BIRMINGHAM, Ala., Feb. 7, 2024
/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 fourth quarter ended December 31, 2023.
Summary results
|
|
|
|
|
Growth
|
|
Q4
2023
|
|
Q4
2022
|
|
Dollars
|
|
Percent
|
|
(In Millions, Except
Per Share Data)
|
Net operating
revenue
|
$ 1,246.8
|
|
$ 1,137.3
|
|
$ 109.5
|
|
9.6 %
|
Income from continuing
operations attributable to Encompass Health per diluted
share
|
0.94
|
|
0.90
|
|
0.04
|
|
4.4 %
|
Adjusted earnings per
share
|
0.95
|
|
0.88
|
|
0.07
|
|
8.0 %
|
Cash flows provided by
operating activities
|
201.0
|
|
172.2
|
|
28.8
|
|
16.7 %
|
Adjusted
EBITDA
|
255.0
|
|
232.7
|
|
22.3
|
|
9.6 %
|
Adjusted free cash
flow
|
93.5
|
|
46.0
|
|
47.5
|
|
103.3 %
|
|
|
|
|
|
|
|
|
(Actual
Amounts)
|
|
|
|
|
|
Discharges
|
59,247
|
|
54,700
|
|
|
|
8.3 %
|
Same-store
discharge growth
|
|
|
|
|
|
|
5.3 %
|
Net patient revenue per
discharge
|
$
20,538
|
|
$
20,347
|
|
|
|
0.9 %
|
See attached supplemental information for calculations of
non-GAAP measures and reconciliations to their most comparable GAAP
measure.
"The fourth quarter was a very strong finish to 2023," said
President and Chief Executive Officer of Encompass Health Mark
Tarr. "Strong discharge growth facilitated a fourth quarter
increase of 9.6% in net operating revenue and Adjusted EBITDA. For
the full year, net operating revenue increased 10.4% and Adjusted
EBITDA grew 18.5%. Our value proposition and operating strategy
continue to be validated and we remain highly optimistic about the
long-term prospects of our business."
- Net operating revenue growth of 9.6% resulted primarily from
discharge growth of 8.3%, including same-store growth of 5.3%. Net
revenue per discharge grew 0.9%.
- Cash flows provided by operating activities increased 16.7%
over the prior year to $201.0
million, due to a favorable change in working capital and an
increase in net income.
- The 9.6% increase in Adjusted EBITDA resulted primarily from
higher revenue.
Full-year results
|
Full
Year
|
|
Growth
|
|
2023
|
|
2022
|
|
Dollars
|
|
Percent
|
|
(In Millions, Except
Per Share Data)
|
Net operating
revenue
|
$ 4,801.2
|
|
$ 4,348.6
|
|
$ 452.6
|
|
10.4 %
|
Income from continuing
operations attributable to Encompass Health per diluted
share
|
3.59
|
|
2.56
|
|
1.03
|
|
40.2 %
|
Adjusted earnings per
share
|
3.64
|
|
2.85
|
|
0.79
|
|
27.7 %
|
Cash flows provided by
operating activities
|
850.8
|
|
705.8
|
|
145.0
|
|
20.5 %
|
Adjusted
EBITDA
|
971.1
|
|
819.3
|
|
151.8
|
|
18.5 %
|
Adjusted free cash
flow
|
525.7
|
|
340.1
|
|
185.6
|
|
54.6 %
|
|
|
|
|
|
|
|
|
(Actual
Amounts)
|
|
Discharges
|
229,480
|
|
211,116
|
|
|
|
8.7 %
|
Same-store
discharge growth
|
|
|
|
|
|
|
4.8 %
|
Net patient revenue per
discharge
|
$
20,454
|
|
$
20,139
|
|
|
|
1.6 %
|
2024 Guidance
The Company provided the following guidance for 2024.
