Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Encompass Health Corp | form8k-2011q2.htm |
| EX-99.1 - EXHIBIT 99.1 - Encompass Health Corp | exhibit99-1.htm |
Exhibit 99-2
Second Quarter 2011 Earnings Call
Supplemental Slides
Exhibit 99-2
The information contained in this presentation includes certain estimates, projections and other forward-
looking information that reflect our current views and plans with respect to future events, strategy, capital
expenditures and financial performance. These estimates, projections and other forward-looking
information are based on assumptions that HealthSouth believes, as of the date hereof, are reasonable.
Inevitably, there will be differences between such estimates and actual events or results, and those
differences may be material.
looking information that reflect our current views and plans with respect to future events, strategy, capital
expenditures and financial performance. These estimates, projections and other forward-looking
information are based on assumptions that HealthSouth believes, as of the date hereof, are reasonable.
Inevitably, there will be differences between such estimates and actual events or results, and those
differences may be material.
There can be no assurance that any estimates, projections or forward-looking information will be realized.
All such estimates, projections and forward-looking information speak only as of the date hereof.
HealthSouth undertakes no duty to publicly update or revise the information contained herein.
HealthSouth undertakes no duty to publicly update or revise the information contained herein.
You are cautioned not to place undue reliance on the estimates, projections and other forward-looking
information in this presentation as they are based on current expectations and general assumptions and
are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the
year ended December 31, 2010, our Form 10-Q for the quarters ended March 31, 2011, and June 30, 2011,
when filed, and in other documents we previously filed with the SEC, many of which are beyond our
control, that may cause actual events or results to differ materially from the views, beliefs and estimates
expressed herein.
information in this presentation as they are based on current expectations and general assumptions and
are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the
year ended December 31, 2010, our Form 10-Q for the quarters ended March 31, 2011, and June 30, 2011,
when filed, and in other documents we previously filed with the SEC, many of which are beyond our
control, that may cause actual events or results to differ materially from the views, beliefs and estimates
expressed herein.
Note Regarding Presentation of Non-GAAP Financial Measures
The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G
under the Securities Exchange Act of 1934. Schedules are attached that reconcile the non-GAAP financial
measures included in the following presentation to the most directly comparable financial measures
calculated and presented in accordance with Generally Accepted Accounting Principles in the United
States. Our Form 8-K, dated July 27, 2011, to which the following supplemental slides are attached as Exhibit
99.2, provides further explanation and disclosure regarding our use of non-GAAP financial measures and
should be read in conjunction with these supplemental slides.
The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G
under the Securities Exchange Act of 1934. Schedules are attached that reconcile the non-GAAP financial
measures included in the following presentation to the most directly comparable financial measures
calculated and presented in accordance with Generally Accepted Accounting Principles in the United
States. Our Form 8-K, dated July 27, 2011, to which the following supplemental slides are attached as Exhibit
99.2, provides further explanation and disclosure regarding our use of non-GAAP financial measures and
should be read in conjunction with these supplemental slides.
Forward-Looking Statements
2
Exhibit 99-2
Table of Contents
3
Exhibit 99-2
Q2 2011 Summary (Q2 2011 vs. Q2 2010)
ü Revenue growth of 8.1%
― Inpatient revenue growth of 8.8% driven by volume and price
§ Discharge growth 6.1%; same-store discharge growth 3.5%
• Continued positive contribution from hospitals opened or acquired in the
last 12 months
last 12 months
§ Revenue per discharge increase of 2.6%
― Outpatient and other revenue benefited by $1.9 million in state provider taxes.
§ Q2 2011 had 29 outpatient satellite clinics vs. 38 in Q2 2010.
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Location
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# of Beds
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Transaction
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Date
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Loudoun County, VA
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40
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De Novo
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Q2 2010
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Las Vegas, NV
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50
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Acquired new IRF
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Q2 2010
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Bristol, VA
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25
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De Novo
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Q3 2010
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Houston, TX
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50
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Acquired new IRF
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Q3 2010
|
4
Exhibit 99-2
Q2 2011 Summary (Q2 2011 vs. Q2 2010) (cont.)
ü SWB as a percent of revenue decreased 60 bps.
ü Hospital-related expenses as a percent of revenue declined 40 bps.
ü Adjusted EBITDA(1) grew 14.8%.
