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HEALTHSOUTH Corp. Message Board

  • bluecheese4u bluecheese4u Feb 18, 2013 8:35 PM Flag

    HealthSouth Reports Strong Results for Fourth Quarter and Full Year 2012

    HealthSouth Reports Strong Results for Fourth Quarter and Full Year 2012

    Revenue Growth of 6.7% (Full Year of 6.7%)
    Discharge Growth of 5.4% (Full Year of 4.6%)
    Cash Provided by Operating Activities of $109.3 million (Full Year of $411.5 million)
    Adjusted EBITDA of $128.6 million (Full Year of $505.9 million)
    Increases Common Stock Repurchase Authorization from $125 Million to $350 Million

    BIRMINGHAM, Ala., Feb. 18, 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 fourth quarter and year ended December 31, 2012.

    "The fourth quarter was a strong finish to another excellent year for HealthSouth," said Jay Grinney, President and Chief Executive Officer of HealthSouth. "Demand for our services remained strong, our hospitals continued to provide high-quality care on a disciplined, cost-effective basis, and our solid cash flows allowed us to continue to invest in future growth. In addition, on February 15, 2013, our board of directors approved an increase in our existing common stock repurchase authorization from $125 million to $350 million."

    Fourth Quarter Results

    •Consolidated net operating revenues were $552.9 million for the fourth quarter of 2012 compared to $518.1 million for the fourth quarter of 2011, or an increase of 6.7%. This increase was attributable to a 5.4% increase in patient discharges and a 2.4% increase in net patient revenue per discharge. Discharge growth was comprised of 2.4% growth from new stores and a 3.0% increase in same-store discharges. Approximately 120 basis points of discharge growth from new stores resulted from the consolidation of St. Vincent Rehabilitation Hospital beginning in the third quarter of 2012. As previously disclosed, discharge growth in the fourth quarter of 2012 was favorably impacted by the timing of patient discharges into the first week of October. This resulted in a modest decrease in the Company's fourth quarter average length of stay. The Company's net patient revenue per discharge increased in the fourth quarter of 2012 compared to the same period of 2011 primarily due to pricing adjustments from Medicare and managed care payors, higher average acuity for the patients served, and a higher percentage of Medicare patients offset by the unfavorable impact to pricing related to the aforementioned decrease in the fourth quarter's average length of stay.
    •Income from continuing operations attributable to HealthSouth per diluted share for the fourth quarter of 2012 was $0.42 compared to $0.50 for the same period of 2011. Earnings per share in the fourth quarter of 2012 included income tax expense of $24.5 million, or $0.26 per share, compared to income tax expense of $15.2 million, or $0.14 per share, in the fourth quarter of 2011. Earnings per share in the fourth quarter of 2012 included a $2.7 million, or $0.02 per share after tax, loss on early extinguishment of debt that resulted from the redemption of 10% of the Company's 7.25% Senior Notes due 2018 and 7.75% Senior Notes due 2022 in October 2012. The Company's basic and diluted earnings per share were the same for the fourth quarter of 2012.
    •Cash flows provided by operating activities were $109.3 million for the three months ended December 31, 2012 compared to $129.5 million for the same period of 2011. Cash flows provided by operating activities were negatively impacted during the fourth quarter of 2012 due to an increase in net working capital, including the timing of an approximate $12 million interest payment in the fourth quarter of 2012.
    •Adjusted EBITDA (see attached supplemental information) for the three months ended December 31, 2012 was $128.6 million compared to $122.9 million for the three months ended December 31, 2011, or an increase of 4.6%. This improvement was primarily driven by continued revenue growth, disciplined expense management, and an approximate $4 million reduction in group medical costs due to favorable claim trends. These items were offset by a one-time, merit-based, year-end bonus paid in the fourth quarter of 2012 to all eligible nonmanagement employees in lieu of an annual merit increase and expenses related to the continued implementation of the Company's clinical information system. Adjusted EBITDA in the fourth quarter of 2011 was favorably impacted by a $2.4 million nonrecurring franchise tax recovery.
    •Adjusted free cash flow (see attached supplemental information) for the three months ended December 31, 2012 was $81.2 million compared to $99.2 million for the same period of 2011. Adjusted free cash flow in the fourth quarter of 2012 was negatively impacted by the increase in working capital discussed above.

