Increases full-year guidance
BIRMINGHAM, Ala., Aug. 1, 2023
/PRNewswire/ -- Encompass Health Corporation (NYSE: EHC), the
largest owner and operator of inpatient rehabilitation hospitals in
the United States, today reported
its results of operations for the second quarter ended June 30, 2023.
Summary results
|
|
|
|
|
Growth
|
|
Q2
2023
|
|
Q2
2022
|
|
Dollars
|
|
Percent
|
|
(In Millions, Except
Per Share Data)
|
|
Net operating
revenue
|
$ 1,187.1
|
|
$ 1,062.5
|
|
$ 124.6
|
|
11.7 %
|
|
Income from continuing
operations attributable to Encompass Health per diluted
share
|
0.91
|
|
0.38
|
|
0.53
|
|
139.5 %
|
|
Adjusted earnings per
share
|
0.95
|
|
0.63
|
|
0.32
|
|
50.8 %
|
|
Cash flows provided by
operating activities
|
206.7
|
|
244.6
|
|
(37.9)
|
|
(15.5) %
|
|
Adjusted
EBITDA
|
249.6
|
|
196.4
|
|
53.2
|
|
27.1 %
|
|
Adjusted free cash
flow
|
124.2
|
|
144.3
|
|
(20.1)
|
|
(13.9) %
|
|
|
|
|
|
|
|
|
|
(Actual
Amounts)
|
|
|
|
|
|
|
Discharges
|
57,011
|
|
51,902
|
|
|
|
9.8 %
|
|
Same-store
discharge growth
|
|
|
|
|
|
|
6.2 %
|
|
Net patient revenue per
discharge
|
$
20,387
|
|
$
19,995
|
|
|
|
2.0 %
|
See attached supplemental information for calculations of
non-GAAP measures and reconciliations to their most comparable GAAP
measure.
"We are very pleased with our second quarter performance," said
President and Chief Executive Officer of Encompass Health Mark
Tarr. "Strong discharge growth of 9.8% combined with year-over-year
improvement in labor costs to drive Adjusted EBITDA growth of
27.1%. Our value proposition and operating strategy continue to be
validated and we remain highly optimistic about the long-term
prospects of our business. We are increasing our 2023 guidance to
reflect our strong first half results and updated expectations for
the balance of the year."
- Revenue growth of 11.7% resulted primarily from increased
volumes. Total discharge growth for the second quarter of 2023 was
9.8% including same-store growth of 6.2%. Net revenue per discharge
grew 2.0%, inclusive of a 30 basis point decline in revenue
reserves related to bad debt as a percent of revenue.
- Cash flows provided by operating activities decreased 15.5%
over the prior year to $206.7
million, due primarily to an increase in cash tax
payments.
- The 27.1% increase in Adjusted EBITDA primarily resulted from
increased revenue and a decrease in contract labor expense and
sign-on and shift bonuses.
2023 Guidance
The Company increased its full-year guidance as follows:
|
Full-Year 2023
Guidance
|
|
Previous
Guidance
|
|
Updated
Guidance
|
|
(In Millions, Except
Per Share Data)
|
|
Net operating
revenue
|
$4,700 to
$4,770
|
|
$4,750 to
$4,810
|
|
Adjusted
EBITDA
|
$870 to
$910
|
|
$920 to
$950
|
|
Adjusted earnings per
share from continuing operations attributable to Encompass
Health
|
$2.94 to
$3.23
|
|
$3.31 to
$3.53
|
For considerations regarding the Company's 2023 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
10:00 a.m. Eastern Time on Wednesday,
August 2, 2023 to discuss its results for the second quarter
of 2023. 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 800 267-6316 and
giving the conference ID EHCQ223. International callers should dial
203 518-9765 and give the same conference ID. 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
Encompass Health (NYSE: EHC) is the largest owner and operator
of inpatient rehabilitation hospitals in the United States. With a national footprint
that includes 158 hospitals in 37 states and Puerto Rico, the Company provides
high-quality, compassionate rehabilitative care for patients
recovering from a major injury or illness, using advanced
technology and innovative treatments to maximize recovery.
