SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2002; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
_____________.
Commission File Number 1-10315
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HEALTHSOUTH CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 63-0860407
- ------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
ONE HEALTHSOUTH PARKWAY, BIRMINGHAM, ALABAMA 35243
--------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(205) 967-7116
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all Reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such Reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 6, 2002
----------------------- --------------------------
COMMON STOCK, PAR VALUE 393,504,322 shares
$.01 PER SHARE
Page 1
HEALTHSOUTH CORPORATION AND SUBSIDIARIES
INDEX
PART I -- FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 2002 (Unaudited) 3
and December 31, 2001
Consolidated Statements of Income (Unaudited) -- Three Months
Ended March 31, 2002 and 2001 5
Consolidated Statements of Cash Flows (Unaudited) -- Three Months
Ended March 31, 2002 and 2001 6
Notes to Consolidated Financial Statements (Unaudited) -- Three Months
Ended March 31, 2002 and 2001 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 20
Item 6. Exhibits and Reports on Form 8-K 20
Page 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HEALTHSOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2002 2001
----------------- ------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 236,178 $ 276,583
Other marketable securities 1,873 1,873
Accounts receivable 1,023,160 940,414
Inventories, prepaid expenses and
other current assets 443,284 438,295
Income tax refund receivable 49,063 79,290
----------------- ------------------
TOTAL CURRENT ASSETS 1,753,558 1,736,455
OTHER ASSETS 367,354 342,943
PROPERTY, PLANT AND EQUIPMENT--NET 2,888,573 2,774,736
INTANGIBLE ASSETS--NET 2,720,886 2,725,103
----------------- ------------------
TOTAL ASSETS $ 7,730,371 $ 7,579,237
================ ==================
Page 3
HEALTHSOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2002 2001
----------------- ------------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 35,687 $ 37,085
Salaries and wages payable 64,476 65,364
Deferred income taxes 127,617 99,873
Accrued interest payable and other liabilities 143,758 134,762
Current portion of long-term debt 21,912 21,912
----------------- ------------------
TOTAL CURRENT LIABILITIES 393,450 358,996
LONG-TERM DEBT 2,997,129 3,005,035
DEFERRED INCOME TAXES 271,506 259,535
DEFERRED REVENUE AND OTHER LONG-TERM LIABILITIES 6,492 4,206
MINORITY INTERESTS--LIMITED PARTNERSHIPS 151,433 154,541
STOCKHOLDERS' EQUITY:
Preferred Stock, $.10 par value--1,500,000
shares authorized; issued and outstanding--
none - -
Common Stock, $.01 par value--600,000,000 shares authorized;
430,623,000 and 430,422,000 shares issued at March 31, 2002 and
December 31, 2001, respectively 4,306 4,304
Additional paid-in capital 2,660,480 2,657,804
Accumulated other comprehensive income 20,251 16,607
Retained earnings 1,538,595 1,430,846
Treasury stock (282,478) (280,524)
Receivable from Employee Stock Ownership Plan (1,405) (2,699)
Notes receivable from stockholders, officers
and management employees (29,388) (29,414)
----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 3,910,361 3,796,924
----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,730,371 $ 7,579,237
================= ==================
See accompanying notes.
Page 4
HEALTHSOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
---------------------------------------------
2002 2001
------------------- -------------------
Revenues $ 1,129,775 $ 1,090,462
Operating unit expenses 736,401 736,045
Corporate general and administrative expenses 39,966 32,654
Provision for doubtful accounts 24,995 24,383
Depreciation and amortization 77,582 91,219
Interest expense 48,043 59,420
Interest income (1,063) (2,721)
----------------- ------------------
925,924 941,000
----------------- ------------------
Income before income taxes
and minority interests 203,851 149,462
Provision for income taxes 68,167 49,170
----------------- ------------------
Income before minority interests 135,684 100,292
Minority interests (27,935) (24,981)
----------------- ------------------
Net income $ 107,749 $ 75,311
================= ==================
Weighted average common shares outstanding 391,863 388,143
================= ==================
Net income per common share $ 0.27 $ 0.19
================= ==================
Weighted average common shares
outstanding -- assuming dilution 414,872 398,456
================= ==================
Net income per common share --
assuming dilution $ 0.27 $ 0.19
================= ==================
See accompanying notes.
Page 5
HEALTHSOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2002 2001
---------------- ----------------
OPERATING ACTIVITIES
Net income $ 107,749 $ 75,311
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 77,582 91,219
Provision for doubtful accounts 24,995 24,383
Equity-based compensation 1,130 (4,015)
Income applicable to minority interests of
limited partnerships 27,935 24,981
Provision for deferred income taxes 37,264 33,200
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable (107,741) (45,263)
Inventories, prepaid expenses and other current
assets 25,238 (20,473)
Accounts payable and accrued expenses 6,710 (99,147)
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 200,862 80,196
INVESTING ACTIVITIES
Purchases of property, plant and equipment (183,950) (95,528)
Proceeds from sale of property, plant and equipment -- 992
Additions to intangible assets, net of effects of
acquisitions (615) (11,097)
Assets obtained through acquisitions, net of liabilities
assumed (2,637) (2,539)
Purchase of limited partnership units (14,015) (7,060)
Changes in other assets (15,800) (10,788)
Investments in other marketable securities -- (1,272)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (217,017) (127,292)
Page 6
HEALTHSOUTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED - IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2002 2001
---------------- ----------------
FINANCING ACTIVITIES
Proceeds from borrowings $ 201,000 $ 580,000
Principal payments on long-term debt (208,906) (535,398)
Proceeds from exercise of options 1,548 12,171
Purchases of treasury stock (1,954) -
Reduction in receivable from Employee Stock
Ownership Plan 1,294 2,716
Decrease in loans to stockholders, officers and
management employees 26 511
Proceeds from investment by minority interests - 3,576
Payment of cash distributions to limited partners (17,028) (16,803)
Foreign currency translation adjustment (230) 1,683
---------------- ----------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (24,250) 48,456
---------------- ----------------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (40,405) 1,360
Cash and cash equivalents at beginning of period
276,583 180,317
---------------- ----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 236,178 $ 181,677
================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for:
Interest $ 19,891 $ 34,213
Income taxes 4,098 4,480
See accompanying notes.
