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HealthSouth Reports Solid Results for Third Quarter 2013 and Raises Full-Year Guidance



HealthSouth Reports Solid Results for Third Quarter 2013 and Raises Full-Year
                                   Guidance

Revenue Growth of 5.0% and Discharge Growth of 5.7%

Cash Provided by Operating Activities of $142.6 million ($369.4 million
Year-to-Date)

Adjusted EBITDA Increased by 8.2%

Announces Board Authorization to Repurchase Up to $200 Million of Its Common
Stock

PR Newswire

BIRMINGHAM, Ala., Oct. 28, 2013

BIRMINGHAM, Ala., Oct. 28, 2013 /PRNewswire/ -- HealthSouth Corporation (NYSE:
HLS), the nation's largest owner and operator of inpatient rehabilitation
hospitals, today reported its results of operations for the third quarter
ended September 30, 2013.

"The third quarter was another solid quarter for HealthSouth," said Jay
Grinney, President and Chief Executive Officer of HealthSouth. "Same-store
hospital discharges grew 3.2% while our new hospitals in Ocala, Florida,
Augusta, Georgia, Littleton, Colorado, and Stuart, Florida contributed another
2.5% of growth quarter over quarter. Our hospitals continued to provide this
care in a cost-effective manner which contributed to a $10.3 million, or 8.2%,
increase in Adjusted EBITDA. Most importantly, we generated $106.4 million of
adjusted free cash flow which brought our year-to-date adjusted free cash flow
to $264.6 million, an increase of $77.8 million, or 41.6%, compared to the
first nine months of 2012."

Third Quarter Results

  o Consolidated net operating revenues were $564.0 million for the third
    quarter of 2013 compared to $537.0 million for the third quarter of 2012,
    or an increase of 5.0%. This increase was attributable to a 5.7% increase
    in patient discharges and a 0.3% increase in net patient revenue per
    discharge. Discharge growth included a 3.2% increase in same-store
    discharges. Same-store discharges in the third quarter of 2013 were
    negatively impacted by the closure of 41 skilled nursing facility beds at
    two of the Company's hospitals in the first quarter of 2013. The increase
    in net patient revenue per discharge resulted from pricing adjustments,
    higher patient acuity, and a higher percentage of Medicare patients. Net
    patient revenue per discharge was negatively impacted in the third quarter
    of 2013 by sequestration and a modest decline in average length of stay
    attributable to the timing of patient discharges around quarter end.
  o Income from continuing operations attributable to HealthSouth per diluted
    share for the third quarter of 2013 was $0.59 per share compared to $0.44
    per share for the same period of 2012. Earnings per share for the third
    quarter of 2013 included solid operating results, a gain in government,
    class action, and related settlements, and a lower share count. During the
    third quarter of 2013, the Company recorded a $21.3 million gain related
    to an agreement with the plaintiffs in the 2004 consolidated securities
    action for amounts claimed by them under the 2007 comprehensive settlement
    of that action brought against the Company by its stockholders and
    bondholders, as well as the collection of judgments entered against
    certain former officers of the Company. The lower share count in 2013
    resulted from the Company's repurchase of approximately 9.1 million shares
    of its common stock in the first quarter of 2013. The net after-tax impact
    of these two items on earnings in the third quarter of 2013 approximated
    $0.16 per share. Earnings per share for the third quarter of 2012
    benefited by approximately $0.05 per share after tax as a result of a $4.9
    million gain resulting from the consolidation of St. Vincent
    Rehabilitation Hospital and a $3.5 million gain related to a recovery from
    former officers of the Company.
  o Cash flows provided by operating activities were $369.4 million for the
    nine months ended September 30, 2013 compared to $302.2 million for the
    same period of 2012. This increase was primarily due to increased net
    operating revenues and continued disciplined expense management.
  o Adjusted EBITDA (see attached supplemental information) for the three
    months ended September 30, 2013 was $135.5 million compared to $125.2
    million for the three months ended September 30, 2012, or an increase of
    8.2%. This improvement was due primarily to continued revenue growth and
    disciplined expense management. Adjusted EBITDA for the third quarter of
    2013 benefited from an approximate $8 million reduction in the Company's
    group medical, workers' compensation, and professional and general
    liability reserves due to favorable trends in claims. Sequestration
    negatively impacted Adjusted EBITDA by approximately $8 million during the
    third quarter of 2013.
  o Adjusted free cash flow (see attached supplemental information) for the
    third quarter of 2013 was $106.4 million compared to $71.6 million for the
    same period of 2012. Adjusted free cash flow for the third quarter of 2013
    benefited from higher Adjusted EBITDA and the timing of the collection of
    accounts receivable.

