Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Merrill Lynch Health Services Conference 2006
16 slides from Encompass Health's conference presentation, Nov 28, 2006
Slide 1: Unlocking Value
Unlocking Value Merrill Lynch Health Services Conference November 28, 2006 New York, NY
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% Inpatient Surgery 57.1% 24.3% % of
Slide 4: Inpatient Division
Inpatient Division Overview Payor Mix(1) for the nine months ended 9/30/2006 rd Nation's largest provider of inpatient rehabilitation Other 3 Party Patients 5.1% 0.2% services Managed Care 193 locations (92 IRFs, 91 outpatient satellites) 18.7% Also have 10 LTCH facilities YTD Performance (09/30/06)
Slide 5: Strategic Repositioning
Strategic Repositioning August 14, 2006: HealthSouth announced it would seek strategic alternatives for its Surgery and Outpatient business segments Diagnostic business segment previously designated as “non- core” The “new” HealthSouth = Focus on Inpatient Rehabilitation Facilities (“IRF”) Future gr
Slide 6: Repositioning Rationale: Significant CAPEX Required to Fund Growth
Repositioning Rationale Significant CAPEX Required to Fund Growth ($ in millions) “Base Case” “Growth Case” $400 $350 $300 $250 $200 $150 $100 $50 $0> 2006E 2007E 2008E 2009E 2010E 2011E Borrow (can’t take on more debt) Incremental Cumulative Growth Float Equity (can’t dilute How to Fund? CAPEX vs.
Slide 7: Repositioning Rationale (cont'd)
Repositioning Rationale (cont’d) No strategic or financial synergies among divisions – Historic connection = Orthopedic care – No longer consistent with current realities Orthopedic surgeons used to: Today Orthopedic Surgeons: Admit knees/hips to our rehab Cannot admit most of their hospitals (~20+%
Slide 8: IRF Segment
Projected Medicare Compliant Case Growth(1) IRF Segment + 22% IRF 7% $9 Billion (2) U.S. IRF Market ( 2004) = 1337 IRFs Post Acute Market (2004) (3) Free-standing = 334 (25%) In-hospital Unit = 1003 (75%) HLS All Others For-Profit Not-for-Profit Hospitals Hospitals Number of IRFs 92 242 266 737 Note
Slide 9: Inpatient Division – Strong Cash Flow Characteristics
Inpatient Division – Strong Cash Flow Characteristics Inpatient Division ($ in millions) YTD 09/30/06 2005 (2) YTD 09/30/06 Annualized Net Operating Revenues $1,776.3 $1,303.3 $1,737.7 Operating Earnings 388.3 277.7 370.3 (1) Corporate OH (as a % of revenue) (75.5) (55.4) (73.9) Depreciation 65.4 47
Slide 10: Growth Opportunities
Growth Opportunities Post divestiture, HealthSouth’s growth will occur through organic and development initiatives 2-3% Pricing Organic* Mid-to high-single digit 1-2% SS Volume EBITDA growth *After full implementation of 75% Rule Development: Development Strategies LTCH IRF J.V. 1. Consolidation (Ex
Slide 11: Growth Potential – Illustrative Examples
Growth Potential – Illustrative Examples ($ 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 12: 2006 Development Achievements
2006 Development Achievements Growth is occurring ahead of plan: Opened new 40-bed IRF in Petersburg, VA Created joint venture/market consolidation in Tucson, AZ Merged competitor’s 20-bed IRF with existing HLS 80-bed IRF Broke ground on new 40-bed IRF in Fredericksburg, VA Approved new 50-bed IRF i
Slide 13: Future Growth Opportunities: Other Post-Acute Sectors
Future Growth Opportunities: Other Post-Acute Sectors The Post-Acute Market is Sizeable and Remains Highly Fragmented Post-Acute Usage After Hospital Discharge Post-Acute Growth Opportunities Segment Projected Growth Post Acute Care Inpatient Rehab Facilities (IRFs) 4-6% 33% Home Health 5-9% Hospice
Slide 14: Summary
Summary HealthSouth: a new Board, a new management team, a new balance sheet and a new direction. Re-listed on NYSE (symbol: HLS) on October 26, 2006. By divesting its non-core assets, the Company will be well-positioned to become a “pure-play” post-acute provider and a consolidator in the fragmente
Slide 15: Appendix: Non-GAAP Financial Reconciliations
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 16: Appendix (cont'd): Non-GAAP Financial Reconciliations
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
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