2015 Q2 Form 10-Q Financial Statement

#000078516115000069 Filed on July 30, 2015

View on sec.gov

Income Statement

Concept 2015 Q2 2014 Q2
Revenue $764.4M $604.4M
YoY Change 26.47% 7.07%
Cost Of Revenue $31.70M $27.80M
YoY Change 14.03% 4.51%
Gross Profit $721.8M $567.3M
YoY Change 27.23% 6.86%
Gross Profit Margin 94.43% 93.86%
Selling, General & Admin $446.5M $327.8M
YoY Change 36.21% 3.34%
% of Gross Profit 61.86% 57.78%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $32.70M $26.40M
YoY Change 23.86% 14.29%
% of Gross Profit 4.53% 4.65%
Operating Expenses $583.4M $439.7M
YoY Change 32.68% 4.87%
Operating Profit $123.4M $127.6M
YoY Change -3.29% 14.34%
Interest Expense -$28.60M -$25.20M
YoY Change 13.49% 19.43%
% of Operating Profit -23.18% -19.75%
Other Income/Expense, Net $3.000M $28.20M
YoY Change -89.36% 1384.21%
Pretax Income $94.00M $130.6M
YoY Change -28.02% 41.34%
Income Tax $32.20M $36.50M
% Of Pretax Income 34.26% 27.95%
Net Earnings $42.90M $83.10M
YoY Change -48.38% -49.7%
Net Earnings / Revenue 5.61% 13.75%
Basic Earnings Per Share $0.47 $0.93
Diluted Earnings Per Share $0.45 $0.85
COMMON SHARES
Basic Shares Outstanding 89.80M shares 86.70M shares
Diluted Shares Outstanding 101.5M shares 100.6M shares

Balance Sheet

Concept 2015 Q2 2014 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $45.50M $65.80M
YoY Change -30.85% -4.22%
Cash & Equivalents $45.50M $65.80M
Short-Term Investments
Other Short-Term Assets $126.7M $103.9M
YoY Change 21.94% -6.9%
Inventory
Prepaid Expenses
Receivables $351.8M $272.3M
Other Receivables $0.00 $0.00
Total Short-Term Assets $712.4M $580.9M
YoY Change 22.64% -1.79%
LONG-TERM ASSETS
Property, Plant & Equipment $1.063B $976.5M
YoY Change 8.84% 23.09%
Goodwill $1.098B $34.80M
YoY Change 3053.74% 154.01%
Intangibles $325.5M $103.3M
YoY Change 215.1% 19.01%
Long-Term Investments
YoY Change
Other Assets $191.6M $148.0M
YoY Change 29.46% 7.17%
Total Long-Term Assets $2.757B $1.996B
YoY Change 38.16% 3.93%
TOTAL ASSETS
Total Short-Term Assets $712.4M $580.9M
Total Long-Term Assets $2.757B $1.996B
Total Assets $3.470B $2.577B
YoY Change 34.66% 2.58%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $60.00M $55.70M
YoY Change 7.72% -2.79%
Accrued Expenses $283.2M $243.6M
YoY Change 16.26% -4.21%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due $21.40M
YoY Change
Total Short-Term Liabilities $364.6M $299.3M
YoY Change 21.82% -3.95%
LONG-TERM LIABILITIES
Long-Term Debt $2.104B $1.475B
YoY Change 42.66% 11.78%
Other Long-Term Liabilities $137.3M $141.1M
YoY Change -2.69% 7.38%
Total Long-Term Liabilities $137.3M $141.1M
YoY Change -2.69% 7.38%
TOTAL LIABILITIES
Total Short-Term Liabilities $364.6M $299.3M
Total Long-Term Liabilities $137.3M $141.1M
Total Liabilities $2.606B $1.916B
YoY Change 36.06% 8.67%
SHAREHOLDERS EQUITY
Retained Earnings -$1.971B
YoY Change -10.73%
Common Stock $1.000M
YoY Change 0.0%
Preferred Stock
YoY Change
Treasury Stock (at cost) $457.6M
YoY Change 13.27%
Treasury Stock Shares 16.24M shares
Shareholders Equity $605.9M $413.7M
YoY Change
Total Liabilities & Shareholders Equity $3.470B $2.577B
YoY Change 34.66% 2.58%

Cashflow Statement

Concept 2015 Q2 2014 Q2
OPERATING ACTIVITIES
Net Income $42.90M $83.10M
YoY Change -48.38% -49.7%
Depreciation, Depletion And Amortization $32.70M $26.40M
YoY Change 23.86% 14.29%
Cash From Operating Activities $102.9M $128.0M
YoY Change -19.61% 21.44%
INVESTING ACTIVITIES
Capital Expenditures -$34.90M -$36.90M
YoY Change -5.42% -13.58%
Acquisitions $15.90M
YoY Change -44.98%
Other Investing Activities -$46.10M -$2.300M
YoY Change 1904.35% -78.7%
Cash From Investing Activities -$81.00M -$39.20M
YoY Change 106.63% -26.73%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -184.7M -76.10M
YoY Change 142.71% 20.22%
NET CHANGE
Cash From Operating Activities 102.9M 128.0M
Cash From Investing Activities -81.00M -39.20M
Cash From Financing Activities -184.7M -76.10M
Net Change In Cash -162.8M 12.70M
YoY Change -1381.89% -211.4%
FREE CASH FLOW
Cash From Operating Activities $102.9M $128.0M
Capital Expenditures -$34.90M -$36.90M
Free Cash Flow $137.8M $164.9M
YoY Change -16.43% 11.34%

Facts In Submission

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us-gaap Common Stock Dividends Per Share Declared
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CY2015Q2 us-gaap Common Stock Dividends Per Share Declared
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0.21
us-gaap Common Stock Dividends Per Share Declared
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CY2014Q2 us-gaap Comprehensive Income Net Of Tax
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us-gaap Comprehensive Income Net Of Tax
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CY2015Q2 us-gaap Comprehensive Income Net Of Tax
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43000000 USD
us-gaap Comprehensive Income Net Of Tax
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CY2014Q2 us-gaap Comprehensive Income Net Of Tax Attributable To Noncontrolling Interest
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us-gaap Comprehensive Income Net Of Tax Attributable To Noncontrolling Interest
