HealthSouth
Barclays Capital
Global Healthcare Conference
Miami, Florida
March 10, 2009
Exhibit 99.1
Note Regarding 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-K for the
fiscal year ended December 31, 2008, and in other documents we previously filed with the SEC, many of
which are beyond our control, that may cause actual results to differ materially from the views, beliefs and
estimates expressed herein.
Note Regarding Presentation of Non-GAAP Financial Measures
The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under
the Securities Exchange Act of 1934. The Appendix at the end of this presentation includes reconciliations of
the non-GAAP financial measures found in the following presentation to the most directly comparable
financial measures calculated and presented in accordance with Generally Accepted Accounting Principles
in the United States. Our Form 8-K, dated March 9, 2009, to which the following presentation slides are
attached as Exhibit 99.1, provides further explanation and disclosure regarding our use of non-GAAP
financial measures and should be read in conjunction with these presentation slides.
Cautionary Statements
HealthSouth Today
IRH
LTCH
93 Rehabilitation Hospitals and
Outpatient Departments
6 Long-Term Acute Care Hospitals
49 Outpatient Satellites
25 Hospital-Based Home
Health Agencies
Operational Components
Rehabilitation Nursing
Physical Therapy
Occupational Therapy
Speech-Language Therapy
Case Management
Specialized Technology
Major Services
Largest Provider of Inpatient Rehabilitative Healthcare Services in the U.S.
Development Sites
Employees: ~ 22,000
Corporate Office: Birmingham, AL
Exchange (Symbol): NYSE (HLS)
Longer term, we will pursue acquisitions of complementary,
post-acute services provided they are accretive to HealthSouth.
Target: 5-8% annual Adjusted Consolidated EBITDA growth
Margins will expand modestly
Target: 15-20% annual Adjusted EPS growth
Strategy:
To create shareholder value as the preeminent provider of
rehabilitative care in the U.S. by:
Creating a strong balance sheet through deleveraging;
Driving organic growth through operational excellence; and
Pursuing disciplined, opportunistic growth.
No near-term refinancing
Revolver = 2012
Term Loan = 2013
Bonds = 2014 & 2016
Future deleveraging:
Excess cash from operations
Derivative proceeds
UBS settlement; received ~ $60
million in cash
E&Y and Scrushy litigation
on-going
(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.
(2) Based on 2008 Adjusted Consolidated EBITDA of $341.8 million; see related debt schedule on slide 31.
Debt to EBITDA 6.3X 6.3X 5.3X 5.1X(2)
($ Billions)
Short-Term Goal: 4.5X by YE10
Highlight: Debt Reduction
Highlight: Free Cash Flow
(1) Reconciliation to GAAP provided on slides 32 through 35.
(2) Includes capital expenditures for the hospital refresh program.
(Millions)
341.8
$
Cash interest expense
(158.5)
Change in working capital
(12.2)
Estimated state tax expense
(5.0)
Capital expenditures for maintenance
(2)
(37.3)
Net settlements on interest rate swap
(20.7)
Dividends paid on convertible perpetual preferred stock
(26.0)
Adjusted free cash flow
82.1
$
Adjusted Consolidated EBITDA
(1)
Year Ended
December 31, 2008
Highlight: Disciplined Use of Cash
Non-Operating Cash
Tax refunds
Derivative proceeds
Digital Hospital
proceeds
De novo’s
Acquisitions/
Consolidations
Debt
Reduction
Bed
Expansions
Adjusted Free
Cash Flow(1)
(Major Focus)
(Opportunistic)
($15-20 million)
(3rd-party
financed)
(1) After maintenance CAPEX of ~ $35 million annually, which includes ~ $5-10 million for infrastructure enhancements.
HealthSouth’s volume growth
continues to outpace
competitors’ growth
Same store discharges were
+9.7% for HLS in Q408
Bed expansions will help
facilitate organic growth:
65 – 75 new beds in 2009;
another 44 in 2010
% Discharges of HLS vs. UDS Industry Sites(1)
(1) Data provided by UDSMR, a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry, including 88 HLS sites.
(2) Includes all 93 HLS inpatient rehab hospitals and six long-term acute care hospitals.
