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): January 13, 2014

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:

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

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

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

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

ITEM 7.01. Regulation FD Disclosure.

HealthSouth Corporation (the “Company”) will participate in the 32^nd Annual J.P. Morgan Healthcare Conference in San Francisco, California on January 13-16, 2014. HealthSouth President and Chief Executive Officer, Jay Grinney, will make a presentation on Tuesday, January 14^th, at 10:30 a.m. PT/1:30 p.m. ET using the slides attached to this Current Report on Form 8-K as Exhibit 99.1 (the "Conference Slides"). The presentation will address, among other things, the Company's strategy and financial performance and discuss industry trends and dynamics. The presentation will be webcast live and will be available at http://investor.healthsouth.com by clicking on an available link. While the format of certain slides may have changed, the Conference Slides contain much of the same information as previously included in the Investor Reference Book filed in a Current Report on Form 8-K dated November 19, 2013.

While the Company has not closed its books for the quarter or year ended December 31, 2013, the Company will share its preliminary observations and considerations on the quarter and year ended December 31, 2013 in the Conference Slides. These preliminary observations and considerations on the quarter and year ended December 31, 2013 are:

▪ Volume. The Company continued to experience positive discharge growth and expects to report 3.8% and 5.0% discharge growth for the quarter and year ended December 31, 2013, respectively, compared to the same periods of 2012. The Company expects to report 2.5% new-store discharge growth for both the quarter and year ended December 31, 2013 compared to the same periods of 2012. The Company expects to report 1.3% and 2.5% same-store discharge growth for the quarter and year ended December 31, 2013, respectively, compared to the same periods of 2012. Same-store discharge growth for the quarter and year ended December 31, 2013 was negatively impacted by the divestiture of 41 skilled nursing facility beds in the first quarter of 2013.

▪ Pricing. The Company expects an approximate 3.4% increase in net patient revenue per discharge before sequestration for the quarter ended December 31, 2013 compared to the same period of 2012.

▪ Adjusted EBITDA. In the fourth quarter of 2013, the Company expects an Adjusted EBITDA reduction of approximately $8 million, net of noncontrolling interests, for sequestration.

• Salaries and Benefits. The fourth quarter of 2013 includes a 2.2% merit increase compared to an approximate $10 million bonus in lieu of a merit increase for the same period of 2012.

• Taxes. The Company assumes a provision for income tax of approximately 40% for the quarter ended December 31, 2013. The Company's 2013 provision for income tax includes an approximate $115 million, or $1.31 per basic share, benefit related to the Company's previously disclosed settlement with the IRS in April 2013. Cash taxes are expected to be approximately $7 million for the year ended December 31, 2013.

• Earnings per Share. For the year ended December 31, 2013, the Company's share count reflects the repurchase of approximately 9.1 million shares in the first quarter of 2013 through a tender offer. In the fourth quarter of 2013, the Company exchanged 257,110 shares of its 6.5% Series A Convertible Perpetual Preferred Stock for $320 million of new 2.0% Convertible Senior Subordinated Notes due 2043.

Based on its preliminary observations of continued strong operating results for the year ended December 31, 2013, the Company announced it is increasing previously provided Adjusted EBITDA and earnings per share guidance for 2013. Adjusted EBITDA guidance for 2013 has been increased from a range of $533 million to $538 million to a range of $542 million to $545 million. Earnings per share guidance for 2013 has been increased from a range of $2.43 to $2.46 per share to a range of $2.50 to $2.52 per share. Earnings per share are presented using income from continuing operations attributable to HealthSouth.

In addition, the Company will share its preliminary observations and considerations of adjusted free cash flow for 2013 and its preliminary assumptions around free cash flow for 2014 in the Conference Slides. These considerations around adjusted free cash flow include the following:

Certain Cash Flow Items	2012 Actuals	2013 Estimates	2014 Assumptions
	(In Millions)
Cash interest expense	$90.4	$95	$100
Cash payments for taxes, net of refunds	$11.8	$7	$10 to $15
Working capital and other	$28.2	$5 to $15	$10 to $20
Maintenance capital expenditures	$83.0	$87	$80 to $90
Dividends paid on preferred stock	$24.6	$23	$6

While the Company believes it will continue to generate strong free cash flow, the potential depletion of the Company's federal net operating loss during the 2014 to 2016 timeframe will affect its compound annual growth rate for free cash flow.

The Company will also discuss its opportunities for deploying its free cash flows. While the Company's free cash flow deployment priorities may shift based on prevailing market conditions, the Company's growth, debt reduction, and shareholder distribution opportunities include the following:

	2012 Actuals	2013 Estimates	2014 Assumptions
Growth in Core Business
Bed expansions (target approximately 80 beds/year) and unit consolidations	$16.6	$25	$20 to $30
New IRF's (target 4-6/year)	41.1	56	45 to 75
	$57.7	$81	$65 to $105, excluding acquisitions
Debt Reduction
Debt pay down, net (1)	—	$(257)	N/A
Purchase leased properties (2)	$19.1	90	$15 to $20
Shareholder Distribution
Convertible preferred stock repurchase (1)	46.5	248	—
Cash dividends on common stock (3)	—	16	64
Common stock repurchase ($200 million authorization) (4)	—	234	TBD
	$65.6	$331	TBD

⁽¹⁾ The Company issued $320 million of 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of the Company’s 6.5% Series A Convertible Perpetual Preferred Stock. No cash was used in the transaction. The Company expects to record approximately $248 million as debt and approximately $72 million as equity.

⁽²⁾ 2012 includes the purchase of the real estate (previously subject to an operating lease) associated with the Company's joint venture hospital in Fayetteville, Arkansas for approximately $15 million, half of which was reimbursed to the Company by its joint venture partner through a capital contribution. Also, 2012 and 2013 includes an investment for a replacement hospital for the Company's previously leased hospital in Ludlow, Massachusetts.

⁽³⁾ On July 25, 2013, the Company's board of directors approved the initiation of a quarterly cash dividend on the Company's common stock of $0.18 per share.

