Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2011

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

12. Condensed Consolidating Financial Information

     The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” Each of the subsidiary guarantors is 100% owned by HealthSouth, and all guarantees are full and unconditional and joint and several. HealthSouth’s investments in its consolidated subsidiaries, as well as guarantor subsidiaries’ investments in non-guarantor subsidiaries and non-guarantor subsidiaries’ investments in guarantor subsidiaries, are presented under the equity method of accounting.

     As described in Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2010 Form 10-K, the terms of our credit agreement restrict us from declaring or paying cash dividends on our common stock unless: (1) we are not in default under our credit agreement and (2) the amount of the dividend, when added to the aggregate amount of certain other defined payments made during the same fiscal year, does not exceed certain maximum thresholds. However, as described in Note 11, Convertible Perpetual Preferred Stock, to the consolidated financial statements accompanying the 2010 Form 10-K, our preferred stock generally provides for the payment of cash dividends, subject to certain limitations.

HealthSouth Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Condensed Consolidating Statement of Operations

	Three Months Ended June 30, 2011
	HealthSouth			Guarantor			Non Guarantor			Eliminating			HealthSouth
	Corporation			Subsidiaries			Subsidiaries			Entries			Consolidated
	(In Millions)
Net operating revenues	$	4.4		$	362.0		$	149.8		$	(11.1	)	$	505.1
Operating expenses:
Salaries and benefits		4.6			169.8			70.6			(3.4	)		241.6
Other operating expenses		10.1			49.1			21.5			(5.3	)		75.4
General and administrative expenses		27.4			—			—			—			27.4
Supplies		0.3			18.5			7.4			—			26.2
Depreciation and amortization		2.4			13.0			4.2			—			19.6
Occupancy costs		1.2			9.0			4.4			(2.5	)		12.1
Provision for doubtful accounts		0.1			3.5			1.4			—			5.0
Loss on disposal of assets		—			0.1			0.9			—			1.0
Government, class action, and related settlements		(10.6	)		—			—			—			(10.6	)
Professional fees—accounting, tax, and legal		8.4			—			—			—			8.4
Total operating expenses		43.9			263.0			110.4			(11.2	)		406.1
Loss on early extinguishment of debt		26.1			—			—			—			26.1
Interest expense and amortization of debt discounts and fees		32.4			2.1			0.7			(0.3	)		34.9
Other income		(0.2	)		—			(0.8	)		0.3			(0.7	)
Equity in net income of nonconsolidated affiliates		(0.8	)		(2.3	)		(0.1	)		—			(3.2	)
Equity in net income of consolidated affiliates		(56.9	)		(2.8	)		—			59.7			—
Management fees		(23.9	)		18.6			5.3			—			—
(Loss) income from continuing operations before income tax (benefit) expense		(16.2	)		83.4			34.3			(59.6	)		41.9
Provision for income tax (benefit) expense		(37.3	)		39.6			8.9			—			11.2
Income from continuing operations		21.1			43.8			25.4			(59.6	)		30.7
Income (loss) from discontinued operations, net of tax		0.8			1.2			(0.4	)		—			1.6
Net Income		21.9			45.0			25.0			(59.6	)		32.3
Less: Net income attributable to noncontrolling interests		—			—			(10.4	)		—			(10.4	)
Net income attributable to HealthSouth	$	21.9		$	45.0		$	14.6		$	(59.6	)	$	21.9

