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Long-term Debt | 12 Months Ended
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Dec. 31, 2019
Debt Disclosure [Abstract] |
Long-term Debt | Long-term Debt: Our long-term debt outstanding consists of the following (in millions):
| As of December 31,
| 2019 |  | 2018
Credit Agreement— |  |  |
Advances under revolving credit facility | $ | 45.0 |  |  | $ | 30.0 |
Term loan facilities | 265.2 |  |  | 280.1 |
Bonds payable— |  |  |
5.125% Senior Notes due 2023 | 297.3 |  |  | 296.6 |
5.75% Senior Notes due 2024 | 697.3 |  |  | 1,194.7 |
5.75% Senior Notes due 2025 | 345.6 |  |  | 345.0 |
4.50% Senior Notes due 2028 | 491.7 |  |  | — |
4.75% Senior Notes due 2030 | 491.7 |  |  | — |
Other notes payable | 44.7 |  |  | 104.2 |
Finance lease obligations | 384.1 |  |  | 263.8 |
| 3,062.6 |  |  | 2,514.4 |
Less: Current portion | (39.3 | ) |  | (35.8 | )
Long-term debt, net of current portion | $ | 3,023.3 |  |  | $ | 2,478.6 |
The following chart shows scheduled principal payments due on long-term debt for the next five years and thereafter (in millions):
Year Ending December 31, |  | Face Amount |  | Net Amount
2020 |  | $ | 39.3 |  |  | $ | 39.3 |
2021 |  | 35.5 |  |  | 35.5 |
2022 |  | 46.3 |  |  | 46.3 |
2023 |  | 335.1 |  |  | 332.4 |
2024 |  | 995.7 |  |  | 991.6 |
Thereafter |  | 1,638.6 |  |  | 1,617.5 |
Total |  | $ | 3,090.5 |  |  | $ | 3,062.6 |
As a result of the 2019 and 2017 redemptions discussed below, we recorded a $7.7 million and $10.7 million Loss on early extinguishment of debt in 2019 and 2017, respectively. There were no redemptions resulting in a Loss on early extinguishment of debt during 2018. Senior Secured Credit Agreement— Credit Agreement In November 2019, we amended our existing credit agreement, previously amended in September 2017 (the “Credit Agreement”). The Credit Agreement provided for a $270 million term loan commitment and a $1 billion revolving credit facility, with a $260 million letter of credit subfacility and a swingline loan subfacility, all of which mature in November 2024. Outstanding term loan borrowings are payable in equal consecutive quarterly installments, commencing on December 31, 2019, of 1.25% of the aggregate principal amount of the term loans outstanding as of December 31, 2019, with the remainder due at maturity. We have the right at any time to prepay, in whole or in part, any borrowing under the term loan facilities. Amounts drawn on the term loan facilities and the revolving credit facility bear interest at a rate per annum of, at our option, (1) LIBOR or (2) the higher of (a) Barclays Bank PLC’s (“Barclays”) prime rate and (b) the federal funds rate plus 0.5%, in each case, plus, in each case, an applicable margin that varies depending upon our leverage ratio. We are also subject to a commitment fee of 0.375% per annum on the daily amount of the unutilized commitments under the term loan facilities and revolving credit facility. The current interest rate on borrowings under the Credit Agreement is LIBOR plus 1.50%. The Credit Agreement contains affirmative and negative covenants and default and acceleration provisions, including a minimum interest coverage ratio and a maximum leverage ratio. Under one such negative covenant, we are restricted from paying common stock dividends, prepaying certain senior notes, making certain investments, and repurchasing preferred and common equity unless (1) we are not in default under the terms of the Credit Agreement and (2) our senior secured leverage ratio, as defined in the Credit Agreement, does not exceed 2x. In the event the senior secured leverage ratio exceeds 2x, these payments are subject to a limit of $200 million plus an amount equal to a portion of available excess cash flows each fiscal year. Our obligations under the Credit Agreement are secured by the current and future personal property of the Company and its subsidiary guarantors. The maximum leverage ratio in the financial covenants is 4.50x through December 2021 and 4.25x from then until maturity. As of December 31, 2019 and 2018, $45 million and $30 million were drawn under the revolving credit facility with an interest rate of 3.2% and 3.9%, respectively. Amounts drawn as of December 31, 2019 and 2018 exclude $38.9 million and $37.4 million, respectively, utilized under the letter of credit subfacility, which were being used in the ordinary course of business to secure workers’ compensation and other insurance coverages and for general corporate purposes. Currently, there are no undrawn term loan commitments under the Credit Agreement. 