This is the Tagline, edited under "Misc Content"
HealthSouth Corporation
"Overall, I'm encouraged by the progress we made in the second quarter," said HealthSouth President and CEO Jay Grinney. "We saw improved results from the prior year and our development pipeline indicates there are excellent growth opportunities in the post-acute, surgery and outpatient segments. Additionally, our Diagnostic Division is stabilizing and we believe there will be strong interest in these assets when we begin marketing them later this year."
Consolidated Results
The Company reported a pretax loss from continuing operations in the second quarter of $28.9 million, an improvement of $17.0 million over the second quarter 2005 pretax loss from continuing operations of $45.9 million.
Revenues for the second quarter were $787.5 million, a 3.8 percent decline from the same quarter a year ago. The revenue decline is a result of (i) the continued negative impact of the 75% Rule and negative pricing in the Inpatient Division; (ii) facility closures (which do not qualify as discontinued operations) primarily in the Outpatient, Surgery, and Diagnostic Divisions; and (iii) three surgery center facilities that became equity method investments rather than consolidated entities.
Segment Highlights
Operating Earnings are a key performance measure used by management to assess the results of each operating segment. Operating earnings include divisional overhead, but exclude corporate overhead. Operating earnings include the effect of minority interests in earnings of consolidated affiliates and equity in the net income of nonconsolidated affiliates.
Inpatient Division
Revenue in the Inpatient Division was lower by 1.7 percent or $7.8 million from declining volumes as a result of the continued implementation of the 75% Rule and negative Medicare pricing pressure. However, the strategic focus on growing compliant cases continues to yield excellent results. Compliant case growth was 4.8 percent in the second quarter.
Operating earnings margin declined to 21.2 percent in the second quarter from 23.9 percent in the same quarter a year ago. The operating earnings margin decline is the result of lower volumes, the negative effect of Medicare reimbursement changes and the higher costs of salaries and benefits (including inflationary increases needed to retain qualified personnel) and supplies related to treating more acute patients without a corresponding price increase. The second quarter included a $4.1 million loss on disposal of assets, which represented 0.9 percent of net operating revenues in the quarter.
In August 2006, the division signed a letter of intent to partner with TMC Healthcare in Tucson, Arizona to provide rehabilitation services and concluded its non-U.S. operations with the sale of its Australian facility, Cedar Court Rehabilitation Hospital.
Surgery Centers Division
The Surgery Centers Division revenue decline in the second quarter is an improvement over the first quarter 2006 performance where this division experienced a 6.7 percent decline. The decline in the quarter was 3.4 percent or $6.7 million with the majority of the decrease the result of three surgery centers that became equity method investments rather than consolidated entities after the second quarter of 2005 and the closure of seven facilities that did not qualify as discontinued operations.
Operating earnings margin declined to 10.5 percent in the second quarter from 11.1 percent in the same quarter a year ago. Operating earnings for the second quarter include a $1.6 million impairment charge, which is 0.8 percent of net operating revenues.
Outpatient Division
The Outpatient Division experienced a decline in revenues of $12.8 million in the second quarter as a result of continued competition, closures of underperforming facilities and the annual per-beneficiary limitation on Medicare outpatient therapy services (effective January 1, 2006).
Operating earnings margin increased to 8.8 percent from 5.8 percent in the same quarter a year ago, as the division continued to reduce expenses through headcount reductions and closure of underperforming facilities.
In July 2006, the division completed a transaction to acquire the assets of Hurrle Orthopaedic Physical Therapy, P.C. in Indianapolis, Indiana.
Diagnostic Division
The Diagnostic Division, which is not considered part of the Company's core business, experienced a decline in revenues of $5.6 million or 9.8 percent less than the second quarter a year ago due to competitive pressures and the closure of underperforming facilities that did not qualify as discontinued operations.
The division has a negative operating margin of (23.5) percent in the quarter compared to 1.8 percent in the second quarter of 2005. The second quarter includes an impairment charge of $2.0 million, 3.9 percent of net operating revenues, and a loss on disposal of assets of $2.0 million, 3.9 percent of net operating revenues. The balance of the decline is primarily related to added expenses from the installation of a new billing and collection system and reduced profitability as a result of a negative case mix change in scanning activity.
Corporate and Other
Corporate and other operating loss improved $22.1 million from the same quarter a year ago. The second quarter of 2005 included an impairment of $13.0 million, primarily related to the Digital Hospital. The second quarter of 2006 includes a $6.9 million gain from the recovery of amounts previously reserved related to Source Medical. The remaining improvement relates, primarily, to lower professional fees and lower insurance costs.
