Encompass Health Corp

Previous wording

We are the nation’s largest owner and operator of inpatient rehabilitation hospitals (“IRFs”) in terms of patients treated, revenues, and number of hospitals. We provide specialized rehabilitative treatment on an inpatient basis. We operate IRFs in 38 states and Puerto Rico, with concentrations in Florida and Texas. As of June 30, 2025, we operated 168 IRFs. For additional information about our business, see Item 1, Business, and Item 1A, Risk Factors, of the 2024 Form 10‑K.

Current wording

We are the nation’s largest owner and operator of inpatient rehabilitation hospitals (“IRFs”) in terms of patients treated, revenues, and number of hospitals. We provide specialized rehabilitative treatment on an inpatient basis. We operate IRFs in 39 states and Puerto Rico, with concentrations in Florida and Texas. As of September 30, 2025, we operated 170 IRFs. For additional information about our business, see Item 1, Business, and Item 1A, Risk Factors, of the 2024 Form 10‑K.

Previous wording

During the three and six months ended June 30, 2025, Net operating revenues increased 12.0% and 11.3%, respectively, over the same periods of 2024 due primarily to volume growth and increased pricing. See “Results of Operations” section of this Item for additional volume and pricing information.

Current wording

During the three and nine months ended September 30, 2025, Net operating revenues increased 9.4% and 10.6%, respectively, over the same periods of 2024 due primarily to volume growth and increased pricing. See “Results of Operations” section of this Item for additional volume and pricing information.

Previous wording

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

Current wording

•expanded our capacity by adding 140 new beds to existing hospitals (inclusive of our new 50-bed satellite inpatient rehabilitation hospital in Wildwood, Florida (The Villages) which began operating in September); and

Previous wording

We also continued our shareholder distributions during the six months ended June 30, 2025 through common stock repurchases and paying a quarterly cash dividend. For additional information see the “Liquidity and Capital Resources” section of this Item.

Current wording

We also continued our shareholder distributions during the nine months ended September 30, 2025 through common stock repurchases and paying a quarterly cash dividend. For additional information see the “Liquidity and Capital Resources” section of this Item.

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. The opt-out validation percentages for the second and third cycles were 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 the first cycle ending in February 2024 exceeded the required 80% at our IRFs in Alabama. For the second cycle, which began on May 1, 2024, we elected not to opt out, so our IRFs in Alabama remained subject to the 100% pre-claim review. None of our IRFs in Alabama achieved the 85% claim validation rate for the second cycle ending in October 2024. In the third cycle, we again submitted 100% of review requests pre-claim. None of our IRFs in Alabama achieved the 90% claim validation rate for the third cycle ending in June 2025. We believe many of the non-affirmations in the second and third cycles were based on application of improper standards or requirements that directly conflict with the Medicare coverage criteria for IRFs. We have engaged, and will continue to engage, with the MAC and CMS to ensure the review process is consistent with existing rules, regulations and statutes. Given the inconsistent review process applied by the MAC across the previous three cycles, we cannot predict the impact, if any, RCD may have on the collectability of our Medicare claims over the program’s term and ultimately on 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. The opt-out validation percentages for the second cycle was 85% and the third and fourth cycles were 90% or greater. 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 the first cycle ending in February 2024 exceeded the required 80% at our IRFs in Alabama. For the second cycle, which began on May 1, 2024, we elected not to opt out, so our IRFs in Alabama remained subject to the 100% pre-claim review. None of our IRFs in Alabama achieved the 85% claim validation rate for the second cycle ending in October 2024. In the third cycle, we again submitted 100% of review requests pre-claim. None of our IRFs in Alabama achieved the 90% claim validation rate for the third cycle ending in June 2025. We believe many of the non-affirmations in the second and third cycles were based on application of improper standards or requirements that directly conflict with the Medicare coverage criteria for IRFs. In the fourth cycle, we are again submitting 100% of review requests pre-claim. We have engaged, and will continue to engage, with the MAC and CMS to ensure the review process is consistent with existing rules, regulations and statutes. Given the inconsistent review process applied by the MAC across the previous three cycles, we cannot predict the impact, if any, RCD may have on the collectability of our Medicare claims over the program’s term and ultimately on our financial position, results of operations, and cash flows.