2017 Credit Agreement In September 2017, we amended our existing credit agreement (the “ 2017 Credit Agreement”). The 2017 Credit Agreement provided for a $300 million term loan commitment and a $700 million revolving credit facility, with a $260 million letter of credit subfacility and a swingline loan subfacility, all of which would have matured in September 2022. Outstanding term loan borrowings were payable in equal consecutive quarterly installments, commencing on December 31, 2017, of 1.25% of the aggregate principal amount of the term loans outstanding as of December 31, 2017, with the remainder due at maturity. The 2017 Credit Agreement contained similar affirmative and negative covenants and default and acceleration provisions as the Credit Agreement. The 2017 amendment to our existing credit agreement included a net repayment of approximately $110 million to our existing term loan facility. Bonds Payable— Nonconvertible Notes The Company’s 2023 Notes, 2024 Notes, 2025 Notes, 2028 Notes, and 2030 Notes (collectively, the “Senior Notes”) were issued pursuant to an indenture (the “Base Indenture”) dated as of December 1, 2009, as supplemented by each Senior Notes’ respective supplemental indenture (together with the Base Indenture, the “Indenture”). Pursuant to the terms of the Indenture, the Senior Notes are jointly and severally guaranteed on a senior, unsecured basis by all of our existing and future subsidiaries that guarantee borrowings under our Credit Agreement and other capital markets debt (see Note 21, Condensed Consolidating Financial Information). The Senior Notes are senior, unsecured obligations of Encompass Health and rank equally with our other senior indebtedness, senior to any of our subordinated indebtedness, and effectively junior to our secured indebtedness to the extent of the value of the collateral securing such indebtedness. Upon the occurrence of a change in control (as defined in the Indenture), each holder of the Senior Notes may require us to repurchase all or a portion of the notes in cash at a price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest. The Senior Notes contain covenants and default and acceleration provisions, that, among other things, limit our and certain of our subsidiaries’ ability to (1) incur additional debt, (2) make certain restricted payments, (3) consummate specified asset sales, (4) incur liens, and (5) merge or consolidate with another person. 2023 Notes In March 2015, we issued $300 million of 5.125% Senior Notes due 2023 (“the 2023 Notes”) at par, which resulted in approximately $295 million in net proceeds from the public offering. The 2023 Notes mature on March 15, 2023 and bear interest at a per annum rate of 5.125%. Inclusive of financing costs, the effective interest rate on the 2023 Notes is 5.4%. Interest on the 2023 Notes is payable semiannually in arrears on March 15 and September 15. We may redeem the 2023 Notes, in whole or in part, at any time on or after March 15, 2018 at the redemption prices set forth below:
Period |  | Redemption Price*
2019 |  | 102.563 | %
2020 |  | 101.281 | %
2021 and thereafter |  | 100.000 | %
* Expressed in percentage of principal amount 2024 Notes In September 2012, we completed a public offering of $275 million aggregate principal amount of the 5.75% Senior Notes due 2024 (“the 2024 Notes”) at par. In September 2014, we issued an additional $175 million of the 2024 Notes at a price of 103.625% of the principal amount, in January 2015, we issued an additional $400 million of the 2024 Notes at a price of 102% of the principal amount, and in August 2015, we issued an additional $350 million of our 2024 Notes at a price of 100.5% of the principal amount. The 2024 Notes mature on November 1, 2024 and bear interest at a per annum rate of 5.75%. Inclusive of premiums and financing costs, the effective interest rate on the 2024 Notes is 5.8%. Interest is payable semiannually in arrears on May 1 and November 1 of each year. In June 2019, we redeemed $100 million of outstanding principal amount of our 2024 Notes using cash on hand and capacity under our revolving credit facility. Pursuant to the terms of the 2024 Notes, this optional redemption was made at a price of 101.917%, which resulted in a total cash outlay of approximately $102 million. In November 2019, we redeemed $400 million of the outstanding principal amount of our 2024 Notes. Pursuant to the terms of the 2024 Notes, this optional redemption was made at a price of 100.958%, which resulted in a total cash outlay of approximately $404 million. We may redeem the 2024 Notes, in whole or in part, at any time on or after November 1, 2017, at the redemption prices set forth below:
Period |  | Redemption Price*
2019 |  | 100.958 | %
2020 and thereafter |  | 100.000 | %
