EXHIBIT 99-2
TEXT OF INVESTOR RELATIONS SLIDESHOW/ELECTRONIC ROADSHOW IN USE
BEGINNING SEPTEMBER 7, 2001
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FORWARD-LOOKING STATEMENTS
Except for historical information discussed, the statements made today are
forward-looking statements that involve risks and uncertainties. Investors are
cautioned that such statements are only predictions and that actual events or
results may differ materially. These forward-looking statements speak only as of
this date. HEALTHSOUTH undertakes no obligation to publicly release the results
of any revisions to the forward-looking statements made today to reflect events
or circumstances after today or to reflect the occurrence of unanticipated
events. Please refer to our SEC filings for a description of some of the factors
that may affect the accuracy of such forward-looking statements.
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MANAGEMENT REPRESENTATIVES
o Bill Owens -- President and Chief Operating Officer
o Weston Smith -- Executive Vice President and Chief Financial
Officer
o Tadd McVay -- Executive Vice President and Treasurer
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AGENDA
o Offering Summary
o Overview of HEALTHSOUTH
o Overview of Operating Segments
o Financial Overview
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PROPOSED OFFERING SUMMARY
o Issuer: HEALTHSOUTH Corporation
o Amount: $500 Million
o Ranking: Senior Notes
o Maturity: 5 year and/or 10 year
o Format: Rule 144A with Registration Rights
o Rating: Ba1 / BBB- (Stable Outlook)
o Use of Proceeds: Repay Bank Debt
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KEY INVESTMENT CONSIDERATIONS
o Leading Provider in Core Business Lines & One of the Largest Healthcare
Providers in the US
o Strong Credit Profile due to High Cash Flow Margins & Conservative Balance
Sheet
o Strategy Focused on Maximizing the Financial Performance and Value of the Core
Franchise
o Network of High-Quality, State-of-the-Art Facilities
o Strong Commitment to Investment Grade Rating
o Experienced and Deep Management Team
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COMPANY OVERVIEW
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LEADING HEALTHCARE PROVIDER
o Over 1,900 Facilities in all 50 States and Every Major Metropolitan Market
o Largest Operator of:
- Inpatient and Outpatient Rehabilitation Facilities
- Freestanding Outpatient Surgery Centers
- Freestanding Diagnostic Centers
o Over $4.0 Billion in Revenue with $1.2 Billion EBITDA Run Rate
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SIGNIFICANT PRESENCE IN EVERY MAJOR MARKET
[Map omitted]
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LEADING HEALTHCARE PROVIDER
o Strong Credit Profile due to High Cash Flow Margins and Conservative Balance
Sheet
o Up to 100,000 Patients Treated per Day
o Approximately 85,000 Referring Physicians
o Excellent Relationships with National and Regional Payors
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LEADING FRANCHISE
o No One Can Duplicate What HRC Has Built Over the Last 17 Years
o HRC Has "Virtual Patent" on Ambulatory Healthcare Delivery
o HRC Has "Virtual Patent" on Freestanding Inpatient Rehabilitation Care
o HRC Leads the Industry in All Core Business Lines
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EXPERIENCED MANAGEMENT TEAM
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NAME TITLE AND POSITION AGE YEARS WITH
COMPANY
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Richard M. Scrushy Chairman and Chief Executive Officer 49 17
William T. Owens President and Chief Operating Officer; Director 42 15
Patrick A. Foster President - Inpatient Services 55 7
Larry D. Taylor President - Ambulatory Services 43 14
Thomas W. Carman EVP - Corporate Development 50 16
William W. Horton EVP and Corporate Counsel 41 7
Malcolm E. McVay EVP and Treasuerer 39 2
Weston L. Smith EVP and Chief Financial Officer 40 14
Brandon O. Hale SVP - Administration and Secretary 51 14
Susan M. Jones SVP - Reimbursement 36 11
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PROVIDER OF CHOICE
o Demographics Favor Outpatient Services Over Traditional Acute-Care Offerings
o Our Integrated Service Model Moves the Patient Through the System More
Efficiently
o HRC Is a Leader in Technological Advances
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STRONG BRAND RECOGNITION
o Strong Brand Name Reflects
- Service Excellence
- Superior Patient Outcomes
- Exceptional Patient Satisfaction
o Branding Efforts Encourage Repeat Business (Same Store Growth)
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PARTNER OF CHOICE
o Strong Physician Relationships
- Approximately 85,000 Referring Physicians
- Superior Clinical Outcomes
- Convenience, Efficiency and State-of-the-Art Equipment
- Professional Websites and Web-Enabled Scheduling for Affiliated Physicians