ü Strong adjusted free cash flow generation (1)
― Higher Adjusted EBITDA
― Offset by anticipated increase in interest expense and maintenance capital
expenditures
expenditures
― Benefited from swap payment of $11.2 million in same period last year.
(1) Reconciliation to GAAP provided on slides 32, 33, 35, and 39.
5
Exhibit 99-2
Q2 2011 Summary (Q2 2011 vs. Q2 2010) (cont.)
ü Earnings per share from continuing operations attributable to HealthSouth were
impacted by the following non-recurring and tax-related items that in aggregate
decreased earnings per share by $0.33 per share in the second quarter of 2011
compared to the second quarter 2010 (see table on slide 13):
impacted by the following non-recurring and tax-related items that in aggregate
decreased earnings per share by $0.33 per share in the second quarter of 2011
compared to the second quarter 2010 (see table on slide 13):
§ $26.1 million, or $0.28 per share, loss (pre-tax) on early extinguishment of debt
related to the Company’s repayment of $335 million of 10.75% senior notes on
June 15, 2011.
related to the Company’s repayment of $335 million of 10.75% senior notes on
June 15, 2011.
§ $12.5 million, or $0.13 per share, increase in income tax expense mainly
aattributable to the release of the valuation allowance in Q4 2010
aattributable to the release of the valuation allowance in Q4 2010
§ $10.6 million, or $0.11 per share, gain (pre-tax) in government, class action,
and related settlements, and a $2.7 million, or $0.03 per share, expense (pre-
tax) for higher professional fees primarily related to recoveries
and related settlements, and a $2.7 million, or $0.03 per share, expense (pre-
tax) for higher professional fees primarily related to recoveries
6
The Company reported GAAP earning per basic share; diluted
earning per share is antidilutive for the quarter.
earning per share is antidilutive for the quarter.
Exhibit 99-2
Q2 2011 Summary (Q2 2011 vs. Q2 2010) (cont.)
ü Pending sale of five long-term acute care hospitals (LTCHs) for approx. $117.5 million.
― The LTCH in Houston will be retained and closed.
― Expect to close on the sale of the five LTCHs next week
― The six LTCHs contributed $121.7 million of net operating revenues and $17.5
million of Adjusted EBITDA in 2010.
million of Adjusted EBITDA in 2010.
― The six LTCHs have been reclassified to discontinued operations (retrospective
application to reported numbers for all of 2011 and prior periods).
application to reported numbers for all of 2011 and prior periods).
― The Company intends to use the proceeds along with revolver capacity and
cash on hand to retire the remaining 10.75% senior notes during the third
quarter.
cash on hand to retire the remaining 10.75% senior notes during the third
quarter.
ü Additional capital structure enhancements
― Amended the credit facility and added $100 million term loan maturing in 2016
― Reduced revolver spread 100 bps and extended maturity to 2016
― Completed initial call of $335 million in principal of the10.75% senior notes due
2016
2016
7
Exhibit 99-2
Q2 2011 Summary (Q2 2011 vs. Q2 2010) (cont.)
ü Growth
― De novo: Announced final CON approval for 40-bed inpatient rehabilitation
hospital in Marion County (Ocala), FL; expect to begin accepting patients Q1
2013.
hospital in Marion County (Ocala), FL; expect to begin accepting patients Q1
2013.
― Acquisition: Announced intent to purchase substantially all assets of Drake
Center’s inpatient rehabilitation services in Cincinnati, OH and sublease space
for the operation of a 38-bed inpatient rehabilitation hospital; expect to begin
accepting patients in Q4 2011.
Center’s inpatient rehabilitation services in Cincinnati, OH and sublease space
for the operation of a 38-bed inpatient rehabilitation hospital; expect to begin
accepting patients in Q4 2011.
ü TeamWorks Care Management implementation completed in 86 hospitals
ü Clinical information system (CIS)
― The Company signed an agreement with Cerner for company-wide
implementation starting in 2012.
implementation starting in 2012.
8
Exhibit 99-2
HealthSouth Functional Outcomes Continue to Outpace Industry Average
HealthSouth Average
UDS Average*
FIM Gain
LOS Efficiency
* Average = Expected, Risk-adjusted
Source: UDSmr Database - On Demand Report: Q2 2011 Report
FIM Gain
Change in Functional
Independence
Measurement (based
Independence
Measurement (based
on an 18 point
assessment) from
admission to discharge.
assessment) from
admission to discharge.
