10/28/2024 | Press release | Distributed by Public on 10/28/2024 14:34
Growth | ||||||||
Q3 2024 | Q3 2023 | Dollars | Percent | |||||
(In Millions, Except Per Share Data) | ||||||||
Net operating revenue | $ | 1,351.0 | $ | 1,206.9 | $ | 144.1 | 11.9 | % |
Income from continuing operations attributable to Encompass Health per diluted share
|
1.07 | 0.85 | 0.22 | 25.9 | % | |||
Adjusted earnings per share | 1.03 | 0.86 | 0.17 | 19.8 | % | |||
Cash flows provided by operating activities
|
267.8 | 215.2 | 52.6 | 24.4 | % | |||
Adjusted EBITDA | 269.3 | 237.5 | 31.8 | 13.4 | % | |||
Adjusted free cash flow | 189.7 | 149.3 | 40.4 | 27.1 | % | |||
(Actual Amounts) | ||||||||
Discharges | 62,715 | 57,665 | 8.8 | % | ||||
Same-store discharge growth | 6.8 | % | ||||||
Net patient revenue per discharge | $ | 20,987 | $ | 20,472 | 2.5 | % |
1
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Full-Year 2024 Guidance | ||
Previous Guidance | Updated Guidance | |
(In Millions, Except Per Share Data) | ||
Net operating revenue | $5,275 to $5,350 | $5,325 to $5,375 |
Adjusted EBITDA | $1,040 to $1,075 | $1,070 to $1,090 |
Adjusted earnings per share from continuing operations attributable to Encompass Health | $3.97 to $4.22 | $4.19 to $4.33 |
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3
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
(In Millions, Except Per Share Data) | ||||||||
Net operating revenues | $ | 1,351.0 | $ | 1,206.9 | $ | 3,968.2 | $ | 3,554.4 |
Operating expenses: | ||||||||
Salaries and benefits | 732.1 | 658.6 | 2,144.2 | 1,923.8 | ||||
Other operating expenses | 202.4 | 183.7 | 596.2 | 534.3 | ||||
Occupancy costs | 14.4 | 14.2 | 42.6 | 42.3 | ||||
Supplies | 60.6 | 53.9 | 176.7 | 159.7 | ||||
General and administrative expenses | 54.0 | 49.8 | 154.7 | 148.6 | ||||
Depreciation and amortization | 78.4 | 67.3 | 221.6 | 203.8 | ||||
Total operating expenses | 1,141.9 | 1,027.5 | 3,336.0 | 3,012.5 | ||||
Loss on early extinguishment of debt | 0.4 | - | 0.4 | - | ||||
Interest expense and amortization of debt discounts and fees | 34.9 | 35.9 | 104.4 | 108.6 | ||||
Other income | (9.3) | (0.5) | (18.0) | (6.8) | ||||
Equity in net income of nonconsolidated affiliates | (0.7) | (1.0) | (2.8) | (2.3) | ||||
Income from continuing operations before income tax expense | 183.8 | 145.0 | 548.2 | 442.4 | ||||
Provision for income tax expense | 36.0 | 30.3 | 112.6 | 95.0 | ||||
Income from continuing operations | 147.8 | 114.7 | 435.6 | 347.4 | ||||
Loss from discontinued operations, net of tax | (0.7) | (1.3) | (3.2) | (3.5) | ||||
Net and comprehensive income | 147.1 | 113.4 | 432.4 | 343.9 | ||||
Less: Net and comprehensive income attributable to noncontrolling interests | (38.9) | (28.1) | (97.6) | (79.5) | ||||
Net and comprehensive income attributable to Encompass Health | $ | 108.2 | $ | 85.3 | $ | 334.8 | $ | 264.4 |
Weighted average common shares outstanding: | ||||||||
Basic | 99.9 | 99.5 | 99.9 | 99.5 | ||||
Diluted | 102.1 | 101.4 | 102.2 | 101.1 | ||||
Earnings per common share:
|
||||||||
Basic earnings per share attributable to Encompass Health common shareholders:
|
||||||||
Continuing operations
|
$ | 1.09 | $ | 0.86 | $ | 3.36 | $ | 2.68 |
