Encompass Health Corp

Previous wording

This MD&A is designed to provide the reader with information that will assist in understanding our condensed consolidated financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our condensed consolidated financial statements. See “Cautionary Statement Regarding Forward-Looking Statements” on page ii of this report, which is incorporated herein by reference for a description of important factors that could cause actual results to differ from expected results. See also Item 1A, Risk Factors, of this report and to the 2023 Form 10‑K.

Current wording

This MD&A is designed to provide the reader with information that will assist in understanding our condensed consolidated financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our condensed consolidated financial statements. See “Cautionary Statement Regarding Forward-Looking Statements” beginning on page ii of this report, which is incorporated herein by reference for a description of important factors that could cause actual results to differ from expected results. See also Item 1A, Risk Factors, of this report and to the 2023 Form 10‑K.

Previous wording

We are the nation’s largest owner and operator of inpatient rehabilitation hospitals in terms of patients treated, revenues, and number of hospitals. We provide specialized rehabilitative treatment on an inpatient basis. We operate hospitals in 37 states and Puerto Rico, with concentrations in Florida and Texas. As of March 31, 2024, we operate 160 inpatient rehabilitation hospitals. For additional information about our business, see Item 1, Business, and Item 1A, Risk Factors, of the 2023 Form 10‑K.

Current wording

We are the nation’s largest owner and operator of inpatient rehabilitation hospitals in terms of patients treated, revenues, and number of hospitals. We provide specialized rehabilitative treatment on an inpatient basis. We operate hospitals in 37 states and Puerto Rico, with concentrations in Florida and Texas. As of June 30, 2024, we operate 163 inpatient rehabilitation hospitals. For additional information about our business, see Item 1, Business, and Item 1A, Risk Factors, of the 2023 Form 10‑K.

Previous wording

During the three months ended March 31, 2024, Net operating revenues increased 13.4% over the same period of 2023 due primarily to volume growth. See “Results of Operations” section of this Item for additional volume information.

Current wording

During the three and six months ended June 30, 2024, Net operating revenues increased 9.6% and 11.5%, respectively, over the same periods of 2023 due primarily to volume growth. See “Results of Operations” section of this Item for additional volume information.

Previous wording

•continued our capacity expansions by adding 51 new beds to existing hospitals; and

Current wording

•continued our capacity expansions by adding 115 new beds to existing hospitals (inclusive of our new 40-bed satellite inpatient rehabilitation hospital in Ballwin, Missouri which began operating in May 2024); and

Previous wording

We also continued our shareholder distributions during the three months ended March 31, 2024 by paying a quarterly cash dividend of $0.15 per share on our common stock in January and declaring a cash dividend of $0.15 per share in February that was paid in April. For additional information see the “Liquidity and Capital Resources” section of this Item.

Current wording

We also continued our shareholder distributions during the six months ended June 30, 2024 by paying a quarterly cash dividend of $0.15 per share on our common stock in January 2024, April 2024, and July 2024, respectively. On July 24, 2024, our board of directors approved an increase in our quarterly dividend and declared a cash dividend of $0.17 per share, payable on October 15, 2024 to stockholders of record on October 1, 2024. In addition, we repurchased 0.2 million shares of our common stock in the open market for $16.8 million during the six months ended June 30, 2024. For additional information see the “Liquidity and Capital Resources” section of this Item.

Previous wording

We remain highly optimistic regarding the intermediate and long-term prospects of our business. Demographic trends, such as population aging, should continue to increase long-term demand for the services we provide. While we treat patients of all ages, most of our patients are 65 and older, and the number of Medicare enrollees is expected to grow approximately 3% per year for the foreseeable future, reaching approximately 73 million people over the age of 65 by 2030. More specifically, the average age of our Medicare patients is approximately 76, and the population group ranging in ages from 75 to 79 is expected to grow at approximately 5% per year through 2026. We believe the demand for the services we provide will continue to increase as the U.S. population ages. We believe these factors align with our strengths in, and focus on, inpatient rehabilitation services.

