|        |
|--------|
|        |  |
| ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |

|   |
|---|
|   |  |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 |

|                                                               |
|---------------------------------------------------------------|
|                                                               |  |
| Delaware                                                      | 63-0860407 |
| (State or Other Jurisdiction ofIncorporation or Organization) | (I.R.S. EmployerIdentification No.) |
|                                                          |   |
| 3660 Grandview Parkway, Suite 200Birmingham, Alabama          | 35243 |
| (Address of Principal Executive Offices)                      | (Zip Code) |
|                                                          |   |
| (205) 967-7116                                                |
| (Registrant’s telephone number)                         |

----

|              |
|--------------|
|              |  |  |
|         |   | Page |
| PART I  | Financial Information |   |
|         |   |   |
| Item 1. | Financial Statements (Unaudited) | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 52 |
| Item 4. | Controls and Procedures | 52 |
|         |   |     |
| PART II | Other Information |   |
|         |   |   |
| Item 1. | Legal Proceedings | 53 |
| Item 1A.     | Risk Factors | 53 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 53 |
| Item 6. | Exhibits | 54 |

|         |                                                                                                                                                                                                                                                                                                                          |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | each of the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2013, as well as uncertainties and factors discussed elsewhere in this Form 10-Q, in our other filings from time to time with the SEC, or in materials incorporated therein by reference; |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | changes in the rules and regulations of the healthcare industry at either or both of the federal and state levels, including those contemplated now and in the future as part of national healthcare reform and deficit reduction such as the transformation of the current healthcare system to coordinated care delivery and payment models, the reinstatement of the “75% Rule,” or the introduction of site neutral payments with skilled nursing facilities for certain conditions, and related increases in the costs of complying with such changes; |

----

|         |                                                                                                                                                                                                         |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | reductions or delays in, or suspension of, reimbursement for our services by governmental or private payors, including our ability to obtain and retain favorable arrangements with third-party payors; |

|         |                                                                                                                                                                                                                                                                  |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | increased costs of regulatory compliance and compliance monitoring in the healthcare industry, including the costs of investigating and defending asserted claims, whether meritorious or not, and the potential reputational harm associated with those claims; |

|         |                                                                                                                                              |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------|
| • | the ability of each of our hospitals to maintain licensure, certification, and accreditation necessary to operate and receive reimbursement; |

|         |                                                                                                                                                                                                                                                                              |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | our 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 our labor expenses from potential union activity and staffing recruitment and retention; |

|         |                                                                                       |
|---------|---------------------------------------------------------------------------------------|
| • | competitive pressures in the healthcare industry and our response to those pressures; |

|         |                                                                                                                                                                                                                                                                                                                                                 |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | our ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with our growth strategy, including realization of anticipated revenues, cost savings, and productivity improvements arising from the related operations and avoidance of unforeseen exposure to liabilities; |

|         |                                                                                                                                                                                                                            |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings, including the ongoing investigations initiated by the U.S. Department of Health and Human Services, Office of the Inspector General; |

|         |                                                                                                                                                                |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | increased costs of defending and insuring against alleged professional liability and other claims and the ability to predict the costs related to such claims; |

|         |                                                                                                                                                                                                |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | potential incidents affecting the proper operation, availability, or security of our information systems, including unauthorized access to or theft of patient or other sensitive information; |

|         |                                                                                                                                                                        |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | the price of our common or preferred stock as it affects our willingness and ability to repurchase shares and the financial and accounting effects of any repurchases; |

|         |                                                                                           |
|---------|-------------------------------------------------------------------------------------------|
| • | our ability and willingness to continue to declare and pay dividends on our common stock; |

|         |                                                                 |
|---------|-----------------------------------------------------------------|
| • | our ability to attract and retain key management personnel; and |

|         |                                                                                                                                                                                                                                |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | general conditions in the economy and capital markets, including any instability or uncertainty related to political disputes or impasses over the United States federal budget or similar matters affecting federal spending. |

----

|         |                                  |
|---------|----------------------------------|
| Item 1. | Financial Statements (Unaudited) |

|                                                                       |
|-----------------------------------------------------------------------|
|                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                  | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                  | 2014 |   | 2013 |   | 2014 |   | 2013 |
|                                                                  | (In Millions) |
| Net operating revenues                                                | $ | 596.9 |  |   | $ | 564.0 |  |   | $ | 1,792.5 |  |   | $ | 1,701.1 |  |
| Less: Provision for doubtful accounts                                 | (8.2 | ) |   | (8.0 | ) |   | (25.0 | ) |   | (22.4 | ) |
| Net operating revenues less provision for doubtful accounts           | 588.7 |  |   | 556.0 |  |   | 1,767.5 |  |   | 1,678.7 |  |
| Operating expenses:                                                   |   |  |   |   |  |   |   |   |   |
| Salaries and benefits                                                 | 290.0 |  |   | 269.5 |  |   | 861.4 |  |   | 817.7 |  |
| Other operating expenses                                              | 89.4 |  |   | 82.2 |  |   | 260.2 |  |   | 241.3 |  |
| Occupancy costs                                                       | 10.3 |  |   | 11.7 |  |   | 31.1 |  |   | 35.8 |  |
| Supplies                                                              | 26.6 |  |   | 25.5 |  |   | 82.0 |  |   | 78.3 |  |
| General and administrative expenses                                   | 27.5 |  |   | 28.8 |  |   | 88.4 |  |   | 88.5 |  |
| Depreciation and amortization                                         | 27.4 |  |   | 24.3 |  |   | 80.2 |  |   | 69.5 |  |
| Government, class action, and related settlements                     | — |  |   | (21.3 | ) |   | (0.8 | ) |   | (23.3 | ) |
| Professional fees—accounting, tax, and legal                    | 4.0 |  |   | 4.2 |  |   | 7.6 |  |   | 7.8 |  |
| Total operating expenses                                              | 475.2 |  |   | 424.9 |  |   | 1,410.1 |  |   | 1,315.6 |  |
| Interest expense and amortization of debt discounts and fees          | 27.8 |  |   | 25.3 |  |   | 83.5 |  |   | 73.9 |  |
| Other income                                                          | (0.2 | ) |   | (0.6 | ) |   | (30.1 | ) |   | (3.2 | ) |
| Equity in net income of nonconsolidated affiliates                    | (1.9 | ) |   | (2.0 | ) |   | (8.8 | ) |   | (8.2 | ) |
| Income from continuing operations before income tax expense (benefit) | 87.8 |  |   | 108.4 |  |   | 312.8 |  |   | 300.6 |  |
| Provision for income tax expense (benefit)                            | 22.1 |  |   | 35.2 |  |   | 91.4 |  |   | (17.8 | ) |
| Income from continuing operations                                     | 65.7 |  |   | 73.2 |  |   | 221.4 |  |   | 318.4 |  |
| (Loss) income from discontinued operations, net of tax                | (0.9 | ) |   | (0.9 | ) |   | 2.8 |  |   | (1.2 | ) |
| Net income                                                            | 64.8 |  |   | 72.3 |  |   | 224.2 |  |   | 317.2 |  |
| Less: Net income attributable to noncontrolling interests             | (14.7 | ) |   | (14.1 | ) |   | (44.3 | ) |   | (42.5 | ) |
| Net income attributable to HealthSouth                                | 50.1 |  |   | 58.2 |  |   | 179.9 |  |   | 274.7 |  |
| Less: Convertible perpetual preferred stock dividends                 | (1.6 | ) |   | (5.7 | ) |   | (4.7 | ) |   | (17.2 | ) |
| Net income attributable to HealthSouth common shareholders            | $ | 48.5 |  |   | $ | 52.5 |  |   | $ | 175.2 |  |   | $ | 257.5 |  |

----

|                                                                             |
|-----------------------------------------------------------------------------|
|                                                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                        | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                        | 2014 |   | 2013 |   | 2014 |   | 2013 |
|                                                                        | (In Millions, Except Per Share Data) |
| Weighted average common shares outstanding:                                 |   |  |   |   |  |   |   |   |   |
| Basic                                                                       | 86.5 |  |   | 86.2 |  |   | 86.8 |  |   | 88.7 |  |
| Diluted                                                                     | 100.5 |  |   | 100.4 |  |   | 100.7 |  |   | 102.4 |  |
|                                                                        |   |   |   |   |   |   |   |
| Earnings per common share:                                                  |   |   |   |   |   |   |   |
| Basic earnings per share attributable to HealthSouth common shareholders:   |   |   |   |  |   |   |   |   |
| Continuing operations                                                       | $ | 0.56 |  |   | $ | 0.61 |  |   | $ | 1.96 |  |   | $ | 2.87 |  |
| Discontinued operations                                                     | (0.01 | ) |   | (0.01 | ) |   | 0.03 |  |   | (0.01 | ) |
| Net income                                                                  | $ | 0.55 |  |   | $ | 0.60 |  |   | $ | 1.99 |  |   | $ | 2.86 |  |
| Diluted earnings per share attributable to HealthSouth common shareholders: |   |   |   |   |   |   |   |
| Continuing operations                                                       | $ | 0.53 |  |   | $ | 0.59 |  |   | $ | 1.82 |  |   | $ | 2.69 |  |
| Discontinued operations                                                     | (0.01 | ) |   | (0.01 | ) |   | 0.03 |  |   | (0.01 | ) |
| Net income                                                                  | $ | 0.52 |  |   | $ | 0.58 |  |   | $ | 1.85 |  |   | $ | 2.68 |  |
|                                                                        |   |   |   |   |   |   |   |
| Cash dividends per common share                                             | $ | 0.21 |  |   | $ | 0.18 |  |   | $ | 0.57 |  |   | $ | 0.18 |  |
|                                                                        |   |   |   |   |   |   |   |
| Amounts attributable to HealthSouth common shareholders:                    |   |   |   |  |   |   |   |   |
| Income from continuing operations                                           | $ | 51.0 |  |   | $ | 59.1 |  |   | $ | 177.1 |  |   | $ | 275.9 |  |
| (Loss) income from discontinued operations, net of tax                      | (0.9 | ) |   | (0.9 | ) |   | 2.8 |  |   | (1.2 | ) |
| Net income attributable to HealthSouth                                      | $ | 50.1 |  |   | $ | 58.2 |  |   | $ | 179.9 |  |   | $ | 274.7 |  |

----

|                                                                                     |
|-------------------------------------------------------------------------------------|
|                                                                                     |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                                | 2014 |   | 2013 |   | 2014 |   | 2013 |
|                                                                                | (In Millions) |
| COMPREHENSIVE INCOME                                                                |   |   |   |   |   |   |   |
| Net income                                                                          | $ | 64.8 |  |   | $ | 72.3 |  |   | $ | 224.2 |  |   | $ | 317.2 |  |
| Other comprehensive (loss) income, net of tax:                                      |   |  |   |   |  |   |   |   |   |
| Net change in unrealized (loss) gain on available-for-sale securities:              |   |  |   |   |  |   |   |   |   |
| Unrealized net holding (loss) gain arising during the period                        | (0.2 | ) |   | — |  |   | 0.5 |  |   | (0.8 | ) |
| Reclassifications to net income                                                     | — |  |   | 0.1 |  |   | (0.5 | ) |   | (0.9 | ) |
| Other comprehensive (loss) income before income taxes                               | (0.2 | ) |   | 0.1 |  |   | — |  |   | (1.7 | ) |
| Provision for income tax benefit related to other comprehensive (loss) income items | 0.1 |  |   | — |  |   | — |  |   | 0.1 |  |
| Other comprehensive (loss) income, net of tax                                       | (0.1 | ) |   | 0.1 |  |   | — |  |   | (1.6 | ) |
| Comprehensive income                                                                | 64.7 |  |   | 72.4 |  |   | 224.2 |  |   | 315.6 |  |
| Comprehensive income attributable to noncontrolling interests                       | (14.7 | ) |   | (14.1 | ) |   | (44.3 | ) |   | (42.5 | ) |
| Comprehensive income attributable to HealthSouth                                    | $ | 50.0 |  |   | $ | 58.3 |  |   | $ | 179.9 |  |   | $ | 273.1 |  |

