Exhibit 99
[GRAPHIC OMITTED HEALTHSOUTH]
Media Contact March 29, 2006
Andy Brimmer, 205-410-2777 For Immediate Release
HEALTHSOUTH FILES 2005 FORM 10-K
Birmingham, Ala. - March 29, 2006-- HealthSouth Corporation (OTC Pink Sheets:
HLSH) today filed its Annual Report on Form 10-K, including its audited
financial statements, for the year ended December 31, 2005 with the Securities
and Exchange Commission (the "SEC"). The filing can be found on the SEC's
website at www.sec.gov.
Net loss for the year ended December 31, 2005 was $446.0 million, which includes
a previously disclosed $215 million non-cash charge relating to a global,
preliminary agreement in principle to settle litigation and other restructuring
costs, on net revenues of $3.2 billion. Consolidated Adjusted EBITDA was $629.1
million in 2005.
"We're pleased that our consolidated adjusted EBITDA was consistent with our
expectations, which underscores the fundamental strength of HealthSouth's
business model and positioning in our core segments," said HealthSouth President
and Chief Executive Officer Jay Grinney. "The company's underlying cash flow
continues to be strong. While cash flow provided by operations declined from
$391.6 million in 2004 to $1.6 million in 2005, the significant decline is
related primarily to government settlement payments and cash used in
discontinued operations."
HealthSouth Chief Financial Officer John Workman said, "HealthSouth's multi-year
process of reconstructing its historical accounting records is now complete. We
have also made significant improvements in effectively remediating a number of
previously reported internal control weaknesses. Filing our 2005 Form 10-K
within the timeframe prescribed by the SEC is another significant step in
HealthSouth's progress and we want to thank the many people who have tirelessly
dedicated their time and efforts in the preparation and filing of this important
document."
Internal Controls
HealthSouth notes that the 2005 Form 10-K includes an unqualified opinion from
PricewaterhouseCoopers LLP, the company's independent auditor, as to the fair
presentation of the financial statements included in the Form 10-K. The company
further notes that the 2005 Form 10-K contains an unqualified opinion with
respect to the company's assessment of its internal control over financial
reporting but contains an adverse opinion with respect to the effectiveness of
the company's internal control over financial reporting, which is consistent
with the company's assessment.
Since December 31, 2004, the company has significantly reduced the number of
material weaknesses. Improvements in internal controls include improved
company-wide policies and procedures over the financial close and reporting
process, implementation of an anti-fraud program, substantial improvements to
the corporate governance process and updated and enhanced procedures with
respect to the review, supervision, and monitoring of accounting operations at
the facility level.
Net Loss
HealthSouth's 2005 net loss was $446.0 million as compared with a loss of $174.5
million in 2004. The increased loss principally resulted from the following:
o the previously disclosed $215 million non-cash charge relating to a
global, preliminary agreement in principle with the lead plaintiffs in
the federal securities class actions and the derivative actions, as
well as with insurance carriers, to settle litigation filed against
the company, certain former directors and officers, and certain other
parties;
o a decrease in operating revenue as a result of declining volumes in
each of the company's operating segments, particularly declines in its
Inpatient Division due to the continuing negative effects of the 75%
Rule and changes in the prospective payment system for inpatient
rehabilitation facilities as well as the classification of two
previously consolidated inpatient facilities as managed facilities as
described below;
o The company has classified two Massachusetts inpatient
facilities, which were previously consolidated, as managed
facilities as a result of a change in ownership of the facilities
due to the termination of the lease by the landlord.
Consequently, our net operating revenues and operating earnings
were negatively impacted by approximately $106.3 million and $3.6
million, respectively, in 2005.
o higher other operating expenses, primarily related to increased
professional fees associated with projects related to the company's
compliance with Section 404 of the Sarbanes-Oxley Act of 2002,
strategic consulting and other similar services from accounting and
consulting firms;
o increased interest expense, due primarily to amortization of consent
fees and bond issue costs associated with the company's 2004 consent
solicitation and 2005 refinancing transactions; and
o an increase in the provision for income taxes despite a higher loss.
The above negative effects were partially offset by a $37.9 million recovery of
bad debt in 2005 associated with the Meadowbrook transaction and the company's
effective management of labor-related costs during periods of declining volume.
