ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
63-0860407
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(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
|
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3660 Grandview Parkway, Suite 200
Birmingham, Alabama
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35243
|
(Address of Principal Executive Offices)
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(Zip Code)
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(205) 967-7116
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(Registrant’s telephone number)
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Page
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
|
|
|
|
|
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||
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|
|
•
|
each of the factors discussed in Item 1A,
Risk Factors
, of our Annual Report on Form 10-K for the year ended
December 31, 2014
, as well as uncertainties and factors discussed in Part II, Item 1A,
Risk Factors
, and elsewhere in this Form 10-Q, in our other filings from time to time with the SEC, or in materials incorporated therein by reference;
|
•
|
changes in the rules and regulations of the healthcare industry at either or both of the federal and state levels, including those contemplated now and in the future as part of national healthcare reform and deficit reduction such as the reinstatement of the “75% Rule,” Medicare payment bundling initiatives or the introduction of site neutral payments with skilled nursing facilities for certain conditions, and related increases in the costs of complying with such changes;
|
•
|
reductions or delays in, or suspension of, reimbursement for our services by governmental or private payors, including our ability to obtain and retain favorable arrangements with third-party payors and our exposure to the effects of Medicare claims audits for services previously provided;
|
•
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increased costs of regulatory compliance and compliance monitoring in the healthcare industry, including the costs of investigating and defending asserted claims, whether meritorious or not;
|
•
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our ability to control costs, particularly labor and employee benefit costs, including group medical expenses;
|
•
|
impacts resulting from coverage determinations made by Medicare administrative contractors regarding our Medicare reimbursement claims and delays in our recovery of improperly denied claims through the administrative appeals process on a timely basis;
|
•
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our ability to adapt to changes in the healthcare delivery system, including involvement in coordinated care initiatives or programs that may arise with our referral sources;
|
•
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our ability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages and the impact on our labor expenses from potential union activity and staffing recruitment and retention;
|
•
|
competitive pressures in the healthcare industry and our response to those pressures;
|
•
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our ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with our growth strategy, including realization of anticipated revenues, cost savings, and productivity improvements arising from the related operations;
|
•
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any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings, including the ongoing investigations initiated by the U.S. Department of Health and Human Services, Office of the Inspector General;
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•
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increased costs of defending and insuring against alleged professional liability and other claims and the ability to predict the costs related to such claims;
|
•
|
potential incidents affecting the proper operation, availability, or security of our information systems;
|
•
|
the price of our common stock as it affects our willingness and ability to repurchase shares and the financial and accounting effects of any repurchases;
|
•
|
our ability and willingness to continue to declare and pay dividends on our common stock;
|
•
|
our ability to successfully integrate Encompass Home Health and Hospice and the inpatient rehabilitation hospitals acquired from Reliant Hospital Partners, LLC and to close on the acquisition of, and integrate, the home health agency operations of CareSouth Health System, Inc., including the realization of anticipated benefits from those acquisitions and avoidance of unanticipated difficulties, costs, or liabilities that could arise from the acquisitions or integrations;
|
•
|
our ability to attract and retain key management personnel, including as a part of executive management succession planning; and
|
•
|
general conditions in the economy and capital markets, including any instability or uncertainty related to a governmental impasse over approval of the United States federal budget, an increase to the debt ceiling, or an international sovereign debt crisis.
|
Item 1.
|
Financial Statements (Unaudited)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In Millions)
|
||||||||||||||
Net operating revenues
|
$
|
778.6
|
|
|
$
|
596.9
|
|
|
$
|
2,283.6
|
|
|
$
|
1,792.5
|
|
Less: Provision for doubtful accounts
|
(10.7
|
)
|
|
(8.2
|
)
|
|
(33.2
|
)
|
|
(25.0
|
)
|
||||
Net operating revenues less provision for doubtful accounts
|
767.9
|
|
|
588.7
|
|
|
2,250.4
|
|
|
1,767.5
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||
Salaries and benefits
|
417.1
|
|
|
290.0
|
|
|
1,204.0
|
|
|
861.4
|
|
||||
Other operating expenses
|
106.7
|
|
|
89.4
|
|
|
314.1
|
|
|
260.2
|
|
||||
Occupancy costs
|
12.5
|
|
|
10.3
|
|
|
37.1
|
|
|
31.1
|
|
||||
Supplies
|
31.0
|
|
|
26.6
|
|
|
94.1
|
|
|
82.0
|
|
||||
General and administrative expenses
|
30.6
|
|
|
27.5
|
|
|
97.3
|
|
|
88.4
|
|
||||
Depreciation and amortization
|
33.7
|
|
|
27.4
|
|
|
98.3
|
|
|
80.2
|
|
||||
Government, class action, and related settlements
|
—
|
|
|
—
|
|
|
8.0
|
|
|
(0.8
|
)
|
||||
Professional fees—accounting, tax, and legal
|
0.4
|
|
|
4.0
|
|
|
2.7
|
|
|
7.6
|
|
||||
Total operating expenses
|
632.0
|
|
|
475.2
|
|
|
1,855.6
|
|
|
1,410.1
|
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
20.0
|
|
|
—
|
|
||||
Interest expense and amortization of debt discounts and fees
|
35.6
|
|
|
27.8
|
|
|
98.3
|
|
|
83.5
|
|
||||
Other income
|
(0.7
|
)
|
|
(0.2
|
)
|
|
(4.2
|
)
|
|
(30.1
|
)
|
||||
Equity in net income of nonconsolidated affiliates
|
(2.4
|
)
|
|
(1.9
|
)
|
|
(6.3
|
)
|
|
(8.8
|
)
|
||||
Income from continuing operations before income tax expense
|
103.4
|
|
|
87.8
|
|
|
287.0
|
|
|
312.8
|
|
||||
Provision for income tax expense
|
35.9
|
|
|
22.1
|
|
|
98.4
|
|
|
91.4
|
|
||||
Income from continuing operations
|
67.5
|
|
|
65.7
|
|
|
188.6
|
|
|
221.4
|
|
||||
Income (loss) from discontinued operations, net of tax
|
0.3
|
|
|
(0.9
|
)
|
|
(1.6
|
)
|
|
2.8
|
|
||||
Net income
|
67.8
|
|
|
64.8
|
|
|
187.0
|
|
|
224.2
|
|
||||
Less: Net income attributable to noncontrolling interests
|
(17.1
|
)
|
|
(14.7
|
)
|
|
(50.9
|
)
|
|
(44.3
|
)
|
||||
Net income attributable to HealthSouth
|
50.7
|
|
|
50.1
|
|
|
136.1
|
|
|
179.9
|
|
||||
Less: Convertible perpetual preferred stock dividends
|
—
|
|
|
(1.6
|
)
|
|
(1.6
|
)
|
|
(4.7
|
)
|
||||
Net income attributable to HealthSouth common shareholders
|
$
|
50.7
|
|
|
$
|
48.5
|
|
|
$
|
134.5
|
|
|
$
|
175.2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In Millions, Except Per Share Data)
|
||||||||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
90.6
|
|
|
86.5
|
|
|
89.1
|
|
|
86.8
|
|
||||
Diluted
|
101.5
|
|
|
100.5
|
|
|
101.4
|
|
|
100.7
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share attributable to HealthSouth common shareholders:
|
|
|
|
|
|
|
|
|
|||||||
Continuing operations
|
$
|
0.56
|
|
|
$
|
0.56
|
|
|
$
|
1.52
|
|
|
$
|
1.96
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
0.03
|
|
||||
Net income
|
$
|
0.56
|
|
|
$
|
0.55
|
|
|
$
|
1.50
|
|
|
$
|
1.99
|
|
Diluted earnings per share attributable to HealthSouth common shareholders:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.52
|
|
|
$
|
0.53
|
|
|
$
|
1.43
|
|
|
$
|
1.82
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
0.03
|
|
||||
Net income
|
$
|
0.52
|
|
|
$
|
0.52
|
|
|
$
|
1.41
|
|
|
$
|
1.85
|
|
|
|
|
|
|
|
|
|
||||||||
Cash dividends per common share
|
$
|
0.23
|
|
|
$
|
0.21
|
|
|
$
|
0.65
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts attributable to HealthSouth common shareholders:
|
|
|
|
|
|
|
|
|
|||||||
Income from continuing operations
|
$
|
50.4
|
|
|
$
|
51.0
|
|
|
$
|
137.7
|
|
|
$
|
177.1
|
|
Income (loss) from discontinued operations, net of tax
|
0.3
|
|
|
(0.9
|
)
|
|
(1.6
|
)
|
|
2.8
|
|
||||
Net income attributable to HealthSouth
|
$
|
50.7
|
|
|
$
|
50.1
|
|
|
$
|
136.1
|
|
|
$
|
179.9
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In Millions)
|
||||||||||||||
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
67.8
|
|
|
$
|
64.8
|
|
|
$
|
187.0
|
|
|
$
|
224.2
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
||||||
Net change in unrealized (loss) gain on available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized net holding (loss) gain arising during the period
|
(0.7
|
)
|
|
(0.2
|
)
|
|
0.2
|
|
|
0.5
|
|
||||
Reclassifications to net income
|
(0.6
|
)
|
|
—
|
|
|
(1.2
|
)
|
|
(0.5
|
)
|
||||
Other comprehensive loss before income taxes
|
(1.3
|
)
|
|
(0.2
|
)
|
|
(1.0
|
)
|
|
—
|
|
||||
Provision for income tax benefit related to other comprehensive loss items
|
0.5
|
|
|
0.1
|
|
|
0.4
|
|
|
—
|
|
||||
Other comprehensive loss, net of tax
|
(0.8
|
)
|
|
(0.1
|
)
|
|
(0.6
|
)
|
|
—
|
|
||||
Comprehensive income
|
67.0
|
|
|
64.7
|
|
|
186.4
|
|
|
224.2
|
|
||||
Comprehensive income attributable to noncontrolling interests
|
(17.1
|
)
|
|
(14.7
|
)
|
|
(50.9
|
)
|
|
(44.3
|
)
|
||||
Comprehensive income attributable to HealthSouth
|
$
|
49.9
|
|
|
$
|
50.0
|
|
|
$
|
135.5
|
|
|
$
|
179.9
|
|
|
September 30,
2015 |
|
December 31,
2014 |
||||
|
(In Millions)
|
||||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
801.6
|
|
|
$
|
66.7
|
|
Accounts receivable, net of allowance for doubtful accounts of $34.8 in 2015; $22.2 in 2014
|
350.9
|
|
|
323.2
|
|
||
Deferred income tax assets
|
185.9
|
|
|
188.4
|
|
||
Other current assets
|
124.6
|
|
|
108.3
|
|
||
Total current assets
|
1,463.0
|
|
|
686.6
|
|
||
Property and equipment, net
|
1,079.1
|
|
|
1,019.7
|
|
||
Goodwill
|
1,105.0
|
|
|
1,084.0
|
|
||
Intangible assets, net
|
324.7
|
|
|
306.1
|
|
||
Deferred income tax assets
|
55.4
|
|
|
129.4
|
|
||
Other long-term assets
|
222.1
|
|
|
183.0
|
|
||
Total assets
|
$
|
4,249.3
|
|
|
$
|
3,408.8
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
23.6
|
|
|
$
|
20.8
|
|
Accounts payable
|
65.6
|
|
|
53.4
|
|
||
Accrued expenses and other current liabilities
|
314.4
|
|
|
290.1
|
|
||
Total current liabilities
|
403.6
|
|
|
364.3
|
|
||
Long-term debt, net of current portion
|
2,800.7
|
|
|
2,110.8
|
|
||
Other long-term liabilities
|
140.7
|
|
|
136.3
|
|
||
|
3,345.0
|
|
|
2,611.4
|
|
||
Commitments and contingencies
|
|
|
|
||||
Convertible perpetual preferred stock
|
—
|
|
|
93.2
|
|
||
Redeemable noncontrolling interests
|
114.1
|
|
|
84.7
|
|
||
Shareholders’ equity:
|
|
|
|
|
|
||
HealthSouth shareholders’ equity
|
630.4
|
|
|
473.2
|
|
||
Noncontrolling interests
|
159.8
|
|
|
146.3
|
|
||
Total shareholders’ equity
|
790.2
|
|
|
619.5
|
|
||
Total liabilities and shareholders’ equity
|
$
|
4,249.3
|
|
|
$
|
3,408.8
|
|
|
Nine Months Ended September 30, 2015
|
|||||||||||||||||||||||||||||
|
(In Millions)
|
|||||||||||||||||||||||||||||
|
HealthSouth Common Shareholders
|
|
|
|
|
|||||||||||||||||||||||||
|
Number of Common
Shares Outstanding
|
|
Common Stock
|
|
Capital in Excess of
Par Value
|
|
Accumulated
Deficit
|
|
Accumulated Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Noncontrolling
Interests
|
|
Total
|
|||||||||||||||
Balance at beginning of period
|
87.8
|
|
|
$
|
1.0
|
|
|
$
|
2,810.5
|
|
|
$
|
(1,879.1
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
(458.7
|
)
|
|
$
|
146.3
|
|
|
$
|
619.5
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
136.1
|
|
|
—
|
|
|
—
|
|
|
40.8
|
|
|
176.9
|
|
|||||||
Conversion of preferred stock
|
3.3
|
|
|
—
|
|
|
93.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
93.2
|
|
|||||||
Receipt of treasury stock
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17.2
|
)
|
|
—
|
|
|
(17.2
|
)
|
|||||||
Dividends declared on common stock
|
—
|
|
|
—
|
|
|
(59.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59.1
|
)
|
|||||||
Dividends declared on convertible perpetual preferred stock
