001-10315 | 63-0860407 |
(Commission File Number) | (IRS Employer Identification No.) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
For the Three Months Ended | For the Six Months Ended | For the Year Ended | |||||||||||||||||
June 30, | June 30, | December 31, | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2011 | |||||||||||||||
(In Millions) | |||||||||||||||||||
Net cash provided by operating activities | $ | 114.0 | $ | 68.6 | $ | 195.0 | $ | 158.1 | $ | 342.7 | |||||||||
Provision for doubtful accounts | (6.5 | ) | (5.0 | ) | (12.8 | ) | (9.8 | ) | (21.0 | ) | |||||||||
Professional fees—accounting, tax, and legal | 5.5 | 8.4 | 9.1 | 12.2 | 21.0 | ||||||||||||||
Interest expense and amortization of debt discounts and fees | 23.0 | 34.9 | 46.3 | 70.0 | 119.4 | ||||||||||||||
Equity in net income of nonconsolidated affiliates | 3.1 | 3.2 | 6.4 | 5.7 | 12.0 | ||||||||||||||
Net income attributable to noncontrolling interests in continuing operations | (13.2 | ) | (11.3 | ) | (25.8 | ) | (23.1 | ) | (47.0 | ) | |||||||||
Amortization of debt discounts and fees | (0.9 | ) | (1.2 | ) | (1.8 | ) | (2.4 | ) | (4.2 | ) | |||||||||
Distributions from nonconsolidated affiliates | (2.2 | ) | (2.8 | ) | (5.5 | ) | (5.5 | ) | (13.0 | ) | |||||||||
Current portion of income tax expense (benefit) | 2.2 | 0.7 | 4.3 | (1.4 | ) | 0.6 | |||||||||||||
Change in assets and liabilities | 1.5 | 17.4 | 38.4 | 28.3 | 49.9 | ||||||||||||||
Premium received on bond issuance | — | — | — | (4.1 | ) | (4.1 | ) | ||||||||||||
Premium paid on bond redemption | — | 18.0 | — | 18.0 | 26.9 | ||||||||||||||
Change in government, class action, and related settlements | — | (10.8 | ) | — | (6.5 | ) | (8.5 | ) | |||||||||||
Net cash provided by operating activities of discontinued operations | (1.3 | ) | (5.1 | ) | (1.7 | ) | (7.2 | ) | (9.1 | ) | |||||||||
Other | (0.1 | ) | 0.3 | 0.2 | 0.5 | 0.6 | |||||||||||||
Adjusted EBITDA | $ | 125.1 | $ | 115.3 | $ | 252.1 | $ | 232.8 | $ | 466.2 |
Exhibit Number | Description | |
99.1 | Press release of HealthSouth Corporation, dated July 26, 2012. | |
99.2 | Supplemental slides provided in connection with the second quarter 2012 earnings call of HealthSouth Corporation. |
By: | /S/ JOHN P. WHITTINGTON | |
Name: | John P. Whittington | |
Title: | Executive Vice President, General Counsel and Corporate Secretary |
Media Contact | July 26, 2012 |
Casey Lassiter, 205-410-2777 | For Immediate Release |
casey.lassiter@healthsouth.com | |
Investor Relations Contact | |
Mary Ann Arico, 205-969-6175 | |
maryann.arico@healthsouth.com |
• | Consolidated net operating revenues were $533.4 million for the second quarter of 2012 compared to $505.1 million for the second quarter of 2011, or an increase of 5.6%. This increase was attributable to a 3.0% increase in patient discharges and a 3.2% increase in net patient revenue per discharge. Same-store discharges were 1.9% higher in the second quarter of 2012 compared to the second quarter of 2011. Net patient revenue per discharge increased in the second quarter of 2012 compared to the same period of 2011 primarily due to pricing adjustments from Medicare and managed care payors and higher average acuity for the patients we served. |
