Encompass Health Corporation · NYSE:EHC
Encompass Health — Q1 2013 Earnings Presentation
31 slides from Encompass Health's earnings presentation, Apr 26, 2013
Slide 1: First Quarter 2013 Earnings Call Supplemental Slides
F i rst Q u a r te r 2 0 1 3 Ea r n i n g s C a l l Supplemental Slides
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: Table of Contents
Table of Contents Q1 2013 Summary… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … …4-6 ……………… Highlights… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 7 …… Quality… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … …
Slide 4: Q1 2013 Summary (Q1 2013 vs. Q1 2012)
Q1 2013 Summary (Q1 2013 vs. Q1 2012) Revenue growth of 6.3% ― Inpatient revenue growth of 7.3% Discharge growth of 4.1% • Same-store discharge growth of 2.2% (negatively impacted by leap year in 2012 and closure of 41 SNF beds at two hospitals) • New-store growth was 1.9% (120 bps from the cons
Slide 5: Q1 2013 Summary (Q1 2013 vs. Q1 2012)
Q1 2013 Summary (Q1 2013 vs. Q1 2012) Improved operating leverage and labor productivity ― Salaries and benefits as percent of revenue declined in Q1 2013 as a result of the foregone merit increase in anticipation of sequestration, and improved productivity. ― Partially offset by expected higher e
Slide 6: Q1 2013 Summary (cont.)
Q1 2013 Summary (cont.) Diluted earnings (1) per share of $0.48 reflected strong operating results (see table on slide 12). Completed tender offer of common shares ― Approx. 9.5% or 9,119,450, of our common shares were purchased at $25.50 per share. ― Total cost of approx. $234 million (includin
Slide 7: Highlights
Highlights Development: ― Completed the purchase on April 1, 2013 of Walton Rehabilitation Hospital, a 58-bed inpatient rehabilitation hospital in Augusta, GA. ― Continued development and construction of hospitals in Stuart, FL (34 beds), and Littleton, CO (40 beds); both operational in Q2 2013 ―
Slide 8: Quality
Quality HealthSouth Functional Outcomes Continue to Outpace Industry Average HealthSouth Average UDSMR Average* 35.0 3.5 34.9 30.0 3.0 3.10 30.1 25.0 2.5 2.61 20.0 2.0 15.0 1.5 FIM Gain LOS Efficiency * Average = Expected, Risk-adjusted Source: UDSMR Database – On Demand Report: Q1 2013 Report FI
Slide 9: Revenues (Q1 2013 vs. Q1 2012)
Revenues (Q1 2013 vs. Q1 2012) Q1 Q1 Increase/ (Millions) 2013 2012 (Decrease) Inpatient $ 537.1 $ 500.6 7.3% Outpatient and other 35.5 38.0 (6.6%) Consolidated net operating $ 572.6 $ 538.6 6.3% (Actual Amounts) Discharges 32,130 30,871 4.1% Net patient revenue / discharge $ 16,716 $ 16,216 3.1%
Slide 10: Expenses (Q1 2013 vs. Q1 2012)
Expenses (Q1 2013 vs. Q1 2012) Q1 Q1 Increase/ (Millions) 2013 2012 (Decrease) Salaries and benefits $ 274.6 $ 261.0 5.2% Percent of net operating revenues 48.0% 48.5% (50 bps) EPOB (employees per occupied bed) 3.31 3.34 (0.9%) Hospital-related expenses $ 116.4 $ 112.0 3.9% (other operating (1), sup
Slide 11: Adjusted EBITDA
Adjusted EBITDA (1) Adjusted EBITDA Change Q1 (Millions) 2013 2012 Q1 2013 Net operating revenues $ 572.6 $ 538.6 +$12.3M Less: Prov ision for doubtful accounts (7.4) (6.3) +9.7% Net operating rev enues less prov ision for doubtful accounts 565.2 532.3 • Revenue growth and Operating expenses: improv