"During the quarter, we continued our strategy of augmenting consistent
operating results with the utilization of free cash flow and balance sheet
capacity to enhance the long-term value of our franchise," said Doug Coltharp,
Executive Vice President and Chief Financial Officer of HealthSouth.
"Specifically, we deployed approximately $70 million to consummate the
purchases of four hospitals previously operated under lease agreements."

Previously, the Company reported basic and diluted earnings per share of $0.44
and $1.23 for the three and nine months ended September 30, 2012,
respectively. In conjunction with the initiation of quarterly cash dividends
in the third quarter of 2013, the Company is revising its calculation to
present earnings per share using the two-class method, which takes into
consideration the impact of participating securities. Additional information
regarding this revision and a computation of basic and diluted earnings per
share can be found in Note 9, Earnings per Common Share, to the condensed
consolidated financial statements included in Part I, Item 1, Financial
Statements (Unaudited), of the Form 10-Q for the quarterly period ended
September 30, 2013, when filed.

2013 Guidance

Based on its year-to-date results as discussed above, the Company is:

  o raising its full-year 2013 Adjusted EBITDA guidance to a range of $533 to
    $538 from a range of $520 to $530.
  o raising its full-year 2013 guidance for income from continuing operations
    attributable to HealthSouth per share to $3.06 to $3.09 per diluted share
    from $2.87 to $2.93 per diluted share.

The earnings per share guidance above does not take into account any potential
share repurchase or other capital transactions.

Stock Repurchase Authorization

On October 25, 2013, the Company's board of directors authorized the
repurchase of up to $200 million of its common stock. This repurchase
authorization does not require the repurchase of a specific number of shares,
has an indefinite term, and is subject to termination at any time by the
Company's board of directors. Subject to certain terms and conditions,
including a maximum price per share and compliance with federal and state
securities and other laws, the repurchases may be made from time to time in
open market transactions, privately negotiated transactions, or other
transactions, including trades under a plan established in accordance with
Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

Call Option on 2018 and 2022 Senior Notes

As previously disclosed, on July 25, 2013, the Company's board of directors
granted discretion to management to exercise the call option for up to 10% of
the outstanding principal amount of its existing 7.25% Senior Notes due 2018
and 7.75% Senior Notes due 2022 pursuant to the terms of these senior notes.
The Company plans to give notice tomorrow of its intent to redeem $30.2
million and $27.9 million of the outstanding principal amount of its 7.25%
Senior Notes due 2018 and its 7.75% Senior Notes due 2022, respectively.
Pursuant to the terms of these senior notes, this optional redemption
represents 10% of the outstanding principal amount of the notes at a price of
103%, which will result in a total cash outlay of approximately $60 million to
retire the $58.1 million in principal. This redemption is expected to close in
November 2013 and is expected to be funded using a combination of cash on hand
and availability under the Company's revolving credit facility. As a result of
this redemption, the Company expects to record an approximate $2 million loss
on early extinguishment of debt in the fourth quarter of 2013. This expected
loss has been included in the revised earnings per share guidance presented
above.

Earnings Conference Call and Webcast

The Company will host an investor conference call at 9:00 a.m. Eastern Time on
Tuesday, October 29, 2013 to discuss its results for the third quarter of
2013. For reference during the call, the Company will post certain
supplemental slides at http://investor.healthsouth.com.

The conference call may be accessed by dialing 877-587-6761 and giving the
pass code 68264728. International callers should dial 706-679-1635 and give
the same pass code. Please call approximately ten minutes before the start of
the call to ensure you are connected.  The conference call will also be
webcast live and will be available at http://investor.healthsouth.com by
clicking on an available link.

A replay of the conference call will be available, beginning approximately two
hours after the completion of the conference call, from October 29, 2013 until
November 12, 2013. To access the replay, please dial 800-585-8367.
International callers should dial 404-537-3406. The webcast will also be
archived for replay purposes after the live broadcast at
http://investor.healthsouth.com.