• | Income from continuing operations attributable to HealthSouth per diluted share for the second quarter of 2012 was $0.39 per share compared to $0.14 per share for the same period of 2011. Earnings per share for the second quarter of 2012 reflected strong operating results, lower interest expense, and an effective income tax rate of approximately 39%. Earnings per share in the second quarter of 2011 included a $10.6 million gain related to a recovery from Richard M. Scrushy, our former chairman and chief executive officer, and a $26.1 million loss on early extinguishment of debt that resulted from the optional redemption in June 2011 of a portion of our then-outstanding 10.75% Senior Notes due 2016. The net after-tax impact of these two items on earnings per share in the second quarter of 2011 approximated $0.11 per share. The effective income tax rate for the second quarter of 2011 was approximately 37%. The Company's basic and diluted earnings per share were the same for both periods. |
• | Cash flows provided by operating activities were $195.0 million for the six months ended June 30, 2012, compared to $158.1 million for the same period of 2011. This increase was primarily due to increased net operating revenues, improved operating leverage, and a decrease in interest expense. |
• | Adjusted EBITDA (see attached supplemental information) for the three months ended June 30, 2012 was $125.1 million compared to $115.3 million for the three months ended June 30, 2011, or an increase of 8.5%. This improvement was primarily driven by continued revenue growth as well as improved operating leverage and labor productivity. |
• | Adjusted free cash flow (see attached supplemental information) for the three months ended June 30, 2012 was $70.0 million compared to $63.6 million for the same period of 2011. Adjusted free cash flow for the quarter ended June 30, 2012 reflected continued Adjusted EBITDA growth and lower interest expense offset by the planned increase in our maintenance capital expenditures including investments in our electronic clinical information system and hospital refresh projects. |
• | During the second quarter of 2012, we repurchased 21,645 shares of our convertible perpetual preferred stock for $21.5 million, bringing our year-to-date repurchases to 46,645 shares for $46.5 million. These repurchases have the benefit of eliminating $3.0 million of the 6.5% annual dividend obligation on the repurchased shares and reducing our diluted share count by 1.5 million shares. |
• | raising its full-year 2012 Adjusted EBITDA guidance to a range of $487 million to $495 million from a range of $475 million to $485 million. |
• | raising its full-year 2012 guidance for income from continuing operations attributable to HealthSouth per share to $1.45 to $1.50 per share from $1.32 to $1.39 per share. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In Millions, Except Per Share Data) | |||||||||||||||
Net operating revenues | $ | 533.4 | $ | 505.1 | $ | 1,072.0 | $ | 1,011.1 | |||||||
Less: Provision for doubtful accounts | (6.5 | ) | (5.0 | ) | (12.8 | ) | (9.8 | ) | |||||||
Net operating revenues less provision for doubtful accounts | 526.9 | 500.1 | 1,059.2 | 1,001.3 | |||||||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | 257.4 | 241.6 | 518.4 | 485.6 | |||||||||||
Other operating expenses | 74.4 | 75.4 | 147.4 | 146.3 | |||||||||||
General and administrative expenses | 28.0 | 27.4 | 58.0 | 54.3 | |||||||||||
Supplies | 25.9 | 26.2 | 52.4 | 52.0 | |||||||||||
Depreciation and amortization | 20.0 | 19.6 | 39.5 | 39.1 | |||||||||||
Occupancy costs | 12.3 | 12.1 | 24.8 | 23.7 | |||||||||||
