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"The fourth quarter was a strong conclusion to an excellent year for HealthSouth," said Jay Grinney, President and Chief Executive Officer of HealthSouth. "The Company continued to execute its business plan and performed well across all key metrics: we discharged 4.6% more patients; provided this care on a cost-effective basis; and strengthened our balance sheet repaying approximately $34 million of debt. For the year, we discharged 5.4% more patients and reduced debt by approximately $151 million through the continued generation of strong cash flows. We believe these solid results provide the necessary momentum for another successful year in 2010."
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Fourth Quarter Results
Full Year Results
As of December 31, 2009, total debt outstanding approximated $1.7 billion, with no amounts drawn on the Company's $400 million revolving credit facility. During 2009, the Company reduced its total debt outstanding by approximately $151 million and increased its cash and cash equivalents by approximately $49 million. Cash flows provided by operating activities were $406.1 million for 2009 compared to $227.2 million for 2008. Cash flows provided by operating activities in 2009 included $73.8 million in net cash proceeds related to the Company's settlement with UBS and the receipt of $63.7 million in income tax refunds associated with amended tax returns from previous periods.
"Our previously reported refinancing transaction, in combination with the previously announced amendment to our credit agreement and our strong cash flow generation in 2009, resulted in a stronger balance sheet that gives us greater flexibility going forward," said Ed Fay, Senior Vice President - Finance and Treasurer of HealthSouth. "HealthSouth made significant progress on its deleveraging goal in 2009 through both debt reduction and Adjusted Consolidated EBITDA growth. Looking ahead, our strong cash flows will continue to support further debt reduction and new expansion opportunities for the Company."
Due to the Company's debt reduction efforts and its higher Adjusted Consolidated EBITDA (see attached supplemental information), the Company's leverage ratio was 4.3x as of December 31, 2009 compared to 5.3x as of December 31, 2008. The Company remains confident it can achieve its leverage ratio goal of 3.5x to 4.0x by the end of 2011.
2010 Guidance
Adjusted income from continuing operations for 2010 is expected to be in the range of $1.60 to $1.70 per diluted share, compared to $1.45 per share in 2009. Adjusted income from continuing operations excludes any gain or loss associated with the fair value adjustments to the Company's interest rate swaps that are not designated as hedges, certain professional fees (related primarily to the Company's derivative litigation), and other non-recurring items.
Adjusted Consolidated EBITDA for 2010 is expected to be in the range of $397 million to $407 million, compared to $383 million for 2009. The Company's credit agreement allows unusual noncash items or nonrecurring charges to be added to net income to arrive at Adjusted Consolidated EBITDA.
See the attached supplemental information, as well as the Current Report on Form 8-K furnished with this press release on February 22, 2010, for additional information related to our use and the definitions of adjusted income from continuing operations and Adjusted Consolidated EBITDA.
Earnings Conference Call and Webcast
The Company will host an investor conference call at 9:00 a.m. Eastern Time on Tuesday, February 23, 2010 to discuss its results for the fourth quarter of 2009. For reference during the call, the Company will post certain supplemental slides at http://investor.healthsouth.com.
The conference call may be accessed by dialing 866-406-5369 and giving the pass code 48454905. 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 http://investor.healthsouth.com by clicking on an available link.
A replay of the conference call will be available, beginning approximately two hours after the completion of the conference call, from February 23 until March 9, 2010. To access the replay, please dial 8006421687. International callers should dial 7066459291. The webcast will also be archived for replay purposes after the live broadcast at http://investor.healthsouth.com.
About HealthSouth
HealthSouth is the nation's largest provider of inpatient rehabilitative healthcare 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 rehabilitative healthcare services and can be found on the Web at www.healthsouth.com.
Other Information
The Company's leverage ratio that is referenced in this release and elsewhere from time to time is defined in the Company's credit agreement as the ratio of consolidated total debt to Adjusted Consolidated EBITDA for the trailing four quarters. Reconciliations of net income to Adjusted Consolidated EBITDA can be found in the following schedules.
On January 1, 2009, we reclassified our noncontrolling interests (formerly known as "minority interests") as a component of equity and now report net income and comprehensive income attributable to our noncontrolling interests separately from net income and comprehensive income attributable to HealthSouth. Due to the adoption of this accounting guidance, all prior period amounts presented in the attached financial information are labeled "as adjusted."
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, 2009 (the "2009 Form 10-K"), when filed, as well as the Company's Current Report on Form 8-K filed on February 22, 2010. In addition, the Company will post supplemental slides today on its website at http://investor.healthsouth.com for reference during its February 23, 2010 earnings call.
The Company expects to file its 2009 Form 10-K this week. When filed, the report can be found on the Company's website at http://investor.healthsouth.com and the SEC's website at www.sec.gov.
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 (including in connection with resolution of Medicare payment reviews or appeals), or suspension of reimbursement for HealthSouth's services by governmental or private payors; changes in the regulation of the healthcare industry at either or both of the federal and state levels; competitive pressures in the healthcare industry and HealthSouth's response thereto; HealthSouth's ability to obtain and retain favorable arrangements with third-party payors; HealthSouth's ability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages and the impact on HealthSouth's labor expenses from potential union activity and staffing shortages; general conditions in the economy and capital markets; and other factors which may be identified from time to time in HealthSouth's SEC filings and other public announcements, including HealthSouth's Form 10K for the year ended December 31, 2009, which is expected to be filed later this week.
-- Consolidated net operating revenues were $486.2 million for the fourth quarter of 2009 compared to $460.8 million for the fourth quarter of 2008, or an increase of 5.5%. This increase was driven primarily by a 4.6% quarter-over-quarter increase in patient discharges. Discharges increased by 4.2% quarter over quarter on a same store basis. -- Reported net income per diluted share for the fourth quarter of 2009 was $0.35 per share compared to $1.81 per diluted share for the fourth quarter of 2008. The Company's results for the fourth quarter of 2008 included a $121.3 million, or $1.20 per diluted share, gain associated with the UBS Settlement and an income tax benefit of $48.4 million, or $0.48 per diluted share, primarily related to an additional income tax refund for tax years 1995 through 1999. -- Adjusted net income from continuing operations (see attached supplemental information) for the fourth quarter of 2009, which included a $15.6 million, or $0.14 per diluted share, loss on early extinguishment of debt related to the Company's previously reported debt refinancing transaction in the quarter, was $0.22 per diluted share compared to $0.24 per diluted share for the fourth quarter of 2008. Excluding the loss on early extinguishment of debt, the Company experienced quarter-over-quarter growth due primarily to increased revenues, lower interest expense, and effective expense management. -- Adjusted Consolidated EBITDA (see attached supplemental information) for the fourth quarter of 2009 was $94.7 million compared to $87.5 million in the fourth quarter of 2008, or an increase of 8.2%. This increase resulted from increased revenues, as discussed above, and effective expense management.
SOURCE HealthSouth Corporation