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
19.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19.0
|
|
|||||||
Stock options exercised
|
0.2
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|
—
|
|
|
2.2
|
|
|||||||
Distributions declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36.7
|
)
|
|
(36.7
|
)
|
|||||||
Capital contributions from consolidated affiliates
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.5
|
|
|
9.5
|
|
|||||||
Fair value adjustments to redeemable noncontrolling interests, net of tax
|
—
|
|
|
—
|
|
|
(14.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.9
|
)
|
|||||||
Other
|
0.7
|
|
|
0.1
|
|
|
1.6
|
|
|
—
|
|
|
(0.6
|
)
|
|
(1.6
|
)
|
|
(0.1
|
)
|
|
(0.6
|
)
|
|||||||
Balance at end of period
|
91.4
|
|
|
$
|
1.1
|
|
|
$
|
2,855.3
|
|
|
$
|
(1,743.0
|
)
|
|
$
|
(1.1
|
)
|
|
$
|
(481.9
|
)
|
|
$
|
159.8
|
|
|
$
|
790.2
|
|
|
Nine Months Ended September 30, 2014
|
|||||||||||||||||||||||||||||
|
(In Millions)
|
|||||||||||||||||||||||||||||
|
HealthSouth Common Shareholders
|
|
|
|
|
|||||||||||||||||||||||||
|
Number of Common Shares Outstanding
|
|
Common Stock
|
|
Capital in Excess of Par Value
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Treasury Stock
|
|
Noncontrolling Interests
|
|
Total
|
|||||||||||||||
Balance at beginning of period
|
88.0
|
|
|
$
|
1.0
|
|
|
$
|
2,849.4
|
|
|
$
|
(2,101.1
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
(404.6
|
)
|
|
$
|
124.1
|
|
|
$
|
468.7
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
179.9
|
|
|
—
|
|
|
—
|
|
|
38.9
|
|
|
218.8
|
|
|||||||
Receipt of treasury stock
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.7
|
)
|
|
—
|
|
|
(9.7
|
)
|
|||||||
Dividends declared on common stock
|
—
|
|
|
—
|
|
|
(50.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50.6
|
)
|
|||||||
Dividends declared on convertible perpetual preferred stock
|
—
|
|
|
—
|
|
|
(4.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.7
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
19.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19.3
|
|
|||||||
Stock options exercised
|
0.3
|
|
|
—
|
|
|
7.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.4
|
|
|||||||
Stock warrants exercised
|
0.2
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.3
|
|
|||||||
Distributions declared
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33.7
|
)
|
|
(33.7
|
)
|
|||||||
Repurchases of common stock in open market
|
(1.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43.1
|
)
|
|
—
|
|
|
(43.1
|
)
|
|||||||
Consolidation of Fairlawn Rehabilitation Hospital
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14.0
|
|
|
14.0
|
|
|||||||
Other
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|
(0.1
|
)
|
|
0.1
|
|
|||||||
Balance at end of period
|
87.8
|
|
|
$
|
1.0
|
|
|
$
|
2,828.0
|
|
|
$
|
(1,921.2
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
(458.1
|
)
|
|
$
|
143.2
|
|
|
$
|
592.8
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In Millions)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
187.0
|
|
|
$
|
224.2
|
|
Loss (income) from discontinued operations
|
1.6
|
|
|
(2.8
|
)
|
||
Adjustments to reconcile net income to net cash provided by operating activities—
|
|
|
|
|
|
||
Provision for doubtful accounts
|
33.2
|
|
|
25.0
|
|
||
Provision for government, class action, and related settlements
|
8.0
|
|
|
(0.8
|
)
|
||
Depreciation and amortization
|
98.3
|
|
|
80.2
|
|
||
Loss on early extinguishment of debt
|
20.0
|
|
|
—
|
|
||
Equity in net income of nonconsolidated affiliates
|
(6.3
|
)
|
|
(8.8
|
)
|
||
Distributions from nonconsolidated affiliates
|
4.5
|
|
|
9.4
|
|
||
Stock-based compensation
|
21.8
|
|
|
19.3
|
|
||
Deferred tax expense
|
88.0
|
|
|
81.6
|
|
||
Gain on consolidation of Fairlawn Rehabilitation Hospital
|
—
|
|
|
(27.2
|
)
|
||
Other
|
8.2
|
|
|
13.0
|
|
||
Change in assets and liabilities—
|
|
|
|
|
|||
Accounts receivable
|
(83.7
|
)
|
|
(48.7
|
)
|
||
Other assets
|
(8.3
|
)
|
|
8.9
|
|
||
Accounts payable
|
4.4
|
|
|
3.7
|
|
||
Accrued payroll
|
(16.6
|
)
|
|
(8.6
|
)
|
||
Accrued interest payable
|
13.9
|
|
|
4.7
|
|
||
Other liabilities
|
(3.0
|
)
|
|
(3.7
|
)
|
||
Premium received on bond issuance
|
9.8
|
|
|
6.3
|
|
||
Premium paid on redemption of bonds
|
(11.8
|
)
|
|
—
|
|
||
Net cash used in operating activities of discontinued operations
|
(0.8
|
)
|
|
(1.0
|
)
|
||
Total adjustments
|
179.6
|
|
|
153.3
|
|
||
Net cash provided by operating activities
|
368.2
|
|
|
374.7
|
|
||
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In Millions)
|
||||||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(85.2
|
)
|
|
(133.9
|
)
|
||
Capitalized software costs
|
(20.7
|
)
|
|
(12.6
|
)
|
||
Acquisitions of businesses, net of cash acquired
|
(87.1
|
)
|
|
(15.9
|
)
|
||
Proceeds from sale of marketable securities
|
12.8
|
|
|
2.7
|
|
||
Purchase of restricted investments
|
(6.5
|
)
|
|
(2.5
|
)
|
||
Other
|
7.3
|
|
|
(0.1
|
)
|
||
Net cash used in investing activities
|
(179.4
|
)
|
|
(162.3
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Principal borrowings on term loan facilities
|
125.0
|
|
|
—
|
|
||
Proceeds from bond issuance
|
1,400.0
|
|
|
175.0
|
|
||
Principal payments on debt, including pre-payments
|
(546.3
|
)
|
|
(5.7
|
)
|
||
Borrowings on revolving credit facility
|
315.0
|
|
|
65.0
|
|
||
Payments on revolving credit facility
|
(615.0
|
)
|
|
(110.0
|
)
|
||
Debt amendment and issuance costs
|
(31.3
|
)
|
|
(3.1
|
)
|
||
Repurchases of common stock, including fees and expenses
|
—
|
|
|
(43.1
|
)
|
||
Dividends paid on common stock
|
(56.3
|
)
|
|
(47.4
|
)
|
||
Dividends paid on convertible perpetual preferred stock
|
(3.1
|
)
|
|
(4.7
|
)
|
||
Distributions paid to noncontrolling interests of consolidated affiliates
|
(39.7
|
)
|
|
(39.6
|
)
|
||
Other
|
(2.2
|
)
|
|
9.0
|
|
||
Net cash provided by (used in) financing activities
|
546.1
|
|
|
(4.6
|
)
|
||
Increase in cash and cash equivalents
|
734.9
|
|
|
207.8
|
|
||
Cash and cash equivalents at beginning of period
|
66.7
|
|
|
64.5
|
|
||
Cash and cash equivalents at end of period
|
$
|
801.6
|
|
|
$
|
272.3
|
|
|
|
|
|
||||
Supplemental schedule of noncash financing activity:
|
|
|
|
||||
Conversion of preferred stock to common stock
|
$
|
93.2
|
|
|
$
|
—
|
|
1.
|
Basis of Presentation
|
|
September 30, 2015
|
|
December 31, 2014
|
||
Medicare
|
71.5
|
%
|
|
72.2
|
%
|
Medicaid
|
2.8
|
%
|
|
1.8
|
%
|
Workers' compensation
|
1.7
|
%
|
|
1.9
|
%
|
Managed care and other discount plans, including Medicare Advantage
|
19.0
|
%
|
|
18.5
|
%
|
Other third-party payors
|
3.9
|
%
|
|
3.8
|
%
|
Patients
|
1.1
|
%
|
|
1.8
|
%
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
2.
|
Business Combinations
|
Total current assets
|
$
|
10.1
|
|
Property and equipment, net
|
42.7
|
|
|
Identifiable intangible assets:
|
|
|
|
Noncompete agreements (useful lives of 2 to 3 years)
|
0.1
|
|
|
Trade names (useful life of 20 years)
|
0.8
|
|
|
Certificates of need (useful lives of 20 years)
|
8.8
|
|
|
Licenses (useful life of 20 years)
|
0.2
|
|
|
Goodwill
|
0.7
|
|
|
Total assets acquired
|
63.4
|
|
|
Total liabilities assumed
|
(2.7
|
)
|
|
Net assets acquired
|
$
|
60.7
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Fair value of assets acquired
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62.8
|
|
|
$
|
52.0
|
|
Goodwill
|
—
|
|
|
—
|
|
|
0.7
|
|
|
34.8
|
|
||||
Fair value of liabilities assumed
|
—
|
|
|
—
|
|
|
(2.7
|
)
|
|
(21.9
|
)
|
||||
Fair value of noncontrolling interest owned by joint venture partner
|
—
|
|
|
—
|
|
|
(4.2
|
)
|
|
(14.0
|
)
|
||||
Fair value of equity interest prior to acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
(35.0
|
)
|
||||
Net cash paid for acquisitions
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
56.6
|
|
|
$
|
15.9
|
|
•
|
In March 2015, we acquired Integrity Home Health Care, Inc. (“Integrity”), a home health company with two locations in the Las Vegas, Nevada area.
|
•
|
In April 2015, we acquired Harvey Home Health Services, Inc. (“Harvey”), a home health company in Houston, Texas.
|
•
|
In May 2015, we acquired Heritage Home Health Care, LLC (“Heritage”), a home health company in Texarkana, Arkansas.
|
•
|
In June 2015, we acquired Washington County Home Health Care, Inc. and Benton County Home Health, Inc., doing business as Alliance Home Health (“Alliance”), a home health company with two locations in the Fayetteville, Arkansas area.
|
•
|
In July 2015, we acquired Southern Utah Home Health, Inc. (“Southern Utah”), a home health and hospice company with two home health locations and two hospice locations in southern Utah.
|
•
|
In July 2015, we acquired Orthopedic Rehab Specialist, LLC (“ORS”), a home health company in Ocala, Florida.
|
Property and equipment
|
$
|
0.1
|
|
Identifiable intangible assets:
|
|
|
|
Noncompete agreements (useful lives of 2 to 5 years)
|
1.3
|
|
|
Trade names (useful lives of 1 year)
|
0.5
|
|
|
Certificates of need (useful lives of 10 years)
|
4.9
|
|
|
Licenses (useful lives of 10 years)
|
3.6
|
|
|
Goodwill
|
20.3
|
|
|
Total assets acquired
|
30.7
|
|
|
Total liabilities assumed
|
(0.2
|
)
|
|
Net assets acquired
|
$
|
30.5
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Fair value of assets acquired
|
$
|
1.9
|
|
|
$
|
—
|
|
|
$
|
10.4
|
|
|
$
|
—
|
|
Goodwill
|
7.5
|
|
|
—
|
|
|
20.3
|
|
|
—
|
|
||||
Fair value of liabilities assumed
|
(0.1
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
||||
Net cash paid for acquisitions
|
$
|
9.3
|
|
|
$
|
—
|
|
|
$
|
30.5
|
|
|
$
|
—
|
|
|
Net Operating Revenues
|
|
Net Income Attributable to HealthSouth
|
||||
Acquired entities only: Actual from acquisition date to September 30, 2015*
|
$
|
40.8
|
|
|
$
|
0.6
|
|
Combined entity: Supplemental pro forma from 07/01/2015-09/30/2015
|
778.9
|
|
|
50.7
|
|
||
Combined entity: Supplemental pro forma from 07/01/2014-09/30/2014
|
621.5
|
|
|
51.2
|
|
||
Combined entity: Supplemental pro forma from 01/01/2015-09/30/2015
|
2,316.3
|
|
|
136.6
|
|
||
Combined entity: Supplemental pro forma from 01/01/2014-09/30/2014
|
1,863.9
|
|
|
181.3
|
|
*
|
Savannah - includes operating results from April 1, 2015 through September 30, 2015
|
3.
|
Investments in and Advances to Nonconsolidated Affiliates
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net operating revenues
|
$
|
9.2
|
|
|
$
|
7.8
|
|
|
$
|
26.3
|
|
|
$
|
44.1
|
|
Operating expenses
|
(4.0
|
)
|
|
(3.3
|
)
|
|
(11.7
|
)
|
|
(22.7
|
)
|
||||
Income from continuing operations, net of tax
|
5.1
|
|
|
4.2
|
|
|
13.8
|
|
|
28.2
|
|
||||
Net income
|
5.1
|
|
|
4.2
|
|
|
13.8
|
|
|
28.2
|
|
4.
|
Long-term Debt
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Credit Agreement—
|
|
|
|
||||
Advances under revolving credit facility
|
$
|
25.0
|
|
|
$
|
325.0
|
|
Term loan facilities
|
320.0
|
|
|
450.0
|
|
||
Bonds payable—
|
|
|
|
||||
8.125% Senior Notes due 2020
|
—
|
|
|
287.0
|
|
||
7.75% Senior Notes due 2022
|
227.0
|
|
|
227.1
|
|
||
5.125% Senior Notes due 2023
|
300.0
|
|
|
—
|
|
||
5.75% Senior Notes due 2024
|
1,215.2
|
|
|
456.2
|
|
||
5.75% Senior Notes due 2025
|
350.0
|
|
|
—
|
|
||
2.0% Convertible Senior Subordinated Notes due 2043
|
264.7
|
|
|
258.0
|
|
||
Other notes payable
|
40.3
|
|
|
41.6
|
|
||
Capital lease obligations
|
82.1
|
|
|
86.7
|
|
||
|
2,824.3
|
|
|
2,131.6
|
|
||
Less: Current portion
|
(23.6
|
)
|
|
(20.8
|
)
|
||
Long-term debt, net of current portion
|
$
|
2,800.7
|
|
|
$
|
2,110.8
|
|
|
Face Amount
|
|
Net Amount
|
||||
October 1 through December 31, 2015
|
$
|
3.4
|
|
|
$
|
3.4
|
|
2016
|
27.3
|
|
|
27.3
|
|
||
2017
|
25.6
|
|
|
25.6
|
|
||
2018
|
25.0
|
|
|
25.0
|
|
||
2019
|
27.8
|
|
|
27.8
|
|
||
2020
|
603.0
|
|
|
547.7
|
|
||
Thereafter
|
2,151.4
|
|
|
2,167.5
|
|
||
Total
|
$
|
2,863.5
|
|
|
$
|
2,824.3
|
|
Period
|
|
Redemption
Price*
|
|
2018
|
|
103.844
|
%
|
2019
|
|
102.563
|
%
|
2020
|
|
101.281
|
%
|
2021 and thereafter
|
|
100.000
|
%
|
Period
|
|
Redemption
Price*
|
|
2020
|
|
102.875
|
%
|
2021
|
|
101.917
|
%
|
2022
|
|
100.958
|
%
|
2023 and thereafter
|
|
100.000
|
%
|
5.
|
Redeemable Noncontrolling Interests
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
Balance at beginning of period
|
$
|
84.7
|
|
|
$
|
13.5
|
|
Net income attributable to noncontrolling interests
|
10.1
|
|
|
5.4
|
|
||
Distributions declared
|
(5.6
|
)
|
|
(6.7
|
)
|
||
Change in fair value
|
24.9
|
|
|
—
|
|
||
Balance at end of period
|
$
|
114.1
|
|
|
$
|
12.2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net income attributable to nonredeemable noncontrolling interests
|
$
|
13.4
|
|
|
$
|
12.9
|
|
|
$
|
40.8
|
|
|
$
|
38.9
|
|
Net income attributable to redeemable noncontrolling interests
|
3.7
|
|
|
1.8
|
|
|
10.1
|
|
|
5.4
|
|
||||
Net income attributable to noncontrolling interests
|
$
|
17.1
|
|
|
$
|
14.7
|
|
|
$
|
50.9
|
|
|
$
|
44.3
|
|
6.