Loss on disposal of assets | 0.6 | 1.0 | 1.4 | 1.1 | |||||||||||
Government, class action, and related settlements | — | (10.6 | ) | — | (10.6 | ) | |||||||||
Professional fees—accounting, tax, and legal | 5.5 | 8.4 | 9.1 | 12.2 | |||||||||||
Total operating expenses | 424.1 | 401.1 | 851.0 | 803.7 | |||||||||||
Loss on early extinguishment of debt | — | 26.1 | — | 26.1 | |||||||||||
Interest expense and amortization of debt discounts and fees | 23.0 | 34.9 | 46.3 | 70.0 | |||||||||||
Other income | (0.4 | ) | (0.7 | ) | (1.3 | ) | (1.3 | ) | |||||||
Equity in net income of nonconsolidated affiliates | (3.1 | ) | (3.2 | ) | (6.4 | ) | (5.7 | ) | |||||||
Income from continuing operations before income tax expense | 83.3 | 41.9 | 169.6 | 108.5 | |||||||||||
Provision for income tax expense | 26.9 | 11.2 | 56.0 | 3.8 | |||||||||||
Income from continuing operations | 56.4 | 30.7 | 113.6 | 104.7 | |||||||||||
Income from discontinued operations, net of tax | 3.5 | 1.6 | 3.1 | 19.1 | |||||||||||
Net income | 59.9 | 32.3 | 116.7 | 123.8 | |||||||||||
Less: Net income attributable to noncontrolling interests | (13.2 | ) | (10.4 | ) | (25.8 | ) | (22.1 | ) | |||||||
Net income attributable to HealthSouth | 46.7 | 21.9 | 90.9 | 101.7 | |||||||||||
Less: Convertible perpetual preferred stock dividends | (6.0 | ) | (6.5 | ) | (12.4 | ) | (13.0 | ) | |||||||
Less: Repurchase of convertible perpetual preferred stock | (0.3 | ) | — | (0.8 | ) | — | |||||||||
Net income attributable to HealthSouth common shareholders | $ | 40.4 | $ | 15.4 | $ | 77.7 | $ | 88.7 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 94.6 | 93.3 | 94.5 | 93.2 | |||||||||||
Diluted | 108.0 | 109.5 | 108.3 | 109.3 | |||||||||||
Basic and diluted earnings per common share: | |||||||||||||||
Income from continuing operations attributable to HealthSouth common shareholders | $ | 0.39 | $ | 0.14 | $ | 0.79 | $ | 0.74 | |||||||
Income from discontinued operations, net of tax, attributable to HealthSouth common shareholders | 0.04 | 0.03 | 0.03 | 0.21 | |||||||||||
Net income attributable to HealthSouth common shareholders | $ | 0.43 | $ | 0.17 | $ | 0.82 | $ | 0.95 | |||||||
Amounts attributable to HealthSouth common shareholders: | |||||||||||||||
Income from continuing operations | $ | 43.2 | $ | 19.4 | $ | 87.8 | $ | 81.6 | |||||||
Income from discontinued operations, net of tax | 3.5 | 2.5 | 3.1 | 20.1 | |||||||||||
Net income attributable to HealthSouth | $ | 46.7 | $ | 21.9 | $ | 90.9 | $ | 101.7 |
June 30, 2012 | December 31, 2011 | ||||||
(In Millions) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 41.1 | $ | 30.1 | |||
Accounts receivable, net of allowance for doubtful accounts of $24.6 in 2012; $21.4 in 2011 | 245.7 | 222.8 | |||||
Other current assets | 137.7 | 138.1 | |||||
Total current assets | 424.5 | 391.0 | |||||
Property and equipment, net | 718.9 | 664.4 | |||||
Goodwill | 421.7 | 421.7 | |||||
Intangible assets, net | 69.0 | 57.7 | |||||
Deferred income tax assets | 552.8 | 608.1 | |||||
Other long-term assets | 128.8 | 128.3 | |||||
Total assets | $ | 2,315.7 | $ | 2,271.2 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 59.6 | $ | 45.4 | |||
Accrued expenses and other current liabilities | 265.0 | 267.8 | |||||
Total current liabilities | 324.6 | 313.2 | |||||
Long-term debt, net of current portion | 1,219.4 | 1,235.8 | |||||
Other long-term liabilities | 135.8 | 133.2 | |||||
1,679.8 | 1,682.2 | ||||||
Commitments and contingencies | |||||||
