BIRMINGHAM, Ala., Oct. 28, 2020 /PRNewswire/ -- Encompass
Health Corp. (NYSE: EHC), a national leader in integrated
healthcare, offering facility-based and home-based patient care
through its network of inpatient rehabilitation hospitals, home
health agencies and hospice agencies, today reported its results of
operations for the third quarter ended September 30, 2020.
"Our teams are doing an extraordinary job in managing through
the COVID-19 pandemic," said President and Chief Executive Officer
of Encompass Health Mark Tarr. "Our volumes recovered substantially
in the third quarter, and we remain confident in the longer-term
outlook for our company."
Consolidated
results
|
|
|
|
|
|
|
Growth
|
|
Q3
2020
|
|
Q3
2019
|
|
Dollars
|
|
Percent
|
|
(In Millions, Except
per Share Data)
|
Net operating
revenues
|
$
|
1,173.9
|
|
|
$
|
1,161.6
|
|
|
$
|
12.3
|
|
|
1.1
|
%
|
Income from
continuing operations attributable to Encompass Health per diluted
share
|
0.78
|
|
|
0.98
|
|
|
(0.20)
|
|
|
(20.4)
|
%
|
Adjusted earnings per
share
|
0.78
|
|
|
0.93
|
|
|
(0.15)
|
|
|
(16.1)
|
%
|
Cash flows provided
by operating activities
|
173.4
|
|
|
114.4
|
|
|
59.0
|
|
|
51.6
|
%
|
Adjusted
EBITDA
|
230.2
|
|
|
231.6
|
|
|
(1.4)
|
|
|
(0.6)
|
%
|
Adjusted free cash
flow
|
124.1
|
|
|
109.6
|
|
|
14.5
|
|
|
13.2
|
%
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Cash flows provided
by operating activities
|
$
|
425.0
|
|
|
$
|
419.7
|
|
|
$
|
5.3
|
|
|
1.3
|
%
|
Adjusted free cash
flow
|
366.9
|
|
|
379.6
|
|
|
(12.7)
|
|
|
(3.3)
|
%
|
Revenue growth resulted from favorable pricing in the inpatient
rehabilitation segment partially offset by decreased volumes in
both segments and a pricing decrease in the home health and hospice
segment.
Income from continuing operations attributable to Encompass
Health per diluted share for the third quarter of 2019 included a
$19 million, or $0.14 per share, gain on the consolidation of
Yuma Rehabilitation Hospital.
The decrease in adjusted earnings per share in the third quarter
of 2020 compared to the third quarter of 2019 resulted from higher
depreciation and amortization and higher interest expense primarily
resulting from funding the purchase of the Home Health Holdings
rollover shares and exercise of SARs in the first quarter of
2020.
Cash flows provided by operating activities in the first nine
months increased slightly year over year. Adjusted free cash flow
was lower in the first nine months of 2020 than the first nine
months of 2019 primarily due to a decrease in revenues and
increased cash interest payments partially offset by a decrease in
working capital and lower payments for cash taxes. The decrease in
working capital primarily resulted from the timing of and increase
in payroll accruals.
See attached supplemental information for calculations of
non-GAAP measures and reconciliations to their most comparable GAAP
measure.
Inpatient
rehabilitation segment results
|
|
|
|
|
|
Growth
|
|
Q3
2020
|
|
Q3
2019
|
|
Dollars
|
|
Percent
|
Net operating
revenues:
|
(In
Millions)
|
Inpatient
|
$
|
883.2
|
|
|
$
|
850.6
|
|
|
$
|
32.6
|
|
|
3.8
|
%
|
Outpatient and
other
|
16.2
|
|
|
21.7
|
|
|
(5.5)
|
|
|
(25.3)
|
%
|
Total segment
revenue
|
$
|
899.4
|
|
|
$
|
872.3
|
|
|
$
|
27.1
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
(Actual
Amounts)
|
Discharges
|
45,962
|
|
|
46,669
|
|
|
(707)
|
|
|
(1.5)
|
%
|
Same-store discharge
growth
|
|
|
|
|
|
|
(2.8)
|
%
|
Net patient
revenue per discharge
|
$
|
19,216
|
|
|
$
|
18,226
|
|
|
$
|
990
|
|
|
5.4
|
%
|
Revenue reserves
related to bad debt as a percent of revenue
|
1.4
|
%
|
|
1.5
|
%
|
|
|
|
(10 basis
points)
|
|
|
|
|
|
|
|
|
|
(In
Millions)
|
Adjusted
EBITDA
|
$
|
209.2
|
|
|
$
|
210.6
|
|
|
$
|
(1.4)
|
|
|
(0.7)
|
%
|
|
|
•
|
Revenue -
Inpatient revenue growth resulted from favorable pricing partially
offset by decreased volumes. New-store discharge growth of 1.3%
resulted from joint ventures in Boise, Idaho (July 2019) and
Coralville, Iowa (June 2020) and wholly owned hospitals in Katy,
Texas (September 2019) Murrieta, California (February 2020) and
Sioux Falls, South Dakota (June 2020). Growth in net patient
revenue per discharge primarily resulted from a higher acuity
patient mix and the temporary suspension of
sequestration.
|
|
|
|
The decrease in
outpatient and other revenue resulted from the COVID-19 pandemic
related suspension of hospital-based outpatient services in
mid-March 2020 and the closure of certain hospital-based outpatient
programs in 2019.
|
|
|
|
Revenue reserves
related to bad debt as a percent of revenue decreased to 1.4% as
Medicare Administrative Contractors did not resume targeted probe
and educate audits during the third quarter of 2020.
|
|
|
•
|
Adjusted
EBITDA - The decrease in Adjusted EBITDA primarily related
to the COVID-19 pandemic.
|
Home health and
hospice segment results
|
|
|
|
|
|
|
Growth
|
|
Q3
2020
|
|
Q3
2019
|
|
Dollars
|
|
Percent
|
Net operating
revenues:
|
(In
Millions)
|
Home health
|
$
|
223.3
|
|
|
$
|
238.9
|
|
|
$
|
(15.6)
|
|
|
(6.5)
|
%
|
Hospice
|
51.2
|
|
|
50.4
|
|
|
0.8
|
|
|
1.6
|
%
|
Total segment
revenue
|
$
|
274.5
|
|
|
$
|
289.3
|
|
|
$
|
(14.8)
|
|
|
(5.1)
|
%
|
|
|
|
|
|
|
|
|
Home Health
Metrics
|
(Actual
Amounts)
|
Admissions
|
40,765
|
|
|
42,174
|
|
|
(1,409)
|
|
|
(3.3)
|
%
|
Same-store admissions
growth
|
|
|
|
|
|
|
(4.6)
|
%
|
Episodes
|
68,261
|
|
|
72,016
|
|
|
(3,755)
|
|
|
(5.2)
|
%
|
Same-store episode
growth
|
|
|
|
|
|
|
(6.2)
|
%
|
Revenue per
episode
|
$
|
2,910
|
|
|
$
|
2,980
|
|
|
$
|
(70)
|
|
|
(2.3)
|
%
|
|
|
|
|
|
|
|
|
|
(In
Millions)
|
Adjusted
EBITDA
|
$
|
51.8
|
|
|
$
|
50.8
|
|
|
$
|
1.0
|
|
|
2.0
|
%
|
|
|
•
|
Revenue -
Decreased volumes and pricing resulted in a decline in home health
revenue. New-store admissions growth primarily resulted from one
acquired location in Virginia (Q1 2020) and one de novo location in
Florida (Q2 2020). Revenue per episode was negatively impacted by
the implementation of the Patient Driven Groupings Model ("PDGM"),
the effects of which were exacerbated by the COVID-19 pandemic. The
revenue per episode decrease of 2.3% was favorably impacted by the
temporary suspension of sequestration and an increase in new
episode starts late in the quarter.