⁽⁴⁾ On October 25, 2013, the Company's board of directors authorized the repurchase of up to $200 million of the Company's common stock, subject to certain terms and conditions. The $234 million reflects the tender offer for approximately 9.5% of the common shares completed in the first quarter of 2013.

The Company uses “same-store” comparisons to explain the changes in certain performance metrics and line items within its financial statements. Same-store comparisons are calculated based on hospitals open throughout both the full current periods and throughout the full prior periods presented. These comparisons include the financial results of market consolidation transactions in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on the Company's results of operations.

The information contained herein is being furnished pursuant to 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, 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 Conference Slides attached hereto as Exhibit 99.1 includes 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 reconciles Adjusted EBITDA to net income in the Conference Slides attached hereto as Exhibit 99.1 and to net cash provided by operating activities below.

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 Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” and 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, 2012 (the “2012 Form 10‑K”). These covenants are material terms of the credit agreement. Noncompliance 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, paying common stock dividends, 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 consolidated net income (1) all unusual or nonrecurring items reducing consolidated net income (of which only up to $10 million in a year may be cash expenditures), (2) costs and expenses related to refinancing transactions (in years prior to 2012), (3) any losses from discontinued operations and closed locations, (4) costs and expenses, including legal fees and expert witness fees, incurred with respect to litigation associated with stockholder derivative litigation, including the matters related to Ernst & Young LLP and Richard Scrushy discussed in Note 19, Contingencies and Other Commitments, to the consolidated financial statements accompanying the 2012 Form 10-K and Note 10, Contingencies and Other Commitments, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of the Company’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2013 (the “September 2013 Form 10-Q”), and (5) share-based compensation expense. The Company also subtracts from consolidated net income all unusual or nonrecurring items to the extent they increase consolidated net income.

Under the credit agreement, the Adjusted EBITDA calculation does not include net income attributable to noncontrolling interests and includes (1) gain or loss on disposal of assets, (2) professional fees unrelated to the stockholder derivative litigation, and (3) unusual or nonrecurring cash expenditures in excess of $10 million. These items may not be indicative of the Company’s ongoing performance, so the Adjusted EBITDA calculation presented here includes adjustments for them.

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. 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 Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2012 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, pursue development activities, and return capital to its common stockholders. The calculation of adjusted free cash flow and a reconciliation of net cash provided by operating activities to adjusted free cash flow is included in the Conference Slides attached hereto as Exhibit 99.1. 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. The Company’s 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 consolidated statements of cash flows included in the 2012 Form 10-K and the condensed consolidated statements of cash flows included in the September 2013 Form 10-Q for the GAAP measures of cash flows from operating, investing, and financing activities.

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Year Ended December 31,
	2013			2012			2013			2012			2012			2011			2010			2009			2008
	(In Millions)
Net cash provided by operating activities	$	142.6		$	107.2		$	369.4		$	302.2		$	411.5		$	342.7		$	331.0		$	406.1		$	227.2
Provision for doubtful accounts	(8.0		)	(7.0		)	(22.4		)	(19.8		)	(27.0		)	(21.0		)	(16.4		)	(30.7		)	(23.0		)
Professional fees—accounting, tax, and legal	4.2			4.1			7.8			13.2			16.1			21.0			17.2			8.8			44.4
Interest expense and amortization of debt
discounts and fees	25.3			23.5			73.9			69.8			94.1			119.4			125.6			125.7			159.3
UBS Settlement proceeds, gross	—			—			—			—			—			—			—			(100.0		)	—
Equity in net income of nonconsolidated
affiliates	2.0			3.3			8.2			9.7			12.7			12.0			10.1			4.6			10.6
Net income attributable to noncontrolling
interests in continuing operations	(14.1		)	(12.8		)	(42.5		)	(38.6		)	(50.9		)	(47.0		)	(40.9		)	(33.3		)	(29.8		)
Amortization of debt discounts and fees	(1.0		)	(0.9		)	(3.0		)	(2.7		)	(3.7		)	(4.2		)	(6.3		)	(6.6		)	(6.5		)
Distributions from nonconsolidated affiliates	(4.6		)	(2.4		)	(9.6		)	(7.9		)	(11.0		)	(13.0		)	(8.1		)	(8.6		)	(10.9		)
Current portion of income tax expense (benefit)	2.5			(0.6		)	3.0			3.7			5.9			0.6			2.9			(7.0		)	(72.8		)
Change in assets and liabilities	(14.4		)	10.4			21.8			48.8			58.1			41.4			5.7			9.1			58.0
Net premium paid on bond
issuance/redemption	—			—			—			—			1.9			22.8			—			—			—
Net cash used in (provided by) operating
activities of discontinued operations	1.2			0.2			1.4			(1.5		)	(2.0		)	(9.1		)	(13.2		)	(5.7		)	(32.5		)
Other, including realized losses and (gains)
on sales of investments	(0.2		)	0.2			1.3			0.4			0.2			0.6			2.0			1.3			(1.4		)
Adjusted EBITDA	$	135.5		$	125.2		$	409.3		$	377.3		$	505.9		$	466.2		$	409.6		$	363.7		$	322.6

For the three months ended September 30, 2013, net cash used in investing activities was $95.8 million and resulted primarily from capital expenditures. Net cash used in financing activities during the three months ended September 30, 2013 was $50.5 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 September 30, 2012, net cash used in investing activities was $36.0 million and resulted primarily from capital expenditures. Net cash provided by financing activities during the three months ended September 30, 2012 was $50.8 million and resulted primarily from net proceeds from debt transactions offset by distributions paid to noncontrolling interests of consolidated affiliates and dividends paid on the Company's convertible perpetual preferred stock.

For the nine months ended September 30, 2013, net cash used in investing activities was $197.2 million and resulted primarily from capital expenditures and acquisition activity. Net cash used in financing activities during the nine months ended September 30, 2013 was $240.0 million and resulted primarily from repurchases of common stock as part of the tender offer completed in the first quarter of 2013.