Previous wording

Our consolidated Net operating revenues increased during the three months ended June 30, 2025 compared to the same period of 2024 primarily due to increased volumes and favorable pricing. Discharge growth included a 4.7% increase in same-store discharges. Discharge growth from new stores during the three months ended June 30, 2025 compared to the same period of 2024 resulted from our joint ventures in Atlanta, Georgia (May 2024), Louisville, Kentucky (June 2024), Athens, Georgia (March 2025), and Fort Myers, Florida (May 2025), as well as our wholly owned hospitals in Kissimmee, Florida (May 2024), Johnston, Rhode Island (July 2024), Fort Mill, South Carolina (September 2024), and Houston, Texas (November 2024). Growth in net patient revenue per discharge during the three months ended June 30, 2025 compared to the same period of 2024 primarily resulted from increase in reimbursement rates and lower revenue reserves related to bad debt. Revenue reserves related to bad debt as a percentage of Net operating revenues decreased during the three months ended June 30, 2025 to 2.0% from 2.9% during the three months ended June 30, 2024 primarily due to a decrease in medical necessity claim review audits.

Current wording

Our consolidated Net operating revenues increased during the three months ended September 30, 2025 compared to the same period of 2024 primarily due to increased volumes and favorable pricing. Discharge growth included a 2.9% increase in same-store discharges. Discharge growth from new stores during the three months ended September 30, 2025 compared to the same period of 2024 resulted from our joint ventures in Athens, Georgia (March 2025) and Fort Myers, Florida (May 2025), as well as our wholly owned hospitals in Johnston, Rhode Island (July 2024), Fort Mill, South Carolina (September 2024), Houston, Texas (November 2024), and Daytona Beach, Florida (July 2025). Growth in net patient revenue per discharge during the three months ended September 30, 2025 compared to the same period of 2024 primarily resulted from increase in reimbursement rates.

Previous wording

Growth in revenues, discharges, and net patient revenue per discharge during the six months ended June 30, 2025 were impacted primarily by the same factors as discussed above for the second quarter of 2025. Discharge growth included a 4.5% increase in same-store discharges.

Current wording

Growth in revenues, discharges, and net patient revenue per discharge during the nine months ended September 30, 2025 were impacted primarily by the same factors as discussed above for the third quarter of 2025. Discharge growth included a 3.8% increase in same-store discharges. Discharge growth from new stores during the nine months ended September 30, 2025 compared to the same period of 2024 also resulted from our joint ventures in Atlanta, Georgia (May 2024) and Louisville, Kentucky (June 2024), as well as our wholly owned hospital in Kissimmee, Florida (May 2024).

Previous wording

The increase in outpatient and other revenue during the three and six months ended June 30, 2025 included an increase of $8.5 million and $13.8 million, respectively, in Medicaid supplemental payments (offset by an increase of $9.3 million and $16.4 million, respectively, in provider tax expenses included in Other operating expenses). Medicaid supplemental payments represent amounts received under state directed and supplemental payment programs associated with Medicaid. For additional information, see Item 1, Business, “Medicaid Reimbursement,” of the 2024 Form 10‑K.

Current wording

The increase in outpatient and other revenue during the three and nine months ended September 30, 2025 included an increase of $16.3 million and $30.1 million, respectively, in Medicaid supplemental payments (offset by an increase of $8.7 million and $25.1 million, respectively, in provider tax expenses included in Other operating expenses). Medicaid supplemental payments represent amounts received under state directed and supplemental payment programs associated with Medicaid. For additional information, see Item 1, Business, “Medicaid Reimbursement,” of the 2024 Form 10‑K.

