Exhibit 99.1
Bank of America Merrill Lynch Leveraged Finance Conference
Orlando, FL| November 30, 2011
Orlando, FL| November 30, 2011
Doug Coltharp, Executive Vice President and Chief Financial Officer
Ed Fay, Senior Vice President and Treasurer
Exhibit 99.1
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, capital expenditures, financial performance, and
business model. 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 outlook, views and plans with respect to future events, including
legislative and regulatory developments, strategy, capital expenditures, financial performance, and
business model. 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, the Form 10-Q for the quarters ended September 30, 2011, June 30, 2011,
and March 31, 2011, and in other documents we previously filed with the SEC, many of which are beyond
our control, that may cause actual 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, the Form 10-Q for the quarters ended September 30, 2011, June 30, 2011,
and March 31, 2011, and in other documents we previously filed with the SEC, many of which are beyond
our control, that may cause actual 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 November 30, 2011, to which the following supplemental slides are attached as
Exhibit 99.1, 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 November 30, 2011, to which the following supplemental slides are attached as
Exhibit 99.1, 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 99.1
Inpatient Rehabilitation Hospitals (“IRF”) | |
Outpatient Rehabilitation Satellite Clinics | |
Hospital-Based Home Health Agencies | |
Employees | |
Revenue in 2010 | |
Inpatient Discharges in 2010 | |
Outpatient Visits in 2010 | |
Number of States | |
NYSE (HLS) | Exchange (Symbol) |
3
Largest Provider of Inpatient Rehabilitative Healthcare Services in the U.S.
Marketshare |
~ 8% of IRFs (Total in U.S. = 1,152) ~ 19% of Licensed Beds ~ 23% of Patients Served |
CON approved for Ocala, FL;
expect to be operational Q4
2012
expect to be operational Q4
2012
CON approved for Stuart, FL
(Martin County); expect to be
operational Q3 2013
(Martin County); expect to be
operational Q3 2013
Our Hospitals
Major Services
• Rehabilitation Physicians: manage and treat medical needs of patients
• Rehabilitation Nurses: oversee treatment programs of patients
• Physical Therapists: address physical function, mobility, safety
• Occupational Therapists: promote independence and re-integration
• Speech-Language Therapists: treat communication & swallowing disorders
• Case Managers: coordinate care plan with physician, caregivers and family
• Post-discharge services: outpatient therapy and home health
4
Exhibit 99.1
Our Patients
5
Most Common Conditions (Q3 2011)
1.Neurological 17.1%
2.Stroke 16.9%
3.Debility 10.9%
4.Fracture of the lower extremity 10.2%
5.Other orthopedic conditions 9.9%
6.Knee/Hip replacement 8.5%
7.Brain injury 7.7%
8.Cardiac conditions 4.2%
9.Spinal cord injury 2.8%
10.All other 11.8%
Referral Sources
94% Acute Care Hospitals
5% Physician Offices
1% Skilled Nursing Facilities
Admission to an IRF
• Physicians and acute care
hospital case managers are key
decision-makers.
hospital case managers are key
decision-makers.
• All IRF patients must meet
reasonable and necessary criteria
and must be admitted by a
physician.
reasonable and necessary criteria
and must be admitted by a
physician.
• All IRF patients must be medically
stable and have potential to
tolerate three hours of therapy per
day (minimum).
stable and have potential to
tolerate three hours of therapy per
day (minimum).
• IRF patients receive 24-hour, 7
days a week nursing care.
days a week nursing care.
• Average length of stay (ALOS) =
~14 days
~14 days
Exhibit 99.1
Exhibit 99.1
Volume:
• Q3 2011 YTD discharge growth of 6.3%
• On track to achieve 1.0% to 2.0% discharge growth in Q4 2011
− Strong volume comparison in Q4 2010 of 5.9%
− Would bring full-year discharge growth to between 4.9% and 5.2%
Guidance confirmation for full year 2011 Adjusted EBITDA (1) :
• Q3 2011 YTD Adjusted EBITDA of $343.3 million, an increase of 15.4% over YTD 2010
• Full-year Adjusted EBITDA guidance of $450 million to $455 million, an increase of
9.9% to 11.1% over 2010
9.9% to 11.1% over 2010
Growth:
• HealthSouth Rehabilitation Hospital of Cypress, TX began accepting patients on
October 24, 2011.
October 24, 2011.
Q4 2011 Observations (as of November 30, 2011)
6
(1) Reconciliation to GAAP provided on slides 16,17,18, and 20
Exhibit 99.1
HealthSouth is now positioned with a lower-cost, flexible capital
structure…
structure…
7
$500
Revolver
L+225
September 30 , 2011 (3)
$276
Undrawn
Undrawn
2016
10% of the outstanding principal is
currently callable per annum at 103%
currently callable per annum at 103%
(1) Based on trailing four-quarter Adjusted EBITDA of $455.4 million; reconciliation to GAAP provided on slides 16,17,18, and 20.
(2) The credit agreement has a $200 million restricted payment basket for debt repayment and stock repurchases, which is subject to
an annual grower basket equal to 50% of excess cash flow plus certain other amounts including net cash proceeds from certain
equity issuances.
an annual grower basket equal to 50% of excess cash flow plus certain other amounts including net cash proceeds from certain
equity issuances.
(3) Does not include $387.4 million of convertible perpetual preferred stock and capital leases and other note payables.
Capital Structure Enhancements:
§Completed the retirement of the 10.75% notes due 2016
§Reduced total debt by $131 million during Q3 2011; Reduced total debt by $184 since year-end 2010.
