Encompass Health reports results for fourth quarter 2020 and issues full-year 2021 guidance and longer term growth targets

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  • EHC

BIRMINGHAM, Ala. , Jan. 26, 2021 /PRNewswire/ -- Encompass Health Corporation (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 fourth quarter ended December 31, 2020.

(PRNewsfoto/Encompass Health Corporation)
(PRNewsfoto/Encompass Health Corporation)

"We are pleased with our performance in 2020, which demonstrates the resiliency of our business model," said President and Chief Executive Officer of Encompass Health Mark Tarr. "Throughout the past year, we have continued to successfully meet the needs of our patients, employees and business partners. As we look ahead into 2021, we remain confident in our business and long-term prospects."

Consolidated results







Growth



Q4 2020


Q4 2019


Dollars


Percent



(In Millions, Except per Share Data)


Net operating revenues

$

1,214.4



$

1,184.4



$

30.0



2.5

%


Income from continuing operations attributable to Encompass Health per diluted share

0.86



0.68



0.18



26.5

%


Adjusted earnings per share

0.93



0.85



0.08



9.4

%


Cash flows provided by operating activities

279.7



215.6



64.1



29.7

%


Adjusted EBITDA

239.9



238.2



1.7



0.7

%


Adjusted free cash flow

213.0



136.9



76.1



55.6

%



Year Ended December 31,







2020


2019






Cash flows provided by operating activities

$

704.7



$

635.3



69.4



10.9

%


Adjusted free cash flow

579.9



516.5



63.4



12.3

%


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.

The increase in income from continuing operations attributable to Encompass Health per diluted share and adjusted earnings per share in 2020 resulted primarily from decreased stock-based compensation resulting from the final exercise of the Home Health Holdings stock appreciation rights in the first quarter of 2020.

The increase in full-year cash flows provided by operating activities and adjusted free cash flow resulted primarily from a decrease in working capital and lower payments for cash taxes.

See attached supplemental information for calculations of non-GAAP measures and reconciliations to their most comparable GAAP measure.

Inpatient rehabilitation segment results







Growth


Q4 2020


Q4 2019


Dollars


Percent

Net operating revenues:

(In Millions)

Inpatient

$

914.9



$

873.5



$

41.4



4.7

%

Outpatient and other

18.2



23.2



(5.0)



(21.6)

%

Total segment revenue

$

933.1



$

896.7



$

36.4



4.1

%










(Actual Amounts)

Discharges

46,503



47,885



(1,382)



(2.9)

%

Same-store discharge growth







(3.8)

%

Net patient revenue per discharge

$

19,674



$

18,242



$

1,432



7.9

%

Revenue reserves related to bad debt as a percent of revenue

2.2

%


1.7

%




50 basis points










(In Millions)

Adjusted EBITDA

$

218.0



$

225.1



$

(7.1)



(3.2)

%

 

  • Revenue - Inpatient revenue growth resulted from favorable pricing partially offset by decreased volumes. New-store discharge growth of 0.9% resulted from a joint venture in Coralville, Iowa ( June 2020 ) and wholly owned hospitals in Murrieta, California ( February 2020 ) and Sioux Falls, South Dakota ( June 2020 ). Discharge growth was impacted by limitations on elective procedures and capacity and staffing constraints at certain of the Company's hospitals. Growth in net patient revenue per discharge primarily resulted from a higher acuity patient mix, an increase in reimbursement rates and the suspension of sequestration.
     
    The decrease in outpatient and other revenue resulted from the inclusion of $2.5 million of business interruption insurance recoveries in the fourth quarter of 2019 related to Hurricane Michael, the COVID-related suspension of hospital-based outpatient services in 2020 and the closure of certain hospital-based outpatient programs in the fourth quarter of 2019.
     
    Revenue reserves related to bad debt as a percent of revenue increased to 2.2% due to a $4.5 million increase primarily related to prior denied claims.
     

  • Adjusted EBITDA - The decrease in Adjusted EBITDA for the inpatient rehabilitation segment resulted primarily from increases in: bad debt expense, group medical expense, and use and cost of personal protective equipment.