Previous wording

Salaries and benefits increased during the three and six months ended June 30, 2025 compared to the same periods of 2024 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 and six months ended June 30, 2025 compared to the same periods of 2024 primarily due a decline in EPOB and decreases in both contract labor and sign-on and shift bonuses.

Current wording

Salaries and benefits increased during the three and nine months ended September 30, 2025 compared to the same periods of 2024 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 September 30, 2025 compared to the same period of 2024 primarily due to decreases in both contract labor and sign-on and shift bonuses. Salaries and benefits decreased as a percent of Net operating revenues during the nine months ended September 30, 2025 compared to the same period of 2024 primarily due to a decline in EPOB and decreases in both contract labor and sign-on and shift bonuses.

Previous wording

Other operating expenses increased in terms of dollars and as a percent of Net operating revenues during the three months ended June 30, 2025 compared to the same period of 2024 primarily due to increased provider taxes and higher costs resulting from our development activities.

Current wording

Other operating expenses increased in terms of dollars and as a percent of Net operating revenues during the three and nine months ended September 30, 2025 compared to the same periods of 2024 primarily due to increased provider taxes and higher costs resulting from our development activities.

Previous wording

Other operating expenses increased during the six months ended June 30, 2025 compared to the same period of 2024 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 also 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. Other operating expenses decreased as a percent of Net operating revenues during the six months ended June 30, 2025 compared to the same period of 2024 primarily due to higher volumes.

Current wording

Other operating expenses during the nine months ended September 30, 2024 also 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 nine months ended September 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 June 30, 2025 compared to the same period of 2024 primarily due to mark-to-market adjustments on our non-qualified deferred compensation plan and higher incentive compensation, benefits, and salaries. General and administrative expenses increased during the six months ended June 30, 2025 compared to the same period of 2024 primarily due to higher incentive compensation, benefits, and software expenses.

Current wording

General and administrative expenses increased during the three months ended September 30, 2025 compared to the same period of 2024 primarily due to higher contract services and software expenses. General and administrative expenses increased during the nine months ended September 30, 2025 compared to the same period of 2024 primarily due to higher incentive compensation, benefits, and software expenses. General and administrative expenses decreased as a percent of Net operating revenues during the three and nine months ended September 30, 2025 compared to the same periods of 2024 primarily due to higher volumes.

Previous wording

Depreciation and amortization increased during the three and six months ended June 30, 2025 compared to the same periods of 2024 due to our capital investments. 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.

Current wording

Depreciation and amortization increased during the three and nine months ended September 30, 2025 compared to the same periods of 2024 due to our capital investments. See the “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 and six months ended June 30, 2025 compared to the same periods of 2024 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 nine months ended September 30, 2025 compared to the same periods of 2024 primarily due to the increase in Net operating revenues as discussed above.

Previous wording

Our Provision for income tax expense increased during the three and six months ended June 30, 2025 compared to the same periods of 2024 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 nine months ended September 30, 2025 compared to the same periods of 2024 primarily due to higher Income from continuing operations before income tax expense.

Previous wording

In certain jurisdictions, we do not expect to generate sufficient income to use all of the available state net operating losses and foreign tax credits prior to their expiration. This determination is based on our evaluation of all available evidence in these jurisdictions including results of operations during the preceding three years, our forecast of future earnings, and prudent tax planning strategies. It is possible we may be required to increase or decrease our valuation allowance at some future time if our forecast of future earnings varies from actual results on a consolidated basis or in the applicable tax jurisdiction, if the timing of future tax deductions differs from our expectations, or pursuant to changes in state and foreign tax laws and rates.

Current wording

In certain jurisdictions, we do not expect to generate sufficient income to use all available state net operating losses and foreign tax credits prior to their expiration. This determination is based on our evaluation of all available evidence in these jurisdictions including results of operations during the preceding three years, our forecast of future earnings, and prudent tax planning strategies. It is possible we may be required to increase or decrease our valuation allowance at some future time if our forecast of future earnings varies from actual results on a consolidated basis or in the applicable tax jurisdiction, if the timing of future tax deductions differs from our expectations, or pursuant to changes in state and foreign tax laws and rates.