----

|                                                                                                               |
|---------------------------------------------------------------------------------------------------------------|
|                                                                                                               |  |  |  |  |  |  |  |
|                                                                                                          | September 30, 2014 |   | December 31, 2013 |
|                                                                                                          | (In Millions) |
| Assets                                                                                                        |   |   |   |
| Current assets:                                                                                               |   |   |   |
| Cash and cash equivalents                                                                                     | $ | 272.3 |  |   | $ | 64.5 |  |
| Accounts receivable, net of allowance for doubtful accounts of $24.2 in 2014; $23.1 in 2013                   | 261.6 |  |   | 261.8 |  |
| Deferred income tax assets                                                                                    | 138.9 |  |   | 139.0 |  |
| Other current assets                                                                                          | 110.2 |  |   | 115.1 |  |
| Total current assets                                                                                          | 783.0 |  |   | 580.4 |  |
| Property and equipment, net                                                                                   | 994.6 |  |   | 910.5 |  |
| Goodwill                                                                                                      | 491.7 |  |   | 456.9 |  |
| Intangible assets, net                                                                                        | 99.9 |  |   | 88.2 |  |
| Deferred income tax assets                                                                                    | 255.3 |  |   | 354.3 |  |
| Other long-term assets                                                                                        | 169.5 |  |   | 144.1 |  |
| Total assets                                                                                                  | $ | 2,794.0 |  |   | $ | 2,534.4 |  |
| Liabilities and Shareholders’ Equity                                                                    |   |   |   |
| Current liabilities:                                                                                          |   |   |   |
| Current portion of long-term debt                                                                             | $ | 208.5 |  |   | $ | 12.3 |  |
| Accounts payable                                                                                              | 54.8 |  |   | 61.9 |  |
| Accrued expenses and other current liabilities                                                                | 251.4 |  |   | 237.4 |  |
| Total current liabilities                                                                                     | 514.7 |  |   | 311.6 |  |
| Long-term debt, net of current portion                                                                        | 1,441.4 |  |   | 1,505.2 |  |
| Other long-term liabilities                                                                                   | 139.7 |  |   | 142.2 |  |
|                                                                                                          | 2,095.8 |  |   | 1,959.0 |  |
| Commitments and contingencies                                                                                 |  |  |   |  |  |
| Convertible perpetual preferred stock                                                                         | 93.2 |  |   | 93.2 |  |
| Redeemable noncontrolling interests                                                                           | 12.2 |  |   | 13.5 |  |
| Shareholders’ equity:                                                                                   |   |  |   |   |  |
| HealthSouth shareholders’ equity                                                                        |   |   |   |
| Common stock, $.01 par value; 200,000,000 shares authorized; issued: 104,011,178 in 2014; 102,648,302 in 2013 | 1.0 |  |   | 1.0 |  |
| Capital in excess of par value                                                                                | 2,828.0 |  |   | 2,849.4 |  |
| Accumulated deficit                                                                                           | (1,921.2 | ) |   | (2,101.1 | ) |
| Accumulated other comprehensive loss                                                                          | (0.1 | ) |   | (0.1 | ) |
| Treasury stock, at cost (16,255,544 shares in 2014 and 14,654,436 shares in 2013)                             | (458.1 | ) |   | (404.6 | ) |
| Total HealthSouth shareholders’ equity                                                                  | 449.6 |  |   | 344.6 |  |
| Noncontrolling interests                                                                                      | 143.2 |  |   | 124.1 |  |
| Total shareholders’ equity                                                                              | 592.8 |  |   | 468.7 |  |
| Total liabilities and shareholders’ equity                                                              | $ | 2,794.0 |  |   | $ | 2,534.4 |  |

----

|                                                             |
|-------------------------------------------------------------|
|                                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                        | Nine Months Ended September 30, 2014 |
|                                                        | (In Millions) |
|                                                        | HealthSouth Common Shareholders |   |   |   |   |
|                                                        | Number of Common Shares Outstanding |   | Common Stock |   | Capital in Excess of Par Value |   | Accumulated Deficit |   | Accumulated Other Comprehensive Loss |   | Treasury Stock |   | Noncontrolling Interests |   | Total |
| Balance at beginning of period                              | 88.0 |  |   | $ | 1.0 |  |   | $ | 2,849.4 |  |   | $ | (2,101.1 | ) |   | $ | (0.1 | ) |   | $ | (404.6 | ) |   | $ | 124.1 |  |   | $ | 468.7 |  |
| Net income                                                  | — |  |   | — |  |   | — |  |   | 179.9 |  |   | — |  |   | — |  |   | 38.9 |  |   | 218.8 |  |
| Receipt of treasury stock                                   | (0.3 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (9.7 | ) |   | — |  |   | (9.7 | ) |
| Dividends declared on common stock                          | — |  |   | — |  |   | (50.6 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (50.6 | ) |
| Dividends declared on convertible perpetual preferred stock | — |  |   | — |  |   | (4.7 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (4.7 | ) |
| Stock-based compensation                                    | — |  |   | — |  |   | 19.3 |  |   | — |  |   | — |  |   | — |  |   | — |  |   | 19.3 |  |
| Stock options exercised                                     | 0.3 |  |   | — |  |   | 7.4 |  |   | — |  |   | — |  |   | — |  |   | — |  |   | 7.4 |  |
| Stock warrants exercised                                    | 0.2 |  |   | — |  |   | 6.3 |  |   | — |  |   | — |  |   | — |  |   | — |  |   | 6.3 |  |
| Distributions declared                                      | — |  |   | — |  |   | — |  |   | — |  |   | — |  |   | — |  |   | (33.7 | ) |   | (33.7 | ) |
| Repurchases of common stock in open market                  | (1.3 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (43.1 | ) |   | — |  |   | (43.1 | ) |
| Consolidation of Fairlawn Rehabilitation Hospital           | — |  |   | — |  |   | — |  |   | — |  |   | — |  |   | — |  |   | 14.0 |  |   | 14.0 |  |
| Other                                                       | 0.9 |  |   | — |  |   | 0.9 |  |   | — |  |   | — |  |   | (0.7 | ) |   | (0.1 | ) |   | 0.1 |  |
| Balance at end of period                                    | 87.8 |  |   | $ | 1.0 |  |   | $ | 2,828.0 |  |   | $ | (1,921.2 | ) |   | $ | (0.1 | ) |   | $ | (458.1 | ) |   | $ | 143.2 |  |   | $ | 592.8 |  |

|                                                             |
|-------------------------------------------------------------|
|                                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                        | Nine Months Ended September 30, 2013 |
|                                                        | (In Millions) |
|                                                        | HealthSouth Common Shareholders |   |   |   |   |
|                                                        | Number of Common Shares Outstanding |   | Common Stock |   | Capital in Excess of Par Value |   | Accumulated Deficit |   | Accumulated Other Comprehensive Income (Loss) |   | Treasury Stock |   | Noncontrolling Interests |   | Total |
| Balance at beginning of period                              | 95.7 |  |   | $ | 1.0 |  |   | $ | 2,876.6 |  |   | $ | (2,424.7 | ) |   | $ | 1.4 |  |   | $ | (163.3 | ) |   | $ | 112.5 |  |   | $ | 403.5 |  |
| Net income                                                  | — |  |   | — |  |   | — |  |   | 274.7 |  |   | — |  |   | — |  |   | 38.4 |  |   | 313.1 |  |
| Receipt of treasury stock                                   | (0.3 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (5.8 | ) |   | — |  |   | (5.8 | ) |
| Dividends declared on common stock                          | — |  |   | — |  |   | (15.9 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (15.9 | ) |
| Dividends declared on convertible perpetual preferred stock | — |  |   | — |  |   | (17.2 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (17.2 | ) |
| Stock-based compensation                                    | — |  |   | — |  |   | 19.0 |  |   | — |  |   | — |  |   | — |  |   | — |  |   | 19.0 |  |
| Stock options exercised                                     | 0.3 |  |   | — |  |   | 7.5 |  |   | — |  |   | — |  |   | — |  |   | — |  |   | 7.5 |  |
| Distributions declared                                      | — |  |   | — |  |   | — |  |   | — |  |   | — |  |   | — |  |   | (30.1 | ) |   | (30.1 | ) |
| Repurchases of common stock through tender offer            | (9.1 | ) |   | — |  |   | — |  |   | — |  |   | — |  |   | (234.1 | ) |   | — |  |   | (234.1 | ) |
| Other                                                       | 0.8 |  |   | — |  |   | 4.5 |  |   | — |  |   | (1.6 | ) |   | (1.0 | ) |   | 0.1 |  |   | 2.0 |  |
| Balance at end of period                                    | 87.4 |  |   | $ | 1.0 |  |   | $ | 2,874.5 |  |   | $ | (2,150.0 | ) |   | $ | (0.2 | ) |   | $ | (404.2 | ) |   | $ | 120.9 |  |   | $ | 442.0 |  |

----

|                                                                                         |
|-----------------------------------------------------------------------------------------|
|                                                                                         |  |  |  |  |  |  |  |
|                                                                                    | Nine Months Ended September 30, |
|                                                                                    | 2014 |   | 2013 |
|                                                                                    | (In Millions) |
| Cash flows from operating activities:                                                   |   |   |   |
| Net income                                                                              | $ | 224.2 |  |   | $ | 317.2 |  |
| (Income) loss from discontinued operations                                              | (2.8 | ) |   | 1.2 |  |
| Adjustments to reconcile net income to net cash provided by operating activities— |   |  |   |   |  |
| Provision for doubtful accounts                                                         | 25.0 |  |   | 22.4 |  |
| Provision for government, class action, and related settlements                         | (0.8 | ) |   | (23.3 | ) |
| Depreciation and amortization                                                           | 80.2 |  |   | 69.5 |  |
| Equity in net income of nonconsolidated affiliates                                      | (8.8 | ) |   | (8.2 | ) |
| Distributions from nonconsolidated affiliates                                           | 9.4 |  |   | 9.6 |  |
| Stock-based compensation                                                                | 19.3 |  |   | 19.0 |  |
| Deferred tax expense (benefit)                                                          | 81.6 |  |   | (20.8 | ) |
| Gain on consolidation of Fairlawn Rehabilitation Hospital                               | (27.2 | ) |   | — |  |
| Other                                                                                   | 13.0 |  |   | 6.0 |  |
| (Increase) decrease in assets—                                                    |   |   |   |  |
| Accounts receivable                                                                     | (48.7 | ) |   | (26.5 | ) |
| Other assets                                                                            | 8.9 |  |   | (4.5 | ) |
| Increase (decrease) in liabilities—                                               |   |   |   |  |
| Accounts payable                                                                        | 3.7 |  |   | 9.9 |  |
| Other liabilities                                                                       | (7.6 | ) |   | (0.7 | ) |
| Premium received on bond issuance                                                       | 6.3 |  |   | — |  |
| Net cash used in operating activities of discontinued operations                        | (1.0 | ) |   | (1.4 | ) |
| Total adjustments                                                                       | 153.3 |  |   | 51.0 |  |
| Net cash provided by operating activities                                               | 374.7 |  |   | 369.4 |  |
|                                                                                    |   |   |   |

----

|                                                                           |
|---------------------------------------------------------------------------|
|                                                                           |  |  |  |  |  |  |  |
|                                                                      | Nine Months Ended September 30, |
|                                                                      | 2014 |   | 2013 |
|                                                                      | (In Millions) |
| Cash flows from investing activities:                                     |   |   |   |
| Purchases of property and equipment                                       | (133.9 | ) |   | (166.8 | ) |
| Capitalized software costs                                                | (12.6 | ) |   | (15.6 | ) |
| Acquisition of business, net of cash acquired                             | (15.9 | ) |   | (28.9 | ) |
| Proceeds from sale of restricted investments                              | 0.3 |  |   | 16.9 |  |
| Proceeds from sale of Digital Hospital                                    | — |  |   | 10.8 |  |
| Purchase of restricted investments                                        | (2.5 | ) |   | (8.1 | ) |
| Other                                                                     | 2.3 |  |   | (5.5 | ) |
| Net cash used in investing activities                                     | (162.3 | ) |   | (197.2 | ) |
| Cash flows from financing activities:                                     |   |   |   |
| Proceeds from bond issuance                                               | 175.0 |  |   | — |  |
| Principal borrowings on notes                                             | — |  |  | 15.2 |  |
| Borrowings on revolving credit facility                                   | 65.0 |  |  | 147.0 |  |
| Payments on revolving credit facility                                     | (110.0 | ) |  | (112.0 | ) |
| Repurchases of common stock, including fees and expenses                  | (43.1 | ) |   | (234.1 | ) |
| Dividends paid on common stock                                            | (47.4 | ) |   | — |  |
| Dividends paid on convertible perpetual preferred stock                   | (4.7 | ) |   | (17.2 | ) |
| Distributions paid to noncontrolling interests of consolidated affiliates | (39.6 | ) |   | (34.1 | ) |
| Other                                                                     | 0.2 |  |   | (4.8 | ) |
| Net cash used in financing activities                                     | (4.6 | ) |   | (240.0 | ) |
| Increase (decrease) in cash and cash equivalents                          | 207.8 |  |   | (67.8 | ) |
| Cash and cash equivalents at beginning of period                          | 64.5 |  |   | 132.8 |  |
| Cash and cash equivalents at end of period                                | $ | 272.3 |  |   | $ | 65.0 |  |

----

|    |                       |
|----|-----------------------|
| 1. | Basis of Presentation |

|                                                                     |
|---------------------------------------------------------------------|
|                                                                     |  |  |  |  |  |  |  |  |  |  |  |
|                                                                | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Medicare                                                            | 73.5 | % |   | 74.1 | % |   | 74.1 | % |   | 74.5 | % |
| Medicaid                                                            | 2.2 | % |   | 1.5 | % |   | 1.8 | % |   | 1.2 | % |
| Workers’ compensation                                         | 1.1 | % |   | 1.3 | % |   | 1.2 | % |   | 1.3 | % |
| Managed care and other discount plans, including Medicare Advantage | 18.8 | % |   | 18.7 | % |   | 18.6 | % |   | 18.5 | % |
| Other third-party payors                                            | 1.8 | % |   | 1.7 | % |   | 1.7 | % |   | 1.7 | % |
| Patients                                                            | 1.1 | % |   | 1.1 | % |   | 1.0 | % |   | 1.1 | % |
| Other income                                                        | 1.5 | % |   | 1.6 | % |   | 1.6 | % |   | 1.7 | % |
| Total                                                               | 100.0 | % |   | 100.0 | % |   | 100.0 | % |   | 100.0 | % |

