Ed Fay, SVP and Treasurer Andy Price, Chief Accounting Officer - PowerPoint PPT Presentation

Goldman Sachs Leveraged Finance Healthcare Conference 2012 New York | May 1, 2012 Ed Fay, SVP and Treasurer Andy Price, Chief Accounting Officer

Forward-Looking Statements The information contained in this presentation includes certain estimates, projections and other forward- looking information that reflect our current outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, capital expenditures, development activities, dividend strategies, effective tax rates, financial performance, and business model. These estimates, projections and other forward-looking information are based on assumptions that HealthSouth believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual events or results, and those differences may be material. There can be no assurance that any estimates, projections or forward-looking information will be realized. All such estimates, projections and forward-looking information speak only as of the date hereof. HealthSouth undertakes no duty to publicly update or revise the information contained herein. You are cautioned not to place undue reliance on the estimates, projections and other forward-looking information in this presentation as they are based on current expectations and general assumptions and are subject to various risks, uncertainties and other factors, including those set forth in the Form 10-K for the year ended December 31, 2011, the Form 10-Q for the quarter ended March 31, 2012, and in other documents we previously filed with the SEC, many of which are beyond our control, that may cause actual results to differ materially from the views, beliefs and estimates expressed herein. Note Regarding Presentation of Non-GAAP Financial Measures T he following presentation includes certain “non - GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934. Schedules are attached that reconcile the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States. Our Form 8-K, dated April 26, 2012 provides further explanation and disclosure regarding our use of non-GAAP financial measures and should be read in conjunction with these supplemental slides. 2

Our Company Portfolio – As of March 31, 2012 Inpatient Rehabilitation Hospitals (―IRF‖) 99 • 29 operate as JV’s with Acute Care Hospitals Outpatient Rehabilitation Satellite 26 Clinics 25 Hospital-Based Home Health Agencies 27 + Puerto Rico Number of States Key Statistics – Trailing 4 Quarters ~ 22,000 Employees ~ $2.1 Billion Revenue 120,098 Inpatient Discharges New Hospitals 937,921 Outpatient Visits CON approved for Ocala, FL; expect to be operational Q4 2012 Patients Served CON approved for Stuart, FL (Martin Most Common Conditions (Q1 2012): County); expect to be operational Q2 2013 1. Neurological 18.7% Purchased land for Littleton, CO; expect to be operational Q2 2013 2. Stroke 17.2% Marketshare 3. Fracture of the lower extremity 10.2% Purchased land for southwest Phoenix, AZ; expect to be operational Q3 2013 4. Debility 9.9% ~ 8% of IRFs (Total in U.S. = 1,152) CON approved for Middletown, DE; being 5. Other orthopedic conditions 9.5% contested ~ 18% of Licensed Beds CON approved for Williamson Co, TN; being contested ~ 23% of Patients Served Largest Owner and Operator of Inpatient Rehabilitation Hospitals in the U.S. 3

Our Hospitals Major Services • Rehabilitation Physicians: manage and treat medical needs of patients • Rehabilitation Nurses: oversee treatment programs of patients • Physical Therapists: address physical function, mobility, safety • Occupational Therapists: promote independence and re-integration • Speech-Language Therapists: treat communication and swallowing disorders • Case Managers: coordinate care plan with physician, caregivers and family • Post-discharge services: outpatient therapy and home health 4

Q1 2012 Summary (Q1 2012 vs. Q1 2011)  HealthSouth Functional Outcomes Continue to Outpace Industry Average HealthSouth Average UDS Average* 35.0 3.5 33.9 30.0 3.0 3.02 29.3 25.0 2.5 2.53 20.0 2.0 15.0 1.5 FIM Gain LOS Efficiency * Average = Expected, Risk-adjusted Source: UDSmr Database – On Demand Report: Q1 2012 Report 5

Our Track Record ($ in millions) Revenue Discharge Volume $2,060 $2,027 $1,878 120,098 $1,785 118,354 $1,701 112,514 109,106 $1,608 103,356 96,700 2007 2008 2009 2010 2011 Trailing 2007 2008 2009 2010 2011 Trailing 4Qtrs 4Qtrs Income from Continuing Operations Adjusted EBITDA (1) Attributable to HealthSouth (2) $890 $476 $466 $410 $364 $323 $307 $220 $191 $159 $141 $77 2007 2008 2009 2010 2011 Trailing 2007 2008 2009 2010 2011 Trailing 4 Qtrs 4Qtrs (1) Reconciliation to GAAP provided on slides 25 - 29. (2) 2010 includes an income tax benefit of ~$741 million primarily due to the reversal of a substantial portion of the valuation allowance against deferred tax assets. 6