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 our newsroom, Twitter, Instagram 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 June 30, 2023 (the "June 2023 Form 10-Q"), when filed, as well as the
Company's Current Report on Form 8-K filed on August 1, 2023
(the "Q2 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
August 2, 2023 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, except with
regard to non-GAAP guidance, are included below or in the Q2
Earnings Form 8-K. Readers are encouraged to review the "Note
Regarding Presentation of Non-GAAP Financial Measures" included in
the Q2 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 not 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 not 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
2023 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 $145 million to
$155 million
- Amortization of debt-related items - approximately $10 million
The Q2 Earnings Form 8-K and, when filed, the June 2023 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
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In Millions,
Except Per Share Data)
|
|
Net operating
revenues
|
$
1,187.1
|
|
$
1,062.5
|
|
$ 2,347.5
|
|
$ 2,121.8
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Salaries and
benefits
|
636.2
|
|
585.9
|
|
1,265.2
|
|
1,173.3
|
|
Other operating
expenses
|
172.7
|
|
169.3
|
|
350.6
|
|
328.3
|
|
Occupancy
costs
|
14.3
|
|
13.8
|
|
28.1
|
|
29.2
|
|
Supplies
|
52.0
|
|
47.3
|
|
105.8
|
|
97.1
|
|
General and
administrative expenses
|
55.4
|
|
36.2
|
|
98.8
|
|
73.6
|
|
Depreciation and
amortization
|
72.6
|
|
60.5
|
|
136.5
|
|
118.2
|
|
Total operating
expenses
|
1,003.2
|
|
913.0
|
|
1,985.0
|
|
1,819.7
|
|
Loss on early
extinguishment of debt
|
—
|
|
1.1
|
|
—
|
|
1.4
|
|
Interest expense and
amortization of debt discounts and fees
|
36.3
|
|
60.4
|
|
72.7
|
|
100.0
|
|
Other (income)
expense
|
(2.7)
|
|
6.4
|
|
(6.3)
|
|
10.0
|
|
Equity in net income of
nonconsolidated affiliates
|
(0.9)
|
|
(1.0)
|
|
(1.3)
|
|
(1.9)
|
|
Income from continuing
operations before income tax expense
|
151.2
|
|
82.6
|
|
297.4
|
|
192.6
|
|
Provision for income
tax expense
|
32.8
|
|
22.8
|
|
64.7
|
|
46.4
|
|
Income from continuing
operations
|
118.4
|
|
59.8
|
|
232.7
|
|
146.2
|
|
(Loss) income from
discontinued operations, net of tax
|
(1.2)
|
|
11.5
|
|
(2.2)
|
|
35.2
|
|
Net and
comprehensive income
|
117.2
|
|
71.3
|
|
230.5
|
|
181.4
|
|
Less: Net income
attributable to noncontrolling interests included in continuing
operations
|
(25.8)
|
|
(21.9)
|
|
(51.4)
|
|
(43.9)
|
|
Less: Net income
attributable to noncontrolling interests included in discontinued
operations
|
—
|
|
(0.7)
|
|
—
|
|
(1.3)
|
|
Less: Net and
comprehensive income attributable to noncontrolling
interests
|
(25.8)
|
|
(22.6)
|
|
(51.4)
|
|
(45.2)
|
|
Net and
comprehensive income attributable to Encompass
Health
|
$ 91.4
|
|
$ 48.7
|
|
$
179.1
|
|
$
136.2
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
99.5
|
|
99.2
|
|
99.5
|
|
99.2
|
|
Diluted
|
101.1
|
|
100.3
|
|
101.0
|
|
100.2
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
Basic earnings per
share attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$ 0.92
|
|
$ 0.38
|
|
$ 1.81
|
|
$ 1.03
|
|
Discontinued
operations
|
(0.01)
|
|
0.11
|
|
(0.02)
|
|
0.34
|
|
Net income
|
$ 0.91
|
|
$ 0.49
|
|
$ 1.79
|
|
$ 1.37
|
|
Diluted earnings
per share attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$ 0.91
|
|
$ 0.38
|
|
$ 1.79
|
|
$ 1.02
|
|
Discontinued
operations
|
(0.01)
|
|
0.11
|
|
(0.02)
|
|
0.34
|
|
Net income
|
$ 0.90
|
|
$ 0.49
|
|
$ 1.77
|
|
$ 1.36
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
|
Income from continuing
operations
|
$ 92.6
|
|
