BIRMINGHAM, Ala., Oct. 28, 2015 /PRNewswire/ -- HealthSouth Corporation (NYSE: HLS), one of the nation's largest providers of post-acute healthcare services, offering both facility-based and home-based post-acute services, today reported its results of operations for the third quarter ended September 30, 2015.

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"Both segments experienced strong volume and net revenue growth in the third quarter with inpatient discharges increasing 9.6% and home health admissions from agencies owned by Encompass prior to 2014 increasing 17.1% year over year," said Jay Grinney, President and Chief Executive Officer of HealthSouth. "We acquired Reliant Hospital Partners on October 1st, and we expect to close our acquisition of CareSouth on November 1st. These acquisitions are expected to contribute between $20 million and $25 million of incremental Adjusted EBITDA in the fourth quarter and, along with new hospitals and home health agencies that are expected to open in 2016, establish a solid foundation for continued, future growth."

Third Quarter Consolidated Results


    --  The Company's consolidated net operating revenues increased by $181.7
        million, or 30.4%, in the third quarter of 2015 compared to the third
        quarter of 2014. Approximately $125 million of this increase resulted
        from the Company's acquisition of Encompass Home Health and Hospice
        ("Encompass") on December 31, 2014. The remainder of the increase
        predominantly came from the Company's inpatient rehabilitation
        hospitals. Net operating revenues from the Company's inpatient
        rehabilitation segment were 10.5% higher for the third quarter of 2015
        compared to the same quarter of 2014.
    --  Income from continuing operations attributable to HealthSouth per
        diluted share for the third quarter of 2015 was $0.52 per share compared
        to $0.53 per share for the third quarter of 2014. Earnings per share for
        the third quarter of 2015 were negatively impacted by (1) lower pricing
        growth and expense headwinds in the inpatient rehabilitation segment (as
        discussed below), (2) higher interest expense due to the debt used to
        fund the acquisitions of Encompass and Reliant Hospital Partners, LLC
        and affiliated entities ("Reliant"), (3) increased depreciation and
        amortization resulting from the Company's capital expenditures and
        development activities throughout 2014 and 2015, and (4) a higher
        effective income tax rate. The Company's effective income tax rate in
        2014 was reduced as a result of the nontaxable gain related to its
        acquisition of an additional 30% equity interest in Fairlawn
        Rehabilitation Hospital and the election to claim certain tax credits.
    --  Cash flows provided by operating activities were $368.2 million for the
        nine months ended September 30, 2015 compared to $374.7 million for the
        nine months ended September 30, 2014. This decrease primarily resulted
        from increases in working capital and cash interest expense, as well as
        transaction costs related to the Company's acquisition of Reliant and
        pending acquisition of the home health agency operations of CareSouth
        Health System, Inc. ("CareSouth").
    --  Adjusted EBITDA (see attached supplemental information) for the third
        quarter of 2015 was $165.4 million compared to $140.0 million for the
        third quarter of 2014, an increase of 18.1%.
    --  Adjusted free cash flow (see attached supplemental information) for the
        third quarter of 2015 was $132.0 million compared to $103.3 million for
        the third quarter of 2014 primarily due to the Company's growth in
        Adjusted EBITDA.

Third Quarter Results -- Home Health and Hospice Segment

The Company's home health and hospice segment reported $127.0 million of net operating revenues and $20.7 million of Adjusted EBITDA for the third quarter of 2015. The results of operations for the home health and hospice segment in 2014 include only HealthSouth's legacy hospital-based home health agencies. The increase in net operating revenues and Adjusted EBITDA (see attached supplemental information) for the Company's home health and hospice segment in 2015 resulted from its acquisition of Encompass on December 31, 2014.

Within Encompass, revenue and volume growth were driven both by locations owned prior to 2014 and those acquired during 2014. In the third quarter of 2015, for those locations owned by Encompass prior to 2014, admissions increased 17.1%, recertifications increased 8.7%, and episodes increased 11.9%, all as compared to the third quarter of 2014. This growth includes volumes resulting from Encompass' integration of 12 HealthSouth legacy home health agencies that were relocated or merged into existing Encompass locations (i.e., market consolidations).

Third Quarter Results -- Inpatient Rehabilitation Segment


    --  Net operating revenues for the inpatient rehabilitation segment were
        $651.6 million for the third quarter of 2015 compared to $589.9 million
        for the third quarter of 2014, an increase of 10.5%. This increase was
        attributable to a 9.6% increase in patient discharges and a 1.2%
        increase in net patient revenue per discharge. Discharge growth included
        a 3.9% increase in same-store discharges and a 5.7% increase in
        new-store discharges. Discharge growth from new stores resulted from
        three de novo hospitals that opened in the fourth quarter of 2014
        (Altamonte Springs, Florida; Newnan, Georgia; and Middletown, Delaware),
        the Company's acquisitions of Quillen Rehabilitation Hospital in Johnson
        City, Tennessee (November 2014) and Cardinal Hill Rehabilitation
        Hospital in Lexington, Kentucky (May 2015), and the Company's joint
        venture with Memorial Health in Savannah, Georgia (April 2015). Similar
        to the second quarter of 2015, pricing growth was impacted by
        proportionally higher discharge growth in Medicaid and managed care
        payors, where the Company's reimbursement is lower. Pricing for the
        third quarter of 2015 was also impacted by lower average acuity of the
        patients treated. Additional information regarding payor mix trends can
        be found on page 10 of the supplemental slides posted on the Company's
        website at http://investor.healthsouth.com.
    --  Adjusted EBITDA (see attached supplemental information) from the
        inpatient rehabilitation segment for the third quarter of 2015 was
        $166.2 million compared to $161.5 million for the third quarter of 2014.
        This segment's Adjusted EBITDA was impacted in the third quarter of 2015
        by (1) deleveraging of salaries and benefits as a percent of revenue
        (inclusive of a $4.5 million increase to group medical insurance
        reserves), (2) increased bad debt expense from continued pre-payment
        claims denials predominantly by one of the Company's Medicare
        Administrative Contractors, and (3) incremental investments in the
        Company's operating platform, as previously disclosed. Increases in
        group medical costs resulted from an increase in the number and size of
        large claims (claims >$100,000) and an increase in the cost and use of
        specialty pharmaceuticals. Additional information regarding group
        medical costs and pre-payment claims denials can be found on pages 12
        through 14 of the supplemental slides posted on the Company's website at
        http://investor.healthsouth.com.

