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HealthSouth Reports Strong Results for Third Quarter 2012 and Updates Full-Year Guidance

    HealthSouth Reports Strong Results for Third Quarter 2012 and Updates
                              Full-Year Guidance

Revenue Growth of 7.9%

Discharge Growth of 4.2%

Cash Provided by Operating Activities of $107.2 million ($302.2 million
Year-to-Date)

Adjusted EBITDA Increased by 13.3%

PR Newswire

BIRMINGHAM, Ala., Oct. 25, 2012

BIRMINGHAM, Ala., Oct. 25, 2012 /PRNewswire/ --HealthSouth Corporation (NYSE:
HLS), the nation's largest owner and operator of inpatient rehabilitation
hospitals, today reported its results of operations for the third quarter
ended September30, 2012.

"HealthSouth's third quarter was solid in every respect," said Jay Grinney,
President and Chief Executive Officer of HealthSouth. "Our high-quality,
cost-effective hospitals treated 4.2% more patients than in the third quarter
of 2011 resulting in a 13.3% quarter-over-quarter increase in Adjusted EBITDA.
We enhanced the flexibility of our capital structure through the issuance of
$275 million of 5.75% senior notes maturing in 2024 and continued to lay the
foundation for future growth through the development and construction of three
new hospitals and the execution of a letter of intent to purchase Walton
Rehabilitation Hospital in Augusta, Georgia."

Third Quarter Results

  oConsolidated net operating revenues were $537.0 million for the third
    quarter of 2012 compared to $497.7 million for the third quarter of 2011,
    or an increase of 7.9%. This increase was attributable to a 4.2% increase
    in patient discharges and a 4.4% increase in net patient revenue per
    discharge. Discharge growth was comprised of 2.5% growth from new stores
    and a 1.7% increase in same-store discharges. Approximately 130 basis
    points of discharge growth from new stores resulted from the consolidation
    of St. Vincent Rehabilitation Hospital beginning in the third quarter of
    2012, as discussed below. Discharge growth in the third quarter of 2012
    was unfavorably impacted by the timing of patient discharges from the last
    week of September into the first week of October. We experienced a modest
    increase in the length of stay of our September patient population which
    we have seen normalize in October. Because we recognize revenue on a per
    diem basis, much of the revenue associated with the carryover patients was
    recognized in September even though the discharges occurred in October.
    Net patient revenue per discharge in the third quarter of 2012 compared to
    the same period of 2011 was favorably impacted by the aforementioned
    increase in length of stay and also benefited from pricing adjustments
    from Medicare and managed care payors, higher average acuity for the
    patients served, and a higher percentage of Medicare patients.

  oIncome from continuing operations attributable to HealthSouth per share
    for the third quarter of 2012 was $0.44 per share compared to $0.17 per
    share for the same period of 2011. Earnings per share for the third
    quarter of 2012 reflected strong operating results as well as a $4.9
    million gain resulting from the consolidation of St. Vincent
    Rehabilitation Hospital and a $3.5 million gain related to a recovery from
    Richard Scrushy. The net after-tax impact of these two items on earnings
    in the third quarter of 2012 approximated $0.05 per share. Earnings per
    share in the third quarter of 2011 included a $12.7 million, or $0.08 per
    share after tax, loss on early extinguishment of debt that resulted from
    the optional redemption of a portion of the Company's then-outstanding
    10.75% Senior Notes due 2016. The Company's basic and diluted earnings per
    share were the same for both periods.

  oCash flows provided by operating activities were $302.2 million for the
    nine months ended September30, 2012, compared to $213.2 million for the
    same period of 2011. This increase was primarily due to increased net
    operating revenues, improved operating leverage, and a decrease in
    interest expense. Cash flows provided by operating activities for the nine
    months ended September 30, 2011 included $26.9 million related to the
    premium paid in conjunction with the redemption of the Company's 10.75%
    Senior Notes and a $15.8 million decrease in the liability associated with
    refunds due patients and other third-party payors. The decrease in this
    liability primarily related to payments associated with previously
    disclosed settlements related to audits of unclaimed property.