Cash Flow and Balance Sheet
Cash and cash equivalents were $53.9 million at June 30, 2006. Total debt was $3,334.0 million. Payments on government and litigation were $56.2 million and capital expenditures were $43.2 million in six months ended June 30, 2006.
HealthSouth Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Data)
Three Months Ended June 30,
2006 2005
Net operating revenues $787,513 $818,277
Operating expenses:
Salaries and benefits 354,870 360,371
Professional and medical director fees 19,978 23,073
Supplies 73,631 79,485
Other operating expenses 168,442 194,292
Provision for doubtful accounts 29,592 22,836
Depreciation and amortization 38,917 40,199
Loss (gain) on disposal of assets 2,954 (2,247)
Impairments 3,860 12,978
Government, class action,
and related settlements expense 17,186 -
Professional fees - accounting, tax, and legal 27,996 28,981
Total operating expenses 737,426 759,968
Loss on early extinguishment of debt 4,565 33
Interest expense and amortization
of debt discounts and fees, net 78,657 80,917
(Gain) loss on sale of investments (1,049) 4,592
Gain on interest rate swap (18,604) -
Minority interests in earnings of
consolidated affiliates, net of equity
income of nonconsolidated affiliates 15,459 18,691
Loss from continuing operations
before income tax expense (28,941) (45,924)
Provision for income tax expense 9,086 9,540
Loss from continuing operations (38,027) (55,464)
Loss from discontinued operations,
net of income tax expense (4,409) (6,949)
Net Loss $(42,436) $(62,413)
Convertible perpetual preferred dividends (9,244) -
Net loss available to common shareholders $(51,680) $(62,413)
Weighted average common shares outstanding:
Basic 398,165 397,047
Diluted 464,511 398,827
Basic and diluted loss per share:
Net loss per share available
to common shareholders $(0.13) $(0.16)
HealthSouth Corporation
Supplemental Non-GAAP Disclosures
(In Thousands)
Three Months Ended June 30,
2006 2005
Loss from continuing operations $(38,027) $(55,464)
Income tax expense 9,086 9,540
Depreciation and amortization 38,917 40,199
Interest expense, net 78,657 80,917
Other debt related (income) expense (14,039) 33
Other adjustments under Debt Agreements (a):
Professional Fees 27,996 28,981
Impairments 3,860 12,978
Government, class action,
and related settlements expense 17,186 -
All other (b) 12,309 16,780
Consolidated Adjusted EBITDA (1) $135,945 $133,964
(1) Consolidated Adjusted EBITDA is a non-GAAP financial measure. We
believe Consolidated Adjusted EBITDA is an important measure that
supplements discussion and analysis of our results of operation. We
believe that it is useful to investors.
Consolidated Adjusted EBITDA is not a measure of financial performance
under accounting principles generally accepted in the United States
and should not be considered as an alternative to net income as an
operating performance measure or to cash flows from operating,
investing, or financing activities as a measure of liquidity. Because
Consolidated Adjusted EBITDA is not a measure determined in accordance
with generally accepted accounting principles and is susceptible to
varying calculations, Consolidated Adjusted EBITDA, as presented, may
not be comparable to other similarly titled measures presented by
other companies.
(a) Our Senior Credit Facility and Senior Notes allow certain items to be
added to arrive at Consolidated Adjusted EBITDA that are viewed as not
being ongoing costs once the Company has completed its restructuring.
(b) All other.