About HealthSouth

HealthSouth is the nation's largest owner and operator of inpatient
rehabilitation hospitals in terms of patients treated and discharged,
revenues, and number of hospitals. Operating in 28 states across the country
and in Puerto Rico, HealthSouth serves patients through its network of
inpatient rehabilitation hospitals, outpatient rehabilitation satellite
clinics, and home health agencies. HealthSouth's hospitals provide a higher
level of rehabilitative care to patients who are recovering from conditions
such as stroke and other neurological disorders, cardiac and pulmonary
conditions, brain and spinal cord injuries, complex orthopedic conditions, and
amputations. HealthSouth can be found on the Web at www.healthsouth.com.

Other Information

The information in this press release is summarized and should be read in
conjunction with the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2013 (the "September 2013 Form 10-Q"), when filed, as well
as the Company's Current Report on Form 8-K filed on October 28, 2013. In
addition, the Company will post supplemental slides today on its website at
http://investor.healthsouth.com for reference during its October 29, 2013
earnings call.

When filed, the September 2013 Form 10-Q can be found on the Company's website
at http://investor.healthsouth.com and the SEC's website at www.sec.gov.

HealthSouth Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
                                    Three Months Ended  Nine Months Ended

                                    September 30,       September 30,
                                    2013      2012      2013        2012
                                    (In Millions)
Net operating revenues              $ 564.0   $ 537.0   $ 1,701.1   $ 1,609.0
Less: Provision for doubtful        (8.0)     (7.0)     (22.4)      (19.8)
accounts
Net operating revenues less         556.0     530.0     1,678.7     1,589.2
provision for doubtful accounts
Operating expenses:
Salaries and benefits               269.5     262.3     817.7       780.7
Other operating expenses            82.2      77.0      241.3       225.8
Occupancy costs                     11.7      11.8      35.8        36.6
Supplies                            25.5      23.8      78.3        76.2
General and administrative expenses 28.8      29.3      88.5        87.3
Depreciation and amortization       24.3      21.3      69.5        60.8
Government, class action, and       (21.3)    (3.5)     (23.3)      (3.5)
related settlements
Professional fees—accounting, tax,  4.2       4.1       7.8         13.2
and legal
Total operating expenses            424.9     426.1     1,315.6     1,277.1
Loss on early extinguishment of     —         1.3       —           1.3
debt
Interest expense and amortization   25.3      23.5      73.9        69.8
of debt discounts and fees
Other income                        (0.6)     (6.1)     (3.2)       (7.4)
Equity in net income of             (2.0)     (3.3)     (8.2)       (9.7)
nonconsolidated affiliates
Income from continuing operations
before income tax                   108.4     88.5      300.6       258.1

expense (benefit)
Provision for income tax expense    35.2      28.1      (17.8)      84.1
(benefit)
Income from continuing operations   73.2      60.4      318.4       174.0
(Loss) income from discontinued     (0.9)     (0.5)     (1.2)       2.6
operations, net of tax
Net income                          72.3      59.9      317.2       176.6
Less: Net income attributable to    (14.1)    (12.8)    (42.5)      (38.6)
noncontrolling interests
Net income attributable to          58.2      47.1      274.7       138.0
HealthSouth
Less: Convertible perpetual         (5.7)     (5.7)     (17.2)      (18.1)
preferred stock dividends
Less: Repurchase of convertible     —         —         —           (0.8)
perpetual preferred stock
Net income attributable to
HealthSouth common                  $ 52.5    $ 41.4    $ 257.5     $ 119.1

shareholders

HealthSouth Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (Continued)
(Unaudited)
                                       Three Months Ended  Nine Months Ended