Discontinued operations
|
(0.01) | (0.01) | (0.03) | (0.04) | ||||
Net income
|
$ | 1.08 | $ | 0.85 | $ | 3.33 | $ | 2.64 |
Diluted earnings per share attributable to Encompass Health common shareholders:
|
||||||||
Continuing operations
|
$ | 1.07 | $ | 0.85 | $ | 3.31 | $ | 2.65 |
Discontinued operations
|
(0.01) | (0.01) | (0.03) | (0.03) | ||||
Net income
|
$ | 1.06 | $ | 0.84 | $ | 3.28 | $ | 2.62 |
Amounts attributable to Encompass Health common shareholders: | ||||||||
Income from continuing operations | $ | 108.9 | $ | 86.6 | $ | 338.0 | $ | 267.9 |
Loss from discontinued operations, net of tax | (0.7) | (1.3) | (3.2) | (3.5) | ||||
Net income attributable to Encompass Health | $ | 108.2 | $ | 85.3 | $ | 334.8 | $ | 264.4 |
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September 30, 2024 | December 31, 2023 | |||
(In Millions) | ||||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ | 147.8 | $ | 69.1 |
Restricted cash | 51.1 | 35.1 | ||
Accounts receivable | 576.4 | 611.6 | ||
Other current assets | 158.6 | 126.0 | ||
Total current assets | 933.9 | 841.8 | ||
Property and equipment, net | 3,523.7 | 3,301.0 | ||
Operating lease right-of-use assets | 209.7 | 208.5 | ||
Goodwill | 1,284.0 | 1,281.3 | ||
Intangible assets, net | 296.2 | 278.2 | ||
Other long-term assets | 210.9 | 191.6 | ||
Total assets | $ | 6,458.4 | $ | 6,102.4 |
Liabilities and Shareholders' Equity | ||||
Current liabilities: | ||||
Current portion of long-term debt | $ | 233.0 | $ | 24.8 |
Current operating lease liabilities | 26.5 | 24.1 | ||
Accounts payable | 170.3 | 170.0 | ||
Accrued expenses and other current liabilities | 467.6 | 437.5 | ||
Total current liabilities | 897.4 | 656.4 | ||
Long-term debt, net of current portion | 2,344.5 | 2,687.8 | ||
Long-term operating lease liabilities | 195.5 | 196.1 | ||
Deferred income tax liabilities | 97.1 | 87.0 | ||
Other long-term liabilities | 198.3 | 177.9 | ||
Total liabilities | 3,732.8 | 3,805.2 | ||
Commitments and contingencies | ||||
Redeemable noncontrolling interests | 56.5 | 42.0 | ||
Shareholders' equity: | ||||
Encompass Health shareholders' equity | 1,959.8 | 1,647.5 | ||
Noncontrolling interests | 709.3 | 607.7 | ||
Total shareholders' equity | 2,669.1 | 2,255.2 | ||
Total liabilities and shareholders' equity | $ | 6,458.4 | $ | 6,102.4 |
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Nine Months Ended September 30, | ||||
2024 | 2023 | |||
(In Millions) | ||||
Cash flows from operating activities: | ||||
Net income | $ | 432.4 | $ | 343.9 |
Loss from discontinued operations, net of tax | 3.2 | 3.5 | ||
Adjustments to reconcile net income to net cash provided by operating activities- | ||||
Depreciation and amortization | 221.6 | 203.8 | ||
Stock-based compensation | 35.8 | 37.2 | ||
Deferred tax expense (benefit) | 2.1 | (2.9) | ||
Other, net | 13.5 | 10.0 | ||
Change in assets and liabilities, net of acquisitions- | ||||
Accounts receivable | 29.1 | 20.7 | ||
Other assets | (43.3) | (4.1) | ||
Accounts payable | 1.4 | (0.2) | ||
Accrued payroll | (2.6) | 24.1 | ||
Accrued interest payable | (19.2) | (19.1) | ||
Other liabilities | 53.7 | 37.5 | ||
Net cash used in operating activities of discontinued operations | (3.7) | (4.6) | ||
