Professional Documents
Culture Documents
com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
HealthSouth Corporation
(Exact name of Registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
001-10315 63-0860407
(Commission File Number) (IRS Employer Identification No.)
(205) 967-7116
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Processed and formatted by SEC Watch - Visit SECWatch.com
ITEM 2.02. Results of Operations and Financial Condition.
The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, “Results of Operations and Financial
Condition,” and Item 7.01 of Form 8-K, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On February 23, 2009, HealthSouth Corporation (the “Company”) issued a press release reporting the financial results of the
Company for the three months and year ended December 31, 2008. A copy of the press release is attached to this report as Exhibit 99.1 and
incorporated herein by reference.
In addition, a copy of the supplemental slides which will be discussed during the Company’s earnings call at 9:30 a.m. Eastern Time
on Tuesday, February 24, 2009 is attached to this report as Exhibit 99.2 and incorporated herein by reference.
The financial data contained in the press release and supplemental slides includes non-GAAP financial measures, including
“Adjusted Consolidated EBITDA.” The Company continues to believe Adjusted Consolidated EBITDA as defined in its Credit Agreement is a
measure of leverage capacity, its ability to service its debt, and its ability to make capital expenditures.
The Company uses Adjusted Consolidated EBITDA on a consolidated basis as a liquidity measure. The Company believes this
financial measure on a consolidated basis is important in analyzing its liquidity because it is the key component of certain material covenants
contained within the Company’s Credit Agreement, which is discussed in more detail in Note 8, Long-term Debt, to the consolidated financial
statements included in its Annual Report on Form 10-K for the year ended December 31, 2008 (the “2008 Form 10-K”), when filed. These
covenants are material terms of the Credit Agreement, and the Credit Agreement represents a substantial portion of the Company’s
capitalization. Non-compliance with these financial covenants under the Credit Agreement – its interest coverage ratio and its leverage ratio –
could result in the Company’s lenders requiring the Company to immediately repay all amounts borrowed. If the Company anticipated a
potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might not be
on terms as favorable to those in the Company’s existing Credit Agreement. In addition, if the Company cannot satisfy these financial
covenants, it would be prohibited under the Credit Agreement from engaging in certain activities, such as incurring additional indebtedness,
making certain payments, and acquiring and disposing of assets. Consequently, Adjusted Consolidated EBITDA is critical to the Company’s
assessment of its liquidity.
In general terms, the definition of Adjusted Consolidated EBITDA, per the Credit Agreement, allows the Company to add back to
Adjusted Consolidated EBITDA all unusual noncash items or non-recurring charges. These items include, but may not be limited to,
(1) amounts associated with government, class action, and related settlements, (2) fees, costs, and expenses related to the Company’s
recapitalization transactions, (3) any losses from discontinued operations and closed locations, (4) charges in respect of professional fees for
reconstruction and restatement of financial statements, including fees paid to outside professional firms for matters related to internal controls
and legal fees for continued litigation defense and support matters discussed in Note 20, Settlements, and Note 21, Contingencies and Other
Commitments, to the consolidated financial statements included in the 2008 Form 10-K, when filed, (5) compensation expense recorded in
accordance with Financial Accounting Standards Board Statement No. 123(R), Share-Based Payment, (6) investment and other income
(including interest income), and (7) fees associated with the Company’s divestiture activities.
However, Adjusted Consolidated EBITDA is not a measure of financial performance under generally accepted accounting principles
in the United States of America (“GAAP”), and the items excluded from Adjusted Consolidated EBITDA are significant components in
understanding and assessing financial performance. Therefore,
Processed and formatted by SEC Watch - Visit SECWatch.com
Adjusted Consolidated EBITDA should not be considered a substitute for net income (loss) or cash flows from operating, investing, or
financing activities. The Company reconciles Adjusted Consolidated EBITDA to net income (loss), which reconciliation is set forth in the
press release attached as Exhibit 99.1, and to net cash provided by operating activities, which reconciliation is set forth below. Because
Adjusted Consolidated EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations,
Adjusted Consolidated EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and
expenses are measured in accordance with the policies and procedures described in the 2008 Form 10-K.
The Company also uses adjusted income (loss) from continuing operations and the related per share amounts as analytical indicators
to assess its performance. Management believes the presentation of adjusted income (loss) from continuing operations and the related per
share amounts provides useful information to management and investors about the Company’s operating business before taking into account
certain items that are non-operational or infrequent in nature. These measures are not defined measures of financial performance under GAAP
and should not be considered as alternatives to net income (loss) and net income (loss) per share available to common shareholders. Because
these measures are not measures determined in accordance with GAAP and are susceptible to varying calculations, they may not be
comparable to other similarly titled measures presented by other companies. See the condensed consolidated statements of operations
included in the press release attached as Exhibit 99.1 for the GAAP measures of net income (loss), income (loss) from continuing operations,
and basic and diluted earnings (loss) per common share. A reconciliation of net income (loss) to adjusted income (loss) from continuing
operations, and the related per share amounts, is included in the earnings release attached as Exhibit 99.1 and the supplemental slides attached
as Exhibit 99.2.
The Company also uses adjusted free cash flow as an analytical indicator to assess its performance. Given the Company’s high
leverage, management believes the presentation of adjusted free cash flow provides investors an efficient means by which they can evaluate
the Company’s capacity to reduce debt and pursue development activities. The calculation of adjusted free cash flow is included in the
supplemental slides attached as Exhibit 99.2. This measure is not a defined measure of financial performance under GAAP and should not be
considered as an alternative to net cash provided by operating activities. Our definition of adjusted free cash flow is limited and does not
represent residual cash flows available for discretionary spending. Because this measure is not determined in accordance with GAAP and is
susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. See the
consolidated statements of cash flows included in the 2008 Form 10-K, when filed, for the GAAP measures of cash flows from operating,
investing, and financing activities. A reconciliation of cash provided by operating activities to Adjusted Consolidated EBITDA and adjusted
free cash flow is presented below.
Processed and formatted by SEC Watch - Visit SECWatch.com
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Consolidated EBITDA and Adjusted Free Cash Flow
For the year ended December 31, 2008 and 2007, net cash (used in) provided by investing activities was ($40.0) million and $1,184.5
million, respectively. Net cash provided by investing activities for the year ended December 31, 2007 included $1,169.8 million of proceeds from
the divestitures of the Company’s surgery centers, outpatient, and diagnostic divisions.
For the year ended December 31, 2008 and 2007, net cash used in financing activities was ($176.0) million and ($1,436.6) million,
respectively. Net cash used in financing activities for the year ended December 31, 2007 included $1,334.3 million of net debt payments
primarily using the net proceeds from the divestitures discussed above.
Forward-Looking Statements
The information contained in the earnings release and supplemental slides includes certain estimates, projections, and other forward-
looking information that reflect the Company’s current views with respect to future events and financial performance. These estimates,
projections, and other forward-looking information are based on assumptions the Company believes, as of the date hereof, are reasonable.
Inevitably, there will be differences between such estimates and actual results, and those differences may be material.
There can be no assurance that any estimates, projections, or forward-looking information will be realized.
All such estimates, projections, and forward-looking information speak only as of the date hereof. The Company undertakes no duty
to publicly update or revise the information contained herein.
