HealthSouth Reports Strong Results for Fourth Quarter and Full Year 2012

   HealthSouth Reports Strong Results for Fourth Quarter and Full Year 2012

Revenue Growth of 6.7% (Full Year of 6.7%)

Discharge Growth of 5.4% (Full Year of 4.6%)

Cash Provided by Operating Activities of $109.3 million (Full Year of $411.5
million)

Adjusted EBITDA of $128.6 million (Full Year of $505.9 million)

Increases Common Stock Repurchase Authorization from $125 Million to $350
Million

PR Newswire

BIRMINGHAM, Ala., Feb. 18, 2013

BIRMINGHAM, Ala., Feb. 18, 2013 /PRNewswire/ -- HealthSouth Corporation (NYSE:
HLS), the nation's largest owner and operator of inpatient rehabilitation
hospitals, today reported its results of operations for the fourth quarter and
year ended December31, 2012.

"The fourth quarter was a strong finish to another excellent year for
HealthSouth," said Jay Grinney, President and Chief Executive Officer of
HealthSouth. "Demand for our services remained strong, our hospitals continued
to provide high-quality care on a disciplined, cost-effective basis, and our
solid cash flows allowed us to continue to invest in future growth. In
addition, on February 15, 2013, our board of directors approved an increase in
our existing common stock repurchase authorization from $125 million to $350
million."

Fourth Quarter Results

  oConsolidated net operating revenues were $552.9 million for the fourth
    quarter of 2012 compared to $518.1 million for the fourth quarter of 2011,
    or an increase of 6.7%. This increase was attributable to a 5.4% increase
    in patient discharges and a 2.4% increase in net patient revenue per
    discharge. Discharge growth was comprised of 2.4% growth from new stores
    and a 3.0% increase in same-store discharges. Approximately 120 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 previously disclosed, discharge growth in the fourth quarter of
    2012 was favorably impacted by the timing of patient discharges into the
    first week of October. This resulted in a modest decrease in the Company's
    fourth quarter average length of stay. The Company's net patient revenue
    per discharge increased in the fourth quarter of 2012 compared to the same
    period of 2011 primarily due to pricing adjustments from Medicare and
    managed care payors, higher average acuity for the patients served, and a
    higher percentage of Medicare patients offset by the unfavorable impact to
    pricing related to the aforementioned decrease in the fourth quarter's
    average length of stay.
  oIncome from continuing operations attributable to HealthSouth per diluted
    share for the fourth quarter of 2012 was $0.42 compared to $0.50 for the
    same period of 2011. Earnings per share in the fourth quarter of 2012
    included income tax expense of $24.5 million, or $0.26 per share,
    compared to income tax expense of $15.2 million, or $0.14 per share, in
    the fourth quarter of 2011. Earnings per share in the fourth quarter of
    2012 included a $2.7 million, or $0.02 per share after tax, loss on early
    extinguishment of debt that resulted from the redemption of 10% of the
    Company's 7.25% Senior Notes due 2018 and 7.75% Senior Notes due 2022 in
    October 2012. The Company's basic and diluted earnings per share were the
    same for the fourth quarter of 2012.
  oCash flows provided by operating activities were $109.3 million for the
    three months ended December31, 2012 compared to $129.5 million for the
    same period of 2011. Cash flows provided by operating activities were
    negatively impacted during the fourth quarter of 2012 due to an increase
    in net working capital, including the timing of an approximate $12 million
    interest payment in the fourth quarter of 2012.
  oAdjusted EBITDA (see attached supplemental information) for the three
    months ended December31, 2012 was $128.6 million compared to $122.9
    million for the three months ended December31, 2011, or an increase of
    4.6%. This improvement was primarily driven by continued revenue growth,
    disciplined expense management, and an approximate $4 million reduction in
    group medical costs due to favorable claim trends. These items were offset
    by a one-time, merit-based, year-end bonus paid in the fourth quarter of
    2012 to all eligible nonmanagement employees in lieu of an annual merit
    increase and expenses related to the continued implementation of the
    Company's clinical information system. Adjusted EBITDA in the fourth
    quarter of 2011 was favorably impacted by a $2.4 million nonrecurring
    franchise tax recovery.
  oAdjusted free cash flow (see attached supplemental information) for the
    three months ended December31, 2012 was $81.2 million compared to $99.2
    million for the same period of 2011. Adjusted free cash flow in the fourth
    quarter of 2012 was negatively impacted by the increase in working capital
    discussed above.