Current wording

We remain highly optimistic regarding the intermediate and long-term prospects of our business. Demographic trends, such as population aging, should continue to increase long-term demand for the services we provide. While we treat patients of all ages, most of our patients are 65 and older, and the number of Medicare enrollees is expected to grow approximately 3% per year for the foreseeable future, reaching approximately 73 million people over the age of 65 by 2030. More specifically, the average age of our Medicare patients is approximately 77, and the population group ranging in ages from 75 to 79 is expected to grow at approximately 5% per year through 2026. We believe the demand for the services we provide will continue to increase as the U.S. population ages. We believe these factors align with our strengths in, and focus on, inpatient rehabilitation services.

Previous wording

The healthcare industry faces the prospect of ongoing efforts to transform the healthcare system to coordinated care delivery and payment models. The nature, timing and extent of that transformation remains uncertain, as the development and implementation of new care delivery and payment systems will require significant time and resources. Our goal is to position the Company in a prudent manner to be responsive to industry shifts. We have invested in our core business and created an infrastructure that enables us to provide high-quality care on a cost-effective basis. We have been disciplined in creating a capital structure that is flexible with no significant debt maturities in 2024. We continue to have a strong, well-capitalized balance sheet, including a substantial portfolio of owned real estate, and ample availability under our revolving credit facility, which along with the cash flows generated from operations should, we believe, provide sufficient support for our ability to adapt to changes in reimbursement, sustain our business model, and grow throughde novo and bed additions. See also Item 1, Business, “Competitive Strengths” and “Strategy and 2024 Strategic Priorities” of the 2023 Form 10‑K.

Current wording

The healthcare industry faces the prospect of ongoing efforts to transform the healthcare system to coordinated care delivery and payment models. The nature, timing and extent of that transformation remains uncertain, as the development and implementation of new care delivery and payment systems will require significant time and resources. Our goal is to position the Company in a prudent manner to be responsive to industry shifts. We have invested in our core business and created an infrastructure that enables us to provide high-quality care on a cost-effective basis. We have been disciplined in creating a capital structure that is flexible with no significant debt maturities in 2024. We continue to have a strong, well-capitalized balance sheet, including a substantial portfolio of owned real estate, and ample availability under our revolving credit facility, which along with the cash flows generated from operations should, we believe, provide sufficient support for our ability to adapt to changes in reimbursement, sustain our business model, and grow throughde novo hospitals and bed additions. See also Item 1, Business, “Competitive Strengths” and “Strategy and 2024 Strategic Priorities” of the 2023 Form 10‑K.

Previous wording

•Changes in Medicare Reimbursement and Regulatory Requirements for Operating IRFs. On March 27, 2024, the Centers for Medicare & Medicaid Services (“CMS”) released its notice of proposed rulemaking for fiscal year 2025 for IRFs (the “2025 Proposed Rule”) under the inpatient rehabilitation facility prospective payment system. The 2025 Proposed Rule will implement a net 2.8% market basket increase (market basket update of 3.2% reduced by a productivity adjustment of 0.4%) effective for discharges between October 1, 2024 and September 30, 2025. The 2025 Proposed Rule also includes changes that impact our hospital-by-hospital base rate for Medicare reimbursement. Such changes include, but are not limited to, revisions to the wage index, updates to outlier payments, and updates to the case-mix group relative weights and average lengths of stay values. Based on our analysis that utilizes, among other things, the acuity of our patients annualized over a twelve-month period ended February 29, 2024, our experience with outlier payments over this same time frame, and other factors, we believe the 2025 Proposed Rule will result in a net increase to our Medicare payment rates of approximately 3.0% effective October 1, 2024.

Current wording

•Changes in Medicare Reimbursement and Regulatory Requirements for Operating IRFs. On July 31, 2024, the Centers for Medicare & Medicaid Services (“CMS”) released its notice of final rulemaking for fiscal year 2025 for IRFs (the “2025 Final Rule”) under the inpatient rehabilitation facility prospective payment system. The 2025 Final Rule will implement a net 3.0% market basket increase (market basket update of 3.5% reduced by a productivity adjustment of 0.5%) effective for discharges between October 1, 2024 and September 30, 2025. The 2025 Final Rule also includes changes that impact our hospital-by-hospital base rate for Medicare reimbursement. Such changes include, but are not limited to, revisions to the wage index, updates to outlier payments, and updates to the case-mix group relative weights and average lengths of stay values. Based on our analysis that utilizes the acuity of our patients annualized over a twelve-month period ended June 30, 2024, our experience with outlier payments over this same time frame, and other factors, we believe the 2025 Final Rule will result in a net increase to our Medicare payment rates of approximately 3.3% effective October 1, 2024.