For the nine months ended September 30, 2012, net cash used in investing activities was $124.3 million and resulted primarily from capital expenditures. Net cash used in financing activities during the nine months ended September 30, 2012 was $44.8 million and resulted primarily from repurchases of 46,645 shares of the Company's convertible perpetual preferred stock, distributions paid to noncontrolling interests of consolidated affiliates, and dividends paid on the Company's convertible perpetual preferred stock offset by net proceeds from debt transactions and capital contributions from consolidated affiliates.

For the year ended December 31, 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 December 31, 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 December 31, 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 December 31, 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.

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 sale of the Company’s hospital in Baton Rouge. Net cash used in financing activities during the year ended December 31, 2010 was $237.5 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.

For the year ended December 31, 2009, net cash used in investing activities was $133.0 million and resulted primarily from capital expenditures and net settlement payments related to interest rate swaps. Net cash used in financing activities during the year ended December 31, 2009 was $224.3 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.

For the year ended December 31, 2008, net cash used in investing activities was $40.0 million and resulted primarily from capital expenditures, including expenditures associated with development activities, and net settlement payments related to an interest rate swap offset by proceeds from asset disposals, including the Company’s corporate campus. Net cash used in financing activities during the year ended December 31, 2008 was $176.0 million and resulted primarily from net debt payments made during the period, as well as distributions paid to noncontrolling interests of consolidated affiliates and dividends paid on the Company’s perpetual preferred stock, offset by proceeds from the issuance of common stock.

Forward-Looking Statements

Statements contained in this document and the Conference Slides attached hereto as Exhibit 99.1 which are not historical facts are forward-looking statements. In addition, HealthSouth, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such estimates, projections, and

forward-looking information speak only as of the date hereof, and HealthSouth undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information, involve a number of risks and uncertainties, and relate to, among other things, future events, HealthSouth’s plan to repurchase its debt or equity securities, dividend strategies, 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, the price of HealthSouth's common or preferred stock as it affects the Company's willingness and ability to repurchase shares and the financial and accounting effects of any repurchases; any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings involving HealthSouth, including its pending HHS-OIG investigations; 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 December 31, 2012 and Form 10-Q for the quarters ended September 30, 2013, June 30, 2013, and March 31, 2013.

ITEM 9.01. Financial Statements and Exhibits.

(d)    Exhibits

99.1 Conference Slides of HealthSouth Corporation used in connection with its January 14, 2014 presentation at the 32^nd Annual J.P. Morgan Healthcare Conference in San Francisco.

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: January 13, 2014

EX-99.1

J . P . M o r g a n H e a l t h c a r e C o n f e r e n c e S a n F r a n c i s c o , C A │ J a n u a r y 1 4 , 2 0 1 4 Jay Grinney, President and Chief Executive Officer

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, development activities, dividend strategies, repurchases of securities, effective tax rates, 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, 2012, our Form 10-Q for the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013, 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 January 13, 2014, to which the following supplemental slides are attached as Exhibit 99.1, 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

Portfolio – As of December 31, 2013 103 Inpatient Rehabilitation Hospitals (“IRF”) • 31 operate as JV’s with Acute Care Hospitals 20 Outpatient Rehabilitation Satellite Clinics 25 Hospital-Based Home Health Agencies 28 + Puerto Rico Number of States ~ 23,600 Employees Key Statistics – TTM as of Sept 30, 2013 ~ $2.3 Billion Revenue 128,777 Inpatient Discharges 812,296 Outpatient Visits Patients Served Most Common Conditions (Q3 2013): 1. Neurological 22.4% 2. Stroke 16.0% 3. Other orthopedic conditions 9.7% 4. Fracture of the lower extremity 9.4% 5. Debility 8.7% 3 Marketshare ~ 9% of IRFs (Total in U.S. = 1,134) ~ 19% of Licensed Beds ~ 21% of Patients Served HealthSouth is the Nation’s leading IRF Owner and Operator New Hospitals Walton acquisition; 58-bed hospital in Augusta, GA; acquired April 1, 2013 Littleton, CO; 40-bed hospital; began accepting patients May 15, 2013 Stuart, FL; 34-bed hospital; began accepting patients June 5, 2013 CON approved for 50-bed hospital in Altamonte Springs, FL; expect to be operational Q4 2014 CON approved for 50-bed hospital in Newnan, GA; expect to be operational Q4 2014 CON approved for 34-bed hospital in Middletown, DE; expect to be operational Q4 2014 Purchased land for 50-bed hospital in Modesto, CA; expect to be operational in Q4 2015 CON approved for 40-bed hospital in Franklin, TN; under appeal

2013 Summary 4 Strong operating performance and operations enhancements Organic growth complemented by capacity expansions and new development Further strengthening of the balance sheet Significant shareholder distributions

2013 Highlights  2013 full-year discharge growth of approx. 5.0%; Same-store discharge growth of approx. 2.5%(1)  Integrated three new hospitals (Augusta, GA; Littleton, CO; Stuart, FL)  Continued quality improvement as measured by FIM® (2) gain (functional independence measure)  Installed clinical information system (CIS) in 20 additional hospitals bringing the total to 36 hospitals  Major renovations at two hospitals (Sunrise, FL; Chattanooga, TN)  96 HealthSouth hospitals have now received certification for one or more disease-specific certifications from the Joint Commission’s Disease-Specific Care Certification Program. 5 Strong Operating Performance and Operations Enhancements (1) Negatively impacted by the divestiture of 41 SNF beds in Q1 2013. (2)FIM ® is a registered trademark of Uniform Data System for Medical Rehabilitation, a division of UB Foundation Activities, Inc.

