HealthSouth to use free cash flow for debt prepayment, acquisitions

By Aleesia Forni

Columbus, Ohio, Sept. 8 - HealthSouth Corp. plans to use some of its free cash flow for additional debt prepayment, including its revolver, term loan and senior notes.

However, the company has moved debt reduction down on its list of priorities for use of free cash flow, which the company has primarily focused on in the past.

"Our view is ... health care is a very volatile industry, and there's always going to be something that's going to be hitting it at some level," chief executive officer Jay Grinney said during the company's presentation at Baird's 2011 Health Care Conference. "We wanted to make sure that our balance sheet was strong enough for us to be able to absorb whatever hits [the health care industry]."

But having made progress on reducing its borrowings, HealthSouth now plans to reinvest its free cash flow in the growth of its business, including hospital acquisitions and bed expansions.

"We've got a couple of hospitals where we could buy out the lease, and we're definitely going to be pursuing that," Grinney said.

During the current "uncertain times," the company plans on making its decisions regarding free cash flow in a "highly disciplined and flexible manner," according to Grinney.

"[This] makes a tremendous amount of sense versus going out and making a bet-the-farm kind of transaction that could conceivably result in buying something today that is significantly devalued tomorrow," Grinney said.

HealthSouth is a Birmingham, Ala.-based inpatient rehabilitation services provider.

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