Three Months Ended June 30,
2006 2005
(In Thousands)
Non-cash losses on asset disposals $6,159 $3,503
Compensation expense under FASB No. 123(R) 3,757 -
Restructuring charges under
FASB Statement No. 146 2,077 5,584
Other 316 7,693
All Other $12,309 $16,780
HealthSouth Corporation
Supplemental Segment Information
(In Thousands)
Three Months Ended June 30, 2006
Surgery Corporate
Inpatient Centers Outpatient Diagnostic and Other
Net operating
revenues:
2Q 2006 $451,345 $191,261 $85,682 $51,268 $20,424
2Q 2005 $459,098 $197,985 $98,479 $56,831 $24,272
Operating
earnings (loss):
2Q 2006 $95,517 $20,113 $7,535 $(12,059) $(76,478)
2Q 2005 $109,603 $21,920 $5,687 $1,024 $(98,616)
Depreciation and
amortization:
2Q 2006 $17,612 $7,093 $3,023 $5,954 $5,236
2Q 2005 $15,496 $8,217 $3,310 $4,806 $8,369
Number of facilities
as of 6/30/2006 202(a) 153 606 76 5
(a) Includes 98 Outpatient Satellites
HealthSouth Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands)
Three Months Ended
June 30, 2006 December 31, 2005
Assets
Current Assets:
Cash and cash equivalents and
marketable securities $53,856 $199,456
Current portion of restricted cash 161,643 156,412
Accounts receivable, net of allowance
for doubtful accounts 404,669 403,887
Other current assets 103,661 114,500
Total current assets 723,859 874,255
Property and equipment, net 1,153,879 1,197,944
Goodwill 913,820 911,403
Intangible assets, net 50,408 54,247
Investment in and advances to
nonconsolidated affiliates 55,721 46,388
Other long-term assets 412,862 507,976
Total assets $3,310,549 $3,592,213
Liabilities and Shareholders' Deficit
Current liabilities:
Current portion of long-term debt $60,164 $33,866
Accounts payable 100,206 123,899
Accrued expenses and other
current liabilities 394,318 476,616
Refunds due patients and other
third-party payors 122,008 142,319
Current portion of government, class action,
and related settlements 361,020 333,124
Total current liabilities 1,037,716 1,109,824
Long-term debt, net of current portion 3,273,843 3,368,071
Other long-term liabilities 338,467 381,297
4,650,026 4,859,192
Minority interest in equity of
consolidated affiliates 292,909 273,742
Convertible perpetual preferred stock 387,403 -
Shareholders' deficit:
Total shareholders' deficit (2,019,789) (1,540,721)
Total liabilities and
shareholders' deficit $3,310,549 $3,592,213
HealthSouth Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
Six Months Ended June 30,
2006 2005
Net cash used in operating activities $(50,564) $(20,361)
Net cash provided by (used in)
investing activities 33,587 (24,725)
Net cash used in financing activities (105,575) (131,973)
Effect of exchange rate on cash
and cash equivalents (123) (314)
Decrease in cash and cash equivalents (122,675) (177,373)
Cash and cash equivalents at
beginning of period 175,617 449,097
Cash and cash equivalents of discontinued
operations at beginning of period 1,977 6,314
Less: Cash and cash equivalents of discontinued
operations at end of period (1,063) (5,152)
Cash and cash equivalents at end of period $53,856 $272,886
Earnings Conference Call/Meeting
The Company will hold a meeting for investors in New York City on August 14, 2006 at 8 a.m. ET to review the second quarter earnings and provide an update of its current operations and strategic plan. The meeting will be held in the Penthouse Ballroom of the St. Regis Hotel at 2 East 55 Street, New York City. Individuals attending the meeting in person do not need to make a reservation.
Individuals will also be able to access the meeting via teleconference or a live Internet broadcast. To access the meeting by phone, please dial 800- 369-1733 and enter pass code 9314005. International callers should dial 517- 319-9288 and use the same pass code. A digital recording will be available, beginning approximately two hours after the completion of the meeting, from August 14, 2006 to August 28, 2006. To access the recording, please dial 866- 424-4003. International callers should dial 203-369-0853.
The Internet broadcast will be available at www.healthsouth.com by clicking on an available link. The Webcast will be archived for replay purposes for two weeks after the live broadcast on the same Web site.
About HealthSouth
HealthSouth is one of the nation's largest providers of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, operating facilities nationwide. HealthSouth can be found on the Web at www.healthsouth.com.
Statements contained in this press release which are not historical facts 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 and involve a number of risks and uncertainties. HealthSouth's actual results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual results to differ materially from those estimated by HealthSouth include, but are not limited to the consummation of the proposed settlement of pending litigation relating to HealthSouth's prior reporting and financial practices; significant changes in HealthSouth's management team; HealthSouth's ability to continue to operate in the ordinary course and manage its relationships with its creditors, including its lenders, bondholders, vendors and suppliers, employees and customers; HealthSouth's ability to successfully remediate its internal control weaknesses; changes, delays in or suspension of reimbursement for HealthSouth's services by governmental or private payors; changes in the regulation of the healthcare industry at either or both of the federal and state levels; competitive pressures in the healthcare industry and HealthSouth's response thereto; HealthSouth's ability to obtain and retain favorable arrangements with third- party payors; HealthSouth's ability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages; general conditions in the economy and capital markets; and other factors which may be identified from time to time in the company's SEC filings and other public announcements, including HealthSouth's Form 10-K for the year ended December 31, 2005; Form 10-Q for the quarter ended March 31, 2006; and Form 10-Q for the quarter ended June 30, 2006.
Media Contact
Andy Brimmer, 205-410-2777
SOURCE: HealthSouth Corporation
CONTACT: Andy Brimmer for HealthSouth Corporation, +1-205-410-2777
Web site: http://www.healthsouth.com/