Capacity Expansions and New Development 2013 Highlights  Acquired Walton Rehabilitation Hospital (58 beds) in Augusta, GA, in April 2013  Opened two de novos:  Littleton, CO in May 2013 (40 beds)  Stuart, FL in June 2013 (34 beds)  Added 68 beds to existing hospitals  Moved into new HealthSouth Rehabilitation Hospital of Western Massachusetts in Ludlow, MA (53 beds) in December 2013. This hospital replaced a leased facility.  Broke ground in Q4 2013 on three de novos and expect all to be operational in Q4 2014:  Altamonte Springs, FL (50 beds)  Newnan, GA (50 beds)  Middletown, DE (34 beds) 6 Total incremental IRF beds added in 2013 = 200

Strengthened Balance Sheet 2013 Highlights  Amended and extended the revolving credit facility  Exchanged 257,110 shares of our convertible perpetual preferred stock for $320 million of 2.0% Convertible Senior Subordinated Notes due 2043 (non- cash transaction)  Purchased the real estate previously subject to leases associated with four of our hospitals (~ $70 million)  Redeemed 10% of the 2018 and 2022 Senior Notes (~$58 million)  Entered into agreements with the IRS resulting in increase of gross federal NOL of approx. $283 million 7

Significant Shareholder Distributions 2013 Highlights  Completed tender offer of common shares ―Approx. 9.5% (9,119,450) of our common shares were purchased at $25.50 per share. ― Total cost of approx. $234 million (including fees and expenses related to the tender offer)  Paid first quarterly cash dividend on common stock of $0.18 per share on October 15, 2013  Declared a quarterly cash dividend on common stock payable on January 15, 2014 to holders of record on January 2, 2014 8

Revised 2013 Guidance(1) (as of January 13, 2014) (1) The Company has not yet closed its books for Q4 2013 and year-end 2013. A number of items have not been finalized including insurance reserves (group medical, workers’ compensation, general and professional liability) and bad debt expense. (2) Reconciliation to GAAP provided on slides 20, 24, and 29. 9 Feb. 19, 2013 October 28, 2013 January 13, 2014 $506 million to $516 $533 million to $538 $542 million to $545 million million million October 28, 2013 $533 million to $538 million Earnings per Share from Continuing Operations Attributable to HealthSouth (2) Adjusted EBITDA (2) Original Guidance Revised Guidance Preliminary observations and considerations can be found in the appendix on slides 19 and 20. January 13, 2014 (1) $ 2.50 to $ 2.52

$1.81 $1.66 $1.51 $1.25 $1.25 $1.51 -2 -1 0 1 2 3 4 5 6 $1.00 $1.25 $1.50 $1.75 $2.00 YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 Sept. 30, 2013 Pro Forma Total Debt 5.6x 2.8x (3) (4) Reflects the exchange transaction (4) Strong Free Cash Flow and Balance Sheet Flexibility Facilitate Shareholder Value Creating Opportunities 10 Leverage Ratio (2) (billions) $9 $155 $181 $243 $268 $346 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 2008 2009 2010 2011 2012 Sept. 30, 2013 Trailing 4 Qtrs Adjusted Free Cash Flow (1) (millions) (1) Reconciliation to GAAP provided on slide 23. (2) Based on 2008 and pro forma 4 Qtr. trailing Adjusted EBITDA as of September 30, 2013 of $322.6 million and $537.9 million, respectively; reconciliation to GAAP provided on slides 24-29. (3) In November 2013, the Company redeemed $30.2 million and $27.9 million of its 7.25% Senior Notes due 2018 and its 7.75% Senior Notes due 2022, respectively. (4) On November 18, 2013, the Company closed separate, privately negotiated exchange agreements under which it issued $320 million of 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of the Company’s 6.5% Series A Convertible Perpetual Preferred Stock. The Company expects to record approx. $248 million as debt and approx. $72 million as equity. Cash Interest Expense $159 $98

Priorities for Reinvesting Free Cash Flow 11 Growth in Core Business Debt Reduction Shareholder Distribution (1) The Company has not yet closed its books for Q4 2013 and year-end 2013. (2) Issued $320 million of 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of the Company’s 6.5% Series A Convertible Perpetual Preferred Stock. No cash was used in the transaction. The Company expects to record approx. $248 million as debt and approx. $72 million as equity. (3) 2012 includes the purchase of the real estate (previously subject to an operating lease) associated with our joint venture hospital in Fayetteville, AR for approx. $15 million, half of which was reimbursed to us by our joint venture partner through a capital contribution; 2012 and 2013 include an investment for a replacement hospital for our previously leased hospital in Ludlow, MA. (4) On July 25, 2013, the board of directors approved the initiation of a quarterly cash dividend on our common stock of $0.18 per share. (5) On October 25, 2013, the board of directors authorized the repurchase of up to $200 million of our common stock, subject to certain terms and conditions. The $234 million reflects the tender offer for approx. 9.5% of the common shares completed in Q1 2013. (millions) 2014 Assumptions 2013 Estimates (1) 2012 Actuals Bed expansions (target ~ 80 beds/yr) and unit consolidations $20 to $30 $25 $16.6 New IRF's (target 4-6/yr) 45 to 75 56 41.1 $65 to $105, excluding acquisitions $81 $57.7 2014 Assumptions 2013 (1) Estimates 2012 Actuals Debt pay down, net (2) N/A ($257) - Purchase leased properties (3) $15 to $20 90 $19.1 Convertible preferred stock repurchase (2) - 248 46.5 Cash dividends on common stock (4) 64 16 - Common stock repurchase ($200 million authorization) (5) TBD 234 - TBD $331 $65.6 Remain s H ig h e st P rio rit y Objectives Achieved Complements Growth Investments