|
|
|
|
Hospice same-store
admissions growth of 15.8% yielded a 1.6% increase in hospice
revenue. Hospice revenue growth was impacted by a decrease in
length of say resulting from a change in patient mix.
|
|
|
•
|
Adjusted
EBITDA - The increase in Adjusted EBITDA primarily
resulted from a decrease in cost of services as a percent of
revenue in the third quarter of 2020. Cost of services decreased as
a percent of revenue primarily due to changes in the clinician
compensation structure implemented in May 2020. The segment's
support and overhead costs increased year over year due to an
increase in sales force full-time equivalents and increased
administrative costs associated with the implementation of PDGM and
the Review Choice Demonstration program.
|
General and
administrative expenses
|
|
|
Q3
2020
|
|
% of
Consolidated
Revenue
|
|
Q3
2019
|
|
% of
Consolidated
Revenue
|
|
(In
Millions)
|
General and
administrative expenses, excluding stock-based compensation and
transaction costs
|
$
|
30.8
|
|
|
2.6%
|
|
$
|
29.8
|
|
|
2.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
General and
administrative expenses were flat as a percent of
consolidated revenue.
|
Expansion Activity
During the third quarter of 2020, the Company announced plans to
build seven new inpatient rehabilitation hospitals and added 36
beds to existing hospitals. These announcements bring the Company's
planned new hospital openings in 2021 and 2022 to eight in each
year.
Shareholder and other distributions
In the third quarter of 2020, the Company paid a quarterly cash
dividend of $0.28 per share on its
common stock and declared a quarterly cash dividend of $0.28 per share that was paid in October 2020. In October
2020, the Company declared a quarterly cash dividend of
$0.28 per share on its common stock
to be paid in January 2021.
Balance sheet and liquidity
As of September 30, 2020, the
Company had approximately $450
million in cash and approximately $964 million available to it under its
$1.0 billion revolving credit
facility. The Company's leverage ratio at the end of the third
quarter of 2020 was 4.2x (3.6x net of cash on hand).
In October 2020, the Company
issued $400 million of 4.625% Senior
Notes due 2031. The proceeds from this issuance together with
approximately $300 million of
available cash will be used to fully redeem $700 million of 5.75% Senior Notes due 2024 at
par on November 1, 2020, resulting in
a pro forma leverage ratio of 3.8x (3.6x net of cash on
hand).
Q4 2020 Guidance
The Company provided the following guidance for the fourth
quarter of 2020.
|
Q4 2020
Guidance
|
|
(In Millions,
Except
Per Share Data)
|
Net operating
revenues
|
$1,150 to
$1,220
|
Adjusted
EBITDA
|
$225 to
$240
|
Adjusted earnings per
share from continuing operations attributable to Encompass
Health
|
$0.79 to
$0.90
|
For additional considerations regarding the Company's Q4 2020
guidance, see the supplemental information posted on the Company's
website at http://investor.encompasshealth.com. See also the "Other
Information" section below for an explanation of why the Company
does not provide guidance for comparable GAAP measures for Adjusted
EBITDA and adjusted earnings per share.
Earnings conference call and webcast
The Company will host an investor conference call at
9:00 a.m. Eastern Time on Thursday,
October 29, 2020, to discuss its results for the third quarter
of 2020. For reference during the call, the Company will post
certain supplemental information at
http://investor.encompasshealth.com.
The conference call may be accessed by dialing 877 587-6761 and
giving the pass code 1451026. International callers should dial 706
679-1635 and give the same pass code. Please call approximately ten
minutes before the start of the call to ensure you are
connected. The conference call will also be webcast live and
will be available for on-line replay at
http://investor.encompasshealth.com by clicking on an available
link.
About Encompass Health
As a national leader in integrated healthcare services,
Encompass Health (NYSE: EHC) offers both facility-based and
home-based patient care through its network of inpatient
rehabilitation hospitals, home health agencies and hospice
agencies. With a national footprint that includes 136 hospitals,
242 home health locations and 83 hospice locations in 39 states and
Puerto Rico, the Company is
committed to delivering high-quality, cost-effective integrated
care across the healthcare continuum. Driven by a set of shared
values, Encompass Health is ranked as one of Fortune's 100 Best
Companies to Work For. For more information, visit
encompasshealth.com, or follow us on Twitter and Facebook.
Other information
The information in this press release is summarized and should
be read in conjunction with the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2020 (the
"September 2020 Form 10–Q"),
when filed, as well as the Company's Current Report on Form 8-K
filed on October 28, 2020 (the "Q3 Earnings Form 8-K"), to
which this press release is attached as Exhibit 99.1. In
addition, the Company will post supplemental information today on
its website at http://investor.encompasshealth.com for reference
during its October 29, 2020 earnings call.
The financial data contained in the press release and
supplemental information include non-GAAP financial measures,
including the Company's adjusted earnings per share, leverage
ratio, Adjusted EBITDA, and adjusted free cash flow.
Reconciliations to their most comparable GAAP measure are included
below, in the supplemental information, or in the Q3 Earnings Form
8-K. Readers are encouraged to review the "Note Regarding
Presentation of Non-GAAP Financial Measures" included in the Q3
Earnings Form 8-K which provides further explanation and disclosure
regarding the Company's use of these non-GAAP financial
measures.
Excluding net operating revenues, the Company does not provide
guidance on a GAAP basis because it is unable to predict, with
reasonable certainty, the future impact of items that are deemed to
be outside the control of the Company or otherwise non-indicative
of its ongoing operating performance. Such items include
government, class action, and related settlements; professional
fees-accounting, tax, and legal; mark-to-market adjustments for
stock appreciation rights; gains or losses related to hedging
instruments; loss on early extinguishment of debt; adjustments to
its income tax provision (such as valuation allowance adjustments
and settlements of income tax claims); items related to corporate
and facility restructurings; and certain other items the Company
believes to be non-indicative of its ongoing operations. These
items cannot be reasonably predicted and will depend on several
factors, including industry and market conditions, and could be
material to the Company's results computed in accordance with
GAAP.