You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking information in the earnings
release and supplemental slides as they are based on current expectations and general
Processed and formatted by SEC Watch - Visit SECWatch.com
assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in the 2008 Form 10-K, when filed,
many of which are beyond the Company’s control. These factors may cause actual results to differ materially from the views, beliefs, and
estimates expressed herein.
(d) Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned hereunto duly authorized.
HEALTHSOUTH CORPORATION
Exhibit 99.1
HealthSouth Reports Results for Fourth Quarter Ended December 31, 2008
Net Operating Revenues Increased 6.7% with Strong Same Store Discharge Growth
BIRMINGHAM, Ala. – HealthSouth Corporation (NYSE: HLS) today reported its results of operations for the fourth
quarter ended December 31, 2008. The results showed consolidated net operating revenues of $463.8 million for the
fourth quarter of 2008 compared to $434.5 million for the fourth quarter of 2007. This increase was driven by increased
discharges quarter over quarter. Compared to the fourth quarter of 2007, consolidated net operating revenues increased
by 6.7%. Diluted net income per share was $1.81 per share for the fourth quarter of 2008 compared to a loss of ($0.67) per
share for the fourth quarter of 2007. On an adjusted basis, income (loss) from continuing operations was $0.24 per
diluted share and ($0.01) per diluted share for the fourth quarters of 2008 and 2007, respectively (excludes amounts
associated with government, class action, and related settlements, our loss on interest rate swap, and other non-
recurring items; see attached supplemental information).
“The fourth quarter was another solid quarter for HealthSouth: same store discharges were up an impressive 9.7%;
consolidated net operating revenues increased 6.7%; and adjusted earnings per share increased $0.25 per diluted share
compared to the same period of last year,” said Jay Grinney, President and Chief Executive Officer of HealthSouth. “We
believe these results demonstrate the solid foundation and strength of HealthSouth’s business model. We also believe
our emphasis on providing high quality patient care and enhancing our balance sheet through continued debt
repayment will position HealthSouth to achieve its previously targeted 15% to 20% EPS growth in 2009.”
In addition, the Company continued to deleverage its balance sheet. During 2008, the Company used approximately
$254 million of cash to reduce its total debt outstanding. Due to the addition of two capital leases for hospitals, the
Company’s net total debt reduction was approximately $228 million during the year. Total debt outstanding
approximated $1.8 billion as of December 31, 2008. Total cash and cash equivalents as of December 31, 2008
approximated $32.2 million compared to $19.8 million as of December 31, 2007.
“Our ability to continue to generate cash from operations and non-operating sources allowed us to reduce our leverage
ratio by a full turn in 2008,” said John Workman, Executive Vice President and Chief Financial Officer. “We will continue
to be disciplined in our use of cash in 2009 with a heavy focus towards debt reduction. In fact, we have reduced our
debt by an additional $64 million, thereby reducing our leverage ratio by another 0.2 turn, since the end of 2008. ”
2009 Guidance
Adjusted diluted earnings per share for 2009 is expected to be in the range of $0.85 to $0.90 per share, compared to $0.75
per diluted share in 2008. Adjusted diluted earnings per share excludes the fair value adjustments to the liability
associated with the Company’s securities litigation settlement that are required until the applicable common stock and
warrants are issued, any gain or loss associated with the fair value adjustments to the Company’s interest rate swap
that is not classified as a hedge, professional fees (related primarily to the Company’s derivative litigation), and other
non-recurring items.
Processed and formatted by SEC Watch - Visit SECWatch.com
Adjusted Consolidated EBITDA for 2009 is expected to be in the range of $342.0 million to $352.0 million, compared to
$341.8 million for 2008. The Company’s Credit Agreement allows all unusual noncash items or nonrecurring charges to
be added to arrive at Adjusted Consolidated EBITDA. See the Company’s Current Report on Form 8-K furnished with
this press release on February 23, 2009 for additional information related to the definition of Adjusted Consolidated
EBITDA under the Company’s Credit Agreement.
Other Information
The information in this press release is summarized and should be read in conjunction with the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008 (the “2008 Form 10-K”), when filed, as well as the
Company’s Current Report on Form 8-K filed on February 23, 2009. In addition, the Company will post certain
supplemental slides today on its website at www.healthsouth.com/who_we_are/investor_information.asp for reference
during its February 24, 2009 earnings call.
The Company expects to file its 2008 Form 10-K this week. When filed, the report can be found on the Company’s
website at www.healthsouth.com/who_we_are/investor_information.asp and the SEC’s website at www.sec.gov.
2
Processed and formatted by SEC Watch - Visit SECWatch.com
Th re e Mon ths En de d Ye ar En de d
De ce m be r 31, De ce m be r 31,
2008 2007 2008 2007
(In Million s, Exce pt Pe r S h are Data)
Net operating revenues $ 463.8 $ 434.5 $ 1,842.4 $ 1,737.5
Operating expenses:
Salaries and benefits 233.7 217.4 934.7 863.6
Other operating expenses 66.2 56.0 268.3 243.8
General and administrative expenses 26.7 26.1 105.5 127.9
Supplies 27.8 25.4 108.9 100.3
Depreciation and amortization 18.0 19.4 83.8 76.2
Impairment of long-lived assets – – 0.6 15.1
Gain on UBS Settlement (121.3) – (121.3) –
Occupancy costs 12.2 13.9 49.8 52.4
P rovision for doubtful accounts 7.0 7.5 27.8 33.6
Loss on disposal of assets 1.4 3.6 2.0 5.9
Government, class action, and related
settlements expense (39.3) 31.2 (67.2) (2.8)
P rofessional fees—accounting, tax, and legal 31.5 7.3 44.4 51.6
T otal operating expenses 263.9 407.8 1,437.3 1,567.6
Loss on early extinguishment of debt 0.1 8.3 5.9 28.2
Interest expense and amortization of debt discounts and
fees 28.4 51.9 159.7 229.8
Other expense (income) 2.0 (0.9) (0.1) (15.5)
Loss on interest rate swap 39.6 23.6 55.7 30.4
Equity in net income of nonconsolidated affiliates (2.8) (2.9) (10.6) (10.3)
Minority interests in earnings of consolidated affiliates 8.1 8.2 29.8 31.4
Income (loss) from continuing operations before
income tax benefit 124.5 (61.5) 164.7 (124.1)
P rovision for income tax benefit (48.4) (34.2) (70.1) (322.4)
Income (loss) from continuing operations 172.9 (27.3) 234.8 198.3
Income (loss) from discontinued operations, net of
income tax benefit (expense) 9.0 (18.6) 17.6 455.1
Ne t in com e (loss) 181.9 (45.9) 252.4 653.4
Convertible perpetual preferred stock dividends (6.5) (6.5) (26.0) (26.0)
Net income (loss) available to common shareholders $ 175.4 $ (52.4) $ 226.4 $ 627.4
W e ighte d ave rage com m on sh are s ou tstan ding:
Basic 87.4 78.6 83.0 78.7
Diluted 100.7 91.9 96.4 92.0
Earn ings (loss) pe r com m on sh are :
Basic:
Income (loss) from continuing operations available
to common shareholders $ 1.91 $ (0.43) $ 2.52 $ 2.19
Income (loss) from discontinued operations,
net of tax 0.10 (0.24) 0.21 5.78
Net income (loss) per share available to
