8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 27, 2011

HealthSouth Corporation

(Exact name of Registrant as specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

001-10315	63-0860407
(Commission File Number)	(IRS Employer Identification No.)

3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243

(Address of Principal Executive Offices, Including Zip Code)

(205) 967-7116

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)  

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)  

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))  

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))  

ITEM 2.02. Results of Operations and Financial Condition.

The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, “Results of Operations and Financial Condition,” and Item 7.01 of Form 8-K, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On October 27, 2011, HealthSouth Corporation (the “Company”) issued a press release reporting the financial results of the Company for the three and nine months ended September 30, 2011. A copy of the press release is attached to this report as Exhibit 99.1 and incorporated herein by reference.

ITEM 7.01. Regulation FD Disclosure.

See Item 2.02, “Results of Operations and Financial Condition,” above.

In addition, a copy of the supplemental slides which will be discussed during the Company’s earnings call at 9:30 a.m. Eastern Time on Friday, October 28, 2011 is attached to this report as Exhibit 99.2 and incorporated herein by reference. This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Note Regarding Presentation of Non-GAAP Financial Measures

The financial data contained in the press release and supplemental slides include non-GAAP financial measures, including the Company’s leverage ratio and Adjusted EBITDA. The leverage ratio referenced therein is defined as the ratio of consolidated total debt to Adjusted EBITDA for the trailing four quarters. The Company believes its leverage ratio and Adjusted EBITDA are measures of its ability to service its debt and its ability to make capital expenditures. Additionally, the leverage ratio is a standard measurement used by investors to gauge the creditworthiness of an institution. The Company’s credit agreement also includes a maximum leverage ratio financial covenant which allows the Company to deduct up to $75 million of cash on hand from consolidated total debt.

The Company uses Adjusted EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important in analyzing its liquidity because it is the key component of certain material covenants contained within the Company’s credit agreement, which is discussed in more detail in Note 8, Long-term Debt, to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) and Note 3, Long-term Debt, to the condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 (the “September 2011 Form 10-Q”), when filed. These covenants are material terms of the credit agreement, and the credit agreement represents a substantial portion of the Company’s liquidity. Non-compliance with these financial covenants under the credit agreement – its interest coverage ratio and its leverage ratio – could result in the Company’s lenders requiring the Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might not be on terms favorable to those in the Company’s existing credit agreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the credit agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the Company’s assessment of its liquidity.

In general terms, the credit agreement definition of Adjusted EBITDA, referred to as “Adjusted Consolidated EBITDA” there, allows the Company to add back to consolidated net income interest expense, income taxes, and depreciation and amortization and then add back to or subtract from consolidated net income unusual non-cash or non-recurring items. These items have included, but may not be limited to, (1) amounts associated with government, class action, and related settlements, (2) amounts related to discontinued operations and closed locations, (3) charges in respect of professional fees for reconstruction and restatement of financial statements, including fees paid to outside professional firms for matters related to internal controls and legal fees for continued

litigation and support matters discussed in Note 21, Settlements, and Note 22, Contingencies and Other Commitments, to the consolidated financial statements included in the 2010 Form 10-K, and Note 10, Settlements, and Note 11, Contingencies, to the condensed consolidated financial statements included in the September 2011 Form 10-Q, when filed, (4) stock-based compensation expense, (5) net investment and other income (including interest income), and (6) fees associated with the Company’s divestiture activities.

In accordance with the credit agreement, the Company has been allowed to add certain other items to the calculation of Adjusted EBITDA, and there may also be certain other deductions required. This includes net income attributable to noncontrolling interests and interest income associated with income tax recoveries, as discussed in Note 19, Income Taxes, to the consolidated financial statements included in the 2010 Form 10-K. In addition, the Company has been allowed to add non-recurring cash gains, such as the cash proceeds from the UBS Settlement (see Note 21, Settlements, to the consolidated financial statements included in the 2010 Form 10-K) to the calculation of Adjusted EBITDA. As these adjustments may not be indicative of the Company’s ongoing performance, they have been excluded from Adjusted EBITDA presented herein and in the press release and supplemental slides attached as Exhibits 99.1 and 99.2, respectively.

However, Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America (“GAAP”), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income or cash flows from operating, investing, or financing activities. The Company reconciles Adjusted EBITDA to net income, which reconciliation is set forth in the press release attached as Exhibit 99.1, and to net cash provided by operating activities, which reconciliation is set forth below. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in the 2010 Form 10-K.

The Company also uses adjusted free cash flow as an analytical indicator to assess its performance. Management believes the presentation of adjusted free cash flow provides investors an efficient means by which they can evaluate the Company’s capacity to reduce debt and pursue development activities. The calculation of adjusted free cash flow is included in the press release attached as Exhibit 99.1 and the supplemental slides attached as Exhibit 99.2. This measure is not a defined measure of financial performance under GAAP and should not be considered as an alternative to net cash provided by operating activities. Our definition of adjusted free cash flow is limited and does not represent residual cash flows available for discretionary spending. Because this measure is not determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. See the condensed consolidated statements of cash flows included in the press release attached as Exhibit 99.1 for the GAAP measures of cash flows from operating, investing, and financing activities. A reconciliation of net cash provided by operating activities to adjusted free cash flow is included in the press release attached as Exhibit 99.1 and the supplemental slides attached as Exhibit 99.2.

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

	For the Three Months Ended						For the Nine Months Ended						For the Year Ended
	September 30,						September 30,						December 31,
	2011			2010			2011			2010			2010
	(In Millions)
Net cash provided by operating activities	$	53.9		$	90.8		$	210.8		$	263.9		$	331.0
Provision for doubtful accounts		(5.1	)		(3.7	)		(14.9	)		(14.8	)		(16.4	)
Professional fees—accounting, tax,
and legal		4.0			5.2			16.2			13.8			17.2
Interest expense and amortization of debt
discounts and fees		26.3			30.8			96.3			91.4			125.6
Equity in net income of nonconsolidated
affiliates		3.1			2.3			8.8			7.5			10.1
Net income attributable to noncontrolling
interests in continuing operations		(11.4	)		(10.3	)		(34.5	)		(30.3	)		(40.9	)
Amortization of debt discounts and fees		(1.0	)		(1.7	)		(3.3	)		(5.1	)		(6.3	)
Distributions from nonconsolidated
affiliates		(4.2	)		(1.4	)		(9.7	)		(4.7	)		(8.1	)
Current portion of income tax
(benefit) expense		(0.1	)		(0.7	)		(1.5	)		(1.7	)		2.9
Change in assets and liabilities		38.6			(12.6	)		68.1			(14.1	)		2.7
Change in government, class action, and
related settlements		-			-			(6.5	)		0.8			2.9
Premium paid on bond redemption		8.9			-			26.9			-			-
Premium received on bond issuance		-			-			(4.1	)		-			-
Cash provided by operating activities of
discontinued operations		(2.2	)		(3.1	)		(9.4	)		(10.4	)		(13.2	)
Other		(0.3	)		0.3			0.1			1.2			2.1
Adjusted EBITDA	$	110.5		$	95.9		$	343.3		$	297.5		$	409.6

Forward-Looking Statements

The information contained in the press release and supplemental slides includes certain estimates, projections, and other forward-looking information that reflect the Company’s current outlook, views, or plans with respect to future events, financial performance, and business model. These estimates, projections, and other forward-looking information are based on assumptions the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.

