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Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies:
Organization and Description of Business
Enhabit, Inc. (“Enhabit,” “we,” “us,” “our,” and the “Company”), incorporated in Delaware in 2014, provides a comprehensive range of Medicare-certified skilled home health and hospice services in 34 states, with a concentration in the southern half of the United States. We manage our operations and disclose financial information using two reportable segments: (1) home health and (2) hospice. See Note 8, Segment Reporting. Prior to July 1, 2022, the Company operated as a reporting segment of Encompass Health Corporation (“Encompass”).
Separation from Encompass
On July 1, 2022, Encompass completed the separation of the Company through the distribution of all of the outstanding shares of common stock, par value $0.01 per share, of Enhabit to the stockholders of record of Encompass (the “Distribution”). As a result of the Distribution, Enhabit is now an independent public company, and its common stock is listed under the symbol “EHAB” on the New York Stock Exchange (the “Separation”).
The Separation was completed pursuant to a separation and distribution agreement (the “Separation and Distribution Agreement”) and other agreements with Encompass related to the Separation, including, but not limited to, a tax matters agreement (the “Tax Matters Agreement”), an employee matters agreement (the “Employee Matters Agreement”), and a transition services agreement (the “Transition Services Agreement” or “TSA”). Following the Separation, certain functions were provided by Encompass under the TSA. As of April 1, 2024, these functions are being performed using the Company’s own resources or third‑party providers.
In early 2022, in anticipation of the Distribution, we transferred the “Encompass” trade name with a book value of $135.2 million and the related deferred tax liabilities with a book value of $31.0 million to Encompass, as they will continue to operate under the Encompass brand.
See also Note 4, Long‑Term Debt.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries should be read in conjunction with the audited consolidated financial statements and accompanying notes contained in the Company’s Annual Report for the year ended December 31, 2023 on Form 10-K (the “Form 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on March 15, 2024. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC applicable to interim financial information. Certain information and note disclosures included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been omitted in these interim statements, as allowed by such SEC rules and regulations. The unaudited Condensed Consolidated Balance Sheet as of December 31, 2023 has been derived from audited financial statements, but it does not include all disclosures required by GAAP. However, we believe the disclosures are adequate to make the information presented not misleading.
The unaudited results of operations for the interim periods shown in these financial statements are not necessarily indicative of operating results for the entire year. In our opinion, the accompanying unaudited condensed consolidated financial statements recognize all adjustments of a normal recurring nature considered necessary for a fair statement of the financial position, results of operations, and cash flows for each interim period presented.
The unaudited condensed consolidated financial statements include the assets, liabilities, revenues, and expenses of all wholly owned subsidiaries, majority-owned subsidiaries over which we exercise control, and, when applicable, entities in which we have a controlling financial interest. We eliminate all intercompany accounts and transactions within the Company from our financial results.
Net Service Revenue—
Our Net service revenue disaggregated by payor source and segment are as follows (in millions):
Home HealthHospiceConsolidated
Three Months Ended
September 30,
Three Months Ended
September 30,
Three Months Ended
September 30,
202420232024202320242023
Medicare$117.3 $141.0 $51.7 $46.7 $169.0 $187.7 
Medicare Advantage59.2 45.7 — — 59.2 45.7 
Managed care22.2 21.2 0.3 — 22.5 21.2 
Medicaid2.2 2.9 0.6 0.7 2.8 3.6 
Other0.1 0.1 — — 0.1 0.1 
Total$201.0 $210.9 $52.6 $47.4 $253.6 $258.3 
Home HealthHospiceConsolidated
Nine Months Ended
September 30,
Nine Months Ended
September 30,
Nine Months Ended
September 30,
202420232024202320242023
Medicare$367.3 $426.5 $150.0 $140.5 $517.3 $567.0 
Medicare Advantage179.8 148.3 — — 179.8 148.3 
Managed care68.8 56.5 2.2 4.3 71.0 60.8 
Medicaid7.1 8.7 — 0.4 7.1 9.1 
Other1.4 0.5 — — 1.4 0.5 
Total$624.4 $640.5 $152.2 $145.2 $776.6 $785.7 
For a discussion of our significant accounting policies, including our policy related to Net service revenue, see Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Form 10-K.
Loss Per Common Share
The following table sets forth the computation of diluted weighted average common shares outstanding for the three and nine months ended September 30, 2024 and 2023 (in millions):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024202320242023
Weighted average common shares outstanding:
Basic50.249.950.249.8
Dilutive effect of restricted stock, restricted stock units and performance units— — 
Diluted50.249.950.249.8
A total of 0.3 million options to purchase Enhabit’s shares and 2.1 million shares of restricted stock awards, performance units and restricted stock units were excluded from the diluted weighted average common shares outstanding for the three and nine months ended September 30, 2024 because their effects were anti-dilutive. A total of 0.3 million options to purchase Enhabit’s shares and 1.5 million shares of restricted stock awards, performance units and restricted stock units were excluded from the diluted weighted average common shares outstanding for the three and nine months
ended September 30, 2023 because their effects were anti-dilutive. See Note 9, Stock-Based Payments, to the consolidated financial statements included in the Form 10-K for additional information.
Cash, Cash Equivalents, and Restricted Cash—
The following table details supplemental cash flow disclosures related to the reconciliation of cash and cash equivalents and restricted cash balances reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows (in millions):
September 30,
2024
December 31, 2023
Cash, cash equivalents, and restricted cash reconciliation:
Cash and cash equivalents$45.7 $27.4 
Restricted cash1.7 2.4
Cash, cash equivalents, and restricted cash presented in the statements of cash flows
$47.4 $29.8 
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures.” This standard provides guidance to improve the disclosures about a public entity’s reportable segments and addresses requests from investors for additional, more detailed information about a reportable segment’s expenses. The standard is effective for fiscal years beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted, and the disclosures in this standard are required to be applied on a retrospective basis. The Company does not expect the adoption of this standard to have an impact on its consolidated financial statements, but it will require certain additional disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This standard requires disaggregated income tax disclosures on the effective tax rate reconciliation and income taxes paid. This standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and the disclosures in this standard are required to be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement (Topic 220): Reporting Comprehensive Income—Expense Disaggregation Disclosures.” This standard requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.