Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Raymond James 35th Annual Institutional Investor Conference (March 2014)
26 slides from Encompass Health's conference presentation, Mar 3, 2014
Slide 1: Raymond James 35th Annual Institutional Investor Conference
R a y m o n d J a m e s 3 5 th A n n u a l Institutional Investor Conference Orlando, FL │ March 3, 2014 Jay Grinney, President and Chief Executive 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, capit
Slide 3: Our Company
Our Company Portfolio – As of December 31, 2013 Inpatient Rehabilitation Hospitals (―IRF‖) 103 • 31 operate as JV’s with Acute Care Hospitals 20 Outpatient Rehabilitation Satellite Clinics 25 Hospital-Based Home Health Agencies 28 + Puerto Rico Number of States ~ 23,600 Employees Key Statistics – 20
Slide 4: Our Strong Balance Sheet
Our Strong Balance Sheet Debt Outstanding Liquidity $2.00 6 Dec. 31, Dec. 31, 2013 2012 5 Cash Available $ 64.5 $ 132.8 4.6x (1) Revolver Total Line $ 600.0 $ 600.0 $1.75 4 Less: - Draws (45.0) - 2.8x (1) 3 - Letters of Credit (36.5) (39.5) $1.66 Available $ 518.5 $ 560.5 (billions) $1.50 2 $1.51 $1
Slide 5: Our Track Record
Our Track Record Revenue Discharge Volume 129,988 $2,273 123,854 $2,162 118,354 $1,878 $2,027 109,106 112,514 $1,785 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Adjusted EBITDA (1) Adjusted Free Cash Flow (1) $331 $552 ($ millions) $268 $506 $466 $243 $364 $410 $181 $155 2009 2010 2011 2012 20
Slide 6: Adjusted Free Cash Flow Considerations
Adjusted Free Cash Flow (1) Considerations Reflects: • Continued investment in the CIS and hospital refresh projects • Timing of maintenance capital expenditures in 2013 and 2014 Adjusted Free Cash Flow (1) Certain Cash Flow Items (2) 2012 2013 2014 (millions) Actual Actual Assumptions (millions) $3
Slide 7: Priorities for Reinvesting Free Cash Flow
Priorities for Reinvesting Free Cash Flow (millions) 2012 2013 2014 Highest Priority Actuals Actuals Assumptions Remains Bed expansions (target ~ 80 beds/yr) Growth and unit consolidations $16.6 $24.9 $25 to $35 in Core New IRF's (target 4-6/yr) 41.1 55.5 55 to 75 Business $80 to $110, excluding $57
Slide 8: New IRFs: De Novo (40 bed) Assumptions
New IRFs: De Novo (40 bed) Assumptions All projects have minimum IRR target of 15% (pre-tax). Investment Considerations • Prototype includes all private rooms (1) • Cash Payback = 5 to 7 years • A minimum of 30 patients treated for zero • Inclusive of CON costs (where applicable) revenue (Medicare c
Slide 9: New IRFs: De Novo Occupancy and EBITDA Trends
New IRFs: De Novo Occupancy and EBITDA(1) Trends Occupancy Sustained Positive EBITDA Range 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 Months Mesa Loudoun Bristol Cypress Ocala Littleton Stuart HLS Avg. 2013 Occupancy (1) Hospital EBITDA = earnings before interest, taxes,
Slide 10: New IRFs: Acquisition Assumptions
New IRFs: Acquisition Assumptions All projects have minimum IRR target of 15% (pre-tax). Acquisition Assumptions Investment Considerations Value Added • Price varies depending on size, market, • TeamWorks approach to sales/marketing and physical asset • Labor management tools and best practices • Ca
Slide 11: New IRFs Contribute to HealthSouth's Sustained Discharge Growth
New IRFs Contribute to HealthSouth’s Sustained Discharge Growth 9.0% Las Vegas, NV (50 beds) Loudoun County, VA (40 Beds) 8.0% Augusta, GA (58 beds) Cypress, TX (40 beds) Littleton, CO (40 beds) 7.0% Bristol, VA (25 beds) Cincinnati, OH (40 beds) Stuart, FL (34 beds) Sugar Land, TX (50 Beds) 6.0% Oc
Slide 12: Priorities for Reinvesting Free Cash Flow
Priorities for Reinvesting Free Cash Flow (millions) 2012 2013 2014 Actuals Actuals Assumptions Highest Priority Bed expansions (target ~ 80 beds/yr) Growth Remains and unit consolidations $16.6 $24.9 $25 to $35 in Core New IRF's (target 4-6/yr) 41.1 55.5 55 to 75 Business $80 to $110, excluding $57
Slide 13: Preparing for Shifts to Coordinated Care Delivery