Slide 12: Earnings per Share
Earnings per Share Earnings per Share from Q1 Continuing Operations (2) (In Millions, Except Per Share Data) 2013 2012 Adjusted EBITDA $ 139.3 $ 127.0 Interest expense and amortization of Q1 2013 reflects: debt discounts and fees (24.2) (23.3) Depreciation and amortization (22.1) (19.5) • Higher Adj
Slide 13: Adjusted Free Cash Flow
Adjusted Free Cash Flow Q1 Full Year (Millions) 2013 2012 2012 Net cash provided by operating activities $ 121.4 $ 81.0 $ 411.5 Impact of discontinued operations 0.7 (0.4) (2.0) Net cash provided by operating 122.1 80.6 409.5 activities of continuing operations Capital expenditures for maintenance (
Slide 14: Adjusted Free Cash Flow
Adjusted Free Cash Flow (1) Q1 Change (Millions) 2013 2012 $ % (1) Adjusted free cash flow $ 85.7 $ 45.2 $ 40.5 89.6% Operating Cash Flows Investing and Financing Cash Flows $26.9 (2) $0.2 (3) $1.1 (4) $85.7 $12.3 $45.2 Adjusted Free Cash Adjusted EBITDA Working Capital and Maintenance Capital Prefe
Slide 15: 2013 Guidance - Adjusted EBITDA
2013 Guidance - Adjusted EBITDA(1) Discharge growth between 3.0% and 4.0% (includes acquisition of Walton) 2013 Adjusted EBITDA = $506 million to $516 million Revenue growth before sequestration of 4.9% to 6.2% and revenue per discharge Based on results of Q1 2013, HealthSouth expects its 2013 f
Slide 16: 2013 Guidance - EPS
2013 Guidance - EPS Based on results of Q1 2013, HealthSouth expects Earnings per Share from Continuing its 2013 full year results to be at the high end of, or greater than, this guidance range. Operations Attributable to HealthSouth (1) EPS Guidance $1.61 to $1.68 Actual Low High (Updated to reflec
Slide 17: Income Tax Considerations
Income Tax Considerations GAAP Considerations: • As of 3/31/13, the Company’s federal NOL had a gross balance of approx. $906 million. • As a result of the April 25, 2013 agreements with the IRS, the Company will increase its federal NOL (on a gross basis) by at least $260 million in Q2 2013. • The
Slide 18: Adjusted Free Cash Flow Considerations
Adjusted Free Cash Flow (1) Considerations 2013 reflects: Continued spending on the CIS and hospital refresh projects Completion of delevering and refinancing Certain Cash Flow Items (2) 2013 Q1 2013 2012 Adjusted Free Cash Flow(1) (millions) Assumptions Actuals Actuals $309 Cash interest expe
Slide 19: Priorities for Reinvesting Free Cash Flow
Priorities for Reinvesting Free Cash Flow (millions) 2013 Q1 2012 Priorities may shift based on prevailing market Growth in core business Assumptions 2013 Actuals Bed expansions (target approx. 80 beds/yr) $25 to $35 $4.4 $16.6 De novo hospitals (target 4/yr) $55 to $75 11.1 41.1 Growth Acquisitions
Slide 20: Appendix
Appendix HEALTHSOUTH,
Slide 21: Debt Schedule
Debt Schedule Credit Rating Change S&P Moody March 31, Dec. 31, in Debt (Millions) Corporate BB- Ba3 2013 2012 vs. YE 2012 Advances under $600 million revolving credit facility, August 2017 - 1 Month LIBOR +175bps BB+ Baa3 $ 122.0 $ - $ 122.0 Bonds Payable: 7.25% Senior Notes due 2018 BB- B1 302.8 3