There can be no assurance that any estimates, projections, or forward-looking information will be realized.

All such estimates, projections, and forward-looking information speak only as of the date hereof. The Company undertakes no duty to publicly update or revise the information contained herein.

You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking information in the press release and supplemental slides as they are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in the 2010 Form 10-K, the Company’s quarterly report on Form 10-Q for the quarterly periods ended September, 30, 2011, when filed, June 30, 2011, and March 31, 2011, and in other documents the Company previously filed with the SEC, many of which are beyond the Company’s control. These factors may cause actual results to differ materially from the views, beliefs, and estimates expressed herein.

ITEM 9.01. Financial Statements and Exhibits.

(d)           Exhibits.

Exhibit Number	Description
99.1	Press release of HealthSouth Corporation, dated October 27, 2011.
99.2	Supplemental slides provided in connection with the third quarter 2011 earnings call of HealthSouth Corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

HEALTHSOUTH CORPORATION
By:	/s/    JOHN P. WHITTINGTON
	Name:    John P. Whittington
	Title:      Executive Vice President, General Counsel
	and Corporate Secretary

Dated: October 27, 2011

EX-99.1

 Exhibit 99.1

Media Contact	October 27, 2011
Andy Brimmer, 205-410-2777	For Immediate Release
Helen Todd, 205-969-5608
helen.todd@healthsouth.com
Investor Relations Contact
Mary Ann Arico, 205-969-6175
maryann.arico@healthsouth.com

HealthSouth Reports Strong Results for Third Quarter 2011 and

Raises Full-Year 2011 Guidance

¾Revenue Growth of 8.0%

¾Discharge Growth of 5.1%

¾Cash Provided by Operating Activities of $53.9 Million

¾Adjusted EBITDA of $110.5 Million

Announces Board Authorization to Repurchase Up to $125 Million of Its Common Stock

BIRMINGHAM, Ala. – 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 September 30, 2011.

“The third quarter of 2011 was another solid quarter for HealthSouth,” said Jay Grinney, President and Chief Executive Officer of HealthSouth. “The demand for our services contributed to significant discharge and revenue growth and a 15.2% increase in Adjusted EBITDA over the same period of 2010. The fundamentals of our business remain strong, and we expect to generate at least $210 million in full-year adjusted free cash flow.”

Third Quarter Results

·   Consolidated net operating revenues were $497.7 million for the third quarter of 2011 compared to $460.8 million for the third quarter of 2010, an increase of 8.0%. This increase was attributable to a 5.1% increase in patient discharges and a 3.3% increase in net patient revenue per discharge. Discharge growth included a 4.0% increase in same-store discharges, with the remainder coming from hospitals opened or acquired in the prior 12 months. Net patient revenue per discharge increased primarily due to pricing adjustments from Medicare and managed care payors, the impact of the initial Medicare enrollment period on new hospitals opened in 2010, and improved patient outcomes.

·   Income from continuing operations attributable to HealthSouth per share for the third quarter of 2011 was $0.17 per share compared to $0.24 per share for the same period of 2010. Earnings per share in the third quarter of 2011 included income tax expense of $18.1 million, or $0.19 per share, compared to an income tax benefit of $0.4 million, or $0.01 per share, in the third quarter of 2010. The increase in income tax expense in the third quarter of 2011 compared to the third quarter of 2010 primarily resulted from the Company’s reversal of a substantial portion of its valuation allowance in the fourth quarter of 2010. The Company’s basic and diluted earnings per share were the same for both periods.

Exhibit 99.1

·   Cash flows provided by operating activities were $210.8 million for the nine months ended September 30, 2011 compared to $263.9 million for the same period of 2010. 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 in June and September 2011 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. The timing of interest payments on long-term debt and an increase in Medicare-related accounts receivable due to revenue growth and timing issues resulting from legal entity reorganizations also negatively impacted cash flows during the third quarter of 2011.

·   Adjusted EBITDA (see attached supplemental information) for the three months ended September 30, 2011 was $110.5 million compared to $95.9 million for the three months ended September 30, 2010, an increase of 15.2%. This improvement was driven by continued revenue growth and disciplined expense management.

·   Adjusted free cash flow for the three months ended September 30, 2011 was $32.4 million compared to $53.8 million for the same period of 2010. Increases to adjusted free cash flow resulting from higher Adjusted EBITDA and the expiration of the Company’s interest rate swaps in March 2011 were offset by the timing of interest payments and an increase in accounts receivable, as discussed above. The Company estimates adjusted free cash flow for the year ending December 31, 2011 will be at least $210 million compared to approximately $181 million for the year ended December 31, 2010, or at least 16% year-over-year growth.

“During the third quarter, we completed the retirement of our expensive 10.75% senior notes, and we ended the quarter with our leverage ratio inside our target range,” said Doug Coltharp, Executive Vice President and Chief Financial Officer of HealthSouth. “Both of these objectives were achieved well ahead of schedule, and their achievement substantially reduces our annual interest expense, facilitating the potential reallocation of free cash flow to other priorities.”

2011 Guidance

Based on its year-to-date results, the Company is:

·   raising its full-year 2011 Adjusted EBITDA guidance to a range of $450 million to $455 million from a range of $447 million to $453 million.

·   raising its full-year 2011 earnings per share guidance to $1.18 to $1.23 per share from $1.17 to $1.22 per share. Basic and diluted earnings per share are expected to be the same for 2011.

Stock Repurchase Authorization

The Company’s board of directors has authorized the repurchase of up to $125 million of its common stock. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination by the Company’s board of directors. Subject to certain terms and conditions, including compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

2

Exhibit 99.1

Earnings Conference Call and Webcast

The Company will host an investor conference call at 9:30 a.m. Eastern Time on Friday, October 28, 2011 to discuss its results for the third quarter of 2011. 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 11128167. 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 28 until November 11, 2011. 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 revenues, number of hospitals, and patients treated and discharged. Operating in 26 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 September 30, 2011, when filed, as well as the Company’s Current Report on Form 8-K filed on October 27, 2011. In addition, the Company will post supplemental slides today on its website at http://investor.healthsouth.com for reference during its October 28, 2011 earnings call.

