Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Q3 2008 Earnings Presentation
26 slides from Encompass Health's earnings presentation, Nov 4, 2008
Slide 1: Third Quarter 2008 Earnings Call Supplemental Slides
Third Quarter 2008 Earnings Call Supplemental Slides Exhibit 99.2
Slide 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 information are based on assump
Slide 3: Table of Contents
Table of Contents Slide Revenues (Q3, Sequential)....................................................... 4-5 Expenses (Q3)….…………………………………………………. 6 Labor……… ……………………………………………………..... 7 Expenses (Sequential)….………………………………………... 8 Bad Debt Expense……….……………………………………..… 9 Adjusted Consolidated EBITDA Res
Slide 4: Revenues (Q3 2008 vs Q3 2007)
Revenues (Q3 2008 vs Q3 2007) Inpatient revenue growth was driven by strong discharge volumes. Volume growth was driven by the TeamWorks effort, the acquisition of a 34-bed hospital in Vineland, NJ, and the acquisitions / consolidations of a 30-bed hospital unit in Arlington, TX and a 38-bed hospita
Slide 5: Revenues (Sequential)
Revenues (Sequential) The slight decline in consolidated net operating revenues and volumes sequentially is a result of normal seasonality. Outpatient and other revenue is down sequentially as a result of seasonality and the closure of four outpatient satellites in the third quarter of 2008.
Slide 6: Expenses (Q3 2008 vs Q3 2007)
Expenses (Q3 2008 vs Q3 2007) Salaries and benefits increased quarter over quarter due to an increase in the number of employees required to serve the increase in volumes coupled with higher labor cost per FTE (see next slide). Hospital related expenses increase was driven by higher costs for suppli
Slide 7: Productivity improved 2.4%
Productivity improved 2.4% Employees per occupied bed, or EPOB, decreased from 3.78 to 3.69 Salary, wage & benefit (“SWB”) dollars per FTE increased 7.6% quarter over quarter due to: October 1, 2007, merit increases of 3.7% Range adjustments in select markets, contract labor and the cost of recruitm
Slide 8: Expenses (Sequential)
Expenses (Sequential) Salaries and benefits were up in third quarter primarily as the result of higher cost per employee related to our benefits programs. Hospital related expenses were higher in the third quarter mainly attributed to insurance costs which tend to vary, higher seasonal utilities cos
Slide 9: Bad Debt Expense
Bad Debt Expense (Millions, except percent) The decline of the provision for doubtful accounts is attributable to the Patcom system we installed in 2006. Provision for doubtful accounts is expected to be in the 1.5% to 1.8% range as a percent of net operating revenues for the foreseeable future. New
Slide 10: Adjusted Consolidated EBITDA Results
Adjusted Consolidated EBITDA Results (1) Reconciliation to GAAP provided on slide 20 and slide 22 (2) Includes an $8.6 million gain on the sale of our investment in Source Medical (3) Adjusted Consolidated EBITDA was revised upward in the second quarter 2008 earnings release (3) No change; benefit a
Slide 11: Adjusted Income per Share Results
Adjusted Income per Share Results (1) Reconciliation to GAAP provided on slide 20 and slide 22 (2) Q3 2007 calculated ignoring the antidilutive impact of negative EPS
Slide 12: Strong Normalized Free Cash Flow
Strong Normalized Free Cash Flow Free Cash Flow Year to Date (1) Reconciliation to GAAP provided on slide 22 and slide 26 (2) Includes capital expenditures for the refresh programs (2)
Slide 13: Liquidity
Liquidity (Millions) (1) Letters of credit will be reduced by $33.6 million when we have court approval of the UBS settlement
Slide 14: Debt Reduction
Debt to EBITDA on September 30, 2008 = 5.5X ; Target = 4.5X Debt Reduction (Millions) Significant debt reduction since $208 million paid down in first 10 months of 2008 (1)(2) No near-term refinancing requirements Future debt reduction from: Excess cash from operations Additional income tax recoveri
Slide 15: Interest Expense and Swap Settlements
As of September 30, 2008, we were in compliance with the covenants under our Credit Agreement. Interest Expense and Swap Settlements (Millions) (1) We have the flexibility to peg 1,2,3 or 6 month Libor, or prime
Slide 16: Development Growth YTD
Development Growth YTD (2) (1) Plan to work with a developer to obtain a lease arrangement (2) CON is being appealed; Operational Date may change 154 additional beds in total, 34 of which apply to third quarter 2008 Revenue contribution starting in Q3 2008 through Q3 2010 Location Announced Type of
Slide 17: Appendix
Appendix
Slide 18: Outstanding Share Summary
Outstanding Share Summary (Millions) 3rd Qtr. 3rd Qtr. 9 Months 9 Months Basic shares outstanding (2)(3) 87.4 78.5 81.6 78.6 Diluted shares outstanding (1)(2)(3) 101.0 91.8 95.1 91.9 Basic shares outstanding (2)(3) 88.0 78.6 88.0 78.6 Diluted shares outstanding (1)(2)(3) 101.6 91.9 101.5 91.9 Notes:
Slide 19: Debt Schedule
Debt to EBITDA on September 30, 2008 = 5.5X ; Target = 4.5X Debt Schedule (1) Credit Agreement limits debt pay down on non–term loan balances to $50 million per year with the addition of a lifetime basket of $100 million. As of Sept. 30, 2008, the $50 million yearly limit had been reached for 2008,
Slide 20: Q3 2008 Reconciliation of Net Income to Adjusted EBITDA
Q3 2008 Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA (1)(3) – (Notes on following page)
Slide 21: Q3 2008 Reconciliation Notes
Q3 2008 Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA – Notes
Slide 22: 9 Months 2008 Reconciliation of Net Income to Adjusted EBITDA
9 Months 2008 Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA (1)(3) – (Notes on following page)
Slide 23: 9 Months 2008 Reconciliation Notes
9 Months 2008 Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA – Notes
Slide 24: Q2 2008 Reconciliation of Net Income to Adjusted EBITDA
Q2 2008 Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA (1)(3) – (Notes on following page)
Slide 25: Q2 2008 Reconciliation Notes
Q2 2008 Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA – Notes
Slide 26: 9 Months 2008 Reconciliation of Adjusted EBITDA to Operating Cash Flow
9 Months 2008 Reconciliation of Adjusted Consolidated EBITDA (1) to Net Cash Provided by Operating Activities