Full Year Results

  oConsolidated net operating revenues were $2,161.9 million for 2012
    compared to $2,026.9 million for 2011, or an increase of 6.7%. This
    increase was attributable to a 4.6% increase in patient discharges and a
    3.0% increase in net patient revenue per discharge. Discharge growth was
    comprised of 1.7% growth from new stores and a 2.9% increase in same-store
    discharges. Discharge growth was enhanced during 2012 compared to 2011 by
    the additional day in February due to leap year as well as a 60 basis
    point increase in discharges resulting from the consolidation of St.
    Vincent Rehabilitation Hospital beginning in the third quarter of 2012.
    Net patient revenue per discharge in 2012 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 2012 was $1.65 compared to $1.42 for 2011. Earnings per share for 2012
    reflected strong operating results and lower interest expense than 2011.
    Earnings per share for 2011 included a $38.8 million, or $0.25 per share
    after tax, loss on early extinguishment of debt compared to a $4.0
    million, or $0.03 per share after tax, loss in 2012. Earnings per share in
    2012 included income tax expense of $108.6 million, or $1.15 per share,
    compared to income tax expense of $37.1 million, or $0.40 per share, in
    2011. The Company's basic and diluted earnings per share were the same in
    2012 and 2011.
  oCash flows provided by operating activities were $411.5 million for 2012
    compared to $342.7 million for 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
    in 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 $16.2
    million decrease in the liability associated with refunds due patients and
    other third-party payors.
  oAdjusted EBITDA (see attached supplemental information) for 2012 was
    $505.9 million compared to $466.2 million for 2011, or an increase of
    8.5%. 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 2012
    was $268.0 million compared to $243.3 million for 2011, or an increase of
    10.2%. This increase resulted from continued Adjusted EBITDA growth, lower
    interest expense, and the lack of swap-related payments in 2012. These
    items were offset by an increase in working capital, primarily related to
    the timing of payroll-related liabilities, and planned increase in
    maintenance capital expenditures, including investments in the Company's
    clinical information system and hospital refresh projects.

"The strength of our Company's cash flow generating abilities was evidenced by
the 10.2% increase in adjusted free cash flow for 2012 which follows a 34.1%
increase in 2011," said Doug Coltharp, Executive Vice President and Chief
Financial Officer of HealthSouth. "We ended 2012 with cash and cash
equivalents of approximately $133 million and with no borrowings under our
$600 million revolving credit facility. Our leverage ratio, net of cash and
cash equivalents, at year end was 2.2x."

2013 Guidance

"Before taking into consideration the net effect of sequestration,
HealthSouth's 2013 net operating revenues are expected to increase by between
4.9% and 6.2%, driven by a forecasted increase in discharges of between 3% and
4%, while Adjusted EBITDA is expected to increase by between $39.6 million and
$49.6 million," said Mr. Grinney. "However, sequestration will reduce our 2013
Adjusted EBITDA by approximately $25 million. When evaluating our
year-over-year growth in Adjusted EBITDA and earnings per share, it will be
important to take into consideration certain factors affecting our performance
in both years."