common shareholders $ 2.01 $ (0.67) $ 2.73 $ 7.97
Diluted:
Income (loss) from continuing operations available
to common shareholders $ 1.72 $ (0.43) $ 2.44 $ 2.16
Income (loss) from discontinued operations,
net of tax 0.09 (0.24) 0.18 4.94
Net income (loss) per share available to
common shareholders $ 1.81 $ (0.67) $ 2.62 $ 7.10
3
Processed and formatted by SEC Watch - Visit SECWatch.com
HealthSouth Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
As of December 31,
2008 2007
(In Millions)
Assets
Current assets:
Cash and cash equivalents $ 32.2 $ 19.8
Restricted cash 154.0 63.6
Restricted marketable securities 20.3 28.9
Accounts receivable, net of allowance for doubtful accounts of $31.1
in 2008; $37.6 in 2007 235.9 217.7
Other current assets 55.1 58.4
Insurance recoveries receivable 182.8 230.0
Current assets held for sale 2.4 19.0
Total current assets 682.7 637.4
Property and equipment, net 674.3 729.6
Goodwill 414.7 406.1
Intangible assets, net 42.8 26.1
Investments in and advances to nonconsolidated affiliates 36.7 42.7
Assets held for sale 24.5 78.0
Income tax refund receivable 55.9 52.5
Other long-term assets 66.6 78.2
Total assets $ 1,998.2 $ 2,050.6
Liabilities and Shareholders’ Deficit
Current liabilities
Current portion of long-term debt $ 24.8 $ 68.3
Accounts payable 45.7 48.7
Accrued expenses and other current liabilities 371.8 364.2
Government, class action, and related settlements 268.5 400.7
Current liabilities held for sale 35.4 88.6
Total current liabilities 746.2 970.5
Long-term debt, net of current portion 1,789.6 1,974.4
Liabilities held for sale 3.8 4.2
Other long-term liabilities 158.4 171.4
2,698.0 3,120.5
Commitments and contingencies
Minority interest in equity of consolidated affiliates 82.2 97.2
Convertible perpetual preferred stock 387.4 387.4
Shareholders’ deficit:
Total shareholders’ deficit (1,169.4) (1,554.5)
Total liabilities and shareholders’ deficit $ 1,998.2 $ 2,050.6
4
Processed and formatted by SEC Watch - Visit SECWatch.com
Year Ended
December 31,
2008 2007
(In Millions)
Net cash provided by operating activities $ 227.2 $ 230.6
Net cash (used in) provided by investing activities (40.0) 1,184.5
Net cash used in financing activities (176.0) (1,436.6)
Effect of exchange rate changes on cash and cash equivalents 0.8 0.1
Increase (decrease) in cash and cash equivalents 12.0 (21.4)
Cash and cash equivalents at beginning of year 19.8 27.2
Cash and cash equivalents of divisions and facilities held for
sale at beginning of year 0.4 14.4
Less: Cash and cash equivalents of divisions and facilities held for sale
at end of year – (0.4)
Cash and cash equivalents at end of year $ 32.2 $ 19.8
Operating activities. Net cash provided by operating activities in 2008 and 2007 included federal income tax
refunds of approximately $46 million and $440 million, respectively. If the Company excludes these cash refunds in each
year, its net cash provided by (used in) operating activities becomes $181.2 million and ($209.4) million, respectively, or
a year-over-year improvement of $390.6 million. Net cash provided by operating activities increased year over year due
to an increase in net operating revenues, a decrease in cash interest expense, and a decrease in cash settlement
payments related primarily to the Company’s Medicare Program Settlement negotiated in 2004 and its SEC Settlement
negotiated in 2005. The year ended December 31, 2008 included cash settlement payments of $7.4 million related
primarily to the Company’s settlement with the United States Department of Health and Human Services Office of
Inspector General negotiated in 2007.
Investing activities. The decrease in net cash provided by investing activities was due to the cash proceeds
received from the divestitures of the Company’s surgery centers, outpatient, and diagnostic divisions during 2007. Net
cash used in investing activities for 2008 included $39.2 million in expenditures associated with the Company’s
development activities, including $6.4 million of capital expenditures associated with land purchases for de novo
projects.
Financing activities. The decrease in net cash used in financing activities was due to the use of the cash
proceeds from the divestitures of the Company’s surgery centers, outpatient, and diagnostic divisions to reduce debt
outstanding under its Credit Agreement during 2007. During 2008, the Company made approximately $254.2 million of
net debt payments. During 2007, the Company made approximately $1.3 billion of net debt payments. The net debt
payments made during 2008 primarily resulted from the sale of the Company’s corporate campus in March 2008, the net
proceeds from its June 2008 equity offering, and the Company’s federal income tax recovery in October 2008.
5
Processed and formatted by SEC Watch - Visit SECWatch.com
6
Processed and formatted by SEC Watch - Visit SECWatch.com
7
Processed and formatted by SEC Watch - Visit SECWatch.com
(1) Adjustedincome (loss) from continuing operations and Adjusted Consolidated EBITDA are non-GAAP financial
measures. Management and some members of the investment community utilize adjusted income (loss) from continuing
operations as a financial measure and Adjusted Consolidated EBITDA as a liquidity measure on an ongoing basis.
These measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP
measures of performance or liquidity. In evaluating these adjusted measures, the reader should be aware that in the
future HealthSouth may incur expenses similar to the adjustments set forth above.
(2) Per share amounts for each period presented are based on basic weighted average common shares outstanding for all
amounts except adjusted income (loss) from continuing operations per diluted share, which is based on diluted shares
outstanding. The diluted share counts contain approximately 13.1 million shares related to the potential dilution of the
Company’s convertible perpetual preferred stock. Per share amounts do not include 5.0 million shares of common stock
or warrants to purchase approximately 8.2 million shares of common stock not yet issued under the securities litigation
settlement. The increase in the Company’s basic and diluted weighted average common shares outstanding for the
three months and year ended December 31, 2008 compared to the same periods of 2007 was primarily the result of its
equity offering of 8.8 million shares that was completed on June 27, 2008. The calculation of adjusted loss from
continuing operations per diluted share ignores the antidilutive impact in 2007.
(3) Inthe first quarter of 2008, and in accordance with Financial Accounting Standards Board Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, the Company accelerated the depreciation of its
corporate campus so that the net book value of the campus equaled the estimated net proceeds the Company expected
to receive on the sale transaction’s closing date. The year-over-year impact of this acceleration of depreciation
approximated $10 million. No similar charges are expected in 2009.
(4) Interest
expense and amortization of debt discounts and fees in the Company’s consolidated statements of
operations for the three months and year ended December 31, 2008 included the reversal of approximately $9.4 million of
accrued interest related to the loan guarantee for which the Company received a release as part of the UBS Settlement.
(5) Adjusted
income (loss) from continuing operations per diluted share and Adjusted Consolidated EBITDA are two
components of the Company’s guidance.