Highlight: Strong Organic Growth
Projected sustainable discharge growth: 4+% annual
(1)
(2)
Organic Growth Enhanced Through Bed Expansions
Hospitals with greater than 85% occupancy are candidates for
bed expansion
We expect to add 65-75 beds by the end of 2009 and at least
another 44 beds in 2010
Average cost per bed:
With new construction = $100 – 250K
Internal renovation, only = $15 – 45K
Cash pay back in 2.5 to 3 years
Q408
Q407
Hospitals
14
10
Greater than 85% occupancy
Highlight: Development Growth
(2)
(1) Working with a third party to obtain lease arrangements.
(2) CON is being appealed; operational date may change.
154 additional beds in total, 34 added in third quarter 2008
Location
Announced
Type of Investment
Installed Beds
Operational
Date
Vineland, NJ
Aug-08
Acquisition of free
standing
34 Beds
Q308
Arlington, TX
Aug-08
Acquisition and
consolidation
n/a
Q308
Midland, TX
Sep-08
Acquisition and
consolidation
n/a
Q308
Mesa, AZ
Oct-08
De novo
(1)
40 Beds
Q309
Loudoun County, VA
Aug-08
De novo
40 Beds
Q210
Marion County, FL
Aug-08
De novo
(1)
40 Beds
Q310
Highlight: 2008 Goals vs. Results
Goal One – Organic Growth
Achieved 7.0% year-over-year discharge growth through the
implementation of the TeamWorks sales and marketing initiative
Goal Two – Delever the Balance Sheet
Reduced debt by $228 million and leverage from 6.3X to 5.3X
Equity issuance of 8.8 million shares for $150 million
Goal Three – Disciplined Opportunistic Growth
Acquired freestanding hospital in Vineland, New Jersey
Acquired and consolidated hospitals in Arlington and Midland, Texas
Adjusted Consolidated EBITDA(1) $341.8M vs. $321.3M in 2007
Adjusted EPS(1) $0.75 vs. ($0.64) in 2007
(1) For a reconciliation of Adjusted Consolidated EBITDA and Adjusted EPS, see slides 32 through 35.
Q109 Initial Observations
Volume:
Through February discharge growth in-line with expectations
Reminder: Q1 is typically a seasonally strong quarter; February 2008 had
one extra day.
Pricing:
No significant sequential change in pricing vs. Q408
Reminder: Quarter-over-quarter comparables will show decline due to last
year’s pricing roll-back.
Expenses:
Continued improvement in productivity and managing labor costs
Reminder: An average 3% merit increase went into effect on October 1,
2008 for non-management employees; benefits changes were effective
January 1, 2009.
Debt pay down:
~ $67 million in debt pay down through February month end
Reminder: Does not include the use of ~$60 million cash received from the
UBS settlement.
2009 Guidance
(1) Reconciliation to GAAP provided on slides 32 through 35.
(2) Adjusted income from continuing operations per diluted share.
Adjusted Consolidated EBITDA(1)
2008 Actual: $341.8 million
Adjusted for non-comparables $335 million
2009: Expected to be in the range of $342.0 million to $352.0
million
Adjusted Earnings per Share(1)(2)
2008 Actual: $0.75 per share
2009: Expected to be in the range of $0.85 to $0.90 per share
Political and Regulatory Landscape: “How the
sausage is made…”
(e.g. Recommend market
basket increases)
Healthcare
Policies &
Regulations
Health &
Human
Services
Congress / Legislative
Directive
President’s
Annual Budget
MedPAC(1)
(e.g. Congress directing
CMS to change 75%
threshold through
legislation)
(1) Independent agency that advises Congress on healthcare policy.
Background
Longstanding concept: Combine payments of acute care and post-acute
providers and pay “bundled” rate to acute care hospital
Most recently included in the December 2008 CBO report which listed 115
budget options (1)
Also included as a proposal in President George H.W. Bush's fiscal year
1992 budget
President's FY 2010 Budget Proposal/Rationale:
~ 18% of hospitalizations of Medicare beneficiaries come from
readmissions
By “bundling” acute and post-acute payments, acute care hospitals,
theoretically, will become more involved in determining appropriate post-
acute care, thereby reducing readmission rates
President's FY 2010 Budget Proposal/Timeline: Three year phase-in,
beginning FY 2013 and ending FY 2015
Details are sparse; Congress not bound by President's budget timeline
Observations on “Bundling”
(1) Source - Congressional Budget Office, http://www.cbo.gov/ftpdocs/99xx/doc9925/12-18-HealthOptions.pdf
Observations on “Bundling” (cont’d)
Comments:
Existing post-acute system is highly fragmented and burdened by
inefficient regulations
If bundling proposal eliminates these barriers, it could be a positive for
patients and HealthSouth
HLS could utilize its asset base more efficiently
Would be consistent with HealthSouth’s long-term strategy to
expand its post-acute footprint (LTCH, Home Health, SNF)
If bundling is adopted, safeguards would need to be put in place to
ensure:
Patients receive the post-acute care they require
Providers of post-acute care receive adequate reimbursement for
the services they provide
Emphasis is on quality of care and returning patients to their homes
Investment Considerations
Turnaround Complete: management focused on operations and
growth
Industry Leader in Attractive Industry
Strong Cash Flows: flexibility in the use of FCF
Deleveraging as Priority: reduce leverage to 4.5X or less by YE
2010
Solid Organic Growth: TeamWorks initiative will help us meet or
exceed our Adjusted Consolidated EBITDA targets
Opportunistic, disciplined expansion
Focus : Delivering shareholder value through
15% – 20% Adjusted EPS growth
Appendix and Reconciliations
Revenues (Q408 vs. Q407)
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.
