HealthSouth Confirms Restructuring Plans
Officials for Alabama-based rehabilitation hospital chain HealthSouth on Monday confirmed plans to spin off or sell three of four company divisions, the Birmingham News reports.
HealthSouth, which currently has $3.4 billion in debt related to allegations of $2.7 billion in accounting fraud, plans to restructure operations around the company inpatient rehabilitation division. The division, which has 23,700 employees at 202 facilities, accounted for 57.9% of revenue and 86% of earnings for the second quarter. HealthSouth will spin off or sell the company surgery center, outpatient rehabilitation and diagnostic divisions.
The surgery center division, which has 6,400 employees at 153 facilities, accounted 24.5% of revenue and 18.1% of earnings for the second quarter.
The outpatient rehabilitation division, which has 3,500 employees at 606 facilities, accounted for 11% of revenue and 6.8% of earnings for the second quarter.
The diagnostic division, which has 1,260 employees at 76 facilities, accounted for 6.6% of revenue for the second quarter and a 10.9% loss (Tomberlin, Birmingham News, 8/14).
HealthSouth CEO Jay Grinney said that the company will make a decision on whether to spin off or sell the three divisions within six months and will complete plans to restructure operations within one year (Reeves, AP/Philadelphia Inquirer, 8/15).
Grinney said that the HealthSouth inpatient rehabilitation division is "responsible for generating a substantial portion of ... cash flow" and has "tremendous growth opportunities associated with it." He added, "The growth prospects in the post-acute arena were significant, but, because of our debt load, we were unable to pursue those as well as pursue development opportunities in our other sectors" (Birmingham News, 8/14).
Derrick Dagnan, an analyst for Avondale Partners, said that the spin off or sale of the three divisions would help HealthSouth "plans to pay off $1 billion in debt in five years" (Ostrow, Bloomberg/South Florida Sun-Sentinel, 8/15).
HealthSouth on Monday announced a second-quarter loss of $42.4 million, or 13 cents per share, compared with a loss of $62.4 million, or 16 cents per share, a year earlier (Wall Street Journal, 8/15). The second-quarter results included preferred dividends of $9.2 million. Second-quarter revenue decreased 4%, to $787.5 million from $818.3 million a year earlier.
In addition, HealthSouth officials said that the company will seek reenlistment on the New York Stock Exchange.
HealthSouth also announced a one-for-five reverse stock split, which will consolidate 398.2 million outstanding shares into 80 million shares (AP/Philadelphia Inquirer, 8/15).