The Company expects to file its third quarter 2011 Form 10-Q next week. When filed, the report can be found on the Company’s website at http://investor.healthsouth.com and the SEC’s website at www.sec.gov.

3

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

 (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(In Millions, Except Per Share Data)
Net operating revenues	$	497.7		$	460.8		$	1,508.8		$	1,386.7
Operating expenses:
Salaries and benefits		245.0			231.7			730.6			684.2
Other operating expenses		70.3			65.4			216.6			197.4
General and administrative expenses		26.4			24.9			80.7			77.9
Supplies		24.7			24.1			76.7			73.3
Depreciation and amortization		19.5			18.4			58.6			53.7
Occupancy costs		12.5			11.4			36.2			33.0
Provision for doubtful accounts		5.1			3.7			14.9			14.8
Loss on disposal of assets		2.8			0.1			3.9			0.5
Government, class action, and related settlements		-			0.8			(10.6	)		0.8
Professional fees—accounting, tax, and legal		4.0			5.2			16.2			13.8
Total operating expenses		410.3			385.7			1,223.8			1,149.4
Loss on early extinguishment of debt		12.7			-			38.8			0.4
Interest expense and amortization of debt discounts and fees		26.3			30.8			96.3			91.4
Other income		(0.2	)		(0.7	)		(1.5	)		(2.8	)
Loss on interest rate swaps		-			9.0			-			13.0
Equity in net income of nonconsolidated affiliates		(3.1	)		(2.3	)		(8.8	)		(7.5	)
Income from continuing operations before income tax
expense (benefit)		51.7			38.3			160.2			142.8
Provision for income tax expense (benefit)		18.1			(0.4	)		21.9			0.7
Income from continuing operations		33.6			38.7			138.3			142.1
Income from discontinued operations, net of tax		34.7			3.2			53.8			7.8
Net income		68.3			41.9			192.1			149.9
Less: Net income attributable to noncontrolling interests		(11.3	)		(10.1	)		(33.4	)		(30.1	)
Net income attributable to HealthSouth		57.0			31.8			158.7			119.8
Less: Convertible perpetual preferred stock dividends		(6.5	)		(6.5	)		(19.5	)		(19.5	)
Net income attributable to HealthSouth
common shareholders	$	50.5		$	25.3		$	139.2		$	100.3
Weighted average common shares outstanding:
Basic		93.3			92.8			93.2			92.7
Diluted		109.2			108.3			109.1			108.3
Basic and diluted earnings per common share:
Income from continuing operations attributable
to HealthSouth common shareholders	$	0.17		$	0.24		$	0.90		$	0.99
Income from discontinued operations, net of tax,
attributable to HealthSouth common shareholders		0.37			0.03			0.59			0.09
Net income attributable to HealthSouth
common shareholders	$	0.54		$	0.27		$	1.49		$	1.08
Amounts attributable to HealthSouth common shareholders:
Income from continuing operations	$	22.2		$	28.4		$	103.8		$	111.8
Income from discontinued operations, net of tax		34.8			3.4			54.9			8.0
Net income attributable to HealthSouth	$	57.0		$	31.8		$	158.7		$	119.8

4

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30,		December 31,
	2011		2010
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	47.7	$	48.3
Accounts receivable, net of allowance for doubtful accounts of
$21.4 in 2011; $22.7 in 2010		219.2		206.7
Other current assets		143.5		151.2
Total current assets		410.4		406.2
Property and equipment, net		648.8		642.6
Goodwill		420.3		420.3
Intangible assets, net		42.8		48.8
Deferred income tax assets		622.5		679.3
Other long-term assets		126.2		174.9
Total assets	$	2,271.0	$	2,372.1
Liabilities and Shareholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	45.4	$	44.6
Accrued expenses and other current liabilities		242.7		314.7
Total current liabilities		288.1		359.3
Long-term debt, net of current portion		1,308.7		1,496.8
Other long-term liabilities		135.0		130.8
		1,731.8		1,986.9
Commitments and contingencies
Convertible perpetual preferred stock		387.4		387.4
Shareholders’ equity (deficit):
HealthSouth shareholders’ equity (deficit)		67.9		(85.2	)
Noncontrolling interests		83.9		83.0
Total shareholders’ equity (deficit)		151.8		(2.2	)
Total liabilities and shareholders’ equity (deficit)	$	2,271.0	$	2,372.1

5

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2011			2010
	(In Millions)
Cash flows from operating activities:
Net income	$	192.1		$	149.9
Income from discontinued operations, net of tax		(53.8	)		(7.8	)
Adjustments to reconcile net income to net cash provided by
operating activities—
Provision for doubtful accounts		14.9			14.8
Provision for government, class action, and related settlements		(10.6	)		0.8
Depreciation and amortization		58.6			53.7
Loss on interest rate swaps		-			13.0
Loss on early extinguishment of debt		38.8			0.4
Amortization of debt discounts		3.3			5.1
Equity in net income of nonconsolidated affiliates		(8.8	)		(7.5	)
Distributions from nonconsolidated affiliates		9.7			4.7
Stock-based compensation		14.4			11.2
Deferred tax expense		23.4			2.4
Other		3.8			(0.5	)
(Increase) decrease in assets—
Accounts receivable		(27.4	)		(11.6	)
Other assets		(12.8	)		(8.3	)
Income tax refund receivable		(0.3	)		3.0
Increase (decrease) in liabilities—
Accounts payable		0.8			(0.4	)
Accrued interest		(16.6	)		14.1
Other liabilities		4.0			20.0
Premium received on bond issuance		4.1			-
Premium paid on redemption of bonds		(26.9	)		-
Refunds due patients and other third-party payors		(15.8	)		(2.7	)
Government, class action, and related settlements		6.5			(0.8	)
Net cash provided by operating activities of discontinued operations		9.4			10.4
Total adjustments		72.5			121.8
Net cash provided by operating activities		210.8			263.9