(Millions)
4th Qtr. 2008
4th Qtr. 2007
Change
Inpatient
418.4
$
388.4
$
7.7%
Outpatient and other
45.4
46.1
��
(1.5%)
Consolidated net operating
463.8
$
434.5
$
6.7%
(Actual Amounts)
Discharges
27,654
25,005
10.6%
Net patient revenue/discharge
15,130
$
15,533
$
(2.6%)
Expenses (Q408 vs. Q407)
Salaries and benefits increased quarter over quarter:
Increased labor costs in response to higher discharge volumes partially offset by productivity
improvements.
Range adjustments in select markets, contract labor, and the cost of recruitment and
orientation.
October 1, 2008 average merit increases of 3.0% (except senior management).
Minor adjustments to benefit plans November 15, 2008.
Hospital related expenses comparison affected by a reduction of self-insurance costs in
Q407 resulting from revised actuarial estimates.
Fewer non-comparable items in Q408.
G&A goal remains at 4.75% of net operating revenues.
(Millions, except percent)
Salaries and benefits
233.7
$
217.4
$
7.5
%
Percent of net operating revenues
50.4%
50.0%
40
bps
Hospital related expenses
113.2
$
102.8
$
10.1
%
(other operating, supplies, occupancy, bad debts)
Percent of net operating revenues
24.4%
23.7%
70
bps
General and administrative
23.5
$
23.6
$
(0.4)
%
(excludes 123(R) compensation expense)
Percent of net operating revenues
5.1%
5.4%
(30)
bps
4th Qtr. 2008
4th Qtr. 2007
Change
Revenues (Year End)
Inpatient revenue growth was driven by strong discharge volumes.
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 6.1%, excluding our above-referenced Vineland, NJ
hospital.
Outpatient revenue declined as a result of 11 fewer outpatient satellites year over year.
(Millions)
2008
2007
Change
Inpatient
1,659.5
$
1,544.0
$
7.5%
Outpatient and other
182.9
193.5
(5.5%)
Consolidated net operating
1,842.4
$
1,737.5
$
6.0%
(Actual Amounts)
Discharges
107,780
100,738
7.0%
Net patient revenue/discharge
15,397
$
15,327
$
0.5%
Expenses (Year End)
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.
(Millions, except percent)
Salaries and benefits
934.7
$
863.6
$
8.2
%
Percent of net operating revenues
50.7%
49.7%
100
bps
Hospital related expenses
454.8
$
430.1
$
5.7
%
(other operating, supplies, occupancy, bad debts)
Percent of net operating revenues
24.7%
24.8%
(10)
bps
General and administrative
93.8
$
117.3
$
(20.0)
%
(excludes 123(R) compensation expense)
Percent of net operating revenues
5.1%
6.8%
170
bps
Change
2008
2007
Adjusted Consolidated EBITDA(1)(2)
(Millions)
(1) Reconciliation to GAAP provided on slides 32 through 35.
(2) Q407 and Q108 included a market basket price increase that was rolled-back on April 1, 2008.
(3) Includes $8.6 million gain for Source Medical.
(3)
Q408 vs. Q407
Strong volume growth in Q408 helped
offset the absence of Medicare price
increase
Q407 Medicare pricing: $7-8 million benefit
2008 vs. 2007
Year-over-year improvement driven by:
increased volumes;
cost management; and
improved labor productivity.
4th Qtr.
2008
4th Qtr.