However, the following reasonably estimable GAAP measures for Q4
2020 would be included in a reconciliation for Adjusted EBITDA if
the other reconciling GAAP measures could be reasonably
predicted:
- Interest expense and amortization of debt discounts and fees -
estimate of $39 million to
$49 million
- amortization of debt-related items - approximately $2 million
The Q3 Earnings Form 8-K and, when filed, the September 2020 Form 10-Q can be found on the
Company's website at http://investor.encompasshealth.com and the
SEC's website at www.sec.gov.
Encompass Health
Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Comprehensive Income
|
(Unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
(In Millions,
Except per Share Data)
|
Net operating
revenues
|
$
|
1,173.9
|
|
|
$
|
1,161.6
|
|
|
$
|
3,430.0
|
|
|
$
|
3,420.6
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Salaries and
benefits
|
664.9
|
|
|
660.8
|
|
|
1,995.9
|
|
|
1,904.5
|
|
|
Other operating
expenses
|
163.4
|
|
|
156.6
|
|
|
471.3
|
|
|
456.5
|
|
|
Occupancy
costs
|
20.3
|
|
|
21.8
|
|
|
60.8
|
|
|
61.7
|
|
|
Supplies
|
52.5
|
|
|
42.9
|
|
|
148.8
|
|
|
124.7
|
|
|
General and
administrative expenses
|
39.1
|
|
|
52.5
|
|
|
117.7
|
|
|
183.0
|
|
|
Depreciation and
amortization
|
61.2
|
|
|
55.1
|
|
|
180.7
|
|
|
160.3
|
|
|
Government, class
action, and related settlements
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
|
Total operating
expenses
|
1,001.4
|
|
|
989.7
|
|
|
2,978.0
|
|
|
2,890.7
|
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
|
Interest expense and
amortization of debt discounts and fees
|
49.0
|
|
|
40.3
|
|
|
138.0
|
|
|
115.2
|
|
|
Other
income
|
(2.5)
|
|
|
(21.0)
|
|
|
(6.4)
|
|
|
(26.9)
|
|
|
Equity in net income
of nonconsolidated affiliates
|
(1.0)
|
|
|
(1.2)
|
|
|
(2.5)
|
|
|
(5.5)
|
|
|
Income from continuing
operations before income tax expense
|
127.0
|
|
|
153.8
|
|
|
322.9
|
|
|
444.8
|
|
|
Provision for income
tax expense
|
26.9
|
|
|
34.3
|
|
|
65.8
|
|
|
88.6
|
|
|
Income from continuing
operations
|
100.1
|
|
|
119.5
|
|
|
257.1
|
|
|
356.2
|
|
|
Loss from
discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6)
|
|
|
Net and
comprehensive income
|
100.1
|
|
|
119.5
|
|
|
257.1
|
|
|
355.6
|
|
|
Less: Net and
comprehensive income attributable to noncontrolling
interests
|
(22.4)
|
|
|
(21.9)
|
|
|
(58.9)
|
|
|
(64.5)
|
|
|
Net and
comprehensive income attributable to Encompass
Health
|
$
|
77.7
|
|
|
$
|
97.6
|
|
|
$
|
198.2
|
|
|
$
|
291.1
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
98.7
|
|
|
97.8
|
|
|
98.5
|
|
|
98.1
|
|
|
Diluted
|
99.9
|
|
|
99.4
|
|
|
99.7
|
|
|
99.5
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share:
|
|
|
|
|
|
|
|
Basic earnings per
share attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
0.78
|
|
|
$
|
0.99
|
|
|
$
|
2.01
|
|
|
$
|
2.97
|
|
|
Discontinued
operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01)
|
|
|
Net income
|
$
|
0.78
|
|
|
$
|
0.99
|
|
|
$
|
2.01
|
|
|
$
|
2.96
|
|
|
Diluted earnings
per share attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
0.78
|
|
|
$
|
0.98
|
|
|
$
|
1.99
|
|
|
$
|
2.94
|
|
|
Discontinued
operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01)
|
|
|
Net income
|
$
|
0.78
|
|
|
$
|
0.98
|
|
|
$
|
1.99
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
Income from continuing
operations
|
$
|
77.7
|
|
|
$
|
97.6
|
|
|
$
|
198.2
|
|
|
$
|
291.7
|
|
|
Loss from discontinued
operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6)
|
|
|
Net income
attributable to Encompass Health
|
$
|
77.7
|
|
|
$
|
97.6
|
|
|
$
|
198.2
|
|
|
$
|
291.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Encompass Health
Corporation and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
|
September
30,
2020
|
|
December
31,
2019
|
|
(In
Millions)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
450.0
|
|
|
$
|
94.8
|
|
Restricted
cash
|
57.2
|
|
|
57.4
|
|
Accounts
receivable
|
593.3
|
|
|
506.1
|
|
Other current
assets
|
73.9
|
|
|
97.5
|
|
Total current
assets
|
1,174.4
|
|
|
755.8
|
|
Property and
equipment, net
|
2,094.9
|
|
|
1,959.3
|
|
Operating lease
right-of-use assets
|
267.2
|
|
|
276.5
|
|
Goodwill
|
2,318.7
|
|
|
2,305.2
|
|
Intangible assets,
net
|
441.9
|
|
|
476.3
|
|
Deferred income tax
assets
|
7.5
|
|
|
2.9
|
|
Other long-term
assets
|
305.9
|
|
|
304.7
|
|
Total
assets
|
$
|
6,610.5
|
|
|
$
|
6,080.7
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
|
37.0
|
|
|
$
|
39.3
|
|
Current operating
lease liabilities
|
47.1
|
|
|
40.4
|
|
Accounts
payable
|
119.6
|
|
|
94.6
|
|
Accrued expenses and
other current liabilities
|
478.8
|
|
|
546.7
|
|
Total current
liabilities
|
682.5
|
|
|
721.0
|
|
Long-term debt, net
of current portion
|
3,539.4
|
|
|
3,023.3
|
|
Long-term operating
lease liabilities
|
228.9
|
|
|
243.8
|
|
Other long-term
liabilities
|
230.0
|
|
|
159.9
|
|
|
4,680.8
|
|
|
4,148.0
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
34.0
|
|
|
239.6
|
|
Shareholders'
equity:
|
|
|
|
Encompass Health
shareholders' equity
|
1,520.8
|
|
|
1,352.2
|
|
Noncontrolling
interests
|
374.9
|
|
|
340.9
|
|
Total shareholders'
equity
|
1,895.7
|
|
|
1,693.1
|
|
Total liabilities
and shareholders' equity
|
$
|
6,610.5
|
|
|
$
|
6,080.7
|
|
Encompass Health
Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
(In
Millions)
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
257.1
|
|
|
$
|
355.6
|
|
Loss from
discontinued operations, net of tax
|
—
|
|
|
0.6
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities—
|
|
|
|
Depreciation and
amortization
|
180.7
|
|
|
160.3
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
2.3
|
|
Stock-based
compensation
|
25.3
|
|
|
87.0
|
|
Deferred tax (benefit)
expense
|
(5.7)
|
|
|
20.8
|
|
Gain on consolidation
of Yuma Rehabilitation Hospital
|
—
|
|
|
(19.2)
|
|
Other, net
|
15.5
|
|
|
2.3
|
|
Change in assets and
liabilities, net of acquisitions—