o Strong Payor Relationships
- National Footprint
- Proven, Cost-Effective Outcomes
- Preferred Partner for National Electronic Claims Platform
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HRC'S COMPETITIVE ADVANTAGES
o Unique National Presence
o Strong Brand Equity and Relationships with Leading Professional and Amateur
Sports Organizations
[Graphic Omitted]
o Extensive Orthopaedic Expertise ("Best Practice" Techniques)
o Low-Cost, Efficient Provider
o Superior Clinical Outcomes with Exceptional Patient Satisfaction
o Nationwide Credentialing Program
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BUSINESS OVERVIEW
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SUBSTANTIAL AND DIVERSIFIED REVENUE BASE
LTM TOTAL REVENUE: $4,327 MILLION
[Graphic omitted]
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OUTPATIENT REHABILITATION
Services provided include rehabilitation programs for orthopaedic, sports and
work-related injuries
o Market Size = $10 Billion
o Estimated Annual Industry Growth Rate of 5%
o Payor Mix = 10% Medicare; 90% Non-Medicare
o HEALTHSOUTH:
- #1 Market Share (10%)
- 1,432 Outpatient Rehabilitation Centers in All 50 States and the UK
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OUTPATIENT SURGERY
Provider of orthopaedic, plastic, ENT and other surgical procedures on an
outpatient basis
o Market Size = $6 Billion
o Estimated Annual Industry Growth Rate of 7-9%
o Payor Mix = 20% Medicare; 80% Non-Medicare
o HEALTHSOUTH:
- #1 Market Share (16%)
- 216 Surgery Centers in 38 States
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SURGERY CENTER INITIATIVES
o Opportunity to Bring in New Surgeons To Drive Case Volumes
o Goal of Adding 1,000 New Surgical Partners
o Operating at 50% Capacity Today; Incremental Volume Generates High EBITDA
Margin (40%+)
o Focus on Orthopaedics and Plastics
- Superior Pricing
- High Private Pay on Plastics
o Solidifies Physician Relationship
o Enhances Cross-Referrals for Physical Therapy and Diagnostic
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SURGERY CENTER INITIATIVES (CONT'D)
o 1,000 New Surgical Partners
o Perform 1 Case per Day
o Average Pricing of $1,100/Case
o 40% EBITDA Margin
o HRC Ownership Decreases From 67% to 60%
Result: Approximately $111MM Incremental EBITDA
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SURGERY CENTERS INITIATIVES UPDATE
o Added 282 New Physicians in 2000
- Majority Added in 4Q00
o Increased Physician Base 7% in 2000 Due to Syndication
o Added Approximately 143 New Physicians Year To Date 2001
o Syndication Efforts Paying Off: Same Store Growth of 7.2% in 2Q01
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DIAGNOSTIC IMAGING
Provider of imaging services, including magnetic resonance imaging (MRI),
computerized tomography (CT), X-rays, ultrasounds, mammography and fluoroscopy
o Market Size = $8 Billion
o Estimated Annual Industry Growth Rate of 8 - 10%
o Payor Mix = 15% Medicare; 85% Non-Medicare
o HEALTHSOUTH:
- #1 Market Share (4%)
- 140 Diagnostic Centers in 30 States and the UK
- Ideal Strategic and Operational Fit with Other Business Lines
- Significant Cross-Referral Opportunities
- Completes Patient Care Cycle
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INPATIENT REHABILITATION
Provider of rehabilitation services for orthopaedic conditions, strokes, brain
and spinal cord injuries, neuromuscular disease and amputees
o Market Size = 35,000 Beds and 450,000 Patients per Year
o Estimated Annual Industry Growth Rate of 4-5%
o Payor Mix = 70% Medicare; 30% Non-Medicare
o HEALTHSOUTH:
- #1 Market Share (10%)
- 60% of All Freestanding Inpatient Rehabilitation Facilities
- 22% of All Inpatient Rehabilitation Beds
- 120 Facilities with 7,556 Beds
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INPATIENT REHABILITATION PPS UPDATE
o Final Rules & Rates Issued August 7, 2001
o Implementation Scheduled for January 1, 2002
o Final Rule Improvements:
- Base Rate (Before Adjustments) of $11,838 per Discharge - Up from $11,509 in
Preliminary Rules
- HRC Expects Approximately $11,200 per Discharge
- Patient Assessment Changed to Industry Standard FIM Scores - Less Costly
than Preliminary Version
HIGHER REIMBURSEMENT, LOWER ADMINISTRATIVE COSTS
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INPATIENT REHABILITATION PPS
FAVORABLE COST TRENDS
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1997 1998 1999 Current
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Cost per Medicare Discharge $11,504 $10,754 $9,940 ~ $9,600
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Medicare Discharges 60,036 60,606 65,927 ~70,000
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POTENTIAL IMPACTS OF INPATIENT REHABILITATION PPS
o Potential Impact of PPS at Full Implementation:
$1,600 x 70,000 Discharges = $112MM (Pre-tax)