Previous wording

The increase in Net income attributable to noncontrolling interests during the three and six months ended June 30, 2025 compared to the same periods of 2024 resulted from increased profitability from certain existing joint venture hospitals. Net income attributable to noncontrolling interests during the six months ended June 30, 2024 included 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 and nine months ended September 30, 2025 compared to the same periods of 2024 resulted from increased profitability from certain existing joint venture hospitals. Net income attributable to noncontrolling interests during the nine months ended September 30, 2024 included 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

The objectives of our capital structure strategy are to ensure we maintain adequate liquidity and flexibility. Pursuing and achieving those objectives allow us to support the execution of our operating and strategic plans and weather temporary disruptions in the capital markets and general business environment. Maintaining adequate liquidity is a function of our unrestricted Cash and cash equivalentsand our available borrowing capacity. Maintaining flexibility in our capital structure is a function of, among other things, the amount of debt maturities in any given year, the options for debt prepayments without onerous penalties, and limiting restrictive terms and maintenance covenants in our debt agreements.

Current wording

The objectives of our capital structure strategy are to ensure we maintain adequate liquidity and flexibility. Pursuing and achieving those objectives allow us to support the execution of our operating and strategic plans and weather temporary disruptions in the capital markets and general business environment. Maintaining adequate liquidity is a function of our unrestricted Cash and cash equivalentsand our available borrowing capacity. Maintaining flexibility in our capital structure is a function of, among other things, the amount of debt maturities in any given year, the options for debt prepayments without onerous penalties, and limiting restrictive terms and maintenance covenants in our debt agreements. Consistent with these objectives, in September 2025, we redeemed the remaining $100 million of the outstanding principal balance of our 5.75% Senior Notes due 2025 at maturity using cash on hand and capacity under our revolving credit facility.

Previous wording

As of June 30, 2025, we had $99.1 million in Cash and cash equivalents. This amount excludes $38.3 million in Restricted cash and $128.1 million of restricted marketable securities ($33.2 million included in Other current assets and $94.9 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 4, Marketable Securities, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 4, Cash and Marketable Securities, to the consolidated financial statements accompanying the 2024 Form 10‑K.

Current wording

As of September 30, 2025, we had $48.7 million in Cash and cash equivalents. This amount excludes $45.0 million in Restricted cash and $139.8 million of restricted marketable securities ($34.1 million included in Other current assets and $105.7 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 4, Marketable Securities, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 4, Cash and Marketable Securities, to the consolidated financial statements accompanying the 2024 Form 10‑K.

Previous wording

In addition to Cash and cash equivalents, as of June 30, 2025, we had approximately $953 million available to us under our revolving credit facility. Our credit agreement governs the substantial majority of our senior secured borrowing capacity and contains a leverage ratio and an interest coverage ratio as financial covenants. Our leverage ratio is defined in our credit agreement as the ratio of consolidated total debt (less cash on hand) to Adjusted EBITDA for the trailing four quarters. In calculating the leverage ratio under our credit agreement, we are permitted to use pro forma Adjusted EBITDA, the calculation of which includes historical income statement items and pro forma adjustments, subject to certain limitations, resulting from (1) dispositions and repayments or incurrence of debt and (2) investments, acquisitions, mergers, amalgamations, consolidations and other operational changes to the extent such items or effects are not yet reflected in our trailing four-quarter financial statements. Our interest coverage ratio is defined in our credit agreement as the ratio of Adjusted EBITDA to consolidated interest expense, excluding the amortization of financing fees, for the trailing four quarters. As of June 30, 2025, the maximum leverage ratio requirement per our credit agreement was 4.50x and the minimum interest coverage ratio requirement was 3.0x, and we were in compliance with these covenants. Based on Adjusted EBITDA for the trailing four quarters and the interest rate in effect under our credit agreement during the three-month period ended June 30, 2025, if we had drawn on the first day and maintained the maximum amount of outstanding draws under our revolving credit facility for that entire period, we would still be in compliance with the maximum leverage ratio and minimum interest coverage ratio requirements.