Convertible perpetual preferred stock | 342.2 | 387.4 | |||||
Shareholders’ equity: | |||||||
HealthSouth shareholders’ equity | 195.8 | 117.0 | |||||
Noncontrolling interests | 97.9 | 84.6 | |||||
Total shareholders’ equity | 293.7 | 201.6 | |||||
Total liabilities and shareholders’ equity | $ | 2,315.7 | $ | 2,271.2 |
Six Months Ended June 30, | |||||||
2012 | 2011 | ||||||
(In Millions) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 116.7 | $ | 123.8 | |||
Income from discontinued operations | (3.1 | ) | (19.1 | ) | |||
Adjustments to reconcile net income to net cash provided by operating activities— | |||||||
Provision for doubtful accounts | 12.8 | 9.8 | |||||
Provision for government, class action, and related settlements | — | (10.6 | ) | ||||
Depreciation and amortization | 39.5 | 39.1 | |||||
Loss on early extinguishment of debt | — | 26.1 | |||||
Equity in net income of nonconsolidated affiliates | (6.4 | ) | (5.7 | ) | |||
Distributions from nonconsolidated affiliates | 5.5 | 5.5 | |||||
Stock-based compensation | 12.0 | 9.5 | |||||
Deferred tax expense | 51.7 | 5.2 | |||||
Other | 3.0 | 3.0 | |||||
Increase in assets— | |||||||
Accounts receivable | (35.7 | ) | (15.9 | ) | |||
Other assets | (7.0 | ) | (12.3 | ) | |||
Increase (decrease) in liabilities— | |||||||
Accounts payable | 10.3 | 0.8 | |||||
Accrued payroll | (15.8 | ) | 4.3 | ||||
Other liabilities | 5.5 | 11.5 | |||||
Premium on bond issuance | — | 4.1 | |||||
Premium paid on redemption of bonds | — | (18.0 | ) | ||||
Refunds due patients and other third-party payors | 4.3 | (16.7 | ) | ||||
Government, class action, and related settlements | — | 6.5 | |||||
Net cash provided by operating activities of discontinued operations | 1.7 | 7.2 | |||||
Total adjustments | 81.4 | 53.4 | |||||
Net cash provided by operating activities | 195.0 | 158.1 |
(Continued) | 6 |
Six Months Ended June 30, | |||||||
2012 | 2011 | ||||||
(In Millions) | |||||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (82.8 | ) | (31.7 | ) | |||
Capitalized software costs | (11.6 | ) | (3.8 | ) | |||
Purchase of restricted investments | (4.4 | ) | (7.9 | ) | |||
Net change in restricted cash | 4.6 | 5.3 | |||||
Net settlements on interest rate swaps | — | (10.9 | ) | ||||
Other | (1.8 | ) | 0.1 | ||||
Net cash provided by (used in) investing activities of discontinued operations | 7.7 | (0.3 | ) | ||||
Net cash used in investing activities | (88.3 | ) | (49.2 | ) | |||
Cash flows from financing activities: | |||||||
Principal borrowings on term loan | — | 100.0 | |||||
Proceeds from bond issuance | — | 120.0 | |||||
Principal payments on debt, including pre-payments | (4.7 | ) | (335.9 | ) | |||
Borrowings on revolving credit facility | 40.0 | 190.0 | |||||
Payments on revolving credit facility | (50.0 | ) | (128.0 | ) | |||
Principal payments under capital lease obligations | (5.7 | ) | (6.8 | ) | |||
Repurchase of convertible perpetual preferred stock | (46.0 | ) | — | ||||
Debt issue costs | — | (4.2 | ) | ||||
Dividends paid on convertible perpetual preferred stock | (13.1 | ) | (13.0 | ) | |||
Distributions paid to noncontrolling interests of consolidated affiliates | (24.0 | ) | (23.3 | ) | |||
Contributions from consolidated affiliates | 7.9 | — | |||||
Other | — | 4.2 | |||||
Net cash used in financing activities | (95.6 | ) | (97.0 | ) | |||
Increase in cash and cash equivalents | 11.1 | 11.9 | |||||