6

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

	Nine Months Ended September 30,
	2011			2010
	(In Millions)
Cash flows from investing activities:
Capital expenditures		(61.9	)		(48.8	)
Acquisition of businesses, net of cash acquired		-			(34.1	)
Purchase of restricted investments		(8.0	)		(25.5	)
Proceeds from sale of restricted investments		0.7			10.4
Net change in restricted cash		6.3			34.1
Net settlements on interest rate swaps		(10.9	)		(33.7	)
Other		(0.7	)		(0.3	)
Net cash provided by (used in) investing activities of discontinued
operations—
Proceeds from sale of LTCHs		107.9			-
Other investing activities of discontinued operations		(0.7	)		7.1
Net cash provided by (used in) investing activities		32.7			(90.8	)
Cash flows from financing activities:
Principal borrowings on term loan		100.0			-
Proceeds from bond issuance		120.0			-
Principal payments on debt, including pre-payments		(503.0	)		(8.2	)
Borrowings on revolving credit facility		338.0			-
Payments on revolving credit facility		(238.0	)		-
Principal payments under capital lease obligations		(10.1	)		(10.6	)
Debt issue costs		(4.3	)		-
Dividends paid on convertible perpetual preferred stock		(19.5	)		(19.5	)
Distributions paid to noncontrolling interests of
consolidated affiliates		(31.6	)		(26.3	)
Other		4.3			1.1
Net cash used in financing activities of discontinued operations		-			(0.1	)
Net cash used in financing activities		(244.2	)		(63.6	)
(Decrease) increase in cash and cash equivalents		(0.7	)		109.5
Cash and cash equivalents at beginning of period		48.3			80.7
Cash and cash equivalents of facilities in discontinued operations
at beginning of period		0.1			0.2
Less: Cash and cash equivalents of facilities in discontinued
operations at end of period		-			-
Cash and cash equivalents at end of period	$	47.7		$	190.4

7

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Supplemental Information

Earnings Per Share

	QTD Prior EPS Measure (1)				QTD GAAP EPS Measure (2)
		Q3 2010				Q3 2010				Q3 2011
	(In Millions, Except Per Share Data)
Adjusted EBITDA	$	95.9			$	95.9			$	110.5
Interest expense and amortization of
debt discounts and fees		(30.8	)			(30.8	)			(26.3	)
Depreciation and amortization		(18.4	)			(18.4	)			(19.5	)
Stock-based compensation expense		(3.4	)			(3.4	)			(4.9	)
Other, including non-cash loss on
disposal of assets		(0.3	)			(0.3	)			(2.8	)
		43.0				43.0				57.0
Certain nonrecurring expenses:
Government, class action, and related
settlements		-				(0.8	)			-
Professional fees - accounting, tax,
and legal		-				(5.2	)			(4.0	)
Loss on interest rate swaps		-				(9.0	)			-
Loss on early extinguishment of debt		-				-				(12.7	)
Pre-tax income		43.0				28.0				40.3
Income tax benefit (expense)		-		(3)		0.4		(4)(5)		(18.1	)	(4)(6)
Income from continuing operations	$	43.0		(1)	$	28.4		(2)	$	22.2		(2)
Basic shares		92.8				92.8				93.3
Diluted shares		108.3				108.3				109.2
Basic earnings per share	$	0.46			$	0.24		(2)(7)	$	0.17		(2)(7)
Diluted earnings per share	$	0.40			$	0.24		(2)(7)	$	0.17		(2)(7)

(1)   Adjusted income from continuing operations. This non-GAAP measure was part of our historical guidance. A reconciliation of adjusted income from continuing operations to the corresponding GAAP measure can be found on page 10. Amounts have been recast for the inclusion of the Company’s LTCHs in discontinued operations.

(2)   Income from continuing operations attributable to HealthSouth.

(3)   Current period amounts in income tax provision.

(4)   Actual tax provision recorded for the period.

(5)   During the third quarter of 2010, the Company maintained a valuation allowance against substantially all of its deferred tax assets. A substantial portion of the valuation allowance was released in the fourth quarter of 2010.

(6)   Cash income taxes for the third quarter of 2011 were $1.7 million.

(7)   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 9, 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 September 30, 2011, when filed.

8

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Supplemental Information

Earnings Per Share

	YTD Prior EPS Measure (1)				YTD GAAP EPS Measure (2)
		Q3 2010				Q3 2010				Q3 2011
	(In Millions, Except Per Share Data)
Adjusted EBITDA	$	297.5			$	297.5			$	343.3
Interest expense and amortization of
debt discounts and fees		(91.4	)			(91.4	)			(96.3	)
Depreciation and amortization		(53.7	)			(53.7	)			(58.6	)
Stock-based compensation expense		(11.2	)			(11.2	)			(14.4	)
Other, including non-cash loss on
disposal of assets		(0.7	)			(0.7	)			(3.9	)
		140.5				140.5				170.1
Certain nonrecurring expenses:
Government, class action, and related
settlements		-				(0.8	)			10.6
Professional fees - accounting, tax,
and legal		-				(13.8	)			(16.2	)
Loss on interest rate swaps		-				(13.0	)			-
Loss on early extinguishment of debt		(0.4	)			(0.4	)			(38.8	)
Pre-tax income		140.1				112.5				125.7
Income tax expense		(4.4	)	(3)		(0.7	)	(4)(5)		(21.9	)	(4)(6)
Income from continuing operations	$	135.7		(1)	$	111.8		(2)	$	103.8		(2)
Basic shares		92.7				92.7				93.2
Diluted shares		108.3				108.3				109.1
Basic earnings per share	$	1.46			$	0.99		(2)(7)	$	0.90		(2)(7)
Diluted earnings per share	$	1.25			$	0.99		(2)(7)	$	0.90		(2)(7)

(1)   Adjusted income from continuing operations. This non-GAAP measure was part of our historical guidance. A reconciliation of adjusted income from continuing operations to the corresponding GAAP measure can be found on page 10. Amounts have been recast for the inclusion of the Company’s LTCHs in discontinued operations.

(2)   Income from continuing operations attributable to HealthSouth.

(3)   Current period amounts in income tax provision.

(4)   Actual tax provision recorded for the period.

(5)   During the first nine months of 2010, the Company maintained a valuation allowance against substantially all of its deferred tax assets. A substantial portion of the valuation allowance was released in the fourth quarter of 2010.

(6)   Includes an approximate $28 million, or $0.30 per share, benefit related to the Company’s settlement of federal income tax claims 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. Cash income taxes for the nine months ended September 30, 2011 were $5.9 million.

(7)   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 9, 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 September 30, 2011, when filed.