Consolidated Adjusted EBITDA
HealthSouth's Consolidated Adjusted EBITDA, which the company uses to assess its
operating performance, was $629.1 million in 2005 versus $698.8 million for
2004, representing a decrease of $69.7 million or 9.9%. Certain previously
reported financial results have been reclassified to conform to the current year
presentation, which reclassifications primarily relate to facilities the company
closed or sold in 2005 that are now classified as discontinued operations. The
facilities that were classified as discontinued operations in 2005 had a
positive impact of approximately $56 million on 2004 Consolidated Adjusted
EBITDA reported in the company's 2004 annual report. The decline in Consolidated
Adjusted EBITDA in 2005 from 2004 was primarily due to declining volumes
experienced by the company's operating segments and increased operating expenses
associated with professional service fees, as discussed above.
Conference Call and Webcast
HealthSouth will hold an investor conference call at 8:30 a.m. Eastern Time on
Friday, March 31, 2006 to provide a review of its Form 10-K for the year ended
December 31, 2005.
The conference call may be accessed by dialing 800-369-1733 and entering pass
code 9314005. International callers should dial 517-319-9288 and enter the same
pass code. The conference call will also be webcast live and will be available
at www.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 March 31 to April 14,
2006. To access the replay, please dial 866-463-4967. International callers
should dial 203-369-1403. The webcast will also be archived for replay purposes
for two weeks after the live broadcast on www.healthsouth.com.
About Consolidated Adjusted EBITDA
HealthSouth continues to believe that an understanding of Consolidated Adjusted
EBITDA is an important measure of operating performance, leverage capacity, its
ability to service its debt, and its ability to make capital expenditures for
its stakeholders. The company believes it is meaningful because it provides
investors with a measure used by its internal decision makers for evaluating its
business. HealthSouth's internal decision makers believe Consolidated Adjusted
EBITDA is a meaningful measure, because it represents a transparent view of its
recurring operating performance and allows the company's management to readily
view operating trends, perform analytical comparisons and perform benchmarking
between segments. Additionally, HealthSouth's management believes the inclusion
of professional fees associated with litigation, financial restructuring,
government investigations, forensic accounting, creditor advisors, accounting
reconstruction, audit and tax work associated with the reconstruction process,
the implementation of Section 404 of the Sarbanes-Oxley Act of 2002, and
non-ordinary course charges incurred after March 19, 2003 and related to its
overall corporate restructuring distort, within EBITDA, their ability to
efficiently assess and view the core operating trends on a consolidated basis
and within segments. Additionally, HealthSouth uses Consolidated Adjusted EBITDA
as a significant criterion in its determination of performance-based cash
bonuses and stock awards. The company reconciles Consolidated Adjusted EBITDA to
loss from continuing operations, which reconciliation is set forth below.
HealthSouth also uses Consolidated Adjusted EBITDA on a consolidated basis as a
liquidity measure. The company believes this financial measure on a consolidated
basis is important in analyzing its liquidity because it is also a component of
certain material covenants contained within the documents governing its
long-term indebtedness, as discussed in more detail in the 2005 Form 10-K. These
covenants are material terms of these agreements because they govern several of
its credit agreements, which in turn represent a substantial portion of its
capitalization. Non-compliance with these financial covenants under its credit
facilities - its interest coverage ratio and its leverage ratio - could result
in the lenders requiring us to immediately repay all amounts borrowed. In
addition, if the company cannot satisfy these financial covenants in the
indenture governing the credit agreements, it cannot engage in certain
activities, such as incurring additional indebtedness, making certain payments,
and acquiring and disposing of assets. Consequently, Consolidated Adjusted
EBITDA is critical to the company's assessment of its liquidity.
In general terms, the definition of Consolidated Adjusted EBITDA, per the
documents governing the company's long-term indebtedness, allow the company to
add back to Consolidated Adjusted EBITDA charges classified as "Restructuring
Charges." Costs which the company classifies as "Restructuring Charges" include
professional fees associated with certain litigation, financial restructuring,
government investigations, forensic accounting, creditor advisors, accounting
reconstruction, audit and tax work associated with the reconstruction process,
compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and non-ordinary
course charges incurred after March 19, 2003 related to the company's overall
corporate restructuring.