$ 37.9
|
|
$
181.3
|
|
$
102.3
|
|
(Loss) income from
discontinued operations, net of tax
|
(1.2)
|
|
10.8
|
|
(2.2)
|
|
33.9
|
|
Net income
attributable to Encompass Health
|
$ 91.4
|
|
$ 48.7
|
|
$
179.1
|
|
$
136.2
|
|
Encompass Health Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(Unaudited)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
(In
Millions)
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
117.5
|
|
$
21.8
|
|
Restricted
cash
|
36.5
|
|
31.6
|
|
Accounts
receivable
|
532.3
|
|
536.8
|
|
Other current
assets
|
137.7
|
|
127.0
|
|
Total current
assets
|
824.0
|
|
717.2
|
|
Property and equipment,
net
|
3,062.2
|
|
2,939.2
|
|
Operating lease
right-of-use assets
|
206.2
|
|
212.5
|
|
Goodwill
|
1,270.7
|
|
1,263.2
|
|
Intangible assets,
net
|
278.1
|
|
282.3
|
|
Other long-term
assets
|
219.7
|
|
222.1
|
|
Total
assets
|
$
5,860.9
|
|
$
5,636.5
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
$
22.8
|
|
$
25.2
|
|
Current operating
lease liabilities
|
26.1
|
|
25.6
|
|
Accounts
payable
|
155.8
|
|
132.9
|
|
Accrued medical
insurance
|
34.1
|
|
25.0
|
|
Accrued expenses and
other current liabilities
|
416.2
|
|
367.2
|
|
Total current
liabilities
|
655.0
|
|
575.9
|
|
Long-term debt, net of
current portion
|
2,697.6
|
|
2,741.8
|
|
Long-term operating
lease liabilities
|
192.3
|
|
199.7
|
|
Deferred income tax
liabilities
|
83.2
|
|
83.0
|
|
Other long-term
liabilities
|
175.8
|
|
174.2
|
|
3,803.9
|
|
3,774.6
|
|
Commitments and
contingencies
|
|
|
|
|
Redeemable
noncontrolling interests
|
39.3
|
|
35.6
|
|
Shareholders'
equity:
|
|
|
|
|
Encompass Health
shareholders' equity
|
1,475.3
|
|
1,310.3
|
|
Noncontrolling
interests
|
542.4
|
|
516.0
|
|
Total shareholders'
equity
|
2,017.7
|
|
1,826.3
|
|
Total liabilities
and shareholders' equity
|
$
5,860.9
|
|
$
5,636.5
|
|
Encompass Health Corporation and
Subsidiaries
Condensed Consolidated Statements of Cash
Flows
(Unaudited)
|
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
(In
Millions)
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
|
$
230.5
|
|
$
181.4
|
|
Loss (income) from
discontinued operations, net of tax
|
2.2
|
|
(35.2)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities—
|
|
|
|
|
Depreciation and
amortization
|
136.5
|
|
118.2
|
|
Stock-based
compensation
|
23.5
|
|
13.8
|
|
Deferred tax expense
(benefit)
|
0.3
|
|
(6.5)
|
|
Other, net
|
3.1
|
|
22.5
|
|
Change in assets and
liabilities, net of acquisitions—
|
|
|
|
|
Accounts
receivable
|
11.5
|
|
16.4
|
|
Other
assets
|
(8.4)
|
|
4.9
|
|
Accounts
payable
|
4.0
|
|
4.7
|
|
Other
liabilities
|
34.3
|
|
67.4
|
|
Net cash (used in)
provided by operating activities of discontinued
operations
|
(2.9)
|
|
75.9
|
|
Total
adjustments
|
201.9
|
|
317.3
|
|
Net cash provided
by operating activities
|
434.6
|
|
463.5
|
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of property
and equipment
|
(213.8)
|
|
(225.6)
|
|
Other, net
|
(18.7)
|
|
(17.2)
|
|
Net cash used in
investing activities of discontinued operations
|
—
|
|
(3.5)
|
|
Net cash used in
investing activities
|
(232.5)
|
|
(246.3)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Principal borrowings
on notes
|
20.0
|
|
—
|
|
Principal payments on
debt, including pre-payments
|
(5.7)
|
|
(344.8)
|
|
Borrowings on
revolving credit facility
|
60.0
|
|
130.0
|
|
Payments on revolving
credit facility
|
(115.0)
|
|
(330.0)
|
|
Principal payments
under finance lease obligations
|
(9.5)
|
|
(9.4)
|
|
Debt amendment
costs
|
(0.1)
|
|
(21.6)
|
|
Taxes paid on behalf
of employees for shares withheld
|
(7.7)
|
|
(7.2)
|
|
Contributions from
noncontrolling interests of consolidated affiliates
|
46.3
|
|
35.3
|
|
Dividends paid on
common stock
|
(30.5)
|
|
(56.3)
|
|
