This is the Tagline, edited under "Misc Content"
HEALTHSOUTH Corporation
For the year ended December 31, 2002, HEALTHSOUTH's revenues were $4.311 billion, compared to $4.380 billion for 2001. Operating revenues for 2002 were $4.466 billion. The company incurred a net loss of ($270.1) million for 2002, compared to net income for 2001 of $202.4 million. Operating income for 2002 was $267.3 million, compared to operating income of $326.1 million for 2001. For the year, the company incurred a net loss per share (assuming dilution) of ($0.68), compared to earnings per share (assuming dilution) of $0.51 for 2001. Operating earnings per share (assuming dilution) for 2002 were $0.67, compared to $0.82 for 2001.
Operating revenues, operating income and operating earnings per share exclude the effects of certain items that are included in revenues and net income, including unusual items of gains or loss, the effects of changes in accounting principles, the effects of changes in estimates, and restructuring and similar charges. Management believes that operating revenues, operating income and operating earnings per share excluding such items and charges provide a clearer picture of HEALTHSOUTH's operational performance than revenues, net income and earnings per share standing alone. A reconciliation of operating revenues, operating income and operating earnings per share to revenues, net income and earnings per share as determined under generally accepted accounting principles is provided in the accompanying financial information, and a description of the items excluded from revenues and net income to calculate operating revenues and operating income in the fourth quarter of 2002 is set forth below. For the fourth quarter of 2002, the following items and charges were excluded from revenues and net income to calculate operating revenues, operating income and operating earnings per share:
* Restructuring and Other Charges: The company incurred restructuring
and other charges aggregating approximately $445.0 million pretax, or
$305.1 million net of taxes. Many of the components of these charges
were non-cash in nature. The cash portion of the charges was
approximately $58.9 million ($36.8 million net of taxes). Included in
this category are:
* Restructuring charges of approximately $255.5 million ($175.7 million
net of taxes) relating to the company's decision to close,
consolidate or sell approximately 220 facilities, primarily
outpatient rehabilitation facilities. This decision was made
primarily in response to the impact of decreased Medicare
reimbursement for outpatient rehabilitation services, and the
facilities involved were determined to be consistent underperformers,
to represent duplicative capacity or no longer to be strategically
useful to the company. The restructuring charges include employee
severance expense and continuing lease obligations on closed
facilities.
* Asset impairment charges under the requirements of Statement of
Financial Accounting Standards No. 144 of approximately $55.6 million
($34.1 million net of taxes). The impairment charges result from a
comparison of the fair value of affected long-lived assets to the
carrying value of such assets, and primarily relate to the adverse
impact of decreases in Medicare reimbursement for outpatient
rehabilitation services.
* Goodwill impairment charges under the requirements of Statement of
Financial Accounting Standards No. 142 of approximately $80.5 million
($62.5 million net of taxes). The impairment charges result from a
comparison of the implied fair value of the goodwill associated with
various reporting units containing facilities acquired in various
past transactions with the current fair value of those units in
accordance with SFAS No. 142. Again, the impairment is primarily
related to diminished expected future cash flows primarily relating
to the adverse impact of decreases in Medicare reimbursement for
outpatient rehabilitation services. HEALTHSOUTH is awaiting a final
report from an independent appraisal firm to complete the detailed
calculations required by SFAS No. 142; thus, the goodwill impairment
charge reflected in this announcement is preliminary in nature and
subject to change upon receipt of the final appraisal report and
completion of such calculations. Any adjustment to management's
preliminary estimate will be reflected in the audited financial
statements to be included in the company's Annual Report on Form 10-K
for the year ended December 31, 2002.
* Expenses of approximately $6.1 million ($3.7 million net of taxes)
relating to the settlement of certain litigation relating to a
contract dispute over a terminated surgery center acquisition and to
a potential tax liability incurred by an entity the company sold to a
third party.