|
|
|
|
2024
Guidance
|
|
(In Millions, Except
Per Share Data)
|
Net operating
revenue
|
|
$5,200 to
$5,300
|
Adjusted
EBITDA
|
|
$1,015 to
$1,055
|
Adjusted earnings per
share from continuing operations attributable to Encompass
Health
|
|
$3.77 to
$4.06
|
For considerations regarding the Company's 2024 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 Thursday,
February 8, 2024 to discuss its results for the fourth 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 800 579-2543 and
giving the conference ID EHCQ423. International callers should dial
785 424-1789 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 161 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 World's Most Admired
Companies and Modern Healthcare's Best Places to Work in
Healthcare. 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 Annual Report on Form
10-K for the year ended December 31, 2023 (the "2023 Form
10-K"), when filed, as well as the Company's Current Report on Form
8-K filed on February 7, 2024 (the "Q4 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 February 8, 2024 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 Q4
Earnings Form 8-K. Readers are encouraged to review the "Note
Regarding Presentation of Non-GAAP Financial Measures" included in
the Q4 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
2024 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 -
approximately $140 million to
$150 million
- Amortization of debt-related items - approximately $10 million
The Q4 Earnings Form 8-K and, when filed, the 2023 Form 10-K 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)
|
|
|
For the Three
Months
Ended December 31,
|
|
For the Year
Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In Millions, Except
Per Share Data)
|
Net operating
revenues
|
$
1,246.8
|
|
$
1,137.3
|
|
$ 4,801.2
|
|
$ 4,348.6
|
Operating
expenses:
|
|
|
|
|
|
|
|
Salaries and
benefits
|
676.3
|
|
614.4
|
|
2,600.1
|
|
2,393.3
|
Other operating
expenses
|
184.8
|
|
170.1
|
|
719.1
|
|
670.4
|
Occupancy
costs
|
14.0
|
|
13.1
|
|
56.3
|
|
54.7
|
Supplies
|
58.6
|
|
53.9
|
|
218.3
|
|
202.1
|
General and
administrative expenses
|
53.1
|
|
42.8
|
|
201.7
|
|
154.3
|
Depreciation and
amortization
|
70.1
|
|
63.3
|
|
273.9
|
|
243.6
|
Total operating
expenses
|
1,056.9
|
|
957.6
|
|
4,069.4
|
|
3,718.4
|
Loss on early
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
1.4
|
Interest expense and
amortization of debt discounts and fees
|
34.9
|
|
37.5
|
|
143.5
|
|
175.7
|
Other (income)
expense
|
(8.9)
|
|
(8.4)
|
|
(15.7)
|
|
5.2
|
Equity in net income of
nonconsolidated affiliates
|
(0.9)
|
|
(0.3)
|
|
(3.2)
|
|
(2.9)
|
Income from continuing
operations before income tax expense
|
164.8
|
|
150.9
|
|
607.2
|
|
450.8
|
Provision for income
tax expense
|
37.2
|
|
31.9
|
|
132.2
|
|
100.1
|
Income from continuing
operations
|
127.6
|
|
119.0
|
|
475.0
|
|
350.7
|
(Loss) income from
discontinued operations, net of tax
|
(8.5)
|
|
(1.5)
|
|
(12.0)
|
|
15.2
|
Net and
comprehensive income
|
119.1
|
|
117.5
|
|
463.0
|
|
365.9
|
Less: Net income
attributable to noncontrolling interests included in continuing
operations