LOS Efficiency
Functional gain divided
by length of stay.
by length of stay.
High-Quality Care
9
Exhibit 99-2
ü Revenue growth of 8.1%
– Inpatient revenue growth of 8.8% driven by volume and price
§ Discharge growth of 6.1%; same-store discharge growth of 3.5%
• Continued positive contribution from hospitals opened or acquired in the last 12 months
§ Revenue per discharge increased 2.6%
– Outpatient and other revenue benefited by $1.9 million in state provider taxes.
§ Q2 2011 had 29 outpatient satellite clinics vs. 38 in Q2 2010.
10
Exhibit 99-2
Expenses (Q2 2011 vs. Q2 2010)
ü SWB as a percent of revenue decreased 60 bps.
ü Hospital-related expenses as a percent of revenue declined 40 bps.
11
Exhibit 99-2
Adjusted EBITDA Change
Q2 6 Months
+$14.9M +$31.2M
+14.8% +15.5%
Improvements driven by:
•Revenue growth driven by
higher volumes and price and
disciplined expense
management.
higher volumes and price and
disciplined expense
management.
Adjusted EBITDA (1)
12
Exhibit 99-2
Earnings per Share from
Continuing Operations (1)
Continuing Operations (1)
Impacted by the following non-
recurring and tax-related items
that in aggregate decreased
earnings per share by $0.33 in Q2
2011 vs. Q2 2010:
recurring and tax-related items
that in aggregate decreased
earnings per share by $0.33 in Q2
2011 vs. Q2 2010:
• $26.1 million, or $0.28 per share,
loss (pre-tax) on early
extinguishment of debt related
to the Company’s repayment
of $335 million of 10.75% senior
notes on June 15, 2011
loss (pre-tax) on early
extinguishment of debt related
to the Company’s repayment
of $335 million of 10.75% senior
notes on June 15, 2011
• $12.5 million, or $0.13 per
share, increase in income tax
expense mainly attributable to
the release of the valuation
allowance in Q4 2010
share, increase in income tax
expense mainly attributable to
the release of the valuation
allowance in Q4 2010
• $10.6 million, or $0.11 per share,
gain (pre-tax) in government,
class action, and related
settlements , and $2.7 million, or
$0.03 per share, expense (pre-
tax) for higher professional fees
primarily related to recoveries
gain (pre-tax) in government,
class action, and related
settlements , and $2.7 million, or
$0.03 per share, expense (pre-
tax) for higher professional fees
primarily related to recoveries
13
(1) Income from continuing operations attributable to HealthSouth
(2) Actual tax provision recorded for the period
(3) Cash income taxes for 3 and 6 months ended June 30, 2011 were $1.7 million and $4.2 million, respectively.
(4) During Q2 2010 and 6 months 2010, the Company maintained a valuation allowance against substantially all of its deferred tax assets. A substantial portion of the valuation
allowance was released in Q4 2010.
allowance was released in Q4 2010.
(5) Includes a $0.27 per diluted share benefit related to the Company’s settlement with the IRS for tax years 2007 and 2008 and a reduction in unrecognized tax benefits due to the
lapse of the statute of limitations for certain federal and state claims.
lapse of the statute of limitations for certain federal and state claims.
(6) Diluted earnings per share on a GAAP basis are the same as basic earnings per share due to the antidilutive impact in each period presented.
Exhibit 99-2
Adjusted Free Cash Flow
• Continued strong adjusted free cash flow generation
– Higher Adjusted EBITDA
– Offset by anticipated increases in interest expense and maintenance capital expenditures
– Final swap payment of $10.9 million was made in March 2011.
14
Exhibit 99-2
(1) Based on 2008 and trailing 4 quarter Adjusted EBITDA of $322.6 million and $440.8 million, respectively; reconciliation to GAAP provided
on slides 32-35 and 39.
on slides 32-35 and 39.
Debt, Liquidity, and Swaps
Liquidity
15
Credit Ratings
Exhibit 99-2
(2) Does not include $387.4 million of convertible perpetual preferred stock and capital leases and other note payables.