* Adjustments aggregating approximately $17.1 million ($10.5 million
net of taxes) relating to final post-closing settlements in
connection with the sale of four rehabilitation hospitals to a third
party and to the sale of certain technology assets to Source Medical
Solutions, Inc.
* Losses aggregating approximately $17.3 million ($10.6 million net of
taxes) representing the company's share of the losses of certain
unconsolidated entities accounted for on the equity method.
* Unrealized losses on investment aggregating approximately
$9.6 million ($5.9 million net of taxes) relating to unconsolidated
entities in which the company has an interest accounted for on the
cost method. Under generally accepted accounting principles,
the company is required to report unrealized losses on such
investments, but is not permitted to report unrealized gains or to
offset such unrealized gains against unrealized losses.
* A loss of approximately $3.4 million ($2.1 million net of taxes) on
the sale of the company's interest in a surgery center. In exchange
for accepting a lower price for the sale of its interest, the company
obtained relief from certain restrictive covenants relating to the
surgery center and resolved a dispute over amounts owed by the
surgery center to the company.
* Other Unusual Charges: In addition to the amounts described above as
"Restructuring and Other Charges", during the fourth quarter the
company incurred certain additional unusual charges, the effects of
which are reflected in other line items on the company's income
statement. These items aggregated approximately $194.8 million
($119.3 net of taxes). The cash portion of such charges was
approximately $175.8 million ($107.7 million net of taxes). Those
items include the following:
* The company's results of operations include the effects of a change
in estimate relating to the valuation of accounts receivable and bad
debt expense as a result of a detailed analysis of the collectibility
of accounts receivable. During the fourth quarter, the company's
enhanced focus on collection of accounts receivable resulted in a
cash collection rate that was significantly higher than the company's
previous experience. In the course of the intensified focus on
collections, however, the company reviewed its estimates of
historical reserves for contractual allowances and bad debt and
determined that its estimates regarding the collectibility of some
older accounts receivable should be revised. The results of this
change in estimate are reflected as a reduction of approximately
$100.0 million ($61.3 million net of taxes) in revenues and an
increase of approximately $10.0 million ($6.1 million net of taxes)
in bad debt reserves.
* The company's fourth quarter results reflect a change in estimate
relating to open cost report settlements for the company's inpatient
operations. The cost report settlements relate primarily to fiscal
years ending December 31, 2001 and earlier. That change in estimate
is reflected as a reduction of approximately $65.8 million ($40.3 net
of taxes) in revenues. During 2002, the inpatient rehabilitation
facilities transitioned to the new Medicare prospective payment
system.
* The company accrued a reserve of approximately $19.0 million
($11.6 million net of taxes) reflecting estimated future obligations
relating to certain unfunded contractual retirement benefits. This
accrual is reflected as an increase in operating expenses. The
reserve will be reduced in future periods as the related benefits are
paid.
In addition to the foregoing, the company incurred significant expenses in the fourth quarter relating to legal, consulting and audit fees incurred in connection with the proposed tax-free separation of the company's surgery center operations and legal, consulting and other professional fees relating to litigation, internal and external investigations and related matters. These expenses are reflected in operating expenses for the quarter and are not excluded in calculating operating income and operating earnings per share, but management believes that they are not representative of operating expenses that are expected to be incurred going forward.
"The fourth quarter was another very challenging one for us, but we believe that it represents a bottom from which we expect to see growth in 2003," said Richard M. Scrushy, Chairman of the Board and Chief Executive Officer of HEALTHSOUTH. "Our quarterly operating revenues decreased 2% year over year, and were essentially flat on a sequential-quarter basis, primarily as a result of decreases in outpatient rehabilitation revenues and continued weak volumes in outpatient rehabilitation as we continue to deal with the effects of Medicare Program Transmittal 1753. However, we saw some positive trends in other lines of business, as inpatient rehabilitation revenues increased 12% and surgery center revenues increased 5% over the fourth quarter of 2001. In addition, we saw year-over-year same-store volume growth in our inpatient rehabilitation facilities, surgery centers and medical centers, including our tenth consecutive quarter of same-store growth in surgery volumes. In addition, volumes were off only slightly from the third quarter in our outpatient rehabilitation and diagnostic operations, and part of that reduction was due to the closure or consolidation of some facilities in those lines of business during the quarter. We believe that this confirms that we have reached a baseline from which we can resume positive trends in those lines."