Condensed Consolidating Statement of Operations

	Three Months Ended June 30, 2010
	HealthSouth			Guarantor			Non Guarantor			Eliminating			HealthSouth
	Corporation			Subsidiaries			Subsidiaries			Entries			Consolidated
	(In Millions)
Net operating revenues	$	5.3		$	335.5		$	136.1		$	(9.6	)	$	467.3
Operating expenses:
Salaries and benefits		5.3			158.5			65.5			(3.1	)		226.2
Other operating expenses		2.1			47.3			25.8			(4.4	)		70.8
General and administrative expenses		26.7			—			—			—			26.7
Supplies		0.2			17.8			7.0			—			25.0
Depreciation and amortization		2.3			11.8			3.7			—			17.8
Occupancy costs		0.6			8.0			4.1			(2.0	)		10.7
Provision for doubtful accounts		0.2			3.9			1.1			—			5.2
Loss on disposal of assets		—			0.3			0.1			—			0.4
Professional fees—accounting, tax, and legal		5.7			—			—			—			5.7
Total operating expenses		43.1			247.6			107.3			(9.5	)		388.5
Loss on early extinguishment of debt		0.1			—			—			—			0.1
Interest expense and amortization of debt discounts and fees		27.7			2.2			0.9			(0.7	)		30.1
Other income		(0.3	)		(0.1	)		(1.7	)		0.7			(1.4	)
Gain on interest rate swaps		(0.3	)		—			—			—			(0.3	)
Equity in net income of nonconsolidated affiliates		(0.5	)		(2.0	)		(0.1	)		—			(2.6	)
Equity in net income of consolidated affiliates		(45.9	)		(4.4	)		—			50.3			—
Management fees		(22.7	)		17.6			5.1			—			—
Income from continuing operations before income tax (benefit) expense		4.1			74.6			24.6			(50.4	)		52.9
Provision for income tax (benefit) expense		(40.6	)		33.2			6.1			—			(1.3	)
Income from continuing operations		44.7			41.4			18.5			(50.4	)		54.2
Income (loss) from discontinued operations, net of tax		2.6			0.9			(0.3	)		0.1			3.3
Net Income		47.3			42.3			18.2			(50.3	)		57.5
Less: Net income attributable to noncontrolling interests		—			—			(10.2	)		—			(10.2	)
Net income attributable to HealthSouth	$	47.3		$	42.3		$	8.0		$	(50.3	)	$	47.3

Condensed Consolidating Statement of Operations

	Six Months Ended June 30, 2011
	HealthSouth			Guarantor			Non Guarantor			Eliminating			HealthSouth
	Corporation			Subsidiaries			Subsidiaries			Entries			Consolidated
	(In Millions)
Net operating revenues	$	10.5		$	727.3		$	295.6		$	(22.3	)	$	1,011.1
Operating expenses:
Salaries and benefits		10.5			341.5			140.4			(6.8	)		485.6
Other operating expenses		14.1			99.4			43.4			(10.6	)		146.3
General and administrative expenses		54.3			—			—			—			54.3
Supplies		0.3			37.3			14.4			—			52.0
Depreciation and amortization		5.1			25.7			8.3			—			39.1
Occupancy costs		2.1			17.8			8.7			(4.9	)		23.7
Provision for doubtful accounts		0.2			7.1			2.5			—			9.8
Loss on disposal of assets		—			0.2			0.9			—			1.1
Government, class action, and related settlements		(10.6	)		—			—			—			(10.6	)
Professional fees—accounting, tax, and legal		12.2			—			—			—			12.2
Total operating expenses		88.2			529.0			218.6			(22.3	)		813.5
Loss on early extinguishment of debt		26.1			—			—			—			26.1
Interest expense and amortization of debt discounts and fees		65.0			4.3			1.3			(0.6	)		70.0
Other income		(0.3	)		(0.1	)		(1.5	)		0.6			(1.3	)
Equity in net income of nonconsolidated affiliates		(1.6	)		(4.0	)		(0.1	)		—			(5.7	)
Equity in net income of consolidated affiliates		(113.2	)		(4.9	)		—			118.1			—
Management fees		(48.1	)		37.5			10.6			—			—
(Loss) income from continuing operations before income tax (benefit) expense		(5.6	)		165.5			66.7			(118.1	)		108.5
Provision for income tax (benefit) expense		(90.0	)		76.8			17.0			—			3.8
Income from continuing operations		84.4			88.7			49.7			(118.1	)		104.7
Income (loss) from discontinued operations, net of tax		17.3			2.5			(0.7	)		—			19.1
Net Income		101.7			91.2			49.0			(118.1	)		123.8
Less: Net income attributable to noncontrolling interests		—			—			(22.1	)		—			(22.1	)
Net income attributable to HealthSouth	$	101.7		$	91.2		$	26.9		$	(118.1	)	$	101.7

