Percent of net operating revenues 49.4% 51.3% 190bps EPOB (employees per occupied bed) 3.52 3.65 3.6% Hospital-related expenses $ 118.1 $ 109.6 (7.8%) (other operating, supplies,
Slide 7: Adjusted Consolidated EBITDA (2Q 2009)
(1) Adjusted Consolidated EBITDA (2Q 2009) (Millions) Change 2nd Qtr. 2009 2nd Qtr. 2008 $ % $ 94.0 $ 85.9 $ 8.1 9.4% • Improvements driven by: – Increased volumes – Improved labor productivity – Lower G&A • Improvements offset by: – Higher operating expense related to a self-insurance reduction in
Slide 8: Adjusted Consolidated EBITDA (6 months)
(1) Adjusted Consolidated EBITDA (6 months) (Millions) Change 6 Months 2009 6 Months 2008 $ % $ 192.7 $ 174.8 $ 17.9 10.2% • Improvements driven by: – Increased volumes – Improved labor productivity – Lower G&A • Improvements offset by: – Higher operating expense related to a self-insurance reductio
Slide 9: Adjusted Income per Diluted Share (2Q 2009)
Adjusted Income per Diluted Share (2Q 2009) 2nd Qtr. 2nd Qtr. Change (Millions, except per share data) 2009 2008 $ % (Loss) income from continuing operations attributable to HealthSouth $ (6.7) (1) $ 48.3 (1) $ (55.0) (113.9%) (1) Includes a charge of $48.7 million and a gain of $8.6 million, respec
Slide 10: Adjusted Income per Diluted Share (6 Months)
Adjusted Income per Diluted Share (6 Months) 6 Months 6 Months Change (Millions, except per share data) 2009 2008 $ % Income from continuing operations attributable to HealthSouth $ 41.3 (1) $ 52.9 (1) $ (11.6) (21.9%) (1) Includes a charge of $32.8 million and a gain of $45.0 million, respectively,
Slide 11: Free Cash Flow
Free Cash Flow Adjusted Free Cash Flow 3 Months Ended 6 Months Ended Year Ended (Millions) June 30, 2009 June 30, 2009 December 31, 2008 Net cash provided by operating activities $ 46.1 $ 229.2 $ 227.2 Impact of discontinued operations 6.8 7.0 (6.6) Net cash provided by operating activities of conti
Slide 12: Debt Reduction
Debt Reduction ($ Billions) Debt Outstanding (1) • No near-term refinancing $3.5 $3.40 – Revolver = 2012 $3.0 – Term Loan = 2013 $2.5 – Bonds = 2014 & 2016 $2.0 $2.04 $1.81 • Future deleveraging $1.5 $1.70 – Excess cash from operations $1.0 – Derivative proceeds $0.5 ¾ E&Y arbitration ¾ Scrushy asse
Slide 13: Liquidity
Liquidity (Millions) June 30, 2009 December 31, 2008 Cash Available $ 49.8 $ 32.2 Revolver Total line $ 400.0 $ 400.0 Less: – Draws - (40.0) – Letters of credit - (52.7) Available $ 400.0 $ 307.3 Total Liquidity (available cash and revolver) $ 449.8 $ 339.5 13
Slide 14: 2009 Guidance - Adjusted Consolidated EBITDA
2009 Guidance - Adjusted Consolidated EBITDA (1) Previous Revised $342 to $352 $354 to $362 million million Key Drivers: 9 Sustainable discharge growth • Bed expansions • New hospitals 9 High-quality, cost-effective patient care Unknown: 9 Market basket update (1) Reconciliation to GAAP provided on
Slide 15: 2009 Guidance - Adjusted Earnings per Diluted Share
(1) 2009 Guidance - Adjusted Earnings per Diluted Share Previous Revised $0.85 to $90 $1.15 to $1.25 per share per share Key Drivers: 9 Increased Adjusted Consolidated EBITDA 9 Deleveraging 9 Lower floating-rate interest expense (results in higher cash payment on the swap) Unknown: 9 Market basket u
Slide 16: Appendix
Appendix 16
Slide 17: Operational Excellence = "High-Quality" Care
Operational Excellence = “High-Quality” Care FIM Gain = Change in Functional LOS Efficiency = Functional gain Independent Measurement (based on divided by length of stay an 18 point assessment) from Admission to Discharge FIM Gain LOS Efficiency 30 2.6 28 2.4 26 2.2 24 29.5 2.0 2.54 2.26 22 1.8 20 2
Slide 18: Operational Excellence = "Cost-Effective" Care
Operational Excellence = “Cost-Effective” Care CMS Fiscal Year 2010 IRF Rate Setting File Analysis (1) HealthSouth Hospitals (2) Freestanding (2) Units (2) Total Number of IRFs 227 978 1,205 93 Average # of Discharges per IRF 616 242 312 747 Outlier Payments as % of Total Payments 1.72% 3.76% 3.00%
Slide 19: Revenue (6 months)
Revenue (6 months) Favorable 6 Months 6 Months (Unfavorable) (Millions) 2009 2008 Change Inpatient $ 872.1 $ 829.6 5.1% Outpatient and other 86.7 91.2 (4.9%) Consolidated net operating $ 958.8 $ 920.8 4.1% (Actual Amounts) Discharges 56,301 53,299 5.6% Net patient revenue / discharge $ 15,490 $ 15,5
Slide 20: Expenses (6 months)
Expenses (6 months) Favorable/ 6 Months 6 Months (Unfavorable) (Millions, except percent) 2009 2008 Change Salaries and benefits $ 473.8 $ 464.5 (2.0%) Percent of net operating revenues 49.4% 50.4% 100 bps EPOB (employees per occupied bed) 3.50 3.59 2.5% Hospital related expenses $ 232.7 $ 225.4 (3.