Distributions paid to
noncontrolling interests of consolidated affiliates
|
(59.4)
|
|
(45.9)
|
|
Other, net
|
0.1
|
|
(0.1)
|
|
Net cash provided by
financing activities of discontinued operations
|
—
|
|
569.8
|
|
Net cash used in
financing activities
|
(101.5)
|
|
(80.2)
|
|
Increase in cash,
cash equivalents, and restricted cash
|
100.6
|
|
137.0
|
|
Cash, cash
equivalents, and restricted cash at beginning of
period
|
53.4
|
|
120.3
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
154.0
|
|
$
257.3
|
|
|
|
|
|
|
|
|
|
Encompass Health Corporation and
Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Continued)
(Unaudited)
|
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
(In
Millions)
|
|
Reconciliation of
Cash, Cash Equivalents, and Restricted Cash
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
$
21.8
|
|
$
49.4
|
|
Restricted cash at
beginning of period
|
31.6
|
|
62.5
|
|
Restricted cash
included in other long-term assets at beginning of
period
|
—
|
|
0.4
|
|
Cash, cash
equivalents, and restricted cash in discontinued operations at
beginning of period
|
—
|
|
8.0
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
$
53.4
|
|
$
120.3
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
$
117.5
|
|
$
136.3
|
|
Restricted cash at end
of period
|
36.5
|
|
67.4
|
|
Cash, cash
equivalents, and restricted cash in discontinued operations at end
of period
|
—
|
|
53.6
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
154.0
|
|
$
257.3
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Earnings Per Share
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In Millions,
Except Per Share Data)
|
|
Adjusted
EBITDA
|
$ 249.6
|
|
$ 196.4
|
|
$ 478.6
|
|
$ 391.3
|
|
Depreciation and
amortization
|
(72.6)
|
|
(60.5)
|
|
(136.5)
|
|
(118.2)
|
|
Interest expense and
amortization of debt discounts and fees
|
(36.3)
|
|
(60.4)
|
|
(72.7)
|
|
(100.0)
|
|
Stock-based
compensation
|
(15.6)
|
|
(7.7)
|
|
(23.5)
|
|
(13.8)
|
|
Loss on disposal or
impairment of assets
|
(0.8)
|
|
(2.8)
|
|
(1.5)
|
|
(3.5)
|
|
124.3
|
|
65.0
|
|
244.4
|
|
155.8
|
|
Items not indicative of
ongoing operating performance:
|
|
|
|
|
|
|
|
|
Loss on early
extinguishment of debt
|
—
|
|
(1.1)
|
|
—
|
|
(1.4)
|
|
State regulatory
change impact on noncontrolling interests
|
2.2
|
|
—
|
|
2.2
|
|
—
|
|
Change in fair market
value of equity securities
|
(1.1)
|
|
(3.2)
|
|
(0.6)
|
|
(5.7)
|
|
Pre-tax
income
|
125.4
|
|
60.7
|
|
246.0
|
|
148.7
|
|
Income tax
expense
|
(32.8)
|
|
(22.8)
|
|
(64.7)
|
|
(46.4)
|
|
Income from
continuing operations (1)
|
$ 92.6
|
|
$ 37.9
|
|
$ 181.3
|
|
$ 102.3
|
|
|
|
|
|
|
|
|
|
Basic shares
|
99.5
|
|
99.2
|
|
99.5
|
|
99.2
|
|
Diluted
shares
|
101.1
|
|
100.3
|
|
101.0
|
|
100.2
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share (1)
|
$ 0.92
|
|
$ 0.38
|
|
$ 1.81
|
|
$ 1.03
|
|
Diluted earnings per
share (1)
|
$ 0.91
|
|
$ 0.38
|
|
$ 1.79
|
|
$ 1.02
|
|
|
(1)
Income from continuing operations attributable to Encompass
Health
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
|
|
|
Q2
|
|
6
Months
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
Earnings per share,
as reported
|
$
0.91
|
|
$
0.38
|
|
$
1.79
|
|
$
1.02
|
|
Adjustments, net of
tax:
|
|
|
|
|
|
|
|
|
Bondholder consent
fees associated with Enhabit distribution
|
—
|
|
0.15
|
|
—
|
|
0.15
|
|
Income tax
adjustments
|
—
|
|
0.07
|
|
—
|
|
0.07
|
|
State regulatory
change impact
|
0.03
|
|
—
|
|
0.03
|
|
—
|
|
Loss on early
extinguishment of debt
|
—
|
|
0.01
|
|
—
|
|
0.01
|
|
Change in fair market
value of equity securities
|
0.01
|
|
0.02
|
|
—
|
|
0.04
|
|
Adjusted earnings
per share*
|
$
0.95
|
|
$
0.63
|
|
$
1.83
|
|
$
1.30
|
|
|
* Adjusted EPS may not sum
due to rounding.