Total adjustments | 288.4 | 302.4 | ||
Net cash provided by operating activities | 724.0 | 649.8 | ||
Cash flows from investing activities: | ||||
Purchases of property, equipment, and intangible assets | (443.8) | (371.4) | ||
Purchase of restricted investments | (20.0) | (21.1) | ||
Proceeds from sale of restricted investments | 17.9 | 7.0 | ||
Other, net | (3.7) | (9.2) | ||
Net cash used in investing activities | (449.6) | (394.7) | ||
Cash flows from financing activities: | ||||
Principal borrowings on notes | 15.0 | 20.0 | ||
Principal payments on debt, including pre-payments | (153.4) | (6.3) | ||
Borrowings on revolving credit facility | 50.0 | 60.0 | ||
Payments on revolving credit facility | (50.0) | (115.0) | ||
Principal payments under finance lease obligations | (16.2) | (35.9) | ||
Taxes paid on behalf of employees for shares withheld | (12.1) | (8.1) | ||
Contributions from noncontrolling interests of consolidated affiliates | 139.7 | 54.7 | ||
Dividends paid on common stock | (45.8) | (45.5) | ||
Distributions paid to noncontrolling interests of consolidated affiliates | (85.5) | (91.9) | ||
Repurchases of common stock, including fees and expenses | (23.6) | - | ||
Other, net | 2.2 | 0.7 | ||
Net cash used in financing activities | (179.7) | (167.3) | ||
Increase in cash, cash equivalents, and restricted cash | 94.7 | 87.8 | ||
Cash, cash equivalents, and restricted cash at beginning of period | 104.2 | 53.4 | ||
Cash, cash equivalents, and restricted cash at end of period | $ | 198.9 | $ | 141.2 |
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Nine Months Ended September 30, | ||||
2024 | 2023 | |||
(In Millions) | ||||
Reconciliation of Cash, Cash Equivalents, and Restricted Cash | ||||
Cash and cash equivalents at beginning of period | $ | 69.1 | $ | 21.8 |
Restricted cash at beginning of period
|
35.1 | 31.6 | ||
Cash, cash equivalents, and restricted cash at beginning of period
|
$ | 104.2 | $ | 53.4 |
Cash and cash equivalents at end of period
|
$ | 147.8 | $ | 99.7 |
Restricted cash at end of period
|
51.1 | 41.5 | ||
Cash, cash equivalents, and restricted cash at end of period
|
$ | 198.9 | $ | 141.2 |
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
(In Millions, Except Per Share Data) | ||||||||
Adjusted EBITDA | $ | 269.3 | $ | 237.5 | $ | 814.1 | $ | 716.1 |
Depreciation and amortization
|
(78.4) | (67.3) | (221.6) | (203.8) | ||||
Interest expense and amortization of debt discounts and fees
|
(34.9) | (35.9) | (104.4) | (108.6) | ||||
Stock-based compensation | (12.9) | (13.7) | (35.8) | (37.2) | ||||
Loss on disposal or impairment of assets | (0.6) | (2.2) | (11.3) | (3.7) | ||||
142.5 | 118.4 | 441.0 | 362.8 | |||||
Items not indicative of ongoing operating performance: | ||||||||
Loss on early extinguishment of debt | (0.4) | - | (0.4) | - | ||||
State regulatory change impact on noncontrolling interests | - | - | - | 2.2 | ||||
Change in fair market value of equity securities
|
2.8 | (1.5) | 2.7 | (2.1) | ||||
Asset impairment impact on noncontrolling interests | - | - | 7.3 | - | ||||
Pre-tax income | 144.9 | 116.9 | 450.6 | 362.9 | ||||
Income tax expense
|
(36.0) | (30.3) | (112.6) | (95.0) | ||||