|
Fair Value Measurements
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||
As of September 30, 2015
|
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Valuation Technique
(1)
|
||||||||
Other current assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Current portion of restricted marketable securities
|
$
|
16.6
|
|
|
$
|
—
|
|
|
$
|
16.6
|
|
|
$
|
—
|
|
|
M
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Restricted marketable securities
|
39.4
|
|
|
—
|
|
|
39.4
|
|
|
—
|
|
|
M
|
||||
Redeemable noncontrolling interests
|
114.1
|
|
|
—
|
|
|
—
|
|
|
114.1
|
|
|
I
|
||||
As of December 31, 2014
|
|
|
|
|
|
|
|
|
|
||||||||
Other current assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Current portion of restricted marketable securities
|
$
|
4.6
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
—
|
|
|
M
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Option to purchase SCA stock
|
9.9
|
|
|
—
|
|
|
—
|
|
|
9.9
|
|
|
M
|
||||
Restricted marketable securities
|
45.9
|
|
|
—
|
|
|
45.9
|
|
|
—
|
|
|
M
|
||||
Redeemable noncontrolling interests
|
84.7
|
|
|
—
|
|
|
—
|
|
|
84.7
|
|
|
I
|
•
|
Restricted marketable securities
- The fair values of our available-for-sale restricted marketable securities are determined based on quoted market prices in active markets or quoted prices, dealer quotations, or alternative pricing sources supported by observable inputs in markets that are not considered to be active.
|
•
|
Redeemable noncontrolling interests
- The fair value of the
Redeemable noncontrolling interest
related to our home health segment (see Note 2,
Business Combinations
, to the consolidated financial statements accompanying
|
•
|
Option to purchase SCA stock
- The fair value of the option to purchase Surgical Care Affiliates (“SCA”) stock was determined using a lattice model. Inputs into the model included the historical price volatility of SCA’s common stock, the risk-free interest rate, and probability factors for the timing of when the option was expected to be exercisable.
|
|
As of September 30, 2015
|
|
As of December 31, 2014
|
||||||||||||
|
Carrying Amount
|
|
Estimated Fair Value
|
|
Carrying Amount
|
|
Estimated Fair Value
|
||||||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Advances under revolving credit facility
|
$
|
25.0
|
|
|
$
|
25.0
|
|
|
$
|
325.0
|
|
|
$
|
325.0
|
|
Term loan facilities
|
320.0
|
|
|
320.0
|
|
|
450.0
|
|
|
450.0
|
|
||||
8.125% Senior Notes due 2020
|
—
|
|
|
—
|
|
|
287.0
|
|
|
302.5
|
|
||||
7.75% Senior Notes due 2022
|
227.0
|
|
|
235.9
|
|
|
227.1
|
|
|
240.7
|
|
||||
5.125% Senior Notes due 2023
|
300.0
|
|
|
289.8
|
|
|
—
|
|
|
—
|
|
||||
5.75% Senior Notes due 2024
|
1,215.2
|
|
|
1,182.0
|
|
|
456.2
|
|
|
471.4
|
|
||||
5.75% Senior Notes due 2025
|
350.0
|
|
|
340.4
|
|
|
—
|
|
|
—
|
|
||||
2.00% Convertible Senior Subordinated Notes due 2043
|
264.7
|
|
|
362.4
|
|
|
258.0
|
|
|
358.4
|
|
||||
Other notes payable
|
40.3
|
|
|
40.3
|
|
|
41.6
|
|
|
41.6
|
|
||||
Financial commitments:
|
|
|
|
|
|
|
|
||||||||
Letters of credit
|
—
|
|
|
34.2
|
|
|
—
|
|
|
31.8
|
|
7.
|
Share-Based Payments
|
8.
|
Income Taxes
|
|
Gross Unrecognized Income Tax Benefits
|
||
Balance at December 31, 2014
|
$
|
0.9
|
|
Gross amount of increases in unrecognized tax benefits related to prior periods
|
1.5
|
|
|
Balance at September 30, 2015
|
$
|
2.4
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Basic:
|
|
|
|
|
|
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
67.5
|
|
|
$
|
65.7
|
|
|
$
|
188.6
|
|
|
$
|
221.4
|
|
Less: Net income attributable to noncontrolling interests included in continuing operations
|
(17.1
|
)
|
|
(14.7
|
)
|
|
(50.9
|
)
|
|
(44.3
|
)
|
||||
Less: Income allocated to participating securities
|
(0.3
|
)
|
|
(0.5
|
)
|
|
(0.9
|
)
|
|
(2.1
|
)
|
||||
Less: Convertible perpetual preferred stock dividends
|
—
|
|
|
(1.6
|
)
|
|
(1.6
|
)
|
|
(4.7
|
)
|
||||
Income from continuing operations attributable to HealthSouth common shareholders
|
50.1
|
|
|
48.9
|
|
|
135.2
|
|
|
170.3
|
|
||||
Income (loss) from discontinued operations, net of tax, attributable to HealthSouth common shareholders
|
0.3
|
|
|
(0.9
|
)
|
|
(1.6
|
)
|
|
2.8
|
|
||||
Net income attributable to HealthSouth common shareholders
|
$
|
50.4
|
|
|
$
|
48.0
|
|
|
$
|
133.6
|
|
|
$
|
173.1
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average common shares outstanding
|
90.6
|
|
|
86.5
|
|
|
89.1
|
|
|
86.8
|
|
||||
Basic earnings per share attributable to HealthSouth common shareholders:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.56
|
|
|
$
|
0.56
|
|
|
$
|
1.52
|
|
|
$
|
1.96
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
0.03
|
|
||||
Net income
|
$
|
0.56
|
|
|
$
|
0.55
|
|
|
$
|
1.50
|
|
|
$
|
1.99
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted:
|
|
|
|
|
|
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
67.5
|
|
|
$
|
65.7
|
|
|
$
|
188.6
|
|
|
$
|
221.4
|
|
Less: Net income attributable to noncontrolling interests included in continuing operations
|
(17.1
|
)
|
|
(14.7
|
)
|
|
(50.9
|
)
|
|
(44.3
|
)
|
||||
Add: Interest on convertible debt, net of tax
|
2.4
|
|
|
2.3
|
|
|
7.0
|
|
|
6.8
|
|
||||
Income from continuing operations attributable to HealthSouth common shareholders
|
52.8
|
|
|
53.3
|
|
|
144.7
|
|
|
183.9
|
|
||||
Income (loss) from discontinued operations, net of tax, attributable to HealthSouth common shareholders
|
0.3
|
|
|
(0.9
|
)
|
|
(1.6
|
)
|
|
2.8
|
|
||||
Net income attributable to HealthSouth common shareholders
|
$
|
53.1
|
|
|
$
|
52.4
|
|
|
$
|
143.1
|
|
|
$
|
186.7
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Diluted weighted average common shares outstanding
|
101.5
|
|
|
100.5
|
|
|
101.4
|
|
|
100.7
|
|
||||
Diluted earnings per share attributable to HealthSouth common shareholders:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.52
|
|
|
$
|
0.53
|
|
|
$
|
1.43
|
|
|
$
|
1.82
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
0.03
|
|
||||
Net income
|
$
|
0.52
|
|
|
$
|
0.52
|
|
|
$
|
1.41
|
|
|
$
|
1.85
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Basic weighted average common shares outstanding
|
90.6
|
|
|
86.5
|
|
|
89.1
|
|
|
86.8
|
|
Convertible perpetual preferred stock
|
—
|
|
|
3.2
|
|
|
1.3
|
|
|
3.2
|
|
Convertible senior subordinated notes
|
8.4
|
|
|
8.2
|
|
|
8.3
|
|
|
8.1
|
|
Restricted stock awards, dilutive stock options, restricted stock units, and common stock warrants
|
2.5
|
|
|
2.6
|
|
|
2.7
|
|
|
2.6
|
|
Diluted weighted average common shares outstanding
|
101.5
|
|
|
100.5
|
|
|
101.4
|
|
|
100.7
|
|
10.
|
Contingencies and Other Commitments
|
11.
|
Segment Reporting
|
•
|
Inpatient Rehabilitation
- Our national network of inpatient rehabilitation hospitals stretches across
29
states and Puerto Rico, with a concentration of hospitals in the eastern half of the United States and Texas. As of
September 30, 2015
, we operate
109
inpatient rehabilitation hospitals, including
one
hospital that operates as a joint venture which we account for using the equity method of accounting. In addition, we manage
three
inpatient rehabilitation units through management contracts. We provide specialized rehabilitative treatment on both an inpatient and outpatient basis. Our inpatient rehabilitation hospitals provide a higher level of rehabilitative care to patients who are recovering from conditions such as stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions, and amputations.
|
•
|
Home Health and Hospice
- As of
September 30, 2015
, we provide home health and hospice services in
164
locations across
18
states. Our home health services include a comprehensive range of Medicare-certified home nursing services to adult patients in need of care. These services include, among others, skilled nursing, physical, occupational, and speech therapy, medical social work, and home health aide services. We also provide specialized home care services in Texas and Kansas for pediatric patients with severe medical conditions. Our hospice services primarily include in-home services to terminally ill patients and their families to address patients’ physical needs, including pain control and symptom management, and to provide emotional and spiritual support.
|
|
Inpatient Rehabilitation
|
|
Home Health and Hospice
|
||||||||||||||||||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||||||
Net operating revenues
|
$
|
651.6
|
|
|
$
|
589.9
|
|
|
$
|
1,927.2
|
|
|
$
|
1,771.5
|
|
|
$
|
127.0
|
|
|
$
|
7.0
|
|
|
$
|
356.4
|
|
|
$
|
21.0
|
|
Less: Provision for doubtful accounts
|
(10.2
|
)
|
|
(8.1
|
)
|
|
(31.4
|
)
|
|
(24.7
|
)
|
|
(0.5
|
)
|
|
(0.1
|
)
|
|
(1.8
|
)
|
|
(0.3
|
)
|
||||||||
Net operating revenues less provision for doubtful accounts
|
641.4
|
|
|
581.8
|
|
|
1,895.8
|
|
|
1,746.8
|
|
|
126.5
|
|
|
6.9
|
|
|
354.6
|
|
|
20.7
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Inpatient rehabilitation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Salaries and benefits
|
326.8
|
|
|
285.0
|
|
|
950.8
|
|
|
846.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other operating expenses
|
95.8
|
|
|
86.1
|
|
|
284.5
|
|
|
252.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Supplies
|
28.9
|
|
|
26.5
|
|
|
88.6
|
|
|
81.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Occupancy costs
|
10.6
|
|
|
10.2
|
|
|
31.7
|
|
|
30.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Home health and hospice:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cost of services sold (excluding depreciation and amortization)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61.7
|
|
|
4.1
|
|
|
171.8
|
|
|
12.5
|
|
||||||||
Support and overhead costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42.6
|
|
|
1.7
|
|
|
121.7
|
|
|
5.1
|
|
||||||||
|
462.1
|
|
|
407.8
|
|
|
1,355.6
|
|
|
1,211.4
|
|
|
104.3
|
|
|
5.8
|
|
|
293.5
|
|
|
17.6
|
|
||||||||
Other income
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(1.0
|
)
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Equity in net income of nonconsolidated affiliates
|
(2.4
|
)
|
|
(1.9
|
)
|
|
(6.3
|
)
|
|
(8.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Noncontrolling interests
|
15.6
|
|
|
14.6
|
|
|
46.4
|
|
|
44.0
|
|
|
1.5
|
|
|
0.1
|
|
|
4.5
|
|
|
0.3
|
|
||||||||
Segment Adjusted EBITDA
|
$
|
166.2
|
|
|
$
|
161.5
|
|
|
$
|
501.1
|
|
|
$
|
503.1
|
|
|
$
|
20.7
|
|
|
$
|
1.0
|
|
|
$
|
56.6
|
|
|
$
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Capital expenditures
|
$
|
43.8
|
|
|
$
|
46.1
|
|
|
$
|
103.2
|
|
|
$
|
146.6
|
|
|
$
|
0.5
|
|
|
$
|
—
|
|
|
$
|
2.7
|
|
|
$
|
—
|
|
|
Inpatient Rehabilitation
|
|
Home Health and Hospice
|
|
HealthSouth Consolidated
|
||||||
As of September 30, 2015
|
|
|
|
|
|
||||||
Total assets
|
$
|
3,419.4
|
|
|
$
|
894.2
|
|
|
$
|
4,249.3
|
|
Investments in and advances to nonconsolidated affiliates
|
11.1
|
|
|
—
|
|
|
11.1
|
|
|||
As of December 31, 2014
|
|
|
|
|
|
||||||
Total assets
|
$
|
2,596.8
|
|
|
$
|
876.3
|
|
|
$
|
3,408.8
|
|
Investments in and advances to nonconsolidated affiliates
|
9.4
|
|
|
—
|
|
|
9.4
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Total segment Adjusted EBITDA
|
$
|
186.9
|
|
|
$
|
162.5
|
|
|
$
|
557.7
|
|
|
$
|
505.9
|
|
General and administrative expenses
|
(30.6
|
)
|
|
(27.5
|
)
|
|
(97.3
|
)
|
|
(88.4
|
)
|
||||
Depreciation and amortization
|
(33.7
|
)
|
|
(27.4
|
)
|
|
(98.3
|
)
|
|
(80.2
|
)
|
||||
Loss on disposal or impairment of assets
|
(0.9
|
)
|
|
(2.7
|
)
|
|
(0.2
|
)
|
|
(5.7
|
)
|
||||
Government, class action, and related settlements
|
—
|
|
|
—
|
|
|
(8.0
|
)
|
|
0.8
|
|
||||
Professional fees - accounting, tax, and legal
|
(0.4
|
)
|
|
(4.0
|
)
|
|
(2.7
|
)
|
|
(7.6
|
)
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
(20.0
|
)
|
|
—
|
|
||||
Interest expense and amortization of debt discounts and fees
|
(35.6
|
)
|
|
(27.8
|
)
|
|
(98.3
|
)
|
|
(83.5
|
)
|
||||
Gain on consolidation of former equity method hospital
|
—
|
|
|
—
|
|
|
—
|
|
|
27.2
|
|
||||
Net income attributable to noncontrolling interests
|
17.1
|
|
|
14.7
|
|
|
50.9
|
|
|
44.3
|
|
||||
Gain related to SCA equity interest
|
0.6
|
|
|
—
|
|
|
3.2
|
|
|
—
|
|
||||
Income from continuing operations before income tax expense
|
$
|
103.4
|
|
|
$
|
87.8
|
|
|
$
|
287.0
|
|
|
$
|
312.8
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Total assets for reportable segments
|
$
|
4,313.6
|
|
|
$
|
3,473.1
|
|
Reclassification of noncurrent deferred income tax liabilities to net noncurrent deferred income tax assets
|
(64.3
|
)
|
|
(64.3
|
)
|
||
Total consolidated assets
|
$
|
4,249.3
|
|
|
$
|
3,408.8
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Inpatient rehabilitation:
|
|
|
|
|
|
|
|
||||||||
Inpatient
|
$
|
625.1
|
|
|
$
|
563.7
|
|
|
$
|
1,850.4
|
|
|
$
|
1,691.6
|
|
Outpatient and other
|
26.5
|
|
|
26.2
|
|
|
76.8
|
|
|
79.9
|
|
||||
Total inpatient rehabilitation
|
651.6
|
|
|
589.9
|
|
|
1,927.2
|
|
|
1,771.5
|
|
||||
Home health and hospice:
|
|
|
|
|
|
|
|
||||||||
Home health
|
118.3
|
|
|
7.0
|
|
|
333.7
|
|
|
21.0
|
|
||||
Hospice
|
8.7
|
|
|
—
|
|
|
22.7
|
|
|
—
|
|
||||
Total home health and hospice
|
127.0
|
|
|
7.0
|
|
|
356.4
|
|
|
21.0
|
|
||||
Total net operating revenues
|
$
|
778.6
|
|
|
$
|
596.9
|
|
|
$
|
2,283.6
|
|
|
$
|
1,792.5
|
|
12.