(6) The Company’s Credit Agreement allows all unusual non-cash items or non-recurring charges to be added to arrive
at Adjusted Consolidated EBITDA. In addition, the Company is allowed to add investment and other income, including
interest income, as well as non-recurring cash gains, to the calculation of Adjusted Consolidated EBITDA under its
Credit Agreement. This includes interest income associated with the Company’s federal income tax recoveries and the
estimated cash proceeds from legal settlements, such as the UBS Settlement. These amounts have not been included in
the above calculation as it would not be indicative of the Company’s Adjusted Consolidated EBITDA for future
periods.
8
Processed and formatted by SEC Watch - Visit SECWatch.com
HealthSouth Corporation and Subsidiaries
Earnings Conference Call
The Company will host an investor conference call at 9:30 a.m. Eastern Time on Tuesday, February 24, 2009 to discuss
its results for the fourth quarter and year ended December 31, 2008. For reference during the call, the Company will post
certain supplemental slides on its website at www.healthsouth.com/who_we_are/investor_information.asp.
The conference call may be accessed by dialing 866-406-5369 and giving the pass code 76626362. International callers
should dial 973-582-2847 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
www.healthsouth.com/who_we_are/investor_information.asp 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 February 24 until March 10, 2009. To access the replay, please dial 800-642-1687. International
callers should dial 706-645-9291. The webcast will also be archived for replay purposes after the live broadcast on
www.healthsouth.com/who_we_are/investor_information.asp.
About HealthSouth
HealthSouth is the nation’s largest provider of inpatient rehabilitative services. Operating in 26 states across the
country and in Puerto Rico, HealthSouth serves patients through its network of inpatient rehabilitation hospitals, long-
term acute care hospitals, outpatient rehabilitation satellites, and home health agencies. HealthSouth strives to be the
nation’s preeminent provider of inpatient rehabilitation services and 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. 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 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, any adverse outcome of various
lawsuits, claims, and legal or regulatory proceedings that may be brought against the Company; 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; 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, 2008, which is expected to be filed later this week.
Exhibit 99.2
Supplemental Slides
Processed and formatted by SEC Watch - Visit SECWatch.com
Supplemental Slides
Forward-Looking Statements
The information contained in this presentation includes certain estimates, projections and other forward-
looking information that reflect our current views with respect to future events and financial performance.
These estimates, projections and other forward-looking information are based on assumptions that
HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will be differences between
such estimates and actual results, and those differences may be material.
There can be no assurance that any estimates, projections or forward-looking information will be realized.
All such estimates, projections and forward-looking information speak only as of the date hereof.
HealthSouth undertakes no duty to publicly update or revise the information contained herein.
You are cautioned not to place undue reliance on the estimates, projections and other forward-looking
information in this presentation as they are based on current expectations and general assumptions and are
subject to various risks, uncertainties and other factors, including those set forth in our Form 10-Q for the
quarters ended March 31, 2008, June 30, 2008, and September 30, 2008, and Form 10-K for the year
ended December 31, 2007, and in other documents we previously filed with the SEC, as well as our Form
10-K for the year ended December 31, 2008, when filed, many of which are beyond our control, that may
cause actual results to differ materially from the views, beliefs and estimates expressed herein.
Table of Contents
2008 Goals vs. Results................................................................
................................
....................4
Organic Growth ................................
................................
................................
...............................5
Debt Reduction................................
................................
................................
................................6
Development Growth ................................................................
................................
.......................7
Revenues (Q4) ................................
................................
................................
................................8
Expenses (Q4) ................................
................................
................................
................................9
Processed and formatted by SEC Watch - Visit SECWatch.com
Forward-Looking Statements
The information contained in this presentation includes certain estimates, projections and other forward-
looking information that reflect our current views with respect to future events and financial performance.
These estimates, projections and other forward-looking information are based on assumptions that
HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will be differences between
such estimates and actual results, and those differences may be material.
There can be no assurance that any estimates, projections or forward-looking information will be realized.
All such estimates, projections and forward-looking information speak only as of the date hereof.
HealthSouth undertakes no duty to publicly update or revise the information contained herein.
You are cautioned not to place undue reliance on the estimates, projections and other forward-looking
information in this presentation as they are based on current expectations and general assumptions and are
subject to various risks, uncertainties and other factors, including those set forth in our Form 10-Q for the
quarters ended March 31, 2008, June 30, 2008, and September 30, 2008, and Form 10-K for the year
ended December 31, 2007, and in other documents we previously filed with the SEC, as well as our Form
10-K for the year ended December 31, 2008, when filed, many of which are beyond our control, that may
cause actual results to differ materially from the views, beliefs and estimates expressed herein.
Table of Contents
2008 Goals vs. Results................................ ....................................................................................4
Organic Growth ................................ ...............................................................................................5
Debt Reduction................................ ................................................................................................6
Development Growth ................................ .......................................................................................7
Revenues (Q4) ................................ ................................................................................................8
Expenses (Q4) ................................ ................................................................................................9
Adjusted Consolidated EBITDA................................ ..................................................................... 10
Adjusted Income (Loss) Per Share................................ ................................................................ 11
Free Cash Flow ................................ .............................................................................................12
Liquidity ................................
................................
.........................................................................13
UBS Settlement................................ .............................................................................................14
Year-End Summary................................ .......................................................................................15
2009 Guidance ................................ .............................................................................................. 16
Appendix ................................................................
.......................................................................17
Revenues (Sequential) ................................ ..................................................................................18
Expenses (Sequential) ................................ ..................................................................................19
Revenues (Year End) ................................ ....................................................................................20
Expenses (Year End) ................................ ....................................................................................21
Operational and Labor Metrics ................................ ...................................................................... 22
Supplemental Information ................................ ..............................................................................23
Debt Schedule................................ ............................................................................................... 24
Debt Maturities and Swap ................................ .............................................................................25
Non-Operating Cash/Tax Position................................ ................................................................. 26
Outstanding Share Summary ................................ ........................................................................27
Processed and formatted by SEC Watch - Visit SECWatch.com
Table of Contents
2008 Goals vs. Results................................ ....................................................................................4
Organic Growth ................................ ...............................................................................................5
Debt Reduction................................ ................................................................................................6
Development Growth ................................ .......................................................................................7
Revenues (Q4) ................................ ................................................................................................8
Expenses (Q4) ................................ ................................................................................................9
Adjusted Consolidated EBITDA................................ ..................................................................... 10
Adjusted Income (Loss) Per Share................................ ................................................................ 11
Free Cash Flow ................................ .............................................................................................12
Liquidity ................................
................................
.........................................................................13
UBS Settlement................................ .............................................................................................14
Year-End Summary................................ .......................................................................................15
2009 Guidance ................................ .............................................................................................. 16
Appendix ................................................................
.......................................................................17
Revenues (Sequential) ................................ ..................................................................................18
Expenses (Sequential) ................................ ..................................................................................19
Revenues (Year End) ................................ ....................................................................................20
Expenses (Year End) ................................ ....................................................................................21
Operational and Labor Metrics ................................ ...................................................................... 22
Supplemental Information ................................ ..............................................................................23
Debt Schedule................................ ............................................................................................... 24
Debt Maturities and Swap ................................ .............................................................................25
Non-Operating Cash/Tax Position................................ ................................................................. 26
Outstanding Share Summary ................................ ........................................................................27
Reconciliation to Non-GAPP Financial Measures ................................ ....................................28-31 3
(2)
(3)
(2)
(3)
(1)Credit Agreement limits debt pay down on non–term loan balances. We have the right to buy back non-term loan debt with the discretionary
cash available to the Company.