"The volume growth we have generated in both of our businesses this year is indicative of the underlying demand for the services we provide, and we continue to make tangible progress on clinical collaboration," said Doug Coltharp, Executive Vice President and Chief Financial Officer of HealthSouth. "While lower than anticipated pricing and expense challenges have impacted our Adjusted EBITDA flow through, we remain confident in our ability to adjust to changes in our environment."

Debt Transactions

In August 2015, the Company issued an additional $350 million of 5.75% Senior Notes due 2024 (the "2024 Notes") at a price of 100.5% of the principal amount, which resulted in approximately $351 million in net proceeds from the private offering. In September 2015, the Company issued $350 million of 5.75% Senior Notes due 2025 at par, which resulted in approximately $344 million in net proceeds from the private offering. On October 1, 2015, the Company used proceeds from both offerings to fund a portion of the Reliant acquisition.

On October 28, 2015, the Company gave notice of its intent to redeem $50 million of the outstanding principal amount of its 7.75% Senior Notes due 2022. This optional redemption will be made at a price of 103.875% pursuant to the underlying indenture. The Company plans to use cash on hand and borrowings under its senior secured credit facility to fund the redemption, which is expected to be completed on November 30, 2015.

Development Activity

On October 1, 2015, the Company completed its previously announced acquisition of Reliant for a cash purchase price of approximately $730 million. Reliant operates a portfolio of 11 inpatient rehabilitation hospitals in Texas, Massachusetts, and Ohio for a total of 902 beds. All of the Reliant hospitals are leased, and seven of the leases are treated as capital leases for accounting purposes. The Company assumed the lease obligations of all the acquired hospitals. The amount of the capital lease obligation to be recognized on the Company's balance sheet is preliminarily estimated at approximately $210 million.

On August 31, 2015, the Company announced that Encompass had entered into a definitive agreement to acquire CareSouth for a cash purchase price of approximately $170 million. CareSouth operates a portfolio of 45 home health locations in 7 states. This transaction is expected to close on November 1, 2015. The Company expects to fund the transaction with senior debt and cash on hand.

During the third quarter of 2015, Encompass acquired three home health locations and two hospice locations and opened one new home health location.

2015 Guidance

The Company is updating its Adjusted EBITDA guidance range to $675 million to $685 million for 2015. This range assumes the inpatient rehabilitation segment pricing, salaries and benefits (including increased group medical claims activity), and bad debt expense trends continue in the fourth quarter of 2015. In addition, this guidance range includes an expected combined Adjusted EBITDA contribution of $20 million to $25 million from Reliant and CareSouth in the fourth quarter of 2015.

The Company also is updating its previously provided earnings per diluted share guidance for 2015 to a range of $1.94 to $1.99 per share to include the above as well as expenses associated with the Reliant and CareSouth acquisitions. These expenses include (1) increased interest resulting from the debt associated with the funding of these acquisitions, (2) depreciation and amortization associated with the assets acquired, and (3) transaction fees ($5.6 million incurred to date; approximately $5 million expected to be incurred in the fourth quarter of 2015). In addition, and in connection with the redemption of a portion of the 7.75% Senior Notes due 2022 in November 2015, the Company expects to record a loss on early extinguishment of debt of approximately $2 million in the fourth quarter of 2015.

Earnings per share are presented using income from continuing operations attributable to HealthSouth.

Earnings Conference Call and Webcast

The Company will host an investor conference call at 9:00 a.m. Eastern Time on Thursday, October 29, 2015 to discuss its results for the third quarter of 2015. 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 42795111. 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.

An on-line replay of the conference call will be available after the live broadcast at http://investor.healthsouth.com.

About HealthSouth

HealthSouth is one of the nation's largest providers of post-acute healthcare services, offering both facility-based and home-based post-acute services in 33 states and Puerto Rico through its network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies. 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, 2015 (the "September 2015 Form 10-Q"), when filed, as well as the Company's Current Report on Form 8-K filed on October 28, 2015. In addition, the Company will post supplemental slides today on its website at http://investor.healthsouth.com for reference during its October 29, 2015 earnings call.

When filed, the September 2015 Form 10-Q can be found on the Company's website at http://investor.healthsouth.com and the SEC's website at www.sec.gov.



