Company: EHC
Filing Date: 2025-04-01
Form Type: DEF 14A
Source: 0000785161-25-000013
Chunk: 64

Company: Encompass Health Corp
Filing Date: 2025-04-01
Form: DEF 14A
Chunk 64
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 earnings per share used in our earnings releases and publicly available financial guidance. We believe the calculation for compensation purposes for the associated performance period more accurately represents those matters within the control of management compared to that used in communications with the market.

5 For purposes of 2024 PSUs, ROIC is defined as the three-year average net operating profit after taxes (“NOPAT”) divided by the average invested capital as of December 31, 2023, 2024, 2025, and 2026. Invested capital is calculated as total assets less deferred tax assets, assets from discontinued operations, current liabilities, long-term operating lease liabilities, noncontrolling interests and redeemable noncontrolling interests plus current portion of long-term debt. NOPAT is defined as income from continuing operations attributable to Encompass Health common shareholders, excluding interest expense, fair value adjustments to the value of marketable securities, and loss on early extinguishment of debt, as adjusted for a normalized income tax expense. Both the numerator and the denominator are adjusted based on applicable items from the five categories for these unusual or nonrecurring unbudgeted items described above. For the 2023 ROIC performance period ended December 31, 2024, those unbudgeted items included divestitures, net debt redemptions, a real estate lease buyout, common stock repurchases, and CON accelerated amortization, for which the average annual net adjustment to NOPAT was an increase of $3.1 million and the net adjustments to the invested capital amounts at year end 2023 and 2024 were a decrease of $16.9 million and an increase of $227.5 million, respectively.

6 Publicly reported financial results do not otherwise include the normalized EPS or ROIC metrics.

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Time-Based Restricted Stock Awards in 2024

The Committee believes the portion of the 2024 award value denominated in RSAs provides retention incentives to our executives and facilitates stock ownership, which further links executives to our stockholders. Under our equity incentive plan, NEOs may be granted RSAs which entitle them to receive a predetermined number of restricted shares upon completion of a specified service period. The 2024 RSA awards vest ratably in equal annual increments over three years from the award date. The recipients of RSA awards have rights to vote and receive dividends. Dividends accrue when paid on outstanding shares, but the holders of RSAs will not receive the cash payments related to these accrued dividends until the