----

|    |                       |
|----|-----------------------|
| 2. | Business Combinations |

|                                               |
|-----------------------------------------------|
|                                               |  |  |  |
| Total current assets                          | $ | 12.1 |  |
| Property and equipment, net                   | 30.4 |  |
| Identifiable intangible assets:               |   |  |
| Noncompete agreement (useful life of 3 years) | 0.4 |  |
| Tradename (useful life of 20 years)           | 2.5 |  |
| Certificate of need (useful life of 20 years) | 9.7 |  |
| License (useful life of 20 years)             | 2.0 |  |
| Goodwill                                      | 34.8 |  |
| Total assets acquired                         | 91.9 |  |
| Total current liabilities assumed             | (7.8 | ) |
| Total long-term liabilities assumed           | (14.1 | ) |
| Net assets acquired                           | $ | 70.0 |  |

----

|                                                                               |
|-------------------------------------------------------------------------------|
|                                                                               |  |  |  |  |  |  |  |
|                                                                          | Net Operating Revenues |   | Net Income Attributable to HealthSouth |
| Acquired entity only: Actual from acquisition date to September 30, 2014 | $ | 15.4 |  |   | $ | 2.6 |  |
| Combined entity: Supplemental pro forma from 07/01/2014-09/30/2014*           | 596.9 |  |   | 50.1 |  |
| Combined entity: Supplemental pro forma from 07/01/2013-09/30/2013            | 574.8 |  |   | 59.3 |  |
| Combined entity: Supplemental pro forma from 01/01/2014-09/30/2014            | 1,811.3 |  |   | 181.6 |  |
| Combined entity: Supplemental pro forma from 01/01/2013-09/30/2013            | 1,734.4 |  |   | 278.0 |  |

|                                                                             |
|-----------------------------------------------------------------------------|
|                                                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                        | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                        | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Fair value of assets acquired, net of $5.1 million of cash acquired in 2014 | $ | — |  |   | $ | — |  |   | $ | 52.0 |  |   | $ | 15.6 |  |
| Goodwill                                                                    | — |  |   | — |  |   | 34.8 |  |   | 13.7 |  |
| Fair value of liabilities assumed                                           | — |  |   | — |  |   | (21.9 | ) |   | (0.4 | ) |
| Fair value of noncontrolling interest owned by joint venture partner        | — |  |   | — |  |   | (14.0 | ) |   | — |  |
| Fair value of equity interest prior to acquisition                          | — |  |   | — |  |   | (35.0 | ) |   | — |  |
| Net cash paid for acquisitions                                              | $ | — |  |   | $ | — |  |   | $ | 15.9 |  |   | $ | 28.9 |  |

|    |                                                           |
|----|-----------------------------------------------------------|
| 3. | Investments in and Advances to Nonconsolidated Affiliates |

----

|                                               |
|-----------------------------------------------|
|                                               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                          | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                          | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Net operating revenues                        | $ | 7.8 |  |   | $ | 16.2 |  |   | $ | 44.1 |  |   | $ | 55.4 |  |
| Operating expenses                            | (3.3 | ) |   | (10.3 | ) |   | (22.7 | ) |   | (32.5 | ) |
| Income from continuing operations, net of tax | 4.2 |  |   | 4.4 |  |   | 28.2 |  |   | 18.4 |  |
| Net income                                    | 4.2 |  |   | 4.4 |  |   | 28.2 |  |   | 18.4 |  |

|    |                |
|----|----------------|
| 4. | Long-term Debt |

|                                                     |
|-----------------------------------------------------|
|                                                     |  |  |  |  |  |  |  |
|                                                | September 30, 2014 |   | December 31, 2013 |
| Credit Agreement—                             |   |   |   |
| Advances under revolving credit facility            | $ | — |  |   | $ | 45.0 |  |
| Term loan facility                                  | — |  |   | — |  |
| Bonds payable—                                |   |   |   |
| 7.25% Senior Notes due 2018                         | 272.3 |  |   | 272.4 |  |
| 8.125% Senior Notes due 2020                        | 286.9 |  |   | 286.6 |  |
| 7.75% Senior Notes due 2022                         | 252.4 |  |   | 252.5 |  |
| 5.75% Senior Notes due 2024                         | 456.3 |  |   | 275.0 |  |
| 2.0% Convertible Senior Subordinated Notes due 2043 | 255.8 |  |   | 249.5 |  |
| Other notes payable                                 | 41.9 |  |   | 47.6 |  |
| Capital lease obligations                           | 84.3 |  |   | 88.9 |  |
|                                                | 1,649.9 |  |   | 1,517.5 |  |
| Less: Current portion                               | (208.5 | ) |   | (12.3 | ) |
| Long-term debt, net of current portion              | $ | 1,441.4 |  |   | $ | 1,505.2 |  |

----

|                                      |
|--------------------------------------|
|                                      |  |  |  |  |  |  |  |
|                                 | Face Amount |   | Net Amount |
| October 1 through December 31, 2014* | $ | 273.3 |  |   | $ | 274.2 |  |
| 2015                                 | 9.0 |  |   | 9.0 |  |
| 2016                                 | 9.0 |  |   | 9.0 |  |
| 2017                                 | 8.1 |  |   | 8.1 |  |
| 2018                                 | 8.6 |  |   | 8.6 |  |
| 2019                                 | 11.5 |  |   | 11.5 |  |
| Thereafter                           | 1,389.1 |  |   | 1,329.5 |  |
| Total                                | $ | 1,708.6 |  |   | $ | 1,649.9 |  |

|         |                                                                                                                       |
|---------|-----------------------------------------------------------------------------------------------------------------------|
| • | add a new $150 million term loan facility in addition to our existing $600 million revolving credit facility; |

|         |                                                                                                                                            |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------|
| • | permit additional restricted payments so long as the senior secured leverage ratio remains less than or equal to 1.75x (previously 1.50x); |

|         |                                                                                                                  |
|---------|------------------------------------------------------------------------------------------------------------------|
| • | increase the amount of permitted capital expenditures in a given year from $250 million to $300 million; and |

|         |                                                                                                                                                                                       |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | set the maturity date for both the revolving credit and term loan facilities to September 20, 2019, which represents a one-year extension for our existing revolving credit facility. |

----

|    |                                     |
|----|-------------------------------------|
| 5. | Redeemable Noncontrolling Interests |

|                                                     |
|-----------------------------------------------------|
|                                                     |  |  |  |  |  |  |  |
|                                                | Nine Months Ended September 30, |
|                                                | 2014 |   | 2013 |
| Balance at beginning of period                      | $ | 13.5 |  |   | $ | 7.2 |  |
| Net income attributable to noncontrolling interests | 5.4 |  |   | 4.1 |  |
| Distributions declared                              | (6.7 | ) |   | (3.6 | ) |
| Contribution to joint venture                       | — |  |   | 6.2 |  |
| Balance at end of period                            | $ | 12.2 |  |   | $ | 13.9 |  |

|                                                                   |
|-------------------------------------------------------------------|
|                                                                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                              | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                              |
|                                                              | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Net income attributable to nonredeemable noncontrolling interests | $ | 12.9 |  |   | $ | 12.6 |  |   | $ | 38.9 |  |   | $ | 38.4 |  |
| Net income attributable to redeemable noncontrolling interests    | 1.8 |  |   | 1.5 |  |   | 5.4 |  |   | 4.1 |  |
| Net income attributable to noncontrolling interests               | $ | 14.7 |  |   | $ | 14.1 |  |   | $ | 44.3 |  |   | $ | 42.5 |  |

----

|    |                         |
|----|-------------------------|
| 6. | Fair Value Measurements |

|                                                     |
|-----------------------------------------------------|
|                                                     |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                |   |   | Fair Value Measurements at Reporting Date Using |
| As of September 30, 2014                            | Fair Value |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   | Significant Other Observable Inputs(Level 2) |   | Significant Unobservable Inputs(Level 3) |   | Valuation Technique (1) |
| Other current assets:                               |   |   |   |   |   |   |   |   |   |
| Current portion of restricted marketable securities | $ | 4.3 |  |   | $ | — |  |   | $ | 4.3 |  |   | $ | — |  |   | M |
| Other long-term assets:                             |   |   |   |   |   |   |   |   |   |
| Restricted marketable securities                    | 45.9 |  |   | — |  |   | 45.9 |  |   | — |  |   | M |
| As of December 31, 2013                             |   |   |   |   |   |   |   |   |   |
| Other current assets:                               |   |   |   |   |   |   |   |   |   |
| Current portion of restricted marketable securities | $ | 4.7 |  |   | $ | — |  |   | $ | 4.7 |  |   | $ | — |  |   | M |
| Other long-term assets:                             |   |   |   |   |   |   |   |   |   |
| Restricted marketable securities                    | 42.9 |  |   | — |  |   | 42.9 |  |   | — |  |   | M |

----

|                                                      |
|------------------------------------------------------|
|                                                      |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                 | As of September 30, 2014 |   | As of December 31, 2013 |
|                                                 | Carrying Amount |   | Estimated Fair Value |   | Carrying Amount |   | Estimated Fair Value |
| Long-term debt:                                      |   |  |   |   |  |   |   |  |   |   |  |
| Advances under revolving credit facility             | $ | — |  |   | $ | — |  |   | $ | 45.0 |  |   | $ | 45.0 |  |
| 7.25% Senior Notes due 2018                          | 272.3 |  |   | 281.3 |  |   | 272.4 |  |   | 291.4 |  |
| 8.125% Senior Notes due 2020                         | 286.9 |  |   | 306.0 |  |   | 286.6 |  |   | 319.4 |  |
| 7.75% Senior Notes due 2022                          | 252.4 |  |   | 269.0 |  |   | 252.5 |  |   | 275.0 |  |
| 5.75% Senior Notes due 2024                          | 456.3 |  |   | 456.2 |  |   | 275.0 |  |   | 273.6 |  |
| 2.00% Convertible Senior Subordinated Notes due 2043 | 255.8 |  |   | 349.2 |  |   | 249.5 |  |   | 339.7 |  |
| Other notes payable                                  | 41.9 |  |   | 41.9 |  |   | 47.6 |  |   | 47.6 |  |
| Financial commitments:                               |   |  |   |   |  |   |   |  |   |   |  |
| Letters of credit                                    | — |  |   | 31.8 |  |   | — |  |   | 36.5 |  |

|    |                      |
|----|----------------------|
| 7. | Share-Based Payments |

|    |                                                                  |
|----|------------------------------------------------------------------|
| 8. | Assets and Liabilities in and Results of Discontinued Operations |

----

|    |              |
|----|--------------|
| 9. | Income Taxes |

----

|                                                                                 |
|---------------------------------------------------------------------------------|
|                                                                                 |  |  |  |  |  |  |  |
|                                                                            | Gross Unrecognized Income Tax Benefits |   | Accrued Interest and Penalties |
| Balance at December 31, 2013                                                    | $ | 1.1 |  |   | $ | 0.3 |  |
| Gross amount of increases in unrecognized tax benefits related to prior periods | — |  |   | 0.1 |  |
| Gross amount of decreases in unrecognized tax benefits related to prior periods | (0.7 | ) |   | (0.3 | ) |
| Balance at September 30, 2014                                                   | $ | 0.4 |  |   | $ | 0.1 |  |

