Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Investor Presentation (November 2007)
19 slides from Encompass Health's investor presentation, Nov 14, 2007
Slide 1: HealthSouth Current Investor Presentation
1 Exhibit 99 HEALTHSOUTH Current Investor Presentation November 2007
Slide 2: Forward-Looking Statements
2 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 inf
Slide 3: A Look Back
3 A Look Back…… Cured Bond Cured Bank Filed 2000 - Refinanced Balance Completed $1B Announced Strategic $440M Tax Recovery Defaults Defaults 2003 Form 10k Sheet $2.55B Senior Notes Offering Repositioning Received Reached CMS Reached SEC Filed 2004 Filed 2005 Relisted on Divestitures Settlement Settl
Slide 4: HealthSouth Today
4 HealthSouth Today Leadership Franchise: largest provider of inpatient rehabilitative care in the U.S. Market share gains realized despite 75% Rule headwind Attractive industry: demand for post-acute services expected to grow (favorable demographics) Earnings growth: through organic and disciplined
Slide 5: The "New" HealthSouth
5 The “New” HealthSouth Our Goal: To be the preeminent provider of inpatient rehabilitative care in the U.S. through: clinical, service and operational excellence; growing market share in existing markets; building new hospitals in new markets; and acquiring or joint-venturing competitors. Longer te
Slide 6: Leadership Franchise
6 Leadership Franchise Current Portfolio and Services Current Portfolio: 94 inpatient rehabilitation hospitals 6 LTCH Hospitals 25 Licensed Home Health Agencies Major Services Offered: Specialized nursing care (24/7) Three-hours intensive therapy per day (minimum) Physical Therapy Key Statistics: Oc
Slide 7: Leadership Franchise: Value Proposition
7 Leadership Franchise Value Proposition FIM Gains LOS Efficiency Source: UDSmr Database –On Demand Reports - Q2 2007 ***Benchmark = Risk Adjusted Expectancy
Slide 8: Attractive Industry: Expected Increased Demand
8 Attractive Industry Expected Increased Demand Projected percentage of US population Projected Medicare Compliant Case Growth (2) 65 years or older through 2050 (1) + 22% “Compliant Cases” are expected to grow Demand for post-acute services will increase ~2% annually for the foreseeable future, cre
Slide 9: Attractive Industry: Better Outcomes at a Comparable Cost
9 Attractive Industry Better Outcomes at a Comparable Cost IRFs provide a Higher Level of Service… Characteristic IRF SNF Attending physician visits 4+ times per week At least every 30 days Multi-disciplinary team approach; Required Not required coordinated Program of Care MD or DO designated as Req
Slide 10: Attractive Industry: Fragmented Sector with Consolidation Opportunities
10 Attractive Industry Fragmented Sector with Consolidation Opportunities 1 2 2 The inpatient rehabilitative sector is highly fragmented = consolidation opportunities Inpatient rehabilitation is HLS’ core business -vs- one of many, secondary services provided by acute-care competitors HLS hospitals
Slide 11: Industry Issue: 75% Rule
11 Industry Issue 75% Rule After July 1, 2008, 75% of patients must come from one of thirteen qualifying conditions (i.e. Compliant Cases) 75% Rule limits access to inpatient rehabilitative care HLS implementation schedule: Minimum Compliance Threshold Cost Reporting # of Consolidated Year End HLS H
Slide 12: Industry Issue: 75% Rule (continued)
12 Industry Issue 75% Rule (continued) Proposed legislative relief (“CHAMP”): “Freeze” threshold at 60% Co-morbidities included as qualifying conditions Study inpatient rehabilitation across all post-acute settings Adjust payments for knee/hip replacements and hip fractures Industry-wide initiative
Slide 13: Earnings Growth
13 Earnings Growth Positive EPS Organic “Steady State”:* 1-2% SS Volume 2-3% Pricing = Mid- to high-single digit Post 75% Rule Labor @ 3-4% EBITDA growth Other Op Exp @ inflation Development Fully implemented 75% Rule Amended 75% Rule (i.e. 60%) Primary focus: Consolidations in Primary focus: De-nov
Slide 14: Third Quarter Highlights
14 Third Quarter Highlights (dollars in millions) Dollars Change 2007 2006 (a) Inpatient Hospital Revenues $384 $365 5% Outpatient Satellites & Other (b) 48 49 Flat Total Revenues $432 $414 4% 2007 2006 Consolidated Adjusted EBITDA $88.7 $107.3 Non-recurring Items ($8.6) ($35.0) Normalized $80.1 $72
Slide 15: Solid Financials: Strong Cash Flow
15 Solid Financials Strong Cash Flow Significant turnaround from 2006 FCF = Normalized ($208M) Free Cash Flow Gen & Admin Expense (a) (b) All Settlement Payments completed by at 5.6% at 5.2% (in millions) 12/31/07 of Rev. of Rev. 2007 Nine Months Adj. Consol. EBITDA $ 236.0 $ 236.0 FCF will be used
Slide 16: Solid Financials: Ongoing Debt Reduction
16 Solid Financials Ongoing Debt Reduction Debt Balance 10.75% Senior Notes (in millions) Debt Balance Per December 31, 2006 10K $3,411.4 Purchased ~$51M of Debt Balance Sept. 30, 2007 $2,401.0 Notes during Sept/ Oct timeframe at an average Post Sept 30, 2007: price of 103.8 Additional Proceeds from
Slide 17: Investment Considerations
17 Investment Considerations Focused management: proven track record of achieving objectives Attractive industry: demand for post-acute services expected to grow (favorable demographics) Strong presence: largest provider of inpatient rehabilitative care in the U.S. Market share gains realized despit
Slide 18: Appendix
18 Appendix Three Months Ended Nine Months Ended September30, September30, 2007 2006 2007 2006 (In Millions) Net income (loss) $ 287.6 $ (76.1) $ 699.2 $ (553.7) (Income) loss from discontinued operations (37.6) 18.0 (475.7) 35.4 Provision for income tax (benefit) expense (281.1) 2.1 (288.2) 21.0 Lo
Slide 19: Appendix (cont'd)
19 Appendix (cont'd) Our Credit Agreement allows certain items to be added to arrive at Adjusted Consolidated EBITDA that are viewed as not being ongoing costs once the Company has completed its restructuring. After consummation of the divestitures of our surgery centers, outpatient, and diagnostic