  oAdjusted EBITDA (see attached supplemental information) for the three
    months ended September30, 2012 was $125.2 million compared to $110.5
    million for the three months ended September30, 2011, or an increase of
    13.3%. This improvement was primarily driven by continued revenue growth
    as well as improved operating leverage and labor productivity.

  oAdjusted free cash flow (see attached supplemental information) for the
    three months ended September30, 2012 was $71.6 million compared to $32.3
    million for the same period of 2011. Increases to adjusted free cash flow
    resulted from continued Adjusted EBITDA growth, the timing of interest and
    payroll payments, and lower interest expense offset by the planned
    increase in maintenance capital expenditures including investments in the
    Company's electronic clinical information system and hospital refresh
    projects.

"During the quarter, we took advantage of the favorable conditions available
to us in the fixed income market and issued $275 million of senior unsecured
notes maturing in 2024 carrying a coupon of 5.75%," said Doug Coltharp,
Executive Vice President and Chief Financial Officer of HealthSouth. "We
utilized a portion of the proceeds to fund an optional redemption of 10% of
each of our existing senior unsecured notes maturing in 2018 and 2022 and to
pay down the outstanding balance on our revolving credit facility. These
transactions further enhance our liquidity and the flexibility of our capital
structure, and we remain confident we will be presented with compelling
near-term opportunities to offset any residual dilution associated with the
new notes offering."

Consolidation of St. Vincent Rehabilitation Hospital

During the third quarter of 2012, the Company negotiated with its partner to
amend the joint venture agreement related to St. Vincent Rehabilitation
Hospital which resulted in a change in accounting for this hospital from the
equity method of accounting to a consolidated entity. The amendment revised
certain participatory rights held by the Company's joint venture partner
resulting in HealthSouth gaining control of this entity from an accounting
perspective. As a result of the consolidation of this hospital and the
remeasurement of the Company's previously held equity interest at fair value,
the Company recorded a $4.9 million gain as part of other income during the
three and nine months ended September 30, 2012. See the attached supplemental
schedule for additional information.

2012 Guidance

Adjusted EBITDA and earnings per share in the fourth quarter of 2012 will be
impacted by the Company's decision to replace its 2012 merit increase with a
one-time, merit-based, year-end bonus to be paid in December 2012 to all
eligible non-management employees. The Company did this to reward its
non-management employees for their performance in 2012 while not carrying the
additional costs associated with a merit increase into 2013 and beyond where
the Company faces the impact of sequestration and the risk of potential
additional Medicare reimbursement reductions. The Company expects salaries and
benefits to increase by approximately $11 million in the fourth quarter of
2012 as a result of this special bonus. This bonus is approximately $5.5
million more than included in the Company's previous 2012 guidance estimates
that assumed a 2.25% merit increase for all non-management employees effective
October 1, 2012.

Based on its year-to-date results and including the impact of the bonus to be
paid to non-management employees in December 2012, the Company is:

  onarrowing its full-year 2012 Adjusted EBITDA guidance to a range of $490
    million to $495 million from a range of $487 million to $495 million.

  oraising its full-year 2012 guidance for income from continuing operations
    attributable to HealthSouth per share to a range of $1.49 to $1.53 per
    share from a range of $1.45 to $1.50 per share.

Earnings Conference Call and Webcast

The Company will host an investor conference call at 8:00 a.m. Eastern Time on
Friday, October26, 2012 to discuss its results for the third quarter of 2012.
For reference during the call, the Company will post certain supplemental
slides at http://investor.healthsouth.com.

