What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-05 compared with 2020-11-04 · 116 added, 254 removed, 165 unchanged (69% of the section changed)

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and its subsidiaries.

Unless the context implies otherwise, the term “affiliates” means direct and indirect subsidiaries of Surgery Partners, Inc., and partnerships and joint ventures in which such subsidiaries are partners.

Unless the context implies otherwise, the term “affiliates” means direct and indirect subsidiaries of Surgery Partners, Inc.

and partnerships and joint ventures in which such subsidiaries are partners.

The terms “facilities” or “hospitals” refer to entities owned and operated by affiliates of Surgery Partners, Inc.

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These factors include, without limitation, the duration and severity of the COVID-19 outbreak in the United States and the regions in which we operate;

the impact to the state and local economies of prolonged shelter in place orders and the pandemic generally;

the impact to the state and local economies of prolonged restrictive orders and the pandemic generally;

our ability to respond nimbly to challenging economic conditions;

the unpredictability of our case volume both in the current environment and if and when restrictions are eased;

the unpredictability of our case volume both in the current environment and as restrictions are eased;

our ability to preserve or raise sufficient funds to continue operations throughout this period of uncertainty;

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our ability to successfully integrate acquisitions;

the anticipated impact and timing of our ongoing efficiency efforts, including insurance consolidations and completed headcount actions, as well as our ongoing procurement and revenue cycle efforts;

the anticipated impact and timing of our ongoing efficiency efforts;

the impact of adverse weather conditions and other events outside of our control;

and the risks and uncertainties set forth under the heading "Risk Factors" in this report, our 2019 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and discussed from time to time in our reports filed with the SEC.

and the risks and uncertainties set forth under the heading "Risk Factors" in our 2020 Annual Report on Form 10-K and discussed from time to time in our reports filed with the SEC.

Considering these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements.

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Executive Overview

Total revenues for the third quarter of 2020 increased 9.8% to $496.1 million from $452.0 million for the third quarter of 2019.

Same-facility revenues for the third quarter of 2020 increased 8.4% from the same period last year, with a 11.9% increase in revenue per case partially offset by a 3.1% decrease in same-facility cases.

The decrease in same-facility cases is attributable to the impacts of the COVID-19 pandemic that the Company began experiencing in mid-March, and extending into the third quarter, which is described in further detail below in the section titled "Impact of COVID-19." Same-facility revenue per case growth was driven by a favorable surgical case mix as we experienced a faster recovery of higher acuity cases in the three months ended September 30, 2020.

For the third quarter of 2020, the Company’s net loss attributable to common stockholders and Adjusted EBITDA was $71.6 million and $61.1 million, respectively, compared to $24.8 million and $62.2 million for the same period last year.

A reconciliation of non-GAAP financial measures appears below under "Certain Non-GAAP Metrics." The increase in net loss attributable to common stockholders was primarily attributable to the impairment charges taken during the third quarter of 2020 and the decline in surgical cases due to the impacts of COVID-19 as discussed further below.

We had cash and cash equivalents of $450.0 million and $112.5 million of borrowing capacity under our revolving credit facility at September 30, 2020.

Operating cash flows were $26.9 million in the third quarter of 2020, a decline of $30 million as compared to the prior year period, primarily driven by an acceleration of accounts payable as volumes returned towards pre-COVID levels, as well as higher accounts receivable balances, primarily reflecting timing impacts associated with lower volumes in the second quarter of 2020 due to COVID-19.

Net operating cash outflows, including operating cash flows less distributions to non-controlling interests, were $3.7 million for the third quarter of 2020.

Total revenues for the first quarter of 2021 increased 16.2% to $512.4 million from $441.0 million for the first quarter of 2020.

Same-facility revenues for the first quarter of 2021 increased 15.3% from the same period last year, with a 7.6% increase in revenue per case and a 7.1% increase in same-facility cases.

The increase in same-facility revenues is attributable to the Company's recovery from the negative impacts of the COVID-19 pandemic in the first quarter of 2020.

For the first quarter of 2021, the Company’s net loss attributable to common stockholders and Adjusted EBITDA was $31.3 million and $72.9 million, respectively, compared to $37.0 million and $46.5 million for the same period last year.

A reconciliation of non-GAAP financial measures appears below under "Certain Non-GAAP Metrics." The increase in Adjusted EBITDA was primarily attributable to the Company's recovery from the negative impacts of the COVID-19 pandemic in the first quarter of 2020.

We had cash and cash equivalents of $541.9 million and $162.5 million of borrowing capacity under our revolving credit facility at March 31, 2021.

Operating cash flows were $50.2 million in the first quarter of 2021, an increase of $21.0 million as compared to the prior year period, primarily driven by an overall increase in net income.

Net operating cash inflows, including operating cash flows less distributions to non-controlling interests, were $18.9 million for the first quarter of 2021, compared to $5.2 million for the first quarter of 2020.

Impact of COVID-19

The COVID-19 global pandemic has significantly affected our facilities, employees, patients, communities, business operations and financial performance, as well as the United States economy and financial markets.

On March 18, 2020, we reported that we had withdrawn our previously announced full-year 2020 outlook and on April 15, 2020, we filed a Current Report on Form 8-K providing additional disclosure about the impact of the pandemic on our operations.

The COVID-19 crisis is still evolving and much of its impact remains unknown and difficult to predict;

however, it materially impacted our financial performance for the second and third quarters of 2020, and potentially could negatively impact our financial performance for the year ending December 31, 2020 or longer.

We are taking or supporting measures to try to slow the spread and minimize the impact of the virus.

Beginning mid-March, the COVID-19 pandemic began to negatively affect our net revenue and business operations.

Due in part to local, state and federal guidelines as well as recommendations from major medical societies regarding social distancing and self-quarantines in response to the COVID-19 pandemic, we cancelled or postponed a substantial percentage of the elective procedures scheduled at our facilities and reduced operating hours at a significant number of our facilities.

As a result, our facilities experienced lower surgical case volume, which was more significant at the beginning of the second quarter and has improved as states re-open and allow for non-emergent procedures.