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating
Activities to Adjusted EBITDA
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
Millions)
|
|
Net cash provided by
operating activities
|
$ 206.7
|
|
$ 244.6
|
|
$ 434.6
|
|
$ 463.5
|
|
Interest expense and
amortization of debt discounts and fees
|
36.3
|
|
60.4
|
|
72.7
|
|
100.0
|
|
Gain (loss) on sale of
investments, excluding impairments
|
0.1
|
|
(7.3)
|
|
1.8
|
|
(11.9)
|
|
Equity in net income of
nonconsolidated affiliates
|
0.9
|
|
1.0
|
|
1.3
|
|
1.9
|
|
Net income attributable
to noncontrolling interests in continuing operations
|
(25.8)
|
|
(21.9)
|
|
(51.4)
|
|
(43.9)
|
|
Amortization of
debt-related items
|
(2.4)
|
|
(2.5)
|
|
(4.7)
|
|
(4.8)
|
|
Distributions from
nonconsolidated affiliates
|
(0.1)
|
|
(1.9)
|
|
(0.2)
|
|
(2.9)
|
|
Current portion of
income tax expense
|
36.5
|
|
31.6
|
|
64.4
|
|
52.9
|
|
Change in assets and
liabilities
|
(3.5)
|
|
(71.4)
|
|
(41.4)
|
|
(93.4)
|
|
Cash used in (provided
by) operating activities of discontinued operations
|
1.6
|
|
(39.5)
|
|
2.9
|
|
(75.9)
|
|
State regulatory change
impact on noncontrolling interests
|
(2.2)
|
|
—
|
|
(2.2)
|
|
—
|
|
Change in fair market
value of equity securities
|
1.1
|
|
3.2
|
|
0.6
|
|
5.7
|
|
Other
|
0.4
|
|
0.1
|
|
0.2
|
|
0.1
|
|
Adjusted
EBITDA
|
$ 249.6
|
|
$ 196.4
|
|
$ 478.6
|
|
$ 391.3
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations
Attributable to Encompass Health per Diluted Share to Adjusted
Earnings Per Share
|
|
|
For the Three
Months Ended June 30, 2023
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
State
Regulatory
Change
Impact
|
|
Income Tax
Adjustments
|
|
Change in Fair
Market Value
of Equity
Securities
|
|
As
Adjusted
|
|
(In Millions,
Except Per Share Amounts)
|
|
Adjusted
EBITDA*
|
$
249.6
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$ 249.6
|
|
Depreciation and
amortization
|
(72.6)
|
|
6.1
|
|
—
|
|
—
|
|
(66.5)
|
|
Interest expense and
amortization of debt discounts and fees
|
(36.3)
|
|
—
|
|
—
|
|
—
|
|
(36.3)
|
|
Stock-based
compensation
|
(15.6)
|
|
—
|
|
—
|
|
—
|
|
(15.6)
|
|
Loss on disposal or
impairment of assets
|
(0.8)
|
|
—
|
|
—
|
|
—
|
|
(0.8)
|
|
State regulatory change
impact on noncontrolling interests
|
2.2
|
|
(2.2)
|
|
—
|
|
—
|
|
—
|
|
Change in fair market
value of equity securities
|
(1.1)
|
|
—
|
|
—
|
|
1.1
|
|
—
|
|
Income from
continuing operations before income tax expense
|
125.4
|
|
3.9
|
|
—
|
|
1.1
|
|
130.4
|
|
Provision for income
tax expense
|
(32.8)
|
|
(1.0)
|
|
0.1
|
|
(0.3)
|
|
(34.0)
|
|
Income from
continuing operations attributable to Encompass
Health
|
$
92.6
|
|
$
2.9
|
|
$
0.1
|
|
$
0.8
|
|
$
96.4
|
|
Diluted earnings per
share from continuing operations**
|
$
0.91
|
|
$
0.03
|
|
$
—
|
|
$
0.01
|
|
$
0.95
|
|
Diluted shares used
in calculation
|
101.1
|
|
|
|
|
|
|
|
|
|
|
* See reconciliation of net
income to Adjusted EBITDA
|
|
**
Adjusted EPS may not sum across due to rounding.