----

|     |                           |
|-----|---------------------------|
| 10. | Earnings per Common Share |

|                                                                                                         |
|---------------------------------------------------------------------------------------------------------|
|                                                                                                         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                                    | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                                                    | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Basic:                                                                                                  |   |   |   |   |   |   |   |
| Numerator:                                                                                              |   |   |   |   |   |   |   |
| Income from continuing operations                                                                       | $ | 65.7 |  |   | $ | 73.2 |  |   | $ | 221.4 |  |   | $ | 318.4 |  |
| Less: Net income attributable to noncontrolling interests included in continuing operations             | (14.7 | ) |   | (14.1 | ) |   | (44.3 | ) |   | (42.5 | ) |
| Less: Income allocated to participating securities                                                      | (0.5 | ) |   | (0.6 | ) |   | (2.1 | ) |   | (4.1 | ) |
| Less: Convertible perpetual preferred stock dividends                                                   | (1.6 | ) |   | (5.7 | ) |   | (4.7 | ) |   | (17.2 | ) |
| Income from continuing operations attributable to HealthSouth common shareholders                       | 48.9 |  |   | 52.8 |  |   | 170.3 |  |   | 254.6 |  |
| (Loss) income from discontinued operations, net of tax, attributable to HealthSouth common shareholders | (0.9 | ) |   | (0.9 | ) |   | 2.8 |  |   | (1.2 | ) |
| Net income attributable to HealthSouth common shareholders                                              | $ | 48.0 |  |   | $ | 51.9 |  |   | $ | 173.1 |  |   | $ | 253.4 |  |
| Denominator:                                                                                            |   |   |   |   |   |   |   |
| Basic weighted average common shares outstanding                                                        | 86.5 |  |   | 86.2 |  |   | 86.8 |  |   | 88.7 |  |
| Basic earnings per share attributable to HealthSouth common shareholders:                               |   |   |   |   |   |   |   |
| Continuing operations                                                                                   | $ | 0.56 |  |   | $ | 0.61 |  |   | $ | 1.96 |  |   | $ | 2.87 |  |
| Discontinued operations                                                                                 | (0.01 | ) |   | (0.01 | ) |   | 0.03 |  |   | (0.01 | ) |
| Net income                                                                                              | $ | 0.55 |  |   | $ | 0.60 |  |   | $ | 1.99 |  |   | $ | 2.86 |  |
|                                                                                                    |   |   |   |   |   |   |   |
| Diluted:                                                                                                |   |   |   |   |   |   |   |
| Numerator:                                                                                              |   |   |   |   |   |   |   |
| Income from continuing operations                                                                       | $ | 65.7 |  |   | $ | 73.2 |  |   | $ | 221.4 |  |   | $ | 318.4 |  |
| Less: Net income attributable to noncontrolling interests included in continuing operations             | (14.7 | ) |   | (14.1 | ) |   | (44.3 | ) |   | (42.5 | ) |
| Add: Interest on convertible debt, net of tax                                                           | 2.3 |  |   | — |  |   | 6.8 |  |   | — |  |
| Income from continuing operations attributable to HealthSouth common shareholders                       | 53.3 |  |   | 59.1 |  |   | 183.9 |  |   | 275.9 |  |
| (Loss) income from discontinued operations, net of tax, attributable to HealthSouth common shareholders | (0.9 | ) |   | (0.9 | ) |   | 2.8 |  |   | (1.2 | ) |
| Net income attributable to HealthSouth common shareholders                                              | $ | 52.4 |  |   | $ | 58.2 |  |   | $ | 186.7 |  |   | $ | 274.7 |  |
| Denominator:                                                                                            |   |   |   |   |   |   |   |
| Diluted weighted average common shares outstanding                                                      | 100.5 |  |   | 100.4 |  |   | 100.7 |  |   | 102.4 |  |
| Diluted earnings per share attributable to HealthSouth common shareholders:                             |   |   |   |   |   |   |   |
| Continuing operations                                                                                   | $ | 0.53 |  |   | $ | 0.59 |  |   | $ | 1.82 |  |   | $ | 2.69 |  |
| Discontinued operations                                                                                 | (0.01 | ) |   | (0.01 | ) |   | 0.03 |  |   | (0.01 | ) |
| Net income                                                                                              | $ | 0.52 |  |   | $ | 0.58 |  |   | $ | 1.85 |  |   | $ | 2.68 |  |

----

|                                                                             |
|-----------------------------------------------------------------------------|
|                                                                             |  |  |  |  |  |  |  |  |  |  |  |
|                                                                        | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                        | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Basic weighted average common shares outstanding                            | 86.5 |  |   | 86.2 |  |   | 86.8 |  |   | 88.7 |  |
| Convertible perpetual preferred stock                                       | 3.2 |  |   | 11.6 |  |   | 3.2 |  |   | 11.6 |  |
| Convertible senior subordinated notes                                       | 8.2 |  |   | — |  |   | 8.1 |  |   | — |  |
| Restricted stock awards, dilutive stock options, and restricted stock units | 2.6 |  |   | 2.6 |  |   | 2.6 |  |   | 2.1 |  |
| Diluted weighted average common shares outstanding                          | 100.5 |  |   | 100.4 |  |   | 100.7 |  |   | 102.4 |  |

----

|                                                           |
|-----------------------------------------------------------|
|                                                           |  |  |  |  |  |  |
|                                                      | Number of Warrants |   | Weighted Average Exercise Price |
| Common stock warrants outstanding as of December 31, 2013 | 2.9 |  |   | $ | 32.50 |  |
| Cashless exercise                                         | (1.8 | ) |   | 32.16 |  |
| Cash exercise                                             | (1.0 | ) |   | 32.16 |  |
| Expired                                                   | (0.1 | ) |   | 32.16 |  |
| Common stock warrants outstanding as of January 16, 2014  | — |  |   |   |

|     |                                     |
|-----|-------------------------------------|
| 11. | Contingencies and Other Commitments |

----

----

----

----

|     |                                               |
|-----|-----------------------------------------------|
| 12. | Condensed Consolidating Financial Information |

----

|                                                                       |
|-----------------------------------------------------------------------|
|                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                  | Three Months Ended September 30, 2014 |
|                                                                  | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                                  | (In Millions) |
| Net operating revenues                                                | $ | 4.0 |  |   | $ | 424.5 |  |   | $ | 191.2 |  |   | $ | (22.8 | ) |   | $ | 596.9 |  |
| Less: Provision for doubtful accounts                                 | — |  |   | (5.7 | ) |   | (2.5 | ) |   | — |  |   | (8.2 | ) |
| Net operating revenues less provision for doubtful accounts           | 4.0 |  |   | 418.8 |  |   | 188.7 |  |   | (22.8 | ) |   | 588.7 |  |
| Operating expenses:                                                   |   |  |   |   |  |   |   |  |   |   |  |   |   |
| Salaries and benefits                                                 | 4.1 |  |   | 197.9 |  |   | 91.8 |  |   | (3.8 | ) |   | 290.0 |  |
| Other operating expenses                                              | 5.0 |  |   | 62.0 |  |   | 31.8 |  |   | (9.4 | ) |   | 89.4 |  |
| Occupancy costs                                                       | 1.1 |  |   | 14.5 |  |   | 4.3 |  |   | (9.6 | ) |   | 10.3 |  |
| Supplies                                                              | 0.1 |  |   | 18.6 |  |   | 7.9 |  |   | — |  |   | 26.6 |  |
| General and administrative expenses                                   | 27.5 |  |   | — |  |   | — |  |   | — |  |   | 27.5 |  |
| Depreciation and amortization                                         | 2.3 |  |   | 18.2 |  |   | 6.9 |  |   | — |  |   | 27.4 |  |
| Professional fees—accounting, tax, and legal                    | 4.0 |  |   | — |  |   | — |  |   | — |  |   | 4.0 |  |
| Total operating expenses                                              | 44.1 |  |   | 311.2 |  |   | 142.7 |  |   | (22.8 | ) |   | 475.2 |  |
| Interest expense and amortization of debt discounts and fees          | 25.7 |  |   | 1.7 |  |   | 0.7 |  |   | (0.3 | ) |   | 27.8 |  |
| Other income                                                          | 0.1 |  |   | — |  |   | (0.6 | ) |   | 0.3 |  |   | (0.2 | ) |
| Equity in net income of nonconsolidated affiliates                    | — |  |   | (1.9 | ) |   | — |  |   | — |  |   | (1.9 | ) |
| Equity in net income of consolidated affiliates                       | (62.6 | ) |   | (7.2 | ) |   | — |  |   | 69.8 |  |   | — |  |
| Management fees                                                       | (26.8 | ) |   | 20.4 |  |   | 6.4 |  |   | — |  |   | — |  |
| Income from continuing operations before income tax (benefit) expense | 23.5 |  |   | 94.6 |  |   | 39.5 |  |   | (69.8 | ) |   | 87.8 |  |
| Provision for income tax (benefit) expense                            | (27.5 | ) |   | 39.2 |  |   | 10.4 |  |   | — |  |   | 22.1 |  |
| Income from continuing operations                                     | 51.0 |  |   | 55.4 |  |   | 29.1 |  |   | (69.8 | ) |   | 65.7 |  |
| Loss from discontinued operations, net of tax                         | (0.9 | ) |   | — |  |   | — |  |   | — |  |   | (0.9 | ) |
| Net Income                                                            | 50.1 |  |   | 55.4 |  |   | 29.1 |  |   | (69.8 | ) |   | 64.8 |  |
| Less: Net income attributable to noncontrolling interests             | — |  |   | — |  |   | (14.7 | ) |   | — |  |   | (14.7 | ) |
| Net income attributable to HealthSouth                                | $ | 50.1 |  |   | $ | 55.4 |  |   | $ | 14.4 |  |   | $ | (69.8 | ) |   | $ | 50.1 |  |
| Comprehensive income                                                  | $ | 50.0 |  |   | $ | 55.4 |  |   | $ | 29.1 |  |   | $ | (69.8 | ) |   | $ | 64.7 |  |
| Comprehensive income attributable to HealthSouth                      | $ | 50.0 |  |   | $ | 55.4 |  |   | $ | 14.4 |  |   | $ | (69.8 | ) |   | $ | 50.0 |  |

----

|                                                                       |
|-----------------------------------------------------------------------|
|                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                  | Three Months Ended September 30, 2013 |
|                                                                  | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                                  | (In Millions) |
| Net operating revenues                                                | $ | 3.0 |  |   | $ | 399.7 |  |   | $ | 179.2 |  |   | $ | (17.9 | ) |   | $ | 564.0 |  |
| Less: Provision for doubtful accounts                                 | — |  |   | (5.6 | ) |   | (2.4 | ) |   | — |  |   | (8.0 | ) |
| Net operating revenues less provision for doubtful accounts           | 3.0 |  |   | 394.1 |  |   | 176.8 |  |   | (17.9 | ) |   | 556.0 |  |
| Operating expenses:                                                   |   |  |   |   |  |   |   |  |   |   |  |   |   |
| Salaries and benefits                                                 | 0.1 |  |   | 187.4 |  |   | 85.6 |  |   | (3.6 | ) |   | 269.5 |  |
| Other operating expenses                                              | 3.2 |  |   | 59.6 |  |   | 27.9 |  |   | (8.5 | ) |   | 82.2 |  |
| Occupancy costs                                                       | 1.0 |  |   | 12.0 |  |   | 4.5 |  |   | (5.8 | ) |   | 11.7 |  |
| Supplies                                                              | — |  |   | 17.9 |  |   | 7.6 |  |   | — |  |   | 25.5 |  |
| General and administrative expenses                                   | 28.8 |  |   | — |  |   | — |  |   | — |  |   | 28.8 |  |
| Depreciation and amortization                                         | 2.2 |  |   | 16.7 |  |   | 5.4 |  |   | — |  |   | 24.3 |  |
| Government, class action, and related settlements                     | (21.3 | ) |   | — |  |   | — |  |   | — |  |   | (21.3 | ) |
| Professional fees—accounting, tax, and legal                    | 4.2 |  |   | — |  |   | — |  |   | — |  |   | 4.2 |  |
| Total operating expenses                                              | 18.2 |  |   | 293.6 |  |   | 131.0 |  |   | (17.9 | ) |   | 424.9 |  |
| Interest expense and amortization of debt discounts and fees          | 22.4 |  |   | 2.4 |  |   | 0.8 |  |   | (0.3 | ) |   | 25.3 |  |
| Other income                                                          | (0.4 | ) |   | — |  |   | (0.5 | ) |   | 0.3 |  |   | (0.6 | ) |
| Equity in net income of nonconsolidated affiliates                    | (0.3 | ) |   | (1.7 | ) |   | — |  |   | — |  |   | (2.0 | ) |
| Equity in net income of consolidated affiliates                       | (59.7 | ) |   | (5.5 | ) |   | — |  |   | 65.2 |  |   | — |  |
| Management fees                                                       | (25.2 | ) |   | 19.2 |  |   | 6.0 |  |   | — |  |   | — |  |
| Income from continuing operations before income tax (benefit) expense | 48.0 |  |   | 86.1 |  |   | 39.5 |  |   | (65.2 | ) |   | 108.4 |  |
| Provision for income tax (benefit) expense                            | (10.3 | ) |   | 34.9 |  |   | 10.6 |  |   | — |  |   | 35.2 |  |
| Income from continuing operations                                     | 58.3 |  |   | 51.2 |  |   | 28.9 |  |   | (65.2 | ) |   | 73.2 |  |
| Loss from discontinued operations, net of tax                         | (0.1 | ) |   | (0.4 | ) |   | (0.4 | ) |   | — |  |   | (0.9 | ) |
| Net Income                                                            | 58.2 |  |   | 50.8 |  |   | 28.5 |  |   | (65.2 | ) |   | 72.3 |  |
| Less: Net income attributable to noncontrolling interests             | — |  |   | — |  |   | (14.1 | ) |   | — |  |   | (14.1 | ) |
| Net income attributable to HealthSouth                                | $ | 58.2 |  |   | $ | 50.8 |  |   | $ | 14.4 |  |   | $ | (65.2 | ) |   | $ | 58.2 |  |
| Comprehensive income                                                  | $ | 58.3 |  |   | $ | 50.8 |  |   | $ | 28.5 |  |   | $ | (65.2 | ) |   | $ | 72.4 |  |
| Comprehensive income attributable to HealthSouth                      | $ | 58.3 |  |   | $ | 50.8 |  |   | $ | 14.4 |  |   | $ | (65.2 | ) |   | $ | 58.3 |  |