    Full Year Results
    •Consolidated net operating revenues were $2,161.9 million for 2012 compared to $2,026.9 million for 2011, or an increase of 6.7%. This increase was attributable to a 4.6% increase in patient discharges and a 3.0% increase in net patient revenue per discharge. Discharge growth was comprised of 1.7% growth from new stores and a 2.9% increase in same-store discharges. Discharge growth was enhanced during 2012 compared to 2011 by the additional day in February due to leap year as well as a 60 basis point increase in discharges resulting from the consolidation of St. Vincent Rehabilitation Hospital beginning in the third quarter of 2012. Net patient revenue per discharge in 2012 benefited from pricing adjustments from Medicare and managed care payors, higher average acuity for the patients served, and a higher percentage of Medicare patients.
    •Income from continuing operations attributable to HealthSouth per share for 2012 was $1.65 compared to $1.42 for 2011. Earnings per share for 2012 reflected strong operating results and lower interest expense than 2011. Earnings per share for 2011 included a $38.8 million, or $0.25 per share after tax, loss on early extinguishment of debt compared to a $4.0 million, or $0.03 per share after tax, loss in 2012. Earnings per share in 2012 included income tax expense of $108.6 million, or $1.15 per share, compared to income tax expense of $37.1 million, or $0.40 per share, in 2011. The Company's basic and diluted earnings per share were the same in 2012 and 2011.
    •Cash flows provided by operating activities were $411.5 million for 2012 compared to $342.7 million for 2011. This increase was primarily due to increased net operating revenues, improved operating leverage, and a decrease in interest expense. Cash flows provided by operating activities in 2011 included $26.9 million related to the premium paid in conjunction with the redemption of the Company's 10.75% Senior Notes and a $16.2 million decrease in the liability associated with refunds due patients and other third-party payors.
    •Adjusted EBITDA (see attached supplemental information) for 2012 was $505.9 million compared to $466.2 million for 2011, or an increase of 8.5%. This improvement was primarily driven by continued revenue growth as well as improved operating leverage and labor productivity.
    •Adjusted free cash flow (see attached supplemental information) for 2012 was $268.0 million compared to $243.3 million for 2011, or an increase of 10.2%. This increase resulted from continued Adjusted EBITDA growth, lower interest expense, and the lack of swap-related payments in 2012. These items were offset by an increase in working capital, primarily related to the timing of payroll-related liabilities, and planned increase in maintenance capital expenditures, including investments in the Company's clinical information system and hospital refresh projects.

    "The strength of our Company's cash flow generating abilities was evidenced by the 10.2% increase in adjusted free cash flow for 2012 which follows a 34.1% increase in 2011," said Doug Coltharp, Executive Vice President and Chief Financial Officer of HealthSouth. "We ended 2012 with cash and cash equivalents of approximately $133 million and with no borrowings under our $600 million revolving credit facility. Our leverage ratio, net of cash and cash equivalents, at year end was 2.2x."

    2013 Guidance

    "Before taking into consideration the net effect of sequestration, HealthSouth's 2013 net operating revenues are expected to increase by between 4.9% and 6.2%, driven by a forecasted increase in discharges of between 3% and 4%, while Adjusted EBITDA is expected to increase by between $39.6 million and $49.6 million," said Mr. Grinney. "However, sequestration will reduce our 2013 Adjusted EBITDA by approximately $25 million. When evaluating our year-over-year growth in Adjusted EBITDA and earnings per share, it will be important to take into consideration certain factors affecting our performance in both years."

    Adjusted EBITDA in 2012 was impacted by the following items:
    •an approximate $4.5 million increase in salaries and benefits due to the one-time, merit-based, year-end bonus paid to ell eligible nonmanagement employees in lieu of merit increases in 2012;
    •an approximate $6 million reduction in self-insured general and professional liability and workers' compensation costs primarily due to revised actuarial estimates resulting from better-than-expected claims experience in prior years ($4 million general and professional liability and $2 million workers' compensation); and
    •an approximate $4 million reduction in group medical costs due to favorable claim trends.

    Adjusted EBITDA in 2013 will be impacted by the following items:
    •an approximate $25 million negative impact related to sequestration (net of noncontrolling interests);
    •an approximate $5 million increase in noncontrolling interests expense due to changes at two joint venture hospitals, as explained below; and
    •an approximate $4 million increase in operating expenses associated with the continued implementation of the Company's clinical information system. The Company installed its clinical information system in 13 hospitals during 2012 and expects to install the system at 20 additional hospitals during 2013.

    The Company's noncontrolling interests expense is expected to increase by approximately $5 million in 2013 due to changes at two of its existing hospitals. The Company has entered into an agreement to convert its 100% owned hospital in Jonesboro, Arkansas into a joint venture with St. Bernards Healthcare. Following the formation of the joint venture, the Company's ownership percentage will be reduced to approximately 56%. This transaction is consistent with the Company's strategy of aligning with high-quality acute care hospitals in key markets. In addition, the Company's share of profits from its joint venture hospital in Memphis, Tennessee will decrease in 2013 from 70% to 50% pursuant to the terms of that partnership agreement entered into in 1993.

    Initial 2013 Adjusted EBITDA guidance: $506 million to $516 million

    Initial 2013 earnings per share guidance: $1.50 to $1.56 per share

    Earnings per share guidance for 2013 assumes an effective tax rate of approximately 40% (using pre-tax income from continuing operations attributable to HealthSouth) and is before the effect of any potential share repurchase activity. Diluted earnings per share are expected to be the same as basic earnings per share due to the antidilutive impact in the year.

    Earnings Conference Call and Webcast

    The Company will host an investor conference call at 9:00 a.m. Eastern Time on Tuesday, February 19, 2013

    investorDOThealthsouthDOTcom/releasedetailDOTcfm?ReleaseID=741029

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