Processed and formatted by SEC Watch - Visit SECWatch.com
(1)Credit Agreement limits debt pay down on non–term loan balances. We have the right to buy back non-term loan debt with the discretionary
cash available to the Company.
6
(1)
Mesa, AZ Oct-08 De novo 40 Beds Q309
(1) (2)
Marion County, FL Aug-08 De novo 40 Beds Q310
(1)
Mesa, AZ Oct-08 De novo 40 Beds Q309
(1) (2)
Marion County, FL Aug-08 De novo 40 Beds Q310
Inpatient revenue growth was driven by strong discharge volumes, offset by lower pricing
in Q408 due to Medicare pricing roll-back.
Volume growth was driven by the TeamWorks effort, the acquisition of a 34-bed hospital in
Vineland, NJ, and the acquisitions/consolidations of a 30-bed hospital unit in Arlington, TX
and a 38-bed hospital in Midland, TX.
“Same store” discharge growth was 9.7%, excluding our above-referenced Vineland, NJ
hospital.
Hospitals prepared for 65% threshold in Q407.
Net patient revenue/discharge was lower due to the roll-back in Medicare pricing on
April 1, 2008.
Outpatient revenue declined as a result of 11 fewer outpatient satellites year over year.
Processed and formatted by SEC Watch - Visit SECWatch.com
Inpatient revenue growth was driven by strong discharge volumes, offset by lower pricing
in Q408 due to Medicare pricing roll-back.
Volume growth was driven by the TeamWorks effort, the acquisition of a 34-bed hospital in
Vineland, NJ, and the acquisitions/consolidations of a 30-bed hospital unit in Arlington, TX
and a 38-bed hospital in Midland, TX.
“Same store” discharge growth was 9.7%, excluding our above-referenced Vineland, NJ
hospital.
Hospitals prepared for 65% threshold in Q407.
Net patient revenue/discharge was lower due to the roll-back in Medicare pricing on
April 1, 2008.
Outpatient revenue declined as a result of 11 fewer outpatient satellites year over year.
Year-over-year adjusted income from continuing operations per diluted share improved
by $1.39 per share. Major drivers were:
Lower interest expense
Lower early extinguishment of debt expenses
Lower G&A expense
Operational improvements
Processed and formatted by SEC Watch - Visit SECWatch.com
Year-over-year adjusted income from continuing operations per diluted share improved
by $1.39 per share. Major drivers were:
Lower interest expense
Lower early extinguishment of debt expenses
Lower G&A expense
Operational improvements
Liquidity
(Millions)
December 31,
2008
Cash
Available $ 32.2
Revolver
Total line $ 400.0
Less:
– Draws (40.0) (1)
– Letters of credit (52.7) (2)
Available $ 307.3
Total Liquidity
(available cash and revolver) $ 339.5
(1) In February 2009, draws under the revolver were reduced to zero.
(2) We expect the letters of credit will be reduced by approximately $33.6 million in connection with implementing the court order approving the
final UBS settlement in the first quarter of 2009.
Processed and formatted by SEC Watch - Visit SECWatch.com
Liquidity
(Millions)
December 31,
2008
Cash
Available $ 32.2
Revolver
Total line $ 400.0
Less:
– Draws (40.0) (1)
– Letters of credit (52.7) (2)
Available $ 307.3
Total Liquidity
(available cash and revolver) $ 339.5
(1) In February 2009, draws under the revolver were reduced to zero.
(2) We expect the letters of credit will be reduced by approximately $33.6 million in connection with implementing the court order approving the
final UBS settlement in the first quarter of 2009.
13
UBS Settlement
(Announced October 27, 2008)
$100.0 million in cash (funded by UBS Securities and its insurance
carriers and held in escrow).
$30.7 million release of loan guarantee.
$21.3 million principal
$9.4 million accrued interest (included in interest expense)
Cash + principal = Gain on UBS Settlement.
$26.2 million fees and expenses owed to derivative plaintiffs’ attorneys
(included in professional fees – accounting, tax, and legal).
25% of net settlement proceeds to derivative plaintiffs (included in
government, class action, and related settlements expense).
~ $60 million of net cash proceeds to the Company.
Funds expected to be dispersed to applicable parties in Q109.
Processed and formatted by SEC Watch - Visit SECWatch.com
UBS Settlement
(Announced October 27, 2008)
$100.0 million in cash (funded by UBS Securities and its insurance
carriers and held in escrow).
$30.7 million release of loan guarantee.
$21.3 million principal
$9.4 million accrued interest (included in interest expense)
Cash + principal = Gain on UBS Settlement.
$26.2 million fees and expenses owed to derivative plaintiffs’ attorneys
(included in professional fees – accounting, tax, and legal).
25% of net settlement proceeds to derivative plaintiffs (included in
government, class action, and related settlements expense).
~ $60 million of net cash proceeds to the Company.
Funds expected to be dispersed to applicable parties in Q109.
14
Employees per
Occupied Bed (EPOB)(1) SWB per FTE(1)
-2.7% 7.1%
Processed and formatted by SEC Watch - Visit SECWatch.com
Employees per
Occupied Bed (EPOB)(1) SWB per FTE(1)
-2.7% 7.1%
(1) For full-time equivalents and EPOB table, see slide 22.
15
2009 Guidance
Adjusted Consolidated EBITDA(1)
2008 Actual: $341.8 million
2009: Expected to be in the range of $342.0 million to $352.0 million
2009 Guidance
Adjusted Consolidated EBITDA(1)
2008 Actual: $341.8 million
2009: Expected to be in the range of $342.0 million to $352.0 million
Appendix
Processed and formatted by SEC Watch - Visit SECWatch.com
Appendix
17
Revenues (Sequential)
(Millions) 4th Qtr. 2008 3rd Qtr. 2008 Change
Inpatient $ 418.4 $ 411.5 1.7%
Outpatient and other 45.4 44.7 1.6%
Consolidated net operating $ 463.8 $ 456.2 1.7%
(Actual Amounts)
Discharges 27,654 26,827 3.1%
Net patient revenue/discharge $ 15,130 $ 15,339 (1.4%)
Revenues (Sequential)
(Millions) 4th Qtr. 2008 3rd Qtr. 2008 Change
Inpatient $ 418.4 $ 411.5 1.7%
Outpatient and other 45.4 44.7 1.6%
Consolidated net operating $ 463.8 $ 456.2 1.7%
(Actual Amounts)
Discharges 27,654 26,827 3.1%
Net patient revenue/discharge $ 15,130 $ 15,339 (1.4%)
18
Expenses (Sequential)
(Millions, except percent) 4th Qtr. 2008 3rd Qtr. 2008 Change
Salaries and benefits $ 233.7 $ 236.5 (1.2) %
Percent of net operating revenues 50.4% 51.8% (140) bps
Hospital related expenses $ 113.2 $ 114.6 (1.2) %
(other operating, supplies, occupancy, bad debts)
Percent of net operating revenues 24.4% 25.1% (70) bps
General and administrative $ 23.5 $ 23.0 2.2 %
(excludes 123(R) compensation expense)
Percent of net operating revenues 5.1% 5.0% 10 bps
Adjustments were made to the benefit plans during Q408 and a 3.0% merit increase
was implemented October 1, 2008.