|
Condensed Consolidating Financial Information
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Net operating revenues
|
$
|
4.3
|
|
|
$
|
468.6
|
|
|
$
|
331.7
|
|
|
$
|
(26.0
|
)
|
|
$
|
778.6
|
|
Less: Provision for doubtful accounts
|
—
|
|
|
(7.7
|
)
|
|
(3.0
|
)
|
|
—
|
|
|
(10.7
|
)
|
|||||
Net operating revenues less provision for doubtful accounts
|
4.3
|
|
|
460.9
|
|
|
328.7
|
|
|
(26.0
|
)
|
|
767.9
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salaries and benefits
|
14.7
|
|
|
218.9
|
|
|
187.7
|
|
|
(4.2
|
)
|
|
417.1
|
|
|||||
Other operating expenses
|
6.5
|
|
|
68.2
|
|
|
42.0
|
|
|
(10.0
|
)
|
|
106.7
|
|
|||||
Occupancy costs
|
1.1
|
|
|
16.9
|
|
|
6.3
|
|
|
(11.8
|
)
|
|
12.5
|
|
|||||
Supplies
|
—
|
|
|
20.2
|
|
|
10.8
|
|
|
—
|
|
|
31.0
|
|
|||||
General and administrative expenses
|
27.8
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
30.6
|
|
|||||
Depreciation and amortization
|
2.6
|
|
|
20.0
|
|
|
11.1
|
|
|
—
|
|
|
33.7
|
|
|||||
Professional fees—accounting, tax, and legal
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|||||
Total operating expenses
|
53.1
|
|
|
344.2
|
|
|
260.7
|
|
|
(26.0
|
)
|
|
632.0
|
|
|||||
Interest expense and amortization of debt discounts and fees
|
33.4
|
|
|
2.1
|
|
|
2.7
|
|
|
(2.6
|
)
|
|
35.6
|
|
|||||
Other income
|
(2.5
|
)
|
|
(0.1
|
)
|
|
(0.7
|
)
|
|
2.6
|
|
|
(0.7
|
)
|
|||||
Equity in net income of nonconsolidated affiliates
|
—
|
|
|
(2.4
|
)
|
|
—
|
|
|
—
|
|
|
(2.4
|
)
|
|||||
Equity in net income of consolidated affiliates
|
(80.4
|
)
|
|
(9.2
|
)
|
|
—
|
|
|
89.6
|
|
|
—
|
|
|||||
Management fees
|
(29.2
|
)
|
|
22.2
|
|
|
7.0
|
|
|
—
|
|
|
—
|
|
|||||
Income from continuing operations before income tax (benefit) expense
|
29.9
|
|
|
104.1
|
|
|
59.0
|
|
|
(89.6
|
)
|
|
103.4
|
|
|||||
Provision for income tax (benefit) expense
|
(20.5
|
)
|
|
39.5
|
|
|
16.9
|
|
|
—
|
|
|
35.9
|
|
|||||
Income from continuing operations
|
50.4
|
|
|
64.6
|
|
|
42.1
|
|
|
(89.6
|
)
|
|
67.5
|
|
|||||
Income from discontinued operations, net of tax
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|||||
Net income
|
50.7
|
|
|
64.6
|
|
|
42.1
|
|
|
(89.6
|
)
|
|
67.8
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(17.1
|
)
|
|
—
|
|
|
(17.1
|
)
|
|||||
Net income attributable to HealthSouth
|
$
|
50.7
|
|
|
$
|
64.6
|
|
|
$
|
25.0
|
|
|
$
|
(89.6
|
)
|
|
$
|
50.7
|
|
Comprehensive income
|
$
|
49.9
|
|
|
$
|
64.6
|
|
|
$
|
42.1
|
|
|
$
|
(89.6
|
)
|
|
$
|
67.0
|
|
Comprehensive income attributable to HealthSouth
|
$
|
49.9
|
|
|
$
|
64.6
|
|
|
$
|
25.0
|
|
|
$
|
(89.6
|
)
|
|
$
|
49.9
|
|
|
Three Months Ended September 30, 2014
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Net operating revenues
|
$
|
4.0
|
|
|
$
|
424.5
|
|
|
$
|
191.2
|
|
|
$
|
(22.8
|
)
|
|
$
|
596.9
|
|
Less: Provision for doubtful accounts
|
—
|
|
|
(5.7
|
)
|
|
(2.5
|
)
|
|
—
|
|
|
(8.2
|
)
|
|||||
Net operating revenues less provision for doubtful accounts
|
4.0
|
|
|
418.8
|
|
|
188.7
|
|
|
(22.8
|
)
|
|
588.7
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salaries and benefits
|
4.1
|
|
|
197.9
|
|
|
91.8
|
|
|
(3.8
|
)
|
|
290.0
|
|
|||||
Other operating expenses
|
5.0
|
|
|
62.0
|
|
|
31.8
|
|
|
(9.4
|
)
|
|
89.4
|
|
|||||
Occupancy costs
|
1.1
|
|
|
14.5
|
|
|
4.3
|
|
|
(9.6
|
)
|
|
10.3
|
|
|||||
Supplies
|
0.1
|
|
|
18.6
|
|
|
7.9
|
|
|
—
|
|
|
26.6
|
|
|||||
General and administrative expenses
|
27.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27.5
|
|
|||||
Depreciation and amortization
|
2.3
|
|
|
18.2
|
|
|
6.9
|
|
|
—
|
|
|
27.4
|
|
|||||
Professional fees—accounting, tax, and legal
|
4.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.0
|
|
|||||
Total operating expenses
|
44.1
|
|
|
311.2
|
|
|
142.7
|
|
|
(22.8
|
)
|
|
475.2
|
|
|||||
Interest expense and amortization of debt discounts and fees
|
25.7
|
|
|
1.7
|
|
|
0.7
|
|
|
(0.3
|
)
|
|
27.8
|
|
|||||
Other income
|
0.1
|
|
|
—
|
|
|
(0.6
|
)
|
|
0.3
|
|
|
(0.2
|
)
|
|||||
Equity in net income of nonconsolidated affiliates
|
—
|
|
|
(1.9
|
)
|
|
—
|
|
|
—
|
|
|
(1.9
|
)
|
|||||
Equity in net income of consolidated affiliates
|
(62.6
|
)
|
|
(7.2
|
)
|
|
—
|
|
|
69.8
|
|
|
—
|
|
|||||
Management fees
|
(26.8
|
)
|
|
20.4
|
|
|
6.4
|
|
|
—
|
|
|
—
|
|
|||||
Income from continuing operations before income tax (benefit) expense
|
23.5
|
|
|
94.6
|
|
|
39.5
|
|
|
(69.8
|
)
|
|
87.8
|
|
|||||
Provision for income tax (benefit) expense
|
(27.5
|
)
|
|
39.2
|
|
|
10.4
|
|
|
—
|
|
|
22.1
|
|
|||||
Income from continuing operations
|
51.0
|
|
|
55.4
|
|
|
29.1
|
|
|
(69.8
|
)
|
|
65.7
|
|
|||||
Loss from discontinued operations, net of tax
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.9
|
)
|
|||||
Net income
|
50.1
|
|
|
55.4
|
|
|
29.1
|
|
|
(69.8
|
)
|
|
64.8
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(14.7
|
)
|
|
—
|
|
|
(14.7
|
)
|
|||||
Net income attributable to HealthSouth
|
$
|
50.1
|
|
|
$
|
55.4
|
|
|
$
|
14.4
|
|
|
$
|
(69.8
|
)
|
|
$
|
50.1
|
|
Comprehensive income
|
$
|
50.0
|
|
|
$
|
55.4
|
|
|
$
|
29.1
|
|
|
$
|
(69.8
|
)
|
|
$
|
64.7
|
|
Comprehensive income attributable to HealthSouth
|
$
|
50.0
|
|
|
$
|
55.4
|
|
|
$
|
14.4
|
|
|
$
|
(69.8
|
)
|
|
$
|
50.0
|
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Net operating revenues
|
$
|
14.7
|
|
|
$
|
1,394.8
|
|
|
$
|
950.5
|
|
|
$
|
(76.4
|
)
|
|
$
|
2,283.6
|
|
Less: Provision for doubtful accounts
|
—
|
|
|
(25.0
|
)
|
|
(8.2
|
)
|
|
—
|
|
|
(33.2
|
)
|
|||||
Net operating revenues less provision for doubtful accounts
|
14.7
|
|
|
1,369.8
|
|
|
942.3
|
|
|
(76.4
|
)
|
|
2,250.4
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Salaries and benefits
|
35.0
|
|
|
647.0
|
|
|
534.5
|
|
|
(12.5
|
)
|
|
1,204.0
|
|
|||||
Other operating expenses
|
22.7
|
|
|
199.6
|
|
|
122.4
|
|
|
(30.6
|
)
|
|
314.1
|
|
|||||
Occupancy costs
|
3.2
|
|
|
48.6
|
|
|
18.6
|
|
|
(33.3
|
)
|
|
37.1
|
|
|||||
Supplies
|
—
|
|
|
62.2
|
|
|
31.9
|
|
|
—
|
|
|
94.1
|
|
|||||
General and administrative expenses
|
93.6
|
|
|
—
|
|
|
3.7
|
|
|
—
|
|
|
97.3
|
|
|||||
Depreciation and amortization
|
7.3
|
|
|
58.7
|
|
|
32.3
|
|
|
—
|
|
|
98.3
|
|
|||||
Government, class action, and related settlements
|
8.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8.0
|
|
|||||
Professional fees—accounting, tax, and legal
|
2.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|||||
Total operating expenses
|
172.5
|
|
|
1,016.1
|
|
|
743.4
|
|
|
(76.4
|
)
|
|
1,855.6
|
|
|||||
Loss on early extinguishment of debt
|
20.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20.0
|
|
|||||
Interest expense and amortization of debt discounts and fees
|
91.0
|
|
|
6.6
|
|
|
8.2
|
|
|
(7.5
|
)
|
|
98.3
|
|
|||||
Other income
|
(9.6
|
)
|
|
(0.2
|
)
|
|
(1.9
|
)
|
|
7.5
|
|
|
(4.2
|
)
|
|||||
Equity in net income of nonconsolidated affiliates
|
—
|
|
|
(6.3
|
)
|
|
—
|
|
|
—
|
|
|
(6.3
|
)
|
|||||
Equity in net income of consolidated affiliates
|
(241.0
|
)
|
|
(25.4
|
)
|
|
—
|
|
|
266.4
|
|
|
—
|
|
|||||
Management fees
|
(87.0
|
)
|
|
66.2
|
|
|
20.8
|
|
|
—
|
|
|
—
|
|
|||||
Income from continuing operations before income tax (benefit) expense
|
68.8
|
|
|
312.8
|
|
|
171.8
|
|
|
(266.4
|
)
|
|
287.0
|
|
|||||
Provision for income tax (benefit) expense
|
(68.9
|
)
|
|
118.9
|
|
|
48.4
|
|
|
—
|
|
|
98.4
|
|
|||||
Income from continuing operations
|
137.7
|
|
|
193.9
|
|
|
123.4
|
|
|
(266.4
|
)
|
|
188.6
|
|
|||||
Loss from discontinued operations, net of tax
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|||||
Net income
|
136.1
|
|
|
193.9
|
|
|
123.4
|
|
|
(266.4
|
)
|
|
187.0
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(50.9
|
)
|
|
—
|
|
|
(50.9
|
)
|
|||||
Net income attributable to HealthSouth
|
$
|
136.1
|
|
|
$
|
193.9
|
|
|
$
|
72.5
|
|
|
$
|
(266.4
|
)
|
|
$
|
136.1
|
|
Comprehensive income
|
$
|
135.5
|
|
|
$
|
193.9
|
|
|
$
|
123.4
|
|
|
$
|
(266.4
|
)
|
|
$
|
186.4
|
|
Comprehensive income attributable to HealthSouth
|
$
|
135.5
|
|
|
$
|
193.9
|
|
|
$
|
72.5
|
|
|
$
|
(266.4
|
)
|
|
$
|
135.5
|
|
|
Nine Months Ended September 30, 2014
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Net operating revenues
|
$
|
11.5
|
|
|
$
|
1,286.4
|
|
|
$
|
561.7
|
|
|
$
|
(67.1
|
)
|
|
$
|
1,792.5
|
|
Less: Provision for doubtful accounts
|
—
|
|
|
(17.6
|
)
|
|
(7.4
|
)
|
|
—
|
|
|
(25.0
|
)
|
|||||
Net operating revenues less provision for doubtful accounts
|
11.5
|
|
|
1,268.8
|
|
|
554.3
|
|
|
(67.1
|
)
|
|
1,767.5
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries and benefits
|
15.9
|
|
|
590.2
|
|
|
266.6
|
|
|
(11.3
|
)
|
|
861.4
|
|
|||||
Other operating expenses
|
15.0
|
|
|
182.1
|
|
|
90.0
|
|
|
(26.9
|
)
|
|
260.2
|
|
|||||
Occupancy costs
|
3.1
|
|
|
43.4
|
|
|
13.5
|
|
|
(28.9
|
)
|
|
31.1
|
|
|||||
Supplies
|
—
|
|
|
57.9
|
|
|
24.1
|
|
|
—
|
|
|
82.0
|
|
|||||
General and administrative expenses
|
88.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88.4
|
|
|||||
Depreciation and amortization
|
7.4
|
|
|
54.1
|
|
|
18.7
|
|
|
—
|
|
|
80.2
|
|
|||||
Government, class action, and related settlements
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|||||
Professional fees—accounting, tax, and legal
|
7.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.6
|
|
|||||
Total operating expenses
|
136.6
|
|
|
927.7
|
|
|
412.9
|
|
|
(67.1
|
)
|
|
1,410.1
|
|
|||||
Interest expense and amortization of debt discounts and fees
|
76.3
|
|
|
5.9
|
|
|
2.1
|
|
|
(0.8
|
)
|
|
83.5
|
|
|||||
Other income
|
(0.3
|
)
|
|
(28.4
|
)
|
|
(2.2
|
)
|
|
0.8
|
|
|
(30.1
|
)
|
|||||
Equity in net income of nonconsolidated affiliates
|
—
|
|
|
(8.8
|
)
|
|
—
|
|
|
—
|
|
|
(8.8
|
)
|
|||||
Equity in net income of consolidated affiliates
|
(233.9
|
)
|
|
(21.3
|
)
|
|
—
|
|
|
255.2
|
|
|
—
|
|
|||||
Management fees
|
(80.7
|
)
|
|
61.6
|
|
|
19.1
|
|
|
—
|
|
|
—
|
|
|||||
Income from continuing operations before income tax (benefit) expense
|
113.5
|
|
|
332.1
|
|
|
122.4
|
|
|
(255.2
|
)
|
|
312.8
|
|
|||||
Provision for income tax (benefit) expense
|
(63.5
|
)
|
|
122.0
|
|
|
32.9
|
|
|
—
|
|
|
91.4
|
|
|||||
Income from continuing operations
|
177.0
|
|
|
210.1
|
|
|
89.5
|
|
|
(255.2
|
)
|
|
221.4
|
|
|||||
Income (loss) from discontinued operations, net of tax
|
2.9
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
2.8
|
|
|||||
Net income
|
179.9
|
|
|
210.1
|
|
|
89.4
|
|
|
(255.2
|
)
|
|
224.2
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(44.3
|
)
|
|
—
|
|
|
(44.3
|
)
|
|||||
Net income attributable to HealthSouth
|
$
|
179.9
|
|
|
$
|
210.1
|
|
|
$
|
45.1
|
|
|
$
|
(255.2
|
)
|
|
$
|
179.9
|
|
Comprehensive income
|
$
|
179.9
|
|
|
$
|
210.1
|
|
|
$
|
89.4
|
|
|
$
|
(255.2
|
)
|
|
$
|
224.2
|
|
Comprehensive income attributable to HealthSouth
|
$
|
179.9
|
|
|
$
|
210.1
|
|
|
$
|
45.1
|
|
|
$
|
(255.2
|
)
|
|
$
|
179.9
|
|
|
As of September 30, 2015
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
786.7
|
|
|
$
|
0.1
|
|
|
$
|
14.8
|
|
|
$
|
—
|
|
|
$
|
801.6
|
|
Accounts receivable, net
|
—
|
|
|
227.2
|
|
|
123.7
|
|
|
—
|
|
|
350.9
|
|
|||||
Deferred income tax assets
|
122.7
|
|
|
39.8
|
|
|
23.4
|
|
|
—
|
|
|
185.9
|
|
|||||
Other current assets
|
43.0
|
|
|
17.7
|
|
|
100.5
|
|
|
(36.6