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations
Attributable to Encompass Health per Diluted Share to Adjusted
Earnings Per Share
|
|
|
For the Three
Months Ended June 30, 2022
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
Loss on
Early
Exting.
of Debt
|
|
Income Tax
Adjustments
|
|
Bondholder
Consent Fees
Associated
with Enhabit
Distribution
|
|
Change in
Fair Market
Value of
Equity
Securities
|
|
As
Adjusted
|
|
(In Millions,
Except Per Share Amounts)
|
|
Adjusted
EBITDA*
|
$
196.4
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$ 196.4
|
|
Depreciation and
amortization
|
(60.5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(60.5)
|
|
Interest expense and
amortization of debt discounts and fees
|
(60.4)
|
|
—
|
|
—
|
|
20.5
|
|
—
|
|
(39.9)
|
|
Stock-based
compensation
|
(7.7)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(7.7)
|
|
Loss on disposal or
impairment of assets
|
(2.8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2.8)
|
|
Loss on early
extinguishment of debt
|
(1.1)
|
|
1.1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Change in fair market
value of equity securities
|
(3.2)
|
|
—
|
|
—
|
|
—
|
|
3.2
|
|
—
|
|
Income from
continuing operations before income tax expense
|
60.7
|
|
1.1
|
|
—
|
|
20.5
|
|
3.2
|
|
85.5
|
|
Provision for income
tax expense
|
(22.8)
|
|
(0.3)
|
|
7.0
|
|
(5.3)
|
|
(0.9)
|
|
(22.3)
|
|
Income from
continuing operations attributable to Encompass
Health
|
$
37.9
|
|
$ 0.8
|
|
$
7.0
|
|
$
15.2
|
|
$
2.3
|
|
$
63.2
|
|
Diluted earnings per
share from continuing operations**
|
$
0.38
|
|
$
0.01
|
|
$
0.07
|
|
$
0.15
|
|
$
0.02
|
|
$
0.63
|
|
Diluted shares used
in calculation
|
100.3
|
|
|
|
|
|
|
|
|
|
|
|
|
* See reconciliation of net
income to Adjusted EBITDA
|
|
**
Adjusted EPS may not sum across due to rounding.
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations
Attributable to Encompass Health per Diluted Share to Adjusted
Earnings Per Share
|
|
|
For the Six Months
Ended June 30, 2023
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
State
Regulatory
Change
Impact
|
|
Income Tax
Adjustments
|
|
Change in Fair
Market Value of
Equity Securities
|
|
As
Adjusted
|
|
(In Millions,
Except Per Share Amounts)
|
|
Adjusted
EBITDA*
|
$
478.6
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$ 478.6
|
|
Depreciation and
amortization
|
(136.5)
|
|
6.1
|
|
—
|
|
—
|
|
(130.4)
|
|
Interest expense and
amortization of debt discounts and fees
|
(72.7)
|
|
—
|
|
—
|
|
—
|
|
(72.7)
|
|
Stock-based
compensation
|
(23.5)
|
|
—
|
|
—
|
|
—
|
|
(23.5)
|
|
Loss on disposal or
impairment of assets
|
(1.5)
|
|
—
|
|
—
|
|
—
|
|
(1.5)
|
|
State regulatory change
impact on noncontrolling interests
|
2.2
|
|
(2.2)
|
|
—
|
|
—
|
|
—
|
|
Change in fair market
value of equity securities
|
(0.6)
|
|
—
|
|
—
|
|
0.6
|
|
—
|
|
Income from
continuing operations before income tax expense
|
246.0
|
|
3.9
|
|
—
|
|
0.6
|
|
250.5
|
|
Provision for income
tax expense
|
(64.7)
|
|
(1.0)
|
|
0.4
|
|
(0.2)
|
|
(65.5)
|
|
Income from
continuing operations attributable to Encompass
Health
|
$
181.3
|
|
$
2.9
|
|
$
0.4
|
|
$
0.4
|
|
$ 185.0
|
|
Diluted earnings per
share from continuing operations**
|
$
1.79
|
|
$
0.03
|
|
$
—
|
|
$
—
|
|
$
1.83
|
|
Diluted shares used
in calculation
|
101.0
|
|
|
|
|
|
|
|
|
|
|
* See reconciliation of net
income to Adjusted EBITDA
|
|
**
Adjusted EPS may not sum across due to rounding.