The conference call may be accessed by dialing 877-587-6761 and giving the
pass code 27207089. International callers should dial 706-679-1635 and give
the same pass code. Please call approximately ten minutes before the start of
the call to ensure you are connected.  The conference call will also be
webcast live and will be available at http://investor.healthsouth.com by
clicking on an available link.

A replay of the conference call will be available, beginning approximately two
hours after the completion of the conference call, from October 26, 2012 until
November 9, 2012. To access the replay, please dial 800-585-8367.
International callers should dial 404-537-3406. The webcast will also be
archived for replay purposes after the live broadcast at
http://investor.healthsouth.com.

About HealthSouth

HealthSouth is the nation's largest owner and operator of inpatient
rehabilitation hospitals in terms of patients treated and discharged,
revenues, and number of hospitals. Operating in 27 states across the country
and in Puerto Rico, HealthSouth serves patients through its network of
inpatient rehabilitation hospitals, outpatient rehabilitation satellite
clinics, and home health agencies. HealthSouth's hospitals provide a higher
level of rehabilitative care to patients who are recovering from conditions
such as stroke and other neurological disorders, orthopedic, cardiac and
pulmonary conditions, brain and spinal cord injuries, and amputations.
HealthSouth can be found on the Web at www.healthsouth.com.

Other Information

The information in this press release is summarized and should be read in
conjunction with the Company's Quarterly Report on Form 10-Q for the quarter
ended September30, 2012 (the "September 2012 Form 10-Q"), when filed, as well
as the Company's Current Report on Form 8-K filed on October25, 2012. In
addition, the Company will post supplemental slides today on its website at
http://investor.healthsouth.com for reference during its October26, 2012
earnings call.

When filed, the September 2012 Form 10-Q can be found on the Company's website
at http://investor.healthsouth.com and the SEC's website at www.sec.gov.

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)
                                      Three Months Ended  Nine Months Ended

                                      September 30,      September 30,
                                      2012       2011     2012       2011
                                      (In Millions, Except Per Share Data)
Net operating revenues                $  537.0   $ 497.7  $ 1,609.0  $ 1,508.8
Less: Provision for doubtful accounts (7.0)      (5.1)    (19.8)     (14.9)
Net operating revenues less provision
for                                   530.0      492.6    1,589.2    1,493.9

doubtful accounts
Operating expenses:
Salaries and benefits                 262.3      245.0    780.7      730.6
Other operating expenses              75.4       70.3     222.8      216.6
General and administrative expenses   29.3       26.4     87.3       80.7
Supplies                              23.8       24.7     76.2       76.7
Depreciation and amortization         21.3       19.5     60.8       58.6
Occupancy costs                       11.8       12.5     36.6       36.2
Loss on disposal of assets            1.6        2.8      3.0        3.9
Government, class action, and related
                                      (3.5)      —        (3.5)      (10.6)
settlements
Professional fees—accounting, tax,    4.1        4.0      13.2       16.2
and legal
Total operating expenses              426.1      405.2    1,277.1    1,208.9
Loss on early extinguishment of debt  1.3        12.7     1.3        38.8
Interest expense and amortization of  23.5       26.3     69.8       96.3
debt discounts and fees
Other income                          (6.1)      (0.2)    (7.4)      (1.5)
Equity in net income of               (3.3)      (3.1)    (9.7)      (8.8)
nonconsolidated affiliates
Income from continuing operations
before                                88.5       51.7     258.1      160.2

income tax expense
Provision for income tax expense      28.1       18.1     84.1       21.9
Income from continuing operations     60.4       33.6     174.0      138.3
(Loss) income from discontinued
operations,                           (0.5)      34.7     2.6        53.8

net of tax
Net income                            59.9       68.3     176.6      192.1
Less: Net income attributable to
noncontrolling                        (12.8)     (11.3)   (38.6)     (33.4)

interests
Net income attributable to            47.1       57.0     138.0      158.7
HealthSouth
Less: Convertible perpetual preferred
stock                                 (5.7)      (6.5)    (18.1)     (19.5)

