Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Corporate Update (August 2011)
26 slides from Encompass Health's corporate update, Aug 9, 2011
Slide 1: Budget Control Act of 2011 Conference Call
Exhibit 99.2 1 Budget Control Act of 2011 Conference Call August 9, 2011 Jay Grinney, President and Chief Executive Officer
Slide 2: Forward-Looking Statements
Exhibit 99.2 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 information are bas
Slide 3: Reaffirmed Business Model and Strategy
Exhibit 99.2 Business Model • Adjusted EBITDA CAGR: 5-8% (1) • Adjusted Free Cash Flow CAGR: 12-17% (1) Delevering (2) Achieved 3.5x debt to EBITDA Longer-Term Goal: ~ 3.0x debt to EBITDA Growth Same-store growth (Includes capacity expansions and unit consolidations) De novos (minimum of 4/year) IRF
Slide 4: Strong and Sustainable Business Fundamentals
Growth Opportunities Financial Strengths Industry Leading Position Attractive Healthcare Sector Cost-Effectiveness Real Estate Portfolio Exhibit 99.2 Strong and Sustainable Business Fundamentals (1) Inclusive of non-consolidated entities
Slide 5: Impact Analysis
Exhibit 99.2 Impact Analysis
Slide 6: Estimated Impact to HealthSouth
Estimated Impact to HealthSouth Scenario Comments Above estimates assume no mitigating actions by HealthSouth Exhibit 99.2 Our assessment of potential Medicare reductions emanating from the Budget Control Act 1) Special Committee actions mirror President’s Fiscal Commission (Simpson Bowles) (million
Slide 7: HealthSouth Track Record
Exhibit 99.2 HealthSouth Track Record
Slide 8: HealthSouth has successfully managed through Medicare payment cuts and an economic recession
Exhibit 99.2 HealthSouth has successfully managed through Medicare payment cuts and an economic recession… Adjusted EBITDA ($million) Discharges
Slide 9: HealthSouth differentiates itself by its quality
Exhibit 99.2 HealthSouth differentiates itself by its quality…. FIM Gain Change in Functional Independence Measurement (based on an 18 point assessment) from admission to discharge (1) Average = Expected, Risk-adjusted for UDS database • Inpatient rehabilitation hospitals evaluate all patients at ad
Slide 10: HealthSouth differentiates itself by its cost-effectiveness
HealthSouth differentiates itself by providing superior quality care at a lower cost. Exhibit 99.2 (1) The 1,146 total and the 95 for HLS do not include HealthSouth Rehabilitation Hospital of Fredericksburg, VA. Also, HealthSouth Sugar Land Rehabilitation Hospital, purchased in September 2010, was i
Slide 11: CMS Fiscal Year 2012 IRF Rate Setting File Analysis
Exhibit 99.2 CMS Fiscal Year 2012 IRF Rate Setting File Analysis Notes: (1) All data provided was filtered and compiled from the Centers for Medicare and Medicaid Services (CMS) Fiscal Year 2012 IRF rate setting Final Rule file found at http://www.cms.gov/InpatientRehabFacPPS/07_DataFiles.asp#TopOfP
Slide 12: HealthSouth's volume growth has consistently outpaced competitors
4.7% 5.9% 5.9% 5.8% 5.9% 2.7% 2.5% 1.3% Exhibit 99.2 (1) Data provided by UDSMR, a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry, including HealthSouth sites. (2) Includes consolidated HealthSouth inpatient rehabilitation hospitals classifi
Slide 13: HealthSouth has delevered its balance sheet and enhanced its adjusted free cash flow
Exhibit 99.2 HealthSouth has delevered its balance sheet and enhanced its adjusted free cash flow… Leverage Ratio (1) (billions) (1) Reconciliation to GAAP provided on slides 19 - 26. Interest Expense $229 $135
Slide 14: HealthSouth is now positioned with a lower-cost, flexible capital structure
10% of the principal is callable each year at $103 Exhibit 99.2 (2) Does not include $387.4 million of convertible perpetual preferred stock and capital leases and other note payables. HealthSouth is now positioned with a lower-cost, flexible capital structure… $500 Revolver L+250 § Adequate undrawn
Slide 15: Free Cash Flow Reinvestment
Exhibit 99.2 Free Cash Flow Reinvestment
Slide 16: HealthSouth's priorities for reinvesting free cash flow
Business Model: Adjusted free cash flow CAGR: 12-17% (1) Exhibit 99.2 HealthSouth’s priorities for reinvesting free cash flow… • Additional debt prepayment (revolver, term loan and senior notes) • Growth in core business • Bed expansions • De novo hospitals • Hospital acquisitions • Acute care IRF u
Slide 17: Strong and Sustainable Business Fundamentals
Growth Opportunities Financial Strengths Industry Leading Position Attractive Healthcare Sector Cost-Effectiveness Real Estate Portfolio Exhibit 99.2 Strong and Sustainable Business Fundamentals (1) Inclusive of non-consolidated entities
Slide 18: Reconciliations to GAAP
Exhibit 99.2 Reconciliations to GAAP
Slide 19: Adjusted Free Cash Flow
Exhibit 99.2 Adjusted Free Cash Flow (1) Maintenance capital expenditures are expected to be $60 million in 2011 and $75 million in 2012. (2) Final swap payment of $10.9 million was made in March 2011.
Slide 20: Net Cash Provided by Operating Activities
Exhibit 99.2 Net Cash Provided by Operating Activities
Slide 21: Reconciliation of Net Income to Adjusted EBITDA
Exhibit 99.2 Reconciliation of Net Income to Adjusted EBITDA (1)(3) (1) (2) (3) - Notes on page 26.
Slide 22: Reconciliation of Net Income to Adjusted EBITDA
Exhibit 99.2 Reconciliation of Net Income to Adjusted EBITDA (1)(3) (1) (2) (3) - Notes on page 26.
Slide 23: Reconciliation of Net Income to Adjusted EBITDA
Exhibit 99.2 Reconciliation of Net Income to Adjusted EBITDA (1) (3) (1) (2) (3) - Notes on page 26.
Slide 24: Reconciliation of Net Income to Adjusted EBITDA
Exhibit 99.2 Reconciliation of Net Income to Adjusted EBITDA (1) (3) (1) (2) (3) - Notes on page 26.
Slide 25: Reconciliation of Net Income to Adjusted EBITDA
Exhibit 99.2 Reconciliation of Net Income to Adjusted EBITDA (1) (3) (1) (2) (3) - Notes on page 26.
Slide 26: Reconciliation Notes for Slides 21-25
Exhibit 99.2 Reconciliation Notes for Slides 21- 25 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