form_8k-03012010presentation.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (date of earliest event reported): March 1, 2010
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)
|
(I.R.S.
Employer
Identification
No.)
|
3660
Grandview Parkway, Suite 200, Birmingham, Alabama 35243
(Address
of Principal Executive Officers, Including Zip Code)
(205) 967-7116
(Registrant’s
telephone number)
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:
¨ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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ITEM
7.01. Regulation FD
Disclosure.
HealthSouth
Corporation (“HealthSouth” or the “Company”) will participate in the J.P. Morgan
Global High Yield & Leveraged Finance Conference on March 1 - 3, 2010 in
Miami, Florida. As part of this conference, representatives of HealthSouth will
make a presentation on March 1, 2010 at 5:00 p.m. ET using the slides attached
to this Current Report on Form 8-K as Exhibit 99.1.
The
Company will also participate in the RBC Capital Markets Healthcare Conference
on March 2 – 3, 2010 in New York City, New York. As part of this conference,
representatives of HealthSouth will make a presentation using the slides
attached to this Current Report on Form 8-K as Exhibit 99.1 and also participate
in a post-acute panel discussion on Tuesday, March 2, 2010 at 11:00 a.m.
ET.
Both
presentations will address, among other things, the Company’s strategy,
objectives, and financial performance and discuss industry trends and dynamics.
The presentation at the RBC Capital Markets Healthcare Conference will be
webcast live and will be available at http://investor.healthsouth.com
by clicking on an available link.
While the
format of certain slides may have changed, the slide presentation attached to
this Current Report on Form 8-K as Exhibit 99.1 contains substantially the same
information as previously provided in Current Reports on Form 8-K dated February
22, 2010 and January 11, 2010.
The
Company uses “same store” comparisons to explain the changes in certain
performance metrics and line items within its financial statements. Same store
comparisons are calculated based on hospitals open throughout both the full
current periods and throughout the full prior periods presented. These
comparisons include the financial results of market consolidation transactions
in existing markets, as it is difficult to determine, with precision, the
incremental impact of these transactions on the Company’s results of
operations.
The
Company also reiterated its guidance for 2010 that was previously provided in a
Current Report on Form 8-K dated February 22, 2010 and discussed during the
Company’s earnings conference call on February 23, 2010.
The
information in this Current Report on Form 8-K, including the information set
forth in Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall
it be 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. The furnishing of this report is not
intended to constitute a determination by the Company that the information is
material or that the dissemination of the information is required by Regulation
FD.
Note
Regarding Presentation of Non-GAAP Financial Measures
The
financial data contained in the presentation includes non-GAAP financial
measures, including the Company's leverage ratio and Adjusted Consolidated
EBITDA. The Company's leverage ratio is defined in its credit agreement as the
ratio of consolidated total debt to Adjusted Consolidated EBITDA for the
trailing four quarters. The Company continues to believe both its leverage ratio
and Adjusted Consolidated EBITDA as defined in its credit agreement are measures
of 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, 2009 (the “2009 Form 10-K”). 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 or subtract from consolidated net
income unusual non-cash or non-recurring items. These items include, but may not
be limited to, (1) amounts associated with government, class action, and
related settlements, (2) amounts related to discontinued operations and closed
locations, (3) 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 22, Settlements, and Note 23,
Contingencies and Other
Commitments, to the consolidated
financial statements included in the 2009 Form 10-K, (4) stock-based
compensation expense, (5) net investment and other income (including
interest income), and (6) fees associated with the Company’s divestiture
activities.
In
accordance with the credit agreement, the Company is allowed to add certain
other items to the calculation of Adjusted Consolidated EBITDA, and there may
also be certain other deductions required. This includes the interest income
associated with income tax recoveries, as discussed in Note 19, Income Taxes, to the
consolidated financial statements included in the 2009 Form 10-K. In addition,
the Company is allowed to add non-recurring cash gains, such as the cash
proceeds from the UBS Settlement (see Note 22, Settlements, to the
consolidated financial statements included in the 2009 Form 10-K) to the
calculation of Adjusted Consolidated EBITDA. As these adjustments may not be
indicative of the Company’s ongoing performance, they have been excluded from
Adjusted Consolidated EBITDA included in the slide presentation attached as
Exhibit 99.1.
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, Adjusted Consolidated EBITDA should not be considered a substitute
for net income or
cash flows from operating, investing, or financing activities. The Company
reconciles Adjusted Consolidated EBITDA to net income, which reconciliation is
set forth in the slide presentation 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 2009
Form 10-K.