Debt Profile
16
Call schedule:
June 15, 2011 (price 105.375);
June 15, 2012 (price 103.583);
June 15, 2013 (price 101.792);
June 15, 2014 and thereafter
(price 100.000)
(price 100.000)
$500
Revolver
L+250
Retirement of the 10.75% Senior Notes
§ Completed call of $335 million in principal on June 15, 2011 (cash use approx. $353 million)
§ The Company intends to use the proceeds from the sale of five LTCHs along with revolver
capacity and cash on hand to retire the remaining 10.75% senior notes during the third
quarter.
capacity and cash on hand to retire the remaining 10.75% senior notes during the third
quarter.
§ The Company now expects interest expense(1) to be approx. $52 million in the second half
of 2011 and expects to record an additional approx. $13 million for loss on early
extinguishment of debt.
of 2011 and expects to record an additional approx. $13 million for loss on early
extinguishment of debt.
June 30 , 2011(2)
$48 LC
$312
Undrawn
Undrawn
2016
Exhibit 99-2
2011 Guidance - Adjusted EBITDA(1)
Original Guidance
Feb. 17, 2011
$440 million to $450 million
(Inclusive of 12 months LTCH
Adjusted EBITDA)
(Inclusive of 12 months LTCH
Adjusted EBITDA)
(1) Reconciliation to GAAP provided on slides 32-35 and 39.
Considerations:
üBad debt expense was 0.6% of revenue in second half of 2010; expect 2011
second half bad debt expense to be approximately 1.5% of revenue
second half bad debt expense to be approximately 1.5% of revenue
üMedicare pricing in Q4 2011 is expected to increase by approx. 2.0%.
üSWB as a percent of revenue is expected to be comparable to second half of
2010 (impact of care management investment, seasonally higher for vacations
and holidays; October merit increases).
2010 (impact of care management investment, seasonally higher for vacations
and holidays; October merit increases).
17
Updated
July 27, 2011
$447 million to $453 million
(exclusive of any LTCH
Adjusted EBITDA)
(exclusive of any LTCH
Adjusted EBITDA)
Revised Guidance
May 18, 2011
$440 million to $450 million;
(The high end of, or greater than,
exclusive of any LTCH Adjusted
EBITDA)
(The high end of, or greater than,
exclusive of any LTCH Adjusted
EBITDA)
Guidance essentially raised by the 2011
expected LTCH Adjusted EBITDA
($17.5 million EBITDA in 2010)
expected LTCH Adjusted EBITDA
($17.5 million EBITDA in 2010)
Reflects 9.1% to 10.6% growth over 2010
Exhibit 99-2
2011 Guidance - EPS
Basic Earnings per Share from
Continuing Operations Attributable
to HealthSouth (1)
Continuing Operations Attributable
to HealthSouth (1)
$1.17 to $1.22
Considerations:
ü Includes $26.1 million, or $0.28 per share, loss (pre-tax) on early extinguishment of debt related
to the Company’s repayment of $335 million of 10.75% senior notes on June 15, 2011.
to the Company’s repayment of $335 million of 10.75% senior notes on June 15, 2011.
ü Includes $0.27 per share benefit for Q1 2011 and assumes provision for income tax of 40% for
the remainder of 2011; cash taxes expected to be $5-$8 million.
the remainder of 2011; cash taxes expected to be $5-$8 million.
ü $10.6 million, or $0.11 per share, gain (pre-tax) in government, class action, and related
settlements, and a $2.7 million, or $0.03 per share, expense (pre-tax) for higher professional fees
primarily related to recoveries
settlements, and a $2.7 million, or $0.03 per share, expense (pre-tax) for higher professional fees
primarily related to recoveries
üThe Adjusted EBITDA ($17.5 million in 2010) associated with the Company’s six LTCHs has been
reclassified to discontinued operations.
reclassified to discontinued operations.
ü The Company now expects interest expense to be approx. $52 million in the second half of
2011 and expects to record an additional approx. $13 million for loss on early extinguishment of
debt.
2011 and expects to record an additional approx. $13 million for loss on early extinguishment of
debt.
(1) Income from continuing operations attributable to HealthSouth
18
Diluted earnings per share on a GAAP
basis are the same as basic earnings per
share due to the antidilutive impact in
the period.
basis are the same as basic earnings per
share due to the antidilutive impact in
the period.