Page 7
HEALTHSOUTH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
NOTE 1 -- The accompanying consolidated financial statements include the
accounts of HEALTHSOUTH Corporation (the "Company") and its
subsidiaries. This information should be read in conjunction
with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001. It is management's opinion that
the accompanying consolidated financial statements reflect all
adjustments (which are normal recurring adjustments, except as
otherwise indicated) necessary for a fair presentation of the
results for the interim period and the comparable period
presented.
NOTE 2 -- The Company has a $1,750,000,000 revolving credit facility with
Bank of America, N.A. and other participating banks (the "1998
Credit Agreement"). Interest on the 1998 Credit Agreement is
paid based on LIBOR plus a predetermined margin, a base rate, or
competitively bid rates from the participating banks. The
Company is required to pay a fee based on the unused portion of
the revolving credit facility ranging from 0.09% to 0.25%,
depending on certain defined ratios. The principal amount is
payable in full on June 22, 2003. The Company has provided a
negative pledge on all assets under the 1998 Credit Agreement.
At March 31, 2002, the effective interest rate associated with
the 1998 Credit Agreement was approximately 2.34%.
On March 20, 1998, the Company issued $500,000,000 in 3.25%
Convertible Subordinated Debentures due 2003 (the "3.25%
Convertible Debentures") in a private placement. An additional
$67,750,000 principal amount of the 3.25% Convertible Debentures
was issued on March 31, 1998 to cover underwriters'
overallotments. Interest is payable on April 1 and October 1.
The 3.25% Convertible Debentures are convertible into common
stock of the Company at the option of the holder at a conversion
price of $36.625 per share. The conversion price is subject to
adjustment upon the occurrence of (a) a subdivision, combination
or reclassification of outstanding shares of common stock, (b)
the payment of a stock dividend or stock distribution on any
shares of the Company's capital stock, (c) the issuance of
rights or warrants to all holders of common stock entitling them
to purchase shares of common stock at less than the current
market price, or (d) the payment of certain other distributions
with respect to the Company's common stock. In addition, the
Company may, from time to time, lower the conversion price for
periods of not less than 20 days, in its discretion. The net
proceeds from the issuance of the 3.25% Convertible Debentures
were used by the Company to pay down indebtedness outstanding
under its then-existing credit facilities. The 3.25% Convertible
Debentures mature on April 1, 2003.
On June 22, 1998, the Company issued $250,000,000 in 6.875%
Senior Notes due 2005 and $250,000,000 in 7.0% Senior Notes due
2008 (collectively, the "Senior Notes"). Interest is payable on
June 15 and December 15. The Senior Notes are unsecured,
unsubordinated obligations of the Company. The net proceeds from
the issuance of the Senior Notes were used by the Company to pay
down indebtedness outstanding under its then-existing credit
facilities. The Senior Notes mature on June 15, 2005 and June
15, 2008.
On September 25, 2000, the Company issued $350,000,000 in
10-3/4% Senior Subordinated Notes due 2008 (the "10-3/4%
Notes"). Interest is payable on April 1 and October 1. The
10-3/4% Notes are senior subordinated obligations of the Company
and, as such, are subordinated to all existing and future senior
indebtedness of the Company, and
Page 8
also are effectively subordinated to all existing and future
liabilities of the Company's subsidiaries and partnerships. The
net proceeds from the issuance of the 10-3/4% Notes were used by
the Company to redeem its then-outstanding 9.5% Senior Notes due
2001 and to pay down indebtedness outstanding under its
then-existing credit facilities. The 10-3/4% Notes mature on
October 1, 2008.
On February 1, 2001, the Company issued $375,000,000 in 8-1/2%
Senior Notes due 2008 (the "8-1/2% Notes"). Interest is payable
on February 1 and August 1. The 8-1/2% Notes are unsecured,
unsubordinated obligations of the Company. The net proceeds from
the issuance of the 8-1/2% Notes were used to pay down
indebtedness outstanding under the Company's credit facilities.
The 8-1/2% Notes mature on February 1, 2008.
On September 28, 2001, the Company issued $400,000,000 in 8-3/8%
Senior Notes due 2011 (the "8-3/8% Notes"). Interest is payable
on April 1 and October 1. The 8-3/8% Notes are unsecured,
unsubordinated obligations of the Company. The net proceeds from
the issuance of the 8-3/8% Notes were used to pay down
indebtedness outstanding under the Company's credit facilities.
The 8-3/8% Notes mature on October 1, 2011.
On September 28, 2001, the Company issued $200,000,000 in 7-3/8%
Senior Notes due 2006 (the "7-3/8% Notes"). Interest is payable
on April 1 and October 1. The 7-3/8% Notes are unsecured,
unsubordinated obligations of the Company. The net proceeds from
the issuance of the 7-3/8% Notes were used to pay down
indebtedness outstanding under the Company's credit facilities.
The 7-3/8% Notes mature on October 1, 2006.