dividends
Less: Repurchase of convertible
perpetual                             —          —        (0.8)      —

preferred stock
Net income attributable to
HealthSouth                           $  41.4    $ 50.5   $ 119.1    $ 139.2

common shareholders
Weighted average common shares

outstanding:
Basic                                 94.7       93.3     94.6       93.2
Diluted                               108.1      109.2    108.2      109.1
Basic and diluted earnings per common

share:
Income from continuing operations

attributable to HealthSouth common   $  0.44    $ 0.17   $ 1.23     $ 0.90

shareholders
Income from discontinued operations,
net of

tax, attributable to HealthSouth     —          0.37     0.03       0.59
common

shareholders
Net income attributable to
HealthSouth                           $  0.44    $ 0.54   $ 1.26     $ 1.49

common shareholders
Amounts attributable to HealthSouth

common shareholders:
Income from continuing operations     $  47.6    $ 22.2   $ 135.4    $ 103.8
(Loss) income from discontinued
operations,                           (0.5)      34.8     2.6        54.9

net of tax
Net income attributable to            $  47.1    $ 57.0   $ 138.0    $ 158.7
HealthSouth



HealthSouth Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)
                                                   September30,  December31,
                                                   2012           2011
                                                   (In Millions)
Assets
Current assets:
Cash and cash equivalents                          $  163.2       $  30.1
Accounts receivable, net of allowance for doubtful
accounts of $26.7                                  247.5          222.8

 in 2012; $21.4 in 2011
Other current assets                               138.1          138.1
Total current assets                               548.8          391.0
Property and equipment, net                        739.3          664.4
Goodwill                                           437.3          421.7
Intangible assets, net                             73.6           57.7
Deferred income tax assets                         526.5          608.1
Other long-term assets                             130.7          128.3
Total assets                                       $  2,456.2     $  2,271.2
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable                                   $  51.9        $  45.4
Accrued expenses and other current liabilities     325.9          267.8
Total current liabilities                          377.8          313.2
Long-term debt, net of current portion             1,242.3        1,235.8
Other long-term liabilities                        137.9          133.2
                                                   1,758.0        1,682.2
Commitments and contingencies
Convertible perpetual preferred stock              342.2          387.4
Shareholders' equity:
HealthSouth shareholders' equity                   244.7          117.0
Noncontrolling interests                           111.3          84.6
Total shareholders' equity                         356.0          201.6
Total liabilities and shareholders' equity         $  2,456.2     $  2,271.2



HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)
                                               Nine Months Ended September 30,
                                               2012             2011
                                               (In Millions)
Cash flows from operating activities:
Net income                                     $    176.6       $   192.1
Income from discontinued operations            (2.6)            (53.8)
Adjustments to reconcile net income to net
cash provided by operating activities—
Provision for doubtful accounts                19.8             14.9
Provision for government, class action, and    (3.5)            (10.6)
related settlements
Depreciation and amortization                  60.8             58.6
Loss on early extinguishment of debt           1.3              38.8
Amortization of debt discounts                 2.7              3.3
Equity in net income of nonconsolidated        (9.7)            (8.8)
affiliates
Distributions from nonconsolidated affiliates  7.9              9.7
Stock-based compensation                       18.1             14.4
Deferred tax expense                           80.4             23.4
Other                                          (2.3)            3.8
Increase in assets—
Accounts receivable                            (42.3)           (27.4)
Other assets                                   (8.0)            (13.1)
Increase (decrease) in liabilities—
Accounts payable                               1.4              0.8
Other liabilities                              (5.8)            (10.2)
Premium on bond issuance                       —                4.1
Premium paid on redemption of bonds            —                (26.9)
Refunds due patients and other third-party     3.3              (15.8)
payors
Government, class action, and related          2.6              6.5
settlements
Net cash provided by operating activities of   1.5              9.4
discontinued operations
Total adjustments                              128.2            74.9
Net cash provided by operating activities      302.2            213.2
(Continued) 



HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)
                                              Nine Months Ended September 30,
                                              2012             2011
                                              (In Millions)
Cash flows from investing activities:
Purchases of property and equipment           (112.5)          (55.9)
Capitalized software costs                    (15.7)           (6.0)
Purchase of restricted investments            (8.6)            (8.0)
Net change in restricted cash                 7.6              6.3
Net settlements on interest rate swaps        —                (10.9)
Other                                         (2.8)            —
Net cash provided by (used in) investing
activities of discontinued operations
Proceeds from sale of LTCHs                   —                107.9
Other investing activities of discontinued    7.7              (0.7)
operations
Net cash (used in) provided by investing      (124.3)          32.7
activities
Cash flows from financing activities:
Principal borrowings on term loan             —                100.0
Proceeds from bond issuance                   275.0            120.0
Principal payments on debt, including         (101.3)          (503.0)
pre-payments
Borrowings on revolving credit facility       135.0            338.0
Payments on revolving credit facility         (245.0)          (238.0)
Principal payments under capital lease        (8.9)            (10.1)
obligations
Repurchase of convertible perpetual preferred (46.0)           —
stock
Debt issue costs                              (7.0)            (4.3)
Dividends paid on convertible perpetual       (18.9)           (19.5)
preferred stock
Distributions paid to noncontrolling          (37.6)           (34.0)
interests of consolidated affiliates
Contributions from consolidated affiliates    9.5              —
Other                                         0.4              4.3
Net cash used in financing activities         (44.8)           (246.6)
Increase (decrease) in cash and cash          133.1            (0.7)
equivalents
Cash and cash equivalents at beginning of     30.1             48.3
period
Cash and cash equivalents of facilities in
discontinued operations                       —                0.1

atbeginning of period
Less: Cash and cash equivalents of facilities
in discontinued                               —                —

operations at end of period
Cash and cash equivalents at end of period    $    163.2       $    47.7



HealthSouth Corporation and Subsidiaries

Supplemental Information

Earnings Per Share
                                          QTD
                                          Q3 2012            Q3 2011
                                          (In Millions, Except Per Share Data)
Adjusted EBITDA                           $     125.2        $    110.5
Interest expense and amortization of debt (23.5)             (26.3)
discounts and fees
Depreciation and amortization             (21.3)             (19.5)
Stock-based compensation expense          (6.1)              (4.9)
Non-cash loss on disposal of assets       (1.6)              (2.8)
                                          72.7               57.0
Certain nonrecurring expenses:
Government, class action and related      3.5                —
settlements
Professional fees—accounting, tax, and    (4.1)              (4.0)
legal
Loss on early extinguishment of debt      (1.3)              (12.7)
Gain on consolidation of St. Vincent      4.9                —
Rehabilitation Hospital
Pre-tax income                            75.7               40.3
Income tax expense ^(1)                   (28.1)             (18.1)
Income from continuing operations ^(2)    $     47.6         $    22.2
Basic shares                              94.7               93.3
Diluted shares                            108.1              109.2
Basic earnings per share ^(2)             $     0.44         $    0.17
Diluted earnings per share ^(2) (3)       $     0.44         $    0.17

^(1)  Cash income tax expense for the three months ended September30, 2012
         and 2011 was $2.1 million and $1.7 million, respectively.
^(2) Income from continuing operations attributable to HealthSouth
         Basic and diluted earnings per share for the third quarter of 2012
         are the same due to rounding. For the third quarter of 2011, adding
         back the dividends for the Company's convertible perpetual preferred
         stock to income from continuing operations causes a per share
         increase when calculating diluted earnings per share resulting in an
^(3)  antidilutive per share amount. Therefore, basic and diluted earnings
         per share are the same. A computation of basic and diluted earnings
         per share can be found in Note 8, Earnings per Common Share, to the
         condensed consolidated financial statements included in Part I, Item
         1, Financial Statements (Unaudited), of our Form 10-Q for the
         quarterly period ended September30, 2012, when filed.