Exhibit 99-2
(2) Income from continuing operations attributable to HealthSouth (reclassified for the 6 LTCHs moving to discontinued operations)
(3) Current period amounts in income tax provision; see slides 36 - 37.
(4) Total income tax provision for full-year 2010, including the reversal of a substantial portion of the Company's valuation allowance against deferred tax
assets.
assets.
(5) Includes a $0.27 per diluted share benefit related to the Company’s settlement with the IRS for tax years 2007 and 2008, and a reduction in unrecognized
tax benefits due to the lapse of the statute of limitations for certain federal and state claims.
tax benefits due to the lapse of the statute of limitations for certain federal and state claims.
19
Exhibit 99-2
Adjusted Free Cash Flow (1) Considerations
(1) Numbers in chart reflect reclassification of LTCHs to discontinued operations; reconciliation to GAAP provided on slide 38.
HealthSouth’s GAAP income statement will be affected by a
number of items that will not affect adjusted free cash flow:
number of items that will not affect adjusted free cash flow:
•Normalized GAAP tax rate resulting from the valuation
allowance reversal in Q4 2010.
allowance reversal in Q4 2010.
•Loss on early extinguishment of debt
Business Model Multi-Year Adjusted Free Cash Flow 12% to 17% CAGR
20
Exhibit 99-2
Appendix
Exhibit 99-2
Income Tax Considerations
|
GAAP Considerations:
•As of 6/30/11, the Company had an ending balance of approx. $1.4 billion in federal
NOLs and a remaining valuation allowance of approx. $106 million, primarily related to state NOLs. •Expect effective tax rate of approx. 40% going forward
Future Cash Tax Payments:
•The Company expects to pay approx. $5-$8 million per year of income tax.
•The Company does not expect to pay significant federal income taxes for up to 7
years. •HealthSouth is not currently subject to an annual use limitation (“AUL”) under Internal
Revenue Code Section 382 (“Section 382”). A “change of ownership,” as defined by Section 382, would subject us to an AUL, which is equal to the market capitalization of the Company at the time of the “change of ownership” multiplied by the long-term tax exempt rate. |
22
Exhibit 99-2
(1) Data provided by UDSMR, a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry,
including HealthSouth sites.
including HealthSouth sites.
(2) Includes consolidated HealthSouth inpatient rehabilitation hospitals classified as same store during that time period.
• HealthSouth’s
volume growth has
outpaced
competitors’.
volume growth has
outpaced
competitors’.
• TeamWorks =
standardized and
enhanced sales &
marketing
standardized and
enhanced sales &
marketing
• Bed additions will
help facilitate
continued organic
growth.
help facilitate
continued organic
growth.
4.7%
5.9%
5.9%
5.8%
5.9%
2.7%
2.5%
1.3%
23
2008 vs. 2009 vs. 2010 vs. Q110 vs. Q210 vs. Q310 vs. Q410 vs. Q111 vs. Q211 vs.
2007 2008 2009 Q109 Q209 Q309 Q409 Q110 Q211
Exhibit 99-2
Debt Schedule
(1) Based on 4 quarter trailing and 2010 Adjusted EBITDA of $440.8 million and $409.6 million, respectively; reconciliation to GAAP provided
on slides 32, 33, 35, and 39.
on slides 32, 33, 35, and 39.
24
Exhibit 99-2
Revenues & Expenses (6 Months)
25
Exhibit 99-2
Revenues & Expenses (Sequential)
26
Exhibit 99-2
Payment Sources (Percent of Revenue)
(1) Managed Medicare revenues represent ~ 7%, 8%, 7%, 8%, 8% and 8% of total revenues for Q2 2011, Q2 2010, 6 Months 2011, 6 Months
2010, Full Year 2010 and Historical Reported 2010, respectively, and are included in “Managed care and other discount plans.”
2010, Full Year 2010 and Historical Reported 2010, respectively, and are included in “Managed care and other discount plans.”
27
Exhibit 99-2
Operational and Labor Metrics (1)
(1) Numbers have been reclassified to reflect current continuing operations.
(2) Represents discharges from HealthSouth’s 94 consolidated hospitals in Q2 2011, Q1 2011, Q4 2010 and Q3 2010, 92 consolidated
hospitals in Q2 2010, and 90 consolidated hospitals prior to Q2 2010.
hospitals in Q2 2010, and 90 consolidated hospitals prior to Q2 2010.