Condensed Consolidating Statement of Operations

	Six Months Ended June 30, 2010
	HealthSouth			Guarantor			Non Guarantor			Eliminating			HealthSouth
	Corporation			Subsidiaries			Subsidiaries			Entries			Consolidated
	(In Millions)
Net operating revenues	$	10.0		$	665.7		$	269.4		$	(19.2	)	$	925.9
Operating expenses:
Salaries and benefits		10.9			317.2			130.6			(6.2	)		452.5
Other operating expenses		4.4			91.0			45.4			(8.8	)		132.0
General and administrative expenses		53.0			—			—			—			53.0
Supplies		0.3			35.2			13.7			—			49.2
Depreciation and amortization		4.6			23.5			7.2			—			35.3
Occupancy costs		1.5			16.0			8.2			(4.1	)		21.6
Provision for doubtful accounts		0.3			8.1			2.7			—			11.1
Loss on disposal of assets		—			0.4			—			—			0.4
Professional fees—accounting, tax, and legal		8.6			—			—			—			8.6
Total operating expenses		83.6			491.4			207.8			(19.1	)		763.7
Loss on early extinguishment of debt		0.4			—			—			—			0.4
Interest expense and amortization of debt discounts and fees		55.8			4.4			1.6			(1.2	)		60.6
Other income		(0.5	)		(0.1	)		(2.7	)		1.2			(2.1	)
Loss on interest rate swaps		4.0			—			—			—			4.0
Equity in net income of nonconsolidated affiliates		(1.2	)		(3.9	)		(0.1	)		—			(5.2	)
Equity in net (income) loss of consolidated affiliates		(94.5	)		(6.5	)		0.1			100.9			—
Management fees		(44.8	)		34.9			9.9			—			—
Income from continuing operations before income tax (benefit) expense		7.2			145.5			52.8			(101.0	)		104.5
Provision for income tax (benefit) expense		(77.9	)		65.6			13.4			—			1.1
Income from continuing operations		85.1			79.9			39.4			(101.0	)		103.4
Income (loss) from discontinued operations, net of tax		2.9			2.1			(0.5	)		0.1			4.6
Net Income		88.0			82.0			38.9			(100.9	)		108.0
Less: Net income attributable to noncontrolling interests		—			—			(20.0	)		—			(20.0	)
Net income attributable to HealthSouth	$	88.0		$	82.0		$	18.9		$	(100.9	)	$	88.0

Condensed Consolidating Balance Sheet

	As of June 30, 2011
	HealthSouth		Guarantor		Non Guarantor			Eliminating			HealthSouth
	Corporation		Subsidiaries		Subsidiaries			Entries			Consolidated
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	56.0	$	1.2	$	3.1		$	—		$	60.3
Accounts receivable, net		2.9		146.7		63.2			—			212.8
Other current assets		73.7		29.8		85.8			(33.9	)		155.4
Total current assets		132.6		177.7		152.1			(33.9	)		428.5
Property and equipment, net		23.3		465.7		153.5			—			642.5
Goodwill		—		264.7		155.6			—			420.3
Intangible assets, net		0.4		35.1		9.6			—			45.1
Deferred income tax assets		598.3		—		64.5			(0.1	)		662.7
Other long-term assets		71.0		78.1		37.4			(8.2	)		178.3
Intercompany receivable		1,120.8		559.4		—			(1,680.2	)		—
Total assets	$	1,946.4	$	1,580.7	$	572.7		$	(1,722.4	)	$	2,377.4
Liabilities and Shareholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	9.1	$	25.8	$	10.5		$	—		$	45.4
Accrued expenses and other current liabilities		150.4		76.9		84.3			(37.9	)		273.7
Total current liabilities		159.5		102.7		94.8			(37.9	)		319.1
Long-term debt, net of current portion		1,340.4		78.4		25.5			(4.2	)		1,440.1
Other long-term liabilities		45.6		11.0		77.6			—			134.2
Intercompany payable		—		—		1,393.3			(1,393.3	)		—
		1,545.5		192.1		1,591.2			(1,435.4	)		1,893.4
Commitments and contingencies
Convertible perpetual preferred stock		387.4		—		—			—			387.4
Shareholders’ equity (deficit) :
HealthSouth shareholders’ equity (deficit)		13.5		1,388.6		(1,101.6	)		(287.0	)		13.5
Noncontrolling interests		—		—		83.1			—			83.1
Total shareholders’ equity (deficit)		13.5		1,388.6		(1,018.5	)		(287.0	)		96.6
Total liabilities and shareholders’ equity (deficit)	$	1,946.4	$	1,580.7	$	572.7		$	(1,722.4	)	$	2,377.4