Consolidated Adjusted EBITDA is not a measure of financial performance under
generally accepted accounting principles in the United States of America, and
the items excluded from Consolidated Adjusted EBITDA are significant components
in understanding and assessing financial performance. Therefore, Consolidated
Adjusted EBITDA should not be considered a substitute for net loss from
continuing operations or cash flows from operating, investing, or financing
activities. Because Consolidated Adjusted EBITDA is not a measurement determined
in accordance with generally accepted accounting principles in the United States
of America and is thus susceptible to varying calculations, Consolidated
Adjusted EBITDA, as presented, may not be comparable to other similarly titled
measures of other companies. Revenue and expenses are measured in accordance
with the policies and procedures described in the 2005 Form 10-K.
From 2004 and 2005, the company's Consolidated Adjusted EBITDA was as follows:
Reconciliation of Loss from Continuing Operations to
Consolidated Adjusted EBITDA
For the year ended
December 31,
----------------------------
2005 2004
------------ -----------
(In Thousands)
Loss from continuing operations $ (384,585) $ (54,128)
Provision for income tax expense (benefit) 39,792 11,914
Depreciation and amortization 167,112 176,959
Loss (gain) on disposal of assets 14,776 9,539
Impairment charges 45,203 37,290
Loss (gain) on early extinguishment of debt 33 (45)
Interest expense and amortization of debt discounts and fees 338,701 302,635
Interest income (17,141) (13,090)
Gain on sale of marketable securities (8) -
------------ -----------
Consolidated Adjusted EBITDA before government and class action 203,883 471,074
settlements expense, professional fees - reconstruction and
restatement, and other restructuring charges
Government, class action, and related settlements expense 215,000 -
Professional fees - reconstruction and restatement 169,804 206,244
Sarbanes-Oxley related costs 32,204 17,534
Restructuring activities under FASB Statement No. 146 8,190 3,973
------------ -----------
Consolidated Adjusted EBITDA $ 629,081 $ 698,825
============ ===========
Reconciliation of Consolidated Adjusted EBITDA to Net Cash Provided
by Operating Activities
For the year ended December
31,
-----------------------------
2005 2004
------------ ------------
(In Thousands)
Consolidated Adjusted EBITDA $ 629,081 $ 698,825
Professional fees - reconstruction and restatement (169,804) (206,244)
Sarbanes-Oxley related costs (32,204) (17,534)
Interest expense and amortization of debt discounts and fees (338,701) (302,635)
Interest income 17,141 13,090
Provision for doubtful accounts 98,417 113,783
Amortization of debt issue costs, debt discounts, and fees 39,023 21,838
Amortization of restricted stock 1,998 614
Accretion of debt securities (410) -
(Gain) loss on sale of investments, excluding marketable securities (221) (3,601)
Equity in net income of nonconsolidated affiliates (29,432) (9,949)
Distributions from nonconsolidated affiliates 22,457 17,029
Minority interest in earnings of consolidated affiliates 96,728 94,389
Stock-based compensation - (460)
Current portion of income tax provision (22,295) (17,253)
Restructuring charges under FASB Statement No. 146 (8,190) (3,973)
Other operating cash used in discontinued operations (47,823) (33,473)
Cash payments related to government, class action, and related settlements (165,434) (6,997)
Change in assets and liabilities, net of acquisitions (88,770) 34,147
------------ ------------
Net Cash Provided by Operating Activities $ 1,561 $ 391,596
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About HealthSouth
HealthSouth is one of the nation's largest providers of outpatient surgery,
diagnostic imaging and rehabilitative healthcare services, operating facilities
nationwide. HealthSouth can be found on the Web at www.healthsouth.com.
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. 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 the investigation by the Department
of Justice into HealthSouth's financial reporting and related activity calling
into question the accuracy of the company's previously filed financial
statements; the consummation of the proposed settlement of pending litigation
relating to these matters; 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; HealthSouth's ability to
successfully remediate its internal control weaknesses; changes, delays in 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; general
conditions in the economy and capital markets; and other factors which may be
identified from time to time in the company's SEC filings and other public
announcements, including HealthSouth's Form 10-K for the year ended December 31,
2005.
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