Previous wording

Under RCD, participating IRFs have an initial choice between pre-claim or post-payment review of 100% of Medicare claims submitted to demonstrate compliance with applicable requirements during the first six-month review period or cycle. We elected the pre-claim review option for our IRFs in Alabama for the first cycle. Under the pre-claim review choice, services can begin prior to the submission of the review request and continue while the decision is being made. The pre-claim review request with required documentation must be submitted, reviewed, and approved before the final claim is paid. If a certain percentage of the claims reviewed are found to be valid, the IRF may then opt out of the 100% review. For the first cycle ending in February 2024, that validation percentage was 80% or greater. The validation percentages for cycles two and three are 85% or greater and 90% or greater, respectively. In opting out, the IRF may elect spot prepayment reviews of samples consisting of 5% of total claims or selective post-payment review of a statistically valid random sample. Our claim validation rate for cycle one exceeded 80% at our IRFs in Alabama. For cycle two, which begins on May 1, 2024, we have elected the pre-claim option for our IRFs in Alabama. We cannot predict the impact, if any, RCD may have on the collectability of our Medicare claims over its five-year term and ultimately our financial position, results of operations, and cash flows.

Current wording

Under RCD, participating IRFs have an initial choice between pre-claim or post-payment review of 100% of Medicare claims submitted to demonstrate compliance with applicable requirements during the first six-month review period or cycle. We elected the pre-claim review option for our IRFs in Alabama for the first cycle. Under the pre-claim review choice, services can begin prior to the submission of the review request and continue while the decision is being made. The pre-claim review request with required documentation must be submitted, reviewed, and approved before the final claim is paid. If a certain percentage of the claims reviewed are found to be valid, the IRF may then opt out of the 100% review. For the first cycle ending in February 2024, that validation percentage was 80% or greater. The validation percentages for cycles two and three are 85% or greater and 90% or greater, respectively. In opting out, the IRF may elect spot prepayment reviews of samples consisting of 5% of total claims or selective post-payment review of a statistically valid random sample. Our claim validation rate for cycle one exceeded 80% at our IRFs in Alabama. For cycle two, which began on May 1, 2024, we elected not to opt out, so our IRFs in Alabama remain subject to the 100% pre-claim review. We cannot predict the impact, if any, RCD may have on the collectability of our Medicare claims over its five-year term and ultimately our financial position, results of operations, and cash flows.

Previous wording

In the discussion that follows, we use “same-store” comparisons to explain the changes in certain performance metrics and line items within our financial statements. We calculate same-store comparisons based on hospitals open throughout both the full current periods and prior periods presented. These comparisons include the financial results of market consolidation transactions in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on our results of operations.

Current wording

In the discussion that follows, we use “same-store” comparisons to explain the changes in certain performance metrics within our financial statements. We calculate same-store comparisons based on hospitals open throughout both the full current periods and prior periods presented. These comparisons include the financial results of market consolidation transactions and capacity expansions (including the addition of satellite and remote hospitals) in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on our results of operations.

Previous wording

Our consolidated Net operating revenues increased during the three months ended March 31, 2024 compared to the same period of 2023 primarily due to increased volumes. Discharge growth included a 6.7% increase in same-store discharges. Discharge growth from new stores during the three months ended March 31, 2024 compared to the same period of 2023 resulted from our joint ventures in Knoxville, Tennessee (March 2023), Owasso, Oklahoma (March 2023), Bowie, Maryland (June 2023), and Columbus, Georgia (September 2023), as well as our wholly owned hospitals in Clermont, Florida (April 2023), Prosper, Texas (November 2023), and Fitchburg, Wisconsin (November 2023). Growth in net patient revenue per discharge during the three months ended March 31, 2024 compared to the same period of 2023 primarily resulted from an increase in reimbursement rates partially offset by change in patient mix.