Core Business: Investment Considerations 12 (1) Future cash payback periods may increase when the Company exhausts its NOLs (slide 22). All projects have minimum IRR target of 15% (pre-tax). New Inpatient Rehabilitation Hospitals (IRFs) New IRFs – De Novos (40 bed) New IRFs - Acquisitions • Typical investment of $18 to $22 million per hospital • Cash Payback (1) = 5 to 7 years • May be structured as a joint venture • Inclusive of CON costs (where applicable) • Includes cost of CIS installation • Prototype includes all private rooms • A minimum of 30 patients treated for zero revenue (Medicare certification) • Core infrastructure of building anticipates future expansion; potential to enhance returns with future bed expansion • Price varies depending on size, market and physical asset • Cash Payback (1) = 4 to 6 years • May be structured as a joint venture • Clinical information system is additive to purchase price Value Added • TeamWorks approach to sales/marketing • Labor management tools and best practices • Clinical expertise • Clinical technology and programming • Supply chain efficiency • Medical leadership and clinical advisory boards Investment Considerations Same-Store Growth Bed Expansions Unit Consolidations • High incremental margins; best use of discretionary capex • May be subject to CON approval • Investment varies based on size and hospital configuration • Low risk - market presence and bed need well- established • May be structured as a joint venture • Improves occupancy in market • Facilitates future bed expansions

13 Summary: Multiple Avenues Available for Continued Growth The IRF patient population is experiencing favorable long-term demographic trends: • Aging of baby boomer generation • Increased average life expectancy • Low threat of technological obsolescence • The Company continues to have excellent organic growth opportunities, including bed expansions and unit consolidations. – Nondiscretionary nature of many conditions served – Track record of consistent market share gains • Organic growth will be complemented with new IRF’s. – De novos and IRF acquisitions will allow entry into, and growth in, new markets. – Proven track record of success • Longer-term consideration of opportunistic acquisitions of complementary post-acute services predicated on: – Regulatory clarity – Purchase price and terms and conditions (1) 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds – pages 10 and 22 As the 1946-1965 baby boom generation reaches 65, the growth in the number of beneficiaries increases from 2% to about 3%. (1)

31 joint ventures with acute care hospitals already in place (examples include): • Barnes-Jewish • University of Virginia Medical Center • Vanderbilt University Summary: Well Positioned for Shifts to Coordinated Care Delivery Models Participation in new delivery models: • Exploring ACO participation in several markets • Participating in bundled payment pilots Installing clinical information systems (CIS) in all HealthSouth hospitals: • 36 installations completed • Cerner custom system capable of interfaces with all major acute care EMR systems • Participating in Health Information Exchanges (HIE) High-quality, cost-effective provider: • FIM® gains consistently exceed industry results • Scale and operating leverage contribute to low cost per discharge (1) • On average, Medicare pays HealthSouth less per discharge although HealthSouth treats a higher acuity patient. (1) Flexibility in managing physical plant: • 102 HealthSouth IRF’s are free-standing • 75 HealthSouth IRF’s are owned vs. leased Strong balance sheet and free cash flow: • No significant debt maturities prior to 2018 • Relatively low financial leverage • Ample liquidity under revolving credit facility • Consistently strong free cash flow (1) Reference slide 8 in the Investor Reference Book at www.healthsouth.com/investors • Evolutionary rather than revolutionary • Strong balance sheet and free cash flow enhance flexibility 14

Appendix

Business Outlook: 2014 to 2016(1) Business Model • Adjusted EBITDA CAGR: 4-8% (2) • Continued strong free cash flow generation Strategy Leverage < 3.0x Debt to Adjusted EBITDA < 3.0x Debt to Adjusted EBITDA (subject to shareholder value-creating opportunities) Core Growth Same-store Growth (Includes bed expansions and unit consolidations) Consider opportunistic, disciplined acquisitions of complementary post-acute services (1) If legislation affecting Medicare is passed, HealthSouth will evaluate its effect on the Company’s business model. (2) This is a multi-year CAGR; annual results may fall outside the range. Reconciliation to GAAP provided on slides 23, 24, and 29. 16 New IRF’s = 3 Littleton, CO, Stuart, FL, Augusta, GA Key Operational Initiatives • Enhancing outcomes and patient experience • Implementing CIS: Target 20 hospitals/year; Installation complete in 36 hospitals through YE2013; Expect installation at all hospitals by YE2017. New IRF’s (target of 4-6/year) Altamonte Springs, FL; Newnan, GA; Middletown, DE Opportunistic Growth Bed expansion = 68 • Positioning for evolving delivery and payment models: ACO, bundling, etc. Shareholder Distribution • Quarterly cash dividends • Opportunistic share repurchases $233 million common stock tender; initiated dividends 2013 2014 2015 2016 Potential depletion of the federal NOL during the 2014 to 2016 timeframe will affect Cash Flow CAGR. New IRF’s (target of 4-6/year)

Business Outlook: Revenue Assumptions Revenue Volume • 2.5% to 3.5% annual growth (excludes acquisitions) • Includes bed expansions, de novos and unit consolidations Pricing 72% 8% 20% FY 2014 (3) FY 2015 FY 2016 Q4 13 - Q3 14 Q4 14 - Q3 15 Q4 15 - Q3 16 Market basket update (1) 2.6% 2.9% 2.9% Healthcare reform reduction 30 bps 20 bps 20 bps Productiv ity adjustment (1) 50 bps ~ 100 bps ~ 100 bps Medicare Pricing 2014 2015 2016 2-4% 2-4% 2-4% Expected Price Increases Managed Care Medicare Managed Care Other (1) Medicare IRF-PPS Notice for FY 2014 and management’s estimates for FY 2015 and FY 2016. (2) The Budget Control Act of 2011 included a reduction of up to 2% to Medicare payments for all providers that began on April 1, 2013 (as modified by H.R. 8). The reduction was made from whatever level of payment would otherwise have been provided under Medicare law and regulation. We currently estimate this automatic reduction, known as “sequestration,” will result in a net year-over-year decrease to our net operating revenues of approx. $8 million in 2014 (Anniversaries April 1, 2014). (3) HealthSouth believes, based on the Medicare IRF-PPS Rule for FY 2014, it should realize a net increase of approx. 1.95% in FY 2014 before sequestration. Because sequestration began in Q2 2013 and does not anniversary until Q2 2014, HealthSouth expects Medicare pricing after sequestration to be approx. flat for Q1 2014. 17 2% Sequestration (2)