----

|                                                                       |
|-----------------------------------------------------------------------|
|                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                  | Nine Months Ended September 30, 2014 |
|                                                                  | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                                  | (In Millions) |
| Net operating revenues                                                | $ | 11.5 |  |   | $ | 1,286.4 |  |   | $ | 561.7 |  |   | $ | (67.1 | ) |   | $ | 1,792.5 |  |
| Less: Provision for doubtful accounts                                 | — |  |   | (17.6 | ) |   | (7.4 | ) |   | — |  |   | (25.0 | ) |
| Net operating revenues less provision for doubtful accounts           | 11.5 |  |   | 1,268.8 |  |   | 554.3 |  |   | (67.1 | ) |   | 1,767.5 |  |
| Operating expenses:                                                   |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| Salaries and benefits                                                 | 15.9 |  |   | 590.2 |  |   | 266.6 |  |   | (11.3 | ) |   | 861.4 |  |
| Other operating expenses                                              | 15.0 |  |   | 182.1 |  |   | 90.0 |  |   | (26.9 | ) |   | 260.2 |  |
| Occupancy costs                                                       | 3.1 |  |   | 43.4 |  |   | 13.5 |  |   | (28.9 | ) |   | 31.1 |  |
| Supplies                                                              | — |  |   | 57.9 |  |   | 24.1 |  |   | — |  |   | 82.0 |  |
| General and administrative expenses                                   | 88.4 |  |   | — |  |   | — |  |   | — |  |   | 88.4 |  |
| Depreciation and amortization                                         | 7.4 |  |   | 54.1 |  |   | 18.7 |  |   | — |  |   | 80.2 |  |
| Government, class action, and related settlements                     | (0.8 | ) |   | — |  |   | — |  |   | — |  |   | (0.8 | ) |
| Professional fees—accounting, tax, and legal                    | 7.6 |  |   | — |  |   | — |  |   | — |  |   | 7.6 |  |
| Total operating expenses                                              | 136.6 |  |   | 927.7 |  |   | 412.9 |  |   | (67.1 | ) |   | 1,410.1 |  |
| Interest expense and amortization of debt discounts and fees          | 76.3 |  |   | 5.9 |  |   | 2.1 |  |   | (0.8 | ) |   | 83.5 |  |
| Other income                                                          | (0.3 | ) |   | (28.4 | ) |   | (2.2 | ) |   | 0.8 |  |   | (30.1 | ) |
| Equity in net income of nonconsolidated affiliates                    | — |  |   | (8.8 | ) |   | — |  |   | — |  |   | (8.8 | ) |
| Equity in net income of consolidated affiliates                       | (233.9 | ) |   | (21.3 | ) |   | — |  |   | 255.2 |  |   | — |  |
| Management fees                                                       | (80.7 | ) |   | 61.6 |  |   | 19.1 |  |   | — |  |   | — |  |
| Income from continuing operations before income tax (benefit) expense | 113.5 |  |   | 332.1 |  |   | 122.4 |  |   | (255.2 | ) |   | 312.8 |  |
| Provision for income tax (benefit) expense                            | (63.5 | ) |   | 122.0 |  |   | 32.9 |  |   | — |  |   | 91.4 |  |
| Income from continuing operations                                     | 177.0 |  |   | 210.1 |  |   | 89.5 |  |   | (255.2 | ) |   | 221.4 |  |
| Income (loss) from discontinued operations, net of tax                | 2.9 |  |   | — |  |   | (0.1 | ) |   | — |  |   | 2.8 |  |
| Net Income                                                            | 179.9 |  |   | 210.1 |  |   | 89.4 |  |   | (255.2 | ) |   | 224.2 |  |
| Less: Net income attributable to noncontrolling interests             | — |  |   | — |  |   | (44.3 | ) |   | — |  |   | (44.3 | ) |
| Net income attributable to HealthSouth                                | $ | 179.9 |  |   | $ | 210.1 |  |   | $ | 45.1 |  |   | $ | (255.2 | ) |   | $ | 179.9 |  |
| Comprehensive income                                                  | $ | 179.9 |  |   | $ | 210.1 |  |   | $ | 89.4 |  |   | $ | (255.2 | ) |   | $ | 224.2 |  |
| Comprehensive income attributable to HealthSouth                      | $ | 179.9 |  |   | $ | 210.1 |  |   | $ | 45.1 |  |   | $ | (255.2 | ) |   | $ | 179.9 |  |

----

|                                                                       |
|-----------------------------------------------------------------------|
|                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                  | Nine Months Ended September 30, 2013 |
|                                                                  | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                                  | (In Millions) |
| Net operating revenues                                                | $ | 9.0 |  |   | $ | 1,215.1 |  |   | $ | 529.2 |  |   | $ | (52.2 | ) |   | $ | 1,701.1 |  |
| Less: Provision for doubtful accounts                                 | — |  |   | (15.6 | ) |   | (6.8 | ) |   | — |  |   | (22.4 | ) |
| Net operating revenues less provision for doubtful accounts           | 9.0 |  |   | 1,199.5 |  |   | 522.4 |  |   | (52.2 | ) |   | 1,678.7 |  |
| Operating expenses:                                                   |   |   |   |   |   |   |   |   |   |
| Salaries and benefits                                                 | 13.5 |  |   | 565.7 |  |   | 249.4 |  |   | (10.9 | ) |   | 817.7 |  |
| Other operating expenses                                              | 9.1 |  |   | 177.4 |  |   | 79.8 |  |   | (25.0 | ) |   | 241.3 |  |
| Occupancy costs                                                       | 3.1 |  |   | 35.9 |  |   | 13.1 |  |   | (16.3 | ) |   | 35.8 |  |
| Supplies                                                              | — |  |   | 55.1 |  |   | 23.2 |  |   | — |  |   | 78.3 |  |
| General and administrative expenses                                   | 88.5 |  |   | — |  |   | — |  |   | — |  |   | 88.5 |  |
| Depreciation and amortization                                         | 6.5 |  |   | 47.8 |  |   | 15.2 |  |   | — |  |   | 69.5 |  |
| Government, class action, and related settlements                     | (23.3 | ) |   | — |  |   | — |  |   | — |  |   | (23.3 | ) |
| Professional fees—accounting, tax, and legal                    | 7.8 |  |   | — |  |   | — |  |   | — |  |   | 7.8 |  |
| Total operating expenses                                              | 105.2 |  |   | 881.9 |  |   | 380.7 |  |   | (52.2 | ) |   | 1,315.6 |  |
| Interest expense and amortization of debt discounts and fees          | 66.8 |  |   | 5.7 |  |   | 2.4 |  |   | (1.0 | ) |   | 73.9 |  |
| Other income                                                          | (0.7 | ) |   | (0.8 | ) |   | (2.7 | ) |   | 1.0 |  |   | (3.2 | ) |
| Equity in net income of nonconsolidated affiliates                    | (2.5 | ) |   | (5.7 | ) |   | — |  |   | — |  |   | (8.2 | ) |
| Equity in net income of consolidated affiliates                       | (243.3 | ) |   | (22.3 | ) |   | — |  |   | 265.6 |  |   | — |  |
| Management fees                                                       | (76.6 | ) |   | 58.7 |  |   | 17.9 |  |   | — |  |   | — |  |
| Income from continuing operations before income tax (benefit) expense | 160.1 |  |   | 282.0 |  |   | 124.1 |  |   | (265.6 | ) |   | 300.6 |  |
| Provision for income tax (benefit) expense                            | (114.5 | ) |   | 69.7 |  |   | 27.0 |  |   | — |  |   | (17.8 | ) |
| Income from continuing operations                                     | 274.6 |  |  | 212.3 |  |  | 97.1 |  |  | (265.6 | ) |   | 318.4 |  |
| Income (loss) from discontinued operations, net of tax                | 0.1 |  |   | (0.1 | ) |   | (1.2 | ) |   | — |  |   | (1.2 | ) |
| Net Income                                                            | 274.7 |  |   | 212.2 |  |   | 95.9 |  |   | (265.6 | ) |   | 317.2 |  |
| Less: Net income attributable to noncontrolling interests             | — |  |   | — |  |   | (42.5 | ) |   | — |  |   | (42.5 | ) |
| Net income attributable to HealthSouth                                | $ | 274.7 |  |   | $ | 212.2 |  |   | $ | 53.4 |  |   | $ | (265.6 | ) |   | $ | 274.7 |  |
| Comprehensive income                                                  | $ | 273.1 |  |   | $ | 212.2 |  |   | $ | 95.9 |  |   | $ | (265.6 | ) |   | $ | 315.6 |  |
| Comprehensive income attributable to HealthSouth                      | $ | 273.1 |  |   | $ | 212.2 |  |   | $ | 53.4 |  |   | $ | (265.6 | ) |   | $ | 273.1 |  |

----

|                                                       |
|-------------------------------------------------------|
|                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                  | As of September 30, 2014 |
|                                                  | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                  | (In Millions) |
| Assets                                                |   |   |   |   |   |   |   |   |   |
| Current assets:                                       |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                             | $ | 266.5 |  |   | $ | 1.5 |  |   | 4.3 |  |   | $ | — |  |   | $ | 272.3 |  |
| Accounts receivable, net                              | — |  |   | 186.1 |  |   | 75.5 |  |   | — |  |   | 261.6 |  |
| Deferred income tax assets                            | 85.5 |  |   | 34.5 |  |   | 18.9 |  |   | — |  |   | 138.9 |  |
| Other current assets                                  | 40.4 |  |   | 14.1 |  |   | 91.2 |  |   | (35.5 | ) |   | 110.2 |  |
| Total current assets                                  | 392.4 |  |   | 236.2 |  |   | 189.9 |  |   | (35.5 | ) |   | 783.0 |  |
| Property and equipment, net                           | 13.6 |  |   | 753.5 |  |   | 227.5 |  |   | — |  |   | 994.6 |  |
| Goodwill                                              | — |  |   | 279.6 |  |   | 212.1 |  |   | — |  |   | 491.7 |  |
| Intangible assets, net                                | 12.9 |  |   | 46.2 |  |   | 40.8 |  |   | — |  |   | 99.9 |  |
| Deferred income tax assets                            | 203.4 |  |   | 24.5 |  |   | 27.4 |  |   | — |  |   | 255.3 |  |
| Other long-term assets                                | 74.5 |  |   | 35.3 |  |   | 59.7 |  |   | — |  |   | 169.5 |  |
| Intercompany receivable                               | 1,562.7 |  |   | — |  |   | — |  |   | (1,562.7 | ) |   | — |  |
| Total assets                                          | $ | 2,259.5 |  |   | $ | 1,375.3 |  |   | $ | 757.4 |  |   | $ | (1,598.2 | ) |   | $ | 2,794.0 |  |
| Liabilities and Shareholders’ Equity            |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| Current liabilities:                                  |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| Current portion of long-term debt                     | $ | 217.7 |  |   | $ | 4.1 |  |   | $ | 4.2 |  |   | $ | (17.5 | ) |   | 208.5 |  |
| Accounts payable                                      | 8.8 |  |   | 33.0 |  |   | 13.0 |  |   | — |  |   | 54.8 |  |
| Accrued expenses and other current liabilities        | 121.3 |  |   | 73.0 |  |   | 75.1 |  |   | (18.0 | ) |   | 251.4 |  |
| Total current liabilities                             | 347.8 |  |   | 110.1 |  |   | 92.3 |  |   | (35.5 | ) |   | 514.7 |  |
| Long-term debt, net of current portion                | 1,324.3 |  |   | 85.0 |  |   | 32.1 |  |   | — |  |   | 1,441.4 |  |
| Other long-term liabilities                           | 44.6 |  |   | 12.5 |  |   | 82.6 |  |   | — |  |   | 139.7 |  |
| Intercompany payable                                  | — |  |   | 431.9 |  |   | 212.5 |  |   | (644.4 | ) |   | — |  |
|                                                  | 1,716.7 |  |   | 639.5 |  |   | 419.5 |  |   | (679.9 | ) |   | 2,095.8 |  |
| Commitments and contingencies                         |  |  |   |  |  |   |  |  |   |  |  |   |  |  |
| Convertible perpetual preferred stock                 | 93.2 |  |   | — |  |   | — |  |   | — |  |   | 93.2 |  |
| Redeemable noncontrolling interests                   | — |  |   | — |  |   | 12.2 |  |   | — |  |   | 12.2 |  |
| Shareholders’ equity:                           |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| HealthSouth shareholders’ equity                | 449.6 |  |   | 735.8 |  |   | 182.5 |  |   | (918.3 | ) |   | 449.6 |  |
| Noncontrolling interests                              | — |  |   | — |  |   | 143.2 |  |   | — |  |   | 143.2 |  |
| Total shareholders’ equity                      | 449.6 |  |   | 735.8 |  |   | 325.7 |  |   | (918.3 | ) |   | 592.8 |  |
| Total liabilities and shareholders’ equity | $ | 2,259.5 |  |   | $ | 1,375.3 |  |   | $ | 757.4 |  |   | $ | (1,598.2 | ) |   | $ | 2,794.0 |  |