                                       September 30,       September 30,
                                       2013       2012     2013      2012
                                       (In Millions, Except Per Share Data)
Weighted average common shares

outstanding:
Basic                                  86.2       94.7     88.7      94.6
Diluted                                100.4      108.1    102.4     108.2
Earnings per common share:
Basic earnings per share

attributable to HealthSouth

common shareholders:
Continuing operations                  $  0.61    $ 0.44   $ 2.87    $ 1.21
Discontinued operations                (0.01)     (0.01)   (0.01)    0.03
Net income                             $  0.60    $ 0.43   $ 2.86    $ 1.24
Diluted earnings per share

attributable to HealthSouth

common shareholders:
Continuing operations                  $  0.59    $ 0.44   $ 2.69    $ 1.21
Discontinued operations                (0.01)     (0.01)   (0.01)    0.03
Net income                             $  0.58    $ 0.43   $ 2.68    $ 1.24
Cash dividends per common share        $  0.18    $ —      $ 0.18    $ —
Amounts attributable to HealthSouth

 common shareholders:
Income from continuing operations      $  59.1    $ 47.6   $ 275.9   $ 135.4
(Loss) income from discontinued
                                       (0.9)      (0.5)    (1.2)     2.6
operations, net of tax
Net income attributable to HealthSouth $  58.2    $ 47.1   $ 274.7   $ 138.0

 

 

HealthSouth Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
                                                   September 30,  December 31,
                                                   2013           2012
                                                   (In Millions)
Assets
Current assets:
Cash and cash equivalents                          $  65.0        $  132.8
Accounts receivable, net of allowance for doubtful
                                                   253.4          249.3
accounts of $34.4 in 2013; $28.7 in 2012
Deferred income tax assets                         137.5          137.5
Other current assets                               119.2          117.2
Total current assets                               575.1          636.8
Property and equipment, net                        893.5          748.0
Goodwill                                           457.2          437.3
Intangible assets, net                             87.3           73.2
Deferred income tax assets                         412.6          393.5
Other long-term assets                             130.8          135.4
Total assets                                       $  2,556.5     $  2,424.2
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable                                   $  54.2        $  45.3
Accrued expenses and other current liabilities     257.6          255.6
Total current liabilities                          311.8          300.9
Long-term debt, net of current portion             1,306.2        1,239.9
Other long-term liabilities                        140.4          130.5
                                                   1,758.4        1,671.3
Commitments and contingencies
Convertible perpetual preferred stock              342.2          342.2
Redeemable noncontrolling interests                13.9           7.2
Shareholders' equity:
HealthSouth shareholders' equity                   321.1          291.0
Noncontrolling interests                           120.9          112.5
Total shareholders' equity                         442.0          403.5
Total liabilities and shareholders' equity         $  2,556.5     $  2,424.2

 

HealthSouth Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
                                               Nine Months Ended September 30,
                                               2013              2012
                                               (In Millions)
Cash flows from operating activities:
Net income                                     $   317.2         $   176.6
Loss (income) from discontinued operations     1.2               (2.6)
Adjustments to reconcile net income to net
cash provided

by operating activities—
Provision for doubtful accounts                22.4              19.8
Provision for government, class action, and    (23.3)            (3.5)
related settlements
Depreciation and amortization                  69.5              60.8
Equity in net income of nonconsolidated        (8.2)             (9.7)
affiliates
Distributions from nonconsolidated affiliates  9.6               7.9
Stock-based compensation                       19.0              18.1
Deferred tax (benefit) expense                 (20.8)            80.4
Other                                          6.0               1.7
Increase in assets—
Accounts receivable                            (26.5)            (42.3)
Other assets                                   (4.5)             (8.0)
Increase (decrease) in liabilities—
Accounts payable                               9.9               1.4
Other liabilities                              (6.6)             (2.5)
Government, class action, and related          5.9               2.6
settlements
Net cash (used in) provided by operating
activities of                                  (1.4)             1.5

discontinued operations
Total adjustments                              51.0              128.2
Net cash provided by operating activities      369.4             302.2

 

 