Preparing for Shifts to Coordinated Care Delivery • Evolutionary rather than revolutionary • Strong balance sheet and free cash flow enhance flexibility 31 joint venture hospitals with acute care systems Strong balance sheet and free cash flow: already in place (examples include): • No significant d
Slide 14: Potential Future Expansion: Post-Acute Care Services
Potential Future Expansion: Post-Acute Care Services (Highest Acuity) (Lowest Acuity) Long-Term Acute Care Discharge Inpatient Skilled Home Acute Hospice Rehabilitation Nursing Health (1) Hospital Care Facility (1) Facility Hospital Medicare Spending (billions) $5.4 $13.8 $6.5 $28.8 $18.4 # of Disch
Slide 15: Our Strong and Sustainable Business Fundamentals
Our Strong and Sustainable Business Fundamentals • Favorable demographic trends Attractive Healthcare Sector • Nondiscretionary nature of many conditions treated in IRFs • Highly fragmented industry • #1 market share: above industry same-store growth and margins Industry Leading Position • Consisten
Slide 16: Appendix
Appendix HEALTHSOUTH,
Slide 17: Income Tax Considerations
Income Tax Considerations GAAP Considerations: • As of 12/31/13, the Company’s federal NOL had a gross balance of approx. $929 million. ― Includes the approx. $283 million increase in the federal NOL (on a gross basis) as a result of the April 25, 2013 agreements with the IRS • The Company has a rem
Slide 18: Our Cost-Effectiveness
Our Cost-Effectiveness Total Inpatient Rehabilitation Facilities (IRFs): 1,134 • The Avg. Est. Total Payment per Discharge has not been reduced by 2% for sequestration (4) Avg. Est. Avg. Est. Total Avg. Total Cost Payment Avg. Medicare Case per per • Medicare pays Beds Discharges Mix Discharge Disch
Slide 19: CMS Fiscal Year 2014 IRF Final Rule Rate Setting File Analysis
CMS Fiscal Year 2014 IRF Final Rule Rate Setting File Analysis Notes: (1) All data provided was filtered and compiled from the Centers for Medicare and Medicaid Services (CMS) Fiscal Year 2014 IRF Final Rule rate setting file found at http://www.cms.gov/Medicare/Medicare-Fee-for-Service- Payment/Inp
Slide 20: Adjusted Free Cash Flow
Adjusted Free Cash Flow Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow Q4 Full Year (Millions) 2013 2012 2013 2012 2011 2010 2009 Net cash provided by operating activities $ 100.9 $ 109.3 $ 470.3 $ 411.5 $ 342.7 $ 331.0 $ 406.1 I mpact of discontinued operatio
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) 2013 2012 2013 2012 2011 2010 2009 Net cash provided by operating activities $ 100.9 $ 109.3 $ 470.3 $ 411.5 $ 342.7 $ 331.0 $ 406.1 Provision for doubtful accounts (3.6) (7.2) (26.0) (27.0) (21.0) (16.4)
Slide 22: Reconciliation of Net Income to Adjusted EBITDA (2013)
(1) Reconciliation of Net Income to Adjusted EBITDA 2013 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 $ 65.9 $ 179.0 $ 72.3 $ 64.2 $ 381.4 Loss (income) from disc ops, net of tax, attributable to
Slide 23: Reconciliation of Net Income to Adjusted EBITDA (2012)
(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 24: Reconciliation of Net Income to Adjusted EBITDA (2011)
Reconciliation of Net Income to Adjusted EBITDA (1) 2011 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 $ 91.5 $ 32.3 $ 68.3 $ 62.5 $ 254.6 (Income) loss from disc ops, net of tax, attributable to
Slide 25: Reconciliation of Net Income to Adjusted EBITDA (2009-2010)
Reconciliation of Net Income to Adjusted EBITDA (1) 2009 2010 (in millions, except per share data) Total Per Share Total Per Share Net income $ 128.8 $ 939.8 Income from disc ops, net of tax, attributable to HealthSouth (17.7) (9.2) Net income attributable to noncontrolling interests (34.0) (40.8) I
Slide 26: Reconciliation Notes for Slides 22-25
Reconciliation Notes for Slides 22-25 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 community utili
HealthSouth — Raymond James 35th Annual Institutional Investor Conference (March 2014) on 6ix