Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Investor Presentation (November 2006)
15 slides from Encompass Health's investor presentation, Nov 14, 2006
Slide 1: Unlocking Value
Unlocking Value November 2006
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 infor
Slide 3: Diversified Healthcare Services Provider
Diversified Healthcare Services Provider National Provider of Healthcare Services Diversified Business Portfolio (b) (c) : % of Net Operating Revenues Diagnostic Other The Company is a leader in each of its four major 6.7% 0.8% operating divisions Outpatient 11.0% Market YTD Net Rev. YTD Op. Earn. (
Slide 4: Q3 2006 Earnings Call Re-cap
Q3 2006 Earnings Call Re-cap Consolidated Net Operating Revenues of $731.2 million Pre-tax loss from continuing operations of $68.3 million $28.4 million provision for government, class action and related settlements expense $28.7 million loss on interest rate swap Re-listed on NYSE on Thursday, Oct
Slide 5: Q3 2006 Earnings Call Re-cap (cont’d)
Q3 2006 Earnings Call Re-cap (cont’d) Inpatient Net Operating Revenues 3Q 2006 $420 million vs $440 million 3Q 2005 Acute-care weakness; 75% Rule; Pricing Q3 Compliant Case growth approximately 4.9% Post-acute strategy; several development milestones: Closed market consolidation in Tucson; admission
Slide 6: Q3 2006 Earnings Call Re-cap (cont’d)
Q3 2006 Earnings Call Re-cap (cont’d) Q3 “Normalized” EBITDA(1) ($ millions) Q3 2006 2005 Adjusted Consolidated EBITDA per 10-Q $ 141.9 $ 174.9 Non-recurring gains (35.0) (37.9) Non-core Diagnostic 4.2 (5.4) Inpatient - new system implementation 6.0 Adjusted EBITDA $ 117.1 $ 131.6 Shortfall in line
Slide 7: Repositioning: Post-Acute; Focus: IRFs
Repositioning: Post-Acute; Focus: IRFs The Post-Acute Market is Sizeable and Remains Highly Fragmented Post-Acute Usage After Hospital Discharge Post-Acute Growth Opportunity Segment Projected Growth Inpatient Rehab Facilities (IRFs) 4-6% Post Acute Care Home Health 5-9% 33% Hospice 12-15% Long Term
Slide 8: IRF Segment Profile
IRF Segment Profile IRF 7% $9 Billion U. S. IRF (1) Market (2004) 1337 IRFs Post Acute Market Free-standing = 334 (25%) In-hospital Unit (2) = 1003 (75%) HLS All Others For-Profit Not-for-Profit Hospitals Hospitals Number of IRFs 92 242 266 737 Notes: 1. Source: Annual Reports; Verispan data; manage
Slide 9: Inpatient Division
Inpatient Division Overview Payor Mix(1) for the nine months ended 9/30/2006 Nation's largest provider of inpatient rehabilitation rd Other 3 Party Patients services 5.1% 0.2% 193 locations (92 IRFs, 91 outpatient satellites) Managed Care 18.7% 10 LTCH facilities YTD Performance (09/30/06) Workers C
Slide 10: Inpatient Division (cont’d)
Inpatient Division (cont’d) Strong cash flow characteristics Inpatient Division ($ in millions) YTD 9/30/06 2005 (2) Net Operating Revenues $1,303.3 $1,776.3 Operating Earnings 277.7 388.3 (1) Corporate OH (as a % of revenue) (55.4) (75.5) Depreciation 47.5 65.4 Available Cash Before CAPEX & Debt Se
Slide 11: Growth Opportunities
Growth Opportunities Post divestiture, HealthSouth’s growth will occur through organic and development initiatives 2-3% Pricing Organic* Mid-to high-single digit 1-2% SS Volume EBITDA growth *After full implementation of 75% Rule Development: Current IRF/LTCH pipeline: Development Strategies LTCH IR
Slide 12: Growth Potential – Illustrative Examples
Growth Potential – Illustrative Examples ($ in thousands) Consolidation - Joint Venture DeNovo - Proforma (40 Bed) (1) (1) Revenue EBITDA % Revenue EBITDA % Stand Alone $10,000 $2,000 16% Year 1 $8,500 $1,275 11% (2) Joint Venture $14,000 $3,200 19% Year 2 $10,500 $2,500 20% - Minority Interest ($64
Slide 13: Summary
Summary HealthSouth has emerged from a period of unprecedented uncertainty and upheaval with a new Board, a new management team, a new balance sheet and a new direction. By divesting its non-core assets, the Company will be well-positioned to become a “pure-play” post-acute provider and a consolidat
Slide 14: Appendix
Appendix Non-GAAP Financial Reconciliations Reconciliation of Net Loss to Adjusted Consolidated EBITDA Three Months Ended Nine Months Ended September 30, September 30, (In Thousands) 2006 2005 2006 2005 Net loss $ (76,144) $ (11,541) $ (553,718) $ (332,158) Loss from discontinued operations 3,291 11
Slide 15: Appendix (cont’d)
Appendix (cont’d) Non-GAAP Financial Reconciliations Reconciliation of Adjusted Consolidated EBITDA to Net Cash (Used In) Provided By Operating Activities Nine Months Ended September 30, 2006 2005 (In Thousands) Adjusted Consolidated EBITDA $ 411,805 $ 501,407 Professional fees—accounting, tax, and