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FINANCIAL OVERVIEW
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PRIOR OPERATING STRATEGY
o Rapid Acquisition/Consolidation Focus
o Establish Nationwide Network
o Substantial CapEx Required to Upgrade to HRC Standards
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CURRENT OPERATING STRATEGY
o Increase Utilization of Existing Facilities (Minimal CapEx)
o Fuel Growth with De Novo Development in Select Markets
o Incorporate Technological Innovations/Partnerships to Drive Efficiencies
o Strict Return Requirements (20% ROE Hurdle Rate)
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RESULT: SUBSTANTIAL FREE CASH FLOW
Change in Operating Strategy Leads to:
o High Internal Growth Rates
o Expanding Operating Margins
o Less Integration Risk
o Substantial Free Cash Flow
HRC MOVING FROM GROWTH BY ACQUISITION TO
STRONG, SUSTAINABLE GROWTH FROM OPERATIONS
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SECOND QUARTER HIGHLIGHTS
o Record Quarterly Revenues of $1.1 Billion (Up 9% Over 2Q00 excluding
Occupational Medicine Division)
o EBITDA Margin Improvement (28.1% vs. 26.6% in 2Q00)
o Operating Earnings Up 27% (vs. 2Q00)
o Same Store Volume Growth Across All Business Lines
o Pricing Increases Across All Business Lines
o $0.21 EPS Exceeded Consensus Estimate of $0.20 (Up 24%)
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2001 YTD ACCOMPLISHMENTS
o DSO's Down 5 Days YTD (Currently 76 Days)
o Reduced Debt by $111MM YTD
o Early Retirement of $400MM Secondary Line of Credit
o Divestitures
- Occupational Medicine Business (4/1/01)
- Richmond Medical Center (6/29/01)
o On Pace with Annual CapEx Budget of $350-$450MM
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FREE CASH FLOW GENERATION AND DELEVERAGING
($US in millions)
6/30/00 6/30/01 Variance
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LTM Debt/EBITDA 3.0x 2.6x (0.4x)
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Bank Debt $1,776 $1,205 ($571)
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Total Debt $3,260 $3,101 ($159)
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REVENUE TREND
[Graphic omitted]
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EBITDA Trend
[Graphic omitted]
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EBITDA MARGIN TREND
[Graphic omitted]
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SOURCES AND USES
Sources ($mm) Uses ($mm)
Senior Notes $500.0 Repay Bank Debt $491.8
Estimated Fees and Expenses 8.3
Total $500.0 $500.0
PRO FORMA REVOLVER AVAILABILITY OF APPROXIMATELY $1.0B
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PRO FORMA CAPITALIZATION
($mm)
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MATURITY 6/30/01 PF CLOSING (1)
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Revolving Credit Facility ($1.75bn) 2003 $1,205.0 $713.3
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6.875% Senior Notes 2005 250.0 250.0
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7.000% Senior Notes 2008 250.0 250.0
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8.500% Senior Notes 2008 375.0 375.0
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`New' Senior Notes 2006/2011 -- 500.0
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TOTAL SENIOR DEBT $2,080 $2,088.3
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10.750% Senior Sub Notes 2008 $350.0 $350.0
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3.250% Convertible Subordinated
Debentures 2003 567.8 567.8
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Other Debt 103.5 103.5
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TOTAL DEBT $3,101.3 $3,109.5
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STOCKHOLDERS' EQUITY $3,614.1 $3,614.1
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TOTAL CAPITALIZATION $6,715.4 $6,723.6
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(1) PF Closing as of 9/01
(2) LTM EBITDA of $1.193 billion as of 6/30/01
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PRO FORMA CREDIT STATISTICS
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LTM 6/30/01
EBITDA/Net Interest Expense 5.28x
EBITDA-Capex/Net Interest Expense 2.94x
Senior Debt/EBITDA 1.75x
Total Debt/EBITDA 2.61x
Total Debt/Total Capitalization 46.2%
Upon Consummation of the Transaction, HEALTHSOUTH Will Remain
Conservatively Capitalized
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SUMMARY
o Leading Provider in Core Business Lines & One of the Largest Healthcare
Providers in the US
o Strong Credit Profile due to High Cash Flow Margins &
Conservative Balance Sheet
o Strategy Focused on Maximizing the Financial
Performance and Value of the Core Franchise
o Network of High-Quality,
State-of-the-Art Facilities
o Strong Commitment to Investment Grade Rating
o Experienced and Deep Management Team