Processed and formatted by SEC Watch - Visit SECWatch.com
Expenses (Sequential)
(Millions, except percent) 4th Qtr. 2008 3rd Qtr. 2008 Change
Salaries and benefits $ 233.7 $ 236.5 (1.2) %
Percent of net operating revenues 50.4% 51.8% (140) bps
Hospital related expenses $ 113.2 $ 114.6 (1.2) %
(other operating, supplies, occupancy, bad debts)
Percent of net operating revenues 24.4% 25.1% (70) bps
General and administrative $ 23.5 $ 23.0 2.2 %
(excludes 123(R) compensation expense)
Percent of net operating revenues 5.1% 5.0% 10 bps
Adjustments were made to the benefit plans during Q408 and a 3.0% merit increase
was implemented October 1, 2008.
19
20
Salaries and benefits were higher in 2008 driven by higher cost per employee and an
increase in the number of employees needed to manage the increase in discharge
volumes. The increase was offset by a 2.7% improvement in productivity.
Hospital related expenses were higher in 2008 mainly due to higher patient volumes,
but were essentially unchanged as a percent of net operating revenues.
Processed and formatted by SEC Watch - Visit SECWatch.com
Salaries and benefits were higher in 2008 driven by higher cost per employee and an
increase in the number of employees needed to manage the increase in discharge
volumes. The increase was offset by a 2.7% improvement in productivity.
Hospital related expenses were higher in 2008 mainly due to higher patient volumes,
but were essentially unchanged as a percent of net operating revenues.
21
equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of occupied beds is
Processed and formatted by SEC Watch - Visit SECWatch.com
equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of occupied beds is
determined by multiplying the number of licensed beds by the Company’s occupancy percentage.
22
Supplemental Information
Payment Source
For the Year Ended December 31,
2008 2007 2006
Medicare 67.2% 67.8% 68.6%
Medicaid 2.2% 2.0% 2.1%
Workers' compensation 2.1% 2.3% 2.6%
Managed care and other discount plans 19.0% 18.5% 18.5%
Other third-party payors 7.0% 6.3% 5.0%
Patients 0.7% 0.6% 0.4%
Other income 1.8% 2.5% 2.8%
Total 100.0% 100.0% 100.0%
Supplemental Information
Payment Source
For the Year Ended December 31,
2008 2007 2006
Medicare 67.2% 67.8% 68.6%
Medicaid 2.2% 2.0% 2.1%
Workers' compensation 2.1% 2.3% 2.6%
Managed care and other discount plans 19.0% 18.5% 18.5%
Other third-party payors 7.0% 6.3% 5.0%
Patients 0.7% 0.6% 0.4%
Other income 1.8% 2.5% 2.8%
Total 100.0% 100.0% 100.0%
23
Debt Schedule
Debt Balance s
Dece m ber 31, Dece m ber 31, 2008 Debt
(1)(2)
(Millions) 2008 2007 Reduction
Advances under $400 million revolving credit facility,
March 2012 $ 40.0 $ 75.0 $ 35.0
Term loan facility - March 2013 783.6 862.8 79.2
Bonds Payable:
7.000% Senior Notes due 2008 - 5.0 5.0
10.750% Senior Subordinated Notes due 2008 - 30.3 30.3
8.500% Senior Notes due 2008 - 9.4 9.4
8.375% Senior Notes due 2011 0.3 0.3 -
7.625% Senior Notes due 2012 1.5 1.5 -
Floating Rate Senior Notes due 2014 366.0 375.0 9.0
(6 month Libor plus 600)
10.75% Senior Notes due 2016 494.3 558.2 63.9
Notes payable to banks and others at interest rates
from 7.9% to 12.9% 12.8 17.0 4.2
Capital lease obligations 115.9 108.2 (7.7)
Total $ 1,814.4 $ 2,042.7 $ 228.3
Debt to Adj. Consol. EBITDA on December 31, 2008 = 5.3X ; Target = 4.5X by YE 2010
(1) The Company used approximately $254 million of cash to reduce its total debt outstanding. Due to the addition of two capital leases, the
Company net total debt reduction was $228.3 million.
(2) Credit Agreement limits debt pay down on non–term loan balances. We have the ability to buy back non-term loan debt with the discretionary
Processed and formatted by SEC Watch - Visit SECWatch.com
Debt Schedule
Debt Balance s
Dece m ber 31, Dece m ber 31, 2008 Debt
(1)(2)
(Millions) 2008 2007 Reduction
Advances under $400 million revolving credit facility,
March 2012 $ 40.0 $ 75.0 $ 35.0
Term loan facility - March 2013 783.6 862.8 79.2
Bonds Payable:
7.000% Senior Notes due 2008 - 5.0 5.0
10.750% Senior Subordinated Notes due 2008 - 30.3 30.3
8.500% Senior Notes due 2008 - 9.4 9.4
8.375% Senior Notes due 2011 0.3 0.3 -
7.625% Senior Notes due 2012 1.5 1.5 -
Floating Rate Senior Notes due 2014 366.0 375.0 9.0
(6 month Libor plus 600)
10.75% Senior Notes due 2016 494.3 558.2 63.9
Notes payable to banks and others at interest rates
from 7.9% to 12.9% 12.8 17.0 4.2
Capital lease obligations 115.9 108.2 (7.7)
Total $ 1,814.4 $ 2,042.7 $ 228.3
Debt to Adj. Consol. EBITDA on December 31, 2008 = 5.3X ; Target = 4.5X by YE 2010
(1) The Company used approximately $254 million of cash to reduce its total debt outstanding. Due to the addition of two capital leases, the
Company net total debt reduction was $228.3 million.
(2) Credit Agreement limits debt pay down on non–term loan balances. We have the ability to buy back non-term loan debt with the discretionary
Debt Maturities
Debt Maturities
Notes:
(1) The difference between the basic and diluted shares outstanding is primarily related to our convertible perpetual preferred
stock.
(2) Does not include warrants issued in connection with a January 2004 loan repaid to Credit Suisse First Boston. In
connection with this transaction, we issued warrants to the lender to purchase two million shares of our common stock.
Each warrant has a term of ten years from the date of issuance and an exercise price of $32.50 per share. The warrants
were not assumed exercised for dilutive shares outstanding because they were antidilutive in the periods presented.
(3) Does not include approximately 5.0 million shares of common stock and warrants to purchase approximately 8.2 million
shares of common stock at a strike price of $41.40 to settle our class action securities litigation. This agreement received
final court approval on January 11, 2007. As of December 31, 2008, these shares of common stock and warrants have
not been issued and are not included in our basic or diluted common shares outstanding. We expect a ruling in the first
quarter 2009. If the judgment is affirmed, the distribution would occur in the first half of 2009.
(4) Completed an equity offering for 8.8 million shares on June 27, 2008.