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us-gaap Comprehensive Income Net Of Tax Attributable To Noncontrolling Interest
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CY2014Q2 us-gaap Comprehensive Income Net Of Tax Including Portion Attributable To Noncontrolling Interest
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98000000 USD
us-gaap Comprehensive Income Net Of Tax Including Portion Attributable To Noncontrolling Interest
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CY2015Q2 us-gaap Comprehensive Income Net Of Tax Including Portion Attributable To Noncontrolling Interest
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60300000 USD
us-gaap Comprehensive Income Net Of Tax Including Portion Attributable To Noncontrolling Interest
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119400000 USD
us-gaap Conversion Of Stock Amount Converted1
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us-gaap Conversion Of Stock Amount Converted1
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CY2014Q2 us-gaap Costs And Expenses
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467500000 USD
us-gaap Costs And Expenses
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934900000 USD
CY2015Q2 us-gaap Costs And Expenses
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615100000 USD
us-gaap Costs And Expenses
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CY2014Q4 us-gaap Debt And Capital Lease Obligations
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CY2015Q2 us-gaap Debt And Capital Lease Obligations
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us-gaap Deferred Income Tax Expense Benefit
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us-gaap Deferred Income Tax Expense Benefit
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CY2014Q4 us-gaap Deferred Tax Assets Liabilities Net Current
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CY2015Q2 us-gaap Deferred Tax Assets Liabilities Net Current
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188400000 USD
CY2015Q2 us-gaap Deferred Tax Assets Net
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268100000 USD
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CY2015Q2 us-gaap Deferred Tax Assets Net Current
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CY2014Q4 us-gaap Deferred Tax Assets Net Noncurrent
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CY2015Q2 us-gaap Deferred Tax Assets Net Noncurrent
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CY2015Q2 us-gaap Deferred Tax Assets Valuation Allowance
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CY2014Q2 us-gaap Depreciation Depletion And Amortization
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26400000 USD
us-gaap Depreciation Depletion And Amortization
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52800000 USD
CY2015Q2 us-gaap Depreciation Depletion And Amortization
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32700000 USD
us-gaap Depreciation Depletion And Amortization
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64600000 USD
CY2014Q4 us-gaap Derivative Assets Noncurrent
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9900000 USD
CY2014Q2 us-gaap Derivative Gain On Derivative
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6700000 USD
us-gaap Derivative Gain On Derivative
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6700000 USD
us-gaap Other Comprehensive Income Loss Before Tax
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200000 USD
CY2015Q2 us-gaap Derivative Gain On Derivative
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2000000 USD
us-gaap Derivative Gain On Derivative
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2000000 USD
us-gaap Derivative Loss On Derivative
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400000 USD
us-gaap Dividends Common Stock Cash
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32000000 USD
us-gaap Dividends Common Stock Cash
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38000000 USD
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us-gaap Dividends Preferred Stock
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0 USD
us-gaap Dividends Preferred Stock
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1600000 USD
us-gaap Dividends Preferred Stock Cash
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3100000 USD
us-gaap Dividends Preferred Stock Cash
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1600000 USD
CY2014Q4 us-gaap Due From Related Parties Noncurrent
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0 USD
CY2015Q2 us-gaap Due From Related Parties Noncurrent
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0 USD
CY2014Q4 us-gaap Due To Related Parties Noncurrent
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0 USD
CY2015Q2 us-gaap Due To Related Parties Noncurrent
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0 USD
CY2014Q2 us-gaap Earnings Per Share Basic
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0.93