Slide 22: Revenues & Expenses (Sequential)
Revenues & Expenses (Sequential) Q1 Q4 Increase/ Revenues (millions) 2013 2012 (Decrease) Inpatient $ 537.1 $ 518.1 3.7% Outpatient and other 35.5 34.8 2.0% Consolidated net operating $ 572.6 $ 552.9 3.6% (Actual Amounts) Discharges 32,130 31,695 1.4% Net patient revenue / discharge $ 16,716 $ 16,34
Slide 23: Payment Sources (Percent of Revenues)
Payment Sources (Percent of Revenues) Q1 Full Year 2013 2012 2012 Medicare 74.7% 73.5% 73.4% Medicaid 1.1% 1.1% 1.2% Workers' compensation 1.3% 1.5% 1.5% Managed care and other discount plans (1) 18.5% 19.3% 19.3% Other third-party payors 1.7% 1.7% 1.8% Patients 1.1% 1.4% 1.3% Other income 1.6% 1.5%
Slide 24: Operational and Labor Metrics
Operational and Labor Metrics Q1 Q4 Q3 Q2 Q1 3 Months 3 Months Full Year 2013 2012 2012 2012 2012 2013 2012 2012 (In Millions) Net patient revenue-inpatient $ 537.1 $ 518.1 $ 498.9 $ 495.0 $ 500.6 $ 537.1 $ 500.6 $ 2,012.6 Net patient revenue-outpatient and other revenues 35.5 34.8 38.1 38.4 38.0 35
Slide 25: Outstanding Share Summary and Warrant Information
Outstanding Share Summary and Warrant Information (Millions) Weighted Average for the Period Q1 Q1 Full Year 2013 2012 2012 2011 Basic shares outstanding (1) (2) (3) 94.0 94.5 94.6 93.3 (1) (2) (3) (4) Diluted shares outstanding 107.1 108.7 108.1 109.2 End of Period Q1 Q1 Full Year 2013 2012 2012 20
Slide 26: Adjusted EBITDA History
Adjusted EBITDA (1) History Q1 Q4 Q3 Q2 Q1 3 Months 3 Months Full Year (Millions) 2013 2012 2012 2012 2012 2013 2012 2012 Net operating revenues $ 572.6 $ 552.9 $ 537.0 $ 533.4 $ 538.6 $ 572.6 $ 538.6 $ 2,161.9 Less: Prov ision for doubtful accounts (7.4) (7.2) (7.0) (6.5) (6.3) (7.4) (6.3) (27.0) N
Slide 27: Adjusted Free Cash Flow
Adjusted Free Cash Flow Q1 Full Year (Millions) 2013 2012 2012 2011 2010 2009 Net cash provided by operating activities $ 121.4 $ 81.0 $ 411.5 $ 342.7 $ 331.0 $ 406.1 Impact of discont inued operat ions 0.7 (0.4) (2.0) (9.1) (13.2) (5.7) Net cash provided by operating 122.1 80.6 409.5 333.6 317.8 40
Slide 28: Reconciliation of Net Income to Adjusted EBITDA
(1) Reconciliation of Net Income to Adjusted EBITDA 2013 Q1 (in millions, except per share data) Total Per Share Net income $ 65.9 Loss from disc ops, net of tax, attributable to HealthSouth 0.4 Net income attributable to noncontrolling interests (14.6) Income from continuing operations attributable
Slide 29: Reconciliation of Net Income to Adjusted EBITDA
(1) Reconciliation of Net Income to Adjusted EBITDA 2012 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 $ 56.8 $ 59.9 $ 59.9 $ 59.3 $ 235.9 Loss (income) from disc ops, net of tax, attributable to
Slide 30: Reconciliation Notes for Slides 28-29
Reconciliation Notes for Slides 28-29 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
Slide 31: Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA
Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA Q1 Full Year (Millions) 2013 2012 2012 Net cash provided by operating activities $ 121.4 $ 81.0 $ 411.5 Prov ision for doubtful accounts (7.4) (6.3) (27.0) Professional fees—accounting, tax, and legal 1.4 3.6 16.1 Interest expen