|
)
|
|
124.6
|
|
|||||
Total current assets
|
952.4
|
|
|
284.8
|
|
|
262.4
|
|
|
(36.6
|
)
|
|
1,463.0
|
|
|||||
Property and equipment, net
|
14.9
|
|
|
779.4
|
|
|
284.8
|
|
|
—
|
|
|
1,079.1
|
|
|||||
Goodwill
|
—
|
|
|
278.1
|
|
|
826.9
|
|
|
—
|
|
|
1,105.0
|
|
|||||
Intangible assets, net
|
11.9
|
|
|
60.9
|
|
|
251.9
|
|
|
—
|
|
|
324.7
|
|
|||||
Deferred income tax assets
|
89.4
|
|
|
17.5
|
|
|
—
|
|
|
(51.5
|
)
|
|
55.4
|
|
|||||
Other long-term assets
|
474.0
|
|
|
66.6
|
|
|
67.5
|
|
|
(386.0
|
)
|
|
222.1
|
|
|||||
Intercompany receivable and investments in consolidated affiliates
|
1,983.6
|
|
|
—
|
|
|
—
|
|
|
(1,983.6
|
)
|
|
—
|
|
|||||
Total assets
|
$
|
3,526.2
|
|
|
$
|
1,487.3
|
|
|
$
|
1,693.5
|
|
|
$
|
(2,457.7
|
)
|
|
$
|
4,249.3
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current portion of long-term debt
|
$
|
29.8
|
|
|
$
|
4.4
|
|
|
$
|
6.9
|
|
|
$
|
(17.5
|
)
|
|
$
|
23.6
|
|
Accounts payable
|
9.8
|
|
|
32.8
|
|
|
23.0
|
|
|
—
|
|
|
65.6
|
|
|||||
Accrued expenses and other current liabilities
|
125.5
|
|
|
75.3
|
|
|
132.7
|
|
|
(19.1
|
)
|
|
314.4
|
|
|||||
Total current liabilities
|
165.1
|
|
|
112.5
|
|
|
162.6
|
|
|
(36.6
|
)
|
|
403.6
|
|
|||||
Long-term debt, net of current portion
|
2,690.0
|
|
|
81.0
|
|
|
415.7
|
|
|
(386.0
|
)
|
|
2,800.7
|
|
|||||
Other long-term liabilities
|
40.7
|
|
|
12.0
|
|
|
139.1
|
|
|
(51.1
|
)
|
|
140.7
|
|
|||||
Intercompany payable
|
—
|
|
|
240.8
|
|
|
182.7
|
|
|
(423.5
|
)
|
|
—
|
|
|||||
|
2,895.8
|
|
|
446.3
|
|
|
900.1
|
|
|
(897.2
|
)
|
|
3,345.0
|
|
|||||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
114.1
|
|
|
—
|
|
|
114.1
|
|
|||||
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
HealthSouth shareholders’ equity
|
630.4
|
|
|
1,041.0
|
|
|
519.5
|
|
|
(1,560.5
|
)
|
|
630.4
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
159.8
|
|
|
—
|
|
|
159.8
|
|
|||||
Total shareholders’ equity
|
630.4
|
|
|
1,041.0
|
|
|
679.3
|
|
|
(1,560.5
|
)
|
|
790.2
|
|
|||||
Total liabilities and shareholders’ equity
|
$
|
3,526.2
|
|
|
$
|
1,487.3
|
|
|
$
|
1,693.5
|
|
|
$
|
(2,457.7
|
)
|
|
$
|
4,249.3
|
|
|
As of December 31, 2014
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
41.9
|
|
|
$
|
1.5
|
|
|
$
|
23.3
|
|
|
$
|
—
|
|
|
$
|
66.7
|
|
Accounts receivable, net
|
—
|
|
|
202.6
|
|
|
120.6
|
|
|
—
|
|
|
323.2
|
|
|||||
Deferred income tax assets
|
125.0
|
|
|
39.8
|
|
|
23.6
|
|
|
—
|
|
|
188.4
|
|
|||||
Other current assets
|
30.9
|
|
|
15.1
|
|
|
81.1
|
|
|
(18.8
|
)
|
|
108.3
|
|
|||||
Total current assets
|
197.8
|
|
|
259.0
|
|
|
248.6
|
|
|
(18.8
|
)
|
|
686.6
|
|
|||||
Property and equipment, net
|
16.1
|
|
|
752.0
|
|
|
251.6
|
|
|
—
|
|
|
1,019.7
|
|
|||||
Goodwill
|
—
|
|
|
279.6
|
|
|
804.4
|
|
|
—
|
|
|
1,084.0
|
|
|||||
Intangible assets, net
|
11.3
|
|
|
50.6
|
|
|
244.2
|
|
|
—
|
|
|
306.1
|
|
|||||
Deferred income tax assets
|
163.3
|
|
|
17.5
|
|
|
—
|
|
|
(51.4
|
)
|
|
129.4
|
|
|||||
Other long-term assets
|
461.3
|
|
|
42.5
|
|
|
64.3
|
|
|
(385.1
|
)
|
|
183.0
|
|
|||||
Intercompany receivable and investments in consolidated affiliates
|
1,898.7
|
|
|
—
|
|
|
—
|
|
|
(1,898.7
|
)
|
|
—
|
|
|||||
Total assets
|
$
|
2,748.5
|
|
|
$
|
1,401.2
|
|
|
$
|
1,613.1
|
|
|
$
|
(2,354.0
|
)
|
|
$
|
3,408.8
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current portion of long-term debt
|
$
|
27.9
|
|
|
$
|
4.2
|
|
|
$
|
6.2
|
|
|
$
|
(17.5
|
)
|
|
$
|
20.8
|
|
Accounts payable
|
9.3
|
|
|
29.5
|
|
|
14.6
|
|
|
—
|
|
|
53.4
|
|
|||||
Accrued expenses and other current liabilities
|
107.1
|
|
|
72.6
|
|
|
111.7
|
|
|
(1.3
|
)
|
|
290.1
|
|
|||||
Total current liabilities
|
144.3
|
|
|
106.3
|
|
|
132.5
|
|
|
(18.8
|
)
|
|
364.3
|
|
|||||
Long-term debt, net of current portion
|
1,993.7
|
|
|
83.9
|
|
|
418.3
|
|
|
(385.1
|
)
|
|
2,110.8
|
|
|||||
Other long-term liabilities
|
44.1
|
|
|
12.7
|
|
|
130.9
|
|
|
(51.4
|
)
|
|
136.3
|
|
|||||
Intercompany payable
|
—
|
|
|
368.7
|
|
|
195.5
|
|
|
(564.2
|
)
|
|
—
|
|
|||||
|
2,182.1
|
|
|
571.6
|
|
|
877.2
|
|
|
(1,019.5
|
)
|
|
2,611.4
|
|
|||||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Convertible perpetual preferred stock
|
93.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
93.2
|
|
|||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
84.7
|
|
|
—
|
|
|
84.7
|
|
|||||
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
HealthSouth shareholders’ equity
|
473.2
|
|
|
829.6
|
|
|
504.9
|
|
|
(1,334.5
|
)
|
|
473.2
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
146.3
|
|
|
—
|
|
|
146.3
|
|
|||||
Total shareholders’ equity
|
473.2
|
|
|
829.6
|
|
|
651.2
|
|
|
(1,334.5
|
)
|
|
619.5
|
|
|||||
Total liabilities and shareholders’ equity
|
$
|
2,748.5
|
|
|
$
|
1,401.2
|
|
|
$
|
1,613.1
|
|
|
$
|
(2,354.0
|
)
|
|
$
|
3,408.8
|
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Net cash provided by operating activities
|
$
|
13.9
|
|
|
$
|
189.9
|
|
|
$
|
164.0
|
|
|
$
|
0.4
|
|
|
$
|
368.2
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchases of property and equipment
|
(10.0
|
)
|
|
(31.5
|
)
|
|
(43.7
|
)
|
|
—
|
|
|
(85.2
|
)
|
|||||
Capitalized software costs
|
(19.0
|
)
|
|
(0.4
|
)
|
|
(1.3
|
)
|
|
—
|
|
|
(20.7
|
)
|
|||||
Acquisitions of businesses, net of cash acquired
|
(56.6
|
)
|
|
—
|
|
|
(30.5
|
)
|
|
—
|
|
|
(87.1
|
)
|
|||||
Proceeds from sale of marketable securities
|
12.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12.8
|
|
|||||
Purchase of restricted investments
|
—
|
|
|
—
|
|
|
(6.5
|
)
|
|
—
|
|
|
(6.5
|
)
|
|||||
Other
|
13.6
|
|
|
3.3
|
|
|
3.4
|
|
|
(13.0
|
)
|
|
7.3
|
|
|||||
Net cash used in investing activities
|
(59.2
|
)
|
|
(28.6
|
)
|
|
(78.6
|
)
|
|
(13.0
|
)
|
|
(179.4
|
)
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Principal borrowings under term loan facilities
|
125.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125.0
|
|
|||||
Proceeds from bond issuance
|
1,400.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,400.0
|
|
|||||
Principal payments on debt, including pre-payments
|
(545.0
|
)
|
|
(0.8
|
)
|
|
(15.5
|
)
|
|
15.0
|
|
|
(546.3
|
)
|
|||||
Borrowings on revolving credit facility
|
315.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
315.0
|
|
|||||
Payments on revolving credit facility
|
(615.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(615.0
|
)
|
|||||
Debt amendment and issue costs
|
(31.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31.3
|
)
|
|||||
Dividends paid on common stock
|
(56.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56.3
|
)
|
|||||
Dividends paid on convertible perpetual preferred stock
|
(3.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|||||
Distributions paid to noncontrolling interests of consolidated affiliates
|
—
|
|
|
—
|
|
|
(39.7
|
)
|
|
—
|
|
|
(39.7
|
)
|
|||||
Other
|
1.8
|
|
|
(0.5
|
)
|
|
(1.5
|
)
|
|
(2.0
|
)
|
|
(2.2
|
)
|
|||||
Change in intercompany advances
|
199.0
|
|
|
(161.4
|
)
|
|
(37.2
|
)
|
|
(0.4
|
)
|
|
—
|
|
|||||
Net cash provided by (used in) financing activities
|
790.1
|
|
|
(162.7
|
)
|
|
(93.9
|
)
|
|
12.6
|
|
|
546.1
|
|
|||||
Increase (decrease) in cash and cash equivalents
|
744.8
|
|
|
(1.4
|
)
|
|
(8.5
|
)
|
|
—
|
|
|
734.9
|
|
|||||
Cash and cash equivalents at beginning of period
|
41.9
|
|
|
1.5
|
|
|
23.3
|
|
|
—
|
|
|
66.7
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
786.7
|
|
|
$
|
0.1
|
|
|
$
|
14.8
|
|
|
$
|
—
|
|
|
$
|
801.6
|
|
|
Nine Months Ended September 30, 2014
|
||||||||||||||||||
|
HealthSouth Corporation
|
|
Guarantor Subsidiaries
|
|
Nonguarantor Subsidiaries
|
|
Eliminating Entries
|
|
HealthSouth Consolidated
|
||||||||||
|
(In Millions)
|
||||||||||||||||||
Net cash provided by operating activities
|
$
|
53.5
|
|
|
$
|
206.9
|
|
|
$
|
114.3
|
|
|
$
|
—
|
|
|
$
|
374.7
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchases of property and equipment
|
(11.9
|
)
|
|
(97.9
|
)
|
|
(24.1
|
)
|
|
—
|
|
|
(133.9
|
)
|
|||||
Capitalized software costs
|
(4.1
|
)
|
|
(1.5
|
)
|
|
(7.0
|
)
|
|
—
|
|
|
(12.6
|
)
|
|||||
Acquisitions of businesses, net of cash acquired
|
—
|
|
|
—
|
|
|
(15.9
|
)
|
|
—
|
|
|
(15.9
|
)
|
|||||
Proceeds from sale of marketable securities
|
—
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
2.7
|
|
|||||
Purchase of restricted investments
|
—
|
|
|
—
|
|
|
(2.5
|
)
|
|
—
|
|
|
(2.5
|
)
|
|||||
Other
|
1.0
|
|
|
1.3
|
|
|
(2.4
|
)
|
|
—
|
|
|
(0.1
|
)
|
|||||
Net cash used in investing activities
|
(15.0
|
)
|
|
(98.1
|
)
|
|
(49.2
|
)
|
|
—
|
|
|
(162.3
|
)
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Principal payments on debt, including pre-payments
|
(1.5
|
)
|
|
(1.1
|
)
|
|
(3.1
|
)
|
|
—
|
|
|
(5.7
|
)
|
|||||
Proceeds from bond issuance
|
175.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
175.0
|
|
|||||
Borrowings on revolving credit facility
|
65.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65.0
|
|
|||||
Payments on revolving credit facility
|
(110.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(110.0
|
)
|
|||||
Debt amendment and issuance costs
|
(3.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|||||
Repurchases of common stock, including fees and expenses
|
(43.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43.1
|
)
|
|||||
Dividends paid on common stock
|
(47.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47.4
|
)
|
|||||
Dividends paid on convertible perpetual preferred stock
|
(4.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.7
|
)
|
|||||
Distributions paid to noncontrolling interests of consolidated affiliates
|
—
|
|
|
—
|
|
|
(39.6
|
)
|
|
—
|
|
|
(39.6
|
)
|
|||||
Other
|
13.3
|
|
|
(1.9
|
)
|
|
(2.4
|
)
|
|
—
|
|
|
9.0
|
|
|||||
Change in intercompany advances
|
124.0
|
|
|
(106.6
|
)
|
|
(17.4
|
)
|
|
—
|
|
|
—
|
|
|||||
Net cash provided by (used in) financing activities
|
167.5
|
|
|
(109.6
|
)
|
|
(62.5
|
)
|
|
—
|
|
|
(4.6
|
)
|
|||||
Increase (decrease) in cash and cash equivalents
|
206.0
|
|
|
(0.8
|
)
|
|
2.6
|
|
|
—
|
|
|
207.8
|
|
|||||
Cash and cash equivalents at beginning of period
|
60.5
|
|
|
2.3
|
|
|
1.7
|
|
|
—
|
|
|
64.5
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
266.5
|
|
|
$
|
1.5
|
|
|
$
|
4.3
|
|
|
$
|
—
|
|
|
$
|
272.3
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
continuing to provide high-quality, cost-effective care to patients in our existing markets;
|
•
|
achieving organic growth at our existing hospitals, home health agencies, and hospice agencies;
|
•
|
expanding our services to more patients who require post-acute healthcare services by constructing and acquiring new hospitals in new markets and acquiring home health and hospice agencies in new markets;
|
•
|
continuing our shareholder value-enhancing strategies such as common stock dividends and repurchases of our common stock; and
|
•
|
positioning the Company for continued success in the evolving healthcare delivery system. This preparation includes continuing the installation of our electronic clinical information system in our hospitals which allows for interfaces with all major acute care electronic medical record systems and health information exchanges and participating in bundling projects and Accountable Care Organizations (“ACOs”).