HealthSouth Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
                                               Nine Months Ended September 30,
                                               2013              2012
                                               (In Millions)
Cash flows from investing activities:
Purchases of property and equipment            (166.8)           (112.5)
Capitalized software costs                     (15.6)            (15.7)
Acquisition of business, net of cash acquired  (28.9)            (3.1)
Proceeds from sale of restricted investments   16.9              0.3
Proceeds from sale of Digital Hospital         10.8              —
Purchase of restricted investments             (8.1)             (8.6)
Net change in restricted cash                  (3.9)             7.6
Other                                          (1.6)             —
Net cash provided by investing activities of   —                 7.7
discontinued operations
Net cash used in investing activities          (197.2)           (124.3)
Cash flows from financing activities:
Proceeds from bond issuance                    —                 275.0
Principal payments on debt, including          (2.5)             (101.3)
pre-payments
Principal borrowings on notes                  15.2              —
Borrowings on revolving credit facility        147.0             135.0
Payments on revolving credit facility          (112.0)           (245.0)
Principal payments under capital lease         (8.6)             (8.9)
obligations
Repurchase of common stock, including fees and (234.1)           —
expenses
Repurchase of convertible perpetual preferred  —                 (46.0)
stock
Debt issue costs                               (1.2)             (7.0)
Dividends paid on convertible perpetual        (17.2)            (18.9)
preferred stock
Distributions paid to noncontrolling interests (34.1)            (37.6)
of consolidated affiliates
Contributions from consolidated affiliates     —                 9.5
Proceeds from exercising stock options         7.5               0.4
Net cash used in financing activities          (240.0)           (44.8)
(Decrease) increase in cash and cash           (67.8)            133.1
equivalents
Cash and cash equivalents at beginning of      132.8             30.1
period
Cash and cash equivalents at end of period     $    65.0         $   163.2

 

 

 

HealthSouth Corporation and Subsidiaries
Supplemental Information
Earnings Per Share
                                     QTD
                                     Q3 2013               Q3 2012
                                     (In Millions, Except Per Share Data)
Adjusted EBITDA                      $    135.5            $   125.2
Interest expense and amortization of (25.3)                (23.5)
debt discounts and fees
Depreciation and amortization        (24.3)                (21.3)
Stock-based compensation expense     (6.2)                 (6.1)
Noncash loss on disposal of assets   (2.5)                 (1.6)
                                     77.2                  72.7
Certain nonrecurring expenses:
Government, class action and related 21.3                  3.5
settlements
Professional fees—accounting, tax,   (4.2)                 (4.1)
and legal
Loss on early extinguishment of debt —                     (1.3)
Gain on consolidation of St. Vincent —                     4.9
Rehabilitation Hospital
Pre-tax income                       94.3                  75.7
Income tax benefit (expense) ^(1)    (35.2)                (28.1)
Income from continuing operations    $    59.1             $   47.6
^(2)
Basic shares                         86.2                  94.7
Diluted shares                       100.4                 108.1
Basic earnings per share ^(2)        $    0.61             $   0.44       ^(3)
Diluted earnings per share ^(2)      $    0.59             $   0.44       ^(3)

^(1)       Current income tax expense (benefit) for the three months ended
September 30, 2013 and 2012 was $2.5 million and ($0.6) million, respectively.

^(2)       Income from continuing operations attributable to HealthSouth.

^(3)       In conjunction with the initiation of quarterly cash dividends in
the third quarter of 2013, the Company is revising its calculation to present
earnings per share using the two-class method, which takes into consideration
the impact of participating securities. Additional information regarding this
revision and a computation of basic and diluted earnings per share can be
found in Note 9, Earnings per Common Share, to the condensed consolidated
financial statements included in Part I, Item 1, Financial Statements
(Unaudited), of the Form 10-Q for the quarterly period ended September 30,
2013, when filed. Diluted earnings per share are the same as basic earnings
per share due to antidilution.

 

HealthSouth Corporation and Subsidiaries
Supplemental Information
Earnings Per Share
                                     YTD
                                     Q3 2013               Q3 2012
                                     (In Millions, Except Per Share Data)
Adjusted EBITDA                      $   409.3             $   377.3
Interest expense and amortization of (73.9)                (69.8)
debt discounts and fees
Depreciation and amortization        (69.5)                (60.8)
Stock-based compensation expense     (19.0)                (18.1)
Noncash loss on disposal of assets   (4.3)                 (3.0)
                                     242.6                 225.6
Certain nonrecurring expenses:
Government, class action and related 23.3                  3.5
settlements
Professional fees—accounting, tax,   (7.8)                 (13.2)
and legal
Loss on early extinguishment of debt —                     (1.3)
Gain on consolidation of St. Vincent —                     4.9
Rehabilitation Hospital
Pre-tax income                       258.1                 219.5
Income tax benefit (expense) ^(1)    17.8           ^(2)   (84.1)
Income from continuing operations    $   275.9             $   135.4
^(3)
Basic shares                         88.7                  94.6
Diluted shares                       102.4                 108.2
Basic earnings per share ^(3)        $   2.87              $   1.21       ^(4)
Diluted earnings per share ^(3)      $   2.69              $   1.21       ^(4)

 

^(1)       Current income tax expense for the nine months ended September 30,
2013 and 2012 was $3.0 million and $3.7 million, respectively.