Current wording

In addition to Cash and cash equivalents, as of September 30, 2025, we had approximately $873 million available to us under our revolving credit facility. Our credit agreement governs the substantial majority of our senior secured borrowing capacity and contains a leverage ratio and an interest coverage ratio as financial covenants. Our leverage ratio is defined in our credit agreement as the ratio of consolidated total debt (less cash on hand) to Adjusted EBITDA for the trailing four quarters. In calculating the leverage ratio under our credit agreement, we are permitted to use pro forma Adjusted EBITDA, the calculation of which includes historical income statement items and pro forma adjustments, subject to certain limitations, resulting from (1) dispositions and repayments or incurrence of debt and (2) investments, acquisitions, mergers, amalgamations, consolidations and other operational changes to the extent such items or effects are not yet reflected in our trailing four-quarter financial statements. Our interest coverage ratio is defined in our credit agreement as the ratio of Adjusted EBITDA to consolidated interest expense, excluding the amortization of financing fees, for the trailing four quarters. As of September 30, 2025, the maximum leverage ratio requirement per our credit agreement was 4.50x and the minimum interest coverage ratio requirement was 3.0x, and we were in compliance with these covenants. Based on Adjusted EBITDA for the trailing four quarters and the interest rate in effect under our credit agreement during the three-month period ended September 30, 2025, if we had drawn on the first day and maintained the maximum amount of outstanding draws under our revolving credit facility for that entire period, we would still be in compliance with the maximum leverage ratio and minimum interest coverage ratio requirements.

Previous wording

We do not face near-term refinancing risk, as the amounts outstanding under our credit agreement do not mature until 2027, and except for approximately $100 million of our 2025 Notes, our bonds all mature in 2028 and beyond. See Note 5, Long-term Debt, to the accompanying condensed consolidated financial statements, for additional information related to our debt. Also, see the “Contractual Obligations” section below for information related to our contractual obligations as of June 30, 2025.

Current wording

We do not face near-term refinancing risk, as the amounts outstanding under our credit agreement do not mature until 2027, and our bonds all mature in 2028 and beyond. See Note 5, Long-term Debt, to the accompanying condensed consolidated financial statements, for additional information related to our debt. Also, see the “Contractual Obligations” section below for information related to our contractual obligations as of September 30, 2025.

Previous wording

Operating activities. The increase in Net cash provided by operating activities for the six months ended June 30, 2025 compared to the same period of 2024 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 nine months ended September 30, 2025 compared to the same period of 2024 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 six months ended June 30, 2025 compared to the same period of 2024 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 nine months ended September 30, 2025 compared to the same period of 2024 primarily resulted from increased Purchases of property, equipment, and intangible assets.

Previous wording

Financing activities. The increase in Net cash used in financing activities during the six months ended June 30, 2025 compared to the same period of 2024 primarily resulted from higher Repurchases of common stock, including fees and expenses, higher net debt payments on our revolving credit facility and lower Contributions from noncontrolling interests of consolidated affiliates. For additional information related to our stock repurchases, see “Authorizations for Returning Capital to Stakeholders” section below.

Current wording

Financing activities. The increase in Net cash used in financing activities during the nine months ended September 30, 2025 compared to the same period of 2024 primarily resulted from lower Contributions from noncontrolling interests of consolidated affiliatesand higher Repurchases of common stock, including fees and expenses, partially offset by lower net debt payments. Contributions from noncontrolling interests of consolidated affiliates during the nine months ended September 30, 2024 included approximately $90 million from Piedmont Healthcare. See Note 1, Basis of Presentation, “Noncontrolling Interests in Consolidated Affiliates,”to the accompanying condensed consolidated financial statements, for additional information on this transaction. For additional information related to our stock repurchases, see “Authorizations for Returning Capital to Stakeholders” section below. For additional information on our net debt payments, see Note 5, Long-term Debt, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 9, Long-term Debt, to the consolidated financial statements accompanying the 2024 Form 10‑K.