The impact of the COVID-19 pandemic on our surgical facilities varies based on the market in which the facility operates, the type of surgical facility and the procedures that are typically performed.

It is difficult to predict the duration of this lower surgical case volume and, while restrictions have been eased, we cannot predict the timing of the potential recapture of cancelled or postponed procedures, if any.

The Company's operating structure naturally enables some flexibility in the cost structure according to the volume of surgical procedures performed, including much of its cost of revenues.

In addition to the natural variability of these costs, the Company and its partners in the surgical facilities have undertaken additional steps to preserve financial flexibility.

Beginning in mid-March, and into the second and third quarters, the Company took actions that included significantly reducing cash operating expenses and deferring non-essential expenditures at the height of the crisis.

These measures were gradually reduced as surgical case volumes improved.

In addition to the cost management measures, on March 18, 2020, we drew down our available capacity under the Revolver, as a precautionary measure in order to increase liquidity and preserve financial flexibility in light of uncertainty resulting from the COVID-19 pandemic.

During the second quarter, we fully repaid the outstanding balance.

On April 22, 2020, we entered into a second incremental term loan amendment providing for an incremental borrowing of $120.0 million, and on July 30, 2020, we issued an additional $115.0 million aggregate principal amount of 10.000% senior unsecured notes due 2027.

"Long-Term Debt" to our condensed consolidated financial statements included elsewhere in this report for a further discussion of the second incremental term loan amendment and the senior unsecured notes.

Additionally, as a result of the CARES Act and other governmental assistance programs, during the nine months ended September 30, 2020, the Company received approximately $53 million in direct grant funding and approximately $120 million in accelerated Medicare payments, each of which is described in more detail in Note 1.

“Organization and Summary of Accounting Polices - COVID-19 Pandemic” to our condensed consolidated financial statements included elsewhere in this report.

Even after taking into account our actions intended to increase financial flexibility (including actions that management estimates have lowered cash operating expenses), the volume reductions we are experiencing have resulted in materially higher losses and material decreases in Adjusted EBITDA during the nine months ended September 30, 2020, and may potentially continue to do so for subsequent quarters.

The COVID-19 global pandemic has significantly affected our facilities, employees, patients, communities, business operations and financial performance, as well as the U.S.

economy and financial markets.

The COVID-19 pandemic materially impacted our financial performance for the year ending December 31, 2020, and has continued to impact our financial performance during the three months ended March 31, 2021.

The length and severity of the pandemic continues to be difficult to predict and is dependent on factors beyond our control.

The impact of the COVID-19 pandemic on our surgical facilities varies based on the market in which the facility operates, the type of surgical facility and the procedures typically performed.

Although we cannot provide any certainty regarding the length and severity of

the impact of the COVID-19 pandemic, surgical case volumes continue to improve as states re-open and allow for non-emergent procedures.

We cannot predict if or when utilization may return to pre-pandemic levels.

The Company is continuing to monitor legislative actions at federal and state levels, including the impact of the CARES Act and other governmental assistance that might be available.

Furthermore, please see "Capital Resources" and "Summary" under the heading "Liquidity and Capital Resources" below for more information about the impact of the COVID-19 pandemic on the Company.

Regulatory Developments in Response to COVID-19

Numerous recent legislative and regulatory actions have been taken in an attempt to provide businesses, including health care providers, with relief from the negative impacts of the COVID-19 pandemic.

The legislative and regulatory responses to the COVID-19 pandemic generally impact many of the statutes, regulations and policies summarized or discussed throughout this report and in our 2019 Annual Report on Form 10-K.

On March 27, 2020, the CARES Act was signed into law.

The CARES Act is intended to provide over $2 trillion in stimulus benefits for the U.S.

economy in order to offset the negative economic impact of the COVID-19 public health emergency.

Among other things, the CARES Act includes support for small businesses, expands unemployment benefits, and provides $500 billion for loans, loan guarantees, and other investments for or in U.S.

The CARES Act contains a number of provisions that are intended to assist health care providers as they combat the effects of the COVID-19 public health emergency.

The healthcare-specific provisions include:

• the temporary suspension of Medicare sequestration from May 1, 2020, to December 31, 2020;

• an appropriation of $100 billion to the Public Health and Social Services Emergency Fund for a new program to reimburse, through grants or other mechanisms, eligible health care providers and other approved entities for COVID-19-related expenses or lost revenues;

• the expansion of CMS’ Accelerated and Advance Payment Program;

• waivers or temporary suspension of certain regulatory requirements.

Waivers or Temporary Suspension of Certain Regulatory Requirements

In addition to the financial and other relief that has been provided by the federal government through the CARES Act and other legislation that has been passed by Congress, CMS and many state governments have also issued a number of waivers and temporary suspensions of health care facility licensure, certification, and reimbursement requirements in order to provide hospitals, ambulatory surgery centers, physicians, and other health care providers with increased flexibility to meet the challenges presented by the COVID-19 public health emergency.

For example, CMS has temporarily waived the enforcement of certain requirements of the Medicare conditions of participation and implemented a "hospitals without walls" program that would enable hospitals to treat patients in temporary locations and enable ASCs to temporarily enroll in Medicare as hospitals.

CMS has also temporarily waived many provisions of the Stark law, including those provisions of the Stark law that prohibit our hospitals with physician ownership from expanding capacity.

Many states have also suspended the enforcement of certain regulatory requirements to ensure that health care providers have sufficient capacity to treat COVID-19 patients.

These regulatory changes are temporary, with most slated to expire at the end of the declared COVID-19 public health emergency.

Our revenues consist of patient service revenues and other service revenues.

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Other service revenues include management and administrative service fees derived from our non-consolidated facilities that we account for under the equity method, management of surgical facilities and physician practices in which we do not own an interest and management services we provide to physician practices for which we are not required to provide capital or additional assets.

For the three months ended March 31, 2020, other service revenues also includes optical service revenues, which consisted of handling charges billed to the members of our optical products purchasing organization, which was sold on December 31, 2020.