^(2)       Includes an approximate $115 million, or $1.12 per diluted share,
benefit related to the Company's settlement with the IRS related to the
previous restatement of its 2000 and 2001 financial statements, as well as
certain other tax matters, through December 31, 2008.

^(3)       Income from continuing operations attributable to HealthSouth

^(4)       Previously, the Company reported basic and diluted earnings per
share of $1.23. In conjunction with the initiation of quarterly cash dividends
in the third quarter of 2013, the Company is revising its calculation to
present earnings per share using the two-class method, which takes into
consideration the impact of participating securities. Additional information
regarding this revision and a computation of basic and diluted earnings per
share can be found in Note 9, Earnings per Common Share, to the condensed
consolidated financial statements included in Part I, Item 1, Financial
Statements (Unaudited), of the Form 10-Q for the quarterly period ended
September 30, 2013, when filed. Diluted earnings per share are the same as
basic earnings per share due to antidilution.

 

HealthSouth Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Income to Adjusted EBITDA
                                        Three Months Ended  Nine Months Ended

                                        September 30,       September 30,
                                        2013      2012      2013      2012
                                        (In Millions)
Net income                              $ 72.3    $ 59.9    $ 317.2   $ 176.6
Loss (income) from discontinued
operations, net of tax, attributable to 0.9       0.5       1.2       (2.6)
HealthSouth
Provision for income tax expense        35.2      28.1      (17.8)    84.1
(benefit)
Interest expense and amortization of    25.3      23.5      73.9      69.8
debt discounts and fees
Loss on early extinguishment of debt    —         1.3       —         1.3
Professional fees—accounting, tax, and  4.2       4.1       7.8       13.2
legal
Government, class action, and related   (21.3)    (3.5)     (23.3)    (3.5)
settlements
Net noncash loss on disposal of assets  2.5       1.6       4.3       3.0
Depreciation and amortization           24.3      21.3      69.5      60.8
Stock-based compensation expense        6.2       6.1       19.0      18.1
Net income attributable to              (14.1)    (12.8)    (42.5)    (38.6)
noncontrolling interests
Gain on consolidation of St. Vincent    —         (4.9)     —         (4.9)
Rehabilitation Hospital
Adjusted EBITDA                         $ 135.5   $ 125.2   $ 409.3   $ 377.3

HealthSouth Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free
Cash Flow
                        Three Months Ended     Nine Months Ended  Year Ended

                        September 30,          September 30,      December 31,
                      2013         2012      2013       2012      2012
                      (In Millions)
Net cash provided by  $ 142.6      $ 107.2   $ 369.4    $ 302.2   $   411.5
operating activities
Impact of
discontinued          1.2          0.2       1.4        (1.5)     (2.0)
operations
Net cash provided by
operating activities
of                    143.8        107.4     370.8      300.7     409.5

continuing operations
Capital expenditures  (18.6)       (17.9)    (54.3)     (68.0)    (83.0)
for maintenance
Dividends paid on
convertible perpetual (5.7)        (5.8)     (17.2)     (18.9)    (24.6)
preferred stock
Distributions paid to
noncontrolling
interests of          (10.2)       (13.6)    (34.1)     (37.6)    (49.3)
consolidated
affiliates
Nonrecurring items:
Premium paid on       —            —         —          —         1.9
redemption of bonds
Cash paid for:
Professional
fees—accounting, tax, 1.7          4.1       5.3        13.2      16.1
and legal
Government, class
action, and related   (4.6)        (2.6)     (5.9)      (2.6)     (2.6)
settlements
Adjusted free cash    $ 106.4      $ 71.6    $ 264.6    $ 186.8   $   268.0
flow

For the three months ended September 30, 2013, net cash used in investing
activities was $95.8 million and resulted primarily from capital expenditures.
Net cash used in financing activities during the three months ended
September 30, 2013 was $50.5 million and resulted primarily from net debt
payments, distributions paid to noncontrolling interests of consolidated
affiliates, and dividends paid on the Company's convertible perpetual
preferred stock. 