|
•
|
began operating the inpatient rehabilitation hospital at Memorial University Medical Center in Savannah, Georgia with our joint venture partner, Memorial Health, on April 1, 2015. The joint venture will build a new, 50-bed replacement inpatient rehabilitation hospital, which is expected to be completed in the first half of 2016;
|
•
|
acquired Cardinal Hill Rehabilitation Hospital (“Cardinal Hill”), comprised of 158 licensed inpatient rehabilitation beds and 74 licensed skilled nursing beds, in Lexington, Kentucky on May 1, 2015;
|
•
|
entered into an agreement, in May 2015, with West Tennessee Healthcare to form a joint venture to own and operate a 48-bed inpatient rehabilitation hospital in Jackson, Tennessee. The agreement calls for the relocation of the existing inpatient rehabilitation unit at Jackson-Madison County General Hospital to a free-standing hospital to be built by the joint venture, as well as joint ownership of our existing Cane Creek Rehabilitation Hospital in Martin, Tennessee. Under the agreement, HealthSouth will assume management of the existing rehabilitation unit on January 1, 2016, until the new hospital is complete. Construction of the new inpatient rehabilitation hospital will begin in 2016, once the required state regulatory approvals are obtained;
|
•
|
entered into an agreement, in June 2015, with Mount Carmel Health System to begin construction of a new inpatient rehabilitation hospital in Westerville, Ohio. Construction of the 60-bed joint venture hospital is expected to begin in the fourth quarter of 2015 and be completed by the first quarter of 2017;
|
•
|
formed a joint venture, in June 2015, with St. John Health System to own and operate a 40-bed inpatient rehabilitation hospital in Broken Arrow, Oklahoma. Initially, the joint venture will own and operate the Bernsen Rehabilitation Center at St. John, a 24-bed inpatient rehabilitation unit currently located on the campus of St. John Medical Center in Tulsa, Oklahoma. The joint venture’s operation of this unit is expected to begin in the first quarter of 2016. Additionally, in the first quarter of 2016, the joint venture plans to begin construction of the new 40-bed, free-standing hospital, with construction expected to be completed in the fourth quarter of 2016;
|
•
|
entered into an agreement, in June 2015, with CHI St. Vincent Hot Springs, a Catholic Health Initiatives’ hospital, to jointly build, own, and operate a 40-bed inpatient rehabilitation hospital in Hot Springs, Arkansas. Initially, the joint venture will own and operate the 20-bed inpatient rehabilitation unit currently located on the campus of CHI St. Vincent Hot Springs. The joint venture’s operation of this unit is expected to begin in the fourth quarter of 2015. At that time, the unit will be expanded to 27 beds. Additionally, in the fourth quarter of 2015, the joint venture will begin construction of the new hospital, with construction expected to be completed in the third quarter of 2016; and
|
•
|
continued development of the following de novo hospitals:
|
Location
|
# of Beds
|
Actual / Expected Construction Start Date
|
Expected Operational Date
|
Franklin, Tennessee
|
40
|
Q4 2014
|
Q4 2015
|
Modesto, California
|
50
|
Q1 2015
|
Q2 2016
|
Murrieta, California*
|
50
|
First half of 2017
|
2018
|
•
|
Integrity Home Health Care, Inc. - two locations in the Las Vegas, Nevada area (March 2015)
|
•
|
Harvey Home Health Services, Inc. - one location in Houston, Texas (April 2015)
|
•
|
Heritage Home Health, LLC - one location in Texarkana, Arkansas (May 2015)
|
•
|
Cardinal Hill - one location in Lexington, Kentucky (May 2015)
|
•
|
Alliance Home Health - two locations in the Fayetteville, Arkansas area (June 2015)
|
•
|
Southern Utah Home Health, Inc. - two home health locations and two hospice locations in southern Utah (July 2015)
|
•
|
Orthopedic Rehab Specialist, LLC - one location in Ocala, Florida (July 2015)
|
•
|
in January 2015, issued an additional $400 million of our 5.75% Senior Notes due 2024 at a price of 102% of the principal amount and used $250 million of the net proceeds to repay borrowings under our term loan facilities, with the remaining net proceeds used to repay borrowings under our revolving credit facility;
|
•
|
in March 2015, issued $300 million of 5.125% Senior Notes due 2023 at a price of 100% of the principal amount and, in April 2015, used the net proceeds from the issuance along with cash on hand to redeem all the outstanding principal of our 8.125% Senior Notes due 2020;
|
•
|
in June 2015, amended our credit agreement to (1) provide that the leverage ratio financial covenant be calculated on a pro forma basis to include the effects of investments, acquisitions, mergers, and other operational changes and (2) increase the amount of specifically permitted capital lease obligations from $200 million to $350 million;
|
•
|
in July 2015, amended our credit agreement to (1) add $500 million of new term loan facilities to our existing $600 million revolving credit facility and $195 million of outstanding term loans, (2) change the maximum leverage ratio in the financial covenants applicable for the period July 2015 through June 2017 from 4.25x to 4.50x and to 4.25x from then until maturity, and (3) extend the maturity date for all borrowings to July 2020. Under the terms of the amendment, our issuance of additional senior notes in August 2015 and September 2015, as discussed below, reduced our availability under the new term loan facilities to $250 million;
|
•
|
in August 2015, issued an additional $350 million of our 5.75% Senior Notes due 2024 at a price of 100.50% of the principal amount and used the net proceeds from the issuance to reduce borrowings under our revolving credit facility and, in October 2015, to fund a portion of the Reliant acquisition; and
|
•
|
in September 2015, issued $350 million of 5.75% Senior Notes due 2025 at a price of 100% of the principal amount and, in October 2015, used the net proceeds from the issuance to fund a portion of the Reliant acquisition.
|
•
|
Operating in a Highly Regulated Industry
. We are required to comply with extensive and complex laws and regulations at the federal, state, and local government levels. These rules and regulations have affected, or could in the future affect, our business activities by having an impact on the reimbursement we receive for services provided or the costs of compliance, mandating new documentation standards, requiring additional licensure or certification, regulating our relationships with physicians and other referral sources, regulating the use of our properties, and limiting our ability to enter new markets or add new capacity to existing hospitals and agencies. Ensuring continuous compliance with extensive laws and regulations is an operating requirement for all healthcare providers.
|
Market basket update
|
2.4%
|
Healthcare reform reduction
|
20 basis points
|
Productivity adjustment
|
50 basis points
|
•
|
Changes to Our Operating Environment Resulting from Healthcare Reform
. Our challenges related to healthcare reform are discussed in Item 1,
Business
, “Sources of Revenues,” Item 1A,
Risk Factors
, and Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations
, “Executive Overview—Key Challenges,” to the 2014 Form 10-K. Many provisions within the 2010 Healthcare Reform Laws have impacted, or could in the future impact, our business. Most notably for us are the reductions to our hospitals’ annual market basket updates, including productivity adjustments, mandated reductions to home health and hospice Medicare reimbursements, and future payment reforms such as ACOs and bundled payments.
|
•
|
Maintaining Strong Volume Growth
. Various factors, including competition and increasing regulatory and administrative burdens, may impact our ability to maintain and grow our hospital, home health, and hospice volumes. In any particular market, we may encounter competition from local or national entities with longer operating histories or other competitive advantages, such as acute care hospitals who provide post-acute services similar to ours or other post-acute providers with relationships with referring acute care hospitals or physicians. Aggressive payment review practices by Medicare contractors, aggressive enforcement of regulatory policies by government agencies, and restrictive or burdensome rules, regulations or statutes governing admissions practices may lead us to not accept patients who would be appropriate for and would benefit from the services we provide. In addition, from time to time, we must get regulatory approval to expand our services and locations in states with certificate of need laws. This approval may be withheld or take longer than expected. In the case of new-store volume growth, the addition of hospitals, home health agencies, and hospice agencies to our portfolio also may be difficult and take longer than expected.