Income from continuing operations (1)
|
$ | 108.9 | $ | 86.6 | $ | 338.0 | $ | 267.9 |
Basic shares | 99.9 | 99.5 | 99.9 | 99.5 | ||||
Diluted shares | 102.1 | 101.4 | 102.2 | 101.1 | ||||
Basic earnings per share (1)
|
$ | 1.09 | $ | 0.86 | $ | 3.36 | $ | 2.68 |
Diluted earnings per share (1)
|
$ | 1.07 | $ | 0.85 | $ | 3.31 | $ | 2.65 |
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Q3 | 9 Months | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Earnings per share, as reported | $ | 1.07 | $ | 0.85 | $ | 3.31 | $ | 2.65 |
Adjustments, net of tax: | ||||||||
Asset impairment impact | - | - | 0.02 | - | ||||
Income tax adjustments
|
(0.02) | - | (0.05) | - | ||||
State regulatory change impact | - | - | - | 0.03 | ||||
Change in fair market value of equity securities
|
(0.02) | 0.01 | (0.02) | 0.02 | ||||
Adjusted earnings per share*
|
$ | 1.03 | $ | 0.86 | $ | 3.26 | $ | 2.69 |
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
(In Millions) | ||||||||
Net cash provided by operating activities
|
$ | 267.8 | $ | 215.2 | $ | 724.0 | $ | 649.8 |
Interest expense and amortization of debt discounts and fees
|
34.9 | 35.9 | 104.4 | 108.6 | ||||
Gain (loss) on sale of investments, excluding impairments | 4.6 | (2.7) | 5.8 | (0.9) | ||||
Equity in net income of nonconsolidated affiliates
|
0.7 | 1.0 | 2.8 | 2.3 | ||||
Net income attributable to noncontrolling interests in continuing operations
|
(38.9) | (28.1) | (97.6) | (79.5) | ||||
Amortization of debt-related items
|
(2.4) | (2.4) | (7.3) | (7.1) | ||||
Distributions from nonconsolidated affiliates
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(1.1) | (0.4) | (3.1) | (0.6) | ||||
Current portion of income tax expense | 38.1 | 33.5 | 110.5 | 97.9 | ||||
Change in assets and liabilities | (32.5) | (17.5) | (19.1) | (58.9) | ||||
Cash used in operating activities of discontinued operations | 1.0 | 1.7 | 3.7 | 4.6 | ||||
State regulatory change impact on noncontrolling interests | - | - | - | (2.2) | ||||
Asset impairment impact on noncontrolling interests | - | - | (7.3) | - | ||||
Change in fair market value of equity securities | (2.8) | 1.5 | (2.7) | 2.1 | ||||
Other | (0.1) | (0.2) | - | - | ||||
Adjusted EBITDA | $ | 269.3 | $ | 237.5 | $ | 814.1 | $ | 716.1 |
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For the Three Months Ended September 30, 2024 | ||||||||||
Adjustments | ||||||||||
As Reported | Loss on Early Extinguishment of Debt | Income Tax Adjustments | Change in Fair Market Value of Equity Securities | As Adjusted | ||||||
(In Millions, Except Per Share Amounts) | ||||||||||
Adjusted EBITDA* | $ | 269.3 | $ | - | $ | - | $ | - | $ | 269.3 |
Depreciation and amortization | (78.4) | - | - | - | (78.4) | |||||
Interest expense and amortization of debt discounts and fees
|
(34.9) | - | - | - | (34.9) | |||||
Stock-based compensation | (12.9) | - | - | - | (12.9) | |||||
Loss on disposal or impairment of assets | (0.6) | - | - | - | (0.6) | |||||
Loss on early extinguishment of debt | (0.4) | 0.4 | - | - | - | |||||
Change in fair market value of equity securities
|
2.8 | - | - | (2.8) | - | |||||
Income from continuing operations before income tax expense
|
144.9 | 0.4 | - | (2.8) | 142.5 | |||||