HealthSouth Corporation and Subsidiaries

Supplemental Information

Earnings Per Share
                                         YTD
                                         Q3 2012        Q3 2011
                                         (In Millions, Except Per Share Data)
Adjusted EBITDA                          $   377.3      $   343.3
Interest expense and amortization of     (69.8)         (96.3)
debt discounts and fees
Depreciation and amortization            (60.8)         (58.6)
Stock-based compensation expense         (18.1)         (14.4)
Non-cash loss on disposal of assets      (3.0)          (3.9)
                                         225.6          170.1
Certain nonrecurring expenses:
Government, class action and related     3.5            10.6
settlements
Professional fees—accounting, tax, and   (13.2)         (16.2)
legal
Loss on early extinguishment of debt     (1.3)          (38.8)
Gain on consolidation of St. Vincent     4.9            —
Rehabilitation Hospital
Pre-tax income                           219.5          125.7
Income tax expense ^(1)                  (84.1)         (21.9)      ^(2)
Income from continuing operations ^(3)   $   135.4      $   103.8
Basic shares                             94.6           93.2
Diluted shares                           108.2          109.1
Basic earnings per share ^(3)            $   1.23       $   0.90
Diluted earnings per share ^(3) (4)      $   1.23       $   0.90

^(1)    Cash income tax expense for the nine months ended September30, 2012
          and 2011 was $6.4 million and $5.9 million, respectively.
          Includes an approximate $28 million, or $0.30 per share, benefit
          related to the Company's settlement of federal income tax claims
^(2)   with the IRS for tax years 2007 and 2008 and a reduction in
          unrecognized tax benefits due to the lapse of the statute of
          limitations for certain federal and state claims.
^(3)  Income from continuing operations attributable to HealthSouth
          Adding back the dividends for the Company's convertible perpetual
          preferred stock to income from continuing operations causes a per
          share increase when calculating diluted earnings per share resulting
          in an antidilutive per share amount. Therefore, basic and diluted
^(4) earnings per share are the same. A computation of basic and diluted
          earnings per share can be found in Note 8, Earnings per Common
          Share, to the condensed consolidated financial statements included
          in Part I, Item 1, Financial Statements (Unaudited), of our Form
          10-Q for the quarterly period ended September30, 2012, when filed.



HealthSouth Corporation and Subsidiaries

Supplemental Information

Impact of Consolidation of St. Vincent Rehabilitation Hospital
                          St. Vincent          St. Vincent

                          Rehabilitation       Rehabilitation

                          Hospital as        Hospital as Equity

                          Consolidated Entity  Method Entity
                                               Q3 2012 Without
                          Q3 2012 As Reported                       Difference
                                               Accounting Change
                          (In Millions)
Net patient revenue -     $     498.9          $     493.2          $   5.7
inpatient
Net patient revenue -
outpatient and other      38.1                 38.0                 0.1

revenues
Net operating revenues    $     537.0          $     531.2          $   5.8
Adjusted EBITDA           $     125.2          $     124.7          $   0.5
                          (Actual Amounts)
Discharges                30,569               30,199               370
Outpatient visits         221,648              219,566              2,082
Average length of stay    13.6                 13.6                 —
(days)
Occupancy %               68.3%                68.1%                0.2%
# of licensed beds        6,598                6,538                60
Occupied beds             4,506                4,452                54
Full-time equivalents     15,545               15,388               157
Employees per occupied    3.46                 3.47                 (0.01)
bed



HealthSouth Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Income to Adjusted EBITDA
                                       Three Months Ended  Nine Months Ended

