HEALTHSOUTH Reports Strong Revenue, Volume, And Earnings Growth For Second Quarter 2016 And Raises Full-Year 2016 Guidance
BIRMINGHAM, Ala., July 28, 2016 /PRNewswire/ -- HealthSouth Corporation (NYSE: HLS), one of the nation's largest providers of post-acute healthcare services, offering both facility-based and home-based post-acute services, today reported its results of operations for the second quarter ended June 30, 2016.
"The second quarter was another strong quarter for HealthSouth with volume, revenue, and earnings from our recent acquisitions complementing solid organic growth," said Jay Grinney, President and Chief Executive Officer of HealthSouth. "The quarter also was successful from a development standpoint with the announcement of four, new hospital projects, two of which will be in states where we currently do not have a hospital (North Carolina and Oklahoma) and two in existing states (Alabama and Missouri). With these newly announced projects, we have 11 inpatient rehabilitation facilities that are scheduled to come on-line over the next two to three years and contribute to future growth. Our home health partner, Encompass Home Health and Hospice, also added to its portfolio in the quarter with the acquisition of two home health agencies and two hospice agencies, as well as the opening of one de novo home health agency."
Consolidated Results | ||||||||||||||
Growth | ||||||||||||||
Q2 2016 | Q2 2015 | Dollars | Percent | |||||||||||
(In Millions, Except per Share Data) | ||||||||||||||
Net operating revenues | $ | 920.7 | $ | 764.4 | $ | 156.3 | 20.4 | % | ||||||
Income from continuing operations attributable to HealthSouth per diluted share | 0.65 | 0.47 | 0.18 | 38.3 | % | |||||||||
Adjusted earnings per share | 0.69 | 0.59 | 0.10 | 16.9 | % | |||||||||
Cash flows provided by operating activities | 152.2 | 102.9 | 49.3 | 47.9 | % | |||||||||
Adjusted EBITDA | 204.3 | 169.5 | 34.8 | 20.5 | % | |||||||||
Adjusted free cash flow | 115.3 | 94.5 | 20.8 | 22.0 | % | |||||||||
Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | |||||||||||||
Cash flows provided by operating activities | 311.9 | 204.9 | 107.0 | 52.2 | % | |||||||||
Adjusted free cash flow | 244.8 | 173.9 | 70.9 | 40.8 | % | |||||||||
Revenue growth primarily resulted from strong volumes in both of the Company's operating segments and included the effect of the Company's acquisitions of Reliant Hospital Partners, LLC and affiliated entities ("Reliant") on October 1, 2015 and CareSouth Health System, Inc. ("CareSouth") on November 2, 2015. Revenue growth was the primary driver of the 20.5% increase in Adjusted EBITDA.
The increase in adjusted earnings per share primarily resulted from increased Adjusted EBITDA. Adjusted earnings per share also included the impact of higher interest expense related to the financing of the Reliant and CareSouth acquisitions, higher depreciation and amortization related to acquisitions and capital investments, and a lower share count resulting from share repurchases.
Adjusted free cash flow also increased primarily as a result of the Company's growth in Adjusted EBITDA. Adjusted free cash flow in the first half of 2016 included increased cash interest expense related to the acquisitions of Reliant and CareSouth and lower working capital primarily attributable to payroll-related liabilities.
See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.
Inpatient Rehabilitation Segment Results | ||||||||||||||
Growth | ||||||||||||||
Q2 2016 | Q2 2015 | Dollars | Percent | |||||||||||
Net operating revenues: | (In Millions) | |||||||||||||
Inpatient | $ | 721.2 | $ | 618.7 | $ | 102.5 | 16.6 | % | ||||||
Outpatient and other | 31.4 | 26.6 | 4.8 | 18.0 | % | |||||||||
Total segment revenue | $ | 752.6 | $ | 645.3 | $ | 107.3 | 16.6 | % | ||||||
(Actual Amounts) | ||||||||||||||
Discharges | 41,365 | 36,408 | 4,957 | 13.6 | % | |||||||||
Same-store discharge growth | 1.9 | % | ||||||||||||
Net patient revenue per discharge | $ | 17,435 | $ | 16,994 | $ | 441 | 2.6 | % | ||||||
(In Millions) | ||||||||||||||
Adjusted EBITDA | $ | 204.1 | $ | 170.5 | $ | 33.6 | 19.7 | % | ||||||
- Revenue - Revenue growth resulted primarily from same-store and new-store volume growth. Discharge growth from new stores resulted from the Company's acquisitions of Reliant (October 2015) and Cardinal Hill Rehabilitation Hospital (May 2015), the Company's joint venture with CHI St. Vincent in Hot Springs, Arkansas (February 2016), and the de novo opened in Franklin, Tennessee (December 2015).
Growth in net patient revenue per discharge benefited by approximately 90 basis points from an approximate $5 million Supplemental Security Income ("SSI") adjustment that negatively impacted revenue in the second quarter of 2015.
The increase in outpatient and other revenues primarily was due to the acquisition of Reliant.
- Adjusted EBITDA - Inpatient rehabilitation segment Adjusted EBITDA increased by 19.7% driven primarily by revenue growth. All operating expenses as a percent of net operating revenues were impacted in the second quarter of 2015 by the aforementioned SSI adjustment. Salaries and benefits in the second quarter of 2016 included the positive impact of $2.4 million in rebates associated with a contractual periodic pharmacy benefit reconciliation for 2014 and 2015. Hospital operating expenses (other operating expenses, supplies, and occupancy costs) as a percent of net operating revenues improved in the second quarter of 2016 compared to the second quarter of 2015 primarily due to continued supply chain initiatives. This improvement in hospital operating expenses occurred in spite of an increase in occupancy costs as a percent of net operating revenues due to the acquisition of Reliant.
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