The following table summarizes our revenues by service type as a percentage of total revenues for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Patient service revenues:

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Ancillary services revenues 3.2 % 3.9 %

98.8 % 98.3 % 98.6 % 98.6 %

Total patient service revenues 98.7 % 98.6 %

Other service revenues 1.3 % 1.4 %

Optical services revenues 0.2 % 0.2 % 0.2 % 0.2 %

Other 1.0 % 1.5 % 1.2 % 1.2 %

1.2 % 1.7 % 1.4 % 1.4 %

Total revenues 100.0 % 100.0 %

The following table sets forth by type of payor the percentage of our patient service revenues generated at the surgical facilities which we consolidate for financial reporting purposes in the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Private insurance payors 48.7 % 52.0 %

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Other payors (1)

4.9 % 4.6 % 4.7 % 4.8 %

Total 100.0 % 100.0 %

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The following table sets forth the percentage of cases in each specialty performed at the surgical facilities which we consolidate for financial reporting purposes for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Orthopedic and pain management 37.5 % 38.7 %

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Results of Operations

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

The following table summarizes certain results from the statements of operations for the three months ended September 30, 2020 and 2019 (dollars in millions):

Three Months Ended September 30,

Revenues $ 496.1 $ 452.0

Operating expenses:

Cost of revenues 381.9 353.1

General and administrative expenses 25.2 19.9

Depreciation and amortization 24.1 18.4

Income from equity investments (3.1) (2.4)

Loss on disposals and deconsolidations, net 0.7 0.6

Transaction and integration costs 5.4 3.4

Impairment charges 33.5 —

Grant funds 9.9 —

Total operating expenses 477.6 393.0

Operating income 18.5 59.0

Interest expense, net (51.5) (45.7)

(Loss) income before income taxes (33.0) 13.3

Income tax expense 1.3 2.4

Net (loss) income (34.3) 10.9

Net income attributable to non-controlling interests (27.3) (26.6)

Net loss attributable to Surgery Partners, Inc.

$ (61.6) $ (15.7)

During the three months ended September 30, 2020, our revenues increased 9.8% to $496.1 million compared to $452.0 million for the three months ended September 30, 2019.

We incurred a net loss attributable to Surgery Partners, Inc.

of $61.6 million for the 2020 period, compared to $15.7 million for the 2019 period, primarily attributable to the impairment charges taken during the third quarter of 2020 and the continued impact of the COVID-19 pandemic on surgical case volumes.

Revenues for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 were as follows (dollars in millions):

Three Months Ended September 30,

Patient service revenues $ 489.8 $ 444.5

Optical service revenues 0.9 0.9

Other service revenues 5.4 6.6

Total revenues $ 496.1 $ 452.0

Patient service revenues increased 10.2% to $489.8 million for the three months ended September 30, 2020 compared to $444.5 million for the three months ended September 30, 2019.

The increase of 10.2% was driven by a 11.9% increase in same-facility revenue per case, partially offset by a 3.1% decrease in same-facility case volume primarily due to the impacts of the COVID-19 pandemic.

Same-facility revenue per case growth was driven by a favorable surgical case mix as we experienced a faster recovery of higher acuity cases in the three months ended September 30, 2020.

Cost of Revenues.

Cost of revenues were $381.9 million for the three months ended September 30, 2020 compared to $353.1 million for the three months ended September 30, 2019.

The increase in costs was primarily attributable to a de novo hospital completed in 2019, acquisitions completed in 2020 and 2019 and an increase in supply costs associated with higher acuity surgical case volumes.

As a percentage of revenues, cost of revenues decreased to 77.0% for the 2020 period compared to 78.1% for the 2019 period.

General and Administrative Expenses.

General and administrative expenses were $25.2 million for the three months ended September 30, 2020 compared to $19.9 million for the three months ended September 30, 2019.

As a percentage of revenues, general and

administrative expenses increased to 5.1% for the 2020 period compared to 4.4% for the 2019 period.

The increase as a percentage of revenues is primarily the result of the continued decline in surgical case volume that began in mid-March due to the COVID-19 pandemic.

Depreciation and Amortization.

Depreciation and amortization was $24.1 million and $18.4 million for the three months ended September 30, 2020 and 2019, respectively.

The increase is primarily due to increased capital investments and integration of a de novo hospital completed in 2019 as well as acquisitions completed in 2020 and 2019.

As a percentage of revenues, depreciation and amortization expenses was 4.9% for the 2020 period compared to 4.1% for the 2019 period.

Loss on Disposals and Deconsolidations, Net.

The net loss on disposals and deconsolidations was $0.7 million for the 2020 period, including a $5.1 million gain on the sale of certain assets related to our anesthesia business, offset by a $3.5 million loss due to the closure of a diagnostic laboratory, and $2.3 million primarily related to disposals of other long-lived assets.

The net loss on disposals and deconsolidations was $0.6 million for the 2019 period related to disposals of other long-lived assets.

Transaction and Integration Costs.

We incurred $5.4 million of transaction and integration costs for the three months ended September 30, 2020 compared to $3.4 million for the three months ended September 30, 2019.

The increase primarily relates to costs for ongoing development initiatives, divestitures completed in 2020 and the integration of acquisitions we completed in 2020 and 2019.

During the three months ended September 30, 2020, the Company updated its estimate of the amount of grant funds received that qualify for recognition based on revised HHS guidance issued in the September Notice, resulting in the reversal of $9.9 million of grant funds previously recognized in the second quarter of 2020.

For further discussion, see Note 1.

"Organization and Summary of Accounting Polices - COVID-19 Pandemic" to our condensed consolidated financial statements included elsewhere in this report.

There were no grant funds received for the 2019 period.

Impairment Charges.

For the three months ended September 30, 2020, we recorded a non-cash impairment charge of $28.6 million and $4.9 million for the Ancillary Services and Alliance reporting units, respectively.

"Organization and Summary of Accounting Polices - Goodwill" to our condensed consolidated financial statements included elsewhere in this report for further discussion.

Interest Expense, Net.

Interest expense, net, increased to $51.5 million for the three months ended September 30, 2020 compared to $45.7 million for the three months ended September 30, 2019.