----

|                                                       |
|-------------------------------------------------------|
|                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                  | As of December 31, 2013 |
|                                                  | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                  | (In Millions) |
| Assets                                                |   |   |   |   |   |   |   |   |   |
| Current assets:                                       |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                             | $ | 60.5 |  |   | $ | 2.3 |  |   | $ | 1.7 |  |   | $ | — |  |   | $ | 64.5 |  |
| Accounts receivable, net                              | — |  |   | 184.7 |  |   | 77.1 |  |   | — |  |   | 261.8 |  |
| Deferred income tax assets                            | 85.5 |  |   | 34.5 |  |   | 19.0 |  |   | — |  |   | 139.0 |  |
| Other current assets                                  | 37.0 |  |   | 15.8 |  |   | 80.8 |  |   | (18.5 | ) |   | 115.1 |  |
| Total current assets                                  | 183.0 |  |   | 237.3 |  |   | 178.6 |  |   | (18.5 | ) |   | 580.4 |  |
| Property and equipment, net                           | 16.3 |  |   | 698.5 |  |   | 195.7 |  |   | — |  |   | 910.5 |  |
| Goodwill                                              | — |  |   | 279.6 |  |   | 177.3 |  |   | — |  |   | 456.9 |  |
| Intangible assets, net                                | 18.1 |  |   | 49.6 |  |   | 20.5 |  |   | — |  |   | 88.2 |  |
| Deferred income tax assets                            | 288.8 |  |   | 24.5 |  |   | 41.0 |  |   | — |  |   | 354.3 |  |
| Other long-term assets                                | 64.6 |  |   | 27.1 |  |   | 52.4 |  |   | — |  |   | 144.1 |  |
| Intercompany receivable                               | 1,438.8 |  |   | — |  |   | — |  |   | (1,438.8 | ) |   | — |  |
| Total assets                                          | $ | 2,009.6 |  |   | $ | 1,316.6 |  |   | $ | 665.5 |  |   | $ | (1,457.3 | ) |   | $ | 2,534.4 |  |
| Liabilities and Shareholders’ Equity            |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| Current liabilities:                                  |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| Current portion of long-term debt                     | $ | 19.4 |  |   | $ | 3.8 |  |   | $ | 6.6 |  |   | $ | (17.5 | ) |   | $ | 12.3 |  |
| Accounts payable                                      | 15.1 |  |   | 32.6 |  |   | 14.2 |  |   | — |  |   | 61.9 |  |
| Accrued expenses and other current liabilities        | 111.1 |  |   | 67.2 |  |   | 60.1 |  |   | (1.0 | ) |   | 237.4 |  |
| Total current liabilities                             | 145.6 |  |   | 103.6 |  |  | 80.9 |  |  | (18.5 | ) |   | 311.6 |  |
| Long-term debt, net of current portion                | 1,381.7 |  |   | 88.1 |  |   | 35.4 |  |   | — |  |   | 1,505.2 |  |
| Other long-term liabilities                           | 44.5 |  |   | 17.4 |  |   | 80.3 |  |   | — |  |   | 142.2 |  |
| Intercompany payable                                  | — |  |   | 299.2 |  |   | 228.9 |  |   | (528.1 | ) |   | — |  |
|                                                  | 1,571.8 |  |   | 508.3 |  |  | 425.5 |  |  | (546.6 | ) |   | 1,959.0 |  |
| Commitments and contingencies                         |  |  |   |  |  |   |  |  |   |  |  |   |  |  |
| Convertible perpetual preferred stock                 | 93.2 |  |   | — |  |   | — |  |   | — |  |   | 93.2 |  |
| Redeemable noncontrolling interests                   | — |  |   | — |  |   | 13.5 |  |   | — |  |   | 13.5 |  |
| Shareholders’ equity:                           |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| HealthSouth shareholders’ equity                | 344.6 |  |   | 808.3 |  |   | 102.4 |  |   | (910.7 | ) |   | 344.6 |  |
| Noncontrolling interests                              | — |  |   | — |  |   | 124.1 |  |   | — |  |   | 124.1 |  |
| Total shareholders’ equity                      | 344.6 |  |   | 808.3 |  |  | 226.5 |  |  | (910.7 | ) |   | 468.7 |  |
| Total liabilities and shareholders’ equity | $ | 2,009.6 |  |   | $ | 1,316.6 |  |  | $ | 665.5 |  |  | $ | (1,457.3 | ) |   | $ | 2,534.4 |  |

----

|                                                                           |
|---------------------------------------------------------------------------|
|                                                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                      | Nine Months Ended September 30, 2014 |
|                                                                      | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                                      | (In Millions) |
| Net cash provided by operating activities                                 | $ | 53.5 |  |   | $ | 206.9 |  |   | $ | 114.3 |  |   | $ | — |  |   | $ | 374.7 |  |
| Cash flows from investing activities:                                     |   |  |   |   |  |   |   |  |   |   |  |   |   |  |
| Purchases of property and equipment                                       | (11.9 | ) |   | (97.9 | ) |   | (24.1 | ) |   | — |  |   | (133.9 | ) |
| Capitalized software costs                                                | (4.1 | ) |   | (1.5 | ) |   | (7.0 | ) |   | — |  |   | (12.6 | ) |
| Acquisition of business, net of cash acquired                             | — |  |   | — |  |   | (15.9 | ) |   | — |  |   | (15.9 | ) |
| Proceeds from sale of restricted investments                              | — |  |   | — |  |   | 0.3 |  |   | — |  |   | 0.3 |  |
| Purchase of restricted investments                                        | — |  |   | — |  |   | (2.5 | ) |   | — |  |   | (2.5 | ) |
| Other                                                                     | 1.0 |  |   | 1.3 |  |   | — |  |   | — |  |   | 2.3 |  |
| Net cash used in investing activities                                     | (15.0 | ) |   | (98.1 | ) |  | (49.2 | ) |  | — |  |   | (162.3 | ) |
| Cash flows from financing activities:                                     |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| Proceeds from bond issuance                                               | 175.0 |  |   | — |  |   | — |  |   | — |  |   | 175.0 |  |
| Borrowings on revolving credit facility                                   | 65.0 |  |   | — |  |   | — |  |   | — |  |   | 65.0 |  |
| Payments on revolving credit facility                                     | (110.0 | ) |   | — |  |   | — |  |   | — |  |   | (110.0 | ) |
| Repurchases of common stock, including fees and expenses                  | (43.1 | ) |   | — |  |   | — |  |   | — |  |   | (43.1 | ) |
| Dividends paid on common stock                                            | (47.4 | ) |   | — |  |   | — |  |   | — |  |   | (47.4 | ) |
| Dividends paid on convertible perpetual preferred stock                   | (4.7 | ) |   | — |  |   | — |  |   | — |  |   | (4.7 | ) |
| Distributions paid to noncontrolling interests of consolidated affiliates | — |  |   | — |  |   | (39.6 | ) |   | — |  |   | (39.6 | ) |
| Other                                                                     | 8.7 |  |   | (3.0 | ) |   | (5.5 | ) |   | — |  |   | 0.2 |  |
| Change in intercompany advances                                           | 124.0 |  |   | (106.6 | ) |   | (17.4 | ) |   | — |  |   | — |  |
| Net cash provided by (used in) financing activities                       | 167.5 |  |   | (109.6 | ) |  | (62.5 | ) |  | — |  |   | (4.6 | ) |
| Increase (decrease) in cash and cash equivalents                          | 206.0 |  |   | (0.8 | ) |  | 2.6 |  |  | — |  |   | 207.8 |  |
| Cash and cash equivalents at beginning of period                          | 60.5 |  |   | 2.3 |  |   | 1.7 |  |   | — |  |   | 64.5 |  |
| Cash and cash equivalents at end of period                                | $ | 266.5 |  |   | $ | 1.5 |  |  | $ | 4.3 |  |  | $ | — |  |   | $ | 272.3 |  |

----

|                                                                           |
|---------------------------------------------------------------------------|
|                                                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                      | Nine Months Ended September 30, 2013 |
|                                                                      | HealthSouth Corporation |   | Guarantor Subsidiaries |   | Nonguarantor Subsidiaries |   | Eliminating Entries |   | HealthSouth Consolidated |
|                                                                      | (In Millions) |
| Net cash provided by operating activities                                 | $ | 70.9 |  |   | $ | 215.6 |  |   | $ | 82.9 |  |   | $ | — |  |   | $ | 369.4 |  |
| Cash flows from investing activities:                                     |   |  |   |   |  |   |   |  |   |   |  |   |   |  |
| Purchases of property and equipment                                       | (5.2 | ) |   | (142.3 | ) |   | (19.3 | ) |   | — |  |   | (166.8 | ) |
| Capitalized software costs                                                | (4.8 | ) |   | (7.6 | ) |   | (3.2 | ) |   | — |  |   | (15.6 | ) |
| Acquisition of business, net of cash acquired                             | — |  |   | (28.9 | ) |   | — |  |   | — |  |   | (28.9 | ) |
| Proceeds from sale of restricted investments                              | — |  |   | — |  |   | 16.9 |  |   | — |  |   | 16.9 |  |
| Proceeds from sale of Digital Hospital                                    | 10.8 |  |   | — |  |   | — |  |   | — |  |   | 10.8 |  |
| Purchase of restricted investments                                        | — |  |   | — |  |   | (8.1 | ) |   | — |  |   | (8.1 | ) |
| Other                                                                     | (0.2 | ) |   | (1.0 | ) |   | (4.3 | ) |   | — |  |   | (5.5 | ) |
| Net cash provided by (used in) investing activities                       | 0.6 |  |   | (179.8 | ) |   | (18.0 | ) |   | — |  |   | (197.2 | ) |
| Cash flows from financing activities:                                     |   |  |   |   |  |   |   |  |   |   |  |   |  |  |
| Principal borrowings on notes                                             | — |  |   | — |  |   | 15.2 |  |   | — |  |   | 15.2 |  |
| Borrowings on revolving credit facility                                   | 147.0 |  |   | — |  |   | — |  |   | — |  |   | 147.0 |  |
| Payments on revolving credit facility                                     | (112.0 | ) |   | — |  |   | — |  |   | — |  |   | (112.0 | ) |
| Repurchases of common stock, including fees and expenses                  | (234.1 | ) |   | — |  |   | — |  |   | — |  |   | (234.1 | ) |
| Dividends paid on convertible perpetual preferred stock                   | (17.2 | ) |   | — |  |   | — |  |   | — |  |   | (17.2 | ) |
| Distributions paid to noncontrolling interests of consolidated affiliates | — |  |   | — |  |   | (34.1 | ) |   | — |  |   | (34.1 | ) |
| Other                                                                     | 4.6 |  |   | (6.7 | ) |   | (2.7 | ) |   | — |  |   | (4.8 | ) |
| Change in intercompany advances                                           | 70.5 |  |   | (27.5 | ) |   | (43.0 | ) |   | — |  |   | — |  |
| Net cash used in financing activities                                     | (141.2 | ) |   | (34.2 | ) |   | (64.6 | ) |   | — |  |   | (240.0 | ) |
| (Decrease) increase in cash and cash equivalents                          | (69.7 | ) |   | 1.6 |  |   | 0.3 |  |   | — |  |   | (67.8 | ) |
| Cash and cash equivalents at beginning of period                          | 131.3 |  |   | 0.3 |  |   | 1.2 |  |   | — |  |   | 132.8 |  |
| Cash and cash equivalents at end of period                                | $ | 61.6 |  |   | $ | 1.9 |  |   | $ | 1.5 |  |   | $ | — |  |   | $ | 65.0 |  |

----

|         |                                                                                             |
|---------|---------------------------------------------------------------------------------------------|
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |

|         |                                                                                              |
|---------|----------------------------------------------------------------------------------------------|
| • | continuing to provide high-quality, cost-effective care to patients in our existing markets; |

|         |                                                     |
|---------|-----------------------------------------------------|
| • | achieving organic growth at our existing hospitals; |

|         |                                                                                                                                                   |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| • | expanding our services to more patients who require inpatient rehabilitative services by constructing and acquiring new hospitals in new markets; |

|         |                                                                                                                               |
|---------|-------------------------------------------------------------------------------------------------------------------------------|
| • | continuing our shareholder value-enhancing strategies such as common stock dividends and repurchases of our common stock; and |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | positioning the Company for continued success in the evolving healthcare delivery system. This preparation includes continuing the installation of our electronic clinical information system which allows for interfaces with all major acute care electronic medical record systems and health information exchanges, participating in bundling projects and Accountable Care Organizations (“ACOs”), and evaluating potential service line expansions via acquisitions. |

----

|                            |
|----------------------------|
|                            |  |  |  |
| Location                   | # of Beds | Actual / Expected Construction Start Date | Expected Operational Date |
| Altamonte Springs, Florida | 50 | Q4 2013 | Q4 2014 |
| Newnan, Georgia            | 50 | Q4 2013 | Q4 2014 |
| Middletown, Delaware       | 34 | Q4 2013 | Q4 2014 |
| Franklin, Tennessee*       | 40 | Q4 2014 | Q4 2015 |
| Modesto, California        | 50 | Q4 2014 | Q1 2016 |
| Murrieta, California**     | 50 | Q3 2016 | Q4 2017 |

----

----

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Operating in a Highly Regulated Industry. We are required to comply with extensive and complex laws and regulations at the federal, state, and local government levels. These rules and regulations have affected, or could in the future affect, our business activities by having an impact on the reimbursement we receive for services provided or the costs of compliance, mandating new documentation standards, requiring additional licensure or certification of our hospitals, regulating our relationships with physicians and other referral sources, regulating the use of our properties, and limiting our ability to enter new markets or add new beds to existing hospitals. Ensuring continuous compliance with extensive laws and regulations is an operating requirement for all healthcare providers. |