* Expressed in percentage of principal amount 2025 Notes In September 2015, we issued $350 million of 5.75% Senior Notes due 2025 (“the 2025 Notes”) at par. The 2025 Notes mature on September 15, 2025 and bear interest at a per annum rate of 5.75%. Inclusive of financing costs, the effective interest rate on the 2025 Notes is 6.0%. Interest on the 2025 Notes is payable semiannually in arrears on March 15 and September 15. We may redeem the 2025 Notes, in whole or in part, at any time on or after September 15, 2020, at the redemption prices set forth below:
Period |  | Redemption Price*
2020 |  | 102.875 | %
2021 |  | 101.917 | %
2022 |  | 100.958 | %
2023 and thereafter |  | 100.000 | %
* Expressed in percentage of principal amount 2028 and 2030 Notes In September 2019, we issued $500 million of 4.50% Senior Notes due 2028 (the “2028 Notes”) at par and $500 million of 4.75% Senior Notes due 2030 (the “2030 Notes”) at par. The proceeds from this offering were used to fund the purchase of equity and vested stock appreciation rights from management investors of our home health and hospice segment, redeem a portion of our 2024 Notes as discussed above, and repay borrowings under our revolving credit facility. The 2028 Notes mature on February 1, 2028. Inclusive of financing costs, the effective interest rate on the 2028 Notes is 4.7%. Interest on the 2028 Notes is payable semiannually in arrears on February 1 and August 1. We may redeem the 2028 Notes, in whole or in part, at any time on or after February 1, 2023 at the redemption prices set forth below:
Period |  | Redemption Price*
2023 |  | 102.250 | %
2024 |  | 101.125 | %
2025 and thereafter |  | 100.000 | %
* Expressed in percentage of principal amount The 2030 Notes mature on February 1, 2030. Inclusive of financing costs, the effective interest rate on the 2030 Notes is 5.0%. Interest on the 2030 Notes is payable semiannually in arrears on February 1 and August 1. We may redeem the 2030 Notes, in whole or in part, at any time on or after February 1, 2025 at the redemption prices set forth below:
Period |  | Redemption Price*
2025 |  | 102.375 | %
2026 |  | 101.583 | %
2027 |  | 100.792 | %
2028 and thereafter |  | 100.000 | %
* Expressed in percentage of principal amount Convertible Notes Former Convertible Senior Subordinated Notes Due 2043 In November 2013, we exchanged $320 million in aggregate principal amount of newly issued 2.00% Convertible Senior Subordinated Notes due 2043 (the “Former Convertible Notes”) for 257,110 shares of our outstanding 6.50% Series A Convertible Perpetual Preferred Stock. Our Former Convertible Notes were issued pursuant to an indenture dated November 18, 2013 (the “ Former Convertible Notes Indenture”) between us and Wells Fargo Bank, National Association, as trustee and conversion agent. In May 2017, we provided notice of our intent to exercise our early redemption option on the $320 million outstanding principal amount of the Former Convertible Notes. Pursuant to the Former Convertible Notes Indenture, the holders had the right to convert their Former Convertible Notes into shares of our common stock at a conversion rate of 27.2221 shares per $1,000 principal amount of Former Convertible Notes, which rate was increased by the make-whole premium. Holders of $319.4 million in principal of these Former Convertible Notes chose to convert their notes to shares of our common stock resulting in the issuance of 8.9 million shares from treasury stock, including 0.2 million shares due to the make-whole premium. Approximately 8.6 million of these shares were included in Diluted earnings per share attributable to Encompass Health common shareholders as of March 31, 2017. We redeemed the remaining $0.6 million in principal at par in cash. The redemption and all conversions occurred in the second quarter of 2017. The Former Convertible Notes would have matured on December 1, 2043. Inclusive of discounts and financing costs, the effective interest rate on the Former Convertible Notes was 6.0%. Interest was payable semiannually in arrears in cash on June 1 and December 1 of each year. Other Notes Payable— Our notes payable consist of the following (in millions):
| As of December 31, |  |
| 2019 |  | 2018 |  | Interest Rates
Sale/leaseback transactions involving real estate accounted for as financings | $ | 28.0 |  |  | $ | 82.8 |  |  | 8.1% to 11.2% as of December 31, 2019; 7.8% to 11.2% as of December 31, 2018
Construction of a new hospital | 12.9 |  |  | 14.6 |  |  | 5.0% as of December 31, 2019; 4.8% to 5.0% as of December 31, 2018
Other | 3.8 |  |  | 6.8 |  |  | 4.3% to 6.8%
Other notes payable | $ | 44.7 |  |  | $ | 104.2 |  |  |
As a result of adopting ASC 842 on January 1, 2019, notes payable of approximately $52 million related to a sale/leaseback transaction involving real estate became a finance lease obligation. See Note 1, Summary of Significant Accounting Policies, “Recent Accounting Pronouncements,” for additional information on ASC 842.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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