For the three months ended September 30, 2012, net cash used in investing
activities was $36.0 million and resulted primarily from capital expenditures.
Net cash provided by financing activities during the three months ended
September 30, 2012 was $50.8 million and resulted primarily from net proceeds
from debt transactions offset by distributions paid to noncontrolling
interests of consolidated affiliates and dividends paid on the Company's
convertible perpetual preferred stock.

For the nine months ended September 30, 2013, net cash used in investing
activities was $197.2 million and resulted primarily from capital expenditures
and acquisition activity. Net cash used in financing activities during the
nine months ended September 30, 2013 was $240.0 million and resulted primarily
from repurchases of common stock as part of the tender offer completed in the
first quarter of 2013.

For the nine months ended September 30, 2012, net cash used in investing
activities was $124.3 million and resulted primarily from capital
expenditures. Net cash used in financing activities during the nine months
ended September 30, 2012 was $44.8 million and resulted primarily from
repurchases of 46,645 shares of the Company's convertible perpetual preferred
stock, distributions paid to noncontrolling interests of consolidated
affiliates, and dividends paid on the Company's convertible perpetual
preferred stock offset by net proceeds from debt transactions and capital
contributions from consolidated affiliates.

For the year ended December 31, 2012, net cash used in investing activities
was $178.8 million and resulted primarily from capital expenditures. Net cash
used in financing activities during the year ended December 31, 2012 was
$130.0 million and resulted primarily from distributions paid to
noncontrolling interests of consolidated affiliates, repurchases of 46,645
shares of the Company's convertible perpetual preferred stock, dividends paid
on the Company's convertible perpetual preferred stock, and net principal
payments on debt offset by capital contributions from consolidated affiliates.

HealthSouth Corporation and Subsidiaries
Forward-Looking Statements

Statements contained in this press release which are not historical facts,
such as the dividend payment and stock repurchase plans and the financial
guidance, 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. All such estimates,
projections, and forward-looking information speak only as of the date hereof,
and HealthSouth undertakes no duty to publicly update or revise such
forward-looking information, whether as a result of new information, future
events, or otherwise. Such forward-looking statements are necessarily
estimates based upon current information, involve a number of risks and
uncertainties, and relate to, among other things, future events, HealthSouth's
plan to repurchase its debt or equity securities, dividend strategies,
effective income tax rates, HealthSouth's business strategy, its financial
plans, its future financial performance, or its projected business results or
model, or its projected capital expenditures, or its leverage ratio. Actual
events or results may differ materially from those 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
events or results to differ materially from those estimated by HealthSouth
include, but are not limited to, the price of HealthSouth's common or
preferred stock as it affects the Company's willingness and ability to
repurchase shares and the financial and accounting effects of any repurchases;
any adverse outcome of various lawsuits, claims, and legal or regulatory
proceedings involving HealthSouth, including its pending HHS-OIG
investigations; potential disruptions, breaches, or other incidents affecting
the proper operation, availability, or security of HealthSouth's information
systems; significant changes in HealthSouth's management team; HealthSouth's
ability to successfully complete and integrate de novo developments,
acquisitions, investments, and joint ventures consistent with its growth
strategy; changes, delays in (including in connection with resolution of
Medicare payment reviews or appeals), 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, including as part of national healthcare reform and deficit
reduction; 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 and the impact on
HealthSouth's labor expenses from potential union activity and staffing
shortages; general conditions in the economy and capital markets; the increase
in the costs of defending and insuring against alleged professional liability
claims and HealthSouth's ability to predict the estimated costs related to
such claims; and other factors which may be identified from time to time in
HealthSouth's SEC filings and other public announcements, including
HealthSouth's Form 10‑K for the year ended December 31, 2012 and Form 10-Q for
the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013, when
filed.

Media Contact
Casey Lassiter, 205-410-2777
casey.lassiter@healthsouth.com
Investor Relations Contact
Mary Ann Arico, 205-969-6175
maryann.arico@healthsouth.com

SOURCE HealthSouth Corporation

Website: http://www.healthsouth.com
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