Processed and formatted by SEC Watch - Visit SECWatch.com
Notes:
(1) The difference between the basic and diluted shares outstanding is primarily related to our convertible perpetual preferred
stock.
(2) Does not include warrants issued in connection with a January 2004 loan repaid to Credit Suisse First Boston. In
connection with this transaction, we issued warrants to the lender to purchase two million shares of our common stock.
Each warrant has a term of ten years from the date of issuance and an exercise price of $32.50 per share. The warrants
were not assumed exercised for dilutive shares outstanding because they were antidilutive in the periods presented.
(3) Does not include approximately 5.0 million shares of common stock and warrants to purchase approximately 8.2 million
shares of common stock at a strike price of $41.40 to settle our class action securities litigation. This agreement received
final court approval on January 11, 2007. As of December 31, 2008, these shares of common stock and warrants have
not been issued and are not included in our basic or diluted common shares outstanding. We expect a ruling in the first
quarter 2009. If the judgment is affirmed, the distribution would occur in the first half of 2009.
(4) Completed an equity offering for 8.8 million shares on June 27, 2008.
27
Fourth Quarter Reconciliation of Net Income (Loss) to Adjusted Income (Loss) from
Continuing Operations and Adjusted Consolidated EBITDA (1)(3)(4)
Three Months Ended December 31,
(2) (2)
2008 Per Share 2007 Per Share
(In Millions, Except Per Share Data)
Net income (loss) $ 181.9 $ 2.08 $ (45.9) $ (0.58)
(Income) loss from discontinued operations (9.0) (0.10) 18.6 0.24
Income (loss) from continuing operations 172.9 1.98 (27.3) (0.35)
Gain on UBS Settlement (121.3) (1.39) - -
Government, class action, and related settlements (39.3) (0.45) 31.2 0.40
Professional fees - accounting, tax, and legal 31.5 0.36 7.3 0.09
Loss on interest rate swap 39.6 0.45 23.6 0.30
Provision for income tax benefit (48.4) (0.55) (34.2) (0.44)
Interest associated with UBS Settlement (9.4) (0.11) - -
Estimated state tax expense (1)(3)
(1.3) (0.01) (1.3) (0.02)
Adjusted income (loss) from continuing operations 24.3 0.28 (0.7) (0.01)
(2)
Adjustment to GAAP EPS for dilution (0.04) -
Adjusted income(2)(3)
(loss) from continuing operations per
per diluted share $ 0.24 $ (0.01)
Estimated state tax expense 1.3 1.3
Interest expense and amortization of debt discounts and fees,
excluding interest associated with the UBS Settlement 37.8 51.9
Depreciation and amortization 18.0 19.4
81.4 71.9
Other adjustments per the Company's Credit Agreement:
Impairment charges related to investments 1.8 -
Net noncash loss on disposal of assets 1.4 3.6
Loss on early extinguishment of debt 0.1 8.3
Compensation expense under FASB Statement No. 123(R) 3.2 2.5
Other (0.1) 0.1
(1)(3)(4)
Adjusted Consolidated EBITDA $ 87.8 $ 86.4
Weighted average common shares outstanding:
Basic 87.4 78.6
Diluted 100.7 91.9
Processed and formatted by SEC Watch - Visit SECWatch.com
Fourth Quarter Reconciliation of Net Income (Loss) to Adjusted Income (Loss) from
Continuing Operations and Adjusted Consolidated EBITDA (1)(3)(4)
Three Months Ended December 31,
(2) (2)
2008 Per Share 2007 Per Share
(In Millions, Except Per Share Data)
Net income (loss) $ 181.9 $ 2.08 $ (45.9) $ (0.58)
(Income) loss from discontinued operations (9.0) (0.10) 18.6 0.24
Income (loss) from continuing operations 172.9 1.98 (27.3) (0.35)
Gain on UBS Settlement (121.3) (1.39) - -
Government, class action, and related settlements (39.3) (0.45) 31.2 0.40
Professional fees - accounting, tax, and legal 31.5 0.36 7.3 0.09
Loss on interest rate swap 39.6 0.45 23.6 0.30
Provision for income tax benefit (48.4) (0.55) (34.2) (0.44)
Interest associated with UBS Settlement (9.4) (0.11) - -
Estimated state tax expense (1)(3)
(1.3) (0.01) (1.3) (0.02)
Adjusted income (loss) from continuing operations 24.3 0.28 (0.7) (0.01)
(2)
Adjustment to GAAP EPS for dilution (0.04) -
Adjusted income(2)(3)
(loss) from continuing operations per
per diluted share $ 0.24 $ (0.01)
Estimated state tax expense 1.3 1.3
Interest expense and amortization of debt discounts and fees,
excluding interest associated with the UBS Settlement 37.8 51.9
Depreciation and amortization 18.0 19.4
81.4 71.9
Other adjustments per the Company's Credit Agreement:
Impairment charges related to investments 1.8 -
Net noncash loss on disposal of assets 1.4 3.6
Loss on early extinguishment of debt 0.1 8.3
Compensation expense under FASB Statement No. 123(R) 3.2 2.5
Other (0.1) 0.1
(1)(3)(4)
Adjusted Consolidated EBITDA $ 87.8 $ 86.4
Weighted average common shares outstanding:
Basic 87.4 78.6
Diluted 100.7 91.9
28
Twelve Month Reconciliation of Net Income to Adjusted Income (Loss) from Continuing
Operations and Adjusted Consolidated EBITDA(1)(3)(4)
Year Ended December 31,
(2) (2)
2008 Per Share 2007 Per Share
(In Millions, Except Per Share Data)
Net income $ 252.4 $ 3.04 $ 653.4 $ 8.30
Income from discontinued operations (17.6) (0.21) (455.1) (5.78)
Income from continuing operations 234.8 2.83 198.3 2.52
Gain on UBS Settlement (121.3) (1.46) - -
Government, class action, and related settlements (67.2) (0.81) (2.8) (0.04)
Professional fees - accounting, tax, and legal 44.4 0.53 51.6 0.66
Loss on interest rate swap 55.7 0.67 30.4 0.39
Accelerated depreciation of corporate campus 10.0 0.12 - -
Gain on sale of investment in Source Medical - - (8.6) (0.11)
Interest associated with UBS Settlement (9.4) (0.11) - `
Provision for income tax benefit (70.1) (0.84) (322.4) (4.10)
Estimated state tax expense (5.0) (0.06) (5.0) (0.06)
(1)(3)
Adjusted income (loss) from continuing operations 71.9 0.87 (58.5) (0.74)
(2)
Adjustment to GAAP EPS for dilution (0.12) 0.10
Adjusted income
(2)(3)
(loss) from continuing operations per
diluted share $ 0.75 $ (0.64)
Estimated state tax expense 5.0 5.0
Interest expense and amortization of debt discounts and fees,
excluding interest associated with the UBS Settlement 169.1 229.8
Depreciation and amortization, excluding accelerated
depreciation of corporate campus 73.8 76.2
319.8 252.5
Other adjustments per the Company's Credit Agreement:
Impairment charges, including investments 2.4 15.1
Net noncash loss on disposal of assets 2.0 5.9
Loss on early extinguishment of debt 5.9 28.2
Gain on sale of investment in Source Medical - 8.6
Compensation expense under FASB Statement No. 123(R) 11.7 10.6
Other (1)(3)(4)
- 0.4
Adjusted Consolidated EBITDA $ 341.8 $ 321.3
Weighted average common shares outstanding:
Basic 83.0 78.7
Processed and formatted by SEC Watch - Visit SECWatch.com
Twelve Month Reconciliation of Net Income to Adjusted Income (Loss) from Continuing
Operations and Adjusted Consolidated EBITDA(1)(3)(4)
Year Ended December 31,
