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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;border-bottom:double 2.25pt;padding-bottom:1;'>&nbsp;</p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;'><B><font SIZE=5>UNITED STATES</font></B></p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;'><B><font SIZE=5>SECURITIES AND EXCHANGE COMMISSION</font></B></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>WASHINGTON, DC 20549</font></B></p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;'><font size=1>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;'><B><font SIZE=5>FORM 8-K</font></B></p>

<p style=' margin-bottom:0pt; margin-top:6pt;text-align:center;'><B><font SIZE=2>CURRENT REPORT</font></B></p>

<p style=' margin-bottom:0pt; margin-top:6pt;text-align:center;'><b><font size=2>Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934</font></b></p>

<p style=' margin-bottom:0pt; margin-top:10pt;text-align:center;'><font size=2>Date of Report (date of earliest event reported): May&nbsp;6, 2008</font></p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;'><font size=1>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;'><u><b><font size=2>HealthSouth Corporation</font></b></u></p>

<p style=' margin-bottom:0pt; margin-top:1.5pt;text-align:center;'><font size=2>(Exact name of Registrant as specified in its Charter)</font></p>

<p style=' margin-bottom:0pt; margin-top:18pt;text-align:center;'><u><b><font size=2>Delaware</font></b></u></p>

<p style=' margin-bottom:0pt; margin-top:1.5pt;text-align:center;'><font size=2>(State or Other Jurisdiction of Incorporation)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>001-10315</font></b></u><u></u></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>63-0860407</font></b></u><u></u></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:1.5pt;margin-bottom:0pt'><font size=2>(Commission File Number)</font></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:1.5pt;margin-bottom:0pt'><font size=2>(IRS Employer Identification No.)</font></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td> </tr></table>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><b><font size=2>3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243</font></b></u></p>

<p style=' margin-bottom:0pt; margin-top:1.5pt;text-align:center;'><font size=2>(Address of Principal Executive Offices, Including Zip Code)</font></p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;'><u><b><font size=2>(205)</font></b><font size=2>&nbsp;</font><b><font size=2>967-7116</font></b></u></p>

<p style=' margin-bottom:0pt; margin-top:1.5pt;text-align:center;'><font size=2>(Registrant&#146;s Telephone Number, Including Area Code)</font></p>

<p style=' margin-bottom:0pt; margin-top:9pt;text-align:left;'><font size=2>Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font face=Wingdings>o</font></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</font></p> </td> </tr></table>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</font></p> </td> </tr></table>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</font></p> </td> </tr></table>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</font></p> </td> </tr></table>
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<p style=' margin-bottom:0pt; margin-top:9pt;text-align:center;border-top:double 2.25pt;padding-top:1;'><font size=1>&nbsp;</font></p>