2007
87.8
$
86.4
$
Full-Year
2008
Full-Year
2007
341.8
$
321.3
$
Adjusted Income (Loss) per Share
(1) Reconciliation to GAAP provided on slides 32 through 35.
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
(Millions, except per share data)
4th Qtr.
2008
4th Qtr.
2007
Full-Year
2008
Full-Year
2007
Income (loss) from continuing operations
172.9
$
(27.3)
$
234.8
$
198.3
$
Adjusted income (loss) from continuing
operations
(1)
24.3
$
(0.7)
$
71.9
$
(58.5)
$
Adjusted income (loss) from continuing
operations per diluted share
(1)
0.24
$
(0.01)
$
0.75
$
(0.64)
$
Per Share
Per Share
Operational and Labor Metrics
(1) Represents discharges from HealthSouth’s consolidated hospitals. As of December 31, 2008, the Company had 90 consolidated hospitals.
(2) Excludes 399 and 459 full-time equivalents for the three months ended December 31, 2008 and 2007, respectively, and 410 and 565 full-time
equivalents for the years ended December 31, 2008 and 2007, respectively, who are considered part of corporate overhead with their salaries
and benefits included in general and administrative expenses in the Company’s condensed consolidated statements of operations. Full-time
equivalents included in the above table represent HealthSouth employees who participate in or support the operations of the Company’s
hospitals.
(3) Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full-time
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.
2008
2007
2008
2007
Net patient revenue-inpatient
418.4
$
388.4
$
1,659.5
$
1,544.0
$
Net patient revenue-outpatient and
other revenues
45.4
46.1
182.9
193.5
Net operating revenues
463.8
$
434.5
$
1,842.4
$
1,737.5
$
Discharges
(1)
27,654
25,005
107,780
100,738
Outpatient visits
292,081
306,828
1,228,233
1,319,198
Average length of stay
14.3 days
14.9 days
14.7 days
15.1 days
Occupancy %
65.7%
61.6%
66.3%
63.5%
# of licensed beds
6,543
6,573
6,543
6,573
Occupied beds
4,299
4,049
4,338
4,174
Full-time equivalents (FTEs)
(2)
15,550
15,247
15,580
15,406
Contract labor
119
151
170
175
Total FTE and contract labor
15,669
15,398
15,750
15,581
EPOB
(3)
3.64
3.80
3.63
3.73
(Actual Amounts)
(In Millions)
Year Ended
December 31,
Three Months Ended
December 31,
Supplemental Information
For the Year Ended December 31,
100.0%
100.0%
100.0%
Total
2.8%
2.5%
1.8%
Other income
0.4%
0.6%
0.7%
Patients
5.0%
6.3%
7.0%
Other third-party payors
18.5%
18.5%
19.0%
Managed care and other discount plans
2.6%
2.3%
2.1%
Workers' compensation
2.1%
2.0%
2.2%
Medicaid
68.6%
67.8%
67.2%
Medicare
2006
2007
2008
Payment Source
TeamWorks Growth Initiative Implementation and Discharge Growth
Cumulative # of
Hospitals with TeamWorks
Quarter-over-Quarter
Year-over-Year
Q108
44
2.6%
2.6%
Q208
76
5.6%
4.1%
Q308
92
9.3%
5.8%
Q408
93
10.6%
7.0%
% Increase in Discharges for All Hospitals
(1) In February 2009, draws under the revolver were reduced to zero.
(2) Includes approximately $33.6 million for letters of credit released in Q109 as part of the UBS Settlement.
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
$
Debt Maturities and Swap
(Millions)
$400.0
Undrawn revolver
goes away in 2012
(1) We have the flexibility to peg 1,2,3 or 6 month Libor, or Prime.
(2) On December 31, 2008, a portion of the term loan was pegged to Prime.
Minimal amortization and no
near-term financing risk
As of December 31, 2008, we
were in compliance with the
covenants under our Credit
Agreement
Debt Maturities
December 31,
Floating Rate Debt Balances
2008
Advances under $400 million revolving credit facility
40.0
$
Libor plus 325
(1)
Term loan facility
783.6
Libor plus 250
(1)(2)
Floating Rate Senior Notes due 2014
366.0
6 month Libor +6%
Total
1,189.6
$
Swap Settlement
Dec. 31, 2008
March 2009
March 2011
Notional amount of the interest rate swap
1,121.2
$
1,056.0
$
-
$
Receive 3 month Libor and pay 5.22% fixed
Floating Interest Rate
Non-Operating Cash/Tax Position
Cash Refunds
$55.9 million receivable on balance sheet at
December 31, 2008.
