Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Q4 2008 Earnings Presentation
31 slides from Encompass Health's earnings presentation, Feb 23, 2009
Slide 1: Fourth Quarter 2008 Earnings Call Supplemental Slides
Exhibit 99.2 Fourth Quarter 2008 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 2008 Goals vs. Results.................................................................................................................... 4 Organic Growth ..............................................................................................................................
Slide 4: Highlights: 2008 Goals vs. Results
Highlights: 2008 Goals vs. Results Goal One – Organic Growth Achieved 7.0% year-over-year discharge growth through the implementation of the TeamWorks sales and marketing initiative Goal Two – Delever the Balance Sheet Reduced debt by $228 million and leverage from 6.3X to 5.3X Equity issuance of 8.
Slide 5: Highlights: Strong Organic Growth
Highlights: Strong Organic Growth (1) (2) HealthSouth’s volume growth continues to outpace competitors’ growth Same store discharges were +9.7% for HLS in Q408 Bed expansions will help facilitate organic growth: 65 – 75 new beds in 2009; another 44 in 2010 % Discharges of HLS vs. UDS Industry Sites(
Slide 6: Highlight: Debt Reduction
Highlight: Debt Reduction No near-term refinancing Revolver = 2012 ($ Billions) Term Loan = 2013 Bonds = 2014 & 2016 Future debt reduction: Excess cash from operations Additional income tax recoveries $24 million federal income tax refund (+ interest) received February 2009 Derivative proceeds UBS s
Slide 7: Highlight: Development Growth
Highlight: Development Growth Operational Location Announced Type of Investment Installed Beds Date Acquisition of free Vineland, NJ Aug-08 standing 34 Beds Q308 Acquisition and Arlington, TX Aug-08 consolidation n/a Q308 Acquisition and Midland, TX Sep-08 consolidation n/a Q308 (1) Mesa, AZ Oct-08
Slide 8: Revenues (Q408 vs. Q407)
Revenues (Q408 vs. Q407) (Millions) 4th Qtr. 2008 4th Qtr. 2007 Change Inpatient $ 418.4 $ 388.4 7.7% Outpatient and other 45.4 46.1 (1.5%) Consolidated net operating $ 463.8 $ 434.5 6.7% (Actual Amounts) Discharges 27,654 25,005 10.6% Net patient revenue/discharge $ 15,130 $ 15,533 (2.6%) Inpatient
Slide 9: Expenses (Q408 vs. Q407)
Expenses (Q408 vs. Q407) (Millions, except percent) 4th Qtr. 2008 4th Qtr. 2007 Change Salaries and benefits $ 233.7 $ 217.4 7.5 % Percent of net operating revenues 50.4% 50.0% 40 bps Hospital related expenses $ 113.2 $ 102.8 10.1 % (other operating, supplies, occupancy, bad debts) Percent of net op
Slide 10: Adjusted Consolidated EBITDA
Adjusted Consolidated EBITDA(1)(2) (Millions) 4th Qtr. 4th Qtr. Q408 vs. Q407 2008 2007 Strong volume growth in Q408 helped offset the absence of Medicare price increase $ 87.8 $ 86.4 Q407 Medicare pricing: $7-8 million benefit 2008 vs. 2007 Full-Year Full-Year Year-over-year improvement driven by:
Slide 11: Adjusted Income (Loss) per Share
Adjusted Income (Loss) per Share 4th Qtr. 4th Qtr. Full-Year Full-Year (Millions, except per share data) 2008 2007 2008 2007 Income (loss) from continuing operations $ 172.9 $ (27.3) $ 234.8 $ 198.3 Adjusted income (loss) from continuing (1) operations $ 24.3 $ (0.7) $ 71.9 $ (58.5) Per Share Per Sh