Current wording

Our consolidated Net operating revenues increased during the three months ended June 30, 2024 compared to the same period of 2023 primarily due to increased volumes. Discharge growth included a 4.8% increase in same-store discharges. Discharge growth from new stores during the three months ended June 30, 2024 compared to the same period of 2023 resulted from our joint ventures in Bowie, Maryland (June 2023), Columbus, Georgia (September 2023), and Atlanta, Georgia (May 2024), as well as our wholly owned hospitals in Clermont, Florida (April 2023), Prosper, Texas (November 2023), Fitchburg, Wisconsin (November 2023), and Kissimmee, Florida (May 2024). Growth in net patient revenue per discharge during the three months ended June 30, 2024 compared to the same period of 2023 primarily resulted from an increase in reimbursement rates partially offset by higher revenue reserves related to bad debt. Revenue reserves related to bad debt as a percentage of Net operating revenues increased during the three months ended June 30, 2024 to 2.9% from 1.9% during the three months ended June 30, 2023 primarily due to an increase in medical necessity claim review audits and the reversal of Supplemental Medical Review Contractor audit reserves in the three months ended June 30, 2023.

Previous wording

The increase in outpatient and other revenue during the three months ended March 31, 2024 included an increase of $6.9 million in provider tax revenues (offset by a $1.9 million increase in provider tax expenses included in Other operating expenses).

Current wording

The increase in outpatient and other revenue during the three and six months ended June 30, 2024 included an increase of $10.3 million and $17.2 million, respectively, in provider tax revenues (offset by an increase of $5.4 million and $7.3 million, respectively, in provider tax expenses included in Other operating expenses).

Previous wording

Salaries and benefits increased during the three months ended March 31, 2024 compared to the same period of 2023 primarily due to salary and benefit cost increases for our employees and increased patient volumes, including an increase in the number of full-time equivalents as a result of our development activities. Salaries and benefits decreased as a percent of Net operating revenues during the three months ended March 31, 2024 compared to the same period of 2023 primarily due to decreases in both contract labor and sign-on and shift bonuses.

Current wording

Salaries and benefits increased during the three and six months ended June 30, 2024 compared to the same periods of 2023 primarily due to salary and benefit cost increases for our employees and increased patient volumes, including an increase in the number of full-time equivalents as a result of our development activities. Salaries and benefits increased as a percent of Net operating revenues during the three and six months ended June 30, 2024 compared to the same periods of 2023 primarily due to the increase in revenue reserves discussed above partially offset by the decreases in both contract labor and sign-on and shift bonuses. In order to meet our clinical staffing needs, we have continued to utilize third-party agencies and to pay sign-on and shift bonuses to our employees. While the costs associated with these actions have declined compared to the prior year period, future costs will be affected by labor market conditions and other factors.

Previous wording

Other operating expenses increased in terms of dollars and as a percent of Net operating revenues during the three months ended March 31, 2024 compared to the same period of 2023 primarily due to increased provider taxes, higher costs resulting from our development activities, and a $10.4 million impairment charge related to the closure of our joint venture inpatient rehabilitation hospital in Eau Claire, Wisconsin. In January 2024, we received notice that our joint venture partner intended to close its acute-care hospital in which our joint venture inpatient rehabilitation hospital is located. We closed that joint venture hospital in February 2024 and incurred a one-time impairment charge of $10.4 million. The impact to Net income attributable to Encompass Health during the three months ended March 31, 2024 resulting from the impairment was $1.8 million after reductions for Net income attributable to noncontrolling interestsof $7.3 million and the Provision for income tax expense of $1.3 million.

Current wording

Other operating expenses increased in terms of dollars and as a percent of Net operating revenues during the three and six months ended June 30, 2024 compared to the same periods of 2023 primarily due to increased provider taxes and higher costs resulting from our development activities. Other operating expenses during the six months ended June 30, 2024 included a $10.4 million impairment charge related to the closure of our joint venture inpatient rehabilitation hospital in Eau Claire, Wisconsin. In January 2024, we received notice that our joint venture partner intended to close its acute-care hospital in which our joint venture inpatient rehabilitation hospital was located. We closed that joint venture hospital in February 2024 and incurred a one-time impairment charge of $10.4 million. The impact to Net income attributable to Encompass Health during the six months ended June 30, 2024 resulting from the impairment was $1.8 million after reductions for Net income attributable to noncontrolling interestsof $7.3 million and the Provision for income tax expense of $1.3 million.