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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:10pt; margin-top:0pt;text-align:left;'><B><font SIZE=2>ITEM 2.02. </font></B><i><font size=2>Results of Operations and Financial Condition. </font></i></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, &#147;Results of Operations and Financial Condition.&#148; This information shall not be deemed &#147;filed&#148; for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>On May&nbsp;6, 2008, HealthSouth Corporation (the &#147;Company&#148;) issued a press release reporting the financial results of the Company for the three months ended March&nbsp;31, 2008. A copy of the press release is attached to this report as Exhibit 99 and incorporated herein by reference.</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt;text-align:left;'><i><b><font size=2>Note Regarding Presentation of Non-GAAP Financial Measures</font></b></i></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>The financial data contained in the press release includes non-GAAP financial measures, including &#147;Adjusted Consolidated EBITDA.&#148; The Company continues to believe Adjusted Consolidated EBITDA under its Credit Agreement is a measure of leverage capacity, its ability to service its debt, and its ability to make capital expenditures. However, as the Company continues to deleverage its balance sheet and the large, non-ordinary course charges related to the &#147;sins of the past&#148; are behind the Company, this measure will become less significant.</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>The Company uses Adjusted Consolidated EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important in analyzing its liquidity because it is the key component of certain material covenants contained within the Company&#146;s Credit Agreement, which is discussed in more detail in Note&nbsp;8, </font><i><font size=2>Long-term Debt</font></i><font size=2>, to the consolidated financial statements included in its Annual Report on Form 10-K (the &#147;2007 Form 10-K&#148;). These covenants are material terms of the Credit Agreement, and the Credit Agreement represents a substantial portion of the Company&#146;s capitalization. Non-compliance with these financial covenants under the Credit Agreement &#150; its interest coverage ratio and its leverage ratio &#150; could result in the Company&#146;s lenders requiring the
Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might not be on terms as favorable to those in the Company&#146;s existing Credit Agreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted Consolidated EBITDA is critical to the Company&#146;s assessment of its liquidity.</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>In general terms, the definition of Adjusted Consolidated EBITDA, per the Credit Agreement, allows the Company to add back to Adjusted Consolidated EBITDA all unusual non-cash items or non-recurring items. These items include, but may not be limited to, (1)&nbsp;amounts associated with government, class action, and related settlements, (2)&nbsp;fees, costs, and expenses related to the Company&#146;s recapitalization transactions, (3)&nbsp;any losses from discontinued operations and closed locations, (4)&nbsp;charges in respect of professional fees for reconstruction and restatement of financial statements, including fees paid to outside professional firms for matters related to internal controls and legal fees for continued litigation defense and support matters discussed in Note&nbsp;21, </font><i><font size=2>Contingencies and Other Commitments</font></i><font size=2>, to the consolidated
financial statements included in the 2007 Form 10-K, (5)&nbsp;compensation expenses recorded in accordance with Financial Accounting Standards Board Statement No.&nbsp;123(R), </font><i><font size=2>Share-Based Payment</font></i><font size=2>, (6)&nbsp;investment and other income (including interest income), and (7)&nbsp;fees associated with the Company&#146;s divestiture activities.</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>However, Adjusted Consolidated EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America (&#147;GAAP&#148;), and the items excluded from Adjusted Consolidated EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted Consolidated EBITDA should not be considered a substitute for </font><i><font size=2>Net income (loss)</font></i><font size=2> or cash flows from operating, investing, or financing activities. The Company reconciles Adjusted Consolidated EBITDA to </font><i><font size=2>Net income (loss)</font></i><font size=2>, which reconciliation is set forth in the press release attached as Exhibit&nbsp;99, and to </font><i><font size=2>Net cash provided by (used in) operating activities</font></i><font size=2>, which reconciliation is set forth below. Because Adjusted
Consolidated EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted Consolidated EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:10pt; margin-top:0pt;text-align:left;'><font size=2>Revenues and expenses are measured in accordance with the policies and procedures described in the 2007 Form 10-K.</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt;text-align:center;'><b><font size=2>Reconciliation of Adjusted Consolidated EBITDA to Net Cash Provided by (Used in) Operating Activities</font></b></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td  colspan="3" valign=bottom style=' border-bottom:solid black 1.0pt; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Three Months Ended</font></b><br> <b><font size=2>March 31,</font></b></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='border-bottom: solid black 1.0pt; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>2008</font></b></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='border-bottom: solid black 1.0pt; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>2007</font></b></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Adjusted Consolidated EBITDA</font></b></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;89.0</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;68.9</font></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Compensation expense under FASB Statement No. 123(R)</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(3.3)</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(3.6)</font></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Sarbanes-Oxley related costs</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&#150;</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(0.3)</font></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Provision for doubtful accounts</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>8.1</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:24.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>10.4</font></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Professional fees&#151;accounting, tax, and legal</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(3.6)</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:21.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(21.8)</font></p> </td> </tr>
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        <td width="462" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Interest expense and amortization of debt discounts and fees</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:21.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(47.4)</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:21.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(58.5)</font></p> </td> </tr>