At March 31, 2002, and December 31, 2001, long-term debt consisted of
the following:
March 31, December 31,
2002 2001
----------------- -----------------
(In thousands)
Advances under a $1,750,000,000 credit
agreement with banks $ 540,000 $ 540,000
3.25% Convertible Subordinated Debentures
due 2003 567,750 567,750
6.875% Senior Notes due 2005 250,000 250,000
7-3/8% Senior Notes due 2006 200,000 200,000
7.0% Senior Notes due 2008 250,000 250,000
10-3/4% Senior Subordinated Notes due 2008 350,000 350,000
8-1/2% Senior Notes due 2008 375,000 375,000
8-3/8% Senior Notes due 2011 400,000 400,000
Other long-term debt 86,291 94,197
----------------- -----------------
3,019,041 3,026,947
Less amounts due within one year 21,912 21,912
----------------- -----------------
$2,997,129 $3,005,035
================= =================
Page 9
NOTE 3 -- During the first three months of 2002, the Company acquired
two outpatient rehabilitation facilities. The total purchase
price of these acquired facilities was approximately $2,638,000.
The Company also entered into non-compete agreements totaling
approximately $350,000 in connection with these transactions.
The cost in excess of the acquired facilities' net asset value
was approximately $2,503,000. The results of operations (not
material individually or in the aggregate) of these acquisitions
are included in the consolidated financial statements from their
respective acquisition dates.
NOTE 4 -- During 1998, the Company recorded impairment and restructuring
charges related to the Company's decision to close certain
facilities that did not fit with the Company's strategic vision,
underperforming facilities and facilities not located in target
markets (the "Fourth Quarter 1998 Charge"). Approximately 97.8%
of the locations identified in the Fourth Quarter 1998 Charge
have been closed.
Details of the impairment and restructuring charge activity
through the first quarter of 2002 are as follows:
Activity
--------
Balance at Cash Non-Cash Balance at
Description 12/31/01 Payments Impairments 03/31/02
--------------------------------------------------------------------------------------------
(In thousands)
Fourth Quarter 1998 Charge:
Lease abandonment costs $ 9,465 $ 1,101 $ - $ 8,364
---------------------------------------------------------
Total Fourth Quarter 1998 Charge $ 9,465 $ 1,101 $ - $ 8,364
=========================================================
The remaining balance at March 31, 2002 is included in accrued
interest payable and other liabilities in the accompanying
balance sheet.
NOTE 5 -- The Company has adopted the provisions of FASB Statement No.
131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"). SFAS No. 131 requires the
utilization of a "management approach" to define and report the
financial results of operating segments. The management approach
defines operating segments along the lines used by management to
assess performance and make operating and resource allocation
decisions. The Company has based its management and reporting
structure on three segments: (1) Inpatient and Other Clinical
Services, (2) Outpatient Services and (3) Non-Patient Care
Services. The inpatient and other clinical services segment
includes the operations of inpatient rehabilitation facilities
and medical centers, as well as the operations of certain
physician practices and other clinical services which are
managerially aligned with inpatient services. The outpatient
services segment includes the operations of outpatient
rehabilitation facilities, outpatient surgery centers and
outpatient diagnostic centers. The non-patient care services
segment includes the operations of the corporate office, general
and administrative costs, non-clinical subsidiaries and other
operations that are independent of the inpatient and outpatient
services segments.
Page 10
Operating results and other financial data are presented for the
principal operating segments as follows:
Three Months Ended
March 31,
2002 2001
----------------- -----------------
(In thousands)
Revenues:
Inpatient and other clinical services $ 517,659 $ 480,286
Outpatient services 601,825 600,768
----------------- -----------------
1,119,484 1,081,054
Non-patient care services 10,291 9,408
----------------- -----------------
Consolidated revenues $1,129,775 $1,090,462
================= =================
Income before income taxes and minority interests:
Inpatient and other clinical services $ 142,415 $ 104,816
Outpatient services 153,965 139,859
----------------- -----------------
296,380 244,675
Non-patient care services (92,529) (95,213)
----------------- -----------------
Consolidated income before income taxes and
minority interests $ 203,851 $ 149,462
================ =================
NOTE 6 -- During the first three months of 2002, the Company granted
nonqualified stock options to certain Directors, employees and
others to purchase 4,313,500 shares of Common Stock at exercise
prices ranging from $10.90 to $14.90 per share.
NOTE 7 -- In June 2001, the Financial Accounting Standards Board issued
FASB Statement No. 141, "Business Combinations" ("SFAS No.
141"), and FASB Statement No. 142, "Goodwill and Other
Intangibles" ("SFAS No. 142"). SFAS No. 141 eliminates the use
of the pooling method for business combinations and requires
that all acquisitions be accounted for under the purchase
method. This statement is effective for acquisitions completed
after June 30, 2001. SFAS No. 142 requires the periodic testing
of goodwill for impairment rather than a monthly amortization of
the balance. This testing takes place in two steps: (1) the
determination of the fair value of a reporting unit, and (2) the
determination of the implied fair value of the goodwill. The
Company adopted this statement on January 1, 2002. If the policy
had been in effect in the first quarter of 2001, reported net
income for that period would have increased by $11,700,000, or
$.03 per share (assuming dilution).
In June 2001, the Financial Accounting Standards Board issued
FASB Statement No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 requires that the
fair value of a liability for an asset retirement be recognized
in the period in which it is incurred if a reasonable estimate
of fair value can be determined. SFAS No. 143 is effective for
fiscal years beginning after June 15, 2002. Management has not
determined the effect of the adoption of this statement.
In August 2001, the Financial Accounting Standards Board issued
FASB Statement No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144
addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. The Company adopted this
statement on January 1, 2002. Management is currently evaluating
the financial impact of adopting the new policy.
Page 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
We provide outpatient and rehabilitative healthcare services through
our inpatient and outpatient rehabilitation facilities, surgery centers,
diagnostic centers and medical centers. We have expanded our operations through
the acquisition or opening of new facilities and satellite locations and by
enhancing our existing operations. As of March 31, 2002, we had approximately
1,900 locations in 50 states, Puerto Rico, the United Kingdom, Australia and
Canada, including 1,419 outpatient rehabilitation locations, 117 inpatient
rehabilitation facilities, four medical centers, 208 surgery centers and 134
diagnostic centers.