Slide 12: Free Cash Flow
Free Cash Flow Year Ended (Millions) December 31, 2008 (1) Adjusted Consolidated EBITDA $ 341.8 Cash interest expense (158.5) Change in working capital (12.2) Estimated state tax expense (5.0) (2) Capital expenditures for maintenance (37.3) Net settlements on interest rate swap (20.7) Dividends paid
Slide 13: Liquidity
Liquidity (Millions) December 31, 2008 Cash Available $ 32.2 Revolver Total line $ 400.0 Less: – Draws (40.0) (1) – Letters of credit (52.7) (2) Available $ 307.3 Total Liquidity (available cash and revolver) $ 339.5 (1) In February 2009, draws under the revolver were reduced to zero. (2) We expect
Slide 14: UBS Settlement
UBS Settlement (Announced October 27, 2008) $100.0 million in cash (funded by UBS Securities and its insurance carriers and held in escrow). $30.7 million release of loan guarantee. $21.3 million principal $9.4 million accrued interest (included in interest expense) Cash + principal = Gain on UBS Se
Slide 15: Summary 2008 vs. 2007
Summary 2008 vs. 2007 Volume Revenue EBITDA + 7.0% +6.0% +6.4% Volume and revenue reflect strong organic growth. Labor productivity (EPOB) helps offset increase in salaries and benefits (SWB) per employee. Employees per Occupied Bed (EPOB)(1) SWB per FTE(1) -2.7% 7.1% (1) For full-time equivalents a
Slide 16: 2009 Guidance
2009 Guidance Adjusted Consolidated EBITDA(1) 2008 Actual: $341.8 million 2009: Expected to be in the range of $342.0 million to $352.0 million Adjusted Earnings per Share(1)(2) 2008 Actual: $0.75 per share 2009: Expected to be in the range of $0.85 to $0.90 per share (1) Reconciliation to GAAP prov
Slide 17: Appendix
Appendix 17
Slide 18: Revenues (Sequential)
Revenues (Sequential) (Millions) 4th Qtr. 2008 3rd Qtr. 2008 Change Inpatient $ 418.4 $ 411.5 1.7% Outpatient and other 45.4 44.7 1.6% Consolidated net operating $ 463.8 $ 456.2 1.7% (Actual Amounts) Discharges 27,654 26,827 3.1% Net patient revenue/discharge $ 15,130 $ 15,339 (1.4%) The increase in
Slide 19: Expenses (Sequential)
Expenses (Sequential) (Millions, except percent) 4th Qtr. 2008 3rd Qtr. 2008 Change Salaries and benefits $ 233.7 $ 236.5 (1.2) % Percent of net operating revenues 50.4% 51.8% (140) bps Hospital related expenses $ 113.2 $ 114.6 (1.2) % (other operating, supplies, occupancy, bad debts) Percent of net
Slide 20: Revenues (Year End)
Revenues (Year End) (Millions) 2008 2007 Change Inpatient $ 1,659.5 $ 1,544.0 7.5% Outpatient and other 182.9 193.5 (5.5%) Consolidated net operating $ 1,842.4 $ 1,737.5 6.0% (Actual Amounts) Discharges 107,780 100,738 7.0% Net patient revenue/discharge $ 15,397 $ 15,327 0.5% Inpatient revenue growt
Slide 21: Expenses (Year End)
Expenses (Year End) (Millions, except percent) 2008 2007 Change Salaries and benefits $ 934.7 $ 863.6 8.2 % Percent of net operating revenues 50.7% 49.7% 100 bps Hospital related expenses $ 454.8 $ 430.1 5.7 % (other operating, supplies, occupancy, bad debts) Percent of net operating revenues 24.7%
Slide 22: Operational and Labor Metrics
Operational and Labor Metrics Three Months Ended Year Ended December 31, December 31, 2008 2007 2008 2007 (In Millions) Net patient revenue-inpatient $ 418.4 $ 388.4 $ 1,659.5 $ 1,544.0 Net patient revenue-outpatient and other revenues 45.4 46.1 182.9 193.5 Net operating revenues $ 463.8 $ 434.5 $ 1
