Encompass Health Corporation · NYSE:EHC
Encompass Health — Q4 2012 Earnings Presentation
37 slides from Encompass Health's earnings presentation, Feb 19, 2013
Slide 1: Fourth Quarter 2012 Earnings Call Supplemental Slides
Fourth Quarter 2012 Earnings Call Supplemental Slides
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: Table of Contents
Table of Contents Q4 2012 Summary… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 4-8 …………… Revenues (Q4 2012 vs. Q4 2011)… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … …9… … … … … … Expenses (Q4 2012 vs. Q4 2011)… … … … … … … … … … … … … … … … … … … … …
Slide 4: Q4 2012 Summary (Q4 2012 vs. Q4 2011)
Q4 2012 Summary (Q4 2012 vs. Q4 2011) Revenue growth of 6.7% ― Inpatient revenue growth of 7.9% Discharge growth of 5.4% • Same-store discharge growth of 3.0% • New-store growth was 2.4% (120 bps from the consolidation of St. Vincent (1)) • Favorably impacted by carryover discharges from Septemb
Slide 5: Q4 2012 Summary (Q4 2012 vs. Q4 2011)
Q4 2012 Summary (Q4 2012 vs. Q4 2011) Disciplined expense management offset by: ― A one-time, nonmanagement bonus in lieu of Oct. 1, 2012 merit increase ― Higher expense related to the continued implementation of the clinical information system (CIS) ― The impact of a favorable franchise tax recov
Slide 6: Q4 2012 Summary (Q4 2012 vs. Q4 2011) (cont.)
Q4 2012 Summary (Q4 2012 vs. Q4 2011) (cont.) Adjusted free cash flow (1) for the quarter of $81.2 million and $268.0 million for full- year 2012 reflected: ― Continued Adjusted EBITDA growth, lower full-year interest expense, and no swap- related payments ― The planned investment in the CIS and h
Slide 7: Q4 2012 Summary (cont.)
Q4 2012 Summary (cont.) Growth: Opened HealthSouth Rehabilitation Hospital of Ocala, FL (40 beds) Continued construction on a replacement hospital for HealthSouth Rehabilitation Hospital of Western Massachusetts (This hospital will be owned and will replace an existing leased facility.) Contin
Slide 8: Q4 2012 Summary (cont.)
Q4 2012 Summary (cont.) HealthSouth Functional Outcomes Continue to Outpace Industry Average HealthSouth Average UDS Average* 35.0 3.5 34.5 30.0 3.0 3.10 29.8 25.0 2.5 2.62 20.0 2.0 15.0 1.5 FIM Gain LOS Efficiency * Average = Expected, Risk-adjusted Source: UDSmr Database – On Demand Report: Q4 2
Slide 9: Revenues (Q4 2012 vs. Q4 2011)
Revenues (Q4 2012 vs. Q4 2011) Q4 Q4 Increase/ (Millions) 2012 2011 (Decrease) Inpatient $ 518.1 $ 480.1 7.9% Outpatient and other 34.8 38.0 (8.4%) Consolidated net operating $ 552.9 $ 518.1 6.7% (Actual Amounts) Discharges 31,695 30,066 5.4% Net patient revenue / discharge $ 16,346 $ 15,968 2.4%
Slide 10: Expenses (Q4 2012 vs. Q4 2011)
Expenses (Q4 2012 vs. Q4 2011) Q4 Q4 Increase/ (Millions) 2012 2011 (Decrease) Salaries and benefits $ 269.5 $ 251.4 7.2% Percent of net operating revenues 48.7% 48.5% 20 bps EPOB (employees per occupied bed) 3.46 3.46 0.0% Hospital-related expenses $ 114.8 $ 105.7 8.6% (1) (other operating , suppli
Slide 11: Adjusted EBITDA
Adjusted EBITDA (1) Q4 12 Months Adjusted EBITDA Change (Millions) 2012 2011 2012 2011 Net operating revenues $ 552.9 $ 518.1 $ 2,161.9 $ 2,026.9 12 Months Less: Prov ision for doubtful accounts (7.2) (6.1) (27.0) (21.0) Q4 2012 __2012__ Net operating rev enues less prov ision +$5.7M +$39.7M for dou
Slide 12: Earnings per Share
Earnings per Share from Earnings per Share Q4 12 Months Continuing Operations (3) (In Millions, Except Per Share Data) 2012 2011 2012 2011 Adjusted EBITDA $ 128.6 $ 122.9 $ 505.9 $ 466.2 Q4 2012 and 12 Months 2012 Interest expense and amortization of debt discounts and fees (24.3) (23.1) (94.1) (119
Slide 13: Adjusted Free Cash Flow
