HealthSouth Corp. held its first annual meeting without fired CEO Richard Scrushy on Thursday, presenting investors with a no-nonsense plan for continued recovery from a fraud that nearly drove the rehabilitation chain to ruin.
While the Scrushy era was marked by quick growth and extravagances including a corporate air fleet and a traveling road show, only to collapse in scandal, successor Jay Grinney said the company was now focused on building capital, implementing a long-term plan and getting HealthSouth's stock relisted on a major exchange.
HealthSouth and Scrushy, its primary founder, are engaged in a court fight over his claims for as much as $100 million in compensation related to his ouster, but his name is gone from the conference center where the meeting was held. His old office has been divided into two smaller ones.
"He really has no presence here," Grinney said in an interview.
Investors gave the new management team a round of applause at the end of the shareholder meeting, HealthSouth's first since May 2002.
"I believe this group of people we have in charge now are going in the right direction," said Truman Malone, a retired investor from Birmingham. "I think it's going to take two or three years before they can really make some money."
HealthSouth stock, which traded for nearly $20 a share as recently as late 2001, has been selling for around $5 a share for almost two years in over-the-counter trading. Shares sold for $4.92 at midday Thursday.
Stockholder Karen Kassouf of Atlanta said the company seemed well poised to take advantage of an expanding health care market as the baby boom generation ages.
"From what I read and hear I believe they have built a solid foundation," said Kassouf, managing partner of Cedar Ventures, a consulting and venture capital management firm in Atlanta.
HealthSouth was nearly driven into bankruptcy after the Securities and Exchange Commission filed suit alleging a massive fraud in March 2003, and it was only this year that the company finished reconstructing its financial statements _ a major step toward more normal operations.
Jurors acquitted Scrushy of all charges following a six-month trial, but HealthSouth's current management has publicly accused him of directing the scheme to overstate earnings in what prosecutors said was a $2.7 billion fraud.
Fifteen former executives pleaded guilty, including all five finance chiefs who served under Scrushy, and a 16th was convicted by jurors.
Scrushy was fired in 2003, but he quit HealthSouth's board only this month. At the meeting, shareholders approved a slate of 10 directors to serve through next year, but they defeated a stockholder proposal to require an independent chairman.
HealthSouth chairman Jon F. Hanson said the post-fraud changes at HealthSouth included a corporate culture that has switched from being "CEO-centered" to one that values all the company's 40,000 employees.
HealthSouth now "meets or exceeds" all the requirements of the Sarbanes-Oxley corporate reporting law, he said.
"I believe the proper foundation has been laid for HealthSouth's success," he said.
Grinney said managers will concentrate on stabilizing HealthSouth finances in 2006 through a possible refinancing or the sale of the company's diagnostic division. Officials said HealthSouth would also seek tax refunds of as much as $261 million for taxes paid on overstated income during the fraud.
HealthSouth hopes to apply for admission to a national stock exchange by mid-2006, he said, but the company might not go back to the New York Stock Exchange, which delisted its stock after the fraud was revealed.