|
•
|
Recruiting and Retaining High-Quality Personnel
. See Item 1A,
Risk Factors
, to the 2014 Form 10-K for a discussion of competition for staffing, shortages of qualified personnel, and other factors that may increase our
|
|
Three Months Ended September 30,
|
|
Percentage Change
|
|
Nine Months Ended September 30,
|
|
Percentage Change
|
||||||||||||||
|
2015
|
|
2014
|
|
2015 vs. 2014
|
|
2015
|
|
2014
|
|
2015 vs. 2014
|
||||||||||
|
(In Millions, Except Percentage Change)
|
||||||||||||||||||||
Net operating revenues
|
$
|
778.6
|
|
|
$
|
596.9
|
|
|
30.4
|
%
|
|
$
|
2,283.6
|
|
|
$
|
1,792.5
|
|
|
27.4
|
%
|
Less: Provision for doubtful accounts
|
(10.7
|
)
|
|
(8.2
|
)
|
|
30.5
|
%
|
|
(33.2
|
)
|
|
(25.0
|
)
|
|
32.8
|
%
|
||||
Net operating revenues less provision for doubtful accounts
|
767.9
|
|
|
588.7
|
|
|
30.4
|
%
|
|
2,250.4
|
|
|
1,767.5
|
|
|
27.3
|
%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and benefits
|
417.1
|
|
|
290.0
|
|
|
43.8
|
%
|
|
1,204.0
|
|
|
861.4
|
|
|
39.8
|
%
|
||||
Other operating expenses
|
106.7
|
|
|
89.4
|
|
|
19.4
|
%
|
|
314.1
|
|
|
260.2
|
|
|
20.7
|
%
|
||||
Occupancy costs
|
12.5
|
|
|
10.3
|
|
|
21.4
|
%
|
|
37.1
|
|
|
31.1
|
|
|
19.3
|
%
|
||||
Supplies
|
31.0
|
|
|
26.6
|
|
|
16.5
|
%
|
|
94.1
|
|
|
82.0
|
|
|
14.8
|
%
|
||||
General and administrative expenses
|
30.6
|
|
|
27.5
|
|
|
11.3
|
%
|
|
97.3
|
|
|
88.4
|
|
|
10.1
|
%
|
||||
Depreciation and amortization
|
33.7
|
|
|
27.4
|
|
|
23.0
|
%
|
|
98.3
|
|
|
80.2
|
|
|
22.6
|
%
|
||||
Government, class action, and related settlements
|
—
|
|
|
—
|
|
|
N/A
|
|
|
8.0
|
|
|
(0.8
|
)
|
|
(1,100.0
|
)%
|
||||
Professional fees—accounting, tax, and legal
|
0.4
|
|
|
4.0
|
|
|
(90.0
|
)%
|
|
2.7
|
|
|
7.6
|
|
|
(64.5
|
)%
|
||||
Total operating expenses
|
632.0
|
|
|
475.2
|
|
|
33.0
|
%
|
|
1,855.6
|
|
|
1,410.1
|
|
|
31.6
|
%
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
N/A
|
|
|
20.0
|
|
|
—
|
|
|
100.0
|
%
|
||||
Interest expense and amortization of debt discounts and fees
|
35.6
|
|
|
27.8
|
|
|
28.1
|
%
|
|
98.3
|
|
|
83.5
|
|
|
17.7
|
%
|
||||
Other income
|
(0.7
|
)
|
|
(0.2
|
)
|
|
250.0
|
%
|
|
(4.2
|
)
|
|
(30.1
|
)
|
|
(86.0
|
)%
|
||||
Equity in net income of nonconsolidated affiliates
|
(2.4
|
)
|
|
(1.9
|
)
|
|
26.3
|
%
|
|
(6.3
|
)
|
|
(8.8
|
)
|
|
(28.4
|
)%
|
||||
Income from continuing operations before income tax expense
|
103.4
|
|
|
87.8
|
|
|
17.8
|
%
|
|
287.0
|
|
|
312.8
|
|
|
(8.2
|
)%
|
||||
Provision for income tax expense
|
35.9
|
|
|
22.1
|
|
|
62.4
|
%
|
|
98.4
|
|
|
91.4
|
|
|
7.7
|
%
|
||||
Income from continuing operations
|
67.5
|
|
|
65.7
|
|
|
2.7
|
%
|
|
188.6
|
|
|
221.4
|
|
|
(14.8
|
)%
|
||||
Income (loss) from discontinued operations, net of tax
|
0.3
|
|
|
(0.9
|
)
|
|
(133.3
|
)%
|
|
(1.6
|
)
|
|
2.8
|
|
|
(157.1
|
)%
|
||||
Net income
|
67.8
|
|
|
64.8
|
|
|
4.6
|
%
|
|
187.0
|
|
|
224.2
|
|
|
(16.6
|
)%
|
||||
Less: Net income attributable to noncontrolling interests
|
(17.1
|
)
|
|
(14.7
|
)
|
|
16.3
|
%
|
|
(50.9
|
)
|
|
(44.3
|
)
|
|
14.9
|
%
|
||||
Net income attributable to HealthSouth
|
$
|
50.7
|
|
|
$
|
50.1
|
|
|
1.2
|
%
|
|
$
|
136.1
|
|
|
$
|
179.9
|
|
|
(24.3
|
)%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Provision for doubtful accounts
|
1.4
|
%
|
|
1.4
|
%
|
|
1.5
|
%
|
|
1.4
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
||||
Salaries and benefits
|
53.6
|
%
|
|
48.6
|
%
|
|
52.7
|
%
|
|
48.1
|
%
|
Other operating expenses
|
13.7
|
%
|
|
15.0
|
%
|
|
13.8
|
%
|
|
14.5
|
%
|
Occupancy costs
|
1.6
|
%
|
|
1.7
|
%
|
|
1.6
|
%
|
|
1.7
|
%
|
Supplies
|
4.0
|
%
|
|
4.5
|
%
|
|
4.1
|
%
|
|
4.6
|
%
|
General and administrative expenses
|
3.9
|
%
|
|
4.6
|
%
|
|
4.3
|
%
|
|
4.9
|
%
|
Depreciation and amortization
|
4.3
|
%
|
|
4.6
|
%
|
|
4.3
|
%
|
|
4.5
|
%
|
Government, class action, and related settlements
|
—
|
%
|
|
—
|
%
|
|
0.4
|
%
|
|
—
|
%
|
Professional fees—accounting, tax, and legal
|
0.1
|
%
|
|
0.7
|
%
|
|
0.1
|
%
|
|
0.4
|
%
|
Total operating expenses
|
81.2
|
%
|
|
79.6
|
%
|
|
81.3
|
%
|
|
78.7
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Medicare
|
73.2
|
%
|
|
73.1
|
%
|
|
73.0
|
%
|
|
73.9
|
%
|
Medicaid
|
3.0
|
%
|
|
2.2
|
%
|
|
2.6
|
%
|
|
1.8
|
%
|
Workers’ compensation
|
1.0
|
%
|
|
1.1
|
%
|
|
1.1
|
%
|
|
1.2
|
%
|
Managed care and other discount plans, including Medicare Advantage
|
18.9
|
%
|
|
19.0
|
%
|
|
19.2
|
%
|
|
18.8
|
%
|
Other third-party payors
|
1.7
|
%
|
|
1.9
|
%
|
|
1.9
|
%
|
|
1.7
|
%
|
Patients
|
0.6
|
%
|
|
1.1
|
%
|
|
0.7
|
%
|
|
1.0
|
%
|
Other income
|
1.6
|
%
|
|
1.6
|
%
|
|
1.5
|
%
|
|
1.6
|
%
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
Three Months Ended September 30,
|
|
Percentage Change
|
|
Nine Months Ended September 30,
|
|
Percentage Change
|
||||||||||||||
|
2015
|
|
2014
|
|
2015 vs. 2014
|
|
2015
|
|
2014
|
|
2015 vs. 2014
|
||||||||||
|
(In Millions, Except Percentage Change)
|
||||||||||||||||||||
Net operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inpatient
|
$
|
625.1
|
|
|
$
|
563.7
|
|
|
10.9
|
%
|
|
$
|
1,850.4
|
|
|
$
|
1,691.6
|
|
|
9.4
|
%
|
Outpatient and other
|
26.5
|
|
|
26.2
|
|
|
1.1
|
%
|
|
76.8
|
|
|
79.9
|
|
|
(3.9
|
)%
|
||||
Inpatient rehabilitation segment revenues
|
651.6
|
|
|
589.9
|
|
|
10.5
|
%
|
|
1,927.2
|
|
|
1,771.5
|
|
|
8.8
|
%
|
||||
Less: Provision for doubtful accounts
|
(10.2
|
)
|
|
(8.1
|
)
|
|
25.9
|
%
|
|
(31.4
|
)
|
|
(24.7
|
)
|
|
27.1
|
%
|
||||
Net operating revenues less provision for doubtful accounts
|
641.4
|
|
|
581.8
|
|
|
10.2
|
%
|
|
1,895.8
|
|
|
1,746.8
|
|
|
8.5
|
%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries and benefits
|
326.8
|
|
|
285.0
|
|
|
14.7
|
%
|
|
950.8
|
|
|
846.1
|
|
|
12.4
|
%
|
||||
Other operating expenses
|
95.8
|
|
|
86.1
|
|
|
11.3
|
%
|
|
284.5
|
|
|
252.8
|
|
|
12.5
|
%
|
||||
Supplies
|
28.9
|
|
|
26.5
|
|
|
9.1
|
%
|
|
88.6
|
|
|
81.7
|
|
|
8.4
|
%
|
||||
Occupancy costs
|
10.6
|
|
|
10.2
|
|
|
3.9
|
%
|
|
31.7
|
|
|
30.8
|
|
|
2.9
|
%
|
||||
Other income
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(50.0
|
)%
|
|
(1.0
|
)
|
|
(2.9
|
)
|
|
(65.5
|
)%
|
||||
Equity in net income of nonconsolidated affiliates
|
(2.4
|
)
|
|
(1.9
|
)
|
|
26.3
|
%
|
|
(6.3
|
)
|
|
(8.8
|
)
|
|
(28.4
|
)%
|
||||
Noncontrolling interests
|
15.6
|
|
|
14.6
|
|
|
6.8
|
%
|
|
46.4
|
|
|
44.0
|
|
|
5.5
|
%
|
||||
Segment Adjusted EBITDA
|
$
|
166.2
|
|
|
$
|
161.5
|
|
|
2.9
|
%
|
|
$
|
501.1
|
|
|
$
|
503.1
|
|
|
(0.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(Actual Amounts)
|
||||||||||||||||||||
Discharges
|
36,746
|
|
|
33,541
|
|
|
9.6
|
%
|
|
108,270
|
|
|
100,050
|
|
|
8.2
|
%
|
||||
Net patient revenue per discharge
|
$
|
17,011
|
|
|
$
|
16,806
|
|
|
1.2
|
%
|
|
$
|
17,091
|
|
|
$
|
16,908
|
|
|
1.1
|
%
|
Outpatient visits
|
138,121
|
|
|
144,510
|
|
|
(4.4
|
)%
|
|
414,388
|
|
|
436,867
|
|
|
(5.1
|
)%
|
||||
Average length of stay (days)
|
12.9
|
|
|
13.2
|
|
|
(2.3
|
)%
|
|
13.0
|
|
|
13.2
|
|
|
(1.5
|
)%
|
||||
Occupancy %
|
69.6
|
%
|
|
69.6
|
%
|
|
—
|
%
|
|
69.7
|
%
|
|
70.4
|
%
|
|
(1.0
|
)%
|
||||
# of licensed beds
|
7,422
|
|
|
6,890
|
|
|
7.7
|
%
|
|
7,422
|
|
|
6,890
|
|
|
7.7
|
%
|
||||
Full-time equivalents*
|
17,782
|
|
|
16,499
|
|
|
7.8
|
%
|
|
17,462
|
|
|
16,276
|
|
|
7.3
|
%
|
||||
Employees per occupied bed
|
3.47
|
|
|
3.46
|
|
|
0.3
|
%
|
|
3.40
|
|
|
3.37
|
|
|
0.9
|
%
|
*
|
Excludes approximately 400 full-time equivalents in each period who are considered part of corporate overhead with their salaries and benefits included in
General and administrative expenses
in our consolidated statements of operations. Full-time equivalents included in the above table represent HealthSouth employees who participate in or support the operations of our hospitals and exclude an estimate of full-time equivalents related to contract labor.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Medicare
|
84.7
|
%
|
|
97.5
|
%
|
|
84.1
|
%
|
|
96.9
|
%
|
Medicaid
|
5.7
|
%
|
|
—
|
%
|
|
5.7
|
%
|
|
—
|
%
|
Workers’ compensation
|
—
|
%
|
|
0.4
|
%
|
|
—
|
%
|
|
0.2
|
%
|
Managed care and other discount plans, including Medicare Advantage
|
9.6
|
%
|
|
1.1
|
%
|
|
10.0
|
%
|
|
1.8
|
%
|
Other third-party payors
|
—
|
%
|
|
1.0
|
%
|
|
0.1
|
%
|
|
1.1
|
%
|
Patients
|
—
|
%
|
|
—
|
%
|
|
0.1
|
%
|
|
—
|
%
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
Three Months Ended September 30,
|
|
Percentage Change
|
|
Nine Months Ended September 30,
|
|
Percentage Change
|
||||||||||||||
|
2015
|
|
2014
|
|
2015 vs. 2014
|
|
2015
|
|
2014
|
|
2015 vs. 2014
|
||||||||||
|
(In Millions, Except Percentage Change)
|
||||||||||||||||||||
Net operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Home health
|
$
|
118.3
|
|
|
$
|
7.0
|
|
|
NMF
|
|
|
$
|
333.7
|
|
|
$
|
21.0
|
|
|
NMF
|
|
Hospice
|
8.7
|
|
|
—
|
|
|
N/A
|
|
|
22.7
|
|
|
—
|
|
|
N/A
|
|
||||
Home health and hospice segment revenues
|
127.0
|
|
|
7.0
|
|
|
NMF
|
|
|
356.4
|
|
|
21.0
|
|
|
NMF
|
|
||||
Less: Provision for doubtful accounts
|
(0.5
|
)
|
|
(0.1
|
)
|
|
NMF
|
|
|
(1.8
|
)
|
|
(0.3
|
)
|
|
NMF
|
|
||||
Net operating revenues less provision for doubtful accounts
|
126.5
|
|
|
6.9
|
|
|
NMF
|
|
|
354.6
|
|
|
20.7
|
|
|
NMF
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of services sold (excluding depreciation and amortization)
|
61.7
|
|
|
4.1
|
|
|
NMF
|
|
|
171.8
|
|
|
12.5
|
|
|
NMF
|
|
||||
Support and overhead costs
|
42.6
|
|
|
1.7
|
|
|
NMF
|
|
|
121.7
|
|
|
5.1
|
|
|
NMF
|
|
||||
Noncontrolling interests
|
1.5
|
|
|
0.1
|
|
|
NMF
|
|
|
4.5
|
|
|
0.3
|
|
|
NMF
|
|
||||
Segment Adjusted EBITDA
|
$
|
20.7
|
|
|
$
|
1.0
|
|
|
NMF
|
|
|
$
|
56.6
|
|
|
$
|
2.8
|
|
|
NMF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(Actual Amounts)
|
||||||||||||||||||||
Home health:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Admissions
|
18,076
|
|
|
1,839
|
|
|
NMF
|
|
|
51,437
|
|
|
5,652
|
|
|
NMF
|
|
||||
Recertifications
|
16,542
|
|
|
247
|
|
|
NMF
|
|
|
46,130
|
|
|
726
|
|
|
NMF
|
|
||||
Episodes
|
33,542
|
|
|
2,012
|
|
|
NMF
|
|
|
94,871
|
|
|
6,144
|
|
|
NMF
|
|
||||
Average revenue per episode
|
$
|
3,123
|
|
|
$
|
3,373
|
|
|
(7.4
|
)%
|
|
$
|
3,103
|
|
|
$
|
3,313
|
|
|
(6.3
|
)%
|
Episodic visits per episode
|
19.6
|
|
|
18.8
|
|
|
4.3
|
%
|
|
19.5
|
|
|
18.6
|
|
|
4.8
|
%
|
||||
Total visits
|
721,055
|
|
|
38,940
|
|
|
NMF
|
|
|
2,027,149
|
|
|
118,293
|
|
|
NMF
|
|
||||
Cost per visit
|
$
|
72
|
|
|
$
|
105.4
|
|
|
(31.7
|
)%
|
|
$
|
71
|
|
|
$
|
107
|
|
|
(33.6
|
)%
|
Hospice:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Admissions
|
620
|
|
|
N/A
|
|
|
N/A
|
|
|
1,838
|
|
|
N/A
|
|
|
N/A
|
|
||||
Patient days
|
55,627
|
|
|
N/A
|
|
|
N/A
|
|
|
145,797
|
|
|
N/A
|
|
|
N/A
|
|
||||
Revenue per day
|
$
|
156
|
|
|
N/A
|
|
|
N/A
|
|
|
$
|
155
|
|
|
N/A
|
|
|
N/A
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
Net cash provided by operating activities
|
$
|
368.2
|
|
|
$
|
374.7
|
|
Net cash used in investing activities
|
(179.4
|
)
|
|
(162.3
|
)
|
||
Net cash provided by (used in) financing activities
|
546.1
|
|
|
(4.6
|
)
|
||
Increase in cash and cash equivalents
|
$
|
734.9
|
|
|
$
|
207.8
|
|
|
Total
|
|
October 1 through December 31, 2015
|
|
2016 - 2017
|
|
2018 - 2019
|
|
2020 and thereafter
|
||||||||||
Long-term debt obligations:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt, excluding revolving credit facility and capital lease obligations
(a)
|
$
|
2,717.2
|
|
|
$
|
1.3
|
|
|
$
|
35.6
|
|
|
$
|
39.8
|
|
|
$
|
2,640.5
|
|
Revolving credit facility
|
25.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.0
|
|
|||||
Interest on long-term debt
(b)
|
1,304.6
|
|
|
35.0
|
|
|
279.0
|
|
|
277.3
|
|
|
713.3
|
|
|||||
Capital lease obligations
(c)
|
156.8
|
|
|
3.7
|
|
|
30.6
|
|
|
24.4
|
|
|
98.1
|
|
|||||
Operating lease obligations
(d)(e)
|
257.9
|
|
|
11.9
|
|
|
84.9
|
|
|
63.8
|
|
|
97.3
|
|
|||||
Purchase obligations
(e)(f)
|
115.7
|
|
|
8.5
|
|
|
52.8
|
|
|
31.2
|
|
|
23.2
|
|
|||||
Other long-term liabilities
(g)(h)
|
3.9
|
|
|
0.3
|
|
|
0.4
|
|
|
0.4
|
|
|
2.8
|
|
|||||
Total
|
$
|
4,581.1
|
|
|
$
|
60.7
|
|
|
$
|
483.3
|
|
|
$
|
436.9
|
|
|
$
|
3,600.2
|
|
(a)
|
Included in long-term debt are amounts owed on our bonds payable and other notes payable. These borrowings are further explained in Note
4
,
Long-term Debt
, to the condensed consolidated financial statements included in Part I,
|
(b)
|
Interest on our fixed rate debt is presented using the stated interest rate. Interest expense on our variable rate debt is estimated using the rate in effect as of
September 30, 2015
. Interest pertaining to our credit agreement and bonds is included to their respective ultimate maturity dates. Interest related to capital lease obligations is excluded from this line. Future minimum payments, which are accounted for as interest, related to sale/leaseback transactions involving real estate accounted for as financings are included in this line (see Note 5,
Property and Equipment
, and Note 8,
Long-term Debt
, to the consolidated financial statements accompanying the
2014 Form 10-K
). Amounts exclude amortization of debt discounts, amortization of loan fees, or fees for lines of credit that would be included in interest expense in our consolidated statements of operations.