9

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Income to Adjusted EBITDA

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In Millions)
Net income	$	68.3		$	41.9		$	192.1		$	149.9
Income from discontinued operations, net of tax,
attributable to HealthSouth		(34.8	)		(3.4	)		(54.9	)		(8.0	)
Provision for income tax expense (benefit)		18.1			(0.4	)		21.9			0.7
Loss on interest rate swaps		-			9.0			-			13.0
Interest expense and amortization of debt discounts
and fees		26.3			30.8			96.3			91.4
Loss on early extinguishment of debt		12.7			-			38.8			0.4
Professional fees—accounting, tax, and legal		4.0			5.2			16.2			13.8
Government, class action, and related settlements		-			0.8			(10.6	)		0.8
Net noncash loss on disposal of assets		2.8			0.1			3.9			0.5
Depreciation and amortization		19.5			18.4			58.6			53.7
Stock-based compensation expense		4.9			3.4			14.4			11.2
Net income attributable to noncontrolling interests		(11.3	)		(10.1	)		(33.4	)		(30.1	)
Other		-			0.2			-			0.2
Adjusted EBITDA	$	110.5		$	95.9		$	343.3		$	297.5

Reconciliation of Net Income to Adjusted Income from Continuing Operations

	Three Months Ended September 30, 2010			Nine Months Ended September 30, 2010
	(In Millions, Except Per Share Data)
Net income	$	41.9		$	149.9
Income from discontinued operations, net of tax,
attributable to HealthSouth		(3.4	)		(8.0	)
Net income attributable to noncontrolling interests		(10.1	)		(30.1	)
Income from continuing operations
attributable to HealthSouth		28.4			111.8
Government, class action, and related settlements		0.8			0.8
Professional fees – accounting, tax, and legal		5.2			13.8
Loss on interest rate swaps		9.0			13.0
Adjustment for prior period amounts in tax provision		(0.4	)		(3.7	)
Adjusted income from continuing operations	$	43.0		$	135.7
Adjusted income from continuing operations
per diluted share	$	0.40		$	1.25
Weighted average common shares outstanding:
Basic		92.8			92.7
Diluted		108.3			108.3

10

Exhibit 99.1

HealthSouth Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net Cash Provided by Operating Activities

to Adjusted Free Cash Flow

	Three Months			Three Months			Nine Months			Nine Months			Year
	Ended			Ended			Ended			Ended			Ended
	September 30,			September 30,			September 30,			September 30,			December 31,
	2011			2010			2011			2010			2010
	(In Millions)
Net cash provided by operating
activities	$	53.9		$	90.8		$	210.8		$	263.9		$	331.0
Impact of discontinued operations		(2.2	)		(3.1	)		(9.4	)		(10.4	)		(13.2	)
Net cash provided by
operating activities of
continuing operations		51.7			87.7			201.4			253.5			317.8
Capital expenditures for maintenance		(12.8	)		(11.8	)		(35.1	)		(24.6	)		(37.9	)
Net settlements on interest rate swaps		-			(10.6	)		(10.9	)		(33.7	)		(44.7	)
Dividends paid on convertible perpetual
preferred stock		(6.5	)		(6.5	)		(19.5	)		(19.5	)		(26.0	)
Distributions paid to noncontrolling
interests of consolidated affiliates		(9.4	)		(8.0	)		(31.6	)		(26.3	)		(34.4	)
Non-recurring items:
Income tax refunds related to
prior periods		(3.5	)		(2.2	)		(6.9	)		(11.9	)		(13.5	)
Premium received on bond issuance		-			-			(4.1	)		-			-
Premium paid on redemption of bonds		8.9			-			26.9			-			-
Cash paid for:
Professional fees - accounting, tax,
and legal		4.0			5.2			16.2			13.8			17.2
Government, class action, and related
settlements, including certain
settlements related to unclaimed
property		-			-			7.7			0.8			2.9
Adjusted free cash flow	$	32.4		$	53.8		$	144.1		$	152.1		$	181.4

For the three months ended September 30, 2011, net cash provided by investing activities was $81.9 million and resulted primarily from the 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 September 30, 2011 was $148.4 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 three months ended September 30, 2010, net cash used in investing activities was $50.7 million and resulted primarily from capital expenditures, including the acquisition of an inpatient rehabilitation hospital, net settlement payments related to interest rate swaps, and net purchases of restricted investments offset by a decrease in restricted cash. Net cash used in financing activities during the three months ended September 30, 2010 was $22.2 million and resulted primarily from distributions paid to noncontrolling interests of consolidated affiliates, dividends paid on the Company’s convertible perpetual preferred stock, and net debt payments.

For the nine months ended September 30, 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, net settlement payments related to interest rate swaps, and purchases of restricted investments. Net cash used in financing activities during the nine months ended September 30, 2011 was $244.2 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 nine months ended September 30, 2010, net cash used in investing activities was $90.8 million and resulted primarily from capital expenditures, acquisitions of two inpatient rehabilitation hospitals, and net settlement payments related to interest rate swaps offset by a decrease in restricted cash and proceeds from the sale of our hospital in Baton Rouge, Louisiana. Net cash used in financing activities during the nine months ended September 30, 2010 was $63.6 million and resulted primarily from distributions paid to noncontrolling interests of consolidated affiliates, dividends paid on the Company’s convertible perpetual preferred stock, and net debt payments.

For the year ended December 31, 2010, net cash used in investing activities was $125.9 million and resulted primarily from capital expenditures, net settlement payments related to interest rate swaps, acquisitions of businesses, and net purchases of restricted investments offset by a decrease in restricted cash and proceeds from the

11

Exhibit 99.1

sale of the Company’s hospital in Baton Rouge, Louisiana. Net cash used in financing activities during the year ended December 31, 2010 was $237.7 million and resulted primarily from net debt payments, distributions paid to noncontrolling interests of consolidated affiliates, dividends paid on the Company’s convertible perpetual preferred stock, and debt amendment and issuance costs.

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 shares of its common stock, the timing or outcome of the HHS-OIG investigation, 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; 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, 2010 and Form 10-Q for the quarters ended September 30, 2011 (expected to be filed next week), June 30, 2011, and March 31, 2011.

12

EX-99.2

Exhibit 99.2

Third Quarter 2011 Earnings Call

Supplemental Slides

Exhibit 99.2

The information contained in this presentation includes certain estimates, projections and other forward-
looking information that reflect our current outlook, views and plans with respect to future events, including
legislative and regulatory developments, strategy, capital expenditures, financial performance, and
business model. These estimates, projections and other forward-looking information are based on
assumptions that HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will be
differences between such estimates and actual events or results, and those differences may be material.

There can be no assurance that any estimates, projections or forward-looking information will be realized.

All such estimates, projections and forward-looking information speak only as of the date hereof.
HealthSouth undertakes no duty to publicly update or revise the information contained herein.