Previous wording

General and administrative expenses increased in terms of dollars and as a percent of Net operating revenues during the three months ended March 31, 2024 compared to the same period of 2023 primarily due to higher incentive compensation costs.

Current wording

General and administrative expenses decreased in terms of dollars and as a percent of Net operating revenues during the three months ended June 30, 2024 compared to the same period of 2023 primarily due to higher volumes and lower incentive compensation costs.

Previous wording

Depreciation and amortization increased during the three months ended March 31, 2024 compared to the same period of 2023 due to our capital investments. We expect Depreciation and amortization to increase going forward as a result of our recent and ongoing capital investments.

Current wording

See “Executive Overview” section of this item for information related to our development activity. We expect Depreciation and amortization to increase going forward as a result of our recent and ongoing capital investments.

Previous wording

Our pre-tax income from continuing operations increased during the three months ended March 31, 2024 compared to the same period of 2023 primarily due to the increase in Net operating revenues as discussed above.

Current wording

Our pre-tax income from continuing operations increased during the three and six months ended June 30, 2024 compared to the same periods of 2023 primarily due to the increase in Net operating revenues as discussed above.

Previous wording

Our Provision for income tax expense increased during the three months ended March 31, 2024 compared to the same period of 2023 primarily due to higher Income from continuing operations before income tax expense.

Current wording

Our Provision for income tax expense increased during the three and six months ended June 30, 2024 compared to the same periods of 2023 primarily due to higher Income from continuing operations before income tax expense.

Previous wording

The increase in Net income attributable to noncontrolling interests during the three months ended March 31, 2024 compared to the same period of 2023 resulted from increased profitability from certain existing joint venture hospitals mostly offset by the impact from the impairment related to the closure of our joint venture hospital in Eau Claire, Wisconsin in February 2024, as discussed above.

Current wording

The increase in Net income attributable to noncontrolling interests during the three months ended June 30, 2024 compared to the same period of 2023 resulted from increased profitability from certain existing joint venture hospitals. The increase in Net income attributable to noncontrolling interests during the six months ended June 30, 2024 compared to the same period of 2023 resulted from increased profitability from certain existing joint venture hospitals partially offset by the impact from the impairment related to the closure of our joint venture hospital in Eau Claire, Wisconsin in February 2024, as discussed above.

Previous wording

As of March 31, 2024, we had $134.4 million in Cash and cash equivalents. This amount excludes $38.3 million in Restricted cash and $113.0 million of restricted marketable securities ($35.8 million included in Other current assets and $77.2 million included in Other long-term assetsin our condensed consolidated balance sheet). Our restricted assets pertain primarily to obligations associated with our captive insurance company, as well as obligations we have under agreements with joint venture partners. See Note 5, Cash and Marketable Securities, to the consolidated financial statements accompanying the 2023 Form 10‑K.

Current wording

As of June 30, 2024, we had $154.4 million in Cash and cash equivalents. This amount excludes $27.7 million in Restricted cash and $117.3 million of restricted marketable securities ($37.4 million included in Other current assets and $79.9 million included in Other long-term assetsin our condensed consolidated balance sheet). Our restricted assets pertain primarily to obligations associated with our captive insurance company, as well as obligations we have under agreements with joint venture partners. See Note 5, Cash and Marketable Securities, to the consolidated financial statements accompanying the 2023 Form 10‑K.

Previous wording

Operating activities. The increase in Net cash provided by operating activities for the three months ended March 31, 2024 compared to the same period of 2023 primarily resulted from an increase in Net income which was driven by growth in Net operating revenues.

Current wording

Operating activities. The increase in Net cash provided by operating activities for the six months ended June 30, 2024 compared to the same period of 2023 primarily resulted from an increase in Net income which was driven by growth in Net operating revenues.

Previous wording

Investing activities. The increase in Net cash used in investing activities during the three months ended March 31, 2024 compared to the same period of 2023 primarily resulted from increased Purchases of property, equipment, and intangible assets.

Current wording

Investing activities. The increase in Net cash used in investing activities during the six months ended June 30, 2024 compared to the same period of 2023 primarily resulted from increased Purchases of property, equipment, and intangible assets.