FASB Statement ("SFAS") No. 131, "Disclosures about Segments of an
Enterprise and Related Information", requires an enterprise to report operating
segments based upon the way its operations are managed. This approach defines
operating segments along the lines used by management to assess performance and
make operating and resource allocation decisions. Based on our management and
reporting structure, segment information has been presented for (1) inpatient
and other clinical services, (2) outpatient services and (3) non-patient care
services. The inpatient and other clinical services segment includes the
operations of our inpatient rehabilitation facilities and medical centers, as
well as the operations of certain physician practices and other clinical
services which are managerially aligned with our inpatient services. The
outpatient services segment includes the operations of our outpatient
rehabilitation facilities, outpatient surgery centers and outpatient diagnostic
centers. The non-patient care services segment includes the operations of our
corporate office, general and administrative costs, non-clinical subsidiaries
and other operations that are independent of our inpatient and outpatient
services segments. See Note 5 of "Notes to Consolidated Financial Statements"
for financial data for each of our operating segments.
There are increasing pressures from many payor sources to control
healthcare costs and to reduce or limit increases in reimbursement rates for
medical services. There can be no assurance that payments under governmental and
third-party payor programs will remain at levels comparable to present levels.
In addition, there have been, and we expect that there will continue to be, a
number of proposals to limit Medicare reimbursement for certain services. We
cannot now predict whether any of these proposals will be adopted or, if adopted
and implemented, what effect such proposals would have on us. Changes in
reimbursement policies or rates by private or governmental payors could have an
adverse effect on our future results of operations.
Medicare reimbursement for inpatient rehabilitation services is
changing from a cost-based reimbursement system to a prospective payment system
("PPS"), with the phase-in of the PPS having begun January 1, 2002. We believe
we are well-positioned and well-prepared for the transition and that our
emphasis on cost-effective services means that the inpatient rehabilitation PPS
will have a positive effect on our results of operations. Our early experience
with payments under PPS has been consistent with our internal estimates.
However, because implementation of PPS has only recently begun, we cannot be
certain that the ultimate impact of the PPS transition will be consistent with
our current expectations. In addition, the climate for both governmental and
non-governmental reimbursement frequently changes, and future changes in
reimbursement rates could have a material effect on our financial condition or
results of operations.
In many cases, we operate more than one site within a market. In such
markets, there is customarily an outpatient center or inpatient facility with
associated satellite outpatient locations. For purposes of the following
discussion and analysis, same store outpatient rehabilitation operations are
measured on locations within markets in which similar operations existed at the
end of the period and include the operations of additional outpatient
rehabilitation locations opened within the same market. New store outpatient
rehabilitation operations are measured on locations within new markets. Same
store
Page 12
operations in our other business lines are measured based on specific
locations. We may, from time to time, close or consolidate similar locations in
multi-site markets to obtain efficiencies and respond to changes in demand.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. In preparing these financial statements, we are required to make
estimates and judgments that affect the reported amounts of our assets,
liabilities, revenues and expenses. Those reported amounts could differ, in some
cases materially, if we made different estimates and judgments with respect to
particular items in our financial statements. We make such estimates and
judgments based on our historical experience and on assumptions that we believe
are reasonable under the circumstances in an effort to ensure that our financial
statements fairly reflect our financial condition and results of operations. We
describe some of the most important policies that we follow in making such
estimates and judgments below.
Revenues and Contractual Reserves
Our revenues include net patient service revenues and other operating
revenues. Net patient service revenues are reported at estimated net realizable
amounts from patients, insurance companies, third-party payors (primarily
Medicare and Medicaid) and others for services rendered. Revenues from
third-party payors also include estimated retroactive adjustments under
reimbursement agreements that are subject to final review and settlement by
appropriate authorities. We estimate contractual adjustments from
non-governmental third-party payors based on historical experience and the terms
of payor contracts. Our reimbursement from governmental third-party payors is
based upon cost reports, Medicare and Medicaid payment regulations and other
reimbursement mechanisms which require the application and interpretation of
complex regulations and policies, and such reimbursement is subject to various
levels of review and adjustment by fiscal intermediaries and others, which may
affect the final determination of reimbursement. We estimate net realizable
amounts from governmental payors based on historical experience and
interpretations of such regulations and policies. In the event that final
reimbursement differs from our estimates, our actual revenues and net income,
and our accounts receivable, could vary from the amounts reported.
Allowance for Doubtful Accounts
As with any healthcare provider, some of our accounts receivable will
ultimately prove uncollectible for various reasons, including the inability of
patients or third-party payors to satisfy their financial obligations to us. We
estimate allowances for doubtful accounts based on the specific agings and payor
classifications at each facility. Net accounts receivable includes only those
amounts we estimate to be collectible based on this evaluation. Unforeseen
factors, such as the insolvency of third-party payors, could cause our estimate
to be inaccurate and could cause our actual results and the amount of our
accounts receivable to vary from amounts reported in our financial statements.
Impairment of Goodwill
Many of our facilities came to us through acquisitions. We determine
the amortization period of the cost in excess of net asset value of purchased
facilities based on an evaluation of the facts and circumstances of each
individual purchase transaction. The evaluation includes an analysis of historic
and projected financial performance, an evaluation of the estimated useful life
of the buildings and fixed assets acquired, the indefinite useful life of
certificates of need and licenses acquired, the competition within local
markets, lease terms where applicable, and the legal terms of partnerships where
applicable. We utilize independent appraisers and rely on our own management
expertise in evaluating each of the factors noted above. With respect to the
carrying value of the excess of cost over net asset value of individual
purchased facilities and other intangible assets, we determine on a quarterly
basis whether an impairment event has
Page 13
occurred by considering factors such as the market value of the asset, a
significant adverse change in legal factors or in the business climate, adverse
action by regulators, a history of operating losses or cash flow losses, or a
projection of continuing losses associated with an operating entity. The
carrying value of excess cost over net asset value of purchased facilities and
other intangible assets will be evaluated if the facts and circumstances suggest
that it has been impaired. If this evaluation indicates that the value of the
asset will not be recoverable, as determined based on the undiscounted cash
flows of the entity acquired over the remaining amortization period, our
carrying value of the asset will be reduced to the estimated fair market value.