The increase primarily relates to the 2020 Incremental Term Loans, which were fully drawn on April 22, 2020, issuance of additional 2027 Unsecured Notes in the amount of $115.0 million effective July 30, 2020 as well as interest on the Revolver during the period it was fully drawn.

As a percentage of revenues, interest expense, net was 10.4% for the 2020 period compared to 10.1% for the 2019 period.

Income Tax Expense.

The income tax expense was $1.3 million for the three months ended September 30, 2020 compared to $2.4 million for the 2019 period.

The effective tax rate was (3.9)% for the three months ended September 30, 2020 compared to 18.0% for the three months ended September 30, 2019.

Based upon the application of interim accounting guidance, the tax rate as a percentage of net income after income attributable to non-controlling interests will vary based upon the relative net income from period to period.

Net Income Attributable to Non-Controlling Interests.

Net income attributable to non-controlling interests was $27.3 million for the three months ended September 30, 2020 compared to $26.6 million for the three months ended September 30, 2019.

As a percentage of revenues, net income attributable to non-controlling interests was 5.5% in the 2020 period and 5.9% for the 2019 period.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The following table summarizes certain results from the statements of operations for the nine months ended September 30, 2020 and 2019 (dollars in millions):

Nine Months Ended September 30,

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

The following table summarizes certain results from the statements of operations for the three months ended March 31, 2021 and 2020 (dollars in millions):

Three Months Ended March 31,

Revenues $ 512.4 $ 441.0

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Income from equity investments (2.6) (2.0)

Loss (gain) on disposals and deconsolidations, net 7.1 (7.0)

(Gain) loss on disposals and deconsolidations, net (0.9) 3.5

Transaction and integration costs 5.3 5.5

Impairment charges 33.5 —

Grant funds (15.1) —

Litigation settlement — 1.2

Loss on debt extinguishment — 11.7

Other income — (1.5)

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Operating income 64.3 23.5

Tax receivable agreement expense — (2.4)

Interest expense, net (53.3) (47.1)

(Loss) income before income taxes (61.1) 27.6

Income tax (benefit) expense (14.5) 5.1

Net (loss) income (46.6) 22.5

Income (loss) before income taxes 11.0 (23.6)

Income tax expense (benefit) 0.2 (15.2)

Net income (loss) 10.8 (8.4)

Net income attributable to non-controlling interests (31.8) (19.1)

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$ (21.0) $ (27.5)

During the nine months ended September 30, 2020, our revenues decreased 0.2% to $1,311.8 million compared to $1,314.2 million for the nine months ended September 30, 2019.

During the three months ended March 31, 2021, our revenues increased 16.2% to $512.4 million compared to $441.0 million for the three months ended March 31, 2020.

We incurred a net loss attributable to Surgery Partners, Inc.

of $121.6 million for the 2020 period, compared to $55.6 million for the 2019 period, primarily attributable to the decline in surgical case volume that began in mid-March and continued into the third quarter due to the COVID-19 pandemic.

Revenues for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 were as follows (dollars in millions):

Nine Months Ended September 30,

of $21.0 million for the 2021 period, compared to $27.5 million for the 2020 period.

The increase in revenues was primarily attributable to increases in surgical case volumes as the Company continues to recover from the COVID-19 pandemic that began in the first quarter of 2020 and acquisitions completed in 2020.

Revenues for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 were as follows (dollars in millions):

Three Months Ended March 31,

Patient service revenues $ 505.7 $ 434.6

Optical service revenues 2.2 3.0

Other service revenues 6.7 6.4

Total revenues $ 512.4 $ 441.0

Patient service revenues decreased 0.1% to $1,293.5 million for the nine months ended September 30, 2020 compared to $1,294.8 million for the nine months ended September 30, 2019.

The decrease of 0.1% was driven by a 16.8% decrease in same-facility case volume primarily due to the impacts of the COVID-19 pandemic, offset by a 17.1% increase in revenue per case.

Same-facility revenue per case growth was driven by a favorable surgical case mix as lower acuity cases were some of the first to decline as the COVID-19 crisis developed.

Patient service revenues increased 16.4% to $505.7 million for the three months ended March 31, 2021 compared to $434.6 million for the three months ended March 31, 2020.

The increase of 16.4% was driven by a 7.6% increase in same-facility revenue per case and a 7.1% increase in same-facility case volume primarily driven by case count and case mix recovery from the impacts of the COVID-19 pandemic that the Company began experiencing in the first quarter of 2020.

Cost of Revenues.

Cost of revenues were $1,067.4 million for the nine months ended September 30, 2020 compared to $1,019.6 million for the nine months ended September 30, 2019.

The increase in costs was primarily attributable to a de novo hospital completed in

2019, acquisitions completed in 2020 and 2019 and an increase in supply costs associated with higher acuity surgical case volumes.

As a percentage of revenues, cost of revenues increased to 81.4% for the 2020 period compared to 77.6% for the 2019 period.

Cost of revenues were $408.9 million for the three months ended March 31, 2021 compared to $366.2 million for the three months ended March 31, 2020.

The increase in costs was primarily attributable to acquisitions completed in 2020 and 2019 and an increase in supply costs associated with higher acuity surgical case volumes.

As a percentage of revenues, cost of revenues decreased to 79.8% for the 2021 period compared to 83.0% for the 2020 period, as lower acuity procedures with lower cost of sales returned from COVID-19 related lows experienced in the first quarter of 2020.

General and Administrative Expenses.

General and administrative expenses were $73.3 million for the nine months ended September 30, 2020 compared to $64.9 million for the nine months ended September 30, 2019.

As a percentage of revenues, general and administrative expenses was 5.6% for the 2020 period compared to 4.9% for the 2019 period.

The increase as a percentage of revenues is primarily the result of the decreased revenues driven by the decline in surgical case volume that began in mid-March due to the COVID-19 pandemic.

General and administrative expenses were $26.8 million for the three months ended March 31, 2021 compared to $22.8 million for the three months ended March 31, 2020.

As a percentage of revenues, general and administrative expenses remained flat at 5.2% for both the 2021 and 2020 periods.

Depreciation and Amortization.

Depreciation and amortization was $69.3 million and $56.3 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase is primarily due to increased capital investments and integration of a de novo hospital completed in 2019 as well as acquisitions completed in 2020 and 2019.