Previous wording

Financing activities. The decrease in Net cash used in financing activities during the three months ended March 31, 2024 compared to the same period of 2023 primarily resulted from lower net debt payments on our revolving credit facility and distributions paid to noncontrolling interests of consolidated affiliates.

Current wording

Financing activities. The decrease in Net cash used in financing activities during the six months ended June 30, 2024 compared to the same period of 2023 primarily resulted from lower net debt payments partially offset by higher Repurchases of common stock, including fees and expenses. For additional information related to our stock repurchases, see “Authorizations for Returning Capital to Stakeholders” section below.

Previous wording

(b) Interest on our fixed rate debt is presented using the stated interest rate. Interest pertaining to our bonds is included to their respective ultimate maturity dates. Interest related to finance lease obligations is excluded from this line.

Current wording

(b) Interest on our fixed rate debt is presented using the stated interest rate. Interest pertaining to our bonds is included to their respective ultimate maturity dates. Interest related to finance lease obligations is excluded from this line. Amounts exclude amortization of debt discounts, amortization of loan fees, or fees for lines of credit that would be included in interest expense in our condensed consolidated statements of comprehensive income.

Previous wording

Our capital expenditures include costs associated with our hospital renovation program, de novo projects, capacity expansions, technology initiatives, and building and equipment upgrades and purchases. During the three months ended March 31, 2024, we made capital expenditures of approximately $139 million for property, equipment, and intangible assets. During 2024, we expect to spend approximately $580 million to $610 million for capital expenditures using cash on hand and borrowings under our revolving credit facility. Approximately $185 million to $195 million of this budgeted amount is considered nondiscretionary expenditures, which we may refer to in other filings as “maintenance” expenditures. Actual amounts spent will be dependent upon the timing of development projects.

Current wording

Our capital expenditures include costs associated with our hospital renovation program, de novo projects, capacity expansions, technology initiatives, and building and equipment upgrades and purchases. During the six months ended June 30, 2024, we made capital expenditures of approximately $296 million for property, equipment, and intangible assets. During 2024, we expect to spend approximately $580 million to $610 million for capital expenditures using cash on hand and borrowings under our revolving credit facility. Approximately $185 million to $195 million of this budgeted amount is considered nondiscretionary expenditures, which we may refer to in other filings as “maintenance” expenditures. Actual amounts spent will be dependent upon the timing of development projects.

Previous wording

In October 2023 and February 2024, our board of directors declared cash dividends of $0.15 per share that were paid in January 2024 and April 2024, respectively. We expect quarterly dividends to be paid in January, April, July, and October. However, the actual declaration of any future cash dividends, and the setting of record and payment dates as well as the per share amounts, will be at the discretion of our board of directors after consideration of various factors, including our capital position and alternative uses of funds. Cash dividends are expected to be funded using cash flows from operations, cash on hand, and availability under our revolving credit facility.

Current wording

In October 2023, February 2024, and May 2024, our board of directors declared cash dividends of $0.15 per share that were paid in January 2024, April 2024, and July 2024, respectively. On July 24, 2024, our board of directors approved an increase in our quarterly dividend and declared a cash dividend of $0.17 per share, payable on October 15, 2024 to stockholders of record on October 1, 2024. We expect quarterly dividends to be paid in January, April, July, and October. However, the actual declaration of any future cash dividends, and the setting of record and payment dates as well as the per share amounts, will be at the discretion of our board of directors after consideration of various factors, including our capital position and alternative uses of funds. Cash dividends are expected to be funded using cash flows from operations, cash on hand, and availability under our revolving credit facility.

Previous wording

On July 24, 2018, our board approved resetting the aggregate common stock repurchase authorization to $250 million. As of March 31, 2024, approximately $198 million remained under this authorization. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. For additional information, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report.

Current wording

On July 24, 2018, our board approved resetting the aggregate common stock repurchase authorization to $250 million. As of June 30, 2024, approximately $181 million remained under this authorization. On July 24, 2024, our board of directors approved resetting the aggregate common stock repurchase authorization to $500 million. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the six months ended June 30, 2024, we repurchased 0.2 million shares of our common stock in the open market for $16.8 million under this repurchase authorization using cash on hand. Future repurchases under this authorization generally are expected to be funded using a combination of cash on hand and availability under our $1 billion revolving credit facility. For additional information, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report.