 

Home health and hospice segment results







Growth


Q4 2020


Q4 2019


Dollars


Percent

Net operating revenues:

(In Millions)

Home health

$

227.7



$

236.9



$

(9.2)



(3.9)

%

Hospice

53.6



50.8



2.8



5.5

%

Total segment revenue

$

281.3



$

287.7



$

(6.4)



(2.2)

%









Home Health Metrics

(Actual Amounts)

Episodic admissions

40,830



41,781



(951)



(2.3)

%

Same-store episodic admissions growth







(3.8)

%

Episodes

71,441



73,055



(1,614)



(2.2)

%

Same-store episode growth







(3.2)

%

Revenue per episode

$

2,883



$

2,901



$

(18)



(0.6)

%










(In Millions)

Adjusted EBITDA

$

55.5



$

49.6



$

5.9



11.9

%

 

  • Revenue  - Home health volumes declined as a result of episodic admissions decreasing 27% from patients residing in senior living facilities, 36% from patients discharging from skilled nursing facilities, and 12% from patients receiving elective procedures in acute care hospitals. The combined impact of these declines represented a loss of approximately 3,900 admissions, or a 9% negative impact on the growth rate for the fourth quarter of 2020. During the fourth quarter of 2020, the Company averaged 360 home health employees per day on COVID-related quarantine, which further impacted its ability to accept referrals. Revenue per episode was impacted by the implementation of the Patient Driven Groupings Model ("PDGM"). Revenue per episode benefited from the suspension of sequestration.
     
    Hospice same-store admissions growth of 16.1% yielded a 5.5% increase in hospice revenue. Hospice revenue growth was impacted by a decrease in length of stay resulting from a change in patient mix.
     

  • Adjusted EBITDA  - The 11.9% increase in Adjusted EBITDA primarily resulted from improved cost per visit supported by the clinician compensation model changes implemented in May 2020 .

 

General and administrative expenses



Q4 2020


% of
Consolidated
Revenue


Q4 2019


% of
Consolidated
Revenue


(In Millions)

General and administrative expenses, excluding stock-based compensation

$

33.6



2.8%


$

36.5



3.1%













General and administrative expenses decreased as a percent of consolidated revenue due to lower costs associated with incentive compensation.

Full-year consolidated results



Full-Year


Growth


2020


2019


Dollars


Percent


(in millions, except per share data)

Net operating revenues

$

4,644.4



$

4,605.0



$

39.4



0.9

%

Income from continuing operations attributable to Encompass Health per diluted share

2.85



3.62



(0.77)



(21.3)

%

Adjusted earnings per share

2.89



3.91



(1.02)



(26.1)

%

Adjusted EBITDA

860.3



964.9



(104.6)



(10.8)

%

See the attached supplemental information for additional details regarding these calculations.

2021 guidance and longer term growth targets

The Company provided the following guidance for full-year 2021 and growth targets for 2020 through 2025.

Full-year 2021 guidance ranges

(in millions, except per share data)

Net operating revenues

$5,000 to $5,170

Adjusted EBITDA

$925 to $955

Adjusted earnings per share from continuing operations attributable to Encompass Health

$3.31 to $3.53



2020 through 2025 Growth Targets

Net operating revenues

8% to 10% CAGR

Adjusted EBITDA

8% to 10% CAGR

Adjusted free cash flow

5% to 7% CAGR

On December 9, 2020 , the Company announced it is exploring strategic alternatives for its home health and hospice business. The review is ongoing, and no decision has been made. Accordingly, the Company's 2021 guidance and longer term growth targets assume the continuation of the current structure of the business. The guidance and growth targets may change depending on the ultimate outcome of the review.

Base year 2020 adjusted free cash flow benefited from a temporary payroll tax holiday. Exclusive of this item, the adjusted free cash flow CAGR target would be 8% to 10%.

For additional considerations regarding the Company's 2021 guidance ranges, 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 Wednesday , January 27, 2021 to discuss its results for the fourth 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 6192515. 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 137 hospitals and 241 home health locations and 82 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 Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K"), when filed, as well as the Company's Current Report on Form 8-K filed on January 26, 2021 (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 January 27, 2021 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 non-indicative of its ongoing operating performance. Such items include government, class action, and related settlements; professional feesaccounting, 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 2021 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 $164 million to $174 million

  • Amortization of debt-related items - approximately $9 million

The Q4 Earnings Form 8-K and, when filed, the 2020 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,


2020


2019


2020


2019


(In Millions)

Net operating revenues

$

1,214.4



$

1,184.4



$

4,644.4



$

4,605.0


Operating expenses:








Salaries and benefits

686.1



668.5



2,682.0



2,573.0


Other operating expenses

163.1



167.1



634.4



623.6


Occupancy costs

20.4



20.6



81.2



82.3


Supplies

51.7



43.2



200.5



167.9


General and administrative expenses

37.8



64.0



155.5



247.0


Depreciation and amortization

62.3



58.4



243.0



218.7


Government, class action, and related settlements





2.8




Total operating expenses

1,021.4



1,021.8



3,999.4



3,912.5


Loss on early extinguishment of debt

2.3



5.4



2.3



7.7


Interest expense and amortization of debt discounts and fees

46.2



44.5



184.2



159.7


Other income

(4.2)



(3.6)



(10.6)



(30.5)


Equity in net income of nonconsolidated affiliates

(1.0)



(1.2)



(3.5)



(6.7)


Income from continuing operations before income tax expense

149.7



117.5



472.6



562.3


Provision for income tax expense

38.0



27.3



103.8



115.9


Income from continuing operations

111.7



90.2



368.8



446.4


Loss from discontinued operations, net of tax







(0.6)


Net and comprehensive income

111.7



90.2



368.8



445.8


Less: Net and comprehensive income attributable to

noncontrolling interests

(25.7)



(22.6)



(84.6)



(87.1)


Net and comprehensive income attributable to

Encompass Health

$

86.0



$

67.6



$

284.2



$

358.7










Weighted average common shares outstanding:








Basic

98.7



97.8



98.6



98.0


Diluted

100.1



99.5



99.8



99.4


Earnings per common share:








Basic earnings per share attributable to Encompass Health common shareholders:








Continuing operations

$

0.87



$

0.69



$

2.87



$

3.66


Discontinued operations







(0.01)


Net income

$

0.87



$

0.69



$

2.87



$

3.65


Diluted earnings per share attributable to Encompass Health common shareholders:








Continuing operations

$

0.86



$

0.68



$

2.85



$

3.62


Discontinued operations







(0.01)


Net income

$

0.86



$

0.68



$

2.85



$

3.61










Amounts attributable to Encompass Health:








Income from continuing operations

$

86.0



$

67.6



$

284.2



$

359.3


Loss from discontinued operations, net of tax







(0.6)


Net income attributable to Encompass Health

$

86.0



$

67.6



$

284.2



$

358.7


 

Encompass Health Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)



December 31,
2020


December 31,
2019


(In Millions)

Assets




Current assets:




Cash and cash equivalents

$

224.0



$

94.8


Restricted cash

65.4



57.4


Accounts receivable

572.8



506.1


Prepaid expenses and other current assets

86.4



97.5


Total current assets

948.6



755.8


Property and equipment, net

2,206.6



1,959.3


Operating lease right-of-use assets

245.7



276.5


Goodwill

2,318.7



2,305.2


Intangible assets, net

431.3



476.3


Deferred income tax assets



2.9


Other long-term assets

295.0



304.7


Total assets

$

6,445.9



$

6,080.7


Liabilities and Shareholders' Equity




Current liabilities:




Current portion of long-term debt

$

38.3



$

39.3


Current operating lease liabilities

44.8



40.4


Accounts payable

115.0



94.6


Accrued payroll

253.8



210.5


Accrued interest payable

47.1



32.4


Other current liabilities

218.3



303.8


Total current liabilities

717.3



721.0


Long-term debt, net of current portion

3,250.6



3,023.3


Long-term operating lease liabilities

209.6



243.8


Self-insured risks

121.2



117.2


Deferred income tax liabilities

51.8




Other long-term liabilities

93.8



42.7



4,444.3



4,148.0


Commitments and contingencies




Redeemable noncontrolling interests

31.6



239.6


Shareholders' equity:




Encompass Health shareholders' equity

1,588.0



1,352.2


Noncontrolling interests

382.0



340.9


Total shareholders' equity

1,970.0



1,693.1


Total liabilities and shareholders' equity

$

6,445.9



$

6,080.7


Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)



For the Year Ended
December 31,



2020


2019



(In Millions)


Cash flows from operating activities:





Net income

$

368.8



$

445.8


Loss from discontinued operations, net of tax



0.6


Adjustments to reconcile net income to net cash provided by operating activities—





Provision for government, class action, and related settlements

2.8




Depreciation and amortization

243.0



218.7


Amortization of debt-related items

7.2



4.5


Loss on early extinguishment of debt

2.3



7.7


Equity in net income of nonconsolidated affiliates

(3.5)



(6.7)


Distributions from nonconsolidated affiliates

3.8



6.6


Stock-based compensation

29.5



114.4


Deferred tax expense

52.4



40.0


Gain on consolidation of Yuma Rehabilitation Hospital



(19.2)


Other, net

5.9



7.4


Changes in assets and liabilities, net of acquisitions —





Accounts receivable

(38.1)



(22.9)


Prepaid expenses and other assets

0.1



(35.4)


Accounts payable

13.6



(6.1)


Accrued payroll

92.0



13.2


Other liabilities

(74.9)



(128.9)


Net cash used in operating activities of discontinued operations

(0.2)



(4.4)


Total adjustments

335.9



188.9


Net cash provided by operating activities

704.7



635.3


Cash flows from investing activities:





Acquisition of businesses, net of cash acquired

(1.1)



(231.5)


Purchases of property and equipment

(396.0)



(372.4)


Additions to capitalized software costs

(8.7)



(13.0)


Purchases of intangible assets

(3.5)



(18.7)


Proceeds from sale of restricted investments

12.6



17.6


Purchases of restricted investments

(8.7)



(32.9)


Other, net

(2.1)



(6.5)


Net cash used in investing activities

(407.5)



(657.4)















Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)



For the Year Ended

December 31,


2020


2019


(In Millions)

Cash flows from financing activities:




Proceeds from bond issuance

992.5



1,000.0


Principal payments on debt, including pre-payments

(718.3)



(519.5)


Borrowings on revolving credit facility

330.0



635.0


Payments on revolving credit facility

(375.0)



(620.0)


Principal payments under finance lease obligations

(22.5)



(19.5)


Debt amendment and issuance costs

(20.3)



(21.5)


Repurchases of common stock, including fees and expenses

(6.1)



(45.9)


Dividends paid on common stock

(111.9)



(108.7)


Purchase of equity interests in consolidated affiliates

(162.3)



(162.9)


Distributions paid to noncontrolling interests of consolidated affiliates

(72.2)



(79.8)


Taxes paid on behalf of employees for shares withheld

(15.7)



(16.6)


Contributions from consolidated affiliates

34.9



15.9


Other, net

1.0



(8.3)


Net cash (used in) provided by financing activities

(145.9)



48.2


Increase in cash, cash equivalents, and restricted cash

151.3



26.1


Cash, cash equivalents. and restricted cash at beginning of year

159.6



133.5


Cash, cash equivalents, and restricted cash at end of year

$

310.9



$

159.6






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

$

224.0



$

94.8


Restricted cash at end of period

65.4



57.4


Restricted cash included in other long-term assets at end of period

21.5



7.4


Cash, cash equivalents, and restricted cash at end of period

$

310.9



$

159.6






Encompass Health Corporation and Subsidiaries
Supplemental Information
Earnings Per Share



Q4


Year Ended


2020


2019


2020


2019


(In Millions, Except Per Share Data)

Adjusted EBITDA

$

239.9



$

238.2



$

860.3



$

964.9


Depreciation and amortization

(62.3)



(58.4)



(243.0)



(218.7)


Interest expense and amortization of debt discounts and fees

(46.2)



(44.5)



(184.2)



(159.7)


Stock-based compensation expense

(4.2)



(27.4)



(29.5)



(114.4)


Loss on disposal of assets

(1.0)



(7.8)



(11.6)



(11.1)



126.2



100.1



392.0



461.0


Certain items non-indicative of ongoing operating performance:








Loss on early extinguishment of debt

(2.3)



(5.4)



(2.3)



(7.7)


Transaction costs



(0.1)





(2.1)


Gain on consolidation of former equity method location





2.2



19.2


SARs mark-to-market impact on noncontrolling interests



0.7





5.0


Change in fair market value of equity securities

0.1



(0.4)



0.4



0.8


Government, class action, and related settlements





(2.8)




Payroll taxes on SARs exercise





(1.5)



(1.0)


Pre-tax income

124.0



94.9



388.0



475.2


Income tax expense

(38.0)



(27.3)



(103.8)



(115.9)


Income from continuing operations (1)

$

86.0



$

67.6



$

284.2



$

359.3










Basic shares

98.7



97.8



98.6



98.0


Diluted shares

100.1



99.5



99.8



99.4










Basic earnings per share (1)

$

0.87



$

0.69



$

2.87



$

3.66


Diluted earnings per share (1)

$

0.86



$

0.68



$

2.85



$

3.62




(1) Income from continuing operations attributable to Encompass Health

Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share



Q4


Year Ended


2020


2019


2020


2019









Earnings per share, as reported

$

0.86



$

0.68



$

2.85



$

3.62


Adjustments, net of tax:








Government, class action, and related settlements





0.02




Mark-to-market adjustment for stock appreciation rights



0.11





0.47


Transaction costs







0.02


Income tax adjustments

0.06



0.02



0.01



(0.10)


Loss on early extinguishment of debt

0.02



0.04



0.02



0.06


Change in fair market value of equity securities







(0.01)


Gain on consolidation of former equity method location





(0.02)



(0.14)


Payroll taxes on SARs exercise





0.01



0.01


Adjusted earnings per share*

$

0.93



$

0.85



$

2.89



$

3.91



* Adjusted EPS may not sum due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share



For the Three Months Ended December 31, 2020




Adjustments




As
Reported


Loss on Early
Extinguishment
of Debt


Income Tax
Adjustments


Change in Fair
Market Value
of Equity
Securities


As
Adjusted


(In Millions, Except Per Share Amounts)

Adjusted EBITDA*

$

239.9



$



$



$



$

239.9


Depreciation and amortization

(62.3)









(62.3)


Interest expense and amortization of debt discounts and fees

(46.2)









(46.2)


Stock-based compensation

(4.2)









(4.2)


Loss on disposal or impairment of assets

(1.0)









(1.0)


Loss on early extinguishment of debt

(2.3)



2.3








Change in fair market value of equity securities

0.1







(0.1)




Income from continuing operations before income tax expense

124.0



2.3





(0.1)



126.2


Provision for income tax expense

(38.0)



(0.6)



5.6





(33.0)


Income from continuing operations attributable to Encompass Health

$

86.0



$

1.7



$

5.6



$

(0.1)



$

93.2


Diluted earnings per share from continuing operations, as reported**

$

0.86



$

0.02



$

0.06



$



$

0.93


Diluted shares used in calculation

100.1











* See reconciliation of net income to Adjusted EBITDA

** Adjusted EPS may not sum across due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share



For the Three Months Ended December 31, 2019




Adjustments




As
Reported


Mark-to-
Market
Adjustment
for Stock
Comp.
Expense


Loss on Early
Extinguishment
of Debt


Income Tax
Adjustments


Transaction
Costs


Change in
Fair
Market
Value of
Equity
Securities


As
Adjusted


(In Millions, Except Per Share Amounts)

Adjusted EBITDA*

$

238.2



$



$



$



$



$



$

238.2


Depreciation and amortization

(58.4)













(58.4)


Interest expense and amortization of debt discounts and fees

(44.5)













(44.5)


Stock-based compensation

(27.4)



15.5











(11.9)


Loss on disposal of assets

(7.8)













(7.8)


Loss on early extinguishment of debt

(5.4)





5.4










Transaction costs

(0.1)









0.1






SARs mark-to-market impact on noncontrolling interests

0.7



(0.7)












Change in fair market value of equity securities

(0.4)











0.4




Income from continuing operations before income tax expense

94.9



14.8



5.4





0.1



0.4



115.6


Provision for income tax expense

(27.3)



(4.0)



(1.5)



2.3



(0.1)



(0.1)



(30.7)


Income from continuing operations attributable to Encompass Health

$

67.6



$

10.8



$

3.9



$

2.3



$



$

0.3



$

84.9


Diluted earnings per share from continuing
operations**

$

0.68



$

0.11



$

0.04



$

0.02



$



$



$

0.85


Diluted shares used in calculation

99.5















* See reconciliation of net income to Adjusted EBITDA

** Adjusted EPS may not sum across due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share




For the Year Ended December 31, 2020




Adjustments




As
Reported


Gov't, Class
Action, &
Related
Settlements


Loss on
Early
Exting.
of Debt


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*

$

860.3



$



$



$



$



$



$



$

860.3


Depreciation and amortization

(243.0)















(243.0)


Interest expense and amortization of debt discounts and fees

(184.2)















(184.2)


Stock-based compensation

(29.5)















(29.5)


Loss on disposal or impairment of assets

(11.6)















(11.6)


Loss on early extinguishment of debt

(2.3)





2.3












Gain on consolidation of Treasure Coast

2.2











(2.2)






Change in fair market value of equity securities

0.4









(0.4)








Government, class action, and related settlements

(2.8)



2.8














Payroll taxes on SARs exercise

(1.5)













1.5




Income from continuing operations before income tax expense

388.0



2.8



2.3





(0.4)



(2.2)



1.5



392.0


Provision for income tax expense

(103.8)



(0.7)



(0.6)



1.0



0.1



0.6



(0.4)



(103.8)


Income from continuing operations attributable to Encompass Health

$

284.2



$

2.1



$

1.7



$

1.0



$

(0.3)



$

(1.6)



$

1.1



$

288.2


Diluted earnings per share from continuing operations, as reported**

$

2.85



$

0.02



$

0.02



$

0.01



$



$

(0.02)



$

0.01



$

2.89


Diluted shares used in calculation

99.8

















* See reconciliation of net income to Adjusted EBITDA

** Adjusted EPS may not sum across due to rounding.

Encompass Health Corporation and Subsidiaries
Supplemental Information
Adjusted Earnings Per Share



For the Year Ended December 31, 2019




Adjustments




As
Reported


Mark-to-
Market
Adjustment
on Stock
Compensation
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*

$

964.9



$



$



$



$



$



$



$



$

964.9


Depreciation and amortization

(218.7)

















(218.7)


Interest expense and amortization of debt discounts and fees

(159.7)

















(159.7)


Stock-based compensation

(114.4)



68.5















(45.9)


Loss on disposal of assets

(11.1)

















(11.1)


Loss on early extinguishment of debt

(7.7)





7.7














Transaction costs

(2.1)









2.1










Gain on consolidation of Yuma

19.2













(19.2)






SARs mark-to-market impact on noncontrolling interests

5.0



(5.0)
















Change in fair market value of equity securities

0.8











(0.8)








Payroll taxes on SARs exercise

(1.0)















1.0




Income from continuing operations before income tax expense

475.2



63.5



7.7





2.1



(0.8)



(19.2)



1.0



529.5


Provision for income tax
expense

(115.9)



(17.2)



(2.1)



(10.3)



(0.6)



0.2



5.2



(0.2)



(140.9)


Income from continuing operations attributable to Encompass Health

$

359.3



$

46.3



$

5.6



$

(10.3)



$

1.5



$

(0.6)



$

(14.0)



$

0.8



$

388.6


Diluted earnings per share from continuing operations**

$

3.62



$

0.47



$

0.06



$

(0.10)



$