Our Track Record Total Debt Adjusted Free Cash Flow (1) (billions) (millions) 7 $2.25 $230 6.7x Leverage Ratio (1) $243 $229 $240 6 Interest Expense $180 $2.00 $2.04 $181 5 $155 $130 $1.81 $1.75 4 $108 $1.66 $80 2.7x 3 $1.50 $1.51 Swap Cash Payments 2 $30 $11 $9 $1.25 $1.27 $1.25 1 2007 2008 2009 2010 2011 Trailing ($20) 4QTrs Final swap payment in 0 $1.00 ($79) March 2011 YE 2007 YE 2008 YE 2009 YE 2010 YE 2011 Trailing ($70) 4Qtrs (1) Based on 2007 and trailing 4 Qtrs Adjusted EBITDA of $306.7 million and $475.7 million, respectively; reconciliation to GAAP provided on slides 25 – 29. 7

Debt Maturity Profile HealthSouth is now positioned with a lower- cost, flexible capital structure…  Additional debt pre-payment opportunities and flexible covenants (1)  No near-term maturities and well-spaced debt maturities  Limited exposure to higher interest rates March 31, 2012 (2) 10% of the outstanding principal is 10 % of principal callable each year at $103 currently callable per annum at 103% ($ in millions) $500 Revolver $331 L+225 $337 $312 Undrawn $286 Senior Senior Senior Notes Notes $125 Notes 7.25% 7.75% Drawn 8.125% $96 Term + $44 LC Loan L +225 2016 2012 2013 2014 2015 2016 2016 2017 2018 2019 2020 2021 2022 (1) The credit agreement has a $200 million restricted payment basket for debt repayment and stock repurchases, which is subject to an annual grower basket equal to 50% of excess cash flow plus certain other amounts including net cash proceeds from certain equity issuances. (2) Does not include $363.2 million of convertible perpetual preferred stock and capital leases and other note payables. 8

Adjusted Free Cash Flow (1) Considerations The increase in 2012  2012 adjusted free cash flow growth reflects increased maintenance CAPEX maintenance capital expenditures and working is driven by the capital. clinical information system roll-out, two  Multi-year adjusted free cash flow CAGR of 12% to 17% major hospital renovations, and increased hospital Certain Cash Flow Items (2) 2011 Q1 2012 2012 refresh projects. (millions) Actual Actual Assumptions  Cash interest expense (3) $115.2 $22.4 $92  Cash payments for taxes $9.1 $2.5 $7 to $10  Working capital $10.6 $31.0 $30-$40  Maintenance CAPEX $50.8 $19.1 $75 to $85  Net cash swap-related settlements $10.9 - -  Dividends paid on preferred stock (4) $26 $6.8 $25.1 (1) Reconciliation to GAAP provided on slide 24 (2) Definition of adjusted free cash flow is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, net settlements on interest rate swaps, dividends paid on preferred stock, distributions to noncontrolling interests, and nonrecurring items. (3) Net of amortization of debt and discounts and fees (4) Q1 2012 includes cash dividend payments of $6.5 million for dividends declared in Q4 2011 and paid in Q1 2012 plus $0.3 million for cumulative dividends paid for the shares repurchased in Q12012. Assumptions for 2012 include the $6.8 Q1 2012 dividends paid plus expected cash dividends of $6.1 million for each of the remaining three quarters. 9

Priorities for Reinvesting Free Cash Flows (millions) 2012 Q1 2012 Assumptions Actual • Growth in core business  Bed expansions $20 to $25 $5.5 (80-100 beds) Priorities $50 to $70 $9.2  De novo hospitals Growth (complete Ocala; start 4 others) TBD -  Acquisitions (target 2/year) − Free standing IRFs $70 to $95, − Hospital unit excluding acquisitions $14.7 Q1 2012 Actual Debt Opportunities • Debt prepayment Reduction - Alternate • Purchase leased properties (limited opportunity) - $25.0 • Convertible preferred stock repurchase ($125 million authorization) • Common share repurchase ($125 million authorization) Shareholder - • Cash dividends (one time or regular) Distribution - $25.0 10