us-gaap Earnings Per Share Basic
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1.44
CY2015Q2 us-gaap Earnings Per Share Basic
EarningsPerShareBasic
0.47
us-gaap Earnings Per Share Basic
EarningsPerShareBasic
0.94
CY2014Q2 us-gaap Earnings Per Share Diluted
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0.85
us-gaap Earnings Per Share Diluted
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1.33
CY2015Q2 us-gaap Earnings Per Share Diluted
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0.45
us-gaap Earnings Per Share Diluted
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0.89
us-gaap Employee Service Share Based Compensation Tax Benefit From Compensation Expense
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14300000 USD
us-gaap Equity Method Investment Dividends Or Distributions
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6500000 USD
us-gaap Equity Method Investment Dividends Or Distributions
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3700000 USD
CY2014Q2 us-gaap Equity Method Investment Summarized Financial Information Income Loss From Continuing Operations Before Extraordinary Items
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5500000 USD
us-gaap Equity Method Investment Summarized Financial Information Income Loss From Continuing Operations Before Extraordinary Items
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24000000 USD
CY2015Q2 us-gaap Equity Method Investment Summarized Financial Information Income Loss From Continuing Operations Before Extraordinary Items
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4800000 USD
us-gaap Equity Method Investment Summarized Financial Information Income Loss From Continuing Operations Before Extraordinary Items
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8700000 USD
CY2014Q2 us-gaap Equity Method Investment Summarized Financial Information Net Income Loss
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5500000 USD
us-gaap Equity Method Investment Summarized Financial Information Net Income Loss
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24000000 USD
CY2015Q2 us-gaap Equity Method Investment Summarized Financial Information Net Income Loss
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4800000 USD
us-gaap Equity Method Investment Summarized Financial Information Net Income Loss
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8700000 USD
CY2014Q2 us-gaap Equity Method Investment Summarized Financial Information Revenue
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15000000 USD
us-gaap Equity Method Investment Summarized Financial Information Revenue
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36300000 USD
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8900000 USD
us-gaap Equity Method Investment Summarized Financial Information Revenue
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17100000 USD
CY2014Q2 us-gaap Gain Loss On Sales Of Assets And Asset Impairment Charges
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us-gaap Gain Loss On Sales Of Assets And Asset Impairment Charges
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CY2015Q2 us-gaap Gain Loss On Sales Of Assets And Asset Impairment Charges
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CY2014Q2 us-gaap Gains Losses On Extinguishment Of Debt
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0 USD
us-gaap Gains Losses On Extinguishment Of Debt
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CY2015Q1 us-gaap Gains Losses On Extinguishment Of Debt
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us-gaap Gains Losses On Extinguishment Of Debt
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CY2014Q2 us-gaap General And Administrative Expense
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30200000 USD
us-gaap General And Administrative Expense
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CY2015Q2 us-gaap General And Administrative Expense
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32100000 USD
us-gaap General And Administrative Expense
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66700000 USD
CY2014Q4 us-gaap Goodwill
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CY2014Q2 us-gaap Income Loss From Continuing Operations
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us-gaap Income Loss From Continuing Operations
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CY2015Q2 us-gaap Income Loss From Continuing Operations
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us-gaap Income Loss From Continuing Operations
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CY2014Q2 us-gaap Income Loss From Continuing Operations Attributable To Noncontrolling Entity
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us-gaap Income Loss From Continuing Operations Attributable To Noncontrolling Entity
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us-gaap Income Loss From Continuing Operations Attributable To Noncontrolling Entity
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33800000 USD
