Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — J.P. Morgan High Yield and Leveraged Finance Conference 2016
25 slides from Encompass Health's conference presentation, Mar 2, 2016
Slide 1: J.P. Morgan High Yield and Leveraged Finance Conference
» HEALTHSOUTH,. J.P. Morgan High Yield and Leveraged Finance Conference Miami, FL| March 2, 2016 Doug Coltharp Executive Vice President 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, capita
Slide 3: HealthSouth: A Leading Provider of Post-Acute Care
HealthSouth: A Leading Provider of Post-Acute Care 60% of HealthSouth's IRFs are located within a 30-mile radius of an Encompass location. Inpatient Rehabilitation Encompass Home Health and Hospice Portfolio as of Portfolio as of 2014 2015 2014 2015 December 31, December 31, Inpatient Rehabilitation
Slide 4: 2015: Established Home Health Platform
2015: Established Home Health Platform ü Enhanced HLS’ position in integrated delivery and value-based payment models by adding home-based, post-acute services via partnership with Encompass • 44* home health and 3 hospice locations in 7 states • Best-in-class home health provider; across the southe
Slide 5: 2015: Expanded Inpatient Rehabilitation Portfolio
2015: Expanded Inpatient Rehabilitation Portfolio ü Entered new markets, primarily through joint ventures ü Enhanced geographic coverage in existing markets December 31, 2014 2015 13% increase # of hospitals 107 121 18% increase # of licensed beds 7,095 8,404 ACQUISITIONS JOINT VENTURES • Memorial H
Slide 6: Key Demographic Tailwind: Expanding Medicare Beneficiary Population
Key Demographic Tailwind: Expanding Medicare Beneficiary Population Key Observations: • The growth rate of Medicare beneficiaries increased in 2011 from a 2% CAGR to an approx. 3% CAGR as “baby boomers” started turning 65. • In 15 years (2030), the Medicare population is projected to increase to 80
Slide 7: CMS: Driving Change Toward Integrated Delivery Payment Models, Value-Based Purchasing
CMS: Driving Change Toward Integrated Delivery Payment Models, Value-Based Purchasing >> 30% of Medicare fee-for-service payments via integrated delivery >> 50% of Medicare fee-for-service payment models (e.g., bundled payments via integrated delivery payments accountable care CMS organizations (ACO
Slide 8: Q4 2015 Summary (Q4 2015 vs. Q4 2014)
Q4 2015 Summary (Q4 2015 vs. Q4 2014) Q4 YTD HealthSouth Consolidated 2015 2014 Delta % 2015 2014 Delta % ($millions) Net operating revenues $ 879.3 $ 613.4 $ 265.9 43.3 % $3,162.9 $2,405.9 $ 757.0 31.5 % Adjusted EBITDA* $ 191.5 $ 140.8 $ 50.7 36.0 % $ 682.5 $ 577.6 $ 104.9 18.2 % Major takeaways:
Slide 9: 2015 Adjusted Free Cash Flow
2015 Adjusted Free Cash Flow*(1) $104.9 $7.0 $8.9 $3.2 ($32.1) ($14.2) $389.0 $311.3 Adjusted Free Cash Adjusted Cash Interest Cash Tax Payments, Working Capital Maintenance Capital Preferred Adjusted Free Cash Flow 12 Mos. 2014 EBITDA Expense Net of Refunds and Other Expenditures Dividends Flow 12
Slide 10: Priorities for 2016
Priorities for 2016 GROWTH • Integrate Reliant and CareSouth ("pause" on additional large acquisitions) • Achieve organic growth at existing hospitals and home health/hospice agencies • Acquire and construct new hospitals and acquire and open new home health/hospice agencies CAPITAL STRUCTURE • Redu
Slide 11: Guidance
Guidance Projected Year-Over- 2015 Year 2016 Growth Net Operating Revenues Net Operating Revenues 12% to $3,162.9 million 15% $3,550 million to $3,650 million Adjusted EBITDA Adjusted EBITDA 12% to $682.5 million 15% $765 million to $785 million Adjusted Earnings per Share Adjusted Earnings per Shar
Slide 12: 2016 Guidance Considerations
2016 Guidance Considerations Inpatient Rehabilitation Home Health and Hospice u Full-year contribution from 2015 u Full-year contribution from 2015 acquisitions and openings, acquisitions and openings, including Reliant including CareSouth Transitioning to HLS business model Transitioning to Enc
Slide 13: Adjusted Free Cash Flow and Tax Assumptions
Adjusted Free Cash Flow*(1) and Tax Assumptions Certain Cash Flow Items 2016 2015 2014 (millions) Assumptions Actual Actual • Cash interest expense $165 to $175 $128.6 $96.5 (net of amortization of debt discounts and fees) Working capital increase in 2015 driven primarily by • Cash payments for taxe
Slide 14: Free Cash Flow Priorities
Free Cash Flow Priorities (In Millions) 2016 2015 2014 Highest Priority Assumptions Actuals Actuals IRF bed expansions $20 to $30 $20.8 $23.6 Growth New IRF’s in Core - De novos 70 to 90 47.8 53.7 Business - Acquisitions 0 to 20 786.2 20.2 New home health and hospice acquisitions 30 to 40 200.2 674.