Condensed Consolidating Balance Sheet

	As of December 31, 2010
	HealthSouth			Guarantor		Non Guarantor			Eliminating			HealthSouth
	Corporation			Subsidiaries		Subsidiaries			Entries			Consolidated
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	45.8		$	0.1	$	2.4		$	—		$	48.3
Accounts receivable, net		0.9			148.2		57.6			—			206.7
Other current assets		48.6			33.2		69.4			—			151.2
Total current assets		95.3			181.5		129.4			—			406.2
Property and equipment, net		23.2			465.2		154.2			—			642.6
Goodwill		—			264.7		155.6			—			420.3
Intangible assets, net		0.4			37.3		11.1			—			48.8
Deferred income tax assets		604.2			9.1		66.0			—			679.3
Other long-term assets		70.5			79.2		39.4			(14.2	)		174.9
Intercompany receivable		1,142.9			490.1		—			(1,633.0	)		—
Total assets	$	1,936.5		$	1,527.1	$	555.7		$	(1,647.2	)	$	2,372.1
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	6.8		$	24.9	$	12.9		$	—		$	44.6
Accrued expenses and other current liabilities		182.6			68.9		63.2			—			314.7
Total current liabilities		189.4			93.8		76.1			—			359.3
Long-term debt, net of current portion		1,401.0			83.3		26.7			(14.2	)		1,496.8
Other long-term liabilities		43.9			11.3		75.6			—			130.8
Intercompany payable		—			—		1,400.8			(1,400.8	)		—
		1,634.3			188.4		1,579.2			(1,415.0	)		1,986.9
Commitments and contingencies
Convertible perpetual preferred stock		387.4			—		—			—			387.4
Shareholders’ (deficit) equity
HealthSouth shareholders’ (deficit) equity		(85.2	)		1,338.7		(1,106.5	)		(232.2	)		(85.2	)
Noncontrolling interests		—			—		83.0			—			83.0
Total shareholders’ (deficit) equity		(85.2	)		1,338.7		(1,023.5	)		(232.2	)		(2.2	)
Total liabilities and shareholders’ (deficit) equity	$	1,936.5		$	1,527.1	$	555.7		$	(1,647.2	)	$	2,372.1