CY2014Q2 us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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130600000 USD
us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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94000000 USD
us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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us-gaap Income Loss From Continuing Operations Including Portion Attributable To Noncontrolling Interest
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us-gaap Income Loss From Continuing Operations Including Portion Attributable To Noncontrolling Interest
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CY2014Q2 us-gaap Income Loss From Continuing Operations Per Basic Share
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us-gaap Income Loss From Continuing Operations Per Basic Share
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CY2015Q2 us-gaap Income Loss From Continuing Operations Per Basic Share
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us-gaap Income Loss From Continuing Operations Per Basic Share
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CY2014Q2 us-gaap Income Loss From Continuing Operations Per Diluted Share
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us-gaap Income Loss From Continuing Operations Per Diluted Share
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us-gaap Income Loss From Discontinued Operations Net Of Tax
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us-gaap Income Loss From Discontinued Operations Net Of Tax
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us-gaap Income Loss From Discontinued Operations Net Of Tax Attributable To Reporting Entity
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3700000 USD
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us-gaap Income Loss From Discontinued Operations Net Of Tax Attributable To Reporting Entity
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CY2014Q2 us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
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us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
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us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
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us-gaap Incremental Common Shares Attributable To Conversion Of Debt Securities
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CY2014Q2 us-gaap Incremental Common Shares Attributable To Conversion Of Preferred Stock
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us-gaap Incremental Common Shares Attributable To Conversion Of Preferred Stock
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CY2015Q2 us-gaap Incremental Common Shares Attributable To Conversion Of Preferred Stock
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us-gaap Incremental Common Shares Attributable To Conversion Of Preferred Stock
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CY2014Q2 us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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2500000 shares
CY2014Q2 us-gaap Income Loss From Discontinued Operations Net Of Tax Per Diluted Share
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us-gaap Income Loss From Discontinued Operations Net Of Tax Per Diluted Share
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CY2015Q2 us-gaap Income Loss From Discontinued Operations Net Of Tax Per Diluted Share
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us-gaap Income Loss From Discontinued Operations Net Of Tax Per Diluted Share
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CY2014Q2 us-gaap Income Loss From Equity Method Investments
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2600000 USD
us-gaap Income Loss From Equity Method Investments
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6900000 USD
CY2015Q2 us-gaap Income Loss From Equity Method Investments
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us-gaap Income Loss From Equity Method Investments
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3900000 USD
CY2014Q2 us-gaap Income Tax Expense Benefit
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us-gaap Income Tax Expense Benefit
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us-gaap Income Tax Expense Benefit
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62500000 USD
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1700000 USD
us-gaap Increase Decrease In Accounts Receivable
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us-gaap Increase Decrease In Accrued Salaries
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6500000 USD
us-gaap Increase Decrease In Other Operating Liabilities
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us-gaap Increase Decrease In Restricted Cash
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us-gaap Increase Decrease In Restricted Cash
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CY2014Q2 us-gaap Incremental Common Shares Attributable To Conversion Of Debt Securities