Depreciation and amortization was $25.7 million and $21.8 million for the three months ended March 31, 2021 and 2020, respectively.

The increase is primarily due to acquisitions completed in 2020.

As a percentage of revenues, depreciation and amortization expenses was 5.0% for the 2021 period compared to 4.9% for the 2020 period.

Loss (Gain) on Disposals and Deconsolidations, Net.

The net loss on disposals and deconsolidations was $7.1 million for the 2020 period, including a $5.1 million gain on the sale of certain assets related to our anesthesia business, offset by a $6.6 million loss on the sale of interests in surgical facilities and the closure of a diagnostic laboratory and $5.6 million primarily related to disposals of other long-lived assets.

The net gain on disposals and deconsolidations was $7.0 million for the 2019 period, including a $10.9 million gain on the sale of previously owned real property associated with one of our non-consolidated surgical facility equity method investments, offset by a loss of $3.9 million on disposals of other long-lived assets.

(Gain) Loss on Disposals and Deconsolidations, Net.

The net gain on disposals and deconsolidations was $0.9 million for the 2021 period, related to disposals of long-lived assets.

The net loss on disposals and deconsolidations was $3.5 million for the 2020 period, including a net loss of $3.1 million on the sale of interests in surgical facilities and $0.4 million on disposals of other long-lived assets.

Transaction and Integration Costs.

We incurred $15.8 million of transaction and integration costs for the nine months ended September 30, 2020 compared to $11.6 million for the nine months ended September 30, 2019.

The increase primarily relates to costs for ongoing development initiatives, divestitures completed in 2020 and the integration of acquisitions we completed in 2020 and 2019.

We recognized $33.2 million in grant funds for the nine months ended September 30, 2020.

The funds were received based on relief available to eligible health care providers under the provisions of the CARES Act, which is described in further detail above in the section titled "Impact of COVID-19” and in Note 1.

We incurred $5.3 million of transaction and integration costs for the three months ended March 31, 2021 compared to $5.5 million for the three months ended March 31, 2020.

During the three months ended March 31, 2021, the Company received approximately $7 million of additional grants from HHS.

Based on guidance from HHS and other authorities, the Company updated its estimate of the amount of grant funds received that qualify for recognition, resulting in the recognition of $15.1 million.

For further discussion, see Note 1.

"Organization and Summary of Accounting Polices - COVID-19 Pandemic" to our condensed consolidated financial statements included elsewhere in this report.

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Litigation Settlement .

Litigation settlement costs were $1.2 million for the nine months ended September 30, 2020, related to the resolution of the government investigation, as discussed in Note 10.

Litigation settlement costs were $1.2 million for the three months ended March 31, 2020 related to the resolution of the government investigation, as discussed in Note 9.

"Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this report.

There were no litigation costs for the 2019 period.

Loss on Debt Extinguishment.

We incurred a debt extinguishment loss of $11.7 million in connection with issuance of the 2027 Unsecured Notes during the nine months ended September 30, 2019.

There was no debt extinguishment loss during the 2020 period.

The loss includes the redemption premium paid to redeem the 2021 Unsecured Notes partially offset by the write-off of the unamortized fair value premium as of the redemption date.

There were no litigation settlements for the 2021 period.

Interest Expense, Net.

Interest expense, net, increased to $147.8 million for the nine months ended September 30, 2020, compared to $134.1 million for the nine months ended September 30, 2019.

The increase primarily relates to the issuance of the 2027 Unsecured Notes effective April 11, 2019, the 2020 Incremental Term Loans, which were fully drawn on April 22, 2020, the issuance of additional 2027 Unsecured Notes in the amount of $115.0 million effective July 30, 2020 as well as interest on the Revolver during the period it was fully drawn.

Interest expense, net, increased to $53.3 million for the three months ended March 31, 2021 compared to $47.1 million for the three months ended March 31, 2020.

The increase primarily relates to the 2020 Incremental Term Loans, which were fully drawn on April 22, 2020 and the issuance of additional 2027 Unsecured Notes in the amount of $115.0 million effective July 30, 2020.

As a percentage of revenues, interest expense, net was 10.4% for the 2021 period compared to 10.7% for the 2020 period.

Income Tax (Benefit) Expense.

The income tax benefit was $14.5 million and expense was $5.1 million for the nine months ended September 30, 2020 and 2019, respectively.

The effective tax rate was 23.7% for the nine months ended September 30, 2020 compared to 18.5% for the nine months ended September 30, 2019.

The higher effective tax rate for the 2020 period was primarily due to (a) discrete tax benefits of approximately $11.9 million attributable to (i) the release of federal and state valuation allowances on the Company’s Internal Revenue Code Section 163(j) interest carryforwards as a result of the increase in deductible interest expense allowed under the CARES Act;

and (ii) the Settlement Agreement, as discussed in Note 10.

"Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this report, which provided that a portion of the final settlement amount was "restitution" for income tax purposes;

and (b) a discrete tax expense of approximately $5.0 million attributable to the Company's impairment of goodwill.

Income Tax Expense (Benefit).

The income tax expense was $0.2 million for the three months ended March 31, 2021 compared to an income tax benefit of $15.2 million for the 2020 period.

The effective tax rate was 1.8% for the three months ended March 31, 2021 compared to 64.4% for the three months ended March 31, 2020.

For the three months ended March 31, 2021, the effective tax rate differed from 21% due to tax benefits of $2.2 million related to the vesting of restricted stock awards.

For the three months ended March 31, 2020, the effective tax rate differed from 21% due to tax benefits of $11.9 million attributable to (a) the release of federal and state valuation allowances on the Company’s Internal Revenue Code Section 163(j) interest carryforwards as a result of the increase in deductible interest expense allowed under the CARES Act, and (b) the Settlement Agreement, discussed in Note 9.

"Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this report.

Net Income Attributable to Non-Controlling Interests.

Net income attributable to non-controlling interests was $75.0 million for the nine months ended September 30, 2020 compared to $78.1 million for the nine months ended September 30, 2019.