Fair value is determined based on the individual facts and circumstances of the
impairment event, and the available information related to it. Such information
might include quoted market prices, prices for comparable assets, estimated
future cash flows discounted at a rate commensurate with the risks involved, and
independent appraisals. For purposes of analyzing impairment, assets are
generally grouped at the individual operational facility level, which is the
lowest level for which there are identifiable cash flows. If we acquired the
group of assets being tested as part of a purchase business combination, any
goodwill that arose as part of the transaction is included as part of the asset
grouping.
In July 2001, the Financial Accounting Standards Board issued FASB
Statement ("SFAS") No. 142, "Goodwill and Other Intangibles". SFAS No. 142
requires the periodic testing of goodwill for impairment rather than a monthly
amortization of the balance. This testing takes place in two steps: (1) the
determination of the fair value of a reporting unit, and (2) the determination
of the implied fair value of the goodwill. We adopted SFAS No. 142 on January 1,
2002. We determined that if the policy had been in effect in the first quarter
of 2001, reported net income for that period would have increased by
$11,700,000, or $.03 per share (assuming dilution). We are currently evaluating
goodwill at December 31, 2001 for impairment under SFAS No. 142. Because we have
recorded (and expect in the future to record) significant goodwill in connection
with acquisitions, the impact of this new policy on our future reported results
could be material.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 2002
Our operations generated revenues of $1,129,775,000 for the quarter
ended March 31, 2002, an increase of $39,313,000, or 3.6%, as compared to the
same period in 2001. The increase in revenues is primarily attributable to
increases in patient volumes. Same store revenues for the quarter ended March
31, 2002 were $1,107,120,000, an increase of $89,456,000, or 8.8%, as compared
to the same period in 2001, excluding facilities in operation in 2001 but no
longer in operation in 2002. New store revenues were $22,655,000. Revenues
generated from patients under the Medicare and Medicaid programs respectively
accounted for 34.0% and 2.5% of revenue for the first quarter of 2002, compared
to 30.5% and 2.5% for the same period in 2001. Our Medicare utilization has
increased due to expanded clinical programs directed towards Medicare
beneficiaries. Revenues from any other single third-party payor were not
significant in relation to our revenues. During the first quarter of 2002, same
store outpatient visits, inpatient discharges, surgical cases and diagnostic
cases increased by 7.9%, 4.4%, 6.5% and 4.1%, respectively. Revenue per
outpatient visit, inpatient discharge, surgical case and diagnostic case for
same store operations increased (decreased) by 4.0%, 7.1%, 0.0% and (1.1)%,
respectively.
Operating expenses (expenses excluding corporate general and
administrative expenses, provision for doubtful accounts, depreciation and
amortization, and interest expense) were $736,401,000, or 65.2% of revenues, for
the quarter ended March 31, 2002, compared to 67.5% of revenues for the first
quarter of 2001. Same store operating expenses were $718,697,000, or 64.9% of
comparable revenue. New store operating expenses were $17,704,000, or 78.2% of
comparable revenue. The increase in new store operating expenses is primarily
attributable to start-up costs at new inpatient rehabilitation hospitals.
Corporate general and administrative expenses increased from $32,654,000 during
the 2001 quarter to $39,966,000 during the 2002 quarter. The variance in
corporate general and administrative expense is primarily attributable to
adjustments required under FASB Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB Opinion No.
25". The provision for doubtful accounts was $24,995,000, or 2.2% of revenues,
for the first quarter of 2002, compared to $24,383,000, or 2.2% of revenues, for
the same period in 2001. Management believes that the allowance for doubtful
accounts generated by this provision is adequate to cover any uncollectible
receivables.
Page 14
Depreciation and amortization expense was $77,582,000 for the quarter
ended March 31, 2002, compared to $91,219,000 for the same period in 2001. The
decrease was primarily attributable to decreased amortization expense due to our
adoption of SFAS No. 142. Interest expense was $48,043,000 for the quarter ended
March 31, 2002, compared to $59,420,000 for the quarter ended March 31, 2001.
The decrease is primarily attributable to decreases in effective interest rates.
For the first quarter of 2002, interest income was $1,063,000, compared to
$2,721,000 for the first quarter of 2001.
Income before income taxes and minority interests for the first quarter
of 2002 was $203,851,000, compared to income of $149,462,000 for the same period
in 2001. Minority interests decreased income before income taxes by $27,935,000
for the quarter ended March 31, 2002, compared to decreasing income before
income taxes by $24,981,000 for the first quarter of 2001. The provision for
income taxes for the first quarter of 2002 was $68,167,000, compared to
$49,170,000 for the same period in 2001. The effective tax rate was 38.75% for
the quarter ended March 31, 2002 compared to 39.5% for the quarter ended March
31, 2001. Net income for the first quarter of 2002 was $107,749,000, compared to
net income of $75,311,000 for the first quarter of 2001.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2002, we had working capital of $1,360,108,000,
including cash and marketable securities of $238,051,000. Working capital at
December 31, 2001, was $1,377,459,000, including cash and marketable securities
of $278,456,000. For the first three months of 2002, cash provided by operating
activities was $200,862,000, compared to $80,196,000 for the same period in
2001. The increase is primarily attributable to a significant reduction in
accounts payable in the first quarter of 2001. Additions to property, plant and
equipment and acquisitions accounted for $183,950,000 and $2,637,000,
respectively, during the first three months of 2002. Those same investing
activities accounted for $95,528,000 and $2,539,000, respectively, in the same
period in 2001. Because of the favorable results we have seen in the early
transition to inpatient rehabilitation PPS, we have incurred additional capital
expenditures in the first quarter of 2002 in connection with expansion
activities at some of our facilities and accelerated development activities.