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        <td width="462" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Gain on sale of investments</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(0.2)</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(3.7)</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Equity in net income of nonconsolidated affiliates</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(2.4)</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(2.7)</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Minority interests in earnings of consolidated affiliates</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>7.6</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>8.3</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Amortization of debt discounts and fees</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1.6</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>2.0</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Amortization of restricted stock</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1.9</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1.1</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Distributions from nonconsolidated affiliates</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>2.2</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1.5</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Stock-based compensation</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1.4</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>2.5</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Current portion of income tax benefit (expense)</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>0.7</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(2.0)</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Change in assets and liabilities</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(5.7)</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(5.8)</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Change in government, class action, and related settlements liability</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(7.3)</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:21.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(29.9)</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Other operating cash (used in) provided by discontinued operations</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(0.4)</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='background:#99CCFF;padding: 0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:24.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>31.4</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:0pt'><font size=2>Other</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:25.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(0.4)</font></p> </td>
        <td width="17" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:28.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>0.1</font></p> </td> </tr>
    <tr >
        <td width="462" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:18.05pt;text-align:left;margin-top:1.5pt;margin-bottom:0pt'><b><font size=2>Net Cash Provided by (Used in) Operating Activities</font></b></p> </td>
        <td width="61" valign=bottom style='border-top:solid black 1.0pt; border-left:none;border-bottom:double black 2.25pt;border-right:none;  background:#99CCFF;padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;41.8</font></p> </td>
        <td width="17" valign=bottom style='background:#99CCFF; padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.5pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p> </td>
        <td width="61" valign=bottom style='border-top:solid black 1.0pt; border-left:none;border-bottom:double black 2.25pt;border-right:none;  background:#99CCFF;padding:0in 1.45pt 0in 1.45pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2.1)</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>The Company also uses operating earnings as an analytical indicator to assess its performance. The Company defines operating earnings as income before (1)&nbsp;loss on early extinguishment of debt, (2)&nbsp;interest expense and amortization of debt discounts and fees, (3)&nbsp;other income, (4)&nbsp;loss on interest rate swap, and (5)&nbsp;income tax expense. The calculation of operating earnings for the three months ended March&nbsp;31, 2008 and 2007 is included in the press release attached as Exhibit&nbsp;99. Operating earnings is not a defined measure of financial performance under GAAP and should not be considered as an alternative to </font><i><font size=2>Net income (loss)</font></i><font size=2> as an operating performance measure. Because operating earnings is not a measure determined in accordance with GAAP and is susceptible to varying calculations, operating earnings, as
presented, may not be comparable to other similarly titled measures presented by other companies. </font></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>The Company also uses basic and diluted income (loss) from continuing operations per common share as an analytical indicator to assess its performance. The calculation of basic and diluted income (loss) from continuing operations per common share is included in the press release attached as Exhibit 99. This measure is not a defined measure of financial performance under GAAP and should not be considered as an alternative to the per common share loss from continuing operations available to common shareholders. Because this measure is not a measure determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. Specifically, the Company&#146;s measure of basic and diluted income (loss) from continuing operations per common share excludes $6.5 million of dividends associated with the
Company&#146;s convertible perpetual preferred stock. See the condensed consolidated statements of operations included in the press release attached as Exhibit 99 for the GAAP measure of basic and diluted earnings (loss) per common share. </font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:left;'><i><b><font size=2>Forward-Looking Statements</font></b></i></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>The information contained in the earnings release includes certain estimates, projections, and other forward-looking information that reflect the Company&#146;s current views with respect to future events and financial performance. These estimates, projections, and other forward-looking information are based on assumptions that the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>There can be no assurance that any estimates, projections, or forward-looking information will be realized.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>All such estimates, projections and forward-looking information speak only as of the date hereof. The Company undertakes no duty to publicly update or revise the information contained herein.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking information in the earnings release as they are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in our Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2007, and in other documents the Company previously filed with the SEC, many of which are beyond the Company&#146;s control. These factors may cause actual results to differ materially from the views, beliefs and estimates expressed herein.</font></p>

