Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Bank of America Merrill Lynch 2013 Leveraged Finance Conference
23 slides from Encompass Health's conference presentation, Dec 3, 2013
Slide 1: Bank of America Merrill Lynch 2013 Leveraged Finance Conference
Bank of America Merrill Lynch 2013 Leveraged Finance Conference Boca Raton, FL │December 3, 2013 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, capit
Slide 3: Our Company
Our Company Portfolio – As of September 30, 2013 Inpatient Rehabilitation Hospitals (―IRF‖) 103 • 31 operate as JV’s with Acute Care Hospitals 21 Outpatient Rehabilitation Satellite Clinics 25 Hospital-Based Home Health Agencies 28 + Puerto Rico Number of States ~ 23,700 Employees Key Statistics – T
Slide 4: Q3 2013 Highlights
Q3 2013 Highlights Discharge Volume (million) Net Operating Revenues 120,000 +5.3% +5.7% $1,800 100,000 97,082 92,159 $1,500 $1,201.1 80,000 $1,609.0 60,000 $1,200 40,000 $900 20,000 $600 9 Months 2013 9 Months 2012 9 Months 2013 9 Months 2012 (million) Adjusted EBITDA (1) Earnings Per Share (2) $48
Slide 5: Highlights
Highlights On November 29, 2013, the Company completed the redemption of $30.2 million and $27.9 million of its 7.25% Senior Notes due 2018 and its 7.75% Senior Notes due 2022, respectively. On November 18, 2013, the Company closed separate, privately negotiated exchange agreements under which i
Slide 6: Our Patients
Our Patients Admission to an IRF Average Age of a HealthSouth Patient: • Physicians and acute care hospital case • All patients = 72 managers are key decision makers. • Medicare FFS = 76 • All IRF patients must meet reasonable Referral Sources and necessary criteria and must be 94% Acute Care Hospit
Slide 7: Our Quality
Our Quality 38 36 FIM Gain is 34 based on the 32 change from 30 admission to 28 discharge of 26 an 18 point assessment. 24 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 HealthSouth UDS Average (1) • Inpatient rehabilitation hospitals evaluate all patients at a
Slide 8: Our Cost-Effectiveness
Our Cost-Effectiveness • The Avg. Est. Total Payment Total Inpatient Rehabilitation Facilities (IRFs): 1,134 per Discharge has not been Avg. Est. reduced by 2% for Avg. Est. Total sequestration (4) Avg. Total Cost Payment Avg. Medicare per per Beds per Discharges Case Mix Discharge Discharge • Medic
Slide 9: Our Track Record
Our Track Record Total Debt Adjusted Free Cash Flow (1) $2.00 6 (millions) $180 (billions) $346 5.6x $159 $160 5 Leverage Ratio (1) Interest Expense $140 $1.75 $1.81 4 $268 $243 $120 2.8x 3 $1.66 $100 $1.50 2 $98 $1.51 $181 $1.51 $80 1 $155 $60 Final swap payment $1.32 $1.25 0 in March 2011 $1.25 $1
Slide 10: Debt Maturity Profile
Debt Maturity Profile HealthSouth is now positioned with a lower-cost, flexible capital structure… No near-term maturities and well-spaced debt maturities Limited exposure to higher interest rates Pro forma Sept. 30, 2013 (1) (2) (3) for Redemption and Exchange ($ in millions) • 10% of the outst
Slide 11: Priorities for Reinvesting Free Cash Flow
Priorities for Reinvesting Free Cash Flow (millions) 2013 9 Months 2012 Growth in core business Assumptions 2013 Actuals Priorities may shift based on prevailing market Bed expansions (target approx. 80 beds/yr) $20 to $30 $18.4 $16.6 De novo hospitals (target 4/yr) $35 to $45 24.5 41.1 Growth Acqui
Slide 12: Business Outlook: 2013 to 2015
Business Outlook: 2013 to 2015 (1) CAGRs reflect: Business Model • Completion of delevering and refinancing • Adjusted EBITDA CAGR: 4-8% (2) • Sequestration beginning March 2013 • Adjusted Free Cash Flow CAGR: 10-14% (2)(3) Strategy 2012 2013 2014 2015 Purchased $46 million Shareholder • Completed $
Slide 13: Strong and Sustainable Business Fundamentals
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 • Consistent ac
Slide 14: Appendix
Appendix HEALTHSOUTH,
Slide 15: 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 16: Adjusted Free Cash Flow
Adjusted Free Cash Flow Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow Q3 9 Months Full Year (Millions) 2013 2012 2013 2012 2012 2011 2010 2009 2008 Net cash provided by operating activities $ 142.6 $ 107.2 $ 369.4 $ 302.2 $ 411.5 $ 342.7 $ 331.0 $ 406.1 $ 227
Slide 17: Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA
Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA Q3 9 Months Full Year (Millions) 2013 2012 2013 2012 2012 2011 2010 2009 2008 Net cash provided by operating activities $ 142.6 $ 107.2 $ 369.4 $ 302.2 $ 411.5 $ 342.7 $ 331.0 $ 406.1 $ 227.2 Prov ision for doubtful accounts (8.
Slide 18: Reconciliation of Net Income to Adjusted EBITDA (2013)
(1) Reconciliation of Net Income to Adjusted EBITDA 2013 Q1 Q2 Q3 9 Months (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Net income $ 65.9 $ 179.0 $ 72.3 $ 317.2 Loss (income) from disc ops, net of tax, attributable to HealthSouth 0.4 (0.1) 0.9
Slide 19: 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 20: 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 21: Reconciliation of Net Income to Adjusted EBITDA (2010)
Reconciliation of Net Income to Adjusted EBITDA (1) 2010 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 $ 50.5 $ 57.5 $ 41.9 $ 789.9 $ 939.8 Income from disc ops, net of tax, attributable to Health
Slide 22: Reconciliation of Net Income to Adjusted EBITDA (2008)
Reconciliation of Net Income to Adjusted EBITDA (1) 2008 2009 (in millions, except per share data) Total Per Share Total Per Share Net income $ 281.8 $ 128.8 Income from disc ops, net of tax, attributable to HealthSouth (32.5) (17.7) Net income attributable to noncontrolling interests (29.4) (34.0)
Slide 23: Reconciliation Notes for Slides 18-22
Reconciliation Notes for Slides 18-22 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
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