Provision for income tax expense | (36.0) | (0.1) | (2.1) | 0.7 | (37.5) | |||||
Income from continuing operations attributable to Encompass Health
|
$ | 108.9 | $ | 0.3 | $ | (2.1) | $ | (2.1) | $ | 105.0 |
Diluted earnings per share from continuing operations** | $ | 1.07 | $ | - | $ | (0.02) | $ | (0.02) | $ | 1.03 |
Diluted shares used in calculation | 102.1 |
11
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For the Three Months Ended September 30, 2023 | ||||||||
Adjustments | ||||||||
As Reported | Income Tax Adjustments | Change in Fair Market Value of Equity Securities | As Adjusted | |||||
(In Millions, Except Per Share Amounts) | ||||||||
Adjusted EBITDA* | $ | 237.5 | $ | - | $ | - | $ | 237.5 |
Depreciation and amortization | (67.3) | - | - | (67.3) | ||||
Interest expense and amortization of debt discounts and fees
|
(35.9) | - | - | (35.9) | ||||
Stock-based compensation | (13.7) | - | - | (13.7) | ||||
Loss on disposal or impairment of assets | (2.2) | - | - | (2.2) | ||||
Change in fair market value of equity securities
|
(1.5) | - | 1.5 | - | ||||
Income from continuing operations before income tax expense
|
116.9 | - | 1.5 | 118.4 | ||||
Provision for income tax expense | (30.3) | (0.5) | (0.3) | (31.1) | ||||
Income from continuing operations attributable to Encompass Health
|
$ | 86.6 | $ | (0.5) | $ | 1.2 | $ | 87.3 |
Diluted earnings per share from continuing operations**
|
$ | 0.85 | $ | - | $ | 0.01 | $ | 0.86 |
Diluted shares used in calculation | 101.4 |
12
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For the Nine Months Ended September 30, 2024 | ||||||||||||
Adjustments | ||||||||||||
As Reported | Asset Impairment Impact | Loss on Early Extinguishment of Debt | Income Tax Adjustments | Change in Fair Market Value of Equity Securities | As Adjusted | |||||||
(In Millions, Except Per Share Amounts) | ||||||||||||
Adjusted EBITDA* | $ | 814.1 | $ | - | $ | - | $ | - | $ | - | $ | 814.1 |
Depreciation and amortization | (221.6) | - | - | - | - | (221.6) | ||||||
Interest expense and amortization of debt discounts and fees
|
(104.4) | - | - | - | - | (104.4) | ||||||
Stock-based compensation | (35.8) | - | - | - | - | (35.8) | ||||||
Loss on disposal or impairment of assets | (11.3) | 10.4 | - | - | - | (0.9) | ||||||
Loss on early extinguishment of debt | (0.4) | - | 0.4 | - | - | - | ||||||
Change in fair market value of equity securities
|
2.7 | - | - | - | (2.7) | - | ||||||
Asset impairment impact on noncontrolling interests | 7.3 | (7.3) | - | - | - | - | ||||||
Income from continuing operations before income tax expense
|
450.6 | 3.1 | 0.4 | - | (2.7) | 451.4 | ||||||
Provision for income tax expense | (112.6) | (1.3) | (0.1) | (5.1) | 0.7 | (118.4) | ||||||
Income from continuing operations attributable to Encompass Health
|
$ | 338.0 | $ | 1.8 | $ | 0.3 | $ | (5.1) | $ | (2.0) | $ | 333.0 |
Diluted earnings per share from continuing operations** | $ | 3.31 | $ | 0.02 | $ | - | $ | (0.05) | $ | (0.02) | $ | 3.26 |
Diluted shares used in calculation | 102.2 |
13
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For the Nine Months Ended September 30, 2023 | ||||||||||
Adjustments | ||||||||||