|
|
|
|
Accounts
receivable
|
(71.8)
|
|
|
(37.8)
|
|
Other
assets
|
17.3
|
|
|
(11.1)
|
|
Accounts
payable
|
10.3
|
|
|
(4.2)
|
|
Accrued
payroll
|
86.7
|
|
|
(21.0)
|
|
Accrued interest
payable
|
(0.2)
|
|
|
7.4
|
|
Other
liabilities
|
(90.0)
|
|
|
(118.7)
|
|
Net cash used in
operating activities of discontinued operations
|
(0.2)
|
|
|
(4.6)
|
|
Total
adjustments
|
167.9
|
|
|
63.5
|
|
Net cash provided
by operating activities
|
425.0
|
|
|
419.7
|
|
Cash flows from
investing activities:
|
|
|
|
Acquisitions of
businesses, net of cash acquired
|
(1.1)
|
|
|
(231.2)
|
|
Purchases of property
and equipment
|
(256.2)
|
|
|
(259.9)
|
|
Additions to
capitalized software costs
|
(5.7)
|
|
|
(9.2)
|
|
Other, net
|
(1.8)
|
|
|
(11.4)
|
|
Net cash used in
investing activities
|
(264.8)
|
|
|
(511.7)
|
|
|
|
|
|
Encompass Health
Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows (Continued)
|
(Unaudited)
|
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
(In
Millions)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from bond
issuance
|
592.5
|
|
|
1,000.0
|
|
Principal payments on
debt, including pre-payments
|
(14.7)
|
|
|
(115.8)
|
|
Borrowings on
revolving credit facility
|
330.0
|
|
|
525.0
|
|
Payments on revolving
credit facility
|
(375.0)
|
|
|
(555.0)
|
|
Principal payments
under finance lease obligations
|
(16.7)
|
|
|
(14.2)
|
|
Debt issuance
costs
|
(13.5)
|
|
|
(15.2)
|
|
Taxes paid on behalf
of employees for shares withheld
|
(15.7)
|
|
|
(16.2)
|
|
Dividends paid on
common stock
|
(84.3)
|
|
|
(81.3)
|
|
Distributions paid to
noncontrolling interests of consolidated affiliates
|
(52.9)
|
|
|
(57.6)
|
|
Repurchases of common
stock, including fees and expenses
|
(4.9)
|
|
|
(45.9)
|
|
Purchase of equity
interests in consolidated affiliates
|
(162.3)
|
|
|
(162.9)
|
|
Other, net
|
25.8
|
|
|
11.4
|
|
Net cash provided
by financing activities
|
208.3
|
|
|
472.3
|
|
Increase in cash,
cash equivalents, and restricted cash
|
368.5
|
|
|
380.3
|
|
Cash, cash
equivalents, and restricted cash at beginning of
period
|
159.6
|
|
|
133.5
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
528.1
|
|
|
$
|
513.8
|
|
|
|
|
|
Reconciliation of
Cash, Cash Equivalents, and Restricted Cash
|
|
|
|
Cash and cash
equivalents at beginning of period
|
$
|
94.8
|
|
|
$
|
69.2
|
|
Restricted cash at
beginning of period
|
57.4
|
|
|
59.0
|
|
Restricted cash
included in other long-term assets at beginning of
period
|
7.4
|
|
|
5.3
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
$
|
159.6
|
|
|
$
|
133.5
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
$
|
450.0
|
|
|
$
|
422.0
|
|
Restricted cash at end
of period
|
57.2
|
|
|
66.8
|
|
Restricted cash
included in other long-term assets at end of period
|
20.9
|
|
|
25.0
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
528.1
|
|
|
$
|
513.8
|
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Earnings Per
Share
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In Millions,
Except Per Share Data)
|
Consolidated
Adjusted EBITDA
|
$
|
230.2
|
|
|
$
|
231.6
|
|
|
$
|
620.4
|
|
|
$
|
726.7
|
|
Depreciation and
amortization
|
(61.2)
|
|
|
(55.1)
|
|
|
(180.7)
|
|
|
(160.3)
|
|
Interest expense and
amortization of debt discounts and fees
|
(49.0)
|
|
|
(40.3)
|
|
|
(138.0)
|
|
|
(115.2)
|
|
Stock-based
compensation expense
|
(8.3)
|
|
|
(21.7)
|
|
|
(25.3)
|
|
|
(87.0)
|
|
Loss on disposal or
impairment of assets
|
(7.5)
|
|
|
(0.9)
|
|
|
(10.6)
|
|
|
(3.3)
|
|
|
104.2
|
|
|
113.6
|
|
|
265.8
|
|
|
360.9
|
|
Certain items
non-indicative of ongoing operating performance:
|
|
|
|
|
|
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.3)
|
|
Transaction
costs
|
—
|
|
|
(1.0)
|
|
|
—
|
|
|
(2.0)
|
|
Gain on consolidation
of former equity method location
|
—
|
|
|
19.2
|
|
|
2.2
|
|
|
19.2
|
|
SARs mark-to-market
impact on noncontrolling interests
|
—
|
|
|
0.9
|
|
|
—
|
|
|
4.3
|
|
Change in fair market
value of equity securities
|
0.4
|
|
|
—
|
|
|
0.3
|
|
|
1.2
|
|
Government, class
action, and related settlements
|
—
|
|
|
—
|
|
|
(2.8)
|
|
|
—
|
|
Payroll taxes on SARs
exercise
|
—
|
|
|
(0.8)
|
|
|
(1.5)
|
|
|
(1.0)
|
|
Pre-tax
income
|
104.6
|
|
|
131.9
|
|
|
264.0
|
|
|
380.3
|
|
Income tax
expense
|
(26.9)
|
|
|
(34.3)
|
|
|
(65.8)
|
|
|
(88.6)
|
|
Income from
continuing operations (1)
|
$
|
77.7
|
|
|
$
|
97.6
|
|
|
$
|
198.2
|
|
|
$
|
291.7
|
|
|
|
|
|
|
|
|
|
Basic
shares
|
98.7
|
|
|
97.8
|
|
|
98.5
|
|
|
98.1
|
|
Diluted
shares
|
99.9
|
|
|
99.4
|
|
|
99.7
|
|
|
99.5
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share (1)
|
$
|
0.78
|
|
|
$
|
0.99
|
|
|
$
|
2.01
|
|
|
$
|
2.97
|
|
Diluted earnings
per share (1)
|
$
|
0.78
|
|
|
$
|
0.98
|
|
|
$
|
1.99
|
|
|
$
|
2.94
|
|
|
|
(1)
|
Income from
continuing operations attributable to Encompass Health
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Adjusted Earnings
Per Share
|
|
|
Q3
|
|
9
Months
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Earnings per
share, as reported
|
$
|
0.78
|
|
|
$
|
0.98
|
|
|
$
|
1.99
|
|
|
$
|
2.94
|
|
Adjustments, net of
tax:
|
|
|
|
|
|
|
|
Government, class
action, and related settlements
|
—
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
Mark-to-market
adjustments for stock compensation expense
|
—
|
|
|
0.08
|
|
|
—
|
|
|
0.36
|
|
Transaction
costs
|
—
|
|
|
0.01
|
|
|
—
|
|
|
0.02
|
|
Income tax
adjustments
|
—
|
|
|
—
|
|
|
(0.05)
|
|
|
(0.13)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
0.02
|
|
Change in fair market
value of equity securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01)
|
|
Gain on consolidation
of former equity method location
|
—
|
|
|
(0.14)
|
|
|
(0.02)
|
|
|
(0.14)
|
|
Payroll taxes on SARs
exercise
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|
0.01
|
|
Adjusted earnings
per share(1)
|
$
|
0.78
|
|
|
$
|
0.93
|
|
|
$
|
1.96
|
|
|
$
|
3.05
|
|
|
|
(1)
|
Adjusted EPS may not
sum due to rounding.