(3) Excludes approximately 400 full-time equivalents, who are considered part of corporate overhead with their salaries and benefits
included in general and administrative expenses in the Company’s consolidated statements of operations. Full-time equivalents
included in the above table represent HealthSouth employees who participate in or support the operations of the Company’s
hospitals.
included in general and administrative expenses in the Company’s consolidated statements of operations. Full-time equivalents
included in the above table represent HealthSouth employees who participate in or support the operations of the Company’s
hospitals.
(4) Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full-
time equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of
occupied beds is determined by multiplying the number of licensed beds by the Company’s occupancy percentage.
time equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of
occupied beds is determined by multiplying the number of licensed beds by the Company’s occupancy percentage.
28
Exhibit 99-2
29
(1) General and administrative excludes stock-based compensation.
(2) Represents discharges from HealthSouth’s 94 consolidated hospitals Q1 2011, Q4 2010 and Q3 2010, 92 consolidated hospitals Q2 2010, and 90 consolidated hospitals prior to
Q2 2010.
Q2 2010.
(3) Excludes approximately 400 full-time equivalents, who are considered part of corporate overhead with their salaries and benefits included in general and administrative
expenses in the Company’s consolidated statements of operations. Full-time equivalents included in the above table represent HealthSouth employees who participate in or
support the operations of the Company’s hospitals.
expenses in the Company’s consolidated statements of operations. Full-time equivalents included in the above table represent HealthSouth employees who participate in or
support the operations of the Company’s hospitals.
(4) Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full-time equivalents from the utilization of
contract labor, by the number of occupied beds during each period. The number of occupied beds is determined by multiplying the number of licensed beds by the
Company’s occupancy percentage.
contract labor, by the number of occupied beds during each period. The number of occupied beds is determined by multiplying the number of licensed beds by the
Company’s occupancy percentage.
Exhibit 99-2
30
Notes:
(1) Does not include 2.0 million warrants issued in connection with a January 2004 loan repaid to Credit Suisse First Boston. In connection
with this transaction, we issued warrants to the lender to purchase two million shares of our common stock. Each warrant has a term
of ten years from the date of issuance (expire January 16, 2014) and an exercise price of $32.50 per share. The warrants were not
assumed exercised for dilutive shares outstanding because they were antidilutive in the periods presented.
with this transaction, we issued warrants to the lender to purchase two million shares of our common stock. Each warrant has a term
of ten years from the date of issuance (expire January 16, 2014) and an exercise price of $32.50 per share. The warrants were not
assumed exercised for dilutive shares outstanding because they were antidilutive in the periods presented.
(2) The agreement to settle our class action securities litigation received final court approval in January 2007. These shares of common
stock and warrants were issued on September 30, 2009. The 5.0 million of common shares are now included in the outstanding shares.
The warrants to purchase approx. 8.2 million shares of common stock at a strike price of $41.40 (expire January 17, 2017) were not
assumed exercised for the dilutive shares outstanding because they are anti-dilutive in the periods presented.
stock and warrants were issued on September 30, 2009. The 5.0 million of common shares are now included in the outstanding shares.
The warrants to purchase approx. 8.2 million shares of common stock at a strike price of $41.40 (expire January 17, 2017) were not
assumed exercised for the dilutive shares outstanding because they are anti-dilutive in the periods presented.
(3) The difference between the basic and diluted shares outstanding is primarily related to our convertible perpetual preferred stock
(13.1 million shares). The preferred stock is convertible, at the option of the holder, at any time into shares of common stock at an
initial conversion price of $30.50 per share, which is equal to an initial conversion rate of approximately 32.7869 shares of common
stock per share of preferred stock, subject to a specified adjustment. On or after July 20, 2011, we may cause the shares of preferred
stock to be automatically converted into shares of our common stock at the conversion rate then in effect if the closing price of our
common stock for 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date we
give the notice of forced conversion exceeds 150% of the conversion price of the preferred stock.
(13.1 million shares). The preferred stock is convertible, at the option of the holder, at any time into shares of common stock at an
initial conversion price of $30.50 per share, which is equal to an initial conversion rate of approximately 32.7869 shares of common
stock per share of preferred stock, subject to a specified adjustment. On or after July 20, 2011, we may cause the shares of preferred
stock to be automatically converted into shares of our common stock at the conversion rate then in effect if the closing price of our
common stock for 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date we
give the notice of forced conversion exceeds 150% of the conversion price of the preferred stock.