Adjusted EBITDA in 2012 was impacted by the following items:

  oan approximate $4.5 million increase in salaries and benefits due to the
    one-time, merit-based, year-end bonus paid to ell eligible nonmanagement
    employees in lieu of merit increases in 2012;
  oan approximate $6 million reduction in self-insured general and
    professional liability and workers' compensation costs primarily due to
    revised actuarial estimates resulting from better-than-expected claims
    experience in prior years ($4 million general and professional liability
    and $2 million workers' compensation); and
  oan approximate $4 million reduction in group medical costs due to
    favorable claim trends.

Adjusted EBITDA in 2013 will be impacted by the following items:

  oan approximate $25 million negative impact related to sequestration (net
    of noncontrolling interests);
  oan approximate $5 million increase in noncontrolling interests expense due
    to changes at two joint venture hospitals, as explained below; and
  oan approximate $4 million increase in operating expenses associated with
    the continued implementation of the Company's clinical information system.
    The Company installed its clinical information system in 13 hospitals
    during 2012 and expects to install the system at 20 additional hospitals
    during 2013.

The Company's noncontrolling interests expense is expected to increase by
approximately $5 million in 2013 due to changes at two of its existing
hospitals. The Company has entered into an agreement to convert its 100% owned
hospital in Jonesboro, Arkansas into a joint venture with St. Bernards
Healthcare. Following the formation of the joint venture, the Company's
ownership percentage will be reduced to approximately 56%. This transaction is
consistent with the Company's strategy of aligning with high-quality acute
care hospitals in key markets. In addition, the Company's share of profits
from its joint venture hospital in Memphis, Tennessee will decrease in 2013
from 70% to 50% pursuant to the terms of that partnership agreement entered
into in 1993.

Initial 2013 Adjusted EBITDA guidance: $506 million to $516 million

Initial 2013 earnings per share guidance: $1.50 to $1.56 per share

Earnings per share guidance for 2013 assumes an effective tax rate of
approximately 40% (using pre-tax income from continuing operations
attributable to HealthSouth) and is before the effect of any potential share
repurchase activity. Diluted earnings per share are expected to be the same as
basic earnings per share due to the antidilutive impact in the year.

Earnings Conference Call and Webcast

The Company will host an investor conference call at 9:00 a.m. Eastern Time on
Tuesday, February19, 2013 to discuss its results for the fourth 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 85630761. 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 February 19, 2013
until March 5, 2013. 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 Company's leverage ratio that is referenced in this release is defined as
the ratio of consolidated total debt to Adjusted EBITDA for the trailing four
quarters. The Company's credit agreement contains a maximum leverage ratio
financial covenant which allows the Company to net up to $75 million of cash
on hand against total debt in the calculation. Reconciliations of net income
to Adjusted EBITDA can be found in the following schedules.

The information in this press release is summarized and should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December31, 2012 (the "2012 Form 10-K"), when filed, as well as the Company's
Current Report on Form 8-K expected to be filed on February19, 2013. In
addition, the Company will post supplemental slides on its website on the
morning of February19, 2013 at http://investor.healthsouth.com for reference
during its February19, 2013 earnings call.

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

Media Contact
Casey Lassiter, 205-410-2777
casey.lassiter@healthsouth.com
Investor Relations Contact
Mary Ann Arico, 205-969-6175
maryann.arico@healthsouth.com