(2) (2)
2008 Per Share 2007 Per Share
(In Millions, Except Per Share Data)
Net income $ 252.4 $ 3.04 $ 653.4 $ 8.30
Income from discontinued operations (17.6) (0.21) (455.1) (5.78)
Income from continuing operations 234.8 2.83 198.3 2.52
Gain on UBS Settlement (121.3) (1.46) - -
Government, class action, and related settlements (67.2) (0.81) (2.8) (0.04)
Professional fees - accounting, tax, and legal 44.4 0.53 51.6 0.66
Loss on interest rate swap 55.7 0.67 30.4 0.39
Accelerated depreciation of corporate campus 10.0 0.12 - -
Gain on sale of investment in Source Medical - - (8.6) (0.11)
Interest associated with UBS Settlement (9.4) (0.11) - `
Provision for income tax benefit (70.1) (0.84) (322.4) (4.10)
Estimated state tax expense (5.0) (0.06) (5.0) (0.06)
(1)(3)
Adjusted income (loss) from continuing operations 71.9 0.87 (58.5) (0.74)
(2)
Adjustment to GAAP EPS for dilution (0.12) 0.10
Adjusted income
(2)(3)
(loss) from continuing operations per
diluted share $ 0.75 $ (0.64)
Estimated state tax expense 5.0 5.0
Interest expense and amortization of debt discounts and fees,
excluding interest associated with the UBS Settlement 169.1 229.8
Depreciation and amortization, excluding accelerated
depreciation of corporate campus 73.8 76.2
319.8 252.5
Other adjustments per the Company's Credit Agreement:
Impairment charges, including investments 2.4 15.1
Net noncash loss on disposal of assets 2.0 5.9
Loss on early extinguishment of debt 5.9 28.2
Gain on sale of investment in Source Medical - 8.6
Compensation expense under FASB Statement No. 123(R) 11.7 10.6
Other (1)(3)(4)
- 0.4
Adjusted Consolidated EBITDA $ 341.8 $ 321.3
Weighted average common shares outstanding:
Basic 83.0 78.7
Diluted 96.4 92.0
29
Year Ended
December 31, 2008
Adjusted Consolidated EBITDA $ 341.8
Compensation expense under FASB Statement No. 123(R) (11.7)
Provision for doubtful accounts 27.8
Professional fees—accounting, tax, and legal (44.4)
Interest expense and amortization of debt discounts and fees (159.7)
Loss on sale of investments 1.4
Equity in net income of nonconsolidated affiliates (10.6)
Minority interests in earnings of consolidated affiliates 29.8
Amortization of debt discounts and fees 6.5
Amortization of restricted stock 6.7
Distributions from consolidated affiliates 10.9
Stock-based compensation 5.0
Current portion of income tax benefit 73.8
Change in assets and liabilities (49.1)
Change in government, class action, and related settlements (7.4)
Other operating cash provided by discontinued operations 6.4
Net cash provided by operating activities $ 227.2
Processed and formatted by SEC Watch - Visit SECWatch.com
Year Ended
December 31, 2008
Adjusted Consolidated EBITDA $ 341.8
Compensation expense under FASB Statement No. 123(R) (11.7)
Provision for doubtful accounts 27.8
Professional fees—accounting, tax, and legal (44.4)
Interest expense and amortization of debt discounts and fees (159.7)
Loss on sale of investments 1.4
Equity in net income of nonconsolidated affiliates (10.6)
Minority interests in earnings of consolidated affiliates 29.8
Amortization of debt discounts and fees 6.5
Amortization of restricted stock 6.7
Distributions from consolidated affiliates 10.9
Stock-based compensation 5.0
Current portion of income tax benefit 73.8
Change in assets and liabilities (49.1)
Change in government, class action, and related settlements (7.4)
Other operating cash provided by discontinued operations 6.4
Net cash provided by operating activities $ 227.2
30
Reconciliation Notes
1. Adjusted income (loss) from continuing operations and Adjusted Consolidated EBITDA are
non-GAAP financial measures. Management and some members of the investment
community utilize adjusted income (loss) from continuing operations as a financial measure
and Adjusted Consolidated EBITDA as a liquidity measure on an ongoing basis. These
measures are not recognized in accordance with GAAP and should not be viewed as an
alternative to GAAP measures of performance or liquidity. In evaluating these adjusted
measures, the reader should be aware that in the future HealthSouth may incur expenses
similar to the adjustments set forth above.
2. Per share amounts for the three months and twelve months ended December 31, 2008 and
2007 are based on basic weighted average common shares outstanding for all amounts
except adjusted income (loss) from continuing operations per diluted share, which is based on
diluted weighted average shares outstanding. The difference in shares between the basic and
diluted shares outstanding is primarily related to our convertible perpetual preferred stock. Per
share amounts do not include 5.0 million shares not yet issued under the securities litigation
settlement. The calculation of adjusted loss from continuing operations per diluted share
ignores the antidilutive impact in 2007.
3. Adjusted income (loss) from continuing operations per diluted share and Adjusted
Consolidated EBITDA are two components of our guidance.
4. The Company’s Credit Agreement allows all unusual non-cash or non-recurring charges to be
added to arrive at Adjusted Consolidated EBITDA.
Processed and formatted by SEC Watch - Visit SECWatch.com
Reconciliation Notes
1. Adjusted income (loss) from continuing operations and Adjusted Consolidated EBITDA are
non-GAAP financial measures. Management and some members of the investment
community utilize adjusted income (loss) from continuing operations as a financial measure
and Adjusted Consolidated EBITDA as a liquidity measure on an ongoing basis. These
measures are not recognized in accordance with GAAP and should not be viewed as an
alternative to GAAP measures of performance or liquidity. In evaluating these adjusted
measures, the reader should be aware that in the future HealthSouth may incur expenses
similar to the adjustments set forth above.
2. Per share amounts for the three months and twelve months ended December 31, 2008 and
2007 are based on basic weighted average common shares outstanding for all amounts
except adjusted income (loss) from continuing operations per diluted share, which is based on
diluted weighted average shares outstanding. The difference in shares between the basic and
diluted shares outstanding is primarily related to our convertible perpetual preferred stock. Per
share amounts do not include 5.0 million shares not yet issued under the securities litigation
settlement. The calculation of adjusted loss from continuing operations per diluted share
ignores the antidilutive impact in 2007.
3. Adjusted income (loss) from continuing operations per diluted share and Adjusted
Consolidated EBITDA are two components of our guidance.
4. The Company’s Credit Agreement allows all unusual non-cash or non-recurring charges to be
added to arrive at Adjusted Consolidated EBITDA.
31