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us-gaap Incremental Common Shares Attributable To Conversion Of Debt Securities
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CY2015Q2 us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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2700000 shares
us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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2700000 shares
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CY2015Q2 us-gaap Intangible Assets Net Excluding Goodwill
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us-gaap Interest And Debt Expense
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us-gaap Interest And Debt Expense
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CY2014Q2 us-gaap Interest On Convertible Debt Net Of Tax
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us-gaap Interest On Convertible Debt Net Of Tax
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4500000 USD
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2300000 USD
us-gaap Interest On Convertible Debt Net Of Tax
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4600000 USD
CY2014Q4 us-gaap Investments In Affiliates Subsidiaries Associates And Joint Ventures
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9400000 USD
us-gaap Payments For Repurchase Of Common Stock
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0 USD
us-gaap Management Fees Revenue
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0 USD
CY2015Q2 us-gaap Management Fees Revenue
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0 USD
us-gaap Management Fees Revenue
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CY2015Q2 us-gaap Minority Interest
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22300000 USD
us-gaap Minority Interest Decrease From Distributions To Noncontrolling Interest Holders
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23400000 USD
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9500000 USD
CY2014Q2 us-gaap Labor And Related Expense
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285300000 USD
us-gaap Labor And Related Expense
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571400000 USD
CY2015Q2 us-gaap Labor And Related Expense
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401800000 USD
us-gaap Labor And Related Expense
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CY2015Q2 us-gaap Liabilities
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2606300000 USD
CY2014Q4 us-gaap Liabilities And Stockholders Equity
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3408800000 USD
CY2015Q2 us-gaap Liabilities And Stockholders Equity
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364300000 USD
CY2015Q2 us-gaap Liabilities Current
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364600000 USD
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CY2015Q2 us-gaap Line Of Credit
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CY2014Q4 us-gaap Loans Payable To Bank
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450000000 USD
CY2014Q4 us-gaap Long Term Debt And Capital Lease Obligations
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20800000 USD
CY2015Q2 us-gaap Long Term Debt And Capital Lease Obligations Current
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21400000 USD
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us-gaap Net Cash Provided By Used In Financing Activities
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us-gaap Net Cash Provided By Used In Financing Activities
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us-gaap Net Cash Provided By Used In Investing Activities
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us-gaap Net Cash Provided By Used In Investing Activities
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us-gaap Net Cash Provided By Used In Operating Activities
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235100000 USD
us-gaap Net Cash Provided By Used In Operating Activities
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204900000 USD
CY2014Q2 us-gaap Net Income Loss
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83100000 USD
us-gaap Net Income Loss
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CY2015Q2 us-gaap Net Income Loss
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42900000 USD
us-gaap Net Income Loss
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CY2014Q2 us-gaap Net Income Loss Attributable To Noncontrolling Interest
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us-gaap Net Income Loss Attributable To Noncontrolling Interest
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CY2014Q2 us-gaap Net Income Loss Attributable To Nonredeemable Noncontrolling Interest
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us-gaap Net Income Loss Attributable To Nonredeemable Noncontrolling Interest
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CY2015Q2 us-gaap Net Income Loss Attributable To Nonredeemable Noncontrolling Interest
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13800000 USD