HealthSouth Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

                            For the Three Months Ended  For the Year Ended
                            December 31,
                                                        December 31,
                            2012           2011         2012        2011
                            (In Millions)
Net operating revenues      $   552.9      $  518.1     $ 2,161.9   $ 2,026.9
Less: Provision for        (7.2)          (6.1)        (27.0)      (21.0)
doubtful accounts
Net operating revenues less
provision for doubtful      545.7          512.0        2,134.9     2,005.9
accounts
Operating expenses:
Salaries and benefits       269.5          251.4        1,050.2     982.0
Other operating expenses    78.0           67.8         303.8       288.3
General and administrative  30.6           29.8         117.9       110.5
expenses
Supplies                    26.2           26.1         102.4       102.8
Depreciation and            21.7           20.2         82.5        78.8
amortization
Occupancy costs             12.0           12.2         48.6        48.4
Government, class action,   —              (1.7)        (3.5)       (12.3)
and related settlements
Professional
fees—accounting, tax, and   2.9            4.8          16.1        21.0
legal
Total operating expenses    440.9          410.6        1,718.0     1,619.5
Loss on early               2.7            —            4.0         38.8
extinguishment of debt
Interest expense and
amortization of debt        24.3           23.1         94.1        119.4
discounts and fees
Other income                (1.1)          (1.2)        (8.5)       (2.7)
Equity in net income of     (3.0)          (3.2)        (12.7)      (12.0)
nonconsolidated affiliates
Income from continuing
operations before income    81.9           82.7         340.0       242.9
tax expense
Provision for income tax    24.5           15.2         108.6       37.1
expense
Income from continuing      57.4           67.5         231.4       205.8
operations
Income (loss) from
discontinued operations,    1.9            (5.0)        4.5         48.8
net of tax
Net income                  59.3           62.5         235.9       254.6
Less: Net income
attributable to             (12.3)         (12.5)       (50.9)      (45.9)
noncontrolling interests
Net income attributable to  47.0           50.0         185.0       208.7
HealthSouth
Less: Convertible perpetual (5.8)          (6.5)        (23.9)      (26.0)
preferred stock dividends
Less: Repurchase of
convertible perpetual       —              —            (0.8)       —
preferred stock
Net income attributable to
HealthSouth common          $   41.2       $  43.5      $ 160.3     $ 182.7
shareholders





HealthSouth Corporation and Subsidiaries
Consolidated Statements of Operations (Continued)
(Unaudited)

                       For the Three Months Ended December  For the Year Ended
                       31,
                                                            December 31,
                       2012                 2011            2012      2011
                       (In Millions, Except per Share Data)
Weighted average
common shares
outstanding:
Basic                  94.7                 93.3            94.6      93.3
Diluted                108.0                109.1           108.1     109.2
Earnings per common
share:
Basic earnings per
share attributable to
HealthSouth common
shareholders:
Continuing operations  $    0.42            $    0.52       $ 1.65    $ 1.42
Discontinued           0.02                 (0.05)          0.04      0.54
operations
Net income             $    0.44            $    0.47       $ 1.69    $ 1.96
Diluted earnings per
share attributable to
HealthSouth common
shareholders:
Continuing operations  $    0.42            $    0.50       $ 1.65    $ 1.42
Discontinued           0.02                 (0.04)          0.04      0.54
operations
Net income             $    0.44            $    0.46       $ 1.69    $ 1.96
Amounts attributable
to HealthSouth:
Income from continuing $    45.1            $    55.0       $ 180.5   $ 158.8
operations
Income (loss) from
discontinued           1.9                  (5.0)           4.5       49.9
operations, net of tax
Net income
attributable to        $    47.0            $    50.0       $ 185.0   $ 208.7
HealthSouth





HealthSouth Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

                                                        As of December 31,
                                                        2012        2011
                                                        (In Millions)
Assets
Current assets:
Cash and cash equivalents                               $ 132.8     $ 30.1
Restricted cash                                         49.3        35.3
Accounts receivable, net of allowance for doubtful      249.3       222.8
accounts of $28.7 in 2012; $21.4 in 2011
Deferred income tax assets                              137.5       127.2
Prepaid expenses and other current assets               67.9        76.2
Total current assets                                    636.8       491.6
Property and equipment, net                             748.0       664.4
Goodwill                                                437.3       421.7
Intangible assets, net                                  73.2        57.7
Deferred income tax assets                              393.1       507.5
Other long-term assets                                  135.4       128.3
Total assets                                            $ 2,423.8   $ 2,271.2
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt                       $ 13.6      $ 18.9
Accounts payable                                        45.3        45.4
Accrued payroll                                         85.7        85.0
Accrued interest payable                                25.9        22.5
Other current liabilities                               130.4       141.4
Total current liabilities                               300.9       313.2
Long-term debt, net of current portion                  1,239.9     1,235.8
Self-insured risks                                      106.5       102.8
Other long-term liabilities                             30.2        30.4
                                                        1,677.5     1,682.2
Commitments and contingencies
Convertible perpetual preferred stock                   342.2       387.4
Shareholders' equity:
HealthSouth shareholders' equity                        291.6       117.0
Noncontrolling interests                                112.5       84.6
Total shareholders' equity                              404.1       201.6
Total liabilities and shareholders' equity              $ 2,423.8   $ 2,271.2