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

                                                                                            Three Months Ended                                Nine Months Ended
                                                                                               September 30,                                    September 30,
                                                                                               -------------                                    -------------

                                                                                           2015                   2014                    2015                         2014
                                                                                           ----                   ----                    ----                         ----

                                                                                                                        (In Millions)

    Net operating revenues                                                                         $778.6                                        $596.9                     $2,283.6  $1,792.5

    Less: Provision for doubtful accounts                                                (10.7)                           (8.2)                             (33.2)          (25.0)
                                                                                          -----                             ----                               -----            -----

    Net operating revenues less provision for doubtful accounts                           767.9                            588.7                             2,250.4          1,767.5
                                                                                          -----                            -----                             -------          -------

    Operating expenses:

    Salaries and benefits                                                                 417.1                            290.0                             1,204.0            861.4

    Other operating expenses                                                              106.7                             89.4                               314.1            260.2

    Occupancy costs                                                                        12.5                             10.3                                37.1             31.1

    Supplies                                                                               31.0                             26.6                                94.1             82.0

    General and administrative expenses                                                    30.6                             27.5                                97.3             88.4

    Depreciation and amortization                                                          33.7                             27.4                                98.3             80.2

    Government, class action, and related settlements                                         -                               -                                8.0            (0.8)

    Professional fees-accounting, tax, and legal                                            0.4                              4.0                                 2.7              7.6
                                                                                            ---                              ---                                 ---              ---

    Total operating expenses                                                              632.0                            475.2                             1,855.6          1,410.1

    Loss on early extinguishment of debt                                                      -                               -                               20.0                -

    Interest expense and amortization of debt discounts and fees                           35.6                             27.8                                98.3             83.5

    Other income                                                                          (0.7)                           (0.2)                              (4.2)          (30.1)

    Equity in net income of nonconsolidated affiliates                                    (2.4)                           (1.9)                              (6.3)           (8.8)
                                                                                           ----                             ----                                ----             ----

    Income from continuing operations before income tax expense                           103.4                             87.8                               287.0            312.8

    Provision for income tax expense                                                       35.9                             22.1                                98.4             91.4
                                                                                           ----                             ----                                ----             ----

    Income from continuing operations                                                      67.5                             65.7                               188.6            221.4

    Income (loss) from discontinued operations, net of tax                                  0.3                            (0.9)                              (1.6)             2.8
                                                                                            ---                             ----                                ----              ---

    Net income                                                                             67.8                             64.8                               187.0            224.2

    Less: Net income attributable to noncontrolling interests                            (17.1)                          (14.7)                             (50.9)          (44.3)
                                                                                          -----                            -----                               -----            -----

    Net income attributable to HealthSouth                                                 50.7                             50.1                               136.1            179.9

    Less: Convertible perpetual preferred stock dividends                                     -                           (1.6)                              (1.6)           (4.7)
                                                                                                                                                              ----             ----

    Net income attributable to HealthSouth common shareholders                                      $50.7                                         $48.5                       $134.5    $175.2
                                                                                                    =====                                         =====                       ======    ======


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

                                                                                       Three Months Ended                         Nine Months Ended
                                                                                         September 30,                              September 30,
                                                                                         -------------                              -------------

                                                                                       2015                2014                    2015                  2014
                                                                                       ----                ----                    ----                  ----

                                                                                                      (In Millions, Except Per Share Data)

    Weighted average common shares outstanding:

    Basic                                                                              90.6                          86.5                               89.1                86.8
                                                                                       ====                          ====                               ====                ====

    Diluted                                                                           101.5                         100.5                              101.4               100.7
                                                                                      =====                         =====                              =====               =====


    Earnings per common share:

    Basic earnings per share attributable to HealthSouth
     common shareholders:

    Continuing operations                                                                      $0.56                                      $0.56                           $1.52   $1.96

    Discontinued operations                                                               -                       (0.01)                            (0.02)               0.03
                                                                                        ---                        -----                              -----                ----

    Net income                                                                                 $0.56                                      $0.55                           $1.50   $1.99
                                                                                               =====                                      =====                           =====   =====

    Diluted earnings per share attributable to HealthSouth
     common shareholders:

    Continuing operations                                                                      $0.52                                      $0.53                           $1.43   $1.82

    Discontinued operations                                                               -                       (0.01)                            (0.02)               0.03
                                                                                        ---                        -----                              -----                ----

    Net income                                                                                 $0.52                                      $0.52                           $1.41   $1.85
                                                                                               =====                                      =====                           =====   =====


    Cash dividends per common share                                                            $0.23                                      $0.21                           $0.65   $0.57
                                                                                               =====                                      =====                           =====   =====


    Amounts attributable to HealthSouth common shareholders:

    Income from continuing operations                                                          $50.4                                      $51.0                          $137.7  $177.1

    Income (loss) from discontinued operations, net of tax                              0.3                         (0.9)                             (1.6)                2.8
                                                                                        ---                          ----                               ----                 ---

    Net income attributable to HealthSouth                                                     $50.7                                      $50.1                          $136.1  $179.9
                                                                                               =====                                      =====                          ======  ======


                  
    HealthSouth Corporation and Subsidiaries
    Condensed Consolidated Balance Sheets
    (Unaudited)

                                                              September 30,                  December 31,
                                                                       2015                           2014
                                                                       ----                           ----

                                                                            (In Millions)

                            Assets

    Current assets:

    Cash and cash equivalents                                                    $801.6                          $66.7

    Accounts receivable, net of allowance
     for doubtful accounts of $34.8 in
     2015; $22.2 in 2014                                              350.9                            323.2

    Deferred income tax assets                                        185.9                            188.4

    Other current assets                                              124.6                            108.3
                                                                      -----                            -----

    Total current assets                                            1,463.0                            686.6

    Property and equipment, net                                     1,079.1                          1,019.7

    Goodwill                                                        1,105.0                          1,084.0

    Intangible assets, net                                            324.7                            306.1

    Deferred income tax assets                                         55.4                            129.4

    Other long-term assets                                            222.1                            183.0
                                                                      -----                            -----

    Total assets                                                               $4,249.3                       $3,408.8
                                                                               ========                       ========

             Liabilities and Shareholders' Equity

    Current liabilities:

    Current portion of long-term debt                                             $23.6                          $20.8

    Accounts payable                                                   65.6                             53.4

    Accrued expenses and other current
     liabilities                                                      314.4                            290.1
                                                                      -----                            -----

    Total current liabilities                                         403.6                            364.3