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Adjusted Earnings
Per Share
|
|
|
For the Three
Months Ended September 30, 2020
|
|
|
|
Adjustments
|
|
|
As
Reported
|
|
Income Tax
Adjustments
|
|
Change in Fair
Market Value of
Equity Securities
|
|
As
Adjusted
|
|
(In Millions,
Except Per Share Amounts)
|
Adjusted
EBITDA(1)
|
$
|
230.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
230.2
|
|
Depreciation and
amortization
|
(61.2)
|
|
|
—
|
|
|
—
|
|
|
(61.2)
|
|
Interest expense and
amortization of debt discounts and fees
|
(49.0)
|
|
|
—
|
|
|
—
|
|
|
(49.0)
|
|
Stock-based
compensation
|
(8.3)
|
|
|
—
|
|
|
—
|
|
|
(8.3)
|
|
Loss on disposal or
impairment of assets
|
(7.5)
|
|
|
—
|
|
|
—
|
|
|
(7.5)
|
|
Change in fair market
value of equity securities
|
0.4
|
|
|
—
|
|
|
(0.4)
|
|
|
—
|
|
Income from
continuing operations before income tax expense
|
104.6
|
|
|
—
|
|
|
(0.4)
|
|
|
104.2
|
|
Provision for income
tax expense
|
(26.9)
|
|
|
0.1
|
|
|
0.1
|
|
|
(26.7)
|
|
Income from
continuing operations attributable to Encompass
Health
|
$
|
77.7
|
|
|
$
|
0.1
|
|
|
$
|
(0.3)
|
|
|
$
|
77.5
|
|
Diluted earnings
per share from continuing operations(2)
|
$
|
0.78
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.78
|
|
Diluted shares
used in calculation
|
99.9
|
|
|
|
|
|
|
|
|
|
(1)
|
See reconciliation of
net income to Adjusted EBITDA
|
(2)
|
Adjusted EPS may not
sum across due to rounding.
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Adjusted Earnings
Per Share
|
|
|
For the Three
Months Ended September 30, 2019
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
Mark-to-
Market
Adjustment
for Stock
Compensation
Expense
|
|
Income Tax
Adjustments
|
|
Transaction
Costs
|
|
Gain on
Consolidation
of Yuma
|
|
Payroll
Taxes on
SARs
xercise
|
|
As
Adjusted
|
|
(In Millions,
Except Per Share Amounts)
|
Adjusted
EBITDA(1)
|
$
|
231.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
231.6
|
|
Depreciation and
amortization
|
(55.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55.1)
|
|
Interest expense and
amortization of debt discounts and fees
|
(40.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40.3)
|
|
Stock-based
compensation
|
(21.7)
|
|
|
12.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.7)
|
|
Loss on disposal of
assets
|
(0.9)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.9)
|
|
Transaction
costs
|
(1.0)
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
SARs mark-to-market
impact on noncontrolling interests
|
0.9
|
|
|
(0.9)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Gain on consolidation
of Yuma
|
19.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19.2)
|
|
|
—
|
|
|
—
|
|
Payroll taxes on SARs
exercise
|
(0.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
Income from
continuing operations before income tax expense
|
131.9
|
|
|
11.1
|
|
|
—
|
|
|
1.0
|
|
|
(19.2)
|
|
|
0.8
|
|
|
125.6
|
|
Provision for income
tax expense
|
(34.3)
|
|
|
(3.0)
|
|
|
(0.2)
|
|
|
(0.2)
|
|
|
5.2
|
|
|
(0.2)
|
|
|
(32.7)
|
|
Income from
continuing operations attributable to Encompass
Health
|
$
|
97.6
|
|
|
$
|
8.1
|
|
|
$
|
(0.2)
|
|
|
$
|
0.8
|
|
|
$
|
(14.0)
|
|
|
$
|
0.6
|
|
|
$
|
92.9
|
|
Diluted earnings
per share from continuing operations(2)
|
$
|
0.98
|
|
|
$
|
0.08
|
|
|
$
|
—
|
|
|
$
|
0.01
|
|
|
$
|
(0.14)
|
|
|
$
|
0.01
|
|
|
$
|
0.93
|
|
Diluted shares
used in calculation
|
99.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See reconciliation of
net income to Adjusted EBITDA
|
(2)
|
Adjusted EPS may not
sum across due to rounding.