|
(31.5)
|
|
(28.1)
|
|
(111.0)
|
|
(93.6)
|
Less: Net income
attributable to noncontrolling interests included in discontinued
operations
|
—
|
|
—
|
|
—
|
|
(1.3)
|
Less: Net and
comprehensive income attributable to noncontrolling
interests
|
(31.5)
|
|
(28.1)
|
|
(111.0)
|
|
(94.9)
|
Net and
comprehensive income attributable to Encompass
Health
|
$ 87.6
|
|
$ 89.4
|
|
$
352.0
|
|
$
271.0
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
99.5
|
|
99.3
|
|
99.5
|
|
99.2
|
Diluted
|
101.5
|
|
100.8
|
|
101.3
|
|
100.4
|
Earnings per common
share:
|
|
|
|
|
|
|
|
Basic earnings per
share attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
Continuing
operations
|
$ 0.96
|
|
$ 0.91
|
|
$ 3.63
|
|
$ 2.58
|
Discontinued
operations
|
(0.09)
|
|
(0.02)
|
|
(0.12)
|
|
0.14
|
Net income
|
$ 0.87
|
|
$ 0.89
|
|
$ 3.51
|
|
$ 2.72
|
Diluted earnings
per share attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
Continuing
operations
|
$ 0.94
|
|
$ 0.90
|
|
$ 3.59
|
|
$ 2.56
|
Discontinued
operations
|
(0.08)
|
|
(0.01)
|
|
(0.12)
|
|
0.14
|
Net income
|
$ 0.86
|
|
$ 0.89
|
|
$ 3.47
|
|
$ 2.70
|
|
|
|
|
|
|
|
|
Amounts
attributable to Encompass Health common
shareholders:
|
|
|
|
|
|
|
|
Income from continuing
operations
|
$ 96.1
|
|
$ 90.9
|
|
$
364.0
|
|
$
257.1
|
(Loss) income from
discontinued operations, net of tax
|
(8.5)
|
|
(1.5)
|
|
(12.0)
|
|
13.9
|
Net income
attributable to Encompass Health
|
$ 87.6
|
|
$ 89.4
|
|
$
352.0
|
|
$
271.0
|
Encompass Health Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(Unaudited)
|
|
|
As of December
31,
|
|
2023
|
|
2022
|
|
(In
Millions)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
69.1
|
|
$
21.8
|
Restricted
cash
|
35.1
|
|
31.6
|
Accounts
receivable
|
611.6
|
|
536.8
|
Prepaid
expenses
|
34.5
|
|
34.9
|
Other current
assets
|
91.5
|
|
92.1
|
Total current
assets
|
841.8
|
|
717.2
|
Property and equipment,
net
|
3,301.0
|
|
2,939.2
|
Operating lease
right-of-use assets
|
208.5
|
|
212.5
|
Goodwill
|
1,281.3
|
|
1,263.2
|
Intangible assets,
net
|
278.2
|
|
282.3
|
Other long-term
assets
|
191.6
|
|
222.1
|
Total
assets
|
$
6,102.4
|
|
$
5,636.5
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
24.8
|
|
$
25.2
|
Current operating
lease liabilities
|
24.1
|
|
25.6
|
Accounts
payable
|
170.0
|
|
132.9
|
Accrued
payroll
|
207.5
|
|
168.3
|
Accrued interest
payable
|
42.6
|
|
42.8
|
Other current
liabilities
|
187.4
|
|
181.1
|
Total current
liabilities
|
656.4
|
|
575.9
|
Long-term debt, net of
current portion
|
2,687.8
|
|
2,741.8
|
Long-term operating
lease liabilities
|
196.1
|
|
199.7
|
Self-insured
risks
|
131.8
|
|
128.5
|
Deferred income tax
liabilities
|
87.0
|
|
83.0
|
Other long-term
liabilities
|
46.1
|
|
45.7
|
Total
liabilities
|
3,805.2
|
|
3,774.6
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
42.0
|
|
35.6
|
Shareholders'
equity:
|
|
|
|
Encompass Health
shareholders' equity
|
1,647.5
|
|
1,310.3
|
Noncontrolling
interests
|
607.7
|
|
516.0
|
Total shareholders'
equity
|
2,255.2
|
|
1,826.3
|
Total liabilities
and shareholders' equity
|
$
6,102.4
|
|
$
5,636.5
|
Encompass Health Corporation and
Subsidiaries