Condensed Consolidating Statement of Cash Flows

	Six Months Ended June 30, 2011
	HealthSouth			Guarantor			Non Guarantor			Eliminating			HealthSouth
	Corporation			Subsidiaries			Subsidiaries			Entries			Consolidated
	(In Millions)
Net cash provided by operating activities	$	72.1		$	141.4		$	62.2		$	(118.8	)	$	156.9
Cash flows from investing activities:
Capital expenditures		(5.2	)		(23.3	)		(7.0	)		—			(35.5	)
Purchase of restricted investments		—			—			(7.9	)		—			(7.9	)
Proceeds from sale of restricted investments		—			—			0.6			—			0.6
Net change in restricted cash		(0.2	)		—			5.5			—			5.3
Net settlements on interest rate swaps		(10.9	)		—			—			—			(10.9	)
Other		—			(0.5	)		—			—			(0.5	)
Net cash used in investing activities of discontinued operations		—			(0.3	)		—			—			(0.3	)
Net cash used in investing activities		(16.3	)		(24.1	)		(8.8	)		—			(49.2	)
Cash flows from financing activities:
Principal borrowings on term loan		100.0			—			—			—			100.0
Proceeds from bond issuance		120.0			—			—			—			120.0
Principal payments on debt, including pre-payments		(337.0	)		(0.9	)		—			2.0			(335.9	)
Borrowings on revolving credit facility		190.0			—			—			—			190.0
Payments on revolving credit facility		(128.0	)		—			—			—			(128.0	)
Principal payments under capital lease obligations		(0.6	)		(5.1	)		(1.1	)		—			(6.8	)
Debt issue costs		(4.2	)		—			—			—			(4.2	)
Dividends paid on convertible perpetual preferred stock		(13.0	)		—			—			—			(13.0	)
Distributions paid to noncontrolling interests of consolidated affiliates		—			—			(22.2	)		—			(22.2	)
Other		4.3			—			—			—			4.3
Change in intercompany advances		22.8			(110.2	)		(29.4	)		116.8			—
Net cash used in financing activities		(45.7	)		(116.2	)		(52.7	)		118.8			(95.8	)
Increase in cash and cash equivalents		10.1			1.1			0.7			—			11.9
Cash and cash equivalents at beginning of period		45.8			0.1			2.4			—			48.3
Cash and cash equivalents of facilities held for sale at beginning of period		0.1			—			—			—			0.1
Less: Cash and cash equivalents of facilities held for sale at end of period		—			—			—			—			—
Cash and cash equivalents at end of period	$	56.0		$	1.2		$	3.1		$	—		$	60.3

Condensed Consolidating Statement of Cash Flows

	Six Months Ended June 30, 2010
	HealthSouth			Guarantor			Non Guarantor			Eliminating			HealthSouth
	Corporation			Subsidiaries			Subsidiaries			Entries			Consolidated
	(In Millions)
Net cash provided by operating activities	$	110.9		$	102.2		$	62.6		$	(102.6	)	$	173.1
Cash flows from investing activities:
Capital expenditures		(3.5	)		(15.2	)		(10.4	)		—			(29.1	)
Acquisition of a business, net of cash acquired		—			(9.9	)		—			—			(9.9	)
Purchase of restricted investments		—			—			(13.3	)		—			(13.3	)
Proceeds from sale of restricted investments		—			—			10.0			—			10.0
Net change in restricted cash		1.0			—			17.1			—			18.1
Net settlements on interest rate swaps		(23.1	)		—			—			—			(23.1	)
Other		(0.1	)		(0.3	)		—			—			(0.4	)
Net cash provided by (used in) investing activities of discontinued operations		0.5			(0.4	)		7.5			—			7.6
Net cash (used in) provided by investing activities		(25.2	)		(25.8	)		10.9			—			(40.1	)
Cash flows from financing activities:
Principal payments on debt, including pre-payments		(5.8	)		—			—			2.0			(3.8	)
Principal payments under capital lease obligations		(1.1	)		(5.1	)		(1.0	)		—			(7.2	)
Dividends paid on convertible perpetual preferred stock		(13.0	)		—			—			—			(13.0	)
Distributions paid to noncontrolling interests of consolidated affiliates		—			—			(18.3	)		—			(18.3	)
Other		0.3			—			0.6			—			0.9
Change in intercompany advances		28.0			(73.0	)		(55.6	)		100.6			—
Net cash provided by (used in) financing activities		8.4			(78.1	)		(74.3	)		102.6			(41.4	)
Increase (decrease) in cash and cash equivalents		94.1			(1.7	)		(0.8	)		—			91.6
Cash and cash equivalents at beginning of period		76.2			1.7			2.8			—			80.7
Cash and cash equivalents of facilities held for sale at beginning of period		0.1			—			0.2			—			0.3
Cash and cash equivalents at end of period	$	170.4		$	—		$	2.2		$	—		$	172.6