HealthSouth Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

                                               For the Year Ended December 31,
                                               2012              2011
                                               (In Millions)
Cash flows from operating activities:
Net income                                     $   235.9         $   254.6
Income from discontinued operations, net of    (4.5)             (48.8)
tax
Adjustments to reconcile net income to net
cash provided by operating activities—
Provision for doubtful accounts                27.0              21.0
Provision for government, class action, and    (3.5)             (12.3)
related settlements
Depreciation and amortization                  82.5              78.8
Loss on early extinguishment of debt           4.0               38.8
Equity in net income of nonconsolidated        (12.7)            (12.0)
affiliates
Distributions from nonconsolidated affiliates  11.0              13.0
Stock-based compensation                       24.1              20.3
Deferred tax expense                           102.7             36.5
Other                                          3.0               7.9
(Increase) decrease in assets—
Accounts receivable                            (51.3)            (37.1)
Prepaid expenses and other assets              0.6               (12.5)
(Decrease) increase in liabilities—
Accounts payable                               (4.4)             0.8
Accrued payroll                                (11.8)            3.7
Accrued interest                               3.4               1.0
Refunds due patients and other third-party     2.7               (16.2)
payors
Other liabilities                              0.1               10.4
Premium received on bond issuance              —                 4.1
Premium paid on redemption of bonds            (1.9)             (26.9)
Government, class action, and related          2.6               8.5
settlements
Net cash provided by operating activities of   2.0               9.1
discontinued operations
Total adjustments                              180.1             136.9
Net cash provided by operating activities      411.5             342.7





HealthSouth Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(Unaudited)

                                                            For the Year Ended
                                                            December 31,
                                                            2012      2011
                                                            (In Millions)
Cash flows from investing activities:
Purchases of property and equipment                         (140.8)   (100.3)
Capitalized software costs                                  (18.9)    (8.8)
Acquisition of businesses, net of cash acquired             (3.1)     (4.9)
Proceeds from sale of restricted investments                0.3       1.2
Purchases of restricted investments                         (9.1)     (8.4)
Net change in restricted cash                               (14.0)    1.2
Net settlements on interest rate swaps not designated as    —         (10.9)
hedges
Other                                                       (0.9)     (0.9)
Net cash provided by (used in) investing activities of
discontinued operations—
Proceeds from sale of LTCHs                                 —         107.9
Other investing activities of discontinued operations       7.7       (0.7)
Net cash used in investing activities                       (178.8)   (24.6)
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 pre-payments          (166.2)   (504.9)
Borrowings on revolving credit facility                     135.0     338.0
Payments on revolving credit facility                       (245.0)   (306.0)
Principal payments under capital lease obligations          (12.1)    (13.2)
Repurchase of convertible perpetual preferred stock         (46.0)    —
Dividends paid on convertible perpetual preferred stock     (24.6)    (26.0)
Debt amendment and issuance costs                           (7.7)     (4.4)
Distributions paid to noncontrolling interests of           (49.3)    (44.2)
consolidated affiliates
Contributions from consolidated affiliates                  10.5      —
Other                                                       0.4       4.4
Net cash used in financing activities                       (130.0)   (336.3)
Increase (decrease) in cash and cash equivalents            102.7     (18.2)
Cash and cash equivalents at beginning of year              30.1      48.3
Cash and cash equivalents at end of year                    $ 132.8   $  30.1