Adjusted Free Cash Flow Q4 12 Months (Millions) 2012 2011 2012 2011 Net cash provided by operating activities $ 109.3 $ 129.5 $ 411.5 $ 342.7 Impact of discontinued operations (0.5) 0.3 (2.0) (9.1) Net cash provided by operating 108.8 129.8 409.5 333.6 activities of continuing operations Capital exp
Slide 14: Adjusted Free Cash Flow
Adjusted Free Cash Flow (1) 12 Months Change (Millions) 2012 2011 $ % (1) Adjusted free cash flow $ 268.0 $ 243.3 $ 24.7 10.2% Operating Cash Flows Investing Cash Flows $24.8 (2) $10.9 (4) $39.7 ($18.5) (3) ($32.2) (5) $268.0 $243.3 Adjusted Free Cash Adjusted EBITDA Cash Interest Working Capital Sw
Slide 15: 2013 Guidance - Adjusted EBITDA
2013 Guidance - Adjusted EBITDA(1) Discharge growth between 3.0% and 4.0% (includes acquisition of Walton) Revenue growth before sequestration of 2013 Adjusted EBITDA = $506 million to $516 million 4.9% to 6.2% and revenue per discharge growth of 2.3% to 2.6% Net impact of foregone merit incre
Slide 16: 2013 Guidance - EPS
2013 Guidance - EPS Diluted earnings per share on a GAAP basis are the same as basic earnings per share due to the Earnings per Share from Continuing antidilutive impact in the period. Operations Attributable to HealthSouth (1) EPS Guidance (before share repurchases) Actual Low High (In Millions, Ex
Slide 17: Income Tax Considerations
Income Tax Considerations GAAP Considerations: • As of 12/31/12, the Company’s federal NOL had a balance of approx. $1.0 billion. • The Company has a remaining valuation allowance of approx. $40 million, primarily related to state NOLs. Cash Tax Payments: • The Company expects to pay approx. $8 mill
Slide 18: Adjusted Free Cash Flow Considerations
Adjusted Free Cash Flow (1) Considerations 2013 reflects: Continued spending on the CIS and hospital refresh projects Completion of delevering and refinancing Certain Cash Flow Items (2) 2013 2012 2011 (millions) Assumptions Actuals Actuals Adjusted Free Cash Flow(1) Cash interest expense (3)
Slide 19: Priorities for Reinvesting Free Cash Flow
Priorities for Reinvesting Free Cash Flow (millions) 2013 2012 2011 Growth in core business Assumptions Actuals Actuals Priorities may shift based on prevailing market Bed expansions (target approx. 80 beds/yr) $25 to $35 $16.6 $12.5 De novo hospitals (target 4/yr) $55 to $75 41.1 15.6 Growth Acquis
Slide 20: Appendix
Appendix HEALTHSOUTH,
Slide 21: Business Outlook: 2013 to 2015
Business Outlook: 2013 to 2015 (1) Business Model Revised CAGRs reflect: • Adjusted EBITDA CAGR: 4-8% (2)(3) • Completion of delevering and refinancing • Adjusted Free Cash Flow CAGR: 10-14% (2)(3)(4) • Sequestration beginning March 2013 Strategy 2012 2013 2014 2015 Maintained < 3.0x < 3.0x Debt to
Slide 22: Our Track Record
Our Track Record ($ in millions, except EPS) Discharge Growth Revenue 123,854 $2,162 $2,027 118,354 $1,785 $1,878 112,514 109,106 2009 2010 2011 2012 2009 2010 2011 2012 Adjusted EBITDA (1) EPS (2)(3) $8.20 $506 $466 $410 $364 $1.42 $1.65 $0.58 2009 2010 2011 2012 2009 2010 2011 2012 (1) Reconciliat
Slide 23: Debt Schedule
Debt Schedule Credit Rating Change S&P Moody Dec. 31, Dec. 31, in Debt (Millions) Corporate BB- Ba3 2012 2011 vs. YE 2011 Advances under $600 million revolving credit facility, August 2017 - 3 Month LIBOR +175bps BB+ Baa3 $ - $ - $ - Advances under $500 million revolving credit facility, May 2016 -
Slide 24: Revenues & Expenses (Sequential)
Revenues & Expenses (Sequential) Q4 Q3 Increase/ Revenues (millions) 2012 2012 (Decrease) Inpatient $ 518.1 $ 498.9 3.8% Outpatient and other 34.8 38.1 (8.7%) Consolidated net operating $ 552.9 $ 537.0 3.0% (Actual Amounts) Discharges 31,695 30,569 3.7% Net patient revenue / discharge $ 16,346 $ 16,
Slide 25: Revenues & Expenses (12 months)