Condensed Consolidated Statements of Cash
Flows
(Unaudited)
|
|
|
For the Year
Ended
December
31,
|
|
2023
|
|
2022
|
|
(In
Millions)
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
463.0
|
|
$
365.9
|
Loss (income) from
discontinued operations, net of tax
|
12.0
|
|
(15.2)
|
Adjustments to
reconcile net income to net cash provided by operating
activities—
|
|
|
|
Depreciation and
amortization
|
273.9
|
|
243.6
|
Amortization of
debt-related items
|
9.5
|
|
9.7
|
Loss on early
extinguishment of debt
|
—
|
|
1.4
|
Equity in net income
of nonconsolidated affiliates
|
(3.2)
|
|
(2.9)
|
Distributions from
nonconsolidated affiliates
|
1.6
|
|
4.0
|
Stock-based
compensation
|
50.6
|
|
29.2
|
Deferred tax
expense
|
3.9
|
|
27.9
|
Other, net
|
5.2
|
|
20.3
|
Change in assets and
liabilities, net of acquisitions—
|
|
|
|
Accounts
receivable
|
(22.4)
|
|
(16.9)
|
Prepaid expenses and
other assets
|
6.1
|
|
8.0
|
Accounts
payable
|
11.8
|
|
2.3
|
Accrued
payroll
|
39.2
|
|
(31.2)
|
Other
liabilities
|
15.6
|
|
7.4
|
Net cash (used in)
provided by operating activities of discontinued
operations
|
(16.0)
|
|
52.3
|
Total
adjustments
|
375.8
|
|
355.1
|
Net cash provided
by operating activities
|
850.8
|
|
705.8
|
Cash flows from
investing activities:
|
|
|
|
Purchases of property,
equipment, and intangible assets
|
(583.1)
|
|
(584.1)
|
Purchase of restricted
investments
|
(23.0)
|
|
(35.2)
|
Other, net
|
3.3
|
|
(4.2)
|
Net cash used in
investing activities of discontinued operations
|
—
|
|
(3.5)
|
Net cash used in
investing activities
|
(602.8)
|
|
(627.0)
|
Cash flows from
financing activities:
|
|
|
|
Principal payments on
debt, including pre-payments
|
(7.2)
|
|
(345.8)
|
Principal borrowings
on notes
|
20.0
|
|
11.8
|
Borrowings on
revolving credit facility
|
60.0
|
|
240.0
|
Payments on revolving
credit facility
|
(115.0)
|
|
(385.0)
|
Principal payments
under finance lease obligations
|
(41.1)
|
|
(19.2)
|
Debt amendment and
issuance costs
|
(0.1)
|
|
(24.1)
|
Taxes paid on behalf
of employees for shares withheld
|
(8.2)
|
|
(7.3)
|
Contributions from
noncontrolling interests of consolidated affiliates
|
68.3
|
|
64.1
|
Dividends paid on
common stock
|
(60.4)
|
|
(99.0)
|
Distributions paid to
noncontrolling interests of consolidated affiliates
|
(114.7)
|
|
(96.6)
|
Other, net
|
1.2
|
|
0.3
|
Net cash provided by
financing activities of discontinued operations
|
—
|
|
515.1
|
Net cash used in
financing activities
|
(197.2)
|
|
(145.7)
|
|
|
|
|
Encompass Health Corporation and
Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Continued)
(Unaudited)
|
|
|
For the Year
Ended
December
31,
|
|
2023
|
|
2022
|
|
(In
Millions)
|
Increase (decrease)
in cash, cash equivalents, and restricted cash
|
50.8
|
|
(66.9)
|
Cash, cash
equivalents, and restricted cash at beginning of
period
|
53.4
|
|
120.3
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
104.2
|
|
$
53.4
|
|
|
|
|
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
|
$
69.1
|
|
$
21.8
|
Restricted cash at end
of period
|
35.1
|
|
31.6
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
104.2
|
|
$
53.4
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Earnings Per Share
