Exhibit 99.1
NEWS FROM
[HEALTHSOUTH OBJECT OMITTED]
Media Contact September 27, 2006
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Andy Brimmer, 205-410-2777 For Immediate Release
HEALTHSOUTH ENTERS INTO DEFINITIVE SETTLEMENT AGREEMENT
IN CLASS ACTION AND DERIVATIVE LITIGATION
BIRMINGHAM, Ala., September 27, 2006 - HealthSouth Corporation (OTC Bulletin
Board: HLSH.OB) announced today that it has entered into definitive agreements
with the lead plaintiffs in the federal securities class actions and the
derivative actions, as well as certain of its insurance carriers, to settle
litigation filed against HealthSouth, certain of its former directors and
officers and certain other parties in the United States District Court for the
Northern District of Alabama and the Circuit Court in Jefferson County, Alabama
relating to financial reporting and related activity that occurred at the
company during periods ended in March 2003. These agreements memorialize the
preliminary settlement previously announced on February 23, 2006.
Under the settlement agreements, federal securities and fraud claims brought in
the class action against HealthSouth and certain of its former directors and
officers will be settled for consideration consisting of HealthSouth common
stock and warrants valued at $215 million and cash payments by HealthSouth's
insurance carriers of $230 million, or aggregate consideration of $445 million.
In addition, the federal securities class action plaintiffs will receive 25% of
any net recoveries from future judgments obtained by or on behalf of
HealthSouth with respect to certain claims against Richard Scrushy, the
company's former chief executive officer, Ernst & Young, the company's former
auditors, and UBS, the company's former primary investment bank, each of which
remains a defendant in the derivative actions as well as the federal securities
class actions. The settlement is subject to the satisfaction of a number of
conditions, including final approval of the U.S. District Court. The settlement
agreement is also conditioned upon the approval of bar orders in the federal
securities and derivative litigations by the U.S. District Court and the
Circuit Court that would, among other things, preclude certain claims by the
non-settling co-defendants against HealthSouth and the insurance carriers
relating to matters covered by the settlement agreements. The settlement
agreement also requires HealthSouth to indemnify the settling insurance
carriers for any amounts that they are legally obligated to pay to any
nonsettling defendants.
"This settlement represents another significant milestone in HealthSouth's
recovery and is a powerful symbol of the progress we have made as a company,"
said HealthSouth President and CEO Jay Grinney. "I would like to thank the many
people who have worked tirelessly over the last three years to settle this
litigation and help us continue to put the past behind us."
The settlement does not contain any admission of wrongdoing by HealthSouth or
any other settling defendant. Securities to be issued by HealthSouth in
connection with the settlement will consist of an aggregate of 25,118,656
shares of its common stock and eleven-year warrants to purchase an aggregate of
40,756,326 additional shares of HealthSouth common stock at an exercise price
of $8.28 per share, in each case, as the same will be adjusted by the proposed
1-for-5 reverse stock split of HealthSouth's common stock, which, subject to
stockholder approval, is expected to become effective before the end of
October.
The settlement does not include Ernst & Young, UBS, Mr. Scrushy or any former
HealthSouth officer who entered a guilty plea or was convicted of a crime in
connection with the company's former financial reporting activities.
About HealthSouth
HealthSouth is one of the nation's largest providers of outpatient surgery,
diagnostic imaging and rehabilitative healthcare services, operating facilities
nationwide. HealthSouth can be found on the Web at www.healthsouth.com.
Statements contained in this press release which are not historical facts are
forward-looking statements. In addition, HealthSouth, through its senior
management, may from time to time make forward-looking public statements
concerning the matters described herein. Such forward-looking statements are
necessarily estimates based upon current information and involve a number of
risks and uncertainties. HealthSouth's actual results may differ materially
from the results anticipated in these forward-looking statements as a result of
a variety of factors. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those
estimated by HealthSouth include, but are not limited to the consummation of
the proposed settlement of pending litigation relating to HealthSouth's prior
reporting and financial practices; significant changes in HealthSouth's
management team; HealthSouth's ability to continue to operate in the ordinary
course and manage its relationships with its creditors, including its lenders,
bondholders, vendors and suppliers, employees and customers; HealthSouth's
ability to successfully remediate its internal control weaknesses; changes,
delays in or suspension of reimbursement for HealthSouth's services by
governmental or private payors; changes in the regulation of the healthcare
industry at either or both of the federal and state levels; competitive
pressures in the healthcare industry and HealthSouth's response thereto;
HealthSouth's ability to obtain and retain favorable arrangements with
third-party payors; HealthSouth's ability to attract and retain nurses,
therapists, and other healthcare professionals in a highly competitive
environment with often severe staffing shortages; general conditions in the
economy and capital markets; and other factors which may be identified from
time to time in the company's SEC filings and other public announcements,
including HealthSouth's Form 10-K for the year ended December 31, 2005; Form
10-Qs for the quarters ended March 31, 2006 and June 30, 2006.
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