us-gaap Net Income Loss Attributable To Nonredeemable Noncontrolling Interest
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27400000 USD
CY2014Q2 us-gaap Net Income Loss Attributable To Redeemable Noncontrolling Interest
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1600000 USD
us-gaap Net Income Loss Attributable To Redeemable Noncontrolling Interest
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3600000 USD
CY2015Q2 us-gaap Net Income Loss Attributable To Redeemable Noncontrolling Interest
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3500000 USD
us-gaap Net Income Loss Attributable To Redeemable Noncontrolling Interest
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Contingencies and Other Commitments</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims, and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. The resolution of any such lawsuits, claims, or legal and regulatory proceedings could materially and adversely affect our financial position, results of operations, and cash flows in a given period. </font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">General Medicine Action&#8212;</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On August&#160;16, 2004, General Medicine, P.C. filed a lawsuit in the Circuit Court of Jefferson County, Alabama (the &#8220;Alabama Action&#8221;) against us captioned </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">General Medicine, P.C. v. HealthSouth Corp.</font><font style="font-family:inherit;font-size:10pt;"> seeking the recovery of allegedly fraudulent transfers involving assets of Horizon/CMS Healthcare Corporation, a former subsidiary of HealthSouth. </font></div><div style="line-height:120%;padding-bottom:13px;padding-top:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">General Medicine&#8217;s underlying claim against Horizon/CMS originates from a services contract entered into in 1995 between General Medicine and Horizon/CMS whereby General Medicine agreed to provide medical director services to skilled nursing facilities owned by Horizon/CMS for a term of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">three years</font><font style="font-family:inherit;font-size:10pt;">. Horizon/CMS terminated the agreement for cause six months after it was executed, and General Medicine then initiated a lawsuit against Horizon/CMS in the United States District Court for the Eastern District of Michigan in 1996 (the &#8220;Michigan Action&#8221;). General Medicine&#8217;s complaint in the Michigan Action alleged that Horizon/CMS breached the services contract by wrongfully terminating General Medicine. We acquired Horizon/CMS in 1997 and sold it to Meadowbrook Healthcare, Inc. in 2001 pursuant to a stock purchase agreement. In 2004, Meadowbrook, without the knowledge of HealthSouth, consented to the entry of a final judgment in the Michigan Action in favor of General Medicine against Horizon/CMS for the alleged wrongful termination of the contract with General Medicine in the amount of </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$376 million</font><font style="font-family:inherit;font-size:10pt;"> (the &#8220;Consent Judgment&#8221;). The </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$376 million</font><font style="font-family:inherit;font-size:10pt;"> damages figure was unilaterally selected by General Medicine and was not tested or opposed by Meadowbrook. Additionally, the settlement agreement (the &#8220;Settlement&#8221;) used as the basis for the Consent Judgment provided that Meadowbrook would pay only </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">$300,000</font><font style="font-family:inherit;font-size:10pt;"> to General Medicine to settle the Michigan Action and that General Medicine would seek to recover the remaining balance of the Consent Judgment solely from us. We were not a party to the Michigan Action, the Settlement negotiated by Meadowbrook, or the Consent Judgment. </font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The complaint filed by General Medicine against us in the Alabama Action alleged that while Horizon/CMS was our wholly owned subsidiary, General Medicine was an existing creditor of Horizon/CMS by virtue of the breach of contract claim underlying the Settlement. The complaint also alleged we caused Horizon/CMS to transfer its assets to us for less than a reasonably equivalent value or, in the alternative, with the actual intent to defraud creditors of Horizon/CMS, including General Medicine, in violation of the Alabama Uniform Fraudulent Transfer Act. General Medicine further alleged in its amended complaint that we were liable for the Consent Judgment despite not being a party to it because as Horizon/CMS&#8217;s parent we failed to observe corporate formalities in our operation and ownership of Horizon/CMS, misused our control of Horizon/CMS, stripped assets from Horizon/CMS, and engaged in other conduct which amounted to a fraud on Horizon/CMS&#8217;s creditors. General Medicine requested relief including recovery of the unpaid amount of the Consent Judgment, the avoidance of the subject transfers of assets, attachment of the assets transferred to us, appointment of a receiver over the transferred properties, and a monetary judgment for the value of properties transferred. </font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We denied liability to General Medicine and asserted defenses and a counterclaim against General Medicine that the Consent Judgment was the product of collusion by General Medicine and Meadowbrook. Consequently, we asserted that the Consent Judgment was not evidence of a legitimate debt owed by Horizon/CMS to General Medicine that was collectible from HealthSouth under any theory of liability.