Cash and cash equivalents at beginning of period | 30.1 | 48.3 | |||||
Cash and cash equivalents of facilities in discontinued operations at beginning of period | — | 0.1 | |||||
Less: Cash and cash equivalents of facilities in discontinued operations at end of period | (0.1 | ) | — | ||||
Cash and cash equivalents at end of period | $ | 41.1 | $ | 60.3 |
QTD | ||||||||
Q2 2012 | Q2 2011 | |||||||
(In Millions, Except Per Share Data) | ||||||||
Adjusted EBITDA | $ | 125.1 | $ | 115.3 | ||||
Interest expense and amortization of debt discounts and fees | (23.0 | ) | (34.9 | ) | ||||
Depreciation and amortization | (20.0 | ) | (19.6 | ) | ||||
Stock-based compensation expense | (5.9 | ) | (5.3 | ) | ||||
Other, including non-cash loss on disposal of assets | (0.6 | ) | (1.0 | ) | ||||
75.6 | 54.5 | |||||||
Certain nonrecurring expenses: | ||||||||
Government, class action and related settlements | — | 10.6 | ||||||
Professional fees—accounting, tax, and legal | (5.5 | ) | (8.4 | ) | ||||
Loss on early extinguishment of debt | — | (26.1 | ) | |||||
Pre-tax income | 70.1 | 30.6 | ||||||
Income tax expense (1) | (26.9 | ) | (11.2 | ) | ||||
Income from continuing operations (2) | $ | 43.2 | $ | 19.4 | ||||
Basic shares | 94.6 | 93.3 | ||||||
Diluted shares | 108.0 | 109.5 | ||||||
Basic earnings per share (2) | $ | 0.39 | $ | 0.14 | ||||
Diluted earnings per share (2) (3) | $ | 0.39 | $ | 0.14 |
(1) | Cash income tax expense for the three months ended June 30, 2012 and 2011 was $2.2 million and $1.7 million, respectively. |
(2) | Income from continuing operations attributable to HealthSouth. |
(3) | Adding back the dividends for the Company's convertible perpetual preferred stock to income from continuing operations causes a per share increase when calculating diluted earnings per share resulting in an antidilutive per share amount. Therefore, basic and diluted earnings per share are the same. A computation of basic and diluted earnings per share can be found in Note 7, Earnings per Common Share, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of our Form 10-Q for the quarterly period ended June 30, 2012, when filed. |
YTD | ||||||||
Q2 2012 | Q2 2011 | |||||||
(In Millions, Except Per Share Data) | ||||||||
Adjusted EBITDA | $ | 252.1 | $ | 232.8 | ||||
Interest expense and amortization of debt discounts and fees | (46.3 | ) | (70.0 | ) | ||||
Depreciation and amortization | (39.5 | ) | (39.1 | ) | ||||
Stock-based compensation expense | (12.0 | ) | (9.5 | ) | ||||
Other, including non-cash loss on disposal of assets | (1.4 | ) | (1.1 | ) | ||||
152.9 | 113.1 | |||||||
Certain nonrecurring expenses: | ||||||||
Government, class action and related settlements | — | 10.6 | ||||||
Professional fees—accounting, tax, and legal | (9.1 | ) | (12.2 | ) | ||||
Loss on early extinguishment of debt | — | (26.1 | ) | |||||
Pre-tax income | 143.8 | 85.4 | ||||||
Income tax expense (1) | (56.0 | ) | (3.8 | ) | (2) | |||
Income from continuing operations (3) | $ | 87.8 | $ | 81.6 | ||||
Basic shares | 94.5 | 93.2 | ||||||
Diluted shares | 108.3 | 109.3 | ||||||
Basic earnings per share (3) | $ | 0.79 | $ | 0.74 | ||||
Diluted earnings per share (3) (4) | $ | 0.79 | $ | 0.74 |
(1) | Cash income tax expense for the six months ended June 30, 2012 and 2011 was $4.3 million and $4.2 million, respectively. |
(2) | Includes a $0.27 per diluted share benefit related to the Company's settlement of federal income tax claims 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. |