<p style=' margin-bottom:10pt; margin-top:0pt;text-align:left;'><B><font SIZE=2>ITEM 9.01. </font></B><i><font size=2>Financial Statements and Exhibits.</font></i></p>


<div align=left>

<table border="0" cellspacing=0 cellpadding=0 width="116" style='border-collapse:collapse'>
    <tr >
        <td width="48" nowrap valign=top style='padding:0in 0in 10.0pt 0in; '>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(d)</font></p> </td>
        <td width="68" nowrap valign=top style='padding:0in 0in 10.0pt 0in; '>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Exhibits.</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>See Exhibit Index.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:10pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>SIGNATURES</font></B></p>

<p style=' margin-bottom:10pt; margin-top:0pt; text-indent:0.5in;text-align:left;'><font size=2>Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<div align=center>

<table border="0" cellspacing=0 cellpadding=0 width="584" style='border-collapse:collapse'>
    <tr style='height:12.0pt'>
        <td width="256" valign=top style=' height:12.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="29" style='height:12.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="298" style='height:12.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>HEALTHSOUTH CORPORATION</font></p> </td> </tr>
    <tr style='height:12.0pt'>
        <td width="256" valign=top style=' height:12.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="29" style='height:12.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="298" style='height:12.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="256" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="29" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:0pt'><font size=2>By:</font></p> </td>
        <td width="298" valign=top style='border-bottom: solid black 1.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>/</font><font SIZE=1>S</font><font size=2>/&nbsp;&nbsp; J</font><font SIZE=1>OHN</font><font size=2> P. W</font><font SIZE=1>HITTINGTON</font></p> </td> </tr>
    <tr >
        <td width="256" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="29" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="298" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Name:&nbsp;&nbsp;&nbsp;&nbsp;John P. Whittington</font></p> </td> </tr>
    <tr >
        <td width="256" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="29" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="298" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Title:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President, General Counsel</font></p>
<p style='margin-left:0pt;text-indent:.5in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>and Corporate Secretary</font></p> </td> </tr></table>
</div>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>Dated: May&nbsp;6, 2008</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:10pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>EXHIBIT INDEX</font></B></p>