----

|         |                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Changes to Our Operating Environment Resulting from Healthcare Reform. Our challenges related to healthcare reform are discussed in Item 1, Business, “Sources of Revenue,” Item 1A, Risk Factors, and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Executive Overview—Key Challenges,” to the 2013 Form 10‑K. |

|                             |
|-----------------------------|
|                             |  |
| Market basket update        | 2.9% |
| Healthcare reform reduction | 20 basis points |
| Productivity adjustment     | 50 basis points |

----

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Maintaining Strong Volume Growth. Various factors may impact our ability to maintain our recent volume growth rates, including competition and increasing regulatory and administrative burdens. In any particular market, we may encounter competition from local or national entities with longer operating histories or other competitive advantages, such as acute care hospitals with their own rehabilitation units and other post-acute providers with relationships with referring acute care hospitals or physicians. Aggressive payment review practices by Medicare contractors, aggressive enforcement of regulatory policies by government agencies, and restrictive or burdensome rules, regulations or statutes governing admissions practices may lead us to not accept patients who would be appropriate for and would benefit from the services we provide. In addition, from time to time, we must get regulatory approval to add beds to our existing hospitals in states with certificate of need laws. This approval may be withheld or take longer than expected. In the case of new store volume growth, the addition of hospitals to our portfolio, whether de novo construction or the product of acquisitions or joint ventures, also may be difficult and take longer than expected. |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Recruiting and Retaining High-Quality Personnel. See Item 1A, Risk Factors, to the 2013 Form 10‑K for a discussion of competition for staffing, shortages of qualified personnel, and other factors that may increase our labor costs. Recruiting and retaining qualified personnel for our hospitals remain a high priority for us. We attempt to maintain a comprehensive compensation and benefits package that allows us to remain competitive in this challenging staffing environment while remaining consistent with our goal of being a high-quality, cost-effective provider of inpatient rehabilitative services. |

----

|                                                                     |
|---------------------------------------------------------------------|
|                                                                     |  |  |  |  |  |  |  |  |  |  |  |
|                                                                | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Medicare                                                            | 73.5 | % |   | 74.1 | % |   | 74.1 | % |   | 74.5 | % |
| Medicaid                                                            | 2.2 | % |   | 1.5 | % |   | 1.8 | % |   | 1.2 | % |
| Workers’ compensation                                         | 1.1 | % |   | 1.3 | % |   | 1.2 | % |   | 1.3 | % |
| Managed care and other discount plans, including Medicare Advantage | 18.8 | % |   | 18.7 | % |   | 18.6 | % |   | 18.5 | % |
| Other third-party payors                                            | 1.8 | % |   | 1.7 | % |   | 1.7 | % |   | 1.7 | % |
| Patients                                                            | 1.1 | % |   | 1.1 | % |   | 1.0 | % |   | 1.1 | % |
| Other income                                                        | 1.5 | % |   | 1.6 | % |   | 1.6 | % |   | 1.7 | % |
| Total                                                               | 100.0 | % |   | 100.0 | % |   | 100.0 | % |   | 100.0 | % |

----

|                                                                       |
|-----------------------------------------------------------------------|
|                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                  | Three Months Ended September 30, |   | Percentage Change |   | Nine Months Ended September 30, |   | Percentage Change |
|                                                                  | 2014 |   | 2013 |   | 2014 vs. 2013 |   | 2014 |   | 2013 |   | 2014 vs. 2013 |
|                                                                  | (In Millions, Except Percentage Change) |
| Net operating revenues                                                | $ | 596.9 |  |   | $ | 564.0 |  |   | 5.8 |  % |   | $ | 1,792.5 |  |   | $ | 1,701.1 |  |   | 5.4 |  % |
| Less: Provision for doubtful accounts                                 | (8.2 | ) |   | (8.0 | ) |   | 2.5 |  % |   | (25.0 | ) |   | (22.4 | ) |   | 11.6 |  % |
| Net operating revenues less provision for doubtful accounts           | 588.7 |  |   | 556.0 |  |   | 5.9 |  % |   | 1,767.5 |  |   | 1,678.7 |  |   | 5.3 |  % |
| Operating expenses:                                                   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |
| Salaries and benefits                                                 | 290.0 |  |   | 269.5 |  |   | 7.6 |  % |   | 861.4 |  |   | 817.7 |  |   | 5.3 |  % |
| Hospital-related expenses:                                            |   |   |   |   |   |   |   |   |   |   |   |
| Other operating expenses                                              | 89.4 |  |   | 82.2 |  |   | 8.8 |  % |   | 260.2 |  |   | 241.3 |  |   | 7.8 |  % |
| Occupancy costs                                                       | 10.3 |  |   | 11.7 |  |   | (12.0 | )% |   | 31.1 |  |   | 35.8 |  |   | (13.1 | )% |
| Supplies                                                              | 26.6 |  |   | 25.5 |  |   | 4.3 |  % |   | 82.0 |  |   | 78.3 |  |   | 4.7 |  % |
| General and administrative expenses                                   | 27.5 |  |   | 28.8 |  |   | (4.5 | )% |   | 88.4 |  |   | 88.5 |  |   | (0.1 | )% |
| Depreciation and amortization                                         | 27.4 |  |   | 24.3 |  |   | 12.8 |  % |   | 80.2 |  |   | 69.5 |  |   | 15.4 |  % |
| Government, class action, and related settlements                     | — |  |   | (21.3 | ) |   | (100.0 | )% |   | (0.8 | ) |   | (23.3 | ) |   | (96.6 | )% |
| Professional fees—accounting, tax, and legal                    | 4.0 |  |   | 4.2 |  |   | (4.8 | )% |   | 7.6 |  |   | 7.8 |  |   | (2.6 | )% |
| Total operating expenses                                              | 475.2 |  |   | 424.9 |  |   | 11.8 |  % |   | 1,410.1 |  |   | 1,315.6 |  |   | 7.2 |  % |
| Interest expense and amortization of debt discounts and fees          | 27.8 |  |   | 25.3 |  |   | 9.9 |  % |   | 83.5 |  |   | 73.9 |  |   | 13.0 |  % |
| Other income                                                          | (0.2 | ) |   | (0.6 | ) |   | (66.7 | )% |   | (30.1 | ) |   | (3.2 | ) |   | 840.6 |  % |
| Equity in net income of nonconsolidated affiliates                    | (1.9 | ) |   | (2.0 | ) |   | (5.0 | )% |   | (8.8 | ) |   | (8.2 | ) |   | 7.3 |  % |
| Income from continuing operations before income tax expense (benefit) | 87.8 |  |   | 108.4 |  |   | (19.0 | )% |   | 312.8 |  |   | 300.6 |  |   | 4.1 |  % |
| Provision for income tax expense (benefit)                            | 22.1 |  |   | 35.2 |  |   | (37.2 | )% |   | 91.4 |  |   | (17.8 | ) |   | (613.5 | )% |
| Income from continuing operations                                     | 65.7 |  |   | 73.2 |  |   | (10.2 | )% |   | 221.4 |  |   | 318.4 |  |   | (30.5 | )% |
| (Loss) income from discontinued operations, net of tax                | (0.9 | ) |   | (0.9 | ) |   | — |  % |   | 2.8 |  |   | (1.2 | ) |   | (333.3 | )% |
| Net income                                                            | 64.8 |  |   | 72.3 |  |   | (10.4 | )% |   | 224.2 |  |   | 317.2 |  |   | (29.3 | )% |
| Less: Net income attributable to noncontrolling interests             | (14.7 | ) |   | (14.1 | ) |   | 4.3 |  % |   | (44.3 | ) |   | (42.5 | ) |   | 4.2 |  % |
| Net income attributable to HealthSouth                                | $ | 50.1 |  |   | $ | 58.2 |  |   | (13.9 | )% |   | $ | 179.9 |  |   | $ | 274.7 |  |   | (34.5 | )% |

----

|                                                    |
|----------------------------------------------------|
|                                                    |  |  |  |  |  |  |  |  |  |  |  |
|                                               | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                               | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Provision for doubtful accounts                    | 1.4 | % |   | 1.4 |  % |   | 1.4 |  % |   | 1.3 |  % |
| Operating expenses:                                |   |   |   |   |   |   |   |
| Salaries and benefits                              | 48.6 | % |   | 47.8 |  % |   | 48.1 |  % |   | 48.1 |  % |
| Hospital-related expenses:                         |   |   |   |   |   |   |   |
| Other operating expenses                           | 15.0 | % |   | 14.6 |  % |   | 14.5 |  % |   | 14.2 |  % |
| Occupancy costs                                    | 1.7 | % |   | 2.1 |  % |   | 1.7 |  % |   | 2.1 |  % |
| Supplies                                           | 4.5 | % |   | 4.5 |  % |   | 4.6 |  % |   | 4.6 |  % |
| General and administrative expenses                | 4.6 | % |   | 5.1 |  % |   | 4.9 |  % |   | 5.2 |  % |
| Depreciation and amortization                      | 4.6 | % |   | 4.3 |  % |   | 4.5 |  % |   | 4.1 |  % |
| Government, class action, and related settlements  | — | % |   | (3.8 | )% |   | — |  % |   | (1.4 | )% |
| Professional fees—accounting, tax, and legal | 0.7 | % |   | 0.7 |  % |   | 0.4 |  % |   | 0.5 |  % |
| Total operating expenses                           | 79.6 | % |   | 75.3 |  % |   | 78.7 |  % |   | 77.3 |  % |

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                           | Three Months Ended September 30, |   | Percentage Change |   | Nine Months Ended September 30, |   | Percentage Change |
|                                           | 2014 |   | 2013 |   | 2014 vs. 2013 |   | 2014 |   | 2013 |   | 2014 vs. 2013 |
|                                           | (In Millions, Except Percentage Change) |
| Net patient revenue—inpatient            | $ | 563.7 |  |   | $ | 528.8 |  |   | 6.6 |  % |   | $ | 1,691.6 |  |   | $ | 1,593.3 |  |   | 6.2 |  % |
| Net patient revenue—outpatient and other | 33.2 |  |   | 35.2 |  |   | (5.7 | )% |   | 100.9 |  |   | 107.8 |  |   | (6.4 | )% |
| Net operating revenues                         | $ | 596.9 |  |   | $ | 564.0 |  |   | 5.8 |  % |   | $ | 1,792.5 |  |   | $ | 1,701.1 |  |   | 5.4 |  % |
|                                           | (Actual Amounts) |
| Discharges                                     | 33,541 |  |   | 32,307 |  |   | 3.8 |  % |   | 100,050 |  |   | 97,082 |  |   | 3.1 |  % |
| Net patient revenue per discharge              | $16,806 |   | $16,368 |   | 2.7 |  % |   | $16,908 |   | $16,412 |   | 3.0 |  % |
| Outpatient visits                              | 183,450 |  |   | 202,479 |  |   | (9.4 | )% |   | 555,160 |  |   | 614,157 |  |   | (9.6 | )% |
| Average length of stay (days)                  | 13.2 |  |   | 13.3 |  |   | (0.8 | )% |   | 13.2 |  |   | 13.3 |  |   | (0.8 | )% |
| Occupancy %                                    | 69.6 | % |   | 69.0 | % |   | 0.9 |  % |   | 70.4 | % |   | 69.9 | % |   | 0.7 |  % |
| # of licensed beds                             | 6,890 |  |   | 6,789 |  |   | 1.5 |  % |   | 6,890 |  |   | 6,789 |  |   | 1.5 |  % |
| Full-time equivalents*                         | 16,614 |  |   | 16,213 |  |   | 2.5 |  % |   | 16,399 |  |   | 16,071 |  |   | 2.0 |  % |
| Employees per occupied bed                     | 3.48 |  |   | 3.48 |  |   | — |  % |   | 3.40 |  |   | 3.40 |  |   | — |  % |

|   |
|---|
|   |  |
| * | Excludes approximately 400 full-time equivalents who are considered part of corporate overhead with their salaries and benefits included in General and administrative expenses in our condensed consolidated statements of operations. Full-time equivalents included in the above table represent those who participate in or support the operations of our hospitals and exclude an estimate of full-time equivalents related to contract labor. |

----

----

----

----

|         |                                                                                                                                                                              |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | add a new $150 million term loan facility (under which amounts may be drawn on or before March 31, 2015) in addition to our existing $600 million revolving credit facility; |

----

|         |                                                                                                                                            |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------|
| • | permit additional restricted payments so long as the senior secured leverage ratio remains less than or equal to 1.75x (previously 1.50x); |

|         |                                                                                                              |
|---------|--------------------------------------------------------------------------------------------------------------|
| • | increase the amount of permitted capital expenditures in a given year from $250 million to $300 million; and |

|         |                                                                                                                                                                                   |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | set the maturity date for both the revolving credit and term loan facilities to September 2019, which represents a one-year extension for our existing revolving credit facility. |

----

|                                                  |
|--------------------------------------------------|
|                                                  |  |  |  |  |  |  |  |
|                                             | Nine Months Ended September 30, |
|                                             | 2014 |   | 2013 |
| Net cash provided by operating activities        | $ | 374.7 |  |   | $ | 369.4 |  |
| Net cash used in investing activities            | (162.3 | ) |   | (197.2 | ) |
| Net cash used in financing activities            | (4.6 | ) |   | (240.0 | ) |
| Increase (decrease) in cash and cash equivalents | $ | 207.8 |  |   | $ | (67.8 | ) |