As Reported | State Regulatory Change Impact | Income Tax Adjustments | Change in Fair Market Value of Equity Securities | As Adjusted | ||||||
(In Millions, Except Per Share Amounts) | ||||||||||
Adjusted EBITDA* | $ | 716.1 | $ | - | $ | - | $ | - | $ | 716.1 |
Depreciation and amortization | (203.8) | 6.1 | - | - | (197.7) | |||||
Interest expense and amortization of debt discounts and fees
|
(108.6) | - | - | - | (108.6) | |||||
Stock-based compensation | (37.2) | - | - | - | (37.2) | |||||
Loss on disposal or impairment of assets | (3.7) | - | - | - | (3.7) | |||||
State regulatory change impact on noncontrolling interests | 2.2 | (2.2) | - | - | - | |||||
Change in fair market value of equity securities
|
(2.1) | - | - | 2.1 | - | |||||
Income from continuing operations before income tax expense
|
362.9 | 3.9 | - | 2.1 | 368.9 | |||||
Provision for income tax expense | (95.0) | (1.0) | (0.1) | (0.5) | (96.6) | |||||
Income from continuing operations attributable to Encompass Health
|
$ | 267.9 | $ | 2.9 | $ | (0.1) | $ | 1.6 | $ | 272.3 |
Diluted earnings per share from continuing operations**
|
$ | 2.65 | $ | 0.03 | $ | - | $ | 0.02 | $ | 2.69 |
Diluted shares used in calculation | 101.1 |
14
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
(In Millions) | ||||||||
Net income | $ | 147.1 | $ | 113.4 | $ | 432.4 | $ | 343.9 |
Loss from discontinued operations, net of tax, attributable to Encompass Health | 0.7 | 1.3 | 3.2 | 3.5 | ||||
Net income attributable to noncontrolling interests included in continuing operations | (38.9) | (28.1) | (97.6) | (79.5) | ||||
Provision for income tax expense | 36.0 | 30.3 | 112.6 | 95.0 | ||||
Interest expense and amortization of debt discounts and fees
|
34.9 | 35.9 | 104.4 | 108.6 | ||||
Depreciation and amortization | 78.4 | 67.3 | 221.6 | 203.8 | ||||
Loss on early extinguishment of debt | 0.4 | - | 0.4 | - | ||||
Loss on disposal or impairment of assets | 0.6 | 2.2 | 11.3 | 3.7 | ||||
Stock-based compensation | 12.9 | 13.7 | 35.8 | 37.2 | ||||
State regulatory change impact on noncontrolling interests | - | - | - | (2.2) | ||||
Change in fair market value of equity securities | (2.8) | 1.5 | (2.7) | 2.1 | ||||
Asset impairment impact on noncontrolling interests | - | - | (7.3) | - | ||||
Adjusted EBITDA | $ | 269.3 | $ | 237.5 | $ | 814.1 | $ | 716.1 |
15
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
(In Millions) | ||||||||
Net cash provided by operating activities | $ | 267.8 | $ | 215.2 | $ | 724.0 | $ | 649.8 |
Impact of discontinued operations | 1.0 | 1.7 | 3.7 | 4.6 | ||||
Net cash provided by operating activities of continuing operations
|
268.8 | 216.9 | 727.7 | 654.4 | ||||
Capital expenditures for maintenance | (46.2) | (35.3) | (133.8) | (129.8) | ||||
Distributions paid to noncontrolling interests of consolidated affiliates
|
(33.0) | (32.5) | (85.5) | (91.9) | ||||
Items not indicative of ongoing operating performance: | ||||||||
Transaction costs and related liabilities | 0.1 | 0.2 | (8.6) | (0.5) | ||||
Adjusted free cash flow | $ | 189.7 | $ | 149.3 | $ | 499.8 | $ | 432.2 |
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17
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18
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