    Long-term debt, net of current portion                          2,800.7                          2,110.8

    Other long-term liabilities                                       140.7                            136.3
                                                                      -----                            -----

                                                                    3,345.0                          2,611.4
                                                                    -------                          -------

    Commitments and contingencies

    Convertible perpetual preferred stock                                 -                            93.2
                                                                        ---                            ----

    Redeemable noncontrolling interests                               114.1                             84.7
                                                                      -----                             ----

    Shareholders' equity:

    HealthSouth shareholders' equity                                  630.4                            473.2

    Noncontrolling interests                                          159.8                            146.3
                                                                      -----                            -----

    Total shareholders' equity                                        790.2                            619.5
                                                                      -----                            -----

    Total liabilities and shareholders'
     equity                                                                    $4,249.3                       $3,408.8
                                                                               ========                       ========


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

                                                    Nine Months Ended September 30,
                                                    -------------------------------

                                                          2015                   2014
                                                          ----                   ----

                                                              (In Millions)

    Cash flows from operating
     activities:

    Net income                                                    $187.0                                      $224.2
                                                                  ------                                      ------

    Loss (income) from
     discontinued operations                               1.6                            (2.8)
                                                           ---                             ----

    Adjustments to reconcile net
     income to net cash provided
     by operating activities-

    Provision for doubtful
     accounts                                             33.2                             25.0

    Provision for government,
     class action, and related
     settlements                                           8.0                            (0.8)

    Depreciation and amortization                         98.3                             80.2

    Loss on early extinguishment
     of debt                                              20.0                                -

    Equity in net income of
     nonconsolidated affiliates                          (6.3)                           (8.8)

    Distributions from
     nonconsolidated affiliates                            4.5                              9.4

    Stock-based compensation                              21.8                             19.3

    Deferred tax expense                                  88.0                             81.6

    Gain on consolidation of
     Fairlawn Rehabilitation
     Hospital                                                -                          (27.2)

    Other                                                  8.2                             13.0

    Change in assets and
     liabilities-

    Accounts receivable                                 (83.7)                          (48.7)

    Other assets                                         (8.3)                             8.9

    Accounts payable                                       4.4                              3.7

    Accrued payroll                                     (16.6)                           (8.6)

    Accrued interest payable                              13.9                              4.7

    Other liabilities                                    (3.0)                           (3.7)

    Premium received on bond
     issuance                                              9.8                              6.3

    Premium paid on redemption of
     bonds                                              (11.8)                               -

    Net cash used in operating
     activities of discontinued
     operations                                          (0.8)                           (1.0)
                                                          ----                             ----

    Total adjustments                                    179.6                            153.3
                                                         -----                            -----

    Net cash provided by
     operating activities                                368.2                            374.7
                                                         -----                            -----


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


                                               Nine Months Ended September 30,
                                               -------------------------------

                                                     2015                   2014
                                                     ----                   ----

                                                       (In Millions)

    Cash flows from
     investing activities:

    Purchases of property
     and equipment                                 (85.2)                         (133.9)

    Capitalized software
     costs                                         (20.7)                          (12.6)

    Acquisitions of
     businesses, net of cash
     acquired                                      (87.1)                          (15.9)

    Proceeds from sale of
     marketable securities                           12.8                              2.7

    Purchase of restricted
     investments                                    (6.5)                           (2.5)

    Other                                             7.3                            (0.1)

    Net cash used in
     investing activities                         (179.4)                         (162.3)
                                                   ------                           ------


    Cash flows from
     financing activities:

    Principal borrowing on
     term loan facilities                           125.0                                -

    Proceeds from bond
     issuance                                     1,400.0                            175.0

    Principal payments on
     debt, including pre-
     payments                                     (546.3)                           (5.7)

    Borrowings on revolving
     credit facility                                315.0                             65.0

    Payments on revolving
     credit facility                              (615.0)                         (110.0)

    Debt amendment and
     issuance costs                                (31.3)                           (3.1)

    Repurchases of common
     stock, including fees
     and expenses                                       -                          (43.1)

    Dividends paid on common
     stock                                         (56.3)                          (47.4)

    Dividends paid on
     convertible perpetual
     preferred stock                                (3.1)                           (4.7)

    Distributions paid to
     noncontrolling
     interests of
     consolidated affiliates                       (39.7)                          (39.6)

    Other                                           (2.2)                             9.0
                                                     ----                              ---

    Net cash provided by
     (used in) financing
     activities                                     546.1                            (4.6)
                                                    -----                             ----

    Increase in cash and
     cash equivalents                               734.9                            207.8

    Cash and cash
     equivalents at
     beginning of period                             66.7                             64.5

    Cash and cash
     equivalents at end of
     period                                                  $801.6                                    $272.3
                                                             ======                                    ======


    Supplemental schedule of
     noncash financing
     activity:

    Conversion of preferred
     stock to common stock                                    $93.2                                  $      -


                                                    
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Inpatient Rehabilitation Metrics

                                                                               Three Months Ended                                        Nine Months Ended
                                                                                                                                           September 30,
                                                                                  September 30,
                                                                                  -------------

                                                                        2015                      2014                   2015                      2014
                                                                        ----                      ----                   ----                      ----

                                                                                                   (In Millions)

    Net operating revenues:

    Inpatient                                                                    $625.1                                          $563.7                     $1,850.4  $1,691.6

    Outpatient and other                                                26.5                                26.2                                  76.8           79.9
                                                                        ----                                ----                                  ----           ----

    Total inpatient rehabilitation segment revenues                              $651.6                                          $589.9                     $1,927.2  $1,771.5
                                                                                 ======                                          ======                     ========  ========


                                                                                                 (Actual Amounts)

    Discharges                                                        36,746                              33,541                               108,270        100,050