|
|
|
Q4
|
|
Year
Ended
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In Millions, Except
Per Share Data)
|
Adjusted
EBITDA
|
$ 255.0
|
|
$ 232.7
|
|
$ 971.1
|
|
$ 819.3
|
Depreciation and
amortization
|
(70.1)
|
|
(63.3)
|
|
(273.9)
|
|
(243.6)
|
Interest expense and
amortization of debt discounts and fees
|
(34.9)
|
|
(37.5)
|
|
(143.5)
|
|
(175.7)
|
Stock-based
compensation
|
(13.4)
|
|
(8.1)
|
|
(50.6)
|
|
(29.2)
|
Loss on disposal or
impairment of assets
|
(6.1)
|
|
(2.4)
|
|
(9.8)
|
|
(4.8)
|
|
130.5
|
|
121.4
|
|
493.3
|
|
366.0
|
Items not indicative of
ongoing operating performance:
|
|
|
|
|
|
|
|
Loss on early
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
(1.4)
|
State regulatory
change impact on noncontrolling interests
|
—
|
|
—
|
|
2.2
|
|
—
|
Change in fair market
value of equity securities
|
2.8
|
|
1.4
|
|
0.7
|
|
(7.4)
|
Pre-tax
income
|
133.3
|
|
122.8
|
|
496.2
|
|
357.2
|
Income tax
expense
|
(37.2)
|
|
(31.9)
|
|
(132.2)
|
|
(100.1)
|
Income from
continuing operations (1)
|
$ 96.1
|
|
$ 90.9
|
|
$ 364.0
|
|
$ 257.1
|
|
|
|
|
|
|
|
|
Basic shares
|
99.5
|
|
99.3
|
|
99.5
|
|
99.2
|
Diluted
shares
|
101.5
|
|
100.8
|
|
101.3
|
|
100.4
|
|
|
|
|
|
|
|
|
Basic earnings per
share (1)
|
$ 0.96
|
|
$ 0.91
|
|
$ 3.63
|
|
$ 2.58
|
Diluted earnings per
share (1)
|
$ 0.94
|
|
$ 0.90
|
|
$ 3.59
|
|
$ 2.56
|
|
|
(1)
|
Income from continuing
operations attributable to Encompass Health
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Adjusted Earnings Per Share
|
|
|
Q4
|
|
Year
Ended
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Earnings per share,
as reported
|
$
0.94
|
|
$
0.90
|
|
$
3.59
|
|
$
2.56
|
Adjustments, net of
tax:
|
|
|
|
|
|
|
|
Bondholder consent
fees associated with Enhabit distribution
|
—
|
|
—
|
|
—
|
|
0.15
|
Income tax
adjustments
|
0.03
|
|
(0.01)
|
|
0.03
|
|
0.07
|
State regulatory
change impact
|
—
|
|
—
|
|
0.03
|
|
—
|
Loss on early
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
0.01
|
Change in fair market
value of equity securities
|
(0.02)
|
|
(0.01)
|
|
—
|
|
0.05
|
Adjusted earnings
per share*
|
$
0.95
|
|
$
0.88
|
|
$
3.64
|
|
$
2.85
|
|
* 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
|
|
|
Q4
|
|
Year
Ended
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
Millions)
|
Net cash provided by
operating activities
|
$ 201.0
|
|
$ 172.2
|
|
$ 850.8
|
|
$ 705.8
|
Interest expense and
amortization of debt discounts and fees
|
34.9
|
|
37.5
|
|
143.5
|
|
175.7
|
Gain (loss) on sale of
investments, excluding impairments
|
5.5
|
|
1.0
|
|
4.6
|
|
(15.5)
|
Equity in net income of
nonconsolidated affiliates
|
0.9
|
|
0.3
|
|
3.2
|
|
2.9
|
Net income attributable
to noncontrolling interests in continuing operations
|
(31.5)
|
|
(28.1)
|
|
(111.0)
|
|
(93.6)
|
Amortization of
debt-related items
|
(2.4)
|
|
(2.3)
|
|
(9.5)
|
|
(9.7)
|
Distributions from
nonconsolidated affiliates
|
(1.0)
|
|
(0.3)
|
|
(1.6)
|
|
(4.0)
|
Current portion of
income tax expense
|
30.4
|
|
(3.7)
|
|
128.3
|
|
72.2
|
Change in assets and
liabilities
|
8.6
|
|
53.9
|
|
(50.3)
|
|
30.4
|
Cash used in (provided
by) operating activities of discontinued operations