(3) | Income from continuing operations attributable to HealthSouth. |
(4) | Adding back the dividends for the Company's convertible perpetual preferred stock to income from continuing operations causes a per share increase when calculating diluted earnings per share resulting in an antidilutive per share amount. Therefore, basic and diluted earnings per share are the same. A computation of basic and diluted earnings per share can be found in Note 7, Earnings per Common Share, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of our Form 10-Q for the quarterly period ended June 30, 2012, when filed. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
(In Millions) | |||||||||||||||
Net income | $ | 59.9 | $ | 32.3 | $ | 116.7 | $ | 123.8 | |||||||
Income from discontinued operations, net of tax, attributable to HealthSouth | (3.5 | ) | (2.5 | ) | (3.1 | ) | (20.1 | ) | |||||||
Provision for income tax expense | 26.9 | 11.2 | 56.0 | 3.8 | |||||||||||
Interest expense and amortization of debt discounts and fees | 23.0 | 34.9 | 46.3 | 70.0 | |||||||||||
Loss on early extinguishment of debt | — | 26.1 | — | 26.1 | |||||||||||
Professional fees-accounting, tax, and legal | 5.5 | 8.4 | 9.1 | 12.2 | |||||||||||
Government, class action, and related settlements | — | (10.6 | ) | — | (10.6 | ) | |||||||||
Net noncash loss on disposal of assets | 0.6 | 1.0 | 1.4 | 1.1 | |||||||||||
Depreciation and amortization | 20.0 | 19.6 | 39.5 | 39.1 | |||||||||||
Stock-based compensation expense | 5.9 | 5.3 | 12.0 | 9.5 | |||||||||||
Net income attributable to noncontrolling interests | (13.2 | ) | (10.4 | ) | (25.8 | ) | (22.1 | ) | |||||||
Adjusted EBITDA | $ | 125.1 | $ | 115.3 | $ | 252.1 | $ | 232.8 |
Three Months Ended June 30, | Six Months Ended June 30, | Year Ended December 31, | |||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2011 | |||||||||||||||
(In Millions) | |||||||||||||||||||
Net cash provided by operating activities | $ | 114.0 | $ | 68.6 | $ | 195.0 | $ | 158.1 | $ | 342.7 | |||||||||
Impact of discontinued operations | (1.3 | ) | (5.1 | ) | (1.7 | ) | (7.2 | ) | (9.1 | ) | |||||||||
Net cash provided by operating activities of continuing operations | 112.7 | 63.5 | 193.3 | 150.9 | 333.6 | ||||||||||||||
Capital expenditures for maintenance | (31.0 | ) | (13.2 | ) | (50.1 | ) | (22.3 | ) | (50.8 | ) | |||||||||
Net settlement on interest rate swaps | — | — | — | (10.9 | ) | (10.9 | ) | ||||||||||||
Dividends paid on convertible perpetual preferred stock | (6.3 | ) | (6.5 | ) | (13.1 | ) | (13.0 | ) | (26.0 | ) | |||||||||
Distributions paid to noncontrolling interests of consolidated affiliates | (10.9 | ) | (9.6 | ) | (24.0 | ) | (23.3 | ) | (44.2 | ) | |||||||||
Nonrecurring items: | |||||||||||||||||||
Income tax refunds related to prior periods | — | (0.4 | ) | — | (3.4 | ) | (7.9 | ) | |||||||||||
Premium received on bond issuance | — | — | — | (4.1 | ) | (4.1 | ) | ||||||||||||
Premium paid on redemption of bonds | — | 18.0 | — | 18.0 | 26.9 | ||||||||||||||
Cash paid for: | |||||||||||||||||||
Professional fees—accounting, tax, and legal | 5.5 | 8.4 | 9.1 | 12.2 | 21.0 | ||||||||||||||
Government, class action, and related settlements, including certain settlements related to unclaimed property | — | 3.4 | — | 7.7 | 5.7 | ||||||||||||||
Adjusted free cash flow | $ | 70.0 | $ | 63.6 | $ | 115.2 | $ | 111.8 | $ | 243.3 |
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