Delaware | | | 47-2409192 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. employer identification number) |
6688 N. Central Expressway Suite 1300 Dallas, TX | | | 75206 |
(Address of principal executive offices) | | | (Zip code) |
Title of Each Class to be so Registered | | | Name of Each Exchange on which Each Class is to be Registered |
Common Stock, par value $0.01 per share | | | New York Stock Exchange |
Large accelerated filer | | | ☐ | | | | | Accelerated filer | | | ☐ | |
Non-accelerated filer | | | ☒ | | | | | Smaller reporting company | | | ☐ | |
| | | | | | Emerging growth company | | | ☐ |
Item 1. | Business. |
Item 1A. | Risk Factors. |
Item 2. | Financial Information. |
Item 3. | Properties. |
Item 4. | Security Ownership of Certain Beneficial Owners and Management. |
Item 5. | Directors and Executive Officers. |
Item 6. | Executive Compensation. |
Item 7. | Certain Relationships and Related Transactions, and Director Independence. |
Item 8. | Legal Proceedings. |
Item 9. | Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters. |
Item 10. | Recent Sales of Unregistered Securities. |
Item 11. | Description of Registrant’s Securities to be Registered. |
Item 12. | Indemnification of Directors and Officers. |
Item 13. | Financial Statements and Supplementary Data. |
Item 14. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 15. | Financial Statements and Exhibits. |
(a) | Financial Statements and Schedule |
(b) | Exhibits |
Exhibit Number | | | Exhibit Description |
2.1 | | | Form of Separation and Distribution Agreement by and between Encompass Health Corporation and Enhabit, Inc.* |
2.2 | | | Form of Transition Services Agreement by and between Encompass Health Corporation and Enhabit, Inc.* |
2.3 | | | Form of Tax Matters Agreement by and between Encompass Health Corporation and Enhabit, Inc.* |
2.3 | | | Form of Employee Matters Agreement by and between Encompass Health Corporation and Enhabit, Inc.* |
| | Form of Amended and Restated Certificate of Incorporation of Enhabit, Inc. | |
| | Form of Amended and Restated Bylaws of Enhabit, Inc. | |
| | Form of Enhabit, Inc. 2022 Omnibus Performance Incentive Plan | |
| | Form of Enhabit, Inc. Change in Control Benefits Plan | |
| | Form of Enhabit, Inc. Executive Severance Plan | |
| | List of Subsidiaries | |
| | Information Statement of Enhabit, Inc., preliminary and subject to completion, dated [ ], 2022 |
* | To be filed by amendment. |
| | ENHABIT, INC. | |||||||
| | | | | | ||||
| | By: | | | /s/ Barbara Jacobsmeyer | ||||
| | | | Name: | | | Barbara Jacobsmeyer | ||
| | | | Title: | | | President and Chief Executive Officer | ||
| | | | | | ||||
Date: May 25, 2022 | | | | | | |
(1) |
The cash, or fair market value of other consideration, to be received per share by holders of the Corporation’s Common Stock in the business combination, is at least an amount equal to (A) the highest per share price paid by the other
entity in acquiring any of its holdings of the Corporation’s Common Stock plus (B) the aggregate amount, if any, by which Five Percent (5%) per annum of that per share price exceeds the aggregate amount of all dividends paid in cash, in each
case since the date on which the other entity acquired the Twenty Percent (20%) interest;
|
(2) |
After the other entity has acquired a Twenty Percent (20%) interest and prior to the consummation of the business combination: (A) the other entity shall have taken steps to ensure that the Corporation’s Board of Directors included at all
times representation by continuing Director(s) (as hereinafter defined) proportionate to the stockholders of the public holders of the Corporation’s Common Stock not affiliated with the other entity (with a continuing Director to occupy any
resulting fractional board position); (B) the other entity shall not have acquired any newly issued shares, directly or indirectly, from the Corporation (except upon conversion of convertible securities acquired by it prior to obtaining a
Twenty Percent (20%) interest or as a result of a pro rata share dividend or share split); and (C) the other entity shall not have acquired any additional outstanding shares of the Corporation’s Common Stock or securities convertible into
shares of the Corporation’s Common Stock except as a part of the transaction that resulted in the other entity’s acquiring its Twenty Percent (20%) interest;
|
(3) |
The other entity shall not have (A) received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the
Corporation or (B) made any major change in the Corporation’s business or equity capital structure without in either case the approval of at least a majority of all the Directors and at least two-thirds of the continuing Directors prior to
the consummation of the business combination; and
|
(4) |
A proxy statement responsive to the requirements of the Securities Exchange Act of 1934 shall have been mailed to public stock holders of the Corporation for the purpose of soliciting stockholder approval of the business combination and
shall have contained at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the business combination that the continuing Directors, or any of them, may choose to state and, if deemed
advisable by a majority of the continuing Directors, an opinion of a reputable investment banking firm as to the fairness of the terms of the business combination, from the point of view of the remaining public stockholders of the Corporation
(the investment banking firm to be selected by a majority of the continuing Directors and to be paid a reasonable fee for its services by the Corporation upon receipt of the opinion).
|
Enhabit, Inc.
|
||
By:
|
||
Name:
|
Barbara A. Jacobsmeyer
|
|
Title:
|
President and Chief Executive Officer
|
Attest:
|
||
By:
|
||
Name:
|
Chad Knight
|
|
Title:
|
General Counsel
|
Page
|
||
ARTICLE I
|
||
OFFICES
|
||
Section 1.1
|
Registered Office
|
1
|
Section 1.2
|
Change of Location
|
1
|
ARTICLE II
|
||
MEETINGS OF STOCKHOLDERS
|
||
Section 2.1
|
Annual Meeting
|
1
|
Section 2.2
|
Special Meetings
|
1
|
Section 2.3
|
List of Stockholders Entitled to Vote
|
2
|
Section 2.4
|
Notice of Meetings
|
2
|
Section 2.5
|
Adjourned Meetings and Notice Thereof
|
2
|
Section 2.6
|
Quorum
|
3
|
Section 2.7
|
Voting
|
3
|
Section 2.8
|
Action by Consent of Stockholders
|
3
|
Section 2.9
|
Nature of Business at Annual Meetings of Stockholders
|
4
|
ARTICLE III
|
||
BOARD OF DIRECTORS
|
||
Section 3.1
|
General Powers
|
6
|
Section 3.2
|
Number of Directors
|
6
|
Section 3.3
|
Qualification
|
6
|
Section 3.4
|
Election
|
6
|
Section 3.5
|
Term
|
11
|
Section 3.6
|
Resignation and Removal
|
12
|
Section 3.7
|
Vacancies
|
12
|
Section 3.8
|
Quorum and Voting
|
12
|
Section 3.9
|
Regulations
|
12
|
Section 3.10
|
Annual Meeting
|
13
|
Section 3.11
|
Regular Meetings
|
13
|
Section 3.12
|
Special Meetings
|
13
|
Section 3.13
|
Notice of Meetings; Waiver of Notice
|
13
|
Section 3.14
|
Committees of Directors
|
14
|
Section 3.15
|
Powers and Duties of Committees
|
14
|
Section 3.16
|
Compensation of Directors
|
14
|
Section 3.17
|
Action Without Meeting
|
14
|
ARTICLE IV
|
||
OFFICERS
|
||
Section 4.1
|
Establishment of Offices
|
15
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Section 4.2
|
Term of Office
|
15
|
Section 4.3
|
Delegation of Duties of Officers
|
15
|
Section 4.4
|
Removal of Officers
|
15
|
Section 4.5
|
Resignations
|
15
|
Section 4.6
|
Chairman and Vice Chairman of the Board
|
16
|
Section 4.7
|
Chief Executive Officer
|
16
|
Section 4.8
|
Chief Financial Officer
|
16
|
Section 4.9
|
President
|
16
|
Section 4.10
|
Chief Operating Officer
|
16
|
Section 4.11
|
Vice Presidents
|
17
|
Section 4.12
|
Secretary
|
17
|
Section 4.13
|
Treasurer
|
17
|
Section 4.14
|
Controller
|
17
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ARTICLE V
|
||
CAPITAL STOCK
|
||
Section 5.1
|
Issuance of Certificates of Stock; Uncertificated Stock
|
17
|
Section 5.2
|
Signatures on Stock Certificates
|
17
|
Section 5.3
|
Stock Ledger
|
18
|
Section 5.4
|
Regulations Relating to Transfer
|
18
|
Section 5.5
|
Transfers
|
18
|
Section 5.6
|
Cancellation
|
18
|
Section 5.7
|
Lost, Destroyed, Stolen and Mutilated Certificates
|
18
|
Section 5.8
|
Fixing of Record Dates
|
19
|
ARTICLE VI
|
||
INDEMNIFICATION
|
||
Section 6.1
|
Indemnification
|
20
|
Section 6.2
|
Indemnification Insurance; Advancement of Expenses
|
20
|
ARTICLE VII
|
||
MISCELLANEOUS PROVISIONS
|
||
Section 7.1
|
Corporate Seal
|
21
|
Section 7.2
|
Fiscal Year
|
21
|
Section 7.3
|
Waiver of Notice
|
21
|
Section 7.4
|
Execution of Instruments, Contracts, Etc.
|
21
|
Section 7.5
|
Forum for Adjudication of Certain Disputes
|
22
|
Section 7.6
|
Severability
|
22
|
ARTICLE VIII
|
||
AMENDMENTS
|
||
Section 8.1
|
By Stockholders
|
23
|
Section 8.2
|
By Directors
|
23
|
Reason for
Termination
|
Continuing
Exercise Period
|
|||
Disability
|
1 year following termination
|
|||
Death (Including death during the applicable continuing exercise period following termination for another reason)
|
1 year following death
|
|||
Retirement
|
Lesser of the Original Term of Option or SAR or 3 Years
|
|||
Reason Other Than Death, Disability, Retirement or Cause
|
90 days following termination
|
ENHABIT, INC.
|
||
By:
|
||
Date
|
EXECUTIVE
|
||
Name:
|
||
Date
|
Name:
|
|||
1.
|
Amount Payable:
|
$
|
|
2.
|
Months:
|
ENHABIT, INC.
|
||
By:
|
||
Date
|
EXECUTIVE
|
||
Name:
|
||
Date
|
Name:
|
|||
1.
|
Severance Amount:
|
$
|
|
2.
|
Months:
|
Subsidiary Name
|
Jurisdiction of Incorporation
|
DBA
|
A&B Home Health Solutions, LLC
|
DE
|
Enhabit Home Health
|
Abba Home Health, L.P.
|
TX
|
Enhabit Home Health
|
Enhabit Hospice
|
||
Advanced Homecare Management, LLC
|
DE
|
Enhabit Home Health and Hospice
|
AHM Action Home Health, LP
|
TX
|
Enhabit Home Health
|
AHM Texas GP, LLC
|
DE
|
|
AHM Texas LP, Inc.
|
TX
|
|
Apex Hospice LLC
|
TX
|
Enhabit Hospice
|
Best Home Care LP
|
TX
|
Enhabit Home Health
|
Camellia Home Health of Alabama, LLC
|
AL
|
Enhabit Hospice Huntsville
|
Camellia Home Health of East Tennessee, LLC
|
DE
|
Enhabit Home Health
|
Camellia Home Health of the Gulf Coast, LLC
|
MS
|
Enhabit Home Health of the Gulf Coast
|
Camellia Hospice of Central Mississippi, LLC
|
MS
|
Enhabit Hospice of Central Mississippi
|
Camellia Hospice of East Louisiana, LLC
|
DE
|
Enhabit Hospice of Vidalia
|
Camellia Hospice of Louisiana, LLC
|
DE
|
Enhabit Hospice of the Northshore
|
Camellia Hospice of North Mississippi, LLC
|
MS
|
Enhabit Hospice of North Mississippi
|
Camellia Hospice of Northeast Alabama LLC
|
AL
|
Enhabit Hospice Rainbow City
|
Camellia Hospice of Northeast Mississippi, LLC
|
MS
|
Enhabit Hospice of Northeast Mississippi
|
Camellia Hospice of South Alabama, LLC
|
MS
|
Enhabit Hospice Dothan
|
Enhabit Hospice Prattville
|
||
Camellia Hospice of Southwest Mississippi, LLC
|
MS
|
Enhabit Hospice of Southwest Mississippi
|
Camellia Hospice of the Gulf Coast, LLC
|
MS
|
Enhabit Hospice of the Gulf Coast
|
Camellia Medical Systems, Inc.
|
MS
|
|
CareServices of Bethesda, LLC
|
FL
|
Enhabit Home Health of Bethesda
|
CareServices of the Treasure Coast, LLC
|
FL
|
|
CareSouth Health System, Inc.
|
DE
|
|
CareSouth HHA Holdings of Columbus, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Dothan, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Gainesville, LLC
|
GA
|
Enhabit Home Health
|
Enhabit Hospice
|
||
CareSouth HHA Holdings of Greensboro, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Lexington, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Middle Georgia, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of North Florida, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Panama City, LLC
|
FL
|
Enhabit Home Health
|
CareSouth HHA Holdings of Richmond, LLC
|
DE
|
Enhabit Home Health
|
CareSouth HHA Holdings of South Carolina, LLC
|
GA
|
Enhabit Home Health
|
Enhabit Home Health Aiken
|
||
Enhabit Home Health Bluffton
|
||
Enhabit Home Health Columbia
|
||
CareSouth HHA Holdings of Tallahassee, LLC
|
FL
|
Enhabit Home Health
|
CareSouth HHA Holdings of the Bay Area, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of the Treasure Coast, LLC
|
FL
|
Enhabit Home Health of Jupiter Medical Center
|
CareSouth HHA Holdings of Valley, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Virginia, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Washington, LLC
|
GA
|
Enhabit Home Health
|
Enhabit Hospice
|
||
CareSouth HHA Holdings of Western Carolina, LLC
|
GA
|
Enhabit Home Health
|
CareSouth HHA Holdings of Winchester, LLC
|
GA
|
Enhabit Home Health
|
Enhabit Hospice
|
||
CareSouth HHA Holdings, LLC
|
GA
|
|
CareSouth Hospice, LLC
|
GA
|
Enhabit Hospice
|
Continental Home Care, LLC
|
DE
|
Enhabit Home Health of Eastern Oklahoma
|
CS Health & Wellness, LLC
|
GA
|
|
Day-By-Day Staff Relief, LLC
|
DE
|
Enhabit Home Health
|
Enhabit Home Health of Northeast Oklahoma
|
||
Enhabit Hospice
|
||
DOSIK, INC.
|
TX
|
Enhabit Home Health
|
DRC Health Systems, L.P.
|
TX
|
Enhabit Home Health
|
Enhabit Hospice
|
||
EH Health Home Health of Alabama, LLC
|
DE
|
Enhabit Home Health
|
EH Health Home Health of Birmingham, LLC
|
DE
|
Enhabit Home Health
|
EH Health Home Health of Central Virginia, LLC
|
DE
|
Enhabit Home Health
|
EH Health Home Health of Florida, LLC
|
DE
|
Enhabit Home Health
|
EH Health Home Health of Kentucky, LLC
|
DE
|
Enhabit Home Health of Kentucky
|
EH Health Home Health of Miami, LLC
|
FL
|
Enhabit Home Health
|
EH Health Home Health of New England, LLC
|
DE
|
Enhabit Home Health
|
EH Health Home Health of Ohio, LLC
|
DE
|
Enhabit Home Health
|
Enhabit Hospice
|
||
EH Health Home Health of South Florida, LLC
|
FL
|
|
EH Health Home Health of the Northwest, LLC
|
DE
|
Enhabit Home Health
|
EH Health Home Health of the Southwest, LLC
|
DE
|
EH Hospice of the West, LLC
|
ID
|
Enhabit Hospice
|
Enhabit Hospice of Eastern Idaho
|
||
EH of Fort Worth, LP
|
TX
|
Enhabit Home Health
|
EH of West Texas, LP
|
TX
|
Enhabit Home Health
|
Enhabit Hospice
|
||
EHHH Support Companies, LLC
|
DE
|
|
Encompass Cares
|
TX
|
|
Encompass Health Home Health of Talladega, LLC
|
FL
|
|
Encompass Health Hospice of Talladega, LLC
|
DE
|
|
Enhabit Holdings, Inc.
|
DE
|
|
EXCELLA ASSOCIATES, L.L.C.
|
MA
|
|
EXCELLA HEALTHCARE, INC.
|
MA
|
|
EXCELLA HOME HEALTH AGENCY, LLC
|
MA
|
Enhabit Home Health
|
EXCELLA HOMECARE, INC.
|
MA
|
Enhabit Home Health
|
Guardian Home Care, Inc.
|
ID
|
Enhabit Home Health
|
Enhabit Home Health of Idaho
|
||
Enhabit Hospice of Idaho
|
||
Hallmark Homecare, L.P.
|
TX
|
Enhabit Home Health
|
Enhabit Hospice
|
||
HealthCare Innovations of Oklahoma, L.L.C.
|
TX
|
Enhabit Home Health of Southeast Oklahoma
|
Enhabit Hospice
|
||
HEALTHCARE INNOVATIONS OF WESTERN OKLAHOMA, LLC
|
TX
|
Enhabit Home Health of Western Oklahoma
|
HealthCare Innovations-Travertine Health Services, L.L.C.
|
TX
|
Enhabit Home Health of Central Oklahoma
|
Heart of the Rockies Home Health, LLC
|
DE
|
Enhabit Home Health & Hospice
|
Home Health Care of Bogalusa, Inc.
|
DE
|
Enhabit Home Health of the Northshore
|
Home Health Care Systems, Inc.
|
MS
|
Enhabit Home Health & Hospice
|
Hospice Care of Mississippi, LLC
|
MS
|
Enhabit Hospice
|
Hospice of Southwest Montana, LLC
|
DE
|
Enhabit Hospice
|
Idaho Homecare Holdings, Inc.
|
ID
|
|
Orion Homecare, LLC
|
ID
|
Enhabit Home Health of Western Idaho
|
Enhabit Hospice
|
||
Enhabit Home Health
|
||
Preferred Home Health, L.P.
|
TX
|
Enhabit Home Health
|
Saad Healthcare of St. Clair County LLC
|
DE
|
|
Saint Alphonsus Home Health and Hospice, LLC
|
DE
|
Enhabit Home Health & Hospice
|
Texas Senior Care, L.P.
|
TX
|
Enhabit Home Health
|
TH of San Antonio LLC
|
TX
|
Enhabit Hospice
|
TVG Logic Holdings, LLC
|
DE
|
|
WellCare, Inc.
|
NM
|
Enhabit Home Health
|
Enhabit Hospice
|
||
Wellmark Healthcare Services of El Paso, Inc.
|
TX
|
Enhabit Home Health
|
Enhabit Hospice
|
||
West Mississippi Home Health Services, Inc.
|
MS
|
Enhabit Home Health
|
| | Sincerely, | |
| | ||
| | Mark Tarr President and Chief Executive Officer Encompass Health Corporation |
| | Sincerely, | |
| | ||
| | Barbara A. Jacobsmeyer President and Chief Executive Officer Enhabit, Inc. |
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• | The information included in this information statement about Enhabit, including the Consolidated Financial Statements of Enhabit, assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. |
• | As used in this information statement, references to “Enhabit,” “we,” “us,” “our,” “our company” and “the company” may, depending on the context, refer to Enhabit, Inc., to the Home Health and Hospice business segment of Encompass as described more particularly under “Certain Relationships and Related Party Transactions—Relationship with Encompass—Historical Relationship with Encompass” or to Enhabit and its consolidated subsidiaries after giving effect to the transactions referred to in this information statement in connection with the separation and distribution. |
• | References in this information statement to “Encompass” refer to Encompass Health Corporation, a Delaware corporation, and its consolidated subsidiaries, including Encompass’s Home Health and Hospice business segment prior to completion of the separation and distribution and excluding Encompass’s Home Health and Hospice business segment following completion of the separation and distribution. |
• | References in this information statement to the “separation” refer to the separation of the Enhabit Business from Encompass’s other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, Enhabit, holding the assets and liabilities associated with the Enhabit Business after the distribution. |
• | References in this information statement to the “distribution” refer to the pro rata distribution of all of Enhabit’s issued and outstanding shares of common stock to Encompass stockholders as of the close of business on the record date for the distribution. |
• | References in this information statement to Enhabit’s per share data assume a distribution ratio of [ ] shares of Enhabit common stock for every one share of Encompass common stock. |
• | References in this information statement to Enhabit’s historical assets, liabilities, products, businesses or activities generally refer to the historical assets, liabilities, products, businesses or activities of the Enhabit Business as the businesses were conducted as part of Encompass prior to the completion of the separation and distribution. |
* | Note: Includes Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG). |
• | Skilled nursing facility-at-home, or “SNF-at-home,” care refers to an emerging service area that seeks to provide care to higher acuity patients in the home. According to Lincoln Healthcare Leadership, approximately 25% of short-stay SNF episodes can be cared for in the home setting. We believe SNF-at-home could potentially be an attractive way to leverage our home health operating model. However, SNF-at-home care does not yet have a distinct reimbursement model, state licensure category, or Medicare certification status. A combination of federal and state regulatory action, as well as new reimbursement policies, will likely be needed before SNF-at-home services develop into a potential expansion opportunity. |
• | Palliative care services refer to care that improves the quality of life for patients, making the patient as comfortable as possible by anticipating, preventing, diagnosing and treating their symptoms, but does not seek to cure the patient’s underlying illness. Unlike hospice services, which are also palliative in nature, palliative care services are not limited to patients with terminal illnesses. While the nature of the patient care is substantially similar, palliative care services and hospice services are distinct from a state licensure and Medicare reimbursement perspective. Palliative care services are complementary to our existing business because they are often regarded as a bridge between home health and hospice. |
• | Care management services refer to the management of patient care outside of home health under contracts with Medicare Advantage payors, ACOs or other risk-bearing entities. We currently receive a small amount of revenue from care management services. |
• | Private duty services refer to the provision of typically non-clinical hourly care to patients with a wide variety of serious or chronic illnesses and conditions or those that need assistance with activities of daily living in their homes. Private duty services typically last 4 to 24 hours a day. We currently provide private duty services through three of our locations, but it is not a material part of our business. |
• | Hospital-at-home care refers to the provision of acute care hospital services in patients’ homes. The concept received significant industry attention following a March 2020 announcement by CMS allowing Medicare-certified hospitals to request waivers to provide acute hospital care services in patients’ homes during the COVID-19 public health emergency. Hospital-at-home care under Medicare still requires the provider to meet all of the Medicare Conditions of Participation applicable to hospitals and involves a much higher intensity of care than home health agencies are equipped to provide. In order to provide hospital-at-home care, we would need to enter into an arrangement with a Medicare-certified hospital that has received an Acute Hospital Care at Home waiver from CMS to provide acute hospital care services at home on behalf of the hospital. Additionally, it is uncertain what CMS’s position on these services will be after the public health emergency ends. |
• | Reimbursement. The cost of healthcare is funded substantially by government and private insurance programs. If such funding is reduced, limited or no longer available, our business may be adversely impacted. Our primary source of reimbursement is the Medicare program, and Medicare reimbursement is subject to significant changes from time to time. Delays in the administrative appeals process associated with denied Medicare reimbursement claims could delay or reduce our reimbursement for services previously provided. Additionally, reimbursement claims are subject to various audits, which may negatively affect the reimbursement we receive. |
• | Regulation. We conduct business in a heavily regulated industry, and changes in regulations, including alternative payment models and value-based purchasing initiatives, may significantly affect our business and results of operations. Compliance with laws and regulations requires substantial time, effort and expense. Further, the enforcement of these regulations and any violations of these regulations may result in increased costs or sanctions that reduce our revenues and profitability. |
• | Collections. Delays in collection or non-collection of our accounts receivable, including delays associated with the appeals process for Medicare claim denials, could adversely affect our business, financial position, results of operations and liquidity. |
• | Relationships with Referral Sources. If we are unable to maintain or develop relationships with patient referral sources, including the Encompass rehabilitation hospitals which accounted for approximately 27,000 admissions in 2021, our growth and profitability could be adversely affected. There can be no assurance that individuals will not attempt to steer patients to competing post-acute providers or otherwise limit our access to potential referrals. The establishment of joint ventures or networks between referral sources, such as acute care hospitals, and other post-acute providers may hinder patient referrals to us. The growing emphasis on integrated care delivery across the healthcare continuum increases that risk. Additionally, it is possible that the separation will result in reduced referrals from Encompass’s inpatient rehabilitation facilities. |
• | Payor and Patient Mix. Changes in the mix of our payors, such as a shift from Medicare fee-for-service to Medicare Advantage and to other payors, as well as changes to our patient mix, may adversely affect our profitability. |
• | Staffing. In some markets, the lack of availability of medical personnel is a significant operating issue facing all healthcare providers, including us. Competition for staffing, shortages of qualified personnel, union activity or other factors may increase turnover and otherwise increase our staffing costs and reduce profitability. Our operations are dependent on the efforts, abilities, and experience of our medical personnel, such as physical therapists, occupational therapists, speech pathologists, nurses and other healthcare professionals. We compete with other healthcare providers in recruiting and retaining qualified personnel responsible for the daily operations of each of our locations. Our ability to attract and retain qualified personnel depends on several factors, including our ability to provide competitive wages and benefits. |
• | Cybersecurity and Privacy and Security Laws. The proper function, availability, and security of our and our vendors’ information systems are critical to our business, and failure by us or our vendors to maintain proper function, availability, or security of information systems or protect data against unauthorized access could have a material adverse effect on our business, financial position, results of operations, and cash flows. Our information systems and protection, collection, storage, use, retention, security and processing of confidential, sensitive and personal information, including patient health information, must comply with a number of federal and state privacy and security laws, which are evolving and changing rapidly. |
• | Competition. We face intense competition for patients from other healthcare providers. We compete with a variety of companies in both home health and hospice, some of which, including several large public companies, may have greater financial and other resources and may be more established in their respective communities. In addition, from time to time, there are efforts in states with certificate of need laws to weaken those laws, which could potentially increase competition in those states. |
• | COVID-19. The COVID-19 pandemic has significantly affected and is expected to continue to significantly affect our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the operations of a significant number of acute care hospitals and physician practices are disrupted for a lengthy period of time. The pandemic has also disrupted our supply chain for equipment, pharmaceuticals and medical supplies and resulted in an increase in staffing shortages. Because of the nature of our business and the types of patients we serve, we may be more vulnerable to the effects of public health catastrophes, including the COVID-19 pandemic. |
• | Failure to Execute on Growth Strategy. Our success depends in large part on organic growth at existing operations through increased referrals from patient referral sources in the communities we serve. We may not be able to maintain our existing referral source relationships or be able to develop and maintain new relationships in existing or new markets. Additionally, we may face limitations on our ability to identify and complete acquisition transactions, which could delay or increase the cost of executing on our growth strategy. If we fail to successfully integrate our acquired businesses, we may not realize the benefits of our acquisition transactions. |
• | Litigation. We operate in a highly regulated industry in which healthcare providers are routinely subject to litigation. As a result, various lawsuits, claims and regulatory proceedings have been and can be asserted against us. Substantial damages, fines or other remedies assessed against us or agreed to in settlements could have a material adverse effect on our business. |
• | No Existing Market. No market currently exists for our common stock, and there is no assurance that an active trading market for our common stock will develop or be sustained after the distribution and, following the distribution, the price of Enhabit common stock may fluctuate significantly. |
• | Separation. We may not achieve some or all of the expected benefits of the separation. Further, our ability to operate our business effectively may suffer if we are unable to cost-effectively establish our own administrative and other support functions in order to operate as a stand-alone company after the expiration of our shared services and other intercompany agreements with Encompass. Enhabit has no history of operating as an independent, publicly traded company, and its historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and may not be a reliable indicator of its future results. Furthermore, we cannot be certain that we will continue to receive the same level of referrals from Encompass’s inpatient rehabilitation facilities after the separation. |
• | Enhanced Management Focus on Core Businesses. The separation will provide each company’s management team with undiluted focus on their unique strategic priorities, target markets and corporate development opportunities. The separation will enable the management teams of each company to set |
• | Separate Capital Structures and Allocation of Financial Resources. Each of Encompass and Enhabit has different cash flow structures and capital requirements. The separation will permit each company to allocate its financial resources to meet the unique needs of its businesses and intensify the focus on its distinct operating and strategic priorities. The separation will also give each business its own capital structure and allow it to manage capital allocation and adopt distinct capital return strategies. Further, the separation will eliminate internal competition for capital between the two businesses and enable each business to implement a capital structure tailored to its strategy and business needs. |
• | Improved Alignment of Management Incentives and Performance. The separation will allow each company to more effectively recruit, retain and motivate employees through the use of equity-based compensation that more closely reflects and aligns management and employee incentives with specific business objectives, financial goals and business attributes. To the extent that the separate equity currencies are more attractively valued, this would further benefit Encompass and Enhabit. |
• | Creation of Independent Equity Currencies and Enhanced Strategic Opportunities. The separation will provide each of Encompass and Enhabit with its own pure-play equity currency that can be used to facilitate capital raising and to pursue accretive M&A opportunities that are more closely aligned with each company’s strategic goals and expected growth opportunities. To the extent that the separate equity currencies are more attractively valued, this would further increase these benefits to Encompass and Enhabit. |
• | Clear-Cut Investment Identities. The separation will allow investors to more clearly understand the separate business models, financial profiles and investment identities of the two companies and to invest in each based on a better appreciation of these characteristics. Each company is expected to appeal to types of investors who may differ from Encompass’s current investors. Following the separation, the separate management teams of each of the two companies are expected to be better positioned to implement goals and evaluate strategic opportunities in light of the expectations of the specific investors in that individual company’s market. To the extent that enhanced investor understanding results in greater investor demand for shares of Encompass stock and/or Enhabit stock, it could cause each company to be valued at multiples higher than Encompass’s current multiple, and higher than its publicly traded peers. Any such increase in the aggregate market value of Encompass and Enhabit following the separation over Encompass’s market value prior to the separation would benefit Encompass, Enhabit, and their respective stakeholders. |
• | Risk of Failure to Achieve Anticipated Benefits of the Separation. We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: the separation will demand significant management resources and require significant amounts of management’s time and effort, which may divert management’s attention from operating our business; following the separation and distribution, we may be more susceptible to market fluctuations, and other events may be more disadvantageous for us than if we were still part of Encompass, because our business would be less diversified than Encompass’s business is prior to the completion of the separation and distribution. |
• | Disruptions and Costs Related to the Separation and Distribution. The actions required to separate the Enhabit Business from Encompass could disrupt our operations. In addition, we will incur substantial costs in connection with the separation and the transition to being a standalone public company, which may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel who are new to Enhabit, tax costs, and costs to separate information systems. |
• | Loss of Scale and Increased Administrative Costs. Prior to the separation, Enhabit is able to take advantage of Encompass’s size and purchasing power in procuring certain goods, services and technologies. After the separation and distribution, as a standalone company, we may be unable to |
• | Limitations on Strategic Transactions. Under the terms of the tax matters agreement that we will enter into with Encompass, we will be restricted from taking certain actions that could cause the distribution or certain related transactions (or certain transactions undertaken as part of the internal reorganization), in each case, as set forth in the tax matters agreement, to fail to qualify as tax-free under applicable law. The tax matters agreement will contain specific restrictions applicable until the second anniversary of the distribution that may limit our ability to pursue certain strategic transactions and equity issuances or engage in other transactions that might increase the value of our business. |
• | Uncertainty Regarding Stock Prices. We cannot predict the effect of the separation on the trading prices of Enhabit or Encompass common stock or know with certainty whether the combined market value of [ ] shares of our common stock and one share of Encompass common stock will be less than, equal to or greater than the market value of one share of Encompass common stock prior to the distribution. |
| | | | statement forms a part; there being no order suspending the effectiveness of the registration statement; and no proceedings for such purposes having been instituted or threatened by the SEC; | ||
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| | • | | | this information statement having been made available to Encompass stockholders; | |
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| | • | | | the receipt by Encompass and continuing validity of an opinion of its outside counsel, satisfactory to the Encompass board of directors, regarding the qualification of the distribution as a transaction that is generally tax free for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”); | |
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| | • | | | the receipt by Encompass and continuing validity of a favorable private letter ruling from the U.S. Internal Revenue Service (the “IRS”), satisfactory to the Encompass board of directors, regarding the qualification of the distribution as a transaction that is generally tax free for U.S. federal income tax purposes under Section 355 of the Code and certain other U.S. federal income tax matters relating to the separation and distribution; | |
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| | • | | | an independent valuation or financial advisory firm acceptable to the Encompass board of directors having delivered one or more opinions to the Encompass board of directors regarding solvency and capital adequacy matters with respect to each of Encompass and Enhabit after completion of the distribution, in each case in a form and substance acceptable to the Encompass board of directors in its sole and absolute discretion; | |
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| | • | | | all actions and filings necessary or appropriate under applicable U.S. federal, state or other securities or blue sky laws and the rules and regulations thereunder relating to the separation and distribution having been taken or made and, where applicable, having become effective or been accepted; | |
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| | • | | | the transaction agreements relating to the separation and distribution having been duly executed and delivered by the parties thereto; | |
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| | • | | | no order, injunction or decree issued by any government authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions being in effect; | |
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| | For the Three Months Ended March 31, | | | For the Year Ended December 31, | ||||||||||||||||
| | Pro Forma 2022 | | | 2022 | | | 2021 | | | Pro Forma 2021 | | | 2021 | | | 2020 | | | 2019 | |
| | (in Millions) | |||||||||||||||||||
Consolidated Statements of Income: | | | | | | | | | | | | | | | |||||||
Net service revenue | | | $274.3 | | | 274.3 | | | $270.5 | | | $1,106.6 | | | $1,106.6 | | | $1,078.2 | | | $1,092.0 |
Cost of service (excluding depreciation and amortization) | | | 129.7 | | | 129.7 | | | 124.6 | | | 513.9 | | | 513.9 | | | 537.5 | | | 527.4 |
Gross margin | | | 144.6 | | | 144.6 | | | 145.9 | | | 592.7 | | | 592.7 | | | 540.7 | | | 564.6 |
General and administrative expenses | | | 106.2 | | | 100.7 | | | 99.9 | | | 442.1 | | | 412.9 | | | 398.0 | | | 465.7 |
Depreciation and amortization | | | 9.0 | | | 8.5 | | | 9.1 | | | 38.2 | | | 36.9 | | | 40.0 | | | 37.7 |
Operating income | | | 29.4 | | | 35.4 | | | 36.9 | | | 112.4 | | | 142.9 | | | 102.7 | | | 61.2 |
Interest expense | | | 4.6 | | | — | | | 0.1 | | | 18.8 | | | 0.3 | | | 5.2 | | | 28.4 |
Equity in net income of nonconsolidated affiliates | | | — | | | — | | | (0.2) | | | (0.6) | | | (0.6) | | | (0.5) | | | (1.2) |
Other income | | | — | | | — | | | — | | | (4.8) | | | (4.8) | | | (2.2) | | | — |
Income before income taxes and noncontrolling interests | | | 24.8 | | | 35.4 | | | 37.0 | | | 99.0 | | | 148.0 | | | 100.2 | | | 34.0 |
Income tax expense | | | 6.3 | | | 8.7 | | | 8.7 | | | 24.2 | | | 35.1 | | | 24.4 | | | 9.2 |
Net income | | | 18.5 | | | 26.7 | | | 28.3 | | | 74.8 | | | 112.9 | | | 75.8 | | | 24.8 |
Less: Net income attributable to noncontrolling interests | | | 0.6 | | | 0.6 | | | 0.4 | | | 1.8 | | | 1.8 | | | 0.8 | | | 0.8 |
Net income attributable to Enhabit, Inc. | | | $17.9 | | | $26.1 | | | $27.9 | | | $73.0 | | | $111.1 | | | $75.0 | | | $24.0 |
| | As of March 31, | | | As of December 31, | |||||||
| | Pro Forma 2022 | | | 2022 | | | 2021 | | | 2020 | |
| | (in Millions) | ||||||||||
Consolidated Balance Sheet Data: | | | | | | | | | ||||
Cash and cash equivalents | | | $17.5 | | | $17.5 | | | $5.4 | | | $38.5 |
Property and equipment, net | | | 21.9 | | | 20.7 | | | 20.4 | | | 24.2 |
Total assets | | | 1,609.4 | | | 1,743.2 | | | 1,720.0 | | | 1,616.8 |
Total debt | | | 573.8 | | | 7.3 | | | 8.5 | | | 9.7 |
Total stockholders’ equity | | | 825.4 | | | 1,495.9 | | | 1,478.3 | | | 1,398.8 |
| | For the Three Months Ended March 31, | | | For the Year Ended December 31, | ||||||||||||||||
| | Pro Forma 2022 | | | 2022 | | | 2021 | | | Pro Forma 2021 | | | 2021 | | | 2020 | | | 2019 | |
Other Financial Data: | | | | | | | | | (in Millions) | | | ||||||||||
Adjusted EBITDA(1) | | | $42.8 | | | $47.0 | | | $47.2 | | | $180.9 | | | $197.2 | | | $150.9 | | | $189.8 |
(1) | We present Adjusted EBITDA as a non-GAAP measure of our financial performance. Below, we have provided a reconciliation of Adjusted EBITDA to our Net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to Net income or any other measure of financial performance calculated and presented in accordance with GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of other organizations because other organizations may not calculate Adjusted EBITDA in the same manner as we calculate this measure. |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; |
• | Adjusted EBITDA does not reflect capital expenditure requirements for such replacements or other contractual commitments; |
• | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; and |
• | other companies, including companies in our industry, may calculate Adjusted EBITDA measures differently, which reduces their usefulness as a comparative measure. |
| | For the Three Months Ended March 31, | | | For the Year Ended December 31, | ||||||||||||||||
| | Pro Forma 2022 | | | 2022 | | | 2021 | | | Pro Forma 2021 | | | 2021 | | | 2020 | | | 2019 | |
| | (in Million) | |||||||||||||||||||
Net Income | | | $18.5 | | | $26.7 | | | $28.3 | | | $74.8 | | | $112.9 | | | $75.8 | | | $24.8 |
Income tax expense | | | 6.3 | | | 8.7 | | | 8.7 | | | 24.2 | | | 35.1 | | | 24.4 | | | 9.2 |
Interest expense | | | 4.6 | | | — | | | 0.1 | | | 18.8 | | | 0.3 | | | 5.2 | | | 28.4 |
Depreciation and amortization | | | 9.0 | | | 8.5 | | | 9.1 | | | 38.2 | | | 36.9 | | | 40.0 | | | 37.7 |
(Gain) loss on disposal or impairment of assets | | | (0.1) | | | (0.1) | | | (0.1) | | | (0.8) | | | (0.8) | | | 1.1 | | | — |
Stock-based compensation | | | 3.1 | | | 1.3 | | | 0.6 | | | 8.5 | | | 3.6 | | | 3.9 | | | 84.9 |
Stock-based compensation included in overhead allocation | | | — | | | 0.5 | | | 0.2 | | | — | | | 2.3 | | | 2.0 | | | 2.5 |
Net income attributable to noncontrolling interest | | | (0.6) | | | (0.6) | | | (0.4) | | | (1.8) | | | (1.8) | | | (0.8) | | | (0.8) |
Transaction costs | | | 2.0 | | | 2.0 | | | 0.7 | | | 22.2 | | | 11.9 | | | — | | | 2.1 |
Gain on consolidation of joint venture formerly accounted for under the equity method of accounting | | | — | | | — | | | — | | | (3.2) | | | (3.2) | | | (2.2) | | | — |
Payroll taxes on SARs exercise | | | — | | | — | | | — | | | — | | | — | | | 1.5 | | | 1.0 |
Adjusted EBITDA | | | $42.8 | | | $47.0 | | | $47.2 | | | $180.9 | | | $197.2 | | | $150.9 | | | $189.8 |
Performance Year | | | Number of ACOs | | | Assigned Beneficiaries (in Millions) |
2022 | | | 483 | | | 11.0 |
2021 | | | 477 | | | 10.7 |
2020 | | | 517 | | | 11.2 |
2019 | | | 487 | | | 10.4 |
2018 | | | 561 | | | 10.5 |
• | licensure, certification, enrollments, and accreditation; |
• | policies, either at the national or local level, delineating what conditions must be met to qualify for reimbursement under Medicare (also referred to as coverage requirements); |
• | coding and billing for services; |
• | relationships with physicians and other referral sources, including physician self-referral and anti-kickback laws; |
• | quality of medical care; |
• | use and maintenance of medical supplies and equipment; |
• | maintenance, security and privacy of patient information and medical records; |
• | minimum staffing; |
• | acquisition and dispensing of pharmaceuticals and controlled substances; and |
• | disposal of medical and hazardous waste. |
• | limitations, including state CONs as well as anti-trust, Medicare and other regulatory approval requirements, on our ability to complete such acquisitions, particularly those involving not for profit providers, on terms, timetables and valuations reasonable to us; |
• | limitations in obtaining financing for acquisitions at a cost reasonable to us; |
• | difficulties integrating acquired operations, personnel, and information systems, and in realizing projected revenues, efficiencies and cost savings, or returns on invested capital; |
• | entry into markets, businesses or services in which we may have little or no experience; |
• | diversion of business resources or management’s attention from ongoing business operations; and |
• | exposure to undisclosed or unforeseen liabilities of acquired operations, including liabilities for failure to comply with healthcare laws and anti-trust considerations in specific markets, successor liability imposed by Medicare, and risks and liabilities related to previously compromised information systems. |
• | limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy and other general corporate purposes; |
• | making us more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation and in our business by limiting our flexibility in planning for, and making it more difficult for us to react quickly to, changing conditions; |
• | placing us at a competitive disadvantage compared with competing providers that have less debt; and |
• | exposing us to risks inherent in interest rate fluctuations for outstanding amounts under our credit facility, which could result in higher interest expense in the event of increases in interest rates, as discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this information statement. |
• | labor, tax, employee benefit, indemnification and other matters arising from our separation from Encompass; |
• | employee retention and recruiting; |
• | business combinations involving us; and |
• | the nature, quality and pricing of services that we and Encompass have agreed to provide each other. |
• | actual or anticipated fluctuations in our operating results and those of our competitors; |
• | publication of research reports about us, our competitors, or our industry, or changes in, or failure to meet, estimates made by securities analysts or ratings agencies of our financial and operating performance, or lack of research reports by industry analysts or ceasing of analyst coverage; |
• | announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures, capital commitments or other strategic actions; |
• | our quarterly or annual earnings, or those of other companies in our industry; |
• | general geopolitical, economic and business conditions, conditions in the financial markets and the effects of the COVID-19 pandemic; |
• | the public reaction to our press releases, our other public announcements and our filings with the SEC; |
• | changes in governmental regulation; |
• | risks and changes in conditions or trends related to our business and our industry, including those discussed above; |
• | the trading volume of our common stock and future sales of our common stock or other securities; |
• | whether, when and in what manner Encompass completes the distribution; and |
• | investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives. |
• | rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; |
• | rules regarding the number of votes of stockholders required to amend certain provisions of our amended and restated certificate of incorporation; |
• | the right of our board of directors to issue preferred stock without stockholder approval; and |
• | the ability of our directors, and not stockholders, to fill vacancies on our board of directors. |
• | intense competition among home health and hospice companies; |
• | our ability to maintain relationships with existing patient referral sources and to establish relationships with new patient referral sources; |
• | our ability to have services funded from third-party payors, including Medicare, Medicaid and private health insurance companies; |
• | incidents affecting the proper operation, availability or security of our or our vendors’ or partners’ information systems, including patient information stored there; |
• | changes to Medicare or Medicaid reimbursement rates or methods governing Medicare or Medicaid payments, and the implementation of alternative payment models; |
• | our limited ability to control reimbursement rates for our services; |
• | audits of reimbursement claims that may lead to assertions that we have been overpaid or have submitted improper claims, which may require us to incur additional costs to respond to requests for records and defend the validity of payments and claims; |
• | the effects of, and the cost of compliance with, complex and evolving federal, state, and local laws and regulations regarding healthcare, including those contemplated now and in the future as part of national healthcare reform and deficit reduction (such as the re-basing of payment systems, the introduction of site neutral payments or case-mix weightings across post-acute settings, and other payment system reforms); |
• | our ability to successfully select, execute and integrate our acquisitions; |
• | our ability to retain the services of key personnel; |
• | fluctuations in our results of operations and stock price over time; |
• | global economic conditions; |
• | changes in tax rates, changes in tax laws or exposure to additional income tax liabilities; |
• | additional liabilities for taxes, duties, interest and penalties related to our operations as a result of indirect tax laws in multiple jurisdictions; |
• | current and future litigation matters or a failure to comply with current or future laws or regulations; |
• | potential strain on our operations and increase in our operating expenses as a result of our expansion of operations and infrastructure; |
• | political events, war, terrorism, public health issues, natural disasters, sudden changes in trade and immigration policies, and other circumstances that could materially adversely affect us; |
• | the timing of the distribution and whether the distribution will occur at all; |
• | our ongoing relationship with Encompass and any related conflicts of interest; |
• | failure of the distribution to qualify for tax-free treatment, which may result in significant tax liabilities to Encompass for which we may be required to indemnify Encompass in certain situations; |
• | achievement of the expected benefits of the separation; |
• | our ability to operate as a stand-alone public company; |
• | our ability to meet expectations with respect to payments of dividends and repurchases of our common stock; |
• | impacts and lasting effects of the COVID-19 pandemic; and |
• | the effect of the separation and distribution on our business. |
• | we expect that Encompass will complete certain internal restructuring transactions that will allocate and align certain assets and liabilities of Encompass and Enhabit to the respective company; |
• | we expect that Enhabit will enter into a $400 million term loan A facility and a $350 million revolving credit facility, as described under “Description of Certain Material Indebtedness;” and |
• | we expect that using all or a portion of the net proceeds of the borrowings under the new term loan A facility on or prior to the completion of the distribution, Enhabit will transfer approximately $[ ] of cash to Encompass. |
• | Enhanced Management Focus on Core Businesses. The separation will provide each company’s management team with undiluted focus on their unique strategic priorities, target markets and corporate development opportunities. The separation will enable the management teams of each company to set their own strategy for long-term growth and profitability, including implementing development and commercialization strategies specific to each business, pursuing business development opportunities, structuring and restructuring its operations, attracting talent, and investing current earnings to generate organic growth. |
• | Separate Capital Structures and Allocation of Financial Resources. Each of Encompass and Enhabit has different cash flow structures and capital requirements, with Encompass’s business being far more capital intensive. The separation will permit each company to allocate its financial resources to meet the unique needs of its businesses and intensify the focus on its distinct operating and strategic priorities. The separation will also give each business its own capital structure and allow it to manage capital allocation and adopt distinct capital return strategies. Further, the separation will eliminate internal competition for capital between the two businesses and enable each business to implement a capital structure tailored to its strategy and business needs. |
• | Improved Alignment of Management Incentives and Performance. The separation will allow each company to more effectively recruit, retain and motivate employees through the use of equity-based compensation that more closely reflects and aligns management and employee incentives with specific business objectives, financial goals and business attributes. To the extent that the separate equity currencies are more attractively valued, this would further benefit Encompass and Enhabit. |
• | Creation of Independent Equity Currencies and Enhanced Strategic Opportunities. The separation will provide each of Encompass and Enhabit with its own pure-play equity currency that can be used to facilitate capital raising and to pursue accretive M&A opportunities that are more closely aligned with each company’s strategic goals and expected growth opportunities. To the extent that the separate equity currencies are more attractively valued, this would further increase these benefits to Encompass and Enhabit. |
• | Clear-Cut Investment Identities. The separation will allow investors to more clearly understand the separate business models, financial profiles and investment identities of the two companies and to invest in each based on a better appreciation of these characteristics. Each company is expected to appeal to types of investors who differ from Encompass’s current investors. Following the separation, the separate management teams of each of the two companies are expected to be better positioned to implement goals and evaluate strategic opportunities in light of the expectations of the specific investors in that individual company’s market. To the extent that enhanced investor understanding results in greater investor demand for shares of Encompass stock and/or Enhabit stock, it could cause each company to be valued at multiples higher than Encompass’s current multiple, and higher than its publicly traded peers. Any such increase in the aggregate market value of Encompass and Enhabit following the separation over Encompass’s market value prior to the separation would benefit Encompass, Enhabit, and their respective stakeholders. |
• | Risk of Failure to Achieve Anticipated Benefits of the Separation. We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: the separation will demand significant management resources and require significant amounts of management’s time and effort, which may divert management’s attention from operating our business; and following the separation, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of Encompass because our business will be less diversified than Encompass’s business prior to the completion of the separation and distribution. |
• | Disruptions and Costs Related to the Separation. The actions required to separate the Enhabit Business from Encompass could disrupt our operations. In addition, we will incur substantial costs in connection with the separation and the transition to being a standalone, public company, which may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel who are new to Enhabit, tax costs and costs to separate information systems. |
• | Loss of Scale and Increased Administrative Costs. Prior to the separation, as part of Encompass, Enhabit takes advantage of Encompass’s size and purchasing power in procuring certain goods and services. After the separation and distribution, as a standalone company, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those Encompass obtained prior to completion of the separation and distribution. In addition, as part of Encompass, Enhabit benefits from certain functions performed by Encompass, such as accounting, tax, legal, human resources and other general and administrative functions. After the separation and distribution, Encompass will not perform these functions for us, other than certain functions that will be provided for a limited time pursuant to the transition services agreement, and, because of our smaller scale as a standalone company, our cost of performing such functions could be higher than the amounts reflected in our historical financial statements, which would cause our profitability to decrease. |
• | Limitations on Strategic Transactions. Under the terms of the tax matters agreement that we will enter into with Encompass, we will be restricted from taking certain actions that could cause the distribution or certain related transactions (or certain transactions undertaken as part of the internal reorganization), |
• | Uncertainty Regarding Stock Prices. We cannot predict the effect of the separation on the trading prices of Enhabit or Encompass common stock or know with certainty whether the combined market value of [ ] shares of our common stock and one share of Encompass common stock will be less than, equal to or greater than the market value of one share of Encompass common stock prior to the distribution. |
• | Restricted Stock Awards (“RSAs”) held by Enhabit Employees. Each Encompass RSA held by an individual who will be an employee of Enhabit following the separation and distribution will be converted into an RSA with respect to Enhabit common stock. The number of shares subject to each such award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original Encompass award as measured immediately before and immediately after the separation and distribution (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Such adjusted award will otherwise be subject to the same terms and conditions that applied to the original Encompass award immediately prior to the separation and distribution. |
• | Performance Share Units (“PSUs”) held by Enhabit Employees. Each award of Encompass PSUs held by an individual who will be an employee of Enhabit following the separation and distribution will be converted into an RSA with respect to Enhabit common stock. The number of shares subject to each RSA will be equal to the number of shares of Encompass common stock calculated based on a level of performance as determined by the Compensation and Human Capital Committee of the Encompass board of directors, which number will then be adjusted to a number of shares of Enhabit common stock immediately following the separation and distribution. This adjustment will be made in a manner intended to preserve the aggregate intrinsic value of the original Encompass award as measured immediately before and immediately after the separation and distribution (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Such adjusted award will otherwise be subject to the same terms and conditions that applied to the original Encompass award immediately prior to the separation and distribution. |
• | Stock Options held by Enhabit Employees. Each award of Encompass stock options held by an individual who will be an employee of Enhabit following the separation and distribution will be converted into an award of stock options with respect to Enhabit common stock. The exercise price of, and number of shares subject to, each such award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original Encompass award as measured immediately before and immediately after the separation and distribution (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Such adjusted award will otherwise be subject to the same terms and conditions that applied to the original Encompass award immediately prior to the separation and distribution. |
• | RSUs and Deferred Stock held by nonemployee directors of Enhabit. Each award of Encompass RSUs or deferred stock held by an individual who will be a nonemployee director of Enhabit following the separation and distribution will remain denominated in shares of Encompass common stock, although the number of shares subject to the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original RSU or deferred stock award as measured immediately before and immediately after the separation and distribution (in each case, as calculated based on the |
• | the SEC declaring effective the registration statement on Form 10 of which this information statement forms a part; there being no order suspending the effectiveness of the registration statement; and no proceedings for such purposes having been instituted or threatened by the SEC; |
• | this information statement having been made available to Encompass stockholders; |
• | the receipt by Encompass and continuing validity of an opinion of its outside counsel, satisfactory to the Encompass board of directors, regarding the qualification of the distribution as a transaction that is generally tax free for U.S. federal income tax purposes under Section 355 of the Code; |
• | the receipt by Encompass and continuing validity of a favorable private letter ruling from the IRS, satisfactory to the Encompass board of directors, regarding the qualification of the distribution as a transaction that is generally tax free for U.S. federal income tax purposes under Section 355 of the Code and certain other U.S. federal income tax matters relating to the separation and distribution; |
• | an independent appraisal firm acceptable to the Encompass board of directors having delivered one or more opinions to the Encompass board of directors confirming the solvency and financial viability of Encompass before the completion of the distribution, in each case in a form and substance acceptable to the Encompass board of directors in its sole and absolute discretion; |
• | all actions and filings necessary or appropriate under applicable U.S. federal, state or other securities or blue sky laws and the rules and regulations thereunder relating to the separation and distribution having been taken or made and, where applicable, having become effective or been accepted; |
• | the transaction agreements relating to the separation and distribution having been duly executed and delivered by the parties thereto; |
• | no order, injunction or decree issued by any government authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions being in effect; |
• | the shares of Enhabit common stock to be distributed having been approved for listing on the NYSE, subject to official notice of distribution; |
• | Encompass having received certain proceeds from the financing arrangements described under “Description of Certain Material Indebtedness” and being satisfied in its sole and absolute discretion that, as of the effective time of the distribution, it will have no further liability under such arrangements, and Encompass having completed any required refinancing of its existing indebtedness on terms satisfactory to the Encompass board of directors in its sole and absolute discretion; and |
• | no other event or development existing or having occurred that, in the judgment of Encompass’s board of directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution or the other related transactions. |
• | on a historical basis; and |
• | on an unaudited pro forma basis to reflect the separation and distribution and the transactions described in the section titled “Unaudited Pro Forma Condensed Consolidated Financial Statements,” including the borrowings under the new term loan A facility we intend to incur in connection with the separation, and the application of proceeds of such borrowings. |
| | As of March 31, 2022 | ||||
(Dollars in millions, except per share data) | | | Actual | | | Pro forma |
Cash and cash equivalents | | | $17.5 | | | $17.5 |
Debt: | | | | | ||
Long-term debt | | | 2.9 | | | 549.4 |
Total debt | | | 7.3 | | | 573.8 |
Redeemable noncontrolling interest | | | 5.1 | | | 5.1 |
Common stock $0.01 par value, | | | | | ||
4,000,000 shares authorized actual, [ ] shares authorized pro forma, 3,853,248 shares issued actual, [ ] shares issued pro forma | | | 0.1 | | | 0.1 |
Capital in excess of par value | | | 1,066.4 | | | 395.9 |
Retained earnings | | | 401.5 | | | 401.5 |
Total Enhabit, Inc. equity | | | 1,468.0 | | | 797.5 |
Noncontrolling interest | | | 27.9 | | | 27.9 |
Total stockholders’ equity | | | 1,495.9 | | | 825.4 |
Total capitalization | | | $1,508.3 | | | $1,404.3 |
| | Historical | | | Transaction Accounting Adjustments | | | Autonomous Entity Adjustments | | | Pro Forma | |
Net service revenue | | | $274.3 | | | $— | | | $— | | | $274.3 |
Cost of service (excluding depreciation and amortization) | | | 129.7 | | | — | | | — | | | 129.7 |
Gross margin | | | 144.6 | | | — | | | — | | | 144.6 |
General and administrative expenses | | | 100.7 | | | — | | | 5.5(b) | | | 106.2 |
Depreciation and amortization | | | 8.5 | | | — | | | 0.5(c) | | | 9.0 |
Operating income | | | 35.4 | | | — | | | (6.0) | | | 29.4 |
Interest expense | | | — | | | 4.6(a) | | | — | | | 4.6 |
Income before income taxes and noncontrolling interests | | | 35.4 | | | (4.6) | | | (6.0) | | | 24.8 |
Income tax expense | | | 8.7 | | | (1.1)(d) | | | (1.3)(d) | | | 6.3 |
Net income | | | 26.7 | | | (3.5) | | | (4.7) | | | 18.5 |
Less: Net income attributable to noncontrolling interests | | | 0.6 | | | — | | | — | | | 0.6 |
Net income attributable to Enhabit, Inc. | | | $26.1 | | | $(3.5) | | | $(4.7) | | | $17.9 |
Weighted average common shares outstanding: | | | | | | | | | ||||
Basic | | | 3.9 | | | | | | | (e) | ||
Diluted | | | 3.9 | | | | | | | (e) | ||
Earnings per common share: | | | | | | | | | ||||
Basic earnings per share attributable to Enhabit, Inc. common stockholders | | | $6.69 | | | | | | | $ (e) | ||
Diluted earnings per share attributable to Enhabit, Inc. | | | $6.69 | | | | | | | $ (e) |
| | Historical | | | Transaction Accounting Adjustments | | | Autonomous Entity Adjustments | | | Pro Forma | |
Net service revenue | | | $1,106.6 | | | $— | | | $— | | | $1,106.6 |
Cost of service (excluding depreciation and amortization) | | | 513.9 | | | — | | | — | | | 513.9 |
Gross margin | | | 592.7 | | | — | | | — | | | 592.7 |
General and administrative expenses | | | 412.9 | | | — | | | 29.2(b) | | | 442.1 |
Depreciation and amortization | | | 36.9 | | | — | | | 1.3(c) | | | 38.2 |
Operating income | | | 142.9 | | | — | | | (30.5) | | | 112.4 |
Interest expense | | | 0.3 | | | 18.5(a) | | | — | | | 18.8 |
Equity in net income of nonconsolidated affiliates | | | (0.6) | | | — | | | — | | | (0.6) |
Other income | | | (4.8) | | | — | | | — | | | (4.8) |
Income before income taxes and noncontrolling interests | | | 148.0 | | | (18.5) | | | (30.5) | | | 99.0 |
Income tax expense | | | 35.1 | | | (4.4)(d) | | | (6.5)(d) | | | 24.2 |
Net income | | | 112.9 | | | (14.1) | | | (24.0) | | | 74.8 |
Less: Net income attributable to noncontrolling interests | | | 1.8 | | | — | | | — | | | 1.8 |
Net income attributable to Enhabit, Inc. | | | $111.1 | | | $(14.1) | | | $(24.0) | | | $73.0 |
Weighted average common shares outstanding: | | | | | | | | | ||||
Basic | | | 3.9 | | | | | | | (e) | ||
Diluted | | | 3.9 | | | | | | | (e) | ||
Earnings per common share: | | | | | | | | | ||||
Basic earnings per share attributable to Enhabit, Inc. common stockholders | | | $28.49 | | | | | | | $ (e) | ||
Diluted earnings per share attributable to Enhabit, Inc. common stockholders | | | $28.49 | | | | | | | $ (e) |
| | Historical | | | Transaction Accounting Adjustments | | | Autonomous Entity Adjustments | | | Pro Forma | |
Assets | | | | | | | | | ||||
Current assets: | | | | | | | | | ||||
Cash and cash equivalents | | | $17.5 | | | $— | | | $— | | | $17.5 |
Restricted cash | | | 3.7 | | | — | | | — | | | 3.7 |
Accounts receivable | | | 168.1 | | | — | | | — | | | 168.1 |
Prepaid expenses and other current assets | | | 8.1 | | | — | | | — | | | 8.1 |
Total current assets | | | 197.4 | | | — | | | — | | | 197.4 |
Property and equipment, net | | | 20.7 | | | — | | | 1.2(g) | | | 21.9 |
Operating lease right-of-use assets | | | 46.9 | | | — | | | | | 46.9 | |
Goodwill | | | 1,217.7 | | | — | | | | | 1,217.7 | |
Intangible assets, net | | | 254.1 | | | (135.0)(f) | | | — | | | 119.1 |
Other long-term assets | | | 6.4 | | | — | | | — | | | 6.4 |
Total assets | | | $1,743.2 | | | $(135.0) | | | $1.2 | | | $1,609.4 |
Liabilities and Stockholders’ Equity | | | | | | | | | ||||
Current liabilities: | | | | | | | | | ||||
Current portion of long-term debt | | | $4.4 | | | $20.0(a) | | | $— | | | $24.4 |
Current operating lease liabilities | | | 14.9 | | | — | | | — | | | 14.9 |
Accounts payable | | | 3.0 | | | — | | | — | | | 3.0 |
Accrued payroll | | | 65.0 | | | — | | | — | | | 65.0 |
Refunds due patients and other third-party payors | | | 9.3 | | | — | | | — | | | 9.3 |
Income tax payable | | | 13.9 | | | — | | | — | | | 13.9 |
Accrued medical insurance | | | 9.2 | | | — | | | — | | | 9.2 |
Other current liabilities | | | 23.6 | | | — | | | 1.2(g) | | | 24.8 |
Total current liabilities | | | 143.3 | | | 20.0 | | | 1.2 | | | 164.5 |
Long-term debt, net of current portion | | | 2.9 | | | 546.5(a) | | | — | | | 549.4 |
Long-term operating lease liabilities | | | 32.1 | | | — | | | — | | | 32.1 |
Deferred income tax liabilities | | | 63.9 | | | (31.0)(f) | | | — | | | 32.9 |
| | 242.2 | | | 535.5 | | | 1.2 | | | 778.9 | |
Redeemable noncontrolling interests | | | 5.1 | | | — | | | — | | | 5.1 |
Stockholders’ equity: | | | | | | | | | ||||
Enhabit, Inc. stockholders’ equity: | | | | | | | | | ||||
Common stock | | | 0.1 | | | — | | | — | | | 0.1 |
Capital in excess of par value | | | 1,066.4 | | | (670.5)(a,f) | | | — | | | 395.9 |
Retained earnings | | | 401.5 | | | — | | | — | | | 401.5 |
Total Enhabit, Inc. stockholders’ equity | | | 1,468.0 | | | (670.5) | | | — | | | 797.5 |
Noncontrolling interests | | | 27.9 | | | — | | | — | | | 27.9 |
Total stockholders’ equity | | | 1,495.9 | | | (670.5) | | | — | | | 825.4 |
Total liabilities and stockholders’ equity | | | $1,743.2 | | | $(135.0) | | | $1.2 | | | $1,609.4 |
(a) | Reflects indebtedness of approximately $570 million, consisting of a $400 million term loan A facility and $170 million drawn under a $350 million revolving credit facility with maturities of five years and variable interest rates based on the Secured Overnight Financing Rate (“SOFR”), which are expected to be issued in connection with the separation, and related debt issuance costs of $3.5 million. The unaudited pro forma condensed consolidated statement of income reflects estimated interest expense related to the debt issuances and amortization of deferred issuance costs. Interest expense was calculated assuming constant debt levels throughout the period and an interest rate of approximately 3.0%. A 0.125 percent change to the annual interest rate would change interest expense by approximately $0.2 million and $0.7 million, respectively, for the three months ended March 31, 2022 and year ended December 31, 2021. |
(b) | As an independent, separate public company following the separation from Encompass, we expect to incur certain costs including financial reporting and regulatory compliance, board of directors’ fees and expenses, accounting, auditing, tax, legal, insurance, information technology, human resources, investor relations, internal audit, risk management, treasury and other general and administrative-related function. The following table reflects incremental costs to establish an autonomous public entity including the following: |
| | For the Three Months Ended March 31, 2022 | | | For the Year Ended December 31, 2021 | |
Payments to Encompass under transition services agreement | | | $0.1 | | | $4.7 |
Costs incurred for services not previously provided by Encompass or following conclusion of transition services agreement(i) | | | 7.1 | | | 26.0 |
Cost related to new share-based compensation program(ii) | | | 1.8 | | | 4.9 |
One-time costs for rebranding, employee recruiting and retention and establishment of stand-alone IT infrastructure and security | | | — | | | 10.3 |
Less: Overhead allocation included in historical financial statements | | | (3.5) | | | (16.7) |
Net increase in general and administrative expenses | | | $5.5 | | | $29.2 |
(i) | Includes costs associated with executive oversight, treasury, investor relations, legal, human resources, tax, internal audit, financial reporting and information technology. |
(ii) | Reflects estimates of costs under the Company’s anticipated long-term incentive program to be established following the separation based on targeted total direct compensation utilizing third party survey data and assuming a three-year vesting schedule. |
(c) | Reflects the corresponding estimated increase in amortization of capitalized costs for leasehold improvements and equipment associated with the Company’s rebranding as described in the “Business” section of this information statement. |
(d) | Pro forma adjustments tax effected utilizing the combined federal and state statutory rate adjusted to include the impact of nondeductible executive compensation. |
(e) | Calculated utilizing the number of shares of our common stock expected to be outstanding following the separation including potentially dilutive securities related to the Company’s anticipated long-term incentive plan. |
(f) | We anticipate transferring the ‘Encompass’ trade name to Encompass upon consummation of the spin-off as Encompass will continue operating under the Encompass brand. The Transaction Accounting Adjustment reflects the carrying value of the Encompass trade name and associated deferred tax liability. |
(g) | Reflects incremental capitalized costs for leasehold improvements and equipment related to rebranding of the Company as described in the “Business” section of this information statement. |
* | Note: Includes Amedisys, Inc. (Nasdaq: AMED) and LHC Group, Inc. (Nasdaq: LHCG). |
• | Skilled nursing facility-at-home, or “SNF-at-home,” care refers to an emerging service area that seeks to provide care to higher acuity care patients in the home. According to Lincoln Healthcare Leadership, approximately 25% of short-stay SNF episodes can be cared for in the home setting. We believe |
• | Palliative care services refer to care that improves the quality of life for patients, making the patient as comfortable as possible by anticipating, preventing, diagnosing and treating their symptoms, but does not seek to cure the patient’s underlying illness. Unlike hospice services, which are also palliative in nature, palliative care services are not limited to patients with terminal illnesses. While the nature of the patient care is substantially similar, palliative care services and hospice services are distinct from a state licensure and Medicare reimbursement perspective. Palliative care services are complementary to our existing business because they are often regarded as a bridge between home health and hospice. |
• | Care management services refer to the management of patient care outside of home health under contracts with Medicare Advantage payors, ACOs or other risk-bearing entities. We currently receive a small amount of revenue from care management services. |
• | Private duty services refer to the provision of typically non-clinical hourly care to patients with a wide variety of serious or chronic illnesses and conditions or those that need assistance with activities of daily living in their homes. Private duty services typically last 4 to 24 hours a day. We currently provide private duty services through three of our locations, but it is not a material part of our business. |
• | Hospital-at-home care refers to the provision of acute care hospital services in patients’ homes. The concept received significant industry attention following a March 2020 announcement by CMS allowing Medicare-certified hospitals to request waivers to provide acute hospital care services in patients’ homes during the COVID-19 public health emergency. Hospital-at-home care under Medicare still requires the provider to meet all of the Medicare Conditions of Participation applicable to hospitals and involves a much higher intensity of care than home health agencies are equipped to provide. In order to provide hospital-at-home care, we would need to enter into an arrangement with a Medicare-certified hospital that has received an Acute Hospital Care at Home waiver from CMS to provide acute care hospital services at home on behalf of the hospital. Additionally, it is uncertain what CMS’s position on these services will be after the public health emergency ends. |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Medicare | | | 81.9% | | | 83.1% | | | 84.2% |
Medicare Advantage | | | 10.6% | | | 10.8% | | | 10.2% |
Managed care | | | 5.9% | | | 4.4% | | | 3.6% |
Medicaid | | | 1.4% | | | 1.4% | | | 1.7% |
Other | | | 0.2% | | | 0.3% | | | 0.3% |
Total | | | 100.0% | | | 100.0% | | | 100.0% |
• | ensure the establishment and maintenance of a regulatory compliance program and the development of a comprehensive quality of care program designed to measure and improve the quality of care and safety furnished to patients; |
• | appoint and oversee the activities of a chief compliance officer with responsibility for developing and implementing our regulatory compliance program; |
• | oversee the cyber risk management program designed to monitor, mitigate and respond to cyber risks, threats, and incidents, and review periodic reports from the vice president of information technology, including developments in cyber threat environment and cyber risk mitigation efforts; |
• | review periodic reports from the chief compliance officer, including an annual regulatory compliance report summarizing compliance-related activities undertaken by us during the year, and the results of all regulatory compliance audits conducted during the year; and |
• | review and approve annually the quality of care program and review periodic reports from the executive vice president of clinical services regarding our efforts to advance patient safety and quality of care. |
• | maintaining competitive compensation and benefit programs that reward and recognize employee performance; |
• | fostering a strong culture that values inclusion, diversity, and equity; and |
• | emphasizing employee development and engagement to attract talent and reduce turnover. |
• | we provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location; |
• | we base annual increases and incentive compensation on merit, which is communicated to employees through our talent management process as part of our annual review procedures; |
• | all full-time employees are eligible for health insurance, paid and unpaid leaves, a retirement plan, tuition assistance through the Encompass Scholars and Young Scholars Program, employee assistance services, life and disability/accident coverage, an accrual rate for paid days off, and an extended illness benefit program; |
• | we provide an employer match on retirement plan contributions; |
• | we also offer a wide variety of voluntary benefits that allow employees to select the options that meet their needs, including dental insurance, vision insurance, hospital indemnity insurance, accident insurance, critical illness insurance, supplemental life insurance, disability insurance, health savings accounts, and flexible spending accounts; |
• | we have various short-term incentive plans for leadership; and |
• | we plan to make annual grants of restricted stock to employees at various levels of leadership to foster a strong sense of ownership and align the interests of management with those of our stockholders. |
• | Attract. We are pursuing specific initiatives including inclusion and diversity training for all employees and as a foundational element of our leadership development curriculum, scholastic partnership with historically black colleges, recruitment tools to help identify diverse talent, and ongoing policy reviews to incorporate language that supports inclusion and diversity. |
• | Welcome. We have a Welcome Ambassador program to ensure that all employees are welcomed to the organization and are aware of our organizational commitment to inclusion and diversity. |
• | Support & Equip. We use our weekly blasts and podcasts to educate our employees about inclusion and diversity topics, such as unconscious bias. This education supports our employees by equipping them with the informational tools necessary to better foster an inclusive and diverse workplace. |
• | Opportunity. We are pursuing further specific initiatives, including a leadership inclusion and diversity program to identify and create opportunities for diverse leaders. |
• | Education opportunities. We offer our nurses an opportunity to advance their academic degrees at a reduced tuition rate of 20% to 50% of the total program cost. Our full-time nursing and therapy staff also have unlimited access to online education and training to ensure continuing education units are available at no cost. |
• | Tuition reimbursement and scholarship programs. Employees also have the opportunity to advance their education through our Encompass Scholars and Young Scholars scholarship programs, pursuant to which we award tuition reimbursement grants to employees and their dependents. |
• | Employee Development Center. We offer extensive on-site and regional courses to develop our employees. Courses include clinical, sales, operations, and leadership development programs that help our employees to stay current on best practices, ensure compliance with policies and process, and promote continued growth and development at all levels of the organization. A state-of-the-art classroom and a broadcast studio have been designed to enhance the educational environment to support adult learning principles and sustained impact of our educational programs. |
• | Other employee development programs: |
○ | career ladders that offer paths to develop, demonstrate, and be rewarded for expanded responsibility in nursing, therapy, case management, sales leadership, and operations management; |
○ | formal coaching and online development library that provides access to a wide range of readily available internal and external content on many topics important for success in current or desired jobs; |
○ | robust leadership development program that develops employees interested in supervisory positions through executive leadership; and |
○ | leadership coaching that provides six months of executive coaching to high-performing leaders. |
State | | | Home Health Locations | | | Hospice Locations | | | Total |
Alabama+* | | | 29 | | | 27 | | | 56 |
Alaska | | | 1 | | | 1 | | | 2 |
Arizona | | | 5 | | | — | | | 5 |
Arkansas+* | | | 3 | | | 2 | | | 5 |
Colorado | | | 6 | | | 2 | | | 8 |
Connecticut | | | 1 | | | — | | | 1 |
Florida | | | 21 | | | — | | | 21 |
Georgia+ | | | 21 | | | 4 | | | 25 |
Idaho | | | 8 | | | 6 | | | 14 |
Illinois | | | 3 | | | — | | | 3 |
Indiana | | | 1 | | | — | | | 1 |
Kansas | | | 4 | | | 2 | | | 6 |
Kentucky+* | | | 3 | | | — | | | 3 |
Louisiana* | | | 1 | | | 2 | | | 3 |
Maryland+* | | | 3 | | | — | | | 3 |
Massachusetts | | | 5 | | | — | | | 5 |
Mississippi+ | | | 9 | | | 11 | | | 20 |
Missouri | | | 1 | | | 1 | | | 2 |
Montana+ | | | 3 | | | 5 | | | 8 |
Nevada+* | | | 3 | | | 1 | | | 4 |
New Mexico | | | 5 | | | 3 | | | 8 |
North Carolina+* | | | 6 | | | — | | | 6 |
State | | | Home Health Locations | | | Hospice Locations | | | Total |
Ohio | | | 1 | | | — | | | 1 |
Oklahoma | | | 19 | | | 2 | | | 21 |
Oregon | | | 2 | | | — | | | 2 |
Pennsylvania | | | 3 | | | 1 | | | 4 |
Rhode Island+* | | | 1 | | | — | | | 1 |
South Carolina+* | | | 3 | | | 1 | | | 4 |
Tennessee+* | | | 7 | | | 1 | | | 8 |
Texas | | | 51 | | | 15 | | | 66 |
Utah | | | 6 | | | 6 | | | 12 |
Virginia | | | 11 | | | 2 | | | 13 |
Washington | | | 1 | | | 1 | | | 2 |
Wyoming | | | 5 | | | 3 | | | 8 |
| | 252 | | | 99 | | | 351 |
+ | Home health certificate of need state. |
* | Hospice certificate of need state. |
| | For the Three Months Ended March 31, | ||||||||||
| | 2022 | | | % of consolidated revenue | | | 2021 | | | % of consolidated revenue | |
| | (In Millions) | ||||||||||
Home health segment net service revenue | | | $224.9 | | | 82.0% | | | $219.9 | | | 81.3% |
Hospice segment net service revenue | | | 49.4 | | | 18.0% | | | 50.6 | | | 18.7% |
Consolidated net service revenue | | | $274.3 | | | 100.0% | | | $270.5 | | | 100.0% |
| | For the Year Ended December 31, | ||||||||||||||||
| | 2021 | | | % of consolidated revenue | | | 2020 | | | % of consolidated revenue | | | 2019 | | | % of consolidated revenue | |
| | (In Millions) | ||||||||||||||||
Home health segment net service revenue | | | $897.3 | | | 81.1% | | | $877.6 | | | 81.4% | | | $918.1 | | | 84.1% |
Hospice segment net service revenue | | | 209.3 | | | 18.9% | | | 200.6 | | | 18.6% | | | 173.9 | | | 15.9% |
Consolidated net service revenue | | | $1,106.6 | | | 100.0% | | | $1,078.2 | | | 100.0% | | | $1,092.0 | | | 100.0% |
| | Three Months Ended March 31, | | | For the Year Ended December 31, | ||||||||||
| | 2022 | | | 2021 | | | 2021 | | | 2020 | | | 2019 | |
Medicare | | | 79.2% | | | 82.7% | | | 81.9% | | | 83.1% | | | 84.2% |
Medicare Advantage | | | 12.6% | | | 10.4% | | | 10.6% | | | 10.8% | | | 10.2% |
Managed care | | | 6.9% | | | 5.3% | | | 5.9% | | | 4.4% | | | 3.6% |
Medicaid | | | 1.3% | | | 1.4% | | | 1.4% | | | 1.4% | | | 1.7% |
Other | | | —% | | | 0.2% | | | 0.2% | | | 0.3% | | | 0.3% |
Total | | | 100.0% | | | 100.0% | | | 100.0% | | | 100.0% | | | 100.0% |
| | For the Three Months Ended March 31, | | | Percentage Change | ||||
| | 2022 | | | 2021 | | | 2022 vs. 2021 | |
| | (In Millions) | | | |||||
Net service revenue | | | $ 274.3 | | | $ 270.5 | | | 1.4% |
Cost of service (excluding depreciation and amortization) | | | 129.7 | | | 124.6 | | | 4.1% |
Gross margin | | | 144.6 | | | 145.9 | | | (0.9)% |
General and administrative expenses | | | 100.7 | | | 99.9 | | | 0.8% |
Depreciation and amortization | | | 8.5 | | | 9.1 | | | (6.6)% |
Operating income | | | 35.4 | | | 36.9 | | | (4.1)% |
Interest expense | | | — | | | 0.1 | | | (100.0)% |
Equity in net income of nonconsolidated affiliates | | | — | | | (0.2) | | | (100.0)% |
Income before income taxes and noncontrolling interests | | | 35.4 | | | 37.0 | | | (4.3)% |
Income tax expense | | | 8.7 | | | 8.7 | | | —% |
Net income | | | 26.7 | | | 28.3 | | | (5.7)% |
Less: Net income attributable to noncontrolling interests | | | 0.6 | | | 0.4 | | | 50.0% |
Net income attributable to Enhabit, Inc. | | | $26.1 | | | $27.9 | | | (6.5)% |
| | For the Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Cost of service (excluding depreciation and amortization) | | | 47.3 % | | | 46.1 % |
General and administrative expenses | | | 36.7 % | | | 36.9 % |
Depreciation and amortization | | | 3.1 % | | | 3.4 % |
Income tax expense | | | 24.6 % | | | 23.5 % |
| | For the Year Ended December 31, | | | Percentage Change | ||||||||||
| | 2021 | | | 2020 | | | 2019 | | | 2021 vs. 2020 | | | 2020 vs. 2019 | |
| | (In Millions) | | | | | |||||||||
Net service revenue | | | $1,106.6 | | | $1,078.2 | | | $1,092.0 | | | 2.6 % | | | (1.3) % |
Cost of service (excluding depreciation and amortization) | | | 513.9 | | | 537.5 | | | 527.4 | | | (4.4) % | | | 1.9 % |
Gross margin | | | 592.7 | | | 540.7 | | | 564.6 | | | 9.6 % | | | (4.2) % |
General and administrative expenses | | | 412.9 | | | 398.0 | | | 465.7 | | | 3.7 % | | | (14.5) % |
Depreciation and amortization | | | 36.9 | | | 40.0 | | | 37.7 | | | (7.8) % | | | 6.1% |
Operating income | | | 142.9 | | | 102.7 | | | 61.2 | | | 39.1 % | | | 67.8 % |
Interest expense | | | 0.3 | | | 5.2 | | | 28.4 | | | (94.2) % | | | (81.7) % |
Equity in net income of nonconsolidated affiliates | | | (0.6) | | | (0.5) | | | (1.2) | | | 20.0 % | | | (58.3) % |
Other income | | | (4.8) | | | (2.2) | | | — | | | 118.2 % | | | N/A |
Income before income taxes and noncontrolling interests | | | 148.0 | | | 100.2 | | | 34.0 | | | 47.7 % | | | 194.7 % |
Income tax expense | | | 35.1 | | | 24.4 | | | 9.2 | | | 43.9 % | | | 165.2 % |
Net income | | | 112.9 | | | 75.8 | | | 24.8 | | | 48.9 % | | | 205.6 % |
Less: Net income attributable to noncontrolling interests | | | 1.8 | | | 0.8 | | | 0.8 | | | 125.0% | | | — % |
Net income attributable to Enhabit, Inc. | | | $111.1 | | | $75.0 | | | $24.0 | | | 48.1% | | | 212.5% |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Cost of service (excluding depreciation and amortization) | | | 46.4 % | | | 49.9 % | | | 48.3 % |
General and administrative expenses | | | 37.3 % | | | 36.9 % | | | 42.6 % |
Depreciation and amortization | | | 3.3 % | | | 3.7 % | | | 3.5 % |
Income tax expense | | | 23.7% | | | 24.3 % | | | 27.1 % |
| | For the Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Net Income | | | $ 26.7 | | | $ 28.3 |
Income tax expense | | | 8.7 | | | 8.7 |
Interest expense | | | — | | | 0.1 |
Depreciation and amortization | | | 8.5 | | | 9.1 |
Gain on disposal or impairment of assets | | | (0.1) | | | (0.1) |
Stock-based compensation | | | 1.3 | | | 0.6 |
Stock-based compensation included in overhead allocation | | | 0.5 | | | 0.2 |
Net income attributable to noncontrolling interest | | | (0.6) | | | (0.4) |
Transaction costs | | | 2.0 | | | 0.7 |
Adjusted EBITDA | | | $47.0 | | | $ 47.2 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Net Income | | | $112.9 | | | $75.8 | | | $24.8 |
Income tax expense | | | 35.1 | | | 24.4 | | | 9.2 |
Interest expense | | | 0.3 | | | 5.2 | | | 28.4 |
Depreciation and amortization | | | 36.9 | | | 40.0 | | | 37.7 |
(Gain) loss on disposal or impairment of assets | | | (0.8) | | | 1.1 | | | — |
Stock-based compensation | | | 3.6 | | | 3.9 | | | 84.9 |
Stock-based compensation included in overhead allocation | | | 2.3 | | | 2.0 | | | 2.5 |
Net income attributable to noncontrolling interest | | | (1.8) | | | (0.8) | | | (0.8) |
Transaction costs | | | 11.9 | | | — | | | 2.1 |
Gain on consolidation of joint venture formerly accounted for under the equity method of accounting | | | (3.2) | | | (2.2) | | | — |
Payroll taxes on SARs exercise | | | — | | | 1.5 | | | 1.0 |
Adjusted EBITDA | | | $197.2 | | | $150.9 | | | $189.8 |
| | For the Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Medicare | | | 75.4% | | | 79.2 % |
Medicare Advantage | | | 15.3% | | | 12.7 % |
Managed care | | | 7.9% | | | 6.3 % |
Medicaid | | | 1.4% | | | 1.6 % |
Other | | | —% | | | 0.2 % |
Total | | | 100.0% | | | 100.0% |
| | For the Three Months Ended March 31, | | | Percentage Change | ||||
| | 2022 | | | 2021 | | | 2022 vs. 2021 | |
| | (In Millions, Except Percentage Change) | |||||||
Net service revenue: | | | | | | | |||
Episodic | | | $191.7 | | | $194.2 | | | (1.3)% |
Non-episodic | | | 30.4 | | | 22.2 | | | 36.9% |
Other | | | 2.8 | | | 3.5 | | | (20.0)% |
Home health segment revenue | | | 224.9 | | | 219.9 | | | 2.3% |
Cost of service (excluding depreciation and amortization) | | | 108.0 | | | 103.0 | | | 4.9% |
Gross margin | | | 116.9 | | | 116.9 | | | —% |
General and administrative expenses | | | 58.7 | | | 60.7 | | | (3.3)% |
Equity earnings and noncontrolling interests | | | 0.5 | | | 0.2 | | | 150.0% |
Home health Segment Adjusted EBITDA(a) | | | $57.7 | | | $56.0 | | | 3.0% |
| | (Actual Amounts) | |||||||
Episodic: | | | | | | | |||
Admissions | | | 38,971 | | | 40,215 | | | (3.1)% |
Recertifications | | | 25,808 | | | 28,083 | | | (8.1)% |
Completed episodes | | | 63,111 | | | 66,435 | | | (5.0)% |
Visits | | | 957,831 | | | 1,048,017 | | | (8.6)% |
Revenue per episode | | | $3,038 | | | $2,923 | | | 3.9% |
Non-Episodic: | | | | | | | |||
Admissions | | | 14,338 | | | 10,584 | | | 35.5% |
Recertifications | | | 5,979 | | | 3,819 | | | 56.6% |
Visits | | | 270,253 | | | 191,056 | | | 41.5% |
Revenue per visit | | | $112 | | | $116 | | | (3.4)% |
Total: | | | | | | | |||
Admission | | | 53,309 | | | 50,799 | | | 4.9% |
Recertifications | | | 31,787 | | | 31,902 | | | (0.4)% |
Starts of care (total admissions and recertifications) | | | 85,096 | | | 82,701 | | | 2.9% |
Visits | | | 1,228,084 | | | 1,239,073 | | | (0.9)% |
Cost per visit | | | $86 | | | $81 | | | 6.2% |
(a) | Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting, as a measure reported to management for |
| | For the Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Cost of service (excluding depreciation and amortization) | | | 48.0 % | | | 46.8 % |
General and administrative expenses | | | 26.1 % | | | 27.6 % |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Medicare | | | 78.2 % | | | 79.5 % | | | 81.6 % |
Medicare Advantage | | | 13.1 % | | | 13.2 % | | | 12.2 % |
Managed care | | | 6.9 % | | | 5.2 % | | | 4.1 % |
Medicaid | | | 1.6 % | | | 1.8 % | | | 1.8 % |
Other | | | 0.2 % | | | 0.3 % | | | 0.3 % |
Total | | | 100.0 % | | | 100.0 % | | | 100.0 % |
| | For the Year Ended December 31, | | | Percentage Change | ||||||||||
| | 2021 | | | 2020 | | | 2019 | | | 2021 vs. 2020 | | | 2020 vs. 2019 | |
| | (In Millions, Except Percentage Change) | |||||||||||||
Net service revenue: | | | | | | | | | | | |||||
Episodic | | | $781.5 | | | $780.0 | | | $818.9 | | | 0.2 % | | | (4.8) % |
Non-episodic | | | 102.0 | | | 82.3 | | | 83.4 | | | 23.9 % | | | (1.3) % |
Other | | | 13.8 | | | 15.3 | | | 15.8 | | | (9.8) % | | | (3.2) % |
Home health segment revenue | | | 897.3 | | | 877.6 | | | 918.1 | | | 2.2 % | | | (4.4) % |
Cost of service (excluding depreciation and amortization) | | | 423.5 | | | 443.8 | | | 445.6 | | | (4.6) % | | | (0.4) % |
Gross margin | | | 473.8 | | | 433.8 | | | 472.5 | | | 9.2 % | | | (8.2) % |
General and administrative expenses | | | 244.2 | | | 248.7 | | | 244.7 | | | (1.8) % | | | 1.6 % |
Other income | | | (1.6) | | | — | | | — | | | N/A | | | — % |
Equity earnings and noncontrolling interests | | | 1.1 | | | 0.5 | | | (0.4) | | | 120.0 % | | | 225.0 % |
Home health Segment Adjusted EBITDA(a) | | | $230.1 | | | $184.6 | | | $228.2 | | | 24.6 % | | | (19.1) % |
| | (Actual Amounts) | |||||||||||||
Episodic: | | | | | | | | | | | |||||
Admissions | | | 155,357 | | | 158,912 | | | 159,727 | | | (2.2) % | | | (0.5) % |
Recertifications | | | 111,394 | | | 114,775 | | | 116,084 | | | (2.9) % | | | (1.1) % |
Completed episodes | | | 264,581 | | | 268,508 | | | 275,578 | | | (1.5) % | | | (2.6) % |
Visits | | | 4,071,600 | | | 4,410,183 | | | 4,710,528 | | | (7.7) % | | | (6.4) % |
Revenue per episode | | | $2,954 | | | $2,905 | | | $2,972 | | | 1.7 % | | | (2.3) % |
Non-Episodic: | | | | | | | | | | | |||||
Admissions | | | 45,269 | | | 35,337 | | | 34,771 | | | 28.1 % | | | 1.6 % |
Recertifications | | | 19,865 | | | 13,923 | | | 13,905 | | | 42.7 % | | | 0.1 % |
Visits | | | 898,099 | | | 729,289 | | | 721,363 | | | 23.1 % | | | 1.1 % |
Revenue per visit | | | $114 | | | $113 | | | $116 | | | 0.9 % | | | (2.6) % |
Total: | | | | | | | | | | | |||||
Admissions | | | 200,626 | | | 194,249 | | | 194,498 | | | 3.3 % | | | (0.1) % |
Recertifications | | | 131,259 | | | 128,698 | | | 129,989 | | | 2.0 % | | | (1.0) % |
Starts of care (total of admissions and recertifications) | | | 331,885 | | | 322,947 | | | 324,487 | | | 2.8 % | | | (0.5) % |
Visits | | | 4,969,699 | | | 5,139,472 | | | 5,431,621 | | | (3.3) % | | | (5.4) % |
Cost per visit | | | $83 | | | $84 | | | $80 | | | (1.2) % | | | 5.0 % |
(a) | Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting, as a measure reported to management for purposes of making decisions on allocating resources and addressing the performance of our segments. Segment Adjusted EBITDA is calculated similarly to consolidated Adjusted EBITDA but excludes corporate overhead costs that are not allocated to reportable segments because they are not considered when management evaluates segment performance. See Note 14, Segment Reporting, to the accompanying consolidated financial statements for additional information about Segment Adjusted EBITDA. |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Cost of service (excluding depreciation and amortization) | | | 47.2 % | | | 50.6 % | | | 48.5 % |
General and administrative expenses | | | 27.2 % | | | 28.3 % | | | 26.7 % |
| | For the Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Medicare | | | 97.0 % | | | 98.4 % |
Managed care | | | 2.2 % | | | 1.0 % |
Medicaid | | | 0.8% | | | 0.6 % |
Total | | | 100.0% | | | 100.0% |
| | For the Three Months Ended March 31, | | | Percentage Change | ||||
| | 2022 | | | 2021 | | | 2022 vs. 2021 | |
| | (In Millions, Except Percentage Change) | |||||||
Hospice segment revenue | | | $49.4 | | | $50.6 | | | (2.4)% |
Cost of service (excluding depreciation and amortization) | | | 21.7 | | | 21.6 | | | 0.5% |
Gross margin | | | 27.7 | | | 29.0 | | | (4.5)% |
General and administrative expenses | | | 14.9 | | | 15.5 | | | (3.9)% |
Equity earnings and noncontrolling interests | | | 0.1 | | | — | | | N/A |
Hospice Segment Adjusted EBITDA(a) | | | $12.7 | | | $13.5 | | | (5.9)% |
| | (Actual Amounts) | |||||||
Total: | | | | | | | |||
Admissions | | | 3,246 | | | 3,330 | | | (2.5)% |
Patient days | | | 319,834 | | | 334,400 | | | (4.4)% |
Average daily census | | | 3,554 | | | 3,716 | | | (4.4)% |
Revenue per patient day | | | $154 | | | $151 | | | 2.0% |
Cost per patient day | | | $68 | | | $65 | | | 4.6% |
(a) | Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting, as a measure reported to management for purposes of making decisions on allocating resources and addressing the performance of our segments. Segment Adjusted EBITDA is calculated similarly to consolidated Adjusted EBITDA but excludes corporate overhead costs that are not allocated to reportable segments because they are not considered when management evaluates segment performance. See Note 7, Segment Reporting, to the accompanying condensed consolidated financial statements, for additional information about Segment Adjusted EBITDA. |
| | For the Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Cost of service (excluding depreciation and amortization) | | | 43.9% | | | 42.7% |
General and administrative expenses | | | 30.2% | | | 30.6% |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Medicare | | | 97.9 % | | | 99.1 % | | | 98.0 % |
Managed care | | | 1.5 % | | | 0.9 % | | | 1.0 % |
Medicaid | | | 0.6 % | | | — % | | | 1.0 % |
Total | | | 100.0 % | | | 100.0 % | | | 100.0 % |
| | For the Year Ended December 31, | | | Percentage Change | ||||||||||
| | 2021 | | | 2020 | | | 2019 | | | 2021 vs. 2020 | | | 2020 vs. 2019 | |
| | (In Millions, Except Percentage Change) | |||||||||||||
Hospice segment revenue | | | $209.3 | | | $200.6 | | | $173.9 | | | 4.3 % | | | 15.4 % |
Cost of service (excluding depreciation and amortization) | | | 90.4 | | | 93.7 | | | 81.8 | | | (3.5) % | | | 14.5 % |
Gross margin | | | 118.9 | | | 106.9 | | | 92.1 | | | 11.2 % | | | 16.1 % |
General and administrative expenses | | | 62.6 | | | 60.4 | | | 42.8 | | | 3.6 % | | | 41.1 % |
Equity earnings and noncontrolling interests | | | 0.1 | | | (0.2) | | | — | | | (150.0) % | | | N/A |
Hospice Segment Adjusted EBITDA(a) | | | $56.2 | | | $46.7 | | | $49.3 | | | 20.3 % | | | (5.3) % |
| | (Actual Amounts) | |||||||||||||
Total: | | | | | | | | | | | |||||
Admissions | | | 13,113 | | | 12,878 | | | 10,452 | | | 1.8 % | | | 23.2 % |
Patient days | | | 1,372,980 | | | 1,367,060 | | | 1,197,927 | | | 0.4 % | | | 14.1 % |
Average daily census | | | 3,762 | | | 3,735 | | | 3,282 | | | 0.7 % | | | 13.8 % |
Revenue per patient day | | | $152 | | | $147 | | | $145 | | | 3.4 % | | | 1.4 % |
Cost per patient day | | | $66 | | | $69 | | | $68 | | | (4.3) % | | | 1.5 % |
(a) | Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting, as a measure reported to management for purposes of making decisions on allocating resources and addressing the performance of our segments. Segment Adjusted EBITDA is calculated similarly to consolidated Adjusted EBITDA but excludes corporate overhead costs that are not allocated to reportable segments because they are not considered when management evaluates segment performance. See Note 14, Segment Reporting, to the accompanying consolidated financial statements for additional information about Segment Adjusted EBITDA. |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Cost of service (excluding depreciation and amortization) | | | 43.2 % | | | 46.7 % | | | 47.0 % |
General and administrative expenses | | | 29.9 % | | | 30.1 % | | | 24.6 % |
| | For the Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Net cash provided by operating activities | | | $41.4 | | | $20.4 |
Net cash used in investing activities | | | (1.4) | | | (0.7) |
Net cash used in financing activities | | | (26.8) | | | (20.0) |
Increase (decrease) in cash, cash equivalents, and restricted cash | | | $13.2 | | | $(0.3) |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Net cash provided by operating activities | | | $123.3 | | | $24.9 | | | $59.5 |
Net cash used in investing activities | | | (119.2) | | | (3.0) | | | (246.0) |
Net cash (used in) provided by financing activities | | | (36.1) | | | (16.7) | | | 198.2 |
(Decrease) increase in cash, cash equivalents, and restricted cash | | | $(32.0) | | | $5.2 | | | $11.7 |
| | Total | | | Current | | | Long-term | |
Finance lease obligations(a) | | | $6.6 | | | $4.1 | | | $2.5 |
Operating lease obligations(b) | | | 52.2 | | | 16.5 | | | 35.7 |
Purchase obligations(c) | | | 39.6 | | | 22.3 | | | 17.3 |
Total | | | $98.4 | | | $42.9 | | | $55.5 |
(a) | We lease automobiles for our clinicians under finance leases. Amounts include interest portion of future minimum finance lease payments. |
(b) | Our home health and hospice segments lease: (1) relatively small office spaces in the localities they serve, (2) space for their corporate office, and (3) equipment in the normal course of business. Amounts include interest portion of future minimum operating lease payments. For more information, see Note 6, Leases, to the accompanying consolidated financial statements. |
(c) | Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty. Our purchase obligations primarily relate to software licensing and support. Purchase obligations are not recognized in our consolidated balance sheet. |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
| | (in Millions) | ||||
Current: | | | | | ||
0 – 30 Days | | | $113.4 | | | $96.2 |
31 – 60 Days | | | 22.3 | | | 16.7 |
61 – 90 Days | | | 10.2 | | | 8.7 |
91 – 120 Days | | | 4.5 | | | 3.8 |
120+ Days | | | 14.1 | | | 11.1 |
| | 164.5 | | | 136.5 | |
Noncurrent patient accounts receivable | | | 6.1 | | | 6.4 |
Accounts receivable | | | $170.6 | | | $142.9 |
• | macroeconomic conditions, such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; |
• | industry and market considerations and changes in healthcare regulations, including reimbursement and compliance requirements under the Medicare and Medicaid programs; |
• | cost factors, such as an increase in labor, supply, or other costs; |
• | overall financial performance, such as negative or declining cash flows or a decline in actual or forecasted revenue or earnings; |
• | other relevant company-specific events, such as material changes in management or key personnel or outstanding litigation; |
• | material events, such as a change in the composition or carrying amount of each reporting unit’s net assets, including acquisitions and dispositions; and |
• | length of time since most recent quantitative analysis. |
Name | | | Age | | | Position(s) |
Barbara A. Jacobsmeyer | | | 56 | | | Director, President and Chief Executive Officer |
Crissy B. Carlisle | | | 50 | | | Chief Financial Officer |
Julie D. Jolley | | | 50 | | | Executive Vice President of Home Health and Hospice Operations |
Chad K. Knight | | | 38 | | | General Counsel |
Tanya R. Marion | | | 48 | | | Chief Human Resources Officer |
Name | | | Age | | | Position(s) |
Leo I. Higdon, Jr. | | | 75 | | | Director, Chairman |
Barbara A. Jacobsmeyer | | | 56 | | | Director, President and Chief Executive Officer |
Jeffrey W. Bolton | | | 67 | | | Director |
Yvonne M. Curl | | | 67 | | | Director |
Charles M. Elson | | | 62 | | | Director |
Erin P. Hoeflinger | | | 57 | | | Director |
John E. Maupin, Jr. | | | 75 | | | Director |
Gregory S. Rush | | | 54 | | | Director |
L. Edward Shaw, Jr. | | | 77 | | | Director |
• | assist the board of directors in the oversight of the integrity of our financial statements and compliance with legal and regulatory requirements, the qualifications and independence of our independent auditor, and the performance of our internal audit function and our independent auditor; |
• | appoint, compensate, replace, retain, and oversee the work of our independent auditor; |
• | at least annually, review a report by our independent auditor regarding its internal quality control procedures, material issues raised by certain reviews, inquiries or investigations relating to independent audits within the last five years, and relationships between the independent auditor and the Company; |
• | review and evaluate our quarterly and annual financial statements with management and our independent auditor, including management’s assessment of and the independent auditor’s opinion regarding the effectiveness of our internal control over financial reporting; |
• | discuss earnings press releases as well as financial information and earnings guidance provided to analysts and rating agencies with management; and |
• | discuss policies with respect to risk assessment and risk management. |
• | review and approve our compensation programs and policies, including our benefit plans, incentive compensation plans and equity-based plans and administer those plans as may be required; |
• | review and approve (or recommend to the board of directors in the case of the chief executive officer) goals and objectives relevant to the compensation of the executive officers and evaluate their performances in light of those goals and objectives; |
• | determine and approve (together with the other independent directors in the case of the chief executive officer) the compensation levels for the executive officers; |
• | review and discuss with management the Compensation Discussion and Analysis and recommend inclusion thereof in our annual report or proxy statement; |
• | review and approve (or recommend to the board of directors in the case of the chief executive officer) employment arrangements, severance arrangements and termination arrangements and change-in-control arrangements to be made with any executive officer; |
• | review at least annually our management succession plan and material compensation and human capital-related risk exposures as well as management’s efforts to monitor and mitigate those exposures; and |
• | review and recommend to the board of directors the compensation for the non-employee members of the board. |
• | recommend nominees for board membership to be submitted for stockholder vote at each annual meeting, and to recommend to the board candidates to fill vacancies on the board and newly created positions on the board; |
• | assist the board of directors in determining the appropriate characteristics, skills and experience for the individual directors and the board as a whole and create a process to allow the committee to identify and evaluate individuals qualified to become board members; |
• | evaluate annually and make recommendations to the board regarding the composition of each standing committee of the board of directors, the policy with respect to rotation of committee memberships and/or chairpersonships, and the functioning of the committees; |
• | review the suitability for each board member’s continued service as a director when his or her term expires, and recommend whether or not the director should be renominated; |
• | assist the board of directors in considering whether a transaction between a member of the board of directors and the Company presents an inappropriate conflict of interest and/or impairs the independence of any member of the board of directors; and |
• | develop corporate governance guidelines that are consistent with applicable laws and listing standards, periodically review those guidelines, and recommend to the board of directors any changes the committee deems necessary or advisable. |
• | review and approve certain expenditures, contractual obligations and financial commitments per delegated authority from our board of directors; and |
• | review, evaluate, and make recommendations to the board of directors regarding (i) capital structure and proposed changes thereto, including significant new issuances, purchases, or redemptions of our securities, (ii) plans for allocation and disbursement of capital expenditures, (iii) credit rating, activities with credit rating agencies, and key financial ratios, (iv) long-term financial strategy and financial needs, (v) major activities with respect to mergers, acquisition and divestitures, and (vi) plans to manage insurance and asset risk. |
• | ensure the establishment and maintenance of a regulatory compliance program and the development of a comprehensive quality of care program designed to measure and improve the quality of care and safety furnished to patients; |
• | appoint and oversee the activities of a chief compliance officer with responsibility for developing and implementing our regulatory compliance program; |
• | oversee the cyber risk management program designed to monitor, mitigate and respond to cyber risks, threats, and incidents, and review periodic reports from the chief information officer, including developments in cyber threat environment and cyber risk mitigation efforts; |
• | review periodic reports from the chief compliance officer, including an annual regulatory compliance report summarizing compliance-related activities undertaken by us during the year, and the results of all regulatory compliance audits conducted during the year; and |
• | review and approve annually the quality-of-care program and review periodic reports regarding our efforts to advance patient safety and quality of care. |
Chair Position | | | Fees Earned or Paid in Cash ($) |
Chairman of the Board | | | 75,000 |
Audit Committee | | | 25,000 |
Compensation and Human Capital Committee | | | 20,000 |
Nominating/Corporate Governance Committee | | | 20,000 |
Finance Committee | | | 15,000 |
Compliance/Quality of Care Committee | | | 15,000 |
Name | | | Title |
Barbara A. Jacobsmeyer | | | President and Chief Executive Officer |
Crissy B. Carlisle | | | Chief Financial Officer |
Julie D. Jolley | | | Executive Vice President of Home Health and Hospice Operations |
Chad K. Knight | | | General Counsel |
Tanya R. Marion | | | Chief Human Resources Officer |
• | provide a competitive rewards program for its senior management that aligns management’s interests with those of its long-term stockholders; |
• | correlate compensation with corporate, regional and business unit outcomes by recognizing performance with appropriate levels and forms of awards; |
• | establish financial and operational goals to sustain strong performance over time; |
• | place 100% of annual cash incentives and a majority of equity incentive awards at risk by directly linking those incentive payments and awards to Encompass’s performance; and |
• | provide limited executive benefits to members of senior management. |
Base Salary | | | + | | | Annual Cash Incentives | | | + | | | Long-Term Equity Incentives | | | = | | | Total Direct Compensation |
Named Executive Officer | | | Base Salary | | | Target Annual Cash Incentive | | | Target Long-Term Equity Incentive | | | Target Total Direct Compensation |
Barbara A. Jacobsmeyer | | | $730,846 | | | $637,500 | | | $1,608,750 | | | $2,950,096 |
Crissy B. Carlisle | | | $319,849 | | | $233,333 | | | $171,600 | | | $724,782 |
Chad K. Knight | | | $256,345 | | | $152,506 | | | $112,203 | | | $521,054 |
Julie D. Jolley | | | $318,893 | | | $187,491 | | | $151,260 | | | $657,644 |
Base Pay | | | Annual Incentive | | | Options | | | PSU | | | RSA |
23.9% | | | 21.6% | | | 10.9% | | | 32.7% | | | 10.9% |
54.5% Long-Term |
Base Pay | | | Annual Incentive | | | PSU | | | RSA |
47.3% | | | 30.0% | | | 13.6% | | | 9.1% |
22.7% Long-Term |
Compensation Survey Sources | |||
Mercer Benchmark Database | | | Aon Hewitt Executive |
Mercer Integrated Health Networks | | | Willis Towers Watson Executive |
Component | | | Purpose | | | 2021 Actions | | | 2022 Actions |
Base Salary | | | Provide executives with a competitive level of regular income. | | | Increased base salaries for Mses. Jacobsmeyer, Carlisle, Jolley and Mr. Knight. | | | No changes. |
| | | | | | ||||
Annual Incentives | | | Drive company performance while focusing on annual objectives. | | | Increased incentive targets for Mses. Carlisle and Mr. Knight. | | | No changes. |
| | | | | | ||||
Long-Term Incentives | | | Focus executives’ attention on longer-term strength of the business and align their interests with stockholders. | | | Increased incentive targets for Mses. Carlisle, Jolley, and Knight. | | | No changes. |
| | | | | | ||||
Health and Welfare Benefits | | | Provide executives with programs that promote health and financial security. | | | No changes. | | | No changes. |
| | | | | | ||||
Other Benefits and Perquisites | | | Encourage supplemental tax deferral savings beyond 401(k) limitations and promote health awareness. | | | No changes. | | | No changes. |
| | | | | | ||||
Change in Control and Severance | | | Provide business continuity during periods of transition. | | | No changes. | | | Following the separation and distribution, the Named Executive Officers will participate in the Enhabit change in control and severance plans. |
2021 Annual Base Salaries | ||||||
| | Base Salary Rate as of January 1, 2021 | | | Base Salary Rate as of December 31, 2021 | |
Barbara A. Jacobsmeyer | | | $650,000 | | | $750,000 |
Crissy B. Carlisle | | | $260,000 | | | $400,000 |
Chad K. Knight | | | $234,998 | | | $305,001 |
Julie D. Jolley | | | $275,017 | | | $374,982 |
2021 SMBP Quantitative Objectives | ||||||||||||
| | Award Range | ||||||||||
| | Not Eligible | | | Threshold | | | Target | | | Maximum | |
Objective | | | 0% | | | 50% | | | 100% | | | 200% |
Encompass Adjusted EBITDA(1) | | | <$867,692,000 | | | $867,692,000 | | | $938,045,000 | | | ≥$1,008,398,000 |
Home Health Segment Adjusted EBITDA(2) | | | <$178,137,000 | | | $178,137,000 | | | $192,580,000 | | | ≥$207,024,000 |
(1) | For purposes of the 2021 SMBP, Encompass Adjusted EBITDA was calculated on a consolidated basis, as discussed in more detail in Appendix A to Encompass’s latest definitive proxy statement filed with the SEC, including reconciliations to corresponding GAAP financial measures. |
(2) | For purposes of the 2021 SMBP, Home Health Segment Adjusted EBITDA was calculated as described in Note 14, Segment Reporting, to the accompanying consolidated financial statements. |
HHH Quality Scorecard (applicable to all NEOs) | |||||||||||||||
| | Consolidated Star/Hospice Rating | |||||||||||||
| | | | Not Eligible | | | Threshold | | | Target | | | Maximum | ||
Objective | | | Sub-Weight | | | 0% | | | 50% | | | 100% | | | 200% |
Home Health Quality Stars | | | 25% | | | <3.2 | | | 3.2 | | | 3.6 | | | 4.0 |
Home Health Patient Satisfaction Stars | | | 25% | | | <3.0 | | | 3.0 | | | 3.5 | | | 4.0 |
Hospice HIS Measures | | | 25% | | | <3.0 | | | 3.0 | | | 4.0 | | | 5.0 |
Hospice CAHPS | | | 25% | | | <3.0 | | | 3.0 | | | 4.0 | | | 5.0 |
• | performance measures could be achieved independently of each other; and |
• | as results increased above the threshold, a corresponding percentage of the target cash incentive would be awarded. In other words, levels listed are on a continuum, and straight-line interpolation is used to determine the payout multiple between two payout levels shown in the table above. |
| | | | Components of Cash Incentive Opportunity | | ||||||||||
Named Executive Officer | | | Target Cash Incentive Opportunity as a % of Salary | | | Encompass Consolidated Adjusted EBITDA | | | IRF Quality Scorecard | | | HHH Segment Adjusted EBITDA | | | HHH Segment Quality Scorecard |
Barbara A. Jacobsmeyer | | | 85% | | | 45% | | | 15% | | | 28% | | | 12% |
Crissy B. Carlisle | | | 58% | | | 45% | | | 15% | | | 28% | | | 12% |
Chad K. Knight | | | 50% | | | 20% | | | — | | | 56% | | | 24% |
Julie D. Jolley | | | 50% | | | 20% | | | — | | | 56% | | | 24% |
Objective | | | Target | | | Result | | | % of Target Metric Achievement |
EHC Adjusted EBITDA | | | $938,045,000 | | | $973,665,000 | | | 150.6% |
HHH Adjusted EBITDA | | | $192,580,000 | | | $192,262,000 | | | 98.9% |
Objective | | | % of Target Metric Achievement | | | Weight | | | Weighted Metric Achievement |
Discharge to Community | | | 200.0% | | | 30% | | | 60.0% |
Acute Transfer | | | — | | | 15% | | | — |
Discharge to Skilled Nursing Facility | | | 200.0% | | | 30% | | | 60.0% |
Patient Satisfaction | | | 159.0% | | | 25% | | | 39.8% |
Combined | | | | | 100% | | | 159.8% |
Objective | | | % of Target Metric Achievement | | | Weight | | | Weighted Metric Achievement |
Home Health Quality Stars | | | 175.0% | | | 25% | | | 43.8% |
Home Health Patient Satisfaction Stars | | | 200.0% | | | 25% | | | 50.0% |
Hospice HIS Measures | | | 100.0% | | | 25% | | | 25.0% |
Hospice CAHPS | | | 100.0% | | | 25% | | | 25.0% |
Combined | | | | | 100% | | | 143.8% |
Name | | | Amount of 2021 Bonus Earned |
Barbara A. Jacobsmeyer | | | $871,386 |
Crissy B. Carlisle | | | $318,939 |
Chad K. Knight | | | $183,031 |
Julie D. Jolley | | | $225,019 |
Name | | | 2021 Home Health and Hospice Retention Bonus Plan Value |
Barbara A. Jacobsmeyer | | | N/A |
Crissy B. Carlisle | | | N/A |
Chad K. Knight | | | $127,504 |
Julie D. Jolley | | | $152,495 |
Name | | | Total Target Equity Award Opportunity | | | Options as a % of the Award | | | PSUs as a % of the Award | | | RSAs as a % of the Award |
Barbara A. Jacobsmeyer | | | $1,608,750 | | | 20% | | | 60% | | | 20% |
Crissy B. Carlisle | | | $171,600 | | | — | | | 60% | | | 40% |
Chad K. Knight | | | $112,203 | | | — | | | 60% | | | 40% |
Julie D. Jolley | | | $151,260 | | | — | | | 60% | | | 40% |
1 | For purposes of the 2021 PSUs, Encompass EPS is calculated on a weighted-average diluted shares outstanding basis by adjusting Encompass’s net income from continuing operations attributable to Encompass for the normalization of income tax expense, fair value adjustments to the value of stock appreciation rights (“SARs”) and marketable securities, and certain unusual or nonrecurring unbudgeted items, to more accurately reflect items within management’s control while also minimizing unintended incentives or disincentives associated with the accounting treatment for unbudgeted, discretionary transactions. |
2 | For purposes of the 2021 PSUs, Encompass ROIC is defined as Encompass’s net operating profit after taxes (“NOPAT”) divided by Encompass’s average invested capital as of December 31, 2020, 2021, and 2022. Encompass’s invested capital is calculated as Encompass’s total assets less deferred tax assets, assets from discontinued operations, current liabilities, noncontrolling interest and redeemable noncontrolling plus current portion of long-term debt. NOPAT is defined as Encompass’s income from continuing operations attributable to Encompass common shareholders, excluding interest expense, government, class action and related settlements, professional fees - accounting, tax, and legal, fair value adjustments to the value of SARs and marketable securities, and loss on early extinguishment of debt, as adjusted for a normalized income tax expense. Both the numerator and the denominator are then adjusted as described in the note above for the applicable unusual or nonrecurring unbudgeted items |
Stock Options | | | Restricted Stock |
Outstanding options to purchase Encompass common stock will only vest if the participant is terminated for good reason or without cause within 24 months of a change in control of Encompass or if not assumed or substituted and, for Tier 1 participants, all options will remain exercisable for three years. Tier 3 participants are not eligible to receive stock options. | | | Encompass restricted stock will only vest if the participant is terminated for good reason or without cause within 24 months of a change in control of Encompass or if not assumed or substituted. |
• | Ms. Jacobsmeyer’s annual base salary will increase to $850,000, her annual target bonus opportunity will equal 105% of her annual base salary, and her annual long-term incentive opportunity will equal 315% of her annual base salary. In addition, it is expected that Ms. Jacobsmeyer will be granted a supplemental RSA on the distribution date with a grant date value of $1,087,500 to recognize her increased responsibilities after the fiscal year 2021 annual equity award was granted to her. It is expected that the number of shares of Enhabit common stock subject to the supplemental RSA will be equal to the grant date value of such award divided by the closing trading price of Enhabit common stock on the NYSE on the distribution date. The supplemental RSA will vest in three equal installments on each of February 25, 2023, February 25, 2024, and February 25, 2025, in each case, generally subject to continued employment through the applicable vesting date. |
• | For Ms. Carlisle, it is expected that her current compensation levels will remain in place; therefore, she will continue to have an annual base salary of $400,000, an annual target bonus opportunity equal to 70% of her annual base salary, and an annual long-term incentive opportunity equal to 125% of her annual base salary. |
• | Ms. Jolley’s annual base salary will increase to $390,000, her annual target bonus opportunity will equal 70% of her annual base salary, and her annual long-term incentive opportunity will equal 100% of her annual base salary. |
• | Mr. Knight’s annual base salary will increase to $350,000, his annual target bonus opportunity will equal 70% of his annual base salary, and his annual long-term incentive opportunity will equal 100% of his annual base salary. |
• | For Ms. Marion, it is expected that her current compensation levels will remain in place; therefore, she will continue to have an annual base salary of $350,000, an annual target bonus opportunity equal to 50% of her annual base salary, and an annual long-term incentive opportunity equal to 75% of her annual base salary. |
Name and Principal Position | | | Year(1) | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($)(2) | | | Option Awards ($)(3) | | | Non-Equity Incentive Plan Compensation ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) |
Barbara A. Jacobsmeyer President and Chief Executive Officer | | | 2021 | | | 703,846 | | | — | | | 1,303,548 | | | 319,295 | | | 871,386 | | | 143,320 | | | 3,341,395 |
| 2020 | | | 620,000 | | | — | | | 1,211,485 | | | 266,742 | | | 497,250 | | | 26,963 | | | 2,622,440 | ||
| 2019 | | | 650,000 | | | — | | | 892,115 | | | 219,960 | | | 700,544 | | | 26,206 | | | 2,488,825 | ||
Crissy B. Carlisle Chief Finance Officer | | | 2021 | | | 319,849 | | | — | | | 173,834 | | | — | | | 318,939 | | | 40,410 | | | 853,032 |
Chad K. Knight General Counsel | | | 2021 | | | 256,345 | | | — | | | 97,421 | | | — | | | 183,031 | | | 2,288 | | | 539,085 |
Julie D. Jolley Executive Vice President | | | 2021 | | | 318,893 | | | — | | | 353,385 | | | — | | | 225,019 | | | 2,822 | | | 900,119 |
(1) | We have included three years of compensation information for Ms. Jacobsmeyer because it has previously been reported in Encompass’s definitive proxy statements filed with the SEC. For the other NEOs, only 2021 compensation is reported consistent with SEC requirements. |
(2) | The stock awards for each year consist of performance-based restricted stock, or “PSUs,” and time-based restricted stock, or “RSAs,” as part of the long-term incentive plan for the given year. The amounts shown in this column are the grant date fair values computed in accordance with Accounting Standards Codification Topic 718, Compensation - Stock Compensation (“ASC 718”), assuming the most probable outcome of the performance conditions as of the grant dates (i.e., target performance). All of the values in this column are consistent with the estimate of aggregate compensation expense to be recognized over the applicable vesting period, excluding any adjustment for forfeitures. The assumptions used in the valuations are discussed in Note 10, Stock-Based Payments, to the accompanying consolidated financial statements. |
Name | | | Year | | | Threshold Performance Value ($) | | | Target Performance Value ($) | | | Maximum Performance Value ($) |
Barbara A. Jacobsmeyer | | | 2021 | | | 488,810 | | | 977,620 | | | 1,955,240 |
| 2020 | | | 454,287 | | | 908,573 | | | 1,817,146 | ||
| 2019 | | | 334,535 | | | 669,070 | | | 1,338,141 | ||
Crissy B. Carlisle | | | 2021 | | | 52,158 | | | 104,317 | | | 208,634 |
Chad K. Knight | | | 2021 | | | 34,097 | | | 68,195 | | | 136,389 |
Julie D. Jolley | | | 2021 | | | 46,000 | | | 92,001 | | | 184,001 |
(3) | The values of option awards listed in this column are the grant date fair values computed in accordance with ASC 718 as of the grant date. All of the values in this column are consistent with the estimate of aggregate compensation expense to be recognized over the three-year vesting period, excluding any adjustment for forfeitures. The assumptions used in the valuations are discussed in Note 14, Share-Based Payments, to the consolidated financial statements in Encompass’s 2021 Form 10-K. |
(4) | The amounts shown in this column are bonuses earned under Encompass’s senior management bonus plan in the corresponding year but paid in the first quarter of the following year. |
(5) | The items reported in this column for 2021 are described as set forth below. The amounts reflected in the “Dividend Rights” column are the aggregate values of dividends associated with outstanding restricted stock awards to the extent that the per share dividend rate increased beyond the rate in existence on the grant date of the awards. That is, the grant date fair values for awards granted prior to the increases in the dividend rate in October 2018 and 2019 may not have factored in those incremental dividend rights, so the aggregate amount of dividend rights equal to those incremental increases is included in this column. Both RSA and PSU awards accrue rights to cash dividends that are only paid if the awards vest. The dividend rights paid on or accruing to our equity awards are equivalent in value to the rights of common stockholders generally and are not preferential. The amount included in the “Other” column below for Ms. Jacobsmeyer includes (a) $121,981 in direct payments and the employer’s payroll tax responsibility associated with relocation expenses in connection with her transition to leadership of the home health and hospice business in Dallas, Texas, (b) $2,999 for an executive physical examination, and (c) $75 for a small gift of appreciation. The amount included in the “Other” column below for Ms. Carlisle discloses the relocation expenses paid to Ms. Carlisle in connection with her transition to leadership of the home health and hospice business in Dallas, Texas. |
Name | | | Qualified 401(k) Match ($) | | | Nonqualified 401(k) Match ($) | | | Dividend Rights ($) | | | Other ($) |
Barbara A. Jacobsmeyer | | | 7,750 | | | 10,168 | | | 347 | | | 125,055 |
Crissy B. Carlisle | | | 7,339 | | | 815 | | | 12 | | | 32,244 |
Chad K. Knight | | | 2,288 | | | — | | | — | | | — |
Julie D. Jolley | | | 2,812 | | | — | | | 10 | | | — |
| | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan | | | All Other Stock Awards: Number of Shares of Stock or Units(6) (#) | | | All Other Option Awards: Number of Securities Underlying Options(7) (#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||
Name | | | Grant Date | | | Date of Board Approval of Grant | | | Threshold(3) ($) | | | Target(4) ($) | | | Maximum(5) ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | |||||||||||
Barbara A. Jacobsmeyer | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
Annual Incentive | | | — | | | — | | | 318,750 | | | 637,500 | | | 1,275,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
PSU | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | 5,914 | | | 11,827 | | | 23,654 | | | — | | | — | | | — | | | 977,620 |
Stock options | | | 3/2/2021 | | | 3/2/2021 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 16,620 | | | 80.40 | | | 319,295 |
RSA | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,943 | | | — | | | — | | | 325,928 |
Crissy B. Carlisle | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
Annual Incentive | | | — | | | — | | | 116,667 | | | 233,333 | | | 466,666 | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
PSU | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | 631 | | | 1,262 | | | 2,524 | | | — | | | — | | | — | | | 104,317 |
RSA | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | — | | | — | | | — | | | 841 | | | — | | | — | | | 69,517 |
Chad K. Knight | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
Annual Incentive | | | — | | | — | | | 76,253 | | | 152,506 | | | 305,012 | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Retention Incentive | | | — | | | — | | | — | | | 127,504(8) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
PSU | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | 413 | | | 825 | | | 1,650 | | | — | | | — | | | — | | | 68,195 |
RSA | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | — | | | — | | | — | | | 550 | | | — | | | — | | | 45,463 |
Julie D. Jolley | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
Annual Incentive | | | — | | | — | | | 93,746 | | | 187,491 | | | 374,982 | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Retention Incentive | | | — | | | — | | | — | | | 152,495(8) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
PSU | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | 557 | | | 1,113 | | | 2,226 | | | — | | | — | | | — | | | 92,001 |
RSA | | | 2/24/2021 | | | 2/24/2021 | | | — | | | — | | | — | | | — | | | — | | | — | | | 742 | | | — | | | — | | | 61,334 |
RSA | | | 10/4/2021 | | | —(9) | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,724 | | | — | | | — | | | 200,051 |
(1) | The possible payments described in these three columns are cash amounts provided for by Encompass’s 2021 Senior Management Bonus Plan as discussed under “—Compensation Discussion and Analysis—Annual Incentives.” Final payments under the 2021 program were calculated and paid in the first quarter of 2022 and are reflected in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation.” |
(2) | Awards which are designated as “PSU” are performance share units. As described in “—Compensation Discussion and Analysis—Long-Term Incentives—PSU Awards in 2021,” these awards vest and shares are earned based upon the level of attainment of performance objectives for the two-year period from January 1, 2021 ending December 31, 2022 and a one-year time-vesting requirement ending December 31, 2023. Each of the threshold, target and maximum share numbers reported in these three columns assume the performance objectives are each achieved at that respective level. Upon a change in control, the Encompass Compensation Committee will determine the extent to which the performance goals for PSUs have been met and what awards have been earned or if the goals should be modified on account of the change in control. The PSUs, and resulting restricted stock, accrue ordinary dividends during the service period, to the extent paid on our common stock, but the holders will not receive the cash payments related to these accrued dividends until the restricted stock resulting from performance attainment vests. The Encompass Compensation Committee will determine whether the restricted stock will be entitled to any extraordinary dividends, if any are declared and paid. |
(3) | The threshold amounts in this column assume: (i) Encompass reached only threshold achievement on each of the quantitative objectives and (ii) the Encompass Compensation Committee exercised no discretion based on performance, resulting in payment of the minimum |
(4) | The target payment amounts in this column assume: (i) Encompass achieved exactly 100% of each of the quantitative objectives and (ii) the Encompass Compensation Committee exercised no discretion based on an individual’s performance. The target amount payable for each NEO is her or his base salary multiplied by the target cash incentive opportunity percentage set out in the table under “—Compensation Discussion and Analysis—Annual Incentives—Establishing the Target Cash Incentive Opportunity.” |
(5) | The maximum payment amounts in this column assume Encompass achieved at or above the maximum achievement level of each of the quantitative objectives, at which level no discretion can be applied to increase the payment. Thus, following the procedures discussed under “—Compensation Discussion and Analysis—Annual Incentives—Assessing and Rewarding 2021 Achievement of Objectives,” Encompass would multiply the target amount by 200% (the maximum payout multiple) to arrive at the amount payable for maximum achievement. |
(6) | Awards which are designated as “RSA” are time-vesting restricted stock awards. The number of shares of restricted stock set forth will vest in three equal annual installments beginning on the first anniversary of the grant, provided that the officer is still employed by Encompass. A change in control of Encompass will also cause these awards to immediately vest. This restricted stock accrues ordinary dividends to the extent paid on our common stock, but the holders will not receive the cash payments related to these accrued dividends until the restricted stock vests. The Encompass Compensation Committee will determine whether the restricted stock will be entitled to any extraordinary dividends, if any are declared and paid. |
(7) | All stock option grants will vest, subject to the officer’s continued employment by Encompass, in three equal annual installments beginning on the first anniversary of grant. A change in control of Encompass will also cause options to immediately vest. |
(8) | Based on their leadership, Mr. Knight and Ms. Jolley participated in the 2021 Retention Bonus Plan at 50% of their current annual base salaries. |
(9) | Authority delegated to Mr. Tarr on September 15, 2021 to make a limited amount of special equity grants. |
| | Option Awards(1) | | | Stock Awards | |||||||||||||||||||
| | Number of Securities Underlying Unexercised Options (#) | | | Number of Securities Underlying Unexercised Options (#) | | | Option Exercise Price ($) | | | Option Expiration Date(2) | | | Number of Shares or Units of Stock That Have Not Vested (#)(3) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(6) | |
Name | | | Exercisable | | | Unexercisable | | |||||||||||||||||
Barbara A. Jacobsmeyer | | | 7,792 | | | — | | | 42.22 | | | 2/24/2027 | | | 7,536 | | | 491,799 | | | 9,875 | | | 644,443 |
| | 12,151 | | | — | | | 53.79 | | | 3/1/2028 | | | 1,137 | | | 74,201 | | | 23,654 | | | 1,543,660 | |
| | 9,491 | | | 4,746 | | | 63.77 | | | 3/1/2029 | | | 2,446 | | | 159,626 | | | — | | | — | |
| | 5,743 | | | 11,484 | | | 76.54 | | | 3/2/2030 | | | 3,943 | | | 257,320 | | | — | | | — | |
| | — | | | 16,620 | | | 80.40 | | | 3/2/2031 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | |||||||||
Crissy B. Carlisle | | | — | | | — | | | — | | | — | | | 935 | | | 61,018 | | | 1,015 | | | 66,239 |
| | — | | | — | | | — | | | — | | | 282 | | | 18,403 | | | 2,524 | | | 164,716 | |
| | — | | | — | | | — | | | — | | | 502 | | | 32,761 | | | — | | | — | |
| | — | | | — | | | — | | | — | | | 841 | | | 54,884 | | | — | | | — | |
| | | | | | | | | | | | | | | | |||||||||
Chad K. Knight | | | — | | | — | | | — | | | — | | | 314 | | | 20,492 | | | 636 | | | 41,505 |
| | — | | | — | | | — | | | — | | | 550 | | | 35,893 | | | 1,650 | | | 107,679 | |
| | | | | | | | | | | | | | | | |||||||||
Julie D. Jolley | | | — | | | — | | | — | | | — | | | 1,012 | | | 66,043 | | | 930 | | | 60,692 |
| | | | | | | | | | 460 | | | 30,020 | | | 2,226 | | | 145,269 | |||||
| | | | | | | | | | 742 | | | 48,423 | | | | | |||||||
| | | | | | | | | | 2,724 | | | 177,768 | | | | |
(1) | All options shown above vest in three equal annual installments beginning on the first anniversary of the grant date. |
(2) | The expiration date of each option occurs 10 years after the grant date of each option. |
(3) | For Mses. Jacobsmeyer and Carlisle, the first amount shown in this column is restricted stock awards resulting from the attainment of the related PSU awards’ performance objectives during the 2019-2020 performance period, and the second, third, and fourth amounts represent the annual grants of time-based restricted stock in February 2019, 2020, and 2021, respectively, each of which vest in three equal annual installments beginning on the first anniversary of the grant date. For Mr. Knight, the amounts reflected in this column are his annual grants of time-based restricted stock in February 2020 and 2021. For Ms. Jolley, the first amount shown in this column is restricted stock awards resulting from the attainment of the related PSU awards’ performance objectives during the 2019 performance period, and the second and third amounts represent the annual grants of time-based restricted stock in February 2020 and 2021, |
(4) | The market value reported was calculated by multiplying the closing price of Encompass common stock on the last trading day of 2021, $65.26, by the number of shares set forth in the preceding column. |
(5) | The PSU awards shown in this column are contingent upon the level of attainment of performance goals for the two-year period from January 1 of the year in which the grant is made. The determination of whether and to what extent the PSU awards are achieved will be made following the close of the two-year period. The first amount for each officer in this column represents the actual number of shares earned over the 2020-2021 performance period as officially determined by Encompass’s board of directors in February 2022, which shares shall be restricted through December 31, 2022. The second amount for each officer in this column represents the number of shares to be earned assuming achievement of maximum performance during the 2021-2022 performance period on the normalized earnings per share and return on invested capital objectives. The actual number of restricted shares earned at the end of that performance period may be lower. |
(6) | The market value reported was calculated by multiplying the closing price of Encompass’s common stock on the last trading day of 2021, $65.26, by the number of shares set forth in the preceding column. |
| | Option Awards | | | Stock Awards | |||||||
Name | | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) |
Barbara A. Jacobsmeyer | | | * | | | * | | | 16,497 | | | 1,356,409 |
Crissy B. Carlisle | | | * | | | * | | | 3,021 | | | 247,798 |
Chad K. Knight | | | * | | | * | | | 158 | | | 12,721 |
Julie D. Jolley | | | * | | | * | | | 2,531 | | | 208,787 |
* | No stock option exercises in 2021. |
Name | | | Executive Contributions in Last Fiscal Year ($)(1) | | | Registrant Contribution in Last Fiscal Year ($)(2) | | | Aggregate Earnings in Last Fiscal Year ($)(3) | | | Aggregate Balance at Last Fiscal Year End ($)(4) |
Barbara A. Jacobsmeyer | | | 74,588 | | | 10,168 | | | 88,921(5) | | | 526,334 |
Crissy B. Carlisle | | | 6,452 | | | 815 | | | 10,759(6) | | | 82,620 |
Chad K. Knight | | | — | | | — | | | — | | | — |
Julie D. Jolley | | | — | | | — | | | — | | | — |
(1) | All amounts in this column are included in the 2021 amounts represented as “Salary” and “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table, except $74,588 for Ms. Jacobsmeyer. |
(2) | All amounts in this column are included in the 2021 amounts represented as “All Other Compensation” in the Summary Compensation Table, except $10,168 for Ms. Jacobsmeyer. |
(3) | No amounts in this column are included, or are required to be included, in the Summary Compensation Table. |
(4) | Other than the amounts reported in this table for 2021, the balances in this column were previously reported as “Salary,” “Non-Equity Incentive Plan Compensation” and “All Other Compensation” in our Summary Compensation Tables in previous years, except for the following amounts which represent the aggregate earnings, all of which are non-preferential and not required to be reported in the Summary Compensation Table: $166,373 for Ms. Jacobsmeyer and $34,889 for Ms. Carlisle. |
(5) | Represents earnings and (losses) from amounts invested in the following mutual funds: Vanguard Mid Cap Index Instl, Vanguard Wellington Admiral Shares, Vanguard Small Cap Index Instl, Vanguard Equity Income Adm, EuroPacific Growth R6 and Vanguard Inst Index. |
(6) | Represents earnings and (losses) from amounts invested in the following mutual funds: Vanguard Mid Cap Index Instl, Vanguard Wellington Admiral Shares, Dodge & Cox Income, Vanguard Infl Protected Secs In, Vanguard Mid Cap Growth Index Adm, EuroPacific Growth R6, Vanguard Inst Index, DFA Emerging Markets and Amcent Emerging Markets R6. |
Name/Triggering Event | | | Lump Sum Payments ($)(1) | | | Continuation of Insurance Benefits ($) | | | Accelerated Vesting of Equity Awards ($)(2) | | | Total Termination Benefits ($) |
Barbara A. Jacobsmeyer | | | | | | | | | ||||
Executive Severance Plan | | | | | | | | | ||||
Without Cause/For Good Reason | | | 1,500,000 | | | 35,965 | | | 1,473,651 | | | 3,009,616 |
Disability or Death | | | — | | | — | | | 2,479,641 | | | 2,479,641 |
Change in Control Benefits Plan | | | 4,956,936 | | | 53,948 | | | 2,480,034 | | | 7,490,918 |
Crissy B. Carlisle | | | | | | | | | ||||
Executive Severance Plan | | | | | | | | | ||||
Without Cause/For Good Reason | | | 400,000 | | | 16,141 | | | 185,277 | | | 601,418 |
Disability or Death | | | — | | | — | | | 315,663 | | | 315,663 |
Change in Control Benefits Plan | | | 1,423,622 | | | 32,282 | | | 315,663 | | | 1,771,567 |
Chad K. Knight | | | | | | | | | ||||
Executive Severance Plan | | | | | | | | | ||||
Without Cause/For Good Reason | | | — | | | — | | | 68,110 | | | 68,110 |
Disability or Death | | | — | | | — | | | 151,730 | | | 151,730 |
Change in Control Benefits Plan | | | — | | | — | | | 151,730 | | | 151,730 |
Julie D. Jolley | | | | | | | | | ||||
Executive Severance Plan | | | | | | | | | ||||
Without Cause/For Good Reason | | | — | | | — | | | 177,326 | | | 177,326 |
Disability or Death | | | — | | | — | | | 455,580 | | | 455,580 |
Change in Control Benefits Plan | | | — | | | — | | | 455,580 | | | 455,580 |
(1) | Encompass automatically reduces payments under the Change in Control Benefits Plan to the extent necessary to prevent such payments being subject to “golden parachute” excise tax under Section 280G and Section 4999 of the Internal Revenue Code, but only to the extent the after-tax benefit of the reduced payments exceeds the after-tax benefit if such reduction were not made (“best payment method”). The lump sum payments shown may be subject to reduction under this best payment method. |
(2) | The amounts reported in this column reflect outstanding equity awards, the grant date value of which along with accrued dividends and dividend equivalents has been reported as compensation in 2021 or prior years. The value of the accelerated vesting of equity awards listed in this column has been determined based on the $65.26 closing price of Encompass common stock on the last trading day of 2021. The Encompass Compensation Committee may, in its discretion, provide that upon a change in control: (x) equity awards be canceled in exchange for a payment in an amount equal to the fair market value of Encompass stock immediately prior to the change in control over the exercise or base price (if any) per share of the award, and (y) each award be canceled without payment therefore if the fair market value of Encompass stock is less than the exercise or purchase price (if any) of the award. With respect to PSUs, amounts were calculated assuming achievement of the target level of performance. |
Named Executive Officer | | | Accelerated Vesting of Equity Awards Due to Retirement (Assuming Retirement Eligible) |
Barbara A. Jacobsmeyer | | | $1,473,651 |
Crissy B. Carlisle | | | $185,277 |
Chad K. Knight | | | $68,110 |
Julie D. Jolley | | | $177,326 |
(i) | evidence of fraud or similar offenses affecting Encompass; |
(ii) | indictment for, conviction of, or plea of guilty or no contest to, any felony; |
(iii) | suspension or debarment from participation in any federal or state health care program; |
(iv) | an admission of liability, or finding, of a violation of any securities laws, excluding any that are noncriminal; |
(v) | a formal indication that the person is a target or the subject of any investigation or proceeding for a violation of any securities laws in connection with his or her employment by Encompass, excluding any that are noncriminal; and |
(vi) | breach of any material provision of any employment agreement or other duties. |
(i) | the acquisition of 30% or more of either the then-outstanding shares of common stock or the combined voting power of Encompass’s then-outstanding voting securities; or |
(ii) | the individuals who currently constitute the board of directors of Encompass, or the “Incumbent Board,” cease for any reason to constitute at least a majority of the board (any person becoming a director in the future whose election, or nomination for election, was approved by a vote of at least a majority of the directors then constituting the Incumbent Board shall be considered as though such person were a member of the Incumbent Board); or |
(iii) | a consummation of a reorganization, merger, consolidation or share exchange, where persons who were the stockholders of Encompass immediately prior to such reorganization, merger, consolidation or share exchange do not own at least 50% of the combined voting power; or |
(iv) | a liquidation or dissolution of Encompass or the sale of all or substantially all of its assets. |
(i) | an assignment of a position that is of a lesser rank and that results in a material adverse change in reporting position, duties or responsibilities or title or elected or appointed offices as in effect immediately prior to the change, or in the case of a Change in Control ceasing to be an executive officer of a company with registered securities; or |
(ii) | a material reduction in compensation from that in effect immediately prior to the Change in Control; or |
(iii) | any change in benefit level under a benefit plan if such change in status occurs during the period beginning 6 months prior to a Change in Control and ending 24 months after it; or |
(iv) | any change of more than 50 miles in the location of the principal place of employment. |
• | an individual who is a citizen or resident of the United States; |
• | a corporation (or any other entity or arrangement treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust, if (1) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust or (2) it has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
• | no gain or loss will be recognized by (and no amount will be includible in the income of) Encompass as a result of the distribution; |
• | no gain or loss will be recognized by (and no amount will be includible in the income of) U.S. holders of Encompass common stock upon the receipt of Enhabit common stock in the distribution, except with respect to any cash received in lieu of fractional shares of Enhabit common stock; |
• | the aggregate tax basis in the Encompass common stock and the Enhabit common stock received in the distribution (including any fractional share interest in Enhabit common stock for which cash is received) in the hands of each U.S. holder of Encompass common stock immediately after the distribution will equal the aggregate basis of Encompass common stock held by such U.S. holder immediately before the distribution, allocated between the Encompass common stock and the Enhabit common stock (including any fractional share interest in Enhabit common stock for which cash is received) in proportion to the relative fair market value of each on the date of the distribution; and |
• | the holding period of Enhabit common stock received by each U.S. holder of Encompass common stock in the distribution will generally include the holding period at the time of the distribution for the Encompass common stock with respect to which the distribution is made. |
Name of Beneficial Owner | | | Amount and Nature of Beneficial Ownership(1) | | | Percent of Class(2) |
BlackRock, Inc. | | | [ ](3) | | | [ ]% |
Wellington Management Group LLP | | | [ ](4) | | | [ ]% |
The Vanguard Group | | | [ ](5) | | | [ ]% |
* | Less than 1% |
(1) | According to the rules adopted by the SEC, a person is a beneficial owner of securities if the person or entity has or shares the power to vote them or to direct their investment or has the right to acquire beneficial ownership of such securities within 60 days through the exercise of an option, warrant or right, conversion of a security or otherwise. Unless otherwise indicated, each person or entity named in the table has sole voting and investment power, or shares voting and investment power, with respect to all shares of stock listed as owned by that person. |
(2) | The percentage of beneficial ownership is based upon [ ] shares of common stock outstanding as of [•], 2022. |
(3) | This holder is located at 55 East 52nd Street, New York, NY 10055. |
(4) | These holders are located at 280 Congress Street, Boston, MA 02210. |
(5) | This holder is located at 100 Vanguard Blvd., Malvern, PA 19355. |
Name of Beneficial Owner | | | Shares of Common Stock Beneficially Owned | | | Percentage of Common Stock Outstanding |
Directors and Named Executive Officers | | | | | ||
Leo I. Higdon, Jr. | | | | | % | |
Barbara A. Jacobsmeyer | | | | | % | |
Jeffrey W. Bolton | | | | | % |
Name of Beneficial Owner | | | Shares of Common Stock Beneficially Owned | | | Percentage of Common Stock Outstanding |
Crissy B. Carlisle | | | | | % | |
Yvonne M. Curl | | | | | % | |
Charles M. Elson | | | | | % | |
Erin P. Hoeflinger | | | | | % | |
Julie D. Jolley | | | | | % | |
Chad K. Knight | | | | | % | |
Tanya R. Marion | | | | | % | |
John E. Maupin, Jr. | | | | | % | |
Gregory S. Rush | | | | | % | |
L. Edward Shaw, Jr. | | | | | % | |
All directors and officers as a group ( persons) | | | | | % |
• | shares of common stock, par value $0.01 per share; and |
• | shares of preferred stock, par value $0.10 per share, in one or more series. |
• | prior to the date of the transaction, the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; |
• | upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time such transaction commenced, excluding, for purposes of determining the number of shares outstanding, (1) shares owned by persons who are directors and also officers of the corporation and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
• | on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder. |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
| | (In Millions, Except Per Share Data) | |||||||
Net service revenue | | | $1,106.6 | | | $1,078.2 | | | $1,092.0 |
Cost of service (excluding depreciation and amortization) | | | 513.9 | | | 537.5 | | | 527.4 |
Gross margin | | | 592.7 | | | 540.7 | | | 564.6 |
General and administrative expenses | | | 412.9 | | | 398.0 | | | 465.7 |
Depreciation and amortization | | | 36.9 | | | 40.0 | | | 37.7 |
Operating income | | | 142.9 | | | 102.7 | | | 61.2 |
Interest expense | | | 0.3 | | | 5.2 | | | 28.4 |
Equity in net income of nonconsolidated affiliates | | | (0.6) | | | (0.5) | | | (1.2) |
Other income | | | (4.8) | | | (2.2) | | | — |
Income before income taxes and noncontrolling interests | | | 148.0 | | | 100.2 | | | 34.0 |
Income tax expense | | | 35.1 | | | 24.4 | | | 9.2 |
Net income | | | 112.9 | | | 75.8 | | | 24.8 |
Less: Net income attributable to noncontrolling interests | | | 1.8 | | | 0.8 | | | 0.8 |
Net income attributable to Enhabit, Inc. | | | $111.1 | | | $75.0 | | | $24.0 |
| | | | | | ||||
Weighted average common shares outstanding: | | | | | | | |||
Basic | | | 3.9 | | | 3.9 | | | 3.9 |
Diluted | | | 3.9 | | | 3.9 | | | 3.9 |
| | | | | | ||||
Earnings per common share: | | | | | | | |||
Basic earnings per share attributable to Enhabit, Inc. common stockholders | | | $28.49 | | | $19.23 | | | $6.15 |
Diluted earnings per share attributable to Enhabit, Inc. common stockholders | | | $28.49 | | | $19.23 | | | $6.15 |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
| | (In Millions, Except Share Data) | ||||
Assets | | | | | ||
Current assets: | | | | | ||
Cash and cash equivalents | | | $5.4 | | | $38.5 |
Restricted cash | | | 2.6 | | | 1.5 |
Accounts receivable | | | 164.5 | | | 136.5 |
Prepaid expenses and other current assets | | | 6.3 | | | 6.1 |
Total current assets | | | 178.8 | | | 182.6 |
Property and equipment, net | | | 20.4 | | | 24.2 |
Operating lease right-of-use assets | | | 48.4 | | | 40.9 |
Goodwill | | | 1,189.0 | | | 1,088.7 |
Intangible assets, net | | | 259.1 | | | 269.4 |
Other long-term assets | | | 24.3 | | | 11.0 |
Total assets(1) | | | $1,720.0 | | | $1,616.8 |
Liabilities and Stockholders’ Equity | | | | | ||
Current liabilities: | | | | | ||
Current portion of long-term debt | | | $5.0 | | | $6.5 |
Current operating lease liabilities | | | 14.9 | | | 13.5 |
Accounts payable | | | 3.5 | | | 3.4 |
Accrued payroll | | | 66.4 | | | 58.0 |
Refunds due patients and other third-party payors | | | 9.4 | | | 11.4 |
Other current liabilities | | | 37.3 | | | 34.1 |
Total current liabilities | | | 136.5 | | | 126.9 |
Long-term debt, net of current portion | | | 3.5 | | | 3.2 |
Long-term operating lease liabilities | | | 33.5 | | | 27.3 |
Deferred income tax liabilities | | | 63.2 | | | 54.7 |
Other long-term liabilities | | | — | | | 14.9 |
| | 236.7 | | | 227.0 | |
Commitments and contingencies | | | | | ||
Redeemable noncontrolling interests | | | 5.0 | | | — |
Stockholders’ equity: | | | | | ||
Enhabit, Inc. stockholders’ equity: | | | | | ||
Common stock, $.01 par value; 4,000,000 shares authorized; issued: 3,853,248 in 2021 and 2020 | | | 0.1 | | | 0.1 |
Capital in excess of par value | | | 1,094.5 | | | 1,118.7 |
Retained earnings | | | 375.4 | | | 264.3 |
Total Enhabit, Inc. stockholders’ equity | | | 1,470.0 | | | 1,383.1 |
Noncontrolling interests | | | 8.3 | | | 6.7 |
Total stockholders’ equity | | | 1,478.3 | | | 1,389.8 |
Total liabilities(1) and stockholders’ equity | | | $1,720.0 | | | $1,616.8 |
(1) | Our consolidated assets as of December 31, 2021 and 2020 include total assets of variable interest entities of $18.2 million and $6.8 million, respectively, that cannot be used by us to settle the obligations of other entities. Our consolidated liabilities as of December 31, 2021 and 2020 include total liabilities of the variable interest entities of $0.4 million and $0.4 million, respectively. See Note 3, Variable Interest Entities |
| | Enhabit, Inc. Common Stockholders | | | | | ||||||||||||
| | Number of Common Shares Outstanding | | | Common Stock | | | Capital in Excess of Par Value | | | Retained Earnings | | | Noncontrolling Interests | | | Total | |
| | (In Millions) | ||||||||||||||||
December 31, 2018 | | | 3.9 | | | $0.1 | | | $377.6 | | | $165.3 | | | $4.5 | | | $547.5 |
Net income | | | — | | | — | | | — | | | 24.0 | | | 0.8 | | | 24.8 |
Capital contributions | | | — | | | — | | | 92.0 | | | — | | | — | | | 92.0 |
Capital distributions | | | — | | | — | | | (4.9) | | | — | | | — | | | (4.9) |
Distributions declared | | | — | | | — | | | — | | | — | | | (0.9) | | | (0.9) |
December 31, 2019 | | | 3.9 | | | 0.1 | | | 464.7 | | | 189.3 | | | 4.4 | | | 658.5 |
Net income | | | — | | | — | | | — | | | 75.0 | | | 0.8 | | | 75.8 |
Capital contributions (see Note 9) | | | — | | | — | | | 798.5 | | | — | | | — | | | 798.5 |
Capital distributions | | | — | | | — | | | (144.5) | | | — | | | — | | | (144.5) |
Distributions declared | | | — | | | — | | | — | | | — | | | (1.0) | | | (1.0) |
Consolidation of joint venture formerly accounted for under the equity method of accounting | | | — | | | — | | | — | | | — | | | 2.5 | | | 2.5 |
December 31, 2020 | | | 3.9 | | | 0.1 | | | 1,118.7 | | | 264.3 | | | 6.7 | | | 1,389.8 |
Net income | | | — | | | — | | | — | | | 111.1 | | | 1.8 | | | 112.9 |
Capital contributions | | | — | | | — | | | 130.4 | | | — | | | — | | | 130.4 |
Capital distributions | | | — | | | — | | | (154.5) | | | — | | | — | | | (154.5) |
Distributions declared | | | — | | | — | | | — | | | — | | | (1.3) | | | (1.3) |
Acquisitions | | | — | | | — | | | — | | | — | | | 1.1 | | | 1.1 |
Other | | | — | | | — | | | (0.1) | | | — | | | — | | | (0.1) |
December 31, 2021 | | | 3.9 | | | $0.1 | | | $1,094.5 | | | $375.4 | | | $8.3 | | | $1,478.3 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
| | (In Millions) | |||||||
Cash flows from operating activities: | | | | | | | |||
Net income | | | $112.9 | | | $75.8 | | | $24.8 |
Adjustments to reconcile net income to net cash provided by operating activities— | | | | | | | |||
Depreciation and amortization | | | 36.9 | | | 40.0 | | | 37.7 |
Equity in net income of nonconsolidated affiliates | | | (0.6) | | | (0.5) | | | (1.2) |
Distributions from nonconsolidated affiliates | | | 0.3 | | | 0.4 | | | 0.5 |
Stock-based compensation | | | 3.6 | | | 3.9 | | | 84.9 |
Deferred tax expense | | | 8.6 | | | 18.5 | | | 2.1 |
Other, net | | | (5.6) | | | (1.1) | | | — |
Changes in assets and liabilities, net of acquisitions — | | | | | | | |||
Accounts receivable | | | (24.8) | | | (32.9) | | | (14.5) |
Prepaid expenses and other assets | | | (0.1) | | | 8.7 | | | (9.8) |
Accounts payable | | | (0.7) | | | (0.5) | | | (1.7) |
Accrued payroll | | | (7.7) | | | 12.8 | | | 2.1 |
Other liabilities | | | 0.5 | | | (100.2) | | | (65.4) |
Net cash provided by operating activities | | | 123.3 | | | 24.9 | | | 59.5 |
Cash flows from investing activities: | | | | | | | |||
Acquisition of businesses, net of cash acquired | | | (117.5) | | | (1.1) | | | (231.5) |
Purchases of property and equipment | | | (4.3) | | | (3.2) | | | (8.6) |
Additions to capitalized software costs | | | (1.3) | | | (0.4) | | | (3.5) |
Other, net | | | 3.9 | | | 1.7 | | | (2.4) |
Net cash used in investing activities | | | (119.2) | | | (3.0) | | | (246.0) |
Cash flows from financing activities: | | | | | | | |||
Principal payments on fixed rate debt | | | — | | | (1.1) | | | (0.9) |
Borrowings on variable rate debt | | | — | | | 15.5 | | | 292.2 |
Payments on variable rate debt | | | — | | | (1.2) | | | (94.4) |
Principal payments under finance lease obligations | | | (7.2) | | | (8.1) | | | (7.9) |
Distributions paid to noncontrolling interests of consolidated affiliates | | | (1.8) | | | (1.3) | | | (1.0) |
Contributions from Encompass | | | 126.4 | | | 124.0 | | | 19.0 |
Distributions to Encompass | | | (154.1) | | | (144.5) | | | (4.9) |
Other, net | | | 0.6 | | | — | | | (3.9) |
Net cash (used in) provided by financing activities | | | (36.1) | | | (16.7) | | | 198.2 |
(Decrease) increase in cash, cash equivalents, and restricted cash | | | (32.0) | | | 5.2 | | | 11.7 |
Cash, cash equivalents, and restricted cash at beginning of year | | | 40.0 | | | 34.8 | | | 23.1 |
Cash, cash equivalents, and restricted cash at end of year | | | $8.0 | | | $40.0 | | | $34.8 |
| | | | | | ||||
Supplemental cash flow information: | | | | | | | |||
Interest paid | | | $(0.2) | | | $(5.3) | | | $(28.4) |
Income tax payments to Encompass | | | (28.4) | | | — | | | (22.0) |
| | | | | | ||||
Supplemental schedule of noncash financing activities: | | | | | | | |||
Contribution from Encompass of promissory notes and accrued interest | | | $— | | | $668.8 | | | $— |
Summary of Significant Accounting Policies: |
• | licensure, certification, enrollments, and accreditation; |
• | policies, either at the national or local level, delineating what conditions must be met to qualify for reimbursement under Medicare (also referred to as coverage requirements); |
• | coding and billing for services; |
• | relationships with physicians and other referral sources, including physician self-referral and anti-kickback laws; |
• | quality of medical care; |
• | use and maintenance of medical supplies and equipment; |
• | maintenance, security and privacy of patient information and medical records; |
• | minimum staffing; |
• | acquisition and dispensing of pharmaceuticals and controlled substances; and |
• | disposal of medical and hazardous waste. |
| | Home Health | | | Hospice | | | Consolidated | |||||||||||||||||||
| | Year Ended December 31, | | | Year Ended December 31, | | | Year Ended December 31, | |||||||||||||||||||
| | 2021 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2019 | |
Medicare | | | $701.8 | | | $697.3 | | | $749.5 | | | $204.8 | | | $198.7 | | | $170.5 | | | $906.6 | | | $896.0 | | | $920.0 |
Medicare Advantage | | | 117.4 | | | 116.2 | | | 111.9 | | | — | | | — | | | — | | | 117.4 | | | 116.2 | | | 111.9 |
Managed care | | | 62.1 | | | 45.9 | | | 37.4 | | | 3.2 | | | 1.9 | | | 1.7 | | | 65.3 | | | 47.8 | | | 39.1 |
Medicaid | | | 14.2 | | | 15.6 | | | 16.7 | | | 1.3 | | | — | | | 1.7 | | | 15.5 | | | 15.6 | | | 18.4 |
Other | | | 1.8 | | | 2.6 | | | 2.6 | | | — | | | — | | | — | | | 1.8 | | | 2.6 | | | 2.6 |
Total | | | $897.3 | | | $877.6 | | | $918.1 | | | $209.3 | | | $200.6 | | | $173.9 | | | $1,106.6 | | | $1,078.2 | | | $1,092.0 |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
Medicare | | | 83.8% | | | 81.0% |
Managed care and other discount plans, including Medicare Advantage | | | 14.0% | | | 15.5% |
Medicaid | | | 2.0% | | | 3.3% |
Other | | | 0.2% | | | 0.2% |
Total | | | 100.0% | | | 100.0% |
| | Years | |
Leasehold improvements | | | 2 to 5 |
Vehicles | | | 3 |
Furniture, fixtures, and equipment | | | 2 to 5 |
| | Estimated Useful Life and Amortization Basis | |
Certificates of need | | | 10 years using straight-line basis |
Licenses | | | 10 to 20 years using straight-line basis |
Noncompete agreements | | | 2 to 5 years using straight-line basis |
Trade names: | | | |
Encompass | | | indefinite-lived asset |
All other | | | 1 to 5 years using straight-line basis |
Internal-use software | | | 3 years using straight-line basis |
• | Level 1 – Observable inputs such as quoted prices in active markets; |
• | Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
• | Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
• | Market approach – Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities; |
• | Cost approach – Amount that would be required to replace the service capacity of an asset (i.e., replacement cost); and |
• | Income approach – Techniques to convert future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing models, and lattice models). |
2. | Business Combinations: |
Cash and cash equivalents | | | $0.8 |
Accounts receivable, net | | | 0.9 |
Prepaid expenses and other current assets | | | 0.2 |
Property and equipment | | | 0.1 |
Operating lease right-of-use-assets | | | 0.9 |
Identifiable intangible assets: | | | |
Noncompete agreement (useful life of 5 years) | | | 1.7 |
Trade name (useful life of 3 months) | | | 0.2 |
Certificates of need (useful lives of 10 years) | | | 3.1 |
Licenses (useful lives of 10 years) | | | 4.8 |
Goodwill | | | 92.4 |
Total assets acquired | | | 105.1 |
Liabilities assumed: | | | |
Current operating lease liabilities | | | 0.3 |
Accounts payable | | | 0.2 |
Accrued payroll | | | 0.8 |
Long-term operating lease liabilities | | | 0.7 |
Total liabilities assumed | | | 2.0 |
Redeemable and nonredeemable noncontrolling interests | | | 3.9 |
Net assets acquired | | | $99.2 |
Fair value of assets acquired, net of $0.8 million of cash acquired | | | $11.9 |
Goodwill | | | 92.4 |
Fair value of liabilities assumed | | | (2.0) |
Fair value of redeemable and nonredeemable noncontrolling interest owned by joint venture partner | | | (3.9) |
Net cash paid for acquisitions | | | $98.4 |
Cash and cash equivalents | | | $0.8 |
Accounts receivable, net | | | 2.0 |
Identifiable intangible assets: | | | |
Noncompete agreement (useful life of 2 years) | | | 0.1 |
Licenses (useful lives of 10 years) | | | 1.7 |
Goodwill | | | 8.0 |
Total assets acquired | | | 12.6 |
Liabilities assumed: | | | |
Accounts payable | | | 0.2 |
Accrued payroll | | | 0.3 |
Other current liabilities | | | 0.4 |
Other long-term liabilities | | | 0.1 |
Total liabilities assumed | | | 1.0 |
Redeemable noncontrolling interests | | | 2.3 |
Net assets acquired | | | $9.3 |
Fair value of assets acquired, net of $0.8 million of cash acquired | | | $3.8 |
Goodwill | | | 8.0 |
Fair value of liabilities assumed | | | (1.0) |
Fair value of redeemable noncontrolling interest owned by joint venture partner | | | (2.3) |
Fair value of equity interest prior to acquisition | | | (5.3) |
Net cash paid for acquisition | | | $3.2 |
| | Net Service Revenue | | | Net Income (Loss) Attributable to the Company | |
Acquired entities only: Actual from acquisition date to December 31, 2021 | | | | | ||
Frontier | | | $19.7 | | | $0.7 |
All other home health and hospice | | | 0.9 | | | (0.1) |
Combined entity: Supplemental pro forma from 01/01/2021-12/31/2021 (unaudited) | | | 1,131.0 | | | 111.6 |
Combined entity: Supplemental pro forma from 01/01/2020-12/31/2020 (unaudited) | | | 1,124.0 | | | 76.8 |
Identifiable intangible assets: | | | |
Licenses (useful lives of 10 years) | | | $0.2 |
Goodwill | | | 0.9 |
Total assets acquired | | | $1.1 |
Fair value of assets acquired | | | $0.2 |
Goodwill | | | 0.9 |
Net cash paid for acquisitions | | | $1.1 |
| | Net Service Revenue | | | Net Income Attributable to the Company | |
Acquired entities only: Actual from acquisition date to December 31, 2020 | | | $1.5 | | | $— |
Combined entity: Supplemental pro forma from 01/01/2020-12/31/2020 (unaudited) | | | 1,078.5 | | | 75.0 |
Combined entity: Supplemental pro forma from 01/01/2019-12/31/2019 (unaudited) | | | 1,094.0 | | | 24.0 |
Fair value of assets acquired | | | $68.6 |
Goodwill | | | 163.9 |
Fair value of liabilities assumed | | | (14.7) |
Net cash paid for acquisition | | | $217.8 |
• | In February 2019, we acquired the assets of Tidewater Home Health, PA in Columbia, South Carolina. |
• | In March 2019, we acquired the assets and assumed the liabilities of two home health locations from Care Resource Group in East Providence, Rhode Island and Westport, Massachusetts. |
Fair value of assets acquired | | | $3.2 |
Goodwill | | | 10.8 |
Fair value of liabilities assumed | | | (0.3) |
Net cash paid for acquisitions | | | $13.7 |
| | Net Service Revenue | | | Net Income (Loss) Attributable to the Company | |
Acquired entities only: Actual from acquisition date to December 31, 2019 | | | | | ||
Alacare | | | $58.5 | | | $1.6 |
All other home health | | | 6.5 | | | (1.5) |
Combined entity: Supplemental pro forma from 01/01/2019-12/31/2019 (unaudited) | | | 1,156.1 | | | 29.4 |
3. | Variable Interest Entities: |
| | December 31, 2021 | | | December 31, 2020 | |
Assets | | | | | ||
Current assets: | | | | | ||
Restricted cash | | | $1.7 | | | $1.5 |
Accounts receivable | | | 2.8 | | | 1.1 |
Total current assets | | | 4.5 | | | 2.6 |
Operating lease right-of-use assets | | | 0.1 | | | 0.1 |
Goodwill | | | 12.3 | | | 3.3 |
Intangible assets, net | | | 1.3 | | | 0.8 |
Total assets | | | $18.2 | | | $6.8 |
| | December 31, 2021 | | | December 31, 2020 | |
Liabilities | | | | | ||
Current liabilities: | | | | | ||
Current operating lease liabilities | | | $0.1 | | | $0.1 |
Accrued payroll | | | 0.3 | | | 0.2 |
Total current liabilities | | | 0.4 | | | 0.3 |
Other long-term liabilities | | | — | | | 0.1 |
Total liabilities | | | $0.4 | | | $0.4 |
4. | Accounts Receivable: |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
Current patient accounts receivable | | | $164.5 | | | $136.5 |
Noncurrent patient accounts receivable | | | 6.1 | | | 6.4 |
Accounts receivable | | | $170.6 | | | $142.9 |
5. | Property and Equipment: |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
Leasehold improvements | | | $3.0 | | | $2.4 |
Vehicles | | | 31.1 | | | 30.3 |
Furniture, fixtures, and equipment | | | 35.1 | | | 31.4 |
| | 69.2 | | | 64.1 | |
Less: Accumulated depreciation and amortization | | | (48.8) | | | (39.9) |
Property and equipment, net | | | $20.4 | | | $24.2 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Depreciation expense | | | $5.8 | | | $5.9 | | | $6.0 |
6. | Leases: |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Operating lease cost | | | $19.2 | | | $18.3 | | | $16.1 |
Finance lease cost: | | | | | | | |||
Amortization of right-of-use assets | | | 6.0 | | | 7.1 | | | 6.7 |
Interest on lease liabilities | | | 0.2 | | | 0.4 | | | 0.5 |
Total finance lease cost | | | 6.2 | | | 7.5 | | | 7.2 |
Total lease cost | | | $25.4 | | | $25.8 | | | $23.3 |
| | | | As of December 31, | |||||
| | Classification | | | 2021 | | | 2020 | |
Assets | | | | | | | |||
Operating lease | | | Operating lease right-of-use assets | | | $48.4 | | | $40.9 |
Finance lease(1) | | | Property and equipment, net | | | 10.3 | | | 12.6 |
Total leased assets | | | | | $58.7 | | | $53.5 | |
| | | | | | ||||
Liabilities | | | | | | | |||
Current liabilities: | | | | | | | |||
Operating lease | | | Current operating lease liabilities | | | $14.9 | | | $13.5 |
Finance lease | | | Current portion of long-term debt | | | 4.0 | | | 6.5 |
Noncurrent liabilities: | | | | | | | |||
Operating lease | | | Long-term operating lease liabilities | | | 33.5 | | | 27.3 |
Finance lease | | | Long-term debt, net of current portion | | | 2.5 | | | 3.2 |
Total leased liabilities | | | | | $54.9 | | | $50.5 |
(1) | Finance lease assets are recorded net of accumulated amortization of $20.8 million and $17.7 million as of December 31, 2021 and 2020, respectively. |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
Weighted Average Remaining Lease Term | | | | | ||
Operating lease | | | 3.7 years | | | 3.4 years |
Finance lease | | | 1.7 years | | | 1.7 years |
Weighted Average Discount Rate | | | | | ||
Operating lease | | | 3.9% | | | 4.3% |
Finance lease | | | 2.2% | | | 3.2% |
Year Ending December 31, | | | Operating Leases | | | Finance Leases |
2022 | | | $16.5 | | | $4.1 |
2023 | | | 14.5 | | | 2.0 |
2024 | | | 9.5 | | | 0.5 |
2025 | | | 5.5 | | | — |
2026 | | | 3.3 | | | — |
2027 and thereafter | | | 2.9 | | | — |
Total lease payments | | | 52.2 | | | 6.6 |
Less: Interest portion | | | (3.8) | | | (0.1) |
Total lease liabilities | | | $48.4 | | | $6.5 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | |||
Operating cash flows from operating leases | | | $16.5 | | | $16.4 | | | $14.6 |
Operating cash flows from finance leases | | | 0.2 | | | 0.4 | | | 0.5 |
Financing cash flows from finance leases | | | 7.2 | | | 8.1 | | | 7.9 |
| | | | | | ||||
Right-of-use assets obtained in exchange for lease obligations: | | | | | | | |||
Operating leases | | | $24.2 | | | $12.8 | | | $16.7 |
Finance leases | | | 4.1 | | | 5.4 | | | 8.6 |
7. | Goodwill and Other Intangible Assets: |
| | Home Health | | | Hospice | | | Consolidated | |
Goodwill as of December 31, 2019 | | | $845.5 | | | $239.0 | | | $1,084.5 |
Acquisitions | | | 0.9 | | | — | | | 0.9 |
Consolidation of joint venture formerly accounted for under the equity method of accounting | | | 3.3 | | | — | | | 3.3 |
Goodwill as of December 31, 2020 | | | $849.7 | | | $239.0 | | | $1,088.7 |
Acquisitions | | | 54.0 | | | 38.3 | | | 92.3 |
Consolidation of joint venture formerly accounted for under the equity method of accounting | | | 8.0 | | | — | | | 8.0 |
Goodwill as of December 31, 2021 | | | $911.7 | | | $277.3 | | | $1,189.0 |
| | Gross Carrying Amount | | | Accumulated Amortization | | | Net | |
Certificates of need: | | | | | | | |||
2021 | | | $89.2 | | | $(32.8) | | | $56.4 |
2020 | | | 86.1 | | | (24.3) | | | 61.8 |
Licenses: | | | | | | | |||
2021 | | | $128.8 | | | $(67.8) | | | $61.0 |
2020 | | | 122.3 | | | (55.3) | | | 67.0 |
Noncompete agreements: | | | | | | | |||
2021 | | | $13.2 | | | $(10.7) | | | $2.5 |
2020 | | | 11.5 | | | (9.7) | | | 1.8 |
Trade name - Encompass: | | | | | | | |||
2021 | | | $135.2 | | | $— | | | $135.2 |
2020 | | | 135.2 | | | — | | | 135.2 |
Trade names - all other: | | | | | | | |||
2021 | | | $7.5 | | | $(7.5) | | | $— |
2020 | | | 7.3 | | | (7.3) | | | — |
Internal-use software: | | | | | | | |||
2021 | | | $26.2 | | | $(22.2) | | | $4.0 |
2020 | | | 22.8 | | | (19.2) | | | 3.6 |
Total intangible assets: | | | | | | | |||
2021 | | | $400.1 | | | $(141.0) | | | $259.1 |
2020 | | | 385.2 | | | (115.8) | | | 269.4 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Amortization expense | | | $25.1 | | | $27.0 | | | $25.0 |
Year Ending December 31, | | | Estimated Amortization Expense |
| | ||
2022 | | | $25.7 |
2023 | | | 23.2 |
2024 | | | 22.0 |
2025 | | | 14.6 |
2026 | | | 11.5 |
8. | Investments in and Advances to Nonconsolidated Affiliates: |
9. | Long-term Debt: |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
Variable Rate Promissory Note | | | $— | | | $— |
Fixed Rate Promissory Note due 2024 | | | — | | | — |
Fixed Rate Promissory Note due 2030 | | | — | | | — |
Other notes payable | | | 2.0 | | | — |
Finance lease obligations | | | 6.5 | | | 9.7 |
| | 8.5 | | | 9.7 | |
Less: Current portion | | | (5.0) | | | (6.5) |
Long-term debt, net of current portion | | | $3.5 | | | $3.2 |
Year Ending December 31, | | | Face Amount | | | Net Amount |
2022 | | | $5.0 | | | $5.0 |
2023 | | | 3.0 | | | 3.0 |
2024 | | | 0.5 | | | 0.5 |
Total | | | $8.5 | | | $8.5 |
10. | Stock-Based Payments: |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Expected volatility | | | 28.4% | | | 24.8% | | | 25.3% |
Risk-free interest rate | | | 1.1% | | | 1.0% | | | 2.7% |
Expected life (years) | | | 7.1 | | | 7.1 | | | 7.1 |
Dividend yield | | | 1.9% | | | 2.0% | | | 2.1% |
| | Shares (In Thousands) | | | Weighted- Average Exercise Price per Share | | | Weighted- Average Remaining Life (Years) | | | Aggregate Intrinsic Value (In Millions) | |
Outstanding, December 31, 2020 | | | 16 | | | $71.41 | | | | | ||
Granted | | | 9 | | | 80.40 | | | | | ||
Transferred | | | 68 | | | 66.82 | | | | | ||
Exercised | | | (7) | | | 69.23 | | | | | ||
Forfeitures | | | (18) | | | 77.01 | | | | | ||
Expirations | | | — | | | — | | | | | ||
Outstanding, December 31, 2021 | | | 68 | | | $66.82 | | | 7.5 | | | $0.3 |
Exercisable, December 31, 2021 | | | 35 | | | 57.63 | | | 6.5 | | | $0.3 |
| | As of December 31, 2019 | |
Expected volatility | | | 38.6% |
Risk-free interest rate | | | 1.5% |
Expected life (years) | | | 0.3 |
Dividend yield | | | —% |
| | Shares | | | Weighted- Average Grant Date Fair Value | |
Nonvested shares at December 31, 2020 | | | 129 | | | $66.15 |
Granted | | | 57 | | | 77.04 |
Transferred | | | 18 | | | 72.95 |
Vested | | | (70) | | | 63.64 |
Forfeited | | | (57) | | | 70.87 |
Nonvested shares at December 31, 2021 | | | 77 | | | 74.62 |
11. | Employee Benefit Plans: |
12. | Income Taxes: |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Current: | | | | | | | |||
Federal | | | $22.2 | | | $3.1 | | | $4.7 |
State and other | | | 4.3 | | | 2.8 | | | 2.4 |
Total current expense | | | 26.5 | | | 5.9 | | | 7.1 |
Deferred: | | | | | | | |||
Federal | | | 7.9 | | | 17.1 | | | 1.3 |
State and other | | | 0.7 | | | 1.4 | | | 0.8 |
Total deferred expense | | | 8.6 | | | 18.5 | | | 2.1 |
Total income tax expense related to continuing operations | | | $35.1 | | | $24.4 | | | $9.2 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Tax expense at statutory rate | | | 21.0% | | | 21.0% | | | 21.0% |
Increase (decrease) in tax rate resulting from: | | | | | | | |||
State and other income taxes, net of federal tax benefit | | | 3.3% | | | 3.6% | | | 5.4% |
Nondeductible expenses | | | 0.3% | | | 0.5% | | | 1.8% |
Stock-based windfall tax benefits | | | (0.2)% | | | (0.3)% | | | (1.4)% |
Prior period adjustments | | | (0.2)% | | | (0.2)% | | | 1.7% |
Tax credits | | | (0.1)% | | | (0.1)% | | | (0.8)% |
Other, net | | | (0.4)% | | | (0.2)% | | | (0.6)% |
Income tax expense | | | 23.7% | | | 24.3% | | | 27.1% |
| | As of December 31, | ||||
| | 2021 | | | 2020 | |
Deferred income tax assets: | | | | | ||
Insurance reserve | | | $0.2 | | | $0.2 |
Stock-based compensation | | | 0.9 | | | 1.0 |
Revenue reserves | | | 0.3 | | | 0.3 |
Operating lease liabilities | | | 11.7 | | | 10.0 |
Carrying value of partnerships | | | — | | | 0.5 |
Other accruals | | | 12.2 | | | 15.8 |
Total deferred income tax assets | | | 25.3 | | | 27.8 |
Deferred income tax liabilities: | | | | | ||
Property, net | | | (3.4) | | | (3.9) |
Intangibles | | | (72.6) | | | (68.6) |
Operating lease right-of-use assets | | | (11.7) | | | (10.0) |
Carrying value of partnerships | | | (0.8) | | | — |
Total deferred income tax liabilities | | | (88.5) | | | (82.5) |
Net deferred income tax liabilities | | | $(63.2) | | | $(54.7) |
13. | Contingencies and Other Commitments: |
14. | Segment Reporting: |
• | Home Health - Our home health operations represent the nation’s fourth largest provider of Medicare-certified skilled home health services in terms of Medicare revenues. We operate home health agencies in 34 states, with a concentration in the southern half of the United States. As of December 31, 2021, the Company operates 251 home health agencies. We are the sole owner of 242 of these locations. We retain 50.0% to 81.0% ownership in the remaining nine jointly owned locations. Our home health services include a comprehensive range of Medicare-certified home nursing services to adult patients in need of care. These services include, among others, skilled nursing, physical, occupational, and speech therapy, medical social work, and home health aide services. |
• | Hospice - Our hospice operations represent the nation’s twelfth largest provider of Medicare-certified hospice services in terms of Medicare revenues. We operate hospice agencies in 22 states, with a concentration in the southern half of the United States. As of December 31, 2021, the Company operates 96 hospice agencies. We are the sole owner of 94 of these locations. We retain 50.0% to 90.0% ownership in the remaining two jointly owned locations. Hospice care focuses on the quality of life for patients who are experiencing an advanced, life limiting illness while treating the person and symptoms of the disease, rather than the disease itself. |
| | Home Health | | | Hospice | |||||||||||||
| | For the Year Ended December 31, | | | For the Year Ended December 31, | |||||||||||||
| | 2021 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | | 2019 | |
Net service revenue | | | $897.3 | | | $877.6 | | | $918.1 | | | $209.3 | | | $200.6 | | | $173.9 |
Cost of service (excluding depreciation and amortization) | | | 423.5 | | | 443.8 | | | 445.6 | | | 90.4 | | | 93.7 | | | 81.8 |
Gross margin | | | 473.8 | | | 433.8 | | | 472.5 | | | 118.9 | | | 106.9 | | | 92.1 |
General and administrative expenses | | | 244.2 | | | 248.7 | | | 244.7 | | | 62.6 | | | 60.4 | | | 42.8 |
Other income | | | (1.6) | | | — | | | — | | | — | | | — | | | — |
Equity in net income of nonconsolidated affiliates | | | (0.6) | | | (0.5) | | | (1.2) | | | — | | | — | | | — |
Noncontrolling interests | | | 1.7 | | | 1.0 | | | 0.8 | | | 0.1 | | | (0.2) | | | — |
Segment Adjusted EBITDA | | | $230.1 | | | $184.6 | | | $228.2 | | | $56.2 | | | $46.7 | | | $49.3 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Total Segment Adjusted EBITDA | | | $286.3 | | | $231.3 | | | $277.5 |
Non-segment general and administrative expenses | | | (102.5) | | | (85.0) | | | (93.3) |
Depreciation and amortization | | | (36.9) | | | (40.0) | | | (37.7) |
Interest expense | | | (0.3) | | | (5.2) | | | (28.4) |
Net income attributable to noncontrolling interests | | | 1.8 | | | 0.8 | | | 0.8 |
Stock-based compensation expense | | | (3.6) | | | (3.9) | | | (84.9) |
Other income | | | 3.2 | | | 2.2 | | | — |
Income before income taxes and noncontrolling interests | | | $148.0 | | | $100.2 | | | $34.0 |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Home health: | | | | | | | |||
Episodic | | | $781.5 | | | $780.0 | | | $818.9 |
Non-episodic | | | 102.0 | | | 82.3 | | | 83.4 |
Other | | | 13.8 | | | 15.3 | | | 15.8 |
Total home health | | | 897.3 | | | 877.6 | | | 918.1 |
Hospice | | | 209.3 | | | 200.6 | | | 173.9 |
Total net service revenue | | | $1,106.6 | | | $1,078.2 | | | $1,092.0 |
15. | Related Party Transactions: |
| | For the Year Ended December 31, | |||||||
| | 2021 | | | 2020 | | | 2019 | |
Overhead allocation | | | $16.7 | | | $14.8 | | | $17.2 |
Stock-based compensation | | | 3.6 | | | 3.9 | | | 84.9 |
16. | Subsequent Events: |
| | Three Months Ended March 31, | | ||||||
| | 2022 | | | 2021 | | |||
| | (In Millions, Except Per Share Data) | |||||||
Net service revenue | | | $274.3 | | | $270.5 | | ||
Cost of service (excluding depreciation and amortization) | | | 129.7 | | | 124.6 | | ||
Gross margin | | | 144.6 | | | 145.9 | | ||
General and administrative expenses | | | 100.7 | | | 99.9 | | ||
Depreciation and amortization | | | 8.5 | | | 9.1 | | ||
Operating income | | | 35.4 | | | 36.9 | | ||
Interest expense | | | — | | | 0.1 | | ||
Equity in net income of nonconsolidated affiliates | | | — | | | (0.2) | | ||
Income before income taxes and noncontrolling interests | | | 35.4 | | | 37.0 | | ||
Income tax expense | | | 8.7 | | | 8.7 | | ||
Net income | | | 26.7 | | | 28.3 | | ||
Less: Net income attributable to noncontrolling interests | | | 0.6 | | | 0.4 | | ||
Net income attributable to Enhabit, Inc. | | | $26.1 | | | $27.9 | | ||
| | | | | |||||
Weighted average common shares outstanding: | | | | | | ||||
Basic | | | 3.9 | | | 3.9 | | ||
Diluted | | | 3.9 | | | 3.9 | | ||
| | | | | |||||
Earnings per common share: | | | | | | ||||
Basic earnings per share attributable to Enhabit, Inc. common stockholders | | | $6.69 | | | $7.15 | | ||
Diluted earnings per share attributable to Enhabit, Inc. common stockholders | | | $6.69 | | | $7.15 | |
| | March 31, 2022 | | | December 31, 2021 | |
| | (In Millions) | ||||
Assets | | | | | ||
Current assets: | | | | | ||
Cash and cash equivalents | | | $17.5 | | | $5.4 |
Restricted cash | | | 3.7 | | | 2.6 |
Accounts receivable | | | 168.1 | | | 164.5 |
Prepaid expenses and other current assets | | | 8.1 | | | 6.3 |
Total current assets | | | 197.4 | | | 178.8 |
Property and equipment, net | | | 20.7 | | | 20.4 |
Operating lease right-of-use assets | | | 46.9 | | | 48.4 |
Goodwill | | | 1,217.7 | | | 1,189.0 |
Intangible assets, net | | | 254.1 | | | 259.1 |
Other long-term assets | | | 6.4 | | | 24.3 |
Total assets(1) | | | $1,743.2 | | | $1,720.0 |
Liabilities and Stockholders’ Equity | | | | | ||
Current liabilities: | | | | | ||
Current portion of long-term debt | | | $4.4 | | | $5.0 |
Current operating lease liabilities | | | 14.9 | | | 14.9 |
Accounts payable | | | 3.0 | | | 3.5 |
Accrued payroll | | | 65.0 | | | 66.4 |
Refunds due patients and other third-party payors | | | 9.3 | | | 9.4 |
Income tax payable | | | 13.9 | | | 4.2 |
Accrued medical insurance | | | 9.2 | | | 8.3 |
Other current liabilities | | | 23.6 | | | 24.8 |
Total current liabilities | | | 143.3 | | | 136.5 |
Long-term debt, net of current portion | | | 2.9 | | | 3.5 |
Long-term operating lease liabilities | | | 32.1 | | | 33.5 |
Deferred income tax liabilities | | | 63.9 | | | 63.2 |
| | 242.2 | | | 236.7 | |
Commitments and contingencies | | | | | ||
Redeemable noncontrolling interests | | | 5.1 | | | 5.0 |
Stockholders’ equity: | | | | | ||
Enhabit, Inc. stockholders’ equity: | | | | | ||
Total Enhabit, Inc. stockholders’ equity | | | 1,468.0 | | | 1,470.0 |
Noncontrolling interests | | | 27.9 | | | 8.3 |
Total stockholders’ equity | | | 1,495.9 | | | 1,478.3 |
Total liabilities(1) and stockholders’ equity | | | $1,743.2 | | | $1,720.0 |
(1) | Our consolidated assets as of March 31, 2022 and December 31, 2021 include total assets of variable interest entities of $19.6 million and $18.2 million, respectively, that cannot be used by us to settle the obligations of other entities. Our consolidated liabilities as of March 31, 2022 and December 31, 2021 include total liabilities of the variable interest entities of $0.6 million and $0.4 million, respectively. See Note 3, Variable Interest Entities. |
| | Three Months Ended March 31, 2022 | ||||||||||||||||
| | Enhabit, Inc. Common Stockholders | | | | | ||||||||||||
| | Number of Common Shares Outstanding | | | Common Stock | | | Capital in Excess of Par Value | | | Retained Earnings | | | Noncontrolling Interests | | | Total | |
| | (In Millions) | ||||||||||||||||
Balance at beginning of period | | | 3.9 | | | $0.1 | | | $1,094.5 | | | $375.4 | | | $8.3 | | | $1,478.3 |
Net income | | | — | | | — | | | — | | | 26.1 | | | 0.6 | | | 26.7 |
Capital contributions | | | — | | | — | | | 24.8 | | | — | | | — | | | 24.8 |
Capital distributions | | | — | | | — | | | (55.8) | | | — | | | — | | | (55.8) |
Distributions declared | | | — | | | — | | | — | | | — | | | (0.4) | | | (0.4) |
Saint Alphonsus acquisition | | | — | | | — | | | — | | | — | | | 15.9 | | | 15.9 |
Contributions from noncontrolling interests of consolidated affiliates | | | — | | | — | | | 2.9 | | | — | | | 3.5 | | | 6.4 |
Balance at end of period | | | $3.9 | | | $0.1 | | | $1,066.4 | | | $401.5 | | | $27.9 | | | $1,495.9 |
| | Three Months Ended March 31, 2021 | ||||||||||||||||
| | Enhabit, Inc. Common Stockholders | | | | | ||||||||||||
| | Number of Common Shares Outstanding | | | Common Stock | | | Capital in Excess of Par Value | | | Retained Earnings | | | Noncontrolling Interests | | | Total | |
| | (In Millions) | ||||||||||||||||
Balance at beginning of period | | | 3.9 | | | 0.1 | | | 1,118.7 | | | 264.3 | | | 6.7 | | | 1,389.8 |
Net income | | | — | | | — | | | — | | | 27.9 | | | 0.4 | | | 28.3 |
Capital contributions | | | — | | | — | | | 5.1 | | | — | | | — | | | 5.1 |
Capital distributions | | | — | | | — | | | (22.4) | | | — | | | — | | | (22.4) |
Distributions declared | | | — | | | — | | | — | | | — | | | (0.6) | | | (0.6) |
Balance at end of period | | | 3.9 | | | $0.1 | | | $1,101.4 | | | $292.2 | | | $6.5 | | | $1,400.2 |
| | Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
| | (In Millions) | ||||
Cash flows from operating activities: | | | | | ||
Net income | | | $26.7 | | | $28.3 |
Adjustments to reconcile net income to net cash provided by operating activities— | | | | | ||
Depreciation and amortization | | | 8.5 | | | 9.1 |
Equity in net income of nonconsolidated affiliates | | | — | | | (0.2) |
Distributions from nonconsolidated affiliates | | | — | | | 0.1 |
Stock-based compensation | | | 1.3 | | | 0.6 |
Deferred tax (benefit) expense | | | (0.2) | | | 0.6 |
Other, net | | | (0.2) | | | (0.1) |
Changes in assets and liabilities, net of acquisitions — | | | | | ||
Accounts receivable | | | (0.1) | | | (34.6) |
Prepaid expenses and other assets | | | (1.6) | | | (0.2) |
Accounts payable | | | (0.6) | | | 3.3 |
Accrued payroll | | | (1.6) | | | 5.0 |
Other liabilities | | | 9.2 | | | 8.5 |
Net cash provided by operating activities | | | 41.4 | | | 20.4 |
Cash flows from investing activities: | | | | | ||
Purchases of property and equipment | | | (2.3) | | | (0.9) |
Other, net | | | 0.9 | | | 0.2 |
Net cash used in investing activities | | | (1.4) | | | (0.7) |
Cash flows from financing activities: | | | | | ||
Principal payments under finance lease obligations | | | (1.4) | | | (1.8) |
Distributions paid to noncontrolling interests of consolidated affiliates | | | (0.5) | | | (0.3) |
Contributions from Encompass | | | 23.5 | | | 4.5 |
Distributions to Encompass | | | (55.8) | | | (22.4) |
Contributions from noncontrolling interests of consolidated affiliates | | | 7.4 | | | — |
Net cash used in financing activities | | | (26.8) | | | (20.0) |
Increase (decrease) in cash, cash equivalents, and restricted cash | | | (13.2) | | | (0.3) |
Cash, cash equivalents, and restricted cash at beginning of year | | | 8.0 | | | 40.0 |
Cash, cash equivalents, and restricted cash at end of period | | | $21.2 | | | $39.7 |
Summary of Significant Accounting Policies: |
| | Home Health | | | Hospice | | | Consolidated | ||||||||||
| | Three Months Ended March 31, | | | Three Months Ended March 31, | | | Three Months Ended March 31, | ||||||||||
| | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Medicare | | | $169.5 | | | $174.1 | | | $47.9 | | | $49.8 | | | $217.4 | | | $223.9 |
Medicare Advantage | | | 34.5 | | | 28.0 | | | — | | | — | | | 34.5 | | | 28.0 |
Managed care | | | 17.7 | | | 13.8 | | | 1.1 | | | 0.5 | | | 18.8 | | | 14.3 |
Medicaid | | | 3.1 | | | 3.5 | | | 0.4 | | | 0.3 | | | 3.5 | | | 3.8 |
Other | | | 0.1 | | | 0.5 | | | — | | | — | | | 0.1 | | | 0.5 |
Total | | | $224.9 | | | $219.9 | | | $49.4 | | | $50.6 | | | $274.3 | | | $270.5 |
2. | Business Combinations: |
Cash and cash equivalents | | | $0.7 |
Accounts receivable, net | | | 1.6 |
Operating lease right-of-use-assets | | | 0.3 |
Identifiable intangible assets: | | ||
Noncompete agreement (useful life of 5 years) | | | 0.2 |
Trade name (useful life of 6 months) | | | 0.1 |
Licenses (useful lives of 10 years) | | | 0.9 |
Internal-use software (useful life of 3 years) | | | 0.1 |
Goodwill | | | 28.7 |
Total assets acquired | | | 32.6 |
Liabilities assumed: | | | |
Current operating lease liabilities | | | 0.1 |
Accounts payable | | | 0.1 |
Accrued payroll | | | 0.2 |
Other current liabilities | | | 0.2 |
Long-term operating lease liabilities | | | 0.2 |
Total liabilities assumed | | | 0.8 |
Noncontrolling interests | | | 15.9 |
Net assets acquired | | | $15.9 |
| | Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Fair value of assets acquired | | | $3.9 | | | $— |
Goodwill | | | 28.7 | | | — |
Fair value of liabilities assumed | | | (0.8) | | | — |
Fair value of noncontrolling interest owned by joint venture partner | | | (15.9) | | | — |
Cash paid for acquisition(1) | | | $15.9 | | | $— |
(1) | As discussed above, the $15.9 million was paid on December 31, 2021; therefore, this amount is not included in the condensed consolidated statement of cash flows for the three months ended March 31, 2022. |
| | Net Service Revenues | | | Net Income Attributable to the Company | |
Acquired entities only: Actual from acquisition date to March 31, 2022 | | | $1.8 | | | $0.2 |
Combined entity: Supplemental pro forma from 01/01/2022-3/31/2022 (unaudited) | | | 274.3 | | | 26.1 |
Combined entity: Supplemental pro forma from 01/01/2021-3/31/2021 (unaudited) | | | 272.8 | | | 28.1 |
3. | Variable Interest Entities: |
| | March 31, 2022 | | | December 31, 2021 | |
Assets | | | | | ||
Current assets: | | | | | ||
Restricted cash | | | $3.0 | | | $1.7 |
Accounts receivable | | | 2.7 | | | 2.8 |
Total current assets | | | 5.7 | | | 4.5 |
Operating lease right-of-use assets | | | 0.2 | | | 0.1 |
Goodwill | | | 12.4 | | | 12.3 |
| | March 31, 2022 | | | December 31, 2021 | |
Intangible assets, net | | | 1.3 | | | 1.3 |
Total assets | | | $19.6 | | | $18.2 |
Liabilities | | | | | ||
Current liabilities: | | | | | ||
Current operating lease liabilities | | | $0.1 | | | $0.1 |
Accrued payroll | | | 0.3 | | | 0.3 |
Total current liabilities | | | 0.4 | | | 0.4 |
Other long-term liabilities | | | 0.2 | | | — |
Total liabilities | | | $0.6 | | | $0.4 |
4. | Stock-Based Payments: |
5. | Income Taxes: |
6. | Contingencies: |
7. | Segment Reporting: |
• | Home Health - Our home health operations represent the nation’s fourth largest provider of Medicare-certified skilled home health services in terms of Medicare revenues. We operate home health agencies in 34 states, with a concentration in the southern half of the United States. As of March 31, 2022, the Company operates 252 home health agencies. We are the sole owner of 240 of these locations. We retain 50.0% to 81.0% ownership in the remaining 12 jointly owned locations. Our home health services include a comprehensive range of Medicare-certified home nursing services to adult patients in need of care. These services include, among others, skilled nursing, physical, occupational, and speech therapy, medical social work, and home health aide services. |
• | Hospice - Our hospice operations represent the nation’s twelfth largest provider of Medicare-certified hospice services in terms of Medicare revenues. We operate hospice agencies in 22 states, with a concentration in the southern half of the United States. As of March 31, 2022, the Company operates 99 hospice agencies. We are the sole owner of 95 of these locations. We retain 50.0% to 90.0% ownership in the remaining four jointly owned locations. Our hospice services include in-home services to terminally ill patients and their families to address patients’ physical needs, including pain control and symptom management, and to provide emotional and spiritual support. |
| | Home Health | | | Hospice | |||||||
| | Three Months Ended March 31, | | | Three Months Ended March 31, | |||||||
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Net service revenue | | | $224.9 | | | $219.9 | | | $49.4 | | | $50.6 |
Cost of service (excluding depreciation and amortization) | | | 108.0 | | | 103.0 | | | 21.7 | | | 21.6 |
Gross margin | | | 116.9 | | | 116.9 | | | 27.7 | | | 29.0 |
General and administrative expenses | | | 58.7 | | | 60.7 | | | 14.9 | | | 15.5 |
Equity in net income of nonconsolidated affiliates | | | — | | | (0.2) | | | — | | | — |
Noncontrolling interests | | | 0.5 | | | 0.4 | | | 0.1 | | | — |
Segment Adjusted EBITDA | | | $57.7 | | | $56.0 | | | $12.7 | | | $13.5 |
| | Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Total Segment Adjusted EBITDA | | | $70.4 | | | $69.5 |
Non-segment general and administrative expenses | | | (25.8) | | | (23.1) |
Depreciation and amortization | | | (8.5) | | | (9.1) |
Interest expense | | | — | | | (0.1) |
Net income attributable to noncontrolling interests | | | 0.6 | | | 0.4 |
Stock-based compensation expense | | | (1.3) | | | (0.6) |
Income before income taxes and noncontrolling interests | | | $35.4 | | | $37.0 |
| | Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Home health: | | | | | ||
Episodic | | | $191.7 | | | $194.2 |
Non-episodic | | | 30.4 | | | 22.2 |
Other | | | 2.8 | | | 3.5 |
Total home health | | | 224.9 | | | 219.9 |
Hospice | | | 49.4 | | | 50.6 |
Total net service revenue | | | $274.3 | | | $270.5 |
8. | Related Party Transactions: |
| | Three Months Ended March 31, | ||||
| | 2022 | | | 2021 | |
Overhead allocation | | | $3.5 | | | $3.6 |
Stock-based compensation | | | 1.3 | | | 0.6 |
9. | Subsequent Events: |