    Net patient revenue per discharge                                           $17,011                                         $16,806                      $17,091   $16,908

    Outpatient visits                                                138,121                             144,510                               414,388        436,867

    Average length of stay (in days)                                    12.9                                13.2                                  13.0           13.2

    Occupancy %                                                      69.6%                              69.6%                                69.7%         70.4%

    # of licensed beds                                                 7,422                               6,890                                 7,422          6,890

    Full-time equivalents                                             17,782                              16,499                                17,462         16,276

    Employees per occupied bed                                          3.47                                3.46                                  3.40           3.37


                                                   
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Home Health and Hospice Metrics

                                                                                   Three Months Ended                             Nine Months Ended
                                                                                      September 30,                                 September 30,
                                                                                      -------------                                 -------------

                                                                               2015                       2014                   2015                 2014
                                                                               ----                       ----                   ----                 ----

                                                                                                        (In Millions)

    Net operating revenues:

    Home health                                                                        $118.3                                     $7.0                          $333.7       $21.0

    Hospice                                                                     8.7                            -                              22.7                   -
                                                                                ---                          ---                              ----                 ---

    Total home health and hospice segment revenues                                     $127.0                                     $7.0                          $356.4       $21.0
                                                                                       ======                                     ====                          ======       =====


                                                                                                    (Actual Amounts)

    Home health:

    Admissions                                                               18,076                        1,839                             51,437               5,652

    Recertifications                                                         16,542                          247                             46,130                 726

    Episodes                                                                 33,542                        2,012                             94,871               6,144

    Average revenue per episode                                                        $3,123                                   $3,373                          $3,103      $3,313

    Episodic visits per episode                                                19.6                         18.8                               19.5                18.6

    Total visits                                                            721,055                       38,940                          2,027,149             118,293

    Cost per visit                                                                        $72                                     $105                             $71        $107

    Hospice:

    Admissions                                                                  620                          N/A                             1,838                 N/A

    Patient days                                                             55,627                          N/A                           145,797                 N/A

    Revenue per day                                                                      $156                            N/A                               $155         N/A


                                                                    
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Adjusted EBITDA

                                                                                                         Three Months Ended September 30, 2015
                                                                                                         -------------------------------------

                                                                                   Inpatient                Home Health               Reclassifications           HealthSouth
                                                                                 Rehabilitation             and Hospice                                           Consolidated
                                                                                 --------------             -----------                                           ------------

                                                                                                                     (In Millions)

    Net operating revenues                                                                         $651.6                                          $127.0                               $        -       $778.6

    Less: Provision for doubtful accounts                                                (10.2)                             (0.5)                             -                           (10.7)
                                                                                          -----                               ----                            ---

    Net operating revenues less provision for doubtful accounts                           641.4                              126.5                              -                            767.9

    Operating expenses:

    Inpatient rehabilitation:

    Salaries and benefits                                                                 326.8                                  -                          90.3                             417.1

    Other operating expenses (1)                                                           95.8                                  -                          10.0                             105.8

    Supplies                                                                               28.9                                  -                           2.1                              31.0

    Occupancy costs                                                                        10.6                                  -                           1.9                              12.5

    Home health and hospice:

    Cost of services sold (excluding depreciation and amortization)                           -                              61.7                         (61.7)                                -

    Support and overhead costs                                                                -                              42.6                         (42.6)                                -
                                                                                            ---                              ----                          -----

                                                                                          462.1                              104.3                              -                            566.4

    Other income                                                                          (0.1)                                 -                             -                            (0.1)

    Equity in net income of nonconsolidated affiliates                                    (2.4)                                 -                             -                            (2.4)

    Noncontrolling interests                                                               15.6                                1.5                              -                             17.1

    Adjusted EBITDA - segment level                                                                $166.2                                           $20.7                               $        - 186.9
                                                                                                   ======                                           =====                             ===      ===

    General and administrative expenses (2)(3)                                                                                                                       22.1

    Gain related to SCA equity interest                                                                                                                             (0.6)
                                                                                                                                                                     ----

    Adjusted EBITDA                                                                                                                                                            $165.4
                                                                                                                                                                               ======


    In arriving at Adjusted EBITDA, the following were excluded:

    (1) Net loss on disposal or impairment of assets                                                 $0.9                                     $         -                              $        -         $0.9

    (2) Stock-based compensation expense                                                      -                                 -                             -                              6.2

    (3) Reliant/CareSouth transaction costs                                                   -                                 -                             -                              2.3


                                                                    
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Adjusted EBITDA

                                                                                                        Three Months Ended September 30, 2014
                                                                                                        -------------------------------------

                                                                                   Inpatient                Home Health               Reclassifications         HealthSouth
                                                                                 Rehabilitation             and Hospice                                         Consolidated
                                                                                 --------------             -----------                                         ------------

                                                                                                                    (In Millions)

    Net operating revenues                                                                         $589.9                                           $7.0                              $       -       $596.9

    Less: Provision for doubtful accounts                                                 (8.1)                             (0.1)                           -                           (8.2)
                                                                                           ----                               ----                          ---

    Net operating revenues less provision for doubtful accounts                           581.8                                6.9                            -                           588.7

    Operating expenses:

    Inpatient rehabilitation:

    Salaries and benefits                                                                 285.0                                  -                         5.0                            290.0

    Other operating expenses (1)                                                           86.1                                  -                         0.6                             86.7

    Supplies                                                                               26.5                                  -                         0.1                             26.6

    Occupancy costs                                                                        10.2                                  -                         0.1                             10.3

    Home health and hospice:

    Cost of services sold (excluding depreciation and amortization)                           -                               4.1                        (4.1)                               -

    Support and overhead costs                                                                -                               1.7                        (1.7)                               -
                                                                                            ---                               ---                         ----