You are cautioned not to place undue reliance on the estimates, projections and other forward-looking
information in this presentation as they are based on current expectations and general assumptions and
are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the
year ended December 31, 2010, our Form 10-Q for the quarters ended March 31, 2011, June 30, 2011, and
September 30, 2011, when filed, and in other documents we previously filed with the SEC, many of which
are beyond our control, that may cause actual events or results to differ materially from the views, beliefs
and estimates expressed herein.

Note Regarding Presentation of Non-GAAP Financial Measures
The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G
under the Securities Exchange Act of 1934. Schedules are attached that reconcile the non-GAAP financial
measures included in the following presentation to the most directly comparable financial measures
calculated and presented in accordance with Generally Accepted Accounting Principles in the United
States. Our Form 8-K, dated October 27, 2011, to which the following supplemental slides are attached as
Exhibit 99.2, provides further explanation and disclosure regarding our use of non-GAAP financial measures
and should be read in conjunction with these supplemental slides.

Forward-Looking Statements

2

Exhibit 99.2

Table of Contents

3

Exhibit 99.2

Q3 2011 Summary (Q3 2011 vs. Q3 2010)

üRevenue growth of 8.0%

―Inpatient revenue growth of 8.6%

§Discharge growth 5.1%

•Strong same-store discharge growth of 4.0%

§Revenue per discharge increase of 3.3%

üDisciplined expense management and improved operating leverage

―SWB as a percent of revenue decreased 110 bps.

―Hospital-related expenses as a percent of revenue decreased by 10 bps.

Location	# of Beds	Transaction	Date
Bristol, VA	25	De Novo	Q3 2010
Houston, TX	50	Acquired new IRF	Q3 2010

4

Exhibit 99.2

Q3 2011 Summary (Q3 2011 vs. Q3 2010) (cont.)

üAdjusted EBITDA (1) for the quarter of $110.5 million reflects growth of 15.2%.

üAdjusted free cash flow (1) for the quarter of $32.4 million:

―Benefited from higher Adjusted EBITDA

―Benefited from the absence of a swap payment ($10.6 million in Q3 2010)

―Offset by approx. $16 million for timing of interest payments

―Offset by approx. $17 million increase in accounts receivable

•Medicare payment deferrals related to legal entity reorganizations

•Increases resulting from revenue growth

üEarnings per share (2) were negatively impacted by an $18.5 million, or $0.20 per
share, increase in income tax expense mainly attributable to the release of the
valuation allowance in Q4 2010 (see table on slide 11).

(1)Reconciliation to GAAP provided on slides 31, 32, 34, and 37 - 38.

(2)Earnings per share from continuing operations attributable to HealthSouth

5

Expect full-year adjusted free cash flow to be at least $210 million
reflecting growth over full-year 2010 of at least 16%

Exhibit 99.2

Q3 2011 Summary (Q3 2011 vs. Q3 2010) (cont.)

üCompleted the sale of five long-term acute care hospitals (LTCHs) for approx.
$117.5 million.

üAdditional capital structure enhancements

―Completed the retirement of the10.75% senior notes due 2016

üTeamWorks Care Management implementation completed in all HealthSouth
hospitals

üClinical information system (CIS) implementation completed in second hospital

―Pilot phase now complete

―System-wide rollout will begin in 2012

6

Leverage ratio reduced to 2.9x (1)

(1)Based on trailing four-quarter Adjusted EBITDA of $455.4 million; reconciliation to GAAP provided on slides 31, 32, 34, and 38.

Exhibit 99.2

HealthSouth Functional Outcomes Continue to Outpace Industry Average

HealthSouth Average

UDS Average*

FIM Gain

LOS Efficiency

* Average = Expected, Risk-adjusted

Source:UDSmr Database - On Demand Report:Q3 2011 Report

FIM Gain

Change in Functional
Independence
Measurement (based

on an 18 point
assessment) from
admission to discharge.

LOS Efficiency

Functional gain divided
by length of stay.

High-Quality Care

7

Exhibit 99.2

―Inpatient revenue growth of 8.6%

§Discharge growth of 5.1%

•Strong same-store discharge growth of 4.0%

•Continued positive contribution from hospitals opened or acquired in the last 12 months

§Revenue per discharge increased 3.3%

•Medicare (2.25%) and managed care price adjustments

•Q3 2010 impacted by initial Medicare enrollment period (1) at hospitals opened in 2010

•Improved patient outcomes

―Outpatient and other revenue benefited from $1.7 million in state provider taxes.

8

(1)We generally do not receive full reimbursement for the first 30 Medicare patients discharged from a new hospital.

Exhibit 99.2

Expenses (Q3 2011 vs. Q3 2010)

üDisciplined expense management and improved operating leverage

―SWB as a percent of revenue decreased 110 bps.

§ Q3 2010 results impacted by the ramping up of new hospitals.

―Hospital-related expenses as a percent of revenue decreased 10 bps.

§Improved operating leverage offset by higher bad debt expense in Q3 2011

9

Exhibit 99.2

Adjusted EBITDA Change

Q39 Months

+$14.6M+$45.8M

+15.2%+15.4%

•Revenue growth driven
by higher volumes and
price

•Disciplined expense
management and
improved operating
leverage

10

Exhibit 99.2

11

(1)Income from continuing operations attributable to HealthSouth

(2)Actual tax provision recorded for the period

(3)Cash income taxes for the 3 and 9 months ended September 30, 2011 were $1.7 million and $5.9 million, respectively.

(4)During Q3 2010 and 9 months 2010, the Company maintained a valuation allowance against substantially all of its deferred tax assets. A substantial portion of the valuation
allowance was released in Q4 2010.

(5)Includes an approx. $28 million, or $0.30 per share, benefit related to the Company’s settlement 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.

(6)The $6.5 million and $19.5 million dividends related to our convertible perpetual preferred stock in the 3 and 9 month periods ended September 30, 2011 and 2010, respectively,
must be subtracted from income from continuing operations when calculating basic earnings per share.

(7)Diluted earnings per share on a GAAP basis are the same as basic earnings per share due to the antidilutive impact in each period presented.

Exhibit 99.2

•Adjusted free cash flow for the quarter was affected by:

–Benefited from higher Adjusted EBITDA

–Benefited from the absence of a swap payment ($10.6 million Q3 2010)

–Offset by approx. $16 million for the timing of interest payments

–Offset by approx. $17 million increase in accounts receivable

§Medicare payment deferrals related to legal entity reorganizations

§Increases resulting from revenue growth

12

Expect full-year adjusted free cash flow to be at least $210 million reflecting
growth over full-year 2010 of at least 16%

Exhibit 99.2

(1)Based on 2008 and trailing four-quarter Adjusted EBITDA of $322.6 million and $455.4 million, respectively; reconciliation to GAAP provided
on slides 31 - 34 and 38.