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Adjusted Earnings
Per Share
|
|
|
|
For the Nine
Months Ended September 30, 2020
|
|
|
|
|
Adjustments
|
|
|
|
|
As
Reported
|
|
Gov't, Class
Action, &
Related
Settlements
|
|
Income Tax
Adjustments
|
|
Change in
Fair
Market
Value of
Equity
Securities
|
|
Gain on
Consolidation
of Treasure
Coast
|
|
Payroll
Taxes on
SARs
Exercise
|
|
As
Adjusted
|
|
|
(In Millions,
Except Per Share Amounts)
|
|
|
|
|
Adjusted
EBITDA(1)
|
|
620.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
620.4
|
|
Depreciation and
amortization
|
|
(180.7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(180.7)
|
|
Government, class
action and related settlements
|
|
(2.8)
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest expense and
amortization of debt discounts and fees
|
|
(138.0)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(138.0)
|
|
Stock-based
compensation
|
|
(25.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25.3)
|
|
Loss on disposal or
impairment of assets
|
|
(10.6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10.6)
|
|
Change in fair market
value of equity securities
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
(0.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Gain on consolidation
of Treasure Coast
|
|
2.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.2)
|
|
|
—
|
|
|
—
|
|
Payroll taxes on SARs
exercise
|
|
(1.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
Income from
continuing operations before income tax expense
|
|
264.0
|
|
|
2.8
|
|
|
—
|
|
|
(0.3)
|
|
|
(2.2)
|
|
|
1.5
|
|
|
265.8
|
|
Provision for income
tax expense
|
|
(65.8)
|
|
|
(0.7)
|
|
|
(4.6)
|
|
|
0.1
|
|
|
0.6
|
|
|
(0.4)
|
|
|
(70.8)
|
|
Income from
continuing operations attributable to Encompass
Health
|
|
$
|
198.2
|
|
|
$
|
2.1
|
|
|
$
|
(4.6)
|
|
|
$
|
(0.2)
|
|
|
$
|
(1.6)
|
|
|
$
|
1.1
|
|
|
$
|
195.0
|
|
Diluted earnings
per share from continuing operations(2)
|
|
$
|
1.99
|
|
|
$
|
0.02
|
|
|
$
|
(0.05)
|
|
|
$
|
—
|
|
|
$
|
(0.02)
|
|
|
$
|
0.01
|
|
|
$
|
1.96
|
|
Diluted shares
used in calculation
|
|
99.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See reconciliation of
net income to Adjusted EBITDA
|
(2)
|
Adjusted EPS may not
sum across due to rounding.
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Adjusted Earnings
Per Share
|
|
|
For the Nine
Months Ended September 30, 2019
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
Mark-to-
Market
Adjustment
for Stock
Comp.
Expense
|
|
Loss
on
Early
Exting.
of
Debt
|
|
Income Tax
Adjustments
|
|
Transaction
Costs
|
|
Change in
Fair
Market
Value of
Equity
Securities
|
|
Gain on
Consolidation
of Yuma
|
|
Payroll
Taxes
on SARs
Exercise
|
|
As
Adjusted
|
|
|
(In Millions,
Except Per Share Amounts)
|
Adjusted
EBITDA(1)
|
$
|
726.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
726.7
|
|
|
Depreciation and
amortization
|
(160.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(160.3)
|
|
|
Loss on early
extinguishment of debt
|
(2.3)
|
|
|
—
|
|
|
2.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Interest expense and
amortization of debt discounts and fees
|
(115.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(115.2)
|
|
|
Stock-based
compensation
|
(87.0)
|
|
|
53.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34.0)
|
|
|
Loss on disposal of
assets
|
(3.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.3)
|
|
|
Transaction
costs
|
(2.0)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
SARs mark-to-market
impact on noncontrolling interests
|
4.3
|
|
|
(4.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Change in fair market
value of equity securities
|
1.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Gain on consolidation
of Yuma
|
19.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19.2)
|
|
|
—
|
|
|
|
|
Payroll taxes on SARs
exercise
|
(1.0)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
Income from
continuing operations before income tax expense
|
380.3
|
|
|
48.7
|
|
|
2.3
|
|
|
—
|
|
|
2.0
|
|
|
(1.2)
|
|
|
(19.2)
|
|
|
1.0
|
|
|
413.9
|
|
|
Provision for income
tax expense
|
(88.6)
|
|
|
(13.2)
|
|
|
(0.6)
|
|
|
(12.6)
|
|
|
(0.5)
|
|
|
0.3
|
|
|
5.2
|
|
|
(0.2)
|
|
|
(110.2)
|
|
|
Income from
continuing operations attributable to Encompass
Health
|
$
|
291.7
|
|
|
$
|
35.5
|
|
|
$
|
1.7
|
|
|
$
|
(12.6)
|
|
|
$
|
1.5
|
|
|
$
|
(0.9)
|
|
|
$
|
(14.0)
|
|
|
$
|
0.8
|
|
|
$
|
303.7
|
|
|
Diluted earnings
per share from continuing operations(2)
|
$
|
2.94
|
|
|
$
|
0.36
|
|
|
$
|
0.02
|
|
|
$
|
(0.13)
|
|
|
$
|
0.02
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.14)
|
|
|
$
|
0.01
|
|
|
$
|
3.05
|
|
|
Diluted shares
used in calculation
|
99.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See reconciliation of
net income to Adjusted EBITDA
|
(2)
|
Adjusted EPS may not
sum across due to rounding.