As a percentage of revenues, net income attributable to non-controlling interests was 5.7% in the 2020 period and 5.9% for the 2019 period.

Net income attributable to non-controlling interests was $31.8 million for the three months ended March 31, 2021 compared to $19.1 million for the three months ended March 31, 2020.

As a percentage of revenues, net income attributable to non-controlling interests was 6.2% for the 2021 period and 4.3% for the 2020 period.

Liquidity and Capital Resources

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The primary source of our operating cash flow is the collection of accounts receivable from federal and state agencies (under the Medicare and Medicaid programs), private insurance companies and individuals.

During the nine months ended September 30, 2020, our cash flow provided by operating activities was $238.0 million compared to $104.1 million in the nine months ended September 30, 2019

primarily attributable to Medicare accelerated payments and other funds received under the CARES Act as well as actions taken to significantly reduce operating expenses and defer non-essential capital expenditures at the height of the crisis.

During the three months ended March 31, 2021, our cash flow provided by operating activities was $50.2 million compared to $29.2 million in the three months ended March 31, 2020 primarily due to the timing of certain payroll and trade payable payments.

Investing Activities

Net cash provided by investing activities during the nine months ended September 30, 2020, was $6.8 million, which included $27.8 million related to purchases of property and equipment.

We paid $14.2 million in cash for acquisitions (net of cash acquired), which included a surgical facility in a new market and four surgical facilities in existing markets that were merged into existing facilities.

Additionally, we received cash proceeds of $48.3 million related to the sale of certain assets related to our anesthesia business and the sale of interests in two surgery centers, one of which was previously accounted for as an equity method investment.

Net cash used in investing activities during the nine months ended September 30, 2019 was $61.8 million, which included $50.2 million related to purchases of property and equipment.

We paid an additional $13.8 million in cash for acquisitions (net of cash acquired), which primarily included a surgical facility, a clinic that was merged into an existing facility and a physician practice.

Further, we paid $15.2 million in cash for a non-controlling interest in four surgical facilities accounted for as equity method investments and we received cash proceeds of $17.6 million related to the sale of previously owned real property associated with one of our non-consolidated equity method investments.

Net cash used in investing activities during the three months ended March 31, 2021, was $14.3 million, which included $14.5 million related to purchases of property and equipment.

We paid $2.1 million in cash for acquisitions (net of cash acquired), which included two surgical facilities in existing markets that were merged into existing facilities.

Additionally, we received cash proceeds of $2.3 million related to the disposal of certain long-lived assets.

Net cash used in investing activities during the three months ended March 31, 2020 was $7.7 million, which included $11.8 million related to purchases of property and equipment.

We paid $5.5 million in cash for acquisitions (net of cash acquired), which included a surgical facility in a new market and a surgical facility that was merged into an existing facility.

Additionally, we received cash proceeds of $9.4 million related to the sale of our interests in two surgery centers, one of which was previously accounted for as an equity method investment.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2020 was $112.5 million.

Net cash provided by financing activities during the three months ended March 31, 2021 was $187.8 million.

During this period, we received gross proceeds of $260.9 million from an equity offering which was partially offset by equity offering costs paid of $12.6 million.

We made distributions to non-controlling interest holders of $31.3 million and received proceeds related to ownership transactions with consolidated affiliates of $1.0 million.

We made repayments on our long-term debt of $16.6 million, which was offset by borrowings of $0.6 million.

We also paid a cash dividend of $5.1 million related to the Series A preferred stock.

Net cash provided by financing activities during the three months ended March 31, 2020 was $80.4 million.

During this period, we made distributions to non-controlling interest holders of $24.0 million and payments related to ownership transactions with consolidated affiliates of $0.4 million.

Additionally, we made repayments on our long-term debt of $52.8 million, which was offset by borrowings of $158.4 million.

In connection with the 2020 Incremental Term Loans, which were fully drawn on April 22, 2020, and the issuance of additional 2027 Unsecured Notes in the amount of $115.0 million effective July 30, 2020, we paid debt issuance costs of $8.3 million.

Net cash used in financing activities during the nine months ended September 30, 2019 was $115.3 million.

During this period, we made distributions to non-controlling interest holders of $89.5 million and payments related to ownership transactions with consolidated affiliates of $4.6 million.

Further, we made repayments on our long-term debt of $436.1 million, which was offset by borrowings of $442.5 million.

In connection with the issuance of the 2027 Unsecured Notes and redemption of the existing 2021 Unsecured Notes, we paid debt issuance costs of $8.8 million and paid a redemption premium of $17.8 million.

As of September 30, 2020, the carrying value of our total indebtedness was $2.822 billion, which includes unamortized fair value discount of $3.9 million and unamortized deferred financing costs, issuance discount and premium of $16.8 million.

On April 20, 2021, we announced that we sent notice to Bain Capital of our intent to convert all of the outstanding shares of Series A Preferred Stock into shares of common stock of the Company on May 17, 2021.

Following the conversion, no shares of Series A Preferred Stock will remain outstanding.

Additionally, on May 3, 2021, the Company entered into a sixth amendment to credit agreement, dated as of May 3, 2021 (the “Sixth Amendment”), which amended the credit agreement, originally dated as of August 31, 2017 (the “Credit Agreement”).

The Sixth Amendment provides for, among other things, a new tranche of term loans under the Credit Agreement in an aggregate original principal amount of approximately $1.545 billion (the “New Term Loans”), which New Term Loans replace or refinance in full all of the existing term loans outstanding under the Credit Agreement (as in effect immediately prior to the Sixth Amendment), all as further set forth in the Sixth Amendment.

"Subsequent Events" for further discussion.

As of March 31, 2021, the carrying value of our total indebtedness was $2.851 billion, which includes unamortized fair value discount of $3.4 million and unamortized deferred financing costs, issuance discount and premium of $15.7 million.

Term Loan and Revolving Credit Facility

As of September 30, 2020, we had term loan borrowings with a carrying value of $1.543 billion, consisting of outstanding aggregate principal of $1.547 billion and unamortized fair value discount of $3.9 million (the "Term Loan").