<div align=center>

<table border="0" cellspacing=0 cellpadding=0 width="624" >
    <tr >
        <td width="124" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Exhibit Number</font></b></u><u></u></p> </td>
        <td width="39" valign=bottom >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
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            <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:8.4pt; '><u><b><font size=2>Description</font></b></u><u></u></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:6.0pt'><font size=2>99</font></p> </td>
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        <td width="461" valign=top >
            <p style='margin-left:8.4pt;text-indent:0pt;text-align:left;margin-top:0in;margin-bottom:6.0pt'><font size=2>Press release of HealthSouth Corporation, dated May&nbsp;6, 2008.</font></p> </td> </tr></table>
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[{"type": "8-K", "sequence": "1", "filename": "form_8k-2008q1.htm", "description": "FORM 8-K", "secsgml_size_bytes": 47557}]
{"company-data": {"conformed-name": "HEALTHSOUTH CORP", "cik": "0000785161", "assigned-sic": "8093", "irs-number": "630860407", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-10315", "film-number": "08807172"}, "business-address": {"street1": "ONE HEALTHSOUTH PKWY", "street2": "STE 224W", "city": "BIRMINGHAM", "state": "AL", "zip": "35243", "phone": "2059677116"}, "mail-address": {"street1": "ONE HEALTHSOUTH PARKWAY", "city": "BIRMINGHAM", "state": "AL", "zip": "35243"}, "former-company": {"former-conformed-name": "HEALTHSOUTH REHABILITATION CORP", "date-changed": "19920703"}}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 6, 2008
HealthSouth Corporation
(Exact name of Registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
001-10315
63-0860407
(Commission File Number)
(IRS Employer Identification No.)
3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243
(Address of Principal Executive Offices, Including Zip Code)
(205)
967-7116
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02.
Results of Operations and Financial Condition.
The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, "Results of Operations and Financial Condition." This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On May 6, 2008, HealthSouth Corporation (the "Company") issued a press release reporting the financial results of the Company for the three months ended March 31, 2008. A copy of the press release is attached to this report as Exhibit 99 and incorporated herein by reference.
Note Regarding Presentation of Non-GAAP Financial Measures
The financial data contained in the press release includes non-GAAP financial measures, including "Adjusted Consolidated EBITDA." The Company continues to believe Adjusted Consolidated EBITDA under its Credit Agreement is a measure of leverage capacity, its ability to service its debt, and its ability to make capital expenditures. However, as the Company continues to deleverage its balance sheet and the large, non-ordinary course charges related to the "sins of the past" are behind the Company, this measure will become less significant.
The Company uses Adjusted Consolidated EBITDA on a consolidated basis as a liquidity measure. The Company believes this financial measure on a consolidated basis is important in analyzing its liquidity because it is the key component of certain material covenants contained within the Company's Credit Agreement, which is discussed in more detail in Note 8,
Long-term Debt
, to the consolidated financial statements included in its Annual Report on Form 10-K (the "2007 Form 10-K"). These covenants are material terms of the Credit Agreement, and the Credit Agreement represents a substantial portion of the Company's capitalization. Non-compliance with these financial covenants under the Credit Agreement – its interest coverage ratio and its leverage ratio – could result in the Company's lenders requiring the
Company to immediately repay all amounts borrowed. If the Company anticipated a potential covenant violation, it would seek relief from its lenders, which would have some cost to the Company, and such relief might not be on terms as favorable to those in the Company's existing Credit Agreement. In addition, if the Company cannot satisfy these financial covenants, it would be prohibited under the Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted Consolidated EBITDA is critical to the Company's assessment of its liquidity.
In general terms, the definition of Adjusted Consolidated EBITDA, per the Credit Agreement, allows the Company to add back to Adjusted Consolidated EBITDA all unusual non-cash items or non-recurring items. These items include, but may not be limited to, (1) amounts associated with government, class action, and related settlements, (2) fees, costs, and expenses related to the Company's recapitalization transactions, (3) any losses from discontinued operations and closed locations, (4) charges in respect of professional fees for reconstruction and restatement of financial statements, including fees paid to outside professional firms for matters related to internal controls and legal fees for continued litigation defense and support matters discussed in Note 21,
Contingencies and Other Commitments
, to the consolidated
financial statements included in the 2007 Form 10-K, (5) compensation expenses recorded in accordance with Financial Accounting Standards Board Statement No. 123(R),
Share-Based Payment
, (6) investment and other income (including interest income), and (7) fees associated with the Company's divestiture activities.
