ehab-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-41406

___________________

Enhabit, Inc.

(Exact name of registrant as specified in its charter)


Delaware			47-2409192
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

6688 N. Central Expressway, Suite 1300, Dallas, Texas			75206
(Address of Principal Executive Offices)			(Zip Code)

(214) 239-6500

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	EHAB	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☒

The registrant had outstanding 50,099,817 shares of common stock as of May 8, 2023.

TABLE OF CONTENTS


		Page No
Note to Readers
Cautionary Note Regarding Forward-Looking Statements		ii
Part I - Financial Information		1
	Item 1. Financial Statements (Unaudited)	1
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
	Item 4. Controls and Procedures	26
Part II - Other Information		27
	Item 1. Legal Proceedings	27
	Item 1A. Risk Factors	27
	Item 6. Exhibits	29
Signature		30

NOTE TO READERS

As used in this report, the terms “Enhabit,” “we,” “us,” “our,” and the “Company” refer to Enhabit, Inc. and its consolidated subsidiaries, unless otherwise stated or indicated by context.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains historical information, as well as forward-looking statements (within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that involve known and unknown risks and relate to, among other things, future events, projections, financial guidance, legislative or regulatory developments, strategy or growth opportunities, our future financial performance, our projected business results, or our projected capital expenditures. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, the reader can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Any forward-looking statement speaks only as of the date of this report, and the Company undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties, many of which are beyond our control. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by the Company include, but are not limited to, our ability to execute on our strategic plans, regulatory and other developments impacting the markets for our services, changes in reimbursement rates, general economic conditions, our ability to attract and retain key management personnel and healthcare professionals, potential disruptions or breaches of our or our vendors’ information systems, the outcome of litigation, our ability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures, and our ability to control costs, particularly labor and employee benefit costs. Our Annual Report on Form 10-K for the year ended December 31, 2022 dated April 14, 2023, which can be found on the Company’s website at http://investors.ehab.com, discusses other risks and factors that could cause actual results to differ materially from those expressed or implied by any forward-looking statement in this report.

Part I - Financial Information

Item 1. Financial Statements (Unaudited)

Enhabit, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)


	Three Months Ended March 31,
	2023		2022
	(In Millions, Except Per Share Data)
Net service revenue	$	265.1	$	274.3
Cost of service, excluding depreciation and amortization	132.6		129.7

General and administrative expenses	110.5		100.7
Depreciation and amortization	7.8		8.5
Operating income	14.2		35.4
Interest expense and amortization of debt discounts and fees	9.5		—


Income before income taxes and noncontrolling interests	4.7		35.4
Income tax expense	1.5		8.7
Net income	3.2		26.7
Less: Net income attributable to noncontrolling interests	0.5		0.6
Net income attributable to Enhabit, Inc.	$	2.7	$	26.1

Weighted average common shares outstanding:
Basic	49.8		49.6
Diluted	50.1		49.6

Earnings per common share:
Basic earnings per share attributable to Enhabit, Inc. common stockholders	$	0.05	$	0.53
Diluted earnings per share attributable to Enhabit, Inc. common stockholders	$	0.05	$	0.53

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Enhabit, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,
	2023		2022
	(In Millions)
Net income including noncontrolling interest	$	3.2	$	26.7
Other comprehensive loss:
Unrealized loss of cash flow hedges, net of tax benefit of $0.3, and $0.0, respectively	(1.1)		—
Total other comprehensive loss	(1.1)		—
Comprehensive income including noncontrolling interest	2.1		26.7
Less: Comprehensive income attributable to noncontrolling interest	0.5		0.6
Comprehensive income attributable to Enhabit, Inc.	$	1.6	$	26.1

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Enhabit, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


	March 31, 2023		December 31, 2022
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	37.6	$	22.9
Restricted cash	2.0		4.3
Accounts receivable	156.5		149.6
Income tax receivable	4.3		11.4



Prepaid expenses and other current assets	12.2		23.6
Total current assets	212.6		211.8
Property and equipment, net	19.0		20.4
Operating lease right-of-use assets	45.8		42.0
Goodwill	1,147.5		1,144.8
Intangible assets, net	97.1		102.6
Other long-term assets	5.0		5.2
Total assets(1)	$	1,527.0	$	1,526.8


Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	22.7	$	23.1
Current operating lease liabilities	11.6		14.0
Accounts payable	6.2		3.8
Accrued payroll	47.7		35.5
Refunds due patients and other third-party payors	8.0		8.3


Accrued medical insurance	7.5		7.5


Other current liabilities	31.9		40.7
Total current liabilities	135.6		132.9
Long-term debt, net of current portion	549.7		560.0
Long-term operating lease liabilities	34.2		28.1
Deferred income tax liabilities	28.5		28.6
Other long-term liabilities	3.0		1.9
	751.0		751.5
Commitments and contingencies
Redeemable noncontrolling interests	5.1		5.2
Stockholders’ equity:
Enhabit, Inc. stockholders’ equity:
Common stock, $.01 par value; 200,000,000 shares authorized; issued: 50,157,207 as of March 31, 2023 and 50,099,716 as of December 31, 2022	0.5		0.5
Capital in excess of par value	408.4		406.9
Accumulated other comprehensive income	(1.8)		(

SEC Form 10-Q filed by Enhabit Inc.