</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The trial in the Alabama Action began on March 9, 2015. On March 22, 2015, we entered into an agreement with General Medicine to settle the Alabama Action</font><font style="font-family:inherit;font-size:10pt;font-style:italic;">. </font><font style="font-family:inherit;font-size:10pt;">Although the specific terms of this settlement agreement are confidential, both parties agreed to dismiss with prejudice the lawsuit pending in the Circuit Court of Jefferson County, Alabama and to release all claims between the parties. In exchange for General Medicine&#8217;s release, we agreed to pay an amount of cash that is not material.</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Other Litigation&#8212;</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We have been named as a defendant in a lawsuit filed March 28, 2003 by several individual stockholders in the Circuit Court of Jefferson County, Alabama, captioned </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Nichols v. HealthSouth Corp</font><font style="font-family:inherit;font-size:10pt;">. The plaintiffs allege that we, some of our former officers, and our former investment bank engaged in a scheme to overstate and misrepresent our earnings and financial position. The plaintiffs are seeking compensatory and punitive damages. This case was consolidated with the </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">Tucker</font><font style="font-family:inherit;font-size:10pt;"> case for discovery and other pretrial purposes and was stayed in the Circuit Court on August&#160;8, 2005. The plaintiffs filed an amended complaint on November 9, 2010 to which we responded with a motion to dismiss filed on December 22, 2010. During a hearing on February&#160;24, 2012, plaintiffs&#8217; counsel indicated his intent to dismiss certain claims against us. Instead, on March 9, 2012, the plaintiffs amended their complaint to include additional securities fraud claims against HealthSouth and add several former officers to the lawsuit. On September 12, 2012, the plaintiffs further amended their complaint to request certification as a class action. One of those named officers has repeatedly attempted to remove the case to federal district court, most recently on December 11, 2012. We filed our latest motion to remand the case back to state court on January 10, 2013. On September 27, 2013, the federal court remanded the case back to state court. On November 25, 2014, the plaintiffs filed another amended complaint to assert new allegations relating to the time period of 1997 to 2002. On December 10, 2014, we filed a motion to dismiss on the grounds the plaintiffs lack standing because their claims are derivative in nature, and the claims are time-barred by the statute of limitations. A hearing on our motion has not yet been set.</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We intend to vigorously defend ourselves in this case. Based on the stage of litigation, review of the current facts and circumstances as we understand them, the nature of the underlying claim, the results of the proceedings to date, and the nature and scope of the defense we continue to mount, we do not believe an adverse judgment or settlement is probable in this matter, and it is also not possible to estimate the amount of loss, if any, or range of possible loss that might result from an adverse judgment or settlement of this case.</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Governmental Inquiries and Investigations&#8212;</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On June 24, 2011, we received a document subpoena addressed to HealthSouth Hospital of Houston, a long-term acute care hospital (&#8220;LTCH&#8221;) we closed in August 2011, and issued from the Dallas, Texas office of the HHS-OIG. The subpoena stated it was in connection with an investigation of possible false or otherwise improper claims submitted to Medicare and Medicaid and requested documents and materials relating to patient admissions, length of stay, and discharge matters at this closed LTCH. We furnished the documents requested and have heard nothing from the HHS-OIG since December 2012.