|
(c)
|
Amounts include interest portion of future minimum capital lease payments.
|
(d)
|
Our inpatient rehabilitation segment leases approximately 16% of its hospitals as well as other property and equipment under operating leases in the normal course of business. Our home health and hospice segment leases relatively small office spaces in the localities it serves, space for its corporate office, and other equipment under operating leases in the normal course of business. Some of our hospital leases contain escalation clauses based on changes in the Consumer Price Index while others have fixed escalation terms. The minimum lease payments do not include contingent rental expense. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease agreements. For more information, see Note 5,
Property and Equipment,
to the consolidated financial statements accompanying the
2014 Form 10-K
.
|
(e)
|
Future operating lease obligations and purchase obligations are not recognized in our condensed consolidated balance sheet.
|
(f)
|
Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on HealthSouth and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty. Our purchase obligations primarily relate to software licensing and support.
|
(g)
|
Because their future cash outflows are uncertain, the following noncurrent liabilities are excluded from the table above: general liability, professional liability, and workers' compensation risks, noncurrent amounts related to third-party billing audits, and deferred income taxes. Also, as of
September 30, 2015
, we had
$2.4 million
of total gross unrecognized tax benefits. For more information, see Note 9,
Self-Insured Risks,
Note 16,
Income Taxes,
and Note 18,
Contingencies and Other Commitments,
to the consolidated financial statements accompanying the
2014 Form 10-K
and Note
8
,
Income Taxes
, to the condensed consolidated financial statements included in Part I, Item 1,
Financial Statements (Unaudited)
, of this report.
|
(h)
|
The table above does not include
Redeemable noncontrolling interests
of
$114.1 million
because of the uncertainty surrounding the timing and amounts of any related cash outflows.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net income
|
$
|
67.8
|
|
|
$
|
64.8
|
|
|
$
|
187.0
|
|
|
$
|
224.2
|
|
(Income) loss from discontinued operations, net of tax, attributable to HealthSouth
|
(0.3
|
)
|
|
0.9
|
|
|
1.6
|
|
|
(2.8
|
)
|
||||
Provision for income tax expense
|
35.9
|
|
|
22.1
|
|
|
98.4
|
|
|
91.4
|
|
||||
Interest expense and amortization of debt discounts and fees
|
35.6
|
|
|
27.8
|
|
|
98.3
|
|
|
83.5
|
|
||||
Professional fees—accounting, tax, and legal
|
0.4
|
|
|
4.0
|
|
|
2.7
|
|
|
7.6
|
|
||||
Government, class action, and related settlements
|
—
|
|
|
—
|
|
|
8.0
|
|
|
(0.8
|
)
|
||||
Net noncash loss on disposal or impairment of assets
|
0.9
|
|
|
2.7
|
|
|
0.2
|
|
|
5.7
|
|
||||
Depreciation and amortization
|
33.7
|
|
|
27.4
|
|
|
98.3
|
|
|
80.2
|
|
||||
Loss on early extinguishment of debt
|
—
|
|
|
—
|
|
|
20.0
|
|
|
—
|
|
||||
Stock-based compensation expense
|
6.2
|
|
|
5.0
|
|
|
21.8
|
|
|
19.3
|
|
||||
Net income attributable to noncontrolling interests
|
(17.1
|
)
|
|
(14.7
|
)
|
|
(50.9
|
)
|
|
(44.3
|
)
|
||||
Reliant/CareSouth transaction costs
|
2.3
|
|
|
—
|
|
|
5.6
|
|
|
—
|
|
||||
Gain on consolidation of Fairlawn Rehabilitation Hospital
|
—
|
|
|
—
|
|
|
—
|
|
|
(27.2
|
)
|
||||
Adjusted EBITDA
|
$
|
165.4
|
|
|
$
|
140.0
|
|
|
$
|
491.0
|
|
|
$
|
436.8
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
Net cash provided by operating activities
|
$
|
368.2
|
|
|
$
|
374.7
|
|
Provision for doubtful accounts
|
(33.2
|
)
|
|
(25.0
|
)
|
||
Professional fees—accounting, tax, and legal
|
2.7
|
|
|
7.6
|
|
||
Interest expense and amortization of debt discounts and fees
|
98.3
|
|
|
83.5
|
|
||
Equity in net income of nonconsolidated affiliates
|
6.3
|
|
|
8.8
|
|
||
Net income attributable to noncontrolling interests in continuing operations
|
(50.9
|
)
|
|
(44.3
|
)
|
||
Amortization of debt-related items
|
(10.9
|
)
|
|
(9.5
|
)
|
||
Distributions from nonconsolidated affiliates
|
(4.5
|
)
|
|
(9.4
|
)
|
||
Current portion of income tax expense
|
10.4
|
|
|
9.8
|
|
||
Change in assets and liabilities
|
93.3
|
|
|
43.7
|
|
||
Premium received on bond issuance
|
(9.8
|
)
|
|
(6.3
|
)
|
||
Premium paid on bond redemption
|
11.8
|
|
|
—
|
|
||
Reliant/CareSouth transaction costs
|
5.6
|
|
|
—
|
|
||
Net cash used in operating activities of discontinued operations
|
0.8
|
|
|
1.0
|
|
||
Other
|
2.9
|
|
|
2.2
|
|
||
Adjusted EBITDA
|
$
|
491.0
|
|
|
$
|
436.8
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of Shares (or Units) Purchased
(1)
|
|
Average Price Paid per Share (or Unit) ($)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
(2)
|
||||||
July 1 through July 31, 2015
|
|
20,042
|
|
|
$
|
44.76
|
|
|
—
|
|
|
$
|
206,944,707
|
|
August 1 through August 31, 2015
|
|
11,468
|
|
|
44.86
|
|
|
—
|
|
|
206,944,707
|
|
||
September 1 through September 30, 2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
206,944,707
|
|
||
Total
|
|
31,510
|
|
|
44.80
|
|
|
—
|
|
|
|
|
(1)
|
Except as noted in the following sentence, employees tendered these shares as payments of the tax liabilities incident to the vesting of previously awarded shares of restricted stock and the exercise price and tax liability incident to the net settlement of an option exercise. In July, 245 shares were purchased pursuant to our Directors’ Deferred Stock Investment Plan. This plan is a nonqualified deferral plan allowing non-employee directors to make advance elections to defer a fixed percentage of their director fees. The plan administrator acquires the shares in the open market which are then held in a rabbi trust. The plan provides that dividends paid on the shares held for the accounts of the directors will be reinvested in shares of our common stock which will also be held in the trust. The directors’ rights to all shares in the trust are nonforfeitable, but the shares are only released to the directors after departure from our board.
|
(2)
|
On October 28, 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock. On February 14, 2014, our board of directors approved an increase in this common stock repurchase authorization from $200 million to $250 million. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
|
Item 6.
|
Exhibits
|
|
HEALTHSOUTH CORPORATION
|
|
|
|
|
|
By:
|
/s/ Douglas E. Coltharp
|
|
|
Douglas E. Coltharp
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
Date:
|
October 29, 2015
|
No.
|
|
Description
|
||
|
|
|
|
|
3.1
|
|
Restated Certificate of Incorporation of HealthSouth Corporation, as filed in the Office of the Secretary of State of the State of Delaware on May 21, 1998 (incorporated by reference to HealthSouth’s Annual Report on Form 10-K filed with the SEC on June 27, 2005).
|
||
|
|
|
|
|
3.2
|
|
Certificate of Amendment to the Restated Certificate of Incorporation of HealthSouth Corporation, as filed in the Office of the Secretary of State of the State of Delaware on October 25, 2006 (incorporated by reference to Exhibit 3.1 to HealthSouth’s Current Report on Form 8-K filed on October 31, 2006).
|
||
|
|
|
|
|
3.3
|
|
Amended and Restated Bylaws of HealthSouth Corporation, effective as of May 7, 2015 (incorporated by reference to Exhibit 3.1 to HealthSouth’s Current Report on Form 8-K filed on May 11, 2015).
|
||
|
|
|
|
|
3.4
|
|
Certificate of Designations of 6.50% Series A Convertible Perpetual Preferred Stock, as filed with the Secretary of State of the State of Delaware on March 7, 2006 (incorporated by reference to Exhibit 3.1 to HealthSouth’s Current Report on Form 8-K filed on March 9, 2006).
|
||
|
|
|
||
4.1
|
|
Sixth Supplemental Indenture, dated August 7, 2015, among HealthSouth Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as successor to The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.4 to HealthSouth’s Current Report on Form 8-K filed on August 12, 2015).
|
||
|
|
|
||
4.2
|
|
Registration Rights Agreement, dated August 7, 2015, among HealthSouth Corporation, the subsidiary guarantors named therein and the several initial purchasers named therein (incorporated by reference to Exhibit 4.5 to HealthSouth’s Current Report on Form 8-K filed on August 12, 2015).
|
||
|
|
|
||
4.3
|
|
Seventh Supplemental Indenture, dated September 16, 2015, among HealthSouth Corporation, the subsidiary guarantors named therein and Wells Fargo Bank, National Association, as successor to The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.2 to HealthSouth’s Current Report on Form 8-K filed on September 21, 2015).
|
||
|
|
|
||
4.4
|
|
Registration Rights Agreement, dated September 16, 2015, among HealthSouth Corporation, the subsidiary guarantors named therein and the representative of the several initial purchasers named therein (incorporated by reference to Exhibit 4.4 to HealthSouth’s Current Report on Form 8-K filed on September 21, 2015).
|
||
|
|
|
||
10.1
|
|
Acquisition Agreement, dated as of June 10, 2015, by and among HealthSouth Corporation, HealthSouth Acquisition Holdings, LLC, Reliant Holding Company, LLC, Reliant Hospital Partners, LLC, Nautic Partners VI, L.P., Nautic Partners VI-A, L.P., Reliant Blocker Corp., the additional indemnitors listed therein, and the sellers’ representative named therein (incorporated by reference to Exhibit 2.1 to HealthSouth’s Current Report on Form 8-K filed on June 12, 2015).
#
|
||
|
|
|
||
10.2
|
|
Fourth Amendment and Additional Tranches of Term Loans Amendment to Third Amended and Restated Credit Agreement, dated as of July 29, 2015, among HealthSouth Corporation, Barclays Bank PLC, as administrative agent and collateral agent, Citigroup Global Markets Inc., as syndication agent, Bank of America, N.A., Goldman Sachs Lending Partners LLC, and Morgan Stanley Senior Funding, Inc., as co-documentation agents, and various other lenders from time to time.
|
||
|
|
|
||
31.1
|
|
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
|
|
|
||
31.2
|
|
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
|
|
|
||
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
|
|
|
||
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
|
|
|
Leverage Ratio:
|
ABR
Spread (%) |
Eurodollar
Spread (%) |
Category 1
> 4.50 to 1.00 |
1.25
|
2.25
|
Category 2
> 3.00 to 1.00 but ≤ 4.50 to 1.00 |
1.00
|
2.00
|
Category 3
> 1.75 to 1.00 but ≤ 3.00 to 1.00 |
0.75
|
1.75
|
Category 4
≤ 1.75 to 1.00 |
0.50
|
1.50
|
Leverage Ratio:
|
ABR
Spread (%) |
Eurodollar
Spread (%) |
Category 1
> 4.50 to 1.00 |
1.25
|
2.25
|
Category 2
> 3.00 to 1.00 but ≤ 4.50 to 1.00 |
1.00
|
2.00
|
Category 3
> 1.75 to 1.00 but ≤ 3.00 to 1.00 |
0.75
|
1.75
|
Category 4
≤ 1.75 to 1.00 |
0.50
|
1.50
|
By:
|
/s/ Douglas E. Coltharp
Name: Douglas E. Coltharp Title: Executive Vice President and |
By:
|
Continental Medical of Kentucky, Inc., its General Partner
|
By:
|
Continental Rehabilitation Hospital of Arizona, Inc., its General Partner
|
By:
|
Western Neuro Care, Inc.,
|
2015A Incremental Lender
|
2015A Term Commitment
|
Barclays Bank PLC
|
$30,625,000
|
Bank of America, N.A.
|
$24,375,000
|
Citibank, N.A.
|
$24,375,000
|
Goldman Sachs Bank USA
|
$24,375,000
|
JPMorgan Chase Bank, N.A.
|
$24,375,000
|
Morgan Stanley Bank, N.A.
|
$24,375,000
|
SunTrust Bank
|
$24,375,000
|
Wells Fargo Bank, N.A.
|
$24,375,000
|
Royal Bank of Canada
|
$32,515,723
|
Regions Bank
|
$14,150,943
|
Cadence Bank NA
|
$2,083,334
|
TOTAL
|
$250,000,000
|
2015B Incremental Lender
|
2015B Term Commitment
|
Barclays Bank PLC
|
$27,777,778
|
Bank of America, N.A.
|
$27,777,778
|
Citibank, N.A.
|
$27,777,778
|
Goldman Sachs Bank USA
|
$27,777,778
|
JPMorgan Chase Bank, N.A.
|
$27,777,778
|
Morgan Stanley Bank, N.A.
|
$27,777,778
|
SunTrust Bank
|
$27,777,778
|
Wells Fargo Bank, N.A.
|
$27,777,778
|
Royal Bank of Canada
|
$27,777,776
|
TOTAL
|
$250,000,000
|
1.
|
I have reviewed this quarterly report on Form 10-Q of HealthSouth Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
October 29, 2015
|
|
|
|
|
|
By:
|
/s/ J
AY
G
RINNEY
|
|
|
|
|
Jay Grinney
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of HealthSouth Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
October 29, 2015
|
|
|
|
|
|
By:
|
/s/ D
OUGLAS
E. C
OLTHARP
|
|
|
|
|
Douglas E. Coltharp
|
|
|
|
|
Executive Vice President and
|
|
|
|
|
Chief Financial Officer
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HealthSouth Corporation.
|
Date:
|
October 29, 2015
|
|
|
|
|
|
By:
|
/s/ J
AY
G
RINNEY
|
|
|
|
|
Jay Grinney
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HealthSouth Corporation.
|
Date:
|
October 29, 2015
|
|
|
|
|
|
By:
|
/s/ D
OUGLAS
E. C
OLTHARP
|
|
|
|
|
Douglas E. Coltharp
|
|
|
|
|
Executive Vice President and
|
|
|
|
|
Chief Financial Officer
|
|