As of March 31, 2021, we had term loan borrowings with a carrying value of $1.536 billion, consisting of outstanding aggregate principal of $1.532 billion and unamortized fair value discount of $3.4 million (the "Term Loan").

The Term Loan matures on August 31, 2024.

The Term Loan amortizes in equal quarterly installments of 0.25% of the aggregate original principal amount of the Term Loan.

We have a Revolver providing for revolving borrowings of up to $120.0 million.

The Revolver will mature on August 31, 2022.

As of September 30, 2020, our availability on the Revolver was $112.5 million (including outstanding letters of credit of $7.5 million) .

On January 27, 2021, the Company entered into an amendment to the credit agreement governing its revolving credit facility (the "Revolver"), dated as of January 27, 2021, which amended and supplemented the credit agreement, dated as of August 31, 2017, to provide for an extension of the maturity date of the Revolver to February 1, 2026 and an increase in the outstanding commitments under the Revolver in an amount equal to $50.0 million.

The maturity extension and the additional commitments became operative on February 1, 2021.

As of March 31, 2021, the Company's availability on the Revolver was $162.5 million (including outstanding letters of credit of $7.5 million).

The Revolver may be utilized for working capital, capital expenditures and general corporate purposes.

Subject to certain conditions and requirements set forth in the credit agreement, we may request one or more additional incremental term loan facilities or one or more increases in the commitments on the Revolver.

The Revolver and the Term Loan, together the "Senior Secured Credit Facilities" bear interest at a rate per annum equal to (x) LIBOR plus a margin ranging from 3.00% to 3.25% per annum, depending on our first lien net leverage ratio or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.5% per annum above the federal funds effective rate and (iii) one-month LIBOR plus 1.00% per annum (solely with respect to the Term Loan, the alternate base rate shall not be less than 2.00% per annum)) plus a margin ranging from 2.00% to 2.25% per annum.

per annum (solely with respect to the Term Loan, the alternate base rate shall not be less than 2.00% per annum)) plus a margin ranging from 2.00% to 2.25% per annum.

In addition, we are required to pay a commitment fee of 0.50% per annum in respect of unused commitments on the Revolver.

On April 22, 2020, we entered into a second incremental term loan amendment, which amended and supplemented the existing credit agreement, to provide for an incremental borrowing of $120.0 million.

The incremental amounts were fully drawn on April 22, 2020, and are included in the term loan borrowings discussed above.

On April 16, 2020, we entered into a third amendment to our credit agreement, which amended and supplemented financial covenants applicable to the Revolver under the credit agreement.

Pursuant to the third amendment, the Company's requirement to comply with a maximum consolidated total net leverage ratio will be waived for the remainder of 2020.

Additionally, for the first three quarters of 2021, the third amendment provides for an alternative calculation for the maximum consolidated total net leverage ratio where the trailing four quarter basis may be negatively impacted by the impacts of the COVID-19 pandemic.

The third amendment became effective concurrently with the funding of the incremental term loans on April 22, 2020, discussed above.

Senior Unsecured Notes

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The 2027 Unsecured Notes bear interest at the rate of 10.000% per year, payable semi-annually on April 15 and October 15 of each year.

"Long-Term Debt" to our condensed consolidated financial statements included elsewhere in this report for a further discussion of the senior unsecured notes.

On July 30, 2020, we completed the issuance and sale of $115.0 million in aggregate principal amount of senior unsecured notes due 2027 at 100.75% of the principal amount.

The notes were issued as part of the same series as the existing 2027 Unsecured Notes originally issued in April 2019, and have the same terms.

We have $370.0 million aggregate principal amount of senior unsecured notes due July 1, 2025 outstanding (the "2025 Unsecured Notes").

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We and certain of our subsidiaries have other debt consisting of outstanding bank indebtedness of $131.2 million, which is collateralized by the real estate and equipment owned by the surgical facilities to which the loans were made, and right-of-use finance lease obligations of $284.5 million for which we are liable to various vendors for several property and equipment leases classified as finance leases.

Pursuant to the CARES Act, repayment of certain advanced payments and other deferrals received as part of relief during 2020 will begin in 2021.

"Organization and Summary of Accounting Policies" to our condensed consolidated financial statements included elsewhere in this report, for further discussion on the repayment terms related to certain relief previously received by us.

Capital Resources

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As previously noted in Note 7.

"Organization and Summary of Accounting Policies" to our condensed consolidated financial statements included elsewhere in this report, as of September 30, 2020, we received relief via the CARES Act, including approximately $53 million in direct grant payments and approximately $120 million of accelerated payments pursuant to the Medicare Accelerated and Advance Payment Program.

The direct grant payments are not required to be repaid, subject to certain terms and conditions, while payments received under the Medicare Accelerated and Advance Payment Program are required to be repaid.

Additionally, the CARES Act permits the deferral of payment of the social security payroll tax match for the remainder of 2020, with half of the deferred amount due December 2021 and the other half due December 2022.

As of September 30, 2020, the Company has deferred approximately $7.3 million, included as a component of accrued payroll and benefits in the condensed consolidated balance sheets as of September 30, 2020.

We believe that deferral of the social security payroll tax match, which we began doing in April 2020, along with the funds received under the CARES Act as noted above, have positively impacted our cash flows from operations during 2020.

"Earning Per Share" to our condensed consolidated financial statements included elsewhere in this report, on February 1, 2021, we completed a public offering pursuant to which the Company sold 8,625,000 shares of common stock, resulting in net proceeds of $248.3 million.

As previously noted in Note 1.

"Organization and Summary of Accounting Policies" to our condensed consolidated financial statements included elsewhere in this report, for the three months ended March 31, 2021, we received additional relief via the CARES Act, including approximately $7 million in direct grant payments, which are not required to be repaid, subject to certain terms and conditions,

The COVID-19 pandemic has resulted in, and may continue to result in, significant disruptions of financial and capital markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

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If general economic conditions continue to deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed.

Based on our current level of operations, we believe cash flow from operations, available cash, available capacity on our Revolver, the incremental term loan borrowings and issuance of new notes discussed above, funds we have received under the CARES Act, funds we may receive in the future and continued access to capital markets, together with the cost cutting steps taken in response to the impact of the COVID-19 pandemic, as discussed in Item 1A.