Exhibit 99-2
Adjusted EBITDA (1) History
31
Exhibit 99-2
Reconciliation of Net Income to Adjusted EBITDA (1)(3)
(1) (2) (3) - Notes on page 35
32
Exhibit 99-2
Reconciliation of Net Income to Adjusted EBITDA (1)(3)
(1) (2) (3) - Notes on page 35.
33
Exhibit 99-2
Reconciliation of Net Income to Adjusted EBITDA (1) (3)
(1) (2) (3) - Notes on page 35.
34
Exhibit 99-2
Reconciliation Notes for Slides 32-34
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 utilize Adjusted EBITDA as a financial measure and the leverage ratio as a
liquidity measure on an ongoing basis. These measures are not recognized in
accordance with GAAP and should not be viewed as an alternative to GAAP
measures of performance or liquidity. In evaluating Adjusted EBITDA, the reader should
be aware that in the future HealthSouth may incur expenses similar to the adjustments
set forth.
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 utilize Adjusted EBITDA as a financial measure and the leverage ratio as a
liquidity measure on an ongoing basis. These measures are not recognized in
accordance with GAAP and should not be viewed as an alternative to GAAP
measures of performance or liquidity. In evaluating Adjusted EBITDA, the reader should
be aware that in the future HealthSouth may incur expenses similar to the adjustments
set forth.
2. Per share amounts for each period presented are based on diluted weighted average
shares outstanding unless the amounts are antidilutive, in which case the per share
amount is calculated using the basic share count after subtracting the $6.5 million per
quarter dividend on the convertible perpetual preferred stock. The difference in shares
between the basic and diluted shares outstanding is primarily related to our
convertible perpetual preferred stock.
shares outstanding unless the amounts are antidilutive, in which case the per share
amount is calculated using the basic share count after subtracting the $6.5 million per
quarter dividend on the convertible perpetual preferred stock. The difference in shares
between the basic and diluted shares outstanding is primarily related to our
convertible perpetual preferred stock.
3. Adjusted EBITDA is a component of our guidance.
35
Exhibit 99-2
36
Exhibit 99-2
Reconciliation Notes for Slide 36
1. Adjusted income from continuing operations and Adjusted EBITDA are non-GAAP
financial measures. 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 utilize
adjusted income from continuing operations as a financial measure and Adjusted
EBITDA and the leverage ratio as liquidity measures on an ongoing basis. These
measures are not recognized in accordance with GAAP and should not be viewed as
an alternative to GAAP measures of performance or liquidity. In evaluating these
adjusted measures, the reader should be aware that in the future HealthSouth may
incur expenses similar to the adjustments set forth.
financial measures. 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 utilize
adjusted income from continuing operations as a financial measure and Adjusted
EBITDA and the leverage ratio as liquidity measures on an ongoing basis. These
measures are not recognized in accordance with GAAP and should not be viewed as
an alternative to GAAP measures of performance or liquidity. In evaluating these
adjusted measures, the reader should be aware that in the future HealthSouth may
incur expenses similar to the adjustments set forth.
2. Per share amounts for each period presented are based on basic weighted average
common shares outstanding for all amounts except adjusted income from continuing
operations per diluted share, which is based on diluted weighted average shares
outstanding. The difference in shares between the basic and diluted shares
outstanding is primarily related to our convertible perpetual preferred stock.
common shares outstanding for all amounts except adjusted income from continuing
operations per diluted share, which is based on diluted weighted average shares
outstanding. The difference in shares between the basic and diluted shares
outstanding is primarily related to our convertible perpetual preferred stock.
3. Adjusted income from continuing operations per diluted share and Adjusted EBITDA
are two components of our historical guidance.
are two components of our historical guidance.
4. The Company’s credit agreement allows certain other items to be added to arrive at
Adjusted EBITDA, and there may be certain other deductions required.
Adjusted EBITDA, and there may be certain other deductions required.
37
Exhibit 99-2
Adjusted Free Cash Flow
(1) Maintenance capital expenditures are expected to be $20 million higher in 2011 than in 2010.
(2) Final swap payment of $10.9 million was made in March 2011.
38
Exhibit 99-2
Net Cash Provided by Operating Activities
39