Business Outlook: Expense Assumptions Expense Salaries & Benefits (1) Hospital Expenses • Other operating expenses and supply costs tracking with inflation • Occupancy costs declining as a percent of revenue • Bad debt expense of approx. 1.3% to 1.5 % 2014 2015 2016 Merit increases 2.0-2.5% 2.0-2.5% 2.0-2.5% Benefit costs in reases 5-8% 5-8% 5-8% General and Administrative ~4% of revenue (excludes stock-based compensation) Salaries & Benefits Hospital Expenses (1) Salaries, Wages and Benefits: ~ 89% Salaries and Wages; ~11% Benefits. 18

Revised Adjusted EBITDA (1) Guidance (1) Reconciliation to GAAP provided on slides 24 and 29. Q4 2013 preliminary observations and considerations:  Discharge growth of approx. 3.8%; New-store discharge growth of 2.5%  Revenue per discharge increase of approx. 3.4% before sequestration  Adjusted EBITDA reduction of approx. $8 million (net of noncontrolling interests) for sequestration  Q4 2013 included a 2.2% merit increase vs. an approx. $10 million bonus in lieu of a merit increase in Q4 2012.  The Company has not yet closed its books for Q4 2013 and year-end 2013. A number of items have not been finalized including insurance reserves (group medical, workers’ compensation, general and professional liability) and bad debt expense. 19 Revised Guidance Original Guidance Feb. 19, 2013 $506 million to $516 million January 13, 2014 $542 million to $545 million October 28, 2013 $533 million to $538 million Reflects 7.1% to 7.7% growth over 2012 including three quarters of sequestration

Revised Earnings Per Share Guidance (1) Revised 2013 Guidance Earnings per Share from Continuing Operations Attributable to HealthSouth (2) $ 2.50 to $ 2.52 Considerations:  Higher depreciation and amortization related to recent capital investments  Assumes provision for income tax of approx. 40% in Q4 2013 (cash taxes expected to be $7 million for full year 2013)  Includes the $1.31 per basic share income tax benefit related to the IRS settlement (slide 22)  Share count reflects the repurchase of approx. 9.1 million shares in Q1 2013 through a tender offer.  Includes the exchange of 257,110 shares of Convertible Perpetual Preferred Stock for $320 million of 2.0% Convertible Senior Subordinated Notes due 2043. (1) The Company has not yet closed its books for Q4 and year-end 2013. (2) Income from continuing operations attributable to HealthSouth (3) See notes 2-5 on slide 29. 20 Actual Low High (In Millions, Except Per Share Data) 2012 Adjusted EBITDA 505.9$ 542$ 545$ Interest expense and amortization of debt discounts and fees (94.1) Depreciation and amortization (82.5) Stock-based compensation expense (24.1) Other, including noncash loss on disposal of assets (4.4) 300.8 314 317 Certain Nonrecurring Expenses: Government, class action, and related settlements 3.5 Professional fees - accounting, tax, and legal (16.1) Loss on early extinguishment of debt (4.0) Gain on consolidation of St. Vincent Rehabilitation Hospital 4.9 Pre-tax income 289.1 327 330 Income tax (108.6) (10) (11) Income from continuing operations (2) 180.5 317 319 Income allocated to participating securities (2.2) (4.0) (4.0) Convertible perpetual preferred dividends (23.9) (21.0) (21.0) Repurchase of convertible perpetual preferred stock (0.8) (72.0) (72.0) Basic shares 94.6 88.1 88.1 Diluted shares 108.1 102.1 102.1 Earnings per share (3) 1.62$ (3) 2.50$ 2.52$ - (2) 24 (9) (7) EPS Guidance 2013 (101) (95) (25)

2014 to 2016 Adjusted Free Cash Flow (1) Considerations (1) Reconciliation to GAAP is provided on slide 23. (2) Definition of adjusted free cash flow is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, net settlements on interest rate swaps, dividends paid on preferred stock, distributions to noncontrolling interests, and nonrecurring items. Common stock dividends (approx. $16 million paid in Q4 2013) are not included in the calculation of adjusted free cash flow. (3) The Company has not yet closed its books for Q4 2013 or year-end 2013. (4) Net of amortization of debt discounts and fees (5) Approx. $21 million of preferred dividends will be incurred in 2013 while approx. $23 million will be paid due to cash payment of each declared preferred dividend on a quarter lag. 21 Certain Cash Flow Items (2) (millions) 2012 Actual 2013 Estimate (3) 2014 Assumptions • Cash interest expense (4) $90.4 $95 $100 • Cash payments for taxes, net of refunds $11.8 $7 $10 to $15 • Working capital and other $28.2 $5 to $15 $10 to $20 • Maintenance CAPEX $83.0 $87 $80 to $90 • Dividends paid on preferred stock $24.6 $23 (5) $6 Reflects: • Continued spending on the CIS and hospital refresh projects • Completion of delevering and refinancing $181 $243 $268 2010 2011 2012 Trailing 4 Qtrs Adjusted Free Cash Flow (1) (millions) $346

Income Tax Considerations GAAP Considerations: •As of 9/30/13, the Company’s federal NOL had a gross balance of approx. $1.0 billion. ― Includes the approx. $283 million increase in the federal NOL (on a gross basis) as a result of the April 25, 2013 agreements with the IRS • The Company has a remaining valuation allowance of approx. $36 million, primarily related to state NOLs. Cash Tax Payments: • In 2013, the Company expects to pay approx. $7 million of income tax, net of refunds. • In 2014, the Company expects to pay approx. $10 to $15 million of income tax, net of refunds. •HealthSouth is not currently subject to an annual use limitation (“AUL”) under Internal Revenue Code Section 382 (“Section 382”). An “ownership change,” as defined by Section 382, could subject the Company to an AUL, which would approximate the value of the Company at the time of the “ownership change” multiplied by the long- term tax exempt rate. 22