</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">On March 4, 2013, we received document subpoenas from an office of the HHS-OIG addressed to </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">four</font><font style="font-family:inherit;font-size:10pt;"> of our hospitals. Those subpoenas also requested complete copies of medical records for </font><font style="font-family:inherit;font-size:10pt;">100</font><font style="font-family:inherit;font-size:10pt;"> patients treated at each of those hospitals between September 2008 and June 2012. The investigation is being conducted by the United States Department of Justice (the &#8220;DOJ&#8221;). On April 24, 2014, we received document subpoenas relating to an additional </font><font style="font-family:inherit;font-size:10pt;">seven</font><font style="font-family:inherit;font-size:10pt;"> of our hospitals. The new subpoenas reference substantially similar investigation subject matter as the original subpoenas and request materials from the period January 2008 through December 2013. </font><font style="font-family:inherit;font-size:10pt;">Two</font><font style="font-family:inherit;font-size:10pt;"> of the four hospitals addressed in the original set of subpoenas have received supplemental subpoenas to cover this new time period. The most recent subpoenas do not include requests for specific patient files. However, in February 2015, the DOJ requested the voluntary production of the medical records of an additional </font><font style="font-family:inherit;font-size:10pt;">70</font><font style="font-family:inherit;font-size:10pt;"> patients, some of whom were treated in hospitals not subject to the subpoenas, and we provided these records. </font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">All of the subpoenas are in connection with an investigation of alleged improper or fraudulent claims submitted to Medicare and Medicaid and request documents and materials relating to practices, procedures, protocols and policies, of certain pre- and post-admissions activities at these hospitals including, among other things, marketing functions, pre-admission screening, post-admission physician evaluations, patient assessment instruments, individualized patient plans of care, and compliance with the Medicare </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">60%</font><font style="font-family:inherit;font-size:10pt;"> rule. Under the Medicare rule commonly referred to as the &#8220;</font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">60%</font><font style="font-family:inherit;font-size:10pt;"> rule,&#8221; an inpatient rehabilitation hospital must treat </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">60%</font><font style="font-family:inherit;font-size:10pt;"> or more of its patients from at least one of a specified list of medical conditions in order to be reimbursed at the inpatient rehabilitation hospital payment rates, rather than at the lower acute care hospital payment rates. </font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We are cooperating fully with the DOJ in connection with these subpoenas and are currently unable to predict the timing or outcome of the related investigations. </font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Other Matters&#8212;</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The False Claims Act, 18 U.S.C. &#167; 287, allows private citizens, called &#8220;relators,&#8221; to institute civil proceedings alleging violations of the False Claims Act. These </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">qui tam</font><font style="font-family:inherit;font-size:10pt;"> cases are generally sealed by the court at the time of filing. The only parties typically privy to the information contained in the complaint are the relator, the federal government, and the presiding court. It is possible that </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">qui tam</font><font style="font-family:inherit;font-size:10pt;"> lawsuits have been filed against us and that those suits remain under seal or that we are unaware of such filings or prevented by existing law, court order, or agreement with the government from discussing or disclosing the filing of such suits. We may be subject to liability under one or more undisclosed </font><font style="font-family:inherit;font-size:10pt;font-style:italic;">qui tam</font><font style="font-family:inherit;font-size:10pt;"> cases brought pursuant to the False Claims Act.</font></div><div style="line-height:120%;padding-bottom:13px;text-align:left;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">It is our obligation as a participant in Medicare and other federal healthcare programs to routinely conduct audits and reviews of the accuracy of our billing systems and other regulatory compliance matters. As a result of these reviews, we have made, and will continue to make, disclosures to the HHS-OIG and the United States Centers for Medicare and Medicaid Services relating to amounts we suspect represent over-payments from these programs, whether due to inaccurate billing or otherwise. Some of these disclosures have resulted in, or may result in, HealthSouth refunding amounts to Medicare or other federal healthcare programs.</font></div></div>

Files In Submission

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