Scrushy continued, "We have responded to these challenges by initiating a plan to close, consolidate or sell a number of locations, primarily outpatient rehabilitation facilities, that are duplicative, that are no longer strategic for us or that are consistent underperformers. Some of those facilities were closed, consolidated or sold in the fourth quarter, and we are continuing to implement the plan in the first quarter of 2003. All of the costs we expect to incur with respect to the closure plan are reflected in the fourth quarter restructuring charge. We have also reduced our workforce, and we are closely monitoring other expenditures. During January 2003, we began seeing the results of our efforts, as our revenues and volumes exceeded budget in all of our business lines. Based on the trends we have seen thus far in the first quarter, we remain comfortable with our EPS guidance of $0.13 for the first quarter and $0.55 for 2003, and we reiterate our expectation that capital expenditures will not exceed $400 million for the year."
Scrushy concluded, "We believe that the fourth quarter represents a bottom from which we can grow and produce positive results. The last half of 2002 was a difficult chapter in HEALTHSOUTH's history, but we believe we are positioned to put it behind us and move forward again in 2003."
HEALTHSOUTH is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with nearly 1,700 locations in all 50 states, the United Kingdom, Australia, Puerto Rico, Saudi Arabia and Canada. HEALTHSOUTH can be found on the Web at http://www.healthsouth.com/ .
HEALTHSOUTH will hold a conference call to discuss its third quarter results at 10:00 a.m. Central Time on Monday, March 3, 2003. Simultaneously with the conference call, a "webcast" of the call will be available to interested parties at http://www.healthsouth.com/ via an Internet link under the "Investor Relations" section. A replay of the call will be available at the same Internet site address for 15 days following the call.
Statements contained in this press release which are not historical facts are forward-looking statements. Without limiting the generality of the preceding statement, all statements in this press release concerning or relating to estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, HEALTHSOUTH, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. Such forward-looking statements are necessarily estimates based upon current information, involve a number of risks and uncertainties and are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. HEALTHSOUTH's actual results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors, including those identified in this press release and in the public filings made by HEALTHSOUTH with the Securities and Exchange Commission, including HEALTHSOUTH's Annual Report on Form 10-K for the year ended December 31, 2001 and its Quarterly Reports on Form 10-Q, and forward- looking statements contained in this press release or in other public statements of HEALTHSOUTH or its senior management should be considered in light of those factors. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements.
HEALTHSOUTH Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Revenues $923,528 $1,115,152 $4,310,771 $4,380,477
Operating unit expenses 822,369 731,542 3,093,128 2,902,833
Corporate general and
administrative expenses 61,063 44,380 199,445 167,206
Provision for doubtful
accounts 30,460 24,649 104,994 107,871
Depreciation and
amortization 87,249 95,039 324,143 375,270
Early extinguishment of
debt (56) -- (19,600) 6,475
Restructuring and Other
Charges 445,012 34,244 521,702 176,337
Interest expense 58,537 52,519 217,444 218,100
Interest income (2,510) (1,607) (6,715) (7,349)
1,502,124 980,766 4,434,541 3,946,743
Income before income
taxes and minority
interests (578,596) 134,386 (123,770) 433,734
Provision for income taxes (203,078) 46,274 (55,208) 139,467
Income before minority
interests (375,518) 88,112 (68,562) 294,267
Minority interests (30,280) (20,214) (118,367) (91,880)
Income before cumulative
effect of accounting
change (405,798) 67,898 (186,929) 202,387
Cumulative effect of
accounting change -- -- (83,165) --
Net income $(405,798) $67,898 $(270,094) $202,387
Weighted average common
shares outstanding 395,488 391,446 394,766 389,717
Income per common share
before cumulative
effect of accounting
change (1.03) 0.17 (0.47) 0.52
Cumulative effect of
accounting change -- -- (0.21) --
Net income per common share $(1.03) $0.17 $(0.68) $0.52
Weighted average common
shares outstanding
-- assuming dilution 395,894 399,940 398,330 399,227
Income per common share
before cumulative
effect of accounting
change -- assuming dilution (1.03) 0.17 (0.47) 0.51
Cumulative effect of
accounting change -- -- (0.21) --
Net income per common share
-- assuming dilution $(1.03) $0.17 $(0.68) $0.51
Add-back to income for
diluted earnings per
share: Interest and
amortization on
convertible debt. $ -- $ -- $10,420 $ --
* * *
* The effect of these securities was antidilutive.