Adjusted Free Cash Flow (Millions) 2013 2012 2013 2012 2012 2011 2010 2009 2008 142.6$ 107.2$ 369.4$ 302.2$ 411.5$ 342.7$ 331.0$ 406.1$ 227.2$ 1.2 0.2 1.4 (1.5) (2.0) (9.1) (13.2) (5.7) (32.5) Capital expenditures for maintenance (1) (18.6) (17.9) (54.3) (68.0) (83.0) (50.8) (37.9) (33.2) (41.5) Net settlements on interest rate swaps (2) - - - - - (10.9) (44.7) (42.2) (20.7) Div idends paid on convertible perpetual preferred stock Distributions paid to noncontrolling interests of consolidated affiliates Non-recurring items: UBS Settlement proceeds, less fees to derivative plaintiffs' attorneys Net premium paid (received) on bond issuance/redemption - - - - 1.9 22.8 - - - Cash paid for professional fees - accounting, tax, and legal Cash paid for government, class action, and related settlements Income tax refunds related to prior periods - - - - - (7.9) (13.5) (63.7) (89.4) Adjusted free cash flow 106.4$ 71.6$ 264.6$ 186.8$ 268.0$ 243.3$ 181.4$ 155.4$ 9.3$ - 1.7 4.1 Q3 143.8 107.4 (5.7) (5.8) (4.6) (2.6) (10.2) (13.6) - - 5.3 13.2 (5.9) (2.6) 11.2 17.2 - (2.6) 16.1 Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow - 300.7 (17.2) (18.9) 15.3 Full Year 317.8 (24.6) (33.4) 409.5 - (49.3) - (73.8) (32.6) 5.7 2.9 21.0 7.4 333.6 (26.0) (44.2) 194.7 (26.0) activities of continuing operations Net cash provided by operating Impact of discontinued operations (34.1) (37.6) Net cash provided by operating activities 9 Months 370.8 - 18.2 400.4 (34.4) (26.0) (26.0) (1) Maintenance capital expenditures are expected to be $80 to $90 million in the next two to three years. (2) Final swap payment of $10.9 million was made in March 2011. 23

Reconciliation of Net Income to Adjusted EBITDA (1) (1) (2) – See notes 1 and 2 on slide 29. (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Net income 65.9$ 179.0$ 72.3$ 317.2$ Loss (income) from disc ops, net of tax, attributable to HealthSouth 0.4 (0.1) 0.9 1.2 Net income attributable to noncontrolling interests (14.6) (13.8) (14.1) (42.5) Income from continuing operations attributable to HealthSouth (2) 51.7 0.48$ 165.1 1.66$ 59.1 0.59$ 275.9 2.69$ Gov't, class action, and related settlements - (2.0) (21.3) (23.3) Pro fees - acct, tax, and legal 1.4 2.2 4.2 7.8 Provision for income tax expense (benefit) 33.5 (86.5) 35.2 (17.8) Interest expense and amortization of debt discounts and fees 24.2 24.4 25.3 73.9 Depreciation and amortization 22.1 23.1 24.3 69.5 Other, including net noncash loss on disposal of assets 0.1 1.7 2.5 4.3 Stock-based compensation expense 6.3 6.5 6.2 19.0 Adjusted EBITDA (1) 139.3$ 134.5$ 135.5$ 409.3$ Weighted average common shares outstanding: Basic 94.0 86.1 86.2 88.7 Diluted 107.1 99.8 100.4 102.4 2013 9 MonthsQ1 Q2 Q3 24

Reconciliation of Net Income to Adjusted EBITDA (1) (1) (2) – See notes 1-3 on slide 29. (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income 56.8$ 59.9$ 59.9$ 59.3$ 235.9$ Loss (income) from disc ops, net of tax, attributable to HealthSouth 0.4 (3.5) 0.5 (1.9) (4.5) Net income attributable to noncontrolling interests (12.6) (13.2) (12.8) (12.3) (50.9) Income from continuing operations attributable to HealthSouth (2) 44.6 0.39$ 43.2 0.38$ 47.6 0.44$ 45.1 0.41$ 180.5 1.62$ Gov't, class action, and related settlements - - (3.5) - (3.5) Pro fees - acct, tax, and legal 3.6 5.5 4.1 2.9 16.1 Provision for income tax expense 29.1 26.9 28.1 24.5 108.6 Interest expense and amortization of debt discounts and fees 23.3 23.0 23.5 24.3 94.1 Depreciation and amortization 19.5 20.0 21.3 21.7 82.5 Loss on early extinguishment of debt - - 1.3 2.7 4.0 Gain on consolidation of St. Vincent Rehabilitation Hospital - - (4.9) - (4.9) Other, including net noncash loss on disposal of assets 0.8 0.6 1.6 1.4 4.4 Stock-based compensation expense 6.1 5.9 6.1 6.0 24.1 Adjusted EBITDA (1) 127.0$ 125.1$ 125.2$ 128.6$ 505.9$ Weighted average common shares outstanding: Basic 94.5 94.6 94.7 94.7 94.6 Diluted 108.7 108.0 108.1 108.0 108.1 2012 Full YearQ1 Q2 Q4Q3 25

Reconciliation of Net Income to Adjusted EBITDA (1) (1) (2) – See notes 1-3 on slide 29. 26 (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income 91.5$ 32.3$ 68.3$ 62.5$ 254.6$ (Income) loss from disc ops, net of tax, attributable to HealthSouth (17.6) (2.5) (34.8) 5.0 (49.9) Net income attributable to noncontrolling interests (11.7) (10.4) (11.3) (12.5) (45.9) Income from continuing operations attributable to HealthSouth (2) 62.2 0.57$ 19.4 0.14$ 22.2 0.17$ 55.0 0.50$ 158.8 1.39$ Gov't, class action, and related settlements - (10.6) - (1.7) (12.3) Pro fees - acct, tax, and legal 3.8 8.4 4.0 4.8 21.0 Provision for income tax (benefit) expense (7.4) 11.2 18.1 15.2 37.1 Interest expense and amortization of debt discounts and fees 35.1 34.9 26.3 23.1 119.4 Depreciation and amortization 19.5 19.6 19.5 20.2 78.8 Loss on early extinguishment of debt - 26.1 12.7 - 38.8 Net noncash loss on disposal of assets 0.1 1.0 2.8 0.4 4.3 Stock-based compensation expense 4.2 5.3 4.9 5.9 20.3 Adjusted EBITDA (1) 117.5$ 115.3$ 110.5$ 122.9$ 466.2$ Weighted average common shares outstanding: Basic 93.1 93.3 93.3 93.3 93.3 Diluted 109.0 109.5 109.2 109.1 109.2 2011 Q1 Q2 Full YearQ3 Q4