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Reconciliation of Income from Continuing Operations
Attributable to Encompass Health per Diluted Share to Adjusted
Earnings Per Share
|
|
|
For the Six Months
Ended June 30, 2022
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
Loss on
Early
Exting. of
Debt
|
|
Income Tax
Adjustments
|
|
Bondholder
Consent Fees
Associated
with Enhabit
Distribution
|
|
Change in
Fair Market
Value of
Equity
Securities
|
|
As
Adjusted
|
|
(In Millions,
Except Per Share Amounts)
|
|
Adjusted
EBITDA*
|
$
391.3
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$ 391.3
|
|
Depreciation and
amortization
|
(118.2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(118.2)
|
|
Interest expense and
amortization of debt discounts and fees
|
(100.0)
|
|
—
|
|
—
|
|
20.5
|
|
—
|
|
(79.5)
|
|
Stock-based
compensation
|
(13.8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(13.8)
|
|
Loss on disposal or
impairment of assets
|
(3.5)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3.5)
|
|
Loss on early
extinguishment of debt
|
(1.4)
|
|
1.4
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Change in fair market
value of equity securities
|
(5.7)
|
|
—
|
|
—
|
|
—
|
|
5.7
|
|
—
|
|
Income from
continuing operations before income tax expense
|
148.7
|
|
1.4
|
|
—
|
|
20.5
|
|
5.7
|
|
176.3
|
|
Provision for income
tax expense
|
(46.4)
|
|
(0.4)
|
|
7.2
|
|
(5.3)
|
|
(1.5)
|
|
(46.4)
|
|
Income from
continuing operations attributable to Encompass
Health
|
$
102.3
|
|
$
1.0
|
|
$
7.2
|
|
$
15.2
|
|
$
4.2
|
|
$ 129.9
|
|
Diluted earnings per
share from continuing operations**
|
$
1.02
|
|
$
0.01
|
|
$
0.07
|
|
$
0.15
|
|
$
0.04
|
|
$
1.30
|
|
Diluted shares used
in calculation
|
100.2
|
|
|
|
|
|
|
|
|
|
|
|
|
* See reconciliation of net
income to Adjusted EBITDA
|
|
**
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
June 30,
|
|
Six Months
Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
Millions)
|
|
Net
income
|
$ 117.2
|
|
$ 71.3
|
|
$ 230.5
|
|
$ 181.4
|
|
Loss (income) from
discontinued operations, net of tax, attributable to Encompass
Health
|
1.2
|
|
(11.5)
|
|
2.2
|
|
(35.2)
|
|
Net income attributable
to noncontrolling interests included in continuing
operations
|
(25.8)
|
|
(21.9)
|
|
(51.4)
|
|
(43.9)
|
|
Provision for income
tax expense
|
32.8
|
|
22.8
|
|
64.7
|
|
46.4
|
|
Interest expense and
amortization of debt discounts and fees
|
36.3
|
|
60.4
|
|
72.7
|
|
100.0
|
|
Depreciation and
amortization
|
72.6
|
|
60.5
|
|
136.5
|
|
118.2
|
|
Loss on early
extinguishment of debt
|
—
|
|
1.1
|
|
—
|
|
1.4
|
|
Loss on disposal or
impairment of assets
|
0.8
|
|
2.8
|
|
1.5
|
|
3.5
|
|
Stock-based
compensation
|
15.6
|
|
7.7
|
|
23.5
|
|
13.8
|
|
State regulatory change
impact on noncontrolling interests
|
(2.2)
|
|
—
|
|
(2.2)
|
|
—
|
|
Change in fair market
value of equity securities
|
1.1
|
|
3.2
|
|
0.6
|
|
5.7
|
|
Adjusted
EBITDA
|
$ 249.6
|
|
$ 196.4
|
|
$ 478.6
|
|
$ 391.3
|
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating
Activities to Adjusted Free Cash Flow
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
Millions)
|
|
Net cash provided by
operating activities
|
$ 206.7
|
|
$ 244.6
|
|
$ 434.6
|
|
$ 463.5
|
|
Impact of discontinued
operations
|
1.6
|
|
(39.5)
|
|
2.9
|
|
(75.9)
|
|
Net cash provided by
operating activities of continuing operations
|
208.3
|
|
205.1
|
|
437.5
|
|
387.6
|
|
Capital expenditures
for maintenance
|
(56.7)
|
|
(39.2)
|
|
(94.5)
|
|
(71.4)
|
|
Distributions paid to
noncontrolling interests of consolidated affiliates
|
(27.6)
|
|
(25.1)
|
|
(59.4)
|
|
(45.9)
|
|
Items not indicative
of ongoing operating performance:
|
|
|
|
|
|
|
|
|
Transaction costs and
related liabilities
|
0.2
|
|
3.5
|
|
(0.7)
|
|
(2.8)
|
|
Adjusted free cash
flow
|
$ 124.2
|
|
$ 144.3
|
|
$ 282.9
|
|
$ 267.5
|
For the three months ended June 30, 2023, net cash used in
investing activities was $128.5
million and resulted primarily from capital expenditures.