                                       September 30,      September 30,
                                       2012       2011     2012      2011
                                       (In Millions)
Net income                             $  59.9    $ 68.3   $  176.6  $ 192.1
Loss (income) from discontinued
operations, net of                     0.5        (34.8)   (2.6)     (54.9)

 tax, attributable to HealthSouth
Provision for income tax expense       28.1       18.1     84.1      21.9
Interest expense and amortization of
debt discounts                         23.5       26.3     69.8      96.3

and fees
Loss on early extinguishment of debt   1.3        12.7     1.3       38.8
Professional fees-accounting, tax, and 4.1        4.0      13.2      16.2
legal
Government, class action, and related  (3.5)      —        (3.5)     (10.6)
settlements
Net noncash loss on disposal of assets 1.6        2.8      3.0       3.9
Depreciation and amortization          21.3       19.5     60.8      58.6
Stock-based compensation expense       6.1        4.9      18.1      14.4
Net income attributable to             (12.8)     (11.3)   (38.6)    (33.4)
noncontrolling interests
Gain on consolidation of St. Vincent
Rehabilitation                         (4.9)      —        (4.9)     —

 Hospital
Adjusted EBITDA                        $  125.2   $ 110.5  $  377.3  $ 343.3



HealthSouth Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free
Cash Flow
                                                                    Year Ended
                        Three Months Ended       Nine Months Ended
                        September 30,            September 30,      December
                                                                    31,
                        2012           2011      2012      2011     2011
                        (In Millions)
Net cash provided by
operating               $   107.2      $  55.1   $  302.2  $ 213.2  $   342.7

 activities
Impact of discontinued  0.2            (2.2)     (1.5)     (9.4)    (9.1)
operations
Net cash provided by
operating activities
                        107.4          52.9      300.7     203.8    333.6
of continuing
operations
Capital expenditures    (17.9)         (12.8)    (68.0)    (35.1)   (50.8)
for maintenance
Net settlement on       —              —         —         (10.9)   (10.9)
interest rate swaps
Dividends paid on
convertible perpetual   (5.8)          (6.5)     (18.9)    (19.5)   (26.0)

 preferred stock
Distributions paid to
noncontrolling
interests               (13.6)         (10.7)    (37.6)    (34.0)   (44.2)

 of consolidated
affiliates
Nonrecurring items:
Income tax refunds
related to prior        —              (3.5)     —         (6.9)    (7.9)
periods
Premium received on     —              —         —         (4.1)    (4.1)
bond issuance
Premium paid on         —              8.9       —         26.9     26.9
redemption of bonds
Cash paid for:
Professional
fees—accounting, tax,   4.1            4.0       13.2      16.2     21.0
and legal
Government, class
action, and related

 settlements,
including certain       (2.6)          —         (2.6)     7.7      5.7
settlements

 relatedto unclaimed
property
Adjusted free cash flow $   71.6       $  32.3   $  186.8  $ 144.1  $   243.3

For the three months ended September30, 2012, net cash used in investing
activities was $36.0 million and resulted primarily from capital expenditures.
Net cash provided by financing activities during the three months ended
September30, 2012 was $50.8 million and resulted primarily from net proceeds
from debt transactions offset by distributions paid to noncontrolling
interests of consolidated affiliates and dividends paid on the Company's
convertible perpetual preferred stock.

For the three months ended September30, 2011, net cash provided by investing
activities was $81.9 million and resulted primarily from proceeds from the
sale of five long-term acute care hospitals in August 2011. Net cash used in
financing activities during the three months ended September30, 2011 was
$149.6 million and resulted primarily from net debt payments, including the
September 2011 optional redemption of $165.6 million of the Company's 10.75%
Senior Notes due 2016.

For the nine months ended September30, 2012, net cash used in investing
activities was $124.3 million and resulted primarily from capital
expenditures. Net cash used in financing activities during the nine months
ended September30, 2012 was $44.8 million and resulted primarily from
repurchases of 46,645 shares of the Company's convertible perpetual preferred
stock, distributions paid to noncontrolling interests of consolidated
affiliates, and dividends paid on the Company's convertible perpetual
preferred stock offset by net proceeds from debt transactions and capital
contributions from consolidated affiliates.