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Reconciliation of
Net Income to Adjusted EBITDA
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In
Millions)
|
Net
income
|
$
|
100.1
|
|
|
$
|
119.5
|
|
|
$
|
257.1
|
|
|
$
|
355.6
|
|
Loss from
discontinued operations, net of tax, attributable to Encompass
Health
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
Net income
attributable to noncontrolling interests
|
(22.4)
|
|
|
(21.9)
|
|
|
(58.9)
|
|
|
(64.5)
|
|
Provision for income
tax expense
|
26.9
|
|
|
34.3
|
|
|
65.8
|
|
|
88.6
|
|
Interest expense and
amortization of debt discounts and fees
|
49.0
|
|
|
40.3
|
|
|
138.0
|
|
|
115.2
|
|
Government, class
action, and related settlements
|
—
|
|
|
—
|
|
|
2.8
|
|
|
—
|
|
Depreciation and
amortization
|
61.2
|
|
|
55.1
|
|
|
180.7
|
|
|
160.3
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
Loss on disposal or
impairment of assets
|
7.5
|
|
|
0.9
|
|
|
10.6
|
|
|
3.3
|
|
Stock-based
compensation expense
|
8.3
|
|
|
21.7
|
|
|
25.3
|
|
|
87.0
|
|
Transaction
costs
|
—
|
|
|
1.0
|
|
|
—
|
|
|
2.0
|
|
Gain on consolidation
of former equity method location
|
—
|
|
|
(19.2)
|
|
|
(2.2)
|
|
|
(19.2)
|
|
SARs mark-to-market
impact on noncontrolling interests
|
—
|
|
|
(0.9)
|
|
|
—
|
|
|
(4.3)
|
|
Change in fair market
value of equity securities
|
(0.4)
|
|
|
—
|
|
|
(0.3)
|
|
|
(1.2)
|
|
Payroll taxes on SARs
exercise
|
—
|
|
|
0.8
|
|
|
1.5
|
|
|
1.0
|
|
Adjusted
EBITDA
|
$
|
230.2
|
|
|
$
|
231.6
|
|
|
$
|
620.4
|
|
|
$
|
726.7
|
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Reconciliation of
Segment Adjusted EBITDA to
|
Income from
Continuing Operations Before Income Tax Expense
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2019
|
|
(In
Millions)
|
Total segment
Adjusted EBITDA
|
$
|
261.0
|
|
|
$
|
261.4
|
|
|
$
|
712.8
|
|
|
$
|
820.7
|
|
|
$
|
1,095.4
|
|
General and
administrative expenses
|
(39.1)
|
|
|
(52.5)
|
|
|
(117.7)
|
|
|
(183.0)
|
|
|
(247.0)
|
|
Depreciation and
amortization
|
(61.2)
|
|
|
(55.1)
|
|
|
(180.7)
|
|
|
(160.3)
|
|
|
(218.7)
|
|
Loss on disposal or
impairment of assets
|
(7.5)
|
|
|
(0.9)
|
|
|
(10.6)
|
|
|
(3.3)
|
|
|
(11.1)
|
|
Government, class
action, and related settlements
|
—
|
|
|
—
|
|
|
(2.8)
|
|
|
—
|
|
|
—
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.3)
|
|
|
(7.7)
|
|
Interest expense and
amortization of debt discounts and fees
|
(49.0)
|
|
|
(40.3)
|
|
|
(138.0)
|
|
|
(115.2)
|
|
|
(159.7)
|
|
Net income
attributable to noncontrolling interests
|
22.4
|
|
|
21.9
|
|
|
58.9
|
|
|
64.5
|
|
|
87.1
|
|
SARs mark-to-market
impact on noncontrolling interests
|
—
|
|
|
0.9
|
|
|
—
|
|
|
4.3
|
|
|
5.0
|
|
Change in fair market
value of equity securities
|
0.4
|
|
|
—
|
|
|
0.3
|
|
|
1.2
|
|
|
0.8
|
|
Gain on consolidation
of former equity method location
|
—
|
|
|
19.2
|
|
|
2.2
|
|
|
19.2
|
|
|
19.2
|
|
Payroll taxes on SARs
exercise
|
—
|
|
|
(0.8)
|
|
|
(1.5)
|
|
|
(1.0)
|
|
|
(1.0)
|
|
Income from
continuing operations before income tax expense
|
$
|
127.0
|
|
|
$
|
153.8
|
|
|
$
|
322.9
|
|
|
$
|
444.8
|
|
|
$
|
562.3
|
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Reconciliation of
Net Cash Provided by Operating Activities to Adjusted
EBITDA
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
Year Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2019
|
|
(In
Millions)
|
Net cash provided
by operating activities
|
$
|
173.4
|
|
|
$
|
114.4
|
|
|
$
|
425.0
|
|
|
$
|
419.7
|
|
|
$
|
635.3
|
|
Interest expense and
amortization of debt discounts and fees
|
49.0
|
|
|
40.3
|
|
|
138.0
|
|
|
115.2
|
|
|
159.7
|
|
Equity in net income
of nonconsolidated affiliates
|
1.0
|
|
|
1.2
|
|
|
2.5
|
|
|
5.5
|
|
|
6.7
|
|
Net income
attributable to noncontrolling interests in continuing
operations
|
(22.4)
|
|
|
(21.9)
|
|
|
(58.9)
|
|
|
(64.5)
|
|
|
(87.1)
|
|
Amortization of
debt-related items
|
(2.0)
|
|
|
(1.1)
|
|
|
(5.1)
|
|
|
(3.1)
|
|
|
(4.5)
|
|
Distributions from
nonconsolidated affiliates
|
(0.8)
|
|
|
(0.2)
|
|
|
(2.8)
|
|
|
(4.8)
|
|
|
(6.6)
|
|
Current portion of
income tax expense
|
23.5
|
|
|
14.1
|
|
|
71.5
|
|
|
67.8
|
|
|
75.9
|
|
Change in assets and
liabilities
|
7.2
|
|
|
83.7
|
|
|
47.7
|
|
|
185.4
|
|
|
180.1
|
|
Cash used in
operating activities of discontinued operations
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
4.6
|
|
|
4.4
|
|
Transaction
costs
|
—
|
|
|
1.0
|
|
|
—
|
|
|
2.0
|
|
|
2.1
|
|
Payroll taxes on SARs
exercise
|
—
|
|
|
0.8
|
|
|
1.5
|
|
|
1.0
|
|
|
1.0
|
|
SARs mark-to-market
impact on noncontrolling interests
|
—
|
|
|
(0.9)
|
|
|
—
|
|
|
(4.3)
|
|
|
(5.0)
|
|
Change in fair market
value of equity securities
|
(0.4)
|
|
|
—
|
|
|
(0.3)
|
|
|
(1.2)
|
|
|
(0.8)
|
|
Other
|
1.6
|
|
|
0.1
|
|
|
1.1
|
|
|
3.4
|
|
|
3.7
|
|
Consolidated
Adjusted EBITDA
|
$
|
230.2
|
|
|
$
|
231.6
|
|
|
$
|
620.4
|
|
|
$
|
726.7
|
|
|
$
|
964.9
|
|
Encompass Health
Corporation and Subsidiaries
|
Supplemental
Information
|
Reconciliation of
Net Cash Provided by Operating Activities to Adjusted Free Cash
Flow
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In
Millions)
|
Net cash provided
by operating activities
|
$
|
173.4
|
|
|
$
|
114.4
|
|
|
$
|
425.0
|
|
|
$
|
419.7
|
|
Impact of
discontinued operations
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
4.6
|
|
Net cash provided by
operating activities of continuing operations
|
173.5
|
|
|
114.5
|
|
|
425.2
|
|
|
424.3
|
|
Capital expenditures
for maintenance
|
(34.0)
|
|
|
(41.0)
|
|
|
(107.5)
|
|
|
(105.1)
|
|
Distributions paid to
noncontrolling interests of consolidated affiliates
|
(15.4)
|
|
|
(21.1)
|
|
|
(52.9)
|
|
|
(57.6)
|
|
Items
non-indicative of ongoing operations:
|
|
|
|
|
|
|
|
Cash paid for SARs
exercise (inclusive of payroll taxes)
|
—
|
|
|
56.2
|
|
|
102.1
|
|
|
69.6
|
|
Transaction costs and
related assumed liabilities
|
—
|
|
|
1.0
|
|
|
—
|
|
|
2.0
|
|
Cash paid for
government, class action, and related settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
46.4
|
|
Adjusted free cash
flow
|
$
|
124.1
|
|
|
$
|
109.6
|
|
|
$
|
366.9
|
|
|
$
|
379.6
|
|
For the three months ended September 30, 2020, net cash
used in investing activities was $89.7
million and primarily resulted from capital expenditures.