Financing activities used $24,250,000 and provided $48,456,000 during the first
three months of 2002 and 2001, respectively. Net principal payments on long-term
debt for the first three months of 2002 were $7,906,000, versus net borrowing
proceeds of $44,602,000 for the first three months of 2001.
Net accounts receivable were $1,023,160,000 at March 31, 2002, compared
to $940,414,000 at December 31, 2001. The number of days of average quarterly
revenues in ending receivables at March 31, 2002, was 81.5, compared to 77.6
days of average quarterly revenues in ending receivables at December 31, 2001.
This increase was primarily attributable to delays by some of our Medicare
fiscal intermediaries in implementing systems for processing inpatient
rehabilitation PPS payments. The concentration of net accounts receivable from
patients, third-party payors, insurance companies and others at March 31, 2002,
is consistent with the related concentration of revenues for the period then
ended.
We have a $1,750,000,000 revolving credit facility with Bank of
America, N.A. and other participating banks (the "1998 Credit Agreement").
Interest on the 1998 Credit Agreement is paid based on LIBOR plus a
predetermined margin, a base rate, or competitively bid rates from the
participating banks. We are required to pay a fee based on the unused portion of
the revolving credit facility ranging from 0.09% to 0.25%, depending on certain
defined ratios. The principal amount is payable in full on June 22, 2003. We
have provided a negative pledge on all assets under the 1998 Credit Agreement.
The effective interest rate on the average outstanding balance under the 1998
Credit Agreement was 2.38% for the three months ended March 31, 2002, compared
to the average prime rate of 4.75% during the same period. At March 31, 2002, we
had drawn $540,000,000 under the 1998 Credit Agreement.
During 1995 and 1998, we entered into two tax retention operating lease
agreements structured through financial institutions for our corporate
headquarters building and for nine of our rehabilitation hospitals. These
agreements have a total value of $187,000,000 and terminate on June 22, 2003. At
Page 15
termination, unless we renegotiate and extend the leases, we must purchase the
facilities or obtain a purchaser for them. We provide a residual value guaranty
of approximately $163,690,000 related to these lease agreements.
In December 2001, we entered into a seven-and-one-half year operating
lease agreement to provide for the financing of our replacement medical center
in Birmingham, Alabama. During the construction period, we provide a residual
value guaranty for up to 89% of the value of the improvements. At March 31,
2002, the value of the improvements totaled approximately $15,752,000. At
maturity, our residual value guaranty will total 85% of the value of the
improvements.
The table below sets forth certain information concerning amounts due
with respect to our long-term debt and various other commitments as of March 31,
2002:
Due Due Due Due 2007
Total 2002 2003-2004 2005-2006 and beyond
-------------------------------------------------------------------------------
Long-Term Debt $ 2,978,375,000 $ 6,662,000 $ 1,118,460,000 $ 458,586,000 $ 1,394,667,000
Capital Lease Obligations 22,686,000 17,000 8,025,000 5,036,000 9,608,000
Noncompete Obligations 17,980,000 6,847,000 8,829,000 2,304,000 -
Operating Leases 1,310,754,000 164,951,000 355,219,000 237,633,000 552,951,000
------------- ----------- ----------- ------------------------------
Total Obligations $ 4,329,795,000 $ 178,477,000 $ 1,490,533,000 $ 703,559,000 $ 1,957,226,000
While the rates of interest payable under our principal credit facility
and payments under some of our operating leases vary depending in part on
investment ratings of our debt, we have no credit or lease agreements which
provide for the acceleration of maturities or the termination of such agreements
based upon any change in our investment rating.
We intend to pursue the acquisition or development of additional
healthcare operations, including outpatient rehabilitation facilities, inpatient
rehabilitation facilities, ambulatory surgery centers, outpatient diagnostic
centers and companies engaged in the provision of other complementary services,
and to expand certain of our existing facilities. While it is not possible to
estimate precisely the amounts which will actually be expended in the foregoing
areas, we anticipate that over the next twelve months, we will spend
approximately $150,000,000 to $200,000,000 on maintenance and expansion of our
existing facilities and approximately $300,000,000 to $350,000,000 on
development activities and on continued development of the Integrated Service
Model.
Although we are continually considering and evaluating acquisitions and
opportunities for future growth, we have not entered into any agreements with
respect to material future acquisitions. Our 1998 Credit Agreement matures in
June 2003, and we are in the process of obtaining commitments for a replacement
primary credit facility, which we currently expect to have in place before the
end of the second quarter of 2002. We believe that existing cash, cash flow from
operations, and borrowings under existing credit facilities will be sufficient
to satisfy our estimated cash requirements for the next twelve months, and,
together with the proposed replacement credit facility and proceeds from
potential capital markets transactions as market conditions allow, for the
reasonably foreseeable future.
Inflation in recent years has not had a significant effect on our
business, and is not expected to adversely affect us in the future unless it
increases significantly.
EXPOSURES TO MARKET RISK
We are exposed to market risk related to changes in interest rates. The
impact on earnings and value of market risk-sensitive financial instruments
(principally marketable security investments and long-term debt) is subject to
change as a result of movements
Page 16
in market rate and prices. We use sensitivity analysis models to
evaluate these impacts. We do not hold or issue derivative instruments for
trading purposes and are not a party to any instruments with leverage features.