For the nine months ended September30, 2011, net cash provided by investing
activities was $32.7 million and resulted primarily from the proceeds from the
sale of five long-term acute care hospitals in August 2011 offset by capital
expenditures and net settlement payments related to interest rate swaps. Net
cash used in financing activities during the nine months ended September30,
2011 was $246.6 million and resulted primarily from net debt payments,
including the optional redemption of the Company's 10.75% Senior Notes due
2016, distributions paid to noncontrolling interests of consolidated
affiliates, and dividends paid on the Company's convertible perpetual
preferred stock.

For the year ended December31, 2011, net cash used in investing activities
was $24.6 million and resulted primarily from capital expenditures, net
settlement payments related to interest rate swaps, and purchases of
restricted investments offset by proceeds from the sale of five long-term
acute care hospitals in August 2011. Net cash used in financing activities
during the year ended December31, 2011 was $336.4 million and resulted
primarily from net debt payments, including the optional redemption of the
Company's 10.75% Senior Notes due 2016, distributions paid to noncontrolling
interests of consolidated affiliates, and dividends paid on the Company's
convertible perpetual preferred stock.

HealthSouth Corporation and Subsidiaries
Forward-Looking Statements

Statements contained in this press release which are not historical facts are
forward-looking statements. In addition, HealthSouth, through its senior
management, may from time to time make forward-looking public statements
concerning the matters described herein. All such estimates, projections, and
forward-looking information speak only as of the date hereof, and HealthSouth
undertakes no duty to publicly update or revise such forward-looking
information, whether as a result of new information, future events, or
otherwise. Such forward-looking statements are necessarily estimates based
upon current information, involve a number of risks and uncertainties, and
relate to, among other things, future events, HealthSouth's plan to repurchase
its debt or equity securities, effective income tax rates, HealthSouth's
business strategy, its financial plans, its future financial performance, or
its projected business results or model, or its projected capital
expenditures. Actual events or results may differ materially from those
anticipated in these forward-looking statements as a result of a variety of
factors. While it is impossible to identify all such factors, factors which
could cause actual events or results to differ materially from those estimated
by HealthSouth include, but are not limited to, any adverse outcome of various
lawsuits, claims, and legal or regulatory proceedings involving the Company,
including the Houston HHS-OIG investigation; significant changes in
HealthSouth's management team; HealthSouth's ability to successfully complete
and integrate de novo developments, acquisitions, investments, and joint
ventures consistent with its growth strategy; changes, delays in (including in
connection with resolution of Medicare payment reviews or appeals), or
suspension of reimbursement for HealthSouth's services by governmental or
private payors; changes in the regulation of the healthcare industry at either
or both of the federal and state levels, including as part of national
healthcare reform and deficit reduction; competitive pressures in the
healthcare industry and HealthSouth's response thereto; HealthSouth's ability
to obtain and retain favorable arrangements with third-party payors;
HealthSouth's 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 HealthSouth's labor expenses from
potential union activity and staffing shortages; general conditions in the
economy and capital markets; the increase in the costs of defending and
insuring against alleged professional liability claims and our ability to
predict the estimated costs related to such claims; and other factors which
may be identified from time to time in HealthSouth's SEC filings and other
public announcements, including HealthSouth's Form 10-K for the year ended
December 31, 2011 and Form 10-Q for the quarters ended March 31, 2012,
June30, 2012, and September 30, 2012, when filed.

Media Contact
Lindsay Jones, 205-410-2777
lindsay.jones@healthsouth.com

Investor Relations Contact
Mary Ann Arico, 205-969-6175
maryann.arico@healthsouth.com

SOURCE HealthSouth Corporation

Website: http://www.healthsouth.com
 
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