Net cash used in financing activities during the three months ended
September 30, 2020 was $45.6
million and primarily resulted from cash dividends paid on
common stock and distributions paid to noncontrolling interests of
consolidated affiliates.
For the three months ended September 30, 2019, net
cash used in investing activities was $320.1
million and primarily resulted from the acquisition of
Alacare and capital expenditures. Net cash provided by financing
activities during the three months ended September 30,
2019 was $431.8 million and primarily
resulted from the issuance of $1.0
billion of senior notes offset by repayments on the
Company's revolving credit facility and the purchase of one-third
of the rollover shares held by members of the home health and
hospice management team.
For the nine months ended September 30, 2020, net cash used
in investing activities was $264.8
million and primarily resulted from capital expenditures.
Net cash provided by financing activities during the nine months
ended September 30, 2020 was $208.3
million and primarily resulted from the issuance of
additional senior notes in May 2020
offset by the settlement of the final put and exercise of the Home
Health Holdings rollover shares and SARs, cash dividends paid on
common stock, and distributions paid to noncontrolling interests of
consolidated affiliates.
For the nine months ended September 30, 2019, net cash used
in investing activities was $511.7
million and primarily resulted from the acquisition of
Alacare and capital expenditures. Net cash provided by financing
activities during the nine months ended September 30, 2019 was
$472.3 million and primarily resulted
from the issuance of $1.0 billion of
senior notes offset by repayments on the Company's revolving credit
facility, the purchase of one-third of the rollover shares held by
members of the home health and hospice management team, dividends
paid common stock, distributions paid to noncontrolling interests
of consolidated affiliates, and repurchases of common stock.
Statements contained in this press release and the
supplemental information which are not historical facts, such as
those relating to the nature of the COVID-19 pandemic and its
impact on Encompass Health's business and financial assumptions,
financial guidance, balance sheet and cash flow plans, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. In addition, Encompass
Health, through its senior management, may from time to time make
forward-looking public statements concerning the matters described
herein. All such estimates, projections, and forward-looking
information speak only as of the date hereof, and Encompass Health
undertakes no duty to publicly update or revise such
forward-looking information, whether as a result of new
information, future events, or otherwise. Such forward-looking
statements are necessarily estimates based upon current
information, involve a number of risks and uncertainties, and
relate to, among other things, future events, Encompass Health's
plan to repurchase its debt or equity securities, dividend
strategies, effective income tax rates, its business strategy, its
financial plans, its future financial performance, its projected
business results or model, its ability to return value to
shareholders, its projected capital expenditures, its leverage
ratio, its acquisition opportunities, and the impact of future
legislation or regulation. Actual events or results may differ
materially from those 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 events or results to differ materially from those estimated
by Encompass Health include, but are not limited to, the continued
spread of COVID-19, including the speed, depth, geographic reach
and duration of the spread, which could decrease our patient
volumes and revenues and lead to staffing and supply shortages and
associated cost increases; actions to be taken by the Company in
response to the pandemic; the legal, regulatory and administrative
developments that occur at the federal, state and local levels; the
Company's infectious disease prevention and control efforts; the
demand for the Company's services, including based on any downturns
in the economy, consumer confidence, or the capital markets and
unemployment among family members; the price of Encompass Health's
common stock as it affects the Company's willingness and ability to
repurchase shares and the financial and accounting effects of any
repurchases; any adverse outcome of various lawsuits, claims, and
legal or regulatory proceedings involving Encompass Health,
including any matters related to yet undiscovered issues, if any,
in acquired operations; Encompass Health's ability to attract and
retain key management personnel; any adverse effects on Encompass
Health's stock price resulting from the integration of acquired
operations; potential disruptions, breaches, or other incidents
affecting the proper operation, availability, or security of
Encompass Health's or its vendors' information systems, including
unauthorized access to or theft of patient, business associate, or
other sensitive information or inability to provide patient care
because of system unavailability as well as unforeseen issues, if
any, related to integration of acquired systems; the ability to
successfully integrate acquired operations, including realization
of anticipated tax benefits, revenues, and cost savings, minimizing
the negative impact on margins arising from the changes in staffing
and other operating practices, and avoidance of unforeseen exposure
to liabilities; Encompass Health's ability to successfully complete
and integrate de novo developments, acquisitions, investments, and
joint ventures consistent with its growth strategy; increases in
Medicare audit activity, including increased use of sampling and
extrapolation, resulting in additional unpaid reimbursement claims
and an increase in the backlog of appealed claims denials; changes,
delays in (including in connection with resolution of Medicare
payment reviews or appeals), or suspension of reimbursement for
Encompass Health'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, including as part of national
healthcare reform and deficit reduction (such as the Patient-Driven
Groupings Model for home health, the new patient assessment
measures, referred to as "Section GG functional measures," for
inpatient rehabilitation, and other payment system reforms) and
Encompass Health's ability to adapt operations to those changes;
competitive pressures in the healthcare industry and Encompass
Health's response thereto; Encompass Health's ability to obtain and
retain favorable arrangements with third-party payors; Encompass
Health's ability to control costs, particularly labor and employee
benefit costs, including group medical expenses; adverse effects
resulting from coverage determinations made by Medicare
Administrative Contractors regarding its Medicare reimbursement
claims and lengthening delays in Encompass Health's ability to
recover improperly denied claims through the administrative appeals
process on a timely basis; Encompass Health's ability to adapt to
changes in the healthcare delivery system, including value-based
purchasing and involvement in coordinated care initiatives or
programs that may arise with its referral sources; Encompass
Health's ability to attract and retain nurses, therapists, and
other healthcare professionals in a highly competitive environment
with often severe staffing shortages, which may be worsened by the
pandemic, and the impact on Encompass Health's labor expenses from
potential union activity and staffing shortages; general conditions
in the economy and capital markets, including any instability or
uncertainty related to armed conflict or an act of terrorism,
governmental impasse over approval of the
United States federal budget, an increase in the debt
ceiling, or an international sovereign debt crisis; the increase in
the costs of defending and insuring against alleged professional
liability claims, including claims associated with patient and
employee exposures to COVID-19, and Encompass Health's ability to
predict the estimated costs related to such claims; and other
factors which may be identified from time to time in Encompass
Health's SEC filings and other public announcements, including
Encompass Health's Form 10–K for the year ended
December 31, 2019 and Form 10-Q for the quarters ended
March 31, 2020, June 30, 2020, and September 30, 2020, when
filed.
Media
Contact
|
Casey Lassiter, 205
447-6410
|
casey.lassiter@encompasshealth.com
|
|
Investor Relations
Contact
|
Crissy Carlisle, 205
970-5860
|
crissy.carlisle@encompasshealth.com
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/encompass-health-reports-results-for-third-quarter-2020-301162200.html
SOURCE Encompass Health Corp.