The
Company also uses adjusted income from continuing operations and the related per
share amounts, which amounts are also referred to as "adjusted earnings per
share," as analytical indicators to assess its performance. Management believes
the presentation of adjusted income 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 and net income per share available to HealthSouth
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 consolidated statements of operations included in the 2009 Form 10-K for
the GAAP measures of net income, income from continuing operations, and basic
and diluted earnings per common share. A reconciliation of net income to
adjusted income from continuing operations, and the related per share amounts,
is included in the slide presentation attached as
Exhibit 99.1.
The
Company also uses adjusted free cash flow as an analytical indicator to assess
its performance. 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 slide presentation attached as
Exhibit 99.1. 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 2009 Form 10-K for the
GAAP measures of cash flows from operating, investing, and financing activities.
A reconciliation of net cash provided by operating activities to Adjusted
Consolidated EBITDA and adjusted free cash flow is presented below.
Reconciliation
of Net Cash Provided by Operating Activities to Adjusted Consolidated
EBITDA
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For
the Year Ended December 31,
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2009
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2008
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(In
Millions)
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Net
cash provided by operating activities
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$ |
406.1 |
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$ |
227.2 |
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Provision
for doubtful accounts
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(33.1 |
) |
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(27.0 |
) |
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Professional
fees—accounting, tax, and legal
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8.8 |
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44.4 |
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Interest
expense and amortization of debt discounts and fees
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125.8 |
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159.5 |
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Gain
(loss) on sale of investments
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0.8 |
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(1.4 |
) |
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UBS
Settlement proceeds, gross
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(100.0 |
) |
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- |
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Equity
in net income of nonconsolidated affiliates
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4.6 |
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10.6 |
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Net
income attributable to noncontrolling interests in continuing
operations
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(33.4 |
) |
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(29.8 |
) |
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Amortization
of debt discounts and fees
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(6.6 |
) |
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(6.5 |
) |
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Distributions
from nonconsolidated affiliates
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(8.6 |
) |
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(10.9 |
) |
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Current
portion of income tax benefit
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(7.3 |
) |
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(73.8 |
) |
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Change
in assets and liabilities
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0.8 |
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53.1 |
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Change
in government, class action, and related settlements
liability
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11.2 |
|
|
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7.4 |
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Other
operating cash used in (provided by) discontinued
operations
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13.5 |
|
|
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(11.4 |
) |
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Other
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|
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0.4 |
|
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(0.2 |
) |
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Adjusted
Consolidated EBITDA
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$ |
383.0 |
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$ |
341.2 |
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Reconciliation
of Net Cash Provided by Operating Activities to Adjusted Free Cash
Flow
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Three
Months
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Three
Months
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Year
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Year
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|
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Ended
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Ended
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Ended
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Ended
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December
31,
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December
31,
|
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December
31,
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|
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December
31,
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|
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2009
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2008
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|
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2009
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2008
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(In
Millions)
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Net
cash provided by operating activities
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$ |
44.0 |
(1) |
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$ |
77.9 |
(1) |
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$ |
406.1 |
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$ |
227.2 |
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|
Impact
of discontinued operations
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4.1 |
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(11.9 |
) |
|
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13.5 |
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|
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(11.4 |
) |
Net
cash provided by operating activities of continuing
operations
|
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48.1 |
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66.0 |
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419.6 |
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215.8 |
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Capital
expenditures for maintenance
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|
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(9.6 |
) |
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(17.4 |
) |
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(34.1 |
) |
|
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(42.6 |
) |
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Net
settlements on interest rate swaps
|
|
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(11.9 |
) |
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(6.8 |
) |
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(42.2 |
) |
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(20.7 |
) |
Dividends
paid on convertible perpetual preferred stock
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(6.5 |
) |
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(6.5 |
) |
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(26.0 |
) |
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(26.0 |
) |
Distributions
paid to noncontrolling interests of consolidated
affiliates
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(9.9 |
) |
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(7.1 |
) |
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(32.7 |
) |
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(33.4 |
) |
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Non-recurring
items:
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|
|
|
|
|
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|
|
|
|
|
|
|
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UBS
Settlement proceeds, less fees to derivative plaintiffs'
attorneys
|
|
|
- |
|
|
|
- |
|
|
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(73.8 |
) |
|
|
- |
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Income
tax refunds related to prior periods
|
|
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(4.2 |
) |
|
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(63.1 |
) |
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(63.7 |
) |
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(90.4 |
) |
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Cash
paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Professional
fees - accounting, tax, and legal
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|
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3.8 |
|
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5.3 |
|
|
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15.3 |
|
|
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18.2 |
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Government,
class action, and related settlements
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|
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0.2 |
|
|
|
- |
|
|
|
11.2 |
|
|
|
7.4 |
|
|
Adjusted
free cash flow
|
|
$ |
10.0 |
|
|
$ |
(29.6 |
) |
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$ |
173.6 |
|
|
$ |
28.3 |
|
| |
(1) |
Net cash
provided by operating activities for the year ended December 31, 2009 and
2008 was $406.1 million and $227.2 million, respectively. Net cash
provided by operating activities for the nine months ended September 30,
2009 and 2008 was $362.1 million and $149.3 million, respectively, as
reported in the Company’s Form 10-Q for the quarterly period ended
September 30, 2009. The difference is the $44.0 million and $77.9
million of net cash provided by operating activities for the three months
ended December 31, 2009 and 2008,
respectively. |
For the
three months ended December 31, 2009, net cash used in investing activities was
$8.6 million and resulted primarily from capital expenditures and net settlement
payments related to interest rate swaps offset by a decrease in restricted cash.