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. 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 operations.

Current wording

(b) Interest on our fixed rate debt is presented using the stated interest rate. Interest on our variable rate debt is estimated using the rate in effect as of September 30, 2025. 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 operations.

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 six months ended June 30, 2025, we made capital expenditures of approximately $320 million for property, equipment, and intangible assets. During 2025, we expect to spend approximately $785 million to $820 million for capital expenditures using cash on hand and borrowings under our revolving credit facility. Approximately $215 million to $225 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. At June 30, 2025, we have projects under construction which have an estimated additional cost to complete over the next two years of approximately $380 million. We expect to fund capital expenditures using cash on hand and borrowings under our revolving credit facility.

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 nine months ended September 30, 2025, we made capital expenditures of approximately $507 million for property, equipment, and intangible assets. During 2025, we expect to spend approximately $785 million to $820 million for capital expenditures using cash on hand and borrowings under our revolving credit facility. Approximately $215 million to $225 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. At September 30, 2025, we have projects under construction which have an estimated additional cost to complete over the next two years of approximately $424 million. We expect to fund capital expenditures using cash on hand and borrowings under our revolving credit facility.

Previous wording

In October 2024, February 2025, and May 2025, our board of directors declared cash dividends of $0.17 per share that were paid in January 2025, April 2025, and July 2025, respectively. On July 24, 2025, our board of directors approved an increase in our quarterly dividend and declared a cash dividend of $0.19 per share, payable on October 15, 2025 to stockholders of record on October 1, 2025. 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 2024, February 2025, and May 2025, our board of directors declared cash dividends of $0.17 per share that were paid in January 2025, April 2025, and July 2025, respectively. On July 24, 2025, our board of directors approved an increase in our quarterly dividend and declared a cash dividend of $0.19 per share, that was paid on October 15, 2025 to stockholders of record on October 1, 2025. On October 23, 2025, our board of directors declared a cash dividend of $0.19 per share, payable on January 15, 2026 to stockholders of record on January 2, 2026. 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

In 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock, which has been amended from time to time. Most recently, on July 24, 2024, our board approved resetting the aggregate common stock repurchase authorization to $500 million. As of June 30, 2025, approximately $433 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. During the six months ended June 30, 2025, we repurchased 0.6 million shares of our common stock in the open market for $56.8 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.

Current wording

In 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock, which has been amended from time to time. Most recently, on July 24, 2024, our board approved resetting the aggregate common stock repurchase authorization to $500 million. As of September 30, 2025, approximately $408 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. During the nine months ended September 30, 2025, we repurchased 0.8 million shares of our common stock in the open market for $81.7 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.

Previous wording

Our indebtedness under our credit agreement and the 5.75% Senior Notes due 2025, 4.50% Senior Notes due 2028, 4.75% Senior Notes due 2030, and 4.625% Senior Notes due 2031, (collectively, the “Senior Notes”) are guaranteed by certain consolidated subsidiaries. These guarantees are full and unconditional and joint and several, subject to certain customary conditions for release. The Senior Notes are 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. The other subsidiaries of Encompass Health do not guarantee the Senior Notes (such subsidiaries are referred to as the “non-guarantor subsidiaries”).

Current wording

Our indebtedness under our credit agreement and the 4.50% Senior Notes due 2028, 4.75% Senior Notes due 2030, and 4.625% Senior Notes due 2031, (collectively, the “Senior Notes”) are guaranteed by certain consolidated subsidiaries. These guarantees are full and unconditional and joint and several, subject to certain customary conditions for release. The Senior Notes are 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. The other subsidiaries of Encompass Health do not guarantee the Senior Notes (such subsidiaries are referred to as the “non-guarantor subsidiaries”).