"Risk Factors" elsewhere in this report, will be adequate to meet our short-term (i.e., 12 months) liquidity needs.

Based on our current level of operations, we believe cash flow from operations, available cash, available capacity on our Revolver, funds we have received under the CARES Act, funds we may receive in the future and continued access to capital markets, will be adequate to meet our short-term (i.e., 12 months) and long-term (beyond 12 months) liquidity needs.

Certain Non-GAAP Metrics

Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with GAAP.

The items excluded from this non-GAAP metric are significant components in understanding and evaluating our financial performance.

We believe such adjustments are

appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance.

Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

When we use the term "Adjusted EBITDA," we are referring to income before income taxes, adjusted for net income attributable to non-controlling interests, depreciation and amortization, interest expense, net, equity-based compensation expense, transaction, integration and acquisition costs, net loss on disposals and deconsolidations, impairment charges, litigation settlement and other litigation costs, gain on escrow release, loss on debt extinguishment and tax receivable agreement expense.

We use Adjusted EBITDA as a measure of financial performance.

Adjusted EBITDA is a key measure used by our management to assess operating performance, make business decisions and allocate resources.

The following table reconciles Adjusted EBITDA to (loss) income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Adjusted EBITDA and Adjusted EBITDA excluding grant funds are not measurements of financial performance under GAAP and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with GAAP.

The items excluded from these non-GAAP metrics are significant components in understanding and evaluating our financial performance.

We believe such adjustments are appropriate, as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance.

Our calculation of Adjusted EBITDA and Adjusted EBITDA excluding grant funds may not be comparable to similarly titled measures reported by other companies.

We use Adjusted EBITDA and Adjusted EBITDA

excluding grant funds as measures of financial performance.

Adjusted EBITDA and Adjusted EBITDA excluding grant funds are key measures used by our management to assess operating performance, make business decisions and allocate resources.

The following table reconciles Adjusted EBITDA and Adjusted EBITDA excluding grant funds to gain (loss) before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

Three Months Ended March 31,

Condensed Consolidated Statements of Operations Data:

(Loss) income before income taxes $ (33.0) $ 13.3 $ (61.1) $ 27.6

Income (loss) before income taxes $ 11.0 $ (23.6)

Plus (minus):

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Transaction, integration and acquisition costs (1)

7.5 5.3 30.2 16.8

Loss (gain) on disposals and deconsolidations, net 0.7 0.6 7.1 (7.0)

Impairment charges 33.5 — 33.5 —

(Gain) loss on disposals and deconsolidations, net (0.9) 3.5

Litigation settlement and other litigation costs (2)

1.1 2.8 4.9 2.8

Gain on escrow release (3)

Loss on debt extinguishment — — — 11.7

Tax receivable agreement expense — — — 2.4

Adjusted EBITDA $ 72.9 $ 46.5

Impact of grant funds (4)

5.4 — (21.9) —

Adjusted EBITDA excluding grant funds $ 62.2 $ 46.5

(1) This amount includes transaction and integration costs of $5.4 million and $3.4 million for the three months ended September 30, 2020 and 2019, respectively.

This amount further includes other acquisition costs and start-up costs related to a de novo surgical hospital of $2.1 million and $1.9 million for the three months ended September 30, 2020 and 2019, respectively.

This amount includes transaction and integration costs of $15.8 million and $11.6 million for the nine months ended September 30, 2020 and 2019, respectively.

This amount further includes other acquisition costs and start-up costs related to a de novo surgical hospital of $14.4 million and $5.2 million for the nine months ended September 30, 2020 and 2019, respectively.

(2) This amount includes other litigation costs of $1.1 million and $2.8 million for the three months ended September 30, 2020 and 2019, respectively.

This amount includes litigation settlement costs of $1.2 million for the nine months ended September 30, 2020, with no comparable settlement costs in the same 2019 period.

This amount further includes other litigation costs of $3.7 million and $2.8 million for the nine months ended September 30, 2020 and 2019, respectively.

(3) Included in other income in the condensed consolidated statement of operations for the nine months ended September 30, 2020, with no comparable gain in the same 2019 period.

(1) This amount includes transaction and integration costs of $5.3 million and $5.5 million for the three months ended March 31, 2021 and 2020, respectively.

This amount further includes start-up costs related to a de novo surgical hospital of $4.1 million and $7.1 million for the three months ended March 31, 2021 and 2020, respectively.

(2) This amount includes other litigation costs of $1.0 million for the three months ended March 31, 2021.

This amount includes litigation settlement costs of $1.2 million and other litigation costs of $0.3 million for the three months ended March 31, 2020.

(3) Included in other income in the condensed consolidated statement of operations for the three months ended March 31, 2020, with no comparable gain in the same 2021 period.

(4) Represents the impact of grant funds recognized, net of amounts attributable to non-controlling interests.

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The following table reconciles Credit Agreement EBITDA to cash flows from operating activities, the most directly comparable GAAP financial measure (in millions and unaudited):

Twelve Months Ended September 30, 2020

Twelve Months Ended March 31, 2021

Cash flows from operating activities $ 267.9

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Litigation settlement and other litigation costs 5.9

Gain on escrow release (0.8)

Acquisitions and synergies (1)

Credit Agreement EBITDA $ 359.1

(1) Represents impact of acquisitions as if each acquisition had occurred on October 1, 2019.

(1) Represents impact of acquisitions as if each acquisition had occurred on April 1, 2020.

Further this includes revenue synergies from other business initiatives, de novo facilities and an adjustment for the effects of adopting the new lease accounting standard, as defined in the credit agreement governing the Senior Secured Credit Facilities.

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Please refer to Note 1.

"Organization and Summary of Accounting Policies" to our condensed consolidated financial statements included elsewhere in this report for a discussion of the impact of the adoption of recently issued accounting standards.

"Organization and Summary of Accounting Policies - Recent Accounting Pronouncements" to our condensed consolidated financial statements included elsewhere in this report for a discussion of the impact of the adoption of recently issued accounting standards and accounting standards not yet adopted.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis