Item 7.01. Regulation FD Disclosure.

Encompass Health Corporation ("Encompass Health" or the "Company") will
participate in Baird's 2020 Global Healthcare Conference, which is being held as
a virtual event, on September 9-10, 2020. Encompass Health President and Chief
Executive Officer, Mark Tarr, and Executive Vice President and Chief Financial
Officer, Doug Coltharp, will participate in a fireside chat on Wednesday,
September 9, 2020 at 11:25 a.m. ET. The fireside chat will be webcast live and
will be available at http://investor.encompasshealth.com by clicking on an
available link.
As shown in the slides attached to this Current Report on Form 8-K as
Exhibit 99.1 (the "Supplemental Information"), the Company is providing:
•volume trends;
•utilization, cost, and inventory for personal protective equipment; and
•items that impacted Adjusted EBITDA for the three months ended June 30, 2020.
The information contained herein is being furnished pursuant to Item 7.01 of
Form 8-K, "Regulation FD Disclosure." This information shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or incorporated by reference in any filing under
the Securities Act of 1933, as amended, or the Exchange Act, except as shall be
expressly set forth by specific reference in such a filing. The furnishing of
this information will not be deemed an admission as to the materiality of any
information contained herein.
Note Regarding Presentation of Non-GAAP Financial Measures
The financial data contained in the Supplemental Information include the
Company's Adjusted EBITDA, a non-GAAP financial measure. The Company uses
Adjusted EBITDA on a consolidated basis as a liquidity measure. The Company
believes this financial measure on a consolidated basis is important in
analyzing its liquidity because it is the key component of certain material
covenants contained within the Company's credit agreement, which is discussed in
more detail in Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, "Liquidity and Capital Resources," and
Note 10, Long-term Debt, to the consolidated financial statements included in
its Annual Report on Form 10­K for the year ended December 31, 2019 (the "2019
Form 10­K"). These covenants are material terms of the credit agreement.
Noncompliance with these financial covenants under the credit agreement-its
interest coverage ratio and its leverage ratio-could result in the Company's
lenders requiring the Company to immediately repay all amounts borrowed. If the
Company anticipated a potential covenant violation, it would seek relief from
its lenders, which would have some cost to the Company, and such relief might be
on terms less favorable to those in the Company's existing credit agreement. In
addition, if the Company cannot satisfy these financial covenants, it would be
prohibited under the credit agreement from engaging in certain activities, such
as incurring additional indebtedness, paying common stock dividends, making
certain payments, and acquiring and disposing of assets. Consequently, Adjusted
EBITDA is critical to the Company's assessment of its liquidity. The Company
reconciles Adjusted EBITDA to net income and to net cash provided by operating
activities below.
In general terms, the credit agreement definition of Adjusted EBITDA, therein
referred to as "Adjusted Consolidated EBITDA," allows the Company to add back to
consolidated net income interest expense, income taxes, and depreciation and
amortization and then add back to consolidated net income (1) all unusual or
nonrecurring items reducing consolidated net income (of which only up to $10
million in a year may be cash expenditures), (2) any losses from discontinued
operations, (3) non-ordinary course fees, costs and expenses incurred with
respect to any litigation or settlement, (4) share-based compensation expense,
(5) costs and expenses associated with changes in the fair value of marketable
securities, (6) costs and expenses associated with the issuance or prepayment
debt and acquisitions, and (7) any restructuring charges not in excess of 20% of
Adjusted Consolidated EBITDA. The Company also subtracts from consolidated net
income all unusual or nonrecurring items to the extent they increase
consolidated net income.
The calculation of Adjusted EBITDA under the credit agreement does not require
us to deduct net income attributable to noncontrolling interests or gains on
fair value adjustments of hedging and equity instruments, disposal of assets,
and development activities. It also does not allow us to add back losses on fair
value adjustments of hedging instruments or unusual or nonrecurring cash
expenditures in excess of $10 million. These items and amounts, in addition to
the items falling within the credit agreement's "unusual or nonrecurring"
classification, may occur in future periods, but can vary significantly from
period to period and may not directly relate to, or be indicative of, the
Company's ongoing liquidity or operating performance. Accordingly, the Adjusted
EBITDA calculation presented here includes adjustments for them.
Adjusted EBITDA is not a measure of financial performance under GAAP, and the
items excluded from Adjusted EBITDA are significant components in understanding
and assessing financial performance. Therefore, Adjusted EBITDA should not be
considered a substitute for net income or cash flows from operating, investing,
or financing activities. Because Adjusted EBITDA is


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not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2019 Form 10-K.


                Reconciliation of Net Income to Adjusted EBITDA
                                                                 Three Months Ended
                                                                   June 30, 2020
                                                                   (In Millions)
Net income                                                    $               48.3

Income from discontinued operations, net of tax, attributable to Encompass Health

                                                           (0.1 )
Net income attributable to noncontrolling interests                          (14.8 )
Provision for income tax expense                                              11.8
Interest expense and amortization of debt discounts and fees                  45.8
Depreciation and amortization                                                 60.7
Loss on disposal or impairment of assets                                       3.0
Stock-based compensation expense                                               9.9
Change in fair market value of equity securities                              (2.4 )
Adjusted EBITDA                                               $              162.2


Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA


                                                                 Three Months Ended
                                                                   June 30, 2020
                                                                   (In Millions)
Net cash provided by operating activities                     $              222.3
Interest expense and amortization of debt discounts and fees                  45.8
Equity in net income of nonconsolidated affiliates                             0.7

Net income attributable to noncontrolling interests in continuing operations

                                                        (14.8 )
Amortization of debt-related items                                            (1.7 )
Distributions from nonconsolidated affiliates                                 (1.0 )
Current portion of income tax expense                                         22.3
Change in assets and liabilities                                            (113.9 )
Change in fair market value of equity securities                              (2.4 )
Other                                                                          4.9
Adjusted EBITDA                                               $              162.2

Forward-Looking Statements Certain statements in this Current Report on Form 8-K, the Supplemental Information, and the fireside chat constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding the Company's intent, belief or expectations, including statements and assumptions regarding the nature of the COVID-19 pandemic, its impact on the Company's results of operations, cash flow and liquidity, actions to be taken by the Company in response to the pandemic, and the demand for the Company's services. These forward-looking statements are based on certain assumptions and expectations, and the Company's ability to predict results or the actual effect of future actions, plans or strategies, or the spread and impact of COVID-19 is inherently uncertain. Actual results and performance could differ materially. Factors which could have a material adverse effect on the Company's operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, the continued spread of COVID-19, including the speed, depth, geographic reach and duration of the spread, which could decrease our patient volumes and revenues and lead to staffing and supply shortages and associated cost increases; actions to be taken by the Company in response to the pandemic; the legal, regulatory and administrative developments that occur at the federal, state and local levels; the Company's infectious disease prevention and control

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efforts; the demand for the Company's services, including based on any downturns
in the economy, consumer confidence, or the capital markets and unemployment
among family members; the Company's ability to attract and retain nurses,
therapists, and other healthcare professionals in a highly competitive
environment with often severe staffing shortages, which may be worsened by the
pandemic, and the impact on the Company's labor expenses from potential union
activity and staffing shortages; potential disruptions, breaches, or other
incidents affecting the proper operation, availability, or security of the
Company's or its vendors' or partners' information systems, including
unauthorized access to or theft of patient, business associate, or other
sensitive information or inability to provide patient care because of system
unavailability; the Company's ability to comply with extensive, complex, and
ever-changing federal, state and local regulations and sub-regulatory guidance
in both business in general, such as privacy and wage and hour regulations, and
the healthcare industry specifically; any adverse outcome of various lawsuits,
claims, and legal or regulatory proceedings involving the Company, including any
matters related to yet undiscovered issues, if any, in acquired operations; the
Company's ability to attract and retain key management personnel; changes,
delays in (including in connection with resolution of Medicare payment reviews
or appeals), or suspension of reimbursement for the Company's services by
governmental or private payors; changes in the regulation of the healthcare
industry at either or both of the federal and state levels (such as the
Patient-Driven Groupings Model for home health, the new patient assessment
measures, which we refer to as "Section GG functional measures," for inpatient
rehabilitation, and other payment system reforms) and the Company's ability to
adapt operations to those changes; the Company's ability to control costs,
particularly labor and employee benefit costs, including group medical expenses;
the Company's ability to maintain proper local, state and federal licensing,
including compliance with the Medicare conditions of participation and provider
enrollment requirements, which is required to participate in the Medicare
program; and changes in the Company's payor mix or the acuity of its patients
affecting reimbursement rates as well as other risks detailed from time to time
in Encompass Health's SEC filings and other public announcements, including its
Form 10­K for the year ended December 31, 2019 and Form 10-Q for the quarters
ended March 31, 2020 and June 30, 2020.
When considering forward-looking statements, readers should keep in mind the
risk factors and other cautionary statements in such SEC filings. Readers are
cautioned not to place undue reliance on any of these forward-looking
statements, which reflect management's views as of the date of this
presentation. The Company cannot guarantee future results, levels of activity,
performance or achievements, and, except as required by law, it expressly
disclaims any obligation to release publicly any updates or revisions to any
forward-looking statements to reflect any change in its expectations with regard
thereto or change in events, conditions or circumstances on which any statement
is based.
ITEM 9.01. Financial Statements and Exhibits.
(d)  Exhibits.
Exhibit Number    Description
     99.1           Supplemental Information

      104         Cover Page Interactive Data File - the cover page iXBRL tags
                  are embedded within the Inline XBRL document




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