Company: EHC
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000785161-25-000009
Chunk: 168

Company: Encompass Health Corp
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7A
Chunk 168
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Item 7A.Quantitative and Qualitative Disclosures about Market Risk

Our primary exposure to market risk is to changes in interest rates on our variable rate long-term debt. We use a sensitivity analysis model to evaluate the impact of interest rate changes on our variable rate debt. As of December 31, 2024, our primary variable rate debt outstanding related to $20.0 million in advances under our revolving credit facility. Assuming outstanding balances were to remain the same, a 1% increase in interest rates would result in an incremental negative cash flow of approximately $0.2 million over the next 12 months, while a 1% decrease in interest rates would result in an incremental positive cash flow of approximately $0.2 million over the next 12 months. HCS, Ltd., our wholly owned insurance captive maintains positions in investment securities for other than trading purposes, which, as of December 31, 2024, had a fair market value of approximately $131 million. Changes in the value of these securities is recorded in the accompanying consolidated statements of comprehensive income. During the year ended December 31, 2024, we recorded an unrealized gain of $1.0 million pertaining to these securities. For additional information, see Note 4, Cash and Marketable Securities, and Note 12, Fair Value Measurements, to the accompanying consolidated financial statements.

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The fair value of our fixed rate debt is determined using inputs, including quoted prices in nonactive markets, that are observable either directly or indirectly, or Level 2 inputs within the fair value hierarchy, and is summarized as follows (in millions):

December 31, 2024December 31, 2023Financial Instrument:Book ValueMarket ValueBook ValueMarket Value5.75% Senior Notes due 2025Carrying Value$99.8 $— $348.5 $— Unamortized debt discount and fees0.2 — 1.5 — Principal amount100.0 99.7 350.0 349.3 4.50% Senior Notes due 2028Carrying Value788.4 — 785.0 — Unamortized debt discount and fees11.6 — 15.0 — Principal amount800.0 772.3 800.0 763.6 4.75% Senior Notes due 2030Carrying Value784.2 — 781.5 — Unamort