Debt and Liquidity

Liquidity

13

Credit Ratings

Exhibit 99.2

Debt Profile

14

$500

Revolver

L+225

September 30 , 2011 (3)

$276
Undrawn

2016

10% of the outstanding principal is
currently callable per annum at $103

(1)Based on trailing four-quarter Adjusted EBITDA of $455.4 million; reconciliation to GAAP provided on slides 31, 32, 34, and 38.

(2)The credit agreement has a $200 million restricted payment basket for debt repayment and stock repurchases, which is subject to
an annual grower basket equal to 50% of excess cash flow plus certain other amounts including net cash proceeds from certain
equity issuances.

(3)Does not include $387.4 million of convertible perpetual preferred stock and capital leases and other note payables.

Capital Structure Enhancements:

§Completed the retirement of the 10.75% notes due 2016

§Reduced total debt by $131 million during the quarter

§Leverage ratio reduced to 2.9x (1)

Debt Profile:

§Additional debt pre-payment opportunities and flexible covenants (2)

§No near-term maturities and well-spaced debt maturities

§Limited exposure to higher interest rates

Exhibit 99.2

Reinvesting Free Cash Flow

15

•Additional debt prepayment (revolver, term loan
and senior notes)

•Growth in core business

•Bed expansions

•De novo hospitals

•Hospital acquisitions

•Acute care IRF unit acquisitions/consolidations

•Purchase properties under operating leases

•Lower capital cost

•Greater control of property, CON and/or license

•Share repurchase ($125 million authorization)

−Offset dilution from shares underlying convertible
preferred shares (13.1 million shares), shares issued in
settlement of securities litigation (5.0 million shares),
and shares issued as a result of the Company’s stock
incentive plan

•Cash dividends (one time or regular)

Exhibit 99.2

2011 Guidance - Adjusted EBITDA(1)

Original Guidance

Feb.17, 2011

$440 million to $450
million (Inclusive of
12 monthsLTCH
Adjusted EBITDA)

(1) Reconciliation to GAAP provided on slides 31, 32, 34, and 38.

Q4 2011 Considerations:

üTough discharge volume comps (5.9% discharge growth in Q4 2010)

üBad debt expense was $1.3 million, or 0.3% of revenue, in Q4 2010.

üMedicare pricing in Q4 2011 is expected to increase by approx. 1.6%.

üSWB benefited in Q4 2010 from a $3.3 million favorable adjustment related to workers’
compensation.

16

July 27, 2011

$447 million to $453
million

May 18, 2011

$440 million to $450
million;
(The high end of, or
greater than)

Guidance effectively raised by the 2011
expected LTCH Adjusted EBITDA
($17.5 million EBITDA in 2010)

Reflects 9.9% to 11.1%growth over 2010

Oct.27, 2011

$450 million to $455
million

Raised Guidance

Exhibit 99.2

2011 Guidance - EPS

ü  The Adjusted EBITDA ($17.5 million in 2010) associated with the Company’s six LTCHs has been
      reclassified to discontinued operations.

Basic Earnings per Share from
Continuing Operations Attributable
to HealthSouth (1)

$1.18 to $1.23

Considerations:

üIncludes $38.8 million, or $0.42 per share, loss (pre-tax) on early extinguishment of debt related
to the Company’s retirement of its 10.75% senior notes

üIncludes an approx. $28 million, or $0.30 per share, benefit and assumes provision for income
tax of 38% to 40% for Q4 2011; cash taxes expected to be $5 million to $8 million.

ü$10.6 million, or $0.11 per share, gain (pre-tax) in government, class action, and related
settlements

üThe Company expects interest expenseto be approx. $24 million in Q4 2011.

üAssumes a basic share count of 93.3 million shares

(1)Income from continuing operations attributable to HealthSouth

17

Diluted earnings per share on a GAAP
basis are the same as basic earnings per
share due to the antidilutive impact in
the period.

Exhibit 99.2

(2)Income from continuing operations attributable to HealthSouth (reclassified for the 6 LTCHs moving to discontinued operations)

(3)Current period amounts in income tax provision; see slides 35 - 36.

(4)Total income tax provision for full-year 2010, including the reversal of a substantial portion of the Company's valuation allowance against deferred tax assets.

(5)Includes an approx. $28 million, or $0.30 per share, benefit related to the Company’s settlement 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; assumes 38% to 40% effective tax rate for Q4 2011.

(6)The dividends related to our convertible perpetual preferred stock must be subtracted from income from continuing operations when calculating basic
earnings per share.

18

Exhibit 99.2

(1)Reconciliation to GAAP provided on slide 37.

HealthSouth’s GAAP income statement will be affected by a
number of items that will not affect adjusted free cash flow:

•Normalized GAAP tax rate resulting from the valuation
allowance reversal in Q4 2010.

•Loss on early extinguishment of debt

Expect full-year adjusted free cash flow to be at least $210 million
reflecting growth over full-year 2010 of at least 16%

19

Exhibit 99.2

Appendix

Exhibit 99.2

(1)Reconciliation to GAAP provided on slides 31 - 38.

(2)Exclusive of any E&Y recovery.

21

Business Model

•Adjusted EBITDA CAGR: 5-8% (1)

•Adjusted Free Cash Flow CAGR: 12-17% (1)

Exhibit 99.2

Income Tax Considerations

GAAP Considerations:

•As of 9/30/11, the Company had an ending balance of approx. $1.3 billion in federal
 NOLs and a remaining valuation allowance of approx. $105 million, primarily related to
 state NOLs.

•Expect effective tax rate of approx. 40% going forward

Future Cash Tax Payments:

•The Company expects to pay approx. $5 million to $8 million per year of income tax.

•The Company does not expect to pay significant federal income taxes for up to 7
  years.

•HealthSouth is not currently subject to an annual use limitation (“AUL”) under Internal
  Revenue Code Section 382 (“Section 382”). A “change of ownership,” as defined by
  Section 382, would subject us to an AUL, which is equal to the market capitalization of
  the Company at the time of the “change of ownership” multiplied by the long-term
  tax exempt rate.

22

Exhibit 99.2

HealthSouth’s volume growth has outpaced competitors’

(2)Includes consolidated HealthSouth inpatient rehabilitation hospitals classified as same store during that time period.

Our Historic Discharge Growth vs. Industry

4.7%

5.9%

5.9%

5.8%

5.9%

2.7%

2.5%

1.3%

23

•TeamWorks = standardized and
enhanced sales & marketing

•Bed additions will help facilitate
continued organic growth

UDS Industry Sites(1)

HLS Same Store(2)

5.1%

6.1%

7.8%

Yearly
Discharge6.9%5.6%3.1%

Growth

2008 vs. 2009 vs.2010 vs.Q110 vs.Q210 vs.Q310 vs.Q410 vs.Q111 vs.Q211 vs.Q311 vs.