Revenues & Expenses (12 months) 12 Months 12 Months Increase/ Revenues (millions) 2012 2011 (Decrease) Inpatient $ 2,012.6 $ 1,866.4 7.8% Outpatient and other 149.3 160.5 (7.0%) Consolidated net operating $ 2,161.9 $ 2,026.9 6.7% (Actual Amounts) Discharges 123,854 118,354 4.6% Net patient revenue /
Slide 26: Payment Sources (Percent of Revenues)
Payment Sources (Percent of Revenues) Q4 Full Year 2012 2011 2012 2011 Medicare 73.6% 72.8% 73.4% 72.0% Medicaid 1.1% 1.4% 1.2% 1.6% Workers' compensation 1.4% 1.5% 1.5% 1.6% Managed care and other discount plans (1) 19.2% 19.5% 19.3% 19.8% Other third-party payors 1.9% 2.0% 1.8% 2.0% Patients 1.3%
Slide 27: Operational and Labor Metrics
Operational and Labor Metrics Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year 2012 2012 2012 2012 2011 2011 2011 2011 2012 2011 (In Millions) Net patient revenue-inpatient $ 518.1 $ 498.9 $ 495.0 $ 500.6 $ 480.1 $ 458.8 $ 465.4 $ 462.1 $ 2,012.6 $ 1,866.4 Net patient revenue-outpatient and other revenues 34.8 38.
Slide 28: Operational and Labor Metrics – Impact of St. Vincent Rehabilitation Hospital Consolidation
Operational and Labor Metrics – Impact of St. Vincent Rehabilitation Hospital Consolidation St. Vincent St. Vincent St. Vincent St. Vincent Rehabilitation Rehabilitation Rehabilitation Rehabilitation Hospital as Hospital as Equity Hospital as Hospital as Equity Consolidated Entity Method Entity Cons
Slide 29: Outstanding Share Summary and Warrant Information
Outstanding Share Summary and Warrant Information Weighted Average for the Period (Millions) Q4 Q4 Full Year 2012 2011 2012 2011 2010 (1) (2) Basic shares outstanding 94.7 93.3 94.6 93.3 92.8 (1) (2) (3) Diluted shares outstanding 108.0 109.1 108.1 109.2 108.5 End of Period Q4 Q4 Full Year 2012 2011
Slide 30: Adjusted EBITDA History
Adjusted EBITDA (1) History Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year (Millions) 2012 2012 2012 2012 2011 2011 2011 2011 2012 2011 Net operating revenues $ 552.9 $ 537.0 $ 533.4 $ 538.6 $ 518.1 $ 497.7 $ 505.1 $ 506.0 $ 2,161.9 $ 2,026.9 Less: Prov ision for doubtful accounts (7.2) (7.0) (6.5) (6.3) (6.1) (
Slide 31: Adjusted Free Cash Flow
Adjusted Free Cash Flow Q4 Full Year (Millions) 2012 2011 2012 2011 2010 2009 2008 Net cash provided by operating activities $ 109.3 $ 129.5 $ 411.5 $ 342.7 $ 331.0 $ 406.1 $ 227.2 Impact of discont inued operat ions (0.5) 0.3 (2.0) (9.1) (13.2) (5.7) (32.5) Net cash provided by operating 108.8 129.
Slide 32: Reconciliation of Net Income to Adjusted EBITDA
(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 33: Reconciliation of Net Income to Adjusted EBITDA - Impact of Consolidation of St. Vincent
Reconciliation of Net Income to Adjusted EBITDA (1) - Impact of Consolidation of St. Vincent Rehabilitation Hospital St. Vincent St. Vincent St. Vincent St. Vincent Rehabilitation Rehabilitation Rehabilitation Rehabilitation Hospital as Hospital as Equity Hospital as Hospital as Equity Consolidated
Slide 34: Reconciliation of Net Income to Adjusted EBITDA
(1) Reconciliation of Net Income to Adjusted EBITDA 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 35: Reconciliation of Net Income to Adjusted EBITDA
(1) Reconciliation of Net Income to Adjusted EBITDA Full Year 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
Slide 36: Reconciliation Notes for Slides 32-35
Reconciliation Notes for Slides 32-35 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 util
Slide 37: Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA
Net Cash Provided by Operating Activities Reconciled to Adjusted EBITDA Q4 Full Year (Millions) 2012 2011 2012 2011 2010 2009 2008 Net cash provided by operating activities $ 109.3 $ 129.5 $ 411.5 $ 342.7 $ 331.0 $ 406.1 $ 227.2 Prov ision for doubtful accounts (7.2) (6.1) (27.0) (21.0) (16.4) (30.7