|
11.4
|
|
3.7
|
|
16.0
|
|
(52.3)
|
State regulatory change
impact on noncontrolling interests
|
—
|
|
—
|
|
(2.2)
|
|
—
|
Change in fair market
value of equity securities
|
(2.8)
|
|
(1.4)
|
|
(0.7)
|
|
7.4
|
Other
|
—
|
|
(0.1)
|
|
—
|
|
—
|
Adjusted
EBITDA
|
$ 255.0
|
|
$ 232.7
|
|
$ 971.1
|
|
$ 819.3
|
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 December 31, 2023
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
Income Tax
Adjustments
|
|
Change in Fair
Market Value
of Equity
Securities
|
|
As
Adjusted
|
|
(In Millions, Except
Per Share Amounts)
|
Adjusted
EBITDA*
|
$
255.0
|
|
$
—
|
|
$
—
|
|
$ 255.0
|
Depreciation and
amortization
|
(70.1)
|
|
—
|
|
—
|
|
(70.1)
|
Interest expense and
amortization of debt discounts and fees
|
(34.9)
|
|
—
|
|
—
|
|
(34.9)
|
Stock-based
compensation
|
(13.4)
|
|
—
|
|
—
|
|
(13.4)
|
Loss on disposal or
impairment of assets
|
(6.1)
|
|
—
|
|
—
|
|
(6.1)
|
Change in fair market
value of equity securities
|
2.8
|
|
—
|
|
(2.8)
|
|
—
|
Income from
continuing operations before income tax expense
|
133.3
|
|
—
|
|
(2.8)
|
|
130.5
|
Provision for income
tax expense
|
(37.2)
|
|
2.9
|
|
0.7
|
|
(33.6)
|
Income from
continuing operations attributable to Encompass
Health
|
$
96.1
|
|
$
2.9
|
|
$
(2.1)
|
|
$
96.9
|
Diluted earnings per
share from continuing operations**
|
$
0.94
|
|
$
0.03
|
|
$
(0.02)
|
|
$
0.95
|
Diluted shares used
in calculation
|
101.5
|
|
|
|
|
|
|
|
* 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 December 31, 2022
|
|
|
|
Adjustments
|
|
|
|
As
Reported
|
|
Income Tax
Adjustments
|
|
Change in Fair
Market Value of
Equity Securities
|
|
As
Adjusted
|
|
(In Millions, Except
Per Share Amounts)
|
Adjusted
EBITDA*
|
$
232.7
|
|
$
—
|
|
$
—
|
|
$ 232.7
|
Depreciation and
amortization
|
(63.3)
|
|
—
|
|
—
|
|
(63.3)
|
Interest expense and
amortization of debt discounts and fees
|
(37.5)
|
|
—
|
|
—
|
|
(37.5)
|
Stock-based
compensation
|
(8.1)
|
|
—
|
|
—
|
|
(8.1)
|
Loss on disposal or
impairment of assets
|
(2.4)
|
|
—
|
|
—
|
|
(2.4)
|
Change in fair market
value of equity securities
|
1.4
|
|
—
|
|
(1.4)
|
|
—
|
Income from
continuing operations before income tax expense
|
122.8
|
|
—
|
|
(1.4)
|
|
121.4
|
Provision for income
tax expense
|
(31.9)
|
|
(1.1)
|
|
0.4
|
|
(32.6)
|
Income from
continuing operations attributable to Encompass
Health
|
$
90.9
|
|
$
(1.1)
|
|
$
(1.0)
|
|
$
88.8
|
Diluted earnings per
share from continuing operations**
|
$
0.90
|
|
$
(0.01)
|
|
$
(0.01)
|
|
$
0.88
|
Diluted shares used
in calculation
|
100.8
|
|
|
|
|
|
|
|
* 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 Year Ended
December 31, 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*
|
$
971.1
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$ 971.1
|
Depreciation and
amortization
|
(273.9)
|
|
6.1
|
|
—
|
|
—
|
|
(267.8)
|
Interest expense and
amortization of debt discounts and fees
|
(143.5)
|
|
—
|
|
—
|
|
—
|
|
(143.5)
|
Stock-based
compensation
|
(50.6)
|
|
—
|
|
—
|
|
—
|
|
(50.6)
|
Loss on disposal or
impairment of assets
|
(9.8)
|
|
—
|
|
—
|
|
—
|
|
(9.8)
|
State regulatory change
impact on noncontrolling interests