§Leverage ratio reduced to 2.9x (1)
Debt Profile:
§Additional debt pre-payment opportunities and flexible covenants (2)
§No near-term maturities and well-spaced debt maturities
§Limited exposure to higher interest rates
8
Leverage Ratio(1)
(billions)
(1) Reconciliation to GAAP provided on slides 16 - 20.
(2) Expect full-year adjusted free cash flow to be at least $210 million reflecting growth over full-year 2010 of at least 16%.
Interest Expense
$229
$131
Exhibit 99.1
Exhibit 99.1
HealthSouth’s priorities for reinvesting free cash flow…
9
• Additional debt prepayment (revolver, term loan and
senior notes)
senior notes)
• Growth in core business
• Bed expansions
• De novo hospitals
• Hospital acquisitions
• Acute care IRF unit acquisitions/consolidations
• Purchase properties under operating leases
• Lower capital cost
• Greater control of property, CON and/or license
• Share repurchase ($125 million authorization)
− Offset dilution from shares underlying convertible
preferred stock (13.1 million shares), issued in
settlement of securities litigation (5.0 million
shares), and issued as a result of the Company’s
employee stock incentive plan
preferred stock (13.1 million shares), issued in
settlement of securities litigation (5.0 million
shares), and issued as a result of the Company’s
employee stock incentive plan
• Cash dividends (one time or regular)
Expect full-year adjusted free
cash flow (1) to be at least $210
million reflecting growth over full
-year 2010 of at least 16% (as of
November 30, 2011)
cash flow (1) to be at least $210
million reflecting growth over full
-year 2010 of at least 16% (as of
November 30, 2011)
(1) Reconciliation to GAAP provided on slide 19.
10
Medicare Reduction Emanating from the Budget Control Act:
2% Sequestration
2% Sequestration
Estimated Impact to
HealthSouth
HealthSouth
Budget Control Act
Comments
§ Special Committee fails and
sequestration is triggered
sequestration is triggered
− Medicare limited to 2%
sequestration
sequestration
(million)
Net Operating Revenues ($32.0)
Adjusted EBITDA ($32.0)
Note: Effective 1/1/13; impact is
shown for 2013
shown for 2013
(1) In any year for which there is sequestration, the reduction would be made from whatever level of payment would otherwise be provided
under Medicare law and regulations. For example, if hospital prospective payments were scheduled to increase by 4 percent, then a 2
percent reduction (that is, payment of 98 percent of the normal payment amount) would permit some increase to remain. (Source:
Conference Committee Report on the Balanced Budget and Emergency Deficit Control Act of 1985 as Applicable to Medicare and
Medicaid Programs. Congressional Record (H 11706-11707) December 10, 1985)
under Medicare law and regulations. For example, if hospital prospective payments were scheduled to increase by 4 percent, then a 2
percent reduction (that is, payment of 98 percent of the normal payment amount) would permit some increase to remain. (Source:
Conference Committee Report on the Balanced Budget and Emergency Deficit Control Act of 1985 as Applicable to Medicare and
Medicaid Programs. Congressional Record (H 11706-11707) December 10, 1985)
• Effective 1/1/13; impact is shown for 2013
• Beyond 2013:
− Medicare reimbursement would be
subject to market basket updates less
healthcare reform adjustments.
subject to market basket updates less
healthcare reform adjustments.
− Medicare revenues may continue to be
subject to sequestration (1)
subject to sequestration (1)
Above estimates assume no mitigating actions by HealthSouth
Exhibit 99.1
Exhibit 99.1
HealthSouth has successfully managed through
Medicare payment cuts and an economic recession…
Medicare payment cuts and an economic recession…
11
Adjusted EBITDA ($million)
Discharges
Strong and Sustainable Business Fundamentals
Growth Opportunities
Financial Strengths
Industry Leading Position
Attractive Healthcare Sector
12
Cost-Effectiveness
Real Estate Portfolio
(1) Inclusive of non-consolidated entities
Exhibit 99.1
Appendix
Exhibit 99.1
Exhibit 99.1
Note: These numbers are program spending only and do not include beneficiary copayments.
Sources: Center for Medicare & Medicaid Services, Medicare Trustees Report May 2011 - Page 45 and Medpac Data Book, June 2011 -
page 122
page 122
Skilled nursing
facilities 18.1%
facilities 18.1%
Home health
agencies 17.7%
agencies 17.7%
Inpatient
rehabilitation
hospitals 8.4%
Long-term acute
care hospitals 5.7%
14
2009
Medicare
Margin
Medicare
Margin
Post-Acute Settings
Inpatient rehabilitation
spending (% of total
Medicare spending)
spending (% of total
Medicare spending)
Debt Schedule
(1) Based on 4 quarter trailing and 2010 Adjusted EBITDA of $455.4 million and $409.6 million, respectively; reconciliation to GAAP provided
on slides 16,17,18, and 20.
on slides 16,17,18, and 20.
15
Exhibit 99.1
Reconciliation of Net Income to Adjusted EBITDA (1)(3)
(1) (2) (3) (4) - Notes on page 18
16
Exhibit 99.1
Reconciliation of Net Income to Adjusted EBITDA (1)(3)
(1) (2) (3) (4) - Notes on page 18.
17
Exhibit 99.1
Reconciliation Notes for Slides 16-17
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.
4. The dividends related to our convertible perpetual preferred stock must be subtracted
from income from continuing operations when calculating basic earnings per share.
from income from continuing operations when calculating basic earnings per share.
18
Exhibit 99.1
Exhibit 99.1
Adjusted Free Cash Flow
(1) Maintenance capital expenditures are expected to be approx $50 million in 2011 and $75 million in 2012.
(2) Final swap payment of $10.9 million was made in March 2011.
19
Net Cash Provided by Operating Activities
20
Exhibit 99.1