HealthSouth Corporation and Subsidiaries
Supplemental Information
Earnings Per Share

                                         QTD
                                         Q4 2012               Q4 2011
                                         (In Millions, Except Per Share Data)
Adjusted EBITDA                          $   128.6             $   122.9
Interest expense and amortization of     (24.3)                (23.1)
debt discounts and fees
Depreciation and amortization            (21.7)                (20.2)
Stock-based compensation expense         (6.0)                 (5.9)
Noncash loss on disposal of assets       (1.4)                 (0.4)
                                         75.2                  73.3
Certain nonrecurring expenses:
Government, class action, and related    —                     1.7
settlements
Professional fees—accounting, tax, and   (2.9)                 (4.8)
legal
Loss on early extinguishment of debt     (2.7)                 —
Pre-tax income                           69.6                  70.2
Income tax expense ^(1)                  (24.5)                (15.2)
Income from continuing operations ^(2)   $   45.1              $   55.0
Basic shares                             94.7                  93.3
Diluted shares                           108.0                 109.1
Basic earnings per share ^(2)            $   0.42              $   0.52
Diluted earnings per share ^(2)          $   0.42    ^(3)      $   0.50



^(1) Cash income tax expense for the three months ended December31,
2012 and 2011 was $2.6 million and $2.3 million, respectively.

^(2) Income from continuing operations attributable to HealthSouth

^(3) 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 earnings per share
are the same. A computation of basic and diluted earnings per share can be
found in Note 18, Earnings per Common Share, to the consolidated financial
statements accompanying the Company's Form 10-K for the year ended
December31, 2012, when filed.



HealthSouth Corporation and Subsidiaries
Supplemental Information
Earnings Per Share

                                         YTD
                                         2012              2011
                                         (In Millions, Except Per Share Data)
Adjusted EBITDA                          $   505.9         $   466.2
Interest expense and amortization of     (94.1)            (119.4)
debt discounts and fees
Depreciation and amortization            (82.5)            (78.8)
Stock-based compensation expense         (24.1)            (20.3)
Noncash loss on disposal of assets       (4.4)             (4.3)
                                         300.8             243.4
Certain nonrecurring expenses:
Government, class action, and related    3.5               12.3
settlements
Professional fees—accounting, tax, and   (16.1)            (21.0)
legal
Loss on early extinguishment of debt     (4.0)             (38.8)
Gain on consolidation of St. Vincent     4.9               —
Rehabilitation Hospital
Pre-tax income                           289.1             195.9
Income tax expense ^(1)                  (108.6)           (37.1)      ^(2)
Income from continuing operations ^(3)   $   180.5         $   158.8
Basic shares                             94.6              93.3
Diluted shares                           108.1             109.2
Basic earnings per share ^(3)            $   1.65          $   1.42
Diluted earnings per share ^(3) (4)      $   1.65          $   1.42





^(1) Cash income tax expense for the year ended December31, 2012 and
2011 was $9.0 million and $9.1 million, respectively.

^(2) Includes a $0.49 per share benefit related to the Company's
settlement of federal income tax claims with the IRS for tax years 2007 and
2008, a decrease in the valuation allowance, 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

^(4) 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 earnings per share
are the same. A computation of basic and diluted earnings per share can be
found in Note 18, Earnings per Common Share, to the consolidated financial
statements accompanying the Company's Form 10-K for the year ended
December31, 2012, when filed.