Slide 15: Debt Maturity Profile - Face Value
Debt Maturity Profile - Face Value HealthSouth is positioned with a cost-efficient, flexible capital structure. As of December 31, 2015* ($ in millions) Callable beginning March 2018 Callable beginning November 2017 $1,200 Callable beginning $436 Became callable in September 2015 Senior September 20
Slide 16: HLS: Strong and Sustainable Business Fundamentals
HLS: Strong and Sustainable Business Fundamentals • Favorable demographic trends Attractive Healthcare Sectors • Nondiscretionary nature of many conditions treated • Highly fragmented post-acute industries • #1 market share in inpatient rehabilitation segment Industry Leading Position • #5 largest p
Slide 17: Appendix
Appendix "7 HEALTHSOUTH,
Slide 18: Debt Schedule
Debt Schedule(6) Change in Dec. 31, Dec. 31, Debt vs. ($millions) 2015 2014 YE 2014 Advances under $600 million revolving credit facility, July 2020 - LIBOR +200bps(7)(8) $ 130.0 $ 325.0 $ (195.0) Term loan facility, July 2020 - LIBOR +200bps(7)(8) 443.3 447.5 (4.2) Bonds Payable: 8.125% Senior Note
Slide 19: Reconciliation of Net Income to Adjusted EBITDA (2015)
Reconciliation of Net Income to Adjusted EBITDA(14) 2015 Q1 Q2 Q3 Q4 Full Year Per Per Per Per Per (in millions, except per share data) Total Share Total Share Total Share Total Share Total Share Net Income $ 59.0 $ 60.2 $ 67.8 $ 65.8 $ 252.8 Loss (income) from disc ops, net of tax, attributable to
Slide 20: Reconciliation of Net Income to Adjusted EBITDA (2014)
Reconciliation of Net Income to Adjusted EBITDA(14) 2014 Q1 Q2 Q3 Q4 Full Year Per Per Per Per Per (in millions, except per share data) Total Share Total Share Total Share Total Share Total Share Net Income $ 61.5 $ 97.9 $ 64.8 $ 57.5 $ 281.7 Loss (income) from disc ops, net of tax, attributable to
Slide 21: Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA
Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA Q4 Full Year (Millions) 2015 2014 2015 2014 Net cash provided by operating activities $ 116.6 $ 70.2 $ 484.8 $ 444.9 Provision for doubtful accounts (14.0) (6.6) (47.2) (31.6) Professional fees—accounting, tax, and legal 0.3 1.7
Slide 22: Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow(1) Q4 Full Year ($millions) 2015 2014 2015 2014 Net cash provided by operating activities $ 116.6 $ 70.2 $ 484.8 $ 444.9 Impact of discontinued operations (0.1) 0.2 0.7 1.2 Net cash provided by operating activitie
Slide 23: Adjusted EPS - Full-Year 2015
Adjusted EPS(2) - Full-Year 2015 For the Year Ended December 31, 2015 Adjustments Income Pro. Tax Gov’t, Class Fees - Valuation Loss on Action, & Acct., Allowance Early As Related Tax, & & Other Transaction Exting. As Reported Settlements Legal Adj. Costs of Debt Adjusted (In Millions, Except Per Sh
Slide 24: End Notes
End Notes (1) Definition of adjusted free cash flow is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, dividends paid on preferred stock, distributions to noncontrolling interests, and nonrecurring items. Common stock dividends are not i
Slide 25: End Notes, con't.
End Notes, con’t. (11) In August 2015, the Company issued an additional $350 million of its 5.75% senior notes due 2024. In September 2015, the Company issued $350 million of 5.75% senior notes due 2025. The proceeds from both offerings were used to fund a portion of the Reliant acquisition. (12) Th
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