|
2.2
|
|
(2.2)
|
|
—
|
|
—
|
|
—
|
Change in fair market
value of equity securities
|
0.7
|
|
—
|
|
—
|
|
(0.7)
|
|
—
|
Income from
continuing operations before income tax expense
|
496.2
|
|
3.9
|
|
—
|
|
(0.7)
|
|
499.4
|
Provision for income
tax expense
|
(132.2)
|
|
(1.0)
|
|
2.8
|
|
0.2
|
|
(130.2)
|
Income from
continuing operations attributable to Encompass
Health
|
$
364.0
|
|
$
2.9
|
|
$
2.8
|
|
$
(0.5)
|
|
$ 369.2
|
Diluted earnings per
share from continuing operations**
|
$
3.59
|
|
$
0.03
|
|
$
0.03
|
|
$
—
|
|
$
3.64
|
Diluted shares used
in calculation
|
101.3
|
|
|
|
|
|
|
|
|
|
* 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 Year Ended
December 31, 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*
|
$
819.3
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$ 819.3
|
Depreciation and
amortization
|
(243.6)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(243.6)
|
Interest expense and
amortization of debt discounts and fees
|
(175.7)
|
|
—
|
|
—
|
|
20.5
|
|
—
|
|
(155.2)
|
Stock-based
compensation
|
(29.2)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(29.2)
|
Loss on disposal or
impairment of assets
|
(4.8)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4.8)
|
Loss on early
extinguishment of debt
|
(1.4)
|
|
1.4
|
|
—
|
|
—
|
|
—
|
|
—
|
Change in fair market
value of equity securities
|
(7.4)
|
|
—
|
|
—
|
|
—
|
|
7.4
|
|
—
|
Income from
continuing operations before income tax expense
|
357.2
|
|
1.4
|
|
—
|
|
20.5
|
|
7.4
|
|
386.5
|
Provision for income
tax expense
|
(100.1)
|
|
(0.4)
|
|
7.4
|
|
(5.3)
|
|
(1.9)
|
|
(100.3)
|
Income from
continuing operations attributable to Encompass
Health
|
$
257.1
|
|
$
1.0
|
|
$
7.4
|
|
$
15.2
|
|
$
5.5
|
|
$ 286.2
|
Diluted earnings per
share from continuing operations**
|
$
2.56
|
|
$
0.01
|
|
$
0.07
|
|
$
0.15
|
|
$
0.05
|
|
$
2.85
|
Diluted shares used
in calculation
|
100.4
|
|
|
|
|
|
|
|
|
|
|
|
* 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
|
|
|
Q4
|
|
Year
Ended
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
Millions)
|
Net
income
|
$ 119.1
|
|
$ 117.5
|
|
$ 463.0
|
|
$ 365.9
|
Loss (income) from
discontinued operations, net of tax, attributable to Encompass
Health
|
8.5
|
|
1.5
|
|
12.0
|
|
(15.2)
|
Net income attributable
to noncontrolling interests included in continuing
operations
|
(31.5)
|
|
(28.1)
|
|
(111.0)
|
|
(93.6)
|
Provision for income
tax expense
|
37.2
|
|
31.9
|
|
132.2
|
|
100.1
|
Interest expense and
amortization of debt discounts and fees
|
34.9
|
|
37.5
|
|
143.5
|
|
175.7
|
Depreciation and
amortization
|
70.1
|
|
63.3
|
|
273.9
|
|
243.6
|
Loss on early
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
1.4
|
Loss on disposal or
impairment of assets
|
6.1
|
|
2.4
|
|
9.8
|
|
4.8
|
Stock-based
compensation
|
13.4
|
|
8.1
|
|
50.6
|
|
29.2
|
State regulatory change
impact on noncontrolling interests
|
—
|
|
—
|
|
(2.2)
|
|
—
|
Change in fair market
value of equity securities
|
(2.8)
|
|
(1.4)
|
|
(0.7)
|
|
7.4
|
Adjusted
EBITDA
|
$ 255.0
|
|
$ 232.7
|
|
$ 971.1
|
|
$ 819.3
|
Encompass Health Corporation and
Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating
Activities to Adjusted Free Cash Flow
|
|
|
Q4
|
|
Year
Ended
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
Millions)
|
Net cash provided by
operating activities
|
$ 201.0
|
|
$ 172.2
|
|
$ 850.8
|
|
$ 705.8
|
Impact of discontinued
operations
|
11.4
|
|
3.7
|
|
16.0
|
|
(52.3)
|
Net cash provided by
operating activities of continuing operations
|
212.4
|
|
175.9
|
|
866.8
|
|
653.5
|
Capital expenditures
for maintenance
|
(87.1)
|
|
(110.8)
|
|
(216.9)
|
|
(238.4)
|
Distributions paid to
noncontrolling interests of consolidated affiliates
|
(22.8)
|
|
(28.4)
|
|
(114.7)
|
|
(96.6)
|
Items not indicative
of ongoing operating performance:
|
|
|
|
|
|
|
|
Transaction costs and
related liabilities
|
(9.0)
|
|
9.3
|
|
(9.5)
|
|
21.6
|
Adjusted free cash
flow
|
$ 93.5
|
|
$ 46.0
|
|
$ 525.7
|
|
$ 340.1
|
For the three months ended December 31,
2023, net cash used in investing activities was $208.1 million and resulted primarily from
capital expenditures. Net cash used in financing activities during
the three months ended December 31,
2023 was $29.9 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 interests of consolidated affiliates.
For the three months ended December 31,
2022, net cash used in investing activities was $206.4 million and resulted primarily from
capital expenditures. Net cash used in financing activities during
the three months ended December 31,
2022 was $16.5 million and
resulted primarily from cash dividends paid on common stock,
distributions paid to noncontrolling interests of consolidated
affiliates, and debt amendment costs partially offset by net debt
borrowings and contributions from noncontrolling interests of
consolidated affiliates.
For the year ended December 31,
2023, net cash used in investing activities was $602.8 million and resulted primarily from
capital expenditures. Net cash used in financing activities during
the year ended December 31, 2023 was
$197.2 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
interests of consolidated affiliates.
For the year ended December 31,
2022, net cash used in investing activities was $627.0 million and resulted primarily from
capital expenditures. Net cash used in financing activities during
the year ended December 31, 2022 was
$145.7 million and resulted primarily
from net debt payments, cash dividends paid on common stock and
distributions paid 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 strategy, outlook, growth targets
and guidance considerations, dividend strategies, effective income
tax rates, cost trends, legislative and regulatory developments or
their impacts, financial guidance, ability to return value to
shareholders, projected capital expenditures, acquisition
opportunities, development projects, addressable market size, 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; 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, 2023, when filed.
Media Contact
Danielle Hall, 205 970-5912
danielle.hall@encompasshealth.com
Investor Relations Contact
Mark Miller, 205 970-5860
mark.miller@encompasshealth.com
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SOURCE Encompass Health Corp.