                                                                                          407.8                                5.8                            -                           413.6

    Other income                                                                          (0.2)                                 -                           -                           (0.2)

    Equity in net income of nonconsolidated affiliates                                    (1.9)                                 -                           -                           (1.9)

    Noncontrolling interests                                                               14.6                                0.1                            -                            14.7
                                                                                           ----                                ---

    Adjusted EBITDA - segment level                                                                $161.5                                           $1.0                              $       - 162.5
                                                                                                   ======                                           ====                            ===     ===

    General and administrative expenses (2)                                                                                                                        22.5
                                                                                                                                                                   ----

    Adjusted EBITDA                                                                                                                                                          $140.0
                                                                                                                                                                             ======


    In arriving at Adjusted EBITDA, the following were excluded:

    (1) Net loss on disposal or impairment of assets                                                 $2.7                                     $        -                             $       -         $2.7

    (2) Stock-based compensation expense                                                      -                                 -                           -                             5.0


                                                                    
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Adjusted EBITDA

                                                                                                              Nine Months Ended September 30, 2015
                                                                                                              ------------------------------------

                                                                                       Inpatient                  Home Health               Reclassifications            HealthSouth
                                                                                     Rehabilitation               and Hospice                                            Consolidated
                                                                                     --------------               -----------                                            ------------

                                                                                                                          (In Millions)

    Net operating revenues                                                                             $1,927.2                                          $356.4                                $        -       $2,283.6

    Less: Provision for doubtful accounts                                                    (31.4)                               (1.8)                              -                           (33.2)
                                                                                              -----                                 ----                             ---

    Net operating revenues less provision for doubtful accounts                             1,895.8                                354.6                               -                          2,250.4

    Operating expenses:

    Inpatient rehabilitation:

    Salaries and benefits                                                                     950.8                                    -                          253.2                           1,204.0

    Other operating expenses (1)                                                              284.5                                    -                           29.4                             313.9

    Supplies                                                                                   88.6                                    -                            5.5                              94.1

    Occupancy costs                                                                            31.7                                    -                            5.4                              37.1

    Home health and hospice:

    Cost of services sold (excluding depreciation and amortization)                               -                               171.8                         (171.8)                                -

    Support and overhead costs                                                                    -                               121.7                         (121.7)                                -
                                                                                                ---                               -----                          ------

                                                                                            1,355.6                                293.5                               -                          1,649.1

    Other income                                                                              (1.0)                                   -                              -                            (1.0)

    Equity in net income of nonconsolidated affiliates                                        (6.3)                                   -                              -                            (6.3)

    Noncontrolling interests                                                                   46.4                                  4.5                               -                             50.9
                                                                                               ----                                  ---                             ---

    Adjusted EBITDA - segment level                                                                      $501.1                                           $56.6                                $        - 557.7
                                                                                                         ======                                           =====                              ===      ===

    General and administrative expenses (2)(3)                                                                                                                              69.9

    Gain related to SCA equity interest                                                                                                                                    (3.2)
                                                                                                                                                                            ----

    Adjusted EBITDA                                                                                                                                                                   $491.0
                                                                                                                                                                                      ======


    In arriving at Adjusted EBITDA, the following were excluded:

    (1) Net loss (gain) on disposal or impairment of assets                                                $0.3                                          $(0.1)                               $        -           $0.2

    (2) Stock-based compensation expense                                                          -                                   -                              -                             21.8

    (3) Reliant/CareSouth transaction costs                                                       -                                   -                              -                              5.6


                                                                    
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Adjusted EBITDA

                                                                                                                    Nine Months Ended September 30, 2014
                                                                                                                    ------------------------------------

                                                                                             Inpatient                  Home Health               Reclassifications          HealthSouth
                                                                                           Rehabilitation               and Hospice                                          Consolidated
                                                                                           --------------               -----------                                          ------------

                                                                                                                               (In Millions)

    Net operating revenues                                                                                   $1,771.5                                          $21.0                               $        -       $1,792.5

    Less: Provision for doubtful accounts                                                          (24.7)                               (0.3)                            -                           (25.0)
                                                                                                    -----                                 ----                           ---

    Net operating revenues less provision for doubtful accounts                                   1,746.8                                 20.7                             -                          1,767.5

    Operating expenses:

    Inpatient rehabilitation:

    Salaries and benefits                                                                           846.1                                    -                         15.3                             861.4

    Other operating expenses (1)                                                                    252.8                                    -                          1.7                             254.5

    Supplies                                                                                         81.7                                    -                          0.3                              82.0

    Occupancy costs                                                                                  30.8                                    -                          0.3                              31.1

    Home health and hospice:

    Cost of services sold (excluding depreciation and amortization)                                     -                                12.5                        (12.5)                                -

    Support and overhead costs                                                                          -                                 5.1                         (5.1)                                -
                                                                                                      ---                                 ---                          ----

                                                                                                  1,211.4                                 17.6                             -                          1,229.0

    Other income (2)                                                                                (2.9)                                   -                            -                            (2.9)

    Equity in net income of nonconsolidated affiliates                                              (8.8)                                   -                            -                            (8.8)

    Noncontrolling interests                                                                         44.0                                  0.3                             -                             44.3
                                                                                                     ----                                  ---                           ---

    Adjusted EBITDA - segment level                                                                            $503.1                                           $2.8                               $        - 505.9
                                                                                                               ======                                           ====                             ===      ===

    General and administrative expenses (3)                                                                                                                                     69.1
                                                                                                                                                                                ----

    Adjusted EBITDA                                                                                                                                                                       $436.8
                                                                                                                                                                                          ======


    In arriving at Adjusted EBITDA, the following were excluded:

    (1) Net loss on disposal or impairment of assets                                                             $5.7                                     $        -                              $        -           $5.7

    (2) Gain on consolidation of Fairlawn Rehabilitation Hospital                                    27.2                                    -                            -                             27.2

    (3) Stock-based compensation expense                                                                -                                   -                            -                             19.3


                       
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Earnings Per Share

                                                                      QTD
                                                                      ---

                                                         Q3 2015               Q3 2014
                                                         -------               -------

                                                        (In Millions, Except Per Share
                                                                     Data)

    Adjusted EBITDA                                                  $165.4                                  $140.0

    Interest expense and
     amortization of debt discounts
     and fees                                              (35.6)                          (27.8)

    Depreciation and amortization                          (33.7)                          (27.4)

    Stock-based compensation expense                        (6.2)                           (5.0)

    Noncash loss on disposal or
     impairment of assets                                   (0.9)                           (2.7)
                                                             ----                             ----

                                                             89.0                             77.1

    Certain nonrecurring expenses:

    Professional fees-accounting,
     tax, and legal                                         (0.4)                           (4.0)

    Reliant/CareSouth transaction
     costs                                                  (2.3)                               -

    Pre-tax income                                           86.3                             73.1

    Income tax expense (1)                                 (35.9)                          (22.1)              (2)
                                                            -----                            -----

    Income from continuing
     operations (3)                                                   $50.4                                   $51.0
                                                                      =====                                   =====


    Basic shares                                             90.6                             86.5
                                                             ====                             ====

    Diluted shares                                          101.5                            100.5
                                                            =====                            =====


    Basic earnings per share (3)                                      $0.56                                   $0.56
                                                                      =====                                   =====

    Diluted earnings per share (3)                                    $0.52                                   $0.53
                                                                      =====                                   =====



            (1)    Current income tax expense for the
                    three months ended September 30,
                    2015 and 2014 was $3.5 million and
                    $3.2 million, respectively.

            (2)    The Company's effective income tax
                    rate was reduced as a result of
                    the nontaxable gain related to its
                    acquisition of an additional 30%
                    equity interest in Fairlawn
                    Rehabilitation Hospital.

            (3)    Income from continuing operations
                    attributable to HealthSouth.



                       
    HealthSouth Corporation and Subsidiaries
    Supplemental Information
    Earnings Per Share

                                                                      YTD
                                                                      ---

                                                         Q3 2015               Q3 2014
                                                         -------               -------

                                                        (In Millions, Except Per Share
                                                                     Data)

    Adjusted EBITDA                                                  $491.0                                  $436.8

    Interest expense and
     amortization of debt discounts
     and fees                                              (98.3)                          (83.5)

    Depreciation and amortization                          (98.3)                          (80.2)

    Stock-based compensation expense                       (21.8)                          (19.3)

    Noncash loss on disposal or
     impairment of assets                                   (0.2)                           (5.7)
                                                             ----                             ----

                                                            272.4                            248.1

    Certain nonrecurring expenses:

    Government, class action, and
     related settlements                                    (8.0)                             0.8

    Professional fees-accounting,
     tax, and legal                                         (2.7)                           (7.6)

    Loss on early extinguishment of
     debt                                                  (20.0)                               -

    Reliant/CareSouth transaction
     costs                                                  (5.6)                               -

    Gain on consolidation of
     Fairlawn Rehabilitation
     Hospital                                                   -                            27.2
                                                              ---                            ----

    Pre-tax income                                          236.1                            268.5

    Income tax expense (1)                                 (98.4)                          (91.4)              (2)
                                                            -----                            -----

    Income from continuing
     operations (3)                                                  $137.7                                  $177.1
                                                                     ======                                  ======


    Basic shares                                             89.1                             86.8
                                                             ====                             ====

    Diluted shares                                          101.4                            100.7
                                                            =====                            =====


    Basic earnings per share (3)                                      $1.52                                   $1.96
                                                                      =====                                   =====

    Diluted earnings per share (3)                                    $1.43                                   $1.82
                                                                      =====                                   =====



            (1)    Current income tax expense for the
                    six months ended September 30,
                    2015 and 2014 was $10.4 million
                    and $9.8 million, respectively.

            (2)    The Company's effective income tax
                    rate was reduced as a result of
                    the nontaxable gain related to its
                    acquisition of an additional 30%
                    equity interest in Fairlawn
                    Rehabilitation Hospital.

            (3)    Income from continuing operations
                    attributable to HealthSouth.


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

                                                                                             Three Months Ended                            Nine Months Ended
                                                                                                September 30,                                September 30,
                                                                                                -------------                                -------------

                                                                                            2015                   2014                    2015                   2014
                                                                                            ----                   ----                    ----                   ----

                                                                                                                         (In Millions)

    Net income                                                                                       $67.8                                         $64.8                        $187.0  $224.2

    (Income) loss from discontinued operations, net of tax,
     attributable to HealthSouth                                                           (0.3)                             0.9                                 1.6             (2.8)

    Provision for income tax expense                                                        35.9                             22.1                                98.4              91.4

    Interest expense and amortization of debt discounts and fees                            35.6                             27.8                                98.3              83.5

    Professional fees-accounting, tax, and legal                                             0.4                              4.0                                 2.7               7.6

    Government, class action, and related settlements                                          -                               -                                8.0             (0.8)

    Loss on early extinguishment of debt                                                       -                               -                               20.0                 -

    Net noncash loss on disposal or impairment of assets                                     0.9                              2.7                                 0.2               5.7

    Depreciation and amortization                                                           33.7                             27.4                                98.3              80.2

    Stock-based compensation expense                                                         6.2                              5.0                                21.8              19.3

    Net income attributable to noncontrolling interests                                   (17.1)                          (14.7)                             (50.9)           (44.3)