Net cash used in financing activities during the three months ended December 31,
2009 was $71.6 million and resulted primarily from net debt payments, debt
amendment and issuance costs, distributions paid to noncontrolling interests of
consolidated affiliates, and dividends paid on the Company’s convertible
perpetual preferred stock.
For the
three months ended December 31, 2008, net cash used in investing activities was
$28.1 million and resulted primarily from capital expenditures and net
settlement payments related to an interest rate swap. Net cash used in financing
activities during the three months ended December 31, 2008 was $42.6 million and
resulted primarily from net debt payments made during the period, as well as
distributions paid to noncontrolling interests of consolidated affiliates and
dividends paid on the Company’s convertible perpetual preferred
stock.
For the
year ended December 31, 2009, net cash used in investing activities was $133.0
million and resulted primarily from capital expenditures and net settlement
payments related to interest rate swaps. Net cash used in financing activities
during the year ended December 31, 2009 was $224.3 million and resulted
primarily from net debt payments made during the period, as well as
distributions paid to noncontrolling interests of consolidated affiliates,
dividends paid on the Company’s convertible perpetual preferred stock, and debt
amendment and issuance costs.
For the
year ended December 31, 2008, net cash used in investing activities was $40.0
million and resulted primarily from capital expenditures, including expenditures
associated with development activities, and net settlement payments related to
an interest rate swap offset by proceeds from asset disposals, including our
corporate campus. Net cash used in financing activities during the year ended
December 31, 2008 was $176.0 million and
resulted
primarily from net debt payments made during the period, as well as
distributions paid to noncontrolling interests of consolidated affiliates and
dividends paid on the Company’s perpetual preferred stock, offset by proceeds
from the issuance of common stock.
Forward-Looking
Statements
The
information contained in this Current Report on Form 8-K and the slide
presentation attached as Exhibit 99.1 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 or in the slide
presentation.
The slide
presentation also includes estimates and projections published by the Centers
for Medicare and Medicaid Services (“CMS”). HealthSouth is not able to verify
those estimates or projections or the detailed calculations thereof by CMS which
are not made public. Any changes or errors in those calculations, among other
uncertainties such as those referred to below and changes in CMS’s own rules and
policies, could cause actual results to differ materially from CMS’s
projections. Furthermore, the Company does not believe that CMS’s numbers
are consistent with financial reporting results. CMS data and projections should
not be used as an indication of financial performance.
You are
cautioned not to place undue reliance on the estimates, projections, and other
forward-looking information in the slide presentation as it is based on current
expectations and general assumptions and is subject to various risks,
uncertainties, and other factors, including those set forth in the 2009 Form
10-K and in other documents the Company previously filed with the SEC, 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.
ITEM
9.01. Financial Statements and
Exhibits
(d) Exhibits
|
|
99.1
|
Slide
presentation of HealthSouth Corporation used in connection with the
Company’s March 1, 2010 presentation at the J.P. Morgan Global High Yield
& Leveraged Finance Conference and the Company's March 2, 2010
presentation at the RBC Capital Markets Healthcare
Conference.
|
SIGNATURES
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.
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HEALTHSOUTH
Corporation |
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By:
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/s/
JOHN P.
WHITTINGTON |
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Name:
John P. Whittington |
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Title:
Executive Vice President, General Counsel, and Corporate
Secretary |
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Dated:
March 1, 2010