$24 million tax refund + applicable interest
approved by Joint Committee on Taxation;
cash received in February 2009.
Future Cash Tax Payments
With over $2.5 billion in NOLs and tax
deductions, we do not expect to pay significant
federal income tax for the next 10-12 years.
Expect to pay about $5-7 million per year state
income tax.
Some exposure to Alternative Minimum Tax
(AMT).
GAAP Considerations
HealthSouth’s balance sheet currently reflects
a valuation allowance for the potential value
of NOLs and future deductions. The valuation
allowance is approximately $1.0 billion.
GAAP tax rate will net to small amount for
foreseeable future as there will be a reduction
in the valuation allowance when NOLs are
utilized.
NOL Usage
HealthSouth does not have an annual use
limitation (AUL) under section 382.
If we experienced a “change of ownership” as
defined by the Internal Revenue Service we
would be subject to an AUL. However, even
with a change of ownership we do not expect to
pay significant federal income tax for the next
10-12 years.
Outstanding Share Summary
(Millions)
4th Qtr.(4)
2008
4th Qtr.
2007
Year-End(4)
2008
Year-End
2007
Basic shares outstanding
(2)(3)
87.4
78.6
83.0
78.7
Diluted shares outstanding
(1)(2)(3)
100.7
91.9
96.4
92.0
Basic shares outstanding
(2)(3)
88.0
78.7
88.0
78.7
Diluted shares outstanding
(1)(2)(3)
101.3
92.0
101.4
92.0
Notes:
Average for the Period
End of Period
(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.
Debt Schedule
Debt to Adj. Consol. EBITDA on February 28, 2008 = 5.1X (2) ; Target = 4.5X by YE 2010
(1) 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 cash
available to the Company.
(2) Based on 2008 Adjusted Consolidated EBITDA of $341.8 million.
(Millions)
2009 Debt
Reduction
(1)
March 2012
$ -
$ 40.0
$ (40.0)
Term loan facility - March 2013
759.1
783.6
(24.5)
Bonds Payable:
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
366.0
-
(6 month Libor plus 600)
10.75%
Senior Notes due 2016
494.4
494.3
0.1
from 7.9% to 12.9%
12.6
12.8
(0.2)
Capital lease obligations
113.4
115.9
(2.5)
Total
1,747.3
$
1,814.4
$
(67.1)
$
Year-to-date debt reduction
(1)
67.1
$
Debt Balances
December 31,
2008
Notes payable to banks and others at interest rates
Advances under $400 million revolving credit facility,
February 28,
2009
Fourth Quarter Reconciliation of Net Income (Loss) to Adjusted Income (Loss) from
Continuing Operations and Adjusted Consolidated EBITDA (1)(3)(4)
Per Share
(2)
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)
(0.01)
(1.3)
(0.02)
Adjusted income (loss) from continuing operations
(1)(3)
24.3
0.28
(0.7)
(0.01)
Adjustment to GAAP EPS for dilution
(2)
(0.04)
-
Adjusted income (loss) from continuing operations per
per diluted share
(2)(3)
$ 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
Adjusted Consolidated EBITDA
(1)(3)(4)
$
87.8
86.4
$
Weighted average common shares outstanding:
Basic
87.4
78.6
Diluted
100.7
91.9
Per Share
(2)
(In Millions, Except Per Share Data)
Three Months Ended December 31,
2007
2008
Twelve Month Reconciliation of Net Income to Adjusted Income (Loss) from Continuing
Operations and Adjusted Consolidated EBITDA(1)(3)(4)
Per Share
(2)
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)
Adjusted income (loss) from continuing operations
(1)(3)
71.9
0.87
(58.5)
(0.74)
Adjustment to GAAP EPS for dilution
(2)
(0.12)
0.10
Adjusted income (loss) from continuing operations per
diluted share
(2)(3)
$ 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
-
0.4
Adjusted Consolidated EBITDA
(1)(3)(4)
$
341.8
$
321.3
Weighted average common shares outstanding:
Basic
83.0
78.7
Diluted
96.4
92.0
(In Millions, Except Per Share Data)
2007
2008
Per Share
(2)
Year Ended December 31,
2008 Reconciliation of Adjusted Consolidated EBITDA(1) to Net Cash Provided by
Operating Activities
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
$
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.