However, Adjusted Consolidated EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America ("GAAP"), and the items excluded from Adjusted Consolidated EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted Consolidated EBITDA should not be considered a substitute for
Net income (loss)
or cash flows from operating, investing, or financing activities. The Company reconciles Adjusted Consolidated EBITDA to
Net income (loss)
, which reconciliation is set forth in the press release attached as Exhibit 99, and to
Net cash provided by (used in) operating activities
, which reconciliation is set forth below. Because Adjusted
Consolidated EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted Consolidated EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.
Revenues and expenses are measured in accordance with the policies and procedures described in the 2007 Form 10-K.
Reconciliation of Adjusted Consolidated EBITDA to Net Cash Provided by (Used in) Operating Activities
Three Months Ended
March 31,
2008
2007
Adjusted Consolidated EBITDA
$        89.0
$        68.9
Compensation expense under FASB Statement No. 123(R)
(3.3)
(3.6)
Sarbanes-Oxley related costs
–
(0.3)
Provision for doubtful accounts
8.1
10.4
Professional fees—accounting, tax, and legal
(3.6)
(21.8)
Interest expense and amortization of debt discounts and fees
(47.4)
(58.5)
Gain on sale of investments
(0.2)
(3.7)
Equity in net income of nonconsolidated affiliates
(2.4)
(2.7)
Minority interests in earnings of consolidated affiliates
7.6
8.3
Amortization of debt discounts and fees
1.6
2.0
Amortization of restricted stock
1.9
1.1
Distributions from nonconsolidated affiliates
2.2
1.5
Stock-based compensation
1.4
2.5
Current portion of income tax benefit (expense)
0.7
(2.0)
Change in assets and liabilities
(5.7)
(5.8)
Change in government, class action, and related settlements liability
(7.3)
(29.9)
Other operating cash (used in) provided by discontinued operations
(0.4)
31.4
Other
(0.4)
0.1
Net Cash Provided by (Used in) Operating Activities
$        41.8
$         (2.1)
The Company also uses operating earnings as an analytical indicator to assess its performance. The Company defines operating earnings as income before (1) loss on early extinguishment of debt, (2) interest expense and amortization of debt discounts and fees, (3) other income, (4) loss on interest rate swap, and (5) income tax expense. The calculation of operating earnings for the three months ended March 31, 2008 and 2007 is included in the press release attached as Exhibit 99. Operating earnings is not a defined measure of financial performance under GAAP and should not be considered as an alternative to
Net income (loss)
as an operating performance measure. Because operating earnings is not a measure determined in accordance with GAAP and is susceptible to varying calculations, operating earnings, as
presented, may not be comparable to other similarly titled measures presented by other companies.
The Company also uses basic and diluted income (loss) from continuing operations per common share as an analytical indicator to assess its performance. The calculation of basic and diluted income (loss) from continuing operations per common share is included in the press release attached as Exhibit 99. This measure is not a defined measure of financial performance under GAAP and should not be considered as an alternative to the per common share loss from continuing operations available to common shareholders. Because this measure is not a measure determined in accordance with GAAP and is susceptible to varying calculations, it may not be comparable to other similarly titled measures presented by other companies. Specifically, the Company's measure of basic and diluted income (loss) from continuing operations per common share excludes $6.5 million of dividends associated with the
Company's convertible perpetual preferred stock. See the condensed consolidated statements of operations included in the press release attached as Exhibit 99 for the GAAP measure of basic and diluted earnings (loss) per common share.
Forward-Looking Statements
The information contained in the earnings release includes certain estimates, projections, and other forward-looking information that reflect the Company's current views with respect to future events and financial performance. These estimates, projections, and other forward-looking information are based on assumptions that the Company believes, as of the date hereof, are reasonable. Inevitably, there will be differences between such estimates and actual results, and those differences may be material.
There can be no assurance that any estimates, projections, or forward-looking information will be realized.
All such estimates, projections and forward-looking information speak only as of the date hereof. The Company undertakes no duty to publicly update or revise the information contained herein.
You are cautioned not to place undue reliance on the estimates, projections, and other forward-looking information in the earnings release as they are based on current expectations and general assumptions and are subject to various risks, uncertainties, and other factors, including those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and in other documents the Company previously filed with the SEC, many of which are beyond the Company's control. These factors may cause actual results to differ materially from the views, beliefs and estimates expressed herein.
ITEM 9.01.
Financial Statements and Exhibits.
(d)
Exhibits.
See Exhibit Index.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
HEALTHSOUTH CORPORATION
By:
/
S
/   J
OHN
P. W
HITTINGTON
Name:    John P. Whittington
Title:     Executive Vice President, General Counsel
and Corporate Secretary
Dated: May 6, 2008
EXHIBIT INDEX
Exhibit Number
Description
99
Press release of HealthSouth Corporation, dated May 6, 2008.