Slide 21: Revenues (Sequential)
Revenues (Sequential) Favorable (Unfavorable) (Millions, except percent) 2nd Qtr. 2009 1st Qtr. 2009 Change Inpatient $ 439.0 $ 433.1 1.4% Outpatient and other 44.7 42.0 6.4% Consolidated net operating $ 483.7 $ 475.1 1.8% (Actual Amounts) Discharges 28,494 27,807 2.5% Net patient revenue / discharg
Slide 22: Expenses (Sequential)
Expenses (Sequential) Favorable (Unfavorable) (Millions, except percent) 2nd Qtr. 2009 1st Qtr. 2009 Change Salaries and benefits $ 239.1 $ 234.7 (1.9%) Percent of net operating revenues 49.4% 49.4% 0 bps EPOB (employees per occupied bed) 3.52 3.47 (1.4%) Hospital related expenses $ 118.1 $ 114.6 (3
Slide 23: Operational and Labor Metrics
Operational and Labor Metrics Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 (In Millions) (In Millions) Net patient revenue-inpatient $ 439.0 $ 410.4 $ 872.1 $ 829.6 Net patient revenue-outpatient and other revenues 44.7 46.2 86.7 91.2 Net operating revenues $ 483.7 $ 456
Slide 24: Payment Sources
Payment Sources Three Months Six Months Ended June 30, Ended June 30, 2009 2008 2009 2008 Medicare 67.6% 67.5% 67.9% 67.3% Medicaid 2.2% 2.1% 2.2% 2.2% Workers' compensation 1.5% 2.2% 1.6% 2.2% Managed care and other discount plans (1) 23.7% 22.7% 23.0% 22.5% Other third-party payors 2.8% 3.5% 3.0%
Slide 25: Debt Maturities
Debt Maturities (Millions) $800 $737.5 $700 $600 $559.9 $500 Current undrawn revolver $400.0 $400 matures in 2012 $336.0 $300 $200 $100 $10.8 $21.9 $21.2 $20.6 $0 2009 2010 2011 2012 2013 2014 Thereafter • Minimal amortization and no near-term financing risk. • As of June 30, 2009, we were in compli
Slide 26: Interest Rate Swaps
Interest Rate Swaps (Millions) Floating Floating Rate Debt Balances June 30, 2009 Interest Rate (1) Advances under $400 million revolving credit facility $ - Libor plus 325 (1) (2) Term Loan facility 755.1 Libor plus 225 Floating Rate Senior Notes due 2014 329.6 6 month Libor Total $ 1,084.7 Swap Se
Slide 27: Debt Schedule
Debt Schedule (Millions) Debt Balances June 30, December 31, Q209 YTD Debt 2009 2008 Reduction (1) (2) Advances under $400 million revolving credit facility, March 2012 $ - $ 40.0 $ (40.0) Term loan facility - March 2013 755.1 783.6 (28.5) Bonds Payable: 8.375% Senior Notes due 2011 0.3 0.3 - 7.625%
Slide 28: Non-Operating Cash/Tax Position
Non-Operating Cash/Tax Position Cash Refunds as of June 30, 2009 Future Cash Tax Payments • Federal tax recoveries virtually complete. • Expect to pay about $5-7 million per year of – Approx. $42 million received. income tax. • State tax refunds in progress. – State income tax. – Approx. $11 million
Slide 29: Outstanding Share Summary
Outstanding Share Summary (Millions) (1) (1) 2nd Qtr. 2nd Qtr. 6 Months 6 Months Year-End 2009 2008 2009 2008 2008 Weighted Average for the Period (2) (3) Basic Shares outstanding 87.6 79.5 87.5 79.2 83.0 (2) (3) (4) Diluted Shares outstanding 101.5 93.0 101.2 92.6 96.4 End of Period (2) (3) Basic S
Slide 30: Three & Six Months Reconciliation of Net Income to Adjusted Income from Continuing Operations
Three & Six Months Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA (1) (3) Three Months Ended Three Months Ended Six Months Ended Six Months Ended (In Millions, Except Per Share Data) June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008
Slide 31: 2008 Year-End Reconciliation of Net Income to Adjusted Income from Continuing Operations
2008 Year-End Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA (1) (3) Year Ended December 31, (2) (In Millions, Except Per Share Data) 2008 Per Share Net income $ 281.8 $ 3.40 Income from discontinued operations, net of tax, attributable to
Slide 32: YTD Reconciliation of Adjusted Consolidated EBITDA to Net Cash Provided by Operating Activities
YTD Reconciliation of Adjusted Consolidated EBITDA (1) to Net Cash Provided by Operating Activities Six Months Ended June 30, (Millions) 2009 2008 Adjusted Consolidated EBITDA $ 192.7 $ 174.8 Provision for doubtful accounts 17.6 13.9 Professional fees - accounting, tax, and legal (1.5) (8.9) Interes
Slide 33: Reconciliation Notes
Reconciliation Notes 1. Adjusted income from continuing operations and Adjusted Consolidated EBITDA are non-GAAP financial measures. The Company’s leverage ratio (Total Consolidated Debt to Adjusted Consolidated EBITDA for the trailing four quarters) is, likewise, a non-GAAP financial measure. Manag