----

|                                                                                       |
|---------------------------------------------------------------------------------------|
|                                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                  | Total |   | October 1 through December 31, 2014 |   | 2015 - 2016 |   | 2017 - 2018 |   | 2019 and thereafter |
| Long-term debt obligations:                                                           |   |   |   |   |   |  |   |   |  |   |   |
| Long-term debt, excluding revolving credit facility and capital lease obligations (a) | $ | 1,565.6 |  |   | $ | 272.9 |  |   | $ | 4.9 |  |   | $ | 2.1 |  |   | $ | 1,285.7 |  |
| Revolving credit facility                                                             | — |  |   | — |  |   | — |  |   | — |  |   | — |  |
| Interest on long-term debt (b)                                                        | 755.5 |  |   | 19.7 |  |   | 157.0 |  |   | 156.6 |  |   | 422.2 |  |
| Capital lease obligations (c)                                                         | 166.3 |  |   | 3.0 |  |   | 27.1 |  |   | 27.0 |  |   | 109.2 |  |
| Operating lease obligations (d)(e)                                                    | 237.7 |  |   | 10.0 |  |   | 72.0 |  |   | 52.9 |  |   | 102.8 |  |
| Purchase obligations (e)(f)                                                           | 102.9 |  |   | 6.8 |  |   | 49.5 |  |   | 20.8 |  |   | 25.8 |  |
| Other long-term liabilities (g)(h)                                                    | 3.8 |  |   | 0.1 |  |   | 0.4 |  |   | 0.4 |  |   | 2.9 |  |
| Total                                                                                 | $ | 2,831.8 |  |   | $ | 312.5 |  |   | $ | 310.9 |  |   | $ | 259.8 |  |   | $ | 1,948.6 |  |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a)  | Included in long-term debt are amounts owed on our bonds payable and other notes payable. These borrowings are further explained in Note 4, Long-term Debt, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report and Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2013 Form 10-K. See also Note 4, Long-term Debt, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report for a discussion of our redemption of approximately $271 million in principal of our 7.25% Senior Notes due 2018 in October 2014, as well as our intent to redeem approximately $25 million in principal of our 7.75% Senior Notes due 2022 in December 2014. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b)  | Interest on our fixed rate debt is presented using the stated interest rate. Interest expense on our variable rate debt is estimated using the rate in effect as of September 30, 2014. Interest pertaining to our credit agreement and bonds is included to their respective ultimate maturity dates. Interest related to capital lease obligations is excluded from this line. Future minimum payments, which are accounted for as interest, related to sale/leaseback transactions involving real estate accounted for as financings are included in this line (see Note 5, Property and Equipment, and Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2013 Form 10-K). Amounts exclude amortization of debt discounts, amortization of loan fees, or fees for lines of credit that would be included in interest expense in our consolidated statements of operations. |

|           |                                                                            |
|-----------|----------------------------------------------------------------------------|
| (c)  | Amounts include interest portion of future minimum capital lease payments. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (d)  | We lease approximately 16% of our hospitals as well as other property and equipment under operating leases in the normal course of business. Some of our hospital leases contain escalation clauses based on changes in the Consumer Price Index while others have fixed escalation terms. The minimum lease payments do not include contingent rental expense. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease agreements. For more information, see Note 5, Property and Equipment, to the consolidated financial statements accompanying the 2013 Form 10-K. |

|           |                                                                                                                             |
|-----------|-----------------------------------------------------------------------------------------------------------------------------|
| (e)  | Future operating lease obligations and purchase obligations are not recognized in our condensed consolidated balance sheet. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (f)  | Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on HealthSouth and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty. Our purchase obligations primarily relate to software licensing and support. |

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|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (g)  | Because their future cash outflows are uncertain, the following noncurrent liabilities are excluded from the table above: general liability, professional liability, and workers' compensation risks, noncurrent amounts related to third-party billing audits, and deferred income taxes. Also, at September 30, 2014, we had $0.4 million of total gross unrecognized tax benefits. For more information, see Note 9, Self-Insured Risks, Note 16, Income Taxes, and Note 18, Contingencies and Other Commitments, to the consolidated financial statements accompanying the 2013 Form 10-K and Note 9, Income Taxes, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report. |

|           |                                                                                                                                                                                           |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (h)  | The table above does not include Redeemable noncontrolling interests of $12.2 million because of the uncertainty surrounding the timing and amounts of any related cash outflows. |

----

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|                                                                                     |
|-------------------------------------------------------------------------------------|
|                                                                                     |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                | Three Months Ended September 30, |   | Nine Months Ended September 30, |
|                                                                                | 2014 |   | 2013 |   | 2014 |   | 2013 |
| Net income                                                                          | $ | 64.8 |  |   | $ | 72.3 |  |   | $ | 224.2 |  |   | $ | 317.2 |  |
| Loss (income) from discontinued operations, net of tax, attributable to HealthSouth | 0.9 |  |   | 0.9 |  |   | (2.8 | ) |   | 1.2 |  |
| Provision for income tax expense (benefit)                                          | 22.1 |  |   | 35.2 |  |   | 91.4 |  |   | (17.8 | ) |
| Interest expense and amortization of debt discounts and fees                        | 27.8 |  |   | 25.3 |  |   | 83.5 |  |   | 73.9 |  |
| Professional fees—accounting, tax, and legal                                  | 4.0 |  |   | 4.2 |  |   | 7.6 |  |   | 7.8 |  |
| Government, class action, and related settlements                                   | — |  |   | (21.3 | ) |   | (0.8 | ) |   | (23.3 | ) |
| Net noncash loss on disposal or impairment of assets                                | 2.7 |  |   | 2.5 |  |   | 5.7 |  |   | 4.3 |  |
| Depreciation and amortization                                                       | 27.4 |  |   | 24.3 |  |   | 80.2 |  |   | 69.5 |  |
| Stock-based compensation expense                                                    | 5.0 |  |   | 6.2 |  |   | 19.3 |  |   | 19.0 |  |
| Net income attributable to noncontrolling interests                                 | (14.7 | ) |   | (14.1 | ) |   | (44.3 | ) |   | (42.5 | ) |
| Gain on consolidation of Fairlawn Rehabilitation Hospital                           | — |  |   | — |  |   | (27.2 | ) |   | — |  |
| Adjusted EBITDA                                                                     | $ | 140.0 |  |   | $ | 135.5 |  |   | $ | 436.8 |  |   | $ | 409.3 |  |

|                                                                              |
|------------------------------------------------------------------------------|
|                                                                              |  |  |  |  |  |  |  |
|                                                                         | Nine Months Ended September 30, |
|                                                                         | 2014 |   | 2013 |
| Net cash provided by operating activities                                    | $ | 374.7 |  |   | $ | 369.4 |  |
| Provision for doubtful accounts                                              | (25.0 | ) |   | (22.4 | ) |
| Professional fees—accounting, tax, and legal                           | 7.6 |  |   | 7.8 |  |
| Interest expense and amortization of debt discounts and fees                 | 83.5 |  |   | 73.9 |  |
| Equity in net income of nonconsolidated affiliates                           | 8.8 |  |   | 8.2 |  |
| Net income attributable to noncontrolling interests in continuing operations | (44.3 | ) |   | (42.5 | ) |
| Amortization of debt discounts and fees                                      | (9.5 | ) |   | (3.0 | ) |
| Distributions from nonconsolidated affiliates                                | (9.4 | ) |   | (9.6 | ) |
| Current portion of income tax expense                                        | 9.8 |  |   | 3.0 |  |
| Change in assets and liabilities                                             | 43.7 |  |   | 21.8 |  |
| Premium received on bond issuance                                            | (6.3 | ) |   | — |  |
| Net cash used in operating activities of discontinued operations             | 1.0 |  |   | 1.4 |  |
| Other                                                                        | 2.2 |  |   | 1.3 |  |
| Adjusted EBITDA                                                              | $ | 436.8 |  |   | $ | 409.3 |  |

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|         |                                                            |
|---------|------------------------------------------------------------|
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |

|         |                         |
|---------|-------------------------|
| Item 4. | Controls and Procedures |

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|         |                   |
|---------|-------------------|
| Item 1. | Legal Proceedings |

|          |              |
|----------|--------------|
| Item 1A. | Risk Factors |

|         |                                                             |
|---------|-------------------------------------------------------------|
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |

|                                        |
|----------------------------------------|
|                                        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Period                                 |   | Total Number of Shares (or Units) Purchased |   | Average Price Paid per Share (or Unit) ($) |   | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |   | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs(1) |
| July 1 through July 31, 2014           |   | 1,199 |  | (2)  | $ | 36.12 |  |   | — |  |   | $ | 206,944,707 |  |
| August 1 through August 31, 2014       |   | — |  |   | — |  |   | — |  |   | 206,944,707 |  |
| September 1 through September 30, 2014 |   | — |  |  | — |  |   | — |  |   | 206,944,707 |  |
| Total                                  |   | 1,199 |  |   | 36.12 |  |   | — |  |   |  |  |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | On October 28, 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock. On February 14, 2014, our board of directors approved an increase in this common stock repurchase authorization from $200 million to $250 million. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | These shares were purchased pursuant to previous elections by one or more members of our board of directors to participate in our Directors’ Deferred Stock Investment Plan. This plan is a nonqualified deferral plan allowing non-employee directors to make advance elections to defer a fixed percentage of their director fees. The plan administrator acquires the shares in the open market which are then held in a rabbi trust. The plan provides that dividends paid on the shares held for the accounts of the directors will be reinvested in shares of our common stock which will also be held in the trust. The directors’ rights to all shares in the trust are nonforfeitable, but the shares are only released to the directors after departure from our board. |

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|         |          |
|---------|----------|
| Item 6. | Exhibits |

----

|        |
|--------|
|        |  |  |
|   | HEALTHSOUTH CORPORATION |
|   |   |   |
|   | By: | /s/ Douglas E. Coltharp |
|   |   | Douglas E. Coltharp |
|   |   | Executive Vice President and Chief Financial Officer |
|   |   |   |
|   | Date: | October 28, 2014 |

----

|        |
|--------|
|        |  |  |  |  |
| No.    |   | Description |
|   |   |   |   |   |
| 3.1    |   | Restated Certificate of Incorporation of HealthSouth Corporation, as filed in the Office of the Secretary of State of the State of Delaware on May 21, 1998 (incorporated by reference to HealthSouth’s Annual Report on Form 10-K filed with the SEC on June 27, 2005). |
|   |   |   |   |   |
| 3.2    |   | Certificate of Amendment to the Restated Certificate of Incorporation of HealthSouth Corporation, as filed in the Office of the Secretary of State of the State of Delaware on October 25, 2006 (incorporated by reference to Exhibit 3.1 to HealthSouth’s Current Report on Form 8-K filed on October 31, 2006). |
|   |   |   |   |   |
| 3.3    |   | Amended and Restated Bylaws of HealthSouth Corporation, effective as of October 30, 2009 (incorporated by reference to Exhibit 3.3 to HealthSouth’s Quarterly Report on Form 10-Q filed on November 4, 2009). |
|   |   |   |   |   |
| 3.4    |   | Certificate of Designations of 6.50% Series A Convertible Perpetual Preferred Stock, as filed with the Secretary of State of the State of Delaware on March 7, 2006 (incorporated by reference to Exhibit 3.1 to HealthSouth’s Current Report on Form 8-K filed on March 9, 2006). |
|   |   |   |
| 10.1   |   | Second Amendment and Additional Tranche Term Loan Amendment to Third Amended and Restated Credit Agreement, dated as of September 22, 2014, among HealthSouth Corporation, Barclays Bank PLC, as administrative agent and collateral agent, Citigroup Global Markets Inc., as syndication agent, Bank of America, N.A., Goldman Sachs Lending Partners LLC, and Morgan Stanley Senior Funding, Inc., as co-documentation agents, and various other lenders from time to time (incorporated by reference to Exhibit 10.1 to HealthSouth’s Current Report on Form 8-K filed on September 24, 2014). |
|   |   |   |
| 25.1   |   | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wells Fargo Bank, National Association, as successor trustee under the indenture for debt securities. |
|   |   |   |
| 31.1   |   | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |   |   |   |   |
| 31.2   |   | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |   |   |   |   |
| 32.1   |   | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |   |   |   |   |
| 32.2   |   | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |   |   |   |   |
| 101    |   | Sections of the HealthSouth Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in XBRL (eXtensible Business Reporting Language), submitted in the following files: |
|   |   |   |   |   |
|   |   | 101.INS |   | XBRL Instance Document |
|   |   |   |   |   |
|   |   | 101.SCH |   | XBRL Taxonomy Extension Schema Document |
|   |   |   |   |   |
|   |   | 101.CAL |   | XBRL Taxonomy Extension Calculation Linkbase Document |
|   |   |   |   |   |
|   |   | 101.DEF |   | XBRL Taxonomy Extension Definition Linkbase Document |
|   |   |   |   |   |
|   |   | 101.LAB |   | XBRL Taxonomy Extension Label Linkbase Document |
|   |   |   |   |   |
|   |   | 101.PRE |   | XBRL Taxonomy Extension Presentation Linkbase Document |
|   |   |   |   |   |