Slide 23: Supplemental Information
Supplemental Information Payment Source For the Year Ended December 31, 2008 2007 2006 Medicare 67.2% 67.8% 68.6% Medicaid 2.2% 2.0% 2.1% Workers' compensation 2.1% 2.3% 2.6% Managed care and other discount plans 19.0% 18.5% 18.5% Other third-party payors 7.0% 6.3% 5.0% Patients 0.7% 0.6% 0.4% Other
Slide 24: Debt Schedule
Debt Schedule Debt Balances December 31, December 31, 2008 Debt (1)(2) (Millions) 2008 2007 Reduction Advances under $400 million revolving credit facility, March 2012 $ 40.0 $ 75.0 $ 35.0 Term loan facility - March 2013 783.6 862.8 79.2 Bonds Payable: 7.000% Senior Notes due 2008 - 5.0 5.0 10.750%
Slide 25: Debt Maturities and Swap
Debt Maturities and Swap (Millions) December 31, Floating Rate Debt Balances 2008 Floating Interest Rate (1) Advances under $400 million revolving credit facility $ 40.0 Libor plus 325 (1)(2) Term loan facility 783.6 Libor plus 250 Floating Rate Senior Notes due 2014 366.0 6 month Libor +6% Total $
Slide 26: Non-Operating Cash/Tax Position
Non-Operating Cash/Tax Position Cash Refunds Future Cash Tax Payments $55.9 million receivable on balance sheet at With over $2.5 billion in NOLs and tax December 31, 2008. deductions, we do not expect to pay significant federal income tax for the next 10-12 years. $24 million tax refund + applicabl
Slide 27: Outstanding Share Summary
Outstanding Share Summary 4th Qtr.(4) 4th Qtr. Year-End(4) Year-End (Millions) 2008 2007 2008 2007 Average for the Period Basic shares outstanding(2)(3) 87.4 78.6 83.0 78.7 (1)(2)(3) Diluted shares outstanding 100.7 91.9 96.4 92.0 End of Period Basic shares outstanding(2)(3) 88.0 78.7 88.0 78.7 (1)(
Slide 28: Fourth Quarter Reconciliation of Net Income (Loss) to Adjusted Income (Loss)
Fourth Quarter Reconciliation of Net Income (Loss) to Adjusted Income (Loss) from Continuing Operations and Adjusted Consolidated EBITDA (1)(3)(4) Three Months Ended December 31, (2) (2) 2008 Per Share 2007 Per Share (In Millions, Except Per Share Data) Net income (loss) $ 181.9 $ 2.08 $ (45.9) $ (0
Slide 29: Twelve Month Reconciliation of Net Income to Adjusted Income (Loss)
Twelve Month Reconciliation of Net Income to Adjusted Income (Loss) from Continuing Operations and Adjusted Consolidated EBITDA(1)(3)(4) Year Ended December 31, (2) (2) 2008 Per Share 2007 Per Share (In Millions, Except Per Share Data) Net income $ 252.4 $ 3.04 $ 653.4 $ 8.30 Income from discontinue
Slide 30: 2008 Reconciliation of Adjusted Consolidated EBITDA to Operating Cash Flow
2008 Reconciliation of Adjusted Consolidated EBITDA(1) to Net Cash Provided by Operating Activities Year Ended December 31, 2008 Adjusted Consolidated EBITDA $ 341.8 Compensation expense under FASB Statement No. 123(R) (11.7) Provision for doubtful accounts 27.8 Professional fees—accounting, tax, an
Slide 31: Reconciliation Notes
Reconciliation Notes 1. Adjusted income (loss) from continuing operations and Adjusted Consolidated EBITDA are non-GAAP financial measures. Management and some members of the investment community utilize adjusted income (loss) from continuing operations as a financial measure and Adjusted Consolidat