200720082009Q109Q209Q309Q409Q110 Q210Q310

Quarterly Discharge Growth

Same Store

HealthSouth vs. Industry

Exhibit 99.2

Debt Schedule

(1)Based on 4 quarter trailing and 2010 Adjusted EBITDA of $455.4 million and $409.6 million, respectively; reconciliation to GAAP provided
on slides 31, 32, 34, and 38.

24

Exhibit 99.2

Revenues & Expenses (9 Months)

25

Exhibit 99.2

26

Exhibit 99.2

Payment Sources (Percent of Revenue)

(1)Managed Medicare revenues represent ~ 7%, 8%, 7%, 8%, and 8% of total revenues for Q3 2011, Q3 2010, 9 Months 2011, and 9 Months
2010, Full Year 2010, respectively, and are included in “Managed care and other discount plans.”

27

Exhibit 99.2

Operational and Labor Metrics (1)

(1)Numbers have been reclassified to reflect current continuing operations.

(2)Represents discharges from HealthSouth’s 94 consolidated hospitals in Q3 2011, Q2 2011, Q1 2011, Q4 2010 and Q3 2010, 92
consolidated hospitals in Q2 2010, and 90 consolidated hospitals prior to Q2 2010.

(3)Excludes approximately 400 full-time equivalents, who are considered part of corporate overhead with their salaries and benefits
included in general and administrative expenses in the Company’s consolidated statements of operations. Full-time equivalents
included in the above table represent HealthSouth employees who participate in or support the operations of the Company’s
hospitals.

(4)Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full-
time equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of
occupied beds is determined by multiplying the number of licensed beds by the Company’s occupancy percentage.

28

Exhibit 99.2

29

Notes:

(1) Does not include 2.0 million warrants issued in connection with a January 2004 loan repaid to Credit Suisse First Boston. In connection
with this transaction, we issued warrants to the lender to purchase two million shares of our common stock. Each warrant has a term
of ten years from the date of issuance (expire January 16, 2014) and an exercise price of $32.50 per share. The warrants were not
assumed exercised for dilutive shares outstanding because they were antidilutive in the periods presented.

(2) The agreement to settle our class action securities litigation received final court approval in January 2007. These shares of common
stock and warrants were issued on September 30, 2009. The 5.0 million of common shares are now included in the outstanding shares.
The warrants to purchase approx. 8.2 million shares of common stock at a strike price of $41.40 (expire January 17, 2017) were not
assumed exercised for the dilutive shares outstanding because they are anti-dilutive in the periods presented.

(3) The difference between the basic and diluted shares outstanding is primarily related to our convertible perpetual preferred stock
(13.1 million shares). The preferred stock is convertible, at the option of the holder, at any time into shares of common stock at an
initial conversion price of $30.50 per share, which is equal to an initial conversion rate of approximately 32.7869 shares of common
stock per share of preferred stock, subject to a specified adjustment. On or after July 20, 2011, we may cause the shares of preferred
stock to be automatically converted into shares of our common stock at the conversion rate then in effect if the closing price of our
common stock for 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date we
give the notice of forced conversion exceeds 150% of the conversion price of the preferred stock.

Exhibit 99.2

Adjusted EBITDA (1) History

30

Exhibit 99.2

Reconciliation of Net Income to Adjusted EBITDA(1)(3)

(1) (2) (3) (4) - Notes on page 34

31

Exhibit 99.2

Reconciliation of Net Income to Adjusted EBITDA(1)(3)

(1) (2) (3) (4) - Notes on page 34.

32

Exhibit 99.2

Reconciliation of Net Income to Adjusted EBITDA(1) (3)

(1) (2) (3) (4) - Notes on page 34.

33

Exhibit 99.2

Reconciliation Notes for Slides 31-33

1.Adjusted EBITDA is a non-GAAP financial measure. The Company’s leverage ratio (total
consolidated debt to Adjusted EBITDA for the trailing four quarters) is, likewise, a non-
GAAP financial measure. Management and some members of the investment
community utilize Adjusted EBITDA as a financial measure and the leverage ratio as a
liquidity measure on an ongoing basis. These measures are not recognized in
accordance with GAAP and should not be viewed as an alternative to GAAP
measures of performance or liquidity. In evaluating Adjusted EBITDA, the reader should
be aware that in the future HealthSouth may incur expenses similar to the adjustments
set forth.

2.Per share amounts for each period presented are based on diluted weighted average
shares outstanding unless the amounts are antidilutive, in which case the per share
amount is calculated using the basic share count after subtracting the $6.5 million per
quarter dividend on the convertible perpetual preferred stock. The difference in shares
between the basic and diluted shares outstanding is primarily related to our
convertible perpetual preferred stock.

3.Adjusted EBITDA is a component of our guidance.

4.The dividends related to our convertible perpetual preferred stock must be subtracted
from income from continuing operations when calculating basic earnings per share.

34

Exhibit 99.2

35

Exhibit 99.2

Reconciliation Notes for Slide 35

1.Adjusted income from continuing operations and Adjusted EBITDA are non-GAAP financial
measures. The Company’s leverage ratio (total consolidated debt to Adjusted EBITDA for the
trailing four quarters) is, likewise, a non-GAAP financial measure. Management and some
members of the investment community utilize adjusted income from continuing operations as
a financial measure and Adjusted EBITDA and the leverage ratio as liquidity measures on an
ongoing basis. These measures are not recognized in accordance with GAAP and should not
be viewed as an alternative to GAAP measures of performance or liquidity. In evaluating
these adjusted measures, the reader should be aware that in the future HealthSouth may
incur expenses similar to the adjustments set forth.

2.Per share amounts for each period presented are based on basic weighted average
common shares outstanding for all amounts except adjusted income from continuing
operations per diluted share, which is based on diluted weighted average shares
outstanding. The difference in shares between the basic and diluted shares outstanding is
primarily related to our convertible perpetual preferred stock.

3.Adjusted income from continuing operations per diluted share and Adjusted EBITDA are two
components of our historical guidance.

4.The Company’s credit agreement allows certain other items to be added to arrive at
Adjusted EBITDA, and there may be certain other deductions required.

36

Exhibit 99.2

Adjusted Free Cash Flow

(1)Maintenance capital expenditures are expected to be $10 to $15 million higher in 2011 than in 2010.

(2)Final swap payment of $10.9 million was made in March 2011.

37

Exhibit 99.2

Net Cash Provided by Operating Activities

38