Reconciliation of Net Income to Adjusted EBITDA (1) (1) (2) – See notes 1-3 slide 29. (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income 50.5$ 57.5$ 41.9$ 789.9$ 939.8$ Income from disc ops, net of tax, attributable to HealthSouth (1.2) (3.4) (3.4) (1.2) (9.2) Net income attributable to noncontrolling interests (9.8) (10.2) (10.1) (10.7) (40.8) Income from continuing operations attributable to HealthSouth (2) 39.5 0.35$ 43.9 0.40$ 28.4 0.23$ 778.0 7.15$ 889.8 8.20$ Gov't, class action, and related settlements - - 0.8 0.3 1.1 Pro fees - acct, tax, and legal 2.9 5.7 5.2 3.4 17.2 Loss (gain) on interest rate swaps 4.3 (0.3) 9.0 0.3 13.3 Provision for income tax expense (benefit) 2.4 (1.3) (0.4) (741.5) (740.8) Interest expense and amortization of debt discounts and fees 30.5 30.1 30.8 34.2 125.6 Depreciation and amortization 17.5 17.8 18.4 19.4 73.1 Net noncash loss on disposal of assets - 0.4 0.1 0.9 1.4 Loss on early extinguishment of debt 0.3 0.1 - 11.9 12.3 Stock-based compensation expense 3.8 4.0 3.4 5.2 16.4 Other - - 0.2 - 0.2 Adjusted EBITDA (1) 101.2$ 100.4$ 95.9$ 112.1$ 409.6$ Weighted average common shares outstanding: Basic 92.7 92.8 92.8 92.8 92.8 Diluted 108.0 108.2 108.3 108.8 108.5 2010 Q1 Q2 Q3 Q4 Full Year 27

Reconciliation of Net Income to Adjusted EBITDA (1) (in millions, except per share data) Total Per Share Total Per Share Net income 281.8$ 128.8$ Income from disc ops, net of tax, attributable to HealthSouth (32.5) (17.7) Net income attributable to noncontrolling interests (29.4) (34.0) Income from continuing operations attributable to HealthSouth (2) 219.9 2.28$ 77.1 0.57$ Gain on UBS Settlement (121.3) - Gov't, class action, and related settlements (67.2) 36.7 Pro fees - acct, tax, and legal 44.4 8.8 Loss on interest rate swaps 55.7 19.6 Provision for income tax benefit (69.1) (2.9) Interest expense and amortization of debt discounts and fees 159.3 125.7 Depreciation and amortization 78.9 67.6 Impairment charges, including investments 2.4 1.4 Net noncash loss on disposal of assets 2.0 3.4 Loss on early extinguishment of debt 5.9 12.5 Stock-based compensation expense 11.7 13.4 Other - 0.4 Adjusted EBITDA (1) 322.6$ 363.7$ Weighted average common shares outstanding: Basic 83.0 88.8 Diluted 96.4 103.3 2008 2009 (1) (2) – See notes 1-3 on slide 29. 28

Reconciliation Notes 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 quarterly dividend on the convertible perpetual preferred stock and income allocated to participating securities. The difference in shares between the basic and diluted shares outstanding is primarily related to the convertible senior subordinated notes and our convertible perpetual preferred stock. 3. In conjunction with the initiation of quarterly cash dividends in the third quarter of 2013, the Company revised its calculation to present earnings per share using the two-class method, which takes into consideration the impact of participating securities. Additional information regarding this revision and 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 the Form 10-Q for the quarterly period ended September 30, 2013. 4. Diluted earnings per share are the same as basic earnings per share due to antidilution. 5. The difference between the basic and diluted shares outstanding is primarily related to the convertible senior subordinated notes and our convertible perpetual preferred stock (convertible into 8.1 million and 3.2 million common shares, respectively, as of year-end 2013). a. On November 18, 2013, the Company closed separate, privately negotiated exchanges in which it issued $320 million of 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of the Company’s 6.5% Series A Convertible Perpetual Preferred Stock. The Company expects to record approx. $248 million as debt and approx. $72 million as equity. The convertible notes are convertible, at the option of the holders, at any time on or prior to the close of business on the business day immediately preceding December 1, 2043 into shares of the Company’s common stock at a conversion rate of approx. 25.22 shares per $1,000 in principal amount, which is equal to a conversion price of approximately $39.65 per share, subject to customary anti-dilution adjustments. The Company has the right to redeem the convertible notes before December 1, 2018 if the volume weighted average price of the Company’s common stock is at least 120% ($47.58) of the conversion price of the convertible notes for a specified period. On or after December 1, 2018, the Company may, at its option, redeem all or any part of the convertible notes. In either case, the redemption price will be equal to 100% of the principal amount of the convertible notes to be redeemed, plus accrued and unpaid interest. As a result of the transaction, the dividend on the convertible perpetual preferred stock was reduced from approx. $5.7 million per quarter to approx. $1.6 million per quarter. b. The 96,245 shares of preferred stock outstanding after the exchange transaction are convertible at the option of the holder, at any time into shares of common stock at a conversion price of $30.17 per share, which is equal to a conversion rate of approx. 33.15 shares of common stock per share of preferred stock, subject to a specified adjustment. We may at any time 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% ($45.25) of the conversion price of the preferred stock. 29