    Reliant/CareSouth transaction costs                                                      2.3                                -                                5.6                 -

    Gain on consolidation of Fairlawn Rehabilitation Hospital                                  -                               -                                  -           (27.2)

    Adjusted EBITDA                                                                                 $165.4                                        $140.0                        $491.0  $436.8
                                                                                                    ======                                        ======                        ======  ======


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

                                                                                         Three Months Ended                            Nine Months Ended
                                                                                            September 30,                                September 30,
                                                                                                                                         -------------


                                                                                        2015                   2014                    2015                   2014
                                                                                        ----                   ----                    ----                   ----

                                                                                                                 (In Millions)

    Net cash provided by operating activities                                                   $163.3                                        $139.6                                        $368.2  $374.7

    Impact of discontinued operations                                                    0.5                            (0.2)                                0.8                               1.0
                                                                                         ---                             ----                                 ---                               ---

    Net cash provided by operating activities of continuing
     operations                                                                        163.8                            139.4                               369.0                             375.7

    Capital expenditures for maintenance                                              (19.5)                          (18.1)                             (55.9)                           (65.9)

    Dividends paid on convertible perpetual preferred stock                                -                           (1.6)                              (3.1)                            (4.7)

    Distributions paid to noncontrolling interests of
     consolidated affiliates                                                          (13.4)                          (14.2)                             (39.7)                           (39.6)

    Nonrecurring items:

    Net premium (received) paid on redemption/issuance of bonds                        (1.8)                           (6.3)                                2.0                             (6.3)

    Encompass transaction costs and related assumed liabilities                          0.2                                -                               17.9                                 -

    Reliant/CareSouth transaction costs                                                  2.3                                -                                3.9                                 -

    Cash paid (received) for:

    Professional fees-accounting, tax, and legal                                         0.4                              4.1                                 3.8                               7.3

    Government, class action, and related settlements                                      -                               -                                8.0                             (0.6)
                                                                                         ---                             ---                                ---                              ----

    Adjusted free cash flow                                                                     $132.0                                        $103.3                                        $305.9  $265.9
                                                                                                ======                                        ======                                        ======  ======

For the three months ended September 30, 2015, net cash used in investing activities was $52.7 million and resulted primarily from capital expenditures, acquisitions of businesses, and the net change in restricted cash offset by proceeds received from the sale of common stock in Surgical Care Affiliates (our former surgery centers division). Net cash provided by financing activities during the three months ended September 30, 2015 was $645.5 million and resulted primarily from the issuance of an additional $350 million of the Company's existing 5.75% Senior Notes due 2024 in August 2015 and the issuance of $350 million of 5.75% Senior Notes due 2025 in September 2015.

For the three months ended September 30, 2014, net cash used in investing activities was $55.3 million and resulted primarily from capital expenditures. Net cash provided by financing activities during the three months ended September 30, 2014 was $122.2 million and resulted primarily from the issuance of an additional $175 million of the Company's existing 5.75% Senior Notes due 2024 in September 2014.

For the nine months ended September 30, 2015, net cash used in investing activities was $179.4 million and resulted primarily from capital expenditures and acquisitions of businesses offset by proceeds received from the sale of common stock in Surgical Care Affiliates. Net cash used in financing activities during the nine months ended September 30, 2015 was $546.1 million and resulted primarily from net debt issuances offset by cash dividends on common stock and distributions paid to noncontrolling interests of consolidated affiliates.

For the nine months ended September 30, 2014, net cash used in investing activities was $162.3 million and resulted primarily from capital expenditures and acquisition activity. Net cash used in financing activities during the nine months ended September 30, 2014 was $4.6 million and resulted primarily from dividends paid on the Company's common stock and convertible perpetual preferred stock, repurchases of the Company's common stock in the open market, and distributions paid to noncontrolling interests of consolidated affiliates offset by net debt issuances during the period.

HealthSouth Corporation and Subsidiaries
Forward-Looking Statements

Statements contained in this press release which are not historical facts, such as those relating to financial guidance and anticipated acquisitions, 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, its projected business results or model, its ability to return value to shareholders, its projected capital expenditures, its leverage ratio, its acquisition opportunities, and the impact of future legislation or regulation. 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 DOJ and HHS-OIG investigations and any matters related to yet undiscovered issues, if any, at Encompass, Reliant, or CareSouth; any adverse effects on HealthSouth's stock price resulting from the integration of Encompass, Reliant, or CareSouth; potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of HealthSouth's information systems, including unauthorized access to or theft of patient or other sensitive information as well as unforeseen issues, if any, related to integration of Encompass' systems; the ability to successfully integrate Encompass, Reliant, or CareSouth, including realization of anticipated tax benefits, revenues, and cost savings, minimizing the negative impact on margins arising from the changes in staffing and other operating practices, and avoidance of unforeseen exposure to liabilities; 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 control costs, particularly labor and employee benefit costs, including group medical expenses; adverse effects resulting from coverage determinations made by Medicare Administrative Contractors regarding its Medicare reimbursement claims and lengthening delays in HealthSouth's ability to recover improperly denied claims through the administrative appeals process on a timely basis; HealthSouth's ability to adapt to changes in the healthcare delivery system, including involvement in coordinated care initiatives or programs that may arise with its referral sources; 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, including any crisis resulting from uncertainty in the sovereign debt market; 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, 2014 and Form 10-Q for the quarters ended March 31, 2015, June 30, 2015, and September 30, 2015, when filed.

Media Contact
Casey Lassiter, 205-410-2777
casey.lassiter@healthsouth.com

Investor Relations Contact
Crissy Carlisle, 205-970-5860
crissy.carlisle@healthsouth.com

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SOURCE HealthSouth Corporation