Income per common share before
cumulative effect of
accounting change $(405,798) $67,898 $(186,929) $202,387
Add back unusual items
Unusual items 639,724 34,244 685,938 199,150
Tax benefit (provision) (215,347) (13,527) (231,678) (75,405)
Operating income $18,579 $88,615 $267,331 $326,132
Weighted average common shares
outstanding 395,488 391,446 394,766 389,717
Weighted average common shares
outstanding -- assuming dilution 395,894 415,442 398,330 414,729
Operating income per common share $0.05 $0.23 $0.68 $0.84
Operating income per common share
-- assuming dilution $0.05 $0.22 $0.67 $0.82
Add-back to income for diluted
earnings per share:
Interest and amortization on
convertible debt. $ -- $3,112 $ -- $12,448
* *
* The effect of these securities was antidilutive.
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Statements of Income
Twelve Months Ended December 31,2002
(UNAUDITED - In thousands, except per share amounts)
Twelve
Months Ended
Twelve Less December 31,
Months Ended Unusual 2002 Before
December 31, 2002 Items Unusual Items
Revenues $4,310,771 $(154,883) (1) $4,465,654
Operating unit expenses 3,093,128 18,953 (2) 3,074,175
Corporate general and
administrative expenses 199,445 -- 199,445
Provision for doubtful accounts 104,994 10,000 (3) 94,994
Depreciation and amortization 324,143 -- 324,143
Early extinguishment of debt (19,600) (19,600) (4) --
Restructuring and Other Charges 521,702 521,702 (5) --
Interest expense 217,444 -- 217,444
Interest income (6,715) -- (6,715)
4,434,541 531,055 3,903,486
Income before income taxes,
minority interests
and cumulative effect of
accounting change (123,770) (685,938) 562,168
Provision for income taxes (55,208) (231,678) 176,470
Income before minority interests
and cumulative
effect of accounting change (68,562) (454,260) 385,698
Minority interests (118,367) -- (118,367)
Income before cumulative effect of
accounting change, Impairment
and other
one time charges (186,929) (454,260) 267,331
Cumulative effect of accounting
change (83,165) (83,165) --
Net income $(270,094) $(537,425) $267,331
Weighted average common shares
outstanding 394,766 394,766
Income per common share before
cumulative
effect of accounting change (0.47) 0.68
Cumulative effect of accounting
change (0.21) --
Net income per common share $(0.68) $0.68
Weighted average common shares
outstanding -- assuming
dilution 398,330 398,330
Income per common share before
cumulative
effect of accounting change --
assuming dilution (0.47) 0.67
Cumulative effect of accounting
change (0.21) --
Net income per common share --
assuming dilution $(0.68) $0.67
(1) Effect of change in estimate relating to the valuation of accounts
receivable and final cost report settlements for the company's
inpatient operations.
(2) Effect of estimated future obligations relating to certain unfunded
contractual retirement benefits.
(3) Effect of detailed analysis of collectibility of accounts receivable.
(4) Effect of early extinguishment of debt.