Our investment in marketable securities was $1,873,000 at March 31,
2002, which represents less than 1% of total assets at that date. These
securities are generally short-term, highly liquid instruments and, accordingly,
their fair value approximates cost. Earnings on investments in marketable
securities are not significant to our results of operations, and therefore any
changes in interest rates would have a minimal impact on future pre-tax
earnings.
With respect to our interest-bearing liabilities, approximately
$540,000,000 in long-term debt at March 31, 2002 is subject to variable rates of
interest, while the remaining balance in long-term debt of $2,479,041,000 is
subject to fixed rates of interest (see Note 2 of "Notes to Consolidated
Financial Statements" for further description). This compares to $540,000,000 in
long-term debt subject to variable rates of interest and $2,486,947,000 in
long-term debt subject to fixed rates of interest at December 31, 2001. The fair
value of our total long-term debt, based on discounted cash flow analyses,
approximates its carrying value at March 31, 2002 and December 31, 2001 except
for our 3.25% Convertible Subordinated Debentures due 2003, 6.875% Senior Notes
due 2005, 7.0% Senior Notes due 2008, 10-3/4% Senior Notes due 2008, 8-1/2%
Senior Notes due 2008, 8-3/8% Senior Notes due 2011 and 7-3/8% Senior Notes due
2006. The fair value of the 3.25% Convertible Debentures was approximately
$547,524,000 and $541,974,000 at March 31, 2002 and December 31, 2001,
respectively. The fair value of the 6.875% Senior Notes was approximately
$247,500,000 and $250,191,000 at March 31, 2002 and December 31, 2001,
respectively. The fair value of the 7% Senior Notes was approximately
$245,000,000 and $243,713,000 at March 31, 2002 and December 31, 2001,
respectively. The fair value of the 10-3/4% Senior Notes was approximately
$385,438,000 and $386,365,000 at March 31, 2002 and December 31, 2001,
respectively. The fair value of the 8-1/2% Senior Notes was approximately
$387,188,000 and $392,231,000 at March 31, 2002 and December 31, 2001,
respectively. The fair value of the 8-3/8% Senior Notes was approximately
$413,000,000 and $414,940,000 at March 31, 2002 and December 31, 2001,
respectively. The fair value of the 7-3/8% Senior Notes was approximately
$200,250,000 and $201,350,000 at March 31, 2002 and December 31, 2001,
respectively. Based on a hypothetical 1% increase in interest rates, the
potential losses in future annual pre-tax earnings would be approximately
$5,400,000. The impact of such a change on the carrying value of long-term debt
would not be significant. These amounts are determined considering the impact of
the hypothetical interest rates on our borrowing cost and long-term debt
balances. These analyses do not consider the effects, if any, of the potential
changes in the overall level of economic activity that could exist in such an
environment. Further, in the event of a change of significant magnitude,
management would expect to take actions intended to further mitigate its
exposure to such change.
Foreign operations, and the related market risks associated with
foreign currency, are currently insignificant to our results of operations and
financial position.
FORWARD-LOOKING STATEMENTS
Statements contained in this Quarterly Report on Form 10-Q which are
not historical facts are forward-looking statements. Without limiting the
generality of the preceding statement, all statements in this Quarterly Report
on Form 10-Q concerning or relating to estimated and projected earnings,
margins, costs, expenditures, cash flows, growth rates and financial results are
forward-looking statements. In addition, HEALTHSOUTH, through its senior
management, from time to time makes forward-looking public statements concerning
our expected future operations and performance and other developments. Such
forward-looking statements are necessarily estimates that we believe are
reasonable based upon current information, involve a number of risks and
uncertainties and are made pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. There can be no assurance that
our actual results will not differ materially from the results anticipated in
such forward-looking statements. While is impossible to identify all such
factors, factors which could cause actual results to differ materially from
those estimated by us include, but are not limited to, changes in the regulation
of the healthcare
Page 17
industry at either or both of the federal and state levels, changes or delays in
reimbursement for our services by governmental or private payors, competitive
pressures in the healthcare industry and our response thereto, our ability to
obtain and retain favorable arrangements with third-party payors, unanticipated
delays in the implementation of our Integrated Service Model and other strategic
initiatives, general conditions in the economy and capital markets, and other
factors which may be identified from time to time in our Securities and Exchange
Commission filings and other public announcements.
Page 18
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We were served with various lawsuits filed beginning September 30, 1998
purporting to be class actions under the federal and Alabama securities laws.
These lawsuits were filed following a decline in our stock price at the end of
the third quarter of 1998. Seven such suits were filed in the United States
District Court for the Northern District of Alabama. In January 1999, those
suits were ordered to be consolidated under the case style In re HEALTHSOUTH
Corporation Securities Litigation, Master File No. CV98-O-2634-S. On April 12,
1999, the plaintiffs filed a consolidated amended complaint against HEALTHSOUTH
and certain of our current and former officers and directors alleging that,
during the period April 24, 1997 through September 30, 1998, the defendants
misrepresented or failed to disclose certain material facts concerning our
business and financial condition and the impact of the Balanced Budget Act of
1997 on our operations in order to artificially inflate the price of our common
stock and issued or sold shares of such stock during the purported class period,
all allegedly in violation of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 thereunder. Certain of the named plaintiffs in the
consolidated amended complaint also purport to represent separate subclasses
consisting of former stockholders of Horizon/CMS Healthcare Corporation and
National Surgery Centers, Inc. who received shares of HEALTHSOUTH common stock
in connection with our acquisition of those entities and assert additional
claims under Section 11 of the Securities Act of 1933 with respect to the
registration of securities issued in those acquisitions.
Another suit, Peter J. Petrunya v. HEALTHSOUTH Corporation, et al.,
Civil Action No. 98-05931, was filed in the Circuit Court for Jefferson County,
Alabama, alleging that during the period July 16, 1996 through September 30,
1998 the defendants misrepresented or failed to disclose certain material facts
concerning the Company's business and financial condition, allegedly in
violation of Sections 8-6-17 and 8-6-19 of the Alabama Securities Act. The
Petrunya complaint was voluntarily dismissed by the plaintiff without prejudice
in January 1999. Additionally, a suit styled Dennis Family Trust v. Richard M.
Scrushy, et al., Civil Action No. 98-06592, has been filed in the Circuit Court
for Jefferson County, Alabama, purportedly as a derivative action on behalf of
HEALTHSOUTH. That suit largely replicates the allegations originally set forth
in the individual complaints filed in the federal actions described in the
preceding paragraph and alleges that our then-current directors, certain of our
former directors and certain of our officers breached their fiduciary duties to
HEALTHSOUTH and engaged in other allegedly tortious conduct. The plaintiff in
that case has forborne pursuing its claim thus far pending further developments
in the federal action, and the defendants have not yet been required to file a
responsive pleading in the case.
We filed a motion to dismiss the consolidated amended complaint in the
federal action in late June 1999. On September 13, 2000, the magistrate judge
issued his report and recommendation, recommending that the court dismiss the
amended complaint in its entirety, with leave to amend. The plaintiffs objected
to that report, and we responded to that objection. On December 20, 2000,
without oral argument, the court issued an order rejecting the magistrate
judge's report and recommendation and denying our motion to dismiss. We believed
that the December 20, 2000 order failed to follow the standards required under
the Private Securities Litigation Reform Act of 1995 and Rule 9(b) of the
Federal Rules of Civil Procedure, and we filed a motion asking the court to
reconsider that order or to certify it for an interlocutory appeal to the United
States Eleventh Circuit Court of Appeals. Oral argument on that motion was held
on March 2, 2001, and the court denied that motion on March 12, 2001.
Accordingly, we filed our answer to the consolidated amended complaint on March
26, 2001. The court held a hearing on the plaintiffs' motion for class
certification on April 23, 2002, and requested further briefing on various
issues. We do not expect any ruling on class certification earlier than the
third quarter of 2002. We believe that all claims asserted in the above suits
are without merit, and expect to vigorously defend against such claims. Because
such suits remain at an early stage, we cannot currently predict the outcome of
any such suits or the magnitude of any potential loss if our defense is
unsuccessful.
Page 19
In late December 2001, the United States Department of Justice filed a
Notice of Election to Intervene in Part and to Decline to Intervene in Part in a
case styled United States ex rel. DeWayne Manning v. HEALTHSOUTH Corporation,
No. CV-99-BE-2150-S, filed in the United States District Court for the Northern
District of Alabama. The Department's Notice indicated that it was partially
intervening in a complaint under the federal False Claims Act filed by a former
employee of HEALTHSOUTH which alleged that certain physical therapy practices,
primarily involving the use of physical therapy aids and other assistive
personnel, violated Medicare regulations related to the provision of physical
therapy to Medicare beneficiaries in freestanding outpatient centers. The Notice
also indicated that the Department was declining to intervene in any other
claims asserted by the relator, but that the Department intended to assert other
claims relating to alleged violations of certain regulations relating to
technical documentation requirements for Medicare physical therapy claims, that
the Department may seek to consolidate other cases containing similar
allegations, and that the Department intended to file a complaint with respect
to such allegations within 120 days. On January 15, 2002, the Court entered an
Order unsealing the original relator's complaint, granting the Department 120
days from that date to file and serve its complaint, and prohibiting the relator
from serving his complaint until the Department served its new complaint. We are
aware of four similar complaints that were filed under seal in three other
federal district courts, in at least two of which the Department has filed a
substantially identical notice of partial intervention and in at least one of
which the Department has declined to intervene. We understand that the relator
in the case in which the Department has declined to intervene is seeking to
dismiss his complaint with prejudice. On May 8, 2002, one day before its
court-ordered deadline to file its complaint in the Manning case, the Department
filed a notice withdrawing its intervention based on the existence of
earlier-filed cases alleging the same claims, a fact apparently known to the
Department when it originally intervened. The relator in that case has moved to
dismiss his original complaint. To date, we have not been served with any of the
underlying complaints in the other cases in which the Department has elected to
intervene. Based upon the information available to us, we believe that the
Department's theory with respect to the issues regarding the use of physical
therapy aides and other assistive personnel is without support in applicable law
or regulation and is inconsistent with traditionally accepted practices in the
physical therapy industry. Accordingly, we expect to vigorously defend against
the claims asserted at such time as we are served with any of the complaints.
However, because of the preliminary status of this litigation, it is not
possible to predict at this time the outcome or effect of this litigation or the
length of time it will take to resolve this litigation.
ITEM 2. CHANGES IN SECURITIES.
(c) Recent Sales of Unregistered Securities
We had no unregistered sales of equity securities during the
three months ended March 31, 2002.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
11. Computation of Income Per Share (unaudited)
(b) Reports on Form 8-K
During the three months ended March 31, 2002, we filed Current
Reports on form 8-K dated January 8, 2002, January 29, 2002
and February 4, 2002, in each case furnishing under Item 9 the
text of slides currently being used in investor and analyst
presentations by our management.
No other items of Part II are applicable to the Registrant for the
period covered by this Quarterly Report on Form 10-Q.
Page 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed
on its behalf by the undersigned thereunto duly authorized.
HEALTHSOUTH CORPORATION
-----------------------
(Registrant)
Date: May 10, 2002 /s/ RICHARD M. SCRUSHY
-------------------------
Richard M. Scrushy
Chairman of the Board and
Chief Executive Officer
Date: May 10, 2002 /s/ WESTON L. SMITH
-------------------------
Weston L. Smith
Executive Vice President and
Chief Financial Officer
Page 21