Net cash used in financing activities during the three months ended
June 30, 2023 was $43.5 million
and resulted primarily from net debt payments, distributions paid
to noncontrolling interests of consolidated affiliates, and cash
dividends paid on common stock partially offset by contributions
from noncontrolling interest of consolidated affiliates.
For the three months ended June 30, 2022, net cash used in
investing activities was $123.2
million and primarily resulted from capital expenditures.
Net cash used in financing activities during the three months ended
June 30, 2022 was $19.3 million
and primarily resulted from net debt payments and issuance costs,
cash dividends paid on common stock and distributions to
noncontrolling interests of consolidated affiliates partially
offset by net cash provided by financing activities of discontinued
operations and contributions from noncontrolling interests of
consolidated affiliates.
For the six months ended June 30, 2023, net cash used in
investing activities was $232.5
million and primarily resulted from capital expenditures.
Net cash used in financing activities during the six months ended
June 30, 2023 was $101.5 million
and primarily resulted from net debt payments, distributions paid
to noncontrolling interests of consolidated affiliates, and cash
dividends paid on common stock partially offset by contributions
from noncontrolling interest of consolidated affiliates.
For the six months ended June 30, 2022, net cash used in
investing activities was $246.3
million and primarily resulted from capital expenditures.
Net cash used in financing activities during the six months ended
June 30, 2022 was $80.2 million
and primarily resulted from net debt payments and issuance costs,
cash dividends paid on common stock and distributions to
noncontrolling interests of consolidated affiliates partially
offset by net cash provided by financing activities of discontinued
operations and contributions from noncontrolling interests of
consolidated affiliates.
Encompass Health Corporation and
Subsidiaries
Forward-Looking Statements
Statements contained in this press release and the
supplemental information which are not historical facts, such as
those relating to the business model, strategy, outlook and
guidance, dividend strategies, effective income tax rates, labor
cost trends, legislative and regulatory developments or their
impacts, financial guidance, ability to return value to
shareholders, projected capital expenditures, acquisition
opportunities, development projects, other 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
and involve a number of risks and uncertainties. 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, an infectious disease outbreak, including the speed, depth,
geographic reach and duration of its spread, which could decrease
our patient volumes and revenues and lead to staffing and supply
shortages and associated cost increases; the legal, regulatory and
administrative developments that occur at the federal, state and
local levels; Encompass Health's infectious disease prevention and
control efforts; the demand for Encompass Health's services,
including based on any downturns in the economy, consumer
confidence, or the capital markets; the price of Encompass Health's
common stock as it affects Encompass Health'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' or partners' 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; Encompass Health's ability to
realize construction cost savings from prefabrication of hospitals;
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 and Encompass Health's ability to adapt operations to
those changes, including in connection with the CMS inpatient
rehabilitation review choice demonstration project; 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 infectious disease
outbreaks, and the impact on Encompass Health's labor expenses from
potential union activity, staffing shortages, and competitive
compensation practices; 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 cost of,
or the decrease in the availability of, necessary supplies, such as
personal protective equipment; the increase in the costs of
defending and insuring against alleged professional
liability claims, 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,
2022 and Form 10-Q for the quarters ended March 31, 2023, and June 30, 2023, when
filed.
Media Contact
Casey Winger, 205 447-6410
casey.winger@encompasshealth.com
Investor Relations Contact
Mark Miller, 205 970-5860
mark.miller@encompasshealth.com
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SOURCE Encompass Health Corp.