(5) Effect of restructuring charges relating to the company's decision to
close, consolidate or sell certain facilities, asset impairment
charges under the requirements of Statement of Financial Accounting
Standards No. 144, goodwill impairment charges under the requirements
of Statement of Financial Accounting Standards No. 142, loss on sale
of certain facilities and other charges.
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Statements of Income
Three Months Ended December 31, 2002
(UNAUDITED - In thousands, except per share amounts)
Three
Months Ended
Twelve Less December 31,
Months Ended Unusual 2002 Before
December 31, 2002 Items Unusual Items
Revenues $923,528 $(165,815) (1) $1,089,343
Operating unit expenses 822,369 18,953 (2) 803,416
Corporate general and
administrative expenses 61,063 -- 61,063
Provision for doubtful accounts 30,460 10,000 (3) 20,460
Depreciation and amortization 87,249 -- 87,249
Early extinguishment of debt (56) (56) (4) --
Restructuring and Other Charges 445,012 445,012 (5) --
Interest expense 58,537 -- 58,537
Interest income (2,510) -- (2,510)
1,502,124 473,909 1,028,215
Income before income taxes and
minority interests (578,596) (639,724) 61,128
Provision for income taxes (203,078) (215,347) 12,269
Income before minority interests (375,518) (424,377) 48,859
Minority interests (30,280) -- (30,280)
Net income $(405,798) $(424,377) $18,579
Weighted average common shares
outstanding 395,488 395,488
Net income per common share $(1.03) $0.05
Weighted average common shares
outstanding -- assuming dilution 395,894 395,894
Net income per common share -
assuming dilution $(1.03) $0.05
(1) Effect of change in estimate relating to the valuation of accounts
receivable and final cost report settlements for the company's
inpatient operations.
(2) Effect of estimated future obligations relating to certain unfunded
contractual retirement benefits.
(3) Effect of detailed analysis of collectibility of accounts receivable.
(4) Effect of early extinguishment of debt.
(5) Effect of restructuring charges relating to the company's decision to
close, consolidate or sell certain facilities, asset impairment
charges under the requirements of Statement of Financial Accounting
Standards No. 144, goodwill impairment charges under the requirements
of Statement of Financial Accounting Standards No. 142 and other
charges.
HEALTHSOUTH Corporation
Quarterly Statistics (Unaudited)
For Period Ending December 31, 2002
4Q 2002 4Q 2001
Outpatient Rehab
Total Visits: 1,951,462 2,391,459
Total Volume Growth (Y/Y): -18.4%
Same Store Volume Growth (Y/Y): -11.6%
Average Revenue per Visit: $91 $98
Facility Count: 1,229 1,415
Surgery Centers
Total Cases: 224,049 221,594
Total Volume Growth (Y/Y): 1.1%
Same Store Volume Growth (Y/Y): 2.9%
Average Revenue per Case: $1,156 $1,116
Facility Count: 203 213
Diagnostic Imaging
Total Scans: 266,432 275,191
Total Volume Growth (Y/Y): -3.2%
Same Store Volume Growth (Y/Y): -0.6%
Average Revenue per Scan: $296 $307
Facility Count: 127 135
Inpatient Division
Total Discharges: 30,602 29,297
Total Volume Growth (Y/Y): 4.5%
Same Store Volume Growth (Y/Y): 5.7%
Average Revenue per Discharge: $16,183 $15,129
Facility Count: 117 120
Medical Centers
Total Days: 25,549 22,766
Total Volume Growth (Y/Y): 12.2%
Same Store Volume Growth (Y/Y): 12.2%
Average Revenue per Day: $2,924 $3,042
Facility Count: 4 4
For more information, contact:
Investor Relations: Jason Brown, (205) 967-7116
Media: HEALTHSOUTH Public Relations, (205) 969-7584
SOURCE: HEALTHSOUTH Corporation
CONTACT: Investors - Jason Brown, +1-205-967-7116, or Media -
HEALTHSOUTH Public Relations, +1-205-969-7584
Web site: http://www.healthsouth.com/