HealthSouth Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Income to Adjusted EBITDA

                                For the Three Months Ended  For the Year Ended
                                December 31,
                                                            December 31,
                                2012           2011         2012      2011
                                (In Millions)
Net income                      $   59.3       $  62.5      $ 235.9   $ 254.6
(Income) loss from
discontinued operations, net    (1.9)          5.0          (4.5)     (49.9)
of tax, attributable to
HealthSouth
Provision for income tax        24.5           15.2         108.6     37.1
expense
Interest expense and
amortization of debt discounts  24.3           23.1         94.1      119.4
and fees
Loss on early extinguishment    2.7            —            4.0       38.8
of debt
Professional fees—accounting,   2.9            4.8          16.1      21.0
tax, and legal
Government, class action, and   —              (1.7)        (3.5)     (12.3)
related settlements
Net noncash loss on disposal    1.4            0.4          4.4       4.3
or impairment of assets
Depreciation and amortization   21.7           20.2         82.5      78.8
Stock-based compensation        6.0            5.9          24.1      20.3
expense
Net income attributable to      (12.3)         (12.5)       (50.9)    (45.9)
noncontrolling interests
Gain on consolidation of St.
Vincent Rehabilitation          —              —            (4.9)     —
Hospital
Adjusted EBITDA                 $   128.6      $  122.9     $ 505.9   $ 466.2



HealthSouth Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free
Cash Flow

                                For the Three Months Ended  For the Year Ended
                                December 31,                December 31,
                                2012           2011         2012      2011
                                (In Millions)
Net cash provided by operating  $   109.3      $  129.5     $ 411.5   $ 342.7
activities
Impact of discontinued          (0.5)          0.3          (2.0)     (9.1)
operations
Net cash provided by operating
activities of continuing        108.8          129.8        409.5     333.6
operations
Capital expenditures for        (15.0)         (15.7)       (83.0)    (50.8)
maintenance
Net settlement on interest rate —              —            —         (10.9)
swaps
Dividends paid on convertible   (5.7)          (6.5)        (24.6)    (26.0)
perpetual preferred stock
Distributions paid to
noncontrolling interests of     (11.7)         (10.2)       (49.3)    (44.2)
consolidated affiliates
Nonrecurring items:
Income tax refunds related to   —              (1.0)        —         (7.9)
prior periods
Premium received on bond        —              —            —         (4.1)
issuance
Premium paid on redemption of   1.9            —            1.9       26.9
bonds
Cash paid for:
Professional fees—accounting,   2.9            4.8          16.1      21.0
tax, and legal
Government, class action, and
related settlements, including  —              (2.0)        (2.6)     5.7
certain settlements related to
unclaimed property
Adjusted free cash flow         $   81.2       $  99.2      $ 268.0   $ 243.3



For the three months ended December31, 2012, net cash used in investing
activities was $54.5 million and resulted primarily from capital expenditures
and the net change in restricted cash. Net cash used in financing activities
during the three months ended December31, 2012 was $85.2 million and resulted
primarily from net debt payments, distributions paid to noncontrolling
interests of consolidated affiliates, and dividends paid on the Company's
convertible perpetual preferred stock.

For the three months ended December31, 2011, net cash used in investing
activities was $57.3 million and resulted primarily from capital expenditures,
the acquisition of a business, and the net change in restricted cash. Net cash
used in financing activities during the three months ended December31, 2011
was $89.7 million and resulted primarily from net debt payments, distributions
paid to noncontrolling interests of consolidated affiliates, and dividends
paid on the Company's convertible perpetual preferred stock.

For the year ended December31, 2012, net cash used in investing activities
was $178.8 million and resulted primarily from capital expenditures. Net cash
used in financing activities during the year ended December31, 2012 was
$130.0 million and resulted primarily from distributions paid to
noncontrolling interests of consolidated affiliates, repurchases of 46,645
shares of the Company's convertible perpetual preferred stock, dividends paid
on the Company's convertible perpetual preferred stock, and net principal
payments on debt offset by capital contributions from consolidated affiliates.

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 $336.3 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 guidance and the other 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, or its leverage ratio. 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; potential disruptions, breaches, or other incidents affecting
the proper operation, availability, or security of HealthSouth's information
systems; 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 HealthSouth's 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 December31, 2012, when filed.



SOURCE HealthSouth Corporation

Website: http://www.healthsouth.com
 
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